UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 1-14036
DST SYSTEMS, INC.
(Exact name of Company as specified in its charter)
Delaware 43-1581814
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 West 11th Street, Kansas City, Missouri 64105
(Address of principal executive offices) (Zip Code)
(816) 435-1000
(Company's telephone number, including area code)
No Changes
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of October 31, 1997, there were 49,111,261 shares of the Company's $.01 par
value Common Stock outstanding.
<PAGE>
DST SYSTEMS, INC.
FORM 10-Q
September 30, 1997
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Introductory Comments 3
Condensed Consolidated Balance Sheet -
December 31, 1996 and September 30, 1997 4
Condensed Consolidated Statement of Income -
Three and Nine Months Ended September 30, 1996 and 1997 5
Condensed Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1996 and 1997 6
Notes to Condensed Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial Condition 9-13
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14-15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
The Company's service marks and trademarks include without limitation, DST(TM),
Securities Transfer System(TM), TA2000(R), Portfolio Accounting System(TM),
Automated Work Distributor(TM), AWD(R), TRAC-2000(R), FAST2000(TM) referred to
in this Report.
DST SYSTEMS, INC.
FORM 10-Q
September 30, 1997
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Introductory Comments
The Condensed Consolidated Financial Statements of DST Systems, Inc. ("DST" or
the "Company") included herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the United States Securities and
Exchange Commission ("SEC"). Certain information and disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
enable a reasonable understanding of the information presented. These Condensed
Consolidated Financial Statements should be read in conjunction with the audited
financial statements and the notes thereto for the year ended December 31, 1996.
Additionally, the Condensed Consolidated Financial Statements should be read in
conjunction with Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations included in this Form 10-Q.
The results of operations for the three and nine months ended September 30,
1997, are not necessarily indicative of the results to be expected for the full
year 1997.
DST SYSTEMS, INC.
Condensed Consolidated Balance Sheet
(dollars in thousands, except per share amounts)
(unaudited)
December 31, September 30,
1996 1997
ASSETS
Current assets
Cash and cash equivalents $ 8,279 $ 15,796
Accounts receivable 154,094 157,417
Other assets 38,922 41,800
----------- -----------
201,295 215,013
Investments 620,437 767,090
Properties 243,989 229,555
Intangibles and other assets 55,867 51,502
----------- -----------
Total assets $1,121,588 $1,263,160
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Debt due within one year $ 15,159 $ 13,668
Accounts payable 44,944 32,557
Accrued compensation and benefits 33,276 25,164
Deferred revenues and gains 14,553 15,871
Other liabilities 17,772 22,503
----------- ----------
125,704 109,763
Long-term debt 75,895 72,514
Deferred income taxes 180,853 232,845
Other liabilities 42,939 41,060
----------- ----------
425,391 456,182
----------- ----------
Commitments and contingencies
----------- ----------
Minority interest 972 1,579
----------- ----------
Stockholders' equity
Common stock, $0.01 par; 125,000,000 shares
authorized, 50,000,000 shares issued 500 500
Additional paid-in capital 408,807 408,807
Retained earnings 203,638 245,217
Treasury stock (396,000 and 843,290 shares,
respectively), at cost (12,345) (26,764)
Net unrealized gain on investments 94,625 177,639
----------- ----------
Total stockholders' equity 695,225 805,399
----------- ----------
Total liabilities and
stockholders' equity $1,121,588 $1,263,160
=========== ===========
The accompanying notes are an integral part of these financial statements.
