UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For transition period from to
Commission file number: 1-15168
CERIDIAN CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
41-1981625 (IRS Employer Identification No.) |
|
| 3311 East Old Shakopee Road, Minneapolis, Minnesota (Address of principal executive offices) |
55425 (Zip Code) |
Registrant’s telephone number, including area code: (952) 853-8100
Former name, former address and former fiscal year if changed from last report: Not Applicable
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES x NO o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
YES x NO o
The number of shares of registrant’s Common Stock, par value $.01 per share, outstanding as of October 31, 2002, was 148,424,914.
CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
| Part I. Financial Information | Pages | |||||
| Item 1. | Financial Statements | |||||
| Consolidated Statements of Operations for the three and nine month periods ended September 30, 2002 and 2001 | 3 | |||||
| Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001 | 4 | |||||
| Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2002 and 2001 | 5 | |||||
| Notes to Consolidated Financial Statements | 6 | |||||
| In the opinion of Ceridian Corporation, the unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals, except as set forth in the notes to consolidated financial statements) necessary to present fairly our financial position as of September 30, 2002, and results of operations for the three and nine month periods and cash flows for the nine month periods ended September 30, 2002 and 2001. | ||||||
| The results of operations for the nine month period ended September 30, 2002 are not necessarily indicative of the results to be expected for the full year. | ||||||
| The consolidated financial statements should be read in conjunction with the notes to consolidated financial statements. | ||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | ||||
| Item 3. | Quantitative and Qualitative Disclosure About Market Risk | 29 | ||||
| Item 4. | Controls and Procedures | 29 | ||||
| Part II Other Information | ||||||
| Item 6. | Exhibits and Reports on Form 8-K | 30 | ||||
| Signature | 31 | |||||
| Certification of Chief Executive Officer | 32 | |||||
| Certification of Chief Financial Officer | 33 | |||||
- 2 -
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
| CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in millions, except per share data) |
Ceridian Corporation and Subsidiaries |
| For Periods Ended September 30, | |||||||||||||||||||
| Three Months | Nine Months | ||||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||||
Revenue |
$ | 288.6 | $ | 282.6 | $ | 878.2 | $ | 886.2 | |||||||||||
Costs and Expenses |
|||||||||||||||||||
Cost of revenue |
141.6 | 142.7 | 424.4 | 434.4 | |||||||||||||||
Selling, general and administrative |
87.2 | 92.2 | 284.4 | 302.4 | |||||||||||||||
Research and development |
15.1 | 14.0 | 44.8 | 45.1 | |||||||||||||||
Other expense (income) |
9.7 | (1.9 | ) | 19.4 | 48.2 | ||||||||||||||
Total costs and expenses |
253.6 | 247.0 | 773.0 | 830.1 | |||||||||||||||
Earnings before interest and taxes |
35.0 | 35.6 | 105.2 | 56.1 | |||||||||||||||
Interest income |
0.6 | 2.5 | 1.5 | 6.0 | |||||||||||||||
Interest expense |
(1.5 | ) | (3.5 | ) | (5.3 | ) | (16.5 | ) | |||||||||||
Earnings before income taxes |
34.1 | 34.6 | 101.4 | 45.6 | |||||||||||||||
Income tax provision |
12.3 | 14.0 | 36.5 | 18.9 | |||||||||||||||
Earnings from continuing operations |
21.8 | 20.6 | 64.9 | 26.7 | |||||||||||||||
Discontinued operations |
— | — | — | 5.2 | |||||||||||||||
Net earnings |
$ | 21.8 | $ | 20.6 | $ | 64.9 | $ | 31.9 | |||||||||||
Basic earnings per share |
|||||||||||||||||||
Continuing operations |
$ | 0.15 | $ | 0.14 | $ | 0.44 | $ | 0.18 | |||||||||||
Net earnings |
$ | 0.15 | $ | 0.14 | $ | 0.44 | $ | 0.22 | |||||||||||
Diluted earnings per share |
|||||||||||||||||||
Continuing operations |
$ | 0.15 | $ | 0.14 | $ | 0.43 | $ | 0.18 | |||||||||||
Net earnings |
$ | 0.15 | $ | 0.14 | $ | 0.43 | $ | 0.22 | |||||||||||
Shares used in calculations (in 000’s) |
|||||||||||||||||||
Weighted average shares (basic) |
148,526 | 146,149 | 147,882 | 145,966 | |||||||||||||||
Dilutive securities |
1,407 | 3,207 | 3,496 | 2,460 | |||||||||||||||
Weighted average shares (diluted) |
149,933 | 149,356 | 151,378 | 148,426 | |||||||||||||||
Antidilutive shares excluded (in 000’s) |
10,766 | 5,698 | 4,400 | 5,427 | |||||||||||||||
See notes to consolidated financial statements.
