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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from _________________ to ____________________

Commission file number:  1-15168

CERIDIAN CORPORATION
(Exact name of registrant as specified in its charter)

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.

     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 July 31, 2003, was 148,136,640.

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CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q

INDEX

	In the opinion of Ceridian Corporation, the unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals, except as set forth in the notes to consolidated financial statements) necessary to present fairly our financial position as of June 30, 2003, and results of operations for the three and six month periods and cash flows for the six month periods ended June 30, 2003 and 2002.
	The results of operations for the six month period ended June 30, 2003 are not necessarily indicative of the results to be expected for the full year.
	The consolidated financial statements should be read in conjunction with the notes to consolidated financial statements.

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FORM 10-Q
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
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(Dollars in millions, except per share data)
(Unaudited)

STOCKHOLDERS’ EQUITY

COMPREHENSIVE INCOME (LOSS)

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FORM 10-Q
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 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 on an interim basis 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. 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

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 was $2.4 for the second quarter of 2003 compared to $(0.4) in the second quarter of 2002 and $5.0 for the first half of 2003 compared to $(0.9) for the first half 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 half of 2003, we made voluntary employer cash contributions to the principal plan of $16.4. We also made voluntary cash contributions to the supplemental plan of $0.5 during the second quarter of 2003 and $3.3 during the second quarter of 2002.

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FORM 10-Q
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(Dollars in millions, except per share data)
(Unaudited)

OTHER EXPENSE (INCOME)

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.

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FORM 10-Q
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(Dollars in millions, except per share data)
(Unaudited)

INVESTING ACTIVITY (Continued)

The fair market value of these derivative securities is reported in the non-current asset section of the balance sheet. The fair market value increased from $71.4 at December 31, 2002 to $75.6 at June 30, 2003. This increase in value was primarily due to a decline in forward interest rates net of collections of cash payments from counterparties of $12.5 during the first six months of 2003. Based upon future expected interest rates as determined from LIBOR futures prices in effect at the close of business on June 30, 2003, we expect to collect an additional $30.8 during the next 12 months.

At June 30, 2003, the net unrealized gain related to these securities amounted to $49.0, after reduction for deferred income taxes of $26.3, 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. The impact on our results of operations and financial position as of and for the periods ended June 30, 2003 was not material.

Investments

During March 2003, we paid $3.0 to acquire from the issuer 750,000 unregistered shares of the common stock of The Ultimate Software Group, Inc. (which this report refers to as “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 June 30, 2003, we also held 785,000 Ultimate common shares purchased on the open market. Our holdings of Ultimate represent an equity interest of approximately 7.8% of the outstanding shares of Ultimate as of July 17, 2003. 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 June 30, 2003. 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 $7.9 at June 30, 2003 and $2.9 at December 31, 2002. The carrying values of our holdings of USIH amounted to $10.8 at June 30, 2003 and December 31, 2002. At June 30, 2003, the net unrealized gain related to these securities amounted to $2.1, after reduction for deferred income taxes of $1.3, and is reported in accumulated 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
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(Dollars in millions, except per share data)
(Unaudited)

INVESTING ACTIVITY (Continued)

Capital expenditures

Effective June 1, 2003, we entered into two leasing agreements with different lessors intended to provide us with greater flexibility to take advantage of future data storage technology at a lower cost. One arrangement involved the sale and leaseback of storage equipment recently acquired by us. We received $6.3 as cash proceeds from the sale of the equipment, which is reported as an investing cash inflow. We accounted for the leaseback of this equipment, which has a 3-year term and a negligible residual value, as a capital lease. We recorded the capital lease asset in machinery and equipment and the related capital lease obligation in long term debt at $6.9 with no effect on cash flows. The carrying value of the capital lease asset will be amortized on a straight line basis over the term of the lease.

The other leasing arrangement involved the replacement with new data storage equipment of data storage equipment we owned or leased. Under this arrangement, we received $4.6 as cash proceeds from the sale of owned equipment at its carrying value, which is reported as an investing cash inflow. We accounted for the lease of new storage equipment, which has a 5-year term and negligible residual value, as a capital lease. We recorded the capital lease asset in machinery and equipment and the capital lease obligation in long-term debt at $15.3 with no effect on cash flows. The lease allows us access to increased levels of data storage capacity at months 10 and 22 according to a contractual schedule that correlates additional capacity with the lease payment schedule. Amortization of the capital lease asset will be allocated to each period of the lease based on the storage capacity available during that period.

See the accompanying note entitled “Financing” for a description of the capital lease obligations.

In addition, during the second quarter of 2003, we completed the purchase of software for a call center tracking system representing a capital expenditure of $7.7.

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FORM 10-Q
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(Dollars in millions, except per share data)
(Unaudited)

FINANCING

Capital Lease Obligations

In an accompanying note entitled “Investing Activity” under the heading “Capital Expenditures,” we described two leasing arrangements that became effective on June 1, 2003 that are accounted for as capital leases. The following schedule presents the amount recorded for the present value of the minimum payment obligation required by these leases and the principal amounts to be paid by year over the terms of the leases.

Debt Instruments

At June 30, 2003 and 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 $3.0 at June 30, 2003 and $2.0 at December 31, 2002.

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 at December 31, 2002 was $150.0, and we have maintained that amount through June 30, 2003. The aggregate amount of receivables serving as collateral amounted to $182.1 at June 30, 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 half 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 six months of 2002 amounted to $35.0. At June 30, 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 June 30, 2003.

Equity Instruments

During the first six months of 2003, we paid $19.0 to repurchase 1,314,700 shares of our common stock on the open market at an average net price of $14.48 per share. As of June 30, 2003, we may repurchase up to 10,892,300 additional shares of our common stock under an existing authorization from our board of directors. We utilize our treasury stock to satisfy our obligations under our stock option and employee stock purchase plans.

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FORM 10-Q
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(Dollars in millions, except per share data)
(Unaudited)

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 reclassified to conform to the current presentation.

Customer funds and the offsetting obligations amounted to $2,363.9 at June 30, 2003 and $2,440.9 at December 31, 2002. This amount varies significantly during the year and averaged $2,335.7 and $2,112.9, respectively, for the six-month periods ended June 30, 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
CERIDIAN CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2003
(Dollars in millions, except per share data)
(Unaudited)

CAPITAL ASSETS