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DST System 8-K Filing: Completes Sale And Leaseback Transaction, Proceeds Were $107.3M; Enters Similar Agreement & May Generate Proceeds Of $21.7M

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DST Systems, Inc. (the "Company" or "DST") through certain of its wholly-owned subsidiaries has completed a sale and leaseback transaction of three of its U.S. production facilities serving its Customer Communications business for proceeds totaling $107.3 million, before applicable taxes and transaction costs.
The Company's Customer Communications business provides solutions from campaign design and execution, analytics and consulting, to fulfillment and direct mail services. The production facilities, which will continue to operate as usual, are located in El Dorado Hills, CA, South Windsor, CT and Kansas City, MO.
The leases provide for an initial term of fourteen (14) years and further provide DST with options to extend the lease terms for two consecutive five year terms at then fair market rents. The total annual rent payments (combined for all three leases) for year one are approximately $7.8 million and include 2% annual rent escalations, resulting in approximately $8.9 million of annual rent expense.
In addition, the Company has entered into an agreement to consummate a substantially similar transaction involving its Canadian production facility in Markham, Ontario, Canada. The proceeds from the Canadian transaction are expected to approximate $21.7 million, before applicable taxes and transaction costs. The Canadian lease will provide for an initial term of twelve (12) years and further provide DST with an option to extend the lease for two consecutive five year terms at then fair market rents. The total annual rent payments for the Canadian lease for year one are approximately $1.2 million and include 2% annual rent escalations, resulting in approximately $1.4 million of annual rent expense.
When combined, the proceeds from the U.S. and Canadian transactions are expected to total approximately $129.0 million, before applicable taxes and transaction costs. Net proceeds from the transactions will be used in accordance with the Company's ongoing plan to manage its capital structure.
A pre-tax gain of approximately $39.9 million on the combined sale transactions will be deferred and amortized on a straight-line basis over the future lease terms. Annual depreciation for the four facilities was approximately $6.1 million. DST expects these transactions to be approximately $0.02 dilutive to earnings per share on an annual basis, before consideration of the use of the proceeds.

Posted-In: News Contracts

 

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