-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BxCrfOQF1yMf/cu5XmJLY+eqDKmbabgJmH3x3ILK5fo75EDBULdRyzjYVdI21Nbw OUvQ4/Hzw+s2n5qCD/kJjA== 0000913738-96-000039.txt : 19960830 0000913738-96-000039.hdr.sgml : 19960830 ACCESSION NUMBER: 0000913738-96-000039 CONFORMED SUBMISSION TYPE: ARS PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960829 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDEN ENTERPRISES INC CENTRAL INDEX KEY: 0000042228 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 630250005 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: ARS SEC ACT: 1934 Act SEC FILE NUMBER: 000-04339 FILM NUMBER: 96623233 BUSINESS ADDRESS: STREET 1: 2101 MAGNOLIA AVE STE 212 STREET 2: SOUTH CITY: BIRMINGHAM STATE: AL ZIP: 35205 BUSINESS PHONE: 2053266101 MAIL ADDRESS: STREET 1: 2101 MAGNOLIA AVE SOUTH STREET 2: STE 212 CITY: BIRMINGHAM STATE: AL ZIP: 35205 FORMER COMPANY: FORMER CONFORMED NAME: GOLDEN FLAKE INC DATE OF NAME CHANGE: 19761019 FORMER COMPANY: FORMER CONFORMED NAME: MAGIC CITY FOOD PRODUCTS INC DATE OF NAME CHANGE: 19700805 ARS 1 1996 Annual Report GOLDEN ENTERPRISES, INC. CONTENTS To Our Stockholders 2 Golden Flake Snack Foods Report 4 Financial Highlights 6 Consolidated Statements of Income 7 Consolidated Balance Sheets 8 Consolidated Statements of Cash Flows 10 Consolidated Statements of Changes in Stockholders' Equity 11 Notes to Consolidated Financial Statements 12 Report of Independent Certified Public Accountants 19 Market and Dividend Information 20 Financial Review 21 Management's Discussion and Analysis of Financial Condition and Results of Operations 22 Management of Golden Enterprises, Inc. and Its Subsidiaries 24 COUNSEL Spain & Gillon Birmingham, Alabama AUDITORS Dudley, Hopton-Jones, Sims & Freeman PLLP REGISTRAR & TRANSFER AGENT AMSOUTH BANK, N.A. P.O. Box 11426 Birmingham, Alabama 35202 Copies of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K will be furnished free of charge upon written request directed to John Shannon, 2101 Magnolia Avenue South, Suite 212, Birmingham, Alabama 35205. GOLDEN ENTERPRISES, INC. Golden Enterprises is a holding company which owns all the outstanding shares of Golden Flake Snack Foods, Inc. The Company was organized as Magic City Food Products, Inc. in 1946. In 1958, the Company adopted the name Golden Flake, Inc. Five years later, the Company purchased Don's Foods, Inc., a Nashville, Tennessee based manufacturer and distributor of snack food products. Don's Foods was operated as a separate entity until 1966 when Golden Flake was reorganized as a Delaware Corporation and combined Don's operations with those of Golden Flake. The Company acquired Steel City Bolt & Screw, Inc. and Nall & Associates, Inc. and a real estate and insurance subsidiary in 1971. Golden Enterprises was formed as a holding company with its operating division, Golden Flake Snack Foods, as a wholly-owned subsidiary on January 1, 1977. In September of that same year, the assets of the real estate and insurance subsidiary were sold. Steel City Bolt & Screw, Inc. and Nall & Associates, Inc. were sold as of the close of business on January 31, 1995, leaving Golden Flake as the Company's only subsidiary. This represents the corporate structure of Golden Enterprises as it stands today. TO OUR STOCKHOLDERS: The fiscal year ended May 31, 1996 was an eventful one for your Company and the snack food industry. During the year both Keebler and Eagle closed their salty snack plants and withdrew from the snack food market. This has given the Company some marketing opportunities which your management is pursuing with considerable success. Sales trends in fiscal year 1997 are showing some improvement. The emphasis on developing and distributing good tasting low fat and no fat snack food products continued during fiscal year 1996. The Company now distributes items in five different segments in this category and will continue to seek further growth with this type of