â/2ÿ ñH6      d 1$&%*ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ*ñ'STATEMENTS OF CONSOLIDATED EARNINGS7ñ'AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES/ñ'(In thousands, except per share amounts)ñ'Years ended June 30, ñ"1998 ñ"1997 ñ"1996ñ"----------ñ"----------ñ"----------ñ 'Revenueñ "$4,798,061ñ "$4,112,186ñ "$3,566,597ñ "----------ñ "----------ñ "----------ñ 'Operating expensesñ "2,063,145ñ "1,722,846ñ "1,516,4073ñ 'General, administrative and selling expensesñ "1,206,844ñ "1,117,557ñ "933,8050ñ'Systems development and programming costsñ"375,214ñ"296,544ñ"249,635$ñ'Depreciation and amortizationñ"244,616ñ"223,435ñ"201,629ñ'Interest expense ñ"24,042 ñ"27,794 ñ"29,731ñ"----------ñ"----------ñ"----------ñ"3,913,861ñ"3,388,176ñ"2,931,207ñ"----------ñ"----------ñ"----------#ñ'Earnings before income taxesñ"884,200ñ"724,010ñ"635,390!ñ'Provision for income taxesñ"278,900ñ"210,510ñ"180,690ñ"----------ñ"----------ñ"----------ñ'Net earningsñ"$ 605,300ñ"$ 513,500ñ"$ 454,700ñ"----------ñ"----------ñ"----------ñ"----------ñ"----------ñ"----------ñ'Basic earnings per shareñ"$ 2.04ñ"$ 1.76ñ"$ 1.57ñ"----------ñ"----------ñ"----------!ñ'Diluted earnings per shareñ"$ 1.98ñ"$ 1.71ñ"$ 1.53ñ"----------ñ"----------ñ"----------ñ!'Basic shares outstandingñ!"296,878ñ!"290,990ñ!"288,967ñ""----------ñ""----------ñ""----------!ñ#'Diluted shares outstandingñ#"310,411ñ#"306,659ñ#"305,009ñ$"----------ñ$"----------ñ$"----------ñ%"----------ñ%"----------ñ%"----------6ñ''See notes to consolidated financial statements.ñ*'page 20"ñ,'CONSOLIDATED BALANCE SHEETS7ñ.'AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES/ñ0'(In thousands, except per share amounts)ñ1'June 30, ñ1"1998 ñ1"1997ñ2"-----------ñ2"----------- ñ4'ASSETSñ5'Current assets: ñ6'Cash and cash equivalentsñ6"$ 752,240ñ6"$ 590,578'ñ7'Short-term marketable securitiesñ7"144,936ñ7"434,341ñ8'Accounts receivableñ8"727,936ñ8"605,068ñ9'Other current assetsñ9"204,192ñ9"175,335ñ:"---------ñ:"---------ñ<'Total current assetsñ<"1,829,304ñ<"1,805,322ñ="---------ñ="---------&ñ?'Long-term marketable securitiesñ?"765,272ñ?"470,164ñ@"---------ñ@"---------ñA'Long-term receivablesñA"177,946ñA"176,771ñB"---------ñB"---------0ñC'Property, plant and equipment -- at cost:ñD'Land and buildingsñD"386,745ñD"361,594 ñE'Data processing equipmentñE"696,424ñE"626,013&ñF'Furniture, leaseholds and otherñF"432,654ñF"364,161ñG"---------ñG"---------ñH"1,515,823ñH"1,351,768$ñI'Less accumulated depreciationñI"932,150ñI"832,423ñJ"---------ñJ"---------ñK"583,673ñK"519,345ñL"---------ñL"---------ñM'Other assetsñM"166,112 ñM"96,383ñN"---------ñN"---------ñO'IntangiblesñO"1,653,048ñO"1,314,787ñP"---------ñP"---------ñQ"$ 5,175,355ñQ"$ 4,382,772ñR"---------ñR"---------ñS"---------ñS"---------+ñU'LIABILITIES AND SHAREHOLDERS' EQUITYñW'Current liabilities:ñX'Notes payableñX"$ 239,811ñX"$ 129,168ñY'Accounts payableñY"119,803ñY"110,2665ñZ'Accrued expenses and other current liabilitiesñZ"806,297ñZ"718,959ñ['Income taxes ñ["55,130 