SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 from to .
Commission file number 000-23249
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
PRIORITY HEALTHCARE CORPORATION 401(K) PROFIT SHARING PLAN
(F/K/A PROFIT SHARING PLAN OF
PRIORITY HEALTHCARE CORPORATION AND AFFILIATES)
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
PRIORITY HEALTHCARE CORPORATION
250 Technology Park
Lake Mary, Florida 32746
REQUIRED INFORMATION
| Item 4. | | The Plan is subject to the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Plan’s financial statements and schedule have been prepared in accordance with the financial reporting requirements of ERISA. Such financial statements and schedule are included in this Report in lieu of the information required by Items 1-3 of Form 11-K. |
Financial Statements and Exhibits
Independent Auditors’ Reports
Financial Statements:
Statements of Net Assets Available for Benefits, at December 31, 2002 and 2001
Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2002
Notes to Financial Statements
*Supplemental Schedule
Schedule 1—Schedule of Assets Held for Investment Purposes at End of Year
*Other schedules required by Section 2520.103-10 of the Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable.
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| 23.1 | | — | | Consent of Tedder, James, Worden & Associates, P.A. |
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| 23.2 | | — | | Consent of Ent & Imler CPA Group, PC |
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| 99 | | — | | Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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INDEPENDENT AUDITORS’ REPORT
To the Administrator and Administrative
Committee of the Priority Healthcare Corporation
401(k) Profit Sharing Plan:
We have audited the statement of net assets available for benefits of the Priority Healthcare Corporation 401(k) Profit Sharing Plan (the “Plan”) as of December 31, 2002, and the related statement of changes in net assets available for benefits for the year 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 audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 2002 financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2002, and the changes in net assets available for benefits for the year then ended in conformity with accounting principles generally accepted in the United States of America.
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 for investment purposes 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/ TEDDER, JAMES, WORDEN & ASSOCIATES, P.A.
Orlando, Florida
May 30, 2003
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INDEPENDENT AUDITORS’ REPORT
To the Administrator and
Administrative Committee of
The Profit Sharing Plan of Priority
Healthcare Corporation and Affiliates:
We have audited the accompanying statements of net assets available for plan benefits, with fund information, of The Profit Sharing Plan of Priority Healthcare Corporation and Affiliates (the “Plan”) as of December 31, 2001. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on the financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 net assets available for plan benefits, with fund information, as of December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.
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| | | /s/ ENT & IMLER CPA GROUP, PC |
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| | | ENT & IMLER CPA GROUP, PC |
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Indianapolis, Indiana
June 21, 2002
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PRIORITY HEALTHCARE CORPORATION
401(K) PROFIT SHARING PLAN
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001
| | | 2002
| | 2001
|
Assets: | | | | | |
Investments at fair value: | | | | | |
PHC common stock | | $ | 1,564,326 | | 1,762,481 |
Registered investment companies | | | 3,696,744 | | 3,153,915 |
Participant loans | | | 75,210 | | 44,373 |
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| |
|
Total investments | | | 5,336,280 | | 4,960,769 |
Receivables: | | | | | |
Participants’ contributions | | | 37,995 | | — |
Employer’s contribution | | | 1,408,339 | | 876,143 |
Accrued investment income | | | — | | 48 |
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Total receivables | | | 1,446,334 | | 876,191 |
Cash | | | 3,315 | | — |
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Net assets available for benefits | | $ | 6,785,929 | | 5,836,960 |
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See accompanying notes to financial statements.
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PRIORITY HEALTHCARE CORPORATION
401(K) PROFIT SHARING PLAN
Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 2002
| Additions to (deductions from) net assets attributed to: | | | |
Investment income (loss): | | | | |
Interest and dividends | | $ | 37,881 | |
Net decrease in fair value of investments | | | (1,223,652 | ) |
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Total investment loss | | | (1,185,771 | ) |
Contributions: | | | | |
Employer’s | | | 1,408,339 | |
Participants’ | | | 1,359,146 | |
Rollover from other qualified plan | | | 66,364 | |
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Total contributions | | | 2,833,849 | |
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Total additions | | | 1,648,078 | |
Deductions from net assets attributed to: | | | | |
Benefits paid to participants | | | 694,554 | |
Administrative expenses | | | 4,555 | |
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Total deductions | | | 699,109 | |
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Net increase | | | 948,969 | |
Net assets available for benefits: | | | | |
Beginning of year | | | 5,836,960 | |
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End of year | | $ | 6,785,929 | |
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See accompanying notes to financial statements.
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PRIORITY HEALTHCARE CORPORATION
401(K) PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2002
The following description of the Priority Healthcare Corporation 401(k) Profit Sharing Plan (f/k/a the Profit Sharing Plan of Priority Healthcare Corporation and Affiliates) (the “Plan”) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan.
