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CAL-MAINE FOODS INC - Quarter Report: 2021 February (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
February 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:
 
000-38695
 
 
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.)
 
3320 Woodrow Wilson Avenue
,
Jackson
,
Mississippi
 
39209
 
(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
tha
t 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
44,056,163
 
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 March 29, 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)
 
 
February 27, 2021
43981
Assets
Current assets:
Cash and cash equivalents
$
52,917
$
78,130
Investment securities available-for-sale
127,771
154,163
Trade and other receivables, net
130,314
98,375
Inventories
207,739
187,216
Prepaid expenses and other current assets
4,162
4,367
Total current
 
assets
522,903
522,251
Property, plant &
 
equipment, net
585,389
557,375
Finance lease right-of-use asset, net
563
678
Operating lease right-of-use asset, net
1,922
2,531
Investments in unconsolidated entities
57,055
60,982
Goodwill
35,525
35,525
Intangible assets, net
22,256
22,816
Other long-term assets
5,671
4,536
Total Assets
$
1,231,284
$
1,206,694
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
99,851
$
92,182
Current portion of finance lease obligation
212
205
Current portion of operating lease obligation
741
796
Total current
 
liabilities
100,804
93,183
Long-term finance lease obligation
492
652
Long-term operating lease obligation
1,180
1,735
Other noncurrent liabilities
9,690
8,681
Deferred income taxes
102,669
92,768
Total liabilities
214,835
197,019
Commitments and contingencies - see
Note 12
 
 
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
63,170
60,372
Retained earnings
980,212
975,147
Accumulated other comprehensive income (loss), net of tax
(135)
79
Common stock in treasury at cost –
26,205
 
shares at February 27, 2021 and
26,287
shares at May 30, 2020
(27,549)
(26,674)
Total stockholders’
 
equity
1,016,449
1,009,675
Total Liabilities and
 
Stockholders’ Equity
$
1,231,284
 
$
 
1,206,694
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
 
Thirteen Weeks
 
Ended
Thirty-nine Weeks
 
Ended
February 27, 2021
February 29, 2020
February 27, 2021
February 29, 2020
Net sales
$
359,080
$
345,588
$
999,189
$
898,276
Cost of sales
311,563
295,760
876,457
840,198
Gross profit
47,517
49,828
122,732
58,078
Selling, general and administrative
47,656
44,231
135,494
132,434
Loss on disposal of fixed assets
354
385
476
467
Operating income (loss)
(493)
5,212
(13,238)
(74,823)
Other income (expense):
Interest income, net
591
803
2,181
3,628
Royalty income
321
414
906
1,173
Patronage dividends
9,004
10,096
9,004
10,096
Equity income of unconsolidated entities
1,872
1,445
1,886
537
Other, net
537
79
1,485
1,897
Total other income,
 
net
12,325
12,837
15,462
17,331
Income (loss) before income taxes
11,832
18,049
2,224
(57,492)
Income tax (benefit) expense
(1,716)
4,278
(4,080)
(15,356)
Net income (loss)
13,548
13,771
6,304
(42,136)
Less: Income (loss) attributable to noncontrolling
interest
22
(64)
Net income (loss) attributable to Cal-Maine
Foods, Inc.
$
13,548
$
13,749
$
6,304
$
(42,072)
Net income (loss) per common share attributable
to Cal-Maine Foods, Inc.:
Basic
$
0.28
$
0.28
$
0.13
$
(0.87)
Diluted
$
0.28
$
0.28
$
0.13
$
(0.87)
Weighted average
 
shares outstanding:
Basic
48,530
48,473
48,511
48,455
Diluted
48,659
48,588
48,649
48,455
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
 
Comprehensive Income (Loss)
(in thousands)
(unaudited)
 
 
Thirteen Weeks
 
Ended
Thirty-nine Weeks
 
Ended
February 27, 2021
February 29, 2020
February 27, 2021
February 29, 2020
Net profit (loss)
$
13,548
 
$
 
13,771
 
$
 
6,304
 
$
 
(42,136)
Other comprehensive income (loss), before tax:
Unrealized holding loss on available-for-sale
securities, net of reclassification adjustments
(378)
(38)
(283)
(863)
Income tax benefit related to items of other
comprehensive income
92
9
69
210
Other comprehensive loss, net of tax
(286)
(29)
(214)
(653)
Comprehensive income (loss)
13,262
13,742
6,090
(42,789)
Less: Comprehensive income (loss) attributable
to the noncontrolling interest
22
(64)
Comprehensive income (loss) attributable to Cal-
Maine Foods, Inc.
$
13,262
$
13,720
$
6,090
$
(42,725)
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
Thirty-nine Weeks
 
Ended
February 27, 2021
February 29, 2020
Operating activities:
Net income (loss)
$
6,304
$
(42,136)
Depreciation and amortization
44,391
42,911
Deferred income taxes
9,970
(13,406)
Impairment loss on property,
 
plant & equipment
2,919
Other adjustments, net
(45,936)
(26,742)
Net cash provided by (used in) operations
14,729
(36,454)
Investing activities:
Purchases of investment securities
(59,415)
(12,100)
Sales and maturities of investment securities
85,202
181,533
Distributions from unconsolidated entities
5,813
6,114
Acquisition of business
(44,515)
Purchases of property,
 
plant and equipment
(73,796)
(94,600)
Net proceeds from disposal of property,
 
plant and equipment
3,273
1,839
Net cash provided by (used in) investing activities
(38,923)
38,271
Financing activities:
Purchase of common stock by treasury
(871)
(910)
Distributions to noncontrolling interests
(755)
Principal payments on long-term debt
(1,500)
Principal payments on finance lease
(153)
(146)
Contributions
5
Net cash used in financing activities
(1,019)
(3,311)
Net change in cash and cash equivalents
(25,213)
(1,494)
Cash and cash equivalents at beginning of period
78,130
69,247
Cash and cash equivalents at end of period
$
52,917
 
$
 
67,753
Supplemental Information:
Cash paid for operating leases
$
703
$
635
Interest paid
$
193
 
$
 
77
See Notes to Condensed Consolidated Financial Statements.
 
7
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
February 27, 2021
(unaudited)
 
Note 1 - Summary of Significant Accounting Policies
 
Basis of Presentation
 
The
 
unaudited
 
condensed
 
consolidated
 
financial
 
statements
 
of
 
Cal-Maine
 
Foods,
 
Inc.
 
and
 
its
 
subsidiaries
 
(the
 
"Company,"
"we,"
 
"us,"
 
"our")
 
have
 
been
 
prepared
 
in
 
accordance
 
with
 
the
 
instructions
 
to
 
Form
 
10-Q
 
and
 
Article
 
10
 
of
 
Regulation
 
S-X.
 
Therefore, they
 
do not
 
include all of
 
the information
 
and footnotes
 
required by
 
generally accepted
 
accounting principles
 
in the
United
 
States
 
of
 
America
 
("GAAP")
 
for
 
complete
 
financial
 
statements
 
and
 
should
 
be
 
read
 
in
 
conjunction
 
with
 
our
 
Annual
Report
 
on
 
Form
 
10-K
 
for
 
the
 
fiscal
 
year
 
ended
 
May
 
30,
 
2020
 
(the
 
"2020
 
Annual
 
Report").
 
These
 
statements
 
reflect
 
all
adjustments that are, in
 
the opinion of management, necessary
 
to a fair statement of
 
the results for the interim
 
periods presented
and,
 
in
 
the
 
opinion
 
of
 
management,
 
consist
 
of
 
adjustments
 
of
 
a
 
normal
 
recurring
 
nature.
 
Operating
 
results
 
for
 
the
 
interim
periods are not necessarily indicative of operating results for the entire fiscal
 
year.
 
Fiscal Year
 
The Company's
 
fiscal year
 
ends on
 
the Saturday
 
closest to
 
May 31.
 
Each of
 
the three-month
 
periods and
 
year-to-date periods
ended on February 27, 2021 and February 29, 2020 included 13 weeks
 
and 39 weeks, respectively.
 
Use of Estimates
 
The preparation of the
 
consolidated financial statements in
 
conformity with GAAP requires management
 
to make estimates and
assumptions
 
that affect
 
the amounts
 
reported in
 
the consolidated
 
financial statements
 
and accompanying
 
notes. Actual
 
results
could differ from those estimates.
 
