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, 2003
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
------------ EXCHANGE ACT OF 1934
For the transition period form __________ to __________
COMMISSION FILE NUMBER: 000-50371
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
---------
Exhibit Description
------- -----------
Exhibit 23.1 Consent of Independent Registered Public Accounting Firm
CURATIVE HEALTH SERVICES, INC. EMPLOYEE SAVINGS PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
YEARS ENDED DECEMBER 31, 2003 AND 2002
WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Curative Health Services, Inc.
Employee Savings Plan
Index to Financial Statements
and Supplemental Schedule
Years ended December 31, 2003 and 2002
Contents
Report of Independent Registered Public Accounting Firm................ 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, 2003.............................. 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 Registered Public Accounting Firm
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, 2003 and 2002, 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 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. 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, 2003 and 2002, and the changes in its net assets available for plan
benefits for the years then ended, in conformity with U.S. generally accepted
accounting principles.
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, 2003 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
Melville, New York
June 18, 2004
1
Curative Health Services, Inc.
Employee Savings Plan
Statements of Net Assets Available for Plan Benefits
December 31
2003 2002
------------------------------
Assets
Investments, at fair value:
Guaranteed Account $ 1,434,267 $ 1,474,482
Money Market Account 746,770 774,443
Bond and Mortgage Account 1,073,079 955,504
International Stock Account 1,024,980 746,151
Real Estate Account 534,687 477,415
Bond Emphasis Balanced Account 350,418 373,215
Principal Financial Group, Inc. Stock Account 512,072 564,061
Government Securities Account 516,379 477,483
Medium Company Value Account 1,713,217 1,390,580
Large Cap Stock Index Account 1,105,747 949,931
Large Cap Blend Account 1,507,846 1,312,230
CHS Stock Account 2,021,242 2,673,661
American Century Income & Growth Account 166,547 50,570
Lifetime Strategic Income Account 21,046 14,623
Lifetime 2010 Account 56,072 45,613
Lifetime 2020 Account 32,982 3,616
Lifetime 2030 Account 23,293 15,565
Lifetime 2040 Account 22,814 13,742
Lifetime 2050 Account 9,986 489
American Century Small Cap Account 298,592 77,869
American Century Ultra Account 182,224 27,633
Fidelity Advisor Mid Cap Account 129,453 39,483
Fidelity Advisor Small Cap Account 121,353 10,377
Medium Company Blend Account 93,919 20,530
Small Company Blend Account 166,627 60,258
Janus Advisor Capital Appreciation Account 70,806 39,339
------------------------------
Total investments 13,936,418 12,588,863
Participant loans 66,746 110,917
Participants' contributions receivable 52,343 1
------------------------------
Net assets available for plan benefits $ 14,055,507 $ 12,699,781
==============================
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
2003 2002
----------------------------
Additions to net assets:
Contributions:
Employer $ 134,849 $ 4,519
Participants 1,796,445 1,595,222
----------------------------
Total contributions 1,931,294 1,599,741
Investment income (loss):
Interest and dividend income 74,968 82,059
Net realized and unrealized (depreciation) appreciation in
fair value of Company stock (456,706) 675,045
Net realized and unrealized appreciation (depreciation) in
fair value of pooled investments 1,713,329 (827,486)
-----------------------------
Total investment income (loss) 1,331,591 (70,382)
Transfer of assets into plan (Note 1) - 262,596
Other (loss) income (7,629) 246
----------------------------
Total additions 3,255,256 1,792,201
Deductions from net assets:
Benefits paid to participants 1,893,222 2,112,032
Administrative expenses 6,308 5,500
----------------------------
Total deductions 1,899,530 2,117,532
----------------------------
Net increase (decrease) 1,355,726 (325,331)
Net assets available for plan benefits at beginning of year 12,699,781 13,025,112
----------------------------
Net assets available for plan benefits at end of year $ 14,055,507 $ 12,699,781
============================
See accompanying notes.
3
Curative Health Services, Inc.
Employee Savings Plan
Notes to Financial Statements
December 31, 2003
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 was 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 one month 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 50% of the annual eligible
compensation. For the years ended December 31, 2003 and 2002, the participants'
contributions amounted to approximately $1,796,000 and $1,595,000, respectively.
Employer contributions are based on a percentage match of 401(k) salary
deferrals. Prior to July 1, 2003, Curative Health Services, Inc. ("CHS" or the
"Company") matched 25% of the salary deferral up to 1% of an employee's salary.
Effective July 1, 2003, CHS matches 50% of the salary deferral up to a maximum
match of 2% of an employee's salary. For the years ended December 31, 2003 and
2002, the Company's discretionary contributions amounted to approximately
$135,000 and $5,000, respectively.
