UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q/A

(Mark One)

For the quarterly period ended March 31, 2003

or

For transition period from                   to                   

Commission file number: 1-15168

CERIDIAN CORPORATION

Registrant’s telephone number, including area code: (952) 853-8100

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.

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

The number of shares of registrant’s Common Stock, par value $.01 per share, outstanding as of April 30, 2003, was 148,099,691.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A

EXPLANATORY NOTE

     This Amendment No. 1 on Form 10-Q/A amends Items 1, 2 and 3 of Part I and Item 6 of Part II of our Quarterly Report on Form 10-Q previously filed for the quarterly period ended March 31, 2003. This Form 10-Q/A is filed in connection with our restated financial statements as of and for the periods ended March 31, 2003 as a result of changes in revenue recognition at our Stored Value Systems unit. 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-Q/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. 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-Q/A as Exhibits 31.01, 31.02, 32.01 and 32.02. All other information contained in this Form 10-Q/A is as of the date of the original filing.

     We are filing an Amendment No. 1 to our annual report on Form 10-K for the fiscal year ended December 31, 2002 and an Amendment No. 1 to quarterly reports on Form 10-Q for each of the second and third quarters of 2003 concurrently with the filing of this Form 10-Q/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.

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Table of Contents

CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A

INDEX

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FORM 10-Q/A
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS

See notes to consolidated financial statements.

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See notes to consolidated financial statements.

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See notes to consolidated financial statements.

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FORM 10-Q/A
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2003
(Dollars in millions, except per share data)
(Unaudited)

STOCKHOLDERS’ EQUITY (Restated)

COMPREHENSIVE INCOME (LOSS) (Restated)

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FORM 10-Q/A
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2003
(Dollars in millions, except per share data)
(Unaudited)

RESTATEMENT OF FINANCIAL STATEMENTS

As announced on February 18, 2004 and as described in a note to our amended Annual Report on Form 10-K/A for the year ended December 31, 2002, 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 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 revised policy in Part II, Item 8 of our Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2002 in Note A, Accounting Policies,” to the consolidated financial statements in the section entitled “Revenue Recognition” under the heading “Retail Services.”

The cumulative effect of this restatement reduced retained earnings by $5.7 at March 31, 2003 and $7.1 at December 31, 2002. The corrections had no effect on operating, investing or financing cash flows.

CHANGES IN PRESENTATION

Comdata’s provision for doubtful accounts has been reclassified from cost of revenue to general expense to be consistent with the classification of such provisions by our other businesses. Amounts for prior periods have been reclassified to conform to the current presentation. Also see the accompanying note to the consolidated financial statements entitled “Customer Funds” regarding a reclassification of funds held by benefits services.

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FORM 10-Q/A
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2003
(Dollars in millions, except per share data)
(Unaudited)

EMPLOYEE PLANS

Stock Plans

We account for our stock-based compensation plans under the intrinsic method of APB Opinion No. 25 and related Interpretations. Under 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.

Pro Forma Effect of Fair Value Accounting (Restated)

Retirement Plans

We maintain defined benefit pension plans for participating employees in the U.S. and in the UK. The U.S. plans include a principal plan that was offered to employees until it was closed on January 2, 1995. Inactive participants in this plan represent approximately 90% of the total participants. The other U.S. defined benefit plan is a supplemental plan that is not subject to ERISA. At December 31, 2002, the aggregate projected benefit obligation for these plans exceeded the aggregate fair value of plan assets by $239.2. The net periodic pension cost (credit) for these defined benefit pension plans for the first quarter of 2003 amounted to $2.6 compared to $(0.5) in the first quarter of 2002. We used assumptions of a 6.75% discount rate, a long-term rate of return on plan assets of 8.75% and a rate of compensation increase of 4.0% in determining the 2003 net periodic pension cost.

During the first quarter of 2003, we made a voluntary employer cash contribution to the principal plan of $4.1.

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FORM 10-Q/A
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2003
(Dollars in millions, except per share data)
(Unaudited)

OTHER EXPENSE (INCOME)

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 March 31, 2003, 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 with The Ultimate Software Group, Inc. (which this report refers to as “Ultimate”). Also during the first quarter of 2002, we conducted a periodic reassessment of our environmental obligations, which revealed a reduced requirement for certain of these obligations that were previously established. As a result, we credited $4.1 to other expense (income) and removed that amount from other noncurrent liabilities.

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 (all terminated by December 31, 2002), and other exit costs of $2.9 and in Comdata for severance costs of $0.6, involving 41 employees (all of whom were terminated by March 31, 2003), 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.

