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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549





FORM 10-K/A

(Amendment No. 1)





Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2002

Commission File Number 1-15168

CERIDIAN CORPORATION

(Exact name of Registrant as specified in its charter)


|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 41-1981625
(I.R.S. Employer Identification No.)

3311 East Old Shakopee Road
Minneapolis, Minnesota 55425(Address of principal executive offices)

Telephone No.: (952) 853-8100(Registrants telephone number, including area code)




Securities Registered Pursuant to Section 12(b) of the Act:

|                                                                                                       |  |                                                        
|------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------
|Title of each class:                                                                                   |  | Name of each exchange on which registered:             
|                                                                                                       |  |                                                        
|Common stock, par value $.01 per share
Rights to Purchase Class A Junior Participating
Preferred Stock |  | The New York Stock Exchange
The New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [   ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No
[   ]

The aggregate market value of the voting stock of Ceridian held by
non-affiliates of Ceridian on June 28, 2002 was $2,814,985,352, based on the
closing sales price of Ceridian common stock as reported on The New York Stock
Exchange on June 28, 2002.

The number of shares of Ceridian common stock outstanding as of March 20, 2003
was 148,150,587.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Annual Meeting of Stockholders to be held on May 21, 2003: Part III



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|                                                 |                                                                                                   |  |  |  |  |  |  | 
|------------------------------------------------ | ------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                          
|                                                 | Item 1. Business                                                                                 
|                                                 | Item 1A. Executive Officers of the Registrant                                                    
|                                                 | Item 2. Properties                                                                               
|                                                 | Item 3. Legal Proceedings                                                                        
|                                                 | Item 4. Submission of Matters to a Vote of Security Holders                                      
|PART II                                         
|                                                 | Item 5. Market For Registrants Common Equity and Related Stockholder Matters                    
|                                                 | Item 6. Selected Financial Data                                                                  
|                                                 | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations    
|                                                 | Item 7A. Quantitative and Qualitative Disclosures about Market Risk                              
|                                                 | Item 8. Financial Statements and Supplementary Data                                              
|                                                 | Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure     
|PART III                                        
|                                                 | Item 10. Directors and Executive Officers of the Registrant                                      
|                                                 | Item 11. Executive Compensation                                                                  
|                                                 | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stock Matters
|                                                 | Item 13. Certain Relationships and Related Transactions                                          
|                                                 | Item 14. Controls and Procedures                                                                 
|PART IV                                         
|                                                 | Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K                         
|SIGNATURES                                      
|Exhibit Index                                   
|Consent of Independent Auditors - KPMG LLP      
|Certification of CEO Pursuant to Section 302    
|Certification of CFO Pursuant to Section 302    
|Written Statement of CEO Pursuant to Section 906
|Written Statement of CFO Pursuant to Section 906



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CERIDIAN CORPORATION

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A amends Item 1 of Part I, Items 6, 7, 7A
and 8 of Part II and Item 15 of Part IV of our Annual Report on Form 10-K
previously filed for the fiscal year ended December 31, 2002. This Form 10-K/A
is filed in connection with our restated financial statements for the
fiscal years ended December 31, 2002, 2001 and 2000 as a result of changes in
revenue recognition at our Stored Value Systems unit. For further discussion
of these restatements, see Note B, Restatement of Financial Statements, to our
consolidated financial statements. Stored Value Systems is a wholly owned
subsidiary of our Comdata subsidiary that provides stored value cards and
related processing principally to the retail industry. Financial statement
information and related disclosures included in this Form 10-K/A reflect, where
appropriate, changes as a result of the restated financial statements and certain other changes that were responsive to comments received from the Division of Corporation Finance of the Securities and Exchange Commission.  Consent of our independent auditors is attached to this Form 10-K/A as Exhibit 23.01, and certifications from our
Chief Executive Officer and Chief Financial Officer required by Sections 302
and 906 of the Sarbanes-Oxley Act of 2002 are attached to this Form 10-K/A as
Exhibits 31.01, 31.02, 32.01 and 32.02. All other information contained in
this Form 10-K/A is as of the date of the original filing.

We are filing an Amendment No. 1 to our quarterly reports on Form 10-Q for
each of the first, second and third quarters of 2003 concurrently with the
filing of this Form 10-K/A. We have not amended and do not intend to amend our
previously filed annual reports on Form 10-K or our quarterly reports on Form
10-Q for the periods affected by the restated financial statements for periods ending on or prior to December 31,
2002. For this reason, the consolidated financial statements, auditors reports
and related financial information contained in such reports for the affected
periods should no longer be relied upon.




PART I

This Amendment No. 1 to our Annual Report on Form 10-K/A contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. The statements regarding Ceridian Corporation
and its subsidiaries contained in this report that are not historical in
nature, particularly those that utilize terminology such as may, will,
should, likely, expects, anticipates, estimates, believes or
plans, or comparable terminology, are forward-looking statements based on
current expectations and assumptions, and entail various risks and
uncertainties that could cause actual results to differ materially from those
expressed in such forward-looking statements. Important factors known to us
that could cause material differences are identified in Managements
Discussion and Analysis of Financial Condition and Results of Operations under
the caption Cautionary Factors That Could Affect Future Results, included in
Part II, Item 7 of this report. You should carefully consider each cautionary
factor and all of the other information in this report. We undertake no
obligation to correct or update any forward-looking statements, whether as a
result of new information, future events or otherwise. You are advised,
however, to consult any future disclosures we make on related subjects in
future reports to the SEC.

We own or have the rights to various trademarks, trade names or service
marks, including the following: BusinessLink, Ceridian Corporation® and logo,
Ceridian®, CobraServ®,

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Comchek®, Comchek eCash®, Comdata Corporation® and logo, Comdata®,
HR/Comply®, LifeWorks®, Powerpay®, Signature®, SourceWeb, Stored Value
Systems® and logo, and Trendar. The trademarks American Express®, Discover®,
Maestro®, MasterCard®, Microsoft®, UltiPro® , Visa® and Windows® referred to in
this report are the registered trademarks of others.




Item 1. Business

General

Ceridian Corporation was formed on August 8, 2000 and is incorporated in
Delaware. Our principal executive office is located at 3311 East Old Shakopee
Road, Minneapolis, Minnesota 55425, and our telephone number is (952) 853-8100.

Ceridian Corporation was formed as a result of the spin-off of the human
resource solutions division and human resource solutions and Comdata
subsidiaries of Arbitron Inc., formerly known as Ceridian Corporation (which
entity this report refers to as Old Ceridian or Ceridians predecessor).
On March 30, 2001, we became an independent public company when Old Ceridian
distributed all of our outstanding common stock to its stockholders in a
tax-free spin-off transaction (which transaction this report refers to as the
spin-off). Despite the legal form of the spin-off, because of the relative
significance of our businesses to Old Ceridian, we are considered the divesting
entity and treated as the accounting successor to Old Ceridian for financial
reporting purposes. As used in this report, references to Ceridian, the
Company, we, our or us mean Ceridian Corporation, formerly known as New
Ceridian Corporation, together with our consolidated subsidiaries, and include
the historical operating results and activities of the businesses and
operations that constituted Old Ceridian prior to the spin-off, as well as the
continuing operations of the operations that were transferred to us by Old
Ceridian in the spin-off, unless the context otherwise indicates.

We refer you to Part II, Item 7 and Item 7A of this report for additional
descriptions of our business.

Human Resource Solutions

The businesses comprising our human resource solutions business (referred
to in this report as HRS) offer a broad range of managed human resource
solutions designed to help companies maximize the value of their people by more
effectively managing their work forces and the information that is integral to
human resource processes. Our human resource management products and services
are provided principally in the United States, Canada and the United Kingdom.
HRS revenue for the years 2002, 2001 and 2000 was as follows:

|               |  |                |  |                |  |  |  |  |  | 
|-------------- |  | -------------- |  | -------------- |  |  |  |  |  | 
|2002           |  | 2001           |  | 2000          
|               |  |                |  |               
|$878.1 million |  | $873.8 million |  | $873.1 million

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Payroll processing and tax filing services accounted for about 73 percent
of the $878.1 million of revenue in 2002, with about 70 percent of 2002 payroll
processing and tax filing revenue derived from the United States.

Our HRS revenue includes investment income earned from customer deposits
temporarily held in the United States and Canada pending remittance to taxing
authorities, customer employees or other third parties. About 10 percent of
the $878.1 million of revenue in 2002 was attributable to this investment
income, including income from interest rate derivative contracts. Due to the
significance of this investment income, our quarterly revenue and profitability
fluctuate as a result of changes in interest rates and in the amount of
customer deposits held. We use derivative securities such as interest rate
collars and swaps to manage interest rate risk on customer deposits on a global
basis as further described in Part II, Item 7A of this report. Because the
volume of payroll items processed increases in the first and fourth quarters of
each year in connection with employers year-end reporting requirements, and
because the amount of tax filing deposits also tends to be greatest in the
first quarter, our HRS revenue and profitability tend to be greater in those
quarters.

Market

The market for human resource solutions covers a comprehensive range of
information management, human resource administration and employee assistance
services and software. These products and services include:



| |  |  | transaction-oriented administrative services and software
products, primarily in areas such as payroll processing, tax filing
and benefits enrollment and administration; and       
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | management support software and services, primarily in areas
such as human resource administration, regulatory compliance,
work-life effectiveness and employee assistance programs.

We believe that the market for these solutions is expected to continue to
grow as organizations seek to reduce costs, improve productivity and add
services for employees by outsourcing administrative services and further
automating internal processes. We also expect the demand for human resource
solutions to increase as organizations acquire managed human resource services
from third parties to obtain assistance in maintaining compliance with the
increasing scope and complexity of laws and regulations governing businesses
and increasingly complicated work-life issues faced by employers and employees.

We generally classify customers in the human resource solutions market by
employer size into three categories, each of which represents a distinct market
opportunity for us:

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|                 |  |                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|---------------- |  | ------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Type of Employer |  | Size of Employer         |  | Typical Characteristics                                                                                                                                                                                                                                                                                                                                                                                              
|                 |  |                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|Small            |  | Fewer than 350 employees |  | Tend to be relatively more
price sensitive, to require
less customization or
flexibility in product and
service offerings and to
switch more readily from
one provider to another                                                                                                                                                                                                                                    
|                 |  |                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|Medium           |  | 350 to 5,000 employees   |  | Human resource management
needs tend to be more
complex, and therefore
often require more
customization and
flexibility in products and
services, greater
integration among data
processing systems and a
greater variety of products
and services                                                                                                                                                                   
|                 |  |                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|Large            |  | Over 5,000 employees     |  | Human resource management
needs tend to be the most
complex, and therefore
often require the most
customization and
flexibility in products and
services, the greatest
integration among data
processing systems and the
greatest variety of
products and serviceshas
the greatest reliance on
their integral legacy
systems which increase
integration complexity and
challenge outsourcing and
migration decisions

We believe, however, that with regard to any size employer, a provider of
a transaction-based service, such as payroll processing or tax filing services,
is afforded attractive opportunities to complement that core service with
additional products and services that are natural adjuncts to that core
service, such as time and labor management, 401(k) retirement plan
administration, COBRA notification, flexible spending account administration,
employee self-service, benefits eligibility and enrollment, and employee
assistance and work-life services. Our ability to wrap value-added services
around a core service or product in an integrated manner will, we believe, lead
to revenue growth and our ability to command higher margins.

Products and Services

Our human resource management solutions include:



| |  |  | payroll processing and integrated human resource information systems solutions;                                    
| | - |  | -------------------------------------------------------------------------------------------------------------------
|
| |  |  | tax filing services;                                                                                               
|
| |  |  | benefits administration, qualified retirement and other plan
administration and regulatory compliance services; and

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| |  |  | work-life effectiveness and employee assistance programs.
| | - |  | ---------------------------------------------------------

Payroll Processing and Integrated Human Resource Information Systems
Solutions.Our payroll processing for customers in the United States consists
primarily of preparing and furnishing employee payroll checks, direct deposit
advices and supporting journals and summaries. For certain business customers,
we may handle the transmission of customer payroll funds. We also supply
quarterly and annual social security, Medicare and federal, state and local
income tax withholding reports that are required to be filed by employers and
employees.

We provide human resource information systems (commonly referred to as
HRIS) solutions that run in Microsoft Windows environments and serve as a
front-end to our payroll processing system, allowing our customers to utilize
a common database for both payroll and other HRIS purposes. This enables the
customer to create a single database of employee information for on-line
inquiry, updating and reporting in payroll and other areas important to human
resource administration and management, such as employee data tracking,
government compliance, compensation analysis and benefits administration. We
also provide HRIS solutions for Microsoft operating environments that
incorporate open, industry standard technology, are scalable, and can be
utilized with an existing interface as a front-end for our payroll processing
and tax filing services.

Our Source 500 product suite provides an integrated HR/payroll and
benefits solution with outsourced payroll and tax filing services to customers
primarily in the medium and large employee range. It is available in a hosted
Application Service Provider environment (Source Assist) or can be managed
in-house as an installed application. Our hosted solutions provide customers
with secure 24/7 access to our solutions using a standard web browser.

We recently introduced eSource, a web-enabled, fully hosted integrated
payroll and human resource administration solution, designed specifically for
the medium and large customer market. eSource also includes integrated time
management and Source self service features, as well as wage attachments and
disbursements, internet payroll management, and customization features within
the core product offering.

Additionally, we have a license agreement with Ultimate Software Group,
Inc. to allow us to use that companys UltiPro software as part of an on-line
payroll service offering. In January 2003, using the UltiPro software as
modified by us, we introduced SourceWeb, an integrated payroll, HRIS, self
service solution that is completely hosted and supported by us. This product
is designed specifically for small to smaller medium employee size companies.

We also provide Internet payroll processing, tax filing, unemployment
compensation management and related services for small employers located in the
United States and Canada. Our Powerpay product is a web-based solution that
allows customers to complete payroll transactions via the Internet. The
Powerpay product also provides small businesses with access to services, such
as new hire reporting, tax filing, direct deposit, optional benefits programs,
unemployment filing and special reports services that were previously only
available to larger companies.

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Tax Filing Services.Our payroll tax filing services for customers in the
United States consist primarily of collecting funds for federal, state and
local employment taxes from customers based on payroll information provided by
the customers, remitting funds collected to the appropriate taxing authorities,
filing applicable returns and handling related regulatory correspondence and
amendments. Our tax filing services are provided not only to employers who
utilize our payroll processing service, but also to local and regional payroll
processors and stand alone tax services provided directly to employees.
Payroll-related services are typically priced on a fee-per-item-processed
basis.

We hold our customers tax filing deposits in a trust. This trust invests
primarily in high quality collateralized short-term investments, money market
funds, U.S. Treasury and Agency securities, AAA rated asset-backed securities
and corporate securities rated A3/A or better. The duration of these
investments is carefully managed to meet the liquidity needs of the trust.

Benefits Administration, Qualified Retirement and Other Plan
Administration and Regulatory Compliance Services.We provide employee health
and welfare benefits administration and qualified plan administration services
to our customers. Employee health and welfare benefits administration services
include health insurance portability (i.e., the Consolidated Omnibus Budget
Reconciliation Act, or COBRA, and the Health Insurance Portability and
Accountability Act of 1996, or HIPAA) compliance services. We provide our
portability services through the trade name CobraServ. Health and welfare
benefits administration services also encompass benefits provided to active
employees, such as annual health plan enrollment, ongoing employee enrollment
and eligibility services, tuition refund plans, transportation reimbursement
under the Transportation Equity Act, and Internal Revenue Code Section 125
plans including fully administered and self-administered flexible spending
accounts and premium-only plans. We also provide administration services for
benefits provided to retired and inactive employees, including retiree
healthcare, disability, surviving dependent, family leave and severance
benefits.

Our qualified plan administration services include 401(k) plan
administration, profit sharing administration, defined benefit plan
administration, ESOP administration and Qualified Domestic Relations Order
administration.

In 2002, we made three acquisitions to enhance our ability to provide
human resource compliance and enrollment and benefit management services. We
acquired substantially all of the assets of HR Comply to enhance our ability to
provide human resource compliance services, and SYLINQ Corporation and
substantially all of the assets of Great Lakes Strategies, LLC to further our
capabilities in enrollment and benefits management through leading edge
software platform technologies.

Work-Life Effectiveness and Employee Assistance Programs.We are a leader
in providing customers and their employees with a single source for fully
integrated work-life and employee assistance programs to clients of all sizes
throughout the United States, Canada and the

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United Kingdom. Services are delivered through on-line access and
telephonically, and through face-to-face meetings provided by referral
resources.

The services and programs we provide may be customized to meet
a customers particular needs. Our portfolio of products allows a
customer to choose the mix, level and mode of access to services that best meet
its needs. These products range from high touch technology capabilities
allowing employees to access specific information on-line to comprehensive
person-to-person consultation and referral services. Also included are
specialized service options, such as assistance with college selection, elder
care assessment and facility review services, and health and wellness services.
These services address employee effectiveness issues and seek to improve
employee retention and productivity, and to reduce absenteeism as well as
increase the customers recruitment success. Consultants provide confidential
assistance 24 hours a day to customers employees to help them address issues
ranging from everyday matters to crisis situations. Supporting these
consultants are research and subject matter experts who provide specialized
expertise or referrals in areas such as parenting/child care, elder care,
disabilities, addiction disorders, mental health, health and wellness,
financial, legal, managerial/supervisory and education/schooling issues. We
have also entered into arrangements with some service and product providers to
provide additional leading edge services and expertise to our customers.

International Operations

Approximately 22 percent of HRS 2002 revenue was obtained from customers
outside of the United States. Our international HRS operations are primarily
conducted in the United Kingdom, through Centrefile Limited, and Canada,
through Ceridian Canada Ltd. Centrefile Limited provides human resource
services, payroll processing services and HRIS software in the United Kingdom.
Centrefiles services generally do not involve the handling or transmission of
customer funds. In a very few instances, Centrefile holds client funds for a
short period of time in non-interest bearing segregated accounts prior to
disbursement pursuant to Centrefiles clients instructions.

Ceridian Canadas operations handle payroll as well as tax filing funds
for our Canadian customers. These Canadian operations collect payroll and
payroll tax amounts from customers and remit tax amounts to applicable
governmental authorities and make direct deposits of payroll amounts to
employees bank accounts. As a result, revenue from our payroll processing
services in Canada includes investment income received from temporarily holding
these amounts in trust. About 23 percent of the 2002 revenue of this Canadian
business was attributable to this investment income. The Canadian trust
invests in securities issued by the government and provinces of Canada, highly
rated Canadian banks and corporations, asset backed trusts and mortgages. We
earn income from the trust and charge fees for services similar to those
provided in the United States. We also provide for interest rate risk
management in Canada as further described in Item 7A of this report.

We are expanding our international payroll services into other countries
in Europe, including Belgium, France, Germany, the Netherlands, the Republic of
Ireland, Spain and

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Switzerland, by engaging partners within each country to provide us with
payroll administration and processing services for that country. We in turn
have contracted with multinational customers for their international
requirements, and deliver a fully outsourced payroll service to these
customers.

Customers

We target employers of all sizes in diverse industries. Our existing
customer base covers a wide range of industries and markets. Our products and
services are generally provided under written license or service agreements,
with contracts for repetitive services generally terminable upon relatively
short notice.

Customer retention is an important factor in the amount and predictability
of revenue and profits in our HRS businesses. In providing some of our
services, particularly payroll processing and tax filing services, we incur
installation and conversion costs in connection with new customers that need to
be recovered before the contractual relationship will provide incremental
profit. The length of time it takes for a contract to become profitable
depends on a number of factors such as the number of employees covered by the
contract, the complexity of the services involved, the amount of customization
of services required and the number of locations in which the customers
employees are located. The longer we are able to retain a customer, the more
profitable that contract will likely be.

Sales and Marketing

Payroll processing, tax filing and human resource management services are
marketed in the United States through our direct sales force operating
throughout the country. We have established marketing relationships with
banks, accounting firms, insurance companies and others pursuant to which these
products and services are offered to the business clients of these entities.
The most significant source of customer leads for these transaction-based
products and services are referrals from these marketing relationships and
existing customers, and other direct marketing efforts, such as telemarketing,
direct mail and trade shows. Our operations in the United Kingdom and Canada
utilize their own direct sales forces. Customer leads for the products and
services of these businesses are generally obtained through referrals, trade
shows, product demonstration seminars, third party resellers and direct sales
efforts.

We utilize cooperative marketing relationships with other companies
offering products or services that complement our businesses as well as
informal marketing alliances with human resource consulting firms. We are
exploring similar cooperative arrangements with other software, insurance and
human resource services providers. We are also seeking to further integrate
and coordinate the sales and marketing efforts of our businesses and to sell a
greater variety of our products and services to the customers of our various
businesses.

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Competition

The human resource solutions industry is highly competitive. Competition
comes from national, regional and local third party transaction processors, as
well as from software companies, consulting firms, governments, enterprise wide
providers of financial services and internally developed and operated systems
and software.

The majority of all payroll processing and tax filing in the United
States, Canada and the United Kingdom is supported in-house, with the remainder
supported by third party providers. In the United States, Automatic Data
Processing, Inc. is the largest third party provider of payroll processing in
terms of revenue, with Paychex, Inc., Ceridian and ProBusiness Services, Inc.
comprising the other three large, national providers in terms of revenue. ADP
serves all sizes of employers, while Paychex generally focuses on small
employers and ProBusiness generally focuses on large employers. On January 8,
2003, ADP and ProBusiness announced that they had entered into a merger
agreement providing for the acquisition of ProBusiness by ADP. Other third
party payroll and tax filing providers are generally regional and local
competitors, although larger, national providers of benefits administration,
401(k) processing services or financial institutions may expand further into
outsourced payroll processing. In the United Kingdom, we believe that our
Centrefile subsidiary is the largest outsourced payroll processing provider in
terms of revenue, competing with several other national providers, including a
subsidiary of ADP, and local providers. In Canada, we believe that our
Ceridian Canada subsidiary is the second largest outsourced payroll processing
provider in terms of revenue, facing a similar competitive environment as in
the United Kingdom. Competition in both the payroll processing and HRIS areas
also comes from a number of large, national software companies that provide
both payroll processing software for in-house processing as well as HRIS
software, often in conjunction with other enterprise management software
applications.

Apart from payroll processing and tax filing, our other HRS solutions
generally compete with a variety of national and regional application software
companies, consulting firms, financial services companies and human resource
services providers. Generally, the market for these products and services is
evolving and is not dominated by a small number of competitors.

Currently, we believe the principal competitive factors in the human
resource solutions industry are:



| |  |  | customer service;                     
| | - |  | --------------------------------------
|
| |  |  | leadership in technology applications;
|
| |  |  | choice of services;                   
|
| |  |  | integrated platforms;                 
|
| |  |  | performance;                          
|
| |  |  | price;                                
|
| |  |  | functionality;                        

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| |  |  | ease and flexibility of use; and
| | - |  | --------------------------------
|
| |  |  | expertise in HR processes.      

We believe that the ability to integrate human resource management
software applications with customers other in-house applications and the
ability to provide client/server-based solutions and solutions delivered
through the Internet are increasingly important competitive factors. While we
believe our businesses will be able to compete effectively in the overall human
resource solutions market, our ability to compete effectively will depend in
large measure on our ability to timely develop and implement new technology,
particularly that which incorporates industry standard architecture and
client/server and Internet-based solutions, and provide leading-edge customer
service.

Research and Development

We intend to continue to invest substantial resources to extend the
functionality of our proprietary payroll processing systems and further develop
a comprehensive and fully integrated suite of employee administrative services.
For example, we are developing several products that are Internet-based. In
addition, we expect to introduce additional enhancements to our Source 500
product.

The table below reflects the amount of research and development expenses
for our HRS businesses for the periods indicated.

|                         |  |                          |      |      |  |      |      |   |  |   |      |  
|------------------------ |  | ------------------------ | ---- | ---- |  | ---- | ---- | - |  | - | ---- | -
|                         |  | Years Ended December 31,
|                         |  |                         
|                         |  | 2002                     |      | 2001 |  | 2000
|                         |  |                          |      |      |  |     
|                         |  | (dollars in millions)   
|Research and development |  | $                        | 56.9 |      |  | $    | 54.7 |   |  | $ | 54.8 |  
|Percent of revenue       |  |                          | 6.5  | %    |  |      | 6.3  | % |  |   | 6.3  | %

Comdata

Our Comdata subsidiary provides transaction processing and regulatory
compliance services to the transportation and other industries. Comdatas
restated revenue from products and services for the years 2002, 2001 and 2000 was as
follows:

|               |  |                |  |                |  |  |  |  |  | 
|-------------- |  | -------------- |  | -------------- |  |  |  |  |  | 
|2002           |  | 2001           |  | 2000          
|               |  |                |  |               
|$312.9 million |  | $305.2 million |  | $301.7 million

Approximately 80 percent of Comdatas revenue for 2002 was attributable to
its transportation business.

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Principal Markets

The trucking segment of the transportation industry is comprised of both
long haul fleets and local fleets. Private fleets predominate in the local
fleet segment, but play a lesser role in the long haul fleet segment. Common
carriers, which provide trucking services to companies that do not have fleets
of trucks of their own, predominate in the long haul fleet segment, which is
comprised of less-than-truckload and truckload components. The
less-than-truckload component, which involves trucks that make multiple stops
to load and unload, is characterized by large capital requirements and a
relatively high degree of consolidation. The truckload component, which
involves the transportation of full loads directly from shipper to final
destination without going through any sorting terminals, is highly fragmented.

The majority of Comdatas trucking company customers are common carriers
serving the truckload component of the long haul segment. Many of these
carriers do not employ their drivers, but instead contract with individual
owner-operators. These owner-operators usually settle their expenses with the
common carrier after the completion of each trip. Drivers for truckload
carriers often spend weeks on the road at a time, creating a number of unique
conditions and business opportunities. Truckload carriers are challenged to
monitor and control fuel purchases, provide driver services to aid in
recruitment and improve retention, obtain necessary licenses and permits, and
effectively manage the routing and logistics of the long-distance trips.

Stored Value Systems, Inc., a wholly owned subsidiary of Comdata and a
part of Comdatas retail services division (which we refer to in this report as
SVS), provides electronic private label cards that can be assigned a cash
value. The market for these private label cards includes merchants, such as
retailers and oil companies through gas stations, who (1) use traditional paper
gift certificates or gift cards, (2) give store credits in connection with the
return of products, and (3) make monetary promotions. SVS markets its private
label cash card to these merchants, namely major retailers and gas stations,
for use with their customers. Comdatas retail services division also provides
a card-based funds transfer system for use by employers and others for, among
other things, expense reimbursements, payroll delivery and termination pay.
SVS markets this card-based funds transfer system to temporary staffing
companies, professional employment organizations, custodial companies, the
restaurant and hospitality industries, and retailers, including the customers
of SVS.

Services

Comdata provides transaction processing and regulatory compliance services
primarily to the transportation industry. Comdata also provides transaction
processing services to other industries, including the retail, temporary
staffing, oil company, restaurant and grocery store sectors. Comdata provides
services to trucking companies, truck stops and truck drivers in the long haul
segment of the trucking industry, and to the local fleet segment. These
services primarily involve the use of a proprietary funds transfer card that
facilitates truck driver transactions and provides transaction control and trip
information for trucking firms. Additionally, Comdata provides assistance in
obtaining regulatory permits and other compliance

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services, local fueling services and discounted telecommunications
services in its markets. Through Comdatas retail services division (which
includes SVS), Comdata provides its specialty card products and services to
customers outside of the transportation industry. Comdata operates primarily
in the United States and Canada and is expanding its business into Mexico.

BusinessLink.Comdata recently introduced BusinessLink, a card with
credit and debit capabilities principally designed to provide businesses with
control over payments to and spending by employees. The BusinessLink card
allows businesses to authenticate and authorize individual employee purchases,
provide payroll to employees and positively identify employees. Through
BusinessLink a business can review reports of transactions made by its
employees over the Internet. BusinessLink offers businesses the capability of
performing these services on a single, customizable employee card. The
BusinessLink card may be customized for each individual employee within a
business. Comdata intends to expand the services currently available under the
BusinessLink card. BusinessLink has been initially introduced to Comdatas
primary markets, transportation and retail. Comdata believes that the
BusinessLink card has application to businesses in other industries.

Trucking Company Services (The Comdata Card).Comdatas funds transfer
system, most commonly initiated through the use of Comdatas proprietary
Comdata card, is designed to enable truck drivers to obtain funding for
purchases and cash advances at truck stops and other locations en route to
their destination. Drivers may use the Comdata card to purchase fuel, lodging
and other approved items, obtain cash advances from ATM machines or through the
use of Comchek drafts, make long distance phone calls and make direct deposits
of pay, settlements (for non-employee owner-operators) or trip advances to
personal bank accounts. In 2002, Comdata processed approximately 82.1 million
funds transfer transactions involving approximately $13.0 billion for the
transportation industry.

Use of the Comdata card allows the trucking company customer greater
control over its expenses by allowing it to set limits on the use of the cards,
such as by designating locations where the cards may be used, the frequency
with which they may be used, phone numbers which may be called and the amount
of authorized use. Use of a Comdata card also enables Comdata to capture and
provide transaction and trip-related information to trucking company customers
(usually within 24 hours after the completion of a given trip). This
information greatly enhances a customers ability to track and plan fuel
purchases and other trip expenses and settle with drivers. Comdata also
provides trucking companies with a Windows-based software application that
provides trucking companies with on-line access to Comdatas computer system
for data on fuel purchases and other trip information, and facilitates pre- and
post-trip planning functions. Comdatas iConnectData and MOTRS (Modular Over
The Road System) Web-based applications enable customers to go on-line for
local dial-up access, interactive reporting capabilities, the latest diesel
fuel prices and related information from their desktop.

Use of a Comdata card, in many instances, generates a Comchek draft, which
is payable through a Comdata bank account. Comdata funds the underlying
transaction when the truck stop (or other payee) negotiates the draft by
depositing it in its bank account. Comdata bills the trucking company for the
amount of the draft plus a portion of the service fee, and collects from

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the truck stop the balance of the service fee. The trucking company
remits payment to Comdata by wire transfer or check, typically within six days,
although Comdata may bill trucking companies in advance for all funds transfers
authorized for any purpose in connection with a particular trip. Risks
associated with fraudulent or unauthorized transactions are allocated between
Comdata and its customers based upon which party may be at fault under a
specific circumstance and based upon which party is in the better position to
control or eliminate these types of transactions. Comdata believes that
historically the number of fraudulent or unauthorized transactions has been
minimal compared to the aggregate dollar amount of funds Comdata has
transferred annually. Comdata is licensed by 39 states as a seller of checks or
money transmitter and, pursuant to these licenses, undergoes annual
examinations by several states with respect to the integrity of its funds
transfer methods and procedures.

Approximately 12 percent of Comdatas funds transfer revenue is derived
from transactions that do not involve the Comdata card. When a truck driver
makes a request at a truck stop for a funds transfer, Comdata verifies that the
drivers company has established sufficient credit. Upon presentation of valid
identification, the truck stop obtains an authorization number from Comdata and
issues a Comchek draft. Comdata also provides information gathering and
processing services in connection with fueling transactions that Comdata does
not fund, but instead are billed directly by the truck stop to the trucking
company. Fees for these direct bill transactions are substantially lower.
Comdata also provides fuel price tracking reports and management within a
network of truck stops, including cost/plus fuel purchase programs.

Comdatas regulatory compliance division determines the permits needed for
a designated trip, truck and load; purchases those permits on behalf of the
customer; and delivers them by facsimile machine to a truck stop where they can
be picked up by the driver. Comdata also provides regulatory compliance
services, such as processing and auditing of driver trip logs, reporting of
fuel taxes, annual licensing and motor vehicle registration verification.
Vehicle escort services for oversized loads are also provided.

Truck Stop Services.Comdata maintains a nationwide electronic data
network with 24-hour independent truck stop service centers that utilize
point-of-sale devices and other computer equipment to facilitate communication
with Comdatas database and operations centers. The service centers act as
Comdatas agents pursuant to a service center agreement, and typically also
offer the funds transfer services of other companies.

Comdatas merchant services division provides fueling centers with
PC-based, point of sale systems that automate the various transactions that
occur at a fuel purchase desk, systems which enable customers to transact
card-based fuel purchases at the fuel pump, UPC scanning devices and truck stop
management software. These systems accept many types of fuel purchase cards
currently used by drivers.

Local Fueling.Comdata is a provider of fuel management and payment
systems for local transportation fleets. Comdata provides local fleet
operators with Comchek MasterCard

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fleet cards that offer the fleet operators transaction control and
trip-related information gathering features similar to those of the Comdata
card.

Retail Services.SVS provides, among other services, debit card programs
to major retailers that are used as gift cards, gift certificates, credits for
returned product and retail promotions. SVS believes that its cards,
transaction reliability, card maintenance/inventory programs and reporting
capability provide benefits to retailers and their customers, including ease of
use and controls previously difficult to realize. Card programs and other
services available through SVS may potentially have benefits in e-commerce,
facilitating transactions between on-line merchants and their customers.

Comchek eCash is a card-based service allowing employers to post or load
payment of wages and other payments, such as expense reimbursements, to Comchek
cards issued to employees and other recipients. Cardholders, in turn, may
access these funds in a number of ways, including withdrawal of cash from ATMs,
point-of-sale purchases at stores or issuance of a Comdata negotiable draft.
Long distance telephone service is also available through the card.

Sales and Marketing

Comdata markets its card-based financial and data management services to
several industries, the largest of which is the transportation industry.
Comdata markets its services to the transportation industry through a direct
sales force domiciled at its headquarters in Brentwood, Tennessee, and
operating throughout the United States and Canada. Comdata provides services
to more than 18,000 over-the-road and local trucking fleets with approximately
750,000 active fuel cards. Comdata also provides services to more than 8,000
truck stops, travel centers and repair facilities nationwide. Contracts
generally range from one to three years in duration.

Through SVS, Comdata markets its private label cash cards, electronic
payroll cards and ancillary services through a direct sales force located in
Louisville, Kentucky and operating throughout the country. SVS has recently
begun sales and marketing efforts in Canada and Europe, most notably in the
United Kingdom. SVS has contracts with approximately 130 retailers and oil
companies to provide cash cards and/or payroll services. These contracts are
generally three years in duration.

Competition

The principal competitive factors relevant to funds transfers are
marketing efforts, pricing, reliability of computer and communications systems
and time required to effect transactions. The major credit and debit card
associations and companies, such as Visa, MasterCard, American Express and
Discover, are significant competitors of Comdata in that they make cash
available to, and facilitate purchases of fuel and other products by, holders
of their cards on a nationwide basis. Several other companies also offer
similar funds transfer services, including Concord EFS, Inc., T-Chek Systems,
Inc., TransPlatinum Service Corp., and Wright Express LLC. In addition, truck
stops often negotiate directly with trucking companies for a direct billing
relationship. Some of Comdatas competitors, such as TCH, LLC, an affiliate of

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Flying J, Inc., are under common ownership with entities that operate or
franchise nationwide truck stop chains. In addition, Comdata competes with
service centers, such as truck stops, that offer similar products and services.
Comdata also faces increasing competition in the funds transfer area from ATMs
that participate in national networks.

While the majority of regulatory services continue to be performed
in-house, at least one other nationwide company, Xerofax, Inc., and several
regional companies, including The Permit Company, provide permit services
similar to those provided by Comdata. Competition in this market is influenced
by price, the expertise of personnel and the ease with which permits may be
ordered and received. In addition, Comdata believes that technological
advances, such as the Internet, will impact the way regulatory services are
delivered. These advances may give rise to new competitors or change the way
this service is offered.

Comdata believes that one of its competitive weaknesses is that its
information technology infrastructure is, in many instances, a mainframe based,
legacy system built over many years. This legacy system makes innovation
cumbersome. Many of Comdatas competitors are either web-born or
web-enabled and, thus, able to take better advantage of transaction and
information delivery available through the Internet and information technology
systems architectures which are more open than that of Comdatas. Another one
of Comdatas competitive weaknesses is that unlike competitors with a brand
relationship with a credit card association, such as Visa and MasterCard,
Comdatas proprietary card does not possess ubiquitous acceptance. Finally,
some of Comdatas competitors possess greater financial and other resources
than Comdata.

Comdata believes that its competitive strengths include its:



| |  |  | ability to provide services to trucking companies and drivers
at a large number of locations in the continental United States and
Canada;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | ability to offer a variety of services, frequently tailored
to an individual customers needs;                                           
|
| |  |  | proprietary databases regarding funds transfers and fuel purchases;                                                                      
|
| |  |  | long-term relationships in the transportation industry;                                                                                  
|
| |  |  | high quality of customer service;                                                                                                        
|
| |  |  | product design innovation; and                                                                                                           
|
| |  |  | long-time reputation in the transportation industry.                                                                                     

Comdatas retail services division (which includes SVS) competes with a
number of national companies in providing private label cards, including
ValueLink, a subsidiary of First Data Corporation. Comdatas retail services
division competes on the bases of breadth of services offered, systems,
technology and price. Comdata believes that one of the competitive weaknesses
of its retail services division is that most of its competitors have
established relationships with many of the potential customers of Comdatas
retail services division because these competitors provide additional and
unrelated products and services to these customers,

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such as credit card processing and check authorization services. By
providing these other services which Comdatas retail services division does
not provide, these competitors have an advantage of being able to bundle their
products and services together and present them to existing customers with whom
they have established relationships. Another competitive weakness of Comdatas
retail services division is that their competitors have greater financial,
sales and marketing resources and better brand name recognition than Comdatas
retail services division.

Comdata believes the competitive strengths of Comdatas retail services
division are:



| |  |  | leading edge information and communications systems which
provide real-time connectivity with retailers existing platforms;                           
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | breadth of solutions offered; and                                                                                                                      
|
| |  |  | experience in transaction processing and related services
providing for high quality control and reduced time of
implementation of cash card solutions.

Network and Data Processing Operations

Comdatas principal communications center for its funds transfer business
is located near its headquarters in Brentwood, Tennessee, with a secondary
center located in suburban Dallas, Texas and an SVS facility in Louisville,
Kentucky. Comdata receives telecommunications services from MCI WORLDCOM
Network Services, Inc. and Sprint Corporation. Substantially all of Comdatas
internal data processing functions for its transportation business, including
its payment processing systems, are conducted in a facility located near
Nashville, Tennessee, with SVS operating a data processing facility for its
business in Louisville, Kentucky.

Regulation

Many states require persons engaged in the business of selling or issuing
payment instruments, such as the Comchek draft, or in the business of
transmitting funds to obtain a license from the appropriate state agency. In
some states, Comdata is required to post bonds or other collateral to secure
its obligations to its customers in those states. Comdata believes that it is
currently in compliance in all material respects with the regulatory
requirements applicable to its business. The failure to comply with the
requirements of any particular state could significantly harm Comdatas
business in that state.

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Research and Development

Comdatas research and development activities principally include
applications development to enhance existing products and services, and the new
product development around the BusinessLink initiative. Comdata anticipates a
continuing need to develop applications to enhance its products and services to
meet the needs of its customers. Further, Comdata expects to develop
applications to bring additional features to its products and services, thus
enhancing their use in new segments and industries.

The table below reflects the amount of research and development expenses
for Comdata for the periods indicated.

|                              |  |                          |     |      |  |      |     |   |  |   |     |  
|----------------------------- |  | ------------------------ | --- | ---- |  | ---- | --- | - |  | - | --- | -
|                              |  | Years Ended December 31,
|                              |  |                         
|                              |  | 2002                     |     | 2001 |  | 2000
|                              |  |                          |     |      |  |     
|                              |  | (dollars in millions)   
|Research and development      |  | $                        | 2.4 |      |  | $    | 4.4 |   |  | $ | 8.0 |  
|Percent of revenue (restated) |  |                          | 0.8 | %    |  |      | 1.4 | % |  |   | 2.7 | %

The decrease in the amount of research and development expense in 2002 and 2001
was due largely to development cost savings resulting from the termination of
an outsourced transaction processing contract.

Additional Financial Information About Segments

We refer you to Note E, Segment Data,to our consolidated financial
statements for additional financial information about our business segments.
This information may be found in Part II, Item 8 of this report.

Other Investments and Divestitures

In addition to the spin-off transaction described previously under the
heading General, we refer you to Note G, Investing Activity,to our
consolidated financial statements for further information on our investing and
divesting activities. This information may be found in Part II, Item 8 of this
report.

Intellectual Property

We own or license a number of trademarks, tradenames, copyrights, service
marks, trade secrets and other intellectual property rights that relate to our
products and services, including several mentioned in this report. Although we
believe that these intellectual property rights are, in the aggregate, of
material importance to our businesses, we believe that none of our businesses
is materially dependent upon any particular trademark, tradename, copyright,
service mark, license or other intellectual property right. We believe,
however, that the Ceridian and Comdata names, marks and logos are of
material importance to us.

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We have entered into confidentiality agreements with most of our employees
and consultants. In addition, we have entered into license agreements with
customers of our businesses, which agreements impose restrictions on these
customers use of our proprietary software and other intellectual property
rights.

Employees

As of March 1, 2003, we employed approximately 9,411 people on a full- or
part-time basis, including 7,187 full-time and 533 part-time employees of HRS
and 1,496 full-time and 102 part-time employees of Comdata. None of our
employees is covered by a collective bargaining agreement.

Backlog

Although our businesses are typically characterized by long-term customer
relationships that result in a high level of recurring revenue, a substantial
portion of our customer contracts used by our businesses are terminable by our
customers upon relatively short notice periods, including contracts that have
been extended beyond their original terms. In addition, orders for products
and services are terminable by our customers, and no order for one of our
products or services is considered firm until it is delivered or installed and
begins producing revenue. The timing of the delivery or installation of our
products and services is largely dependent upon the customer. As such, we do
not believe that meaningful backlog information can be provided for our
businesses.

