ADP Reports Third Quarter Fiscal 2007 Results; Raises Full-Year Revenue Growth Forecast; Confident in Attaining High End of Full-Year EPS Forecast.Third Quarter Revenues Increase 14%; EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. 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 Rises 20% 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 14% revenue growth, to $2.2 billion, and $0.65 earnings per share from continuing operations for the third fiscal quarter ended March 31, 2007, Gary C. Butler, president and chief executive officer, announced today. Pretax and net earnings from continuing operations grew 15% and 16%, 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 20%, from $0.54 a year ago on fewer shares outstanding. ADP has acquired 20.1 million shares for treasury for approximately $945 million during this fiscal year. 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 $2.8 billion at March 31, 2007 including the cash dividend of $690 million received in connection with the Brokerage Services Group (BSG BSG Battlestar Galactica BSG Broadband Stakeholder Group (UK) BSG British Society of Gastroenterology (London, UK) BSG Business Systems Group BSG Business Solutions Group BSG Basigin ) business tax-free spin-off on March 30. The cash balance includes $73 million (U.S.) that was repatriated from BSG's Canadian operations. Discontinued Operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. On March 30, 2007, ADP completed the tax-free spin-off of its BSG business, which was comprised of the Brokerage Services and Securities Clearing and Outsourcing Services (SCOS SCOS Supply Chain Operating Services (i2) SCOS Standing Conference on Organizational Symbolism SCOS Spacecraft Operating System SCOS Scottish Chamber of Safety SCOS Service Center Organization Study ) segments. The results of operations for the BSG business and related separation costs are reported within discontinued operations in the third quarter and in prior periods. In the third quarter ended March 31, 2007, ADP reported a gain of $11.2 million, or $6.9 million after tax, from the January 23, 2007 sale of Sandy Corporation, a business unit within its Dealer Services segment. This amount is recorded in earnings from discontinued operations in the third quarter. Current Quarter Discussion Commenting on the results, Mr. Butler said, "We are extremely pleased with our strong results for the quarter. We have excellent momentum in our businesses and our key business metrics continue to be strong. In addition, in March we completed the acquisition of Intuit's fully outsourced payroll business which we anticipate will contribute approximately $12 million in revenues in the current fiscal year. The Employer Services' acquisitions completed in fiscal 2007 year-to-date contributed 1% of revenue growth in the third quarter." Employer Services "Employer Services' revenues increased 12% for the third quarter compared with last year, reflecting continued strength 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 8%, and beyond payroll revenue growth was particularly strong at 23%. 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, grew 13% in the United States and 12% worldwide. National Account Services, TotalSource[R], Major Accounts Services and GlobalView[R]continued to post strong sales results. Worldwide client retention, while just below last year's record level, remained excellent. The number of employees on our clients' payrolls in the United States increased 3% with growth in all market segments, and Europe continued to show growth compared with a year ago. As anticipated, pretax margin declined approximately 50 basis points in the quarter as a result of a 60 basis point decline due to acquisition activity to date. The continuation in the quarter of the higher step-off level of expenses from last fiscal year were offset by margin improvement from leveraging the growth in the business. The higher step-off level of expenses relates to our investments in sales and implementation headcount and our 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 growth initiatives that increased toward the end of last year's third quarter. As we anniversary that higher expense level in the fourth quarter, we continue to anticipate very strong fourth quarter pretax margin improvement, which is forecasted to drive pretax margin improvement for the full year." Dealer Services "Dealer Services' revenues increased 8% for the third quarter, and 6% internally, excluding the effect of acquisitions. Revenue growth was driven by strong sales 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. Dealer Services' pretax margin improved 340 basis points due to cost synergies Cost Synergy In the context of mergers, cost synergy is the savings in operating costs expected after two companies, who compliment each other's strengths, join. Notes: The savings in operating costs usually come in the form of laying off employees. attained in the international business from the integration of Kerridge Computer Company Ltd (Kerridge) as well as 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. in last year's third quarter relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Kerridge acquisition." Client Funds "Interest on client funds grew 19% over last year's third quarter, to $198 million, due to an 8.3% increase in average client funds balances and a higher average interest yield of 40 basis points." Fiscal 2007 Guidance "We are highly confident that ADP will grow revenues over 13% for the year. The increase from our previous 12% to 13% revenue growth forecast is primarily due to our current estimate of the benefit from foreign exchange rates. We are equally confident that ADP will attain the high end of our earnings per share from continuing operations forecast of $1.79 to $1.83, or 20% to 23% growth, compared with $1.49 earnings per share from continuing operations in fiscal 2006." The fiscal 2007 estimates include: * Approximately 1% increase in revenues, and a reduction to earnings per share of about $0.02, due to the impact of acquisition activity to date. The fiscal 2007 estimates exclude: * The increase in diluted earnings per share from continuing operations of $0.04 from the net one-time items recorded in the first quarter which included the gain from the sale of a Dealer Services non-core minority investment offset by restructuring charges. The increase from the previously reported $0.03 per share for the net one-time items is due to BSG-related restructuring charges being reclassified from continuing operations to discontinued operations when the tax-free spin-off occurred. * The separation costs related to the BSG tax-free spin-off which are reported within discontinued operations. These costs are estimated to be approximately $40 million, which is lower than our previous estimate of $45 - $55 million. "For fiscal 2007 we continue to forecast Employer Services' revenue growth of 12% and pretax margin improvement of 20 basis points driven by a particularly strong fourth quarter. While we anticipate a tough comparison for new business sales growth in the fourth quarter compared with last year's particularly strong fourth quarter, we continue to anticipate double-digit new business sales growth for the year. We continue to anticipate approximately 14% revenue growth in Dealer Services with pretax margin improvement of over 100 basis points. We anticipate an increase of approximately 18% in client funds' interest revenues based on expected growth of approximately 8% in average client funds balances and a 40 basis point improvement in the client portfolio average interest yield to about 4.5%. Our interest assumptions are based on recent futures contracts and forward yield curves." "We are very pleased with our results for the third quarter. Our opportunities for growth are unique, and we continue to be excited about ADP's future growth prospects," Mr. Butler concluded. Fiscal 2007 discontinued operations include the following items: * BSG business, comprised of the Brokerage Services and SCOS segments * Separation costs related to the BSG tax-free spin-off * International income tax impact of the BSG tax-free spin-off * Sandy Corp., a business unit within the Dealer Services segment * Claims Services Group business working capital adjustment The schedules noted below have been restated to reflect the above items as discontinued operations and are posted to the Investor Relations Investor relations The process by which the corporation communicates with its investors. home page (http://www.investquest.com/iq/a/adp/index.htm) of our website www.adp.com under financial data: * Quarterly and full-year statements of earnings for fiscal 2006 * Statements of earnings for the first and second quarters of fiscal 2007 * Quarterly and full-year historical revenue and pretax earnings by reportable segment An analyst conference call will be held today, Tuesday, May 1 at 8:30 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . 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 60 minutes before the webcast at the ADP Investor Relations home page at http://www.investquest.com/iq/a/adp/index.htm. ADP's news releases, current financial information, SEC filings and Investor Relations presentations are accessible at the same website. ADP, with over $7 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 document and other written or oral statements made from time to time by ADP may contain "forward-looking statements" 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. and employee benefits; overall market and economic conditions, including interest rate and foreign currency trends; competitive conditions; 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. ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. These risks and uncertainties, along with the risk factors discussed under "Item 1A. - Risk Factors" in our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended June 30, 2006, should be considered in evaluating any forward-looking statements contained herein. |
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