KANSAS CITY, Mo., Oct. 20, 2017 /PRNewswire/ -- DST Systems,
Inc. (NYSE: DST) reported consolidated net income attributable to
DST of $48.5 million ($0.79 per diluted share) for the third quarter
2017 compared to $273.3 million
($4.13 per diluted share) for the
third quarter 2016. Net income attributable to DST for the nine
months ended September 30, 2017 was $370.3 million ($5.91 per diluted share) compared to $384.4 million ($5.72 per diluted share) for the nine months
ended September 30, 2016.
Income from continuing operations attributable to DST Systems,
Inc. ("DST Earnings"), which excludes discontinued operations, was
$48.8 million ($0.79 per diluted share) for the third quarter
2017 compared to $50.5 million
($0.76 per diluted share) for the
third quarter 2016. DST Earnings for the nine months ended
September 30, 2017 was $365.8
million ($5.84 per diluted
share) compared to $124.4 million
($1.85 per diluted share) for the
nine months ended September 30, 2016.
Taking into account certain non-GAAP adjustments, DST Earnings
were $46.5 million ($0.76 per diluted share) for the third quarter
2017 compared to $50.7 million
($0.77 per diluted share) for the
third quarter 2016, and $140.3
million ($2.24 per diluted
share) for the nine months ended September 30, 2017 compared
to $137.0 million ($2.04 per diluted share) for the nine months
ended September 30, 2016.
"We are pleased with our third quarter results, which
demonstrate the capabilities and strengths of our teams around the
world as we continue to execute on our key initiatives to win
business and grow organically in the face of an environment that
continues to be challenging and competitive," said Steve Hooley, Chairman, CEO and President of
DST. "Our third quarter results demonstrate strong execution on our
organic growth initiatives, particularly in our Healthcare business
which recorded double digit revenue growth absent the client
migrations previously disclosed. We also continue to make progress
on effectively integrating Boston Financial Data Services ("BFDS")
and International Financial Data Services U.K. ("IFDS U.K."). The
integration of people and systems are ahead of schedule and we are
seeing the benefits of the synergy savings."
Consolidated Financial Highlights
Operating Results
Third quarter 2017 diluted earnings per share from continuing
operations, after non-GAAP adjustments, was $0.76, a decrease of $0.01 or 1.3% from third quarter 2016.
Significant items impacting the quarterly results include the
following:
- Consolidated operating revenues increased $159.3 million or 43.6% to $524.8 million as compared to third quarter 2016,
primarily as a result of the 2017 acquisitions of the remaining
interests in BFDS and IFDS U.K. which contributed $161.6 million of incremental operating revenues
during third quarter 2017.
- Consolidated operating income on a GAAP basis decreased
$18.5 million to $55.8 million as compared to third quarter 2016.
Consolidated operating income, after non-GAAP adjustments,
decreased $1.1 million or 1.5% to
$72.5 million as compared to third
quarter 2016. The decrease in operating income was primarily due to
increased performance-based stock compensation expense and higher
information technology spend partially offset by the operating
income from the acquisitions of the remaining interests in BFDS and
IFDS U.K. in 2017.
- Equity in earnings of unconsolidated affiliates decreased
$2.8 million to $4.2 million as compared to third quarter 2016,
primarily due to the 2017 acquisitions of the remaining interests
in previously unconsolidated joint ventures, BFDS and IFDS U.K.
- Weighted average diluted shares outstanding for third quarter
2017 were 61.6 million, a decrease of 4.5 million shares or 6.8%
from third quarter 2016, primarily as a result of share repurchases
during 2016 and 2017.
Share Repurchase Activity
During the third quarter 2017, the Company spent $75.0 million to repurchase approximately 1.2
million shares of DST common stock resulting in $225.0 million remaining under the share
repurchase plan that was approved in second quarter 2017.
Detailed Review of Financial Results
The following discussion of financial results takes into account
the non-GAAP adjustments described in the section entitled "Use of
Non-GAAP Financial Information" and detailed in the attached
schedule titled "Reconciliation of Reported Results to Non-GAAP
Results." On a GAAP basis, operating income for the third quarter
2017 for each segment was as follows: $35.6
million for the Domestic Financial Services segment,
$1.8 million for the International
Financial Services segment and $18.4
million for the Healthcare Services segment.
Segment Results
Domestic Financial Services Segment
Operating revenues for the Domestic Financial Services segment
for third quarter 2017 increased $57.9
million or 23.4% to $305.3
million as compared to third quarter 2016. The operating
revenue increase was primarily driven by operating revenues from
BFDS, which contributed approximately $55.8
million of incremental revenues during the third quarter
2017. Excluding the BFDS operating revenues in 2017, operating
revenues for the Domestic Financial Services segment increased
$2.1 million or 0.8%. This additional
increase in operating revenues was due to higher fund flows at ALPS
as well as organic growth in ancillary products, partially offset
by lower revenue resulting from the exit of certain product
offerings and lower subaccounting and mutual fund registered
shareowner account processing revenues. Also, software license
revenues of $4.1 million in third
quarter 2017 were $1.9 million lower
as compared to third quarter 2016.
