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

calm-20210227
 
 
 
 
1
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington,
 
DC
 
20549
 
FORM
10-Q
 
 
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
 
Act of 1934
 
For the quarterly period ended
August 28, 2021
 
 
or
 
 
 
Transition report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from ____________ to ____________
 
Commission File Number:
 
001-38695
 
 
CAL-MAINE FOODS, INC
.
(Exact name of registrant as specified in its charter)
 
Delaware
 
64-0500378
(State or other jurisdiction of incorporation or organization)
 
(I.R.S Employer Identification No.)
 
1052 Highland Colony Pkwy
,
Suite 200
,
Ridgeland
,
Mississippi
 
39157
 
(Address of principal executive offices)
 
(Zip Code)
 
(
601
)
948-6813
 
(Registrant’s telephone number,
 
including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
CALM
The
NASDAQ
 
Global Select Market
 
Indicate
 
by
 
check
 
mark
 
whether
 
the
 
registrant:
 
(1)
 
has
 
filed
 
all
 
reports
 
required
 
to
 
be
 
filed
 
by
 
Section
 
13
 
or
 
15(d)
 
of
 
the
Securities Exchange
 
Act of 1934
 
during the preceding
 
12 months (or
 
for such
 
shorter period that
 
the registrant was
 
required to
file such reports), and (2) has been subject to such filing requirements for the past
 
90 days.
Yes
 
No
 
 
Indicate by check
 
mark whether the
 
registrant has submitted
 
electronically every
 
Interactive Data File
 
required to be
 
submitted
pursuant to
 
Rule 405
 
of Regulation
 
S-T (§232.405
 
of this
 
chapter) during
 
the preceding
 
12 months
 
(or for
 
such shorter
 
period
that the registrant was required to submit such files).
 
Yes
 
No
 
 
Indicate by
 
check mark
 
whether the registrant
 
is a large
 
accelerated filer,
 
an accelerated
 
filer, a
 
non-accelerated filer,
 
a smaller
reporting
 
company,
 
or
 
an
 
emerging
 
growth
 
company.
 
See
 
the
 
definitions
 
of
 
“large
 
accelerated
 
filer,”
 
“accelerated
 
filer”,
“smaller reporting company”, and “emerging growth
 
company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer
Accelerated filer
 
Non – Accelerated filer
 
Smaller reporting company
 
Emerging growth company
 
If
 
an
 
emerging
 
growth
 
company,
 
indicate
 
by
 
check
 
mark
 
if
 
the
 
registrant
 
has
 
elected
 
not
 
to
 
use
 
the
 
extended
transition
 
period
 
for
 
complying
 
with
 
any
 
new
 
or
 
revised
 
financial
 
accounting
 
standards
 
provided
 
pursuant
 
to
Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a shell company (as defined
 
in Rule 12b-2 of the Exchange Act).
Yes
 
No
 
 
There were
 
44,057,329
 
shares of Common
 
Stock, $0.01 par
 
value, and
4,800,000
 
shares of Class A
 
Common Stock, $0.01
 
par
value,
 
outstanding as of September 28, 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
PART
 
I.
 
FINANCIAL
 
INFORMATION
ITEM 1.
 
FINANCIAL STATEMENTS
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except for par value amounts)
 
 
August 28, 2021
May 29, 2021
Assets
Current assets:
Cash and cash equivalents
$
16,684
$
57,352
Investment securities available-for-sale
73,666
112,158
Trade and other receivables, net
134,400
126,639
Inventories
226,470
218,375
Prepaid expenses and other current assets
9,249
5,407
Total current
 
assets
460,469
519,931
Property, plant &
 
equipment, net
667,963
589,417
Finance lease right-of-use asset, net
486
525
Operating lease right-of-use asset, net
1,533
1,724
Investments in unconsolidated entities
10,722
54,941
Goodwill
44,006
35,525
Intangible assets, net
19,798
20,341
Other long-term assets
6,753
6,770
Total Assets
$
1,211,730
$
1,229,174
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
96,709
$
89,191
Current portion of finance lease obligation
217
215
Current portion of operating lease obligation
617
691
Total current
 
liabilities
97,543
90,097
Long-term finance lease obligation
383
438
Long-term operating lease obligation
916
1,034
Other noncurrent liabilities
10,325
10,416
Deferred income taxes
106,996
114,408
Total liabilities
216,163
216,393
Commitments and contingencies - see
Note 13
0
 
0
 
Stockholders’ equity:
Common stock ($
0.01
 
par value):
Common stock - authorized
120,000
 
shares, issued
70,261
 
shares
703
703
Class A convertible common stock - authorized and issued
4,800
 
shares
48
48
Paid-in capital
65,044
64,044
Retained earnings
957,951
975,977
Accumulated other comprehensive loss, net of tax
(728)
(558)
Common stock in treasury at cost –
26,203
 
shares at August 28, 2021 and
26,202
 
shares
at May 29, 2021
(27,451)
(27,433)
Total stockholders’
 
equity
995,567
1,012,781
Total Liabilities and Stockholders’
 
Equity
$
1,211,730
$
1,229,174
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
 
Thirteen Weeks
 
Ended
August 28, 2021
August 29, 2020
Net sales
$
331,704
$
292,782
Cost of sales
325,059
276,017
Gross profit
6,645
16,765
Selling, general and administrative
46,525
43,965
(Gain) loss on disposal of fixed assets
(213)
23
Operating loss
(39,667)
(27,223)
Other income (expense):
Interest income, net
232
925
Royalty income
273
305
Equity income (loss) of unconsolidated entities
135
(44)
Other, net
5,163
512
Total other
 
income, net
5,803
1,698
Loss before income taxes
(33,864)
(25,525)
Income tax benefit
(15,838)
(6,126)
Net loss
$
(18,026)
$
(19,399)
Net loss per common share:
Basic
$
(0.37)
$
(0.40)
Diluted
$
(0.37)
$
(0.40)
Weighted average
 
shares outstanding:
Basic
48,858
48,501
Diluted
48,858
48,501
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
 
Comprehensive Loss
(in thousands)
(unaudited)
 
 
Thirteen Weeks
 
Ended
August 28, 2021
August 29, 2020
Net loss
$
(18,026)
 
$
 
(19,399)
Other comprehensive income (loss), before tax:
Unrealized holding gain (loss) on available-for-sale securities, net
 
of reclassification
adjustments
(224)
468
Income tax benefit (expense) related to items of other comprehensive income
54
(114)
Other comprehensive income (loss), net of tax
(170)
354
Comprehensive loss
$
(18,196)
$
(19,045)
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
Thirteen Weeks
 
Ended
August 28, 2021
August 29, 2020
Operating activities:
Net loss
$
(18,026)
$
(19,399)
Depreciation and amortization
17,389
14,744
Deferred income taxes
(15,838)
(6,126)
Other adjustments, net
(7,637)
(4,019)
Net cash used in operations
(24,112)
(14,800)
Investing activities:
Purchases of investment securities
(1,388)
(24,195)
Sales and maturities of investment securities
39,388
28,231
Distributions from unconsolidated entities
400
650
Acquisition of business, net of cash acquired
(44,823)
Purchases of property,
 
plant and equipment
(11,233)
(25,338)
Net proceeds from disposal of property,
 
plant and equipment
1,171
181
Net cash used in investing activities
(16,485)
(20,471)
Financing activities:
Purchase of common stock by treasury
(18)
Principal payments on finance lease
(53)
(50)
Net cash used in financing activities
(71)
(50)
Net change in cash and cash equivalents
(40,668)
(35,321)
Cash and cash equivalents at beginning of period
57,352
78,130
Cash and cash equivalents at end of period
$
16,684
 
$
 
42,809
Supplemental Information:
Cash paid for operating leases
$
217
$
237
Interest paid
$
62
 
$
 
65
See Notes to Condensed Consolidated Financial Statements.
 
7
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
 
Note 1 - Summary of Significant Accounting Policies
 
Basis of Presentation
 
The
 
unaudited
 
condensed
 
consolidated
 
financial
 
statements
 
of
 
Cal-Maine
 
Foods,
 
Inc.
 
and
 
its
 
subsidiaries
 
(the
 
"Company,"
"we,"
 
"us,"
 
"our")
 
have
 
been
 
prepared
 
in
 
accordance
 
with
 
the
 
instructions
 
to
 
Form
 
10-Q
 
and
 
Article
 
10
 
of
 
Regulation
 
S-X.
Therefore, they
 
do not
 
include all of
 
the information
 
and footnotes
 
required by
 
generally accepted
 
accounting principles
 
in the
United
 
States
 
of
 
America
 
("GAAP")
 
for
 
complete
 
financial
 
statements
 
and
 
should
 
be
 
read
 
in
 
conjunction
 
with
 
our
 
Annual
Report
 
on
 
Form
 
10-K
 
for
 
the
 
fiscal
 
year
 
ended
 
May
 
29,
 
2021
 
(the
 
"2021
 
Annual
 
Report").
 
These
 
statements
 
reflect
 
all
adjustments that are, in
 
the opinion of management, necessary
 
to a fair statement of
 
the results for the interim
 
periods presented
and,
 
in
 
the
 
opinion
 
of
 
management,
 
consist
 
of
 
adjustments
 
of
 
a
 
normal
 
recurring
 
nature.
 
Operating
 
results
 
for
 
the
 
interim
periods are not necessarily indicative of operating results for the entire fiscal
 
year.
 
Fiscal Year
 
The Company's fiscal
 
year ends on
 
the Saturday closest
 
to May 31.
 
Each of the three-month
 
periods ended on
 
August 28, 2021
and August 29, 2020 included 13 weeks.
 
Use of Estimates
 
The preparation of the
 
consolidated financial statements in
 
conformity with GAAP requires management
 
to make estimates and
assumptions
 
that affect
 
the amounts
 
reported in
 
the consolidated
 
financial statements
 
and accompanying
 
notes. Actual
 
results
could differ from those estimates.
 
The severity,
 
magnitude and duration, as well as
 
the economic consequences of the COVID-19
 
pandemic, are uncertain, rapidly
changing
 
and
 
difficult
 
to
 
predict.
 
Therefore,
 
our
 
accounting
 
estimates
 
and
 
assumptions
 
might
 
change
 
materially
 
in
 
future
periods in response to COVID-19.
 
Investment Securities
 
Our investment
 
securities are
 
accounted
 
for in
 
accordance with
 
ASC 320,
 
“Investments -
 
Debt and
 
Equity Securities”
 
(“ASC
320”).
 
The
 
Company
 
considers
 
all
 
its
 
debt
 
securities
 
for
 
which
 
there
 
is
 
a
 
determinable
 
fair
 
market
 
value,
 
and
 
there
 
are
 
no
restrictions
 
on
 
the
 
Company's
 
ability
 
to
 
sell
 
within
 
the
 
next
 
12
 
months,
 
as
 
available-for-sale.
 
We
 
classify
 
these
 
securities
 
as
current, because the
 
amounts invested are available
 
for current operations.
 
Available-for-sale
 
securities are carried at
 
fair value,
with unrealized
 
gains and
 
losses reported
 
as a
 
separate
 
component
 
of stockholders’
 
equity.
 
The Company
 
regularly
 
evaluates
changes to
 
the rating of
 
its debt securities
 
by credit
 
agencies and economic
 
conditions to assess
 
and record
 
any expected cre
 
dit
losses through allowance
 
for credit losses,
 
limited to the
 
amount that fair value
 
was less than the
 
amortized cost basis. The
 
cost
basis for realized gains and
 
losses on available-for-sale securities is
 
determined by the specific identification
 
method. Gains and
losses
 
are
 
recognized
 
in
 
other
 
income
 
(expenses)
 
as
 
Other,
 
net
 
in
 
the
 
Company's
 
Condensed
 
Consolidated
 
Statements
 
of
Operations. Investments
 
in mutual
 
funds are
 
classified as
 
“Other long-term
 
assets” in
 
the Company’s
 
Condensed Consolidated
Balance Sheets.
 
