FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended May 31, 2002
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.)
Suite 208, 2140 11th Avenue, South
Birmingham, Alabama 35205
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number including area code
(205) 933-9300
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 $0.66-2/3
(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. [ ]
State the aggregate market value of the voting stock held
by non-affiliates of the registrant as of
August 12, 2002.
Common Stock, Par Value $0.662/3 - $17,904,634
Indicate the number of shares outstanding of each of
the Registrant's Classes of Common Stock, as
of August 12, 2002.
Class Outstanding at August 12, 2002
Common Stock, Par Value $0.662/ 11,883,305
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Proxy Statement for the year ended
May 31, 2002 are incorporated by reference into Part III.
TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT - 2002
GOLDEN ENTERPRISES, INC.
Page
PART I
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote
of Security Holders 6
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 7
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 9
Item 7A. Quantitative and Qualitative
Disclosure About Market Risk 13
Item 8. Financial Statements and
Supplementary Data 13
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 35
PART III
Item 10. Directors and Executive Officers
of the Registrant 35
Item 11. Executive Compensation 35
Item 12. Security Ownership of Certain
Beneficial Owners and Management
and Related Stockholder Matters 35
Item 13. Certain Relationships and Related
Transactions 35
PART IV
Item 14. Exhibits, Financial Statement
Schedules,and Reports on
Form 8-K 36
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 25, 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, 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%
f 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 approximately
448route 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 856 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, 666 store delivery vehicles and
57 cars and miscellaneous vehicles. Golden
Flake also leases 20
store delivery vehicles.
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 1,200 employees.
Approximately 700 employees are involved in route sales
and sales supervision, approximately 400 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.
Environmental Matters
There have been no material effects of compliance
with government provisions regulating discharge of
materials into the environment.
Recent Developments
Since the beginning of its last fiscal year, Golden
Flake completed the sale of approximately 27.7 acres of
undeveloped surplus land adjacent to its manufacturing
plant in Ocala, Florida, on May 31, 2002, for $921,908.
Golden Flake continues to own and operate its
manufacturing plant in Ocala, Florida as
described herein under the heading "Properties".
Other than these changes, no significant changes have
occurred in the kinds of products manufactured or in the
markets or methods of distribution, and no material
changes or developments have occurred in the
business done and intended
to be done by Golden Flake.
Executive Officers Of Registrant
And Its Subsidiary
Name and Age Position and Offices with Management
John S. Stein, 65
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, 2003.
Mark W. McCutcheon, 47
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. During his employment,
he has served as Plant Manager of the Ocala, Florida Plant,
Plant Manager of the Birmingham, Alabama Plant, Vice President
of Manufacturing, Vice President of Operations, and Executive
Vice President. 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, 2003.
John H. Shannon, 65Mr. 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 then. Mr. Shannon is elected to his positions on an
annual basis, and his present term of office will
expire on May 31, 2003.
ITEM 2. - PROPERTIES
The headquarters of the Company are located at Suite 208,
2140 11th Avenue South, Birmingham Alabama 35205. The Company
occupies approximately 1500 square feet of office space under
lease. The properties of the subsidiary are described below.
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
3 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, Pelham, 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 856 vehicles which
includes 666 route trucks, 37 tractors, 96 trailers
and 57 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.
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, 2002 and 2001 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
Dividends Paid
Quarter High Low Per Share
Fiscal 2001
First $ 4.150 $ 2.950 $ .0625
Second 4.020 3.150 .0625
Third 3.950 3.400 .0625
Fourth 4.550 3.450 .0625
Fiscal 2000
First $ 3.563 $ 2.875 $ .0600
Second 4.750 3.063 .0625
Third 4.469 3.063 .0625
Fourth 4.500 3.688 .0625
As of August 12, 2002, 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:
Sale of Unregistered Securities
On May 6, 2002, an employee exercised stock options and purchased 1,000
shares of common stock of the Company for the sum of $3,810. The stock
options were issued on October 15, 2001 under the Company's 1996 Long
Term Incentive Plan. The issuance of the 1,000 shares of common stock
were exempt from registration under the Securities Act of 1933 pursuant
to Section 4(2) as a private offering.
Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Critical Accounting Estimates and Policies
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 judgements 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 judgement and use of assumptions
as to future uncertainties and, as a result, actual results
could differ from these estimates.
Adoption of EITF 01-9
During 2000 and 2001, the Financial Accounting Standards
Board's (FASB) Emerging Issues Task Force (EITF) addressed
various issues related to income statement classification of
certain promotional payments, including consideration from
a vendor to a reseller or another party that purchases the
vendor's products. EITF 01-9, Accounting for Consideration
Given by a Vendor to a Customer (Including a Reseller of
the Vendor's Products), was issued in November, 2001 and
codified earlier pronouncements. Adoption of EITF 01-9 is
required for financial statements covering annual or interim
periods beginning after December 15, 2001. The Task Force
encouraged earlier adoption, and the Company has complied
by adopting EITF 01-9 for the fiscal year ended May 31, 2002.
Financial statements for prior periods presented for comparative
purposes have been reclassified to comply with the income statement
display requirements under EITF 01-9. Adoption of EITF 01-9 in
the fiscal year ended May 31, 2002 had the effect of reducing
total revenues by $11.72 million, $l2.93 million, and $l3.46
million for fiscal years 2002, 2001, and 2000, respectively.
Selling, general and administrative expenses were reduced by
the same amounts. There was no net income impact.
