SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] Annual Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
For The Year Ended December 31, 2000
or
[_] Transition Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For The Transition Period from_________to
Commission File Number 00107923
HANDLEMAN COMPANY SALARY
DEFERRAL PLAN
-------------
(Full title of the Plan)
HANDLEMAN COMPANY
-----------------
(Name of issuer of the securities held pursuant to the Plan)
500 Kirts Boulevard
Troy, Michigan 48084
--------------------
(Address of principal executive offices)
1 of 10
The following financial statements and exhibits are presented pursuant to
Section 15(d) of the Securities Exchange Act of 1934:
Page
----
(a) Financial Statements:
Report of Independent Accountants I-1
Statement of Assets Available for Benefits
as of December 31, 2000 and 1999 I-2
Statement of Changes in Assets Available for
Benefits for the year ended December 31, 2000 I-3
Notes to Financial Statements I-4 to I-6
Schedule of Assets Held for Investment
Purposes as of December 31, 2000 I-7
Exhibit
Number
-------
(b) 1. Consent of Independent Accountants with
respect to their report on their audit of
the financial statements of the Handleman
Company Salary Deferral Plan as of and
for the year ended December 31, 2000 23
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this
annual report to be signed by the undersigned thereunto duly authorized.
HANDLEMAN COMPANY SALARY DEFERRAL PLAN
By: /s/ Leonard A. Brams
-------------------------------------------------
Leonard A. Brams, Senior Vice President and Chief
Financial Officer
Handleman Company
2 of 10
HANDLEMAN COMPANY
SALARY DEFERRAL PLAN
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGES
-----
Report of Independent Accountants 4
Financial Statements:
Statement of Assets Available for
Benefits as of December 31, 2000 and 1999 5
Statement of Changes in Assets Available
for Benefits for the year ended
December 31, 2000 6
Notes to Financial Statements 7-9
Supplemental Schedules:
Schedule of Assets Held for
Investment Purposes as of December 31, 2000 10
3 of 10
Report of Independent Accountants
To the Participants and Administrator of the
Handleman Company Salary Deferral Plan:
In our opinion, the accompanying statements of net assets available for benefits
and of accumulated plan benefits and the related statements of changes in net
assets available for benefits and of changes in accumulated plan benefits
present fairly, in all material respects, the financial status of the Handleman
Company Salary Deferral Plan (the "Plan") at December 31, 2000 and December 31,
1999, and the changes in its financial status for the year ended December 31,
2000 in conformity with accounting principles generally accepted in the United
States of America. 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 of these
statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of this Form
11-K 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. The
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits 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.
PricewaterhouseCoopers LLP
Detroit, Michigan
June 8, 2001
HANDLEMAN COMPANY
SALARY DEFERRAL PLAN
STATEMENT OF ASSETS AVAILABLE FOR BENEFITS
December 31,
-----------
2000 1999
-------------- ---------------
ASSETS:
Accrued dividends and interest $ 430 $ 568
Employee contributions receivable 86,231 0
Employer contribution receivable 16,159 0
Investments, at fair value 15,013,896 15,027,335
Loans to participants at rates of 8.75% to 10.50%, maturing in 1 to 5 years 391,629 425,597
-------------- ---------------
ASSETS AVAILABLE FOR BENEFITS $15,508,345 $15,453,500
============== ===============
The accompanying notes are an integral part of the financial statements.
I-2
5 of 10
HANDLEMAN COMPANY
SALARY DEFERRAL PLAN
STATEMENT OF CHANGES IN ASSETS
AVAILABLE FOR BENEFITS
for the year ended December 31, 2000
------------------------------------
Additions:
Employer contributions $ 387,175
Employee contributions 2,194,947
Dividend income 661,504
Interest income 36,759
Other 3,169
-----------
Total additions 3,283,554
Deductions:
Participants' benefits paid 837,479
Net depreciation in fair value of investments 2,359,679
Other 31,551
-----------
Total deductions 3,228,709
-----------
Net increase 54,845
Assets available for benefits, 15,453,500
beginning of year -----------
Assets available for benefits, $15,508,345
end of year ===========
The accompanying notes are an integral part of the financial statements.