 
The severity,
 
magnitude and duration, as well as
 
the economic consequences of the COVID-19
 
pandemic, are uncertain, rapidly
changing
 
and
 
difficult
 
to
 
predict.
 
Therefore,
 
our
 
accounting
 
estimates
 
and
 
assumptions
 
might
 
change
 
materially
 
in
 
future
periods in response to COVID-19.
 
Investment Securities
 
Our investment
 
securities are
 
accounted
 
for in
 
accordance with
 
ASC 320,
 
“Investments -
 
Debt and
 
Equity Securities”
 
(“ASC
320”).
 
The
 
Company
 
considers
 
all
 
its
 
debt
 
securities
 
for
 
which
 
there
 
is
 
a
 
determinable
 
fair
 
market
 
value,
 
and
 
there
 
are
 
no
restrictions
 
on
 
the
 
Company's
 
ability
 
to
 
sell
 
within
 
the
 
next
 
12
 
months,
 
as
 
available-for-sale.
 
We
 
classify
 
these
 
securities
 
as
current, because the
 
amounts invested are available
 
for current operations.
 
Available-for-sale
 
securities are carried at
 
fair value,
with unrealized
 
gains and
 
losses reported
 
as a
 
separate
 
component
 
of stockholders’
 
equity.
 
The Company
 
regularly
 
evaluates
changes to
 
the rating of
 
its debt securities
 
by credit
 
agencies and economic
 
conditions to assess
 
and record
 
any expected
 
credit
losses through allowance
 
for credit losses limited
 
to the amount
 
that fair value
 
was less than the
 
amortized cost basis.
 
The cost
basis for realized gains and
 
losses on available-for-sale securities is
 
determined by the specific identification
 
method. Gains and
losses
 
are
 
recognized
 
in
 
other
 
income
 
(expenses)
 
as
 
Other,
 
net
 
in
 
the
 
Company's
 
Condensed
 
Consolidated
 
Statements
 
of
Operations.
 
Investments
 
in
 
mutual
 
funds
 
are
 
classified
 
as
 
“Other
 
long-term
 
assets”
 
in
 
the
 
Company’s
 
Consolidated
 
Balance
Sheets.
 
 
Trade Receivables
 
 
Trade
 
receivables are
 
stated at
 
their carrying
 
values, which
 
include a
 
reserve for
 
credit losses.
 
At February
 
27, 2021
 
and May
30,
 
2020,
 
reserves
 
for
 
credit
 
losses
 
were
 
$
728
 
thousand
 
and
 
$
744
 
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
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 - Investment
 
Securities
 
The following represents the Company’s
 
investment securities as of February 27, 2021 and May 30, 2020 (in
 
thousands):
 
February 27, 2021
Amortized
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
16,157
$
52
$
$
16,209
Commercial paper
6,345
6,345
Corporate bonds
92,256
1,062
93,318
Certificates of deposits
2,084
7
2,077
Asset backed securities
9,823
1
9,822
Total current
 
investment securities
$
126,665
$
1,114
$
8
$
127,771
Mutual funds
$
2,293
$
1,424
$
$
3,717
Total noncurrent
 
investment securities
$
2,293
$
1,424
$
$
3,717
 
43981
Amortized
 
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
16,093
$
86
$
$
16,179
Commercial paper
6,965
17
6,982
Corporate bonds
125,594
1,274
126,868
Certificates of deposits
1,492
1,492
Asset backed securities
2,629
13
2,642
Total current
 
investment securities
$
152,773
$
1,390
$
$
154,163
Mutual funds
$
2,005
$
744
$
$
2,749
Total noncurrent
 
investment securities
$
2,005
$
744
$
$
2,749
 
Available-for-sale
 
Proceeds from sales
 
and maturities of investment
 
securities available-for-sale
 
were $
85.2
 
million and $
181.5
 
million during the
thirty-nine weeks
 
ended February 27,
 
2021 and
 
February 29,
 
2020,
 
respectively.
 
Gross realized
 
gains for
 
the thirty-nine
 
weeks
ended
 
February
 
27,
 
2021
 
and
 
February
 
29,
 
2020
 
were
 
$
116
 
thousand
 
and
 
$
246
 
thousand,
 
respectively.
 
There
 
were
 
$
17
thousand
 
and
 
$
7
 
thousand
 
gross
 
realized
 
losses
 
for
 
the
 
thirty-nine
 
weeks
 
ended February
 
27,
 
2021
 
and
 
February
 
29,
 
2020,
respectively.
 
There were
no
 
allowance for credit losses at February 27, 2021 and May 30, 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9
Actual maturities
 
may differ
 
from contractual
 
maturities as some
 
borrowers have
 
the right to
 
call or prepay
 
obligations with
 
or
without penalties.
 
Contractual maturities of current investments at February 27, 2021 are
 
as follows (in thousands):
 
Estimated Fair Value
Within one year
$
44,862
1-5 years
82,909
Total
$
127,771
 
Noncurrent
 
 
There were
no
 
sales of
 
noncurrent investment
 
securities during
 
the thirty-nine
 
weeks ended February
 
27, 2021.
 
Proceeds from
sales
 
and
 
maturities
 
of
 
noncurrent
 
investment
 
securities
 
were
 
$
1.2
 
million
 
during
 
the
 
thirty-nine
 
weeks
 
ended February
 
29,
2020.
 
Gross
 
realized
 
gains
 
for
 
the
 
thirty-nine
 
weeks
 
ended February
 
29,
 
2020
 
were
 
$
611
 
thousand.
 
There
 
were
no
 
realized
losses for the thirty-nine weeks ended February 27, 2021 and February
 
29, 2020.
 
Note 3 - Fair Value
 
Measurements
 
 
The Company
 
is required
 
to categorize
 
both financial
 
and nonfinancial
 
assets and
 
liabilities based
 
on the
 
following fair
 
value
hierarchy.
 
The fair
 
value of
 
an asset
 
is the
 
price at
 
which the
 
asset could
 
be sold
 
in an
 
orderly transaction
 
between unrelated,
knowledgeable, and willing
 
parties able to engage in
 
the transaction. A liability’s
 
fair value is defined
 
as the amount that would
be
 
paid
 
to
 
transfer
 
the
 
liability
 
to
 
a
 
new
 
obligor
 
in
 
a
 
transaction
 
between
 
such
 
parties,
 
not
 
the
 
amount
 
that
 
would
 
be paid
 
to
settle the liability with the creditor.
 
 
Level 1
 
- 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 February 27, 2021 and May 30,
 
2020 (in thousands):
 
February 27, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
16,209
$
$
16,209
Commercial paper
6,345
6,345
Corporate bonds
93,318
93,318
Certificates of deposits
2,077
2,077
Asset backed securities
9,822
9,822
Mutual funds
3,717
3,717
Total assets measured at fair
 
value
$
3,717
$
127,771
$
$
131,488
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10
43981
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
16,179
$
$
16,179
Commercial paper
6,982
6,982
Corporate bonds
126,868
126,868
Certificates of deposits
1,492
1,492
Asset backed securities
2,642
2,642
Mutual funds
2,749
2,749
Total assets measured at fair
 
value
$
2,749
$
154,163
$
$
156,912
 
Investment
 
securities
 
 
available-for-sale
 
classified
 
as Level
 
2
 
consist
 
of
 
securities
 
with maturities
 
of
 
three
 
months
 
or longer
when purchased. Observable inputs for these securities are yields, credit risks, default
 
rates, and volatility.
 
Note 4 - Inventories
 
Inventories consisted of the following as of February 27, 2021 and
 
May 30, 2020 (in thousands):
 
February 27, 2021
43981
Flocks, net of amortization
$
115,904
$
110,198
Eggs and egg products
18,069
18,487
Feed and supplies
73,766
58,531
$
207,739
$
187,216
 
We
 
grow
 
and
 
maintain
 
flocks
 
of
 
layers
 
(mature
 
female
 
chickens),
 
pullets
 
(female
 
chickens,
 
under
 
18
 
weeks
 
of
 
age),
 
and
breeders (male and female chickens used to produce fertile eggs
 
to hatch for egg production flocks).
 
