10-K 1 a5479637.txt GOLDEN ENTERPRISES, INC. 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 1, 2007 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.) One Golden Flake Drive Birmingham, Alabama 35205 --------------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number including area code (205) 458-7316 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 if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ( ) No (X) Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ( ) No (X) 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. (X) Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (as defined in Rule 12b-2 of the Act). (Check One) Large accelerated filer ( ) Accelerated filer ( ) Non-accelerated filer (X) Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ( ) No (X) State the aggregate market value of the voting common stock held by non-affiliates of the registrant as of August 3, 2007. Common Stock, Par Value $0.66 2/3 --$17,470,091 Indicate the number of shares outstanding of each of the Registrant's Classes of Common Stock, as of August 3, 2007. Class Outstanding at August 3, 2007 ----- ----------------------------- Common Stock, Par Value $0.66 2/3 11,835,330 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Proxy Statement for the Annual Meeting of Stockholders to be held on September 20, 2007 are incorporated by reference into Part III. TABLE OF CONTENTS FORM 10-K ANNUAL REPORT -2007 GOLDEN ENTERPRISES, INC. Page ---- PART I. Item 1. Business..................................................... 3 Item 1A. Risk Factors................................................. 6 Item 1B. Unresolved Staff Comments.................................... 6 Item 2. Properties................................................... 7 Item 3. Legal Proceedings............................................ 7 Item 4. Submission of Matters to a Vote of Security Holders.......... 8 PART II. Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities............ 8 Item 6. Selected Financial Data...................................... 11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 12 Item 7A. Quantitative and Qualitative Disclosure About Market Risk.... 18 Item 8. Financial Statements and Supplementary Data.................. 18 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................... 41 Item 9A. Controls and Procedures...................................... 41 Item 9B. Other Information............................................ 41 PART III. Item 10. Directors and Executive Officers and Corporate Governance.... 41 Item 11. Executive Compensation....................................... 41 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters........ 42 Item 13. Certain Relationships and Related Transactions and Director Independence................................................ 42 Item 14. Principal Accountant Fees and Services....................... 42 PART IV. Item 15. Exhibits and Financial Statement Schedules................... 43 2 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 15, 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 puff corn. 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% of 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 over 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, Missouri and Texas. The products are distributed by approximately 470 route salesmen and independent distributors 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 3 the direct-store delivery system. 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 821 company owned vehicles to support the route sales system, including 45 tractors and 122 trailers for long haul delivery to the various company warehouses located throughout its distribution areas, 591 store delivery vehicles and 63 cars and miscellaneous 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 are 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 970 employees. Approximately 584 employees are involved in route sales and sales supervision, approximately 274 are in production and production supervision, and approximately 112 are management and administrative personnel. Golden Flake believes that the performance and loyalty of its employees are two of 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/her 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. Other Matters The Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, are available via the Company's website. The website address is www.goldenflake.com. All required reports are made available on the website as soon as reasonably practicable after they are electronically filed with the Securities and Exchange Commission. Environmental Matters There have been no material effects of compliance with government provisions regulating discharge of materials into the environment. Recent Developments 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. 4
Executive Officers Of Registrant And Its Subsidiary Name and Age Position and Offices with Management ------------ ------------------------------------ John S. Stein, 70 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 June 1, 2008. Mark W. McCutcheon, 52 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. 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 June 1, 2008. Patty Townsend, 49 Ms. Townsend is Chief Financial Officer, Vice President and Secretary of Golden Enterprises, Inc. and Controller of Golden Flake Snack Foods, Inc. a wholly owned subsidiary of the Company. She was elected Chief Financial Officer, Vice-President and Secretary of the Company on March 1, 2004 and Controller of Golden Flake on March 15, 1997. She has been employed with the Company since 1988. Ms. Townsend is elected to her positions on an annual basis, and her present term of office will expire on June 1, 2008. Randy Bates, 53 Mr. Bates is Executive, Vice-President of Sales, Marketing and Transportation for Golden Flake. He has held these positions since October 26, 1998. Mr. Bates was Vice-President of Sales from October 1, 1994 to 1998. Mr. Bates has been employed by Golden Flake since March 1979. Mr. Bates is elected to his positions on an annual basis, and his present term of office will expire on June 1, 2008. David Jones, 55 Mr. Jones is Executive Vice-President of Operations, Human Resources and Quality Control for Golden Flake. He has held these positions since May 20, 2002. Mr. Jones was Vice- President of Manufacturing from 1998 to 2002 and Vice-President of Operations from 2000 to 2002. Mr. Jones has been employed by Golden Flake since 1984. Mr. Jones is elected to his positions on an annual basis, and his present term of office will expire on June 1, 2008.
5 ITEM 1A. - RISK FACTORS Important factors that could cause the Company's actual business results, performance or achievements to differ materially from any forward looking statements or other projections contained in this Annual Form 10-K Report include, but are not limited to the principal risk factors set forth below. Additional risks and uncertainties, including risks not presently known to the Company, or that it currently deems immaterial, may also impair the Company's business and or operations. If the events, discussed in these risk factors occur, the Company's business, financial condition, results of operations or cash flow could be adversely affected in a material way and the market value of the Company's common stock could decline. Competition Price competition and consolidation within the Snack Food industry could adversely impact the Company's performance. The Company's business requires significant marketing and sales effort to compete with larger companies. These larger competitors sell a significant portion of their products through discounting and other price cutting techniques. This intense competition increases the possibility that the Company could lose one or more customers, lose market share and/or be forced to increase discounts and reduce pricing, any of which could have an adverse impact on the Company's business, financial condition, results of operation and/or cash flow. Commodity and Energy Cost Fluctuations Significant commodity price fluctuations for certain commodities purchased by the Company, particularly potatoes, could have a material impact on results of operations. In an attempt to manage commodity price risk, the Company, in the normal course of business, enters into contracts to purchase pre-established quantities of various types of raw materials, at contracted prices based on expected short term needs. The Company can also be adversely impacted by changes in the cost of natural gas and other fuel costs. Long term increases in the cost of natural gas and fuel costs could adversely impact the Company's cost of sales and selling, marketing and delivery expenses. There are other risks and factors not described above that could also cause actual results to differ materially from those in any forward looking statement made by the Company. ITEM 1B. - UNRESOLVED STAFF COMMENTS Not Applicable. 6 ITEM 2. - PROPERTIES The headquarters of the Company are located at One Golden Flake Drive, Birmingham, Alabama 35205. 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 three 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. 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 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, Midfield, Demopolis, Fort Payne, Muscle Shoals, Huntsville, Phenix City, Tuscaloosa, Mobile, Dothan and Oxford, Alabama; Gulfport and Jackson, Mississippi; Knoxville and Memphis, Tennessee; Decatur, Marietta and Macon, Georgia; Jacksonville, Panama City, Tallahassee and Pensacola, Florida and New Orleans, Louisiana. 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 821 vehicles which includes 591 route trucks, 45 tractors, 122 trailers and 63 cars and miscellaneous vehicles. There are no liens or encumbrances on Golden Flake's vehicle fleet. Golden Flake also 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. 7 ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. PART II ITEM 5. - MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES GOLDEN ENTERPRISES, INC. AND SUBSIDIARY 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 June 1, 2007 and June 2, 2006 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 High Low Dividend Quarter Price Price Paid Year Ended 2007 Per share ----------------------------------------------------------- ---------- -------- ----------- First quarter (13 weeks ended September 1, 2006) $3.25 $2.61 $.0313 Second quarter (13 weeks ended December 1, 2006) 3.65 2.95 .0313 Third quarter (13 weeks ended March 2, 2007) 3.25 2.77 .0313 Fourth quarter (13 weeks ended June 1, 2007) 3.21 2.81 .0313 High Low Dividend Quarter Price Price Paid Year Ended 2006 ----------------------------------------------------------- ---------- -------- ----------- First quarter (13 weeks ended September 2, 2005) $4.89 $3.43 $.0313 Second quarter (13 weeks ended December 2, 2005) 4.85 3.07 .0313 Third quarter (13 weeks ended March 3, 2006) 3.46 2.80 .0313 Fourth quarter (13 weeks ended June 2, 2006) 3.60 2.32 .0313
