UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly (twenty-six weeks) period ended December 2, 2005
----------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------------- -----------------
Commission file number 0-4339
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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 Principle Executive Offices) (Zip Code)
(205) 458-7316
--------------
(Registrant's telephone number, including area code)
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes ( ) No (X)
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes ( ) No (X)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of December 31, 2005.
Outstanding at
Class December 31, 2005
----- -----------------
Common Stock, Par Value $0.66 2/3 11,835,330
GOLDEN ENTERPRISES, INC.
INDEX
Part I. FINANCIAL INFORMATION Page No.
Item 1 Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheets
December 2, 2005 (unaudited) and June 3, 2005 3
Condensed Consolidated Statements of Operations (unaudited)
Twenty-Six Weeks Ended December 2, 2005 and November 26,
2004
4
Condensed Consolidated Statements of Cash Flows
(unaudited)- Twenty-Six Weeks Ended December 2, 2005 and
November 26, 2004 5
Notes to Condensed Consolidated Financial
Statements (unaudited) 7
Report of Independent Registered Public Accounting Firm 10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3 Quantitative and Qualitative
Disclosure About Market Risk 16
Item 4 Controls and Procedures 16
Part II. OTHER INFORMATION 16
Item 1 Legal Proceedings 16
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3 Defaults Upon Senior Securities 17
Item 4 Submission of Matters to a Vote of Security Holders 17
Item 5 Other Information 17
Item 6 Exhibits 18
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
December 2, June 3,
2005 2005
----------------- ---------------
(Unaudited) (Audited)
ASSETS
Cash and cash equivalents $ 393,789 $ 371,204
Receivables, net 7,372,932 7,691,464
Note Receivable, current 51,574 49,558
Inventories:
Raw material and supplies 1,670,317 1,100,715
Finished goods 2,611,184 2,869,352
--------- ---------
4,281,501 3,970,067
--------- ---------
Prepaid expense 2,428,558 2,436,748
Deferred income taxes 589,946 589,946
------- -------
Total current assets 15,118,300 15,108,987
---------- ----------
Property, plant and equipment, net 14,029,756 14,247,036
Long-term Note Receivable 1,744,127 1,770,428
Other assets 3,299,024 3,275,296
--------- ---------
$ 34,191,207 $ 34,401,747
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Checks outstanding in excess of bank balances $ 1,826,205 $ 1,493,153
Accounts payable 2,238,238 2,270,035
Other accrued expenses 4,600,883 4,701,726
Salary continuation plan 108,138 103,912
Note payable-bank, current 732,422 690,332
Line of credit outstanding 1,584,446 522,008
--------- -------
Total current liabilities 11,090,332 9,781,166
---------- ---------
Long-Term Liabilities:
Note payable-bank, non-current 623,286 1,013,846
Salary Continuation Plan 1,699,724 1,735,885
--------- ---------
Total long-term liabilities 2,323,010 2,749,731
--------- ---------
Deferred income taxes 964,047 964,047
------- -------
Stockholder's Equity:
Common Stock - $.66 - 2/3 par value:
35,000,000 shares authorized
Issued 13,828,793 shares 9,219,195 9,219,195
Additional paid-in capital 6,497,954 6,497,954
Retained earnings 14,774,263 15,867,248
---------- ----------
30,491,412 31,584,397
Less: Cost of common shares in treasury (1,993,463 at
December 2, 2005 and June 3, 2005) (10,677,594) (10,677,594)
------------ ------------
Total stockholders' equity 19,813,818 20,906,803
---------- ----------
Total $ 34,191,207 $ 34,401,747
============ ============