I-3
6 of 10
HANDLEMAN COMPANY
SALARY DEFERRAL PLAN
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. Description of Plan
-------------------
The following description of the Handleman Company Salary Deferral Plan
(the "Plan") provides only general information. Participants should refer
to the Plan Document for a complete description of the Plan's provisions.
General
The Plan is a defined contribution plan which includes salary deferral and
employee stock ownership provisions. The Plan covers nearly all employees
of the Handleman Company (the "Company") and subsidiaries and affiliates
that have adopted the Plan. Effective May 1, 2001 eligibility for covered
employees to enter the Plan was changed from one year of service to the
first of the month following sixty days of employment. The Plan generally
excludes employees that are covered by collective bargaining agreements,
laid off, on leave of absence, on active duty in the armed forces of any
nation other than the armed forces of the United States of America, leased
employees, or any person whose status as an employee is the result of a
judicial or administrative determination. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Contributions
Employee authorized contributions of tax deferred compensation are limited
in any one year to the lesser of fifteen percent of employee compensation
or the statutory maximum. In addition, total contributions by highly
compensated employees cannot exceed specific percentage limitations of the
aggregate contributions of all other employees as set forth in the
Internal Revenue Code.
The Company provides for a matching contribution equal to 25 percent of
the elective salary deferral contribution made by each participant, up to
six percent of such participant's compensation, to be invested in Company
stock. Effective May 1, 2001, the Plan was amended to change Company
matching contributions to 50 percent of the elective contribution by each
participant, up to six percent of such participant's compensation, to be
invested in Company stock.
Plan Assets
Employees may direct employee and employer contributions to the Plan into
Company stock or various investment funds, which are established by the
Company from time to time.
Participant Accounts
Each participant's account is credited with employee contributions, in
addition to an allocation of any Company contribution and Plan earnings,
net of Plan expenses. In addition to the Company match, the Company shall
allocate discretional contributions and forfeitures if any, as of the last
day of the Plan Year among Company Contribution Accounts of the
Participants who received Creditable Compensation during the Plan Year.
Top Heavy Contributions, if any, shall also be allocated as of the last
day of the Plan Year to the account of each Participant who is a Non-Key
Employee. To receive a share of the discretionary contributions,
forfeitures and/or Non-Key Employee Contributions, a participant must be
employed by the Company on the last day of the Plan Year.
Salary Deferral Portion of Plan - Company contributions to the Salary
-------------------------------
Deferral portion of the Plan are allocated to participants who are
eligible as defined by the Plan. There are certain limitations on the
amounts which can be allocated.
Stock Ownership Portion of Plan - Effective May 2, 1994, the Plan was
-------------------------------
amended to discontinue Company contributions for employees hired after
April 30, 1994. As of December 31, 1996, Company contributions for all
employees were discontinued.
I-4
7 of 10
HANDLEMAN COMPANY
SALARY DEFERRAL PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
-----------------------------
1. Description of Plan, continued
-------------------
Loans to Participants
The Plan allows participants to borrow against their account balances. The
maximum loan to any participant is the lesser of 50% of the participant's
non-forfeitable salary deferral account balance or $50,000.
Plan Expenses
Expenses of the Trustee and Administrative Committee are charged to
participant accounts unless the Company at its discretion elects to pay
these expenses.
Vesting
The Plan includes a graded vesting schedule for matching contributions of
20 percent for each year of service, resulting in 100 percent vesting
after five years of service. Non-vested Company contributions for
terminated participants are forfeited by the participant and are used to
reduce future employer contributions to the Plan.
Payment of Benefits
On termination of service, a participant will be eligible to receive the
plan assets allocated to the participant's account and which have vested
or an equivalent amount in cash. At December 31, 2000 and 1999, $229,961
and $198,937 respectively, were reported as benefits payable on the Form
5500.
