UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A-3
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) March 25, 1999
(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>
SECOND AMENDMENT AND RESTATEMENT TO CAUTIONARY STATEMENTS
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
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, DST Systems, Inc. (the "Company") is hereby
amending and restating its Form 8-K dated March 15, 1996, amended and restated
April 13, 1998, and August 4, 1998, setting forth certain cautionary statements
identifying important factors that either individually or in combination with
other factors could cause the Company's actual operating results to differ
materially from those projected in forward-looking statements, whether oral or
written, concerning the Company and made by, or on behalf of, the Company.
ITEM 6 RESIGNATIONS OF REGISTRANT'S DIRECTORS Not applicable.
ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS
Cautionary statements for purposes of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 are attached hereto as Restated
and Amended Exhibit 99.
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: March 25, 1999
Restated and Amended
Exhibit 99
CAUTIONARY STATEMENTS AS AMENDED AND RESTATED
MARCH 25, 1999 WITH RESPECT TO FORWARD-LOOKING COMMENTS
FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
DST Systems, Inc. (the "Company") desires to take advantage of the
"safe harbor" provisions of the Private Securities Litigation Act of 1995 and is
filing this Form 8-K/A-3 in order to do so. The Company or others on behalf of
the Company may make from time to time (whether orally or in writing)
forward-looking comments or statements concerning potential future events,
including but not limited to the results of the Company's operations. Such
forward-looking statements are based upon assumptions by the Company's
management at the time the statements are made, including assumptions about
risks and uncertainties faced by the Company. If any of management's assumptions
prove incorrect or unanticipated circumstances arise, the actual results could
differ materially from those anticipated by such forward-looking statements. The
differences could be caused by a number of factors or combinations of factors
including, but not limited to, those factors set forth below. Persons hearing or
reading such forward-looking comments should consider carefully the following
factors, in addition to the other information contained in the Company's public
documents, when evaluating such forward-looking comments. The Company does not
currently intend to update any forward-looking statement made or published to
reflect events or developments occurring after the making or publishing of such
statement.
Dependence on Certain Industries
The Company derives a substantial proportion of its consolidated
revenues from the delivery of services and products to clients in the mutual
fund, cable and satellite television, telecommunications and utilities
industries. Business consolidations which would decrease the number of potential
clients in such industries, events which would reduce the rate of growth in or
negatively impact such industries, or significant declines in the number of
accounts or subscribers serviced by clients in such industries could have a
material adverse effect on the Company.
Integration with Acquired Company and Management of Growth
On December 21, 1998, USCS International, Inc. ("USCS") became a
wholly-owned subsidiary of the Company (the "USCS Merger"). The transition to
combined operations will require substantial attention from management. Neither
company's management has experience in integrating operations on the scale
represented by the USCS Merger. There could be a disruption in the business
activities of DST, USCS or both. There could also be significant costs incurred
to achieve the benefits of the USCS Merger. If integration of DST and USCS is
not efficient, if significant disruptions occur, or if the costs outweigh the
benefits, DST and USCS may not realize fully the anticipated benefits of the
USCS Merger. The diversion of management attention and any difficulties
encountered in the transition process could also have a material adverse effect
on the business or financial results of the Company.
Growth of the Company may place additional demands on the Company's
management, operations and systems. The Company's ability to execute its
business strategy will depend in part upon its ability to manage the demands of
a growing business. Any failure of the Company's management to effectively
manage growth could have a material adverse effect on the Company's business,
financial condition or results of operations.
Impact of Technological and Market Changes
The Company's clients use computer technology-based products and
services in the complex and rapidly changing markets in which they operate. The
technology available to the Company's clients, such as methods for the
electronic dissemination of documents, is expanding. The Company's future
success depends in part on its ability to continue to adapt its technology, on a
timely and cost effective basis, to meet clients' needs and demands for the
latest technology. There can be no assurance that the Company will be able to
respond adequately and in advance of its competitors to these technological
demands or that more advanced technology, including technology for the
electronic dissemination of documents, will not reduce or replace the needs for
certain of the Company's products and services.
The Company has expended considerable funds to develop products to
serve new and rapidly changing markets. If such markets grow or converge more
slowly than anticipated or the Company's products and services fail to achieve
market acceptance, there could be a material adverse effect on the financial
condition and results of operations of the Company.
Reliance on Processing Facilities
The Company's processing services are primarily dependent on the
Winchester Data Center, which is the Company's central computer operations and
information processing facility in Kansas City, Missouri, the Poindexter Data
Center, which is the Company's AWD image processing facility in Kansas City,
Missouri, and the Company's two bill processing facilities in El Dorado Hills,
California. A natural disaster or other calamity that causes long-term damage to
the facilities could have a material adverse effect on the Company.