See Accompanying Notes to Condensed Consolidated Financial Statements
3
ITEM1- GOLDEN ENTERPRISES, INC. AND SUBSIDARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Thirteen Weeks Ended Twenty-Six Weeks Ended
December 2, November 26, December 2, November 26,
2005 2004 2005 2004
--------------------------------------------------------------------------
Net Sales $ 25,430,115 $ 24,851,760 $ 51,461,951 $ 49,618,186
Cost of sales 13,801,541 13,278,674 28,029,446 26,301,063
-------------- --------------- -------------- --------------
Gross margin 11,628,574 11,573,086 23,432,505 23,317,123
Selling, general and administrative expenses 12,088,312 11,617,267 24,054,122 23,167,003
-------------- --------------- -------------- --------------
Operating (loss) income (459,738) (44,181) (621,617) 150,120
-------------- --------------- -------------- --------------
Other income (expenses):
Investment income 36,953 38,787 73,828 76,306
Gain on sale of assets 20,320 26,216 98,954 39,168
Other income 19,395 8,429 28,263 107,098
Interest expense (74,957) (48,591) (139,188) (93,507)
-------------- --------------- -------------- --------------
Total other income (expenses) 1,711 24,841 61,857 129,065
-------------- --------------- -------------- --------------
(Loss) income before income taxes (458,027) (19,340) (559,760) 279,185
Provision for income taxes (168,996) (12,127) (206,487) 98,223
-------------- --------------- -------------- --------------
Net (loss) income $ (289,031) $ (7,213) $ (353,273) $ 180,962
============== =============== ============== ==============
PER SHARE OF COMMON STOCK:
Basic earnings $ (0.02) $ (0.00) $ (.03) $ 0.02
Diluted earnings $ (0.02) $ (0.00) $ (.03) $ 0.02
Weighted average number of common stock
shares outstanding:
Basic 11,835,330 11,852,830 11,835,330 11,852,830
Diluted 11,864,453 11,852,830 11,863,456 11,852,830
Cash dividends paid per share of common
Stock $ 0.0313 $ 0.0313 $ 0.0626 $ 0.0626
============== =============== ============== ==============
See Accompanying Notes to Condensed Consolidated Financial Statements
4
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Twenty-Six Weeks Ended
December 2, November 26,
2005 2004
----------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 51,780,483 $ 49,718,370
Interest income 73,828 76,306
Rental income 22,490 11,583
Other operating cash payments 5,773 95,515
Cash paid to suppliers & employees for cost of goods sold (27,530,243) (24,554,569)
Cash paid to suppliers & employees for selling, general & administrative (23,660,831) (23,652,257)
Interest expenses paid (139,188) (93,507)
------------------- -----------------
Net cash from operating activities 552,312 1,601,441
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property plant & equipment (975,134) (1,740,630)
Proceeds from sale of property, plant & equipment 113,814 67,395
Collection of notes rec. 24,285 22,424
------------------ -----------------
Net cash used in investing activities (837,035) (1,650,811)
CASH FLOWS FROM FINANCING ACTIVITIES
Debt proceeds 11,914,771 7,736,272
Debt repayments (11,200,803) (6,409,770)
Increase in checks outstanding in excess of bank balance 333,052 (329,418)
Purchases of treasury shares -0- -0-
Proceeds from exercise of stock options -0- -0-
Cash dividends paid (739,712) (740,806)
------------------- ------------------
Net cash (used in) provided by financing activities 307,308 256,278
Net change in cash and cash equivalents 22,585 206,908
Cash and Cash equivalents at beginning of period 371,204 565,195
------------------- ------------------
Cash and Cash equivalents at end of period $ 393,789 $ 772,103
=================== ==================
5
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) CONTINUED...
