AUTOMATIC DATA PROCESSING INC — Annual Report 1998

Sep 23, 1998

• -------------------------------------------------------------------------------- FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-5397 AUTOMATIC DATA PROCESSING, INC. (Exact name of registrant as specified in its charter) Delaware 22-1467904 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One ADP Boulevard, Roseland, New Jersey 07068 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 973-994-5000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock, $.10 Par Value New York Stock Exchange (voting) Chicago Stock Exchange Pacific Stock Exchange Liquid Yield Option Notes due 2012 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE 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 the filing requirements for the past 90 days. Yes x No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant as of September 11, 1998 was approximately $21,830,440,000. On September 11, 1998, there were 303,200,554 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's 1998 Annual Report to Shareholders Parts I, II & IV Portions of the Registrant's Proxy Statement for Annual Meeting of Stockholders to be held on November 10, 1998. Part III - -------------------------------------------------------------------------------- 2 Part I Item 1. Business Automatic Data Processing, Inc., incorporated in Delaware in 1961, and its subsidiaries (collectively, "ADP") are engaged in the computing services business. The following summary describes ADP's activities. Industry Segment All of ADP's computing services enable clients to process and/or distribute data (their own, ADP's or that of third parties) and/or to interactively access and utilize ADP and third party databases and information, utilizing ADP's batch, interactive and client site systems. Employer Services ADP Employer Services offers a comprehensive range of payroll, human resources, benefits administration, time and attendance and tax filing and reporting services to more than 400,000 employers in the United States, Canada, Europe and South America. In addition to its direct marketing, Employer Services has marketing relationships with many banks and accountants whereby ADP offers its services to their business clients. Payroll and tax filing and reporting services comprise over 80% of Employer Services' revenue. Payroll services include the preparation of pay checks and direct deposits (with major bank partners), along with supporting journals, summaries and management reports. ADP also supplies the quarterly and annual social security, medicare, and federal, state and local income tax withholding reports required to be filed by employers and employees. ADP's tax filing services process federal, state and local payroll taxes on behalf of ADP clients and remit such taxes to the appropriate taxing authorities when due. As new products evolve (such as new hire reporting, ADP check/full service direct deposit and wage garnishment payment), the ADP Tax Filing Center is also responsible for the efficient movement of funds and information to third parties. ADP's "Payroll AnyWay" strategy presents to businesses of virtually every size and type an extensive menu of outsourced and on-site payroll solutions, from simple software packages to turnkey payroll services. ADP's Employer Services approach to the market is to match a client's needs with the product that will best meet expectations. Approximately 29% of Employer Services' payroll and payroll tax filing services revenue during the past fiscal year was attributable to Emerging Business Services (companies with less than 100 employees); approximately 31% of such revenue was attributable to Major Accounts (companies with between 100 and 999 employees) and approximately 26% of such revenue was attributable to National Accounts (companies with 1,000 or more employees). ADP's Human Resources (HR) services, operating in conjunction with a client's payroll database, provide comprehensive recordkeeping HR services, including benefits administration and outsourcing, applicant tracking, employee history and position control. The various HR systems run on standalone PC's, local or wide area networks or client/server systems. Emerging Business Services processes payroll for approximately 325,000 clients. Major 3 Accounts offers a robust line of best-of-breed payroll and human resource solutions for medium-size companies with full database and functional integration between payroll and HR. Many of the world's largest corporations are ADP National Accounts clients. In many cases, ADP provides system solutions for clients' entire human resource, payroll and benefits needs. For those companies who choose to process these applications in-house, ADP delivers stand-alone services such as tax filing, check printing and distribution, year-end statements (W-2's), and benefits administration. The ADP Tax Filing Center supports all three market segments. It provides an electronic interface between approximately 315,000 ADP clients in the United States and Canada and over 