Our total flock at February
27, 2021 consisted of approximately
9.6
 
million pullets and breeders and
41.3
 
million layers.
 
 
Note 5 - Accrued Dividends Payable and Dividends per Common
 
Share
 
 
We
 
accrue dividends at
 
the end of
 
each quarter according
 
to the Company’s
 
dividend policy adopted
 
by its Board
 
of Directors.
The Company
 
pays a dividend
 
to shareholders
 
of its Common
 
Stock and
 
Class A Common
 
Stock on
 
a quarterly basis
 
for each
quarter for
 
which the
 
Company reports
 
net income
 
attributable to
 
Cal-Maine Foods,
 
Inc. computed
 
in accordance
 
with GAAP
in an amount
 
equal to one-third
 
(1/3) of such
 
quarterly income. Dividends
 
are paid to
 
shareholders of record
 
as of the 60th
 
day
following the
 
last day of
 
such quarter,
 
except for the
 
fourth fiscal quarter.
 
For the fourth
 
quarter,
 
the Company pays
 
dividends
to shareholders of record on the 65th day after the
 
quarter end. Dividends are payable on the 15th day following
 
the record date.
 
Following a quarter for which the Company does not report net income
 
attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend
 
for a subsequent profitable
 
quarter until the Company
 
is profitable on a cumulative
 
basis computed from the
date
 
of
 
the
 
last
 
quarter
 
for
 
which
 
a
 
dividend
 
was
 
paid.
 
For
 
the
 
third
 
quarter
 
of
 
fiscal
 
2021,
 
we
 
will
 
pay
 
a
 
cash
 
dividend
 
of
approximately
 
$
0.034
 
per share
 
to holders
 
of our
 
Common Stock
 
and
 
Class A
 
Common
 
Stock.
 
The amount
 
of the
 
accrual is
recorded in Accounts payable and accrued expenses in the Company’s
 
Condensed Consolidated Balance Sheets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
On
 
our
 
condensed
 
consolidated
 
statement
 
of
 
operations,
 
we
 
determine
 
dividends
 
per
 
common
 
share
 
in
 
accordance
 
with
 
the
computation in the following table (in thousands, except per share data):
 
Thirteen Weeks
 
Ended
Thirty-nine Weeks
 
Ended
February 27, 2021
February 29, 2020
February 27, 2021
February 29, 2020
Net income (loss) attributable to Cal-Maine
Foods, Inc.
$
13,548
$
13,749
$
6,304
$
(42,072)
Cumulative losses to be recovered prior to
payment of divided at beginning of period
(8,614)
(75,582)
(1,370)
(19,761)
Net income attributable to Cal-Maine Foods,
Inc. available for dividend
$
4,934
$
$
4,934
$
1/3 of net income attributable to Cal-Maine
Foods, Inc. available for dividend
1,645
Common stock outstanding (shares)
44,056
Class A common stock outstanding (shares)
4,800
Total common stock
 
outstanding (shares)
48,856
Dividends per common share*
$
0.034
*
Dividends per common share
 
= 1/3 of Net
 
income (loss) attributable to
 
Cal-Maine Foods, Inc. available
 
for dividend ÷ Total
 
common stock
outstanding (shares).
 
 
Note 6 - Equity
 
The following reflects the equity activity,
 
for the thirteen and thirty-nine weeks ended February 27,
 
2021 and February 29, 2020
(in thousands):
 
Thirteen Weeks Ended February
 
27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Total
Balance at November 28, 2020
$
703
$
48
$
(26,723)
$
62,206
$
151
$
968,325
$
1,004,710
Other comprehensive loss, net of
tax
(286)
(286)
Purchase of company stock
(826)
(826)
Restricted stock compensation
964
964
Dividends
(1,661)
(1,661)
Net income
13,548
13,548
Balance at February 27, 2021
$
703
$
48
$
(27,549)
$
63,170
$
(135)
$
980,212
$
1,016,449
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12
Thirteen Weeks Ended February 29, 2020
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Interest
Total
Balance at November 30,
2019
$
703
$
48
$
(25,888)
$
58,652
$
(269)
$
900,485
$
562
$
934,293
Other comprehensive
loss, net of tax
(29)
(29)
Restricted stock
forfeitures
103
(103)
Purchase of company
stock
(889)
(889)
Restricted stock
compensation
886
886
Net income
13,749
22
13,771
Balance at February 29,
2020
$
703
$
48
$
(26,674)
$
59,435
$
(298)
$
914,234
$
584
$
948,032
 
Thirty-nine Weeks Ended February
 
27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Total
Balance at May 30, 2020
$
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 loss, net of
tax
(214)
(214)
Restricted stock forfeitures
(4)
4
Purchase of company stock
(871)
(871)
Restricted stock compensation
2,789
2,789
Contributions
5
5
Dividends
(1,661)
(1,661)
Net income
6,304
6,304
Balance at February 27, 2021
$
703
$
48
$
(27,549)
$
63,170
$
(135)
$
980,212
$
1,016,449
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13
Thirty-nine Weeks Ended February 29, 2020
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Interest
Total
Balance at June 01, 2019
$
703
$
48
$
(25,866)
$
56,857
$
355
$
954,527
$
3,182
$
989,806
Other comprehensive
loss, net of tax
(653)
(653)
Restricted stock
forfeitures
102
(102)
Purchase of company
stock
(910)
(910)
Distributions to
noncontrolling interest
partners
(755)
(755)
Reclass of equity portion
of Texas Egg Products,
LLC in connection with
acquisition
1,779
(1,779)
Restricted stock
compensation
2,680
2,680
Net loss
(42,072)
(64)
(42,136)
Balance at February 29,
2020
$
703
$
48
$
(26,674)
$
59,435
$
(298)
$
914,234
$
584
$
948,032
 
Note 7 - Net Income (Loss) per Common Share
 
 
 
Basic net
 
income (loss)
 
per share
 
attributable to
 
Cal-Maine Foods,
 
Inc. is
 
based on
 
the weighted
 
average Common
 
Stock and
Class A Common
 
Stock outstanding.
 
Diluted net income
 
per share attributable
 
to Cal-Maine Foods,
 
Inc. is based
 
on weighted-
average
 
common
 
shares
 
outstanding
 
during
 
the
 
relevant
 
period
 
adjusted
 
for
 
the
 
dilutive
 
effect
 
of
 
share-based
 
awards.
 
Restricted
 
shares
 
of
121
 
thousand
 
were
 
antidilutive
 
due
 
to
 
the
 
net
 
loss
 
for
 
the
 
thirty-nine
 
weeks
 
ended
 
February
 
29,
 
2020.
 
These shares were not included in the diluted net loss per share calculation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14
The
 
following
 
table
 
provides
 
a
 
reconciliation
 
of
 
the
 
numerators
 
and
 
denominators
 
used
 
to
 
determine
 
basic
 
and
 
diluted
 
net
income per common share attributable to Cal-Maine Foods, Inc.
 
(amounts in thousands, except per share data):
 
Thirteen Weeks
 
Ended
Thirty-nine Weeks
 
Ended
February 27, 2021
February 29, 2020
February 27, 2021
February 29, 2020
Numerator
Net income (loss)
$
13,548
$
13,771
$
6,304
$
(42,136)
Less: Income (loss) attributable to
noncontrolling interest
22
(64)
Net income (loss) attributable to Cal-
Maine Foods, Inc.
$
13,548
$
13,749
$
6,304
$
(42,072)
Denominator
Weighted-average
 
common shares
outstanding, basic
48,530
48,473
48,511
48,455
Effect of dilutive restricted shares
129
115
138
Weighted-average
 
common shares
outstanding, diluted
48,659
48,588
48,649
48,455
Net income (loss) per common share
attributable to Cal-Maine Foods, Inc.
Basic
$
0.28
$
0.28
$
0.13
$
(0.87)
Diluted
$
0.28
$
0.28
$
0.13
$
(0.87)
 
Note 8 - Revenue Recognition
 
Satisfaction of Performance Obligation
 
The vast
 
majority of
 
the Company’s
 
revenue is
 
derived from
 
contracts with
 
customers based
 
on the
 
customer placing
 
an order
for products.
 
Pricing for the most part
 
is determined when the
 
Company and the customer
 
agree upon the specific
 
order, which
establishes the contract for that order.
 
