UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q/A

(Mark One)

For the quarterly period ended March 31, 2004

or

For transition period from                      to                     

Commission file number:     1-15168

CERIDIAN CORPORATION

Former name, former address and former fiscal year if changed from last report:    Not Applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed 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.

YES  þ  NO  o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES  þ  NO  o

The number of shares of registrant’s Common Stock, par value $.01 per share, outstanding as of April 30, 2004, was 148,589,973.

CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004

EXPLANATORY NOTE

As previously disclosed, Ceridian Corporation (the “Company”) has restated its consolidated financial statements for the years 1999 through 2003 and for the first quarter of 2004 (the “Restatement”). The determination to restate these financial statements was made as a result of an investigation directed by the Audit Committee of the Company’s Board of Directors (the “Audit Committee Investigation”) which examined, among other things, the Company’s policies and practices for the capitalization of software development costs, the timing of amortization of capitalized software development costs and the accuracy and timeliness of accruing for costs and expenses. During the review and investigation of these items, the Company determined that certain other adjustments and reclassifications were required to the Company’s consolidated financial statements. Further information on these adjustments and reclassifications can be found in a note entitled “Restatement of Financial Statements” to the accompanying consolidated financial statements.

As previously disclosed, following consultation with KPMG LLP, the Company’s independent registered public accountants (“KPMG”), the Company determined that it was also necessary to make certain additional corrections to the Company’s consolidated financial statements related to a determination that the Company’s interest rate and fuel price derivative contracts did not satisfy the requirements of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS133”) and as such, did not qualify for hedge accounting treatment. These changes have been reflected in the Company's accompanying consolidated financial statements as part of the Restatement, together with the other changes made as a result of the Audit Committee Investigation. Further information on the impact of these changes can be found in a note entitled “Restatement of Financial Statements” to the accompanying consolidated financial statements.

This Amendment No. 1 on Form 10-Q/A (the “Form 10-Q/A”) to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004, initially filed with the Securities and Exchange Commission (the “SEC”) on May 7, 2004 (the “Original Filing”), is being filed to reflect restatements of the Company’s consolidated balance sheet as of March 31, 2004 and the Company’s consolidated statements of operations and cash flows for the three month periods ended March 31, 2004 and March 31, 2003 and the notes related thereto. For a more detailed description of these restatements, see the note entitled “Restatement of Financial Statements” to the accompanying consolidated financial statements and the section entitled “Restatement” in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Form 10-Q/A.

For the convenience of the reader, this Form 10-Q/A sets forth the Original Filing in its entirety. However, this Form 10-Q/A only amends and restates Items 1, 2, 3 and 4 of Part I of the Original Filing, in each case, solely as a result of, and to reflect, the Restatement, and no other information in the Original Filing is amended hereby. The foregoing items have not been updated to reflect other events occurring after the Original Filing or to modify or update those disclosures affected by subsequent events. In addition, pursuant to the rules of the SEC, Item 6 of Part II of the Original Filing has been amended to contain currently-dated certifications from the Company’s Chief Executive Officer and Chief Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications of the Company’s Chief Executive Officer and Chief Financial Officer are attached to this Form 10-Q/A as Exhibits 31.01, 31.02, 32.01 and 32.02.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004

Except for the foregoing amended information, this Form 10-Q/A continues to speak as of the date of the Original Filing, and the Company has not updated the disclosure contained herein to reflect events that occurred at a later date. Other events occurring after the filing of the Original Filing or other disclosures necessary to reflect subsequent events have been or will be addressed in the Company’s Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 2004 and September 30, 2004 which are being filed concurrently with the filing of this Form 10-Q/A and any reports filed with the SEC subsequent to the date of this filing.

