Exhibit 99.2
DST Systems, Inc.
Unaudited Pro Forma Consolidated Financial Data
The following Unaudited Pro Forma Consolidated Financial data of DST Systems, Inc. (“DST” or the “Company”) reflects (i) the sale of 44,478,572 shares of DST’s investment in Asurion Corporation (“Asurion”) for $980 million of cash and approximately $45.8 million of receivables that are expected to be collected within one year from the closing of the transaction on July 3, 2007 and (ii) the exchange of 4,942,064 shares of DST’s investment in Asurion for an equivalent number of shares in the new parent company of Asurion at fair value, collectively “the Transaction”.
Each of the following Unaudited Pro Forma Consolidated Statements of Income for the three months ended March 31, 2007 and for the year ended December 31, 2006 was prepared assuming the Transaction occurred on January 1, 2006. The Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2007 was prepared assuming the proceeds from the sale of 44,478,572 shares and the exchange of 4,942,064 shares occurred on that date.
The Unaudited Pro Forma Consolidated Financial Data is based on certain assumptions and do not purport to represent what the Company’s results of operations would have been had such transactions in fact occurred at the dates indicated, or to project the Company’s results of operations or financial condition to any future period or date. The Unaudited Pro Forma Consolidated Financial data is based upon and should be read in conjunction with the historical consolidated financial statements, including the notes thereto, included in DST’s periodic filings on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission.
DST Systems, Inc.
Unaudited Pro Forma Consolidated Statement of Income
For the year ended December 31, 2006 and the three months ended March 31, 2007
(in millions, except per share amounts)
| | Year ended December 31, 2006 | | Three months ended March 31, 2007 | |
| | Historical | | Pro Forma
Adjustments | | Pro Forma | | Historical | | Pro Forma
Adjustments | | Pro Forma | |
Operating revenues | | $ | 1,556.2 | | $ | | | $ | 1,556.2 | | $ | 426.2 | | $ | | | $ | 426.2 | |
Out-of-pocket reimbursements | | 679.6 | | | | 679.6 | | 159.1 | | | | 159.1 | |
Total revenues (includes related party revenues of $162.2) | | 2,235.8 | | | | 2,235.8 | | 585.3 | | | | 585.3 | |
| | | | | | | | | | | | | |
Costs and expenses | | 1,800.6 | | | | 1,800.6 | | 475.8 | | | | 475.8 | |
Depreciation and amortization | | 129.9 | | | | 129.9 | | 29.9 | | | | 29.9 | |
Income from operations | | 305.3 | | | | 305.3 | | 79.6 | | | | 79.6 | |
| | | | | | | | | | | | | |
Interest expense | | (77.3 | ) | | | (77.3 | ) | (18.2 | ) | | | (18.2 | ) |
Other income, net | | 50.0 | | | | 50.0 | | 12.8 | | | | 12.8 | |
Gains on sale of businesses | | 52.8 | | (52.8 | )(1) | | | | | | | | |
Equity in earnings of unconsolidated affiliates | | 47.7 | | (8.0 | )(2) | 39.7 | | 24.8 | | (11.4 | )(4) | 13.4 | |
| | | | | | | | | | | | | |
Income before income taxes | | 378.5 | | (60.8 | ) | 317.7 | | 99.0 | | (11.4 | ) | 87.6 | |
Income taxes | | 105.6 | | (12.8 | )(3) | 92.8 | | 33.6 | | (4.6 | )(5) | 29.0 | |
| | | | | | | | | | | | | |
Net income | | $ | 272.9 | | $ | (48.0 | ) | $ | 224.9 | | $ | 65.4 | | $ | (6.8 | ) | $ | 58.6 | |
| | | | | | | | | | | | | |
Average common shares outstanding | | 66.1 | | | | 66.1 | | 63.1 | | | | 63.1 | |
Average diluted shares outstanding | | 72.1 | | | | 72.1 | | 71.8 | | | | 71.8 | |
| | | | | | | | | | | | | |
Basic earnings per share | | $ | 4.13 | | $ | (0.73 | ) | $ | 3.40 | | $ | 1.04 | | $ | (0.11 | ) | $ | 0.93 | |
Diluted earnings per share | | $ | 3.78 | | $ | (0.66 | ) | $ | 3.12 | | $ | 0.90 | | $ | (0.08 | ) | $ | 0.82 | |
See Notes to Unaudited Pro Forma Consolidated Financial Data
DST Systems, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 2007
(dollars in millions, except per share amounts)
| | Historical | | Pro Forma
Adjustments | | Pro Forma | |
ASSETS | | | | | | | |
Current assets | | | | | | | |
Cash | | $ | 85.9 | | $ | 980.0 | (6) | $ | 1,065.9 | |
Transfer agency investments | | 72.1 | | | | 72.1 | |
Accounts receivable (includes related party receivables of $23.2) | | 376.9 | | | | 376.9 | |
Inventories | | 17.4 | | | | 17.4 | |
Deferred income taxes | | 40.6 | | | | 40.6 | |
Other assets | | 39.0 | | 45.8 | (7) | 84.8 | |
| | 631.9 | | 1,025.8 | | 1,657.7 | |
| | | | | | | |
Investments | | 1,704.3 | | 88.9 | (8) | 1,793.2 | |
Properties | | 522.8 | | | | 522.8 | |
Goodwill | | 112.9 | | | | 112.9 | |
Intangibles | | 24.5 | | | | 24.5 | |
Other assets | | 66.6 | | | | 66.6 | |
Total assets | | $ | 3,063.0 | | $ | 1,114.7 | | $ | 4,177.7 | |
| | | | | | | |
LIABILITIES AND STOCKHOLDER’S EQUITY | | | | | | | |
Current liabilities | | | | | | | |
