UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) March 17, 2003
(Exact name of registrant as specified in its charter)
DST Systems, Inc.
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
Delaware 1-14036 43-1581814
333 West 11th Street, Kansas City, Missouri 64105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (816) 435-6851
Not Applicable
(Former name or former address, if changed since last report.)
FIFTH AMENDMENT AND RESTATEMENT TO CAUTIONARY STATEMENTS
FORM 8-K
DST SYSTEMS, INC.
ITEM 1 CHANGES IN CONTROL OF REGISTRANT
Not applicable.
ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS
Not applicable.
ITEM 3 BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4 CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5 OTHER EVENTS
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, DST Systems, Inc. (the "Company") is hereby
amending and restating its Form 8-K dated March 15, 1996, amended and restated
April 13, 1998, August 4, 1998, March 25, 1999 and March 19, 2002 setting forth
certain cautionary statements identifying important factors that either
individually or in combination with other factors could cause the Company's
actual operating results to differ materially from those projected in
forward-looking statements, whether oral or written, concerning the Company and
made by, or on behalf of, the Company.
ITEM 6 RESIGNATIONS OF REGISTRANT'S DIRECTORS
Not applicable.
ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS
Cautionary statements for purposes of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 are attached hereto as Restated
and Amended Exhibit 99.
ITEM 8 CHANGE IN FISCAL YEAR
Not applicable.
ITEM 9 REGULATION FD DISCLOSURE
Not applicable.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DST Systems, Inc.
/s/ Gregg Wm. Givens
Vice President and Chief Accounting Officer
Date: March 17, 2003
Restated and Amended
Exhibit 99
CAUTIONARY STATEMENTS AS AMENDED AND RESTATED
MARCH 17, 2003 WITH RESPECT TO FORWARD-LOOKING COMMENTS
FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
DST Systems, Inc. (the "Company") desires to take advantage of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of 1995
and is filing this Form 8-K/A in order to do so. The Company or others on behalf
of the Company may make from time to time (whether orally or in writing)
forward-looking comments or statements concerning potential future events,
including but not limited to the results of the Company's operations. Such
forward-looking statements are based upon assumptions by the Company's
management at the time the statements are made, including assumptions about
risks and uncertainties faced by the Company. If any of management's assumptions
prove incorrect or unanticipated circumstances arise, the actual results could
differ materially from those anticipated by such forward-looking statements. The
differences could be caused by a number of factors or combinations of factors
including, but not limited to, those factors set forth below. Persons hearing or
reading such forward-looking comments should consider carefully the following
factors, in addition to the other information contained in the Company's public
documents, when evaluating such forward-looking comments. The Company does not
currently intend to update any forward-looking statement made or published to
reflect events or developments occurring after the making or publishing of such
statement.
Dependence on Certain Industries
The Company derives a substantial proportion of its consolidated
revenues from the delivery of services and products to clients that are publicly
traded corporations, mutual funds, investment managers, insurance companies,
banks, brokers, or financial planners or are in the video/broadband, direct
broadcast satellite, wire-line, wireless and cellular, debt protection, Internet
protocol telephony, Internet, utility and other businesses. Consolidations which
would decrease the number of potential clients in such businesses, events which
would reduce the rate of growth in or negatively impact such businesses, or
significant declines in the number of accounts or subscribers serviced by
clients in such businesses could have a material adverse effect on the financial
condition and results of operations of the Company.
Development of Technology for Use by Acquired Company
On March 30, 2001, the Company acquired a controlling interest in
EquiServe Limited Partnership, a corporate stock transfer agent that provides
services principally to publicly held corporations. On August 1, 2001, the
Company purchased the remaining interest in the business, and EquiServe, Inc.
("EquiServe") is now a wholly owned subsidiary of the Company. The Company is
implementing and enhancing a new stock transfer system ("Fairway") that will
replace the existing systems used to maintain corporate stock transfer records.
Success of the acquisition is dependent in part on successful completion of
Fairway, successful conversion of all accounts from the existing systems to
Fairway, and integration of other Company technology and infrastructure to
support EquiServe operations. The failure to successfully complete Fairway
development, successfully convert the existing client base to Fairway, or
successfully integrate Company technology and infrastructure to support
EquiServe could have a material adverse effect on the financial condition and
results of operations of the Company.
