DST Systems, Inc. Announces First Quarter 2013 Financial Results

       DST Systems, Inc. Announces First Quarter 2013 Financial Results

PR Newswire

KANSAS CITY, Mo., April 25, 2013

KANSAS CITY, Mo., April 25, 2013 /PRNewswire/ --DST reported consolidated net
income of $93.2 million ($2.04 per diluted share) for the first quarter 2013
compared to $55.3 million ($1.22 per diluted share) for the first quarter
2012. Taking into account certain non-GAAP adjustments explained herein,
consolidated net income was $45.0 million ($0.99 per diluted share) for first
quarter 2013 compared to $47.5 million ($1.05 per diluted share) for first
quarter 2012.

The diluted EPS impact of non-GAAP adjustments for first quarter 2013 is
summarized as follows:

Reported GAAP diluted EPS                    $ 2.04
Net gain on securities and other investments (0.98)
Other items, net                             (0.07)
Adjusted Non-GAAP diluted EPS                $ 0.99

"We are encouraged by DST's operating results for the first quarter. We
recorded higher GAAP operating revenues and operating income in both the
Financial Services and Customer Communications Segments. Our brokerage,
healthcare, retirement and customer communications businesses successfully
converted previously announced new client business during the quarter. We are
also executing on our strategic initiatives, including selective monetization
of non-core assets," said Steve Hooley, President and CEO of DST.

First quarter 2013 consolidated financial highlights, taking into account
non-GAAP adjustments, were as follows:

  oOperating revenues (excluding out-of-pocket reimbursements) increased
    $13.3 million or 2.8% to $489.2 million, as compared to first quarter
    2012. Financial Services operating revenues increased $3.2 million, or
    1.0%, and Customer Communications operating revenues increased $9.8
    million or 5.9%.
  oIncome from operations increased $6.5 million, or 10.0%, compared to first
    quarter 2012. Financial Services income from operations decreased $4.2
    million, or 7.6% during the quarter to $51.0 million attributable to lower
    operating revenues for mutual fund registered shareowner account servicing
    and lower AWD software license revenues, partially offset by higher
    pharmacy claim processing revenues.

Customer Communications Segment income from operations increased $10.6 million
during the quarter to $19.2 million from higher North American revenues and
lower costs in the U.K. operations.

  oOther non-operating income decreased $11.3 million over the prior year
    quarter primarily from an unrealized loss on foreign currency translation
    of $6.6 million ($0.09 per diluted share) for the first quarter 2013 as
    compared to a foreign currency translation gain of $1.1 million ($0.02 per
    diluted share) for first quarter 2012. The majority of the 2013 foreign
    currency loss was caused by negative movements in the U.K. pound versus
    the U.S. dollar on an intercompany loan that is expected to be repaid over
    the next five years. Other income also decreased in the first quarter 2013
    from $2.4 million of lower dividend income as a result of asset
    monetization activity.

Asset Monetization Update

During the quarter, DST received $100.1 million of pretax cash proceeds,
consisting of $88.4 million from the sales of marketable securities and $11.7
million of distributions from private equity funds and other investments.
Included in the $88.4 million of pretax cash proceeds received from sales of
marketable securities is $28.2 million from the sale of 500,000 shares of
State Street Corporation.

At March 31, 2013, the Company's cash and cash equivalents was $120.8 million,
$32.5 million higher than December 31, 2012. Additionally, at March 31, 2013,
the Company's total debt outstanding was $1,038.4 million, $26.8 million
higher than December 31, 2012 and $321.9 million lower than March 31, 2012.

Share Repurchase Plan & Share Related Activity

During the first quarter 2013, the Company spent $52.5 million to repurchase
approximately 758,000 shares of DST common stock, resulting in approximately
$200 million remaining under DST's existing share repurchase plan. The Company
had 44.1 million shares of common stock outstanding at March 31, 2013, as
compared to 44.3 million shares outstanding at December 31, 2012 as share
repurchases were partially offset by shares issued primarily from the vesting
of restricted stock units.

