UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended May 31, 2003
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-4339
GOLDEN ENTERPRISES, INC.
------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 63-0250005
-------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE GOLDEN FLAKE DRIVE
BIRMINGHAM, ALABAMA 35205
------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (205) 458-7316
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Capital Stock, Par Value $0.662/3
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes__X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
Form 10-K. (X)
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes____ No __X__
State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of August 8, 2003.
Common Stock, Par Value $0.662/3 --$11,155,451
Indicate the number of shares outstanding of each of the Registrant's Classes of
Common Stock, as of August 8, 2003.
CLASS OUTSTANDING AT AUGUST 8, 2003
----- -----------------------------
Common Stock, Par Value $0.662/3 11,883,305 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Proxy Statement for the Annual Meeting of
Stockholders to be held on September 30, 2003 are incorporated by reference into
Part III.
PURPOSE OF AMENDMENT NO. 1
The filing is made to restate the Company's consolidated statements of
income for the years 2003, 2002 and 2001 and consolidated statements of
financial condition as of May 31, 2003 and 2002 and related Management's
Discussion and Analysis to reflect a correction of the accounting for accruals
for its vacation pay and self-insured health and casualty obligations. Also,
selected financial data and Management's Discussion and Analysis has been
restated as of and for the years ended May 31, 2003, 2002, 2001, 2000 and 1999.
Regarding the accompanying consolidated financial statements, the
restatement for years 2003, 2002 and 2001 resulted in a reduction in a
previously reported net loss of approximately $484,380 and a reduction in a
previously reported net income of approximately $476,844 and $47,769,
respectively. Basic and Diluted loss per share was reduced by $.04 per share for
fiscal year 2003. Basic and Diluted earnings per share declined $.04 for fiscal
2002 and earnings per share were not impacted for fiscal year 2001. In addition,
as a result of the cumulative effect of the restatement, retained earnings has
been reduced by $1,927,462, $2,411,842 and $1,934,999 as of May 31, 2003, May
31, 2002 and May 31, 2001, respectively. Also, as a result of the cumulative
effect of the restatement for the years 2001 through 2003, opening Retained
Earnings as of June 1, 2000 has been reduced by $1,887,230.
The restatement adjustments are presented in Note #2 in the Notes to
Consolidated Financial Statements in this Form 10-K/A. The restatement
adjustments reflect a correction of the accounting for accruals for its vacation
pay and self-insured health and casualty obligations. The Company determined
that there had been an error in its accounting for self-insurance related
liabilities. The adjustments required included recognition of previously
unrecorded liabilities and reductions in amounts previously recognized as
prepaid amounts to an employee benefit trust which were incorrect.
The Company determined that it had not recorded liabilities for earned
vacation not yet taken as required by Generally Accepted Accounting Principles
(GAAP).
This amendment does not reflect the effect of any events subsequent to the
original filing of the form 10-K for the year ended May 31, 2003, except for the
aforementioned restatements.
2
TABLE OF CONTENTS
FORM 10-K/A ANNUAL REPORT -2003
GOLDEN ENTERPRISES, INC.
Page
------------
Purpose of Amendment No.1.............................................2
PART I.
Item 1. Business..............................................................4
Item 2. Properties............................................................6
Item 3. Legal Proceedings.....................................................7
Item 4. Submission of Matters to a Vote of Security Holders...................7
PART II.
Item 5. Market for Registrant's Common Equity
and Related StockholderMatters....................................8
Item 6. Selected Financial Data............................................9-9A
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................10
Item 7A. Quantitative and Qualitative Disclosure About Market Risk............16
Item 8. Financial Statements and Supplementary Data..........................16
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.............................42
Item 9A. Controls and Procedures..............................................42
PART III.
Item 10. Directors and Executive Officers of the Registrant...................43
Item 11. Executive Compensation...............................................43
Item l2. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters..............43
Item 13. Certain Relationships and Related Transactions.......................43
Item 14. Controls and Procedures..............................................43
Item 15. Principal Accountant Fees and Services...............................43
PART IV.
Item 16. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K............................................44
3
PART I
ITEM 1. - BUSINESS
Golden Enterprises, Inc. (the "Company") is a holding company which owns
all of the issued and outstanding capital stock of Golden Flake Snack Foods,
Inc., a wholly-owned operating subsidiary company ("Golden Flake"). Golden
Enterprises is paid a fee by Golden Flake for providing management services for
it.
The Company was originally organized under the laws of the State of
Alabama as Magic City Food Products, Inc. on June 11, 1946. On March 11, 1958,
it adopted the name Golden Flake, Inc. On June 15, 1963, the Company purchased
Don's Foods, Inc. a Tennessee corporation which was merged into the Company on
December 10, 1966. The Company was reorganized December 31, 1967 as a Delaware
corporation without changing any of its assets, liabilities or business. On
January 1, 1977, the Company, which had been engaged in the business of
manufacturing and distributing potato chips, fried pork skins, cheese curls and
other snack foods, spun off its operating division into a separate Delaware
corporation known as Golden Flake Snack Foods, Inc. and adopted its present name
of Golden Enterprises, Inc.
The Company owns all of the issued and outstanding capital stock of Golden
Flake Snack Foods, Inc.
GOLDEN FLAKE SNACK FOODS, INC.
GENERAL
Golden Flake Snack Foods, Inc. ("Golden Flake") is a Delaware corporation
with its principal place of business and home office located at One Golden Flake
Drive, Birmingham, Alabama. Golden Flake manufactures and distributes a full
line of salted snack items, such as potato chips, tortilla chips, corn chips,
fried pork skins, baked and fried cheese curls, onion rings and buttered
popcorn. These products are all packaged in flexible bags or other suitable
wrapping material. Golden Flake also sells a line of cakes and cookie items,
canned dips, pretzel, peanut butter crackers, cheese crackers, dried meat
products and nuts packaged by other manufacturers using the Golden Flake label.
No single product or product line accounts for more than 50% of Golden Flake's
sales, which affords some protection against loss of volume due to a crop
failure of major agricultural raw materials.
RAW MATERIALS
Golden Flake purchases raw materials used in manufacturing and processing
its snack food products on the open market and under contract through brokers
and directly from growers. A large part of the raw materials used by Golden
Flake consists of farm commodities which are subject to precipitous change in
supply and price. Weather varies from season to season and directly affects both
the quality and supply available. Golden Flake has no control of the
agricultural aspects and its profits are affected accordingly.
DISTRIBUTION
Golden Flake sells its products through its own sales organization and
independent distributors to commercial establishments which sell food products
in Alabama and in parts of Tennessee, Kentucky, Georgia, Florida, Mississippi,
Louisiana, North Carolina, South Carolina, Arkansas and Missouri. The products
are distributed by approximated 433 route salesmen who are supplied with selling
inventory by the Company's trucking fleet which operates out of Birmingham,
Alabama, Nashville, Tennessee, and Ocala, Florida. All of the route salesmen are
employees of Golden Flake and use the direct store door delivery method. Golden
Flake is not dependent upon any single customer, or a few customers, the loss of
any one or more of which would have a material adverse effect on its business.
No single customer accounts for more than 10% of its total sales. Golden Flake
has a fleet of 835 company owned vehicles to support the route sales system,
including 37 tractors and 96 trailers for long haul delivery to the various
company warehouses located throughout its distribution areas, 644 store delivery
vehicles and 58 cars and miscellaneous vehicles. Golden Flake also leases 20
store delivery vehicles.
4
COMPETITION
The snack foods business is highly competitive. In the area in which
Golden Flake operates, many companies engage in the production and distribution
of food products similar to those produced and sold by Golden Flake. Most, if
not all, of Golden Flake's products are in direct competition with similar
products of several local and regional companies and at least one national
company, the Frito Lay Division of Pepsi Co., Inc., which is larger in terms of
capital and sales volume than is Golden Flake. Golden Flake is unable to state
its relative position in the industry. Golden Flake's marketing thrust is aimed
at selling the highest quality product possible and giving good service to its
customers, while being competitive with its prices. Golden Flake constantly
tests the quality of its products for comparison with other similar products of
competitors and maintains tight quality controls over its products.
EMPLOYEES
Golden Flake employs approximately 1,100 employees. Approximately 650
employees are involved in route sales and sales supervision, approximately 350
are in production and production supervision, and approximately 100 are
management and administrative personnel.
Golden Flake believes that the performance and loyalty of its employees
are the most important factors in the growth and profitability of its business.
Since labor costs represent a significant portion of Golden Flake's expenses,
employee productivity is important to profitability. Golden Flake considers its
relations with its employees to be excellent.
Golden Flake has a 401(k) Profit Sharing Plan and an Employee Stock
Ownership Plan designed to reward the long term employee for his loyalty. In
addition, the employees are provided medical insurance, life insurance, and an
accident and sickness salary continuance plan. Golden Flake believes that its
employee wage rates are competitive with those of its industry and with
prevailing rates in its area of operations.
OTHER MATTERS
The Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K, and amendments to these reports, are available
via the Company's website. The website address is www.goldenflake.com. All
required reports are made available on the website as soon as reasonably
practicable after they are electronically filed with the Securities and Exchange
Commission.
ENVIRONMENTAL MATTERS
There have been no material effects of compliance with government
provisions regulating discharge of materials into the environment.
RECENT DEVELOPMENTS
No significant changes have occurred in the kinds of products manufactured
or in the markets of methods of distribution, and no material changes or
developments have occurred in the business done and intended to be done by
Golden Flake.
5
EXECUTIVE OFFICERS OF REGISTRANT
AND ITS SUBSIDIARY
NAME AND AGE POSITION AND OFFICES WITH MANAGEMENT
------------ ------------------------------------
John S. Stein, 66 Mr. Stein is Chairman of the Board. He was elected Chairman on June 1,
1996. He served as Chief Executive Officer from 1991 to April 4, 2001,
and as President from 1985 to 1998 and from June 1, 2000 to April 4,
2001. Mr. Stein also served as President of Golden Flake Snack Foods,
Inc. from 1976 to 1991. Mr. Stein retired as an employee with the
Company on May 31, 2002. Mr. Stein is elected Chairman annually, and his
present term will expire on May 31, 2004.
Mark W. McCutcheon, 48 Mr. McCutcheon is Chief Executive Officer and President of the Company and
President of Golden Flake Snack Foods, Inc., a wholly owned subsidiary of
the Company. He was elected President and Chief Executive Officer of the
Company on April 4, 2001 and President of Golden Flake on November 1,
1998. He has been employed by Golden Flake since 1980. Mr. McCutcheon
is elected Chief Executive Officer and President of the Company and
President of Golden Flake annually, and his present terms will expire on
May 31, 2004.
John H. Shannon, 66 Mr. Shannon has been employed with the Company since 1962. He was elected
Controller in 1976, Secretary in 1978 and Vice-President in 1979, and has
served in these capacities since the, Mr. Shannon is elected to his
positions on an annual basis, and his present term of office will expire
on May 31, 2004. (Reitred March 1, 2004)
Randy Bates, 49 Mr. Bates is Executive, Vice-President of Sales, Marketing and Transportation
for Golden Flake. He has held these positions since October 26, 1998.
Mr. Bates was Vice-President of Sales from October 1, 1994 to 1998. Mr.
Bates has been employed by Golden Flake since March 1979. Mr. Bates is
elected to his positions on an annual basis, and his present term of
office will expire on May 31, 2004.
