Cal-Maine Foods Inc 10-Q for FY2021 Q3
Cal-Maine Foods Inc (CALM)
10-Q
2021-03-29
For: 2021-02-27
View Original
Added on
April 11, 2026
About this 10-Q
Cal-Maine Foods Inc filed this 10-Q on March 29, 2021, covering the quarter ended February 27, 2021 (FY2021 Q3).
Headline figures
Quarter ended February 27, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $359.08M
- up 3.9% from $345.59M a year earlier
- Net income
- $13.55M
- down 1.5% from net income of $13.75M a year earlier
- Diluted EPS
- $0.28
- unchanged from $0.28 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
tha
t 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 March 29, 2021.
2
INDEX
Page
Number
Part I.
Financial Information
Item 1.
20
Item 2.
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)
February 27, 2021
43981
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 12
—
—
Stockholders’ equity:
Common stock ($
Common stock - authorized
120,000
70,261
Class A convertible common stock - authorized and issued
4,800
Paid-in capital
Retained earnings
Accumulated other comprehensive income (loss), net of tax
(135 )
Common stock in treasury at cost –
26,205
26,287
shares at May 30, 2020
(27,549 )
(26,674 )
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
Thirty-nine Weeks Ended
February 27, 2021
February 29, 2020
February 27, 2021
February 29, 2020
Net sales
$
$
$
$
Cost of sales
Gross profit
Selling, general and administrative
Loss on disposal of fixed assets
Operating income (loss)
(493 )
(13,238 )
(74,823 )
Other income (expense):
Interest income, net
Royalty income
Patronage dividends
Equity income of unconsolidated entities
Other, net
Total other income, net
Income (loss) before income taxes
(57,492 )
Income tax (benefit) expense
(1,716 )
(4,080 )
(15,356 )
Net income (loss)
(42,136 )
Less: Income (loss) attributable to noncontrolling
interest
(64 )
Net income (loss) attributable to Cal-Maine
Foods, Inc.
$
$
$
$
(42,072 )
Net income (loss) per common share attributable
to Cal-Maine Foods, Inc.:
Basic
$
$
$
$
(0.87 )
Diluted
$
$
$
$
(0.87 )
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 Income (Loss)
(in thousands)
(unaudited)
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 27, 2021
February 29, 2020
February 27, 2021
February 29, 2020
Net profit (loss)
$
(42,136 )
Other comprehensive income (loss), before tax:
Unrealized holding loss on available-for-sale
securities, net of reclassification adjustments
(378 )
(38 )
(283 )
(863 )
Income tax benefit related to items of other
comprehensive income
Other comprehensive loss, net of tax
(286 )
(29 )
(214 )
(653 )
Comprehensive income (loss)
(42,789 )
Less: Comprehensive income (loss) attributable
to the noncontrolling interest
(64 )
Comprehensive income (loss) attributable to Cal-
Maine Foods, Inc.
$
$
$
$
(42,725 )
See Notes to Condensed Consolidated Financial Statements.
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Thirty-nine Weeks Ended
February 27, 2021
February 29, 2020
Operating activities:
Net income (loss)
$
$
(42,136 )
Depreciation and amortization
Deferred income taxes
(13,406 )
Impairment loss on property, plant & equipment
Other adjustments, net
(45,936 )
(26,742 )
Net cash provided by (used in) operations
(36,454 )
Investing activities:
Purchases of investment securities
(59,415 )
(12,100 )
Sales and maturities of investment securities
Distributions from unconsolidated entities
Acquisition of business
(44,515 )
Purchases of property, plant and equipment
(73,796 )
(94,600 )
Net proceeds from disposal of property, plant and equipment
Net cash provided by (used in) investing activities
(38,923 )
Financing activities:
Purchase of common stock by treasury
(871 )
(910 )
Distributions to noncontrolling interests
(755 )
Principal payments on long-term debt
(1,500 )
Principal payments on finance lease
(153 )
(146 )
Contributions
Net cash used in financing activities
(1,019 )
(3,311 )
Net change in cash and cash equivalents
(25,213 )
(1,494 )
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
February 27, 2021
(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 30, 2020 (the "2020 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 and year-to-date periods
ended on February 27, 2021 and February 29, 2020 included 13 weeks and 39 weeks, respectively.
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 credit
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 Consolidated Balance
Sheets.
Trade Receivables
Trade receivables are stated at their carrying values, which include a reserve for credit losses. At February 27, 2021 and May
30, 2020, reserves for credit losses were $
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.
8
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 - Investment
Securities
The following represents the Company’s investment securities as of February 27, 2021 and May 30, 2020 (in thousands):
February 27, 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
$
$
$
$
43981
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 $
thirty-nine weeks ended February 27, 2021 and February 29, 2020, respectively. Gross realized gains for the thirty-nine weeks
ended February 27, 2021 and February 29, 2020 were $
thousand and $
respectively. There were
9
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 February 27, 2021 are as follows (in thousands):
Estimated Fair Value
Within one year
$
1-5 years
Total
$
Noncurrent
There were
sales and maturities of noncurrent investment securities were $
2020. Gross realized gains for the thirty-nine weeks ended February 29, 2020 were $
losses for the thirty-nine weeks ended February 27, 2021 and February 29, 2020.
Note 3 - 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 February 27, 2021 and May 30, 2020 (in thousands):
February 27, 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
$
$
$
$
10
43981
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. Observable inputs for these securities are yields, credit risks, default rates, and volatility.
Note 4 - Inventories
Inventories consisted of the following as of February 27, 2021 and May 30, 2020 (in thousands):
February 27, 2021
43981
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 February
27, 2021 consisted of approximately
Note 5 - 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. For the third quarter of fiscal 2021, we will pay a cash dividend of
approximately $
recorded in Accounts payable and accrued expenses in the Company’s Condensed Consolidated Balance Sheets.
11
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
Thirty-nine Weeks Ended
February 27, 2021
February 29, 2020
February 27, 2021
February 29, 2020
Net income (loss) attributable to Cal-Maine
Foods, Inc.