Trade Receivables
 
 
Trade receivables
 
are stated at their
 
carrying values, which
 
include a reserve for
 
credit losses. At August
 
28, 2021 and May
 
29,
2021, reserves for credit losses were
 
$
583
 
thousand and $
795
 
thousand, respectively.
 
The Company extends credit to
 
customers
based
 
on
 
an
 
evaluation
 
of
 
each
 
customer's
 
financial
 
condition
 
and
 
credit
 
history.
 
Collateral
 
is
 
generally
 
not
 
required.
 
The
Company
 
minimizes exposure
 
to counter
 
party credit
 
risk through
 
credit analysis
 
and approvals,
 
credit limits,
 
and monitoring
procedures.
 
In determining
 
our
 
reserve for
 
credit losses,
 
receivables
 
are pooled
 
according
 
to age,
 
with
 
each pool
 
assigned
 
an
expected loss based on historical loss information adjusted as needed for economic
 
and other forward-looking factors.
 
Business Combinations
 
The
 
Company
 
applies fair
 
value
 
accounting
 
guidance
 
to
 
measure
 
non-financial
 
assets and
 
liabilities
 
associated
 
with
 
business
acquisitions.
 
These
 
assets
 
and
 
liabilities
 
are
 
measured
 
at
 
fair
 
value
 
for
 
the
 
initial
 
purchase price
 
allocation.
 
The
 
fair
 
value
 
of
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
non-financial
 
assets
 
acquired
 
is
 
determined
 
internally. Our
 
internal
 
valuation
 
methodology
 
for
 
non-financial
 
assets
 
takes
 
into
account the remaining estimated life of the assets acquired and what management
 
believes is the market value for those assets.
 
Change in Accounting Principle
 
Effective
 
May
 
31,
 
2020,
 
the
 
Company
 
adopted
 
ASU
 
2016-13,
 
Financial
 
Instruments
 
 
Credit
 
Losses
 
(Topic
 
326),
 
which
 
is
intended
 
to
 
improve
 
financial
 
reporting
 
by
 
requiring
 
more
 
timely
 
recording
 
of
 
credit
 
losses
 
on
 
loans
 
and
 
other
 
financial
instruments held by financial institutions and other organizations.
 
The guidance replaces the prior “incurred loss” approach with
an “expected
 
loss” model
 
and requires
 
measurement of
 
all expected
 
credit losses
 
for financial
 
assets held
 
at the
 
reporting date
based
 
on
 
historical
 
experience,
 
current
 
conditions,
 
and
 
reasonable
 
and
 
supportable
 
forecasts.
 
The
 
Company
 
adopted
 
the
guidance on
 
a modified
 
retrospective basis
 
through a
 
cumulative effect
 
adjustment
 
to retained
 
earnings as
 
of the
 
beginning of
the period of
 
adoption. The Company
 
evaluated its current
 
methodology of
 
estimating allowance for
 
doubtful accounts and
 
the
risk
 
profile
 
of
 
its
 
receivables
 
portfolio
 
and
 
developed
 
a
 
model
 
that
 
includes
 
the
 
qualitative
 
and
 
forecasting
 
aspects
 
of
 
the
“expected
 
loss”
 
model
 
under
 
the
 
amended
 
guidance.
 
The
 
Company
 
finalized
 
its
 
assessment
 
of
 
the
 
impact
 
of
 
the
 
amended
guidance and recorded a $
422
 
thousand cumulative increase to retained earnings at May 31, 2020.
 
Note 2 – Acquisitions
 
Effective
 
on
 
May
 
30,
 
2021,
 
the
 
Company
 
acquired
 
the
 
remaining
50
%
 
membership
 
interest
 
in
 
Red
 
River
 
Valley
 
Egg
 
Farm,
LLC (“Red River”)
 
,
 
including certain
 
liabilities. As a
 
result of
 
the acquisition, the
 
entity became a
 
wholly owned
 
subsidiary of
the Company.
 
Red River owns and
 
operates a specialty
 
shell egg production
 
complex with approximately
1.7
 
million cage-free
laying
 
hens,
 
cage-free
 
pullet
 
capacity,
 
feed
 
mill,
 
processing
 
plant,
 
related
 
offices
 
and
 
outbuildings
 
and
 
related
 
equipment
located on approximately
400
 
acres near Bogata, Texas.
 
Pending the
 
finalization of
 
the Company’s
 
valuation, the
 
following table
 
summarizes the
 
consideration paid
 
for Red
 
River and
the amounts of the assets acquired and liabilities assumed recognized at
 
the acquisition date:
 
Cash consideration paid
$
48,500
Fair value of the Company's equity interest in Red River held before the business combination
48,500
$
97,000
Recognized amounts of identifiable assets acquired and
 
liabilities assumed
Cash
$
3,677
Accounts receivables, net
1,980
Inventory
8,789
Property, plant and equipment
85,002
Liabilities assumed
(2,448)
Deferred income taxes
(8,481)
Total identifiable
 
net assets
88,519
Goodwill
8,481
$
97,000
 
Cash and
 
accounts receivables
 
acquired along
 
with liabilities
 
assumed were
 
valued at
 
their carrying
 
value which
 
approximates
fair value due to the short maturity of these instruments.
 
Inventory consisted
 
primarily of
 
flock and feed
 
ingredients. Inventory
 
and property,
 
plant and equipment
 
were valued
 
utilizing
the cost approach.
 
The Company
 
recognized
 
a gain
 
of $
4.5
 
million
 
as a
 
result of
 
remeasuring
 
to fair
 
value its
50
% equity
 
interest in
 
Red
 
River
held before the business combination. The gain
 
was recorded in other income and expense under the
 
heading “Other, net” in the
Company’s
 
Condensed Consolidated
 
Statements of
 
Operations. The
 
acquisition of
 
Red River
 
resulted in
 
a discrete
 
tax benefit
of $
8.3
 
million which
 
includes $
7.3
 
million decrease
 
in deferred
 
income tax
 
expense related
 
to the
 
outside-basis of
 
our equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9
investment
 
in
 
Red
 
River,
 
with
 
a
 
corresponding
 
non-recurring,
 
non-cash
 
$
954,000
 
reduction
 
to
 
income
 
taxes
 
expense
 
on
 
the
non-taxable
 
remeasurement
 
gain
 
associated
 
with
 
the
 
acquisition.
 
As
 
part
 
of
 
the
 
acquisition
 
accounting,
 
the
 
Company
 
also
recorded a $
8.5
 
million deferred tax liability
 
for the difference
 
in the inside-basis
 
of the acquired
 
assets and liabilities assumed.
The recognition
 
of deferred
 
tax liabilities resulted
 
in the
 
recognition of
 
goodwill. None
 
of the goodwill
 
recognized is
 
expected
to be deductible for income tax purposes.
 
Note 3 - Investment
 
Securities
 
The following represents the Company’s
 
investment securities as of August 28, 2021 and May 29, 2021 (in
 
thousands):
 
August 28, 2021
Amortized
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
16,828
$
102
$
$
16,930
Commercial paper
1,999
1,999
Corporate bonds
45,545
334
45,879
Certificates of deposits
Asset backed securities
8,865
7
8,858
Total current
 
investment securities
$
73,237
$
436
$
7
$
73,666
Mutual funds
$
2,306
$
1,810
$
$
4,116
Total noncurrent
 
investment securities
$
2,306
$
1,810
$
$
4,116
 
May 29, 2021
Amortized
 
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
16,424
$
56
$
$
16,480
Commercial paper
1,998
1,998
Corporate bonds
80,092
608
80,700
Certificates of deposits
1,077
1
1,076
Asset backed securities
11,914
10
11,904
Total current
 
investment securities
$
111,505
$
664
$
11
$
112,158
Mutual funds
$
2,306
$
1,810
$
$
4,116
Total noncurrent
 
investment securities
$
2,306
$
1,810
$
$
4,116
 
Available-for-sale
 
Proceeds from
 
sales and
 
maturities of
 
investment securities
 
available-for-sale
 
were $
39.4
 
million and
 
$
28.2
 
million during
 
the
thirteen
 
weeks
 
ended August
 
28,
 
2021
 
and
 
August
 
29,
 
2020,
 
respectively.
 
Gross
 
realized
 
gains
 
for
 
the
 
thirteen
 
weeks
 
ended
August 28, 2021 and August 29, 2020 were $
127
 
thousand and $
28
 
thousand, respectively.
 
Gross realized losses for the thirteen
weeks ended August
 
28, 2021 were
 
$
60
 
thousand. There were
no
 
gross realized losses
 
for the thirteen
 
weeks ended August
 
29,
2020. There were
no
 
allowances for credit losses at August 28, 2021 and May 29, 2021.
 
Actual maturities
 
may differ
 
from contractual
 
maturities as some
 
borrowers have
 
the right to
 
call or prepay
 
obligations with
 
or
without penalties. Contractual maturities of current investments at August
 
28, 2021 are as follows (in thousands):
 
Estimated Fair Value
Within one year
$
30,395
1-5 years
43,271
Total
$
73,666
 
Noncurrent
 
 
Proceeds
 
from
 
sales
 
and
 
maturities
 
of
 
noncurrent
 
investment
 
securities
 
were
 
$
385
 
thousand
 
during
 
the
 
thirteen
 
weeks
ended August 28, 2021.
 
Gross realized gains for
 
the thirteen weeks ended
 
August 28, 2021 were
 
$
130
 
thousand. There were
no
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10
sales of
 
noncurrent
 
investment securities
 
during
 
the thirteen
 
weeks ended
 
August 29,
 
2020. There
 
were
no
 
realized losses
 
for
the thirteen weeks ended August 28, 2021 and August 29, 2020.
 
Note 4 - Fair Value
 
Measurements
 
 
The Company
 
is required
 
to categorize
 
both financial
 
and nonfinancial
 
assets and
 
liabilities based
 
on the
 
following fair
 
value
hierarchy. The
 
fair value
 
of an
 
asset is
 
the price
 
at which
 
the asset
 
could be
 
sold in
 
an orderly
 
transaction between
 
unrelated,
knowledgeable, and willing
 
parties able to engage in
 
the transaction. A liability’s
 
fair value is defined
 
as the amount that would
be
 
paid
 
to
 
transfer
 
the
 
liability
 
to
 
a
 
new
 
obligor
 
in
 
a
 
transaction
 
between
 
such
 
parties,
 
not
 
the
 
amount
 
that
 
would
 
be paid
 
to
settle the liability with the creditor.
 
 
Level 1
 
- Quoted prices in active markets for identical assets or liabilities
 
Level 2
 
- Inputs
 
other than
 
quoted
 
prices included
 
in Level
 
1 that
 
are observable
 
for the
 
asset or
 
liability,
 
either
directly or indirectly,
 
including:
 
Quoted prices for similar assets or liabilities in active markets
 
Quoted prices for identical or similar assets in non-active markets
 
Inputs other than quoted prices that are observable for the asset or liability
 
Inputs derived principally from or corroborated by other observable market
 
data
 
Level 3
 
- Unobservable inputs for the asset or liability that are
 
supported by little or no market activity and that
 
are
significant to the fair value of the assets or liabilities
 
The disclosures of fair value of certain financial assets and liabilities that are recorded
 
at cost are as follows:
Cash and cash equivalents, accounts receivable,
 
and accounts payable:
 
The carrying amount approximates fair value due to the
short maturity of these instruments.
 
