Attached files
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| 8-K - DST SYSTEMS INC | v210223_8k.htm |
Exhibit 99.1
| NEWS RELEASE |
C2011-2
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DST
Systems, Inc.
333
West 11th
Street
Kansas
City, MO
64105-1594
NYSE
Symbol: DST
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Contact:
Thomas
A. McDonnell (816) 435-8684
Chief
Executive Officer
Kenneth
V. Hager (816) 435-8603
Vice
President and Chief Financial
Officer
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FOR
IMMEDIATE RELEASE – February 7, 2011
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Page
1
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DST
SYSTEMS, INC. ANNOUNCES FOURTH QUARTER 2010
AND
ANNUAL 2010 FINANCIAL RESULTS
KANSAS
CITY, MO (February 7, 2011) – DST Systems, Inc. (NYSE: DST) reported
consolidated net income attributable to DST (“DST Earnings”) of $93.3 million
($2.00 per diluted share) for the fourth quarter 2010 compared to $58.8 million
($1.18 per diluted share) for the fourth quarter 2009. DST Earnings
for the year ended December 31, 2010 were $318.5 million ($6.73 per diluted
share) compared to $241.6 million ($4.84 per diluted share) for the year ended
December 31, 2009. Taking into account certain non-GAAP adjustments
explained herein, consolidated DST Earnings were $49.8 million ($1.07 per
diluted share) for fourth quarter 2010 compared to $45.8 million ($0.92 per
diluted share) for fourth quarter 2009, and $209.6 million ($4.43 per diluted
share) for the year ended December 31, 2010 compared to $179.4 million ($3.59
per diluted share) for the year ended December 31, 2009.
The
diluted EPS impact of non-GAAP adjustments for fourth quarter 2010 is summarized
as follows:
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Reported
GAAP diluted EPS
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$ | 2.00 | ||
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Dividend
received from a private equity investment
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(0.75 | ) | ||
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Net
gain on the disposition of securities and other
investments
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(0.30 | ) | ||
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Termination
benefit expenses related to reductions in workforce
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0.05 | |||
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Net
loss on repurchase of Series C convertible debentures
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0.07 | |||
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Adjusted
Non-GAAP diluted EPS
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$ | 1.07 |
Fourth
quarter 2010 financial and operational highlights, taking into account non-GAAP
adjustments, were as follows:
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·
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Consolidated
operating revenues (excluding out-of-pocket reimbursements) increased
$25.2 million or 6.3% to $424.9 million as compared to fourth quarter
2009. Financial Services operating revenues increased $9.2
million or 3.2% during fourth quarter 2010 as compared to the same period
in 2009. Output Solutions operating revenues increased $17.1
million or 14.6%, reflecting revenues of dsicmm Group Limited
(“dsicmm”). DST’s Innovative Output Solutions Limited (“IOS”)
subsidiary completed the acquisition of dsicmm in the third quarter
2010.
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·
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Total
mutual fund shareowner accounts serviced at December 31, 2010 decreased by
2.2 million accounts or 1.9% from September 30, 2010 to 113.7 million
accounts. Registered accounts and subaccounts serviced at
December 31, 2010 were 99.4 million and 14.3 million,
respectively. Registered accounts decreased 3.6 million or 3.5%
and subaccounts increased 1.4 million or 10.9% from September 30,
2010.
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FOR
IMMEDIATE RELEASE – February 7, 2011
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Page
2
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·
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Income
from operations increased $4.5 million or 6.5% as compared to fourth
quarter 2009. Financial Services income from operations
increased $8.1 million or 12.4% to $73.2 million during the quarter
primarily from higher software license and healthcare processing
revenues. Output Solutions income from operations decreased
$2.1 million or 80.8% during the quarter to $500,000 primarily from losses
at IOS, including integration expenses and one-time
charges. The Investments and Other Segment income from
operations decreased $1.3 million as compared to fourth quarter 2009, from
lower operating revenues and fourth quarter 2010 real estate impairments
recorded.
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·
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In
first quarter 2010, DST began implementing a plan to reduce its workforce
by approximately 7% in 2010. The Company incurred $3.5 million
of termination benefit expenses in fourth quarter 2010 as the workforce
reduction plan was completed. For the year ended December 31,
2010, the Company incurred $20.9 million of termination benefit
expenses.
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·
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The
Company received a $49.5 million cash dividend from a private equity
investment on October 25, 2010. Approximately 50% of the
dividend is estimated to qualify for the dividends received
deduction.
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·
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The
Company’s income tax rate was 35.7% in fourth quarter 2010 as compared to
36.5% in fourth quarter 2009.
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·
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On
October 6, 2010, DST’s Board of Directors declared a cash dividend of
$0.30 per share which was paid on November 5, 2010 to shareholders of
record as of the close of business on October 21,
2010. The aggregate amount of the dividend was
approximately $13.9 million.
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Debt
activity during fourth quarter 2010 was as follows:
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·
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The
Company repurchased $50.0 million of aggregate principal (includes
accreted interest) of the Series C convertible debentures for $55.4
million, resulting in a pretax loss of approximately $5.4 million in
fourth quarter 2010. At December 31, 2010, the Company had
approximately $94.1 million of Series C convertible debentures
outstanding.
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·
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At
December 31, 2010, the Company’s total debt outstanding was $1.2 billion,
a decrease of $52.1 million as compared to September 30,
2010.
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Share-related
activity during fourth quarter 2010 was as follows:
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·
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The
Company had 46.3 million shares of common stock outstanding at December
31, 2010. During fourth quarter 2010, the Company repurchased
100,000 shares of DST common stock for $4.3 million or approximately
$43.31 per share. On December 8, 2010, the DST Board of
Directors increased the share repurchase authorization by 600,990
shares. At December 31, 2010, there were 1.0 million shares
remaining under the existing share repurchase authorization
plan.
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·
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Average
diluted shares outstanding for fourth quarter 2010 were 46.7 million
shares, a decrease of 200,000 shares or 0.4 % from third quarter 2010, and
a decrease of 3.1 million shares or 6.2% from fourth quarter
2009. The decrease from both third quarter 2010 and fourth
quarter 2009 is attributable to share
repurchases.
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FOR
IMMEDIATE RELEASE – February 7, 2011
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Page
3
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·
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Total
stock options, restricted stock and restricted stock units (“equity
units”) outstanding at December 31, 2010 were 5.7 million, of which 5.1
million were stock options, 100,000 were restricted stock and 500,000
were restricted stock units. Equity units decreased 700,000 or
10.9% from September 30, 2010 and 1.9 million units or 25.0% from
December 31, 2009. The decrease in equity units from September
30, 2010 is from the exercise and expiration of stock options and the
decrease from December 31, 2009 is attributable to the vesting of
restricted stock and the exercise and expiration of stock options,
partially offset by restricted stock unit
grants.
