Equity

Earnings per share

The computation of basic and diluted earnings per share is as follows (in millions, except per share amounts):



	Three Months Ended
	March 31,
	2013		2012
Net income	$	93.2	$	55.3

Average common shares outstanding	44.3		44.5
Incremental shares from restricted stock units, stock options and convertible debentures	1.3		0.7
Average diluted shares outstanding	45.6		45.2

Basic earnings per share	$	2.10	$	1.24
Diluted earnings per share	$	2.04	$	1.22

The Company had approximately 44.1 million and 44.9 million shares outstanding at March 31, 2013 and 2012, respectively. There were no shares from options to purchase common stock excluded from the diluted earnings per share calculation because they were anti-dilutive for the three months ended March 31, 2013, as compared to 0.8 million for the three months ended March 31, 2012. The Company’s convertible senior debentures would have a potentially dilutive effect on the Company’s stock if converted in the future. At March 31, 2013, outstanding Series C debentures would be convertible into 1.8 million shares of common stock, subject to adjustment. Related to the debentures, the calculation of diluted earnings per share includes an incremental amount of shares assumed to be issued for the conversion spread when the Company’s average daily stock price exceeds the average accreted bond price per share. For the three months ended March 31, 2013, the dilutive effect of the debentures was 0.4 million shares related to the Company's average share price exceeding accreted bond price per share. For the three months ended March 31, 2012 the dilutive effect of debentures was not significant.

Share Based Compensation

The Company has share based compensation plans covering its employees and non-employee directors. During the three months ended March 31, 2013, the Company granted approximately 0.5 million restricted stock units (“RSU’s”), of which approximately 0.3 million are performance stock units (“PSU's”). A portion of the RSU grants contain performance features. Additionally, during the three months ended March 31, 2013, the Company had 0.7 million RSU's vest primarily as the result of the achievement of the performance features. At March 31, 2013, the Company had outstanding 0.6 million unvested RSU’s and 1.4 million stock options (of which 0.5 million are not yet exercisable).

The Company recognized share based compensation expense of $5.9 million during the three months ended March 31, 2013, as compared to $6.0 million during the three months ended March 31, 2012.

At March 31, 2013, the Company had $32.6 million of total unrecognized compensation expense (included in Additional paid-in-capital on the Condensed Consolidated Balance Sheet) related to its share based compensation arrangements, net of estimated forfeitures. The Company estimates that the amortized compensation expense attributable to the stock option and restricted stock unit grants will be approximately $12.3 million for the remainder of 2013, $11.2 million for 2014, $8.0 million for 2015 and $1.1 million for 2016, based on awards currently outstanding.

Other comprehensive income (loss)

Accumulated other comprehensive income balances consist of the following (in millions), net of tax:



	Unrealized Gain on Available-for-Sale Securities		Unrealized Loss on Cash Flow Hedges			Foreign Currency Translation Adjustments			Accumulated Other Comprehensive Income
Balance, December 31, 2012	$	253.7	$	(1.4	)	$	4.5		$	256.8

Net current period other comprehensive income (loss)	37.9		0.4			(4.4		)	33.9

Balance, March 31, 2013	$	291.6	$	(1.0	)	$	0.1		$	290.7

Additions to and reclassifications out of accumulated other comprehensive income attributable to the Company:



	Three Months Ended
	March 31,
	2013						2012
	Pretax			Net of Tax			Pretax			Net of Tax
Available-for-sale securities:
Unrealized gains on available-for-sale securities	$	130.0		$	79.7		$	92.4		$	56.3
Reclassification of gains into net earnings on available-for-sale securities (1)	(68.5		)	(41.8		)	(15.1		)	(9.2		)
Gains on available-for-sale securities	61.5			37.9			77.3			47.1
Cash flow hedges:
Unrealized losses on cash flow hedges							(0.3		)	(0.2		)
Reclassification of losses into net earnings on cash flow hedges (2)	0.7			0.4			0.7			0.4
Gains on cash flow hedges	0.7			0.4			0.4			0.2
Cumulative translation adjustments	(4.5		)	(4.4		)	(0.9		)	0.3
Total other comprehensive income	$	57.7		$	33.9		$	76.8		$	47.6

(1) Realized (gains)/losses on available for sale securities are recognized in other income, net.

(2) Reclassification to net earnings of derivatives qualifying as effective cash flow hedges are recognized in interest expense.

One of DST’s unconsolidated affiliates had an interest rate swap liability with a fair market value of $68.8 million and $73.5 million at March 31, 2013 and December 31, 2012, respectively. DST’s 50% proportionate share of this interest rate swap liability was $34.4 million and $36.8 million at March 31, 2013 and December 31, 2012, respectively. The Company records in Investments and Accumulated other comprehensive income 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 March 31, 2013 and December 31, 2012, no interest rate swap liability was recorded in the consolidated financial statements.

Stock repurchases

The Company repurchased approximately 0.8 million shares of DST common stock for $52.5 million during the three months ended March 31, 2013, resulting in approximately $200.0 million remaining under the Company’s existing share repurchase plan. No shares were repurchased during the three months ended March 31, 2012.

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 $21.6 million and $26.3 million during the three months ended March 31, 2013 and 2012, respectively.

Dividends

On January 30, 2013, the Board of Directors of DST declared a quarterly cash dividend of $0.30 per common share. The total dividend was $13.5 million, of which $13.3 million was paid in March 2013. The remaining amount of the dividend represents dividend equivalent shares of restricted stock units in lieu of the cash dividend.