Domestic Financial Services segment operating income decreased
$5.2 million or 10.1% during third
quarter 2017 to $46.2 million as
compared to third quarter 2016. The decrease in operating income
was primarily due to higher non-cash stock compensation expense as
a result of increasing the expected vesting of certain performance
stock units coupled with lower software license revenue. Operating
expense also increased as a result of additional spending to
support our information technology transformation initiative, as
well as higher run-rate costs for security and other infrastructure
requirements. These decreases to operating income were partially
offset by the operating income from the acquisition of the
remaining interests in BFDS during 2017. Operating margin for third
quarter 2017 was 15.1% as compared to 20.8% in 2016.
International Financial Services Segment
Operating revenues for the International Financial Services
segment for third quarter 2017 increased $102.5 million to $129.4
million as compared to third quarter 2016. The operating
revenue increase was primarily driven by the acquisition of the
remaining interests in IFDS U.K., which contributed $105.8 million of incremental operating revenues
during the third quarter 2017, partially offset by lower revenues
as a result of the previously announced contract termination of a
wealth management client. Software license revenues of $3.0 million in third quarter 2017 were
$1.0 million higher as compared to
third quarter 2016.
International Financial Services segment operating income
increased $4.6 million or 184.0%
during third quarter 2017 to $7.1
million as compared to third quarter 2016. The increase in
operating income was primarily due to the acquisition of the
remaining interest in IFDS U.K. and increased software license
revenues, partially offset by operating costs associated with
on-going development and implementation efforts for our wealth
management platform clients. Operating margin for third quarter
2017 was 5.5% as compared to 9.3% in 2016.
Healthcare Services Segment
Healthcare Services segment operating revenues decreased
$1.9 million or 1.8% during third
quarter 2017 to $104.2 million as
compared to third quarter 2016. The decrease was primarily
attributable to the previously announced client migrations, which
resulted in approximately $13.1
million lower revenues during the third quarter 2017.
Excluding the customer migrations, Healthcare Services segment
operating revenues increased $11.2
million or 12.0%. This increase in operating revenues was
primarily the result of organic growth and the expansion of
high-value services we are offering to clients in both the medical
and pharmacy businesses, as well as a $0.3
million increase in software license revenue to $2.0 million in third quarter 2017. Operating
revenues were also adversely impacted by lower consulting and
professional services revenues in the medical business driven by
continued uncertainty of healthcare regulations as compared to the
prior year.
Healthcare Services segment operating income decreased
$0.5 million or 2.5% during third
quarter 2017 to $19.2 million. The
decrease was primarily due to the client migrations partially
offset by organic growth and the expansion of the high-value
services we are offering to existing clients in both the medical
and pharmacy businesses. Operating margin for third quarter 2017
was 18.4% as compared to 18.6% in the third quarter 2016.
Other Financial Results
Equity in earnings of unconsolidated affiliates
The following table summarizes the Company's equity in earnings
of unconsolidated affiliates (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
IFDS L.P.
|
|
$
|
2.4
|
|
|
$
|
0.9
|
|
|
$
|
5.6
|
|
|
$
|
3.9
|
|
IFDS U.K.
|
|
—
|
|
|
3.4
|
|
|
1.0
|
|
|
8.2
|
|
BFDS
|
|
—
|
|
|
1.2
|
|
|
3.2
|
|
|
5.5
|
|
Other
|
|
1.8
|
|
|
1.5
|
|
|
6.9
|
|
|
6.3
|
|
|
|
$
|
4.2
|
|
|
$
|
7.0
|
|
|
$
|
16.7
|
|
|
$
|
23.9
|
|
|
|
|
|
|
|
|
|
|
DST's equity in earnings of unconsolidated affiliates decreased
as it discontinued recording equity in earnings of IFDS U.K. and
BFDS on March 27, 2017 and
March 30, 2017, respectively, as a
result of the previously discussed acquisitions.
Use of Non-GAAP Financial Information
In addition to reporting financial information on a GAAP basis,
DST has disclosed non-GAAP financial information which has been
reconciled to the corresponding GAAP measures in the following
financial schedules titled "Reconciliation of Reported Results to
Non-GAAP Results." In making these adjustments to determine
the non-GAAP results, the Company takes into account the impact of
items that are not necessarily ongoing in nature, that do not have
a high level of predictability associated with them or that are
non-operational in nature. Generally, these items include net
gains on dispositions of businesses, net gains (losses) associated
with securities and other investments, acquired intangible asset
amortization, restructuring and impairment costs and other similar
items. Our non-GAAP DST Earnings and non-GAAP diluted earnings per
share are also adjusted for the income tax impact of the above
items, as applicable. The income tax impact of each item is
calculated by applying the statutory rate and local tax regulations
in the jurisdiction in which the item was incurred. Management
believes the exclusion of these items provides a useful basis for
evaluating underlying business unit performance, but should not be
considered in isolation and is not in accordance with, or a
substitute for, evaluating business unit performance utilizing GAAP
financial information. Management uses non-GAAP measures in
its budgeting and forecasting processes and to further analyze its
financial trends and "operational run-rate," as well as making
financial comparisons to prior periods presented on a similar
basis. The Company believes that providing such adjusted
results allows investors and other users of DST's financial
statements to better understand DST's comparative operating
performance for the periods presented.
DST's management uses each of these non-GAAP financial measures
in its own evaluation of the Company's performance, particularly
when comparing performance to past periods. DST's non-GAAP
measures may differ from similar measures by other companies, even
if similar terms are used to identify such measures. Although
DST's management believes non-GAAP measures are useful in
evaluating the performance of its business, DST acknowledges that
items excluded from such measures may have a material impact on the
Company's financial information calculated in accordance with
GAAP. Therefore, management typically uses non-GAAP measures
in conjunction with GAAP results. These factors should be
considered when evaluating DST's results.
