Equity | 9 Months Ended |
Sep. 30, 2014 |
Equity [Abstract] | ' |
Equity | ' |
Equity |
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Earnings per share |
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The computation of basic and diluted earnings per share is as follows (in millions, except per share amounts): |
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| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Net income | $ | 100 | | | $ | 96.9 | | | $ | 338.2 | | | $ | 268.6 | |
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Weighted average common shares outstanding | 39.5 | | | 42.9 | | | 40.7 | | | 43.6 | |
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Incremental shares from restricted stock units, stock options and convertible debentures | 0.3 | | | 0.6 | | | 0.5 | | | 0.9 | |
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Weighted average diluted shares outstanding | 39.8 | | | 43.5 | | | 41.2 | | | 44.5 | |
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Basic earnings per share | $ | 2.53 | | | $ | 2.26 | | | $ | 8.3 | | | $ | 6.16 | |
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Diluted earnings per share | $ | 2.51 | | | $ | 2.23 | | | $ | 8.22 | | | $ | 6.03 | |
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The Company had approximately 38.7 million and 42.5 million common shares outstanding at September 30, 2014 and 2013, respectively. No shares from options to purchase common stock were excluded from the diluted earnings per share calculation because they were anti-dilutive for the three and nine months ended September 30, 2014 and 2013. |
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Share based compensation |
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The Company has share based compensation plans covering its employees and non-employee directors. During the nine months ended September 30, 2014, the Company granted approximately 0.3 million restricted stock units (“RSU’s”), of which approximately 0.2 million are performance stock units. Additionally, during the nine months ended September 30, 2014, the Company had 0.2 million RSU’s vest as the result of the completion of the service requirements or achievement of the service and performance features of the awards, as applicable. At September 30, 2014, the Company had outstanding 0.7 million unvested RSU’s and 0.7 million stock options (of which 0.2 million are not yet exercisable). |
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The Company recognized share based compensation expense of $5.3 million and $15.6 million during the three and nine months ended September 30, 2014, respectively, as compared to $3.5 million and $13.9 million during the three and nine months ended September 30, 2013, respectively. |
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At September 30, 2014, the Company had $36.6 million of unrecognized compensation expense related to its share based compensation arrangements, net of estimated forfeitures. The Company estimates that compensation expense recognition attributable to currently outstanding stock option and restricted stock unit grants will be approximately $5.4 million for the remainder of 2014, $15.9 million for 2015, $8.0 million for 2016 and $1.2 million for 2017. Future expense recognition is not projected on approximately $6.1 million of unrecognized compensation expense as the related awards are not currently expected to achieve their required performance features and therefore not expected to vest. |
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Other comprehensive income (loss) |
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Accumulated other comprehensive income balances consist of the following (in millions), net of tax: |
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| Unrealized Gain on Available-for-Sale Securities | | Unrealized Loss on Cash Flow Hedges | | Foreign Currency | | Accumulated |
Translation | Other |
Adjustments | Comprehensive |
| Income |
Balance, December 31, 2013 | $ | 300.8 | | | $ | (0.5 | ) | | $ | 7.9 | | | $ | 308.2 | |
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Net current period other comprehensive income (loss) | (59.4 | ) | | 0.4 | | | (3.1 | ) | | (62.1 | ) |
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Balance, September 30, 2014 | $ | 241.4 | | | $ | (0.1 | ) | | $ | 4.8 | | | $ | 246.1 | |
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Additions to and reclassifications out of accumulated other comprehensive income attributable to the Company: |
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| Three Months Ended |
| September 30, |
| 2014 | | 2013 |
| Pretax | | Net of Tax | | Pretax | | Net of Tax |
Available-for-sale securities | | | | | | | |
Unrealized gains on available-for-sale securities | $ | 34.2 | | | $ | 20.3 | | | $ | 13.8 | | | $ | 8 | |
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Reclassification of gains into net earnings on available-for-sale securities (1) | (48.9 | ) | | (29.8 | ) | | (49.6 | ) | | (30.3 | ) |
Net change in available-for-sale securities | (14.7 | ) | | (9.5 | ) | | (35.8 | ) | | (22.3 | ) |
Cash flow hedges | | | | | | | |
Unrealized losses on cash flow hedges | (0.2 | ) | | (0.1 | ) | | (0.1 | ) | | — | |
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Reclassification of losses into net earnings on foreign currency cash flow hedges (2) | 0.2 | | | 0.1 | | | 0.2 | | | 0.2 | |
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Reclassification of losses into net earnings on interest rate cash flow hedges (3) | — | | | — | | | 0.5 | | | 0.3 | |
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Net change in cash flow hedges | — | | | — | | | 0.6 | | | 0.5 | |
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Cumulative translation adjustments | (5.3 | ) | | (5.2 | ) | | 7.9 | | | 7.8 | |
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Total other comprehensive income (loss) | $ | (20.0 | ) | | $ | (14.7 | ) | | $ | (27.3 | ) | | $ | (14.0 | ) |
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| Nine Months Ended |
| September 30, |
| 2014 | | 2013 |
| Pretax | | Net of Tax | | Pretax | | Net of Tax |
Available-for-sale securities | | | | | | | |
