FOR
IMMEDIATE
RELEASE
ADP
REPORTS SECOND QUARTER FISCAL 2007 RESULTS;
REVENUES
GROW 14%; EPS RISES 16% TO $0.51;
CONFIRMS
REVENUE GROWTH FORECAST OF 11%;
AFFIRMS
HIGH END OF FISCAL 2007 EPS FROM CONTINUING OPERATIONS
GROWTH
FORECAST OF 17% - 20%
ROSELAND
,
New
Jersey, February 6, 2007 - Automatic Data Processing, Inc. (NYSE:ADP) reported
14% revenue growth, to $2.3 billion, and $0.51 earnings per share for the second
fiscal quarter ended December 31, 2006, Gary C. Butler, president and chief
executive officer, announced today. Pretax and net earnings from continuing
operations each grew 10%, and diluted earnings per share from continuing
operations increased 16%, from $0.44 earnings per share a year ago on fewer
shares outstanding. The current second quarter included expenses of $8.0 million
pretax, $5.0 million after tax, or $0.01 earnings per share, related to the
spin-off of the Brokerage Services Group business. These expenses will be
reclassified as discontinued operations upon completion of the spin-off. In
addition, the current second quarter included the anticipated higher Employer
Services step-off expense level from fiscal 2006 related to increased salesforce
and implementation headcount of $9 million, as well as higher HR BPO spending
of
$20 million. These pretax expenses totaled nearly $30 million and decreased
earnings per share by $0.03 in the second quarter. ADP has acquired 18.1 million
shares for treasury for approximately $855 million during this fiscal year.
Cash
and marketable securities balances were $1.7 billion at December 31,
2006.
Discontinued
Operations
During
the
second quarter ended December 31, 2006, ADP received a working capital
adjustment of $13.2 million, or $12.6 million after tax, from the April 13,
2006
sale of its Claims Services business. This amount is recorded in earnings from
discontinued operations in the second quarter.
On
January
23, 2007, ADP closed the sale of its Sandy division, a business within its
Dealer Services segment, with annual revenues of approximately $60 million
that
specializes in sales and marketing training to manufacturers. The results of
operations for this business are reported within discontinued operations in
the
second quarter and in prior periods.
Current
Quarter Discussion
Commenting
on the results, Mr. Butler said, “We are very pleased with our solid results for
the quarter. We are executing well on our strategic initiatives, evidenced
by
the positive momentum in the businesses. Additionally, we are making good
progress in our integration of the previously announced Employer Services’
acquisitions.”
Employer
Services
“Employer
Services’ revenues increased 12% for the second quarter compared with last year,
reflecting continued strength in the business. In the United States, revenues
from our traditional payroll and payroll tax filing business grew 9%, and beyond
payroll revenues grew 19%. New business sales in the quarter, which reflect
annualized recurring revenues anticipated from new orders, grew 11% in the
United States and 13% worldwide. We are particularly pleased with double-digit
sales growth in Major Accounts Services, our most penetrated market. In
addition, National Account Services, TotalSource®, and GlobalView®
continued
to post strong sales results. As we entered the critical year-end retention
period, worldwide client retention remained at excellent levels. The number
of
employees on our clients' payrolls in
the
United
States increased 1.7% with growth in all market segments, and Europe continues
to show growth compared with a year ago. We anticipated the tougher pretax
margin comparisons for the first half of the year and, as noted above, second
quarter expenses were about $30 million higher compared with last year’s second
quarter. This higher expense level, along with the impact of acquisition
activity to date, resulted in an 80 basis points decline in pretax margin
compared with last year’s second quarter. We continue to anticipate pretax
margin improvement for the full year, driven by a particularly strong fourth
quarter.”
Brokerage
Services
"Brokerage
Services' revenues increased 10% for the second quarter compared with last
year.
Revenues in our Investor Communications business grew 11%, driven by 13% growth
in our beyond beneficial products revenues, primarily from higher volumes from
fulfillment and registered mutual fund mailings activity, and related postage
revenue. Beneficial proxy and interim communications revenues grew 9% from
increased equity volumes as well as specials and other one-time mailings and
related postage. Back office revenues grew 7% in the quarter primarily due
to
increased trade volumes. Brokerage Services' pretax margin declined 80 basis
points in the quarter. The leverage in our Investor Communications proxy
business occurs primarily in our fourth fiscal quarter, and accordingly, we
continue to anticipate margin expansion for the full year. Securities Clearing
and Outsourcing Services' revenues increased 17%, and the pretax loss of $5.5
million was in line with our expectations.”
Dealer
Services
“Dealer
Services’ revenues increased 19% for the second quarter, primarily due to the
December 2005 acquisition of UK-based Kerridge Computer Company Ltd. Internal
revenue growth was 5% in the quarter. Dealer Services’ pretax margin improved 30
basis points and we continue to anticipate additional pretax margin improvement
as the year progresses.
New
business sales growth in the quarter was strong compared with last year, with
particular strength in international sales.”
Client
Funds
"Interest
on client funds grew 20% over last year's second quarter, to $142 million,
due
to a 9.2% increase in average client funds balances and a higher interest yield
of 30 basis points.”
Fiscal
2007 guidance
“We
are
highly confident in ADP’s revenue growth forecast of 11%. We also believe we
will be at the high end of our earnings per share from continuing operations
growth forecast of 17% to 20%, up from the $1.85 earnings per share from
continuing operations reported in fiscal 2006.