As of August 3, 2007, there were approximately 1,159 shareholders of record. Shareholder Return Performance Graph The following graph illustrates, for the period commencing May 31, 2002, and ending June 1, 2007, the yearly percentage change in the cumulative total shareholder return on the Company's common stock as compared with the cumulative total returns of other companies included within the NASDAQ Stock Market (U.S. Companies) Index and the Company's Peer Group. The Company has selected a Peer Group consisting of the four publicly-traded companies named below which are in the snack food industry. Most of the Company's direct competitors and peers are privately-held companies or subsidiaries or divisions of larger publicly-held companies so that the available members of the Peer Group are limited. 8 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Golden Enterprises, Inc., The NASDAQ Composite Index And A Peer Group [SEE SUPPLEMENTAL PDF FOR GRAPHIC OF COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN] ------------------------------------------------------------------------------- 5/31/02 5/31/03 5/31/04 6/5/05 6/2/06 6/1/07 ------------------------------------------------------------------------------- Golden Enterprises, Inc. 100.00 51.70 71.30 91.29 75.16 86.22 NASDAQ Composite 100.00 95.35 121.55 126.63 136.43 165.06 Peer Group 100.00 79.90 110.21 131.46 158.22 198.40 This graph assumes that $100 was invested in the Company's common stock on May 31, 2002, in the NASDAQ Stock Market (U.S. Companies) Index and in the Peer Group, which consisted of Lance, Inc., J & J Snack Foods Corp., Tasty Baking Co. and Ralcorp Holdings, Inc. and that dividends were re-invested. 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: 9
EQUITY COMPENSATION PLAN INFORMATION ------------------------------------------------------------------------------------------------------------------------------- Plan category Number of securities to be Weighted-average exercise Number of securities remaining issued upon exercise of out- price of outstanding options, available for future issuance standing options, warrants warrants and rights under equity compensation plans and rights (excluding securities reflected in column (a)) (a) (b) (c) ---------------------------- ---------------------------- ----------------------------- ------------------------------------- Equity compensation plans 369,000 $3.776 130,000 approved by security holders ---------------------------- ---------------------------- ----------------------------- ------------------------------------- Equity compensation plans 0 0 0 not approved by security holders ---------------------------- ---------------------------- ----------------------------- ------------------------------------- Total 369,000 $3.776 130,000 -------------------------------------------------------------------------------------------------------------------------------
ISSUER PURCHASES OF EQUITY SECURITIES The Company did not repurchase any shares of its common stock during the fiscal year ended June 1, 2007. 10 ITEM 6. - SELECTED FINANCIAL DATA GOLDEN ENTERPRISES, INC. AND SUBSIDIARY FINANCIAL REVIEW (Dollar amounts in thousands, except per share data)
Operations 2007 2006 2005 2004 2003 --------------- -------------- --------------- --------------- --------------- ------------------------------------------------------------------------------ Net sales $ 110,827 $ 106,547 $ 103,144 $ 97,583 $ 96,604 Gain on sales of assets 488 139 107 14 304 Other Income 432 483 521 499 506 --------------- -------------- --------------- --------------- --------------- Total revenues 111,747 107,169 103,772 98,096 97,414 Cost of sales 57,978 57,019 55,400 51,243 50,748 Selling, general and administrative expenses 51,481 49,168 48,022 46,595 47,686 Interest 273 295 255 220 269 Income before income taxes 2,015 687 95 38 (1,289) Federal and state income taxes 802 398 (110) 84 (361) --------------- -------------- --------------- --------------- --------------- Net income (loss) $ 1,213 $ 289 $ (15) $ (46) $ (928) ---------------------------------------------------------------------------------------------------------------- Financial data Depreciation and amortization $ 2,268 $ 2,285 $ 2,268 $ 2,347 $ 2,490 Working capital 4,265 4,050 5,328 6,697 8,337 Long-term debt 1,582 1,915 2,426 2,327 3,862 Stockholders' equity 19,450 19,716 20,907 22,456 24,078 Total assets 33,325 33,728 34,402 33,623 36,492 ---------------------------------------------------------------------------------------------------------------- Common stock data Earnings per share (basic) $ 0.10 $ 0.02 $ - $ - $ (0.08) Earnings per share (diluted) 0.10 0.02 - - (0.08) Dividends 0.1250 0.1250 0.1250 0.1250 0.1875 Book value 1.64 1.67 1.77 1.89 2.20 Price range 3.65-2.61 4.89-2.32 4.15-2.01 3.50-2.15 5.530-1.640 ---------------------------------------------------------------------------------------------------------------- Financial statistics Current ratio 1.37 1.36 1.54 1.84 2.09 Net income (loss) as percent of total revenues 1.09% 0.27% (0.01)% (0.04)% (0.95)% Net income (loss) as percent of total stockholders' equity (a) 6.24% 1.47% (0.07)% (0.20)% (5.10)% ---------------------------------------------------------------------------------------------------------------- Other data Weighted average common shares outstanding 11,835,330 11,835,330 11,846,419 11,879,891 11,883,305 Common shares outstanding at year end 11,835,330 11,835,330 11,835,330 11,852,830 11,883,305 Approximate number of stockholders 1,159 1,500 1,500 1,500 1,500 (a) Average amounts at beginning and end of fiscal year
11 ITEM 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GOLDEN ENTERPRISES, INC. AND SUBSIDIARY Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion provides an assessment of the Company's financial condition, results of operations, liquidity and capital resources and should be read in conjunction with the accompanying consolidated financial statements and notes. OVERVIEW The Company manufactures and distributes a full line of snack items, such as potato chips, tortilla chips, corn chips, fried pork skins, baked and fried cheese curls, onion rings and puff corn. The products are all packaged in flexible bags or other suitable wrapping material. The Company also sells a line of cakes and cookie items, canned dips, pretzels, popcorn, 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% of the Company's sales, which affords some protection against loss of volume due to a crop failure of major agricultural raw materials. Raw materials used in manufacturing and processing the Company's snack food products are purchased on the open market and under contract through brokers and directly from growers. A large part of the raw materials used by the Company consists of farm commodities which are subject to precipitous changes in supply and price. Weather varies from season to season and directly affects both the quality and supply available. The Company has no control of the agricultural aspects and its profits are affected accordingly. The Company sells its products through its own sales organization and independent distributors to commercial establishments that sell food products primarily in the Southeastern United States. The products are distributed by approximately 470 route representatives and independent distributors who are supplied with selling inventory by the Company's trucking fleet. All of the route representatives are employees of the Company and use the Company's direct-store delivery system. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's 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 judgments of certain amounts included in the financial statements, giving due considerations to materiality. The Company does not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ materially from these estimates. 12 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. 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. The 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 the 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 $8.8 million, $10.5 million and $11.6 million for the years ended 2007 2006 and 2005, respectively. There was no resulting impact on net operating results from adopting EITF 01-09. Accounts Receivable The Company records accounts receivable at the time revenue is recognized. Amounts for bad debt expense are recorded in selling, general and administrative expenses on the Consolidated Statements of Operations. The amount of the allowance for doubtful accounts is based on management's estimate of the accounts receivable amount that is uncollectible. The Company records a general reserve based on analysis of historical data. In addition, the Company records specific reserves for receivable balances that are considered high-risk due to known facts regarding the customer. The allowance for bad debts is reviewed quarterly, and it is determined whether the amount should be changed. Failure of a major customer to pay the Company amounts owed could have a material impact on the financial statements of the Company. At June 1, 2007 and June 2, 2006, the Company had accounts receivables in the amount of $8.5 million and $8.4 million, net of an allowance for doubtful accounts of $0.1 million and $0.1 million, respectively. The following table summarizes the Company's customer accounts receivable profile as of June 1, 2007: Amount Range No. of Customers ------------- ---------------- Less than $1,000.00 1,189 $1,001.00-$10,000.00 581 $10,001.00-$100,000.00 122 $100,001.00-$500,000.00 7 $500,001.00-$1,000,000.00 2 $1,000,001.00-$2,500,000.00 0 --- Total All Accounts 1,901 ====== 13 Inventories Inventories are stated at the lower of cost or market. Cost is computed on the first-in, first out method. Accrued Expenses Management estimates certain expenses in an effort to record those expenses in the period incurred. The most significant estimates relate to insurance-related expenses, including self-insurance and a salary continuation plan for certain key executives of the Company. The Company is self-insured for certain casualty losses relating to automobile liability, general liability, workers' compensation, property losses and medical claims. The Company also has stop loss coverage to limit the exposure arising from these claims. Automobile liability, general liability, workers' compensation, and property losses costs are covered by letters of credit with the company's claim administrators. The Company uses a third-party actuary to estimate the casualty insurance obligations on an annual basis. In determining the ultimate loss and reserve requirements, the third-party uses various actuarial assumptions including compensation trends, health care cost trends and discount rates. The third-party actuary also uses historical information for claims frequency and severity in order to establish loss development factors. The actuarial calculation includes a margin of error to account for changes in inflation; health care costs, compensation and litigation cost trends as well as estimated future incurred claims. The Company utilized a 75% confidence level for estimating the ultimate outstanding casualty liability. Approximately 75% of each claim should be equal to or less than the ultimate liability recorded based on the historical trends experienced by the Company. If the Company chose a 50% factor, the liability would have been reduced by approximate $0.2 million. If the Company chose a 90% factor, the liability would have increased by approximately $0.2 million. The Company used a 5% investment rate to discount the estimated claims based on the historical payout pattern during 2007 and 2006. A one percentage point change in the discount rate would have impacted the liability by approximately $51,300. Actual ultimate losses could vary from those estimated by the third-party actuary. The Company believes the reserves established are reasonable estimates of the ultimate liability based on historical trends. As of June 1, 2007, the Company's casualty reserve was $1.9 million and at June 2, 2006 the casualty reserve was $1.9 million. 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 assumptions could result in an accrual requirement materially different from the calculated accrual. OTHER MATTERS Transactions with related parties, included in Note 12 of the Notes to Consolidated Financial Statements, are conducted on an arm's-length basis in the ordinary course of business. 14 LIQUIDITY AND CAPITAL RESOURCES Working capital was $4.3 million at June 1, 2007 compared to $4.1 million at June 2, 2006. Net cash provided by operations amounted to $4.6 million in fiscal year 2007, $2.6 million in fiscal year 2006 and $2.4 million in fiscal year 2005. During 2007, the principal source of liquidity for the Company's operating needs was provided from operating activities, credit facilities and cash on hand. Additions to property, plant and equipment are expected to be about $1.5 million in 2008. Cash dividends of $1.5 million were paid each of the fiscal years 2007, 2006, and 2005, respectively. No cash was used to purchase treasury shares in fiscal 2007 and 2006. During fiscal 2007, the Company's debt proceeds net of re-paid debt was ($0.4) million. The following table summarizes the significant contractual obligations of the Company as of June 1, 2007:
Contractual Obligations Total Current 2-3 Years 4-5 Years Thereafter ------------------------------ ------------ ----------- ----------- ----------- ------------- Notes Payable $ 270,625 $ 270,625 $ - $ - $ - Vehicle Lease 479,531 109,713 219,426 150,392 - Salary Continuation Plan 1,704,314 121,877 274,941 322,474 985,022 ------------ ----------- ----------- ----------- ------------- Total Contractual Obligations $ 2,454,470 $ 502,215 $ 494,367 $ 472,866 $ 985,022 ============ =========== =========== =========== =============
Other Commitments The Company had letters of credit in the amount of $2,668,846 outstanding at June 1, 2007 to support the Company's commercial self-insurance program. The Company has a line-of-credit agreement with a local bank that permits borrowing up to $2 million. The line-of-credit is subject to the Company's continued credit worthiness and compliance with the terms and conditions of the advance application. The Company's line of credit debt at June 1, 2007 was $622,950 with an interest rate of 8.25%. The Company's current ratio at year end was 1.37 to l.00. Available cash, cash from operations and available credit under the line of credit are expected to be sufficient to meet anticipated cash expenditures and normal operating requirements for the foreseeable future. OPERATING RESULTS Net sales increased by 4% in fiscal year 2007, 3% in fiscal year 2006, and 6% in fiscal year 2005. Fiscal 2005 included an extra week of sales. If the extra week is excluded, the increase in net sales for fiscal 2006 would have been 5%. Cost of sales as a percentage of net sales amounted to 52.3%, 53.5% and 53.7% in 2007, 2006 and 2005 respectively. Selling, general and administrative expenses were 46.5% of net sales in 2007, 46.1% in 2006 and 46.5% in 2005. 15 The Company's effective tax rates for 2007, 2006 and 2005 were 39.8%, 58.0% and 115.7%, respectively. Note 7 to the Consolidated Financial Statements provide additional information about the provision for income taxes. The following tables compare manufactured products to resale products for the fiscal years ended June 1, 2007, June 2, 2006, and June 3, 2005:
Manufactured Products-Resale Products 2007 2006 2005 ------------------------ -------------------------- ------------------------- Sales % % % Manufactured Products $ 88,827,470 80.1% $ 84,401,413 79.2% $ 81,847,745 79.4% Resale Products 21,999,455 19.9% 22,145,283 20.8% 21,296,234 20.6% -------------- --------- --------------- --------- -------------- --------- Total $110,826,925 100.0% $106,546,696 100.0% $103,143,979 100.0% Gross Margin % % % Manufactured Products $ 45,757,596 51.5% $ 43,305,008 51.3% $ 42,061,821 51.4% Resale Products 7,091,931 32.2% 6,222,787 28.1% 5,682,257 26.7% -------------- --------- --------------- --------- -------------- --------- Total $ 52,849,527 47.7% $ 49,527,795 46.5% $ 47,744,078 46.3%
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 cash equivalents and bank loans, and commodity prices affecting the cost of its raw materials. The Company's cash equivalents consist of short-term marketable securities. Presently these are variable rate money market funds. Its bank loans also carry variable rates. Assuming year end 2007 variable rate investment levels and bank loan balances, a one-point change in interest rates would impact interest income by $2,538 and interest expense by $2,706. 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. 16 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. Higher fuel and commodity costs continue to be a challenge. ENVIRONMENTAL MATTERS There have been no material effects of compliance with government provisions regulating discharge of materials into the environment. FORWARD-LOOKING STATEMENTS This report 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. You are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date which they are made. RECENT DEVELOPMENTS The Company continues to review and analyze its internal audit program and has directed senior management to dedicate resources and take steps to strengthen controls. The company engaged the services of a third party consultant to assist in its review and analysis. The Company is identifying and implementing actions to improve the effectiveness of procedures and internal controls, including enhanced training with respect to financial reporting and disclosure responsibilities. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In November 2004, the FASB issued SFAS No. 151, "Inventory Cost or Amendment of ARB No. 43, Chapter 4." This Statement amends AR 13 No. 43, to clarify abnormal amounts of facility expense, freight, handling costs and waster material should be recognized in current-period charges. In addition, this Statement requires that allocation of fixed production overhead to the costs on conversion be based on the normal capacity of the production facilities. This provision is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. SAFS No. 151 did not have an impact on the Company's financial position, results of operations or cash flows. In December 2004, the FASB revised its SFAS No. 123 (SFAS No. 123R), "Accounting for Stock Based Compensation." The revision established standards for the accounting of transactions in which an entity exchanges its equity instruments for goods or services particularly transaction in which an entity obtains employee services in share based payment transactions. The revised statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is to be recognized over the period during which the employee is required to proved service in exchange for the award. Changes in fair value during the requisite service period are to be recognized as compensation cost over that period. In addition the revised statement amends SFAS No. 95, "Statement of Cash Flows," to require that excess tax benefits be reported as a financing cash flow rather than as a reduction of taxes paid. Beginning June 3, 2006, we adopted SFAS No. 123R "Share Based Payment". We adopted the "modified prospective method" in adopting SFAS 123R. The adoption of SFAS 123R did not have a material effect on the current period financial position results of operations, or cash flows. 17 In June 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement 109" (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes". This interpretation prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken. FIN 48 is not expected to have a material impact on our results of operations or financial positions. In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3." This statement carries forward without change the guidance contained in APB Opinion No. 20 for reporting the correction of an error in previously issued financial statements and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 did not have a significant impact on the Company's results of operations or financial position. In September 2005, FASB issued its consensus on EITF Issue No. 04-13, Accounting for Purchases and Sales of Inventory with the Same Counterparty. This consensus concludes that an entity is required to treat sales and purchases of inventory between the entity and the same counterparty as one transaction for purposes of applying APB Opinion No. 29, Accounting for Nonmonetary Transactions, when the transactions are entered into in contemplation of each other. The consensus should be applied to new arrangements entered into, or modifications or renewals of existing arrangements, in the first interim or annual reporting period beginning after March 15, 2006. This consensus did not have a material effect on the Company's financial position, results of operation or cash flows. In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 157 is not expected to have a material impact on our financial condition, results of operations or cash flows. ITEM 7 A. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations- Market Risk beginning on page 15. ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements of the registrant and its subsidiary for the year ended June 1, 2007, consisting of the following, are contained herein:
Consolidated Balance Sheets - As of June 1, 2007 and June 2, 2006 Consolidated Statements of Operations - Fiscal years ended 2007, 2006, and 2005 Consolidated Statements of Changes in Stockholders' Equity - Fiscal years ended 2007, 2006, and 2005 Consolidated Statements of Cash Flows - Fiscal years ended 2007, 2006, and 2005 Notes to Consolidated Financial Statements - Fiscal years ended 2007, 2006, and 2005 Quarterly Results of Operations - Fiscal years ended 2007 and 2006
18 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 June 1, 2007 and June 2, 2006, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the three year period ended June 1, 2007. Our audits also included the financial statement schedule listed at Item 15(a) Schedule II. 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 the standards of the Public Company Accounting Oversight Board (United States). 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 June 1, 2007 and June 2, 2006, and the consolidated results of their operations and their cash flows for each of the three years in the three year period ended June 1, 2007, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, such financial statement schedule, when considering in relation to the basic consolidated financial statements, taken as a whole, presents fairly, in all material respects, the information set forth therein. Birmingham, Alabama DUDLEY, HOPTON-JONES, SIMS & FREEMAN PLLP July 31, 2007 19 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS As of June 1, 2007 and June 2, 2006 ASSETS 2007 2006 -------------- ---------- CURRENT ASSETS Cash and cash equivalents $ 706,852 $ 321,627 Receivables: Trade accounts 8,559,984 8,477,457 Other 11,358 19,321 -------------- ---------- 8,571,342 8,496,778 Less: Allowance for doubtful accounts 112,915 133,422 -------------- ---------- 8,458,427 8,363,356 Notes receivable, current 58,126 53,672 -------------- ---------- 8,516,553 8,417,028 -------------- ---------- Inventories: Raw materials 1,340,389 1,425,605 Finished goods 3,035,285 2,850,466 -------------- ---------- 4,375,674 4,276,071 -------------- ---------- Prepaid expenses 1,622,900 1,608,459 Deferred income taxes 583,179 669,976 -------------- ---------- Total current assets 15,805,158 15,293,161 -------------- ---------- PROPERTY, PLANT AND EQUIPMENT Land 2,962,283 3,010,974 Buildings 16,641,960 16,628,236 Machinery and equipment 37,563,985 36,561,024 Transportation equipment 15,112,873 15,662,458 -------------- ---------- 72,281,101 71,862,692 Less: Accumulated depreciation 59,324,468 58,279,641 -------------- ---------- 12,956,633 13,583,051 -------------- ---------- OTHER ASSETS Notes receivable, long-term 1,658,630 1,716,756 Cash surrender value of life insurance 2,253,412 2,431,626 Other 651,595 703,488 -------------- ---------- Total other assets 4,563,637 4,851,870 -------------- ---------- TOTAL $ 33,325,428 $33,728,082 ============== ========== See Accompanying Notes to Consolidated Financial Statements 20 LIABILITIES AND STOCKHOLDERS' EQUITY 2007 2006 ------------- ------------- CURRENT LIABILITIES Checks outstanding in excess of bank balances $ 1,385,663 $ 2,619,026 Accounts payable 3,760,499 2,210,026 Accrued income taxes 318,198 509,318 Current portion of long-term debt 270,625 750,177 Line of credit outstanding 622,950 313,923 Other accrued expenses 5,060,758 4,727,753 Salary continuation plan 121,877 112,536 ------------- ------------- Total current liabilities 11,540,570 11,242,759 ------------- ------------- LONG-TERM LIABILITIES Note payable - bank, non-current - 253,618 Salary continuation plan 1,582,437 1,661,363 Deferred income taxes 752,298 854,028 ------------- ------------- Total long-term liabilities 2,334,735 2,769,009 ------------- ------------- 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 6,497,954 Retained earnings 14,410,568 14,676,759 Treasury shares - at cost (1,993,463 shares in 2007 and 2006) (10,677,594) (10,677,594) ------------- ------------- Total stockholders' equity 19,450,123 19,716,314 ------------- ------------- TOTAL $ 33,325,428 $ 33,728,082 ============= ============= 21
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 2007 2006 2005 ---------------- ---------------- --------------- Net sales $110,826,925 $106,546,696 $103,143,979 Cost of sales 57,977,398 57,018,901 55,399,901 ---------------- ---------------- --------------- Gross margin 52,849,527 49,527,795 47,744,078 Selling, general and administrative expenses 51,481,437 49,168,289 48,022,149 ---------------- ---------------- --------------- Operating income (loss) 1,368,090 359,506 (278,071) ---------------- ---------------- --------------- Other income (expenses): Gain on sale of assets 488,174 138,884 107,382 Interest expense (273,209) (294,549) (255,132) Other income 432,084 483,481 520,862 ---------------- ---------------- --------------- Total other income (expenses) 647,049 327,816 373,112 ---------------- ---------------- --------------- Income before income tax 2,015,139 687,322 95,041 ---------------- ---------------- --------------- Provision for income taxes 801,905 398,386 109,965 ---------------- ---------------- --------------- Net income (loss) $ 1,213,234 $ 288,936 $ (14,924) ================ ================ =============== PER SHARE OF COMMON STOCK Basic earnings $ 0.10 $ 0.02 $ - Diluted earnings $ 0.10 $ 0.02 $ -
See Accompanying Notes to Consolidated Financial Statements 22
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 Additional Total Common Paid-in Retained Treasury Stockholders' Stock Capital Earnings Shares Equity ------------- ------------- ---------------- ---------------- ---------------- Balance - May 29, 2004 $9,219,195 $6,497,954 $ 17,363,237 $ (10,624,602) $ 22,455,784 Net loss - 2005 - - (14,924) - (14,924) Cash dividends paid - - (1,481,065) - (1,481,065) Treasury shares purchased - - - (52,992) (52,992) ------------- ------------- ---------------- ---------------- ---------------- Balance - June 3, 2005 9,219,195 6,497,954 15,867,248 (10,677,594) 20,906,803 Net income - 2006 - - 288,936 - 288,936 Cash dividends paid - - (1,479,425) - (1,479,425) ------------- ------------- ---------------- ---------------- ---------------- Balance - June 2, 2006 9,219,195 6,497,954 14,676,759 (10,677,594) 19,716,314 Net income - 2007 - - 1,213,234 - 1,213,234 Cash dividends paid - - (1,479,425) - (1,479,425) ------------- ------------- ---------------- ---------------- ---------------- Balance - June 1, 2007 $9,219,195 $6,497,954 $ 14,410,568 $ (10,677,594) $ 19,450,123 ============= ============= ================ ================ ================
See Accompanying Notes to Consolidated Financial Statements 23
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 2007 2006 2005 ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 110,731,854 $ 105,874,804 $ 102,944,666 Interest income 144,687 146,072 150,685 Rental income 31,974 36,469 32,471 Other operating cash payments/receipts 255,423 300,940 337,706 Cash paid to suppliers & employees for cost of goods sold (54,923,539) (55,762,586) (53,551,622) Cash paid for suppliers & employees for selling, general & administrative (50,336,873) (47,888,447) (47,233,583) Income taxes (1,007,958) 231,982 3,902 Interest expense (273,209) (294,549) (255,132) ------------- ------------- ------------- Net cash provided by operating activities 4,622,359 2,644,685 2,429,093 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (1,731,230) (1,670,021) (2,700,674) Proceeds from sale of property, plant and equipment 577,355 188,221 139,644 Collection of notes receivable 53,672 49,558 45,760 ------------- ------------- ------------- Net cash used in investing activities (1,100,203) (1,432,242) (2,515,270) CASH FLOWS FROM FINANCING ACTIVITIES Debt proceeds 23,163,475 21,525,001 16,952,546 Debt repayments (23,587,618) (22,433,469) (15,725,922) Decrease in checks outstanding in excess of bank balances (1,233,363) 1,125,873 199,619 Purchases of treasury shares - - (52,992) Cash dividends paid (1,479,425) (1,479,425) (1,481,065) ------------- ------------- ------------- Net cash used in financing activities (3,136,931) (1,262,020) (107,814) NET INCREASE IN CASH AND CASH EQUIVALENTS 385,225 (49,577) (193,991) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 321,627 371,204 565,195 ------------- ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 706,852 $ 321,627 $ 371,204 ============= ============= =============
See Accompanying Notes to Consolidated Financial Statements 24
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 2007 2006 2005 ---------- ---------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $1,213,234 $ 288,936 $ (14,924) Adjustment to reconcile net income (loss) to net cash provided by operating activities: Depreciation 2,268,468 2,284,669 2,267,718 Deferred income taxes (14,933) (190,049) 172,472 Gain on sale of property and equipment (488,174) (138,884) (107,382) Change in receivables - net (95,071) (671,892) (199,313) Change in inventories (99,603) (306,004) (267,018) Change in prepaid expenses (14,441) 828,289 (143,805) Change in cash surrender value of insurance 178,214 149,732 67,209 Change in other assets 51,892 (9,550) (104,178) Change in accounts payable 1,550,473 (60,009) 453,156 Change in accrued expenses 333,005 26,027 366,928 Change in salary continuation plan (69,585) (65,898) (61,770) Change in accrued income taxes (191,120) 509,318 - ---------- ---------- ------------- Net cash provided by operating activities $4,622,359 $2,644,685 $ 2,429,093 ========== ========== =============
See Accompanying Notes to Consolidated Financial Statements 25 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 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 and 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 inter-company 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. Accounts Receivable ------------------- The Company records accounts receivable at the time revenue is recognized. Amounts for bad debt expense are recorded in selling, general and administrative expenses on the consolidated statements of income. The determination of the allowance for doubtful accounts is based on management's estimate of uncollectible accounts receivables. The Company records a general reserve based on analysis of historical data. In addition, management records specific reserves for receivable balances that are considered at higher risk due to known facts regarding the customer. Fiscal Year ----------- The Company ends its fiscal year on the Friday closest to the last day in May. The years ended June 1, 2007, June 2, 2006 and June 3, 2005 included 52, 52, and 53 weeks, respectively. Fair Value of Financial Instruments ----------------------------------- The carrying amount of cash and cash equivalents, receivables, accounts payable and short and long-term debt approximate fair value. Cash and Cash Equivalents ------------------------- The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. 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. 26 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED --------------------------------------------------------------- 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 operations. Self-Insurance -------------- The Company is self-insured for certain casualty losses relating to automobile liability, general liability, workers' compensation, property losses and medical claims. The Company also has stop loss coverage to limit the exposure arising from these claims. Automobile liability, general liability, workers' compensation, and property losses costs are covered by letters of credit with the company's claim administrators. The Company uses a third-party actuary to estimate the casualty insurance obligations on an annual basis. In determining the ultimate loss and reserve requirements, the third-party uses various actuarial assumptions including compensation trends, health care cost trends and discount rates. The third-party actuary also uses historical information for claims frequency and severity in order to establish loss development factors. The actuarial calculation includes a margin of error to account for changes in inflation; health care costs, compensation and litigation cost trends as well as estimated future incurred claims. Advertising ----------- The Company expenses advertising costs as incurred. These costs are included in selling, general and administrative expenses in the Consolidated Statement of Operations. Advertising expense amounted to $6,030,702, $5,970,393 and $5,503,641 for the fiscal years 2007, 2006 and 2005, respectively. Income Taxes ------------ Deferred income taxes are provided using the 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. 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 Southeastern United States. Stock Options ------------- The Company adopted SFAS 123R as of June 3, 2006. SFAS 123R establishes standards for accounting of transactions in which an entity exchanges its equity instruments for goods or services, such as when an entity obtains employee services in share-based payment transactions. The revised statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost is to be recognized over the period during which the employee is required to provide service in exchange for the award. Changes in fair value during the required service period are to be recognized as compensation cost over the period. In addition, SFAS 123R amends SFAS No. 95, "Statement of Cash Flows," to require that excess tax benefits be reported as a financing cash flow rather than as a reduction of taxes paid. When we adopted 27 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For the Fiscal Year Ended June 1, 2007, June 2, 2006 and June 3, 2005 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED --------------------------------------------------------------- SFAS 123R, we elected the modified prospective application method and prior period amounts have not been restated. As of June 3, 2006, all outstanding options were fully vested. Additionally, no options were granted during the fifty-two week period ended June 1, 2007. The adoption of SFAS 123R did not have a material effect on the current period financial position, results of operations, or cash flows. Prior to the effective date of SFAS 123R, we followed Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretation for stock options granted to employees and directors. Because the exercise price of our stock options was equal to or more than fair market value of the underlying stock on the date of grant, no compensation expense was recognized. We adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure." The following illustrates the pro-forma information, as required under SFAS No. 123, determined as if we had applied the fair value method of accounting for stock options, during the years ended June 2, 2006 and June 3, 2005: Year End -------- 2006 2005 ----------- ------------- Net income (loss) as reported $ 288,936 $ (14,924) Deduct: total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (10,458) (10,458) ----------- ------------- Pro-forma net income (loss) $ 278,478 $ (25,382) =========== ============= Earnings per share: Basic - as reported $ 0.02 $ - =========== ============= Basic - Pro-forma $ 0.02 $ - =========== ============= Diluted - as reported $ 0.02 $ - =========== ============= Diluted - Pro-forma $ 0.02 $ - ----------- ------------- Shipping and Handling Costs --------------------------- Shipping and handling costs, which include salaries and vehicle operations expenses relating to the delivery of products to customers by the Company are classified as Selling, General and Administrative (SG&A) expenses. Shipping and handling costs classified as SG&A amounted to $3,257,608 million, $2,991,430 million and $2,788,746 million for the fiscal years 2007, 2006 and 2005, respectively. 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. 28 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED --------------------------------------------------------------- Recently Issued Accounting Pronouncements ----------------------------------------- In November 2004, the FASB issued SFAS No. 151, "Inventory Cost or Amendment of ARB No. 43, Chapter 4." This Statement amends AR 13 No. 43, to clarify abnormal amounts of facility expense, freight, handling costs and waster material should be recognized in current-period charges. In addition, this Statement requires that allocation of fixed production overhead to the costs on conversion be based on the normal capacity of the production facilities. This provision is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. SAFS No. 151 did not have an impact on the Company's financial position, results of operations or cash flows. In December 2004, the FASB revised its SFAS No. 123 (SFAS No. 123R), "Accounting for Stock Based Compensation." The revision established standards for the accounting of transactions in which an entity exchanges its equity instruments for goods or services particularly transaction in which an entity obtains employee services in share based payment transactions. The revised statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is to be recognized over the period during which the employee is required to proved service in exchange for the award. Changes in fair value during the requisite service period are to be recognized as compensation cost over that period. In addition the revised statement amends SFAS No. 95, "Statement of Cash Flows," to require that excess tax benefits be reported as a financing cash flow rather than as a reduction of taxes paid. Beginning June 3, 2006, we adopted SFAS No. 123R "Share Based Payment". We adopted the "modified prospective method" in adopting SFAS 123R. The adoption of SFAS 123R did not have a material effect on the current period financial position results of operations, or cash flows. In June 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement 109" (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes". This interpretation prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken. FIN 48 is effective for fiscal years beginning after December 15, 2006. FIN 48 is not expected to have a material impact on our results of operations or financial positions. In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3." This statement carries forward without change the guidance contained in APB Opinion No. 20 for reporting the correction of an error in previously issued financial statements and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 did not have a significant impact on the Company's results of operations or financial position. In September 2005, FASB issued its consensus on EITF Issue No. 04-13, Accounting for Purchases and Sales of Inventory with the Same Counterparty. This consensus concludes that an entity is required to treat sales and purchases of inventory between the entity and the same counterparty as one transaction for purposes of applying APB Opinion No. 29, Accounting for Nonmonetary Transactions, when the transactions are entered into in contemplation of each other. The consensus should be applied to new arrangements entered into, or modifications or renewals of existing arrangements, in the first interim or annual reporting period beginning after March 15, 2006. This consensus did not have a material effect on the Company's financial position, results of operation or cash flows. 29 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED --------------------------------------------------------------- In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 157 is not expected to have a material impact on our financial condition, results of operations or cash flows. NOTE 2 - NOTES RECEIVABLE ------------------------- Notes receivable as of June 1, 2007 and June 2, 2006 consist of the following:
2007 2006 ----------- ----------- 8% note, due in 120 monthly installments of $3,640 through November 1, 2010, collateralized by property $ 132,955 $ 164,608 8% note, due in 360 monthly installments of $12,474 through November 1, 2030, collateralized by property 1,583,801 1,605,820 ----------- ----------- 1,716,756 1,770,428 Less current portion 58,126 53,672 ----------- ----------- $1,658,630 $1,716,756 =========== =========== Maturities at year end 2009 $ 62,951 2010 68,176 2011 51,630 2012 32,804 2013 35,526 Thereafter 1,407,543
30 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 NOTE 3 - PREPAID EXPENSES ------------------------- At June 1, 2007 and June 2, 2006, prepaid expenses consist of the following: 2007 2006 ------------- ------------- Prepaid slotting fees $ 220,437 $ 177,479 Other prepaid expenses 1,402,463 1,430,980 ------------- ------------- $1,622,900 $1,608,459 ============= ============= NOTE 4 - OTHER ACCRUED EXPENSES ------------------------------- At June 1, 2007 and June 2, 2006, other accrued expenses consist of the following: 2007 2006 ------------- ------------- Accrued payroll $ 457,398 $ 461,050 Self insurance liability 1,865,200 1,885,500 Accrued vacation 1,230,385 1,402,369 Other accrued expenses 1,507,775 978,834 ------------- ------------- $5,060,758 $4,727,753 ============= ============= NOTE 5 - LINE OF CREDIT ----------------------- The Company has a line of credit agreement with a local bank which permits borrowing up to $2 million. The balance on the line of credit at June 1, 2007 was $622,950 a rate of 8.25%. The line credit is subject to the Company's continued credit worthiness and compliance with the terms and conditions of the advance application. 31 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 NOTE 6 - LONG-TERM LIABILITIES ------------------------------ At June 1, 2007 and June 2, 2006, long-term debt consists of the following: Note payable - bank - payable in equal monthly 2007 2006 installments of $65,108 including interest at ----------- ----------- the LIBOR index rate plus 1.75% 7.07% at June 1, 2007) through November 30, 2007, secured by equipment $270,625 $1,003,795 Less: current portion 270,625 750,177 ----------- ----------- $ - $ 253,618 =========== =========== Other long-term obligations at June 1, 2007 and June 2, 2006 consist of the following: 2007 2006 ------------ ------------- Salary continuation plan $1,704,314 $1,773,899 Less: current portion (121,877) (112,536) ------------ ------------- $1,582,437 $1,661,363 ============ ============= 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 $42,951, $38,014 and $34,178 for fiscal 2007, 2006 and 2005, respectively. 32 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 NOTE 7 - INCOME TAXES --------------------- At June 1, 2007, June 2, 2006 and June 3, 2005 the provision for income taxes consists of the following: 2007 2006 2005 --------- ---------- --------- Current: Federal $727,167 $ 523,353 $(55,620) State 89,671 65,082 (6,890) --------- ---------- --------- 816,838 588,435 (62,510) Deferred: Federal (13,288) (169,111) 155,191 State (1,645) (20,938) 17,284 --------- ---------- --------- (14,933) (190,049) 172,475 --------- ---------- --------- Total $801,905 $ 398,386 $109,965 The effective tax rate for continuing operations differs from the expected tax using statutory rates. A reconciliation between the expected tax and actual tax follows: 2007 2006 2005 --------- --------- --------- Tax on income at statutory rates $685,147 $233,689 $ 32,327 (Decrease) increase resulting from: State income taxes, less Federal income tax effect 59,183 42,954 (4,547) Tax exempt interest (1,818) (881) (1,142) Change in valuation allowance (49,249) 36,040 57,559 Other - net 108,642 86,584 25,768 --------- --------- --------- Total $801,905 $398,386 $109,965 ========= ========= ========= 33 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 NOTE 7 - INCOME TAXES- CONTINUED -------------------------------- The tax effects of temporary differences that result in deferred tax assets and liabilities are as follows: 2007 2006 ----------- ----------- Deferred tax assets Salary continuation plan $ 624,972 $ 650,489 Accrued vacation 451,182 514,248 Contribution carry forward 346,179 423,569 Inventory capitalization 25,167 16,463 Allowance for doubtful accounts 41,406 48,926 Other accrued expenses 146,258 155,421 ----------- ----------- Gross deferred tax assets before valuation allowance 1,635,164 1,809,116 Less valuation allowance (219,350) (268,599) ----------- ----------- Total deferred tax assets 1,415,814 1,540,517 ----------- ----------- Deferred tax liabilities Property and equipment 1,504,099 1,659,487 Prepaid expenses 80,834 65,082 ----------- ----------- Total deferred tax liabilities 1,584,933 1,724,569 ----------- ----------- Net deferred tax liability $ (169,119) $ (184,052) =========== =========== NOTE 8 - 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 fifty 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% of the participants' compensation. The annual contributions to the plans are determined by the Board of Directors. Total plan expenses for the years ended June 1, 2007, June 2, 2006, and June 3, 2005 were $121,583, $122,641and $129,529, 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 June 1, 2007, June 2, 2006 and June 3, 2005 were $-0-. Each participant's account is credited with an allocation of shares acquired with the Company's annual contributions, dividends received on Employee Stock Ownership Plan shares and forfeitures of terminated participants' non-vested accounts. 34 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 NOTE 8 - EMPLOYEE BENEFIT PLANS - CONTINUED ------------------------------------------- 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 each 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:
2007 2006 --------------- --------------- Accrued salary continuation plan - beginning of year $1,773,899 $1,839,797 Benefits accrued 42,951 38,058 Benefits paid (112,536) (103,956) --------------- --------------- Accrued salary continuation plan - end of year $1,704,314 $1,773,899 =============== ===============
NOTE 9- LONG-TERM INCENTIVE PLANS --------------------------------- The Company has a long-term incentive plan currently in effect under which future stock option grants may be issued. This Plan (the 1996 Plan) is administered by the Stock Option Committee of the Board of Directors, which has sole discretion, subject to the terms of the Plan, 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 Plan, 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 the 2007, 2006, and 2005 are exercisable. The 1996 Plan provides for the granting of the 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 option 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. 35 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 NOTE 9 - LONG-TERM INCENTIVE PLANS - CONTINUED ---------------------------------------------- Five hundred thousand shares of the Company's stock have been reserved for issuance under this Plan. The following is a summary of transactions:
2007 2006 2005 ---- ---- ---- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price Outstanding - beginning of year 369,000 $3.78 369,000 $3.78 369,000 $3.78 Granted - - - - - - Exercised - - - - - - Forfeited - - - - - - Cancelled - - - - - - ---------- ---------- ---------- ---------- ---------- ---------- Outstanding - end of year 369,000 $3.78 369,000 $3.78 369,000 $3.78 ========== ========== ========== ========== ========== ==========
Pro forma 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 the 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. 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 the employee stock options. 36 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 NOTE 10 - NET INCOME PER SHARE ------------------------------ Basic earnings per common share are computed by dividing earnings available to stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects per share amounts that would have resulted if dilutive potential common stock equivalents had been converted to common stock, as prescribed by Statement of Financial Accounting Standards No. 128, "Earnings per Share". At June 1, 2007, options on all 369,000 shares were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive. At June 1, 2006, the effect of options was computed on the 40,000 shares of common stock that were dilutive at that time. Options on the remaining 329,000 shares were antidilutive. At June 3, 2005 options on all 369,000 common shares were antidilutive. The following reconciles the information used to compute basic and diluted earnings per share: Average Common Stock Shares --------------------------- 2007 2006 2005 ----------- ------------ ------------ Basic weighted average shares outstanding 11,835,330 11,835,330 11,846,419 Effect of options - 329 - ----------- ------------ ------------ 11,835,330 11,835,659 11,846,419 =========== ============ ============ NOTE 11 - 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 instruments, 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 disclose 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 value of notes receivable is estimated by using a discount rate that approximates the current rate for comparable notes. At June 1, 2007 and June 2, 2006 the aggregate fair value was approximately $2,015,145 and $2,090,955 compared to a carrying amount of $1,716,756 and $1,770,428, respectively. 37 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 NOTE 11 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS -CONTINUED -------------------------------------------------------------------------- The interest rate on the Company's long-term 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 12 - COMMITMENTS AND CONTINGENCIES --------------------------------------- Rental expense was $443,752 in 2007, $354,261 in 2006 and $316,724 in 2005. In August 2006, the Company entered into various operating lease agreements to replace aging route vans. The current annual obligation under this agreement is $109,713. Future minimum lease commitments for operating leases at June 1, 2007 were as follows: 2008 $109,713 2009 109,713 2010 109,713 2011 109,713 2012 40,679 The Company leases its airplane to a major shareholder of the Company for approximately $20,000 per month. The lease provides for their 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 $2,668,846 outstanding at June 1, 2007 to support the Company's commercial self-insurance program. The Company pays a commitment fee of 0.50% to maintain the letters of credit. The Company has entered into various other short term purchase commitments with suppliers for raw materials in the normal course of business. The Company is subject to routine litigation and claims incidental to its business. In the opinion of management, such routine litigation and claims should not have a material adverse effect upon the Company's consolidated financial statements taken as a whole. 38 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 NOTE 13 - 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 deposit relationships with high credit quality financial institutions. The Company's trade receivables result primarily from its snack food operations and reflect a broad customer base, primarily large grocery store chains located in the Southeastern United States. The Company routinely assesses the financial strength of its customers. As a consequence, concentrations of credit risk are limited. The Company's notes receivable require collateral and management believes they are well secured. NOTE 14 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) ------------------------------------------------------ The following is a summary of the unaudited quarterly results of operations of the years ended June 1, 2007 and June 2, 2006. Per Share Net Income Net Income Net Sales (Loss) (Loss) --------------- ------------- ----------- Quarter ------- 2007 ---- First $ 27,824,938 $ 220,223 $ 0.02 Second 26,596,212 (239,128) (0.02) Third 27,124,000 611,428 0.05 Fourth 29,281,775 620,711 0.05 --------------- ------------- ----------- For the year $110,826,925 $1,213,234 $ 0.10 =============== ============= =========== 2006 ---- First $ 26,031,836 $ (64,242) $ (0.01) Second 25,430,115 (289,031) (0.02) Third 26,819,759 490,297 0.04 Fourth 28,264,986 151,912 0.01 --------------- ------------- ----------- For the year $106,546,696 $ 288,936 $ 0.02 =============== ============= =========== 39 GOLDEN ENTERPRISES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005 NOTE 15 - SUPPLEMENTARY STATEMENT OF INCOME INFORMATION ------------------------------------------------------- The following tabulation gives certain supplementary statement of income information for continuing operations for the years ended June 1, 2007, June 2, 2006 and June 3, 2005: 2007 2006 2005 -------------- ------------- ------------- Maintenance and repairs $6,394,349 $6,274,607 $6,036,556 Depreciation 2,268,468 2,284,669 2,267,718 Payroll taxes 2,312,079 2,341,678 2,379,888 Advertising costs 6,030,702 5,970,393 5,503,641 Amounts for other taxes, rents and research and development costs are not presented because each of such amounts is less than 1% of total revenues. 40 ITEM 9. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. ITEM 9A. - CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures The Company performed an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the fiscal year ended June 1, 2007. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the fiscal year ended June 1, 2007, the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed in reports that the Company files or submits under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the specified time periods. (b) Changes in Internal Controls There has been no change in the Company's Internal Control over financial reporting that occurred during the year ending June 1, 2007 that has materially affective or is reasonably likely to materially affect the Company's Internal Control over financial reporting. ITEM 9B. - OTHER INFORMATION Not Applicable. PART III ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE With the exception of information set forth under the caption Executive Officers of the Registrant and Its Subsidiary which appears in Part I of this Form 10-K on Page 6, the information required by this item is incorporated by reference to the sections entitled "Election of Directors," "Additional Information Concerning the Board of Directors," "Executive Compensation and Other Information," "Section 16(a) Beneficial Ownership Reporting Compliance", "Code of Conduct and Ethics" and "Corporate Governance" of the Company's Proxy Statement for the 2007 Annual Meeting of Stockholders to be held September 20, 2007. ITEM 11. - EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to the sections entitled "Executive Compensation and Other Information" of the Company's Proxy Statement for the 2007 Annual Meeting of Stockholders to be held September 20, 2007. See Item 5 of this Annual Report on Form 10-K for information concerning the Company's equity compensation plans. 41 ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item is incorporated by reference to the sections entitled "Security Ownership of Certain Beneficial Owners and Management" and "Section 16(a) Beneficial Ownership Reporting Compliance," of the Company's Proxy Statement for the 2007 Annual Meeting of Stockholders to be held September 20, 2007. ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE The information required by this item is incorporated by reference to the section entitled "Certain Transactions" and "Director Independence" of the Company's Proxy Statement for the 2007 Annual Meeting of Stockholders to be held September 20, 2007. ITEM 14. - PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item is incorporated by reference to the section entitled "Independent Accountants" of the Company's Proxy Statement for the 2007 Annual Meeting of Stockholders to be held September 20, 2007. Prior to September 29, 2007, the Company will file a definitive Proxy Statement with the Securities and Exchange Commission pursuant to Regulation 14A which involves the election of directors. 42 PART IV ITEM 15.- EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) 1. LIST OF FINANCIAL STATEMENTS The following consolidated financial statements of Golden Enterprises, Inc., and subsidiary required to be included in Item 8 are listed below: Consolidated Balance Sheets - June 1, 2007 and June 2, 2006 Consolidated Statements of Operations- Years ended June 1, 2007, June 2, 2006 and June 3, 2005 Consolidated Statements of Changes in Stockholders' Equity- Years ended June 1, 2007, June 2, 2006, and June 3, 2005 Consolidated Statements of Cash Flows- Years ended June 1, 2007, June 2, 2006 and June 3, 2005 Notes to Consolidated Financial Statements (a) 2. LIST OF FINANCIAL STATEMENT SCHEDULES The following consolidated financial statements schedule is included in Item 15 (c): 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. (a) 3. Exhibits (3) Articles of Incorporation and By-laws of Golden Enterprises, Inc. 3.1 Certificate of Incorporation of Golden Enterprises, Inc. (originally known as "Golden Flake, Inc.") dated December 11, 1967 (incorporated by reference to Exhibit 3.1 to Golden Enterprises, Inc. May 31, 2004 Form 10-K filed with the Commission). 3.2 Certificate of Amendment of Certificate of Incorporation of Golden Enterprises, Inc. dated December 22, 1976 (incorporated by reference to Exhibit 3.2 to Golden Enterprises, Inc. May 31, 2004 Form 10-K filed with the Commission). 3.3 Certificate of Amendment of Certificate of Incorporation of Golden Enterprises, Inc. dated October 2, 1978 (incorporated by reference to Exhibit 3 to Golden Enterprises, Inc. May 31, 1979 Form 10-K filed with the Commission). 3.4 Certificate of Amendment of Certificate of Incorporation of Golden Enterprises, Inc. dated October 4, 1979 (incorporated by reference to Exhibit 3 to Golden Enterprises, Inc. May 31, 1980 Form 10-K filed with the Commission). 3.5 Certificate of Amendment of Certificate of Incorporation of Golden Enterprises, Inc. dated September 24, 1982 (incorporated by reference to Exhibit 3.1 to Golden Enterprises, Inc. May 31, 1983 Form 10-K filed with the Commission). 43 3.6 Certificate of Amendment of Certificate of Incorporation of Golden Enterprises, Inc. dated September 22, 1983 (incorporated by reference to Exhibit 19.1 to Golden Enterprises, Inc. Form 10-Q Report for the quarter ended November 30, 1983 filed with the Commission). 3.7 Certificate of Amendment of Certificate of Incorporation of Golden Enterprises, Inc. dated October 3, 1985 (incorporated by reference to Exhibit 19.1 to Golden Enterprises, Inc. Form 10-Q Report for the quarter ended November 30, 1985 filed with the Commission). 3.8 Certificate of Amendment of Certificate of Incorporation of Golden Enterprises, Inc. dated September 23, 1987 (incorporated by reference to Exhibit 3.1 to Golden Enterprises, Inc. May 31, 1988 Form 10-K filed with the Commission). 3.9 By-Laws of Golden Enterprises, Inc. (incorporated by reference to Exhibit 3.4 to Golden Enterprises, Inc. May 31, 1988 Form 10-K filed with the Commission). (10) Material Contracts. 10.1 A Form of Indemnity Agreement executed by and between Golden Enterprises, Inc. and Each of Its Directors (incorporated by reference as Exhibit 19.1 to Golden Enterprises, Inc. Form 10-Q Report for the quarter ended November 30, 1987 filed with the Commission). 10.2 Amended and Restated Salary Continuation Plans for John S. Stein (incorporated by reference to Exhibit 19.1 to Golden Enterprises, Inc. May 31, 1990 Form 10-K filed with the Commission). 10.3 Indemnity Agreement executed by and between the Company and J. Wallace Nall, Jr. (incorporated by reference as Exhibit 19.4 to Golden Enterprises, Inc. May 31, 1991 Form 10-K filed with the Commission). 10.4 Salary Continuation Plans - Retirement, Disability and Death Benefits for F. Wayne Pate (incorporated by reference to Exhibit 19.1 to Golden Enterprises, Inc. May 31, 1992 Form 10-K filed with the Commission). 10.5 Indemnity Agreement executed by and between the Registrant and F. Wayne Pate (incorporated by reference as Exhibit 19.3 to Golden Enterprises, Inc. May 31, 1992 Form 10-K filed with the Commission). 10.6 Golden Enterprises, Inc. 1996 Long-Term Incentive Plan (incorporated by reference as Exhibit 10.1 to Golden Enterprises, Inc. May 31, 1997 Form 10-K filed with the Commission). 10.7 Equipment Purchase and Sale Agreement dated October 2000 whereby Golden Flake Snack Foods, Inc., a wholly-owned subsidiary of Golden Enterprises, Inc., sold the Nashville, Tennessee Plant Equipment (incorporated by reference as Exhibit 10.1 to Golden Enterprises, Inc. May 31, 2001 Form 10-K filed with the Commission). 10.8 Real Property Contract of Sale dated October 2000 whereby Golden Flake Snack Foods, Inc. sold the Nashville, Tennessee Plant Real Property (incorporated by reference as Exhibit 10.2 to Golden Enterprises, Inc. May 31, 2001 Form 10-K filed with the Commission). 44 10.9 Amendment to Salary Continuation Plans, Retirement and Disability for F. Wayne Pate dated April 9, 2002 (incorporated by reference to Exhibit 10.2 to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed with the Commission). 10.10 Amendment to Salary Continuation Plans, Retirement and Disability for John S. Stein dated April 9, 2002 (incorporated by reference to Exhibit 10.3 to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed with the Commission). 10.11 Amendment to Salary Continuation Plan, Death Benefits for John S. Stein dated April 9, 2002 (incorporated by reference to Exhibit 10.4 to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed with the Commission). 10.12 Retirement and Consulting Agreement for John S. Stein dated April 9, 2002 (incorporated by reference to Exhibit 10.5 to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed with the Commission). 10.13 Salary Continuation Plan for Mark W. McCutcheon dated May 15, 2002 (incorporated by reference to Exhibit 10.6 to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed with the Commission). 10.14 Trust Under Salary Continuation Plan for Mark W. McCutcheon dated May 15, 2002 (incorporated by reference to Exhibit 10.7 to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed with the Commission). 