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Full year
2010 financial and operational highlights, taking into account non-GAAP
adjustments, were as follows:
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·
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Diluted
earnings per share increased $0.84 to $4.43, an increase of
23.4%.
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·
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Consolidated
operating revenues were $1,640.2 million, an increase of $44.8 million or
2.8%, mostly attributable to a full year of Argus versus nine months in
2009 and the acquisition of dsicmm in third quarter
2010.
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·
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Consolidated
income from operations was $308.5 million, an increase of $34.2 million or
12.5%, mostly attributable to higher earnings in the Financial Services
Segment.
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·
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Completed
a workforce reduction of approximately
7%.
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·
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Reduced
the Company’s total debt outstanding by $137.5 million as compared to
December 31, 2009.
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·
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Reduced
the Company’s convertible senior debentures by $486.0 million during 2010
to $94.1 million.
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·
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Refinanced
the Company’s $600 million revolving credit
facility.
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·
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Placed
$370 million of senior secured notes in August 2010 with an average life
of eight years and a blended average interest rate of
5.06%.
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·
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Initiated
semi-annual cash dividends which totaled $0.60 per common share in
2010.
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·
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Expanded
the Output Solutions Segment with the acquisition of
dsicmm.
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·
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Reduced
shares outstanding by 2.9 million during 2010 to 46.3
million.
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Use
of Non-GAAP Financial Information
In
addition to reporting operating income, pretax income, net income attributable
to DST Systems, Inc. and earnings per share on a GAAP basis, DST has also made
certain non-GAAP adjustments which are described in the attached schedule titled
“Description of Non-GAAP Adjustments” and are reconciled to the corresponding
GAAP measures in the attached financial schedules titled “Reconciliation of
Reported Results to Income Adjusted for Certain Non-GAAP Items” that accompany
this earnings release. In making these non-GAAP adjustments, the
Company takes into account the impact of items that are not necessarily ongoing
in nature, that do not have a high level of predictability associated
with
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IMMEDIATE RELEASE – February 7, 2011
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4
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them or that are non-operational
in nature. Generally, these items include net gains on dispositions
of business units, net gains (losses) associated with securities and other
investments, restructuring and impairment costs and other similar
items. Management believes the exclusion of these items provides a
useful basis for evaluating underlying business unit performance, but should not
be considered in isolation and is not in accordance with, or a substitute for,
evaluating business unit performance utilizing GAAP financial
information. Management uses non-GAAP measures in its budgeting and
forecasting processes and to further analyze its financial trends and
“operational run-rate,” as well as making financial comparisons to prior periods
presented on a similar basis. The Company believes that providing
such adjusted results allows investors and other users of DST’s financial
statements to better understand DST’s comparative operating performance for the
periods presented.
DST’s
management uses each of these non-GAAP financial measures in its own evaluation
of the Company’s performance, particularly when comparing performance to past
periods. DST’s non-GAAP measures may differ from similar measures by
other companies, even if similar terms are used to identify such
measures. Although DST’s management believes non-GAAP measures are
useful in evaluating the performance of its business, DST acknowledges that
items excluded from such measures may have a material impact on the Company’s
income from operations, pretax income, net income and earnings per share
calculated in accordance with GAAP. Therefore, management typically
uses non-GAAP measures in conjunction with GAAP results. Investors
and users of our financial information should also consider the above factors
when evaluating DST’s results.
Use
of EBITDA
DST
defines EBITDA as earnings from operations before interest expense, income
taxes, depreciation and amortization. DST defines EBITDA Margin as
EBITDA divided by operating revenues. These supplemental non-GAAP
liquidity measures are provided in addition to, but not as a substitute for,
cash flow from operations. As a measure of liquidity, the Company
believes EBITDA is useful as an indicator of its ability to generate cash
flow. EBITDA, as calculated by the Company, may not be consistent
with computation of EBITDA by other companies. Historically the
Company has analyzed Output Solutions income from operations and operating
margin. The Company believes a useful measure of Output Solutions’
contribution to DST’s results is to focus on cash flow. DST
management believes EBITDA is an appropriate measure of cash flow for Output
Solutions and will be a primary measurement the Company intends to review going
forward. A reconciliation of Output Solutions Segment income from
operations to EBITDA is included in a schedule that accompanies this earnings
release.
Detailed
Review of Financial Results
The
following discussion of financial results takes into account the non-GAAP
adjustments described in the section entitled “Use of Non-GAAP Financial
Information” and detailed in the attached schedule titled “Description of
Non-GAAP Adjustments.”
Segment
Results
Financial
Services Segment
Operating
revenues for the Financial Services Segment excluding out-of-pocket
reimbursements for fourth quarter 2010 increased $9.2 million or 3.2% to $292.7
million as compared to fourth quarter
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IMMEDIATE RELEASE – February 7, 2011
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2009, resulting from higher revenues at Argus Health Systems,
DST Global Solutions, DST Health Solutions and AWD.
Argus
revenues increased from higher fees per pharmacy claim paid and increased
pharmacy claims related services, partially offset by lower paid claims
processing volumes. Revenues of DST Global Solutions increased from
changes in foreign currency exchange rates, which increased operating revenues
by approximately $1.0 million, and from higher professional service and software
license revenues. DST Health Solutions operating revenue increased
from higher software license revenues, partially offset by lower demand for
professional services and lower volumes of transaction
processing. AWD operating revenues increased primarily from higher
software license revenue. U.S. Investment Recordkeeping Solutions
operating revenues during fourth quarter 2010 were essentially unchanged as
increased revenues from higher retirement participant recordkeeping services,
higher volume of subaccounts serviced and increased distribution support
solutions volumes were offset by decreased shareowner processing revenues from
lower levels of registered accounts.
Financial
Services Segment software license fee revenues are derived principally from DST
Global Solutions (investment management), DST Health Solutions (medical claims
processing) and AWD (business process management - BPM). Operating
revenues include approximately $14.1 million of software license fee revenues
for fourth quarter 2010, an increase of $3.7 million or 35.6% over the same
period in 2009. The increase is primarily due to higher medical
claims, investment management and AWD software license
revenues. While license fee revenues are not a significant percentage
of DST’s total operations, they can significantly impact earnings in the period
in which they are recognized. Revenues and operating results from
individual license sales depend heavily on the timing, size and nature of the
contract.
Costs and
expenses for fourth quarter 2010 were $208.2 million, a decrease of $100,000
from the same period in 2009. Excluding reimbursable operating costs
of $9.4 million and $12.7 million during fourth quarter 2010 and 2009,
respectively, costs and expenses increased $3.2 million or 1.6% during fourth
quarter 2010 to $198.8 million. Deferred compensation costs increased
$2.2 million (the effect of which is offset in other non-operating income) and
foreign currency exchange effects increased costs by approximately $1.7
million.
