SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of The Securities Act of 1934
Date of Report (Date of earliest event reported) July 18, 1996
(Exact name of registrant as specified in its charter)
DST Systems, Inc.
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
Delaware 1-14036 43-1581814
1055 Broadway, Kansas City, Missouri 64105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (816) 435-6568
Not applicable.
(Former name or former address, if changed since last report.)
FORM 8-K
DST SYSTEMS, INC.
ITEM 1 CHANGES IN CONTROL OF REGISTRANT
Not applicable.
ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS
Not applicable.
ITEM 3 BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4 CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5 OTHER EVENTS
See attached as an Exhibit to this Form 8-K a News Release released
July 18, 1996 concerning the announcement of financial results.
ITEM 6 RESIGNATIONS OF REGISTRANT'S DIRECTORS
Not applicable.
ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS
Not applicable.
ITEM 8 CHANGE IN FISCAL YEAR
Not applicable.
SIGNATURE
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.
/s/ Robert C. Canfield
Senior Vice President, General Counsel,
Secretary
Date: July 24, 1996
HEADLINE: DST SYSTEMS, INC. ANNOUNCES SECOND QUARTER AND SIX MONTHS 1996 RESULTS
DATELINE: KANSAS CITY, MO. July 18
BODY:
DST Systems, Inc. (NYSE: DST) announces financial results for the second
quarter and six months ended June 30, 1996.
Quarter ended June 30, 1996
For the quarter ended June 30, 1996, DST consolidated net income was
$12.3 million or $.25 per share, compared to $5.7 million for the same
quarter in 1995, an increase of 116%.
Revenues for the quarter ended June 30, 1996 totaled $143.2 million,
an increase of 22% over the prior year quarter. U.S. revenues were
$121.7 million for the quarter, an increase of 17% over comparable 1995
revenues. U.S. revenues reflected growth in U.S. mutual fund shareowner
accounts serviced to 39.0 million at June 30, 1996, an increase of 700
thousand accounts from March 31, 1996 and 2.5 million accounts from
December 31, 1995. Output Technologies domestic pages printed for the
quarter increased 51% over second quarter 1995 volumes to 310 million
pages. AWD domestic workstations licensed increased 22% from June 30,
1995 to 10,200 workstations at June 30, 1996.
International revenues totaled $21.5 million for the quarter, an
increase of 57% over comparable prior year revenues. DST International
reported higher revenues for the quarter. Xebec Imaging Services, Ltd.,
a Canadian output services provider acquired in January 1996, recorded
$3.5 million of revenues in the second quarter. AWD workstations
licensed outside the U.S. at June 30, 1996 were 3,800, an increase of
approximately 270% from June 30, 1995. International results, including
equity in earnings of unconsolidated affiliates, were a loss of $2.0
million for the quarter primarily because of costs of software
development at DST's United Kingdom transfer agent joint venture. While
encouraged by international revenue growth, Management had expected that
DST's international business would break even in 1996. That now
appears unlikely because of the software development costs at the joint
venture.
Consolidated income from operations increased 100% over the prior
year quarter to $17.5 million as a result of increased revenues,
improved margins and the absence in 1996 of certain 1995 non-recurring
costs.
DST recorded equity in earnings of unconsolidated affiliates of $3.1
million for the quarter ended June 30, 1996, a decline of 28% from the
$4.4 million recorded in the second quarter 1995. Higher operating
earnings were recorded at The Continuum Company, Inc. (Continuum).
These were offset by lower earnings from Argus Health Systems, Inc. as a
result of increased development costs for a new claims processing system
and a level volume of claims processed as compared to the same period in
1995.
Also, increased costs were incurred in DST's jointly owned
international transfer agent operations resulting from higher business
development costs and an acceleration of the delivery timetable for the
FAST2000 Unit Trust product. 1995 second quarter results also included
$500 thousand of equity in earnings of the Midland joint ventures which
were sold in the third quarter of 1995.
Interest expense totaled $1.7 million for the quarter ended June 30,
1996, a decrease of $4.4 million or 72% compared to the prior year
quarter, primarily as a result of the elimination of interest on debt
which was retired with the proceeds of DST's 1995 fourth quarter public
offering.
Six Months ended June 30, 1996
For the six months ended June 30, 1996, net income was
$16.8 million, or $.34 per share. Excluding the effect of a non-
recurring Continuum charge (discussed below) in the first quarter 1996,
net income for the six months ended June 30, 1996 was $26.2 million, or
$.52 per share, as compared to $14.3 million for the six months ended
June 30,1995 (excluding an $8.6 million gain on the sale of Investors
Fiduciary Trust Company in the first quarter of 1995.)
Revenues for the six months ended June 30, 1996 increased 25% to
$287.5 million, as a result of increases in processing volumes and
increased international revenue. Operating income increased 69% to
$36.6 million over the comparable 1995 period. DST recorded a loss of
$4.5 million in equity in earnings of unconsolidated affiliates
primarily reflecting its share of a non-recurring charge by Continuum
related to Continuum's March 1996 acquisition of Hogan Systems, Inc..
Year-to-date interest expense declined $7.0 million to $3.7 million,
reflecting the effect of the retirement of debt with the proceeds of
DST's public offering.
Continuum/Computer Sciences Merger
The merger of Continuum and Computer Sciences Corporation (CSC) is
expected to be completed in the third quarter 1996. Upon completion,
DST will own approximately 4.4 million shares (approximately 6%) of CSC,
will cease to record equity in the earnings of Continuum, and DST will
record a one time gain (net of deferred income taxes) of approximately
$130 million, based on CSC's closing New York Stock Exchange price of
$67.625 on July 17, 1996.
Stock Repurchases
The Board of Directors has authorized the repurchase of up to
1.2 million shares of DST common stock during the period ending in
April, 1998. Such purchases may be made in private or market
transactions and the shares purchased will be available to provide to
employees under DST's stock award program and to provide to option
holders who execute options. DST will purchase such shares in
compliance with applicable Securities and Exchange Commission rules.
DST SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1995 1996 1995 1996
Revenues $117.7 $143.2 $229.9 $287.5
Costs and expenses 92.3 106.5 177.4 213.0
Depreciation and amortization 16.7 19.2 30.8 37.9
Income from operations 8.7 17.5 21.7 36.6
Interest expense (6.1) (1.7) (10.7) (3.7)
Other income, net 1.1 1.0 1.6 1.9
Gain on sale of
equity investment 43.6
Equity in earnings (losses) of
unconsolidated affiliates 4.4 3.1 7.8 (4.5)
Income before income taxes and
minority interests 8.1 19.9 64.0 30.3
Income taxes 2.5 7.5 41.2 13.5
Income before minority
interests 5.6 12.4 22.8 16.8
Minority interests (0.1) 0.1 (0.1) 0.0
Net income $5.7 $12.3 $22.9 $16.8
Average common shares
outstanding 50.0 50.0
Earnings per shares $0.25 $0.34
CONTACT: Thomas A. McDonnell, President and Chief Executive Officer,
816-435-8684, or Kenneth V. Hager, Vice President and Chief Financial Officer,
816-435-8603