Available Information

Our Internet website is http://www.ceridian.com and you may access, free
of charge, through the Investor Relations portion of our website, our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and amendments to such reports filed or furnished pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as
reasonably practicable after we electronically file such material with, or
furnish it to, the SEC. We also post other documents containing a substantial
amount of information about us on this site. In the future, we anticipate
disclosing various information relating to our corporate governance policies
and practices, charters of our committees, codes of conduct and other corporate
governance matters as is required by the Sarbanes-Oxley Act of 2002 and the
rules and regulations of the SEC and The New York Stock Exchange. Our Internet
website and the information contained on or connected to the website are not
intended to be incorporated by reference into this report.




Item 1A. Executive Officers of the Registrant

The following provides information on our executive officers as of March
1, 2003:

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|                       |  |                                                                                                                                     
|---------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------
|Name (Age)             |  | Current Position                                                                                                                    
|                       |  |                                                                                                                                     
|Ronald L. Turner (56)  |  | Chairman, President and Chief Executive Officer                                                                                     
|                       |  |                                                                                                                                     
|John R. Eickhoff (62)  |  | Executive Vice President and Chief Financial Officer                                                                                
|                       |  |                                                                                                                                     
|Loren D. Gross (57)    |  | Vice President and Corporate Controller                                                                                             
|                       |  |                                                                                                                                     
|Shirley J. Hughes (57) |  | Senior Vice President of Human Resources                                                                                            
|                       |  |                                                                                                                                     
|Gary A. Krow (48)      |  | Executive Vice President and President of Comdata                                                                                   
|                       |  |                                                                                                                                     
|Gary M. Nelson (51)    |  | Executive Vice President, General Counsel and Corporate Secretary                                                                   
|                       |  |                                                                                                                                     
|Bruce J. Thew (44)     |  | Executive Vice President; President, Ceridian
International Human Resource Services; and Group
Managing Director, Centrefile Limited

Our executive officers are annually elected by our Board of Directors and
serve at the pleasure of the Board of Directors and the Chief Executive
Officer. There are no immediate family relationships between or among any of
our executive officers.

Upon the completion of our spin-off from Ceridians predecessor on March
31, 2001, each of our executive officers resigned from Ceridians predecessor
and was thereafter reappointed to the equivalent position within Ceridian. Our
executive officers have held the following positions with Ceridian, Ceridians
predecessor and certain other entities since March 1998:

Ronald L. Turner has served as a director since July 1998; Chairman since
May 2000; Chief Executive Officer since January 2000; and President since April
1998. Mr. Turner was Chief Operating Officer from April 1998 to January 2000;
and Executive Vice President of Operations from March 1997 to April 1998.

John R. Eickhoff has served as Executive Vice President and Chief
Financial Officer since January 25, 2000. Mr. Eickhoff was Executive Vice
President of Strategic Development from January 3, 2000 to January 25, 2000;
and Executive Vice President and Chief Financial Officer from May 1995 to
January 2000.

Loren D. Gross has served as Vice President and Corporate Controller since
July 1993.

Shirley J. Hughes has served as Senior Vice President of Human Resources
since June 1998. Ms. Hughes was Vice President of Human Resources of Mercy
Health Services, a non-profit integrated health care delivery system currently
named Trinity Health Services, from October 1994 to June 1998.

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Gary A. Krow has served as Executive Vice President and President of our
Comdata subsidiary since November 1999. Mr. Krow was Executive Vice President
and Chief Operating Officer of Comdata from January 1999 until November 1999;
and Executive Vice President, Transportation Services, of Comdata from January
1997 until December 1998.

Gary M. Nelson has served as Executive Vice President since October 2001;
General Counsel since July 1997; and Corporate Secretary since October 1998.
Mr. Nelson was Vice President from July 1997 until October 2001.

Bruce J. Thew has served as Executive Vice President and President,
Ceridian International Human Resource Services since July 2002. Mr. Thew has
served as Group Managing Director, Centrefile Limited since 1997.




Item 2. Properties

Our principal executive offices are located at 3311 East Old Shakopee
Road, Minneapolis, Minnesota 55425. As of March 1, 2003, the principal
computer and office facilities used in our businesses were located in the
metropolitan areas of Minneapolis, Minnesota; Atlanta, Georgia; Los Angeles,
California; Chicago, Illinois; East Hanover, New Jersey; Louisville, Kentucky;
Nashville, Tennessee; Dallas, Texas; Boston, Massachusetts; St. Petersburg,
Florida; Philadelphia, Pennsylvania; Manitoba, Ontario, and Quebec, Canada; and
London, England.

The following table summarizes the usage and location of our facilities as
of March 1, 2003:

Facilities
(in thousands of square feet)

|                                |       |  |       |       |          |  |       |     |  |  |       |       | 
|------------------------------- | ----- |  | ----- | ----- | -------- |  | ----- | --- |  |  | ----- | ----- | 
|                                |       |  | U.S.  |       | Non-U.S. |  | Total
|                                |       |  |       |       |          |  |      
|Type of Property Interest       |       |  |       |       |          |  |       |     |  |  |       |      
|Owned                           |       |  | 393   |       |          |  |      |     |  |  | 393   |      
|Leased                          |       |  | 2,024 |       |          |  | 389   |     |  |  | 2,413 |      
|                                |       |  |       |       |          |  |       |     |  |  |       |      
|                                | Total |  |       | 2,417 |          |  |       | 389 |  |  |       | 2,806 | 
|Property Interest by Segment    |       |  |       |       |          |  |       |     |  |  |       |      
|HRS                             |       |  | 1,583 |       |          |  | 375   |     |  |  | 1,958 |      
|Comdata                         |       |  | 447   |       |          |  | 14    |     |  |  | 461   |      
|Corporate                       |       |  | 387   |       |          |  |      |     |  |  | 387   |      
|                                |       |  |       |       |          |  |       |     |  |  |       |      
|                                | Total |  |       | 2,417 |          |  |       | 389 |  |  |       | 2,806 | 
|Utilization of Property         |       |  |       |       |          |  |       |     |  |  |       |      
|Office, Computer Center & Other |       |  | 2,217 |       |          |  | 389   |     |  |  | 2,606 |      
|Leased or Subleased to Others   |       |  | 200   |       |          |  |      |     |  |  | 200   |      
|                                |       |  |       |       |          |  |       |     |  |  |       |      
|                                | Total |  |       | 2,417 |          |  |       | 389 |  |  |       | 2,806 | 

We conduct a substantial portion of our operations in leased facilities,
including our 207,000 square feet Minneapolis headquarters complex in
Minneapolis, Minnesota. Most of

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these leases contain renewal options and require payment for taxes,
insurance and maintenance. Space subject to assigned leases is not included in
the table above, and we remain secondarily liable under all of those leases.
As of March 1, 2003, the assigned leases consisted of 45,483 square feet of
space and future rental obligations totaled $1.3 million. We do not anticipate
any material non-performance by the assignees of those leases.

Our owned facility in St. Petersburg, Florida is not subject to any major
encumbrances. We believe that our facilities are adequate for their intended
purposes, are adequately maintained and are reasonably necessary for current
and anticipated output levels of those businesses.




Item 3. Legal Proceedings

Ceridian and its subsidiaries are involved in a number of judicial and
administrative proceedings considered normal in the nature of our current and
past operations, including employment-related disputes, contract disputes,
government proceedings, customer disputes, and tort claims. In some
proceedings, the claimant seeks damages as well as other relief, which, if
granted, would require substantial expenditures on our part.

Some of these matters raise difficult and complex factual and legal
issues, and are subject to many uncertainties, including the facts and
circumstances of each particular action, and the jurisdiction, forum and law
under which each action is proceeding. Because of this complexity, final
disposition of some of these proceedings may not occur for several years. As
such, we are not always able to estimate the amount of our possible future
liabilities. There can be no certainty that we may not ultimately incur
charges in excess of presently or future established financial accruals or
insurance coverage. Although occasional adverse decisions (or settlements) may
occur, it is managements opinion that the final disposition of these
proceedings will not, considering the merits of the claims and available
reserves, have a material adverse effect on our financial position or results
of operations.




Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of our stockholders during the fourth
quarter of 2002.

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PART II




Item 5. Market For Registrants Common Equity and Related Stockholder Matters

Our common stock is listed and trades on The New York Stock Exchange under
the symbol CEN. The number of holders of record of our common stock on March
1, 2003 was 11,280. We have not declared or paid any cash dividends on our
common stock since our inception, and our board of directors presently intends
to retain all earnings for use in the business for the foreseeable future. The
transfer agent and registrar for our common stock is the Bank of New York.

The following table sets forth the high and low sale prices of our common
stock as reported on the NYSE Composite Tape for each quarterly period since
the spin-off and ending December 31, 2002.

|     |  |    |       |    |  |    |       |    |  |   |       |  |  |   |       | 
|---- |  | -- | ----- | -- |  | -- | ----- | -- |  | - | ----- |  |  | - | ----- | 
|2002 |  | 1Q |       | 2Q |  | 3Q |       | 4Q
|     |  |    |       |    |  |    |       |   
|High |  | $  | 22.50 |    |  | $  | 23.05 |    |  | $ | 19.02 |  |  | $ | 16.26 | 
|Low  |  | $  | 17.00 |    |  | $  | 18.05 |    |  | $ | 13.10 |  |  | $ | 11.40 | 

|     |  |  |  |    |  |    |       |    |  |   |       |  |  |   |       | 
|---- |  |  |  | -- |  | -- | ----- | -- |  | - | ----- |  |  | - | ----- | 
|2001 |  |  |  | 2Q |  | 3Q |       | 4Q
|     |  |  |  |    |  |    |       |   
|High |  |  |  |    |  | $  | 20.55 |    |  | $ | 19.95 |  |  | $ | 19.43 | 
|Low  |  |  |  |    |  |    | 13.99 |    |  |   | 13.65 |  |  |   | 13.90 | 

For informational purposes, the high and low sales price of Ceridians
predecessors common stock as reported on the NYSE Composite Tape for the
quarterly period beginning on January 1, 2001 and ending at the time of the
spin-off was $21.85 and $14.00, respectively.

23



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Item 6. Selected Financial Data

|                                                        |                                     |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |         |   |      | 
|------------------------------------------------------- | ----------------------------------- | - | --------------------- | ------- | ---------- | ---- | ---------- | ------- | -------------------------------------------- | ---- | ------- | ------- | ---- | ---- | ------- | ------- | - | ---- | ------- | ------- | - | ---- | 
|                                                        |                                     |   |                       |         |            |      |            |         | (Dollars in millions, except per share data) |      |         |         |     
|                                                        |                                     |   |                       |         | 2002       |      | 2001       |         | 2000                                         |      | 1999    |         | 1998
|                                                        |                                     |   |                       |         |            |      |            |         |                                              |      |         |         |     
|                                                        |                                     |   |                       |         | (restated) |      | (restated) |         | (restated)                                   |      |         |         |      |      |         |         |  
|Revenue (1)                                             |                                     | $ | 1,191.0               |         |            | $    | 1,179.0    |         |                                              | $    | 1,174.8 |         |      | $    | 1,127.0 |         |   | $    | 967.6   |        
|                                                        |                                     |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |        
|Earnings from continuing operations (2)                 |                                     | $ | 92.1                  |         |            | $    | 46.9       |         |                                              | $    | 76.6    |         |      | $    | 104.4   |         |   | $    | 125.3   |        
|Discontinued operations                                 |                                     |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |        
|                                                        | Arbitron (3)                        |   |                       |        |            |      |            | 5.2     |                                              |      |         | 20.7    |      |      |         | 40.9    |   |      |         | 36.6    |  
|                                                        | Computing Devices International (4) |   |                       |        |            |      |            |        |                                              |      |         |        |      |      |         |        |   |      |         | 25.4    |  
|                                                        |                                     |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |        
|                                                        |                                     |   | Total                 |         |            |     |            |         |                                              | 5.2  |         |         |      | 20.7 |         |         |   | 40.9 |         |         |   | 62.0 | 
|                                                        |                                     |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |        
|Net earnings                                            |                                     | $ | 92.1                  |         |            | $    | 52.1       |         |                                              | $    | 97.3    |         |      | $    | 145.3   |         |   | $    | 187.3   |        
|                                                        |                                     |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |        
|Earnings Per Common Share                               |                                     |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |        
|                                                        | Basic                               |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |         |  
|                                                        |                                     |   | Continuing operations |         | $          | 0.62 |            |         | $                                            | 0.32 |         |         | $    | 0.53 |         |         | $ | 0.72 |         |         | $ | 0.87 | 
|                                                        |                                     |   | Net earnings          |         | $          | 0.62 |            |         | $                                            | 0.36 |         |         | $    | 0.67 |         |         | $ | 1.01 |         |         | $ | 1.30 | 
|                                                        | Diluted                             |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |         |  
|                                                        |                                     |   | Continuing operations |         | $          | 0.61 |            |         | $                                            | 0.32 |         |         | $    | 0.52 |         |         | $ | 0.71 |         |         | $ | 0.85 | 
|                                                        |                                     |   | Net earnings          |         | $          | 0.61 |            |         | $                                            | 0.35 |         |         | $    | 0.66 |         |         | $ | 0.98 |         |         | $ | 1.27 | 
|Shares used in calculations (in thousands)              |                                     |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |        
|                                                        | Basic                               |   |                       | 148,029 |            |      |            | 146,069 |                                              |      |         | 145,229 |      |      |         | 144,524 |   |      |         | 144,070 |  
|                                                        | Diluted                             |   |                       | 150,562 |            |      |            | 148,596 |                                              |      |         | 146,734 |      |      |         | 147,964 |   |      |         | 147,597 |  
|                                                        |                                     |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |        
|Balance Sheet Data                                      |                                     |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |        
|Working capital                                         |                                     | $ | 249.3                 |         |            | $    | 189.6      |         |                                              | $    | 236.9   |         |      | $    | 174.7   |         |   | $    | 186.9   |        
|Total assets before customer funds                      |                                     | $ | 2,030.0               |         |            | $    | 1,878.5    |         |                                              | $    | 2,056.8 |         |      | $    | 1,954.8 |         |   | $    | 1,216.9 |        
|Customer funds                                          |                                     | $ | 2,440.9               |         |            | $    | 2,170.9    |         |                                              | $    | 2,980.4 |         |      | $    | 2,305.4 |         |   | $    | 2,705.0 |        
|Total assets                                            |                                     | $ | 4,470.9               |         |            | $    | 4,049.4    |         |                                              | $    | 5,037.2 |         |      | $    | 4,260.2 |         |   | $    | 3,921.9 |        
|Debt obligations                                        |                                     | $ | 193.5                 |         |            | $    | 237.9      |         |                                              | $    | 500.6   |         |      | $    | 611.3   |         |   | $    | 54.5    |        
|Stockholders equity                                    |                                     | $ | 1,119.7               |         |            | $    | 1,055.6    |         |                                              | $    | 933.3   |         |      | $    | 812.2   |         |   | $    | 623.7   |        
|                                                        |                                     |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |        
|Equity Per Common Share                                 |                                     | $ | 7.54                  |         |            | $    | 7.21       |         |                                              | $    | 6.40    |         |      | $    | 5.61    |         |   | $    | 4.35    |        
|Common shares outstanding at end of
year (in thousands) |                                     |   | 148,541               |         |            |      | 146,485    |         |                                              |      | 145,754 |         |      |      | 144,734 |         |   |      | 143,514 |        
|                                                        |                                     |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |        
|Number of Employees at End of Year (5)                  |                                     |   | 9,400                 |         |            |      | 9,500      |         |                                              |      | 9,700   |         |      |      | 9,500   |         |   |      | 8,200   |        
|                                                        |                                     |   |                       |         |            |      |            |         |                                              |      |         |         |      |      |         |         |   |      |         |        



|(1) |  | For a description of the  restatement due to a change in our revenue recognition policy for Comdatas Stored Value Systems stored value card sales and processing, see Note B, Restatement of Financial Statements, to the consolidated financial statements contained in this report.  A change in the classification of customer freight billings and costs is described in Note A to the consolidated
financial statements under the heading Changes in Presentation.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Earnings from continuing operations include unusual losses of $34.8 ($22.2 after-tax) in 2002, $48.3 ($31.7 after-tax)
in 2001, and $30.5 ($18.7 after-tax) in 2000. Earnings from continuing operations for 1998 included unusual gains
of $27.7 ($24.3 after-tax). The unusual losses in 2002, 2001 and 2000 and the recovery in 2000 of a portion of
an amount accrued for exit costs in 1997 are further described in Note D to the consolidated financial statements.  
|   
|(3) |  | Includes earnings, net of costs related to the Arbitron spin-off, as further described in Note D, Supplementary Data to Statements of Operations, to the consolidated financial
statements contained in this report.                                                                                                                                                                                                                                                      
|   
|(4) |  | Represents an adjustment to the gain from the December 1997 sale of Computing Devices International.                                                                                                                                                                                                                                                                                                                                                                        
|   
|(5) |  | Continuing operations only.                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our
consolidated financial statements and the notes related to those consolidated
financial statements contained in Part II, Item 8 of this report. This
discussion reflects the impact of restatements to our previously reported
consolidated financial statements as of December 31, 2002 and 2001 and for each
of the years in the three-year period ended December 31, 2002 as described in
Note B, Restatement of Financial Statements, to our consolidated financial
statements contained in this report.

Overview

Ceridian Corporation provides human resource solutions to employers
through our HRS business segment operations in the United States, Canada and
the United Kingdom. We also provide transaction processing and related
services primarily to the transportation and retail industries through our
Comdata business segment operations in the United States. Our businesses are
more fully described in Part I, Item 1 of this report and in a note to our
consolidated financial statements entitled Segment Data.

This discussion presents our views on our earnings and cash flow
performance over the most recent three-year period and our financial condition
at the end of the two most recent years in the following manner:



| |  |  | We address our earnings performance in a section entitled
Results of Operations, which includes comparisons of 2002 to
2001 and 2001 to 2000 for the whole company as well as for our HRS
and Comdata business segments. Transactions affecting earnings
that we consider unusual or nonrecurring are discussed in a
subsection entitled Unusual Items.                                                                                                                      
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | We discuss our financial condition and cash flow
performance in a following section entitled Financial Condition.
There we describe the impact on our cash balances of our
operating, investing and financing activities. In a subsection
entitled Liquidity and Capital Resources, we also discuss our
plans for funding future major expenditures and any financial
commitments, including those that are not reported in our balance
sheet under current accounting rules.
|
| |  |  | We conclude our discussion by describing what we believe
to be the most critical accounting policies in determining our
financial condition and results of operations and the most
significant risks and uncertainties facing our businesses.                                                                                                                                                                                                                                    

The period covered by this discussion featured a number of events or
arrangements that had or will have a significant effect on our financial
condition and performance. You will find the following matters described in
this discussion or through a reference to the notes to our consolidated
financial statements.

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| |  |  | The Arbitron spin-off: On March 30, 2001, we separated
our HRS division and subsidiaries and Comdata subsidiaries from
our former media information business, Arbitron, to form two
independent, publicly-traded companies. Due to the beneficial use
of a reverse spin-off approach, we briefly became New Ceridian
Corporation before resuming the use of the name of Ceridian
Corporation. Because of the greater size of HRS and Comdata
businesses compared to the Arbitron business at the time of the
spin-off, we are considered to be the divesting entity and are
treated as the accounting successor for financial reporting
purposes. Therefore, we present Arbitron as a discontinued
operation in the accompanying consolidated financial statements of
Ceridian. We discuss this event in a note to our consolidated
financial statements entitled Supplementary Data to Statements of
Operations under the heading Discontinued Operations.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | A new rule on goodwill accounting: Beginning in 2002,
goodwill is no longer amortized as a charge against earnings over
a specific period of time. Instead, the value of recorded
goodwill is reassessed annually and written down against earnings
when impairment is evident. Since this accounting rule does not
permit restatement of prior periods in the financial statements,
this change results in a lack of comparability between the
earnings results in 2002 and those for 2001 and 2000. You will
see in this discussion that we have eliminated goodwill
amortization expense for 2001 and 2000 in the consolidated and
segment earnings performance tables and the related discussion in
order to improve comparability. We also discuss this event in a
note to our consolidated financial statements entitled Accounting
Policies under the heading Goodwill and Other Intangibles.                                                         
|
| |  |  | Unusual or nonrecurring gains and losses: During the past
three years, we have recorded a variety of gains and losses that
are not expected to regularly occur in our normal operations.
These include the results of securities sales, exit activities
related to consolidation of operations, settlements of litigation,
contract terminations and asset write-downs. The net results of
these transactions were losses of $34.8 million in 2002, $48.3
million in 2001 and $30.5 million in 2000. You will find these
matters discussed in a subsection of this discussion entitled
Unusual Items.                                                                                                                                                                                                                                                                                                                                                          
|
| |  |  | Our software development arrangement with Ultimate
Software: We contracted with The Ultimate Software Group, Inc. in
2001 to obtain a license to use their software as part of a
Web-enabled integrated payroll/HR/self-service offering to small
business customers. This arrangement involved up front payments
of $10.0 million in 2001 and $6.5 million in 2002 and a commitment
for additional minimum monthly payments beginning with January
2004 totaling $26.7 million over the remaining noncancelable term
of the contract to March 2008. As of December 31, 2002, we have
capitalized $13.6 million of additional costs to prepare the
resulting product offering for release in early 2003. Effective
January 1, 2003, we also entered into an agreement with Ultimate
for extended technical support that requires quarterly payments
during 2003 totaling $2.3 million. We                                                                        

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| |   |  | discuss this development in the Liquidity and Capital Resources
subsection of this discussion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Our principal defined benefit pension plan: As is the
case with the defined benefit pension plans of many companies,
recent declines in equity securities market values and in interest
rates have resulted in turning a plan that had been over-funded
for many years into an under-funded plan. This change in funded
status required that the former pension asset be reclassified as a
combined reduction of our equity and an increase in our
liabilities. In addition, we anticipate that there will be a
negative effect on our pre-tax earnings in 2003 of about $15
million compared to 2002 and a prospect that we will begin to make
cash contributions before the end of 2003. We discuss our pension
plans in a note to our consolidated financial statements entitled
Retirement Plans.                                                                                                                                                                                                                                                              
|
| |  |  | Invested customer funds and interest rate collars or
swaps: We receive earnings from investment of customer funds held
temporarily for remittance to taxing authorities, customer
employees and others and record these amounts as revenue in lieu
of fees for services performed. A substantial portion of these
invested funds are subject to short-term interest rate risk. We
manage this risk in part by the use of interest rate contracts
that establish ceiling and floor interest rates for a sizeable
portion of our annual average short-term investment portfolio. In
recent periods, these contracts have preserved a significant
amount of revenue and cash flows. We describe this strategy and
its results within this discussion as well as in notes to our
consolidated financial statements entitled Commitments and
Contingencies and Accounting Policies under the heading Cash
and Investments, including Derivatives and in Part II, Item 7A,
Quantitative and Qualitative Disclosures about Market Risk that
follows this discussion.

Results of Operations

Comparison of Annual Periods Ended December 31, 2002, 2001 and 2000

Consolidated Statements of Operations Highlights As Reported (Restated)
(Dollars in millions, except per share data)

|                                                                   |  |                          |         |      |  |      |         |  |  |   |         | 
|------------------------------------------------------------------ |  | ------------------------ | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                                                   |  | Years ended December 31,
|                                                                   |  |                         
|                                                                   |  | 2002                     |         | 2001 |  | 2000
|                                                                   |  |                          |         |      |  |     
|Revenue                                                            |  | $                        | 1,191.0 |      |  | $    | 1,179.0 |  |  | $ | 1,174.8 | 
|Net earnings                                                       |  | $                        | 92.1    |      |  | $    | 52.1    |  |  | $ | 97.3    | 
|Earnings from continuing operations                                |  | $                        | 92.1    |      |  | $    | 46.9    |  |  | $ | 76.6    | 
|Earnings and gain/loss from disposition of discontinued
operations |  | $                        |        |      |  | $    | 5.2     |  |  | $ | 20.7    | 
|Diluted shares used in calculations (in thousands)                 |  |                          | 150,562 |      |  |      | 148,596 |  |  |   | 146,734 | 
|Net earnings per diluted share                                     |  | $                        | 0.61    |      |  | $    | 0.35    |  |  | $ | 0.66    | 
|Earnings from continuing operations per diluted share              |  | $                        | 0.61    |      |  | $    | 0.32    |  |  | $ | 0.52    | 

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##### Table of Contents



Revenue for 2002 of $1,191.0 million showed an increase of $12.0 million
over the comparable 2001 amount. Changes to this presentation are further
discussed in a note to our consolidated financial statements entitled
Accounting Policies under the heading Changes in Presentation. Earnings
from continuing operations increased from $46.9 million, or 32¢ per diluted
share, in 2001 to $92.1 million, or 61¢ per diluted share, in 2002. If we
eliminate goodwill amortization and related income taxes from the 2001 amounts
to compare with the 2002 treatment, earnings from continuing operations for
2001 would have been $77.2 million, or 52¢ per diluted share. The earnings and
gain/loss from discontinued operations included in net earnings in 2001 and
2000 related to Arbitron.

Revenue for 2001 of $1,179.0 million was up $4.2 million over 2000.
Earnings from continuing operations in 2001 of $46.9 million, or 32¢ per
diluted share, were down $29.7 million from $76.6 million, or 52¢ per diluted
share, for 2000. If we eliminate goodwill amortization and related income
taxes from the 2000 amount, as we have done in the 2002 and 2001 comparison,
earnings from continuing operations for 2000 would have been $106.2 million, or
72¢ per diluted share.

Operational and economic factors affecting these results are further
discussed in the annual comparisons sections entitled Consolidated Results 
Overview and Business Segment Results that appear later in this discussion.

In the following tables and text, we use certain abbreviations described
below:



| |  |  | SG&A expense represents selling, general and administrative expense                                                             
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | R&D expense represents research and development expense                                                                         
|
| |  |  | EBIT represents earnings before interest and taxes                                                                              
|
| |  |  | Other relates to the results of our corporate center
operations that were not allocated to our HRS and Comdata business
segments
|
| |  |  | NM represents percentage relationships in the tables that are not meaningful                                                    
|
| |  |  | UK represents the United Kingdom                                                                                                
|
| |  |  | U.S. represents the United States                                                                                               

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##### Table of Contents



2002 Compared to 2001

Statements of Operations Comparisons (Restated)
(Dollars in millions, except per share data)

|                                        |  |        |         |            |  |              |         |   |  |          |       |      |  |  |       |   |  |    |       |    |  |  |       |  
|--------------------------------------- |  | ------ | ------- | ---------- |  | ------------ | ------- | - |  | -------- | ----- | ---- |  |  | ----- | - |  | -- | ----- | -- |  |  | ----- | -
|                                        |  |        |         |            |  |              |         |   |  | Increase |       |      |  |  |       |   |  |   
|                                        |  | Amount |         | (Decrease) |  | % of Revenue
|                                        |  |        |         |            |  |             
|                                        |  | 2002   |         | 2001       |  | $            |         | % |  | 2002     |       | 2001
|                                        |  |        |         |            |  |              |         |   |  |          |       |     
|Revenue                                 |  | $      | 1,191.0 |            |  | $            | 1,179.0 |   |  |          | 12.0  |      |  |  | 1.0   |   |  |    | 100.0 |    |  |  | 100.0 |  
|Cost of revenue                         |  |        | 561.1   |            |  |              | 561.8   |   |  |          | (0.7  | )    |  |  | (0.1  | ) |  |    | 47.1  |    |  |  | 47.7  |  
|SG&A expense*                           |  |        | 389.4   |            |  |              | 382.4   |   |  |          | 7.0   |      |  |  | 1.9   |   |  |    | 32.7  |    |  |  | 32.4  |  
|R&D expense                             |  |        | 59.3    |            |  |              | 59.0    |   |  |          | 0.3   |      |  |  | 0.5   |   |  |    | 5.0   |    |  |  | 5.0   |  
|Other expense (income)                  |  |        | 34.3    |            |  |              | 48.2    |   |  |          | (13.9 | )    |  |  | (28.9 | ) |  |    | 2.9   |    |  |  | 4.1   |  
|Interest
income                         |  |        | (2.1    | )          |  |              | (6.5    | ) |  |          | 4.4   |      |  |  | (67.7 | ) |  |    | (0.2  | )  |  |  | (0.6  | )
|Interest
expense                        |  |        | 6.6     |            |  |              | 19.0    |   |  |          | (12.4 | )    |  |  | (65.2 | ) |  |    | 0.6   |    |  |  | 1.6   |  
|Total
costs and expenses*               |  |        | 1,048.6 |            |  |              | 1,063.9 |   |  |          | (15.3 | )    |  |  | (1.4  | ) |  |    | 88.0  |    |  |  | 90.2  |  
|Earnings before income taxes*           |  |        | 142.4   |            |  |              | 115.1   |   |  |          | 27.3  |      |  |  | 23.7  |   |  |    | 12.0  |    |  |  | 9.8   |  
|Income taxes*                           |  |        | 50.3    |            |  |              | 37.9    |   |  |          | 12.4  |      |  |  | 32.9  |   |  |    | 4.2   |    |  |  | 3.2   |  
|Earnings from continuing operations*    |  | $      | 92.1    |            |  | $            | 77.2    |   |  |          | 14.9  |      |  |  | 19.2  |   |  |    | 7.7   |    |  |  | 6.5   |  
|Diluted EPS from continuing operations* |  | $      | 0.61    |            |  | $            | 0.52    |   |  |          | 0.09  |      |  |  | 17.3  |   |  | NM |       | NM
|Earnings from cont. ops. as reported    |  | $      | 92.1    |            |  | $            | 46.9    |   |  |          | 45.2  |      |  |  | 96.1  |   |  |    | 7.7   |    |  |  | 4.0   |  
|Diluted EPS from cont. ops. as reported |  | $      | 0.61    |            |  | $            | 0.32    |   |  |          | 0.29  |      |  |  | 90.6  |   |  | NM |       | NM

(*) We eliminated goodwill amortization from reported 2001 amounts in order to
compare with the required treatment for 2002. Its elimination reduced SG&A
expense by $35.1 million and increased income taxes by $4.8 million. In turn,
this increased earnings from continuing operations by $30.3 million and
earnings per diluted share by 20¢.

Consolidated
Results - Overview

The following factors significantly influenced our revenue and
profitability performances in 2002:



| |  |  | Lower employment levels of our HRS customers                               
| | - |  | ---------------------------------------------------------------------------
|
| |  |  | The impact of lower interest rates on our investments of HRS customer funds
|
| |  |  | Higher level of HRS payroll and tax filing installations                   
|
| |  |  | Acquisitions and dispositions of businesses in HRS                         
|
| |  |  | Increased revenue from retail card
sales and processing                    
|
| |  |  | Lower revenue from the sale of
equipment and permitting services by Comdata
|
| |  |  | Changes in fuel prices and transaction volumes at Comdata                  

As publicly reported employment levels in the private sector continued to
fall during 2002, so did employment levels for our HRS customers, although at a
slower rate of decline than we experienced in 2001. These lower employment
levels translated into fewer fee-producing transactions and lower balances of
customer funds available for revenue-producing investment.

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Interest rates continued to decline in 2002, though not as steeply as in
2001. Our strategy of investing a portion of customer funds in long-term
securities and using interest rate contracts to reduce the variability in
investment yields limited the adverse effect of lower rates. While we
continued to experience HRS customer deferrals of installations in 2002, the
install rate increased significantly during the last half of the year. We
disposed of our Usertech business in the third quarter of 2001; and in 2002
acquired SYLINQ Corporation in March, HR Comply in June and certain assets of
Great Lakes Strategies in December. We further describe our business and asset
acquisitions in a note to our consolidated financial statements entitled
Investing Activity and in the Financial Condition section of this
discussion under the heading Investing.

Growth
in Comdata's retail card sales and processing business in 2002
compared to 2001 contributed significantly to revenue. Sales of point of sale
terminals by Comdata slowed in 2002 along with the economy. Over the course of
2002, the volume of Comdata transportation card transactions increased
modestly, while fuel prices rose over the prior year level in the fourth
quarter of 2002. Further details are provided in the following section
entitled Business Segment Results.

Cost of revenue declined by $0.7 million while SG&A expense increased by
$7.0 million. R&D expense changed little between the two years. Other expense
(income) amounted to $34.3 million in 2002 compared to $48.2 million in 2001,
down $13.9 million. The principal contributors to other expense (income) in
2002 included unusual items consisting of asset write-downs of $24.6 million
involving minority investments, software and factoring receivables and net
charges of $10.2 million largely related to business consolidation efforts.
Other expense (income) for 2001 included unusual items consisting of $53.7
million of litigation costs and $12.8 million of asset write-downs and
consolidation costs, offset by gains of $18.2 million from marketable and
derivative securities. Unusual items reported in other expense (income) are
described in the section of this discussion entitled Unusual Items. Further
details on total costs and expenses are provided in the following section
entitled Business Segment Results.

Our 2002 interest income decreased by $4.4 million compared to 2001 due
largely to lower rates. We also received interest income in 2001 related to a
tax refund and from yields on an accumulation of cash in the first quarter of
2001 in preparation for the Arbitron spin-off.

Our 2002 interest expense declined by $12.4 million compared to 2001 as a
result of a lower level of outstanding debt and lower interest rates. By the
end of 2001, we had paid all amounts outstanding under our Canadian revolving
credit agreements. At the time of the Arbitron spin-off in March 2001, we
retired $430.0 million of 7.25% senior notes by using a $225.0 million payment
by Arbitron, a drawing of $235.0 million on our U.S. revolving credit facility
and existing cash balances. The Canadian facility and the senior notes
contributed $8.3 million to 2001 interest expense. During 2002, we reduced our
borrowings under U.S. credit facilities from $235.0 million to $190.0. The
average outstanding balance under these facilities decreased from $208.6
million in 2001 to $207.3 million in 2002. Our average effective interest rate
on these facilities declined from 4.73% in 2001 to 2.67% in 2002. A further
discussion of our financing arrangements can be found in a note to the
consolidated financial statements

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entitled Financing and in the Financial Condition section of this
discussion under the heading Financing.

Income taxes, including the goodwill adjustment, increased by $12.4
million from 2001 to 2002 due largely to the increase in earnings before income
taxes. The reported effective tax rate decreased from 41.3% for 2001 to 35.3%
for 2002 largely due to the elimination of goodwill amortization for financial
reporting purposes in 2002. Much of the goodwill amortization was not tax
deductible.

Business Segment Results

Segment Comparisons (Restated)
(Dollars in millions)

|        |       |   |       |         |  |            |       |              |  |   |       |          |  |      |       |      |  |    |      |       |  |  |      |       |  | 
|------- | ----- | - | ----- | ------- |  | ---------- | ----- | ------------ |  | - | ----- | -------- |  | ---- | ----- | ---- |  | -- | ---- | ----- |  |  | ---- | ----- |  | 
|        |       |   |       |         |  |            |       |              |  |   |       | Increase |  |      |       |      |  |    |      |      
|        |       |   |       | Amount  |  | (Decrease) |       | % of Revenue
|        |       |   |       |         |  |            |       |             
|        |       |   |       | 2002    |  | 2001       |       | $            |  | % |       | 2002     |  | 2001
|        |       |   |       |         |  |            |       |              |  |   |       |          |  |     
|Revenue |       |   |       |         |  |            |       |              |  |   |       |          |  |      |       |      |  |    |      |       |  |  |      |      
|HRS     |       | $ | 878.1 |         |  | $          | 873.8 |              |  |   | 4.3   |          |  |      | 0.5   |      |  |    | 73.7 |       |  |  | 74.1 |      
|Comdata |       |   | 312.9 |         |  |            | 305.2 |              |  |   | 7.7   |          |  |      | 2.6   |      |  |    | 26.3 |       |  |  | 25.9 |      
|        | Total |   | $     | 1,191.0 |  |            | $     | 1,179.0      |  |   |       | 12.0     |  |      |       | 1.0  |  |    |      | 100.0 |  |  |      | 100.0 | 
|EBIT*   |       |   |       |         |  |            |       |              |  |   |       |          |  |      |       |      |  |    |      |       |  |  |      |      
|HRS     |       | $ | 50.6  |         |  | $          | 74.9  |              |  |   | (24.3 | )        |  |      | (32.5 | )    |  |    | 5.8  |       |  |  | 8.6  |      
|Comdata |       |   | 92.2  |         |  |            | 38.4  |              |  |   | 53.8  |          |  |      | 140.3 |      |  |    | 29.4 |       |  |  | 12.6 |      
|Other   |       |   | 4.1   |         |  |            | 14.3  |              |  |   | (10.2 | )        |  |      | (71.0 | )    |  | NM |      | NM   
|        | Total |   | $     | 146.9   |  |            | $     | 127.6        |  |   |       | 19.3     |  |      |       | 15.2 |  |    |      | 12.3  |  |  |      | 10.8  | 

(*) We measure the business
performance of our business segments by reference to earnings before
interest and taxes since consolidated interest income and interest
expense are not allocated to those segments. We eliminated goodwill amortization from reported 2001 amounts in order to
compare with the required treatment for 2002. Its elimination reduced SG&A
expense and increased EBIT by $26.2 million for HRS and $8.9 million for
Comdata.

HRS.The increase in HRS revenue in 2002 compared to 2001 reflected
increases of $3.6 million from ongoing U.S. operations and $7.8 million from
HRS operations in Canada and the United Kingdom. The sale of our Usertech
employee training business in August 2001 adversely affected the comparison by
$7.1 million, reducing the net increase over 2001 to $4.3 million. Businesses
acquired during 2002 provided $6.4 million of the U.S. operations revenue
benefit to the comparison, as well as post-acquisition revenue growth.

Revenue from U.S. operations benefited from increases of $8.3 million in
benefits services revenue and $4.3 million from LifeWorks employee assistance
services, due primarily to acquisitions. Payroll and tax filing services in
the U.S. experienced a $9.0 million reduction in revenue compared to 2001. The
reduced revenue largely reflected lower customer employment levels and lower
investment yields. The decline in customer employment levels was at
approximately 1.5% at the end of 2002 compared to approximately 3% at the end
of 2001. We estimate that 1.5% decline represents approximately $20.6 million
of lost revenue in 2002. Interest income from investment of payroll and tax
filing funds and benefits services customer deposits included in HRS revenue
decreased by $13.0 million as the average yield fell from

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5.50% for the 2001 period to 4.83% for the 2002 period. The revenue
comparison benefited from a higher level of payroll and tax filing
installations, particularly in the last half of the year, and a targeted price
increase effected in the first quarter of 2002. The average balance of these
investments for 2002 remained at the 2001 level as the benefit from a pickup in
installations offset the adverse effect of the decline in the number of
employees of existing customers and lower U.S. Federal income tax withholding
resulting from tax rate reductions effective in July 2001 and January 2002.

Revenue performance for Canada changed little from the 2001 level in 2002
as the adverse effects of lower employment levels at larger customers and lower
investment yields were largely offset by growth in the small business market
and nonrecurring sales. Centrefile operations in the United Kingdom produced $7.8 million
more revenue in 2002 than in 2001 due to growth in outsourcing revenue and
expansion of services offerings. Changes in foreign currency exchange rates
benefited the international operations revenue comparison by $1.6 million in
2002.

During 2002, we had in place active interest rate contracts covering an
average of $800.0 million of short-term customer funds investments that, at
December 31, 2002, had an average floor of 5.08% and cap of 5.91%. These
contracts, along with longer term investments and floating rate debt, reduced
the impact of the decline in interest rates during 2002. During 2002, use of
these interest rate contracts benefited revenue cash flows by $26.9 million and
is expected to benefit 2003 revenue cash flows by $29.0 million based on
expected future interest rates. Interest rate contracts are further discussed
in notes to our consolidated financial statements entitled, Accounting
Policies, under the heading Cash and Investments, including Derivatives, and
Commitments and Contingencies and in Part II, Item 7A of this report.

HRS costs and expenses (without 2001 goodwill amortization of $26.2
million in SG&A expense) increased by $28.6 million from 2001 to 2002. An
increase in other expense (income) of $22.5 million represented the largest
part of the increase. The sale of Usertech in August 2001 resulted in
reductions of $5.4 million in the cost of revenue comparison, $3.3 million in
the SG&A comparison and $3.3 million in the other expense (income) comparison.

Cost of revenue (without Usertech) increased by $5.3 million in 2002
compared to 2001. The consolidation of 25 district processing centers into 4
regional centers and other productivity efforts during the past two years
reduced U.S. payroll and tax filing cost of revenue by $15.6 million compared
to 2001, primarily by staff reductions. Higher levels of depreciation and
amortization and increased royalties added $3.2 million to payroll and tax
filing cost of revenue in 2002.

In 2002, we benefited from a full year of cost of revenue savings of $4.0
million from the 2001 consolidation of our Boston LifeWorks operation into our
Philadelphia LifeWorks operation. We also incurred incremental costs in
LifeWorks of $1.2 million in 2001 related to the 9/11 event. We reduced our
LifeWorks costs in 2002 by another $4.4 million largely by bringing research
activities in-house that had been provided by outside consultants. Cost of
revenue of $3.8 million from the addition of HR Comply in 2002 offset these
LifeWorks savings.

