UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2004

or

[ ] 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

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           [X]           NO [  ]

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 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

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 March 31, 2004, and results of operations and cash flows for the three month periods ended March 31, 2004 and 2003.

     The results of operations for the three month period ended March 31, 2004 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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FORM 10-Q

See notes to consolidated financial statements.

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FORM 10-Q

See notes to consolidated financial statements.

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FORM 10-Q
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2004
(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
March 31, 2004
(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 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.

ACCRUED EXIT COSTS

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

OTHER EXPENSE (INCOME)

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 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.

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

EMPLOYEE PLANS (Continued)

Retirement Plans

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

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 in lieu of fees as reported in HRS revenue. Counterparties are all commercial banks with debt ratings of A or better.

The fair market value of the derivative securities 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. 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.

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

INVESTING ACTIVITY (Continued)

At March 31, 2004, the net unrealized gain on derivative securities amounted to $39.7, after reduction for deferred income taxes of $21.4, and is reported in accumulated other comprehensive income. This compares to a net unrealized gain on derivative securities of $36.1, after reduction for deferred income taxes of $19.4, at December 31, 2003.

In March 2004, 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, which hedge approximately 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 carrying amount of these contracts at March 31, 2004 was less than $0.1, representing the expected aggregate future payments from the counterparty (and increase in revenue) over the term of the contracts.

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

CUSTOMER FUNDS

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 $25.9 and $24.1 for the quarterly periods ended March 31, 2004 and 2003.

Customer funds and the offsetting obligations amounted to $3,658.4 at March 31, 2004 and $3,132.1 at December 31, 2003. This amount varies significantly during the year and averaged $2,774.6 and $2,415.2, 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.

Investments of Customer Funds

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