DST SYSTEMS, INC. KANSAS CITY, Mo., Jan. 29, 2015 /PRNewswire/ -- DST Systems, Inc. (NYSE: DST) reported consolidated net income of $255.1 million ($6.65 per diluted share) for the fourth quarter 2014 compared to $84.0 million ($1.97 per diluted share) for the fourth quarter 2013. Consolidated net income for the year ended December 31, 2014 was $593.3 million ($14.66 per diluted share) compared to $352.6 million ($8.00 per diluted share) for the year ended December 31, 2013.
Taking into account certain non-GAAP adjustments, consolidated net income was $66.4 million ($1.73 per diluted share) for fourth quarter 2014 compared to $57.0 million ($1.34 per diluted share) for fourth quarter 2013, and $224.6 million ($5.55 per diluted share) for the year ended December 31, 2014 compared to $201.1 million ($4.57 per diluted share) for the year ended December 31, 2013.
"Every group in the DST enterprise contributed to the success of our Company in 2014 which is evidenced by our strong growth in operating revenues, operating income and EPS," said Steve Hooley, Chairman, CEO and President of DST. "We have made several organizational changes to consolidate and centralize certain functions within our business and these changes have helped us gain more consistency and efficiency in supporting our customers. I believe the combination of our people, our solutions and our industry expertise will provide us with continued new opportunities for our business in 2015 and beyond."
Consolidated Financial Highlights
Operating Results
Fourth quarter 2014 diluted earnings per share of $1.73 increased $0.39 or 29.1% from fourth quarter 2013, taking into account non-GAAP adjustments, principally from the following:
-- Consolidated operating revenues (excluding out-of-pocket reimbursements)
increased $16.6 million or 3.3% to $516.7 million, as compared to fourth
quarter 2013.
-- Consolidated income from operations increased $4.9 million or 5.5% to
$93.5 million, as compared to fourth quarter 2013.
-- Equity in earnings of unconsolidated affiliates increased $6.1 million
to $10.2 million, as compared to fourth quarter 2013.
-- The tax rate for fourth quarter 2014 was 33.3%, a decrease as compared
to 38.2% in fourth quarter 2013, primarily due to an increase in the
proportion of earnings related to international operations in 2014.
-- Weighted average diluted shares outstanding for fourth quarter 2014 were
38.4 million, a decrease of 4.2 million shares or 9.9% from fourth
quarter 2013, primarily as a result of share repurchases.
Sale of DST Global Solutions Ltd.
-- As previously announced, effective November 30, 2014, DST sold its
wholly-owned subsidiary, DST Global Solutions Ltd. ("Global Solutions")
for cash consideration of $95.0 million, subject to customary working
capital post-closing adjustments. Global Solutions is a provider of
stand-alone software for investment managers. DST's operating revenues
from the Global Solutions businesses sold were approximately $61.4
million for the eleven months ended November 30, 2014. The Company
recorded a pretax gain of $100.5 million on the sale during the fourth
quarter 2014, which has been treated as a non-GAAP adjustment.
Monetization, Share Repurchase and Dividend Activities
-- DST received $103.6 million of pretax cash proceeds from the
monetization of investment assets during fourth quarter 2014, consisting
of $93.1 million from sales of marketable securities (including $91.3
million from the sale of 1.2 million shares of State Street Corporation)
and $10.5 million from private equity investment distributions.
-- During the fourth quarter 2014, the Company spent $107.9 million to
repurchase approximately 1.2 million shares of DST common stock. During
January 2015, the Company spent $50.0 million to purchase 525,000 shares
which completed the existing share repurchase plan. On January 28, 2015,
the Board of Directors of DST authorized a new $250.0 million share
repurchase plan.
-- During the fourth quarter 2014, DST paid a dividend of $0.30 per share.
Additionally, on January 28, 2015, the Board of Directors of DST
declared a quarterly cash dividend of $0.30 per share on its common
stock, payable on March 13, 2015, to shareholders of record at close of
business on February 27, 2015.