$
$
$
$
(42,072 )
Cumulative losses to be recovered prior to
payment of divided at beginning of period
(8,614 )
(75,582 )
(1,370 )
(19,761 )
Net income attributable to Cal-Maine Foods,
Inc. 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*
$
*
Dividends per common share = 1/3 of Net income (loss) attributable to Cal-Maine Foods, Inc. available for dividend ÷ Total common stock
outstanding (shares).
Note 6 - Equity
The following reflects the equity activity, for the thirteen and thirty-nine weeks ended February 27, 2021 and February 29, 2020
(in thousands):
Thirteen Weeks Ended February 27, 2021
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 November 28, 2020
$
$
$
(26,723 )
$
$
$
$
Other comprehensive loss, net of
tax
—
—
—
—
(286 )
—
(286 )
Purchase of company stock
—
—
(826 )
—
—
—
(826 )
Restricted stock compensation
—
—
—
—
—
Dividends
—
—
—
—
—
(1,661 )
(1,661 )
Net income
—
—
—
—
—
Balance at February 27, 2021
$
$
$
(27,549 )
$
$
(135 )
$
$
12
Thirteen Weeks Ended February 29, 2020
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Interest
Total
Balance at November 30,
2019
$
$
$
(25,888 )
$
$
(269 )
$
$
$
Other comprehensive
loss, net of tax
—
—
—
—
(29 )
—
—
(29 )
Restricted stock
forfeitures
—
—
(103 )
—
—
—
—
Purchase of company
stock
—
—
(889 )
—
—
—
—
(889 )
Restricted stock
compensation
—
—
—
—
—
—
Net income
—
—
—
—
—
Balance at February 29,
2020
$
$
$
(26,674 )
$
$
(298 )
$
$
$
Thirty-nine Weeks Ended February 27, 2021
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 loss, net of
tax
—
—
—
—
(214 )
—
(214 )
Restricted stock forfeitures
—
—
(4 )
—
—
—
Purchase of company stock
—
—
(871 )
—
—
—
(871 )
Restricted stock compensation
—
—
—
—
—
Contributions
—
—
—
—
—
Dividends
—
—
—
—
—
(1,661 )
(1,661 )
Net income
—
—
—
—
—
Balance at February 27, 2021
$
$
$
(27,549 )
$
$
(135 )
$
$
13
Thirty-nine Weeks Ended February 29, 2020
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Interest
Total
Balance at June 01, 2019
$
$
$
(25,866 )
$
$
$
$
$
Other comprehensive
loss, net of tax
—
—
—
—
(653 )
—
—
(653 )
Restricted stock
forfeitures
—
—
(102 )
—
—
—
—
Purchase of company
stock
—
—
(910 )
—
—
—
—
(910 )
Distributions to
noncontrolling interest
partners
—
—
—
—
—
—
(755 )
(755 )
Reclass of equity portion
of Texas Egg Products,
LLC in connection with
acquisition
—
—
—
—
—
(1,779 )
—
Restricted stock
compensation
—
—
—
—
—
—
Net loss
—
—
—
—
—
(42,072 )
(64 )
(42,136 )
Balance at February 29,
2020
$
$
$
(26,674 )
$
$
(298 )
$
$
$
Note 7 - Net Income (Loss) per Common Share
Basic net income (loss) per share attributable to Cal-Maine Foods, Inc. is based on the weighted average Common Stock and
Class A Common Stock outstanding. Diluted net income per share attributable to Cal-Maine Foods, Inc. is based on weighted-
average common shares outstanding during the relevant period adjusted for the dilutive effect of share-based awards.
Restricted shares of
These shares were not included in the diluted net loss per share calculation.
14
The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net
income per common share attributable to Cal-Maine Foods, Inc. (amounts in thousands, except per share data):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 27, 2021
February 29, 2020
February 27, 2021
February 29, 2020
Numerator
Net income (loss)
$
$
$
$
(42,136 )
Less: Income (loss) attributable to
noncontrolling interest
(64 )
Net income (loss) attributable to Cal-
Maine Foods, Inc.
$
$
$
$
(42,072 )
Denominator
Weighted-average common shares
outstanding, basic
Effect of dilutive restricted shares
Weighted-average common shares
outstanding, diluted
Net income (loss) per common share
attributable to Cal-Maine Foods, Inc.
Basic
$
$
$
$
(0.87 )
Diluted
$
$
$
$
(0.87 )
Note 8 - Revenue Recognition
Satisfaction of Performance Obligation
The vast majority 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.
15
Disaggregation of Revenue
The following table provides revenue disaggregated by product category (in thousands):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 27, 2021
February 29, 2020
February 27, 2021
February 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. The amortization period of these costs is less than
one year; therefore, they are expensed as incurred.
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 and they are generally immaterial to the
financial statements.
Note 9 - 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 February 27, 2021
39 Weeks Ended February 27, 2021
Operating Lease cost
$
$
Finance Lease cost
Amortization of right-of-use asset
$
$
Interest on lease obligations
$
$
Short term lease cost
$
$
16
Future minimum lease payments under non-cancelable leases are as follows (in thousands):
As of February 27, 2021
Operating Leases
Finance Leases
Remainder fiscal 2021
$
$
2022
2023
2024
2025
2026
Thereafter
Total
Less imputed interest
(185 )
(60 )
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 February 27, 2021
Operating Leases
Finance Leases
Weighted-average remaining lease term (years)
Weighted-average discount rate
%
%
Note 10 - Stock Based Compensation
On October 2, 2020, shareholders approved the Amended and Restated Cal-Maine Foods, Inc. 2012 Omnibus Long-Term
Incentive Plan (the “Plan”). The purpose of the Plan is to assist us and our subsidiaries in attracting and retaining selected
individuals who are expected to contribute to our long-term success. The maximum number of shares of common stock
available for awards under the Plan is
, of which
authorized but unissued shares or treasury shares. Awards may be granted under the Plan to any employee, any non-employee
member of the Company’s Board of Directors, and any consultant who is a natural person and provides services to us or one of
our subsidiaries (except for incentive stock options, which may be granted only to our employees).