Concurrently with the filing of this Form 10-Q/A, the Company is filing (i) an amendment on Form 10-K/A (the “2003 10-K/A”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (the “2003 10-K”) to provide restatements of the financial statements or financial data as of and for the periods included in the 2003 10-K, (ii) a Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 and (iii) a Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004. With the exception of the 2003 10-K/A, the Company has not amended and does not intend to amend its previously filed Annual Reports on Form 10-K or its Quarterly Reports on Form 10-Q for the periods affected by the Restatement that ended prior to December 31, 2003. For this reason, the consolidated financial statements, auditors’ reports and related financial information for the affected periods contained in such reports should no longer be relied upon.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004

INDEX

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FORM 10-Q/A

CONSOLIDATED STATEMENTS OF OPERATIONS

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FORM 10-Q/A

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FORM 10-Q/A

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004
Notes to Consolidated Financial Statements
(Dollars in millions, except per share data)
(Unaudited)

RESTATEMENT OF FINANCIAL STATEMENTS

As described in “Explanatory Note” in the forepart of this report and in the 2003 10-K/A, we have restated our consolidated financial statements for the years 1999 through 2003 and for the first quarter of 2004. This Note should be read in conjunction with Note B, “Restatement of Financial Statements” in the notes to our consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” of the 2003 10-K/A, which we are filing concurrently with this Form 10-Q/A and which provides further information on the nature and impact of the Restatement.

The determination to restate these financial statements was made as a result of:

The Restatement included the following classes of adjustments:

In addition, certain amounts in other notes to our consolidated financial statements within this Form 10-Q/A have been restated to reflect the Restatement adjustments.

The adjustments that had the most significant effect on our consolidated statements of operations related to the recent change in accounting for interest rate and fuel price derivative instruments and the capitalization and expensing of software development costs (net of amortization effects).

In January 2005, we determined that our interest rate and fuel price derivative contracts did not satisfy the requirements of FAS 133, and as such, did not qualify for hedge accounting treatment. The correction of accounting for these derivative instruments affected the timing of gain or loss recognition on our consolidated statements of operations. The unrealized gains and losses previously reported under hedge accounting treatment in accumulated other comprehensive income within stockholders’ equity of our consolidated balance sheets are now reported in net earnings on our consolidated statements of operations. The pre-tax earnings impact of the correction of unrealized gains and losses on derivative instruments was an increase of $5.6 for the first quarter of 2004 and a decrease of $0.8 for the first quarter of 2003. The correction of accounting for realized gains and losses had no effect on pre-tax earnings but did require us to reclassify the realized gains and losses from revenue to costs and expenses. As a result of the Restatement, both realized and unrealized gains or losses on interest rate and fuel price derivative instruments now appear on our consolidated statements of operations in a line item entitled “(gain) loss on derivative instruments.”

The adjustments for capitalization and expensing of software development costs (net of amortization effects) largely resulted in the charging to expense of previously capitalized software costs, including the reversal of

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004
Notes to Consolidated Financial Statements
(Dollars in millions, except per share data)
(Unaudited)

related amortization expense. The adjustments resulted in a decrease in pre-tax earnings of $5.3 in the first quarter of 2004 and $1.3 in the first quarter of 2003.

The Restatement reduced our earnings before income taxes by $1.1 for the first quarter of 2004, consisting of $5.3 related to capitalized internally developed software, $1.0 related to accrual of costs and expenses and $0.4 related to revenue recognition (net of costs), substantially offset by increases of $5.6 as a result of the recording of unrealized gains and losses on derivative instruments on our consolidated statements of operations and reduced our earnings before income taxes by $1.4 for the first quarter of 2003, consisting of $1.3 related to capitalized internally developed software, $0.1 related to accrual of costs and expenses and $0.8 as a result of the recording of unrealized gains and losses on derivative instruments on our consolidated statement of operations, offset by increases of $0.8 related to revenue recognition (net of costs). The effect of the Restatement on the consolidated statements of operations for the three months ended March 31, 2004 and 2003 is shown in a table accompanying this note.