Depreciation
and amortization expense for fourth quarter 2010 was $20.7 million, a decrease
of $2.1 million as compared to fourth quarter 2009. The decrease in
depreciation and amortization is primarily attributable to a $2.5 million
impairment of internally developed software in 2009.
Financial
Services Segment income from operations for fourth quarter 2010 totaled $73.2
million as compared to $65.1 million in fourth quarter 2009, an increase of $8.1
million or 12.4%. Excluding the impact of the $2.2 million increase
in deferred compensation costs described above, income from operations increased
$10.3 million, primarily from higher software license and healthcare processing
revenues. Operating margin for fourth quarter 2010 was 25.0% as
compared to 23.0% for fourth quarter 2009. Excluding the effect of
the deferred compensation costs described above, operating margin would have
been 26.1% for fourth quarter 2010 as compared to 23.3% for fourth quarter
2009.
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IMMEDIATE RELEASE – February 7, 2011
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Financial
Services Segment Account Statistics:
The
following table summarizes changes in registered accounts and subaccounts
serviced during the three months ended December 31, 2010 (in
millions):
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Registered
Accounts
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Balance
at September 30, 2010
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103.0 | |||
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New
client conversions
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0.2 | |||
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Subaccounting
conversions
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(3.3 | ) | ||
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Organic
decline
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(0.5 | ) | ||
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Balance
at December 31, 2010
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99.4 | |||
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Subaccounts
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Balance
at September 30, 2010
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12.9 | |||
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New
client conversions
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0.6 | |||
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Conversions
from DST's registered accounts
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0.3 | |||
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Organic
growth
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0.5 | |||
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Balance
at December 31, 2010
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14.3 | |||
Total
mutual fund shareowner accounts serviced at December 31, 2010 decreased by 2.2
million accounts or 1.9% from September 30, 2010 to 113.7 million accounts, and
decreased 7.4 million accounts or 6.1% from December 31,
2009. Registered accounts decreased 3.6 million or 3.5% and
subaccounts increased 1.4 million or 10.9% from September 30,
2010. For the year ended December 31, 2010, registered accounts
decreased 10.5 million accounts or 9.6% and subaccounts increased 3.1 million
accounts or 27.7%. Tax-advantaged accounts were 44.6 million at
December 31, 2010, a decrease of 1.1 million accounts or 2.4% as compared to
September 30, 2010 and a decrease of 1.7 million accounts or 3.7% as compared to
December 31, 2009. The decrease in tax-advantaged accounts during the
quarter is primarily attributable to a DST client’s loss of a state’s Section
529 program to a competitor who is not a DST client. Tax-advantaged
accounts represent 44.9% of total registered accounts serviced at December 31,
2010 as compared to 42.1% at December 31, 2009.
The
Company received new client commitments of 200,000 registered accounts that are
expected to convert in second quarter 2011. When combined with
previously announced client commitments, the Company expects approximately
300,000 registered accounts to convert in 2011.
As
previously announced, an existing subaccounting client with approximately
600,000 subaccounts intends to terminate its processing contract in connection
with a corporate merger and convert to a non-DST subaccounting platform in first
quarter 2011.
Projections
of registered accounts converting to subaccounts are based on information
obtained from DST’s clients and are subject to change. Based on
information provided by its clients, the Company currently expects the
subaccounting trend to continue in 2011 and conversions of registered accounts
to subaccounts in 2011 are expected to approximate the levels experienced in
2010. The Company’s current outlook for 2011 includes the expectation
that a client managing a single state Section 529 plan will permit a single
brokerage firm to subaccount approximately 800,000 registered Section 529 plan
accounts. The actual number of accounts estimated to convert to and
from various DST platforms, as well as the timing of those events, is dependent
upon a number of factors. Actual results could differ from the
Company’s estimates.
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IMMEDIATE RELEASE – February 7, 2011
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The
following table summarizes changes in defined contribution participants serviced
during the three months ended December 31, 2010 (in millions):
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Defined
Contribution Participants
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||||
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Balance
at September 30, 2010
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3.9 | |||
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New
client conversions
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0.5 | |||
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Organic
growth
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0.1 | |||
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Balance
at December 31, 2010
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4.5 | |||
Defined
contribution (“DC”) participants were 4.5 million at December 31, 2010, an
increase of 600,000 participants or 15.4% from September 30, 2010 and an
increase of 300,000 participants or 7.1% from December 31, 2009. New
client conversions accounted for the increase from September 30,
2010. The Company has previously reported new client commitments that
will convert approximately 1.4 million new participants from 2011 through 2013,
including 600,000 in the second half of 2011.
Pharmacy
claims paid by Argus during fourth quarter 2010 were 95.7 million, a decrease of
1.2 million claims or 1.2% from the prior year quarter.
DST
Health Solutions covered lives were 22.9 million at December 31, 2010, a
decrease of 100,000 covered lives or 0.4% as compared to September 30, 2010 and
a decrease of 600,000 covered lives or 2.6% as compared to December 31,
2009.
Active
AWD workstations during fourth quarter 2010 were 195,900, an increase of 700
workstations or 0.4% from September 30, 2010 and 2,400 workstations or 1.2% from
December 31, 2009.
Output
Solutions Segment
Excluding
revenues resulting from the consolidation of dsicmm, Output Solutions Segment
operating revenues (excluding out-of-pocket reimbursements) for fourth quarter
2010 were $107.2 million, a decrease of $10.3 million or 8.8% compared to fourth
quarter 2009. On this basis, out-of-pocket reimbursements decreased
$2.1 million or 1.5% in fourth quarter 2010 to $137.9 million.
Excluding
operating volume information for dsicmm, images produced during fourth quarter
2010 were 2.4 billion, a decrease of 900 million images or 27.3% as compared to
fourth quarter 2009. The decline in images produced was primarily
attributable to the previously mentioned loss of a telecommunications client and
from lower images from existing clients, partially offset by images from new
clients. Items mailed during fourth quarter 2010 were 547.0 million,
a decrease of 49.7 million or 8.3% as compared to the same period in
2009. The decrease in items mailed was primarily the result of the
client loss mentioned above, partially offset by volumes from new
clients. Revenue per unit (items mailed and images produced) declined
during the quarter attributable to higher relative volumes from clients with
lower unit pricing. The Company currently anticipates this trend to
continue for the next few quarters.
Output
Solutions received a new client commitment in North America representing, when
fully transitioned, approximately 98 million of aggregate packages annually,
based on current volume levels. Production for this new client is
expected to begin in third quarter 2011. Full conversion of all
applications for this client is expected to be completed by the end of first
quarter 2012.
