FORM 10-Q/A
Amendment No. 1
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 (thirteen weeks) period ended September 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
--------------------------------------------
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 September 30, 2005.
Outstanding at
Class September 30, 2005
----- ------------------
Common Stock, Par Value $0.66 2/3 11,835,330
EXPLANATORY NOTE:
This Amendment No. 1 on Form 10-Q/A is being filed with respect to our
quarterly report on Form 10-Q for the quarterly period ended September 2, 2005,
filed with the Securities and Exchange Commission on October 7, 2005. This
Amendment No. 1 reflects the correction of a typographical error for the amount
of "Total current assets" from the incorrect amount of $16,008,567 to the
correct amount of $15,333,921, which appears on Page 3 of Part 1. Financial
Statements, Item 1. Condensed Consolidated Balance Sheets.
1A
GOLDEN ENTERPRISES, INC.
INDEX
Part I. FINANCIAL INFORMATION Page No.
Item 1 Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheets
September 2, 2005 (unaudited) and June 3, 2005 3
Condensed Consolidated Statements of Operations (unaudited)
Thirteen Weeks Ended September 2, 2005 and August 27, 2004
4
Condensed Consolidated Statements of Cash Flows
(unaudited)- Thirteen Weeks Ended September 2, 2005 and
August 27, 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 5 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 16
Item 3 Defaults Upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 17
Item 5 Other Information 17
Item 6 Exhibits 17
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
September 2, June 3,
2005 2005
----------------- ---------------
(Unaudited) (Audited)
ASSETS
Cash and cash equivalents $ 290,087 $ 371,204
Receivables, net 7,798,869 7,691,464
Note Receivable, current 50,556 49,558
Inventories:
Raw material and supplies 1,188,764 1,100,715
Finished goods 2,662,266 2,869,352
--------- ---------
3,851,030 3,970,067
--------- ---------
Prepaid expense 2,753,424 2,436,748
Deferred income taxes 589,946 589,946
------- -------
Total current assets 15,333,912 15,108,987
---------- ----------
Property, plant and equipment, net 14,053,257 14,247,036
Long-term Note Receivable 1,757,409 1,770,428
Other assets 3,249,334 3,275,296
--------- ---------
$ 34,393,912 $ 34,401,747
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Checks outstanding in excess of bank balances $ 1,532,543 $ 1,493,153
Accounts payable 2,889,214 2,270,035
Other accrued expenses 4,615,471 4,701,726
Salary continuation plan 106,004 103,912
Bank note 723,702 690,332
Line of credit outstanding 565,678 522,008
------- -------
Total current liabilities 10,432,612 9,781,166
---------- ---------
Long-Term Liabilities:
Note payable-bank, non-current 806,447 1,013,846
Salary Continuation Plan 1,718,101 1,735,885
--------- ---------
Total long-term liabilities 2,524,548 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 15,433,150 15,867,248
---------- ----------
31,150,299 31,584,397
Less: Cost of common shares in treasury (1,993,463 at
September 2, 2005 and June 3, 2005) (10,677,594) (10,677,594)
------------ ------------
Total stockholders' equity 20,472,705 20,906,803
---------- ----------
Total $ 34,393,912 $ 34,401,747
============ ============
See Accompanying Notes to Condensed Consolidated Financial Statements
3
GOLDEN ENTERPRISES, INC. AND SUBSIDARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Thirteen Weeks Ended
September 2, August 27,
2005 2004
------------------------------------
Net Sales $ 26,031,836 $ 24,766,426
Cost of sales 14,227,905 13,022,389
------------------- ---------------
Gross margin 11,803,931 11,744,037
Selling, general and administrative expenses 11,965,810 11,549,736
------------------- ---------------
Operating (loss) income (161,879) 194,301
------------------- ---------------
Other income (expenses):
Investment income 36,875 37,519
Gain on sale of assets 78,634 12,952
Other income 8,868 98,669
Interest expense (64,231) (44,916)
------------------- ---------------
Total other income (expenses) 60,146 104,224
------------------- ---------------
(Loss) income before taxes (101,733) 298,525
Provision for income taxes (37,491) 110,350
------------------- ---------------
Net (loss) income $ (64,242) $ 188,175
=================== ===============
PER SHARE OF COMMON STOCK:
Basic earnings $ (0.01) $ 0.02
Diluted earnings $ (0.01) $ 0.02
Weighted average number of common stock shares outstanding:
Basic 11,835,330 11,852,830
Diluted 11,861,949 11,852,830
Cash dividends paid per share of common
Stock $ 0.0313 $ 0.0313
=================== ===============
See Accompanying Notes to Condensed Consolidated Financial Statements
4
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Thirteen Weeks Ended
September 2, August 27,
2005 2004
