10-Q
Cal-Maine Foods Inc (CALM)
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Index
1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
DC
20549
FORM
10-Q
☑
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended
August 28, 2021
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:
001-38695
CAL-MAINE FOODS, INC
.
(Exact name of registrant as specified in its charter)
Delaware
64-0500378
(State or other jurisdiction of incorporation or organization)
(I.R.S Employer Identification No.)
1052 Highland Colony Pkwy
,
Suite 200
,
Ridgeland
,
Mississippi
39157
(Address of principal executive offices)
(Zip Code)
(
601
)
948-6813
(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
Common Stock, $0.01 par value per share
CALM
The
NASDAQ
Global Select Market
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
☑
No
☐
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).
Yes
☑
No
☐
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.
Large Accelerated filer
☑
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
☐
No
☑
There were
44,057,329
shares of Common
Stock, $0.01 par
value, and
4,800,000
shares of Class A
Common Stock, $0.01
par
value,
outstanding as of September 28, 2021.
Index
2
INDEX
Page
Number
Part I.
Financial Information
Item 1.
Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
August 28, 2021 and May 29, 2021
3
Condensed Consolidated Statements of Operations -
Thirteen Weeks Ended August 28, 2021 and August 29, 2020
4
Condensed Consolidated Statements of Comprehensive Loss -
Thirteen Weeks Ended August 28, 2021 and August 29, 2020
5
Condensed Consolidated Statements of Cash Flows -
Thirteen Weeks Ended August 28, 2021 and August 29, 2020
6
Notes to Condensed Consolidated Financial Statements
7
Item 2.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
17
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
25
Item 4.
Controls and Procedures
25
Part II.
Other Information
Item 1.
Legal Proceedings
25
Item 1A.
Risk Factors
25
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
25
Item 6.
Exhibits
26
Signatures
26
Index
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
$
16,684
$
57,352
Investment securities available-for-sale
73,666
112,158
Trade and other receivables, net
134,400
126,639
Inventories
226,470
218,375
Prepaid expenses and other current assets
9,249
5,407
Total current
assets
460,469
519,931
Property, plant &
equipment, net
667,963
589,417
Finance lease right-of-use asset, net
486
525
Operating lease right-of-use asset, net
1,533
1,724
Investments in unconsolidated entities
10,722
54,941
Goodwill
44,006
35,525
Intangible assets, net
19,798
20,341
Other long-term assets
6,753
6,770
Total Assets
$
1,211,730
$
1,229,174
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
96,709
$
89,191
Current portion of finance lease obligation
217
215
Current portion of operating lease obligation
617
691
Total current
liabilities
97,543
90,097
Long-term finance lease obligation
383
438
Long-term operating lease obligation
916
1,034
Other noncurrent liabilities
10,325
10,416
Deferred income taxes
106,996
114,408
Total liabilities
216,163
216,393
Commitments and contingencies - see
Note 13
0
0
Stockholders’ equity:
Common stock ($
0.01
par value):
Common stock - authorized
120,000
shares, issued
70,261
shares
703
703
Class A convertible common stock - authorized and issued
4,800
shares
48
48
Paid-in capital
65,044
64,044
Retained earnings
957,951
975,977
Accumulated other comprehensive loss, net of tax
(728)
(558)
Common stock in treasury at cost –
26,203
shares at August 28, 2021 and
26,202
shares
at May 29, 2021
(27,451)
(27,433)
Total stockholders’
equity
995,567
1,012,781
Total Liabilities and Stockholders’
Equity
$
1,211,730
$
1,229,174
See Notes to Condensed Consolidated Financial Statements.
Index
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
$
331,704
$
292,782
Cost of sales
325,059
276,017
Gross profit
6,645
16,765
Selling, general and administrative
46,525
43,965
(Gain) loss on disposal of fixed assets
(213)
23
Operating loss
(39,667)
(27,223)
Other income (expense):
Interest income, net
232
925
Royalty income
273
305
Equity income (loss) of unconsolidated entities
135
(44)
Other, net
5,163
512
Total other
income, net
5,803
1,698
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
48,858
48,501
Diluted
48,858
48,501
See Notes to Condensed Consolidated Financial Statements.
Index
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)
468
Income tax benefit (expense) related to items of other comprehensive income
54
(114)
Other comprehensive income (loss), net of tax
(170)
354
Comprehensive loss
$
(18,196)
$
(19,045)
See Notes to Condensed Consolidated Financial Statements.
Index
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
17,389
14,744
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
39,388
28,231
Distributions from unconsolidated entities
400
650
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
1,171
181
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
57,352
78,130
Cash and cash equivalents at end of period
$
16,684
$
42,809
Supplemental Information:
Cash paid for operating leases
$
217
$
237
Interest paid
$
62
$
65
See Notes to Condensed Consolidated Financial Statements.
Index
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
$
583
thousand and $
795
thousand, respectively.