product. Total revenues for fiscal 1996 were down 1% to $127.8 million from $129.4 million the previous year, and net income per share was $.28 compared to $.42 last year. Net income was down because of the lower sales volume combined with higher manufacturing costs and start up costs of the new low fat and no fat product lines. In October, 1995, the quarterly cash dividend was increased 2.2% from $.1150 to $.1175 per share. This was the twenty-fourth consecutive annual increase. Effective May 31, 1996, Sloan Y. Bashinsky, Sr. retired as Chairman of the Board. Mr. Bashinsky had been with the Company since 1946. His leadership has meant so much to the management of the Company, and he will be missed. Mr. Bashinsky has been elected Chairman Emeritus. His wife, Joann F. Bashinsky was elected to the Board on July 11, 1996, filling the vacancy that was created by Mr. Bashinsky's retirement. We appreciate the continued support of our customers, consumers, employees, directors, stockholders, suppliers and friends. We hope you will attend our annual meeting of stockholders to be held on September 27, 1996 at 11:00 A.M. at the general offices of Golden Flake Snack Foods, Inc. in Birmingham. Sincerely, /s/ John Stein John Stein Chairman, President and Chief Executive Officer GOLDEN FLAKE SNACK FOODS, INC. Golden Flake Snack Foods, Inc. manufactures and distributes a full line of snack foods through a direct-store delivery system. Plants are located in Nashville, Tennessee, Ocala, Florida, and Birmingham, Alabama with distribution into all or parts of twelve states and the Bahamas. During fiscal '96, we experienced substantial increases in the price of packaging materials, cardboard, most raw materials and utilities. These higher prices continue into fiscal '97 and while the prices of some items are expected to remain high, others have begun to moderate and hopefully will return to more normal levels. A very modest price increase on a few of its items was implemented by the Company during the past fiscal year. Two competitors exited the snack food market during the year. Eagle Snacks division of Anheuser Busch announced on February 7, 1996, that they were getting out of the snack food business. A few months earlier, Keebler, a division of United Biscuit, announced that they were leaving the snack food business. This has given us opportunities in a number of markets, but the competitive environment remains very tough. The Low Fat/No Fat snack category continues to have excellent growth and your company has made substantial investments in order to take advantage of the opportunities in this growing segment. Company-wide distribution of Low Fat Cheese Curls began in the fall of 1995. These are produced on a new manufacturing line in our Birmingham plant. Fat Free Caramel Popcorn and Low Fat Baked Potato Crisps were introduced in December 1995 and January 1996 respectively. Our largest investment to date in the Low Fat/No Fat category is in a state-of-the-art baked tortilla line in our Nashville plant. Production of Baked Tostados tortilla chips began in the spring of 1996. The products just listed, along with pretzels, give us items in five different segments in this area of growth. We will continue to pursue opportunities to provide consumers with other great tasting Low Fat/No Fat snacks. Our plans are to keep doing the "right things" the "right way" which is in keeping with the "Golden Rule", our company's guiding principle. With some improvement in prices and perhaps the competitive environment, fiscal '97 results should be better than last year. Golden Flake employees are dedicated to providing the best service and products available from any source. Thank you for your support. FINANCIAL HIGHLIGHTS
Condensed Financial Statements At year end: 1996 1995 1996 1995 Total Revenues 127,824,835 129,445,406 Total Assets 48,846,226 52,011,930 Pre-Tax Income 5,075,234 8,297,472 Total Liabilities 8,264,299 8,521,527 Net Income 3,375,234 5,154,214 Stockholders' Equity 40,581,927 43,490,403 Net Income Per Share .28 .42