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Cost of revenue in benefits services operations increased by $17.1 million
of which $3.3 million resulted from the added costs of SYLINQ and Great Lakes
Strategies in 2002. Early in 2002, we closed facilities in California and
Virginia and transferred their retirement planning services activities into
other benefits services operations. In connection with this consolidation, we
incurred transitional and additional systems costs of approximately $6.8
million in the third and fourth quarter of 2002 that were included in cost of
revenue. Other increases in benefits services operations cost of revenue of
$7.0 million in 2002 related primarily to a higher volume of activity and
reassignment of duties to administrative functions.

Cost of revenue in Canada operations increased by $2.6 million in 2002 due
primarily to an increase in the proportion of revenue from nonrecurring sales
and the introduction of new service offerings. Cost of revenue in UK
operations increased by $3.8 million primarily as a result of revenue growth
and geographic market expansion.

The 2002 increase in SG&A expense (without goodwill amortization and
Usertech) for HRS amounted to $7.3 million over the 2001 amount. Selling
expense in HRS grew by $11.9 million in comparison to 2001 reflecting increased
marketing efforts in the U.S. and UK and higher commissions arising from the
continued growth in orders. The increased marketing effort in U.S. operations
related in large part to acquired businesses and small business development.
Usertech expenses, eliminated by its sale, reduced the increase in selling
expense by $0.9 million. General and administrative expense in 2002 decreased
by $4.6 million, primarily in U.S. operations, due to the elimination of 2001
Usertech expenses of $2.4 million from the comparison. Cost savings from
facility consolidations and reduced provisions for incentive compensation
further reduced these costs. R&D expense increased by $2.2 million over 2001,
reflecting additional U.S. payroll, benefit services and tax filing services
product development efforts. The increase in other expense (income) from $3.7
million in 2001 to $26.1 million in 2002 is further discussed in the section
below entitled Unusual Items.

Comdata.Comdata revenue increased by $7.7 million in 2002 compared
to 2001. Over-the-road transportation revenue decreased by
$1.0 million as a 1% increase in transaction volume was
more than offset by the impact of lower fuel prices. Revenue
from retail card sales and processing for 2002 increased
by $12.1 million. Revenue from sales of equipment to merchants decreased by $4.5 million
in 2002 as we believe customers restricted their capital
spending; while truck stop service fees increased by
$2.8 million. Business fleet revenue grew by
$2.1 million in 2002 over 2001 as major local fueling
customers increased their utilization of Comdata products and
services. Phone services revenue declined by $2.0 million
in 2002. Regulatory compliance revenue, including permitting and
pilot services, declined by $4.6 million compared to 2001
as cooperative efforts by permit issuers continued to reduce the
volume of transactions. Factoring operations contributed an
additional $3.9 million to 2002 revenue over 2001.

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Comdata reduced costs and expenses (without 2001
goodwill amortization of $8.9 million) by
$46.1 million in 2002 compared to 2001. Costs of revenue
related to retail card sales and transaction processing
increased by $9.0 million in 2002 compared to 2001.
Reductions in cost of revenue included $1.5 million of
lower phone services costs. The lower levels of sales of
equipment to merchants and regulatory compliance services and
renegotiated telecommunications rates also contributed
$2.5 million to reducing cost of revenue. Cost savings in
2002 from operating efficiency efforts in customer relations and
technology functions produced a $3.6 million reduction in
cost of revenue and a $1.9 million reduction in R&D
expense compared to 2001. Comdata increased its provision for
doubtful accounts in general expense by $1.3 million in
2002 over 2001 due largely to a bankruptcy filing by a major
customer. Other income (expense) included a $9.8 million
factoring receivables loss in the third quarter of 2002 and
$52.4 million of litigation costs in the second quarter of
2001. Costs related to the cancellation of the outsourced
transaction processing contract and facility consolidations,
included in other expense (income), declined from
$6.6 million in 2001 to $3.0 million in 2002. These other
income (expense) items are further described in the section
below entitled Unusual Items.

Other.The reported EBIT of $4.1 million for 2002 results from
the reduction
of a previously established accrual for environmental cleanup, based on a
periodic review that took place in the first quarter of 2002. The reported EBIT
for 2001 includes a gain of $15.6 million related to sales of marketable
securities described in the note to consolidated financial statements entitled
Investing Activity. The 2001 gain was reduced by a provision for litigation
costs not allocated to the business segments. Further details on these unusual
gains and losses appear in the following section entitled Unusual Items.

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2001 Compared to 2000

Statements of Operations Comparisons (Restated)
(Dollars in millions, except per share data)

|                                        |  |        |         |            |  |              |         |   |  |          |       |      |  |  |       |   |  |    |       |    |  |  |       | 
|--------------------------------------- |  | ------ | ------- | ---------- |  | ------------ | ------- | - |  | -------- | ----- | ---- |  |  | ----- | - |  | -- | ----- | -- |  |  | ----- | 
|                                        |  |        |         |            |  |              |         |   |  | Increase |       |      |  |  |       |   |  |   
|                                        |  | Amount |         | (Decrease) |  | % of Revenue
|                                        |  |        |         |            |  |             
|                                        |  | 2001   |         | 2000       |  | $            |         | % |  | 2001     |       | 2000
|                                        |  |        |         |            |  |              |         |   |  |          |       |     
|Revenue                                 |  | $      | 1,179.0 |            |  | $            | 1,174.8 |   |  |          | 4.2   |      |  |  | 0.4   |   |  |    | 100.0 |    |  |  | 100.0 | 
|Cost of revenue                         |  |        | 561.8   |            |  |              | 550.9   |   |  |          | 10.9  |      |  |  | 2.0   |   |  |    | 47.7  |    |  |  | 46.9  | 
|SG&A expense*                           |  |        | 382.4   |            |  |              | 336.7   |   |  |          | 45.7  |      |  |  | 13.6  |   |  |    | 32.4  |    |  |  | 28.7  | 
|R&D expense                             |  |        | 59.0    |            |  |              | 62.8    |   |  |          | (3.8  | )    |  |  | (6.0  | ) |  |    | 5.0   |    |  |  | 5.3   | 
|Other expense (income)                  |  |        | 48.2    |            |  |              | 31.7    |   |  |          | 16.5  |      |  |  | 52.2  |   |  |    | 4.1   |    |  |  | 2.7   | 
|Interest income                         |  |        | (6.5    | )          |  |              | (4.7    | ) |  |          | 1.8   |      |  |  | 39.0  |   |  |    | 0.6   |    |  |  | 0.4   | 
|Interest expense                        |  |        | 19.0    |            |  |              | 39.8    |   |  |          | (20.8 | )    |  |  | (52.3 | ) |  |    | 1.6   |    |  |  | 3.4   | 
|Total costs and expenses*               |  |        | 1,063.9 |            |  |              | 1,017.2 |   |  |          | 46.7  |      |  |  | 4.6   |   |  |    | 90.2  |    |  |  | 86.6  | 
|Earnings before income taxes*           |  |        | 115.1   |            |  |              | 157.6   |   |  |          | (42.5 | )    |  |  | (27.0 | ) |  |    | 9.8   |    |  |  | 13.4  | 
|Income taxes                            |  |        | 37.9    |            |  |              | 51.4    |   |  |          | (13.5 | )    |  |  | (26.4 | ) |  |    | 3.2   |    |  |  | 4.4   | 
|Earnings from continuing operations*    |  | $      | 77.2    |            |  | $            | 106.2   |   |  |          | (29.0 | )    |  |  | (27.3 | ) |  |    | 6.5   |    |  |  | 9.0   | 
|Diluted EPS from continuing operations* |  | $      | 0.52    |            |  | $            | 0.72    |   |  |          | (0.20 | )    |  |  | (27.8 | ) |  | NM |       | NM
|Earnings from cont. ops. as reported    |  | $      | 46.9    |            |  | $            | 76.6    |   |  |          | (29.7 | )    |  |  | (38.7 | ) |  |    | 4.0   |    |  |  | 6.5   | 
|Diluted EPS from cont. ops. as reported |  | $      | 0.32    |            |  | $            | 0.52    |   |  |          | (0.20 | )    |  |  | (39.5 | ) |  | NM |       | NM

(*) Goodwill amortization has been eliminated from reported results in this
table in order to compare with the required treatment for 2002. Its
elimination reduced SG&A expense by $35.1 million in 2001 and $34.4 million in
2000 and increased income taxes by $4.8 million in each year. In turn, this
increased earnings from continuing operations by $30.3 million for 2001 and
$29.6 million for 2000, or 20¢ per diluted share in each year.

Consolidated
Results - Overview

Comparing 2001 to 2000, our consolidated revenue increased by $4.2 million
while HRS revenue increased by 0.1% and Comdata revenue increased by 1.2%.
Revenue comparisons are further discussed in the following section entitled
Business Segment Results. The following factors significantly affected our
revenue performance in 2001.



| |  |  | Lower employment levels of our HRS customers and a lower
volume of card transactions for Comdata due to the general
economic slowdown in the U.S.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The impact of lower interest rates on our investments of HRS customer funds                                                                      
|
| |  |  | Falling diesel fuel prices on price-related Comdata transaction revenue                                                                          
|
| |  |  | Dispositions of the HRS Usertech and the Comdata phone resale businesses                                                                         
|
| |  |  | Strength of the U.S. dollar against HRS Canada and UK local currencies                                                                           
|
| |  |  | Higher levels of retail cards in
use and transaction volume                                                                                      

Our total costs and expenses for 2001 increased by $69.3 million over the
comparable 2000 amount. HRS costs and expenses increased by $24.7 million from
2000 to 2001 with an increase of $44.1 million in selling expense offset in
part by a $33.4 million decrease in net

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unusual losses. Comdatas costs and expenses increased by $49.8 million
from 2000 to 2001 including a first quarter 2001 unusual charge of $6.6 million
for termination of an outsourced transaction processing contract (which this
discussion refers to as the outsourced contract) and a second quarter 2001
unusual charge of $52.4 million related to settlement of litigation. These
charges were offset in part by estimated savings of $10.8 million from the
outsourced contract termination including $4.0 million in cost of revenue, $3.1
million in SG&A expense and $3.7 million in R&D expense. Comdata unusual
charges recorded in 2000 were $2.6 million. The increase in total costs and
expenses for our business segments was reduced by a net increase of $5.2
million in unusual gains not allocated to the business segments. Comparative
costs and expenses are further discussed in the following sections entitled
Business Segment Results and Unusual Items.

Our 2001 interest income increased by $1.8 million over the 2000 amount,
even though interest rates declined. The increase was largely due to interest
on a state tax refund received during 2001 and an accumulation of cash in the
first quarter of 2001 in preparation for the spin-off. Interest expense
decreased by $20.8 million due primarily to the refinancing of our debt in
connection with the spin-off, which is further described in a note to our
consolidated financial statements entitled Financing, and lower interest
rates. The average interest rates on borrowings under the revolving credit
agreements of our Canadian subsidiary decreased from 6.14% in 2000 to 5.49% in
2001 and on our U.S. revolving credit facility from 6.79% in 2000 to 4.73% in
2001. Our income taxes decreased by $13.4 million in comparison with 2000 due
primarily to the decrease in pre-tax earnings. Our reported effective tax rate
for 2001, including the effect of goodwill amortization, increased to 41.3%
compared to 37.8% for 2000, as the ratio of nondeductible goodwill expense to
pre-tax income increased. Without regard to the goodwill amortization effect,
our effective tax rate would have been about 33% for both years.

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Business Segment Results

Segment Comparisons (Restated)
(Dollars in millions)

|        |       |   |        |         |            |   |              |         |   |  |          |       |      |    |       |       |   |    |      |       |  |  |      |       | 
|------- | ----- | - | ------ | ------- | ---------- | - | ------------ | ------- | - |  | -------- | ----- | ---- | -- | ----- | ----- | - | -- | ---- | ----- |  |  | ---- | ----- | 
|        |       |   |        |         |            |   |              |         |   |  | Increase |       |      |    |       |       |   |    |     
|        |       |   | Amount |         | (Decrease) |   | % of Revenue
|        |       |   |        |         |            |   |             
|        |       |   | 2001   |         | 2000       |   | $            |         | % |  | 2001     |       | 2000
|        |       |   |        |         |            |   |              |         |   |  |          |       |     
|Revenue |       |   |        |         |            |   |              |         |   |  |          |       |      |    |       |       |   |    |      |       |  |  |      |      
|HRS     |       | $ | 873.8  |         |            | $ | 873.1        |         |   |  | 0.7      |       |      |    | 0.1   |       |   |    | 74.1 |       |  |  | 74.3 |      
|Comdata |       |   | 305.2  |         |            |   | 301.7        |         |   |  | 3.5      |       |      |    | 1.2   |       |   |    | 25.9 |       |  |  | 25.7 |      
|        | Total |   | $      | 1,179.0 |            |   | $            | 1,174.8 |   |  |          | 4.2   |      |    |       | 0.4   |   |    |      | 100.0 |  |  |      | 100.0 | 
|EBIT*   |       |   |        |         |            |   |              |         |   |  |          |       |      |    |       |       |   |    |      |       |  |  |      |      
|HRS     |       | $ | 74.9   |         |            | $ | 98.9         |         |   |  | (24.0    | )     |      |    | (24.3 | )     |   |    | 8.6  |       |  |  | 11.3 |      
|Comdata |       |   | 38.4   |         |            |   | 84.7         |         |   |  | (46.3    | )     |      |    | (54.7 | )     |   |    | 12.6 |       |  |  | 28.1 |      
|Other   |       |   | 14.3   |         |            |   | 9.1          |         |   |  | 5.2      |       |      | NM |       | NM    |   | NM
|        | Total |   | $      | 127.6   |            |   | $            | 192.7   |   |  |          | (65.1 | )    |    |       | (33.8 | ) |    |      | 10.8  |  |  |      | 16.4  | 

(*)
We
measure the performance of our business segments by reference to
earnings before interest and taxes since consolidated interest income
and interest expense are not allocated to those segments.

We eliminated goodwill amortization from costs and expenses in this
presentation in order to compare with the required treatment for 2002. Its
elimination increased 2001 and 2000 EBIT, respectively, by $26.2 million and
$26.4 million for HRS and by $8.9 million and $8.0 million for Comdata for a
total of $35.1 million and $34.4 million.

HRS.Our HRS revenue in 2001 increased by $0.7 million compared to 2000.
Increases totaling $13.5 million in our LifeWorks employee effectiveness
services and benefits services businesses and $16.2 million in HRS operations
in Canada and the United Kingdom largely offset a decrease of $29.0 million in
the U.S. payroll and training businesses. We sold our Usertech training
business during the third quarter of 2001, which reduced the revenue comparison
by $7.4 million. The reduction in U.S. payroll services revenue related
primarily to the impact of a general economic slowdown on customer employment
levels, a significant decrease in interest rates, and, to a lesser extent,
customer-requested installation delays, particularly in late 2001. This
reduction was offset in part by a targeted price increase in the first quarter
of 2001. Revenue performance for our Canada and UK operations was reduced by
$7.7 million in the annual comparison due to the weakness of the Canadian
dollar and British pound sterling against the U.S. dollar in 2001. Interest
income from investment of payroll and tax filing funds and benefits services
customer deposits included in HRS revenue decreased by $13.4 million as the
average yield fell from 6.07% for the 2000 period to 5.50% for the 2001 period.
The average balance of these investments was down by 2.0% in comparison with
2000 largely due to a decrease in the number of employees of our existing
customers and reduced U.S. Federal income tax withholding resulting from tax
legislation effective in July 2001.

During 2001, we had in place interest rate contracts with an average floor
of 5.23% covering an average of $758.3 million of short-term payroll and tax
filing fund investments that, along with longer term investments and floating
rate debt, reduced the impact of the decline in interest rates during the year.

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HRS costs and expenses (without goodwill amortization) increased by $24.7
million from 2000 to 2001. Cost of revenue for 2001 increased by $13.1 million
over 2000 as direct costs rose in line with revenue increases in the LifeWorks,
benefits services and non-U.S. HRS businesses. Also included in the increase
of cost of revenue for HRS were $1.2 million of incremental costs associated
with increased volume in the employee assistance services of the work-life
services business related to the 9/11 event, and generally higher compensation
costs. The increase in HRS SG&A expense in 2001 amounted to $46.2 million over
the 2000 amount. The increase was due largely to an increase in selling
expense of $44.1 million, reflecting the addition of approximately 160 sales
personnel in U.S. operations in late 2000 and early 2001, reorganization costs
and higher compensation levels. General and administrative expense (without
goodwill amortization) increased by $2.1 million as improved organizational
efficiency and reduced provisions for incentive payouts largely offset the
impact of management reorganization costs and higher compensation levels in
2001. R&D expense, reflecting U.S. payroll, benefit services and tax filing
services product development efforts, changed little from the 2000 level. The
decrease from $37.0 million in 2000 to $3.6 million in 2001 in net unusual
losses is further discussed in the section below entitled Unusual Items.

Comdata.Comdata revenue for 2001 increased by $3.5 million compared to
2000. The comparison was negatively affected by the divestiture of a phone
resale business that recorded $8.9 million of 2000 revenue before its sale in
July 2000. The revenue comparison was positively impacted by an increase of
$12.5 million in the retail cash card business and
$4.8 million from sales of equipment and services to truck stops. The revenue comparison was
adversely affected by the impact of the economic slowdown on the over-the-road
trucking market, which resulted in a reduction in the number of customer
fueling transactions. Revenue was also adversely affected by lower diesel fuel
prices, particularly in late 2001, and lower revenue from permitting
and phone services.

Comdatas costs and expenses (without goodwill amortization) increased by
$49.8 million from 2000 to 2001 due largely to the litigation costs of $52.4
million recorded in the second quarter of 2001. Cost of revenue decreased by $2.1 million in 2001, as
increased costs of $8.8 million associated with higher revenue from the retail cash card
business were more than offset by the effect of the sale of the phone resale
business in July 2000 and cost reduction efforts. The divested business
reported $6.8 million in cost of revenue in 2000. The cost reduction efforts
saved $5.4 million of which $4.0 million related to bringing an outsourced
transaction processing service in-house and $1.4 million related to other cost
reduction efforts. Selling, general and administrative expenses (without
goodwill amortization) increased by $1.1 million in comparison with 2000 as
additional bad debt expense amortization costs for software and intangibles
other than goodwill was largely offset by $3.1 million of administrative
expense savings from the termination of the outsourced contract. The bad debt
provision of $12.9 million for 2001 increased by $1.0 million over the 2000
amount as Comdata continued its efforts to improve the quality of customer
accounts in the face of the general economic slowdown. R&D expense decreased
by $3.7 million due largely to development cost savings resulting from the
outsourced contract termination. Other expense (income) in 2001 included
litigation costs of $52.4 million and a first quarter $6.6 million charge
resulting from the outsourced contract termination. Other expense (income) in
2000 included $2.6 million of

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first quarter unusual charges for severance and other exit costs related
primarily to facility closures. These unusual charges are further described in
the section below entitled Unusual Items.

Other. The reported EBIT for 2001 related to gains of $15.6 million from
the sale of marketable securities described in a note to our consolidated
financial statements entitled Investing Activity, and a provision for legal
costs of $1.3 million. The reported EBIT for 2000 relates to the recovery of
accruals in the amount of $10.0 million from unusual charges recorded in 1997,
reduced by $0.9 million of severance costs included in the first quarter 2000
unusual charges. Further details on unusual charges and recoveries are
provided in the section below entitled Unusual Items.

Unusual Items

The comparison of our earnings from continuing operations is significantly
affected by a number of unusual events and transactions. We also have
presented information on this subject in a note to our consolidated financial
statements entitled Supplementary Data to Statements of Operations.

Unusual Losses (Gains or Recoveries)
(Dollars in millions)

|                                                        |  |             |      |      |  |      |       |   |  |   |      |  
|------------------------------------------------------- |  | ----------- | ---- | ---- |  | ---- | ----- | - |  | - | ---- | -
|                                                        |  | Years Ended
|                                                        |  | December 31
|                                                        |  |            
|                                                        |  | 2002        |      | 2001 |  | 2000
|                                                        |  |             |      |      |  |     
|Accrued exit costs, net of recoveries                   |  | $           | 13.5 |      |  | $    | 6.7   |   |  | $ | 12.2 |  
|Factoring receivables loss                              |  |             | 9.8  |      |  |      |      |   |  |   |     |  
|Asset write-downs                                       |  |             | 6.7  |      |  |      | 6.1   |   |  |   | 18.3 |  
|Loss (gain) on sale of marketable securities            |  |             | 6.3  |      |  |      | (15.6 | ) |  |   |     |  
|Loss (gain) on derivative securities                    |  |             | 1.8  |      |  |      | (2.6  | ) |  |   |     |  
|Litigation costs                                        |  |             | 0.8  |      |  |      | 53.7  |   |  |   |     |  
|Reduction in environmental accrual                      |  |             | (4.1 | )    |  |      |      |   |  |   |     |  
|                                                        |  |             |      |      |  |      |       |   |  |   |      |  
|Total unusual losses reported in other expense (income) |  | $           | 34.8 |      |  | $    | 48.3  |   |  | $ | 30.5 |  
|                                                        |  |             |      |      |  |      |       |   |  |   |      |  
|HRS                                                     |  | $           | 26.1 |      |  | $    | 3.6   |   |  | $ | 37.0 |  
|Comdata                                                 |  |             | 12.8 |      |  |      | 59.0  |   |  |   | 2.6  |  
|Other                                                   |  |             | (4.1 | )    |  |      | (14.3 | ) |  |   | (9.1 | )
|                                                        |  |             |      |      |  |      |       |   |  |   |      |  
|Total unusual losses reported in other expense (income) |  | $           | 34.8 |      |  | $    | 48.3  |   |  | $ | 30.5 |  
|                                                        |  |             |      |      |  |      |       |   |  |   |      |  

During the first quarter of 2002, we announced a series of actions
intended to consolidate certain operations in both of our business segments and
recorded accrued exit costs of $9.0 million. A plan to consolidate certain HRS
payroll and tax filing processing services, previously conducted in 25 district
offices, into 4 regional processing centers resulted in the accrual of $7.5
million for exit costs. We completed this effort before the end of 2002 and
estimate that we saved approximately $6.5 million during 2002, primarily from
staff reductions, and anticipate that we will reduce our costs by approximately
$12 million annually going forward. Of the $7.5

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million accrual, $5.3 million related to severance costs for 317 employees
all of whom were terminated by December 31, 2002, and $2.2 million represented
other exit costs, primarily related to lease terminations. Consolidation of
certain Comdata facilities resulted in accrued severance costs of $1.0 million
for 76 employees, including 67 terminated by December 31, 2002, and other exit
costs of $0.5 million, primarily related to lease terminations.

HRS recorded a $4.9 million asset write-down
of internally developed software costs in the first quarter of
2002 as a result of the February 2002 acceptance of the software
technology provided under a March 2001 agreement with Ultimate.
Also during the first quarter of 2002, we conducted a periodic
reassessment of our environmental obligation. This obligation
relates to the 1989 sale by our predecessor (Control Data
Corporation) of its disk drive operations, which involved
remediable environmental sites. The sale agreement provided
terms describing how remedial costs related to remediable
environmental sites would be shared between the buyer and us as
the seller. The terms of the agreement included periodic joint
reviews of the obligation by the buyer and us. Our obligations
covered only those sites identified prior to the fifth
anniversary of the sale. At the time of the sale, we established
an accrual for our estimated costs that might occur as a result
of this agreement. During the first 10 years following the
sale, both parties incurred significant costs, which then began
to reduce as these sites entered a water extraction and
monitoring stage. During the first quarter of 2002, we
participated in a periodic review of the status of this
obligation with the environmental officer of the buyer. A site
visit was made by our environmental representative at that time,
and it was determined that our estimated liability was
$4.1 million less than previously
determined. The excess accrual was then credited back to
earnings as a component of other expense (income).

During the third quarter of 2002, we examined purchases of receivables
from certain trucking companies by Comdatas factoring business that had grown
rapidly during 2002 and found that the debtors could not be verified. In the
meantime, the parties that had sold us the receivables declared bankruptcy. We
notified the appropriate authorities in efforts to have appropriate inquiries
made with respect to this matter and have initiated a number of civil actions
and discovery efforts. We have also made certain modifications to our policies
and procedures related to the factoring business. We are seeking to identify
and recover assets to cover all or some of the amount owed and to obtain any
recovery available under the terms of our insurance coverage. Since the amount
of potential recovery cannot be determined at this time, we have recorded the
full amount of the loss of $9.8 million, including $0.3 million of
investigative costs incurred. Due to the unusual and non-recurring nature of
the loss, we have reported the loss as other expense (income).

In the fourth quarter of 2002, we reviewed the status of accrued exit
costs and revised the estimated amounts to reduce the severance cost provisions
made by HRS in the first quarter of 2002 by $0.8 million and in the first
quarter of 2000 by $0.3 million and by Comdata in the first quarter of 2002 by
$0.3 million. We also incurred additional expense in HRS for severance costs
of $1.3 million, involving 81 employees, and other exit costs of $2.9 million
and in Comdata for severance costs of $0.6 million, involving 41 employees, and
other exit costs of $1.1 million. We paid all of the additional HRS severance
costs during the fourth quarter of 2002. The other exit costs largely
represented lease commitments, net of expected recoveries. At December 31,
2002, we remained obligated for 2002 accrued exit costs of $5.0 million of
which $0.8 million represented severance costs and $4.2 million other exit
costs.

Also in the fourth quarter of 2002, HRS recorded a $7.8 million write-down
of the carrying values of certain marketable equity and cost-based investments,
recorded a $1.8 million loss related to derivatives and wrote off the $0.3
million carrying value of an abandoned software product. The investment
write-down related primarily to our December 2001 cost-based investment in
U.S.I. Holdings preferred stock in connection with a joint marketing agreement,
which was converted to common stock as a result of an initial public offering
in October 2002. The $1.8 million loss on derivatives represented the
amortization of a portion of the previously

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deferred $2.6 million gain on derivatives recorded in the first quarter of
2001. The remaining $0.8 million will be charged to operations during 2003 as
the derivatives to which the deferred gain relates expire. We also recorded
$0.8 million of other unusual costs in HRS for a litigation settlement.

The 2001 gain on sale of marketable securities of
$15.6 million related to our sale of HotJobs.com, Ltd.
common stock and is further described in Note G,
Investing Activity, to our consolidated financial
statements. The gain on derivative securities of
$2.6 million resulted from the application of FAS 133
as amended and interpreted at that date. The second quarter 2001
litigation costs include a settlement of $49.0 million and
associated costs of $3.4 million related to litigation
involving Comdata and a provision of $1.3 million for
litigation costs not allocated to our business segments. The
litigation settlement and associated costs at Comdata related to
an action brought by Flying J, Inc. The nature and facts
and circumstances of this litigation are fully disclosed in
Note K, Legal Matters, to our consolidated
financial statements for the year ended December 31, 2000,
and the resulting settlement is fully disclosed in Part II,
Item 1, Legal Proceedings, of our Quarterly
Report on Form 10-Q, for the quarterly period ended
June 30, 2001. The additional provision of
$1.3 million for litigation costs not allocated to our
business segments related to disputes involving postretirement
benefits.

During the first quarter of 2001, we took certain actions, described
below, that were expected to improve operational efficiency, take advantage of
technological opportunities and further focus our human resource businesses.
These actions resulted in accrued exit costs of $9.9 million and asset
write-downs of $6.1 million. We paid these accrued exit costs in full by the
end of 2001. We also recovered $3.2 million of costs accrued during the first
quarter of 2000, due to a revision of the estimated cost related to those
actions.

In February 2001, Comdata terminated an outsourced contract for
transaction processing and software development and brought those activities
in-house. This action was intended to improve management control over these
activities and reduce costs. The termination charge of $6.6 million was
recorded and paid during the first quarter of 2001. In order to implement the
in-house operation, Comdata hired a number of personnel from the outsourcing
contractor and made incremental investments in capitalized equipment and
software of $7.4 million in the same quarter. During the course of 2001,
Comdata realized cost savings of approximately $10.8 million related to this
action.

In March 2001, HRS transferred most of its LifeWorks employee
effectiveness services operation in Boston, Massachusetts into a related
operation in Philadelphia, Pennsylvania and we decided to sell our Usertech
employee training business. As a result of these actions, unrecoverable
goodwill of $1.9 million related to Usertech and $1.1 million of equipment
related to the Boston operation were recorded as asset write-downs. We sold
Usertech in the third quarter of 2001. In addition, HRS charged $2.3 million
of severance costs for approximately 250 employees and $1.0 million of excess
facility costs to operations and recorded as accrued exit costs. These charges
were offset in part by the recovery of $3.2 million of the estimated severance
costs accrued in the first quarter of 2000, due primarily to a reduction in the
scale of the downsizing of the St. Louis, Missouri customer services
operations. Also in March 2001, HRS reassessed its strategy for developing
software to serve its middle market payroll and tax filing customers and
conducted an impairment review of internally developed software related to this
effort. As a result, $3.1 million of unrecoverable cost related to this
software development effort was recognized as an asset write-down.

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On January 25, 2000, we announced actions to improve customer service and
the quality of operations, particularly in the U.S. payroll business. The
principal actions taken to achieve these objectives included decentralization
of the U.S. payroll business customer service operations, termination of
certain product development efforts, and realignment of certain management
responsibilities and consolidation of similar operations. Decentralization of
U.S. payroll customer service operations involved the downsizing of staff and
space usage in a centralized facility in St. Louis, Missouri and the transfer
of these responsibilities to district offices. The termination of certain
product development efforts required a reassessment of the recoverability of
goodwill and other intangibles and capitalized development costs, which
resulted in a reduction in the carrying values of those assets and staff
reductions. Realignment of certain management responsibilities involved
staffing changes in a number of senior management positions. The consolidation
of similar operations led to staff reductions as well as the identification of
excess space and furnishings and related charges for asset write-downs and
future rental obligations.

In March 2000, we approved plans to execute these actions and recorded as
other expense (income) charges of $44.7 million in first quarter 2000. These
charges included $26.4 million of accrued exit costs and $18.3 million for
asset write-downs. Exit costs for severance involved involuntary termination
notices for approximately 500 employment positions, primarily in HRS, of which
approximately 466 had been eliminated by December 31, 2000 with the remainder
in early 2001. The other exit costs were primarily the lease cost for idled
facilities and contract termination fees. By December 31, 2002, those accrued
exit costs had been paid in full. Asset write-downs included the write-off of
capitalized software amounts related to a software development contract that
was terminated in the first quarter 2000, certain property and equipment
abandoned at a number of idled facilities, and certain goodwill and intangible
asset balances with respect to two previous acquisitions.

With respect to accrued amounts related to certain actions we had taken in
1997, we paid the remaining $6.4 million of accrued costs during the year ended
December 31, 2000. Additionally, during the first quarter of 2000, we credited
other expense (income) with a recovery of $14.2 million of unused accruals
established in connection with these 1997 actions. This recovery relates to the
reversal of the amount accrued in excess of the settlement amount for a
securities litigation matter that was finalized on March 31, 2000.

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Financial Condition

Consolidated Statements of Cash Flows Highlights (Restated)
(Dollars in millions)

|                                        |  |                          |        |      |  |      |        |   |  |   |        |  
|--------------------------------------- |  | ------------------------ | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                        |  | Years ended December 31,
|                                        |  |                         
|                                        |  | 2002                     |        | 2001 |  | 2000
|                                        |  |                          |        |      |  |     
|Operating activities                    |  | $                        | 148.9  |      |  | $    | 173.9  |   |  | $ | 268.6  |  
|Investing activities                    |  |                          | (115.9 | )    |  |      | (106.7 | ) |  |   | (107.9 | )
|Financing activities                    |  |                          | (15.1  | )    |  |      | (56.1  | ) |  |   | (101.3 | )
|Effect of exchange rate changes on cash |  |                          | 0.2    |      |  |      |       |   |  |   | (1.1   | )
|                                        |  |                          |        |      |  |      |        |   |  |   |        |  
|Net cash flows provided (used)          |  | $                        | 18.1   |      |  | $    | 11.1   |   |  | $ | 58.3   |  
|                                        |  |                          |        |      |  |      |        |   |  |   |        |  
|Cash and equivalents at end of year     |  | $                        | 134.3  |      |  | $    | 116.2  |   |  | $ | 105.1  |  

Reconciliation of Earnings to Cash Inflows (Outflows) from Operating Activities (Restated)
(Dollars in millions)

|                                                      |  |                          |       |      |  |      |       |   |  |   |       |  
|----------------------------------------------------- |  | ------------------------ | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                                      |  | Years ended December 31,
|                                                      |  |                         
|                                                      |  | 2002                     |       | 2001 |  | 2000
|                                                      |  |                          |       |      |  |     
|Earnings from continuing operations                   |  | $                        | 92.1  |      |  | $    | 46.9  |   |  | $ | 76.6  |  
|Deferred income tax provision                         |  |                          | 13.2  |      |  |      | 28.9  |   |  |   | 43.7  |  
|Depreciation and amortization                         |  |                          | 75.9  |      |  |      | 105.4 |   |  |   | 97.2  |  
|Provision for doubtful accounts                       |  |                          | 17.0  |      |  |      | 15.8  |   |  |   | 14.8  |  
|Asset write-downs                                     |  |                          | 6.7   |      |  |      | 6.1   |   |  |   | 18.3  |  
|Loss (gain) on marketable and derivative securities   |  |                          | 8.1   |      |  |      | (19.2 | ) |  |   |      |  
|Other reconciling items                               |  |                          | (14.0 | )    |  |      | (9.0  | ) |  |   | (5.7  | )
|                                                      |  |                          |       |      |  |      |       |   |  |   |       |  
|From continuing operations earnings                   |  |                          | 199.0 |      |  |      | 174.9 |   |  |   | 244.9 |  
|From continuing operations working capital activities |  |                          | (50.1 | )    |  |      | (0.2  | ) |  |   | (1.1  | )
|                                                      |  |                          |       |      |  |      |       |   |  |   |       |  
|Operating cash flows from continuing operations       |  |                          | 148.9 |      |  |      | 174.7 |   |  |   | 243.8 |  
|From discontinued operations                          |  |                          |      |      |  |      | (0.8  | ) |  |   | 24.8  |  
|                                                      |  |                          |       |      |  |      |       |   |  |   |       |  
|Cash flows provided by operating activities           |  | $                        | 148.9 |      |  | $    | 173.9 |   |  | $ | 268.6 |  

We describe in the note to our consolidated
financial statements entitled Customer Funds the
effect on the consolidated statements of cash flows of a
reclassification of benefit services customer funds effective in
2003. Prior periods have been conformed to the current
presentation.

Cash Flows

Cash Balances and Operations

Our cash and equivalents increased by $18.1 million to $134.3 million
during 2002 as we used operating cash flows and cash balances to fund investing
activities and repay debt. In 2001, our cash and equivalents increased by
$11.1 million to $116.2 million as operating cash flows provided funds for
investing, primarily for capital assets at a level comparable to 2000, and to
reduce debt. During 2000, cash and equivalents increased by $58.3 million to
$105.1 million as strong operating cash flows fully funded investing activities
and provided funding for debt reduction.

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Our operating cash flows from continuing operations decreased by $25.8
million during 2002 as compared to 2001 primarily due to a buildup of
receivables at the end of 2002. Cash provided by earnings from continuing
operations grew by $24.1 million while cash outflows from continuing operations
working capital activities reduced operating cash flows by $49.9 million. Our
2001 operating cash flows from earnings included the $34.1 million after-tax
effect of the nonrecurring Comdata litigation costs described in the previous
section entitled Unusual Items. The decrease in the amount of depreciation
and amortization largely reflects the elimination from earnings of the charge
for goodwill amortization effective for 2002. The increased use of cash for
working capital activities reflected a net cash outflow from a build-up of
receivables in 2002 of $37.9 million compared to a $42.8 million net cash
inflow from liquidation of receivables in 2001. When comparing the working
capital cash flows for 2002 to 2001, the total $80.7 million increase in cash
utilized by receivables related substantially to Comdata receivables activity
and was offset in part by a increase of $26.4 million in cash provided by
Comdata drafts payable in those periods. Comdata receivables increased by
$26.2 million during 2002 compared to a decrease of $55.5 million during 2001.
The increase during 2002 reflected increases in factoring, business fleet and
retail card receivables, offset in part by a decrease in other transportation
receivables. The relationship of the period-end date and the timing of weekly
draft clearing operations at Comdata at December 31, 2001 also affected the
comparison of net cash provided by or utilized for drafts payable and
receivables outstanding in 2002 and 2001 as described in the following
paragraph.

Our operating cash flows for 2001 decreased by $94.7 million from the 2000
level due primarily to lower cash flows from earnings, which in 2001 were
reduced by the $34.1 million after-tax effect payment of the Comdata litigation
costs. Without regard to the effect of these litigation costs, 2001 operating
cash flows from continuing operations of $174.7 million would have been $208.8
million and operating cash flows from continuing operations earnings of $174.9
million would have been $209.0 million. Working capital activities of
continuing operations used $0.9 million less cash during 2001 than in 2000.
This change reflected a net cash inflow of $42.8 million from liquidation of
receivables in 2001, compared to a net cash outflow from a build-up of
receivables of $55.0 million in 2000. When comparing the working capital cash
flows for 2001 to 2000, the total $97.8 million increase in cash provided by
receivables related substantially to Comdata receivables activity and was
offset in part by a decrease of $54.6 million in cash provided by Comdata
drafts payable in those periods. The relationship of the period-end date and
the timing of weekly draft clearing operations at Comdata significantly
affected the amount of drafts payable and receivables outstanding at the end of
2001. The year 2001 ended on a Monday rather than on a weekend as it had in
2000, which permitted the weekly settlement of an additional amount of
receivables and drafts payable in the year 2001 reporting period compared to
2000.

Investing

During 2002, our investment in capital expenditures included $31.1 million
for property and equipment and $35.0 million for software and development
costs. The software development costs included $10.0 million for SourceWeb, a
web-enabled payroll/HR/self-service offering that HRS is rolling out in 2003.
During 2002, we also spent $15.6 million to acquire

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SYLINQ, $8.9 million for HR Comply, $19.0 million for Great Lakes
Strategies and a total of $6.8 million for other acquisitions. We described
these transactions further in the note to consolidated financial statements
entitled Investing Activity.

During 2001, our investment in capital expenditures included $43.2 million
for property and equipment and $50.8 million for software and development
costs, of which $23.6 million of software and development spending took place
during the first quarter. Investing cash flows also included a payment of $10.0
million to Ultimate to acquire a non-exclusive software license. Cash expended
for acquisitions during 2001 also included $20.2 million for minority
investments intended to expand product offerings in HRS as further discussed in
the Investing Activity note. Proceeds from sales of businesses and assets of
$18.7 million for 2001 principally represented our sale of common stock of
HotJobs.com, Ltd., which provided proceeds of $15.6 million.

Investing cash flows in 2000 included $65.1 million expended for
investments in and advances to businesses, including the May acquisition of the
remaining ownership interest in Stored Value Systems by Comdata and payments
related to purchase acquisitions made during the second quarter of 2000 and in
prior years. Our capital expenditures during 2000 amounted to $97.0 million,
including software development costs of $30.5 million. Capital expenditures in
2000 also involved $28.5 million, including furnishings and capitalized
interest, for our newly constructed headquarters facility and the renovation of
an office facility for use by our HRS benefits services business. In November
2000, we sold and leased back real property in Bloomington, Minnesota,
constituting our headquarters facility, for $41.0 million in cash. The annual
rental cost under the lease is approximately $4.2 million over a 20-year
period. In September 2000, we also sold property in Palm Harbor, Florida,
formerly used in HRS benefits services operations, for cash proceeds of $12.8
million.

Financing

In June 2002, Comdata entered into a $150.0 million receivables
securitization facility. The facility has up to a three-year term and used
certain of Comdatas trade receivables as collateral for borrowings. At
December 31, 2002, $150.0 million had been drawn against and remained
outstanding under this facility. We used those proceeds and additional
payments of $45.0 million to reduce borrowings under our $350.0 million
revolving credit facility to $40.0 million at the end of 2002. These advances,
along with a $2.3 million letter of credit, leave us with unused borrowing
capacity of $307.7 million, of which we have designated $150.0 million as
backup to the receivables securitization facility. Proceeds from exercises of
stock options and employee stock purchase plans during 2002 amounted to $34.9
million compared to $9.1 million in 2001. Higher market prices for Ceridian
stock, particularly in the second quarter of 2002, resulted in a higher level
of option exercises, which produced the increased proceeds. We purchased
393,000 shares of our common stock on the open market during the last half of
2002 for $5.4 million at an average price, including commissions, of $13.74 per
share. When we disposed of the $182.9 million net liabilities of Arbitron
discontinued operations at the time of the Arbitron spin-off, our retained
earnings increased by that amount. During the third quarter of

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2002, we reduced this amount and our net deferred tax asset by $5.7
million based on the filing of 2001 tax returns for the entities involved in
the Arbitron spin-off.

Our financing activities in 2001 largely involved transactions related to
the spin-off. At the time of the spin-off, advances of $235.0 million from the
January 2001 credit facility, a $225.0 million Arbitron payment and existing
cash balances funded the required early retirement of the $430.0 million of
senior notes outstanding and payment of the $50.0 million balance outstanding
under the $250.0 million domestic revolving credit facility dated July 1997.
The redemption of senior notes required a payment of $456.5 million. The
establishment of the January 2001 credit facility resulted in the payment of
$1.0 million for origination costs to be amortized over the term of the
facility. During the second quarter of 2001, we drew an additional $50.0
million of advances on the January 2001 credit facility in connection with the
litigation settlement described earlier in this discussion under Unusual
Items. During 2001, we reduced outstanding advances by payments of $50.0
million to $235.0 million. Another $2.0 million of the credit line was
utilized for letters of credit at December 31, 2001. In addition, payments of
$18.8 million and currency translation adjustments of $0.3 million extinguished
the balance of $19.1 million outstanding on our Canadian revolving credit
agreements at December 31, 2000 leaving only a $0.9 million letter of credit
outstanding at December 31, 2001. Financing cash flows in 2001 also included
cash inflows of $9.1 million from exercises of stock options and employee stock
plan purchases.