The Company extends credit to
customers
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
Index
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 $
422
thousand cumulative increase to retained earnings at May 31, 2020.
Note 2 – Acquisitions
Effective
on
May
30,
2021,
the
Company
acquired
the
remaining
50
%
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
1.7
million cage-free
laying
hens,
cage-free
pullet
capacity,
feed
mill,
processing
plant,
related
offices
and
outbuildings
and
related
equipment
located on approximately
400
acres near Bogata, Texas.
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
$
48,500
Fair value of the Company's equity interest in Red River held before the business combination
48,500
$
97,000
Recognized amounts of identifiable assets acquired and
liabilities assumed
Cash
$
3,677
Accounts receivables, net
1,980
Inventory
8,789
Property, plant and equipment
85,002
Liabilities assumed
(2,448)
Deferred income taxes
(8,481)
Total identifiable
net assets
88,519
Goodwill
8,481
$
97,000
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 $
4.5
million
as a
result of
remeasuring
to fair
value its
50
% 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 $
8.3
million which
includes $
7.3
million decrease
in deferred
income tax
expense related
to the
outside-basis of
our equity
Index
9
investment
in
Red
River,
with
a
corresponding
non-recurring,
non-cash
$
954,000
reduction
to
income
taxes
expense
on
the
non-taxable
remeasurement
gain
associated
with
the
acquisition.
As
part
of
the
acquisition
accounting,
the
Company
also
recorded a $
8.5
million deferred tax liability
for the difference
in the inside-basis
of the acquired
assets and liabilities assumed.
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
$
16,828
$
102
$
—
$
16,930
Commercial paper
1,999
—
—
1,999
Corporate bonds
45,545
334
—
45,879
Certificates of deposits
—
—
—
—
Asset backed securities
8,865
—
7
8,858
Total current
investment securities
$
73,237
$
436
$
7
$
73,666
Mutual funds
$
2,306
$
1,810
$
—
$
4,116
Total noncurrent
investment securities
$
2,306
$
1,810
$
—
$
4,116
May 29, 2021
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
16,424
$
56
$
—
$
16,480
Commercial paper
1,998
—
—
1,998
Corporate bonds
80,092
608
—
80,700
Certificates of deposits
1,077
—
1
1,076
Asset backed securities
11,914
—
10
11,904
Total current
investment securities
$
111,505
$
664
$
11
$
112,158
Mutual funds
$
2,306
$
1,810
$
—
$
4,116
Total noncurrent
investment securities
$
2,306
$
1,810
$
—
$
4,116
Available-for-sale
Proceeds from
sales and
maturities of
investment securities
available-for-sale
were $
39.4
million and
$
28.2
million during
the
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 $
127
thousand and $
28
thousand, respectively.
Gross realized losses for the thirteen
weeks ended August
28, 2021 were
$
60
thousand. There were
no
gross realized losses
for the thirteen
weeks ended August
29,
- There were
no
allowances for credit losses at August 28, 2021 and May 29, 2021.
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
$
30,395
1-5 years
43,271
Total
$
73,666
Noncurrent
Proceeds
from
sales
and
maturities
of
noncurrent
investment
securities
were
$
385
thousand
during
the
thirteen
weeks
ended August 28, 2021.
Gross realized gains for
the thirteen weeks ended
August 28, 2021 were
$
130
thousand. There were
no
Index
10
sales of
noncurrent
investment securities
during
the thirteen
weeks ended
August 29,
- There
were
no
realized losses
for
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
- Quoted prices in active markets for identical assets or liabilities
•
Level 2
- Inputs
other than
quoted
prices included
in Level
1 that
are observable
for the
asset or
liability,
either
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
- Unobservable inputs for the asset or liability that are
supported by little or no market activity and that
are
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:
The carrying amount approximates fair value due to the
short maturity of these instruments.
Lease obligations:
The carrying value of the Company’s lease obligations
is at its present value which approximates fair value.
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
$
—
$
16,930
$
—
$
16,930
Commercial paper
—
1,999
—
1,999
Corporate bonds
—
45,879
—
45,879
Certificates of deposits
—
—
—
—
Asset backed securities
—
8,858
—
8,858
Mutual funds
4,116
—
—
4,116
Total assets measured at fair
value
$
4,116
$
73,666
$
—
$
77,782
May 29, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
16,480
$
—
$
16,480
Commercial paper
—
1,998
—
1,998
Corporate bonds
—
80,700
—
80,700
Certificates of deposits
—
1,076
—
1,076
Asset backed securities
—
11,904
—
11,904
Mutual funds
4,116
—
—
4,116
Total assets measured at fair
value
$
4,116
$
112,158
$
—
$
116,274
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.
Index
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
$
139,870
$
123,860
Eggs and egg products
20,869
21,084
Feed and supplies
65,731
73,431
$
226,470
$
218,375
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
10.3
million pullets and breeders and
40.8
million layers.
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 $
22.3
million.