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 "Reconciliation of Reported Results to Non-GAAP Results."
Segment Results
Financial Services Segment
Operating revenues for the Financial Services Segment (excluding out-of-pocket reimbursements) for fourth quarter 2014 increased $6.3 million or 2.4% to $264.3 million as compared to fourth quarter 2013. The increase in operating revenues was primarily driven by net positive fund flows and overall positive market conditions which have contributed to the growth of assets under management within the ALPS proprietary funds and increases in other ALPS distribution and service revenues. Operating revenues also increased due to higher professional services revenue within Retirement Solutions, as well as organic and new client growth within Brokerage Solutions. These increases in operating revenues were partially offset by decreases in software license revenue, Global Solutions revenue, and mutual fund registered shareholder account processing revenue. Software license revenues decreased $3.0 million in fourth quarter 2014 as compared to the same period of the prior year. The Global Solutions business, which was sold as of November 30, 2014, contributed $11.7 million of operating revenues for the two months owned during the fourth quarter 2014, as compared to $19.1 million during the three months ended December 31, 2013, resulting in $7.4 million lower operating revenues in fourth quarter 2014. Mutual fund registered shareowner account processing continues to decline primarily as a result of subaccounting conversions.
Financial Services Segment income from operations decreased $2.9 million or 5.0% during fourth quarter 2014 to $54.8 million as compared to fourth quarter 2013. The decrease was partially due to the sale of Global Solutions which had $0.6 million less operating income as a result of only having two months of operations in the fourth quarter 2014. Global Solutions contributed $3.7 million of income from operations during fourth quarter 2014 as compared to $4.3 million during fourth quarter 2013. Income from operations was also lower due to lower software license sales, increased processing costs to support the incremental processing revenues, as well as increased risk, compliance and security costs. Costs were also higher as a result of new business initiatives as DST expands its ALPS asset gathering, Applied Analytics and Brokerage Solutions service offerings. These incremental costs are partially offset by higher operating revenues as discussed above. Operating margin for fourth quarter 2014 was 20.7% as compared to 22.4% in 2013. Excluding deferred compensation costs (which are offset within other income), the operating margin was 21.1% for fourth quarter 2014 as compared to 23.8% for fourth quarter 2013.
Total mutual fund shareowner accounts decreased by 0.4 million to 97.4 million accounts during fourth quarter 2014. Registered shareowner accounts processed at December 31, 2014 were 68.8 million, a decrease of 0.6 million accounts from September 30, 2014 and a decrease of 2.4 million accounts from December 31, 2013. For the year ended December 31, 2014, 2.5 million registered accounts converted to subaccounts. Consistent with our prior estimates, conversion of registered accounts to subaccounts during 2015 is currently estimated to be four to five million accounts. The number of accounts estimated to convert from various DST platforms is based upon information obtained from clients. There are a variety of factors that affect the number and timing of registered accounts converted to subaccounts.
Healthcare Services Segment
Healthcare Services Segment operating revenues (excluding out-of-pocket reimbursements) during fourth quarter 2014 increased $11.2 million or 12.4% to $101.8 million as compared to fourth quarter 2013. The improvement in operating revenue is primarily attributable to increased Medicare, Medicaid, discount card and healthcare exchange pharmacy claim processing. Medical claims transaction processing from new and existing business process outsourcing clients also contributed to the increased operating revenues.
Healthcare Services Segment income from operations increased $3.2 million or 16.2% during fourth quarter 2014 to $23.0 million primarily due to higher operating revenues, partially offset by increased staffing costs incurred to service the increased transaction volumes. Operating margin for fourth quarter 2014 was 22.6% as compared to 21.9% in the fourth quarter 2013. Operating margins are generally higher in the fourth quarter, as compared to the full year operating margins of 14.9% in 2014 and 15.7% in 2013.
