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<PAGE>
DECEMBER 1, 1998
DST/USCS CONFERENCE CALL
DISCUSSION OUTLINE
DST OVERVIEW (McDonnell)
READ DISCLAIMER
Before starting today, I would like to make a statement under SEC
procedures and rules:
If in the course of our conference call today we make
forward-looking comments respecting DST and USCS and their
businesses, such comments would be based on our views as of
today, and actual results could differ. There could be a number
of factors affecting actual future results, including those set
forth in a Form S-4 and joint proxy statement dated November 25,
1998 which we filed with the SEC. Any such factors should be
considered in evaluating any forward-looking comments which we
may make today.
DST is very comfortable with the outlook for our business and
feel we are well positioned for growth
Mutual fund shareowner growth has been solid for 1998:
Year to date growth through 9/30/98 - 3.9 million a/c s -
8.9 %
3.9 million is net of 1.6 million a/c s for Prudential and
GT Global which were removed in 1998
IRA a/c growth of remaining clients in 1998 was 2.9 million
a/c s, of which 700K were new IRA s (i.e., Roth, etc.)
IRA a/c growth has tripled in 1998
Continue to see solid increases in IRA activity
New account conversions in 4th quarter will be approximately
1.4 million accounts
Revenue growth at DSTI and DST Canada have also been strong
Investment accounting revenues at DSTI have increased, aided
by Y2K and EMU revenue opportunities
Canadian Mutual fund revenues are being driven by higher
account and activity levels
EFDS has converted its first clients to FAST2000 and has
scheduled the rest of the accounts for conversion; while
losses will continue at the same pace for the next few
quarters improvement should begin late in 1999.
DBS revenues have increased from DirecTV subscriber growth and
increased development activities
I will now turn the presentation over to Jim Castle who will
provide a few comments regarding USCS
Thanks Tom and good morning to all of you.
Let me begin by saying that I m sorry we couldn t meet with you
in person, but would like to thank Steve for setting up this
teleconference, and look forward to seeing you post-closing when
we are able to get on the road.
I realize some of you may not be too familiar with USCS, so I d
like to spend a few minutes summarizing our business, our
customer base, our financial outlook and our ongoing growth
strategy.
First . . . who we are:
USCS International provides the essential software and billing
solutions that are the vital link between our customers and their
customers in more than half of the 100 million households in the
US and millions more overseas.
USCS was founded in 1969 and has grown to become a leading
provider of customer management software and billing solutions to
the global communications marketplace, the utilities market and
other high volume services industries.
We believe USCS International is truly unique due to our breadth
of services, geographic and market diversification, and years of
experience.
USCS International s approach to the market includes the
provision of both customer management software services, and
statement processing and production services.
Our customer management software products offer the full range of
support from order entry to customer service to account
information and management reporting. We license our software
generally on a per-subscriber, per-month basis, under contracts
ranging from 3-5 years.
Our statement processing products and services support a
diversity of business requirements ranging from traditional
printing, to consolidated statements, to presentation of
divergent billing streams for converged billing, to the newest
frontier of electronic presentation and remittance processing.
These services too, are generally offered under long-term
contracts ranging from 5-7 years.
Although our traditional core market has been the US Cable
industry, we have significantly diversified both our market and
our geographic presence and sources of revenue.
For instance, our Intelecable product, which we believe is the
first developed and deployed convergence software product,
enables our customers to not only support video services, but
also residential and business telephony, interactive offerings or
a converged offering of any of these services.
We developed an aggressive sales strategy and partner network to
enter the international market. In fact, with our Intelecable
convergence software and Custima, our newly acquired utilities
software, we now have a presence in over 30 countries.
Some of our blue-chip software customers served by our CableData
subsidiary include Cablevision; Comcast; and MediaOne, all of
whom renewed their contracts with us this year; Marcus Cable;
Intermedia; BellSouth; Southern New England Telephone; Multicanal
Argentina; Metropolis in Chile and Billingsoft in Japan. All of
these customers operate under long-term volume, drive contracts
providing a high level of revenue visibility and predictability.
Similarly, the statement processing services offered by our
International Billing Services subsidiary, are not unique to, or
limited by, certain industry requirements.
Several years ago, we targeted the wireless and wireline markets
with our statement processing services and now enjoy a nearly 40%
market share in cellular and a 12% share of landline bills
processed in addition to our more than 50% share in cable. Our
statement processing customers are also operate under multi-year,
volume driven, recurring revenue contracts.
Examples of some of our diversified statement processing
customers include AT&T, Ameritech, Convergys, ITDS, Ford Credit,
UPS, Fed EX and Montgomery Securities. These latter four
customers represent new business signed within the last 12
months, while Convergys, ITDS, and Ameritech have recently
renewed or expanded their contractual relationship with us.
We now process about 80 million statements per month and are
responsible for approximately 2% of all US first class mail
Shifting now to our financial outlook . . .
When I joined the company in mid 1992, about 90% of our revenues
were coming from the US cable market. While this remains an
important market for us, it is relatively mature, with most
experts predicting single digit growth rates. As is clearly
demonstrated by our diversified customer base, we have
successfully extended the reach of both our software and services
to address faster growing markets such as global wireless
telecom, convergence, and utilities, so that today, revenues from
US cable represent approximately 50% of our total.
This diversification strategy proved essential to our ability to
absorb the transition of TCI, our largest customer, to a
competitor s platform and still show the robust earnings growth
that we have consistently delivered.
Our strategy for maintaining and expanding this growth is very
straightforward.
We have an extensive, existing recurring revenue customer
base in our core communications market. We will continue to
build on that base.
We will identify new target markets of opportunity for our
bill processing services and expand those services with
ongoing investment in electronic billing options
We will focus on rapid and profitable international growth
in both software and statement processing.
We will have a particular focus on utilities as we
aggressively extend the sales and marketing initiatives on
behalf of our new Custima subsidiary.
Underlying all these strategies is, of course, ongoing
investment in extending our technology leadership
And finally, we will be working to efficiently maximize
synergies with DST.
With that I d like to thank you for your attention and turn the
call back to Tom.
MERGER DISCUSSION
I would like to spend a few minutes speaking about the DST/USCS
merger. As indicated in the proxy, both companies believe the
merger will provide significant benefits to our shareowner
groups. We would like to stress that the merger is accretive for
1999 without synergies. These synergies can be categorized as
follows:
OPERATING
Different peak print mail processing periods, which should
allow for greater overall utilization of existing capacity
and reduce excess capacity currently required to process
existing and future volumes
OTI and IBS s production technologies are complementary
(i.e., OTI handles large volumes of smaller jobs while IBS
handles smaller volumes of larger jobs). The combination of
these technologies should provide great flexibility to
approach a wide variety of applications
The combined OTI/IBS business will have significant presence
in all major geographic regions
REVENUE
Combining Cabledata s cable TV product offerings and DBS s
satellite TV product offering will provide a broad based
product offering
New markets - utilities, convergence billing and electronic
bill presentment.
The combination provides the potential to expand the
presence of other DST products such as AWD and call center
processing to the new markets
ADMINISTRATIVE
Elimination of duplicate public company costs will result
from the merger.
There have been a number of questions raised about certain
announcements regarding client activities at USCS. USCS
fully disclosed these items to DST during the process and we
are comfortable that USCS will produce the results we have
anticipated. We are as committed to the merger today as we
were on the day of signing.
WE WILL NOW TURN THE REST OF THE CALL OVER THE QUESTIONS FROM OUR
LISTENERS.