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FORM 10-Q/A
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2003
(Dollars in millions, except per share data)
(Unaudited)

OTHER EXPENSE (INCOME) (Continued)

Accrued Exit Costs

INVESTING ACTIVITY

Derivative Securities

During the reported periods we maintained interest rate contracts to hedge interest rate risk in our customer funds and corporate cash portfolios. These derivative securities 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 investment income from customer funds as reported in HRS revenue. Counterparties are all commercial banks with debt ratings of A or better. The maximum length of any derivative security is approximately 5.2 years.

The fair market value of the derivative securities is reported in the non-current asset section of the balance sheet. The fair market value decreased from $71.4 at December 31, 2002 to $70.3 at March 31, 2003. This decrease in value was primarily due to a decline in forward interest rates net of collections of cash payments from counterparties of $7.3 during the first three months of 2003. Based upon future expected interest rates as determined from LIBOR futures prices in effect at the close of business on March 31, 2003, we expect to collect an additional $30.2 during the next 12 months.

At March 31, 2003, the net unrealized gain related to these securities amounted to $45.3, after reduction for deferred income taxes of $24.4, and is reported in other comprehensive income. This compares to a net unrealized gain of $45.9, after reduction for deferred income taxes of $24.7, at December 31, 2002.

In April 2003, Comdata executed diesel fuel price hedge contracts to hedge the variability of Comdata revenue from customer contracts in which Comdata fees are determined as a percentage of pump fuel prices. These contracts hedge approximately half of the expected change in total Comdata revenue due to changes in diesel fuel prices for the period June 1 to December 31, 2003.

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FORM 10-Q/A
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2003
(Dollars in millions, except per share data)
(Unaudited)

INVESTING ACTIVITY (Continued)

Investments

During March 2003, we paid $3.0 to acquire from the issuer 750,000 unregistered shares of the common stock of Ultimate and a warrant to purchase an additional 75,000 unregistered common shares at a price of $4.00 per share. At December 31, 2002 and March 31, 2003, we also held 785,000 Ultimate common shares purchased on the open market. Our holdings of Ultimate represent an equity interest of approximately 9.2%. In addition, we held 919,227 common shares of U.S.I. Holdings Corporation (which this report refers to as “USIH”) at December 31, 2002 and March 31, 2003. These securities are recorded at cost and 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 $6.0 at March 31, 2003 and $2.9 at December 31, 2002. The carrying values of our holdings of USIH amounted to $9.6 at March 31, 2003 and $10.8 at December 31, 2002. At March 31, 2003, the net unrealized gain related to these securities amounted to $0.3, after reduction for deferred income taxes of $0.2, and is reported in other comprehensive income. This compares to a net unrealized gain of $1.0, after reduction for deferred income taxes of $0.6, at December 31, 2002.

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FORM 10-Q/A
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2003
(Dollars in millions, except per share data)
(Unaudited)

FINANCING

Debt Instruments

At December 31, 2002, we maintained two major credit facilities described below. We also maintain an overdraft account in our UK subsidiary with outstanding balances of $2.2 at March 31, 2003 and $2.0 at December 31, 2002. A note payable for $1.5 due in January 2003 to a creditor that was also a customer was converted into a customer advance at the maturity date of the note in connection with a sales arrangement. Therefore, the non-cash settlement of the note does not appear in the statement of cash flows.

In June 2002, Comdata entered into a $150.0 receivables securitization facility with up to a three-year term that uses Comdata trade receivables as collateral for borrowings. The amount outstanding under this facility at December 31, 2002 was $150.0, and we have maintained that amount through March 31, 2003. The aggregate amount of receivables serving as collateral amounted to $182.6 at March 31, 2003 and $173.3 at December 31, 2002. The amounts outstanding as long-term debt and the collateralized receivables remain on our consolidated balance sheet.

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. We had no activity in this facility during the first quarter of 2003, so the balances outstanding remain at $40.0 for advances and $2.3 for letters of credit. Payments under this facility during the first quarter of 2002 amounted to $15.0. At March 31, 2003, we have unused borrowing capacity under the domestic revolving credit facility of $307.7, of which we have designated $150.0 as backup to the receivables securitization facility.

We remain in compliance with covenants under our credit facilities at March 31, 2003.

Equity Instruments

During the first quarter of 2003, we paid $9.1 to repurchase 675,800 shares of our common stock on the open market at an average net price of $13.48 per share. As of March 31, 2003, we may repurchase up to 11,531,200 additional shares of our common stock under an existing authorization from our board of directors.

CUSTOMER FUNDS

Effective in 2003, we report our benefits services funds together with our payroll and tax filing funds and present the combined amount as “customer funds” in our balance sheet. 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, even though the use of these funds is not restricted by law or regulation. Amounts for prior periods have been restated to conform to the current presentation.

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FORM 10-Q/A
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2003
(Dollars in millions, except per share data)
(Unaudited)

CUSTOMER FUNDS (Continued)

The balance sheet effect of the change reclassified benefit services assets previously reported in “cash and equivalents” and “short-term investments” ($33.4 and $27.0 at December 31, 2002) into “customer funds” and reclassified related liabilities previously presented in “drafts and customer funds payable” ($60.4 at December 31, 2002) into “customer funds obligations.” The effect on the statement of cash flows eliminated this “cash and equivalents” amount from the operations “cash and equivalents balance,” any changes in these “short-term investments” from investing cash flows, and any changes in these “customer funds payable” from working capital operating cash flows.

Investment income from invested customer funds constitutes a component of our compensation for providing services under agreements with our customers. Invested income from invested customer funds included in revenue amount to $23.8 and $23.7 for the quarterly periods ended March 31, 2003 and 2002.

Customer funds and the offsetting obligations amounted to $2,906.2 at March 31, 2003 and $2,440.9 at December 31, 2002. This amount varies significantly during the year and averaged $2,414.4 and $2,218.1, respectively, for the three-month periods ended March 31, 2003 and 2002. The following tables provide information on cost and market price for various classifications of customer fund investments and amounts by maturity date.

Investments of Customer Funds

Investments of Customer Funds by Maturity Date

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FORM 10-Q/A
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2003
(Dollars in millions, except per share data)
(Unaudited)

CAPITAL ASSETS

Amortization for other intangible assets held at March 31, 2003 is estimated to be $16.2 for 2003, $15.8 for 2004, $13.8 for 2005, $11.1 for 2006 and $7.8 for 2007.

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FORM 10-Q/A
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2003
(Dollars in millions, except per share data)
(Unaudited)

SEGMENT DATA (Restated)

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2003

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

This Amendment No. 1 to our Quarterly Report on 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 Amendment No. 1 to our Quarterly Report on Form 10-Q/A and discussed in our Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2002, 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.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2003

RESULTS OF OPERATIONS

Consolidated Results - Overview

Our net earnings for the first quarter of 2003 amounted to $28.1 million, or 19¢ per diluted share, compared to net earnings of $19.4 million, or 13¢ per diluted share, in the same quarter of 2002. Our revenue for the first quarter of 2003 amounted to $314.1 million compared to $302.1 million in the same quarter of 2002. Net earnings for the first quarter of 2002 included net unusual losses before income taxes of $9.8 million that are further described later in this discussion under the heading “Unusual Items.”

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

Statements of Operations First Quarter Comparisons (Restated)

Our consolidated revenue increased by $12.0 million in the quarterly comparison with $8.9 million of the increase coming from HRS and $3.1 million coming from Comdata.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2003

The following factors had the most significant impacts on our HRS revenue performance:

The following factors had the most significant impacts on our Comdata revenue performance:

Further details are provided in the following section entitled “Business Segment Results.”

Our total costs and expenses decreased by $1.3 million in the quarterly comparison. HRS costs and expenses, excluding unallocated net interest expense, decreased by $4.1 million and Comdata costs and expenses, excluding unallocated net interest expense, decreased by $0.4 million. Also, first quarter 2002 costs and expenses included the benefit of a $4.1 million reduction of environmental accruals not allocated to our business segments. The principal factors affecting the comparison of total costs and expenses included:

Our interest income increased by $0.2 million due to a higher level of invested cash equivalents.

Our interest expense declined by $0.7 million as a result of lower interest rates and a lower level of outstanding debt. Our average effective interest rate on borrowings from our major credit facilities declined from 3.32% in the first quarter of 2002 to 2.36% in the first quarter of 2003, and our average outstanding borrowings from those facilities in those periods declined from $224.8 million to $190.0 million.

Our effective tax rate decreased from 36.0% for the first quarter of 2002 to 35.5% for the first quarter of 2003.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2003

Business Segment Results

* 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.

HRS

Revenue for our HRS business increased by $8.9 million in the quarterly comparison. Revenue from U.S. operations increased by $4.4 million while revenue from Canadian operations increased by $1.8 million and UK operations increased by $2.7 million.