Change in Accounting Policy
In conjunction with the adoption of EITF 01-9, the Company
changed its accounting policy for slotting fees from expensing
when incurred to allocating the cost over the life of the
agreement, generally one year. The trend of incurred slotting
fees has increased during the last half of each fiscal year,
and expensing when incurred would disproportionately reduce
total revenues, as slotting fee costs reduce revenues under
EITF 01-9. The change to allocating the cost over the life
of the agreement gives a much better match with the revenues
produced by the shelf space obtained with the slotting fees.
The cumulative effect of this change on the amount of
retained earnings at the beginning of fiscal year 2002,
was $0.41 million ($0.03 per share) and is included in
net income for fiscal year 2002, the period of the change,
as required by APB 20.
Impairment of Long -Lived Assets
Long-lived assets historically have been reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable.
Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of the assets to future
net cash flows estimated to be generated by such assets.
If such assets are considered to be impaired, the impairment
to be recognized is the amount by which the carrying amount
of the assets exceeds the fair value of the assets. There are
no events or changes in circumstances of which management is
aware indicating that the carrying value of the Company's
long-lived assets may not be recoverable. As described in
Note 1 of Notes to Consolidated Financial Statements under
"Recent Issued Accounting Standards," the accounting
treatment for goodwill and other intangible asset will
not have a material impact on the financial statements
of the Company.
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
The Company does not have off-balance sheet arrangement, financings,
or other relationships with unconsolidated entities or other
persons, also known as "special purpose entities." Transactions
with related parties, reported in Note 15 of 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 $13.4 million at May 31, 2002 compared
to $12.9 million at May 31, 2001. Net cash provided by
operations amounted to $1.9 million in fiscal year 2002,
$0.05 million in fiscal year 2001 and $8.4 million in fiscal
year 2000. Year-to-year changes in receivables, inventories,
prepaid expenses and accounts payable impacted cash flow
unfavorably for fiscal years 2002 and 2001. The most material
of these changes for fiscal 2002 was an increase in prepaid
expenses of $1.8 million, $1.0 million of which was slotting
fees that were set up to be allocated over the lives of the
slotting fee agreements. Most of the balance of the increase
in prepaid expenses was in prepaid taxes and prepaid insurance.
There was a net decrease in investment securities providing
$2.5 million in cash this year $1.9 million in 2001, and
a net cash usage of $4.4 million to increase investment
securities in 2000.
Additions to property, plant and equipment, net of disposals,
were $3.8 million, $1.3 million and $0.1 million in fiscal
years 2002, 2001, and 2000, respectively, and are expected
to be about $1.8 million in 2003. Included in this year's
additions was $4.0 million to upgrade the potato chip
packaging department with new conveyors, scales, packaging
machines, etc. Expenditures of $0.6 million were also made
on a special warehouse renovation project and $0.3 million
on the corn products department. These projects were
completed in fiscal 2002. In addition to the liquidation
of investment securities previously discussed, capital
expenditures were financed by increasing bank debt by $3.1 million.
Cash dividends of $3.0 million, $3.0 million and $2.9 million
were paid during fiscal years 2002, 2001, and 2000, respectively.
Cash in the amount of $0.2 million was used to purchase
treasury shares in fiscal 2002, $0.5 was used in 2001,
and $0.3 million was used for this purpose in 2000.
Long-term liabilities as a percentage of total capitalization
was 14.4% at May 31, 2002. The Company's current ratio at
year end was 3.26 to 1.00.
Operating Results
Net sales and other operating income increased by 1.8% in fiscal year 2002, and
decreased by 8.5% and 2.3 % in fiscal years 2001 and 2000, respectively. The
increase in 2002 was primarily due to less promotional payments to vendors that
were subtracted from sales as required by EITF 01-9. The sales decreases for
fiscal 2001 and 2000 were 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 which is explained further in a
separate section of this Management's Discussion.
The Company's investment income was 4.7% of income before cumulative
effect of a change in accounting policy and income taxes in 2002,
7.4% in 2001, and 3.1% in 2000. Investment income for fiscal year
2002 was lower than 2001 because of a lower level of investment
securities and generally lower interest rates. Investment income
for fiscal year 2001 was higher than the previous year because
investment securities were at a higher level for most of the year.
The cash and notes received from the sale of the Nashville plant
and equipment were major factors contributing to the increase in
investments for fiscal 2001.
Cost of sales as a percentage of net sales amounted to 51.9% in 2002,
52.2% in 2001, and 50.7% in 2000. The cost decrease in 2002 was due
primarily to lower energy costs, while the cost increase in 2001
was because of higher energy prices. Favorable trends in commodity
prices and packaging costs were the major factors contributing to
the relatively low cost of sales in fiscal 2000.
Selling, general and administrative expenses were 45.2% of sales
in 2002, 45.1% in 2001, and 45.8% in 2000. The improvement in
fiscal 2002 and 2001 was 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 2002, 2001, and 2000
were 38.8%, 34.4% and 42.3%, respectively. Note ten to the
consolidated financial statements provides additional information
about the provision for income taxes.
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 investment
securities and 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 funds. Its bank loans also carry variable rates.
Assuming year end 2002 variable rate investment levels and
bank loan balances, a one-point change in interest rates
would impact interest income by $160 and interest
expense by $40,004.
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.
Environmental Matters
There have been no material effects of compliance with
governmental provisions regulating discharge of materials
into the environment.
Restructuring Charges
The restructuring charge of $2,564,892 recognized in
fiscal 2000 relates to a restructuring plan approved by
the Board of Directors in January 2000 whereby the
Nashville plant which primarily manufactured low fat
snacks was closed, a voluntary retirement package was
offered to a group of qualified employees, and the
company-operated distribution system for Golden Flake
Brand products in three fringe sales regions in
Central Florida was discontinued.