2,000 tax agencies, from the Internal Revenue Service to town governments. ADP complements its payroll and HR services with additional employer services that include products ranging from time and attendance tracking to 401(k) recordkeeping. ADP's unemployment compensation services aid clients in managing and reducing unemployment insurance costs. Peachtree and One Write software business applications are sold to small clients through retail channels. ADP enhanced its position as a leading benefits administration provider with the acquisition of the benefits administration business of William M. Mercer, Incorporated ("Mercer"), and the formation with Mercer of the Administrative Solutions Group, an alliance providing benefits administration and consulting services. TotalSource-SM-, ADP's professional employer organization, supports 26,000 work-site employees in Florida, Georgia and Illinois and is positioned to substantially increase its presence in the fast-expanding employee leasing industry. The continued increase in multinational companies makes payroll and human resource management services a global opportunity. Employer Services already has 23,000 payroll and HR clients in Belgium, France, Germany, Italy, the Netherlands, Spain, Switzerland, the United Kingdom and Brazil. In late 1997, ADP acquired the payroll services business of Royal Bank of Canada. The addition of Royal Bank's payroll clients makes ADP the largest payroll outsourcer in Canada. ADP's acquisition of a Brazilian computing services company permits it to offer employer services solutions to many businesses in Brazil, the world's ninth-largest economy. Brokerage Services ADP's Brokerage Services provides securities processing, desktop productivity applications, and investor communications services to the financial services industry. ADP is the largest provider of securities processing services in North America. In fiscal 1998, ADP processed more than 15% of the retail equity transactions in the United States and Canada, handling an average of over 620,000 trades per day, and on October 28, 1997, ADP's systems handled more than one million trades. In September 1998, ADP signed an agreement with Bridge Information Systems, Inc., a global market information and news company, to create a long-term, strategic alliance to provide market data, desktop applications and transaction processing services to the financial services industry. As part of this alliance, Bridge will purchase the market data assets and products of ADP, which generated approximately $190 million of revenue in fiscal 1998. ADP will acquire a minority interest in Bridge. In addition, ADP signed an agreement with Comprehensive Software Systems (CSS) to 4 exclusively market their BrokerView(TM) desktop product, a browser-based support tool for retail, discount, or independent brokers and trading desk personnel. ADP acquired a minority interest in CSS. ADP Investor Communications Services (ICS), the largest processor and provider of shareholder communications services, handles shareholder mailings and proxy processing for shareholders whose securities are left in "street name" in the custody of ADP's "nominee" clients (principally brokerage firms and banks). In fiscal 1998, ADP processed over 360 million shareholder mailings for over 12,000 publicly-traded companies on behalf of more than 800 brokerage firms and banks and 450 mutual fund families. Shareholder ballots representing approximately 250 billion shares were processed. ADP provides back-office stock brokerage and related financial computing services such as trade processing, cage management, stock loan accounting, on-line inquiry and data collection, portfolio reporting, order matching and on-line trading. All of these services are offered in the United States and Canada. ADP's Wilco Systems' Gloss series international trading and settlement systems offer global multi-instrument, multi-currency trading, settlement and accounting services. As part of its shareholder communication services, StreetLink is a quickly deliverable laser printed alternative to expensive quarterly mailings to shareholders. Proxy Edge is an electronic voting service which dramatically improves voting efficiency and record keeping. PhoneVOTE Services enable mutual fund shareholders to vote their proxy over the telephone for same-day tabulation. Dealer Services ADP's Dealer Services provides computing, data and professional services to automobile and truck dealerships, as well as manufacturers, world-wide. Over 18,000 dealers use ADP's on-site systems and communications networks to manage every area of sales and operations in the U.S., Canada, Europe, Latin America and Taiwan. ADP addresses critical dealership areas and offers software and professional services to improve consumer loyalty, asset management, innovative technology, employee productivity training, manufacturer relations, business improvements and real-time information access. ADP offers clients a service solution that includes computer hardware, licensed software, software support, network