DST Systems, Inc. Announces First Quarter 2014 Financial Results

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Thursday, April 24th 2014
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KANSAS CITY, Mo., April 24, 2014 /PRNewswire/ -- DST Systems, Inc. (NYSE: DST) reported consolidated net income of $100.4 million ($2.37 per diluted share) for the first quarter 2014 compared to $93.2 million ($2.04 per diluted share) for the first quarter 2013. Taking into account certain non-GAAP adjustments, consolidated net income was $47.5 million ($1.12 per diluted share) for first quarter 2014 compared to $45.0 million ($0.99 per diluted share) for first quarter 2013.

"I am encouraged by the positive operating results we are delivering and the progress we are making on our strategic initiatives during the first quarter of 2014. We have continued to effectively utilize our liquidity to advance our business strategy, with a focus on investing in activities that drive recurring revenue and support the expansion of our existing relationships in our key vertical markets. We expect to continue to make investments in our core operating businesses and maintain a disciplined approach of reviewing the assets in our business portfolio," said Steve Hooley, President and CEO of DST.

Consolidated Financial Highlights

Operating Results

First quarter 2014 diluted earnings per share increased $0.13 or 13.1% from first quarter 2013, taking into account non-GAAP adjustments, principally from the following:

  • Consolidated operating revenues (excluding out-of-pocket reimbursements) increased $16.0 million or 3.3% to $505.2 million, as compared to first quarter 2013.
  • Consolidated income from operations increased $1.6 million or 2.3% to $72.7 million, as compared to first quarter 2013.
  • Other non-operating income benefited from the absence of a foreign currency translation loss of $6.6 million ($0.09 per diluted share) that was recorded in 2013.
  • The tax rate for first quarter 2014 was 36.8%, as compared to 33.8% in first quarter 2013, primarily from a higher mix of domestic earnings.
  • Weighted average diluted shares outstanding for first quarter 2014 were 42.4 million, a decrease of 3.2 million shares or 7.0% from first quarter 2013, primarily as a result of share repurchases during 2013.

Monetization Activity

  • DST received $109.4 million of pretax cash proceeds from the monetization of investment assets during first quarter 2014, consisting of $50.2 million from sales of marketable securities (including $44.6 million from the sale of 600,000 shares of State Street Corporation) and $59.1 million of distributions/dividends from private equity funds and other private company investments.

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 Income Adjusted for Certain Non-GAAP Items."

Segment Results

Financial Services Segment

Operating revenues for the Financial Services Segment (excluding out-of-pocket reimbursements) for first quarter 2014 increased $13.6 million or 5.6% to $256.4 million as compared to first quarter 2013. The increase in operating revenues was primarily driven from increased revenues at ALPS due to organic growth at existing clients and favorable market conditions. DST Brokerage Solutions had increased revenues from conversions of new clients and organic growth from existing clients. These revenue increases were partially offset by declines in mutual fund registered shareowner account processing due to lower registered accounts primarily as a result of subaccounting conversions.