UNITED STATES
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
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE YEAR ENDED DECEMBER 31, 2001 AND AS OF DECEMBER 31, 2000
Commission file number 0-00000
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FRIEDMAN'S INC. RETIREMENT SAVINGS PLAN
FRIEDMAN'S INC.
A Delaware Corporation
IRS Employer Identification Number 58-2058362
Four West State Street
Savannah, Georgia 31401
Telephone (912) 233-9333
Friedman's Inc. Retirement Savings Plan
Financial Statements and Supplemental Schedule
Year ended December 31, 2001 and as of December 31, 2000
CONTENTS
Report of Independent Auditors................................................1
Statements of Net Assets Available for Benefits...............................2
Statement of Changes in Net Assets Available for Benefits.....................3
Notes to Financial Statements.................................................4
Supplemental Schedule
Schedule of Assets (Held at End of Year)......................................8
Signature ....................................................................9
Exhibit
Consent (Exhibit 23).........................................................10
Report of Independent Auditors
The Plan Committee
Friedman's Inc. Retirement Savings Plan
Savannah, Georgia
We have audited the accompanying statements of net assets available for benefits
of Friedman's Inc. Retirement Savings Plan as of December 31, 2001 and 2000, and
the related statement of changes in net assets available for benefits for the
year ended December 31, 2001. 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. 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 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 at
December 31, 2001 and 2000, and the changes in its net assets available for
benefits for the year ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental Schedule of Assets
(Held at End of Year) as of December 31, 2001 is presented for purposes of
additional analysis and is not a required part of the 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. The supplemental schedule has been subjected to auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst & Young LLP
June 26, 2002
Atlanta, Georgia
1
Friedman's Inc. Retirement Savings Plan
Statements of Net Assets Available for Benefits
DECEMBER 31
2001 2000
------------------------------
ASSETS
Investments, at fair value $5,658,502 $4,944,088
------------------------------
Net assets available for benefits $5,658,502 $4,944,088
==============================
See accompanying notes.
2
Friedman's Inc. Retirement Savings Plan
Statement of Changes in Net Assets Available for Benefits
YEAR ENDED DECEMBER 31, 2001
Additions to net assets attributed to:
Contributions:
Participants $1,119,089
Employer 315,013
Net appreciation in fair value of investments 12,788
Dividends and Interest 26,717
---------------
1,473,607
Deductions from net assets attributed to:
Distributions to participants 739,837
Administrative expenses 19,356
---------------
759,193
---------------
Net increase in net assets 714,414
Net assets available for benefits at beginning of year 4,944,088
---------------
Net assets available for benefits at end of year $5,658,502
===============
See accompanying notes.
3
Friedman's Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2001
1. DESCRIPTION OF THE PLAN
A complete description of the Friedman's Inc. Retirement Savings Plan (the Plan)
provisions is included in the Summary Plan Description and the Plan Document.
Copies of these documents are available from the Friedman's Inc. Benefits
Department. The following summary should be read in conjunction with the
aforementioned documents.
GENERAL
The Plan is a defined contribution plan subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended (ERISA) and covers
substantially all employees of Friedman's Inc. (the Company). The Plan was
established and became effective January 1, 1996.
CONTRIBUTIONS
Participants are allowed to make contributions to the Plan in accordance with
Section 401(k) of the Internal Revenue Code (Code) ranging from 1% to 15% of
their pre-tax compensation, as defined in the Plan document. Participants may
not make additional after-tax contributions. In addition, the Company makes
matching contributions on behalf of each participant equal to 50% of the first
4% of each participant's contribution to the Plan.
VESTING, WITHDRAWALS AND DISTRIBUTIONS
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in Company contributions plus actual earnings thereon is based
on years of continuous service. A participant vests 20% in Company contributions
after two years of service and an additional 20% each year thereafter until they
are 100% vested after six years of service. Any forfeitures are used to reduce
Company matching contributions. Upon retirement, death, disability or
termination of employment, the vested balance in the participant's account is
payable to the participant or designated beneficiary as a lump sum payment.
4
Friedman's Inc. Retirement Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
LOANS TO PARTICIPANTS
Participants are permitted to borrow, under the loan provisions of the Plan, not
less than $1,000 up to a maximum of the lesser of $50,000 or 50% of the
participant's vested account balance. Participants may have up to two loans
outstanding which must be repaid within five years unless the loan is for the
purchase of a primary residence, in which case the loan must be repaid within
ten years. The loans are secured by the balance in the participant's account and
bear interest at the prime rate plus 2% in effect at the beginning of the month
in which the loan originated.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions, the
appropriate portion of the Company's contributions and an allocation of Plan
investment results. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's account. Participant
contributions and the related investment income are at all times 100% vested and
nonforfeitable. Participants become vested in Company contributions and actual
earnings thereon according to the vesting schedule described above.