David Jones, 50 Mr. Jones is Executive Vice-President of Operations, Human Resources and
Quality Control for Golden Flake. He has held these positions since May
20, 2002. Mr. Jones was Vice-President of Manufacturing from 1998 to
2002 and Vice-President of Operations from 2000 to 2002. Mr. Jones has
been employed by Golden Flake since 1984. Mr. Jones is elected to his
positions on an annual basis, and his present term of office will expire
on May 31, 2004.
ITEM 2. - PROPERTIES
The headquarters of the Company during the fiscal year ended May 31, 2003
were at Suite 208, 2140 11th Avenue South, Birmingham, Alabama 35205. The
Company occupied approximately 1500 square feet of office space under lease. On
March 1, 2004, the Company relocated to One Golden Flake Drive, Birmingham, AL
35205. The properties of the subsidiary are described below.
6
GOLDEN FLAKE
MANUFACTURING PLANTS AND OFFICE HEADQUARTERS
The main plant and office headquarters of Golden Flake are located at One
Golden Flake Drive, Birmingham, Alabama, and are situated on approximately 40
acres of land which is serviced by a railroad spur track. This facility consists
of three buildings which have a total of approximately 300,000 square feet of
floor area. The plant manufactures a full line of Golden Flake products. Golden
Flake maintains a garage and vehicle maintenance service center from which it
services, maintains, repairs and rebuilds its fleet and delivery trucks. Golden
Flake has adequate employee and fleet parking.
Approximately 17 acres of the Birmingham property is undeveloped. This
property is zoned for industrial use and is readily available for future use.
Plans for the utilization of this property have not been finalized.
Golden Flake also has a manufacturing plant in Ocala, Florida. This plant
was placed in service in November 1984. The plant consists of approximately
100,000 square feet, with allowance for future expansion, and is located on a
28-acre site on Silver Springs Boulevard. The Company manufactures corn chips,
tortilla chips and potato chips from this facility.
The manufacturing plants, office headquarters and additional lands are
owned by Golden Flake free and clear of any debts.
DISTRIBUTION WAREHOUSES
Golden Flake owns branch warehouses in Birmingham, Montgomery, Midfield,
Demopolis, Fort Payne, Muscle Shoals, Huntsville, Phenix City, Tuscaloosa,
Mobile, Dothan and Oxford, Alabama; Gulfport and Jackson, Mississippi;
Chattanooga, Knoxville, and Memphis, Tennessee; Decatur, Marietta, and Macon
Georgia; Jacksonville, Panama City, Tallahassee and Pensacola, Florida; Baton
Rouge and New Orleans, Louisiana; and Little Rock, Arkansas. The warehouses vary
in size from 2,400 to 8,000 square feet. All distribution warehouses are owned
free and clear of any debts.
VEHICLES
Golden Flake owns a fleet of 835 vehicles which includes 644 route trucks,
37 tractors, 96 trailers and 58 cars and miscellaneous vehicles. There are no
liens or encumbrances on Golden Flake's vehicle fleet. Golden Flake also leases
20 route trucks and owns a 1987 Cessna Citation II aircraft.
ITEM 3. - LEGAL PROCEEDINGS
There are no material pending legal proceedings against the Company or its
subsidiary other than ordinary routine litigation incidental to the business of
the Company and its subsidiary.
ITEM 4. - SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS
Not Applicable.
7
PART II
ITEM 5. - MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
MARKET AND DIVIDEND INFORMATION
The Company's common stock is traded in the over-the-counter market under
the "NASDAQ" symbol, GLDC, and transactions are reported through the National
Association of Securities Dealers Automated Quotation (NASDAQ) National Market
System. The following tabulation sets forth the high and low sale prices for the
common stock during each quarter of the fiscal years ended May 31, 2003 and 2002
and the amount of dividends paid per share in each quarter. The Company
currently expects that comparable regular cash dividends will be paid in the
future.
MARKET PRICE
------------------------
DIVIDEND PAID
QUARTER HIGH LOW PER SHARE
FISCAL 2003
First ............................................ $ 4.490 $ 3.710 $ .0625
Second ........................................... 5.530 2.760 .0625
Third ............................................ 4.100 2.160 .0313
Fourth ........................................... 2.500 1.640 .0313
FISCAL 2002
First ............................................ $ 4.150 $ 2.950 $ .0625
Second ........................................... 4.020 3.150 .0625
Third ............................................ 3.950 3.400 .0625
Fourth ........................................... 4.550 3.450 .0625
As of August 8, 2003, there were approximately 1,500 shareholders of record.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.
The following table provides Equity Compensation Plan information under
which equity securities of the Registrant are authorized for issuance:
EQUITY COMPENSATION PLAN INFORMATION
------------------------------ --------------------------- -------------------------- ------------------------------------
Plan category (a) (b) (c)
Number of securities to be Weighted-average exercise Number of securities remaining
issued upon exercise of price of outstanding available for future issuance
outstanding options, options, warrants and rights under equity compensation plans
warrants and rights (excluding securities reflected in
column (a))
------------------------------- --------------------------- -------------------------- ----------------------------------------
Equity compensation plans 369,000 $3.776 130,000
approved by security holders
------------------------------- --------------------------- -------------------------- ----------------------------------------
Equity compensation plans 0 0 0
not approved by security
holders
------------------------------- --------------------------- -------------------------- ----------------------------------------
Total 369,000 $3.776 130,000
------------------------------- --------------------------- -------------------------- ----------------------------------------
8
ITEM 6 - SELECTED FINANCIAL DATA
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY (RESTATED)
FINANCIAL REVIEW (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Year Ended May 31,
-------------------------------------------------------------------------
OPERATIONS 2003 2002 2001 2000 1999
Restated Restated Restated Restated Restated
Net sales (b) ...................... $ 96,604 $ 104,335 $ 102,797 $ 113,227 $ 115,662
Gain on sales of assets............. 304 756 599 250 537
Other income ....................... 506 563 691 67 66
------------ ------------ ------------ ------------ ------------
Total revenues ................ 97,414 106,654 104,087 113,544 116,265
Cost of sales ...................... 50,748 54,326 53,631 57,460 60,221
Selling, general and
administrative expenses .......... 47,686 47,653 46,333 52,100 54,035
Interest ........................... 269 189 85 -- --
Restructuring charge ............... -- -- -- 2,565 --
(Loss) income before cumulative
effect of a change in accounting
policy and income
taxes .......................... (1,289) 3,486 4,038 1,419 2,009
Federal and state income taxes ..... (361) 1,367 1,386 642 726
Net (loss) income before cumulative
effect of a change in accounting
policy .......................... (928) 2,119 2,652 777 1,283
Cumulative effect of a change in
accounting policy net of
taxes .......................... -- 413 -- -- --
Net (loss) income ......... $ (928) $ 2,532 $ 2,652 $ 777 $ 1,283
===============================================================================================================
FINANCIAL DATA
Depreciation and amortization ...... $ 2,490 $ 2,594 $ 2,436 $ 3,230 $ 3,309
Capital expenditures, net of
disposals .......................... 287 3,802 1,294 149 1,861
Working capital .................... 8,818 10,989 12,909 14,028 10,220
Long-term debt ..................... 3,862 5,083 1,807 1,807 1,579
Stockholders' equity ............... 24,078 27,233 27,865 28,641 31,082
Total assets ....................... 36,492 40,840 40,243 41,814 41,065
===============================================================================================================
COMMON STOCK DATA
Net (loss) income before cumulative
effect of a change in accounting
policy ........................... $ (0.08) $ 0.18 $ 0.22 $ 0.06 $ 0.11
Cumulative effect of a change in
accounting policy net of taxes ... -- 0.03 -- -- --
Basic and diluted net (loss) income (0.08) 0.21 0.22 0.06 0.11
Dividends .......................... .1875 0.25 0.25 0.24 0.36
Book value ......................... 2.20 2.29 2.33 2.37 2.55
Price range ........................ 5.530-1.640 4.550-2.950 4.750-2.875 4.125-2.313 6.625-2.500
===============================================================================================================
FINANCIAL STATISTICS
Current ratio ...................... 2.09 2.37 2.58 2.43 2.29
Net (loss) income as percent of
total revenues ................. (1.0)% 2.4% 2.5% 0.7% 1.1%
Net (loss) income as percent of
stockholders' equity (a) ........... (5.1)% 10.1% 9.0% 3.9% 3.1%
===============================================================================================================
OTHER DATA
Weighted average common shares
outstanding ..................... 11,883,305 11,898,097 11,965,671 12,154,057 12,171,043
Common shares outstanding at
year end ........................ 11,883,305 11,883,305 11,932,741 12,065,000 12,160,950
Approximate number of
stockholders ....................... 1,500 1,500 1,500 1,600 1,600
===============================================================================================================
(a) Average amounts at beginning and end of fiscal year.
(b) Reflects on all periods presented, the effect on revenues of adopting the
provisions of the Emerging Issues Task Force of the Financial Accounting
Standards Board issue No. 01-9 Accounting for Consideration Given by a
Vendor to a Customer (Including a Reseller of the Vendor's Products) (EITF
01-9)
9
The 2003 Restatement adjustments affecting the years 2000 and 1999 are set forth
in the following table:
2000 1999
------------------------- -------------------------
As As
Previously As Previously As
Reported Restated Reported Restated
------------------------- -------------------------
Income statement data;
Net sales $ 113,227 113,227 $ 115,662 115,662
Net Income 1,243 777 1,073 1,283
Basic and diluted net income per share 0.10 0.06 0.09 0.11
Financial position data (at May 31):
Total assets $ 41,333 41,814 $ 41,912 41,065
Stockholders' equity 30,528 28,641 32,504 31,085
The 2003 restatement adjustments affecting the years 2000 and 1999 are
adjustments with respect to self insurance accruals and accrued compensated
absences, as described in "Item 8. Financial Statements - Note 2. Restatement."
9-A
ITEM 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations presented below reflects certain restatements to the Company's
previously reported consolidated financial statements for all periods presented
(See "Restatement" below"). The purpose of this discussion is to provide
additional information about Golden Enterprises, Inc., its financial condition
and its results of operations. Readers should refer to the consolidated
financial statements and other financial data presented throughout this report
to fully understand the following discussion and analysis.
The accompanying consolidated financial statements, the restatement for
years 2003, 2002 and 2001 resulted in a reduction in a previously reported net
loss of approximately $484,380 and a reduction in a previously reported net
income of approximately $476,844 and $47,769, respectively. Basic and Diluted
loss per share was reduced by $.04 per share for fiscal year 2003. Basic and
Diluted earnings per share declined $.04 for fiscal 2002 and earnings per share
were not impacted for fiscal year 2001. In addition, as a result of the
cumulative effect of the restatement, retained earnings has been reduced by
$1,927,462, $2,411,842 and $1,934,999 as of May 31, 2003, May 31, 2002 and May
31, 2001, respectively. Also, as a result of the cumulative effect of the
restatement for the years 2001 through 2003, opening Retained Earnings as of
June 1, 2000 has been reduced by $1,887,230. For a discussion of individual
adjustment items, see "Item 8- Financial Statements- Notes 2 Restatement."
OVERVIEW
The Company manufactures and distributes a full line of snack items, such
as potato chips, tortilla chips, corn chips, fried pork skins, baked and fried
cheese curls, onion rings and buttered popcorn. The products are all packaged in
flexible bags or other suitable wrapping material. The Company also sells a line
of cakes and cookie items, canned dips, pretzels, peanut butter crackers, cheese
crackers, dried meat products and nuts packaged by other manufacturers using the
Golden Flake label.
