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 Period from ________ to ________
Commission File Number 1-11373
Syncor International Corporation Employees' Savings and Stock Ownership Plan
------------------------------------------------------------------------------
(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)
1
Syncor International Corporation
Employees' Savings and Stock Ownership Plan
Financial Statements and Supplemental Schedule
December 31, 2003 and 2002 and for the
Year Ended December 31, 2003
TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm ............... 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).......................... 15
Signature.............................................................. 16
Exhibits:
Exhibit 23.01 - Consent of Independent Registered Public Accounting Firm
2
Report of Independent Registered Public Accounting Firm
To the Plan Committee of
Syncor International Corporation Employees' Savings and Stock Ownership Plan
We have audited the accompanying statements of net assets available for benefits
of Syncor International Corporation Employees' Savings and Stock Ownership Plan
as of December 31, 2003 and 2002, and the related statement of changes in net
assets available for benefits for the year ended December 31, 2003. 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 benefits of the Plan at
December 31, 2003 and 2002, and the changes in its net assets available for
benefits for the year ended December 31, 2003, 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 supplemental schedule of assets (held at end of
year) 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. The supplemental
schedule is the responsibility of the Plan's management and 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.
Columbus, Ohio /s/ Ernst & Young LLP
June 22, 2004
3
Syncor International Corporation Employees'
Savings and Stock Ownership Plan
Statements of Net Assets Available for Benefits
DECEMBER 31
2003 2002
------------- -------------
ASSETS:
Cash $ 232,785 $ 5
Investments, at fair value 122,861,804 120,553,313
Employer contributions receivable - 662,076
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Net assets available for benefits $ 123,094,589 $ 121,215,394
============= =============
See accompanying notes.
4
Syncor International Corporation Employees'
Savings and Stock Ownership Plan
Statement of Changes in Net Assets Available for Benefits
FOR THE YEAR ENDED
DECEMBER 31, 2003
------------------
ADDITIONS:
Contributions:
Employer $ 1,462,411
Participant 4,401,666
Net appreciation in the fair value of investments 9,554,408
Plan's interest in Master Trust net investment gain 1,301,489
Interest and dividend income 944,248
-------------
Total additions 17,664,222
DEDUCTIONS:
Benefits paid directly to participants 15,774,361
Administrative expenses 10,666
-------------
Total deductions 15,785,027
Net increase 1,879,195
Net assets available for benefits, beginning of period 121,215,394
-------------
Net assets available for benefits, end of period $ 123,094,589
=============
See accompanying notes.
5
Syncor International Corporation
Employees' Savings and Stock Ownership Plan
Notes to Financial Statements
December 31, 2003
1. DESCRIPTION OF PLAN
GENERAL
The Syncor International Corporation Employees' Savings and Stock Ownership Plan
(the Plan) is a defined contribution Plan covering substantially all employees
of Cardinal Health 414, Inc. (formerly known as Syncor International
Corporation) not covered by a collective bargaining agreement who had attained
age 18 and completed three months of employment, as defined, prior to August 1,
2003. On and after August 1, 2003, the Plan covers substantially all employees
of Cardinal Health 414, Inc. not covered by a collective bargaining agreement
and who complete one full month of employment. 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 provision.
The Plan is administered by the Plan Committee. The Plan trustee, record keeper
and asset custodian is Putnam Fiduciary Trust Company (Putnam). Prior to August
1, 2003, administrative expenses were paid by the Company, excluding loan fees.
As of August 1, 2003, administrative expenses are paid by the Plan unless paid
by the Company, excluding loan fees, which are paid directly from the borrowing
participant's account.
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, 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.
The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974 (ERISA). The ESSOP acquired 1,750,000 shares of Syncor International
Corporation (the Company and Sponsor) common stock with funds borrowed from or
guaranteed by the Company. As of December 31, 2001, all such borrowings had been
fully repaid.
6
Syncor International Corporation
Employees' Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
GENERAL (CONTINUED)
With the acquisition of the Company by Cardinal Health, Inc. (Cardinal Health)
as of January 1, 2003 (Effective Date), the 2,895,292.487 common shares of
Syncor International Corporation in the Stock Fund with a total fair value of
$80,584,348 on the Effective Date was exchanged for 1,361,452.073 Cardinal
Health common shares of equal fair value. The share exchange was effected as of
January 1, 2003. There are no other changes to the provisions of the Plan. As of
July 1, 2003, all active participants in the Plan were permitted to begin
participating in a Cardinal Health sponsored retirement plan. On and after July
1, 2003, participants in the Plan were not permitted to make pre-tax
contributions to the Plan.