The following is a summary of the one-time restructuring
charge to expense for the year ended May 31, 2000.
Employee termination benefits $1,335,550
Other Charges 1,229,342
Total restructuring charge $ 2,564,892
Net after tax $ 1,607,892
Per share $ .13
The employee related termination benefits of $1,335,550
primarily includes severance costs for 104 employees, 10 of
which accepted the voluntary retirement package, 71 of
which were employed in the three fringe sales regions of
Central Florida and 23 of which were employed at the
Nashville plant.
The other charges of $1,229,342 consisted primarily of gains,
and losses on disposal of property and equipment and the cost
related to the exiting of sales regions in Central Florida.
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.
ITEM 7A. - 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 11.
ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the registrant
and its subsidiary for the year ended May 31, 2001,
consisting of the following, are contained herein:
Consolidated Balance Sheets - May 31, 2002 and 2001
Consolidated Statements of Income - Years ended May 31, 2002,
2001 and 2000
Consolidated Statements of - Years ended May 31, 2002,
Cash Flows 2001 and 2000
Consolidated Statements
of Changes - Years ended May 31, 2002,
in Stockholders' Equity 2001 and 2000
Notes to Consolidated Financial
Statements - Years ended May 31, 2002,
2001 and 2000
Quarterly Results of Operations - Years ended May 31, 2002
and 2001
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and
Board of Directors of
Golden Enterprises, Inc.
We have audited the accompanying consolidated balance sheets of
Golden Enterprises, Inc. and subsidiary as of May 31, 2002 and
2001, and the related consolidated statements of income,
changes in stockholders' equity and cash flows for each of
the three years in the period ended May 31, 2002. Our
audits also included the financial statement schedule
listed at Item 14 (2). These consolidated financia
l statements and financial statement schedule are the
responsibility of the Company's management.
Our responsibility is to express an opinion
on these consolidated financial statements
and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States of
America. 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 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, 2002 and 2001, and the
consolidated results of their operations and their cash
flows for each of the three years in the period ended
May 31, 2002, in conformity with accounting principles
generally accepted in the United States of America.
Also, in our opinion, such financial statement schedule,
when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly,
in all material respects, the information set forth
therein.
As discussed in Note 3 to the financial statements,
effective June 1, 2001 the Company changed its
accounting policy with respect to slotting fees.
Birmingham, Alabama
July 18, 2002 DUDLEY, HOPTON-JONES, SIMS & FREEMAN PLLP
CONSOLIDATED BALANCE SHEETS
May 31, 2002 and 2001
ASSETS
2002 2001
Current Assets:
Cash and cash equivalents $286,480 $ 710,278
Investment securities
available-for-sale 15,998 2,500,147
Receivables:
Trade accounts 9,014,850 9,017,885
Other 931,911 430,197
9,946,761 9,448,082
Less: Allowance for
doubtful accounts 196,100 346,100
9,750,661 9,101,982
Notes receivable,
current 45,918 42,399
9,796,579 9,144,381
Inventories:
Raw materials 1,605,640 1,883,167
Finished goods 3,604,482 2,856,593
5,210,122 4,739,760
Prepaid expenses 4,031,037 2,275,659
Total current assets 19,340,216 19,370,225
Property, Plant and equipment:
Land 3,086,571 3,528,054
Buildings 17,040,006 17,151,522
Machinery and
equipment 40,819,601 36,023,701
Transportation
equipment 15,286,803 15,727,913
76,232,981 72,431,190
Less accumulated
depreciation 59,136,721 57,433,048
17,096,260 14,998,142
Other Assets
Notes receivable,
long-term 1,981,718 2,027,636
Cash surrender
value of life
insurance 2,785,336 2,835,950
Other 15,337 15,339
Total other assets 4,782,391 4,878,925
Total $41,218,867 $39,247,292
See Accompanying Notes to Consolidated Financial Statements.
LIABILITIES AND STOCKHOLDERS' EQUITY
2002 2001
Current Liabilities:
Checks outstanding in
excess of bank balances $ 621,326 $ 1,552,461
Accounts payable 2,803,182 2,924,428
Current portion of
long-term debt 371,516 -___
Note payable -
line of credit 478,894 860,100
Other accrued expenses 975,047 941,360
Deferred income taxes 607,489 142,522
Salary continuation plan 81,805 40,773
Total current
liabilities 5,939,259 6,461,644
Long-term liabilities:
Note payable - bank,
non current 3,150,020 -___
Salary continuation plan 1,932,586 1,887,050
Total long-term
liabilities 5,082,606 1,887,050
Deferred income taxes 551,742 1,098,672
Commitments and Contingencies - -
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 6,499,554
Retained earnings 24,461,288 24,426,345
Treasury shares - at cost (1,945,488 shares in 2002
and 1,896,052
shares in 2001) (10,533,177) (10,345,168)
Total stockholders'
equity 29,645,260 29,799,926
Total $41,218,867 $39,247,292
CONSOLIDATED STATEMENTS OF INCOME
Years ended May 31, 2002, 2001 and 2000
2002 2001 2000
Revenues:
Net sales $104,572,608 $102,796,741 $112,723,457
Other income, including gain on sale