Reconciliation of Net Income to Net Cash from Operating Activities
CASH FLOWS FROM OPERATING ACTIVITIES
Twenty-Six Weeks Ended
December 2, November 26,
2005 2004
------------------------------------------
Net (Loss) income $ (353,273) $ 180,962
Adjustment to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization 1,177,552 1,095,314
Deferred income taxes -0- (57,364)
Gain on sale of property and equipment (98,954) (39,169)
Changes in operating assets and liabilities:
Change in receivable- net 318,532 100,184
Change in inventories (311,432) (632,287)
Change in pre-paid expenses 8,190 (512,191)
Change in other assets- long term (23,728) (38,331)
Change in accounts payable (31,797) 1,565,460
Change in accrued expenses (100,843) (31,208)
Change in salary continuation plan accrual (31,935) (29,929)
--------------- --------------
Net cash provided by operating activities $ 552,312 $ 1,601,441
--------------- --------------
6
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. The accompanying unaudited condensed consolidated financial statements of
Golden Enterprises, Inc. (the "Company") have been prepared in accordance
with accounting principles generally accepted in the United States of
America (GAAP) for interim financial information and with the instructions
to Form 10-Q and Article 10 to Regulation S-X. Accordingly, they do not
include all information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments
consisting of normal recurring accruals considered necessary for a fair
presentation have been included. For further information, refer to the
consolidated financial statements and footnotes included in the Golden
Enterprises, Inc. and subsidiary ("the Company") Annual Report on Form 10-K
for year ended June 3, 2005.
2. The consolidated results of operations for the twenty-six weeks ended
December 2, 2005 are not necessarily indicative of the results to be
expected for the fifty-two week fiscal year ending June 2, 2006. Certain
prior year amounts have been reclassified to conform to the current year
presentation.
3. The Company changed its accounting policy in the fourth quarter of fiscal
2005 with regard to casualty insurance reserves. The effect of this
accounting change was to adopt this policy as of the beginning of fiscal
2005 (May 29, 2004). Previously, casualty insurance reserves were
calculated using the case reserves method. The Company changed this
accounting policy to the fully developed actuarial method of estimating
insurance reserves. This change in accounting policy was made to improve
the quality of the accounting estimate. The fully developed method reflects
future costs inherent in the total population of claims including claims
reported and IBNR (incurred but not reported). The estimate includes the
recognition of inflation trends and the fact that injuries may become more
severe over time. The cumulative effect of this change in accounting policy
did not have a material effect on the financial statements. For further
information, refer to the consolidated financial statements and footnotes
included in the Golden Enterprises, Inc. and subsidiary ("the Company")
Annual Report on Form 10-K for year ended June 3, 2005.
4. The following tables summarize the prepaid assets accounts:
Prepaid Breakdown
December 2, 2005 November 26, 2004
---------------- -----------------
Truck Shop Supplies $ 624,411 $ 627,170
Insurance Deposit 242,517 393,155
Slotting Fees 235,083 317,245
Deferred Advertising Fees 362,008 362,008
Prepaid Insurance 224,125 824,181
Prepaid Taxes/ Licenses 675,262 259,663
Prepaid Dues/ Supplies 47,154 3,818
Other 17,998 17,894
------ ------
$ 2,428,558 $ 2,805,134
=========== ===========
7
5. The principal raw materials used in the manufacture of the Company's snack
food products are potatoes, corn, vegetable oils and seasoning. The
principal supplies used are flexible film, cartons, trays, boxes and bags.
These raw materials and supplies are generally available in adequate
quantities in the open market from sources in the United States and are
generally contracted up to a year in advance.
6. 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 described in Note 8 below.
7. The following table provides a reconciliation of the denominator used in
computing basic earnings per share to the denominator used in computing
diluted earnings per share for the twenty-six weeks ended December 2, 2005
and November 26, 2004:
December 2, 2005 November 26, 2004
---------------- -----------------
Weighted average number of common shares used in computing
basic earnings per share 11,835,330 11,852,830
Effect of dilutive stock options 28,126 0
---------------- ------------------
Weighted average number of common shares and dilutive
potential common stock used in computing dilutive earnings
per share 11,863,456 11,852,830
================ ==================
Stock options excluded from the above reconciliation because
they are anti-dilutive 0 369,000
================ ==================
8. The Company applies APB Opinion No. 25 in accounting for all of its stock
option plans and, accordingly, no compensation cost has been recognized for
its stock options in the financial statements. The table below presents the
pro-forma net income effect of the options using the Black-Scholes option
pricing model prescribed under SFAS No. 123.
