ADP
REPORTS SECOND QUARTER FISCAL 2008 RESULTS;
CONFIRMS
FISCAL 2008 REVENUE AND
EPS
FROM CONTINUING OPERATIONS GROWTH FORECASTS
Second
Quarter Revenues Grow Nearly 15%;
EPS
from Continuing Operations Increases 22% to $0.55 including $0.02 from Tax
Benefits
ROSELAND,
New Jersey, February 1, 2008
- Automatic Data Processing, Inc. (NYSE:ADP) announced nearly 15% revenue
growth
to $2.15 billion, with over 12% growth on a constant foreign currency basis,
for
the second fiscal quarter ended December 31, 2007, Gary C. Butler, president
and
chief executive officer, announced today. Pretax earnings from
continuing operations grew 11% compared with last year’s second
quarter. During the second quarter of fiscal 2008 the company
recorded a reduction in the provision for income taxes of $12.4 million,
which
was primarily related to the settlement of a state tax matter. This
tax benefit reduced the quarter’s effective tax rate nearly 3 percentage points
to 33.8%, and contributed 5 percentage points of the 18% growth in net earnings
from continuing operations and approximately $0.02 of earnings per
share. Diluted earnings per share from continuing operations
increased 22% to $0.55 from $0.45 a year ago on fewer shares
outstanding.
Fiscal
year to date, ADP acquired over 18 million shares of its stock for treasury
at a
cost of nearly $842 million. At December 31, 2007, cash and
marketable securities balances were $1.4 billion.
Commenting
on the results, Mr. Butler said, “We are pleased with our results for the second
quarter. Our continued strong performance confirms the strength of
our recurring revenue business model.”
Employer
Services
“Employer
Services had a strong quarter. Revenues increased 11% for the second
quarter. Organic revenue growth was nearly 10%, up from nearly 9% a
year ago. In the United States, revenues from our traditional payroll
and payroll tax filing business grew over 8%. Our beyond payroll
revenues in the United States, excluding PEO Services revenues, grew
16%. The number of employees on our clients' payrolls in the United
States increased 1.7%, and pay growth in Europe was stronger than it has
been in
several years. As we headed into the key client retention period at
the start of the calendar year, worldwide client retention, while slightly
lower
than last year’s second quarter, remained at excellent
levels. Employer Services’ pretax margin improved nearly 70 basis
points as a result of operating leverage.”
“Combined
new business sales growth for Employer Services and PEO Services was over
8%
worldwide. New business sales represent annualized recurring revenues
anticipated from new orders.”
PEO
Services
“PEO
Services’ revenues increased 22%
for the second quarter, all organic. PEO Services’ pretax margin
declined 20 basis points. Average worksite employees paid by PEO
Services increased to approximately 170,000, or 20%, compared with the second
quarter of fiscal 2007.”
Dealer
Services
“Dealer
Services’ results were also strong for the quarter. Revenues
increased 9.5% for the second quarter. Organic revenue growth
continued to improve with 7% growth in the quarter compared with 5% growth
a
year ago. New business sales growth was very strong in both our North
American and International businesses. Operating leverage, partially
offset by the dilutive effect of fiscal 2008 first quarter acquisitions,
drove
nearly 90 basis points of improvement in Dealer Services’ pretax
margin.”
Client
Funds
"Interest
on funds held for clients grew approximately 14% over last year's second
quarter, to $162.0 million, due to an 8.9% increase in average client funds
balances to $14.3 billion and a higher average interest yield of 20 basis
points
to 4.5% from an average interest yield of 4.3% last year. This 20
basis point increase in average interest yield is due to our investment strategy
of laddering maturities on marketable securities.”
Fiscal
2008
forecast
“We
anticipate continued strong growth in our businesses, and are affirming our
forecast of 12% to 13% revenue growth for fiscal 2008. This forecast
includes our current estimate of one to two percentage points of anticipated
benefit from foreign exchange rates.”
“We
move
into the second half of fiscal 2008 facing headwinds from lower interest
rates
and economic uncertainty. However, we remain confident in our ability
to achieve the high-end of our 18% to 21% forecasted growth in diluted earnings
per share from continuing operations, up from $1.80 in fiscal 2007 which
excludes the net one-time gain recorded in the first quarter of fiscal
2007. This forecast includes the following items which were not
reflected in our previous forecast on October 30, 2007:
|
•
|
$0.02
from the reduction in the income tax provision in the second quarter
primarily from a state tax
settlement;
|
|
•
|
About
$0.01 additional accretion from share repurchases subsequent to
the first
quarter; and
|
|
•
|
$0.01
from the current estimated benefit of favorable foreign exchange
rates
anticipated for the fiscal year.
|
This
approximate $0.04 anticipated increase in earnings per share is partially
offset
by:
|
•
|
($0.03)
from lower expected client funds interest revenues based on Fed
Funds
futures contracts and forward yield curves as of January 31, 2008
as well
as lower anticipated client funds balance
growth.”
|
“For
Employer Services, we anticipate revenue growth of approximately 10%, which
is
slightly lower than our previous forecast partially due to lower forecasted
growth in client funds balances. We are slightly narrowing our
anticipated pretax margin expansion to 70 to 110 basis points. For
PEO Services, we continue to anticipate 19% to 20% revenue growth and pretax
margin expansion of 50 to 90 basis points. We continue to forecast
high single-digit to low double-digit new business sales growth worldwide
for
Employer Services and PEO Services on a combined basis. We continue
to anticipate revenue growth of about 10% in Dealer Services, and pretax
margin
expansion of 70 to 90 basis points.”
