ADP 2002 Annual Report Download - page 5

•Return on equity was over 22%.
•Our Board increased ADP’s dividend for the 28th consecutive year by 12% to
$.46 per share.
•We introduced a significant number of new products and services in ’02, as
you’ll see in the narrative body of this annual report.
•Most of ADP’s businesses set new highs in client satisfaction even though
client retention weakened, primarily from increased bankruptcies.
•Our associate retention was at the best level in over a decade although our
associate satisfaction scores declined slightly. We recognize that associate
retention is aided by the weak market alternatives and we continue to work
toward being an employer of choice.
•As the economy stayed soft for the second year in a row, we instituted tight cost
containment and reduced our expense run rate for ’03 by about $100 million
from where it would have been. This is in addition to the reduction of $150
million in ’02.
As we look at our results, the surprise is not Employer Services, where the busi-
ness trends are not that unusual compared to our experience in prior recessions
and recoveries. The big surprise – and challenge – is Brokerage Services. While
our Employer Services business typically lags an economic recovery, Brokerage
Services has performed well ahead of economic rebounds. This clearly has not
happened. An unprecedented series of events – including the collapse of the dot
com boom, the September 11th tragedy, the well-publicized corporate accounting
scandals, and the loss of confidence in stock analysts – have led to a serious
erosion of individual investor confidence, significantly lower retail trading activity,
and less growth in the number of different stocks held by street name share-
holders. We will have to see how these stock market-related issues evolve in
the future.
LONGER TERM OUTLOOK
As we focus on the longer term, ADP remains remarkably strong and
well positioned. Our markets are solid and growing. We have leading
market share in most of our markets. Our financial position is excellent.
We have very strong direct sales capabilities. Our service levels and reputation
are very good – and improving. Our service offerings are robust and getting more
so. Associate retention – a key to building our long-term client relationships –
is at record levels. Furthermore, our productivity – bolstered by tight cost
containment – is also at record levels, and should position us well as revenue
rebounds with an economic recovery.
ACQUISITIONS
Our strategic acquisition activity increased during ’02, as sellers’ price
expectations became more reasonable. During the year we acquired
several businesses, the largest of which were:
•In August, we acquired Avert, Inc., a leading pre-employment background
verification and human resource help desk company, and have integrated
Avert’s employment screening solutions with our core payroll, tax filing, human
resource, and benefit services capabilities.
•In October, we acquired IBM’s Output Services business, which expands our
statement printing capacity, and strengthens our position as a market leader
in statement production and distribution to the financial services industry.
•In April, we acquired Digital Motorworks to provide the integration of key
automotive data across multiple dealer management systems utilized by
automotive manufacturers and the dealer consolidators. 3
O ur markets are solid and
growing. We have leading
market share in most of
our markets. O ur financial
position is excellent.
O ur Board
increased ADP’s
dividend for the
28th consecutive year by
12% to $.46 per share.
28th
Consecutive
Year