10-Q 1 tenqa.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 28, 2002 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to______________ Commission file number ________________0-4339____________________ (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 _______________________________ __________________________ (205) 933-9300 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes__X__ No _____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of March 31, 2002. Outstanding at Class March 31, 2002 Common Stock, Par Value $0.66 2/3 11,882,305 GOLDEN ENTERPRISES, INC. INDEX Part I. Financial Information Page No. Consolidated Condensed Balance Sheets February 28, 2002 and May 31, 2001 3 Consolidated Condensed Statements of Income Three Months 4 and Nine Months ended February 28, 2002 and 2001 Consolidated Condensed Statements of Cash Flows - Nine Months Ended February 28, 2002 and 2001 5 Notes to Consolidated Condensed Financial Statements 6 Independent Accountant's Report 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8,9 Part II. Other Information 10 PART I. FINANCIAL INFORMATION "GOLDEN ENTERPRISES, INC. AND SUBSIDIARIES" CONSOLIDATED CONDENSED BALANCE SHEETS February 28, May 31," 2002 2001 Unaudited) (Audited) ASSETS Cash and cash equivalents $338,940 $710,278 Investment Securities 15,917 $2,500,147 Receivables, net $9,832,777 $9,101,982 Note Receivable, Current $45,012 $42,399 Inventories: Raw material and supplies $1,970,065 $1,883,167 Finished goods $3,857,827 $2,856,593 $5,827,892 $4,739,760 Prepaid expense $3,169,040 $2,275,659 Net assets held for disposition $0 $0 Total current assets $19,229,578 $19,370,225 Property, plant and equipment, net $18,024,000 $14,998,142 Long-term Note Receivable $1,993,544 $2,027,636 Other assets $2,851,290 $2,851,289 $42,098,412 $39,247,292 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Checks outstanding in excess of bank balance $2,720,283 $1,552,461 Accounts payable $1,521,254 $2,924,428 Accrued and deferred income taxes $260,196 $260,196 Other accrued expenses $877,462 $941,360 Salary continuation plan $43,285 $40,773 Note payable- bank, current $500,250 $220,387 Total current $5,922,730 $5,939,605 Long-Term Liabilities: Salary Continuation Plan $1,949,772 $1,887,050 Note payable-bank, non-current $3,361,057 $639,713 Total long-term liabilities: $5,310,829 $2,526,763 Deferred income taxes $898,882 $980,998 Stockholder's Equity: Common Stock - $.66 - 2/3 par value: 35,000,000 shares authorized Issued 13,828,793 shares $9,219,195 $9,219,195 Additional paid-in capital $6,499,554 $6,499,554 Retained earnings $24,785,809 $24,426,345 $40,504,558 $40,145,094 Less: Cost of common shares in treasury (1,892,052 at May 31, 2001 and 1,946,488 shares at February 28, 2002) -$10,538,587 -$10,345,168 Total stockholders' equity $29,965,971 $29,799,926 Total $42,098,412 $39,247,292 See Accompanying Notes to Consolidated Condensed Financial Statements Golden Enterprises, Inc. & Subsidiaries Three Months Ended Nine Months Ended February 28 February 28 2002 2001 2002 2001 CONSOLIDATED CONDENSED STATEMENTS OF INCOME REVENUES: Net Sales $29,822,080 $29,233,830 $86,558,924 $85,813,272 Other operating revenues $69,847 $40,508 $277,780 $685,933 Investment income $40,891 $87,872 $156,979 $233,536 Total revenues $29,932,818 $29,362,210 $86,993,683 $86,732,741 COST AND EXPENSES: Cost of sales $14,281,584 $13,766,647 $40,322,413 39,415,275 Selling, general and administrative expense" $13,988,420 $14,997,375 $42,473,663 $43,025,652 Interest $32,109 $0 $75,640 $0 Total costs and expenses $28,302,113 $28,764,022 $82,871,716 $82,440,927 Income before income taxes $1,630,705 $598,188 $4,121,967 $4,291,814 Income taxes $602,501 $209,032 $1,531,144 $1,551,246 Net income $1,028,204 $389,156 $2,590,823 $2,740,568 PER SHARE OF COMMON STOCK: Basic earnings per share $0.09 $0.03 $0.22 $0.23 Basic weighted shares outstanding 11,884,608 11,956,889 11,903,323 11,975,854 Diluted earnings per share $0.09 $0.03 $0.22 $0.23 Diluted weighted shares outstanding 11,886,471 1,960,412 11,905,648 11,976,857 Cash dividend paid per share of common stock $0.0625 $0.0625 $0.1875 $0.1875 See Accompanying Notes to Consolidated Condensed Financial Statements. GOLDEN ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED February 28, February 28, 2002 2001 Cash flows from operating activities: Net income $2,590,823 $2,740,568 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization $1,900,658 $1,827,692 Compensation related to stock plan $0 $0 Salary Continuation Benefits $95,506 $90,892 Deferred income taxes -$82,116 -$138,319 Gain on sale of equipment -$187,728 -$584,797 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable -$730,795 -$335,210 Decrease (increase) in inventories -$1,088,132 -$714,792 Decrease (increase) in prepaid expenses -$893,381 -$1,409,481 Decrease (increase) in other assets- long term $1 $0 Increase (decrease) in accounts payable -$1,403,174 -$1,789,849 Increase (decrease) in accrued income taxes $0 $0 Increase (decrease) in accrued expenses -$63,898 -$1,013,968 Net cash provided (used) by operating activities $137,764 -$1,327,264 Cash flows from investing activities: Purchase of property, plant and equipment" -$5,083,120 -1,303,749 Proceeds from sale of equipment $344,330 $154,672 Cash received from disposal of Nashville Plant & Equipment $0 $1,710,000 Net decrease (increase) in investment securities $2,484,230 $1,208,337 Net cash provided by (used in) Investing activities -$2,254,560 $1,769,260 Cash flows from financing activities: (Decrease) increase in checks outstanding in excess of bank balance $1,167,822 $1,640,330 Payments of current installments of long-term debt -$30,272 -$27,953 Increase in proceeds from bank loan $3,001,207 $0 Purchase of treasury stock -$193,419 -$422,295 Collection of long term notes, rec. $31,479 $9,883 Cash dividend paid -$2,231,359 -$2,214,257 Net cash used in financing