SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
Annual Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended December 31, 2003
Commission file number: 0-10736
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
MGI PHARMA, INC. Retirement Plan
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
MGI PHARMA, INC.
5775 West Old Shakopee Road, Suite 100
Bloomington, MN 55437-3174
MGI PHARMA, INC. RETIREMENT PLAN
Financial Statements and Supplemental Schedules
December 31, 2003 and 2002
(Report of Independent Registered Public Accounting Firm)
MGI PHARMA, INC. RETIREMENT PLAN
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Trustees
MGI Pharma, Inc. Retirement Plan:
We have audited the accompanying statements of net assets available for benefits of MGI Pharma, Inc. Retirement Plan (the Plan) as of December 31, 2003 and 2002, and the related statement of changes in net assets available for benefits for the years 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 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 also 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 as of December 31, 2003 and 2002, and the changes in net assets available for benefits for the years then ended in conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets (held at end of year) and reportable transactions 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 management. The supplemental schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Minneapolis, Minnesota
May 7, 2004
MGI PHARMA, INC. RETIREMENT PLAN
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
| | | | | |
| | | 2003
| | 2002
|
Assets: | | | | | |
Investments at fair value (note 6): | | | | | |
Mutual funds | | $ | 8,198,632 | | 4,369,501 |
MGI Pharma, Inc. common stock | | | 18,290,278 | | 2,759,036 |
Participant loans | | | 54,515 | | 85,004 |
| | |
|
| |
|
| | | | 26,543,425 | | 7,213,541 |
| | |
|
| |
|
Receivables: | | | | | |
Employer contribution | | | 1,462,325 | | 1,181,663 |
| | |
|
| |
|
Total receivables | | | 1,462,325 | | 1,181,663 |
| | |
|
| |
|
Net assets available for benefits | | $ | 28,005,750 | | 8,395,204 |
| | |
|
| |
|
See accompanying notes to financial statements.
2
MGI PHARMA, INC. RETIREMENT PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2003 and 2002
| | | | | | | |
| | | 2003
| | | 2002
| |
Additions (reductions): | | | | | | | |
Investment income (loss): | | | | | | | |
Net appreciation (depreciation) in fair value of investments (note 6) | | $ | 17,207,397 | | | (3,276,856 | ) |
Interest and dividends | | | 64,906 | | | 38,376 | |
| | |
|
|
| |
|
|
Net investment income (loss) | | | 17,272,303 | | | (3,238,480 | ) |
| | |
|
|
| |
|
|
Contributions: | | | | | | | |
Employer | | | 1,798,380 | | | 928,928 | |
Employee | | | 2,055,577 | | | 1,122,537 | |
| | |
|
|
| |
|
|
Total contributions | | | 3,853,957 | | | 2,051,465 | |
| | |
|
|
| |
|
|
Deductions: | | | | | | | |
Benefits paid to participants | | | (1,515,364 | ) | | (171,132 | ) |
Plan administrator fees | | | (350 | ) | | (869 | ) |
| | |
|
|
| |
|
|
Total deductions | | | (1,515,714 | ) | | (172,001 | ) |
| | |
Transfers in from other plan | | | — | | | 1,781,526 | |
| | |
|
|
| |
|
|
Net increase in net assets available for benefits | | | 19,610,546 | | | 422,510 | |
| | |
Net assets available for benefits: | | | | | | | |
Beginning of year | | | 8,395,204 | | | 7,972,694 | |
| | |
|
|
| |
|
|
End of year | | $ | 28,005,750 | | | 8,395,204 | |
| | |
|
|
| |
|
|
See accompanying notes to financial statements.
3
MGI PHARMA, INC. RETIREMENT PLAN
Notes to Financial Statements
December 31, 2003 and 2002
| (1) | Summary of Significant Accounting Policies |
The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
| | (b) | Investments and Income Recognition |
MGI Pharma, Inc. Retirement Plan (the Plan) investments are stated at fair value. Shares of registered investment companies are valued at quoted market prices that represent the net asset value of shares held by the Plan at year-end. Company stock is valued at its quoted market price of $41.15 and $7.25 per share at December 31, 2003 and 2002, respectively. Participant loan notes receivable are valued at cost, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Investment income is allocated to participants’ accounts based upon their pro rata share of the respective investment balance during the income period.
Benefits are recorded when paid.
All administrative expenses of the Plan, with the exception of loan fees, are paid by MGI Pharma, Inc. (MGI or the Company).
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of net assets available for plan benefits and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of changes in net assets available for plan benefits during the reporting period. Actual results could differ from those estimates.
| | (f) | Risks and Uncertainties |
The Plan offers a number of investment options to participants that are exposed to various risks, such as interest rate, credit, and overall market volatility risk. Due to the level of risk associated 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 plan benefits and participant accounts.
| (2) | Summary Description of the Plan |
The following description of the Plan provides only general information. Participants should refer to the Summary Plan Description for a more complete description of the Plan’s provisions. The Plan is a defined contribution retirement savings plan sponsored by MGI. The Plan conforms to Section 401(k) of the
MGI PHARMA, INC. RETIREMENT PLAN
Notes to Financial Statements
December 31, 2003 and 2002
Internal Revenue Code and, therefore, defers income taxes on qualifying contributions and Plan earnings. The Plan benefits eligible employees by accumulating retirement assets during their working careers through employee participation in a systematic savings and investment program to which MGI also contributes. The Plan is administered by an Administrative Committee appointed for that purpose by MGI’s board of directors.
