8-KEarnings & ResultsLeadership ChangesExhibits & Filings

STATE STREET CORP 8-K Report, Financial Results (Jan 3, 2008)

Filed January 3, 2008For Securities:STTSTT-PG

Summary

State Street Corporation (STT) filed a Form 8-K on January 3, 2008, reporting two key events. Firstly, the company announced it would record a charge in the fourth quarter of 2007 and provided updated guidance for the full fiscal year 2007, focusing on "operating basis" results that exclude certain charges and merger costs for comparability. Investors should note that the company uses non-GAAP "operating basis" measures for financial goals and trend analysis, which exclude items like the Q4 2007 charge and integration costs from the Investors Financial Services Corp. acquisition. Secondly, the report details the resignation of William W. Hunt, Vice Chairman and President/CEO of State Street Global Advisors, effective January 2, 2008. Mr. Hunt's separation agreement includes significant severance compensation and benefits totaling approximately $14.1 million, excluding already vested options and retirement benefits. This package includes cash payments for base pay, satisfaction of certain equity awards, and continued vesting/exercise rights for some options and stock appreciation rights, subject to clawback provisions and non-compete clauses. This departure from a key executive role in its investment management arm may warrant investor attention.

Key Highlights

  • 1State Street Corporation announced a charge in Q4 2007 and updated its 2007 full-year guidance, emphasizing "operating basis" results.
  • 2The company defines "operating basis" results to exclude specific charges, merger/integration costs, and prior-year tax adjustments for comparable trend analysis.
  • 3William W. Hunt, Vice Chairman and CEO of State Street Global Advisors, resigned from his positions on January 2, 2008.
  • 4Mr. Hunt's separation agreement provides for aggregate severance compensation and benefits valued at approximately $14.1 million.
  • 5The severance package includes cash payments, resolution of outstanding equity awards, and retention of vested stock options/SARs.
  • 6Mr. Hunt is subject to a 18-month non-compete agreement with specific exceptions for establishing or joining hedge funds after certain periods.
  • 7The separation agreement includes mutual releases and clauses allowing State Street to cease payments and cancel awards in case of Mr. Hunt's breach of obligations.

Frequently Asked Questions

State Street announced it would record a charge in the fourth quarter of 2007 and provided updated guidance for the full fiscal year 2007. The company is presenting "operating basis" results, which exclude the Q4 2007 charge, merger and integration costs related to the Investors Financial Services Corp. acquisition, and certain 2006 tax adjustments to facilitate year-over-year comparisons and trend analysis.

William W. Hunt was the Vice Chairman of State Street Corporation and President and Chief Executive Officer of State Street Global Advisors (SSgA), the company's investment management business. His resignation from these significant roles may impact the strategic direction and performance of SSgA, a key segment of State Street.

Mr. Hunt's separation agreement provides for an aggregate value of approximately $14.1 million in severance compensation and benefits. This includes cash severance payments equivalent to his annual base pay for two years, cash payments to settle certain equity awards, and the continuation of vesting/exercise rights for some of his vested stock options and stock appreciation rights. This value excludes already vested options with intrinsic value and vested retirement benefits.

Yes, Mr. Hunt has agreed to a 18-month non-compete period following his resignation. This includes restrictions on accepting employment with specified competitors, soliciting customers, or soliciting employees. However, he is permitted to establish a hedge fund six months after separation or join an independent hedge fund twelve months after separation, provided they are not considered direct competitors under the agreement.