Cal-Maine Foods Inc 10-Q for FY2022 Q1
Cal-Maine Foods Inc (CALM)
10-Q
2021-09-28
For: 2021-08-28
View Original
Added on
April 11, 2026
About this 10-Q
Cal-Maine Foods Inc filed this 10-Q on September 28, 2021, covering the quarter ended August 28, 2021 (FY2022 Q1).
Headline figures
Quarter ended August 28, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $331.7M
- up 13.3% from $292.78M a year earlier
- Net loss
- $18.03M
- compared with a net loss of $19.4M a year earlier
- Diluted EPS
- -$0.37
- compared with -$0.40 a year earlier
1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended
or
Transition report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number:
.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S Employer Identification No.)
,
,
,
(Address of principal executive offices) (Zip Code)
(
)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
The
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.
☑
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
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 such files).
☑
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,
“smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☑
Accelerated filer
☐
Non – Accelerated filer
☐
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
☑
There were
value, outstanding as of September 28, 2021.
2
INDEX
Page
Number
Part I.
Financial Information
Item 1.
Item 2.
Item 3.
Item 4.
Part II.
Other Information
Item 1.
Item 1A.
Item 2.
Item 6.
3
PART I. FINANCIAL
INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except for par value amounts)
August 28, 2021
May 29, 2021
Assets
Current assets:
Cash and cash equivalents
$
$
Investment securities available-for-sale
Trade and other receivables, net
Inventories
Prepaid expenses and other current assets
Total current assets
Property, plant & equipment, net
Finance lease right-of-use asset, net
Operating lease right-of-use asset, net
Investments in unconsolidated entities
Goodwill
Intangible assets, net
Other long-term assets
Total Assets
$
$
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
$
Current portion of finance lease obligation
Current portion of operating lease obligation
Total current liabilities
Long-term finance lease obligation
Long-term operating lease obligation
Other noncurrent liabilities
Deferred income taxes
Total liabilities
Commitments and contingencies - see
Note 13
0
0
Stockholders’ equity:
Common stock ($
Common stock - authorized
Class A convertible common stock - authorized and issued
Paid-in capital
Retained earnings
Accumulated other comprehensive loss, net of tax
(728 )
(558 )
Common stock in treasury at cost –
at May 29, 2021
(27,451 )
(27,433 )
Total stockholders’ equity
Total Liabilities and Stockholders’ Equity
$
$
See Notes to Condensed Consolidated Financial Statements.
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Thirteen Weeks Ended
August 28, 2021
August 29, 2020
Net sales
$
$
Cost of sales
Gross profit
Selling, general and administrative
(Gain) loss on disposal of fixed assets
(213 )
Operating loss
(39,667 )
(27,223 )
Other income (expense):
Interest income, net
Royalty income
Equity income (loss) of unconsolidated entities
(44 )
Other, net
Total other income, net
Loss before income taxes
(33,864 )
(25,525 )
Income tax benefit
(15,838 )
(6,126 )
Net loss
$
(18,026 )
$
(19,399 )
Net loss per common share:
Basic
$
(0.37 )
$
(0.40 )
Diluted
$
(0.37 )
$
(0.40 )
Weighted average shares outstanding:
Basic
Diluted
See Notes to Condensed Consolidated Financial Statements.
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
Comprehensive Loss
(in thousands)
(unaudited)
Thirteen Weeks Ended
August 28, 2021
August 29, 2020
Net loss
$
(18,026 )
(19,399 )
Other comprehensive income (loss), before tax:
Unrealized holding gain (loss) on available-for-sale securities, net of reclassification
adjustments
(224 )
Income tax benefit (expense) related to items of other comprehensive income
(114 )
Other comprehensive income (loss), net of tax
(170 )
Comprehensive loss
$
(18,196 )
$
(19,045 )
See Notes to Condensed Consolidated Financial Statements.
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Thirteen Weeks Ended
August 28, 2021
August 29, 2020
Operating activities:
Net loss
$
(18,026 )
$
(19,399 )
Depreciation and amortization
Deferred income taxes
(15,838 )
(6,126 )
Other adjustments, net
(7,637 )
(4,019 )
Net cash used in operations
(24,112 )
(14,800 )
Investing activities:
Purchases of investment securities
(1,388 )
(24,195 )
Sales and maturities of investment securities
Distributions from unconsolidated entities
Acquisition of business, net of cash acquired
(44,823 )
Purchases of property, plant and equipment
(11,233 )
(25,338 )
Net proceeds from disposal of property, plant and equipment
Net cash used in investing activities
(16,485 )
(20,471 )
Financing activities:
Purchase of common stock by treasury
(18 )
Principal payments on finance lease
(53 )
(50 )
Net cash used in financing activities
(71 )
(50 )
Net change in cash and cash equivalents
(40,668 )
(35,321 )
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
$
Supplemental Information:
Cash paid for operating leases
$
$
Interest paid
$
See Notes to Condensed Consolidated Financial Statements.
7
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements of Cal-Maine Foods, Inc. and its subsidiaries (the "Company,"
"we," "us," "our") have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Therefore, they do not include all of the information and footnotes required by generally accepted accounting principles in the
United States of America ("GAAP") for complete financial statements and should be read in conjunction with our Annual
Report on Form 10-K for the fiscal year ended May 29, 2021 (the "2021 Annual Report"). These statements reflect all
adjustments that are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented
and, in the opinion of management, consist of adjustments of a normal recurring nature. Operating results for the interim
periods are not necessarily indicative of operating results for the entire fiscal year.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to May 31. Each of the three-month periods ended on August 28, 2021
and August 29, 2020 included 13 weeks.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
The severity, magnitude and duration, as well as the economic consequences of the COVID-19 pandemic, are uncertain, rapidly
changing and difficult to predict. Therefore, our accounting estimates and assumptions might change materially in future
periods in response to COVID-19.
Investment Securities
Our investment securities are accounted for in accordance with ASC 320, “Investments - Debt and Equity Securities” (“ASC
320”). The Company considers all its debt securities for which there is a determinable fair market value, and there are no
restrictions on the Company's ability to sell within the next 12 months, as available-for-sale. We classify these securities as
current, because the amounts invested are available for current operations. Available-for-sale securities are carried at fair value,
with unrealized gains and losses reported as a separate component of stockholders’ equity. The Company regularly evaluates
changes to the rating of its debt securities by credit agencies and economic conditions to assess and record any expected cre dit
losses through allowance for credit losses, limited to the amount that fair value was less than the amortized cost basis. The cost
basis for realized gains and losses on available-for-sale securities is determined by the specific identification method. Gains and
losses are recognized in other income (expenses) as Other, net in the Company's Condensed Consolidated Statements of
Operations. Investments in mutual funds are classified as “Other long-term assets” in the Company’s Condensed Consolidated
Balance Sheets.
Trade Receivables
Trade receivables are stated at their carrying values, which include a reserve for credit losses. At August 28, 2021 and May 29,
2021, reserves for credit losses were $
based on an evaluation of each customer's financial condition and credit history. Collateral is generally not required. The
Company minimizes exposure to counter party credit risk through credit analysis and approvals, credit limits, and monitoring
procedures. In determining our reserve for credit losses, receivables are pooled according to age, with each pool assigned an
expected loss based on historical loss information adjusted as needed for economic and other forward-looking factors.
