What changed in this filing

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Item 1. Financial Statements

2022-02-01 compared with 2021-11-03 · 193 added, 92 removed, 662 unchanged (30% of the section changed)

4 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2021 2020 2021 2020

Revenues (Note 3) $ 1,259.6 $ 1,054.9 $ 2,452.5 $ 2,072.3

5 unchanged sentences

Interest expense, net (Note 5) ( 21.4 ) ( 11.1 ) ( 44.0 ) ( 25.6 )

Other non-operating income (expenses), net ( 2.4 ) 9.5

Other non-operating income, net 4.4 1.0 2.0 10.5

Earnings before income taxes 51.9 69.4 130.1 143.0

12 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2021 2020 2021 2020

Net earnings $ 47.2 $ 56.3 $ 114.4 $ 122.1

1 unchanged sentence

Foreign currency translation adjustments ( 31.8 ) 5.2 ( 102.6 ) 42.1

Pension and post-retirement liability adjustment, net of taxes of $( 0.2 ) and $( 0.2 ) for the three months ended September 30, 2021 and 2020, respectively

Cash flow hedge amortization, net of taxes of $( 0.1 ) and $( 0.0 ) for the three months ended September 30, 2021 and 2020, respectively

Pension and post-retirement liability adjustment, net of taxes of $( 0.2 ) and $( 0.2 ) for the three months ended December 31, 2021 and 2020, respectively;

and $( 0.3 ) and $( 0.4 ) for the six months ended December 31, 2021 and 2020, respectively

0.5 0.6 1.0 1.2

Cash flow hedge amortization, net of taxes of $( 0.1 ) and $( 0.0 ) for the three months ended December 31, 2021 and 2020, respectively;

and $( 0.1 ) and $( 0.0 ) for the six months ended December 31, 2021 and 2020, respectively

Total other comprehensive income (loss), net ( 31.0 ) 5.7 ( 101.1 ) 43.3

5 unchanged sentences

(In millions, except per share amounts)

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

Current assets:

41 unchanged sentences

(In millions)

Three Months Ended

September 30,

Six Months Ended

Cash Flows From Operating Activities

Net earnings $ 114.4 $ 122.1

Adjustments to reconcile net earnings to net cash flows used in operating activities:

Adjustments to reconcile net earnings to net cash flows (used in) provided by operating activities:

Depreciation and amortization 41.1 31.3

8 unchanged sentences

Decrease in Accounts receivable, net 49.2 100.3

Decrease (increase) in Other current assets 1.6 ( 22.2 )

Increase in Other current assets ( 32.5 ) ( 35.7 )

Decrease in Payables and accrued expenses ( 236.5 ) ( 140.2 )

Decrease in Contract liabilities ( 5.8 ) ( 1.6 )

Increase in Contract liabilities 28.3 5.9

Non-current assets and liabilities:

1 unchanged sentence

Increase in Other non-current liabilities 24.0 48.8

Net cash flows used in operating activities ( 135.4 ) ( 44.2 )

Net cash flows (used in) provided by operating activities ( 94.6 ) 83.3

Cash Flows From Investing Activities

28 unchanged sentences

(In millions, except per share amounts)

Three Months Ended September 30, 2021

Three Months Ended December 31, 2021

Capital Retained

4 unchanged sentences

Shares Amount

Balances, September 30, 2021 154.5 $ 1.6 $ 1,263.6 $ 2,576.6 $ ( 2,027.0 ) $ ( 60.9 ) $ 1,753.8

Comprehensive income (loss) — — — 47.2 — ( 31.0 ) 16.2

Stock option exercises — — 31.9 — — — 31.9

Stock-based compensation — — 22.5 — — — 22.5

Treasury stock acquired (less than 0.1 shares)

— — — — ( 1.7 ) — ( 1.7 )

Treasury stock reissued ( 0.4 shares)

— — ( 10.3 ) — 10.3 — —

Common stock dividends ($ 0.64 per share)

— — — ( 74.7 ) — — ( 74.7 )

Balances, December 31, 2021 154.5 $ 1.6 $ 1,307.7 $ 2,549.1 $ ( 2,018.4 ) $ ( 91.9 ) $ 1,748.1

Six Months Ended December 31, 2021

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Stockholders’

Shares Amount

Balances, June 30, 2021 154.5 $ 1.6 $ 1,245.5 $ 2,583.8 $ ( 2,030.9 ) $ 9.2 $ 1,809.1

2 unchanged sentences

Stock-based compensation — — 35.8 — — — 35.8

Treasury stock acquired ( 0.0 shares)

Treasury stock acquired (less than 0.1 shares)

— — — — ( 1.7 ) — ( 1.7 )

3 unchanged sentences

— — — ( 149.1 ) — — ( 149.1 )

Balances, December 31, 2021 154.5 $ 1.6 $ 1,307.7 $ 2,549.1 $ ( 2,018.4 ) $ ( 91.9 ) $ 1,748.1

Amounts may not sum due to rounding.

See Notes to Condensed Consolidated Financial Statements.

