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CAL-MAINE FOODS INC - Quarter Report: 2021 November (Form 10-Q)

calm-20211127
 
 
 
1
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington,
 
DC
 
20549
FORM
10-Q
 
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
 
Act of 1934
For the quarterly period ended
November 27, 2021
 
or
 
Transition report pursuant to Section 13 or 15(d)
 
of the Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number:
 
001-38695
 
CAL-MAINE FOODS, INC
.
(Exact name of registrant as specified in its charter)
Delaware
 
64-0500378
(State or other jurisdiction of incorporation or organization)
 
(I.R.S Employer Identification No.)
1052 Highland Colony Pkwy
,
Suite 200
,
Ridgeland
,
Mississippi
 
39157
 
(Address of principal executive offices)
 
(Zip Code)
(
601
)
948-6813
 
(Registrant’s telephone number,
 
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
CALM
The
NASDAQ
 
Global Select Market
Indicate
 
by
 
check
 
mark
 
whether
 
the
 
registrant:
 
(1)
 
has
 
filed
 
all
 
reports
 
required
 
to
 
be
 
filed
 
by
 
Section
 
13
 
or
 
15(d)
 
of
 
the
Securities Exchange
 
Act of 1934
 
during the preceding
 
12 months (or
 
for such
 
shorter period that
 
the registrant was
 
required to
file such reports), and (2) has been subject to such filing requirements for the past
 
90 days.
Yes
 
No
Indicate by check
 
mark whether the
 
registrant has submitted
 
electronically every
 
Interactive Data File
 
required to be
 
submitted
pursuant to
 
Rule 405
 
of Regulation
 
S-T (§232.405
 
of this
 
chapter) during
 
the preceding
 
12 months
 
(or for
 
such shorter
 
period
that the registrant was required to submit such files).
Yes
 
No
Indicate by
 
check mark
 
whether the registrant
 
is a large
 
accelerated filer,
 
an accelerated
 
filer, a
 
non-accelerated filer,
 
a smaller
reporting
 
company,
 
or
 
an
 
emerging
 
growth
 
company.
 
See
 
the
 
definitions
 
of
 
“large
 
accelerated
 
filer,”
 
“accelerated
 
filer”,
“smaller reporting company”, and “emerging growth
 
company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer
Accelerated filer
 
Non – Accelerated filer
 
Smaller reporting company
 
Emerging growth company
 
If
 
an
 
emerging
 
growth
 
company,
 
indicate
 
by
 
check
 
mark
 
if
 
the
 
registrant
 
has
 
elected
 
not
 
to
 
use
 
the
 
extended
transition
 
period
 
for
 
complying
 
with
 
any
 
new
 
or
 
revised
 
financial
 
accounting
 
standards
 
provided
 
pursuant
 
to
Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a shell company (as defined
 
in Rule 12b-2 of the Exchange Act).
Yes
 
No
There were
44,056,599
 
shares of
 
Common Stock,
 
$0.01 par value,
 
and
4,800,000
 
shares of Class
 
A Common
 
Stock, $0.01
 
par
value, outstanding as of December 28, 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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)
 
 
November 27, 2021
May 29, 2021
Assets
Current assets:
Cash and cash equivalents
$
15,484
$
57,352
Investment securities available-for-sale
69,672
112,158
Trade and other receivables, net
152,958
126,639
Inventories
236,201
218,375
Prepaid expenses and other current assets
6,814
5,407
Total current
 
assets
481,129
519,931
Property, plant &
 
equipment, net
667,250
589,417
Finance lease right-of-use asset, net
448
525
Operating lease right-of-use asset, net
1,347
1,724
Investments in unconsolidated entities
10,985
54,941
Goodwill
44,006
35,525
Intangible assets, net
19,241
20,341
Other long-term assets
7,588
6,770
Total Assets
$
1,231,994
$
1,229,174
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
115,619
$
89,191
Current portion of finance lease obligation
219
215
Current portion of operating lease obligation
550
691
Total current
 
liabilities
116,388
90,097
Long-term finance lease obligation
327
438
Long-term operating lease obligation
797
1,034
Other noncurrent liabilities
10,306
10,416
Deferred income taxes
106,753
114,408
Total liabilities
234,571
216,393
Commitments and contingencies - see
Note 13
Stockholders’ equity:
Common stock ($
0.01
 
par value):
Common stock - authorized
120,000
 
shares, issued
70,261
 
shares
703
703
Class A convertible common stock - authorized and issued
4,800
 
shares
48
48
Paid-in capital
66,019
64,044
Retained earnings
959,124
975,977
Accumulated other comprehensive loss, net of tax
(996)
(558)
Common stock in treasury at cost –
26,204
 
shares at November 27, 2021 and
26,202
shares at May 29, 2021
(27,450)
(27,433)
Total Cal-Maine Foods,
 
Inc. stockholders’ equity
997,448
1,012,781
Noncontrolling interest in consolidated entity
(25)
Total stockholders’
 
equity
997,423
1,012,781
Total Liabilities and Stockholders’
 
Equity
$
1,231,994
$
1,229,174
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
Twenty-six Weeks
 
Ended
November 27,
2021
November 28,
2020
November 27,
2021
November 28,
2020
Net sales
$
390,903
$
347,328
$
722,607
$
640,110
Cost of sales
347,156
288,877
672,215
564,894
Gross profit
43,747
58,451
50,392
75,216
Selling, general and administrative
47,780
43,873
94,305
87,838
(Gain) loss on disposal of fixed assets
(1,968)
99
(2,181)
122
Operating income (loss)
(2,065)
14,479
(41,732)
(12,744)
Other income (expense):
Interest income, net
129
664
361
1,589
Royalty income
278
280
551
585
Equity income of unconsolidated entities
264
58
399
14
Other, net
1,862
436
7,025
948
Total other income, net
2,533
1,438
8,336
3,136
Income (loss) before income taxes
468
15,917
(33,396)
(9,608)
Income tax (benefit) expense
(677)
3,762
(16,515)
(2,364)
Net income (loss)
1,145
12,155
(16,881)
(7,244)
Less: Loss attributable to noncontrolling interest
(28)
(28)
Net income (loss) attributable to Cal-Maine Foods,
Inc.
$
1,173
$
12,155
$
(16,853)
$
(7,244)
Net income (loss) per common share:
Basic
$
0.02
$
0.25
$
(0.34)
$
(0.15)
Diluted
$
0.02
$
0.25
$
(0.34)
$
(0.15)
Weighted average
 
shares outstanding:
Basic
48,857
48,501
48,859
48,501
Diluted
49,016
48,645
48,859
48,501
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
Twenty-six Weeks
 
Ended
November 27,
2021
November 28,
2020
November 27,
2021
November 28,
2020
Net income (loss)
$
1,145
 
$
12,155
 
$
(16,881)
 
$
(7,244)
Other comprehensive income (loss), before tax:
Unrealized holding gain (loss) on available-for-sale
securities, net of reclassification adjustments
(355)
(373)
(579)
95
Income tax benefit (expense) related to items of other
comprehensive income
87
91
141
(23)
Other comprehensive income (loss), net of tax
(268)
(282)
(438)
72
Comprehensive income (loss)
877
11,873
(17,319)
(7,172)
Less: Comprehensive loss attributable to the
noncontrolling interest
(28)
(28)
Comprehensive income (loss) attributable to Cal-Maine
Foods, Inc.
$
905
$
11,873
$
(17,291)
$
(7,172)
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
Twenty-six Weeks
 
Ended
November 27, 2021
November 28, 2020
Cash flows from operating activities:
Net loss
$
(16,881)
$
(7,244)
Depreciation and amortization
33,969
29,305
Deferred income taxes
(15,995)
(2,364)
Other adjustments, net
(16,585)
(30,348)
Net cash used in operations
(15,492)
(10,651)
Cash flows from investing activities:
Purchases of investment securities
(26,387)
(29,637)
Sales and maturities of investment securities
67,864
59,077
Distributions from unconsolidated entities
400
2,650
Acquisition of business, net of cash acquired
(44,823)
Purchases of property,
 
plant and equipment
(28,647)
(52,373)
Net proceeds from disposal of property,
 
plant and equipment
5,338
253
Net cash used in investing activities
(26,255)
(20,030)
Cash flows from financing activities:
Purchase of common stock by treasury
(18)
(45)
Principal payments on finance lease
(106)
(101)
Contributions
3
5
Net cash used in financing activities
(121)
(141)
Net change in cash and cash equivalents
(41,868)
(30,822)
Cash and cash equivalents at beginning of period
57,352
78,130
Cash and cash equivalents at end of period
$
15,484
$
47,308
Supplemental Information:
Cash paid for operating leases
$
425
$
237
Interest paid
$
125
$
129
See Notes to Condensed Consolidated Financial Statements.
7
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The
 
unaudited
 
condensed
 
consolidated
 
financial
 
statements
 
of
 
Cal-Maine
 
Foods,
 
Inc.
 
and
 
its
 
subsidiaries
 
(the
 
"Company,"
"we,"
 
"us,"
 
"our")
 
have
 
been
 
prepared
 
in
 
accordance
 
with
 
the
 
instructions
 
to
 
Form
 
10-Q
 
and
 
Article
 
10
 
of
 
Regulation
 
S-X.
Therefore, they
 
do not
 
include all of
 
the information
 
and footnotes
 
required by
 
generally accepted
 
accounting principles
 
in the
United
 
States
 
of
 
America
 
("GAAP")
 
for
 
complete
 
financial
 
statements
 
and
 
should
 
be
 
read
 
in
 
conjunction
 
with
 
our
 
Annual
Report
 
on
 
Form
 
10-K
 
for
 
the
 
fiscal
 
year
 
ended
 
May
 
29,
 
2021
 
(the
 
"2021
 
Annual
 
Report").
 
These
 
statements
 
reflect
 
all
adjustments that are, in
 
the opinion of management, necessary
 
to a fair statement of
 
the results for the interim
 
periods presented
and,
 
in
 
the
 
opinion
 
of
 
management,
 
consist
 
of
 
adjustments
 
of
 
a
 
normal
 
recurring
 
nature.
 
Operating
 
results
 
for
 
the
 
interim
periods are not necessarily indicative of operating results for the entire fiscal
 
year.
Fiscal Year
The Company's
 
fiscal year
 
ends on
 
the Saturday
 
closest to
 
May 31.
 
Each of
 
the three-month
 
periods and
 
year-to-date
 
periods
ended on November 27, 2021 and November 28, 2020 included
 
13 weeks and 26 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
 
the allowance
 
for credit
 
losses, limited
 
to the amount
 
that fair value
 
was less than
 
the amortized
 
cost basis. The
cost
 
basis
 
for
 
realized
 
gains
 
and
 
losses
 
on
 
available-for-sale
 
securities
 
is
 
determined
 
by
 
the
 
specific
 
identification
 
method.
Gains and losses are recognized in other income
 
(expenses) as Other, net in the Company's
 
Condensed Consolidated Statements
of
 
Operations.
 
Investments
 
in
 
mutual
 
funds
 
are
 
classified
 
as
 
“Other
 
long-term
 
assets”
 
in
 
the
 
Company’s
 
Condensed
Consolidated Balance Sheets.
Trade Receivables
 
Trade receivables
 
are stated at
 
their carrying values,
 
which include a
 
reserve for credit
 
losses. At November
 
27, 2021 and
 
May
29,
 
2021,
 
reserves
 
for
 
credit
 
losses
 
were
 
$
1.1
 
million
 
and
 
$
795
 
thousand,
 
respectively.
 
The
 
Company
 
extends
 
credit
 
to
customers based on
 
an evaluation of
 
each customer's financial
 
condition and credit
 
history.
 
Collateral is generally
 
not required.
The
 
Company
 
minimizes
 
exposure
 
to
 
counter
 
party
 
credit
 
risk
 
through
 
credit
 
analysis
 
and
 
approvals,
 
credit
 
limits,
 
and
monitoring
 
procedures.
 
In
 
determining
 
our
 
reserve
 
for
 
credit losses,
 
receivables
 
are
 
pooled
 
according
 
to
 
age,
 
with
 
each
 
pool
assigned
 
an
 
expected
 
loss
 
based
 
on
 
historical
 
loss
 
information
 
adjusted
 
as
 
needed
 
for
 
economic
 
and
 
other
 
forward-looking
factors.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
Business Combinations
The
 
Company
 
applies fair
 
value
 
accounting
 
guidance
 
to
 
measure
 
non-financial
 
assets and
 
liabilities
 
associated
 
with
 
business
acquisitions.
 
These
 
assets
 
and
 
liabilities
 
are
 
measured
 
at
 
fair
 
value
 
for
 
the
 
initial
 
purchase price
 
allocation.
 
The
 
fair
 
value
 
of
non-financial assets acquired is determined internally.
 
Our internal valuation methodology for non-financial assets considers the
remaining estimated life of the assets acquired and what management
 
believes is the market value for those assets.
Change in Accounting Principle
Effective
 
May
 
31,
 
2020,
 
the
 
Company
 
adopted
 
ASU
 
2016-13,
 
Financial
 
Instruments
 
 
Credit
 
Losses
 
(Topic
 
326),
 
which
 
is
intended
 
to
 
improve
 
financial
 
reporting
 
by
 
requiring
 
more
 
timely
 
recording
 
of
 
credit
 
losses
 
on
 
loans
 
and
 
other
 
financial
instruments held by financial institutions and other organizations.
 
The guidance replaces the prior “incurred loss” approach with
an “expected
 
loss” model
 
and requires
 
measurement of
 
all expected
 
credit losses
 
for financial
 
assets held
 
at the
 
reporting date
based
 
on
 
historical
 
experience,
 
current
 
conditions,
 
and
 
reasonable
 
and
 
supportable
 
forecasts.
 
The
 
Company
 
adopted
 
the
guidance on
 
a modified
 
retrospective basis
 
through a
 
cumulative effect
 
adjustment to
 
retained earnings
 
as of
 
the beginning
 
of
the period of
 
adoption. The Company
 
evaluated its current
 
methodology of
 
estimating allowance for
 
doubtful accounts and
 
the
risk
 
profile
 
of
 
its
 
receivables
 
portfolio
 
and
 
developed
 
a
 
model
 
that
 
includes
 
the
 
qualitative
 
and
 
forecasting
 
aspects
 
of
 
the
“expected
 
loss”
 
model
 
under
 
the
 
amended
 
guidance.
 
The
 
Company
 
finalized
 
its
 
assessment
 
of
 
the
 
impact
 
of
 
the
 
amended
guidance and recorded a $
422
 
thousand cumulative increase to retained earnings at May 31, 2020.
Note 2 – Acquisition
Effective
 
on
 
May
 
30,
 
2021,
 
the
 
Company
 
acquired
 
the
 
remaining
50
%
 
membership
 
interest
 
in
 
Red
 
River
 
Valley
 
Egg
 
Farm,
LLC (“Red River”),
 
including certain liabilities.
 
As a result of
 
the acquisition, Red River
 
became a wholly owned
 
subsidiary of
the Company.
 
