ADP® (Nasdaq:ADP), a leading global provider of Human Capital
Management (HCM) solutions, today announced its first quarter
fiscal 2017 financial results, and provided an update to its fiscal
2017 outlook.
Compared to last year’s first quarter, revenues grew 7% to $2.9
billion, 8% on a constant dollar basis. Net earnings from
continuing operations grew 9% to $369 million, 8% on a constant
dollar basis. Adjusted EBIT grew 21% to $579 million, 20% on
a constant dollar basis. Adjusted EBIT margin increased about
230 basis points in the quarter to 19.8% driven by operational
efficiencies and a slower growth in our selling expenses.
Diluted earnings per share from continuing operations increased to
$0.81, representing growth of 13%, 11% on a constant dollar basis
and included a $0.03 tax benefit related to the adoption of new
stock-based compensation accounting guidance. Adjusted
diluted earnings per share from continuing operations increased 26%
to $0.86, 26% on a constant dollar basis. Diluted earnings
per share growth reflects a lower effective tax rate and fewer
shares outstanding compared with last year’s first
quarter.
Constant dollar, adjusted EBIT, adjusted EBIT margin and
adjusted diluted earnings per share are non-GAAP financial
measures. For ADP’s definition of adjusted EBIT, see the
paragraph “Non-GAAP Financial Information” at the end of this
release. Please refer to the accompanying financial tables
for a reconciliation of non-GAAP financial measures to their
comparable GAAP measures.
“We are off to a solid start in fiscal 2017, and are pleased
with the strategic and operational progress we achieved during the
quarter,” said Carlos Rodriguez, president and chief executive
officer, ADP. “In particular, we believe efforts to align our
service model to our HCM solution strategy and upgrade our clients
to our strategic cloud platforms are having a positive impact on
our business performance.”
“Our business performed very well in the quarter posting solid
revenue growth and better than expected earnings growth,” said Jan
Siegmund, chief financial officer, ADP. “New business
bookings were in line with expectations and flat against a
difficult compare in the first quarter of fiscal 2016 and we
continue to expect growth of 4% to 6% for fiscal 2017.”
First Quarter 2017 Segment Results
Employer Services – Employer Services offers a comprehensive
range of HCM and human resources outsourcing solutions.
- Employer Services revenues increased 6% compared to last year’s
first quarter, 6% on a constant dollar basis.
- The number of employees on ADP clients' payrolls in the United
States increased 2.7% for the first quarter when measured on a
same-store-sales basis for a subset of clients ranging from small
to large businesses.
- Employer Services client revenue retention declined 100 basis
points compared to last year’s first quarter which included a 100
basis point decline related to a single client loss within our CHSA
business.
- Employer Services segment margin increased approximately 230
basis points compared to last year’s first quarter. This
increase was primarily driven by operational efficiencies and a
slower growth in our selling expenses.
PEO Services – PEO Services provides comprehensive employment
administration outsourcing solutions through a co-employment
relationship.
- PEO Services revenues increased 13% compared to last year’s
first quarter.
- PEO Services segment margin increased approximately 90 basis
points compared to last year’s first quarter, primarily driven by
operational efficiencies.
- Average worksite employees paid by PEO Services increased 13%
for the quarter to approximately 439,000.
Interest on Funds Held for Clients – The safety, liquidity and
diversification of ADP clients’ funds are the foremost objectives
of the company’s 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 first quarter, interest on funds held for clients
increased 2% to $89 million from $88 million a year ago.
- Average client funds balances increased 4% in the first quarter
to $20.0 billion compared to $19.4 billion a year ago.
- The average interest yield on client funds was 1.8% which was
flat compared to a year ago.
Notable Subsequent Events
On November 1, 2016, ADP signed an agreement to sell its CHSA
and COBRA businesses to WageWorks for $235 million and anticipates
an estimated pre-tax gain of approximately $200 million. The
results of operations of these businesses were included in the
Employer Services segment during the quarter and our fiscal 2017
outlook has been adjusted accordingly. The Company expects
the sale to be completed during the second quarter of fiscal 2017,
subject to normal and customary closing conditions.
Fiscal 2017 Outlook
Certain components of ADP’s fiscal 2017 outlook and related
growth comparisons exclude the impact of the following items and
are discussed on an adjusted basis where applicable. Please
refer to the accompanying financial tables for a reconciliation of
these adjusted amounts to their closest comparable GAAP
measure.
- Fiscal 2016 first quarter pre-tax gain on sale of the
AdvancedMD business of $29 million
- Fiscal 2016 second quarter pre-tax gain on sale of a building
of $14 million
- Fiscal 2016 fourth quarter pre-tax workforce optimization
charge of $48 million
- Fiscal 2017 pre-tax restructuring charges of approximately $90
million, $40 million of which occurred in the first quarter, with
the remaining $50 million expected to occur in the latter part of
the fiscal year
- Anticipated Fiscal 2017 second quarter pre-tax gain on sale of
the CHSA and COBRA businesses of approximately $200 million
Subsequent to the disposition of our CHSA and COBRA businesses,
ADP now forecasts full year revenue growth of 7% to 8% compared to
our prior forecast of 7% to 9% growth. Foreign currency
translation is not expected to have a significant impact on revenue
growth in fiscal 2017. This revenue forecast still assumes
growth in worldwide new business bookings of 4% to 6% compared to
the $1.75 billion sold in fiscal 2016.