activities $1,745,458 -$1,014,292 Net (decrease) increase in cash and cash equivalents -$371,338 -$572,296 Cash and cash equivalents at beginning of year $710,278 $835,074 Cash and cash equivalents at end of quarter $338,940 $262,778 Supplemental information: Cash paid during the year for: Income taxes $1,825,842 $1,548,126 Interest $75,640 $0 See Accompanying Notes to Consolidated Condensed Financial Statements. GOLDEN ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly its financial position as February 28, 2002 and May 31, 2001 and its results of operations for the three months and nine months ended February 28, 2002 and 2001 and its cash flows for the nine months ended February 28, 2002 and 2001. The accounting policies followed by the Company are set forth in note 1 to the Company's financial statements in the Annual Report to stockholders for fiscal year ended May 31, 2001, which is incorporated by reference in Form 10-K. 2. The results of operations for the three months and nine months ended February 28, 2002 and 2001 are not necessarily indicative of the results to be expected for the full year. INDEPENDENT ACCOUNTANT'S REPORT We have reviewed the accompanying interim consolidated balance sheet of Golden Enterprises, Inc. and subsidiary as of February 28, 2002 and the related interim consolidated statements of income and cash flows for the nine-month period then ended. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial statements consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. Birmingham, Alabama DUDLEY, HOPTON-JONES April 11, 2002 SIMS & FREEMAN PLLP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Working Capital was $13.43 million at June 1, 2001 and $13.31 million at the end of the third quarter. Net cash provided by operating activities amounted to $0.14 million for the nine months this year compared to $1.33 million used by operating activities for last year's first nine months. Additions to property, plant and equipment, net of disposals, were $4.93 million this year and $1.26 million last year. Cash dividends of $2.23 million were paid during this year's first nine months compared to $2.21 million last year. Cash in the amount of $0.19 million was used to purchase treasury stock this year and $0.42 million was used last year, and $2.48 million of cash was provided by a decrease in investment securities this year compared to $1.21 million last year. Also $3.00 million of cash was provided by a bank loan that was obtained to finance the special project to upgrade the potato chip packaging department. The Company's current ratio was 3.25 to 1.00 at February 28, 2002. Operating Results For the three months ended February 28, 2002, total revenues increased 1.94% from the comparable period in fiscal 2001. Cost of sales was 47.9% of net sales compared to 47.1% last year. Selling, general and administrative expenses were 46.9% of net sales this year and 51.3% last year. This favorable comparison was due to balanced spending in the areas of promotion and advertising expenses. For the year-to-date, total revenues increased 0.30% from the comparable period in fiscal 2001. Cost of sales was 46.6% of net sales compared to 45.9% last year. Selling, general and administrative expenses were 49.1% of net sales this year and 50.1% last year. The Company's third quarter investment income as a percentage of pre-tax income was 2.5% this year compared to 14.7% last year. There was an actual dollar decrease in investment income of 53.5%, and pre-tax income increased 172.6%. For the nine months, investment income was 3.8% of pre-tax income this year and 5.4% last year. For the nine months investment income dollars decreased 32.8% and pre-tax income decreased 4.0%. The Company's effective tax rate for the third quarter was 36.9% compared to 34.9 % for last year's third quarter and 37.1% versus 36.1% for the nine months. Management's Discussion and Analysis of Financial Condition and Results of Operations Market Risk The principal markets risks (i.e., the risk of loss arising from adverse changes in market rates and prices) to which the Company is exposed are interest rates on its investment securities, bank loans, and commodity prices, affecting the cost of its raw materials. The Company's investment securities consist of short-term marketable securities. Presently these are variable rate money market mutual funds, certificates of deposits, and municipal obligations. Assuming February 28, 2002 variable rate investment levels, a one-point change in interest rates would impact interest income by $159 on an annual basis and interest expense by $38,613. The Company is subject to market risk with respect to commodities because its ability to recover increased costs through higher pricing may be limited by the competitive environment in which it operates. The Company purchases its raw materials on the open market, under contract through brokers and directly from growers. Future contracts have been used occasionally to hedge immaterial amounts of commodity purchases but none are presently being used. Forward-Looking Statements This discussion contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those forward-looking statements. Factors that may cause actual results to differ materially include price competition, industry consolidation, raw material costs and effectiveness of sales and marketing activities, as described in the Company's filings with the Securities and Exchange Commission. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K b) Reports on Form 8-K- There were no reports on form 8-K filed for the three months ended February 28, 2002. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GOLDEN ENTERPRISES, INC. (Registrant) Dated: April 11, 2002 _________________________ John S. Stein Chairman Dated: April 11, 2002 ___________________________ John H. Shannon Vice-President/Controller (Principal Accounting Officer)