10-QPeriod: Q1 FY2002

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q1 Ended Sep 30, 2001

Filed November 7, 2001For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) reported solid financial results for the quarter ended September 30, 2001, demonstrating continued growth and a strong financial position. Total revenues reached $1.61 billion, a 4% increase year-over-year, driven primarily by its Employer Services segment. Net earnings saw a significant increase of 7% to $196.6 million, or $0.31 per diluted share, up from $0.27 in the prior year period (pro forma adjusted). This growth was achieved despite a weaker economic environment that impacted client retention and new business sales in some segments, as well as the direct effects of the September 11th terrorist attacks on Brokerage Services. The company also benefited from the adoption of SFAS 142, which eliminated goodwill amortization, positively impacting reported earnings and reducing the effective tax rate.

Key Highlights

  • 1Total revenues grew 4% to $1.61 billion for the quarter ended September 30, 2001.
  • 2Net earnings increased by 7% to $196.6 million, with diluted EPS rising to $0.31 from a pro forma adjusted $0.28.
  • 3Employer Services, ADP's largest segment, showed an 8% revenue increase, although growth moderated due to economic conditions.
  • 4The adoption of SFAS 142 eliminated goodwill amortization, contributing to higher reported net income and a lower effective tax rate.
  • 5The company repurchased approximately 9 million shares of common stock for treasury during the quarter, signaling confidence and capital return to shareholders.
  • 6ADP maintains a strong financial position with $2.4 billion in cash and marketable securities and a low long-term debt to equity ratio of 2%.

Frequently Asked Questions

The September 11th terrorist attacks directly impacted ADP's Brokerage Services segment, leading to fewer trades per day and lower demand for research and print services. This resulted in Brokerage Services revenue remaining flat year-over-year.

ADP adopted SFAS 142, "Goodwill and Other Intangible Assets," which requires that goodwill no longer be amortized but tested for impairment. This change eliminated goodwill amortization expense, leading to higher reported net earnings and a lower effective income tax rate for the quarter. The company anticipates completing its impairment assessment by December 31, 2001, and does not currently foresee any impairment.

Management expects revenue growth in the mid-single digits and projects double-digit earnings per share growth over fiscal year 2001, based on pro forma full-year results. This outlook considers ongoing investments in new products and cost containment initiatives.

ADP reported strong cash flow generation and maintained a robust financial position with $2.4 billion in cash and marketable securities at quarter-end. The company also reduced its long-term debt and has a very low long-term debt-to-equity ratio of 2%. Additionally, ADP actively repurchased shares, with $437 million spent on treasury stock purchases during the quarter.