Revenues are
 
recognized in
 
an amount
 
that reflects
 
the net
 
consideration we
 
expect to
 
receive in
 
exchange for
 
the goods.
 
Our
shell eggs
 
are sold
 
at prices
 
related to
 
independently
 
quoted wholesale
 
market prices,
 
negotiated prices
 
or formulas
 
related to
our costs
 
of production.
 
The Company’s
 
sales predominantly
 
contain a
 
single performance
 
obligation.
 
We
 
recognize revenue
upon satisfaction
 
of the performance
 
obligation with
 
the customer,
 
which typically occurs
 
within days of
 
the Company
 
and the
customer agreeing upon the order.
Returns and Refunds
 
Some of our contracts
 
include a guaranteed sale
 
clause, pursuant to which
 
we credit the customer’s
 
account for product
 
that the
customer is unable to
 
sell before expiration.
 
The Company records an
 
estimate of returns and
 
refunds by using historical return
data and
 
comparing to
 
current period
 
sales and
 
accounts receivable.
 
The allowance
 
is recorded
 
as a
 
reduction in
 
sales with
 
a
corresponding reduction in trade accounts receivable.
 
 
Sales Incentives Provided to Customers
 
The
 
Company
 
periodically
 
provides
 
incentive
 
offers
 
to
 
its
 
customers
 
to
 
encourage
 
purchases.
 
Such
 
offers
 
include
 
current
discount offers
 
(e.g., percentage
 
discounts off
 
current purchases), inducement
 
offers (e.g.,
 
offers for
 
future discounts subject
 
to
a minimum
 
current purchase),
 
and other
 
similar offers.
 
Current discount
 
offers,
 
when accepted
 
by customers,
 
are treated
 
as a
reduction
 
to
 
the sales
 
price
 
of the
 
related
 
transaction,
 
while inducement
 
offers,
 
when
 
accepted
 
by
 
customers,
 
are
 
treated
 
as a
reduction to sales price based on estimated future redemption rates.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15
Disaggregation of Revenue
 
The following table provides revenue disaggregated by product category
 
(in thousands):
 
Thirteen Weeks
 
Ended
Thirty-nine Weeks
 
Ended
February 27, 2021
February 29, 2020
February 27, 2021
February 29, 2020
Conventional shell egg sales
$
203,189
$
210,329
$
560,297
$
518,898
Specialty shell egg sales
145,210
125,019
408,537
352,118
Egg products
9,098
9,212
25,736
24,210
Other
1,583
1,028
4,619
3,050
$
359,080
$
345,588
$
999,189
$
898,276
 
Contract Costs
 
The Company can
 
incur costs to obtain
 
or fulfill a contract
 
with a customer.
 
The amortization period
 
of these costs is
 
less than
one year; therefore, they are expensed as incurred.
Contract Balances
 
The Company
 
receives payment
 
from
 
customers based
 
on specified
 
terms that
 
are generally
 
less than
 
30 days
 
from
 
delivery.
 
There are
 
rarely contract
 
assets or
 
liabilities related
 
to performance
 
under the
 
contract and
 
they are generally
 
immaterial to
 
the
financial statements.
 
Note 9 - Leases
 
 
Expenses related
 
to operating
 
leases, amortization
 
of finance
 
leases, right-of-use
 
assets, and
 
finance lease
 
interest are
 
included
in Cost of sales, Selling general and administrative expense, and Interest
 
income, net in the Condensed Consolidated Statements
of Operations. The Company’s lease cost
 
consists of the following (in thousands):
 
13 Weeks Ended
 
February 27, 2021
39 Weeks Ended
 
February 27, 2021
Operating Lease cost
$
233
$
703
Finance Lease cost
Amortization of right-of-use asset
$
44
$
125
Interest on lease obligations
$
9
$
27
Short term lease cost
$
857
$
2,714
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16
Future minimum lease payments under non-cancelable leases are as follows (in
 
thousands):
 
As of February 27, 2021
Operating Leases
Finance Leases
Remainder fiscal 2021
$
224
$
68
2022
802
239
2023
539
239
2024
380
218
2025
130
2026
26
Thereafter
5
Total
2,106
764
Less imputed interest
(185)
(60)
Total
$
1,921
$
704
 
The
 
weighted-average
 
remaining
 
lease
 
term
 
and
 
discount
 
rate
 
for
 
lease
 
liabilities
 
included
 
in
 
our
 
Condensed
 
Consolidated
Balance Sheet are as follows:
 
As of February 27, 2021
Operating Leases
Finance Leases
Weighted-average
 
remaining lease term (years)
3.0
2.8
Weighted-average
 
discount rate
5.9
%
4.9
%
 
Note 10 - Stock Based Compensation
 
On
 
October
 
2,
 
2020,
 
shareholders
 
approved
 
the
 
Amended
 
and
 
Restated
 
Cal-Maine
 
Foods,
 
Inc.
 
2012
 
Omnibus
 
Long-Term
Incentive
 
Plan
 
(the
 
“Plan”).
 
The
 
purpose
 
of
 
the
 
Plan
 
is
 
to
 
assist
 
us
 
and
 
our
 
subsidiaries
 
in
 
attracting
 
and
 
retaining
 
selected
individuals
 
who
 
are
 
expected
 
to
 
contribute
 
to
 
our
 
long-term
 
success.
 
The
 
maximum
 
number
 
of
 
shares
 
of
 
common
 
stock
available
 
for
 
awards
 
under
 
the
 
Plan
 
is
2,000,000
,
 
of
 
which
1,128,488
 
shares
 
remain
 
available
 
for
 
issuance,
 
and
 
may
 
be
authorized but
 
unissued shares
 
or treasury
 
shares. Awards
 
may be
 
granted under
 
the Plan
 
to any
 
employee, any
 
non-employee
member of the Company’s
 
Board of Directors, and
 
any consultant who is
 
a natural person and
 
provides services to us
 
or one of
our subsidiaries (except for incentive stock options, which may be granted
 
only to our employees).
 
The only
 
outstanding awards
 
under the
 
Plan are
 
restricted stock
 
awards. The
 
restricted stock
 
vests one
 
to three
 
years from
 
the
grant
 
date, or
 
upon death
 
or disability,
 
change
 
in control,
 
or retirement
 
(subject to
 
certain requirements).
 
The restricted
 
stock
contains no other service or performance
 
conditions. Restricted stock is awarded in
 
the name of the recipient and, except
 
for the
right of
 
disposal, constitutes
 
issued and
 
outstanding shares
 
of the
 
Company’s
 
common stock
 
for all
 
corporate purposes
 
during
the period
 
of restriction
 
including the
 
right to
 
receive dividends.
 
Compensation
 
expense is
 
a fixed
 
amount based
 
on the
 
grant
date closing price and is amortized over the vesting period.
 
Total
 
stock-based compensation
 
expense was
 
$
2.8
 
million and
 
$
2.7
 
million for
 
the thirty-nine
 
weeks ended
 
February 27,
 
2021
and February 29, 2020, respectively.
 
Unrecognized
 
compensation expense
 
as a
 
result of
 
non-vested
 
shares of
 
restricted stock
 
outstanding under
 
the 2012
 
Omnibus
Long-Term
 
Incentive Plan
 
at February
 
27, 2021
 
of $
7.5
 
million will
 
be recorded
 
over a
 
weighted average
 
period of
2.3
 
years.
 
Refer
 
to
 
Note
 
16
 
of
 
our
 
audited
 
financial
 
statements
 
in
 
our
2020
 
Annual
 
Report
 
for
 
further
 
information
 
on
 
our
 
stock
compensation plans.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17
The Company’s restricted share activity
 
for the thirty-nine weeks ended February 27, 2021 follows:
 
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 30, 2020
273,046
$
41.36
Granted
110,560
37.71
Vested
(79,328)
43.96
Forfeited
(4,431)
40.12
Outstanding, February 27, 2021
299,847
$
39.35
 
Note 11 – Income Taxes
 
The differences
 
between income
 
tax expense
 
(benefit)
 
at the
 
Company’s
 
effective
 
income tax
 
rate and
 
income tax
 
expense at
the statutory federal income tax rate for the thirteen and thirty-nine
 
weeks ended as of February 27, 2021 were as follows:
 
Thirteen Weeks
 
Ended
Thirty-nine Weeks
 
Ended
February 27, 2021
February 27, 2021
Statutory federal income tax
 
$
2,907
$
543
Enacted net operating loss carryback provision
(6,422)
(6,422)
Domestic manufacturers deduction
1,408
1,408
Other, net
391
391
$
(1,716)
$
(4,080)
 
On March
 
27, 2020,
 
the Coronavirus
 
Aid, Relief,
 
and Economic
 
Security
 
Act (the
 
“CARES Act”)
 
was enacted.
 
