FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 1-14036
DST SYSTEMS, INC.
(Exact name of Company as specified in its charter)
Delaware 43-1581814
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1055 Broadway, Kansas City, Missouri 64105
(Address of principal executive offices) (Zip Code)
(816) 435-1000
(Company's telephone number, including area code)
No Changes
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Company (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of May 3, 1996, there were 50,000,000 shares of the Company's $.01 par value
Common Stock outstanding.
1
DST SYSTEMS, INC.
FORM 10-Q
MARCH 31, 1996
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Introductory Comments 3
Condensed Consolidated Balance Sheet -
December 31, 1995 and March 31, 1996 4
Condensed Consolidated Statement of Income -
Three Months Ended March 31, 1995 and 1996 5
Condensed Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1995 and 1996 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
2
DST SYSTEMS, INC.
FORM 10-Q
March 31, 1996
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 Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
enable a reasonable understanding of the information presented. These
Condensed Consolidated Financial Statements should be read in conjunction with
the audited financial statements and the notes thereto for the year ended
December 31, 1995. 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, 1996 are not
necessarily indicative of the results to be expected for the full year 1996.
3
DST SYSTEMS, INC.
Condensed Consolidated Balance Sheet
(In thousands, except share amounts)
(unaudited)
December 31, March 31,
1995 1996
---- ----
ASSETS
Current assets
Cash and cash equivalents $ 13,057 $ 6,063
Accounts receivable 136,314 144,854
Inventories 10,647 11,309
Other assets 28,500 33,107
------- -------
Total current assets 188,518 195,333
Investments 251,677 258,391
Properties 247,014 249,285
Intangibles and other assets 62,311 65,330
------- -------
Total assets $749,520 $768,339
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Debt due within one year $ 31,822 $ 37,638
Accounts payable 47,208 36,628
Deferred revenues and gains 12,219 11,871
Accrued compensation and benefits 30,017 18,011
Other liabilities 11,937 14,395
------- -------
Total current liabilities 133,203 118,543
Long-term debt 52,477 73,738
Deferred income taxes 50,734 57,209
Other liabilities 46,272 38,759
------- -------
282,686 288,249
Commitments and contingencies
------- -------
Minority interest 476 468
------- -------
Stockholders' equity
Preferred stock, $0.01 par; 10,000,000 shares authorized
and unissued
Common stock, $0.01 par; 125,000,000 shares authorized,
50,000,000 issued and outstanding 500 500
Additional paid-in capital 408,807 408,807
Retained earnings 34,988 39,147
Net unrealized gain on investments 22,063 31,168
------- -------
Total stockholders' equity 466,358 479,622
------- -------
Total liabilities and stockholders' equity $749,520 $768,339
======= =======
The accompanying notes are an integral part of these financial statements.
4
DST SYSTEMS, INC.
Condensed Consolidated Statement of Income
(In thousands, except per share amount)
(unaudited)
For the Three Months
Ended March 31,
--------------------
1995 1996
---- ----
Revenues $112,266 $144,262
Costs and expenses 85,218 106,389
Depreciation and amortization 14,082 18,688
------- -------
Income from operations 12,966 19,185
Interest expense (4,538) (2,102)
Other income, net 486 931
Gain on sale of equity investment 43,610
Equity in earnings (losses) of unconsolidated affiliates 3,413 (7,641)
------- -------
Income before income taxes and minority interest 55,937 10,373
Income taxes 38,734 5,963
------- -------
Income before minority interest 17,203 4,410
Minority interest in losses (51) (7)
------- -------
Net income $ 17,254 $ 4,417
======= =======
Average common shares outstanding 50,000
Earnings per share 0.09
The accompanying notes are an integral part of these financial statements.
5
DST SYSTEMS, INC.