No single product or product line accounts for more than 50% of the
Company's sales, which affords some protection against loss of volume due to a
crop failure of major agricultural raw materials. Raw materials used in
manufacturing and processing the Company's snack food products are purchased on
the open market and under contract through brokers and directly from growers. A
large part of the raw materials used by the Company consists of farm commodities
which are subject to precipitous changes in supply and price. Weather varies
from season to season and directly affects both the quality and supply
available. The Company has no control of the agricultural aspects and its
profits are affected accordingly.
The Company sells its products through its own sales organization and
independent distributors to commercial establishments that sell food products
primarily in the Southeastern United States. The products are distributed by
approximately 433 route representatives who are supplied with selling inventory
by the Company's trucking fleet. All of the route representatives are employees
of the Company and use the Company's direct-store delivery system.
10
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's discussion and analysis of its financial condition and
results of operations are based upon the Company's consolidated financial
statements, the preparation of which in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that in certain circumstances affect amounts reported
in the consolidated financial statements. In preparing these financial
statements, management has made its best estimates and judgments of certain
amounts included in the financial statements, giving due considerations to
materiality. The Company does not believe there is a great likelihood that
materially different amounts would be reported under different conditions or
using different assumptions related to the accounting policies described below.
However, application of these accounting policies involves the exercise of
judgment and use of assumptions as to future uncertainties and, as a result,
actual results could differ from these estimates.
The Company believes the following to be critical accounting policies. That
is, they are both important to the portrayal of the Company's financial
condition and results and they require management to make judgments and
estimates about matters that are inherently uncertain.
Revenue Recognition
The Company recognizes sales and related costs upon delivery or shipment of
products to its customers. Sales are reduced by returns and allowances to
customers.
In November 2001, the Emerging Issues task force reached a consensus on
Issue No. 01-09 Accounting for Consideration given by a Vendor to a Customer
(Including a Reseller of the Vendor's Products) effective for annual or interim
periods beginning after December 15, 2001. The issue addresses the recognition,
measurement and income statement classification for certain sales incentives.
The Company implemented this new accounting policy in the fourth quarter of
fiscal 2002. The effect of this accounting change is to adopt this policy as of
the beginning of the fiscal 2002 (June 1, 2001). Certain of these expenses,
including slotting fees, previously classified as selling, general, and
administrative expenses, are now characterized as offsets to net sales.
Reclassifications have been made to prior period financial statements to conform
to current year presentation. Total vendor sales incentives now characterized as
reductions of net sales that previously would have been classified as selling,
general and administrative expenses were approximately $12.8 million, $11.7
million and $12.9 million for the years ended 2003, 2002 and 2001, respectively.
There was no resulting impact on net operating results from adopting EITF 01-09.
Change in Accounting Policy
The Company changed its accounting policy in the fourth quarter of fiscal
2002 with regard to slotting fees. The effect of this accounting change was to
adopt this policy as of the beginning of fiscal 2002 (June 1, 2001). Previously,
slotting fees were expensed as incurred. The Company changed this accounting
policy to capitalize and amortize such costs over the expected benefit period,
which is generally one year. This change in accounting policy was made to more
closely match the cost of the shelf space obtained with the slotting fees with
the revenues produced by the shelf space. The cumulative effect of this change
in accounting policy resulted in a non-cash cumulative adjustment of $413,401
($0.03 per share), net of taxes. The accounting change also increased net income
before the cumulative effect in 2002 by $197,141 ($0.02 per share). Quarterly
results for 2002 reflecting this change in accounting are included in Note 16,
Quarterly Results of Operations.
11
Accounts Receivable
The Company records accounts receivable at the time revenue is recognized.
Amounts for bad debt expense are recorded in selling, general and administrative
expenses on the Consolidated Statements of Operations. The amount of the
allowance for doubtful accounts is based on management's estimate of the
accounts receivable amount that is uncollectible. Management records a general
reserve based on analysis of historical data. In addition, management records
specific reserves for receivable balances that are considered high-risk due to
known facts regarding the customer. The allowance for bad debts is reviewed
quarterly, and it is determined whether the amount should be changed. Failure of
a major customer to pay the Company amounts owed could have a material impact on
the financial statements of the Company. At May 31, 2003 and 2002 the Company
had accounts receivables in the amount of $7.9 million and $9.4 million, net of
an allowance for doubtful accounts of $0.2 million and $0.2 million,
respectively.
Inventories
Inventories are stated at the lower of cost or market. Cost is computed on
the first-in, first out method.
Accrued Expenses
Management estimates certain material expenses in an effort to record those
expenses in the period incurred. The most material accrued estimates relate to a
salary continuation plan for certain key executives of the Company, and to
insurance-related expenses, including self-insurance. Workers' compensation and
general liability insurance accruals are recorded based on insurance claims
processed as well as historical claims experience for claims incurred, but not
yet reported. These estimates are based on historical loss development factors.
Employee medical insurance accruals are recorded based on medical claims
processed as well as historical medical claims experienced for claims incurred
but not yet reported. Differences in estimates and assumption could result in an
accrual requirement materially different from the calculated accrual.
OTHER MATTERS
Transactions with related parties, reported in Note 14 of the Notes to
Consolidated Financial Statements, are conducted on an arm's-length basis in the
ordinary course of business.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $8.8 million at May 31, 2003 compared to $11.0 million
at May 31, 2002 Net cash provided by operations amounted to $4.6 million in
fiscal year 2003, $1.9 million in fiscal year 2002 and $0.05 million in fiscal
year 2001. The increase in net cash provided by operations is primarily related
to decreases in receivables, inventories, prepaid expenses and an increase in
accrued expenses offset by the net loss for fiscal year 2003 of $0.9 million
compared to the net income for fiscal year 2002 of $2.5 million.
Additions to property, plant and equipment, net of disposals were $0.3
million, $3.8 million, $1.3 million and $1.3 million in fiscal years 2003, 2002,
and 2001, respectively, and are expected to be about $1.7 million in 2004.
Cash dividends of $2.2 million, $3.0 million and $3.0 million were paid
during fiscal years 2003, 2002, and 2001, respectively. The quarterly dividend
was reduced to $.03125 from $.0625 in the third quarter in response to a
decrease in earnings.
No cash was used to purchase treasury shares in fiscal 2003, $0.2 million
was used in 2002, and $0.5 million was used for this purpose in 2001.
12
During fiscal 2003, the company re-paid debt, net of borrowings, of $1.6
million.
The following table summarizes the significant contractual obligations of
the Company as of May 31, 2003:
CONTRACTUAL OBLIGATIONS TOTAL 2004 2005-2006 2007-2008 THEREAFTER
----------------------- ---------- ---------- ---------- ----------- ----------
Long-Term Debt $2,422,909 $ 432,142 $ 904,933 $ 961,970 $ 123,864
Purchase Commitment 3,684,000 1,588,000 2,096,000 -0- -0-
Salary Continuation Plan 1,959,586 88,595 199,860 234,413 1,436,718
---------- ---------- ---------- ---------- ----------
Total Contractual Obligations $8,066,495 $2,108,737 $3,200,793 $1,196,383 $1,560,582
========== ========== ========== ========== ==========
Other Commitments
The Company had letters of credit in the amount of $1,790,000 outstanding
at May 31, 2003 to support the Company's commercial self-insurance program.
The Company has a line-of-credit agreement with a local bank that permits
borrowing up to $1 million. The line-of-credit is subject to the Company's
continued credit worthiness and compliance with the terms and conditions of the
advance application.
Long-term liabilities as a percentage of total capitalization was 16.5% at
May 31, 2003. The Company's current ratio at year end was 2.15 to l.00.
Available cash, cash from operations and available credit under the line of
credit are expected to be sufficient to meet anticipated cash expenditures and
normal operating requirements for the foreseeable future.
OPERATING RESULTS
Net sales decreased by 7.4% in fiscal year 2003, increased by 1.5% in
fiscal year 2002, and decreased by 9.2% in fiscal year 2001. The decrease in
fiscal 2003 was due to a general sales weakness in the U.S. salty snacks
category, particularly during the first part of the fiscal year. The increase in
fiscal 2002 was primarily due to less promotional payments to vendors that were
subtracted from sales as required by EITF 01-9. The sales decrease for fiscal
2001 was primarily a result of discontinuing the Company-operated distribution
of Golden Flake Branded products in three fringe sales regions in Central
Florida as part of the fiscal year 2000 restructuring plan.
13
Cost of sales as a percentage of net sales amounted to 52.5% in 2003, 52.1%
in 2002, and 52.2% in 2001. The percentage increase in cost of sales for fiscal
2003 was caused by the lower sales volume and higher commodity prices and energy
cost. The cost decrease in 2002 was due primarily to lower energy costs, while
the higher cost in 2001 was attributed to higher energy prices.
Selling, general and administrative expenses were 49.4% of net sales in
2003, 45.7% in 2002, and 45.1% in 2001. The higher percentage cost for fiscal
2003 is attributed to significant increases in employee medical, worker's
compensation, general and auto liability insurance costs, and energy costs. The
more favorable cost percentages for fiscal 2002 and 2001 were primarily due to
lower selling and delivery cost brought about by the exiting of the fringe sales
regions in Central Florida as part of the fiscal 2000 restructuring plan.
The Company's effective tax rates for 2003, 2002, and 2001 were (27.9%).
39.2% and 34.3%, respectively. Note 8 to the Consolidated Financial Statements
provides additional information about the provision for income taxes.
OFF-BALANCE SHEET ARRANGEMENT
The Company entered into a five-year term product purchase agreement during
the year ending May 31, 2001 with a supplier. Under the terms of the agreement
the minimum purchase quantity and the purchase price were fixed resulting in a
minimum first year commitment of approximately $2,171,000. After the first year,
the minimum purchase quantity was fixed and the purchase unit price, was
negotiable based on the current market. The purchase product agreement as
subsequently amended is described in more detail in Note 13 of the Notes to
Consolidated Financial Statements.
MARKET RISK
The principal market risks (i.e. the risk of loss arising from adverse
changes in market rates and prices) to which the Company is exposed are interest
rates on its cash equivalents, investment securities and bank loans, and
commodity prices affecting the cost of its raw materials.
The Company's cash equivalents consist of short-term marketable securities.
Presently these are variable rate money market funds. Its bank loans also carry
variable rates. Assuming year end 2003 variable rate investment levels and bank
loan balances, a one-point change in interest rates would impact interest income
by $10,159 and interest expense by $24,229.
The Company is subject to market risk with respect to commodities because
its ability to recover increased costs through higher pricing may be limited by
the competitive environment in which it operates. The Company purchases its raw
materials on the open market, under contract through brokers and directly from
growers. Futures contracts have been used occasionally to hedge immaterial
amounts of commodity purchases, but none are presently being used.
INFLATION
Certain costs and expenses of the Company are affected by inflation, and
the Company's prices for its products over the past several years have remained
relatively flat. The Company will contend with the effect of further inflation
through efficient purchasing, improved manufacturing methods, pricing, and by
monitoring and controlling expenses.
14
ENVIRONMENTAL MATTERS
There have been no material effects of compliance with governmental
provisions regulating discharge of materials into the environment.
