NEWS RELEASE C1997-01
DST Systems, Inc.
333 West 11th Street
Kansas City, MO
64105-1594
NYSE Symbol: DST
FOR IMMEDIATE RELEASE
DST SYSTEMS, INC. ANNOUNCES FOURTH QUARTER AND FULL YEAR 1996 RESULTS
KANSAS CITY, MO (January 24, 1997)_DST Systems, Inc. ("DST") announces
financial results for the three months and year ended December 31, 1996.
Quarter Ended December 31, 1996
For the quarter ended December 31, 1996, DST consolidated net income was
$11.8 million, or $.24 per share, as compared to $0.1 million for the
quarter ended December 31, 1995. 1995 results included equity accounting
for a non-recurring charge of $8.4 million in connection with an
acquisition by The Continuum Company, Inc. (Continuum). Excluding this
charge of $7.7 million after tax, DST's 1995 fourth quarter net income
would have been $7.8 million. In the 1995 quarter, DST owned 29% of
Continuum. DST's consolidated revenues for the quarter ended December
31, 1996 totaled $153.8 million, an increase of 16.1% over the prior
year quarter. DST's U.S. revenues increased 18.1% over the prior year
quarter to $130.9 million. Increases in domestic revenues over the
prior year quarter were the result of higher mutual fund shareowner
accounts serviced (41.1 million accounts at December 31, 1996),
increased output services as pages printed increased 32% to 338 million
pages, increased Automated Work DistributorTM (AWD)r workstations in
service which resulted in an increase of 74.2% in AWD revenues, and
increases in the number of DirecTVTM satellite subscribers serviced by
DBS Systems Corp. (DBS).
(page 2)
International revenues increased 5.8% over the prior year quarter to
$22.9 million for the quarter ended December 31, 1996, reflecting
additional output service revenues from Xebec Imaging Services, Inc., a
Canadian company acquired in January 1996.
Consolidated income from operations totaled $18.6 million for the
quarter ended December 31, 1996, an increase of 97.4% over the prior
year quarter. U.S. operating income rose 82.1% to $18.1 million for the
current quarter, derived primarily from higher mutual fund, AWD, and DBS
revenues and lower increases in operating costs, principally
depreciation and amortization. Fourth quarter 1995 costs included $2.9
million of costs associated with a subsidiary's performance based
incentive compensation program that ended in 1995. International
operations posted a nominal operating profit for the quarter. The
improvement in international results reflects contributions in Canadian
processing and output operations and increased AWD revenues. However,
DST International continues to incur significant development costs for
its new international portfolio accounting system, GPS2000.
Equity in earnings of unconsolidated affiliates totaled $520 thousand,
as compared to a loss of $4.4 million for the prior year quarter.
However, excluding the $8.4 million non-recurring charge from Continuum
in the fourth quarter 1995, equity in earnings declined $3.5 million
from the 1995 quarter. This decline resulted from the absence of equity
in Continuum earnings beginning in the third quarter
(page 3)
1996 as a result of the merger of Continuum and Computer Sciences
Corporation (Continuum/CSC merger), which, adjusting the non-recurring
charge, were $2.2 million for the 1995 quarter. Also, lower earnings
were recorded at Argus Health Systems, Inc. (Argus) as a result of
lower revenues and increased system development costs, and higher losses
were incurred at European Financial Data Services, Ltd. (EFDS)
resulting from continued costs for the development of its new unit trust
system, FAST2000. These reductions were partially offset by increased
earnings at Boston Financial Data Services, Inc. (BFDS).
Interest expense declined $2.1 million from the prior year quarter to
$1.8 million for the current year quarter, primarily as a result of the
elimination of interest on debt which was retired with the proceeds of
DST's fourth quarter 1995 Public Offering.
DST's effective income tax rate was 34.9% for the 1996 quarter, as
compared to 87.0% for the 1995 quarter. Excluding the effect of the
non-recurring Continuum charge, the 1995 quarter's effective tax rate
was 23.5%. The increase in the effective tax rate in fourth quarter
1996 over the adjusted rate for the 1995 quarter was primarily due to
the decline in equity in earnings of unconsolidated affiliates in 1996.
(page 4)
Year Ended December 31, 1996 For the year ended December 31, 1996, net
income was $167.2 million, or $3.35 per share, as compared to $27.6
million for the prior year. DST's net income for the year ended
December 31, 1996 would have been $44.0 million or $.88 per share, if
all Continuum related equity in earnings, gains and charges were
eliminated.
Consolidated revenues for the year ended December 31, 1996 increased
20.0% over the prior year to $580.8 million, primarily as a result of
increases in U.S. mutual fund, AWD, DBS and Canadian revenues.
Consolidated income from operations (excluding the one time $13.7
million ESOP contribution associated with the Continuum/CSC merger) was
$70.7 million, an increase of $29.9 million, or 73.1%, over the
comparable 1995 period.
Equity in earnings of unconsolidated affiliates declined $10.5 million
from the prior year as a result the discontinuance of recording equity
in Continuum earnings in the third quarter 1996, lower Argus earnings
and increased losses at EFDS. Interest expense for the year declined
$15.0 million from the prior year reflecting the retirement of debt with
proceeds of the Public Offering.
(page 5)
Gains on sales of equity investments were $44.9 million in 1995
primarily from the sale of Investors Fiduciary Trust Company (IFTC), and
$223.4 million in 1996, as a result of the gain on the Continuum/CSC
merger.
DST's effective tax rate for 1996 was 38.7%, verses 62.5% in 1995. The
1995 rate was significantly higher due to increased deferred taxes
recorded on the gain from the sale of IFTC because of the significant
difference in DST's book and tax basis in IFTC.
(page 6)
DST SYSTEMS, INC.
Condensed Consolidated Statement of Income
(In thousands, except earnings per share)
(unaudited)
For the Three Months For the Year
Ended December 31, Ended December 31,
1995 1996 1995 1996
Revenues $132,452 $153,761 $484,131 $580,808
Costs and expenses 102,601 114,266 373,561 431,563
Depreciation and amortization 20,409 20,888 69,749 78,572
Other expenses 13,700
------- ------- ------- -------
Income from operations 9,442 18,607 40,821 56,973
Interest expense (3,972) (1,829) (21,964) (6,940)
Other income 956 1,352 3,627 4,176
Gains on sale of equity investments 44,895 223,438
Equity in earnings (losses) of
unconsolidated affiliates (4,356) 518 6,452 (4,028)
------- ------- ------- -------
Income before income taxes and
minority interest 2,070 18,648 73,831 273,619
Income taxes 1,800 6,511 46,174 105,920
Income before minority interest 270 12,137 27,657 167,699
Minority interest 180 309 17 497
------- ------- ------- -------
Net income $90 $11,828 $27,640 $167,202
Average common shares outstanding 49,679 49,871
Earnings per share $0.24 $3.35