DST Systems Inc. (DST) reported earnings of $1.11 per share in the first quarter, exceeding the Zacks Consensus Estimate of 92 cents per share.
Revenue
Total revenues for the quarter were $566.7 million, down 1.0% from $560.9 million in the year-ago quarter. Excluding reimbursements, operating revenues came in at $409.4 million or up 3.5% from $395.6 million in the year-ago quarter. This increase in revenue may be attributed to a $15.7 million increase in Financial Services, although Investments & Other Income declined $0.5 million.
Excluding $26.0 million of net incremental operating revenues resulting from the consolidation of Argus, Financial Services operating revenues decreased $10.3 million or 3.9% during the first quarter of 2010 as compared to the year-ago quarter.
During the quarter, total mutual fund shareowner accounts serviced increased by 1.0 million, or 0.8%, from 122.1 million accounts reported in the previous quarter. Registered accounts and subaccounts serviced by the company during the quarter were 107.0 million and 15.1 million, respectively.
Operating Results
Total cost and expense for the quarter was $468.1 million, up 2.2% from $458.2 million reported in the year-ago quarter. Consolidated income from operations was $68.3 million, down 8.2% from $74.4 million in the year-ago quarter.
Financial Services operating income decreased $1.9 million during the quarter from the year-ago period, attributable to an increase in deferred compensation costs of approximately $4.5 million. This apart, the consolidation of Argus has also led to the decline in operating profits in this segment. Output Solutions operating income increased approximately $7.7 million during the quarter compared to the year-ago period, primarily from lower operating cost.
Net income for the quarter was $76.9 million or $1.58 per share versus a net income of $73.2 million or $1.47 per share in the year-ago quarter. Excluding certain non-GAAP items, like termination benefit expense, net gains on securities and other investments, and gain on securities and other expense, adjusted net income for the quarter came in at $53.8 million or $1.11 per share. This compares to adjusted net income of $41.6 million or $0.83 per share in the year-ago quarter.
In the recently concluded first quarter, 2.1 million shares were repurchased by DST for an amount of $84.9 million, or around $40.43 per share. Currently, the company has around 164,000 shares remaining under the existing share repurchase authorization plan. This apart, another 110,000 shares of common stock were repurchased in March 2010, for an amount of $4.6 million or approximately $41.82 per share but were settled in April 2010.
Balance Sheet
The balance sheet seems highly leveraged. DST exited the quarter with $124.0 million in cash, up from $106.0 million reported in the previous quarter, and debt of $1.32 billion, up from $1.22 billion reported in he previous quarter. During the quarter, DST repurchased 4.125% Series A, senior convertible debentures of approximately $28.5 million in principal amount. This apart, in early April 2010, the Company repurchased an additional $8.0 million in principal amount of the 4.125% Series A senior convertible debentures.
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