The
fiscal
2007 estimates include:
|
·
|
0.7%
increase in revenues and a reduction to earnings per share of about
$0.03
due to the impact of acquisition activity to
date
|
The
fiscal
2007 estimates exclude:
|
·
|
The
$0.03 from the net one-time items recorded in the first
quarter
|
|
·
|
Any
one-time expenses anticipated in connection with the Brokerage Services
Group spin-off, including the $10.6 million recorded through the
end of
the second quarter.
|
We
will
provide guidance for continuing operations excluding Brokerage Services Group
as
we get closer to the anticipated March or April 2007 spin-off
date.”
“We
continue to forecast Employer Services’ revenue growth of 12%, pretax margin
improvement of 20 basis points driven by a particularly strong fourth quarter,
and higher than planned double-digit new business sales growth for the year.
We
anticipate approximately 6% revenue growth in Brokerage Services, up from 5%
to
6% previously forecasted, and pretax margin improvement of about 70 basis
points, which is slightly lower than the previous forecast of nearly 100 basis
points improvement. We anticipate approximately 14% revenue growth in Dealer
Services, up from the previous forecast of 13%, with the recent sale of a slower
growing Dealer Services’ business noted above in discontinued operations. We
continue to anticipate pretax margin improvement in Dealer Services of over
100
basis points for fiscal 2007. We anticipate an increase of approximately 18%
in
client funds interest revenues based on expected growth of over 8% in client
funds balances and a 40 basis point improvement in the client portfolio average
interest yield to about 4.5%. This is down from our previous forecast of nearly
10% growth in client funds balances. Our interest assumptions are based on
recent futures contracts and forward yield curves.”
Spin-off
of Brokerage Services
“We
are
progressing as planned with the Brokerage Services Group spin-off, and continue
to anticipate completing the spin-off in the late March or early April
timeframe. The new publicly traded company will be called Broadridge Financial
Solutions, Inc. (Broadridge), and we anticipate Broadridge will be listed on
the
New York Stock Exchange with the symbol BR. In December 2006, Broadridge (under
the name of BSG LLC) filed a registration statement on Form 10 with the
Securities and Exchange Commission. The financial presentation of Broadridge
in
the Form 10 differs from the financial presentation of the Brokerage Services
and Securities Clearing and Outsourcing Services segments in ADP’s financial
statements due to adjustments made in the Form 10 to reflect additional
corporate expenses and other operating costs. We continue to estimate that
the
one-time spin-related expenses will be approximately $45 to $55 million. These
costs are not included in the above guidance.”
“We
are
particularly pleased with our results as we enter the second half of the year.
We continue to see strong demand for our products and services and are highly
confident about the prospects for ADP’s future growth,” Mr. Butler concluded.
An
analyst
conference call will be held today, Tuesday, February 6 at 8:30 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 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/aud/index.htm
.
ADP’s
news releases, current financial information, SEC filings and Investor Relations
presentations are accessible at the same Web site.
ADP,
with
nearly $9 billion in revenues and more than 570,000 clients worldwide, is one
of
the largest providers of a broad range of premier, mission-critical,
cost-effective transaction processing and information-based business
solutions.
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Automatic
Data Processing, Inc. and Subsidiaries
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Condensed
Consolidated Balance Sheets
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(In
millions)
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December
31,
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June
30,
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2006
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2006
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(unaudited)
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Assets
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Cash
and cash equivalents/Short-term
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marketable
securities
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$
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1,544.1
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$
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2,268.5
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Securities
clearing receivables
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924.0
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836.8
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Other
current assets
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1,803.5
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1,637.0
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Assets
of discontinued operations
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20.5
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|
18.0
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Total
current assets
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4,292.1
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4,760.3
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Long-term
marketable securities
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155.6
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334.0
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Property,
plant and equipment, net
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780.6
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782.2
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Other
non-current assets
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4,584.4
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4,129.7
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Funds
held for clients
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21,799.5
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17,483.9
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Total
assets
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$
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31,612.2
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$
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27,490.1
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Liabilities
and Stockholders' Equity
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Securities
clearing payables
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$
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790.5
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$
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613.6
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Other
current liabilities
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1,729.8
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1,953.6
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Liabilities
of discontinued operations
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31.2
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35.0
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Total
current liabilities
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2,551.5
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2,602.2
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Long-term
debt
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73.8
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74.3
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Other
non-current liabilities
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1,143.5
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|
1,014.6
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Client
funds obligations
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21,936.9
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17,787.4
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Total
liabilities
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25,705.7
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21,478.5
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Total
stockholders' equity
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5,906.5
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6,011.6
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Total
liabilities and stockholders' equity
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$
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31,612.2
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$
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27,490.1
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Automatic
Data Processing, Inc. and Subsidiaries
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Consolidated
Statements of Earnings
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(In
millions, except per share amounts)
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(Unaudited)
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Three
Months Ended
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Six
Months Ended
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December
31,
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December
31,
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2006
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2005
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2006
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2005
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Revenues,
other than interest on funds
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held
for Employer Services' clients and
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PEO
revenues
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$
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1,968.3
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$
|
1,748.0
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$
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3,837.8
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$
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3,390.5
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Interest
on funds held for
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Employer
Services' clients
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142.4
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118.9
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277.0
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227.3
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PEO
revenues (A)
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205.4
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163.5
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400.4
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319.3
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Total
revenues
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2,316.1
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2,030.4
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4,515.2
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3,937.1
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Operating
expenses
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1,110.4
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947.7
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2,209.5
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1,859.5
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Selling,
general and administrative expenses
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540.3
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459.5
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1,064.2
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913.2
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Systems
development and programming costs
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145.1
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145.9
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282.8
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287.9
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Depreciation
and amortization
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86.2
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