Ceridian Reports Third Quarter 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. ): --Provides Restated Results and Offers Updated Fourth Quarter and Full Year Earnings Guidance --John R. (Jack) Eickhoff to Retire as Chief Financial Officer --Douglas C. Neve named as Successor --Additional Document Request from SEC --Webcast Teleconference at 10:00 a.m. Eastern Time on December 16, 2004 Third Quarter 2004 Highlights: --Revenue of $334.3 million up 10.7 percent year over year --Human Resource Solutions posts ninth consecutive quarter of top-line growth with revenue of $241.7 million --Comdata posts second straight quarter of 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" revenue growth at $92.6 million --EPS of $.11 --Cash flow from operations remains strong. Debt balance reduced during the quarter by $36 million to $123.0 million. Cash balance remains healthy at $156.3 million. Ceridian Corporation (NYSE:CEN) today reported third quarter 2004 earnings, provided restated historical financial results, and gave updated guidance for the fourth quarter of 2004. Review of earnings results and adjustments by the Company's external auditor The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. is continuing. Third quarter 2004 net earnings were $16.4 million, or $.11 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 of common stock, on revenue of $334.3 million. Supplementary schedules containing historical earnings results for the past ten quarters along with restated segment information are available on Ceridian Corporation's website at www.ceridian.com. "Revenue growth for the third quarter of 2004 was strong in both of our business units, and was in line with the expectations we set in October," 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. "Earnings per share of $.11 for the quarter came in slightly below our preliminary estimates, primarily because we underestimated the additional third quarter expense that would result from applying the revised capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. policy to software development spending in the Human Resource Solutions (HRS hrs abbr (= hours) → h hrs abbr (= hours) → Std. ) business. "During the third quarter, the HRS business posted solid top-line growth. Strong installations, higher float balances, better retention, higher interest rates, a weaker dollar, and firming customer employment levels combined to drive revenue higher. Order levels in U.S. HRS were weak, however, because of the disruption disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. and uncertainty related to the internal accounting investigation. On the positive side, orders in Canada and the U.K. were very strong. "Comdata posted very strong results in the third quarter, and the outlook for this business is excellent. Revenue was up significantly year over year. Transaction levels in the core fueling business remain strong and the new BusinessLink service continues to gain traction Traction Definition Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. . Stored Value Systems again posted strong double digit growth, as demand for gift cards is at an all time high. "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 remained healthy during the third quarter, despite 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. spending of approximately $7 million on the internal investigation and Sarbanes-Oxley compliance. Debt was paid down by $36 million since the end of the June quarter, and the cash balance remained healthy at $156 million." Restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. Ceridian expects to file with the Securities and Exchange Commission (SEC) its amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. 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 2003, its amended Form 10-Q Form 10-Q See 10-Q. for the first quarter of 2004, and its Form 10-Q reports for the second and third quarters of 2004 in the next few weeks. Additional adjustments have been made to Ceridian's historical financial statements since our October 18, 2004 press release reporting second quarter results. The adjustments, which pertain to pertain to verb relate to, concern, refer to, regard, be part of, belong to, apply to, bear on, befit, be relevant to, be appropriate to, appertain to the results of HRS, are primarily line item expense reclassifications, and there was a minor change in revenue reporting relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc services provided to our customers by third party vendors. The adjustments reduced reported R&D expense, reduced reported selling expense, increased reported cost of revenue, and caused a minor reduction in HRS revenue. The impact on net profit from these most recent adjustments was minimal. Schedules D, E and F posted on Ceridian's web site reflect these additional adjustments and the latest restated financial results for the Company. The Company is reviewing one other issue related to revenue recognition in its U.K. HRS operation which may or may not result in an additional adjustment to its historical financial statements. The Company anticipates that any adjustment related to this remaining issue would not be material. Guidance for Fourth Quarter 2004 HRS revenue and margins will be negatively impacted by continuing weakness in order levels in the U.S. The Company anticipates that orders should rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective as the uncertainty surrounding the Audit Committee investigation clears, however, we now expect HRS orders in the fourth quarter to be down modestly compared to last year. This will also have a negative impact on our performance in 2005. For the fourth quarter, the Company expects earnings per share to be $.24 to $.27; HRS revenue to be between $276 million and $282 million; and Comdata