ADP
REPORTS FIRST QUARTER FISCAL 2008 RESULTS;
FISCAL
2008 REVENUES ANTICIPATED TO GROW
12%
TO 13%;
CONFIDENT
IN ATTAINING HIGH END OF 18% TO 21%
FULL-YEAR
EPS GROWTH FORECAST
First
Quarter Revenues Grow 13.5%; EPS from Continuing
Operations
Increases
25% Excluding Prior Year One-Time Net Gain
ROSELAND,
New Jersey, October 30, 2007
- Automatic Data Processing, Inc. (NYSE:ADP) reported 13.5% revenue growth
to
$2.0 billion for the first fiscal quarter ended September 30, 2007, Gary
C.
Butler, president and chief executive officer, announced
today. Revenue growth benefited approximately 1% from favorable
foreign exchange rates during the quarter. On a reported basis, last
year’s first quarter included a net one-time gain primarily from the sale of a
Dealer Services non-core minority investment. As reported, pretax and
net earnings from continuing operations grew 9% and 10%, respectively, and
diluted earnings per share from continuing operations increased 15% to $0.45
from $0.39 a year ago on fewer shares outstanding. Excluding the net
one-time gain in last year’s first quarter, diluted earnings per share from
continuing operations increased 25%, and pretax and net earnings both increased
21%.
ADP
acquired nearly 12 million shares of its stock for treasury for over $560
million fiscal year-to-date, with nearly 11 million shares purchased in the
first fiscal quarter at a cost of approximately $514 million. At
September 30, 2007, cash and marketable securities balances included assets
related to an outstanding reverse repurchase agreement of approximately $345
million, which matured on October 1, 2007. Cash and marketable securities
were $1.9 billion, or $1.5 billion excluding the assets related to the reverse
repurchase agreement, at September 30, 2007.
Commenting
on the results, Mr. Butler said, “We are happy to report a strong start to
fiscal 2008 with results ahead of our expectations. I am particularly
pleased to anticipate delivering fiscal 2008 earnings per share growth at
the
high end of our forecast. The positive momentum in the businesses, as
well as approximately $0.01 per share accretion anticipated for the year
from
share repurchases to date counteract an anticipated impact of about $0.04
to
$0.05 from lower than originally planned interest on client funds.”
Employer
Services
“Employer
Services had a terrific quarter. Revenues increased 11% for the first
quarter. In the United States, revenues from our traditional payroll
and payroll tax filing business grew 8%. Our beyond payroll revenues
in the United States grew 18%. The number of employees on our
clients' payrolls in the United States increased 1.6%. Worldwide
client retention is excellent and improved 50 basis points over the prior
year’s
first quarter to a new record level. Employer Services’ pretax margin
improved over 50 basis points.”
“Combined
new business sales growth for Employer Services and PEO Services was a healthy
11% worldwide. New business sales represents annualized recurring
revenues anticipated from new orders. We are pleased that all
market-facing businesses achieved double-digit new business sales
growth.”
PEO
Services
“PEO
Services’ revenues increased 21%
for the first quarter. PEO Services pretax margin improved over
250 basis points. Average worksite employees paid by PEO
Services increased to approximately 165,000, or 19%, compared with the first
quarter of fiscal 2007.”
Dealer
Services
“Dealer
Services also had a very solid quarter. Revenues increased 8% for the
first quarter. New business sales growth in our International
business was excellent with strong sales of our Autoline
product. North American sales of products beyond the core Dealer
Management Systems were strong. Dealer Services’ pretax margin
improved nearly 70 basis points due to increased business momentum and expense
control, partially offset by costs related to acquisitions made during the
quarter.”
Client
Funds
“Interest
on funds held for clients grew approximately 15% over last year's first quarter,
to $154.5 million, due to a 7.5% increase in average client funds balances
to
$13.5 billion and a higher average interest yield of 30 basis points to
4.6%.”
Fiscal
2008 forecast
“
We
anticipate 12% to 13% revenue growth for fiscal 2008. The increase from our
previous forecast of approximately 12% revenue growth is primarily due to
our
current estimate of the benefit from foreign exchange rates, as well as the
acquisition activity in Dealer Services.
We
are
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.”
“For
Employer Services, we anticipate revenue growth of approximately 10.5%, which
is
slightly lower than our previous forecast based on lower forecasted growth
in
client funds balances. We are raising our Employer Services pretax
margin expansion forecast to 70 to 120 basis points. We anticipate
stronger results for PEO Services with 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 anticipate
higher revenue growth of about 10% in Dealer Services, and lower pretax margin
expansion of 70 to 90 basis points due to the first quarter acquisitions
mentioned earlier.”
“We
have
updated our client funds portfolio forecast. The interest assumptions in
our
current forecast are based on Fed Funds futures contracts and forward yield
curves as of October 29, 2007, which anticipate three further declines in
the
Fed Funds rate of 25 basis points each through the remainder of fiscal
2008. Interest on funds held for clients is anticipated to grow
approximately 8% based on expected growth of 7% to 8% in average client funds
balances and an overall average interest yield of nearly 4.5%. This
forecast is $30 to $40 million lower than our previous estimate of 13% to
14%
growth in interest on funds held for clients, which was based on expected
growth
of over 8% in average client funds balances and a 20 basis point improvement
in
the overall yield to 4.7%.”
“I
am
delighted with ADP’s performance thus far in fiscal 2008, and we are on target
to deliver earnings per share growth at the high end of our
forecast. Last year’s Employer Services acquisitions are generating
terrific results in terms of selling additional business and bringing new
clients to ADP in support of our strategic growth program. We are
continuing to execute on our well-defined strategic initiatives, giving us
high
confidence in ADP’s future growth opportunities,” Mr. Butler
concluded.
Discontinued
Operations
As
previously disclosed, ADP completed the sale of its Travel Clearing business,
an
airline ticket clearing business based in Spain, on July 6,
2007. This business has historically been reported in the “Other”
segment. Travel Clearing revenues were $74 million in fiscal
2007. The results of operations for this business are reported within
discontinued operations in the fiscal 2007 results within this
release. Discontinued operations in the current fiscal quarter
include a pretax gain on the sale of approximately $88 million, $57 million
after tax, or $0.11 per share.
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 first
quarter fiscal 2008 results and posted to the Investor Relations home page
(
http://www.investquest.com/iq/a/ad
p
/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, Tuesday, October 30 at 8:30 a.m.
EDT. 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 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.