Safe Harbor Statement
Certain material presented in the press release includes
forward-looking statements intended to qualify for the safe harbor
from liability established by the Private Securities Litigation
Reform Act of 1995. These forward-looking statements include, but
are not limited to, (i) all statements, other than statements
of historical fact, included in this press release that address
activities, events or developments that we expect or anticipate
will or may occur in the future or that depend on future events, or
(ii) statements about our future business plans and strategy
and other statements that describe the Company's outlook,
objectives, plans, intentions or goals, and any discussion of
future operating or financial performance. Whenever used, words
such as "may," "will," "would," "should," "potential," "strategy,"
"anticipates," "estimates," "expects," "project," "predict,"
"intends," "plans," "believes," "targets" and other terms of
similar meaning are intended to identify such forward-looking
statements. Forward-looking statements are uncertain and to some
extent unpredictable, and involve known and unknown risks,
uncertainties and other important factors that could cause actual
results to differ materially from those expressed or implied in, or
reasonably inferred from, such forward-looking statements. Factors
that could cause results to differ materially from those
anticipated include, but are not limited to, the risk factors and
cautionary statements included in the Company's periodic and
current reports (Forms 10-K, 10-Q and 8-K) filed from time to time
with the Securities and Exchange Commission. All such factors
should be considered in evaluating any forward-looking statements.
Any forward-looking statements made in this press release speak
only as of the date of this press release. Except as may be
required by applicable law, the Company undertakes no obligation to
update any forward-looking statements in this press release to
reflect new information, future events or otherwise.
DST SYSTEMS,
INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September 30,
|
|
September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
Operating
revenues
|
$
|
524.8
|
|
|
$
|
365.5
|
|
|
$
|
1,534.0
|
|
|
$
|
1,100.7
|
|
Out-of-pocket
reimbursements
|
37.8
|
|
|
21.2
|
|
|
90.3
|
|
|
57.2
|
|
Total
revenues
|
562.6
|
|
|
386.7
|
|
|
1,624.3
|
|
|
1,157.9
|
|
|
|
|
|
|
|
|
|
Costs and
expenses
|
472.1
|
|
|
289.6
|
|
|
1,323.7
|
|
|
916.9
|
|
Depreciation and
amortization
|
34.7
|
|
|
22.8
|
|
|
92.7
|
|
|
69.1
|
|
Operating
income
|
55.8
|
|
|
74.3
|
|
|
207.9
|
|
|
171.9
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
(6.9)
|
|
|
(5.4)
|
|
|
(19.7)
|
|
|
(18.0)
|
|
Other income,
net
|
8.7
|
|
|
6.7
|
|
|
217.2
|
|
|
20.0
|
|
Equity in earnings of
unconsolidated affiliates
|
4.2
|
|
|
7.0
|
|
|
27.3
|
|
|
23.9
|
|
Income from
continuing operations before income taxes and non-controlling
interest
|
61.8
|
|
|
82.6
|
|
|
432.7
|
|
|
197.8
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
13.0
|
|
|
31.6
|
|
|
66.3
|
|
|
73.8
|
|
Income from
continuing operations before non-controlling interest
|
48.8
|
|
|
51.0
|
|
|
366.4
|
|
|
124.0
|
|
|
|
|
|
|
|
|
|
Income (loss) from
discontinued operations, net of tax
|
(0.3)
|
|
|
222.8
|
|
|
4.5
|
|
|
260.0
|
|
Net income
|
48.5
|
|
|
273.8
|
|
|
370.9
|
|
|
384.0
|
|
|
|
|
|
|
|
|
|
Net (income) loss
attributable to non-controlling interest
|
—
|
|
|
(0.5)
|
|
|
(0.6)
|
|
|
0.4
|
|
Net income
attributable to DST Systems, Inc.
|
$
|
48.5
|
|
|
$
|
273.3
|
|
|
$
|
370.3
|
|
|
$
|
384.4
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
60.7
|
|
|
65.4
|
|
|
61.9
|
|
|
66.5
|
|
Weighted average
diluted shares outstanding
|
61.6
|
|
|
66.1
|
|
|
62.7
|
|
|
67.3
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share:
|
|
|
|
|
|
|
|
Continuing operations
attributable to DST Systems, Inc.
|
$
|
0.81
|
|
|
$
|
0.77
|
|
|
$
|
5.91
|
|
|
$
|
1.88
|
|
Discontinued
operations
|
(0.01)
|
|
|
3.41
|
|
|
0.07
|
|
|
3.90
|
|
Basic earnings per
share
|
$
|
0.80
|
|
|
$
|
4.18
|
|
|
$
|
5.98
|
|
|
$
|
5.78
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share:
|
|
|
|
|
|
|
|
Continuing operations
attributable to DST Systems, Inc.
|
$
|
0.79
|
|
|
$
|
0.76
|
|
|
$
|
5.84
|
|
|
$
|
1.85
|
|
Discontinued
operations
|
—
|
|
|
3.37
|
|
|
0.07
|
|
|
3.87
|
|
Diluted earnings per
share
|
$
|
0.79
|
|
|
$
|
4.13
|
|
|
$
|
5.91
|
|
|
$
|
5.72
|
|
|
|
|
|
|
|
|
|
Cash dividends per
share of common stock
|
$
|
0.18
|
|
|
$
|
0.17
|
|
|
$
|
0.54
|
|
|
$
|
0.50
|
|
DST SYSTEMS,
INC.