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Excluding
costs and expenses resulting from the consolidation of dsicmm, Output Solutions
costs and expenses for fourth quarter 2010 were $231.8 million, a decrease of
$11.2 million or 4.6% from the same period in 2009. Excluding
reimbursable operating costs of $137.9 million in fourth quarter 2010 and $140.0
million in fourth quarter 2009, costs and expenses decreased $9.1 million or
8.8% to $93.9 million, reflecting lower material costs and reductions in
staffing levels.
Excluding
depreciation and amortization resulting from the consolidation of dsicmm, Output
Solutions depreciation and amortization expense for fourth quarter 2010 was
$10.6 million, a decrease of $1.3 million or 10.9% primarily due to lower levels
of capital expenditures.
Excluding
an operating loss resulting from the consolidation of dsicmm, Output Solutions
recorded income from operations for fourth quarter 2010 of $2.7 million, an
increase of $100,000 or 3.8% as compared to fourth quarter 2009. On
this basis, operating margin for fourth quarter 2010 was 2.5% as compared to
2.2% for fourth quarter 2009.
Excluding
EBITDA of dsicmm resulting from the consolidation of dsicmm, Output Solutions
EBITDA was $13.3 million, a decrease from 2009 of $1.2 million or 8.3%,
primarily attributable to lower operating revenue.
Total
revenues from dsicmm during fourth quarter 2010 were $37.3 million comprised of
$27.4 million of operating revenues and $9.9 million of out-of-pocket
reimbursement revenue. The Company will begin including dsicmm
operating volume information (images produced and items mailed) in its Output
Solutions Segment operating volume statistics beginning with first quarter
2011. Costs and expenses of dsicmm during the quarter were $37.5
million including integration expenses and certain one-time
charges. Excluding reimbursable operating costs of $9.9 million in
fourth quarter 2010, costs and expenses for dsicmm were $27.6 million in fourth
quarter 2010. Depreciation and amortization expense of dsicmm was
$2.0 million (including approximately $600,000 of intangible asset amortization)
during fourth quarter 2010. Amortization of intangible assets
acquired from dsicmm is estimated to be approximately $2.4 million
annually. dsicmm incurred an operating loss of approximately $2.2
million (including approximately $600,000 of intangible asset amortization
expense) in fourth quarter 2010.
Investments
and Other Segment
Investments
and Other Segment operating revenues decreased $600,000 or 4.2% to $13.8 million
for fourth quarter 2010 as compared to fourth quarter 2009. Income
from operations decreased $1.3 million to $1.7 million, from lower operating
revenues and impairments of certain real estate assets not used in the Company’s
operations in fourth quarter 2010.
Other
Financial Results
Equity
in earnings (losses) of unconsolidated affiliates
The
following table summarizes the Company’s equity in earnings (losses) of
unconsolidated affiliates (in millions):
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Three
Months Ended
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Year
Ended
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December
31,
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December
31,
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2010
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2009
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2010
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2009
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BFDS
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$ | 3.1 | $ | 3.1 | $ | 14.8 | $ | 12.1 | ||||||||
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IFDS
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7.0 | 5.1 | 22.1 | 15.6 | ||||||||||||
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Other
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(0.7 | ) | 0.6 | (0.5 | ) | 5.1 | ||||||||||
| $ | 9.4 | $ | 8.8 | $ | 36.4 | $ | 32.8 | |||||||||
DST’s
equity in BFDS earnings for fourth quarter 2010 was $3.1 million, essentially
unchanged as compared to fourth quarter 2009. Lower occupancy costs
and processing costs from improvements in operations were offset by lower levels
of accounts serviced. Average daily client cash balances invested by
BFDS were $1.2 billion during fourth quarter 2010 compared to $950 million
during fourth quarter 2009 from higher levels of transaction
activity. Average interest rates earned on the balances increased
from 0.12% in fourth quarter 2009 to 0.19% in fourth quarter 2010.
DST’s
equity in IFDS earnings for fourth quarter 2010 increased $1.9 million as
compared to fourth quarter 2009. The increase resulted from higher
levels of shareowner accounts serviced at IFDS U.K. from both new and existing
clients and improvements in operations and higher earnings from unconsolidated
affiliates of IFDS. Shareowner accounts serviced by IFDS U.K. were
7.1 million at December 31, 2010, an increase of 100,000 from September 30, 2010
and an increase of 500,000 accounts from December 31,
2009. Shareowner accounts serviced by IFDS Canada were 10.7 million
at December 31, 2010, unchanged from September 30, 2010 and an increase of
500,000 accounts from December 31, 2009.
Other
income, net
Other
income, net during fourth quarter 2010 increased $2.6 million over fourth
quarter 2009. The increase in other income is attributable to an
increase in unrealized appreciation on trading securities in fourth quarter 2010
as compared to 2009 (the effect of which is offset in costs and expenses in the
Financial Services Segment) and from lower accounts receivable program costs
which were included in interest expense beginning January 1, 2010.
Interest
expense
Interest
expense was $12.4 million for fourth quarter 2010, an increase of $3.8 million
from fourth quarter 2009. The increase is attributable to higher
weighted average interest rates from the Company’s syndicated revolving credit
facility which was renewed on April 16, 2010 and the privately placed senior
notes issued in August 2010, and the recording of accounts receivable
securitization program costs as interest expense beginning January 1, 2010,
partially offset by lower weighted average amounts outstanding.
Income
taxes
The
Company’s tax rate was 35.7% for fourth quarter 2010, a decrease of 0.8% from
fourth quarter 2009. The Company expects its tax rate to be 36.0% in
2011, but this rate will likely vary on a quarterly basis depending on the
timing of estimated 2011 sources of taxable income (e.g. domestic consolidated,
international, and/or joint venture).
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Accounting
Standards
Earnings
Per Share Proposed Accounting Standard
In August
2008, the FASB issued a revised exposure draft, that would amend current
earnings per share accounting guidance to clarify guidance for mandatorily
convertible instruments, the treasury stock method, contingently issuable
shares, and contracts that may be settled in cash or shares. The
final statement has yet to be issued. In April 2009, the FASB decided
to pause the earnings per share project. DST is currently evaluating
the impact of this proposed accounting standard and currently believes that this
proposed amendment would impact the way the Company treats the incremental
shares to be issued from the assumed conversion of the convertible debentures in
calculating diluted earnings per share. The proposed amendment would
require the use of the “if-converted” method from the date of issuance of the
convertible debentures. The proposed amendment would remove the
ability of a company to support the presumption that the convertible securities
will be satisfied in cash and not converted into shares of common
stock. Under this “if converted” method, GAAP diluted earnings per
share would have been $1.92 and $1.06 (versus GAAP reported earnings of $2.00
and $1.18) for the three months ended December 31, 2010 and 2009, respectively,
and $5.95 and $4.15 (versus GAAP reported earnings of $6.73 and $4.84) for the
year ended December 31, 2010 and 2009, respectively. The above
information presents only the effect on diluted earnings per share of the “if
converted” method included in the exposure draft, but does not include any other
computational changes (e.g., treasury stock method considerations) discussed in
the exposure draft. DST is continuing to monitor the FASB’s progress
towards finalizing this proposed accounting standard.
