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, 1999
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
AND STOCK 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)
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
INDEX TO FINANCIAL STATEMENT
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PAGES
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Report of Independent Accountants 1
Financial Statements:
Statement of Assets Available for
Benefits as of December 31, 1999 and 1998 2
Statement of Changes in Assets Available
for Benefits for the year ended
December 31, 1999 3
Notes to Financial Statements 4-7
Supplemental Schedules:
Schedule of Assets Held for
Investment Purposes as of December 31, 1999 8
Item 27d - Schedule of Reportable Transactions
for the year ended December 31, 1999 9
[PricewaterhouseCoopers Letterhead]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrative Committee of the
Handleman Company Salary Deferral and Stock Plan:
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of Handleman Company Salary Deferral and Stock Plan (the "Plan") at December 31,
1999 and December 31, 1998, and the changes in net assets available for benefits
for the year ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States. 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, 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 the opinion expressed above.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules on pages 11
through 13 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. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audits 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.
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
June 28, 2000
1
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
STATEMENT OF ASSETS AVAILABLE FOR BENEFITS
December 31,
1999 1998
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ASSETS:
Accrued dividends and interest $ 568 $ 257
Employee contributions receivable 0 56,905
Employer contribution receivable 0 10,106
Investments, at fair value 15,027,335 13,615,833
Loans to participants at rates of 8.75% to 10.0%,
maturing in 1 to 5 years 425,597 347,209
----------- -----------
ASSETS AVAILABLE FOR BENEFITS $15,453,500 $14,030,310
=========== ===========
The accompanying notes are an integral part of the financial statements.
2
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
STATEMENT OF CHANGES IN ASSETS
AVAILABLE FOR BENEFITS
for the year ended December 31, 1999
------------------------------------
Additions:
Employer contributions $ 319,827
Employee authorized contributions 1,825,441
Dividend income 657,652
Interest income 35,958
Net appreciation in fair value of investments 854,091
Other 15,562
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3,708,531
Total additions
Deductions:
Participants' benefits paid 2,237,820
Other 47,521
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Total deductions 2,285,341
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Net increase 1,423,190
Assets available for benefits, 14,030,310
beginning of year -----------
Assets available for benefits, $15,453,500
end of year ===========
The accompanying notes are an integral part of the financial statements.
3
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS
1. Description of Plan
The following description of the Handleman Company Salary Deferral and
Stock 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 all employees of the
Handleman Company (the "Company") and subsidiaries and affiliates that
have adopted the Plan who have one year of service and who are not covered
by collective bargaining agreements (unless they specifically refer to the
Plan). 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 $10,000. 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 contribution made 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 authorized
contributions, in addition to an allocation of any Company contribution
and Plan earnings, net of Plan expenses. A participant must be employed by
the Company on the last day of the Company's fiscal year to receive the
allocation of Company contributions.
Salary Deferral Portion - 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 - 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.
4
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK 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. The Company paid such expenses for the year ended December
31, 1999.
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, 1999 and 1998, $198,937
and $1,027,833 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 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, N&B Genesis 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.
5
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
2. Summary of Accounting Policies, continued
Dividend Income
Dividend income is recognized on the ex-dividend date. Dividend income on
Company stock for the year ended December 31, 1999 was $0.
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,
1999 1998
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Victory U.S. Government Obligations Fund 137,921 and $ 1,677,820 $ 1,609,440
138,368 shares, respectively
American Balanced Fund 182,671 and 186,555 shares, respectively 2,634,128 2,940,109
Victory Stock Index Fund 272,315 and 278,506 shares, respectively 6,652,656 5,915,466
Handleman Company Common Stock 183,441 and 190,516 shares, 2,453,027 2,676,357
respectively
Janus Worldwide Fund 13,974 and 3,186 shares, respectively 1,068,071 150,867
Other 541,633 323,594
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Total $15,027,335 $13,615,833
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During the Plan year ended December 31, 1999, the Plan's investments
(including investments bought and sold, as well as held during the year)
appreciated (depreciated) in value by $854,091 as follows:
KeyCorp Investments:
Victory U.S. Government Obligation Fund
$ 75,091
American Balanced Fund (220,961)
Victory Stock Index Fund
878,844
N&B Genesis Fund
8,360
Fidelity Growth Opportunity Fund
(21,152)
Janus Worldwide Fund
247,518
Handleman Company Common Stock (113,609)
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$ 854,091
=========
6
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
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.
