10-QPeriod: Q3 FY2003

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q3 Ended Mar 31, 2003

Filed May 2, 2003For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) reported its first-quarter results for fiscal year 2003, ending March 31, 2003. While consolidated revenues saw a modest increase of 2% to $1.9 billion, the company experienced a 6% decline in earnings before income taxes to $533 million, and a 6% drop in net earnings to $329 million, resulting in diluted earnings per share of $0.54, down from $0.56 in the prior year's quarter. This performance was primarily influenced by a significant downturn in the Brokerage Services segment, which was partially offset by growth in Employer Services and Dealer Services. Despite the mixed financial results, ADP maintained a strong financial position with substantial cash and marketable securities, and continued its share repurchase program. The company also announced a pending acquisition of ProBusiness Services, Inc. for approximately $500 million, subject to shareholder approval and regulatory review.

Key Highlights

  • 1Consolidated revenues increased by 2% to $1.9 billion for the three months ended March 31, 2003, compared to the prior year.
  • 2Net earnings decreased by 6% to $329 million, and diluted EPS fell to $0.54 from $0.56.
  • 3Brokerage Services revenue declined significantly by 14% due to weakness in the financial services industry.
  • 4Employer Services revenue grew by 6%, driven by payroll and tax businesses, with improved client retention.
  • 5Dealer Services revenue showed strong growth of 15%, fueled by acquisitions and new business lines.
  • 6The company announced a pending acquisition of ProBusiness Services, Inc. for approximately $500 million.
  • 7ADP continues to execute its share repurchase program, repurchasing approximately 23.7 million shares during the nine-month period.

Frequently Asked Questions

ADP's consolidated revenue growth was primarily driven by a 6% increase in Employer Services revenue and a strong 15% increase in Dealer Services revenue. These gains were partially offset by a significant 14% decline in Brokerage Services revenue.

Net earnings decreased by 6% primarily because total expenses grew at a faster rate than revenues. Selling, general, and administrative expenses increased by 12%, driven by growth in Employer Services and Dealer Services, and there were also restructuring charges of approximately $10 million in the quarter.

ADP has entered into a definitive agreement to acquire ProBusiness Services, Inc. for approximately $500 million. The transaction is subject to ProBusiness shareholder approval and regulatory review, with the Department of Justice having requested additional information as part of its review.

ADP maintains a strong financial position, with $2.7 billion in cash and marketable securities at March 31, 2003. The company's cash flows from operations remained stable at $1.2 billion for the nine-month period, and it has an unsecured revolving credit facility and a commercial paper program in place for liquidity.