The only outstanding awards under the Plan are restricted stock awards. The restricted stock vests one to three years from the
grant date, or upon death or disability, change in control, or retirement (subject to certain requirements). The restricted stock
contains no other service or performance conditions. Restricted stock is awarded in the name of the recipient and, except for the
right of disposal, constitutes issued and outstanding shares of the Company’s common stock for all corporate purposes during
the period of restriction including the right to receive dividends. Compensation expense is a fixed amount based on the grant
date closing price and is amortized over the vesting period.
Total stock-based compensation expense was $
and February 29, 2020, respectively.
Unrecognized compensation expense as a result of non-vested shares of restricted stock outstanding under the 2012 Omnibus
Long-Term Incentive Plan at February 27, 2021 of $
Refer to Note 16 of our audited financial statements in our
2020
Annual Report for further information on our stock
compensation plans.
17
The Company’s restricted share activity for the thirty-nine weeks ended February 27, 2021 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 30, 2020
$
Granted
Vested
(79,328 )
Forfeited
(4,431 )
Outstanding, February 27, 2021
$
Note 11 – Income Taxes
The differences between income tax expense (benefit) at the Company’s effective income tax rate and income tax expense at
the statutory federal income tax rate for the thirteen and thirty-nine weeks ended as of February 27, 2021 were as follows:
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 27, 2021
February 27, 2021
Statutory federal income tax
$
$
Enacted net operating loss carryback provision
(6,422 )
(6,422 )
Domestic manufacturers deduction
Other, net
$
(1,716 )
$
(4,080 )
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted. The CARES
Act contains several income tax provisions, as well as other measures, that are intended to assist businesses impacted by the
economic effects of the COVID-19 pandemic. The most significant provision of the CARES Act that materially affects our
accounting for income taxes includes a five-year carryback allowance for taxable net operating losses generated in tax years
2018 through 2020, our fiscal years 2019 through 2021.
Our financial statements for the thirteen weeks ended February 27, 2021 were affected by the changes enacted by the CARES
Act. As a result of the applicable accounting guidance and the provisions enacted by the CARES Act, our income tax provision
for the third quarter of fiscal 2021 reflects the carryback of taxable net operating losses generated during periods in which the
statutory federal income tax rate was
% to periods in which the statutory federal income tax rate was
%. Due to the
difference in statutory rates, we recorded a $
the thirteen weeks ended February 27, 2021. Because the net operating losses were carried back to years in which we initially
reduced our taxable income using the Domestic Production Activities Deduction, we recorded a partially offsetting $
discrete income tax expense during the thirteen weeks ended February 27, 2021 to account for the reduced taxable income.
Note 12 - 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
18
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. 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 their
motion to dismiss the plaintiffs’ first amended class action complaint. The court has not ruled on this motion to dismiss.
Management believes the risk of material loss related to this matter to be remote.
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, but no schedule has yet been entered by
the court. It appears that the case will not be tried until later in 2021 or 2022.
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.
19
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 13 - 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 2020 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
$
. Pursuant to the Agreement, the Selling Stockholders reimbursed the Company $
.
20
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 30, 2020 (the
“2020 Annual Report”), and the accompanying financial statements and notes included in Part II, Item 8 of the 2020 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 2020
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. Our total flock of approximately 41.3 layers and 9.6 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 United States.
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 speaking, 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 the majority of our
conventional shell eggs based on formulas that take into account, 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 2020 ranged from a low of $0.62 in July 2019 to a high of $3.18
in March 2020.
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.
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 23% of the U.S.
21
total population according to the U.S. Census Bureau, 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
2020 Annual Report, Part I, Item 1, “Business – Growth Strategy” and “– Government Regulation,” and the fifth risk factor in
Part I, Item 1A, “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 the families in the communities where we live and work, and we are
committed to helping where we can. One way we have done this is by providing food assistance to those in need. Cal-Maine
Foods has donated approximately 1.5 million dozen eggs in the first three quarters of fiscal 2021. 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 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. All non-essential corporate travel has been suspended. 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. In the thirty-nine weeks ended February 27, 2021, we spent $1.8 million (excluding
medical insurance claims) related to the pandemic, of which $397 thousand was spent in the third quarter of fiscal 2021. The
majority of such expenses for both periods were related to additional labor, primarily reflected in cost of sales. Medical
insurance claims related to COVID-19 paid during the thirty-nine weeks ended February 27, 2021 were an additional $1.1
million of which $322 thousand were incurred in the third fiscal quarter of 2021.
EXECUTIVE OVERVIEW
For the third quarter of fiscal 2021, we recorded a gross profit of $47.5 million compared to $49.8 million for the same period
of fiscal 2020. Demand for shell eggs remained favorable, primarily at the retail level as consumers continue to prepare more
meals at home during the COVID-19 pandemic. According to data provided by Informational Resources, Inc. (“IRI”) dozens
sold in the Total US - Multi Outlet channel for conventional eggs for the calendar year-to-date through March 7, 2021 increased
2.7% and specialty dozens increased 14.0% compared to the same period in the calendar year. Our total dozens sold increased
3.1% to 279.7 million dozen shell eggs for the third quarter of fiscal 2021 compared to 271.3 million dozen for the same period
of fiscal 2020. This is due to an increase in specialty egg dozens sold of 16.2%.
The daily average price for the UB southeastern large index for third quarter of fiscal 2021 increased 4.3% from the same
period in the prior year. Our net average selling price per dozen for the third quarter of fiscal 2021 was $1.246 compared to
$1.236 in the prior year period. Although the hen numbers reported by the United States Department of Agriculture (“USDA”)
as of March 1, 2020 were 327.4 million, which represents 3.1 million fewer hens than reported a year ago. The USDA reported
that the hatch from October 2020 through February 2021 increased 2.6% as compared to the prior comparable period, which
may indicate an increased supply of hens in the future. As we emerge from the COVID-19 pandemic with an anticipated return
in food service demand, these growing supply indicators could affect the overall balance of supply and demand for shell eggs
and have an impact on market prices.