Reflecting the tax benefit received in the first quarter, ADP
now anticipates an adjusted effective tax rate of 32.7% compared to
the prior forecast of 33.3%. Subsequent to the disposition of
our CHSA and COBRA businesses and the associated gain on sale, ADP
now forecasts full year diluted earnings per share from continuing
operations to grow 15% to 17% compared to our prior forecast of 6%
to 8% growth and adjusted diluted earnings per share growth of 11%
to 13% compared to our prior forecast of 10% to 12% growth.
This earnings growth forecast now assumes an adjusted EBIT margin
expansion of about 50 basis points compared to our prior forecast
of 25 to 50 basis points. This forecast continues to assume
fiscal 2017 share repurchases of $1.0 to $1.4 billion funded by
existing balance sheet cash.
Reportable Segments Fiscal 2017 Forecast
- For the Employer Services segment, ADP still anticipates
revenue growth of approximately 4% to 5% with pretax margin
expansion of about 50 basis points.
- ADP still expects pays per control to increase 2.5% for the
year.
- For the PEO Services segment, ADP continues to anticipate 14%
to 16% revenue growth. ADP now expects PEO Services segment
margin expansion of about 75 basis points compared to our prior
forecast of 50 to 75 basis points.
Client Funds Extended Investment Strategy Fiscal 2017
Forecast
The interest assumptions in our forecasts are based on Fed Funds
futures contracts and forward yield curves as of October 31,
2016. The Fed Funds futures contracts used in the client
short and corporate cash interest income forecasts assumes a
moderate increase in the Fed Funds near the second half of the
fiscal year. The three-and-a-half and five-year U.S.
government agency rates based on the forward yield curves as of
October 31, 2016 were used to forecast new purchase rates for the
client and corporate extended, and client long portfolios,
respectively.
- Interest on funds held for clients is expected to increase $5
to $10 million, or 2% to 3%, compared to the prior forecast of up
to $5 million, or about 2%. This is based on anticipated
growth in average client funds balances of 2% to 4% from $22.4
billion in fiscal 2016 and an average yield which is anticipated to
be about flat at 1.7% compared to the fiscal 2016 average
yield.
- The total contribution from the client funds extended
investment strategy is now expected to be up $5 million compared to
our prior forecast of about flat compared with a year ago.
Investor Webcast Today
ADP will host a conference call for financial analysts today,
Wednesday, November 2, 2016 at 8:30 a.m. EDT. The conference
call will be webcast live on ADP’s website at investors.adp.com and
will be available for replay following the call. A slide
presentation will be available shortly before the webcast.
Supplemental financial information including schedules of
quarterly and full year reportable segment revenues and earnings
for fiscal years 2015 and 2016, as well as details of the first
quarter fiscal 2017 results from the client funds extended
investment strategy, are posted to ADP’s website at
investors.adp.com. ADP news releases, current financial
information, SEC filings and Investor Relations presentations are
accessible at the same website.
Non-GAAP Financial Information
The company has presented certain financial data that are
considered non-GAAP financial measures and are reconciled to their
comparable GAAP measures in the accompanying financial
tables. The adjusted EBIT performance measures include
interest income earned on investments associated with our client
funds extended investment strategy and interest expense on
borrowings related to our client funds extended investment
strategy. ADP believes these amounts to be fundamental to the
underlying operations of our business model. ADP’s
calculation of adjusted EBIT may differ from similarly titled
measures used by other companies.
The presentation of growth rates on a constant dollar basis
represent a non-GAAP measure and are calculated by restating
current period results into U.S. dollars using the comparable prior
period’s exchange rates.
About ADP (Nasdaq:ADP)
Powerful technology plus a human touch. Companies of all
types and sizes around the world rely on ADP’s cloud software and
expert insights to help unlock the potential of their people.
HR. Talent. Benefits. Payroll. Compliance. Working
together to build a better workforce. For more information,
visit ADP.com.
