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DOW JONES NEWSWIRES
Automatic Data Processing Inc. (ADP) reported Monday that its
fiscal third-quarter earnings fell 2.7% as rising unemployment
resulted in fewer workers at its clients' businesses.
While joblessness has been steadily increasing, there has been a
lag in its effects on payroll-processing companies like ADP, which
also provide other services such as benefits processing and
human-resources outsourcing.
The decline in clients' payrolls is expected to continue this
quarter, said Chief Financial Officer Chris Reidy, but that the
drop is figured into its forecasts for the year. He added ADP has
been cutting costs to reflect the decline, mostly through
attrition.
The company's Cobra business, though a small part of its
offerings, has seen a small uptick owing to the government's
extension of the benefit that allows workers to buy health coverage
after they leave a job. The federal government is subsidising the
lion's share of the costs.
For the quarter ended March 31, the global payroll-processing
company reported a profit of $402.5 million, or 80 cents a share,
down from $413.6 million, or 79 cents a share, a year earlier. The
prior year included 2 cents of earnings from discontinued
operations.
Revenue decreased 2% to $2.37 billion, with the stronger dollar
reducing revenue by three percentage points. International sales
account for about 15% of the company's revenue.
Analysts polled by Thomson Reuters most recently were looking
for earnings of 80 cents on revenue of $2.39 billion.
Gross margin fell to 48.7% from 49.6%.
At its employer-services business, by far its largest, revenue
increased a lower-than-expected 1%. Employees on U.S. clients'
payrolls were down 4.2%. The figure turned down in the second
quarter, and Reidy said it is expected to be down 3% for the full
year.
Combined new business sold in its employer-services and
human-resources benefits outsourcing businesses fell 10%. The
results are combined as some clients use both services. Its smaller
human-resources outsourcing business was a bright spot, with
revenue up 10% amid growth in employees on clients' payrolls.
Shares of ADP, which affirmed its 2009 earnings forecast, were
up 2.1% at $35.58 in recent trading.
-By Tess Stynes, Dow Jones Newswires; 201-938-2473;
tess.stynes@dowjones.com