-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q7jX80XNbZHjBxKqUzCjAsL4ef74M3Yx76VBsyxayGVC5v8/jHs/XVXWcMV9TX7/ RcBGxEsuDX3XCurPLpeodQ== 0001193125-08-240930.txt : 20081121 0001193125-08-240930.hdr.sgml : 20081121 20081121123918 ACCESSION NUMBER: 0001193125-08-240930 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20081121 ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20081121 DATE AS OF CHANGE: 20081121 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROADRIDGE FINANCIAL SOLUTIONS, INC. CENTRAL INDEX KEY: 0001383312 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-33220 FILM NUMBER: 081206335 BUSINESS ADDRESS: STREET 1: 1981 MARCUS AVENUE CITY: LAKE SUCCESS STATE: NY ZIP: 11042 BUSINESS PHONE: 516-472-5400 MAIL ADDRESS: STREET 1: 1981 MARCUS AVENUE CITY: LAKE SUCCESS STATE: NY ZIP: 11042 FORMER COMPANY: FORMER CONFORMED NAME: BROADRIDGE FINANCIAL SOLUTIONS, LLC DATE OF NAME CHANGE: 20070126 FORMER COMPANY: FORMER CONFORMED NAME: BSG LLC DATE OF NAME CHANGE: 20061212 8-K 1 d8k.htm FORM 8-K Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

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

Date of Report (Date of earliest event reported): November 21, 2008

 

 

BROADRIDGE FINANCIAL SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

 

 

DELAWARE

(State or other jurisdiction of incorporation)

 

001-33220   33-1151291
(Commission file number)   (I.R.S. Employer Identification No.)

1981 Marcus Avenue

Lake Success, New York 11042

(Address of principal executive offices)

Registrant’s telephone number, including area code: (516) 472-5400

N/A

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 8.01. Other Events

Exhibit 100 to this Current Report on Form 8-K contains documents formatted in XBRL (eXtensible Business Reporting Language) with information from Broadridge Financial Solutions, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed with the Securities and Exchange Commission (SEC) on November 6, 2008. The information includes the (i) Condensed Consolidated Statements of Earnings for the three months ended September 30, 2008 and 2007, (ii) Condensed Consolidated Balance Sheets as of September 30, 2008 and June 30, 2008, and (iii) Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2008 and 2007.

Users of this data are advised pursuant to Rule 401 of Regulation S-T that the financial information contained in the XBRL-Related Documents is unaudited and these are not the financial statements of Broadridge Financial Solutions, Inc. as filed with the SEC. The purpose of submitting these XBRL-Related Documents is to test the related format and technology and, as a result, investors should not rely on the information in this Current Report on Form 8-K, including Exhibit 100, in making investment decisions.

In accordance with Rule 402 of Regulation S-T, the information in this Current Report on Form 8-K, including Exhibit 100, shall not be deemed to be “filed” for purposes of Section 11 of the Securities Act of 1933, as amended (Securities Act), or Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liabilities of these sections, and are not part of any registration statement to which they relate, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

The following exhibits are furnished herewith:

 

   

Exhibit Description

Exhibit 100   The following materials from Broadridge Financial Solutions, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed on November 6, 2008, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Earnings for the three months ended September 30, 2008 and 2007, (ii) Condensed Consolidated Balance Sheets as of September 30, 2008 and June 30, 2008, and (iii) Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2008 and 2007.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: November 21, 2008

 

BROADRIDGE FINANCIAL SOLUTIONS, INC.
By:  

/s/ Dan Sheldon

Name:   Dan Sheldon
Title:   Vice President, Chief Financial Officer

Exhibit Index

 