The primary impact of the Restatement on the historical consolidated balance sheets and consolidated statements of cash flows related to the adjustments concerning software capitalization and amortization changes. The effect of the Restatement on the consolidated balance sheet as of March 31, 2004 is shown in an accompanying table, which shows that capitalized software development costs were reduced by $57.1. The correction of accounting for derivative instruments had no impact on operating cash flows. We separately restated the consolidated balance sheet as of December 31, 2003 in the 2003 10-K/A. The effect of the Restatement on the consolidated statements of cash flows is shown in a table accompanying this note. The Restatement had no effect on historical cash balances or net cash flows since the entire reduction in operating cash flows is offset by the reduction in capital expenditures included in cash flows from investing activities.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004
Notes to Consolidated Financial Statements
(Dollars in millions, except per share data)
(Unaudited)

The following table presents the effect of the Restatement on the consolidated statements of operations:

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004
Notes to Consolidated Financial Statements
(Dollars in millions, except per share data)
(Unaudited)

The following table presents the effect of the Restatement on the consolidated balance sheet:

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004
Notes to Consolidated Financial Statements
(Dollars in millions, except per share data)
(Unaudited)

     The following table presents the Restatement effects by reason on the consolidated balance sheet:

     The consolidated balance sheet impacts by reason differ slightly from the consolidated statement of operations adjustments due to foreign currency translation impacts since balance sheet adjustments are based on end of period exchange rates and statement of operations adjustments are based on average exchange rates.

     The above adjustments are sorted by Restatement reason. A summary of the above items by consolidated balance sheet line item would result in the “Adjustments” to asset and liability amounts presented in the table on the previous page in this Form 10-Q/A.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004
Notes to Consolidated Financial Statements
(Dollars in millions, except per share data)
(Unaudited)

The following table presents the effect of the Restatement on the consolidated statements of cash flows:

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004
Notes to Consolidated Financial Statements
(Dollars in millions, except per share data)
(Unaudited)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Financial Accounting Standards Board (“FASB”) Interpretation No. (“FIN”) 46(R), “Consolidation of Variable Interest Entities” became effective for us for the period ended March 31, 2004. FIN 46(R) provides guidance on whether a beneficiary of a variable interest entity should include that entity in its consolidated financial statements. We have concluded that our payroll and tax filing trusts are variable interest entities. We have further concluded that the trusts should be included in our consolidated financial statements since we hold both contractual and pecuniary interests in the trusts, act as trustee, and have investment control over trust assets along with the related risk.

On March 31, 2004, the FASB issued an Exposure Draft of a Proposed Statement of Financial Accounting Standards on Share-Based Payment. The Exposure Draft proposed an amendment to Statement of Financial Accounting Standards (“FAS”) 123 and 95 that would eliminate use of Accounting Principles Board Opinion (“APB”) No. 25 and related interpretations for the purpose of accounting for stock-based compensation effective for us as of January 2005. The principal effect of the Exposure Draft, if issued as a standard, would be to require the inclusion in earnings of a compensation expense for stock option grants and employee stock plan purchases that previously was only reported as a disclosure in a note to our consolidated financial statements. We are presently studying the Exposure Draft and believe that the compensation expense that would be determined as a result of adoption of its provisions would not differ materially from the amounts previously presented in the notes to our consolidated financial statements.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004
Notes to Consolidated Financial Statements
(Dollars in millions, except per share data)
(Unaudited)

In January 2004, we committed to the internal development of a replacement for our HRS LifeWorks customer management system as a result of the failure of an external contractor to meet our requirements for such a project. In connection with our restatement of software development costs described in an accompanying note, we recorded an asset write-down of $2.3 in the first quarter of 2004 representing the carrying value of the capitalized software related to work performed by the external contractor that was abandoned and determined to have no future value to us.

EMPLOYEE PLANS

Retirement Plans

The components of net periodic pension cost for our defined benefit pension plans and for our postretirement benefit plans are included in the following tables.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004
Notes to Consolidated Financial Statements
(Dollars in millions, except per share data)
(Unaudited)

EMPLOYEE PLANS (Continued)

Stock Plans

We account for our stock-based compensation plans under the intrinsic method of APB Opinion No. 25 and related interpretations. Under FAS 123 and FAS 148, we are required to disclose the pro forma effects on reported net earnings and earnings per share that would have resulted if we elected to use the fair value method of accounting for stock-based compensation on an interim basis. This disclosure is presented in the accompanying table. We employ the Black-Scholes option pricing model to determine the fair value of stock option grants and employee stock purchase plan purchases.