Three Months Ended December 31, 2020

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Stockholders’

Shares Amount

Balances, September 30, 2020 154.5 $ 1.6 $ 1,198.5 $ 2,302.1 $ ( 2,025.5 ) $ ( 62.9 ) $ 1,413.8

Three Months Ended September 30, 2020

Comprehensive income (loss) — — — 56.3 — 5.7 62.0

Stock option exercises — — 6.5 — — — 6.5

Stock-based compensation — — 18.2 — — — 18.2

Treasury stock acquired ( 0.0 shares)

— — — — — — —

Treasury stock reissued ( 0.2 shares)

— — ( 3.6 ) — 3.6 — —

Common stock dividends ($ 0.575 per share)

— — — ( 66.5 ) — — ( 66.5 )

Balances, December 31, 2020 154.5 $ 1.6 $ 1,219.6 $ 2,291.8 $ ( 2,021.8 ) $ ( 57.1 ) $ 1,434.0

Six Months Ended December 31, 2020

Capital Retained

14 unchanged sentences

— — — ( 132.9 ) — — ( 132.9 )

Balances, September 30, 2020 154.5 $ 1.6 $ 1,198.5 $ 2,302.1 $ ( 2,025.5 ) $ ( 62.9 ) $ 1,413.8

Balances, December 31, 2020 154.5 $ 1.6 $ 1,219.6 $ 2,291.8 $ ( 2,021.8 ) $ ( 57.1 ) $ 1,434.0

Amounts may not sum due to rounding.

44 unchanged sentences

These Condensed Consolidated 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, 2021 filed on August 12, 2021 with the SEC.

These Condensed Consolidated Financial Statements include all normal and recurring adjustments necessary for a fair presentation in accordance with GAAP of the Company’s financial position at September 30, 2021 and June 30, 2021, the results of its operations for the three months ended September 30, 2021 and 2020, its cash flows for the three months ended September 30, 2021 and 2020, and its changes in stockholders’ equity for the three months ended September 30, 2021 and 2020.

These Condensed Consolidated Financial Statements include all normal and recurring adjustments necessary for a fair presentation in accordance with GAAP of the Company’s financial position at December 31, 2021 and June 30, 2021, the results of its operations for the three and six months ended December 31, 2021 and 2020, its cash flows for the six months ended December 31, 2021 and 2020, and its changes in stockholders’ equity for the three and six months ended December 31, 2021 and 2020.

Certain prior period amounts have been reclassified to conform to the current year presentation where applicable.

35 unchanged sentences

2016-13 did not have a material impact on the Company's Condensed Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

In October 2021, the FASB issued ASU No.

2021-08, “Business Combinations:

Accounting for Contract Assets and Contract liabilities from Contracts with Customers” (“ASU No.

2021-08”), which requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers.

2021-08 is effective for the Company in the first quarter of fiscal year 2024.

Early adoption of the amendments is permitted, including adoption in an interim period.

The Company is currently assessing the impact that the adoption of ASU No.

2021-08 will have on its Condensed Consolidated Financial Statements.

REVENUE RECOGNITION

10 unchanged sentences

As such, Issuers and mutual funds are viewed as the customer of the Company’s services.

As a result, revenues for distribution services as well as proxy materials fulfillment services are recorded in Revenue on a gross basis with corresponding costs including amounts remitted to the broker-dealers and banks (referred to as “Nominees”) recorded in Cost of revenues.

recorded in Cost of revenues.

Fees for the Company’s investor communications services arrangements are typically billed and paid on a monthly basis following the delivery of the services.

36 unchanged sentences

Distribution revenues primarily include revenues related to the physical mailing and distribution of proxy materials, interim communications, transaction reporting, customer communications and fulfillment services, as well as Matrix administrative services.

In the second quarter of fiscal year 2021, the Company changed its presentation of disaggregated revenue by product line disclosures to reflect internal realignment of the Company’s revenue reporting, specifically as it relates to recurring fee revenues.

Presentation of disaggregated revenue by product line disclosures in prior periods have been changed to conform to the current period presentation.

Three Months Ended

September 30,

December 31, Six Months Ended

2021 2020 2021 2020

(in millions)

24 unchanged sentences

The following table provides information about contract assets and liabilities:

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

(in millions)

4 unchanged sentences

Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period.

During the three months ended September 30, 2021, contract liabilities decreased due to the timing of client payments in relation to the timing of revenue recognized.

The Co mpany recognized $ 117.0 million of revenue dur ing the three months ended September 30, 2021 that was included in the contract liability balance as of June 30, 2021.

During the six months ended December 31, 2021, contract liabilities increased due to the timing of client invoices in relation to the timing of revenue recognized.

The Co mpany recognized $ 174.4 million of revenue dur ing the six months ended December 31, 2021 that was included in the contract liability balance as of June 30, 2021.

WEIGHTED-AVERAGE SHARES OUTSTANDING

1 unchanged sentence

The Company calculates diluted EPS using the treasury stock method, which reflects the potential dilution that could occur if outstanding stock options at the presented date are exercised and restricted stock unit awards have vested.

The computation of diluted EPS excluded 0.3 million options to purchase Broadridge common stock for the three months ended September 30, 2021, and less than 0.1 million options to purchase Broadridge common stock for the three months ended September 30, 2020, as the effect of their inclusion would have been anti-dilutive.

