SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 9, 2001
STILWELL FINANCIAL INC.
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(Exact name of company as specified in its charter)
DELAWARE 001-15253 43-1804048
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(State or other jurisdiction (Commission file (IRS Employer
of incorporation) number) Identification Number)
920 Main Street, 21st Floor, Kansas City, Missouri 64105
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(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code:
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(816) 218 - 2400
Not Applicable
(Former name or former address if changed since last report)
Item 2. Acquisition or Disposition of Assets
Background
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During November 2001, Stilwell Financial Inc. ("Stilwell" or the
"Company") completed the acquisition of 609,950 shares of Janus Capital
Corporation ("Janus") common stock owned by Thomas H. Bailey, Janus' President,
Chairman and Chief Executive Officer, and one other minority stockholder. The
acquisitions of the common stock by Stilwell, which were pursuant to put rights
held by Mr. Bailey and the other minority stockholder that were included in the
1984 Stock Purchase Agreement (the "Janus Stock Purchase Agreement"), cost
approximately $613 million and were funded using proceeds from Stilwell's senior
note issuance (discussed below) and existing cash.
With the completion of these transactions, Stilwell owns approximately 98%
of Janus, with the remainder owned by Janus employees. In addition, all
mandatory put rights to Stilwell associated with Janus stock were eliminated.
Mr. Bailey is expected to continue in his senior executive role with Janus.
In third quarter 2001, Stilwell recorded a one-time non-cash increase to
minority interest of approximately $64 million in connection with its commitment
to purchase the 609,950 shares of Janus common stock. This commitment dates back
to the initial purchase of Janus common stock in 1984 and results from put
rights held by Mr. Bailey and the other minority stockholder whereby the price
of Janus shares are determined by Janus' earnings from the prior calendar year.
Therefore, the contractual price paid was computed using the results from Janus'
record year in 2000. Based on the decline in Janus' earnings during 2001
compared to 2000, accounting guidelines require an evaluation of whether the
contractual put price of the purchase commitment exceeds fair value. After
consultation with third party valuation professionals, this charge was recorded
as an increase to minority interest. Upon completion of the acquisition of the
Janus shares, the intangible assets and goodwill that were recorded were reduced
by the amount of this charge.
In connection with the foregoing transactions, a portion of the shares of
restricted Janus common stock held by other minority stockholders will become
vested pursuant to stock purchase and restriction agreements that require the
acceleration of vesting upon the sale of Mr. Bailey's remaining Janus shares and
the termination of various management rights held by Mr. Bailey under the Janus
Stock Purchase Agreement.
Net effect of Acquisitions
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Stilwell adopted the provisions of Statement of Accounting Standards
No. 141 "Business Combinations" ("FAS 141") and Statement of Accounting
Standards No. 142 "Goodwill and Other Intangible Assets" ("FAS 142") for
acquisitions occurring on or after July 1, 2001. With respect to acquisitions
occurring prior to July 1, 2001, FAS 141 and FAS 142 will be adopted on
January 1, 2002 as required by the new rules. FAS 141 requires the purchase
method of accounting and FAS 142 provides that goodwill and intangible assets
with indefinite lives will no longer be amortized. As a result, with respect to
acquisitions occurring prior to July 1, 2001, all goodwill and intangible assets
are amortized over their respective lives, assumed to be a period of 20 years
for the pro forma financial statements provided in Item 7 herein. With respect
to acquisitions occurring on or after July 1, 2001, goodwill will not be
amortized and only those intangible assets with determinate lives will be
amortized over their respective lives, assumed to be a period of 20 years for
the pro forma financial statements provided in Item 7 herein.