Customer Communications Segment
Customer Communications Segment operating revenues (excluding out-of-pocket reimbursements) were $163.3 million in fourth quarter 2014, an increase of $1.3 million from fourth quarter 2013. North America operating revenues increased $1.0 million, or 0.9%, to $114.6 million in fourth quarter 2014 primarily due to increased volumes from new clients, partially offset by decreased volumes from existing clients. U.K. operating revenues increased $0.3 million, or 0.6%, to $48.7 million in fourth quarter 2014.
Customer Communications Segment income from operations increased $5.5 million during fourth quarter 2014 to $15.1 million. Operating income in North America increased $2.6 million to $13.4 million and operating income in the U.K. increased $2.9 million to $1.7 million as compared to the same period in 2013. Higher operating revenues and lower equipment and depreciation costs in North America were partially offset by increased costs from higher variable expenses due to the processing for a new client beginning in November 2014 which is expected to be among the largest customers for the Segment once fully converted. The increase in U.K. operating income is the result of higher revenues, reductions in overall operating costs and lower depreciation. Customer Communications Segment operating margin for fourth quarter 2014 was 9.2% as compared to 5.9% in 2013. North America operating margin was 11.7% in fourth quarter 2014 as compared to 9.5% in fourth quarter 2013, while the U.K. operating margin was a positive 3.5% in fourth quarter 2014 as compared to a negative 2.5% in fourth quarter 2013.
Investments and Other Segment
Investments and Other Segment operating revenues for fourth quarter 2014 decreased $0.9 million, or 6.5%, as compared to fourth quarter 2013. Investments and Other Segment income from operations decreased $0.7 million during fourth quarter 2014 to $2.8 million primarily from prior period sales of real estate assets which were occupied by third parties.
Other Financial Results
Equity in earnings of unconsolidated affiliates
The following table summarizes the Company's equity in earnings of unconsolidated affiliates (in millions):
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2014 2013 2014 2013
---- ---- ---- ----
BFDS $0.6 $2.1 $5.1 $7.1
IFDS 8.8 0.8 19.1 3.4
Other 0.8 1.2 5.5 5.1
--- ---
$10.2 $4.1 $29.7 $15.6
Overall equity in earnings of unconsolidated affiliates increased primarily from higher earnings from IFDS, partially offset by lower earnings from BFDS and other investments. BFDS equity in earnings declined from fourth quarter 2013 primarily due to lower shareowner processing revenues, which were partially offset by increased revenues from other ancillary services. Favorable reductions in BFDS operating expenses were largely offset by investments in ancillary product offerings, the timing of commission expenses and severance costs incurred as a result of actions taken during the fourth quarter of 2014.
The increase in IFDS equity in earnings from fourth quarter 2013 is primarily the result of revenues recognized related to the ongoing conversion and processing services for the previously announced new wealth management clients in the U.K. These multi-year implementation efforts for the two new clients are continuing to progress as various phases of each project are completed. Earnings will continue to be impacted by the rate of progress related to the conversions and therefore may not be consistent period to period throughout the implementation and conversion process. IFDS continues to incur significant costs to develop the new wealth management platform for the U.K market and to expand its infrastructure to prepare for the addition of these new clients and associated services offerings.
Use of Non-GAAP Financial Information
In addition to reporting financial information on a GAAP basis, DST has disclosed non-GAAP financial information which has been reconciled to the corresponding GAAP measures in the following financial schedules titled "Reconciliation of Reported Results to Non-GAAP Results." In making these adjustments to determine the non-GAAP results, 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 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 financial information calculated in accordance with GAAP. Therefore, management typically uses non-GAAP measures in conjunction with GAAP results. These factors should be considered when evaluating DST's results.
Safe Harbor Statement
Certain material presented in the press release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, (i) all statements, other than statements of historical fact, included in this press release that address activities, events or developments that we expect or anticipate will or may occur in the future or that depend on future events, or (ii) statements about our future business plans and strategy and other statements that describe the Company's outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance. Whenever used, words such as "may," "will," "would," "should," "potential," "strategy," "anticipates," "estimates," "expects," "project," "predict," "intends," "plans," "believes," "targets" and other terms of similar meaning are intended to identify such forward-looking statements. Forward-looking statements are uncertain and to some extent unpredictable, and involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such forward-looking statements. Factors that could cause results to differ materially from those anticipated include, but are not limited to, the risk factors and cautionary statements included in the Company's periodic and current reports (Forms 10-K, 10-Q and 8-K) 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 new information, future events or otherwise.