FORWARD-LOOKING STATEMENTS
This discussion contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Actual results
could differ materially from those forward-looking statements. Factors that may
cause actual results to differ materially include price competition, industry
consolidation, raw material costs and effectiveness of sales and marketing
activities, as described in the Company's filings with Securities and Exchange
Commission.
RECENT ISSUED ACCOUNTING PRONOUNCEMENTS
Effective June 1, 2002, the Company adopted Financial Accounting Standards
Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets", which requires that goodwill and
intangible assets with indefinite useful lives no longer be amortized, but
instead, subjected to impairment testing. Intangible assets with finite lives
will continue to be amortized over their useful lives. SFAS No. 142 requires an
initial goodwill and indefinite life intangible asset impairment assessment in
the year of adoption and annual impairment testing thereafter based on fair
value. The adoption of SFAS No.142 did not have a material impact on the
Company's financial position, results of operations or cash flows.
Effective June 1, 2002, the Company adopted SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets to be held and used, to be disposed of other than by sale and to be
disposed of by sale. The adoption of this standard did not have a material
impact on the Company's financial position, results of operations or cash flows.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Cost Associated
with Exit or Disposal Activities." SFAS No. 146 requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Costs covered by
SFAS no. 146 includes lease termination costs and certain employee severance
costs that are associated with a restructuring, discontinued operations, plant
closing or other exit or disposal activity. SFAS No. 146 is effective for exit
or disposal activities initiated after December 31, 2002. Management does not
believe that the adoption of this standard will have a material impact on the
Company's financial position, results of operations or cash flows.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure-an amendment of FASB
Statement No. 123." SFAS No. 148 amends SFAS No. 123, "Accounting for
Stock-Based Compensation" to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The
Company has adopted the disclosure requirements of SFAS No. 148 effective May
31, 2003 in its consolidated financial statements. The Company will continue to
account for stock-based compensation using the methods detailed in the
stock-based compensation accounting policy as described earlier.
15
In November, 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." Interpretation 45 requires a guarantor to
include disclosure of certain obligations and, if applicable, at the inception
of the guarantee, to recognize a liability for the fair value of other certain
obligations undertaken in issuing a guarantee. The recognition requirement is
effective for guarantees issued or modified after December 31, 2002 and did not
have material impact on the Company.
In January 2003, the FASB issued FASB Interpretation No. 46 (FIN No. 46),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51."
FIN No. 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN No. 46 is
effective for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first interim
or annual period beginning after June 15, 2003. The Company does not expect FIN
No. 46 to have a material effect on its results of operations, financial
condition or cash flows.
ITEM 7 A.- QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Included in Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations- Market Risk beginning on page 14.
ITEM 8.- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the registrant and its subsidiary
for the year ended May 31, 2003, consisting of the following, are contained
herein:
Consolidated Balance Sheets (Restated) - May 31, 2003 and 2002
Consolidated Statements of Operations (Restated) - Years ended May 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows (Restated) - Years ended May 31, 2003, 2002 and 2001
Consolidated Statements of Changes
in Stockholders'Equity (Restated) - Years ended May 31, 2003, 2002 and 2001
Notes to Consolidated Financial Statements (Restated) - Years ended May 31, 2003, 2002 and 2001
Quarterly Results of Operations (Restated) - Years ended May 31, 2003, and 2002
16
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and
Board of Directors of
Golden Enterprises, Inc.
We have audited the accompanying restated consolidated balance sheets of Golden
Enterprises, Inc. and subsidiary as of May 31, 2003 and 2002, and the related
consolidated restated statements of operations, changes in stockholders' equity
and cash flows for each of the three years in the period ended May 31, 2003. Our
audits also included the financial statement schedule listed at Item 16(a)2.
These restated consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the restated consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Golden Enterprises, Inc. and subsidiary as of May 31, 2003 and 2002, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended May 31, 2003, in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, such financial statement schedule, when considering in relation to the
basic consolidated financial statements, taken as a whole, presents fairly, in
all material respects, the information set forth therein.
Dudley, Hopton-Jones, Sims & Freeman, PLLP
Birmingham, Alabama
July 21, 2004
17
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
May 31, 2003 and 2002
ASSETS
Restated Restated
2003 2002
----------- -----------
CURRENT ASSETS
Cash and cash equivalents ............. $ 1,278,333 $ 302,478
Receivables:
Trade accounts ...................... 7,835,874 8,777,476
Other ............................... 206,480 835,225
----------- -----------
8,042,354 9,612,701
Less: Allowance for doubtful accounts 196,100 196,100
----------- -----------
7,846,254 9,416,601
Notes receivable, current ........... 42,253 45,918
----------- -----------
7,888,507 9,462,519
----------- -----------
Inventories:
Raw materials ....................... 1,496,992 1,605,640
Finished goods ...................... 2,289,145 3,604,482
----------- -----------
3,786,137 5,210,122
Prepaid expenses ...................... 2,881,121 3,664,479
Deferred income taxes ................. 652,153 321,295
----------- -----------
Total current assets ............... 16,486,251 18,960,893
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Land .................................. 3,030,974 3,086,571
Buildings ............................. 16,897,204 17,040,006
Machinery and equipment ............... 41,478,108 40,819,601
Transportation equipment .............. 15,113,558 15,286,803
----------- -----------
76,519,844 76,232,981
Less: Accumulated depreciation ...... 61,158,271 59,136,721
----------- -----------
15,361,573 17,096,260
----------- -----------
OTHER ASSETS
Notes receivable, long-term ........... 1,865,747 1,981,718
Cash surrender value of life insurance 2,762,739 2,785,336
Other ................................. 15,233 15,337
----------- -----------
Total other assets .................. 4,643,719 4,782,391
----------- -----------
TOTAL ............................... $36,491,543 $40,839,544
=========== ===========
See Accompanying Notes to Restated
Consolidated Financial Statements
18
LIABILITIES AND STOCKHOLDERS' EQUITY
Restated Restated
2003 2002
------------ ------------
CURRENT LIABILITIES
Checks outstanding in excess of bank balances ......................... $ 1,157,108 $ 621,326
Accounts payable ...................................................... 1,700,934 2,189,729
Current portion of long-term debt ..................................... 432,142 371,516
Note payable - line of credit ......................................... -- 478,894
Other accrued expenses ................................................ 4,289,448 4,228,508
Salary continuation plan .............................................. 88,595 81,805
------------ ------------
Total current liabilities ........................................... 7,668,227 7,971,778
------------ ------------
LONG-TERM LIABILITIES
Note payable - bank, non-current ...................................... 1,990,767 3,150,020
Salary continuation plan .............................................. 1,870,991 1,932,586
Deferred income taxes ................................................. 884,033 551,742
------------ ------------
Total long-term liabilities ......................................... 4,745,791 5,634,348
------------ ------------
STOCKHOLDERS' EQUITY
Common stock - $.66 2/3 par value:
Authorized 35,000,000 shares;
issued 13,828,793 shares ............................................ 9,219,195 9,219,195
Additional paid-in capital ............................................ 6,497,954 6,497,954
Retained earnings ..................................................... 18,893,553 22,049,446
Treasury shares - at cost (1,945,488) shares .......................... (10,533,177) (10,533,177)
------------ ------------
Total stockholders' equity ............................................ 24,077,525 27,233,418
------------ ------------
TOTAL .................................................................... $ 36,491,543 $ 40,839,544
------------ ------------
19
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended May 31, 2003, 2002 and 2001
Restated Restated Restated
2003 2002 2001
------------ ------------- -------------
Net sales ................................................. $ 96,604,461 $ 104,335,234 $ 102,796,741
Cost of sales ............................................. 50,747,626 54,325,919 53,631,311
------------ ------------- -------------
Gross margin .............................................. 45,856,835 50,009,315 49,165,430
Selling, general and administrative expenses .............. 47,686,174 47,653,164 46,333,145
------------ ------------- -------------
Operating (loss) income ................................... (1,829,339) 2,356,151 2,832,285
------------ ------------- -------------
Other income (expenses):
Gain on sale of assets .................................... 304,221 756,259 599,497
Interest expense .......................................... (268,489) (190,159) (85,420)
Other income .............................................. 506,296 563,383 691,027
------------ ------------- -------------
Total other income (expenses) ........................... 542,028 1,129,483 1,205,104
------------ ------------- -------------
(Loss) income before cumulative effect of a change
in accounting policy and income taxes .................. (1,287,311) 3,485,634 4,037,389
------------ ------------- -------------
Provision for income taxes ............................. (359,546) 1,366,930 1,385,003
------------ ------------- -------------
Net (loss) income before cumulative effect of a change in
accounting policy ...................................... (927,765) 2,118,704 2,652,386
Cumulative effect of a change in accounting
policy, net of taxes of $262,037 ....................... -- 413,401 --
------------ ------------- -------------
Net (loss) income ....................................... $ (927,765) $ 2,532,105 $ 2,652,386
============ ============= =============
PER SHARE OF COMMON STOCK
Net (loss) income before cumulative effect of a change
in accounting policy .................................... $ (0.08) $ 0.18 $ 0.22
Cumulative effect of a change in accounting
policy, net of taxes .................................... -- 0.03 --
------------ ------------- -------------
Basic earnings ............................................ $ (0.08) $ 0.21 $ 0.22
============ ============= =============
Diluted earnings .......................................... $ (0.08) $ 0.21 $ 0.22
============ ============= =============
See Accompanying Notes to Restated
Consolidated Statements
20
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended May 31, 2003, 2002 and 2001
Additional Total
Common Paid-in Retained Treasury Stockholders'
Stock Capital Earnings Shares Equity
---------- ------------- ------------ ------------ -------------
Balance - May 31, 2000 as originally reported ... $9,219,195 $ 624,686,435 $ 24,686,435 $ (9,877,217) $ 30,527,967
Effect of restatement on periods ending on or
prior to May 31, 2000 ....................... -- -- (1,887,230) -- (1,887,230)
---------- ------------- ------------ ------------ -------------
Balance - May 31, 2000 as restated .............. 9,219,195 6,499,554 22,799,205 (9,877,217) 28,640,737
Net income - 2001 ............................ -- -- 2,652,386 -- 2,652,386
Cash dividends paid .......................... -- -- (2,960,245) -- (2,960,245
Treasury shares purchased .................... -- -- -- (467,951) (467,951)
---------- ------------- ------------ ------------ -------------
Balance - May 31, 2001 as restated .............. 9,219,195 6,499,554 22,491,346 (10,345,168) 27,864,927
Net income - 2002 ............................ -- -- 2,532,105 -- 2,532,105
Cash dividends paid .......................... -- -- (2,974,005) -- (2,974,005)
Treasury shares purchased .................... -- -- -- (193,419) (193,419)
Stock options exercised ...................... -- (1,600) -- 5,410 3,810
---------- ------------- ------------ ------------ -------------
Balance - May 31, 2002 as restated .............. 9,219,195 6,497,954 22,049,446 (10,533,177) 27,233,418
Net loss - 2003 .............................. -- -- (927,765) -- (927,765)
Cash dividends paid .......................... -- -- (2,228,128) -- (2,228,128)
---------- ------------- ------------ ------------ -------------
Balance - May 31, 2003 as restated .............. $9,219,195 $ 6,497,954 $ 18,893,553 $(10,533,177) $ 24,077,525
========== ============= ============ ============ =============
See Accompanying Notes to Restated
Consolidated Financial Statements
21
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended May 31, 2003, 2002 and 2001
Restated Restated Restated
2003 2002 2001
----------- ----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income ......................................................... $ (927,765) $2,532,105 $2,652,386
Adjustment to reconcile net (loss) income to net cash provided
by operating activities:
Cumulative effect of a change in accounting policy ..................... -- (413,401) --
Depreciation ........................................................... 2,490,329 2,593,621 2,435,262
Deferred income taxes .................................................. 1,431 36,641 436,613
Gain on sale of property and equipment ................................. (304,221) (756,259) (599,497)
Decrease (increase) in receivables - net ................................. 1,570,347 (408,060) (486,252)