Average diluted shares outstanding for first quarter 2013 were 45.6 million, a
decrease of 500,000 shares or 1.1%, from fourth quarter 2012 and an increase
of 400,000 shares or 0.9% from first quarter 2012. The decrease in average
diluted shares outstanding from fourth quarter 2012 resulted primarily from
share repurchases. The increase in average diluted shares outstanding from
first quarter 2012 resulted primarily from higher dilutive effects of equity
compensation awards and convertible debentures associated with a higher
average stock price.

During March 2013, DST paid a quarterly cash dividend of $0.30 per share on
its common stock.

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 "Description of
Non-GAAP Adjustments."

Segment Results

Financial Services Segment

Operating revenues for the Financial Services Segment (excluding out-of-pocket
reimbursements) for first quarter 2013 increased $3.2 million or 1.0% to
$314.3 million as compared to first quarter 2012. Increased operating revenues
from DST HealthCare, DST Retirement Solutions, ALPS and DST Brokerage
Solutions were partially offset by lower operating revenues from mutual fund
registered shareowner account processing and AWD software license and
professional services.

Total mutual fund shareowner accounts increased 6.9 million to 95.0 million
accounts during first quarter 2013. Registered shareowner accounts processed
at March 31, 2013 were 75.0 million, a decrease of 700,000 accounts from
December 31, 2012 and a decrease of 7.8 million accounts from March 31, 2012.

The following table summarizes changes in U.S. mutual fund registered accounts
and subaccounts serviced during the three months ended March 31, 2013 (in
millions):

Registered Accounts
Beginning balance                               75.7
 New client conversions                         0.3
 Subaccounting conversions to DST platforms     (0.7)
 Subaccounting conversions to non-DST platforms (0.7)
 Organic growth                                 0.4
Ending balance                                  75.0
Subaccounts
Beginning balance                               12.4
 New client conversions                         5.7
 Conversions from DST's registered accounts     0.7
 Conversions from non-DST registered platforms  0.5
 Organic growth                                 0.7
Ending balance                                  20.0
Total Accounts                                  95.0

The Company currently expects conversions of registered accounts to
subaccounts for 2013 to be between 5-6 million, of which approximately 25% of
these accounts are expected to convert to DST's subaccounting platform. These
estimates are consistent with prior estimates. The actual number of accounts
estimated to convert to and from various DST platforms, as well as the timing
of those events, is dependent upon a number of factors including information
obtained from DST's clients. Actual results could differ from the Company's
estimates.

DST Brokerage operating revenues increased during first quarter 2013 as
compared to first quarter 2012 as a result of higher levels of subaccounts
processed. The Company successfully converted 5.7 million subaccounts to DST's
subaccounting platform in the first quarter of 2013. New subaccount
conversions were approximately 300,000 accounts in excess of DST's previous
estimates.

ALPS operating revenues increased during first quarter 2013 from market
appreciation and new clients. The following table summarizes ALPS operating
statistics (in billions):

                                 March 31,
                                 2013     2012
Assets Under Active Distribution $ 72.5   $ 57.5
Assets Under Administration      115.5    94.2

DST Retirement operating revenues for the first quarter 2013 increased from
first quarter 2012 from higher defined contribution participants processed.
Total defined contribution participants processed were 7.1 million at March
31, 2013, an increase of 1.7 million participants from March 31, 2012 and an
increase of 1.0 million from December 31, 2012.

To align with retirement plan industry reporting practices, beginning with
first quarter 2013, DST will report total defined contribution participants on
DST's retirement processing platform. Reporting periods prior to 2013 have
been adjusted to conform to the current period reporting presentation. Total
defined contribution participants include: 1) participants with account
balances; 2) new employees in the process of becoming eligible to participate;
3) employees that have met plan eligibility requirements, but do not have
account balances; and 4) terminated employees who are still treated as plan
participants for purposes of annual plan compliance tests (such as participant
discrimination tests) and for tax reporting purposes. As previously
communicated, retirement plan record keepers generally experience an annual
reduction in participants processed during the second quarter when tax and
other compliance activities for the prior year are finalized.