of property and equipment of
$756,259 in 2002, $599,497
in 2001
and $250,180
in 2000 1,121,956 985,741 753,385
Investment
income 197,686 304,783 67,454
Total
revenues 105,892,250 104,087,265 113,544,296
Cost And
Expenses:
Cost of
sales 54,257,812 53,636,803 57,146,571
Selling,
general
and
administrative
expenses 47,107,554 46,153,184 51,168,987
Interest 110,932 3,068 -
Contributions to employee
401(k) profit-sharing
and employee stock
ownership
plans 177,405 181,055 510,000
Restructuring
charge - - 2,564,892
Total costs a
and expenses 101,653,703 99,974,110 111,390,450
Income before cumulative
effect of a change
in accounting
policy and
income taxes 4,238,547 4,113,155 2,153,846
Provision for income taxes:
Currently payable:
Federal 1,762,000 1,678,000 1,242,000
State 225,000 199,000 188,000
Deferred
taxes (344,000) (464,000) (519,000)
Total provision
for income
taxes 1,643,000 1,413,000 911,000
Net income
before
cumulative
effect of a
change in
accounting
policy 2,595,547 2,700,155 1,242,846
Cumulative effect
of a change
in accounting
policy net
of taxes
of $262,037 413,401 - -
Net income $3,008,948 $2,700,155 $1,242,846
Per share of common stock:
Net income before cumulative
effect of a change
in accounting
policy $0.22 $0.23 $0.10
Cumulative effect of a
change in accounting
policy net of
taxes $0.03 - -
Basic earnings $0.25 $0.23 $0.10
Diluted earnings $0.25 $0.23 $0.10
Basic weighted
shares
outstanding 11,898,097 11,965,671 12,154,057
See Accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended May 31, 2002, 2001, and 2000
2002 2001 2000
Cash flows from
operating activities:
Net income $3,008,948 $2,700,155 $1,242,846
Adjustment to
reconcile
net income
to net cash
provided
by operating
activities:
Cumulative
effect of
a change
in accounting
policy (413,401) - -
Depreciation
and
amortization 2,593,621 2,435,599 3,230,321
Deferred income
taxes (344,000) (464,000) (519,000)
Gain on sale of
property and
equipment (756,259) (599,497) (250,180)
Change in
operating
assets and
liabilities:
(Increase)
decrease
in
receivables -
net (648,679) (497,688) 1,631,229
(Increase)
decrease in
inventories (470,362) (697,415) 586,264
(Increase)
decrease
in prepaid
expenses (1,079,977) (71,729) 145,045
Decrease in cash
surrender value
of insurance 50,614 30,591 2,618
(Decrease)
increase
in accounts
payable (121,246) (2,073,900) 1,308,713
Increase
(decrease)
in accrued
expenses (33,687) (795,999) 784,993
Increase in salary
continuation plan 86,568 83,542 264,828
Net cash provided
by operating
activities 1,939,514 49,659 8,427,677
Cash flows from investing
activities:
Purchase of
property,
plant and
equipment (5,236,601) (2,443,988) (1,065,586)
Proceeds from sale of
property, plant
and equipment 1,301,160 253,972 1,166,672
Cash received from disposal
of Nashville plant
and equipment --_ 1,710,000 -
Collection of notes
receivable 42,399 19,965_ -
Investment securities available-for-sale:
Purchases 5,261,176) (10,123,555) (6,909,902)
Proceeds from
disposals 7,745,325 12,045,251 2,550,000
Net cash (used in)
provided by
investing
activities (1,408,893) 1,461,645 (4,258,816)
Cash flows from financing activities:
Debt proceeds 7,806,676 860,100 -
Debt repayments 4,666,346) -_
Increase (decrease) in checks
outstanding in
excess of bank
balances (931,135) 931,996 (342,009)
Purchases of
treasury shares (193,419) (467,951) (300,797)
Proceeds from
exercise of
stock option 3,810 --- -----
Cash dividends paid (2,974,005) (2,960,245) (2,918,101)
Net cash (used in)
financing activities (954,419) (1,636,100) (3,560,907)
Net (decrease)
cash equivalents (423,798) (124,796) 607,954
Cash and cash
equivalents
at beginning
of year 710,278 835,074 227,120
Cash and cash
equivalents at
end of year $ 286,480 $ 710,278 $ 835,074
Supplemental information
Cash paid durint
the year for:
Income taxes $ 2,343,597 $ 1,898,808 $ 1,349,392
Interest 110,932 3,068 --_
See Accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended May 31, 2002, 2001 and 2000
Additional Total
Common Paid-in Retained Treasury Stockholders'
Stock Capital Earnings Shares Equity
Balance - May 31 1999 $ 9,219,195 $ 6,499,554 $
26,361,690 $ (9,576,420 ) $ 32,504,019
Net income - 2000 -____ -___
1,242,846 -___ 1,242,846
Cash dividends declared -
$.24 per share -____ -___
(2,918,101 ) -___ (2,918,101 )
Treasury shares purchased -____ -___
-___ (300,797 ) (300,797 )
Balance - May 31 2000 9,219,195 6,499,554
24,686,435 (9,877,217 ) 30,527,967
Net income - 2001 -____ -___
2,700,155 -___ 2,700,155
Cash dividends declared -
$.25 per share -____ -___
(2,960,245 ) -___ (2,960,245 )
Treasury shares purchased -____ -___
-___ (467,951 ) (467,951 )
Balance - May 31 2001 9,219,195
6,499,554 24,426,345 (10,345,168 )
29,799,926
Net income - 2002 -____ -___
3,008,948 -___ 3,008,948
Cash dividends declared -
$.25 per share -____ -___
(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 $ 9,219,195 $
6,497,954 $ 24,461,288 $ (10,533,177 ) $
29,645,260
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
nd 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 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.
Cash and Cash Equivalents
The Company considers all highly liquid investments
purchased with a maturity of three months or less
to be cash equivalents.