Our farm production costs per dozen produced for the third quarter of fiscal 2021 increased 7.0% or $0.051 compared to third
quarter of fiscal 2020. This increase was primarily due to higher feed costs in the third quarter of fiscal 2021 compared to the
22
same period in the prior fiscal year due to increased prices for corn and soybeans caused by increased export demand, global
weather conditions and geopolitical issues. Other farm production costs for the third quarter of fiscal 2021 decreased 3.1%
compared to the same period in the prior fiscal year due to reductions in 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
39 Weeks Ended
February 27, 2021
February 29, 2020
February 27, 2021
February 29, 2020
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
86.8
%
85.6
%
87.7
%
93.5
%
Gross profit
13.2
%
14.4
%
12.3
%
6.5
%
Selling, general and administrative
13.3
%
12.8
%
13.6
%
14.7
%
Loss on disposal of fixed assets
0.1
%
0.1
%
—
%
0.1
%
Operating income (loss)
(0.2)
%
1.5
%
(1.3)
%
(8.3)
%
Total other income, net
3.4
%
3.7
%
1.5
%
1.9
%
Income (loss) before income taxes
3.2
%
5.2
%
0.2
%
(6.4)
%
Income tax (benefit) expense
(0.5)
%
1.2
%
(0.4)
%
(1.7)
%
Net income (loss)
3.7
%
4.0
%
0.6
%
(4.7)
%
Less: Income (loss) attributable to
noncontrolling interest
—
%
%
—
%
%
Net income (loss) attributable to Cal-Maine
Foods, Inc.
3.7
%
4.0
%
0.6
%
(4.7)
%
(*)
Represents less than
0.1% of Net sales
NET SALES
Net sales for the third quarter of fiscal 2021 were $359.1 million, an increase of $13.5 million, or 3.9%, compared to net sales
of $345.6 million for the same period of fiscal 2020. The increase was primarily due to a 3.1% increase in the total volume of
dozen eggs sold which accounted for a $10.5 million increase in net sales. Dozens sold for the third quarter ended February 27,
2021 were 279.7 million compared to 271.3 million for the same period of fiscal 2020.
Net shell egg sales of $350.0 million and $336.4 million made up approximately 97.5% and 97.3% of net sales for the third
quarters ended February 27, 2021 and February 29, 2020, respectively. The net average selling price per dozen of shell eggs for
the third quarters ended February 27, 2021 and February 29, 2020 was $1.246 and $1.236, respectively. The increase in selling
price per dozen accounted for a $2.8 million increase in net sales.
Egg products accounted for 2.5% and 2.7% of net sales for the third quarter ended February 27, 2021 and February 29, 2020,
respectively. These revenues were $9.1 million and $9.2 million for the third quarters of fiscal 2021 and 2020, respectively.
The decrease is primarily due to decreased volume partially offset by higher selling prices.
Net sales for the thirty-nine weeks ended February 27, 2021 were $999.2 million, an increase of $100.9 million, or 11.2%,
compared to net sales of $898.3 million for the same period of fiscal 2020 . The increase was primarily due to a 7.0% increase
in egg selling prices which accounted for a $63.8 million increase in net sales. The net average selling price per dozen of shell
eggs for the thirty-nine weeks ended February 27, 2021 and February 29, 2020 was $1.185 and $1.107, respectively.
Net shell egg sales of $973.5 million and $874.1 million made up approximately 97.4% and 97.3% of net sales for the thirty-
nine weeks ended February 27, 2021 and February 29, 2020, respectively. Dozens sold for the thirty-nine weeks ended
February 27, 2021 were 817.4 million, a 3.9% increase from 786.7 million for the same period of fiscal 2020. The total volume
increase accounted for a $36.3 million increase in net sales.
Egg products accounted for 2.6% and 2.7% of net sales for the thirty -nine weeks ended February 27, 2021 and February 29,
2020, respectively. These revenues were $25.7 million for the thirty-nine weeks ended February 27, 2021, compared to
$24.2 million for the same period in fiscal 2020, primarily due to higher selling prices slightly offset by decreased volume.
23
The table below presents an analysis of our conventional and specialty shell egg sales (in thousands, except percentage data):
13 Weeks Ended
39 Weeks Ended
February 27, 2021
February 29, 2020
February 27, 2021
February 29, 2020
Total net sales
$
359,080
$
345,588
$
999,189
$
898,276
Conventional
$
203,189
58.0
%
$
210,329
62.5
%
$
560,297
57.5
%
$
518,898
59.4
%
Specialty
145,210
41.5
%
125,019
37.2
%
408,537
42.0
%
352,118
40.3
%
Egg sales, net
348,399
99.5
%
335,348
99.7
%
968,834
99.5
%
871,016
99.7
%
Other
1,583
0.5
%
1,028
0.3
%
4,619
0.5
%
3,050
0.3
%
Net shell egg sales
$
349,982
100.0
%
$
336,376
100.0
%
$
973,453
100.0
%
$
874,066
100.0
%
Net shell egg sales as a
percent of total net sales
97.5
%
97.3
%
97.4
%
97.3
%
Dozens sold:
Conventional
203,070
72.6
%
205,307
75.7
%
599,625
73.4
%
599,788
76.2
%
Specialty
76,645
27.4
%
65,970
24.3
%
217,735
26.6
%
186,939
23.8
%
Total dozens sold
279,715
100.0
%
271,277
100.0
%
817,360
100.0
%
786,727
100.0
%
Net average selling price per
dozen:
Conventional
$
1.001
$
1.024
$
0.934
$
0.865
Specialty
$
1.895
$
1.895
$
1.876
$
1.884
All shell eggs
$
1.246
$
1.236
$
1.185
$
1.107
Conventional shell eggs include all shell egg sales not specifically identified as specialty shell egg sales. Comparing the third
quarters ended February 27, 2021 and February 29, 2020, conventional egg dozens sold decreased 1.1% and the average selling
price per dozen decreased 2.2% to $1.001 from $1.024. Comparing the thirty-nine weeks ended February 27, 2021 and
February 29, 2020, conventional shell egg dozens sold remained relatively flat while the average selling price per dozen
increased 8.0% to $0.934 from $0.865.
