EX-99 4 exhibit8k.txt EXHIBIT ADP REPORTS 4% REVENUE GROWTH FOR FIRST FISCAL QUARTER; EPS DECLINES 6% ROSELAND, NJ, October 17, 2003 - Automatic Data Processing, Inc. (NYSE:ADP) reported 4% revenue growth and $.32 earnings per share for the first fiscal quarter ended September 30, 2003, Arthur F. Weinbach, chairman and chief executive officer, announced today. Revenues of $1.7 billion increased 4% over last year. Pretax earnings declined 9% and net earnings declined 7%. Diluted earnings per share declined 6% from $.34 per share last year. Commenting on the quarter, Mr. Weinbach said, "The primary reasons for the earnings decline are the previously disclosed reductions in interest rates, the weakness in the brokerage industry and the overall economy, and our incremental investment activity. Nevertheless, earnings were slightly stronger than our expectations, although some of our key indicators of future performance remained mixed. Revenues in Employer Services grew 10% with internal revenue growth of 5%. Employer Services' new business sales declined 4% from a year ago, which is slightly behind our plan. Client retention continues to be strong, improving slightly over last year's record retention levels. While our plans contemplated flat employment throughout the fiscal year, we had a decline of less than 0.5% in the number of employees on our clients' payrolls in the first quarter. As expected, our margin in Employer Services declined due to previously announced accelerated investments as well as the integration of June's ProBusiness Services acquisition. Dealer Services' revenues grew 8% continuing the positive momentum from last year. Brokerage Services' revenues declined 13%. The decline from last year is based on lower back office trades per day, although above expectations, and lower investor communications activity. Claims Services' revenues declined 6%, primarily due to the previously announced exiting of our Medical Claims Business. "Our fiscal 2004 guidance for mid-single digit revenue growth and earnings per share of $1.50 - $1.60 remains unchanged. While we are slightly ahead of our planned results for the quarter, our incremental investment spending was slower than anticipated and will ramp-up over the fiscal year. We remain cautious on our full year estimate for sales growth in Employer Services, and our outlook continues to anticipate no change in the economy. We are optimistic about the incremental investments we are making in our businesses and their impact on our future growth opportunities," Mr. Weinbach concluded. An analyst conference call to review the first quarter results will be held today, Friday, October 17 at 1:30 p.m. EDT. A live audio webcast of the call will be available to the public on a listen-only basis. To listen to the webcast go to www.adp.com and click on the webcast icon. ADP's news releases, current financial information, SEC filings and Investor Relations presentations are accessible at the same website. ADP, with over $7 billion in revenues and approximately 500,000 clients, is one of the largest independent computing services firms in the world. AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) THREE MONTHS ENDED SEPTEMBER 30, 2003 2002 ----------- ---------- Revenues, other than interest on funds held for clients and PEO revenues $1,532,389 $1,476,424 Interest on funds held for Clients 82,934 89,865 PEO revenues (A) 104,954 80,396 ---------- ---------- Total revenues 1,720,277 1,646,685 ---------- ---------- Operating expenses 794,241 708,468 Selling, general and administrative expenses 426,878 447,953 Systems development and programming costs 131,754 119,898 Depreciation and amortization 74,726 67,684 Other income, net (18,592) (37,718) ---------- ---------- Total expenses 1,409,007 1,306,285 ---------- ---------- Earnings before income taxes 311,270 340,400 Provision for income taxes 116,420 130,000 --------- --------- Net earnings $ 194,850 $ 210,400 ========= ========= Basic earnings per share $ 0.33 $ 0.35 ========= ========= Diluted earnings per share $ 0.32 $ 0.34 ========= ========= Dividends per common share $ 0.1200 $ 0.1150 ========= ========= (A) Net of pass-through costs of $911,569 and $763,379 for the three months ended September 30, 2003 and 2002, respectively.
AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES OTHER SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) THREE MONTHS ENDED SEPTEMBER 30, 2003 2002 ---------- ---------- Revenues for select business units (B) Employer Services $1,110,000 $1,008,000 Brokerage Services $ 313,000 $ 358,000 Dealer Services $ 211,000 $ 195,000 Pre-tax earnings for select business units (B) Employer Services $ 206,000 $ 213,000 Brokerage Services $ 20,000 $ 56,000 Dealer Services $ 32,000 $ 30,000
(B) Prior year's segment results were adjusted to reflect fiscal year 2004 budgeted foreign exchange rates. In addition, Employer Services' prior year revenue was adjusted to include interest earned on client funds credited at 4.5%. Employer Services' revenues are credited with interest earned on client funds at a standard rate to better judge real business growth without the impact of changing interest rates. Given the sustained lower interest rates over recent years, ADP has changed the standard rate from 6.0% to 4.5%. A full description of segment information follows the balance sheet. The tables at the end of this release provide the adjusted quarterly segment data for the prior three fiscal years.
