July 17, 1997
DST SYSTEMS, INC. ANNOUNCES SECOND QUARTER AND YEAR-TO-DATE 1997
FINANCIAL RESULTS
KANSAS CITY, MO-DST Systems, Inc. (DST) announces financial results for the
second quarter and six months ended June 30, 1997.
Quarter ended June 30, 1997
For the quarter ended June 30, 1997, DST consolidated net income was $13.8
million or $.28 per share, compared to $12.3 million or $.25 per share for the
same quarter in 1996, an increase of 12.1%. Eliminating the equity in earnings
of its former affiliate, The Continuum Company, Inc. (Continuum), net income for
the quarter ended June 30, 1996 would have been $9.4 million, or $.19 per share.
Therefore, 1997 second quarter earnings were 47% higher than 1996 second quarter
earnings without Continuum.
Revenues for the quarter ended June 30, 1997 totaled $155.4 million, an
increase of 8.5% over the prior year quarter. U.S. revenues were $132.1 million
for the quarter, an increase of 8.5% over comparable period 1996 revenues. U.S.
revenues reflected growth in mutual fund, output processing, Automated Work
Distributor (AWD) and subscriber management revenues. The number of U.S. mutual
fund shareowner accounts serviced by DST increased to 42.4 million at June 30,
1997, an increase of 0.6 million accounts from March 31, 1997 and 1.3 million
accounts from December 31, 1996. Pages printed by Output Technologies, Inc. in
the U.S. increased 6% over second quarter 1996 volumes to 329 million pages. AWD
U.S. workstations licensed increased 26% from December 31, 1996 to 16,900
workstations at June 30, 1997.
International revenues totaled $23.3 million for the quarter, an increase of
8.4% over comparable prior year revenues, primarily resulting from higher AWD
and Canadian mutual fund processing revenues. AWD workstations licensed outside
the U.S. at June 30, 1997 were 7,100, an increase of approximately 12% from
December 31, 1996. Canadian mutual fund accounts serviced totaled 2.8 million at
June 30, 1997, an increase of 74% over December 31, 1996.
Consolidated income from operations increased 20% over the prior year quarter to
$20.9 million, with an operating margin of 13.5% compared to 12.2% for the prior
year quarter. Costs and expenses increased 7.9% to $115.0 million, primarily
from increased personnel and facilities costs. Depreciation and amortization
increased 1.4% from the prior year quarter. Although individual unit results
varied, international businesses posted operating income of $1.0 million for the
current year quarter compared to an operating loss of $0.2 million from the
prior year quarter, primarily from higher revenues.
DST recorded equity in earnings of unconsolidated affiliates of $0.8 million for
the quarter ended June 30, 1997, compared to $3.1 million recorded in the second
quarter of 1996. However, 1996 included $3.1 million of equity in Continuum
earnings. Thus, the 1997 quarter increased $0.8 million over the 1996 quarter
excluding Continuum. Increased earnings were recorded at both Argus Health
Systems, Inc. as claims processed increased 20% over the prior year quarter and
at Boston Financial Data Services resulting from increased non-mutual fund
related processing and increased mutual fund operating earnings. These increases
were substantially offset by increased costs at European Financial Data Services
(EFDS) resulting from increased FAST2000 development costs and additional
operating costs to convert new full service clients and support existing
clients' unit trust growth. At June 30, 1997, unitholder accounts serviced
totaled 700,000, an increase of 109% over December 31, 1996.
Interest expense totaled $1.9 million for the quarter ended June 30, 1997, an
increase of $0.2 million compared to the prior year quarter.
DST's effective tax rate was 33.5% for the second quarter 1997, as compared to
37.9% for the prior year quarter, primarily as a result of tax benefits relating
to certain international operations.
Six Months ended June 30, 1997
In general, the same operating trends affecting the current quarter results also
affected year-to-date results. For the six months ended June 30, 1997, net
income was $28.9 million, or $.58 per share, as compared to $16.7 million, or
$.34 per share for the six months ended June 30, 1996. Excluding the effects of
Continuum, net income for the six months ended June 30, 1996 was $21.3 million,
or $.43 per share. Therefore, 1997 year-to-date earnings were 35% higher than
1996 year-to-date earnings without Continuum.
Revenues for the six months ended June 30, 1997 increased 9.3% to $314.1
million. U.S. revenues increased 10.1% to $270.8 million and international
revenues grew 4.4% to $43.3 million. Operating income increased 21.8% to $44.6
million over the comparable 1996 period. DST recorded $1.9 million in equity in
earnings of unconsolidated affiliates for the 1997 six month period, an increase
of $1.5 million over the comparable 1996 period excluding Continuum. 1997
year-to-date interest expense increased $0.3 million to $4.0 million. The
year-to-date effective income tax rate declined from 44.6% in 1996 to 34.4% in
1997. The higher 1996 effective rate was primarily the result of a large
non-recurring loss recorded by Continuum in the first quarter of 1996.
Stock Repurchases
During the second quarter, DST repurchased 150,000 shares of its common stock
under its 1.2 million share repurchase program. As of June 30, 1997, DST has
repurchased 300,000 shares in 1997 and a total of 700,000 shares since the
program commenced. The shares purchased will be available to provide to
employees under DST's stock award program and to provide to option holders who
exercise options.
DST SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1997 1996 1997
Revenues $143,216 $155,394 $287,478 $314,077
Costs and expenses 106,565 114,983 212,954 230,337
Depreciation and amortization 19,192 19,468 37,880 39,097
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Income from operations 17,459 20,943 36,644 44,643
Interest expense (1,653) (1,884) (3,754) (4,046)
Other income, net 981 1,231 1,912 2,210
Equity in earnings (losses) of
unconsolidated affiliates 3,140 820 (4,502) 1,864
-------- --------- ------- -------
Income before income taxes and minority
interests 19,927 21,110 30,300 44,671
Income taxes 7,549 7,064 13,512 15,366
-------- ------- ------- ------
Income before minority interests 12,378 14,046 16,788 29,305
Minority interests 51 229 44 385
---------- -------- --------- --------
Net income $12,327 $13,817 $16,744 $28,920
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Average common shares outstanding 49,965 49,374 49,982 49,451
Earnings per share $0.25 $0.28 $0.34 $0.58
DST Systems, Inc.
333 West 11th Street
Kansas City, MO
64105-1594
NYSE Symbol: DST
Contact:
Thomas A. McDonnell (816) 435-8684
President and Chief Executive Officer
Kenneth V. Hager (816) 435-8603
Vice President and Chief Financial Officer