Company Quick10K Filing
Ceridian
Price49.01 EPS1
Shares149 P/E91
MCap7,310 P/FCF297
Net Debt-357 EBIT48
TEV6,953 TEV/EBIT145
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-06
10-K 2019-12-31 Filed 2020-02-28
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-07-30
10-Q 2019-03-31 Filed 2019-05-01
S-1 2019-03-15 Public Filing
10-K 2018-12-31 Filed 2019-02-28
S-1 2018-11-09 Public Filing
10-Q 2018-09-30 Filed 2018-10-29
10-Q 2018-06-30 Filed 2018-08-09
10-Q 2018-03-31 Filed 2018-05-24
S-1 2018-03-26 Public Filing
8-K 2020-06-18
8-K 2020-06-11
8-K 2020-05-06
8-K 2020-05-05
8-K 2020-04-28
8-K 2020-04-08
8-K 2020-04-02
8-K 2020-03-31
8-K 2020-02-27
8-K 2020-02-05
8-K 2020-02-04
8-K 2020-01-31
8-K 2019-12-17
8-K 2019-11-12
8-K 2019-11-07
8-K 2019-11-01
8-K 2019-09-04
8-K 2019-08-01
8-K 2019-07-30
8-K 2019-05-21
8-K 2019-05-07
8-K 2019-05-01
8-K 2019-05-01
8-K 2019-05-01
8-K 2019-04-09
8-K 2019-03-14
8-K 2019-02-14
8-K 2019-02-05
8-K 2018-10-29
8-K 2018-08-08
8-K 2018-08-07
8-K 2018-07-22
8-K 2018-05-22
8-K 2018-05-09
8-K 2018-04-30

CDAY 10Q Quarterly Report

Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.4 cday-ex104_23.htm
EX-31.1 cday-ex311_7.htm
EX-31.2 cday-ex312_8.htm
EX-32.1 cday-ex321_9.htm
EX-32.2 cday-ex322_6.htm

Ceridian Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02016201720182020
Assets, Equity
0.30.20.10.1-0.0-0.12016201720182020
Rev, G Profit, Net Income
2.01.30.6-0.0-0.7-1.42016201720182020
Ops, Inv, Fin

cday-10q_20200331.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly reporting period ended March 31, 2020

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                     to                    

Commission file number 001-38467

 

Ceridian HCM Holding Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

46-3231686

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer

Identification Number)

3311 East Old Shakopee Road

Minneapolis, Minnesota 55425

(952) 853-8100

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, $0.01 par value

 

CDAY

 

New York Stock Exchange

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as the latest practicable date: 145,020,556 shares of Common Stock, $0.01 par value per share, as of May 4, 2020.

 

 

 


Ceridian HCM Holding Inc.

Table of Contents

 

 

 

Page

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

3

 

 

PART I. FINANCIAL INFORMATION

5

 

 

 

Item 1.

Condensed Consolidated Financial Statements (unaudited)

5

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

35

 

 

 

Item 4.

Controls and Procedures

36

 

 

PART II. OTHER INFORMATION

37

 

 

 

Item 1.

Legal Proceedings

37

 

 

 

Item 1A.

Risk Factors

37

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

 

 

 

Item 3.

Defaults Upon Senior Securities

42

 

 

 

Item 4.

Mine Safety Disclosures

42

 

 

 

Item 5.

Other Information

42

 

 

 

Item 6.

Exhibits

43

 

2


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”) contains, or incorporates by reference, not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and that are subject to the safe harbor created by those sections. Forward-looking statements, including, without limitation, statements concerning the conditions of the human capital management solutions industry and our operations, performance, and financial condition, including, in particular, statements relating to our business, growth strategies, product development efforts, and future expenses. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “assumes,” “projects,” “could,” “may,” “will,” “should,” and similar references to future periods, or by the inclusion of forecasts or projections.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national, or global political, economic, business, competitive, market, and regulatory conditions and the following:

 

 

the impact of the Coronavirus disease 2019 (“COVID-19”) pandemic on our business, operations, and financial results;

 

our inability to attain or to maintain profitability;

 

significant competition for our solutions;

 

our inability to continue to develop or to sell our existing Cloud solutions;

 

our inability to manage our growth effectively;

 

the risk that we may not be able to successfully migrate our Bureau customers to our Cloud solutions or to offset the decline in Bureau revenue with Cloud revenue;

