10-QPeriod: Q3 FY2002

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q3 Ended Mar 31, 2002

Filed May 6, 2002For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) reported strong financial results for the nine months ended March 31, 2002, with total revenues reaching $5.16 billion, a 2% increase year-over-year. Net earnings saw a significant boost of 21% to $813.5 million for the nine-month period, driven by robust performance in Employer Services and efficient cost management across the organization. The company also experienced a 17% increase in net earnings for the third quarter, reaching $352.3 million. This growth was supported by a 1% increase in total revenues to $1.87 billion for the quarter. Key financial highlights include a substantial increase in earnings per share (EPS), with diluted EPS rising to $1.29 for the nine months and $0.56 for the quarter, reflecting growth driven by improved profitability and a reduction in outstanding shares due to ongoing share repurchase programs. ADP's balance sheet remains strong, with $2.8 billion in cash and marketable securities and a low long-term debt to equity ratio of 2%, underscoring its financial stability and capacity for future investments and shareholder returns.

Key Highlights

  • 1Consolidated revenues grew 1% to $1.87 billion for the three months ended March 31, 2002, and 2% to $5.16 billion for the nine months ended March 31, 2002.
  • 2Net earnings for the nine months ended March 31, 2002, increased by 21% to $813.5 million, compared to $669.7 million in the prior year.
  • 3Diluted earnings per share (EPS) for the nine months ended March 31, 2002, increased to $1.29 from $1.04 in the prior year, representing a 24% increase.
  • 4The company maintained a strong financial position with $1.2 billion in cash and cash equivalents and $1.6 billion in short-term and long-term marketable securities as of March 31, 2002.
  • 5Shareholders' equity stood at $5.0 billion, with a strong capital structure indicated by a long-term debt to equity ratio of 2%.
  • 6The adoption of SFAS 142 (Goodwill and Other Intangible Assets) eliminated goodwill amortization, positively impacting reported net earnings and EPS.
  • 7ADP repurchased approximately 12.5 million shares of common stock in the first nine months of fiscal 2002, contributing to the decrease in outstanding shares and increased EPS.

Frequently Asked Questions

For the three months ended March 31, 2002, Employer Services revenue grew 4%, Brokerage Services revenue increased 4%, and Dealer Services revenue saw a 1% increase. However, 'Other' revenues declined 45%. For the nine months ended March 31, 2002, Employer Services revenue increased 6%, Brokerage Services revenue grew 1%, and Dealer Services revenue rose 3%, while 'Other' revenues decreased 23%.

The adoption of SFAS 142, which eliminated the amortization of goodwill, has led to a significant decrease in amortization expenses. This positively impacted reported net earnings and EPS. For example, pro forma net earnings for the nine months ended March 31, 2001, adjusted for SFAS 142, were $704.5 million, compared to the previously reported $669.7 million, and pro forma diluted EPS was $1.09 compared to $1.04.

The company projects consolidated revenue growth in the low single-digits for fiscal year 2002. Additionally, ADP projects double-digit earnings per share growth over the fiscal year 2001 pro forma full-year results.

ADP generated strong cash flows from operations, totaling $1.2 billion for the nine months ended March 31, 2002. The company maintains a strong cash position with $2.8 billion in cash and marketable securities. Its capital structure is robust, with shareholders' equity at $5.0 billion and a low long-term debt to equity ratio of 2%. ADP also has a new $4.0 billion unsecured revolving credit facility and a $4.0 billion commercial paper program.