The computation of diluted EPS excluded less than 0.1 million options to purchase Broadridge common stock for the three months ended December 31, 2021, and less than 0.1 million options to purchase Broadridge common stock for the six months ended December 31, 2021, as the effect of their inclusion would have been anti-dilutive.

The computation of diluted EPS excluded less than 0.1 million options to purchase Broadridge common stock for the three months ended December 31, 2020, and less than 0.1 million options to purchase Broadridge common stock for the six months ended December 31, 2020, 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,

December 31, Six Months Ended

2021 2020 2021 2020

(in millions)

6 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2021 2020 2021 2020

(in millions)

5 unchanged sentences

The excess of the purchase price over the estimated fair values of the underlying assets acquired and liabilities assumed is allocated to Goodwill.

During the three months ended September 30, 2021, there were no material acquisitions.

During the six months ended December 31, 2021, there were no material acquisitions.

The Company is providing unaudited pro forma supplemental information for the acquisition of Itiviti as the acquisition was material to the Company’s operating results.

61 unchanged sentences

The measurement is based on significant inputs that are not observable in the market, therefore, the Company classifies this liability as Level 3 in the table below.

The following tables set forth the Company’s financial assets and liabilities at September 30, 2021 and June 30, 2021, respectively, that are recorded at fair value, segregated by level within the fair value hierarchy:

September 30, 2021

The following tables set forth the Company’s financial assets and liabilities at December 31, 2021 and June 30, 2021, respectively, that are recorded at fair value, segregated by level within the fair value hierarchy:

December 31, 2021

Level 1 Level 2 Level 3 Total

4 unchanged sentences

Securities 0.7 — — 0.7

Derivative asset — — — —

Other non-current assets:

Securities 132.9 — — 132.9

Total assets as of September 30, 2021 $ 128.2 $ — $ — $ 128.2

Total assets as of December 31, 2021

$ 133.6 $ — $ — $ 133.6

Contingent consideration obligations — — 18.8 18.8

Derivative liability — — — —

Total liabilities as of September 30, 2021 $ — $ — $ 19.0 $ 19.0

Total liabilities as of December 31, 2021

$ — $ — $ 18.8 $ 18.8

June 30, 2021

10 unchanged sentences

Total liabilities as of June 30, 2021 $ — $ — $ 23.2 $ 23.2

(a) Money market funds include money market deposit account balances of zero and less than $ 0.1 million as of September 30, 2021 and June 30, 2021, respectively.

In addition, the Company has non-marketable securities with a carrying amount of $ 37.8 million and $ 37.5 million as of September 30, 2021 and June 30, 2021, respectively, that are classified as Level 2 financial assets and included as part of Other non-current assets on the Condensed Consolidated Balance Sheets.

The following table sets forth an analysis of changes during the three months ended September 30, 2021 and 2020, respectively, in Level 3 financial liabilities of the Company:

Three Months Ended September 30,

(a) Money market funds include money market deposit account balances of less than $ 0.1 million as of December 31, 2021 and June 30, 2021, respectively.

In addition, the Company has non-marketable securities with a carrying amount of $ 46.0 million and $ 37.5 million as of December 31, 2021 and June 30, 2021, respectively, that are classified as Level 2 financial assets and included as part of Other non-current assets on the Condensed Consolidated Balance Sheets.

The following table sets forth an analysis of changes during the three and six months ended December 31, 2021 and 2020, respectively, in Level 3 financial liabilities of the Company:

Three Months Ended December 31, Six Months Ended December 31,

2021 2020 2021 2020

(in millions)

Beginning balance $ 19.0 $ 23.7 $ 23.2 $ 33.1

Net increase (decrease) in contingent consideration liability 1.1 —

Net increase in contingent consideration liability — — 1.1 —

Foreign currency impact on contingent consideration liability ( 0.2 ) — ( 0.6 ) 1.4

5 unchanged sentences

Other non-current assets consisted of the following:

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

(in millions)

10 unchanged sentences

(c) Represents deferred data center costs associated with the Company’s information technology services agreements, please refer to Note 14, “Contractual Commitments, Contingencies and Off-Balance Sheet Arrangements” for a further discussion.

The total amount of deferred client conversion and start-up costs and deferred sales commission costs amortized in Operating expenses during the three months ended September 30, 2021 and 2020, were $ 23.3 million and $ 18.7 million, respectively.

The total amount of deferred client conversion and start-up costs and deferred sales commission costs amortized in Operating expenses during the three months ended December 31, 2021 and 2020, were $ 27.3 million and $ 21.0 million, respectively.

The total amount of deferred client conversion and start-up costs and deferred sales commission costs amortized in Operating expenses during the six months ended December 31, 2021 and 2020, were $ 50.6 million and $ 39.7 million, respectively.