NET INCOME ($ millions) 1992 4.8 1993 5.0 1994 3.1 1995 5.2 1996 3.4 REVENUES ($ millions) 1992 127.8 1993 130.5 1994 126.9 1995 129.4 1996 127.8 EARNINGS PER SHARE ($) 1992 .38 1993 .40 1994 .25 1995 .42 1996 .28 CAPITAL EXPENDITURES, NET OF DISPOSALS AND DEPRECIATION ($ millions) 1992 2.4 4.2 1993 1.8 3.9 1994 0.7 3.4 1995 1.4 2.9 1996 6.2 2.5 TOTAL ASSETS ($ millions) 1992 58.9 1993 57.8 1994 54.3 1995 52.0 1996 48.8 SHAREHOLDERS' EQUITY ($ millions) 1992 50.1 1993 49.1 1994 45.6 1995 43.5 1996 40.6 RETURN ON EQUITY (%) 1992 9.5 1993 10.0 1994 6.5 1995 11.6 1996 8.0 GOLDEN ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Years ended May 31, 1996, 1995 and 1994 1996 1995 1994 Revenues: Net sales $126,557,610 $128,144,977 $125,840,804 Other income, including gain on sale of property and equipment of $326,797 in 1996, $457,385 in 1995, and $465,743 in 1994 592,134 626,202 620,845 Net investment income 675,091 674,227 438,463 Total revenues 127,824,835 129,445,406 126,900,112 Costs and expenses: Cost of sales 57,330,989 56,285,331 55,113,907 Selling, general and administrative expenses 64,846,206 64,240,117 66,515,778 Contributions to employee profit-sharing and employee stock ownership plans 572,406 622,486 627,474 Interest -- -- 101 Total costs and expenses 122,749,601 121,147,934 122,257,260 Income from continuing operations before income taxes 5,075,234 8,297,472 4,642,852 Provision for income taxes: Currently payable: Federal 1,475,000 2,856,000 1,654,000 State 255,000 440,000 254,000 Deferred taxes (30,000) (150,000) (246,000) Total provision for income taxes 1,700,000 3,146,000 1,662,000 Income from continuing operations 3,375,234 5,151,472 2,980,852 Discontinued Operations: Income from operations of discontinued business, net of related income taxes -- 2,490 92,563 Gain on disposal of discontinued business -- 252 -- Net income $ 3,375,234 $ 5,154,214 $ 3,073,415 Per share of common stock: Income from continuing operations $.28 $.42 $.24 Income from operations of discontinued business -- -- .01 Net income $.28 $.42 $.25 See Accompanying Notes to Consolidated Financial Statements.
GOLDEN ENTERPRISES,INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS May 31, 1996 and 1995 ASSETS
1996 1995 Current Assets: Cash and cash equivalents $ 227,173 $ 623,592 Investment securities available-for-sale 7,260,285 13,828,663 Receivables: Trade accounts 9,839,209 10,234,990 Other 305,394 644,709 10,144,603 10,879,699 Less: Allowance for doubtful accounts 10,000 10,000 10,134,603 10,869,699 Inventories: Raw materials 2,191,788 1,697,629 Finished goods 2,580,584 2,857,217 4,772,372 4,554,846 Prepaid expenses 2,305,346 1,968,851 Total current assets 24,699,779 31,845,651 Property, plant and equipment: Land 3,840,429 3,974,429 Buildings 18,989,934 18,987,134 Machinery and equipment 36,939,067 31,745,856 Transportation equipment 16,697,460 16,271,171 76,466,890 70,978,590 Less: Accumulated depreciation 54,734,381 52,842,545 21,732,509 18,136,045 Other Assets 2,413,938 2,030,234 Total $48,846,226 $52,011,930
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995 Current Liabilities: Accounts payable $ 4,038,743 $ 4,324,632 Accrued income taxes -- 135,217 Other accrued expenses 1,318,263 1,307,049 Deferred income taxes 289,973 291,246 Total current liabilities 5,646,979 6,058,144 Long-term liabilities 823,227 598,922 Deferred income taxes 1,794,093 1,864,461 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 6,499,554 6,499,554 Retained earnings 34,170,713 36,521,373 Treasury shares -- at cost (1,622,843 shares in 1996 and 1,566,843 shares in 1995) (9,301,533) (8,818,533) Unrealized (losses) gains on securities available-for-sale, net of deferred income taxes (6,002) 68,814 Total stockholders' equity 40,581,927 43,490,403 Total $48,846,226 $52,011,930 See Accompanying Notes to Consolidated Financial Statements.