Importance of Key Personnel
The Company's operations and the continuing implementation of its
business strategy are dependent upon the efforts of its technical personnel and
senior management. Recruiting and retaining capable personnel, particularly
those with expertise in the types of computer hardware and software utilized by
the Company, are vital to the Company's success. There is substantial
competition for qualified technical and management personnel, and there can be
no assurance that the Company will be able to attract or keep the qualified
personnel it requires. The loss of key personnel or the failure to hire
qualified personnel could have a material adverse effect on the Company.
Lack of Control of Joint Ventures
The Company's business strategy for growth and expansion includes a
reliance on joint ventures. The Company can derive a significant part of its net
income from its pro rata share in the earnings of these unconsolidated
companies. Although the Company owns significant equity interests in such
companies and has representation on their Boards of Directors, the Company is
not in a position to exercise control over their operations, strategies or
financial decisions without the concurrence of its equity partners. The
Company's equity interests in Boston Financial Data Services, Inc. ("BFDS") and
Argus Health Systems, Inc. also are subject to contractual buy/sell arrangements
that restrict the Company's ability to fully dispose of its interest in these
companies and that under certain circumstances permit such companies to purchase
the Company's interest.
The other parties to such existing joint venture arrangements, and to
arrangements in which the Company may participate in the future, may at any time
have economic, business or legal interests or goals that are inconsistent with
those of the joint venture or of the Company. In addition, if a joint venture
partner were unable to meet its economic or other obligations to the venture, it
could, depending upon the nature of such obligations, adversely affect the
combined operations of the Company and the price of the Company's common stock.
Influence by Current Stockholder
Kansas City Southern Industries, Inc. ("KCSI") currently owns
approximately 32 percent of the outstanding common stock of the Company. In
addition, two directors of KCSI are also directors of the Company, and KCSI is
generally exempted from the restrictions in the Company's Stockholders' Rights
Plan until such time as KCSI's ownership of the Company drops below certain
levels. As a result, KCSI may be able to influence matters affecting the
Company, including matters submitted to a vote of the Company's stockholders,
such as the election of directors and the approval of corporate transactions.
Significant Competition from Other Providers
The Company and its subsidiaries and joint ventures encounter
significant competition for the Company's services and products from other
third-party providers of similar services and products and from potential
clients who have chosen not to outsource certain services the Company could
provide. The Company's ability to compete effectively depends, in part, on the
availability of capital and other resources, and some of these competitors have
greater resources and greater access to capital than the Company. The Company
also competes for shareowner accounting services with brokerage firms that
perform sub-accounting services for the brokerage firms' customers who purchase
or sell shares of mutual funds for which the Company serves as transfer agent.
Such brokerage firms maintain only an "omnibus" account with the Company
representing the aggregate number of shares of a mutual fund owned by the
brokerage firms' customers, thus resulting in fewer mutual fund shareowner
accounts being maintained by the Company. Any of these events could have a
material adverse effect on the financial condition and results of operations,
including gross profit margins, of the Company. In addition, competitive factors
could influence or alter the Company's overall revenue mix between the various
business segments.
Regulation
As registered transfer agents, the Company, BFDS and BFDS' subsidiary,
National Financial Data Services, Inc. ("NFDS"), are subject to the Securities
Exchange Act of 1934, as amended, (the "Exchange Act") and to the rules and
regulations of the Securities and Exchange Commission ("SEC") under the Exchange
Act which require the Company, BFDS, and NFDS to register with the SEC and which
impose on them recordkeeping and reporting requirements. Certain of the
operations and records of the Company, BFDS, and NFDS are subject to examination
by the SEC and, as providers of services to financial institutions, to
examination by bank and thrift regulatory agencies. Material noncompliance with
the Exchange Act or SEC rules and regulations by the Company, BFDS, or NFDS
could result in the suspension or revocation of their transfer agent
registrations, which could have a material adverse effect on the Company. In
addition, DST Canada, Inc., a subsidiary of the Company, and CFDS Limited, a
subsidiary of BFDS, are subject to regulation of similar regulatory agencies in
Canada, and European Financial Data Services Limited, a joint venture of the
Company and State Street Corporation, is subject to regulation of similar
regulatory agencies in the United Kingdom. Any of these companies could have its
regulatory authorizations suspended or revoked if it were to materially violate
applicable regulations, which could have an adverse effect on the Company.