PAYABLES AND ACCRUED EXPENSES

Payables and accrued expenses consisted of the following:

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

(in millions)

10 unchanged sentences

Outstanding borrowings and available capacity under the Company’s borrowing arrangements were as follows:

Date Principal amount outstanding at September 30, 2021 Carrying value at September 30, 2021 Carrying value at June 30, 2021 Unused

Capacity Fair Value at September 30, 2021

Date Principal amount outstanding at December 31, 2021 Carrying value at December 31, 2021 Carrying value at June 30, 2021 Unused

Capacity Fair Value at December 31, 2021

(in millions)

Long-term debt, excluding current portion

Long-term debt

Fiscal 2021 Revolving Credit Facility:

12 unchanged sentences

Fiscal 2021 Revolving Credit Facility:

In April 2021, the Company entered into an amended and restated $ 1.5 billion five-year revolving credit facility (the “Fiscal 2021 Revolving Credit Facility”), which replaced the $ 1.5 billion five-year revolving credit facility entered into during March 2019 (the “Fiscal 2019 Revolving Credit Facility”) (together the “Revolving Credit Facilities”).

In April 2021, the Company entered into an amended and restated $ 1.5 billion five-year revolving credit facility, as further amended on December 23, 2021, (the “Fiscal 2021 Revolving Credit Facility”), which replaced the $ 1.5 billion five-year revolving credit facility entered into during March 2019 (the “Fiscal 2019 Revolving Credit Facility”) (together the “Revolving Credit Facilities”).

The Fiscal 2021 Revolving Credit Facility is comprised of a $ 1.1 billion U.S.

dollar tranche and a $ 400.0 million multicurrency tranche.

The weighted-average interest rate on the Revolving Credit Facilities was 1.19 % for the three months ended September 30, 2021 and 1.22 % for the three months ended September 30, 2020.

The fair value of the variable-rate Fiscal 2021 Revolving Credit Facility borrowings at September 30, 2021 approximates carrying value and has been classified as a Level 2 financial liability (as defined in Note 7, “Fair Value of Financial Instruments”).

The weighted-average interest rate on the Revolving Credit Facilities was 1.16 % and 1.17 % for the three and six months ended December 31, 2021, respectively, and 1.21 % and 1.22 % for the three and six months ended December 31, 2020, respectively.

The fair value of the variable-rate Fiscal 2021 Revolving Credit Facility borrowings at December 31, 2021 approximates carrying value and has been classified as a Level 2 financial liability (as defined in Note 7, “Fair Value of Financial Instruments”).

Under the Fiscal 2021 Revolving Credit Facility, revolving loans denominated in U.S.

3 unchanged sentences

The Fiscal 2021 Revolving Credit Facility is subject to certain covenants, including a leverage ratio.

At September 30, 2021, the Company is in compliance with all covenants of the Fiscal 2021 Revolving Credit Facility.

At December 31, 2021, the Company is in compliance with all covenants of the Fiscal 2021 Revolving Credit Facility.

Fiscal 2021 Term Loans:

In March 2021, the Company entered into a term credit agreement (“Term Credit Agreement”) providing for term loan commitments in an aggregate principal amount of $ 2.55 billion, comprised of a $ 1.0 billion tranche (“Tranche 1”) and a $ 1.55 billion tranche (“Tranche 2,” together with Tranche 1, the “Fiscal 2021 Term Loans”).

In March 2021, the Company entered into a term credit agreement, as amended on December 23, 2021, (“Term Credit Agreement”) providing for term loan commitments in an aggregate principal amount of $ 2.55 billion, comprised of a $ 1.0 billion tranche (“Tranche 1”) and a $ 1.55 billion tranche (“Tranche 2,” together with Tranche 1, the “Fiscal 2021 Term Loans”).

The Company borrowed the Fiscal 2021 Term Loans in May 2021 in order to finance the Itiviti acquisition.

7 unchanged sentences

The Term Credit Agreement is subject to certain covenants, including a leverage ratio.

At September 30, 2021, the Company is in compliance with all covenants of the Fiscal 2021 Term Loans.

At December 31, 2021, the Company is in compliance with all covenants of the Fiscal 2021 Term Loans.

Fiscal 2016 Senior Notes:

4 unchanged sentences

The indenture governing the Fiscal 2016 Senior Notes contains certain covenants including covenants restricting the Company’s ability to create or incur liens securing indebtedness for borrowed money, to enter into certain sale-leaseback transactions, certain subsidiary indebtedness, and to engage in mergers or consolidations and transfer or lease all or substantially all of our assets.

At September 30, 2021, the Company is in compliance with the covenants of the indenture governing the Fiscal 2016 Senior Notes.

At December 31, 2021, the Company is in compliance with the covenants of the indenture governing the Fiscal 2016 Senior Notes.

The indenture also contains covenants regarding the purchase of the Fiscal 2016 Senior Notes upon a change of control triggering event.

The Company may redeem the Fiscal 2016 Senior Notes in whole or in part at any time before their maturity.

The fair value of the fixed-rate Fiscal 2016 Senior Notes at September 30, 2021 and June 30, 2021 was $ 545.9 million and $ 549.0 million, respectively, based on quoted market prices and has been classified as a Level 1 financial liability (as defined in Note 7, “Fair Value of Financial Instruments”).