INVESTING ACTIVITY

Derivative Instruments

During the reported periods we maintained interest rate contracts to mitigate interest rate risk in our customer funds and corporate cash portfolios. These derivative instruments provide that if one-month LIBOR is below a floor, the counterparty makes a payment to us. Likewise, if one-month LIBOR is above a cap, we make a payment to the counterparty. These payments increase or decrease “(gain) loss on derivative instruments” in our consolidated statements of operations. Counterparties are all commercial banks with debt ratings of A or better.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004
Notes to Consolidated Financial Statements
(Dollars in millions, except per share data)
(Unaudited)

INVESTING ACTIVITY (Continued)

The fair market value of the derivative instruments is reported in the noncurrent asset section of the balance sheet. The fair market value increased from $55.7 at December 31, 2003 to $61.2 at March 31, 2004. This increase in value was primarily due to an increase in forward interest rates net of collections of cash payments from counterparties of $8.1 during the first three months of 2004. Unrealized gains and losses due to changes in the fair value of derivative instruments are reflected in (gain) loss on derivative instruments in our consolidated statements of operations. Based upon future expected interest rates as determined from LIBOR futures prices in effect at the close of business on March 31, 2004, we expect to collect an additional $29.1 during the next 12 months.

In March 2004, Comdata executed diesel fuel price derivative contracts to limit the effect on earnings related to the variability of Comdata revenue from customer contracts in which Comdata fees are determined as a percentage of pump fuel prices. These contracts, which have the effect of reducing the exposure to price variability of diesel fuel by approximately one half of the expected change in total Comdata revenue due to changes in diesel fuel prices, effectively establish an average fixed price of $1.51 per gallon of diesel fuel for the effected transactions during the period from July 1 to December 31, 2004. The impact of both realized and unrealized gains and losses on the fuel derivative instruments is reflected in (gain) loss on derivative instruments in our consolidated statements of operations. The carrying amount of these contracts at March 31, 2004 was less than $0.1, representing the expected aggregate future payments from the counterparty over the term of the contracts.

See Note A, “Accounting Policies—Cash and Investments, including Derivatives,” and Note B, “Restatement of Financial Statements,” in the notes to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2003 10-K/A for a further discussion of the reclassification of realized gains and unrealized gains on derivative instruments as part of the Restatement.

Investments

At December 31, 2003, we held 750,000 shares of The Ultimate Software Group, Inc. (“Ultimate”) common stock and a warrant to purchase an additional 75,000 Ultimate common shares at a price of $4.00 per share, which we acquired for $3.0 in March 2003. In March 2004, we sold 50,000 shares of Ultimate for proceeds of $0.7 and a net gain of $0.5 reported in other expense (income). Our holdings of Ultimate as of March 31, 2004 represent an equity interest of approximately 3.4% of their outstanding shares. In addition, we held 782,069 common shares of U.S.I. Holdings Corporation (“USIH”) at December 31, 2003 and March 31, 2004.

The Ultimate and USIH securities are treated as “available for sale” securities. The carrying value of these securities has been adjusted at each balance sheet date to reflect the market price reported by the stock exchange that lists those securities. The amount of this change is reported as unrealized gain or loss from marketable securities in comprehensive income. The carrying values of our holdings of Ultimate amounted to $10.2 at March 31, 2004 and $6.9 at December 31, 2003. The carrying values of our holdings of USIH amounted to $11.6 at March 31, 2004 and $10.2 at December 31, 2003. At March 31, 2004, the net unrealized gain on marketable securities amounted to $7.1, after reduction for deferred income taxes of $4.1, and is reported in accumulated other comprehensive income. This compares to a net unrealized gain on marketable securities of $3.9, after reduction for deferred income taxes of $2.4, at December 31, 2003.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004
Notes to Consolidated Financial Statements
(Dollars in millions, except per share data)
(Unaudited)

FINANCING

Debt Instruments

At March 31, 2004 and December 31, 2003, we maintained two major credit facilities described below. Ceridian Centrefile also maintains an overdraft account with outstanding balances of $3.0 at March 31, 2004 and $2.7 at December 31, 2003. Our capital lease obligations for equipment amounted to $19.7 at March 31, 2004 and $20.8 at December 31, 2003.

