11-K 1 cure11k0603.txt CURE11K 401KPLAN 0603 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 11-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ----------- ACT OF 1934 For the fiscal year ended DECEMBER 31, 2002 OR TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES ----------- EXCHANGE ACT OF 1934 For the transition period form __________ to __________ COMMISSION FILE NUMBER: 000-19370 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: CURATIVE HEALTH SERVICES, INC. EMPLOYEE SAVINGS PLAN B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: CURATIVE HEALTH SERVICES, INC. 150 Motor Parkway Hauppauge, NY 11788 INDEX Items 1 through 3 Not Applicable Item 4 Financial Statements and Supplemental Schedule for Curative Health Services, Inc. Employee Savings Plan Signature Exhibits 23.1 Consent of Independent Auditors 99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 CURATIVE HEALTH SERVICES, INC. EMPLOYEE SAVINGS PLAN FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE YEARS ENDED DECEMBER 31, 2002 AND 2001 WITH REPORT OF INDEPENDENT AUDITORS Curative Health Services, Inc. Employee Savings Plan Index to Financial Statements and Supplemental Schedule Years ended December 31, 2002 and 2001 Contents Report of Independent Auditors.............................................. 1 Financial Statements Statements of Net Assets Available for Plan Benefits........................ 2 Statements of Changes in Net Assets Available for Plan Benefits............. 3 Notes to Financial Statements............................................... 4 Supplemental Schedule Form 5500, Schedule H, Line 4i - Schedule of Assets Held At End of Year as of December 31, 2002...................................... 9 All other schedules are omitted as they are not applicable or are not required based on the disclosure requirements of the Employee Retirement Income Security Act of 1974, as amended, and applicable regulations issued by the U.S. Department of Labor. Report of Independent Auditors To the Administrator of the Curative Health Services, Inc. Employee Savings Plan We have audited the accompanying statements of net assets available for plan benefits of the Curative Health Services, Inc. Employee Savings Plan (the "Plan") as of December 31, 2002 and 2001, and the related statements of changes in net assets available for plan benefits for the years then ended. 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 in accordance with auditing standards generally accepted in the 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan at December 31, 2002 and 2001, and the changes in its net assets available for plan benefits for the years then ended, in conformity with accounting principles generally accepted in the United States. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets held at end of year as of December 31, 2002 is presented for purposes of additional analysis and is not a required part of the 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. This supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Ernst & Young LLP May 28, 2003 -1- Curative Health Services, Inc. Employee Savings Plan Statements of Net Assets Available for Plan Benefits December 31 2002 2001 ------------ ------------ Assets Investments, at fair value: Guaranteed Account $ 1,474,482 $ 1,528,351 Money Market Account 774,443 798,659 Bond and Mortgage Account 955,504 767,261 International Stock Account 746,151 881,025 Real Estate Account 477,415 455,293 Bond Emphasis Balanced Account 373,215 435,832 Principal Financial Group, Inc. Stock Account 564,061 558,475 Government Securities Account 477,483 405,651 Medium Company Value Account 1,390,580 1,540,382 Large Cap Stock Index Account 949,931 1,553,014 Large Company Blend Account 1,312,230 2,021,109 CHS Stock Account 2,673,661 2,007,809 American Century Income & Growth Account 50,570 - Lifetime Strategic Income Account 14,623 - Lifetime 2010 Account 45,613 - Lifetime 2020 Account 3,616 - Lifetime 2030 Account 15,565 - Lifetime 2040 Account 13,742 - Lifetime 2050 Account 489 - American Century Small Cap Account 77,869 - American Century Ultra Account 27,633 - Fidelity Advisor Mid Cap Account 39,483 - Fidelity Advisor Small Cap Account 10,377 - Medium Company Blend Account 20,530 - Small Company Blend Account 60,258 - Janus Advisor Capital Appreciation Account 39,339 - ------------ ------------ Total investments 12,588,863 12,952,861 Participant loans 110,917 50,336 Participants' contributions receivable 1 21,915 ------------ ------------ Net assets available for plan benefits $ 12,699,781 $ 13,025,112 ============ ============ See accompanying notes. -2- Curative Health Services, Inc. Employee Savings Plan Statements of Changes in Net Assets Available for Plan Benefits Year ended December 31 2002 2001 ------------ ------------ Additions to net assets: Contributions: Employer $ 4,519 $ 130,950 Participants 1,595,222 1,283,497 ---------- ---------- Total contributions 1,599,741 1,414,447 Investment (loss) income: Interest and dividends 757,104 1,212,906 Net realized and unrealized depreciation in fair value of pooled investments (827,486) (738,630) ---------- ---------- Total investment (loss) income (70,382) 474,276 Transfer of assets into plan (Note 1) 262,596 - Other income (Note 3) 246 448,504 ---------- ---------- Total additions 1,792,201 2,337,227 Deductions from net assets: Benefits paid to participants 2,112,032 2,561,297 Administrative expenses 5,500 4,679 Other expenses - 16 ---------- ---------- Total deductions 2,117,532 2,565,992 ---------- ---------- Net decrease (325,331) (228,765) Net assets available for plan benefits at beginning of year 13,025,112 13,253,877 ---------- ---------- Net assets available for plan benefits at end of year $ 12,699,781 $ 13,025,112 ========== ========== See accompanying notes. -3- Curative Health Services, Inc. Employee Savings Plan Notes to Financial Statements December 31, 2002 1. Description of the Plan The following description of the Plan provides general information. Participants should refer to the Summary Plan Description for a more complete description of the Plan's provisions. General The Plan is a defined contribution plan and is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). Participation Each employee who is hired before June 1, 1998 became a participant on the enrollment date coincident with or next following the employee's first day of employment. For employees hired on or after June 1, 1998, the general rule is that the employee becomes a participant in the Plan on the enrollment date coincident with or next following the date the employee completes two months of continuous service. Contributions Employee contributions are from 401(k) salary deferrals, which are subject to the limits of the Plan. The employee 401(k) salary deferral shall be a percentage of not less than 1% and not greater than 15% of the annual eligible compensation. For the years ended December 31, 2002 and 2001, the participants' contributions amounted to approximately $1,595,000 and $1,283,000, respectively. For the years ended December 31, 2002 and 2001, Curative Health Services, Inc.'s ("CHS" or the "Company") discretionary contributions amounted to approximately $5,000 and $131,000, respectively. For the years ended December 31, 2002 and 2001, approximately $72,000 and $122,000, respectively, of nonvested account balances were forfeited. These forfeited amounts were used by the Company to offset Company contributions. At December 31, 2002, the Company has approximately $89,000 of forfeitures that will be utilized to offset future Company contributions. -4- Curative Health Services, Inc. Employee Savings Plan Notes to Financial Statements (continued) 1. Description of the Plan (continued) Transfer of Assets During the year ended December 31, 2002, approximately $263,000 of assets were transferred into the Plan. The transfer of these assets was related to the Company's acquisition of eBiocare.com, Inc. in 2001. Administrative Expense Certain expenses of administering the Plan are paid by the Company. Such expenses were approximately $25,000 for 2002 and $34,000 for 2001. Participants' Accounts Each participant's account is credited with the participant's contributions and an allocation of Plan earnings. The allocation of Plan earnings is based upon the balance the participant maintains in the selected account. Vesting Participants are immediately 100% vested in their own contributions and earnings thereon. Participants become 20% vested in benefits arising from Company contributions after two years of service, 40% vested after three years of service, 60% vested after four years of service, 80% vested after five years of service and 100% vested after six years of service. Payment of Benefits The value of a participant's account is payable to the participant upon retirement or disability or to the participant's beneficiary if death occurs during employment. The value of a participant's contributions and earnings thereon plus all vested matching contributions and earnings thereon are payable upon termination. Payment may be made as installment payments, a lump sum or in the form of an annuity. -5- Curative Health Services, Inc. Employee