For the Thirteen Weeks Ended For the Twenty Six Weeks Ended
-----------------------------------------------------------------
12/2/2005 11/26/2004 12/2/2005 11/26/2004
-----------------------------------------------------------------
Net (loss) income as reported $ (289,031) $ (7,213) $ (353,273) $ 180,962
Stock based compensation costs, net of income
tax, that would have been included in net
income if the fair value method had
been applied (2,614) (2,614) (5,228) (5,228)
------------- ------------ ------------ ------------
Pro-forma net (loss) income $ (291,645) $ (9,827) $ (358,501) $ 175,734
============= ============ ============ ============
(Loss) income per share as reported-basic $ (.02) $ (.00) $ (.03) $ .02
(Loss) income per share as reported-diluted $ (.02) $ (.00) $ (.03) $ .02
Pro-forma (loss) income per share-basic $ (.02) $ (.00) $ (.03) $ .02
Pro-forma (loss) income per share-diluted $ (.02) $ (.00) $ (.03) $ .01
8
9. 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.
The purchase commitment with the supplier, based on a specific purchase
price and specific annual quantities, ended as of October 25, 2005. The
Company is prohibited from purchasing the product from any other vendor
until October 25, 2006.
10. The interest rate on the Company's bank debt is reset monthly to reflect
the 30 days LIBOR rate. Consequently, the carrying value of the bank debt
approximates fair value. During the twenty-six weeks ended December 2, 2005
the Company's bank debt was increased by $.71 million compared to an
increase of $1.33 million last year. The interest rate at December 2, 2005
was 5.83% compared to 3.96% at November 26, 2004.
11. The Company has a letter of credit in the amount of $3,084,365 outstanding
at December 2, 2005 to support the Company's commercial self-insurance
program.
12. Currently, the company has a line-of-credit agreement with a local bank
that permits borrowing up to $2 million, compared to $1 million at this
time last year. The line-of-credit is subject to the Company's continued
credit worthiness and compliance with the terms and conditions of the
advance application. The Company's line-of-credit debt as of December 2,
2005 was $1,584,446 with an interest rate of 7.00%, leaving the Company
with $415,554 of credit availability. The Company's line-of-credit debt as
of November 26, 2004 was $188,564 with an interest rate of 5.00%, leaving
the Company with $811,436 of credit availability.
13. 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 requires collateral and buyer investment
and management believes they are well secured.
9
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
We have reviewed the accompanying interim consolidated balance sheet of Golden
Enterprises, Inc. and subsidiary as of December 2, 2005 and the related interim
consolidated statements of income and cash flows for the twenty-six week period
then ended. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the Public
Accounting Oversight Board (United States). A review of interim financial
statements consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with the standards of the Public Company Accounting Oversight Board, the
objective of which is the expressions of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with accounting principles generally accepted in the United States of America.
We previously audited in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet as of
June 3, 2005 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the fiscal year then ended (not
presented herein), and in our report dated August 5, 2005 we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of June 3, 2005, is fairly stated in all material respects in relation
to the consolidated balance sheet from which it has been derived.
As discussed in Note 3 to the accompanying consolidated financial statements,
the Company has changed its accounting policy with respect to the casualty
insurance liability.
Birmingham, Alabama
January 11, 2006 DUDLEY, HOPTON-JONES, SIMS & FREEMAN PLLP
10
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The purpose of this discussion is to provide additional information about Golden
Enterprises, Inc., its financial condition and the results of its 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.
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 puff corn. 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 439 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.
BASIS OF PRESENTATION
The Company's discussion and analysis of its financial condition and results of
operations are based upon the accompanying unaudited condensed consolidated
financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP) for interim
financial information and with the instructions to Form 10-Q and Article 10 to
Regulation S-X. Accordingly, they do not include all information and footnotes
required by GAAP for complete financial statements. In the opinion of
management, all adjustments consisting of normal recurring accruals considered
necessary for a fair presentation have been included.
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 unaudited condensed 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.
11
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.
Change in Accounting Policy
The Company is self-insured for certain casualty losses relating to automobile
liability, general liability, workers' compensation, property losses and medical
claims. The Company also has stop loss coverage to limit the exposure arising
from these claims. Automobile liability, general liability, workers'
compensation, and property losses costs are covered by letters of credit with
the Company's claim administrators.
