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Funds Held for Clients and Corporate Investments | 12 Months Ended
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May 31, 2011
Funds Held for Clients and Corporate Investments [Abstract] |
Funds Held for Clients and Corporate Investments |
Note E — | Funds Held for Clients and Corporate Investments
Funds held for clients and corporate investments are as follows:
|  | May 31, 2011 |
|  |  |  |  | Gross |  |  | Gross |  |  |  |
|  | Amortized |  |  | unrealized |  |  | unrealized |  |  | Fair |
In millions |  | cost |  |  | gains |  |  | losses |  |  | value |
Type of issue: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market securities and other cash equivalents |  | $ | 1,372.9 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,372.9 |
Available-for-sale securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General obligation municipal bonds |  |  | 1,017.5 |  |  |  | 33.1 |  |  |  | (0.1 | ) |  |  | 1,050.5 |
Pre-refunded municipal bonds(1) |  |  | 470.5 |  |  |  | 14.2 |  |  |  | — |  |  |  | 484.7 |
Revenue municipal bonds |  |  | 361.6 |  |  |  | 12.1 |  |  |  | — |  |  |  | 373.7 |
Variable rate demand notes |  |  | 828.3 |  |  |  | — |  |  |  | — |  |  |  | 828.3 |
Total available-for-sale securities |  |  | 2,677.9 |  |  |  | 59.4 |  |  |  | (0.1 | ) |  |  | 2,737.2 |
Other |  |  | 8.3 |  |  |  | 0.6 |  |  |  | — |  |  |  | 8.9 |
Total funds held for clients and corporate investments |  | $ | 4,059.1 |  |  | $ | 60.0 |  |  | $ | (0.1 | ) |  | $ | 4,119.0 |
|  | May 31, 2010 |
|  |  |  |  | Gross |  |  | Gross |  |  |  |
|  | Amortized |  |  | unrealized |  |  | unrealized |  |  | Fair |
In millions |  | cost |  |  | gains |  |  | losses |  |  | value |
Type of issue: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market securities and other cash equivalents |  | $ | 1,754.5 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,754.5 |
Available-for-sale securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General obligation municipal bonds |  |  | 951.1 |  |  |  | 33.7 |  |  |  | (0.3 | ) |  |  | 984.5 |
Pre-refunded municipal bonds(1) |  |  | 539.8 |  |  |  | 19.5 |  |  |  | — |  |  |  | 559.3 |
Revenue municipal bonds |  |  | 368.0 |  |  |  | 13.8 |  |  |  | (0.1 | ) |  |  | 381.7 |
Variable rate demand notes |  |  | 226.3 |  |  |  | — |  |  |  | — |  |  |  | 226.3 |
Total available-for-sale securities |  |  | 2,085.2 |  |  |  | 67.0 |  |  |  | (0.4 | ) |  |  | 2,151.8 |
Other |  |  | 7.5 |  |  |  | — |  |  |  | (0.2 | ) |  |  | 7.3 |
Total funds held for clients and corporate investments |  | $ | 3,847.2 |  |  | $ | 67.0 |  |  | $ | (0.6 | ) |  | $ | 3,913.6 |
(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 May 31, 2011 and May 31, 2010 are U.S. agency discount notes, government money market funds, and bank demand deposit accounts. In addition, included in other cash equivalents as of May 31, 2011 was a municipal bond with a maturity of less than 90 days when acquired. Classification of investments on the Consolidated Balance Sheets is as follows:
|  | May 31, |
In millions |  | 2011 |  |  | 2010 |
Funds held for clients |  | $ | 3,566.7 |  |  | $ | 3,541.0 |
Corporate investments |  |  | 345.0 |  |  |  | 82.5 |
Long-term corporate investments |  |  | 207.3 |  |  |  | 290.1 |
Total funds held for clients and corporate investments |  | $ | 4,119.0 |  |  | $ | 3,913.6 |
The Company is exposed to credit risk in connection with these investments through the possible inability of borrowers to meet the terms of their bonds. In addition, the Company is exposed to interest rate risk, as rate volatility will cause fluctuations in the fair value of held investments and in the earnings potential of future investments. The Company’s investment strategy focuses on optimizing liquidity and protecting principal. The Company invests primarily in high credit quality securities with AAA and AA ratings and short-term securities with A-1/P-1 ratings. It limits the amounts that can be invested in any single issuer, and invests in short- to intermediate-term instruments whose fair value is less sensitive to interest rate changes. All the investments held as of May 31, 2011 were traded in active markets. The Company has not and does not utilize derivative financial instruments to manage interest rate risk. The Company’s available-for-sale securities reflected a net unrealized gain of $59.3 million as of May 31, 2011 compared with a net unrealized gain of $66.6 million as of May 31, 2010. Included in the net unrealized gain as of May 31, 2011 and 2010, respectively, were 15 and 23 available-for-sale securities in an unrealized loss position. The securities in an unrealized loss position were as follows:
|  | May 31, 2011 |
|  | Less than |  |  | More than |  |  |  |
|  | twelve months |  |  | twelve months |  |  | Total |
|  | Gross |  |  |  |  |  | Gross |  |  |  |  |  | Gross |  |  |  |
|  | unrealized |  |  | Fair |  |  | unrealized |  |  | Fair |  |  | unrealized |  |  | Fair |
In millions |  | losses |  |  | value |  |  | losses |  |  | value |  |  | losses |  |  | value |
Type of issue: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General obligation municipal bonds |  | $ | (0.1 | ) |  | $ | 37.3 |  |  | $ | — |  |  | $ | — |  |  | $ | (0.1 | ) |  | $ | 37.3 |
Pre-refunded municipal bonds |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Revenue municipal bonds |  |  | — |  |  |  | 14.4 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 14.4 |
Total |  | $ | (0.1 | ) |  | $ | 51.7 |  |  | $ | — |  |  | $ | — |  |  | $ | (0.1 | ) |  | $ | 51.7 |
|  | May 31, 2010 |
|  | Less than |  |  | More than |  |  |  |
|  | twelve months |  |  | twelve months |  |  | Total |
|  | Gross |  |  |  |  |  | Gross |  |  |  |  |  | Gross |  |  |  |
|  | unrealized |  |  | Fair |  |  | unrealized |  |  | Fair |  |  | unrealized |  |  | Fair |
In millions |  | losses |  |  | value |  |  | losses |  |  | value |  |  | losses |  |  | value |
Type of issue: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General obligation municipal bonds |  | $ | (0.3 | ) |  | $ | 44.0 |  |  | $ | — |  |  | $ | — |  |  | $ | (0.3 | ) |  | $ | 44.0 |
Pre-refunded municipal bonds |  |  | — |  |  |  | 4.1 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4.1 |
Revenue municipal bonds |  |  | (0.1 | ) |  |  | 25.5 |  |  |  | — |  |  |  | — |  |  |  | (0.1 | ) |  |  | 25.5 |
Total |  | $ | (0.4 | ) |  | $ | 73.6 |  |  | $ | — |  |  | $ | — |  |  | $ | (0.4 | ) |  | $ | 73.6 |
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 May 31, 2011 were not other-than-temporarily impaired. While $51.7 million of available-for-sale securities had fair values that were below amortized cost, the Company believes that it is probable that the principal and interest will be collected in accordance with contractual terms, and that the unrealized loss on these securities of $0.1 million was due to changes in interest rates and was not due to increased credit risk or other valuation concerns. All of the securities in an unrealized loss position as of May 31, 2011 and 2010 held an AA rating or better. The Company intends to hold these investments until the recovery of their amortized cost basis or maturity, and further believes that it is more-likely-than-not that it will not 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 from the sale of available-for-sale securities were as follows:
|  | Year ended May 31, |
In millions |  | 2011 |  |  | 2010 |  |  | 2009 |
Gross realized gains |  | $ | 1.3 |  |  | $ | 3.2 |  |  | $ | 1.2 |
Gross realized losses |  |  | — |  |  |  | — |  |  |  | (0.1 | )
Net realized gains |  | $ | 1.3 |  |  | $ | 3.2 |  |  | $ | 1.1 |
The amortized cost and fair value of available-for-sale securities that had stated maturities as of May 31, 2011 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.
|  | May 31, 2011 |
|  | Amortized |  |  | Fair |
In millions |  | cost |  |  | value |
Maturity date: |  |  |  |  |  |  |  |
Due in one year or less |  | $ | 408.7 |  |  | $ | 412.3 |
Due after one year through three years |  |  | 603.0 |  |  |  | 626.9 |
Due after three years through five years |  |  | 570.8 |  |  |  | 592.7 |
Due after five years |  |  | 1,095.4 |  |  |  | 1,105.3 |
Total |  | $ | 2,677.9 |  |  | $ | 2,737.2 |
VRDNs 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.

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