Golden Retirement Savings Program
Financial Statements
Years ended December 31, 1999 and 1998
Contents
Report of Independent Auditors................................................ 1
Financial Statements
Statements of Net Assets Available for Benefits............................... 2
Statements of Changes in Net Assets Available for Benefits.................... 3
Notes to Financial Statements................................................. 4
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Report of Independent Auditors
The Plan Administrator
Golden Retirement Savings Program
We have audited the accompanying statements of net assets available for benefits
of Golden Retirement Savings Program (the Plan) as of December 31, 1999 and
1998, and the related statement of changes in net assets available for benefits
for the years then ended. 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, 1999 and 1998, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
May 3, 2000
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Golden Retirement Savings Program
Statements of Net Assets Available for Benefits
December 31
1999 1998
---------------------------------
Assets
Investment in Golden Books Publishing
Company, Inc. Master Retirement Trust
(Notes 2 and 3) $31,564,521 $29,534,693
Receivables:
Employer contribution receivable 14,158 22,001
Participant contribution receivable 46,936 68,158
---------------------------------
Total assets 31,625,615 29,624,852
Liabilities
Payable to third parties 11,304 11,304
---------------------------------
Net assets available for benefits $31,614,311 $29,613,548
=================================
See accompanying notes. 2
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Golden Retirement Savings Program
Statements of Net Assets Available for Benefits
December 31
1999 1998
--------------------------------
Additions:
Equity in earnings of Golden Books
Publishing Company, Inc. Master
Retirement Trust (Notes 2 and 3) $ 5,653,873 $2,976,020
Contributions:
Employer 216,225 350,868
Participants 743,674 1,091,580
--------------------------------
959,899 1,442,448
--------------------------------
6,613,772 4,418,468
Deductions:
Benefit payments and withdrawals 4,632,952 5,256,760
Administrative expenses 9,654 10,717
--------------------------------
4,642,606 5,267,477
Transfer of assets from other plans 29,597 1,773
--------------------------------
Net increase (decrease) 2,000,763 (847,236)
Net assets available for benefits at beginning
of year 29,613,548 30,460,784
--------------------------------
Net assets available for benefits at end of
year $31,614,311 $29,613,548
================================
See accompanying notes. 3
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Golden Retirement Savings Program
Notes to Financial Statements
December 31, 1999
1. Description of the Plan
The following description of the Golden Retirement Savings Program (the Plan)
provides only general information. Participants should refer to the Summary Plan
Description for a more complete description of the Plan's provisions. The Plan
is a contributory defined-contribution plan covering all eligible employees of
Golden Books Publishing Company, Inc. (the Company). The Company is a subsidiary
of Golden Books Family Entertainment, Inc. (Parent Company). Employees of any
United States subsidiary of the Parent Company which adopts the Plan, with the
consent of the Company, who meet certain eligibility requirements are also
eligible. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
On November 26, 1999, the Company consummated the sale of its manufacturing
facility in Racine, Wisconsin to Artech Printing, Inc. (Artech). Account
balances of Plan participants who became employees of Artech will be transferred
to the applicable Artech Plans in May 2000.
The Parent Company filed for bankruptcy on February 26, 1999, and filed a Joint
Plan of Reorganization on March 25, 1999, that was approved by the Company
Senior Notes and TOPrS holders. Under an order dated September 24, 1999, the
bankruptcy court confirmed the Parent Company's Amended Joint Plan of
Reorganization and significant components were approved by the court on December
22, 1999. On January 27, 2000, the Parent Company formally emerged from
protection under the bankruptcy code upon the consummation of the Amended Joint
Plan of Reorganization. Currently, there are no intentions to terminate the Plan
and the Company continues to make contributions to the Plan as required under
the Plan Document.
Each employee becomes a participant of the Plan on specified monthly entry dates
after meeting the following requirements:
a. Is a member of group of employees to which the Plan has been and continues
to be extended by the participating company (Employer), either
unilaterally or through collective bargaining; and
b. Has completed six months of continuous employment (as defined in the Plan)
if he is covered by a collective bargaining agreement; has completed one
month of continuous employment if not covered by a collective bargaining
agreement.
