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 JUNE 30, 1997
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.)
333 WEST 11TH STREET, 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 August 8, 1997, there were 49,255,815 shares of the Company's $.01 par
value Common Stock outstanding.
DST SYSTEMS, INC.
FORM 10-Q
JUNE 30, 1997
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Introductory Comments 3
Condensed Consolidated Balance Sheet -
December 31, 1996 and June 30, 1997 4
Condensed Consolidated Statement of Income -
Three and Six Months Ended June 30, 1996 and 1997 5
Condensed Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1996 and 1997 6
Notes to Condensed Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13-14
Item 5. Other Information 14-15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
The Company's service marks and trademarks include without limitation, DST(TM),
Securities Transfer System(TM), TA2000(R), Portfolio Accounting System(TM),
Automated Work Distributor(TM), AWD(R), TRAC-2000(R), FAST2000(TM) referred to
in this Report.
DST SYSTEMS, INC.
FORM 10-Q
JUNE 30, 1997
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 ("SEC"). Certain information and 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, 1996.
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 and six months ended June 30, 1997, are
not necessarily indicative of the results to be expected for the full year 1997.
3
DST SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(dollars in thousands, except per share amounts)
(unaudited)
DECEMBER 31, JUNE 30,
1996 1997
---- ----
ASSETS
Current assets
Cash and cash equivalents $ 8,279 $ 9,763
Accounts receivable 154,094 152,131
Other assets 38,922 46,986
----------- -----------
201,295 208,880
Investments 620,437 685,269
Properties 243,989 232,716
Intangibles and other assets 55,867 52,052
----------- -----------
Total assets $ 1,121,588 $ 1,178,917
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Debt due within one year $ 15,159 $ 13,322
Accounts payable 44,944 30,343
Accrued compensation and benefits 33,276 18,141
Deferred revenues and gains 14,553 16,536
Other liabilities 17,772 22,598
----------- -----------
125,704 100,940
Long-term debt 75,895 90,404
Deferred income taxes 180,853 200,155
Other liabilities 42,939 39,644
----------- -----------
425,391 431,143
----------- -----------
Commitments and contingencies
----------- -----------
Minority interest 972 1,358
----------- -----------
Stockholders' equity
Common stock, $0.01 par; 125,000,000
shares authorized, 50,000,000 shares
issued 500 500
Additional paid-in capital 408,807 408,807
Retained earnings 203,638 232,715
Treasury stock (396,000 and 694,185 shares,
respectively), at cost (12,345) (21,644)
Net unrealized gain on investments 94,625 126,038
----------- -----------
Total stockholders' equity 695,225 746,416
----------- -----------
Total liabilities and
stockholders' equity $ 1,121,588 $ 1,178,917
=========== ===========
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 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
-------- -------- -------- --------
Income from operations 17,459 20,943 36,644 44,643
Interest expense (1,653) (1,884) (3,754) (4,046)
Other income 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 interest 19,927 21,110 30,300 44,671
Income taxes 7,549 7,064 13,512 15,366
-------- -------- --------- --------
Income before minority interest 12,378 14,046 16,788 29,305
Minority interest 51 229 44 385
-------- -------- --------- --------
Net income $ 12,327 $ 13,817 $ 16,744 $ 28,920
======== ======== ========= ========
Average common shares outstanding 49,965 49,374 49,982 49,451
Earnings per share $ 0.25 $ 0.28 $ 0.34 $ 0.58
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 Six Months
Ended June 30,
--------------------
1996 1997
Cash flows -- operating activities:
Net income $ 16,744 $ 28,920
--------- --------
Adjustments to net income:
Depreciation and amortization 37,880 39,097
Equity in (earnings) losses of unconsolidated affiliates 4,502 (1,864)
Changes in accounts receivable (7,392) 1,963
Changes in other current assets 1,292 (5,301)
Changes in accounts payable and accrued liabilities (19,763) (22,473)
Other, net (3,483) 983
--------- ---------
Total adjustments to net income 13,036 12,405
--------- ---------
Net 29,780 41,325
--------- ---------
Cash flows -- investing activities:
Investment in and advances to unconsolidated affiliates (5,147) (12,318)
Capital expenditures (30,202) (25,697)
Payment for purchases of subsidiaries, net of cash acquired (3,183)
Other, net 3,305 1,132
--------- ---------
Net (35,227) (36,883)
--------- ---------
Cash flows -- financing activities:
Principal payments on long-term debt (10,788) (7,406)
Net increase in credit facilities and notes payable 21,661 20,188
Common stock repurchased (3,375) (9,353)
Other, net (8,411) (6,387)
--------- ---------
Net (913) (2,958)
--------- ---------
Net increase (decrease) in cash and cash equivalents (6,360) 1,484
Cash and cash equivalents at beginning of period 13,057 8,279
-------- ---------
Cash and cash equivalents at end of period $ 6,697 $ 9,763
========= =========
The accompanying notes are an integral part of these financial statements.