Business Combinations
The Company applies fair value accounting guidance to measure non-financial assets and liabilities associated with business
acquisitions. These assets and liabilities are measured at fair value for the initial purchase price allocation. The fair value of
8
non-financial assets acquired is determined internally. Our internal valuation methodology for non-financial assets takes into
account the remaining estimated life of the assets acquired and what management believes is the market value for those assets.
Change in Accounting Principle
Effective May 31, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which is
intended to improve financial reporting by requiring more timely recording of credit losses on loans and other financial
instruments held by financial institutions and other organizations. The guidance replaces the prior “incurred loss” approach with
an “expected loss” model and requires measurement of all expected credit losses for financial assets held at the reporting date
based on historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted the
guidance on a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of
the period of adoption. The Company evaluated its current methodology of estimating allowance for doubtful accounts and the
risk profile of its receivables portfolio and developed a model that includes the qualitative and forecasting aspects of the
“expected loss” model under the amended guidance. The Company finalized its assessment of the impact of the amended
guidance and recorded a $
Note 2 – Acquisitions
Effective on May 30, 2021, the Company acquired the remaining
% membership interest in Red River Valley Egg Farm,
LLC (“Red River”) , including certain liabilities. As a result of the acquisition, the entity became a wholly owned subsidiary of
the Company. Red River owns and operates a specialty shell egg production complex with approximately
laying hens, cage-free pullet capacity, feed mill, processing plant, related offices and outbuildings and related equipment
located on approximately
Pending the finalization of the Company’s valuation, the following table summarizes the consideration paid for Red River and
the amounts of the assets acquired and liabilities assumed recognized at the acquisition date:
Cash consideration paid
$
Fair value of the Company's equity interest in Red River held before the business combination
$
Recognized amounts of identifiable assets acquired and liabilities assumed
Cash
$
Accounts receivables, net
Inventory
Property, plant and equipment
Liabilities assumed
(2,448 )
Deferred income taxes
(8,481 )
Total identifiable net assets
Goodwill
$
Cash and accounts receivables acquired along with liabilities assumed were valued at their carrying value which approximates
fair value due to the short maturity of these instruments.
Inventory consisted primarily of flock and feed ingredients. Inventory and property, plant and equipment were valued utilizing
the cost approach.
The Company recognized a gain of $
% equity interest in Red River
held before the business combination. The gain was recorded in other income and expense under the heading “Other, net” in the
Company’s Condensed Consolidated Statements of Operations. The acquisition of Red River resulted in a discrete tax benefit
of $
9
investment in Red River, with a corresponding non-recurring, non-cash $
non-taxable remeasurement gain associated with the acquisition. As part of the acquisition accounting, the Company also
recorded a $
The recognition of deferred tax liabilities resulted in the recognition of goodwill. None of the goodwill recognized is expected
to be deductible for income tax purposes.
Note 3 - Investment
Securities
The following represents the Company’s investment securities as of August 28, 2021 and May 29, 2021 (in thousands):
August 28, 2021
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
Asset backed securities
Total current investment securities
$
$
$
$
Mutual funds
$
$
$
$
Total noncurrent investment securities
$
$
$
$
May 29, 2021
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
Asset backed securities
Total current investment securities
$
$
$
$
Mutual funds
$
$
$
$
Total noncurrent investment securities
$
$
$
$
Available-for-sale
Proceeds from sales and maturities of investment securities available-for-sale were $
thirteen weeks ended August 28, 2021 and August 29, 2020, respectively. Gross realized gains for the thirteen weeks ended
August 28, 2021 and August 29, 2020 were $
weeks ended August 28, 2021 were $
2020. There were
Actual maturities may differ from contractual maturities as some borrowers have the right to call or prepay obligations with or
without penalties. Contractual maturities of current investments at August 28, 2021 are as follows (in thousands):
Estimated Fair Value
Within one year
$
1-5 years
Total
$
Noncurrent
Proceeds from sales and maturities of noncurrent investment securities were $
ended August 28, 2021. Gross realized gains for the thirteen weeks ended August 28, 2021 were $
10
sales of noncurrent investment securities during the thirteen weeks ended August 29, 2020. There were
the thirteen weeks ended August 28, 2021 and August 29, 2020.
Note 4 - Fair Value Measurements
The Company is required to categorize both financial and nonfinancial assets and liabilities based on the following fair value
hierarchy. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated,
knowledgeable, and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would
be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to
settle the liability with the creditor.
•
Level 1
•
Level 2
directly or indirectly, including:
◦
Quoted prices for similar assets or liabilities in active markets
◦
Quoted prices for identical or similar assets in non-active markets
◦
Inputs other than quoted prices that are observable for the asset or liability
◦
Inputs derived principally from or corroborated by other observable market data
•
Level 3
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded at cost are as follows:
Cash and cash equivalents, accounts receivable, and accounts payable:
short maturity of these instruments.
Lease obligations:
Assets and Liabilities Measured at Fair Value on a Recurring Basis
In accordance with the fair value hierarchy described above, the following table shows the fair value of financial assets and
liabilities measured at fair value on a recurring basis as of August 28, 2021 and May 29, 2021 (in thousands):
August 28, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
Asset backed securities
Mutual funds
Total assets measured at fair value
$
$
$
$
May 29, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
Asset backed securities
Mutual funds
Total assets measured at fair value
$
$
$
$
Investment securities – available-for-sale classified as Level 2 consist of securities with maturities of three months or longer
when purchased. We classified these securities as current because amounts invested are readily available for current operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
11
Note 5 - Inventories
Inventories consisted of the following as of August 28, 2021 and May 29, 2021 (in thousands):
August 28, 2021
May 29, 2021
Flocks, net of amortization
$
$
Eggs and egg products
Feed and supplies
$
$
We grow and maintain flocks of layers (mature female chickens), pullets (female chickens, under 18 weeks of age), and
breeders (male and female chickens used to produce fertile eggs to hatch for egg production flocks). Our total flock at August
28, 2021 consisted of approximately
Note 6 - Accrued Dividends Payable and Dividends per Common Share
We accrue dividends at the end of each quarter according to the Company’s dividend policy adopted by its Board of Directors.
The Company pays a dividend to shareholders of its Common Stock and Class A Common Stock on a quarterly basis for each
quarter for which the Company reports net income attributable to Cal-Maine Foods, Inc. computed in accordance with GAAP
in an amount equal to one-third (1/3) of such quarterly income. Dividends are paid to shareholders of record as of the 60th day
following the last day of such quarter, except for the fourth fiscal quarter. For the fourth quarter, the Company pays dividends
to shareholders of record on the 65th day after the quarter end. Dividends are payable on the 15th day following the record date.