ñ["61,479ñ\"---------ñ\"--------- ñ]'Total current liabilitiesñ]"1,221,041ñ]"1,019,872ñ_'Long-term debtñ_"192,063ñ_"401,162ñ`"---------ñ`"---------ña'Other liabilitiesña"103,056 ña"91,685ñb"---------ñb"---------ñc'Deferred income taxesñc"147,397ñc"102,751ñd'Deferred revenueñd"105,347ñd"106,737ñe"---------ñe"---------ñf'Shareholders' equity:(ñg'Preferred stock, $1.00 par value:+ñh'Authorized, 300 shares; issued, none$ñi'Common stock, $.10 par value:9ñj'Authorized, 500,000 shares; issued, 314,288 shares ñj"31,429 ñj"31,429%ñk'Capital in excess of par valueñk"618,455ñk"480,492ñl'Retained earningsñl"3,374,729ñl"2,922,317Fñm'Treasury stock-- at cost 12,182 and 21,439 shares, respectivelyñm"(515,845)ñm"(697,887)ñn'Translation adjustmentsñn"(102,317)ñn"(75,786)ño"---------ño"---------!ñp'Total shareholders' equityñp"3,406,451ñp"2,660,565ñq"---------ñq"---------ñr"$ 5,175,355ñr"$ 4,382,772ñs"---------ñs"---------ñt"---------ñt"---------6ñv'See notes to consolidated financial statements.ñy'page 216ñ{'STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY7ñ}'AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES/ñ'(In thousands, except per share amounts)ñ€"Common Stockñ€"Common Stockñ€"Capital inñ"----------ñ"-----------ñ"Excess ofñ"Retainedñ"Treasuryñ"Translation ñ‚"Shares ñ‚"Amountñ‚"Par Valueñ‚"Earnings ñ‚"Stockñ‚"Adjustmentsñƒ"-------ñƒ"-------ñƒ"---------ñƒ"----------ñƒ"----------ñƒ"-----------ñ„'BALANCE, JULY 1, 1995ñ„"314,234ñ„"$31,424ñ„"$348,197ñ„"$2,182,838ñ„"$(469,554)ñ„"$ 3,710ñ…'Employee stock plans andñ†'related tax benefits ñ†"-- ñ†"-- ñ†"68,286 ñ†"-- ñ†"37,080 ñ†"--ñ‡'Treasury stock acquiredñˆ'(6,640 shares) ñˆ"-- ñˆ"-- ñˆ"-- ñˆ"--ñˆ"(245,224) ñˆ"--"ñ‰'Debt conversion (42 shares) ñ‰"42ñ‰"4 ñ‰"1,459 ñ‰"-- ñ‰"-- ñ‰"--"ñŠ'Acquisitions (1,513 shares) ñŠ"-- ñŠ"-- ñŠ"4,007 ñŠ"12,530 ñŠ"17,809 ñŠ"--ñ‹'Net earnings ñ‹"-- ñ‹"-- ñ‹"--ñ‹"454,700 ñ‹"-- ñ‹"--#ñŒ'Dividends ($.3875 per share) ñŒ"-- ñŒ"-- ñŒ"--ñŒ"(112,116) ñŒ"-- ñŒ"--ñ'Other transactionsñ"1 ñ"--ñ"(1,486) ñ"-- ñ"(345)ñ"(17,973)ñŽ"-------ñŽ"-------ñŽ"---------ñŽ"----------ñŽ"---------ñŽ"---------ñ'BALANCE, JUNE 30, 1996ñ"314,277 ñ"31,428ñ"420,463ñ"2,537,952ñ"(660,234)ñ"(14,263)ñ‘'Employee stock plans andñ’'related tax benefits ñ’"-- ñ’"-- ñ’"83,283 ñ’"-- ñ’"44,167 ñ’"--ñ“'Treasury stock acquiredñ”'(3,166 shares) ñ”"-- ñ”"-- ñ”"-- ñ”"--ñ”"(127,709) ñ”"--"ñ•'Acquisitions (2,978 shares) ñ•"-- ñ•"--ñ•"(35,390) ñ•"679 ñ•"35,727 ñ•"--#ñ–'Debt conversion (629 shares) ñ–"11ñ–"1 ñ–"13,139 ñ–"-- ñ–"10,162 ñ–"--ñ—'Net earnings ñ—"-- ñ—"-- ñ—"--ñ—"513,500 ñ—"-- ñ—"--"ñ˜'Dividends ($.445 per share) ñ˜"-- ñ˜"-- ñ˜"--ñ˜"(129,814) ñ˜"-- ñ˜"--ñ™'Other transactions ñ™"-- ñ™"--ñ™"(1,003) ñ™"-- ñ™"--ñ™"(61,523)ñš"-------ñš"-------ñš"--------ñš"----------ñš"----------ñš"----------ñœ'BALANCE, JUNE 30, 1997ñœ"314,288 ñœ"31,429ñœ"480,492ñœ"2,922,317ñœ"(697,887)ñœ"(75,786)ñ'Employee stock plans andñž'related tax benefits ñž"-- ñž"-- ñž"68,514 ñž"-- ñž"60,444 ñž"--ñŸ'Treasury stock acquiredñ '(896 shares) ñ "-- ñ "-- ñ "-- ñ "--ñ "(40,907) ñ "-- ñ¡'Acquisitions (205 shares) ñ¡"-- ñ¡"-- ñ¡"6,415 ñ¡"-- ñ¡"6,303 ñ¡"--%ñ¢'Debt conversion (5,925 shares) ñ¢"-- ñ¢"-- ñ¢"64,583 ñ¢"--ñ¢"156,202 ñ¢"--ñ£'Net earnings ñ£"-- ñ£"-- ñ£"--ñ£"605,300 ñ£"-- ñ£"--#ñ¤'Dividends ($.5125 per share) ñ¤"-- ñ¤"-- ñ¤"--ñ¤"(152,888) ñ¤"-- ñ¤"--ñ¥'Other transactions ñ¥"-- ñ¥"--ñ¥"(1,549) ñ¥"-- ñ¥"--ñ¥"(26,531)ñ¦"-------ñ¦"-------ñ¦"--------ñ¦"----------ñ¦"----------ñ¦"----------ñ¨'BALANCE, JUNE 30, 1998ñ¨"314,288ñ¨"$31,429ñ¨"$618,455ñ¨"$3,374,729ñ¨"$(515,845)ñ¨"$(102,317)ñ©"-------ñ©"-------ñ©"--------ñ©"----------ñ©"---------ñ©"---------ñª"-------ñª"-------ñª"--------ñª"----------ñª"---------ñª"---------6ñ¬'See notes to consolidated financial statements.ñ¯'page 22,ñ±'STATEMENTS OF CONSOLIDATED CASH FLOWS7ñ³'AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIESñµ'(In thousands)ñ·'Years ended June 30, ñ·"1998 ñ·"1997 ñ·"1996ñ¸"---------ñ¸"---------ñ¸"---------+ñº'CASH FLOWS FROM OPERATING ACTIVITIESñ»'Net earningsñ»"$ 605,300ñ»"$ 513,500ñ»"$ 454,700$ñ¼'Depreciation and amortizationñ¼"244,616ñ¼"223,435ñ¼"201,629ñ½'Deferred income taxesñ½"(4,847)ñ½"(35,291) ñ½"13,9403ñ¾'Changes in operating assets and liabilities:#ñ¿'Receivables and other assetsñ¿"(129,700)ñ¿"(108,786)ñ¿"(46,321),ñÀ'Accounts payable and accrued expenses ñÀ"40,560 ñÀ"48,263ñÀ"(36,175) ñÁ'Other ñÁ"96,152 ñÁ"77,938 ñÁ"86,494ñÂ"---------ñÂ"---------ñÂ"---------/ñÃ'Net cash flows from operating activitiesñÃ"852,081ñÃ"719,059ñÃ"674,267ñÄ"---------ñÄ"---------ñÄ"---------+ñÆ'CASH FLOWS FROM INVESTING ACTIVITIES(ñÇ'Purchase of marketable securitiesñÇ"(618,401)ñÇ"(659,835)ñÇ"(327,808)2ñÈ'Proceeds from sale of marketable securitiesñÈ"550,405ñÈ"626,686ñÈ"521,881ñÉ'Capital expendituresñÉ"(198,586)ñÉ"(175,289)ñÉ"(163,525)ñÊ'Additions to intangiblesñÊ"(95,797)ñÊ"(15,292)ñÊ"(111,054)7ñË'Acquisitions of businesses, net of cash acquiredñË"(338,436)ñË"(115,438)ñË"(472,783) ñÌ'Other ñÌ"13,634 ñÌ"39,683 ñÌ"5,563ñÍ"---------ñÍ"---------ñÍ"---------/ñÎ'Net cash flows from investing activitiesñÎ"(687,181)ñÎ"(299,485)ñÎ"(547,726)ñÏ"---------ñÏ"---------ñÏ"---------+ñÑ'CASH FLOWS FROM FINANCING ACTIVITIES&ñÒ'Proceeds from issuance of notesñÒ"110,951 ñÒ"45,395 ñÒ"90,746-ñÓ'Proceeds from issuance of common stock ñÓ"80,545 ñÓ"71,263ñÓ"125,617"ñÔ'Repurchases of common stockñÔ"(40,907)ñÔ"(127,709)ñÔ"(245,224)ñÕ'Dividends paidñÕ"(152,888)ñÕ"(129,814)ñÕ"(112,116) ñÖ'Other ñÖ"(939)ñÖ"(2,547) ñÖ"15,240ñ×"--------ñ×"--------ñ×"---------/ñØ'Net cash flows from financing activitiesñØ"(3,238)ñØ"(143,412)ñØ"(125,737)ñÙ"---------ñÙ"---------ñÙ"---------.ñÛ'Net change in cash and cash equivalentsñÛ"161,662ñÛ"276,162 ñÛ"8048ñÜ'Cash and cash equivalents, at beginning of periodñÜ"590,578ñÜ"314,416ñÜ"313,612ñÝ"---------ñÝ"---------ñÝ"---------2ñÞ'Cash and cash equivalents, at end of periodñÞ"$ 752,240ñÞ"$ 590,578ñÞ"$ 314,416ñß"---------ñß"---------ñß"---------ñà"---------ñà"---------ñà"---------6ñâ'See notes to consolidated financial statements.