Red River owns and
 
operates a specialty
 
shell egg production
 
complex with approximately
1.7
 
million cage-free
laying
 
hens,
 
cage-free
 
pullet
 
capacity,
 
feed
 
mill,
 
processing
 
plant,
 
related
 
offices
 
and
 
outbuildings
 
and
 
related
 
equipment
located on approximately
400
 
acres near Bogata, Texas.
The
 
following
 
table
 
summarizes
 
the
 
consideration
 
paid
 
for
 
Red
 
River
 
and
 
the
 
amounts
 
of
 
the
 
assets
 
acquired
 
and
 
liabilities
assumed recognized at the acquisition date:
Cash consideration paid
$
48,500
Fair value of the Company's equity interest in Red River held before the business combination
48,500
$
97,000
Recognized amounts of identifiable assets acquired and liabilities assumed
Cash
$
3,677
Accounts receivable, net
1,980
Inventory
8,789
Property, plant and equipment
85,002
Liabilities assumed
(2,448)
Deferred income taxes
(8,481)
Total identifiable
 
net assets
88,519
Goodwill
8,481
$
97,000
Cash and
 
accounts receivable
 
acquired
 
along with
 
liabilities assumed
 
were valued
 
at their
 
carrying value
 
which approximates
fair value due to the short maturity of these instruments.
Inventory consisted primarily
 
of flock,
 
feed ingredients,
 
packaging, and egg
 
inventory.
 
Flock inventory was
 
valued at carrying
value as management believes
 
that their carrying value
 
best approximates their fair
 
value.
 
Feed ingredients, packaging
 
and egg
inventory were all valued based on market prices as of May 30, 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9
Property,
 
plant and
 
equipment were
 
valued utilizing
 
the cost
 
approach which
 
is based
 
on replacement
 
or reproduction
 
costs of
the assets and subtracting any depreciation resulting from physical deterioration
 
and/or functional or economic obsolescence.
The Company
 
recognized
 
a gain
 
of $
4.5
 
million
 
as a
 
result of
 
remeasuring
 
to fair
 
value its
50
% equity
 
interest in
 
Red
 
River
held before the business combination. The gain
 
was recorded in other income and expense under the
 
heading “Other, net” in the
Company’s
 
Condensed Consolidated
 
Statements of
 
Operations. The
 
acquisition of
 
Red River
 
resulted in
 
a discrete
 
tax benefit
of $
8.3
 
million, which includes a $
7.3
 
million decrease in deferred income
 
tax expense related to the outside-basis
 
of our equity
investment
 
in
 
Red
 
River,
 
with
 
a
 
corresponding
 
non-recurring,
 
non-cash
 
$
954,000
 
reduction
 
to
 
income
 
taxes
 
expense
 
on
 
the
non-taxable
 
remeasurement
 
gain
 
associated
 
with
 
the
 
acquisition.
 
As
 
part
 
of
 
the
 
acquisition
 
accounting,
 
the
 
Company
 
also
recorded a $
8.5
 
million deferred tax liability
 
for the difference
 
in the inside-basis
 
of the acquired
 
assets and liabilities assumed.
The recognition
 
of deferred
 
tax liabilities resulted
 
in the
 
recognition of
 
goodwill. None
 
of the goodwill
 
recognized is
 
expected
to be deductible for income tax purposes.
Note 3 - Investment
Securities
The following represents the Company’s
 
investment securities as of November 27, 2021 and May 29, 2021
 
(in thousands):
November 27, 2021
Amortized
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
917
$
4
$
$
921
Commercial paper
5,983
2
5,981
Corporate bonds
54,457
110
54,567
Asset backed securities
8,239
36
8,203
Total current
 
investment securities
$
69,596
$
114
$
38
$
69,672
Mutual funds
$
2,105
$
1,951
$
$
4,056
Total noncurrent
 
investment securities
$
2,105
$
1,951
$
$
4,056
May 29, 2021
Amortized
 
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
16,424
$
56
$
$
16,480
Commercial paper
1,998
1,998
Corporate bonds
80,092
608
80,700
Certificates of deposits
1,077
1
1,076
Asset backed securities
11,914
10
11,904
Total current
 
investment securities
$
111,505
$
664
$
11
$
112,158
Mutual funds
$
2,306
$
1,810
$
$
4,116
Total noncurrent
 
investment securities
$
2,306
$
1,810
$
$
4,116
Available-for-sale
Proceeds from
 
sales and
 
maturities of
 
investment securities
 
available-for-sale
 
were $
67.9
 
million and
 
$
59.1
 
million during
 
the
twenty-six
 
weeks
 
ended November
 
27,
 
2021
 
and
 
November
 
28,
 
2020,
 
respectively.
 
Gross
 
realized
 
gains
 
for
 
the
 
twenty-six
weeks ended
 
November 27,
 
2021 and
 
November 28,
 
2020 were
 
$
165
 
thousand and
 
$
57
 
thousand, respectively.
 
Gross realized
losses
 
for
 
the
 
twenty-six
 
weeks
 
ended
 
November
 
27,
 
2021
 
were
 
$
67
 
thousand.
 
There
 
were
no
 
gross
 
realized
 
losses
 
for
 
the
twenty-six weeks
 
ended November
 
28, 2020.
 
There were
no
 
allowances for
 
credit losses
 
at November
 
27, 2021
 
and May
 
29,
2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10
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 November
 
27, 2021 are as follows (in thousands):
Estimated Fair Value
Within one year
$
41,326
1-5 years
28,346
Total
$
69,672
Noncurrent
 
Proceeds
 
from
 
sales
 
and
 
maturities
 
of
 
noncurrent
 
investment
 
securities
 
were
 
$
453
 
thousand
 
during
 
the
 
twenty-six
 
weeks
ended November
 
27,
 
2021.
 
Gross
 
realized
 
gains
 
for
 
the
 
twenty-six
 
weeks
 
ended November
 
27,
 
2021
 
were
 
$
165
thousand. There were
no
 
realized losses for the twenty-six
 
weeks ended November 27, 2021.
 
There were
no
 
sales of noncurrent
investment securities during the twenty-six weeks ended November
 
28, 2020.
Note 4 - Fair Value
 
Measurements
The Company
 
is required
 
to categorize
 
both financial
 
and nonfinancial
 
assets and
 
liabilities based
 
on the
 
following fair
 
value
hierarchy. The
 
fair value
 
of an
 
asset is
 
the price
 
at which
 
the asset
 
could be
 
sold in
 
an orderly
 
transaction between
 
unrelated,
knowledgeable, and willing
 
parties able to engage in
 
the transaction. A liability’s
 
fair value is defined
 
as the amount that would
be
 
paid
 
to
 
transfer
 
the
 
liability
 
to
 
a
 
new
 
obligor
 
in
 
a
 
transaction
 
between
 
such
 
parties,
 
not
 
the
 
amount
 
that
 
would
 
be paid
 
to
settle the liability with the creditor.
Level 1
 
- Quoted prices in active markets for identical assets or liabilities
Level 2
 
- Inputs
 
other than
 
quoted
 
prices included
 
in Level
 
1 that
 
are observable
 
for the
 
asset or
 
liability,
 
either
directly or indirectly,
 
including:
Quoted prices for similar assets or liabilities in active markets
Quoted prices for identical or similar assets in non-active markets
Inputs other than quoted prices that are observable for the asset or liability
Inputs derived principally from or corroborated by other observable
 
market data
Level 3
 
- Unobservable inputs for the asset or liability that are
 
supported by little or no market activity and that
 
are
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded
 
at cost are as follows:
Cash and cash equivalents, accounts receivable,
 
and accounts payable:
 
The carrying amount approximates fair value due to the
short maturity of these instruments.
Lease obligations:
 
The carrying value of the Company’s lease obligations
 
is at its present value which approximates fair value.
Assets and Liabilities Measured at Fair
 
Value
 
on a Recurring Basis
In
 
accordance
 
with
 
the
 
fair
 
value
 
hierarchy
 
described
 
above,
 
the
 
following
 
table
 
shows
 
the
 
fair
 
value
 
of
 
financial
 
assets and
liabilities measured at fair value on a recurring basis as of November 27, 2021 and May
 
29, 2021 (in thousands):
November 27, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
921
$
$
921
Commercial paper
5,981
5,981
Corporate bonds
54,567
54,567
Asset backed securities
8,203
8,203
Mutual funds
4,056
4,056
Total assets measured at fair
 
value
$
4,056
$
69,672
$
$
73,728
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
May 29, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
16,480
$
$
16,480
Commercial paper
1,998
1,998
Corporate bonds
80,700
80,700
Certificates of deposits
1,076
1,076
Asset backed securities
11,904
11,904
Mutual funds
4,116
4,116
Total assets measured at fair
 
value
$
4,116
$
112,158
$
$
116,274
Investment
 
securities
 
 
available-for-sale
 
classified
 
as Level
 
2
 
consist
 
of
 
securities
 
with maturities
 
of
 
three
 
months
 
or longer
when purchased. We
 
classified these securities as
 
current because amounts
 
invested are readily available
 
for current operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
Note 5 - Inventories
Inventories consisted of the following as of November 27, 2021
 
and May 29, 2021 (in thousands):
 
November 27, 2021
May 29, 2021
Flocks, net of amortization
$
139,645
$
123,860
Eggs and egg products
23,043
21,084
Feed and supplies
73,513
73,431
$
236,201
$
218,375
We
 
grow
 
and
 
maintain
 
flocks
 
of
 
layers
 
(mature
 
female
 
chickens),
 
pullets
 
(female
 
chickens,
 
under
 
18
 
weeks
 
of
 
age),
 
and
breeders
 
(male
 
and
 
female
 
chickens
 
used
 
to
 
produce
 
fertile
 
eggs
 
to
 
hatch
 
for
 
egg
 
production
 
flocks).
 
Our
 
total
 
flock
 
at
November 27, 2021 consisted of approximately
9.3
 
million pullets and breeders and
42.9
 
million layers.
 
Note 6 - Accrued Dividends Payable and Dividends per Common
 
Share
We
 
accrue dividends at
 
the end of
 
each quarter according
 
to the Company’s
 
dividend policy adopted
 
by its Board
 
of Directors.
The Company
 
pays a dividend
 
to shareholders
 
of its Common
 
Stock and
 
Class A Common
 
Stock on
 
a quarterly basis
 
for each
quarter for
 
which the
 
Company reports
 
net income
 
attributable to
 
Cal-Maine Foods,
 
Inc. computed
 
in accordance
 
with GAAP
in an amount
 
equal to one-third
 
(1/3) of such
 
quarterly income. Dividends
 
are paid to
 
shareholders of record
 
as of the 60th
 
day
following the
 
last day
 
of such quarter,
 
except for
 
the fourth fiscal
 
quarter. For
 
the fourth quarter,
 
the Company
 
pays dividends
to shareholders of record on the 65th day after the
 
quarter end. Dividends are payable on the 15th day following
 
the record date.
Following a quarter for which the Company does not report net income
 
attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend
 
for a subsequent profitable
 
quarter until the Company
 
is profitable on a cumulative
 
basis computed from the
date of
 
the most
 
recent quarter
 
for which
 
a dividend
 
was paid.
 
At the
 
end of
 
the second
 
quarter of
 
fiscal 2022,
 
the amount
 
of
cumulative losses to be recovered before payment of a dividend was $
21.1
 
million.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12
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
Twenty-six Weeks
 
Ended
November 27,
November 28,
November 27,
November 28,
Net income (loss)
$
1,173
$
12,155
$
(16,853)
$
(7,244)
Cumulative losses to be recovered prior to
payment of divided at beginning of period
(22,270)
(20,769)
(4,244)
(1,370)
Net income available for dividend
$
$
$
$
1/3 of net income attributable to Cal-Maine
Foods, Inc. available for dividend
Common stock outstanding (shares)
44,057
Class A common stock outstanding (shares)
4,800
Total common stock
 
outstanding (shares)
48,857
*Dividends per common share
 
= 1/3 of Net
 
income (loss) attributable to
 
Cal-Maine Foods, Inc. available
 
for dividend ÷ Total
 
common stock
outstanding (shares).
Note 7 – Credit Facility
On
 
November
 
15,
 
2021,
 
we
 
entered
 
into an
 
Amended
 
and
 
Restated
 
Credit
 
Agreement
 
(the
 
“Credit
 
Agreement”)
 
with a
five
-
year
 
term.
 
The
 
Credit
 
Agreement
 
amended
 
and
 
restated
 
the
 
Company’s
 
previously
 
existing
 
credit
 
agreement
 
dated
 
July
 
10,
2018.
 
The
 
Credit
 
Agreement
 
provides
 
for
 
an
 
increased
 
senior
 
secured
 
revolving
 
credit
 
facility
 
(the
 
“Credit
 
Facility”
 
or
“Revolver”),
 
in
 
an
 
initial
 
aggregate
 
principal
 
amount
 
of
 
up
 
to
 
$
250
 
million,
 
which
 
includes
 
a
 
$
15
 
million
 
sublimit
 
for
 
the
issuance
 
of
 
standby
 
letters
 
of
 
credit
 
and
 
a
 
$
15
 
million
 
sublimit
 
for
 
swingline
 
loans.
 
The
 
Credit
 
Facility
 
also
 
includes
 
an
accordion
 
feature
 
permitting,
 
with
 
the
 
consent
 
of
 
BMO
 
Harris
 
Bank
 
N.A.
 
(the
 
“Administrative
 
Agent”),
 
an
 
increase
 
in
 
the
Credit Facility
 
in the
 
aggregate up
 
to $
200
 
million by
 
adding one
 
or more
 
incremental senior
 
secured term
 
loans or
 
increasing
one or more times the revolving commitments under the Revolver.
 
As of November 27, 2021,
no
 
amounts were borrowed under
the Credit Facility and $
4.1
 
million in standby letters of credit were issued under the Credit Facility.
The
 
interest
 
rate
 
in
 
connection
 
with
 
loans
 
made
 
under
 
the
 
Credit
 
Facility
 
is
 
based
 
on,
 
at
 
the
 
Company’s
 
election,
 
either
 
the
Eurodollar
 
Rate
 
plus
 
the
 
Applicable
 
Margin
 
or
 
the
 
Base
 
Rate
 
plus
 
the
 
Applicable
 
Margin.
 
The
 
“Eurodollar
 
Rate”
 
means
 
the
reserve adjusted
 
rate at
 
which Eurodollar
 
deposits in
 
the London
 
interbank market
 
for an
 
interest period
 
of
one
,
two
,
three
,
six
or
twelve
 
months (as
 
selected by
 
the Company)
 
are quoted.
 