DST SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2014 2013 2014 2013
---- ---- ---- ----
Operating revenues $516.7 $500.1 $2,042.0 $1,960.6
Out-of-pocket
reimbursements 189.8 167.2 707.3 698.0
----- ----- ----- -----
Total revenues 706.5 667.3 2,749.3 2,658.6
Costs and expenses 586.3 544.8 2,309.4 2,202.1
Depreciation and
amortization 33.5 42.9 131.0 143.3
---- ---- ----- -----
Income from operations 86.7 79.6 308.9 313.2
Interest expense (6.6) (7.2) (26.6) (34.5)
Gain on sale of
business 100.5 - 100.5 -
Other income, net 91.2 68.2 373.5 243.2
Equity in earnings of
unconsolidated
affiliates 10.2 4.1 35.4 23.0
---- --- ---- ----
Income before income
taxes 282.0 144.7 791.7 544.9
Income taxes 26.9 60.7 198.4 192.3
---- ---- ----- -----
Net income $255.1 $84.0 $593.3 $352.6
====== ===== ====== ======
Weighted average common
shares outstanding 37.9 42.1 40.0 43.2
Weighted average
diluted shares
outstanding 38.4 42.6 40.5 44.1
Basic earnings per
share $6.72 $2.00 $14.82 $8.15
Diluted earnings per
share $6.65 $1.97 $14.66 $8.00
Cash dividends per
share of common stock $0.30 $0.30 $1.20 $1.20
DST SYSTEMS, INC.
SEGMENT FINANCIAL INFORMATION
(In millions) (Unaudited)
Three Months Ended December 31, 2014
------------------------------------
Financial Healthcare Customer
Services Communications Investments / Elimination Consolidated
Services Other Adjustments Total
-------- ----- ----------- -----
Operating revenues $251.6 $101.8 $160.9 $2.4 $ - $516.7
Intersegment operating
revenues 12.7 - 2.4 10.6 (25.7) -
Out-of-pocket
reimbursements 13.9 1.9 176.3 0.1 (2.4) 189.8
---- --- ----- --- ---- -----
Total revenues 278.2 103.7 339.6 13.1 (28.1) 706.5
Costs and expenses 209.3 75.6 317.9 8.8 (25.3) 586.3
Depreciation and
amortization 17.3 5.1 9.7 2.0 (0.6) 33.5
---- --- --- --- ---- ----
Income from operations $51.6 $23.0 $12.0 $2.3 $(2.2) $86.7
===== ===== ===== ==== ===== =====
Capital expenditures $24.2 $2.6 $9.4 $0.7 $ - $36.9
Three Months Ended December 31, 2013
------------------------------------
Financial Healthcare Customer
Services Communications Investments / Elimination Consolidated
Services Other Adjustments Total
-------- ----- ----------- -----
Operating revenues $246.2 $90.6 $160.1 $3.2 $ - $500.1
Intersegment operating
revenues 11.8 - 1.9 10.7 (24.4) -
Out-of-pocket
reimbursements 12.5 2.0 154.5 - (1.8) 167.2
---- --- ----- --- ---- -----
Total revenues 270.5 92.6 316.5 13.9 (26.2) 667.3
Costs and expenses 195.6 67.7 297.2 7.9 (23.6) 544.8
Depreciation and
amortization 17.6 5.1 11.3 9.5 (0.6) 42.9
---- --- ---- --- ---- ----
Income from operations $57.3 $19.8 $8.0 $(3.5) $(2.0) $79.6
===== ===== ==== ===== ===== =====
Capital expenditures $27.7 $2.1 $7.0 $1.5 $ - $38.3
Year Ended December 31, 2014