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)
44,057
Class A common stock outstanding (shares)
4,800
Total common stock
outstanding (shares)
48,857
*Dividends per common share
= 1/3 of Net
income (loss) attributable to
Cal-Maine Foods, Inc. available
for dividend ÷ Total
common stock
outstanding (shares).
Index
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
$
703
$
48
$
(27,433)
$
64,044
$
(558)
$
975,977
$
1,012,781
Other comprehensive loss, net of tax
—
—
—
—
(170)
—
(170)
Stock compensation plan
transactions
—
—
(18)
1,000
—
—
982
Net loss
—
—
—
—
—
(18,026)
(18,026)
Balance at August 28, 2021
$
703
$
48
$
(27,451)
$
65,044
$
(728)
$
957,951
$
995,567
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
$
703
$
48
$
(26,674)
$
60,372
$
79
$
975,147
$
1,009,675
Impact of ASC 326, see
Note 1
—
—
—
—
—
422
422
Balance at May 31, 2020
703
48
(26,674)
60,372
79
975,569
1,010,097
Other comprehensive income, net of
tax
—
—
—
—
354
—
354
Stock compensation plan
transactions
—
—
(2)
895
—
—
893
Net loss
—
—
—
—
—
(19,399)
(19,399)
Balance at August 29, 2020
$
703
$
48
$
(26,676)
$
61,267
$
433
$
956,170
$
991,945
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
131
thousand and
139
thousand were
antidilutive due
to the
net loss
for the
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
48,858
48,501
Effect of dilutive restricted shares
—
—
Weighted-average
common shares outstanding, diluted
48,858
48,501
Net loss per common share attributable to Cal-Maine Foods, Inc.
Basic
$
(0.37)
$
(0.40)
Diluted
$
(0.37)
$
(0.40)
Index
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
$
182,549
$
155,384
Specialty shell egg sales
138,657
129,245
Egg products
9,366
6,705
Other
1,132
1,448
$
331,704
$
292,782
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.
Index
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
$
217
Finance Lease cost
Amortization of right-of-use asset
$
44
Interest on lease obligations
$
7
Short term lease cost
$
1,097
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
$
586
$
181
2023
539
239
2024
380
217
2025
130
—
2026
26
—
2027
5
—
Total
1,666
637
Less imputed interest
(133)
(37)
Total
$
1,533
$
600
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)
2.7
2.3
Weighted-average
discount rate
5.9
%
4.9
%
Note 11 - Stock Based Compensation
Total stock-based
compensation expense was $
1.0
million and $
893
thousand for the thirteen weeks ended August 28, 2021 and
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 $
5.6
million will be recorded over a weighted average
period
of
1.9
years.
Refer
to
Part
II
Item
8,
Notes
to
Consolidated
Financial
Statements
and
Supplementary
Data,
Note
16:
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
302,147
$
39.37
Vested
(1,359)
40.34
Forfeited
(730)
37.70
Outstanding, August 28, 2021
300,058
$
39.37
Index
15
Note 13 - Commitments and Contingencies
Financial Instruments
The Company
maintained standby
letters of
credit ("LOC")
totaling $
4.1
million at
August 28,
2021 which
were issued
under
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
$
100,000
in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the State’s
original petition with
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,
- 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 $
10,000
per violation,
or $
250,000
for
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,
Index
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
6,900,000
shares
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
$
1.1
million. Pursuant to the Agreement, the Selling Stockholders reimbursed
the Company $
551
thousand.
Index
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
I Item I
of this Quarterly Report on Form 10-Q (“Quarterly Report”).
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
Index
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
Index
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)
%
Index
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.
Index
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.
Index
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.
Index
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,
- 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.
Index
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
Note 1 - Summary of Significant
Accounting Policies
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly
Report.
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.
Index
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
Note 13
: Commitments and Contingencies
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.
Index
26
ITEM 6. EXHIBITS
Exhibits
No.
Description
3.1
Exhibit 3.1 in the Registrant’s Form 8-K, filed July 20, 2018)
3.2
for the quarter ended March 2, 2013, filed April 5, 2013)
31.1*
Rule 13a-14(a) Certification of the Chief Executive Officer
31.2*
Rule 13a-14(a) Certification of the Chief Financial Officer
32**
Section 1350 Certification of the Chief Executive Officer and the Chief Financial Officer
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)
EXHIBIT 31.1 2Q21
Certification
Pursuant to Rule 13a-14(a) or Rule15d-14(a) of the Securities Exchange Act of 1934,
As Adopted Pursuant to Section 302 ofthe 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
EXHIBIT 31.2 2Q21
Certification
Pursuant to Rule 13a-14(a) or Rule15d-14(a) of the Securities Exchange Act of 1934,
As Adopted Pursuant to Section 302 ofthe 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
EXHIBIT 32 2Q21
Certifications Pursuant to 18 U.S.C.§1350,
As Adopted Pursuant to Section 906 ofthe 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 |
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