consulting, design and hardware maintenance services. Clients use ADP's systems to manage business activities such as accounting, inventory, factory communications, scheduling, finance, insurance, sales and service. ADP designs, establishes and maintains communications networks for its clients that allow interactive communications among multiple site locations for larger dealers as well as links between franchise dealers and their respective manufacturers. These networks are used for new vehicle ordering, status inquiry and warranty submission and validation, parts and vehicle locating, credit application submissions, vehicle repair estimates, vehicle registration and lienholder information. ADP continues to automate the business processes for its clients through value-added products such as electronic parts catalogues, repair shop pricing and scheduling, laser printing, data archiving and document storage, and lease fleet management. Changes in customers' expectations and manufacturers' requirements are modifying how the 5 traditional dealership conducts business. In response to these changes, ADP is providing consulting services to its dealer clients to help them reengineer their management processes. ADP also offers solutions to help employee productivity and training, and provides the tools and services necessary to improve dealership productivity and profitability. Claims Services ADP Claims Services offers a broad line of information products to property and casualty insurance companies, claims adjusters, repair shops and auto parts recycling facilities. These products help insurers to accurately estimate auto damage, bodily injury and property claims and help repairshops and recyclers locate parts and manage their operations. Claims Services offers a broad range of cost containment products and services to the automobile physical damage and property claims markets in North America and Europe. These products and services are designed to assist clients in determining settlement amounts, to improve work flow efficiency, and to locate and utilize cost effective parts options. The products and services include automated collision damage repair estimating products for cars and trucks, integrated electronic digital imaging and communications services, vehicle valuation services for total losses, collision repair management systems products, aftermarket and recycled parts locating and pricing services and related management information products. In 1998, ADP acquired Audatex Holding A.G., the leading provider of automobile insurance claims estimating services outside of North America. With Audatex, Claims Services is able to support clients on a worldwide basis. ADP Hollander provides inventory management and communications products and services to the automotive recycling industry. The products are designed to assist clients in creating and capturing operational efficiencies and expanding their market and sales through electronic parts locating with other auto recyclers and their business partners. In connection with a settlement reached with the Federal Trade Commission, in fiscal 1998 ADP completed the divestiture of certain assets used to facilitate electronic commerce among automotive parts recyclers. The remaining business, formerly called the Parts Services unit, was renamed ADP Hollander. Integrated Medical Solutions provides services designed to assist clients in containing medical expenses and personal injury settlements arising from auto liability and workers compensation claims. ADP delivers integrated proprietary and state legislated fee schedules and treatment protocols, personal injury algorithms, access to preferred provider networks, and medical and bill review outsourcing services. These products and services are designed to assist clients in identifying and paying for only medically appropriate treatments. Nature of Services Provided In each of Employer Services, Dealer Services, Claims Services and most of Brokerage Services, ADP's services primarily involve the processing and utilization of client and/or third party data. In the front-office component of the Brokerage Services business, the primary service takes the form of providing securities, commodities and currencies quotation data (which data is provided by various exchanges) and news to clients; this front-office component represents less than 10% of 6 consolidated revenue. Services to all industries are generally available by the electronic transmission (through communications lines) of computer-generated data and information from and to clients. Services are offered through a variety of systems and networks which run on industry-standard operating systems. Virtually none of ADP's services require ADP-proprietary hardware and/or operating systems. All of ADP's services utilize somewhat similar facilities, computers, communications networks, salesforces, and client service support personnel. ADP's businesses share numerous facilities, selected computer rooms and communications networks, and ADP occasionally transfers some of its