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.