----------------------------
Financial Healthcare Customer
Services Communications Investments / Elimination Consolidated
Services Other Adjustments Total
-------- ----- ----------- -----
Operating revenues $1,004.9 $382.2 $641.3 $13.6 $ - $2,042.0
Intersegment operating
revenues 49.3 - 9.2 43.2 (101.7) -
Out-of-pocket
reimbursements 51.5 6.8 659.1 0.2 (10.3) 707.3
---- --- ----- --- ----- -----
Total revenues 1,105.7 389.0 1,309.6 57.0 (112.0) 2,749.3
Costs and expenses 847.5 308.5 1,218.7 35.8 (101.1) 2,309.4
Depreciation and
amortization 68.2 19.5 37.6 8.2 (2.5) 131.0
---- ---- ---- --- ---- -----
Income from operations $190.0 $61.0 $53.3 $13.0 $(8.4) $308.9
====== ===== ===== ===== ===== ======
Capital expenditures $74.4 $10.1 $29.5 $1.7 $ - $115.7
Year Ended December 31, 2013
----------------------------
Financial Healthcare Customer
Services Communications Investments / Elimination Consolidated
Services Other Adjustments Total
-------- ----- ----------- -----
Operating revenues $959.7 $333.3 $652.9 $14.7 $ - $1,960.6
Intersegment operating
revenues 44.6 - 7.6 42.5 (94.7) -
Out-of-pocket
reimbursements 44.4 6.2 654.7 0.1 (7.4) 698.0
---- --- ----- --- ---- -----
Total revenues 1,048.7 339.5 1,315.2 57.3 (102.1) 2,658.6
Costs and expenses 772.8 270.5 1,220.2 30.0 (91.4) 2,202.1
Depreciation and
amortization 65.1 19.3 44.0 17.5 (2.6) 143.3
---- ---- ---- ---- ---- -----
Income from operations $210.8 $49.7 $51.0 $9.8 $(8.1) $313.2
====== ===== ===== ==== ===== ======
Capital expenditures $68.3 $10.8 $23.1 $4.7 $ - $106.9
DST SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
(Unaudited)
December 31, December 31,
2014 2013
---- ----
ASSETS
Current assets
Cash and cash
equivalents $151.7 $62.5
Funds held on
behalf of
clients 315.3 316.3
Client funding
receivable 43.4 50.2
Accounts
receivable 349.6 343.4
Other assets 71.0 70.0
---- ----
931.0 842.4
Investments 656.6 881.3
Unconsolidated
affiliates 298.7 288.1
Properties 403.6 445.2
Intangible
assets 122.5 137.4
Goodwill 414.7 423.7
Other assets 74.9 72.4
---- ----
Total assets $2,902.0 $3,090.5
======== ========
LIABILITIES AND EQUITY
Current liabilities
Current
portion of
debt $167.3 $283.6
Client funds
obligations 358.7 366.5
Accounts
payable 101.8 86.7
Accrued
compensation
and benefits 168.0 154.3
Deferred
revenues and
gains 53.9 71.6
Income taxes
payable 17.6 -
Other
liabilities 113.7 110.1
----- -----
981.0 1,072.8
Long-term debt 385.6 399.4
Income taxes
payable 80.1 124.2
Deferred
income taxes 186.4 255.4
Other
liabilities 32.5 54.9
---- ----
Total
liabilities 1,665.6 1,906.7
------- -------
Stockholders'
equity 1,236.4 1,183.8
------- -------
Total
liabilities
and
stockholders'
equity $2,902.0 $3,090.5
======== ========
Common shares
outstanding 37.6 41.8
DST SYSTEMS, INC.