Our U.S. payroll and tax filing revenue benefited primarily from the sale of add-on services to existing customers. One example is our Payment Solutions service where we make compensation payments to participating customers’ employees from payroll deposits advanced to us by those customers. This service provided an additional $60.0 million to the average balance of our customer funds investments, which would represent $2.4 million of revenue from interest income, for the first quarter of 2003 compared to the first quarter of 2002. The $3.6 million increase in revenue from our LifeWorks employee assistance services and our benefits services operations benefited principally from businesses we acquired during 2002. Customer employment levels declined slightly from year-end 2002 and were below those of the first quarter of 2002, which resulted in a revenue reduction of $1.5 million in the quarterly comparison. Revenue in Canada and UK operations benefited from changes in currency exchange rates by a total of $3.5 million while their sales of add-on services and one-time sales more than offset reductions in repetitive revenue.

In total, the average balance of customer funds rose by 8.8% from $2,218.1 million for the first quarter of 2002 to $2,414.4 million for the first quarter of 2003, which included a Canadian currency exchange benefit that represented about 150 basis points of the percentage increase. The average yields on invested customer funds for the comparative 2003 and 2002 quarters were 4.04% and 4.41%, which reduced our revenue by $2.2 million.

Total costs and expenses for our HRS business decreased by $4.1 million in the quarterly comparison. The principal factor in the decrease related to charges totaling $12.4 million from exit costs and an asset write-down during the first quarter of 2002 with no corresponding charge

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2003

during the current quarter. These charges are described later in this discussion under the heading “Unusual Items.”

Cost of revenue for HRS increased by $3.7 million. Contractual commitments involving our licensing and services agreements with Ultimate, which are associated with the SourceWeb introduction, contributed $2.1 million of the increase. Benefits services operations experienced increased cost of revenue of $2.2 million related to operations acquired in 2002 and $1.6 million of incremental costs associated with the completion of the transfer of certain California and Virginia operations to our Florida operation. Cost of revenue for operations in Canada and the UK increased as a result of exchange rate changes that also benefited the revenue comparison. Reductions in cost of revenue primarily involved staff reductions, lower utilization of outside consultants and cost savings on supplies and materials.

SG&A expense for our HRS business increased by $4.1 million in the quarterly comparison. Increases in selling expense of $4.6 million reflected a higher staffing level in U.S. operations and incremental costs associated with the introduction of SourceWeb. General and administrative expenses reflected $2.3 million of our 2003 additional pension cost as well as added expense related to 2002 acquisitions and the currency rate change. These additional expenses were offset by staff reductions and reduced provisions for incentive payouts and benefits.

R&D expense for our HRS business increased by $0.9 million in the quarterly comparison due primarily to development efforts associated with add-on products and services and the exchange rate effect on non-U.S. expenses.

Comdata

Comdata revenue grew by $3.1 million as higher fuel prices added $2.6 million to the quarterly comparison. Revenue from retail card sales and processing increased by $2.4 million in the quarterly comparison. Revenue from sales of point-of-sale terminal equipment decreased by $1.5 million as customers continued to restrain their capital spending. Permitting services declined by $1.1 million compared to the first quarter of 2002 as the market for permitting services continued to contract. The remainder of the increase in the quarterly comparison of revenue related primarily to a 3.5% increase in transportation card transaction volume.

Comdata’s costs and expenses decreased by $0.4 million in the quarterly comparison. The lower level of revenue from point-of-sale terminal equipment and permitting services accounted for a cost of revenue decrease of $1.3 million. This reduction in cost of revenue was offset by a $1.1 million increase in cost of revenue related to the higher level of retail cash card sales and processing revenue. Comdata absorbed $0.8 million of our additional 2003 pension cost in general and administrative expense. In the first quarter of 2002, Comdata recorded exit costs related to facility consolidation of $1.5 million with no comparable item in the current quarter. The 2002 exit costs are described later in this discussion under the heading “Unusual Items.”

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2003

Other

The reported EBIT of $4.1 million for the first quarter of 2002 results from reduction of a previously established accrual for environmental cleanup. Further details on this item and other unusual gains and losses appear in the following section entitled “Unusual Items.”

Unusual Items

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. Of the $7.5 million accrual:

The consolidation of certain Comdata facilities resulted in accrued severance costs of $1.0 million for 76 employees, including 67 terminated by March 31, 2003, and other exit costs of $0.5 million, primarily related to lease terminations.

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 (all terminated by December 31, 2002), and other exit costs of $2.9 million and in Comdata for severance costs of $0.6 million, involving 41 employees (all of whom were terminated by March 31, 2003), 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.

We also 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.

During the first quarter of 2002, we conducted a periodic reassessment of our environmental obligations, which revealed a reduced requirement for certain of these obligations that were previously established. As a result, we credited $4.1 million to other expense (income) and removed that amount from other noncurrent liabilities.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2003

FINANCIAL CONDITION

Consolidated Statements of Cash Flows Highlights

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

Cash Flows

Cash Balances and Operations

Effective in 2003, we report our HRS benefits services funds together with our payroll and tax filing funds and present the combined amount as “customer funds” in our balance sheet. 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, even though the use of these funds is not restricted by law or regulation. Amounts for prior periods have been restated to conform to the current presentation.

The balance sheet effect of the change reclassified assets previously presented in “cash and equivalents” and “short-term investments” ($33.4 million and $27.0 million at December 31, 2002) into “customer funds” and reclassified related liabilities previously presented in “drafts and customer funds payable” ($60.4 million at December 31, 2002) into “customer funds obligations.” The effect on the statement of cash flows for the first quarter of 2002 eliminated $9.7 million of “cash and equivalents” from the operations “cash and equivalents balance,” a $5.0 million cash outflow for “short-term investments” from investing cash flows, and a cash inflow of $14.7 million from an increase in “customer funds payable” in working capital changes to operating cash flows.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2003

Our cash and equivalents decreased by $25.5 million to $108.8 million during the first quarter of 2003 as we used cash balances to fund restrained investing activities and repurchases of our common stock. Our net operating cash outflow amounted to $3.5 million for the first quarter of 2003 as cash outflows associated with an investment in net working capital of $57.0 million exceeded operating cash inflows from earnings activities of $53.5 million. The net operating cash inflow of $7.7 million for the first quarter of 2002 represented the excess of cash inflows from earnings activities of $38.5 million over cash outflows associated with net working capital investments of $30.8 million.

We discussed the factors that led to the $15.0 million increase in operating cash inflows from earnings activities in the previous section of this discussion called “Results of Operations.” The change in the quarterly comparison of the operating cash flows related to working capital activities is largely driven by a $25.9 million swing in the net balances of Comdata transportation receivables and the related liability for drafts and settlements payable at the beginning and end of the reporting period. The principal factors that influenced this working capital result were as follows:

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2003

Investing

During the first quarter of 2003 we made capital expenditures of $6.2 million for property and equipment and $5.5 million for software and development costs. The respective amounts for 2002 were $6.5 million and $10.0 million. During March 2003, at the request of Ultimate, we paid $3.0 million to Ultimate to acquire 750,000 unregistered shares of Ultimate common stock and a warrant to purchase an additional 75,000 unregistered common shares at a price of $4.00 per share. We described this transaction further in the note to consolidated financial statements entitled “Investing Activity.” During the first quarter of 2002, we spent $15.6 million to acquire SYLINQ Corporation.

Financing

During the first quarter of 2003, we paid $9.1 million to repurchase 675,800 shares of our common stock on the open market at an average net price of $13.48 per share. Proceeds from exercises of stock options and employee stock plan purchases amounted to $1.4 million during the first quarter of 2003 compared to $13.1 million in the first quarter of 2002 due to lower prices for Ceridian stock in 2003. During the first quarter of 2002, we made payments of $15.0 million on our domestic revolving credit facility. We described these transactions further in the note to consolidated financial statements entitled “Financing.”

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 “Cash Balances and Operations” above. Cash flows from operations are primarily influenced by the same factors that influence revenue. We discussed these in a preceding section of this discussion entitled “Results of Operations” and in several of the cautionary factors described at the beginning of this discussion. In addition to issues discussed in “Cash Balances and Operations” above, cautionary factors of particular relevance to our liquidity needs include those that refer to:

As of March 31, 2003, 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 also expect to opportunistically repurchase a modest number of our outstanding common shares in the open market during 2003. As of March 31, 2003, we may repurchase up to 11,531,200 shares of our common stock under an existing authorization from our board of directors.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2003

Critical Accounting Policies

We consider our critical accounting policies to be revenue recognition and recoverability of software and development costs. These policies were discussed in the section with this title in Part II, Item 7 of our Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2002.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in our interest rate market risk during the three-month period ended March 31, 2003.

In April 2003, Comdata executed diesel fuel price hedge contracts to hedge the variability of Comdata revenue from customer contracts in which Comdata fees are determined as a percentage of pump fuel prices. These contracts hedge approximately half of the expected change in total Comdata revenue due to changes in diesel fuel prices for the period June 1 to December 31, 2003.

For additional information on market risk, refer to Part II, Item 7A, Quantitative and Qualitative Disclosure About Market Risk, contained in our Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2002.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2003

Item 4. Controls and Procedures

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
March 31, 2003

Part II. Other Information

Item 6. Exhibits and Reports on Form 8-K

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SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to Quarterly Report on Form 10-Q/A for the period ended March 31, 2003, to be signed on its behalf by the undersigned thereunto duly authorized.

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