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 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, 1996.
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 December 31, 1996, and June 30, 1997, the
results of operations for the three and six months ended June 30, 1996 and 1997,
and cash flows for the six months ended June 30, 1996 and 1997.
The results of operations for the three and six months ended June 30, 1997, are
not necessarily indicative of the results to be expected for the full year 1997.
2. EQUITY IN EARNINGS (LOSSES) OF UNCONSOLIDATED AFFILIATES
The following table summarizes equity in earnings (losses) of unconsolidated
affiliates:
For the Three Months For the Six Months
(in thousands) Ended June 30, Ended June 30,
------------------------- ------------------------
1996 1997 1996 1997
Boston Financial Data Services, Inc. $ 975 $ 1,541 $ 2,438 $ 3,160
Argus Health Systems, Inc. 320 1,475 1,026 2,713
European Financial Data Services Limited (1,444) (2,111) (2,824) (3,794)
Other 124 (85) (251) (215)
---------- ---------- ---------- ---------
(25) 820 389 1,864
The Continuum Company, Inc. 3,165 (4,891)
---------- ---------- ---------- ---------
$ 3,140 $ 820 $ (4,502) $ 1,864
========== ========= ========== =========
3. NEW FINANCIAL ACCOUNTING STANDARDS
EARNINGS PER SHARE
Earnings per share is determined by dividing net income by the weighted average
number of common shares outstanding during the year. The dilutive effect of
stock options is not material.
The Financial Accounting Standards Board issued Statement No. 128, "Earnings per
Share" ("EPS") ("SFAS 128") in February 1997. SFAS 128 replaces the presentation
of "Primary EPS" and "Fully Diluted EPS" with "Basic EPS" and "Diluted EPS",
respectively. This statement requires a presentation of Basic and Diluted EPS on
the face of the income statement for periods ending after December 15, 1997.
Basic EPS and Diluted EPS computed in accordance with SFAS 128 would have been
$0.24 and $0.28 for the three months ended June 30, 1996 and 1997, respectively,
and $0.33 and $0.58 for the six months ended June 30, 1996 and 1997,
respectively.
COMPREHENSIVE INCOME
The Company holds, among others, approximately 4.3 million shares of Computer
Sciences Corporation common stock and approximately 6.0 million shares of State
Street Corporation common stock as investments. At March 31, 1997, the Company's
investments in available for sale securities had an aggregate market value of
$494.0 million. At June 30, 1997, these investments had an aggregate market
value of $604.2 million. The $110.2 million unrealized gain in the second
quarter 1997 on the Company's investments in these securities, net of deferred
taxes of $43.0 million, has been recorded in stockholders' equity in accordance
with SFAS 115, "Accounting for Certain Investments in Debt and Equity
Securities."
The Financial Accounting Standards Board issued Statement No. 130, "Reporting
Comprehensive Income" in June 1997. The new statement requires that all changes
in equity during a period except those resulting from investments by owners and
distributions to owners be reported as "comprehensive income" in the financial
statements beginning in 1998. Upon implementation, DST will include the net
unrealized gain or loss on its available-for-sale securities in the computation
of comprehensive income.
