DST SYSTEMS, INC. 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 International Healthcare Elimination
Financial Financial Services Adjustments
Services Services 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 International Healthcare Elimination
Financial Financial Services Adjustments
Services Services 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 International Healthcare Elimination
Financial Financial Services Adjustments
Services Services 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 International Healthcare Elimination
Financial Financial Services Adjustments
Services Services 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, December 31,
2017 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 International Healthcare
Financial Financial Services
Services 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 International Healthcare
Financial Financial Services
Services 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, December 31, September 30,
2017 2016 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, December 31, September 30,
2017 2016 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, December 31, September 30,
2017 2016 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 11(th) Street
Kansas City, MO 64105-1594
(816) 435-5503
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SOURCE DST Systems, Inc.