  100 Materials from Broadridge Financial Solutions, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed on November 6, 2008, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Earnings for the three months ended September 30, 2008 and 2007, (ii) Condensed Consolidated Balance Sheets as of September 30, 2008 and June 30, 2008, and (iii) Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2008 and 2007.
EX-100.INS 2 br-20080930.xml XBRL INSTANCE DOCUMENT 3690500000 0 1400000 18700000 75100000 477600000 321500000 175400000 2941600000 425000000 16000000 57500000 488200000 31700000 2921300000 3690500000 2478800000 324000000 60300000 153100000 61000000 1974300000 0 75900000 2066800000 274000000 238000000 769200000 2500000 68000000 -130300000 3600000 800000 10600000 1000000 100000 100000 8400000 45700000 -14400000 -91100000 -93100000 696900000 -9200000 2900000 4100000 816900000 5800000 132400000 -17400000 -246300000 -1900000 500000 8400000 14700000 100000 2600000 253300000 2300000 114400000 5700000 -3500000 391300000 1500000 0.25 0.25 0.07 363000000 460500000 2100000 58200000 22600000 35600000 414200000 -5500000 14000000 474500000 472400000 56700000 142200000 140400000 2833600000 0 1400000 28700000 89900000 469500000 415400000 252600000 2079200000 33700000 25500000 60900000 484300000 30100000 2087800000 2833600000 1525400000 447900000 61900000 157400000 53600000 1157400000 0 82600000 1369900000 248200000 0 745800000 2000000 198300000 86400000 -2200000 2500000 -8000000 9900000 500000 0 0 0 61500000 -400000 -129000000 -78600000 49400000 -5600000 13100000 8300000 47700000 13800000 -110400000 -12100000 119800000 -300000 500000 8400000 6100000 1100000 4900000 -17000000 500000 85000000 5600000 3200000 -39400000 2400000 0.26 0.26 0.06 334200000 435500000 8800000 59100000 23100000 36000000 392100000 8800000 24500000 460000000 451200000 49100000 139800000 139100000 88600000 NOTE 1. BASIS OF PRESENTATION A. Description of Business. Broadridge Financial Solutions, Inc. ("Broadridge" or the "Company") is a leading global provider of investor communication, securities processing, and clearing and outsourcing solutions to the financial services industry. The Company classifies its operations into the following three reportable segments: * Investor Communication Solutions-provides solutions for the processing and distribution of proxy materials to investors, including vote processing, and for the distribution of regulatory reports and corporate action/reorganization event information, as well as tax reporting solutions. Investor Communication Solutions also provides financial information distribution and transaction reporting services to both financial institutions and securities issuers. These services include the processing and distribution of account statements and trade confirmations, traditional and personalized document fulfillment and content management services, and imaging, archival and workflow solutions. * Securities Processing Solutions-provides advanced, computerized real-time transaction processing services that automate the securities transaction cycle. Securities Processing Solutions' products and services include desktop productivity tools and portfolio management, order capture and execution, trade confirmation, settlement and accounting services. * Clearing and Outsourcing Solutions-provides securities clearing services, which include the process of matching, recording, and processing transaction instructions and then exchanging payments between counterparties. The Company's securities clearing solutions also enable clients to finance inventory. The Company's operations outsourcing solutions allow broker-dealers to outsource certain administrative functions relating to clearing and settlement to the Company, from order entry to trade matching and settlement, while maintaining their ability to finance and capitalize their business. B. Basis of Presentation. The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S."). These financial statements present the consolidated position of the Company. These financial statements include the entities in which the Company directly or indirectly has a controlling financial interest and various entities in which the Company has investments recorded under the cost and equity methods of accounting. Intercompany balances and transactions have been eliminated. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. These financial statements should be read in conjunction with the Company's consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2008 (the "2008 Annual Report") filed with the Securities and Exchange Commission (the "SEC"). C. Financial Instruments. Substantially all of the financial instruments of the Company other than Long-term debt are carried at fair values, or at carrying amounts that approximate fair values because of the short maturity of the instruments. The carrying value of the Company's long-term variable-rate term loan facility approximates fair value because these instruments reflect market changes to interest rates. The carrying value of the Company's long-term fixed-rate senior notes represents the face value of the long-term fixed-rate senior notes net of the unamortized discount. The fair value of the Company's long-term fixed-rate senior notes is based on quoted market prices. D. Other Revenues and Interest Expense from Securities Operations. Other revenues includes $6.6 million and $7.2 million for the three months ended September 30, 2008 and 2007, respectively, for software maintenance and license fees related to the Securities Processing Solutions segment. Other revenues also includes interest income from securities operations related to the Clearing and Outsourcing Solutions segment resulting from customer margin financing and securities-borrowed transactions that is recognized on a settlement date basis. Interest income included in Other revenues totaled $7.4 million and $17.3 million for the three months ended September 30, 2008 and 2007, respectively. Interest expense from securities operations includes interest incurred on securities loaned transactions and customer credit balances. NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS In April 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position ("FSP") FAS No. 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP FAS 142-3"). This pronouncement amends FASB Statement No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"), regarding the factors that should be considered in developing the useful lives for intangible assets with renewal or extension provisions. FSP FAS 142-3 requires an entity to consider its own historical experience in renewing or extending similar arrangements, regardless of whether those arrangements have explicit renewal or extension provisions, when determining the useful life of an intangible asset. In the absence of such experience, an entity shall consider the assumptions that market participants would use about renewal or extension, adjusted for entity-specific factors. FSP FAS 142-3 also requires an entity to disclose information regarding the extent to which the expected future cash flows associated with an intangible asset are affected by the entity's intent and/or ability to renew or extend the arrangement. FSP FAS 142-3 will be effective for qualifying intangible assets acquired by the Company on or after July 1, 2009. The application of FSP FAS 142-3 is not expected to have a material impact on the Company's results of operations, cash flows or financial positions; however, it could impact future transactions entered into by the Company. In March 2008, the FASB issued Statement No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS No. 161"). SFAS No. 161 amends and expands the disclosure requirements of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." It requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not expect the adoption of SFAS No. 161 to have a material impact on its results of operations, or financial condition. In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS No. 141R"), which replaces SFAS No. 141. SFAS No. 141R establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling interest; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141R is to be applied prospectively to business combinations for which the acquisition date is on or after an entity's fiscal year that begins after December 15, 2008. The Company is currently evaluating the requirements of SFAS No. 141R. In December 2007, FASB issued SFAS No. 160 "Noncontrolling Interests in Consolidated Financial Statements-an amendment to ARB No. 51" ("SFAS No. 160"). SFAS No. 160 establishes accounting and reporting standards that require the ownership interest in subsidiaries held by parties other than the parent be clearly identified and presented in the consolidated balance sheets within equity, but separate from the parent's equity; the amount of consolidated net income attributable to the parent and the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of earnings; and changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently. This statement is effective for fiscal years beginning on or after December 15, 2008. The Company is currently evaluating the requirements of SFAS No. 160. In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115" ("SFAS No. 159"). This statement provides a fair value option election that allows companies to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and liabilities, with changes in fair value recognized in earnings as they occur. SFAS No. 159 permits the fair value option election on an instrument by instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. SFAS No. 