UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
(Mark One)
[ ] 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 6/30/02 to 12/31/02
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Commission File Number 1-11373
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Allegiance Retirement Plan for Union Employees of Hayward, California
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(Full Title of the Plan)
Cardinal Health, Inc.
7000 Cardinal Place
Dublin, Ohio 43017
(Name of Issuer of the Securities Held Pursuant to the Plan and
Address of its Principal Executive Office)
Allegiance Retirement Plan for Union Employees of Hayward, California
Financial Statements and Supplemental Schedule
December 31, 2002 and June 30, 2002 and the six month period ended
December 31, 2002
TABLE OF CONTENTS
Report of Independent Auditors....................................................................... 3
Audited Financial Statements
Statements of Net Assets Available for Benefits................................................. 4
Statement of Changes in Net Assets Available for Benefits....................................... 5
Notes to Financial Statements................................................................... 6
Supplemental Schedule
Schedule of Assets (Held At End of Year)........................................................ 11
Signature............................................................................................ 12
Exhibits:
Exhibit 23.01 - Consent of Independent Auditors
Exhibit 99.01 - Certification of a Plan Committee Member
and the Plan Committee Chairperson, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
2
Report of Independent Auditors
To the Plan Committee of
Allegiance Retirement Plan for Union Employees of Hayward, California
We have audited the accompanying statements of net assets available for benefits
of Allegiance Retirement Plan for Union Employees of Hayward, California as of
December 31, 2002 and June 30, 2002, and the related statement of changes in net
assets available for benefits for the six month period ended December 31, 2002.
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 benefits of the Plan at
December 31, 2002 and June 30, 2002, and the changes in its net assets available
for benefits for the six month period ended December 31, 2002, 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 supplemental schedule of assets (held at end of
year) is presented for purposes 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. The supplemental
schedule is the responsibility of the Plan's Management and is subjected to the
auditing procedures applied in the 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.
Columbus, Ohio /s/ Ernst & Young LLP
May 15, 2003
3
Allegiance Retirement Plan for Union Employees of Hayward, California
Statements of Net Assets Available for Benefits
DECEMBER 31, JUNE 30,
2002 2002
---------------------------------
Assets:
Investments, at fair value $ 1,441,851 $ 1,861,164
---------------------------------
Net assets available for benefits $ 1,441,851 $ 1,861,164
=================================
See accompanying notes.
4
Allegiance Retirement Plan for Union Employees of Hayward, California
Statement of Changes in Net Assets Available for Benefits
FOR THE SIX MONTH
PERIOD ENDED
DECEMBER 31,
2002
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ADDITIONS:
Investment income $ 912
DEDUCTIONS:
Distributions to participants 388,010
Net depreciation in the fair value of investments 17,219
Plan's interest in Master Trust net investment loss 14,589
Administrative expenses 407
----------------
Total deductions 420,225
Net decrease (419,313)
Net assets available for benefits, beginning of period 1,861,164
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Net assets available for benefits, end of period $ 1,441,851
================
See accompanying notes.
5
Allegiance Retirement Plan for Union Employees of Hayward, California
Notes to Financial Statements
December 31, 2002
1. DESCRIPTION OF PLAN
GENERAL
The Allegiance Retirement Plan for Union Employees of Hayward, California (the
Plan) is a defined contribution plan covering substantially all union employees
of the Allegiance Corporation facility located at Hayward, California who have
completed 800 hours of service, as defined. Allegiance Corporation is a
wholly-owned subsidiary of Cardinal Health, Inc. (the Company). The Plan is
subject to the provisions of the Employee Retirement Income Security Act of
1974. This description of the Plan provides only general information.
Participants should refer to the Plan Document for a more complete description
of the Plan's provisions.
The Plan is administered by the Plan committee. The Plan trustee, record keeper
and asset custodian is Putnam Fiduciary Trust Company (Putnam). Administrative
expenses may be paid by the Company or the Plan, excluding loan fees, which are
paid by the borrowing participant.