Decrease (increase) in inventories ....................................... 1,423,985 (470,362) (697,415)
Decrease (increase) in prepaid expenses ................................. 783,358 (1,667,703) (741,112)
Decrease in cash surrender value of insurance ............................ 22,597 50,614 30,591
(Decrease) increase in accounts payable .................................. (488,795) 265,301 (1,473,900)
Increase (decrease) in accrued expenses .................................. 61,046 90,449 (1,590,559)
(Decrease) increase in salary continuation plan .......................... (54,805) 86,568 83,542
----------- ----------- ----------
Net cash provided by operating activities .............................. 4,577,507 1,939,514 49,659
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment ................................. (851,111) (5,236,601) (2,443,988)
Proceeds from sale of property, plant and equipment ....................... 399,690 1,301,160 253,972
Cash received from disposal of Nashville plant and equipment .............. -- -- 1,710,000
Collection of notes receivable ............................................ 119,636 42,399 19,965
Investment securities available-for-sale:
Purchases ................................................................ -- -- (357,332)
Proceeds from disposals .................................................. -- 625,326 243,477
----------- ----------- ----------
Net cash used in investing activities .................................. (331,785) (3,267,716) (573,906)
----------- ----------- ----------
See Accompanying Notes to Restated
Consolidated Financial Statements
22
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years Ended May 31, 2003, 2002 and 2001
Restated Restated Restated
2003 2002 2001
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Debt proceeds .................................................... 11,543,824 7,806,676 860,100
Debt repayments .................................................. (13,121,345) (4,666,346) --
Increase (decrease) in checks outstanding in excess of bank
balances ...................................................... 535,782 (931,135) 931,996
Purchases of treasury shares ..................................... -- (193,419) (467,951)
Proceeds from exercise of stock options .......................... -- 3,810 --
Cash dividends paid .............................................. (2,228,128) (2,974,005) (2,960,245)
------------ ----------- -----------
Net cash used in financing activities ......................... (3,269,867) (954,419) (1,636,100)
------------ ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ................................................. 975,855 (2,282,621) (2,160,347)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR ................................................ 302,478 2,585,099 4,745,446
------------ ----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR ...................................................... $ 1,278,333 $ 302,478 $ 2,585,099
============ =========== ===========
SUPPLEMENTAL INFORMATION
Cash paid during the year for:
Income taxes .................................................... $ (626,349) $ 2,343,597 $ 1,898,808
Interest ........................................................ 268,489 190,159 85,420
Noncash items:
Equipment traded in ............................................. 22,123 -- --
Notes receivable issued in connection with sale of property ..... -- -- 2,090,000
23
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2003, 2002 and 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Golden Enterprises, Inc. and subsidiary
("Company") conform to accounting principles generally accepted in the United
States of America and to general principles within the snack foods industry. The
following is a description of the more significant accounting policies:
NATURE OF THE BUSINESS
The Company manufactures and distributes a full line of snack items that are
sold through its own sales organization and independent distributors to
commercial establishments that sell food products primarily in the Southeastern
United States.
CONSOLIDATION
The restated consolidated financial statements include the accounts of Golden
Enterprises, Inc. and its wholly-owned subsidiary, Golden Flake Snack Foods,
Inc., (the "Company"). All significant intercompany transactions and balances
have been eliminated.
REVENUE RECOGNITION
The Company recognizes sales and related costs upon delivery or shipment of
products to its customers. Sales are reduced by returns and allowances to
customers.
REVENUE CLASSIFICATION CHANGES
In November 2001, the Emerging Issues Task Force reached a consensus on Issue
No. 01-09 Accounting for Consideration Given by a Vendor to a Customer
(Including a Reseller of the Vendor's Products) effective for annual or interim
periods beginning after December 15, 2001. The issue addresses the recognition,
measurement and income statement classification for certain sales incentives.
The Company implemented this new accounting policy in the fourth quarter of
fiscal 2002. The effect of this accounting change is to adopt this policy as of
the beginning of the fiscal 2002 (June 1, 2001). Certain of these expenses,
including slotting fees, previously classified as selling, general, and
administrative expenses, are now characterized as offsets to net sales.
Reclassifications have been made to prior period financial statements to conform
to current year presentation. Total vendor sales incentives now characterized as
reductions of net sales that previously would have been classified as selling,
general and administrative expenses were approximately $12.8 million, $11.7
million and $12.9 million for the years ended 2003, 2002 and 2001, respectively.
There was no resulting impact on net operating results from adopting EITF 01-09.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is computed on the
first-in, first-out method.
24
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. For financial reporting
purposes, depreciation and amortization have been provided principally on the
straight-line method over the estimated useful lives of the respective assets.
Accelerated methods are used for tax purposes.
Expenditures for maintenance and repairs are charged to operations as incurred;
expenditures for renewals and betterments are capitalized and written off by
depreciation and amortization charges. Property retired or sold is removed from
the asset and related accumulated depreciation accounts and any profit or loss
resulting therefrom is reflected in the statements of operations.
SELF-INSURANCE
The Company is self-insured for certain losses relating to automobile liability,
general liability, workers' compensation, property losses and medical claims.
The Company has stop loss coverage to limit the exposure arising from these
claims. Self-insurance claims filed and claims incurred but not reported are
accrued based upon management's estimates of the aggregate liability for
uninsured claims incurred. Workers' compensation, automobile and general
liability costs are covered by standby letters of credit with the Company's
claims administrators. Claims in excess of the self insured levels are fully
insured.
ADVERTISING
The Company expenses advertising costs as incurred. These costs are included in
selling, general and administrative expenses in the restated consolidated
Statement of Operations. Advertising expense amounted to $5,031,409, $4,371,719
and $5,739,488 for the fiscal years 2003, 2002 and 2001, respectively.
INCOME TAXES
Deferred income taxes are provided using the liability method to measure tax
consequences resulting from differences between financial accounting standards
and applicable income tax laws. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not hat
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
SEGMENT INFORMATION
The Company does not identify separate operating segments for management
reporting purposes. The results of operations are the basis on which management
evaluates operations and makes business decisions. The Company's sales are
generated primarily within the Southeastern United States.
STOCK OPTIONS
The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees,"
and related interpretations in accounting for all stock option plans. No
stock-based compensation cost has been recognized in operations for stock
options granted because the option exercise price was equal to or more than the
market price of the underlying common stock on the date of grant.
SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No.
148, "Accounting for Stock-Based Compensation - Transition and Disclosure,"
requires the Company to provide pro forma information regarding net income
(loss) as if the compensation cost for the Company's stock option plans had been
determined in accordance with the fair value based method prescribed in SFAS No.
123. To provide the required pro forma information, the Company estimates the
fair value of each stock option at the grant date by using the Black-Scholes
option-pricing model.
25
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Years Ended May 31,
-----------------------------------------------------
Restated Restated Restated
2003 2002 2001
------------- ------------- -------------
Net (loss) income as reported ......................................... $ (927,765) $ 2,532,105 $ 2,652,386
Deduct: total stock-based employee compensation expense
determined under fair value based method for all awards,
net of related tax effects ........................................... (12,660) (52,289) --
------------- ------------- -------------
Pro forma net (loss) income ........................................... $ (940,425) 2,479,816 2,652,386
============= ============= =============
(Loss) earnings per share:
Basic - as reported ................................................... $ (.08) $ .21 $ .22
============= ============= =============
Basic - Pro forma ..................................................... $ (.08) $ 21 $ .22
============= ============= =============
Diluted - as reported ................................................. $ (.08) $ .21 $ .22
============= ============= =============
Diluted - Pro forma ................................................... $ (.08) $ .21 $ .22
============= ============= =============
SHIPPING AND HANDLING COSTS
Shipping and handling costs, which include salaries and vehicle operations
expenses relating to the delivery of products to customers by the Company are
classified as selling, general and administrative (SG&A) expenses. Shipping and
handling costs classified as SG&A amounted to $2.3 million, $2.5 million and
$2.4 million for the fiscal years 2003, 2002 and 2001, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
RECENT ISSUED ACCOUNTING PRONOUNCEMENTS
Effective June 1, 2002, the Company adopted Financial Accounting Standards Board
("FASB") Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill
and Other Intangible Assets", which requires that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead, subjected to
impairment testing. Intangible assets with finite lives will continue to be
amortized over their useful lives. SFAS No. 142 requires an initial goodwill and
indefinite life intangible asset impairment assessment in the year of adoption
and annual impairment testing thereafter based on fair value. The adoption of
SFAS No. 142 did not have a material impact on the Company's financial position,
results of operations or cash flows.
26
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Effective June 1, 2002, the Company adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets to
be held and used, to be disposed of other than by sale and to be disposed of by
sale. The adoption of this standard did not have a material impact on the
Company's financial position, results of operations or cash flows.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Cost Associated with
Exit or Disposal Activities." SFAS No 146 requires companies to recognize costs
associated with exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. Costs covered by SFAS
No. 146 includes lease termination costs and certain employee severance costs
that are associated with a restructuring, discontinued operations, plant closing
or other exit or disposal activity. SFAS No. 146 is effective for exit or
disposal activities initiated after December 31, 2002. Management does not
believe that the adoption of this standard will have a material impact on the
Company's financial position, results of operations or cash flows.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based
Compensation" to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The Company
has adopted the disclosure requirements of SFAS No. 148 effective May 31, 2003
in its restated consolidated financial statements. The Company will continue to
account for stock-based compensation using the methods detailed in the
stock-based compensation accounting policy as described earlier.
In November, 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." Interpretation 45 requires a guarantor to
include disclosure of certain obligations and, if applicable, at the inception
of the guarantee, to recognize a liability for the fair value of other certain
obligations undertaken in issuing a guarantee. The recognition requirement is
effective for guarantees issued or modified after December 31, 2002 and did not
have a material impact on the Company.
In January 2003, the FASB issued FASB Interpretation No. 46 (FIN No. 46),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51."
FIN No. 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN No. 46 is
effective for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first interim
or annual period beginning after June 15, 2003. The Company does not expect FIN
No. 46 to have a material effect on its results of operations, financial
condition or cash flows.
27
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 2-RESTATEMENT
These financial statements have been restated to reflect adjustments to the
Company's financial information previously reported on Form 10-K for the years
ended May 31, 2003, 2002 and 2001. The Company's 2003 quarterly information and
comparative 2002 information has also been restated to reflect adjustments to
the Company's previously reported financial information on Form 10-Q. The
restatement affected periods prior to 2001. The impact of the restatement on
such prior periods has been reflected as an adjustment to retained earnings as
of June 1, 2000. In addition, the restatement impacts the first, second, and
third quarters of 2003. The restated amounts for these quarters are presented in
Note 16, Quarterly Results of Operations (Unaudited). Each of the restatement
adjustments is an "error" within the meaning of APB Opinion 20, Accounting
Changes.