At December 31, 2003, 280 employees were participants in the Plan. The Plan is available to every employee of MGI who completes one month of employment, is at least 21 years old, and is scheduled for at least 1,000 hours of service annually. Eligible employees may participate in the Plan through: (1) contributions of up to 15% of their compensation; (2) employer matching contributions equal to 50% of employee contributions, up to 6% of an employee’s compensation; (3) employer discretionary contributions; and (4) employee rollover contributions. Contributions are subject to certain limitations.
Employee contributions and related earnings are directed by the participant into available investment options and are fully vested at all times. Employer contributions are in the form of MGI common stock. Following full vesting, a participant may elect to redirect investment of employer contributions to any of the Plan’s investment alternatives. Employer contributions are 20% vested after completion of two years of employment, 40% after three years, 75% after four years, and 100% after five years. Employer discretionary contributions are allocated to a participant’s account based upon his/her pro rata share of total recognized compensation during the year. Forfeitures are used to reduce the amount of MGI’s contributions to the Plan. For the year ended December 31, 2003, $170,174 in forfeitures were used to reduce employer contributions.
A participant’s account may mature and be distributed upon the occurrence of one of the following: (1) death, (2) retirement, (3) the attainment of 70 1/2 years of age, (4) termination of employment, (5) termination of the Plan, or (6) upon certain MGI “change in control” events. Distributions may be a lump sum of cash and MGI common stock held in a participant’s account.
At December 31, 2003, the following investment alternatives were available to plan participants: Vanguard Primecap Fund, Vanguard World, International Growth, American Fund Capital World Growth & Income, ABN AMRO Income Plus Fund, ABN AMRO Chicago Capital Growth Fund, ABN AMRO Veredus Aggressive Growth Fund, ABN AMRO Chicago Capital Balanced Fund, ABN AMRO Chicago Capital Bond Fund, MFS Value Fund, and MGI Pharma, Inc. common stock.
Participants may borrow from their accounts a minimum of $1,000 up to the lesser of $50,000 or one-half of their vested balances. Loan transactions are treated as transfers between the relevant investment fund and the Participant Notes fund. Loan terms generally cannot exceed five years. The loans are secured by balances in the participants’ accounts and bear interest fixed at 1% above the prime rate upon initiation of the loan. Principal and interest is paid monthly or by more frequent installments.
MGI PHARMA, INC. RETIREMENT PLAN
Notes to Financial Statements
December 31, 2003 and 2002
The Plan received a tax qualification letter from the Internal Revenue Service dated November 5, 2003 stating that it is a qualified plan under the Internal Revenue Code (IRC) and, therefore, the associated trust is exempt from federal income taxes. Following the qualification letter, the Plan administration believes operation of the Plan has been performed in a manner to maintain compliance with the applicable requirements of the IRC.
| (4) | Party-in-interest Transactions |
The Plan engaged in transactions involving the Trustee, ABN AMRO Trust Services Company, and the Company, which are parties-in-interest with respect to the Plan. These transactions are not considered “prohibited transactions” under Section 408(b)(8) and are not prohibited by the Employee Retirement Income Security Act (ERISA).
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% vested in their accounts.
The following investments, as of December 31, 2003 and 2002, represented 5% or more of the Plan’s net assets:
| | | | | |
| | | Principal amount or number of shares
| | Market value
|
2003: | | | | | |
Vanguard Group of Mutual Funds: | | | | | |
Primecap Fund | | 37,607 | | $ | 1,994,645 |
ABN AMRO Group of Mutual Funds: | | | | | |
Income Plus Fund | | 264,273 | | | 1,446,556 |
MGI Pharma, Inc. common stock | | 445,667 | | | 18,290,278 |
| | |
2002: | | | | | |
Vanguard Group of Mutual Funds: | | | | | |
Primecap Fund | | 31,640 | | $ | 1,107,223 |
ABN AMRO Group of Mutual Funds: | | | | | |
Chicago Capital Balanced Fund | | 70,059 | | | 697,065 |
Chicago Capital Growth Fund | | 31,791 | | | 574,437 |
Income Plus Fund | | 133,800 | | | 702,979 |
MGI Pharma, Inc. common stock | | 377,949 | | | 2,759,036 |
MGI PHARMA, INC. RETIREMENT PLAN
Notes to Financial Statements
December 31, 2003 and 2002
