Ceridian Reports Second Quarter 2006 Results; Second Quarter EPS up 32%; Earnings Guidance Raised for the Year; William L. Trubeck Joins Board of Directors.MINNEAPOLIS -- Ceridian Corporation (NYSE NYSE See: New York Stock Exchange :CEN CEN - Conseil Européen pour la Normalisation. A body coordinating standardisation activities in the EEC and EFTA countries. ):
Second Quarter 2006 Highlights:
-- EPS of $.29 per diluted share exceeds April guidance range and
includes a $.02 income tax related gain.
-- Revenue of $387.1 million up 8 percent over prior year.
-- Human Resource Solutions revenue up 6 percent, to $271.3
million.
-- Comdata revenue up 13 percent, to $115.8 million.
-- Stock repurchased during quarter was 9.1 million shares for
$221.4 million.
-- HRS and Comdata segment operating margins strong at 7.6
percent and 34.7 percent, respectively.
Ceridian Corporation (NYSE:CEN) today reported second quarter 2006 net earnings of $42.2 million, or $.29 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, on revenue of $387.1 million. For the second quarter of 2005, net earnings were $33.5 million, or $.22 per diluted share which included a tax credit of $.04 per diluted share, on revenue of $358.0 million. For the six months ended June 30, 2006, net earnings were $78.4 million, or $.53 per diluted share, on revenue of $771.4 million. For the six months ended June 30, 2005, net earnings were $55.5 million, or $.37 per diluted share, on revenue of $715.4 million. "The second quarter results were outstanding," said Ronald L. Turner Ronald L. Turner was the Chairman and chief executive officer of Ceridian Corporation. Turner joined Ceridian in 1993 as President of Computing Devices International. He was appointed Executive Vice President of Operations for Ceridian Corporation in 1997 and President and Chief , president and chief executive officer of Ceridian. "Both the Human Resource Solutions (HRS hrs abbr (= hours) → h hrs abbr (= hours) → Std. ) business and the Comdata business turned in strong performances, which drove the second quarter results to the high end of our guided range for revenue, and exceeded our guided range for margins and earnings per diluted share. "Revenue for the quarter in HRS was up 6 percent over last year, which was in line with our guidance," Turner continued. "Particularly encouraging was the improvement in HRS profitability during the quarter. HRS segment earnings as a percentage of revenue more than doubled from the prior year, and were well above our guided range. The major factors driving the current year improvement were higher interest income on a growing float balance, continuing progress on our margin improvement initiatives, and internal revenue growth. "The primary operational indicators in the HRS business were in line with our expectations," Turner said. "Float balances grew 8.2 percent, customer retention was stable, and customer employment levels were up and in line with our plan for the quarter. "As expected, overall order growth in HRS was down comparatively since a large government contract was signed in the second quarter of 2005," Turner continued. "However, order growth in the core HRS businesses (which excludes HRO HRO Housing Referral Office HRO Rostock (Germany, auto license plate) HRO Human Resources Outsourcing HRO Hogeschool Rotterdam (The Netherlands) HRO Human Resources Office HRO Ham Radio Outlet and government) increased by double digits Double Digits was a pricing game on the American television game show, The Price Is Right. Played from April 20, 1973 through May 18, 1973's show, it was played for a car and used small prizes. , led by strong year-over-year improvement in international signings. HRS order growth for the year is still expected to be in double digits. We have submitted a competitive multi-year bid to the U.S. Department of Defense for the government follow-on effort which we believe will be awarded in the last half of 2006. "Comdata turned in another very strong performance this quarter," said Turner. "Revenue growth exceeded our guided range, up 13 percent over the second quarter of last year. Higher fuel prices accounted for about 3 percent of the increase. Comdata's new business initiatives continued to gain momentum during the quarter. Together, new services such as BusinessLink, private label processing and merchant processing accounted for about 3 points of Comdata's year over year growth. Stored Value Systems (SVS SVS - OS/VS2 ) again grew in double digits, including a tripling of international SVS revenue during the quarter which added a full point to Comdata's overall growth rate. "Comdata's segment earnings as a percentage of revenue improved 160 basis points over the prior year quarter, despite a loss of $2.2 million on diesel fuel derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. ," Turner continued. "A favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. business mix, economies of scale, and expense controls all contributed to Comdata's improved profitability during the quarter. "The strong overall earnings performance resulted in healthy cash generation during the quarter," said Douglas C. Neve, executive vice president and chief financial officer of Ceridian. "We effectively deployed our cash balances during the quarter by repurchasing 9.1 million Ceridian shares for $221.4 million. In addition, we made a contribution of $75 million to our legacy defined benefit pension plan. We believe that both of these actions will generate greater returns on invested capital, and will be accretive to 