Investment Securities
Investment securities at May 31, 2002 are principally
instruments of municipalities and of short-term mutual
municipal funds. The Company currently classifies all
investment securities as available-for-sale. Securities
accounted for as available-for-sale include bonds, notes,
common stock and non-redeemable preferred stock not
classified as either held-to-maturity or trading.
Securities classified as available-for-sale are required
to be reported at fair value with unrealized gains and
losses, net of taxes, excluded from earnings and shown
separately as a component of accumulated other
comprehensive income within stockholders' equity.
Realized gains and losses on the sale of securities
available-for-sale are determined using the
specific-identification method.
Inventories
Inventories are stated at the lower of cost or market.
Cost is computed on the first-in, first-out method.
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 income.
Self-Insurance
Self-insurance reserves are established for estimated
losses for automobile liability, general liability,
workers' compensation and property losses based on
claims filed and claims incurred but not reported.
These reserves are necessarily based on estimates;
thus actual results may differ. The Company is
insured for losses in excess of $150,000, $150,000,
$250,000 and $100,000 per occurrence for automobile
liability, generally liability, workers' compensation
and property losses, respectively.
Advertising
The Company expenses advertising costs as incurred.
These costs amounted to $5,344,366, $6,043,507 and
$5,648,140 for the fiscal years 2002, 2001, and 2000,
respectively, and are included in selling, general and
administrative expenses in the Consolidated Statement
of Income.
Income Taxes
Deferred income taxes are recorded on the differences
between the tax bases of assets and liabilities and the
amounts at which they are reported in the consolidated
financial statements. Recorded amounts are adjusted to
reflect changes in income tax rates and other tax law
provisions as they become enacted.
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 United States of America.
Pension and Postretirement Benefits
The Company has adopted the revised disclosure requirements
of the Statement of Financial Accounting Standards No. 132,
Employers' Disclosures about Pensions and Other
Postretirement Benefits. SFAS 132 standardizes the
disclosure requirements for pensions and other
postretirement benefits, eliminates certain disclosures
and requires additional information on changes in benefit
obligations and fair values of plan assets. The adoption
of SFAS 132 did not have a material impact on the
financial statements of the Company.
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 Standards
In June 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 141,
Business Combinations (SFAS 141) and No. 142, Goodwill and
Other Intangible Assets (SFAS 142). SFAS 141 requires that
the purchases method of accounting be used for all business
combinations initiated after June 30, 2001. SFAS 141 also
provides new criteria to determine whether an acquired
intangible asset should be recognized separately from
goodwill. The adopting of SFAS 141 had no impact on the
Company's results of operations or financial condition.
SFAS 142 is effective for the Company as of June 1, 2002.
In accordance with SFAS 142, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized
but will be subject to impairment testing. Intangible assets
with finite lives will continue to be amortized over their
useful lives. SFAS 142 requires an initial goodwill and
indefinite lived intangible asset impairment assessments
in the year of adoption, and at a minimum, annual
impairment testing thereafter. The adoption of
SFAS 142 is not expected to have a material
impact on the Company's results of operations or
financial conditions.
Recent Issued Accounting Standards - Continued
In August 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS 144). SFAS 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. SFAS 144 is effective for the Company as of
June 1, 2002. The adoption of SFAS 144 is not expected
to have a material impact on the Company's results of
operations or financial condition.
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. This 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 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 $11.7 million, $12.9 million and
$13.4 million for the years ended 2002, 2001
and 2000, respectively. There was no resulting
impact on net income from adopting EITF 01-09.
Stock Compensation
The Company has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25), and related
interpretations in accounting for its employees
stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals
the market price of the underlying stock on the date
of grant, no compensation expense is recognized
(see Note 12).
Reclassifications
Certain prior year amounts have been reclassified to
conform to current year classifications.
NOTE 2 - INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and
losses and fair value of the investment securities
available-for-sale as of May 31, 2002 and 2001,
are as follows:
May 31, 2002
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
Municipal
obligations $ -___ $ - $ - $ -___
Mutual funds 15,998 - - 15,998
$15,998 $ - $ - $ 15,998
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
Municipal
obligations $ 625,326 $ - $ - $ 625,326
Mutual funds 1,874,821 - - 1,874,821
$2,500,147 $ - $ - $2,500,147
Maturities of investment securities classified as available-
for-sale at May 31, 2002 by contractual maturity are shown
below. Expected maturities will differ from contractual
maturities because borrowers may have the right to recall or
prepay obligations with or without call or prepayment
penalties
Amortized
Cost Fair Value
Investment securities available-for-sale:
Due within one year $ 15,998 $ 15,998
Due after one year
through three years - -
Due after three years
through five years - -
Total $ 15,998 $ 15,998
Proceeds from sales of investment securities available-for-
sale during fiscal 2002, 2001 and 2000 were $7,745,325, $12,045,251 and
$2,550,000, respectively. No gains or
losses were realized on those sales for fiscal 2002,
2001 and 2000.