----------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $25,924,431 $24,838,946
Interest income 36,875 37,519
Rental income 8,556 5,440
Other operating cash payments 312 93,229
Cash paid to suppliers & employees for cost of goods sold (13,070,741)(12,428,973)
Cash paid to suppliers & employees for selling, general & administrative (12,164,284)(11,305,812)
Income taxes (paid) -0- -0-
Interest expenses paid (64,231) (44,916)
------------ ------------
Net cash from operating activities 670,918 1,195,433
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property plant & equipment (413,931) (825,128)
Proceeds from sale of property, plant & equipment 110,700 32,143
Collection of notes rec. 12,021 11,099
------------ ------------
Net cash used in investing activities (291,210) (781,886)
CASH FLOWS FROM FINANCING ACTIVITIES
Debt proceeds 5,378,745 1,506,662
Debt repayments (5,509,104) (999,562)
Increase in checks outstanding in excess of bank balance 39,390 119,934
Purchases of treasury shares -0- -0-
Proceeds from exercise of stock options -0- -0-
Cash dividends paid (369,856) (370,403)
------------ ------------
Net cash (used in) provided by financing activities (460,825) 256,631
Net change in cash and cash equivalents (81,117) 670,178
Cash and Cash equivalents at beginning of period 371,204 565,195
------------ ------------
Cash and Cash equivalents at end of period $ 290,087 $ 1,235,373
============ ============
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
Thirteen Weeks Ended
September 2, August 27,
2005 2004
---------------------------------------
Net (Loss) income $ (64,242) $ 188,175
Adjustment to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization 575,644 547,387
Deferred income taxes -0- (60,191)
Gain on sale of property and equipment (78,634) (12,952)
Changes in operating assets and liabilities:
Change in receivable- net (107,405) 72,520
Change in inventories 119,037 (338,889)
Change in pre-paid expenses (316,676) (3,652)
Change in other assets- long term 25,962 (20,487)
Change in accounts payable 619,179 932,305
Change in accrued expenses (86,255) (94,053)
Change in salary continuation plan accrual (15,692) (14,730)
---------------- -----------------
Net cash provided by operating activities $ 670,918 $ 1,195,433
---------------- -----------------
See Accompanying Notes to Condensed Consolidated Financial Statements
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 thirteen weeks ended
September 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
September 2, 2005 August 27, 2004
----------------- ---------------
Truck Shop Supplies $ 657,189 $ 707,698
Insurance Deposit 393,155 393,155
Slotting Fees 247,473 301,338
Deferred Advertising Fees 543,004 543,004
Prepaid Insurance 690,971 146,775
Prepaid Taxes/ Licenses 149,106 138,902
Prepaid Dues/ Supplies 6,978 6,686
Other 65,548 59,037
------ ------
$ 2,753,424 $ 2,296,595
=========== ===========
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 material 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 7 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 thirteen weeks ended September 2, 2005
and August 27, 2004:
September 2, 2005 August 27, 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 26,619 0
---------- -----------
Weighted average number of common shares and dilutive
potential common stock used in computing dilutive earnings
per share 11,861,949 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.
Thirteen Weeks Ended
September 2, 2005 August 27, 2004
----------------- ---------------
Net (loss) income as reported $ (64,242) $ 188,175
Stock based compensation costs, net of income
tax, that would have been included in net
income if the fair value method had been (2,614) (2,614)
---------------- ---------------
Pro-forma net (loss) income $ (66,856) $ 185,561
================ ===============
Earnings per share as reported-basic $ (.01) $ .02
Earnings per share as reported-diluted $ (.01) $ .02
Pro-forma earnings per share-basic $ (.01) $ .02
Pro-forma earnings per share-diluted $ (.01) $ .02
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.
8
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 thirteen weeks ended September 2, 2005
the Company's bank debt was decreased by $.13 million compared to an
increase of $.51 million last year. The interest rate at September 2, 2005
was 5.26% compared to 3.29% at August 27, 2004.
11. The Company has a letter of credit in the amount of $3,084,365 outstanding
at September 2, 2005 to support the Company's commercial self-insurance
program.
12. The Company has a line-of-credit agreement with a local bank that permits
borrowing up to $2 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. The Company's line-of-credit debt at September 2,
2005 was $565,678 with an interest of 6.50%.
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 is
limited.