Our financing cash outflows in 2000 included the repurchase on the open
market of $20.0 million face amount of our outstanding senior notes, a
reduction of the amount outstanding under the U.S. revolving credit agreement
of $75.0 million, and payments of $19.6 million under the Canadian revolving
credit facilities. Financing cash inflows included $15.8 million of cash
proceeds from exercises of stock options and employee stock plan purchases.

For further information on financing cash flows, see a note to our
consolidated financial statements entitled Financing, and the following
section entitled Liquidity and Capital Resources.

Liquidity and Capital Resources

We expect to meet our liquidity needs from existing cash balances, cash
flows from operations and borrowings under external credit facilities. Cash
balances and cash flows are discussed under the section entitled Financial
Condition above. Cash flows from operations are primarily influenced by the
same factors that influence revenue as discussed in a preceding section of this
discussion entitled Results of Operations and in several of the items in the
following section entitled Cautionary Factors That Could Affect Future
Results. Cautionary factors of particular relevance include those that refer
to the effects of government regulations on such matters as the timing of tax
payments, interest rates, employee benefits, and funds transfer activities; our
ability to attract new customers and retain our existing customers; and general
economic conditions.

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Our expenditures for capital assets and software presently planned for
2003 total approximately $53.0 million with an estimated allocation of $45.0
million to HRS and $8.0 million to Comdata. Ceridian also plans to continue to
grow its business through strategic acquisitions.

As of December 31, 2002, we have unused borrowing capacity under the
$350.0 million revolving credit facility amounting to $307.7 million of which
we have designated $150.0 million as backup to the securitization of Comdata
receivables. We are also in compliance with all covenants related to these
facilities.

We have entered into lease and other contractual commitments that are not
reflected on our balance sheet at December 31, 2002, under generally accepted
accounting principles. The table below describes the annual cash payments for
which we are obligated under our financing agreements, which are reported on
our balance sheet, and our lease agreements and significant contractual
commitments, which are not on our balance sheet, at that date.

Financial Commitments at
December 31, 2002
(Dollars in Millions)

|                          |  |      |      |      |  |      |       |      |  |      |      |            |  |       |      |  |  |  |      |  |  |  |       |  |  |   |       | 
|------------------------- |  | ---- | ---- | ---- |  | ---- | ----- | ---- |  | ---- | ---- | ---------- |  | ----- | ---- |  |  |  | ---- |  |  |  | ----- |  |  | - | ----- | 
|                          |  | 2003 |      | 2004 |  | 2005 |       | 2006 |  | 2007 |      | Thereafter |  | Total
|                          |  |      |      |      |  |      |       |      |  |      |      |            |  |      
|Debt payments             |  | $    | 2.0  |      |  |      | 151.5 |      |  |      |     |            |  |       | 40.0 |  |  |  |     |  |  |  |      |  |  | $ | 193.5 | 
|Lease payments            |  | $    | 44.1 |      |  |      | 37.9  |      |  |      | 30.7 |            |  |       | 24.2 |  |  |  | 22.6 |  |  |  | 111.8 |  |  | $ | 271.3 | 
|Minimum contract payments |  | $    | 4.5  |      |  |      | 8.2   |      |  |      | 8.2  |            |  |       | 6.3  |  |  |  | 6.9  |  |  |  | 1.5   |  |  | $ | 35.6  | 

Our debt obligations are described above under the heading Financing and
in a note to our consolidated financial statements entitled Financing. Since
we have the capability and intention of continuing our use of short-term
borrowings under our Comdata receivables securitization agreement until June
2005 and our revolving credit facility until the facility matures in 2006, the
outstanding balances are treated as due on those maturity dates.

We conduct a substantial portion of our operations in leased facilities.
Most of these leases contain renewal options and require payments for taxes,
insurance and maintenance. We remain secondarily liable for future obligations
related to assigned leases totaling $1.3 million at December 31, 2002. We do
not anticipate any material non-performance by the assignees of these leases.

In March 2001, we entered into an agreement with
Ultimate that provided us with a non-exclusive license to use
Ultimates software as part of a Web-enabled integrated
payroll/HR/self-service offering to our small business
customers. Our initial payment to Ultimate amounted to
$10.0 million, which provided us with a non-exclusive
license to use its software product in our product offerings.
This payment was partially refundable pending successful
transfer of the technology. Amendments to the license agreement
in August 2001 and February 2002 eliminated any refundable
nature of the initial payment and deemed the technology transfer
complete as of February 2002. In February 2002, we additionally
agreed to pay Ultimate $0.5 million if an upgraded release
were to be delivered prior to August 31, 2002, which did
occur. The $10.5 million is accounted for as purchased
software under SOP 98-1 and amortized on a straight-line basis
over a seven-year period that began in March 2003 when our
SourceWeb software product incorporating this Ultimate software
was placed in service.

Pursuant to the February 2002 amendment, the
license agreement also provided for a monthly royalty commencing
in January 2003, which is based on the number of our
customers employees paid by using the software and subject
to minimum and maximum amounts. Pursuant to the February 2002
amendment, we made an advance payment of $6.0 million to
Ultimate at that time representing the minimum royalty
commitment for 2003. We remain obligated to future minimum
monthly payments of $0.5 million per month from January
2004 until January 1, 2006, when the per-employee monthly
charge will escalate at a rate of 5% per annum until the end of
the noncancellable term in March 2008. We recorded the
$6.0 million payment as prepaid expense and amortized this
amount to cost of revenue on a straight line basis over the
12 months of 2003. Royalty costs under this agreement will
be charged monthly to cost of revenue and paid according to the
terms of the agreement.

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In 2003, HRS expects to place in service software that, in connection with
this agreement, will enable HRS to roll out a new payroll service offering for
small business customers called SourceWeb. In addition to expenditures made
under the agreement, we invested an additional $13.6 million in adapting the
licensed software to meet the needs of this market. We expect that operational
and marketing costs will be higher in the first year of offering this service,
including quarterly payments totaling $2.3 million to Ultimate under a services
agreement effective January 1, 2003. In addition, we will be amortizing the
capitalized and prepaid costs related to the agreement over a 84-month period.
As a result, we expect that the launch of SourceWeb will reduce pre-tax
earnings for 2003 by approximately $15.0 million.

In connection with the acquisition of certain call center assets in
December 2002, we entered into royalty and services arrangements that are
noncancelable for the first 36 months. Under these arrangements, we are
obligated to make minimum payments of $2.2 million in each of 2003, 2004 and
2005.

Critical Accounting Policies

Ceridians significant accounting policies are described in a note to our
consolidated financial statements entitled Accounting Policies. We consider
the most critical of those policies to be revenue recognition and software and
development costs recoverability.

Revenue Recognition

We recognize revenue from sale of our products
and services when the following criteria are met:
(1) persuasive evidence of an arrangement exists;
(2) delivery has occurred or services have been rendered;
(3) the sellers price to the buyer is fixed or
determinable; and (4) collectibility is reasonably assured.
Generally, we rely on a signed contract between us and the
customer as the persuasive evidence of a sales arrangement. We
address these and the other criteria for revenue recognition in
the following discussion of types of revenue within our business.

HRS

Repetitive
Business

The majority of our HRS revenue is generated by
recurring monthly or quarterly fees from our payroll processing,
tax filing services, benefit administration services, work-life
effectiveness and employee assistance services, and human
resource outsourcing products. This revenue is generated by
service fees, income from investment of customer funds in lieu
of fees, software licenses and subscription fees.

Payroll
Processing.Generally, service
fees for HRS payroll transaction processing are contracted on a
per transaction basis and recognized as revenue when transaction
services are provided and the amount is billable. Ceridian
Canada also recognizes payroll services revenue from customer
funds held temporarily pending remittance to the customers
employees. These payroll deposits are invested through grantor
trusts. We derive and recognize investment income in lieu of
fees as a component of revenue as earned.

Tax Filing
Services.Our payroll tax filing
services consist primarily of: (1) collecting funds for
federal, state and local employment taxes from customers based
on payroll information provided by the customers;
(2) remitting funds collected to the appropriate taxing
authorities; (3) filing applicable returns; and
(4) handling related regulatory correspondence and
amendments for customers. Revenue from these tax filing services
is billed and recognized as the services are provided, generally
on a monthly basis.

We hold our customers tax filing deposits
for the period between collection and remittance of the funds to
the applicable taxing authority. These tax filing deposits are
invested through a grantor trust. We derive and recognize this
investment income in lieu of fees as a component of revenue as
earned.

Payroll processing and tax filing services are
all sold separately, so we have standalone value for each
service. Separate sales also establish the fair value of each of
the services sold in the event a customer contracts with us for
multiple services.

Benefits Administration
Services.We provide employee
health and welfare benefits administration and qualified
administration services to our customers. Employee health and
welfare benefits administration services include health
insurance portability compliance services related primarily to
COBRA (Consolidated Omnibus Budget Reconciliation Act). Health
and welfare benefits administration services also encompass
benefits provided to active employees, such as (1) annual
health plan enrollment, (2) ongoing employee enrollment and
eligibility services, (3) tuition refund plans,
(4) transportation reimbursement under the Transportation
Equity Act, and (5) Internal Revenue Code Section 125
plans (Flexible Spending), which include fully administered and
self-administered flexible spending accounts and premium-only
plans.

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We also provide retirement planning services that
include: (1) administration services for benefits provided
to retired and inactive employees, which include retiree
healthcare, disability, surviving dependent, family leave and
severance benefits; and (2) qualified plan administration
services which include 401(k) plan administration, profit
sharing administration, defined benefit plan administration,
ESOP administration and Qualified Domestic Relations Order
administration.

Revenue for COBRA services is earned and
recognized as the services are provided. Revenue associated with
other health and welfare benefits administration and retirement
planning services is recognized monthly based on the number of
customer employees that receive or participate in the benefit.

Benefits services are all sold separately, so we
have standalone value for each service. Separate sales also
establish the fair value of each of the services sold in the
event a customer contracts with us for multiple services.

Work-Life Effectiveness and Employee
Assistance Services
(LifeWorks).We
provide work-life effectiveness and employee assistance programs
to our clients. LifeWorks are delivered through on-line access
and telephonically, and through face-to-face meetings provided
by referral resources. Contracted fees for these services are
generally billed monthly. Revenue is earned and recognized over
the term of the contract based on the number of customer
employees served and the level of service.

Non-Repetitive
Business

Less than 5% of our consolidated revenue in 2002
is generated from the sale and installation of software and data
conversion services in our HRS businesses. These services may
also include training and other consulting. These services have
standalone value as they can be performed by independent
contractors or purchased separately. The fees for these services
are based upon published hourly rates that are considered
competitive with other providers and are consistent with hourly
rates billed for customization and consulting services performed
by us on a standalone basis. Revenue from consulting services is
non-refundable; is primarily determined on a time and materials
basis; and is recognized over the installation and conversion
period, generally two to four months.

Comdata

Comdata revenue is primarily generated from funds
transfer services and stored value card sales and transaction
services. Comdata also generates revenue from regulatory permit
and receivables factoring services as well as the sale of point
of sale terminals and other equipment to fueling centers.

Transportation

Comdatas funds transfer system is designed
to enable truck drivers to obtain funding for purchases and cash
advances at truck stops and other locations en route to their
destinations. Drivers may use Comdatas proprietary Comdata
card to purchase fuel, lodging and other approved items, obtain
cash advances from

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ATM machines or through the use of Comchek
drafts, make long distance phone calls and make direct deposits
of pay, settlements or trip advances to personal bank accounts.
Revenue from funds transfer transactions is based on a per
transaction fee that is based on either a fixed amount or a
percentage of the face value of the transaction and is
recognized when the transaction takes place.

In connection with its transportation services
business, Comdata purchases accounts receivable due to trucking
companies from manufacturers and shippers at a discount and with
recourse back to the trucking company in the event of
non-payment. The service that Comdata provides permits trucking
companies to receive payment on shipping invoices sooner. The
non-refundable discount represents adequate compensation charged
for servicing the receivables over a 30-day period. If the
collection period extends beyond 30 days, a non-refundable
additional fee is charged for each month of servicing. After
90 days, an uncollected receivable can be returned to the
seller for its face value.

Comdata recognizes revenue from the discounted
fee in the month of the purchase and the additional fees for
servicing as we become entitled to collect the fee.

Merchant
Services

Comdatas merchant services division
primarily provides fueling centers with: (1) PC-based,
point of sale systems that automate the various transactions
that occur at a fuel purchase desk; and (2) pay at
the pump systems which enable customers to transact
card-based fuel purchases at the pump. Revenue from the sale of
PC-based point of sale equipment and pay at the pump equipment
is recognized at the time the equipment is shipped. Recurring
service revenues for the merchant services division are
recognized as earned. Support and maintenance contracts are
generally for 12 month periods and are invoiced annually
with the revenues recognized on a straight-line basis over the
maintenance period.

Comdatas merchant services products
and services are all sold separately, so we have standalone
value for each product and service. Separate sales also
establish the fair value of each of the products and services
sold in the event a customer contracts with us for multiple
products and/or services.

Retail
Services

SVS sells stored value cards and provides
subsequent activation, reporting and transaction processing
services (services). Customers may also choose to
purchase cards alone, without a continuing obligation for
services from SVS. SVS recognizes revenue for card sales without
services upon shipment.

For card sales with services, revenue on both the
card sales and services are deferred and reported on the balance
sheet as deferred income. Costs of the cards sold are deferred
and reported on the balance sheet as prepaid expense. Costs on
the services are recognized as incurred. The deferred income and
prepaid expense on the card sale are recognized in earnings over
the transaction processing period (up to approximately
30 months), which begins upon activation of the card. The
deferred income on the services where we charge a fee for
unlimited transactions processed on a card is recognized in
earnings over the same transaction processing period which
begins upon activation of the card. The deferred income on the
services where we charge a fee each time a transaction is
processed on a card is recognized in earnings over the same
transaction processing period which begins each time a
transaction is processed. Our history of providing services to
our customers indicates that (1) we can expect activation
of a card within approximately 7 months following card
shipment, and (2) during the six months following the
activation of a card, approximately 90% of the services have
been performed.

Sales of cards under either arrangement do not
include a right of return of the cards shipped.

Gross
Versus Net Revenue

We include in revenue amounts that we bill for
and remit to third-party vendors for associated products and
services as required on a gross basis as a principal rather than
net as an agent when the following conditions are met:
(1) we are the primary obligor in the arrangement with the
customer; (2) we have credit risk and inventory risk;
(3) we have latitude in the establishment of pricing,
subject to general economic restraints; and (4) we have
full discretion in vendor selection.

Capitalized Software and Development Costs

With regard to the recoverability of capitalized software and development
costs, we regularly perform an assessment of our ability to recover the costs
invested in these assets. The amount of these costs shown on our balance sheet
at December 31, 2002 was $113.5 million. The elements of software and
development costs were purchased software of $32.8 million and internally
developed software of $80.7 million. These amounts represent the costs we have
invested in these assets, reduced by amortization expense charged against our
earnings as the software was used in our operations and by any write-downs as a
result of our recoverability analysis. Our recoverability analysis considers
projected future cash flows from the utilization of the underlying software.
The projections of future cash flows, which are determined by management, are
affected by such factors as technological change, competitive offerings,
marketplace expectations and project development. Changes in any of these
factors may result in future write-downs of the carrying value of these assets.
The amount of the write-down, if any, is largely dependent on managements
estimates of future cash flows and the selection of an appropriate discount
rate. As a result of software recoverability testing during the past three
years, we recorded asset write-down losses of $5.2 million in 2002, $3.1
million in 2001 and $9.0 million in 2000.

Cautionary Factors That Could Affect Future Results

In connection with the safe harbor provisions of the Private Securities
Reform Act of 1995, we present the cautionary statements set forth below,
identifying important factors that could cause our actual results to differ
materially from those projected in forward-looking statements made by us. You
should carefully consider each of the following risks and all of the other
information in this report. The risks and uncertainties described below and in
this report are not the only ones we will face. Additional risks and
uncertainties not presently known to us or that we currently believe to be
immaterial may also adversely affect our businesses. If any of the risks and
uncertainties develops into actual events, our business, financial condition or
results of operations could be materially affected. If that happens, the
trading price of our common stock could decline significantly.

Our revenue depends in large part on our ability to retain customers.

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Customer retention is an important factor in the amount and predictability
of revenue and profits in each of our businesses. Our ability to retain our
customers depends on a number of factors, including:



| |  |  | customer satisfaction                       
| | - |  | --------------------------------------------
|
| |  |  | product and service offerings by competitors
|
| |  |  | customer service levels                     
|
| |  |  | price                                       
|
| |  |  | customer viability                          

In providing some of our services, particularly HRS services, we incur
installation and conversion costs in connection with new customers that will
need to be recovered before the contractual relationship will provide
incremental profit. Longer customer relationships are likely to be more
profitable.

Changes in governmental regulations relating to employee benefits, funds
transfer and other matters may negatively impact our revenue and earnings.

Changes in or the elimination of governmental regulations may adversely
affect our revenue and earnings and the way we conduct our businesses. Changes
in governmental regulations are difficult to predict and could be significant.
For example, the extent and type of benefits that employers are required to or
may choose to provide employees and the amount and type of federal or state
taxes employers and employees are required to pay will affect the associated
new products or services that we may sell. As another example, Comdata is
currently licensed on the state level by the banking or financial institutions
departments of numerous states. Continued licensing by these states is subject
to ongoing satisfaction of compliance requirements regarding safety and
soundness, including, for example, posting of surety bonds to guarantee payment
of funds in transit. Changes in this regulatory environment, including the
implementation of new or varying measures by the U.S. federal government, may
significantly affect or change the manner in which Comdata currently conducts
some of the aspects of its business.

Our future revenue growth will depend on our ability to continue selling our
products and services to our existing customers, introducing new or enhanced
products and services, attracting and retaining new customers and selling
additional products and services to existing customers.

We expect that a portion of our anticipated future revenue growth in each
of our business segments will be derived from:



| |  |  | the continued selling of products and services to our
existing customers           
| | - |  | -----------------------------------------------------------------------------------
|
| |  |  | the planned introduction of new or enhanced products
and services in our businesses
|
| |  |  | the selling of products and services to new customers                              
|
| |  |  | the selling of additional products and services to our existing customers          

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How successful we will be in these efforts will depend on a variety of
factors, including:



| |  |  | our product and service offerings                                                                                                     
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | effective sales and marketing efforts                                                                                                 
|
| |  |  | our ability to attract new and retain new and existing customers                                                                      
|
| |  |  | the level of market acceptance and the avoidance of
difficulties or delays in development or introduction of new
products and services
|
| |  |  | our ability to integrate technology and information
systems into our products and services                                            
|
| |  |  | our successful implementation of products and services
for new and existing customers                                                 

There can be no assurance that we will achieve our revenue growth
objectives from our cross-selling efforts and selling of new products and
services. The inability to cross-sell our products and services, attract and
retain new customers or successfully develop and implement new and enhanced
products and services could harm our business.

Economic factors and litigation may harm our business and operating results.

Trade, monetary and fiscal policies, and political and economic conditions
may substantially change, with corresponding impacts on the industries that we
serve, particularly those more economically sensitive industries such as
trucking and retail. Approximately 80 percent of Comdatas revenue for 2002
was attributable to its transportation business. Comdatas results of
operations are, therefore, dependent on the level of activity in the
transportation industry, which, in turn, is affected by general economic
conditions. For example, a decrease in the number of truck drivers would
decrease the number of Comchek transactions and could adversely affect
Comdatas revenues. Similarly, since a significant portion of our fueling
transactions are priced by reference to the amount spent on the transaction,
our revenue can be significantly affected by changes in diesel fuel prices.
Falling diesel fuel prices directly reduce the amounts of revenue and earnings
related to these transactions. Rising diesel fuel prices increase our revenue
and earnings but also increase the working capital requirements of Comdata and
subject Comdata to greater credit or bad debt risks with respect to its
customers that purchase diesel fuel using a Comdata payment method.

Changes in trade, monetary and fiscal policies, and political and economic
conditions could also affect employment levels, with a corresponding impact on
our payroll processing and tax filing businesses. Decreased employment levels,
as well as slowed economic conditions, could negatively affect wage and bonus
payments, orders and the timing of product installations, and negatively impact
the operating results of our HRS business.

Our future operating results may also be harmed by adverse judgments,
settlements, unanticipated costs or other effects of legal and administrative
proceedings now pending or that may be instituted in the future.

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Any problems or delays we may experience in effecting system upgrades and
conversions could harm our business.

We expect to continue our efforts to transition to new or enhanced data
processing systems and/or software in several of our business units, including
systems that process customer data and internal management information systems
which provide enhanced data and information services. The successful
implementation of these new or enhanced systems will be critical to the
effective delivery of products and services and the efficient operation of our
businesses. Problems or delays with the installation or initial operation of
the new or enhanced systems could disrupt or increase costs in connection with
our delivery of services and with our operations planning, financial reporting
and management. From time to time, we have experienced these types of problems
or delays. For example, in 1997, we terminated a payroll processing
development project and incurred an unusual loss of $150.0 million.

Our ability to remain competitive depends on our ability to adapt to changing
technology.

As a provider of information management and data processing services, we
will need to adapt and respond to the technological advances offered by our
competitors and the technological requirements of our customers, including
those related to the Internet, in order to maintain and improve upon our
competitive position. For example, management intends to focus on developing
and fully implementing a strategy for our HRS business to provide services over
the Internet. As another example, Comdatas credit, debit and cash cards could
be replaced by a next-generation payment method. There can be no assurance
that we will develop and release new products and services or product and
service enhancements within the projected time frames and within targeted
costs. Significant delays, difficulties or added costs in introducing new
products and services or enhancements, either through internal development,
acquisitions or cooperative relationships with other companies, could adversely
affect the market acceptance of our products and services and our operating
results.

Our strategy to make acquisitions of and investments in complementary
businesses, products and technologies involves risks that could harm our
business and operating results.

One of our growth strategies is to make acquisitions of and investments in
complementary businesses, products and technologies that will enable us to add
products and services for our core customer base and for adjacent markets, and
to expand each of our businesses geographically. Our ability to make these
acquisitions and investments will depend on:



| |  |  | the availability of suitable acquisition candidates and
investments at acceptable costs
| | - |  | ---------------------------------------------------------------------------------------
|
| |  |  | our ability to compete effectively for these
acquisition candidates and investments    
|
| |  |  | the availability of capital to complete these
acquisitions and investments             

These risks could be heightened if we complete several acquisitions or
investments within a relatively short period of time. The benefits of an
acquisition or investment may often take

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considerable time to develop, and we cannot guarantee that any acquisition
or investment will in fact produce the revenue, earnings or business synergies
that we anticipated.

In addition, implementation of this strategy entails a number of risks,
including:



| |  |  | inaccurate assessment of undisclosed liabilities                                                                                        
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | entry into markets in which we may have limited or no experience                                                                        
|
| |  |  | potential loss of key employees or customers of the acquired businesses                                                                 
|
| |  |  | difficulties in assimilating the operations and
products of an acquired business or in realizing projected
efficiencies and cost savings
|
| |  |  | reallocation of significant amounts of capital from
operating initiatives to acquisitions                                               
|
| |  |  | increase in our indebtedness and a limitation in our
ability to access additional capital when needed                                   

In addition, some acquisitions and investments may require the consent of
the lenders under our $350 million revolving credit facility, and we cannot
predict whether approvals would be forthcoming or the terms on which the
lenders would approve these transactions. Also, from an accounting
perspective, acquisitions and investments may involve non-recurring charges and
significant charges from periodic reassessments of the recoverable value of
goodwill and other intangible assets arising from acquisitions that could harm
our operating results.

Our $350 million revolving credit and Comdata Receivables Securitization
facilities may restrict our operating flexibility.

The governing documents for our $350 million revolving credit and Comdata
Receivables Securitization facilities contain a number of significant
provisions that, among other things, restrict our ability to:



| |  |  | sell assets                                       
| | - |  | --------------------------------------------------
|
| |  |  | incur more indebtedness                           
|
| |  |  | grant or incur liens on our assets                
|
| |  |  | make investments or acquisitions                  
|
| |  |  | enter into leases or assume contingent obligations
|
| |  |  | engage in mergers or consolidations               
|
| |  |  | engage in transactions with our affiliates        

These restrictions could hurt our ability to finance our future operations
or capital needs or make acquisitions that may be in our best interest. In
addition, our credit facilities require that we satisfy several financial
covenants. Our ability to comply with these financial requirements and other
restrictions may be affected by events beyond our control, and our inability to
comply with them could result in a default under a credit facility. If a
default occurs under one of our credit facilities, the lenders under the other
facility could elect to declare all of the outstanding borrowings, as well as
accrued interest and fees, to be due and payable and require us to apply all

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of our available cash to repay those borrowings. In addition, a default
may result in higher rates of interest and the inability to obtain additional
capital.

The markets we serve may attract new competitors or cause current competitors
to focus more on these markets, which could harm our business.

New competitors could decide to enter the markets we serve or current
competitors could decide to focus more on these markets, and thereby intensify
the highly competitive conditions that already exist. These new entrants and
existing competitors could offer or introduce new technologies or a different
service model, or could treat the services to be provided by one of our
businesses as one component of a larger product or service offering. These
developments could enable these new and existing competitors to offer similar
products or services at reduced prices. Any of these or similar developments
could harm our business and results of operations.

We will be subject to risks related to our international operations, which may
harm our operating results.

We have international operations in Canada and the United Kingdom, which
in 2002 provided about 22 percent of the revenue from our HRS division and
subsidiaries. Our Centrefile Limited subsidiary provides human resource
services, payroll processing services and human resource information systems
software in the United Kingdom. Centrefile is expanding its payroll services
into other countries in Europe by engaging a partner within a country to
provide us with payroll administration and processing services for that
country. Our Canadian operations handle and hold payroll as well as tax filing
funds for our Canadian customers. Comdata also operates in Canada and is
expanding into Mexico. Apart from the risks described in this section of the
report, international operations are subject to various additional risks which
could adversely affect those operations or our business as a whole, including:



| |  |  | costs of customizing products and services for foreign customers     
| | - |  | ---------------------------------------------------------------------
|
| |  |  | difficulties in managing and staffing international operations       
|
| |  |  | difficulties with or inability to engage partners in Europe          
|
| |  |  | reduced protection for intellectual property rights in some countries
|
| |  |  | longer sales and payment cycles                                      
|
| |  |  | the burdens of complying with a wide variety of foreign law          
|
| |  |  | exposure to local economic conditions                                
|
| |  |  | unfavorable currency exchange rates                                  

We expect to continue to implement our plans to improve the performance of our
U.S. HRS business, and we cannot assure you that our efforts and the amount we
invest in these plans will improve the financial performance of our U.S. HRS
business.

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We have ongoing and continued initiatives to invest in and improve the
performance of our U.S. HRS business. These initiatives include:



| |  |  | transitioning small and medium size business customers
to our Internet payroll products                                                     
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | improving our customer service model                                                                                                        
|
| |  |  | improving customer retention                                                                                                                
|
| |  |  | continuing product enhancements                                                                                                             
|
| |  |  | investing in our Six Sigma program, an effort that
focuses on helping organizations produce products and services
better, faster and cheaper
|
| |  |  | consolidating and improving efficiencies at our payroll
processing centers and benefits administration operations                           
|
| |  |  | increasing the effectiveness of our sales efforts                                                                                           

We cannot assure you that our efforts and the amount we invest in this
process will improve the financial performance of our U.S. HRS business, and if
so, by how much. If these initiatives are less successful than planned, or the
level of investment needs to be increased, our business could be harmed.

Government regulation changes on timing or amount of remittances and changes in
interest rates may reduce our investment income from customer deposits.

Our payroll and tax filing business in the United States and Canada has
historically derived significant revenue and earnings from the investment of
customer deposits, and this revenue and earnings are an integral part of our
payroll and tax filing business. Changes in governmental regulations on the
timing and amount of remittances may reduce the period of time we are allowed
to hold these remittances, as well as the amount of such remittances, and may
decrease our revenue and earnings from this source. If governmental
regulations change in this fashion, we would likely seek to require customers
who permit us to retain earnings on their deposits to pay us additional fees in
lieu of this lost investment income.

In addition, changes in interest rates will affect our revenue and
earnings from this source. The average yield on our investment of customer
deposits was 4.83 percent in 2002. Interest rate changes are difficult to
predict and could be significant. We expect to continue to lessen the impact
of interest rate decreases by the use of derivative securities such as interest
rate contract transactions that are described in more detail in a note to our
consolidated financial statements entitled Commitments and Contingencies and
under Part II, Item 7A of this report. There can be no assurance that we will
be able to use derivative securities such as collars and swaps or obtain them
on favorable terms, or to what extent any decrease in investment income would
be offset by the use of these derivative securities. If we were unable to
secure derivative securities on favorable terms and interest rates decrease,
our financial results would be harmed.

Our ability to improve operating margins in our HRS business will depend on the
degree to which and the speed with which we will be able to increase
operational efficiencies and reduce operating costs.

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Our ability to improve profit margins in our HRS business will depend on
factors that include the degree to which and the speed with which we will be
able to increase operational efficiencies and reduce operating costs. Delays
or difficulties in implementing and consolidating process improvements, such as
those designed to reduce printing, telecommunication and customer service
costs, or quickly and effectively installing new customers or new products and
services, and in consolidating various functions, including administrative
functions, eliminating duplicate operations and consolidating facilities could
adversely affect the timing or effectiveness of cost reduction and margin
improvement efforts.

The failure of our benefit services subsidiary to comply with applicable laws
relating to employee benefits administration could result in substantial taxes,
penalties and liabilities that could harm our business.

As a result of the benefits services our benefit services subsidiary
provides, it may be subject to potential legal liability as a provider of
portability compliance services. As a provider of COBRA (Consolidated Omnibus
Budget Reconciliation Act) compliance services, our benefit services subsidiary
is subject to excise taxes for noncompliance with provisions of COBRA. In
addition to the excise tax liability that may be imposed on our benefit
services subsidiary, substantial excise taxes may be imposed under COBRA on our
customers. In addition, as a provider of HIPAA (Health Insurance Portability
and Accountability Act of 1996) compliance and administration services, our
benefit services subsidiary is subject to ERISA (Employee Retirement Income
Security Act of 1974) penalties for noncompliance with various provisions of
HIPAA.

Under various service agreements with its customers, our benefit services
subsidiary assumes financial responsibility for the payment of the taxes and/or
penalties assessed against its customers if a court of competent jurisdiction
in a final nonappealable decision determines that our benefit services
subsidiary failed to comply with COBRA, failed to comply with HIPAA or
liabilities were incurred by its customers arising out of the failure of our
benefit services subsidiary to fulfill the obligations under its agreements
with its customers, unless these taxes, penalties or liabilities are
attributable to the customers failure to comply with COBRA or HIPAA or with
the terms of the agreement the customer has with our benefit services
subsidiary. These taxes, penalties and liabilities could, in some cases, be
substantial and could harm our business and operating results. Additionally,
the failure of our benefit services subsidiary to comply with applicable
provisions of COBRA or HIPAA or to fulfill its obligations under its customer
agreements could harm its reputation, its relationship with its customers and
its ability to gain new customers.

The failure of our HRS business to comply with applicable laws relating to
payroll tax and retirement plan administration could result in substantial
taxes, penalties and liabilities that could harm our business.

Our HRS customers transfer to our HRS division or its subsidiaries
contributed employer and employee tax funds and employer and employee
contributions to qualified retirement plans. Our HRS division or its
subsidiaries process the data received from its customers and remit the

57



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funds along with a tax return to the appropriate taxing authorities when
due. Retirement plan assets are remitted to investment vehicles selected by
the plan administrator or plan sponsor. Tracking, processing and paying these
tax liabilities and administering retirement plans is complex. Mistakes may
occur in connection with this service. Our HRS division or its subsidiaries
and its customers are subject to large cash penalties imposed by tax
authorities for late filings or underpayment of taxes or required plan
contributions. Under service agreements with its customers, our HRS division
or its subsidiaries assume financial responsibility for the payment of the
penalties assessed against its customers arising out of the failure of our HRS
division or its subsidiaries to fulfill its obligations under its agreements
with these customers, unless these penalties are attributable to the customers
failure to comply with the terms of the agreement the customer has with our HRS
division or its subsidiaries. These penalties could, in some cases, be
substantial and could harm its business and operating results. Additionally,
the failure of our HRS division or its subsidiaries to fulfill its obligations
under its customer agreements could harm our reputation, its relationship with
our customers and its ability to gain new customers.

Our HRS business experiences generally higher revenues during first and fourth
quarters which may cause our operating results to fluctuate significantly.

Our HRS business experiences generally higher revenues during the first
quarter as a result of higher payroll funds being processed due to year-end
bonuses being paid and additional year-end services required, such as the
preparation and distribution of W-2s, and during the fourth quarter as result
of special reporting requirements. We expect this trend to continue, which
could cause our quarterly operating results to fluctuate significantly.

The business and results of operations of our Comdata subsidiary are heavily

dependent on several of its vendors and suppliers, the loss of whom could
adversely affect our consolidated results of operations.

Comdatas business is dependent on several significant vendors and
suppliers, the loss of whom could adversely affect not only Comdatas results
of operations but our consolidated results of operations as well. For example,
Comdatas current business relies upon its relationships with third party
suppliers, such as MasterCard, to effect and support transactions, including
access to the Cirrus ATM network and the Maestro point-of-sale debit network.
The ability of Comdata to continue to provide some of its services in the
manner in which it currently delivers them may be affected by actions taken by
MasterCard or other similar card associations. Any adverse change in Comdatas
relationship with these vendors could likely adversely affect Comdatas
business and results of operations and could harm our consolidated results of
operations as well.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Our market risk exposure is primarily due to the
variability of interest income earned on the investment of
customer funds in lieu of fees and reported as revenue. Due to
the short-term nature of customers obligations paid by
funds in our possession, investments of these funds must have
very short maturities. This exposes our interest revenue from
customer funds to changes in short-term interest rates which are
highly volatile. Our objective in managing interest revenue is
to provide a stable and predictable source of such revenue. To achieve this objective
we coordinate a risk management program of investing in
longer-term assets where possible, issuing floating rate debt, and purchasing
interest rate derivative securities (e.g. collars, swaps) that
have the effect of converting variable short-term rates into
fixed long-term rates. By converting the short-term interest
rate exposure to fixed rates, or offsetting short-term interest
earned with short-term interest payments on debt, we achieve a
high degree of stability and predictability of net interest
income. The fair value of our interest rate derivative securities was
$71.4 million at December 31, 2002 and $24.3 million
at December 31, 2001.

The table below indicates the hypothetical change in our after-tax
investment income, net of interest expense, over a one-year period due to an
immediate and sustained change in the annual average interest rate. The base
scenario utilizes a federal funds rate of 1.25% at December 31, 2002.

|                                 |                                     |                           |      |                          |  | 
|-------------------------------- | ----------------------------------- | ------------------------- | ---- | ------------------------ |  | 
|Percent Change in Interest Rates | Hypothetical Change in Net Interest
|Expressed in Basis Points        |                                     | Income from Base Scenario
|                                 |                                     |                          
|                                 |                                     |                           |      | (in millions of dollars)
|300 Rise                         |                                     |                           | 4.4  |                         
|200 Rise                         |                                     |                           | 2.9  |                         
|100 Rise                         |                                     |                           | 1.4  |                         
|50 Rise                          |                                     |                           | 0.7  |                         
|25 Rise                          |                                     |                           | 0.4  |                         
|Base Scenario                   
|25 Decline                       |                                     |                           | (0.4 | )                       
|50 Decline                       |                                     |                           | (0.7 | )                       
|100 Decline                      |                                     |                           | (1.4 | )                       

Computations in the table above are based on assumptions about the amounts
of customer funds and the relative levels of short-term market interest rates
within U.S. and Canadian markets and should not be relied on as precise
indicators of future expected results. Included in the computations are the
effects of interest rate changes on income and expense related to all
short-term and floating rate assets and liabilities owned or issued by Ceridian
or its subsidiaries, including interest rate contracts. The interest rate
contracts that are or will be effective for 2003 cover an average of $800.0
million of payroll and tax filing investments with an average floor strike rate
of 5.08% and an average cap strike rate of 5.91%. In addition, we have entered
into forward contracts with floors ranging from 5.50% to 6.00% in order to
continue coverage at the current level through 2004 and with various maturity
dates ranging out to December 2007. We intend to obtain additional contracts
when market conditions are favorable to replace maturing contracts. We refer
you to a note to our consolidated financial statements entitled Commitments
and Contingencies, found in Part II, Item 8 of this report, for additional
information on interest rate contracts.

We actively monitor and control our overall
interest rate risk exposure such that over the year income from
net assets exposed to changes in interest rates remains fairly
constant. During 2002 our net assets exposed to short-term
assets increased $89 million due to increased customer
assets, adding $144 million after tax per 25 basis points of
sensitivity to changes in interest rates. We currently
anticipate generally falling interest rates in the U.S. and
rising interest rates in Canada. We also intend to
obtain additional interest rate derivative securities when
market conditions are favorable to replace maturing interest
rate contracts. We have no forward interest rate contracts
starting effectiveness for periods beginning after 2004. We
refer you to Note K, Commitments and
Contingencies, in our consolidated financial statements
for additional information on derivative securities.

Other secondary market risk exposures we face
include fuel price risk and foreign exchange risk. Our Comdata
transportation services business revenue and net income is
exposed to variability based on changes in the prices of diesel
fuel. For a large portion of its transportation services
customers, Comdata earns fee revenue for card transactions based
on a percentage of the total amount of each fuel purchase. An
increase/decrease in the price of diesel fuel
increases/decreases the total dollar amount of fuel purchases
and Comdata revenue, accordingly. We estimate that for each $.10
change in the average price of diesel fuel per year, Comdata
revenue and pretax profit are impacted by $1.8 million,
before impact of any fuel price hedging program.

Our exposure to foreign exchange market risk related to our payroll and
human resource operations in Canada and the UK is not considered material to
our financial condition or results of operations. These foreign operations
serve their respective domestic markets, with all revenues and expenses
denominated in local currency. Other intercompany charges between U.S. and
non-U.S. based operations are not material. Translation adjustments on
investments in foreign operations are reported in comprehensive income and are
not hedged.

