Ceridian Reports Third Quarter 2006 Results and Revises Fourth Quarter Guidance
Third Quarter 2006 Highlights: * EPS of $.32 per diluted share exceeds July guidance range. Includes a gain anticipated in previous guidance of $.02 on the sale of a business. Also includes an income tax related gain of $.06, and charges of $.03. * Revenue of $386.5 million up 6 percent ove
MINNEAPOLIS (October 26, 2006) – Ceridian Corporation (NYSE: CEN) today reported third quarter 2006 net earnings of $45.6 million, or $.32 per diluted share, on revenue of $386.5 million. For the third quarter of 2005, net earnings were $25.7 million, or $.17 per diluted share which included $.03 per diluted share in charges, on revenue of $364.1 million. For the nine months ended September 30, 2006, net earnings were $124.0 million, or $.85 per diluted share, on revenue of $1,161.1 million. For the nine months ended September 30, 2005, net earnings were $81.2 million, or $.54 per diluted share, on revenue of $1,079.5 million.
“I am excited to be joining Ceridian,” said Kathryn V. Marinello, who became president and chief executive officer of Ceridian Corporation on October 20, 2006. “I am pleased that the Company posted above-consensus earnings and strong cash flows this quarter. I am especially encouraged by the excellent all-around performance of Comdata, and by the year-over-year margin improvement reported in our Human Resource Solutions (HRS) business. Ceridian’s businesses have solid franchises in attractive markets. I look forward to capitalizing on the opportunities we have and addressing the challenges we face to accelerate the growth and improve the profitability of the business in the future.”
“The third quarter earnings performance was solid,” added Douglas C. Neve, executive vice president and chief financial officer of Ceridian. “Earnings per share of $.32 exceeded our guidance range, even after considering the impact of a favorable income tax item of $.06 and the negative impact of charges totaling $.03 in the quarter. Total revenue of $386.5 million was within our guided range, up 6 percent over the prior year.”
“Revenue for the quarter in HRS was up 3 percent over last year, which was somewhat below our guidance range,” Neve continued. “Incremental revenue deferrals of approximately $3.0 million impacted the quarterly performance. HRS segment earnings as a percentage of revenue improved substantially over the prior year, and were in line with our guided range despite the incremental revenue deferral in the quarter.”
“Overall order growth in HRS was up in double digits on a percentage basis in the quarter. International orders were up modestly year over year, which tempered strong double-digit growth in the U.S. Importantly, year-to-date orders internationally are still up in double-digits on a percentage basis, and are expected to rebound in the fourth quarter because several orders did not close by the September 30 deadline,” said Neve. “The other primary operational indicators in the HRS business during the quarter were in line with our expectations. Float balances grew 8.1 percent, and customer employment levels were up and in line with our plan for the quarter.”
“Comdata turned in another very strong performance this quarter,” Neve continued. “Revenue growth was at the higher end of our guided range, up 13 percent over the third quarter of last year. Higher fuel prices accounted for about 1 percentage point of the increase. Both Comdata’s transportation and retail businesses grew in double digits during the quarter, driven by new client signings, continued traction in new service offerings, and strong organic growth both domestically and internationally.
“Comdata’s segment earnings as a percentage of revenue were down year over year at 31.6 percent, but were pressured in the quarter by a charge taken by Ceridian to reserve for the anticipated settlement of a legal matter relating to operations. Comdata’s share of this $6.3 million pre-tax charge was $5.4 million. The mark-to-market of fuel price related derivatives provided a pre-tax benefit of $2.2 million in the quarter, but had only a modest impact on the year-to-date results,” said Neve.
“Cash generation for the quarter was strong,” Neve concluded. “Cash flow from operations was $67.9 million, and capital expenditures were $15.0 million, which drove our cash balance up $34.2 million, to $205.5 million. Repayments of $9.0 million reduced the debt balance to $89.4 million at the end of the quarter. In addition, we effectively offset option dilution during the quarter by repurchasing 2.0 million shares for $47.1 million.”
Stock-based compensation expense for the quarter was in line with plan, at $4.0 million pre-tax, or $.02 per share. Stock-based compensation expense in the third quarter of 2005 was $0.7 million pre-tax.
Federal Occupational Health (FOH) Contract
Ceridian recently signed a contract to provide employee assistance program (EAP) services to Federal Occupational Health (FOH). This contract, consisting of an initial one-year term with four one-year options of approximately $30 million per year, has been suspended pending resolution of a competitor protest. Although this sort of protest is not uncommon in these situations, this business contract will now likely commence in early 2007. Therefore, the revenue related to this contract previously anticipated in the fourth quarter of 2006 will not be realized. The annual contract value of this agreement may be reduced in scope to approximately $12 million per year when it is implemented because one major government agency may not be part of the future contract.
Source: Ceridian