GOLDEN ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended May 31, 1996, 1995 and 1994 1996 1995 1994 Cash flows from operating activities: Net income $ 3,375,234 $ 5,154,214 $ 3,073,415 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,485,533 2,856,445 3,377,278 Compensation related to stock plan -- 3,509 53,574 Salary continuation benefits 224,305 120,396 257,726 Deferred income taxes ( 30,000) ( 150,000) ( 246,000) Gain on sale of property and equipment ( 326,797) ( 457,385) ( 465,743) Donation of property 134,000 -- -- Gain on disposal of discontinued business -- ( 252) -- Income from operations of discontinued business -- ( 2,490) ( 92,563) Dividends received from discontinued business -- 53,375 165,500 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable 735,096 ( 756,811) ( 1,120,776) (Increase) decrease in inventories ( 217,526) ( 303,593) 238,618 (Increase) decrease in prepaid expenses ( 336,495) ( 1,291) 126,019 (Increase) in other assets -- long-term ( 383,704) ( 276,622) ( 385,607) (Decrease) increase in accounts payable ( 285,889) 279,375 89,697 (Decrease) increase in accrued income taxes ( 135,217) 135,217 ( 22,303) Increase (decrease) in accrued expenses 11,214 ( 73,075) ( 67,582) Net cash provided by operating activities 5,249,754 6,581,012 4,981,253 Cash flows from investing activities: Purchase of property, plant and equipment ( 6,293,499) ( 1,477,321) ( 851,572) Proceeds from sale of property, plant and equipment 404,742 568,727 576,132 Net proceeds from disposal of discontinued business -- 2,050,252 -- Investment securities available-for-sale: Purchases ( 12,625,052) ( 85,802,956) -- Proceeds from disposals 19,076,530 85,497,783 -- Marketable securities: Purchases -- -- ( 52,614,763) Proceeds from disposals -- -- 54,607,629 Net cash provided by investing activities 562,721 836,485 1,717,426 Cash flows from financing activities: Payments of current installment of long-term debt -- ( 71,366) ( 107,723) Purchase of treasury shares ( 483,000) ( 1,883,106) ( 1,172,309) Proceeds from sale of treasury stock -- 182,500 205,000 Cash dividends paid ( 5,725,894) ( 5,663,997) ( 5,610,058) Net cash (used in) financing activities ( 6,208,894) ( 7,435,969) ( 6,685,090) Net (decrease) increase in cash and cash equivalents ( 396,419) ( 18,472) 13,589 Cash and cash equivalents at beginning of year 623,592 642,064 628,475 Cash and cash equivalents at end of year $ 227,173 $ 623,592 $ 642,064 Supplemental information: Cash paid during the year for: Income taxes $ 2,299,579 $ 3,101,623 $ 1,879,447 Interest $ -- $ -- $ 101 See Accompanying Notes to Consolidated Financial Statements.
GOLDEN ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended May 31, 1996, 1995 and 1994 Additional Unrealized Common Paid-in Retained Treasury Deferred Gains (Losses) Stock Capital Earnings Shares Compensation on Securities Balance, May 31, 1993 $9,219,195 $6,552,654 $39,567,799 $(6,178,468) $( 76,872) $ -- Net income -- -- 3,073,415 -- -- -- Cash dividends declared -- $.45 per share -- -- (5,610,058) -- -- -- Purchase of shares for Treasury -- -- -- (1,172,309) -- -- Stock options exercised -- 19,055 -- 213,320 ( 27,375) -- Awards under stock option plan -- ( 43,562) -- -- 43,562 -- Amortization of deferred compensation -- -- -- -- 48,113 -- Balance, May 31, 1994 9,219,195 6,528,147 37,031,156 (7,137,457) ( 12,572) -- Net income -- -- 5,154,214 -- -- -- Cash dividends declared -- $.46 per share -- -- (5,663,997) -- -- -- Purchase of shares for Treasury -- -- -- (1,883,106) -- -- Stock options exercised -- ( 28,593) -- 202,030 9,063 -- Amortization of deferred compensation -- -- -- -- 3,509 -- Unrealized gains on securities available-for-sale -- -- -- -- -- 68,814 Balance, May 31, 1995 9,219,195 6,499,554 36,521,373 (8,818,533) -- 68,814 Net income -- -- 3,375,234 -- -- -- Cash dividends declared -- $.47 per share -- -- (5,725,894) -- -- -- Purchase of shares for Treasury -- -- -- ( 483,000) -- -- Unrealized (losses) on securities available-for-sale -- -- -- -- -- (74,816) Balance, May 31, 1996 $9,219,195 $6,499,554 $34,170,713 $(9,301,533) $ -- $ ( 6,002) See Accompanying Notes to Consolidated Financial Statements.
