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Letter to the Editor

ADP Reports Record Third Fiscal Quarter; Earnings Per Share Increases by 10%

Automatic Data Processing, Inc. achieved record revenues and earnings in its third quarter of fiscal 2002. This represents ADP's 163rd consecutive quarter of record highs in both revenue and earnings per share since becoming a public company in 1961.

Revenues approximated $1.9 billion in the quarter ended March 31, 2002, up 1 percent from last year. Excluding the impact of the prior year non-recurring Bridge Information Systems, Inc. write-off, pre-tax earnings and net earnings both increased 7 percent, and diluted earnings per share, on fewer shares outstanding, increased 10 percent to $.56 from $.51 last year.

Commenting on the quarter, Arthur F. Weinbach, chairman and chief executive officer, said, "ADP continued excellent expense management during a period of slow revenue growth and lower interest rates compared with last year. Revenue growth in Employer Services was 4 percent in the quarter. Growth was impacted by fewer pays per control (the number of employees our clients pay), 2 percent new business sales growth (an improvement over prior quarters), and lower client retention, primarily due to bankruptcies. Brokerage Services revenues increased 4 percent this quarter; excluding acquisitions revenues declined 3 percent. Revenue per trade in our back office business was reduced by a lower percentage of retail transactions compared to institutional transactions. In our investor communications business the increased use of electronic delivery and the "householding," or consolidation of accounts for proxy mailings, reduced postage revenue but slightly improved our overall profitability. Brokerage Services revenue growth was also impacted by the reduction in discretionary spending in the financial services industry in research print and implementation services. Dealer Services revenues increased 1 percent and Claims Services revenues declined 1 percent in the quarter.

"Our businesses are not yet showing signs of economic recovery. Employer Services, in particular, will likely lag a recovery by several months. We are not anticipating the benefits of an improvement in the economy in the near term and are implementing further cost reductions to keep our expense levels in line with continued low revenue growth expectations.

"Despite the near-term lower revenue growth, ADP's strong recurring revenue business model, combined with good cost management and market leading products, position us well for an economic rebound and long-term growth.

"We remain comfortable with our fiscal 2002 forecast of low single-digit revenue growth and double-digit (about 10 percent) earnings per share growth over fiscal 2001 pro forma results of $1.59," Mr. Weinbach concluded.

ADP, with approximately $7 billion in revenues and more than 500,000 clients, is one of the largest independent computing services firms in the world.

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