Condensed Consolidated Statement of Cash Flows
(In thousands)
(unaudited)
For the Three Months
Ended March 31,
--------------------
1995 1996
---- ----
Cash flows -- operating activities:
Net income $ 17,254 $ 4,417
-------- --------
Depreciation and amortization 14,082 18,688
Amortization of deferred revenues and gains (237) (237)
(Undistributed earnings) losses of
unconsolidated affiliates (3,128) 7,641
Gain on sale of equity investment (43,610)
Deferred taxes on gain on sale of equity investment 35,028
Changes in accounts receivable (8,131) (6,398)
Changes in inventories 793 (236)
Changes in other current assets (4,481) (6,369)
Changes in accounts payable and accrued liabilities (2,015) (19,118)
Other, net 7,089 (3,989)
-------- --------
Total adjustments to net income (4,610) (10,018)
-------- --------
Net 12,644 (5,601)
-------- --------
Cash flows -- investing activities:
Investment in and advances to unconsolidated affiliates (2,411) (2,549)
Capital expenditures (13,004) (13,837)
Payment for purchases of subsidiaries,
net of cash acquired (9,982) (3,183)
Other, net 573
-------- --------
Net (25,397) (18,996)
-------- --------
Cash flows -- financing activities:
Proceeds from issuance of long-term debt 24,000
Principal payments on long-term debt (8,636) (5,642)
Net increase in credit facilities and notes payable 6,721 31,656
Other, net (5,308) (8,411)
-------- --------
Net 16,777 17,603
-------- --------
Net increase (decrease) in cash and cash equivalents 4,024 (6,994)
Cash and cash equivalents at beginning of period 3,971 13,057
-------- --------
Cash and cash equivalents at end of period $ 7,995 $ 6,063
======== ========
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 Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
enable a reasonable understanding of the information presented. These
Condensed Consolidated Financial Statements should be read in conjunction with
the audited financial statements and the notes thereto for the year ended
December 31, 1995. 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 DST
Systems, Inc. (the "Company") and its subsidiaries as of March 31, 1996, and
the results of operations and cash flows for the three months then ended.
The results of operations for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year 1996.
2. Earnings per share
Earnings per share for the three months ended March 31, 1996 is based on the
weighted average number of common shares outstanding during the period.
Because the initial public offering of the Company's common stock on October
31, 1995 and use of proceeds therefrom have substantially changed the Company's
capital structure, earnings per share data for the three months ended March 31,
1995 have not been presented.
3. Acquisitions and Dispositions
On March 15, 1996, the Continuum Company, Inc. ("Continuum"), an unconsolidated
affiliate of the Company, announced the completion of its merger with Hogan
Systems, Inc., (the "Hogan Merger") a provider of software to banks and
financial institutions, for shares of Continuum stock. As a result of this
transaction, the Company's common stock interest in Continuum was reduced from
approximately 29% to approximately 23%. The Company recorded in March 1996 its
estimated $9.4 million after tax share of a non-recurring charge recorded by
Continuum in connection with the Hogan Merger.
As discussed under "Recent Events" in Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continuum and Computer Sciences
Corporation ("CSC") announced on April 29, 1996 they have signed a definitive
agreement for CSC to merge with Continuum in a share exchange to be accounted
for as a pooling-of-interests.
In January 1996, the Company's wholly-owned subsidiary, Output Technologies,
Inc., completed the acquisition of Xebec Imaging Services, Inc. ("Xebec"), a
Canadian provider of computer output micrographics for total consideration of
$5.5 million.
7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The discussions set forth in this Form 10-Q may contain forward-looking
comments. Such comments are based upon the information currently available to
management of the Company and management's perception thereof as of the date of
this report. Actual results of the Company's operations could materially differ
from those indicated in the forward-looking comments. The difference could be
caused by a number of factors including, but not limited to, those discussed in
a Current Report on Form 8-K dated March 22, 1996, which has been filed with the
United States Securities and Exchange Commission. That Current Report may be
obtained by contacting the Commission's public reference operations. Readers
are strongly encouraged to obtain and consider the factors listed in the March
22, 1996 Current Report and any amendments or modifications thereof when
evaluating any forward-looking comments concerning the Company.
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations should be read in conjunction with
the Notes to Condensed Consolidated Financial Statements included in this Form
10-Q and the audited financial statements and notes thereto incorporated by
reference in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
INTRODUCTION
The Company provides sophisticated information processing and computer software
services and products, primarily to mutual funds, insurance providers, banks
and other financial services organizations.
