UNITED STATES
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 16, 1997
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DST Systems, Inc.
(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
Delaware 1-14036 43-1581814
333 West 11th Street, 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.)
<PAGE>
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 16,
1997 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 20, 1997
DST SYSTEMS, INC. ANNOUNCES THIRD QUARTER AND NINE MONTHS 1997 RESULTS
KANSAS CITY, MO (October 16, 1997)--DST Systems, Inc. (DST) announces financial
results for the third quarter and nine months ended September 30, 1997.
For the quarter ended September 30, 1997, DST consolidated net income increased
27.9% to $14.1 million or $.29 per share, as compared to $11.0 million or $.22
per share for the same quarter in 1996, after eliminations in the 1996 quarter
of 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). Prior to such elimination, net income for the third quarter
1996 was $138.6 million, or $2.78 per share.
Consolidated revenues for the quarter ended September 30, 1997 totaled
$159.9 million, an increase of 14.5% over the prior year quarter. U.S. revenues
were $134.2 million for the quarter, an increase of 12.3% over comparable period
1996 revenues. U.S. revenues reflected growth in mutual fund, portfolio
accounting, output processing, Automated Work Distributor (AWD) and subscriber
management revenues. The number of U.S. mutual fund shareowner accounts serviced
by DST increased to 43.1 million at September 30, 1997, an increase of 700,000
accounts from June 30, 1997 and an increase of 2 million accounts from December
31, 1996. Pages printed by Output Technologies, Inc. in the U.S. increased 18.9%
over third quarter 1996 volumes to 326 million pages. AWD U.S. workstations
licensed increased 40.5% from December 31, 1996 to 18,786 workstations at
September 30, 1997.
International revenues totaled $25.7 million for the quarter, an increase of
28.0% over comparable prior year revenues, primarily resulting from increased
license and support revenues for investment accounting and AWD systems, and
higher Canadian mutual fund revenues. AWD workstations licensed outside the U.S.
at September 30, 1997 were 7,110, an increase of approximately 11.6% from
December 31, 1996. Canadian mutual fund accounts processed totaled 0.7 million
at September 30, 1997, an increase of 188% over December 31, 1996.
Consolidated income from operations for the third quarter 1997 was $21.6
million, an increase of 40.1% over the 1996 quarter after adjusting 1996 costs
and expenses for a non-recurring $13.7 million charge in connection with the
Continuum/CSC merger. Consolidated operating margin increased to 13.5% from 11%
for the 1996 quarter, as adjusted. Consolidated costs and expenses increased
13.9% to $118.8 million, from increased personnel and facilities costs to
support revenue expansion. Depreciation and amortization decreased 1.8% from the
prior year quarter. Although individual unit results varied, international
businesses posted income from operations of $0.7 million for the current year
quarter, primarily from higher revenues and lower levels of increases in system
development costs, compared to an operating loss of $1.7 million from the prior
year quarter.
For the third quarter 1997, equity in earnings of its unconsolidated affiliates,
Argus Health Systems, Inc. and Boston Financial Data Services, Inc. were $2.6
million, an increase of 49.6% over the third quarter 1996. This increase was
more than offset by a loss of $3.3 million at European Financial Data Services,
Ltd. (EFDS) resulting from increased FAST2000 development costs and additional
operating costs to add new full service clients and support existing clients'
unit trust growth. At September 30, 1997, unitholder accounts serviced by EFDS
totaled 796,500, an increase of 125% over December 31, 1996.
Interest expense totaled $2.0 million for the quarter ended June 30, 1997, an
increase of $0.6 million over the prior year quarter.
DST's effective tax rate was 33.2% for the third quarter 1997, as compared to
25.5% for the prior year quarter (excluding the effects of the Continuum/CSC
merger), primarily as a result of non-recurring tax credits in 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1997
In general, the same operating trends affecting the current quarter results also
affected year-to-date results. For the nine months ended September 30, 1997, net
income was $43.0 million, or $.87 per share, an increase of 33.3% over the $32.2
million, or $.65 per share for the nine months ended September 30, 1996,
excluding the effects of Continuum. Prior to such exclusion, net income for the
nine months ended September 30, 1996 was $155.4 million or $3.11 per share.
Consolidated revenues for the nine months ended September 30, 1997 increased
11.0% to $473.9 million. U.S. revenues increased 10.8% to $405.0 million and
international revenues grew 12.1% to $68.9 million. Consolidated income from
operations increased 27.2% to $66.2 million over the comparable 1996 period,
excluding the effects of Continuum. Consolidated operating margin increased to
14.0% from 12.2% for 1996, as adjusted. DST recorded $1.4 million of equity in
earnings of unconsolidated affiliates for the nine months ended September 30,
1997, an increase of $1.0 million over the comparable 1996 period excluding
Continuum. 1997 year-to-date interest expense increased $0.9 million to $6.0
million. The year-to-date effective income tax rate decreased from 35.3% in 1996
(excluding the effects of Continuum) to 34.0% in 1997, principally due to
differences in non-U.S. income tax rates.
OTHER ACTIONS
During the current quarter, DST repurchased 150,000 shares of its common stock
under its 1.2 million share repurchase program. As of September 30, 1997, DST
has repurchased 450,000 shares in 1997 and a total of 850,000 shares since the
program commenced. The shares purchased will be available to provide to
employees under DST's stock award program and to provide to option holders who
exercise options.
Subsequent to September 30, 1997, DST purchased the minority interest of DBS
Systems Corporation. DBS is now a wholly-owned subsidiary of DST.
<TABLE>
<CAPTION>
DST SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
----------------------------- -----------------------------
1996 1997 1996 1997
<S> <C> <C> <C> <C>
Revenues $ 139,569 $ 159,863 $ 427,047 $ 473,941
Costs and expenses 104,343 118,811 317,297 349,148
Depreciation and amortization 19,804 19,453 57,684 58,551
Other expenses 13,700 13,700
-------------- ------------- ------------- --------------
Income from operations 1,722 21,599 38,366 66,242
Interest expense (1,356) (1,960) (5,110) (6,006)
Other income, net 912 989 2,824 2,987
Gains on sale of equity investments 223,438 1,252 223,438 1,464
Equity in earnings (losses) of
unconsolidated affiliates (45) (507) (4,547) 1,357
-------------- ------------- ------------- --------------
Income before income taxes and
minority interest 224,671 21,373 254,971 66,044
Income taxes 85,897 7,097 99,409 22,463
-------------- ------------- ------------- --------------
Income before minority interest 138,774 14,276 155,562 43,581
Minority interest 144 222 188 607
-------------- ------------- ------------- --------------
Net income $ 138,630 $ 14,054 $ 155,374 $ 42,974
============== ============= ============= ==============
Weighted average common shares outstanding 49,841 49,236 49,935 49,378
Earnings per share $ 2.78 $ 0.29 $ 3.11 $ 0.87
</TABLE>
DST Systems, Inc.
333 West 11th Street
Kansas City, MO
64105-1594
NYSE Symbol: DST
Contact:
Thomas A. McDonnell (816) 435-8684
President and Chief Executive Officer
Kenneth V. Hager (816) 435-8603
Vice President and Chief Financial Officer