RECONCILIATION OF REPORTED RESULTS TO NON-GAAP RESULTS
Three Months Ended December 31,
(Unaudited - in millions, except per share amounts)
2014
----
Operating Operating Pretax Net Diluted
Revenue Income Income Income EPS
------- ------ ------ ------ ---
Reported GAAP results $516.7 $86.7 $282.0 $255.1 $6.65
Adjusted to remove:
Restructuring charges -Financial
Services (1) - 3.2 3.2 2.1 0.05
Restructuring charges -Customer
Communications (1) - 3.1 3.1 1.9 0.05
Charitable contribution -Investments &
Other (2) - 0.5 0.4 0.2 0.01
Net gain on sale of business (3) - - (100.5) (107.2) (2.80)
Net gain on securities and other
investments (4) - - (88.7) (54.9) (1.43)
Income tax items (5) - - - (30.8) (0.80)
Adjusted Non-GAAP results $516.7 $93.5 $99.5 $66.4 $1.73
====== ===== ===== ===== =====
2013
----
Operating Operating Pretax Net Diluted
Revenue Income Income Income EPS
------- ------ ------ ------ ---
Reported GAAP results $500.1 $79.6 $144.7 $84.0 $1.97
Adjusted to remove:
Restructuring charges -Financial
Services (1) - 0.4 0.4 0.3 0.01
Restructuring charges -Customer
Communications (1) - 1.6 1.6 1.3 0.03
Net loss on sale of real estate -
Investments & Other (6) - 7.0 7.0 4.3 0.10
Net gain on securities and other
investments (4) - - (61.5) (38.2) (0.90)
Income tax items (5) - - - 5.3 0.13
------------
Adjusted Non-GAAP results $500.1 $88.6 $92.2 $57.0 $1.34
====== ===== ===== ===== =====
Note: See the "Use of Non-GAAP
Financial Information" section for
management's reasons for providing
non-GAAP financial information.
DST SYSTEMS, INC.
RECONCILIATION OF REPORTED RESULTS TO NON-GAAP RESULTS
Year Ended December 31,
(Unaudited - in millions, except per share amounts)
2014
----
Operating Operating Pretax Net Diluted
Revenue Income Income Income EPS
------- ------ ------ ------ ---
Reported GAAP results $2,042.0 $308.9 $791.7 $593.3 $14.66
Adjusted to remove:
Restructuring charges -Financial
Services (1) - 13.0 13.0 8.2 0.20
Restructuring charges -Customer
Communications (1) - 4.2 4.2 2.6 0.06
Advisory and other transaction costs -
Financial Services (7) - 5.6 5.6 3.5 0.09
Loss accrual reversal -Healthcare
Services (8) - (4.0) (4.0) (4.7) (0.12)
Charitable contribution -Investments &
Other (2) - 0.5 0.4 0.2 0.01
Gain on contract to repurchase common
stock (9) - - (18.1) (18.1) (0.45)
Net gain on sale of business (3) - - (100.5) (107.2) (2.64)
Net gain on securities and other
investments (4) - - (343.5) (212.7) (5.26)
Net gain from unconsolidated affiliates
(10) - - (5.7) (3.6) (0.09)
Income tax items (5) - - - (36.9) (0.91)
Adjusted Non-GAAP results $2,042.0 $328.2 $343.1 $224.6 $5.55
======== ====== ====== ====== =====
2013
----
Operating Operating Pretax Net Diluted
Revenue Income Income Income EPS
------- ------ ------ ------ ---
Reported GAAP results $1,960.6 $313.2 $544.9 $352.6 $8.00
Adjusted to remove:
Restructuring charges -Financial
Services (1) - 3.9 3.9 2.7 0.06
Restructuring charges -Customer
Communications (1) - 1.6 1.6 1.3 0.03
Contract termination payment -Financial
Services (11) (6.0) (6.0) (6.0) (3.7) (0.08)
Loss accrual - Healthcare Services (8) - 2.5 2.5 2.5 0.06
Net loss on sale of real estate -
Investments & Other (6) - 3.2 3.2 1.9 0.04
Leased facility exit costs -Customer
Communications (1) - (2.5) (2.5) (2.5) (0.06)
Net gain on securities and other
investments (4) - - (222.8) (138.1) (3.14)
Net gain from unconsolidated affiliates
(10) - - (7.4) (4.6) (0.10)
Income tax items (5) - - - (11.0) (0.24)
-------------
Adjusted Non-GAAP results $1,954.6 $315.9 $317.4 $201.1 $4.57
======== ====== ====== ====== =====
Note: See the "Use of Non-GAAP
Financial Information" section for
management's reasons for providing
non-GAAP financial information.