2. Summary of Accounting Policies
------------------------------
Company Contributions
Company contributions are accrued in the plan year to which the
contributions relate. Company contributions are in the form of cash, which
will be used to buy Company stock.
Investments
At the end of the plan year, Company stock is valued at the closing market
price of the stock on the last business day of the Plan's year. The
Victory U.S. Government Obligations Fund, American Balanced Fund, Victory
Stock Index Fund, Neuberger Berman Genesis Asset Fund, Fidelity Growth
Opportunity Fund, Janus Worldwide Fund and Employee Benefit Money Market
Fund are reflected at estimated fair values or at the fair value as
determined by quoted market prices at the year-end date as reported by the
Plan's investment custodian, KeyCorp.
The basis on which cost is determined to compute realized gains or losses
from sales of investments, other than the Company stock, is average cost.
The basis on which cost is determined for the Company stock is specific
identification.
The Plan presents in the statement of changes in assets the net
appreciation (depreciation) in fair value of investments which consists of
the realized gains (losses) and the unrealized appreciation (depreciation)
on those investments.
For purposes of determining Company contributions, Company stock received
as the Company contribution is valued at the closing price on the day the
contribution is made.
I-5
8 of 10
HANDLEMAN COMPANY
SALARY DEFERRAL PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
-----------------------------
2. Summary of Accounting Policies, continued
------------------------------
Estimates
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 at
the date of the financial statements and the reported amounts of changes
in assets during the reporting period. Actual results could differ from
these estimates.
3. Investments
-----------
The following presents investments that represent 5 percent or more of the
Plan's net assets.
December 31,
2000 1999
---- ----
Victory U.S. Government Obligations Fund 136,769 and $ 1,758,935 $ 1,677,820
137,921 shares, respectively.
American Balanced Fund 192,980 and 182,671 shares, respectively. 2,985,406 2,634,128
Victory Stock Index Fund 273,433 and 272,315 shares, respectively. 5,846,001 6,652,656
Handleman Company Common Stock 243,497 and 183,441 shares, 1,826,343 2,453,027
respectively.
Janus Worldwide Fund 27,938 and 13,974 shares, respectively. 1,588,547 1,068,071
Other 1,008,664 541,633
------------ ------------
Total $15,013,896 $15,027,335
============ ============
4. 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.
5. Tax Status
----------
The Internal Revenue Service has ruled that the Plan qualifies under
Section 401 of the Internal Revenue Code ("IRC") and is, therefore, not
subject to tax under present income tax laws. Once qualified, the Plan is
required to operate in conformity with the IRC to maintain its
qualification. The plan administrator is not aware of any course or action
or series of events that have occurred that might adversely affect the
Plan's qualified status.
The Plan obtained its latest determination letter on November 24, 1997,
in which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with the applicable requirements of the IRC.
I-6
9 of 10
HANDLEMAN COMPANY
SALARY DEFERRAL PLAN
Calendar Plan year 2000
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
-----------------------------------------------
(a) (b) (c) (d)
Identity of Description of
issue, borrower investment including
lessor, or maturity date, rate of interest, Current
similar party collateral, par or maturity value value
------------- --------------------------------- -----
* KeyCorp Cash Equivalents $ 81,616
Employee Benefit
Money Market
Fund
* KeyCorp Short Term U.S. $1,758,935
Victory U.S. Treasury Securities
Government Obligations Fund
* KeyCorp Common Stock and $2,985,406
American
Balanced Fund Bond Fund
* KeyCorp Common Stock Fund $5,846,001
Victory Stock
Index Fund
* Handleman Common Stock $1,826,343
Company $.01 par value
Common Stock
* KeyCorp Common Stock Fund $ 563,737
Neuberger Berman
Genesis Assets Fund
* KeyCorp Common Stock Fund $ 363,311
Fidelity
Growth Opportunity Fund
* KeyCorp Common Stock Fund $1,588,547
Janus
Worldwide Fund
* Loans to Interest rates of $ 391,629
Participants 8.75% to 10.50% and
maturing in 1 to
5 years
* These investments are with a party-in-interest
I-7
10 of 10