Following a quarter for which the Company does not report net income attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend for a subsequent profitable quarter until the Company is profitable on a cumulative basis computed from the
date of the last quarter for which a dividend was paid. At the end of the first quarter of fiscal 2022, the amount of cumulative
losses to be recovered before payment of a dividend was $
On our condensed consolidated statement of operations, we determine dividends per common share in accordance with the
computation in the following table (in thousands, except per share data):
Thirteen Weeks Ended
August 28, 2021
August 29, 2020
Net loss
$
(18,026 )
$
(19,399 )
Cumulative losses to be recovered prior to payment of divided at beginning of period
(4,244 )
(1,370 )
Net income available for dividend
$
$
1/3 of net income attributable to Cal-Maine Foods, Inc. available for dividend
Common stock outstanding (shares)
Class A common stock outstanding (shares)
Total common stock outstanding (shares)
*Dividends per common share = 1/3 of Net income (loss) attributable to Cal-Maine Foods, Inc. available for dividend ÷ Total common stock
outstanding (shares).
12
Note 7 - Equity
The following reflects equity activity for the thirteen weeks ended August 28, 2021 and August 29, 2020 (in thousands):
Thirteen Weeks Ended August 28, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Total
Balance at May 29, 2021
$
$
$
(27,433 )
$
$
(558 )
$
$
Other comprehensive loss, net of tax
—
—
—
—
(170 )
—
(170 )
Stock compensation plan
transactions
—
—
(18 )
—
—
Net loss
—
—
—
—
—
(18,026 )
(18,026 )
Balance at August 28, 2021
$
$
$
(27,451 )
$
$
(728 )
$
$
Thirteen Weeks Ended August 29, 2020
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Total
Balance at May 30, 2020
$
$
$
(26,674 )
$
$
$
$
Impact of ASC 326, see
Note 1
—
—
—
—
—
Balance at May 31, 2020
(26,674 )
Other comprehensive income, net of
tax
—
—
—
—
—
Stock compensation plan
transactions
—
—
(2 )
—
—
Net loss
—
—
—
—
—
(19,399 )
(19,399 )
Balance at August 29, 2020
$
$
$
(26,676 )
$
$
$
$
Note 8 - Net Loss per Common Share
Basic net loss per share is based on the weighted average Common Stock and Class A Common Stock outstanding. Diluted net
income per share is based on weighted-average common shares outstanding during the relevant period adjusted for the dilutive
effect of share-based awards. Restricted shares of
first quarters of fiscal 2022 and 2021, respectively. These shares were not included in the diluted net loss per share calculation.
The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net
income per common share (amounts in thousands, except per share data):
Thirteen Weeks Ended
August 28, 2021
August 29, 2020
Numerator
Net loss
$
(18,026 )
$
(19,399 )
Denominator
Weighted-average common shares outstanding, basic
Effect of dilutive restricted shares
Weighted-average common shares outstanding, diluted
Net loss per common share attributable to Cal-Maine Foods, Inc.
Basic
$
(0.37 )
$
(0.40 )
Diluted
$
(0.37 )
$
(0.40 )
13
Note 9 - Revenue Recognition
Satisfaction of Performance Obligation
Most of the Company’s revenue is derived from contracts with customers based on the customer placing an order for products.
Pricing for the most part is determined when the Company and the customer agree upon the specific order, which establishes
the contract for that order.
Revenues are recognized in an amount that reflects the net consideration we expect to receive in exchange for the goods. Our
shell eggs are sold at prices related to independently quoted wholesale market prices, negotiated prices or formulas related to
our costs of production. The Company’s sales predominantly contain a single performance obligation. We recognize revenue
upon satisfaction of the performance obligation with the customer, which typically occurs within days of the Company and the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts include a guaranteed sale clause, pursuant to which we credit the customer’s account for product that the
customer is unable to sell before expiration. The Company records an estimate of returns and refunds by using historical return
data and comparing to current period sales and accounts receivable. The allowance is recorded as a reduction in sales with a
corresponding reduction in trade accounts receivable.
Sales Incentives Provided to Customers
The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current
discount offers (e.g., percentage discounts off current purchases), inducement offers (e.g., offers for future discounts subject to
a minimum current purchase), and other similar offers. Current discount offers, when accepted by customers, are treated as a
reduction to the sales price of the related transaction, while inducement offers, when accepted by customers, are treated as a
reduction to sales price based on estimated future redemption rates. Redemption rates are estimated using the Company’s
historical experience for similar inducement offers. Current discount and inducement offers are presented as a net amount in
‘‘Net sales.’’
Disaggregation of Revenue
The following table provides revenue disaggregated by product category (in thousands):
Thirteen Weeks Ended
August 28, 2021
August 29, 2020
Conventional shell egg sales
$
$
Specialty shell egg sales
Egg products
Other
$
$
Contract Costs
The Company can incur costs to obtain or fulfill a contract with a customer. If the amortization period of these costs is less than
one year, they are expensed as incurred. When the amortization period is greater than one year, a contract asset is recognized
and is amortized over the contract life as a reduction in net sales. As of August 28, 2021 the balance for contract assets is
immaterial.
Contract Balances
The Company receives payment from customers based on specified terms that are generally less than 30 days from
delivery. There are rarely contract assets or liabilities related to performance under the contract.
14
Note 10 - Leases
Expenses related to operating leases, amortization of finance leases, right-of-use assets, and finance lease interest are included
in Cost of sales, Selling general and administrative expense, and Interest income, net in the Condensed Consolidated Statements
of Operations. The Company’s lease cost consists of the following (in thousands):
13 Weeks Ended August 28, 2021
Operating Lease cost
$
Finance Lease cost
Amortization of right-of-use asset
$
Interest on lease obligations
$
Short term lease cost
$
Future minimum lease payments under non-cancelable leases are as follows (in thousands):
As of August 28, 2021
Operating Leases
Finance Leases
Remainder fiscal 2022
$
$
2023
2024
2025
2026
2027
Total
Less imputed interest
(133 )
(37 )
Total
$
$
The weighted-average remaining lease term and discount rate for lease liabilities included in our Condensed Consolidated
Balance Sheet are as follows:
As of August 28, 2021
Operating Leases
Finance Leases
Weighted-average remaining lease term (years)
Weighted-average discount rate
%
%
Note 11 - Stock Based Compensation
Total stock-based compensation expense was $
August 29, 2020, respectively.
Unrecognized compensation expense as a result of non -vested shares of restricted stock outstanding under the Amended and
Restated 2012 Omnibus Long-Term Incentive Plan at August 28, 2021 of $
period of
Stock Compensation Plans in our 2021 Annual Report for further information on our stock compensation plans.
The Company’s restricted share activity for the thirteen weeks ended August 28, 2021 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 29, 2021
$
Vested
(1,359 )
Forfeited
(730 )
Outstanding, August 28, 2021
$
15
Note 13 - Commitments and Contingencies
Financial Instruments
The Company maintained standby letters of credit ("LOC") totaling $
the Company's Revolving Credit Facility. The outstanding LOCs are for the benefit of certain insurance companies, and are not
recorded as a liability on the consolidated balance sheets.