<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,
----------------------------- ------------------------------
<S> <C> <C> <C> <C>
1996 1997 1996 1997
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
============================= ==============================
Average common shares outstanding 49,841 49,236 49,935 49,378
Earnings per share $ 2.78 $ 0.29 $ 3.11 $ 0.87
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
DST SYSTEMS, INC.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
For the Nine Months
Ended September 30,
----------------------------------
<S> <C> <C>
1996 1997
Cash flows -- operating activities:
Net income $ 155,374 $ 42,974
--------------- ---------------
Adjustments to net income:
Depreciation and amortization 57,684 58,551
Equity in (earnings) losses of unconsolidated affiliates 4,547 (1,357)
Gains on sale of equity investments (223,438) (1,464)
Deferred taxes on gains on sale of equity investments 87,254
Changes in accounts receivable (5,570) (3,323)
Changes in other current assets (2,328) (2,878)
Changes in accounts payable and accrued liabilities (9,108) (13,996)
Other, net (4,829) (859)
--------------- ---------------
Total adjustments to net income (95,788) 34,674
--------------- ---------------
Net 59,586 77,648
--------------- ---------------
Cash flows -- investing activities:
Investment in and advances to unconsolidated affiliates (8,187) (15,368)
Proceeds from sale of investments 12,359
Capital expenditures (44,810) (41,134)
Payment for purchases of subsidiaries, net of cash acquired (3,183) (2,732)
Other, net (4,683) 2,455
--------------- ---------------
Net (60,863) (44,420)
--------------- ---------------
Cash flows -- financing activities:
Principal payments on long-term debt (15,792) (10,825)
Net increase in credit facilities and notes payable 30,149 6,004
Common stock repurchased (7,342) (14,503)
Other, net (9,744) (6,387)
--------------- ---------------
Net (2,729) (25,711)
--------------- ---------------
Net increase (decrease) in cash and cash equivalents (4,006) 7,517
Cash and cash equivalents at beginning of period 13,057 8,279
--------------- ---------------
Cash and cash equivalents at end of period $ 9,051 $ 15,796
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
DST SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Summary of Accounting Policies
The Condensed Consolidated Financial Statements of DST Systems, Inc. ("DST" or
the "Company") included herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to enable a reasonable
understanding of the information presented. These Condensed Consolidated
Financial Statements should be read in conjunction with the audited financial
statements and the notes thereto for the year ended December 31, 1996.
Additionally, the Condensed Consolidated Financial Statements should be read in
conjunction with Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations included in this Form 10-Q.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting of normal interim
closing procedures) necessary to present fairly the financial position of the
Company and its subsidiaries at December 31, 1996, and September 30, 1997, the
results of operations for the three and nine months ended September 30, 1996 and
1997, and cash flows for the nine months ended September 30, 1996 and 1997.
The results of operations for the three and nine months ended September 30,
1997, are not necessarily indicative of the results to be expected for the full
year 1997.
2. Equity in earnings (losses) of unconsolidated affiliates
The following table summarizes equity in earnings (losses) of unconsolidated
affiliates:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
(in thousands) Ended September 30, Ended September 30,
------------------------- -------------------------
<S> <C> <C> <C> <C>
1996 1997 1996 1997
Boston Financial Data Services, Inc. $ 1,489 $ 1,829 $ 3,927 $ 4,989
Argus Health Systems, Inc. 223 722 1,263 3,435
European Financial Data Services Limited (1,728) (3,278) (4,552) (7,073)
Other (29) 220 (295) 6
------------------------- -------------------------
(45) (507) 343 1,357
The Continuum Company, Inc. (4,890)
------------------------- -------------------------
$ (45) $ (507) $ (4,547) $ 1,357
========================= =========================
</TABLE>
3. New Financial Accounting Standards
Earnings per share
Earnings per share is determined by dividing net income by the weighted average
number of common shares outstanding during the year. The dilutive effect of
stock options is not material.
The Financial Accounting Standards Board issued Statement No. 128, "Earnings per
Share" ("EPS") ("SFAS 128") in February 1997. SFAS 128 replaces the presentation
of "Primary EPS" and "Fully Diluted EPS" with "Basic EPS" and "Diluted EPS",
respectively. This statement requires a presentation of Basic and Diluted EPS on
the face of the income statement for periods ending after December 15, 1997.