The following table presents the sources of the Company's revenues:
Sources of Revenue
Three Months Ended March 31,
(in thousands)
1995 1996
------------ ------------
U.S. Mutual Fund
Processing $ 50,928 45.4% $ 63,616 44.1%
Output Services 16,774 14.9% 21,941 15.2%
------ ------ ------ ------
Total U.S. Mutual Fund 67,702 60.3% 85,557 59.3%
Insurance
Processing 6,396 5.7% 7,163 5.0%
Output services 2,213 2.0% 2,831 2.0%
----- ----- ----- -----
Total Insurance 8,609 7.7% 9,994 7.0%
International 9,893 8.8% 19,952 13.8%
Other output services 19,076 17.0% 21,824 15.1%
Other 6,986 6.2% 6,935 4.8%
------- ------- ------- -------
Total revenues $112,266 100.0% $144,262 100.0%
======= ======= ======= =======
8
RECENT EVENTS
On March 15, 1996, the Continuum Company, Inc. ("Continuum"), an unconsolidated
affiliate of the Company, announced the completion of its merger with Hogan
Systems, Inc., (the "Hogan Merger") a provider of software to banks and
financial institutions, for shares of Continuum stock. As a result of this
transaction, the Company's common stock interest in Continuum was reduced from
approximately 29% to approximately 23%. The Company recorded in March 1996 its
estimated $9.4 million after tax share of a non-recurring charge recorded by
Continuum in connection with the Hogan Merger.
On April 29, 1996, Continuum and Computer Sciences Corporation ("CSC")
announced they have signed a definitive agreement for CSC to merge with
Continuum in a share exchange to be accounted for as a pooling-of-interests.
Under the agreement, CSC common stock is to be exchanged for the common stock
of Continuum at an exchange rate of 0.79 shares for each share of Continuum
stock. DST owns 5,549,141 shares of Continuum stock. The transaction has been
approved by the Boards of Directors of both companies but is subject to
approval of the shareholders of both Continuum and CSC. DST has agreed to vote
its shares in favor of the merger and to certain limitations on the disposition
of the CSC stock DST would receive. Based on the closing price on the New York
Stock Exchange of CSC on April 29, 1996, of $75.375, if the merger were
completed at that date and on the terms proposed, DST would have recognized a
one-time gain after deferred taxes of approximately $150 million. DST would
receive shares of CSC representing an approximate 6% interest in the combined
company and Continuum would cease to be an unconsolidated equity affiliate of
DST. DST recognized equity in earnings of Continuum of $0.5 million, $5.0
million in 1993 and 1994, respectively and equity in losses of Continuum of
$1.1 million in 1995 and $8.1 million for the first quarter 1996. The
Company's resulting investment in CSC would be accounted for as available-for-
sale securities in accordance with Statement of Financial Accounting Standards
No. 115. Although CSC does not currently pay cash dividends, DST would record
dividend income on any cash dividends received from CSC.
DST currently provides all of the North American and United Kingdom data
processing operations for Continuum through DST's Winchester Data Center. The
Company has agreed with CSC to negotiate an agreement which would permit CSC to
transfer, over a period of time after the merger, Continuum data processing
operations from the Winchester Data Center to facilities of CSC. DST
anticipates that it would be able to utilize the data center capacity
relinquished by Continuum as a result of such data processing transfer. The
Company does not believe that any such transfer of data processing would have a
material impact on the Company's results of operations or financial position.
The merger is not expected to affect Continuum's existing agreements with DST
for distribution of DST's Automated Work Distributor (AWD) work flow management
software to the insurance and banking industries.
The Company's wholly-owned subsidiary, Output Technologies, Inc., completed the
acquisition of Xebec Imaging Services, Inc. ("Xebec"), a Canadian provider of
computer output micrographics, in January 1996 for total consideration of $5.5
million.
9
RESULTS OF OPERATIONS
First Quarter 1995 versus First Quarter 1996
The Company's earnings were $0.09 per share for the first quarter 1996.
Because the initial public offering of the Company's common stock on October
31, 1995 and use of proceeds therefrom have substantially changed the
Company's capital structure, earnings per share data for first quarter 1995
have not been presented. Net income decreased $12.9 million, or 74%, from
$17.3 million in 1995 to $4.4 million in 1996. First quarter 1995 and 1996 net
income were affected by certain non-recurring items. First quarter 1995 net
income reflected an $8.6 million after-tax gain on the sale of Investors
Fiduciary Trust Company. First quarter 1996 net income includes a one-time
charge of $9.4 million in connection with the Hogan Merger. Adjusted for these
non-recurring items, the Company's first quarter net income would have been
$8.7 million in 1995 and $13.9 million in 1996. This increase in net income on
an adjusted basis is primarily a result of increased revenues and income from
operations due to the growth of the Company's business and decreased interest
expense resulting from the retirement of debt with proceeds from the Company's
initial public offering in the fourth quarter of 1995.
