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 March 31, 2002
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 registrant 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
(Registrant'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 [ ]
Number of shares outstanding of the Company's common
stock as of April 30, 2002:
Common Stock $0.01 par value - 119,709,187
1
DST Systems, Inc.
Form 10-Q
March 31, 2002
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Introductory Comments 3
Condensed Consolidated Balance Sheet
March 31, 2002 and December 31, 2001 4
Condensed Consolidated Statement of Income -
Three Months Ended March 31, 2002 and 2001 5
Condensed Consolidated Statement of Cash Flows -
Three Months Ended March 31, 2002 and 2001 6
Notes to Condensed Consolidated Financial Statements 7-12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13-20
Item 3. Quantitative and Qualitative Disclosures about Market Risk 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURE 24
The brand, service or product names or marks referred to in this Report are
trademarks or services marks, registered or otherwise, of DST Systems, Inc. or
its subsidiaries, affiliates or of vendors to the Company.
2
DST Systems, Inc.
Form 10-Q
March 31, 2002
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. Certain information and note disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America 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, 2001. 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 months ended March 31, 2002, are not
necessarily indicative of the results to be expected for the full year 2002.
3
DST Systems, Inc.
Condensed Consolidated Balance Sheet
(dollars in millions, except per share amounts)
(unaudited)
March 31, December 31,
2002 2001
---------- -----------
ASSETS
Current assets
Cash and cash equivalents $ 80.9 $ 84.4
Transfer agency investments 47.2 60.6
Accounts receivable 413.8 361.8
Other current assets 105.2 98.0
---------- -----------
647.1 604.8
Investments 1,488.1 1,436.4
Properties 470.0 455.5
Goodwill 177.6 170.5
Intangibles 27.0 27.5
Other assets 11.5 9.3
---------- -----------
Total assets $ 2,821.3 $ 2,704.0
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Debt due within one year $ 48.1 $ 63.5
Transfer agency deposits 47.2 60.6
Accounts payable 110.5 111.2
Accrued compensation and benefits 67.5 77.3
Deferred revenues and gains 65.7 54.7
Other liabilities 123.3 104.1
---------- -----------
462.3 471.4
Long-term debt 247.4 243.4
Deferred income taxes 451.4 427.2
Other liabilities 88.6 89.6
---------- -----------
1,249.7 1,231.6
---------- -----------
Commitments and contingencies
---------- -----------
Stockholders' equity
Common stock, $0.01 par; 300 million shares
authorized, 127.6 million shares issued 1.3 1.3
Additional paid-in capital 387.2 392.1
Retained earnings 1,019.0 960.2
Treasury stock (6.8 million and 7.2 million
shares respectively), at cost (274.1) (289.3)
Accumulated other comprehensive income 438.2 408.1
---------- -----------
Total stockholders' equity 1,571.6 1,472.4
---------- -----------
Total liabilities and stockholders' equity $ 2,821.3 $ 2,704.0
========== ===========
The accompanying notes are an integral part of these financial statements.
4
DST Systems, Inc.
Condensed Consolidated Statement of Income
(in millions, except per share amounts)
(unaudited)
For the Three Months
Ended March 31,
2002 2001
--------------- ---------------
Operating revenues $ 426.6 $ 369.6
Out-of-pocket reimbursements 194.3 169.1
--------------- ---------------
Total revenues 620.9 538.7
Costs and expenses 507.0 429.7
Depreciation and amortization 32.6 31.3
--------------- ---------------
Income from operations 81.3 77.7
Interest expense (2.8) (1.2)
Other income, net 8.1 6.6
Equity in earnings of unconsolidated affiliates 2.5 0.9
--------------- ---------------
Income before income taxes 89.1 84.0
Income taxes 30.3 29.5
--------------- ---------------
Net income $ 58.8 $ 54.5
=============== ===============
Average common shares outstanding 120.6 124.2
Diluted shares outstanding 122.6 128.5
Basic earnings per share $ 0.49 $ 0.44
Diluted earnings per share $ 0.48 $ 0.42
The accompanying notes are an integral part of these financial statements.
5
DST Systems, Inc.
Condensed Consolidated Statement of Cash Flows
(in millions)
(unaudited)
For the Three Months
Ended March 31,
2002 2001
---------------- ----------------
Cash flows -- operating activities:
Net income $ 58.8 $ 54.5
---------------- ----------------
Depreciation and amortization 32.6 31.3
Equity in earnings of unconsolidated affiliates (2.5) (0.9)
Net realized gain on investments (3.7) (3.2)
Deferred taxes 2.5 (3.2)
Changes in accounts receivable (52.6) 14.7
Changes in other current assets (3.6) (7.5)
Changes in accounts payable and accrued liabilities 20.0 (13.3)
Other, net 0.9 (1.3)
---------------- ----------------
Total adjustments to net income (6.4) 16.6
---------------- ----------------
Net 52.4 71.1
---------------- ----------------
Cash flows -- investing activities:
Proceeds from sale of investments 14.7 12.5
Investments and advances to unconsolidated affiliates (14.4)
Investments in securities (10.7) (13.2)
Capital expenditures (50.5) (50.7)
Payment for purchase of subsidiaries, net of cash acquired (5.5) (20.6)
Other, net 1.0 1.2
---------------- ----------------
Net (51.0) (85.2)
---------------- ----------------
Cash flows -- financing activities:
Proceeds from issuance of common stock 8.4 10.3
Principal payments on long-term debt (54.5) (1.6)
Net increase in revolving credit facilities and notes payable 45.0 64.5
Common stock repurchased (3.8) (93.8)
---------------- ----------------
Net (4.9) (20.6)
---------------- ----------------
Net decrease in cash and cash equivalents (3.5) (34.7)
Cash and cash equivalents at beginning of period 84.4 116.2
---------------- ----------------
Cash and cash equivalents at end of period $ 80.9 $ 81.5
================ ================
The accompanying notes are an integral part of these financial statements.