The following table summarizes changes in defined contribution participants
serviced during the three months ended March 31, 2013 (in millions):

Total Defined Contribution Participants
Beginning balance, as adjusted          6.1
         New client conversions         1.1
         Organic decline                (0.1)
Ending balance                          7.1

DST Retirement added 1.1 million participants from conversion activities in
first quarter 2013. DST Retirement is incurring costs associated with first
quarter 2013 participant conversions, as well as future conversions of
previously announced new client participants (totaling approximately 2.3
million participants).

DST HealthCare operating revenues during the first quarter 2013 increased
primarily from higher volumes of pharmacy claims processed. In addition, DST
HealthCare had new operating revenues from new full service healthcare clients
that successfully converted to DST HealthCare's processing platform in first
quarter 2013. The increase in pharmacy claims paid in first quarter 2013 is
associated with increased Medicare and Medicaid members. The increase in
covered lives is principally from organic growth within the existing customer
base driven by Medicaid third party administration processing as well as new
clients.

                                                      March 31,
                                                      2013    2012
Pharmacy claims paid                                  109.2   99.2
Covered lives using DST's medical processing platform 23.1    22.6

AWD operating revenues during the first quarter 2013 decreased as compared to
first quarter 2012 primarily due to lower software license revenues and
professional services. Active AWD users at March 31, 2013 were 207,900, an
increase of 3.7% from March 31, 2012.

DST Global Solutions investment management operating revenues during first
quarter 2013 were essentially flat from the same period in 2012. Increased
operating revenues were partially offset by changes in foreign currency
exchange rates.

Financial Services Segment software license fee revenues, derived principally
from DST Global Solutions, DST Health Solutions and AWD, were approximately
$9.1 million in first quarter 2013, a decrease of $3.1 million or 25.4% from
the same period in 2012 primarily reflecting lower AWD software license fee
revenues. While license fee revenues are not a significant percentage of DST's
operating revenues, they can significantly impact earnings in the period in
which they are recognized. Revenues and operating results from individual
license sales depend heavily on the timing, size and nature of the contract.

Financial Services costs and expenses for first quarter 2013, excluding
reimbursable operating costs, increased $7.9 million or 3.4% to $242.8 million
primarily from increased employee and other operating costs associated with
acquiring and supporting new business.

Financial Services depreciation and amortization expense decreased $500,000 in
first quarter 2013 to $20.5 million, primarily from certain assets becoming
fully depreciated.

Financial Services Segment income from operations decreased $4.2 million
during first quarter 2013 to $51.0 million. Operating margin for first quarter
2013 was 16.2% as compared to 17.7% in 2012. Operating margins were adversely
affected by the decline in mutual fund processing revenues, lower software
license revenues and conversion and business expansion costs in the retirement
and brokerage business units.

Customer Communications Segment

The following tables present the financial results and the operating
statistics of the Customer Communications Segment for first quarter 2013 and
2012 (in millions):

               Three Months Ended March 31,
               2013                             2012
               Operating  Operating  Operating  Operating  Operating  Operating
               Revenue    Income     EBITDA     Revenue    Income     EBITDA
                                                           (Loss)
North America  $  126.8   $  17.2    $  24.6    $  113.7   $  9.6     $  16.9
United Kingdom 48.4       2.0        5.4        51.7       (1.0)      2.7
Customer
Communications $  175.2   $  19.2    $  30.0    $  165.4   $  8.6     $  19.6
Segment



                                Three Months Ended
                                March 31,
                                2013      2012
Images produced
 North America                  2,598.0   2,359.5
 United Kingdom                 543.5     556.8
 Total Customer Communications  3,141.5   2,916.3
Packages Mailed
 North America                  600.6     545.9
 United Kingdom                 192.5     189.8
 Total Customer Communications  793.1     735.7

North America operating revenues increased $13.1 million, or 11.5%, in first
quarter 2013 primarily from new client volumes. Although the Customer
Communications Segment does not have significant seasonal fluctuations in its
business operations, volumes for mutual fund clients are usually highest
during the first quarter primarily due to delivery of year-end statements and
tax forms. The increased operating revenues resulted in a $7.6 million
increase in operating income over first quarter 2012.

