FORM 11-K/A
AMENDMENT NO. 1
TO FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
{X} ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2002
{ } TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _____________________ to _________________
Commission file number 1-14177
A. Full title of the plan:
COBALT CORPORATION 401(K) PLAN
B. Name of issuer of securities held pursuant to the plan and the address
of its principal executive office:
Cobalt Corporation
401 West Michigan Street
Milwaukee, Wisconsin 53203
REQUIRED INFORMATION
The following financial statements and schedules of the Cobalt Corporation.
401(k) Plan (the "Plan"), prepared in accordance with the financial reporting
requirements of the Employee Retirement Income Security Act of 1974, as amended,
are filed herewith.
Cobalt Corporation 401(k) Plan
Financial Statements and Supplemental Schedules
For the Years Ended December 31, 2002 and 2001
Together with Reports of Independent Public Accountants
Cobalt Corporation 401(k) Plan
Financial Statements
December 31, 2002 and 2001
Table of Contents
Page
Reports of Independent Public Accountants......................................1
Financial Statements
Statements of Assets Available for Benefits
as of December 31, 2002 and 2001......................................3
Statements of Changes in Assets Available for Benefits
for the Years Ended December 31, 2002 and 2001........................4
Notes to Financial Statements..................................................5
Supplemental Schedules
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
as of December 31, 2002..............................................11
Schedule H, line 4i - Schedule of Assets (Acquired and Disposed of
Within Year) for the Year Ended December 31, 2002....................12
Schedule H, line 4j - Schedule of Reportable Transactions
for the Year Ended December 31, 2002.................................13
Report of Independent Public Accountants
To the Employee Benefits Committee of Cobalt Corporation:
We have audited the accompanying statement of assets available for benefits of
the Cobalt Corporation 401(k) Plan (the Plan) as of December 31, 2002 and the
related statement of changes in assets available for plan benefits for the year
then ended. These financial statements and the supplemental schedules referred
to below are the responsibility of the Plan's management. Our responsibility is
to express an opinion on these financial statements and supplemental schedules
based on our audit. The 2001 financial statements were reported on by other
auditors whose report dated June 21, 2002 on the statements expressed an
unqualified opinion.
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 Cobalt
Corporation 401(k) Plan as of December 31, 2002 and the changes in assets
available for benefits for the year then ended, in conformity with accounting
principles generally accepted in the United States.
Our audit was conducted for the purpose of forming an opinion on the basic 2002
financial statements taken as a whole. The supplemental schedules, as listed in
the accompanying table of contents, are presented for the purpose of additional
analysis and are not a required part of the basic financial statements but are
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. These supplemental schedules are the responsibility of the
Plan's administrator. The supplemental schedules have been subjected to the
auditing procedures applied in the audit of the basic 2002 financial statements
and, in our opinion, are fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
/s/ Coleman & Williams, Ltd.
Milwaukee, Wisconsin
June 17, 2003
1
Report of Independent Auditors
Employee Benefits Committee
Cobalt Corporation 401(k) Plan
We have audited the accompanying statement of assets available for benefits of
Cobalt Corporation 401(k) Plan as of December 31, 2001, and the related
statement of changes in 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 audits.
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 Cobalt Corporation
401(k) Plan at December 31, 2001, and the changes in its assets available for
benefits for the year then ended, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Milwaukee, Wisconsin
June 21, 2002
2
Cobalt Corporation 401(k) Plan
Statements of Assets Available for Benefits
December 31,
2002 2001
----------- -----------
ASSETS
Investments, at fair value $79,883,814 $75,992,942
Cash 26,344 -
Contribution receivables:
Participant 267,645 303,719
Employer 86,035 97,573
Receivables -
Interest and dividends 30,389 29,059
----------- -----------
ASSETS AVAILABLE FOR BENEFITS $80,294,227 $76,423,293
=========== ===========
The accompanying Notes to Financial Statements are an integral part of
these statements.