GOLDEN ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS May 31, 1996, 1995 and 1994 NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation The consolidated financial statements include the accounts of Golden Enterprises, Inc. and its wholly-owned subsidiaries: Golden Flake Snack Foods, Inc., Steel City Bolt & Screw, Inc. and Nall & Associates, Inc. (the "Company"). All significant intercompany transactions and balances have been eliminated. Discontinued Operations On January 31, 1995, the Company disposed of its investment in its wholly-owned subsidiaries, Steel City Bolt & Screw, Inc. and Nall & Associates, Inc. (the Steel City group) for cash. Accordingly, the Steel City group's income from operations, previously reported in the bolt and other fasteners segment of business, is reported as income from operations of discontinued business. The consolidated financial statements have been reclassified to report separately the assets, liabilities and operating results of the discontinued business. The Company's consolidated financial statements and notes to consolidated financial statements have been restated to reflect comparative information on the continuing business. Revenue Recognition The Company recognizes sales and related costs upon delivery or shipment of products to its 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, 1996 are principally instruments of the U.S. Government and its agencies, of municipalities and of short-term mutual municipal and corporate bond funds. Effective June 1, 1994 the Company adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115). This statement, among other things, requires investment securities (bonds, notes, common stock and preferred stocks) to be divided into one of three categories: held-to-maturity, available-for-sale, and trading. The Company currently classifies all investment securities as available-for-sale. Under SFAS 115 securities accounted for as available-for-sale includes bonds, notes, common stock and non-redeemable preferred stock not classified as either held-to-maturity or trading. Securities available-for-sale are reported at fair value, adjusted for other-than-temporary declines in value. Unrealized holding gains and losses, net of tax, on securities available-for-sale are reported as a net amount in a separate component of stockholders' equity until realized. Realized gains and losses on the sale of securities available-for-sale are determined using the specific-identification method. Prior to adopting SFAS 115, all of the Company's marketable securities were reported at cost which approximated market value. Therefore, no adjustment was necessary for the initial effect of adopting SFAS 115 at June 1, 1994. Inventories Inventories are stated at the lower of cost or market. Cost is computed on the first-in, first-out method. The opening and closing inventories used in computing cost of sales are as follows: Date Amount May 31, 1994 $4,251,253 May 31, 1995 4,554,846 May 31, 1996 4,772,372 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. Employee Benefit and Stock Options Plans The Company has trusteed "Qualified Profit-Sharing Plans." The plans are "Non-Formula" plans and the annual contributions to the plans are determined by the applicable Board of Directors. The profit-sharing expenses for the years ended May 31, 1996, 1995 and 1994 were $518,597, $518,663 and $522,803, 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 Boards 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, 1996, 1995 and 1994 were $53,809, $103,823 and $104,671, 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 participant's nonvested accounts. The contributions to the Profit-Sharing Plans and the Employee 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. In 1988, the Company's shareholders approved the "1988 Stock Option and Stock Appreciation Rights Plan" for certain employees of the Company. The 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. As of May 31, 1996, options and stock appreciation rights had been granted for 145,000 shares (net of 13,000 shares forfeited) at an option price of $6 per share and for 79,500 shares (net of 6,000 shares forfeited) at an option price of $5 per share. 36,500 shares were exercised at $5 per share during the fiscal years ended May 31, 1995. There were no stock options and stock appreciation rights outstanding at May 31, 1996 and 1995. The plan expires July 6, 2002, except as to options and stock appreciation rights outstanding on that date; however, the rights to amend, suspend or terminate the plan have been reserved. 