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. In the event of termination, the total
amount in each participant's account will be distributed to the participant.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accounting records of the Plan are maintained on the accrual basis. All
securities transactions of the Plan are recorded as of the trade date.
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Friedman's Inc. Retirement Savings Plan
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
VALUATION OF INVESTMENTS
Investments in mutual funds, the common collective trust fund, and Friedman's
Inc. common stock are measured by quoted market prices and are reported at fair
value at year-end. Loans to participants are valued at their outstanding
balances, which approximate 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
that could affect the reported amounts of assets, liabilities and other
additions to or deductions from net assets. Actual results could differ from
those estimates.
3. INVESTMENTS
Investments that represent 5 percent or more of the Plan's net assets at
December 31, 2001 and 2000 are as follows:
2001 2000
------------------------------
Investments at fair value as determined by trustee:
Mutual funds:
Evergreen Treasury Money Market Fund $2,772,771 $2,196,879
Fidelity Magellan Fund 1,058,730 1,103,335
Wells Fargo Lifepath 2010 Fund 615,248 641,207
Collective trust fund:
First Union Enhanced Stock Fund 510,044 507,616
6
Friedman's Inc. Retirement Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
During 2001, the Plan investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated in value by
$12,788 as follows:
Mutual funds $(61,576)
Friedman's Inc. Stock Fund 138,883
First Union Enhanced Stock Fund (64,519)
----------------
Net appreciation $ 12,788
================
4. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated September 2, 1997, stating that the Plan is qualified under Section 401(a)
of the Code and, therefore, the related trust is exempt from taxation. Once
qualified, the Plan is required to operate in conformity with the Code to
maintain its qualification. The Plan's Administrative Committee believes the
Plan is being operated in compliance with the applicable requirements of the
Code and, therefore, believes that the Plan is qualified and the related trust
is tax exempt.
5. TRANSACTIONS WITH PARTIES-IN-INTEREST
Participants routinely invest assets in the Enhanced Stock Fund of First Union
National Bank. For the year ended December 31, 2001, transactions in this fund
included purchases at a total cost of $181,277 and sales with a fair value of
$115,109. For the year ended December 31, 2000, transactions in this fund
included purchases at a total cost of $184,979 and sales with a fair value of
$92,511.
Participants routinely invest assets in Friedman's Inc. common stock. The
Friedman's Inc. Stock Fund held 25,862 and 32,801 shares of Friedman's Inc.
Common Stock valued at $257,850 and $186,983 at December 31, 2001 and 2000,
respectively. For the year ended December 31, 2001, transactions in Friedman's
Inc. common stock included purchases at a total cost of $130,820 and sales with
a fair value of $203,547. For the year ended December 31, 2000, transactions in
Friedman's Inc. common stock included purchases at a total cost of $108,525 and
sales with a fair value of $14,705.
7
Friedman's Inc. Retirement Savings Plan
EIN: 58-0249470 Plan No.: 002
Schedule H, Line 4i
Schedule of Assets (Held at End of Year)
December 31, 2001
(b) (e)
IDENTITY OF ISSUE, BORROWER, (c) CURRENT
(a) LESSOR, OR SIMILAR PARTY DESCRIPTION OF INVESTMENT VALUE
-----------------------------------------------------------------------------------------------
Mutual Funds:
Evergreen Funds Distributor, Inc. Treasury Money Market Fund $2,772,771
Evergreen Funds Distributor, Inc. Short-Intermediate Bond Fund 242,321
Fidelity Management Trust Company Magellan Fund 1,058,730
Wells Fargo Lifepath 2010 Fund 615,248
Collective Trust Fund:
* First Union National Bank Enhanced Stock Fund 510,044
Common Stock:
* Friedman's Inc. Stock Fund 257,850
Participant loans Interest rates ranging from 4.75%
to 9.5%, due no later than 2006 201,538
---------------
$5,658,502
===============
*Indicates a party-in-interest to the Plan.
Note: Cost information has not been included in column (d) because all
investments are participant directed.
8
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the plan
committee members have duly caused this annual report to be signed on its behalf
by the undersigned hereunto duly authorized.
RETIREMENT SAVINGS PLAN OF FRIEDMAN'S INC.
By: /s/ Victor M. Suglia
----------------------------------------------
Victor M. Suglia
Senior Vice President and Chief Financial
Officer
Date: June 28, 2002
9