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 immediately. "Despite these actions, our net cash balance remained healthy at the end of the quarter," Neve concluded. "The cash balance as of June 30, 2006, was $171.3 million versus debt of $98.4 million. We intend to continue to allocate To reserve a resource such as memory or disk. See memory allocation. capital to maximize returns, while at the same time maintaining an acceptable risk profile in the market." Stock-based compensation expense for the quarter was in line with plan, at $4.1 million pre-tax, or $.02 per share. Stock-based compensation expense in the second quarter of 2005 was $0.6 million pre-tax. Sale of Retirement Plan Services (RPS rps abbr. revolutions per second ) As announced yesterday, Ceridian has entered into an agreement to sell the major portion of its Retirement Plan Services (RPS) recordkeeping and administration business to The Newport Group, a leading retirement services provider based in Heathrow, Florida Heathrow is a census-designated place and an unincorporated suburban community in Seminole County, Florida, United States. Heathrow is located on the I-4 Corridor in Central Florida, 19 miles Northeast of Orlando and 38 miles Southwest of Daytona Beach. . This transaction is expected to close at the end of July 2006. The Company expects to recognize a gain on the sale of these assets during the third quarter of approximately $0.02 per diluted share. It is anticipated that the transaction will have no additional impact on diluted 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. for 2006, but will negatively impact HRS revenues in the third and fourth quarters of 2006 by approximately $3 million and $4 million, respectively. Guidance that follows for the remainder of 2006 includes the financial impact of this transaction. Guidance for 2006 Earnings per diluted share for the full year are now expected to be between $1.12 and $1.17, including the expected gain The expected gain (or expected return) is the weighted-average most likely outcome in gambling, probability theory, economics or finance. Discrete scenarios In gambling and probability theory, there is usually a discrete set of possible outcomes. of $.02 per diluted share on the sale of the RPS business during the third quarter and the income tax gain of $.02 per diluted share recorded during the second quarter. Guidance also includes the impact of adopting SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 123R. Total stock-based compensation expense for 2006 is expected to be approximately $.10 per share, of which $.06 was incurred in the first half of the year. We estimate that the impact of adopting SFAS No. 123R for 2005 would have lowered 2005 earnings per share of $.86 by approximately $.06 per share. Except for the approximately $7 million revenue impact anticipated from the sale of the major portion of the RPS business, revenue guidance for the remainder of 2006 is unchanged. Total 2006 revenue is expected to be between $1,565 million and $1,590 million. HRS revenue for the year is expected to be between $1,110 million and $1,125 million. HRS segment margins as a percentage of revenue for 2006 are expected to improve to approximately 9 percent, including the impact of stock-based compensation expense. Comdata revenue for 2006 is expected to be between $455 million and $465 million, with segment margins as a percentage of revenue in the range of 33 percent to 34 percent, including the impact of stock-based compensation expense. Stock-based compensation expense is expected to reduce segment margins as a percentage of revenue in both business segments by approximately 1 percent in 2006. The tax rate for 2006, exclusive of tax settlements and other discrete items, is expected to be approximately 38.5 percent. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses for 2006 is expected to be in excess of $225 million, not including the impact of the $75 million pension plan contribution made in the second quarter. Capital expenditures and depreciation and amortization for 2006 are expected to be approximately $65 million, and $85 million, respectively. Revenue and earnings guidance by quarter for the remainder of 2006 follows. Quarterly guidance does not attempt to predict, and does not include, any unrealized gain Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. or loss related to the "mark to market" of Comdata's diesel fuel derivative instruments. Third quarter diluted EPS is expected to be $.27 to $.28 per share, including approximately $.02 per diluted share for stock-based compensation expense and including a gain on the RPS sale transaction of approximately $.02 per diluted share. HRS revenue is expected to be between $265 million and $270 million, including the anticipated impact of the sale of RPS. HRS segment margins as a percentage of revenue are expected to be approximately 8 percent, including the anticipated impact of the RPS sale. Comdata revenue is expected to be between $120 million and $125 million with segment margins as a percentage of revenue of 33 percent to 34 percent. Fourth quarter diluted EPS is expected to be between $.32 and $.36 per share, including approximately $.02 per diluted share for stock-based compensation expense. HRS revenue is expected to be between $295 million and $305 million, including the anticipated impact of the sale of RPS. HRS segment margins as a percentage of revenue are expected to be seasonally high, between 12 percent and 13 percent. Comdata revenue is expected to be between $115 million and $120 million with segment margins