In June 2002, Comdata entered into a $150.0 receivables securitization facility with up to a three-year term that uses selected Comdata trade receivables as collateral for borrowings. The amount outstanding under this facility was $140.0 at December 31, 2003 and March 31, 2004. The aggregate amount of receivables serving as collateral amounted to $165.5 at March 31, 2004 and $187.0 at December 31, 2003. The amounts outstanding as long-term debt and the collateralized receivables remain on our consolidated balance sheet since the terms of the facility permit us to repurchase the receivables.

The domestic revolving credit facility that we initiated in January 2001 provides up to $350.0 for a combination of advances and up to $50.0 of letters of credit until March 2006. At March 31, 2004 and December 31, 2003, we had utilized $2.3 of the facility for letters of credit and had unused borrowing capacity under the domestic revolving credit facility of $347.7, of which we have designated $140.0 as backup to the receivables securitization facility.

We remain in compliance with covenants under our credit facilities at March 31, 2004.

Equity Instruments

During the first quarter of 2004, we paid $58.4 to repurchase 3,012,400 shares of our common stock on the open market at an average net price of $19.42 per share. As of March 31, 2004, we may repurchase up to 7,350,500 additional shares of our common stock under an existing authorization from our board of directors. We generally use our treasury stock to address our obligations under our stock compensation and employee stock purchase plans.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004
Notes to Consolidated Financial Statements
(Dollars in millions, except per share data)
(Unaudited)

CUSTOMER FUNDS

We have restated the amount of customer funds to include funds held by Comdata for its eCash customers, which amounted to $9.8 at March 31, 2004 and $9.2 at December 31, 2003 (at cost and market).

Investment income from invested customer funds constitutes a component of our compensation for providing services under agreements with our customers. The restated investment income from invested customer funds included in revenue amounted to $17.8 and $16.7 for the quarterly periods ended March 31, 2004 and 2003.

Customer funds and the offsetting obligations amounted to $3,668.2 at March 31, 2004 and $3,141.3 at December 31, 2003. This amount varies significantly during the year and averaged $2,785.3 and $2,423.2, respectively, for the three-month periods ended March 31, 2004 and 2003. The following tables provide information on cost and market price for various classifications of customer fund investments and amounts by maturity date.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004
Notes to Consolidated Financial Statements
(Dollars in millions, except per share data)
(Unaudited)

Amortization for other intangible assets held at March 31, 2004 is estimated to be $16.4 for 2004, $16.0 for 2005, $13.2 for 2006, $10.4 for 2007 and $5.9 for 2008.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004
Notes to Consolidated Financial Statements
(Dollars in millions, except per share data)
(Unaudited)

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Form 10-Q/A contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The statements regarding Ceridian Corporation 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. Forward-looking statements are based on current expectations and assumptions, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in these forward-looking statements. Important factors known to us that could cause such material differences are identified and discussed from time to time in our filings with the Securities and Exchange Commission, including those factors discussed in this Form 10-Q/A and discussed in the Form 10-K/A for the year ended December 31, 2003, which factors are also incorporated herein by reference. Such important factors include:

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 disclosure we make on related subjects in future reports to the SEC.

MANAGEMENT SUMMARY

This discussion should be read in conjunction with (i) the accompanying consolidated financial statements and related notes to such financial statements included in Part I, Item 1, “Financial Statements” of this Form 10-Q/A and (ii) the consolidated financial statements and the notes to such financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2003 10-K/A, which we are

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004

filing concurrently with this Form 10-Q/A. All applicable disclosures in the following discussion have been modified to reflect the Restatement, as described below.

Restatement

As described in “Explanatory Note” in the forepart of this report, we have restated our consolidated financial statements for the years 1999 through 2003 and for the first quarter of 2004. The Restatement is further described in the note entitled “Restatement of Financial Statements” in the notes to our consolidated financial statements included in this Form 10-Q/A.

The determination to restate these financial statements was made as a result of:

The Restatement included the following classes of adjustments:

The adjustments that had the most significant effect on our consolidated statements of operations related to the recent change in accounting for interest rate and fuel price derivative instruments and the capitalization and expensing of software development costs (net of amortization effects).

