ADP Reports Third Quarter Fiscal 2012 Results; Updates Fiscal 2012 Guidance
Revenues Rise 7%, 6% Organic; EPS up 8%
ROSELAND, N.J., May 1, 2012 (GLOBE NEWSWIRE) -- Automatic Data Processing, Inc. (Nasdaq:ADP) reported revenue growth of 7%, 6% organic, to $2.9 billion for the third fiscal quarter ended March 31, 2012, Carlos A. Rodriguez, president and chief executive officer, announced today. Pretax earnings and net earnings increased 5% and 7%, respectively. Diluted earnings per share of $0.92 increased 8% from $0.85 a year ago on fewer shares outstanding. ADP acquired 8.9 million shares of its stock for treasury at a cost of about $445 million fiscal year-to-date. Cash and marketable securities were $1.8 billion at March 31, 2012.
Third Quarter Discussion
Commenting on the results, Mr. Rodriguez said, "I am pleased with ADP's third quarter results. New business sales growth was solid for Employer Services and PEO Services. Third quarter new business sales for Dealer Services were also solid. I am also pleased that each business segment posted year-over-year pretax margin improvement for the third quarter. However, it is important to note that ADP's total pretax margin comparisons continued to be negatively impacted by the decline in high-margin client interest revenues resulting from lower interest rates. In addition, subsequent to the end of the quarter, we closed a strategic acquisition in Employer Services that is expected to contribute to ADP's future growth.
"Employer Services' revenues grew 7% for the third quarter, 6% organically, compared to last year's third quarter. The number of employees on our clients' payrolls in the United States increased 3.3% for the quarter as measured on a same-store-sales basis for our clients on our AutoPay platform. Worldwide client retention improved 0.1 percentage points compared with a year ago during the critical calendar year-end retention period. Employer Services' pretax margin improved slightly for the quarter, and included a drag from acquisitions of 90 basis points.
"Combined Employer Services and PEO Services worldwide new business sales increased 12% for the quarter. New business sales represent annualized recurring revenues anticipated from new orders.
"PEO Services' revenues increased 15% for the third quarter, all organic, compared to last year's third quarter. PEO Services' pretax margin improved 50 basis points for the quarter. Average worksite employees paid by PEO Services increased 11% for the quarter to approximately 260,000.
"Dealer Services' revenues grew 7% for the third quarter, 6% organic, compared to last year's third quarter. Dealer Services' pretax margin improved 120 basis points for the quarter.
Interest on Funds Held for Clients
"The safety, liquidity, and diversification of our clients' funds are the foremost objectives of our investment strategy. Client funds are invested in accordance with ADP's prudent and conservative investment guidelines and the credit quality of the investment portfolio is predominantly AAA/AA.
"For the third quarter, interest on funds held for clients declined $15.3 million, or 10%, from $148.6 million a year ago to $133.3 million, due to a decline of 40 basis points in the average interest yield to 2.5%, partially offset by an increase of 5% in average client funds balances from $20.6 billion to $21.7 billion.
Fiscal 2012 Forecast
"We have updated our fiscal 2012 forecast to include the acquisition closed since our last update. Our forecasts exclude the gain realized in the second fiscal quarter on the sale of assets, and continue to reflect the related lost revenue and earnings streams for the remainder of the year:
"Interest on funds held for clients is expected to decline $45 to $50 million, or 8% to 9%, from $540.1 million in fiscal 2011, and is based on 6% to 7% anticipated growth in average client funds balances. This is narrowed from our previously forecasted decline of $45 to $55 million, or 8% to 10%, which was also based on 6% to 7% growth in average client funds balances. Our forecast continues to anticipate a decline of 40 to 50 basis points in the expected average interest yield to 2.7% to 2.8%. The interest assumptions in our forecasts are based on Fed Funds futures contracts and forward yield curves as of April 27, 2012. The Fed Funds futures contracts do not anticipate any changes during the fiscal year in the Fed Funds target rate. The three-and-a-half and five-year U.S. government agency rates based on the forward yield curves as of April 27, 2012 were used to forecast new purchase rates for the client extended and client long portfolios, respectively.
"ADP's business model is strong, key business metrics are positive, and our sales execution is solid. We are focused on product innovation along with enhancing our distribution and service capabilities, which I believe are the right things to grow the business long-term," Mr. Rodriguez concluded.
The schedules of quarterly and full-year revenue and pretax earnings by reportable segment for fiscal years 2010, 2011, and 2012 have been updated for the third quarter of fiscal 2012 and posted to the Investor Relations home page (http://www.investquest.com/iq/a/adp/index.htm) of our website www.ADP.com under Reportable Segments Financial Data.
An analyst conference call will be held today, Tuesday, May 1 at 8:30 a.m. EDT. A live webcast of the call will be available to the public on a listen-only basis. To listen to the webcast and view the slide presentation, go to ADP's home page, www.ADP.com, or ADP's Investor Relations home page, http://www.investquest.com/iq/a/adp/index.htm, and click on the webcast icon. Please note, this webcast will be broadcast in two streams: Windows Media and Flash. You may switch streams by selecting "Windows Media" or "Flash" from the gear-setup symbol located to the right-hand side of the volume control on the webcast player. Please check your system 10 minutes prior to the webcast. The presentation will be available to download and print about 60 minutes before the webcast at the ADP Investor Relations home page at http://www.investquest.com/iq/a/adp/index.htm. ADP's news releases, current financial information, SEC filings and Investor Relations presentations are accessible at the same Web site.
Automatic Data Processing, Inc. (Nasdaq:ADP), with about $10 billion in revenues and approximately 570,000 clients, is one of the world's largest providers of business outsourcing solutions. Leveraging over 60 years of experience, ADP offers a wide range of human resource, payroll, tax and benefits administration solutions from a single source. ADP's easy-to-use solutions for employers provide superior value to companies of all types and sizes. ADP is also a leading provider of integrated computing solutions to auto, truck, motorcycle, marine, recreational vehicle, and heavy equipment dealers throughout the world. For more information about ADP or to contact a local ADP sales office, reach us at 1.800.225.5237 or visit the company's Web site at www.ADP.com.
This document and other written or oral statements made from time to time by ADP may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by the use of words like "expects," "assumes," "projects," "anticipates," "estimates," "we believe," "could be" and other words of similar meaning, are forward-looking statements. These statements are based on management's expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include: ADP's success in obtaining, retaining and selling additional services to clients; the pricing of products and services; changes in laws regulating payroll taxes, professional employer organizations and employee benefits; overall market and economic conditions, including interest rate and foreign currency trends; competitive conditions; auto sales and related industry changes; employment and wage levels; changes in technology; availability of skilled technical associates and the impact of new acquisitions and divestitures. ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. These risks and uncertainties, along with the risk factors discussed under "Item 1A. - Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2011 should be considered in evaluating any forward-looking statements contained herein.
CONTACT: Automatic Data Processing, Inc. ADP Investor Relations Elena Charles, 973.974.4077 Debbie Morris, 973.974.7821
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