 
Lease obligations:
 
The carrying value of the Company’s lease obligations
 
is at its present value which approximates fair value.
 
 
Assets and Liabilities Measured at Fair
 
Value
 
on a Recurring Basis
 
In
 
accordance
 
with
 
the
 
fair
 
value
 
hierarchy
 
described
 
above,
 
the
 
following
 
table
 
shows
 
the
 
fair
 
value
 
of
 
financial
 
assets and
liabilities measured at fair value on a recurring basis as of August 28, 2021 and May 29,
 
2021 (in thousands):
 
August 28, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
16,930
$
$
16,930
Commercial paper
1,999
1,999
Corporate bonds
45,879
45,879
Certificates of deposits
Asset backed securities
8,858
8,858
Mutual funds
4,116
4,116
Total assets measured at fair
 
value
$
4,116
$
73,666
$
$
77,782
 
May 29, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
16,480
$
$
16,480
Commercial paper
1,998
1,998
Corporate bonds
80,700
80,700
Certificates of deposits
1,076
1,076
Asset backed securities
11,904
11,904
Mutual funds
4,116
4,116
Total assets measured at fair
 
value
$
4,116
$
112,158
$
$
116,274
 
Investment
 
securities
 
 
available-for-sale
 
classified
 
as Level
 
2
 
consist
 
of
 
securities
 
with maturities
 
of
 
three
 
months
 
or longer
when purchased. We
 
classified these securities as
 
current because amounts
 
invested are readily available
 
for current operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
 
Note 5 - Inventories
 
Inventories consisted of the following as of August 28, 2021 and May 29,
 
2021 (in thousands):
 
August 28, 2021
May 29, 2021
Flocks, net of amortization
$
139,870
$
123,860
Eggs and egg products
20,869
21,084
Feed and supplies
65,731
73,431
$
226,470
$
218,375
 
We
 
grow
 
and
 
maintain
 
flocks
 
of
 
layers
 
(mature
 
female
 
chickens),
 
pullets
 
(female
 
chickens,
 
under
 
18
 
weeks
 
of
 
age),
 
and
breeders (male
 
and female
 
chickens used
 
to produce
 
fertile eggs
 
to hatch
 
for egg
 
production flocks).
 
Our total
 
flock at
 
August
28, 2021 consisted of approximately
10.3
 
million pullets and breeders and
40.8
 
million layers.
 
 
Note 6 - Accrued Dividends Payable and Dividends per Common
 
Share
 
 
We
 
accrue dividends at
 
the end of
 
each quarter according
 
to the Company’s
 
dividend policy adopted
 
by its Board
 
of Directors.
The Company
 
pays a dividend
 
to shareholders
 
of its Common
 
Stock and
 
Class A Common
 
Stock on
 
a quarterly basis
 
for each
quarter for
 
which the
 
Company reports
 
net income
 
attributable to
 
Cal-Maine Foods,
 
Inc. computed
 
in accordance
 
with GAAP
in an amount
 
equal to one-third
 
(1/3) of such
 
quarterly income. Dividends
 
are paid to
 
shareholders of record
 
as of the 60th
 
day
following the
 
last day
 
of such quarter,
 
except for
 
the fourth fiscal
 
quarter. For
 
the fourth quarter,
 
the Company
 
pays dividends
to shareholders of record on the 65th day after the
 
quarter end. Dividends are payable on the 15th day following
 
the record date.
Following a quarter for which the Company does not report net income
 
attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend
 
for a subsequent profitable
 
quarter until the Company
 
is profitable on a cumulative
 
basis computed from the
date of
 
the last
 
quarter for
 
which a
 
dividend was
 
paid. At
 
the end
 
of the
 
first quarter
 
of fiscal
 
2022, the
 
amount of
 
cumulative
losses to be recovered before payment of a dividend was $
22.3
 
million.
 
On
 
our
 
condensed
 
consolidated
 
statement
 
of
 
operations,
 
we
 
determine
 
dividends
 
per
 
common
 
share
 
in
 
accordance
 
with
 
the
computation in the following table (in thousands, except per share data):
 
Thirteen Weeks
 
Ended
August 28, 2021
August 29, 2020
Net loss
$
(18,026)
$
(19,399)
Cumulative losses to be recovered prior to payment of divided at beginning
 
of period
(4,244)
(1,370)
Net income available for dividend
$
$
1/3 of net income attributable to Cal-Maine Foods, Inc. available for dividend
Common stock outstanding (shares)
44,057
Class A common stock outstanding (shares)
4,800
Total common stock
 
outstanding (shares)
48,857
*Dividends per common share
 
= 1/3 of Net
 
income (loss) attributable to
 
Cal-Maine Foods, Inc. available
 
for dividend ÷ Total
 
common stock
outstanding (shares).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12
Note 7 - Equity
 
The following reflects equity activity for the thirteen weeks ended
 
August 28, 2021 and August 29, 2020 (in thousands):
 
Thirteen Weeks Ended August
 
28, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Total
Balance at May 29, 2021
$
703
$
48
$
(27,433)
$
64,044
$
(558)
$
975,977
$
1,012,781
Other comprehensive loss, net of tax
(170)
(170)
Stock compensation plan
transactions
(18)
1,000
982
Net loss
(18,026)
(18,026)
Balance at August 28, 2021
$
703
$
48
$
(27,451)
$
65,044
$
(728)
$
957,951
$
995,567
 
Thirteen Weeks Ended August
 
29, 2020
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Total
Balance at May 30, 2020
$
703
$
48
$
(26,674)
$
60,372
$
79
$
975,147
$
1,009,675
Impact of ASC 326, see
Note 1
422
422
Balance at May 31, 2020
 
703
 
 
48
 
(26,674)
 
60,372
 
79
975,569
 
1,010,097
Other comprehensive income, net of
tax
354
354
Stock compensation plan
transactions
(2)
895
893
Net loss
(19,399)
(19,399)
Balance at August 29, 2020
$
703
$
48
$
(26,676)
$
61,267
$
433
$
956,170
$
991,945
 
Note 8 - Net Loss per Common Share
 
 
 
Basic net loss per
 
share is based on
 
the weighted average
 
Common Stock and
 
Class A Common
 
Stock outstanding. Diluted
 
net
income per share
 
is based on
 
weighted-average common
 
shares outstanding
 
during the relevant
 
period adjusted
 
for the dilutive
effect of
 
share-based awards.
 
Restricted shares
 
of
131
 
thousand and
139
 
thousand were
 
antidilutive due
 
to the
 
net loss
 
for the
first quarters of fiscal 2022 and 2021, respectively.
 
These shares were not included in the diluted net loss per share calculation.
 
The
 
following
 
table
 
provides
 
a
 
reconciliation
 
of
 
the
 
numerators
 
and
 
denominators
 
used
 
to
 
determine
 
basic
 
and
 
diluted
 
net
income per common share (amounts in thousands, except per share data):
 
Thirteen Weeks
 
Ended
August 28, 2021
August 29, 2020
Numerator
Net loss
$
(18,026)
$
(19,399)
Denominator
Weighted-average
 
common shares outstanding, basic
48,858
48,501
Effect of dilutive restricted shares
Weighted-average
 
common shares outstanding, diluted
48,858
48,501
Net loss per common share attributable to Cal-Maine Foods, Inc.
Basic
$
(0.37)
$
(0.40)
Diluted
$
(0.37)
$
(0.40)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13
Note 9 - Revenue Recognition
 
Satisfaction of Performance Obligation
 
Most of the
 
Company’s revenue
 
is derived from
 
contracts with customers
 
based on the
 
customer placing an
 
order for products.
Pricing for
 
the most
 
part is
 
determined when
 
the Company
 
and the
 
customer agree
 
upon the
 
specific order,
 
which establishes
the contract for that order.
Revenues are
 
recognized in
 
an amount
 
that reflects
 
the net
 
consideration we
 
expect to
 
receive in
 
exchange for
 
the goods. Our
shell eggs
 
are sold
 
at prices
 
related to
 
independently
 
quoted wholesale
 
market prices,
 
negotiated prices
 
or formulas
 
related to
our
 
costs of
 
production.
 
The Company’s
 
sales predominantly
 
contain
 
a single
 
performance obligation.
 
We
 
recognize
 
revenue
upon satisfaction
 
of the performance
 
obligation with
 
the customer,
 
which typically occurs
 
within days of
 
the Company
 
and the
customer agreeing upon the order.
Returns and Refunds
 
Some of our contracts
 
include a guaranteed sale
 
clause, pursuant to which
 
we credit the customer’s
 
account for product
 
that the
customer is unable
 
to sell before
 
expiration. The Company
 
records an estimate
 
of returns and
 
refunds by using
 
historical return
data
 
and
 
comparing
 
to current
 
period
 
sales and
 
accounts
 
receivable. The
 
allowance
 
is recorded
 
as a
 
reduction
 
in sales
 
with
 
a
corresponding reduction in trade accounts receivable.
 
Sales Incentives Provided to Customers
 
The
 
Company
 
periodically
 
provides
 
incentive
 
offers
 
to
 
its
 
customers
 
to
 
encourage
 
purchases.
 
Such
 
offers
 
include
 
current
discount offers
 
(e.g., percentage
 
discounts off
 
current purchases), inducement
 
offers (e.g.,
 
offers for
 
future discounts
 
subject to
a minimum
 
current purchase),
 
and other
 
similar offers.
 
Current discount
 
offers,
 
when accepted
 
by customers,
 
are treated
 
as a
reduction
 
to
 
the sales
 
price
 
of the
 
related
 
transaction,
 
while inducement
 
offers,
 
when
 
accepted
 
by customers,
 
are
 
treated
 
as a
reduction
 
to
 
sales
 
price
 
based
 
on
 
estimated
 
future
 
redemption
 
rates.
 
Redemption
 
rates
 
are
 
estimated
 
using
 
the
 
Company’s
historical
 
experience
 
for
 
similar
 
inducement
 
offers.
 
Current discount
 
and
 
inducement
 
offers
 
are
 
presented
 
as a
 
net amount
 
in
‘‘Net
 
sales.’’
 
Disaggregation of Revenue
 
The following table provides revenue disaggregated by product category
 
(in thousands):
 
Thirteen Weeks
 
Ended
August 28, 2021
August 29, 2020
Conventional shell egg sales
$
182,549
$
155,384
Specialty shell egg sales
138,657
129,245
Egg products
9,366
6,705
Other
1,132
1,448
$
331,704
$
292,782
 
Contract Costs
 
The Company can incur costs to
 
obtain or fulfill a contract with a
 
customer. If the
 
amortization period of these costs is less
 
than
one year,
 
they are
 
expensed as
 
incurred. When
 
the amortization
 
period is
 
greater than
 
one year,
 
a contract
 
asset is
 
recognized
and
 
is
 
amortized
 
over
 
the
 
contract
 
life
 
as
 
a
 
reduction
 
in
 
net
 
sales.
 
As
 
of
 
August
 
28,
 
2021
 
the
 
balance
 
for
 
contract
 
assets
 
is
immaterial.
 