Impact of Technological and Market Changes
The Company's clients use computer technology-based products and
services in the complex and rapidly changing markets in which they operate. The
technology available to the Company's clients, such as methods for the
electronic dissemination of documents, is expanding. The Company's future
success depends in part on its ability to continue to develop and adapt its
technology, on a timely and cost effective basis, to meet clients' needs and
demands for the latest technology. There can be no assurance that the Company
will be able to respond adequately and in advance of its competitors to these
technological demands or that more advanced technology, including technology for
the electronic dissemination of documents, will not reduce or replace the needs
for certain of the Company's products and services.
Similarly, certain of the Company's clients provide services related to
communications devices and/or the communications industry. The communications
industry, and wireless communication devices in particular, are rapidly
evolving. The future success of the Company's business of providing
administrative services to clients in the communications industry depends in
part on the Company's ability to continue to develop and adapt its services, on
a timely and cost effective basis, to meet clients' needs and demands for
administrative services appropriate to the latest communications technology.
The Company has expended considerable funds to develop products to
serve new and rapidly changing markets. If such markets grow or converge more
slowly than anticipated or the Company's products and services fail to achieve
market acceptance, there could be a material adverse effect on the financial
condition and results of operations of the Company.
The Company significantly invests in available-for-sale equity
securities of other companies. The value of such securities depends on the
market for such securities and on changes in the markets in which such other
companies operate.
Reliance on Facilities
The Company's processing services are primarily dependent on facilities
housing central computer operations or in which information, image or bill and
statement processing occur. The Company's mutual fund full service, corporate
stock transfer, and insurance, warranty and debt protection administrative
service businesses are dependent on call centers in various locations. The
Company owns, leases and manages real estate. A natural disaster, terrorist act,
or other calamity that causes long-term damage to the Company's facilities, or
economic or other events impacting the real estate markets in which the Company
owns, leases or manages real estate, could have a material adverse effect on the
financial condition and results of operation of the Company.
Reliance on Insurers
Currently, the Company's business of providing administrative services
in connection with the insurance, warranty, and debt protection services of its
clients significantly depends upon its business relationships with one or more
insurance companies that provide coverage necessary for the clients' products
and services. Termination of the business relationships with such insurance
companies could have a material adverse effect on the financial condition and
results of operations of the Company if the Company were unable to arrange
alternative sources of coverage.
Importance of Key Personnel
The Company's operations and the continuing implementation of its
business strategy depend upon the efforts of its technical personnel and senior
management. Recruiting and retaining capable personnel, particularly those with
expertise in the types of computer hardware and software utilized by the
Company, are vital to the Company's success. There is substantial competition
for qualified technical and management personnel, and there can be no assurance
that the Company will be able to attract or keep the qualified personnel it
requires. The loss of key personnel or the failure to hire qualified personnel
could have a material adverse effect on the financial condition and results of
operations of the Company.
Lack of Control of Joint Ventures
The Company's business strategy for growth and expansion includes
reliance on joint ventures. The Company derives part of its net income from its
pro rata share in the earnings of these unconsolidated companies. Although the
Company owns significant equity interests in such companies and has
representation on their Boards of Directors or governance structures, the
Company is not in a position to exercise control over their operations,
strategies or financial decisions without the concurrence of its equity
partners. The Company's equity interests in Boston Financial Data Services, Inc.
("BFDS"), Argus Health Systems, Inc., and International Financial Data Services
Limited Partnership and International Financial Data Services Limited
(collectively, "IFDS") are subject to contractual buy/sell arrangements that may
restrict the Company's ability to fully dispose of its interest in these
companies and that under certain circumstances permit such companies to purchase
the Company's interest.
The other parties to the Company's current and future joint venture
arrangements may at any time have economic, business or legal interests or goals
that are inconsistent with those of the joint venture or of the Company. In
addition, if such other parties were unable to meet their economic or other
obligations to such ventures, it could, depending upon the nature of such
obligations, adversely affect the financial condition and results of operations
of the Company.