Specialty eggs, which include nutritionally enhanced, cage-free, organic and brown eggs, continued to make up a significant
portion of our total shell egg revenue and dozens sold. Specialty egg retail prices are less cyclical than conventional shell egg
prices and are generally higher due to consumer willingness to pay more for specialty eggs. For the third quarter of fiscal 2021
and 2020, specialty shell egg dozens sold increased 16.2%, and the average selling price per dozen remained the same at
$1.895. For the thirty-nine weeks ended February 27, 2021, specialty shell egg dozens sold increased 16.5% and the average
selling price decreased 0.4% to $1.876 from $1.884 for the same period of fiscal 2020. In the third quarter of fiscal 2021,
demand for specialty eggs increased as consumers opted for the specialty eggs which is noted in the Executive Overview above
along with increased promotional spending. For the thirty-nine weeks ended February 27, 2021, demand for specialty eggs was
positively impacted by the higher conventional egg prices as compared to the same period in the prior year.
The shell egg sales classified as “Other” represent sales of hard cooked eggs, hatching eggs, and other miscellaneous products
included with our shell egg operations.
Egg products are shell eggs that are broken and sold in liquid, frozen, or dried form. Our egg products are sold through our
wholly-owned subsidiaries American Egg Products, LLC and Texas Egg Products, LLC. Comparing the third quarters of fiscal
2021 and 2020, pounds sold decreased 11.3%; however, the average selling price per pound increased 11.2 % to $0.584 from
$0.525. Comparing the thirty-nine weeks ended February 27, 2021 and February 29, 2020, pounds sold decreased 8.9% while
the average selling price per pound increased 16.7% to $0.553 from $0.474.
COST OF SALES
Cost of sales consists of costs directly related to production, processing and packing of 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
24
are 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 cost of sales (in thousands, except cost per dozen data):
13 Weeks Ended
39 Weeks Ended
February 27, 2021
February 29, 2020
% Change
February 27, 2021
February 29, 2020
% Change
Cost of Sales:
Farm production
$
190,883
$
172,525
10.6
%
$
531,877
$
499,840
6.4
%
Processing,
packaging, and
warehouse
63,640
60,186
5.7
187,014
170,998
9.4
Egg purchases and
other (including
change in inventory)
50,443
56,179
(10.2)
137,001
146,754
(6.6)
Total shell eggs
304,966
288,890
5.6
855,892
817,592
4.7
Egg products
6,597
6,870
(4.0)
20,565
19,687
4.5
Other
—
—
—
—
2,919
(100.0)
Total
$
311,563
$
295,760
5.3
%
$
876,457
$
840,198
4.3
%
Farm production costs
(per dozen produced)
Feed
$
0.467
$
0.406
15.0
%
$
0.422
$
0.411
2.7
%
Other
$
0.313
$
0.323
(3.1)
%
$
0.318
$
0.328
(3.0)
%
Total
$
0.780
$
0.729
7.0
%
$
0.740
$
0.739
0.1
%
Outside egg purchases
(average cost per
dozen)
$
1.26
$
1.17
7.7
%
$
1.23
$
1.12
9.8
%
Dozens produced
248,130
239,072
3.8
%
731,205
684,837
6.8
%
Dozens sold
279,715
271,277
3.1
%
817,360
786,727
3.9
%
Cost of sales for the third quarter of fiscal 2021 was $311.6 million, an increase of $15.8 million, or 5.3%, from $295.8 million
for the same period of fiscal 2020. The increase was primarily driven by the increase in farm production costs and processing
costs. Farm production costs were primarily impacted by higher feed costs of $0.467 per dozen produced compared to $0.406
per dozen produced for the same period in the prior year. Other farm production costs per dozen produced decreased 3.1% to
$0.313 for the quarter ended February 27, 2021, compared to $0.323 for the same period of last year, primarily from lower
facility costs and amortization expense. The lower feed costs in prior periods which are capitalized in our flocks during pullet
production helped reduce amortization expense in the third quarter of fiscal 2021 as compared to the same period in fiscal 2020.
Facility costs decreased in the third quarter of fiscal 2021 compared to the same period in fiscal 2020 due to improved
efficiencies in our utilization of our facilities and increased volume of production. Processing costs increased due to a 3.2%
increase in the volume of eggs processed compared to the same period of the prior year. The cost of packaging materials
increased 2.0% compared to the prior year period as the retail channel demand increased due to the pandemic. The pandemic
led to an increase in labor costs. Dozens produced increased 3.8% compared to the same period of fiscal 2020. Egg purchase
expenses decreased 10.2%, primarily due to the decrease in the volume of outside egg purchases, partially offset by an increase
in the cost of these purchases.
Cost of sales for the thirty-nine weeks ended February 27, 2021 was $876.5 million, an increase of $36.3 million, or 4.3%, from
$840.2 million for the same period of fiscal 2020. The increase was primarily driven by the increase in farm production costs
and processing costs. Processing costs increased due to a 5.5% increase in the volume of eggs processed compared to the same
period of the prior year. The cost of packaging materials increased 2.8% compared to the prior year period as the retail channel
demand increased due to the pandemic. The pandemic led to an increase in labor costs. Farm production costs for the thirty-
nine weeks ended February 27, 2021 increased $32.0 million, which was primarily due to an increase in production volume of
6.8% compared to the same period of fiscal 2020. Feed cost per dozen for the thirty-nine weeks ended February 27, 2021 was
$0.422, compared to $0.411 per dozen for the comparable period of fiscal 2020, an increase of 2.7%. Other farm production
costs per dozen produced decreased 3.0% to $0.318 for the thirty-nine weeks ended February 27, 2021 , compared to $0.328 for
25
the same period of last year, primarily from lower amortization and facility expense. In the prior fiscal year we incurred higher
amortization expense due to selling flocks early in fiscal 2020 in response to market conditions. Facility costs decreased due to
improved efficiencies in our utilization of our facilities and increased volume of our production. Egg purchase expenses
decreased 6.6%, primarily due to the decrease in the volume of outside egg purchases, partially offset by an increase in the cost
of these purchases.