Automatic Data Processing, Inc. and
Subsidiaries |
Statements of Consolidated Earnings |
(In millions, except per share amounts) |
(Unaudited) |
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
September 30, |
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
Revenues: |
|
|
|
|
|
|
Revenues,
other than interest on funds held for clients and PEO revenues |
|
$ |
2,037.4 |
|
|
$ |
1,928.7 |
|
|
|
Interest on funds held for clients |
|
|
89.2 |
|
|
|
87.8 |
|
|
|
PEO revenues (A) |
|
|
790.3 |
|
|
|
697.5 |
|
|
|
|
Total
revenues |
|
|
2,916.9 |
|
|
|
2,714.0 |
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
Costs of revenues: |
|
|
|
|
|
|
Operating expenses |
|
|
1,531.5 |
|
|
|
1,439.8 |
|
|
|
Systems development & programming costs |
|
|
154.9 |
|
|
|
156.1 |
|
|
|
Depreciation & amortization |
|
|
57.2 |
|
|
|
50.6 |
|
|
|
|
Total
costs of revenues |
|
|
1,743.6 |
|
|
|
1,646.5 |
|
|
|
|
|
|
|
|
|
|
Selling, general & administrative expenses |
|
|
647.7 |
|
|
|
605.3 |
|
|
Interest expense |
|
|
19.9 |
|
|
|
4.9 |
|
|
|
|
Total
expenses |
|
|
2,411.2 |
|
|
|
2,256.7 |
|
|
|
|
|
|
|
|
|
|
Other income, net |
|
|
(23.0 |
) |
|
|
(47.7 |
) |
|
|
|
|
|
|
|
|
Earnings from continuing operations before income
taxes |
|
|
528.7 |
|
|
|
505.0 |
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
160.0 |
|
|
|
167.5 |
|
|
|
|
|
|
|
|
|
Net
earnings from continuing operations |
|
$ |
368.7 |
|
|
$ |
337.5 |
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations before income taxes |
|
|
— |
|
|
|
(1.4 |
) |
|
|
|
|
|
Provision for income taxes |
|
|
— |
|
|
|
(0.5 |
) |
|
|
|
|
|
Net
earnings from discontinued operations |
|
$
|
— |
|
|
$ |
(0.9 |
) |
|
|
|
|
|
|
|
|
Net
earnings |
|
$ |
368.7 |
|
|
$ |
336.6 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share from continuing operations |
|
$ |
0.82 |
|
|
$ |
0.73 |
|
|
Basic earnings per share from discontinued operations |
|
|
— |
|
|
|
— |
|
|
Basic earnings per share |
|
$ |
0.82 |
|
|
$ |
0.73 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share from continuing operations |
|
$ |
0.81 |
|
|
$ |
0.72 |
|
|
Diluted earnings per share from discontinued operations |
|
|
— |
|
|
|
— |
|
|
Diluted earnings per share |
|
$ |
0.81 |
|
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share |
|
$ |
0.530 |
|
|
$ |
0.490 |
|
|
|
|
|
|
|
|
|
Components of Other income, net: |
|
|
|
|
|
Interest income on corporate funds |
|
$ |
(22.9 |
) |
|
$ |
(18.6 |
) |
|
Realized gains on available-for-sale securities |
|
|
(0.4 |
) |
|
|
(0.9 |
) |
|
Realized losses on available-for-sale securities |
|
|
0.3 |
|
|
|
0.9 |
|
|
Gain on sale of business |
|
|
— |
|
|
|
(29.1 |
) |
|
Total other income, net |
|
$ |
(23.0 |
) |
|
$ |
(47.7 |
) |
|
(A) Professional Employer Organization (“PEO”) revenues are
net of direct pass-through costs, primarily consisting of payroll
wages and payroll taxes of $7,687.6 million and $6,865.3 million
for the three months ended September 30, 2016 and 2015,
respectively. |
Automatic Data
Processing, Inc. and Subsidiaries |
|
|
|
Condensed
Consolidated Balance Sheets |
|
|
|
(In
millions) |
|
|
|
(Unaudited) |
|
|
|
|
September 30, |
|
June 30, |
|
|
2016 |
|
|
|
2016 |
|
Assets |
|
|
|
Cash and cash
equivalents/Short-term marketable securities |
$ |
2,817.6 |
|
|
$ |
3,214.6 |
|
Other
current assets |
|
2,519.4 |
|
|
|
2,444.6 |
|
Total
current assets before funds held for clients |
|
5,337.0 |
|
|
|
5,659.2 |
|
Funds
held for clients |
|
24,787.2 |
|
|
|
33,841.2 |
|
Total
current assets |
|
30,124.2 |
|
|
|
39,500.4 |
|
|
|
|
|
Property, plant and equipment, net |
|
701.0 |
|
|
|
685.0 |
|
Other
non-current assets |
|
3,512.2 |
|
|
|
3,484.6 |
|
Total
assets |
$ |
34,337.4 |
|
|
$ |
43,670.0 |
|
|
|
|
|
Liabilities and
Stockholders' Equity |
|
|
|
Other
current liabilities |
$ |