6
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 United States Securities and
Exchange Commission. Certain information and note disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America 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, 2001. 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 March 31, 2002 and December 31, 2001, and the
results of operations and cash flows for the three months ended March 31, 2002
and 2001.
Certain amounts in the prior year's consolidated financial statements have been
reclassified to conform to the current year presentation.
The results of operations for the three months ended March 31, 2002, are not
necessarily indicative of the results to be expected for the full year 2002.
Revenue recognition
Effective January 1, 2002, the Company adopted EITF Issue No. 01-14, Income
Statement Characterization of Reimbursements received for "Out-of-Pocket"
("OOP") Expenses Incurred ("EITF No. 01-14"), formerly EITF Topic No. D-103.
Prior to the issuance of EITF No. 01-14, the Company netted the OOP expense
reimbursements from customers with the applicable OOP expenditures. The
Company's significant OOP expenses at the consolidated level include postage and
telecommunication expenditures and at the segment level include print mail
services between the Financial Services Segment and the Output Solutions
Segment. Under EITF No. 01-14, the Company is required to record the
reimbursements received for OOP expenses as revenue on an accrual basis. Because
these additional revenues are offset by the reimbursable expenses incurred,
adoption of EITF No. 01-14 did not impact income from operations or net income.
Comparative financial statements for prior periods have been reclassified to
comply with the new guidance. For each segment, total revenues are reported in
two categories, operating revenues (which correspond to amounts previously
reported) and OOP reimbursements. OOP expenses are included in costs and
expenses.
2. EquiServe, Inc. ("EquiServe")
On March 30, 2001, DST completed the acquisition of a 75% interest in EquiServe
by purchasing interests held by FleetBoston Financial ("FleetBoston") and Bank
One Corporation ("Bank One"). On July 31, 2001, DST completed the acquisition of
the remaining 25%, which was owned by Boston Financial Data Services, on
essentially the same terms provided to FleetBoston and Bank One. EquiServe is
one of the nation's largest corporate transfer agency service providers,
maintaining and servicing the records of approximately 26.5 million shareholder
accounts for approximately 1,400 publicly traded companies. A restructuring
provision of $15.9 million was recorded for employee severances and contract
termination costs related to the acquisition. The Company utilized $1.3 million
in the three months ended March 31, 2002 related to the restructuring provision.
7
The restructuring provision for employee severance costs, which affected
employees across nearly all classifications and locations, was $12.5 million
relating to approximately 610 employees, of which 234 employees have been
separated from the Company as of March 31, 2002. The remaining employee
severances of approximately $9.2 million are expected to be paid in 2002.
Contract termination costs of approximately $3.4 million were paid in 2001.
The accrued costs relate primarily to employee severance benefits which are
expected to be paid in 2002 and to facilities that were closed. Lease payments
on closed facilities have terms which end in 2002. The costs of transitioning
the continuing business have not been accrued.
3. Investments
Investments are as follows (in millions):
Carrying Value
-----------------------------------
Ownership March 31, December 31,
Percentage 2002 2001
-------------------- ---------------- ----------------
Available-for-sale securities:
State Street Corporation 4% $ 708.4 $ 668.4
Computer Sciences Corporation 5% 438.1 422.8
Euronet Worldwide, Inc. 9% 31.8 40.5
Other available-for-sale securities 120.6 117.8
---------------- ----------------
1,298.9 1,249.5
---------------- ----------------
Unconsolidated affiliates:
Boston Financial Data Services, Inc. 50% 65.9 63.9
International Financial Data Services, U.K. 50% 10.1 10.5
International Financial Data Services, Canada 50% 13.9 12.9
Other unconsolidated affiliates 63.0 62.2
---------------- ----------------
152.9 149.5
---------------- ----------------
Other:
Net investment in leases 3.7 4.7
Other 32.6 32.7
---------------- ----------------
36.3 37.4
---------------- ----------------
Total investments $ 1,488.1 $ 1,436.4
================ ================
Certain information related to the Company's available-for-sale securities is as
follows (in millions):
March 31, December 31,
2002 2001
----------------- -----------------
Cost $ 567.2 $ 569.0
Gross unrealized gains 735.3 683.8
Gross unrealized losses (3.6) (3.3)
----------------- -----------------
Market value $ 1,298.9 $ 1,249.5
================= =================
8
The following table summarizes equity in earnings (losses) of unconsolidated
affiliates (in millions):
For the Three Months
Ended March 31,
2002 2001
-------------- ---------------
Boston Financial Data Services, Inc. $ 1.9 $ 1.6
International Financial Data Services, U.K. (0.2) (0.2)
International Financial Data Services LP 0.2 0.9
Other 0.6 (1.4)
-------------- ---------------
$ 2.5 $ 0.9
============== ===============
4. Goodwill and Intangibles
Effective July 1, 2001 for goodwill and intangible assets acquired after June
30, 2001 and effective January 1, 2002 for all goodwill and intangible assets,
the Company adopted, as required, Statement of Financial Accounting Standards
("SFAS") No. 142, Goodwill and Other Intangible Assets. This statement
addresses, among other things, how goodwill and other intangible assets should
be accounted for after they have been initially recognized in the financial
statements. Under SFAS No. 142, goodwill and intangible assets that have
indefinite useful lives will not be amortized but rather will be tested at least
annually for impairment. Intangible assets that have finite lives will continue
to be amortized over their useful lives.