The
proposed change in accounting principles would affect the calculation of diluted
earnings per share during the period the debentures are outstanding, but would
not affect DST’s ability to ultimately settle the convertible debentures in
cash, shares or any combination thereof.
* * * *
*
The
information and comments in this press release may include forward-looking
statements respecting DST and its businesses. Such information and
comments are based on DST’s views as of today, and actual actions or results
could differ. There could be a number of factors, risks,
uncertainties or contingencies that could affect future actions or results,
including but not limited to those set forth in DST’s periodic reports (Form
10-K or 10-Q) filed from time to time with the Securities and Exchange
Commission. All such factors should be considered in evaluating any
forward-looking statements. The Company undertakes no obligation to
update any forward-looking statements in this press release to reflect future
events.
|
FOR
IMMEDIATE RELEASE – February 7, 2011
|
Page
11
|
DST
SYSTEMS, INC.
CONDENSED
CONSOLIDATED STATEMENT OF INCOME
(In
millions, except per share amounts)
(Unaudited)
|
Three
Months Ended
|
Year
Ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Operating
revenues
|
$ | 424.9 | $ | 399.7 | $ | 1,713.6 | $ | 1,595.4 | ||||||||
|
Out-of-pocket
reimbursements
|
155.8 | 151.6 | 614.9 | 622.5 | ||||||||||||
|
Total
revenues
|
580.7 | 551.3 | 2,328.5 | 2,217.9 | ||||||||||||
|
Costs
and expenses
|
485.1 | 445.9 | 1,848.5 | 1,813.2 | ||||||||||||
|
Depreciation
and amortization
|
36.0 | 36.6 | 135.4 | 130.4 | ||||||||||||
|
Income
from operations
|
59.6 | 68.8 | 344.6 | 274.3 | ||||||||||||
|
Interest
expense
|
(12.4 | ) | (13.3 | ) | (46.1 | ) | (42.2 | ) | ||||||||
|
Other
income, net
|
73.9 | 24.5 | 141.7 | 85.1 | ||||||||||||
|
Equity
in earnings of unconsolidated affiliates
|
9.4 | 13.3 | 36.4 | 37.3 | ||||||||||||
|
Income
before income taxes
|
||||||||||||||||
|
and
non-controlling interest
|
130.5 | 93.3 | 476.6 | 354.5 | ||||||||||||
|
Income
taxes
|
38.1 | 34.5 | 159.1 | 112.9 | ||||||||||||
|
Net
income
|
92.4 | 58.8 | 317.5 | 241.6 | ||||||||||||
|
Net
loss attributable to non-controlling interest
|
0.9 | 1.0 | ||||||||||||||
|
Net
income attributable to DST Systems, Inc.
|
$ | 93.3 | $ | 58.8 | $ | 318.5 | $ | 241.6 | ||||||||
|
Average
common shares outstanding
|
46.2 | 49.4 | 46.9 | 49.6 | ||||||||||||
|
Average
diluted shares outstanding
|
46.7 | 49.8 | 47.3 | 50.0 | ||||||||||||
|
Basic
earnings per share
|
$ | 2.02 | $ | 1.19 | $ | 6.78 | $ | 4.87 | ||||||||
|
Diluted
earnings per share
|
$ | 2.00 | $ | 1.18 | $ | 6.73 | $ | 4.84 | ||||||||
|
FOR
IMMEDIATE RELEASE – February 7, 2011
|
Page
12
|
DST
SYSTEMS, INC.
STATEMENT
OF REVENUES BY SEGMENT
(In
millions)
(Unaudited)
|
Three
Months Ended
|
Year
Ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Revenues
|
||||||||||||||||
|
Financial
Services
|
||||||||||||||||
|
Operating
|
$ | 292.7 | $ | 283.5 | $ | 1,156.7 | $ | 1,115.2 | ||||||||
|
OOP
reimbursements
|
9.4 | 12.7 | 44.6 | 54.3 | ||||||||||||
| $ | 302.1 | $ | 296.2 | $ | 1,201.3 | $ | 1,169.5 | |||||||||
|
Output
Solutions
|
||||||||||||||||
|
Operating
|
$ | 134.6 | $ | 117.5 | $ | 564.1 | $ | 482.3 | ||||||||
|
OOP
reimbursements
|
147.8 | 140.0 | 575.8 | 571.5 | ||||||||||||
| $ | 282.4 | $ | 257.5 | $ | 1,139.9 | $ | 1,053.8 | |||||||||
|
Investments
and Other
|
||||||||||||||||
|
Operating
|
$ | 13.8 | $ | 14.4 | $ | 57.8 | $ | 59.4 | ||||||||
|
OOP
reimbursements
|
0.1 | 0.3 | 0.4 | 0.7 | ||||||||||||
| $ | 13.9 | $ | 14.7 | $ | 58.2 | $ | 60.1 | |||||||||
|
Eliminations
|
||||||||||||||||
|
Operating
|
$ | (16.2 | ) | $ | (15.7 | ) | $ | (65.0 | ) | $ | (61.5 | ) | ||||
|
OOP
reimbursements
|
(1.5 | ) | (1.4 | ) | (5.9 | ) | (4.0 | ) | ||||||||
| $ | (17.7 | ) | $ | (17.1 | ) | $ | (70.9 | ) | $ | (65.5 | ) | |||||
|
Total
Revenues
|
||||||||||||||||
|
Operating
|
$ | 424.9 | $ | 399.7 | $ | 1,713.6 | $ | 1,595.4 | ||||||||
|
OOP
reimbursements
|
155.8 | 151.6 | 614.9 | 622.5 | ||||||||||||
| $ | 580.7 | $ | 551.3 | $ | 2,328.5 | $ | 2,217.9 | |||||||||
|
FOR
IMMEDIATE RELEASE – February 7, 2011
|
Page
13
|
DST
SYSTEMS, INC.