SEGMENT FINANCIAL INFORMATION
|
(In millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2017
|
|
Domestic Financial
Services
|
|
International
Financial Services
|
|
Healthcare
Services
|
|
Elimination
Adjustments
|
|
Consolidated
Total
|
Operating
revenues
|
$
|
291.4
|
|
|
$
|
129.2
|
|
|
$
|
104.2
|
|
|
$
|
—
|
|
|
$
|
524.8
|
|
Intersegment
operating revenues
|
13.9
|
|
|
0.2
|
|
|
—
|
|
|
(14.1)
|
|
|
—
|
|
Out-of-pocket
reimbursements
|
28.8
|
|
|
7.1
|
|
|
1.9
|
|
|
—
|
|
|
37.8
|
|
Total
revenues
|
334.1
|
|
|
136.5
|
|
|
106.1
|
|
|
(14.1)
|
|
|
562.6
|
|
Costs and
expenses
|
275.9
|
|
|
125.0
|
|
|
85.3
|
|
|
(14.1)
|
|
|
472.1
|
|
Depreciation and
amortization
|
22.6
|
|
|
9.7
|
|
|
2.4
|
|
|
—
|
|
|
34.7
|
|
Operating
income
|
$
|
35.6
|
|
|
$
|
1.8
|
|
|
$
|
18.4
|
|
|
$
|
—
|
|
|
$
|
55.8
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
$
|
16.6
|
|
|
$
|
1.2
|
|
|
$
|
1.8
|
|
|
$
|
—
|
|
|
$
|
19.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2016
|
|
Domestic Financial
Services
|
|
International
Financial Services
|
|
Healthcare
Services
|
|
Elimination
Adjustments
|
|
Consolidated
Total
|
Operating
revenues
|
$
|
232.6
|
|
|
$
|
26.8
|
|
|
$
|
106.1
|
|
|
$
|
—
|
|
|
$
|
365.5
|
|
Intersegment
operating revenues
|
14.8
|
|
|
0.1
|
|
|
—
|
|
|
(14.9)
|
|
|
—
|
|
Out-of-pocket
reimbursements
|
19.2
|
|
|
0.2
|
|
|
1.8
|
|
|
—
|
|
|
21.2
|
|
Total
revenues
|
266.6
|
|
|
27.1
|
|
|
107.9
|
|
|
(14.9)
|
|
|
386.7
|
|
Costs and
expenses
|
194.9
|
|
|
23.6
|
|
|
86.0
|
|
|
(14.9)
|
|
|
289.6
|
|
Depreciation and
amortization
|
18.0
|
|
|
1.0
|
|
|
3.8
|
|
|
—
|
|
|
22.8
|
|
Operating
income
|
$
|
53.7
|
|
|
$
|
2.5
|
|
|
$
|
18.1
|
|
|
$
|
—
|
|
|
$
|
74.3
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
$
|
14.0
|
|
|
$
|
0.6
|
|
|
$
|
1.5
|
|
|
$
|
—
|
|
|
$
|
16.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2017
|
|
Domestic Financial
Services
|
|
International
Financial Services
|
|
Healthcare
Services
|
|
Elimination
Adjustments
|
|
Consolidated
Total
|
Operating
revenues
|
$
|
827.9
|
|
|
$
|
392.9
|
|
|
$
|
313.2
|
|
|
$
|
—
|
|
|
$
|
1,534.0
|
|
Intersegment
operating revenues
|
43.4
|
|
|
0.4
|
|
|
—
|
|
|
(43.8)
|
|
|
—
|
|
Out-of-pocket
reimbursements
|
77.6
|
|
|
7.4
|
|
|
5.5
|
|
|
(0.2)
|
|
|
90.3
|
|
Total
revenues
|
948.9
|
|
|
400.7
|
|
|
318.7
|
|
|
(44.0)
|
|
|
1,624.3
|
|
Costs and
expenses
|
783.6
|
|
|
328.1
|
|
|
256.0
|
|
|
(44.0)
|
|
|
1,323.7
|
|
Depreciation and
amortization
|
63.3
|
|
|
21.3
|
|
|
8.1
|
|
|
—
|
|
|
92.7
|
|
Operating
income
|
$
|
102.0
|
|
|
$
|
51.3
|
|
|
$
|
54.6
|
|
|
$
|
—
|
|
|
$
|
207.9
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
$
|
50.4
|
|
|
$
|
2.9
|
|
|
$
|
5.4
|
|
|
$
|
—
|
|
|
$
|
58.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2016
|
|
Domestic Financial
Services
|
|
International
Financial Services
|
|
Healthcare
Services
|
|
Elimination
Adjustments
|
|
Consolidated
Total
|
Operating
revenues
|
$
|
704.3
|
|
|
$
|
82.1
|
|
|
$
|
314.3
|
|
|
$
|
—
|
|
|
$
|
1,100.7
|
|
Intersegment
operating revenues
|
43.3
|
|
|
0.3
|
|
|
—
|
|
|
(43.6)
|
|
|
—
|
|
Out-of-pocket
reimbursements
|
50.5
|
|
|
0.8
|
|
|
6.3
|
|
|
(0.4)
|
|
|
57.2
|
|
Total
revenues
|
798.1
|
|
|
83.2
|
|
|
320.6
|
|
|
(44.0)
|
|
|
1,157.9
|
|
Costs and
expenses
|
629.9
|
|
|
72.9
|
|
|
258.1
|
|
|
(44.0)
|
|
|
916.9
|
|
Depreciation and
amortization
|
54.9
|
|
|
2.2
|
|
|
12.0
|
|
|
—
|
|
|
69.1
|
|
Operating
income
|
$
|
113.3
|
|
|
$
|
8.1
|
|
|
$
|
50.5
|
|
|
$
|
—
|
|
|
$
|
171.9
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
$
|
35.7
|
|
|
$
|
2.4
|
|
|
$
|
3.8
|
|
|
$
|
—
|
|
|
$
|
41.9
|
|
DST SYSTEMS,
INC.