- 3 -
| FORM 10-Q | ||
| CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in millions) |
Ceridian Corporation and Subsidiaries |
| September 30, | December 31, | ||||||||
| 2002 | 2001 | ||||||||
Assets |
|||||||||
Cash and equivalents |
$ | 144.6 | $ | 138.7 | |||||
Short-term investments |
27.0 | 22.0 | |||||||
Trade receivables, less allowance of $21.9 and $16.2 |
427.5 | 376.4 | |||||||
Other receivables |
29.7 | 21.8 | |||||||
Current portion of deferred income taxes |
26.0 | 31.7 | |||||||
Other current assets |
31.1 | 25.0 | |||||||
Total current assets |
685.9 | 615.6 | |||||||
Property, plant and equipment, net |
150.3 | 159.3 | |||||||
Goodwill, net |
882.1 | 859.6 | |||||||
Other intangible assets, net |
109.6 | 116.2 | |||||||
Software and development costs, net |
107.9 | 92.9 | |||||||
Prepaid pension cost |
14.5 | 10.7 | |||||||
Deferred income taxes, less current portion |
0.1 | 4.3 | |||||||
Investments-cost basis |
22.7 | 26.9 | |||||||
Derivative securities |
70.4 | 24.3 | |||||||
Other noncurrent assets |
7.5 | 0.8 | |||||||
Total assets before payroll and tax filing funds |
2,051.0 | 1,910.6 | |||||||
Payroll and tax filing funds |
1,853.1 | 2,126.4 | |||||||
Total assets |
$ | 3,904.1 | $ | 4,037.0 | |||||
Liabilities and Stockholders’ Equity |
|||||||||
Short-term debt and current
portion of long-term obligations |
$ | 2.4 | $ | 1.5 | |||||
Accounts payable |
35.6 | 31.2 | |||||||
Drafts and customer funds payable |
217.0 | 160.1 | |||||||
Customer advances |
12.8 | 11.8 | |||||||
Deferred income |
32.4 | 35.9 | |||||||
Accrued taxes |
61.9 | 66.2 | |||||||
Employee compensation and benefits |
46.6 | 64.0 | |||||||
Other accrued expenses |
43.3 | 46.3 | |||||||
Total current liabilities |
452.0 | 417.0 | |||||||
Long-term obligations, less current portion |
191.5 | 236.4 | |||||||
Deferred income taxes |
47.6 | 24.8 | |||||||
Employee benefit plans |
136.0 | 140.1 | |||||||
Other noncurrent liabilities |
36.9 | 31.2 | |||||||
Total liabilities before payroll and tax filing obligations |
864.0 | 849.5 | |||||||
Payroll and tax filing obligations |
1,853.1 | 2,126.4 | |||||||
Total liabilities |
2,717.1 | 2.975.9 | |||||||
Stockholders’ equity |
1,187.0 | 1,061.1 | |||||||
Total liabilities and stockholders’ equity |
$ | 3,904.1 | $ | 4,037.0 | |||||
See notes to consolidated financial statements.