SEGMENT INFORMATION
The Financial Accounting Standards Board issued Statement No. 131, "Disclosures
about Segments of an Enterprise and Related Information" in June 1997. The new
statement requires that companies report financial and descriptive information
about its reportable operating segments in its financial statements beginning in
1998. The Company is currently evaluating the effect that implementation of the
new standard will have on the information disclosed in its financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The discussions set forth in this Form 10-Q contain forward-looking comments.
These comments contain such descriptions as "anticipated," "believes," "expects"
and similar terms and conjugations thereof. 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 SEC which is hereby
incorporated by reference. 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 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, 1996.
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.
RECENT EVENTS
On July 16, 1997, the Company sold its approximate 24% interest (on a
fully-diluted basis) in First of Michigan Capital Corporation for $9.6 million.
The transaction, on an after-tax basis, did not have a material effect on the
Company's financial position or results of operations.
RESULTS OF OPERATIONS
SECOND QUARTER AND YEAR-TO-DATE 1996 VERSUS SECOND QUARTER AND YEAR-TO-DATE 1997
For the quarter ended June 30, 1997, DST's consolidated net income was $13.8
million, or $0.28 per share, as compared to $12.3 million, or $0.25 per share
for the quarter ended June 30, 1996. 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 $0.19 per share.
For the six months ended June 30, 1997, DST's consolidated net income was $28.9
million, or $0.58 per share, as compared to $16.7 million, or $0.34 per share
for the six months ended June 30, 1996. Eliminating the equity in losses of
Continuum, net income for the six months ended June 30, 1996, would have been
$21.3 million or $0.43 per share.
REVENUES
Consolidated revenues for the three and six months ended June 30, 1997, were
$155.4 million and $314.1 million, respectively, which represent increases of
8.5% and 9.3%, respectively, over the comparable 1996 periods.
Domestic revenues for the three and six months ended June 30, 1997, were $132.1
million and $270.8 million, respectively, which represent increases of 8.5% and
10.1% over the comparable 1996 periods, reflecting growth in mutual fund, output
processing, Automated Work Distributor (AWD) and satellite television subscriber
management revenues. The number of United States mutual fund shareowner accounts
serviced by DST increased to 42.4 million at June 30, 1997, which represents an
increase of 3.4 million accounts from June 30, 1996 and 1.3 million from
December 31, 1996. The Company anticipates the addition of approximately 1.0
million accounts from committed new client conversions in the latter half of
1997. Additionally, the Company expects that a current remote processing client
with approximately 1.1 million accounts will switch to in-house processing by
the end of 1997. Output Technologies domestic revenues for the three and six
months ended June 30, 1997, increased 5% and 8%, respectively, based on an
increase in pages printed. AWD workstations licensed in the United States
increased to 16,900 at June 30, 1997, an increase of 65% from June 30, 1996 and
26% from December 31, 1996. Satellite television subscriber management revenues
for the three and six months ended June 30, 1997, increased significantly over
the comparable 1996 periods due to an increased number of subscribers and
continuing systems development activities.
International revenues for the three and six months ended June 30, 1997, were
$23.3 million and $43.3 million, respectively, increases of 8.4% and 4.4% over
the comparable 1996 periods. Increases in second quarter revenues resulted from
higher AWD licensing and Canadian mutual fund processing revenues. AWD
workstations licensed outside the United States increased to 7,100 at June 30,
1997, an increase of 85% from June 30, 1996 and 12% from December 31, 1996.
Canadian mutual fund accounts serviced increased to 2.8 million at June 30,
1997, an increase of 74% from December 31, 1996.
COSTS AND EXPENSES
Consolidated costs and expenses for the three and six months ended June 30,
1997, increased 8% over the comparable 1996 periods, primarily from increased
personnel and facilities costs to support growth in mutual fund, AWD and Output
Technologies businesses. Domestic costs and expenses increased 9% and 8%,
respectively, and international costs and expenses increased 3% and 7%,
respectively, for the three and six months ended June 30, 1997, over the
comparable 1996 periods.
The Company has experienced some increases in the salaries required to hire and
retain computer programmers and other systems professionals. While these cost
pressures have not materially affected the Company's overall cost structure to
date, the Company believes that the cost pressures associated with the tight
market for computer programmers and other systems professionals may continue to
increase through the year 2000.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expenses for the three and six months ended June
30, 1997, increased 1% and 3%, respectively, over the comparable 1996 periods,
reflecting a lower level of capital additions in 1997 than in previous years.
