ADP Reports First Quarter Fiscal 2007 Results; Revenues Grow 15%; EPS Rises to $0.46 Including Increase of $0.03 for Net One-Time Items; Raises Revenue Growth Forecast to 11%; Confirms 17% - 20% EPS Growth for Fiscal 2007.ROSELAND, N.J. -- Automatic Data Processing Same as data processing. , Inc. (NYSE NYSE See: New York Stock Exchange :ADP (1) (Automatic Data Processing) Synonymous with data processing (DP), electronic data processing (EDP) and information processing. (2) (Automatic Data Processing, Inc., Roseland, NJ, www.adp. ) reported 15% revenue growth, to $2.2 billion, and $0.46 earnings per share for the first fiscal quarter ended September 30, 2006, Gary C. Butler, president and chief executive officer, announced today. Pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern and net earnings from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the grew 24% and 25%, respectively, and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of from continuing operations increased 31%, from $0.35 earnings per share a year ago on fewer shares outstanding. The current first fiscal quarter included pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. of $29.8 million, $18.6 million after tax, or $0.03 earnings per share, from one-time items, including a pretax gain of $38.6 million, $24.1 million after tax, from the sale of a Dealer Services non-core minority investment, and restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , including Brokerage facility exit costs, of $8.8 million pretax, $5.5 million after tax. In addition, the current first fiscal quarter included the anticipated higher Employer Services step-off expense level from fiscal 2006 related to increased salesforce and implementation headcount of $8 million, higher HR BPO BPO Business Process Outsourcing BPO Benevolent & Protective Order (of Elks of the USA) BPO Benzoyl Peroxide BPO Business Process Optimization BPO Broker Price Opinions BPO Buffalo Philharmonic Orchestra spending of $15 million, as well as higher than planned selling expenses of $6 million due to stronger than anticipated new business sales growth in the quarter. These pretax expenses totaled nearly $30 million, and decreased earnings per share by $0.03 in the first quarter. ADP has acquired 13.6 million shares for treasury for approximately $635 million fiscal year-to-date. Cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has balances were $2.1 billion at September 30, 2006. Commenting on the results, Mr. Butler said, "We are very pleased with our results for the quarter and our key business metrics are moving in the right direction. In addition, we are delighted to have closed three strategic acquisitions in our Employer Services business to date this fiscal year, and have just signed a fourth. These acquisitions are expected to add approximately $60 million in revenues this fiscal year and are expected to reduce Employer Services' pretax margin this fiscal year by approximately $25 to $30 million, or about $0.03 per share. These transactions bring terrific products to ADP that we will leverage with the distribution capabilities of our large, direct sales organization. Employer Services "Employer Services' revenues increased 12% for the first quarter compared with last year, reflecting continued momentum in the business. In the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , revenues from our traditional payroll and payroll tax Payroll Tax Tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee. In most countries, including the U.S., both state and federal authorities collect some form of payroll tax. filing business grew 9%, and beyond payroll revenues grew 18%. New business sales in the quarter, which reflect annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. recurring revenues anticipated from new orders, exceeded our expectations growing 14% in the United States and 16% worldwide. Strong sales continued in National Account Services, TotalSource[R], and GlobalView(SM). Worldwide client retention remained at excellent levels. The number of employees on our clients' payrolls in the United States increased 2.5% with growth in all market segments, and we are also beginning to see some growth in Europe compared with a year ago. In our fiscal 2007 planning process, we anticipated tougher pretax margin comparisons for the first half of the year as noted above. This higher expense level of nearly $30 million related to Employer Services resulted in a 50 basis point decline in pretax margin compared with last year's first quarter pretax margin that was artificially high due to the lower headcount level. We anticipate similar tough comparisons for the second quarter. Brokerage Services "Brokerage Services' revenues increased nearly 16% for the first quarter compared with last year. Revenues in our Investor Communications business grew 21% driven by 31% growth in our beyond beneficial products revenues, primarily from increased reorganization and fulfillment mailing activity and related postage revenue. Beneficial proxy and interim communications revenues grew 11% from increased volumes. Back office revenues were flat in the quarter with increased trade volumes coming from our largest institutional clients whose incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. trades are processed at lower-tiered rates. Brokerage Services' pretax margin declined 115 basis points in the quarter primarily due to higher postage revenues, which have low margins, as well as the mix of mailings. With the proxy season ahead, we anticipate margin expansion in the second half of the year. Securities Clearing and Outsourcing Services' revenues increased 23%, and the level of pretax loss pretax loss A loss reported before tax benefits are considered. is considerably lower than last year, which is in line with our expectations. Dealer Services "Dealer Services' revenues increased 23% for the first quarter, primarily due to the December 2005 acquisition of UK-based Kerridge Computer Company Ltd. Internal revenue growth was 5% in the quarter. Dealer Services' pretax margin declined 90 basis points and we anticipate pretax margin improvement as the year progresses as we reach the anniversary date of this acquisition. New business sales growth in the quarter was strong compared with last year in our North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. market as well as