During 2003 and 2002, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:
| | | | | | |
| | | 2003
| | 2002
| |
Mutual funds | | $ | 1,212,670 | | (595,602 | ) |
MGI Pharma, Inc. common stock | | | 15,994,727 | | (2,681,254 | ) |
| | |
|
| |
|
|
| | | $ | 17,207,397 | | (3,276,856 | ) |
| | |
|
| |
|
|
| (7) | Nonparticipant-directed Investments |
Information about the net assets and the significant components of the changes in net assets relating to the nonparticipant-directed investments is as follows:
| | | | | | | |
| | | 2003
| | | 2002
| |
MGI Pharma, Inc. common stock | | $ | 18,290,278 | | | 2,759,036 | |
Contribution receivable from MGI Pharma, Inc. | | | 954,881 | | | 624,125 | |
| | |
|
|
| |
|
|
Net assets | | $ | 19,245,159 | | | 3,383,161 | |
| | |
|
|
| |
|
|
| | |
| | | 2003
| | | 2002
| |
Changes in net assets: | | | | | | | |
Net appreciation (depreciation) in fair value of investments | | $ | 15,994,727 | | | (2,681,254 | ) |
Contributions | | | 2,036,356 | | | 1,200,091 | |
Transfer to other funds | | | (1,305,768 | ) | | (32,822 | ) |
Forfeitures | | | (164,746 | ) | | (20,435 | ) |
Distributions | | | (698,497 | ) | | (89,488 | ) |
Other | | | (74 | ) | | (123 | ) |
| | |
|
|
| |
|
|
Increase (decrease) in nonparticipant-directed investments | | $ | 15,861,998 | | | (1,624,031 | ) |
| | |
|
|
| |
|
|
7
Schedule 1
MGI PHARMA, INC. RETIREMENT PLAN
Schedule of Assets (Held at End of Year)
December 31, 2003
| | | | | | | | | | | |
Identity of issuer
| | Description
| | Face amount
or shares
| | Cost
| | | Fair market
value
|
Vanguard Group: | | | | | | | | | | | |
Primecap Fund | | Registered Investment Fund | | 37,607 | | | * | * | | $ | 1,994,645 |
World, International Growth | | Registered Investment Fund | | 38,154 | | | * | * | | | 615,406 |
American Fund Capital World G & I | | Registered Investment Fund | | 22,166 | | | * | * | | | 662,303 |
| | | | |
* ABN AMRO: | | | | | | | | | | | |
Chicago Capital Bond Fund | | Registered Investment Fund | | 49,139 | | | * | * | | | 495,817 |
Chicago Capital Balanced Fund | | Registered Investment Fund | | 93,149 | | | * | * | | | 1,058,145 |
Chicago Capital Growth Fund | | Registered Investment Fund | | 43,543 | | | * | * | | | 956,603 |
Income Plus Fund | | Registered Investment Fund | | 264,273 | | | * | * | | | 1,446,556 |
Veredus Aggressive Growth Fund | | Registered Investment Fund | | 32,405 | | | * | * | | | 504,209 |
| | | | |
MFS Value Fund | | Registered Investment Fund | | 22,859 | | | * | * | | | 464,948 |
| | | | |
* MGI Pharma, Inc. common stock | | Common Stock, par value $0.01 | | 445,667 | | $ | 5,347,972 | | | | 18,290,278 |
| | | | |
Participant loans | | Loans to participants ranging
between 5.25% and 10.5%. | | | | | * | * | | | 54,515 |
| | | | | | | | | | |
|
|
Total | | | | | | | | | | $ | 26,543,425 |
| | | | | | | | | | |
|
|
| * | Represents party-in-interest |
| ** | Cost information not required for participant-directed investments |
See accompanying report of independent registered public accounting firm.
8
Schedule 2
MGI PHARMA, INC. RETIREMENT PLAN
Schedule of Reportable Transactions
Year ended December 31, 2003
| | | | | | | | | | | | |
Description of assets
| | Number of
purchases
transactions
| | Number of sales
transactions
| | Cost
| | Fair value
| | Net gain
| |
5% series of transactions by Rule 2520.103-6: | | | | | | | | | | | | |
* MGI Pharma, Inc. common stock | | 2 | | — | | $ | 1,301,830 | | 1,301,830 | | — | |
| | | | | |
5% individual transactions by Rule 2520.103-6: | | | | | | | | | | | | |
American Fund Capital World G & I | | 1 | | — | | $ | 443,185 | | 443,185 | | — | |
Janus Worldwide Fund | | — | | 1 | | | 533,935 | | 443,185 | | (90,750 | ) |
* MGI Pharma, Inc. common stock | | 1 | | — | | | 624,174 | | 624,174 | | — | |
* MGI Pharma, Inc. common stock | | 1 | | — | | | 677,656 | | 677,656 | | — | |
| * | Represents party-in-interest. |
| Note: | Reportable transactions are those transactions which either singly or in a series of combined purchases and sales during the year 5% of the fair value of the Plan’s assets at the beginning of the year. |
See accompanying report of independent registered public accounting firm.
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrative Committee has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | | |
Date: June 28, 2004 | | MGI PHARMA, INC. Retirement Plan |
| | |
| | | By: | | /s/ Kristin Gustafson
|
| | | Name: | | Kristin Gustafson |
| | | Title: | | Plan Administrator |
EXHIBIT INDEX
| | |
Exhibit Number
| | Description
|
| 23 | | Consent of Independent Registered Public Accounting Firm |
