Quarterly report pursuant to Section 13 or 15(d)

Funds Held for Clients and Corporate Investments

v3.5.0.2
Funds Held for Clients and Corporate Investments
3 Months Ended
Aug. 31, 2016
Funds Held for Clients and Corporate Investments [Abstract]  
Funds Held for Clients and Corporate Investments



Note D: Funds Held for Clients and Corporate Investments



Funds held for clients and corporate investments are as follows:







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

August 31, 2016



 

 

 

 

Gross

 

Gross

 

 

 



 

Amortized

 

unrealized

 

unrealized

 

Fair

In millions

 

cost

 

gains

 

losses

 

value

Type of issue:

 

 

 

 

 

 

 

 

 

 

 

 

Funds held for clients money market securities and other
   cash equivalents

 

$

245.2 

 

$

 —

 

$

 —

 

$

245.2 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

142.9 

 

 

4.7 

 

 

 —

 

 

147.6 

General obligation municipal bonds

 

 

1,559.0 

 

 

35.6 

 

 

(0.1)

 

 

1,594.5 

Pre-refunded municipal bonds(1)

 

 

58.1 

 

 

1.5 

 

 

 —

 

 

59.6 

Revenue municipal bonds

 

 

981.1 

 

 

21.1 

 

 

(0.1)

 

 

1,002.1 

U.S. government agency securities

 

 

219.1 

 

 

0.6 

 

 

(0.3)

 

 

219.4 

Variable rate demand notes

 

 

972.3 

 

 

 —

 

 

 —

 

 

972.3 

Total available-for-sale securities

 

 

3,932.5 

 

 

63.5 

 

 

(0.5)

 

 

3,995.5 

Other

 

 

15.6 

 

 

1.0 

 

 

 —

 

 

16.6 

Total funds held for clients and corporate investments

 

$

4,193.3 

 

$

64.5 

 

$

(0.5)

 

$

4,257.3 

  





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

May 31, 2016



 

 

 

 

Gross

 

Gross

 

 

 



 

Amortized

 

unrealized

 

unrealized

 

Fair

In millions

 

cost

 

gains

 

losses

 

value

Type of issue:

 

 

 

 

 

 

 

 

 

 

 

 

Funds held for clients money market securities and other
   cash equivalents

 

$

502.4 

 

$

 —

 

$

 —

 

$

502.4 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

128.4 

 

 

2.9 

 

 

(0.1)

 

 

131.2 

General obligation municipal bonds

 

 

1,594.1 

 

 

27.6 

 

 

(0.1)

 

 

1,621.6 

Pre-refunded municipal bonds(1)

 

 

60.2 

 

 

1.4 

 

 

 —

 

 

61.6 

Revenue municipal bonds

 

 

916.2 

 

 

15.8 

 

 

(0.2)

 

 

931.8 

U.S. government agency securities

 

 

160.8 

 

 

0.6 

 

 

(0.3)

 

 

161.1 

Variable rate demand notes

 

 

1,234.6 

 

 

 —

 

 

 —

 

 

1,234.6 

Total available-for-sale securities

 

 

4,094.3 

 

 

48.3 

 

 

(0.7)

 

 

4,141.9 

Other

 

 

14.2 

 

 

0.8 

 

 

(0.1)

 

 

14.9 

Total funds held for clients and corporate investments

 

$

4,610.9 

 

$

49.1 

 

$

(0.8)

 

$

4,659.2 



(1)

Pre-refunded municipal bonds are secured by an escrow fund of U.S. government obligations.



Included in money market securities and other cash equivalents as of August 31, 2016 are bank demand deposit accounts, short-term municipal bonds, and money market funds. As of May 31, 2016, money market securities and other cash equivalents included bank demand deposit accounts and money market funds.



Classification of investments on the Consolidated Balance Sheets is as follows:







 

 

 

 

 

 



 

 

 

 

 

 



 

August 31,

 

May 31,

In millions

 

2016

 

2016

Funds held for clients

 

$

3,443.3 

 

$

3,997.5 

Corporate investments

 

 

367.7 

 

 

220.6 

Long-term corporate investments

 

 

446.3 

 

 

441.1 

Total funds held for clients and corporate investments

 

$

4,257.3 

 

$

4,659.2 



The Company’s available-for-sale securities reflected a net unrealized gain of $63.0 million as of August 31, 2016 compared with a net unrealized gain of $47.6 million as of May 31, 2016. Included in the net unrealized gain as of August 31, 2016 and May 31, 2016 were 49 and 63 available-for-sale securities in an unrealized loss position, respectively. The available-for-sale securities in an unrealized loss position were as follows:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

August 31, 2016



 