 

the decline or slower than expected development of the market for enterprise cloud computing;

 

failure of our efforts to increase use of our Cloud solutions and our other applications may not succeed;

 

our failure to provide enhancements and new features and modifications to our solutions;

 

failure to comply the Federal Trade Commission’s (“FTC”) ongoing consent order regarding data protection;

 

system interruptions or failures, including cyber-security breaches, identity theft, or other disruptions that could compromise our information;

 

our failure to comply with applicable privacy, security, data, and financial services laws, regulations and standards;

 

changes in regulations governing financial services, privacy concerns, and laws or other domestic or foreign data protection regulations;

 

the risk of loss caused by customer failure to repay distribution of earned net wages and associated tax amounts made on behalf of our customers for our Dayforce Wallet or other services;

 

our inability to successfully expand our current offerings into new markets or further penetrate existing markets;

 

our inability to meet the more complex configuration and integration demands of our large customers;

 

reductions in our customers’ employment levels or other overall declines in the financial viability of our current and prospective customers;

 

the risk of our customers declining to renew their agreements with us or renewing at lower performance fee levels;

 

our failure to manage our technical operations infrastructure;

 

our inability to maintain necessary third party relationships, and third party software licenses or there are errors in the software we license;

 

our inability to protect our intellectual property rights, proprietary technology, information, processes, and know-how;

 

our failure to keep pace with rapid technological changes and evolving industry standards;

 

general economic, political and market forces beyond our control; or

 

changes in laws and regulations related to the Internet or changes in the Internet infrastructure itself.

3


Please refer to Part II, Item IA, “Risk Factors” of this Form 10-Q and Part I, Item IA, “Risk Factors” of our most recently filed Annual Report on Form 10-K, for the year ended December 31, 2019 (“2019 Form 10-K”), for a further description of these and other factors. Although we have attempted to identify important risk factors, there may be other risk factors not presently known to us or that we presently believe are not material that could cause actual results and developments to differ materially from those made in or suggested by the forward-looking statements contained in this Form 10-Q. If any of these risks materialize, or if any of the above assumptions underlying forward-looking statements prove incorrect, actual results and developments may differ materially from those made in or suggested by the forward-looking statements contained in this Form 10-Q. For the reasons described above, we caution you against relying on any forward-looking statements. Any forward-looking statement made by us in this Form 10-Q speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or to revise any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as may be required by law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should be viewed as historical data.

4


PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Ceridian HCM Holding Inc.

Condensed Consolidated Balance Sheets

(Dollars in millions, except share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and equivalents

 

$

255.3

 

 

$

281.3

 

Trade and other receivables, net

 

 

82.8

 

 

 

80.4

 

Prepaid expenses and other current assets

 

 

68.9

 

 

 

57.9

 

Total current assets before customer trust funds

 

 

407.0

 

 

 

419.6

 

Customer trust funds

 

 

3,649.5

 

 

 

3,204.1

 

Total current assets

 

 

4,056.5

 

 

 

3,623.7

 

Right of use lease asset

 

 

34.8

 

 

 

32.0

 

Property, plant, and equipment, net

 

 

124.6

 

 

 

128.3

 

Goodwill

 

 

1,939.5

 

 

 

1,973.5

 

Other intangible assets, net

 

 

176.5

 

 

 

177.9

 

Other assets

 

 

138.2

 

 

 

150.3

 

Total assets

 

$

6,470.1

 

 

$

6,085.7

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

9.7

 

 

$

10.8

 

Current portion of long-term lease liabilities

 

 

8.4

 

 

 

8.8

 

Accounts payable

 

 

34.9

 

 

 

43.2

 

Deferred revenue

 

 

26.8

 

 

 

25.5

 

Employee compensation and benefits

 

 

49.3

 

 

 

75.9

 

Other accrued expenses

 

 

18.4

 

 

 

13.9

 

Total current liabilities before customer trust funds obligations

 

 

147.5

 

 

 

178.1

 

Customer trust funds obligations

 

 

3,605.2

 

 

 

3,193.6

 

Total current liabilities

 

 

3,752.7

 

 

 

3,371.7

 

Long-term debt, less current portion

 

 

665.0

 

 

 

666.3

 

Employee benefit plans

 

 

113.9

 

 

 

117.2

 

Long-term lease liabilities, less current portion

 

 

32.8

 

 

 

30.1

 

Other liabilities

 

 

20.1

 

 

 

18.1

 

Total liabilities

 

 

4,584.5

 

 

 

4,203.4

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par, 500,000,000 shares authorized, 144,937,946 and

   144,386,618 shares issued and outstanding as of March 31, 2020, and

   December 31, 2019, respectively

 

 

1.4

 

 

 

1.4

 

Additional paid in capital

 

 

2,473.0

 

 

 

2,449.1

 

Accumulated deficit

 

 

(221.2

)

 

 

(229.8

)

Accumulated other comprehensive loss

 

 

(367.6

)

 

 

(338.4

)

Total stockholders’ equity

 

 

1,885.6

 

 

 

1,882.3

 

Total liabilities and equity

 

$

6,470.1

 

 

$

6,085.7

 

 

See accompanying notes to condensed consolidated financial statements.

5


 

Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Operations

(Unaudited, dollars in millions, except share and per share data)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

Recurring services

 

$

181.5

 

 

$

172.8

 

Professional services and other

 

 

41.2

 

 

 

30.9

 

Total revenue

 

 

222.7

 

 

 

203.7

 

Cost of revenue:

 

 

 

 

 

 

 

 

Recurring services

 

 

52.2

 

 

 

50.9

 

Professional services and other

 

 

42.6

 

 

 

35.3

 

Product development and management

 

 

17.6

 

 

 

15.2

 

Depreciation and amortization

 

 

9.8

 

 

 

8.7

 

Total cost of revenue

 

 

122.2

 

 

 

110.1

 

Gross profit

 

 

100.5

 

 

 

93.6

 

Selling, general, and administrative

 

 

74.2

 

 

 

66.2

 

Operating profit

 

 

26.3

 

 

 

27.4

 

Interest expense, net

 

 

6.9

 

 

 

8.9

 

Other expense, net

 

 

2.6

 

 

 

1.6

 

Income before income taxes

 

 

16.8

 

 

 

16.9

 

Income tax expense

 

 

8.2

 

 

 

5.7

 

Net income

 

$

8.6

 

 

$

11.2

 

Net income per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.06

 

 

$

0.08

 

Diluted

 

$

0.06

 

 

$

0.08

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

144,645,325

 

 

 

140,149,271

 

Diluted

 

 

151,178,498

 

 

 

147,042,228

 

 

See accompanying notes to condensed consolidated financial statements.

6


Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, dollars in millions)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Net income

 

$

8.6

 

 

$

11.2

 

Items of other comprehensive income (loss) before income taxes:

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustment

 

 

(49.1

)

 

 

12.3

 

Change in unrealized gain from invested customer trust funds

 

 

23.4

 

 

 

21.9

 

Change in pension liability adjustment (1)

 

 

3.3

 

 

 

2.5

 

Other comprehensive (loss) income before income taxes

 

 

(22.4

)

 

 

36.7

 

Income tax expense, net

 

 

6.8

 

 

 

2.7

 

Other comprehensive (loss) income after income taxes

 

 

(29.2

)

 

 

34.0

 

Comprehensive (loss) income

 

$

(20.6

)

 

$

45.2

 

 

(1)

The amount of the pension liability adjustment recognized in the condensed consolidated statements of operations within other expense, net was $3.2 million and $2.6 million during the three months ended March 31, 2020, and 2019, respectively.  

 

See accompanying notes to condensed consolidated financial statements.

7


Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited, dollars in millions, except share data)

 

 

 

Common Stock

 

 

Additional

Paid In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders

 

 

 

Shares

 

 

$

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance as of December 31, 2019

 

 

144,386,618

 

 

$

1.4

 

 

$

2,449.1

 

 

$

(229.8

)

 

$

(338.4

)

 

$

1,882.3

 

Net income

 

 

 

 

 

 

 

 

 

 

 

8.6

 

 

 

 

 

 

8.6

 

Issuance of common stock under share-based compensation plans

 

 

551,328

 

 

 

 

 

 

11.4

 

 

 

 

 

 

 

 

 

11.4

 

Share-based compensation

 

 

 

 

 

 

 

 

12.5

 

 

 

 

 

 

 

 

 

12.5

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(49.1

)

 

 

(49.1

)

Change in unrealized gain, net of tax of $6.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17.4

 

 

 

17.4

 

Change in pension liability adjustment, net of tax of $0.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.5

 

 

 

2.5

 

Balance as of March 31, 2020

 

 

144,937,946

 

 

$

1.4

 

 

$

2,473.0

 

 

$

(221.2

)

 

$

(367.6

)

 

$

1,885.6

 

 

 

 

 

 

 

Common Stock

 

 

Additional

Paid In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders

 

 

 

Shares

 

 

$

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance as of December 31, 2018

 

 

139,453,710

 

 

$

1.4

 

 

$

2,325.6

 

 

$

(335.6

)

 

$

(375.9

)

 

$

1,615.5

 

Cumulative-effect adjustment to accumulated deficit related to

   the adoption of ASU 2018-02

 

 

 

 

 

 

 

 

 

 

 

27.1

 

 

 

(27.1

)

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

11.2

 

 

 

 

 

 

11.2

 

Issuance of common stock under share-based compensation plans

 

 

1,221,622

 

 

 

 

 

 

20.1

 

 

 

 

 

 

 

 

 

20.1

 

Share-based compensation

 

 

 

 

 

 

 

 

6.0

 

 

 

 

 

 

 

 

 

6.0

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12.3

 

 

 

12.3

 

Change in unrealized gain, net of tax of $2.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19.2

 

 

 

19.2

 

Change in pension liability adjustment, net of tax of $0.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.5

 

 

 

2.5

 

Balance as of March 31, 2019

 

 

140,675,332

 

 

$

1.4

 

 

$

2,351.7

 

 

$

(297.3

)

 

$

(369.0

)

 

$

1,686.8

 

 

See accompanying notes to condensed consolidated financial statements.

8


Ceridian HCM Holding Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, dollars in millions)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Net income

 

$

8.6

 

 

$

11.2

 

Adjustments to reconcile net income to net cash provided by (used in)

   operating activities:

 

 

 

 

 

 

 

 

Deferred income tax expense (benefit)

 

 

4.1

 

 

 

(1.9

)

Depreciation and amortization

 

 

11.8

 

 

 

14.4

 

Amortization of debt issuance costs and debt discount

 

 

0.3

 

 

 

0.3

 

Net periodic pension and postretirement cost

 

 

0.8

 

 

 

1.3

 

Non-cash share-based compensation

 

 

12.5

 

 

 

6.0

 

Other

 

 

0.8

 

 

 

0.5

 

Changes in operating assets and liabilities excluding effects of acquisitions and divestitures:

 

 

 

 

 

 

 

 

Trade and other receivables

 

 

(4.5

)

 

 

(3.8

)

Prepaid expenses and other current assets

 

 

(7.5

)

 

 

(7.0

)

Accounts payable and other accrued expenses

 

 

(2.0

)

 

 

(5.8

)

Deferred revenue

 

 

2.1

 

 

 

(0.2

)

Employee compensation and benefits

 

 

(26.4

)

 

 

(16.9

)

Accrued interest

 

 

 

 

 

3.4

 

Accrued taxes

 

 

0.9

 

 

 

(8.1

)

Other assets and liabilities

 

 

(0.1

)

 

 

(2.2

)

Net cash provided by (used in) operating activities

 

 

1.4

 

 

 

(8.8

)

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Purchase of customer trust funds marketable securities

 

 

(24.6

)

 

 

(143.3

)

Proceeds from sale and maturity of customer trust funds marketable securities

 

 

49.5

 

 

 

49.8

 

Expenditures for property, plant, and equipment

 

 

(4.9

)

 

 

(4.0

)

Expenditures for software and technology

 

 

(10.7

)

 

 

(9.9

)

Acquisition costs, net of cash acquired

 

 

 

 

 

(10.2

)

Net cash provided by (used in) investing activities

 

 

9.3

 

 

 

(117.6

)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Increase in customer trust funds obligations, net

 

 

480.8

 

 

 

1,916.1

 

Proceeds from issuance of common stock under share-based compensation plans

 

 

11.4

 

 

 

20.1

 

Repayment of long-term debt obligations

 

 

(2.7

)

 

 

(1.7

)

Net cash provided by financing activities

 

 

489.5

 

 

 

1,934.5

 

Effect of exchange rate changes on cash, restricted cash, and equivalents

 

 

(14.5

)

 

 

3.9

 

Net increase in cash, restricted cash, and equivalents

 

 

485.7

 

 

 