As record keeper and asset custodian of the Plan, Putnam maintains certain
accounting and other records of the Plan transactions and assets. Therefore, the
Plan and the Plan committee rely on Putnam to provide the appropriate
information for purposes of preparation of the financial statements for the
Plan. Although certain procedures are designed to obtain reasonable assurance
about whether the information provided by Putnam is complete and free of
material misstatement, the Plan and Plan committee's ability to verify the
information is somewhat limited. For purposes of disclosures made in these
financial statements and related certifications, the Plan and Plan committee
have no reason to believe that the information provided by Putnam does not
fairly present, in all material respects, the financial condition and results of
operations of the Plan.
Effective June 30, 2002, the Plan was amended to change the Plan year to a
calendar year, with a short Plan year for the six month period of July 1, 2002
to December 31, 2002.
Effective January 1, 2001, Cardinal Health, Inc. established the Master Trust
for Retirement Plans of Cardinal Health (the Master Trust) for the Plan and
certain other Company plans. Certain of the Plan's investments are not included
in the Master Trust.
CONTRIBUTIONS
Participants may contribute 1% to 50% of their compensation, as defined, to the
Plan. Participants direct the investment of their contributions into various
investment options offered by the Plan. The Company may contribute discretionary
matching and profit sharing contributions to the Plan. The Company's
discretionary matching and profit sharing contributions are invested as directed
by the participants.
6
Allegiance Retirement Plan for Union Employees of Hayward, California
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
FORFEITURES
Non-vested account balances are generally forfeited either upon full
distribution or completion of five consecutive one-year breaks in service. Such
forfeited amounts are used to reduce future Company contributions to the Plan.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's elective
contributions, allocations of the Company's contributions, Plan earnings and any
rollover contributions made by the participant. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's vested account balance. All amounts in participant accounts are
participant-directed.
VESTING
Participants are vested immediately in their elective contributions, plus actual
earnings thereon. Vesting in the Company's discretionary contribution portion of
their accounts is based on years of continuous service. Participants are one
hundred percent vested after three years of vesting service.
PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50 percent of their vested account
balance. Loan terms range from 1-5 years or up to 15 years for the purchase of a
primary residence. The loans are secured by the remaining vested balance in the
participant's account and bear interest at a rate commensurate with local
prevailing rates as determined monthly by the Plan Administrator. Principal and
interest are repaid ratably through regular payroll deductions.
PAYMENT OF BENEFITS
Upon termination of employment, death, total disability or retirement, a
participant may elect to receive a lump-sum amount equal to the value of the
participant's vested interest in his or her account.
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Allegiance Retirement Plan for Union Employees of Hayward, California
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared on the accrual basis of
accounting.
USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect the financial statements and the accompanying notes.
Actual results could differ from those estimates.
INVESTMENT VALUATION AND INCOME RECOGNITION
The investments of the Plan are stated at fair market value as determined by the
asset custodian using quoted market prices of underlying investments. Investment
securities, in general, are exposed to various risks, such as interest rate,
credit, and overall market volatility risk. Participant loans are valued at
cost, which approximates fair market value.
Purchases and sales of securities are recorded on a trade-date basis. Dividends
are recorded on the ex-dividend date.
3. INVESTMENTS
The fair market values of individual investments that represent 5 percent or
more of the Plan's assets available for benefits are as follows:
DECEMBER 31, JUNE 30,
2002 2002
-------------- --------------
Plan's interest in Master Trust $ 1,107,015 $ 1,440,306
Cardinal Health, Inc common stock 171,306 232,853
NET DEPRECIATION IN FAIR VALUE OF INVESTMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2002:
Net depreciation in fair value of investments as determined by quoted market
prices:
Mutual Funds $ (8,891)
Cardinal Health, Inc. common stock (8,328)
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Total net depreciation $ (17,219)
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Allegiance Retirement Plan for Union Employees of Hayward, California
Notes to Financial Statements (continued)
4. ASSETS HELD IN MASTER TRUST
The Master Trust assets are valued by the trustee daily, based on quoted market
prices, and allocated to the Plan based on its equitable share of the total
Master Trust assets. The Plan's interest in Master Trust net investment loss,
presented in the statement of changes in net assets available for benefits,
consists of the unrealized and realized gains (losses) and the dividends on
those investments.
