10-QPeriod: Q1 FY2003

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q1 Ended Sep 30, 2002

Filed October 31, 2002For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) reported its quarterly results for the period ending September 29, 2002, showcasing a continued trend of revenue and earnings growth. Total revenues increased by 2% year-over-year to $1.65 billion, driven primarily by the Employer Services segment. Net earnings saw a healthy 7% increase, reaching $210.4 million, which translated to diluted earnings per share of $0.34, up from $0.31 in the prior year. The company maintained a strong financial position with significant cash and marketable securities and a low debt-to-equity ratio. While operating cash flows saw a decrease compared to the previous year, largely due to pre-funding of employee benefit plans, investing activities provided substantial cash through marketable securities sales. ADP also continued its aggressive share repurchase program. Management expressed confidence in future performance, forecasting mid-single-digit growth in revenue and EPS for fiscal year 2003.

Key Highlights

  • 1Total revenues increased by 2% to $1.65 billion for the quarter ended September 30, 2002, compared to $1.61 billion in the prior year.
  • 2Net earnings grew by 7% to $210.4 million, up from $196.6 million in the same period last year.
  • 3Diluted earnings per share rose to $0.34 from $0.31, reflecting both earnings growth and a reduction in outstanding shares.
  • 4Employer Services, the largest segment, showed revenue growth of 4% and pre-tax earnings growth of 11%.
  • 5The company repurchased approximately 18.4 million shares of common stock in the first three months of fiscal 2003.
  • 6ADP ended the quarter with a robust financial position, holding $2.3 billion in cash and marketable securities and a low long-term debt to equity ratio of 2%.

Frequently Asked Questions

Revenue growth was primarily driven by the Employer Services segment, which saw a 4% increase in revenue. New business sales grew by 4% and client retention improved, despite a 2% decline in the number of employees on clients' payrolls, which was a slightly lower decline than the fiscal 2002 average.

ADP's financial condition remains strong. At September 30, 2002, the company had $2.3 billion in cash and marketable securities, shareholders' equity of $4.7 billion, and a low long-term debt-to-equity ratio of 2%. While cash from operations decreased due to specific funding activities, overall liquidity appears stable.

Management forecasts another record year for fiscal 2003, with expectations of mid-single-digit growth in both revenue and earnings per share over fiscal 2002 full-year results.

In October 2002, ADP entered into a new $4.0 billion unsecured revolving credit agreement, replacing a previous one. This facility is primarily intended to provide liquidity for its commercial paper program and fund normal business operations. As of September 30, 2002, there were no borrowings under this new agreement.