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). The effect on income in 2001 and
2000 has not been determined. Quarterly
results for 2002 reflecting this change in
accounting are included in Note 17, Quarterly
Results of Operations. Pro forma earnings per s
hare amounts for previous quarters, assuming the
new policy was applied retroactively, are as follows:
Basic earnings per share: First Second Third
Net income - as reported $ .09 $ .05 $ .09
Net income - pro forma .09 .05 .09
Diluted earnings per share:
Net income - as reported $ .09 $ .05 $ .09
Net income - pro forma .09 .05 .09
NOTE 4 - NOTES RECEIVABLE
Notes receivable as of May 31, 2002 and 2001 consist of the following:
2002 2001
8% note, due in 120 monthly
installments of $1,092
through November 1, 2010,
collateralized by
equipment and
personal guarantee $ 80,625 $ 86,999
8% note, due in 120 monthly
installments of $3,640
through November 1, 2010,
collateralized by property 268,749 289,995
8% note, due in 360 monthly
installments of $12,474
through November 1, 2030,
collateriazed by property 1,678,262 1,693,041
2,027,636 2,070,035
Less current
portion 45,918 42,399
$ 1,981,718 $2,027,636
Maturities at May 31,
2004 $ 49,729
2005 53,856
2006 58,327
2007 63,168
2008 68,410
Thereafter 1,688,228
NOTE 5 - PREPAID EXPENSES
At May 31, prepaid expenses consist of the following:
2002 2001
Prepaid Slotting fees $ 1,001,086 $ -____
Other prepaid expenses 3,029,951 2,275,659
$4,031,037 $2,275,659
NOTE 6 - RESTRUCTURING CHARGES
The restructuring charge of $2,564,892 recognized in the
fourth quarter of fiscal 2000 relates to a restructuring
plan approved by the Board of Directors in January 2000
whereby the Nashville plant which primarily manufactured
low fat snacks was closed, a voluntary retirement
package was offered to a group of qualified employees,
and the Company-operated distribution system for
Golden Flake Brand products in three fringe sales
regions in Central Florida was discontinued.
The following is a summary of the one-time
restructuring charge to expense for the year
ended May 31, 2000.
Employee termination benefits $ 1,335,550
Other charges 1,229,342
Total restructuring charge $ 2,564,892
Net after tax $ 1,607,892
Per share $ .13
The employee related termination benefits of $1,335,550
primarily includes severance costs for 104 employees,
10 of which accepted the voluntary retirement package,
71 of which were employed in the three fringe sales
regions of Central Florida and 23 of which were
employed at the Nashville plant.
The other charges of $1,229,342 consisted primarily
of gains and losses on disposal of property and
equipment and the cost related to the exiting
of sales regions in Central Florida.
NOTE 7 - OTHER ACCRUED EXPENSES
At May 31, other accrued expenses consist of the
following:
2002 2001
Accrued payroll $ 490,000 $ 288,406
Other accrued expenses 485,047 652,954
$ 975,047 $ 941,360
NOTE 8 - NOTES PAYABLE - LINE OF CREDIT
Notes payable - line of credit consists of a revolving
line of credit with a balance of $478,894 at May 31,
2002. The interest rate varies with the bank's prime
2003. (4.75% at May 31, 2002) with principal and
2004. interest due December 31, 2002.
NOTE 9 - LONG-TERM LIABILITIES
2002
Long-term debt consist of the following:
Note payable - bank - payable in equal monthly
installments of $41,688 including interest at
the LIBOR index rate plus 1.75%
3.59% at May 31, 2002) through April 3, 2011,
secured by equipment $ 3,521,536
Less: current portion 371,516
$ 3,150,020
Maturities at May 31,
2004 $ 393,916
2005 408,292
2006 423,194
2007 438,639
2008 454,648
Thereafter 1,031,331
Other long-term obligations at May 31,2002 and 2001
consist of the following:
2002 2001
Salary continuation plan $2,014,391 $1,927,823
Less current portion (81,805) (40,773)
$1,932,586 $1,887,050
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
$127,000, $121,000 and $265,000 for fiscal
2002, 2001and 2000 respectively.
NOTE 10 - INCOME TAXES
The effective tax rate for continuing operations differs
from the expected tax using statutory rates.
A reconciliation between the expected tax and the
actual income tax expense follows:
2002 2001 2000
Tax on income at
statutory rates $ 1,441,000 $1,398,000 $732,000
Increase (decrease)
resulting from:
State income
taxes, less
Federal income
tax benefit 149,000 131,000 124,000
Tax exempt interest (9,000) (59,000) (20,000)
Other - net 62,000 (57,000) 75,000
Total $ 1,643,000 $ 1,413,000 $ 911,000
The tax effects of temporary differences that result in
deferred tax assets and liabilities are as follows:
2002 2001
Deferred tax assets
Salary continuation plan $ 723,500 $ 692,500
Allowance for
doubtful accounts 66,674 117,674
790,174 810,174
Deferred tax liabilities
Property and equipment 1,275,242 1,791,172
Prepaid expenses 674,163 260,196
1,949,405 2,051,368
Total $ (1,159,231) $ (1,241,194)
NOTE 11 - 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, 2002, 2001 and 2000 were
$177,405, $181,055, and $255,000, respectively.
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, 2002, 2001 and 2000 were $-0-, $-0-, and
$ 255,000, respectively. 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 contributions to the 401(k) Profit-Sharing Plans
and the Employees Stock Ownership Plan may not exceed
fifteen percent of the total compensation of all
participating employees. The Company expects to
continue these plans indefinitely; however, the
rights to modify, amend or terminate the plans have been
reserved.
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:
May 31, 2002, 2001 and 2000
002 2001
Accrued Salary Continuation
Plan - beginning of year $1,927,823 $1,844,281
Benefits Accrued 127,341 121,190
Benefits Paid (40,773) (37,648)
Accrued Salary
Continuation
Plan - end of year $2,014,391 $1,927,823
NOTE 12 - STOCK OPTIONS AND LONG-TERM INCENTIVE PLANS
The Company has a stock option plan and a long-term
incentive plan currently in effect under which
future grants may be issued: the 1988 Stock Option a
nd Stock Appreciation Plan (the 1988 Plan) and the 1996
Long-Term Incentive Plan (the 1996 Plan). The Plans are
administered by the Stock Option Committee of the
Board of Directors, which has sole discretion,
subject to the terms of the Plans, 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 Plans, 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 2002,
2001 and 2000 are exercisable.