MASTER TRUST
ASSETS AVAILABLE TO PARTICIPATING PLANS AS OF:
DECEMBER 31, JUNE 30,
2002 2002
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Investments at fair value:
Mutual funds $144,144,606 $149,937,923
Common, Collective Trusts 382,873,704 370,893,945
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Total investments $527,018,310 $520,831,868
==================== ====================
The Plan's share of assets in the Master Trust was less than 1% or $1,107,015
and $1,440,306 at December 31, 2002 and June 30, 2002, respectively.
MASTER TRUST
INVESTMENT INCOME (LOSS)
FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 2002:
Dividend and interest income $ 6,428,062
Net depreciation in fair value of investments as determined by quoted market prices:
Mutual funds (10,142,598)
Common, Collective Trusts (12,547,922)
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Total investment loss $ (16,262,458)
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Allegiance Retirement Plan for Union Employees of Hayward, California
Notes to Financial Statements (continued)
5. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated February 24, 1998, 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 subsequently amended and restated. 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.
6. RISKS AND UNCERTAINTIES
The Plan has a significant participant-directed investment in Cardinal Health,
Inc. common stock, which is exposed to various risks, such as interest rate,
credit, and overall market volatility risk. Due to the level of risk involved
with certain investment securities, it is reasonably possible that changes in
the values of investment securities will occur in the near term and that such
changes could materially affect the amounts reported in the statements of net
assets available for benefits and changes in the net assets available for
benefits.
7. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100 percent vested in their accounts.
8. RELATED PARTY TRANSACTIONS
The Plan held $171,306 and $232,853 of Cardinal Health, Inc. common stock as of
December 31, 2002 and June 30, 2002, respectively.
9. SUBSEQUENT EVENTS
Effective January 31, 2003, the Plan was merged into the Cardinal Health Profit
Sharing, Retirement and Savings Plan. In conjunction with the merger and in
accordance with the Plan Document, investments of approximately $1.4 million
were transferred to the Cardinal Health Profit Sharing, Retirement and Savings
Plan.
10
Allegiance Retirement Plan for Union Employees of Hayward, California
Schedule of Assets (Held at End of Year)
(Schedule H, Part IV, Line 4i on Form 5500)
As of December 31, 2002
IDENTITY OF ISSUER,
BORROWER, LESSOR, OR DESCRIPTION OF INVESTMENT INCLUDING MATURITY CURRENT
SIMILAR PARTY DATE, RATE OF INTEREST, MATURITY OR PAR VALUE VALUE
-------------------- --------------------------------------------- -----
COMMON STOCK
*Cardinal Health, Inc. 2,894 shares $ 171,306
MUTUAL FUNDS
Dodge & Cox Stock Fund 145 shares 12,743
PIMCO Total Return Fund 179 shares 1,909
Liberty Acorn USA Fund 2,161 shares 30,856
* Putnam Vista Fund 2,172 shares 13,447
LOANS
Loans to participants 3.92 to 10.50% 104,575
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Total $ 334,836
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* Denotes party-in-interest.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the members
of the Plan committee have duly caused this transition report to be signed on
its behalf by the undersigned thereunto duly authorized.
ALLEGIANCE RETIREMENT
PLAN FOR UNION EMPLOYEES
OF HAYWARD, CALIFORNIA
Date: June 27, 2003 /s/ Richard J. Miller
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Richard J. Miller, Plan Committee Member
12