LEGAL PROCEEDINGS
State of Texas v. Cal-Maine Foods, Inc. d/b/a Wharton; and Wharton County Foods, LLC
On April 23, 2020, the Company and its subsidiary Wharton County Foods, LLC (“WCF”) were named as defendants in State
of Texas v. Cal-Maine Foods, Inc. d/b/a Wharton; and Wharton County Foods, LLC, Cause No. 2020-25427, in the District
Court of Harris County, Texas. The State of Texas (the “State”) asserted claims based on the Company’s and WCF’s alleged
violation of the Texas Deceptive Trade Practices—Consumer Protection Act, Tex. Bus. & Com. Code §§ 17.41-17.63
(“DTPA”). The State claimed that the Company and WCF offered shell eggs at excessive or exorbitant prices during the
COVID-19 state of emergency and made misleading statements about shell egg prices. The State sought temporary and
permanent injunctions against the Company and WCF to prevent further alleged violations of the DTPA, along with over
$
prejudice. On September 11, 2020, the State filed a notice of appeal, which was assigned to the Texas Court of Appeals for the
First District. The State filed its opening brief on December 7, 2020. The Company and WCF filed their response on February
8, 2021. The Texas Court of Appeals has not ruled on these submissions. Management believes the risk of material loss related
to this matter to be remote.
Bell et al. v. Cal-Maine Foods et al.
On April 30, 2020, the Company was named as one of several defendants in Bell et al. v. Cal-Maine Foods et al., Case No.
1:20-cv-461, in the Western District of Texas, Austin Division. The defendants include numerous grocery stores, retailers,
producers, and farms. Plaintiffs assert that defendants violated the DTPA by allegedly demanding exorbitant or excessive prices
for eggs during the COVID-19 state of emergency. Plaintiffs request certification of a class of all consumers who purchased
eggs in Texas sold, distributed, produced, or handled by any of the defendants during the COVID-19 state of emergency.
Plaintiffs seek to enjoin the Company and other defendants from selling eggs at a price more than 10% greater than the price of
eggs prior to the declaration of the state of emergency and damages in the amount of $
each violation impacting anyone over 65 years old. On December 1, 2020, the Company and certain other defendants filed a
motion to dismiss the plaintiffs’ amended class action complaint. The plaintiffs subsequently filed a motion to strike, and the
motion to dismiss and related proceedings were referred to a United States magistrate judge. On July 14, 2021, the magistrate
judge issued a report and recommendation to the court that the defendants’ motion to dismiss be granted and the case be
dismissed without prejudice for lack of subject matter jurisdiction. On September 20, 2021, the court adopted the magistrate’s
report and recommendation in its entirety and granted defendants’ motion to dismiss plaintiffs’ first amended class action
complaint; thereafter, the court entered a final judgment in favor of the Company and certain other defendants dismissing the
case without prejudice.
Kraft Foods Global, Inc. et al. v. United Egg Producers, Inc. et al.
As previously reported, on September 25, 2008, the Company was named as one of several defendants in numerous antitrust
cases involving the United States shell egg industry. The Company settled all of these cases, except for the claims of certain
plaintiffs who sought substantial damages allegedly arising from the purchase of egg products (as opposed to shell eggs). These
remaining plaintiffs are Kraft Food Global, Inc., General Mills, Inc., and Nestle USA, Inc. (the “Egg Products Plaintiffs”) and
The Kellogg Company.
On September 13, 2019, the case with the Egg Products Plaintiffs was remanded from a multi-district litigation proceeding in
the United States District Court for the Eastern District of Pennsylvania, In re Processed Egg Products Antitrust Litigation,
MDL No. 2002, to the United States District Court for the Northern District of Illinois, Kraft Foods Global, Inc. et al. v. United
Egg Producers, Inc. et al., Case No. 1:11-cv-8808, for trial. The Egg Products Plaintiffs allege that the Company and other
defendants violated Section 1 of the Sherman Act, 15. U.S.C. § 1, by agreeing to limit the production of eggs and thereby
illegally to raise the prices that plaintiffs paid for processed egg products. In particular, the Egg Products Plaintiffs are attacking
certain features of the United Egg Producers animal-welfare guidelines and program used by the Company and many other egg
producers. The Egg Products Plaintiffs seek to enjoin the Company and other defendants from engaging in antitrust violations
and seek treble money damages. The parties filed a joint status report on May 18, 2020. On August 4, 2021, by docket entry,
16
the court instructed the parties to jointly submit a second status report to the court that included a proposed schedule for
preparing a final pretrial order. On August 25, 2021, the parties filed a joint status report, and on August 26, 2021, the court, by
docket entry, informed the parties that the need to discuss issues was no longer necessary and that a scheduled August 30, 2021,
status hearing was stricken. No trial schedule has yet been entered by the court.
In addition, on October 24, 2019, the Company entered into a confidential settlement agreement with The Kellogg Company
dismissing all claims against the Company for an amount that did not have a material impact on the Company’s financial
condition or results of operations. On November 11, 2019, a stipulation for dismissal was filed with the court, but the court has
not yet entered a judgment on the filing.
The Company intends to continue to defend the remaining case with the Egg Products Plaintiffs as vigorously as possible based
on defenses which the Company believes are meritorious and provable. Adjustments, if any, which might result from the
resolution of this remaining matter with the Egg Products Plaintiffs have not been reflected in the financial statements. While
management believes that there is still a reasonable possibility of a material adverse outcome from the case with the Egg
Products Plaintiffs, at the present time, it is not possible to estimate the amount of monetary exposure, if any, to the Company
due to a range of factors, including the following, among others: the matter is in the early stages of preparing for trial following
remand; any trial will be before a different judge and jury in a different court than prior related cases; there are significant
factual issues to be resolved; and there are requests for damages other than compensatory damages (i.e., injunction and treble
money damages).
State of Oklahoma Watershed Pollution Litigation
On June 18, 2005, the State of Oklahoma filed suit, in the United States District Court for the Northern District of Oklahoma,
against Cal-Maine Foods, Inc. and Tyson Foods, Inc. and affiliates, Cobb-Vantress, Inc., Cargill, Inc. and its affiliate, George’s,
Inc. and its affiliate, Peterson Farms, Inc. and Simmons Foods, Inc. The State of Oklahoma claims that through the disposal of
chicken litter the defendants have polluted the Illinois River Watershed. This watershed provides water to eastern Oklahoma.
The complaint seeks injunctive relief and monetary damages, but the claim for monetary damages has been dismissed by the
court. Cal-Maine Foods, Inc. discontinued operations in the watershed. Accordingly, we do not anticipate that Cal-Maine
Foods, Inc. will be materially affected by the request for injunctive relief unless the court orders substantial affirmative
remediation. Since the litigation began, Cal-Maine Foods, Inc. purchased 100% of the membership interests of Benton County
Foods, LLC, which is an ongoing commercial shell egg operation within the Illinois River Watershed. Benton County Foods,
LLC is not a defendant in the litigation.
The trial in the case began in September 2009 and concluded in February 2010. The case was tried without a jury, and the court
has not yet issued its ruling. Management believes the risk of material loss related to this matter to be remote.
Other Matters
In addition to the above, the Company is involved in various other claims and litigation incidental to its business. Although the
outcome of these matters cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that
the final outcome should not have a material effect on the Company’s consolidated results of operations or financial position.
Note 14 - Related Party Transaction
On August 24, 2020, Mrs. Jean Reed Adams, the wife of the Company’s late founder Fred R. Adams, Jr., and the Fred R.