North America operating margin was 13.6% for first quarter 2013 as compared to
8.4% in first quarter 2012. North America Operating EBITDA increased $7.7
million or 45.6% from first quarter 2012.

U.K. operating revenues decreased $3.3 million, or 6.4%, in first quarter 2013
from decreased images produced and foreign currency exchange rate movements.
Income from U.K. operations was $2.0 million during first quarter 2013, a $3.0
million improvement over first quarter 2012. The improvement is the result of
lower costs from facility consolidations and lower headcount. Customer
Communications U.K. Operating EBITDA was $5.4 million, an increase of $2.7
million from first quarter 2012.

Investments and Other Segment

Investments and Other Segment operating revenues for first quarter 2013
decreased $200,000 or 1.4% as compared to first quarter 2012. Income from
operations increased $100,000 to $2.9 million from lower depreciation expense
and lower operating costs.

Other Financial Results

Equity in earnings of unconsolidated affiliates

The following table summarizes the Company's equity in earnings of
unconsolidated affiliates (in millions):

           Three Months Ended
           March 31,
           2013        2012
BFDS       $  1.8      $ 3.2
IFDS U.K.  0.8         1.6
IFDS L.P.  1.1         (0.1)
Other      1.9         0.6
           $  5.6      $ 5.3

The decrease in equity in BFDS earnings from first quarter 2012 is primarily
from lower revenues associated with reduced levels of accounts serviced.
Average daily client cash balances invested by BFDS were $1.4 billion during
first quarter 2013 compared to $1.2 billion during first quarter 2012 from
higher levels of transaction activity. Average interest rates earned on the
balances increased from 0.10% in first quarter 2012 to 0.14% in first quarter
2013.

The decrease in equity in IFDS U.K. earnings from first quarter 2012 is
primarily the result of new product development and client conversion costs,
as well as the impact of foreign currency exchange rate movements. Shareowner
accounts serviced by IFDS U.K. were 9.5 million at March 31, 2013, an increase
of 100,000 accounts from December 31, 2012 and an increase of 1.3 million
accounts from March 31, 2012. The increase in accounts from December 31, 2012
is attributable to organic account growth in first quarter 2013. As previously
announced, IFDS U.K. is in the process of converting new shareowner processing
clients with approximately 200,000 accounts by June 30, 2013. New product
development and client conversion costs are expected to continue to affect
IFDS U.K. 2013 earnings.

The increase in IFDS L.P. earnings from first quarter 2012 is primarily
attributable to higher revenues from a new client in Canada that converted 1.1
million accounts in fourth quarter 2012, partially offset by increased
operating costs to support the new client and decreased earnings from a
Canadian real estate partnership that was sold in December 2012. Shareowner
accounts serviced by IFDS Canada were 11.5 million at March 31, 2013, an
increase of 200,000 accounts as compared to December 31, 2012 and an increase
of 1.1 million accounts from March 31, 2012. The increase in accounts from
December 31, 2012 is attributable to organic account growth.

Equity in earnings of other unconsolidated affiliates for first quarter 2013
increased $1.3 million as compared to first quarter 2012, primarily from
improved performance at DST's real estate and other affiliates.

Other income, net

Other income, net during first quarter 2013 decreased $11.3 million from first
quarter 2012 to $0.9 million. The decrease in other income is primarily
attributable to non-cash unrealized foreign currency exchange losses of $6.6
million during first quarter 2013 as compared to non-cash unrealized foreign
currency exchange gains of $1.1 million in first quarter of 2012. The foreign
currency exchange gains and losses are principally related to intercompany
loans between DST's U.S. and U.K. subsidiaries that are expected to be repaid
over the next five years. Dividend income decreased $2.4 million as a result
of asset monetizations. The remainder of the decrease in other income, net
during the quarter is attributable to lower unrealized gains on trading
securities and from other non-operational costs incurred.