If SFAS No. 142 would have been adopted at January 1, 2001, the Company would
have reported net income and diluted earnings per share as follows:
For the Three Months
Ended March 31,
2002 2001
--------------- ---------------
Reported net income (in millions) $ 58.8 $ 54.5
Add goodwill amortization (net of tax) 1.4
--------------- ---------------
Adjusted net income $ 58.8 $ 55.9
=============== ===============
Basic earnings per share
Reported net income $ 0.49 $ 0.44
Goodwill amortization (net of tax) 0.01
--------------- ---------------
Adjusted net income $ 0.49 $ 0.45
=============== ===============
Diluted earnings per share
Reported net income $ 0.48 $ 0.42
Goodwill amortization (net of tax) 0.01
--------------- ---------------
Adjusted net income $ 0.48 $ 0.43
=============== ===============
9
The following table summarizes intangible assets (in millions):
March 31, 2002 December 31, 2001
---------------------------------- ----------------------------------
Gross Carrying Accumulated Gross Carrying Accumulated
Amount Amortization Amount Amortization
---------------- --------------- ----------------- ---------------
Amortized intangible assets:
Customer relationships $ 28.3 $ 1.4 $ 28.3 $ 0.9
Intellectual property 9.8 9.8
Other 0.2 0.1 2.2 2.1
---------------- --------------- ----------------- ---------------
Total $ 28.5 $ 1.5 $ 40.3 $ 12.8
================ =============== ================= ===============
Amortization of intangible assets for the three months ended March 31, 2002 was
$0.7 million. Estimated amortization of intangible assets for each of the years
2002, 2003, 2004, 2005 and 2006 is $1.6 million.
The following table summarizes the changes in the carrying amount of goodwill
for the three months ended March 31, 2002, by segment (in millions):
December 31, March 31,
2001 Acquisitions Other 2002
--------------- ---------------- ---------------- ----------------
Financial Services $ 156.1 $ $ 5.8 $ 161.9
Output Solutions 8.7 1.3 10.0
Customer Management 5.4 5.4
Investments and Other 0.3 0.3
--------------- ---------------- ---------------- ----------------
Total $ 170.5 $ 1.3 $ 5.8 $ 177.6
=============== ================ ================ ================
Amortization of goodwill and other intangibles, net of tax, for the quarters
ended March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001
totaled $1.4 million, $2.6 million, $2.7 million and $7.2 million, respectively.
5. Stockholders' Equity
Earnings per share. The computation of basic and diluted earnings per share is
as follows (in millions, except per share amounts):
For the Three Months
Ended March 31,
2002 2001
--------------- ---------------
Net income $ 58.8 $ 54.5
=============== ===============
Average common shares outstanding 120.6 124.2
Incremental shares from assumed
conversions of stock options 2.0 4.3
--------------- ---------------
Diluted potential common shares 122.6 128.5
=============== ===============
Basic earnings per share $ 0.49 $ 0.44
Diluted earnings per share $ 0.48 $ 0.42
10
Comprehensive income. Components of comprehensive income (loss) consist of the
following (in millions):
For the Three Months
Ended March 31,
2002 2001
-------------- -------------
Net income $ 58.8 $ 54.5
-------------- -------------
Other comprehensive income (loss):
Unrealized gains (losses) on investments:
Unrealized holding gains (losses) arising
during the period 52.5 (414.5)
Less reclassification adjustments for gains
included in net income (1.3) (3.2)
Foreign currency translation adjustments (1.2) (4.6)
Deferred income taxes (19.9) 163.2
-------------- -------------
Other comprehensive income (loss) 30.1 (259.1)
-------------- -------------
Comprehensive income (loss) $ 88.9 $ (204.6)
============== =============
6. Segment Information
The Company has several operating business units that offer sophisticated
information processing and software services and products. These business units
are reported as three operating segments (Financial Services, Output Solutions
and Customer Management). In addition, investments in certain equity securities
and financial interests and the Company's real estate and computer hardware
leasing subsidiaries and affiliates have been aggregated into an Investments and
Other Segment. The Company evaluates the performance of its segments based on
income before income taxes, non-recurring items and interest expense.
Summarized financial information concerning the segments is shown in the
following tables (in millions):
11
Three Months Ended March 31, 2002
------------------------------------------------------------------------------------------
Financial Output Customer Investments/ Consolidated
Services Solutions Management Other Eliminations Total
------------- ------------- -------------- ------------- ------------- --------------
Operating revenues $ 235.1 $ 138.7 $ 50.1 $ 2.7 $ $ 426.6
Intersegment operating revenues 2.1 15.9 10.3 (28.3)
Out-of-pocket reimbursements 45.3 157.1 15.5 0.1 (23.7) 194.3
------------- ------------- -------------- ------------- ------------- --------------
282.5 311.7 65.6 13.1 (52.0) 620.9
Costs and expenses 207.3 286.5 56.6 8.6 (52.0) 507.0
Depreciation and amortization 19.6 8.8 1.8 2.4 32.6
------------- ------------- -------------- ------------- ------------- --------------
Income from operations 55.6 16.4 7.2 2.1 81.3
Other income, net 2.0 1.4 4.7 8.1
Equity in earnings of
unconsolidated affiliates 2.0 0.5 2.5
------------- ------------- -------------- ------------- ------------- --------------
Income before interest
and income taxes $ 59.6 $ 17.8 $ 7.2 $ 7.3 $ $ 91.9
============= ============= ============== ============= ============= ==============
Three Months Ended March 31, 2001
------------------------------------------------------------------------------------------
Financial Output Customer Investments/ Consolidated
Services Solutions Management Other Eliminations Total
------------- ------------- -------------- ------------- ------------- --------------
Operating revenues $ 167.1 $ 151.4 $ 48.5 $ 2.6 $ $ 369.6
Intersegment operating revenues 0.4 14.1 6.5 (21.0)
Out-of-pocket reimbursements 19.2 158.8 17.7 0.1 (26.7) 169.1
------------- ------------- -------------- ------------- ------------- --------------
186.7 324.3 66.2 9.2 (47.7) 538.7
Costs and expenses 122.8 290.7 58.3 5.6 (47.7) 429.7
Depreciation and amortization 16.2 8.9 4.2 2.0 31.3
------------- ------------- -------------- ------------- ------------- --------------
Income from operations 47.7 24.7 3.7 1.6 77.7
Other income, net 1.3 5.3 6.6
Equity in earnings (losses) of
unconsolidated affiliates 1.1 (0.2) 0.9
------------- ------------- -------------- ------------- ------------- --------------
Income before interest
and income taxes $ 50.1 $ 24.7 $ 3.7 $ 6.7 $ $ 85.2
============= ============= ============== ============= ============= ==============
The consolidated total income before interest and income taxes as shown in the
segment reporting information above less interest expense of $2.8 million and
$1.2 million for the three months ended March 31, 2002 and 2001, respectively,
is equal to the Company's income before income taxes on a consolidated basis for
the corresponding periods.
