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 March 31, 2004
or
o
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 registrant as specified in its charter)
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Delaware |
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43-1581814 |
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(State or other
jurisdiction of |
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(I.R.S. Employer |
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333 West 11th Street, Kansas City, Missouri |
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64105 |
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(Address of principal executive offices) |
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(Zip Code) |
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(816) 435-1000 |
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(Registrant’s telephone number, including area code) |
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No Changes |
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(Former name, former address and former fiscal year, if changed since last report) |
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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
o
Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes
x
No
o
Number of shares
outstanding of the Company’s common stock as of April 30, 2004:
Common Stock $0.01 par value – 84,420,222
1
DST Systems, Inc.
Form 10-Q
March 31, 2004
Table of Contents
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Item 1. |
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3 |
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Condensed Consolidated Balance Sheet
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4 |
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Condensed Consolidated Statement of
Income – |
5 |
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Condensed Consolidated Statement of
Cash Flows – |
6 |
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7-17 |
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Item 2. |
Management’s Discussion and Analysis
of Financial Condition |
18-33 |
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Item 3. |
33-34 |
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Item 4. |
34 |
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Item 1. |
35 |
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Item 2. |
35 |
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Item 3. |
35 |
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Item 4. |
35 |
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Item 5. |
36 |
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Item 6. |
37 |
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37 |
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The brand, service or product names or marks referred to in this Report are trademarks or services marks, registered or otherwise, of DST Systems, Inc. or its subsidiaries and affiliates or of vendors to the Company.
2
DST Systems, Inc.
Form 10-Q
March 31, 2004
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. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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, 2003.
The results of operations for the three months ended March 31, 2004, are not necessarily indicative of the results to be expected for the full year 2004.
3
DST Systems, Inc.
Condensed Consolidated Balance Sheet
(dollars
in millions, except per share amounts)
(unaudited)
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March
31, |
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December
31, |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
95.0 |
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$ |
102.4 |
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Transfer agency investments |
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406.2 |
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63.4 |
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Accounts receivable |
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398.3 |
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399.4 |
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Other current assets |
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124.7 |
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116.6 |
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1,024.2 |
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681.8 |
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Investments |
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1,426.6 |
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1,432.5 |
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Properties |
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645.2 |
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647.2 |
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Goodwill |
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287.6 |
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261.8 |
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Intangibles |
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121.2 |
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123.2 |
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Other assets |
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48.5 |
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52.1 |
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Total assets |
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$ |
3,553.3 |
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$ |
3,198.6 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities |
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Debt due within one year |
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$ |
9.5 |
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$ |
26.9 |
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Transfer agency deposits |
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406.2 |
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63.4 |
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Accounts payable |
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146.8 |
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126.3 |
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Accrued compensation and benefits |
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66.5 |
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98.1 |
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Deferred revenues and gains |
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93.2 |
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95.0 |
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Other liabilities |
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150.7 |
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162.5 |
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872.9 |
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572.2 |
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Long-term debt |
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1,449.1 |
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1,437.8 |
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Deferred income taxes |
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402.3 |
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408.5 |
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Other liabilities |
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94.5 |
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96.4 |
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2,818.8 |
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2,514.9 |
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Commitments and contingencies (Note 5) |
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Stockholders’ equity |
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Common stock, $0.01 par; 300
million shares |
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1.0 |
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1.0 |
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Additional paid-in capital |
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205.1 |
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208.8 |
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Retained earnings |
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566.2 |
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514.6 |
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Treasury stock (10.9 million and
11.9 million shares, |
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(421.7 |
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(438.4 |
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Accumulated other comprehensive income |
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383.9 |
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397.7 |
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Total stockholders’ equity |
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734.5 |
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683.7 |
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Total liabilities and stockholders’ equity |
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$ |
3,553.3 |
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$ |
3,198.6 |
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The accompanying notes are an integral part of these financial statements.
4
DST Systems, Inc.
Condensed Consolidated Statement of Income
(in millions, except per
share amounts)
(unaudited)
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For
the Three Months |
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2004 |
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2003 |
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Operating revenues |
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$ |
430.0 |
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$ |
431.7 |
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Out-of-pocket reimbursements |
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179.5 |
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188.1 |
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Total revenues |
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609.5 |
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619.8 |
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Costs and expenses |
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491.2 |
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507.3 |
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Depreciation and amortization |
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36.4 |
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35.1 |
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Income from operations |
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81.9 |
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77.4 |
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Interest expense |
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(13.5 |
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(3.4 |
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Other income, net |
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6.5 |
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4.2 |
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Equity in earnings (losses) of unconsolidated affiliates |
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5.1 |
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(0.3 |
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Income before income taxes |
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80.0 |
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77.9 |
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Provision for income taxes |
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28.4 |
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26.5 |
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Net income |
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$ |
51.6 |
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$ |
51.4 |
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Average common shares outstanding |
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84.1 |
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119.4 |
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Diluted shares outstanding |
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86.5 |
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120.9 |
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Basic earnings per share |
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$ |
0.61 |
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$ |
0.43 |
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Diluted earnings per share |
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$ |
0.60 |
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$ |
0.43 |
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The accompanying notes are an integral part of these financial statements.
5
DST Systems, Inc.
Condensed Consolidated Statement of Cash Flows
(in
millions)
(unaudited)
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For
the Three Months |
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2004 |
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2003 |
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Cash flows — operating activities: |
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Net income |
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$ |
51.6 |
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$ |
51.4 |
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Depreciation and amortization |
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36.4 |
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35.1 |
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Equity in (earnings) losses of unconsolidated affiliates |
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(5.1 |
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0.3 |
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Net realized gain on investments |
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(3.6 |
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(0.1 |
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Deferred taxes |
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7.6 |
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(0.7 |
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Changes in accounts receivable |
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13.0 |
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0.5 |
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Changes in other current assets |
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(12.9 |
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(7.5 |
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Changes in transfer agency investments |
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(342.8 |
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8.7 |
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Changes in transfer agency deposits |
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342.8 |
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(8.7 |
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Changes in accounts payable and accrued liabilities |
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12.9 |
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(7.5 |
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Changes in deferred revenues and gains |
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(3.4 |
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15.9 |
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Changes in accrued compensation and benefits |
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(26.4 |
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(26.3 |
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Other, net |
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2.1 |
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(4.0 |
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Total adjustments to net income |
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20.6 |
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5.7 |
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Net |
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72.2 |
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57.1 |
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Cash flows — investing activities: |
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Proceeds from sale of investments |
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11.9 |
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13.9 |
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Investments and advances to unconsolidated affiliates |
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(13.9 |
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(4.2 |
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Investments in securities |
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(9.7 |
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(13.8 |
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Capital expenditures |
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(39.9 |
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(68.7 |
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Contingent payment for purchase of EquiServe |
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(25.6 |
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Other, net |
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1.2 |
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0.8 |
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Net |
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(76.0 |
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(72.0 |
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Cash flows — financing activities: |
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Proceeds from issuance of common stock |
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15.8 |
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Principal payments on long-term debt |
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(20.0 |
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(49.1 |
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Net increase in revolving credit facilities and notes payable |
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13.8 |
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60.0 |
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Common stock repurchased |
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