The following table presents the impact of the restatement adjustments on net
earnings for the years ended May 31, 2003, 2002 and 2001 and retained earnings
as of June 1, 2000:
Retained
Earnings
Year Ended May 31, June 1,
--------------------------------------------------- ----------------
Net (loss) income as originally reported ........... $(1,412,145) $ 3,008,948 $ 2,700,155 $ 24,686,435
Adjustments (pretax):
Self-insurance liability .................... 669,136 (523,974) (108,716) (1,336,817)
Compensated absences ........................ 47,826 8,398 33,287 (1,643,177)
Other items ................................. 237,374 (237,374) -- --
----------- ----------- -------------- ----------------
Total adjustments (pretax) ......................... 954,336 (752,950) (75,429) (2,979,994)
Tax effect of restatement adjustments ...... (469,956) 276,107 27,660 1,092,764
----------- ----------- -------------- ----------------
Total net adjustments .............................. 484,380 (476,843) (47,769) (1,887,230)
----------- ----------- -------------- ----------------
Net (loss) income as restated ...................... $ (927,765) $ 2,532,105 $ 2,652,386 $ 22,799,205
=========== =========== ============= ================
Per share of Common Stock:
Net loss- Basic as originally reported ............. $ (0.12) $ 0.25 $ 0.22
Effect of net adjustments .......................... 0.04 (0.04) -0-
----------- ----------- --------------
Net loss- Basic as restated ........................ $ (0.08) $ 0.21 $ 0.22
=========== =========== =============
Net loss- Diluted as originally reported ........... $ (0.12) $ 0.25 $ 0.22
Effect of net adjustments .......................... 0.04 (0.04) -0-
----------- ----------- -------------
Net loss- Diluted as restated ...................... $ (0.08) $ 0.21 $ 0.22
=========== =========== =============
28
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 2-RESTATEMENT-CONTINUED
SELF-INSURANCE LIABILITY: The Company determined that there had been an error in
its accounting for self-insurance related liabilities. The adjustments required
included recognition of previously unrecorded liabilities and reductions in
amounts previously recognized as prepaid amounts to an employee benefit trust
which were incorrect.
COMPENSATED ABSENCES: The Company determined that it had not recorded
liabilities for earned vacation not yet taken as required by GAAP.
OTHER ITEMS: This category includes adjustments previously identified but deemed
to be immaterial. Adjustments in this category change the timing of the items
that were previously recognized.
INCOME TAX ADJUSTMENTS: As a result of the restatement adjustments, the Company
recognized an additional federal and state deferred valuation allowance of
$120,000 in 2003. The remaining amounts pertain to the tax effects of the error
correction themselves.
The following table sets forth the effects of the restatement adjustments
discussed above on the Consolidated Statement of Operations for each of the
years ended May 31 2003, 2002 and 2001, respectively.
Year Ended May 31, 2003 Year Ended May 31, 2002 Year Ended May 31, 2001
----------------------------- -------------------------- ----------------------------
As Originally As Originally As Originally
Reported As Restated Reported As Restated Reported As Restated
-------------- -------------- ------------- ------------ ------------ ------------
Net sales .................................. $ 96,367,088 $104,572,608 $104,335,234 $102,796,741 $102,796,741 $102,796,741
Cost of goods sold ......................... 51,191,313 50,747,626 54,257,812 54,325,919 53,636,803 53,631,311
Selling, general & administrative expenses . 47,959,449 47,686,174 47,205,695 47,653,164 46,252,224 46,333,145
Other income (expenses) .................... 542,028 542,028 1,129,483 1,129,483 1,205,104 1,205,104
------------ ------------ ------------ ------------ ------------ ------------
(Loss) income before cumulative effect of a
change in accounting policy and income taxes (2,241,646) (1,287,311) 4,238,584 3,485,634 4,112,818 4,037,389
Provision for income taxes ................. (829,501) (359,546) 1,643,037 1,366,930 1,412,663 1,385,003
------------ ------------ ------------ ------------ ------------ ------------
Net (loss) income before cumulative
effect of a change in accounting policy .... (1,412,145) (927,765) 2,595,547 2,118,704 2,700,155 2,652,386
Cumulative effect of a change in accounting
policy, net of taxes of $262,037 ........... -- -- 413,401 413,401 -- --
------------ ------------ ------------ ------------ ------------ ------------
Net (loss) income .......................... $ (1,412,145) $ (927,765) 3,008,948 $ 2,532,105 $ 2,700,155 $ 2,652,386
============ ============== ============ ============ ============ ============
Net Loss per share- Basic .................. $ (0.12) $ (0.08) $ 0.25 $ 0.21 $ 0.23 $ 0.22
Average Shares Outstanding ................. 11,883,305 11,883,305 11,898,097 11,898,097 11,965,671 11,965,671
Net Loss per share- Diluted ................ $ (0.12) $ (0.08) $ 0.25 $ 0.21 $ 0.23 $ 0.22
Average Shares Outstanding ................. 11,883,305 11,883,305 11,900,893 11,900,893 11,967,823 11,967,823
29
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 2 - RESTATEMENT - CONTINUED
The following table sets forth the effects of the restatement adjustments
discussed above on the Consolidated Balance Sheet at May 31, 2003 and 2002.
May 31, 2003 May 31, 2002
--------------------------- ---------------------------
As Originally As Originally
Reported As Restated Reported As Restated
--------------------------- ---------------------------
Assets
Current Assets
Cash and cash equivalents $ 1,278,333 $ 1,278,333 $ 302,478 $ 302,478
Receivables:
Trade Accounts 7,835,874 7,835,874 9,014,850 8,777,476
Other 299,142 206,480 931,911 835,225
Allowance for doubtful accounts (196,100) (196,100) (196,100) (196,100)
Notes receivable, current 42,253 42,253 45,918 45,918
Inventories 3,786,137 3,786,137 5,210,122 5,210,122
Prepaid expenses 3,645,298 2,881,121 4,031,037 3,664,479
Deferred income taxes -- 652,153 -- 321,295
------------ ------------ ------------ ------------
Total current assets 16,690,937 16,486,251 19,340,216 18,960,893
------------ ------------ ------------ ------------
Property, Plant and Equipment 15,361,573 15,361,573 17,096,260 17,096,260
Notes receivable, long-term 1,865,747 1,865,747 1,981,718 1,981,718
Cash surrendervalue of life insurance 2,762,739 2,762,739 2,785,336 2,785,336
Other 15,233 15,233 15,337 15,337
------------ ------------ ------------ ------------
Total Assets $ 36,696,229 $ 36,491,543 $ 41,218,867 $ 40,839,544
============ ============ ============ ============
Liabilities and Stockholders' Equity
Current liabilities
Checks outstanding in excess of bank balances $ 1,157,108 $ 1,157,108 $ 621,326 $ 621,326
Accounts payable 1,700,934 1,700,934 2,189,729 2,189,729
Current portion of long-term debt 432,142 432,142 371,516 371,516
Note payable - line of credit -- -- 478,894 478,894
Other accrued expenses 2,381,975 4,289,448 1,588,500 4,228,508
Deferred income taxes 304,698 -- 607,489 --
Salary continuation plan 88,595 88,595 81,805 81,805
------------ ------------ ------------ ------------
Total current liabilities 6,065,452 7,668,227 5,939,259 7,971,778
------------ ------------ ------------ ------------
Note payable - bank, non-current 1,990,767 1,990,767 3,150,020 3,150,020
Salary continuation plan 1,870,991 1,870,991 1,932,586 1,932,586
Deferred income taxes 764,032 884,033 551,742 551,742
------------ ------------ ------------ ------------
Total Liabilities 10,691,242 12,414,018 11,573,607 13,606,126
Stockholders' Equity
Common stock - $.66 2/3 par value:
Authorized 35,000,000 shares;
issued 13,828,793 shares 9,219,195 9,219,195 9,219,195 9,219,195
Additional paid-in capital 6,497,954 6,497,954 6,497,954 6,497,954
Retained earnings 20,821,015 18,893,553 24,461,288 22,049,446
Treasury shares - at cost (1,945,488 shares) (10,533,177) (10,533,177)
------------ ------------ ------------ ------------
Total stockholders' equity 26,004,987 24,077,525 29,645,260 27,233,418
------------ ------------ ------------ ------------
Total liabilities and stockholders' equity $ 36,696,229 $ 36,491,543 $ 41,218,867 $ 40,839,544
============ ============ ============ ============
30
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 3 - CHANGE IN ACCOUNTING POLICY
The Company changed its accounting policy in the fourth quarter of fiscal 2002
with regard to slotting fees. The effect of this accounting change was to adopt
this policy as of the beginning of fiscal 2002 (June 1, 2001). Previously,
slotting fees were expensed as incurred. The Company changed this accounting
policy to capitalize and amortize such costs over the expected benefit period,
which is generally one year. This change in accounting policy was made to more
closely match the cost of the shelf space obtained with the slotting fees with
the revenues produced by the shelf space. The cumulative effect of this change
in accounting policy resulted in a noncash cumulative adjustment of $413,401
($0.03 per share), net of taxes. The accounting change also increased net income
before the cumulative effect in 2002 by $197,141 ($0.02 per share). Quarterly
results for 2002 reflecting this change in accounting are included in Note 16,
Quarterly Results of Operations.
NOTE 4 - NOTES RECEIVABLE
Notes receivable as of May 31, 2003 and 2002 consist of the following:
2003 2002
---------- ----------
8% note, originally due in 120 monthly installments of $1,092
through November 1, 2010, collateralized by
equipment and personal guarantee; paid off .................................. $ -- $ 80,625
8% note, due in 120 monthly installments of $3,640
through November 1, 2010, collateralized by property ....................... 245,743 268,749
8% note, due in 360 monthly installments of $12,474
through November 1, 2030, collateriazed by property ......................... 1,662,257 1,678,262
---------- ----------
1,908,000 2,027,636
Less current portion ................................................... 42,253 45,918
$1,865,747 $1,981,718
========== ==========
Maturities at May 31,
2005 ..... $ 45,760
2006 ..... 49,558
2007 ..... 53,672
2008 ..... 58,126
2009 ..... 62,951
Thereafter ..... 1,595,680
31
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 5 - PREPAID EXPENSES
At May 31, prepaid expenses consist of the following:
Restated Restated
2003 2002
---------- ----------
Prepaid slotting fees ................................................ $ 333,799 $1,001,087
Other prepaid expenses ............................................... 2,547,322 2,663,392
---------- ----------
$2,881,121 $3,664,479
========== ==========
NOTE 6 - OTHER ACCRUED EXPENSES
At May 31, other accrued expenses consist of the following:
Restated Restated
2003 2002
---------- ----------
Accrued payroll ...................................................... $ 448,251 $ 490,000
Self insurance liability ............................................. 1,832,591 1,748,656
Accrued vacation ..................................................... 1,461,005 1,504,805
Other accrued expenses ............................................... 547,601 485,047
---------- ----------
$4,289,448 $4,228,508
========== ==========
NOTE 7 - LINE OF CREDIT
The Company has a line of credit agreement with a local bank which permits
borrowing up to $1 million. The line of credit is subject to the Company's
continued credit worthiness and compliance with the terms and conditions of the
advance application.
