1996
Annual
Report
GOLDEN ENTERPRISES, INC.
CONTENTS
To Our Stockholders 2
Golden Flake Snack Foods Report 4
Financial Highlights 6
Consolidated Statements of Income 7
Consolidated Balance Sheets 8
Consolidated Statements of Cash Flows 10
Consolidated Statements of Changes
in Stockholders' Equity 11
Notes to Consolidated Financial Statements 12
Report of Independent Certified Public Accountants 19
Market and Dividend Information 20
Financial Review 21
Management's Discussion and Analysis of Financial
Condition and Results of Operations 22
Management of Golden Enterprises, Inc.
and Its Subsidiaries 24
COUNSEL
Spain & Gillon
Birmingham, Alabama
AUDITORS
Dudley, Hopton-Jones, Sims & Freeman PLLP
REGISTRAR & TRANSFER AGENT
AMSOUTH BANK, N.A.
P.O. Box 11426
Birmingham, Alabama 35202
Copies of the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K will be furnished free of charge
upon written request directed to John Shannon, 2101 Magnolia Avenue
South, Suite 212, Birmingham, Alabama 35205.
GOLDEN ENTERPRISES, INC.
Golden Enterprises is a holding company which owns all the
outstanding shares of Golden Flake Snack Foods, Inc.
The Company was organized as Magic City Food Products, Inc. in
1946. In 1958, the Company adopted the name Golden Flake, Inc. Five
years later, the Company purchased Don's Foods, Inc., a Nashville,
Tennessee based manufacturer and distributor of snack food
products. Don's Foods was operated as a separate entity until 1966
when Golden Flake was reorganized as a Delaware Corporation and
combined Don's operations with those of Golden Flake.
The Company acquired Steel City Bolt & Screw, Inc. and Nall &
Associates, Inc. and a real estate and insurance subsidiary in
1971.
Golden Enterprises was formed as a holding company with its
operating division, Golden Flake Snack Foods, as a wholly-owned
subsidiary on January 1, 1977. In September of that same year, the
assets of the real estate and insurance subsidiary were sold. Steel
City Bolt & Screw, Inc. and Nall & Associates, Inc. were sold as of
the close of business on January 31, 1995, leaving Golden Flake as
the Company's only subsidiary.
This represents the corporate structure of Golden Enterprises as it
stands today.
TO OUR STOCKHOLDERS:
The fiscal year ended May 31, 1996 was an eventful one for your
Company and the snack food industry. During the year both Keebler
and Eagle closed their salty snack plants and withdrew from the
snack food market. This has given the Company some marketing
opportunities which your management is pursuing with considerable
success. Sales trends in fiscal year 1997 are showing some
improvement.
The emphasis on developing and distributing good tasting low fat
and no fat snack food products continued during fiscal year 1996.
The Company now distributes items in five different segments in
this category and will continue to seek further growth with this
type of product.
Total revenues for fiscal 1996 were down 1% to $127.8 million from
$129.4 million the previous year, and net income per share was $.28
compared to $.42 last year. Net income was down because of the
lower sales volume combined with higher manufacturing costs and
start up costs of the new low fat and no fat product lines.
In October, 1995, the quarterly cash dividend was increased 2.2%
from $.1150 to $.1175 per share. This was the twenty-fourth
consecutive annual increase.
Effective May 31, 1996, Sloan Y. Bashinsky, Sr. retired as Chairman
of the Board. Mr. Bashinsky had been with the Company since 1946.
His leadership has meant so much to the management of the Company,
and he will be missed. Mr. Bashinsky has been elected Chairman
Emeritus. His wife, Joann F. Bashinsky was elected to the Board on
July 11, 1996, filling the vacancy that was created by Mr.
Bashinsky's retirement.
We appreciate the continued support of our customers, consumers,
employees, directors, stockholders, suppliers and friends. We hope
you will attend our annual meeting of stockholders to be held on
September 27, 1996 at 11:00 A.M. at the general offices of Golden
Flake Snack Foods, Inc. in Birmingham.
Sincerely,
/s/ John Stein
John Stein
Chairman, President and
Chief Executive Officer
GOLDEN FLAKE SNACK FOODS, INC.
Golden Flake Snack Foods, Inc. manufactures and distributes a full
line of snack foods through a direct-store delivery system. Plants
are located in Nashville, Tennessee, Ocala, Florida, and
Birmingham, Alabama with distribution into all or parts of twelve
states and the Bahamas.
During fiscal '96, we experienced substantial increases in the
price of packaging materials, cardboard, most raw materials and
utilities. These higher prices continue into fiscal '97 and while
the prices of some items are expected to remain high, others have
begun to moderate and hopefully will return to more normal levels.
A very modest price increase on a few of its items was implemented
by the Company during the past fiscal year.
Two competitors exited the snack food market during the year. Eagle
Snacks division of Anheuser Busch announced on February 7, 1996,
that they were getting out of the snack food business. A few months
earlier, Keebler, a division of United Biscuit, announced that they
were leaving the snack food business. This has given us
opportunities in a number of markets, but the competitive
environment remains very tough.
