UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECITON 15(d) OF
THE SECURITES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-14036
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
DST Systems, Inc. 401(k) Profit Sharing Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
DST Systems, Inc.
333 West 11th Street
Kansas City, Missouri 64105
REQUIRED INFORMATION
1. Report of PricewaterhouseCoopers LLP
2. Audited Statements of Net Assets Available for Benefits as of December 31,
2004 and 2003
3. Audited Statements of Changes in Net Assets Availablefor Benefits for the
Years ended December 31, 2004 and 2003
4. Notes to Financial Statements
5. Schedule of Assets Held at End of Year
6. Signature Page
7. Consent of PricewaterhouseCoopers LLP (Exhibit 23.1)
DST SYSTEMS, INC. 401(k) PROFIT SHARING PLAN
FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
DECEMBER 31, 2004 AND 2003
DST SYSTEMS, INC. 401(k) PROFIT SHARING PLAN
INDEX TO FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
PAGE
Report of Independent Registered Public Accounting Firm 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
December 31, 2004 and 2003 2
Statements of Changes in Net Assets Available for Benefits
for the years ended December 31, 2004 and 2003 3
Notes to Financial Statements 4 - 10
ADDITIONAL INFORMATION: SCHEDULE
Schedule H, line 4i - Schedule of Assets (Held at End of Year) I
*Other schedules required by Section 2520.103-10 of the Department of Labor
Rules and Regulations for Reporting and Disclosure udner ERISA have been
omitted because they are not applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and the Advisory Committee of the
DST Systems, Inc. 401(k) Profit Sharing Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the DST Systems, Inc. 401(k) Profit Sharing Plan (the "Plan") at December 31,
2004 and 2003, and the changes in net assets available for benefits for the year
ended December 31, 2004, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets (Held
At End of Year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ PricewaterhouseCoopers LLP
Kansas City, Missouri
June 22, 2005
1
DST SYSTEMS, INC. 401(K) PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
--------------------------------------------------------------------------------
DECEMBER 31,
------------------------------
2004 2003
------------- -------------
ASSETS
Cash and cash equivalents $ 33,125 $ 66,039
------------- -------------
Investments:
Mutual Funds 248,926,016 201,643,169
DST Common Stock 27,256,363 25,281,379
Investment in Master Trust 317,117,474 282,084,683
Loans to participants 7,295,973 5,713,094
------------- -------------
Total investments 600,595,826 514,722,325
------------- -------------
Contributions receivable:
Employer 22,179,626 21,457,459
Participants 1,029,333
Other 562,273
------------- -------------
23,771,232 21,457,459
------------- -------------
LIABILITIES
Due to broker for securities purchased 1,931,307
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Net assets available for benefits $ 622,468,876 $ 536,245,823
============= =============
The accompanying notes are an integral part of these financial statements.
2
DST SYSTEMS, INC. 401(K) PROFIT SHARING PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
--------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------
2004 2003
-------------- --------------
Investment income:
Dividends, interest and other distributions $ 3,436,234 $ 1,620,007
Net appreciation in fair value of investments 27,364,479 28,142,419
Net appreciation in fair value of investment
in Master Trust 27,317,554 57,020,861
-------------- --------------
58,118,267 86,783,287
-------------- --------------
Contributions:
Employer 34,883,324 33,277,635
Participants 32,028,374 29,223,552
-------------- --------------
66,911,698 62,501,187
-------------- --------------
125,029,965 149,284,474
Transfer from DST Systems of California, Inc.
401 (k) Retirement Plan 72,448,666
Transfer from lock\line, LLC 401 (k)
Retirement Plan 1,306,261
Transfer to Rapid Solutions Group Profit
Sharing Plan (10,445,499)
Benefits paid to participants (29,573,417) (18,040,015)
Administrative expenses (94,257) (67,452)
-------------- --------------
(38,806,912) 54,341,199
-------------- --------------
Net change in net assets available for benefits v 86,223,053 203,625,673
Net assets available for benefits:
Beginning of year 536,245,823 332,620,150
-------------- --------------
End of year $ 622,468,876 $ 536,245,823
============== ==============
The accompanying notes are an integral part of these financial statements.
