AUTOMATIC DATA PROCESSING INC Quarterly Report for Q1 Ended Sep 30, 2013

Summary

Automatic Data Processing, Inc. (ADP) reported solid performance for the fiscal first quarter ended September 29, 2013, with total revenues increasing by 8% year-over-year to $2.84 billion. This growth was driven by increases across all its major segments: Employer Services, PEO Services, and Dealer Services. Net earnings from continuing operations rose by 9% to $328.6 million, leading to diluted earnings per share (EPS) of $0.68, up from $0.62 in the prior year's quarter. The company experienced a decrease in interest income from funds held for clients due to lower interest rates, though this was partially offset by an increase in the average client funds balance. Despite pressure on this revenue stream, ADP demonstrated strong operational execution with overall margins remaining stable. The company also continued its commitment to shareholder returns through active share repurchases, buying back approximately 4.2 million shares during the quarter.

Key Highlights

• 1Total revenues increased 8% to $2.84 billion, driven by growth in Employer Services (+8%), PEO Services (+12%), and Dealer Services (+7%).
• 2Net earnings from continuing operations grew 9% to $328.6 million.
• 3Diluted EPS from continuing operations increased to $0.68 from $0.62 in the prior year's comparable period.
• 4Interest income on funds held for clients decreased due to lower interest rates, but was partly offset by an 8% increase in the average client funds balance.
• 5Operating expenses and total expenses increased by 9% and 7% respectively, largely in line with revenue growth and reflecting investments and acquisitions.
• 6The company repurchased approximately 4.2 million shares of its common stock during the quarter.
• 7The effective tax rate decreased to 33.9% from 35.0% due to the resolution of certain tax matters.

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