In January 2005, we determined that our interest rate and fuel price derivative contracts did not satisfy the requirements of FAS 133, and as such, did not qualify for hedge accounting treatment. The correction of accounting for these derivative instruments affected the timing of gain or loss recognition on our consolidated statements of operations. The unrealized gains and losses previously reported under hedge accounting treatment in accumulated other comprehensive income within stockholders’ equity of our consolidated balance sheets are now reported in our net earnings on our consolidated statements of operations. The pre-tax earnings impact of the correction of unrealized gains and losses on derivative instruments was an increase of $5.6 million for the first quarter of 2004 and a decrease of $0.8 million for the first quarter of 2003. The correction of accounting for realized gains and losses had no effect on pre-tax earnings but did require us to reclassify the realized gains and losses from revenue to costs and expenses. As a result of the Restatement, both realized and unrealized gains or losses on interest rate and fuel price derivative instruments now appear on our consolidated statements of operations in a line item entitled “(gain) loss on derivative instruments.”

The adjustments for capitalization and expensing of software development costs (net of amortization effects) largely resulted in the charging to expense of previously capitalized software costs, including the reversal of related amortization expense. The adjustments resulted in a decrease in pre-tax earnings of $5.3 million in the first quarter of 2004 and $1.3 million in the first quarter of 2003.

The primary impact of the Restatement on the historical consolidated balance sheets and consolidated statements of cash flows related to the adjustments concerning software capitalization and amortization changes. Capitalized software development costs were reduced by $57.1 million. The correction of accounting for derivative instruments had no impact on assets or operating cash flows. We separately restated the consolidated balance sheet as of December 31, 2003 in the 2003 10-K/A. The Restatement had no effect on historical cash balances or net cash flows since the entire reduction in operating cash flows is offset by the reduction in capital expenditures included in investing cash flows.

Operations

Ceridian Corporation provides human resources solutions to employees 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 principally in the United States.

Our net earnings for the first quarter of 2004 amounted to $23.5 million, or 16¢ per diluted share, compared to net earnings of $27.3 million, or 18¢ per diluted share, in the same quarter of 2003. Our revenue for the first quarter of 2004 amounted to $313.9 million compared to $306.9 million in the same quarter of 2003.

Management initiatives expected to affect operating results in 2004 include:

During the first quarter of 2004, internal measurements indicate improvement in HRS customer retention and satisfaction over levels of one year ago as well as high levels of customer retention and satisfaction for Comdata customers. Projects expected to improve HRS installation performance were nearly completed by the end of the first quarter and compensation incentives related to installation performance and customer satisfaction had been put in place. HRS internal installation performance measures indicated an improvement in the current quarter compared to the first quarter of 2003. Order levels improved over those of the fourth quarter and first quarter of 2003, and we added new customers for our human resource outsourcing services and Comdata’s BusinessLink card. Near the end of the quarter, we also acquired a customer base for COBRA services from a major insurance company for our HRS benefits services business. Revenue from

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004

sales of Comdata stored value cards and related services increased by nearly 20% in the first quarter of 2004 over the first quarter of 2003. Additional operational efficiencies during the rest of 2004 from actions taken by Ceridian Canada and Ceridian Centrefile during the first quarter of 2004 are expected to recover related expenditures, primarily severance, incurred during first quarter that amounted to $2.8 million.

Further information on consolidated results of operations as well as business segment results appear in the following sections of this discussion.

Financial Condition and Cash Flows

Net cash inflows from operations during the first quarter of 2004 amounted to $71.2 million compared to net cash outflows of $7.0 million for the first quarter of 2003. The comparison benefited significantly from improved trade receivables collections performance since the first quarter of 2003. We also received a tax refund of $16.5 million during the first quarter of 2004 related to our $75.0 million contribution to our principal pension plan made during the fourth quarter of 2003.

Cash flows from investing activities showed little change in the quarterly comparison. The increase in cash outflows from financing activities reflected expenditures of $58.4 million to repurchase 3,012,400 Ceridian shares under our stock repurchase program.

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

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2004

RESULTS OF OPERATIONS

Consolidated Results - Overview