Contract Balances
 
The Company receives payment from customers based on specified terms that are
 
generally less than 30 days from
delivery. There are rarely
 
contract assets or liabilities related to performance under the contract.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14
Note 10 - Leases
 
 
Expenses related
 
to operating
 
leases, amortization
 
of finance
 
leases, right-of-use
 
assets, and
 
finance lease
 
interest are
 
included
in Cost of sales, Selling general and administrative expense, and Interest
 
income, net in the Condensed Consolidated Statements
of Operations. The Company’s lease cost consists
 
of the following (in thousands):
 
13 Weeks Ended
 
August 28, 2021
Operating Lease cost
$
217
Finance Lease cost
Amortization of right-of-use asset
$
44
Interest on lease obligations
$
7
Short term lease cost
$
1,097
 
Future minimum lease payments under non-cancelable leases are as follows (in
 
thousands):
 
As of August 28, 2021
Operating Leases
Finance Leases
Remainder fiscal 2022
$
586
$
181
2023
539
239
2024
380
217
2025
130
2026
26
2027
5
Total
1,666
637
Less imputed interest
(133)
(37)
Total
$
1,533
$
600
 
The
 
weighted-average
 
remaining
 
lease
 
term
 
and
 
discount
 
rate
 
for
 
lease
 
liabilities
 
included
 
in
 
our
 
Condensed
 
Consolidated
Balance Sheet are as follows:
 
As of August 28, 2021
Operating Leases
Finance Leases
Weighted-average
 
remaining lease term (years)
2.7
2.3
Weighted-average
 
discount rate
5.9
%
4.9
%
 
Note 11 - Stock Based Compensation
 
Total stock-based
 
compensation expense was $
1.0
 
million and $
893
 
thousand for the thirteen weeks ended August 28, 2021 and
August 29, 2020,
 
respectively.
 
Unrecognized
 
compensation
 
expense
 
as a
 
result
 
of non
 
-vested
 
shares
 
of
 
restricted
 
stock outstanding
 
under
 
the
 
Amended
 
and
Restated 2012 Omnibus Long-Term
 
Incentive Plan at August 28, 2021 of $
5.6
 
million will be recorded over a weighted average
period
 
of
1.9
 
years.
 
Refer
 
to
 
Part
 
II
 
Item
 
8,
 
Notes
 
to
 
Consolidated
 
Financial
 
Statements
 
and
 
Supplementary
 
Data,
 
Note
 
16:
Stock Compensation Plans in our 2021 Annual Report for further information
 
on our stock compensation plans.
 
The Company’s restricted share activity
 
for the thirteen weeks ended August 28, 2021 follows:
 
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 29, 2021
302,147
$
39.37
Vested
(1,359)
40.34
Forfeited
(730)
37.70
Outstanding, August 28, 2021
300,058
$
39.37
 
 
 
 
 
 
15
Note 13 - Commitments and Contingencies
 
Financial Instruments
 
The Company
 
maintained standby
 
letters of
 
credit ("LOC")
 
totaling $
4.1
 
million at
 
August 28,
 
2021 which
 
were issued
 
under
the Company's Revolving Credit
 
Facility. The
 
outstanding LOCs are for
 
the benefit of certain
 
insurance companies, and are
 
not
recorded as a liability on the consolidated balance sheets.
 
LEGAL PROCEEDINGS
 
 
State of Texas
 
v. Cal-Maine Foods, Inc. d/b/a Wharton;
 
and Wharton County Foods, LLC
 
 
On April
 
23, 2020,
 
the Company
 
and its subsidiary
 
Wharton County
 
Foods, LLC (“WCF”)
 
were named
 
as defendants in
 
State
of
 
Texas
 
v.
 
Cal-Maine
 
Foods,
 
Inc.
 
d/b/a
 
Wharton;
 
and
 
Wharton
 
County
 
Foods,
 
LLC,
 
Cause
 
No.
 
2020-25427,
 
in
 
the
 
District
Court of
 
Harris County,
 
Texas.
 
The State
 
of Texas
 
(the “State”)
 
asserted claims
 
based on
 
the Company’s
 
and WCF’s
 
alleged
violation
 
of
 
the
 
Texas
 
Deceptive
 
Trade
 
Practices—Consumer
 
Protection
 
Act,
 
Tex.
 
Bus.
 
&
 
Com.
 
Code
 
§§
 
17.41-17.63
(“DTPA”).
 
The
 
State
 
claimed
 
that
 
the
 
Company
 
and
 
WCF
 
offered
 
shell
 
eggs
 
at
 
excessive
 
or
 
exorbitant
 
prices
 
during
 
the
COVID-19
 
state
 
of
 
emergency
 
and
 
made
 
misleading
 
statements
 
about
 
shell
 
egg
 
prices.
 
The
 
State
 
sought
 
temporary
 
and
permanent
 
injunctions
 
against
 
the
 
Company
 
and
 
WCF
 
to
 
prevent
 
further
 
alleged
 
violations
 
of
 
the
 
DTPA,
 
along
 
with
 
over
$
100,000
 
in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the State’s
 
original petition with
prejudice. On September
 
11, 2020,
 
the State filed a
 
notice of appeal,
 
which was assigned to
 
the Texas
 
Court of Appeals
 
for the
First District. The
 
State filed its
 
opening brief
 
on December 7,
 
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.
 
Kraft Foods Global, Inc. et al. v.
 
United Egg Producers, Inc. et al.
 
 
As previously
 
reported, on
 
September 25,
 
2008, the
 
Company
 
was named
 
as one
 
of several
 
defendants
 
in numerous
 
antitrust
cases involving
 
the United
 
States shell
 
egg
 
industry.
 
The Company
 
settled all
 
of these
 
cases, except
 
for
 
the claims
 
of certain
plaintiffs who sought
 
substantial damages allegedly arising
 
from the purchase of egg
 
products (as opposed to shell
 
eggs). These
remaining plaintiffs
 
are Kraft
 
Food Global,
 
Inc., General
 
Mills, Inc.,
 
and Nestle
 
USA, Inc.
 
(the “Egg
 
Products Plaintiffs”)
 
and
The Kellogg Company.
 
On September
 
13, 2019,
 
the case
 
with the
 
Egg Products
 
Plaintiffs was
 
remanded from
 
a multi-district
 
litigation proceeding
 
in
the
 
United
 
States
 
District
 
Court
 
for
 
the
 
Eastern
 
District
 
of
 
Pennsylvania,
 
In
 
re
 
Processed
 
Egg
 
Products
 
Antitrust
 
Litigation,
MDL No. 2002, to
 
the United States District Court
 
for the Northern District
 
of Illinois, Kraft Foods Global,
 
Inc. et al. v.
 
United
Egg
 
Producers,
 
Inc.
 
et
 
al.,
 
Case
 
No.
 
1:11-cv-8808,
 
for
 
trial.
 
The
 
Egg
 
Products
 
Plaintiffs
 
allege
 
that
 
the
 
Company
 
and
 
other
defendants
 
violated
 
Section
 
1
 
of
 
the
 
Sherman
 
Act,
 
15.
 
U.S.C.
 
§
 
1,
 
by
 
agreeing
 
to
 
limit
 
the
 
production
 
of
 
eggs
 
and
 
thereby
illegally to raise the prices that plaintiffs
 
paid for processed egg products. In particular,
 
the Egg Products Plaintiffs are
 
attacking
certain features of
 
the United Egg
 
Producers animal-welfare guidelines
 
and program used by
 
the Company and
 
many other egg
producers. The
 
Egg Products
 
Plaintiffs seek
 
to enjoin
 
the Company
 
and other
 
defendants from
 
engaging in
 
antitrust violations
and seek
 
treble money
 
damages. The
 
parties filed
 
a joint
 
status report
 
on May
 
18, 2020.
 
On August
 
4, 2021,
 
by docket
 
entry,
 
 
 
16
the
 
court
 
instructed
 
the
 
parties
 
to
 
jointly
 
submit
 
a
 
second
 
status
 
report
 
to
 
the
 
court
 
that
 
included
 
a
 
proposed
 
schedule
 
for
preparing a final pretrial
 
order. On August
 
25, 2021, the parties filed a
 
joint status report, and
 
on August 26, 2021, the
 
court, by
docket entry, informed
 
the parties that the need to discuss issues was no longer
 
necessary and that a scheduled August 30, 2021,
status hearing was stricken. No trial schedule has yet been entered by the
 
court.
 
In addition,
 
on October
 
24, 2019,
 
the Company
 
entered into
 
a confidential
 
settlement agreement
 
with The
 
Kellogg Company
dismissing
 
all
 
claims
 
against
 
the
 
Company
 
for
 
an
 
amount
 
that
 
did
 
not
 
have
 
a
 
material
 
impact
 
on
 
the
 
Company’s
 
financial
condition or results
 
of operations. On
 
November 11,
 
2019, a stipulation
 
for dismissal was filed
 
with the court,
 
but the court
 
has
not yet entered a judgment on the filing.
 
The Company intends to
 
continue to defend the remaining
 
case with the Egg Products Plaintiffs
 
as vigorously as possible based
on
 
defenses
 
which
 
the
 
Company
 
believes
 
are
 
meritorious
 
and
 
provable.
 
Adjustments,
 
if
 
any,
 
which
 
might
 
result
 
from
 
the
resolution of
 
this remaining
 
matter with
 
the Egg
 
Products Plaintiffs
 
have not
 
been reflected
 
in the
 
financial statements.
 
While
management
 
believes
 
that
 
there
 
is
 
still
 
a
 
reasonable
 
possibility
 
of
 
a
 
material
 
adverse
 
outcome
 
from
 
the
 
case
 
with
 
the
 
Egg
Products Plaintiffs,
 
at the
 
present time,
 
it is not
 
possible to
 
estimate the
 
amount of
 
monetary exposure,
 
if any,
 
to the
 
Company
due to a range of
 
factors, including the following,
 
among others: the matter is in
 
the early stages of preparing
 
for trial following
remand;
 
any
 
trial
 
will
 
be
 
before
 
a
 
different
 
judge
 
and
 
jury
 
in
 
a
 
different
 
court
 
than
 
prior
 
related
 
cases;
 
there
 
are
 
significant
factual issues
 
to be
 
resolved; and
 
there are
 
requests for
 
damages other
 
than compensatory
 
damages (i.e.,
 
injunction and
 
treble
money damages).
 
State of Oklahoma Watershed Pollution
 
Litigation
 
On June 18,
 
2005, the
 
State of
 
Oklahoma filed
 
suit, in
 
the United
 
States District
 
Court for
 
the Northern
 
District of
 
Oklahoma,
against Cal-Maine Foods, Inc. and
 
Tyson Foods,
 
Inc. and affiliates, Cobb-Vantress,
 
Inc., Cargill, Inc. and its
 
affiliate, George’s,
Inc. and
 
its affiliate,
 
Peterson Farms, Inc.
 
and Simmons Foods,
 
Inc. The
 
State of Oklahoma
 
claims that through
 
the disposal of
chicken
 
litter the
 
defendants have
 
polluted the
 
Illinois River
 
Watershed.
 
This watershed
 
provides
 
water to
 
eastern Oklahoma.
The complaint
 
seeks injunctive
 
relief and
 
monetary damages,
 
but the
 
claim for
 
monetary damages
 
has been
 
dismissed by
 
the
court.
 
Cal-Maine
 
Foods,
 
Inc.
 
discontinued
 
operations
 
in
 
the
 
watershed.
 
Accordingly,
 
we
 
do
 
not
 
anticipate
 
that
 
Cal-Maine
Foods,
 
Inc.
 
will
 
be
 
materially
 
affected
 
by
 
the
 
request
 
for
 
injunctive
 
relief
 
unless
 
the
 
court
 
orders
 
substantial
 
affirmative
remediation. Since
 
the litigation
 
began, Cal-Maine
 
Foods, Inc.
 
purchased 100%
 
of the membership
 
interests of
 
Benton County
Foods, LLC,
 
which is
 
an ongoing
 
commercial shell
 
egg operation
 
within the
 
Illinois River
 
Watershed.
 