3
DST SYSTEMS, INC. 401(K) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE PLAN
The DST Systems, Inc. 401(k) Profit Sharing Plan (the "Plan") is a contributory,
defined contribution plan subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA). The following brief description of the Plan
is provided for general information purposes only. Participants should refer to
the Plan agreement for more complete information.
On June 11, 2004, the lock\line, LLC 401(k) Retirement Plan was merged into the
Plan. The net assets available for the lock\line, LLC 401(k) Retirement Plan at
June 11, 2004 are shown as a transfer into the Plan on the Plan's financial
statements for the year ended December 31, 2004.
On January 26, 2004, the Plan transferred net assets to the Rapid Solutions
Group Profit Sharing Plan in connection with the completion of the Janus Capital
Group Inc. ("Janus") exchange.
Effective December 31, 2003, the DST Systems of California, Inc. 401(k)
Retirement Plan was merged into the DST Systems, Inc. 401(k) Profit Sharing
Plan.
SPONSOR
The Plan Sponsor is DST Systems, Inc. ("DST" or the "Sponsor"). Certain of its
subsidiaries and affiliates participate in the Plan.
TRUSTEE AND INVESTMENT MANAGER
The trustee of the Plan is Marshall & Ilsley Trust Company N.A. The Trustee
holds and administers all assets of the Plan in accordance with the provisions
of the Plan agreement.
The investment manager of the DST Systems, Inc. Master Trust ("Master Trust") is
Ruane, Cunniff & Co., Inc. (the "Investment Manager"). For the years ended
December 31, 2004 and 2003, the Sponsor paid expenses of $4,022,459 and
$3,030,838, respectively.
ADMINISTRATION OF THE PLAN
An advisory committee (the "Advisory Committee"), which consists of members who
are selected by the Board of Directors of DST, has full power, authority and
responsibility to control and manage the operations and administration of the
Plan. All expenses of operating the Plan may be paid out of Plan assets, except
to the extent the Sponsor decides to pay these expenses. For the years ended
December 31, 2004 and 2003, the Sponsor paid Plan expenses of $447,482 and
$446,663, respectively.
ELIGIBILITY
All employees of the Sponsor who are not members of a collective bargaining unit
or nonresident aliens are eligible to participate in the Plan on the Plan entry
date. The Plan entry date is the first day of the calendar month following the
date an employee, other than seasonal or temporary, completes one hour of
service. Seasonal and temporary employees must complete 1,000 hours of service,
as defined in the Plan agreement, prior to entering the Plan.
CONTRIBUTIONS
Contributions are made through participant salary reductions and rollovers from
other qualified plans. Participants can contribute from 1% to 25% of their
annual gross salary to the Plan (subject to Internal Revenue Service
limitations). Beginning in 2002, participants aged 50 or older who have met the
annual
4
DST SYSTEMS, INC. 401(K) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
contribution maximum as set by law may make additional contributions or
"catch-up" contributions (subject to Internal Revenue Service limitations).
Sponsor 401(k) contributions consist of a dollar-for-dollar match of the first
3% of participant contributions ("highly compensated employees" are subject to
Internal Revenue Service limitations).
In addition, the Sponsor may make discretionary profit sharing contributions.
Generally, an employee must complete 1,000 hours of service during the Plan year
and be employed on December 31 to be eligible.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions,
matching contributions, profit sharing contributions, rollover contributions,
forfeitures of terminated participants' non-vested accounts and an allocation of
Plan earnings or losses. Allocations of earnings or losses are based on account
balances. Discretionary contributions and forfeitures are allocated to
participant accounts based on the proportion which the participant's eligible
compensation bears to the aggregate eligible compensation of all participants
for the year. The benefit to which a participant is entitled is the benefit that
can be provided from the participant's account.
VESTING
Participants are always 100% vested in their own contributions, rollover
contributions and catch-up contributions (as adjusted to reflect investment
earnings and losses).