Adams, Jr. Daughters’ Trust, dated July 20, 2018 (the “Daughters’ Trust”), of which the daughters of Mr. Adams are
beneficiaries (together, the “Selling Stockholders”), completed a registered secondary public offering of
Common Stock held by them, pursuant to a previously disclosed Agreement Regarding Common Stock (the “Agreement”) filed
as an exhibit to our 2021 Annual Report. Mrs. Adams and the Daughters’ Trust advised the Company that they were conducting
the offering in order to pay estate taxes related to the settlement of Mr. Adam’s estate and to obtain liquidity. The public
offering was made pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-227742),
including the Prospectus contained therein dated October 9, 2018, and a related Prospectus Supplement dated August 19, 2020,
each of which is on file with the Securities and Exchange Commission. The public offering involved only the sale of shares of
Common Stock that were already outstanding, and thus the Company did not issue any new shares or raise any additional
capital in the offering. The expenses of the offering (not including the underwriting discount and legal fees and expenses of
legal counsel for the Selling Stockholders, which were paid by the Selling Stockholders) paid by the Company were $
million. Pursuant to the Agreement, the Selling Stockholders reimbursed the Company $
17
ITEM 2. MANAGEMENT’S
DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results
of Operations included in Item 7 of the Company’s Annual Report on Form 10-K for its fiscal year ended May 29, 2021 (the
“2021 Annual Report”), and the accompanying financial statements and notes included in Part II Item 8 of the 2021 Annual
Report and in
Part
This report contains numerous forward-looking statements within the meaning of Section 27A of the Securities Act of 1933
(the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) relating to our shell egg
business, including estimated future production data, expected construction schedules, projected construction costs, potential
future supply of and demand for our products, potential future corn and soybean price trends, potential future impact on our
business of the COVID-19 pandemic, potential future impact on our business of new legislation, rules or policies, potential
outcomes of legal proceedings, and other projected operating data, including anticipated results of operations and financial
condition. Such forward-looking statements are identified by the use of words such as “believes,” “intends,” “expects,”
“hopes,” “may,” “should,” “plans,” “projected,” “contemplates,” “anticipates,” or similar words. Actual outcomes or results
could differ materially from those projected in the forward-looking statements. The forward-looking statements are based on
management’s current intent, belief, expectations, estimates, and projections regarding the Company and its industry. These
statements are not guarantees of future performance and involve risks, uncertainties, assumptions, and other factors that are
difficult to predict and may be beyond our control. The factors that could cause actual results to differ materially from those
projected in the forward-looking statements include, among others, (i) the risk factors set forth in Part I, Item 1A of the 2021
Annual Report (ii) the risks and hazards inherent in the shell egg business (including disease, pests, weather conditions, and
potential for product recall), (iii) changes in the demand for and market prices of shell eggs and feed costs, (iv) our ability to
predict and meet demand for cage-free and other specialty eggs, (v) risks, changes, or obligations that could result from our
future acquisition of new flocks or businesses and risks or changes that may cause conditions to completing a pending
acquisition not to be met, (vi) risks relating to the evolving COVID-19 pandemic, and (vii) adverse results in pending litigation
matters. Readers are cautioned not to place undue reliance on forward-looking statements because, while we believe the
assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-
looking statements will prove to be accurate. Further, forward-looking statements included herein are only made as of the
respective dates thereof, or if no date is stated, as of the date hereof. Except as otherwise required by law, we disclaim any
intent or obligation to update publicly these forward-looking statements, whether because of new information, future events, or
otherwise.
GENERAL
Cal-Maine Foods, Inc. is primarily engaged in the production, grading, packaging, marketing and distribution of fresh shell
eggs. Our operations are fully integrated under one operating segment. We are the largest producer and distributor of fresh shell
eggs in the United States (“U.S.”). Our total flock of approximately 40.8 million layers and 10.3 million pullets and breeders is
the largest in the U.S. We sell most of our shell eggs to a diverse group of customers, including national and regional grocery
store chains, club stores, companies servicing independent supermarkets in the U.S., food service distributors, and egg product
consumers in states across the southwestern, southeastern, mid-western and mid-Atlantic regions of the U.S.
Our operating results are materially impacted by market prices for eggs and feed grains (corn and soybean meal), which are
highly volatile, independent of each other, and out of our control. Generally, higher market prices for eggs have a positive
impact on our financial results while higher market prices for feed grains have a negative impact on our financial results.
Although we use a variety of pricing mechanisms in pricing agreements with our customers, we sell most of our conventional
shell eggs based on formulas that consider, in varying ways, independently quoted regional wholesale market prices for shell
eggs or formulas related to our costs of production which include the cost of corn and soybean meal. As an example of the
volatility in the market prices of shell eggs, the Urner-Barry Southeastern Regional Large Egg Market Price per dozen eggs
(“UB southeastern large index”) in fiscal year 2021 ranged from a low of $0.87 in July 2020 to a high of $1.63 in March 2021.
Generally, we purchase primary feed ingredients, mainly corn and soybean meal, at current market prices. Corn and soybean
meal are commodities and are subject to volatile price changes due to weather, various supply and demand factors,
transportation and storage costs, speculators, and agricultural, energy and trade policies in the U.S. and internationally.
An important competitive advantage for Cal-Maine Foods is our ability to meet our customers’ evolving needs with a favorable
product mix of conventional, cage-free, organic and other specialty eggs and egg products. We have also enhanced our efforts
to provide free-range and pasture-raised eggs that meet consumers’ evolving choice preferences. While a small part of our
18
current business, the free-range and pasture-raised eggs we produce and sell represent attractive offerings to a subset of
consumers, and therefore our customers, and help us continue to serve as the trusted provider of quality food choices.
Specialty shell eggs have been a significant and growing portion of the market. In recent years, a significant number of large
restaurant chains, food service companies and grocery chains, including our largest customers, announced goals to transition to
an exclusively cage-free egg supply chain by specified future dates. Additionally, several states, representing 2 4% of the U.S.
total population according to the 2020 U.S. Census, have passed legislation requiring that all eggs sold in those states must be
cage-free eggs by specified future dates, and other states are considering such legislation. For additional information, see the
2021 Annual Report, Part I, Item 1, “Business – Growth Strategy” and “– Government Regulation,” and the first risk factor in
Part I Item 1A, “Risk Factors” under the sub-heading “Legal and Regulatory Risk Factors.”
Retail sales of shell eggs historically have been highest during the fall and winter months and lowest during the summer
months. Prices for shell eggs fluctuate in response to seasonal demand factors and a natural increase in egg production during
the spring and early summer. Historically, shell egg prices tend to increase with the start of the school year and tend to be
highest prior to holiday periods, particularly Thanksgiving, Christmas, and Easter. Consequently, and all other things being
equal, we would expect to experience lower selling prices, sales volumes and net income (and may incur net losses) in our first
and fourth fiscal quarters ending in August/September and May/June, respectively. Because of the seasonal and quarterly
fluctuations, comparisons of our sales and operating results between different quarters within a single fiscal year are not
necessarily meaningful comparisons.