Influence by Current Stockholder
Janus Capital Group Inc. ("JCG") currently owns approximately 33.2
percent of the outstanding common stock of the Company. In addition JCG and
certain JCG affiliates are generally exempted from the restrictions in the
Company's stockholders' rights plan until such time as the ownership of JCG or
certain JCG affiliates drops below certain levels. As a result, JCG may be able
to influence matters affecting the Company, including matters submitted to a
vote of the Company's stockholders, such as the election of directors and the
approval of corporate transactions.
Significant Competition from Other Providers
The Company and its subsidiaries and joint ventures encounter
significant competition for the Company's services and products from other
third-party providers of similar services and products and from potential
clients who have chosen not to outsource certain services the Company could
provide. The Company's ability to compete effectively depends, in part, on the
availability of capital and other resources, and some of these competitors have
greater resources and greater access to capital than the Company. The Company
also competes for shareowner accounting services with brokerage firms that
perform sub-accounting services for the brokerage firms' customers who purchase
or sell shares of mutual funds for which the Company serves as transfer agent.
Such brokerage firms maintain only an "omnibus" account with the Company
representing the aggregate number of shares of a mutual fund owned by the
brokerage firms' customers, thus resulting in fewer mutual fund shareowner
accounts being maintained by the Company. Any of these events could have a
material adverse effect on the financial condition and results of operations,
including gross profit margins, of the Company. In addition, competitive factors
could influence or alter the Company's overall revenue mix between the various
business segments.
Regulation
As registered transfer agents, the Company, its subsidiary EquiServe,
its indirect subsidiary EquiServe Trust Company, N.A. ("EquiServe Trust"), its
joint venture BFDS and BFDS' subsidiary National Financial Data Services, Inc.
(collectively, "Domestic Transfer Agent Businesses") are subject to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and to the
rules and regulations of the Securities and Exchange Commission ("SEC") under
the Exchange Act which require them to register with the SEC and which impose on
them recordkeeping and reporting requirements. Certain of the operations and
records of the Domestic Transfer Agent Businesses are subject to examination by
the SEC and, as providers of services to financial institutions, to examination
by bank and thrift regulatory agencies. In connection with its transfer agency
business, EquiServe Trust serves as a limited purpose trust company subject to
regulation of the Office of the Comptroller of the Currency. In addition,
companies wholly-owned by IFDS ("IFDS Transfer Agent Businesses") are subject to
regulation of similar regulatory agencies in other countries. Any of the
Domestic Transfer Agent Businesses or IFDS Transfer Agent Businesses could have
its regulatory authorizations suspended or revoked if it were to materially
violate applicable regulations, which could have an adverse effect on the
financial condition and results of operations of the Company.
Similarly, certain of the Company's subsidiaries involved in the
business of providing administrative services in connection with insurance and
warranty products are licensed insurance agencies or licensed or registered
service warranty providers and, as such, are subject to applicable state
insurance and service warranty laws and to related rules and regulations. These
laws and regulations impose on them recordkeeping, reporting, financial, and
other requirements and generally regulate the conduct of regulated business
operations. In the event any of the subsidiaries materially violate any of these
applicable laws or regulations, their regulatory authorizations could be
suspended or revoked, which could have a material adverse effect on the
financial condition and results of operations of the Company.
The Company's existing and potential clients are subject to extensive
regulation, and certain of the Company's revenue opportunities may depend on
continued deregulation in the world-wide communications industry. Certain of the
Company's clients are subject to regulations governing the privacy and use of
the customer information that is collected and managed by the Company's products
and services. Regulatory changes that adversely affect the Company's existing
and potential clients could have a material adverse effect on the financial
condition and results of operations of the Company.
Interest Earnings as a Portion of Revenue
The Company's transfer agent businesses derive a certain amount of
service revenue from investment earnings related to cash balances maintained in
transfer agency customer bank accounts. The balances maintained in the bank
accounts are subject to fluctuation. A change in interest rates could have a
material adverse effect on the financial condition and results of operations of
the Company.
