UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[ ] ANNUAL REPORT PURSUANT TO
SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended ________________
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from January 1, 2004 to June 11, 2004
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:
lock\line, LLC 401(k) Retirement 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 June 11, 2004
and December 31, 2003
3. Audited Statements of Changes in Net Assets Available for Benefits for the
Period January 1, 2004 through June 11, 2004 and for the Year Ended
December 31, 2003
4. Notes to Financial Statements
5. Signature Page
6. Consent of PricewaterhouseCoopers LLP (Exhibit 23.1)
lock\line, LLC 401(k) Retirement Plan
Financial Statements and Additional Information
June 11, 2004 and December 31, 2003
lock\line, LLC 401(k) Retirement Plan
Index to Financial Statements
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Page
Report of Independent Registered Public Accounting Firm 1
Financial Statements:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-7
Additional information*
* Schedules required by Section 2520.103-10 of the Department of Labor Rules and
Regulations for Reporting and Disclosure under ERISA have been omitted because
they are not applicable.
Report of Independent Registered Public Accounting Firm
To the Participants and Advisory Committee of the
lock\line, LLC 401(k) Retirement 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 lock\line, LLC 401(k) Retirement Plan (the "Plan") at June 11, 2004 and
December 31, 2003, and the changes in net assets available for benefits for the
period January 1, 2004 through June 11, 2004 and the year ended December 31,
2003, 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.
/s/ PricewaterhouseCoopers LLP
Kansas City, Missouri
November 19, 2004
lock\line, LLC 401(k) Retirement Plan
Statements of Net Assets Available for Benefits
--------------------------------------------------------------------------------
June 11, December 31,
2004 2003
-------------------- -------------------
Investments:
Mutual funds $ $ 1,340,146
Loans to participants 41,609
-------------------- -------------------
Total investments 1,381,755
-------------------- -------------------
Net assets available for benefits $ $ 1,381,755
==================== ===================
The accompanying notes are an integral part of these
financial statements.
2
lock\line, LLC 401(k) Retirement Plan
Statements of Changes in Net Assets Available for Benefits
--------------------------------------------------------------------------------
For the
For the Period Year Ended
January 1, 2004 December 31,
through June 11, 2004 2003
----------------------- ------------------------
Investments income:
Dividends, interest and other distributions $ $ 20,992
4,650
Net appreciation (depreciation) in fair value of
investments (23,287) 273,661
----------------------- ------------------------
(18,637) 294,653
----------------------- ------------------------
Transfer to DST Systems, Inc. 401(k) Profit Sharing Plan
(1,306,261)
Benefits paid to participants (56,607) (134,028)
Administrative expenses (250) (5,770)
----------------------- ------------------------
(1,363,118) (139,798)
----------------------- ------------------------
Net change in net assets available for benefits (1,381,755) 154,855
Net assets available for benefits:
Beginning of year 1,381,755 1,226,900
----------------------- ------------------------
End of year $ $ 1,381,755
======================= ========================
The accompanying notes are an integral part of these
financial statements.
3
lock\line, LLC 401(k) Retirement Plan
Notes to Financial Statements
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1. Description of the Plan
The lock\line, LLC 401(k) Retirement 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.
Effective June 11, 2004, the Plan was merged into DST Systems, Inc. 401(k)
Profit Sharing Plan (the "DST Plan"). Accordingly, the accompanying report does
not include any financial information for net assets available for plan benefits
at June 11, 2004, due to the merger.
Sponsor
The Plan sponsor is lock\line, LLC (the "Sponsor"), a wholly-owned subsidiary
of DST Systems, Inc. ("DST"). Certain of its subsidiaries and affiliates
participate in the plan.
Trustee
As of December 31, 2003, the trustee of the Plan was UMB Bank, n.a. and as of
June 11, 2004, the trustee of the Plan was Marshall & Ilsley Trust Company N.A.
The Trustees hold and administer all assets of the Plan in accordance with the
provisions of the Plan agreement.
