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 June 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition Period from ________ to ________
Commission File Number 1-11373
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
Index to Financial Statements
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Reports of Independent Auditors....................................... 3
Audited Financial Statements:
Statements of Assets Available for Benefits as of
June 30, 2002 and 2001........................................ 5
Statement of Changes in Assets Available for Benefits for the
Year Ended June 30, 2002...................................... 6
Notes to Financial Statements..................................... 7
Supplemental Schedule:
Schedule of Assets (Held at End of Year).......................... 12
Signature............................................................. 13
Exhibits:
Exhibit 23.01 - Consent of Independent Auditors
Exhibit 23.02 - Information Regarding Consent of Arthur Andersen LLP
2
Report of Independent Auditors
To the Plan Committee of
Allegiance Retirement Plan for Union Employees of Hayward, California:
We have audited the accompanying statement of assets available for benefits of
Allegiance Retirement Plan for Union Employees of Hayward, California as of June
30, 2002, and the related statement of changes in assets available for benefits
for the year ended June 30, 2002. These financial statements and the schedule
referred to below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets available for benefits of the Plan at June 30,
2002, and the changes in its assets available for benefits for the year ended
June 30, 2002, in conformity with accounting principles generally accepted in
the United States.
Our audit was performed 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 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 has been subjected to the auditing procedures applied in
the audit 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/ Ernst & Young LLP
ERNST & YOUNG LLP
Columbus, Ohio
December 6, 2002
3
Report of Independent Public Accountants
To the Plan Committee of the
ALLEGIANCE RETIREMENT PLAN FOR UNION EMPLOYEES OF HAYWARD, CALIFORNIA
(formerly "Allegiance Retirement Plan"):
We have audited the accompanying statements of net assets available for plan
benefits of the ALLEGIANCE RETIREMENT PLAN FOR UNION EMPLOYEES OF HAYWARD,
CALIFORNIA (the Plan) as of June 30, 2001 and December 31, 2000, and the related
statement of changes in net assets available for plan benefits for the six
months ended June 30, 2001. These financial statements and the schedule referred
to below are the responsibility of the Plan's management. Our responsibility is
to express an opinion on these financial statements and schedule 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
from 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 as
of June 30, 2001 and December 31, 2000, and the changes in net assets available
for plan benefits for the six months ended June 30, 2001, in conformity with
accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes is presented for the 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 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 when considered in relation to the basic
financial statements taken as a whole.
/s/ Arthur Andersen LLP
Columbus, Ohio,
April 26, 2002
NOTE: THIS IS A COPY OF THE AUDIT REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN
LLP ("ANDERSEN") IN CONNECTION WITH THE ALLEGIANCE RETIREMENT PLAN FOR UNION
EMPLOYEES OF HAYWARD, CALIFORNIA FORM 11-K FILING FOR THE SIX MONTHS ENDED JUNE
30, 2001. THE INCLUSION OF THIS PREVIOUSLY ISSUED ANDERSEN REPORT IS PURSUANT TO
THE "TEMPORARY FINAL RULE AND FINAL RULE REQUIREMENTS FOR ARTHUR ANDERSEN LLP
AUDITING CLIENTS," ISSUED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION IN
MARCH 2002. NOTE THAT THIS PREVIOUSLY ISSUED ANDERSEN REPORT INCLUDES REFERENCES
TO CERTAIN PERIODS, WHICH ARE NOT REQUIRED TO BE PRESENTED IN THE ACCOMPANYING
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED JUNE 30, 2002.
THIS AUDIT REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP IN CONNECTION
WITH THIS FILING ON FORM 11-K. SEE EXHIBIT 23.02 FOR FURTHER DISCUSSION.
4
Allegiance Retirement Plan for Union Employees of Hayward, California
Statements of Assets Available for Benefits
As of June 30, 2002 and 2001
JUNE 30,
------------------------------
2002 2001
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Assets:
Investments $1,861,164 $2,761,486
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Assets available for benefits $1,861,164 $2,761,486
========== ==========
See accompanying notes.