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Golden Retirement Savings Program
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Participants may elect to make contributions to the Plan in amounts based on a
percentage of compensation, as defined in the Plan. A participating employee's
total contribution is limited to not less than 1% and not more than 16% of
compensation. Income deferral contributions were limited to no more than $10,000
in 1999 and 1998, in accordance with the Internal Revenue Code (IRC). The Plan
is intended to satisfy the requirements under Section 404(c) of ERISA and,
therefore, provides that participants may choose to direct their contributions
and all or part of their account balances among any of the Plan's investment
alternatives.
Each participating Employer contributes to the Plan an amount equal to 50% of
the first 6% of income deferral contributions made by or on behalf of the
participant who has completed six months of continuous service if represented by
a collective bargaining agreement or after twelve months of service if not
represented by a collective bargaining agreement. Employer contributions are
reduced by forfeitures credited for the applicable period.
Interest, dividends and net realized and unrealized gains and losses on Plan
investments are allocated to participants' accounts daily based on their
proportionate share of the applicable investment fund's assets.
If a participant's employment terminates for any reason other than retirement,
disability or death, the participant is vested in Employer contributions
according to the following schedule:
Vested Percentage
Years of Continuous of Employer
Employment Contribution Account
---------------------- --------------------
Less than 1 0%
1 but less than 2 25
2 but less than 3 50
3 but less than 4 75
4 or more 100
In the event of a participant's retirement, disability or death, Employer
contributions not previously vested become fully vested and are not subject to
forfeiture, and the participant's account is immediately distributable.
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Golden Retirement Savings Program
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
If a participant's employment terminates for any reason, the participant's
vested account balance will be distributed to the participant or, in the event
of death, to the beneficiary by one or both of the following methods:
a. By a lump-sum distribution of any or all of the account balance.
b. By applying the cash equivalent of any or all such account balance towards
the purchase of an annuity contract, subject to certain requirements as
defined in the Plan.
A participant may elect to defer distribution of their vested account balance
until age 70 1/2.
No more often than once each quarter, a participant may elect to withdraw all or
any portion of the net credit balance in the participant's contribution account,
prior plan account or rollover account. Participants may borrow, up to certain
limits, against their account balance. Loans must be repaid over a period not to
exceed 60 months unless the proceeds were used for the purchase of a primary
residence, in which case it must be repaid within 240 months (360 months for
loans made prior to October 18, 1989). Generally, loan repayments are made by
payroll deduction.
2. Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis
for accounting.
Investments
The Plan participates in investment accounts under the Golden Books Publishing
Company, Inc. Master Retirement Trust (the Master Trust). Investment income and
realized and unrealized appreciation or depreciation on assets held in the
Master Trust are allocated daily to each investment fund under the Plan based on
its proportionate share of Master Trust assets. Plan participation in the Master
Trust is adjusted monthly for withdrawals for benefit payments to Plan
participants and for contributions made to the Plan.
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Golden Retirement Savings Program
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Valuation of Investments
The Master Trust's investment in mutual funds, common trust fund and parent
company stock are valued at fair value based on quoted redemption values on the
last business day of the Plan year. Investments in unallocated insurance
contracts are valued at contract value. Contract value represents contributions
made under the contract, plus interest, less benefit payments. The contracts are
fully benefit responsive, as that terminology is defined in AICPA Statement of
Position (SOP) No. 94-4, "Reporting of Investment Contracts Held by Health and
Welfare Benefit Plans and Defined Contribution Pension Plans." Participant loans
are valued at the remaining unpaid principal amount of the loans, which
approximates fair value.
Expenses
Investment management fees are paid by the Plan and other administrative
expenses of the Plan are paid by the Company.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Reclassifications
Certain 1998 balances were reclassified to conform to the 1999 presentation.