The fair value of the fixed-rate Fiscal 2016 Senior Notes at December 31, 2021 and June 30, 2021 was $ 534.2 million and $ 549.0 million, respectively, based on quoted market prices and has been classified as a Level 1 financial liability (as defined in Note 7, “Fair Value of Financial Instruments”).

Fiscal 2020 Senior Notes:

4 unchanged sentences

The indenture governing the Fiscal 2020 Senior Notes contains certain covenants including covenants restricting the Company’s ability to create or incur liens securing indebtedness for borrowed money, to enter into certain sale-leaseback transactions, certain subsidiary indebtedness, and to engage in mergers or consolidations and transfer or lease all or substantially all of our assets.

At September 30, 2021, the Company is in compliance with the covenants of the indenture governing the Fiscal 2020 Senior Notes.

At December 31, 2021, the Company is in compliance with the covenants of the indenture governing the Fiscal 2020 Senior Notes.

The indenture also contains covenants regarding the purchase of the Fiscal 2020 Senior Notes upon a change of control triggering event.

The Company may redeem the Fiscal 2020 Senior Notes in whole or in part at any time before their maturity.

The fair value of the fixed-rate Fiscal 2020 Senior Notes at September 30, 2021 and June 30, 2021 was $ 787.7 million and $ 791.3 million, respectively, based on quoted market prices and has been classified as a Level 1 financial liability (as defined in Note 7, “Fair Value of Financial Instruments”).

The fair value of the fixed-rate Fiscal 2020 Senior Notes at December 31, 2021 and June 30, 2021 was $ 775.6 million and $ 791.3 million, respectively, based on quoted market prices and has been classified as a Level 1 financial liability (as defined in Note 7, “Fair Value of Financial Instruments”).

Fiscal 2021 Senior Notes:

4 unchanged sentences

The indenture governing the Fiscal 2021 Senior Notes contains certain covenants including covenants restricting the Company’s ability to create or incur liens securing indebtedness for borrowed money, to enter into certain sale-leaseback transactions, certain subsidiary indebtedness, and to engage in mergers or consolidations and transfer or lease all or substantially all of our assets.

At September 30, 2021, the Company is in compliance with the covenants of the indenture governing the Fiscal 2021 Senior Notes.

At December 31, 2021, the Company is in compliance with the covenants of the indenture governing the Fiscal 2021 Senior Notes.

The indenture also contains covenants regarding the purchase of the Fiscal 2021 Senior Notes upon a change of control triggering event.

The Company may redeem the Fiscal 2021 Senior Notes in whole or in part at any time before their maturity.

The fair value of the fixed-rate Fiscal 2021 Senior Notes at September 30, 2021 and June 30, 2021 was $ 1.02 billion and $ 1.02 billion, respectively, based on quoted market prices and has been classified as a Level 1 financial liability (as defined in Note 7, “Fair Value of Financial Instruments”).

The fair value of the fixed-rate Fiscal 2021 Senior Notes at December 31, 2021 and June 30, 2021 was $ 1.01 billion and $ 1.02 billion, respectively, based on quoted market prices and has been classified as a Level 1 financial liability (as defined in Note 7, “Fair Value of Financial Instruments”).

The Fiscal 2021 Revolving Credit Facility, Fiscal 2021 Term Loans, Fiscal 2016 Senior Notes, Fiscal 2020 Senior Notes and Fiscal 2021 Senior Notes are senior unsecured obligations of the Company and are ranked equally in right of payment.

In addition, certain of the Company’s subsidiaries established unsecured, uncommitted lines of credit with banks.

As of September 30, 2021 and June 30, 2021, respectively, there were no outstanding borrowings under these lines of credit.

As of December 31, 2021 and June 30, 2021, respectively, there were no outstanding borrowings under these lines of credit.

OTHER NON-CURRENT LIABILITIES

Other non-current liabilities consisted of the following:

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

(in millions)

15 unchanged sentences

The Broadridge SORP and SERP are nonqualified plans for federal tax purposes and for purposes of Title I of ERISA.

The Rabbi Trust assets had a value of $ 62.3 million at September 30, 2021 and $ 62.6 million at June 30, 2021 and are included in Other non-current assets in the accompanying Condensed Consolidated Balance Sheets.

The SORP and the SERP had a total benefit obligation of $ 66.7 million at September 30, 2021 and $ 65.9 million at June 30, 2021 and are included in Other non-current liabilities in the accompanying Condensed Consolidated Balance Sheets.

The Rabbi Trust assets had a value of $ 63.7 million at December 31, 2021 and $ 62.6 million at June 30, 2021 and are included in Other non-current assets in the accompanying Condensed Consolidated Balance Sheets.

The SORP and the SERP had a total benefit obligation of $ 67.5 million at December 31, 2021 and $ 65.9 million at June 30, 2021 and are included in Other non-current liabilities in the accompanying Condensed Consolidated Balance Sheets.