The Low Fat/No Fat snack category continues to have excellent
growth and your company has made substantial investments in order
to take advantage of the opportunities in this growing segment.
Company-wide distribution of Low Fat Cheese Curls began in the fall
of 1995. These are produced on a new manufacturing line in our
Birmingham plant. Fat Free Caramel Popcorn and Low Fat Baked Potato
Crisps were introduced in December 1995 and January 1996
respectively. Our largest investment to date in the Low Fat/No Fat
category is in a state-of-the-art baked tortilla line in our
Nashville plant. Production of Baked Tostados tortilla chips began
in the spring of 1996. The products just listed, along with
pretzels, give us items in five different segments in this area of
growth. We will continue to pursue opportunities to provide
consumers with other great tasting Low Fat/No Fat snacks.
Our plans are to keep doing the "right things" the "right way"
which is in keeping with the "Golden Rule", our company's guiding
principle. With some improvement in prices and perhaps the
competitive environment, fiscal '97 results should be better than
last year. Golden Flake employees are dedicated to providing the
best service and products available from any source. Thank you for
your support.
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Condensed Financial Statements At year end:
1996 1995 1996 1995
<S> <C> <C> <C> <C> <C>
Total Revenues 127,824,835 129,445,406 Total Assets 48,846,226 52,011,930
Pre-Tax Income 5,075,234 8,297,472 Total Liabilities 8,264,299 8,521,527
Net Income 3,375,234 5,154,214 Stockholders' Equity 40,581,927 43,490,403
Net Income
Per Share .28 .42
</TABLE>
NET INCOME ($ millions)
1992 4.8
1993 5.0
1994 3.1
1995 5.2
1996 3.4
REVENUES ($ millions)
1992 127.8
1993 130.5
1994 126.9
1995 129.4
1996 127.8
EARNINGS PER SHARE ($)
1992 .38
1993 .40
1994 .25
1995 .42
1996 .28
CAPITAL EXPENDITURES, NET OF DISPOSALS AND DEPRECIATION ($ millions)
1992 2.4 4.2
1993 1.8 3.9
1994 0.7 3.4
1995 1.4 2.9
1996 6.2 2.5
TOTAL ASSETS ($ millions)
1992 58.9
1993 57.8
1994 54.3
1995 52.0
1996 48.8
SHAREHOLDERS' EQUITY ($ millions)
1992 50.1
1993 49.1
1994 45.6
1995 43.5
1996 40.6
RETURN ON EQUITY (%)
1992 9.5
1993 10.0
1994 6.5
1995 11.6
1996 8.0
<TABLE>
GOLDEN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Years ended May 31, 1996, 1995 and 1994
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Net sales $126,557,610 $128,144,977 $125,840,804
Other income, including gain
on sale of property and
equipment of $326,797 in
1996, $457,385 in 1995,
and $465,743 in 1994 592,134 626,202 620,845
Net investment income 675,091 674,227 438,463
Total revenues 127,824,835 129,445,406 126,900,112
Costs and expenses:
Cost of sales 57,330,989 56,285,331 55,113,907
Selling, general and
administrative
expenses 64,846,206 64,240,117 66,515,778
Contributions to employee
profit-sharing and
employee stock ownership
plans 572,406 622,486 627,474
Interest -- -- 101
Total costs and
expenses 122,749,601 121,147,934 122,257,260
Income from continuing
operations
before income taxes 5,075,234 8,297,472 4,642,852
Provision for income taxes:
Currently payable:
Federal 1,475,000 2,856,000 1,654,000
State 255,000 440,000 254,000
Deferred taxes (30,000) (150,000) (246,000)
Total provision for
income taxes 1,700,000 3,146,000 1,662,000
Income from continuing
operations 3,375,234 5,151,472 2,980,852
Discontinued Operations:
Income from operations of
discontinued business,
net of related income taxes -- 2,490 92,563
Gain on disposal of
discontinued business -- 252 --
Net income $ 3,375,234 $ 5,154,214 $ 3,073,415
Per share of common stock:
Income from continuing
operations $.28 $.42 $.24
Income from operations of
discontinued business -- -- .01
Net income $.28 $.42 $.25
<FN>
See Accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<TABLE>
GOLDEN ENTERPRISES,INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 31, 1996 and 1995
ASSETS
<CAPTION>
1996 1995
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 227,173 $ 623,592
Investment securities available-for-sale 7,260,285 13,828,663
Receivables:
Trade accounts 9,839,209 10,234,990
Other 305,394 644,709
10,144,603 10,879,699
Less: Allowance for doubtful accounts 10,000 10,000
10,134,603 10,869,699
Inventories:
Raw materials 2,191,788 1,697,629
Finished goods 2,580,584 2,857,217
4,772,372 4,554,846
Prepaid expenses 2,305,346 1,968,851
Total current assets 24,699,779 31,845,651
Property, plant and equipment:
Land 3,840,429 3,974,429
Buildings 18,989,934 18,987,134
Machinery and equipment 36,939,067 31,745,856
Transportation equipment 16,697,460 16,271,171
76,466,890 70,978,590
Less: Accumulated depreciation 54,734,381 52,842,545
21,732,509 18,136,045
Other Assets 2,413,938 2,030,234
Total $48,846,226 $52,011,930
</TABLE>
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
