ADP Reports Second Fiscal Quarter Results
Thursday January 22, 8:10 am ET
Revenues Increase 9%, EPS Declines 12%
Fiscal 2004 EPS Guidance Narrowed to $1.53 - $1.58
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ROSELAND, N.J.--(BUSINESS WIRE)--Jan. 22, 2004--Automatic Data Processing, Inc. (NYSE:ADP) reported 9% revenue growth, with revenues of $1.8 billion and $.38 earnings per share for the second fiscal quarter ended December 31, 2003, Arthur F. Weinbach, chairman and chief executive officer, announced today. Pretax and net earnings declined 14% and 13%, respectively. Diluted earnings per share, on fewer shares outstanding, declined 12% from $.43 per share last year.
Commenting on the quarter, Mr. Weinbach said, "Revenue growth was ahead of our plan for the quarter primarily in Brokerage Services. Revenues in Employer Services, Brokerage Services and Dealer Services grew 9%, 7% and 8%, respectively. Claims Services revenues declined 5% primarily due to the previously announced exiting of our Medical Claims Business. As anticipated, earnings continue to be impacted by lower interest rates, our incremental investment activity which will continue to increase over the fiscal year, and by dilution from last year's acquisitions.
"Employer Services' sales growth was 2% in the second quarter compared with last year. This result is close to our plan and an improvement over the prior four quarters' sales results. We have seen increased interest in comprehensive outsourcing arrangements with large employers that include Managed Payroll, Human Resources and Benefits Administration, and have created a dedicated organization within our National Accounts segment to support the growth in demand for these services.
"Employer Services' client retention continued to be strong, improving slightly over last year's record retention levels. The critical year-end retention period is still ahead of us, but we are pleased with our results so far. The number of employees on our clients' payrolls, or 'pays per control', was relatively flat in North America. However, pays per control in our European businesses is still declining, with individual country results ranging from flat to down 3% compared to last year. Employer Services' margin declined due to the increased investment spending as well as the continued integration of last June's ProBusiness Services and other acquisitions. Brokerage Services' revenue growth was primarily driven by an increase in investor communications activity. Non-proxy mutual fund mailings were especially strong compared with last year based on increased communications related to regulatory oversight.
"We are slightly ahead of our plans as we move into the second half of the fiscal year and the overall outlook for ADP has turned more positive based on better momentum in the brokerage markets, improving economic conditions and increasing confidence that there will be no further interest rate declines. As we are halfway through our fiscal year and have increased visibility on our key metrics, we are narrowing the range of our fiscal 2004 earnings per share guidance to $1.53 - $1.58 from previous guidance of $1.50 - $1.60. We continue to forecast mid-single digit revenue growth. We anticipate stronger sales growth in Employer Services during the second half of the year, due in part to easier comparisons and also due to our investments in products and a larger U.S. sales force. Our investment spending increased to about $30 million in the quarter, about $50 million year-to-date, and we are on track to spend approximately $130 - $145 million for the fiscal year.
"We have continued to acquire ADP shares for treasury. During the first half of fiscal 2004, we acquired over 7 million shares for approximately $270 million," Mr. Weinbach concluded. |