The Company changed its accounting policy in the fourth quarter of fiscal 2005
with regard to the casualty insurance obligations. The Company adopted the use
of a third-party actuary to estimate the casualty insurance obligations on an
annual basis. This change in accounting policy was made to determine the
ultimate loss and reserve requirements through actuarial assumptions including
compensation trends, health care cost trends and discount rates. The third-party
actuary also uses historical information for claims frequency and severity in
order to establish loss development factors. The cumulative effect of this
change in accounting policy did not have a material effect on the financial
statements.
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 December 2, 2005 and June 3, 2005
the Company had accounts receivables in the amount of $7.4 million and $7.7
million, net of an allowance for doubtful accounts of $0.1 million and $0.2
million, respectively.
The following table summarizes the Company's customer accounts receivable
profile as of December 2, 2005:
Amount Range No. of Customers
Less than $1,000.00................................. 1,394
$1,001.00-$10,000.00................................ 542
$10,001.00-$100,000.00.............................. 97
$100,001.00-$500,000.00............................. 7
$500,001.00-$1,000,000.00........................... 1
$1,000,001.00-$2,500,000.00......................... 0
Total All Accounts.................................. 2,041
=====
12
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. In 2005, the Company
adopted the use of a third-party actuary to estimate the casualty insurance
obligations on an annual basis. In determining the ultimate loss and reserve
requirements, the third-party actuary uses various actuarial assumptions
including compensation trends, health care cost trends and discount rates. The
third-party actuary also uses historical information for claims frequency and
severity in order to establish loss development factors.
OTHER MATTERS
Transactions with related parties, reported in Note 14 of the Notes to
Consolidated Financial Statements in the Annual Report to Stockholders for
fiscal year ended June 3, 2005, are conducted on an arm's-length basis in the
ordinary course of business.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital was $5.3 million at June 3, 2005 and $4.0 million at the end of
the twenty-six weeks. Net cash provided by operating activities amounted to $0.6
million for the twenty-six weeks this year compared to $1.60 million for last
year's twenty-six weeks.
Additions to property, plant and equipment, net of disposals, were $0.63 million
this year and $1.71 million last year. Cash dividends of $0.37 million were paid
during this year's twenty-six weeks compared to $0.37 million last year. No cash
was used to purchase treasury stock this year, and no cash was used to increase
investment securities this year. The Company's current ratio was 1.36 to 1.00 at
December 2, 2005.
The following table summarizes the significant contractual obligations of the
Company as of December 2, 2005:
Contractual Obligations Total 2006 2007-2008 2009-2010 Thereafter
----------------------- ----- ---- --------- --------- ----------
Long-Term Debt $ 1,355,708 $ 732,422 $ 384,372 $ 238,914 $ -0-
Salary Continuation Plan 1,807,862 108,137 243,948 286,123 1,169,654
--------- ------- ------- ------- ---------
Total Contractual Obligations $ 3,163,570 $ 840,559 $ 628,320 $ 525,037 $ 1,169,654
========= ======= ======= ======= =========
13
OFF-BALANCE SHEET ARRANGEMENT
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. The purchase commitment with the supplier,
based on a specific purchase price and specific annual quantities, ended as of
October 25, 2005. The Company is prohibited from purchasing the product from any
other vendor until October 25, 2006.
Other Commitments
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
For the thirteen weeks ended December 2, 2005, net sales increased 2.33% from
the comparable period in fiscal 2005. For the year-to-date, twenty-six weeks
ended December 2, 2005, net sales increased 3.72% from the comparable period in
fiscal 2005. This year's thirteen weeks cost of sales was 54.3% of net sales
compared to 53.4% last year, and selling, general, and administrative expenses
were 47.5% of net sales this year and 46.7% last year. The year-to-date cost of
sales was 54.5% of net sales compared to 53.0% last year, and selling, general,
and administrative expenses were 46.7% of net sales this year and 46.7% last
year.