Benton County
 
Foods,
LLC is not a defendant in the litigation.
 
The trial in the case
 
began in September 2009 and
 
concluded in February 2010. The
 
case was tried without a jury,
 
and the court
has not yet issued its ruling. Management believes the risk of material loss related
 
to this matter to be remote.
 
Other Matters
 
In addition to
 
the above, the Company
 
is involved in
 
various other claims
 
and litigation incidental
 
to its business. Although
 
the
outcome of
 
these matters
 
cannot be
 
determined with
 
certainty,
 
management, upon
 
the advice
 
of counsel,
 
is of
 
the opinion
 
that
the final outcome should not have a material effect on the Company’s
 
consolidated results of operations or financial position.
 
Note 14 - Related Party Transaction
 
On
 
August
 
24,
 
2020,
 
Mrs.
 
Jean
 
Reed
 
Adams,
 
the
 
wife
 
of
 
the
 
Company’s
 
late
 
founder
 
Fred
 
R.
 
Adams,
 
Jr.,
 
and
 
the
 
Fred
 
R.
Adams,
 
Jr.
 
Daughters’
 
Trust,
 
dated
 
July
 
20,
 
2018
 
(the
 
“Daughters’
 
Trust”),
 
of
 
which
 
the
 
daughters
 
of
 
Mr.
 
Adams
 
are
beneficiaries
 
(together,
 
the
 
“Selling
 
Stockholders”),
 
completed
 
a
 
registered
 
secondary
 
public
 
offering
 
of
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.
 
 
17
ITEM
 
2.
 
MANAGEMENT’S
 
DISCUSSION
 
AND
 
ANALYSIS
 
OF
 
FINANCIAL
 
CONDITION
 
AND
 
RESULTS
 
OF
OPERATIONS
 
The following
 
should be
 
read in
 
conjunction
 
with Management’s
 
Discussion and
 
Analysis of
 
Financial Condition
 
and Results
of Operations
 
included in
 
Item 7
 
of the
 
Company’s
 
Annual Report
 
on Form
 
10-K for
 
its fiscal
 
year ended
 
May 29,
 
2021 (the
“2021
 
Annual
 
Report”),
 
and
 
the accompanying
 
financial
 
statements
 
and
 
notes included
 
in Part
 
II
 
Item 8
 
of
 
the 2021
 
Annual
Report and in
Part
 
of this Quarterly Report on Form 10-Q (“Quarterly Report”).
 
This
 
report
 
contains
 
numerous
 
forward-looking
 
statements
 
within
 
the
 
meaning
 
of
 
Section
 
27A
 
of
 
the
 
Securities
 
Act
 
of
 
1933
(the “Securities
 
Act”) and
 
Section 21E
 
of the
 
Securities Exchange
 
Act of
 
1934 (the
 
“Exchange Act”)
 
relating to
 
our shell
 
egg
business,
 
including
 
estimated
 
future
 
production
 
data,
 
expected
 
construction
 
schedules,
 
projected
 
construction
 
costs,
 
potential
future
 
supply
 
of and
 
demand
 
for
 
our
 
products,
 
potential
 
future
 
corn
 
and
 
soybean price
 
trends,
 
potential
 
future
 
impact
 
on
 
our
business
 
of
 
the
 
COVID-19
 
pandemic,
 
potential
 
future
 
impact
 
on
 
our
 
business
 
of
 
new
 
legislation,
 
rules
 
or
 
policies,
 
potential
outcomes
 
of
 
legal
 
proceedings,
 
and
 
other
 
projected
 
operating
 
data,
 
including
 
anticipated
 
results
 
of
 
operations
 
and
 
financial
condition.
 
Such
 
forward-looking
 
statements
 
are
 
identified
 
by
 
the
 
use
 
of
 
words
 
such
 
as
 
“believes,”
 
“intends,”
 
“expects,”
“hopes,”
 
“may,”
 
“should,”
 
“plans,”
 
“projected,”
 
“contemplates,”
 
“anticipates,”
 
or
 
similar
 
words.
 
Actual
 
outcomes
 
or
 
results
could
 
differ
 
materially
 
from
 
those
 
projected
 
in
 
the
 
forward-looking
 
statements. The
 
forward-looking
 
statements
 
are
 
based
 
on
management’s
 
current
 
intent,
 
belief,
 
expectations,
 
estimates,
 
and
 
projections
 
regarding
 
the
 
Company
 
and
 
its
 
industry. These
statements
 
are
 
not
 
guarantees
 
of
 
future
 
performance
 
and
 
involve
 
risks,
 
uncertainties,
 
assumptions,
 
and
 
other
 
factors
 
that
 
are
difficult
 
to predict
 
and
 
may be
 
beyond
 
our
 
control. The
 
factors
 
that
 
could cause
 
actual results
 
to
 
differ
 
materially
 
from those
projected
 
in the
 
forward-looking
 
statements include,
 
among others,
 
(i) the
 
risk factors
 
set forth
 
in Part
 
I, Item
 
1A of
 
the 2021
Annual
 
Report
 
(ii)
 
the
 
risks
 
and
 
hazards
 
inherent
 
in
 
the
 
shell egg
 
business
 
(including
 
disease, pests,
 
weather
 
conditions,
 
and
potential for
 
product recall),
 
(iii) changes
 
in the
 
demand for
 
and market
 
prices of
 
shell eggs
 
and feed
 
costs, (iv)
 
our ability
 
to
predict
 
and
 
meet
 
demand
 
for
 
cage-free
 
and
 
other
 
specialty
 
eggs,
 
(v)
 
risks,
 
changes,
 
or
 
obligations
 
that
 
could
 
result
 
from
 
our
future
 
acquisition
 
of
 
new
 
flocks
 
or
 
businesses
 
and
 
risks
 
or
 
changes
 
that
 
may
 
cause
 
conditions
 
to
 
completing
 
a
 
pending
acquisition not to
 
be met, (vi) risks
 
relating to the
 
evolving COVID-19 pandemic,
 
and (vii) adverse
 
results in pending litigation
matters. Readers
 
are
 
cautioned
 
not
 
to
 
place
 
undue
 
reliance
 
on
 
forward-looking
 
statements
 
because,
 
while
 
we
 
believe
 
the
assumptions on
 
which the
 
forward-looking statements
 
are based
 
are reasonable,
 
there can
 
be no
 
assurance that
 
these forward-
looking
 
statements
 
will
 
prove
 
to
 
be
 
accurate. Further,
 
forward-looking statements
 
included
 
herein
 
are
 
only
 
made
 
as
 
of
 
the
respective
 
dates
 
thereof,
 
or
 
if
 
no
 
date
 
is
 
stated,
 
as
 
of
 
the date
 
hereof. Except
 
as
 
otherwise
 
required
 
by
 
law,
 
we
 
disclaim
 
any
intent or obligation
 
to update publicly
 
these forward-looking statements,
 
whether because of
 
new information, future
 
events, or
otherwise.
 
GENERAL
 
Cal-Maine
 
Foods,
 
Inc.
 
is
 
primarily
 
engaged
 
in
 
the
 
production,
 
grading,
 
packaging,
 
marketing
 
and
 
distribution
 
of
 
fresh
 
shell
eggs. Our operations are fully integrated
 
under one operating segment.
 
We are
 
the largest producer and
 
distributor of fresh shell
eggs in the
 
United States (“U.S.”).
 
Our total flock
 
of approximately 40.8
 
million layers and
 
10.3 million pullets
 
and breeders is
the largest
 
in the
 
U.S. We
 
sell most
 
of our
 
shell eggs
 
to a
 
diverse group
 
of customers,
 
including national
 
and regional
 
grocery
store chains,
 
club stores, companies
 
servicing independent
 
supermarkets in
 
the U.S., food
 
service distributors,
 
and egg product
consumers in states across the southwestern, southeastern, mid-western
 
and mid-Atlantic regions of the U.S.
 
Our
 
operating
 
results
 
are
 
materially
 
impacted
 
by
 
market
 
prices for
 
eggs
 
and
 
feed
 
grains
 
(corn
 
and
 
soybean
 
meal),
 
which
 
are
highly
 
volatile,
 
independent
 
of
 
each
 
other,
 
and
 
out
 
of
 
our
 
control.
 
Generally,
 
higher
 
market
 
prices
 
for
 
eggs
 
have
 
a
 
positive
impact
 
on
 
our
 
financial
 
results
 
while
 
higher
 
market
 
prices
 
for
 
feed
 
grains
 
have
 
a
 
negative
 
impact
 
on
 
our
 
financial
 
results.
Although we
 
use a
 
variety of
 
pricing mechanisms
 
in pricing
 
agreements with
 
our customers,
 
we sell
 
most of
 
our conventional
shell eggs
 
based on
 
formulas that
 
consider,
 
in varying
 
ways, independently
 
quoted regional
 
wholesale
 
market prices
 
for shell
eggs
 
or
 
formulas
 
related
 
to
 
our
 
costs
 
of
 
production
 
which
 
include
 
the
 
cost
 
of
 
corn
 
and
 
soybean
 
meal.
 
As
 
an
 
example
 
of
 
the
volatility
 
in
 
the
 
market
 
prices
 
of
 
shell
 
eggs,
 
the
 
Urner-Barry
 
Southeastern
 
Regional
 
Large
 
Egg
 
Market
 
Price
 
per
 
dozen
 
eggs
(“UB southeastern large index”) in fiscal year 2021 ranged
 
from a low of $0.87 in July 2020 to a high of $1.63 in March 2021.
 
Generally,
 
we purchase
 
primary feed
 
ingredients,
 
mainly corn
 
and soybean
 
meal, at
 
current market
 
prices. Corn
 
and soybean
meal
 
are
 
commodities
 
and
 
are
 
subject
 
to
 
volatile
 
price
 
changes
 
due
 
to
 
weather,
 
various
 
supply
 
and
 
demand
 
factors,
transportation and storage costs, speculators, and agricultural, energy
 
and trade policies in the U.S. and internationally.
 
 
An important competitive advantage
 
for Cal-Maine Foods is
 
our ability to meet
 
our customers’ evolving needs
 
with a favorable
product mix
 
of conventional,
 
cage-free, organic
 
and other
 
specialty eggs
 
and egg
 
products. We
 
have also
 
enhanced our
 
efforts
to
 
provide
 
free-range
 
and
 
pasture-raised
 
eggs
 
that
 
meet
 
consumers’
 
evolving
 
choice
 
preferences.
 
While
 
a
 
small
 
part
 
of
 
our
 
18
current
 
business,
 
the
 
free-range
 
and
 
pasture-raised
 
eggs
 
we
 
produce
 
and
 
sell
 
represent
 
attractive
 
offerings
 
to
 
a
 
subset
 
of
consumers,
 
and therefore our customers, and help us continue to serve as the trusted provider of quality
 
food choices.
 
Specialty shell
 
eggs have
 
been a
 
significant and
 
growing portion
 
of the
 
market. In
 
recent years,
 
a significant
 
number of
 
large
restaurant chains, food
 
service companies and
 
grocery chains, including
 
our largest customers,
 
announced goals to
 
transition to
an exclusively
 
cage-free egg
 
supply chain
 
by specified
 
future dates.
 
Additionally,
 
several states,
 
representing 2
 
4% of
 
the U.S.
total population
 
according to
 
the 2020
 
U.S. Census,
 
have passed
 
legislation requiring
 
that all eggs
 
sold in
 
those states
 
must be
cage-free
 
eggs by
 
specified
 
future dates,
 
and
 
other states
 
are
 
considering
 
such legislation.
 