CONDENSED CONSOLIDATED BALANCE SHEET
|
(In millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
140.7
|
|
|
$
|
195.5
|
|
Funds held on behalf
of clients
|
542.9
|
|
|
500.5
|
|
Client funding
receivable
|
47.9
|
|
|
64.1
|
|
Accounts
receivable
|
352.4
|
|
|
215.5
|
|
Other
assets
|
79.7
|
|
|
70.0
|
|
Current assets held
for sale
|
—
|
|
|
72.6
|
|
|
1,163.6
|
|
|
1,118.2
|
|
|
|
|
|
Investments
|
199.6
|
|
|
377.4
|
|
Unconsolidated
affiliates
|
80.7
|
|
|
331.2
|
|
Properties,
net
|
340.5
|
|
|
235.7
|
|
Intangible assets,
net
|
290.3
|
|
|
142.6
|
|
Goodwill
|
796.5
|
|
|
516.4
|
|
Other
assets
|
131.0
|
|
|
50.3
|
|
Total
assets
|
$
|
3,002.2
|
|
|
$
|
2,771.8
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Current portion of
debt
|
$
|
133.6
|
|
|
$
|
208.5
|
|
Client funds
obligations
|
590.8
|
|
|
564.6
|
|
Accounts
payable
|
84.9
|
|
|
62.9
|
|
Accrued compensation
and benefits
|
136.6
|
|
|
101.7
|
|
Deferred revenues and
gains
|
24.4
|
|
|
23.5
|
|
Income taxes
payable
|
6.2
|
|
|
22.0
|
|
Other
liabilities
|
95.1
|
|
|
78.1
|
|
Current liabilities
held for sale
|
—
|
|
|
30.1
|
|
|
1,071.6
|
|
|
1,091.4
|
|
|
|
|
|
|
|
Long-term
debt
|
511.2
|
|
|
299.7
|
|
Income taxes
payable
|
64.1
|
|
|
69.8
|
|
Deferred income
taxes
|
79.5
|
|
|
151.5
|
|
Other
liabilities
|
51.7
|
|
|
22.9
|
|
Total
liabilities
|
1,778.1
|
|
|
1,635.3
|
|
|
|
|
|
|
|
Redeemable
Non-controlling Interest
|
—
|
|
|
21.3
|
|
|
|
|
|
|
|
Stockholders'
equity
|
1,224.1
|
|
|
1,115.2
|
|
Total liabilities,
redeemable non-controlling interest and stockholders'
equity
|
$
|
3,002.2
|
|
|
$
|
2,771.8
|
|
|
|
|
|
|
|
|
|
Common shares
outstanding
|
60.5
|
|
|
64.0
|
|
DST SYSTEMS,
INC.
RECONCILIATION OF REPORTED RESULTS TO NON-GAAP RESULTS - CONTINUING
OPERATIONS
|
Three Months Ended
September 30,
|
(Unaudited - in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
Operating
|
|
Operating
|
|
DST
|
|
Diluted
|
|
|
Revenue
|
|
Income
|
|
Earnings
(a)
|
|
EPS
|
Reported GAAP
results
|
$
|
524.8
|
|
|
$
|
55.8
|
|
|
$
|
48.8
|
|
|
$
|
0.79
|
|
|
Adjusted to
remove:
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets (1)
|
—
|
|
|
9.9
|
|
|
9.9
|
|
|
0.16
|
|
|
Restructuring charges
(2)
|
—
|
|
|
2.5
|
|
|
2.5
|
|
|
0.04
|
|
|
Advisory expenses
(3)
|
—
|
|
|
4.3
|
|
|
4.3
|
|
|
0.07
|
|
|
Net gain on
securities and other investments (4)
|
—
|
|
|
—
|
|
|
(6.6)
|
|
|
(0.11)
|
|
|
Income tax items
(5)
|
—
|
|
|
—
|
|
|
(9.4)
|
|
|
(0.15)
|
|
|
Income tax effect of
adjustments (6)
|
—
|
|
|
—
|
|
|
(3.0)
|
|
|
(0.04)
|
|
Adjusted Non-GAAP
results
|
$
|
524.8
|
|
|
$
|
72.5
|
|
|
$
|
46.5
|
|
|
$
|
0.76
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
Operating
|
|
Operating
|
|
DST
|
|
Diluted
|
|
|
Revenue
|
|
Income
|
|
Earnings
(a)
|
|
EPS
|
Reported GAAP
results
|
$
|
365.5
|
|
|
$
|
74.3
|
|
|
$
|
50.5
|
|
|
$
|
0.76
|
|
|
Adjusted to
remove:
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets (1)
|
—
|
|
|
5.8
|
|
|
5.8
|
|
|
0.09
|
|
|
Reversal of accrued
contingent consideration (7)
|
—
|
|
|
(6.5)
|
|
|
(6.5)
|
|
|
(0.10)
|
|
|
Net gain on
securities and other investments (4)
|
—
|
|
|
—
|
|
|
(3.9)
|
|
|
(0.06)
|
|
|
Income tax items
(5)
|
—
|
|
|
—
|
|
|
2.6
|
|
|
0.04
|
|
|
Income tax effect of
adjustments (6)
|
—
|
|
|
—
|
|
|
2.2
|
|
|
0.04
|
|
Adjusted Non-GAAP
results
|
$
|
365.5
|
|
|
$
|
73.6
|
|
|
$
|
50.7
|
|
|
$
|
0.77
|
|
(a) DST Earnings has
been defined as "Income from continuing operations attributable to
DST Systems, Inc."