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Item 8. Financial Statements and Supplementary Data



|1. |  | Index to Consolidated Financial Statements.                                     
|-- |  | --------------------------------------------------------------------------------
|  
|   |  | The following financial statements and reports are filed as part of this
report:

|                                                                                                                 |  |      |       | 
|---------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | 
|                                                                                                                 |  | Page
|                                                                                                                 |  |     
|Independent Auditors Report                                                                                     |  |      | 61    | 
|Consolidated Statements of Operations (Restated) for the years ended
December 31, 2002, 2001 and 2000            |  |      | 62    | 
|Consolidated Balance Sheets (Restated) as of December 31, 2002 and 2001                                          |  |      | 63    | 
|Consolidated Statements of Cash Flows (Restated) for the years ended
December 31, 2002, 2001 and 2000            |  |      | 64    | 
|Consolidated Statements of Stockholders Equity (Restated ) for the
years ended December 31, 2002, 2001 and 2000 |  |      | 65    | 
|Notes to Consolidated Financial Statements (Restated) for the three
years ended December 31, 2002                |  |      | 66-89 | 



|2. |  | Index to Financial Statement Schedules.
|-- |  | ---------------------------------------

The following financial statement schedule and report is filed as part of
this report and should be read in conjunction with the Consolidated Financial
Statements:

|                                                             |  |      |    | 
|------------------------------------------------------------ |  | ---- | -- | 
|                                                             |  | Page
|                                                             |  |     
|Schedule II. Valuation and Qualifying Accounts               |  |      | 90 | 
|Independent Auditors Report on Financial Statement Schedule |  |      | 91 | 

60



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Independent Auditors Report The Board of Directors and Stockholders of
Ceridian Corporation: We have audited the accompanying consolidated balance sheets of Ceridian
Corporation and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of operations, cash flows and stockholders equity for
each of the years in the three-year period ended December 31, 2002. These
consolidated financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ceridian
Corporation and subsidiaries as of December 31, 2002 and 2001, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America. As
discussed in Note B to the consolidated financial statements, the Company has restated its consolidated
financial statements for the years ended December 31, 2002, 2001 and 2000. As discussed in Note A to the consolidated financial statements, the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets, on January 1, 2002. /s/ KPMG LLP Minneapolis, Minnesota
January 22, 2003
(except as to Note B which is as of March 12, 2004) 61




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CONSOLIDATED STATEMENTS OF OPERATIONS
(RESTATED) (Dollars in millions, except per share data)Years Ended December 31,2002
    
    2001
    
    2000Revenue
    
    $
    1,191.0
    
    
    $
    1,179.0
    
    
    $
    1,174.8Costs and ExpensesCost of revenue
    
    
    561.1
    
    
    
    561.8
    
    
    
    550.9Selling, general and administrative
    
    
    389.4
    
    
    
    417.5
    
    
    
    371.1Research and development
    
    
    59.3
    
    
    
    59.0
    
    
    
    62.8Other expense (income)
    
    
    34.3
    
    
    
    48.2
    
    
    
    31.7Interest income
    
    
    (2.1
    )
    
    
    (6.5
    )
    
    
    (4.7
    )Interest expense
    
    
    6.6
    
    
    
    19.0
    
    
    
    39.8Total costs and expenses
    
    
    1,048.6
    
    
    
    1,099.0
    
    
    
    1,051.6Earnings before income taxes
    
    
    142.4
    
    
    
    80.0
    
    
    
    123.2Income tax provision
    
    
    50.3
    
    
    
    33.1
    
    
    
    46.6Earnings from continuing operations
    
    
    92.1
    
    
    
    46.9
    
    
    
    76.6Discontinued operationsGain (loss) on disposition
    
    
    
    
    
    
    5.2
    
    
    
    (6.9
    )Earnings from operations
    
    
    
    
    
    
    
    
    
    
    27.6Net earnings
    
    $
    92.1
    
    
    $
    52.1
    
    
    $
    97.3Basic earnings per shareContinuing operations
    
    $
    0.62
    
    
    $
    0.32
    
    
    $
    0.53Net earnings
    
    $
    0.62
    
    
    $
    0.36
    
    
    $
    0.67Diluted earnings per shareContinuing operations
    
    $
    0.61
    
    
    $
    0.32
    
    
    $
    0.52Net earnings
    
    $
    0.61
    
    
    $
    0.35
    
    
    $
    0.66Shares used in calculations (in thousands)Weighted average shares (basic)
    
    
    148,029
    
    
    
    146,069
    
    
    
    145,229Dilutive securities
    
    
    2,533
    
    
    
    2,527
    
    
    
    1,505Weighted average shares (diluted)
    
    
    150,562
    
    
    
    148,596
    
    
    
    146,734
 See notes to consolidated financial statements. 62




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CONSOLIDATED BALANCE SHEETS (RESTATED) (Dollars in millions, except per share data)December 31,2002
    
    2001ASSETSCurrent assetsCash and equivalents
    
    $
    134.3
    
    
    $
    116.2Trade and other receivablesTrade, less allowance of $18.4 and $16.2
    
    
    393.1
    
    
    
    376.4Other
    
    
    27.5
    
    
    
    21.8Total
    
    
    420.6
    
    
    
    398.2Current portion of deferred income taxes
    
    
    28.4
    
    
    
    31.7Other current assets
    
    
    45.9
    
    
    
    33.9Total current assets
    
    
    629.2
    
    
    
    580.0Property, plant and equipment, net
    
    
    149.1
    
    
    
    159.3Goodwill
    
    
    890.3
    
    
    
    860.8Other intangible assets, net
    
    
    114.5
    
    
    
    115.0Software and development costs, net
    
    
    113.5
    
    
    
    92.9Prepaid pension cost
    
    
    11.7
    
    
    
    10.7Deferred income taxes, less current portion
    
    
    22.5
    
    
    
    7.8Investments
    
    
    17.5
    
    
    
    26.9Derivative securities
    
    
    71.4
    
    
    
    24.3Other noncurrent assets
    
    
    10.3
    
    
    
    0.8Total assets before customer funds
    
    
    2,030.0
    
    
    
    1,878.5Customer funds
    
    
    2,440.9
    
    
    
    2,170.9Total assets
    
    $
    4,470.9
    
    
    $
    4,049.4LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesShort-term debt and current portion of long-term obligations
    
    $
    2.0
    
    
    $
    1.5Accounts payable
    
    
    35.3
    
    
    
    31.2Drafts and settlements payable
    
    
    120.8
    
    
    
    115.6Customer advances
    
    
    13.2
    
    
    
    11.8Deferred income
    
    
    48.8
    
    
    
    53.8Accrued taxes
    
    
    61.1
    
    
    
    66.2Employee compensation and benefits
    
    
    55.9
    
    
    
    64.0Other accrued expenses
    
    
    42.8
    
    
    
    46.3Total current liabilities
    
    
    379.9
    
    
    
    390.4Long-term obligations, less current portion
    
    
    191.5
    
    
    
    236.4Deferred income taxes
    
    
    25.4
    
    
    
    24.8Employee benefit plans
    
    
    278.3
    
    
    
    140.1Deferred income and other noncurrent liabilities
    
    
    35.2
    
    
    
    31.2Total liabilities before customer funds obligations
    
    
    910.3
    
    
    
    822.9Customer funds obligations
    
    
    2,440.9
    
    
    
    2,170.9Total liabilities
    
    
    3,351.2
    
    
    
    2,993.8Stockholders equityCommon stock, $.01 par, authorized 500,000,000 shares,
issued 148,657,541 and 146,487,624
    
    
    1.5
    
    
    
    1.5Additional paid-in capital
    
    
    906.3
    
    
    
    870.1Retained earnings
    
    
    400.3
    
    
    
    313.9Treasury common stock, 117,001 and 2,662 shares
    
    
    (1.6
    )
    
    
    Accumulated other comprehensive income
    
    
    (186.8
    )
    
    
    (129.9
    )Total stockholders equity
    
    
    1,119.7
    
    
    
    1,055.6Total liabilities and stockholders equity
    
    $
    4,470.9
    
    
    $
    4,049.4
 See notes to consolidated financial statements. 63




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CONSOLIDATED STATEMENTS OF CASH FLOWS (RESTATED) (Dollars in millions)Years Ended December 31,2002
    
    2001
    
    2000Cash Flows from Operating ActivitiesNet earnings
    
    $
    92.1
    
    
    $
    52.1
    
    
    $
    97.3Adjustments to reconcile net earnings to net cash provided by
operating activities:Discontinued operations
    
    
    
    
    
    
    (5.2
    )
    
    
    (20.7
    )Deferred income tax provision
    
    
    13.2
    
    
    
    28.9
    
    
    
    43.7Depreciation and amortization
    
    
    75.9
    
    
    
    105.4
    
    
    
    97.2Provision for doubtful accounts
    
    
    17.0
    
    
    
    15.8
    
    
    
    14.8Asset write-downs
    
    
    6.7
    
    
    
    6.1
    
    
    
    18.3Loss (gain) on marketable and derivative securities
    
    
    8.1
    
    
    
    (19.2
    )
    
    
    Reduction of environmental accrual
    
    
    (4.1
    )
    
    
    
    
    
    
    Contribution to supplemental retirement plan trust
    
    
    (3.3
    )
    
    
    
    
    
    
    Other
    
    
    (6.6
    )
    
    
    (9.0
    )
    
    
    (5.7
    )Decrease (increase) in trade and other receivables
    
    
    (37.9
    )
    
    
    42.8
    
    
    
    (55.0
    )Increase (decrease) in accounts payable
    
    
    2.7
    
    
    
    (0.7
    )
    
    
    (9.9
    )Increase (decrease) in drafts and settlements payable
    
    
    5.2
    
    
    
    (21.1
    )
    
    
    33.5Increase (decrease) in employee compensation and benefits
    
    
    (9.1
    )
    
    
    (1.6
    )
    
    
    4.0Increase (decrease) in accrued taxes
    
    
    6.0
    
    
    
    (3.9
    )
    
    
    25.1Increase (decrease) in other current assets and liabilities
    
    
    (17.0
    )
    
    
    (15.7
    )
    
    
    1.2Cash provided by (used for) operating activities of
discontinued
operations
    
    
    
    
    
    
    (0.8
    )
    
    
    24.8Net cash provided by operating activities
    
    
    148.9
    
    
    
    173.9
    
    
    
    268.6Cash Flows from Investing ActivitiesExpended for property, plant and equipment
    
    
    (31.1
    )
    
    
    (43.2
    )
    
    
    (66.5
    )Expended for software and development costs
    
    
    (35.0
    )
    
    
    (50.8
    )
    
    
    (30.5
    )Proceeds from sales of businesses and assets
    
    
    0.5
    
    
    
    18.7
    
    
    
    56.3Expended for investments and business acquisitions, less cash acquired
    
    
    (50.3
    )
    
    
    (30.2
    )
    
    
    (65.1
    )Cash used by investing activities of discontinued operations
    
    
    
    
    
    
    (1.2
    )
    
    
    (2.1
    )Net cash provided by (used for) investing activities
    
    
    (115.9
    )
    
    
    (106.7
    )
    
    
    (107.9
    )Cash Flows from Financing ActivitiesRevolving credit and overdrafts, net
    
    
    (44.6
    )
    
    
    166.4
    
    
    
    (95.1
    )Repayment of other debt
    
    
    
    
    
    
    (456.6
    )
    
    
    (20.6
    )Repurchase of common stock
    
    
    (5.4
    )
    
    
    
    
    
    
    (1.4
    )Proceeds from exercise of stock options and other
    
    
    34.9
    
    
    
    9.1
    
    
    
    15.8Cash provided by financing activities of discontinued operations
    
    
    
    
    
    
    225.0
    
    
    
    Net cash provided by (used for) financing activities
    
    
    (15.1
    )
    
    
    (56.1
    )
    
    
    (101.3
    )Effect of Exchange Rate Changes on Cash
    
    
    0.2
    
    
    
    
    
    
    
    (1.1
    )Net Cash Flows Provided (Used)
    
    
    18.1
    
    
    
    11.1
    
    
    
    58.3Cash and equivalents at beginning of year
    
    
    116.2
    
    
    
    105.1
    
    
    
    46.8Cash and equivalents at end of year
    
    $
    134.3
    
    
    $
    116.2
    
    
    $
    105.1
 Years Ended December 31,Interest and Income Taxes Paid (Refunded)
    
    2002
    
    2001
    
    2000Interest paid
    
    $
    7.0
    
    
    $
    16.6
    
    
    $
    40.3Income taxes paid
    
    $
    32.0
    
    
    $
    15.3
    
    
    $
    10.6Income taxes refunded
    
    $
    (1.1
    )
    
    $
    (1.3
    )
    
    $
    (5.4
    )
 See notes to consolidated financial
statements. 64




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CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (RESTATED) (Dollars in millions)Amount
    
    Shares2002
    
    2001
    
    2000
    
    2002
    
    2001
    
    2000Common Shares IssuedBeginning balance
    
    $
    1.5
    
    
    $
    80.8
    
    
    $
    80.8
    
    
    
    146,487,624
    
    
    
    161,685,596
    
    
    
    161,685,596Exercises of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,008,932
    
    
    
    411,376
    
    
    
    Restricted stock awards, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,184
    
    
    
    60,555
    
    
    
    Employee stock purchase plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    133,801
    
    
    
    195,984
    
    
    
    Spin-off adjustments (Note D)
    
    
    
    
    
    
    (79.3
    )
    
    
    
    
    
    
    
    
    
    
    (15,865,887
    )
    
    
    Ending
balance - issued
    
    $
    1.5
    
    
    $
    1.5
    
    
    $
    80.8
    
    
    
    148,657,541
    
    
    
    146,487,624
    
    
    
    161,685,596Treasury
Stock - Common SharesBeginning balance
    
    $
    
    
    
    $
    (342.9
    )
    
    $
    (364.6
    )
    
    
    (2,662
    )
    
    
    (15,931,215
    )
    
    
    (16,951,228
    )Repurchases
    
    
    (5.4
    )
    
    
    
    
    
    
    (1.4
    )
    
    
    (393,000
    )
    
    
    
    
    
    
    (54,953
    )Exercises of stock options
    
    
    1.6
    
    
    
    1.1
    
    
    
    16.4
    
    
    
    113,206
    
    
    
    51,571
    
    
    
    762,875Restricted stock awards, net
    
    
    (0.1
    )
    
    
    0.2
    
    
    
    
    
    
    
    (1,790
    )
    
    
    8,782
    
    
    
    1,350Employee stock purchase plans
    
    
    2.3
    
    
    
    0.1
    
    
    
    6.7
    
    
    
    167,245
    
    
    
    2,313
    
    
    
    310,741Spin-off adjustments (Note D)
    
    
    
    
    
    
    341.5
    
    

    
    
    
    
    
    
    
    
    
    15,865,887
    
    
    
    Ending
balance - treasury
    
    $
    (1.6
    )
    
    $
    
    
    
    $
    (342.9
    )
    
    
    (117,001
    )
    
    
    (2,662
    )
    
    
    (15,931,215
    )Common Shares Outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,540,540
    
    
    
    146,484,962
    
    
    
    145,754,381Additional Paid-In CapitalBeginning balance
    
    $
    870.1
    
    
    $
    1,122.7
    
    
    $
    1,126.2Exercises of stock options
    
    
    28.8
    
    
    
    5.1
    
    
    
    (6.0
    )Tax benefit from stock options
    
    
    4.6
    
    
    
    0.9
    
    
    
    3.3Restricted stock awards, net
    
    
    0.6
    
    
    
    0.7
    
    
    
    0.6Employee stock purchase plans
    
    
    2.2
    
    
    
    2.9
    
    
    
    (1.4
    )Spin-off adjustments (Note D)
    
    
    
    
    
    
    (262.2
    )
    
    
    Ending balance
    
    $
    906.3
    
    
    $
    870.1
    
    
    $
    1,122.7
    
    

    Comprehensive Income (Loss)2002
    
    
    
    2001
    
    
    
    2000Retained Earnings (Deficit)Beginning balance (Note B)
    
    $
    313.9
    
    
    $
    78.9
    
    
    $
    (18.4
    )Net earnings (Note B)
    
    
    92.1
    
    
    
    52.1
    
    
    
    97.3
    
    
    $
    92.1
    
    
    $
    52.1
    
    
    $
    97.3Spin-off adjustments (Note D)
    
    
    (5.7
    )
    
    
    182.9
    
    
    
    Ending balance
    
    $
    400.3
    
    
    $
    313.9
    
    
    $
    78.9Accumulated Other Comprehensive Income (Loss)Foreign currency translationBeginning balance
    
    $
    (10.3
    )
    
    $
    (8.7
    )
    
    $
    (3.2
    )Rate changes, net
    
    
    2.8
    
    
    
    (1.6
    )
    
    
    (5.5
    )
    
    
    2.8
    
    
    
    (1.6
    )
    
    
    (5.5
    )Ending balance
    
    
    (7.5
    )
    
    
    (10.3
    )
    
    
    (8.7
    )Unrealized gain on securitiesBeginning balance
    
    $
    13.8
    
    
    $
    11.7
    
    
    $
    Change in unrealized gain, net of
income taxes of $26.8, $10.2 and $6.4
    
    
    50.0
    
    
    
    18.9
    
    
    
    11.7
    
    
    
    50.0
    
    
    
    18.9
    
    
    
    11.7Less realized net gain, net of income
taxes of $9.0, $9.1 and none
    
    
    (16.9
    )
    
    
    (16.8
    )
    
    
    
    
    
    
    (16.9
    )
    
    
    (16.8
    )
    
    
    Ending balance
    
    
    46.9
    
    
    
    13.8
    
    
    
    11.7Pension liability adjustmentBeginning balance
    
    $
    (133.4
    )
    
    $
    (9.2
    )
    
    $
    (8.6
    )Pension liability change, net of income
taxes of $55.0, $65.8 and none (Note H)
    
    
    (92.8
    )
    
    
    (124.2
    )
    
    
    (0.6
    )
    
    
    (92.8
    )
    
    
    (124.2
    )
    
    
    (0.6
    )Ending balance
    
    
    (226.2
    )
    
    
    (133.4
    )
    
    
    (9.2
    )Total ending balance
    
    $
    (186.8
    )
    
    $
    (129.9
    )
    
    $
    (6.2
    )Total Stockholders Equity
    
    $
    1,119.7
    
    
    $
    1,055.6
    
    
    $
    933.3Total Comprehensive Income (Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    35.2
    
    
    $
    (71.6
    )
    
    $
    102.9
 See notes to consolidated financial statements. 65




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(Dollars in millions, except per share data)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (For the three years ended December 31, 2002) INDEX TO NOTES 66
    
    A.
    
    Accounting Policies70
    
    B
    
    Restatement of Financial Statements71
    
    C.
    
    Income Taxes72
    
    D.
    
    Supplementary Data to Statements of Operations74
    
    E.
    
    Segment Data77
    
    F.
    
    Capital Assets78
    
    G.
    
    Investing Activity79
    
    H.
    
    Retirement Plans81
    
    I.
    
    Stock Plans83
    
    J.
    
    Financing84
    
    K.
    
    Commitments and Contingencies87
    
    L.
    
    Legal Matters88
    
    M.
    
    Customer Funds89
    
    N.
    
    Supplementary Quarterly Data (Unaudited)
 A. Accounting Policies Basis of Consolidation As presented in these consolidated financial statements, we are Ceridian
Corporation, which includes subsidiaries and investments in which we have a
majority interest. We provide human resource solutions to employers through
our HRS business segment operations located in the United States, Canada and the United
Kingdom. We also provide transaction processing and related services primarily
to the transportation and retail industries through our Comdata business
segment operations located in the United States. Our products and services and
business segments are more fully described in Note E. We include in our consolidated financial
statements grantor trusts that hold funds provided by our
payroll and tax filing customers pending remittance to employees
of those customers or tax authorities in the United States and
Canada. The customer funds held in trust and customer deposits
related to our benefits services business are separately
identified as customer funds in our consolidated
balance sheet. Further information on our accounting for these
funds is provided in the section entitled Revenue
Recognition of Note A and in Note M. When we acquire between a 20% to 50% equity
interest in another entity, we account for that investment under
the equity method and record our share of its earnings or
losses. During the reporting period, we held no investments
representing an equity interest between 20% and 50%. Our other
investments may include debt or equity securities that may or
may not be marketable securities. We discuss these other
investments in the section entitled Cash and Investments,
including Derivatives of Note A and in Note G.
We review our less-than-20%-owned investments to determine
whether we exercise a degree of significant influence over their
management that would require the application of the equity
method through one or more of the following factors:
(a) our representation on the investees board of
directors; (b) our participation in the investees
policy making decisions; (c) material intercompany
transactions with the investee; (d) interchange of
managerial personnel with the investee; or
(e) technological dependency. All material intercompany transactions have been eliminated from our
consolidated financial statements. Recently Issued Accounting Pronouncements In June 2002, the Financial Accounting Standards Board (FASB) issued
Financial Accounting Standard No. (FAS) 146, Accounting for Costs Associated
with Exit or Disposal Activities (FAS 146), which nullifies Emerging Issues
Task Force Issue No. 94-3 (EITF 94-3), Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). FAS 146 requires that a liability
for a cost associated with an exit or disposal activity be recognized when the
liability is incurred. Under EITF 94-3, a liability for an exit cost was
recognized at the date of an entitys commitment to an exit plan. The
provisions of FAS 146 are effective for exit or disposal activities that are
initiated after December 31, 2002. We do not expect that FAS 146 will have a
material effect on our financial condition or results of operations. In November 2002, the FASB issued Interpretation No. 45 Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 will change current
practice in the accounting for, and disclosure of, guarantees. FIN 45 requires
certain guarantees to be recorded at fair value. Previously guarantees were
recorded as a liability only when a loss was probable and could be reasonably
estimated, as those terms defined in FAS 5, Accounting for Contingencies.
FIN 45 also requires a guarantor to make new disclosures, even when the
likelihood of making any payments under the guarantee is remote. FIN 45
disclosure requirements are effective for financial statements of interim or
annual periods ending after December 15, 2002, including these financial
statements. The initial recognition and initial measurement provisions of FIN
45 are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. Adoption of FIN 45 is not anticipated to have a material
impact on our consolidated financial position or results of operations. In December 2002, the FASB issued FAS 148, Accounting for Stock-Based
Compensation-Transition and Disclosure. FAS 148 amends FAS 123, Accounting
for Stock-Based Compensation. FAS 148 provides alternative methods of
transition for the adoption of the fair value method of accounting for
stock-based employee compensation under FAS 123. FAS 148 also amends the
disclosure provisions of Statement 123 and Accounting Principles Board Opinion
No. 28 Interim Financial Reporting (APB 28) to require disclosure in the
summary of significant accounting policies the effects of an entitys
accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in annual and interim financial statements.
FAS 148 does not amend FAS 123 to require accounting for employee stock options
by the fair value method. Under FAS 148 and the amendment to APB 28, we will
provide in our quarterly report on Form 10-Q for the quarter ended March 31,
2003 and subsequent interim periods information on the pro forma effect of
applying the fair value method to determine stock compensation expense that is
similar to what we provide in Note I of this report. EITF
00-21, Revenue Arrangements with Multiple Deliverables,
was issued in
December 2002, to be effective for us for arrangements entered
into after June 30, 2004. Adoption of EITF 00-21 could have a
material effect on our recognition of revenue. 66




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(Dollars in millions, except per share data)

Stock-Based Compensation We account for stock-based compensation under APB 25 and related
interpretations. Therefore, we do not record compensation expense with respect
to our fixed stock option plans, since the exercise price is set at the market
price on the date of grant, or for our employee stock purchase plan, which is
noncompensatory. Compensation expense for our outstanding restricted stock
awards, none of which is performance-based, is recognized by charging the fair
value of the award at the time of grant to operations ratably over the vesting
period. Grants of stock options to consultants or independent contractors are
accounted for under the fair value method. We also report under the
disclosure-only provisions of FAS 123. Use of Estimates The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires us to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
our financial statements and our reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Estimates that could significantly affect our results of operations or
financial condition include the capitalization, amortization and write-down of
capital assets, hedging of interest rates on payroll and tax filing fund
investments, actions to restructure or discontinue operations, and the
assessment of contingencies. Further discussion on these estimates can be
found in related disclosures elsewhere in our notes to consolidated financial
statements. Changes in Presentation As further described in Note
M, we added our benefits services customer deposits to our
payroll and tax filing funds to present the combined amount as customer funds
in our balance sheet. This presentation is reflected in these amended
financial statements. The related obligations are similarly reported on a
combined basis. We believe that such a presentation better reflects our
practice of utilizing benefits services customer deposits to meet the related
customer obligation. We also reclassified the Comdata provision for doubtful accounts from cost
of revenue to general expense to conform to our classification for the HRS
provision. Amounts for prior periods have been reclassified to conform to the
current presentation. During 2002, we made a change in our accounting for customer freight
billings to ensure consistent treatment throughout the company. Prior to the
change certain freight billings, primarily in our Canadian operations, had been
netted against the corresponding freight charges in cost of revenue. Freight
billings are now included in revenue and freight charges are included in cost
of revenue, in accordance with EITF 00-10, Accounting for Shipping and
Handling Fees and Costs. Amounts for 2001 and 2000 have been conformed to the
current presentation, which increased both revenue and cost of revenue by $7.5
and $6.2. We have reclassified certain other prior year amounts to conform to the
current years presentation. Cash and Investments, including Derivatives We classify investments that are readily
convertible to cash within three months of purchase as cash
equivalents in our consolidated balance sheet and report those
amounts at amortized cost (which does not differ materially from
fair market value). We account for our investments in marketable
securities under FAS 115, Accounting for Certain
Investments in Debt and Equity Securities, and investments
other than marketable or derivative securities under
APB 18, The Equity Method of Accounting for
Investments in Common Stock. Our investments of customer
funds in marketable securities are classified as
held-to-maturity, carried at amortized cost and separately
presented in our balance sheet as further described in
Note M. Our other investments in marketable equity or debt
securities are considered available-for-sale and reported in the
balance sheet as investments. We account for derivatives under FAS 133,
Accounting for Derivative Instruments and Hedging
Activities, as amended and interpreted. FAS 133
requires that derivative securities be measured at fair value
and reflected as assets or liabilities on the balance sheet.
Changes in the carrying value of a derivative are included in
earnings unless the derivative serves as a fully effective hedge
against a related gain or loss. Gains and losses from the
ineffective portion of our hedges, including the time value of
certain hedging instruments, are classified in other
expense (income). We hold derivative securities for the
purpose of hedging interest rate risk and not for speculative
activity. Our hedging activities may include the use of interest
rate contracts such as swaps, collars, caps and floors,
designated as hedges of variable income from investments of
customer funds and corporate cash. These derivative securities typically function
as cash flow hedges of the designated item. We further discuss
derivatives in Note K. 67




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(Dollars in millions, except per share data)

Property, Plant and Equipment Our property, plant and equipment assets are carried at cost and depreciated
for financial statement purposes using straight-line and accelerated methods at
rates based on the estimated lives of the assets, which are generally as
follows: Buildings
    
    40 yearsBuilding improvements
    
    5-15 yearsMachinery and equipment
    
    3-8 yearsComputer equipment
    
    3-6 years
 We charge repairs and maintenance to expense as the costs are incurred.
We include gains or losses on dispositions in other expense (income) when
realized. We included $2.4 of interest costs in 2000 in capitalized costs
related to the construction of a headquarters facility in Bloomington,
Minnesota and the renovation of an office facility in St. Petersburg, Florida
used by certain HRS benefits services operations. We review the carrying value of long-lived assets whenever events or
changes in circumstances such as market value, asset utilization, physical
change, legal factors or other matters indicate that the carrying value may not
be recoverable. When the review indicates that the carrying value of the asset
or group of assets representing the lowest level of identifiable cash flows
exceeds the sum of the expected future cash flows (undiscounted and without
interest charges), we recognize an asset write-down charge against operations.
The amount of the impairment loss is the amount by which the carrying value
exceeds the fair value of the impaired asset or group of assets. Earnings Per Share Basic earnings per share represents earnings divided by the weighted average
number of common shares outstanding for the reporting period. Diluted earnings
per share represents earnings divided by the sum of the weighted average number
of common shares outstanding plus shares derived from other potentially
dilutive securities. Our other potentially dilutive securities include in the
money fixed stock options outstanding. The numbers of shares added for stock
options is determined by the treasury stock method, which assumes exercise of
these options and the use of any proceeds to repurchase a portion of these
shares at the average market price for the period. The option shares excluded
from the calculation of our other potentially dilutive securities (because the
exercise price exceeded the average market price for the year) at each December
31 were 9,847,000 for 2002, 5,691,000 for 2001 and 5,747,000 for 2000. Goodwill and Other Intangibles Goodwill, which represents the excess purchase price over the fair value of net
assets of businesses acquired, is assigned to operating units based on the
benefits derived from the acquisition. On January 1, 2002, new accounting
rules for business combinations and accounting for goodwill and other
intangibles (FAS 141 and 142) became effective for us. As a result and from
that date forward, goodwill is no longer amortized against earnings and
goodwill balances are subject to impairment review on at least an annual basis.
Furthermore, classes of other intangible assets were further defined under
these rules, which caused us to transfer the $1.3 unamortized balance of an
intangible asset, representing the estimated value of an assembled workforce,
to goodwill as of January 1, 2002. Certain minor amounts were reclassified
between classes of intangibles under the new rules. The pro forma effect of
cessation of goodwill amortization and reclassification of intangibles would
have increased earnings from continuing operations for 2001 by $30.3, or 20¢
per diluted common share, and for the year 2000 by $29.6, or 20¢ per diluted
common share. Compliant with the transitional requirements of the new accounting rules,
we, assisted by an independent business valuation firm, completed an impairment
review in June 2002 and determined that there was no impairment of our goodwill
as of January 1, 2002, the measurement date prescribed by these rules. The
operating units identified for this assessment included our U.S.-based HRS
operations, our HRS subsidiary in Canada, the HRS operations of Centrefile in
the United Kingdom, and Comdata. Furthermore, after consideration of the factors
prescribed in these rules that might indicate a risk of impairment, we, through
our own self assessment, found no indication of goodwill impairment at December
31, 2002. Our other intangible assets represent amounts assigned to specifically
identifiable intangible assets at the time of a purchase acquisition. These
costs are amortized on a straight-line basis over the following periods: Customer lists
    
    10-15 yearsTrademarks
    
    30 yearsTechnology
    
    7-8 yearsNon-compete covenants
    
    3-5 years
 We regularly review these recorded amounts and assess their
recoverability. Our review considers factors such as whether the amortization
of other intangible assets for each operating unit can be recovered through
forecasted 68




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(Dollars in millions, except per share data)

undiscounted cash flows over their remaining economic life. Software and Development Costs We capitalize purchased software that is ready for service and development
costs for marketable software incurred from the time of technological
feasibility until the software is ready for use. Under the provisions of
current accounting rules (SOP 98-1), we capitalize costs associated with
software developed or obtained for internal use when both the preliminary
project stage is completed and our management has authorized further funding
for the project which it deems probable of completion and use for the function
intended. Capitalized internal-use software costs include only (1) external
direct costs of materials and services consumed in developing or obtaining the
software, (2) payroll and payroll-related costs for employees who are directly
associated with and who devote time to the project, and (3) interest costs
incurred, when material, while developing the software. Capitalization of
these costs ceases no later than the point at which the project is
substantially complete and ready for its intended purpose. We charge research and development costs and other computer software
maintenance costs related to software development to operations as incurred.
We amortize software development costs using the straight-line method over a
range of three to seven years, but not exceeding the expected life of the
product. We regularly review the carrying value of software and development costs
and recognize a loss when the value of estimated undiscounted cash flow benefit
related to the asset falls below the unamortized cost. Income Taxes We base our provision for income taxes on income recognized for financial
statement purposes, which includes the effects of temporary differences between
financial statement income and income recognized for tax return purposes. We
file a consolidated U.S. federal income tax return for our parent company and
its eligible subsidiaries. Except for selective dividends from future
earnings, we intend to
reinvest the unremitted earnings of our non-U.S. subsidiaries and postpone
their remittance indefinitely. No such dividends have been declared
or paid during the three years ended December 31, 2002. Accordingly, we have not provided for U.S.
income taxes on our non-U.S. earnings during the three years ended December 31,
2002. Revenue Recognition We recognize revenue from sale of our products
and services when the following criteria are met:
(1) persuasive evidence of an arrangement exists;
(2) delivery has occurred or services have been rendered;
(3) the sellers price to the buyer is fixed or
determinable; and (4) collectibility is reasonably assured.
Generally, we rely on a signed contract between us and the
customer as the persuasive evidence of a sales arrangement. We
address these and the other criteria for revenue recognition in
the following discussion of types of revenue within our business. HRS Repetitive
Business The majority of our HRS revenue is generated by
recurring monthly or quarterly fees from our payroll processing,
tax filing services, benefit administration services, work-life
effectiveness and employee assistance services, and human
resource outsourcing products. This revenue is generated by
service fees, income from investment of customer funds in lieu
of fees, software licenses and subscription fees. Payroll
Processing.Generally, service
fees for HRS payroll transaction processing are contracted on a
per transaction basis and recognized as revenue when transaction
services are provided and the amount is billable. Ceridian
Canada also recognizes payroll services revenue from customer
funds held temporarily pending remittance to the customers
employees. These payroll deposits are invested through grantor
trusts. We derive and recognize investment income in lieu of
fees as a component of revenue as earned. Tax Filing
Services.Our payroll tax filing
services consist primarily of: (1) collecting funds for
federal, state and local employment taxes from customers based
on payroll information provided by the customers;
(2) remitting funds collected to the appropriate taxing
authorities; (3) filing applicable returns; and
(4) handling related regulatory correspondence and
amendments for customers. Revenue from these tax filing services
is billed and recognized as the services are provided, generally
on a monthly basis. We hold our customers tax filing deposits
for the period between collection and remittance of the funds to
the applicable taxing authority. These tax filing deposits are
invested through a grantor trust. We derive and recognize this
investment income in lieu of fees as a component of revenue as
earned. Payroll processing and tax filing services are
all sold separately, so we have standalone value for each
service. Separate sales also establish the fair value of each of
the services sold in the event a customer contracts with us for
multiple services. Benefits Administration
Services.We provide employee
health and welfare benefits administration and qualified
administration services to our customers. Employee health and
welfare benefits administration services include health
insurance portability compliance services related primarily to
COBRA (Consolidated Omnibus Budget Reconciliation Act). Health
and welfare benefits administration services also encompass
benefits provided to active employees, such as (1) annual
health plan enrollment, (2) ongoing employee enrollment and
eligibility services, (3) tuition refund plans,
(4) transportation reimbursement under the Transportation
Equity Act, and (5) Internal Revenue Code Section 125
plans (Flexible Spending), which include fully administered and
self-administered flexible spending accounts and premium-only
plans. We also provide retirement planning services that
include: (1) administration services for benefits provided
to retired and inactive employees, which include retiree
healthcare, disability, surviving dependent, family leave and
severance benefits; and (2) qualified plan administration
services which include 401(k) plan administration, profit
sharing administration, defined benefit plan administration,
ESOP administration and Qualified Domestic Relations Order
administration. Revenue for COBRA services is earned and
recognized as the services are provided. Revenue associated with
other health and welfare benefits administration and retirement
planning services is recognized monthly based on the number of
customer employees that receive or participate in the benefit. Benefits services are all sold separately, so we
have standalone value for each service. Separate sales also
establish the fair value of each of the services sold in the
event a customer contracts with us for multiple services. Work-Life Effectiveness and Employee
Assistance Services
(LifeWorks).We
provide work-life effectiveness and employee assistance programs
to our clients. LifeWorks are delivered through on-line access
and telephonically, and through face-to-face meetings provided
by referral resources. Contracted fees for these services are
generally billed monthly. Revenue is earned and recognized over
the term of the contract based on the number of customer
employees served and the level of service. Non-Repetitive
Business Less than 5% of our consolidated revenue in 2002
is generated from the sale and installation of software and data
conversion services in our HRS businesses. These services may
also include training and other consulting. These services have
standalone value as they can be performed by independent
contractors or purchased separately. The fees for these services
are based upon published hourly rates that are considered
competitive with other providers and are consistent with hourly
rates billed for customization and consulting services performed
by us on a standalone basis. Revenue from consulting services is
non-refundable; is primarily determined on a time and materials
basis; and is recognized over the installation and conversion
period, generally two to four months. Comdata Comdata revenue is primarily generated from funds
transfer services and stored value card sales and transaction
services. Comdata also generates revenue from regulatory permit
and receivables factoring services as well as the sale of point
of sale terminals and other equipment to fueling centers. Transportation Comdatas funds transfer system is designed
to enable truck drivers to obtain funding for purchases and cash
advances at truck stops and other locations en route to their
destinations. Drivers may use Comdatas proprietary Comdata
card to purchase fuel, lodging and other approved items, obtain
cash advances from 69




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(Dollars in millions, except
per share data) ATM machines or through the use of Comchek
drafts, make long distance phone calls and make direct deposits
of pay, settlements or trip advances to personal bank accounts.
Revenue from funds transfer transactions is based on a per
transaction fee that is based on either a fixed amount or a
percentage of the face value of the transaction and is
recognized when the transaction takes place. In connection with its transportation services
business, Comdata purchases accounts receivable due to trucking
companies from manufacturers and shippers at a discount and with
recourse back to the trucking company in the event of
non-payment. The service that Comdata provides permits trucking
companies to receive payment on shipping invoices sooner. The
non-refundable discount represents adequate compensation charged
for servicing the receivables over a 30-day period. If the
collection period extends beyond 30 days, a non-refundable
additional fee is charged for each month of servicing. After
90 days, an uncollected receivable can be returned to the
seller for its face value. Comdata recognizes revenue from the discounted
fee in the month of the purchase and the additional fees for
servicing as we become entitled to collect the fee. Merchant
Services Comdatas merchant services division
primarily provides fueling centers with: (1) PC-based,
point of sale systems that automate the various transactions
that occur at a fuel purchase desk; and (2) pay at
the pump systems which enable customers to transact
card-based fuel purchases at the pump. Revenue from the sale of
PC-based point of sale equipment and pay at the pump equipment
is recognized at the time the equipment is shipped. Recurring
service revenues for the merchant services division are
recognized as earned. Support and maintenance contracts are
generally for 12 month periods and are invoiced annually
with the revenues recognized on a straight-line basis over the
maintenance period. Comdatas merchant services products
and services are all sold separately, so we have standalone
value for each product and service. Separate sales also
establish the fair value of each of the products and services
sold in the event a customer contracts with us for multiple
products and/or services. Retail
Services SVS sells stored value cards and provides
subsequent activation, reporting and transaction processing
services (services). Customers may also choose to
purchase cards alone, without a continuing obligation for
services from SVS. SVS recognizes revenue for card sales without
services upon shipment. For card sales with services, revenue on both the
card sales and services are deferred and reported on the balance
sheet as deferred income. Costs of the cards sold is deferred
and reported on the balance sheet as prepaid expense. Costs on
the services are recognized as incurred. The deferred income and
prepaid expense on the card sale is recognized in earnings over
the transaction processing period (up to approximately
30 months), which begins upon activation of the card. The
deferred income on the services where we charge a fee for
unlimited transactions processed on a card is recognized in
earnings over the same transaction processing period which
begins upon activation of the card. The deferred income on the
services where we charge a fee each time a transaction is
processed on a card is recognized in earnings over the same
transaction processing period which begins each time a
transaction is processed. Our history of providing services to
our customers indicates that (1) we can expect activation
of a card within approximately 7 months following card
shipment, and (2) during the six months following the
activation of a card, approximately 90% of the services have
been performed. Sales of cards under either arrangement do not
include a right of return of the cards shipped. Gross
Versus Net Revenue We include in revenue amounts that we bill for
and remit to third-party vendors for associated products and
services as required on a gross basis as a principal rather than
net as an agent when the following conditions are met:
(1) we are the primary obligor in the arrangement with the
customer; (2) we have credit risk and inventory risk;
(3) we have latitude in the establishment of pricing,
subject to general economic restraints; and (4) we have
full discretion in vendor selection. Cost of Revenue We assign to cost of revenue those costs that
directly benefit the delivery of our revenue-producing products
and services. Most of these costs are recognized as incurred,
that is, as we become obligated to pay for them. Some costs of
revenue are recognized in the period that a product is sold and
delivered. Other costs of revenue are recognized over the period
of use or in proportion to the related revenue. For HRS, a substantial portion of the costs
included in cost of revenue are recognized as incurred and the
other costs are recognized over the period of use. The costs
recognized as incurred consist primarily of customer service
staff costs, consulting and purchased services, delivery
services and royalties. The costs of revenue recognized over the
period of use are depreciation and amortization of tangible and
software assets and rentals of facilities and equipment. For Comdata, the principal types of costs
included in cost of revenue that are recognized as incurred
include customer service staff costs, banking fees and
telecommunications costs. The principal Comdata cost of revenue
that is recognized when the product is delivered is equipment
sold to customers. The principal Comdata costs of revenue that
are recognized over the period of use include depreciation and
amortization of tangible and software assets, and rentals of
facilities and equipment. The purchase cost of retail card stock
is deferred and recognized in proportion to and over the same
period as the related revenue. Translation of Foreign Currencies We have determined that local currencies serve as functional currencies for our
international operations. We translate foreign currency balance sheets at the
end-of-period exchange rates and earnings statements at the weighted average
exchange rates for each period. We report the effect of changes in the U.S.
dollar carrying values of assets and liabilities of our international
operations that are due to changes in exchange rates between the U.S. dollar
and their functional currency as foreign currency translation in accumulated
other comprehensive income (loss) in the accompanying Statements of
Stockholders Equity. Gains and losses from translation of assets and
liabilities denominated in other than the functional currency of the
international operation are recorded in results of operations as other expense
(income). Receivables Securitization We maintain a credit facility under which we
sell Comdata receivables to third parties through a
consolidated subsidiary of Comdata. The subsidiary is
consolidated since Comdata owns 100% of the equity, the
subsidiarys activities are virtually all on Comdatas
behalf, and the substantive risks and rewards of the assets rest
directly with Comdata. Additionally, the subsidiary has a
unilateral right to reclaim all of the transferred assets.
Therefore, we account for the outstanding advances as secured
borrowings under FAS 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of
Liabilities, and the sold receivables and borrowings
remain in our consolidated balance sheet. We further explain our
policy and the operation of this facility in Note J. B. Restatement of
Financial Statements As
announced on February 18, 2004, we have corrected our application of SEC Staff
Accounting Bulletin No. 101 (SAB 101) to arrangements that include the sale
of retail cards and related services such as activation, processing and
reporting and restated all prior periods subsequent to December 31, 1999. The
change in revenue and related cost recognition defers and extends the period over which we recognize
revenue and related costs from retail card sales and processing. We present our revenue recognition policies in Note A of this report in
the section entitled Revenue Recognition. Under our
previous application of SAB 101, we recognized revenue and related cost from card
sales under these arrangements on a straight line basis over a period
of 12 months following shipment. We recognized revenue from
related transaction processing services when the transaction occurred. The following table presents the effect of the correction to our
application of SAB 101. The corrections had no effect on operating,
investing or financing cash flows. For Years Ended December 31,Consolidated Statements of Operations
    
    2002
    
    2001
    
    2000Revenue as previously reported
    
    $
    1,192.7
    
    
    $
    1,189.8
    
    
    $
    1,181.9Revenue as restated
    
    $
    1,191.0
    
    
    $
    1,179.0
    
    
    $
    1,174.8Total costs and expenses as previously reported
    
    $
    1,047.9
    
    
    $
    1,105.4
    
    
    $
    1,054.1Total costs and expenses as restated
    
    $
    1,048.6
    
    
    $
    1,099.0
    
    
    $
    1,051.6Earnings before income taxes as previously
    reported
    
    $
    144.8
    
    
    $
    84.4
    
    
    $
    127.8Earnings before income taxes as restated
    
    $
    142.4
    
    
    $
    80.0
    
    
    $
    123.2Income tax provision as previously reported
    
    $
    51.1
    
    
    $
    34.9
    
    
    $
    48.3Income tax provision as restated
    
    $
    50.3
    
    
    $
    33.1
    
    
    $
    46.6Earnings from continuing operations as previously
    reported
    
    $
    93.7
    
    
    $
    49.5
    
    
    $
    79.5Earnings from continuing operations as restated
    
    $
    92.1
    
    
    $
    46.9
    
    
    $
    76.6Net earnings as previously reported
    
    $
    93.7
    
    
    $
    54.7
    
    
    $
    100.2Net earnings as restated
    
    $
    92.1
    
    
    $
    52.1
    
    
    $
    97.3Basic earnings per share as previously reported
    
    $
    0.63
    
    
    $
    0.37
    
    
    $
    0.69Basic earnings per share as restated
    
    $
    0.62
    
    
    $
    0.36
    
    
    $
    0.67Diluted earnings per share as previously reported
    
    $
    0.62
    
    
    $
    0.37
    
    
    $
    0.68Diluted earnings per share as restated
    
    $
    0.61
    
    
    $
    0.35
    
    
    $
    0.66 At December 31,Consolidated Balance Sheets
    
    2002
    
    2001
    
    2000Other current assets as previously reported
    
    $
    37.7
    
    
    $
    25.0
    
    
    $
    25.9Other current assets as restated
    
    $
    45.9
    
    
    $
    33.9
    
    
    $
    28.4Deferred income tax asset as previously reported
    
    $
    18.2
    
    
    $
    4.3
    
    
    $
    Deferred income tax asset as restated
    
    $
    22.5
    
    
    $
    7.8
    
    
    $
    1.7Deferred income as previously reported
    
    $
    29.2
    
    
    $
    35.9
    
    
    $
    38.5Deferred income as restated
    
    $
    48.8
    
    
    $
    53.8
    
    
    $
    45.6Retained earnings as previously reported
    
    $
    407.4
    
    
    $
    319.4
    
    
    $
    81.8Retained earnings as restated
    
    $
    400.3
    
    
    $
    313.9
    
    
    $
    78.9 70




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(Dollars in millions, except
per share data) C. Income Taxes At December 31, 2002, we had U.S. net operating loss carryforwards of $3.2 and
future tax deductions of $310.4. If we do not utilize the net operating loss
by 2010, it will expire. Our income tax returns remain subject to income tax audits in various
jurisdictions for 1989 and subsequent years as a result of tax sharing
agreements related to the disposition of certain operations. We consider our
tax accruals adequate to cover any U.S. and international tax deficiencies not
recoverable through deductions in future years. Under the terms of the spin-off described in Note D, deferred tax assets
related to net operating loss carryforwards, tax credit carryforwards, timing
differences and accrued income taxes attributable to the former parent
corporation and its subsidiaries remained with the predecessor company, now
known as Arbitron Inc. The final amount to be retained by Arbitron Inc. was
determined during the third quarter of 2002 by the filing of income tax returns
for the old consolidated group for periods ended December 31, 2001 and prior.
As a result, we transferred a net additional deferred tax asset of $5.7 to
Arbitron Inc. and reduced our deferred income tax asset and retained earnings
by an equal amount at that time. Based on the projection of future earnings and the reversal of timing differences, we did not consider it necessary to establish a valuation allowance against the deferred tax asset in either 2002 or 2001. Components of Earnings and Taxes fromContinuing Operations (Restated) 2002
    
    2001
    
    2000Earnings Before Income TaxesU.S.
    
