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, 2001
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
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(Full title of the Plan)
HANDLEMAN COMPANY
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(Name of issuer of the securities held pursuant to the Plan)
500 Kirts Boulevard
Troy, Michigan 48084
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(Address of principal executive offices)
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The following financial statements and exhibits are presented pursuant to
Section 15(d) of the Securities Exchange Act of 1934:
Page
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(a) Financial Statements:
Report of Independent Accountants I-1
Statement of Net Assets Available for Benefits
as of December 31, 2001 and 2000 I-2
Statement of Changes in Assets Available for
Benefits for the year ended December 31, 2001 I-3
Notes to Financial Statements I-4 to I-6
Schedule of Assets Held for Investment
Purposes as of December 31, 2001 I-7 to I-8
Exhibit
Number
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(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, 2001 23
SIGNATURE
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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/ Thomas C. Braum, Jr.
-----------------------------------------------------
Thomas C. Braum, Jr., Senior Vice President and Chief
Financial Officer Handleman Company
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HANDLEMAN COMPANY
SALARY DEFERRAL PLAN
INDEX TO FINANCIAL STATEMENTS
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PAGES
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Report of Independent Accountants 4
Financial Statements:
Statement of Assets Available for
Benefits as of December 31, 2001 and 2000 5
Statement of Changes in Assets Available
for Benefits for the year ended
December 31, 2001 6
Notes to Financial Statements 7-9
Supplemental Schedules:
Schedule of Assets Held for
Investment Purposes as of December 31, 2001 10-11
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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, 2001 and December 31,
2000, and the changes in its financial status for the year ended December 31,
2001 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
May 17, 2002
HANDLEMAN COMPANY
SALARY DEFERRAL PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
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2001 2000
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ASSETS:
Accrued dividends and interest $ 1,235 $ 430
Employee contributions receivable 99,612 86,231
Employer contribution receivable 27,300 16,159
Investments, at fair value 18,898,956 15,013,896
Loans to participants at rates of 5.75% to 10.50%, maturing in 1 to 15 years 442,367 391,629
----------- -----------
TOTAL ASSETS 19,469,470 15,508,345
LIABILITIES:
Accounts payable
605 0
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NET ASSETS AVAILABLE FOR BENEFITS $19,468,865 $15,508,345
=========== ===========
The accompanying notes are an integral part of the financial statements.
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HANDLEMAN COMPANY
SALARY DEFERRAL PLAN
STATEMENT OF CHANGES IN ASSETS
AVAILABLE FOR BENEFITS
for the year ended December 31, 2001
------------------------------------
Additions:
Net appreciation in fair value of investments $ 385,115
Employer contributions 817,849
Employee contributions 2,880,816
Dividend income 698,183
Interest income 40,123
Other 34,152
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Total additions 4,856,238
Deductions:
Participants' benefits paid 840,952
Other 54,766
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Total deductions 895,718
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Net increase 3,960,520
Assets available for benefits,
beginning of year 15,508,345
-----------
Assets available for benefits,
end of year $19,468,865
===========
The accompanying notes are an integral part of the financial statements.
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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.
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HANDLEMAN COMPANY
SALARY DEFERRAL PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
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1. Description of Plan, continued
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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, 2001 and 2000, $637,776
and $229,961 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 Stock Index Fund, American Balanced Fund, Gradison Government
Reserve SVP Fund, Janus Worldwide Fund, Neuberger Berman Genesis Asset
Fund, Victory Diversified Stock Fund, PIMCO Total Return SVP Fund,
Employee Benefit Money Market Fund, Dreyfus MidCap Value SVP Fund, The
America Funds: Growth Fund of America SVP Fund, Fidelity MidCap SVP Fund
and Janus Advisor International Growth 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.
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HANDLEMAN COMPANY
SALARY DEFERRAL PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
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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
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The following presents investments that represent 5 percent or more of the
Plan's net assets.
December 31,
2001 2000
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Victory Stock Index Fund 303,057 and 273,433 shares, respectively. $ 5,155,002 $ 5,846,001
Handleman Company Common Stock 260,042 and 243,497 shares, 3,861,603 1,826,343
respectively.
American Balanced Fund 230,058 and 192,980 shares, respectively. 3,646,415 2,985,406
Gradison Government Reserves SVP Fund 230,110 and 0 shares, 2,581,537 0
respectively.
Janus Worldwide Fund 33,247 and 27,938 shares, respectively. 1,457,564 1,588,547
Other 1,203,502 1,008,664
Neuberger Berman Genesis Fund 57,853 and 0 shares, respectively. 993,333 0
Victory U.S. Government Obligations Fund 0 and 0 $ 1,758,935
136,769 shares, respectively.
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Total $18,898,956 $15,013,896
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4. Plan Termination
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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
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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 by a letter dated November
24, 1997. Although the Plan has been amended since receiving the
aforementioned determination letter, 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 Company has requested a
new determination letter, which has not yet been received as of May 17,
2002.
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HANDLEMAN COMPANY
SALARY DEFERRAL PLAN
Calendar Plan year 2001
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
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(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 Common Stock Fund $5,155,002
Victory Stock
Index Fund
* Handleman Common Stock $3,861,603
Company $.01 par value
Common Stock Fund
* KeyCorp Common Stock and $3,646,414
American Bond Fund
Balanced Fund
* KeyCorp U.S. Government Securities $2,581,537
Gradison
Government Reserve SVP Fund
* KeyCorp Common Stock Fund $1,457,563
Janus
Worldwide Fund
* KeyCorp Common Stock Fund $ 993,333
Neuberger Berman
Genesis Assets Fund
* KeyCorp Common Stock Fund $ 495,078
Victory
Diversified Stock SVP Fund
* Loans to Interest rates of $ 442,367
Participants 5.75% to 10.50% and
maturing in 1 to
15 years
* KeyCorp Debt Securities Fund $ 160,947
PIMCO
Total Return SVP Fund
* KeyCorp Cash Equivalents $ 132,775
Employee Benefit
Money Market
Fund
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HANDLEMAN COMPANY
SALARY DEFERRAL PLAN
Calendar Plan year 2001
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES, Continued
----------------------------------------------------------
(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 Preferred and Common $119,383
Dreyfus Stock Fund
MidCap Value SVP Fund
* KeyCorp Common Stock $ 83,597
The America Funds and Securities Fund
Growth Fund of America SVP Fund
* KeyCorp Common Stock $ 52,069
Fidelity and Bond Fund
MidCap SVP Fund
* KeyCorp Common Stock Fund $ 45,701
Janus
Advisor International Growth Fund
* These investments are with a party-in-interest
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