Included in cost of sales for the thirty-nine weeks ended February 29, 2020 is a $2.9 million impairment charge related to
decommissioning older, less efficient production facilities as we invest in new facilities to meet the increasing demand for
specialty eggs and reduce production costs.
Feed costs started trending higher midway through the second quarter of fiscal 2021. For the third quarter, the average Chicago
Board of Trade (“CBOT”) daily market price was $4.97 per bushel for corn and $422.61 per ton for soybean meal, representing
an increase of 29.9% and 42.4%, respectively, compared to the daily average CBOT prices for the same period last year. As
feed ingredient prices rose through the second and third quarters of fiscal 2021, we benefited from our normal operating
practices of filling our storage bins at harvest and locking in the basis portion of our grain purchases several months in advance
to help ensure availability of feed ingredients. Most of this benefit has been realized in our second and third fiscal quarters,
however, during our fourth fiscal quarter we will be exposed more directly to price movements in the feed ingredient market.
We expect to see continued price volatility for the remainder of fiscal 2021 as increased export demand for both soybeans and
corn is placing pressure on domestic supplies and carryout inventories are projected to be lower. Additionally, the ongoing
uncertainties and supply chain disruptions related to the COVID-19 outbreak, weather fluctuations and geopolitical issues will
continue to affect market prices for our primary feed ingredients.
GROSS PROFIT
Gross profit for the third quarter of fiscal 2021 was $47.5 million compared to $49.8 million for the same period of fiscal 2020.
The decrease of $2.3 million was primarily due to increased farm production cost and processing costs, partially offset by an
increase in dozens sold for specialty eggs.
For the thirty-nine weeks ended February 27, 2021 gross profit was $122.7 million compared to $58.1 million for the same
period of fiscal 2020. The increase of $64.7 million was primarily due to the increase in conventional shell egg selling prices
and an increase in dozens sold for specialty eggs.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative (“SGA”) expenses include costs of marketing, distribution, accounting, and corporate
overhead. The following table presents an analysis of our SGA expenses (in thousands):
13 Weeks Ended
February 27, 2021
February 29, 2020
$ Change
% Change
Specialty egg expense
$
16,162
$
12,581
$
3,581
28.5
%
Delivery expense
13,359
13,309
50
0.4
%
Payroll, taxes and benefits
10,195
10,639
(444)
(4.2)
%
Stock compensation expense
964
886
78
8.8
%
Other expenses
6,976
6,816
160
2.3
%
Total
$
47,656
$
44,231
$
3,425
7.7
%
For the third quarter of fiscal 2021, SGA expenses increased 7.7% to $47.7 million from $44.2 million for the same period in
fiscal 2020. Specialty egg expense increased $3.6 million, or 28.5%, compared to the same period of the prior year. Specialty
egg expense, which includes franchise fees and advertising expense, typically fluctuates with specialty egg dozens sold, which
increased 16.2% for the third quarter ended February 27, 2021.
26
39 Weeks Ended
February 27, 2021
February 29, 2020
$ Change
% Change
Specialty egg expense
$
42,898
$
35,995
$
6,903
19.2
%
Delivery expense
38,905
39,341
(436)
(1.1)
%
Payroll, taxes and benefits
31,526
31,391
135
0.4
%
Stock compensation expense
2,789
2,680
109
4.1
%
Other expenses
19,376
23,027
(3,651)
(15.9)
%
Total
$
135,494
$
132,434
$
3,060
2.3
%
For the thirty-nine weeks ended February 27, 2021, SGA expense increased 2.3% to $135.5 million from $132.4 million for the
same period in fiscal 2020. Specialty egg expense increased $6.9 million, or 19.2%, compared to the same period of the prior
year. Specialty egg expense typically fluctuates with specialty egg dozens sold, which increased 16.5% for the thirty-nine
weeks ended February 27, 2021. Other expenses decreased $3.7 million or 15.9% compared to the same period in fiscal 2020.
This decrease is primarily due to the legal settlement paid in the second quarter of fiscal 2020 and the first quarter of fiscal 2021
return of brokerage commissions on property and casualty insurance placements refunded after final reconciliation of all
brokerage service agreements.
Included in Other expenses is approximately $551 thousand relating to the secondary public offering completed in August 2020
by the wife of our late founder and a trust of which his daughters are beneficiaries. For more information, see
Party Transaction of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report.
OPERATING INCOME (LOSS)
For the third quarter of fiscal 2021, we recorded an operating loss of $493 thousand compared to an operating income of $5.2
million for the same period of fiscal 2020.
For the thirty-nine weeks ended February 27, 2021, we recorded an operating loss of $13.2 million compared to an operating
loss of $74.8 million for the same period of fiscal 2020.
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 third quarter of fiscal 2021, we earned $661 thousand of interest income compared to $880 thousand for the same
period of fiscal 2020. For the thirty-nine weeks ended February 27, 2021, we earned $2.4 million of interest income compared
to $3.9 million for the same period of fiscal 2020. The decrease for both periods resulted from significantly lower interest rates.
The Company recorded interest expense of $70 thousand and $77 thousand for the third quarters ended February 27, 2021 and
February 29, 2020 , respectively. For the thirty-nine weeks ended February 27, 2021 and February 29, 2020 interest expense
was $205 thousand and $258 thousand, respectively.