Basic EPS and Diluted EPS computed in accordance with SFAS 128 would have been
as follows:
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
----------------------- ----------------------
1996 1997 1996 1997
Basic earnings per share $2.78 $0.29 $3.11 $0.87
Diluted earnings per share $2.76 $0.28 $3.08 $0.86
Comprehensive income
The Company holds, among others, approximately 4.3 million shares of Computer
Sciences Corporation common stock and approximately 6.0 million shares of State
Street Corporation common stock as investments. At June 30, 1997, the Company's
investments in available for sale securities had an aggregate market value of
$604.2 million. At September 30, 1997, these investments had an aggregate market
value of $688.9 million. The $84.7 million unrealized gain in the third quarter
1997 on the Company's investments in these securities, net of deferred taxes of
$33.1 million, has been recorded in stockholders' equity in accordance with SFAS
115, "Accounting for Certain Investments in Debt and Equity Securities."
The Financial Accounting Standards Board issued Statement No. 130, "Reporting
Comprehensive Income" in June 1997. The new statement requires that all changes
in equity during a period except those resulting from investments by owners and
distributions to owners be reported as "comprehensive income" in the financial
statements beginning in 1998. Upon implementation, DST will include the net
unrealized gain or loss on its available-for-sale securities in the computation
of comprehensive income.
Segment information
The Financial Accounting Standards Board issued Statement No. 131, "Disclosures
about Segments of an Enterprise and Related Information" in June 1997. The new
statement requires that companies report financial and descriptive information
about reportable operating segments in the financial statements beginning in
1998. The Company is currently evaluating the effect that implementation of the
new standard will have on the information disclosed in its financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The discussions set forth in this Form 10-Q contain forward-looking comments.
These comments contain such descriptions as "anticipates," "believes," "expects"
and similar terms and conjugations thereof. Such comments are based upon the
information currently available to management of the Company and management's
perception thereof as of the date of this report. Actual results of the
Company's operations could materially differ from those indicated in the
forward-looking comments. The difference could be caused by a number of factors
including, but not limited to, those discussed in a Current Report on Form 8-K
dated March 22, 1996, which has been filed with the SEC which is hereby
incorporated by reference. That Current Report may be obtained by contacting the
Commission's public reference operations. Readers are strongly encouraged to
obtain and consider the factors listed in the March 22, 1996, Current Report and
any amendments or modifications thereof when evaluating any forward-looking
comments concerning the Company.
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations should be read in conjunction with
the Condensed Consolidated Financial Statements and Notes thereto included in
this Form 10-Q and the audited financial statements and notes thereto in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
INTRODUCTION
The Company provides sophisticated information processing and computer software
services and products, primarily to mutual funds, insurance providers, banks and
other financial services organizations.
RECENT EVENTS
In July 1997, the Company sold its interest in First of Michigan Capital
Corporation for $9.6 million. The transaction, on an after-tax basis, did not
have a material effect on the Company's financial position or results of
operations.
In August 1997, the Company purchased an 81% interest in MSE-Integrated Systems,
Inc. (MSE), the international information technology subsidiary of the Chicago
Stock Exchange (CHX) for approximately $4.0 million in cash. Following its
acquisition by DST, MSE acquired the business of Catalyst Consulting, the
proprietary research arm of Catalyst Institute, a Chicago-based public policy
research institution for global financial markets, and established an operating
alliance with Catalyst Institute. MSE has changed its name to DST Catalyst, Inc.
DST Catalyst develops, markets, installs, maintains and operates computer
systems to support securities exchanges and brokerage firms and performs
research and consulting related to the development of financial markets and
institutions.
In October 1997, the Company purchased the remaining 20% minority interest in
DBS Systems Corp. for $13.2 million in cash. The excess of the purchase price
over the net assets acquired of $11.6 million will be amortized over 12 years.
On a proforma basis, these transactions, both individually and in the aggregate,
did not have a material impact on the Company's historical results of operations
or financial position.
RESULTS OF OPERATIONS
Third Quarter and Year-to-Date 1996 versus Third Quarter and Year-to-Date 1997
For the quarter ended September 30, 1997, DST's consolidated net income was
$14.1 million, or $0.29 per share, as compared to $138.6 million, or $2.78 per
share for the quarter ended September 30, 1996. Eliminating the net after tax
gain of $127.6 million resulting from the completion of the merger of The
Continuum Company ("Continuum") and Computer Sciences Corporation ("CSC") (the
"Continuum Merger"), net income for the quarter ended September 30, 1996, would
have been $11.0 million or $0.22 per share.
For the nine months ended September 30, 1997, DST's consolidated net income was
$43.0 million, or $0.87 per share, as compared to $155.4 million, or $3.11 per
share for the nine months ended September 30, 1996. Eliminating the net after
tax gain from the Continuum / CSC merger and equity in losses of Continuum, net
income for the nine months ended September 30, 1996, would have been $32.2
million or $0.65 per share.
Revenues
Consolidated revenues for the three and nine months ended September 30, 1997,
were $159.9 million and $473.9 million, respectively, which represent increases
of 14.5% and 11.0%, respectively, over the comparable 1996 periods.
Domestic revenues for the three and nine months ended September 30, 1997, were
$134.2 million and $405.0 million, respectively, which represent increases of
12.3% and 10.8%, respectively, over the comparable 1996 periods, reflecting
growth in mutual fund, portfolio accounting, output processing, Automated Work
Distributor (AWD) and satellite television subscriber management revenues. The
number of United States mutual fund shareowner accounts serviced by DST
increased to 43.1 million at September 30, 1997, an increase of 3.1 million
accounts from September 30, 1996 and 2.0 million from December 31, 1996. The
Company anticipates the addition of approximately 1.0 million accounts from
committed new client conversions in the fourth quarter 1997. Additionally, the
Company expects that remote processing clients with approximately 1.1 million
accounts will switch to in-house processing by the end of 1997. Output
Technologies domestic revenues for the three and nine months ended September 30,
1997, increased 9% and 8%, respectively, based on an increase in pages printed.
AWD workstations licensed in the United States increased to 18,786 at September
30, 1997, an increase of 59% from September 30, 1996 and 41% from December 31,
1996. Satellite television subscriber management revenues for the three and nine
months ended September 30, 1997, increased significantly over the comparable
1996 periods due to an increased number of subscribers and continuing systems
development activities.
International revenues for the three and nine months ended September 30, 1997,
were $25.7 million and $68.9 million, respectively, increases of 28.0% and
12.1%, respectively, over the comparable 1996 periods. Increases in third
quarter revenues resulted from increased license and support revenues for
investment accounting and AWD systems, and higher Canadian mutual fund revenues.
AWD workstations licensed outside the United States increased to 7,110 at
September 30, 1997, an increase of 49% from September 30, 1996 and 12% from
December 31, 1996. Canadian mutual fund accounts serviced totaled 0.7 million at
September 30, 1997, an increase of 188% from December 31, 1996.
Costs and expenses
Consolidated costs and expenses for the three and nine months ended September
30, 1997, increased 13.9% and 10.0%, respectively, over the comparable 1996
periods, primarily from increased personnel and facilities costs to support
revenue growth. Domestic costs and expenses increased 13.1% and 9.9%,
respectively, and international costs and expenses increased 17.0% and 10.7%,
respectively, for the three and nine months ended September 30, 1997, over the
comparable 1996 periods.
The Company has experienced some increases in costs necessary to hire and retain
computer programmers and other systems professionals. While these cost increases
have not materially affected the Company's overall cost structure to date, the
Company believes that the costs associated with computer programmers and other
systems professionals may continue to increase at least through the year 2000 at
rates above general inflation.
Depreciation and amortization
Depreciation and amortization expenses for the three months ended September 30,
1997 decreased 1.8% over the comparable 1996 period. For the nine months ended
September 30, 1997, depreciation and amortization increased 1.5% over the
comparable 1996 period. The containment of depreciation and amortization
expenses in 1997 is primarily the result of lower capital additions in 1996 and
1997 compared to prior years and the Company's use of accelerated depreciation
methods for electronic data processing equipment.
