ADP 2006 Annual Report Download - page 10

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WHAT IS YOUR CAPITAL ALLOCATION STRATEGY?
Going forward, ADP expects to lower overall corporate cash balances and return excess cash to shareholders over
time. ADP also intends to utilize its strong cash flows and the one-time proceeds from the Brokerage Services
spin-off to increase share buybacks and/or dividends depending on market conditions and acquisition funding
requirements. ADP’s dividend has increased every year since ADP began paying a dividend in 1974, and this year we
anticipate the Board of Directors will authorize a dividend increase in-line with or higher than the increase last year
of 19%. After the spin-off, ADP will maintain the 2007 dividend at the same dollar amount as before the spin-off.
WHY IS THE “SERVICE-PROFIT CHAIN” MODEL IMPORTANT TO ADP’S CONTINUING SUCCESS?
The “service-profit chain” is a highly productive repetitive business process that simply states: when happy, engaged
associates provide higher levels of client service, in turn, clients stay with ADP longer; they buy more products and
services; and refer others to use our products and services.
Making the “service-profit chain” work takes a perpetual commitment to World Class Service and to being an Employer
of Choice – so you can expect those commitments to remain at the forefront of our strategic priorities.
All this makes good business sense and drives long-term profitability for ADP shareholders.
HOW WILL ADP EXPAND ITS INTERNATIONAL FOOTPRINT?
All of our businesses already have international operations. The two most promising areas for international growth are
in Employer Services and Dealer Services.
GlobalViewSM is an exciting new payroll and HR solution from Employer Services that uses SAP Human
Capital Management software as an underlying platform. This solution, operating today in 30 countries, is designed
to serve global and multinational clients and represents a very large and important opportunity.
The acquisition of U.K.-based Kerridge Computer this year opens the door for ADP to become a global provider in the
Dealer Services market. Kerridge is the largest DMS provider in the U.K. and expands our Dealer Services footprint
into over 40 countries including the Asia-Pacific market.
Our entry into China and Asia-Pacific is another strategic step for ADP. China, which is by far the most important
developing market in the world, is a key growth opportunity for ADP. We opened our first two representative offices
in China this year. Our Shanghai facility includes Employer Services staff to support our GlobalView payroll and HR
offering for multinational firms, and Dealer Services associates to serve the emerging retail dealership industry in
the country with our high-tech, end-to-end solutions.
Certainly, international growth is important to our future expansion plans. Yet, while we will actively pursue
international growth, we also remain committed to growing and serving our North American client base.
I think this is a great time to be at ADP, and it’s my honor and privilege to lead ADP’s dedicated and talented team of
associates worldwide.
Q&A WITH GARY BUTLER, CEO-ELECT