January 22, 1998
DST SYSTEMS, INC. ANNOUNCES FOURTH QUARTER AND FULL YEAR 1997 RESULTS
KANSAS CITY, MO (January 22, 1998)--DST Systems, Inc. ("DST") announces
financial results for the three months and year ended December 31, 1997.
Quarter Ended December 31, 1997
For the quarter ended December 31, 1997, DST consolidated net income increased
35.5% to $16.0 million, resulting in "basic" earnings per share of $.33, as
compared to $11.8 million, or "basic" earnings per share of $.24, for the
quarter ended December 31, 1996. Under accounting standards which became
effective for year-end 1997 reporting, companies must now report earnings per
share in two ways, basic and diluted. Basic earnings per share uses actual
weighted average shares outstanding, the method historically used by DST.
Diluted earnings per share incorporates the effect of options and other rights
which may result in the issuance of shares. Diluted earnings per share were $.32
for the quarter verses $.24 for the prior year quarter.
Consolidated revenues for the quarter ended December 31, 1997 totaled $176.7
million, an increase of 14.9% over the prior year quarter. U.S. revenues
increased 10.6% over the prior year quarter to $144.8 million. Mutual fund
shareowner accounts serviced increased during the quarter 4.4% to 45 million
accounts at December 31, 1997. Mutual fund shareowner accounts increased 9.5%
for the full year 1997. Accounts serviced at December 31, 1997 include
approximately 900,000 accounts of the Invesco Fund Group, which became a remote
processing client during the fourth quarter 1997. Included in the 45 million
year-end account total is one million accounts which are scheduled to be
internalized by Prudential in the first quarter 1998. Output services pages
printed increased 10.4% over the prior year quarter to 372 million pages, and
DBS Systems Corp. (DBS) revenues increased.
International revenues increased 39.8% over the prior year quarter to $31.9
million for the quarter ended December 31, 1997, driven by increases in
investment accounting and Automated Work DistributorTM(AWD(R)) license and
service revenues, and revenues from DST Catalyst, Inc., which was acquired in
August 1997.
Consolidated income from operations totaled $26.0 million for the quarter ended
December 31, 1997, an increase of 39.7% over the prior year, resulting in a
consolidated operating margin of 14.7%. U.S. income from operations rose 33.9%
to $24.3 million for the current quarter derived primarily from higher mutual
fund and DBS revenues and lower depreciation and amortization costs, which were
partially offset by a 14.6% increase in personnel costs. International income
from operations increased $1.2 million from the prior year quarter to $1.7
million, principally from increased investment accounting and AWD software and
service revenues.
Equity in earnings of unconsolidated affiliates was a loss of $2.7 million,
compared to income of $.5 million for the prior year quarter. This decline was
due to a $3.3 million increased loss (DST's share) over the prior year quarter
at European Financial Data Services, Ltd. (EFDS) where development costs of the
new FAST2000 software continue. Fourth quarter 1997 EFDS results included a
write-off of $1.0 million (DST's share) of costs associated with software and
hardware which will be replaced by FAST2000 in 1998. EFDS fourth quarter 1997
costs were also impacted by business growth as accounts serviced totaled 988,000
at December 31, 1997, an increase of 191,500 accounts during the quarter. Higher
operating earnings were recorded at Boston Financial Data Services, Inc. (BFDS)
before certain non-recurring costs in its Canadian operations. Higher earnings
were recorded at Argus Health Systems, Inc.
DST's effective income tax rate was 29.6% for the 1997 quarter, as compared to
34.9% for the 1996 quarter. The decrease in the effective tax rate in fourth
quarter 1997 over the 1996 quarter was primarily due to increased tax benefits
associated with international operations.
Year Ended December 31, 1997
For the year ended December 31, 1997, net income increased 33.9% to $59.0
million, or basic earnings per share of $1.20, as compared to $44.0 million or
basic earnings per share of $.88 for the prior year, after eliminating all
Continuum related equity in earnings, gains and charges. Diluted earnings per
share was $1.18 for 1997 verses $.88 for 1996.
Consolidated revenues for the year ended December 31, 1997 increased 12.0% over
the prior year to $650.7 million. U.S. revenues increased 10.7% to $549.8
million, primarily from increased numbers of mutual fund accounts serviced, AWD
workstations licensed, output pages printed and DirecTV subscribers supported.
International revenues for the year increased 19.6% to $100.9 million, from
increased AWD and investment accounting software and services, and Canadian
mutual fund processing volumes.
1997 consolidated income from operations was $92.2 million, an increase of $21.5
million, or 30.5%, over the comparable 1996 period (excluding from 1996 expenses
the one-time $13.7 million ESOP contribution associated with the Continuum/CSC
merger). Consolidated operating margin rose to 14.2% in 1997.
1997 equity in earnings of unconsolidated affiliates declined $2.2 million from
the prior year (excluding equity in earnings of Continuum from 1996 results) as
a result of the increased losses at EFDS, partially offset by improved earnings
at BFDS and Argus. Gains on sales of equity investments were $1.5 million in
1997 primarily from the sale of First of Michigan, and $223.4 million in 1996,
from the Continuum/CSC merger. DST's effective tax rate for 1997 was 32.9%,
versus 35.2% in 1996, excluding the effects of Continuum.
Other Actions
During the quarter ended December 31, 1997, DST repurchased 150,000 shares of
its common stock under its 1.2 million share repurchase program. DST has
repurchased 600,000 shares in 1997 and a total of one million shares since the
program commenced. On January 21, 1998, DST common stock was listed on the
Chicago Stock Exchange, in addition to its primary listing on the New York Stock
Exchange.
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,
----------------------------- -----------------------------
1996 1997 1996 1997
---- ---- ---- ----
Revenues $ 153,761 $ 176,737 $ 580,808 $ 650,678
Costs and expenses 114,266 129,955 431,563 479,103
Depreciation and amortization 20,888 20,785 78,572 79,335
Other expenses 13,700
-------------- ------------- ------------- --------------
Income from operations 18,607 25,997 56,973 92,240
Interest expense (1,829) (1,663) (6,940) (7,670)
Other income, net 1,352 1,033 4,176 4,020
Gains on sale of equity investments 223,438 1,464
Equity in earnings (losses) of
unconsolidated affiliates 518 (2,702) (4,028) (1,345)
-------------- ------------- ------------- --------------
Income before income taxes and
minority interest 18,648 22,665 273,619 88,709
Income taxes 6,511 6,715 105,920 29,178
-------------- ------------- ------------- --------------
Income before minority interest 12,137 15,950 167,699 59,531
Minority interest 309 (73) 497 534
-------------- ------------- ------------- --------------
Net income $ 11,828 $ 16,023 $ 167,202 $ 58,997
============== ============= ============= ==============
Weighted average common shares outstanding 49,679 49,099 49,871 49,308
Basic earnings per share $ 0.24 $ 0.33 $ 3.35 $ 1.20
Diluted earnings per share $ 0.24 $ 0.32 $ 3.32 $ 1.18
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