The following tables compare manufactured products to resale products:
Manufactured Products-Resale Products
Thirteen Weeks Ended Thirteen Weeks Ended
December 2, 2005 November 26, 2004
Sales % %
Manufactured Products $20,053,010 73.2% $20,815,916 80.6%
Resale Products 5,377,105 26.8% 4,035,844 19.4%
------------- ----- ------------ -----
Total $25,430,115 100.0% $24,851,760 100.0%
GM GM
% %
Gross Margin
Manufactured Products $9,426,551 47.0% $9,167,895 44.0%
Resale Products 2,202,363 41.0% 2,405,191 59.6%
------------- ---------
Total $11,628,914 45.7% $11,573,086 46.6%
14
Manufactured Products-Resale Products
Twenty-Six Weeks Twenty-Six Weeks
Ended Ended
December 2, 2005 November 26, 2004
Sales % %
Manufactured Products $40,689,108 79.1% $40,755,717 82.1%
Resale Products 10,772,843 20.9% 8,862,469 17.9%
---------- ----- ---------- -----
Total $51,461,951 100.0% $49,618,186 100.0%
GM GM
% %
Gross Margin
Manufactured Products $19,147,175 47.1% $18,957,397 46.5%
Resale Products 4,285,330 39.8% 4,359,726 49.2%
------------ -----------
Total $23,432,505 45.5% $23,317,123 47.0%
The Company's gain on sales of assets for the thirteen weeks ended in the amount
of $20,320 was from the sale of used transportation equipment.
For last year's thirteen weeks the gain on sale of assets was $26,216 from the
sale of used transportation equipment for cash.
The Company's investment income decreased 4.7% from last year. For the
twenty-six weeks ended investment income was down 3.2%.
The Company's effective tax rate for the thirteen weeks was -37.0% compared to
-62.7% for the last year's thirteen weeks and -37.0% for the twenty-six weeks
this year and 35.2% last year.
MARKET RISK
The principal market's 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 investment securities, bank loans, and commodity prices,
affecting the cost of its raw materials.
The Company's investment securities consist of short-term marketable securities.
Presently, these are variable rate money market mutual funds. Assuming December,
2005 variable rate investment levels and bank loan balances, a one-point change
in interest rates would impact interest income by $60 on an annual basis and
interest expense by $13,557.
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. Future contracts have been used occasionally to hedge immaterial
amounts of commodity purchases, but none are presently being used.
15
INFLATION
Certain costs and expenses of the Company are affected by inflation. 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.
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 the Securities and
Exchange Commission.
ITEM 3
------
QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK
Included in Item 2, Management's Discussion and Analysis of Financial Condition
and Results of Operations- Market Risk beginning on page 15.
ITEM 4
------
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 period covered by this quarterly report. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that as of the end of the period covered by this quarterly report, 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.
There were no changes in the Company's internal control over financial reporting
which occurred during the period covered by this report which have materially
affected or are reasonably likely to materially affect the Company's internal
control over financial reporting.
PART II OTHER INFORMATION
ITEM 1
------
LEGAL PROCEEDINGS
16
There are no material pending legal proceedings against the Company or its
subsidiary other than routine litigation incidental to the business of the
Company and its subsidiary.
ITEM 2
------
UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
The Company did not sell any equity securities during the period covered by this
report.
Registrant Purchases of Equity Securities.
The Company did not purchase any shares of its equity securities during the
period covered by this report.
ITEM 3
------
DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4
------
SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders of Golden Enterprises, Inc. was
held on September 22, 2005.
(b) All director nominees were elected.
(c) The following is a tabulation of the voting for the election of
Directors:
ELECTION OF DIRECTORS
Names Votes For Votes Withheld
----- --------- --------------
John S. Stein 9,967,352 246,392
Edward R. Pascoe 10,203,585 10,159
John P. McKleroy, Jr. 9,964,515 249,229
James I. Rotenstreich 10,158,083 55,661
John S.P. Samford 10,200,493 13,251
J. Wallace Nall, Jr. 10,200,493 13,251
F. Wayne Pate 10,086,247 127,497
Joann F. Bashinsky 10,082,193 131,551
Mark W. McCutcheon 9,967,715 246,029
17
.