The “Base
 
Rate” means
 
a fluctuating
 
rate per
 
annum equal
 
to the
highest
 
of
 
(a)
 
the
 
federal
 
funds
 
rate
 
plus
0.50
%
 
per
 
annum,
 
(b)
 
the
 
prime
 
rate
 
of
 
interest
 
established
 
by
 
the
 
Administrative
Agent, and (c) the Eurodollar Rate for
 
an interest period of
one
 
month plus
1
% per annum, subject to certain interest
 
rate floors.
The
 
“Applicable
 
Margin”
 
means
0.00
%
 
to
0.75
%
 
per
 
annum
 
for
 
Base
 
Rate
 
Loans
 
and
1.00
%
 
to
1.75
%
 
per
 
annum
 
for
Eurodollar
 
Rate
 
Loans,
 
in
 
each
 
case
 
depending
 
upon
 
the
 
Total
 
Funded
 
Debt
 
to
 
Capitalization
 
Ratio
 
for
 
the
 
Company
 
at
 
the
quarterly pricing
 
date. The
 
Company will pay
 
a commitment fee
 
on the unused
 
portion of the
 
Credit Facility
 
payable quarterly
from
0.15
%
 
to
0.25
%
 
in
 
each
 
case
 
depending
 
upon
 
the
 
Total
 
Funded
 
Debt
 
to
 
Capitalization
 
Ratio
 
for
 
the
 
Company
 
at
 
the
quarterly pricing date. The Credit Agreement contains customary provisions
 
regarding replacement of the Eurodollar Rate.
The
 
Credit
 
Facility
 
is
 
guaranteed
 
by
 
all the
 
current
 
and
 
future wholly
 
-owned
 
direct
 
and
 
indirect
 
domestic
 
subsidiaries
 
of
 
the
Company (the
 
“Guarantors”), and
 
is secured
 
by a
 
first-priority perfected
 
security interest
 
in substantially
 
all of
 
the Company’s
and
 
the
 
Guarantors’
 
accounts,
 
payment
 
intangibles,
 
instruments
 
(including
 
promissory
 
notes),
 
chattel
 
paper,
 
inventory
(including farm products) and deposit accounts maintained with the Administrative
 
Agent.
The
 
Credit
 
Agreement
 
for the
 
Credit
 
Facility
 
contains
 
customary
 
covenants,
 
including
 
restrictions
 
on
 
the incurrence
 
of
 
liens,
incurrence of
 
additional debt,
 
sales of
 
assets and
 
other fundamental
 
corporate changes
 
and investments.
 
The Credit
 
Agreement
requires maintenance
 
of two
 
financial covenants:
 
(i) a
 
maximum Total
 
Funded Debt
 
to Capitalization
 
Ratio tested
 
quarterly of
no greater than
50
%; and (ii) a requirement
 
to maintain Minimum Tangible
 
Net Worth
 
at all times of $
700
 
Million plus
50
% of
net
 
income
 
(if
 
net
 
income
 
is
 
positive)
 
less
 
permitted
 
restricted
 
payments
 
for
 
each
 
fiscal
 
quarter
 
after
 
November
 
27,
 
2021.
Additionally,
 
the Credit Agreement
 
requires that Fred
 
R. Adams Jr.’s
 
spouse, natural children,
 
sons-in-law or grandchildren,
 
or
any trust,
 
guardianship, conservatorship
 
or custodianship
 
for the primary
 
benefit of any
 
of the foregoing,
 
or any family
 
limited
partnership, similar limited liability
 
company or other entity
 
that
100
% of the voting control
 
of such entity is held
 
by any of the
foregoing, shall maintain
 
at least
50
% of the Company's
 
voting stock. Failure
 
to satisfy any of
 
these covenants will constitute
 
a
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13
default under the terms of
 
the Credit Agreement. Further,
 
under the terms of the Credit
 
Agreement, payment of dividends under
the
 
Company's
 
current
 
dividend
 
policy
 
of
one-third
 
of
 
the
 
Company's
 
net
 
income
 
computed
 
in
 
accordance
 
with
 
GAAP
 
and
payment of other
 
dividends or repurchases
 
by the Company
 
of its capital stock
 
is allowed, as long
 
as after giving
 
effect to such
dividend
 
payments or
 
repurchases no
 
default has
 
occurred and
 
is continuing
 
and
 
the sum
 
of cash
 
and cash
 
equivalents of
 
the
Company and its subsidiaries plus availability under the Credit Facility equals
 
at least $
50
 
million.
The Credit
 
Agreement also
 
includes customary
 
events of
 
default and
 
customary remedies
 
upon the
 
occurrence of
 
an event
 
of
default, including acceleration
 
of the amounts due
 
under the Credit Facility
 
and foreclosure of
 
the collateral securing
 
the Credit
Facility.
At November 27, 2021, we were in compliance with the covenant requirements of
 
the Credit Facility.
Note 8 - Equity
The following reflects
 
equity activity for
 
the thirteen and
 
twenty-six weeks ended
 
November 27, 2021
 
and November 28,
 
2020
(in thousands):
Thirteen Weeks
 
Ended November 27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at August 28,
2021
$
703
$
48
$
(27,451)
$
65,044
$
(728)
$
957,951
$
$
995,567
Other comprehensive
loss, net of tax
(268)
(268)
Stock compensation
plan transactions
1
975
976
Contributions
3
3
Net income (loss)
1,173
(28)
1,145
Balance at November
27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
$
(25)
$
997,423
Thirteen Weeks
 
Ended November 28, 2020
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Total
Balance at August 29, 2020
$
703
$
48
$
(26,676)
$
61,267
$
433
$
956,170
$
991,945
Other comprehensive loss, net of tax
(282)
(282)
Stock compensation plan
transactions
(47)
934
887
Contributions
5
5
Net income
12,155
12,155
Balance at November 28, 2020
$
703
$
48
$
(26,723)
$
62,206
$
151
$
968,325
$
1,004,710
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14
Twenty-six Weeks
 
Ended November 27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp.
Earnings
Interest
Total
Balance at May 29,
2021
$
703
$
48
$
(27,433)
$
64,044
$
(558)
$
975,977
$
$
1,012,781
Other comprehensive
loss, net of tax
(438)
(438)
Stock compensation
plan transactions
(17)
1,975
1,958
Contributions
3
3
Net loss
(16,853)
(28)
(16,881)
Balance at November
27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
$
(25)
$
997,423
Twenty-six Weeks
 
Ended November 28, 2020
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Total
Balance at May 30, 2020
$
703
$
48
$
(26,674)
$
60,372
$
79
$
975,147
$
1,009,675
Impact of ASC 326
422
422
Balance at May 31 2020
703
48
(26,674)
60,372
79
975,569
1,010,097
Other comprehensive income, net of
tax
72
72
Stock compensation plan
transactions
(49)
1,829
1,780
Contributions
5
5
Net loss
(7,244)
(7,244)
Balance at November 28, 2020
$
703
$
48
$
(26,723)
$
62,206
$
151
$
968,325
$
1,004,710
Note 9 - Net Income (Loss) per Common Share
 
Basic net
 
income (loss)
 
per share
 
is based
 
on the
 
weighted average
 
Common Stock
 
and Class
 
A Common
 
Stock outstanding.
Diluted net income
 
per share
 
is based on
 
weighted-average common
 
shares outstanding
 
during the
 
relevant period
 
adjusted for
the dilutive
 
effect of
 
share-based awards.
 
Restricted shares
 
of
145
 
thousand and
139
 
thousand were
 
antidilutive due
 
to the
 
net
losses for the first twenty-six weeks of fiscal 2022
 
and 2021, respectively. These
 
shares were not included in the diluted net loss
per share calculation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15
The
 
following
 
table
 
provides
 
a
 
reconciliation
 
of
 
the
 
numerators
 
and
 
denominators
 
used
 
to
 
determine
 
basic
 
and
 
diluted
 
net
income per common share (amounts in thousands, except per share data):
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 27,
2021
November 28,
2020
November 27,
2021
November 28,
2020
Numerator
Net income (loss)
 
$
1,145
$
12,155
$
(16,881)
$
(7,244)
Less: Loss attributable to noncontrolling
interest
(28)
(28)
Net income (loss) attributable to Cal-
Maine Foods, Inc.
$
1,173
$
12,155
$
(16,853)
$
(7,244)
Denominator
Weighted-average
 
common shares
outstanding, basic
48,857
48,501
48,859
48,501
Effect of dilutive restricted shares
159
144
Weighted-average
 
common shares
outstanding, diluted
49,016
48,645
48,859
48,501
Net income (loss) per common share
attributable to Cal-Maine Foods, Inc.
Basic
$
0.02
$
0.25
$
(0.34)
$
(0.15)
Diluted
$
0.02
$
0.25
$
(0.34)
$
(0.15)
Note 10 - Revenue Recognition
Satisfaction of Performance Obligation
Most of the
 
Company’s revenue
 
is derived from
 
contracts with customers
 
based on the
 
customer placing an
 
order for products.
Pricing for
 
the most
 
part is
 
determined when
 
the Company
 
and the
 
customer agree
 
upon the
 
specific order,
 
which establishes
the contract for that order.
Revenues are
 
recognized in
 
an amount
 
that reflects
 
the net
 
consideration we
 
expect to
 
receive in
 
exchange for
 
the goods. Our
shell eggs
 
are sold
 
at prices
 
related to
 
independently
 
quoted wholesale
 
market prices,
 
negotiated prices
 
or formulas
 
related to
our
 
costs of
 
production.
 
The Company’s
 
sales predominantly
 
contain
 
a single
 
performance obligation.
 
We
 
recognize
 
revenue
upon satisfaction
 
of the performance
 
obligation with
 
the customer,
 
which typically occurs
 
within days of
 
the Company
 
and the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts
 
include a guaranteed sale
 
clause, pursuant to which
 
we credit the customer’s
 
account for product
 
that the
customer is unable
 
to sell before
 
expiration. The Company
 
records an estimate
 
of returns and
 
refunds by using
 
historical return
data
 
and
 
comparing
 
to current
 
period
 
sales and
 
accounts
 
receivable. The
 
allowance
 
is recorded
 
as a
 
reduction
 
in sales
 
with
 
a
corresponding reduction in trade accounts receivable.
Sales Incentives Provided to Customers
The
 
Company
 
periodically
 
provides
 
incentive
 
offers
 
to
 
its
 
customers
 
to
 
encourage
 
purchases.
 
Such
 
offers
 
include
 
current
discount offers
 
(e.g., percentage
 
discounts off
 
current purchases), inducement
 
offers (e.g.,
 
offers for
 
future discounts subject
 
to
a minimum
 
current purchase),
 
and other
 
similar offers.
 
Current discount
 
offers,
 
when accepted
 
by customers,
 
are treated
 
as a
reduction
 
to
 
the sales
 
price
 
of the
 
related
 
transaction,
 
while inducement
 
offers,
 
when
 
accepted
 
by customers,
 
are
 
treated
 
as
 
a
reduction
 
to
 
sales
 
price
 
based
 
on
 
estimated
 
future
 
redemption
 
rates.
 
Redemption
 
rates
 
are
 
estimated
 
using
 
the
 
Company’s
historical
 
experience
 
for
 
similar
 
inducement
 
offers.
 
Current discount
 
and
 
inducement
 
offers
 
are
 
presented
 
as a
 
net amount
 
in
‘‘Net sales.’’
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16
Disaggregation of Revenue
The following table provides revenue disaggregated by product category
 
(in thousands):
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 27, 2021
November 28, 2020
November 27, 2021
November 28, 2020
Conventional shell egg sales
$
223,258
$
201,725
$
405,807
$
357,109
Specialty shell egg sales
155,853
134,082
294,510
263,327
Egg products
11,401
9,932
20,767
16,637
Other
391
1,589
1,523
3,037
$
390,903
$
347,328
$
722,607
$
640,110
Contract Costs
The Company can incur costs to
 
obtain or fulfill a contract with a
 
customer. If the
 
amortization period of these costs is less
 
than
one year,
 
they are
 
expensed as
 
incurred. When
 
the amortization
 
period is
 
greater than
 
one year,
 
a contract
 
asset is
 
recognized
and is
 
amortized over
 
the contract
 
life as
 
a reduction
 
in net
 
sales. As
 
of November
 
27, 2021,
 
the balance
 
for contract
 
assets is
immaterial.
Contract Balances
The Company
 
receives payment
 
from
 
customers based
 
on specified
 
terms that
 
are generally
 
less than
 
30 days
 
from
 
delivery.
There are rarely contract assets or liabilities related to performance under
 
the contract.
Note 11 - 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):
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 27, 2021
November 27, 2021
Operating lease cost
$
208
$
425
Finance lease cost
Amortization of right-of-use asset
$
44
$
88
Interest on lease obligations
$
7
$
14
Short term lease cost
$
1,097
$
2,135
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17
Future minimum lease payments under non-cancelable leases are as follows
 
(in thousands):
As of November 27, 2021
Operating Leases
Finance Leases
Remainder fiscal 2022
$
378
$
120
2023
539
239
2024
380
217
2025
130
2026
26
2027
5
Total
1,458
576
Less imputed interest
(111)
(30)
Total
$
1,347
$
546
The
 
weighted-average
 
remaining
 
lease
 
term
 
and
 
discount
 
rate
 
for
 
lease
 
liabilities
 
included
 
in
 
our
 
Condensed
 
Consolidated
Balance Sheet are as follows:
As of November 27, 2021
Operating Leases
Finance Leases
Weighted-average
 
remaining lease term (years)
2.6
2.0
Weighted-average
 
discount rate
5.9
%
4.9
%
Note 12 - Stock Based Compensation
Total stock-based
 
compensation expense was $
2.0
 
million and $
1.8
 
million for the twenty-six weeks
 
ended November 27, 2021
and November 28, 2020, respectively.
Unrecognized
 
compensation
 
expense
 
as a
 
result
 
of non
 
-vested
 
shares
 
of
 
restricted
 
stock outstanding
 
under
 
the
 
Amended
 
and
Restated
 
2012
 
Omnibus
 
Long-Term
 
Incentive
 
Plan
 
at
 
November
 
27,
 
2021
 
of
 
$
4.6
 
million
 
will
 
be
 
recorded
 
over
 
a
 
weighted
average period of
1.7
 
years. Refer to Part
 
II Item 8,
 
Notes to Consolidated
 
Financial Statements and
 
Supplementary Data, Note
16: Stock Compensation Plans in our 2021 Annual Report for further information
 
on our stock compensation plans.
The Company’s restricted share activity
 
for the twenty-six weeks ended November 27, 2021 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 29, 2021
302,147
$
39.37
Vested
(1,359)
40.34
Forfeited
(1,460)
37.70
Outstanding, November 27, 2021
299,328
$
39.38
Note 13 - Commitments and Contingencies
Financial Instruments
The
 
Company
 
maintained
 
standby
 
letters
 
of
 
credit
 
("LOC")
 
totaling
 
$
4.1
 
million
 
at
 
November
 
27,
 
2021
 
which
 
were
 
issued
under
 
the
 
Company's
 
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
 
 
18
Court of
 
Harris County,
 
Texas.
 
The State
 
of Texas
 
(the “State”)
 
asserted claims
 
based on
 
the Company’s
 
and WCF’s
 
alleged
violation
 
of
 
the
 
Texas
 
Deceptive
 
Trade
 
Practices—Consumer
 
Protection
 
Act,
 
Tex.
 
Bus.
 
&
 
Com.
 
Code
 
§§
 
17.41-17.63
(“DTPA”).
 
The
 
State
 
claimed
 
that
 
the
 
Company
 
and
 
WCF
 
offered
 
shell
 
eggs
 
at
 
excessive
 
or
 
exorbitant
 
prices
 
during
 
the
COVID-19
 
state
 
of
 
emergency
 
and
 
made
 
misleading
 
statements
 
about
 
shell
 
egg
 
prices.
 