INTEREST EXPENSE
Interest expense increased 14% for the second quarter 1997, and 8% year-to-date
1997 over the comparable 1996 periods due to higher average debt balances.
EQUITY IN EARNINGS (LOSSES) OF UNCONSOLIDATED AFFILIATES
Equity in earnings of unconsolidated affiliates decreased $2.3 million to $0.8
million for the three months ended June 30, 1997, as compared to the prior year.
Year-to-date, equity in earnings of unconsolidated affiliates increased $6.4
million from the prior year to $1.9 million. Excluding equity in Continuum,
equity in earnings of unconsolidated affiliates would have increased $0.8
million for the three months and $1.5 million for the six months ended June 30,
1997, as compared to the comparable prior year periods. Increased earnings were
recorded at Boston Financial Data Services, Inc. resulting from increased
non-mutual fund related processing and increased mutual fund operating earnings
and at Argus Health Systems, Inc., as claims processed for the three and six
months ended June 30, 1997, increased 20% and 17% , respectively, over the
comparable 1996 periods. These increases were partially offset by increased
costs at European Financial Data Services Limited ("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 by EFDS totaled 700,000, an increase
of 109% from December 31, 1996. Initial installation of FAST2000 unit trust
system components at EFDS is expected by the end of 1997.
INCOME TAXES
The Company's effective tax rate for the second quarter 1997 was 33.5% as
compared to 37.9% for the prior year quarter, primarily as a result of tax
benefits relating to certain international operations. The Company's
year-to-date effective tax rate for 1997 was 34.4% as compared to 44.6% for the
prior year quarter, primarily as a result of tax benefits relating to certain
international operations and a large non-recurring loss recorded by Continuum in
the first quarter of 1996.
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 positive cash flows
from operating activities totaled $41.3 million during the six months ended June
30, 1997. Cash flows from operating activities were reduced by payment of a
$13.7 million ESOP contribution made in first quarter 1997 in conjunction with
the 1996 Computer Sciences Corporation / Continuum merger.
The Company has expended $25.7 million in 1997 for capital additions.
Investments in and advances to unconsolidated affiliates totaled $12.3 million,
primarily as a result of funding the development of FAST2000 at EFDS. During
1997, the Company repurchased 300,000 shares of common stock for $9.4 million,
pursuant to a formal plan previously announced.
The Company maintains a $50 million bank line of credit facility to finance
short-term working capital requirements available through May 1998, of which
total borrowings were $12.9 million as of June 30, 1997. Additionally, the
Company maintains a five-year revolving credit facility of $125 million with a
syndicate of U.S. and international banks. Total borrowings of $40 million were
outstanding on this facility at June 30, 1997.
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 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 be met through cash flows from operations and
existing bank credit facilities.
OTHER
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 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.
YEAR 2000
The approach of the year 2000 raises a general issue with hardware and software
on a world-wide basis concerning potential problems caused by date comparisons
and calculations across the century boundary. The Company has established a
project to perform a thorough analysis of its products and services and
undertake any work necessary to ensure that they continue to operate correctly
across the century boundary. The expenses associated with this project will be
expensed as incurred. At this time, the Company is unable to determine if such
expenses will be material to the Company.
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
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 13, 1997. Proxies for
the meeting were solicited pursuant to Regulation 14A; there was no solicitation
in opposition to management's nominees for directors as listed in such Proxy
Statement and all such nominees were elected. Listed below is each matter voted
on at the Company's Annual Meeting. Each of these matters is fully described in
the Company's Definitive Proxy Statement dated March 31, 1997. A total of
46,411,156 shares of Common Stock, or 93.8% of the shares of Common Stock
outstanding on the record date, were present in person or by proxy at the annual
meeting. These shares were voted on the following matters as follows:
1) Election of two directors for terms ending in 2000
Thomas A. William C.