2,370.2 |
|
|
$ |
2,515.6 |
|
Client
funds obligations |
|
24,349.1 |
|
|
|
33,331.8 |
|
Total
current liabilities |
|
26,719.3 |
|
|
|
35,847.4 |
|
|
|
|
|
Long-term debt |
|
2,007.7 |
|
|
|
2,007.7 |
|
Other
non-current liabilities |
|
1,360.3 |
|
|
|
1,333.3 |
|
Total
liabilities |
|
30,087.3 |
|
|
|
39,188.4 |
|
|
|
|
|
Total
stockholders' equity |
|
4,250.1 |
|
|
|
4,481.6 |
|
Total
liabilities and stockholders' equity |
$ |
34,337.4 |
|
|
$ |
43,670.0 |
|
|
|
|
|
Automatic Data
Processing, Inc. and Subsidiaries |
|
|
|
Condensed
Statements of Consolidated Cash Flows |
|
|
|
(In
millions) |
|
|
|
(Unaudited) |
Three Months Ended |
|
September 30, |
|
|
2016 |
|
|
|
2015 |
|
Cash Flows from
Operating Activities: |
|
|
|
Net
earnings |
$ |
368.7 |
|
|
$ |
336.6 |
|
Adjustments to reconcile net earnings to cash flows provided by
operating activities |
|
178.1 |
|
|
|
145.4 |
|
Changes
in operating assets and liabilities, net of effects from
acquisitions and divestitures of businesses |
|
(217.0 |
) |
|
|
(372.9 |
) |
Net cash flows
provided by operating activities |
|
329.8 |
|
|
|
109.1 |
|
|
|
|
|
Cash Flows from
Investing Activities: |
|
|
|
Purchases and proceeds from corporate and client funds marketable
securities |
|
(271.0 |
) |
|
|
395.5 |
|
Net
decrease / (increase) in restricted cash and cash equivalents held
to satisfy client funds obligations |
|
9,160.8 |
|
|
|
(137.8 |
) |
Capital
expenditures |
|
(48.7 |
) |
|
|
(55.6 |
) |
Additions to intangibles |
|
(57.2 |
) |
|
|
(45.4 |
) |
Other
investing activities |
|
(20.0 |
) |
|
|
162.5 |
|
Net cash flows
provided by investing activities |
|
8,763.9 |
|
|
|
319.2 |
|
|
|
|
|
Cash Flows from
Financing Activities: |
|
|
|
Net
decrease in client funds obligations |
|
(8,928.3 |
) |
|
|
(275.1 |
) |
Net
proceeds from debt issuance |
|
— |
|
|
|
1,986.4 |
|
Repurchases of common stock |
|
(328.6 |
) |
|
|
(308.1 |
) |
Dividends paid |
|
(241.8 |
) |
|
|
(229.0 |
) |
Other
financing activities |
|
(14.9 |
) |
|
|
(46.0 |
) |
Net cash flows
(used in) / provided by financing activities |
|
(9,513.6 |
) |
|
|
1,128.2 |
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents |
|
5.4 |
|
|
|
(11.1 |
) |
|
|
|
|
Net
change in cash and cash equivalents |
|
(414.5 |
) |
|
|
1,545.4 |
|
|
|
|
|
Cash and
cash equivalents, beginning of period |
|
3,191.1 |
|
|
|
1,639.3 |
|
Cash and
cash equivalents, end of period |
$ |
2,776.6 |
|
|
$ |
3,184.7 |
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
Cash
paid for interest |
$ |
33.4 |
|
|
$ |
2.4 |
|
Cash
paid for income taxes, net of income tax refunds |
$ |
36.3 |
|
|
$ |
18.7 |
|
Automatic Data
Processing, Inc. and Subsidiaries |
|
|
|
|
|
|
|
|
Other Selected
Financial Data |
|
|
|
|
|
|
|
|
(Dollars in
millions, except per share amounts) |
|
|
|
|
|
|
|
|
(Unaudited) |
Three Months Ended |
|
% Change |
|
|
September 30, |
|
As |
|
Constant |
|
|
|
2016 |
|
|
|
2015 |
|
|
Reported |
|
Dollar Basis |
|
Revenues from
continuing operations |
|
|
|
|
|
|
|
|
Employer
Services |
$ |
2,261.2 |
|
|
$ |
2,130.8 |
|
|
|
6 |
% |
|
|
6 |
% |
|
PEO
Services |
|
794.7 |
|
|
|
701.5 |
|
|
|
13 |
% |
|
|
13 |
% |
|
Other |
|
(139.0 |
) |
|
|
(118.3 |
) |
|
|
n/m |
|
|
|
n/m |
|
|
Total
revenues from continuing operations |
$ |
2,916.9 |
|
|
$ |
2,714.0 |
|
|
|
7 |
% |
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
Segment earnings from
continuing operations |
|
|
|
|
|
|
|
|
Employer
Services |
$ |
656.6 |
|
|
$ |
570.3 |
|
|
|
15 |
% |
|
|
14 |
% |
|
PEO
Services |
|
107.1 |
|
|
|
88.3 |
|
|
|
21 |
% |
|
|
21 |
% |
|
Other |
|
(235.0 |
) |
|
|
(153.6 |
) |
|
|
n/m |
|
|
|
n/m |
|
|
Total
pretax earnings from continuing operations |
$ |
528.7 |
|
|
$ |
505.0 |
|
|
|
5 |
% |
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
September 30, |
|
|
|
|
|
Segment margin |
|
2016 |
|
|
|