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 period
ended June 11, 2004, and the year ended December 31, 2003, the Sponsor paid Plan
expenses of $4,383 and $11,930, respectively.
Eligibility
All employees of the Sponsor who were employed prior to July 1, 2002, and who
were not members of a collective bargaining unit or reclassified employees were
eligible to participate in the Plan on the Plan entry date. The Plan entry date
is the later of the first day of the month following the date the employee
commences service or the date the employee attains age 20. After December 31,
2002, no new participants were allowed into the Plan. Beginning January 1, 2003,
new participants were enrolled in the DST Systems, Inc. 401(k) Profit Sharing
Plan.
Contributions and Vesting
Effective January 1, 2003, all invested balances in the Plan were fully vested
and no further contributions were permitted. Participant and Sponsor
contributions under the Plan after December 31, 2002, were made to the DST
Systems, Inc. 401(k) Profit Sharing Plan and are subject to its terms and
conditions.
Participant accounts
Each participant's account was credited with the participant's contributions,
matching contributions, profit sharing contributions and rollover contributions.
Each participant's account is credited with an allocation of Plan earnings or
losses. Allocations of earnings or losses are based on account balances.
Discretionary contributions were allocated to participant accounts based on the
proportion which the participant's eligible compensation bore to the aggregate
eligible compensation of all participants for the period. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's account.
4
Investment options
Participants may direct their contributions into DST Common Stock ($0.01 par
value) or any number of the 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.
Plan participants
The following summarizes the number of participants by investment option as of
June 11, 2004 and December 31, 2003:
June 11, December 31,
2004 2003
------------------ --------------------
American Century Adv Ultra 42
Dodge & Cox 102
Dreyfus Appreciation 29
Fidelity Contra 50
Fidelity Equity Income 42
Gabelli Asset 26
Janus Overseas 47
Janus Twenty 37
Managers Fund Special Equity 11
Pimco Total Return 25
Strong Opportunity 28
T Rowe Small Cap 6
UMB Scout Prime 27
Vanguard Horizon 23
Vanguard Index 500 38
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 upon termination
as a cash 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.
5
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 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 publicly announced by
the Trustee plus 1%.
Plan termination
The Plan was merged into the DST Plan as of June 11, 2004 and, therfore, has
ceased to exist as a separate plan. The Sponsor believes the Plan (as merged)
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.
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 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. 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. Unrealized gains and losses are
recognized in the year in which they occur. Loans are valued at the current
amount due from participants.
Contributions
Contributions are recognized in the year to which they relate.
6
Accounting for obligations for benefit payments
The Plan does not record a liability relating to the obligations for benefit
payments. For the period ended June 11, 2004, and the year ended December 31,
2003, amounts allocated to participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment but not yet
paid prior to June 11, 2004, and December 31, 2003, respectively.
Income tax status of the Plan
The Internal Revenue Service has determined and informed the Sponsor by a letter
dated August 30, 2001, 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 letter. However, 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.
Reclassifications
Previously reported amounts for the prior year have in some instances been
reclassified to conform to the current year presentation. These
reclassifications had no effect on net assets available for benefits.
3. Plan Investments
The following investments represent 5% or more of net assets available for
benefits at the period or year-end:
June 11, December 31,
2004 2003
------------------ -------------------
Mutual funds:
American Century Adv Ultra $ $ 129,815
Dodge & Cox 223,169
Dreyfus Appreciation 95,686
Fidelity Contra 188,872
Fidelity Equity Income 119,301
Janus Overseas 101,084
Vanguard Index 500 112,444
During the period ended June 11, 2004, and the year ended December 31, 2003, the
Plan's participant-directed investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
(depreciated) in value as follows:
For the
For the Period Year Ended
January 1, 2004 December 31,
through June 11, 2004 2003
------------------------ -----------------------
Mutual funds $ (23,287) $ 273,661
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.
lock\line, LLC 401(k) Retirement Plan
Date: December 7, 2004 By: /s/ Kenneth V. Hager
------------------------------------------
Kenneth V. Hager
Treasurer of lock\line, LLC,
Plan Administrator