The
 
State
 
sought
 
temporary
 
and
permanent
 
injunctions
 
against
 
the
 
Company
 
and
 
WCF
 
to
 
prevent
 
further
 
alleged
 
violations
 
of
 
the
 
DTPA,
 
along
 
with
 
over
$
100,000
 
in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the State’s
 
original petition with
prejudice. On September
 
11, 2020,
 
the State filed a
 
notice of appeal,
 
which was assigned to
 
the Texas
 
Court of Appeals
 
for the
First District. The
 
State filed its
 
opening brief
 
on December 7,
 
2020. The
 
Company and WCF
 
filed their response
 
on February
8, 2021. The
 
Texas
 
Court of Appeals
 
has not ruled
 
on these submissions.
 
Management believes the
 
risk of material
 
loss related
to this matter to be remote.
Bell et al. v. Cal-Maine Foods et al.
 
On
 
April
 
30, 2020,
 
the Company
 
was named
 
as one
 
of several
 
defendants
 
in
 
Bell et
 
al. v.
 
Cal-Maine
 
Foods et
 
al.,
 
Case No.
1:20-cv-461,
 
in
 
the
 
Western
 
District
 
of
 
Texas,
 
Austin
 
Division.
 
The
 
defendants
 
include
 
numerous
 
grocery
 
stores,
 
retailers,
producers, and farms. Plaintiffs assert that defendants
 
violated the DTPA
 
by allegedly demanding exorbitant or
 
excessive prices
for
 
eggs during
 
the
 
COVID-19
 
state of
 
emergency.
 
Plaintiffs
 
request
 
certification
 
of a
 
class of
 
all consumers
 
who purchased
eggs
 
in
 
Texas
 
sold,
 
distributed,
 
produced,
 
or
 
handled
 
by
 
any
 
of
 
the
 
defendants
 
during
 
the
 
COVID-19
 
state
 
of
 
emergency.
Plaintiffs seek to enjoin
 
the Company and other
 
defendants from selling eggs
 
at a price more than
 
10% greater than the price
 
of
eggs prior
 
to the
 
declaration
 
of the
 
state of
 
emergency
 
and damages
 
in the
 
amount
 
of
 
$
10,000
 
per violation,
 
or $
250,000
 
for
each violation
 
impacting anyone
 
over 65
 
years old.
 
On December
 
1, 2020,
 
the Company
 
and
 
certain other
 
defendants filed
 
a
motion to
 
dismiss the
 
plaintiffs’
 
amended
 
class action
 
complaint. The
 
plaintiffs
 
subsequently
 
filed a
 
motion to
 
strike, and
 
the
motion to
 
dismiss and
 
related proceedings
 
were referred
 
to a
 
United States
 
magistrate judge.
 
On July
 
14, 2021,
 
the magistrate
judge
 
issued
 
a
 
report
 
and
 
recommendation
 
to
 
the
 
court
 
that
 
the
 
defendants’
 
motion
 
to
 
dismiss
 
be
 
granted
 
and
 
the
 
case
 
be
dismissed without
 
prejudice for
 
lack of
 
subject matter
 
jurisdiction. On
 
September 20,
 
2021, the
 
court adopted
 
the magistrate’s
report
 
and
 
recommendation
 
in
 
its
 
entirety
 
and
 
granted
 
defendants’
 
motion
 
to
 
dismiss
 
plaintiffs’
 
first
 
amended
 
class
 
action
complaint; thereafter,
 
the court
 
entered a
 
final judgment
 
in favor
 
of the
 
Company and
 
certain other
 
defendants dismissing
 
the
case without
 
prejudice. On
 
October 18,
 
2021, plaintiffs
 
filed a
 
motion to
 
alter or
 
amend the
 
final judgement
 
and allow
 
a filing
of
 
a
 
second
 
amended
 
complaint.
 
The
 
Company
 
responded
 
on
 
November
 
1,
 
2021.
 
The
 
court
 
has
 
not
 
ruled
 
on
 
the
 
plaintiffs’
motion.
Kraft Foods Global, Inc. et al. v.
 
United Egg Producers, Inc. et al.
 
As previously
 
reported, on
 
September 25,
 
2008, the
 
Company
 
was named
 
as one
 
of several
 
defendants
 
in numerous
 
antitrust
cases involving
 
the United
 
States shell
 
egg
 
industry.
 
The Company
 
settled all
 
of these
 
cases, except
 
for
 
the claims
 
of certain
plaintiffs who sought
 
substantial damages allegedly arising
 
from the purchase of egg
 
products (as opposed to shell
 
eggs). These
remaining plaintiffs
 
are Kraft
 
Food Global,
 
Inc., General
 
Mills, Inc.,
 
and Nestle
 
USA, Inc.
 
(the “Egg
 
Products Plaintiffs”)
 
and
The Kellogg Company.
On September
 
13, 2019,
 
the case
 
with the
 
Egg Products
 
Plaintiffs was
 
remanded from
 
a multi-district
 
litigation proceeding
 
in
the
 
United
 
States
 
District
 
Court
 
for
 
the
 
Eastern
 
District
 
of
 
Pennsylvania,
 
In
 
re
 
Processed
 
Egg
 
Products
 
Antitrust
 
Litigation,
MDL No. 2002, to
 
the United States District Court
 
for the Northern District
 
of Illinois, Kraft Foods Global,
 
Inc. et al. v.
 
United
Egg
 
Producers,
 
Inc.
 
et
 
al.,
 
Case
 
No.
 
1:11-cv-8808,
 
for
 
trial.
 
The
 
Egg
 
Products
 
Plaintiffs
 
allege
 
that
 
the
 
Company
 
and
 
other
defendants
 
violated
 
Section
 
1
 
of
 
the
 
Sherman
 
Act,
 
15.
 
U.S.C.
 
§
 
1,
 
by
 
agreeing
 
to
 
limit
 
the
 
production
 
of
 
eggs
 
and
 
thereby
illegally to raise the prices that plaintiffs
 
paid for processed egg products. In particular,
 
the Egg Products Plaintiffs are
 
attacking
certain features of
 
the United Egg
 
Producers animal-welfare guidelines
 
and program used by
 
the Company and
 
many other egg
producers. The
 
Egg Products
 
Plaintiffs seek
 
to enjoin
 
the Company
 
and other
 
defendants from
 
engaging in
 
antitrust violations
and seek
 
treble money
 
damages. The
 
parties filed
 
a joint
 
status report
 
on May
 
18, 2020.
 
On August
 
4, 2021,
 
by docket
 
entry,
the
 
court
 
instructed
 
the
 
parties
 
to
 
jointly
 
submit
 
a
 
second
 
status
 
report
 
to
 
the
 
court
 
that
 
included
 
a
 
proposed
 
schedule
 
for
preparing a final pretrial
 
order. On August
 
25, 2021, the parties filed a
 
joint status report, and
 
on August 26, 2021, the
 
court, by
docket entry, informed
 
the parties that the need to discuss issues was no longer
 
necessary and that a scheduled August 30, 2021,
status hearing was stricken. No trial schedule has yet been entered by the
 
court.
In addition,
 
on October
 
24, 2019,
 
the Company
 
entered into
 
a confidential
 
settlement agreement
 
with The
 
Kellogg Company
dismissing
 
all
 
claims
 
against
 
the
 
Company
 
for
 
an
 
amount
 
that
 
did
 
not
 
have
 
a
 
material
 
impact
 
on
 
the
 
Company’s
 
financial
condition or results
 
of operations. On
 
November 11,
 
2019, a stipulation
 
for dismissal was filed
 
with the court,
 
but the court
 
has
not yet entered a judgment on the filing.
The Company intends to
 
continue to defend the remaining
 
case with the Egg Products Plaintiffs
 
as vigorously as possible based
on
 
defenses
 
which
 
the
 
Company
 
believes
 
are
 
meritorious
 
and
 
provable.
 
Adjustments,
 
if
 
any,
 
which
 
might
 
result
 
from
 
the
 
 
19
resolution of
 
this remaining
 
matter with
 
the Egg
 
Products Plaintiffs
 
have not
 
been reflected
 
in the
 
financial statements.
 
While
management
 
believes
 
that
 
there
 
is
 
still
 
a
 
reasonable
 
possibility
 
of
 
a
 
material
 
adverse
 
outcome
 
from
 
the
 
case
 
with
 
the
 
Egg
Products Plaintiffs,
 
at the
 
present time,
 
it is not
 
possible to
 
estimate the
 
amount of
 
monetary exposure,
 
if any,
 
to the
 
Company
due to a range of
 
factors, including the following,
 
among others: the matter is in
 
the early stages of preparing
 
for trial following
remand;
 
any
 
trial
 
will
 
be
 
before
 
a
 
different
 
judge
 
and
 
jury
 
in
 
a
 
different
 
court
 
than
 
prior
 
related
 
cases;
 
there
 
are
 
significant
factual issues
 
to be
 
resolved; and
 
there are
 
requests for
 
damages other
 
than compensatory
 
damages (i.e.,
 
injunction and
 
treble
money damages).
State of Oklahoma Watershed Pollution
 
Litigation
On June 18,
 
2005, the
 
State of
 
Oklahoma filed
 
suit, in
 
the United
 
States District
 
Court for
 
the Northern
 
District of
 
Oklahoma,
against Cal-Maine Foods, Inc. and
 
Tyson Foods,
 
Inc. and affiliates, Cobb-Vantress,
 
Inc., Cargill, Inc. and
 
its affiliate, George’s,
Inc. and
 
its affiliate,
 
Peterson Farms, Inc.
 
and Simmons Foods,
 
Inc. The
 
State of Oklahoma
 
claims that through
 
the disposal of
chicken
 
litter the
 
defendants have
 
polluted the
 
Illinois River
 
Watershed.
 
This watershed
 
provides
 
water to
 
eastern Oklahoma.
The complaint
 
seeks injunctive
 
relief and
 
monetary damages,
 
but the
 
claim for
 
monetary damages
 
has been
 
dismissed by
 
the
court.
 
Cal-Maine
 
Foods,
 
Inc.
 
discontinued
 
operations
 
in
 
the
 
watershed.
 
Accordingly,
 
we
 
do
 
not
 
anticipate
 
that
 
Cal-Maine
Foods,
 
Inc.
 
will
 
be
 
materially
 
affected
 
by
 
the
 
request
 
for
 
injunctive
 
relief
 
unless
 
the
 
court
 
orders
 
substantial
 
affirmative
remediation. Since
 
the litigation
 
began, Cal-Maine
 
Foods, Inc.
 
purchased
100
% of the
 
membership interests
 
of Benton
 
County
Foods, LLC,
 
which is
 
an ongoing
 
commercial shell
 
egg operation
 
within the
 
Illinois River
 
Watershed.
 
Benton County
 
Foods,
LLC is not a defendant in the litigation.
The trial in the case
 
began in September 2009 and
 
concluded in February 2010. The
 
case was tried without a jury,
 
and the court
has not yet issued its ruling. Management believes the risk of material loss related
 
to this matter to be remote.
Other Matters
In addition to
 
the above, the Company
 
is involved in
 
various other claims
 
and litigation incidental
 
to its business. Although
 
the
outcome of
 
these matters
 
cannot be
 
determined with
 
certainty,
 
management, upon
 
the advice
 
of counsel,
 
is of
 
the opinion
 
that
the final outcome should not have a material effect on the Company’s
 
consolidated results of operations or financial position.
Note 14 - Related Party Transaction
On
 
August
 
24,
 
2020,
 
Mrs.
 
Jean
 
Reed
 
Adams,
 
the
 
wife
 
of
 
the
 
Company’s
 
late
 
founder
 
Fred
 
R.
 
Adams,
 
Jr.,
 
and
 
the
 
Fred
 
R.
Adams,
 
Jr.
 
Daughters’
 
Trust,
 
dated
 
July
 
20,
 
2018
 
(the
 
“Daughters’
 
Trust”),
 
of
 
which
 
the
 
daughters
 
of
 
Mr.
 
Adams
 
are
beneficiaries
 
(together,
 
the
 
“Selling
 
Stockholders”),
 
completed
 
a
 
registered
 
secondary
 
public
 
offering
 
of
6,900,000
 
shares
 
of
Common Stock held by them, pursuant to a previously
 
disclosed Agreement Regarding Common Stock (the “Agreement”)
 
filed
as an exhibit to our 2021 Annual Report. Mrs. Adams and
 
the Daughters’ Trust advised the Company that
 
they were conducting
the
 
offering
 
in
 
order
 
to
 
pay
 
estate
 
taxes
 
related
 
to
 
the
 
settlement
 
of
 
Mr.
 
Adam’s
 
estate
 
and
 
to
 
obtain
 
liquidity.
 
The
 
public
offering
 
was
 
made
 
pursuant
 
to
 
the
 
Company’s
 
effective
 
shelf
 
registration
 
statement
 
on
 
Form
 
S-3
 
(File
 
No.
 
333-227742),
including the Prospectus
 
contained therein dated
 
October 9, 2018, and
 
a related Prospectus Supplement
 
dated August 19,
 
2020,
each of
 
which is on
 
file with the
 
Securities and
 
Exchange Commission.
 
The public offering
 
involved only
 
the sale of
 
shares of
Common
 
Stock
 
that
 
were
 
already
 
outstanding,
 
and
 
thus
 
the
 
Company
 
did
 
not
 
issue
 
any
 
new
 
shares
 
or
 
raise
 
any
 
additional
capital
 
in
 
the
 
offering.
 
The
 
expenses
 
of
 
the
 
offering
 
(not
 
including
 
the
 
underwriting
 
discount
 
and
 
legal
 
fees
 
and
 
expenses
 
of
legal
 
counsel
 
for
 
the
 
Selling
 
Stockholders,
 
which
 
were
 
paid
 
by
 
the
 
Selling
 
Stockholders)
 
paid
 
by
 
the
 
Company
 
were
 
$
1.1
million. Pursuant to the Agreement, the Selling Stockholders reimbursed
 
the Company $
551
 
thousand.
 
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 Part II Item
 
7 of the Company’s
 
Annual Report on
 
Form 10-K for its
 
fiscal year ended May
 
29, 2021
(the “2021 Annual Report”), and the accompanying financial statements and
 
notes included in Part II Item 8 of the 2021 Annual
Report and in
Part
 
of this Quarterly Report on Form 10-Q (“Quarterly Report”).
This
 
report
 
contains
 
numerous
 
forward-looking
 
statements
 
within
 
the
 
meaning
 
of
 
Section
 
27A
 
of
 
the
 
Securities
 
Act
 
of
 
1933
(the “Securities
 
Act”) and
 
Section 21E
 
of the
 
Securities Exchange
 
Act of
 
1934 (the
 
“Exchange Act”)
 
relating to
 
our shell
 
egg
business,
 
including
 
estimated
 
future
 
production
 
data,
 
expected
 
construction
 
schedules,
 
projected
 
construction
 
costs,
 
potential
future
 
supply
 
of and
 
demand
 
for
 
our
 
products,
 
potential
 
future
 
corn
 
and
 
soybean price
 
trends,
 
potential
 
future
 
impact
 
on
 
our
business
 
of
 
the
 
COVID-19
 
pandemic,
 
potential
 
future
 
impact
 
on
 
our
 
business
 
of
 
new
 
legislation,
 
rules
 
or
 
policies,
 
potential
outcomes
 
of
 
legal
 
proceedings,
 
and
 
other
 
projected
 
operating
 
data,
 
including
 
anticipated
 
results
 
of
 
operations
 
and
 
financial
condition.
 