    $
    110.9
    
    
    $
    53.4
    
    
    $
    102.8International
    
    
    31.5
    
    
    
    26.6
    
    
    
    20.4Total
    
    $
    142.4
    
    
    $
    80.0
    
    
    $
    123.2Income Tax ProvisionCurrentU.S.
    
    $
    21.6
    
    
    $
    0.6
    
    
    $
    0.8State and other
    
    
    3.0
    
    
    
    0.4
    
    
    
    2.4International
    
    
    12.5
    
    
    
    3.2
    
    
    
    (0.3
    )37.1
    
    
    
    4.2
    
    
    
    2.9DeferredU.S.
    
    
    16.1
    
    
    
    20.5
    
    
    
    33.3State and other
    
    
    (0.2
    )
    
    
    
    
    
    
    International
    
    
    (2.7
    )
    
    
    8.4
    
    
    
    10.413.2
    
    
    
    28.9
    
    
    
    43.7Total
    
    $
    50.3
    
    
    $
    33.1
    
    
    $
    46.6
 Effective Rate Reconciliation (Restated) 2002
    
    2001
    
    2000U.S. statutory rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %Income tax provision at
U.S. statutory rate
    
    $
    49.9
    
    
    $
    28.0
    
    
    $
    43.1State income taxes, net
    
    
    2.0
    
    
    
    (0.1
    )
    
    
    1.6Goodwill
    
    
    
    
    
    
    8.9
    
    
    
    8.5Other
    
    
    (1.6
    )
    
    
    (3.7
    )
    
    
    (6.6
    )Income tax provision
    
    $
    50.3
    
    
    $
    33.1
    
    
    $
    46.6
 Tax Effect of Items That
Comprise a Significant Portion of the Net Deferred
Tax Asset and Deferred Tax Liability (Restated) December 31,2002
    
    2001Deferred Tax AssetEmployment related accruals
    
    $
    85.0
    
    
    $
    34.9Restructuring and other accruals
    
    
    38.4
    
    
    
    41.7Intangibles
    
    
    (54.3
    )
    
    
    Other
    
    
    (18.2
    )
    
    
    45.6Total
    
    
    50.9
    
    
    
    122.2Deferred Tax LiabilityIntangibles
    
    
    (17.8
    )
    
    
    (67.6
    )Other
    
    
    (7.6
    )
    
    
    (40.1
    )Total
    
    
    (25.4
    )
    
    
    (107.7
    )Net Deferred Tax Asset
    
    $
    25.5
    
    
    $
    14.5Deferred Tax AssetCurrent portion
    
    $
    28.4
    
    
    $
    31.7Noncurrent portion
    
    
    22.5
    
    
    
    7.8Total
    
    $
    50.9
    
    
    $
    39.5Deferred Tax LiabilityCurrent portion
    
    $
    
    
    
    $
    0.2Noncurrent portion
    
    
    25.4
    
    
    
    24.8Total
    
    $
    25.4

    
    
    $
    25.0Net Deferred Tax Asset by GeographyUnited States
    
    $
    46.6
    
    
    $
    38.4International
    
    
    (21.1
    )
    
    
    (23.9
    )Total
    
    $
    25.5
    
    
    $
    14.5
 71




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(Dollars in millions, except per share data)

D. Supplementary Data to Statements of Operations Unusual Losses (Gains) Years Ended December 31,Other Expense (Income)
    
    2002
    
    2001
    
    2000Accrued exit costs, net of recoveries
    
    $
    13.5
    
    
    $
    6.7
    
    
    $
    12.2Factoring receivables loss
    
    
    9.8
    
    
    
    
    
    
    
    Asset write-downs
    
    
    6.7
    
    
    
    6.1
    
    
    
    18.3Loss (gain) on marketable securities
    
    
    6.3
    
    
    
    (15.6
    )
    
    
    Loss (gain) on derivative securities
    
    
    1.8
    
    
    
    (2.6
    )
    
    
    Litigation costs
    
    
    0.8
    
    
    
    53.7
    
    
    
    Foreign currency translation expense (income)
    
    
    (0.6
    )
    
    
    1.0
    
    
    
    0.5Reduction in environmental accrual
    
    
    (4.1
    )
    
    
    
    
    
    
    Other expense (income)
    
    
    0.1
    
    
    
    (1.1
    )
    
    
    0.7Total
    
    $
    34.3
    
    
    $
    48.2
    
    
    $
    31.7
 During the first quarter of 2002, we announced a series of actions intended to
consolidate certain operations in both of our business segments and recorded
accrued exit costs of $9.0. A plan to consolidate certain HRS payroll and tax
filing processing services, previously conducted in 25 district offices, into 4
regional processing centers resulted in the accrual of $7.5 for exit costs. Of
the $7.5 accrual, $5.3 related to severance costs for 317 employees all of whom
were terminated by December 31, 2002, and $2.2 represented other exit costs,
primarily related to lease terminations. Consolidation of certain Comdata
facilities resulted in accrued severance costs of $1.0 for 76 employees,
including 67 terminated by December 31, 2002, and other exit costs of $0.5,
primarily related to lease terminations. HRS recorded a $4.9 asset write-down of
internally developed software costs in the first quarter of 2002
as a result of the February 2002 acceptance of the software
technology provided under a March 2001 agreement further
described in Note K. Also during the first quarter of 2002,
we conducted a periodic reassessment of our environmental
obligation. This obligation relates to the 1989 sale by our
predecessor (Control Data Corporation) of its disk drive
operations, which involved remediable environmental sites. The
sale agreement provided terms describing how remedial costs
related to remediable environmental sites would be shared
between the buyer and us as the seller. The terms of the
agreement included periodic joint reviews of the obligation by
the buyer and us. Our obligations covered only those sites
identified prior to the fifth anniversary of the sale. At the
time of the sale, we established an accrual for our estimated
costs that might occur as a result of this agreement. During the
first 10 years following the sale, both parties incurred
significant costs, which then began to reduce as these sites
entered a water extraction and monitoring stage. During the
first quarter of 2002, we participated in a periodic review of
the status of this obligation with the environmental officer of
the buyer. A site visit was made by our environmental
representative at that time, and it was determined that our
estimated liability was $4.1 less than previously determined. The excess accrual
was then credited back to earnings as a component of other
expense (income). During the third quarter of 2002, we examined purchases of receivables
from a certain trucking company by Comdatas factoring business that had grown
rapidly during 2002 and found that the debtors could not be verified. In the
meantime, the parties that had sold us the receivables declared bankruptcy. We
notified the appropriate authorities in efforts to have appropriate inquiries
made with respect to this matter and have initiated a number of civil actions
and discovery efforts. We have also made certain modifications to our policies
and procedures related to the factoring business. We are seeking to identify
and recover assets to cover all or some of the amount owed. Since the amount
of potential recovery cannot be determined at this time, we have recorded the
full amount of the loss of $9.8, including $0.3 of investigative costs
incurred. Due to the unusual and non-recurring nature of the loss, we have
reported the loss as other expense (income). In the fourth quarter of 2002, we reviewed the status of accrued exit
costs and revised the estimated amounts to reduce the severance cost provisions
made by HRS in the first quarter of 2002 by $0.8 and in the first quarter of
2000 by $0.3 and by Comdata in the first quarter of 2002 by $0.3. We also
incurred additional expense in HRS for severance costs of $1.3, involving 81
employees, and other exit costs of $2.9 and in Comdata for severance costs of
$0.6, involving 41 employees, and other exit costs of $1.1. We paid all of the
additional HRS severance costs during the fourth quarter of 2002. The other
exit costs largely represented lease commitments, net of expected recoveries.
At December 31, 2002, we remained obligated for 2002 accrued exit costs of $5.0
of Accrued Exit CostsAsset
    
    
    
    
    
    Occupancy
    
    ContractWrite-down
    
    Severance
    
    Costs
    
    Termination
    
    Total2000Total initial charges
    
    $
    18.3
    
    
    $
    16.4
    
    
    $
    8.7
    
    
    $
    1.3
    
    
    $
    44.7Less non-cash asset
write-offs
    
    
    (18.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18.3
    )Total accrued costs
    
    $
    
    
    
    
    16.4
    
    
    
    8.7
    
    
    
    1.3
    
    
    
    26.4Utilization:2000 cash payments
    
    
    
    
    
    
    (9.2
    )
    
    
    (5.1
    )
    
    
    (1.3
    )
    
    
    (15.6
    )2001 cash payments
    
    
    
    
    
    
    (3.5
    )
    
    
    (2.8
    )
    
    
    
    
    
    
    (6.3
    )2001 recoveries
    
    
    
    
    
    
    (3.2
    )
    
    
    
    
    
    
    
    
    
    
    (3.2
    )2002 cash payments
    
    
    
    
    
    
    (0.2
    )
    
    
    (0.8
    )
    
    
    
    
    
    
    (1.0
    )2002 recoveries
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Balance at December
31, 2002
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2002Total initial charges
    
    $
    6.7
    
    
    $
    8.2
    
    
    $
    6.7
    
    
    $
    
    
    
    $
    21.6Less non-cash asset
write-offs
    
    
    (6.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6.7
    )Total accrued costs
    
    $
    
    
    
    
    8.2
    
    
    
    6.7
    
    
    
    
    
    
    
    14.9Utilization:2002 cash payments
    
    
    
    
    
    
    (6.3
    )
    
    
    (2.5
    )
    
    
    
    
    
    
    (8.8
    )2002 recoveries
    
    
    
    
    
    
    (1.1
    )
    
    
    
    
    
    
    
    
    
    
    (1.1
    )Balance at December
31, 2002
    
    
    
    
    
    $
    0.8
    
    
    $
    4.2
    
    
    $
    
    
    
    $
    5.0
 72




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(Dollars in millions, except per share data)

which $0.8 represented severance costs and $4.2 other exit costs. Also in the fourth quarter of 2002, HRS recorded a $7.8 write-down of the
carrying values of certain marketable equity and cost-based investments,
further described in Note G, recorded a $1.8 loss related to derivatives and
wrote off the $0.3 carrying value of an abandoned software product. The
investment write-down related primarily to our December 2001 cost-based
investment in preferred stock of U.S.I. Holdings Corporation, which was
converted to common stock as a result of an initial public offering in October
2002. The $1.8 loss on derivatives represented the amortization of a portion
of the $2.6 gain on derivatives recorded in the
first quarter of 2001. The remaining $0.8 will be charged to operations
during 2003 as the derivatives to which the deferred gain relates expire. We
also recorded $0.8 of other unusual costs in HRS for a litigation settlement. The 2001 gain on sale of marketable securities of
$15.6 related to our sale of HotJobs.com, Ltd. common stock and
is further described in Note G. The gain on derivative
securities of $2.6 resulted from the application of FAS 133
as amended and interpreted at that date. The second quarter 2001
litigation costs include a settlement of $49.0 and associated
costs of $3.4 related to litigation involving Comdata and a
provision of $1.3 for litigation costs not allocated to our
business segments. The litigation settlement and associated
costs at Comdata related to an action brought by Flying J, Inc.
The nature and facts and circumstances of this litigation are
fully disclosed in Note K to our consolidated financial
statements for the year ended December 31, 2000, and the
resulting settlement is fully disclosed in Part II,
Item 1, Legal Proceedings, of our Quarterly
Report on Form 10-Q, for the quarterly period ended
June 30, 2001. The additional provision of $1.3 for
litigation costs not allocated to our business segments related
to disputes involving postretirement benefits. During the first quarter of 2001, we took certain actions, described
below, that were expected to improve operational efficiency, take advantage of
technological opportunities and further focus our human resource businesses.
These actions resulted in accrued exit costs of $9.9 and asset write-downs of
$6.1. We paid these accrued exit costs in full by the end of 2001. We also
recovered $3.2 of costs accrued during the first quarter of 2000, due to a
revision of the estimated cost related to those actions. In February 2001, Comdata decided to terminate an outsourced contract for
transaction processing and software development and bring those activities
in-house. This action was intended to improve management control over these
activities and reduce costs. The termination charge of $6.6 was recorded and
paid during the first quarter of 2001. In order to implement the in-house
operation, Comdata hired a number of personnel from the outsourcing contractor
and made incremental investments in capitalized equipment and software of $7.4
in the same quarter. In March 2001, HRS transferred most of its LifeWorks employee
effectiveness services operation in Boston, Massachusetts into a related
operation in Philadelphia, Pennsylvania and we decided to sell our Usertech
employee training business. As a result of these actions, unrecoverable
goodwill of $1.9 related to Usertech and $1.1 of equipment related to the
Boston operation were recorded as asset write-downs. We sold Usertech in the
third quarter of 2001. In addition, HRS charged $2.3 of severance costs for
approximately 250 employees and $1.0 of excess facility costs to operations and
recorded these as accrued exit costs. These charges were offset in part by the
recovery of $3.2 of the estimated severance costs accrued in the first quarter
of 2000, due primarily to a reduction in the scale of the downsizing of the St.
Louis, Missouri customer services operations. Also in March 2001, HRS
reassessed its strategy for developing software to serve its middle market
payroll and tax filing customers and conducted an impairment review of
internally developed software related to this effort. As a result, $3.1 of
unrecoverable cost related to this software development effort was recognized
as an asset write-down. On January 25, 2000, we announced actions to improve customer service and
the quality of operations, particularly in the U.S. payroll business. The
principal actions taken to achieve these objectives included decentralization
of the U.S. payroll business customer service operations, termination of
certain product development efforts, and realignment of certain management
responsibilities and consolidation of similar operations. Decentralization of
U.S. payroll customer service operations involved the downsizing of staff and
space usage in a centralized facility in St. Louis, Missouri and the transfer
of these responsibilities to district offices. The termination of certain
product development efforts required a reassessment of the recoverability of
goodwill and other intangibles and capitalized development costs, which
resulted in a reduction in the carrying values of those assets and staff
reductions. Realignment of certain management responsibilities involved
staffing changes in a number of senior management positions. The consolidation
of similar operations led to staff reductions as well as the identification of
excess space and furnishings and related charges for asset write-downs and
future rental obligations. In March 2000, we approved plans to execute these actions and recorded as
other expense (income) charges of $44.7 in first quarter 2000. These charges
included $26.4 of accrued exit costs and $18.3 for asset write-downs. Exit
costs for severance involved involuntary termination notices for approximately
500 employment positions, primarily in HRS, of which approximately 466 had been
eliminated by December 31, 2000 with the remainder in early 2001. The other
exit costs were primarily the lease cost for idled facilities and contract
termination fees. At December 31, 2002, those accrued exit costs had been paid
in full. Asset write-downs included the 73




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(Dollars in millions, except per share data)

write-off of capitalized software amounts related to a software
development contract that was terminated in the first quarter 2000, certain
property and equipment abandoned at a number of idled facilities, and certain
goodwill and intangible asset balances with respect to two previous
acquisitions. With respect to accrued amounts related to certain actions we had taken in
1997, we paid the remaining $6.4 of accrued costs during the year ended
December 31, 2000. Additionally, during the first quarter of 2000, we credited
other expense (income) with a recovery of $14.2 of unused accruals established
in connection with these 1997 actions. This recovery relates to the reversal of
the amount accrued in excess of the settlement amount for a securities
litigation matter that was finalized on March 31, 2000. Discontinued Operations On March 30, 2001, we separated our HRS division and subsidiaries and Comdata
subsidiaries from our former media information business, Arbitron, to form two
independent, publicly-traded companies (which this report refers to as the
spin-off). The spin-off required that we establish new financing arrangements further
described in Note J. Under the terms of agreements related to the spin-off,
Arbitron furnished $225.0 from its own borrowings toward the retirement of
Ceridian debt outstanding immediately prior to the spin-off. The $225.0
payment liability, combined with other assets and liabilities of Arbitron,
resulted in net liabilities of discontinued operations of $182.9 at the time of
the spin-off, which increased our retained earnings in that amount when the
spin-off took place. The filing of 2001 income tax returns during the third
quarter of 2002 for the parties involved in the spin-off resulted in the
transfer of an additional deferred tax asset to Arbitron Inc., which reduced
our deferred tax asset and retained earnings by $5.7. Additionally, the par value of our common stock was established as 1¢ per
share, compared to a par value of 50¢ per share for the predecessors common
stock, and none of the predecessors treasury common stock was distributed to
us, resulting in a reduction of $262.2 in our additional paid-in capital. The
effects of these transactions are also presented in the Statements of
Stockholders Equity. Summarized operating results and the gain (loss) on disposition of
Arbitron as a discontinued operation are presented in the accompanying table. Summarized Operating Results and Gain (Loss) on Disposition
of Discontinued Operations Years Ended December 31,2001
    
    2000Earnings from OperationsRevenue of Arbitron
    
    $
    60.2
    
    
    $
    206.8Earnings before income taxes of Arbitron
    
    $
    9.0
    
    
    $
    77.3Net earnings of Arbitron
    
    $
    5.2
    
    
    $
    47.6Less net earnings after measurement date of
July 18, 2000 applied against loss on disposition
    
    
    (5.2
    )
    
    
    (20.0
    )Earnings from discontinued operations of Arbitron
    
    $
    
    
    
    $
    27.6Gain (Loss) on DispositionSpin-off charges (net of income taxes of $11.0)
    
    $
    
    
    
    $
    (39.4
    )2000 earnings after measurement date applied against
loss on disposition (net of income taxes of $12.5)
    
    
    
    
    
    
    20.02001 earnings until spin-off date (net of income
taxes of $3.8 and $7.5)
    
    
    5.2
    
    
    
    12.5Gain (loss) on disposition of Arbitron
    
    $
    5.2
    
    
    $
    (6.9
    )Discontinued Operations Per Share ResultsEarnings from operations per basic share
    
    $
    
    
    
    $
    0.19Earnings from operations per diluted share
    
    $
    
    
    
    $
    0.19Gain (loss) from disposition per basic share
    
    $
    0.04
    
    
    $
    (0.05
    )Gain (loss) from disposition per diluted share
    
    $
    0.03
    
    
    $
    (0.05
    )Shares used in basic calculation (in thousands)
    
    
    146,069
    
    
    
    145,229Shares used in diluted calculation (in thousands)
    
    
    148,596
    
    
    
    146,734
 74




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(Dollars in millions, except per share data)

E. Segment Data We operate in the information services industry
principally in the U.S. and provide products and services
primarily to the human resource, transportation and retail
information markets. Our businesses collect, manage and analyze
data and process transactions on behalf of customers, report
information resulting from such activities to customers, and
provide customers with related products, software applications
and services. Our technology-based products and services of
these businesses are typically provided through long-term
customer relationships that result in a high level of recurring
revenue. Our HRS and Comdata business segments are distinguished
primarily by reference to the markets served and the nature of
the services provided. Selected business segment information is
provided in an accompanying table. HRS offers a broad range of services and software
designed to help employers more effectively manage their work
forces and information that is integral to human resource
processes. These activities are conducted primarily in the U.S.
and, to a lesser extent, through subsidiaries located in Canada
and the United Kingdom. Comdata provides transaction processing and
decision support services to the transportation industry,
including assistance in obtaining regulatory permits and other
services, in its markets. Comdata sells stored value cards and
provides card-based services primarily to retailers in the form
of gift cards and certificates, credits for product returns and
retail promotions. Further information about our business segments
is presented in the section of Note A entitled
Revenue Recognition. The Other reporting element includes the
unallocated amounts related to our corporate center operations.
The assets of corporate center operations include cash and
equivalents as well as deferred income tax and pension-related
assets and liabilities. GEOGRAPHIC SEGMENT DATA
(Restated) Years Ended December 31,2002
    
    2001
    
    2000U.S. OperationsHRS RevenuePayroll and tax filing
    
    $
    447.3
    
    
    
    463.5
    
    
    
    492.4Benefits services
    
    
    124.8
    
    
    
    116.5
    
    
    
    109.7LifeWorks
    
    
    113.9
    
    
    
    109.5
    
    
    
    102.9Total
    
    
    686.0
    
    
    
    689.5
    
    
    
    705.0Comdata RevenueTransportation
    
    
    250.0
    
    
    
    254.3
    
    
    
    263.3Retail
Services
    
    
    62.9
    
    
    
    50.9
    
    
    
    38.4Total
    
    
    312.9
    
    
    
    305.2
    
    
    
    301.7Total Revenue
    
    $
    998.9
    
    
    $
    994.7
    
    
    $
    1,006.7Property, plant and equipment at December 31
    
    
    147.6
    
    
    
    147.5
    
    
    
    147.0Non-U.S. OperationsUnited Kingdom OperationsRevenue
    
    $
    79.2
    
    
    $
    71.4
    
    
    $
    63.4Property, plant and equipment at December 31
    
    
    4.0
    
    
    
    3.4
    
    
    
    4.1Canadian OperationsRevenue
    
    $
    112.9
    
    
    
    112.9
    
    
    
    104.7Property, plant and equipment at December 31
    
    
    7.1
    
    
    
    8.3
    
    
    
    8.8Total Non-U.S. OperationsRevenue
    
    $
    192.1
    
    
    $
    184.3
    
    
    $
    168.1Property, plant and equipment at December 31
    
    
    11.1
    
    
    
    11.7
    
    
    
    12.9Total WorldWideRevenue
    
    
    1,191.0
    
    
    
    1,179.0
    
    
    
    1,174.8Property, plant and equipment at December 31
    
    
    149.1
    
    
    
    159.3
    
    
    
    160.4
 We measure business segment results by reference to earnings before
interest and taxes (EBIT), adjusted for unusual gains and
losses and excluding goodwill amortization in years prior to the
adoption of FAS 142 in 2002. Unusual
gains and losses during the three-year period ended December 31, 2002 are
discussed in Note D. Expenses incurred by corporate center operations are
charged or allocated to the business segments except for certain unusual gains
and losses, which are reported in the Other segment. Revenue from sales between business segments is not material. Our
operations are conducted primarily in the U.S. and revenue from sales between
U.S. and non-U.S. entities is not material. Operations in Canada and
the United Kingdom
relate largely to the HRS segment. Geographic data for or at the end of each
of the last three years, presented in the table above, is determined by
reference to the location of operation. 75




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(Dollars in millions, except per share data)

BUSINESS SEGMENTS (RESTATED) Years Ended December 31,2002
    
    2001
    
    2000HRSRevenue
    
    $
    878.1
    
    
    $
    873.8
    
    
    $
    873.1EBIT before unusual losses and gains and goodwill amortization
    
    $
    76.7
    
    
    $
    78.5
    
    
    $
    135.9Unusual (losses) gains
    
    
    (26.1
    )
    
    
    (3.6
    )
    
    
    (37.0
    )Goodwill amortization
    
    
    
    
    
    
    (26.2
    )
    
    
    (26.4
    )EBIT
    
    $
    50.6
    
    
    $
    48.7
    
    
    $
    72.5Total assets before customer funds
    
    $
    1,383.4
    
    
    $
    1,258.2
    
    
    $
    1,229.3Customer funds
    
    
    2,440.9
    
    
    
    2,170.9
    
    
    
    2,980.4Total assets at December 31
    
    $
    3,824.3
    
    
    $
    3,429.1
    
    
    $
    4,209.7Goodwill
    
    $
    773.3
    
    
    $
    743.8
    
    
    $
    772.1Depreciation and amortization
    
    $
    62.2
    
    
    $
    82.7
    
    
    $
    78.1Expended for property, plant and equipment
    
    $
    25.2
    
    
    $
    34.1
    
    
    $
    43.3ComdataRevenue
    
    $
    312.9
    
    
    $
    305.2
    
    
    $
    301.7EBIT before unusual losses and gains and goodwill amortization
    
    $
    105.0
    
    
    $
    97.4
    
    
    $
    87.3Unusual (losses) gains
    
    
    (12.8
    )
    
    
    (59.0
    )
    
    
    (2.6
    )Goodwill amortization
    
    
    
    
    
    
    (8.9
    )
    
    
    (8.0
    )EBIT
    
    $
    92.2
    
    
    $
    29.5
    
    
    $
    76.7Total assets at December 31
    
    $
    570.2
    
    
    $
    532.5
    
    
    $
    576.8Goodwill
    
    $
    117.0
    
    
    $
    117.0
    
    
    $
    125.8Depreciation and amortization
    
    $
    12.8
    
    
    $
    21.7
    
    
    $
    18.5Expended for property, plant and equipment
    
    $
    5.8
    
    
    $
    8.9
    
    
    $
    7.9OtherEBIT before unusual losses and gains
    
    $
    
    
    
    $
    
    
    
    $
    Unusual (losses) gains
    
    
    4.1
    
    
    
    14.3
    
    
    
    9.1EBIT
    
    $
    4.1
    
    
    $
    14.3
    
    
    $
    9.1Total assets at December 31
    
    $
    76.4
    
    
    $
    87.8
    
    
    $
    250.7Depreciation and amortization
    
    $
    0.9
    
    
    $
    1.0
    
    
    $
    0.6Expended for property, plant and equipment
    
    $
    0.1
    
    
    $
    0.2
    
    
    $
    15.3Total CeridianRevenue
    
    $
    1,191.0
    
    
    $
    1,179.0
    
    
    $
    1,174.8EBIT before unusual losses and gains and goodwill amortization
    
    $
    181.7
    
    
    $
    175.9
    
    
    $
    223.2Unusual (losses) gains
    
    
    (34.8
    )
    
    
    (48.3
    )
    
    
    (30.5
    )Goodwill amortization
    
    
    
    
    
    
    (35.1
    )
    
    
    (34.4
    )EBIT
    
    $
    146.9
    
    
    $
    92.5
    
    
    $
    158.3Interest
income (expense), net
    
    
    (4.5
    )
    
    
    (12.5
    )
    
    
    (35.1
    )Earnings
before income taxes
    
    $
    142.4
    
    
    $
    80.0
    
    
    $
    123.2Total assets before customer funds
    
    $
    2,030.0
    
    
    $
    1,878.5
    
    
    $
    2,056.8Customer funds
    
    
    2,440.9
    
    
    
    2,170.9
    
    
    
    2,980.4Total assets at December 31
    
    $
    4,470.9
    
    
    $
    4,049.4
    
    
    $
    5,037.2Goodwill
    
    $
    890.3
    
    
    $
    860.8
    
    
    $
    897.9Depreciation and amortization
    
    $
    75.9
    
    
    $
    105.4
    
    
    $
    97.2Expended for property, plant and equipment
    
    $
    31.1
    
    
    $
    43.2
    
    
    $
    66.5
 76




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(Dollars in millions, except per share data)

F. CAPITAL ASSETS December 31,2002
    
    2001Property, Plant and EquipmentLand
    
    $
    12.4
    
    
    $
    12.4Machinery and equipment (accumulated depreciation of $196.3 and $172.5)
    
    
    275.0
    
    
    
    264.2Buildings and improvements (accumulated depreciation of $33.9 and $29.0)
    
    
    91.9
    
    
    
    84.2Total property, plant and equipment
    
    
    379.3
    
    
    
    360.8Accumulated depreciation
    
    
    (230.2
    )
    
    
    (201.5
    )Property, plant and equipment, net
    
    $
    149.1
    
    
    $
    159.3Goodwill, net of amortizationAt beginning of year
    
    $
    860.8
    
    
    $
    897.9Acquired (Note F)
    
    
    28.2
    
    
    
    0.5Translation and other adjustments
    
    
    1.3
    
    
    
    (2.5
    )Amortization
    
    
    
    
    
    
    (35.1
    )At end of year
    
    $
    890.3
    
    
    $
    860.8Tax-deductible goodwill at end of year
    
    $
    236.3
    
    
    $
    219.2Other Intangible AssetsCustomer lists (accumulated amortization of $21.3 and $15.2)
    
    $
    45.5
    
    
    $
    39.2Trademarks (accumulated amortization of $16.1 and $13.1)
    
    
    73.2
    
    
    
    74.8Technology (accumulated amortization of $23.4 and $16.9)
    
    
    51.8
    
    
    
    43.4Non-compete agreements (accumulated amortization of $7.0 and $4.7)
    
    
    11.8
    
    
    
    7.5Total other intangible assets
    
    
    182.3
    
    
    
    164.9Accumulated amortization
    
    
    (67.8
    )
    
    
    (49.9
    )Other intangible assets, net
    
    $
    114.5
    
    
    $
    115.0Software and Development CostsPurchased software (accumulated amortization of $31.0 and $24.5)
    
    $
    63.8
    
    
    $
    51.9Software development costs (accumulated amortization of $29.2 and $20.1)
    
    
    109.9
    
    
    
    85.6Total software and development costs
    
    
    173.7
    
    
    
    137.5Accumulated amortization
    
    
    (60.2
    )
    
    
    (44.6
    )Software and development costs, net
    
    $
    113.5
    
    
    $
    92.9
 Years Ended December 31,Depreciation and Amortization
    
    2002
    
    2001
    
    2000Depreciation and amortization
of property, plant and equipment
    
    $
    43.3
    
    
    $
    42.6
    
    
    $
    39.2Amortization of goodwill
    
    
    
    
    
    
    35.1
    
    
    
    34.5Amortization of other intangible assets
    
    
    15.7
    
    
    
    15.2
    
    
    
    14.4Amortization of software and development costs
    
    
    16.9
    
    
    
    12.5
    
    
    
    9.1Total
    
    $
    75.9
    
    
    $
    105.4
    
    
    $
    97.2
 We estimate that amortization of other intangible assets held at December 31,
2002 will be $17.0 for 2003, $16.7 for 2004, $14.5 for 2005, $12.2 for 2006 and
$9.6 for 2007. 77




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(Dollars in millions, except per share data)

G. Investing Activity During 2002, our investment in capital expenditures included $31.1 for property
and equipment and $35.0 for software and development costs. The software
development costs included $10.0 for SourceWeb, a web-enabled
payroll/HR/self-service offering that HRS is rolling out in 2003. In March 2002,
we acquired all of the outstanding stock of SYLINQ Corporation, a
national employee benefits administration outsourcer specializing in automated
enrollment and eligibility management (which this report refers to as
SYLINQ), for $15.6. As a result of the acquisition, we recorded net
liabilities of $2.4, $11.6 of goodwill and $6.4 of other intangible assets.
SYLINQs revenue for its most recent fiscal year was $3.3. In May 2002, we paid $8.9 for certain assets and assumed liabilities of HR
Comply, a provider of online human resource and payroll employment compliance
services that will be associated with our benefits services operations. The
acquisition of HR Comply brought $1.0 of net liabilities, $7.9 of goodwill and
$2.0 of other intangibles to the balance sheet. HR Complys revenue for its
previous fiscal year was $6.2. In December 2002, we acquired selected assets of GLS Benefit Services LLC,
a benefits administration outsourcing firm (which this report refers to as
Great Lakes Strategies), for $19.0. Under the purchase agreement, we paid
$15.7 to the sellers and placed $3.3 in escrow. Of the total escrow amount,
$0.5 would apply to any deficiency below a stated amount in the actual net
value of assets acquired. The $2.8 escrow deposit represents an estimate of an
additional amount that could be paid to the sellers in February 2004 under a
revenue sharing arrangement that applies if revenue earned from the acquired
business during 2003 rises above a stated amount. We recorded the escrowed
funds as other noncurrent assets. The remaining $15.7 of recorded net assets
included $8.8 of goodwill and $4.0 of other intangible assets, subject to
further evaluation of the intangibles acquired. Great Lakes Strategies revenue
for its previous fiscal year was $10.1. During 2002, we also paid $6.8 to acquire certain call center assets and
cost-based investments. At
December 31, 2002, we held the following publicly- or privately-held investments that were accounted for under FAS 115 as
available for sale for publicly-held securities and on a cost
basis for the private holdings. At December 31, 2002
    
    % Owned
    
    Amount
    
    HoldingInvestmentU.S.I. Holdings Corporation
    
    
    2.3
    %
    
    $
    10.8
    
    
    
    PublicUltimate Software Group, Inc.
    
    
    4.9
    %
    
    
    2.9
    
    
    
    PubliciSarla, Inc.
    
    
    19.9
    %
    
    
    1.9
    
    
    
    PrivateSASH Management, LLC
    
    
    19.9
    %
    
    
    0.6
    
    
    
    PrivateNotes receivable and other
    
    
    
    
    
    
    1.3
    
    
    
    PrivateTotal Investments
    
    
    
    
    
    $
    17.5 In 2001, we made minority investments in strategic alliance partners to
expand our HRS product offerings. The aggregate amount included in cost-based
investments for these purchases was $20.2. Of this amount, we paid $15.0 for
preferred stock of U.S.I. Holdings, a leading distributor of insurance and
financial services for middle market organizations, in connection with a
marketing arrangement. In October 2002, U.S.I. Holdings made an initial public
offering of its common stock, which required the conversion of our preferred
stock into common stock. The offering price of the common stock was below our
cost basis for the investment and, as a result, we recorded an asset write-down
of $5.8 in the fourth quarter of 2002. Proceeds from the sales of businesses and assets of $18.7 in 2001
principally represented our sale of common stock of HotJobs.com, Ltd., which
provided proceeds of $15.6. In May 2000, Comdata completed the acquisition of SVS by exercising an
option to purchase the remaining interest and paying $50.9. Comdata had
acquired a majority interest in SVS in March 1999 for $20.3. As a result of
the acquisition, Comdata recorded goodwill of $52.4 and intangibles of $11.0 to
be amortized over periods of 2 to 10 years. Other business acquisitions during
2000 resulted in payments of $14.2, principally for a payroll service that
operates primarily in the UK. Proceeds from sales of assets during 2000 primarily involved the November
sale and leaseback of the real property constituting our headquarters facility
for $41.0. The gain of $1.2 from this transaction will be recognized over the
20-year term of the lease. The September sale of property in Palm Harbor,
Florida, formerly used in our benefits services operations, provided proceeds
of $12.8 and the excess of the proceeds over the carrying value of the property
reduced goodwill related to the 1999 acquisition of ABR Information Services,
Inc. 78




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(Dollars in millions, except per share data)

H. Retirement Plans Pension Benefits We provide retirement income benefits to our employees through a combination of
defined benefit and defined contribution plans. Our principal plan is a
contributory (salary reduction) defined benefit plan for U.S. employees that
closed to any new participants on January 2, 1995. Assets of this plan are held
in an irrevocable trust, do not include any Ceridian securities and consist
principally of equity securities, U.S. government securities, and other fixed
income obligations. Benefits under this plan are generally calculated on final
or career average earnings and years of participation in the plan. Most
participating employees are required to contribute to the plan as a condition
of active participation. Former employees are inactive participants in this
plan and constitute approximately 90% of the plan participants. This plan is
funded in accordance with funding requirements under the Employee Retirement
Income Security Act of 1974, based on determinations of an independent
consulting actuary. We also sponsor a pension benefit plan for our employees in the United
Kingdom and a nonqualified supplemental defined benefit plan for selected U.S.
employees. The UK plan contains both defined benefit and defined contribution
elements. The accompanying tables reflect the combined funded status and net
periodic pension cost (credit) and blended supporting assumptions for the
defined benefit elements of all three plans. We account for our defined benefit pension plans using actuarial models
required by present accounting rules (FAS No. 87). This model uses an
attribution approach that generally spreads the effect of individual events
over the service lives of the employees in the plan. These events include plan
amendments and changes in actuarial assumptions such as the expected long-term
rate of return on plan assets, discount rate related to the benefit obligation,
rate of active participants compensation increases and mortality rates. The
principle underlying the required attribution approach is that employees render
service over their service lives on a relatively smooth basis and, therefore,
the income statement effects of pensions are earned in, and should follow, the
same pattern. Funded Status of Defined Benefit
    
    September 30,Retirement Plans at Measurement Date
    
    2002
    
    2001Change in Projected Benefit Obligation During the PeriodAt beginning of period
    
    $
    588.8
    
    
    $
    587.2Service cost
    
    
    3.0
    
    
    
    2.7Interest cost
    
    
    43.9
    
    
    
    44.2Employee contributions
    
    
    0.2
    
    
    
    0.2Arbitron spin-off
    
    
    
    
    
    
    (15.0
    )Amendments and currency translation
    
    
    2.2
    
    
    
    Actuarial (gain) loss
    
    
    48.1
    
    
    
    17.3Benefits paid
    
    
    (46.8
    )
    
    
    (47.8
    )At end of period
    
    $
    639.4
    
    
    $
    588.8Change in Fair Value of Plan Assets During the PeriodAt beginning of period
    
    $
    485.5
    
    
    $
    639.7Actual return on plan assets
    
    
    (44.1
    )
    
    
    (96.7
    )Arbitron spin-off
    
    
    
    
    
    
    (13.4
    )Currency translation
    
    
    1.6
    
    
    
    Employee contributions
    
    
    0.2
    
    
    
    0.2Employer contributions
    
    
    3.8
    
    
    
    3.5Benefits paid
    
    
    (46.8
    )
    
    
    (47.8
    )At end of period
    
    $
    400.2
    
    
    $
    485.5Funded Status of Plan
    
    $
    (239.2
    )
    
    $
    (103.3
    )Unrecognized net loss
    
    
    358.2
    
    
    
    214.4Unrecognized prior service cost
    
    
    0.1
    
    
    
    2.2Total
    
    $
    119.1
    
    
    $
    113.3Balance Sheet PresentationIntangible pension asset
    
    $
    0.4
    
    
    $
    3.1Accrued benefit liability
    
    
    (228.3
    )
    
    
    (89.0
    )Accumulated other comprehensive income, net of tax
    
    
    226.2
    
    
    
    133.4Deferred income tax asset
    
    
    120.8
    
    
    
    65.8Total
    
    $
    119.1
    
    
    $
    113.3
 Assumptions Used in Calculations
    
    2002
    
    2001
    
    2000Discount rate
    
    
    7.42
    %
    
    
    7.43
    %
    
    
    7.70
    %Rate of compensation increase
    
    
    4.01
    %
    
    
    4.01
    %
    
    
    4.02
    %Expected return on plan assets
    
    
    9.43
    %
    
    
    9.44
    %
    
    
    9.47
    %
 Net Periodic Pension Cost (Credit)
    
    2002
    
    2001
    
    2000Service cost
    
    $
    3.0
    
    
    $
    2.8
    
    
    $
    3.0Interest cost
    
    
    43.9
    
    
    
    44.3
    
    
    
    44.6Expected return on plan assets
    
    
    (54.9
    )
    
    
    (57.4
    )
    
    
    (58.5
    )Net amortization and deferral
    
    
    6.1
    
    
    
    4.6
    
    
    
    4.8Total
    
    $
    (1.9
    )
    
    $
    (5.7
    )
    
    $
    (6.1
    )
 One of the principal components of the net periodic pension calculation is
the expected long-term rate of return on plan assets. The required use of
expected long-term rate of return on plan assets may result in recognized
pension income that is greater or less than the actual returns of those plan
assets in any given year. Over time, however, the expected long-term returns
are designed to approximate the actual long-term returns and, therefore, result
in a pattern of income and expense recognition that more closely matches the
pattern of the services provided by the employees. 79