ITEM 5
------
OTHER INFORMATION
Not Applicable.
ITEM 6
------
EXHIBITS
(3) Articles of Incorporation and By-laws of Golden Enterprises, Inc.
3.1 Certificate of Incorporation of Golden Enterprises, Inc. (originally
known as "Golden Flake, Inc.") dated December 11, 1967 (incorporated
by reference to Exhibit 3.1 to Golden Enterprises, Inc. May 31, 2004
Form 10-K filed with the Commission).
3.2 Certificate of Amendment of Certificate of Incorporation of Golden
Enterprises, Inc. dated December 22, 1976 (incorporated by reference
to Exhibit 3.2 to Golden Enterprises, Inc. May 31, 2004 Form 10-K
filed with the Commission).
3.3 Certificate of Amendment of Certificate of Incorporation of Golden
Enterprises, Inc. dated October 2, 1978 (incorporated by reference to
Exhibit 3 to Golden Enterprises, Inc. May 31, 1979 Form 10-K filed
with the Commission).
3.4 Certificate of Amendment of Certificate of Incorporation of Golden
Enterprises, Inc. dated October 4, 1979 (incorporated by reference to
Exhibit 3 to Golden Enterprises, Inc. May 31, 1980 Form 10-K filed
with the Commission).
3.5 Certificate of Amendment of Certificate of Incorporation of Golden
Enterprises, Inc. dated September 24, 1982 (incorporated by reference
to Exhibit 3.1 to Golden Enterprises, Inc. May 31, 1983 Form 10-K
filed with the Commission).
3.6 Certificate of Amendment of Certificate of Incorporation of Golden
Enterprises, Inc. dated September 22, 1983 (incorporated by reference
to Exhibit 19.1 to Golden Enterprises, Inc. Form 10-Q Report for the
quarter ended November 30, 1983 filed with the Commission).
3.7 Certificate of Amendment of Certificate of Incorporation of Golden
Enterprises. Inc. dated October 3, 1985 (incorporated by reference to
Exhibit 19.1 to Golden Enterprises, inc. Form l0-Q Report for the
quarter ended November 30, 1985 filed with the Commission).
3.8 Certificate of Amendment of Certificate of Incorporation of Golden
Enterprises, Inc. dated September 23, 1987 (incorporated by reference
to Exhibit 3.1 to Golden Enterprises, Inc. May 31, 1988 Form 10-K
filed with the Commission).
18
3.9 By-Laws of Golden Enterprises, Inc. (incorporated by reference to
Exhibit 3.4 to Golden Enterprises, Inc. May 31, 1988 Form 10-K filed
with the Commission).
(10) Material Contracts.
10.1 A Form of Indemnity Agreement executed by and between Golden
Enterprises, Inc. and Each of its Directors (incorporated by reference
as Exhibit 19.1 to Golden Enterprises, Inc. Form 10-Q Report for the
quarter ended November 30, 1987 flIed with the Commission).
10.2 Amended and Restated Salary Continuation Plans for John S. Stein
(incorporated by reference to Exhibit 19.1 to Golden Enterprises, Inc.
May 31, 1990 Form 10-K filed with the Commission).
10.3 Indemnity Agreement executed by and between the Company and S. Wallace
Nall, Jr. (incorporated by reference as Exhibit 19.4 to Golden
Enterprises, Inc. May 31, 1991 Form 10-K filed with the Commission).
10.4 Salary Continuation Plans - Retirement Disability and Death Benefits
for F. Wayne Pate (incorporated by reference to Exhibit 19.1 to Golden
Enterprises, Inc. May 31, 1992 Form 10-K filed with the Commission).
10.5 Indemnity Agreement executed by and between the Registrant and F.
Wayne Pate (incorporated by reference as Exhibit 19.3 to Golden
Enterprises, Inc. May 31, 1992 Form 10-K filed with the Commission).