STOCK-BASED COMPENSATION

The activity related to the Company’s incentive equity awards for the three months ended September 30, 2021 consisted of the following:

The activity related to the Company’s incentive equity awards for the three months ended December 31, 2021 consisted of the following:

Stock Options Time-based

4 unchanged sentences

of Shares Weighted-

Balances at June 30, 2021 3,203,682 $ 88.33 761,337 $ 117.07 247,580 $ 126.29

Balances at September 30, 2021 3,022,516 $ 90.32 798,376 $ 120.31 223,849 $ 131.34

Granted 22,038 173.00 288,678 161.45 100,862 158.28

1 unchanged sentence

Vesting of restricted stock units

— — ( 39,756 ) 99.96 — —

Expired/forfeited ( 23,161 ) 101.09 ( 19,142 ) 139.85 ( 3,441 ) 131.63

Balances at September 30, 2021 (b),(c)

Balances at December 31, 2021 (b),(c)

2,611,362 $ 92.91 1,028,156 $ 132.28 321,270 $ 139.80

(a) Stock options exercised during the period of July 1, 2021 through September 30, 2021 had an aggregate intrinsic value of $ 20.3 million.

(b) As of September 30, 2021, the Company’s outstanding vested and currently exercisable stock options using the September 30, 2021 closing stock price of $ 166.64 (approximately 1.6 million shares) had an aggregate intrinsic value of $ 150.2 million with a weighted-average exercise price of $ 70.95 and a weighted-average remaining contractual life of 5.0 years.

The total of all stock options outstanding as of September 30, 2021 have a weighted-average remaining contractual life of 6.2 years.

(c) As of September 30, 2021, time-based restricted stock units and performance-based restricted stock units expected to vest using the September 30, 2021 closing stock price of $ 166.64 (approximately 0.8 million and 0.2 million shares, respectively) had an aggregate intrinsic value of $ 127.3 million and $ 35.3 million, respectively.

(a) Stock options exercised during the period of October 1, 2021 through December 31, 2021 had an aggregate intrinsic value of $ 38.0 million.

(b) As of December 31, 2021, the Company’s outstanding vested and currently exercisable stock options using the December 31, 2021 closing stock price of $ 182.82 (approximately 1.2 million shares) had an aggregate intrinsic value of $ 135.1 million with a weighted-average exercise price of $ 70.72 and a weighted-average remaining contractual life of 4.7 years.

The total of all stock options outstanding as of December 31, 2021 have a weighted-average remaining contractual life of 6.1 years.

(c) As of December 31, 2021, time-based restricted stock units and performance-based restricted stock units expected to vest using the December 31, 2021 closing stock price of $ 182.82 (approximately 1.0 million and 0.3 million shares, respectively) had an aggregate intrinsic value of $ 178.1 million and $ 55.6 million, respectively.

Performance-based restricted stock units granted in the table above represent initial target awards, and performance adjustments for (i) change in shares issued based upon attainment of performance goals determined in the period, and (ii) estimated change in shares issued resulting from attainment of performance goals to be determined at the end of the prospective performance period.

The activity related to the Company’s incentive equity awards for the six months ended December 31, 2021 consisted of the following:

Stock Options Time-based

Restricted Stock Units Performance-based

Restricted Stock Units

Options Weighted-

of Shares Weighted-

Balances at June 30, 2021 3,203,682 $ 88.33 761,337 $ 117.07 247,580 $ 126.29

Granted 22,038 173.00 337,845 163.02 100,862 158.28

Exercise of stock options (a) ( 579,823 ) 69.99 — — — —

Vesting of restricted stock units

— — ( 39,756 ) 99.96 — —

Expired/forfeited ( 34,535 ) 104.51 ( 31,270 ) 135.11 ( 27,172 ) 85.30

Balances at December 31, 2021

2,611,362 $ 92.91 1,028,156 $ 132.28 321,270 $ 139.80

(a) Stock options exercised during the period of July 1, 2021 through December 31, 2021 had an aggregate intrinsic value of $ 58.3 million.

The Company has stock-based compensation plans under which the Company annually grants stock option and restricted stock unit awards.

Stock options are granted to employees at exercise prices equal to the fair market value of the Company’s common stock on the dates of grant, with the measurement of stock-based compensation expense recognized in Net earnings based on the fair value of the award on the date of grant.

Stock-based compensation expense of $ 13.6 million and $ 10.4 million, as well as related expected tax benefits of $ 3.1 million and $ 2.3 million were recognized for the three months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, the total remaining unrecognized compensation cost related to non-vested stock options and restricted stock unit awards amounted to $ 9.8 million and $ 50.2 million, respectively, which will be amortized over the weighted-average remaining requisite service periods of 1.7 years and 1.4 years, respectively.

Stock-based compensation expense of $ 22.7 million and $ 18.3 million, as well as related expected tax benefits of $ 5.1 million and $ 4.1 million were recognized for the three months ended December 31, 2021 and 2020, respectively.

Stock-based compensation expense of $ 36.2 million and $ 28.7 million, as well as related expected tax benefits of $ 8.2 million and $ 6.3 million were recognized for the six months ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, the total remaining unrecognized compensation cost related to non-vested stock options and restricted stock unit awards amounted to $ 7.2 million and $ 86.4 million, respectively, which will be amortized over the weighted-average remaining requisite service periods of 1.8 years and 1.8 years, respectively.

For stock options granted, the fair value of each stock option was estimated on the date of grant using a binomial option pricing model.