1996 1995
<S> <C> <C>
Current Liabilities:
Accounts payable $ 4,038,743 $ 4,324,632
Accrued income taxes -- 135,217
Other accrued expenses 1,318,263 1,307,049
Deferred income taxes 289,973 291,246
Total current liabilities 5,646,979 6,058,144
Long-term liabilities 823,227 598,922
Deferred income taxes 1,794,093 1,864,461
Commitments and Contingencies -- --
Stockholders' Equity:
Common stock -- $.66 2/3 par value:
Authorized 35,000,000 shares;
issued 13,828,793 shares 9,219,195 9,219,195
Additional paid-in capital 6,499,554 6,499,554
Retained earnings 34,170,713 36,521,373
Treasury shares -- at cost (1,622,843
shares in 1996 and 1,566,843
shares in 1995) (9,301,533) (8,818,533)
Unrealized (losses) gains on
securities available-for-sale,
net of deferred income taxes (6,002) 68,814
Total stockholders' equity 40,581,927 43,490,403
Total $48,846,226 $52,011,930
<FN>
See Accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<TABLE>
GOLDEN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years ended May 31, 1996, 1995 and 1994
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,375,234 $ 5,154,214 $ 3,073,415
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 2,485,533 2,856,445 3,377,278
Compensation related to stock plan -- 3,509 53,574
Salary continuation benefits 224,305 120,396 257,726
Deferred income taxes ( 30,000) ( 150,000) ( 246,000)
Gain on sale of property and
equipment ( 326,797) ( 457,385) ( 465,743)
Donation of property 134,000 -- --
Gain on disposal of discontinued
business -- ( 252) --
Income from operations of
discontinued business -- ( 2,490) ( 92,563)
Dividends received from
discontinued business -- 53,375 165,500
Changes in operating assets and
liabilities:
Decrease (increase) in accounts
receivable 735,096 ( 756,811) ( 1,120,776)
(Increase) decrease in inventories ( 217,526) ( 303,593) 238,618
(Increase) decrease in prepaid
expenses ( 336,495) ( 1,291) 126,019
(Increase) in other assets --
long-term ( 383,704) ( 276,622) ( 385,607)
(Decrease) increase in accounts
payable ( 285,889) 279,375 89,697
(Decrease) increase in accrued
income taxes ( 135,217) 135,217 ( 22,303)
Increase (decrease) in accrued
expenses 11,214 ( 73,075) ( 67,582)
Net cash provided by operating
activities 5,249,754 6,581,012 4,981,253
Cash flows from investing activities:
Purchase of property, plant and
equipment ( 6,293,499) ( 1,477,321) ( 851,572)
Proceeds from sale of property,
plant and equipment 404,742 568,727 576,132
Net proceeds from disposal of
discontinued business -- 2,050,252 --
Investment securities available-for-sale:
Purchases ( 12,625,052) ( 85,802,956) --
Proceeds from disposals 19,076,530 85,497,783 --
Marketable securities:
Purchases -- -- ( 52,614,763)
Proceeds from disposals -- -- 54,607,629
Net cash provided by
investing activities 562,721 836,485 1,717,426
Cash flows from financing activities:
Payments of current installment of
long-term debt -- ( 71,366) ( 107,723)
Purchase of treasury shares ( 483,000) ( 1,883,106) ( 1,172,309)
Proceeds from sale of treasury stock -- 182,500 205,000
Cash dividends paid ( 5,725,894) ( 5,663,997) ( 5,610,058)
Net cash (used in) financing
activities ( 6,208,894) ( 7,435,969) ( 6,685,090)
Net (decrease) increase in cash and
cash equivalents ( 396,419) ( 18,472) 13,589
Cash and cash equivalents at
beginning of year 623,592 642,064 628,475
Cash and cash equivalents
at end of year $ 227,173 $ 623,592 $ 642,064
Supplemental information:
Cash paid during the year for:
Income taxes $ 2,299,579 $ 3,101,623 $ 1,879,447
Interest $ -- $ -- $ 101
<FN>
See Accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<TABLE>
GOLDEN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Years ended May 31, 1996, 1995 and 1994
Additional Unrealized
Common Paid-in Retained Treasury Deferred Gains (Losses)
Stock Capital Earnings Shares Compensation on Securities
<S> <C> <C> <C> <C> <C> <C>
Balance, May 31, 1993 $9,219,195 $6,552,654 $39,567,799 $(6,178,468) $( 76,872) $ --
Net income -- -- 3,073,415 -- -- --
Cash dividends declared --
$.45 per share -- -- (5,610,058) -- -- --
Purchase of shares
for Treasury -- -- -- (1,172,309) -- --
Stock options exercised -- 19,055 -- 213,320 ( 27,375) --
Awards under stock option
plan -- ( 43,562) -- -- 43,562 --
Amortization of deferred
compensation -- -- -- -- 48,113 --
Balance, May 31, 1994 9,219,195 6,528,147 37,031,156 (7,137,457) ( 12,572) --
Net income -- -- 5,154,214 -- -- --
Cash dividends declared --
$.46 per share -- -- (5,663,997) -- -- --
Purchase of shares
for Treasury -- -- -- (1,883,106) -- --
Stock options exercised -- ( 28,593) -- 202,030 9,063 --
Amortization of deferred
compensation -- -- -- -- 3,509 --
Unrealized gains on securities
available-for-sale -- -- -- -- -- 68,814
Balance, May 31, 1995 9,219,195 6,499,554 36,521,373 (8,818,533) -- 68,814
Net income -- -- 3,375,234 -- -- --
Cash dividends declared --
