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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[X] 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
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COMMISSION FILE NUMBER 000-32469
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THE PRINCETON REVIEW, INC. 401(k) EMPLOYEE SAVINGS PLAN
(Full title of the plan)
THE PRINCETON REVIEW, INC.
(Name of the issuer of the securities held pursuant to the plan)
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2315 Broadway
New York, New York 10024
(Address of principal executive office of the issuer)
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Item
Report of Holtz Rubenstein & Co., LLP, Independent Auditor
Statements of net assets available for benefits at December 31, 2002 and 2001
Statement of changes in net assets available for benefits for the year ended
December 31, 2002
Notes to financial statements
Supplemental Schedule
Signature
Exhibit 23.1--Consent of Holtz Rubenstein & Co., LLP, Independent Auditors
Exhibit 99.1--Certification of Chief Executive Officer and Chief Financial and
Principal Accounting Officer pursuant to 18 U.S.C. Section 1350
THE PRINCETON REVIEW, INC.
401(k) EMPLOYEE SAVINGS PLAN
REPORT ON AUDIT OF FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2002
CONTENTS
Page
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FINANCIAL STATEMENTS:
Independent auditors' report 1
Statements of net assets available for benefits 2
Statement of changes in net assets available for benefits 3
Notes to financial statements 4-8
SUPPLEMENTAL SCHEDULE:
Schedule of assets (held at end of year) 9
Independent Auditors' Report
To the Participants and Plan Administrator
of The Princeton Review, Inc.
401(k) Employee Savings Plan
We have audited the accompanying statements of net assets available for benefits
of The Princeton Review, Inc. 401(k) Employee Savings Plan (the "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.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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.
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, 2002 and 2001, and the changes in net assets available for benefits
for the year ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule H, line 4(i) -
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 basic
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. Such schedule has been subjected
to the auditing procedures applied in our 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.
/s/ Holtz Rubenstein & Co., LLP
June 19, 2003
Melville, New York
1
THE PRINCETON REVIEW, INC.
401(k) EMPLOYEE SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
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2002 2001
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ASSETS
Investments, at fair value $3,722,369 $3,266,764
Participant contributions receivable 14,280 56,452
Employer contributions receivable 2,557 10,791
Participant loans receivable 97,805 75,994
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Net assets available for benefits $3,837,011 $3,410,001
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See notes to financial statements
2
THE PRINCETON REVIEW, INC.
401(k) EMPLOYEE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2002
Additions to net assets attributed to:
Investment income:
Net depreciation in fair value of investments $(925,534)
Interest and dividend income 30,387
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(895,147)
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Contributions:
Participant contributions 1,140,499
Employer contributions 201,274
Rollover contributions 133,528
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1,475,301
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Total additions 580,154
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Deductions from net assets attributed to:
Benefits paid to participants 152,305
Administrative expenses 839
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Total deductions 153,144
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Net increase in net assets available for benefits 427,010
Net assets available for benefits:
Beginning of year 3,410,001
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End of year $3,837,011
==========
See notes to financial statements
3
THE PRINCETION REVIEW, INC.
401(k) EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2002
1. Plan Description:
The Princeton Review, Inc. 401(k) Employee Benefits Plan (the "Plan")
covers the employees of Princeton Review Management, LLC, Princeton Review
Publishing, LLC, Princeton Review Products, LLC, and Princeton Review
Operations, LLC (the "Company"). On January 15, 2002 the Company amended the
Plan to allow participants to purchase shares of The Princeton Review, Inc.
The following description of the Plan provides only general information.
Participants should refer to the Summary Plan Description for a more
comprehensive description of the Plan's provisions.
a. General
The Plan is a qualified voluntary defined contribution plan, which
contains a cash or deferred arrangement ("CODA"), also known as a "401(k) Plan".
All salaried employees of the Company who complete one year of service, provided
that the employee worked at least 1,000 Hours of Service during that twelve
month period and are age twenty-one or older, are eligible to participate in the
Plan. Shares of the common stock of The Princeton Review, Inc. are among the
investment options offered to participants pursuant to the Plan. The Plan is
subject to the provisions of the Employee Retirement Income Security Act of 1974
("ERISA").
The assets of Plan at the beginning of the year were invested in funds
held by Nationwide Life Insurance Company. Effective January 15, 2002, the
assets were invested in funds held by Prudential Retirement Services
("Prudential") and are valued on the last day of the Plan year.
b. Contributions
Participants may make elective contributions from 2% up to 20% of
pretax annual compensation, as defined in the Plan. Participants may also
contribute amounts representing distributions from other qualified defined
benefit or contribution plans. Company contributions are made at the discretion
of management. Additional amounts may be contributed at the option of the
Company. Contributions are subject to certain limitations imposed by law.
c. Participants accounts
Each participant's account is credited with the participant's
contributions, allocation of the Company's contribution, if any, and an
allocation of the increases (decreases) in the value of the investment funds.
4
THE PRINCETION REVIEW, INC.