Current portion of long-term debt | | $ | 968.4 | | $ | | | $ | 968.4 | |
Transfer agency deposits | | 72.1 | | | | 72.1 | |
Accounts payable | | 75.4 | | | | 75.4 | |
Accrued compensation and benefits | | 82.0 | | | | 82.0 | |
Deferred revenues and gains | | 76.3 | | | | 76.3 | |
Other liabilities | | 125.4 | | | | 125.4 | |
Income taxes payable | | | | 360.0 | (9) | 360.0 | |
| | 1,399.6 | | 360.0 | | 1,759.6 | |
| | | | | | | |
Long-term debt | | 518.0 | | | | 518.0 | |
Deferred income taxes | | 394.9 | | 40.8 | (10) | 435.7 | |
Income taxes payable | | 65.7 | | 50.0 | (11) | 115.7 | |
Other liabilities | | 61.4 | | | | 61.4 | |
| | 2,439.6 | | 450.8 | | 2,890.4 | |
Commitments and contingencies | | | | | | | |
| | | | | | | |
Stockholder’s equity | | | | | | | |
Preferred stock, $0.01 par, 10 million shares authorized and unissued | | | | | | | |
Common stock, $0.01 par, 400 million shares authorized, 95.3 million share issued | | 1.0 | | | | 1.0 | |
Additional paid-in capital | | 123.1 | | | | 123.1 | |
Retained earnings | | 1,519.6 | | 663.9 | (12) | 2,183.5 | |
Treasury stock, at cost | | (1,574.0 | ) | | | (1,574.0 | ) |
Accumulated other comprehensive income | | 553.7 | | | | 553.7 | |
Total stockholder’s equity | | 623.4 | | 663.9 | | 1,287.3 | |
Total liabilities and stockholder’s equity | | $ | 3,063.0 | | $ | 1,114.7 | | $ | 4,177.7 | |
See Notes to Unaudited Pro Forma Consolidated Financial Data
DST Systems, Inc.
Notes to Unaudited Pro Forma Consolidated Financial Data
Unaudited Pro Forma Consolidated Statement of Income
For the year ended December 31, 2006
(1) Reflects the elimination of the $52.8 million pretax gain from the merger of DST lock\line, Inc. into a wholly owned subsidiary of Asurion Corporation, which occurred on January 1, 2006.
(2) Assuming the Transaction occurred at the beginning of 2006, DST would not have recorded equity in earnings of Asurion Corporation, DST’s equity method investment, for the year ended December 31, 2006.
The pro forma adjustment was computed in the following manner:
DST’s pro rata share of Asurion net income | | $ | 10.8 | |
Amortization of deferred gain | | 1.0 | |
Amortization of identifiable intangibles | | (3.8 | ) |
| | 8.0 | |
(3) Reflects income tax provision of $12.8 million for pro forma adjustments (1) and (2) above, including all Asurion equity in earnings related impacts.
For the three months ended March 31, 2007
(4) Assuming the Transaction occurred at the beginning of 2006, DST would not have recorded equity in earnings of Asurion Corporation, DST’s equity method investment, for the three months ended March 31, 2007.
The pro forma adjustment was computed in the following manner:
DST’s pro rata share of Asurion net income | | $ | 12.1 | |
Amortization of deferred gain | | 0.2 | |
Amortization of identifiable intangibles | | (0.9 | ) |
| | 11.4 | |
(5) Reflects income tax provision of $4.6 million for pro forma adjustment (4) above, including all Asurion equity in earnings related impacts.
Unaudited Pro Forma Consolidated Balance Sheet
(6) Increase in cash and cash equivalents is the result of the receipt of cash proceeds in the amount of $980 million from the closing of the sale of 44.5 million shares of Asurion.
(7) Increase in other current assets is due to $45.8 million of receivables, representing an estimate of the additional cash proceeds associated with the Transaction that are expected to be collected within one year from the closing of the Transaction.
(8) Assuming the Transaction occurred on March 31, 2007, DST would not have used the equity method of accounting associated with the 44.5 million shares of Asurion and would have recorded the investment, at fair value, associated with the tax deferred exchange of 4.9 million shares of Asurion for the equivalent number of shares in the new parent of Asurion. The new investment in Asurion would have been accounted for as a cost basis investment.
The pro forma adjustment was computed in the following manner:
Net investment in Asurion eliminated | | $ | (20.0 | ) |
| | | |
Net investment basis in Asurion, at fair value added | | 108.9 | |
Net change in investment | | $ | 88.9 | |
(9) Reflects the estimated current income tax liability associated with the estimated aggregate proceeds from the sale of Asurion of $1,025.8 million.
(10) The net increase in deferred tax liabilities is the result of the elimination of deferred tax liabilities associated with the original investment in Asurion and the establishment of deferred taxes for the $108.9 million cost basis investment in Asurion after the tax deferred exchange of 4.9 million shares.
(11) Reflects the estimated non-current income tax liability associated with the estimated aggregate proceeds from the sale of Asurion.
(12) Reflects the impact on net assets of DST from pro forma adjustments (6) through (11).
