Golden Enterprises Inc. (GLDC)

[lukematt]

After reading Golden Enterprises, Inc’s newly released Form 10-Q (symbol: GLDC), I first want to chastise holier-than-thou websites who point their noses into the air and say “We don’t cover penny stocks”. The Motley Fool (http://www.fool.com), for example, refuses to open a discussion board for “stocks trading at $5.00 dollars or below”, which includes Golden Enterprises. However, Motley Fool did not have a problem with pumping Horsehead Holding Corp. (symbol: ZINC) in *several* articles such as “3 More Outrageously Cheap Stocks” (August 10, 2008) when its share price was $9.99. ZINC’s share price is now $3.79.

How can anybody who reads Golden Enterprises, Inc’s newly released Form 10-Q not love the company? (Probably explains yesterday’s 21% jump in Golden’s share price)

NOTABLE GOOD NEWS

1. Hooray!!! Only 328 route representatives, which is down from 425 route employees six months ago. As I’ve written before, I hate to see people lose their jobs, but a realignment of distribution routes at Golden was sorely needed.

2. “Line of credit outstanding” is down 24% from the preceding quarter (and ZERO long-term debt).

3. “Gain on sale of assets” is up 327.7% compared to the same quarter in the preceding year. Don’t worry—Golden is selling off trucks that they no longer require due to the realignment of routes.

4. Golden repurchased 11,898 shares during the quarter for an average price of $1.88. (The number of outstanding shares is down 51,903 from the preceding quarter.)

NOTABLE NEGATIVE NEWS

1. “Selling, general and administrative expenses” is up 9.4% compared to the same quarter in the preceding year (and NO explanation).

2. “Interest expense” is up a whopping 83% compared to the same quarter in the preceding year (and NO explanation).

NOTABLE MISSING NEWS

1. ABSOLUTELY ZERO mention of Golden’s “one time cost associated with the re-alignment of the eastern portion of our route system” that appeared in their press release dated September 25, 2008. I can’t even clearly find the “cost” in the newly released Form 10-Q’s balance sheets. My guess: It’s buried in the “Selling, general and administrative expenses”, which rose 9.4%. Hmmm.

2. No explanation for these asset sales that are mentioned in the newly released Form 10-Q:

On August 20, 2008, the Company executed a Purchase and Sale Agreement to sell property located at 2926 Kraft Drive in Nashville, Tennessee and across the street from this address for $2,100,000. The property is scheduled to close in the second quarter of 2009.

On September 10, 2008, the Company executed a Purchase and Sale Agreement to sell property located at 4771 Phyllis Street, Jacksonville, Florida for $200,000. The property is scheduled to close in the second quarter of 2009.

On July 7, 2008, the Company executed a Purchase and Sale Agreement to sell property located at 321 Marble Mill Road, Marietta, Georgia for $556,000. The sale of the property occurred on September 25, 2008.

I would mainly like to know 1) What are these properties and why are they being sold? [my guess: Golden is selling off some of their small distribution centers due to the realignment of distribution routes] and 2) Will Golden show a loss or a gain on the sales? [and is now the right time to be selling real estate?].

3. The dividend that Golden will pay on October 29, 2008, has not been accounted for in this 10-Q, of course. However, the dividend that Golden paid in July 2008 cost $368,566. Golden currently has only $322,405 of cash and cash equivalents.


SUMMARY

As “giff”, the very balanced moderator for Golden’s discussion board on Investors Hub (http://investorshub.advfn.com/boards/board.aspx?board_id=13143) previously wrote, “It appears to me they have a very good CFO”.

I've always considered Golden Enterprises as a "broken" company whose management didn't realize that the company was broken. Well, when Golden's management awakens, they awaken in a big way. In a mere one quarter, Golden has made more positive changes with minimal impact on the balance sheets than I've ever seen in a company. I *like* Golden Enterprises, Inc.