For the Three Months
Geographic information Ended March 31,
(in thousands) --------------------
1995 1996
---- ----
Domestic revenues $102,373 $124,310
Domestic income from operations 13,020 19,415
International revenues 9,893 19,952
International income from operations (54) (230)
Revenues
Consolidated revenues increased 29% to $144.3 million primarily due to
increased mutual fund processing, higher output volumes at Output Technologies
and growth in international businesses.
Domestic revenues increased 21% to $124.3 million primarily due to increased
mutual fund processing, increased Automated Work Distributor (AWD) product
revenues and higher volumes at Output Technologies. United States mutual fund
processing revenues increased 22% as shareowner accounts serviced increased
from 32.5 million at March 31, 1995 to 38.3 million at March 31, 1996. The
growth is due to increases in the number of shareowner accounts at existing
clients and the addition of approximately one million accounts from the
addition of a new client in September 1995. Domestic AWD product revenues
increased 41% on an increase in workstations installed from 8,800 at March 31,
1995 to 11,200 at March 31, 1996. Domestic Output Technologies revenues
increased 23% due primarily to a 37% increase in domestic pages printed.
International revenues for the first quarter increased 102% to $20.0 million
from increased license and development revenues from DST International Limited
and $3.7 million from the acquisition of Xebec.
10
Costs and expenses
Consolidated costs and expenses for the first quarter increased 25% to $106.4
million, primarily as a result of higher operating volumes, increased costs of
international operations and certain other costs as described below.
Domestic costs and expenses for the first quarter increased 16%. Domestic
compensation and benefit expenses increased 18%, or $7.9 million for the first
quarter due to increased staffing levels to support mutual fund, portfolio
accounting, AWD and Output Technologies products.
Costs and expenses from international business for the quarter increased $9.1
million, or 99%, due to the continued development of product offerings and the
addition of $3.0 million of expenses from the operations of Xebec.
Depreciation and amortization
Depreciation and amortization increased 33% primarily due to increased
operating capacities at the Winchester Data Center and Output Technologies and
increased amortization expense related to the purchase of substantially all of
the assets and business operations of Supervised Service Company, Inc. and
mutual fund shareowner servicing system software owned by Kemper Services
Company in April 1995.
Interest expense
Interest expense decreased $2.4 million, or 54%, resulting primarily from the
retirement of debt with proceeds from the Company's initial public offering in
the fourth quarter of 1995.
Other income
Other income increased $0.4 million over prior year as a result of a $0.5
million dividend received on shares of State Street Boston Corporation ("State
Street") common stock held by the Company as a result of the sale of Investors
Fiduciary Trust Company to State Street which was completed in January 1995.
No dividends were received from State Street in the first quarter of 1995.
Equity in earnings (losses) of unconsolidated affiliates
Equity in earnings of unconsolidated affiliates decreased $11.0 million
primarily as a result of the Company recording its estimated $10.2 million
share of a non-recurring charge ($9.4 million after providing deferred tax
benefit) recorded by Continuum in conjunction with the Hogan Merger. Excluding
the effect of the Hogan Merger, equity in earnings of unconsolidated affiliates
decreased $0.8 million, or 24% compared to prior year. Higher operating
earnings were recorded at Continuum and Boston Financial Data Services. These
were offset by lower earnings from Argus Health Systems as a result of
increased development costs for a new claims processing system and a level
volume of claims processed. Increased costs were also incurred at European
Financial Data Services, Ltd. ("EFDS") (formerly Clarke & Tilley Data Services,
Ltd.) resulting from increased development costs and an acceleration of the
delivery timetable for the FAST2000 unit trust product. 1995 first quarter
results also included $0.4 million equity in earnings of Midland joint ventures
which were sold in August 1995.
11
Income taxes
Income tax expense decreased $32.8 million, or 85%, primarily as a result of
the 1995 IFTC transaction. The Company recorded $35.0 million of deferred
income tax expense in the first quarter 1995 as a result of the IFTC
transaction to recognize the deferred tax liability on the difference between
the value of State Street stock received and the Company's tax basis in IFTC
less previous deferred taxes provided.