2015 |
|
|
Change |
|
|
|
Employer
Services |
|
29.0 |
% |
|
|
26.8 |
% |
|
|
2.3 |
% |
|
|
|
PEO
Services |
|
13.5 |
% |
|
|
12.6 |
% |
|
|
0.9 |
% |
|
|
|
Other |
|
n/m |
|
|
|
n/m |
|
|
|
n/m |
|
|
|
|
Total
pretax margin |
|
18.1 |
% |
|
|
18.6 |
% |
|
|
(0.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
% Change |
|
|
September 30, |
|
As |
|
Constant |
|
Earnings per share
information: |
|
2016 |
|
|
|
2015 |
|
|
Reported |
|
Dollar Basis |
|
Net
earnings from continuing operations |
$ |
368.7 |
|
|
$ |
337.5 |
|
|
|
9 |
% |
|
|
8 |
% |
|
Net
earnings |
$ |
368.7 |
|
|
$ |
336.6 |
|
|
|
10 |
% |
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
Basic
weighted average shares outstanding |
|
452.3 |
|
|
|
462.4 |
|
|
|
(2 |
)% |
|
|
n/a |
|
|
Basic
earnings per share from continuing operations |
$ |
0.82 |
|
|
$ |
0.73 |
|
|
|
12 |
% |
|
|
11 |
% |
|
Basic
earnings per share |
$ |
0.82 |
|
|
$ |
0.73 |
|
|
|
12 |
% |
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average shares outstanding |
|
455.3 |
|
|
|
465.7 |
|
|
|
(2 |
)% |
|
|
n/a |
|
|
Diluted
earnings per share from continuing operations |
$ |
0.81 |
|
|
$ |
0.72 |
|
|
|
13 |
% |
|
|
11 |
% |
|
Diluted
earnings per share |
$ |
0.81 |
|
|
$ |
0.72 |
|
|
|
13 |
% |
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
September 30, |
|
|
|
|
|
Key Statistics: |
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
Internal
revenue growth: |
|
|
|
|
|
|
|
|
Employer
Services |
|
6 |
% |
|
|
3 |
% |
|
|
|
|
|
PEO
Services |
|
13 |
% |
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal
revenue growth - Constant Dollar Basis: |
|
|
|
|
|
|
|
|
Employer
Services |
|
6 |
% |
|
|
7 |
% |
|
|
|
|
|
PEO
Services |
|
13 |
% |
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer
Services: |
|
|
|
|
|
|
|
|
Change in
pays per control - U.S. |
|
2.7 |
% |
|
|
2.3 |
% |
|
|
|
|
|
Change in
client revenue retention percentage - worldwide |
|
(1.0 |
)
pts |
|
|
(1.6 |
)
pts |
|
|
|
|
|
Employer
Services/PEO new business bookings growth - worldwide |
|
— |
% |
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PEO
Services: |
|
|
|
|
|
|
|
|
Paid PEO
worksite employees at end of period |
|
443,000 |
|
|
|
392,000 |
|
|
|
|
|
|
Average
paid PEO worksite employees during the period |
|
439,000 |
|
|
|
389,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automatic Data Processing, Inc. and
Subsidiaries |
|
Other Selected Financial Data, Continued |
|
(Dollars in millions, except per share amounts or where
otherwise stated) |
|
(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
September 30, |
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
Change |
|
% Change |
|
Average
investment balances at cost (in billions): |
|
|
|
|
|
|
|
|
Corporate, other than corporate extended |
$ |
2.9 |
|
|
$ |
1.7 |
|
|
$ |
1.2 |
|
|
|
73 |
% |
|
Corporate
extended |
|
4.4 |
|
|
|
4.0 |
|
|
|
0.4 |
|
|
|
10 |
% |
|
Total
corporate |
|
7.3 |
|
|
|
5.7 |
|
|
|
1.6 |
|
|
|
29 |
% |
|
Funds
held for clients |
|
20.0 |
|
|
|
19.4 |
|
|
|
0.7 |
|
|
|
4 |
% |
|
Total |
$ |
27.4 |
|
|
$ |
25.0 |
|
|
$ |
2.3 |
|
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
Average
interest rates earned exclusive of realized losses (gains) on: |
|
|
|
|
|
|
|
|
Corporate, other than corporate extended |
|
0.7 |
% |
|
|
0.5 |
% |
|
|
|
|
|
Corporate
extended |
|
1.6 |
% |
|
|
1.7 |
% |
|
|
|
|
|
Total
corporate |
|
1.3 |
% |
|
|
1.3 |
% |
|
|
|
|
|
Funds
held for clients |
|
1.8 |
% |
|
|
1.8 |
% |
|
|
|
|
|
Total |
|
1.6 |
% |
|
|
1.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
unrealized gain position at end of period |
$ |
438.7 |
|
|
$ |
269.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
short-term financing (in billions): |
|
|
|
|
|
|
|
|
U.S.
commercial paper borrowings |
$ |
4.1 |
|
|
$ |
3.5 |
|
|
|
|
|
|
U.S.