STATEMENT
OF INCOME FROM OPERATIONS BY SEGMENT
(In
millions)
(Unaudited)
|
Three
Months Ended
|
Year
Ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Income
(loss) from operations
|
||||||||||||||||
|
Financial
Services
|
$ | 71.0 | $ | 65.1 | $ | 273.6 | $ | 248.6 | ||||||||
|
Output
Solutions
|
(0.8 | ) | 2.6 | 78.8 | 22.7 | |||||||||||
|
Investments
and Other
|
(8.5 | ) | 3.0 | 0.1 | 10.7 | |||||||||||
|
Elimination
Adjustments
|
(2.1 | ) | (1.9 | ) | (7.9 | ) | (7.7 | ) | ||||||||
| $ | 59.6 | $ | 68.8 | $ | 344.6 | $ | 274.3 | |||||||||
DST
SYSTEMS, INC.
OTHER
SELECTED FINANCIAL INFORMATION
(In
millions)
(Unaudited)
|
December
31,
|
December
31,
|
|||||||
|
Selected
Balance Sheet Information
|
2010
|
2009
|
||||||
|
Cash
and cash equivalents
|
$ | 140 | $ | 106 | ||||
|
Debt
|
1,209 | 1,222 | * | |||||
|
*
Does not include $125.0 million from the accounts receivable
securitization program, which was not treated as debt at December 31,
2009, but was required to be treated as debt on January 1,
2010.
|
||||||||
|
Year
Ended
December
31,
|
||||||||
|
Capital
Expenditures, by Segment
|
2010
|
2009
|
||||||
|
Financial
Services
|
$ | 53 | $ | 60 | ||||
|
Output
Solutions
|
18 | 43 | ||||||
|
Investments
and Other
|
10 | 15 | ||||||
|
FOR
IMMEDIATE RELEASE – February 7, 2011
|
Page
14
|
DST
Systems, Inc.
Description
of Non-GAAP Adjustments
In
addition to reporting operating income, pretax income, net income attributable
to DST Systems, Inc. and earnings per share on a GAAP basis, DST has also made
certain non-GAAP adjustments that are described below and are reconciled to the
corresponding GAAP measures in the attached financial schedules titled
“Reconciliation of Reported Results to Income Adjusted for Certain Non-GAAP
Items” that accompany this earnings release. DST’s use of non-GAAP
adjustments is further described in the section entitled “Use of Non-GAAP
Financial Information.”
The
following items, which occurred during the quarter ended December 31, 2010, have
been treated as non-GAAP adjustments:
|
|
·
|
Termination
benefit expenses of $3.5 million associated with reductions in workforce
in the Financial Services Segment ($2.2 million) and the Output Solutions
Segment ($1.3 million), which were included in costs and
expenses. The aggregate income tax benefit associated with
these costs was approximately $1.3
million.
|
|
|
·
|
Expenses
and net gains related to securities and other
investments. Expenses were associated with a charitable
donation of marketable securities in the amount of $10.2 million by the
Investments and Other Segment, which was included in costs and
expenses. The $27.1 million of net gains on securities and
other investments, which were included in other income, net, for the
fourth quarter 2010 was comprised of net realized gains from dispositions
of available-for-sale securities of $25.2 million and net gains on private
equity funds and other investments of $2.5 million, partially offset by
other than temporary impairments on available-for-sale securities of
$600,000. The aggregate income tax expense associated with the
expenses and net gains was approximately $2.7
million.
|
|
|
·
|
Dividend
income from a private equity investment of $46.5 million, which was
included in other income, net. The gross amount of the dividend
was $49.5 million, but approximately $3.0 million of the dividend was
applied to the Company’s cost basis investment. Approximately
50% of the dividend was estimated to qualify for the dividends received
deduction. The income tax expense associated with this dividend
was approximately $11.7 million.
|
|
|
·
|
Net
loss, in the amount of $5.4 million, associated with the repurchase of
senior convertible debentures, which was included in other income,
net. The income tax benefit associated with this net loss was
approximately $2.1 million.
|
In
addition to the items that occurred in the quarter ended December 31, 2010 as
described above, the following items, which occurred during the nine months
ended September 30, 2010, have been previously reported as non-GAAP
adjustments:
|
|
·
|
Contract
termination payment net of certain other costs resulting from the
termination of a Financial Services subaccounting client, in the amount of
$7.5 million. The net contract termination gain was comprised
of operating revenues of $9.1 million, partially offset by certain other
costs of $1.6 million that were included in costs and
expenses. The aggregate income tax expense associated with this
net contract termination gain was approximately $2.9
million.
|
|
FOR
IMMEDIATE RELEASE – February 7, 2011
|
Page
15
|
|
|
·
|
Contract
termination payment resulting from the termination of an Output Solutions
client, in the amount of $1.3 million, included in operating
revenues. The aggregate income tax expense associated with this
contract termination gain was approximately
$500,000.
|
|
|
·
|
Contract
termination payment, net of termination benefit expenses and asset
impairment charges resulting from the termination of an Output Solutions
telecommunications client, in the amount of $58.4 million. The
net contract termination gain was comprised of operating revenues of $63.0
million, partially offset by termination benefit expenses of $1.5 million
that were included in costs and expenses and asset impairment charges of
$3.1 million which are included in depreciation and amortization
expense. The aggregate income tax expense associated with this
net contract termination gain was approximately $22.8
million.
|
|
|
·
|
Termination
benefit expenses of $17.4 million associated with reductions in workforce
in the Financial Services Segment ($12.1 million) and the Output Solutions
Segment ($5.3 million), which were included in costs and
expenses. The aggregate income tax benefit associated with
these costs was approximately $6.9
million.
|
|
|
·
|
Other
net gain, in the amount of $43.7 million, associated with gains (losses)
related to securities and other investments, which were included in other
income, net. The income tax expense associated with this net
gain was approximately $17.0 million. The $43.7 million of net
gain on securities and other investments for the nine months ended
September 30, 2010 was comprised of net realized gains from sales of
available-for-sale securities of $41.8 million and net gains on private
equity funds and other investments of $2.6 million, partially offset by
other than temporary impairments on available-for-sale securities of
$700,000.
|
|
|
·
|
Dividend
from a private equity investment of $8.3 million, which was included in
other income, net. A portion of the dividend was estimated to
qualify for the dividends received deduction. The income tax
expense associated with this dividend was approximately $1.0
million.
|
|
|
·
|
Net
loss, in the amount of $1.0 million, associated with the repurchase of
senior convertible debentures, which was included in other income,
net. The income tax benefit associated with this net loss was
approximately $300,000.
|
|
|
·
|
An
income tax benefit of approximately $2.3 million related to the release of
a valuation allowance previously established on deferred income tax assets
of DST Output Limited (U.K.) resulting from the acquisition of dsicmm
Group. Innovative Output Solutions Limited (“IOS”) was the
beneficiary of this income tax benefit, and accordingly DST’s share of the
benefit was 70.5% or $1.6 million. The remaining portion of the
income tax benefit (29.5% or $700,000) was attributed to the
non-controlling interest.