For additional
 
information, see
 
the
2021 Annual
 
Report, Part
 
I, Item
 
1, “Business
 
– Growth
 
Strategy” and
 
“– Government
 
Regulation,” and
 
the first
 
risk factor
 
in
Part I Item 1A, “Risk Factors” under the sub-heading “Legal and Regulatory
 
Risk Factors.”
 
Retail
 
sales
 
of
 
shell
 
eggs
 
historically
 
have
 
been
 
highest
 
during
 
the
 
fall
 
and
 
winter
 
months
 
and
 
lowest
 
during
 
the
 
summer
months. Prices
 
for shell
 
eggs fluctuate
 
in response
 
to seasonal
 
demand factors
 
and a
 
natural increase
 
in egg
 
production during
the
 
spring
 
and
 
early
 
summer.
 
Historically,
 
shell
 
egg
 
prices
 
tend
 
to
 
increase
 
with
 
the
 
start
 
of
 
the
 
school
 
year
 
and
 
tend
 
to
 
be
highest
 
prior
 
to
 
holiday
 
periods,
 
particularly
 
Thanksgiving,
 
Christmas,
 
and
 
Easter.
 
Consequently,
 
and
 
all
 
other
 
things
 
being
equal, we would
 
expect to experience
 
lower selling prices, sales
 
volumes and net
 
income (and may incur
 
net losses) in our
 
first
and
 
fourth
 
fiscal
 
quarters
 
ending
 
in
 
August/September
 
and
 
May/June,
 
respectively.
 
Because
 
of
 
the
 
seasonal
 
and
 
quarterly
fluctuations,
 
comparisons
 
of
 
our
 
sales
 
and
 
operating
 
results
 
between
 
different
 
quarters
 
within
 
a
 
single
 
fiscal
 
year
 
are
 
not
necessarily meaningful comparisons.
 
COVID-19
 
Since early
 
2020, the
 
coronavirus (“COVID-19”)
 
outbreak, characterized
 
as a
 
pandemic by
 
the World
 
Health Organization
 
on
March
 
11,
 
2020,
 
has
 
caused
 
significant
 
disruptions
 
in
 
international
 
and
 
U.S.
 
economies
 
and
 
markets.
 
We
 
understand
 
the
challenges
 
and
 
difficult
 
economic
 
environment
 
facing
 
families
 
in
 
the
 
communities
 
where
 
we
 
live
 
and
 
work,
 
and
 
we
 
are
committed
 
to
 
helping
 
where
 
we
 
can.
 
We
 
have
 
provided
 
food
 
assistance
 
to
 
those
 
in
 
need
 
by
 
donating
 
approximately
 
239
thousand
 
dozen
 
eggs
 
to
 
date
 
in
 
fiscal
 
2022.
 
We
 
believe
 
we
 
are
 
taking
 
all
 
reasonable
 
precautions
 
in
 
the
 
management
 
of
 
our
operations in
 
response to
 
the COVID-19
 
pandemic. Our
 
top priority
 
is the
 
health and
 
safety of
 
our employees,
 
who work
 
hard
every day
 
to produce
 
eggs for our
 
customers. As
 
part of the
 
nation’s
 
food supply,
 
we work
 
in a critical
 
infrastructure industry,
and
 
we
 
believe
 
we
 
have
 
a
 
special
 
responsibility
 
to
 
maintain
 
our
 
normal
 
work
 
schedule.
 
As
 
such,
 
we
 
are
 
in
 
regular
communication with our managers across our operations and
 
continue to closely monitor the situation in our facilities and
 
in the
communities where we live and work. We
 
have implemented procedures designed to protect our employees, taking into account
guidelines
 
published
 
by
 
the Centers
 
for
 
Disease Control
 
and
 
other
 
government
 
health
 
agencies,
 
and
 
we
 
have
 
strict sanitation
protocols
 
and
 
biosecurity
 
measures
 
in
 
place
 
throughout
 
our
 
operations
 
with
 
restricted
 
access to
 
visitors.
 
There
 
are
 
no known
indications that COVID-19 affects hens or can be transferred
 
through the food supply.
 
 
We
 
continue to
 
proactively monitor
 
and manage
 
operations during
 
the COVID-19 pandemic,
 
including additional
 
related costs
that
 
we
 
incurred
 
or
 
may
 
incur
 
in
 
the
 
future.
 
The pandemic
 
had
 
a
 
negative
 
impact
 
on our
 
business
 
through
 
disruptions
 
in
 
the
supply chain such as increased costs and limited availability of packaging
 
supplies, and increased labor costs and medical costs.
 
In the
 
first quarters
 
of fiscal
 
2022 and
 
2021,
 
we spent
 
$553 thousand
 
and $832
 
thousand (excluding
 
medical insurance
 
claims)
related
 
to
 
the
 
pandemic,
 
respectively.
 
The
 
majority
 
of
 
these
 
expenses
 
in
 
fiscal
 
2022
 
resulted
 
from
 
additional
 
labor
 
costs and
increased
 
cost
 
of
 
packaging
 
materials,
 
primarily
 
reflected
 
in
 
cost
 
of
 
sales.
 
In
 
fiscal
 
2021,
 
most
 
of
 
these
 
expenses
 
related
 
to
additional
 
labor
 
costs.
 
Medical
 
insurance
 
claims
 
related
 
to
 
COVID-19
 
paid
 
during
 
the
 
first
 
quarter
 
of
 
fiscal
 
2022
 
were
 
an
additional $267 thousand as compared to $324 thousand paid in the
 
same quarter in fiscal 2021.
 
EXECUTIVE OVERVIEW
 
For the first
 
quarter of fiscal
 
2022,
 
we recorded a
 
gross profit of $6.6
 
million compared to
 
$16.8 million for
 
the same period
 
of
fiscal 2021,
 
with the decrease due primarily to the higher costs of feed
 
ingredients and higher processing costs. Our total
 
dozens
sold decreased
 
1.7%
 
to 259.4
 
million dozen
 
shell eggs
 
for the
 
first quarter
 
of fiscal
 
2022 compared
 
to 264.0
 
million dozen
 
for
the
 
same
 
period
 
of
 
fiscal
 
2021.
 
For
 
the
 
first
 
quarter
 
of
 
fiscal
 
2022,
 
conventional
 
dozens
 
sold
 
decreased
 
5.5%
 
and
 
specialty
dozens sold
 
increased 8.9%
 
as compared
 
to the
 
same quarter
 
in fiscal 2021.
 
Specialty dozens
 
sold increased
 
as more
 
cage-free
facilities came into production which helped increase our cage-free
 
egg sales.
 
The
 
daily
 
average
 
price
 
for
 
the
 
UB
 
southeastern
 
large
 
index
 
for
 
first
 
quarter
 
of
 
fiscal
 
2022
 
increased
 
41.2%
 
from
 
the
 
same
period
 
in
 
the prior
 
year.
 
Our net
 
average
 
selling
 
price
 
per dozen
 
for
 
the
 
first
 
quarter
 
of fiscal
 
2021
 
was
 
$1.238
 
compared
 
to
$1.078
 
in
 
the
 
prior
 
year
 
period.
 
Hen
 
numbers
 
reported
 
by the
 
USDA as
 
of
 
September
 
1, 2021,
 
were 319.5
 
million,
 
which
 
is
approximately
 
the same
 
number of
 
hens in
 
same period
 
for the
 
prior year.
 
The USDA
 
also reported
 
that the
 
hatch from
 
April
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19
2021 through August 2021 increased 2.1%
 
compared to the prior-year period. As of September 1, 2021, eggs in incubators were
down 4.9% versus the prior-year period.
 
Our farm
 
production costs
 
per dozen
 
produced for
 
the first
 
quarter of
 
fiscal 2022
 
increased 25.4%
 
or $0.182
 
compared to
 
the
first quarter
 
of fiscal 2021
 
.
 
This increase was
 
primarily due
 
to increased
 
prices for
 
feed ingredients
 
caused by
 
increased export
demand,
 
as
 
well
 
as
 
weather-related
 
shortfalls
 
in
 
production
 
and
 
yields,
 
which
 
have
 
placed
 
additional
 
pressure
 
on
 
domestic
supplies. For the
 
first quarter,
 
the average Chicago
 
Board of Trade
 
(“CBOT”) daily market
 
price was $5.96
 
per bushel for
 
corn
and $364
 
per ton
 
for soybean
 
meal, representing
 
an increase of
 
81.8%
 
and 26.1%,
 
respectively,
 
compared to
 
the average
 
daily
CBOT prices for
 
the first quarter
 
of fiscal 2021.
 
Other farm production
 
costs for the
 
first quarter of
 
fiscal 2022 increased
 
7.6%
compared to the same period in the prior fiscal year due to higher flock amortization
 
and facility expenses.
 
RESULTS OF
 
OPERATIONS
 
The
 
following
 
table
 
sets
 
forth,
 
for
 
the
 
periods
 
indicated,
 
certain
 
items
 
from
 
our
 
Condensed
 
Consolidated
 
Statements
 
of
Operations expressed as a percentage of net sales.
 
13 Weeks Ended
August 28, 2021
August 29, 2020
Net sales
100.0
%
100.0
%
Cost of sales
98.0
%
94.3
%
Gross profit
2.0
%
5.7
%
Selling, general and administrative
14.0
%
15.0
%
(Gain) loss on disposal of fixed assets
(0.1)
%
%
Operating loss
(11.9)
%
(9.3)
%
Total other income, net
1.7
%
0.6
%
Loss before income taxes
(10.2)
%
(8.7)
%
Income tax benefit
(4.8)
%
(2.1)
%
Net loss
(5.4)
%
(6.6)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20
NET SALES
 
Total
 
net sales for the
 
first quarter of fiscal
 
2022 were $331.7
 
million, compared to
 
$292.8 million for
 
the same period of
 
fiscal
2021.
 
Net shell
 
egg
 
sales represented
 
97.2% and
 
97.7% of
 
total net
 
sales for
 
the first
 
quarter of
 
fiscal 2022
 
and 2021,
 
respectively.
Shell
 
egg
 
sales
 
classified
 
as
 
“Other”
 
represent
 
sales
 
of
 
hard
 
cooked
 
eggs,
 
hatching
 
eggs,
 
and
 
other
 
miscellaneous
 
products
included with
 
our shell
 
egg operations.
 
The table
 
below presents
 
an analysis
 
of our
 
conventional and
 
specialty shell
 
egg sales
(in thousands, except percentage data):
 
13 Weeks Ended
August 28, 2021
August 29, 2020
Total net sales
$
331,704
$
292,782
Conventional
$
182,549
56.6
%
$
155,384
54.3
%
Specialty
138,657
43.0
%
129,245
45.2
%
Egg sales, net
321,206
99.6
%
284,629
99.5
%
Other
1,132
0.4
%
1,448
0.5
%
Net shell egg sales
$
322,338
100.0
%
$
286,077
100.0
%
Net shell egg sales as a percent of total net sales
97.2
%
97.7
%
Dozens sold:
Conventional
184,487
71.1
%
195,238
74.0
%
Specialty
74,898
28.9
%
68,756
26.0
%
Total dozens sold
259,385
100.0
%
263,994
100.0
%
Net average selling price per dozen:
Conventional
$
0.989
$
0.796
Specialty
$
1.851
$
1.880
All shell eggs
$
1.238
$
1.078
Egg products sales:
 
Egg products net sales
9,366
6,705
Pounds sold
15,269
15,030
Net average selling price per pound
0.613
0.446
 
Shell egg net sales
-
 
In
 
the
 
first
 
quarter
 
of
 
fiscal
 
2022,
 
conventional
 
egg
 
sales
 
increased
 
$27.2
 
million
 
or
 
17.5%,
 
compared
 
to
 
the
 
first
quarter of
 
fiscal 2021,
 
primarily due
 
to the
 
increase in
 
price, partially
 
offset by
 
a decrease
 
in volume
 
of conventional
eggs
 
sold.
 
