Attached files
| file | filename |
|---|---|
| EX-10.2 - EXHIBIT 10.2 - DST SYSTEMS INC | a102-bfdsexchangeagreement.htm |
| EX-10.4 - EXHIBIT 10.4 - DST SYSTEMS INC | exhibit104-bfdsjointmarket.htm |
| EX-99.1 - EXHIBIT 99.1 - DST SYSTEMS INC | simplicitydststtbfds-ifdsj.htm |
| EX-10.5 - EXHIBIT 10.5 - DST SYSTEMS INC | exhibit105terminationagree.htm |
| EX-10.3 - EXHIBIT 10.3 - DST SYSTEMS INC | exhibit103ifds_purchasexag.htm |
| EX-10.1 - EXHIBIT 10.1 - DST SYSTEMS INC | a101-bfdsreorganizationagr.htm |
| 8-K - 8-K - DST SYSTEMS INC | a8-ksimplicity.htm |
DST SYSTEMS, INC.
March 2017
2
Certain material presented in this presentation include 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 presentation 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. The
Company undertakes no obligation to update any forward-looking statements in this presentation to reflect new
information, future events or otherwise.
COPYRIGHT © 2017 BY DST SYSTEMS, INC. ALL RIGHTS RESERVED. OUR TRADEMARKS AND SERVICE MARKS AND THOSE OF THIRD
PARTIES USED IN THIS PRESENTATION ARE THE PROPERTY OF THEIR RESPECTIVE OWNERS.
FORWARD LOOKING STATEMENTS
3
COMPANY PROFILE
71%
29%
Financial Services
Healthcare Services
2016 Operating Revenue from continuing operations - $1,474.4 million
• Leading provider of:
• Technology
• Strategic advisory
• Business processing solutions
• Strategic focus on two growth industries:
• Financial
• Healthcare
• NYSE: DST
• Headquartered in Kansas City, MO
• Operates with ~16,000 employees
(including BFDS and IFDS UK)
4
LONG HISTORY OF VALUE CREATION
1973:
Formed BFDS,
joint venture
with State
Street Bank
1989:
Acquired 50%
interest in
Argus Health
Systems
1992:
Formed IFDS,
UK, a joint
venture with
State Street
Bank
1995:
Began trading
on the New
York Stock
Exchange
2005:
Acquired DST
Health
Solutions
2008:
Acquired Blue
Door
Technologies
Formed DST
Retirement
Solutions
2009:
Acquired
remaining
stake of
Argus Health
Systems
2011:
Acquired ALPS
Holdings
2012:
Steve Hooley
appointed CEO
Defined
contribution
participants
exceeded 5
million
2013:
Subaccounts
processed
exceeds 25
million
2015:
Acquired kasina, Red Rocks Capital
LLC and Wealth Management Systems
Inc
Completed the sale and leaseback of
Customer Communications’ North
America production facilities
19
73
19
89
19
92
19
95
20
05
20
08
20
09
20
11
20
12
20
13
20
15
20
16
2016:
Acquired Kaufman
Rossin Fund Services LLC.
Completed the sale and leaseback of
Customer Communications’ Bristol, UK
production facilities
Sold Customer Communications North
America business
19
69
20
17
20
16
2017:
Acquired
remaining 50%
of BFDS &
IFDS UK
5
WHO IS BFDS?
• Boston Financial Data Services, Inc. (“BFDS”) provides innovative shareholder recordkeeping,
intermediary and investor services, and regulatory compliance solutions to financial services
clients in the United States
• Formed in 1973 as a joint venture with State Street Corporation
• Provides full-service business process outsourcing services utilizing DST’s core
recordkeeping system (TA 2000) and business process management system (AWD)
• 2,300 employees primarily located in Boston, Massachusetts and Kansas City, Missouri
• Services over $5 Trillion of the U.S. Mutual Fund Industry assets, 1/3 of the market
6
WHO IS IFDS UK?
• International Financial Data Services Limited (“IFDS UK”) is an investor and policy holder
administrative services and technology provider to the collective funds, insurance and
retirement industries in the United Kingdom and Europe
• Formed in 1992 as a joint venture with State Street Corporation
• Provides full-service business process outsourcing services utilizing their proprietary multi-
currency core recordkeeping system (FAST) and DST’s wealth management system
(Bluedoor, Opendoor), as well as DST’s business process management system (AWD)
• 5,000 employees primarily located in the UK
• Provide services to 13 of the top 20 asset managers in the UK market by AUM*
• Asset managers administered by IFDS make up 60% (c.£612 billion) of the UK market by
AUM*
* Source: The Investment Association
7
BFDS & IFDS UK TRANSACTION OVERVIEW
• In Q1 2017, DST reached an agreement to acquire State Street Corporation’s share of:
• BFDS via a non-taxable transaction resulting in the exchange of State Street common stock owned
by DST with a fair market value of $157.6 million
• IFDS UK for $175 million cash
• Following completion of these transactions, DST will own 100% of the equity interests and
consolidate both BFDS and IFDS UK
• Combined, the transactions are expected to increase DST’s annual:
• Operating Revenues by $660 million
• Operating Income by $40 million*
• Diluted EPS accretion of $0.33 to $0.41 per share in the first 12 months*
* before synergies, restructuring costs and amortization of intangibles
8
STRATEGIC RATIONALE
• Materially Accretive – An increase in DST’s diluted EPS, before synergies, restructuring costs and
amortization of intangibles, is expected within the first year
• Unlocks Meaningful Synergies – Helps drive quality enhancements, increased scale, and operational
efficiencies
• Highly Complimentary – Both businesses are naturally aligned to DST’s core competencies and due to
our historical JV ownership, we have first-hand knowledge of their clients and the markets they serve
• Enhances Opportunities – Expands DST client relationships with robust, full service capabilities
• Creates Simplicity – Provides greater clarity and point-of-contact for clients
• Organizational Effectiveness – Streamlines go-to-market strategies, services and opportunity
realization
• Strategic Investments – Enables timely response to market opportunities
9
ECONOMICS OF THE DEAL - BFDS
Purchase Price - $157.6 million of State Street Stock for 50% of BFDS
• State Street stock used as consideration for BFDS interest had a cost basis for tax purposes of
approximately $1.1 million and a fair market value on the day before closing of the transaction of
$157.6 million
• The BFDS transaction was structured to qualify as a non-taxable transaction for U.S. federal
income tax purposes therefore it is expected that no federal income tax will be paid on the
realized gain on the stock used as consideration for the transaction
• Acquired equity in BFDS, as well as certain investments and real estate which were previously
held by International Financial Data Services, L.P. (“IFDS LP”)
Synergies – estimated to achieve annual savings of $20.0 million within 18 months
• Restructuring costs to be incurred within the first 18 months are estimated to be $20 million
10
ECONOMICS OF THE DEAL – IFDS UK
Purchase Price - $175.0 million cash for 50% of IFDS UK
• Acquired equity in IFDS UK, as well as certain real estate and the equity interest in IFDS Percana
which were previously held by IFDS LP, utilizing cash on hand and existing debt facilities
• Nominal synergies are expected due to geographic location, however future restructuring costs
are expected in order to achieve additional operational efficiencies
IFDS LP remains as a 50/50 joint venture between DST and State Street
• Includes IFDS Canada, IFDS Ireland and IFDS Luxembourg, which service offshore and cross-
border markets
• The remaining operations of IFDS LP are expected to contribute approximately $6.6 million of
equity in earnings to DST during 2017
11
(in millions, except earnings per share amounts)
Estimated non-GAAP* Annual Incremental Impacts from Acquisitions: BFDS IFDS UK Total
Operating Revenue $ 220.0 $ 440.0 $ 660.0
Out of Pocket Revenue 40.0 10.0 50.0
Total Revenue 260.0 450.0 710.0
Costs and expenses (230.0) (410.0) (640.0)
Depreciation (10.0) (20.0) (30.0)
Operating Income $ 20.0 $ 20.0 $ 40.0
Estimated Annualized Accretive Impact of Acquisitions:
Adjusted non-GAAP diluted earnings per share* $0.15 to $0.19 $0.18 to $0.22 $0.33 to $0.41
* All amounts reflected above are the estimated incremental impacts after elimination of intercompany transactions with other DST subsidiaries. These amounts also exclude
restructuring charges, impacts of potential synergies and intangible amortization which may be incurred in the future. The Company has not reconciled the non-GAAP amounts above
to the relevant GAAP measure because it has not yet finalized the plans for restructuring and have not yet completed the purchase accounting for the acquisitions. Please see
additional information on management’s use of non-GAAP measures within the Appendix.
FINANCIAL IMPACT TO DST SYSTEMS
12
International United States
Off-shore
multi-currency
cross boarder
distribution
FINANCIAL MARKET: GLOBAL FOOTPRINT
Asset Manager
Solutions
Distribution
Solutions
Brokerage
Solutions
Retirement
Solutions
Insurance
Solutions
Asset
Management
Asset Manager
Solutions
Retirement
Solutions
Insurance
Solutions
Wealth & Platform
Solutions
Bank
Solutions
13
LEADERSHIP POSITIONS IN HEALTH AND WEALTH
Financial Services Healthcare Services
Distribution
Solutions
Serve
45 of 50 largest asset
management firms
Exclusive distributor of
Sector SPDR ETFs
Medical
Solutions
Covered Lives:
22.8M
Pharmacy
Solutions
Pharmacy Claims Paid
in 2016:
507.0M
Asset
Management
ALPS AUM
$17.2B
Retirement
Solutions
TRAC® 6.8M
participants
Largest SaaS
Provider
Brokerage
Solutions
Subaccounting
42.1M accounts
Infrastructure Leverage
Data Centers | Communication Networks | Business Continuity | Disaster Recovery
Business Process Management
Applied Analytics
Compliance
Business Process Outsourcing
Asset Manager
Solutions
TA2000® 61.9M
accounts
Fast 8.9M accounts
iFast 13.7M accounts
ALPS AUA $179.1B
14
ATTRACTIVE BUSINESS MODEL
SAAS
Strategic
Advisory
Applied
Analytics
Customer
Experience
Risk and
Compliance
Business
Process
Management
Full
Service
20
Years
Top 5
Financial
Services
Companies
19
Years
Top 5
Healthcare
Services
Companies
Average Length of Customer Relationships:
Long-Term Contracts
Deeply Embedded in Client Work Flow
Significant Switching Costs
Recurring Revenue
Significant Recurring Sources of Revenue:
15
CRITICAL DEMANDS OF THE FINANCIAL AND HEALTHCARE
INDUSTRIES
Complex and Changing
Regulations & Compliance
Heightened Privacy
Sensitivities
Demand for Top-Tier
Security
Capacity/Scale
Requirements
Data Analytics Dependent
Digital Transformation
Increased Outsourcing of
Processing Services
Empowered Consumers
16
• Asset Management
• $75 million seed fund commitment
• Brokerage Solutions
• Sub-accounting platform
• Distribution Solutions
• Marketshare platform
• Advisor segmentation
• DST SalesConnect™
• Retirement Solutions
• Retirement plan participant analytics
• Rollover services
• Wealth Management Solutions
• SAAS and Full Service
• Wealth Platform
• Pharmacy Solutions
• Government programs administration
• Pharmacy network solutions
• Specialty pharmacy
• Formulary and rebate management
• Healthcare Administration
• Revenue management
• Provider network administration
• Health plan compliance and program integrity
• Health Outcomes Optimization
• Quality incentive management (Star5)
• Population assessment, stratification and care gaps
• Disease/care management
• Predictive/prescriptive analytics
• Behaviorally based interventions
Financial Services Healthcare Services
KEY FOCUS AREAS FOR GROWTH
17
More than 200 years of cumulative industry experience | Leadership team with deep industry expertise
EXPERIENCED, PROVEN MANAGEMENT TEAM
Steve Hooley
Chief Executive
Officer and President
Named DST’s Chief
Executive Officer in 2012
Served as President and Chief
Executive Officer of Boston Financial
Data Services, Inc., a DST joint venture
Joined BFDS in 2004 and DST in
2009
Gregg Givens
Chief Financial
Officer
Named DST CFO
in 2014
Served as senior manager at Price
Waterhouse for 14 years
Joined DST in 1996 and has been
significantly involved with DST’s M&A
activities, financing transactions, and
joint venture operations
Beth Sweetman
Head of
Human Capital
Appointed Senior
Vice President and
Chief Human Resources Officer
in 2013
In June 2013, assumed responsibility
for leading the entire DST Human
Resources organization, both
domestically and internationally
Maria Mann
Chief Information
Officer
Appointed Chief
Information Officer in
2016
Served as CTO, Managing Director at
JPMorgan Chase for 15 years
Vercie Lark
Head of U.S.
Financial Services
Appointed Head of U.S.
Financial Services
in 2016
Joined DST in 2010 as Chief
Information Officer
Ned Burke
Head of ALPS
Joined ALPS in 1991 as
National Sales Manager
and became President
in 2000
William Slattery
Head of International
Financial Services
Appointed International
CEO of DST Financial
Services in 2017
Previously held senior roles at State
Street Europe and Deutsche Asset
Management
Jonathan Boehm
Head of Healthcare
Services
President and CEO of
DST Healthcare as
well as President and CEO of Argus
Health Systems
Joined DST in 1984
18
DST FINANCIAL DISCUSSION
19
FINANCIAL HIGHLIGHTS
Significant recurring revenues
Strong cash flows
Solid balance sheet
Robust revolving debt capacity
Monetization of assets
Focus on returning capital to shareholders
20
Non-GAAP Net Income from Continuing Operations and
EPS from Continuing Operations(1) Non-GAAP Operating Revenues
HISTORICAL FINANCIAL PERFORMANCE
$1,362
$1,446 $1,405
$1,474
$500
$600
$700
$800
$900
$1,000
$1,100
$1,200
$1,300
$1,400
$1,500
2013 2014 2015 2016
$185.9
$201.1
$179.8
$190.9
$4.22
$4.97 $4.93
$5.73
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
$5.50
$6.00
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
$180.0
$200.0
2013 2014 2015 2016
(M
ill
io
ns
)
(M
ill
io
ns
) EPS
Note: Please refer to Non-GAAP reconciliation slides for adjustment details. (1) Non-GAAP net income from continuing operations after non-controlling interest.
21
Non-GAAP Net Income from Continuing Operations and
EPS from Continuing Operations(1) Operating Revenues
QUARTERLY HISTORICAL FINANCIAL PERFORMANCE
$340 $349
$354 $362 $361
$374 $366 $373
$50
$100
$150
$200
$250
$300
$350
$400
$450
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
$40.7
$42.2
$48.0 $48.9
$38.7
$47.6
$50.7
$53.9
$1.08
$1.14
$1.33
$1.40
$1.13
$1.42
$1.53
$1.66
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
(M
ill
io
ns
)
(M
ill
io
ns
) EPS
Note: Please refer to Non-GAAP reconciliation slides for adjustment details. (1) Non-GAAP net income from continuing operations after non-controlling interest.
22 Note: Please refer to Non-GAAP reconciliation slides for adjustment details.
FINANCIAL HIGHLIGHTS
2016 2015 Change
Operating Revenues 1,474.4$ 1,405.0$ 4.9%
Operating Income 285.1$ 252.4$ 13.0%
Diluted EPS 5.73$ 4.93$ 16.2%
Weighted Average Diluted Shares Outstanding 33.3 36.4 -8.5%
Segment Details - Continuing Operations
Financial Services:
Operating Revenues 1,090.2$ 1,063.8$ 2.5%
Operating Margin 18.9% 18.6%
Healthcare Services:
Operating Revenues 426.2$ 376.4$ 13.2%
Operating Margin 19.2% 14.5%
Consolidated Non-GAAP Financial Results -
Continuing Operations
Year ended December 31,
23
CONDENSED BALANCE SHEET
(in millions) December 31,
2016 2015 2014 2013
Current Assets - operating $ 481.0 $ 344.1 $ 378.8 $ 298.5
Client funds 564.6 533.4 399.6 366.5
Investments - Available-for-sale securities 180.5 219.5 475.5 654.0
Investments - Cost method and other investments 128.0 133.2 156.0 183.0
Unconsolidated affiliates (BFDS, IFDS, Real Estate) 331.2 312.2 297.8 287.3
Properties, net 235.7 256.7 240.7 276.6
Assets held for sale 72.6 297.5 401.7 396.6
Other non-current assets 778.2 716.6 592.8 628.0
Total assets $ 2,771.8 $ 2,813.2 $ 2,942.9 $ 3,090.5
Debt $ 508.2 $ 562.1 $ 546.8 $ 675.7
Current liabilities - operating 288.2 294.3 320.3 301.9
Client funds obligations 564.6 533.4 399.6 366.5
Liabilities held for sale 30.1 159.9 147.3 134.5
Other non-current liabilities 244.2 202.4 292.5 428.1
Total stockholders' equity 1,136.5 1,061.1 1,236.4 1,183.8
Total liabilities and stockholders' equity $ 2,771.8 $ 2,813.2 $ 2,942.9 $ 3,090.5
24
MONETIZATION OF ASSETS
(1) All values shown represent pre-tax proceeds.
Q2 2013
2014
$32.7 million
$431.5 million
$202.5 million
($190.3 million from the
sale of shares of State
Street Corporation)
$196.2 million
$145.9 million
(including $11.0 million received from joint
ventures and $129.0 million from sale leaseback)
$415.2 million
$210.5 million
($176.1 million from the
sale of shares of State
Street Corporation)
$58.8 million
2015
$21.1 million
(including $5.1 million received from sale of
non-operating assets and $16.0 million from
sale leaseback)
$113.7 million
$63.1 million
$29.5 million
2016
Sales
of marketable securities
Distributions from private equity
funds and sales of
other investments
Sale of real estate assets
Monetizations
25
OUTSTANDING DEBT
Balance sheet supports strategic initiatives
• As of December 31, 2016, the Company’s outstanding debt
is comprised of $330 million of fixed rate debt and $178
million of variable rate debt
• The Company’s debt leverage ratio was 1.15 as of
December 31, 2016
• Revolver capacity up to $850 million sufficient to pursue
potential M&A initiatives, $795 million available as of
December 31, 2016
• Current balance sheet affords the Company significant
flexibility to meet its goals of making strategic investments
in its business and returning capital to shareholders
PRUDENTLY MANAGING DEBT LEVELS
$676
$547 $562
$508
$0
$200
$400
$600
$800
2013 2014 2015 2016
(Millions)
26
Since 2010, DST has returned $2.0 billion of capital to shareholders
RETURN OF CAPITAL TO SHAREHOLDERS
Total: $447.6 million
DST spent $200 million to repurchase
2.2 million shares of Common Stock
DST paid $47.6 million in dividends
($1.20 per share)
DST spent $200 million to repurchase
2.4 million shares directly from the
Argyros group
2014
Total: $443.1 million
DST paid $43.1 million in dividends
($1.20 per share)
DST spent $400.0 million to repurchase
3.6 million shares of Common Stock
2015
Total: $343.4 million
DST paid $43.4 million in dividends
($1.32 per share)
DST spent $300 million to repurchase 2.7
million shares of Common Stock
2016
27
KEY TAKEAWAYS
Leadership position in industries served
Deep, longstanding customer relationships
Robust, scalable technology platform and infrastructure
Deep regulatory compliance expertise
Attractive business model with significant recurring and diversified revenues
Experienced management team with proven track record
28
APPENDIX – USE OF NON-GAAP
FINANCIAL INFORMATION
In addition to reporting operating revenue, operating income, pretax income, net income, net income attributable to DST Systems, Inc. (“DST Earnings”)
and earnings per share on a GAAP basis, DST has also made certain non-GAAP adjustments which are reconciled to the corresponding GAAP
measures below. In making these non-GAAP adjustments, 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 business units, net gains (losses) associated with securities and other investments, restructuring and impairment costs acquired
intangible amortization and other similar items. 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 operating revenue, operating income,
pretax income, net income, DST earnings and earnings per share 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.
The tables on the following pages reconcile the GAAP financial results to the corresponding non-GAAP financial results. Additional descriptions of the
non-GAAP adjustments can be found in DST’s Form 10-K filings.
29
APPENDIX:
QUARTERLY HISTORICAL NON-GAAP OPERATING INCOME
$10.5
$11.8
$14.8
$17.4 $17.6
$19.5 $19.7
$25.1
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
$18.0
$20.0
$22.0
$24.0
$26.0
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
(M
ill
io
ns
)
(M
ill
io
ns
)
Note: Please refer to Non-GAAP reconciliation slides for adjustment details.
Financial Services Healthcare Services
$48.0
$44.6
$51.3
$53.8
$42.3
$50.5
$54.6
$58.6
$25.0
$30.0
$35.0
$40.0
$45.0
$50.0
$55.0
$60.0
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
30
APPENDIX:
RECONCILIATION OF GAAP TO NON-GAAP OPERATING INCOME BY SEGMENT
(in millions)
Financial Healthcare Financial Healthcare
For the Three Months Ended December 31, 2016 Services Services For the Three Months Ended December 31, 2015 Services Services
Reported GAAP Operating Income 52.4$ 23.5$ Reported GAAP Operating Income 49.0$ 12.4$
Restructuring charges 1.8 - Restructuring charges - 3.4
Amortization of intangible assets 4.4 1.6 Advisory and other transaction costs 1.2 -
Adjusted Non-GAAP Operating Income 58.6$ 25.1$ Amortization of intangible assets 3.6 1.6
Net gain on sale of real estate - -
For the Three Months Ended September 30, 2016 Adjusted Non-GAAP Operating Income 53.8$ 17.4$
Reported GAAP Operating Income 56.9$ 18.1$
Amortization of intangible assets 4.2 1.6 For the Three Months Ended September 30, 2015
Reversal of accrued contingent consideration (6.5) - Reported GAAP Operating Income 48.1$ 13.2$
Adjusted Non-GAAP Operating Income 54.6$ 19.7$ Amortization of intangible assets 3.2 1.6
Adjusted Non-GAAP Operating Income 51.3$ 14.8$
For the Three Months Ended June 30, 2016
Reported GAAP Operating Income 29.7$ 17.3$ For the Three Months Ended June 30, 2015
Restructuring charges 10.4 0.7 Reported GAAP Operating Income 41.8$ 10.2$
Amortization of intangible assets 4.4 1.5 Amortization of intangible assets 2.8 1.6
Software impairment 6.0 - Adjusted Non-GAAP Operating Income 44.6$ 11.8$
Adjusted Non-GAAP Operating Income 50.5$ 19.5$
For the Three Months Ended March 31, 2015
For the Three Months Ended March 31, 2016 Reported GAAP Operating Income 45.2$ 8.9$
Reported GAAP Operating Income 37.1$ 15.1$ Amortization of intangible assets 2.8 1.6
Restructuring charges 1.4 0.9 Adjusted Non-GAAP Operating Income 48.0$ 10.5$
Amortization of intangible assets 3.8 1.6
Adjusted Non-GAAP Operating Income 42.3$ 17.6$
2016 2015
31
APPENDIX:
RECONCILIATION OF GAAP TO NON-GAAP REVENUE, NET INCOME AND EPS BY YEAR
(in millions, except per share amounts)
2013 2016 2015 2014 2013 2016 2015 2014 2013
Reported GAAP Results 1,368.2$ 179.0$ 309.7$ 560.8$ 324.7$ 5.37$ 8.50$ 13.86$ 7.37$
Adjusted to remove:
Net gains on securities and other investments - (11.0) (124.3) (212.7) (138.1) (0.33) (3.42) (5.26) (3.14)
Amortization of intangible assets - 14.7 12.0 11.6 11.5 0.44 0.32 0.28 0.25
Restructuring charges - 9.9 2.1 8.2 2.7 0.30 0.06 0.20 0.06