as a percentage of revenue of 33 percent to 34 percent. The Company manages diesel fuel price risk by holding derivative instruments tied to diesel fuel prices. Approximately 80 percent of Comdata's 2006 diesel fuel related revenue exposure has been locked in at an average price of $2.55 per gallon gallon: see English units of measurement. . The derivative instruments expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. at the end of 2006. Quarterly results for Comdata could be volatile as these contracts are "marked to market" at the end of each period, but for the full year, the gain or loss on derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. included in Comdata's results will be approximately equal to the cash flows related to these instruments. William L. Trubeck joins Board The Company also announced today that William L. Trubeck has joined the Board of Directors on July 25, 2006. Mr. Trubeck is executive vice president and chief financial officer of H&R Block, Inc. He previously served as executive vice president and chief financial officer of Waste Management, Inc Waste Management, Inc. (NYSE: WMI) is a waste management, comprehensive waste, and environmental services company in North America. The company's network includes 413 collection operations, 370 transfer stations, 283 active landfill disposal sites, 17 waste-to-energy plants, . Prior to these positions, Mr. Trubeck was senior vice president and chief financial officer of International Multifoods, Inc., as well as president of its Latin American operations. He serves on the Board of YRC YRC Yellow Roadway Corporation YRC York Railway Company YRC Yokohama Rubber Company, Ltd. Worldwide Inc. and Dynegy Inc. and on the Board of Trustees board of trustees Politics The posse of thugs who oversee an institution's administration. See Board of directors. of Monmouth College History Monmouth College was founded on April 18, 1853 by the Second Presbytery of Illinois, a frontier arm of the Associate Reformed Presbyterian Church. The college celebrates this date annually as "Founders Day", cancelling classes for a day of celebration and an honors in Illinois. Earnings Teleconference Webcast Investors are invited to listen to a teleconference discussing the matters addressed in this press release, live via the Internet at 9:00 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 ) on Thursday, July 27, 2006. The Web-cast can be accessed through the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of Ceridian's website at www.ceridian.com. A replay of the call will also be available at the same address beginning at 11:00 a.m. (EDT) on July 27, 2006. Ceridian Corporation (www.ceridian.com) is an information services See Information Systems. company serving businesses and employees 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. , Canada and Europe. Ceridian is one of the top human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. outsourcing companies List of Outsourcing Firms<ref name="who" /> Revenue (USD) Logo Company Headquarters Country of Largest Employment Service $3300 million in each of its markets, and offers a broad range of human resource services, including payroll, benefits administration, tax compliance, HR information systems and employee advisory programs. Through its Comdata subsidiary, Ceridian is a major payment processor and issuer of credit cards, debit cards debit card, card that allows the cost of goods or services that are purchased to be deducted directly from the purchaser's checking account. They can also be used at automated teller machines for withdrawing cash from the user's checking account. and stored value cards, primarily for the trucking and retail industries in the United States. This press release contains 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. The statements regarding Ceridian Corporation contained in this release that are not historical in nature, particularly those that utilize terminology such as "may," "will," "should," "likely," "expects," "anticipates," "estimates," "believes" or "plans," or comparable terminology, are forward-looking statements based on current expectations and assumptions, and entail entail, in law, restriction of inheritance to a limited class of descendants for at least several generations. The object of entail is to preserve large estates in land from the disintegration that is caused by equal inheritance by all the heirs and by the ordinary various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Important factors known to Ceridian that could cause such material differences are identified and discussed from time to time in Ceridian's filings with the Securities and Exchange Commission, including matters arising from the SEC investigation, the prior restatements of our financial statements, the investigation conducted by the Audit Committee, the pending shareholder litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , the failure to timely comply with Section 404 of the Sarbanes-Oxley Act See SOX. of 2002, volatility associated with Comdata's fuel price derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. contracts and those factors which are discussed in Ceridian's 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 year ended December 31, 2005, and Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended March 31, 2006, which factors are also incorporated herein by reference. Ceridian undertakes no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any future disclosure Ceridian makes on related subjects in future reports to the SEC.