The 1988 Plan provides that non-qualified stock
options and stock appreciation rights may be
granted to key employees for up to 400,000 shares of the
Company's common stock. The options and stock appreciation
rights are exercisable three years after date of grant.
The option price may be less than, equal to or greater
than the fair market value of the stock on the date of
grant. Each stock appreciation right entitles the
option holder, upon exercise of the related stock
option, to receive from the Company the amount of
the appreciation in the underlying common stock as
determined by the excess of the fair market value
of a share of common stock on the exercise date of
the related stock option over the option price. The
options and stock appreciation rights granted, if
not exercised, will expire three months from the date
they are exercisable. There were no stock options and
stock appreciation rights outstanding under this
Plan at May 31, 2002, 2001 and 2000; however, there
were 175,500 shares available for granting of
additional options. The 1988 Plan expires July 6, 2002
except as to options and stock appreciation rights
outstanding on that date; but, the rights to amend,
suspend or terminate the Plan have been reserved.
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 options 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. 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
2002 2001 2000
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Outstanding -
beginning
of year 40,000 3.50 340,000 6.92 340,000 6.92
Granted 330,000 3.81 - - - -
Exercised.. ( 1,000) 3.81 - - - -
Forfieted - - - - - -
Cancelled - - (300,000) 7.38 - -
Outstanding -
end of year 369,000 3.78 40,000 3.50 340,000 6.92
The Company has elected to follow Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB25) and related Interpretation in
accounting for its Employee Stock Options rather
than the Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based
Compensation. Under APB25, because the exercise
price of the Company's employee stock options
equals the market price of the underlying stock
on the date of grant, no compensation expense is
recognized.
Proform a information regarding net income and
earnings per share is presented as if the Company
had accounted for its employee 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 2001 or 2000.
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 its employee
stock options.
The Company's actual and proform a information is
as follows:
2002 2001 2000
Net income:
As reported $3,008,948 $2,700,155 $1,242,846
Pro forma 2,956,659 2,700,155 1,242,846
Basic
earnings
per share:
As reported $ .25 $ .23 $ .10
Pro forma .25 .23 .10
Diluted earnings
per share:
As reported $ .25 $ .23 $ .10
Pro forma .25 .23 .10
NOTE 13 - NET INCOME PER SHARE
During 1996, the FASB issued Statement of Financial
Accounting Standards No. 128, Earnings Per Share.
SFAS 128 specifies the computation, presentation
and disclosure requirements for earnings per share,
replacing the presentation of primary earnings per
share with the presentation of basic earnings per
share. The only difference in the two methods for
computing the Company's per share amounts is
attributable to outstanding options, under the
stock options and long-term incentive plans.
The effect of the stock options was determined
using the treasury stock method. Consolidated net
income as reported was not affected. Shares used
to compute diluted earnings per share are as follows:
Average Common Stock Shares
2002 2001 2000
Basic weighted
shares
outstanding 11,898,097 11,965,671 12,154,057
Effects of options 2,796 2,152 -
Diluted shares 11,900,893 11,967,823 112,154,057
NOTE 14 - 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 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 values of investment securities have been
determined using values supplied by independent
pricing services and are disclosed together with
carrying amounts in Note 2. The fair value of
notes receivable is estimated by using a discount
rate that approximates the current rate for comparable notes.
At May 31, 2002 and 2001 the aggregate fair value
was approximately $2,208,839 and $2,160,906 compared
to a carrying amount of $2,027,636 and $2,070,035,
respectively.
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 15 - COMMITMENTS AND CONTINGENCIES
Rental expense was $547,742 in 2002, $410,189 in 2001, and
$498,307 in 2000. At May 31, 2002, 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
2003 $24,000 $187,000 $211,000
2004 -___ 187,000 187,000
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
$1,500,000 outstanding at May 31, 2002, and $2,000,000
outstanding at May 31, 2001 to support the Company's
commercial self-insurance program. The Company pays
a commitment fee of 0.375% to maintain the letters
of credit.
NOTE 16 -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 its cash accounts primarily
with banks located in Alabama. The total cash
balances are insured by the F.D.I.C. up to $100,000
per bank. The Company had cash balances on deposit
with an Alabama bank at May 31, 2002 that exceeded
the balance insured by the F.D.I.C. in the amount of $625,175.
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.
NOTE 17 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results
of operations of the years ended May 31, 2002 and 2001.
Per Share
Total Revenues Net Income Net Income
Quarter
2002
First $ 26,108,693 $ 1,059,969 $0.09
Second 25,130,769 565,404 0.05
Third 27,137,452 1,122,950 0.09
Fourth 27,515,336 260,925 0.02
For the
year $ 105,892,250 $ 3,008,948 $0.25
2001
First $ 26,573,809 $ 1,272,111 $0.11
Second 25,457,003 1,079,301 0.09
Third 25,721,660 389,156 0.03
Fourth 26,334,793 (40,413) 0.00
For the
year $104,087,265 $ 2,700,155 $0.23
Revenues for the quarterly information 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. 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.
NOTE 18 - SUPPLEMENTARY STATEMENT OF INCOME INFORMATION
The following tabulation gives certain supplementary
statement of income information for continuing
operations for the years ended May 31, 2002,
2001 and 2000:
2002 2001 2000
Maintenance and
repairs $ 5,290,498 $5,375,639 $ 5,889,306
Depreciation
and
amortization 2,593,621 2,435,599 3,230,321
Payroll taxes 2,473,871 2,388,828 2,599,980
Advertising
costs 5,344,366 6,043,507 5,648,140
Amounts for depreciation and amortization of intangible
assets, royalties, other taxes, rents and research and
development costs are not presented because each of
such amounts is less than 1% of total revenues.