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Three Months Ended

September 30,

December 31, Six Months Ended

2021 2020 2021 2020

(in millions)

2 unchanged sentences

Excess tax benefits $ 7.1 $ 3.6 $ 11.5 $ 12.8

The increase in the effective tax rate for the three months ended September 30, 2021 was driven by lower total discrete tax items, inclusive of the excess tax benefits related to equity compensation, compared to the prior year period.

The decrease in the effective tax rate for the three and six months ended December 31, 2021 was driven by higher total discrete tax items, inclusive of the excess tax benefits related to equity compensation, compared to the prior year period.

CONTRACTUAL COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS

8 unchanged sentences

On July 28, 2021, the Company entered into a novation agreement with IBM (the “U.S.

Novation Agreement”) pursuant to which IBM novated the Amended IT Services Agreement to Kyndryl, Inc., an entity formed in connection with IBM’s planned spin-off of its managed infrastructure services business (“Kyndryl”), effective September 1, 2021.

Fixed minimum commitments remaining under the Amended IT Services Agreement at September 30, 2021 are $ 189.3 million through fiscal year 2027, the final year of the Amended IT Services Agreement.

Novation Agreement”) pursuant to which IBM novated the Amended IT Services Agreement to Kyndryl, Inc., an entity formed in connection with IBM’s spin-off of its managed infrastructure services business (“Kyndryl”), effective September 1, 2021.

Fixed minimum commitments remaining under the Amended IT Services Agreement at December 31, 2021 are $ 169.7 million through fiscal year 2027, the final year of the Amended IT Services Agreement.

In December 2019, the Company and IBM entered into an information technology agreement for private cloud services (the “Private Cloud Agreement”) under which IBM will operate, manage and support the Company’s private cloud global distributed platforms and products, and operate and manage certain Company networks.

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Novation Agreement.

Fixed minimum commitments remaining under the Private Cloud Agreement at September 30, 2021 are $ 192.3 million through March 31, 2030, the final year of the contract.

Fixed minimum commitments remaining under the Private Cloud Agreement at December 31, 2021 are $ 191.0 million through March 31, 2030, the final year of the contract.

In March 2014, the Company and IBM United Kingdom Limited (“IBM UK”) entered into an Information Technology Services Agreement (the “EU IT Services Agreement”), under which IBM UK provides data center services supporting the Company’s technology outsourcing services for certain clients in Europe and Asia.

3 unchanged sentences

On August 19, 2021, the Company entered into a novation agreement with IBM UK pursuant to which IBM UK novated the EU IT Services Agreement to Kyndryl UK Limited, effective September 1, 2021.

Fixed minimum commitments remaining under the Amended EU IT Services Agreement at September 30, 2021 are $ 29.5 million through fiscal year 2029, the final year of the contract.

Fixed minimum commitments remaining under the Amended EU IT Services Agreement at December 31, 2021 are $ 30.5 million through fiscal year 2029, the final year of the contract.

Cloud Services Resale Agreement

On December 31, 2021, the Company and Presidio Networked Solutions LLC (“Presidio”), a reseller of services of Amazon Web Services, Inc.

and its affiliates (collectively, “AWS”), entered into an Order Form and AWS Private Pricing Addendum, dated December 31, 2021 (the “Order Form”), to the Cloud Services Resale Agreement, dated December 15, 2017, as amended (together with the Order Form, the “AWS Cloud Agreement”), whereby Presidio will resell to the Company certain public cloud infrastructure and related services provided by AWS for the operation, management and support of the Company’s cloud global distributed platforms and products.

The AWS Cloud Agreement expires on December 31, 2026.

Fixed minimums remaining under the AWS Cloud Agreement at December 31, 2021 are $ 250.0 million through December 31, 2026.

The Company has an equity method investment that is a variable interest in a variable interest entity, the Company is not the primary beneficiary and therefore does not consolidate the investee.

The Company’s potential maximum loss exposure related to this unconsolidated investment totaled $ 31.3 million as of September 30, 2021, which represents the carrying value of the Company's investment and is recorded in Other non-current assets in the Company’s Condensed Consolidated Balance Sheets.

In addition, as of September 30, 2021, the Company also has a future commitment to fund $ 1.7 million to one of the Company’s other investees.

The Company’s potential maximum loss exposure related to its unconsolidated investments in this variable interest entity totaled $ 33.5 million as of December 31, 2021, which represents the carrying value of the Company's investments.

In addition, as of December 31, 2021, the Company also has a future commitment to fund $ 1.5 million to one of the Company’s other investees.

Software License Agreements

1 unchanged sentence

Three Months Ended

September 30,

December 31, Six Months Ended

2021 2020 2021 2020

(in millions)

1 unchanged sentence

Fixed Operating Lease Cost

Fixed operating lease cost for the three months ending September 30, 2021 and September 30, 2020 are as follows:

The Company has incurred the following fixed operating lease costs:

Three Months Ended

September 30,

December 31, Six Months Ended

2021 2020 2021 2020

(in millions)

3 unchanged sentences

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 was not a party to any outstanding derivative financial instruments at September 30, 2021 and June 30, 2021.

