Ceridian Reports Solid Third Quarter 2005 Results.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. ):
Third Quarter 2005 Highlights:
-- EPS of $.17 per diluted share at top of July guidance range.
-- Revenue of $364.1 million up 11 percent over prior year.
-- Human Resource Solutions revenue up 8 percent, to $254.6
million.
-- Comdata revenue up 17 percent, to $109.5 million. Higher
fuel prices accounted for about 4 percent of the year over
year growth.
-- Cash flow from operations was again strong at $48.4 million.
Capital expenditures were $14.1 million.
-- Stock repurchased during the quarter was 2.5 million shares
for $51.9 million.
-- Cash balance at September 30, 2005 was $241.4 million. Debt
balance stands at $71.0 million.
Ceridian Corporation (NYSE:CEN) today reported third quarter 2005 net earnings of $25.7 million, or $.17 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 $364.1 million. For the third quarter of 2004, net earnings were $10.9 million, or $.07 per diluted share, on revenue of $328.7 million. For the nine months ended September 30, 2005, net earnings were $81.2 million, or $.54 per diluted share, on revenue of $1,079.5 million. For the nine months ended September 30, 2004, net earnings were $25.9 million, or $.17 per diluted share, on revenue of $959.1 million. "For the third consecutive quarter, Ceridian exceeded the targets laid out in our operating plan adopted early in 2005," 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 , chairman, president and chief executive officer of Ceridian. "In Human Resource Solutions (HRS hrs abbr (= hours) → h hrs abbr (= hours) → Std. ), we are on track to deliver significant margin improvement in 2005 and 2006. Similarly, the growth in Comdata's business, even excluding the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact of higher fuel prices, has been outstanding. "The strong overall performance in Comdata, and continued progress on the margin initiatives in HRS, drove earnings per diluted share for the third quarter to the top of the range we communicated in July," Turner continued. "Revenue for the quarter in HRS was up 8 percent over last year, driven by a strong performance 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. . HRS segment earnings as a percentage of revenue were very strong in a seasonally weak quarter. The major factors driving the current year improvement were tighter cost controls, revenue growth, pricing discipline, and higher interest income on float balances. Negatively impacting the third quarter results were pre-tax charges in the quarter of approximately $6 million, or $.03 per diluted share, primarily related to software impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. in the U.S. and restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). activity in our UK operation. "The primary operational indicators in the HRS business are strong," Turner said. "Float balances again grew in 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. , customer retention was excellent at over 90 percent, and customer employment levels were up and in line with our plan for the quarter. "Order growth in the core U.S. mid-sized company market, and in Canada, were solidly in double digits. However, an absence in the quarter of larger Human Resource Outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. (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 ) signings in the U.S. and the UK, a significant downsizing (1) Converting mainframe and mini-based systems to client/server LANs. (2) To reduce equipment and associated costs by switching to a less-expensive system. (jargon) downsizing and restructuring of our U.S. small business unit earlier this year, and a large order from the Department of Defense in the third quarter of 2004, caused overall HRS orders in the quarter to be down year over year. In addition, reorganization in the international entities impacted the year over year comparison," Turner continued. "As we have stated previously, order levels can be expected to deviate from quarter to quarter. Importantly, overall order levels remain higher than the previous year on a year-to-date basis, and order growth is expected to be stronger in the fourth quarter, driven largely by double-digit growth in the U.S. "Comdata's performance was again stellar," said Turner. "Revenue growth accelerated in the quarter and was up 17 percent over last year, with higher fuel