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) April 19, 2000
(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 April 19,
2000 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: April 20, 2000
April 19, 2000
DST SYSTEMS, INC. ANNOUNCES FIRST QUARTER 2000 FINANCIAL RESULTS
For the quarter ended March 31, 2000, DST's consolidated net income was $56.2
million ($.87 per diluted share) compared to first quarter 1999 net income of
$33.6 million ($.52 per diluted share), a 67.3% increase in net income and a
67.3% increase in diluted earnings per share. First quarter 2000 results include
an after tax gain of $6.9 million in connection with the settlement of a legal
dispute related to a former equity investment and after tax gains of $4.9
million related to sales of marketable securities. Adjusting first quarter 2000
results for the effect of the settlement gain and securities sales, net income
and diluted earnings per share would have been $44.4 million and $.69,
respectively, an increase of 32.1% and 32.7%, respectively.
The following table summarizes the Company's revenues and income from operations
by segment (dollars in millions):
Quarter ended
March 31,
Revenues 2000 1999
---- ----
Financial Services $147.8 $134.6
Output Solutions 155.2 125.9
Customer Management 48.7 48.2
Investments and Other 8.2 8.2
Intersegment eliminations (19.5) (18.5)
----- -----
$340.4 $298.4
====== ======
Income from operations
Financial Services $35.8 $29.2
Output Solutions 24.0 15.7
Customer Management 2.5 3.0
Investments and Other 1.4 2.0
---- ----
$63.7 $49.9
===== =====
Consolidated revenues increased $42.0 million or 14.1% over the prior year
quarter, reflecting higher financial services and output solutions revenues.
Consolidated income from operations totaled $63.7 million for the quarter, an
increase of $13.8 million or 27.7% over the 1999 first quarter, primarily from
increased operating earnings in financial services and output solutions
segments.
Financial Services Segment
Financial Services Segment revenues for the quarter were $147.8 million, an
increase of $13.2 million or 9.8% over first quarter 1999. U.S. revenues
increased $16.7 million, or 16.3%, primarily from increases in mutual fund
shareowner accounts processed. U.S. mutual fund shareowner accounts processed
totaled 61.0 million at March 31, 2000, an increase of 8.2% from the 56.4
million serviced at December 31, 1999 and an increase of 18.2% from the 51.6
million serviced at March 31, 1999. Total retirement plan accounts increased 1.6
million or 9.2% to 19.0 million at March 31, 2000. Net new IRA accounts for the
first quarter of 2000 were 1.2 million, of which approximately 42% were Roth or
Educational IRA accounts. For the period April 1-17, 2000, mutual fund
shareowner accounts serviced increased an estimated 0.7 million, of which
approximately 43% were IRA accounts. 401(k) accounts serviced increased
approximately 0.4 million or 12% to 3.8 million accounts at March 31, 2000. U.S.
AWD(R) workstations licensed were 39,500 at March 31, 2000, an increase of 10.3%
over year-end 1999 levels.
International revenues totaled $28.6 million for the first quarter 2000, a
decrease of $3.5 million or 10.9% over comparable prior year quarter revenues.
The decrease was attributable to a decline in professional service revenues and
investment management software license revenues, partially resulting from
customer Year 2000 software installation freezes that affected activity the
first quarter of 2000. This decrease was partially offset by higher Canadian
mutual fund processing revenues and an increase in international AWD software
license and maintenance revenues. International AWD workstations licensed were
22,600 at March 31, 2000, an increase of 3.2% over year-end 1999 levels.
Financial Services Segment income from operations for the first quarter 2000
increased $6.6 million or 22.6% over the prior year quarter to $35.8 million,
resulting in an operating margin of 24.2% compared to 21.7% for the prior year.
Costs and expenses increased 4.4%, primarily from increased personnel costs
necessary to support revenue growth. Depreciation and amortization costs
increased $2.6 million or 17.4%, partially attributable to amortization of
capitalized software development costs.
Output Solutions Segment
Output Solutions Segment revenues for the quarter ended March 31, 2000 were
$155.2 million, an increase of $29.3 million or 23.3% over first quarter 1999.
Revenue growth resulted from increased volume of images and statements produced
from U.S. mutual fund shareowner account growth, and internal growth of existing
customers primarily in the telecommunications and package delivery industries.
Output Solutions Segment images produced in the first quarter 2000 increased
17.2% to 1.8 billion and statements mailed increased 18.3% to 485 million
compared to the first quarter of 1999.
Output Solutions Segment income from operations for the first quarter increased
$8.3 million or 52.9% over the prior year quarter to $24.0 million, resulting in
an operating margin of 15.5% compared to 12.5% in the prior year quarter. Costs
and expenses increased 19.6%, principally due to increased personnel costs to
support revenue growth, increased product development costs and integration
costs to standardize facilities and systems. Depreciation and amortization
increased 11.3% in the first quarter 2000 to $7.9 million from additional
capital equipment to support revenue growth.