Changes
 
in
 
price
 
resulted
 
in
 
a
 
$35.6
 
million
 
increase
 
and
 
change
 
in
 
volume
 
resulted
 
in
 
a
 
$10.6
 
million
decrease in net sales, respectively.
-
 
Higher quarter-over-quarter conventional
 
egg prices were primarily due
 
to depressed prices in the first
 
quarter of fiscal
2021,
 
which
 
resulted
 
from
 
conventional
 
eggs
 
entering
 
the
 
retail
 
channel
 
from
 
the
 
foodservice
 
channel
 
due
 
to
 
the
pandemic.
-
 
The decrease
 
in volume
 
of conventional
 
eggs sold
 
was primarily
 
due to
 
the first
 
quarter of
 
fiscal 2021
 
elevated retail
demand due
 
to consumers’
 
preferences to
 
purchase eggs
 
for in-home
 
meal preparation
 
due to
 
the pandemic.
 
We
 
saw
this consumer preference
 
begin to shift in
 
the fourth quarter of
 
fiscal 2021 as consumers
 
began
 
to resume out-of-home
dining and prepare
 
fewer meals at home.
-
 
Specialty
 
egg
 
sales increased
 
$9.4
 
million,
 
or 7.3
 
%,
 
primarily
 
due
 
to
 
increased
 
volume of
 
8.9%
 
which
 
resulted
 
in
 
a
$11.4 million
 
increase in net sales.
 
More cage-free facilities
 
came into production
 
which helped increase our
 
cage-free
egg sales.
-
 
We believe that
 
higher demand for specialty eggs has been driven by the pandemic
 
,
 
as consumers prepared more meals
for in-home
 
consumption rather
 
than dining
 
out.
 
We
 
believe higher
 
at-home meal
 
preparation has
 
driven a
 
consumer
preference to purchase higher-priced specialty eggs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21
Egg products net sales
-
 
Egg products
 
net sales
 
increased $2.7
 
million or
 
39.7%, primarily
 
due to
 
a 37.4%
 
selling price
 
increase compared
 
to
the first quarter of fiscal 2021, which had a $1.6 million positive impact
 
on net sales.
-
 
Selling prices for
 
egg products in
 
the first quarter
 
of fiscal 2021
 
were negatively impacted
 
by a decline
 
in foodservice
demand
 
due to
 
the pandemic.
 
Our egg
 
products net
 
average selling
 
price
 
increased in
 
the first
 
quarter of
 
fiscal 2022
compared to
 
the same
 
period in
 
fiscal 2021
 
as foodservice
 
channel demand
 
has begun
 
to shift
 
more to
 
pre-pandemic
levels.
 
COST OF SALES
 
Costs of
 
sales for
 
the first
 
quarter of
 
fiscal 2022
 
were $325.1
 
million compared
 
to $276.0
 
million for
 
the same
 
period of
 
fiscal
2021.
 
Cost of
 
sales consists
 
of
 
costs directly
 
related
 
to producing,
 
processing
 
and
 
packing
 
shell eggs,
 
purchases
 
of
 
shell
 
eggs from
outside producers, processing and packing of liquid
 
and frozen egg products and other non-egg costs. Farm
 
production costs are
those costs
 
incurred at
 
the egg production
 
facility,
 
including feed,
 
facility,
 
hen amortization,
 
and other
 
related farm
 
production
costs.
 
The following table presents the key variables affecting our cost of
 
sales (in thousands, except cost per dozen data):
 
13 Weeks Ended
August 28, 2021
August 29, 2020
% Change
Cost of Sales:
Farm production
$
207,495
$
161,863
28.2
%
Processing, packaging, and warehouse
65,059
59,869
8.7
Egg purchases and other (including change in inventory)
44,691
48,933
(8.7)
Total shell eggs
317,245
270,665
17.2
Egg products
7,814
5,352
46.0
Total
$
325,059
$
276,017
17.8
%
Farm production costs (per dozen produced)
Feed
$
0.545
$
0.388
40.5
%
Other
$
0.353
$
0.328
7.6
%
Total
$
0.898
$
0.716
25.4
%
Outside egg purchases (average cost per dozen)
$
1.35
$
1.04
29.8
%
Dozens produced
236,458
231,161
2.3
%
Dozens sold
259,385
263,994
(1.7)
%
 
Farm Production
-
 
Feed costs per dozen produced
 
increased 40.5% in the first quarter of
 
fiscal 2022 compared to the first
 
quarter of fiscal
2021,
 
primarily
 
due
 
to
 
higher
 
feed
 
ingredient
 
prices
 
resulting
 
from
 
increased
 
export
 
demand,
 
as
 
well
 
as
 
weather-
related shortfalls in production and yields, which have placed additional
 
pressure on domestic supplies.
-
 
Other
 
farm
 
production
 
costs increased
 
due
 
to higher
 
flock amortization
 
,
 
primarily
 
from an
 
increase
 
in
 
our
 
cage-free
production,
 
which
 
has
 
higher
 
capitalized
 
costs.
 
Also,
 
higher
 
feed
 
costs,
 
which
 
began
 
to
 
rise
 
in
 
our
 
third
 
quarter
 
of
fiscal 2021, are capitalized in our flocks during pullet production and
 
increased our amortization expense.
-
 
We had higher
 
facility expense as more cage-free facilities came into production.
 
Processing, packaging, and warehouse
-
 
Cost
 
of
 
packaging
 
materials
 
increased
 
8.9%
 
compared
 
to
 
the
 
first
 
quarter
 
of
 
fiscal
 
2021
 
as
 
demand
 
for
 
packaging
products
 
increased
 
due
 
to
 
pandemic
 
supply
 
chain
 
constraints
 
and
 
manufacturers
 
increased
 
prices
 
and
 
implemented
pandemic surcharges.
-
 
Labor costs increased 11.1% due to wage
 
increases in response to labor shortages, primarily due to the pandemic.
 
Egg purchases and other (including change in inventory)
-
 
Costs
 
in
 
this
 
category
 
decreased
 
primarily
 
due
 
to
 
the
 
decrease
 
in
 
the
 
volume
 
of
 
outside
 
egg
 
purchases,
 
as
 
our
percentage of produced to sold increased to 91.2%, partially offset
 
by an increase in the cost of these purchases.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22
 
Looking
 
forward
 
throughout
 
the
 
rest
 
of
 
fiscal
 
2022,
 
corn
 
and
 
soybean
 
supplies
 
remained
 
tight
 
relative
 
to
 
demand,
 
primarily
related
 
to
 
higher
 
export
 
demand,
 
as
 
well
 
as
 
weather-related
 
shortfalls
 
in
 
production
 
and
 
yields.
 
We
 
expect
 
market
 
prices
 
to
remain elevated
 
and volatile
 
relative to
 
historical prices
 
at least
 
for the
 
short term
 
given the
 
ongoing disruptions
 
related to
 
the
COVID-19 global pandemic, weather fluctuations and geopolitical issues.
 
GROSS PROFIT
 
 
Gross profit
 
for the
 
first quarter
 
of fiscal
 
2022 was
 
$6.6 million
 
compared to
 
$16.8 million
 
for the
 
same period
 
of fiscal
 
2021.
The decrease of $10.1 million was primarily due to the increased cost of feed ingredients
 
and processing costs.
 
SELLING, GENERAL, AND ADMINISTRATIVE
 
EXPENSES
 
Selling,
 
general,
 
and
 
administrative
 
expenses
 
("SGA")
 
include
 
costs
 
of
 
marketing,
 
distribution,
 
accounting,
 
and
 
corporate
overhead. The following table presents an analysis of our SGA expenses (in thousands):
 
13 Weeks Ended
August 28, 2021
August 29, 2020
$ Change
% Change
Specialty egg expense
$
13,715
$
12,697
$
1,018
8.0
%
Delivery expense
13,936
12,494
1,442
11.5
%
Payroll, taxes and benefits
9,939
11,301
(1,362)
(12.1)
%
Stock compensation expense
1,001
893
108
12.1
%
Other expenses
7,934
6,580
1,354
20.6
%
Total
$
46,525
$
43,965
$
2,560
5.8
%
 
Specialty egg expense
-
 
Advertising and
 
franchise fees increased
 
in the first
 
quarter of
 
fiscal 2022 compared
 
to the first
 
quarter of fiscal
 
2021,
due to the 8.9% increased volume of specialty eggs sales.
 
Delivery expense
-
 
The increased
 
delivery expense is primarily due to the increase in fuel costs.
 
 
Payroll, taxes and benefits
-
 
The
 
decrease
 
in payroll,
 
taxes and
 
benefits
 
is primarily
 
due
 
to
 
a decrease
 
in bonus
 
accruals as
 
well
 
as a
 
decrease
 
in
expense associated with the deferred compensation plan.
 
Other expenses
-
 
The increase in
 
other expenses is primarily
 
due to increased premiums
 
for property and casualty
 
insurance due to
 
hard
market conditions driven by industry high loss ratios and low investment income
 
returns to offset losses.
 
OPERATING
 
INCOME (LOSS)
 
For
 
the
 
first
 
quarter
 
of
 
fiscal
 
2022,
 
we
 
recorded
 
an
 
operating
 
loss
 
of
 
$39.7
 
million
 
compared
 
to
 
an
 
operating
 
loss
 
of
 
$27.2
million for the same period of fiscal 2021.
 
OTHER INCOME (EXPENSE)
 
 
Total
 
other
 
income
 
(expense)
 
consists
 
of
 
items
 
not
 
directly
 
charged
 
or
 
related
 
to
 
operations,
 
such
 
as
 
interest
 
income
 
and
expense, royalty income, equity in income or loss of unconsolidated entities, and
 
patronage income, among other items.
 
For the first quarter of
 
fiscal 2022,
 
we earned $290 thousand of
 
interest income compared to $996
 
thousand for the same period
of fiscal 2021
 
.
 
The decrease resulted
 
from significantly
 
lower investment
 
balances.
 
The Company
 
recorded interest
 
expense of
$58 thousand and $71 thousand for the first quarters
 
ended August 28, 2021 and August 29, 2020,
 
respectively.
 
For
 
the
 
first
 
quarter
 
of
 
fiscal
 
2022,
 
equity
 
income
 
of
 
unconsolidated
 
entities
 
was
 
$135
 
thousand
 
compared
 
to
 
a
 
loss
 
of
 
$44
thousand in the prior year period.
 
 
23
Other,
 
net for
 
the first
 
quarter ended
 
August 28,
 
2021, was
 
income of
 
$5.2 million
 
compared to
 
income of
 
$512 thousand
 
for
the same period
 
of fiscal 2021. The
 
increase is due
 
to the acquisition of
 
Red River Valley
 
Egg Farm, LLC
 
(“Red River”) as we
recognized a $4.5 million gain due to the remeasurement of our equity investmen
 
t.
 
INCOME TAXES
 
For the first quarter
 
of fiscal 2022, pre-tax loss
 
was $33.9 million compared
 
to $25.5 million for the same
 
period of fiscal 2021.
We recorded
 
an income tax benefit of $15.8 million for the first quarter of fiscal 2022,
 
which includes the discrete tax benefit of
$8.3
 
million
 
as
 
discussed
 
in
 
Note
 
2
 
 
Acquisitions
 
of
 
the
 
Notes
 
to
 
Condensed
 
Consolidated
 
Financial
 
Statements
 
in
 
this
Quarterly Report. Excluding the discrete tax benefit, income
 
tax benefit was $7.6 million for the first quarter of fiscal 2022
 
with
an adjusted
 
effective
 
tax rate
 
of 22.4%.
 