Savings Plan Notes to Financial Statements (continued) 1. Description of the Plan (continued) Loans Effective November 1, 1994, the Plan adopted a provision whereby active participants can borrow from their Plan accounts once every 12 months at the prime lending rate plus 1% on the date of the loan (4.50% to 9.50% for loans outstanding as of December 31, 2002), provided participants have only one outstanding loan at a time and the participant's vested account balance in the Plan is at least $2,000. The borrowing limit is the lesser of 50% of the participant's vested account balance or $50,000 and must be repaid within five years. Plan Termination Although it has not expressed any intent to do so, the Company has the right under the Plan to terminate the Plan subject to the provisions of ERISA. In the event of termination, all participants' accounts shall become fully vested and distributed in accordance with the provisions of the Plan. 2. Significant Accounting Policies The accounting records of the Plan are maintained on the accrual basis. The Plan maintains its records of investments at fair value, which equals the quoted market price on the last business day of the Plan year. Securities that have no quoted market price are stated at fair value as determined by the custodian. The Guaranteed Account is invested in unallocated insurance contracts, which are valued at contract value as estimated by the Plan's custodian, which approximates fair value. The average yield was approximately 5% and 6.4% in 2002 and 2001, respectively. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. -6- Curative Health Services, Inc. Employee Savings Plan Notes to Financial Statements (continued) 2. Significant Accounting Policies (continued) Reclassifications Certain amounts in the 2001 financial statements have been reclassified to conform with the 2002 presentation. 3. Investments The Plan's investments are held in custody by Principal Life Insurance Company except for the CHS stock account which is trusteed by Bankers Trust Company. The participants of the Plan may elect to have their accounts invested in any combination (in 5% increments) of the following investment alternatives:
Guaranteed Account Lifetime Strategic Income Account Money Market Account Lifetime 2010 Account Bond and Mortgage Account Lifetime 2020 Account International Stock Account Lifetime 2030 Account Real Estate Account Lifetime 2040 Account Bond Emphasis Balanced Account Lifetime 2050 Account Principal Financial Group, Inc. Stock Account American Century Small Cap Account Government Securities Account American Century Ultra Account Medium Company Value Account Fidelity Advisor Mid Cap Account Large Cap Stock Index Account Fidelity Advisor Small Cap Account Large Company Blend Account Medium Company Blend Account CHS Stock Account Small Company Blend Account American Century Income & Growth Account Janus Advisor Capital Appreciation Account
Investment earnings are automatically reinvested into the fund from which they were derived. During 2001, Principal Financial Group, formerly a mutual holding company, became a publicly traded company and as such, compensated companies that gave up their voting rights. As a result, the Plan received approximately $444,000, which was distributed to the Plan participants on a pro-rata basis and was recorded in the Principal Financial Group, Inc. Stock Account. -7- Curative Health Services, Inc. Employee Savings Plan Notes to Financial Statements (continued) 4. Income Tax Status The Plan has received a determination letter from the Internal Revenue Service dated May 5, 2001, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the "Code") and, therefore, the related trust is exempt from taxation. The Plan has been amended since receiving the determination letter. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt. The Plan administrator has indicated that it will take the necessary steps, if any, to maintain the Plan's qualified status. -8- Supplemental Schedule Curative Health Services, Inc. Employee Savings Plan Form 5500, Schedule H, Line 4i - Schedule of Assets Held at End of Year As of December 31, 2002