Such
 
forward-looking
 
statements
 
are
 
identified
 
by
 
the
 
use
 
of
 
words
 
such
 
as
 
“believes,”
 
“intends,”
 
“expects,”
“hopes,”
 
“may,”
 
“should,”
 
“plans,”
 
“projected,”
 
“contemplates,”
 
“anticipates,”
 
or
 
similar
 
words.
 
Actual
 
outcomes
 
or
 
results
could
 
differ
 
materially
 
from
 
those
 
projected
 
in
 
the
 
forward-looking
 
statements. The
 
forward-looking
 
statements
 
are
 
based
 
on
management’s
 
current
 
intent,
 
belief,
 
expectations,
 
estimates,
 
and
 
projections
 
regarding
 
the
 
Company
 
and
 
its
 
industry. These
statements
 
are
 
not
 
guarantees
 
of
 
future
 
performance
 
and
 
involve
 
risks,
 
uncertainties,
 
assumptions,
 
and
 
other
 
factors
 
that
 
are
difficult
 
to predict
 
and
 
may be
 
beyond
 
our
 
control. The
 
factors
 
that
 
could cause
 
actual results
 
to
 
differ
 
materially
 
from those
projected
 
in the
 
forward-looking
 
statements include,
 
among others,
 
(i) the
 
risk factors
 
set forth
 
in Part
 
I, Item
 
1A of
 
the 2021
Annual
 
Report
 
(ii)
 
the
 
risks
 
and
 
hazards
 
inherent
 
in
 
the
 
shell egg
 
business
 
(including
 
disease, pests,
 
weather
 
conditions,
 
and
potential for
 
product recall),
 
(iii) changes
 
in the
 
demand for
 
and market
 
prices of
 
shell eggs
 
and feed
 
costs, (iv)
 
our ability
 
to
predict
 
and
 
meet
 
demand
 
for
 
cage-free
 
and
 
other
 
specialty
 
eggs,
 
(v)
 
risks,
 
changes,
 
or
 
obligations
 
that
 
could
 
result
 
from
 
our
future
 
acquisition
 
of
 
new
 
flocks
 
or
 
businesses
 
and
 
risks
 
or
 
changes
 
that
 
may
 
cause
 
conditions
 
to
 
completing
 
a
 
pending
acquisition not
 
to be
 
met, (vi)
 
risks relating
 
to the
 
evolving COVID-19
 
pandemic, including
 
without limitation
 
increased costs
and growing
 
inflationary rates, 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.
 
(the
 
“Company,”
 
“we,”
 
“us,”
 
“our”)
 
is
 
primarily
 
engaged
 
in
 
the
 
production,
 
grading,
 
packaging,
marketing
 
and
 
distribution
 
of
 
fresh
 
shell
 
eggs.
 
Our
 
operations
 
are
 
fully
 
integrated
 
under
 
one
 
operating
 
segment.
 
We
 
are
 
the
largest producer
 
and distributor
 
of fresh
 
shell eggs
 
in the
 
United States
 
(“U.S.”).
 
Our total flock
 
of approximately
 
42.9 million
layers
 
and
 
9.3
 
million
 
pullets
 
and
 
breeders
 
is
 
the
 
largest
 
in
 
the
 
U.S.
 
We
 
sell
 
most
 
of
 
our
 
shell
 
eggs
 
to
 
a
 
diverse
 
group
 
of
customers, including
 
national and
 
regional grocery
 
store chains,
 
club stores,
 
companies servicing
 
independent supermarkets
 
in
the U.S., food
 
service distributors, and
 
egg product consumers
 
in states across
 
the southwestern, southeastern,
 
mid-western and
mid-Atlantic regions of the U.S.
We
 
are
 
a
 
member
 
of
 
the
 
Eggland’s
 
Best,
 
Inc.
 
(“EB”)
 
cooperative
 
and
 
produce,
 
market
 
and
 
distribute
 
EB
 
and
 
Land
 
O'Lakes
branded
 
eggs,
 
both
 
directly
 
and
 
through
 
our
 
joint
 
ventures
 
Specialty
 
Eggs,
 
LLC
 
and
 
Southwest
 
Specialty
 
Eggs,
 
LLC,
 
under
exclusive
 
license
 
agreements
 
in
 
Alabama,
 
Arizona,
 
Florida,
 
Georgia,
 
Louisiana,
 
Mississippi
 
and
 
Texas,
 
and
 
in
 
portions
 
of
Arkansas, California,
 
Nevada, North
 
Carolina Oklahoma
 
and South
 
Carolina.
 
We
 
also have
 
an exclusive
 
license in
 
New York
City in addition to exclusivity in select New York
 
metropolitan areas, including areas within New Jersey and Pennsylvania.
Our
 
operating
 
results
 
are
 
materially
 
impacted
 
by
 
market
 
prices for
 
eggs
 
and
 
feed
 
grains
 
(corn
 
and
 
soybean
 
meal),
 
which
 
are
highly
 
volatile,
 
independent
 
of
 
each
 
other,
 
and
 
out
 
of
 
our
 
control.
 
Generally,
 
higher
 
market
 
prices
 
for
 
eggs
 
have
 
a
 
positive
impact
 
on
 
our
 
financial
 
results
 
while
 
higher
 
market
 
prices
 
for
 
feed
 
grains
 
have
 
a
 
negative
 
impact
 
on
 
our
 
financial
 
results.
Although we
 
use a
 
variety of
 
pricing mechanisms
 
in pricing
 
agreements with
 
our customers,
 
we sell
 
most of
 
our conventional
shell eggs
 
based on
 
formulas that
 
consider,
 
in varying
 
ways, independently
 
quoted regional
 
wholesale
 
market prices
 
for shell
eggs
 
or
 
formulas
 
related
 
to
 
our
 
costs
 
of
 
production
 
which
 
include
 
the
 
cost
 
of
 
corn
 
and
 
soybean
 
meal.
 
As
 
an
 
example
 
of
 
the
volatility in the market prices
 
of shell eggs, the Urner-Barry
 
White Large, Southeast
 
Regional Egg Market Price per
 
dozen eggs
(“UB southeast large
 
index”) for the first
 
half of fiscal year
 
2022
 
ranged from a low
 
of $1.00 in June
 
2021 to a high of
 
$1.66 in
November 2021.
21
Generally,
 
we purchase
 
primary feed
 
ingredients,
 
mainly corn
 
and soybean
 
meal, at
 
current market
 
prices. Corn
 
and soybean
meal
 
are
 
commodities
 
and
 
are
 
subject
 
to
 
volatile
 
price
 
changes
 
due
 
to
 
weather,
 
various
 
supply
 
and
 
demand
 
factors,
transportation and storage costs, speculators, and agricultural, energy
 
and trade policies in the U.S. and internationally.
 
An important competitive advantage
 
for Cal-Maine Foods is
 
our ability to meet
 
our customers’ evolving needs
 
with a favorable
product
 
mix
 
of
 
conventional
 
and
 
specialty
 
eggs,
 
including
 
cage-free,
 
organic
 
and
 
other
 
specialty
 
offerings,
 
as
 
well
 
as
 
egg
products.
 
We
 
have
 
also
 
enhanced
 
our
 
efforts
 
to
 
provide
 
free-range
 
and
 
pasture-raised
 
eggs
 
that
 
meet
 
consumers’
 
evolving
choice
 
preferences.
 
While
 
a
 
small
 
part
 
of
 
our
 
current
 
business,
 
the
 
free-range
 
and
 
pasture-raised
 
eggs
 
we
 
produce
 
and
 
sell
represent attractive offerings
 
to a subset of
 
consumers,
 
and therefore our customers,
 
and help us continue
 
to serve as the trusted
provider of quality food choices.
Specialty shell
 
eggs have
 
been a
 
significant and
 
growing portion
 
of the
 
market. In
 
recent years,
 
a significant
 
number of
 
large
restaurant chains, food
 
service companies and
 
grocery chains, including
 
our largest customers,
 
announced goals to
 
transition to
an
 
exclusively
 
cage-free
 
egg
 
supply
 
chain
 
by
 
specified
 
future
 
dates.
 
Additionally,
 
several
 
states,
 
representing
 
approximately
24% of the U.S. total population
 
according to the 2020 U.S. Census,
 
have passed legislation requiring
 
that all eggs sold in those
states
 
must
 
be
 
cage-free
 
eggs
 
by
 
specified
 
future
 
dates,
 
and
 
other
 
states
 
are
 
considering
 
such
 
legislation.
 
In
 
California
 
and
Massachusetts, which represent about
 
14% of the total U.S. population
 
according to the 2020 U.S.
 
Census, cage-free legislation
goes into effect
 
January 1, 2022.
 
For additional information,
 
see the 2021
 
Annual Report, Part
 
I, Item 1,
 
“Business – Specialty
Eggs,”
 
“Business
 
 
Growth
 
Strategy”
 
and
 
“Business
 
 
Government
 
Regulation,”
 
and
 
the
 
first
 
risk
 
factor
 
in
 
Part
 
I
 
Item
 
1A,
“Risk Factors” under the sub-heading “Legal and Regulatory Risk Factors.”
Retail
 
sales
 
of
 
shell
 
eggs
 
historically
 
have
 
been
 
highest
 
during
 
the
 
fall
 
and
 
winter
 
months
 
and
 
lowest
 
during
 
the
 
summer
months. Prices
 
for shell
 
eggs fluctuate
 
in response
 
to seasonal
 
demand factors
 
and a
 
natural increase
 
in egg
 
production during
the
 
spring
 
and
 
early
 
summer.
 
Historically,
 
shell
 
egg
 
prices
 
tend
 
to
 
increase
 
with
 
the
 
start
 
of
 
the
 
school
 
year
 
and
 
tend
 
to
 
be
highest
 
prior
 
to
 
holiday
 
periods,
 
particularly
 
Thanksgiving,
 
Christmas,
 
and
 
Easter.
 
Consequently,
 
and
 
all
 
other
 
things
 
being
equal, we would
 
expect to experience
 
lower selling prices, sales
 
volumes and net
 
income (and may incur
 
net losses) in our
 
first
and
 
fourth
 
fiscal
 
quarters
 
ending
 
in
 
August/September
 
and
 
May/June,
 
respectively.
 
Because
 
of
 
the
 
seasonal
 
and
 
quarterly
fluctuations,
 
comparisons
 
of
 
our
 
sales
 
and
 
operating
 
results
 
between
 
different
 
quarters
 
within
 
a
 
single
 
fiscal
 
year
 
are
 
not
necessarily meaningful comparisons.
COVID-19
Since early
 
2020, the
 
coronavirus (“COVID-19”)
 
outbreak, characterized
 
as a
 
pandemic by
 
the World
 
Health Organization
 
on
March
 
11,
 
2020,
 
has
 
caused
 
significant
 
disruptions
 
in
 
international
 
and
 
U.S.
 
economies
 
and
 
markets.
 
We
 
understand
 
the
challenges
 
and
 
difficult
 
economic
 
environment
 
facing
 
families
 
in
 
the
 
communities
 
where
 
we
 
live
 
and
 
work,
 
and
 
we
 
are
committed
 
to
 
helping
 
where
 
we
 
can.
 
We
 
have
 
provided
 
food
 
assistance
 
to
 
those
 
in
 
need
 
by
 
donating
 
approximately
 
479
thousand
 
dozen
 
eggs
 
to
 
date
 
in
 
fiscal
 
2022.
 
We
 
believe
 
we
 
are
 
taking
 
all
 
reasonable
 
precautions
 
in
 
the
 
management
 
of
 
our
operations in
 
response to
 
the COVID-19
 
pandemic. Our
 
top priority
 
is the
 
health and
 
safety of
 
our employees,
 
who work
 
hard
each day
 
to produce
 
eggs for
 
our customers.
 
As part
 
of the
 
nation’s
 
food supply,
 
we work
 
in a
 
critical infrastructure
 
industry,
and
 
we
 
believe
 
we
 
have
 
a
 
special
 
responsibility
 
to
 
maintain
 
our
 
normal
 
work
 
schedule.
 
As
 
such,
 
we
 
are
 
in
 
regular
communication with our managers across our operations and continue
 
to closely monitor the situation in our facilities and in the
communities where we live and work. We
 
have implemented procedures designed to protect our employees, taking
 
into account
guidelines
 
published
 
by
 
the Centers
 
for
 
Disease Control
 
and
 
other
 
government
 
health
 
agencies,
 
and
 
we
 
have
 
strict sanitation
protocols
 
and
 
biosecurity
 
measures
 
in
 
place
 
throughout
 
our
 
operations
 
with
 
restricted
 
access
 
to
 
visitors.
 
There
 
are
 
no known
indications that COVID-19 affects chickens or
 
can be transferred through the food supply.
 
We
 
continue to
 
proactively monitor
 
and manage
 
operations during
 
the COVID-19 pandemic,
 
including additional
 
related costs
that
 
we
 
incurred
 
or
 
may
 
incur
 
in
 
the
 
future.
 
The pandemic
 
had
 
a
 
negative
 
impact
 
on our
 
business
 
through
 
disruptions in
 
the
supply chain such
 
as increased costs and
 
limited availability of packaging
 
supplies, and increased labor
 
costs and medical costs
and, more recently,
 
inflation.
In the
 
second quarters
 
of fiscal
 
2022 and
 
2021, we
 
spent approximately
 
$713 thousand
 
and $612
 
thousand (excluding
 
medical
insurance
 
claims) related
 
to the
 
pandemic
 
and its
 
effects,
 
respectively.
 
The majority
 
of these
 
expenses
 
in fiscal
 
2022 resulted
from additional
 
labor costs
 
and increased
 
cost of
 
packaging materials,
 
primarily reflected
 
in cost
 
of sales.
 
In fiscal
 
2021, most
of
 
these
 
expenses
 
related
 
to
 
additional
 
labor
 
costs.
 
Medical
 
insurance
 
claims
 
related
 
to
 
COVID-19
 
paid
 
during
 
the
 
second
quarter of fiscal
 
2022 were an
 
additional $870
 
thousand as compared
 
to $529 thousand
 
paid in the
 
comparable quarter in
 
fiscal
2021.
22
In the
 
first half
 
of fiscal
 
2022 and
 
2021, we
 
spent approximately
 
$1.3 million
 
and $1.4
 
million
 
(excluding
 
medical insurance
claims)
 
related
 
to
 
the
 
pandemic
 
and
 
its
 
effects,
 
respectively.
 
The
 
majority
 
of
 
these
 
expenses
 
in
 
fiscal
 
2022
 
resulted
 
from
additional
 
labor
 
costs
 
and
 
increased
 
cost
 
of
 
packaging
 
materials,
 
primarily
 
reflected
 
in
 
cost
 
of
 
sales.
 
In
 
fiscal
 
2021,
 
most
 
of
these
 
expenses
 
related
 
to
 
additional
 
labor
 
costs.
 
Medical
 
insurance
 
claims
 
related
 
to
 
COVID-19
 
paid
 
during
 
the
 
first
 
half
 
of
fiscal 2022 were an additional $1.1 million as compared to $818 thousand paid
 
in the comparable period in fiscal 2021.
EXECUTIVE OVERVIEW
For the second quarter of fiscal 2022,
 
we recorded a gross profit of $43.7 million compared to $58.5
 
million for the same period
of
 
fiscal
 
2021,
 
with
 
the
 
decrease
 
due
 
primarily
 
to
 
the
 
higher
 
costs of
 
feed
 
ingredients
 
and
 
higher
 
processing
 
costs.
 