Unrealized gains (losses) on available-for-sale securities | $ | 1.2 | | | $ | (0.4 | ) | | $ | 200.1 | | | $ | 122.2 | |
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Reclassification of gains into net earnings on available-for-sale securities (1) | (96.8 | ) | | (59.0 | ) | | (133.5 | ) | | (81.5 | ) |
Net change in available-for-sale securities | (95.6 | ) | | (59.4 | ) | | 66.6 | | | 40.7 | |
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Cash flow hedges | | | | | | | |
Unrealized gains (losses) on cash flow hedges | 0.1 | | | 0.1 | | | (0.8 | ) | | (0.5 | ) |
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Reclassification of losses into net earnings on foreign currency cash flow hedges (2) | 0.4 | | | 0.3 | | | 0.2 | | | 0.2 | |
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Reclassification of losses into net earnings on interest rate cash flow hedges (3) | — | | | — | | | 2.5 | | | 1.5 | |
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Net change in cash flow hedges | 0.5 | | | 0.4 | | | 1.9 | | | 1.2 | |
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Cumulative translation adjustments | (3.2 | ) | | (3.1 | ) | | 2.4 | | | 2.4 | |
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Total other comprehensive income (loss) | $ | (98.3 | ) | | $ | (62.1 | ) | | $ | 70.9 | | | $ | 44.3 | |
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(1) Realized (gains)/losses on available-for-sale securities are recognized in Other income, net on the Company’s Condensed Consolidated Statement of Income. |
(2) Reclassification to net earnings of derivatives qualifying as effective foreign currency cash flow hedges are recognized in Costs and expenses on the Company’s Condensed Consolidated Statement of Income. |
(3) Reclassification to net earnings of derivatives qualifying as effective interest rate cash flow hedges are recognized in Interest expense on the Company’s Condensed Consolidated Statement of Income. |
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One of DST’s unconsolidated affiliates had an interest rate swap liability with a fair market value of $47.3 million and $45.5 million at September 30, 2014 and December 31, 2013, respectively. DST’s 50% proportionate share of this interest rate swap liability was $23.7 million and $22.8 million at September 30, 2014 and December 31, 2013, respectively. The Company records in investments and AOCI its proportionate share of this liability in an amount not to exceed the carrying value of its investment in this unconsolidated affiliate. Because the carrying value of this unconsolidated affiliate investment balance was zero at both September 30, 2014 and December 31, 2013, no interest rate swap liability or AOCI was recorded in the consolidated financial statements. |
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Stock repurchases |
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On January 29, 2014, the Board of Directors of DST authorized a new $250.0 million share repurchase plan, which allows, but does not require, the repurchase of common stock in open market and private transactions. The Company repurchased approximately 1.0 million shares of DST common stock for $92.1 million during the nine months ended September 30, 2014, resulting in approximately $157.9 million remaining under the Company’s existing share repurchase plan. The Company repurchased approximately 2.6 million shares of DST common stock for $181.8 million during the nine months ended September 30, 2013 under the previous share repurchase plan. |
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As of March 23, 2014, the Argyros Group beneficially owned 9.2 million shares or 22% of DST common shares. During March 2014, DST entered into an agreement under which DST agreed to a two-step process to assist the Argyros Group with the disposition of a substantial portion of their common stock ownership in DST. To implement the Argyros Group’s disposition, DST facilitated the May 2014 registered, secondary common stock offering of $450.0 million (before any overallotment option) of DST common stock beneficially owned by the Argyros Group. Concurrent with the closing of the secondary offering and based upon a price determined in the secondary offering, DST repurchased, and simultaneously retired, 2.4 million shares of its common stock from the Argyros Group for $200.0 million. In connection with this share repurchase, DST recorded a non-cash gain of $18.1 million during the nine months ended September 30, 2014 resulting from the change in stock price between the date the share repurchase price became fixed and the settlement date. The retirement of the shares during the nine months ended September 30, 2014 reduced Common stock by $0.1 million, Additional paid-in capital by $4.8 million and Retained earnings by $213.2 million within the Consolidated Balance Sheet. |
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Shares received in exchange for satisfaction of the option exercise price and for tax withholding obligations arising from the exercise of options to purchase the Company’s stock or from the vesting of restricted stock shares are included in common stock repurchased in the Condensed Consolidated Statement of Cash Flows. The amount of such share receipts and withholdings for option exercises and restricted stock vesting was $6.1 million and $23.3 million during the nine months ended September 30, 2014 and 2013, respectively. |
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Dividends |
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For each quarter of 2014, the Board of Directors of DST has declared a quarterly cash dividend of $0.30 per common share. Total dividends for the nine months ended September 30, 2014 were $37.0 million, including cash dividends of $11.8 million paid in September 2014, $11.9 million paid in June 2014 and $12.6 million paid in March 2014. The remaining amount of the dividend represents dividend equivalent shares of restricted stock units in lieu of the cash dividend. On October 24, 2014, the Board of Directors declared a quarterly dividend of $0.30 per common share, payable December 12, 2014, to shareholders of record at the close of business on November 26, 2014. |