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. Net Income Per Share Net income per share computations are based on the weighted average number of shares outstanding of 12,243,283 in 1996; 12,376,769 in 1995 and 12,540,809 in 1994. Stock options were not included in these computations as their effect was not material. Postretirement Benefits Other than Pensions In December 1990, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The standard requires employers to account for retiree benefit obligations (principally for health care) on an accrual basis (rather than on a "pay-as-you-go" basis) for fiscal years beginning after December 15, 1992, although recognition in an earlier year was permitted. The Company adopted the standard on June 1, 1993; however, the implementation of the standard did not have a material impact on the financial statements of the Company. Disclosures About Fair Value of Financial Instruments In fiscal 1996, the Company adopted Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments (SFAS 107), which requires companies to disclose fair value information about certain financial instruments. SFAS No. 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 carrying value of the Company's long-term liabilities 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. Postemployment Benefits In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits." The standard requires employers to accrue, for fiscal years beginning after December 15, 1993 with earlier adoption permitted, for benefits provided to former or inactive employees after employment but prior to retirement. The Company adopted the standard in fiscal 1995; however, the implementation of the standard 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. NOTE 2 -- INVESTMENT SECURITIES The amortized cost, gross unrealized gains and losses and fair value of the investment securities available-for-sale are as follows:
May 31, 1996 Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value U.S. Government (See Note 5) $ 2,296,250 $ 4,687 $ -- $ 2,300,937 Municipal obligations 2,549,406 -- 14,065 2,535,341 Mutual funds 2,424,007 -- -- 2,424,007 Total $ 7,269,663 $ 4,687 $ 14,065 $ 7,260,285
May 31, 1995 Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value U.S. Government and its agencies (See Note 5) $ 8,098,280 $ 90,321 $ -- $ 8,188,601 Municipal obligations 3,549,406 17,201 -- 3,566,607 Mutual funds 2,073,455 -- -- 2,073,455 Total $13,721,141 $107,522 $ -- $13,828,663
Maturities of investment securities classified as available-for-sale at May 31, 1996 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 $ 5,818,885 $ 5,836,698 Due after one year through three years 1,450,778 1,423,587 Total $ 7,269,663 $ 7,260,285
Proceeds from sales of investment securities available-for-sale during fiscal 1996 and 1995 were $19,076,530 and $85,497,783, respectively. Gross gains of $31,193 and gross losses of $44,399 for fiscal 1996 and 1995, respectively, were realized on those sales. NOTE 3 -- LONG-TERM LIABILITIES Long-term liabilities consisted of salary continuation benefits accrued under the Company's salary continuation plan in the amounts of $823,227 and $598,922 at May 31, 1996 and 1995, respectively. Aggregate annual maturities of long-term liabilities within each of the next five fiscal years following May 31, 1996 are as follows: 1997 through 2001, $-0-. NOTE 4 -- 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:
1996 1995 1994 Tax on income at statutory rates $1,726,000 $2,821,000 $1,579,000 Increases (decreases) resulting from: State income taxes, less Federal income tax benefit 168,000 290,000 168,000 Tax exempt interest (72,000) (57,000) (107,000) Tax benefit of donated property (134,000) -- -- Other -- net 12,000 92,000 22,000 Total $1,700,000 $3,146,000 $1,662,000
The tax effects of temporary differences that result in deferred tax liabilities are as follows:
1996 1995 Property and equipment $2,092,969 $2,041,253 Accrued expenses (5,527) 75,746 Net unrealized (losses) gains on investment securities available-for-sale (3,376) 38,708 Total $2,084,066 $2,155,707
The income tax effects of changes in temporary differences are as follows:
1996 1995 1994 Property and equipment $ 51,000 $ (146,000) $ (166,000) Accrued expenses (81,000) ( 4,000) ( 80,000) Total $ (30,000) $ (150,000) $ (246,000)
NOTE 5 -- COMMITMENTS AND CONTINGENCIES Rental expenses were $541,744 in 1996, $540,284 in 1995 and $515,256 in 1994. At May 31, 1996, the Company was obligated under certain leases (which have not been capitalized) for buildings, office space and equipment. The following amounts represent future payment commitments under these leases: Years Ending Buildings and May 31, Office Space Equipment Total 1997 $14,000 $223,000 $237,000 1998 -- 136,000 136,000 1999 -- 41,000 41,000 One of the subsidiaries leases equipment from a company which is principally owned by a major shareholder of Golden Enterprises, Inc. The terms of these leases are equal to or better than those available from unaffiliated third parties. The Company had investment securities with a fair value of $2,300,937 and $2,105,901 pledged to its insurance carrier to support the Company's commercial self-insurance program at May 31, 1996 and 1995, respectively. NOTE 6 -- 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 two Alabama banks at May 31, 1996 that exceeded the balance insured by the F.D.I.C. in the amount of $1,174,911. The Company's trade receivables result primarily from its snack food operations and reflect a broad customer base, primarily large grocery 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 7 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of the unaudited quarterly results of operations of the years ended May 31, 1996, 1995 and 1994:
