UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
| þ | 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 0-31781
American Pharmaceutical Partners Savings
and Retirement Plan
(Full title of the plan)
American Pharmaceutical Partners, Inc.
(Name of issuer of the securties held)
1101 Perimeter Drive, Suite 300 Schaumburg, IL (Address of principal executive offices) | 60173 (Zip Code) |
The American Pharmaceutical Partners
Savings and Retirement Plan
Financial Statements and
Supplemental Schedule
December 31, 2002 and 2001 and year ended December 31, 2002
| F-3 | ||
Financial Statements | ||
| F-4 | ||
| F-5 | ||
| F-6 | ||
Supplemental Schedule | ||
Schedule H, Line 4i – Schedule of Assets (Held at End of Year) | F-11 | |
Report of the Independent Auditors
Plan Trustees
The American Pharmaceutical Partners
Savings and Retirement Plan
We have audited the accompanying statements of assets available for benefits of The American Pharmaceutical Partners 401(K) Plan as of December 31, 2002 and 2001, and the related statement of changes in net assets available for benefits for the year ended December 31, 2002. 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.
Except as explained in the following paragraph, 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 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.
As permitted by 29 CFR 2520.103-8 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, investment assets held by UMB Bank, N.A., the trustee of the Plan, were excluded from the scope of our audit of the Plan’s 2001 financial statements, except for comparing the information provided by the trustee, which is summarized in Note 3, with the related information included in the financial statements.
Because of the significance of the information that we did not audit, we are unable to, and do not, express an opinion on the Plan’s financial statements as of December 31, 2001. The form and content of the information included in the 2001 financial statements, other than that derived from the information certified by the trustee have been audited by us and, in our opinion, are presented in compliance with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.
In our opinion, the financial statements referred to above present fairly, in all material respects, the assets available for benefits of the Plan at December 31, 2002, and changes in its assets available for benefits for the year then ended, in conformity with accounting principles generally accepted in the United States.
Our audit of the Plan’s financial statements as of and for the year ended December 31, 2002, was made 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) as of December 31, 2002 is presented for the purpose 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. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the financial statements for the year ended December 31, 2002, 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
June 19, 2003
F-3
EIN 68-0389419
Plan #001
The American Pharmaceutical Partners
Savings and Retirement Plan
Statements of Assets Available for Benefits
| December 31 | ||||||
| 2002 | 2001 | |||||
Investments | $ | 41,411,581 | $ | 45,262,623 | ||
Employer contribution receivable | 195,203 | 4,955 | ||||
Assets available for benefits | $ | 41,606,784 | $ | 45,267,578 | ||
See accompanying notes to financial statements.
F-4
EIN 68-0389419
Plan #001
The American Pharmaceutical Partners
Savings and Retirement Plan
Statement of Changes in Assets Available for Benefits
Year ended December 31, 2002
Additions | ||||
Net investment income (loss): | ||||
Interest and dividend income | �� | $ | 875,061 | |
Net realized and unrealized depreciation in fair value of investments | (7,229,019 | ) | ||
| (6,353,958 | ) | |||
Contributions: | ||||
Participants | 3,021,246 | |||
Employer | 1,125,088 | |||
Rollovers | 543,332 | |||
| 4,689,666 | ||||
Transfers from the Plan | (382,264 | ) | ||
| (2,046,556 | ) | |||
Deductions | ||||
Benefits paid to participants | 1,607,930 | |||
Administrative expenses | 6,308 | |||
Net decrease | (3,660,794 | ) | ||
Assets available for benefits: | ||||
Beginning of year | 45,267,578 | |||
End of year | 41,606,784 | |||
See accompanying notes to financial statements.
F-5
EIN 68-0389419
Plan #001
The American Pharmaceutical Partners
Savings and Retirement Plan
December 31, 2002
1. Description of Plan
The following description of The American Pharmaceutical Partners (the Company) Savings and Retirement Plan (the Plan) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.
General
The Plan is a defined-contribution plan covering eligible employees of the Company. Generally, employees are eligible to participate provided they are scheduled to work 1,000 hours or more in a year and are not subject to a collective bargaining agreement. Participation may commence upon date of hire. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
The Plan is administered by the Company with record-keeping responsibilities provided by American Century Services Corporation. Custodial and trustee responsibilities are provided by UMB Bank, N.A.