Interest expense
Interest expense totaled $2.0 million for the third quarter 1997, an increase of
$0.6 million over the prior year quarter due to higher average debt balances.
Year-to-date 1997, interest expense totaled 6.0 million, an increase of $0.9
million over the prior year. The increases in interest expense is primarily the
result of higher average debt balances.
Other expenses
In connection with the merger of Continuum with CSC in 1996, DST elected to make
a one-time $13.7 million ESOP contribution to provide funding for certain
Continuum employee withdrawals from DST's ESOP. This expense, net of tax, is
included in the $127.6 million gain on the sale of Continuum previously
discussed.
Equity in earnings (losses) of unconsolidated affiliates
Equity in losses of unconsolidated affiliates totaled $0.5 million for the three
months ended September 30, 1997, as compared to essentially breakeven results
for the three months ended September 30, 1996. Equity in earnings of
unconsolidated affiliates totaled $1.4 million for the nine months ended
September 30, 1997, an increase of $1.0 million as compared to the nine months
ended September 30, 1996, excluding the equity in earnings or losses of
Continuum. Increased earnings were recorded at Boston Financial Data Services,
Inc. resulting from increased non-mutual fund related processing and increased
mutual fund operating earnings and at Argus Health Systems, Inc., as claims
processed for the three and nine months ended September 30, 1997, increased 16%
and 17% , respectively, over the comparable 1996 periods. Argus has received
notice of termination from a significant client whose contract terminates in the
first quarter 1998. Increased losses were recorded at European Financial Data
Services Limited ("EFDS") resulting from increased FAST2000 development costs
and additional operating costs to add new full service clients and support
existing clients' unit trust growth. Unitholder accounts serviced by EFDS
totaled 0.8 million at September 30, 1997, an increase of 125% from December 31,
1996. Initial installation of FAST2000 unit trust system components at EFDS is
expected by the end of 1997.
Income taxes
The Company's effective tax rate for the third quarter 1997 was 33.2% as
compared to 25.5% for the prior year quarter (excluding the effects of the
Continuum merger), primarily as a result of non-recurring tax credits in 1996.
The Company's year-to-date effective tax rate for 1997 was 34.0% as compared to
35.3% (excluding the effects of Continuum) for the prior year, primarily as a
result of differences in non-U.S. income tax rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses internally generated funds and borrowings from third parties to
fund operating and investing activities. The Company's cash flows from operating
activities totaled $77.6 million during the nine months ended September 30,
1997. Cash flows from operating activities were reduced by payment of a $13.7
million ESOP contribution made in first quarter 1997 in conjunction with the
1996 Continuum merger.
The Company has expended $41.1 million in 1997 for capital additions.
Investments in and advances to unconsolidated affiliates totaled $15.4 million,
primarily as a result of funding the development of FAST2000 at EFDS. During
1997, the Company has repurchased 450,000 shares of its Common Stock for $14.5
million, pursuant to a formal plan previously announced.
The Company maintains a $50 million bank line of credit facility to finance
short-term working capital requirements available through May 1998, of which
total borrowings were $17.2 million at September 30, 1997. Additionally, the
Company maintains a five-year revolving credit facility of $125 million with a
syndicate of U.S. and international banks. Total borrowings of $20 million were
outstanding on this facility at September 30, 1997.
The Company believes that its existing cash balances and other current assets,
together with cash provided by operating activities and, as necessary, the
Company's credit facilities, will be sufficient to meet the Company's operating
and debt service requirements and other current liabilities for at least the
next twelve months. Further, the Company believes that its longer-term liquidity
and capital requirements will be met through cash flows from operations and
existing bank credit facilities.