Identity of Issue, Borrower, Lessor Current or Similar Party Description of Investment Value ------------------------------------------------------------------------------------------------- Principal Life Insurance Company* Insurance Company General Guaranteed Interest $ 1,474,482 Principal Life Insurance Company* Pooled Separate Accounts Money Market 774,443 Principal Life Insurance Company* Pooled Separate Accounts Bond and Mortgage 955,504 Principal Life Insurance Company* Pooled Separate Accounts Government Securities 477,483 Principal Life Insurance Company* Pooled Separate Accounts Bond Emphasis Balanced 373,215 Principal Life Insurance Company* Pooled Separate Accounts Large Cap Stock Index 949,9 31 Principal Life Insurance Company* Pooled Separate Accounts Medium Company Value 1,390,580 Principal Life Insurance Company* Pooled Separate Accounts Real Estate 477,415 Principal Life Insurance Company* Pooled Separate Accounts Large Company Blend 1,312,230 Principal Life Insurance Company* Pooled Separate Accounts Int'l Stock 746,151 Principal Life Insurance Company* Pooled Separate Accounts Principal Financial Group Inc. Stock 564,061 Principal Life Insurance Company* Pooled Separate Accounts American Century Inc & Growth 50,570 Principal Life Insurance Company* Pooled Separate Accounts Lifetime Strategic Income 14,623 Principal Life Insurance Company* Pooled Separate Accounts Lifetime 2010 45,613 Principal Life Insurance Company* Pooled Separate Accounts Lifetime 2020 3,616 Principal Life Insurance Company* Pooled Separate Accounts Lifetime 2030 15,565
-9- Curative Health Services, Inc. Employee Savings Plan Form 5500, Schedule H, Line 4i - Schedule of Assets Held at End of Year As of December 31, 2002 (continued)
Identity of Issue, Borrower, Lessor Current or Similar Party Description of Investment Value ---------------------------------------------- -------------------------------------------------- Principal Life Insurance Company* Pooled Separate Accounts Lifetime 2040 $ 13,742 Principal Life Insurance Company* Pooled Separate Accounts Lifetime 2050 489 Principal Life Insurance Company* Pooled Separate Accounts American Century Sm Cap Value 77,869 Principal Life Insurance Company* Pooled Separate Accounts American Century Ultra 27,633 Principal Life Insurance Company* Pooled Separate Accounts Fidelity Advisor Mid Cap 39,483 Principal Life Insurance Company* Pooled Separate Accounts Fidelity Advisor Small Cap 10,377 Principal Life Insurance Company* Pooled Separate Accounts Janus Advisor Cap Appreciation 39,339 Principal Life Insurance Company* Pooled Separate Accounts Medium Company Blend 20,530 Principal Life Insurance Company* Pooled Separate Accounts Small Company Blend 60,258 Curative Health Services, Inc. Employer Security-Curative Common Stock 2,673,661 Plan Participants Participant Loans (range of interest rates 4.50% to 9.50%) 110,917 ---------- $ 12,699,780 ==========
* Party-in-interest transactions. This schedule should be read in conjunction with the accompanying financial statements and notes thereto. -10- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrator has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. CURATIVE HEALTH SERVICES, INC. EMPLOYEE SAVINGS PLAN Date: June 30, 2003 by: CURATIVE HEALTH SERVICES, INC. /s/ Thomas Axmacher ------------------------------ Thomas Axmacher Plan Administrator EXHIBIT 23.1 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-85188) pertaining to the Curative Health Services, Inc. Employee Savings Plan of our report dated May 28, 2003, with respect to the financial statements and schedule of the Curative Health Services, Inc. Employee Savings Plan included in this Annual Report (Form 11-K) for the year ended December 31, 2002. /s/ Ernst & Young LLP Melville, New York June 27, 2003 EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. Section 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Curative Health Services, Inc. Employee Savings Plan (the "Plan") on Form 11-K for the year ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Joseph Feshbach, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the net assets available for benefits and changes in net assets available for benefits of the Plan. /s/ Joseph Feshbach ------------------------- Joseph Feshbach Chief Executive Officer June 30, 2003 A signed original of this written statement required by Section 906, or any other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. Section 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Curative Health Services, Inc. Employee Savings Plan (the "Plan") on Form 11-K for the year ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas Axmacher, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the net assets available for benefits and changes in net assets available for benefits of the Plan. /s/ Thomas Axmacher ----------------------------- Thomas Axmacher Chief Financial Officer June 30, 2003 A signed original of this written statement required by Section 906, or any other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.