Summary
Automatic Data Processing, Inc. (ADP) filed an 8-K report on July 28, 2016, detailing its financial results for the fiscal quarter ended June 30, 2016, and announcing a significant service alignment initiative. The initiative aims to streamline ADP's service organization by consolidating operations into strategic locations, with Norfolk, Virginia, and Maitland, Florida, identified as the first two such centers. This move is intended to enhance client service, augment capabilities, and drive long-term operating efficiencies. Investors should note the expected pre-tax restructuring charges associated with this initiative, estimated to be between $100 million and $125 million through fiscal year 2018. These charges are primarily for severance and relocation costs, with additional expenses for contract terminations and asset impairments. The company anticipates a substantial portion of these costs, approximately $45 million in each half of fiscal 2017, with the remainder spread into fiscal 2018.
Key Highlights
- 1ADP announced its financial results for the fiscal quarter ended June 30, 2016, via press release filed as an exhibit.
- 2The company is launching a service alignment initiative to simplify its service organization and align operations with strategic platforms.
- 3Norfolk, Virginia, and Maitland, Florida, are designated as the initial two strategic service locations for the initiative.
- 4The initiative is expected to improve client service experience and enhance service capabilities.
- 5ADP anticipates significant pre-tax restructuring charges totaling $100-$125 million through fiscal year 2018.
- 6These charges include approximately $75-$85 million for severance and $15-$20 million for relocation.
- 7Additional costs for contract termination and asset impairments are expected to range from $10-$20 million.