Schedule A
CONSOLIDATED STATEMENTS OF OPERATIONS Ceridian Corporation
(Dollars in millions, except per share data) and Subsidiaries
(Unaudited)
For Periods Ended June 30,
Current Quarter Year to Date
2006 2005 2006 2005
Revenue $387.1 $358.0 $771.4 $715.4
Costs and Expenses
Cost of revenue 209.1 199.3 414.8 392.3
Selling, general and
administrative 109.0 109.6 224.5 223.7
Research and development 8.5 7.1 16.3 13.5
(Gain) loss on derivative
instruments 2.2 (0.1) 3.1 9.4
Other expense (income) (2.5) (0.7) (4.0) (1.7)
Interest income (4.0) (2.0) (8.1) (3.4)
Interest expense 1.7 1.3 3.0 2.9
Total costs and expenses 324.0 314.5 649.6 636.7
Earnings (loss) before
income taxes 63.1 43.5 121.8 78.7
Income tax provision
(benefit) 20.9 10.0 43.4 23.2
Net earnings (loss) $42.2 $33.5 $78.4 $55.5
Earnings (loss) per share
Basic $0.29 $.23 $0.54 $0.37
Diluted $0.29 $.22 $0.53 $0.37
Shares used in calculations
(in thousands)
Weighted average
shares (basic) 144,269 147,826 144,880 148,969
Dilutive securities 2,809 1,182 3,074 1,090
Weighted average
shares (diluted) 147,078 149,008 147,954 150,059
Schedule B
CONDENSED CONSOLIDATED BALANCE SHEETS Ceridian Corporation
(Unaudited) and Subsidiaries
(Dollars in millions)
June 30, December 31,
2006 2005
Cash and equivalents $171.3 $335.6
Trade and other receivables, net 661.2 584.8
Other assets 1,332.4 1,370.7
Total assets before customer funds 2,164.9 2,291.1
Customer funds 4,043.3 4,341.2
Total assets $6,208.2 $6,632.3
Debt $98.4 $106.4
Drafts and settlements payable 280.5 232.7
Other liabilities 514.2 658.5
Total liabilities before
customer funds obligations 893.1 997.6
Customer funds obligations 4,073.3 4,342.9
Total liabilities 4,966.4 5,340.5
Stockholders' equity 1,241.8 1,291.8
Total liabilities and
stockholders' equity $6,208.2 $6,632.3
Schedule C
Ceridian Corporation and Subsidiaries
Revenue Comparisons
(Dollars in millions)
Second Quarter Six Months YTD
2006 2005 2006 2005
HRS $271.3 $255.5 $551.2 $520.7
Comdata 115.8 102.5 220.2 194.7
Total revenue $387.1 $358.0 $771.4 $715.4
Ceridian Corporation and Subsidiaries
Earnings Comparisons
(Dollars in millions)
Second Quarter
2006 2005
% of % of
Segment Segment
Revenue Revenue
HRS $20.6 7.6% $8.9 3.5%
Comdata 40.2 34.7% 33.9 33.1%
Earnings (loss) before
interest and taxes 60.8 42.8
Interest, net (not
allocated
to business units) 2.3 0.7
Earnings (loss) before
income taxes $63.1 $43.5
Six Months YTD
2006 2005
% of % of
Segment Segment
Revenue Revenue
HRS $42.2 7.7% $21.2 4.1
Comdata 74.5 33.8% 57.0 29.3%
Earnings before
interest and taxes 116.7 78.2
Interest, net (not
allocated
to business units) 5.1 .5
Earnings before income
taxes $121.8 $78.7
|
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion