Golden Enterprises 10-Q 2012
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
For the quarterly (twenty-six weeks) period ended December 2, 2011
GOLDEN ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes ( ) No ( )
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Act). (Check one):
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ( ) No (X)
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of December 30, 2011.
EXCHANGE ACT REPORTS AVAILABLE ON COMPANY WEBSITE>
Under “SEC Filings” on the “Financial” page of the Company’s website located at www.goldenflake.com, links to the following filings are made available as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”)” the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A related to the Company’s Annual Shareholders Meeting, and any amendments to those reports or statements filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Act of 1934. You may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website located at http://www.sec.gov that contains the information we file or furnish electronically with the SEC.
GOLDEN ENTERPRISES, INC. AND SUDSIDIARY
See Accompanying Notes to Condensed Consolidated Financial Statements
See Accompanying Notes to Condensed Consolidated Financial Statements
GOLDEN ENTERPRISES, INC. AND SUBSIDIARY
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.
We have reviewed the accompanying condensed consolidated balance sheet of Golden Enterprises, Inc. and subsidiary as of December 2, 2011, and the related condensed consolidated statements of income for the thirteen week and twenty-six week periods ended December 2, 2011 and November 26, 2010, and the related condensed statements of cash flows for the twenty-six week period ended December 2, 2011 and November 26, 2010. These financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with standards established by the Public Company Accounting Oversight Board (United States). A review of interim financial statements consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We previously audited in accordance with the standards of the Public Company Accounting Oversight Board, the consolidated balance sheet as of June 3, 2011 and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the fiscal year then ended (not presented herein), and in our report dated August 4, 2011 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of June 3, 2011, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.
DUDLEY, HOPTON-JONES, SIMS & FREEMAN PLLP
January 5, 2012
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s discussion and analysis of our financial condition and results of operations are based upon the condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. This discussion should be read in conjunction with our recent SEC filings, including Form 10-K for the year ended June 3, 2011. The preparation of these financial statements requires us to make estimates and judgments about future events that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures. Future events and their effects cannot be determined with absolute certainty. Therefore, management’s determination of estimates and judgments about the carrying values of assets and liabilities requires the exercise of judgment in the selection and application of assumptions based on various factors, including historical experience, current and expected economic conditions and other factors believed to be reasonable under the circumstances. We routinely evaluate our estimates including those considered significant and discussed in detail in Form 10-K for the year ended June 3, 2011. Actual results may differ from these estimates under different assumptions or conditions and such differences may be material.
The Company manufactures and distributes a full line of high quality salted 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 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 the Company’s sales, which affords some protection against loss of volume due to a crop failure of major agricultural raw materials or failure to procure an adequate supply of pork skin pellets. 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 of farm commodities available. The Company has no control of the price of agricultural commodities 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 through the independent distributors and route representatives 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.
Liquidity and Capital Resources
At December 2, 2011 and June 3, 2011, working capital was $6,365,263 and $7,023,694, respectively.
The Company did not purchase shares of treasury stock this quarter. The Company’s current ratio was 1.42 to 1.00 at December 2, 2011 compared to 1.49 to 1.00 at June 3, 2011.
Accounts Receivable and Allowance for Doubtful Accounts
At December 2, 2011 and June 3, 2011 the Company had accounts receivables in the amount of $10,319,437 and $10,220,220, net of an allowance for doubtful accounts of $70,000 in both periods.
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.
For the thirteen weeks ended December 2, 2011, net sales increased 7.5% from the comparable period in fiscal 2011. For the twenty-six weeks ended December 2, 2011, net sales increased 5.7% from the comparable period in fiscal 2011. This year’s second quarter cost of sales was 52.6% of net sales compared to 52.9% for last year’s second quarter. This year’s cost of sales year to date was 52.2% of net sales compared to 51.0% for last year’s year to date. This year’s second quarter, selling, general and administrative expenses were 45.1% of net sales compared to 44.3% for last year’s second quarter. This year’s selling, general and administrative expenses year to date were 45.0% of net sales compared to 44.8% for last year’s year to date.
The following tables compare manufactured products to resale products:
The Company’s gain on sale of assets for the thirteen weeks ended December 2, 2011 in the amount of $8,043 was from the sale of used transportation equipment.
For last year’s thirteen weeks, the gain on sale of assets was $13,608 from the sale of used transportation equipment.
The Company’s effective tax rate for the thirteen weeks was 37.9% compared to 37.9% for the last year’s thirteen weeks. The Company’s effective tax rate for the twenty-six weeks ended December 2, 2011 was 37.7% and 37.8% for the comparable period last year.
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 commodity prices affecting the cost of its raw materials.
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 and under contract through brokers or directly from growers. Future contracts have been used occasionally to hedge immaterial amounts of commodity purchases, but none are presently being used.
Certain costs and expenses of the Company are affected by inflation. 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.
There have been no material effects of compliance with governmental provisions regulating discharge of materials into the environment.
This discussion contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those forward-looking statements. Factors that may cause actual results to differ materially include, but are not limited to, price competition, industry consolidation, raw material costs and effectiveness of sales and marketing activities, as described in the Company’s filings with the Securities and Exchange Commission.
QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK
Pursuant to Item 305(e) of Regulation S-K (Section 229.305(e)) the Company is not required to provide the Information under this item, as it is a “Smaller Reporting Company” as defined by Rule 229.10(f)(1).
CONTROLS AND PROCEDURES
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures provided reasonable assurance that the disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and in accumulating and communicating such information to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the Company’s second fiscal quarter ended December 2, 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Based on that evaluation, there has been no such change during the period covered by this report.
There are no material pending legal proceedings against the Company or its subsidiary other than routine litigation incidental to the business of the Company and its subsidiary.
There are no material changes in our risk factors from those disclosed in our 2011 Annual Report on Form 10-K.
AND USE OF PROCEEDS
The Company did not sell any equity securities during the period covered by this report.
Registrant Purchases of Equity Securities.
The Company did not purchase any shares of treasury stock for the quarterly period ended December 2, 2011.
A VOTE OF SECURITY HOLDERS
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.