prices accounting for about 4 percent of the increase. Results in both the retail and transportation markets exceeded expectations. Demand for the BusinessLink product and further penetration into the gasoline gasoline or petrol, light, volatile mixture of hydrocarbons for use in the internal-combustion engine and as an organic solvent, obtained primarily by fractional distillation and "cracking" of petroleum, but also obtained from natural gas, by fleet market continue to drive growth in Comdata's transportation segment. In retail, demand for stored value cards remains extremely high. Especially encouraging were major new customer signings in Stored Value Systems, both in the U.S. and internationally. Comdata's segment earnings as a percentage of revenue were ahead of plan in the quarter, at 32.4 percent. "The strong overall earnings performance, along with effective management of working capital, generated healthy cash flow in the quarter," Turner concluded. "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 was $48.4 million, capital expenditures were $14.1 million, and depreciation and amortization expense was $21.3 million. The cash balance at September 30, 2005, remained relatively high at $241.4 million, despite the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of 2.5 million shares for $51.9 million during the quarter and a reduction of our debt balance to $71.0 million at quarter end." There was no impact to earnings from the timing of the financial impact of fuel price 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. this quarter. Guidance for 2005 "Another strong quarterly financial performance gives us confidence that our earnings for the year will fall near the top of the range previously communicated in July," said Douglas C. Neve, executive vice president and chief financial officer. Earnings per diluted share for the full year 2005 are now expected to be between $.78 and $.80, including the pre-tax charges of approximately $6 million, or $.03 per diluted share booked in the third quarter of 2005, and the benefit of a tax adjustment of $5.8 million, or $.04 per diluted share, booked in the second quarter of 2005. Total 2005 revenue is now expected to be between $1,460 million and $1,470 million. HRS revenue for the year is expected to be between $1,055 million and $1,060 million, up 9 percent to 10 percent over 2004. HRS segment earnings as a percentage of revenue are expected to improve to approximately 5 percent. HRS order growth for the year is now expected to be in the mid-single digit range on a percentage basis, with double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" growth in the U.S. offset by a decline in international. Comdata revenue for 2005 is now expected to be between $405 million and $410 million, up 14 percent to 15 percent over 2004, with segment earnings as a percentage of revenue in the range of 31 percent to 32 percent. Comdata's revenue for the year will likely be at the higher end Coordinates: For other places with the same name, see Billinge. Higher End or Billinge Higher End is a district of the Metropolitan Borough of Wigan, in Greater Manchester, England. of the guided range if fuel prices remain at current levels. Conversely con·verse 1 intr.v. con·versed, con·vers·ing, con·vers·es 1. To engage in a spoken exchange of thoughts, ideas, or feelings; talk. See Synonyms at speak. 2. , Comdata's segment earnings as a percentage of revenue will likely be at the lower end of the guided range for the year if fuel prices remain at current levels, due to the impact of the fuel price derivatives that remain in effect until year end. Cash flow from operations for the year is now expected to be $15 million to $25 million higher than previously communicated in July to a range of approximately $215 million to $225 million. This forecast assumes that the impact of timing and cut-offs on working capital is modestly negative in the fourth quarter of 2005. Capital expenditures and depreciation and amortization are expected to be approximately $65 million and $85 million, respectively. Cash received in February 2005 from the sale of interest rate derivatives An interest rate derivative is a derivative where the underlying asset is the right to pay or receive a (usually notional) amount of money at a given interest rate. The interest rate derivatives market is the largest derivatives market in the world. of $21 million was recorded