Interest expense

Interest expense for first quarter 2013 decreased $2.1 million, or 17.9% to
$9.6 million compared to first quarter 2012, principally from lower weighted
average debt balances outstanding and lower interest rates.

Income taxes

The Company's tax rate was 33.8% for first quarter 2013 as compared to 32.5%
in first quarter 2012. A change in the proportional mix of domestic and
international income caused an increase in the tax rate in 2013 as compared to
2012. Excluding the effect of discrete period items, the Company expects its
tax rate to be approximately 36.1% for full year 2013, but the rate for the
remainder of the year will likely vary on a quarterly basis between 35.5% and
38.5% depending on the timing of estimated 2013 sources of taxable income
(e.g. domestic consolidated, international, and/or joint venture).

Use of Non-GAAP Financial Information

In addition to reporting operating income, pretax income, net income, and
earnings per share on a GAAP basis, DST has also made certain non-GAAP
adjustments which are described in the attached schedule titled "Description
of Non-GAAP Adjustments" and are reconciled to the corresponding GAAP measures
in the attached financial schedules titled "Reconciliation of Reported Results
to Income Adjusted for Certain Non-GAAP Items" that accompany this earnings
release. 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 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 defines Operating EBITDA as income from operations before depreciation and
amortization. This supplemental non-GAAP liquidity measure is provided in
addition to, but not as a substitute for, cash flow from operations. As a
measure of liquidity, the Company believes Operating EBITDA is useful as an
indicator of its ability to generate cash flow. Operating EBITDA, as
calculated by the Company, may not be consistent with the computation of
Operating EBITDA by other companies. The Company believes a useful measure of
the Customer Communications Segment's contribution to DST's results is to
focus on cash flow and DST's management believes Operating EBITDA is useful
for this purpose. A reconciliation of Customer Communications Segment income
from operations to Operating EBITDA is included in a schedule that accompanies
this earnings release. The non-GAAP adjustments to this reconciliation are
described in the attached schedule titled "Description of Non-GAAP
Adjustments."

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 income
from operations, pretax income, net income and earnings per share calculated
in accordance with GAAP. Therefore, management typically uses non‑GAAP
measures in conjunction with GAAP results. Investors and users of our
financial information should also consider the above factors when evaluating
DST's results.

*****

Safe Harbor Statement

Certain material presented in the press release includes 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 press release 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 press release to
reflect new information, future events or otherwise.

DST SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(In millions, except per share amounts)

(Unaudited)
                                                Three Months Ended
                                                March 31,
                                                2013      2012
Operating revenues                              $ 495.2   $ 475.9
Out-of-pocket reimbursements                    187.2     177.3
Total revenues                                  682.4     653.2
Costs and expenses                              574.6     559.1
Depreciation and amortization                   33.2      34.0
Income from operations                          74.6      60.1
Interest expense                                (9.6)     (11.7)
Other income,net                               73.2      29.7
Equity in earnings of unconsolidated affiliates 5.6       5.3
Income before income taxes                      143.8     83.4
Income taxes                                    50.6      28.1
Net income                                      $ 93.2    $ 55.3
Average common shares outstanding               44.3      44.5
Average diluted shares outstanding              45.6      45.2
Basic earnings per share                        $ 2.10    $ 1.24
Diluted earnings per share                      $ 2.04    $ 1.22



DST SYSTEMS, INC.