Descriptions of Non-GAAP Adjustments
(1) Restructuring charges are comprised of
severance, lease exit and other costs
incurred as a result of organizational
changes. These charges are recorded in
the Condensed Consolidated Statement
of Income within the Costs and
expenses line item. During 2012, the
Company recorded a liability for the
estimated leased facilities
abandonment costs associated with
properties not used in the U.K.
Customer Communications operations.
Subsequently in 2013, a lease
obligation was extinguished resulting
in the reversal of a portion of the
remaining liability ($2.5 million).
During 2014, the Company recorded a
$2.6 million liability for estimated
abandonment and other lease exit costs
in the U.S. Customer Communications
operations.
(2) The expenses for the Company's
charitable contribution of marketable
securities recorded within Costs and
expenses was partially offset by a
gain on the disposition of the donated
securities, which was recorded within
Other income.
(3) DST recorded a gain on the sale of its
Global Solutions business in the
fourth quarter 2014, net of
transaction-related costs. Due to the
recognition of U.K. tax basis
differences, the application of
certain U.K. tax provisions, and the
reversal of liabilities previously
established for uncertain tax
positions, the tax on the gain differs
from our expected statutory tax rates.
(4) Net gain on securities and other
investments is comprised of net
realized gains from sales of
available-for-sale securities, other
than temporary impairments on
available-for-sale securities and
net gains on private equity funds and
other investments. These net gains
were recorded in the Condensed
Consolidated Statement of Income
within the Other income, net line
item.
(5) Income tax items primarily relate to
benefits from the reversal of
liabilities previously established for
uncertain tax positions, historical
domestic manufacturing deductions,
research and experimentation credits
and other similar items. Additionally,
during fourth quarter 2013, the
Company recorded income tax expense
associated with the repatriation of
approximately $62.0 million of
international cash. These items are
included in the Condensed Consolidated
Statement of Income within the Income
taxes line item.
(6) Net gains/losses on sale of real
estate assets are reflected net of
impairments taken on the carrying
value of real estate assets. The
Company recorded impairment charges of
$7.0 million and $7.4 million during
the three months and year ended
December 31, 2013 related to real
estate no longer utilized in the
Company's operations. The impairment
charges are included in the Condensed
Consolidated Statement of Income
within the Depreciation and
amortization expense line item. The
gain on sale of real estate of $4.2
million during the year ended December
31, 2013 is included in the Condensed
Consolidated Statement of Income
within the Costs and expenses line
item.
(7) Advisory and other transaction costs
incurred in connection with a matter
involving a significant shareholder
are recorded in the Condensed
Consolidated Statement of Income
within the Costs and expenses line
item.
(8) Contingent loss accruals are recorded
in the Condensed Consolidated
Statement of Income within the Costs
and expenses line item. An estimated
loss accrual of $3.5 million was
recorded in 2011 for a regulatory
inquiry regarding the processing of
certain pharmacy claims. In 2013, an
incremental loss accrual of $2.5
million was recorded for this matter.
This regulatory inquiry was resolved
during third quarter 2014 for $2.0
million resulting in the reversal of
$4.0 million previously accrued in
excess of the settlement amount. Upon
resolution of this matter, a tax
benefit was recorded in third quarter
2014 as the majority of the settlement
payment will be deductible for tax
purposes.
(9) DST recorded a gain of $18.1 million on
the contract to repurchase 2.4 million
shares of DST common stock resulting
from the change in stock price between
the date the share repurchase price
became fixed and the settlement date.
This gain was recorded in the
Condensed Consolidated Statement of
Income within the Other income, net
line item. There is no income tax
expense associated with this income as
the gain is related to the repurchase
of the Company's own stock.