Customer Management Segment
Customer Management Segment revenues for the quarter ended March 31, 2000 were
$48.7 million, an increase of $0.5 million or 1.0% from the 1999 quarter.
Processing and software service revenues increased $0.6 million or 1.3% and
equipment sales decreased $0.1 million.
Customer Management Segment income from operations for the first quarter 2000
decreased $0.5 million to $2.5 million, resulting in an operating margin of
5.1%. Costs and expenses increased $0.5 million or 1.2%, primarily attributable
to increased costs of international operations. Depreciation and amortization
increased $0.5 million or 13.9%, primarily attributable to amortization of
capitalized software development costs.
Investments and Other
Investments and Other Segment revenues were $8.2 million for the quarters ended
March 31, 2000 and 1999. Segment revenues are primarily rental income for
facilities leased to the Company's operating segments. Investments and Other
Segment income from operations declined $0.6 million for the quarter ended March
31, 2000.
Equity in earnings (losses) of unconsolidated affiliates
The following table summarizes the Company's equity in earnings (losses) of
unconsolidated affiliates (dollars in millions):
Quarter ended
March 31,
2000 1999
---- ----
BFDS $4.0 $2.7
EFDS .3 (1.4)
Argus .2 .9
Other (.4)
---- ----
$4.1 $2.2
==== ====
Increased earnings were recorded at BFDS from higher levels of mutual fund
activity. EFDS results reflected an increase in accounts serviced to 2.3 million
at March 31, 2000, which is 0.3 million or 15.0% above year-end 1999 and 0.7
million or 43.8% over March 31, 1999 levels. EFDS was positively affected by
seasonal processing revenues related to U.K. retirement plan funding deadlines
and non-recurring overflow processing performed for certain remote clients. EFDS
continues to incur system development and conversion costs for FASTTM.
Management believes that EFDS' results for the first quarter of 2000 are not
indicative of their results for the remainder of the year. Argus' earnings
decreased from the prior year quarter primarily from increased data processing
costs and depreciation charges.
Other income, net
Other income was $21.3 million for the quarter ended March 31, 2000, compared to
$1.7 million for the first quarter of 1999. The increase in Other income
resulted from a $10.8 million pretax settlement of a legal dispute related to a
former equity investment. The settlement agreement resolves all outstanding
issues related to this former equity investment. Other income also includes $7.6
million of gains on sales of equity investments and $2.9 million primarily
related to interest and dividend income.
Interest expense
Interest expense totaled $1.4 million for the quarter ended March 31, 2000, a
decrease of $0.1 million from the prior year quarter. Average debt balances were
lower in 2000 compared to 1999.
Income taxes
DST's effective tax rate was 35.9% for the quarter and year ended March 31, 2000
and 1999. The 2000 and 1999 tax rates were affected by tax benefits relating to
certain international operations and recognition of state tax benefits
associated with income apportionment rules.
Other Actions
During the quarter ended March 31, 2000, DST announced a new share repurchase
program, which authorized the repurchase of an additional 4,000,000 shares of
DST common stock. Of the additional 4,000,000 shares to be repurchased, 960,000
shares will be used to meet expected additional share requirements under various
DST option, incentive and benefit plans. The balance of the additional shares
will be repurchased from time to time and will be used for general corporate
purposes. During the quarter ended March 31, 2000 no shares were repurchased
under this program.
During the quarter ended March 31, 2000, DST purchased 530,000 shares of its
common stock under its previously announced 4,175,000 share repurchase program.
As of March 31, 2000, DST has purchased 1,370,000 shares since the program
commenced. The shares purchased will be utilized for DST's stock award and stock
option programs.
* * * *
The information and comments above may include forward-looking statements
respecting DST and its businesses. Such information and comments are based on
DST's views as of today, and actual results could differ. There could be a
number of factors affecting future results, including those set forth in Form
8-K/A dated March 25, 1999 filed by DST with the Securities and Exchange
Commission. All such factors should be considered in evaluating any
forward-looking comment. The Company will not update any forward-looking
statements in this press release to reflect future events.
DST SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
For the Three Months
Ended March 31,
--------------------------------
2000 1999
--------------------------------
Revenues $ 340.4 $ 298.4
Costs and expenses 245.1 221.0
Depreciation and amortization 31.6 27.5
ncome from operations 63.7 49.9
Interest expense (1.4) (1.5)
Other income, net 21.3 1.7
Equity in earnings of
unconsolidated affiliates 4.1 2.2
--------------- ---------------
Income before income taxes and
minority interests 87.7 52.3
Income taxes 31.5 18.8
--------------- ---------------
Income before minority interests 56.2 33.5
Minority interests - (0.1)
--------------- ---------------
Net income $ 56.2 $ 33.6
=============== ===============
Average common shares outstanding 62.9 63.0
Diluted shares outstanding 64.4 64.7
Basic earnings per share $ 0.89 $ 0.53
Diluted earnings per share $ 0.87 $ 0.52
DST Systems, Inc.
333 West 11th Street
Kansas City, MO
64105-1594
NYSE & CHX 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