COVID-19
Since early 2020, the coronavirus (“COVID-19”) outbreak, characterized as a pandemic by the World Health Organization on
March 11, 2020, has caused significant disruptions in international and U.S. economies and markets. We understand the
challenges and difficult economic environment facing families in the communities where we live and work, and we are
committed to helping where we can. We have provided food assistance to those in need by donating approximately 239
thousand dozen eggs to date in fiscal 2022. We believe we are taking all reasonable precautions in the management of our
operations in response to the COVID-19 pandemic. Our top priority is the health and safety of our employees, who work hard
every day to produce eggs for our customers. As part of the nation’s food supply, we work in a critical infrastructure industry,
and we believe we have a special responsibility to maintain our normal work schedule. As such, we are in regular
communication with our managers across our operations and continue to closely monitor the situation in our facilities and in the
communities where we live and work. We have implemented procedures designed to protect our employees, taking into account
guidelines published by the Centers for Disease Control and other government health agencies, and we have strict sanitation
protocols and biosecurity measures in place throughout our operations with restricted access to visitors. There are no known
indications that COVID-19 affects hens or can be transferred through the food supply.
We continue to proactively monitor and manage operations during the COVID-19 pandemic, including additional related costs
that we incurred or may incur in the future. The pandemic had a negative impact on our business through disruptions in the
supply chain such as increased costs and limited availability of packaging supplies, and increased labor costs and medical costs.
In the first quarters of fiscal 2022 and 2021, we spent $553 thousand and $832 thousand (excluding medical insurance claims)
related to the pandemic, respectively. The majority of these expenses in fiscal 2022 resulted from additional labor costs and
increased cost of packaging materials, primarily reflected in cost of sales. In fiscal 2021, most of these expenses related to
additional labor costs. Medical insurance claims related to COVID-19 paid during the first quarter of fiscal 2022 were an
additional $267 thousand as compared to $324 thousand paid in the same quarter in fiscal 2021.
EXECUTIVE OVERVIEW
For the first quarter of fiscal 2022, we recorded a gross profit of $6.6 million compared to $16.8 million for the same period of
fiscal 2021, with the decrease due primarily to the higher costs of feed ingredients and higher processing costs. Our total dozens
sold decreased 1.7% to 259.4 million dozen shell eggs for the first quarter of fiscal 2022 compared to 264.0 million dozen for
the same period of fiscal 2021. For the first quarter of fiscal 2022, conventional dozens sold decreased 5.5% and specialty
dozens sold increased 8.9% as compared to the same quarter in fiscal 2021. Specialty dozens sold increased as more cage-free
facilities came into production which helped increase our cage-free egg sales.
The daily average price for the UB southeastern large index for first quarter of fiscal 2022 increased 41.2% from the same
period in the prior year. Our net average selling price per dozen for the first quarter of fiscal 2021 was $1.238 compared to
$1.078 in the prior year period. Hen numbers reported by the USDA as of September 1, 2021, were 319.5 million, which is
approximately the same number of hens in same period for the prior year. The USDA also reported that the hatch from April
19
2021 through August 2021 increased 2.1% compared to the prior-year period. As of September 1, 2021, eggs in incubators were
down 4.9% versus the prior-year period.
Our farm production costs per dozen produced for the first quarter of fiscal 2022 increased 25.4% or $0.182 compared to the
first quarter of fiscal 2021 . This increase was primarily due to increased prices for feed ingredients caused by increased export
demand, as well as weather-related shortfalls in production and yields, which have placed additional pressure on domestic
supplies. For the first quarter, the average Chicago Board of Trade (“CBOT”) daily market price was $5.96 per bushel for corn
and $364 per ton for soybean meal, representing an increase of 81.8% and 26.1%, respectively, compared to the average daily
CBOT prices for the first quarter of fiscal 2021. Other farm production costs for the first quarter of fiscal 2022 increased 7.6%
compared to the same period in the prior fiscal year due to higher flock amortization and facility expenses.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items from our Condensed Consolidated Statements of
Operations expressed as a percentage of net sales.
13 Weeks Ended
August 28, 2021
August 29, 2020
Net sales
100.0
%
100.0
%
Cost of sales
98.0
%
94.3
%
Gross profit
2.0
%
5.7
%
Selling, general and administrative
14.0
%
15.0
%
(Gain) loss on disposal of fixed assets
(0.1)
%
—
%
Operating loss
(11.9)
%
(9.3)
%
Total other income, net
1.7
%
0.6
%
Loss before income taxes
(10.2)
%
(8.7)
%
Income tax benefit
(4.8)
%
(2.1)
%
Net loss
(5.4)
%
(6.6)
%
20
NET SALES
Total net sales for the first quarter of fiscal 2022 were $331.7 million, compared to $292.8 million for the same period of fiscal
2021.
Net shell egg sales represented 97.2% and 97.7% of total net sales for the first quarter of fiscal 2022 and 2021, respectively.
Shell egg sales classified as “Other” represent sales of hard cooked eggs, hatching eggs, and other miscellaneous products
included with our shell egg operations. The table below presents an analysis of our conventional and specialty shell egg sales
(in thousands, except percentage data):
13 Weeks Ended
August 28, 2021
August 29, 2020
Total net sales
$
331,704
$
292,782
Conventional
$
182,549
56.6
%
$
155,384
54.3
%
Specialty
138,657
43.0
%
129,245
45.2
%
Egg sales, net
321,206
99.6
%
284,629
99.5
%
Other
1,132
0.4
%
1,448
0.5
%
Net shell egg sales
$
322,338
100.0
%
$
286,077
100.0
%
Net shell egg sales as a percent of total net sales
97.2
%
97.7
%
Dozens sold:
Conventional
184,487
71.1
%
195,238
74.0
%
Specialty
74,898
28.9
%
68,756
26.0
%
Total dozens sold
259,385
100.0
%
263,994
100.0
%
Net average selling price per dozen:
Conventional
$
0.989
$
0.796
Specialty
$
1.851
$
1.880
All shell eggs
$
1.238
$
1.078
Egg products sales:
Egg products net sales
9,366
6,705
Pounds sold
15,269
15,030
Net average selling price per pound
0.613
0.446
Shell egg net sales
-
In the first quarter of fiscal 2022, conventional egg sales increased $27.2 million or 17.5%, compared to the first
quarter of fiscal 2021, primarily due to the increase in price, partially offset by a decrease in volume of conventional
eggs sold. Changes in price resulted in a $35.6 million increase and change in volume resulted in a $10.6 million
decrease in net sales, respectively.
-
Higher quarter-over-quarter conventional egg prices were primarily due to depressed prices in the first quarter of fiscal
2021, which resulted from conventional eggs entering the retail channel from the foodservice channel due to the
pandemic.
-
The decrease in volume of conventional eggs sold was primarily due to the first quarter of fiscal 2021 elevated retail
demand due to consumers’ preferences to purchase eggs for in-home meal preparation due to the pandemic. We saw
this consumer preference begin to shift in the fourth quarter of fiscal 2021 as consumers began to resume out-of-home
dining and prepare fewer meals at home.
-
Specialty egg sales increased $9.4 million, or 7.3 %, primarily due to increased volume of 8.9% which resulted in a
$11.4 million increase in net sales. More cage-free facilities came into production which helped increase our cage-free
egg sales.
-
We believe that higher demand for specialty eggs has been driven by the pandemic , as consumers prepared more meals
for in-home consumption rather than dining out. We believe higher at-home meal preparation has driven a consumer
preference to purchase higher-priced specialty eggs.