Generally, participants originally employed by the Sponsor prior to January 1,
2000, will become vested in Sponsor matching contributions and Sponsor profit
sharing contributions (as adjusted to reflect investment earnings and losses) in
accordance with the following schedule:
YEARS OF SERVICE PERCENTAGE VESTED
----------------- -----------------
less than 1 0%
1 but less than 2 10%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 or more 100%
Participants not within the above categories will be vested in Sponsor matching
contributions and Sponsor profit sharing contributions (as adjusted to reflect
investment earnings and losses) according to the following schedule:
YEARS OF SERVICE PERCENTAGE VESTED
---------------- -----------------
less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 or more 100%
5
DST SYSTEMS, INC. 401(K) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
INVESTMENT OPTIONS
Participants may direct their contributions into DST Common Stock ($0.01 par
value) or any number of the mutual fund investment options as selected by the
Advisory Committee. The investment options contain different degrees of risks.
Participants should refer to the respective fund prospectus for a more complete
description of the investment objectives of each fund. The Advisory Committee
reserves the right to change the available investment options from time to time.
Participants may change their investment options daily.
FORFEITURES
Forfeitures of unvested accounts are first used for the restoration of
reemployed participants' forfeited amounts and then added to the profit sharing
contribution. For the years ended December 31, 2004 and 2003, forfeitures of
unvested accounts totaled $2,117,456 and $1,542,676, respectively.
All profit sharing contributions are invested by the Trustee as advised by the
Investment Manager.
PLAN PARTICIPANTS
The following summarizes the number of participants by investment option as of
December 31, 2004:
American Century Growth 1,733
American Century International Growth 1,142
American Century Select 1,197
American Century Ultra 2,041
American Century Value 1,883
Davis New York Venture 1,353
Dodge & Cox International Stock 818
Dodge And Cox Balanced 1,261
DST Systems Company Stock 3,126
Fidelity Advisor Growth Opportunities 1,183
Janus Enterprise 1,919
Janus Investment 2,384
Janus Mercury 2,621
Janus Overseas 2,050
Laudus Rosenberg International Small Cap 513
Lord Abbett Affiliated 860
Lord Abbett Bond-Debenture 683
Managers Fund Special Equity 1,501
Money Market Obligation Prime Value 970
PIMCO Total Return 1,947
Royce Total Return 2,456
Standish Mellon Fixed Income 1,015
T. Rowe Price Mid-Cap Growth 3,033
Vanguard Institutional Index 3,919
Vanguard Total Bond Index 2,996
Vanguard Value Index 1,369
6
DST SYSTEMS, INC. 401(K) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
DISTRIBUTION OF BENEFITS
Benefit distributions generally will be made in the event of retirement, death,
disability, resignation or dismissal. A participant's normal retirement age is
59 1/2.
Balances not exceeding $5,000 will be automatically distributed as a lump sum as
soon as administratively practicable following termination of employment.
Balances exceeding $5,000 (excluding rollover contributions and related earnings
or losses) will be distributed upon participant election as soon as
administratively practicable but no later than April 1 of the Plan year
following the Plan year in which age 70 1/2 is attained. Such distributions may
be elected as a lump sum or paid in monthly, quarterly or annual installments.
Distributions shall be made in cash or, at the option of the Participant, in
cash plus the number of whole shares of DST Common Stock allocated to the
Participant's account.
Unless the participant otherwise elects, distributions begin no later than the
60th day after the close of the Plan year in which a participant reaches normal
retirement age or celebrates their 10th anniversary as a Plan member (whichever
is later). Participants under the age of 62 with balances exceeding $5,000
(excluding rollover contributions and related earnings or losses) must consent
to any distribution.
Upon death, all sums credited to the participant's account will be paid to the
beneficiary or beneficiaries designated by the participant.
Distributions may also be made in the event of financial hardship of the
participant. Certain restrictions apply.