5
Allegiance Retirement Plan for Union Employees of Hayward, California
Statement of Changes in Assets Available for Benefits
For the year ended June 30, 2002
ADDITIONS:
Contributions:
Employer $ 31,692
Participant 72,163
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Total contributions 103,855
Investment income 26,900
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Total additions 130,755
DEDUCTIONS:
Distributions to participants 895,758
Net realized and unrealized depreciation in the fair value of investments 66,977
Plan's interest in Master Trust net investment loss 56,342
Administrative expenses 12,000
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Total deductions 1,031,077
Net decrease in assets (900,322)
Assets available for benefits, beginning of year 2,761,486
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Assets available for benefits, end of year $ 1,861,164
===========
See accompanying notes.
6
Allegiance Retirement Plan for Union Employees of Hayward, California
Notes to Financial Statements
June 30, 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). This description
of the Plan provides only general information. Participants should refer to the
Plan agreement 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 January 1, 2001, the Company established the Master Trust for
Retirement Plans of Cardinal Health (the Master Trust) for the Plan and certain
other Company plans.
Effective June 30, 2002, the Plan was amended to change the Plan year to the
calendar year, with a short Plan year of July 1, 2002 to December 31, 2002.
CONTRIBUTIONS
Participants may contribute 1% to 20% 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. Contributions are subject to certain limitations.
FORFEITURES
Non-vested account balances are generally forfeited upon termination. Such
forfeited amounts are used to reduce future Company contributions to the Plan.
7
Allegiance Retirement Plan for Union Employees of Hayward, California
Notes to Financial Statements (continued)
June 30, 2002
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 contributions, plus actual earnings
thereon. Vesting in the Company's discretionary contribution portion of their
accounts is based on years of continuous service. A participant is 100 percent
vested after three years of credited 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 service, 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.
8
Allegiance Retirement Plan for Union Employees of Hayward, California
Notes to Financial Statements (continued)
June 30, 2002
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 accompanying financial statements and
disclosures. 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. 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 assets
available for benefits. 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 assets that represent 5% or more of the
Plan's assets at June 30, 2002 and 2001 are as follows:
2002 2001
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Plan's Interest in Master Trust $ 1,440,306 $ 1,853,662
Cardinal Health, Inc. Common Stock 232,853 596,424
9
Allegiance Retirement Plan for Union Employees of Hayward, California
Notes to Financial Statements (continued)
June 30, 2002
4. ASSETS HELD IN MASTER TRUST
The Master Trust assets are valued by the trustee daily 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 JUNE 30, 2002 AND 2001:
2002 2001
------------ ------------
Investments at fair value:
Mutual funds $149,937,923 $160,986,057
Common, Collective Trusts 370,893,945 374,001,925
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Total investments $520,831,868 $534,987,982
============ ============
The Plan's share in the Master Trust was .3% ($1,440,306) and .3% ($1,853,662)
at June 30, 2002 and 2001, respectively.
MASTER TRUST
INVESTMENT INCOME (LOSS)
FOR THE YEAR ENDED JUNE 30, 2002:
Dividend and interest income $ 12,793,471
Net depreciation in fair value
of investments:
Mutual funds (16,930,075)
Common, Collective Trusts (27,974,582)
-------------
Total investment loss $ (32,111,186)
=============
10
Allegiance Retirement Plan for Union Employees of Hayward, California
Notes to Financial Statements (continued)
June 30, 2002
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. 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. 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.
11
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 June 30, 2002
IDENTITY OF ISSUE, BORROWER, DESCRIPTION OF INVESTMENT INCLUDING MATURITY
LESSOR, OR SIMILAR PARTY DATE, RATE OF INTEREST, MATURITY OR PAR VALUE CURRENT VALUE
---------------------------- --------------------------------------------- -------------
COMMON STOCK
*Cardinal Health, Inc. Stock 3,792 shares $ 232,853
MUTUAL FUNDS
Dodge & Cox Stock Fund 143 shares 14,015
PIMCO Total Return Fund 170 shares 1,804
Liberty Acorn USA Fund 2,171 shares 36,342
* Putnam Vista Fund 2,173 shares 15,580
LOANS
Loans to participants 120,264
---------
Total $ 420,858
=========
* Denotes party-in-interest.
12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the members
of the Plan Committee have duly caused this annual report to be signed on its
behalf by the undersigned thereunto duly authorized.
ALLEGIANCE RETIREMENT
PLAN FOR UNION EMPLOYEES
OF HAYWARD, CALIFORNIA
Date: December 19, 2002 /s/ Richard J. Miller
----------------------------------------
Richard J. Miller, Plan Committee Member
13