revenue to be between $87 million and $90 million. For the full year, earnings per share are expected to be between $.64 and $.67; HRS revenue to be between $996 million and $1,002 million; and Comdata revenue to be between $350 million and $353 million. Free cash flow (cash from operations less capital expenditures) is expected to be between $140 million and $150 million for 2004. Management Succession The Company also announced that John R. (Jack) Eickhoff, Executive Vice President and Chief Financial Officer, will retire after forty-one years with the Company effective at the end of the year or upon the Company filing with the SEC its amended Annual Report for 2003, amended Quarterly Report for the first quarter of 2004, and its Quarterly Reports for the second and third quarters of 2004. Loren D. (Buzz) Gross, Vice President and Corporate Controller, also will retire at that time after thirty-two years with the Company. The Company further announced that Douglas C. Neve has accepted an offer to serve as the Company's Executive Vice President and Chief Financial Officer following the retirement of Mr. Eickhoff. Mr. Neve is a senior audit partner with the public accounting firm of Deloitte & Touche LLP LLP - Lower Layer Protocol . Mr. Turner said, "Doug is a veteran of the accounting world who has, over the last seven months, developed an in-depth working knowledge and insight as to Ceridian. Deloitte has been assisting us with our Sarbanes-Oxley 404 efforts as to internal controls. Doug has been leading the Deloitte team, so he already knows first-hand our finance department, our people, our systems and our internal controls." SEC Document Request and Investigation As previously announced, the Company is responding to a document request from the SEC, and the SEC has issued a formal order of investigation. In February 2004, the Company provided documents responsive to the SEC. In July 2004, the Company advised the SEC of the investigation the Audit Committee of the Board of Directors was undertaking. Since that time, the Company has continued to keep the SEC advised on a regular basis of the Audit Committee's investigation. On December 10, 2004, the Company received a further formal document request from the SEC. The formal document requests state that the SEC investigation is a non-public, fact-finding inquiry, and that the investigation and document requests do not mean that the SEC has concluded that the Company has violated vi·o·late tr.v. vi·o·lat·ed, vi·o·lat·ing, vi·o·lates 1. To break or disregard (a law or promise, for example). 2. To assault (a person) sexually. 3. any securities laws. The Company is fully cooperating with the SEC and is in the process of responding to the SEC's additional document request. Earnings Teleconference Webcast Investors are invited to listen to a teleconference discussing the matters addressed in this press release, live via the Internet at 10:00 a.m. (EST EST electroshock therapy. EST abbr. electroshock therapy ) on Thursday, December 16, 2004. 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 l2:00 p.m. (EST) on December 16, 2004. 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 change in SVS SVS - OS/VS2 revenue recognition policy, the investigation conducted by the Audit Committee and 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. , and those factors which are discussed in Ceridian's Annual Report on Form 10-K, for the fiscal year ended December 31, 2003, 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
2004 2003 2004 2003
(Restated) (Restated)
Revenue $ 334.3 $ 302.0 $ 983.5 $ 914.6
Costs and Expenses
Cost of revenue 186.6 165.3 533.0 497.7
Selling, general and
administrative 113.4 88.3 332.2 277.5
Research and development 9.7 7.8 27.4 21.9
Other expense (income) (0.7) (1.1) (2.4) (1.3)
Interest income (0.7) (0.5) (1.7) (1.5)
Interest expense 1.2 1.3 3.2 3.6
Total costs and expenses 309.5 261.1 891.7 797.9
Earnings before income taxes 24.8 40.9 91.8 116.7
Income tax provision 8.4 14.9 31.9 41.5
Net earnings $ 16.4 $ 26.0 $ 59.9 $ 75.2
Earnings per share
Basic $ 0.11 $ 0.17 $ 0.40 $ 0.51
Diluted $ 0.11 $ 0.17 $ 0.40 $ 0.50
Shares used in calculations
(in thousands)
Weighted average
shares (basic) 149,098 148,426 148,985 148,282
Dilutive securities 1,544 2,156 2,271 1,098
Weighted average
shares (diluted) 150,642 150,582 151,256 149,380
Schedule B
CONDENSED CONSOLIDATED BALANCE SHEETS Ceridian Corporation
(Unaudited) and Subsidiaries
(Dollars in millions)
September 30, December 31,
2004 2003
(Restated)
Cash and equivalents $ 156.3 $ 124.2
Trade receivables 511.9 436.4
Other receivables 35.2 36.5
Other assets 1,408.4 1,428.1
Total assets before customer funds 2,111.8 2,025.2
Customer funds 3,310.0 3,141.3
Total assets $ 5,421.8 $ 5,166.5
Debt $ 123.0 $ 163.5
Drafts and settlements payable 180.8 113.7
Other liabilities 539.4 499.4
Total liabilities before
customer funds obligations 843.2 776.6
Customer funds obligations 3,285.7 3,141.3
Total liabilities 4,128.9 3,917.9
Stockholders' equity 1,292.9 1,248.6
Total liabilities and
stockholders' equity $ 5,421.8 $ 5,166.5
Schedule C
Ceridian Corporation and Subsidiaries
Revenue Comparisons
(Dollars in millions)
Third Quarter Nine Months YTD
2004 2003 2004 2003
(Restated) (Restated)
HRS $ 241.7 $ 222.3 $ 720.5 $ 676.5
Comdata 92.6 79.7 263.0 238.1
Total revenue $ 334.3 $ 302.0 $ 983.5 $ 914.6
Ceridian Corporation and Subsidiaries
Earnings Comparisons
(Dollars in millions)
Third Quarter Nine Months YTD
2004 2003 2004 2003
(Restated) (Restated)
HRS $ (4.3) $ 14.2 $ 8.1 $ 40.0
Comdata 29.6 27.5 85.2 78.8
Earnings before
interest and taxes $ 25.3 $ 41.7 $ 93.3 $ 118.8
Interest, net (not
allocated to business
units) (0.5) (0.8) (1.5) (2.1)
Earnings before
income taxes $ 24.8 $ 40.9 $ 91.8 $ 116.7
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