as cash flow from investing activities Cash Flow From Investing Activities An item on the cash flow statement that reports the aggregate change in a company's cash position resulting from any gains (or losses) from investments in the financial markets and operating subsidiaries, and changes resulting from amounts spent , and therefore is not included in the projected cash flow from operations. Fourth quarter 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. is now expected to be between $.24 and $.26 per diluted share. HRS revenue is now expected to be between $280 million and $285 million, with seasonally higher segment earnings as a percentage of revenue of approximately 10 percent. Comdata revenue is now expected to be between $100 million and $105 million, with segment earnings as a percentage of revenue of 31 percent to 32 percent. The Company continues to hold derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. tied to diesel fuel prices. The derivative instruments related to 2005 expire at the end of the year, and have been reflected in the guidance for 2005. The Company intends to hedge a portion of its exposure to diesel fuel prices again in 2006, and has entered into contracts which will not become effective until next year. The guidance for the fourth quarter and for the full year 2005 does not attempt to predict, and does not include, any gain or loss related to the "mark to market" of new fuel price derivative instruments effective for 2006. 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, October 27, 2005. The webcast 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 October 27, 2005. Ceridian Corporation (www.ceridian.com) is an information services See Information Systems. company serving businesses and employees in the United States, 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, 2004, 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 September 30,
Current Quarter Year to Date
2005 2004 2005 2004
Revenue $364.1 $328.7 $1,079.5 $959.1
Costs and Expenses
Cost of revenue 198.2 192.4 592.2 547.6
Selling, general and
administrative 112.7 121.3 334.5 355.6
Research and development 6.4 7.0 20.1 19.9
(Gain) loss on derivative
instruments 3.1 (7.9) 12.5 (2.6)
Other expense (income) 4.6 (0.8) 2.9 (2.5)
Interest income (2.0) (0.7) (5.4) (1.7)
Interest expense 1.0 1.2 3.9 3.2
Total costs and expenses 324.0 312.5 960.7 919.5
Earnings before
income taxes 40.1 16.2 118.8 39.6
Income tax provision 14.4 5.3 37.6 13.7
Net earnings $25.7 $10.9 $81.2 $25.9
Earnings per share
Basic $0.18 $0.07 $0.55 $0.17
Diluted $0.17 $0.07 $0.54 $0.17
Shares used in calculations
(in thousands)
Weighted average
shares (basic) 145,543 149,098 147,668 148,985
Dilutive securities 1,929 1,544 1,389 2,271
Weighted average
shares (diluted) 147,472 150,642 149,057 151,256
Schedule B
CONDENSED CONSOLIDATED BALANCE SHEETS Ceridian Corporation
(Unaudited) and Subsidiaries
(Dollars in millions)
September 30, December 31,
2005 2004
Cash and equivalents $241.4 $220.7
Trade and other receivables, net 625.1 505.7
Other assets 1,339.0 1,384.5
Total assets before customer funds 2,205.5 2,110.9
Customer funds 3,489.2 4,096.0
Total assets $5,694.7 $6,206.9
Debt $71.0 $100.7
Drafts and settlements payable 261.3 153.4
Other liabilities 613.6 589.9
Total liabilities before
customer funds obligations 945.9 844.0
Customer funds obligations 3,472.6 4,067.2
Total liabilities 4,418.5 4,911.2
Stockholders' equity 1,276.2 1,295.7
Total liabilities and
stockholders' equity $5,694.7 $6,206.9
Schedule C
Ceridian Corporation and Subsidiaries
Revenue Comparisons
(Dollars in millions)
Third Quarter Nine Months YTD
2005 2004 2005 2004
HRS $254.6 $235.1 $775.3 $695.1
Comdata 109.5 93.6 304.2 264.0
Total revenue $364.1 $328.7 $1,079.5 $959.1
Ceridian Corporation and Subsidiaries
Earnings Comparisons
(Dollars in millions)
Third Quarter
2005 2004
% of % of
Segment Segment
Revenue Revenue
HRS $3.6 1.4% $(12.4) (5.2%)
Comdata 35.5 32.4% 29.1 31.1%
Earnings before
interest and taxes 39.1 16.7
Interest, net (not allocated
to business units) 1.0 (0.5)
Earnings before income taxes
$40.1 $16.2
Nine Months YTD
2005 2004
% of % of
Segment Segment
Revenue Revenue
HRS $24.8 3.2% $(42.6) (6.1%)
Comdata 92.5 30.4% 83.7 31.7%
Earnings before
interest and taxes 117.3 41.1
Interest, net (not allocated
to business units) 1.5 (1.5)
Earnings before income taxes $118.8 $39.6
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