employees among business units. The input and output of all of ADP's businesses is data and information. On occasion ADP has transferred services and products between business units. While the labor intensiveness of a service may vary somewhat based on the degree of automation and complexity in providing the service, all services use the same basic functions as described above. None of ADP's service offerings are particularly capital intensive. Markets and Marketing Methods ADP's services are sold broadly across the United States and Canada. Most ADP services are offered in Western Europe and some employer services are now offered in Brazil. Services offered outside the United States amounted to approximately 16% of fiscal 1998 revenue. All services use common marketing techniques, including direct sales methodologies with emphasis on referral sources. None of ADP's major business groups have a single homogenous client base or market. For example, while Brokerage Services primarily serves the retail brokerage market, it also serves banks, commodity dealers, the institutional brokerage market and individual non-brokerage corporations. Dealer Services primarily serves automobile dealers, but also serves truck and agricultural equipment dealers, auto repair shops, used car lots, state departments of motor vehicles, and manufacturers of automobiles, trucks and agricultural equipment. Claims Services has many clients who are insurance companies, but also provides services to automobile manufacturers, body repair shops, salvage yards, distributors of new and used automobile parts and other non-insurance clients. Employer Services has clients from a large variety of industries and markets. Within this client base are concentrations of clients in specific industries. While concentrations of clients exist, no one business group is material to ADP's overall revenue. Employer Services also sells to auto dealers, brokerage clients, and insurance clients. None of ADP's businesses are overly sensitive to price changes. Economic conditions among selected clients and groups of clients may and do have a temporary impact on demand for ADP's services. ADP enjoys a leadership position in each of its major service offerings and does not believe any major service or business unit in ADP is subject to unique market risk. Competition The computing services industry is highly competitive. ADP knows of no reliable statistics by 7 which it can determine the number of its competitors, but it believes that it is one of the largest independent computing services companies in the world. ADP's competitors include other independent computing services companies, divisions of diversified enterprises and banks. Another competitive factor in the computing services industry is the in-house computing function, whereby a company installs and operates its own computing systems. Competition in the computing services industry is primarily based on service responsiveness, product quality and price. ADP believes that it is very competitive in each of these areas and that there are no material negative factors impacting ADP's competitive position in the computing services industry. No one competitor or group of competitors is dominant in the computing services industry. Clients and Client Contracts ADP provides computing services to over 425,000 clients. Annual revenues attributable to large client accounts range from $1 million to approximately $45 million per client, while thousands of small client accounts produce annual revenues of less than $1,000 each. ADP's largest single client accounts for approximately 1% of its annual revenue. ADP has no material "backlog" because the period between the time a client agrees to use ADP's services and the time the service begins is generally very short and because no sale is considered firm until it is installed and begins producing revenue. ADP's average client retention is eight years in Employer Services and is ten or more years in Brokerage, Dealer and Claims Services, and does not vary significantly from period to period. Discounts, rebates and promotions offered by ADP to clients are not material. ADP's services are provided under written Price Quotations or Services Agreements having varying terms and conditions. No one Price Quotation or Service Agreement is material to ADP. Systems Development and Programming During the fiscal years ended June 30, 1998, 1997 and 1996, ADP spent $375,214,000, $296,544,000, and $249,635,000, respectively, on systems development and programming activities for the development of new, and the improvement and maintenance of existing, computing services. Product Development ADP continually upgrades, enhances and expands its existing products and services. Generally, no new product or service has a significant effect on ADP's revenue or negatively impacts its existing products and services, and each existing product and service has a significant remaining life cycle. Licenses ADP is the licensee under a number of agreements for computer programs and databases. ADP's business is not dependent upon a single license or group of licenses. Licenses, patents, 8 trademarks and franchises are not material to ADP's business as a whole. Compensation of Marketing and Sales Personnel The compensation arrangements of ADP's marketing and sales personnel vary significantly based on the tenure of the particular salesperson, with the commission-based portion of total compensation averaging approximately 40%. ADP sets minimum sales quotas on an individual basis. Computer Systems ADP does not manufacture computer systems or act as a distributor of computer systems. ADP may, however, be deemed to be a value-added reseller of computer systems insofar as its services often include computer equipment as part of the total service solution. ADP's services are offered on a variety of computer platforms which run various operating systems. These computer platforms include those offered by IBM, IBM-compatibles, Digital Equipment Corporation, Apple, Motorola, Hewlett Packard and McDonnell Douglas. The industry-standard operating systems supporting such computer platforms include DOS, Windows, OS2, VSE, MVS, VMS, System 7 OS, Unix, Reality and Pick. ADP's service warranty to its clients is that if any errors or omissions occur in its service offerings, ADP will correct them as soon as possible. In addition, ADP provides, either directly or through third parties, maintenance and support for the ADP-provided equipment and software which facilitates the delivery of its services to clients. Number of Employees ADP employed approximately 34,000 persons as of June 30, 1998. Executive Officers of the Registrant See Item 10 in Part III hereof. Item 2. Properties ADP leases space for more than 55 of its processing centers. In addition, ADP leases numerous small processing centers and sales offices. All of these leases, which aggregate approximately 5,900,000 square feet in the United States, Canada, Europe, South America, Asia, Australia and South Africa, expire at various times up to the year 2016. ADP owns 25 of its processing facilities and its corporate headquarters complex in Roseland, New Jersey, which aggregate approximately 2,750,000 square feet. Item 3. Legal Proceedings None Item 4. Submission of Matters to a Vote of Security Holders 9 None 10 Part II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters See "Market Price, Dividend Data and Other" on page 18 of the Registrant's 1998 Annual Report to Shareholders, which information is incorporated herein by reference. As of June 30, 1998, the Registrant had approximately 30,000 registered holders of its Common Stock, par value $.10 per share. The Registrant's Common Stock is traded on the New York, Chicago and Pacific Stock Exchanges. On February 20, 1998, the Registrant issued an aggregate amount of 158,595 shares of its Common Stock to the two shareholders (one such shareholder being a limited liability company) of a company acquired by the Registrant in exchange for all of the issued and outstanding shares of capital stock of such company pursuant to the terms of a stock purchase agreement. On April 28, 1998, the Registrant issued an aggregate amount of 45,978 shares of its Common Stock to six shareholders of another company acquired by the Registrant in exchange for all of the issued and outstanding shares of capital stock of such other company pursuant to the terms of a stock purchase agreement. No underwriters were involved in the foregoing sales of securities. The Company issued the foregoing shares of Common Stock without registration under the Securities Act of 1933, as amended, in reliance upon the exemption therefrom set forth in Section 4(2) of such Act, relating to sales by an issuer not involving a public offering. Item 6. Selected Financial Data See "Selected Financial Data" on page 16 of the Registrant's 1998 Annual Report to Shareholders, which information is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations See "Management's Discussion and Analysis" on pages 17-18 of the Registrant's 1998 Annual Report to Shareholders, the Letters to Shareholders on pages 2-4 of such report and the business descriptions on pages 5-15 of such report, which information is incorporated herein by reference. Item 7A. Quantitative and Qualitative Disclosures About Market Risk The Registrant's investment portfolio consists primarily of high grade fixed income investments, such as AA or better rated fixed income municipal instruments, maturing in less than 7 years, and such portfolio does not subject the Registrant to material market risk exposures. Item 8. Financial Statements and Supplementary Data The financial statements described in Item 14(a) hereof are incorporated herein. The following supplementary data is incorporated herein by reference: Page in 1998 Annual Report to Shareholders ---------------------- 11

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None Part III Item 10. Directors and Executive Officers of the Registrant Executive Officers of the Registrant The executive officers of the Registrant, their ages, positions and the period during which they have been employed by ADP are as follows:

12 Messrs. Benson, Berke, Butler, Daly, Haviland, Martone and Weinbach have each been employed by ADP in senior executive positions for more than the past five years. G. Harry Durity joined ADP in August 1994 as Vice President, Worldwide Business Development. Prior to joining ADP he was Senior Vice President--Corporate Development of Revlon Consumer Products Company. Between 1990 and February 1993 when he joined Revlon, he was President of The Highlands Group, Inc. Russell P. Fradin joined ADP in 1996. Prior to his promotion to Group President, Employer Services, he served as Senior Vice President. Prior to joining ADP, he was a senior partner of McKinsey & Company and had been associated with that firm for 18 years. Eugene A. Hall joined ADP in 1998 as Senior Vice President. Prior to joining ADP, he was a senior partner of McKinsey & Company and had been associated with that firm for 16 years. John Hogan joined ADP in 1993. Prior to his promotion to Group President of the Brokerage Services Group in July 1997, he held various senior Brokerage Services' positions. Prior to joining ADP in July 1993, he had been Senior Vice President, Processing Division for Fidelity Investments/National Financial Services, Inc. for three years. Each of ADP's executive officers is elected for a term of one year and until their successors are chosen and qualified or until their death, resignation or removal. Directors of the Registrant See "ELECTION OF DIRECTORS" in the Proxy Statement for Registrant's 1998 Annual Meeting of Stockholders, which information is incorporated herein by reference. Section 16(B) Beneficial Ownership Reporting Compliance See "SECTION 16(B) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE" in the Proxy Statement for Registrant's 1998 Annual Meeting of Stockholders, which information is incorporated herein by reference. Item 11. Executive Compensation See "COMPENSATION OF EXECUTIVE OFFICERS" in the Proxy Statement for Registrant's 1998 Annual Meeting of Stockholders, which information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management See "ELECTION OF DIRECTORS--Security Ownership of Certain Beneficial Owners and Managers" in the Proxy Statement for Registrant's 1998 Annual Meeting of Stockholders, which information is incorporated herein by reference. 13 Item 13. Certain Relationships and Related Transactions See "COMPENSATION OF EXECUTIVE OFFICERS--Certain Transactions" in the Proxy Statement for Registrant's 1998 Annual Meeting of Stockholders, which information is incorporated herein by reference. 14 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a)1. Financial Statements The following consolidated financial statements of Automatic Data Processing, Inc. and its subsidiaries are included in Part II, Item 8:

Financial information of the Registrant is omitted because the Registrant is primarily an operating company. The Registrant's subsidiaries which are listed on Exhibit 21 attached hereto are wholly-owned. 2. Financial Statement Schedules

All other Schedules have been omitted because they are inapplicable or are not required or the information is included elsewhere in the financial statements or notes thereto. 3. The following exhibits are filed with this Form 10-K or incorporated herein by reference to the document set forth next to the exhibit in the list below:

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17 INDEPENDENT AUDITORS' REPORT ON SCHEDULE To the Board of Directors and Shareholders of Automatic Data Processing, Inc. Roseland, New Jersey We have audited the consolidated financial statements of Automatic Data Processing, Inc. as of June 30, 1998 and 1997, and for each of the three years in the period ended June 30, 1998, and have issued our report thereon dated August 13, 1998; such consolidated financial statements and report are included in your 1998 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedule of Automatic Data Processing, Inc., listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Deloitte & Touche LLP New York, New York August 13, 1998 18 AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (In thousands)

(A) Doubtful accounts written off, less recoveries on accounts previously written off. (B) Acquired in purchase/pooling transactions. 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AUTOMATIC DATA PROCESSING, INC. (Registrant) September 22, 1998 By: /s/ Arthur F. Weinbach ---------------------- Arthur F. Weinbach Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

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22 APPENDIX (As required pursuant to Rule 304(a) of Regulation S-T) The following is a narrative description of the graphic or image material that appears in Exhibit 13 to the registrant's Annual Report of Form 10-K (the Form "10-K"). Exhibit 13 contains particular pages from the Registrant's 1998 Annual Report to Shareholders (the "1998 Annual Report") that are incorporated by reference into the Form 10-K.

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