& Canadian reverse repurchase agreement borrowings |
|
0.4 |
|
|
|
0.5 |
|
|
|
|
|
|
|
$ |
4.4 |
|
|
$ |
4.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
interest rates paid on: |
|
|
|
|
|
|
|
|
U.S.
commercial paper borrowings |
|
0.4 |
% |
|
|
0.2 |
% |
|
|
|
|
|
U.S.
& Canadian reverse repurchase agreement borrowings |
|
0.6 |
% |
|
|
0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on funds held for clients |
$ |
89.2 |
|
|
$ |
87.8 |
|
|
$ |
1.4 |
|
|
|
2 |
% |
|
Corporate extended interest income (B) |
|
18.1 |
|
|
|
16.6 |
|
|
|
1.5 |
|
|
|
9 |
% |
|
Corporate interest expense-short-term financing (B) |
|
(4.9 |
) |
|
|
(1.9 |
) |
|
|
(3.1 |
) |
|
|
(161 |
)% |
|
|
$ |
102.4 |
|
|
$ |
102.6 |
|
|
$ |
(0.2 |
) |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
|
(B) While “Corporate extended interest income” and “Corporate
interest expense-short-term financing,” related to our client funds
investment strategy, are non-GAAP measures, management believes
this information is beneficial to reviewing the financial
statements of ADP. Management believes this information is
beneficial as it allows the reader to understand the extended
investment strategy for ADP's client funds assets, corporate
investments, and short-term borrowings. A reconciliation of
the non-GAAP measures to GAAP measures is as follows: |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
September 30, |
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate extended interest income |
$ |
18.1 |
|
|
$ |
16.6 |
|
|
|
|
|
|
All
other interest income |
|
4.8 |
|
|
|
2.0 |
|
|
|
|
|
|
Total
interest income on corporate funds |
$ |
22.9 |
|
|
$ |
18.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate interest expense-short-term financing |
$ |
4.9 |
|
|
$ |
1.9 |
|
|
|
|
|
|
All
other interest expense |
|
15.0 |
|
|
|
3.0 |
|
|
|
|
|
|
Total
interest expense |
$ |
19.9 |
|
|
$ |
4.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automatic Data Processing, Inc. and
Subsidiaries |
Consolidated Statement of Adjusted / Non-GAAP Financial
Information |
(in millions, except per share amounts) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within the tables, we use the term "constant dollar basis" so
that certain financial measures can be viewed without the impact of
foreign currency fluctuations to facilitate period-to-period
comparisons of business performance. The financial results on
a "constant dollar basis" are determined by calculating the current
year result using foreign exchange rates consistent with the prior
year. We believe "constant dollar basis" provides information
that isolates the actual growth of our operations. Our
constant dollar results are not measures of performance calculated
in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP") and should not be considered
in isolation from, as a substitute for, or superior to the U.S.
GAAP measures presented. |
|
|
|
|
|
|
|
|
|
|
The table
reconciles our reported results to adjusted results which exclude
one or more of the following: our provision for income taxes,
certain interest amounts, the charges related to our Service
Alignment Initiative, and the gain on the sale of our AMD business
in fiscal 2016. We use certain adjusted results, among other
measures, to evaluate our operating performance in the absence of
certain items and for planning and forecasting of future
periods. We believe that the exclusion of these items helps
us reflect the fundamentals of our underlying business model and
analyze results against our expectations, against prior period, and
to plan for future periods by focusing on our underlying
operations. We believe that these adjusted results provide
relevant and useful information for investors because it allows
investors to view performance in a manner similar to the method
used by management and improves their ability to understand and
assess our operating performance. Generally, the nature of
these exclusions are for specific items that are not fundamental to
our underlying business operations. Specifically, we have
excluded the impact of certain interest expense and certain
interest income from adjusted earnings from continuing operations
before interest and income taxes ("Adjusted EBIT"). We
continue to include the interest income earned on investments
associated with our client funds investment strategy and interest
expense on borrowings related to our client funds extended
investment strategy as we believe these amounts to be fundamental
to the underlying operations of our business model. The
amounts included as adjustments in the table below represent the
interest income and interest expense that is not related to our
client funds extended investment strategy and are labeled as "All
other interest expense" and "All other interest income." The
majority of charges related to our Service Alignment Initiative
represent severance charges. Severance charges have been
taken in the past and not included as an adjustment to get to
adjusted results. Unlike severance charges in prior periods,
these specific charges relate to a broad-based, company-wide
Service Alignment Initiative effort. Since Adjusted EBIT,
Adjusted provision for income taxes, Adjusted net earnings from
continuing operations, Adjusted diluted earnings per share
("Adjusted diluted EPS") from continuing operations and Adjusted
EBIT margin are not measures of performance calculated in
accordance with U.S. GAAP, they should not be considered in
isolation from, as a substitute for, or superior to earnings from
continuing operations before income taxes, provision for income
taxes, net earnings from continuing operations and diluted EPS from
continuing operations and they may not be comparable to similarly
titled measures used by other companies. |
|
|
Three Months Ended |
|
|
|
|
|
|
|
September 30, |
|
% Change |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
As Reported |
|
Constant Dollar Basis |
|
Net
earnings from continuing operations |
|
$ |
368.7 |
|
|
$ |
337.5 |
|
|
|
9 |
% |
|
|
8 |
% |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Provision
for income taxes |
|
|
160.0 |
|
|
|
167.5 |
|
|
|
|
|
|
All other
interest expense |
|
|
15.0 |
|
|
|
3.0 |
|
|
|
|
|
|
All other
interest income |
|
|
(4.8 |
) |
|
|
(2.0 |
) |
|
|
|
|
|
Gain on
sale of AMD |
|
|
— |
|
|
|
(29.1 |
) |
|
|
|
|
|
Service Alignment Initiative |
|
|
39.9 |
|
|
|
— |
|
|
|
|
|
|
Adjusted
EBIT |
|
$ |
578.8 |
|
|
$ |
476.9 |
|
|
|
21 |
% |
|
|
20 |
% |
|
Adjusted
EBIT Margin |
|
|
19.8 |
% |
|
|
17.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
$ |
160.0 |
|
|
$ |
167.5 |
|
|
|
(4 |
)% |
|
|
(5 |
)% |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Gain on
sale of AMD (a) |
|
|
— |
|
|
|
(7.3 |
) |
|
|
|
|
|
Service Alignment Initiative (b) |
|
|
15.1 |
|
|
|
— |
|
|
|
|
|
|
Adjusted
provision for income taxes |
|
$ |
175.1 |
|
|
$ |
160.2 |
|
|
|
9 |
% |
|
|
8 |
% |
|
Adjusted
effective tax rate (c) |
|
|
30.8 |
% |
|
|
33.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings from continuing operations |
|
$ |
368.7 |
|
|
$ |
337.5 |
|
|
|
9 |
% |
|
|
8 |
% |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Gain on
sale of AMD |
|
|
— |
|
|
|
(29.1 |
) |
|
|
|
|
|
Service
Alignment Initiative |
|
|
39.9 |
|
|
|
— |
|
|
|
|
|
|
Provision
for income taxes on gain on sale of AMD (a) |
|
|
— |
|
|
|
7.3 |
|
|
|
|
|
|
Income tax benefit for Service Alignment Initiative (b) |
|
|
(15.1 |
) |
|
|
— |
|
|
|
|
|
|
Adjusted
net earnings from continuing operations |
|
$ |
393.5 |
|
|
$ |
315.7 |
|
|
|
25 |
% |
|
|
24 |
% |
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share from continuing operations |
|
$ |
0.81 |
|
|
$ |
0.72 |
|
|
|
13 |
% |
|
|
11 |
% |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Gain on
sale of AMD |
|
|
— |
|
|
|
(0.05 |
) |
|
|
|
|
|
Service Alignment Initiative |
|
|
0.05 |
|
|
|
— |
|
|
|
|
|
|
Adjusted
diluted earnings per share from continuing operations |
|
$ |
0.86 |
|
|
$ |
0.68 |
|
|
|
26 |
% |
|
|
26 |
% |
|
|
|
|
|
|
|
|
|
|
|
(a) - The tax on the gain on the sale of the AMD business was
calculated based on the marginal rate of the Company in effect
during the quarter of the adjustment adjusted for a book vs. tax
basis difference primarily due to a previously recorded non
tax-deductible goodwill impairment charge. (b) - The tax
provision on the Service Alignment Initiative was calculated based
on the annualized marginal rate of the Company in effect during the
quarter of the adjustment. (c) - The Adjusted effective tax rate is
calculated as our Adjusted provision for income taxes divided by
our Adjusted net earnings from continuing operations plus our
Adjusted provision for income taxes. |
Automatic Data Processing, Inc. and
Subsidiaries |
|
Fiscal 2017 GAAP to Non-GAAP Guidance
Reconciliation |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
Twelve Months Ended |
|
Fiscal 2017 |
|
|
|
|
June 30, 2016 |
|
Forecast |
|
|
Earnings from
continuing operations before income taxes margin (GAAP) |