PARTICIPANT LOANS
Participants may borrow the lesser of $50,000 or 50% of their vested
participant-directed accounts (subject to certain Plan and Internal Revenue
Service limitations). Generally, loans must be repaid within five years. Loans
bear a fixed rate of interest, which is set at loan origination using the Prime
rate as published in the Wall Street Journal plus 1%.
PLAN TERMINATION
The Sponsor believes the Plan will continue without interruption; however, it
reserves the right to terminate the Plan at any time subject to the provisions
of ERISA. In the event of Plan termination, participants will become fully
vested in any unvested balances from Sponsor contributions and their respective
account balances will be distributed in accordance with the Plan.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements are presented on the accrual basis of
accounting. Certain amounts in prior year's financial statements have been
reclassified to conform to current year presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the
7
DST SYSTEMS, INC. 401(K) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
reported amounts of assets, liabilities and changes in net assets available for
plan benefits. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Short-term liquid investments with a maturity of three months or less are
considered cash equivalents. Due to the short-term nature of these investments,
carrying value approximates market value.
INVESTMENT VALUATION AND SECURITY TRANSACTIONS
Investments are recorded at fair value. Unrealized gains and losses are
recognized in the year in which they occur. Investments in mutual funds and DST
Common Stock are valued at net asset value representing the value at which
shares of the fund may be purchased or redeemed. The investments of the Master
Trust are recorded at fair value as determined by quoted prices in active
markets. Investment income of the Master Trust is allocated quarterly to
participating plans based upon the fair value of participating plan interests in
the Master Trust at the end of each quarter. Net assets of the Master Trust are
allocated to participating plans based upon the value of the participating plan
interests in the Master Trust at the beginning of the quarter plus actual
contributions to the Master Trust and allocated investment income less actual
distributions from the Master Trust. Loans are valued at the current amount due
from participants.
CONTRIBUTIONS
Contributions are recognized in the year to which they relate.
ACCOUNTING FOR OBLIGATIONS FOR BENEFIT PAYMENTS
The Plan does not record a liability relating to the obligations for benefit
payments. The following is a reconciliation of net assets available for benefits
per the financial statements to Form 5500:
DECEMBER 31,
--------------------------------------------
2004 2003
-------------------- -------------------
Net assets available for benefits
per the financial statements
$ 622,468,876 $ 536,245,823
Amounts allocated to withdrawing
participants (36,929)
-------------------- -------------------
Net Assets available for benefits
per the Form 5500 $ 622,431,947 $ 536,245,823
==================== ===================
The following is a reconciliation of benefits paid to participants per the
financial statements to Form 5500:
YEAR ENDED
DECEMBER 31,
----------------------
2004
----------------------
Benefits paid to participants per the financial statements $ 29,573,417
Add: Amounts allocated to withdrawing participants at December 31, 2004 36,929
Less: Amounts allocated to withdrawing participants at December 31, 2003
----------------------
Benefits paid to participants per Form 5500 $ 29,610,346
======================
8
DST SYSTEMS, INC. 401(K) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
December 31, 2004, but not yet paid as of that date.
INCOME TAX STATUS OF THE PLAN
The Internal Revenue Service has determined and informed the Sponsor by a letter
dated August 12, 2002, that the Plan is designed in accordance with applicable
sections of the Internal Revenue Code (the "IRC"). The Plan has been amended
since receiving the determination. The Advisory Committee and the Plan's tax
counsel believe that the Plan is designed and is currently being operated in
compliance with the applicable requirements of the IRC. Therefore, no provision
for income taxes has been included in the Plan's financial statements.
3. PLAN INVESTMENTS
The following investments represent 5% or more of net assets available for
benefits at year-end:
DECEMBER 31,
-------------------------------------------------
2004 2003
----------------------- ----------------------
Vanguard Institutional Index $ 34,355,504 $
Investment in Master Trust 317,117,474 282,084,683
The Investment in Master Trust is nonparticipant-directed.