Per Share Total Revenues Income from Income from Quarter from Continuing Continuing Continuing Net Operations Operations Net Income Operations Income 1996 First $ 33,247,256 $1,440,823 $1,440,823 $.12 $.12 Second 29,829,016 835,589 835,589 .07 .07 Third 31,178,423 509,234 509,234 .04 .04 Fourth 33,570,140 589,588 589,588 .05 .05 For the year $127,824,835 $3,375,234 $3,375,234 $.28 $.28 1995 First $ 31,814,543 $1,317,709 $1,341,057 $.11 $.11 Second 30,194,288 1,176,782 1,177,953 .09 .09 Third 32,608,859 1,231,273 1,209,496 .10 .10 Fourth 34,827,716 1,425,708 1,425,708 .12 .12 For the year $129,445,406 $5,151,472 $5,154,214 $.42 $.42 1994 First $ 30,289,504 $1,055,339 $1,096,509 $.08 $.09 Second 30,528,126 429,054 475,390 .04 .04 Third 31,922,292 118,899 116,609 .01 .01 Fourth 34,160,190 1,377,560 1,384,907 .11 .11 For the year $126,900,112 $2,980,852 $3,073,415 $.24 $.25
NOTE 8-- SUPPLEMENTARY STATEMENT OF INCOME INFORMATION The following tabulation gives certain supplementary statement of income information for continuing operations for the years ended May 31, 1996, 1995 and 1994:
1996 1995 1994 Maintenance and repairs $ 4,919,783 $ 4,757,679 $ 4,620,141 Depreciation and amortization 2,485,533 2,856,445 3,377,278 Payroll taxes 2,611,995 2,581,797 2,621,766 Advertising costs 21,058,226 19,984,946 21,706,940
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. 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 subsidiaries as of May 31, 1996 and 1995, 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, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 subsidiaries as of May 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended May 31, 1996, in conformity with generally accepted accounting principles. Birmingham, Alabama July 8, 1996 DUDLEY, HOPTON-JONES, SIMS & FREEMAN PLLP 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 sales prices for the common stock during each quarter of the fiscal years ended May 31, 1996 and 1995 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 1996 First $7 1/2 $6 3/4 $.11 1/2 Second 9 3/4 7 .11 3/4 Third 9 1/8 7 3/4 .11 3/4 Fourth 9 3/4 7 1/2 .11 3/4 Fiscal 1995 First $8 $6 3/4 $.11 1/4 Second 7 1/4 6 3/4 .11 1/2 Third 7 1/4 6 3/4 .11 1/2 Fourth 7 1/4 6 3/4 .11 1/2 As of August 2, 1996, there were approximately 1,800 record holders of common stock. FINANCIAL REVIEW (Dollar amounts in thousands, except per share data)
Year Ended May 31, 1996 1995 1994 1993 1992 Operations Net sales and other operating income $127,150 $128,771 $126,462 $130,070 $127,178 Investment income 675 674 438 459 664 Total revenues 127,825 129,445 126,900 130,529 127,842 Cost of sales 57,331 56,285 55,114 55,110 54,982 Selling, general and administrative expenses 65,419 64,863 67,143 67,521 65,392 Interest 0 0 0 3 7 Income before income taxes 5,075 8,297 4,643 7,895 7,461 Federal and state income taxes 1,700 3,146 1,662 2,943 2,731 Income from continuing operations 3,375 5,151 2,981 4,952 4,730 Discontinued operations: Income from operations of discontinued business net of related income taxes 0 3 92 29 45 Net income 3,375 5,154 3,073 4,981 4,775 Financial data Depreciation and amortization $ 2,486 $ 2,856 $ 3,377 $ 3,893 $ 4,227 Capital expenditures, net of disposals 6,216 1,366 741 1,840 2,380 Working capital 19,053 25,788 26,212 27,402 26,730 Long-term debt 823 599 479 287 150 Stockholders' equity 40,582 43,490 45,628 49,084 50,103 Total assets 48,846 52,012 54,347 57,771 58,902 Common stock data Income from continuing operations $ .28 $ .42 $ .24 $ .40 $ .38 Net income .28 .42 .25 .40 .38 Dividends .47 .46 .45 .44 .42 Book value 3.32 3.55 3.65 3.90 3.96 Price range 9 3/4-6 3/4 8-6 3/4 8 3/4-7 1/8 10 1/4-7 1/2 11-6 3/4 Financial statistics Current ratio 4.37 5.26 5.25 5.48 5.52 Net income as percent of total revenues from continuing operations 2.6% 4.0% 2.4% 3.8% 3.8% Net income as percent of stockholders' equity (a) 8.0% 11.6% 6.5% 10.0% 9.5% Other data Weighted average common shares outstanding 12,243,283 12,376,769 12,540,809 12,595,896 12,636,723 Common shares outstanding at year-end 12,205,950 12,261,950 12,496,446 12,600,403 12,639,400 Approximate number of stockholders 1,800 1,800 1,900 2,000 2,000 (a) Average amounts at beginning and end of fiscal year.