12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The discussions set forth in this Quarterly Report on Form 10-Q contain
statements concerning potential future events. Such forward-looking statements
are based upon assumptions by the Company's management, as of the date of this
Quarterly Report, including assumptions about risks and uncertainties faced by
the Company. Readers can identify these forward-looking statements by the use of
such verbs as expects, anticipates, believes or similar verbs or conjugations of
such verbs. If any of management's assumptions prove incorrect or should
unanticipated circumstances arise, the Company's actual results could materially
differ from those anticipated by such forward-looking statements. The
differences could be caused by a number of factors or combination of factors
including, but not limited to, those factors identified in the Company's amended
Current Report on Form 8-K/A dated March 19, 2002, which is hereby incorporated
by reference. This report has been filed with the United States Securities and
Exchange Commission ("SEC") in Washington, D.C. and can be obtained by
contacting the SEC's Public Reference Branch. Readers are strongly encouraged to
obtain and consider the factors listed in the March 19, 2002 Current Report and
any amendments or modifications thereof when evaluating any forward-looking
statements concerning the Company. The Company will not update any
forward-looking statements in this Quarterly Report to reflect future events or
developments.
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, 2001.
INTRODUCTION
The Company has several operating business units that offer sophisticated
information processing and software services and products. These business units
are reported as three operating segments (Financial Services, Output Solutions
and Customer Management). In addition, investments in certain equity securities
and financial interests and the Company's real estate and computer hardware
leasing subsidiaries and affiliates have been aggregated into an Investments and
Other Segment.
Financial Services
The Financial Services Segment provides sophisticated information processing and
computer software services and products primarily to mutual funds, investment
managers, corporations, insurance companies, banks, brokers and financial
planners.
Output Solutions
The Output Solutions Segment provides complete bill and statement processing
services and solutions, including electronic presentment, which include
generation of customized statements that are produced in sophisticated automated
facilities designed to minimize turnaround time and mailing costs.
Customer Management
The Customer Management Segment provides sophisticated customer management and
open billing solutions to the video/broadband, direct broadcast satellite
("DBS"), wire-line and Internet-protocol telephony, Internet and utility markets
worldwide.
Investments and Other
The Investments and Other Segment holds investments in certain equity securities
and financial interests and the Company's real estate and computer hardware
leasing subsidiaries and affiliates.
13
RESULTS OF OPERATIONS
The following table summarizes the Company's operating results (dollars in
millions, except per share amounts):
Three Months
Ended March 31,
-------------------------------
2002 2001
-------------- ---------------
Revenues
Operating revenues
Financial Services $ 237.2 $ 167.5
Output Solutions 154.6 165.5
Customer Management 50.1 48.5
Investments and Other 13.0 9.1
Eliminations (28.3) (21.0)
-------------- ---------------
$ 426.6 $ 369.6
-------------- ---------------
% change from prior year period 15.4%
Reimbursable expense revenues
Financial Services $ 45.3 $ 19.2
Output Solutions 157.1 158.8
Customer Management 15.5 17.7
Investments and Other 0.1 0.1
Eliminations (23.7) (26.8)
-------------- ---------------
$ 194.3 $ 169.0
-------------- ---------------
% change from prior year period 15.0%
Total revenues $ 620.9 $ 538.6
============== ===============
% change from prior year period 15.3%
Income from operations
Financial Services $ 55.6 $ 47.7
Output Solutions 16.4 24.7
Customer Management 7.2 3.7
Investments and Other 2.1 1.6
-------------- ---------------
81.3 77.7
Interest expense (2.8) (1.2)
Other income, net 8.1 6.6
Equity in earnings of unconsolidated
affiliates, net of income taxes 2.5 0.9
-------------- ---------------
Income before income taxes 89.1 84.0
Income taxes 30.3 29.5
-------------- ---------------
Net income $ 58.8 $ 54.5
============== ===============
Basic earnings per share $ 0.49 $ 0.44
Diluted earnings per share $ 0.48 $ 0.42
14
Consolidated revenues
Consolidated total revenues (including OOP reimbursements) for the three months
ended March 31, 2002 increased $82.3 million, an increase of 15.3% over the
comparable period in 2001. Consolidated operating revenues (excluding OOP
reimbursements) for the quarter were $426.6 million, an increase of $57.0
million or 15.4% over the prior year period, principally from higher Financial
Services Segment revenues, which includes revenues from EquiServe, Inc.
("EquiServe"), in which DST acquired controlling ownership on March 30, 2001.
Excluding EquiServe from the current year and DST's Portfolio Accounting
Services ("PAS") business from the prior year, consolidated operating revenues
for the three months ended March 31, 2002 would have decreased $16.6 million or
4.6% over the comparable period in 2001. U.S. operating revenues for the three
months ended March 31, 2002 were $392.4 million, an increase of 17.3% over the
same period in 2001. International operating revenues for the three months ended
March 31, 2002 were $34.2 million, a decrease of 2.6% over the same period in
2001.
