10-QPeriod: Q3 FY2009

AUTOMATIC DATA PROCESSING INC Quarterly Report for Q3 Ended Mar 31, 2009

Filed May 8, 2009For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) reported its third-quarter results for fiscal year 2009, ending March 31, 2009. Despite a slight year-over-year decrease in total revenues to $2.37 billion for the quarter, the company demonstrated resilience with stable net earnings from continuing operations of $402.5 million. Diluted earnings per share (EPS) from continuing operations saw a modest increase to $0.80, driven by a reduced share count due to ongoing share repurchase programs. For the nine-month period, revenues grew by 3% to $6.76 billion, with net earnings from continuing operations increasing by 5% to $981.0 million and diluted EPS rising by 9% to $1.93. The company's performance was impacted by broader economic conditions, including fluctuations in foreign currency exchange rates which reduced revenue by $52.5 million in the quarter. However, key segments like Employer Services and PEO Services showed revenue growth, while Dealer Services experienced a slight decline. Management highlighted a strong liquidity position and continued operating cash flow generation, underscoring the company's financial stability amidst economic volatility. The company also provided updates on its significant investment portfolio, noting prudent risk management practices and the absence of exposure to subprime mortgage-backed securities.

Financial Highlights

3 data points
Beta

Revenue

$2.37B

48.7% Gross Margin
Financial Statements
Beta
Revenue$2.37B
Cost of Revenue$1.21B
Gross Profit$1.15B

Key Highlights

  • 1Total revenues for the third quarter decreased slightly by 2% to $2.37 billion, while for the nine-month period, revenues increased by 3% to $6.76 billion.
  • 2Net earnings from continuing operations remained stable year-over-year for the quarter at $402.5 million, but increased by 5% to $981.0 million for the nine-month period.
  • 3Diluted EPS from continuing operations increased by 4% to $0.80 for the quarter and by 9% to $1.93 for the nine-month period, benefiting from share repurchases.
  • 4Employer Services and PEO Services segments demonstrated revenue growth, while Dealer Services saw a revenue decline, reflecting varied segment performance.
  • 5The company maintained a strong liquidity position with $1.47 billion in cash and marketable securities at the end of the quarter.
  • 6Operating cash flow for the nine-month period was $1.14 billion, though lower than the prior year's $1.30 billion.
  • 7The company continues to manage its investment portfolio conservatively, with a focus on high-quality, investment-grade securities and no exposure to subprime mortgage-backed securities or similar risky assets.

Frequently Asked Questions

For the three months ended March 31, 2009, ADP's total revenues decreased by 2% to $2.37 billion compared to the same period in the prior year. However, for the nine months ended March 31, 2009, total revenues increased by 3% to $6.76 billion, indicating growth over a longer timeframe.

Foreign currency exchange rate fluctuations had a negative impact on ADP's reported revenues. For the three-month period, this resulted in a revenue reduction of $52.5 million, or approximately 3% of the reported revenue decrease. For the nine-month period, foreign currency fluctuations reduced revenue by $109.9 million.

ADP reported a strong liquidity position with $1.47 billion in cash and marketable securities at March 31, 2009. The company generated $1.14 billion in net cash flow from operating activities during the first nine months of fiscal year 2009 and maintains access to significant credit facilities and a commercial paper program, indicating robust financial health and resources to meet its obligations.

The Dealer Services segment experienced a revenue decrease of 3% for the quarter, impacted by dealership consolidation and closures, particularly among GM and Chrysler. The company anticipates a potential revenue impact of approximately $75 million in the twelve months following the closure of an estimated 3,000 GM and Chrysler dealerships. Despite these challenges, the segment also saw revenue increases from new clients and growth in key products.