|
$ |
2,234.7 |
|
|
19.2 |
% |
|
~+140bps |
|
|
Adjustments: |
|
|
|
|
|
|
|
All other
interest expense |
|
|
47.9 |
|
+40bps |
|
+5bps |
a |
|
All other
interest income |
|
|
(13.6 |
) |
(10)bps |
|
|
- |
b |
|
Gain on
sale of AMD - 1Q F16 |
|
|
(29.1 |
) |
(25)bps |
|
+25bps |
c |
|
Gain on
sale of building - 2Q F16 |
|
|
(13.9 |
) |
(10)bps |
|
+10bps |
d |
|
Workforce
optimization effort - 4Q F16 |
|
|
48.2 |
|
+40bps |
|
(40)bps |
e |
|
Service
Alignment Initiative - F17 |
|
|
- |
|
|
- |
|
|
~+70bps |
f |
|
Gain on
sale of COBRA and CHSA businesses - 2Q F17 |
|
|
- |
|
|
- |
|
|
~(160)bps |
g |
|
Adjusted EBIT margin (Non-GAAP) |
|
$ |
2,274.2 |
|
|
19.5 |
% |
|
+~50 bps |
|
|
|
|
|
|
|
|
|
|
Effective tax rate (GAAP) |
|
|
|
33.2 |
% |
|
|
33.2 |
% |
|
|
Adjustments: |
|
|
|
|
|
|
|
Gain on
sale of AMD - 1Q F16 |
|
|
|
+0.11 |
% |
|
|
- |
|
|
|
Gain on
sale of building - 2Q F16 |
|
|
|
(0.03 |
%) |
|
|
- |
|
|
|
Workforce
optimization effort - 4Q F16 |
|
|
|
+0.02 |
% |
|
|
- |
|
|
|
Service
Alignment Initiative - F17 |
|
|
|
- |
|
|
|
+0.2 |
% |
|
|
Gain on
sale of COBRA and CHSA businesses - 2Q F17 |
|
|
|
- |
|
|
|
(0.7 |
%) |
|
|
Adjusted effective tax rate (Non-GAAP) |
|
|
|
33.3 |
% |
|
|
32.7 |
% |
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share from continuing operations (GAAP) |
|
$ |
3.25 |
|
|
12 |
% |
|
15% - 17% |
|
|
Adjustments: |
|
|
|
|
|
|
|
Gain on
sale of AMD - 1Q F16 |
|
|
(0.05 |
) |
|
(1 |
%) |
|
|
+1 |
% |
c |
|
Gain on
sale of building - 2Q F16 |
|
|
(0.02 |
) |
|
(1 |
%) |
|
|
+1 |
% |
d |
|
Workforce
optimization effort - 4Q F16 |
|
|
0.07 |
|
|
+2 |
% |
|
|
(2 |
%) |
e |
|
Service
Alignment Initiative - F17 |
|
|
- |
|
|
- |
|
|
|
~+4 |
% |
f |
|
Gain on
sale of COBRA and CHSA businesses - 2Q F17 |
|
|
- |
|
|
- |
|
|
|
~(8 |
%) |
g |
|
Adjusted diluted earnings per share from continuing
operations (Non-GAAP) |
|
$ |
3.26 |
|
|
13 |
% |
|
11% - 13% |
|
|
|
|
|
|
|
|
|
|
a) No
material impact is expected from change in all other interest
expense in fiscal 2017 |
|
|
|
|
|
|
|
b) No
material impact is expected from change in all other interest
income in fiscal 2017 |
|
|
|
|
|
|
|
c) First
quarter fiscal 2016 gain on sale of AdvancedMD business will not
recur in fiscal 2017 |
|
|
|
|
|
|
|
d)
Second quarter fiscal 2016 gain on sale of building is not expected
to recur in fiscal 2017 |
|
|
|
|
|
|
|
e) Fourth quarter fiscal 2016 impact of workforce optimization
effort not expected to recur in fiscal 2017 |
|
|
|
|
|
f) Impact of Fiscal 2017 charges in connection with the
Service Alignment Initiative: ~$40 million incurred in 1Q
F17, ~$50 million expected in the latter part of the fiscal
year |
|
|
g) Expected gain on the sale of COBRA and CHSA businesses to
occur in second quarter fiscal 2017 |
|
|
|
|
|
Safe Harbor Statement
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” “is
designed to” and other words of similar meaning, are
forward-looking statements. These statements are based on
management’s expectations and assumptions and depend upon or refer
to future events or conditions 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 or that could contribute to such difference include:
ADP's success in obtaining and retaining clients, and selling
additional services to clients; the pricing of products and
services; compliance with existing or new legislation or
regulations; changes in, or interpretations of, existing
legislation or regulations; overall market, political and economic
conditions, including interest rate and foreign currency trends;
competitive conditions; our ability to maintain our current credit
ratings and the impact on our funding costs and profitability;
security or privacy breaches, fraudulent acts, and system
interruptions and failures; 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, except as
required by law. 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, 2016
should be considered in evaluating any forward-looking statements
contained herein.
ADP and the ADP logo are registered trademarks of ADP,
LLC. ADP A more human resource. is a service mark of ADP,
LLC. All other marks are the property of their respective
owners. Copyright © 2016 ADP, LLC. All rights reserved.
ADP-Investor Relations
Investor Relations Contacts:
Christian Greyenbuhl
973.974.7835
Christian.Greyenbuhl@ADP.com
Byron Stephen
973.974.7896
Byron.Stephen@ADP.com
Media Contact:
Andy Hilton
973.974.4462
Andy.Hilton@ADP.com
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