Our
 
total
dozens sold
 
increased 0.9%
 
to 276.1
 
million dozen
 
shell eggs
 
for the
 
second quarter
 
of fiscal
 
2022 compared
 
to 273.7
 
million
dozen for
 
the same
 
period of
 
fiscal 2021.
 
For the
 
second quarter
 
of fiscal
 
2022, conventional
 
dozens sold
 
decreased 4.4%
 
and
specialty dozens sold
 
increased 15.7%
 
as compared to
 
the same quarter
 
in fiscal 2021.
 
Specialty dozens sold
 
increased as more
cage-free facilities came into production which helped increase our
 
cage-free egg sales.
The
 
daily
 
average
 
price
 
for
 
the
 
UB
 
southeast
 
large
 
index
 
for
 
the
 
second
 
quarter
 
of
 
fiscal
 
2022
 
increased
 
14.6%
 
from
 
the
comparable period
 
in the
 
prior year.
 
Our net
 
average selling
 
price per
 
dozen for
 
the second
 
quarter of
 
fiscal 2022
 
was $1.373
compared to $1.227
 
in the prior-year
 
period. Hen numbers
 
reported by the
 
USDA as of December
 
1, 2021, were
 
327.8 million,
which is approximately 913
 
thousand more hens than
 
the comparable period of
 
the prior year.
 
The USDA also reported
 
that the
hatch
 
from
 
July
 
2021
 
through
 
November
 
2021
 
decreased
 
2.0%
 
compared
 
to
 
the
 
prior-year
 
period.
 
As
 
of
 
December 1,
 
2021,
eggs in incubators were down 9% versus the prior-year period.
Our farm
 
production costs
 
per dozen
 
produced for
 
the second
 
quarter of
 
fiscal 2022
 
increased 21.6%,
 
or $0.156,
 
compared to
the second
 
quarter of
 
fiscal 2021.
 
This increase
 
was primarily
 
due to
 
increased prices
 
for feed
 
ingredients. Feed
 
costs started
trending
 
higher
 
midway
 
through
 
the
 
second
 
quarter
 
of
 
fiscal
 
2021
 
and
 
have
 
remained
 
elevated
 
compared
 
to
 
historical
 
costs.
Though these feed costs
 
began trending higher
 
in fiscal 2021, we initially
 
benefitted from filling our
 
storage bins at harvest and
locking in the
 
basis portion of
 
our grain purchases
 
several months in
 
advance,
 
which reduced our
 
feed costs in
 
fiscal 2021. We
did not
 
experience the
 
same benefits
 
in fiscal
 
2022 given
 
sustained elevated
 
feed costs
 
that increased
 
our feed
 
costs compared
to
 
the
 
comparable
 
fiscal
 
2021
 
period.
 
For
 
the
 
second
 
quarter
 
of
 
fiscal
 
2022,
 
the
 
average
 
Chicago
 
Board
 
of
 
Trade
 
(“CBOT”)
daily market
 
price was
 
$5.43 per
 
bushel for
 
corn and
 
$338 per
 
ton for
 
soybean meal,
 
representing an
 
increase of
 
38.4% and
 
a
decrease of
 
5.9%, respectively,
 
compared to
 
the average
 
daily CBOT
 
prices for
 
the comparable
 
period in
 
the prior
 
year.
 
Other
farm
 
production
 
costs for
 
the second
 
quarter
 
of
 
fiscal
 
2022
 
increased
 
11.9%
 
versus
 
the
 
comparable
 
period
 
in
 
the prior
 
fiscal
year, driven by higher flock amortization
 
and facility expense.
Effective
 
May
 
30,
 
2021,
 
we
 
acquired
 
the
 
remaining
 
50%
 
membership
 
interest
 
in
 
Red
 
River
 
Valley
 
Egg
 
Farm,
 
LLC
 
(“Red
River”). Red River owns and operates a specialty shell egg
 
production complex with approximately 1.7 million
 
cage-free laying
hens,
 
cage-free
 
pullet capacity,
 
feed
 
mill, processing
 
plant, related
 
offices
 
and outbuildings
 
and
 
related
 
equipment located
 
on
approximately 400
 
acres near
 
Bogata, Texas.
 
For additional
 
information,
 
see
 
of the
 
Notes to
 
Condensed
Consolidated Financial Statements included in this Quarterly Report.
During October
 
2021, we
 
announced
 
that our
 
Board of
 
Directors approved
 
a strategic
 
investment that
 
will specialize
 
in high-
value
 
commercial
 
product
 
solutions
 
targeting
 
specific
 
needs
 
in
 
the
 
food
 
industry.
 
The
 
initial
 
focus
 
will
 
include
 
hard-cooked
eggs.
 
The
 
new
 
entity,
 
located
 
in
 
Neosho,
 
Missouri,
 
will
 
operate
 
as
 
MeadowCreek
 
Foods,
 
LLC
 
(“MeadowCreek”).
 
We
 
will
capitalize MeadowCreek
 
with up
 
to $18.5
 
million in
 
debt and
 
equity to
 
purchase property
 
and equipment
 
and to
 
fund working
capital,
 
and we
 
will retain
 
a controlling
 
interest in
 
the venture.
 
We
 
will serve
 
as the
 
preferred provider
 
to supply
 
specialty and
conventional
 
eggs
 
that
 
MeadowCreek
 
needs
 
to
 
manufacture
 
egg
 
products.
 
MeadowCreek’s
 
marketing
 
plan
 
is
 
designed
 
to
extend
 
our
 
reach
 
in
 
the
 
foodservice
 
and
 
retail
 
marketplace
 
and
 
bring
 
new
 
opportunities
 
in
 
the
 
restaurant,
 
institutional
 
and
industrial food products arenas.
Also during
 
October 2021,
 
we announced
 
that our
 
Board of
 
Directors
 
approved a
 
$23.0 million
 
capital project
 
to expand
 
our
cage-free egg production
 
at our Okeechobee,
 
Florida, production facility.
 
The project is
 
designed to include
 
the construction of
two cage-free layer
 
houses and one cage-free
 
pullet house with capacity
 
for approximately 400,000
 
cage-free hens and 210,000
pullets, respectively.
 
Construction
 
has commenced,
 
with first
 
pullet placements
 
planned
 
by mid-May
 
2022 and
 
the first
 
layer
house planned
 
to be
 
finished by
 
October 1,
 
2022, with
 
the second
 
layer house
 
and project completion
 
expected by
 
February 1,
2023. The Company
 
plans to fund the
 
project through a combination
 
of available cash on
 
hand, investments and
 
operating cash
flow.
Effective December
 
5, 2021, we made
 
an additional investment
 
in our joint
 
venture Southwest Specialty
 
Eggs, LLC, to acquire
warehouse
 
and
 
distribution
 
capability
 
to
 
expand
 
Southwest
 
Specialty
 
Eggs,
 
LLC’s
 
customer
 
base
 
in the
 
southern
California, Arizona and Nevada markets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23
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.
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 27, 2021
November 28, 2020
November 27, 2021
November 28, 2020
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
88.8
%
83.2
%
93.0
%
88.2
%
Gross profit
11.2
%
16.8
%
7.0
%
11.8
%
Selling, general and administrative
12.2
%
12.6
%
13.1
%
13.7
%
(Gain) loss on disposal of fixed assets
(0.5)
%
%
(0.3)
%
%
Operating income (loss)
(0.5)
%
4.2
%
(5.8)
%
(1.9)
%
Total other income, net
0.6
%
0.4
%
1.2
%
0.5
%
Income (loss) before income taxes
0.1
%
4.6
%
(4.6)
%
(1.4)
%
Income tax (benefit) expense
(0.2)
%
1.1
%
(2.3)
%
(0.4)
%
Net income (loss)
0.3
%
3.5
%
(2.3)
%
(1.0)
%
NET SALES
Total
 
net
 
sales for
 
the
 
second quarter
 
of
 
fiscal
 
2022
 
were $390.9
 
million
 
compared
 
to $347.3
 
million
 
for
 
the same
 
period
 
of
fiscal 2021.
Net
 
shell
 
egg
 
sales
 
represented
 
97.1%
 
of
 
total
 
net
 
sales
 
for
 
the
 
second
 
quarters
 
of
 
fiscal
 
2022
 
and
 
2021.
 
Shell
 
egg
 
sales
classified
 
as “Other”
 
represent
 
sales of
 
hard-cooked
 
eggs,
 
hatching
 
eggs and
 
other
 
miscellaneous
 
products
 
included
 
with
 
our
shell egg operations.
 
Total
 
net
 
sales for
 
the twenty-six
 
weeks
 
ended
 
November 27,
 
2021
 
were
 
$722.6 million,
 
compared
 
to $640.1
 
million
 
for
 
the
comparable period of fiscal 2021.
Net
 
shell
 
egg
 
sales
 
represented
 
97.1%
 
and
 
97.4%
 
of
 
total
 
net
 
sales
 
for
 
the
 
twenty-six
 
weeks
 
ended
 
November
 
27,
 
2021
 
and
November 28, 2020, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24
The table below presents an analysis of our conventional and specialty shell egg
 
sales (in thousands, except percentage data):
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 27, 2021
November 28, 2020
November 27, 2021
November 28, 2020
Total net sales
$
390,903
$
347,328
$
722,607
$
640,110
Conventional
$
223,258
58.8
%
$
201,725
59.8
%
$
405,807
57.8
%
$
357,109
57.3
%
Specialty
155,853
41.1
%
134,082
39.7
%
294,510
42.0
%
263,327
42.2
%
Egg sales, net
379,111
99.9
%
335,807
99.5
%
700,317
99.8
%
620,436
99.5
%
Other
391
0.1
%
1,589
0.5
%
1,523
0.2
%
3,037
0.5
%
Net shell egg sales
$
379,502
100.0
%
$
337,396
100.0
%
$
701,840
100.0
%
$
623,473
100.0
%
Net shell egg sales as a
percent of total net sales
97.1
%
97.1
%
97.1
%
97.4
%
Dozens sold:
Conventional
192,403
69.7
%
201,317
73.6
%
376,890
70.4
%
396,555
73.8
%
Specialty
83,705
30.3
%
72,334
26.4
%
158,603
29.6
%
141,090
26.2
%
Total dozens sold
276,108
100.0
%
273,651
100.0
%
535,493
100.0
%
537,645
100.0
%
Net average selling price per
dozen:
Conventional
$
1.160
$
1.002
$
1.077
$
0.901
Specialty
$
1.862
$
1.854
$
1.857
$
1.866
All shell eggs
$
1.373
$
1.227
$
1.308
$
1.154
Egg products sales:
 
Egg products net sales
11,401
9,932
20,767
16,637
Pounds sold
16,009
15,967
31,278
30,996
Net average selling price per
pound
0.712
0.622
0.664
0.537
Shell egg net sales
Second Quarter – Fiscal 2022 vs. Fiscal 2021
-
In the second quarter of fiscal
 
2022,
 
conventional egg sales increased $21.5
 
million, or 10.7%, compared to
 
the second
quarter of
 
fiscal 2021,
 
primarily due
 
to the
 
increase in
 
price for
 
conventional shell
 
eggs,
 
partially offset
 
by a decrease
in volume
 
of conventional
 
eggs sold.
 
Changes in
 
price resulted
 
in a
 
$30.4 million
 
increase and
 
the change
 
in volume
resulted in a $10.3 million decrease in net sales, respectively.
-
We
 
believe prices
 
for conventional
 
eggs were
 
positively impacted
 
by a
 
decrease in
 
the conventional
 
production layer
hen
 
flock.
 
According
 
to
 
reports from
 
the
 
USDA,
 
as
 
of
 
November
 
1,
 
2021,
 
the
 
estimated
 
number
 
of
 
hens
 
producing
conventional
 
eggs decreased
 
11.3
 
million, or
 
4.6%, versus
 
the prior-year
 
comparable period.
 
In addition,
 
foodservice
demand
 
improved
 
compared
 
to
 
the
 
comparable
 
prior-year
 
period.
 
Lower
 
conventional
 
egg
 
prices
 
in
 
the
 
prior-year
period were
 
primarily tied
 
to a
 
surplus of
 
conventional eggs
 
entering the
 
retail channel
 
from the
 
foodservice channel
during
 
the pandemic.
 
A stronger
 
export market
 
in our
 
second quarter
 
of fiscal
 
2022 also
 
supported
 
conventional egg
prices.
-
The
 
decrease
 
in
 
volume
 
of
 
conventional
 
eggs
 
sold
 
was
 
primarily
 
due
 
to
 
elevated
 
retail
 
demand
 
during
 
the
 
second
quarter
 
of fiscal
 
2021 given
 
consumers’
 
preferences
 
to purchase
 
eggs for
 
in-home
 
meal preparation
 
during
 
the more
restrictive
 
phases
 
of
 
governmental
 
and
 
business
 
shutdowns
 
due
 
to
 
the
 
pandemic.
 
We
 
saw
 
this
 
consumer
 
preference
begin to shift
 
in the fourth quarter
 
of fiscal 2021
 
as consumers began
 
to resume out-of-home
 
dining and prepare
 
fewer
meals at home.
-
Specialty
 
egg
 
sales
 
increased
 
$21.8
 
million,
 
or
 
16.2%,
 
in
 
the
 
second
 
quarter
 
of
 
fiscal
 
2022
 
compared
 
to
 
the
 
second
quarter of
 
fiscal 2021,
 
primarily due
 
to a
 
15.7% increase
 
in the
 
volume of
 
specialty eggs
 
sold, of
 
which resulted
 
in a
$21.2
 
million increase
 
in net
 
sales. Our
 
specialty egg
 
sales in
 
the second
 
quarter of
 
fiscal 2022
 
versus the
 
prior-year
period benefitted from our acquisition of the remaining 50% membership
 
interest in Red River, which helped drive
 
our
cage-free
 
egg
 
retail
 
sales.
 
Our
 
cage-free
 
sales
 
also
 
benefitted
 
from
 
our
 
continued
 
investment
 
in
 
expanded
 
cage-free
 
25
capabilities as additional
 
cage-free production
 
capacity came online
 
during the quarter.
 
Cage-free egg sales
 
comprised
24.0% of our total sales in second quarter fiscal 2022 and 23.8% of total sales fiscal year-to-date.
-
We
 
believe that
 
the demand
 
for specialty
 
eggs has increased
 
as consumers
 
have evolved
 
their preferences
 
to purchase
higher-priced
 
specialty
 
eggs for
 
at-home
 
meal preparation
 
and
 
as retailers
 
have
 
committed
 
to selling
 
more cage-free
products.
Twenty-six weeks – Fiscal 2022
 
vs. Fiscal 2021
-
For
 
the
 
twenty-six
 
weeks
 
ended
 
November
 
27,
 
2021,
 
conventional
 
egg
 
sales
 
increased
 
$48.7
 
million
 
or
 
13.6%
compared
 
to
 
the
 
same
 
period
 
of
 
fiscal
 
2021,
 
primarily
 
due
 
to
 
the
 
increase
 
in
 
price,
 
partially
 
offset
 
by
 
a
 
decrease
 
in
volume of conventional eggs
 
sold. Changes in price resulted in
 
a $66.3 million increase and
 
change in volume resulted
in a $21.2 million decrease in net sales, respectively.
-
We
 
believe prices
 
for conventional
 
eggs were
 
positively impacted
 
by a
 
decrease in
 
the conventional
 
production layer
hen
 
flock.
 