GOLDEN ENTERPRISES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Working capital was $19.1 million at May 31, 1996 compared to $25.8 million at May 31, 1995. Net cash provided by operations amounted to $5.2 million in fiscal year 1996, $6.6 million in 1995, and $5.0 million in 1994. An additional $6.5 million in cash was provided this year by a net decrease in investment securities compared to a usage of $0.3 million in 1995 to increase investment securities, and in 1994 an additional $2.0 million in cash was provided by a net decrease in investment securities. In fiscal year 1995, $2.1 million in cash was received from the sale of the Company's fastener division. Additions to property, plant and equipment, net of disposals, were $6.2 million, $1.4 million, and $0.7 million in fiscal years 1996, 1995, and 1994, respectively, and are expected to be about $2.0 million in 1997. Cash dividends of $5.7 million were paid during fiscal years 1996 and 1995, and $5.6 million in 1994. Cash in the amount of $0.5 million was used to purchase treasury shares during fiscal 1996 while $1.9 million and $1.2 million was used for this purpose in 1995 and 1994, respectively. Long-term liabilities as a percentage of total capitalization was 1.9% at May 31, 1996. The Company's current ratio at the year end was 4.37 to 1.00. The increase in capital expenditures this year was for the development of new Low Fat and No Fat snack food products, enabling the Company to take advantage of the opportunities in this growing category. All of these new products were in distribution by the end of the fiscal year. Capital expenditures will return to a lower, more normal level in fiscal year 1997. Operating Results Net sales and other operating income decreased by 1.3% in fiscal year 1996, increased by 1.8% in fiscal year 1995, and decreased by 2.8% in 1994. Sales have been essentially flat for the past three years in an extremely competitive environment. The fact that two large competitors recently left the snack food market has given the Company opportunities in a number of its markets, but competition remains very intense. The Company's investment income as a percentage of income before taxes was 13.3% in 1996, 8.1% in 1995, and 9.4% in 1994. The increase in this percentage in 1996 compared to 1995 was due to the decrease in the Company's operating income, and the decrease in 1995 compared to 1994 was due to the increase in operating income. Cost of sales was 45.3% of net sales in 1996, 43.9% in 1995, and 43.8% in 1994. After stabilizing for two years, this percentage increased due to higher prices of packaging materials, cardboard, most raw materials and utilities. Also costs associated with the development of new Low Fat and No Fat snack food products contributed to the increased costs. Selling, general and administrative expenses were 51.7% of sales in 1996, 50.6% in 1995, and 53.4% in 1994. The increase in this percentage for 1996 was primarily due to increased advertising expense and the drop in sales. For 1995 the improvement in the percentage was due to less advertising expense combined with an increase in sales. Inflation Certain costs and expenses of the Company are affected adversely by inflation, and the Company's prices for its products over the last six 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. MANAGEMENT OF GOLDEN ENTERPRISES, INC. AND ITS SUBSIDIARIES DIRECTORS OF GOLDEN ENTERPRISES, INC. Joann F. Bashinsky Vice-President of SYB, Inc. D. Paul Jones, Jr. Chairman of the Board and Chief Executive Officer of Compass Bancshares, Inc. John P. McKleroy, Jr. Partner, Spain & Gillon, Counsel for the Company J. Wallace Nall, Jr. President of Nall Development Corporation Edward R. Pascoe Chairman of Steel City Bolt & Screw, Inc. F. Wayne Pate President of Golden Flake Snack Foods, Inc. James I. Rotenstreich Chairman and Chief Executive Officer of JHF Holdings, Inc. John S. P. Samford President of Samford Capital Corporation John S. Stein Chairman of the Board, President and Chief Executive Officer of Golden Enterprises, Inc. DIRECTORS EMERITUS Sloan Y. Bashinsky, Sr. Retired, Chairman of the Board of Golden Enterprises, Inc. John C. Evins Retired, Chairman of the Board of Hart-Greer, Inc. J. Wallace Nall, Sr. Retired, Vice-Chairman of the Board of Golden Enterprises, Inc. OFFICERS GOLDEN ENTERPRISES, INC. John S. Stein Chairman of the Board, President and Chief Executive Officer John H. Shannon Vice-President and Secretary GOLDEN FLAKE SNACK FOODS, INC. F. Wayne Pate President and Treasurer Mark McCutcheon Vice-President Randy Bates Vice-President -----END PRIVACY-ENHANCED MESSAGE-----