UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 26, 2009
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DST SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of incorporation)
1-14036 43-1581814
(Commission File Number) (IRS Employer Identification No.)
333 West 11th Street, Kansas City, Missouri 64105
(Address of principal executive offices) (Zip Code)
(816) 435-1000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report).
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2.):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On February 26, 2009, DST Systems, Inc. (the "Company") announced that on
December 31, 2009 its chief operating officer, Thomas A. McCullough, will retire
from the Company and that Stephen C. Hooley, age 45, will join the Company on
July 1, 2009 as president and chief operating officer reporting to Thomas A.
McDonnell. The announcement was contained in a News Release, which is attached
as Exhibit 99.1 to this Form 8-K. As of July 1, 2009, Mr. McCullough will
continue as an executive vice president but will no longer be the chief
operating officer of the Company, and Mr. McDonnell will continue as chief
executive officer but will no longer be president of the Company.
Mr. Hooley has served since January 1, 2004 as president and chief
executive officer of Boston Financial Data Services, Inc. ("Boston Financial"),
since May 30, 2007 as chief executive officer of IFDS, L.P., and since October
4, 2006 as a director on the board of International Financial Data Services
Limited ("IFDS U.K."). Boston Financial, IFDS, L.P. and IFDS U.K. are 50% owned
joint ventures of the Company and State Street Corporation ("State Street"). Mr.
Hooley's brother, Joseph L. Hooley, is president and chief operating officer of
State Street.
For 2008, the Company had equity in earnings of unconsolidated affiliates,
net of income taxes provided by the unconsolidated affiliates of $16.4 million
from Boston Financial, $5.8 million from IFDS, L.P., and $10.6 million from IFDS
U.K. The Company's Investments and Other Segment holds investments in State
Street (at December 31, 2008 approximately 10.6 million shares with a market
value of $416.1 million).
Boston Financial is a remote services client of the Company, using its
mutual fund shareowner accounting and recordkeeping system. Certain of the
Company's subsidiaries provide printing, mailing and other services and license
software to Boston Financial and its subsidiaries. In 2008, the Company had
consolidated revenues of $177.5 million from Boston Financial and its
subsidiaries. The Company also entered into a related party promissory note with
Boston Financial on March 1, 2006. The agreement provides for unsecured
revolving borrowings by us of up to $100 million and matures on July 1, 2010.
The amount outstanding under the promissory note was $75 million at December 31,
2008. For the year ended December 31, 2008, the Company recorded interest
expense related to the loan of $4.1 million.
Item 8.01 Other Events.
The Company owns a 50% interest in Argus Health Systems, Inc. ("Argus"),
which provides pharmacy benefit plan processing services to the health care
industry. On February 26, 2009, the Company reached an agreement to purchase the
remaining 50% interest in Argus for $57 million in cash. The transaction is
subject to certain regulatory approvals.
Upon completion of the transaction, Argus will no longer be an
unconsolidated affiliate, but rather a wholly-owned subsidiary of the Company.
As a result, the Company will no longer record equity in earnings of Argus, but
rather will consolidate Argus' results into the Company's
consolidated financial statements. Argus recorded revenues of $ 127.7 million
for the year ended December 31, 2008.
As required by generally accepted accounting principles, the Company will
adopt SFAS No. 141 (R) Business Combinations (SFAS 141R) effective January 1,
2009. In accordance with SFAS 141R the acquisition of the remaining 50% interest
in Argus will be treated as a step acquisition. Accordingly, DST will remeasure
its previously held equity interest in Argus to fair value. DST expects to
recognize a gain from remeasuring the previously held equity interest in the
income statement. DST has not finalized the remeasurement of its equity interest
in Argus, but believes the pre-tax gain from remeasurement may approximate $30
million. DST will recognize 100% of the identifiable assets and goodwill
resulting from the acquisition of the 50% interest in Argus and the
remeasurement of DST's previously held equity interest. Absent the expected gain
from remeasuring the Company's previously held equity interest, the transaction
is not expected to have a material impact on DST's net income or earnings per
share for 2009. DST will fund the acquisition with available cash balances and
existing credit facilities.
The information and comments in this Form 8-K may include forward-looking
statements respecting the Company and its businesses. Such information and
comments are based on the Company's views as of today, and actual actions or
results could differ. There could be a number of factors affecting future
actions or results, including those set forth in the Company's latest periodic
financial report (Form 10-K or 10-Q) filed with the Securities and Exchange
Commission. All such factors should be considered in evaluating any
forward-looking comment. Unless required by applicable laws and regulations, the
Company will not update any forward-looking statements in this Form 8-K to
reflect future events. There can be no assurance that the transaction described
in Item 8.01 will close.
ITEM 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Number Description
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99.1 News Release Dated February 26, 2009
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DST SYSTEMS, INC.
Date: February 26, 2009 By: /s/ Kenneth V. Hager
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Name: Kenneth V. Hager
Title: Vice President, Chief Financial
Officer and Treasurer