3
Cobalt Corporation 401(k) Plan
Statements of Changes in Assets Available for Benefits
For the Years Ended December 31, 2002 and 2001
Year ended December 31,
2002 2001
----------- -----------
ADDITIONS TO ASSETS
Contributions:
Participants $ 7,947,121 $ 8,744,012
Employers 2,076,418 2,515,764
----------- -----------
10,023,539 11,259,776
Interest and dividends 925,676 818,018
Cash transfers and rollovers 195,007 7,885,147
Net appreciation (depreciation) in fair value of investments 2,233,299 (2,262,108)
----------- -----------
Total additions 13,377,521 17,700,833
DEDUCTIONS FROM ASSETS
Benefits and withdrawals 9,506,587 4,532,811
----------- -----------
Total deductions 9,506,587 4,532,811
----------- -----------
Net increase 3,870,934 13,168,022
ASSETS AVAILABLE FOR BENEFITS
Beginning of year 76,423,293 63,255,271
----------- -----------
End of year $80,294,227 $76,423,293
=========== ===========
The accompanying Notes to Financial Statements are an integral part of
these statements.
4
Cobalt Corporation 401(k) Plan
Notes to Financial Statements
December 31, 2002 and 2001
NOTE 1. PLAN DESCRIPTION
The Cobalt Corporation 401(k) Plan (the Plan) is a defined contribution plan
which covers eligible salaried and hourly employees not subject to collective
bargaining agreements of Cobalt Corporation (Employer), formerly known as United
Wisconsin Services, Inc. (UWS), and any subsidiaries including Blue Cross & Blue
Shield United of Wisconsin (BCBSUW), to which participation has been extended.
BCBSUW converted to a stockholder-owned corporation by combining with Cobalt
Corporation on March 23, 2001.
Eligible employees can elect to participate in the Plan upon employment with the
Employer. The Plan allows participants to direct their contributions into one or
a combination of several investment options offered by the Plan. Participants
can make qualifying contributions of 2% to 40% of their eligible compensation,
which the Employer matches on a 50% basis (generally excluding contributions in
excess of 5%). Employer matching contributions are generally required to be
invested in Cobalt common stock through the Cobalt Corporation Pooled Stock
Fund.
Earnings of the Plan are allocated daily to individual participant accounts, as
defined in the Plan.
The participants' contributions and earnings thereon are 100% vested at all
times. Participants' contributions may be withdrawn, subject to certain
limitations, prior to termination of participation in the Plan. Earnings thereon
may be withdrawn only upon termination of employment. Employer contributions and
earnings thereon generally become vested based on years of service and may be
withdrawn only upon termination of employment. Forfeited Employer contributions
are used to offset subsequent employer contributions.
Although they have not expressed any intent to do so, the employers have the
right under the Plan to discontinue their contributions at any time and to
terminate the Plan subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). In the event of Plan termination, participants'
Employer contribution accounts will become 100% vested.
A description of the Plan is contained in the Summary Plan Description, which
can be obtained from the Plan Administrator.
5
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
a. Investment Valuation
--------------------
Assets of the Plan are held by American Express Trust Company under a trust
agreement, under which the assets of the Plan are segregated and invested
separately. Investments are valued at fair value based on quoted market
prices, except for participant loans, which are valued at their current
outstanding balances, which approximate fair value.
b. Contributions
-------------
Contributions from participants are recorded in the period the Employer
makes corresponding payroll deductions. Contributions from the Employer are
recorded based upon amounts required to be contributed as determined by the
Plan.
c. Administrative Expenses
-----------------------
With the exception of fees on personal loans, all administrative expenses
in 2002 and 2001 were paid by the Employer.
d. Basis of Accounting
-------------------
The financial statements have been prepared on the accrual basis of
accounting.
e. 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 reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of additions to
and deductions from assets during the reporting periods. Actual results
could differ from those estimates.