Anti-Takeover Considerations
Some provisions of the Company's Certificate of Incorporation could
make it more difficult for a third party to acquire control of the Company, even
if the change of control would be beneficial to certain stockholders. The
Company has also adopted a stockholders' rights plan which could delay, deter or
prevent a change in control of the Company. A few of the Company's client
agreements allow the client to terminate its agreement or to obtain rights to
use the Company's software used in processing the client's data in the event of
an acquisition or change of control of the Company. In the event of a change in
control of the Company (as defined in the applicable plan or agreement), vesting
of awards (including stock options) under the Company's Stock Option and
Performance Award Plan will be automatically accelerated, certain limited rights
related to such options will become exercisable, and employment continuation
provisions will apply under the employment agreements of certain executive
officers. Certain of the Company's joint venture agreements allow other parties
to the joint venture to buy the Company's joint venture interests in the event
of a change of control of the Company.
Non-U.S. Operations
Consolidated revenues from the Company's subsidiaries in Canada, Europe
and elsewhere outside the U.S. account for a percentage of the Company's
revenues. The Company's current and proposed international business activities
are subject to certain inherent risks, including but not limited to, specific
country, regional or global economic conditions, exchange rate fluctuation and
its impact on liquidity, change in the national priorities of any given country,
and cultural differences. There can be no assurance that such risks will not
have a material adverse effect on the Company's future international sales and,
consequently, the Company's financial condition and results of operations.
Variability of Quarterly Operating Results
The Company's quarterly and annual operating results may fluctuate from
quarter to quarter and year to year depending on various factors, including but
not limited to the impact of significant start-up costs associated with
initiating the delivery of contracted services to new clients, the hiring of
additional staff, new product development and other expenses, introduction of
new products by competitors, pricing pressures, the evolving and unpredictable
nature of the markets in which the Company's products and services are sold, and
general economic conditions.
Client Failure to Renew or Utilize Contracts
Substantially all of the Company's revenue is derived from the sale of
services or products under long-term contracts with its clients. The Company
does not have the unilateral option to extend the terms of such contracts upon
their expiration. Certain of the Company's service agreements contain
"termination for convenience" clauses that enable clients to cancel the
agreements by providing written notice to the Company a specified number of days
prior to the desired termination date. Such clauses are sometimes coupled with a
requirement for payment by the client of a fee in the event of termination for
convenience. The failure of clients to renew contracts, a reduction in usage by
clients under any contracts or the cancellation of contracts could have a
material adverse effect on the Company's financial condition and results of
operations.
Dependence on Proprietary Technology
The Company relies on a combination of patent, trade secret and
copyright laws, nondisclosure agreements, and other contractual and technical
measures to protect its proprietary technology. There can be no assurance that
these provisions will be adequate to protect its proprietary rights. There can
be no assurance that third parties will not assert infringement claims against
the Company or the Company's clients or that such claims, if brought, would not
have a material adverse effect on the financial condition and results of
operations of the Company.
Security of Proprietary Customer Information
The Company's business involves the electronic recordkeeping of
proprietary information of the Company's customers, and of the clients of such
customers. The Company maintains systems and procedures to protect against
unauthorized access to such information and against computer viruses ("Security
Systems"), and there is no guarantee that the Security Systems are adequate to
protect against all security breaches. Rapid advances in technology make it
impossible to anticipate or be prepared to address all potential security
threats. A material breach of Security Systems could cause the Company's
customers to reconsider use of the Company's services and products, affect the
Company's reputation, or otherwise have a material adverse effect on the
Company's financial condition and results of operations.
Miscellaneous
In addition to the factors noted above, there may be other factors that
cause any forward-looking comment to become inaccurate. One such factor is
litigation and claims involving the Company, including routine litigation and
claims involving transfer agency operations in which the plaintiffs or claimants
allege that errors or delays in transaction processing cause damages based on
factors such as unfavorable changes in the market value of securities processed
and including class action claims based upon various regulatory rules and
consumer protection statutes with respect to which class action plaintiffs may
attempt to assert private rights of action. Other factors include, but are not
limited to, accounting or other fraud that may occur with respect to the
financial statements or business of a financial service provider or other client
of the Company; changes in management strategies; changes in lines of business
or markets; failure of anticipated opportunities to materialize; changes in the
cost of necessary supplies; and changes in the economic, political or regulatory
environments in the United States and/or the other countries where the Company
now competes or may compete in the future.