OTHER
Seasonality
Generally, the Company does not have significant seasonal fluctuations in its
business operations. Processing and output volumes for mutual fund customers are
usually highest during the quarter ended March 31 due primarily to processing
year-end transactions and printing and mailing of year end statements and tax
forms during January. The Company has historically added operating equipment in
the last half of the year in preparation for processing year-end transactions
which has the effect of increasing costs for the second half of the year.
Software license revenues and operating results are dependent upon the timing,
size, and terms of the license.
Year 2000
The approach of the year 2000 raises a general issue with hardware and software
on a world-wide basis concerning potential problems caused by date comparisons
and calculations across the century boundary. The Company is performing a
project to thoroughly analyze its products and services and is undertaking the
work necessary to ensure that they continue to operate correctly across the
century boundary. The expenses associated with this project are expensed as
incurred. At this time, the Company is unable to determine if such expenses will
be material to the Company.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is from time to time a party to litigation arising in the ordinary
course of its business. Currently, there are no legal proceedings that
management believes would have a material adverse effect upon the consolidated
results of operations or financial condition of the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
Sources of Revenue September 30, 1996 September 30, 1997
- --------------------------- ---------------------- ---------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
U.S. revenues
Mutual fund / investment management
Data processing services $ 190,582 44.7% $ 211,420 44.6%
Output processing 56,101 13.1% 63,919 13.5%
---------------------- ---------------------
246,683 57.8% 275,339 58.1%
Other output processing 70,036 16.4% 72,666 15.3%
Other 48,810 11.4% 56,977 12.0%
---------------------- --------------------
Total U.S. revenues 365,529 85.6% 404,982 85.4%
International revenues 61,518 14.4% 68,959 14.6%
---------------------- --------------------
Total revenues $ 427,047 100.0% $ 473,941 100.0%
====================== ====================
</TABLE>
<TABLE>
<CAPTION>
Three Months Nine Months
Geographic Operating Results Ended September 30, Ended September 30,
- ------------------------------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
(in thousands) 1996 1997 1996 1997
Domestic revenues $119,483 $134,157 $365,529 $404,982
Domestic income from operations 3,419 20,854 40,493 66,824
International revenues 20,086 25,706 61,518 68,959
International income (losses) from operations (1,697) (2,127) (582) 745
</TABLE>
December 31, September 30,
Other Operating and Financial Data 1996 1997
- --------------------------------------- --------------------------------
Investment Market Values (in thousands) (1)
Computer Sciences Corporation $ 354,466 $ 305,369
State Street Corporation 192,992 363,932
Euronet Services, Inc. (2) $ 1,167 $ 13,556
Operating Data
TA2000 mutual fund shareowner accounts (millions) 41.1 43.1
TRAC-2000 mutual fund accounts (millions) (3) 1.3 1.9
TRAC-2000 participants (millions) 0.6 0.8
Securities Transfer System accounts (millions) 6.1 6.2
Portfolio Accounting System portfolios 2,074 2,320
Automated Work Distributor Workstations 19,700 25,896
Nine Months Ended September 30,
--------------------------------
1996 1997
Output Technologies pages printed (millions) 872 1,067
Argus Pharmaceutical claims processed (millions) 94 110
(1) Based upon the closing price on the last trading day of the applicable
period at the exchange where principally traded.
(2) Euronet Services, Inc. finalized its initial public offering on March 6,
1997. The September 30, 1997 investment balance is based upon the closing
price listed on the NASDAQ.
(3) Included in TA2000 mutual fund shareowner accounts.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a Form 8-K dated July 17, 1997, under Item 5 of such form,
reporting the announcement of financial results for the quarter ended June 30,
1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, and in the capacities indicated on November 11, 1997.
DST Systems, Inc.
/s/ Kenneth V. Hager
Kenneth V. Hager
Vice President and Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule, submitted as Exhibit 27.1 to Form 10-Q, contains
summary financial information extracted from the consolidated condensed
balance sheet and statement of income of DST Systems, Inc., commission
file number 1-14036, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000714603
<NAME> DST Systems, Inc.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Sep-30-1997
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0
0
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</TABLE>