|
The
following items, which occurred during the quarter ended December 31, 2009, have
been treated as non-GAAP adjustments:
|
|
·
|
Interest
expense, in the amount of $4.7 million, associated with financing costs
from the convertible senior debenture exchange transactions completed in
October and November 2009. The income tax benefit associated
with these financing costs was approximately $1.9
million.
|
|
|
·
|
Other
net gain, in the amount of $21.4 million, associated with gains (losses)
related to securities and other investments, which were included in other
income, net. The income tax
expense
|
|
FOR
IMMEDIATE RELEASE – February 7, 2011
|
Page
16
|
| associated with this net gain was approximately $8.3 million. The $21.4 million of net gain on securities and other investments for fourth quarter 2009 was comprised of net realized gains from sales of available-for-sale securities of $20.4 million and net gains on private equity funds and other investments of $1.5 million, and other than temporary impairments on available-for-sale securities and other investments of $500,000. | ||
|
|
·
|
Increased
equity in earnings of unconsolidated affiliates, in the amount of $4.5
million, associated with a gain on the change in equity interest of a
subsidiary investment held by IFDS, L.P. The income tax expense
associated with this gain was approximately $1.8
million. During fourth quarter 2009, an equity method
investment held by IFDS, L.P. was consolidated requiring the existing
equity interest held by IFDS, L.P. to be remeasured to fair
value. This remeasurement to fair value resulted in a $9.0
million gain being recorded by IFDS,
L.P.
|
In
addition to the items that occurred in the quarter ended December 31, 2009 as
described above, the following items, which occurred during the nine months
ended September 30, 2009, have been previously reported as non-GAAP
adjustments:
|
|
·
|
Gain
on equity interest in Argus Health Systems, Inc. (“Argus”), in the amount
of $41.7 million, included in other income, net associated with DST’s
purchase of the remaining 50% interest of Argus on March 31, 2009 for
$57.0 million in cash. As required by generally accepted
accounting principles, the Company adopted the new business combinations
accounting guidance on January 1, 2009. In accordance with the
guidance, the acquisition of the remaining 50% of Argus was treated as a
step acquisition. Accordingly, DST remeasured its previously
held equity interest in Argus to fair value and recorded a $41.7 million
gain. In addition, the Company recorded an income tax benefit
associated with this transaction of approximately $900,000 related to the
elimination of deferred tax liabilities previously established for equity
in earnings of Argus. In accordance with authoritative income
tax accounting guidance, no income taxes were recorded on the $41.7
million gain on equity interest in
Argus.
|
|
|
·
|
Other
net loss, in the amount of $4.2 million, associated with gains (losses)
related to securities and other investments, which were included in other
income, net. The income tax benefit associated with this net
loss was approximately $1.4 million. The $4.2 million of net
loss on securities and other investments for the nine months ended
September 30, 2009 was comprised of net realized gains from sales of
available-for-sale securities of $25.9 million, net losses on private
equity funds and other investments of $3.3 million and other than
temporary impairments on available-for-sale securities of $26.8
million.
|
|
|
·
|
Gain
in the amount of $5.9 million, associated with the repurchase of senior
convertible debentures, which was included in other income,
net. The income tax expense associated with this gain was
approximately $2.2 million.
|
|
|
·
|
An
income tax benefit of approximately $5.7 million resulting from a
reduction in income tax related liabilities principally associated with
the completion of an IRS examination in February 2009 for the tax years
ended December 31, 2002 through
2005.
|
|
FOR
IMMEDIATE RELEASE – February 7, 2011
|
Page
17
|
DST
SYSTEMS, INC.
RECONCILIATION
OF REPORTED RESULTS TO INCOME ADJUSTED FOR CERTAIN NON-GAAP ITEMS
Three
Months Ended December 31,
(Unaudited
- in millions, except per share amounts)
|
2010
|
||||||||||||||||||||
|
Operating
|
Pretax
|
Net
|
DST
|
Diluted
|
||||||||||||||||
|
Income
|
Income
|
Income
|
Earnings*
|
EPS
|
||||||||||||||||
|
Reported
GAAP income
|
$ | 59.6 | $ | 130.5 | $ | 92.4 | $ | 93.3 | $ | 2.00 | ||||||||||
|
Adjusted
to remove:
|
||||||||||||||||||||
|
Included
in operating income:
|
||||||||||||||||||||
|
Termination
benefit expenses - Financial Services
|
2.2 | 2.2 | 1.4 | 1.4 | 0.03 | |||||||||||||||
|
Termination
benefit expenses - Output Solutions
|
1.3 | 1.3 | 0.8 | 0.8 | 0.02 | |||||||||||||||
|
Included
in oper. income and non-oper. income:
|
||||||||||||||||||||
|
Net
gain on the disposition of
|
||||||||||||||||||||
|
securities
and other investments
|
10.2 | (16.9 | ) | (14.2 | ) | (14.2 | ) | (0.30 | ) | |||||||||||
|
Included
in non-operating income:
|
||||||||||||||||||||
|
Dividend
from a private equity investment
|
(46.5 | ) | (34.8 | ) | (34.8 | ) | (0.75 | ) | ||||||||||||
|
Net
loss on repurchase of convertible debentures
|
5.4 | 3.3 | 3.3 | 0.07 | ||||||||||||||||
|
Adjusted
Non-GAAP income
|
$ | 73.3 | $ | 76.0 | $ | 48.9 | $ | 49.8 | $ | 1.07 | ||||||||||
|
2009
|
||||||||||||||||||||
|
Operating
|
Pretax
|
Net
|
DST
|
Diluted
|
||||||||||||||||
|
Income
|
Income
|
Income
|
Earnings*
|
EPS
|
||||||||||||||||
|
Reported
GAAP income
|
$ | 68.8 | $ | 93.3 | $ | 58.8 | $ | 58.8 | $ | 1.18 | ||||||||||
|
Adjusted
to remove:
|
||||||||||||||||||||
|
Included
in non-operating income:
|
||||||||||||||||||||
|
Financing
costs associated with the convertible
|
||||||||||||||||||||
|
debenture
exchange transactions
|
4.7 | 2.8 | 2.8 | 0.05 | ||||||||||||||||
|
Net
gain on securities and other investments
|
(21.4 | ) | (13.1 | ) | (13.1 | ) | (0.26 | ) | ||||||||||||
|
Gain
on change in equity interest of a subsidiary
|
||||||||||||||||||||
|
investment
held by an unconsolidated affiliate
|
(4.5 | ) | (2.7 | ) | (2.7 | ) | (0.05 | ) | ||||||||||||
|
Adjusted
Non-GAAP income
|
$ | 68.8 | $ | 72.1 | $ | 45.8 | $ | 45.8 | $ | 0.92 | ||||||||||
Note: See the Description of
Non-GAAP Adjustments section for a description of each of the above adjustments
and see the Use of Non-GAAP Financial Information section for management's
reasons for providing non-GAAP financial
information.
|
*
|
DST
Earnings has been defined as "Net income attributable to DST Systems,
Inc." (taking into account the loss attributable
to non-controlling interest).
|
|
FOR
IMMEDIATE RELEASE – February 7, 2011
|
Page
18
|
DST
SYSTEMS, INC.