7
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
Calendar Plan year 1999
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
(a) (b) (c) (d) (e)
Description of
Identity of investment including
issue, borrower maturity date, rate of
lessor, or interest, collateral, Current
similar party par or maturity value Cost value
---------------- ---------------------- ---- -----
* KeyCorp Cash Equivalents $ 83,378 $ 83,378
Employee Benefit
Money Market
Fund
* KeyCorp Short Term U.S. $1,559,808 $1,677,820
Victory U.S. Treasury Securities
Government Obligations Fund
* KeyCorp Common Stock and $2,789,142 $2,634,128
American
Balanced Fund Bond Fund
* KeyCorp Common Stock Fund $4,800,639 $6,652,656
Victory Stock
Index Fund
* Handleman Common Stock $1,746,323 $2,453,027
Company $.01 par value
Common Stock
* KeyCorp Common Stock Fund $ 127,286 $ 134,145
N&B
Genesis Fund
* KeyCorp Common Stock Fund $ 338,837 $ 324,110
Fidelity
Growth Opportunity Fund
* KeyCorp Common Stock Fund $ 828,039 $1,068,071
Janus
Worldwide Fund
* Loans to Interest rates of $ 0 $ 425,597
Participants 8.75% to 10% and
maturing in 1 to
5 years
* These investments are with a party-in-interest
8
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
for the year ended December 31, 1999
Purchase Selling Cost
Identity of Party Involved Description of Asset Price Price of Asset
- -------------------------- -------------------- ----------- -------- --------
REPORTING CRITERION I: Any transaction within the plan
year, with respect to any plan
asset, involving an amount in
excess of five percent of the
current value of plan assets.
None
REPORTING CRITERION II: Any series of transactions (other
than transactions with respect to
securities) within the plan year
with or in conjunction with the
same person which, when aggregated,
regardless of the category of asset
and the gain or loss on any
transaction, involves an amount in
excess of five percent of the
current value of plan assets.
None
REPORTING CRITERION III: Any transaction within the plan
year involving securities of the
same issue if within the plan year
any series of transactions with
respect to such securities, when
aggregated, involves an amount in
excess of five percent of the
current value of plan assets.
KeyCorp Employee Benefit Money
Market Fund
74 purchases - 1,121,201 units $1,121,201 $1,121,201
87 sales - 1,092,048 units $1,092,048 1,092,048
KeyCorp American Balanced Fund
69 purchases - 54,720 units 842,353 842,353
94 sales - 58,603 units 927,374 896,309
KeyCorp Victory Stock Index Fund
101 purchases - 62,655 shares 1,433,543 1,433,543
85 sales - 68,846 shares 1,575,196 1,168,476
KeyCorp Janus Worldwide
96 purchases - 12, 614 shares 722,243
722,243
REPORTING CRITERION IV: Any transaction within the plan
year with respect to securities
with or in conjunction with a
person if any prior or subsequent
single transaction within the plan
year with such person with respect
to securities exceeds five percent
of the current value of plan assets.
None
Current Value
of Asset on Net Gain
Identity of Party Involved Description of Asset Transaction Date or (Loss)
- -------------------------- -------------------- ---------------- ---------
REPORTING CRITERION I: Any transaction within the plan
year, with respect to any plan
asset, involving an amount in
excess of five percent of the
current value of plan assets.
None
REPORTING CRITERION II: Any series of transactions (other
than transactions with respect to
securities) within the plan year
with or in conjunction with the
same person which, when aggregated,
regardless of the category of asset
and the gain or loss on any
transaction, involves an amount in
excess of five percent of the
current value of plan assets.
None
REPORTING CRITERION III: Any transaction within the plan
year involving securities of the
same issue if within the plan year
any series of transactions with
respect to such securities, when
aggregated, involves an amount in
excess of five percent of the
current value of plan assets.
KeyCorp Employee Benefit Money
Market Fund
74 purchases - 1,121,201 units $1,121,201
87 sales - 1,092,048 units 1,092,201
KeyCorp American Balanced Fund
69 purchases - 54,720 units 842,353
94 sales - 58,603 units 927,374 $31,065
KeyCorp Victory Stock Index Fund
101 purchases - 62,655 shares 1,433,543
85 sales - 68,846 shares 1,575,196 406,720
KeyCorp Janus Worldwide
96 purchases - 12, 614 shares 722,243
REPORTING CRITERION IV: Any transaction within the plan
year with respect to securities
with or in conjunction with a
person if any prior or subsequent
single transaction within the plan
year with such person with respect
to securities exceeds five percent
of the current value of plan assets.
None
9
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 1
Statement of Assets Available for Benefits
as of December 31, 1999 and 1998 2
Statement of Changes in Assets Available for
Benefits for the year ended December 31, 1999 3
Notes to Financial Statements 4-7
Schedule of Assets Held for Investment
Purposes as of December 31, 1999 8
Item 27d -- Schedule of Reportable Transactions 9
for the year ended December 31, 1999
Schedules:
Other schedules have been omitted because
the required information is shown in the financial
statements or notes thereto, or in another schedule -
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 and Stock Plan
as of and for the year ended December 31, 1999 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 AND STOCK PLAN
By: /s/ Thomas C. Braum, Jr.
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Thomas C. Braum, Jr., Vice President and Corporate Controller
Handleman Company