Financial Services Segment total revenues for the three months ended March 31,
2002 increased $95.8 million or 51.3% over the same period in 2001. Financial
Services operating revenues for the three months ended March 31, 2002 increased
$69.7 million or 41.6% over the comparable period in 2001. U.S. Financial
Services Segment operating revenues for the three months ended March 31, 2002
increased primarily from inclusion of EquiServe and increases in mutual fund
shareowner accounts processed. Excluding EquiServe from the current year and the
PAS business from the prior year, Financial Services operating revenues for the
three months ended March 31, 2002 would have decreased $3.9 million or 2.4% over
the comparable period in 2001. U.S. mutual fund shareowner accounts serviced
totaled 78.4 million at March 31, 2002, an increase of 3.7% from the 75.6
million serviced at December 31, 2001 and an increase of 6.7% from the 73.5
million serviced at March 31, 2001.
Output Solutions Segment total revenues for the three months ended March 31,
2002 decreased $12.6 million or 3.9% over the same period in 2001. Output
Solutions Segment operating revenues for the quarter ended March 31, 2002 were
$154.6 million, a decrease of $10.9 million or 6.6% from the comparable period
in 2001. The revenue decline resulted from the loss of a telecommunications
customer in the fourth quarter 2001, declines in brokerage related marketing
fulfillment and trade confirmation volumes and changes in statement presentation
formats from existing customers which result in lower revenues, partially offset
by increased volumes from the insurance and transportation industries. Output
Solutions Segment images produced for the three months ended March 31, 2002
increased 5.0% to 2.1 billion and items mailed decreased 6.9% to 473 million
compared to the same period in 2001.
Customer Management Segment total revenues for the three months ended March 31,
2002 decreased $0.6 million or 0.9% over the same period in 2001. Customer
Management Segment operating revenues for the quarter ended March 31, 2002 were
$50.1 million, an increase of $1.6 million or 3.3% over the 2001 quarter, due to
higher equipment sales, partially offset by decreased processing and software
service revenues.
Investments and Other Segment total revenues increased $3.9 million for the
three months ended March 31, 2002, an increase of 42.4% as compared to the same
period in 2001. Investments and Other Segment operating revenues were $13.0
million for the quarter ended March 31, 2002, an increase of $3.9 million from
the prior year quarter, primarily from increased real estate leasing activity.
Segment revenues are primarily rental income for facilities leased to the
Company's operating segments and hardware leasing activities.
Income from operations
Consolidated income from operations for the three months ended March 31, 2002
increased $3.6 million or 4.6% over the same period in 2001. U.S. income from
operations for the three months ended March 31, 2002 was $73.6 million, an
increase of 8.6% over the same period in 2001. International income from
operations for the three months ended March 31, 2002 was $7.7 million, a
decrease of 22.2% compared to the same period in 2001.
Financial Services Segment income from operations for the three months ended
March 31, 2002 increased 16.6% or $7.9 million over the comparable prior year
period to $55.6 million. This resulted in a controllable operating margin
(income from operations divided by operating revenues) of 23.4% for the three
months ended March 31, 2002, compared to 28.5% for the comparable prior year
period. The decrease in controllable operating margin resulted
15
primarily from the acquisition of EquiServe and the absence of the PAS business
in 2001, partially offset by increased U.S. revenues related to mutual fund
shareowner processing. Excluding EquiServe from the current year and the PAS
business from the prior year, Financial Services income from operations for the
three months ended March 31, 2002 would have increased $2.2 million or 4.8% over
the comparable period in 2001. The increase in controllable operating margin
resulted primarily from increases in U.S. revenues related to mutual fund
shareowner processing.
Output Solutions Segment income from operations for the three months ended March
31, 2002 decreased $8.3 million or 33.6% over the same period in 2001. Output
Solutions Segment controllable operating margin was 10.6% for the three months
ended March 31, 2002 compared to 14.9% for the same period in 2001.
Customer Management Segment income from operations totaled $7.2 million for the
three months ended March 31, 2002, an increase of 94.6% over the comparable
prior year period. Controllable operating margin was 14.4% for the three months
ended March 31, 2002, compared to 7.6% for the comparable prior year period.
Investments and Other Segment income from operations was $2.1 million for the
three months ended March 31, 2002, as compared to $1.6 million for the three
months ended March 31, 2001.
Interest expense
Interest expense totaled $2.8 million for the three months ended March 31, 2002,
an increase from $1.2 million recorded in the prior year quarter. Average debt
balances were higher in 2002 compared to 2001, while average interest rates were
lower in 2002 compared to 2001.
Other income, net
Other income was $8.1 million for the three months ended March 31, 2002,
compared to $6.6 million for the first quarter 2001. First quarter 2002 results
include $4.2 million primarily related to interest and dividend income and $3.9
million related primarily to net gains on securities. First quarter 2001 results
include $3.3 million primarily related to interest and dividend income and $3.3
million related primarily to net gains on securities.
Equity in earnings of unconsolidated affiliates
Equity in earnings of unconsolidated affiliates totaled $2.5 million for the
three months ended March 31, 2002 as compared to $0.9 million for the three
months ended March 31, 2001. Increased earnings were recorded at Boston
Financial Data Services due to lower operating expenses obtained through a focus
on reducing costs. International Financial Data Services, U.K losses were
unchanged as revenue growth from higher account service levels were offset by
higher costs related to the relocation to new facilities. International
Financial Data Services, U.K. results reflect an increase in accounts serviced
to 3.2 million at March 31, 2002, which is 0.1 million or 3.2% above year end
2001 levels and 0.4 million or 14.3% over March 31, 2001 levels. International
Financial Data Services, Canada earnings decreased from lower revenues from
development work and increased costs from operations.
Income taxes
DST's effective tax rate was 34.0% for the quarter ended March 31, 2002,
compared to 35.1% for the prior year quarter. The 2002 and 2001 tax rates were
affected by tax benefits relating to certain international operations and
recognition of state tax benefits associated with income apportionment rules.