401(k) EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2002
1. Plan Description: (Cont'd)
d. Benefits
i. Vesting benefits
Participants are 100% vested in their contributions, employer
discretionary contributions, plus actual earnings thereon.
ii. Payment of benefits
On termination of service due to death, disability or retirement,
a participant may elect to receive an amount equal to the
participant's vested interest in his or her account generally in a
lump-sum amount. The normal retirement age is 65.
e. Participant loans
The Plan provides that loans are available to all Plan participants on
a nondiscriminatory basis. Plan participants can borrow the lesser of $50,000 or
50% of the vested account balance. Loans must be approved by the Plan
Administrator and are subject to a strict set of rules established by law.
f. Administrative expenses
The Company absorbs certain of the administrative charges associated
with the Plan.
2. Summary of Significant Accounting Policies:
a. Basis of accounting
The financial statements of the Plan are prepared under the accrual
basis of accounting.
b. Valuation of investments
The investments in the Plan are generally stated at fair market value
based upon quoted market prices, except for participant loans which are valued
at cost, which approximates fair value. Purchases and sales of investments are
recorded on a trade-date basis. Any unrealized gains and losses are computed
based on differences between market and cost as of closing of the reporting
period. Any realized gains and losses are computed based on differences between
fair market value, on the date of sale, and cost as of the purchase date, on a
first-in, first-out basis.
5
THE PRINCETION REVIEW, INC.
401(k) EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2002
2. Summary of Significant Accounting Policies: (Cont'd)
c. Investment income
Investment income includes dividends and interest collected during the
plan year and amounts accrued but not collected as of the valuation date. The
investment income is determined and allocated to the Plan by Prudential.
d. Benefit payments
Benefits are recorded when paid.
e. Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and changes therein, and disclosure of contingent assets
and liabilities. Accordingly, actual results could differ from those estimates.
3. 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.
6
THE PRINCETION REVIEW, INC.
401(k) EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2002
4. Investments:
The following presents investments at December 31, 2002 and 2001 that
represent 5% or more of the Plan's net assets:
December 31,
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2002 2001
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Prudential Stock Index Fund Z; 31,879 shares $624,826 $ --
Prudential Jennison Growth Fund A; 39,406 shares 396,428 --
Oppenheimer Global Fund A; 15,015 shares, and
5,746 shares, respectively 544,150 268,492
AIM Basic Value A; 29,924 shares 654,132 --
Growth Fund of America; 38,817 shares 716,941 --
Dreyfus Premier Core Bond A; 14,747 shares 212,511 --
Fidelity Magellan Fund; 5,215 shares -- 543,543
Fidelity Puritan Fund; 24,832 shares -- 438,786
Janus Twenty Fund; 19,983 shares -- 768,554
Neuberger & Berman Guardian Fund TC; 12,093 shares -- 174,637
American Century Ultra Fund IC; 19,532 shares -- 539,861
5. Tax Status:
The Internal Revenue Service has determined and informed the Company by a
letter dated March 11, 1994 that the Plan is designed in accordance with
applicable sections of the Internal Revenue Code. The Plan has been amended
since receiving the determination letter. However, the Plan administrator and
the Plan's tax counsel believe that the Plan is designed and is currently being
operated in accordance with, and continues to qualify under, the applicable
requirements of the Internal Revenue Code, and that the Trust, which forms a
part of the Plan, is exempt from federal income tax.
7
THE PRINCETION REVIEW, INC.
401(k) EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2002
6. Related Party Transactions:
Certain plan investments are shares of mutual funds managed by Prudential.
Prudential is the trustee as defined by the plan, and, therefore, these
transactions qualify as party-in-interest transactions. Purchases and sales of
these funds are open market transactions at fair market value. Such transactions
are permitted under the provisions of the Plan and are exempt from the
prohibition of party-in-interest transactions under ERISA and applicable
exemptions promulgated thereunder.
8
THE PRINCETON REVIEW, INC.
401(k) EMPLOYEE SAVINGS PLAN
PLAN 001 EIN 13-3432057 - FORM 5500
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2002
(a) (b) (c) (d) (e)
Identity of Issuer, Borrower, Description of Current
Lessor or Similar Party Investment Cost** Value
--------------------------------- --------------------------------------- ------------- ----------
* Prudential Moneymart Assets A Investment in Registered Investment Co. $ 103,933
* Prudential Stock Index Fund Z Investment in Registered Investment Co. 624,826
* Prudential Jennison Growth Fund A Investment in Registered Investment Co. 396,428
Oppenheimer Global Fund A Investment in Registered Investment Co. 544,150
Fidelity Advisor Mid Cap T Investment in Registered Investment Co. 101,235
Aim Basic Value A Investment in Registered Investment Co. 654,132
Franklin Balance Sheet Investment in Registered Investment Co. 119,049
Growth Fund of America Investment in Registered Investment Co. 716,941
Franklin US Gov't Securities A Investment in Registered Investment Co. 141,202
Dreyfus Premier Core Bond A Investment in Registered Investment Co. 212,511
* The Princeton Review, Inc. The Princeton Review Common Stock 107,962
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$3,722,369
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Participant Loans Bearing interest at
varying rates from 5.50% to
9.50% per annum maturing at
various dates through July
2006 $ 97,805
==========
* indicates party-in-interest.
** Column (d) cost information is not required when reporting investments
directed by participants.
See independent auditors' report
9
SIGNATURE
The Plan. 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.
The Princeton Review, Inc. 401(k) Employee
Savings Plan
Date: June 26, 2003 By: /s/ Stephen Melvin
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Stephen Melvin
Chief Financial Officer and
Treasurer of the Issuer and Administrator
of the Plan
10