The CARES
Act
 
contains
 
several income
 
tax provisions,
 
as well
 
as other
 
measures,
 
that are
 
intended to
 
assist businesses
 
impacted
 
by
 
the
economic
 
effects
 
of
 
the
 
COVID-19
 
pandemic.
 
The
 
most
 
significant
 
provision
 
of
 
the
 
CARES
 
Act
 
that
 
materially
 
affects
 
our
accounting
 
for
 
income
 
taxes
 
includes
 
a
 
five-year
 
carryback
 
allowance
 
for
 
taxable
 
net
 
operating
 
losses generated
 
in
 
tax
 
years
2018 through 2020, our fiscal years 2019 through 2021.
 
Our financial
 
statements for
 
the thirteen
 
weeks ended
 
February 27,
 
2021 were
 
affected by
 
the changes
 
enacted by
 
the CARES
Act.
 
As a result of the applicable accounting
 
guidance and the provisions enacted by the CARES Act, our
 
income tax provision
for the
 
third quarter
 
of fiscal
 
2021 reflects
 
the carryback
 
of taxable
 
net operating
 
losses generated
 
during periods
 
in which
 
the
statutory
 
federal
 
income
 
tax
 
rate
 
was
21
%
 
to
 
periods
 
in
 
which
 
the
 
statutory
 
federal
 
income
 
tax
 
rate
 
was
35
%.
 
Due
 
to
 
the
difference
 
in statutory
 
rates, we
 
recorded a
 
$
6.4
 
million discrete
 
income tax
 
benefit related
 
to the
 
carryback provisions
 
during
the thirteen
 
weeks ended
 
February 27,
 
2021. Because
 
the net
 
operating losses
 
were carried
 
back to
 
years in
 
which we
 
initially
reduced our taxable income using
 
the Domestic Production Activities Deduction,
 
we recorded a partially offsetting
 
$
1.4
 
million
discrete income tax expense during the thirteen weeks ended February 27,
 
2021 to account for the reduced taxable income.
 
Note 12 - Commitments and Contingencies
 
Financial Instruments
 
The Company maintained
 
standby letters of credit
 
("LOC") totaling $
4.1
 
million at February 27,
 
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
 
 
 
 
18
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.
 
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 their
motion
 
to
 
dismiss
 
the
 
plaintiffs’
 
first
 
amended
 
class
 
action
 
complaint.
 
The
 
court
 
has
 
not
 
ruled
 
on
 
this
 
motion
 
to
 
dismiss.
Management believes the risk of material loss related to this matter to be remote.
 
Kraft Foods Global, Inc. et al. v.
 
United Egg Producers, Inc. et al.
 
 
As previously
 
reported, on
 
September 25,
 
2008, the
 
Company
 
was named
 
as one
 
of several
 
defendants
 
in numerous
 
antitrust
cases involving
 
the United
 
States shell
 
egg
 
industry.
 
The Company
 
settled all
 
of these
 
cases, except
 
for
 
the claims
 
of certain
plaintiffs who sought substantial
 
damages allegedly arising from
 
the purchase of egg products
 
(as opposed to shell eggs).
 
These
remaining plaintiffs
 
are Kraft
 
Food Global,
 
Inc., General
 
Mills, Inc.,
 
and Nestle
 
USA, Inc.
 
(the “Egg
 
Products Plaintiffs”)
 
and
The Kellogg Company.
 
On September
 
13, 2019,
 
the case
 
with the
 
Egg Products
 
Plaintiffs was
 
remanded from
 
a multi-district
 
litigation proceeding
 
in
the
 
United
 
States
 
District
 
Court
 
for
 
the
 
Eastern
 
District
 
of
 
Pennsylvania,
 
In
 
re
 
Processed
 
Egg
 
Products
 
Antitrust
 
Litigation,
MDL No. 2002, to
 
the United States District Court
 
for the Northern
 
District of Illinois, Kraft Foods
 
Global, Inc. et al. v.
 
United
Egg
 
Producers,
 
Inc.
 
et
 
al.,
 
Case
 
No.
 
1:11-cv-8808,
 
for
 
trial.
 
The
 
Egg
 
Products
 
Plaintiffs
 
allege
 
that
 
the
 
Company
 
and
 
other
defendants
 
violated
 
Section
 
1
 
of
 
the
 
Sherman
 
Act,
 
15.
 
U.S.C.
 
§
 
1,
 
by
 
agreeing
 
to
 
limit
 
the
 
production
 
of
 
eggs
 
and
 
thereby
illegally to raise the prices that plaintiffs
 
paid for processed egg products. In particular,
 
the Egg Products Plaintiffs are
 
attacking
certain features of
 
the United Egg
 
Producers animal-welfare guidelines
 
and program used by
 
the Company and
 
many other egg
producers. The
 
Egg Products
 
Plaintiffs seek
 
to enjoin
 
the Company
 
and other
 
defendants from
 
engaging in
 
antitrust violations
and seek treble money damages. The parties filed a joint status
 
report on May 18, 2020, but no schedule has
 
yet been entered by
the court. It appears that the case will not be tried until later in 2021 or 2022.
 
In addition,
 
on October
 
24, 2019,
 
the Company
 
entered into
 
a confidential
 
settlement agreement
 
with The
 
Kellogg Company
dismissing
 
all
 
claims
 
against
 
the
 
Company
 
for
 
an
 
amount
 
that
 
did
 
not
 
have
 
a
 
material
 
impact
 
on
 
the
 
Company’s
 
financial
condition or results
 
of operations. On
 
November 11,
 
2019, a stipulation
 
for dismissal was filed
 
with the court,
 
but the court
 
has
not yet entered a judgment on the filing.
 
The Company intends to
 
continue to defend the remaining
 
case with the Egg Products Plaintiffs
 
as vigorously as possible based
on
 
defenses
 
which
 
the
 
Company
 
believes
 
are
 
meritorious
 
and
 
provable.
 
Adjustments,
 
if
 
any,
 
which
 
might
 
result
 
from
 
the
resolution of
 
this remaining
 
matter with
 
the Egg
 
Products Plaintiffs
 
have not
 
been reflected
 
in the
 
financial statements.
 
While
management
 
believes
 
that
 
there
 
is
 
still
 
a
 
reasonable
 
possibility
 
of
 
a
 
material
 
adverse
 
outcome
 
from
 
the
 
case
 
with
 
the
 
Egg
Products Plaintiffs,
 
at the
 
present time,
 
it is not
 
possible to
 
estimate the
 
amount of
 
monetary exposure,
 
if any,
 
to the
 
Company
due to a range of
 
factors, including the following,
 
among others: the matter is in
 
the early stages of
 
preparing for trial following
remand;
 
any
 
trial
 
will
 
be
 
before
 
a
 
different
 
judge
 
and
 
jury
 
in
 
a
 
different
 
court
 
than
 
prior
 
related
 
cases;
 
there
 
are
 
significant
factual issues
 
to be
 
resolved; and
 
there are
 
requests for
 
damages other
 
than compensatory
 
damages
 
(i.e., injunction
 
and treble
money damages).
 
State of Oklahoma Watershed Pollution
 
Litigation
 
 
On June
 
18, 2005,
 
the State
 
of Oklahoma
 
filed suit,
 
in the
 
United States
 
District Court
 
for the
 
Northern District
 
of Oklahoma,
against Cal-Maine Foods, Inc. and
 
Tyson Foods,
 
Inc. and affiliates, Cobb-Vantress,
 
Inc., Cargill, Inc. and its
 
affiliate, George’s,
Inc. and
 
its affiliate,
 
Peterson Farms, Inc.
 
and Simmons Foods,
 
Inc. The
 
State of Oklahoma
 
claims that through
 
the disposal of
chicken
 
litter the
 
defendants have
 
polluted the
 
Illinois River
 
Watershed.
 