Business Segment Comparisons
FINANCIAL SERVICES SEGMENT
Revenues
Financial Services Segment total revenues for the three months ended March 31,
2002 increased 51.3% over the same period in 2001 to $282.5 million. Financial
Services Segment operating revenues for the three months ending
16
March 31, 2002 were $237.2 million, an increase of $69.7 million or 41.6% over
the prior year period. U.S. Financial Services operating revenue increased 51.9%
to $215.9 million for the three months ended March 31, 2002, primarily from the
inclusion of EquiServe revenues and increases in mutual fund shareowner accounts
processed. Excluding EquiServe from the current year and the PAS business from
the prior year, U.S. revenues for the three months ended March 31, 2002
increased 0.1% over the same period in 2001 to $137.5 million. U.S. mutual fund
processing revenues for the three months ended March 31, 2002 increased 1.8%
over the prior year period as shareowner accounts serviced increased 6.7% from
73.5 million at March 31, 2001 to 78.4 million at March 31, 2002. U.S. AWD
workstations licensed were 60,000 at March 31, 2002, an increase of 20.7% from
March 31, 2001 and an increase of 3.8% over year end 2001 levels, principally
from workstations for Comcast Cable Communications, Inc. and insurance industry
clients.
Financial Services Segment operating revenues from international operations for
the three months ended March 31, 2002 decreased 16.1% to $21.3 million. The
decrease is attributable to a decrease in investment management software license
revenues and consulting and development revenues. International AWD workstations
licensed were 28,100 at March 31, 2002, an increase of 10.6% from March 31, 2001
and an increase of 1.4% over year end 2001 levels.
Costs and expenses
Segment costs and expenses for the three months ended March 31, 2002 increased
68.8% to $207.3 million over the comparable period in 2001. Personnel costs for
the three months ended March 31, 2002 increased 53.9% over the comparable prior
year period as a result of the addition of EquiServe and increased staff levels
to support revenue growth. Excluding EquiServe from the current year and the PAS
business from the prior year, costs and expenses decreased 8.4% and personnel
costs increased 1.7% for the three months ended March 31, 2002 over the
comparable period in 2001.
Depreciation and amortization
Segment depreciation and amortization increased 21.0% or $3.4 million for the
three months ended March 31, 2002 over the comparable period in 2001. The
increase is primarily attributable to EquiServe.
Income from operations
Segment income from operations for the three months ended March 31, 2002
increased 16.6% to $55.6 million over the comparable prior year period. The
Segment's controllable operating margin was 23.4% for the three months ended
March 31, 2002 as compared to 28.5% for the three months ended March 31, 2001.
The decrease in controllable operating margin resulted primarily from the
acquisition of EquiServe and the absence of the PAS business, partially offset
by increased U.S. revenues. Excluding EquiServe from the current year and the
PAS business from the prior year, income from operations for the three months
ended March 31, 2002 increased 4.8% over the comparable period in 2001.
OUTPUT SOLUTIONS SEGMENT
Revenues
Output Solutions Segment total revenues for the three months ended March 31,
2002 decreased 3.9% to $311.7 million as compared to the same period in 2001.
Output Solutions Segment operating revenues for the quarter ended March 31, 2002
were $154.6 million, a decrease of $10.9 million or 6.6% from the comparable
period in 2001. The revenue decline resulted from the loss of a
telecommunications customer in the fourth quarter 2001, declines in brokerage
related marketing fulfillment and trade confirmation volumes and changes in
statement presentation formats from existing customers which result in lower
revenues, partially offset by increased volumes from the insurance and
transportation industries.
Costs and expenses
Segment costs and expenses for the three months ended March 31, 2002 decreased
1.4% to $286.5 million over the comparable period in 2001. Personnel costs for
the three months ended March 31, 2002 decreased 9.1% over the comparable prior
year period. Costs and expenses decreased principally due to decreased personnel
and purchased
17
material costs, partially offset by higher Internet-based electronic bill and
statement product development and selling costs.
In the first quarter of 2002, the Segment relocated its Kansas City, Missouri
operations from a 70,000 square foot production facility to a new
state-of-the-art 225,000 square foot facility. The Company is in the process of
finalizing plans to consolidate the operations of certain smaller facilities,
which the Company believes will result in operational efficiencies. Although the
plans have not been finalized, the Company expects to incur charges in future
periods related to facility consolidations. The costs associated with facility
consolidations could range from $5 million to $7 million in the second quarter
of 2002 and an additional $6 million to $8 million in periods following the
second quarter of 2002. The estimated impact of the facility consolidations
reflect the Company's current views. There may be material differences between
these estimates and the actual costs.
Depreciation and amortization
Segment depreciation and amortization decreased 1.1% or $0.1 million for the
three months ended March 31, 2002 over the comparable period in 2001.
Income from operations
The Segment's income from operations for the three months ended March 31, 2002
decreased $8.3 million or 33.6% over the same period in 2001. The Segment's
controlling operating margin was 10.6% for the three months ended March 31, 2002
as compared to 14.9% for the three months ended March 31, 2001 principally from
lower revenues.
CUSTOMER MANAGEMENT SEGMENT
Revenues
Customer Management Segment total revenues for the three months ended March 31,
2002 decreased 0.9% to $65.6 million as compared to the three months ended March
31, 2001. Customer Management Segment operating revenues for the quarter ended
March 31, 2002 were $50.1 million, an increase of $1.6 million or 3.3% over the
comparable period in 2001. Processing and software service revenues decreased to
$46.3 million for the three months ended March 31, 2002 from $46.9 million for
the three months ended March 31, 2001. Equipment sales increased to $3.8 million
for the three months ended March 31, 2002 from $1.6 million for the three months
ended March 31, 2001. Total cable and satellite subscribers serviced were 40.9
million at March 31, 2002. Subscribers serviced were unchanged compared to year
end 2001 levels, principally from an increase in U.S. cable subscribers offset
by lower international cable subscribers serviced.
The Company has been advised that a customer, Charter Communications Inc.