The Company's existing and potential clients are subject to extensive
regulation, and certain of the Company's revenue opportunities may depend on
continued deregulation in the world-wide communications industry. Certain of the
Company's clients are subject to regulations governing the privacy and use of
the customer information that is collected and managed by the Company's products
and services. Regulatory changes that adversely affect the Company's existing
and potential clients could have a material adverse effect on the financial
condition and results of operations of the Company.
Year 2000
Many computer programs use only two digits to identify a year in a date
field within the program (e.g., "98" or "02"). If not corrected, computer
applications making calculations and comparisons in different centuries may
cause inaccurate results, or fail by or at the Year 2000. These Year
2000-related issues are of particular importance to the Company. The Company
depends upon its computer and other systems and the computer and other systems
of third-parties to conduct and manage the Company's business. Additionally, the
Company's products and services are dependent upon using accurate dates in order
to function properly. These Year 2000-related issues may also adversely affect
the operations and financial performance of one or more of the Company's
customers or suppliers. As a result, the failure of the Company's computer and
other systems, products or services, the computer systems and other systems upon
which the Company depends, or of the Company's customers or suppliers to be Year
2000 ready could have a material adverse effect on the Company.
Although the Company is not aware of any material operational or
financial Year 2000-related issues, the Company cannot assure that its computer
systems, products, services or other systems or the computers and other systems
of others upon which the Company depends will be Year 2000 ready on schedule,
that the costs of its Year 2000 program will not become material or that the
Company's alternative plans will be adequate. The Company is currently unable to
anticipate accurately the magnitude, if any, of the Year 2000-related issues
arising from the Company's customers or suppliers or the degree to which claims
or complaints regarding such issues could be made against the Company. If Year
2000 risks (either with respect to the Company or its customers or suppliers)
materialize, the Company could experience material adverse consequences to its
business.
Anti-Takeover Considerations
Some provisions of the Company's Certificate of Incorporation could
make it more difficult for a third party to acquire control of the Company, even
if the change of control would be beneficial to certain stockholders. Certain of
these provisions could allow the Company's Board of Directors and, because of
its significant influence, KCSI, to take or prevent actions affecting
unaffiliated stockholders without their approval or consent. The Company has
also adopted a stockholders' rights plan which could delay, deter or prevent a
change in control of the Company. A few of the Company's client agreements allow
the client to terminate its agreement or to obtain rights to use the Company's
software used in processing the client's data in the event of an acquisition or
change of control of the Company. One of the Company's joint venture agreements
allows its joint venture partner to buy the Company's interest in the joint
venture in the event of a change of control of the Company.
Non-U.S. Operations
Consolidated revenues outside the U.S. account for a significant
percentage of the Company's revenues. The Company derives revenues from many
countries, primarily Canada and in Europe. The Company's current and proposed
international business activities are subject to certain inherent risks,
including but not limited to, specific country, regional or global economic
conditions, exchange rate fluctuation and its impact on liquidity, change in the
national priorities of any given country and cultural differences. There can be
no assurance that such risks will not have a material adverse effect on the
Company's future international sales and, consequently, the Company's business,
operating results and financial condition.
Variability of Quarterly Operating Results
The Company's quarterly and annual operating results may fluctuate from
quarter to quarter and year to year depending on various factors, including the
impact of significant start-up costs associated with initiating the delivery of
contracted services to new clients, the hiring of additional staff, new product
development and other expenses, introduction of new products by competitors,
pricing pressures, the evolving and unpredictable nature of the markets in which
the Company's products and services are sold and general economic conditions.
Client Failure to Renew or Utilize Contracts
Substantially all of the Company's revenue is derived from the sale of
services or products under long-term contracts with its clients. The Company
does not have the unilateral option to extend the terms of such contracts upon
their expiration. The failure of clients to renew contracts, a reduction in
usage by clients under any contracts or the cancellation of contracts could have
a material adverse effect on the Company's financial condition and results of
operations.
Dependence on Proprietary Technology
The Company relies on a combination of patent, trade secret and
copyright laws, nondisclosure agreements, and other contractual and technical
measures to protect its proprietary technology. There can be no assurance that
these provisions will be adequate to protect its proprietary rights. There can
be no assurance that third parties will not assert infringement claims against
the Company or the Company's clients or that such claims, if brought, would not
have a material adverse effect on the Company.
Miscellaneous
In addition to the factors noted above, there may be other factors that
cause any forward-looking comment to become inaccurate. Other factors include,
but are not limited to, changes in management strategies; changes in lines of
business or markets; failure of anticipated opportunities to materialize;
changes in the cost of necessary supplies; changes in the economic, political or
regulatory environments in the United States and/or the other countries where
the Company now competes or may compete in the future; and litigation involving
the Company.
