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
As of December 31, 2002 and 2001
Commission file number 1-31707
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
As of December 31, 2002 and 2001
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
We have audited the accompanying statements of net assets available for benefits
of Friedman's Inc. Retirement Savings 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. 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, 2002 and 2001, and the changes in its net assets available for
benefits for the year ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States.
Our audit of the financial statements was 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, 2002 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
Atlanta, Georgia
June 25, 2003
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Friedman's Inc. Retirement Savings Plan
Statements of Net Assets Available for Benefits
DECEMBER 31
2002 2001
---------------------------
ASSETS
Investments, at fair value $6,252,754 $5,658,502
---------------------------
Net assets available for benefits $6,252,754 $5,658,502
===========================
See accompanying notes.
2
Friedman's Inc. Retirement Savings Plan
Statement of Changes in Net Assets Available for Benefits
YEAR ENDED DECEMBER 31, 2002
Additions to net assets attributed to:
Contributions:
Participants $1,200,627
Employer 341,153
Dividends and Interest 34,749
----------
1,576,529
Deductions from net assets attributed to:
Distributions to participants 568,199
Administrative expenses 32,551
Net depreciation in fair value of investments 381,527
----------
982,277
----------
Net increase in net assets 594,252
Net assets available for benefits at beginning of year 5,658,502
----------
Net assets available for benefits at end of year $6,252,754
==========
See accompanying notes.
3
Friedman's Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2002
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 100% of
their pre-tax compensation, subject to Internal Revenue Service limitations.
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.
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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. The respective participant's loan principal and
interest are repaid ratably through bi-weekly payroll deductions.
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.
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, 2002 and 2001 are as follows:
2002 2001
---------------------------
Investments at fair value as determined by trustee:
Mutual funds:
Evergreen Treasury Money Market Fund $ - $2,772,771
Stable Portfolio Group Trust 3,352,828 -
Fidelity Magellan Fund 830,489 1,058,730
Wells Fargo Lifepath 2010 Fund 545,788 615,248
Evergreen Core Bond Fund 346,104 -
Collective trust fund:
First Union Enhanced Stock Fund 485,217 510,044
6
Friedman's Inc. Retirement Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
During 2002, the Plan investments (including gains and losses on investments
bought and sold, as well as held during the year) depreciated in value by
$(381,527) as follows:
Mutual funds $ (269,413)
Friedman's Inc. Stock Fund 21,419
First Union Enhanced Stock Fund (133,533)
----------
Net depreciation $ (381,527)
==========
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
First Union National Bank is the trustee of the Plan.
Participants routinely invest assets in the Enhanced Stock Fund of First Union
National Bank. For the year ended December 31, 2002, transactions in this fund
included purchases at a total cost of $279,384 and sales with a fair value of
$170,678.
Participants routinely invest assets in Friedman's Inc. common stock. The
Friedman's Inc. Stock Fund held 23,791and 25,862 shares of Friedman's Inc.
Common Stock valued at $223,937 and $257,850 at December 31, 2002 and 2001,
respectively. For the year ended December 31, 2002, transactions in Friedman's
Inc. common stock included purchases at a total cost of $142,326 and sales with
a fair value of $197,658.
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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, 2002
(a) (b) (e)
IDENTITY OF ISSUE, BORROWER, LESSOR, OR (c) CURRENT
SIMILAR PARTY DESCRIPTION OF INVESTMENT VALUE
----------------------------------------------------------------------------------------------------------------
Mutual Funds:
Fidelity Management Trust Company Magellan Fund $ 830,489
Wells Fargo Outlook 2010 Fund 545,788
Evergreen Funds Distributor, Inc. Evergreen Core Bond Fund 346,104
Dreyfus Dreyfus S&P Midcap Index Fund 52,746
Dreyfus Dreyfus Index Fund Small Cap 47,379
Goldman Sachs Goldman Sachs Small Cap Value 32,801
* Berger Berger inv Port Mid Cap Value 32,687
Evergreen Funds Distributor, Inc. Evergreen Adjustable Rate 21,287
Federated Federated Equity Funds - Kaufman 20,082
AIM Aim Basic Value 11,110
Franklin Templeton Templeton Growth Fund 6,836
Evergreen Funds Distributor, Inc. Evergreen Growth Fund 5,819
MFS MFS Int'l. new Discovery Fund 5,542
Collective Trust Fund:
** Wachovia Bank, National Association
Stable Portfolio Group Trust 3,352,828
** Wachovia Bank, National Association
Enhanced Stock Fund 485,217
Common Stock:
** Friedman's Inc. Common Stock 223,937
** Participant loans Interest rates ranging from 4.75% to
9.5%, due no later than 2007 232,102
-----------
$ 6,252,754
===========
8
*Berger was acquired by Janus Mutual Funds in 2003.
**Indicates a party-in-interest to the Plan.
Note: Cost information has not been included in column (d) because all
investments are participant directed.
9
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, 2003
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