Income tax items - 3.9 (15.8) (36.9) (11.0) 0.12 (0.43) (0.91) (0.24)
Net gain on sale of business - (5.2) - (107.2) - (0.16) - (2.64) -
Software impairment - 3.7 - - - 0.11 - - -
Reversal of accrued contingent consideration - (4.1) - - - (0.12) - - -
Equity in earnings of unconsolidated affiliates items - - (2.3) (3.6) (4.6) - (0.06) (0.09) (0.10)
Business development/advisory expenses - - 0.7 3.5 - - 0.02 0.09 -
Net (gains) losses on real estate assets - - (2.3) - 1.9 - (0.06) - 0.04
Gain on contract to repurchase common stock - - - (18.1) - - - (0.45) -
Loss accruals (loss accrual reversal) - - - (4.7) 2.5 - - (0.12) 0.06
Charitable contribution of securities - - - 0.2 - - - 0.01 -
Contract termination payments received, net (6.0) - - - (3.7) - - - (0.08)
Adjusted Non-GAAP Results 1,362.2$ 190.9$ 179.8$ 201.1$ 185.9$ 5.73$ 4.93$ 4.97$ 4.22$
Year Ended December 31,
Diluted Earnings per Share from Continuing
Operations
Net Income from Continuing Operations
Attributable to DST Systems, Inc.
Year Ended December 31,
Operating
Revenue
Year Ended
December 31,
32
APPENDIX:
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME BY QUARTER
(in millions, except per share amounts)
2016 2015 2016 2015 2016 2015 2016 2015
Reported GAAP Results 39.6$ 93.1$ 34.3$ 95.5$ 50.5$ 66.1$ 54.6$ 55.0$
Adjusted to remove:
Net gains on securities and other investments (4.4) (51.1) (3.7) (56.1) (2.2) (9.3) (0.7) (7.8)
Amortization of intangible assets 3.4 2.8 3.7 2.8 3.9 3.1 3.7 3.3
Restructuring charges 1.5 - 6.9 - - - 1.5 2.1
Income tax items (1.4) - 2.7 - 2.6 (11.9) - (3.9)
Net gain on sale of business - - - - - - (5.2) -
Software impairment - - 3.7 - - - - -
Reversal of accrued contingent consideration - - - - (4.1) - - -
Equity in earnings of unconsolidated affiliates items - (2.3) - - - - - -
Business development/advisory expenses - - - - - - - 0.7
Net (gains) losses on real estate assets - (1.8) - - - - - (0.5)
Adjusted Non-GAAP Results 38.7$ 40.7$ 47.6$ 42.2$ 50.7$ 48.0$ 53.9$ 48.9$
March 31,
Net Income from Continuing Operations Attributable to DST Systems, Inc.
For the Quarter Ended
June 30, September 30, December 31,
33
APPENDIX:
RECONCILIATION OF GAAP TO NON-GAAP DILUTED EPS BY QUARTER
2016 2015 2016 2015 2016 2015 2016 2015
Reported GAAP Results 1.16$ 2.48$ 1.03$ 2.58$ 1.53$ 1.83$ 1.68$ 1.57$
Adjusted to remove:
Net gains on securities and other investments (0.13) (1.36) (0.11) (1.52) (0.07) (0.26) (0.02) (0.23)
Amortization of intangible assets 0.10 0.07 0.11 0.08 0.11 0.09 0.11 0.10
Restructuring charges 0.04 - 0.20 - - - 0.05 0.06
Income tax items (0.04) - 0.08 - 0.08 (0.33) - (0.11)
Net gain on sale of business - - - - - - (0.16) -
Software impairment - - 0.11 - - - - -
Reversal of accrued contingent consideration - - - - (0.12) - - -
Equity in earnings of unconsolidated affiliates items - (0.06) - - - - - -
Business development/advisory expenses - - - - - - - 0.02
Net (gains) losses on real estate assets - (0.05) - - - - - (0.01)
Adjusted Non-GAAP Results 1.13$ 1.08$ 1.42$ 1.14$ 1.53$ 1.33$ 1.66$ 1.40$
Diluted EPS from Continuing Operations
For the Quarter Ended
March 31, June 30, September 30, December 31,