Securities in an unrealized 
loss position for less than 
twelve months

 

Securities in an unrealized 
loss position for more than 
twelve months

 

Total



 

Gross

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 



 

unrealized

 

Fair

 

unrealized

 

Fair

 

unrealized

 

Fair

In millions

 

losses

 

value

 

losses

 

value

 

losses

 

value

Type of issue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

 —

 

$

8.5 

 

$

 

 

$

 —

 

$

 —

 

$

8.5 

General obligation municipal bonds

 

 

(0.1)

 

 

39.9 

 

 

 —

 

 

2.8 

 

 

(0.1)

 

 

42.7 

Revenue municipal bonds

 

 

(0.1)

 

 

22.6 

 

 

 —

 

 

1.1 

 

 

(0.1)

 

 

23.7 

U.S. government agency securities

 

 

(0.3)

 

 

89.3 

 

 

 —

 

 

 —

 

 

(0.3)

 

 

89.3 

Total

 

$

(0.5)

 

$

160.3 

 

$

 —

 

$

3.9 

 

$

(0.5)

 

$

164.2 

  





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

May 31, 2016



 

Securities in an unrealized 
loss position for less than 
twelve months

 

Securities in an unrealized 
loss position for more than 
twelve months

 

Total



 

Gross

 

 

 

 

Gross

 

 

 

 

Gross

 

 

 



 

unrealized

 

Fair

 

unrealized

 

Fair

 

unrealized

 

Fair

In millions

 

losses

 

value

 

losses

 

value

 

losses

 

value

Type of issue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

(0.1)

 

$

14.7 

 

$

 —

 

$

 —

 

$

(0.1)

 

$

14.7 

General obligation municipal bonds

 

 

(0.1)

 

 

48.9 

 

 

 —

 

 

2.8 

 

 

(0.1)

 

 

51.7 

Pre-refunded municipal bonds

 

 

 —

 

 

5.7 

 

 

 —

 

 

 —

 

 

 —

 

 

5.7 

Revenue municipal bonds

 

 

 —

 

 

20.7 

 

 

(0.2)

 

 

11.7 

 

 

(0.2)

 

 

32.4 

U.S. government agency securities

 

 

(0.3)

 

 

51.1 

 

 

 —

 

 

 —

 

 

(0.3)

 

 

51.1 

Total

 

$

(0.5)

 

$

141.1 

 

$

(0.2)

 

$

14.5 

 

$

(0.7)

 

$

155.6 



The Company regularly reviews its investment portfolios to determine if any investment is other-than-temporarily impaired due to changes in credit risk or other potential valuation concerns. The Company believes that the investments held as of August 31, 2016 that had unrealized losses of $0.5 million were not other-than-temporarily impaired. The Company believes that it is probable that the principal and interest will be collected in accordance with contractual terms, and that the unrealized losses on these securities were due to changes in interest rates and were not due to increased credit risk or other valuation concerns. A significant portion of the securities in an unrealized loss position as of August 31, 2016 and May 31, 2016 held an AA rating or better. The Company does not intend to sell these investments until the recovery of their amortized cost basis or maturity and further believes that it is not more-likely-than-not that it will be required to sell these investments prior to that time. The Company’s assessment that an investment is not other-than-temporarily impaired could change in the future due to new developments or changes in the Company’s strategies or assumptions related to any particular investment.



Realized gains and losses on the sales of securities are determined by specific identification of the amortized cost basis of each security. On the Consolidated Statements of Income and Comprehensive Income, realized gains and losses from funds held for clients are included in interest on funds held for clients and realized gains and losses from corporate investments are included in investment income, net. Realized gains were insignificant for each of the three months ended August 31, 2016 and 2015. There were no realized losses recognized in any of the respective periods.



The amortized cost and fair value of available-for-sale securities that had stated maturities as of August 31, 2016 are shown below by contractual maturity. Expected maturities can differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties.







 

 

 

 

 

 



 

 

 

 

 

 



 

August 31, 2016



 

Amortized

 

Fair

In millions

 

cost

 

value

Maturity date:

 

 

 

 

 

 

Due in one year or less

 

$

371.1 

 

$

372.3 

Due after one year through three years

 

 

743.4 

 

 

753.0 

Due after three years through five years

 

 

889.1 

 

 

915.3 

Due after five years

 

 

1,928.9 

 

 

1,954.9 

Total

 

$

3,932.5 

 

$

3,995.5 



Variable rate demand notes are primarily categorized as due after five years in the table above as the contractual maturities on these securities are typically 20 to 30 years. Although these securities are issued as long-term securities, they are priced and traded as short-term instruments because of the liquidity provided through the tender feature.