10.15 Lease of aircraft executed by and between Golden Flake Snack Foods, Inc., a wholly-owned subsidiary of Golden Enterprises, Inc., and Joann F. Bashinsky dated February 1, 2006 (incorporated by reference to Exhibit 10.15 to Golden Enterprises, Inc. June 2, 2006 Form 10-K filed with the Commission). (14) Code of Ethics 14.1 Golden Enterprises, Inc.'s Code of Conduct and Ethics adopted by the Board of Directors on April 8, 2004 (incorporated by reference to Exhibit 14.1 to Golden Enterprises, Inc. May 31, 2004 Form 10-K filed with the Commission). (18) Letter Re: Change in Accounting Principles 18.1 Letter from the Registrant's Independent Accountant dated August 12, 2005 indicating a change in the method of applying accounting practices followed by the Registrant for the fiscal year ended June 3, 2005 (incorporated by reference to Exhibit 18.1 to Golden Enterprises, Inc.'s June 3, 2005 Form 10-K filed with the Commission) 21 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21 to Golden Enterprises, Inc. May 31, 2004 Form 10-K filed with the Commission) (31) Certifications 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 45 (99) Additional Exhibits 99.1 A copy of excerpts of the Last Will and Testament and Codicils thereto of Sloan Y. Bashinsky, Sr. and of the SYB Common Stock Trust created by Sloan Y. Bashinsky, Sr. providing for the creation of a Voting Committee to vote the shares of common stock of Golden Enterprises, Inc. held by SYB, Inc. and the Estate/Testamentary Trust of Sloan Y. Bashinsky, Sr. (incorporated by reference to Exhibit 99.1 to Golden Enterprises, Inc.'s June 3, 2005 Form 10-K filed with the Commission). 46 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 /s/Patty Townsend August 24, 2007 -------------------- --------------- Patty Townsend Date Vice President, Secretary and Principal Financial Officer 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 --------- ----- ---- /s/John S. Stein Chairman of Board August 24, 2007 ------------------------- John S. Stein /s/Mark W. McCutcheon Chief Executive August 24, 2007 ------------------------- Officer, President and Director Mark W. McCutcheon /s/Patty Townsend Vice President, Secretary and August 24, 2007 ------------------------- Principal Financial Officer Patty Townsend /s/F. Wayne Pate Director August 24, 2007 ------------------------- F. Wayne Pate /s/Edward R. Pascoe Director August 24, 2007 ------------------------- Edward R. Pascoe /s/John P. McKleroy, Jr. Director August 24, 2007 ------------------------- John P. McKleroy, Jr. /s/James I. Rotenstreich Director August 24, 2007 ------------------------- James I. Rotenstreich /s/John S.P. Samford Director August 24, 2007 ------------------------- John S.P. Samford /s/J. Wallace Nall, Jr. Director August 24, 2007 ------------------------- J. Wallace Nall, Jr. /s/Joann F. Bashinsky Director August 24, 2007 ------------------------- Joann F. Bashinsky 47 SCHEDULE II GOLDEN ENTERPRISES, INC. AND SUBSIDIARY VALUATION AND QUALIFYING ACCOUNTS For the Fiscal Years Ended June 1, 2007, June 2, 2006 and June 3, 2005
Additions Balance at Charged to Balance Beginning Costs and at End Allowance for Doubtful Accounts of Year Expenses Deductions of Year ---------------------------------- -------------- -------------- --------------- ------------- Year ended June 3, 2005 $185,000 $174,455 $202,988 $156,467 ============== ============== =============== ============= Year ended June 2, 2006 $156,467 $23,676 $46,721 $133,422 ============== ============== =============== ============= Year ended June 1, 2007 $133,422 $41,823 $62,330 $112,915 ============== ============== =============== =============
48 INDEX TO EXHIBITS ----------------- Page ---- 3.1 Certificate of Incorporation of Golden Enterprises, Inc. (originally known as "Golden Flake, Inc.") dated December 11, 1967 (incorporated by reference to Exhibit 3.1 to Golden Enterprises, Inc. May 31, 2004 Form 10-K filed with the Commission). 3.2 Certificate of Amendment of Certificate of Incorporation of Golden Enterprises, Inc. dated December 22, 1976 (incorporated by reference to Exhibit 3.2 to Golden Enterprises, Inc. May 31, 2004 Form 10-K filed with the Commission). 3.3 Certificate of Amendment of Certificate of Incorporation of Golden Enterprises, Inc. dated October 2, 1978 (incorporated by reference to Exhibit 3 to Golden Enterprises, Inc. May 31, 1979 Form 10-K filed with the Commission). 3.4 Certificate of Amendment of Certificate of Incorporation of Golden Enterprises, Inc. dated October 4, 1979 (incorporated by reference to Exhibit 3 to Golden Enterprises, Inc. May 31, 1980 Form 10-K filed with the Commission). 3.5 Certificate of Amendment of Certificate of Incorporation of Golden Enterprises, Inc. dated September 24, 1982 (incorporated by reference to Exhibit 3.1 to Golden Enterprises, Inc. May 31, 1983 Form 10-K filed with the Commission). 3.6 Certificate of Amendment of Certificate of Incorporation of Golden Enterprises, Inc. dated September 22, 1983 (incorporated by reference to Exhibit 19.1 to Golden Enterprises, Inc. Form 10-Q Report for the quarter ended November 30, 1983 filed with the Commission). 3.7 Certificate of Amendment of Certificate of Incorporation of Golden Enterprises, Inc. dated October 3, 1985 (incorporated by reference to Exhibit 19.1 to Golden Enterprises, Inc. Form 10-Q Report for the quarter ended November 30, 1985 filed with the Commission). 3.8 Certificate of Amendment of Certificate of Incorporation of Golden Enterprises, Inc. dated September 23, 1987 (incorporated by reference to Exhibit 3.1 to Golden Enterprises, Inc. May 31, 1988 Form 10-K filed with the Commission). 3.9 By-Laws of Golden Enterprises, Inc. (incorporated by reference to Exhibit 3.4 to Golden Enterprises, Inc. May 31, 1988 Form 10-K filed with the Commission). 10.1 A Form of Indemnity Agreement executed by and between Golden Enterprises, Inc. and Each of Its Directors (incorporated by reference as Exhibit 19.1 to Golden Enterprises, Inc. Form 10-Q Report for the quarter ended November 30, 1987 filed with the Commission). 10.2 Amended and Restated Salary Continuation Plans for John S. Stein (incorporated by reference to Exhibit 19.1 to Golden Enterprises, Inc. May 31, 1990 Form 10-K filed with the Commission). 49 Page ---- 10.3 Indemnity Agreement executed by and between the Company and J. Wallace Nall, Jr. (incorporated by reference as Exhibit 19.4 to Golden Enterprises, Inc. May 31, 1991 Form 10-K filed with the Commission). 10.4 Salary Continuation Plans - Retirement, Disability and Death Benefits for F. Wayne Pate (incorporated by reference to Exhibit 19.1 to Golden Enterprises, Inc. May 31, 1992 Form 10-K filed with the Commission). 10.5 Indemnity Agreement executed by and between the Registrant and F. Wayne Pate (incorporated by reference as Exhibit 19.3 to Golden Enterprises, Inc. May 31, 1992 Form 10-K filed with the Commission). 10.6 Golden Enterprises, Inc. 1996 Long-Term Incentive Plan (incorporated by reference as Exhibit 10.1 to Golden Enterprises, Inc. May 31, 1997 Form 10-K filed with the Commission). 10.7 Equipment Purchase and Sale Agreement dated October 2000 whereby Golden Flake Snack Foods, Inc., a wholly-owned subsidiary of Golden Enterprises, Inc., sold the Nashville, Tennessee Plant Equipment (incorporated by reference as Exhibit 10.1 to Golden Enterprises, Inc. May 31, 2001 Form 10-K filed with the Commission). 10.8 Real Property Contract of Sale dated October 2000 whereby Golden Flake Snack Foods, Inc. sold the Nashville, Tennessee Plant Real Property (incorporated by reference as Exhibit 10.2 to Golden Enterprises, Inc. May 31, 2001 Form 10-K filed with the Commission). 10.9 Amendment to Salary Continuation Plans, Retirement and Disability for F. Wayne Pate dated April 9, 2002 (incorporated by reference to Exhibit 10.2 to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed with the Commission). 10.10 Amendment to Salary Continuation Plans, Retirement and Disability for John S. Stein dated April 9, 2002 (incorporated by reference to Exhibit 10.3 to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed with the Commission). 10.11 Amendment to Salary Continuation Plan, Death Benefits for John S. Stein dated April 9, 2002 (incorporated by reference to Exhibit 10.4 to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed with the Commission). 10.12 Retirement and Consulting Agreement for John S. Stein dated April 9, 2002 (incorporated by reference to Exhibit 10.5 to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed with the Commission). 10.13 Salary Continuation Plan for Mark W. McCutcheon dated May 15, 2002 (incorporated by reference to Exhibit 10.6 to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed with the Commission). 50 Page ---- 10.14 Trust Under Salary Continuation Plan for Mark W. McCutcheon dated May 15, 2002 (incorporated by reference to Exhibit 10.7 to Golden Enterprises, Inc. May 31, 2002 Form 10-K filed with the Commission). 10.15 Lease of aircraft executed by and between Golden Flake Snack Foods, Inc., a wholly-owned subsidiary of Golden Enterprises, Inc., and Joann F. Bashinsky dated February 1, 2006 (incorporated by reference to Exhibit 10.15 to Golden Enterprises, Inc. June 2, 2006 Form 10-K filed with the Commission). 14.1 Golden Enterprises, Inc.'s Code of Conduct and Ethics adopted by the Board of Directors on April 8, 2004 (incorporated by reference to Exhibit 14.1 to Golden Enterprises, Inc. May 31, 2004 Form 10-K filed with the Commission). (18) Letter Re: Change in Accounting Principles 18.1 Letter from the Registrant's Independent Accountant dated August 12, 2005 indicating a change in the method of applying accounting practices followed by the Registrant for the fiscal year ended June 3, 2005 (incorporated by reference to Exhibit 18.1 to Golden Enterprises, Inc.'s June 3, 2005 Form 10-K filed with the Commission). 21 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21 to Golden Enterprises, Inc. May 31, 2004 Form 10-K filed with the Commission) 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 52 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 53 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 54 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 55 99.1 A copy of excerpts of the Last Will and Testament and Codicils thereto of Sloan Y. Bashinsky, Sr. and of the SYB Common Stock Trust created by Sloan Y. Bashinsky, Sr. providing for the creation of a Voting Committee to vote the shares of common stock of Golden Enterprises, Inc. held by SYB, Inc. and the Estate/Testamentary Trust of Sloan Y. Bashinsky, Sr. (incorporated by reference to Exhibit 99.1 to Golden Enterprises, Inc.'s June 3, 2005 Form 10-K filed with the Commission). 51