10-KPeriod: FY2013

AUTOMATIC DATA PROCESSING INC Annual Report, Year Ended Jun 30, 2013

Filed August 19, 2013For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) reported solid revenue growth in fiscal year 2013, with total revenues increasing by 7% to $11.31 billion. This growth was driven by performance across all three segments: Employer Services, PEO Services, and Dealer Services. The company's strategic focus on cloud-based HCM solutions and expanding its global presence is evident in its continued investment in technology and salesforce productivity, which led to strong new business bookings. While net earnings from continuing operations saw a slight decrease of 1% to $1.36 billion, primarily due to a goodwill impairment charge of $42.7 million related to the ADP AdvancedMD business and a decline in interest income from client funds due to lower interest rates, the adjusted earnings present a more favorable picture. Adjusted net earnings increased by 5% to $1.41 billion, highlighting the underlying operational strength. ADP demonstrated a strong commitment to shareholder returns, repurchasing approximately $647 million in stock and returning $805 million through dividends. The company maintains a robust financial position with ample liquidity and a strong balance sheet. Despite facing challenges such as a lower interest rate environment impacting client fund interest income and ongoing investments in technology, ADP's diversified business model, high client retention rates, and market leadership position in human capital management solutions suggest resilience and continued growth potential. Investors should note the company's ongoing investment in systems development and programming, aiming to further enhance its cloud-based offerings and overall service capabilities.

Financial Highlights

50 data points
Beta

Revenue

$9.44B

Net Income

$1.41B

14.9% Net Margin

EPS (Diluted)

$2.89

Total Assets

$32.27B

Cash & Equivalents

$1.40B

Free Cash Flow

$1.58B

Financial Statements
Beta
Revenue$9.44B
SG&A Expenses$2.20B
Operating Expenses$9.31B
Interest Expense$9.10M
Net Income$1.41B
EPS (Basic)$2.91
EPS (Diluted)$2.89
Shares Outstanding (Basic)482.70M
Shares Outstanding (Diluted)487.10M

Key Highlights

  • 1Total revenues grew 7% to $11.31 billion in fiscal 2013, demonstrating broad-based growth across all business segments.
  • 2Employer Services, PEO Services, and Dealer Services all experienced revenue increases of 7%, 11%, and 9% respectively.
  • 3Adjusted net earnings from continuing operations increased by 5% to $1.41 billion, excluding a goodwill impairment charge and a gain on asset sale.
  • 4The company returned $1.45 billion to shareholders through dividends and share repurchases in fiscal 2013.
  • 5Client funds interest income decreased by 15% due to lower interest rates, impacting overall profitability.
  • 6ADP invested $757 million in systems development and programming, signaling a continued focus on technological advancement and product enhancement.
  • 7Client retention remained strong, with Employer Services achieving a rate of 91.3%.

Frequently Asked Questions

In fiscal year 2013, ADP reported a 7% increase in total revenues to $11.31 billion. Net earnings from continuing operations decreased by 1% to $1.36 billion, impacted by a goodwill impairment charge and lower interest income. However, adjusted net earnings from continuing operations rose by 5% to $1.41 billion, reflecting the underlying strength of the business.

ADP demonstrated a strong commitment to returning capital to shareholders, repurchasing approximately $647 million of its common stock and distributing $805 million in dividends during fiscal year 2013. The company maintained a solid financial position with significant cash and marketable securities, and a low long-term debt-to-equity ratio of 0.2%.

Key drivers of ADP's revenue include new business bookings, client retention rates, and the number of employees on client payrolls. Profitability is influenced by revenue growth, operating expense management, and interest income earned on client funds, which is sensitive to prevailing interest rates. Investments in technology and salesforce productivity are also crucial for long-term growth.

ADP operates in three main segments: Employer Services, Professional Employer Organization (PEO) Services, and Dealer Services. In fiscal year 2013, Employer Services revenues grew 7%, PEO Services revenues grew 11%, and Dealer Services revenues grew 9%. All segments showed positive revenue growth, contributing to the company's overall performance.