The Company was not a party to any outstanding derivative financial instruments at December 31, 2021 and June 30, 2021.

In March 2021, the Company entered into a derivative instrument designed to mitigate the Company’s exposure to the impact of changes in interest rates on the Fiscal 2021 Senior Notes.

1 unchanged sentence

Accordingly, changes in the fair value of the Treasury Lock were recorded as part of Other comprehensive income (loss), net each period up to when the Treasury Lock was settled.

In May 2021, the Treasury Lock was settled for a pre-tax loss of $ 11.0 million, after which the final settlement loss will be reclassified into Interest expense, net ratably over the ten year term of the Fiscal 2021 Senior Notes.

The expected amount of the existing loss that would be reclassified into earnings before income taxes within the next twelve months is approximately $ 1.1 million.

In May 2021, the Treasury Lock was settled for a pre-tax loss of $ 11.0 million, after which the final settlement loss will be amortized into Interest expense, net ratably over the ten year term of the Fiscal 2021 Senior Notes.

The expected amount of the existing loss that will be amortized into earnings before income taxes within the next twelve months is approximately $ 1.1 million.

In the normal course of business, the Company is subject to various claims and litigation.

5 unchanged sentences

As a registered broker-dealer and member of FINRA, BBPO is subject to the Uniform Net Capital Rule 15c3-1 of the Securities Exchange Act of 1934, as amended, which requires BBPO to maintain a minimum net capital amount.

At September 30, 2021, BBPO was in compliance with this net capital requirement.

At December 31, 2021, BBPO was in compliance with this net capital requirement.

BBPO, as a “Managing Clearing Member” of the Options Clearing Corporation (the “OCC”), is also subject to OCC Rule 309(b) with respect to the business process outsourcing services that it provides to other OCC “Managed Clearing Member” broker-dealers.

OCC Rule 309(b) requires BBPO to maintain a minimum net capital amount.

At September 30, 2021, BBPO was in compliance with this net capital requirement.

At December 31, 2021, BBPO was in compliance with this net capital requirement.

In addition, Matrix Trust Company, a subsidiary of the Company, is a Colorado State non-depository trust company and National Securities Clearing Corporation trust member, whose primary business is to provide cash agent, custodial and directed trustee services to institutional customers, and investment management services to collective investment trust funds.

1 unchanged sentence

Specific capital requirements that involve quantitative measures of assets, liabilities, and certain off-balance sheet items, when applicable, must be met.

At September 30, 2021, Matrix Trust Company was in compliance with its capital requirements.

At December 31, 2021, Matrix Trust Company was in compliance with its capital requirements.

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS) BY COMPONENT

The following tables summarize the changes in the accumulated balances for each component of accumulated other comprehensive income/(loss) for the three months ended September 30, 2021, and 2020, respectively:

The following tables summarize the changes in the accumulated balances for each component of accumulated other comprehensive income/(loss) for the three and six months ended December 31, 2021, and 2020, respectively:

Translation Pension

1 unchanged sentence

(in millions)

Balances at September 30, 2021 $ ( 37.9 ) $ ( 14.9 ) $ ( 8.1 ) $ ( 60.9 )

Other comprehensive income/(loss) before reclassifications ( 31.8 ) — — ( 31.8 )

Amounts reclassified from accumulated other comprehensive income/(loss)

— 0.5 0.2 0.7

Balances at December 31, 2021 $ ( 69.7 ) $ ( 14.4 ) $ ( 7.8 ) $ ( 91.9 )

Translation Pension

Liabilities Cash Flow Hedge Total

(in millions)

Balances at June 30, 2021 $ 32.9 $ ( 15.4 ) $ ( 8.2 ) $ 9.2

2 unchanged sentences

— 1.0 0.4 1.4

Balances at December 31, 2021 $ ( 69.7 ) $ ( 14.4 ) $ ( 7.8 ) $ ( 91.9 )

Translation Pension

Liabilities Cash Flow Hedge Total

(in millions)

Balances at September 30, 2020 $ ( 47.7 ) $ ( 15.1 ) $ — $ ( 62.9 )

Other comprehensive income/(loss) before reclassifications 5.2 — — 5.2

Amounts reclassified from accumulated other comprehensive income/(loss)

Balances at December 31, 2020 $ ( 42.6 ) $ ( 14.5 ) $ — $ ( 57.1 )

Translation Pension

4 unchanged sentences

Amounts reclassified from accumulated other comprehensive income/(loss)

Balances at September 30, 2020 $ ( 47.7 ) $ ( 15.1 ) $ — $ ( 62.9 )

Balances at December 31, 2020 $ ( 42.6 ) $ ( 14.5 ) $ — $ ( 57.1 )

INTERIM FINANCIAL DATA BY SEGMENT

8 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2021 2020 2021 2020

(in millions)

5 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2021 2020 2021 2020

(in millions)

6 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2021 2020 2021 2020

(in millions)

1 unchanged sentence

Global Technology and Operations 47.6 10.7 96.0 21.4

Other — 0.4 — 0.7

Foreign currency exchange ( 1.3 ) ( 0.7 ) ( 1.9 ) ( 1.7 )

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements