ADP Reports Third Quarter Fiscal 2006 Results; Revenues Grow 10%; EPS from Continuing Operations Increases 24%; Affirms Fiscal 2006 Guidance

Business Wire, April 28, 2006

ROSELAND, N.J. -- Automatic Data Processing, Inc. (NYSE:ADP) reported 10% revenue growth, to $2.4 billion, and $0.61 earnings per share from continuing operations for the third fiscal quarter ended March 31, 2006, Arthur F. Weinbach, chairman and chief executive officer, announced today. On an as reported basis, including stock compensation expense in the current period, pretax and net earnings from continuing operations grew 12% and 11%, respectively, and diluted earnings per share from continuing operations increased 13% from $0.54 per share a year ago. Fiscal 2006 earnings comparisons are affected by the inclusion of stock compensation expense as of July 1, 2005. On a comparable basis, including stock compensation expense in the third quarter of fiscal 2005, pretax and net earnings from continuing operations each grew 22%, and diluted earnings per share from continuing operations increased 24% from $0.49 per share a year ago.

On April 13, 2006, ADP completed the sale of its Claims Services (CSG) business with annual revenues of approximately $415 million. ADP expects to report a one-time pretax gain of approximately $600 million, or $480 million after tax, and net cash from the transaction of approximately $760 million, which are subject to final closing adjustments. Third quarter and year-to-date revenues and pretax earnings from continuing operations for fiscal 2006 and fiscal 2005 do not include CSG. The results of operations for this business are reported within discontinued operations in the third quarter and in prior periods. The one-time gain from this transaction will be reported in discontinued operations in the fourth quarter.

Commenting on the results, Mr. Weinbach said, "We are pleased with our strong results for the third quarter. Employer Services' revenues increased 9%, with 10% internal growth, compared with the third quarter last year. In the United States, revenues from our core payroll and payroll tax filing business grew 8% in the quarter and beyond payroll revenues grew 14%. New business sales in the quarter, which reflect annualized recurring revenues anticipated from new orders, grew 8% in the United States and 10% worldwide. As we anticipated, our international business sales results were strong. We are forecasting about 10% sales growth for the year. In the United States, the number of employees on our clients' payrolls increased 2.7%, with growth in all market segments. The number of employees on our clients' payrolls in Europe continued to hold flat for a second consecutive quarter after several quarters of decline. During this critical year-end retention period we reached a new record level of client retention in the United States for both the third quarter and year to date.

"Brokerage Services' revenues grew 6%, all internal, compared with last year's third quarter, driven primarily by growth in our beyond beneficial products within our investor communications business. Revenues from new sales in transaction reporting and increased volumes from existing clients in fulfillment drove beyond beneficial products' revenue growth of 18%. Beneficial proxy and interim communications revenues declined 3% in the quarter due to timing of equity proxy mailings and less mutual fund meeting activity, partially offset by stock record growth. Back office revenues grew 4%, reflecting increased trade volumes of 17%, partially offset by a decline in revenue per trade of 13% resulting from a higher level of lower-rate institutional trades. Brokerage Services' pretax margin declined 260 basis points due to investor communications' higher new business implementation costs, various one-time charges and a change in the mix of mailings in the quarter. Securities Clearing and Outsourcing Services' (SCOS) revenues were $21 million for the quarter, in line with our expectations. SCOS sales and sales pipeline continue to be strong and ahead of our expectations.

"Dealer Services' revenues grew 21%, 4% internally, favorably impacted by the acquisition of UK-based Kerridge Computer Company Ltd. Pretax margin declined 250 basis points primarily due to restructuring charges relating to the Kerridge acquisition. Dealer Services was awarded a new sales contract to be the sole dealer management systems (DMS) provider for a large dealership group in the United States with approximately 95 dealer sites. 70% of these sites already use ADP Dealer Services' DMS and we expect to convert the remaining 30% over the next 18 - 20 months.

"Interest on client funds grew nearly 34% over last year's third quarter, to $166 million, based on a 10% increase in average client funds balances and higher interest rates. For the full year, we are forecasting client funds interest income of over $540 million. This forecast is based on 10% anticipated growth in average balances and a portfolio yield of about 4% for the full year, an improvement of 60 basis points.

"Pretax earnings in 'Other' increased $57 million in the third quarter, assuming stock compensation was expensed in last year's third quarter, primarily due to a decline in the client funds interest offset of $25.8 million, lower net realized losses of $9.5 million and lower stock compensation expense of $4.6 million.