STATEMENT OF INCOME FROM OPERATIONS BY SEGMENT

(In millions)

(Unaudited)
               Three Months Ended March 31, 2013
               Financial  Customer        Investments  Elimination  Consolidated
               Services   Communications  / Other      Adjustments  Total
Operating      $  318.1   $   173.2       $   3.9      $            $   495.2
revenues
Intersegment
operating      2.2        2.0             10.3         (14.5)
revenues
Out-of-pocket  13.3       175.9                        (2.0)        187.2
reimbursements
Total revenues 333.6      351.1           14.2         (16.5)       682.4
Costs and      258.6      321.1           8.8          (13.9)       574.6
expenses
Depreciation
and            20.5       10.8            2.5          (0.6)        33.2
amortization
Income (loss)
from           $  54.5    $   19.2        $   2.9      $  (2.0)     $   74.6
operations
               Three Months Ended March 31, 2012
               Financial  Customer        Investments  Elimination  Consolidated
               Services   Communications  / Other      Adjustments  Total
Operating      $  309.1   $   163.4       $   3.4      $            $   475.9
revenues
Intersegment
operating      2.0        2.0             11.0         (15.0)
revenues
Out-of-pocket  14.5       164.7           0.1          (2.0)        177.3
reimbursements
Total revenues 325.6      330.1           14.5         (17.0)       653.2
Costs and      252.5      311.9           9.0          (14.3)       559.1
expenses
Depreciation
and            21.0       11.0            2.7          (0.7)        34.0
amortization
Income (loss)
from           $  52.1    $   7.2         $   2.8      $  (2.0)     $   60.1
operations



DST SYSTEMS, INC.

OTHER SELECTED FINANCIAL INFORMATION

(In millions)

(Unaudited)
                                    March 31,  December 31,
Selected Balance Sheet Information
                                    2013       2012
Cash and cash equivalents           $  120.8   $    88.3
Debt                                1,038.4    1,011.6
                                    Three Months Ended
                                    March 31,
Capital Expenditures, by Segment    2013       2012
Financial Services                  $  15.7    $    15.7
Customer Communications             6.4        12.0
Investments and Other               1.7        1.7

DST Systems, Inc.
Description of Non-GAAP Adjustments

In addition to reporting operating income, pretax income, net income and
earnings per share on a GAAP basis, DST has also made certain non-GAAP
adjustments that are described below and are reconciled to the corresponding
GAAP measures in the attached financial schedules titled "Reconciliation of
Reported Results to Income Adjusted for Certain Non-GAAP Items" that accompany
this earnings release. DST's use of non-GAAP adjustments is further described
in the section entitled "Use of Non‑GAAP Financial Information."

The following items, which occurred during the quarter ended March 31, 2013,
have been treated as non-GAAP adjustments:

  oContract termination payment in the amount of $6.0 million from the
    partial termination of a retirement business client in the Financial
    Services Segment, included in operating revenue. The partial contract
    termination payment occurred from DST's client not completing the
    contractual conversion of certain defined contribution participants to
    DST's retirement platform as a result of a business acquisition impacting
    DST's client. The income tax expense associated with this net gain was
    approximately $2.3 million.
  oIncremental loss accrual recorded for a previously disclosed regulatory
    inquiry regarding the processing of certain pharmacy claims during the
    period 2006 to 2009, included in costs and expenses, in the amount of $2.5
    million. There was no income tax benefit attributed to this loss accrual.
  oNet gain on securities and other investments of $72.3 million, which were
    included in other income, net, is comprised of net realized gains from
    sales of available-for-sale securities of $68.5 million and net gains on
    private equity funds and other investments of $3.8 million. The income tax
    expense associated with the aggregate net gains on securities and other
    investments was approximately $27.5 million.
  oIncome tax benefits of $2.2 million, primarily resulting from the
    resolution of historical research and experimentation credits.