The Company's notes receivable require 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 September 2, 2005 and the related interim
consolidated statements of income and cash flows for the thirteen 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
October 7, 2005 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 cracker, cheese
cracker, 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 448 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 estimate 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 September 2, 2005 and June 3, 2005
the Company had accounts receivables in the amount of $7.8 million and $7.4
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 September 2, 2005:
Amount Range No. of Customers
------------ ----------------
Less than $1,000.00................................. 1,443
$1,001.00-$10,000.00................................ 546
$10,001.00-$100,000.00.............................. 111
$100,001.00-$500,000.00............................. 7
$500,001.00-$1,000,000.00........................... 0
$1,000,001.00-$2,500,000.00......................... 1
Total All Accounts.................................. 2,108
=====
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 $5.6 million at the end of
the first quarter. Net cash provided by operating activities amounted to $0.7
million for the first quarter this year compared to $1.20 million for last
year's first quarter.
Additions to property, plant and equipment, net of disposals, were $0.20 million
this year, and $0.81 million last year. Cash dividends of $0.37 million were
paid during this year's first quarter 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 1.53
to 1.00 at September 2, 2005.
The following table summarizes the significant contractual obligations of the
Company as of September 2, 2005:
Contractual Obligations Total 2006 2007-2008 2009-2010 Thereafter
----------------------- ----- ---- --------- --------- ----------
Long-Term Debt $ 1,530,149 $ 723,702 $ 567,533 $ 238,914 $ -0-
Purchase Commitment 605,000 605,000 -0- -0- -0-
Salary Continuation Plan 1,824,105 106,004 239,133 280,476 1,198,492
--------- ------- ------- ------- ---------
Total Contractual Obligations $ 3,959,254 $ 1,434,706 $ 806,666 $ 519,390 $ 1,198,492
========= ========= ======= ======= =========
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.
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 September 2, 2005, net sales increased 5% from the
comparable period in fiscal 2005. This year's first quarter cost of sales was
54.7% of net sales compared to 52.6% last year, and selling, general and
administrative expenses were 46.0% of net sales this year and 46.6% last year.
The following tables compares manufactured products to resale products:
Manufactured Products-Resale Products
Thirteen Weeks Ended Thirteen Weeks Ended
September 2, 2005 August 27, 2004
Sales % %
- -
Manufactured Products $ 20,636,098 79.3% $19,939,801 80.5%
Resale Products 5,395,738 20.7% 4,826,625 19.5%
------------- ----- --------- -----
Total $ 26,031,836 100.0% $24,766,426 100.0%
GM GM
% %
- -
Gross Margin
Manufactured Products $9,720,624 47.1% $9,789,502 49.1%
Resale Products 2,082,967 38.6% 1,954,535 40.5%
------------- -----------
Total $ 11,803,931 45.3% $11,744,037 47.4%
14
The Company's Gain on sales of assets for the thirteen weeks ended in the amount
of $78,634 was from the sale of used transportation equipment and property for
cash.
For last year's thirteen weeks the Gain on sale of assets was $12,952 from the
sale of used transportation equipment for cash.
The Company's investment income decreased 2.0% from last year.
The Company's effective tax rate for the first quarter was 37.0% compared to
37.0% for the last year's first quarter.
UNCERTANTIES
On August 29th, Hurricane Katrina ravaged the Gulf Cost Region of Alabama,
Mississippi and Louisiana. The hurricane impacted our employees, customers and
Golden Enterprises property. The total assessment of this impact has yet to be
determined. All of our employees in this region are safe, many however are
displaced. The Company does not anticipate a material effect from Katrina's
impact.
MARKET RISK
The principal markets 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 September
2, 2005 variable rate investment levels and bank loan balances, a one-point
change in interest rates would impact interest income by $50 on an annual basis
and interest expense by $15,301.
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.
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.
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.
15
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 14.
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 ended 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.
PART II OTHER INFORMATION
ITEM 1
------
LEGAL PROCEEDINGS
There are no material pending legal proceedings against the Company or
it's subsidiary other than routine litigation incidental to the business of the
Company and it's subsidiary.
ITEM 2
------
UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
The Company did not sale 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.
16
ITEM 4
------
SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS
Not Applicable.
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).
17
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 filed 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
Nail, 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).
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).
18
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.
19
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: October 13, 2005 /s/Mark W. McCutcheon
---------------- ---------------------
Mark W. McCutcheon
President and
Chief Executive Officer
Dated: October 13, 2005 /s/ Patty Townsend
---------------- ------------------
Patty Townsend
Vice-President and
Chief Financial Officer
(Principal Accounting Officer)
20