This watershed
 
provides
 
water to
 
eastern Oklahoma.
 
 
19
The complaint
 
seeks injunctive
 
relief and
 
monetary damages,
 
but the
 
claim for
 
monetary damages
 
has been
 
dismissed by
 
the
court.
 
Cal-Maine
 
Foods,
 
Inc.
 
discontinued
 
operations
 
in
 
the
 
watershed.
 
Accordingly,
 
we
 
do
 
not
 
anticipate
 
that
 
Cal-Maine
Foods,
 
Inc.
 
will
 
be
 
materially
 
affected
 
by
 
the
 
request
 
for
 
injunctive
 
relief
 
unless
 
the
 
court
 
orders
 
substantial
 
affirmative
remediation. Since
 
the litigation
 
began, Cal-Maine
 
Foods, Inc.
 
purchased 100%
 
of the membership
 
interests of
 
Benton County
Foods, LLC,
 
which is
 
an ongoing
 
commercial shell
 
egg operation
 
within the
 
Illinois River
 
Watershed.
 
Benton County
 
Foods,
LLC is not a defendant in the litigation.
 
The trial in the case
 
began in September 2009 and
 
concluded in February 2010. The
 
case was tried without a jury,
 
and the court
has not yet issued its ruling. Management believes the risk of material loss related
 
to this matter to be remote.
 
Other Matters
 
 
In addition to
 
the above, the Company
 
is involved in
 
various other claims
 
and litigation incidental
 
to its business. Although
 
the
outcome of
 
these matters
 
cannot be
 
determined with
 
certainty,
 
management, upon
 
the advice
 
of counsel,
 
is of
 
the opinion
 
that
the final outcome should not have a material effect on the Company’s
 
consolidated results of operations or financial position.
 
Note 13 - Related Party Transaction
 
On
 
August
 
24,
 
2020,
 
Mrs.
 
Jean
 
Reed
 
Adams,
 
the
 
wife
 
of
 
the
 
Company’s
 
late
 
founder
 
Fred
 
R.
 
Adams,
 
Jr.,
 
and
 
the
 
Fred
 
R.
Adams,
 
Jr.
 
Daughters’
 
Trust,
 
dated
 
July
 
20,
 
2018
 
(the
 
“Daughters’
 
Trust”),
 
of
 
which
 
the
 
daughters
 
of
 
Mr.
 
Adams
 
are
beneficiaries
 
(together,
 
the
 
“Selling
 
Stockholders”),
 
completed
 
a
 
registered
 
secondary
 
public
 
offering
 
of
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 2020 Annual Report. Mrs. Adams and
 
the Daughters’ Trust advised the Company that
 
they were conducting
the
 
offering
 
in
 
order
 
to
 
pay
 
estate
 
taxes
 
related
 
to
 
the
 
settlement
 
of
 
Mr.
 
Adam’s
 
estate
 
and
 
to
 
obtain
 
liquidity.
 
The
 
public
offering
 
was
 
made
 
pursuant
 
to
 
the
 
Company’s
 
effective
 
shelf
 
registration
 
statement
 
on
 
Form
 
S-3
 
(File
 
No.
 
333-227742),
including the Prospectus
 
contained therein dated
 
October 9, 2018, and
 
a related Prospectus Supplement
 
dated August 19,
 
2020,
each of
 
which is on
 
file with the
 
Securities and
 
Exchange Commission.
 
The public offering
 
involved only
 
the sale of
 
shares of
Common
 
Stock
 
that
 
were
 
already
 
outstanding,
 
and
 
thus
 
the
 
Company
 
did
 
not
 
issue
 
any
 
new
 
shares
 
or
 
raise
 
any
 
additional
capital
 
in
 
the
 
offering.
 
The
 
expenses
 
of
 
the
 
offering
 
(not
 
including
 
the
 
underwriting
 
discount
 
and
 
legal
 
fees
 
and
 
expenses
 
of
legal
 
counsel
 
for
 
the
 
Selling
 
Stockholders,
 
which
 
were
 
paid
 
by
 
the
 
Selling
 
Stockholders)
 
paid
 
by
 
the
 
Company
 
were
$
1,102,000
. Pursuant to the Agreement, the Selling Stockholders reimbursed the Company
 
$
551,000
.
 
20
ITEM
 
2.
 
MANAGEMENT’S
 
DISCUSSION
 
AND
 
ANALYSIS
 
OF
 
FINANCIAL
 
CONDITION
 
AND
 
RESULTS
 
OF
OPERATIONS
 
The following
 
should be
 
read in
 
conjunction
 
with Management’s
 
Discussion and
 
Analysis of
 
Financial Condition
 
and Results
of Operations
 
included in
 
Item 7
 
of the
 
Company’s
 
Annual Report
 
on Form
 
10-K for
 
its fiscal
 
year ended
 
May 30,
 
2020 (the
“2020
 
Annual Report”),
 
and
 
the accompanying
 
financial statements
 
and
 
notes included
 
in Part
 
II, Item
 
8 of
 
the 2020
 
Annual
Report and in
Part
 
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 2020
Annual
 
Report
 
(ii)
 
the
 
risks
 
and
 
hazards
 
inherent
 
in
 
the
 
shell egg
 
business
 
(including
 
disease, pests,
 
weather
 
conditions,
 
and
potential for
 
product recall),
 
(iii) changes
 
in the
 
demand for
 
and market
 
prices of
 
shell eggs
 
and feed
 
costs, (iv)
 
our ability
 
to
predict
 
and
 
meet
 
demand
 
for
 
cage-free
 
and
 
other
 
specialty
 
eggs,
 
(v)
 
risks,
 
changes,
 
or
 
obligations
 
that
 
could
 
result
 
from
 
our
future
 
acquisition
 
of
 
new
 
flocks
 
or
 
businesses
 
and
 
risks
 
or
 
changes
 
that
 
may
 
cause
 
conditions
 
to
 
completing
 
a
 
pending
acquisition not to
 
be met, (vi) risks
 
relating to the
 
evolving COVID-19 pandemic,
 
and (vii) adverse
 
results in pending litigation
matters.
 
Readers
 
are
 
cautioned
 
not
 
to
 
place
 
undue
 
reliance
 
on
 
forward-looking
 
statements
 
because,
 
while
 
we
 
believe
 
the
assumptions on
 
which the
 
forward-looking statements
 
are based
 
are reasonable,
 
there can
 
be no
 
assurance that
 
these forward-
looking
 
statements
 
will
 
prove
 
to
 
be
 
accurate.
 
Further,
 
forward-looking statements
 
included
 
herein
 
are
 
only
 
made
 
as
 
of
 
the
respective
 
dates
 
thereof,
 
or
 
if no
 
date
 
is stated,
 
as of
 
the date
 
hereof.
 
Except
 
as otherwise
 
required
 
by
 
law,
 
we
 
disclaim
 
any
intent or obligation
 
to update publicly
 
these forward-looking statements,
 
whether because of
 
new information, future
 
events, or
otherwise.
 
GENERAL
 
Cal-Maine
 
Foods,
 
Inc.
 
is
 
primarily
 
engaged
 
in
 
the
 
production,
 
grading,
 
packaging,
 
marketing
 
and
 
distribution
 
of
 
fresh
 
shell
eggs. Our operations are fully integrated
 
under one operating segment.
 
We are
 
the largest producer and distributor
 
of fresh shell
eggs in the United States.
 
Our total flock of approximately 41.3 layers and 9.6
 
pullets and breeders is the largest in the U.S. We
sell most
 
of our
 
shell eggs
 
to a
 
diverse
 
group of
 
customers, including
 
national and
 
regional grocery
 
store chains,
 
club stores,
companies
 
servicing
 
independent
 
supermarkets
 
in
 
the
 
U.S.,
 
food
 
service
 
distributors,
 
and
 
egg
 
product
 
consumers
 
in
 
states
across the southwestern, southeastern, mid-western and mid
 
-Atlantic regions of the United States.
 
Our
 
operating
 
results
 
are
 
materially
 
impacted
 
by
 
market
 
prices for
 
eggs
 
and
 
feed
 
grains
 
(corn
 
and
 
soybean
 
meal),
 
which
 
are
highly
 
volatile,
 
independent
 
of
 
each
 
other,
 
and
 
out
 
of
 
our
 
control.
 
