HDL Handleman CO Del

On December 6, 2007, Handleman Company issued a press release announcing its results for the second quarter ended October 27, 2007. A copy of the press release is furnished as Exhibit 99.1 and is incorporated herein by reference.

Included in Exhibit 99.1 are the non-GAAP measures, (i) Pro-forma loss before income taxes, which reconciles GAAP loss before income taxes to this non-GAAP measure by adjusting for expenses that are not considered on-going in nature; and (ii) the non-GAAP measure, Adjusted EBITDA, which reconciles GAAP computed net loss to this non-GAAP measure by deducting investment income and income tax benefits from GAAP computed net loss, and adding back investment loss, interest expense, income tax expense, depreciation and amortization expense, recoupment of development costs and acquired rights, and loss on disposal of property and equipment to GAAP computed net loss from continuing operations.

The Registrant believes these non-GAAP financial measures provide meaningful, supplemental information to investors regarding its operating performance and liquidity by, for example, excluding certain operating expenses and other income and expense items not related to the Registrant’s on-going operating performance. Furthermore, the Registrant believes that investors benefit from viewing its results “through the eyes of management” in addition to GAAP disclosures. These non-GAAP measures also facilitate management’s internal comparisons to historical performance and liquidity, and the calculation of Adjusted EBITDA is a requirement by the Registrant’s lenders. When certain conditions contained within its lending agreements are not met, this measure is a factor in determining the Registrant’s available borrowing base.

Exhibit No.

Description

Exhibit 99.1