CONTRIBUTIONS
Prior to August 1, 2003, participants contributed from 1% to 14% of their
compensation, as defined by the Plan Document, on a tax-deferred basis in the
Funds Deferrals Account. These contributions were allocated among the available
investment funds at the participants' direction. Prior to July 1, 2003,
participants could change their deferral percentage each January 1, April 1,
July 1 or October 1. In addition, prior to April 1, 2003, participants could
direct an additional 1% or 2% tax-deferred contribution to be invested in the
Stock Investment Participant Account (Stock Deferrals Account), which invests in
the Company's common stock via trustee purchases on the open market or directly
from the Company. On and after July 1, 2003, participants may no longer make
deferrals to the Plan. In addition, on and after April 1, 2003, participants may
direct their deferrals to any of the available investment options under the
Plan. Participant contributions are always 100% vested.
Prior to April 1, 2003, all employer contributions were made in the form of
Company stock. Prior to April 1, 2003, the Company matched an additional 50% of
the participant's contributions in the Funds Deferrals Account with Company
common stock, up to the first 4% of the participant's compensation. For those
employees who became participants on or after August 1, 2001, the Company did
not match the participant's pretax contributions until he or she has been a
participant for 9 calendar months. The Company also contributed one share of
Company common stock to match each whole share of common stock purchased with
participants' tax-deferred compensation. All employer contributions were held in
the participants' Stock Investment Company Accounts.
7
Syncor International Corporation
Employees' Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
CONTRIBUTIONS (CONTINUED)
On and after April 1, 2003, all employer contributions are made in the form of
cash with matching contributions made pursuant to a discretionary formula
determined by the Company and communicated to participants.
The Plan is administered by the Plan Committee. Prior to April 1, 2003, the Plan
Committee could also approve a special allocation of Company stock to certain
participants' accounts to allow the Plan to pass applicable Internal Revenue
Service (Service) nondiscrimination tests. Total annual additions to a
participant's account may not exceed the lesser of $40,000 or 100% of the
participant's compensation.
Since the Effective Date of the acquisition of the Company by Cardinal Health,
the Plan Committee members are the members of the Cardinal Health, Inc. Employee
Benefits Policy Committee.
The Plan also provides for a Syncor Cash Bonus Account, specially designed for
foreign employees, to hold Syncor Cash Bonus Contributions.
FORFEITURES
Prior to August 1, 2003, forfeitures were reallocated each year to the
participants' accounts based on the percentage of each participant's
compensation to total compensation, as defined. Total forfeitures in 2003 and
2002 were $112,314 and $1,031,085, respectively. Amounts reallocated from the
forfeiture accounts during the Plan year ended on December 31, 2003 and 2002
were $0 and $9,812,150, respectively. The remaining forfeiture balances at
December 31, 2003 and 2002 were $1,551,084 and $997,842, respectively. On and
after August 1, 2003, forfeitures may be used to pay reasonable administrative
expenses of the Plan or defray employer contributions to the Plan, in the
Company's discretion.
8
Syncor International Corporation
Employees' Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
INVESTMENT OPTIONS AND DIVERSIFICATION
Prior to August 1, 2003, the Plan offered 24 investment options. On and after
August 1, 2003, the Plan offers 10 investment options. Participants can direct
their contributions, in 1% increments, in any of the investment options offered
at the time.
Prior to January 1, 2002, a participant who had attained the age of 55 and had
been a participant at least 10 years could diversify a portion of his/her Stock
Investment Company Account. Such participant could diversify during the next
five years 25% of the total number of shares of Company Stock allocated to the
account and in the sixth year could diversify 50% of the total number of shares.
There was no provision for diversification of the Stock Investment Participant
Account.
Subsequent to January 1, 2002 and prior to April 1, 2003, a participant under
the age of 55 who has been a participant at least 10 years may diversify a
portion of his/her Stock Investment Company Account and Stock Investment
Participant Account. Such participant may diversify 10% of the number of shares
of Company stock allocated to the Stock Investment Company Account and Stock
Investment Participant Account. A participant 55 or older, who was a participant
at least 10 years, may diversify 25%, and in the fifth plan year after attaining
age 55 may diversify 50% of the number of shares of Company stock allocated to
the Stock Investment Company Account and Stock Investment Participant Account.
On and after April 1, 2003, any participant, regardless of age or service, may
direct the investment of all amounts held in their accounts in the Plan into any
of the available investment options under the plan.
PARTICIPANT ACCOUNTS
Individual accounts are maintained for each participant's tax-deferred
contribution and employer contribution balances. Prior to August 1, 2003, on a
quarterly basis, earnings of the various funds were allocated to the participant
account balances according to the ratio that a participant's account balance in
a given fund bears to the total of all participant account balances in the fund.
On and after August 1, 2003, earnings of the various funds are credited on a
daily basis.
9
Syncor International Corporation
Employees' Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
VESTING
Participants are vested immediately in their elective contributions, plus actual
earnings thereon. Vesting in the Company's contribution portion of their
accounts is based on years of continuous service. Prior to August 1, 2003, the
graded vesting schedule provided that a participant is 100% vested after five
years of vesting service. Participants are automatically 100% vested if the age
of 65 is reached or in the case of disability, or death. On and after August 1,
2003, active participants in the Plan are subject to a cliff vesting schedule
providing that a participant is 100% vested after three years of vesting service
(with preservation of prior vesting levels, as applicable).