$.47 per share -- -- (5,725,894) -- -- --
Purchase of shares
for Treasury -- -- -- ( 483,000) -- --
Unrealized (losses) on
securities
available-for-sale -- -- -- -- -- (74,816)
Balance, May 31, 1996 $9,219,195 $6,499,554 $34,170,713 $(9,301,533) $ -- $ ( 6,002)
<FN>
See Accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
GOLDEN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1996, 1995 and 1994
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of
Golden Enterprises, Inc. and its wholly-owned subsidiaries: Golden
Flake Snack Foods, Inc., Steel City Bolt & Screw, Inc. and Nall &
Associates, Inc. (the "Company"). All significant intercompany
transactions and balances have been eliminated.
Discontinued Operations
On January 31, 1995, the Company disposed of its investment in
its wholly-owned subsidiaries, Steel City Bolt & Screw, Inc. and
Nall & Associates, Inc. (the Steel City group) for cash.
Accordingly, the Steel City group's income from operations,
previously reported in the bolt and other fasteners segment of
business, is reported as income from operations of discontinued
business. The consolidated financial statements have been
reclassified to report separately the assets, liabilities and
operating results of the discontinued business. The Company's
consolidated financial statements and notes to consolidated
financial statements have been restated to reflect comparative
information on the continuing business.
Revenue Recognition
The Company recognizes sales and related costs upon delivery
or shipment of products to its customers.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased
with a maturity of three months or less to be cash equivalents.
Investment Securities
Investment securities at May 31, 1996 are principally
instruments of the U.S. Government and its agencies, of
municipalities and of short-term mutual municipal and corporate
bond funds. Effective June 1, 1994 the Company adopted the
provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities"
(SFAS 115). This statement, among other things, requires investment
securities (bonds, notes, common stock and preferred stocks) to be
divided into one of three categories: held-to-maturity,
available-for-sale, and trading. The Company currently classifies
all investment securities as available-for-sale. Under SFAS 115
securities accounted for as available-for-sale includes bonds,
notes, common stock and non-redeemable preferred stock not
classified as either held-to-maturity or trading. Securities
available-for-sale are reported at fair value, adjusted for
other-than-temporary declines in value. Unrealized holding gains
and losses, net of tax, on securities available-for-sale are
reported as a net amount in a separate component of stockholders'
equity until realized. Realized gains and losses on the sale of
securities available-for-sale are determined using the
specific-identification method.
Prior to adopting SFAS 115, all of the Company's marketable
securities were reported at cost which approximated market value.
Therefore, no adjustment was necessary for the initial effect of
adopting SFAS 115 at June 1, 1994.
Inventories
Inventories are stated at the lower of cost or market. Cost is
computed on the first-in, first-out method. The opening and closing
inventories used in computing cost of sales are as follows:
Date Amount
May 31, 1994 $4,251,253
May 31, 1995 4,554,846
May 31, 1996 4,772,372
Property, Plant and Equipment
Property, plant and equipment are stated at cost. For
financial reporting purposes, depreciation and amortization have
been provided principally on the straight-line method over the
estimated useful lives of the respective assets. Accelerated
methods are used for tax purposes.
Expenditures for maintenance and repairs are charged to
operations as incurred; expenditures for renewals and betterments
are capitalized and written off by depreciation and amortization
charges. Property retired or sold is removed from the asset and
related accumulated depreciation accounts and any profit or loss
resulting therefrom is reflected in the statements of income.
Employee Benefit and Stock Options Plans
The Company has trusteed "Qualified Profit-Sharing Plans." The
plans are "Non-Formula" plans and the annual contributions to the
plans are determined by the applicable Board of Directors. The
profit-sharing expenses for the years ended May 31, 1996, 1995 and
1994 were $518,597, $518,663 and $522,803, respectively.
The Company has an Employee Stock Ownership Plan that covers all
full-time employees. The annual contributions to the plan are amounts
determined by the Boards of Directors of the Company. Annual
contributions are made in cash or common stock of the Company. The
Employee Stock Ownership Plan expenses for the years ended May 31,
1996, 1995 and 1994 were $53,809, $103,823 and $104,671, respectively.
Each participant's account is credited with an allocation of shares
acquired with the Company's annual contributions, dividends received
on ESOP shares and forfeitures of terminated participant's nonvested
accounts.
The contributions to the Profit-Sharing Plans and the
Employee Stock Ownership Plan may not exceed fifteen percent of
the total compensation of all participating employees. The Company
expects to continue these plans indefinitely; however, the rights
to modify, amend or terminate the plans have been reserved.
The Company has a salary continuation plan with certain of its
key officers whereby monthly benefits will be paid for a period of
fifteen years following retirement. The Company is accruing the
present value of such retirement benefits until the key officers
reach normal retirement age.
In 1988, the Company's shareholders approved the "1988 Stock
Option and Stock Appreciation Rights Plan" for certain employees of
the Company. The plan provides that non-qualified stock options and
stock appreciation rights may be granted to key employees for up to
400,000 shares of the Company's common stock. The options and stock
appreciation rights are exercisable three years after date of
grant. The option price may be less than, equal to or greater than
the fair market value of the stock on the date of grant. Each stock
appreciation right entitles the option holder, upon exercise of the
related stock option, to receive from the Company the amount of the
appreciation in the underlying common stock as determined by the
excess of the fair market value of a share of common stock on the
exercise date of the related stock option over the option price.
The options and stock appreciation rights granted, if not
exercised, will expire three months from the date they are
exercisable. As of May 31, 1996, options and stock appreciation
rights had been granted for 145,000 shares (net of 13,000 shares
forfeited) at an option price of $6 per share and for 79,500 shares
(net of 6,000 shares forfeited) at an option price of $5 per share.
36,500 shares were exercised at $5 per share during the fiscal
years ended May 31, 1995. There were no stock options and stock
appreciation rights outstanding at May 31, 1996 and 1995. The plan
expires July 6, 2002, except as to options and stock appreciation
rights outstanding on that date; however, the rights to amend,
suspend or terminate the plan have been reserved.
Income Taxes
Deferred income taxes are recorded on the differences between
the tax bases of assets and liabilities and the amounts at which
they are reported in the consolidated financial statements.
Recorded amounts are adjusted to reflect changes in income tax
rates and other tax law provisions as they become enacted.
Net Income Per Share
Net income per share computations are based on the weighted
average number of shares outstanding of 12,243,283 in 1996;
12,376,769 in 1995 and 12,540,809 in 1994. Stock options were not
included in these computations as their effect was not material.
Postretirement Benefits Other than Pensions
In December 1990, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions." The standard requires employers to account for retiree
benefit obligations (principally for health care) on an accrual
basis (rather than on a "pay-as-you-go" basis) for fiscal years
beginning after December 15, 1992, although recognition in an
earlier year was permitted. The Company adopted the standard on
June 1, 1993; however, the implementation of the standard did not
have a material impact on the financial statements of the Company.
Disclosures About Fair Value of Financial Instruments
In fiscal 1996, the Company adopted Statement of Financial
Accounting Standards No. 107, Disclosures about Fair Value of
Financial Instruments (SFAS 107), which requires companies to
disclose fair value information about certain financial
instruments. SFAS No. 107 defines fair value as the quoted market
prices for those instruments that are actively traded in financial
markets. In cases where quoted market prices are not available,
fair values are estimated using present value or other valuation
techniques. The fair value estimates are made at a specific point
in time, based on available market information and judgments about
the financial instrument, such as estimates of timing and amount of
expected future cash flows. Such estimates do not reflect any
premium or discount that could result from offering for sale at one
time the Company's entire holdings of a particular financial
instrument, nor do they consider the tax impact of the realization
of unrealized gains or losses. In many cases, the fair value
estimates cannot be substantiated by comparison to independent
markets, nor can the disclosed value be realized in immediate
settlement of the instrument.
The carrying amounts for cash and cash equivalents approximate
fair value because of the short maturity, generally less than three
months, of these instruments.
The fair values of investment securities have been determined
using values supplied by independent pricing services and are
disclosed together with carrying amounts in Note 2.
The carrying value of the Company's long-term liabilities
approximates fair value because present value is used in accruing
this liability.
The Company does not hold or issue financial instruments for
trading purposes and has no involvement with forward currency
exchange contracts.
