SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 12, 2004
Friedman's Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-22356 58-20583
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
171 Crossroads Parkway
Savannah, Georgia 31422
(Address of principal executive offices)
(912) 233-9333
(Registrant's telephone number, including area code)
Item 5. Other Events.
On March 12, 2004, Friedman's was informed by management of Crescent
Jewelers that Ernst & Young had resigned as the independent accountants for
Crescent Jewelers. Friedman's is not aware of the reasons for E&Y's resignation
as independent accountants for Crescent Jewelers. E&Y has advised Friedman's
that it is continuing its work on the Friedman's financial statements for the
three years in the period ended September 27, 2003.
Since 1996, Friedman's has maintained a strategic relationship with
Crescent Jewelers, a specialty retailer of fine jewelry based in Oakland,
California. Friedman's has a direct investment in Crescent of $85 million,
consisting of $50.0 million of Series A preferred stock and $35 million of
senior subordinated debt. As of September 27, 2003, Crescent also owes
Friedman's accrued dividends and interest on the preferred stock and the
subordinated debt in the amount of approximately $5.5 million. In connection
with the completion of the audit of Friedman's fiscal 2003 financial statements,
Friedman's retained an outside appraisal firm to provide a conclusion on the
fair value of Crescent's business enterprise. This valuation will be used to
assist Friedman's in determining whether any impairment charge to the carrying
value of that investment is warranted. While the valuation of Friedman's
investment in Crescent has not yet been finalized, at this time Friedman's
expects to record a substantial impairment of its investment in Crescent in the
Friedman's Inc. fiscal 2003 financial statements. Friedman's believes that
financial information for Crescent previously included in Friedman's public
filings should no longer be relied upon.
Friedman's is affiliated with Crescent through common controlling ownership
- Phillip E. Cohen controls Crescent and is also the beneficial owner of all of
the Friedman's Class B voting common stock. From September 1999 through August
2002, before Crescent entered into its existing credit facility and Friedman's
made its $85.0 million direct investment in Crescent, Friedman's provided credit
enhancement for Crescent's then-existing credit facility. In partial
consideration for the credit enhancement, Friedman's received a warrant to
purchase 50% of Crescent's non-voting capital stock for $500,000, which remains
outstanding. During fiscal 2003, Friedman's shared common executive management
with Crescent. However, effective as of the beginning of December 2003, Crescent
and Friedman's have been separately managed. Friedman's has contractual
arrangements with Crescent under which Friedman's provides Crescent with
accounting and information technology support, certain other back-office
processing services and the use of the "The Value Leader" trademark. Crescent is
currently in default of the payments required under these agreements. Friedman's
has taken no action with respect to these defaults, but has reserved its rights
to do so at any time.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Friedman's Inc.
(Registrant)
Date: March 15, 2004 By: /s/ Richard Cartoon
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Richard Cartoon
Chief Financial Officer
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