PARTICIPANT LOANS
Prior to August 1, 2003, participants could borrow from their fund accounts a
minimum of $500 up to a maximum equal to the lesser of $50,000 less the highest
outstanding balance during the prior 12 months or 50% of their vested account
balance. On and after August 1, 2003, the minimum loan amount is $1,000. 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 periodically by the Plan Administrator. Principal
and interest are repaid ratably through regular payroll deductions.
PAYMENT OF BENEFITS
Upon termination of employment, death, retirement or disability, all
distributions will be made in the form of a lump sum payment in cash or, if so
invested, Cardinal Health common shares, at the election of the participant. In
addition, the Plan includes a provision for participants to make withdrawals
from their account under certain "hardship" circumstances.
10
Syncor International Corporation
Employees' Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements of the Plan are prepared on the accrual basis of
accounting in conformity with U.S. generally accepted accounting principles.
USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect the financial statements and 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.
11
Syncor International Corporation
Employees' Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
3. INVESTMENTS
The fair market values of individual assets that represent 5% or more of the
Plan's assets as of December 31, 2003 and December 31, 2002 are as follows:
DECEMBER 31, DECEMBER 31,
2003 2002
----------- -----------
Cardinal Health, Inc. common shares $ 66,348,223 $ 80,584,348
Plan's interest in Master Trust 20,917,077 --
Montag & Caldwell Growth Fund, mutual fund 8,935,031 --
Dodge & Cox Stock Fund, mutual fund 7,856,164 --
Artisan Mid Cap Fund, mutual fund 6,842,838 --
Short-term Bond Fund -- 7,340,459
Net appreciation in fair value of investments
is as follows:
FOR THE YEAR
ENDED
DECEMBER 31,
2003
------------
Net appreciation in fair value of investments
as determined by quoted market prices:
Mutual funds $ 7,152,342
Cardinal Health, Inc. common shares 2,402,066
-----------
Total net appreciation $ 9,554,408
===========
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Syncor International Corporation
Employees' Savings and Stock Ownership Plan
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 gain
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, DECEMBER 31,
2003 2002
------------ ------------
Investments at fair value:
Mutual funds $ 193,636,628 $ 144,144,606
Common, Collective Trusts 474,353,972 382,873,704
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Total investments $ 667,990,600 $ 527,018,310
============= =============
The Plan's share of assets in the Master Trust was
approximately 3% or $20,917,077 at December 31, 2003.
MASTER TRUST INVESTMENT INCOME:
FOR THE YEAR
ENDED
DECEMBER 31,
2003
-------------
Dividend and interest income $ 12,865,382
Net appreciation in fair value of investments as
determined by quoted market prices:
Mutual funds 22,505,075
Common, Collective Trusts 34,479,241
------------
Total investment gain $ 69,849,698
============
5. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated March 14, 2003, stating that the Plan, as amended and restated, 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.
13
Syncor International Corporation
Employees' Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
6. RISKS AND UNCERTAINTIES
The Plan has a significant participant-directed investment in Cardinal Health,
Inc. common shares, 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 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 $66,348,223 and $80,584,348 of Cardinal Health, Inc. common shares
as of December 31, 2003 and December 31, 2002, respectively.
14
Syncor International Corporation Employees'
Savings and Stock Ownership Plan
Schedule of Assets (Held At End of Year)
(Schedule H, Part IV, Line 4i on Form 5500)
As of December 31, 2003
(b) (c) (e)
DESCRIPTION OF INVESTMENT INCLUDING
IDENTITY OF ISSUER, BORROWER, MATURITY DATE, RATE OF INTEREST,MATURITY
LESSOR, OR SIMILAR PARTY OR PAR VALUE CURRENT VALUE
---------------------------- --------------------------------------- -------------
COMMON STOCK
*Cardinal Health, Inc. 1,084,830 shares $ 66,348,223
MUTUAL FUNDS
Dodge & Cox Stock Fund 69,047 shares 7,856,164
Montag & Caldwell Growth Fund 408,365 shares 8,935,030
Artisan Mid Cap Fund 265,432 shares 6,842,838
Pimco Total Return Fund 485,408 shares 5,198,718
Columbia Acorn USA Fund Z 185,711 shares 3,901,783
LOANS
Loans to participants 5.0 to 11.50% 2,861,970
-------------
Total $ 101,944,726
=============
* Denotes party-in-interest.
15
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.
SYNCOR INTERNATIONAL
CORPORATION EMPLOYEES'SAVINGS
AND STOCK OWNERSHIP PLAN
Date: June 28, 2004 /s/ Richard J. Miller
-----------------------------------
Richard J. Miller, Plan Committee Member
16