6
NOTE 3. INVESTMENTS
During 2002 and 2001, the Plan's investments (including investments purchased,
sold as well as held during the year) changed in fair value as determined by
American Express Trust as follows:
Net Realized and Unrealized
Appreciation (Depreciation) in
Fair Value of Investments
2002 2001
------------------ ------------------
Mutual funds $(4,176,435) $(4,155,115)
Common trust funds (4,815,087) (2,231,932)
Common stock 11,224,821 4,124,939
------------------ ------------------
$2,233,299 $(2,262,108)
================== ==================
Investments that represent 5% or more of the Plan's assets at December 31 are as
follows:
2002 2001
----------- -----------
Cobalt Corporation Common Stock* $17,399,702 $ 8,479,256
AXP New Dimensions Fund (Y) 5,152,701 6,733,575
PIMCO Total Return Fund 9,260,794 7,368,172
American Express Trust Income Fund II 10,552,092 9,136,653
American Express Trust Equity Index Fund II 14,709,543 19,568,722
AIM Constellation Fund ** 5,954,736
Janus Overseas Fund ** 4,787,047
American Express Trust Horizon Medium Term (50:50)
Fund 6,099,319 6,521,218
*Includes nonparticipant-directed funds (see Note 4)
**Below 5% threshold
NOTE 4. NONPARTICIPANT-DIRECTED INVESTMENTS
The Cobalt Corporation Pooled Stock Fund contains nonparticipant-directed funds.
Information about the assets and the significant components of changes in assets
related to this fund are as follows:
December 31,
2002 2001
----------- -----------
Investments, at fair value:
Cobalt Corporation common stock $17,399,702 $ 8,479,256
Cash and cash equivalents 827,694 333,101
Interest and dividends receivable 201 1,209
----------- -----------
Total of Cobalt Pooled Stock Fund $18,227,597 $ 8,813,566
=========== ===========
7
NOTE 4. NONPARTICIPANT-DIRECTED INVESTMENTS (continued)
Year ended December 31,
2002 2001
----------- -----------
Change in assets:
Contributions:
Employer $ 2,281,571 $2,404,919
Employee 341,603 293,592
Investment income 9,765 -
Cash transfers and rollovers 194,444 94,551
Net realized and unrealized appreciation in fair value of common
stock 10,857,451 3,045,151
Benefits and withdrawals (4,270,803) (369,217)
----------- -----------
Net increase in Cobalt Pooled Stock Fund $ 9,414,031 $ 5,468,996
=========== ===========
The Cobalt Corporation Pooled Stock Fund generally includes the Employer's
matching contributions and employee directed contributions in Cobalt Corporation
common stock, which are limited to 30% of the employee's allowable contribution.
At December 31, 2002 and 2001 the Plan held 1,260,848 and 1,329,027 shares of
Cobalt Corporation common stock, respectively.
On June 3, 2003, Cobalt Corporation announced a tentative agreement to merge
with WellPoint Health Networks Inc. in exchange for approximately $906 million
in cash and stock (see Note 6).
Receivables to the Plan are not allocated until they are received therefore
those amounts are not reflected in the table above.
NOTE 5. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated July 29, 2002, stating that the Plan is qualified under Section 401(a) of
the Internal Revenue Code (IRC) of 1986, as amended, and therefore, the related
trust is exempt from taxation. Subsequent to the issuance of the determination
letter, the Plan was amended. Once qualified, the Plan is required to operate in
conformity with the IRC to maintain its qualification. The Plan will apply for
an updated letter from the Internal Revenue Service stating that the Plan
continues to qualify under the IRC. However, the Plan Administrator believes the
Plan is being operated in compliance with the applicable requirements of the IRC
and, therefore, believes that the Plan is qualified and the related trust is tax
exempt.
8
NOTE 6. SUBSEQUENT EVENTS - COBALT TO MERGE WITH WELLPOINT
WellPoint Health Networks Inc., and Cobalt Corporation, jointly announced on
June 3, 2003 that they have signed a definitive merger agreement. The
transaction is currently valued at approximately $906 million on a fully diluted
basis or $20.50 per share for Cobalt Corporation common stock. Cobalt
Corporation common stock was valued at $13.80 per share as of December 31, 2002.