(10) The net gain from unconsolidated
affiliates is included in the
Condensed Consolidated Statement of
Income within the Equity in earnings
of unconsolidated affiliates line
item. The net gain recorded in 2013
relates to the sale of an
unconsolidated affiliate by IFDS ($6.3
million) and BFDS ($1.1 million).
During 2014, the net gain from
unconsolidated affiliates relates to
the sale of DST's investment in an
unconsolidated affiliate ($5.7
million).
(11) Payments received from customers due to
the early-termination of long-term
contracts are recorded in the
Condensed Consolidated Statement of
Income within Operating revenue.
DST SYSTEMS, INC.
STATISTICAL INFORMATION
(Unaudited - in millions, except as noted)
December 31, December 31,
2014 2013
---- ----
U.S. mutual fund shareowner
accounts processed:
Registered accounts - non tax-
advantaged 29.6 30.6
---- ----
IRA mutual fund accounts 22.3 23.0
Other retirement accounts 8.1 8.3
Section 529 and Educational IRAs 8.8 9.3
--- ---
Registered accounts - tax-
advantaged 39.2 40.6
---- ----
Total registered accounts 68.8 71.2
Subaccounts 28.6 25.7
---- ----
Total 97.4 96.9
==== ====
International mutual fund
shareowner accounts processed:
IFDS U.K. 11.3 10.2
IFDS L.P. (Canada) 12.5 11.6
Defined contribution participant
accounts 7.2 6.9
ALPS (in billions of U.S.
dollars):
Assets Under Management $15.3 $11.8
Assets Under Administration $176.9 $147.7
Automatic Work Distributor
workstations (in thousands) 212.5 209.7
DST Health Solutions covered
lives 24.2 23.5
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2014 2013 2014 2013
---- ---- ----
Argus pharmacy paid claims 126.9 114.0 486.6 444.0
Customer Communications images
produced:
North America 2,359.7 2,179.2 8,713.2 9,448.0
United Kingdom 534.5 474.5 2,125.1 1,999.5
Total 2,894.2 2,653.7 10,838.3 11,447.5
Customer Communications packages
mailed:
North America 503.4 519.7 1,888.9 2,206.6
United Kingdom 219.9 178.7 836.7 724.4
Total 723.3 698.4 2,725.6 2,931.0
DST SYSTEMS, INC.
STATISTICAL INFORMATION
(Unaudited - in millions, except as noted)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2014 2013 2014 2013
---- ---- ---- ----
Changes in registered accounts:
Beginning balance 69.4 71.7 71.2 75.7
New client conversions - 0.1 - 0.4
Subaccounting conversions to DST
platforms (0.2) (0.1) (0.6) (1.6)
Subaccounting conversions to non-DST
platforms (0.2) (0.5) (1.9) (3.5)
Conversions to non-DST platforms (0.3) - (1.0) (0.2)
Organic growth 0.1 - 1.1 0.4
--- --- --- ---
Ending balance 68.8 71.2 68.8 71.2
==== ==== ==== ====
Changes in subaccounts:
Beginning balance 28.4 24.3 25.7 12.4
New client conversions - - - 5.7
Conversions from non-DST registered
platforms - 0.6 0.7 1.5
Conversions from DST's registered
accounts 0.2 0.1 0.6 1.6
Organic growth - 0.7 1.6 4.5
--- --- --- ---
Ending balance 28.6 25.7 28.6 25.7
==== ==== ==== ====
Defined contribution participant
accounts:
Beginning balance 6.9 6.7 6.9 6.1
New client conversions - - 0.3 1.3
Organic growth (decline) 0.3 0.2 - (0.5)
--- --- --- ----
Ending balance 7.2 6.9 7.2 6.9
=== === === ===
Contact:
Gregg Wm. Givens
Senior Vice President, Chief Financial Officer and Treasurer
DST Systems, Inc.
333 West 11(th) Street
Kansas City, MO 64105-1594
(816) 435-5503
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/dst-systems-inc-announces-fourth-quarter-2014-financial-results-300027466.html
SOURCE DST Systems, Inc.