NOTE 8 - LONG-TERM LIABILITIES
Long-term debt consist of the following: 2003 2002
---------- ----------
Note payable - bank - payable in equal monthly installments of
$41,688 including interest at the LIBOR index rate plus 1.75%
(3.06% at May 31, 2003) through April 3, 2011,
secured by equipment .............................................. $2,422,909 $3,521,536
Less: current portion ........................................... 432,142 371,516
---------- ----------
$1,990,767 $3,150,020
========== ==========
32
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 8 - LONG-TERM LIABILITIES - (CONTINUED)
Maturities at May 31,
2005......................... $ 445,553
2006......................... 459,380
2007......................... 473,636
2008......................... 488,334
2009......................... 123,864
Other long-term obligations at May 31, 2003 and 2002, consist of the following:
2003 2002
------------- ---------------
Salary continuation plan.......... $ 1,959,586 $ 2,014,391
Less current portion.............. (88,595) (81,805)
------------- ---------------
$ 1,870,991 $ 1,932,586
============= ===============
The Company is accruing the present values of the estimated future retirement
payments over the period from the date of the agreements to the retirement
dates, for certain key executives. The Company recognized compensation expense
of approximately $27,000, $127,341 and $121,000 for fiscal 2003, 2002 and 2001,
respectively.
NOTE 9 - INCOME TAXES
The provision for income taxes consists of the following:
Restated Restated Restated
2003 2002 2001
------------ ----------- -----------
Federal ............. $ (320,635) $ 1,416,947 $ 843,457
State ............... (40,342) 175,379 104,933
----------- ----------- -----------
(360,977) 1,592,326 948,390
Federal ............. 1,272 (200,560) 388,511
State ............... 159 (24,836) 48,102
----------- ----------- -----------
1,431 (225,396) 436,613
----------- ----------- -----------
Total................ $ (359,546) $ 1,366,930 $ 1,385,003
=========== =========== ===========
33
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 9 - INCOME TAXES - CONTINUED
The effective tax rate for continuing operations differs from the expected tax
using statutory rates. A reconciliation between the expected tax and actual tax
follows:
Restated Restated Restated
2003 2002 2001
----------- ----------- -----------
Tax on income at statutory rates ....................... $ (437,685) $ 1,185,116 $ 1,372,712
(Decrease) increase resulting from:
State income taxes, less Federal income tax effect .. (26,894) 149,000 70,000
Tax exempt interest ................................. (1,356) (9,303) (59,317)
Other - net ......................................... (13,611) 42,117 1,608
Change in valuation allowance ....................... 120,000 -- --
----------- ----------- -----------
Total .............................................. $ (359,546) $ 1,366,930 $ 1,385,003
=========== =========== ===========
The tax effects of temporary differences that result in deferred tax assets
and liabilities are as follows:
Restated Restated
2003 2002
----------- -----------
Deferred tax assets
Salary continuation plan ............................ $ 718,580 $ 723,500
Accrued vacation .................................... 535,751 551,812
Contribution carryforward ........................... 121,491 --
Inventory capitalization ............................ 58,922 --
Allowance for doubtful accounts ..................... 71,910 66,674
Other accrued expenses .............................. 107,974 93,309
----------- -----------
Gross deferred tax assets before valuation allowance 1,614,628 1,435,295
Less valuation allowance ........................... (120,000) --
----------- -----------
1,494,628 1,435,295
----------- -----------
Deferred tax liabilities
Property and equipment .............................. 1,604,103 1,275,242
Prepaid expenses .................................... 122,405 390,500
----------- -----------
Total deferred tax liabilities ......................... 1,726,508 1,665,742
----------- -----------
Net deferred tax liability ......................... $ (231,880) $ (230,447)
=========== ===========
NOTE 10 - EMPLOYEE BENEFIT PLANS
The Company has trusteed "Qualified Profit-Sharing Plans" that were amended and
restated effective June 1, 1996 to add a 401(k) salary reduction provision.
Under this provision, employees can contribute up to fifteen percent of their
compensation to the plan on a pretax basis subject to regulatory limits; and the
Company, at its discretion, can match up to 4 percent of the participants'
compensation. The annual contributions to the plans are determined by the Board
of Directors. Total plan expenses for the years ended May 31, 2003, 2002 and
2001 were $231,332, $177,405, and $181,055, respectively.
34
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 10 - EMPLOYEE BENEFIT PLANS - CONTINUED
The Company has an Employee Stock Ownership Plan that covers all full-time
employees. The annual contributions to the plan are amounts determined by the
Board of Directors of the Company. Annual contributions are made in cash or
common stock of the Company. The Employee Stock Ownership Plan expenses for the
years ended May 31, 2003, 2002 and 2001 were $-0-. Each participant's account is
credited with an allocation of shares acquired with the Company's annual
contributions, dividends received on ESOP shares and forfeitures of terminated
participants' nonvested accounts.
The Company has a salary continuation plan with certain of its key officers
whereby monthly benefits will be paid for a period of fifteen years following
retirement. The Company is accruing the present value of such retirement
benefits until the key officers reach normal retirement age at which time the
principal portion of the retirement benefits paid are applied to the liability
previously accrued. The change in the liability for the Salary Continuation Plan
is as follows:
2003 2002
----------- ------------
Accrued salary continuation plan - beginning of year $ 2,014,391 $ 1,927,823
Benefits accrued ................................... 27,000 127,341
Benefits paid ...................................... (81,805) (40,773)
----------- -----------
Accrued salary continuation plan - end of year ..... $ 1,959,586 $ 2,014,391
=========== ===========
NOTE 11 - LONG-TERM INCENTIVE PLANS
The Company has a long-term incentive plan currently in effect under which
future stock option grants may be issued. This Plan (the 1996 Plan) is
administered by the Stock Option Committee of the Board of Directors, which has
sole discretion, subject to the terms of the Plan, to determine those employees,
including executive officers, eligible to receive awards and the amount and type
of such awards. The Stock Option Committee also has the authority to interpret
the Plan, formulate the terms and conditions of award agreements and make all
other determinations required in the administration thereof. All options
outstanding at the end of the 2003, 2002, and 2001 are exercisable.
The Company had a stock option plan (the 1988 Plan) that expired July 6, 2002.
There were no stock options or stock appreciation rights outstanding under this
Plan at July 6, 2002, May 31, 2002 and 2001.
The 1996 Plan provides for the granting of Incentive Stock Options as defined
under the Internal Revenue Code. Under the Plan, grants may be made to selected
officers and employees, of incentive stock option with a term not exceeding ten
years from the issue date and at a price not less than the fair market value of
the Company's stock at the date of grant.
35
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 11 - LONG-TERM INCENTIVE PLANS - CONTINUED
Five hundred thousand shares of the Company's stock have been reserved for
issuance under this Plan. The following is a summary of transactions:
Shares Under Option 2003 2002 2001
-------------------- ------------------------ ------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- ---------- ----------- ---------- ----------- ----------
---------
Outstanding - beginning of year 369,000 $ 3.78 40,000 $ 3.50 340,000 $ 6.92
Granted ........................ -- -- 330,000 3.81 -- --
Exercised ...................... -- -- (1,000) 3.81 -- --
Forfeited ...................... -- -- -- -- -- --
Cancelled ...................... -- -- -- -- (300,000) 7.38
----------
Outstanding - end of year 369,000 $ 3.78 369,000 $ 3.78 40,000 $ 3.50
=========== ========= =========== ========== =========== ==========
Pro forma information regarding net income and earnings per share is presented
as if the Company had accounted for its employees stock options under the fair
value method. The per share weighted average fair value of the stock options
granted during fiscal 2002 was $.25. The fair value of these options was
estimated at the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions: risk-free interest rate 5.05
percent; dividend yield 6.56 percent; expected option life of 5 years; and
expected volatility of 15 percent. No options were granted during 2003 or 2001.
The Black-Scholes options pricing model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect an option's fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of it employee stock options.
36
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 12 - NET INCOME PER SHARE
Basic earnings per common share are computed by dividing earnings available to
stockholders by the weighted average number of common shares outstanding during
the period. Diluted earnings per share reflects per share amounts that would
have resulted if dilutive potential common stock equivalents had been converted
to common stock, as prescribed by Statement of Financial Accounting Standards
No. 128, "Earnings per Share". Options to purchase 369,000 and 329,000 shares of
common stock at May 31, 2003, and 2002, respectively, were not included in the
computation of diluted earnings per share because the options' exercise price
were greater than the average market price of the common shares and, therefore,
the effect would be antidulitive. No such antidulitive options were outstanding
at May 31, 2001. The following reconciles the information used to compute basic
and diluted earnings per share:
Average Common Stock Shares
----------------------------------
2003 2002 2001
Basic weighted average shares outstanding
11,883,305 11,898,097 11,965,671
Effect of options ....................... -- 2,796 2,152
---------- ---------- ----------
Diluted shares .......................... 11,883,305 11,900,893 11,967,823
========== ========== ==========
NOTE 13 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments requires disclosure of fair value information
about financial instruments, whether or not recognized on the face of the
balance sheet, for which it is practical to estimate that value. SFAS 107
defines fair value as the quoted market prices for those instruments that are
actively traded in financial markets. In cases where quoted market prices are
not available, fair values are estimated using present value or other valuation
techniques. The fair value estimates are made at a specific point in time, based
on available market information and judgments about the financial instrument,
such as estimates of timing and amount of expected future cash flows. Such
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's entire holdings of a particular financial
instrument, nor do they consider the tax impact of the realization of unrealized
gains unrealized gains or losses. In many cases, the fair value estimates cannot
be substantiated by comparison to independent markets, nor can the disclosed
value be realized in immediate settlement of the instrument.
The carrying amounts for cash and cash equivalents approximate fair value
because of the short maturity, generally less than three months, of these
instruments.
The fair value of notes receivable is estimated by using a discount rate that
approximates the current rate for comparable notes. At May 31, 2003 and 2002 the
aggregate fair value was approximately $2,507,357 and $2,208,839 compared to a
carrying amount of $1,908,000 and $2,027,636, respectively.
37
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 13 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS -CONTINUED
The interest rate on the Company's bank debt is reset monthly to reflect the 30
day LIBOR rate. Consequently, the carrying value of the bank debt approximates
fair value.
The carrying value of the Company's salary continuation plan and accrued
liability approximates fair value because present value is used in accruing this
liability.
The Company does not hold or issue financial instruments for trading purposes
and has no involvement with forward currency exchange contracts.
NOTE 14 - COMMITMENTS AND CONTINGENCIES
Rental expense was $498,031 in 2003, $547,742 in 2002, and $410,189 in 2001. At
May 31, 2003, the Company was obligated under certain operating leases for
buildings, office space and equipment. The following amounts represent future
payment commitments under these leases:
May 31, Office Space Equipment Total
------- ------------ --------- -----
2004 ................................... $ 24,000 $187,000 $211,000
2005 ................................... -- -- --
The Company leases equipment for approximately $16,000 per month from a company
which is principally owned by a major shareholder of Golden Enterprises, Inc.
The Company leases its airplane to a major shareholder of the Company for
approximately $20,000 per month. The lease provides for his personal use of the
airplane for up to 100 flight hours per year and is for a term of one year with
automatic renewal at the option of either party.
The Company had letters of credit in the amount of $1,790,000 outstanding at May
31, 2003 to support the Company's commercial self-insurance program. The Company
pays a commitment fee of 0.375% to maintain the letters of credit.
