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ADP Reports Second Quarter Fiscal 2013 Results

Stocks in this article: ADP

Confirms Fiscal 2013 Revenue and EPS Guidance

R evenues Rise 7%, 6% Organic

EPS From Continuing Operations Declined 5%, Increased 7% Excluding Prior Year Gain

ROSELAND, N.J., Feb. 5, 2013 (GLOBE NEWSWIRE) -- ADP ® (Nasdaq:ADP) reported revenue growth of 7%, 6% organic, to $2.7 billion for the second fiscal quarter ended December 31, 2012, Carlos Rodriguez, president and chief executive officer, announced today. The second quarter of fiscal 2012 included a pretax gain of $66 million, $41 million after tax, on a sale of assets. As reported, including the gain, pretax earnings from continuing operations decreased 8% and pretax margin declined 320 basis points. Net earnings from continuing operations decreased 6% and diluted earnings per share from continuing operations of $0.72 decreased 5% from $0.76 a year ago on fewer shares outstanding. 

Excluding the prior year gain, pretax earnings from continuing operations increased 4%, pretax margin declined 60 basis points, net earnings from continuing operations increased 6%, and diluted earnings per share from continuing operations of $0.72 increased 7% from $0.67 a year ago. Fiscal year-to-date through February 1, 2013 ADP acquired 5.9 million shares of its stock for treasury at a cost of $341 million. Cash and marketable securities were $1.5 billion at December 31, 2012.

Second Quarter Discussion

Commenting on the results, Mr. Rodriguez said, "I am pleased with ADP's second quarter results.    Our business segments performed well driving solid revenue growth and pretax margin expansion. Combined worldwide new business bookings for Employer Services and PEO Services grew 5%. With 9% growth in new business bookings through the first half of the fiscal year, we are on track to achieve our full year outlook of 8% to 10% growth.

"Previously communicated challenges and tough comparisons we faced heading into the quarter affected the company's results, including:

  • The gain on a sale of assets in the prior year second quarter negatively impacted growth in pretax earnings from continuing operations 12%, pretax margin 260 basis points, and diluted earnings per share from continuing operations $0.08, or 12%.
  • Unfavorable foreign exchange rates negatively impacted revenue growth 0.5% with minimal impact on earnings. 
  • The decline in high-margin interest revenues due to the lower average yield on client funds balances negatively impacted revenue growth 1%, partially offset by growth in average client funds balances. The client funds extended investment strategy, which is primarily driven by interest on client funds, negatively impacted growth in pretax earnings from continuing operations 4%, pretax margin 110 basis points, and diluted earnings per share from continuing operations $0.03, or 4%. 
  • Foregone revenues and earnings related to the fiscal 2012 second quarter sale of assets and the expiration of certain employment tax credits within our Tax Credit Services business negatively impacted revenue growth 1%, growth in pretax earnings from continuing operations 2%, pretax margin 30 basis points, and diluted earnings per share nearly $0.02, or 3%.
  • Fiscal 2012 acquisitions contributed 1% to total revenue growth and negatively impacted pretax margins 20 basis points with minimal impact on earnings.

Employer Services

"Employer Services' revenues grew 7% for the second quarter, 6% organically, compared to last year's second quarter. The number of employees on our clients' payrolls in the United States increased 2.6% for the quarter as measured on a same-store-sales basis for our clients on our AutoPay platform. Worldwide client retention increased 0.8 percentage points compared with a year ago. As anticipated, Employer Services' pretax margin expanded 70 basis points for the quarter including a 50 basis point drag from fiscal 2012 acquisitions. Increased operating scale and sales efficiencies contributed to the pretax margin improvement.

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