1,812.0

 

Cash, restricted cash, and equivalents at beginning of period

 

 

1,658.6

 

 

 

1,106.3

 

Cash, restricted cash, and equivalents at end of period

 

$

2,144.3

 

 

$

2,918.3

 

Reconciliation of cash, restricted cash, and equivalents to the condensed consolidated

   balance sheets

 

 

 

 

 

 

 

 

Cash and equivalents

 

$

255.3

 

 

$

206.3

 

Restricted cash and equivalents included in customer trust funds

 

 

1,889.0

 

 

 

2,712.0

 

Total cash, restricted cash, and equivalents

 

$

2,144.3

 

 

$

2,918.3

 

 

See accompanying notes to condensed consolidated financial statements.

9


Ceridian HCM Holding Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Organization

Ceridian HCM Holding Inc. and its subsidiaries (also referred to in this report as “Ceridian,” “we,” “our,” “us,” or the “Company”) offer a broad range of services and software designed to help employers more effectively manage employment processes, such as payroll, payroll-related tax filing, human resource information systems, employee self-service, time and labor management, employee assistance programs, and recruitment and applicant screening. Our technology-based services are typically provided through long-term customer relationships that result in a high level of recurring revenue. Our operations are primarily located in the United States and Canada.  

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accounting policies we follow are set forth in Note 2, “Summary of Significant Accounting Policies,” to our audited consolidated financial statements in our 2019 Form 10-K. The following notes should be read in conjunction with these policies and other disclosures in our 2019 Form 10-K.

In the opinion of management, the unaudited condensed consolidated financial statements contained herein reflect all adjustments (consisting only of normal recurring adjustments, except as set forth in these notes to condensed consolidated financial statements) necessary to present fairly in all material aspects the financial position, results of operations, comprehensive income (loss), and cash flows from all periods presented. Interim results are not necessarily indicative of results for a full year.

 

Internally Developed Software Costs

In accordance with ASC Topic 350, we capitalize costs associated with software developed or obtained for internal use when both the preliminary project stage is completed and our management has authorized further funding for the project, which it deems probable of completion. Capitalized software costs include only: (1) external direct costs of materials and services consumed in developing or obtaining the software; (2) payroll and payroll-related costs for employees who are directly associated with and who devote time to the project; and (3) interest costs incurred while developing the software. Capitalization of these costs ceases no later than the point at which the project is substantially complete and ready for its intended purpose. We do not include general and administrative costs and overhead costs in capitalizable costs. We charge research and development costs and other software maintenance costs related to software development to earnings as incurred.

Deferred Costs

Deferred costs, which primarily consist of deferred sales commissions, included within Other assets on our condensed consolidated balance sheets were $101.0 million and $106.4 million as of March 31, 2020, and December 31, 2019, respectively. Amortization expense for the deferred costs was $9.0 million and $7.7 million for the three months ended March 31, 2020, and 2019, respectively.

Recently Issued Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-14, “Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans,” which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.  This update removes disclosures that are no longer considered cost beneficial, adds disclosures identified as relevant, and clarifies certain specific requirements of disclosures to improve the effectiveness of disclosures in the notes to financial statements.  The amendments in this update are effective for public business entities for fiscal years ending after December 15, 2020.  The amendments in this update should be applied on a retrospective basis to all periods presented. The adoption of this guidance will not have a significant impact on our annual defined benefit plan and other postretirement plan disclosures.

10


In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform,” which provides guidance for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.  The amendments in this guidance apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.  The amendments in this guidance provide for an optional method in which modifications of contracts within the scope of ASC Topic 310, Receivables, and ASC Topic 470, Debt, should be accounted for by prospectively adjusting the effective interest rate, in addition to several other optional methods and exceptions.  The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022.  We have not yet determined the impact of the adoption of this guidance on our Senior Secured Credit Facility.

 

 

3. Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of March 31, 2020, our financial assets and liabilities measured at fair value on a recurring basis were categorized as follows:

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

 

Level 3

 

 

 

(Dollars in millions)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale customer trust funds assets

 

$

1,760.5

 

 

$

 

 

$

1,760.5

 

(a)

 

$

 

Total assets measured at fair value

 

$

1,760.5

 

 

$

 

 

$

1,760.5

 

 

 

$

 

As of December 31, 2019, our financial assets and liabilities measured at fair value on a recurring basis were categorized as follows: