Ceridian Reports Second Quarter 2006 Results
Second Quarter EPS up 32% Earnings Guidance Raised for the Year William L. Trubeck Joins Board of Directors Second Quarter 2006 Highlights: * EPS of $.29 per diluted share exceeds April guidance range and includes a $.02 income tax related gain. * Revenue of $387.1 million up 8 percent o
MINNEAPOLIS (July 27, 2006) – Ceridian Corporation (NYSE: CEN) today reported second quarter 2006 net earnings of $42.2 million, or $.29 per diluted share, on revenue of $387.1 million. For the second quarter of 2005, net earnings were $33.5 million, or $.22 per diluted share which included a tax credit of $.04 per diluted share, on revenue of $358.0 million. For the six months ended June 30, 2006, net earnings were $78.4 million, or $.53 per diluted share, on revenue of $771.4 million. For the six months ended June 30, 2005, net earnings were $55.5 million, or $.37 per diluted share, on revenue of $715.4 million.
“The second quarter results were outstanding,” said Ronald L. Turner, president and chief executive officer of Ceridian. “Both the Human Resource Solutions (HRS) business and the Comdata business turned in strong performances, which drove the second quarter results to the high end of our guided range for revenue, and exceeded our guided range for margins and earnings per diluted share.
“Revenue for the quarter in HRS was up 6 percent over last year, which was in line with our guidance,” Turner continued. “Particularly encouraging was the improvement in HRS profitability during the quarter. HRS segment earnings as a percentage of revenue more than doubled from the prior year, and were well above our guided range. The major factors driving the current year improvement were higher interest income on a growing float balance, continuing progress on our margin improvement initiatives, and internal revenue growth.
“The primary operational indicators in the HRS business were in line with our expectations,” Turner said. “Float balances grew 8.2 percent, customer retention was stable, and customer employment levels were up and in line with our plan for the quarter.
“As expected, overall order growth in HRS was down comparatively since a large government contract was signed in the second quarter of 2005,” Turner continued. “However, order growth in the core HRS businesses (which excludes HRO and government) increased by double digits, led by strong year-over-year improvement in international signings. HRS order growth for the year is still expected to be in double digits. We have submitted a competitive multi-year bid to the U.S. Department of Defense for the government follow-on effort which we believe will be awarded in the last half of 2006.
“Comdata turned in another very strong performance this quarter,” said Turner. “Revenue growth exceeded our guided range, up 13 percent over the second quarter of last year. Higher fuel prices accounted for about 3 percent of the increase. Comdata’s new business initiatives continued to gain momentum during the quarter. Together, new services such as BusinessLink, private label processing and merchant processing accounted for about 3 points of Comdata’s year over year growth. Stored Value Systems (SVS) again grew in double digits, including a tripling of international SVS revenue during the quarter which added a full point to Comdata’s overall growth rate.
“Comdata’s segment earnings as a percentage of revenue improved 160 basis points over the prior year quarter, despite a loss of $2.2 million on diesel fuel derivative instruments,” Turner continued. “A favorable business mix, economies of scale, and expense controls all contributed to Comdata’s improved profitability during the quarter.
“The strong overall earnings performance resulted in healthy cash generation during the quarter,” said Douglas C. Neve, executive vice president and chief financial officer of Ceridian. “We effectively deployed our cash balances during the quarter by repurchasing 9.1 million Ceridian shares for $221.4 million. In addition, we made a contribution of $75 million to our legacy defined benefit pension plan. We believe that both of these actions will generate greater returns on invested capital, and will be accretive to diluted earnings per share immediately.
“Despite these actions, our net cash balance remained healthy at the end of the quarter,” Neve concluded. “The cash balance as of June 30, 2006, was $171.3 million versus debt of $98.4 million. We intend to continue to allocate capital to maximize returns, while at the same time maintaining an acceptable risk profile in the market.”
Stock-based compensation expense for the quarter was in line with plan, at $4.1 million pre-tax, or $.02 per share. Stock-based compensation expense in the second quarter of 2005 was $0.6 million pre-tax.
Sale of Retirement Plan Services (RPS)
As announced yesterday, Ceridian has entered into an agreement to sell the major portion of its Retirement Plan Services (RPS) recordkeeping and administration business to The Newport Group, a leading retirement services provider based in Heathrow, Florida. This transaction is expected to close at the end of July 2006. The Company expects to recognize a gain on the sale of these assets during the third quarter of approximately $0.02 per diluted share. It is anticipated that the transaction will have no additional impact on diluted EPS for 2006, but will negatively impact HRS revenues in the third and fourth quarters of 2006 by approximately $3 million and $4 million, respectively. Guidance that follows for the remainder of 2006 includes the financial impact of this transaction.
Source: Ceridian