The Company entered into a five-year term product purchase commitment during the
year ending May 31, 2001 with a supplier. Under the terms of the agreement the
minimum purchase quantity and the unit purchase price were fixed resulting in a
minimum first year commitment of approximately $2,171,000. After the first year,
the minimum purchase quantity was fixed and the purchase unit price was
negotiable, based on current market. Subsequently, in September 2002, the
product purchase agreement was amended to fix the purchase unit price and
establish specific annual quantities. As of May 31, 2003 the Company's
outstanding purchase commitments were as follows:
Years ending
May 31, Amount
------------------ ---------------
2004 ..................................... $ 1,588,000
2005 ..................................... 1,491,000
2006 ..................................... 605,000
38
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 15 -CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of cash equivalents and trade receivables.
The Company maintains deposit relationships with high credit quality financial
institutions. The Company's trade receivables result primarily from its snack
food operations and reflect a broad customer base, primarily large grocery store
chains located in the Southeastern United States. The Company routinely assesses
the financial strength of its customers. As a consequence, concentrations of
credit risk are limited.
The Company's notes receivable require collateral and buyer investment and
managment believes they are well secured.
NOTE 16 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations of
the years ended May 31, 2003 and 2002.
Restated
Restated Per Share
Restated Net (Loss) Net (Loss)
Net Sales Income Income
------------ ----------- --------
Quarter
2003
First ....................................................... $ 24,840,321 $ 222,230 $ 0.01
Second ...................................................... 23,491,688 (385,437) (0.03)
Third ....................................................... 24,021,750 (483,635) (0.04)
Fourth ...................................................... 24,250,702 (280,923) (0.02)
------------ ----------- --------
For the year ................................................ $ 96,604,461 (927,765) $(0.08)
============ =========== ========
2002
First ....................................................... $ 25,819,825 $ 955,486 $ 0.08
Second ...................................................... 24,991,892 441,669 0.04
Third ....................................................... 26,959,889 999,515 0.08
Fourth ...................................................... 26,563,628 135,435 0.01
------------ ----------- ------
For the year ............................................. $104,335,234 $2,532,105 $ 0.21
============ =========== ======
Revenues for the quarterly information have been adjusted from the amounts
previously reported in the Company's 2002 10-Q's. The revised amounts reflect
the adoption of EITF 01-9, which requires reclassification of certain expenses.
The reclassification involves removing certain expenses from selling, general
and administrative expenses and including them as a direct reduction of
revenues. The adoption of EITF 01-9 does not affect net income. Quarterly net
income amounts for 2002 have been adjusted from amounts reported in the
Company's 10-Q's to reflect the change in accounting discussed in Note 3.
39
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
May 31, 2003, 2002 and 2001
NOTE 17 - SUPPLEMENTARY STATEMENT OF INCOME INFORMATION
The following tabulation gives certain supplementary statement of income
information for continuing operations for the years ended May 31, 2003, 2002 and
2001:
2003 2002 2001
-------------- ------------- ------------
Maintenance and repairs $ 5,625,851 $ 5,290,498 $ 5,375,639
Depreciation ................. 2,490,329 2,593,621 2,435,262
Payroll taxes ................ 2,337,330 2,473,871 2,388,828
Advertising costs ............ 5,031,409 4,371,719 5,739,488
Amounts for depreciation, other taxes, rents and research and development costs
are not presented because each of such amounts is less than 1% of total
revenues.
40
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
SUPPLEMENTAL FINANCIAL INFORMATION
SELECTED QUARTERLY FINANCIAL DATA FOR THE
FISCAL YEARS ENDED MAY 31, 2003 AND 2002 (UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
First Second Third Fourth
Quarter Quarter Quarter Quarter
RESTATED RESTATED RESTATED RESTATED
-------- -------- -------- --------
2003
Total revenues $ 24,840 $ 23,492 $ 24,022 $ 24,251
========= =========== =========== ===========
Income before income taxes $ 346 $ (624) $ (779) $ (230)
========= =========== =========== ===========
Net income $ 222 $ (385) $ (484) $ (281)
========= =========== =========== ===========
Net income per share $ .01 $ (0.03) $ (0.04) $ (0.02)
========= =========== =========== ===========
Cash dividends per share $ .0625 $ .0625 $ .0313 $ .0313
========= =========== =========== ==========
2002
Total revenues $ 25,819 $ 24,992 $ 26,960 $ 26,563
========= =========== =========== ==========
Income before income taxes $ 1,507 $ 696 $ 1,578 $ 213
========= =========== =========== ==========
Net income $ 955 $ 441 $ 1,000 $ 135
========= =========== =========== ==========
Net income per share $ .08 $ .04 $ .08 $ .01
========= =========== =========== ==========
Cash dividends per share $ .0625 $ .0625 $ .0625 $ .0625
========= =========== =========== ==========
Quarterly net sales amounts for 2002 have been adjusted from the amounts
previously reported in the Company's 10-Q's. The revised amounts reflect the
adoption of EITF 01-9, which requires reclassification of certain expenses. The
reclassification involves removing certain expenses from selling, general and
administrative expenses and including them as a direct reduction of revenues.
Quarterly net income amounts for 2002 have been adjusted from amounts reported
in the Company's 10-Q's to reflect the change in accounting discused in Note 3
to the Company's consolidated financial statements.
41
ITEM 9. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
ITEM 9A. - CONTROLS AND PROCEDURES
The Company performed an evaluation, under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures as of
the end of the fiscal year ended May 31, 2003. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that as of the end
of the fiscal year ended May 31, 2003, the Company's disclosure controls and
procedures were effective to ensure that information required to be disclosed in
reports that the Company files or submits under the Securities and Exchange Act
of 1934 is recorded, processed, summarized and reported within the specified
time periods.
During the performance of the audit for the fiscal year ended May 31, 2004,
the Company's independent auditors, Dudley, Hopton-Jones, Sims & Freeman, PLLP
(the "Auditor), identified and communicated to the Company material weaknesses
relating to the Company's accounting for its vacation pay (which was not in
conformity with generally accepted accounting principles ("GAAP")) and self
insured obligations. During the fiscal year ended May 31, 2003, the Company did
not accrue for earned vacation pay and its liabilities were understated for
certain incurred as well as incurred but nor reported self-insured casualty
claims and health costs. Based upon the forgoing, the Company has rested its
audited financial statements of fiscal year 2003 and for the first three
quarters of fiscal year 2004 to properly account for accruals for its vacation
pay and self-insured health and casualty obligations. The Company believed,
during the years being restated, that it was correctly following properly
accounting practices.
The Company has accepted the recommendations of its Auditor to reduce
the recurrence of material weaknesses and is implementing policies and
procedures to strengthen the Company's internal controls, including, among other
things, the following: (1) developing written policies and procedures to be
followed with respect to accounting for vacation pay and self-insured
obligations; (2) formally designating management level personnel responsible for
accounting for vacation pay and self-insured obligations; (3) expanding internal
audit activities to include a quarterly examination of vacation pay and
self-insured obligations; (4) implementing a fully developed actuarially based
method of measuring liabilities related self-insured obligations; and (5)
implementing quarterly communications among management, internal auditor, and
the Audit Committee prior to filing Forms 10-Q.
Other than as described above, there has not been any change in the
company's internal controls over financial reporting that has materially
affected, or is reasonably likely to materially affect the Company's internal
control over financial reporting.
42
PART III
ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. - EXECUTIVE COMPENSATION
ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14. - CONTROLS AND PROCEDURES
Included under Item 9A hereof.
ITEM 15. - PRINCIPAL ACCOUNTANT FEES AND SERVICES
With the exception of a description of Executive Officers of The Registrant
which appears on page 6 herein, Part III is omitted because prior to September
28, 2003, the Company will file a definitive Proxy Statement with the Securities
and Exchange Commission pursuant to Regulation 14A which involves the election
of directors.
43
PART IV
ITEM 16.- EXHIBITS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. and 2. LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Golden Enterprises,
Inc., and subsidiary required to be included in Item 8 are listed below:
Consolidated Balance Sheets (Restated) - May 31, 2003 and 2002
Consolidated Statements of Operations (Restated) - Years ended May 31,
2003, 2002, and 2001
Consolidated Statements of Changes in Stockholders' Equity (Restated) -
Years ended May 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows (Restated) - Years ended May 31,
2003, 2002 and 2001
Notes to Consolidated Financial Statements (Restated)
The following consolidated financial statements schedule is included in
Item 16 (d):
Schedule II- Valuation and Qualifying Accounts
All other schedules are omitted because the information required therein is
not applicable, or the information is given in the financial statements and
notes thereto.
3. Exhibits:
31.1 Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
(b) Report on Form 8-K. During the last quarter of the period covered by
this report, the Registrant filed an 8-K Report on April 8, 2003 reporting
the resignation of D. Paul Jones, Jr. as a member of the Board of
Directors.
(c) Exhibits. See (a) 3. above.
(d) Financial Statement Schedules. The response to this portion of Item 16,
is submitted under Item 16.(a) 1. and 2. above.
44
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
GOLDEN ENTERPRISES, INC.
BY /S/PATTY TOWNSEND AUGUST 20, 2004
-------------------- ---------------
PATTY TOWNSEND DATE
VICE PRESIDENT, PRINCIPAL FINANCIAL
OFFICER AND CONTROLLER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
--------- ----- ----
/S/JOHN S. STEIN Chairman of Board August 20, 2004
------------------------------------
JOHN S. STEIN
/S/MARK W. MCCUTCHEON Chief Executive August 20, 2004
------------------------------------ Officer, President and
MARK W. MCCUTCHEON Director
/S/PATTY TOWNSEND Vice President, Secretary, August 20, 2004
------------------------------------ Principal Financial Officer
PATTY TOWNSEND and Controller
Director August 20, 2004
------------------------------------
F. WAYNE PATE
/S/ EDWARD R. PASCOE Director August 20, 2004
------------------------------------
EDWARD R. PASCOE
/S/JOHN P. MCKLEROY, JR.. Director August 20, 2004
------------------------------------
JOHN P. MCKLEROY, JR.
/S/JAMES I. ROTENSTREICH Director August 20, 2004
------------------------------------
JAMES I. ROTENSTREICH
/S/JOHN S.P. SAMFORD Director August 20, 2004
------------------------------------
JOHN S.P. SAMFORD
Director August 20, 2004
------------------------------------
J. WALLACE NALL, JR.
/S/JOANN F. BASHINSKY Director August 20, 2004
------------------------------------
JOANN F. BASHINSKY
45
Schedule II
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MAY 31, 2001, 2002 AND 2003
Additions
Balance at Charged to Balance
Beginning Costs and at End
Allowance for Doubtful Accounts of Year Expenses Deductions of Year
-------------------------------------------- -------------- -------------- --------------- -------------
Year ended May 31, 2001 $600,000 $(194,938) $58,962 $346,100
============== ============== =============== =============
Year ended May 31, 2002 $346,100 $(113,175) $36,825 $196,100
============== ============== =============== =============
Year ended May 31, 2003 $196,100 $224,722 $224,722 $196,100
============== ============== =============== =============
46
INDEX TO EXHIBITS
EXHIBIT NUMBER PAGE
-------------- ----
31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF 48
THE SARBANES-OXLEY ACT OF 2002.
31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF 49
THE SARBANES-OXLEY ACT OF 2002.
32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF 50
THE SARBANES-OXLEY ACT OF 2002.
32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF 51
SARBANES-OXLEY ACT OF 2002.
47