Postemployment Benefits
In November 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits." The standard
requires employers to accrue, for fiscal years beginning after
December 15, 1993 with earlier adoption permitted, for benefits
provided to former or inactive employees after employment but prior
to retirement. The Company adopted the standard in fiscal 1995;
however, the implementation of the standard did not have a material
impact on the financial statements of the Company.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
NOTE 2 -- INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses and fair
value of the investment securities available-for-sale are as
follows:
<TABLE>
<CAPTION>
May 31, 1996
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
U.S. Government (See Note 5) $ 2,296,250 $ 4,687 $ -- $ 2,300,937
Municipal obligations 2,549,406 -- 14,065 2,535,341
Mutual funds 2,424,007 -- -- 2,424,007
Total $ 7,269,663 $ 4,687 $ 14,065 $ 7,260,285
</TABLE>
<TABLE>
<CAPTION>
May 31, 1995
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
U.S. Government and its agencies
(See Note 5) $ 8,098,280 $ 90,321 $ -- $ 8,188,601
Municipal obligations 3,549,406 17,201 -- 3,566,607
Mutual funds 2,073,455 -- -- 2,073,455
Total $13,721,141 $107,522 $ -- $13,828,663
</TABLE>
Maturities of investment securities classified as
available-for-sale at May 31, 1996 by contractual maturity are
shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to recall or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized
Cost Fair Value
<S> <C> <C>
Investment securities available-for-sale:
Due within one year $ 5,818,885 $ 5,836,698
Due after one year through three years 1,450,778 1,423,587
Total $ 7,269,663 $ 7,260,285
</TABLE>
Proceeds from sales of investment securities
available-for-sale during fiscal 1996 and 1995 were $19,076,530 and
$85,497,783, respectively. Gross gains of $31,193 and gross losses
of $44,399 for fiscal 1996 and 1995, respectively, were realized on
those sales.
NOTE 3 -- LONG-TERM LIABILITIES
Long-term liabilities consisted of salary continuation
benefits accrued under the Company's salary continuation plan in
the amounts of $823,227 and $598,922 at May 31, 1996 and 1995,
respectively.
Aggregate annual maturities of long-term liabilities within
each of the next five fiscal years following May 31, 1996 are as
follows: 1997 through 2001, $-0-.
NOTE 4 -- INCOME TAXES
The effective tax rate for continuing operations differs from
the expected tax using statutory rates. A reconciliation between
the expected tax and the actual income tax expense follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Tax on income at statutory rates $1,726,000 $2,821,000 $1,579,000
Increases (decreases) resulting from:
State income taxes, less Federal income
tax benefit 168,000 290,000 168,000
Tax exempt interest (72,000) (57,000) (107,000)
Tax benefit of donated property (134,000) -- --
Other -- net 12,000 92,000 22,000
Total $1,700,000 $3,146,000 $1,662,000
</TABLE>
The tax effects of temporary differences that result in
deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Property and equipment $2,092,969 $2,041,253
Accrued expenses (5,527) 75,746
Net unrealized (losses) gains on investment
securities available-for-sale (3,376) 38,708
Total $2,084,066 $2,155,707
</TABLE>
The income tax effects of changes in temporary differences are
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Property and equipment $ 51,000 $ (146,000) $ (166,000)
Accrued expenses (81,000) ( 4,000) ( 80,000)
Total $ (30,000) $ (150,000) $ (246,000)
</TABLE>
NOTE 5 -- COMMITMENTS AND CONTINGENCIES
Rental expenses were $541,744 in 1996, $540,284 in 1995 and
$515,256 in 1994. At May 31, 1996, the Company was obligated under
certain leases (which have not been capitalized) for buildings,
office space and equipment. The following amounts represent future
payment commitments under these leases:
Years Ending Buildings and
May 31, Office Space Equipment Total
1997 $14,000 $223,000 $237,000
1998 -- 136,000 136,000
1999 -- 41,000 41,000
One of the subsidiaries leases equipment from a company which
is principally owned by a major shareholder of Golden Enterprises,
Inc. The terms of these leases are equal to or better than those
available from unaffiliated third parties.
The Company had investment securities with a fair value of
$2,300,937 and $2,105,901 pledged to its insurance carrier to
support the Company's commercial self-insurance program at May 31,
1996 and 1995, respectively.
NOTE 6 -- CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of cash equivalents
and trade receivables.
The Company maintains its cash accounts primarily with banks
located in Alabama. The total cash balances are insured by the
F.D.I.C. up to $100,000 per bank. The Company had cash balances on
deposit with two Alabama banks at May 31, 1996 that exceeded the
balance insured by the F.D.I.C. in the amount of $1,174,911.
The Company's trade receivables result primarily from its
snack food operations and reflect a broad customer base, primarily
large grocery chains located in the southeastern United States. The
Company routinely assesses the financial strength of its customers.
As a consequence, concentrations of credit risk are limited.
