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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Jun. 03, 2016

Accounting Policies [Abstract]

Nature of the Business

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. (“Golden Enterprises”) and its wholly-owned subsidiary, Golden Flake Snack Foods, Inc., (“Golden Flake”). All significant inter-company transactions and balances have been eliminated.

Fiscal Year

The Company ends its fiscal year on the Friday closest to the last day in May. The year ended June 3, 2016 included 53 weeks and the year ended May 29, 2015 included 52 weeks.

Segment Information

Segment Information

The Company has identified one operating segment for management reporting purposes. The consolidated results of operations are the basis on which management evaluates operations and makes business decisions.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Revenue Recognition

The Company recognizes sales and related costs upon delivery or shipment of products to its customers. Allowances for sales returns, stale products, promotions, and discounts are recorded as reductions of revenue in the consolidated financial statements. Costs associated with the delivery or shipment of these products are recorded gross and shown as part of selling, general and administrative expenses on the consolidated statement of income. Shipping and handling costs amounted to $3,570,571 and $3,827,583 for the fiscal years 2016 and 2015, respectively.

Revenue for products sold to our distributors is recognized when the distributor purchases the inventory from our warehouses or the products are shipped to their stockroom. Revenue for products sold to retail customers through company routes is recognized when the product is delivered to the customer. Revenue for products shipped directly to customers from our warehouses is recognized based on the shipping terms listed on the shipping documentation. Products shipped with terms FOB shipping point are recognized as revenue at the time the product leaves our warehouse. Products shipped with terms FOB destination are recognized as revenue based on the anticipated receipt date by the customer.

We record an allowance for stales and damaged products. This allowance is estimated based on a percentage of historical sales returns and current market information. We record certain reductions to revenue for promotional allowances. There are several different types of promotional allowances such as off-invoice allowances, rebates and shelf space allowances. Shelf space allowances are capitalized and amortized over thirty-six months and recorded as a reduction to revenue. Capitalized shelf space allowances are evaluated for impairment on an ongoing basis. Capitalized shelf space included in other assets amounted to $917,533 and $973,195 as of June 3, 2016 and May 29, 2015, respectively.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the “Fair Value Measures and Disclosures” Topic 820 of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC), the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

See Note 13 for more information on fair value.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

Accounts Receivables

Accounts Receivables

The Company records accounts receivable at the time revenue is recognized. Amounts for bad debt expense are recorded in selling, general and administrative expenses. The determination of the allowance for doubtful accounts is based on management’s estimate of uncollectible accounts receivables. The Company records a reserve based on analysis of historical data and specific reserves for receivable balances that are considered at higher risk due to known facts regarding the customer.

Inventories

Inventories are stated at the lower of cost or market. Cost is computed on the first-in, first-out method.

Income Taxes

The Company accounts for income taxes in accordance with the FASB ASC Topic 740, Income Taxes. The Company has not recognized any liability for unrecognized tax benefits as it has no known tax positions that would subject the Company to any material income tax exposure. The federal and state tax returns for the Company for open tax years (generally three years from the date filed) are subject to examination by the applicable taxing authority.

Deferred income taxes are provided using the asset and liability method to measure tax consequences resulting from differences between financial accounting standards and applicable income tax laws. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Expenditures to acquire and install, and those for betterments and renewals, are capitalized. 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.

Property retired or sold is removed from the asset and related accumulated depreciation accounts and any gain or loss resulting there from is reflected in the statements of operations. The following table summarizes the majority of our estimated useful lives of long-term depreciable assets:

		Useful life
Buildings and building improvements		20 - 30 years
Machinery and equipment		5 - 10 years
Transportation equipment		5 - 15 years

Self-Insurance

The Company maintains reserves for the self-funded portion of employee medical insurance benefits. The Company also has stop loss coverage to limit the exposure arising from these claims. The accrual for incurred but not reported (IBNR) medical insurance claims was $361,000 and $311,000 at June 3, 2016 and May 29, 2015, respectively.

The Company is self-insured for certain casualty losses relating to automobile liability, general liability, workers’ compensation, and property losses. Automobile liability, general liability, workers’ compensation, and property losses costs are covered by letters of credit with the company’s claim administrators. As of June 3, 2016, the Company’s casualty reserve was $1,441,459 and at May 29, 2015, the casualty reserve was $1,472,182.

Due to the complexity of estimating the timing and amounts of insurance claims, the Company uses a third-party actuary to estimate the casualty insurance obligations on an annual basis. In determining the ultimate loss and reserve requirements, the Company uses various actuarial assumptions including compensation trends, health care cost trends, and discount rates. In 2016, we used a discount rate of 4%, the same rate was used in 2015, based on treasury rates over the estimated future payout period. The third-party actuary also uses historical information for claims frequency and severity in order to establish loss development factors. Large fluctuations in claims can have a significant impact on selling, general and administrative expenses.

Advertising

The Company expenses advertising costs as incurred. These costs are included in selling, general and administrative expenses. Advertising expense amounted to $8,319,193 and $7,973,958 for the fiscal years 2016 and 2015, respectively.

Stock Options

The Company accounts for option awards based on the fair value-method using the Black-Scholes model. The following assumptions were used to determine the weighted average fair value of options granted during 2016 and 2015.

		2016			2015
Assumptions used in Black-Scholes pricing model:
Expected dividend yield			2.41	%		3.20	%
Risk-free interest rate			1.22	%		1.40	%
Weighted average expected life			5.5 years			5.6 years
Expected volatility			39	%		43.3	%

The expected dividend yield is based on the projected annual dividend payment per share divided by the stock price at the date of grant. The risk free interest rate is based on rates of U.S. Treasury issues with a remaining life equal to the expected life of the option. We used the simplified method to calculate expected life using the vesting term of the option and the option expiration date, as we did not have sufficient exercise history at the time to calculate a reasonable estimate.