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| FORM 10-Q CONSOLIDATED STATEMENTS OF CASH FLOWS |
Ceridian Corporation and Subsidiaries |
| (Unaudited) | For Periods Ended September 30, | |||||||||
| (Dollars in millions) | Nine Months | |||||||||
| 2002 | 2001 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||||
Net earnings |
$ | 64.9 | $ | 31.9 | ||||||
Adjustments to reconcile net earnings to net cash
provided by operating activities: |
||||||||||
Discontinued operations |
— | (5.2 | ) | |||||||
Deferred income tax provision |
5.1 | 4.8 | ||||||||
Depreciation and amortization |
55.2 | 78.5 | ||||||||
Gains on marketable and derivative securities |
— | (18.2 | ) | |||||||
Asset write-downs |
4.9 | 6.1 | ||||||||
Reduction of environmental accrual |
(4.1 | ) | — | |||||||
Contribution to supplemental retirement plan trust |
(3.3 | ) | — | |||||||
Provision for doubtful accounts |
13.4 | 11.9 | ||||||||
Other |
(5.0 | ) | (3.5 | ) | ||||||
Decrease (Increase) in trade and other receivables |
(72.8 | ) | (27.3 | ) | ||||||
Increase (Decrease) in accounts payable |
3.1 | 1.6 | ||||||||
Increase (Decrease) in drafts and customer funds payable |
56.9 | 26.3 | ||||||||
Increase (Decrease) in employee compensation and benefits |
(18.0 | ) | (14.3 | ) | ||||||
Increase (Decrease) in accrued taxes |
7.0 | 0.6 | ||||||||
Increase (Decrease) in other current assets and liabilities |
(7.6 | ) | (15.5 | ) | ||||||
Cash used by operating activities of discontinued operations |
— | (0.8 | ) | |||||||
Net cash provided by operating activities |
99.7 | 76.9 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||||
Expended for property, plant and equipment |
(22.0 | ) | (31.4 | ) | ||||||
Expended for software and development costs |
(27.0 | ) | (41.0 | ) | ||||||
Expended for investments in and advances
to businesses, less cash acquired |
(26.8 | ) | (12.1 | ) | ||||||
Expended for short term investments |
(5.0 | ) | — | |||||||
Proceeds from sales of businesses and assets |
0.4 | 17.9 | ||||||||
Cash used for investing activities of discontinued operations |
— | (1.2 | ) | |||||||
Net cash provided by (used for) investing activities |
(80.4 | ) | (67.8 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||||
Revolving credit and overdrafts, net |
(44.2 | ) | 189.9 | |||||||
Repayment of other debt |
(0.1 | ) | (456.6 | ) | ||||||
Repurchase of common stock |
(2.7 | ) | — | |||||||
Exercise of stock options and other |
33.6 | 6.2 | ||||||||
Cash provided by financing activities of discontinued operations |
— | 225.0 | ||||||||
Net cash provided by (used for) financing activities |
(13.4 | ) | (35.5 | ) | ||||||
NET CASH PROVIDED (USED) |
5.9 | (26.4 | ) | |||||||
Cash and equivalents at beginning of period |
138.7 | 118.5 | ||||||||
Cash and equivalents at end of period |
$ | 144.6 | $ | 92.1 | ||||||
See notes to consolidated financial statements.
- 5 -
FORM 10-Q
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2002
(Dollars in millions, except per share data)
(Unaudited)
STOCKHOLDERS’ EQUITY
| September 30, | December 31, | |||||||||
| 2002 | 2001 | |||||||||
Common Stock |
||||||||||
Par
value — $.01 |
||||||||||
Shares
authorized — 500,000,000 |
||||||||||
Shares
issued — 148,657,541 and 146,487,624 |
$ | 1.5 | $ | 1.5 | ||||||
Shares
outstanding — 148,612,690 and 146,484,962 |
||||||||||
Additional paid-in capital |
906.4 | 870.1 | ||||||||
Retained earnings |
378.6 | 319.4 | ||||||||
Treasury stock, at cost (44,851 and 2,662 common shares) |
(0.6 | ) | — | |||||||
Accumulated other comprehensive income, net of deferred income taxes: |
||||||||||
Unrealized gain on derivative securities |
44.1 | 14.1 | ||||||||
Unrealized gain on marketable securities |
(0.7 | ) | (0.3 | ) | ||||||
Cumulative translation adjustment |
(8.9 | ) | (10.3 | ) | ||||||
Pension liability adjustment |
(133.4 | ) | (133.4 | ) | ||||||
Total stockholders’ equity |
$ | 1,187.0 | $ | 1,061.1 | ||||||
COMPREHENSIVE INCOME (LOSS)
| For Periods Ended September 30, | |||||||||||||||||
| Three Months | Nine Months | ||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||