NOTE 7 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results
of operations of the years ended May 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
Per Share
Total Revenues Income from Income from
Quarter from Continuing Continuing Continuing Net
Operations Operations Net Income Operations Income
<S> <C> <C> <C> <C> <C>
1996
First $ 33,247,256 $1,440,823 $1,440,823 $.12 $.12
Second 29,829,016 835,589 835,589 .07 .07
Third 31,178,423 509,234 509,234 .04 .04
Fourth 33,570,140 589,588 589,588 .05 .05
For the year $127,824,835 $3,375,234 $3,375,234 $.28 $.28
1995
First $ 31,814,543 $1,317,709 $1,341,057 $.11 $.11
Second 30,194,288 1,176,782 1,177,953 .09 .09
Third 32,608,859 1,231,273 1,209,496 .10 .10
Fourth 34,827,716 1,425,708 1,425,708 .12 .12
For the year $129,445,406 $5,151,472 $5,154,214 $.42 $.42
1994
First $ 30,289,504 $1,055,339 $1,096,509 $.08 $.09
Second 30,528,126 429,054 475,390 .04 .04
Third 31,922,292 118,899 116,609 .01 .01
Fourth 34,160,190 1,377,560 1,384,907 .11 .11
For the year $126,900,112 $2,980,852 $3,073,415 $.24 $.25
</TABLE>
NOTE 8-- SUPPLEMENTARY STATEMENT OF INCOME INFORMATION
The following tabulation gives certain supplementary statement
of income information for continuing operations for the years ended
May 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Maintenance and repairs $ 4,919,783 $ 4,757,679 $ 4,620,141
Depreciation and amortization 2,485,533 2,856,445 3,377,278
Payroll taxes 2,611,995 2,581,797 2,621,766
Advertising costs 21,058,226 19,984,946 21,706,940
</TABLE>
Amounts for depreciation and amortization of intangible
assets, royalties, other taxes, rents and research and development
costs are not presented because each of such amounts is less than
1% of total revenues.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and
Board of Directors of
Golden Enterprises, Inc.
We have audited the accompanying consolidated balance sheets
of Golden Enterprises, Inc. and subsidiaries as of May 31, 1996 and
1995, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in
the period ended May 31, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated
financial position of Golden Enterprises, Inc. and subsidiaries as
of May 31, 1996 and 1995, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended May 31, 1996, in conformity with generally accepted
accounting principles.
Birmingham, Alabama
July 8, 1996 DUDLEY, HOPTON-JONES, SIMS & FREEMAN PLLP
MARKET AND DIVIDEND INFORMATION
The Company's common stock is traded in the over-the-counter
market under the "NASDAQ" symbol, GLDC, and transactions are
reported through the National Association of Securities Dealers
Automated Quotation (NASDAQ) National Market System. The following
tabulation sets forth the high and low sales prices for the common
stock during each quarter of the fiscal years ended May 31, 1996
and 1995 and the amount of dividends paid per share in each
quarter. The Company currently expects that comparable regular cash
dividends will be paid in the future.
Market Price
Dividends Paid
Quarter High Low Per share
Fiscal 1996
First $7 1/2 $6 3/4 $.11 1/2
Second 9 3/4 7 .11 3/4
Third 9 1/8 7 3/4 .11 3/4
Fourth 9 3/4 7 1/2 .11 3/4
Fiscal 1995
First $8 $6 3/4 $.11 1/4
Second 7 1/4 6 3/4 .11 1/2
Third 7 1/4 6 3/4 .11 1/2
Fourth 7 1/4 6 3/4 .11 1/2
As of August 2, 1996, there were approximately 1,800 record
holders of common stock.
<TABLE>
FINANCIAL REVIEW (Dollar amounts in thousands, except per share data)
<CAPTION>
Year Ended May 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Operations
Net sales and other
operating income $127,150 $128,771 $126,462 $130,070 $127,178
Investment income 675 674 438 459 664
Total revenues 127,825 129,445 126,900 130,529 127,842
Cost of sales 57,331 56,285 55,114 55,110 54,982
Selling, general and
administrative
expenses 65,419 64,863 67,143 67,521 65,392
Interest 0 0 0 3 7
Income before income taxes 5,075 8,297 4,643 7,895 7,461
Federal and state income taxes 1,700 3,146 1,662 2,943 2,731
Income from continuing
operations 3,375 5,151 2,981 4,952 4,730
Discontinued operations:
Income from operations of
discontinued business net
of related income taxes 0 3 92 29 45
Net income 3,375 5,154 3,073 4,981 4,775
Financial data
Depreciation and
amortization $ 2,486 $ 2,856 $ 3,377 $ 3,893 $ 4,227
Capital expenditures,
net of disposals 6,216 1,366 741 1,840 2,380
Working capital 19,053 25,788 26,212 27,402 26,730
Long-term debt 823 599 479 287 150
Stockholders' equity 40,582 43,490 45,628 49,084 50,103
Total assets 48,846 52,012 54,347 57,771 58,902
Common stock data
Income from continuing
operations $ .28 $ .42 $ .24 $ .40 $ .38
Net income .28 .42 .25 .40 .38
Dividends .47 .46 .45 .44 .42
Book value 3.32 3.55 3.65 3.90 3.96
Price range 9 3/4-6 3/4 8-6 3/4 8 3/4-7 1/8 10 1/4-7 1/2 11-6 3/4
Financial statistics
Current ratio 4.37 5.26 5.25 5.48 5.52
Net income as percent of total
revenues from continuing
operations 2.6% 4.0% 2.4% 3.8% 3.8%
Net income as percent of
stockholders' equity (a) 8.0% 11.6% 6.5% 10.0% 9.5%
Other data
Weighted average common
shares outstanding 12,243,283 12,376,769 12,540,809 12,595,896 12,636,723
Common shares outstanding
at year-end 12,205,950 12,261,950 12,496,446 12,600,403 12,639,400
Approximate number of
stockholders 1,800 1,800 1,900 2,000 2,000
<FN>
(a) Average amounts at beginning and end of fiscal year.