In
 
addition,
 
foodservice
 
demand
 
improved
 
compared
 
to
 
the
 
same
 
period
 
in
 
the
 
prior
 
year.
 
Lower
conventional
 
egg
 
prices
 
in
 
the prior
 
-year
 
period
 
were
 
primarily
 
due
 
to
 
conventional
 
eggs entering
 
the
 
retail
 
channel
from the foodservice channel due to the pandemic.
 
-
The decrease
 
in volume of
 
conventional eggs
 
sold was primarily
 
due to elevated
 
retail demand
 
during the
 
first half
 
of
fiscal
 
2021
 
due
 
to
 
consumers’
 
preferences
 
to
 
purchase
 
eggs for
 
in-home
 
meal
 
preparation
 
due
 
to
 
the
 
pandemic.
 
We
saw this
 
consumer preference
 
begin to
 
shift in
 
the fourth quarter
 
of fiscal
 
2021 as
 
consumers began
 
to resume
 
out-of-
home dining and prepare fewer meals at home.
-
Specialty egg
 
sales increased
 
$31.2 million,
 
or 11.8%,
 
for the
 
twenty-six weeks
 
ended November
 
27, 2021
 
compared
to the
 
same period
 
of fiscal
 
2021, primarily
 
due to
 
a 12.4%
 
increase in
 
the volume
 
of specialty
 
dozens sold,
 
partially
offset by a
 
decrease in specialty egg
 
prices. Changes in price
 
resulted in a $1.4
 
million decrease and
 
change in volume
resulted
 
in
 
a
 
$32.5
 
million
 
increase
 
in
 
net
 
sales,
 
respectively.
 
We
 
also
 
benefitted
 
from
 
our
 
additional
 
cage-free
production capacity.
Egg products net sales
Second Quarter – Fiscal 2022 vs. Fiscal 2021
-
Egg
 
products
 
net
 
sales increased
 
$1.5
 
million
 
or
 
14.8%
 
for
 
the
 
second
 
quarter
 
of
 
fiscal
 
2022
 
compared
 
to
 
the
 
same
period of fiscal
 
2021, primarily due
 
to a 14.5%
 
selling price increase,
 
which had a
 
$1.4 million positive
 
impact on net
sales.
-
Selling
 
prices
 
for
 
egg
 
products
 
in
 
the
 
second
 
quarter
 
of
 
fiscal
 
2021
 
were
 
negatively
 
impacted
 
by
 
a
 
decline
 
in
foodservice demand due to the pandemic.
 
Our egg products net average selling
 
price increased in the second quarter
 
of
fiscal 2022 compared
 
to the same period
 
in fiscal 2021
 
as foodservice channel
 
demand has begun
 
to shift more
 
to pre-
pandemic levels.
Twenty-six weeks – Fiscal 2022
 
vs. Fiscal 2021
-
Egg products
 
net sales
 
increased $4.1
 
million or
 
24.8%, primarily
 
due to
 
a 23.6%
 
selling price
 
increase compared
 
to
the first twenty-six weeks of fiscal 2021, which had a $4.0 million positive
 
impact on net sales.
-
Our egg products net average selling
 
price increased in the twenty-six
 
weeks end November 27, 2021, compared
 
to the
same
 
period
 
in
 
fiscal
 
2021
 
as
 
foodservice
 
channel
 
demand
 
has
 
begun
 
to
 
shift
 
more
 
towards
 
pre-pandemic
 
levels.
Selling
 
prices
 
for
 
egg
 
products
 
in
 
the
 
twenty-six
 
weeks
 
ended
 
November
 
28,
 
2020
 
were
 
negatively
 
impacted
 
by
 
a
decline in
 
foodservice demand
 
during the
 
more restrictive
 
phases of
 
governmental and
 
business shutdowns
 
due to
 
the
pandemic.
COST OF SALES
Costs
 
of
 
sales
 
for
 
the
 
second
 
quarter
 
of
 
fiscal
 
2022
 
were
 
$347.2
 
million
 
compared
 
to
 
$288.9
 
million
 
for
 
the
 
same
 
period
 
of
fiscal
 
2021.
 
For
 
the
 
twenty-six
 
weeks
 
ended
 
November
 
27,
 
2021
 
and
 
November
 
28,
 
2020,
 
total
 
cost
 
of
 
sales
 
were
 
$672.2
million and $564.9 million, respectively.
Cost of
 
sales consists
 
of
 
costs directly
 
related
 
to producing,
 
processing
 
and
 
packing
 
shell eggs,
 
purchases
 
of
 
shell
 
eggs from
outside producers, processing and packing of liquid
 
and frozen egg products and other non-egg costs. Farm
 
production costs are
those costs
 
incurred at
 
the egg production
 
facility,
 
including feed,
 
facility,
 
hen amortization,
 
and other
 
related farm
 
production
costs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26
The following table presents the key variables affecting our cost of
 
sales (in thousands, except cost per dozen data):
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 27,
2021
November 28,
2020
% Change
November 27,
2021
November 28,
2020
% Change
Cost of Sales:
Farm production
$
221,971
$
179,131
23.9
%
$
429,466
$
340,994
25.9
%
Processing, packaging, and
warehouse
69,474
63,505
9.4
134,533
123,374
9.0
Egg purchases and other (including
change in inventory)
46,039
37,625
22.4
90,730
86,558
4.8
Total shell eggs
337,484
280,261
20.4
654,729
550,926
18.8
Egg products
9,672
8,616
12.3
17,486
13,968
25.2
Total
$
347,156
$
288,877
20.2
%
$
672,215
$
564,894
19.0
%
Farm production costs (per dozen
produced)
Feed
$
0.529
$
0.410
29.0
%
$
0.537
$
0.399
34.6
%
Other
$
0.349
$
0.312
11.9
%
$
0.351
$
0.320
9.7
%
Total
$
0.878
$
0.722
21.6
%
$
0.888
$
0.719
23.5
%
Outside egg purchases (average
cost per dozen)
$
1.56
$
1.24
25.8
%
$
1.45
$
1.13
28.3
%
Dozens produced
256,786
251,914
1.9
%
493,244
483,075
2.1
%
Percent produced to sold
93.0%
92.1%
1.0
%
92.1%
89.9%
2.4
%
Farm Production
Second Quarter – Fiscal 2022 vs. Fiscal 2021
-
Feed costs per dozen
 
produced increased 29.0% in
 
the second quarter of fiscal
 
2022 compared to the
 
second quarter of
fiscal 2021.
 
This increase was
 
primarily due
 
to increased prices
 
for corn,
 
our primary feed
 
ingredient. Feed
 
ingredient
costs started trending
 
higher midway
 
through the
 
second quarter
 
of fiscal 2021
 
and have remained
 
elevated compared
to historical costs. Though these feed costs began trending
 
higher in fiscal 2021, we initially benefitted from
 
filling our
storage
 
bins
 
at
 
harvest
 
and
 
locking
 
in
 
the
 
basis
 
portion
 
of
 
our
 
grain
 
purchases
 
several
 
months
 
in
 
advance,
 
which
reduced our
 
feed costs
 
in fiscal
 
2021. As
 
feed costs
 
have remained
 
elevated entering
 
into our
 
second quarter
 
of fiscal
2022, we
 
did not
 
experience the
 
same benefits,
 
which increased
 
our feed
 
costs compared
 
to the
 
same period
 
of fiscal
2021.
-
Other
 
farm
 
production
 
costs increased
 
due
 
to higher
 
flock amortization
 
,
 
primarily
 
from an
 
increase
 
in
 
our
 
cage-free
production, which
 
has higher capitalized
 
costs. Also, our
 
higher feed
 
costs, which began
 
to rise in
 
our third
 
quarter of
fiscal 2021, are capitalized in our flocks during pullet production and
 
increased our amortization expense.
-
We had higher
 
facility expense as more cage-free facilities came into production.
Twenty-six weeks – Fiscal 2022
 
vs. Fiscal 2021
-
Feed costs
 
per dozen
 
produced increased
 
34.6% in
 
the twenty-six
 
weeks ended
 
November 27,
 
2021 compared
 
to the
same period
 
of fiscal
 
2021, primarily
 
due to
 
higher feed
 
ingredient prices
 
resulting from
 
increased export
 
demand, as
well
 
as
 
weather-related
 
shortfalls
 
in
 
production
 
and
 
yields,
 
which
 
have
 
placed
 
additional
 
pressure
 
on
 
domestic
supplies.
-
Other
 
farm
 
production
 
costs increased
 
due
 
to higher
 
flock amortization,
 
primarily
 
from an
 
increase
 
in
 
our
 
cage-free
production,
 
which
 
has
 
higher
 
capitalized
 
costs.
 
Also,
 
higher
 
feed
 
costs,
 
which
 
began
 
to
 
rise
 
in
 
our
 
third
 
quarter
 
of
fiscal 2021, are capitalized in our flocks during pullet production and
 
increased our amortization expense.
-
We had higher
 
facility expense as more cage-free facilities came into production.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
27
Processing, packaging, and warehouse
Second Quarter – Fiscal 2022 vs. Fiscal 2021
-
Cost of packaging
 
materials increased
 
5.3% compared
 
to the second
 
quarter of fiscal
 
2021 as supply
 
chain constraints
caused by the pandemic increased costs for packaging products and manufacturer
 
s
 
implemented pandemic surcharges.
-
Labor costs
 
increased 18.4%
 
due to
 
wage increases
 
in response
 
to labor
 
shortages, primarily
 
due to
 
the pandemic
 
and
its effects.
Twenty-six weeks – Fiscal 2022
 
vs. Fiscal 2021
-
Cost of
 
packaging
 
materials increased
 
7.0%
 
compared
 
to the
 
twenty-six
 
weeks ended
 
November 27,
 
2021 as
 
supply
chain
 
constraints
 
caused
 
by
 
the
 
pandemic
 
increased
 
costs
 
for
 
packaging
 
products
 
and
 
manufacturers
 
implemented
pandemic surcharges.
-
Labor costs
 
increased 14.8%
 
due to
 
wage increases
 
in response
 
to labor
 
shortages, primarily
 
due to
 
the pandemic
 
and
its effects.
Egg purchases and other (including change in inventory)
Second Quarter – Fiscal 2022 vs. Fiscal 2021
-
Costs
 
in
 
this category
 
increased
 
primarily
 
due
 
to
 
higher
 
egg
 
prices,
 
offset
 
slightly
 
by
 
the
 
decrease
 
in
 
the
 
volume
 
of
outside egg purchases, as our percentage of produced to sold increased
 
to 93.0%.
Twenty-six weeks – Fiscal 2022
 
vs. Fiscal 2021
-
Costs
 
in
 
this category
 
increased
 
primarily
 
due
 
to
 
higher
 
egg
 
prices,
 
offset
 
slightly
 
by
 
the
 
decrease
 
in
 
the
 
volume
 
of
outside egg purchases, as our percentage of produced to sold increased
 
to 92.1%.
Looking
 
forward
 
throughout
 
the
 
rest
 
of
 
fiscal
 
2022,
 
corn
 
and
 
soybean
 
supplies
 
remained
 
tight
 
relative
 
to
 
demand,
 
primarily
related
 
to
 
lower
 
carry-out
 
stock.
 
We
 
expect
 
market
 
prices
 
to
 
remain
 
volatile
 
given
 
the
 
ongoing
 
disruptions
 
related
 
to
 
the
COVID-19 global pandemic, weather fluctuations and geopolitical
 
issues.
GROSS PROFIT
 
Gross
 
profit
 
for
 
the second
 
quarter
 
of fiscal
 
2022 was
 
$43.7
 
million
 
compared
 
to $58.5
 
million
 
for
 
the same
 
period of
 
fiscal
2021.
 
The decrease of $14.7 million was primarily due to the increased cost of feed
 
ingredients and processing costs.
Gross
 
profit
 
for
 
the
 
twenty-six
 
weeks
 
ended
 
November
 
27,
 
2021
 
was
 
$50.4
 
million
 
compared
 
to
 
$75.2
 
million
 
for
 
the
 
same
period of fiscal
 
2021. The decrease
 
of $24.8 million
 
was primarily due
 
to the increased
 
cost of feed
 
ingredients and
 
processing
costs.
SELLING, GENERAL, AND ADMINISTRATIVE
 
EXPENSES
Selling,
 
general,
 
and
 
administrative
 
expenses
 
("SGA")
 
include
 
costs
 
of
 
marketing,
 
distribution,
 
accounting,
 
and
 
corporate
overhead. The following table presents an analysis of our SGA expenses (in
 
thousands):
Thirteen Weeks
 
Ended
November 27, 2021
November 28, 2020
$ Change
% Change
Specialty egg expense
$
14,262
$
14,039
$
223
1.6
%
Delivery expense
14,395
13,052
1,343
10.3
%
Payroll, taxes and benefits
11,303
10,030
1,273
12.7
%
Stock compensation expense
975
931
44
4.7
%
Other expenses
6,845
5,821
1,024
17.6
%
Total
$
47,780
$
43,873
$
3,907
8.9
%
Second Quarter – Fiscal 2022 vs. Fiscal 2021
Specialty egg expense
-
Advertising and
 
franchise fees
 
increased in
 
the second
 
quarter of
 
fiscal 2022
 
compared to
 
the second
 
quarter of
 
fiscal
2021,
 
due to increased
 
advertising expense.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28
Delivery expense
-
The increased
 
delivery expense
 
is primarily
 
due to
 
the increase
 
in fuel
 
and labor
 
costs for
 
both our
 
fleet and
 
contract
trucking.
Payroll, taxes and benefits expense
-
The increase in payroll, taxes and benefits is primarily due to an increase
 
in employee health insurance costs.
Other expenses
-
The
 
increase
 
in
 
other
 
expenses
 
is
 
primarily
 
due
 
to
 
increased
 
premiums
 
for
 
property
 
and
 
casualty
 
insurance
 
due
 
to
insurance market conditions.
Twenty-six Weeks
 
Ended
November 27, 2021
November 28, 2020
$ Change
% Change
Specialty egg expense
$
27,977
$
26,736
$
1,241
4.6
%
Delivery expense
28,331
25,546
2,785
10.9
%
Payroll, taxes and benefits
21,242
21,331
(89)
(0.4)
%
Stock compensation expense
1,976
1,824
152
8.3
%
Other expenses
14,779
12,401
2,378
19.2
%
Total
$
94,305
$
87,838
$
6,467
7.4
%
Twenty-six weeks –
 
Fiscal 2022 vs. Fiscal 2021
Specialty egg expense
-
Advertising
 
and
 
franchise
 
fees
 
increased
 
in
 
the
 
twenty-six
 
weeks
 
ended
 
November
 
27,
 
2021
 
compared
 
to
 
the
 
same
period of fiscal 2021 due to increased
 
advertising expense.
 