("Charter") plans to discontinue its processing agreement. It is not expected
that any substantial portion of Charter's subscribers will be removed during
2002. At March 31, 2002, the Company serviced approximately 4.0 million Charter
subscribers.
Costs and expenses
Segment costs and expenses for the three months ended March 31, 2002 decreased
$1.7 million or 2.9% compared to the same period in 2001.
Depreciation and amortization
Segment depreciation and amortization for the three months ended March 31, 2002
decreased 57.1% compared to the same period in 2001. The decrease is primarily
from lower capitalized software amortization and the required exclusion of
goodwill amortization.
Income from operations
Customer Management Segment income from operations for the first quarter
increased $3.5 million or 94.6% over the prior year period to $7.2 million,
resulting in a controllable operating margin of 14.4% compared to 7.6% in the
prior year period.
18
INVESTMENTS AND OTHER SEGMENT
Revenues
Investments and Other Segment total revenues were $13.1 million for the three
months ended March 31, 2002, an increase of $3.9 million as compared to the
prior year period. The increase is primarily attributable to increased real
estate leasing activity.
Costs and expenses
Costs and expenses increased $3.0 million for the three months ended March 31,
2002 as compared to the three months ended March 31, 2001 primarily as a result
of additional real estate activities.
Depreciation and amortization
Segment depreciation and amortization increased $0.4 million for the three
months ended March 31, 2002 over the same period in 2001, as a result of
increased depreciation related to additional real estate activities.
Income from operations
The Segment's income from operations totaled $2.1 million for the three months
ended March 31, 2002 as compared to $1.6 million for the three months ended
March 31, 2001.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow from operating activities totaled $52.4 million for the
three months ended March 31, 2002. Operating cash flows for the three months
ended March 31, 2002 were primarily impacted by net income of $58.8 million,
depreciation and amortization of $32.6 million and an increase in accounts
receivable of $52.6 million.
Cash flows used in investing activities totaled $51.0 million for the three
months ended March 31, 2002. The Company expended $50.5 million during the three
months ended March 31, 2002 for capital additions. Cash paid in
available-for-sale securities totaled $10.7 million. During the three months
ended March 31, 2002, the Company received $12.0 million from the sale of
investments in available-for-sale securities and $2.7 million from the sale of
investment in unconsolidated affiliates and other. The Company expended
approximately $5.5 million for acquisitions of subsidiaries, net of cash
acquired.
Cash flows used in financing activities totaled $4.9 million for the three
months ended March 31, 2002. The Company received proceeds from the issuance of
common stock of $8.4 million for the three months ended March 31, 2002. In
December 2001, the Company entered into a $285 million (increased to $315
million in February 2002) unsecured revolving credit facility with a syndicate
of U.S. and international banks. The $315 million facility is comprised of a
$210 million three-year facility and a $105 million 364-day facility. The $315
million revolving credit facility replaced the Company's previous $125 million
five year revolving credit facility and $120 million 364-day revolving credit
facility. At March 31, 2002, there was $158.7 million outstanding under the $315
million revolving credit facility. One of the Company's subsidiaries maintains a
364-day $50 million line of credit for working capital requirements and general
corporate purposes. The line of credit is scheduled to mature May 2002. The
subsidiary plans to renew the facility. Net borrowings under this facility
totaled $41.6 million for the three months ended March 31, 2002, bringing total
net borrowings under these facilities to $200.3 million at March 31, 2002.
On March 30, 2001, DST completed the acquisition of a 75% interest in EquiServe
by purchasing interests held by FleetBoston Financial ("FleetBoston") and Bank
One Corporation ("Bank One"). On July 31, 2001, DST completed the acquisition of
the remaining 25%, which was owned by BFDS, on essentially the same terms
provided to FleetBoston and Bank One. EquiServe is one of the nation's largest
corporate transfer agency service providers, maintaining and servicing the
records of approximately 26.5 million shareholder accounts for approximately
1,400 publicly traded companies.
19
The acquisitions were accounted for as a purchase and the results of EquiServe's
operations are included in DST's 2001 consolidated financial statements
beginning March 30, 2001. The minimum purchase price of $186.7 million is to be
paid in four installments. The first installments of approximately $58.5 million
were paid at the closings. The second installments of $55.8 million were paid on
March 8, 2002. The remaining two minimum installments, which total approximately
$72.4 million (discounted to $65.2 million for accounting purposes) are payable
on February 28, 2003 and February 28, 2004. The remaining minimum purchase price
installments can increase pursuant to a formula that provides for additional
consideration to be paid in cash if EquiServe's revenues as defined in the
agreements for the years ending 2000, 2001, 2002 and 2003 exceed certain
targeted levels. The minimum purchase price (discounted to $177.3 million for
accounting purposes) has been allocated to the net assets acquired based upon
their fair values as determined by a valuation. Goodwill will be increased by
the amount of contingent consideration paid. This goodwill will not be subject
to amortization per Statement of Financial Accounting Standard ("SFAS") No. 142.
Assuming the acquisition had occurred January 1, 2001, consolidated total
revenues would have been $621.4 million and consolidated operating revenues
would have been $452.3 million for the three months ended March 31, 2001.
Consolidated proforma net income and earnings per share would not have been
materially different from the reported amounts for 2001. The unaudited proforma
amounts are not indicative of what actual consolidated results of operations
might have been if the acquisition had been effective at the beginning of 2001.
During the first quarter ended March 31, 2002, the Company purchased 23,682
shares of its common stock under previously announced share repurchase programs
for $1.0 million. The shares purchased will be utilized for DST's stock award,
employee stock purchase and stock option programs and for general corporate
purposes. As of March 31, 2002, DST has purchased 13.4 million shares since the
programs commenced.