Generally
 
speaking,
 
higher
 
market
 
prices
 
for
 
eggs
 
have
 
a
positive
 
impact
 
on
 
our
 
financial
 
results
 
while
 
higher
 
market
 
prices
 
for
 
feed
 
grains
 
have
 
a
 
negative
 
impact
 
on
 
our
 
financial
results. Although we
 
use a variety of
 
pricing mechanisms in pricing
 
agreements with our customers,
 
we sell the majority
 
of our
conventional
 
shell
 
eggs
 
based
 
on
 
formulas
 
that
 
take
 
into
 
account,
 
in
 
varying
 
ways,
 
independently
 
quoted
 
regional
 
wholesale
market prices for
 
shell eggs or formulas
 
related to our
 
costs of production which
 
include the cost
 
of corn and soybean
 
meal. As
an example
 
of the volatility
 
in the market
 
prices of shell
 
eggs, the Urner
 
-Barry Southeastern
 
Regional Large
 
Egg Market Price
per dozen eggs
 
(“UB southeastern
 
large index”) in
 
fiscal year 2020
 
ranged from a
 
low of $0.62
 
in July 2019
 
to a high
 
of $3.18
in March 2020.
 
Generally,
 
we purchase
 
primary feed
 
ingredients,
 
mainly corn
 
and soybean
 
meal, at
 
current market
 
prices. Corn
 
and soybean
meal
 
are
 
commodities
 
and
 
are
 
subject
 
to
 
volatile
 
price
 
changes
 
due
 
to
 
weather,
 
various
 
supply
 
and
 
demand
 
factors,
transportation and storage costs, speculators, and agricultural, energy
 
and trade policies in the U.S. and internationally.
 
 
Specialty shell
 
eggs have
 
been a
 
significant and
 
growing portion
 
of the
 
market. In
 
recent years,
 
a significant
 
number of
 
large
restaurant chains, food
 
service companies and
 
grocery chains, including
 
our largest customers,
 
announced goals to
 
transition to
an exclusively
 
cage-free egg
 
supply chain
 
by specified
 
future dates.
 
Additionally,
 
several states,
 
representing 23%
 
of the
 
U.S.
 
21
total population according to the U.S. Census Bureau,
 
have passed legislation requiring that all eggs
 
sold in those states must be
cage-free
 
eggs by
 
specified
 
future dates,
 
and
 
other states
 
are
 
considering
 
such legislation.
 
For additional
 
information, see
 
the
2020 Annual
 
Report, Part I,
 
Item 1, “Business
 
– Growth
 
Strategy” and
 
“– Government
 
Regulation,” and
 
the fifth risk
 
factor in
Part I, Item 1A, “Risk Factors.”
 
 
Retail
 
sales
 
of
 
shell
 
eggs
 
historically
 
have
 
been
 
highest
 
during
 
the
 
fall
 
and
 
winter
 
months
 
and
 
lowest
 
during
 
the
 
summer
months. Prices
 
for shell
 
eggs fluctuate
 
in response
 
to seasonal
 
demand factors
 
and a
 
natural increase
 
in egg
 
production during
the
 
spring
 
and
 
early
 
summer.
 
Historically,
 
shell
 
egg
 
prices
 
tend
 
to
 
increase
 
with
 
the
 
start
 
of
 
the
 
school
 
year
 
and
 
tend
 
to
 
be
highest
 
prior
 
to
 
holiday
 
periods,
 
particularly
 
Thanksgiving,
 
Christmas,
 
and
 
Easter.
 
Consequently,
 
and
 
all
 
other
 
things
 
being
equal, we would
 
expect to experience
 
lower selling prices, sales
 
volumes and net
 
income (and may incur
 
net losses) in our
 
first
and
 
fourth
 
fiscal
 
quarters
 
ending
 
in
 
August/September
 
and
 
May/June,
 
respectively.
 
Because
 
of
 
the
 
seasonal
 
and
 
quarterly
fluctuations,
 
comparisons
 
of
 
our
 
sales
 
and
 
operating
 
results
 
between
 
different
 
quarters
 
within
 
a
 
single
 
fiscal
 
year
 
are
 
not
necessarily meaningful comparisons.
 
COVID-19
 
Since early
 
2020,
 
the coronavirus
 
(“COVID-19”) outbreak,
 
characterized as
 
a pandemic
 
by the
 
World
 
Health Organization
 
on
March
 
11,
 
2020,
 
has
 
caused
 
significant
 
disruptions
 
in
 
international
 
and
 
U.S.
 
economies
 
and
 
markets.
 
We
 
understand
 
the
challenges
 
and
 
difficult
 
economic
 
environment
 
facing
 
the
 
families
 
in
 
the
 
communities
 
where
 
we
 
live
 
and
 
work,
 
and
 
we
 
are
committed to
 
helping where
 
we can.
 
One way
 
we have
 
done this
 
is by providing
 
food assistance
 
to those
 
in need.
 
Cal-Maine
Foods has donated
 
approximately 1.5 million
 
dozen eggs in the
 
first three
 
quarters of fiscal 2021.
 
We
 
believe we are taking
 
all
reasonable
 
precautions
 
in
 
the
 
management
 
of
 
our
 
operations
 
in
 
response
 
to
 
the
 
COVID-19
 
pandemic.
 
Our
 
top priority
 
is
 
the
health and
 
safety of
 
our employees,
 
who work
 
hard every
 
day to
 
produce eggs
 
for our
 
customers. As
 
part of
 
the nation’s
 
food
supply,
 
we work
 
in a critical
 
infrastructure industry,
 
and believe
 
we have
 
a special
 
responsibility to
 
maintain our
 
normal work
schedule. As
 
such, we
 
are in
 
regular communication
 
with our
 
managers across
 
our operations
 
and continue
 
to closely
 
monitor
the situation
 
in our
 
facilities and
 
in the
 
communities
 
where we
 
live and
 
work.
 
We
 
have implemented
 
procedures designed
 
to
protect
 
our
 
employees,
 
taking
 
into
 
account
 
guidelines
 
published
 
by
 
the
 
Centers
 
for
 
Disease
 
Control
 
and
 
other
 
government
health
 
agencies,
 
and
 
we
 
have
 
strict
 
sanitation
 
protocols
 
and
 
biosecurity
 
measures
 
in
 
place
 
throughout
 
our
 
operations
 
with
restricted
 
access
 
to
 
visitors.
 
All
 
non-essential
 
corporate
 
travel
 
has
 
been
 
suspended.
 
There
 
are
 
no
 
known
 
indications
 
that
COVID-19 affects hens or can be transferred through the food supply.
 
 
We
 
continue to
 
proactively monitor
 
and manage
 
operations during
 
the COVID-19 pandemic,
 
including additional
 
related costs
that we incurred or
 
may incur in the future.
 
In the thirty-nine weeks ended
 
February 27, 2021,
 
we spent $1.8
 
million (excluding
medical insurance
 
claims) related
 
to the
 
pandemic, of
 
which $397
 
thousand was
 
spent in
 
the third
 
quarter of
 
fiscal 2021.
 
The
majority
 
of
 
such
 
expenses
 
for
 
both
 
periods
 
were
 
related
 
to
 
additional
 
labor,
 
primarily
 
reflected
 
in
 
cost
 
of
 
sales.
 
Medical
insurance
 
claims
 
related
 
to
 
COVID-19
 
paid
 
during
 
the
 
thirty-nine
 
weeks
 
ended
 
February
 
27,
 
2021
 
were
 
an
 
additional
 
$1.1
million of which $322 thousand were incurred in the third fiscal quarter of
 
2021.
 
 
EXECUTIVE OVERVIEW
 
For the
 
third quarter
 
of fiscal
 
2021,
 
we recorded
 
a gross
 
profit of $47.5
 
million compared
 
to $49.8
 
million for
 
the same period
of fiscal
 
2020.
 
Demand for
 
shell eggs
 
remained favorable,
 
primarily at
 
the retail
 
level as consumers
 
continue to
 
prepare more
meals at
 
home during
 
the COVID-19
 
pandemic.
 