Delivery expense
-
The increased
 
delivery expense
 
is primarily
 
due to
 
the increase
 
in fuel
 
and labor
 
costs for
 
both our
 
fleet and
 
contract
trucking.
Other expenses
-
The increase
 
in other expenses
 
is primarily due
 
to property losses
 
incurred that
 
were not covered
 
by insurance
 
as well
as increased premiums for property and casualty insurance market
 
conditions.
OPERATING
 
INCOME (LOSS)
For
 
the
 
second
 
quarter
 
of fiscal
 
2022,
 
we
 
recorded
 
an operating
 
loss of
 
$2.1 million
 
compared
 
to operating
 
income of
 
$14.5
million for the same period of fiscal 2021.
For the twenty-six
 
weeks ended
 
November 27,
 
2021, we recorded
 
an operating loss
 
of $41.7
 
million compared
 
to an operating
loss of $12.7 million for the same period of fiscal 2021.
OTHER INCOME (EXPENSE)
 
Total
 
other
 
income
 
(expense)
 
consists
 
of
 
items
 
not
 
directly
 
charged
 
or
 
related
 
to
 
operations,
 
such
 
as
 
interest
 
income
 
and
expense, royalty income, equity income or loss of unconsolidated
 
entities, and patronage income, among other items.
For
 
the
 
second
 
quarter
 
of fiscal
 
2022,
 
we
 
earned
 
$207 thousand
 
of interest
 
income
 
compared
 
to $727
 
thousand
 
for
 
the same
period
 
of
 
fiscal
 
2021.
 
The
 
decrease
 
resulted
 
from
 
significantly
 
lower
 
investment
 
balances.
 
The
 
Company
 
recorded
 
interest
expense
 
of
 
$78
 
thousand
 
and
 
$64
 
thousand
 
for
 
the
 
second
 
quarters
 
ended
 
November
 
27,
 
2021
 
and
 
November
 
28,
 
2020,
respectively.
For the twenty-six
 
weeks ended November 27,
 
2021, we earned $497
 
thousand of interest income
 
compared to $1.7 million
 
for
the
 
same
 
period
 
of
 
fiscal
 
2021.
 
The
 
decrease
 
resulted
 
from
 
significantly
 
lower
 
investment
 
balances.
 
The
 
Company
 
recorded
interest expense
 
of $136
 
thousand and
 
$135 thousand
 
for the
 
twenty-six weeks
 
ended November
 
27, 2021
 
and November
 
28,
2020, respectively.
29
For the second quarter of fiscal 2022, equity
 
income of unconsolidated entities was $264 thousand
 
compared to $58 thousand in
the prior-year period.
For the twenty-six
 
weeks ended November
 
27, 2021, equity
 
income of unconsolidated
 
entities was $399
 
thousand compared
 
to
$14 thousand in the prior-year period.
Other, net
 
for the second quarter
 
ended November 27, 2021,
 
was income of $1.9
 
million compared to income
 
of $436 thousand
for
 
the same
 
period of
 
fiscal 2021,
 
which is
 
primarily
 
due to
 
a $1.4
 
million payment
 
related to
 
review
 
and adjustment
 
of our
various marketing agreements.
Other,
 
net
 
for
 
the
 
twenty-six
 
weeks
 
ended
 
November
 
27,
 
2021,
 
was
 
income
 
of
 
$7.0
 
million
 
compared
 
to
 
income
 
of
 
$948
thousand
 
for
 
the
 
same
 
period
 
of
 
fiscal
 
2021.
 
The
 
majority
 
of
 
the
 
increase
 
is
 
due
 
to
 
our
 
acquisition
 
of
 
the
 
remaining
 
50%
membership
 
interest
 
in
 
Red
 
River
 
as
 
we
 
recognized
 
a
 
$4.5
 
million
 
gain
 
due
 
to
 
the
 
remeasurement
 
of
 
our
 
equity
 
investment,
along with the $1.4 million payment related to review and adjustment of our
 
various marketing agreements.
INCOME TAXES
As of November 27, 2021, we remain under
 
audit by the Internal Revenue Service (IRS) for the fiscal years
 
2013 through 2015.
The IRS
 
has proposed
 
adjustments related
 
to the
 
Company’s
 
research and
 
development credits
 
claimed during
 
the years
 
under
audit. Management is continuing to evaluate those proposed adjustments
 
and does not anticipate the adjustments would result in
a
 
material
 
change
 
to
 
its
 
consolidated
 
financial
 
statements.
 
Using
 
the
 
facts,
 
circumstances
 
and
 
information
 
known
 
at
 
the
reporting date, the Company believes
 
it is reasonably possible an
 
adjustment to the previously recognized
 
tax benefits related to
the research
 
and development
 
credits is
 
necessary.
 
As such,
 
we recorded
 
a tax
 
benefit of
 
approximately $520
 
thousand during
the second quarter of fiscal 2022.
For
 
the
 
second
 
quarter
 
of
 
fiscal
 
2022,
 
pre-tax
 
income
 
was
 
$468
 
thousand
 
compared
 
to
 
$15.9
 
million
 
for
 
the
 
same
 
period
 
of
fiscal
 
2021.
 
We
 
recorded
 
an
 
income
 
tax
 
benefit
 
of
 
$677
 
thousand
 
for
 
the
 
second
 
quarter
 
of
 
fiscal
 
2022,
 
which
 
includes
 
the
discrete tax
 
benefit described
 
above. Excluding
 
the discrete
 
tax benefit,
 
income tax
 
benefit was
 
$157 thousand
 
for the
 
second
quarter
 
of fiscal
 
2022
 
with an
 
adjusted
 
effective
 
tax rate
 
of
 
33.5%.
 
Income
 
tax expense
 
was $3.8
 
million
 
for
 
the comparable
period of fiscal 2021, which reflects an effective tax rate of 23.6%.
For
 
the
 
twenty-six
 
weeks
 
ended
 
November
 
27,
 
2021,
 
pre-tax
 
loss
 
was
 
$33.4
 
million
 
compared
 
to
 
$9.6
 
million
 
for
 
the
 
same
period
 
of
 
fiscal
 
2021.
 
We
 
recorded
 
an
 
income
 
tax
 
benefit
 
of
 
$16.5
 
million,
 
which
 
includes
 
the
 
discrete
 
tax
 
benefit
 
of
 
$8.3
million
 
as discussed
 
in Note
 
2 –
 
Acquisitions
 
of the
 
Notes to
 
Condensed Consolidated
 
Financial
 
Statements in
 
this Quarterly
Report.
 
Excluding
 
the discrete
 
tax
 
benefit,
 
income
 
tax benefit
 
was $8.2
 
million
 
with
 
an adjusted
 
effective
 
tax rate
 
of 24.6%,
compared to $2.4 million for the comparable period of fiscal 2021,
 
which reflects an effective tax rate of 24.6%.
At November
 
27, 2021
 
and May
 
29, 2021,
 
trade and
 
other receivables
 
included income
 
taxes receivables
 
of $42.8
 
million and
$42.5 million, respectively.
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
 
our
noncontrolling interest.
 
NET LOSS
Net income for
 
the second quarter ended
 
November 27, 2021, was
 
$1.2 million, or $0.02
 
per basic and diluted
 
share, compared
to net income of $12.2 million or $0.25 per basic and diluted share for the same
 
period of fiscal 2021.
Net loss for the twenty-six
 
weeks ended November 27, 2021, was
 
$16.9 million, or $0.34 per
 
basic and diluted share, compared
to net loss of $7.2 million or $0.15 per basic and diluted share for the same period of fiscal 2021.
CAPITAL RESOURCES
 
AND LIQUIDITY
Our working
 
capital at
 
November 27,
 
2021 was $364.7
 
million, compared
 
to $429.8
 
million at
 
May 29,
 
2021. The
 
calculation
of
 
working
 
capital
 
is
 
defined
 
as
 
current
 
assets
 
less
 
current
 
liabilities.
 
Our
 
current
 
ratio
 
was
 
4.13
 
at
 
November
 
27,
 
2021,
compared with 5.77 at May 29, 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30
We
 
had
 
no long
 
-term
 
debt
 
outstanding
 
at
 
November
 
27,
 
2021
 
or May
 
29,
 
2021.
 
On November
 
15, 2021,
 
we
 
entered
 
into an
Amended and Restated
 
Credit Agreement (the
 
“Credit Agreement”) with
 
a five-year term.
 
The Credit Agreement
 
amended and
restated
 
the
 
Company’s
 
previously
 
existing
 
credit
 
agreement
 
dated
 
July
 
10,
 
2018.
 
The
 
Credit
 
Agreement
 
provides
 
for
 
an
increased senior
 
secured revolving
 
credit facility
 
(the “Credit Facility”),
 
in an
 
initial aggregate
 
principal amount
 
of up
 
to $250
million. As
 
of November
 
27, 2021,
 
no amounts
 
were borrowed
 
under the
 
Credit Facility.
 
We
 
have $4.1
 
million in
 
outstanding
standby
 
letters
 
of
 
credit,
 
issued
 
under
 
our
 
Credit
 
Facility
 
for
 
the
 
benefit
 
of
 
certain
 
insurance
 
companies.
 
For
 
additional
information,
 
see
Note
 
7
 
 
Credit
 
Facility
 
of
 
the
 
Notes
 
to
 
Condensed
 
Consolidated
 
Financial
 
Statements
 
included
 
in
 
this
Quarterly Report.
 
For the
 
twenty-six
 
weeks ended
 
November
 
27,
 
2021, $15.5
 
million
 
in net
 
cash was
 
used
 
in operating
 
activities, compared
 
to
$10.7 million
 
used in
 
operating activities
 
for the
 
comparable period
 
in fiscal
 
2021.
 
This is
 
primarily due
 
to the
 
increased costs
of feed ingredients compared to the prior-year period.
We
 
continue
 
to invest
 
in our
 
facilities,
 
with
 
$28.6
 
million used
 
to purchase
 
property,
 
plant and
 
equipment
 
for
 
the
 
twenty-six
weeks ended November 27,
 
2021, compared to $52.4 million
 
in the same period of fiscal
 
2021.
 
We also
 
acquired the remaining
50%
 
membership
 
interest
 
in
 
Red
 
River
 
during
 
our
 
first
 
quarter
 
of
 
fiscal
 
2022
 
for
 
$48.5
 
million.
 
Sales
 
and
 
maturities
 
of
investment
 
securities, net
 
of purchases,
 
were $41.5
 
million for
 
the twenty-six
 
weeks ended
 
November 27,
 
2021, compared
 
to
$29.4
 
million
 
for
 
the
 
comparable
 
period
 
in
 
fiscal
 
2021.
 
We
 
received
 
$400
 
thousand
 
in
 
distributions
 
from
 
an
 
unconsolidated
entity in the first two quarters of fiscal 2022 compared to $2.70 million for
 
the same period fiscal of 2021.
 
As of
 
November 27,
 
2021, cash
 
decreased $41.9
 
million since
 
May 29,
 
2021, compared
 
to a
 
decrease of
 
$30.8 million
 
during
the same period of fiscal 2021.
We
 
continue
 
to monitor
 
the increasing
 
demand for
 
cage-free eggs
 
and to
 
engage with
 
our customers
 
in an
 
effort
 
to achieve
 
a
smooth transition to
 
meet their announced
 
commitment timeline for
 
cage-free egg sales.
 
We
 
have invested approximately
 
$488
million in facilities, equipment
 
and related operations to
 
expand our cage-free production
 
starting with our first facility
 
in 2008.
During
 
October
 
2021,
 
we
 
announced
 
a
 
new
 
$23.0
 
million
 
capital
 
project
 
to
 
expand
 
our
 
cage-free
 
egg
 
production
 
at
 
our
Okeechobee,
 
Florida,
 
production
 
facility,
 
and
 
a
 
new
 
planned
 
$18.5
 
million
 
strategic
 
investment
 
that
 
will
 
specialize
 
in
 
high
value
 
commercial
 
product
 
solutions
 
targeting
 
specific
 
needs
 
in
 
the
 
food
 
industry.
 
See
 
 
for
 
additional
information. The following table presents material construction
 
projects approved as of November 27, 2021 (in thousands):
Project(s) Type
Projected
 
Completion
Projected Cost
Spent as of
 
November 27, 2021
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2022
132,443
104,477
27,966
Cage-Free Layer & Pullet Houses
Fiscal 2023
23,771
11
23,760
$
156,214
$
104,488
$
51,726
We believe our
 
current cash balances, investments, cash flows from operations, and Credit Facility will be sufficient
 
to fund our
current capital needs.
 
RECENTLY
 
ISSUED/ADOPTED ACCOUNTING STANDARDS
For
 
information
 
on
 
changes
 
in
 
accounting
 
principles
 
and
 
new
 
accounting
 
policies,
 
see
 
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly
 
Report.
CRITICAL ACCOUNTING ESTIMATES
 
Critical accounting
 
estimates
 
are those
 
estimates
 
made
 
in accordance
 
with U.S.
 
generally
 
accepted
 
accounting
 
principles that
involve
 
a
 
significant
 
level
 
of
 
estimation
 
uncertainty
 
and
 
have
 
had
 
or
 
are
 
reasonably
 
likely
 
to
 
have
 
a
 
material
 
impact
 
on
 
our
financial
 
condition
 
or results
 
of operations.
 
There
 
have been
 
no changes
 
to our
 
critical accounting
 
estimates identified
 
in our
2021 Annual Report.
31
ITEM 3. QUANTITATIVE
 
AND QUALITATIVE
 
DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk during the
 
twenty-six weeks ended November 27, 2021
from the information provided in Item 7A. Quantitative and Qualitative
 
Disclosures About Market Risk in our 2021 Annual
Report.
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 November 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 November
 
27, 2021
that has materially affected, or is reasonably likely to materially affect,
 
our internal control over financial reporting.
PART
 
II. OTHER INFORMATION
ITEM 1.
 
LEGAL PROCEEDINGS
Refer
 
to
 
the
 
discussion
 
of
 
certain
 
legal
 
proceedings
 
involving
 
the
 
Company
 
and/or
 
its
 
subsidiaries
 
in
 
(i)
 
our
 
2021
 
Annual
Report,
 
Part I
 
Item 3:
 
Legal Proceedings,
 
and
 
Part II
 
Item 8,
 
Notes to
 
Consolidated
 
Financial
 
Statements and
 
Supplementary
Data, Note 18: Commitments
 
and Contingencies, and
 
(ii) in this Quarterly
 
Report in
of the Notes to Condensed Consolidated Financial Statements, which discussions are incorporated
 
herein by reference.
 
ITEM 1A.
 
RISK
FACTORS
There have been no material changes in the risk factors previously disclosed in the
 
Company’s 2021 Annual
 
Report.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
 
PROCEEDS
 
There were
 
no purchases
 
of our
 
Common Stock
 
made by
 
or on
 
behalf of
 
our Company
 
or any
 
affiliated
 
purchaser during
 
the
second quarter of fiscal 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32
ITEM 6. EXHIBITS
Exhibits
No.
Description
3.1
3.2
10.1
10.2
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:
 
December 28, 2021
/s/ Max P.
 
Bowman
Max P.
 
Bowman
Vice President, Chief Financial
 
Officer
(Principal Financial Officer)
Date:
 
December 28, 2021
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)