</FN>
</TABLE>
GOLDEN ENTERPRISES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Working capital was $19.1 million at May 31, 1996 compared to
$25.8 million at May 31, 1995. Net cash provided by operations
amounted to $5.2 million in fiscal year 1996, $6.6 million in 1995,
and $5.0 million in 1994. An additional $6.5 million in cash was
provided this year by a net decrease in investment securities
compared to a usage of $0.3 million in 1995 to increase investment
securities, and in 1994 an additional $2.0 million in cash was
provided by a net decrease in investment securities. In fiscal year
1995, $2.1 million in cash was received from the sale of the
Company's fastener division.
Additions to property, plant and equipment, net of disposals,
were $6.2 million, $1.4 million, and $0.7 million in fiscal years
1996, 1995, and 1994, respectively, and are expected to be about
$2.0 million in 1997.
Cash dividends of $5.7 million were paid during fiscal years
1996 and 1995, and $5.6 million in 1994.
Cash in the amount of $0.5 million was used to purchase
treasury shares during fiscal 1996 while $1.9 million and $1.2
million was used for this purpose in 1995 and 1994, respectively.
Long-term liabilities as a percentage of total capitalization
was 1.9% at May 31, 1996. The Company's current ratio at the year
end was 4.37 to 1.00.
The increase in capital expenditures this year was for the
development of new Low Fat and No Fat snack food products, enabling
the Company to take advantage of the opportunities in this growing
category. All of these new products were in distribution by the end
of the fiscal year. Capital expenditures will return to a lower,
more normal level in fiscal year 1997.
Operating Results
Net sales and other operating income decreased by 1.3% in
fiscal year 1996, increased by 1.8% in fiscal year 1995, and
decreased by 2.8% in 1994. Sales have been essentially flat for the
past three years in an extremely competitive environment. The fact
that two large competitors recently left the snack food market has
given the Company opportunities in a number of its markets, but
competition remains very intense.
The Company's investment income as a percentage of income
before taxes was 13.3% in 1996, 8.1% in 1995, and 9.4% in 1994. The
increase in this percentage in 1996 compared to 1995 was due to the
decrease in the Company's operating income, and the decrease in
1995 compared to 1994 was due to the increase in operating income.
Cost of sales was 45.3% of net sales in 1996, 43.9% in 1995,
and 43.8% in 1994. After stabilizing for two years, this percentage
increased due to higher prices of packaging materials, cardboard,
most raw materials and utilities. Also costs associated with the
development of new Low Fat and No Fat snack food products
contributed to the increased costs.
Selling, general and administrative expenses were 51.7% of
sales in 1996, 50.6% in 1995, and 53.4% in 1994. The increase in
this percentage for 1996 was primarily due to increased advertising
expense and the drop in sales. For 1995 the improvement in the
percentage was due to less advertising expense combined with an
increase in sales.
Inflation
Certain costs and expenses of the Company are affected
adversely by inflation, and the Company's prices for its products
over the last six years have remained relatively flat. The Company
will contend with the effect of further inflation through efficient
purchasing, improved manufacturing methods, pricing, and by
monitoring and controlling expenses.
Environmental Matters
There have been no material effects of compliance with
governmental provisions regulating discharge of materials into the
environment.
MANAGEMENT OF GOLDEN ENTERPRISES, INC. AND ITS SUBSIDIARIES
DIRECTORS OF GOLDEN ENTERPRISES, INC.
Joann F. Bashinsky Vice-President of SYB, Inc.
D. Paul Jones, Jr. Chairman of the Board and Chief Executive
Officer of Compass Bancshares, Inc.
John P. McKleroy, Jr. Partner, Spain & Gillon, Counsel for the
Company
J. Wallace Nall, Jr. President of Nall Development Corporation
Edward R. Pascoe Chairman of Steel City Bolt & Screw, Inc.
F. Wayne Pate President of Golden Flake Snack Foods,
Inc.
James I. Rotenstreich Chairman and Chief Executive Officer of
JHF Holdings, Inc.
John S. P. Samford President of Samford Capital Corporation
John S. Stein Chairman of the Board, President and
Chief Executive Officer of Golden
Enterprises, Inc.
DIRECTORS EMERITUS
Sloan Y. Bashinsky, Sr. Retired, Chairman of the Board of Golden
Enterprises, Inc.
John C. Evins Retired, Chairman of the Board of
Hart-Greer, Inc.
J. Wallace Nall, Sr. Retired, Vice-Chairman of the Board of
Golden Enterprises, Inc.
OFFICERS
GOLDEN ENTERPRISES, INC.
John S. Stein Chairman of the Board, President and
Chief Executive Officer
John H. Shannon Vice-President and Secretary
GOLDEN FLAKE SNACK FOODS, INC.
F. Wayne Pate President and Treasurer
Mark McCutcheon Vice-President
Randy Bates Vice-President
