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,
	2014		2013
Net income	$	100.4	$	93.2

Weighted average common shares outstanding	42.0		44.3
Incremental shares from restricted stock units, stock options and convertible debentures	0.4		1.3
Weighted average diluted shares outstanding	42.4		45.6

Basic earnings per share	$	2.39	$	2.10
Diluted earnings per share	$	2.37	$	2.04

The Company had approximately 42.1 million and 44.1 million common shares outstanding at March 31, 2014 and 2013, 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, 2014 and 2013.

Share based compensation

The Company has share based compensation plans covering its employees and non-employee directors. During the three months ended March 31, 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 three months ended March 31, 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 March 31, 2014, the Company had outstanding 0.8 million unvested RSU’s and 0.7 million stock options (of which 0.2 million are not yet exercisable).

The Company recognized share based compensation expense of $4.3 million and $5.9 million during the three months ended March 31, 2014 and 2013, respectively.

At March 31, 2014, the Company had $48.0 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 $16.9 million for the remainder of 2014, $16.3 million for 2015, $7.6 million for 2016 and $1.0 million for 2017, based on awards currently outstanding. Future amortization is not projected on approximately $6.2 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.

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, 2013	$	300.8		$	(0.5	)	$	7.9	$	308.2
Net current period other comprehensive income (loss)	(41.4		)	0.2			0.4		(40.8		)
Balance, March 31, 2014	$	259.4		$	(0.3	)	$	8.3	$	267.4

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



	Three Months Ended
	March 31,
	2014						2013
	Pretax			Net of Tax			Pretax			Net of Tax
Available-for-sale securities
Unrealized gains (losses) on available-for-sale securities	$	(21.0	)	$	(13.4	)	$	130.0		$	79.7
Reclassification of gains into net earnings on available-for-sale securities (1)	(45.9		)	(28.0		)	(68.5		)	(41.8		)
Net change in available-for-sale securities	(66.9		)	(41.4		)	61.5			37.9
Cash flow hedges
Reclassification of losses into net earnings on foreign currency cash flow hedges (2)	0.2			0.2			—			—
Reclassification of losses into net earnings on interest rate cash flow hedges (3)	—			—			0.7			0.4
Net change in cash flow hedges	0.2			0.2			0.7			0.4
Cumulative translation adjustments	0.4			0.4			(4.5		)	(4.4		)
Total other comprehensive income (loss)	$	(66.3	)	$	(40.8	)	$	57.7		$	33.9

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(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 foreign currency cash flow hedges are recognized in costs and expenses

(3) Reclassification to net earnings of derivatives qualifying as effective interest rate 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 $48.2 million and $45.5 million at March 31, 2014 and December 31, 2013, respectively. DST’s 50% proportionate share of this interest rate swap liability was $24.1 million and $22.8 million at March 31, 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 March 31, 2014 and December 31, 2013, no interest rate swap liability or AOCI was recorded in the consolidated financial statements.

Stock repurchases

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 did not repurchase any shares of DST common stock during the three months ended March 31, 2014. The Company repurchased approximately 0.8 million shares of DST common stock for $52.5 million during the three months ended March 31, 2013 under the previous share repurchase plan.

As of March 23, 2014, the Argyros Group beneficially owned 9.2 million shares or 22% of DST common shares. On March 23, 2014, DST entered into a settlement agreement with the Argyros Group. The settlement agreement provided, among other things, that, DST will enter into a two-step process to help facilitate the disposition of a substantial portion of the Argyros Group’s common stock ownership in DST. In order to implement the Argyros Group's disposition, DST would, at the election of the Argyros Group and subject to the satisfaction of certain conditions (including execution of definitive agreements), help facilitate a 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, DST would purchase $200.0 million of DST common stock, beneficially owned by the Argyros Group and not sold in the secondary offering, based upon a price determined in connection with the secondary offering. In the event that the Argyros Group has not consummated the secondary offering within nine months following the execution by DST and the Argyros Group of one or more definitive agreements, so long as DST has complied with its obligations to the Argyros Group, DST would no longer have any obligation to help facilitate the Argyros Group's disposition.

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 $5.5 million and $21.6 million during the three months ended March 31, 2014 and 2013, respectively.

Dividends

On January 29, 2014, the Board of Directors of DST declared a quarterly cash dividend of $0.30 per common share. The total dividends for the three months ended March 31, 2014 were $12.9 million, of which $12.6 million were paid in March 2014. The remaining amount of the dividend represents dividend equivalent shares of restricted stock units in lieu of the cash dividend.