For the years ended December 31, 2003 and 2002, approximately $73,000 and
$72,000, respectively, of non-vested account balances were forfeited. These
forfeited amounts were used by the Company to offset Company contributions. At
December 31, 2003, the Company had approximately $27,000 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.
Administrative Expense
Certain expenses of administering the Plan are paid by the Company. Such
expenses were approximately $25,000 for each of the years ended December 31,
2003 and 2002.
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. Prior to July 2003, participants became 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. Effective July 1,
2003, participants become 33% vested in benefits arising from Company
contributions after one year of service, 67% vested after two years of services
and 100% after three 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, 2003), 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% for 2003 and
2002.
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.
Reclassifications
Certain amounts in the 2002 financial statements have been reclassed to conform
with the 2003 presentation.
6
Curative Health Services, Inc.
Employee Savings Plan
Notes to Financial Statements (continued)
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 Banker's Trust. 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. Effective July 1, 2003, participants can no longer enroll in CHS
common stock as an investment fund. Current balances may be maintained by
participants, but no future contributions can be made.
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 sponsor has
indicated that it will take necessary steps, if any, to maintain the Plan's
qualified status.
7
Supplemental Schedule
EIN #510467366
Plan #001
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, 2003
Identity of Issuer, Borrower, Current
Lessor or Similar Party Description of Investment Value
-----------------------------------------------------------------------------------------------------------
Principal Life Insurance Company* Insurance Company General Guaranteed
Interest $ 1,434,267
Principal Life Insurance Company* Pooled Separate Accounts
Money Market 746,770
Principal Life Insurance Company* Pooled Separate Accounts
Bond and Mortgage 1,073,079
Principal Life Insurance Company* Pooled Separate Accounts
Government Securities 516,379
Principal Life Insurance Company* Pooled Separate Accounts
Bond Emphasis Balanced 350,418
Principal Life Insurance Company* Pooled Separate Accounts
Large Cap Stock Index 1,105,747
Principal Life Insurance Company* Pooled Separate Accounts
Medium Company Value 1,713,217
Principal Life Insurance Company* Pooled Separate Accounts
Real Estate 534,687
Principal Life Insurance Company* Pooled Separate Accounts
Large Cap Blend 1,507,846
Principal Life Insurance Company* Pooled Separate Accounts
International Stock 1,024,980
Principal Life Insurance Company* Pooled Separate Accounts
Principal Financial Group Inc. Stock 512,072
Principal Life Insurance Company* Pooled Separate Accounts
American Century Income & Growth 166,547
Principal Life Insurance Company* Pooled Separate Accounts
Lifetime Strategic Income 21,046
Principal Life Insurance Company* Pooled Separate Accounts
Lifetime 2010 56,072
Principal Life Insurance Company* Pooled Separate Accounts
Lifetime 2020 32,982
Principal Life Insurance Company* Pooled Separate Accounts
Lifetime 2030 23,293
9
Curative Health Services, Inc.
Employee Savings Plan
Form 5500, Schedule H, Line 4i--Schedule of Assets Held at End of Year (continued)
As of December 31, 2003
Identity of Issuer, Borrower, Current
Lessor Similar Party Description of Investment Value
-----------------------------------------------------------------------------------------------------------
Principal Life Insurance Company* Pooled Separate Accounts
Lifetime 2040 $ 22,814
Principal Life Insurance Company* Pooled Separate Accounts
Lifetime 2050 9,986
Principal Life Insurance Company* Pooled Separate Accounts
American Century Sm Cap 298,592
Principal Life Insurance Company* Pooled Separate Accounts
American Century Ultra 182,224
Principal Life Insurance Company* Pooled Separate Accounts
Fidelity Advisor Mid Cap 129,453
Principal Life Insurance Company* Pooled Separate Accounts
Fidelity Advisor Small Cap 121,353
Principal Life Insurance Company* Pooled Separate Accounts
Janus Advisor Cap Appreciation 70,806
Principal Life Insurance Company* Pooled Separate Accounts
Medium Company Blend 93,919
Principal Life Insurance Company* Pooled Separate Accounts
Small Company Blend 166,627
Curative Health Services, Inc. Employer Security
Curative Common Stock 2,021,242
Plan Participants Participant Loans (range of
interest rates 4.50% to 9.50%) 66,746
------------
$ 14,003,164
============
* 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.
Date: June 28, 2004
CURATIVE HEALTH SERVICES, INC.
EMPLOYEE SAVINGS PLAN
by: CURATIVE HEALTH SERVICES, INC.
/s/ Thomas Axmacher
------------------------------
Thomas Axmacher
Plan Administrator