Contributions
Effective October 1, 2002, participants may elect to defer from 1% to 100% of their compensation each pay period and contribute those amounts to the Plan. Prior to October 1, 2002, participants were allowed to defer from 1% to 15% of their compensation each pay period. The Company currently makes a matching contribution equal to 50% of each participant’s deferral up to 6% of each participant’s compensation, within Internal Revenue Service (IRS) limits. At its discretion, the Company can elect to make a supplemental contribution. Participants must be employed on the last day of the Plan year to be eligible for an allocation of the supplemental contribution.
Upon enrollment, a participant may direct employee and Company contributions to any of the Plan’s fund options. The Plan also provides for a self-directed feature whereby participants may direct a portion of their current account balance, subject to certain restrictions, to various mutual funds, bonds, and stocks offered through Charles Schwab.
F-6
The American Pharmaceutical Partners
Savings and Retirement Plan
Notes to Financial Statements
Participant Accounts
Each participant’s account is credited with the participant’s contributions and allocations of: (a) the Company’s contributions, and (b) Plan earnings, and charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances as defined. Forfeited balances of terminated participants’ nonvested accounts are used to reduce the Company contributions. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account.
Participant Loans
Participants may obtain loans from their account balances for a maximum of 50% of the vested account balance or $50,000, whichever is less. Such loans bear interest at the prime rate, plus 1%, and are due and payable in full if regular repayments stop, the participant terminates employment with the Company, or the participant dies.
Vesting
Participants’ contributions and earnings thereon are always fully vested.
Company matching contributions vest according to the following schedule:
Years of Service | Vested Percentage | ||
Less than 1 year | 30 | % | |
At least 1 year but less than 2 | 50 | ||
At least 2 years but less than 3 | 80 | ||
3 years or more | 100 |
Company supplemental contributions vest over continuous years of service. A participant is 100% vested after 6 years of credited service.
A participant also becomes 100% vested upon normal retirement age, death, or permanent disability.
F-7
The American Pharmaceutical Partners
Savings and Retirement Plan
Notes to Financial Statements
Benefit Payments
Benefits are payable upon normal, early, or late retirement, as defined, disability, death, and termination. Participants may elect various payment options including installment or lump-sum payments. A participant may withdraw all or a portion of his account for hardship reasons before benefits become payable, as permitted under the law.
Plan Termination
Although it has not expressed any intent in doing so, the Company has the right to terminate the Plan subject to the provisions of the Plan and ERISA. In the event of Plan termination, participants will become 100% vested in their accounts and will be entitled to their entire account balance.
2. Summary of Significant Accounting Policies
Investments Valuation and Income Recognition
Investments are stated at fair value based on the quoted market prices or redemption prices reported by the issuer. Redemption prices generally are based on the fair values of the fund’s underlying investments. Participant loans are stated at their outstanding balances, which approximates fair value.
Purchases and sales of investments are recorded on the trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date.
Contributions
Contributions from participants are recognized by the Plan when withheld by the Company through payroll deductions. Contributions from the Company are recognized by the Plan for the year to which they relate.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
F-8
The American Pharmaceutical Partners
Savings and Retirement Plan
Notes to Financial Statements
Administrative Expenses
All expenses incurred in the administration of the Plan, except management fees, are paid by the Company.
3. Investments
The investment information disclosed in the accompanying financial statements, including investments held at December 31, 2001, was obtained or derived from information supplied to the plan administrator and certified as complete and accurate by UMB Bank, N.A., except for the self-directed accounts.
