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) October 23, 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
October 23, 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: October 24, 1996
HEADLINE:DST SYSTEMS, INC. ANNOUNCES THIRD QUARTER AND NINE MONTHS 1996 RESULTS
DATELINE:KANSAS CITY, MO. October 23, 1996
BODY:
DST Systems, Inc. ("DST") announces financial results for the three
months and nine months ended September 30, 1996.
QUARTER ENDED SEPTEMBER 30, 1996
For the quarter ended September 30, 1996, DST consolidated net income
was $138.6 million, or $2.78 per share, as compared to $4.6 million for
the quarter ended September 30, 1995. The 1996 results include a net
after tax gain of $127.6 million resulting from the completion of the
merger of The Continuum Company, Inc. (Continuum) and Computer Sciences
Corporation (CSC). In connection with the merger, DST elected to make a
one time $13.7 million ESOP contribution to provide funding for certain
Continuum employee withdrawals from DST's retirement plans. Excluding
the effects of the merger and ESOP contribution, DST's net income for
the quarter was $11.0 million, or $.22 per share.
DST's consolidated revenues for the quarter ended September 30, 1996
totaled $139.6 million, an increase of 14.6% over the prior year
quarter. DST's U.S. revenues increased 12.7% over the prior year
quarter to $119.5 million. Increases in domestic revenues were the
result of higher mutual fund shareowner accounts serviced (40.0 million
at September 30, 1996), increased output services as pages printed
increased 16.7% to 274.6 million pages for the quarter ended September
30, 1996, and increases in the number of DirecTV satellite subscribers
serviced by DBS Systems Corp.
International revenues increased 27.7% over the prior year quarter to
$20.1 million for the quarter ended September 30, 1996, reflecting
increased portfolio accounting services and additional output service
revenues from Xebec Imaging Services, Ltd, a Canadian company acquired
in January 1996.
Consolidated income from operations (excluding the previously mentioned
$13.7 million ESOP contribution) increased 59.2% over the prior year
quarter to $15.4 million for the quarter ended September 30, 1996. U.S.
operating income (excluding the $13.7 million ESOP contribution) rose
80.3% to $17.1 million for the current quarter, as a result of higher
revenues and the absence of certain non-recurring 1995 costs.
International operations posted an operating loss of $1.7 million as a
result of increased system development costs for DST's new high end
portfolio accounting system, GPS2000.
Equity in earnings of unconsolidated affiliates was essentially
break-even for the quarter and did not include any earnings from
Continuum. Increased earnings at Boston Financial Data Services, Inc.
(BFDS) were offset by lower earnings at Argus Health Systems, Inc.
(Argus) as a result of lower revenues and increased system development
costs, and higher losses at European Financial Data Services, Ltd.
(EFDS) resulting from increased costs for the development of its new
unit trust system, FAST2000.
Interest expense declined $6.0 million from the prior year quarter to
$1.4 million for the current quarter, primarily as a result of the
elimination of interest on debt which was retired with the proceeds of
DST's fourth quarter 1995 Public Offering.
NINE MONTHS ENDED SEPTEMBER 30, 1996
For the nine months ended September 30, 1996, net income was $155.4
million, or $3.11 per share, as compared to $27.5 million for the prior
year nine months. Excluding the effects of the net after tax gain
associated with the Continuum/CSC merger, the ESOP contribution, and a
non-recurring Continuum charge reflected in the first quarter 1996, net
income was $37.2 million, or $.74 per share, as compared to $19.0
million for 1995 (excluding an $8.6 million net after tax gain on the
sale of Investors Fiduciary Trust Company (IFTC) in the first quarter of
1995).
Consolidated revenues for the nine months ended September 30, 1996
increased 21.4% over the prior year nine months to $427.0 million, as a
result of increases in servicing volumes and increased international
revenue. Consolidated income from operations (excluding the $13.7
million ESOP contribution previously discussed) increased $20.7 million,
or 65.9%, over the comparable 1995 period, to $52.1 million.
Equity in earnings of unconsolidated affiliates declined $15.4 million
from the prior year nine months as a result of the one time Continuum
charge in the first quarter, the discontinuance of recording equity in
Continuum earnings in the third quarter 1996, lower Argus earnings and
increased losses at EFDS. Year to date interest expense declined $12.9
million from the prior year reflecting the retirement of debt with
proceeds of the Public Offering.
CONTINUUM/CSC MERGER
As a result of the Continuum/CSC merger DST received approximately 4.3
million shares of CSC. Since this represents an approximate 6% interest
in CSC, DST's investment in CSC will not be classified as an equity
affiliate, but rather as a marketable equity security. Thus, the CSC
shares received by DST were recorded at market value, resulting in a net
after tax gain (including the one time $13.7 million ESOP contribution)
of $127.6 million. No equity in earnings of Continuum/CSC was recorded
in the third quarter 1996, and none is expected to be recorded in the
future.
If all Continuum related equity in earnings, gains and charges in 1995
and 1996, and the gain on the sale of IFTC in 1995 were eliminated, DST
would have posted net income for the quarter ended September 30, 1996 of
$11.0 million or $.22 per share, as compared to $3.1 million, for the
1995 quarter. Year to date 1996 net income would have been $32.2
million or $.65 per share as compared to $14.4 million for the 1995 year
to date period.
DST SYSTEMS, INC.
Condensed Consolidated Statement of Income
In thousands, except earnings per share)
(unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1995 1996 1995 1996
Revenues $121,740 $139,569 $351,679 $427,047
Costs and expenses 93,486 104,343 270,960 317,297
Depreciation and amortization 18,568 19,804 49,340 57,684
Other expenses 13,700 13,700
------- ------- ------- -------
Income from operations 9,686 1,722 31,379 38,366
Interest expense (7,351) (1,356) (17,992) (5,110)
Other income 1,092 912 2,671 2,824
Gains on sale of equity
investments 1,285 223,438 44,895 223,438
Equity in earnings (losses) of
unconsolidated affiliates 3,057 (45) 10,808 (4,547)
------- ------- ------- -------
Income before income taxes and
minority interest 7,769 224,671 71,761 254,971
Income taxes 3,162 85,897 44,374 99,409
------- ------- ------- -------
Income before minority interest 4,607 138,774 27,387 155,562
Minority interest (24) 144 (163) 188
------- ------- ------- -------
Net income $4,631 $138,630 $27,550 $155,374
Average common shares
outstanding 49,841 49,935
Earnings per share $2.78 $3.11
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