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(Dollars in millions, except
per share data) Differences between actual and expected returns are recognized in the net
periodic pension calculation over five years. We use long-term historical
actual return information, the mix of investments that comprise plan assets,
and future estimates of long-term investment returns by reference to external
sources to develop our expected return on plan assets. For 2003, this rate
will be 8.75%. The discount rate assumptions used for pension plan accounting reflect the
rates available on high-quality fixed-income debt instruments on December 31 of
each year. That rate is used to determine the benefit obligation at that date
and the interest portion of the net periodic pension cost or credit for the
following year. We determine the assumed rate of compensation increase based
upon our long-term plans for such increases. Due to the recent combined adverse effects of falling stock market values
on the valuation of plan assets and of falling interest rates on the benefit
obligation, the accumulated benefit obligation of our principal pension plan
exceeded the fair value of plan assets by $189.4 at December 31, 2002 and $56.9
at December 31, 2001. Under pension accounting rules, this condition required
that we reclassify the prepaid pension cost related to this plan to recognize
this unfunded liability and record the remainder (net of deferred income taxes
and a small intangible asset amount) as a loss in accumulated other
comprehensive income, which reduces stockholders equity. At December 31, 2002 and 2001, our prepaid pension cost asset included
$11.3 and $7.6 held in benefit protection trusts for certain nonqualified plan
participants and an intangible pension asset of $0.4 and $3.1. We recognized expense of $13.4 in 2002, $9.7 in 2001 and $9.2 in 2000 with
respect to employer contributions to our defined contribution retirement plans. Postretirement Benefits September 30,Funded Status of Postretirement
Health Care and Life Insurance Plans
    
    2002
    
    2001Change in Benefit ObligationAt beginning of period
    
    $
    42.4
    
    
    $
    37.6Service cost
    
    
    0.1
    
    
    
    0.1Interest cost
    
    
    3.0
    
    
    
    2.7Participant contributions
    
    
    1.2
    
    
    
    1.3Arbitron spin-off
    
    
    
    
    
    
    (0.3
    )Actuarial loss (gain)
    
    
    11.9
    
    
    
    7.8Benefits paid
    
    
    (4.4
    )
    
    
    (6.8
    )At end of period
    
    $
    54.2
    
    
    $
    42.4Change in Plan AssetsAt beginning of period
    
    $
    
    
    
    $
    Company contributions
    
    
    3.2
    
    
    
    5.5Participant contributions
    
    
    1.2
    
    
    
    1.3Benefits paid
    
    
    (4.4
    )
    
    
    (6.8
    )At end of period
    
    $
    
    
    
    $
    Funded Status of PlanBenefit obligation, net
    
    $
    54.2
    
    
    $
    42.4Unrecognized actuarial
gain (loss)
    
    
    (6.1
    )
    
    
    6.0At end of period
    
    $
    48.1
    
    
    $
    48.4Current portion
    
    $
    6.0
    
    
    $
    6.0Noncurrent portion
    
    
    42.1
    
    
    
    42.4Total
    
    $
    48.1
    
    
    $
    48.4
  Net Periodic Postretirement Benefit Cost
    
    2002
    
    2001
    
    2000Service cost
    
    $
    0.1
    
    
    $
    0.1
    
    
    $
    0.2Interest cost
    
    
    3.0
    
    
    
    2.7
    
    
    
    3.0Actuarial gain amortization
    
    
    (0.1
    )
    
    
    (0.9
    )
    
    
    (0.5
    )Net periodic benefit cost
    
    $
    3.0
    
    
    $
    1.9
    
    
    $
    2.7
 We provide health care and life insurance benefits for eligible retired
employees, including individuals who retired from operations we subsequently
sold or discontinued. We sponsor several health care plans in the U.S. for both
pre- and post-age 65 retirees. Our contributions to these plans differ for
various groups of retirees and future retirees. Most retirees outside the U.S. are covered by governmental health care
programs, and our cost is not significant. The accompanying tables present the amounts and changes in the aggregate
benefit obligation at the beginning and end of and for each of the last two
measurement periods and the components of net periodic postretirement benefit
cost for the plans for the last three years. We do not prefund these costs. The assumed health care cost trend rate used in measuring the benefit
obligation is 12% in 2002 with rates declining at a rate of 1% per year to an
ultimate rate of 5% in 2010. A one percent increase in this rate would
increase the benefit obligation at September 30, 2002 by $3.4 and the aggregate
service and interest cost for the 2002 measurement period by $0.2. A one
percent decrease in this rate would decrease the benefit obligation at
September 30, 2002 by $3.2 and the aggregate service and interest cost for the
2002 measurement period by $0.2. The weighted average discount rates used in
determining the benefit obligation at the measurement dates were 6.75% for 2002
and 7.5% for 2001. 80




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(Dollars in millions, except per share data) I. Stock Plans Weighted-AverageOption Price
    
    
    
    
    
    
    
    
    
    Available
    
    Exercise PriceStock Plans
    
    Per Share
    
    Outstanding
    
    Exercisable
    
    for Grant
    
    of OptionsAt December 31, 1999
    
    $
    3.09 - $42.64
    
    
    
    15,929,406
    
    
    
    6,490,210
    
    
    
    11,771,029
    
    
    $
    22.26Authorized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333,834Granted
    
    
    16.00 - 27.88
    
    
    
    1,466,653
    
    
    
    
    
    
    
    (1,466,653
    )
    
    
    22.55Became exercisable
    
    
    10.53 - 38.97
    
    
    
    
    
    
    
    3,116,997Exercised
    
    
    3.09 - 27.41
    
    
    
    (762,875
    )
    
    
    (762,875
    )
    
    
    
    
    
    
    13.70Canceled
    
    
    11.82 - 38.97
    
    
    
    (2,990,630
    )
    
    
    (672,055
    )
    
    
    884,531
    
    
    
    24.99Expired
    
    
    7.15
    
    
    
    (4,000
    )
    
    
    (4,000
    )
    
    
    
    
    
    
    7.15ESPP purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (310,379
    )UK Plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (362
    )Restricted stock, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,366
    )At December 31, 2000
    
    $
    3.76 - $42.64
    
    
    
    13,638,554
    
    
    
    8,168,277
    
    
    
    11,194,634
    
    
    $
    22.18Granted
    
    
    18.46 - 22.50
    
    
    
    4,814,250
    
    
    
    
    
    
    
    (4,814,250
    )
    
    
    18.52Became exercisable
    
    
    16.00 - 38.97
    
    
    
    
    
    
    
    896,345Exercised
    
    
    3.76 - 21.19
    
    
    
    (51,571
    )
    
    
    (51,571
    )
    
    
    
    
    
    
    17.51Canceled
    
    
    16.00 - 35.63
    
    
    
    (274,188
    )
    
    
    (83,008
    )
    
    
    163,210
    
    
    
    23.05ESPP purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,313
    )Restricted stock, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,444
    )At March 30, 2001
    
    $
    3.76 - $42.64
    
    
    
    18,127,045
    
    
    
    8,930,043
    
    
    
    6,529,837
    
    
    $
    21.20Authorized under new plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,075,495Adjust 2001 option grants
    
    
    
    
    
    
    1,612,002
    
    
    
    
    
    
    
    (1,612,002
    )Adjust prior option grants
    
    
    
    
    
    
    19,925,736
    
    
    
    9,608,778
    
    
    
    (19,925,736
    )Adjust restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (69,583
    )At March 31, 2001, adjusted
    
    $
    2.79 - $31.66
    
    
    
    21,537,738
    
    
    
    9,608,778
    
    
    
    7,468,174
    
    
    $
    15.81Granted
    
    
    13.71 - 20.42
    
    
    
    530,541
    
    
    
    
    
    
    
    (530,541
    )
    
    
    17.55Became exercisable
    
    
    14.25 - 27.29
    
    
    
    
    
    
    
    2,338,476Exercised
    
    
    2.79 - 18.61
    
    
    
    (411,376
    )
    
    
    (411,376
    )
    
    
    
    
    
    
    12.94Canceled
    
    
    2.87 - 27.29
    
    
    
    (1,263,536
    )
    
    
    (361,801
    )
    
    
    1,263,536
    
    
    
    16.40Expired
    
    
    2.87
    
    
    
    (714
    )
    
    
    (714
    )
    
    
    714
    
    
    
    2.87ESPP purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (167,925
    )UK Plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,059
    )Restricted stock, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,180
    )At December 31, 2001
    
    $
    3.71 - $31.66
    
    
    
    20,392,653
    
    
    
    11,173,363
    
    
    
    7,957,719
    
    
    $
    15.88Authorized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000,000Granted
    
    
    13.97 - 22.25
    
    
    
    4,978,925
    
    
    
    
    
    
    
    (4,978,925
    )
    
    
    18.11Became exercisable
    
    
    11.88 - 28.94
    
    
    
    
    
    
    
    4,419,513Exercised
    
    
    3.71 - 21.16
    
    
    
    (2,122,138
    )
    
    
    (2,122,138
    )
    
    
    
    
    
    
    14.34Canceled
    
    
    8.96 - 26.68
    
    
    
    (2,141,341
    )
    
    
    (734,811
    )
    
    
    2,141,341
    
    
    
    16.73ESPP purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (297,830
    )UK Plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,216
    )Restricted stock, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,665
    )At December 31, 2002
    
    $
    4.80 - $31.66
    
    
    
    21,108,099
    
    
    
    12,735,927
    
    
    
    8,793,424
    
    
    $
    16.43
 Common shares reserved for future issuance at December 31, 2002 were 29,901,523. During the three-year period ended December 31, 2002, we maintained stock-based
compensation plans for directors, officers, other employees, consultants and
independent contractors. Our Amended and Restated 2001 Director Performance Incentive Plan
authorizes the issuance of up to 350,000 shares in connection with awards of
stock options, non-performance restricted stock and deferred stock to
non-employee directors. An annual grant of a non-qualified stock option to
purchase 4,000 shares is made to each eligible director with such grants
becoming fully exercisable six months after the date of grant. The exercise
price of the options is the fair market value of the underlying stock at the
date of grant, and the options expire in ten years. A one-time award of non-performance restricted shares is made to each
non-employee director when the director first joins the Board with restrictions
on transfer that will ordinarily lapse annually over a five-year period. The
number of shares awarded will have a fair market value equal to two and
one-half times the then current annual retainer paid to non-employee directors. Additionally, at least one-half of the annual Board retainer for each
non-employee director is also provided in the form of restricted stock,
deferred stock or a combination of the two. The restrictions on transfer of
the retainer awards will lapse at the conclusion of the directors service. Our 2002 Employee Stock Incentive Plan (2002 ESIP) authorizes the
issuance until January 29, 2012 of up to 4,000,000 common shares in connection
with awards of stock options, restricted stock awards and performance unit
awards. Eligible participants in the 2002 ESIP include employees who are not
executive officers or directors. Our Amended and Restated 2001 Long-Term Stock Incentive Plan (2001
LTSIP) authorizes the issuance until November 27, 2010 of up to 27,000,000
common shares in connection with similar awards. At the time of the spin-off, holders of 18,127,045 Ceridian stock options
and 59,870 unvested restricted stock awards had their awards adjusted in
number, kind and exercise price to preserve the intrinsic value of their
holdings based upon their employment status, as indicated in the table above.
Other terms of the options were not changed. Eligible participants in the 2001 LTSIP include our employees and
non-employee directors, consultants and independent contractors. Stock options awarded under the 2002 ESIP and 2001 LTSIP generally vest
annually either over a three-year period or on a specific date if certain 81




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(Dollars in millions, except
per share data) Stock Option Information as of December 31, 2002 Options Outstanding
    
    Options ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageRange of
    
    Number
    
    Contractual
    
    Exercise
    
    Number
    
    ExerciseExercise Prices
    
    Outstanding
    
    Life
    
    Price
    
    Exercisable
    
    Price$4.80 - $13.71
    
    
    5,465,514
    
    
    
    2.95
    
    
    $
    12.99
    
    
    
    2,243,359
    
    
    $
    11.97$13.74 - $14.80
    
    
    2,926,909
    
    
    
    6.43
    
    
    $
    14.66
    
    
    
    2,700,422
    
    
    $
    14.69$14.81 - $15.78
    
    
    2,495,311
    
    
    
    4.37
    
    
    $
    15.34
    
    
    
    2,281,341
    
    
    $
    15.34$15.82 - $17.63
    
    
    1,042,858
    
    
    
    5.16
    
    
    $
    16.66
    
    
    
    860,901
    
    
    $
    16.60$17.68 - $18.11
    
    
    4,033,587
    
    
    
    4.10
    
    
    $
    18.09
    
    
    
    204,096
    
    
    $
    17.99$18.19 - $20.29
    
    
    1,701,192
    
    
    
    4.76
    
    
    $
    18.93
    
    
    
    1,307,751
    
    
    $
    18.87$20.35 - $20.35
    
    
    2,249,126
    
    
    
    5.81
    
    
    $
    20.35
    
    
    
    2,249,126
    
    
    $
    20.35$20.42 - $31.66
    
    
    1,193,602
    
    
    
    5.57
    
    
    $
    22.79
    
    
    
    888,931
    
    
    $
    23.1521,108,099
    
    
    
    
    
    
    
    
    
    
    
    12,735,927
 Pro Forma Effect of Fair Value
Accounting (Restated)
    
    2002
    
    2001
    
    2000Net earnings as reported
    
    $
    92.1
    
    
    $
    52.1
    
    
    $
    97.3Pro forma net earnings
    
    $
    76.5
    
    
    $
    33.1
    
    
    $
    84.2Diluted earnings per share as reported
    
    $
    0.61
    
    
    $
    0.35
    
    
    $
    0.66Pro forma diluted earnings per share
    
    $
    0.51
    
    
    $
    0.22
    
    
    $
    0.57Weighted-Average AssumptionsExpected lives in years
    
    
    4-8
    
    
    
    4-8
    
    
    
    4-8Expected volatility
    
    
    37.5
    %
    
    
    38.7
    %
    
    
    40.4
    %Expected dividend rate
    
    
    
    
    
    
    
    
    
    
    Risk-free interest rate
    
    
    4.5
    %
    
    
    4.0
    %
    
    
    5.0
    %
 Weighted Average Fair Values of Grants, Awards and Purchases 2002
    
    2001
    
    2000Shares
    
    Fair Value
    
    Shares
    
    Fair Value
    
    Shares
    
    Fair ValueStock options
    
    
    4,978,925
    
    
    $
    6.26
    
    
    
    6,956,793
    
    
    $
    5.39
    
    
    
    1,466,653
    
    
    $
    7.65ESPP
    
    
    297,830
    
    
    $
    2.14
    
    
    
    167,925
    
    
    $
    4.10
    
    
    
    310,379
    
    
    $
    4.95
 performance criteria were satisfied, have either a 5-year or 10-year term
and have an exercise price that may not be less than the fair market value of
the underlying stock at the date of grant. The Compensation and Human Resources Committee of our board of directors
has the discretion to determine the effect that a change of control of Ceridian
will have upon awards made under these plans. In most cases, the vesting of
stock options and restricted stock awards granted under these plans will
accelerate upon a change of control of Ceridian. We have reserved 725,495 common shares for issuance under
Save-As-You-Earn stock-based compensation plans for our employees in the
United Kingdom (the UK Plans). Our Employee Stock Purchase Plan (ESPP) provides for the issuance of up
to 1,000,000 shares of newly issued or treasury common stock of Ceridian to
eligible employees. The purchase price of the stock to ESPP participants is
85% of the lesser of the fair market value on either the first day or the last
day of the applicable three-month offering period. In connection with the
spin-off, we suspended activity in the ESPP from December 16, 2000 until June
16, 2001. As reported in Note A, we adopted the disclosure-only provisions of FAS
123 and continue to account for stock-based compensation as in prior years.
Therefore, since all option exercise prices are at or above fair market value
on the date of grant and the ESPP is a non-compensatory plan, no expense is
recorded with respect to our stock option or employee stock purchase plans. We provide the following disclosure, including referenced tables, with
respect to the provisions of FAS 123. We employ the Black-Scholes option
pricing model for determining the fair value of stock option grants and ESPP
purchases as presented in an accompanying table. Weighted average exercise
prices for stock option activity and options outstanding at December 31, 2002,
2001 and 2000 are included in the Stock Plans table. Further information on outstanding and exercisable stock options by
exercise price range as of the end of the current year is disclosed in an
accompanying table. We are required to report the pro forma effect on net
earnings and earnings per share that would have resulted if the fair value
method of accounting for stock-based compensation issued in those years had
been adopted. The application of the fair value method would have resulted in
the determination of compensation cost for grants of stock options and
purchases under the ESPP. This compensation cost would then be allocated to
the related period of service. The results of this calculation and the
assumptions used appear in the accompanying pro forma table. Stock Rights Plan For holders of Ceridian common stock at November 9, 2001, we distributed
one right for each outstanding share entitling the holder to purchase from us
one ten-thousandth of a share of an unissued class of preferred stock for $75
dollars. In the event of a certain effort to acquire Ceridian, the holder
would have the right to exercise the right for cash, property or securities of
the issuer with a value of twice the exercise price. At December 31, 2002, no
such event had occurred. 82




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(Dollars in millions, except
per share data) J. Financing December 31,Debt Obligations
    
    2002
    
    2001U.S. revolving credit facility
    
    $
    40.0
    
    
    $
    235.0Comdata receivable securitization
    
    
    150.0
    
    
    
    UK overdraft facility
    
    
    2.0
    
    
    
    1.4Total revolving credit agreements and overdrafts
    
    
    192.0
    
    
    
    236.4Other long-term debt obligations
    
    
    1.5
    
    
    
    1.5Total debt obligations
    
    
    193.5
    
    
    
    237.9Less short-term debt and current portions of long-term debt
    
    
    2.0
    
    
    
    1.5Long-term obligations, less current portions
    
    $
    191.5
    
    
    $
    236.4
 In June 2002, our subsidiary, Comdata Network, Inc., entered into a $150.0
receivables securitization facility with up to a three-year term involving
certain of its trade receivables (which this report refers to as the
Receivables) and drew an advance of $100.0. The securitization facility is
subject to financial covenants similar to those included in our $350.0
revolving credit facility and consists of two steps. In the first step, Comdata Funding Corporation (which this report refers
to as CFC), a bankruptcy-remote special purpose subsidiary of Comdata, buys
and accepts capital contributions of the Receivables in transactions intended
to constitute true sales or other outright conveyances. In the second step, CFC sells undivided interests in those Receivables
to a third-party multi-seller commercial paper conduit (which this report
refers to as the Conduit) or its liquidity banks (together with the Conduit,
which this report refers to as the Purchasers) in transactions reported as
secured loans. Although title to the Receivables passes to CFC under the first step of
the facility and the Receivables are no longer available to satisfy claims of
Comdatas creditors, Comdata has agreed to act as the servicing agent for the
Receivables acquired by CFC in exchange for a servicing fee of 1% per annum on
the average outstanding balance of the Receivables. We have guaranteed
Comdatas performance as both originator of and servicing agent for the
Receivables. CFC may increase or decrease its use of the securitization facility up to
four times a month provided sufficient qualified Receivables exist to support
the Purchasers investment under the second step. CFC is obligated to pay
interest on the invested amount outstanding either at the Conduits pooled
A-1/P-1 commercial paper rate (which was 1.45% at December 31, 2002), or, in
the event the Conduit is unable to issue commercial paper, at CFCs choice of
the prime rate or LIBOR plus 1.5% per annum. In addition, CFC must pay a
monthly program fee of 0.125% per annum on the average invested amount
outstanding during the preceding month and a monthly facility fee equal to
0.25% per annum on 102% of the average facility size (whether used or unused)
during the preceding month. Both of these fees are included in interest
expense. The invested amount outstanding under the securitization facility
increased from $100.0 to $150.0 during third quarter 2002, and the aggregate
amount of Receivables encumbered by the Purchasers at December 31, 2002 was
$173.3. The invested amount outstanding is accounted for as long-term debt and
the receivables remain on our consolidated balance sheet, even though the
Receivables are not available to satisfy claims of creditors of any of the
companies other than CFC. Under an agreement with a syndicate of commercial banks dated January 31,
2001, we entered into a $350.0 domestic revolving credit facility, of which
$50.0 may be used for letters of credit, that expires in March 2006. This
January 2001 credit facility also permits us to request that the bank syndicate
use its best efforts to provide additional commitments so long as the total
commitment does not exceed $500.0. The January 2001 credit facility is
unsecured and its pricing for both loans and letters of credit is based on our
senior unsecured debt ratings and LIBOR. The interest rate on borrowings under
this facility was 2.44% as of December 31, 2002. Under the terms of the
January 2001 credit facility, our consolidated debt must not exceed our
stockholders equity, as defined in the agreement, as of the end of any fiscal
quarter, and the ratio of earnings before interest and taxes to interest
expense on a rolling four quarter basis must be at least 2.75 to 1. This
facility also contains covenants that, among other things, limit liens,
subsidiary debt, contingent obligations, operating leases, minority equity
investments and divestitures. We have remained in compliance with all of these
covenants. The January 2001 credit facility replaced a $250.0 domestic
revolving credit facility with similar terms that was arranged with a
commercial bank syndicate in July 1997. At December 31, 2000, advances of
$50.0 and $1.7 of letters of credit were outstanding under the July 1997 credit
facility. Senior notes with a face amount of $450.0 were sold in a Rule 144A
offering in June 1999. The senior notes had a five-year term with a coupon
interest rate of 7.25% per annum payable semiannually beginning December 1,
1999. The senior notes were sold at an original issue discount of $4.4 that,
along with $0.8 of issue costs, was amortized to interest expense based on the
term of the notes. We applied the net proceeds from the sale of the senior
notes, along with cash balances and an 83




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(Dollars in millions, except
per share data) advance of $210.0 on the July 1997 credit facility, to fund the
acquisition of ABR Information Services, Inc. in June 1999. During first
quarter 2000, Ceridian repurchased on the open market senior notes with a face
amount of $20.0. In March 2001, at the time of the spin-off, advances of $235.0 from the
January 2001 credit facility, the $225.0 Arbitron payment and existing cash
balances funded the required early retirement of the $430.0 of senior notes
outstanding and payment of the $50.0 balance outstanding under the $250.0
domestic revolving credit facility dated July 1997 at the time of the spin-off.
The redemption of senior notes required a payment of $456.5. The
establishment of the January 2001 credit facility also resulted in the payment
of $1.0 for origination costs that are being amortized over its term. Further
information on the spin-off appears under the heading Discontinued Operations
in Note D. Under the January 2001 credit facility, in addition to the spin-off
financing, we borrowed $50.0 in June 2001 in connection with the settlement of
litigation and repaid a total of $50.0 during 2001. At December 31, 2001,
advances of $235.0 and a letter of credit in the amount of $2.0 were
outstanding under the January 2001 credit facility. We used the $150.0
proceeds from the receivables securitization facility and additional payments
of $45.0 during 2002 to reduce the advances outstanding under January 2001
credit facility to $40.0 at December 31, 2002. These advances, along with a
letter of credit in the amount of $2.3, leave us with unused borrowing capacity
under the $350.0 revolving credit facility of $307.7, of which we have
designated $150.0 as backup to the receivables securitization facility. In addition, payments of $18.8 and translation adjustments of $0.3
extinguished the balance of $19.1 outstanding at December 31, 2000 on revolving
credit agreements of our Canadian subsidiary, leaving only a letter of credit
valued at $0.8 and $0.9 at December 31, 2002 and 2001 outstanding under those
agreements. During 2000, the balance on the Canadian revolving credit
agreements had been reduced by payments of $19.6. Other indebtedness at
December 31, 2002 and 2001 of $3.5 and $3.0 included an overdraft facility of a
subsidiary in the UK and acquisition indebtedness. K. Commitments and Contingencies Interest Rate Contracts In accordance with our risk management policy, we hedge a substantial portion
of our interest rate exposure related to our investment of customer funds, as
further described in Note M, viewed within the context of our expectation of
the future economic environment. Due to liquidity requirements for these
obligations, we hold a large percentage of customer funds in overnight-maturing
investments that are subject to interest rate variability. We manage this
variability in part by investing a portion of these funds in longer-term
instruments and by offsetting the variable rate income with floating rates on
our debt obligations. We also utilize derivative securities such as interest
rate contracts to manage interest rate risk. During the three-year period ended December 31, 2002, we maintained in
effect interest rate contracts that function as cash flow hedges of the
designated item for the purpose of hedging interest rate risk on customer
funds. The counterparties to these arrangements are commercial banks with debt
ratings of A or better. These arrangements, which do not require collateral,
require the banks to pay us the amount by which a one-month LIBOR index of
short-term interest rates falls below a specified floor strike level.
Alternatively, when this index exceeds a specified cap strike level, we pay out
to the banks the excess above the cap strike level. We believe that the risk
of accounting loss through non-performance by the counterparties under any of
these arrangements is negligible. Until FAS 133, neither these hedging arrangements nor the related
investments and offsetting liability to customers were required to be reflected
in our balance sheet. At the 84




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(Dollars in millions, except
per share data) effective date of FAS 133 in January 2001, we recorded our interest rate
contracts with a negligible effect on our accounts, except for a $2.6 gain
required under the interpretation of FAS 133 in effect at that time. A
subsequent interpretation of FAS 133 resulted in a reversal of $1.8 of that
gain in the fourth quarter of 2002. The remainder of the gain will be reversed
over the remaining term of the contracts involved. At December 31, 2002 and 2001, we had interest rate contracts in effect
with an aggregate notional amount of $800.0. The active contracts at the end of
2002 had remaining terms of 5 to 35 months, floor strike levels ranging from
4.50% to 6.07% (averaging 5.05%) and cap strike levels ranging from 4.54% to
7.32% (averaging 5.95%). We report the carrying value of our derivative
securities as a noncurrent asset on our balance sheet and any changes in the
carrying value of these securities in other comprehensive income in our
statement of stockholders equity. We recognize derivative gains and losses as
cash settlements occur and include these amounts in revenue from HRS
operations, along with the investment income hedged by these instruments. The
gross unrealized gains from our derivative securities amounted to $75.8 in 2002
and $32.0 in 2001, and realized gains of $26.9 in 2002 and $10.3 in 2001 were
included in HRS revenue. The gross unrealized gains result largely from a
decline in forward interest rates. Based upon future expected interest rates
as determined from LIBOR future prices in effect at the close of business on
December 31, 2002, we expect to collect an additional $29.0 during
2003. Contracts In March 2001, we entered into an agreement with
Ultimate that provides us with a non-exclusive license to use
Ultimates software as part of a Web-enabled integrated
payroll/HR/self-service offering to our small business
customers. Our initial payment to Ultimate amounted to $10.0,
which provided us with a non-exclusive license to use its
software product in our product offerings. This payment was
partially refundable pending successful transfer of the
technology. Amendments to the license agreement in August 2001
and February 2002 eliminated any refundable nature of the
initial payment and deemed the technology transfer complete as
of February 2002. In February 2002, we additionally agreed to
pay Ultimate $0.5 if an upgraded release were to be delivered
prior to August 31, 2002, which did occur. The $10.5 is
accounted for as purchased software under SOP 98-1 and
amortized on a straight-line basis over a seven-year period that
began in March 2003 when our SourceWeb software product
incorporating this Ultimate software was placed in service. Pursuant to the February 2002 amendment, the
license agreement also provided for a monthly royalty commencing
in January 2003, which is based on the number of our
customers employees paid by using the software and subject
to minimum and maximum amounts. Pursuant to the February 2002
amendment, we made an advance payment of $6.0 to Ultimate at
that time representing the minimum royalty commitment for 2003.
We remain obligated to future minimum monthly payments of $0.5
per month from January 2004 until January 1, 2006, when the
per-employee monthly charge will escalate at a rate of 5% per
annum until the end of the noncancellable term in March 2008. We
recorded the $6.0 payment as prepaid expense and amortized this
amount monthly to cost of revenue on a straight line basis during 2003. Royalty costs under this agreement will
be charged monthly to cost of revenue and paid according to the
terms of the agreement. Effective January 1, 2003, we entered into a services agreement with
Ultimate under which we will make quarterly payments totaling $2.3 during 2003
for extended technical support in connection with the introduction of our
SourceWeb payroll services offering. In connection with the acquisition of certain call center assets in
December 2002, we entered into royalty and services arrangements that are
noncancelable for the first 36 months. Under these arrangements, we are
obligated to make minimum payments of $2.2 in each of 2003, 2004 and 2005. 85




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(Dollars in millions, except
per share data) Leasing We conduct a substantial portion of our operations in leased facilities. Most
of our leases contain renewal options and require payments for taxes, insurance
and maintenance. We remain secondarily liable for future obligations related
to assigned leases totaling $1.3 at December 31, 2002. We do not anticipate
any material non-performance by the assignees of these leases. Virtually all our leasing arrangements for equipment and facilities are
operating leases and the rental payments under these leases are charged to
operations as incurred. The amounts in the accompanying tables do not include
assigned leases or obligations recorded as liabilities. Our rental expense and sublease income for each of the three years ended
December 31, 2002 appear in the accompanying Rental Expense table. Rental Expense
    
    2002
    
    2001
    
    2000Rental expense
    
    $
    49.5
    
    
    $
    44.2
    
    
    $
    39.8Sublease rental income
    
    
    (0.6
    )
    
    
    (0.5
    )
    
    
    (0.3
    )Net rental expense
    
    $
    48.9
    
    
    $
    43.7
    
    
    $
    39.5
 Our future minimum noncancelable lease payments on existing operating
leases at December 31, 2002, which have an initial term of more than one year,
are presented in the accompanying Future Minimum Lease Payments table. Future Minimum Lease Payments2003
    
    $
    44.12004
    
    
    37.92005
    
    
    30.72006
    
    
    24.22007
    
    
    22.6Thereafter
    
    
    111.8
 86




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(Dollars in millions, except
per share data) L. Legal Matters We are involved in a number of judicial and administrative proceedings
considered normal in the nature of their current and past operations, including
employment-related disputes, contract disputes, government proceedings,
customer disputes, and tort claims. In some proceedings, the claimant seeks
damages as well as other relief, which, if granted, would require substantial
expenditures on our part. Some of these matters raise difficult and complex factual and legal
issues, and are subject to many uncertainties, including the facts and
circumstances of each particular action, and the jurisdiction, forum and law
under which each action is proceeding. Because of this complexity, final
disposition of some of these proceedings may not occur for several years. As
such, we are not always able to estimate the amount of our possible future
liabilities. There can be no certainty that we may not ultimately incur
charges in excess of presently or future established accruals or insurance
coverage. Although occasional adverse decisions (or settlements) may occur, it
is the opinion of our management that the final disposition of these
proceedings will not, considering the merits of the claims and available
reserves, have a material adverse effect on our financial position or results
of operations. 87




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(Dollars in millions, except
per share data) M. Customer Funds As indicated in the section entitled Changes in Presentation of Note A, in 2003 we changed our
presentation of benefits services customer deposits in order to
include these amounts with our payroll and tax filing customer funds
in a combined amount described as customer funds
 on our consolidated
balance sheet. The related obligations are similarly reported on a combined basis. The effect of this
reclassification on our consolidated balance sheet moved amounts previously reported in cash and
equivalents and short-term investments and into an asset entitled customer funds. The related
obligations previously reported in drafts and customer funds payable moved into a liability entitled
customer funds obligations. The reclassifications eliminated from our consolidated statements of cash
flows the reclassified cash and equivalents balances, the effect on operating cash flows of changes in the
reclassified customer funds payable, and the effect on investing cash flows from any changes in the
reclassified short-term investments. This reclassification did not affect our consolidated statements of
operations. Payroll and Tax Filing Funds In connection with our U.S. and Canadian payroll and tax filing services, we
collect funds for payment of payroll and taxes; hold such funds in trust until
payment is due; remit the funds to the clients employees and appropriate
taxing authority; file federal, state and local tax returns; and handle related
regulatory correspondence and amendments. We invest the U.S. trust funds primarily in high quality collateralized
short-term investments or money market mutual funds. We may also invest these
funds in U.S. Treasury and Agency securities, AAA rated asset-backed securities
and corporate securities rated A3/A- or better. Our Canadian trust funds are
invested in securities issued by the government and provinces of Canada, highly
rated Canadian banks and corporations, asset-backed trusts and mortgages. Investment income from invested customer funds
constitutes a component of our compensation for providing services
under agreements with our customers. Investment income from invested customer funds
included in revenue amounted to $91.4 in 2002,
$103.0 in 2001 and $107.0 in 2000. These amounts include gross
realized gains from interest rate contracts as presented in
Note K.
We further discuss our accounting for this
investment income in the section of Note A entitled
Revenue Recognition. Due to our positive intent and ability to hold the marketable debt
securities until maturity and supporting historical experience, we classify
these securities as held-to-maturity and report them at amortized cost.
Disposition of these securities before maturity is expected to be limited to
unusual circumstances such as significant deterioration of the issuers
creditworthiness or a major business combination or disposition. As identified on the consolidated balance sheet, payroll and tax filing
funds and the offsetting obligations amounted to $2,380.5 and $2,126.4 at
December 31, 2002 and 2001. This amount varies significantly during the year
and averaged $1,846.5 and $1,867.7 for the years 2002 and 2001. The
accompanying tables provide cost and market price information for various
classifications of payroll and tax filing fund investments and amounts by
maturity date. Benefits Services Funds In connection with our HRS benefits services operations, we receive funds on
behalf of our customers for remittance to employees, insurance providers and
others. These funds are not held in trust. These funds and the offsetting
obligations are included on the balance sheet in customer funds. At December
31, 2002 and 2001, they amounted to $60.4 and $44.5. Investment income earned
on these funds constitutes fees under agreements with customers and is included
in revenue. December 31, 2002
    
    December 31, 2001Investments of Customer Funds
    
    Cost
    
    Market
    
    Cost
    
    
    
    
    
    MarketMoney market securities and other
cash equivalents
    
    $
    1,612.5
    
    
    $
    1,612.5
    
    
    $
    1,520.5
    
    
    
    
    
    
    $
    1,520.5Held-to-maturity investments:U.S. government and agency securities
    
    
    197.6
    
    
    
    207.0
    
    
    
    115.1
    
    
    
    
    
    
    
    118.7Canadian and provincial government securities
    
    
    124.7
    
    
    
    130.5
    
    
    
    87.3
    
    
    
    
    
    
    
    90.2Corporate debt securities
    
    
    211.7
    
    
    
    217.8
    
    
    
    166.2
    
    
    
    
    
    
    
    170.4Asset-backed securities
    
    
    212.7
    
    
    
    223.0
    
    
    
    184.1
    
    
    
    
    
    
    
    194.3Mortgage-backed and other securities
    
    
    81.7
    
    
    
    84.3
    
    
    
    97.7
    
    
    
    
    
    
    
    101.1Total held-to-maturity investments
    
    
    828.4
    
    
    
    862.6
    
    
    
    650.4
    
    
    
    
    
    
    
    674.7Payroll and tax filing funds
    
    $
    2,440.9
    
    
    $
    2,475.1
    
    
    $
    2,170.9
    
    
    
    
    
    
    $
    2,195.2
 December 31, 2002Investments of Customer Funds by Maturity Date
    
    Cost
    
    MarketDue in one year or less
    
    $
    1,770.1
    
    
    $
    1,775.1Due in one to three years
    
    
    258.7
    
    
    
    269.0Due in three to five years
    
    
    412.1
    
    
    
    431.0Total
    
    $
    2,440.9
    
    
    $
    2,475.1
 88




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(Dollars in millions, except
per share data) N. SUPPLEMENTARY QUARTERLY DATA (Unaudited) (Restated) 2002
    
    20014th
    
    3rd
    
    2nd
    
    1st
    
    4th
    
    3rd
    
    2nd
    
    1stQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    QuarterRevenue
    
    $
    308.4
    
    
    $
    288.6
    
    
    $
    291.9
    
    
    $
    302.1
    
    
    $
    296.5
    
    
    $
    279.3
    
    
    $
    292.5
    
    
    $
    310.7Costs and ExpensesCost of revenue
    
    
    145.7
    
    
    
    136.5
    
    
    
    139.7
    
    
    
    139.2
    
    
    
    140.7
    
    
    
    137.8
    
    
    
    140.8
    
    
    
    142.5Selling, general and
administrative
    
    
    93.7
    
    
    
    92.3
    
    
    
    97.4
    
    
    
    106.0
    
    
    
    105.4
    
    
    
    95.0
    
    
    
    100.4
    
    
    
    116.7Research and development
    
    
    14.5
    
    
    
    15.1
    
    
    
    14.4
    
    
    
    15.3
    
    
    
    13.9
    
    
    
    14.0
    
    
    
    15.2
    
    
    
    15.9Other expense (income) (1)
    
    
    14.9
    
    
    
    9.7
    
    
    
    (0.1
    )
    

    
    9.8
    
    
    
    
    
    
    
    (1.9
    )
    
    
    52.5
    
    
    
    (2.4
    )Interest
income
    
    
    (0.6
    )
    
    
    (0.6
    )
    
    
    (0.6
    )
    
    
    (0.3
    )
    
    
    (0.5
    )
    
    
    (2.5
    )
    
    
    (1.7
    )
    
    
    (1.8
    )Interest
expense
    
    
    1.3
    
    
    
    1.5
    
    
    
    1.9
    
    
    
    1.9
    
    
    
    2.5
    
    
    
    3.5
    
    
    
    4.0
    
    
    
    9.0Total costs and expenses
    
    
    269.5
    
    
    
    254.5
    
    
    
    252.7
    
    
    
    271.9
    
    
    
    262.0
    
    
    
    245.9
    
    
    
    311.2
    
    
    
    279.9Earnings (loss) before income
taxes
    
    
    38.9
    
    
    
    34.1
    
    
    
    39.2
    
    
    
    30.2
    
    
    
    34.5
    
    
    
    33.4
    
    
    
    (18.7
    )
    
    
    30.8Income tax provision (benefit)
    
    
    13.1
    
    
    
    12.3
    
    
    
    14.1
    
    
    
    10.8
    
    
    
    14.2
    
    
    
    13.5
    
    
    
    (7.2
    )
    
    
    12.6Earnings (loss) from
continuing operations
    
    
    25.8
    
    
    
    21.8
    
    
    
    25.1
    
    
    
    19.4
    
    
    
    20.3
    
    
    
    19.9
    
    
    
    (11.5
    )
    
    
    18.2Discontinued operations (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.2Net earnings (loss)
    
    $
    25.8
    
    
    $
    21.8
    
    
    $
    25.1
    
    
    $
    19.4
    
    
    $
    20.3
    
    
    $
    19.9
    
    
    $
    (11.5
    )
    
    $
    23.4Earnings (loss) per share (3)BasicContinuing operations
    
    $
    0.17
    
    
    $
    0.15
    
    
    $
    0.17
    
    
    $
    0.13
    
    
    $
    0.14
    
    
    $
    0.14
    
    
    $
    (0.08
    )
    
    $
    0.12Net earnings
    
    $
    0.17
    
    
    $
    0.15
    
    
    $
    0.17
    
    
    $
    0.13
    
    
    $
    0.14
    
    
    $
    0.14
    
    
    $
    (0.08
    )
    
    $
    0.16DilutedContinuing operations
    
    $
    0.17
    
    
    $
    0.15
    
    
    $
    0.16
    
    
    $
    0.13
    
    
    $
    0.14
    
    
    $
    0.13
    
    
    $
    (0.08
    )
    
    $
    0.12Net earnings
    
    $
    0.17
    
    
    $
    0.15
    
    
    $
    0.16
    
    
    $
    0.13
    
    
    $
    0.14
    
    
    $
    0.13
    
    
    $
    (0.08
    )
    
    $
    0.16Shares used in calculations(in thousands)Weighted average shares (basic)
    
    
    148,467
    
    
    
    148,526
    
    
    
    148,246
    
    
    
    146,875
    
    
    
    146,376
    
    
    
    146,149
    
    
    
    145,950
    
    
    
    145,790Dilutive securities
    
    
    401
    
    
    
    1,407
    
    
    
    5,467
    
    
    
    4,057
    
    
    
    2,903
    
    
    
    3,207
    
    
    
    
    
    
    
    766Weighted average
shares (diluted)
    
    
    148,868
    
    
    
    149,933
    
    
    
    153,713
    
    
    
    150,932
    
    
    
    149,279
    
    
    
    149,356
    
    
    
    145,950
    
    
    
    146,556
  (1)
    
    Includes 2002 unusual losses of $9.8 for the first quarter, $9.8 for the third quarter and $15.2 for the fourth quarter and
2001 unusual losses (gains) of $(2.1) for the first quarter, $52.4 for second quarter, and $(2.0) for the third quarter as
described in Note D to the consolidated financial statements.  (2)
    
    For information on discontinued operations, see Note D to the consolidated financial statements.  (3)
    
    For information on the calculation of earnings per share, see Note A to the consolidated financial statements. 89




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(Dollars in millions, except
per share data)   SCHEDULE II CERIDIAN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions) Allowance for Doubtful Accounts Receivable Year Ended December 31,2002
    
    2001
    
    2000Balance at beginning of year
    
    $
    16.2
    
    
    $
    17.4
    
    
    $
    17.5Additions charged to costs and expenses
    
    
    17.0
    
    
    
    15.8
    
    
    
    14.8Write-offs and other adjustments (1)
    
    
    (14.8
    )
    
    
    (17.0
    )
    
    
    (14.9
    )Balance at end of year
    
    $
    18.4
    
    
    $
    16.2
    
    
    $
    17.4
  (1)
    
    Other adjustments include the effect of acquisitions and dispositions of
businesses. 90




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##### Table of Contents



INDEPENDENT AUDITORS REPORT ON FINANCIAL STATEMENT SCHEDULE THE BOARD OF DIRECTORS AND STOCKHOLDERS
CERIDIAN CORPORATION: Under date of January 22, 2003, except as to Note B, which is as of March
12, 2004, we reported on the consolidated balance sheets of Ceridian
Corporation and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of operations, cash flows and stockholders equity for
each of the years in the three-year period ended December 31, 2002, as
contained in Ceridians 2002 Annual Report on Form 10-K/A. In connection with
our audits of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedule as listed in the
accompanying index (see Item 15.(a)2.). This financial statement schedule is
the responsibility of Ceridians management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP Minneapolis, Minnesota
January 22, 2003 91




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##### Table of Contents






Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

None.