The Plan, which was effective January 1, 1999, is a defined contribution plan covering substantially all eligible full and part-time employees of Priority Healthcare Corporation (the ”Company”). The Plan is a combined profit sharing and
401(k) pre-tax savings plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Employees become eligible to make 401(k) pre-tax contributions to the Plan beginning on January 1, April 1, July 1 or October 1 immediately following completion of 90 days of service and attaining age 18.
Employees become eligible to participate in the Company’s profit sharing program of the Plan beginning on January 1, April 1, July 1, or October 1, immediately following completion of one year of service and attaining age 18. An employee is considered to have completed one year of service at the end of the first twelve-month period during which the employee has completed no fewer than 1,000 hours of service.
Plan participants may voluntarily contribute, on a pre-tax basis, up to 80% of their annual compensation to the Plan. Participants may also rollover amounts representing distributions from other qualified defined benefit or defined contribution plans. All investments are participant directed. The maximum allowable pre-tax voluntary contribution, as determined by the Internal Revenue Service was $11,000 for 2002.
The Plan provides for a Company discretionary profit sharing contribution. Discretionary contributions are allocated using a pro-rata formula where the contribution is allocated to the individual accounts of qualifying participants in the ratio that each qualifying participant’s compensation in the plan year bears to the total compensation of all qualifying participants for the plan year. The profit sharing contribution, before forfeitures for 2002 and 2001 was $1,428,594 and $909,826, respectively.
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PRIORITY HEALTHCARE CORPORATION
401(K) PROFIT SHARING PLAN
Notes to Financial Statements
| (1) | | Plan Description, Continued |
Each participant’s account is credited with the participant’s contribution, their pro rata share of Company profit sharing contributions, if any, and an allocation of Plan earnings including market value adjustments on Plan investments. Allocations of earnings are based on account balances, as defined in the Plan agreement.
Employee contributions have full and immediate vesting. Employer discretionary profit sharing contributions vest according to the following schedule:
Years of service
| | Vesting percentage
| |
Less than 1 | | 0 | % |
1 | | 20 | % |
2 | | 40 | % |
3 | | 60 | % |
4 | | 80 | % |
5 or more | | 100 | % |
| | (e) | | Distribution of Participant Accounts |
The entire vested balance of a participant’s account may be distributed at the date of the participant’s retirement, disability, or death. Participants still employed who have reached the age 59 1/2 are eligible for distribution of their vested account balance in a lump sum or installment payments not to exceed their life expectancy. The normal retirement age, as defined by the Plan, is 65. If a participant terminates before retirement, the participant will receive either a lump sum payment of their account balance or if the account exceeds $5,000, the participant may elect any distribution date up to age 70 1/2.
| | (f) | | Forfeitures of Accounts |
Forfeitures are used to reduce future employer contributions. In 2002, $33,683 was used to offset employer profit sharing contributions relating to the 2001 plan year. At December 31, 2002, there was $20,255 remaining in forfeited non-vested accounts.
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PRIORITY HEALTHCARE CORPORATION
401(K) PROFIT SHARING PLAN
Notes to Financial Statements
| (1) | | Plan Description, Continued |
Participants may borrow from their fund accounts a minimum of $1,000 to a maximum of $50,000 or 50% of the present value of the non-forfeitable accrued benefit of the participants balance in the plan, whichever is less. The loan, which is collateralized by the balance in the participant’s account, bears interest at prime plus 1%, determined on the first business day of each month. All loans are repaid within a period of five years, except loans to acquire the participant’s principal residence, which must be repaid in a reasonable period of time, not to exceed 15 years.
| (2) | | Summary of Significant Accounting Policies |
The accompanying financial statements are presented on the accrual basis of accounting.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Plan’s investments are stated at fair value. The value of each registered investment company and the Priority Healthcare Corporation (“PHC”) common stock is determined at the close of each business day based on the market value, as reported by the Trustee. The value of the common collective trusts is determined by the Trustee periodically. Participant loans are valued at the amount of unpaid principal, which approximates fair value.
| | (d) | | Risks and Uncertainties |
Investment securities are exposed to various risks, such as interest rates, market, and credit. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.
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PRIORITY HEALTHCARE CORPORATION
401(K) PROFIT SHARING PLAN
Notes to Financial Statements
| (2) | | Summary of Significant Accounting Policies, Continued |
Benefits are recorded when paid.
The Plan is administered by a committee (the “Committee”) appointed by the Compensation and Stock Option Committee of the Company’s Board of Directors. The Plan had until November 30, 2002 a trust agreement with Key Trust (the “Trustee”) whereby the Trustee received contributions, invested Plan assets and distributed amounts for benefit payments as directed by the Committee. On December 1, 2002, the Plan entered into a trust agreement with Delaware Management Trust Company to provide trustee services. All trustee’s fees and other administrative expenses, exclusive of those incurred in relation to the Committee, are paid by the Plan.