|
|
Note: See the
"Use of Non-GAAP Financial Information" section for management's
reasons for providing non-GAAP financial information.
|
DST SYSTEMS,
INC.
RECONCILIATION OF REPORTED RESULTS TO NON-GAAP RESULTS - CONTINUING
OPERATIONS
|
Three Months Ended
September 30,
|
(Unaudited - in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
Domestic Financial
Services
|
|
International
Financial Services
|
|
Healthcare
Services
|
|
Consolidated
Total
|
Reported GAAP
Operating Income
|
$
|
35.6
|
|
|
$
|
1.8
|
|
|
$
|
18.4
|
|
|
$
|
55.8
|
|
|
Adjusted to
remove:
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets (1)
|
5.4
|
|
|
3.7
|
|
|
0.8
|
|
|
9.9
|
|
|
Restructuring charges
(2)
|
1.2
|
|
|
1.3
|
|
|
—
|
|
|
2.5
|
|
|
Advisory expenses
(3)
|
4.0
|
|
|
0.3
|
|
|
—
|
|
|
4.3
|
|
Adjusted Non-GAAP
Operating Income
|
$
|
46.2
|
|
|
$
|
7.1
|
|
|
$
|
19.2
|
|
|
$
|
72.5
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
Domestic Financial
Services
|
|
International
Financial Services
|
|
Healthcare
Services
|
|
Consolidated
Total
|
Reported GAAP
Operating Income
|
$
|
53.7
|
|
|
$
|
2.5
|
|
|
$
|
18.1
|
|
|
$
|
74.3
|
|
|
Adjusted to
remove:
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets (1)
|
4.2
|
|
|
—
|
|
|
1.6
|
|
|
5.8
|
|
|
Reversal of accrued
contingent consideration (7)
|
(6.5)
|
|
|
—
|
|
|
—
|
|
|
(6.5)
|
|
Adjusted Non-GAAP
Operating Income
|
$
|
51.4
|
|
|
$
|
2.5
|
|
|
$
|
19.7
|
|
|
$
|
73.6
|
|
Note: See the
"Use of Non-GAAP Financial Information" section for management's
reasons for providing non-GAAP financial information.
|
DST SYSTEMS,
INC.
RECONCILIATION OF REPORTED RESULTS TO NON-GAAP RESULTS - CONTINUING
OPERATIONS
|
Nine Months Ended
September 30,
|
(Unaudited - in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
Operating
|
|
Operating
|
|
DST
|
|
Diluted
|
|
|
Revenue
|
|
Income
|
|
Earnings
(a)
|
|
EPS
|
Reported GAAP
results
|
$
|
1,534.0
|
|
|
$
|
207.9
|
|
|
$
|
365.8
|
|
|
$
|
5.84
|
|
|
Adjusted to
remove:
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets (1)
|
—
|
|
|
25.7
|
|
|
25.7
|
|
|
0.41
|
|
|
Restructuring charges
(2)
|
—
|
|
|
11.9
|
|
|
11.9
|
|
|
0.19
|
|
|
Advisory expenses
(3)
|
—
|
|
|
12.0
|
|
|
12.0
|
|
|
0.19
|
|
|
Charitable
contribution of securities (8)
|
—
|
|
|
11.6
|
|
|
1.2
|
|
|
0.02
|
|
|
Contract termination
(9)
|
(93.2)
|
|
|
(53.5)
|
|
|
(53.5)
|
|
|
(0.85)
|
|
|
Net gain on
securities and other investments (4)
|
—
|
|
|
—
|
|
|
(157.5)
|
|
|
(2.52)
|
|
|
Gain on previously
held equity interests (10)
|
—
|
|
|
—
|
|
|
(43.8)
|
|
|
(0.70)
|
|
|
Net gains from
unconsolidated affiliates (11)
|
—
|
|
|
—
|
|
|
(10.6)
|
|
|
(0.17)
|
|
|
Income tax items
(5)
|
—
|
|
|
—
|
|
|
(11.3)
|
|
|
(0.18)
|
|
|
Income tax effect of
adjustments (6)
|
—
|
|
|
—
|
|
|
0.4
|
|
|
0.01
|
|
Adjusted Non-GAAP
results
|
$
|
1,440.8
|
|
|
$
|
215.6
|
|
|
$
|
140.3
|
|
|
$
|
2.24
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
Operating
|
|
Operating
|
|
DST
|
|
Diluted
|
|
|
Revenue
|
|
Income
|
|
Earnings
(a)
|
|
EPS
|
Reported GAAP
results
|
$
|
1,100.7
|
|
|
$
|
171.9
|
|
|
$
|
124.4
|
|
|
$
|
1.85
|
|
|
Adjusted to
remove:
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets (1)
|
—
|
|
|
17.1
|
|
|
17.1
|
|
|
0.25
|
|
|
Restructuring charges
(2)
|
—
|
|
|
13.4
|
|
|
13.4
|
|
|
0.20
|
|
|
Reversal of accrued
contingent consideration (7)
|
—
|
|
|
(6.5)
|
|
|
(6.5)
|
|
|
(0.10)
|
|
|
Software impairment
(12)
|
—
|
|
|
6.0
|
|
|
6.0
|
|
|
0.09
|
|
|
Net gain on
securities and other investments (4)
|
—
|
|
|
—
|
|
|
(16.3)
|
|
|
(0.24)
|
|
|
Income tax items
(5)
|
—
|
|
|
—
|
|
|
3.9
|
|
|
0.06
|
|
|
Income tax effect of
adjustments (6)
|
—
|
|
|
—
|
|
|
(5.0)
|
|
|
(0.07)
|
|
Adjusted Non-GAAP
results
|
$
|
1,100.7
|
|
|
$
|
201.9
|
|
|
$
|
137.0
|
|
|
$
|
2.04
|
|
(a) DST Earnings has
been defined as "Income from continuing operations attributable to
DST Systems, Inc."