internationally. Client Funds "Interest on client funds grew 24% over last year's first quarter, to $135 million due to a 9.6% increase in average client funds balances and a higher interest yield of 50 basis points. Fiscal 2007 guidance "We are raising ADP's revenue growth forecast to 11%, up from 10% as a result of momentum in all of our businesses as well as from the acquisition activity in Employer Services. We remain confident in our earnings per share growth forecast of 17% to 20%, up from the $1.85 earnings per share from continuing operations reported in fiscal 2006. The fiscal 2007 estimates include the impact of the acquisition activity to date of 0.6% increase in revenues, and a reduction to earnings per share of about $0.03, and exclude the $0.03 from the one-time items recorded in the first quarter as well as any one-time expenses anticipated in connection with the Brokerage Services Group spin-off. "We are forecasting Employer Services' revenue growth of 12%, up from the prior forecast of 10%. Due to the impact of the acquisitions, as well as higher than anticipated selling expenses related to higher than planned new business sales, we anticipate Employer Services pretax margin improvement of 20 basis points for the fiscal year compared with the prior forecast of about 100 basis points improvement. We are forecasting higher than planned double-digit Employer Services' new business sales growth for the year. We anticipate 5% - 6% revenue growth in Brokerage Services, up from 4% to 5% previously forecasted, and pretax margin improvement of nearly 100 basis points. We anticipate approximately 13% revenue growth in Dealer Services and continue to anticipate pretax margin improvement of over 100 basis points for fiscal 2007. We continue to anticipate an increase of approximately 20% in client funds interest revenues based on expected growth of nearly 10% in client funds balances and a 40 basis point improvement in the overall average interest yield to 4.5%. Our interest assumptions are based on recent futures contracts Futures Contract An exchange traded agreement to buy or sell a particular type and grade of commodity for delivery at an agreed upon place and time in the future. Futures contracts are transferable between parties. and forward yield curves. Spin-off of Brokerage Services "We are progressing as planned with the Brokerage Services Group spin-off, and continue to anticipate completing the spin-off before the end of fiscal 2007. We estimate spin-related expenses of approximately $45 to $55 million, which are not included in the above guidance. "We are particularly pleased with our results for the quarter, especially our Employer Services and Dealer Services new business sales results. Additionally, the recently announced acquisitions provide us with terrific growth opportunities. We are executing well on our strategic initiatives and are highly confident about ADP's future growth opportunities," Mr. Butler concluded. An analyst conference call will be held today, Tuesday, October 31 at 8:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . A live webcast of the call will be available to the public on a listen-only basis. To listen to the webcast and view the slide presentation, go to www.adp.com and click on the webcast icon. The presentation will be available to download and print approximately 30 minutes before the webcast at the ADP Investor Relations Investor relations The process by which the corporation communicates with its investors. home page at http://www.investquest.com/iq/a/aud/index.htm. ADP's news releases, current financial information, SEC filings and Investor Relations presentations are accessible at the same website. ADP, with nearly $9 billion in revenues and more than 570,000 clients worldwide, is one of the largest providers of a broad range of premier, mission-critical, cost-effective transaction processing Updating the appropriate database records as soon as a transaction (order, payment, etc.) is entered into the computer. It may also imply that confirmations are sent at the same time. Transaction processing systems are the backbone of an organization because they update constantly. and information-based business solutions. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] This release and other written or oral statements made from time to time by ADP may contain "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Statements that are not historical in nature and which may be identified by the use of words like "expects," "assumes," "projects," "anticipates," "estimates," "we believe," "could be" and other words of similar meaning, are forward-looking statements. These statements are based on management's expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include: ADP's success in obtaining, retaining and selling additional services to clients; the pricing of products and services; changes in laws regulating payroll taxes, professional employer organizations A professional employer organization (PEO) provides outsourcing of payroll, workers' compensation, human resources and employee benefits administration. It does this by hiring a client company’s employees, thus becoming their employer of record. , employee benefits and registered clearing agencies and broker-dealers; overall market and economic conditions, including interest rate and foreign currency trends; competitive conditions; stock market activity; auto sales Auto Sales The major producers of domestic automobiles report sales monthly. These numbers are seasonally adjusted by the U.S. Department of Commerce and are available to the public one to five business days after the end of each month. and related industry changes; employment and wage levels; changes in technology; availability of skilled technical associates and the impact of new acquisitions and divestitures. In addition, the proposed spin-off of the Brokerage Services Group is subject to inherent risks and uncertainties, including: risks that the spin-off will not be consummated; increased demands on our management team to accomplish the spin-off; significant transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). ; risks of changes in our credit rating and risks from changes in results of operations of our reportable segments. ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. |
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