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. SFAS No. 159 became effective for the Company beginning on July 1, 2008. The Company has not applied the elective provisions of SFAS No. 159. In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). This statement clarifies the definition of fair value, establishes a framework for measuring fair value, and expands the disclosures on fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued FSP No. 157-1, "Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements that Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13," ("FSP No. 157-1") and FSP No. 157-2, "Effective Date of FASB Statement No. 157" ("FSP No. 157-2"). FSP No. 157-1 amends FASB Statement No. 157 to exclude FASB SFAS No. 13, "Accounting for Leases," ("SFAS No. 13") and other accounting pronouncements that address fair value measurements for purposes of lease classification and measurement under SFAS No. 13. This FSP is effective upon the initial adoption of SFAS 157. FSP No. 157-2 delays the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years for items within the scope of this FSP. The Company adopted SFAS No. 157 and FSP No. 157-1 effective July 1, 2008 and the adoption did not have a material impact on the Company's consolidated results of operations or financial condition. The Company expects to adopt FSP No. 157-2 on July 1, 2009 and the adoption is not expected to have a material effect on the Company's consolidated results of operations or financial condition. NOTE 3. EARNINGS PER SHARE Basic earnings per share ("EPS") is calculated by dividing the Company's Net earnings by the basic Weighted-average shares outstanding for the periods presented. For the three months ended September 30, 2008 and 2007, the computation of diluted EPS did not include 7.2 million and 11.2 million options to purchase Broadridge common stock, respectively, as the effect of their inclusion would have been anti-dilutive. The following table sets forth the denominators of the basic and diluted EPS computations: Three months ended September 30, 2008 2007 Weighted-average shares outstanding: Basic 140.4 139.1 Common stock equivalents 1.8 0.7 Diluted 142.2 139.8 NOTE 4. OTHER (INCOME) EXPENSES, NET Other (income) expenses, net consisted of the following: Three months ended September 30, 2008 2007 Interest expense on borrowings $ 5.4 $ 9.1 Interest income (0.5 ) (0.3 ) Foreign exchange gain (2.0 ) (0.1 ) Gain from purchase of senior notes (8.4 ) - Other, net - 0.1 Other (income) expenses, net $ (5.5 ) $ 8.8 NOTE 5. ACQUISITIONS Assets acquired and liabilities assumed in business combinations were recorded on the Company's Condensed Consolidated Balance Sheets as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of businesses acquired by the Company were included in the Company's Condensed Consolidated Statements of Earnings since their respective dates of acquisition. The excess of the purchase price over the estimated fair values of the underlying assets acquired and liabilities assumed was allocated to goodwill. During the three months ended September 30, 2008, the Company acquired one business in the Securities Processing Solutions segment for $13.7 million. In addition, the Company agreed to pay contingent consideration of up to an additional $13.0 million, which is payable over the next two years, subject to the acquired business' achievement of specified revenue targets. This acquisition resulted in approximately $10.6 million of goodwill. Intangible assets acquired, which totaled approximately $3.8 million, consist primarily of acquired technology and customer relationships that are being amortized over a five-year life and seven-year life, respectively. This acquisition was not material to the Company's operations, financial position, or cash flows. During the three months ended September 30, 2007, the Company acquired one business in the Securities Processing Solutions segment for $6.1 million. This acquisition resulted in approximately $3.6 million of goodwill. Intangible assets acquired, which totaled approximately $2.5 million, consist of acquired technology that is being amortized over a five-year life. This acquisition was not material to the Company's operations, financial position, or cash flows. NOTE 6. SECURITIES CLEARING RECEIVABLES AND PAYABLES Securities clearing receivables and payables consisted of the following: September 30, June 30, 2008 2008 Receivables: Clearing customers $1,040.7 $ 802.3 Securities borrowed 115.8 113.9 Broker-dealers and other 321.3 221.3 Clearing organizations 175.8 75.4 Securities failed to deliver 413.2 157.0 Total $2,066.8 $ 1,369.9 Payables: Clearing customers $1,422.3 $ 759.8 Securities loaned 