The following items, which occurred during the quarter ended March 31, 2012,
have been treated as non-GAAP adjustments:

  oBusiness advisory expenses associated with an action by the DST Board of
    Directors to retain independent advisors to assist the Board with its
    ongoing review of DST's business plan, assets and investment portfolio,
    included in costs and expenses, in the amount of $500,000. The income tax
    benefit associated with these expenses was approximately $200,000.
  oEmployee termination expenses of $4.0 million associated with reductions
    in workforce in the Financial Services Segment ($2.6 million) and the
    Customer Communications Segment ($1.4 million), which were included in
    costs and expenses. The aggregate income tax benefit associated with these
    costs was approximately $1.3 million.
  oOther net gain, in the amount of $17.5 million, associated with gains
    (losses) related to securities and other investments, which were included
    in other income, net. The income tax expense associated with this net gain
    was approximately $6.7 million. The $17.5 million of net gains on
    securities and other investments for first quarter 2012 was comprised of
    net realized gains from sales of available-for-sale securities of $15.4
    million and net gains on private equity funds and other investments of
    $2.4 million, partially offset by other than temporary impairments on
    available-for-sale securities of $300,000.

DST SYSTEMS, INC.

RECONCILIATION OF REPORTED RESULTS TO INCOME ADJUSTED FOR CERTAIN NON-GAAP
ITEMS

Three Months Ended March 31,

(Unaudited- in millions, except per share amounts)
                                         2013
                                         Operating  Pretax    Net      Diluted
                                         Income     Income    Income   EPS
Reported GAAP income                     $  74.6    $ 143.8   $ 93.2   $ 2.04
 Adjusted to remove:
 Included in operating income:
 Contract termination payment -          (6.0)      (6.0)     (3.7)    (0.08)
 Financial Services
 Loss accrual - Financial Services       2.5        2.5       2.5      0.06
 Included in non-operating income:
 Net gain on securities and other                   (72.3)    (44.8)   (0.98)
 investments
 Income tax credits                                           (2.2)    (0.05)
Adjusted Non-GAAP income                 $  71.1    $ 68.0    $ 45.0   $ 0.99
                                         2012
                                         Operating  Pretax    Net      Diluted
                                         Income     Income    Income   EPS
Reported GAAP income                     $  60.1    $ 83.4    $ 55.3   $ 1.22
 Adjusted to remove:
 Included in operating income:
 Business advisory expenses - Financial  0.5        0.5       0.3      0.01
 Services
 Employee termination expenses -         2.6        2.6       1.6      0.04
 Financial Services
 Employee termination expenses -         1.4        1.4       1.1      0.02
 Customer Communications
 Included in non-operating income:
 Net gain on securities and other                   (17.5)    (10.8)   (0.24)
 investments
Adjusted Non-GAAP income                 $  64.6    $ 70.4    $ 47.5   $ 1.05

      See the "Description of Non-GAAP Adjustments" section for a description
Note: of each of the above adjustments and see the Use of Non-GAAP Financial
      Information section for management's reasons for providing non-GAAP
      financial information.

DST SYSTEMS, INC.

RECONCILIATION OF INCOME FROM OPERATIONS TO EBITDA

CUSTOMER COMMUNICATIONS SEGMENT

(Unaudited- in millions)
                                                 Three Months Ended
                                                 March 31,
                                                 2013       2012
Reported GAAP income from operations             $  19.2    $ 7.2
          Adjusted to remove:
          Depreciation and amortization          10.8       11.0
Operating EBITDA, before non-GAAP items          30.0       18.2
          Adjusted to remove:
          Employee termination expenses                     1.4
Adjusted operating EBITDA, after non-GAAP items  $  30.0    $ 19.6

      See the "Description of Non-GAAP Adjustments" section for a description
Note: of each of the above adjustments and see the "Use of Non-GAAP Financial
      Information" section for management's reasons for providing non-GAAP
      financial information.

SOURCE DST Systems, Inc.

Contact: DST, Kenneth V. Hager, +1-816-435-8603, Vice President and Chief
Financial Officer, or Media, Matthew Sherman, or Nicholas Lamplough, Joele
Frank, Wilkinson Brimmer Katcher, +1-212-355-4449, or Investors, Art Crozier,
Jennifer Shotwell, or Larry Miller, Innisfree M&A Incorporated,
+1-212-750-5833