The Company's effective tax rate for the first quarter 1996 was approximately
57%. Excluding the effect of the Hogan Merger, the Company's effective tax
rate for the first quarter would have been approximately 33%. The difference
between the Company's effective tax rate and the combined federal and state
statutory rates is primarily the result of deferred taxes being provided for
unremitted earnings of unconsolidated affiliates net of the 80% dividends
received deduction provided under current tax law.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses internally generated funds and borrowings from third parties
to fund operating and investing activities. The Company's net cash used in
operating activities totaled $5.6 million during the first quarter 1996. Cash
flows from operating activities for the quarter were significantly impacted by
payments related to incentive compensation programs, including a $10.1 million
payment for a multi-year performance based incentive compensation program at an
Output Technologies subsidiary that concluded at December 31, 1995, and an
increase in accounts receivable of approximately $6.4 million related to
revenue growth. Cash flows from operating activities are expected to be
positive during the remainder of 1996.
The Company's net cash flow used in investing activities totaled $19.0 million
for the quarter. The Company expended $3.2 million during the quarter for
purchase of subsidiaries and and $13.8 million during the quarter for capital
additions. The Company anticipates that future capital expenditures will be
funded primarily by cash flows from operating activities, secured term notes,
or bank lines of credit as required.
Net cash flows from financing activities totaled $17.6 million for the quarter.
Net short and long-term borrowings for the quarter totaled $31.7 million, which
were necessary to finance payments for purchase of subsidiaries, capital
additions and payments related to incentive compensation programs as described
above. Other net financing activities include $5.9 million in payments to
vendors relating to software capitalized in prior years and $2.5 million in
deferred payments relating to the acquisiton of HiPortfolio.
The Company maintains $45.0 million of bank line of credit facilities to
finance short-term working capital requirements, of which total borrowings of
$16.9 million had been made on these lines as of March 31, 1996. Additionally,
the Company maintains a revolving credit facility of $100.0 million available
through May 1996 and a revolving credit facility of $150.0 million available
through May 1998 with a syndicate of U.S. and international banks. Total
borrowings of $25.0 million had been made on the long-term revolving credit
facility at March 31, 1996.
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 short-term credit facilities, will be sufficient to meet the
Company's operating and debt service requirements and other current liabilities
for at least the next twelve months. Further, the Company believes that its
longer term liquidity and capital requirements will also be met through cash
from operations and short-term bank lines of credit, as well as the Company's
three year $150.0 million revolving credit facility described above.
12
OTHER INFORMATION
The following summarizes certain key operating and financial data for the
periods indicated:
December 31, March 31,
1995 1996
---- ----
Investment Market Values (1) (in thousands)
The Continuum Company, Inc. $219,010 $230,792 (2)
State Street Boston Corporation 134,375 149,306
First of Michigan Capital Corporation 4,803 4,803
Other Operating Data
Mutual fund shareowner accounts (millions) 36.5 38.3
Securities transfer accounts (millions) 6.2 6.2
Mutual fund portfolios 1,785 1,877
Automated work distributor workstations 10,700 11,200
Three Months Ended March 31,
----------------------------
1995 1996
---- ----
Output Technologies pages printed (millions) 240.7 337.5
Pharmaceutical claims processed (millions) 33.2 32.6
(1) Based upon the closing price on the last trading day of the applicable
period at the exchange where principally traded.
(2) Subsequent to the announcement of a merger agreement between Continuum
and Computer Sciences Corporation on April 29, 1996, the market value of shares
of Continuum held by DST was approximately $319.8 million based upon the closing
price of Continuum common stock on the New York Stock Exchange on that day.
13
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 claims outstanding that would
have a material adverse effect upon the consolidated results of operations or
financial condition of the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted by the Company to security holders during the quarter
ended March 31, 1996.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
The Company filed a Form 8-K dated January 25, 1996 under Item 5 of such form,
reporting the appointment of two additional directors and the announcement of
financial results for the year ended December 31, 1995.
The Company filed a Form 8-K dated March 22, 1996 under Items 5 and 7 of such
form, regarding cautionary statements with respect to forward-looking comments
for purposes of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, and in the capacities indicated on
May 10, 1996.
DST Systems, Inc.
/s/ Kenneth V. Hager
Kenneth V. Hager
Vice President and Chief Financial Officer
(Principal Financial Officer)
15