The following presents investments that represent 5% or more of the Plan’s net assets as of December 31:
| | | 2002
| | 2001
|
PHC Common Stock | | $ | 1,564,326 | | 1,762,481 |
AIM Basic Value Fund | | | 651,256 | | * |
Delaware Stable Value Fund | | | 602,858 | | * |
Pioneer Fund | | | 568,259 | | * |
MFS Total Return Fund | | | 488,925 | | * |
State Street Mid Cap Value Fund | | | 431,825 | | * |
Delaware International Value Equity Fund | | | 338,800 | | * |
Delaware S & P 500 Index Fund | | | 275,005 | | * |
American Washington Mutual Inv Fund | | | * | | 638,516 |
Janus Fund | | | * | | 554,757 |
Victory Special Value Fund | | | * | | 524,459 |
Victory Gradison Government Reserves-G Fund | | | * | | 415,543 |
Victory Balanced Fund | | | * | | 363,438 |
American Europacific Growth Fund | | | * | | 310,273 |
* – Did not constitute 5% or more of plan assets for the year presented.
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PRIORITY HEALTHCARE CORPORATION
401(K) PROFIT SHARING PLAN
Notes to Financial Statements
| (3) | | Investments, Continued |
The Plan’s investments (including gains and losses on investments bought and sold, as well as those held during the year), declined in value by $1,223,652 during the year ended December 31, 2002 as follows:
Registered investment companies | | $ | (560,787 | ) |
Common stock | | | (662,865 | ) |
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| | | $ | (1,223,652 | ) |
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The Plan has received a favorable determination letter from the Internal Revenue Service dated August 7, 2001, which states that the Plan qualifies under the applicable provisions of the Internal Revenue Code and that it is therefore exempt from federal income taxes. The Plan has subsequently been amended to conform with various tax acts. In the opinion of the Plan Administrator, the Plan, as amended, continues to meet the Internal Revenue Code requirements and is currently operating such that its exempt status has been maintained.
Although the Company has not expressed any intent to do so, the Company has the right, under the Plan agreement, to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants’ will become 100% vested in their accounts.
There were no substantial differences between the accompanying financial statements as of December 31, 2002 and 2001 and the financial information reported on Form 5500.
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PRIORITY HEALTHCARE CORPORATION
401(K) PROFIT SHARING PLAN
Schedule of Assets Held for Investment Purposes at End of Year
December 31, 2002
EIN # 35-1927379
Plan # 001
(a)
| | (b)
Identity of issue, borrower,
lessor or similar party
| | (c)
Description of investment including maturity date, rate
of interest, collateral, par or maturity date
| | (d)
Cost
| | (e)
Current
value
|
* | | Priority Healthcare Corporation Common Stock | | Equity securities of Priority Healthcare Corporation | | $ — | | 1,564,326 |
| | | AIM Investments | | Registered Investment Companies
AIM Basic Value Fund | | — | | 651,256 |
* | | Delaware Investments | | Common Collective Trust
Delaware Stable Value Fund | | — | | 602,858 |
| | | Pioneer Investments | | Registered Investment Companies
Pioneer Fund | | — | | 568,259 |
| | | MFS Investment Management | | Registered Investment Companies
MFS Total Return Fund | | — | | 488,925 |
| | | State Street Research | | Registered Investment Companies
State Street Mid Cap Value Fund | | — | | 431,825 |
* | | Delaware Investments | | Registered Investment Companies
Delaware International Value Equity Fund | | — | | 338,800 |
* | | Delaware Investments | | Registered Investment Companies
Delaware S&P 500 Index Fund | | — | | 275,005 |
| | | PIMCO Funds | | Registered Investment Companies
PIMCO Total Return Fund | | — | | 260,629 |
| | | Evergreen Investments | | Registered Investment Companies
Evergreen Special Values Fund | | — | | 27,806 |
| | | MFS Investment Management | | Registered Investment Companies
MFS Mass Investors Growth Stock Fund | | — | | 24,737 |
* | | Delaware Investments | | Registered Investment Companies
Delaware REIT Fund | | — | | 14,448 |
| | | AIM Investments | | Registered Investment Companies
AIM Mid Cap Core Equity Fund | | — | | 10,159 |
* | | Delaware Investments | | Registered Investment Companies
Delaware Trend Fund | | — | | 2,037 |
* | | Delaware Investments | | Cash Account | | — | | 3,315 |
* | | Participant Loans | | Various maturities (Interest rates from 5.25% to 10.5%) | | — | | 75,210 |
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* Party-in-interest | | | | $ — | | 5,339,595 |
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See accompanying independent auditors’ report
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | | | PRIORITY HEALTHCARE CORPORATION 401(K) PROFIT SHARING PLAN (F/K/A PROFIT SHARING PLAN OF PRIORITY HEALTHCARE CORPORATION AND AFFILIATES) |
| | | | |
| Date: | | June 25, 2003 | | | | By: | | /s/ REBECCA M. SHANAHAN
|
| | | | | | | Name: Title: | | Rebecca M. Shanahan Plan Administrator |
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