Consolidated net income for the nine months ended September 30, 2008 was $172.3 million ($2.91 per diluted share) compared to $811.0 million ($11.37 per diluted share) for the nine months ended September 30, 2007. Taking into account certain non-GAAP adjustments explained herein, consolidated net income was $53.2 million ($0.97 per diluted share) for third quarter 2008 compared to $61.5 million ($0.88 per diluted share) for third quarter 2007, and $162.1 million ($2.74 per diluted share) for the nine months ended September 30, 2008 compared to $182.8 million ($2.55 per diluted share) for the nine months ended September 30, 2007.

Third quarter 2008 financial highlights were as follows:

• Consolidated operating revenues decreased $5.3 million or 1.3% to $414.2 million as compared to $419.5 million for third quarter 2007 primarily due to lower Output Solutions operating revenues, partially offset by increases in mutual fund shareowner processing revenues, professional services provided by DST Health Solutions and AWD license fee revenues.
• Consolidated income from operations increased $3.6 million or 4.8% to $78.9 million as compared to $75.3 million for third quarter 2007. Taking into account certain non-GAAP adjustments affecting the 2007 results, income from operations decreased $700,000 or 0.9% as compared to third quarter 2007. Output Solutions income from operations decreased $2.1 million from lower revenues. Financial Services income from operations increased $1.4 million as increased contributions from DST Health Solutions and AWD were partially offset by lower contributions from international financial services operations.
• DST converted approximately 3.6 million subaccounts during third quarter 2008. In early October 2008, DST converted approximately 2.0 million registered mutual fund shareowner accounts.
• Equity in earnings of unconsolidated affiliates decreased $1.3 million as compared to third quarter 2007. Lower equity in earnings of BFDS and Argus, primarily due to lower investment earnings on cash balances maintained on behalf of customers, were partially offset by higher equity in earnings of IFDS and higher contributions from real estate joint ventures.
• Other income decreased $12.1 million to $2.8 million as compared to third quarter 2007. Taking into account certain non-GAAP adjustments, other income decreased $7.2 million as compared to third quarter 2007. In July 2007, the Company received approximately $980 million from the sale of Asurion Corporation. The majority of the proceeds from the Asurion transaction were used to pay down debt. The remainder of the proceeds was invested in cash and short-term investments and was used in December 2007 to satisfy tax obligations associated with the Asurion sale. The decrease in other income (primarily interest income) as compared to third quarter 2007 is attributable to lower amounts of short-term investments. Interest expense increased $2.2 million to $13.8 million as compared to third quarter 2007. The increase in interest expense as compared to third quarter 2007 is primarily attributable to the higher levels of indebtedness.

Share-related activity during third quarter 2008 was as follows:

• During third quarter 2008, the Company repurchased 3,011,587 shares of DST common stock for $175.1 million or approximately $58.14 per share. At September 30, 2008, there were approximately 1.2 million shares remaining under the existing share repurchase authorization plan.
• The Company had approximately 50.3 million shares outstanding at September 30, 2008, a decrease of 11.2 million shares from September 30, 2007. Shares outstanding at September 30, 2008 include approximately 2.6 million unvested restricted shares which are excluded from the determination of average common shares outstanding used in the calculation of basic earnings per share. The net effect of share repurchases and shares issued from stock option exercises during third quarter 2008 resulted in a net decrease in shares outstanding of approximately 3.0 million shares from June 30, 2008.
• Diluted shares outstanding for third quarter 2008 were 55.2 million shares, a decrease of 14.7 million shares or 21.0% from third quarter 2007, and a decrease of 2.8 million shares or 4.8% from second quarter 2008. Diluted shares outstanding at September 30, 2008 include an aggregate 5.9 million shares comprised of the dilutive effects of 3.1 million shares from convertible debentures, 1.7 million shares from restricted stock and 1.1 million shares from outstanding stock options. The aggregate dilutive effect of these items decreased by approximately 500,000 shares from second quarter 2008 from decreases in the Company's average share price, while the aggregate dilutive effect of these items decreased by approximately 4.1 million shares from third quarter 2007 due to decreases in the Company's average stock price and lower stock options outstanding.
• Total stock options and restricted stock ("equity units") outstanding at September 30, 2008 were 8.5 million, a decrease of 100,000 equity units or 1.2% from June 30, 2008 and a decrease of 700,000 equity units or 7.6% from September 30, 2007.

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