Investment information is summarized as follows:
| December 31 | |||||||
| 2002 | 2001 | ||||||
Investments at fair value: | |||||||
Common stock | $ | 466,048 | $ | 852,373 | |||
Mutual funds | 283,989 | 322,463 | |||||
Money market funds | 115,622 | 151,779 | |||||
| 865,659 | 1,326,615 | ||||||
Investments at fair value: | |||||||
| (certified | ) | ||||||
Mutual funds | 30,578,886 | 35,801,641 | |||||
Common collective trust | 8,007,649 | 6,117,624 | |||||
Participant loans | 1,871,715 | 2,016,743 | |||||
American Pharmaceutical Partners, Inc. common stock | 86,975 | — | |||||
Interest bearing cash | 697 | — | |||||
| 40,545,922 | 43,936,008 | ||||||
Total investments, at fair value | $ | 41,411,581 | $ | 45,262,623 | |||
F-9
The American Pharmaceutical Partners
Savings and Retirement Plan
Notes to Financial Statements
| Year ended December 31 2002 | ||||
Net realized and unrealized depreciation in fair value of investments: | ||||
Common stock and mutual funds (self-directed) | $ | (407,373 | ) | |
American Pharmaceutical Partners, Inc. common stock | (14,617 | ) | ||
Common stock and mutual funds | (6,807,029 | ) | ||
Total realized and unrealized net depreciation in fair value of investments | $ | (7,229,019 | ) | |
Investments that represent 5% or more of the Plan’s assets are identified below:
| December 31 | ||||||
| 2002 | 2001 | |||||
Common collective trust: | ||||||
American Century Stable Asset Fund | $ | 8,007,649 | $ | 6,117,624 | ||
Mutual funds: | ||||||
American Century Ultra Fund | 8,542,719 | 11,665,921 | ||||
American Century Heritage Fund | 3,934,177 | 4,516,218 | ||||
American Century International Growth Fund | 3,100,296 | 3,736,521 | ||||
American Century Equity Index | 3,120,086 | 4,243,885 | ||||
American Century Value Fund | 3,061,573 | 3,483,973 | ||||
American Century Diversified Bond Fund | 2,470,806 | * | ||||
| * | Below 5% threshold. |
| 4. | Income Taxes Status |
The Plan has received a determination letter from the IRS dated December 7, 2000, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (Code) and, therefore, the related trust is exempt from taxation. Subsequent to the issuance of this determination letter, the Plan was amended and restated. 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, as amended, is qualified and the related trust is tax-exempt.
| 5. | Transfer of Plan Assets |
In 2002, there was a transfer of Plan assets in the amount of $382,264 resulting from a related company’s employees exiting the Plan.
F-10
EIN 68-0389419
Plan #001
The American Pharmaceutical Partners
Savings and Retirement Plan
Schedule H, Line 4i – Schedule of Assets
(Held at End of Year)
December 31, 2002
Identity of Issuer | Shares/ Units | Current Value | |||
UMB Bank, N.A.*: | |||||
American Century Stable Asset Fund | 8,007,649 | $ | 8,007,649 | ||
American Century Ultra Fund | 403,339 | 8,542,719 | |||
American Century Vista Fund | 144,242 | 1,266,441 | |||
American Century Heritage Fund | 432,327 | 3,934,177 | |||
American Century Value Fund | 514,550 | 3,061,573 | |||
American Century International Growth Fund | 485,940 | 3,100,296 | |||
American Century Strategic Allocation: Conservative Fund | 123,162 | 597,338 | |||
American Century Strategic Allocation: Moderate Fund | 375,379 | 1,970,740 | |||
American Century Strategic Allocation: Aggressive Fund | 144,541 | 794,974 | |||
American Century Income & Growth Fund | 79,105 | 1,719,736 | |||
American Century Equity Index | 886,388 | 3,120,086 | |||
American Century Diversified Fund | 236,894 | 2,470,806 | |||
American Pharmaceutical Partners, Inc.* common stock | 4,886 | 86,975 | |||
Interest bearing cash | 697 | ||||
Self-Directed Account | — | 865,659 | |||
Participant loans (interest rates from 5.25% to 10.5%) | 1,871,715 | ||||
| $ | 41,411,581 | ||||
*Represents party in interest to the Plan.
F-11
EXHIBITS
23.1 Consent of Ernst & Young LLP, Independent Auditors
SIGNATURES
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.
| AMERICAN PHARMACEUTICAL PARTNERS, INC. SAVINGSAND RETIREMENT PLAN | ||
By: | /s/ MIA IGYARTO | |
Mia Igyarto Plan Administrator | ||
Date: June 30, 2003
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