Income
 
tax benefit
 
was $6.1
 
million
 
for the
 
comparable period
 
of fiscal
 
2021,
 
which
reflects an effective tax rate of 24.0%.
 
At August 28, 2021 and May 29, 2021, trade and other receivables, net included
 
income taxes receivables of $42.5 million.
 
 
Our effective tax
 
rate differs from
 
the federal statutory income
 
tax rate due to
 
state income taxes, certain
 
federal tax credits and
certain
 
items
 
included
 
in
 
income
 
for
 
financial
 
reporting
 
purposes
 
that
 
are
 
not
 
included
 
in
 
taxable
 
income
 
for
 
income
 
tax
purposes,
 
including
 
tax
 
exempt
 
interest
 
income,
 
certain
 
nondeductible
 
expenses
 
and
 
net
 
income
 
or
 
loss
 
attributable
 
to
noncontrolling
 
interest.
 
Results
 
for
 
the
 
current
 
quarter
 
were
 
favorably
 
impacted
 
by
 
a
 
$8.3
 
million
 
discrete
 
tax
 
benefit
 
as
discussed in Note 2 – Acquisitions of the Notes to Condensed Consolidated Finan
 
cial Statements in this Quarterly Report.
 
NET LOSS
 
Net loss
 
for the
 
first quarter
 
ended August
 
28, 2021,
 
was $18.0
 
million, or
 
$0.37 per
 
basic and
 
diluted share,
 
compared to
 
net
loss of $19.4 million or $0.40 per basic and diluted share for the same period of fiscal
 
2021.
 
CAPITAL RESOURCES
 
AND LIQUIDITY
 
Our working
 
capital at
 
August 28,
 
2021,
 
was $362.9
 
million, compared
 
to $429.8
 
million at
 
May 29,
 
2021. The
 
calculation of
working
 
capital
 
is
 
defined
 
as curr
 
ent
 
assets
 
less
 
current
 
liabilities.
 
Our
 
current
 
ratio
 
was
 
4.72
 
at
 
August
 
28,
 
2021,
 
compared
with 5.77 at May 29, 2021.
 
We had
 
no long-term debt outstanding at
 
August 28, 2021 or May 29, 2021.
 
On July 10, 2018, we entered into
 
a $100.0 million
Senior Secured Revolving Credit
 
Facility (the “Revolving Credit
 
Facility”). As of August
 
28, 2021, no amounts were
 
borrowed
under the
 
Revolving Credit
 
Facility.
 
We
 
have $4.1
 
million in outstanding
 
standby letters of
 
credit, issued under
 
our Revolving
Credit
 
Facility
 
for
 
the
 
benefit
 
of
 
certain
 
insurance
 
companies.
 
Refer
 
to
 
Part
 
II
 
Item
 
8,
 
Notes
 
to
 
Consolidated
 
Financial
Statements
 
and
 
Supplementary
 
Data,
 
Note
 
10:
 
Credit
 
Facility
 
included
 
in
 
our
 
2021
 
Annual
 
Report
 
for
 
further
 
information
regarding our long-term debt.
 
For the
 
thirteen
 
weeks ended
 
August
 
28, 2021
 
,
 
$24.1 million
 
in net
 
cash was
 
used in
 
operating activities,
 
compared
 
to $14.8
million used in operating
 
activities for the comparable
 
period in fiscal 2021
 
.
 
This is primarily due
 
to the increased costs
 
of feed
ingredients compared to the prior year period.
 
We
 
continue to invest
 
in our facilities with
 
$11.2 million
 
used to purchase property,
 
plant and equipment for
 
the thirteen weeks
ended
 
August
 
28,
 
2021,
 
compared
 
to
 
$25.3
 
million
 
in
 
the
 
same
 
period
 
of
 
fiscal
 
2021.
 
We
 
also
 
acquired
 
the
 
remaining
 
50%
membership
 
interest in
 
Red River
 
during our
 
first quarter
 
of fiscal
 
2022 for
 
$48.5 million.
 
Sales and
 
maturities of
 
investment
securities, net of
 
purchases, were $38.0
 
million for the thirteen
 
weeks ended August
 
28, 2021,
 
compared to $4.0 million
 
for the
comparable period
 
in fiscal 2021.
 
We
 
received $400 thousand
 
in distributions from
 
an unconsolidated entity
 
in the first
 
quarter
of fiscal 2022
 
compared to $650
 
thousand for the
 
same period fiscal
 
of 2021.
 
We
 
used $53 thousand
 
for principal payments
 
on
finance leases in the first quarter of fiscal 2022 compared to $50
 
thousand for the same period of fiscal 2021.
 
As of
 
August 28,
 
2021,
 
cash decreased
 
$40.7 million
 
since May
 
29, 2021,
 
compared to
 
a decrease
 
of $35.3
 
million during
 
the
same period of fiscal 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24
 
We
 
continue
 
to monitor
 
the increasin
 
g
 
demand for
 
cage-free eggs
 
and to
 
engage with
 
our customers
 
in an
 
effort
 
to achieve
 
a
smooth transition to
 
meet their announced
 
commitment timeline for
 
cage-free egg sales.
 
We
 
have invested approximately
 
$482
million in facilities, equipment
 
and related operations to
 
expand our cage-free production
 
starting with our first facility
 
in 2008.
The following table presents material construction projects approved
 
as of August 28, 2021 (in thousands):
 
Project(s) Type
Projected
 
Completion
Projected Cost
Spent as of
 
August 28, 2021
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2022
138,724
99,380
39,344
$
138,724
$
99,380
$
39,344
 
We believe our
 
current cash balances, investments, cash flows from operations, and Revolving Credit Facility
 
will be sufficient
to fund our current capital needs. As we monitor the demand for cage-free
 
eggs and our growth strategy described in Part I Item
I “Business – Growth Strategy” in our 2021 Annual Report,
 
there may be a need for long-term debt financing. We
 
believe with
our strong balance sheet that we will have adequate access to capital markets if that need
 
arises.
 
RECENTLY
 
ISSUED/ADOPTED ACCOUNTING STANDARDS
 
For
 
information
 
on
 
changes
 
in
 
accounting
 
principles
 
and
 
new
 
accounting
 
policies,
 
see
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25
ITEM 4.
 
CONTROLS
 
AND
 
PROCEDURES
 
Disclosure Controls and Procedures
 
Our disclosure
 
controls and
 
procedures are
 
designed to
 
provide reasonable
 
assurance that
 
information required
 
to be
 
disclosed
by us in the reports
 
we file or submit
 
under the Exchange Act
 
is recorded, processed, summarized
 
and reported, within the
 
time
periods
 
specified
 
in
 
the
 
Securities and
 
Exchange
 
Commission’s
 
rules
 
and
 
forms. Disclosure
 
controls
 
and
 
procedures
 
include,
without limitation, controls and
 
procedures designed to ensure that
 
information required to be disclosed
 
by us in the reports that
we file or submit
 
under the Exchange
 
Act is accumulated and
 
communicated to management,
 
including our principal
 
executive
and
 
principal
 
financial
 
officers,
 
or
 
persons
 
performing
 
similar
 
functions,
 
as
 
appropriate
 
to
 
allow
 
timely
 
decisions
 
regarding
required disclosure. Based on an evaluation of our disclosure controls
 
and procedures conducted by our Chief Executive Officer
and
 
Chief
 
Financial
 
Officer,
 
together
 
with
 
other
 
financial
 
officers,
 
such
 
officers
 
concluded
 
that
 
our
 
disclosure
 
controls
 
and
procedures were effective as of August 28, 2021 at the reasonable
 
assurance level.
 
Changes in Internal Control Over Financial Reporting
 
There
 
was no
 
change
 
in our
 
internal control
 
over financial
 
reporting
 
that occurred
 
during the
 
quarter
 
ended
 
August
 
28, 2021
that has materially affected, or is reasonably likely to materially affect,
 
our internal control over financial reporting.
 
ITEM 3. QUANTITATIVE
 
AND QUALITATIVE
 
DISCLOSURES ABOUT MARKET RISK
 
There have been no material changes in our exposure to market risk during the
 
thirteen weeks ended August 28, 2021 from the
information provided in Item 7A. Quantitative and Qualitative Disclosure
 
s
 
About Market Risk in our 2021 Annual Report.
 
 
PART
 
II. OTHER INFORMATION
 
ITEM 1.
 
LEGAL PROCEEDINGS
 
Refer
 
to
 
the
 
discussion
 
of
 
certain
 
legal
 
proceedings
 
involving
 
the
 
Company
 
and/or
 
its
 
subsidiaries
 
in
 
(i)
 
our
 
2021
 
Annual
Report,
 
Part I
 
Item 3:
 
Legal Proceedings,
 
and
 
Part II
 
Item 8,
 
Notes to
 
Consolidated
 
Financial
 
Statements and
 
Supplementary
Data, Note 18: Commitments
 
and Contingencies, and
 
(ii) in this Quarterly
 
Report in
 
of the Notes to Condensed Consolidated Financial Statements, which discussions are incorporated
 
herein by reference.
 
 
 
ITEM 1A.
 
RISK
 
FACTORS
 
There have been no material changes in the risk factors previously disclosed in the
 
Company’s 2021 Annual
 
Report.
 
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
 
PROCEEDS
 
The following table is a summary of our first quarter 2022 share repurchases:
 
Total
 
Number of
Maximum Number
Shares Purchased
of Shares that
Total
 
Number
Average
as Part of Publicly
May Yet
 
Be
of Shares
Price Paid
Announced Plans
Purchased Under the
Period
Purchased (1)
per Share
Or Programs
Plans or Programs
05/30/21 to 06/26/21
$
06/27/21 to 07/24/21
404
36.34
07/25/21 to 08/28/21
404
$
36.34
 
(1)
 
 
As permitted under our Amended and Restated 2012 Omnibus Long
-
term Incentive Plan, these sha
res were withheld
by us to satisfy tax withholding obligations for employees in connection with
 
the vesting of restricted common stock.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26
ITEM 6. EXHIBITS
 
Exhibits
No.
Description
3.1
3.2
31.1*
31.2*
32**
101.SCH*+
Inline XBRL Taxonomy
 
Extension Schema Document
101.CAL*+
Inline XBRL Taxonomy
 
Extension Calculation Linkbase Document
101.DEF*+
Inline XBRL Taxonomy
 
Extension Definition Linkbase Document
101.LAB*+
Inline XBRL Taxonomy
 
Extension Label Linkbase Document
101.PRE*+
Inline XBRL Taxonomy
 
Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained
 
in Exhibit 101)
 
*
Filed herewith as an Exhibit.
 
**
Furnished herewith as an Exhibit.
+
Submitted electronically with this Quarterly Report.
 
 
SIGNATURES
 
Pursuant to
 
the requirements
 
of the Securities
 
Exchange Act
 
of 1934,
 
the registrant has
 
duly caused
 
this report
 
to be signed
 
on
its behalf by the undersigned, thereunto duly authorized.
 
CAL-MAINE FOODS, INC.
(Registrant)
 
Date:
 
September 28, 2021
/s/ Max P.
 
Bowman
Max P.
 
Bowman
Vice President, Chief Financial
 
Officer
(Principal Financial Officer)
໿
Date:
 
September 28, 2021
/s/ Michael D. Castleberry
Michael D. Castleberry
Vice President, Controller
(Principal Accounting Officer)
໿