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, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
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
December 31, 2003 and 2002
3. Audited Statements of Changes in Net Assets Available for Benefits for the
Years Ended December 31, 2003 and 2002
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)
lock\line, LLC 401(k) Retirement Plan
Financial Statements and Additional Information
December 31, 2003 and 2002
lock\line, LLC 401(k) Retirement Plan
Index to Financial Statements and Additional Information
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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* 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 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 December 31, 2003
and 2002, and the changes in net assets available for benefits for the year
ended December 31, 2003, and six-months ended December 31, 2002, 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 24, 2004
lock\line, LLC 401(k) Retirement Plan
Statements of Net Assets Available for Benefits
--------------------------------------------------------------------------------
December 31,
-------------------------------------------
2003 2002
-------------------- -------------------
Investments:
Mutual funds $ 1,340,146 $ 1,181,648
Loans to participants 41,609 18,894
-------------------- -------------------
Total investments 1,381,755 1,200,542
Contributions receivable:
Employer 8,755
Participants 17,603
-------------------- -------------------
26,358
-------------------- -------------------
Net assets available for benefits $ 1,381,755 $ 1,226,900
==================== ===================
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
-------------------------------------------------------------------------------
------------------- -----------------------
Year Ended Six Months Ended
------------------- -----------------------
December 31, December 31,
------------------- -----------------------
2003 2002
------------------- -----------------------
Investments income:
Dividends, interest and other distributions $ 1,569 $ 364
Net appreciation (depreciation) in fair value of
investments 293,084 (238,906)
------------------- -----------------------
294,653 (238,542)
------------------- -----------------------
Contributions:
Employer 69,392
Participants 196,541
------------------- -----------------------
265,933
Transfer from previous existing plan 1,221,402
Benefits paid to participants (134,028) (21,062)
Administrative expenses (5,770) (831)
------------------- -----------------------
(139,798) 1,199,509
------------------- -----------------------
Net change in net assets available for benefits 154,855 1,226,900
Net assets available for benefits:
Beginning of year 1,226,900
------------------- -----------------------
End of year $ 1,381,755 $ 1,226,900
=================== =======================
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.
Sponsor
The Plan Sponsor is lock\line, LLC, a wholly-owned subsidiary of DST Systems,
Inc. ("DST"). Certain of its subsidiaries and affiliates (the "Sponsor")
participate in the plan.
Trustee
As of December 31, 2003, the trustee of the Plan was UMB Bank, n.a. (the
"Trustee"). Subsequently, the assets have been transferred to Marshall & Ilsley
Trust Company N.A., the current trustee of the plan. The Trustee holds and
administers 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 the Sponsor, 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 year
ended December 31, 2003, the Sponsor paid Plan expenses of $11,930.
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, 2004,
new participants are 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 are planned. Participant and Sponsor contributions
under the Plan after December 31, 2002, are 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 year. 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
December 31, 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.
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.
5
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 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.
Subsequent Event
Ownership of all Plan assets was transferred to the DST Systems, Inc. 401(k)
Profit Sharing Plan (the "DST Plan") in June 2004.
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. Amounts allocated to participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
December 31, 2003, 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 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.
3. Plan Investments
The following investments represent 5% or more of net assets available for
benefits at year-end:
December 31,
------------------------------------------
2003 2002
------------------ -------------------
Mutual funds:
American Century Adv Ultra $ 129,815 $ 118,651
Dodge & Cox 223,169 223,704
Dreyfus Appreciation 95,686 83,458
Fidelity Contra 188,872 160,746
Fidelity Equity Income 119,301 99,701
Gabelli Asset 66,014
Janus Overseas 101,084 64,283
Janus Twenty 76,154
Vanguard Index 500 112,444 79,616
During 2003 and 2002, 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 Six Months Ended
------------------------ -----------------------
December 31, December 31,
------------------------ -----------------------
2003 2002
------------------------ -----------------------
Mutual funds $ 293,084 $ (238,906)
7
Schedule I
* 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
lock\line, LLC 401(k) Retirement Plan
EIN 48-1248614 / PIN 001
Schedule H, line 4i -- Schedule of Assets (Held At End of Year)
December 31, 2003
(a) (b) Identity (c) Description (d) Cost (e) Current Value
------------- -------------------------------- ------------------------------- -------------------- ----------------------
American Century Adv Ultra (1) $ 129,815
Dodge & Cox Balanced (1) 223,169
Dreyfus Appreciation (1) 95,686
Fidelity Contra (1) 188,872
Fidelity Equity Income (1) 119,301
Gabelli Asset (1) 68,873
Janus Investment Overseas (1) 101,083
Janus Investment Twenty (1) 64,516
Managers Fund Special Equity (1) 39,597
Pimco Total Return (1) 56,125
Strong Opportunity (1) 45,283
T. Rowe Price Small Cap (1) 8,954
UMB Scout Prime Value (1) 40,962
Vanguard Horizon Capital Opportunity (1) 45,466
Vanguard Index Trust 500 Portfolio (1) 112,444
* Participant Loans Interest rate - Prime + 1% 0 41,609
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: June 28, 2004 By: /s/ Kenneth V. Hager
------------------------------------------
Kenneth V. Hager
Treasurer of lock\line, LLC,
Plan Administrator