The transaction is structured as a merger of Cobalt Corporation with a wholly
owned subsidiary of WellPoint and is intended to be tax free with respect to the
WellPoint stock to be received in the transaction by Cobalt shareholders. The
consideration of $20.50 per share to be received by the shareholders of Cobalt
will be comprised of $10.25 in cash and WellPoint stock at a fixed exchange
ratio of 0.1233 of a share of WellPoint stock for each share of Cobalt stock
(valued at $10.25 per share at the market close on June 3, 2003). The exchange
ratio will be adjusted if WellPoint's stock price falls below $70.97 so that
Cobalt shareholders receive no less than $8.75 per share in stock consideration
and no less than $19.00 in the aggregate.
9
Supplemental Schedules
10
Cobalt Corporation 401(k) Plan
Employer Identification Number 39-1931212
Plan Number 002
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
As of December 31, 2002
Identity of Issue, Borrower, Number Current
Lessor or Similar Party of Shares Cost ** Value
----------------------- --------- ----------- ------------
Common Trust Funds:
American Express Trust Income Fund II* 459,806 N/A $ 10,552,092
AXT Horizon Medium Term (50-50) Fund* 304,981 N/A 6,099,319
American Express Trust Small Cap Equity Index Fund II* 145,955 N/A 1,663,453
American Express Trust Equity Index Fund II* 594,541 N/A 14,709,543
Common Stocks:
Cobalt Stock Pool* 1,767,953 $ 8,134,163 18,227,597
American Medical Securities Stock Pool* 161,777 N/A 1,768,705
Mutual Funds:
PIMCO Total Return Fund 867,928 N/A 9,260,794
AIM Constellation Fund 194,469 N/A 3,234,015
AXP New Dimensions Fund (Y)* 267,395 N/A 5,152,701
AXP Mid Cap Index Fund (Class E)* 395,958 N/A 1,896,637
Neuberger Berman Genesis Trust 46,281 N/A 1,302,336
Brown Capital Management Small Company 2,417 N/A 50,706
Janus Overseas Fund 231,910 N/A 3,545,908
Participant Loans, Interest rates (5.25% - 10.5%), maturity N/A N/A 2,420,008
dates vary with terms of generally 5 years or less ------------
$ 79,883,814
============
* Represents party known to be a party-in-interest to the Plan.
**Cost has been included for nonparticipant-directed investments only.
11
Cobalt Corporation 401(k) Plan
Employer Identification Number 39-1931212
Plan Number 002
Schedule H, line 4i - Schedule of Assets (Acquired and Disposed of Within Year)
For the Year Ended December 31, 2002
Description of Investment
Including Maturity Date,
Identity of Issue, Borrower, Rate of Interest, Collateral, Cost of
or Similar Party Par or Maturity Value Acquisitions
- ---------------------------- ----------------------------- ------------
Brown Capital Management Small Company Mutual Fund $ 52,579
12
Cobalt Corporation 401(k) Plan
Employer Identification Number 39-1931212
Plan Number 002
Schedule H, line 4j - Schedule of Reportable Transactions
For the Year Ended December 31, 2002
Description Purchases Sales
------------------------------ ----------------------------------- -----------------------------------------
Identity of Description No. of Fair Purchase No. of Fair Selling Gain
Party Involved of Asset Transactions Value Price Transactions Value Price (Loss)
------------------------------ ----------------------------------- -----------------------------------------
None.
13
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Cobalt Corporation Employee Benefits Committee, which administers the plan,
has duly caused this amendment to Form 11-K to be signed on its behalf by the
undersigned hereunto duly authorized.
COBALT CORPORATION 401(k) PLAN
August 6, 2003 By: /s/ Gail L. Hanson
-----------------------------------
Gail L. Hanson
Member of the Cobalt Corporation
Employee Benefits Committee
EXHIBIT INDEX
COBALT CORPORATION 401(K) PLAN
FORM 11-K/A
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
-------------------------------------------
Exhibit No. Description
- ----------- -----------
(23.1) Consent of Coleman & Williams , Ltd., Independent Auditors.
(23.2) Consent of Ernst & Young LLP, Independent Auditors.
(32.1) Certification of the Chairman and Chief Executive Officer of
Cobalt Corporation Pursuant to 18 U.S.C. Section 1350.
(32.2) Certification of the Senior Vice President, Chief Financial
Officer and Treasurer of Cobalt Corporation Pursuant to 18 U.S.C.
Section 1350.