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Golden Retirement Savings Program
Notes to Financial Statements (continued)
3. Investments in Master Trust
Assets held by the Master Trust are as follows:
December 31,
1999 1998
-------------------------------
Investments, at fair value determined
by quoted market price:
Mutual funds $68,090,093 $60,561,106
Parent Company common stock 87,084 346,167
Common trust fund 26,265,663 17,750,976
Unallocated insurance contracts, at
contract value -- 7,710,528
Notes receivable from participants
at estimated fair value 1,647,222 2,056,908
-------------------------------
96,090,062 88,425,685
Less amounts allocated to other plan 64,525,541 58,890,992
-------------------------------
$31,564,521 $29,534,693
===============================
The Plan's interest in the Master Trust assets was approximately 33% as of
December 31, 1999 and 1998.
On January 27, 2000, when the Parent Company formally emerged from protection
under the bankruptcy code (see Note 1), shares of Parent Company common stock
(Old Company stock) were canceled and holders of Old Company stock received
warrants to purchase successor company common stock. The warrants have a nominal
fair value and all transactions involving this investment are suspended until
the Plan receives guidance from the Department of Labor as to the proper
disposition of the warrants.
The interest rates on the unallocated insurance contracts held by the Master
Trust were 6.4% in 1999 and 6.05% to 6.40% in 1998. The average yield was 6.3%
and 6.1% in 1999 and 1998, respectively. Contracts in the Master Trust matured
in 1999.
Interest and dividend income earned by the Master Trust was as follows:
Year ended December 31,
1999 1998
---------------------------
Interest and dividend income earned
by the Master Trust $6,335,288 $4,839,630
Less amount allocated to other plan 4,191,175 3,149,203
---------------------------
$2,144,113 $1,690,427
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Golden Retirement Savings Program
Notes to Financial Statements (continued)
3. Investments in Master Trust (continued)
The Master Trust's investments (including investments bought and sold, as well
as held during the year) appreciated (depreciated) in value and were allocated
to the Plan as follows:
Year ended December 31,
1999 1998
------------------------------
Investments at fair value as determined
by quoted market prices:
Mutual funds $14,319,350 $ 8,646,742
Investments in the Parent Company's
common stock 308,931 (3,030,117)
------------------------------
14,628,281 5,616,625
Less amounts allocated to other plan 11,118,521 4,331,032
------------------------------
$ 3,509,760 $ 1,285,593
==============================
4. Income Tax Status
The Internal Revenue Service ruled November 14, 1995, that the Plan is qualified
under Section 401(a) of the IRC and, therefore, the related trust is exempt from
taxation. Once qualified, the Plan is required to operate in conformity with the
IRC to maintain its qualification. The Plan administrator believes that the Plan
is being operated in compliance with the applicable requirements of the IRC and,
therefore, believes the Plan is qualified and the related trust is tax exempt.
5. 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 Plan termination,
participants will become fully vested in their accounts.
6. Transactions with Parties In Interest
The Master Trust invests in common stock of the Parent Company.
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Golden Retirement Savings Program
Notes to Financial Statements (continued)
7. Reconciliation of Financial Statements to Form 5500
The following reconciles net assets available for benefits per the financial
statements to the Form 5500:
December 31
1999 1998
-------------------------------
Net assets available for benefits per financial
statements $31,614,311 $29,613,548
Employer contribution receivable (14,158) (22,001)
Participant contribution receivable (46,936) (68,158)
Payable to third parties 11,304 11,304
-------------------------------
Net assets available for benefits per the Form
5500 $31,564,521 $29,534,693
===============================
The following reconciles contributions per the financial statements to the Form
5500:
Year ended December 31,
1999 1998
---------------------------
Contributions per financial statements $959,899 $1,442,448
Less: Contribution receivables at end of year (61,094) (90,159)
Add: Contribution receivables at beginning of year
90,159 133,313
---------------------------
Contributions per the Form 5500 $988,964 $1,485,602
===========================
Differences between the financial statements and the Form 5500 are due to the
financial statements being prepared on the accrual basis and the Form 5500
prepared on the cash basis.
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