15.1 133.1 Broker-dealers and other 160.3 127.6 Securities failed to receive 376.6 136.9 Total $1,974.3 $ 1,157.4 As of September 30, 2008, the Company has received securities collateral, primarily in connection with customer margin loans, securities borrowed transactions, and correspondent accounts with a market value of approximately $2,729.4 million, which it can sell or repledge. Of this amount, approximately $688.5 million had been pledged or sold as of September 30, 2008 in connection with securities loaned, street-side settlement, deposits with clearing organizations and Federal and other regulations. Included in the securities collateral and pledged or sold amounts stated above were approximately $267.7 million of borrowed securities segregated in a special reserve account pursuant to Rule 15c3-3 of the Securities Exchange Act of 1934 ("Rule 15c3-3"). As a registered broker-dealer and member of the New York Stock Exchange ("NYSE") and the Financial Industry Regulatory Authority ("FINRA"), Ridge Clearing & Outsourcing Solutions, Inc. ("Ridge Clearing") is subject to the Uniform Net Capital Rule 15c3-1 of the Securities Exchange Act of 1934 ("Rule 15c3-1"). Ridge Clearing computes its net capital under the alternative method permitted by Rule 15c3-1, which requires Ridge Clearing to maintain minimum net capital equal to the greater of $1.5 million or 2% of aggregate debit items arising from customer transactions. The NYSE and FINRA may require a member firm to reduce its business if its net capital is less than 4% of aggregate debit items, or may prohibit a member firm from expanding its business or paying cash dividends if resulting net capital would be less than 5% of aggregate debit items. At September 30, 2008, Ridge Clearing had net capital of $213.8 million, which was approximately 15% of aggregate debit items and exceeded the minimum requirements by $185.9 million. Ridge Clearing owns 142.8571 Series A common shares of CAPCO Holdings, Inc. ("CAPCO") to gain access to the Securities Investor Protection Corporation ("SIPC") excess bond for customer protection that is furnished by CAPCO. The excess SIPC bond provides for unlimited insurance coverage up to the net equity of each customer's account. Under the terms of the excess SIPC bond, Ridge Clearing is required to maintain net capital of $200.0 million as defined under Rule 15c3-1, for two consecutive quarters within the twelve-month period ending September 30th of each year. NOTE 7. BORROWINGS The Company's outstanding borrowings consisted of the following: Expiration September 30, June 30, Date 2008 2008 Short-term Securities clearing credit facilities Demand $238.0 $ - Long-term Term loan facility March 2012 200.0 200.0 Senior notes June 2017 124.0 247.9 324.0 447.9 $562.0 $ 447.9 In addition, the Company has a five-year revolving credit facility that expires in March 2012 that has an available capacity of $500.0 million. No amounts were outstanding under this credit facility at September 30, 2008. At September 30, 2008 and June 30, 2008, the Company was not aware of any instances of non-compliance with the financial covenants of its borrowings' obligations. The fair value of the fixed-rate senior notes at September 30, 2008 was $106.3 million based on quoted market prices. The carrying value of the variable-rate term loan facility approximates fair value. Amounts are due on the expiration dates listed above. During the three months ended September 30, 2008, the Company completed the purchase of $125.0 million principal amount of its 6.125% senior notes due 2017 (including $1.0 million unamortized bond discount) pursuant to the cash tender offer for such notes. The consideration paid for the senior notes accepted for payment was $116.3 million. The completed purchase resulted in a one-time non-cash gain from early extinguishment of debt of $8.4 million. NOTE 8. STOCK-BASED COMPENSATION The activity related to the Company's incentive equity awards for the three months ended September 30, 2008 consisted of the following: Time-based Performance-based Stock Options Restricted Stock Restricted Stock Number Weighted- Weighted- Weighted- of Average Average Average Options Exercise Number Grant Number Grant (d) Price of Shares Price of Shares Price Balances at June 30, 2008 17,423,889 $ 19.00 1,118,705 $ 18.59 976,329 $ 19.41 Granted - - 14,425 20.36 191,202 (a) 19.70 Exercised (b) (116,559 ) 16.97 - - - - Vesting of restricted shares - - (69,514 ) 19.70 - - Expired/forfeited (56,090 ) 19.95 (5,401 ) 18.88 (2,517 ) 19.70 Balances at September 30, 2008 (c) 17,251,240 $ 19.00 1,058,215 $ 18.54 1,165,014 $ 19.46 (a) Represents performance-based restricted stock units granted upon the approval of the achievement of pre-set financial performance goals as of June 30, 2008. The achievement of the pre-set performance goals allowed associates to earn from 0% to 125% of their stated restricted stock grant. These restricted stock units will vest on March 22, 2009. (b) Stock options exercised during the period of July 1, 2008 through September 30, 2008 had an intrinsic value of $0.4 million. (c) As of September 30, 2008, the Company's outstanding "in the money" stock options using the September 30, 2008 closing share price of $15.39 (approximately 0.8 million shares) had an aggregate intrinsic value of $1.4 million. (d) Options outstanding as of September 30, 2008 have a weighted-average remaining contractual life of 4.6 years and 12.3 million options are exercisable. The Company accounts for stock-based compensation in accordance with SFAS No. 123R, "Share-Based Payment" which requires the measurement of stock-based compensation expense to be recognized in net earnings based on the fair value of the award on the date of grant. Stock-based compensation expense of $5.7 million and $5.6 million was recognized in earnings for the three months ended September 30, 2008 and 2007, respectively, as well as related tax benefits of $1.9 million and $2.2 million, respectively. As of September 30, 2008, the total remaining unrecognized compensation cost related to non-vested stock options and restricted stock awards amounted to $8.8 million and $18.9 million, respectively, which will be amortized over the weighted-average remaining requisite service periods of 3.3 years and 1.3 years, respectively. For stock options issued, the fair value of each stock option was estimated on the date of grant using a binomial option pricing model. The binomial model considers a range of assumptions related to volatility, risk-free interest rate and employee exercise behavior. Expected volatilities utilized in the binomial model are based on a combination of implied market volatilities, historical volatility of the Company's stock price and other factors. Similarly, the dividend yield is based on historical experience and expected future changes. The risk-free rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The binomial model also incorporates exercise and forfeiture assumptions based on an analysis of historical data. The expected life of the stock option grants is derived from the output of the binomial model and represents the period of time that options granted are expected to be outstanding. NOTE 9. INCOME TAXES The Company's effective tax rate for the fiscal quarter ended September 30, 2008 and 2007 was 38.8% and 39.0%, respectively. The decrease in the effective tax rate was attributable to lower enacted tax rates in certain U.S. state and international tax jurisdictions for the three months ended September 30, 2008. NOTE 10. CONTRACTUAL COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS In the normal course of business, the Company is subject to various claims and litigation. While the outcome of any claim or litigation is inherently unpredictable, the Company believes that the ultimate resolution of these matters will not, individually or in the aggregate, result in a material adverse impact on its financial condition, results of operations or cash flows. It is not the Company's business practice to enter into off-balance sheet arrangements. However, the Company is exposed to market risk from changes in foreign currency exchange rates that could impact its financial position, results of operations, and cash flows. The Company manages its exposure to these market risks through its regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The Company uses derivative financial instruments as risk management tools and not for trading purposes. The Company was not a party to any derivative financial instruments at September 30, 2008 or at June 30, 2008. In the normal course of business, the Company also enters into contracts in which it makes representations and warranties that relate to the performance of the Company's products and services. The Company does not expect any material losses related to such representations and warranties, or collateral arrangements. In the normal course of business, the securities activities of the Company's Clearing and Outsourcing Solutions business primarily involve executions, settlement, and financing of various securities transactions for a nationwide retail and institutional, customer and non-customer client base, introduced by its correspondent broker-dealers. These activities may expose the Company to risk in the event customers, other broker-dealers, banks, clearing organizations, or depositories are unable to fulfill contractual obligations. For transactions in which the Company's Clearing and Outsourcing Solutions segment extends credit to customers and non-customers, the Company seeks to control the risk associated with these activities by requiring customers and non-customers to maintain margin collateral in compliance with various regulatory and internal guidelines. The Company monitors required margin levels daily and, pursuant to such guidelines, requests the deposit of additional collateral or reduces securities positions, when necessary. In addition, the Company's correspondent broker-dealers may be required to maintain deposits relating to its securities clearance activities. The Company's Clearing and Outsourcing Solutions segment records customers' securities transactions on a settlement date basis, which is generally three business days after trade date. The Company is therefore exposed to off-balance sheet risk of loss on unsettled transactions in the event customers and other counterparties are unable to fulfill contractual obligations. The Company may be exposed to a risk of loss not reflected in the Condensed Consolidated Balance Sheets for securities sold, not yet purchased, should the value of such securities rise. In addition, the securities lending activities of the Company's Clearing and Outsourcing Solutions segment requires the Company to pledge securities as collateral. In the event the counterparty is unable to meet its contractual obligation, the Company may be exposed to off-balance sheet risk of acquiring securities at prevailing market prices. The Company monitors the credit standing of counterparties with whom it conducts business. Risk is further controlled by monitoring the market value of securities pledged on a daily basis and by requiring adjustments of collateral level in the event of excess market exposure or instituting securities buy-in procedures when required. The Company also provides guarantees to securities clearinghouses and exchanges. Under the standard membership agreement, members are required to guarantee the performance of the other members. Under the agreements, if another member becomes unable to satisfy its obligations to the clearinghouse, the other members would be required to meet any shortfalls. The Company's liability under these arrangements is not quantifiable and could exceed the cash and securities it has posted as collateral. However, the potential for the Company to be required to make payments under these arrangements is remote. Accordingly, no contingent liability is carried on the Condensed Consolidated Balance Sheets for these transactions. NOTE 11. COMPREHENSIVE INCOME Comprehensive income consisted of the following: Three months ended September 30, 2008 2007 Net earnings $ 35.6 $ 36.0 Foreign currency translation adjustments (10.0 ) 1.6 Comprehensive income $ 25.6 $ 37.6 NOTE 12. INTERIM FINANCIAL DATA BY SEGMENT Investor Communication Solutions, Securities Processing Solutions and Clearing and Outsourcing Solutions are the Company's reportable segments. The primary components of "Other" are the elimination of intersegment revenues and profits as well as certain unallocated expenses. Foreign exchange is a reconciling item between the actual foreign exchange rates and fiscal 2009 budgeted foreign exchange rates. Certain corporate expenses, as well as certain centrally managed expenses, are allocated based upon budgeted amounts. Because the Company compensates the management of its various businesses on, among other factors, segment earnings, the Company may elect to record certain segment-related expense items of an unusual or non-recurring nature in Other rather than reflect such items in segment profit. Segment results: Net revenues Three months ended September 30, 2008 2007 Investor Communication Solutions $ 313.8 $ 299.1 Securities Processing Solutions 133.2 124.4 Clearing and Outsourcing Solutions 23.2 24.7 Other 0.2 2.4 Foreign exchange 2.0 0.6 Total $ 472.4 $ 451.2 Earnings before Income Taxes Three months ended September 30, 2008 2007 Investor Communication Solutions $ 23.3 $ 29.8 Securities Processing Solutions 37.4 38.8 Clearing and Outsourcing Solutions (3.1 ) (2.0 ) Other (0.7 ) (7.8 ) Foreign exchange 1.3 0.3 Total $ 58.2 $ 59.1 0001383312 2008-07-01 2008-09-30 0001383312 2007-06-30 0001383312 2007-07-01 2007-09-30 0001383312 2007-07-01 2007-09-30 0001383312 2007-09-30 0001383312 2008-06-30 0001383312 2008-06-30 0001383312 2008-07-01 2008-09-30 0001383312 2008-07-01 2008-09-30 0001383312 2008-09-30 0001383312 2008-09-30 iso4217:USD iso4217:USD shares shares EX-100.SCH 3 br-20080930.xsd XBRL TAXONOMY EXTENSION SCHEMA Notes to Financial Statements link:calculationLink link:presentationLink EX-100.CAL 4 br-20080930_cal.xml XBRL TAXONOMY EXTENSION CALCULATION LINKBASE EX-100.LAB 5 br-20080930_lab.xml XBRL TAXONOMY EXTENSION LABEL LINKBASE EX-100.PRE 6 br-20080930_pre.xml XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE -----END PRIVACY-ENHANCED MESSAGE-----