21
Egg products net sales
-
Egg products net sales increased $2.7 million or 39.7%, primarily due to a 37.4% selling price increase compared to
the first quarter of fiscal 2021, which had a $1.6 million positive impact on net sales.
-
Selling prices for egg products in the first quarter of fiscal 2021 were negatively impacted by a decline in foodservice
demand due to the pandemic. Our egg products net average selling price increased in the first quarter of fiscal 2022
compared to the same period in fiscal 2021 as foodservice channel demand has begun to shift more to pre-pandemic
levels.
COST OF SALES
Costs of sales for the first quarter of fiscal 2022 were $325.1 million compared to $276.0 million for the same period of fiscal
2021.
Cost of sales consists of costs directly related to producing, processing and packing shell eggs, purchases of shell eggs from
outside producers, processing and packing of liquid and frozen egg products and other non-egg costs. Farm production costs are
those costs incurred at the egg production facility, including feed, facility, hen amortization, and other related farm production
costs.
The following table presents the key variables affecting our cost of sales (in thousands, except cost per dozen data):
13 Weeks Ended
August 28, 2021
August 29, 2020
% Change
Cost of Sales:
Farm production
$
207,495
$
161,863
28.2
%
Processing, packaging, and warehouse
65,059
59,869
8.7
Egg purchases and other (including change in inventory)
44,691
48,933
(8.7)
Total shell eggs
317,245
270,665
17.2
Egg products
7,814
5,352
46.0
Total
$
325,059
$
276,017
17.8
%
Farm production costs (per dozen produced)
Feed
$
0.545
$
0.388
40.5
%
Other
$
0.353
$
0.328
7.6
%
Total
$
0.898
$
0.716
25.4
%
Outside egg purchases (average cost per dozen)
$
1.35
$
1.04
29.8
%
Dozens produced
236,458
231,161
2.3
%
Dozens sold
259,385
263,994
(1.7)
%
Farm Production
-
Feed costs per dozen produced increased 40.5% in the first quarter of fiscal 2022 compared to the first quarter of fiscal
2021, primarily due to higher feed ingredient prices resulting from increased export demand, as well as weather-
related shortfalls in production and yields, which have placed additional pressure on domestic supplies.
-
Other farm production costs increased due to higher flock amortization , primarily from an increase in our cage-free
production, which has higher capitalized costs. Also, higher feed costs, which began to rise in our third quarter of
fiscal 2021, are capitalized in our flocks during pullet production and increased our amortization expense.
-
We had higher facility expense as more cage-free facilities came into production.
Processing, packaging, and warehouse
-
Cost of packaging materials increased 8.9% compared to the first quarter of fiscal 2021 as demand for packaging
products increased due to pandemic supply chain constraints and manufacturers increased prices and implemented
pandemic surcharges.
-
Labor costs increased 11.1% due to wage increases in response to labor shortages, primarily due to the pandemic.
Egg purchases and other (including change in inventory)
-
Costs in this category decreased primarily due to the decrease in the volume of outside egg purchases, as our
percentage of produced to sold increased to 91.2%, partially offset by an increase in the cost of these purchases.
22
Looking forward throughout the rest of fiscal 2022, corn and soybean supplies remained tight relative to demand, primarily
related to higher export demand, as well as weather-related shortfalls in production and yields. We expect market prices to
remain elevated and volatile relative to historical prices at least for the short term given the ongoing disruptions related to the
COVID-19 global pandemic, weather fluctuations and geopolitical issues.
GROSS PROFIT
Gross profit for the first quarter of fiscal 2022 was $6.6 million compared to $16.8 million for the same period of fiscal 2021.
The decrease of $10.1 million was primarily due to the increased cost of feed ingredients and processing costs.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses ("SGA") include costs of marketing, distribution, accounting, and corporate
overhead. The following table presents an analysis of our SGA expenses (in thousands):
13 Weeks Ended
August 28, 2021
August 29, 2020
$ Change
% Change
Specialty egg expense
$
13,715
$
12,697
$
1,018
8.0
%
Delivery expense
13,936
12,494
1,442
11.5
%
Payroll, taxes and benefits
9,939
11,301
(1,362)
(12.1)
%
Stock compensation expense
1,001
893
108
12.1
%
Other expenses
7,934
6,580
1,354
20.6
%
Total
$
46,525
$
43,965
$
2,560
5.8
%
Specialty egg expense
-
Advertising and franchise fees increased in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021,
due to the 8.9% increased volume of specialty eggs sales.
Delivery expense
-
The increased delivery expense is primarily due to the increase in fuel costs.
Payroll, taxes and benefits
-
The decrease in payroll, taxes and benefits is primarily due to a decrease in bonus accruals as well as a decrease in
expense associated with the deferred compensation plan.
Other expenses
-
The increase in other expenses is primarily due to increased premiums for property and casualty insurance due to hard
market conditions driven by industry high loss ratios and low investment income returns to offset losses.
OPERATING INCOME (LOSS)
For the first quarter of fiscal 2022, we recorded an operating loss of $39.7 million compared to an operating loss of $27.2
million for the same period of fiscal 2021.
OTHER INCOME (EXPENSE)
Total other income (expense) consists of items not directly charged or related to operations, such as interest income and
expense, royalty income, equity in income or loss of unconsolidated entities, and patronage income, among other items.
For the first quarter of fiscal 2022, we earned $290 thousand of interest income compared to $996 thousand for the same period
of fiscal 2021 . The decrease resulted from significantly lower investment balances. The Company recorded interest expense of
$58 thousand and $71 thousand for the first quarters ended August 28, 2021 and August 29, 2020, respectively.
For the first quarter of fiscal 2022, equity income of unconsolidated entities was $135 thousand compared to a loss of $44
thousand in the prior year period.
23
Other, net for the first quarter ended August 28, 2021, was income of $5.2 million compared to income of $512 thousand for
the same period of fiscal 2021. The increase is due to the acquisition of Red River Valley Egg Farm, LLC (“Red River”) as we
recognized a $4.5 million gain due to the remeasurement of our equity investmen t.
INCOME TAXES
For the first quarter of fiscal 2022, pre-tax loss was $33.9 million compared to $25.5 million for the same period of fiscal 2021.
We recorded an income tax benefit of $15.8 million for the first quarter of fiscal 2022, which includes the discrete tax benefit of
$8.3 million as discussed in Note 2 – Acquisitions of the Notes to Condensed Consolidated Financial Statements in this
Quarterly Report. Excluding the discrete tax benefit, income tax benefit was $7.6 million for the first quarter of fiscal 2022 with
an adjusted effective tax rate of 22.4%. Income tax benefit was $6.1 million for the comparable period of fiscal 2021, which
reflects an effective tax rate of 24.0%.
At August 28, 2021 and May 29, 2021, trade and other receivables, net included income taxes receivables of $42.5 million.
Our effective tax rate differs from the federal statutory income tax rate due to state income taxes, certain federal tax credits and
certain items included in income for financial reporting purposes that are not included in taxable income for income tax
purposes, including tax exempt interest income, certain nondeductible expenses and net income or loss attributable to
noncontrolling interest. Results for the current quarter were favorably impacted by a $8.3 million discrete tax benefit as
discussed in Note 2 – Acquisitions of the Notes to Condensed Consolidated Finan cial Statements in this Quarterly Report.