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
SUPPLEMENTAL FINANCIAL INFORMATION
Selected quarterly financial data for the
fiscal years ended May 31, 2002 and 2001
(unaudited)
(Dollar amounts in thousands, except per
share data)
First Second Third Fourth
Quarter Quarter Quarter Quarter
2002
Total
revenues $26,109 $25,131 $27,137 $27,515
Income before
income taxes $1,675 $920 $1,787 $533
Net income $1,060 $565 $1,123 $261
Net income
per share $0.09 $0.05 $0.09 $0.02
Cash dividends
per share $0.0625 $0.0625 $0.0625 $0.0625
2001
Total
revenues $26,574 $25,457 $25,722 $26,335
Income before
income taxes $2,004 $1,689 $598 $(178)
Net income $1,272 $1,079 $389 $(40)
Net income
per share $0.11 $0.09 $0.03 $0.00
Cash dividends
per share $0.0600$0.0625 $0.0625 $0.0625
Revenues for the quarterly information 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 discussed
in Note 3 to the Company's consolidated financial
statements.
ITEM 9. - CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
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
With the exception of a description of Executive
Officers of The Registrant which appears on page 5
herein, Part III is omitted because prior to
September 28, 2002, the Company will file a
definitive Proxy Statement with the Securities
and Exchange Commission pursuant to Regulation
14A which involves the election of directors.
PART IV
ITEM 14. - 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 - May 31, 2002 and 2001
Consolidated Statements of Income - Years ended
May 31, 2002, 2001 and 2000
Consolidated Statements of Changes in Stockholders'
Equity - Years ended May 31, 2002, 2001 and 2000
Consolidated Statements of Cash Flows - Years ended
May 31, 2002, 2001 and 2000
Notes to Consolidated Financial Statements
The following consolidated financial statements schedule is
included in Item 14 (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:
10.1 - A copy of Contract for Sale and Purchase of
Ocala, Florida surplus property dated January 24, 2002.
10.2 - A copy of Amendment to Salary Continuation Plan,
Retirement and Disability for F. Wayne Pate dated
April 9, 2002.
10.3 - A copy of Amendment to Salary Continuation Plan,
Retirement and Disability for John S. Stein dated
April 9, 2002.
10.4 - A copy of Amendment to Salary Continuation Plan,
Death Benefits for John S. Stein dated April 9, 2002.
10.5 - A copy of Retirement and Consulting Agreement
for John S. Stein dated April 9, 2002.
10.6 - A copy of Salary Continuation Plan for Mark W.
McCutcheon dated May 15, 2002.
10.7 - A copy of Trust Under Salary Continuation Plan for
Mark W. McCutcheon dated May 15, 2002.
18.1 - A copy of a letter from Dudley, Hopton-Jones,
Sims & Freeman PLLP the Company's independent accountant
describing a change for the fiscal year ended May 31, 2002
in the method of accounting for slotting fees from expensing
the costs as incurred to capitalizing and amortizing such
costs over the expected benefit period, which is generally
one year.
(b) Report on Form 8-K - The Registrant did not file a
Form 8-K report during the last quarter of the
period covered by this report.
(c) Exhibits. See (a) 3. above.
(c) Financial Statement Schedules. The
response to this portion of Item 14, is submitted under
Item 14.(a) 1. and 2. above.
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 August 24, 2002
John H. Shannon 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
Chairman of the Board August 24, 2002
Chief Executive August 24, 2002
Officer, President and Director
Vice President,
Secretary, August 24, 2002
Principal Financial Officer
and Controller
Director August 24, 2002
Director August 24, 2002
Director August 24, 2002
Director August 24, 2002
Director August 24, 2002
Director August 24, 2002
Director August 24, 2002
Director August 24, 2002
Schedule II
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
Years ended May 31, 2000, 2001, and 2002
Additions
Balance at Charged to Balance
Allowance for Beginning Costs and at End
Doubtful Accounts of Year Expenses Deductions of Year
Year ended
May 31, 2000 $111,000 $690,983 $201,983 $600,000
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
INDEX TO EXHIBITS
Exhibit Number Page
10.1 A copy of Contract for Sale and Purchase of Ocala, Florida surplus
property dated January 24, 2002.
10.2 A copy of Amendment to Salary Continuation Plan, Retirement
10.3 and Disability for F. Wayne Pate dated April 9, 2002.
10.4 A copy of Amendment to Salary Continuation Plan, Retirement
10.5 and Disability for John S. Stein dated April 9, 2002.
10.4 A copy of Amendment to Salary Continuation Plan, Death
10.5 Benefits for John S. Stein dated April 9, 2002.
10.6 A copy of Retirement and Consulting Agreement for
10.7 John S. Stein dated April 9, 2002.
10.6 A copy of Salary Continuation Plan for Mark W.
10.7 McCutcheon dated May 15, 2002.
10.8 A copy of Trust Under Salary Continuation Plan for
10.9 Mark W. McCutcheon dated May 15, 2002.
18.1 A copy of a letter from Dudley, Hopton-Jones,
Sims & Freeman PLLP the Company's independent
accountant describing a change for the fiscal
year ended May 31, 2002 in the method of accounting
for slotting fees from expensing the costs as incurred
to capitalizing and amortizing such costs over the
expected benefit period, which is generally one year.