Stilwell has applied FAS 141 and FAS 142 to acquisitions occurring
after July 1, 2001 ("post July 1, 2001 acquisitions"). These acquisitions
include (a) the Janus purchase on September 4, 2001 of approximately 139,000
shares of its common stock from Janus employees at a cost of $139.8 million and
(b) the Stilwell purchase of a total of 609,950 shares of Janus common stock
from Mr. Bailey and one other minority stockholder of Janus at an aggregate
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purchase price of approximately $613 million using the proceeds from the
offering of the senior notes (discussed below). With respect to acquisitions
occurring prior to July 1, 2001 ("initial acquisitions"), Stilwell has applied
generally accepted accounting principles that require the amortization of
goodwill and intangible assets over their respective lives, assumed to be a
period of 20 years for the pro forma financial statements provided in Item 7
herein. These transactions include (a) Stilwell's purchase on March 16, 2001 of
199,042 shares of Janus common stock for approximately $200 million from certain
minority stockholders of Janus, other than Mr. Bailey, who exercised their put
rights under their stock purchase agreements and (b) Stilwell's purchase in
April and May, 2001 of a total of 603,000 shares of Janus common stock at an
aggregate purchase price of approximately $606 million from Mr. Bailey and one
other minority stockholder.
Based on initial estimates, the purchase price relating to the post
July 1, 2001 acquisitions exceeded the fair value of the net tangible assets
acquired in such transactions by approximately $671.6 million, of which
approximately $335.8 million was recorded as goodwill, $167.9 million as
indefinite lived intangible assets and $167.9 million as intangible assets
subject to amortization. Based on initial estimates, the purchase price relating
to the initial acquisitions exceeded the fair value of the net tangible assets
acquired in such transactions by approximately $796 million, of which
approximately $398.0 million was recorded as goodwill and $398.0 million as
intangible assets. Stilwell has engaged an independent valuation professional to
determine the actual allocation of the aggregate purchase price relating to such
transactions. Such independent valuation may affect the initial estimates of
intangible assets and goodwill, if any, to be amortized, as well as the periods
over which such intangible assets and goodwill will be amortized.
Issuance of senior notes due November 1, 2006
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On November 6, 2001, the Company issued $400 million of 7% senior notes
due November 1, 2006 ("Senior Notes"). The Senior Notes are not redeemable prior
to maturity and pay interest semi-annually on the 1st day of November and May,
beginning on May 1, 2002. The Company received approximately $396.1 million
after discount at issuance, underwriters' discount and certain offering
expenses. The proceeds were used to fund a portion of the cost to acquire the
609,950 shares of Janus shares as discussed above.
Summary
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Stilwell disclosed the acquisitions of Janus common stock in Item 5,
Other Information, as part of the September 30, 2001 Form 10-Q. Included as Item
7 herein are the pro forma financial statements associated with these
transactions. Because it was impracticable to file such required pro forma
financial statements at the time of initial disclosure, Stilwell is hereby
filing the pro forma financial statements within 60 days after the date of
filing its notice of the acquisition pursuant to regulations set forth by the
Securities and Exchange Commission.
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Item 7. Financial Statements and Exhibits
(b) Pro forma financial information
Exhibit No. Document
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(99) Additional Exhibits
99.1 Introductory Comments to Unaudited Pro Forma
Financial Information, is attached as Exhibit 99.1
99.2 Unaudited Pro Forma Consolidated Condensed Balance
Sheet at September 30, 2001, is attached hereto as
Exhibit 99.2
99.3 Unaudited Pro Forma Consolidated Condensed
Statement of Income for the year ended December 31,
2000, is attached hereto as Exhibit 99.3
99.4 Unaudited Pro Forma Consolidated Condensed
Statement of Income for the nine months ended
September 30, 2001, is attached hereto as
Exhibit 99.4
99.5 Notes to Unaudited Pro Forma Consolidated Condensed
Financial Statements, is attached hereto as
Exhibit 99.5
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this Report to be signed on its behalf by the undersigned
hereunto duly authorized.
Stilwell Financial Inc.
Date: January 11, 2002 By: /s/ Douglas E. Nickerson
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Douglas E. Nickerson
Vice President, Controller and Treasurer
(Principal Accounting Officer)
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