“Included
in our guidance is an update of our client funds portfolio forecasts. The
interest assumptions in our current forecasts are based on Fed Funds futures
contracts and forward yield curves as of January 31, 2008. The Fed
Funds futures contracts anticipate two further declines of 25 basis points
each
when the Fed is scheduled to meet in March and April 2008, exiting the fiscal
year with a Fed Funds rate of 2.50%. The forward yield curves as of
January 31, 2008 indicate a decline in fixed income rates of over 100 basis
points since our last guidance update on October 30, 2007. Interest
on funds held for clients is now anticipated to grow 3% to 4% based on expected
growth of about 7% in average client funds balances and a full-year average
interest yield of over 4.3%, compared with the fiscal 2007 average interest
yield of nearly 4.5%. This forecast is about $25 million lower than
our previous estimate of about 8% growth in interest on funds held for clients,
which was based on expected growth of 7% to 8% in average client funds balances
and an overall yield of nearly 4.5%.”
“We
are in
a softening economic environment. However, I remain pleased with
ADP’s strong performance during the first half of fiscal 2008, and we are on
target to deliver strong forecasted results for the year. We are the
global market leader and have a strong portfolio of products and
services. We intend to continue our investments in new
products, salesforce expansion, and implementation and client service resources
while sustaining our discipline around pretax margin expansion. We
remain keenly focused on our five-point strategic growth program and remain
confident in our ability to continue to deliver both strong revenue growth
and
margin improvement over our strategic planning horizon.” Mr. Butler
concluded.
Website
Schedules
The
schedules of quarterly
and full-year revenue and pretax earnings by reportable segment for fiscal
years
2006, 2007, and 2008 have been updated for the second quarter fiscal 2008
results and posted to the Investor Relations home page (
http://www.investquest.com/iq/a/adp/index.htm
)
of our website
www.adp.com
under
Financial Data along with the quarterly and full-year statements of earnings
for
fiscal 2006 and fiscal 2007.
An
analyst conference call
will be held today, Friday , February 1 at 8:3 0 a.m. EST. A
live webcast of the call will be available to the public on a listen-only
basis. To listen to the webcast and vi ew the slide presentation, go
to ADP’s home page, www.adp.com , or ADP’s Investor Relations home page,
http://www.investquest.com/InvestQuest/a/adp/
, 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 Web site.
About
ADP
Automatic
Data Processing, Inc. (NYSE: ADP), with nearly $8 billion in revenues and
approximately 585,000 clients, is one of the world's largest providers of
business outsourcing solutions. Leveraging more than 55 years of
experience, ADP offers a wide range of HR, payroll, tax and benefits
administration solutions from a single source. ADP's easy-to-use,
cost-effective solutions for employers provide superior value to companies
of
all types and sizes. ADP is also a leading provider of integrated
computing solutions to auto, truck, motorcycle, marine and recreational vehicle
dealers throughout the world. For more information about ADP or
to contact a local ADP sales office, reach us at 1.800.225.5237 or visit
the
company's Web site at www.ADP.com.
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Automatic
Data Processing, Inc.
and Subsidiaries
|
||||||||
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Condensed
Consolidated Balance
Sheets
|
||||||||
|
(In
millions)
|
||||||||
|
(Unaudited)
|
||||||||
|
December
31,
|
June
30,
|
|||||||
|
2007
|
2007
|
|||||||
|
Assets
|
||||||||
|
Cash
and cash
equivalents/Short-term
|
||||||||
|
marketable
securities
|
$ | 1,341.3 | $ | 1,816.5 | ||||
|
Other
current
assets
|
1,749.9 | 1,490.0 | ||||||
|
Assets
of discontinued
operations
|
- | 57.7 | ||||||
|
Total
current assets
|
3,091.2 | 3,364.2 | ||||||
|
Long-term
marketable
securities
|
68.2 | 68.1 | ||||||
|
Property,
plant and equipment,
net
|
731.0 | 723.8 | ||||||
|
Other
non-current
assets
|
4,155.5 | 4,003.6 | ||||||
|
Funds
held for
clients
|
19,499.8 | 18,489.2 | ||||||
|
Total
assets
|
$ | 27,545.7 | $ | 26,648.9 | ||||
|
Liab
i
lities
and Stockholders'
Equity
|
||||||||
|
Other
current
liabilities
|
$ | 1,752.9 | $ | 1,771.7 | ||||
|
Liabilities
of discontinued
operations
|
- | 19.1 | ||||||
|
Total
current liabilities
|
1,752.9 | 1,790.8 | ||||||
|
Long-term
debt
|
36.7 | 43.5 | ||||||
|
Other
non-current
liabilities
|
1,254.2 | 993.7 | ||||||
|
Client
funds
obligations
|
19,324.3 | 18,673.0 | ||||||
|
Total
liabilities
|
22,368.1 | 21,501.0 | ||||||
|
Total
stockholders'
equity
|
5,177.6 | 5,147.9 | ||||||
|
Total
liabilities and stockholders' equity
|
$ | 27,545.7 | $ | 26,648.9 | ||||