RECONCILIATION
OF REPORTED RESULTS TO INCOME ADJUSTED FOR CERTAIN NON-GAAP ITEMS
Year
Ended December 31,
(Unaudited
- in millions, except per share amounts)
|
2010
|
||||||||||||||||||||
|
Operating
|
Pretax
|
Net
|
DST
|
Diluted
|
||||||||||||||||
|
Income
|
Income
|
Income
|
Earnings*
|
EPS
|
||||||||||||||||
|
Reported
GAAP income
|
$ | 344.6 | $ | 476.6 | $ | 317.5 | $ | 318.5 | $ | 6.73 | ||||||||||
|
Adjusted
to remove:
|
||||||||||||||||||||
|
Included
in operating income:
|
||||||||||||||||||||
|
Contract
termination payment, net - Financial Serv.
|
(7.5 | ) | (7.5 | ) | (4.6 | ) | (4.6 | ) | (0.10 | ) | ||||||||||
|
Contract
termination payment, net - Output Sol.
|
(59.7 | ) | (59.7 | ) | (36.4 | ) | (36.4 | ) | (0.77 | ) | ||||||||||
|
Termination
benefit expenses - Financial Services
|
14.3 | 14.3 | 8.7 | 8.7 | 0.18 | |||||||||||||||
|
Termination
benefit expenses - Output Solutions
|
6.6 | 6.6 | 4.0 | 4.0 | 0.09 | |||||||||||||||
|
Included
in oper. income and non-oper. income:
|
||||||||||||||||||||
|
Net
gain on the disposition of
|
||||||||||||||||||||
|
securities
and other investments
|
10.2 | (60.6 | ) | (40.9 | ) | (40.9 | ) | (0.87 | ) | |||||||||||
|
Included
in non-operating income:
|
||||||||||||||||||||
|
Dividend
from a private equity investment
|
(54.7 | ) | (42.1 | ) | (42.1 | ) | (0.89 | ) | ||||||||||||
|
Net
loss on repurchase of convertible debentures
|
6.4 | 4.0 | 4.0 | 0.09 | ||||||||||||||||
|
Release
of an int'l income tax valuation allowance
|
(2.3 | ) | (1.6 | ) | (0.03 | ) | ||||||||||||||
|
Adjusted
Non-GAAP income
|
$ | 308.5 | $ | 321.4 | $ | 207.9 | $ | 209.6 | $ | 4.43 | ||||||||||
|
2009
|
||||||||||||||||||||
|
Operating
|
Pretax
|
Net
|
DST
|
Diluted
|
||||||||||||||||
|
Income
|
Income
|
Income
|
Earnings*
|
EPS
|
||||||||||||||||
|
Reported
GAAP income
|
$ | 274.3 | $ | 354.5 | $ | 241.6 | $ | 241.6 | $ | 4.84 | ||||||||||
|
Adjusted
to remove:
|
||||||||||||||||||||
|
Included
in non-operating income:
|
||||||||||||||||||||
|
Financing
costs associated with the convertible
|
||||||||||||||||||||
|
debenture
exchange transactions
|
4.7 | 2.8 | 2.8 | 0.05 | ||||||||||||||||
|
Gain
on equity interest in Argus Health Systems
|
(41.7 | ) | (42.6 | ) | (42.6 | ) | (0.85 | ) | ||||||||||||
|
Net
gains on securities and other investments
|
(17.2 | ) | (10.3 | ) | (10.3 | ) | (0.21 | ) | ||||||||||||
|
Gain
on repurchase of convertible debentures
|
(5.9 | ) | (3.7 | ) | (3.7 | ) | (0.07 | ) | ||||||||||||
|
Gain
on change in equity interest of a subsidiary
|
||||||||||||||||||||
|
investment
held by an unconsolidated affiliate
|
(4.5 | ) | (2.7 | ) | (2.7 | ) | (0.05 | ) | ||||||||||||
|
Reduction
in income tax related liabilities
|
(5.7 | ) | (5.7 | ) | (0.12 | ) | ||||||||||||||
|
Adjusted
Non-GAAP income
|
$ | 274.3 | $ | 289.9 | $ | 179.4 | $ | 179.4 | $ | 3.59 | ||||||||||
Note: See the Description of
Non-GAAP Adjustments section for a description of each of the above adjustments
and see the Use of Non-GAAP Financial Information section for management's
reasons for providing non-GAAP financial
information.
|
*
|
DST
Earnings has been defined as "Net income attributable to DST Systems,
Inc." (taking into account the loss attributable
to non-controlling interest).
|
|
FOR
IMMEDIATE RELEASE – February 7, 2011
|
Page
19
|
DST
SYSTEMS, INC.
RECONCILATION
OF INCOME FROM OPERATIONS TO EBITDA
OUTPUT
SOLUTIONS SEGMENT
(Unaudited
- in millions)
|
Three
Months Ended
|
Year
Ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Reported
GAAP income from operations
|
$ | (0.8 | ) | $ | 2.6 | $ | 78.8 | $ | 22.7 | |||||||
|
Adjusted
to remove:
|
||||||||||||||||
|
Depreciation
and amortization
|
12.6 | 11.9 | 47.8 | 41.5 | ||||||||||||
|
EBITDA,
before non-GAAP items
|
11.8 | 14.5 | 126.6 | 64.2 | ||||||||||||
|
Adjusted
to remove:
|
||||||||||||||||
|
Contract
termination payment, net of expenses *
|
(62.8 | ) | ||||||||||||||
|
Termination
benefit expenses
|
1.3 | 6.6 | ||||||||||||||
|
EBITDA,
after non-GAAP items
|
$ | 13.1 | $ | 14.5 | $ | 70.4 | $ | 64.2 | ||||||||
|
*
|
The
year ended December 31, 2010 excludes non-GAAP asset impairment charges of
$3.1
million.
|
|
Note: See the
Description of Non-GAAP Adjustments section for a description of each of
the above adjustments and see the Use of Non-GAAP Financial Information
section for management's reasons for providing non-GAAP financial
information.
|