10-QPeriod: Q2 FY2008

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q2 Ended Dec 31, 2007

Filed February 11, 2008For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) reported a solid financial performance for the quarter and six months ended December 31, 2007. Total revenues increased by 15% year-over-year for the quarter, reaching $2.15 billion, driven by strong growth across all segments, particularly Employer Services and PEO Services. Net earnings from continuing operations saw a significant jump of 18% to $291.6 million for the quarter, translating to a 22% increase in diluted Earnings Per Share (EPS) from continuing operations to $0.55. The company continued its strategic focus on divesting non-core assets, successfully completing the sale of its Travel Clearing business. This focus, combined with robust operational execution, is enabling ADP to enhance shareholder value through share repurchases and dividend payments. Management remains confident in the company's growth potential and its ability to manage market risks effectively.

Key Highlights

  • 1Total revenues grew 15% to $2.15 billion for the three months ended December 31, 2007, compared to the prior year period.
  • 2Net earnings from continuing operations increased 18% to $291.6 million for the three months ended December 31, 2007.
  • 3Diluted EPS from continuing operations rose 22% to $0.55 for the three months ended December 31, 2007.
  • 4All major segments (Employer Services, PEO Services, Dealer Services) demonstrated strong revenue growth.
  • 5The company completed the sale of its Travel Clearing business, continuing its strategy of divesting non-core assets.
  • 6Average client fund balances increased, contributing to higher interest income on funds held for clients.
  • 7ADP repurchased approximately 6.6 million shares of common stock during the quarter, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

Revenue growth was driven by increases across all segments, particularly Employer Services and PEO Services. Strong performance was also supported by an increase in interest on funds held for clients, stemming from higher average client fund balances and slightly higher interest rates.

Profitability improved significantly. Net earnings from continuing operations increased by 18% to $291.6 million for the quarter, and diluted EPS from continuing operations grew by 22% to $0.55, indicating improved operational efficiency and strong revenue performance.

ADP is actively divesting non-strategic, slow-growing businesses to focus on core operations with higher growth potential. The recent sale of the Travel Clearing business is an example of this strategy. This allows for a more concentrated focus by management teams on their respective businesses.

ADP is returning capital to shareholders through a combination of share repurchase programs and cash dividends. During the quarter, the company repurchased approximately 6.6 million shares of its common stock. Dividends declared per common share also increased compared to the prior year.