|
|
Note: See the
"Use of Non-GAAP Financial Information" section for management's
reasons for providing non-GAAP financial information.
|
Descriptions of
Non-GAAP Adjustments
|
|
|
(1)
|
The amortization of
intangible assets is included in the Condensed Consolidated
Statement of Income within the Depreciation and amortization line
item. The adjustment comprises all non-cash amortization of
acquired intangible assets and acquired software.
|
|
|
(2)
|
Restructuring charges
are comprised of severance and other costs incurred as a result of
organizational changes. These charges are recorded in the Condensed
Consolidated Statement of Income within the Costs and expenses line
item.
|
|
|
(3)
|
Advisory and other
transaction costs incurred in connection with the integration of
business acquisitions and other significant transactions are
recorded in the Condensed Consolidated Statement of Income within
the Costs and expenses line item.
|
|
|
(4)
|
Net gain on
securities and other investments is comprised of net realized gains
from exchange or sales of available-for-sale securities, other than
temporary impairments on available-for-sale securities and net
gains on private equity funds, seed capital investments and other
investments. These net gains were recorded in the Condensed
Consolidated Statement of Income within the Other income, net line
item.
|
|
|
(5)
|
Income tax items
relate to benefits realized from the release of particular
uncertain tax positions settled, effectively settled or otherwise
remeasured during the period or transaction related taxes. These
items are included in the Condensed Consolidated Statement of
Income within the Income taxes line item.
|
|
|
(6)
|
This amount
represents the aggregated tax effect of the non-GAAP adjustments
that are subject to income tax. The tax effects are determined
based on the tax treatment of the related adjustments, the
statutory tax rate and local tax regulations in the jurisdictions
pertaining to each adjustment, and taking into consideration their
effect on pre-tax income (loss), and are included in the Condensed
Consolidated Statement of Income within the Income taxes line
item.
|
|
|
(7)
|
The reversal of
previously accrued performance-related contingent consideration for
prior acquisitions is recorded in the Condensed Consolidated
Statement of Income within the Costs and expenses line
item.
|
|
|
(8)
|
The expense for a
charitable contribution of marketable securities of $11.6 million
was offset by a book gain of $10.4 million on the disposition of
the securities, which was recorded in the Condensed Consolidated
Statement of Income within Other income, net line
item.
|
|
|
(9)
|
As a result of
a termination agreement reached with a wealth management platform
client during second quarter 2017, previously deferred revenues and
contractual termination payments received were recognized in the
Condensed Consolidated Statement of Income within Operating
revenues by the International Financial Services segment.
Additionally, bad debt expense, severance and other costs and
expenses of $38.9 million and a fixed asset impairment of $0.8
million were recorded in the Condensed Consolidated Statement of
Income within the Costs and expenses and Depreciation and
amortization line items, respectively.
|
|
|
(10)
|
The gain represents
the step-up of the carrying value of our previously held equity
interests in BFDS and IFDS U.K. to fair value at the acquisition
date of each entity and is included in the Condensed Consolidated
Statement of Income within the Other income, net line item.
|
|
|
(11)
|
The net gains from
unconsolidated affiliates represents the step-up of certain
investments and real estate assets that were distributed out of our
joint ventures BFDS and IFDS L.P. prior to the acquisitions of the
remaining interests in BFDS and IFDS U.K. and are included in the
Condensed Consolidated Statement of Income within the Equity in
earnings of unconsolidated affiliates line item.
|
|
|
(12)
|
The software
impairment is included in the Condensed Consolidated Statement of
Income within the Costs and expenses line item.
|
DST SYSTEMS,
INC.