10.6 Golden Enterprises, Inc. 1996 Long-Term Incentive Plan (incorporated
by reference as Exhibit 10.1 to Golden Enterprises, Inc. May 31, 1997
Form 10-K filed with the Commission).
10.7 Lease of Aircraft executed by and between Golden Flake Snack Foods,
Inc., a wholly-owned subsidiary of Golden Enterprises, Inc., and Sloan
Y. Bashinsky, Sr. (incorporated by reference as Exhibit 10.1 to Golden
Enterprises, Inc. May 31, 1999 Form 10-K filed with the Commission).
10.8 Equipment Purchase and Sale Agreement dated October 2000 whereby
Golden Flake Snack Foods. Inc., a wholly-owned subsidiary of Golden
Enterprises, Inc., sold the Nashville, Tennessee Plant Equipment
(incorporated by reference as Exhibit 10.1 to Golden Enterprises, Inc.
May 31, 2001 Form 10-K filed with the Commission).
10.9 Real Property Contract of Sale dated October 2000 whereby Golden Flake
Snack Foods, Inc. sold the Nashville, Tennessee Plant Real Property
(incorporated by reference as Exhibit 10.2 to Golden Enterprises, Inc.
May 31, 2001 Form 10-K filed with the Commission).
10.10 Amendment to Salary Continuation Plans, Retirement and Disability for
F. Wayne Pate dated April 9. 2002 (incorporated by reference to
Exhibit 10.2 to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed
with the Commission).
19
10.11 Amendment to Salary Continuation Plans, Retirement and Disability for
John S. Stein dated April 9, 2002 (incorporated by reference to
Exhibit 10.3 to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed
with the Commission).
10.12 Amendment to Salary Continuation Plan, Death Benefits for John S.
Stein dated April 9, 2002 (incorporated by reference to Exhibit 10.4
to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed with the
Commission).
10.13 Retirement and Consulting Agreement for John S. Stein dated April 9,
2002 (incorporated by reference to Exhibit 10.5 to Golden Enterprises,
Inc. May 31, 2002 Form 10-K filed with the Commission).
10.14 Salary Continuation Plan for Mark W. McCutcheon dated May 15, 2002
(incorporated by reference to Exhibit 10.6 to Golden Enterprises, Inc.
May 31, 2002 Form 10-K filed with the Commission).
10.15 Trust Under Salary Continuation Plan for Mark W. McCutcheon dated May
15, 2002 (incorporated by reference to Exhibit 10.7 to Golden
Enterprises, Inc. May 31. 2002 Form 10-K filed with the Commission).
(18) Letter Re: Change in Accounting Principles
18.1 Letter from the Registrant's Independent Accountant dated August 12,
2005 indicating a change in the method of applying accounting
practices followed by the Registrant for the fiscal year ended June 3,
2005. (incorporated by reference to Exhibit 18.1 to Golden
Enterprises, inc. May 31, 2005 Form 10-K filed with the Commission)
(31) Certifications
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.
(99) Additional Exhibits
99.1 A copy of excerpts of the Last Will and Testament and Codicils thereto
of Sloan Y. Bashinsky, Sr. and of the SYB Common Stock Trust created
by Sloan Y. Bashinsky, Sr. providing for the creation of a Voting
Committee to vote the shares of common stock of Golden Enterprises,
Inc. held by SYB, Inc. and the Estate/Testamentary Trust of Sloan Y.
Bashinsky, Sr. (Incorporated by reference to Exhibit 99.1 to Golden
Enterprises, Inc. May 31, 2005 Form 10-k filed with the Commission).
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GOLDEN ENTERPRISES, INC.
-----------------------
(Registrant)
Dated: January 11, 2006 /s/Mark W. McCutcheon
---------------- ---------------------
Mark W. McCutcheon
President and
Chief Executive Officer
Dated: January 11, 2006 /s/ Patty Townsend
---------------- ------------------
Patty Townsend
Vice-President and
Chief Financial Officer
(Principal Accounting Officer)
21