What is the primary driver of ADP's revenue growth in this period?

The primary driver of ADP's revenue growth is its Employer Services segment, which experienced a 9% increase in revenue for the quarter and 7% for the year-to-date period. This growth is attributed to new business sales, strong client retention, price increases, and a rise in interest earned on client fund balances. Additionally, the company is seeing significant growth in its 'beyond payroll' products and services, such as PEO services.

How is the acquisition of Bank of America's clearing business impacting ADP?

The acquisition of Bank of America's U.S. Clearing and Broker-Dealer Services divisions, now operating as the Securities Clearing and Outsourcing Services segment, has successfully integrated and is contributing to revenue growth. While the segment generated $22 million in revenue for the quarter and $37 million year-to-date, it also incurred an initial operating loss of $9 million for the quarter and $14 million year-to-date due to integration costs and aligning the cost structure with revenues. The company expects to deconvert two major clients from this segment by June 30, 2005.

What is the company's financial position and liquidity like?

ADP's financial position remains strong. As of March 31, 2005, the company had total assets of $32.8 billion and stockholders' equity of $5.8 billion. Liquidity is robust, with $2.0 billion in cash and marketable securities. The company also has access to significant credit facilities and maintains a commercial paper program, demonstrating its capacity to fund operations and capital expenditures.

Are there any significant changes in accounting policies or upcoming pronouncements that investors should be aware of?

ADP is preparing to adopt SFAS No. 123R, 'Share-Based Payment,' effective for its fiscal year beginning July 1, 2005. This standard requires the recognition of compensation cost for share-based payments, which will impact the company's financial statements. ADP is currently assessing which adoption method (prospective or retrospective) it will use and its overall impact. Additionally, the company is evaluating the potential effects of the American Jobs Creation Act (AJCA) on repatriated foreign earnings, which could range from $0 to $500 million in repatriation with a related tax impact of $0 to $35 million.

ADP 10-Q Quarterly Report Q3 FY2005 — Revenue, Net Income, EPS

Summary

Automatic Data Processing, Inc. (ADP) reported strong financial performance for the third quarter and the first nine months of fiscal year 2005, ending March 31, 2005. Total revenues saw a significant increase of 11% for the quarter and 9% year-to-date, driven by robust growth across its core segments, particularly Employer Services and the newly formed Securities Clearing and Outsourcing Services. Net earnings also rose, with diluted earnings per share increasing by 14% for the quarter to $0.57 and by 12% year-to-date to $1.35. The company's strategic acquisition of Bank of America's U.S. Clearing and Broker-Dealer Services divisions in November 2004 has successfully integrated and is contributing to the growth of the Securities Clearing and Outsourcing Services segment, although it incurred some initial operating losses. ADP demonstrated solid financial health with total assets of $32.8 billion and total liabilities of $27.0 billion, resulting in substantial stockholders' equity of $5.8 billion. The company also maintained strong liquidity, with cash and marketable securities totaling $2.0 billion. Management continues to focus on strategic investments and operational efficiencies, as evidenced by sustained revenue growth and earnings per share expansion, positioning ADP favorably for continued success.

Key Highlights

1Total revenues increased by 11% to $2.35 billion for the third quarter and by 9% to $6.20 billion for the nine-month period ended March 31, 2005.
2Net earnings rose by 13% to $338 million for the quarter and by 10% to $797 million for the nine-month period.
3Diluted earnings per share (EPS) grew by 14% to $0.57 for the quarter and by 12% to $1.35 for the nine-month period, aided by fewer outstanding shares due to ongoing share repurchases.
4The Employer Services segment continues to be a primary growth driver, with revenues increasing by 9% for the quarter and 7% year-to-date, supported by new business sales, client retention, and growth in 'beyond payroll' services.
5The newly established Securities Clearing and Outsourcing Services segment, bolstered by the acquisition of Bank of America's clearing divisions, generated $22 million in revenue for the quarter and $37 million year-to-date.
6The company maintained strong liquidity, with $2.0 billion in cash and marketable securities at March 31, 2005, and a healthy stockholders' equity of $5.8 billion.
7ADP repurchased 3.8 million shares of common stock during the third quarter, continuing its practice of returning capital to shareholders.

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q3 Ended Mar 31, 2005

Summary

Key Highlights

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