Patronage dividends, which represent distributions from our membership in Eggland’s Best, Inc. were $9.0 million and $10.1
million for the thirteen and thirty-nine weeks ended February 27, 2021 and February 29, 2020, respectively. Patronage
dividends are paid once a year based on the profits of Eggland’s Best as well as its available cash.
For the third quarter of fiscal 2021, equity income of unconsolidated entities was $1.9 million compared to $1.4 million in the
prior year period. For the thirty-nine weeks ended February 27, 2021, equity income of unconsolidated entities was $1.9
million compared to $537 thousand for the prior year period. The increase for both periods is primarily due to the increase in
egg selling prices positively impacting the profitability of our joint ventures.
Other, net for the third quarter ended February 27, 2021, was income of $537 thousand compared to income of $79 thousand
for the same period of fiscal 2020.
Other, net for the thirty-nine weeks ended February 27, 2021, was income of $1.5 million compared to income of $1.9 million
for the same period of fiscal 2020. The decrease is primarily driven by lower realized and unrealized gains in investment
securities available-for-sale.
27
INCOME TAXES
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted. The most
significant provision of the CARES Act that materially affected the Company’s income taxes included the five-year carryback
allowance for taxable net operating losses generated in the tax years 2018 through 2020, our fiscal years 2019 through 2021.
The Company is electing to utilize that provision, which will provide additional liquidity in the form of an income tax refund
currently estimated to be approximately $14.6 million. We anticipate we will receive the refund during fiscal year 2022.
Additionally, we recorded an income tax benefit of approximately $5.0 million related to the carryback provision.
For the third quarter of fiscal 2021, pre-tax income was $11.8 million compared to pre-tax income of $18.0 million for the same
period of fiscal 2020. We recorded an income tax benefit of $1.7 million for the third quarter of fiscal 2021, which includes the
discrete tax benefit of $5.0 million described above. Excluding the tax benefit, income tax expense was $2.9 million for the
third quarter of fiscal 2021 with an adjusted effective tax rate of 24.6%. Income tax expense was $4.3 million for the
comparable period of fiscal 2020, which reflects an effective tax rate of 23.7%.
For the thirty-nine weeks ended February 27, 2021, pre-tax income was $2.2 million compared to pre-tax loss of $57.5 million
for the same period of fiscal 2020. We recorded an income tax benefit of $4.1 million, which includes the discrete tax benefit of
$5.0 million described above. Excluding the tax benefit, income tax expense of $543 thousand was recorded with an adjusted
effective tax rate of 24.3%. Income tax benefit of $15.4 million was recorded for the comparable period of fiscal 2020, which
reflects an effective tax rate of 26.7%.
At February 27, 2021, trade and other receivables included income taxes receivables of $23.6 million compared to $9.9 million
at May 30, 2020.
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 $5.0 million discrete tax benefit related to
the CARES Act, as discussed above and in
Note 11
Statements in this Quarterly Report.
NET INCOME (LOSS) ATTRIBUTABLE TO CAL-MAINE FOODS, INC.
Net income for the third quarter ended February 27, 2021 was $13.5 million, or $0.28 per basic and diluted share, compared to
net income of $13.7 million or $0.28 per basic and diluted share for the same period of fiscal 2020.
Net income for the thirty-nine weeks ended February 27, 2021 was $6.3 million, or $0.13 per basic and diluted share, compared
to a net loss of $42.1 million or $0.87 per basic and diluted share for the same period of fiscal 2020.
28
CAPITAL RESOURCES AND LIQUIDITY
Our working capital at February 27, 2021 was $422.0 million, compared to $429.1 million at May 30, 2020. The calculation of
working capital is defined as current assets less current liabilities. Our current ratio was 5.19 at February 27, 2021, compared
with 5.60 at May 30, 2020.
We had no long-term debt outstanding at February 27, 2021 or May 30, 2020. On July 10, 2018, we entered into a $100.0
million Senior Secured Revolving Credit Facility (the “Revolving Credit Facility”). As of February 27, 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 Note 10 of our audited financial statements
included in our 2020 Annual Report for further information regarding our long-term debt.
For the thirty-nine weeks ended February 27, 2021 , $14.7 million in net cash was provided by operating activities, compared to
$36.4 million used in operating activities for the comparable period in fiscal 2020. This is primarily due to an increase in egg
selling prices compared to the prior year period.
We continue to invest in our facilities with $73.8 million used to purchase property, plant and equipment for the thirty-nine
weeks ended February 27, 2021 compared to $94.6 million in the same period of fiscal 2020. Sales and maturities of
investment securities, net of purchases, were $25.8 million for the thirty-nine weeks ended February 27, 2021 compared to
$169.4 million for the comparable period in fiscal 2020. We received $5.8 million in distributions from unconsolidated entities
during the first three quarters of fiscal 2021 compared to $6.1 million for the same peri od fiscal of 2020. During the thirty-nine
weeks ended February 29, 2020, we used $44.5 million in cash in connection with our purchase of certain assets of Mahard Egg
Farm. We used $153 thousand for principal payments on finance leases in the first three quarters of fiscal 2021 compared to
$1.6 million for principal payments on long-term debt and finance leases for the same period of fiscal 2020.
As of February 27, 2021, cash decreased $25.2 million since May 30, 2020 compared to a decrease of $1.5 million during the
same period of fiscal 2020.
We continue to take aggressive steps to position Cal-Maine Foods to meet the expected future demand for cage-free eggs. We
have invested approximately $418 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 February 27,
2021 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of
February 27, 2021
Remaining
Projected Cost
Convertible/Cage-Free Layer Houses & Pullet
Houses
Fiscal 2021
$
46,950
$
10,337
$
36,613
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2022
94,632
79,558
15,074
$
141,582
$
89,895
$
51,687
We believe our current cash balances, investments, cash flows from operations, and Revolving Credit Facility will be sufficient
to fund our current and projected capital needs for at least the next twelve months.
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
2020 Annual Report.
29
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 February 27, 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 February 27, 2021
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 1A. RISK
FACTORS
Except as set forth below, there have been no material changes in the risk factors previously disclosed in the 2020 Annual
Report.