NET LOSS
Net loss for the first quarter ended August 28, 2021, was $18.0 million, or $0.37 per basic and diluted share, compared to net
loss of $19.4 million or $0.40 per basic and diluted share for the same period of fiscal 2021.
CAPITAL RESOURCES AND LIQUIDITY
Our working capital at August 28, 2021, was $362.9 million, compared to $429.8 million at May 29, 2021. The calculation of
working capital is defined as curr ent assets less current liabilities. Our current ratio was 4.72 at August 28, 2021, compared
with 5.77 at May 29, 2021.
We had no long-term debt outstanding at August 28, 2021 or May 29, 2021. On July 10, 2018, we entered into a $100.0 million
Senior Secured Revolving Credit Facility (the “Revolving Credit Facility”). As of August 28, 2021, no amounts were borrowed
under the Revolving Credit Facility. We have $4.1 million in outstanding standby letters of credit, issued under our Revolving
Credit Facility for the benefit of certain insurance companies. Refer to Part II Item 8, Notes to Consolidated Financial
Statements and Supplementary Data, Note 10: Credit Facility included in our 2021 Annual Report for further information
regarding our long-term debt.
For the thirteen weeks ended August 28, 2021 , $24.1 million in net cash was used in operating activities, compared to $14.8
million used in operating activities for the comparable period in fiscal 2021 . This is primarily due to the increased costs of feed
ingredients compared to the prior year period.
We continue to invest in our facilities with $11.2 million used to purchase property, plant and equipment for the thirteen weeks
ended August 28, 2021, compared to $25.3 million in the same period of fiscal 2021. We also acquired the remaining 50%
membership interest in Red River during our first quarter of fiscal 2022 for $48.5 million. Sales and maturities of investment
securities, net of purchases, were $38.0 million for the thirteen weeks ended August 28, 2021, compared to $4.0 million for the
comparable period in fiscal 2021. We received $400 thousand in distributions from an unconsolidated entity in the first quarter
of fiscal 2022 compared to $650 thousand for the same period fiscal of 2021. We used $53 thousand for principal payments on
finance leases in the first quarter of fiscal 2022 compared to $50 thousand for the same period of fiscal 2021.
As of August 28, 2021, cash decreased $40.7 million since May 29, 2021, compared to a decrease of $35.3 million during the
same period of fiscal 2021.
24
We continue to monitor the increasin g demand for cage-free eggs and to engage with our customers in an effort to achieve a
smooth transition to meet their announced commitment timeline for cage-free egg sales. We have invested approximately $482
million in facilities, equipment and related operations to expand our cage-free production starting with our first facility in 2008.
The following table presents material construction projects approved as of August 28, 2021 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of
August 28, 2021
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2022
138,724
99,380
39,344
$
138,724
$
99,380
$
39,344
We believe our current cash balances, investments, cash flows from operations, and Revolving Credit Facility will be sufficient
to fund our current capital needs. As we monitor the demand for cage-free eggs and our growth strategy described in Part I Item
I “Business – Growth Strategy” in our 2021 Annual Report, there may be a need for long-term debt financing. We believe with
our strong balance sheet that we will have adequate access to capital markets if that need arises.
RECENTLY ISSUED/ADOPTED ACCOUNTING STANDARDS
For information on changes in accounting principles and new accounting policies, see
CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates are those estimates made in accordance with U.S. generally accepted accounting principles that
involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our
financial condition or results of operations. There have been no changes to our critical accounting estimates identified in our
2021 Annual Report.
25
ITEM 4. CONTROLS
AND
PROCEDURES
Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed
by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that
we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive
and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding
required disclosure. Based on an evaluation of our disclosure controls and procedures conducted by our Chief Executive Officer
and Chief Financial Officer, together with other financial officers, such officers concluded that our disclosure controls and
procedures were effective as of August 28, 2021 at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended August 28, 2021
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk during the thirteen weeks ended August 28, 2021 from the
information provided in Item 7A. Quantitative and Qualitative Disclosure s About Market Risk in our 2021 Annual Report.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to the discussion of certain legal proceedings involving the Company and/or its subsidiaries in (i) our 2021 Annual
Report, Part I Item 3: Legal Proceedings, and Part II Item 8, Notes to Consolidated Financial Statements and Supplementary
Data, Note 18: Commitments and Contingencies, and (ii) in this Quarterly Report in
of the Notes to Condensed Consolidated Financial Statements, which discussions are incorporated herein by reference.
ITEM 1A. RISK
FACTORS
There have been no material changes in the risk factors previously disclosed in the Company’s 2021 Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table is a summary of our first quarter 2022 share repurchases:
Total Number of
Maximum Number
Shares Purchased
of Shares that
Total Number
Average
as Part of Publicly
May Yet Be
of Shares
Price Paid
Announced Plans
Purchased Under the
Period
Purchased (1)
per Share
Or Programs
Plans or Programs
05/30/21 to 06/26/21
—
$
—
—
—
06/27/21 to 07/24/21
404
36.34
—
—
07/25/21 to 08/28/21
—
—
—
—
404
$
36.34
—
—
(1)
As permitted under our Amended and Restated 2012 Omnibus Long
-
term Incentive Plan, these sha
res were withheld
by us to satisfy tax withholding obligations for employees in connection with the vesting of restricted common stock.
26
ITEM 6. EXHIBITS
Exhibits
No.
Description
3.1
3.2
31.1*
31.2*
32**
101.SCH*+
Inline XBRL Taxonomy Extension Schema Document
101.CAL*+
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*+
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*+
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*+
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Filed herewith as an Exhibit.
**
Furnished herewith as an Exhibit.
+
Submitted electronically with this Quarterly Report.
SIGNATURES
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, thereunto duly authorized.
CAL-MAINE FOODS, INC.
(Registrant)
Date:
September 28, 2021
/s/ Max P. Bowman
Max P. Bowman
Vice President, Chief Financial Officer
(Principal Financial Officer)
Date:
September 28, 2021
/s/ Michael D. Castleberry
Michael D. Castleberry
Vice President, Controller
(Principal Accounting Officer)
Certification
Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934,
As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Adolphus B. Baker, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Cal-Maine Foods, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Adolphus B. Baker |
|
|
Adolphus B. Baker |
|
|
Chief Executive Officer and Chairman of the Board |
|
|
Date: |
September 28, 2021 |
1
Certification
Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934,
As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Max P. Bowman, certify that
1. I have reviewed this Quarterly Report on Form 10-Q of Cal-Maine Foods, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Max P. Bowman |
|
|
Max P. Bowman |
|
|
Vice President and Chief Financial Officer |
|
|
Date: |
September 28, 2021 |
1
Certifications Pursuant to 18 U.S.C. §1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Solely for the purposes of complying with 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and Chief Financial Officer of Cal-Maine Foods, Inc. (the “Company”), hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended August 28, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Adolphus B. Baker |
|
|
Adolphus B. Baker |
|
|
Chief Executive Officer and Chairman of the Board |
|
|
|
|
|
|
|
|
/s/ Max P. Bowman |
|
|
Max P. Bowman |
|
|
Vice President and Chief Financial Officer |
|
|
|
|
|
Date: |
September 28, 2021 |
1