PART III




Item 10. Directors and Executive Officers of the Registrant

We refer you to our Proxy Statement for our 2003 Annual Meeting of
Stockholders and the heading Election of Directors for information regarding
our directors and nominees for director. This information is incorporated by
reference into this item of the report.

We refer you to our Proxy Statement for our 2003 Annual Meeting of
Stockholders and the heading Other MattersSection 16(a) Beneficial Ownership
Reporting Compliance for information regarding compliance with Section 16(a)
of the Securities Exchange Act of 1934. This information is incorporated by
reference into this item of the report.

Information regarding our executive officers is found in Item 1A of this
report under the heading Executive Officers of the Registrant.




Item 11. Executive Compensation

We refer you to our Proxy Statement for our 2003 Annual Meeting of
Stockholders and the headings Director Compensation, Report of Compensation
and Human Resources Committee, Stock Price Performance Graph, Executive
Compensation, and Employment Agreements and Change of Control Arrangements.
This information is incorporated by reference into this item of the report.




Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stock Matters

We refer you to our Proxy Statement for our 2003 Annual Meeting of
Stockholders and the heading Share Ownership Information. This information
is incorporated by reference into this item of the report.

92



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##### Table of Contents



Equity Compensation Plan Information

The following table and accompanying notes provide information about
our common stock that may be issued upon the exercise of options and other
incentive awards under all of our existing equity compensation plans as of
December 31, 2002.

|                                                           |  |                      |            |                      |  |                           |       |  |  |  |           |    
|---------------------------------------------------------- |  | -------------------- | ---------- | -------------------- |  | ------------------------- | ----- |  |  |  | --------- | ---
|                                                           |  |                      |            |                      |  | (c)                      
|                                                           |  | (a)                  |            |                      |  | Number of securities     
|                                                           |  | Number of securities |            | (b)                  |  | remaining available for  
|                                                           |  | to be issued upon    |            | Weighted-average     |  | future issuance under    
|                                                           |  | exercise of          |            | exercise price of    |  | equity compensation plans
|                                                           |  | outstanding options, |            | outstanding options, |  | (excluding securities    
|Plan Category                                              |  | warrants and rights  |            | warrants and rights  |  | reflected in Column (a)) 
|                                                           |  |                      |            |                      |  |                          
|Equity compensation
plans approved by
security holders     |  |                      | 17,286,774 | (1)                  |  | $                         | 16.12 |  |  |  | 7,920,529 | (2)
|Equity compensation
plans not approved
by security holders |  |                      | 3,821,325  |                      |  | $                         | 18.07 |  |  |  | 872,895   | (3)
|Total                                                      |  |                      | 17,726,404 |                      |  |                           |       |  |  |  | 8,793,424 |    



|(1) |  | The Ceridian Corporation Deferred Compensation Plan allows executive
officers the opportunity to invest in various book accounts, including one
that tracks the performance of our common stock (which this section of the
report refers to as Phantom Stock). Upon distribution, such
participants will receive the amounts invested in Phantom Stock in the
form of shares of Ceridian common stock. Column (a) includes the number
of shares that are currently credited to participants Phantom Stock
accounts and would be issued as Ceridian common stock upon a complete
distribution of all amounts in the Phantom Stock account as of December
31, 2002.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The following number of shares remained available for issuance under each
of our equity compensation plans that have been approved by our
stockholders. Grants under these plans may be in the form of any of the
listed types of awards:                                                                                                                                                                                                                                                                                                                                                                                                                           

|                                                              |  |                  |           |                 |  |                                                   
|------------------------------------------------------------- |  | ---------------- | --------- | --------------- |  | --------------------------------------------------
|Plan                                                          |  | Number of Shares |           | Types of Awards
|                                                              |  |                  |           |                
|Amended and Restated 2001
Long-Term Stock Incentive
Plan      |  |                  | 7,098,460 |                 |  | Stock options, restricted
stock, performance units
|                                                              |  |                  |           |                 |  |                                                   
|Amended and Restated 2001
Director Performance
Incentive Plan |  |                  | 287,824   |                 |  | Non-statutory stock
options, restricted stock     

93



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|    |  | Also, 534,245 shares remained available under the Ceridian Corporation
Employee Stock Purchase Plan, an employee stock purchase plan under
Section 423 of the Internal Revenue Code of 1986, as amended.                               
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(3) |  | The following number of shares remained available for issuance under each
of our equity compensation plans that have not been approved by our
stockholders.                                                                              
|   
|    |  | Under our 2002 Employee Stock Incentive Plan, 178,675 shares remained
available for issuance. Grants under this plan may be in the form of
non-statutory stock options, restricted stock or performance units.                           
|   
|    |  | In addition, the following plans for employees in the United Kingdom that
have been approved by Inland Revenue under a save-as-you-earn (SAYE)
plan design and have the following number of shares that remain available
for issuance:

|                                          |  |                  |         | 
|----------------------------------------- |  | ---------------- | ------- | 
|Plan                                      |  | Number of Shares
|                                          |  |                 
|2001 Savings-Related Share Option Plan    |  |                  | 500,000 | 
|UK Compensation Share Option Plan         |  |                  | 79,633  | 
|Amended Savings-Related Share Option Plan |  |                  | 114,587 | 

Ceridian Corporation 2002 Employee Stock Incentive Plan.On January
29, 2002, our Board of Directors approved the Ceridian Corporation 2002
Employee Stock Incentive Plan, pursuant to which incentive awards may be
granted to our employees who are not executive officers or directors of the
company. The plan authorizes the granting of non-statutory stock options,
restricted stock and performance units. Only non-statutory stock options
have been awarded under the plan. The non-statutory stock options have an
exercise price equal to the closing price of Ceridians common stock on the
date of grant, vest ratably over three years and expire in five years from
the date of grant. As of December 31, 2002, non-statutory options to
acquire 3,821,325 shares were outstanding under this plan, out of the
4,000,000 shares originally reserved for issuance.

Ceridian Corporation 2001 Savings-Related Share Option Plan, Ceridian
Corporation UK Compensation Share Option Plan and Ceridian Corporation Amended
Savings-Related Share Option Plan (which this section of the report
collectively refers to as the SAYE Plans). The SAYE Plans have been adopted
by our Board of Directors. The SAYE Plans have been approved by Inland Revenue
in the United Kingdom under the save-as-you-earn plan design and are
available to employees of Ceridians subsidiaries in the United Kingdom.

In 2001, the Board adopted the Ceridian Corporation 2001 Savings-Related
Share Option Plan (2001 SAYE). Under the 2001 SAYE, employee-participants
can commit to save a specified amount from after-tax pay for a fixed period
(either three, five or seven years). At the end of the period chosen,
participants have the choice to receive the savings amount and accumulated
tax-free interest credits either in cash or to use the amount to purchase
common stock from Ceridian at an exercise price equal to the market price of
the stock as of the beginning

94



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##### Table of Contents



of the savings contract period, less a 15% discount. Under the 2001 SAYE
Plan, an aggregate of 500,000 shares of Ceridian common stock has been reserved
for issuance.

In connection with the spin-off, Ceridians predecessor amended the
Ceridian Corporation Amended Savings-Related Share Option Plan (the
Rollover Plan) and transferred the Rollover Plan to Ceridian. As a
result of the spin-off and transfer of the Rollover Plan to Ceridian, the
savings contracts held by employee-participants lost their tax-favored
status. To make employee-participants whole for the income tax and national
insurance liability resulting from the spin-off, employees were awarded
additional savings contracts under the Ceridian Corporation UK Compensation
Share Option Plan (Compensation Plan). Under the Rollover Plan and
Compensation Plan, at the end of the contract period chosen (three, five or
seven years), participants have the choice to receive the savings amount
and accumulated interest credits either in cash or to use the amount to
purchase common stock from Ceridian at an exercise price equal to the
spin-adjusted market price of the stock as of the original date of joining
the Rollover Plan, less a 20% discount. No new contributions are permitted
under the Rollover Plan and the Compensation Plan. As of December 31,
2002, 114,587 and 79,633 shares of common stock, respectively, are eligible
to be purchased from outstanding options under the Rollover Plan and
Compensation Plan.

For additional information concerning our equity compensation plans,
we refer you to Note I, Stock Plans, to our consolidated financial
statements. This information may be found in Part II, Item 8 of this
report.




Item 13. Certain Relationships and Related Transactions

None.




Item 14. Controls and Procedures



|(a) |  | Evaluation of Disclosure Controls and Procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Within 90 days prior to the filing of this report, we carried out an
evaluation, under the supervision and with the participation of our
management, including our President and Chief Executive Officer and
our Executive Vice President and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls
and procedures pursuant to Rule 13a-14 of the Securities Exchange Act
of 1934, as amended. Based upon and as of the date of that
evaluation, our President and Chief Executive Officer and our
Executive Vice President and Chief Financial Officer concluded that
our disclosure controls and procedures (as defined in Rules 13a-14(c)
and 15d-14(c) under the Exchange Act) are effective to ensure that
information required to be disclosed by us in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commission rules and forms.

95



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##### Table of Contents





|(b) |  | Changes in Internal Controls.                                                                                                                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to
the evaluation referenced in paragraph (a) above. There were no
significant deficiencies or material weaknesses, and therefore there
were no corrective actions taken.

96



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##### Table of Contents






PART IV




Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) 1. Financial Statements of Registrant

We refer you to the Index of Consolidated Financial Statements included
in Part II, Item 8 of this report.

(a) 2. Financial Statement Schedules of Registrant

We refer you to the Index of Financial Statement Schedules included in
Part II, Item 8 of this report.

(a) 3. Exhibits

The following is a complete list of exhibits filed or incorporated by
reference as part of this report.

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.01    |  | Amended and Restated Certificate of Incorporation of Ceridian Corporation
(formerly known as New Ceridian Corporation) (incorporated by reference to
Exhibit 3.1 to Ceridians Registration Statement on Form 10 (File No.
001-16149)).                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.02    |  | Amendment to Amended and Restated Certificate of Incorporation of
Ceridian Corporation (formerly known as New Ceridian Corporation)
(incorporated by reference to Exhibit 3.02 to Ceridians Annual Report on
Form 10-K for the year ended December 31, 2000 (File No. 001-16149)).                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.03    |  | Amended and Restated Bylaws of Ceridian Corporation (formerly known as
New Ceridian Corporation) (incorporated by reference to Exhibit 3.2 to
Ceridians Registration Statement on Form 10 (File No. 001-16149)).                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|4.01    |  | Rights Agreement, dated as of November 6, 2001, between Ceridian
Corporation and The Bank of New York, as Rights Agent, including the form
of Certificate of Resignation, Preferences and Rights of Series A
Preferred Stock as Exhibit A, the form of Rights Certificate as Exhibit B
and the Summary of Rights to Purchase Preferred Stock as Exhibit C
(incorporated by reference to Exhibit 4.1 to Ceridians Current Report on
Form 8-K filed by Ceridian on November 6, 2001 (File No. 001-15168)).
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.01   |  | Distribution Agreement between Arbitron Inc., formerly known as Ceridian
Corporation, and Ceridian Corporation, formerly known as New Ceridian
Corporation, dated February 14, 2001 (exhibits and schedules omitted)
(incorporated by reference to Exhibit 10.1 to Ceridians Registration
Statement on Form 10 (File No. 001-16149)).                                                                                                                                                                   

97



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|        |  |                                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                      
|10.02   |  | Amendment No. 1 to Distribution Agreement between Arbitron Inc.,
formerly known as Ceridian Corporation, and Ceridian Corporation, formerly
known as New Ceridian Corporation, dated March 30, 2001 (exhibits and
schedules omitted) (incorporated by reference to Exhibit 10.02 to
Ceridians Annual Report on Form 10-K for the year ended December 31, 2000
(File No. 001-16149)).
|        |  |                                                                                                                                                                                                                                                                                                                                                                                      
|10.03   |  | Personnel Agreement between Arbitron Inc., formerly known as Ceridian
Corporation, and Ceridian Corporation, formerly known as New Ceridian
Corporation, dated February 14, 2001 (incorporated by reference to Exhibit
10.2 to Ceridians Registration Statement on Form 10 (File No.
001-16149)).                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                      
|10.04   |  | Amendment No. 1 to Personnel Agreement between Arbitron Inc., formerly
known as Ceridian Corporation, and Ceridian Corporation, formerly known as
New Ceridian Corporation, dated as of April 3, 2001 (incorporated by
reference to Exhibit 10.02 to Ceridians Quarterly Report on Form 10-Q,
for the quarterly period ended March 31, 2001 (File No. 001-15168)).                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                      
|10.05   |  | Tax Matters Agreement between Arbitron Inc., formerly known as Ceridian
Corporation, and Ceridian Corporation, formerly known as New Ceridian
Corporation, dated February 14, 2001 (incorporated by reference to Exhibit
10.3 to Ceridians Registration Statement on Form 10 (File No.
001-16149)).                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                      
|10.06   |  | Transition Services Agreement between Arbitron Inc., formerly known as
Ceridian Corporation, and Ceridian Corporation, formerly known as New
Ceridian Corporation, dated February 14, 2001 (incorporated by reference
to Exhibit 10.4 to Ceridians Registration Statement on Form 10 (File No.
001-16149)).                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                      
|10.07   |  | Sublease Agreement between Arbitron Inc., formerly known as Ceridian
Corporation, and Ceridian Corporation, formerly known as New Ceridian
Corporation, dated February 14, 2001 (incorporated by reference to Exhibit
10.5 to Ceridians Registration Statement on Form 10 (File No.
001-16149)).                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                      
|10.08*  |  | Executive Employment Agreement between Ceridian Corporation and Ronald
L. Turner, dated January 29, 2002 (incorporated by reference to Exhibit
10.08 to Ceridians Annual Report on Form 10-K for the year ended December
31, 2001 (File No. 001-15168)).                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                      
|10.09*  |  | Amendment No. 1 to the Executive Employment Agreement between Ceridian
Corporation and Ronald L. Turner, dated November 21, 2002 (incorporated by
reference to Exhibit 10.09 to Ceridians Annual Report on Form 10-K for
the year ended December 31, 2002 (File No. 001-15168)).                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                      
|10.10*  |  | Executive Employment Agreement between Ceridian Corporation and John R.
Eickhoff, dated April 22, 2002 (incorporated by reference to Exhibit 10.01
to Ceridians                                                                                                                                                                                                                     

98



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|        |  |                                                                                                                                                                                                                                                                                              
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                              
|        |  | Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2002 (File No. 001-15168)).                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                              
|10.11*  |  | Amendment No. 1 to the Executive Employment Agreement between Ceridian
Corporation and John R. Eickhoff, dated November 21, 2002 (incorporated by
reference to Exhibit 10.11 to Ceridians Annual Report on Form 10-K for
the year ended December 31, 2002 (File No. 001-15168)).            
|        |  |                                                                                                                                                                                                                                                                                              
|10.12*  |  | Executive Employment Agreement between Ceridian Corporation and Gary A.
Krow, dated January 29, 2002 (incorporated by reference to Exhibit 10.11
to Ceridians Annual Report on Form 10-K for the year ended December 31,
2001 (File No. 001-15168)).                                        
|        |  |                                                                                                                                                                                                                                                                                              
|10.13*  |  | Amendment No. 1 to the Executive Employment Agreement between Ceridian
Corporation and Gary A. Krow, dated November 21, 2002 (incorporated by
reference to Exhibit 10.13 to Ceridians Annual Report on Form 10-K for
the year ended December 31, 2002 (File No. 001-15168)).                
|        |  |                                                                                                                                                                                                                                                                                              
|10.14*  |  | Executive Employment Agreement between Ceridian Corporation and Gary M.
Nelson, dated January 29, 2002 (incorporated by reference to Exhibit 10.12
to Ceridians Annual Report on Form 10-K for the year ended December 31,
2001 (File No. 001-15168)).                                      
|        |  |                                                                                                                                                                                                                                                                                              
|10.15*  |  | Amendment No. 1 to the Executive Employment Agreement between Ceridian
Corporation and Gary M. Nelson, dated November 21, 2002 (incorporated by
reference to Exhibit 10.15 to Ceridians Annual Report on Form 10-K for
the year ended December 31, 2002 (File No. 001-15168)).              
|        |  |                                                                                                                                                                                                                                                                                              
|10.16*  |  | Executive Employment Agreement between Ceridian Corporation and Bruce J.
Thew, dated March 24, 2003 (incorporated by reference to Exhibit 10.16 to
Ceridians Annual Report on Form 10-K for the year ended December 31, 2002
(File No. 001-15168)).                                         
|        |  |                                                                                                                                                                                                                                                                                              
|10.17*  |  | Ceridian Corporation Amended and Restated 2001 Long-Term Stock Incentive
Plan (incorporated by reference to Exhibit 10.13 to Ceridians Annual
Report on Form 10-K for the year ended December 31, 2001 (File No.
001-15168)).                                                               
|        |  |                                                                                                                                                                                                                                                                                              
|10.18*  |  | Form of Ceridian Corporation Non-Statutory Stock Option Award Agreement
(under the Amended and Restated 2001 Long-Term Stock Incentive Plan)
(incorporated by reference to Exhibit 10.14 to Ceridians Annual Report on
Form 10-K for the year ended December 31, 2001 (File No. 001-15168)).
|        |  |                                                                                                                                                                                                                                                                                              
|10.19*  |  | Form of Ceridian Corporation Restricted Stock Award Agreement (under the
Amended and Restated 2001 Long-Term Stock Incentive Plan) (incorporated by
reference to Exhibit 10.15 to Ceridians Annual Report on Form 10-K for
the year ended December 31, 2001 (File No. 001-15168)).          

99



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|        |  |                                                                                                                                                                                                                                                                                                   
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                   
|10.20*  |  | Ceridian Corporation Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.7 to Ceridians Registration Statement on Form 10
(File No. 001-16149)).                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                   
|10.21*  |  | Ceridian Corporation Amended and Restated 2001 Director Performance
Incentive Plan (incorporated by reference to Exhibit 10.17 to Ceridians
Annual Report on Form 10-K or the year ended December 31, 2001 (File No.
001-15168)).                                                                
|        |  |                                                                                                                                                                                                                                                                                                   
|10.22*  |  | Form of Ceridian Corporation Non-Statutory Stock Option Award Agreement
(under the Amended and Restated 2001 Director Performance Incentive Plan)
(incorporated by reference to Exhibit 10.18 to Ceridians Annual Report on
Form 10-K for the year ended December 31, 2001 (File No. 001-15168)).
|        |  |                                                                                                                                                                                                                                                                                                   
|10.23*  |  | Form of Ceridian Corporation Restricted Stock Award Agreement (under the
Amended and Restated 2001 Director Performance Incentive Plan)
(incorporated by reference to Exhibit 10.19 to Ceridians Annual Report on
Form 10-K for the year ended December 31, 2001 (File No. 001-15168))           
|        |  |                                                                                                                                                                                                                                                                                                   
|10.24*  |  | Ceridian Corporation 2002 Employee Stock Incentive Plan (incorporated by
reference to Exhibit 10.20 to Ceridians Annual Report on Form 10-K for
the year ended December 31, 2001 (File No. 001-15168)).                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                   
|10.25*  |  | Form of Ceridian Corporation Non-Qualified Stock Option Award Agreement
(under the 2002 Employee Stock Incentive Plan) (incorporated by reference
to Exhibit 10.21 to Ceridians Annual Report on Form 10-K for the year
ended December 31, 2001 (File No. 001-15168)).                           
|        |  |                                                                                                                                                                                                                                                                                                   
|10.26*  |  | Form of Ceridian Corporation Restricted Stock Award Agreement (under the
2002 Employee Stock Incentive Plan) (incorporated by reference to Exhibit
10.22 to Ceridians Annual Report on Form 10-K for the year ended December
31, 2001 (File No. 001-15168)).                                     
|        |  |                                                                                                                                                                                                                                                                                                   
|10.27*  |  | Ceridian Corporation Benefit Equalization Plan, as amended (incorporated
by reference to Exhibit 10.14 to Arbitron Inc.s (formerly known as
Ceridian Corporation) Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 1-1969)).                                            
|        |  |                                                                                                                                                                                                                                                                                                   
|10.28*  |  | Ceridian Corporation Benefit Equalization Plan, First Declaration of
Amendment (incorporated by reference to Exhibit 10.18 to Ceridians Annual
Report on Form 10-K for the year ended December 31, 2000 (File No.
001-16149)).                                                                   
|        |  |                                                                                                                                                                                                                                                                                                   
|10.29*  |  | Ceridian Corporation Benefit Equalization Plan, Second Declaration of
Amendment (incorporated by reference to Exhibit 10.19 to Ceridians Annual
Report on Form 10-K for the year ended December 31, 2000 (File No.
001-16149)).                                                                  

100



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|        |  |                                                                                                                                                                                                                                                                                                                                                                 
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                 
|10.30*  |  | Ceridian Corporation Benefit Equalization Plan, Third Declaration of
Amendment (incorporated by reference to Exhibit 10.20 to Ceridians Annual
Report on Form 10-K for the year ended December 31, 2000 (File No.
001-16149)).                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                 
|10.31*  |  | Ceridian Corporation Employees Benefit Protection Trust Agreement,
dated as of December 1, 1994, between Ceridian Corporation and First Trust
National Association (incorporated by reference to Exhibit 10.15 to
Arbitron Inc.s (formerly known as Ceridian Corporation) Annual Report on
Form 10-K for the year ended December 31, 1994 (File No. 1-1969)). 
|        |  |                                                                                                                                                                                                                                                                                                                                                                 
|10.32*  |  | First Declaration of Amendment to Ceridian Corporation Employees
Benefit Protection Trust Agreement, effective as of January 1, 1999,
between Ceridian Corporation and US Bank National Association
(incorporated by reference to Exhibit 10.22 to Ceridians Annual Report on
Form 10-K for the year ended December 31, 2000 (File No. 001-16149)).           
|        |  |                                                                                                                                                                                                                                                                                                                                                                 
|10.33*  |  | Second Declaration of Amendment to Ceridian Corporation Employees
Benefit Protection Trust Agreement, dated as of March 26, 2001, between
Ceridian Corporation and US Bank National Association (incorporated by
reference to Exhibit 10.23 to Ceridians Annual Report on Form 10-K for
the year ended December 31, 2000 (File No. 001-16149)).               
|        |  |                                                                                                                                                                                                                                                                                                                                                                 
|10.34*  |  | Third Declaration of Amendment to Ceridian Corporation Employees
Benefit Protection Trust Agreement, dated as of August 1, 2001, between
Ceridian Corporation and US Bank National Association (incorporated by
reference to Exhibit 10.02 to Ceridians Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 2001 (File No. 001-15168)).
|        |  |                                                                                                                                                                                                                                                                                                                                                                 
|10.35*  |  | Ceridian Corporation Deferred Compensation Plan (2002 Revision)
(incorporated by reference to Exhibit 10.01 to Ceridians Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 2002 (File No.
001-15168)).                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                 
|10.36*  |  | Split Dollar Agreement between Ronald L. Turner and Ceridian Corporation
(incorporated by reference to Exhibit 10.06 to Ceridians Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2002 (File No.
001-15168)).                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                 
|10.37*  |  | Form of Indemnification Agreement between Ceridian Corporation and its
Directors (incorporated by reference to Exhibit 10.27 to Ceridians Annual
Report on Form 10-K for the year ended December 31, 2000 (File No.
001-16149)).                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                 
|10.38*  |  | Ceridian Corporation 2001 Savings-Related Share Option Plan
(incorporated by reference to Exhibit 10.38 to Ceridians Annual Report on
Form 10-K for the year ended December 31, 2002 (File No. 001-15168)).                                                                                                                                                    

101



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.39*  |  | Ceridian Corporation UK Compensation Share Option Plan (incorporated by
reference to Exhibit 10.39 to Ceridians Annual Report on Form 10-K for
the year ended December 31, 2002 (File No. 001-15168)).                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.40*  |  | Ceridian Corporation Amended Savings-Related Share Option Plan
(incorporated by reference to Exhibit 10.40 to Ceridians Annual Report on
Form 10-K for the year ended December 31, 2002 (File No. 001-15168)).                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.41   |  | Credit Agreement dated as of January 31, 2001 among Ceridian Corporation
(formerly known as New Ceridian Corporation), as the borrower, Bank of
America, N.A., as the Administrative Agent and L/C issuer, Other Lenders
thereto (exhibits and schedules omitted) (incorporated by reference to
Exhibit 10.28 to Ceridians Annual Report on Form 10-K for the year ended
December 31, 2000 (File No. 001-16149)).                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.42   |  | First Amendment to Credit Agreement, dated as of April 19, 2002 among
Ceridian Corporation, as the borrower, the several financial institutions
party to the Credit Agreement, dated as of January 31, 2001, and Bank of
America, N.A., as the Administrative Agent for itself and the other
Lenders (incorporated by reference to Exhibit 10.02 to Ceridians
Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2002 (File No. 001-15168)).
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.43   |  | Receivable Sales Agreement, dated as of June 24, 2002, between Comdata
Network, Inc. and Comdata Funding Corporation (incorporated by reference
to Exhibit 10.01 to Ceridians Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2002 (File No. 001-15168)).                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.44   |  | Receivable Purchase Agreement, dated as of June 24, 2002, among Comdata
Funding Corporation, Comdata Network, Inc., Jupiter Securitization
Corporation, the Financial Institutions party thereto and Bank One, N.A.
(incorporated by reference to Exhibit 10.02 to Ceridians Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2002 (File No.
001-15168)).                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.45   |  | Performance Undertaking, dated as of June 24, 2002, executed by Ceridian
Corporation in favor of Comdata Funding Corporation (incorporated by
reference to Exhibit 10.03 to Ceridians Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 2002 (File No. 001-15168)).                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|21.01   |  | Subsidiaries of Ceridian (incorporated by reference to Exhibit 21.01 to
Ceridians Annual Report on Form 10-K for the year ended December 31, 2002
(File No. 001-15168)).                                                                                                                                                                                                                                                                                        

102



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|        |  |                                                                                                                                                                   
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                       
|        |  |                                                                                                                                                                   
|23.01   |  | Consent of Independent Auditors - KPMG LLP.                                                                                                                       
|        |  |                                                                                                                                                                   
|24.01   |  | Power of Attorney (incorporated by reference to Exhibit 24.01 to
Ceridians Annual Report on Form 10-K for the year ended December 31, 2002
(File No. 001-15168)).
|        |  |                                                                                                                                                                   
|31.01   |  | Certification of our Chief Executive Officer pursuant to Rule 13a-14(a)
and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.      
|        |  |                                                                                                                                                                   
|31.02   |  | Certification of our Chief Financial Officer pursuant to Rule 13a-14(a)
and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.      
|        |  |                                                                                                                                                                   
|32.01   |  | Certification of our Chief Executive Officer required pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.   
|        |  |                                                                                                                                                                   
|32.02   |  | Certification of our Chief Financial Officer required pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.   



---

*     Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this report.

We will provide you with copies of any of the exhibits listed above, upon
request and payment of its reasonable expenses in furnishing such exhibits. We
will also provide to the Securities and Exchange Commission, upon request, any
exhibit or schedule to any of the foregoing exhibits which has not been filed.

(b) Reports on Form 8-K

On October 17, 2002, we filed a Current Report on Form 8-K, dated October
17, 2002, containing a press release reporting our third quarter 2002 earnings
results.

On November 14, 2002, we filed a Current Report on Form 8-K, dated
November 14, 2002, containing the Statements of Chief Executive Officer and
Chief Financial Officer of Ceridian Corporation dated November 14, 2002
required pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, which accompanied the filing of Ceridian
Corporations Quarterly Report on form 10-Q for the quarterly period ended
September 30, 2002.

On January 23, 2003, we filed a Current Report on Form 8-K, dated January
23, 2003, containing a press release reporting our fourth quarter and full year
2002 earnings results.

103



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amended report to be
signed on its behalf by the undersigned, thereunto duly authorized,
as of March 15, 2004.

| |  |                      |  |                                                
| |  | -------------------- |  | -----------------------------------------------
| |  | CERIDIAN CORPORATION
| |  |                      |  |                                                
| |  | By                   |  | /s/ Ronald L. Turner                           
| |  |                      |  |                                                
| |  |                      |  | Ronald L. Turner                               
| |  |                      |  | Chairman, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
amended report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated as of March 15, 2004.

|                                        |  |                                   
|--------------------------------------- |  | ----------------------------------
|/s/ Ronald L. Turner                    |  | /s/ John R. Eickhoff              
|                                        |  |                                   
|Ronald L. Turner                        |  | John R. Eickhoff                  
|Chairman, President and Chief Executive |  | Executive Vice President and Chief
|Officer (Principal Executive Officer)   |  | Financial Officer                 
|                                        |  | (Principal Financial Officer)     
|/s/ Loren D. Gross                      |  |                                   
|                                        |  |                                   
|Loren D. Gross                          |  |                                   
|Vice President and Corporate Controller |  |                                   
|(Principal Accounting Officer)          |  |                                   
|                                        |  |                                   
|/s/ William J. Cadogan                  |  | /s/ Nicholas D. Chabraja          
|                                        |  |                                   
|William J. Cadogan, Director            |  | Nicholas D. Chabraja, Director    
|                                        |  |                                   
|/s/ Robert H. Ewald                     |  | /s/ Ronald T. LeMay               
|                                        |  |                                   
|Robert H. Ewald, Director and Executive |  | Ronald T. LeMay, Director         
|Vice President and President, Ceridian  |  |                                   
|Human Resource Solutions                |  |                                   
|                                        |  |                                   
|/s/ George R. Lewis                     |  | /s/ Carole J. Uhrich              
|                                        |  |                                   
|George R. Lewis, Director               |  | Carole J. Uhrich, Director        
|                                        |  |                                   
|/s/ Alan F. White                       |  |                                   
|Alan F. White, Director                 |  |                                   

104



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##### Table of Contents



CERIDIAN CORPORATION
AMENDMENT NO. 1 TO ANNUAL REPORT ON FORM 10-K/A




Exhibit Index

|            |  |                                                                                                                                                                                                                                                                                                                                                           
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                    
|            |  |                                                                                                                                                                                                                                                                                                                                                           
|3.01*       |  | Amended and Restated Certificate of Incorporation of Ceridian
Corporation (formerly known as New Ceridian Corporation).                                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                                                                           
|3.02*       |  | Amendment to Amended and Restated Certificate of Incorporation of
Ceridian Corporation (formerly known as New Ceridian Corporation).                                                                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                                                                                                           
|3.03*       |  | Amended and Restated Bylaws of Ceridian Corporation (formerly known as
New Ceridian Corporation).                                                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                                                                           
|4.01*       |  | Rights Agreement, dated as of November 6, 2001, between Ceridian
Corporation and The Bank of New York, as Rights Agent, including the form
of Certificate of Resignation, Preferences and Rights of Series A
Preferred Stock as Exhibit A, the form of Rights Certificate as Exhibit B
and the Summary of Rights to Purchase Preferred Stock as Exhibit C.
|            |  |                                                                                                                                                                                                                                                                                                                                                           
|10.01*      |  | Distribution Agreement between Arbitron Inc., formerly known as Ceridian
Corporation, and Ceridian Corporation, formerly known as New Ceridian
Corporation, dated February 14, 2001.                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                                                                                                           
|10.02*      |  | Amendment No. 1 to Distribution Agreement between Arbitron Inc.,
formerly known as Ceridian Corporation, and Ceridian Corporation, formerly
known as New Ceridian Corporation, dated March 30, 2001.                                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                                                                                                           
|10.03*      |  | Personnel Agreement between Arbitron Inc., formerly known as Ceridian
Corporation, and Ceridian Corporation, formerly known as New Ceridian
Corporation, dated February 14, 2001.                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                                                                           
|10.04*      |  | Amendment No. 1 to Personnel Agreement between Arbitron Inc., formerly
known as Ceridian Corporation, and Ceridian Corporation, formerly known as
New Ceridian Corporation, dated as of April 3, 2001.                                                                                                                                                    
|            |  |                                                                                                                                                                                                                                                                                                                                                           
|10.05*      |  | Tax Matters Agreement between Arbitron Inc., formerly known as Ceridian
Corporation, and Ceridian Corporation, formerly known as New Ceridian
Corporation, dated February 14, 2001.                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                                                           
|10.06*      |  | Transition Services Agreement between Arbitron Inc., formerly known as
Ceridian Corporation, and Ceridian Corporation, formerly known as New
Ceridian Corporation, dated February 14, 2001.                                                                                                                                                               





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##### Table of Contents



|            |  |                                                                                                                                                                                 
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                                                          
|            |  |                                                                                                                                                                                 
|10.07*      |  | Sublease Agreement between Arbitron Inc., formerly known as Ceridian
Corporation, and Ceridian Corporation, formerly known as New Ceridian
Corporation, dated February 14, 2001.
|            |  |                                                                                                                                                                                 
|10.08*      |  | Executive Employment Agreement between Ceridian Corporation and Ronald
L. Turner, dated January 29, 2002.                                                                       
|            |  |                                                                                                                                                                                 
|10.09*      |  | Amendment No. 1 to the Executive Employment Agreement between Ceridian
Corporation and Ronald L. Turner, dated November 21, 2002.                                               
|            |  |                                                                                                                                                                                 
|10.10*      |  | Executive Employment Agreement between Ceridian Corporation and John R.
Eickhoff, dated April 22, 2002.                                                                         
|            |  |                                                                                                                                                                                 
|10.11*      |  | Amendment No. 1 to the Executive Employment Agreement between Ceridian
Corporation and John R. Eickhoff, dated November 21, 2002.                                               
|            |  |                                                                                                                                                                                 
|10.12*      |  | Executive Employment Agreement between Ceridian Corporation and Gary A.
Krow, dated January 29, 2002,                                                                           
|            |  |                                                                                                                                                                                 
|10.13*      |  | Amendment No. 1 to the Executive Employment Agreement between Ceridian
Corporation and Gary A. Krow, dated November 21, 2002.                                                   
|            |  |                                                                                                                                                                                 
|10.14*      |  | Executive Employment Agreement between Ceridian Corporation and Gary M.
Nelson, dated January 29, 2002.                                                                         
|            |  |                                                                                                                                                                                 
|10.15*      |  | Amendment No. 1 to the Executive Employment Agreement between Ceridian
Corporation and Gary M. Nelson, dated November 21, 2002.                                                 
|            |  |                                                                                                                                                                                 
|10.16*      |  | Executive Employment Agreement between Ceridian Corporation and Bruce J.
Thew, dated March 24, 2003.                                                                            
|            |  |                                                                                                                                                                                 
|10.17*      |  | Ceridian Corporation Amended and Restated 2001 Long-Term Stock Incentive
Plan.                                                                                                  
|            |  |                                                                                                                                                                                 
|10.18*      |  | Form of Ceridian Corporation Non-Statutory Stock Option Award Agreement
(under the Amended and Restated 2001 Long-Term Stock Incentive Plan).                                   
|            |  |                                                                                                                                                                                 
|10.19*      |  | Form of Ceridian Corporation Restricted Stock Award Agreement (under the
Amended and Restated 2001 Long-Term Stock Incentive Plan).                                             
|            |  |                                                                                                                                                                                 
|10.20*      |  | Ceridian Corporation Employee Stock Purchase Plan.                                                                                                                              
|            |  |                                                                                                                                                                                 
|10.21*      |  | Ceridian Corporation Amended and Restated 2001 Director Performance
Incentive Plan.                                                                                             





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##### Table of Contents



|            |  |                                                                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                                                                               
|            |  |                                                                                                                                                                                                      
|10.22*      |  | Form of Ceridian Corporation Non-Statutory Stock Option Award Agreement
(under the Amended and Restated 2001 Director Performance Incentive Plan).                                                   
|            |  |                                                                                                                                                                                                      
|10.23*      |  | Form of Ceridian Corporation Restricted Stock Award Agreement (under the
Amended and Restated 2001 Director Performance Incentive Plan).                                                             
|            |  |                                                                                                                                                                                                      
|10.24*      |  | Ceridian Corporation 2002 Employee Stock Incentive Plan.                                                                                                                                             
|            |  |                                                                                                                                                                                                      
|10.25*      |  | Form of Ceridian Corporation Non-Qualified Stock Option Award Agreement
(under the 2002 Employee Stock Incentive Plan).                                                                              
|            |  |                                                                                                                                                                                                      
|10.26*      |  | Form of Ceridian Corporation Restricted Stock Award Agreement (under the
2002 Employee Stock Incentive Plan).                                                                                        
|            |  |                                                                                                                                                                                                      
|10.27*      |  | Ceridian Corporation Benefit Equalization Plan, as amended.                                                                                                                                          
|            |  |                                                                                                                                                                                                      
|10.28*      |  | Ceridian Corporation Benefit Equalization Plan, First Declaration of Amendment.                                                                                                                      
|            |  |                                                                                                                                                                                                      
|10.29*      |  | Ceridian Corporation Benefit Equalization Plan, Second Declaration of Amendment.                                                                                                                     
|            |  |                                                                                                                                                                                                      
|10.30*      |  | Ceridian Corporation Benefit Equalization Plan, Third Declaration of Amendment.                                                                                                                      
|            |  |                                                                                                                                                                                                      
|10.31*      |  | Ceridian Corporation Employees Benefit Protection Trust Agreement,
dated as of December 1, 1994, between Ceridian Corporation and First Trust
National Association.                                 
|            |  |                                                                                                                                                                                                      
|10.32*      |  | First Declaration of Amendment to Ceridian Corporation Employees
Benefit Protection Trust Agreement, effective as of January 1, 1999,
between Ceridian Corporation and US Bank National Association.
|            |  |                                                                                                                                                                                                      
|10.33*      |  | Second Declaration of Amendment to Ceridian Corporation Employees
Benefit Protection Trust Agreement, dated as of March 26, 2001, between
Ceridian Corporation and US Bank National Association.    
|            |  |                                                                                                                                                                                                      
|10.34*      |  | Third Declaration of Amendment to Ceridian Corporation Employees
Benefit Protection Trust Agreement, dated as of August 1, 2001, between
Ceridian Corporation and US Bank National Association.     
|            |  |                                                                                                                                                                                                      
|10.35*      |  | Ceridian Corporation Deferred Compensation Plan (2002 Revision).                                                                                                                                     
|            |  |                                                                                                                                                                                                      
|10.36*      |  | Split Dollar Agreement between Ronald L. Turner and Ceridian Corporation.                                                                                                                            
|            |  |                                                                                                                                                                                                      
|10.37*      |  | Form of Indemnification Agreement between Ceridian Corporation and its Directors.                                                                                                                    
|            |  |                                                                                                                                                                                                      
|10.38*      |  | Ceridian Corporation 2001 Savings-Related Share Option Plan.                                                                                                                                         





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##### Table of Contents



|            |  |                                                                                                                                                                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                                                      
|10.39*      |  | Ceridian Corporation UK Compensation Share Option Plan.                                                                                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                      
|10.40*      |  | Ceridian Corporation Amended Savings-Related Share Option Plan.                                                                                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                                                      
|10.41*      |  | Credit Agreement, dated as of January 31, 2001 among Ceridian
Corporation (formerly known as New Ceridian Corporation), as the borrower,
Bank of America, N.A., as the Administrative Agent and L/C issuer, Other
Lenders thereto.                                                                   
|            |  |                                                                                                                                                                                                                                                                                                      
|10.42*      |  | First Amendment to Credit Agreement, dated as of April 19, 2002 among
Ceridian Corporation, as the borrower, the several financial institutions
party to the Credit Agreement, dated as of January 31, 2001, and Bank of
America, N.A., as the Administrative Agent for itself and the other
Lenders.
|            |  |                                                                                                                                                                                                                                                                                                      
|10.43*      |  | Receivable Sales Agreement, dated as of June 24, 2002, between Comdata
Network, Inc. and Comdata Funding Corporation.                                                                                                                                                                                
|            |  |                                                                                                                                                                                                                                                                                                      
|10.44*      |  | Receivable Purchase Agreement, dated as of June 24, 2002, among Comdata
Funding Corporation, Comdata Network, Inc., Jupiter Securitization
Corporation, the Financial Institutions party thereto and Bank One, N.A.                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                      
|10.45*      |  | Performance Undertaking, dated as of June 24, 2002, executed by Ceridian
Corporation in favor of Comdata Funding Corporation.                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                      
|21.01*      |  | Subsidiaries of Ceridian.                                                                                                                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                                                                                                      
|23.01       |  | Consent of Independent Auditors - KPMG LLP.                                                                                                                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                      
|24.01*      |  | Power of Attorney.                                                                                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                      
|31.01       |  | Certification of our Chief Executive Officer pursuant to Rule 13a-14(a)
and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                      
|31.02       |  | Certification of our Chief Financial Officer pursuant to Rule 13a-14(a)
and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                      
|32.01       |  | Certification of our Chief Executive Officer required pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                                                      
|32.02       |  | Certification of our Chief Financial Officer required pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                      



---

|* |  | Incorporated by Reference
|- |  | -------------------------