During 2004 and 2003, the Plan's participant-directed investments (including
gains and losses on investments bought and sold, as well as held during the
year) appreciated in value as follows:
YEAR ENDED DECEMBER 31,
-------------------------------------------------
2004 2003
----------------------- ----------------------
Mutual funds $ 21,852,654 $ 26,208,105
DST Common Stock 5,511,825 1,934,314
----------------------- ----------------------
$ 27,364,479 $ 28,142,419
======================= ======================
4. MASTER TRUST
The Plan's percentage ownership in the Master Trust is 75.7% and 79.0% at
December 31, 2004 and 2003, respectively. The following Master Trust disclosures
represent 100% of the balances in the Master Trust.
9
DST SYSTEMS, INC. 401(K) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The Master Trust's assets by general type at year-end is as follows:
DECEMBER 31,
-------------------------------------------------
2004 2003
----------------------- ----------------------
Other Receivables $ 334,018 $
Mutual funds 44,271,235 870,009
Common stocks 374,216,667 348,566,340
Corporate debt 7,747,025
Government securities 1,634 2,977
----------------------- ----------------------
$ 418,823,554 $ 357,186,351
======================= ======================
The Master Trust's total investment income by type is as follows:
YEAR ENDED DECEMBER 31,
-------------------------------------------------
2004 2003
----------------------- ----------------------
Interest $ 645,489 $ 341,918
Dividends 2,475,135 1,285,360
Net appreciation 32,789,925 70,944,800
----------------------- ----------------------
$ 35,910,549 $ 72,572,078
======================= ======================
The Master Trust's net appreciation of investments by type is as follows:
YEAR ENDED DECEMBER 31,
-------------------------------------------------
2004 2003
----------------------- ----------------------
Mutual funds $ 304,962 $ 35,046
Common stocks 32,657,865 68,853,739
Corporate debt (172,764) 2,056,105
Government securities (138) (90)
----------------------- ----------------------
$ 32,789,925 $ 70,944,800
======================= ======================
10
Schedule I
DST SYSTEMS, INC. 401(K) PROFIT SHARING PLAN
EIN 43-1581814 / PIN 004
Schedule H, line 4i -- Schedule of Assets (Held At End of Year)
December 31, 2004
(A) (B) IDENTITY (C) DESCRIPTION (D) COST (E) CURRENT VALUE
----------------------------------------------------------------------------------------------------------------
American Century Value (1) $ 9,755,561
American Century Growth (1) 7,492,431
American Century Select (1) 4,822,936
American Century Ultra (1) 11,639,466
American Century International (1) 3,686,858
* DST Systems, Inc. Common Stock (1) 27,256,362
Davis NY Venture (1) 8,536,767
Dodge & Cox Balanced (1) 5,960,248
Dodge & Cox International (1) 3,306,295
Fidelity Advisor Growth (1) 4,401,440
Janus Investment Investment (1) 12,241,236
Janus Investment Enterprise (1) 11,355,395
Janus Investment Mercury (1) 18,777,310
Janus Investment Overseas (1) 11,469,272
Laudus Rosenberg International (1) 1,552,369
Lord Abbett Affiliated Class A (1) 3,428,378
Lord Abbett Bond Debenture (1) 1,565,533
Managers Fund Special Equity (1) 7,571,404
Marshall Money Market (1) 399,614
Money Market Obligs Prime Value (1) 8,235,079
PIMCO Total Return (1) 10,313,091
T. Rowe Price Mid-cap Growth (1) 18,382,898
Royce Total Return (1) 15,604,539
Standish Mellon Fixed Income (1) 4,344,726
Vanguard Bond Index (1) 22,990,645
Vanguard Index 500 (1) 34,355,505
Vanguard Value (1) 6,737,022
* Participant Loans Interest rate - Prime + 1 7,295,973
* Indicates a party-in-interest
(1) In accordance with instructions to the Form 5500, the Plan is not required
to disclose the cost component of participant-directed investments.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
DST SYSTEMS, INC. 401(k) PROFIT SHARING PLAN
June 24, 2005 By /s/ Kenneth V. Hager
--------------------------------------
Kenneth V. Hager
Vice President, Chief Financial Officer
and Treasurer