McCullough Nelson
For 45,914,253 45,918,319
Withheld 496,903 492,837
------------ ------------
Total 46,411,156 46,411,156
------------ ------------
The terms of office of Directors A. Edward Allinson and Michael G. Fitt will
continue until the Annual Meeting of Stockholders in 1998. The terms of office
of Directors Thomas A. McDonnell and M. Jeannine Strandjord will continue until
the Annual Meeting of Stockholders in 1999.
2) Approval of the First Amendment to the 1995 Stock Option and Performance
Award Plan
For 40,762,564
Against 5,478,136
Abstentions 170,456
-------------
Total 46,411,156
--------------
3) Ratification of the selection of Price Waterhouse LLP as DST's independent
accountants
For 46,125,757
Against 197,509
Abstentions 87,890
-------------
Total 46,411,156
--------------
Based upon votes required for approval, each of these matters passed.
If a stockholder desires to have a proposal included in DST's Proxy Statement
for next year's annual meeting of stockholders, the Corporate Secretary of DST
must receive such proposal on or before November 30, 1997, and the proposal must
comply with the applicable SEC regulations.
ITEM 5. OTHER INFORMATION
SIX MONTHS ENDED SIX MONTHS ENDED
SOURCES OF REVENUE JUNE 30, 1996 JUNE 30, 1997
- ------------------------------------------ ------------------- -------------------
(dollars in thousands)
U.S. revenues
Mutual fund / investment management
Data processing services $127,861 44.5% $139,801 44.5%
Output processing 38,561 13.4% 44,968 14.3%
--------- ------ -------- ------
166,422 57.9% 184,769 58.8%
Other output processing 49,168 17.1% 49,621 15.8%
Other 30,458 10.6% 36,434 11.6%
--------- ------ -------- ------
Total U.S. revenues 246,048 85.6% 270,824 86.2%
International revenues 41,430 14.4% 43,253 13.8%
--------- ------ -------- ------
Total revenues $287,478 100.0% $314,077 100.0%
========= ====== ======== ======
THREE MONTHS SIX MONTHS
GEOGRAPHIC OPERATING RESULTS ENDED JUNE 30, ENDED JUNE 30,
- -------------------------------------------- ------------------ ------------------
(in thousands) 1996 1997 1996 1997
---- ---- ---- ----
Domestic revenues $121,738 $132,116 $246,048 $270,824
Domestic income from operations 17,660 19,913 37,075 45,969
International revenues 21,478 23,278 41,430 43,253
International income (losses) from operations (201) 1,030 (431) (1,326)
DECEMBER 31, JUNE 30,
OTHER OPERATING AND FINANCIAL DATA 1996 1997
- ------------------------------------------- --------------- ----------------
INVESTMENT MARKET VALUES (IN THOUSANDS) (1)
Computer Sciences Corporation $ 354,466 $ 311,304
State Street Corporation 192,992 276,215
Euronet Services, Inc. (2) $ 1,167 $ 13,040
OTHER OPERATING DATA
TA2000 mutual fund shareowner accounts (millions) 41.1 42.4
TRAC-2000 mutual fund accounts (millions) (3) 1.3 1.7
TRAC-2000 participants (millions) 0.6 0.7
Securities Transfer System accounts (millions) 6.1 6.1
Portfolio Accounting System portfolios 2,074 2,310
Automated Work Distributor workstations 19,700 24,000
SIX MONTHS ENDED JUNE 30,
---------------------------------
1996 1997
---- ----
Output Technologies pages printed (millions) 598 740
Argus Pharmaceutical claims processed (millions) 63 74
(1) Based upon the closing price on the last trading day of the applicable
period at the exchange where principally traded.
(2) Euronet Services, Inc. finalized its initial public offering on
March 6, 1997. The June 30, 1997, investment balance is based upon the
closing price listed on the NASDAQ.
(3) Included in TA2000 mutual fund shareowner accounts.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a Form 8-K dated April 17, 1997, under Item 5 of such form,
reporting the announcement of financial results for the quarter ended March 31,
1997.
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 August 11, 1997.
DST Systems, Inc.
/s/ Kenneth V. Hager
Kenneth V. Hager
Vice President and Chief Financial Officer
(Principal Financial Officer)