THREE MONTHS ENDED SEPTEMBER 30, 2003 2002 ---------- ---------- Components of Other income, net: -------------------------------- Interest income on corporate funds $ (22,100) $ (39,704) Interest expense 4,651 7,976 Realized gains on available-for-sale securities, net (1,143) (5,990) --------- --------- Total other income, net $ (18,592) $ (37,718) ========= ========= Earnings per share information: ------------------------------- Net earnings $ 194,850 $ 210,400 Average shares outstanding 594,843 606,814 Basic earnings per share $ 0.33 $ 0.35 Diluted net earnings $ 195,177 $ 210,713 Diluted shares outstanding 600,849 612,517 Diluted earnings per share $ 0.32 $ 0.34
AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) SEPTEMBER 30, JUNE 30, 2003 2003 ------------- ---------- (UNAUDITED) Assets ------ Cash and cash equivalents/Short-term marketable securities $ 1,859,427 $ 2,005,384 Other current assets 1,466,440 1,670,117 ----------- ----------- Total current assets 3,325,867 3,675,501 Long-term marketable securities 457,743 338,959 Property, plant and equipment, net 604,504 614,701 Other non-current assets 3,440,665 3,396,761 Funds held for clients 10,099,731 11,807,749 ----------- ----------- Total assets $17,928,510 $19,833,671 =========== =========== Liabilities and Shareholders' Equity ----------------------------------- Total current liabilities $ 1,707,534 $ 1,998,783 Long-term debt 84,713 84,674 Other non-current liabilities 979,437 929,826 Client funds obligations 9,807,193 11,448,915 ----------- ----------- Total liabilities 12,578,877 14,462,198 Total shareholders' equity 5,349,633 5,371,473 ----------- ----------- Total liabilities and shareholders' equity $17,928,510 $19,833,671 =========== =========== Segment Information ------------------- Employer Services, Brokerage Services and Dealer Services are ADP's largest business units. ADP evaluates performance of its business units based on operating results before interest on corporate funds, foreign currency gains and losses, and income taxes. Certain revenues and expenses are charged to business units at a standard rate for management and motivation reasons. Other costs are recorded based on management responsibility. Prior years' business unit revenues and earnings before income taxes have been adjusted to reflect updated fiscal year 2004 budgeted foreign exchange rates. In addition, Employer Services' prior years' revenues were adjusted to include interest earned on client funds credited at 4.5%. Prior to fiscal 2004, Employer Services was credited with interest earned on client funds at 6.0%. Given the decline in interest rates over recent years, the standard rate has been changed to 4.5%. Reconciling items for revenues and earnings before income taxes include foreign exchange differences between the actual foreign exchange rates and the fiscal 2004 budgeted foreign exchange rates and the adjustment for the difference between actual interest income earned on invested funds held for clients and interest credited to Employer Services at a standard rate. The business unit results also include an internal cost of capital charge related to the funding of acquisitions and other investments. This charge is eliminated in consolidation and as such represents a reconciling item to earnings before income taxes. The tables below show the adjusted quarterly segment revenues and earnings before income taxes and reconciling items for fiscal years 2001, 2002 and 2003.
AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES REVENUE BY BUSINESS UNIT (IN MILLIONS) Reconciling Items --------------------- Fiscal Foreign Client Fund Year Employer Services Brokerage Services Dealer Services Other Exchange Interest Total ------ ---------------- ------------------ --------------- ----- -------- ----------- ----- $ % $ % $ % $ % $ $ $ % 2001 Q1 892 13% 364 41% 171 (10)% 111 12% (27) 33 1,544 16% Q2 976 14% 372 18% 175 (9)% 124 10% (48) 41 1,640 12% Q3 1,123 11% 449 11% 182 (2)% 97 2% (40) 43 1,854 10% Q4 965 10% 579 14% 181 3% 112 (14)% (52) 31 1,816 8% ----------- ----------- ---------- --------- ------------- ---------- Year 3,956 12% 1,764 19% 709 (5)% 444 2% (167) 148 6,854 11% =========== =========== ========== ========= ============= ========== 2002 Q1 970 9% 364 0% 181 6% 112 1% (45) 26 1,608 4% Q2 1,027 5% 369 (1)% 181 3% 132 6% (49) 21 1,681 3% Q3 1,171 4% 465 4% 183 1% 104 7% (55) 2 1,870 1% Q4 1,008 4% 579 0% 187 3% 116 4% (46) 1 1,845 2% ----------- ----------- ---------- --------- ------------- ---------- Year 4,176 6% 1,777 1% 732 3% 464 5% (195) 50 7,004 2% =========== =========== ========== ========= ============= ========== 2003 Q1 1,008 4% 358 (2)% 195 8% 116 4% (32) 2 1,647 2% Q2 1,064 4% 319 (14)% 201 11% 137 4% (33) (5) 1,683 0% Q3 1,240 6% 401 (14)% 209 14% 96 (8)% (21) (19) 1,906 2% Q4 1,078 7% 532 (8)% 208 11% 113 (2)% (1) (19) 1,911 4% ----------- ---------- ---------- --------- ------------- ----------- Year 4,390 5% 1,610 (9)% 813 11% 462 (0)% (87) (41) 7,147 2% =========== ========== ========== ========= ============= =========== 2004 Q1 1,110 10% 313 (13)% 211 8% 110 (5)% (3) (21) 1,720 4%
AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES PRE-TAX EARNINGS BY BUSINESS UNIT (IN MILLIONS) Reconciling Items ---------------------- Client Cost of Fiscal Employer Brokerage Dealer Frgn Fund Capital Year Services Services Services Other Exch. Int. Charge Total ------ --------------- --------------- --------------- ----------------- ---------------------- --------------- Pre-tax Pre-tax Pre-tax Pre-tax Pre-tax $ % Margin $ % Margin $ % Margin $ % Margin $ $ $ $ % Margin 2001 Q1 149 18% 17% 65 18% 18% 21 (30)% 12% 6 100%+ 5% (2) 33 15 287 29% 19% Q2 198 25% 20% 63 (2)% 17% 28 (13)% 16% 2 (94)% 2% (4) 41 15 343 13% 21% Q3 308 16% 27% 81 (20)% 18% 28 0% 15% 4 100%+ 4% (6) 43 17 475 14% 26% Q4 167 34% 17% 129 7% 22% 27 13% 15% 57 32% 52% (8) 31 17 420 20% 23% ---------------- -------------- -------------- ----------------- ----------------- ----------------- Year 822 22% 21% 338 (1)% 19% 104 (9)% 15% 69 (3)% 16% (20) 148 64 1,525 18% 22% ================ ============== ============== ================= ================= ================= 2002 Q1 188 26% 19% 67 3% 18% 28 33% 15% (12)(100)%+ (11)% (4) 26 27 320 11% 20% Q2 247 25% 24% 64 2% 17% 31 11% 17% 46 100%+ 35% (7) 21 28 430 25% 26% Q3 356 16% 30% 88 9% 19% 31 11% 17% 69 100%+ 66% (10) 2 36 572 20% 31% Q4 204 22% 20% 139 8% 24% 30 11% 16% 66 14% 57% (6) 1 31 465 11% 25% ---------------- -------------- -------------- ---------------- ------------------ ----------------- Year 995 21% 24% 358 6% 20% 120 15% 16% 169 100%+ 36% (27) 50 122 1,787 17% 26% ================ ============== ============== ================ ================== ================= 2003 Q1 213 13% 21% 56 (16)% 16% 30 7% 15% 15 100%+ 13% (4) 2 28 340 6% 21% Q2 268 9% 25% 33 (48)% 10% 35 12% 17% 67 46% 49% (5) (5) 30 423 (2)% 25% Q3 411 15% 33% 45 (49)% 11% 36 16% 17% 40 (42)% 42% (6) (19) 26 533 (7)% 28% Q4 178 (13)% 17% 98 (29)% 18% 36 20% 17% 31 (56)% 25% - (19) 25 349 (25)% 18% ---------------- -------------- -------------- ---------------- ------------------ ----------------- Year 1,070 8% 24% 232 (35)% 14% 137 14% 17% 153 (11)% 33% (15) (41) 109 1,645 (8)% 23% ================ ============== ============== ================ ================== ================= 2004 Q1 206 (3)% 19% 20 (64)% 6% 32 9% 15% 41 100%+ 37% - (21) 33 311 (9)% 18%
-------------------------------------------- This release and other written or oral statements made from time to time by ADP may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by the use of words like "expects," "projects," "anticipates," "estimates," "we believe," "could be" and other words of similar meaning, are forward-looking statements. These statements are based on management's expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include: ADP's success in obtaining, retaining and selling additional services to clients; the pricing of products and services; changes in laws regulating payroll taxes, professional employer organizations and employee benefits; overall market and economic conditions, including interest rate and foreign currency trends; competitive conditions; stock market activity; auto sales and related industry changes; employment and wage levels; changes in technology; availability of skilled technical associates and the impact of new acquisitions and divestitures. ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. #10#17#03#