The Company has entered into forward stock purchase agreements for the
repurchase of its common stock as a means of securing potentially favorable
prices for future purchases of its stock. As of March 31, 2002, the cost to
settle the remaining agreement would be approximately $55.4 million for
approximately 1.3 million shares of common stock. The remaining agreement which
expires in September 2002, allows the Company to elect net cash or net share
settlement in lieu of physical settlement of the shares. Subsequent to March 31,
2002, the Company acquired the shares in the remaining forward purchase
agreement. The purchase of the shares was financed from borrowings under the
Company's syndicated line of credit.
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 bank and revolving credit facilities, will suffice to meet the
Company's operating and debt service requirements and other current liabilities
for at least the next 12 months. Further, the Company believes that its longer
term liquidity and capital requirements will also be met through cash provided
by operating activities and bank credit facilities.
OTHER
Comprehensive income. The Company's comprehensive income for the three months
ended March 31, 2002 and comprehensive loss of 2001 totaled $88.9 million and
$204.6 million, respectively. Comprehensive income consists of net income of
$58.8 million and other comprehensive income of $30.1 million for the three
months ended March 31, 2002 and net income of $54.5 million and other
comprehensive losses of $259.1 million for the three months ended March 31,
2001. Other comprehensive income consists of unrealized gains (losses) on
available-for-sale securities, net of deferred taxes, reclassifications for
gains included in net income and foreign currency translation adjustments. The
principal difference between net income and comprehensive net income is the net
change in unrealized gains (losses) on available-for-sale securities.
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
20
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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
In the operations of its businesses, the Company's financial results can be
affected by changes in equity pricing, interest rates and currency exchange
rates. Changes in interest rates and exchange rates have not materially impacted
the consolidated financial position, results of operations or cash flows of the
Company. Changes in equity values of the Company's investments have had a
material effect on the Company's comprehensive income and financial position.
Available-for-sale equity price risk
The Company's investments in available-for-sale equity securities are subject to
price risk. The fair value of the Company's available-for-sale investments as of
March 31, 2002 was approximately $1,298.9 million. The impact of a 10% change in
fair value of these investments would be approximately $86 million to
comprehensive income. As discussed under "Comprehensive Income" above, net
unrealized gains on the Company's investments in available-for-sale securities
have had a material effect on the Company's comprehensive income and financial
position.
Interest rate risk
The Company derives a certain amount of its service revenues from investment
earnings related to cash balances maintained in transfer agency customer bank
accounts that the Company is agent to. The balances maintained in the bank
accounts are subject to fluctuation. At March 31, 2002, there was approximately
$1.3 billion of cash balances maintained in such accounts. The Company estimates
that a 50 basis point change in interest earnings rate would be approximately
$4.4 million of net income.
At March 31, 2002, the Company had $293.4 million of debt, of which $203.0
million was subject to variable interest rates (Federal Funds rates, LIBOR
rates, Prime rates). The Company estimates that a 10% increase in interest rates
would not be material to the Company's consolidated pretax earnings or to the
fair value of its debt.
Foreign currency exchange rate risk
The operation of the Company's subsidiaries in international markets results in
exposure to movements in currency exchange rates. The principal currencies
involved are the British pound, Canadian dollar and Australian dollar. Currency
exchange rate fluctuations have not historically materially affected the
consolidated financial results of the Company.
The Company's international subsidiaries use the local currency as the
functional currency. The Company translates all assets and liabilities at
year-end exchange rates and income and expense accounts at average rates during
the year. While it is generally not the Company's practice to enter into
derivative contracts, from time to time the Company and its subsidiaries do
utilize forward foreign currency exchange contracts to minimize the impact of
currency movements.
21
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 and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
If a stockholder desires to have a proposal included in DST's Proxy Statement
for the annual meeting of stockholders to be held in 2003, the Corporate
Secretary of DST must receive such proposal on or before November 28, 2002, and
the proposal must comply with the applicable SEC laws and rules and the
procedures set forth in the DST By-laws.
22
Item 5. Other Information
The following table presents operating data for the Company's operating business
segments:
March 31, December 31,
2002 2001
--------------- ---------------
Financial Services Operating Data
Mutual fund shareowner accounts processed (millions)
U.S.
Non-retirement accounts 50.7 49.0
IRA mutual fund accounts 19.1 18.5
TRAC mutual fund accounts 7.9 7.4
Section 529 savings plan accounts 1.0 0.7
--------------- ---------------
78.7 75.6
=============== ===============
International
United Kingdom (1) 3.2 3.1
Canada (2) 1.7 1.7
Security transfer processed accounts (millions) 27.3 27.8
TRAC participants (millions) 2.7 2.5
Automated Work Distributor workstations (thousands) 88.1 85.5
Customer Management Operating Data
Video/broadband/satellite TV subscribers processed (millions)
U.S. 33.0 32.7
International 7.9 8.2
For the Three Months
Ended March 31,
2002 2001
--------------- ---------------
Output Solutions Operating Data
Images produced (millions) 2,162 2,027
Items mailed (millions) 473 508
(1) Processed by International Financial Data Services, U.K., an
unconsolidated affiliate of the Company.
(2) Processed by International Financial Data Services, Canada, an
unconsolidated affiliate of the Company.
23
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
The Company filed under Item 5 of Form 8-K, the Company's Form 8-K dated
January 25, 2002, reporting the announcement of financial results for the
quarter and year ended December 31, 2001.
The Company filed under Item 9 of Form 8-K, the Company's Form 8-K dated
March 1, 2002, reporting the announcing the extension of DST's current
program to repurchase shares of DST common stock and the adoption of a new
program to repurchase shares of DST common stock.
The Company filed under Item 5 of Form 8-K, the Company's Form 8-K/A-2
dated March 19, 2002 amending and restating its Form 8-K dated March 15,
1996 (amended and restated April 13, 1998, August 4, 1998 and March 25,
1999) 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.
SIGNATURE
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 May 15, 2002.
DST Systems, Inc.
/s/ Kenneth V. Hager
- ---------------------------------
Kenneth V. Hager
Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
24