We are controlled by the family of our late founder, Fred R. Adams, Jr., and Adolphus B. Baker, our Chief Executive
Officer and Chairman of our Board of Directors controls the vote of 100% of our outstanding Class A Common Stock.
Fred R. Adams, Jr., our Founder and Chairman Emeritus died on March 29, 2020. Mr. Adams’ son-in-law, Adolphus B. Baker,
our Chief Executive Officer and Chairman of our board of directors, Mr. Baker’s spouse and her three sisters (who are Mr.
Adams’ four daughters) beneficially own, directly or indirectly through related entities, 100% of our outstanding Class A
Common Stock, controlling approximately 52.2% of our total voting power. Additionally, such persons and Jean Reed Adams
(“Mrs. Adams”), the wife of our late founder, Fred R. Adams, Jr., also have additional voting power due to beneficial
ownership of our Common Stock, directly or indirectly through related entities, resulting in family voting control of
approximately 57.7% of our total voting power. Mr. Baker controls the vote of 100% of our outstanding Class A Common
Stock.
We understand that the Adams and Baker families intend to retain ownership of a sufficient amount of our Common Stock and
our Class A Common Stock to assure continued ownership of more than 50% of the voting power of our outstanding shares of
capital stock. As a result of this ownership, the Adams and Baker families have the ability to exert substantial influence over
matters requiring action by our stockholders, including amendments to our certificate of incorporation and by-laws, the election
and removal of directors, and any merger, consolidation, or sale of all or substantially all of our assets, or other corporate
transactions. Delaware law provides that the holders of a majority of the voting power of shares entitled to vote must approve
certain fundamental corporate transactions such as a merger, consolidation and sale of all or substantially all of a corporation’s
assets; accordingly, such a transaction involving us and requiring stockholder approval cannot be effected without the approval
of the Adams and Baker families. Such ownership will make an unsolicited acquisition of our Company more difficult and
discourage certain types of transactions involving a change of control of our Company, including transactions in which the
holders of our Common Stock might otherwise receive a premium for their shares over then current market prices. The Adams
and Baker families’ controlling ownership of our capital stock may adversely affect the market price of our Common Stock.
The price of our Common Stock may be affected by the availability of shares for sale in the market, and you may
experience significant dilution as a result of future issuances of our securities, which could materially and adversely
affect the market price of our Common Stock.
The sale or availability for sale of substantial amounts of our Common Stock could adversely impact its price. Our articles of
incorporation authorize us to issue 120,000,000 shares of our Common Stock. As of March 29, 2021, there were 44,056,163
shares of our Common Stock outstanding. Accordingly, a substantial number of shares of our Common Stock are outstanding
and are, or could become, available for sale in the market. In addition, we may be obligated to issue additional shares of our
Common Stock in connection with employee benefit plans (including equity incentive plans).
30
In the future, we may decide to raise capital through offerings of our Common Stock, additional securities convertible into or
exchangeable for Common Stock, or rights to acquire these securities or our Common Stock. The issuance of additional shares
of our Common Stock or additional securities convertible into or exchangeable for our Common Stock could result in dilution
of existing stockholders’ equity interests in us. Issuances of substantial amounts of our Common Stock, or the perception that
such issuances could occur, may adversely affect prevailing market prices for our Common Stock, and we cannot predict the
effect this dilution may have on the price of our Common Stock.
As described in
Note 13
this Quarterly Report, in August 2020 Mrs. Adams and the Daughters’ Trust (of which the daughters of our late founder are
beneficiaries) sold 6.9 million shares of Common Stock in a secondary public offering pursuant to a previously disclosed
Agreement Regarding Common Stock (the “Agreement”) filed as an exhibit to our 2020 Annual Report. After the sale,
approximately 5.0 million shares (the “Subject Shares”) remain registered under a shelf registration statement and prospectus
dated October 9, 2018 for potential resale, which shares are subject to the Agreement. The Agreement generally provides that if
a holder of Subject Shares intends to sell any of the Subject Shares, such party must give the Company a right of first refusal to
purchase all or any of such shares. The price payable by the Company to purchase shares pursuant to the exercise of the right of
first refusal will reflect a 6% discount to the then-current market price based on the 20 business-day volume weighted average
price. If the Company does not exercise its right of first refusal and purchase the shares offered, such party will, subject to the
approval of a special committee of independent directors of the Board of Directors, be permitted to sell the shares not purchased
by the Company pursuant to a Company registration statement, Rule 144 under the Securities Act of 1933, or another manner
of sale agreed to by the Company. Although pursuant to the Agreement the Company will have a right of first refusal to
purchase all or any of those shares, the Company may elect not to exercise its rights of first refusal, and if so such shares would
be eligible for sale pursuant to the registration rights in the Agreement or pursuant to Rule 144 under the Securities Act of 1933.
Sales, or the availability for sale, of a large number of shares of our Common Stock could result in a decline in the market price
of our Common Stock.
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 2020 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 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table is a summary of our third quarter 2021 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
11/29/20 to 12/26/20
—
$
—
—
—
12/27/20 to 01/23/21
—
—
—
—
01/24/21 to 02/27/21
22,628
36.47
—
—
22,628
$
36.47
—
—
(1)
As permitted under our Amended and Restated 2012 Omnibus Long
-
term Incentive Plan,
these shares were withheld
by us to satisfy tax withholding obligations for employees in connection with the vesting of restricted common stock.
31
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:
March 29, 2021
/s/ Max P. Bowman
Max P. Bowman
Vice President, Chief Financial Officer
(Principal Financial Officer)
Date:
March 29, 2021
/s/ Michael D. Castleberry
Michael D. Castleberry
Vice President, Controller
(Principal Accounting Officer)
Exhibit 31.1
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, 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)
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:
March 29, 2021
Exhibit 31.2
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:
March 29, 2021
Exhibit 32
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
February 27, 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:
March 29, 2021