STATISTICAL INFORMATION
|
(Unaudited - in
millions, except as noted)
|
DOMESTIC FINANCIAL
SERVICES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
December 31,
2016
|
|
September 30,
2016
|
Domestic mutual
fund shareowner accounts processed:
|
|
|
|
|
|
|
Registered accounts -
non tax-advantaged
|
|
24.8
|
|
25.3
|
|
26.4
|
IRA mutual fund
accounts
|
|
20.8
|
|
21.1
|
|
21.3
|
Other retirement
accounts
|
|
7.8
|
|
8.0
|
|
8.1
|
Section 529 and
Educational IRAs
|
|
7.7
|
|
7.5
|
|
7.6
|
Registered accounts -
tax-advantaged
|
|
36.3
|
|
36.6
|
|
37.0
|
Total registered
accounts
|
|
61.1
|
|
61.9
|
|
63.4
|
Subaccounts
|
|
44.5
|
|
42.1
|
|
41.3
|
Total U.S. mutual
fund shareowner accounts
|
|
105.6
|
|
104.0
|
|
104.7
|
|
|
|
|
|
|
|
Defined
contribution participant accounts
|
|
6.8
|
|
6.8
|
|
6.5
|
|
|
|
|
|
|
|
Automatic Work
Distributor workstations(in thousands):
|
|
|
|
|
|
|
Domestic
|
|
167.8
|
|
171.9
|
|
171.7
|
|
|
|
|
|
|
|
ALPS (in
billions of U.S. dollars):
|
|
|
|
|
|
|
Assets Under
Management
|
|
$
|
17.9
|
|
$
|
17.2
|
|
$
|
16.1
|
Assets Under
Administration
|
|
$
|
218.4
|
|
$
|
179.1
|
|
$
|
176.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Changes in
registered accounts:
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
59.7
|
|
64.2
|
|
61.9
|
|
65.4
|
New client
conversions
|
|
2.6
|
|
—
|
|
2.9
|
|
—
|
Subaccounting
conversions to DST platforms
|
|
(0.3)
|
|
—
|
|
(0.4)
|
|
(0.1)
|
Subaccounting
conversions to non-DST platforms
|
|
(0.3)
|
|
—
|
|
(0.9)
|
|
(0.4)
|
Conversions to
non-DST platforms
|
|
(0.2)
|
|
(0.4)
|
|
(0.2)
|
|
(0.6)
|
Organic
decline
|
|
(0.4)
|
|
(0.4)
|
|
(2.2)
|
|
(0.9)
|
Ending
balance
|
|
61.1
|
|
63.4
|
|
61.1
|
|
63.4
|
|
|
|
|
|
|
|
|
|
Changes in
subaccounts:
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
44.0
|
|
30.4
|
|
42.1
|
|
31.3
|
New client
conversions
|
|
—
|
|
10.5
|
|
—
|
|
10.7
|
Conversions from
non-DST registered platforms
|
|
0.1
|
|
—
|
|
1.1
|
|
—
|
Conversions from
DST's registered accounts
|
|
0.3
|
|
—
|
|
0.4
|
|
0.1
|
Conversions to
non-DST platforms
|
|
—
|
|
—
|
|
(0.4)
|
|
—
|
Organic growth
(decline)
|
|
0.1
|
|
0.4
|
|
1.3
|
|
(0.8)
|
Ending
balance
|
|
44.5
|
|
41.3
|
|
44.5
|
|
41.3
|
|
|
|
|
|
|
|
|
|
Defined
contribution participant accounts:
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
6.6
|
|
6.4
|
|
6.8
|
|
7.0
|
New client
conversions
|
|
—
|
|
—
|
|
0.3
|
|
—
|
Organic growth
(decline)
|
|
0.2
|
|
0.1
|
|
(0.3)
|
|
(0.5)
|
Ending
balance
|
|
6.8
|
|
6.5
|
|
6.8
|
|
6.5
|
DST SYSTEMS,
INC.
STATISTICAL INFORMATION
|
(Unaudited - in
millions, except as noted)
|
|
INTERNATIONAL
FINANCIAL SERVICES
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
December 31,
2016
|
|
September 30,
2016
|
International
mutual fund shareowner accounts processed:
|
|
|
|
|
|
|
IFDS U.K.
|
|
8.6
|
|
8.9
|
|
9.0
|
IFDS L.P.
(Canada)
|
|
14.0
|
|
13.7
|
|
13.4
|
|
|
|
|
|
|
|
Automatic Work
Distributor workstations (in thousands):
|
|
|
|
|
|
|
International
|
|
39.1
|
|
40.8
|
|
40.5
|
|
|
HEALTHCARE
SERVICES
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
December 31,
2016
|
|
September 30,
2016
|
|
|
|
|
|
|
|
DST Health
Solutions covered lives
|
|
21.6
|
|
22.8
|
|
23.9
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September
30,
|
|
|
September 30,
|
|
|
|
|
2017
|
|
2016
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
DST Pharmacy
Solutions pharmacy paid claims
|
|
|
|
124.2
|
|
125.7
|
|
|
370.8
|
|
379.3
|
About DST Systems
DST Systems, Inc. (NYSE: DST) is a leading provider of specialized
technology, strategic advisory, and business operations outsourcing
to the financial and healthcare industries. We assist clients in
transforming complexity into strategic advantage by providing tools
and services to help them stay ahead of and capitalize on
ever-changing customer, business and regulatory requirements in the
world's most demanding industries. For more information, visit the
DST website at www.dstsystems.com.
Contact:
Gregg Wm. Givens
Senior Vice President, Chief Financial Officer and Treasurer
DST Systems, Inc.
333 West 11th Street
Kansas City, MO 64105-1594
(816) 435-5503
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SOURCE DST Systems, Inc.