According to
 
data provided
 
by Informational
 
Resources,
 
Inc. (“IRI”)
 
dozens
sold in the Total US -
 
Multi Outlet channel for conventional eggs for the
 
calendar year-to-date through March 7, 2021 increased
2.7% and specialty
 
dozens increased 14.0%
 
compared to the
 
same period in
 
the calendar year.
 
Our total dozens
 
sold increased
3.1% to 279.7 million
 
dozen shell eggs for the
 
third quarter of fiscal 2021
 
compared to 271.3 million
 
dozen for the same period
of fiscal 2020.
 
This is due to an increase in specialty egg dozens sold of 16.2%.
 
The
 
daily
 
average
 
price
 
for
 
the
 
UB
 
southeastern
 
large
 
index
 
for
 
third
 
quarter
 
of
 
fiscal
 
2021
 
increased
 
4.3%
 
from
 
the
 
same
period
 
in the
 
prior
 
year.
 
Our net
 
average
 
selling price
 
per dozen
 
for
 
the third
 
quarter
 
of fiscal
 
2021 was
 
$1.246
 
compared to
$1.236 in the prior
 
year period.
 
Although the hen numbers
 
reported by the United
 
States Department of Agriculture
 
(“USDA”)
as of March 1, 2020 were 327.4
 
million, which represents 3.1 million fewer
 
hens than reported a year ago.
 
The USDA reported
that the
 
hatch
 
from October
 
2020 through
 
February
 
2021 increased
 
2.6%
 
as compared
 
to the
 
prior comparable
 
period, which
may indicate an
 
increased supply of hens
 
in the future. As
 
we emerge from
 
the COVID-19 pandemic
 
with an anticipated return
in food
 
service demand,
 
these growing
 
supply indicators
 
could affect
 
the overall
 
balance of
 
supply and
 
demand for
 
shell eggs
and have an impact on market prices.
 
Our farm
 
production costs
 
per dozen
 
produced for
 
the third
 
quarter of
 
fiscal 2021
 
increased 7.0%
 
or $0.051
 
compared to
 
third
quarter of
 
fiscal 2020.
 
This increase
 
was primarily
 
due to higher
 
feed costs
 
in the
 
third quarter of
 
fiscal 2021
 
compared to
 
the
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22
same period
 
in the
 
prior fiscal
 
year due
 
to increased
 
prices for
 
corn and
 
soybeans caused
 
by increased
 
export demand,
 
global
weather
 
conditions
 
and
 
geopolitical
 
issues.
 
Other
 
farm
 
production
 
costs
 
for
 
the
 
third
 
quarter
 
of
 
fiscal
 
2021
 
decreased
 
3.1%
compared to the same period in the prior fiscal year due to reductions in
 
flock amortization and facility expenses.
 
 
RESULTS OF
 
OPERATIONS
 
The
 
following
 
table
 
sets
 
forth,
 
for
 
the
 
periods
 
indicated,
 
certain
 
items
 
from
 
our
 
Condensed
 
Consolidated
 
Statements
 
of
Operations expressed as a percentage of net sales.
 
13 Weeks Ended
39 Weeks Ended
February 27, 2021
February 29, 2020
February 27, 2021
February 29, 2020
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
86.8
%
85.6
%
87.7
%
93.5
%
Gross profit
13.2
%
14.4
%
12.3
%
6.5
%
Selling, general and administrative
13.3
%
12.8
%
13.6
%
14.7
%
Loss on disposal of fixed assets
0.1
%
0.1
%
%
0.1
%
Operating income (loss)
(0.2)
%
1.5
%
(1.3)
%
(8.3)
%
Total other income, net
3.4
%
3.7
%
1.5
%
1.9
%
Income (loss) before income taxes
3.2
%
5.2
%
0.2
%
(6.4)
%
Income tax (benefit) expense
(0.5)
%
1.2
%
(0.4)
%
(1.7)
%
Net income (loss)
3.7
%
4.0
%
0.6
%
(4.7)
%
Less: Income (loss) attributable to
noncontrolling interest
%
 
(*)
 
%
%
 
(*)
 
%
Net income (loss) attributable to Cal-Maine
Foods, Inc.
3.7
%
4.0
%
0.6
%
(4.7)
%
 
(*)
 
 
Represents less than
0.1% of Net sales
 
 
NET SALES
 
Net sales
 
for the
 
third quarter
 
of fiscal
 
2021 were
 
$359.1 million, an
 
increase of
 
$13.5 million, or 3.9%,
 
compared to
 
net sales
of $345.6 million
 
for the same
 
period of fiscal
 
2020.
 
The increase was
 
primarily due
 
to a 3.1%
 
increase in the
 
total volume of
dozen eggs sold
 
which accounted for a
 
$10.5 million increase in
 
net sales. Dozens sold
 
for the third quarter
 
ended February 27,
2021 were 279.7 million compared to 271.3 million for the same period
 
of fiscal 2020.
 
Net
 
shell
 
egg
 
sales
 
of
 
$350.0 million
 
and
 
$336.4 million
 
made
 
up
 
approximately
 
97.5% and
 
97.3%
 
of
 
net
 
sales for
 
the
 
third
quarters
 
ended February 27, 2021
 
and February 29, 2020,
 
respectively. The
 
net average selling price per
 
dozen of shell eggs for
the third quarters ended
 
February 27, 2021 and
 
February 29, 2020 was $1.246
 
and $1.236, respectively.
 
The increase in selling
price per dozen accounted for a $2.8 million increase in net sales.
 
Egg products
 
accounted for
 
2.5% and
 
2.7% of
 
net sales
 
for the
 
third quarter
 
ended February
 
27, 2021
 
and February
 
29, 2020,
respectively.
 
These
 
revenues
 
were
 
$9.1
 
million
 
and
 
$9.2
 
million
 
for
 
the
 
third
 
quarters
 
of
 
fiscal
 
2021
 
and
 
2020,
 
respectively.
 
The decrease is primarily due to decreased volume partially offset
 
by higher selling prices.
 
Net
 
sales
 
for
 
the
 
thirty-nine
 
weeks
 
ended
 
February
 
27,
 
2021
 
were
 
$999.2 million,
 
an
 
increase
 
of
 
$100.9 million,
 
or 11.2%,
compared to
 
net sales of
 
$898.3 million for
 
the same period
 
of fiscal 2020
 
.
 
The increase was
 
primarily due
 
to a 7.0%
 
increase
in egg selling
 
prices which
 
accounted for
 
a $63.8 million
 
increase in net
 
sales. The
 
net average
 
selling price per
 
dozen of shell
eggs for the thirty-nine weeks ended February 27, 2021 and February
 
29, 2020 was $1.185 and $1.107, respectively.
 
Net shell
 
egg sales
 
of $973.5 million
 
and $874.1
 
million made
 
up approximately
 
97.4% and 97.3%
 
of net
 
sales for
 
the thirty-
nine
 
weeks
 
ended
 
February
 
27,
 
2021
 
and
 
February
 
29,
 
2020,
 
respectively.
 
Dozens
 
sold
 
for
 
the
 
thirty-nine
 
weeks
 
ended
February 27, 2021 were 817.4 million,
 
a 3.9% increase from 786.7 million for
 
the same period of fiscal 2020.
 
The total volume
increase accounted for a $36.3 million increase in net sales.
 
 
Egg
 
products
 
accounted
 
for
 
2.6% and
 
2.7%
 
of net
 
sales for
 
the thirty
 
-nine
 
weeks ended
 
February
 
27, 2021
 
and
 
February
 
29,
2020,
 
respectively.
 
These
 
revenues
 
were
 
$25.7 million
 
for
 
the
 
thirty-nine
 
weeks
 
ended
 
February
 
27,
 
2021,
 
compared
 
to
$24.2 million for the same period in fiscal 2020,
 
primarily due to higher selling prices slightly offset by decreased volume.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23
 
The table below presents an analysis of our conventional and specialty shell egg
 
sales (in thousands, except percentage data):
 
13 Weeks Ended
39 Weeks Ended
February 27, 2021
February 29, 2020
February 27, 2021
February 29, 2020
Total net sales
$
359,080
$
345,588
$
999,189
$
898,276
Conventional
$
203,189
58.0
%
$
210,329
62.5
%
$
560,297
57.5
%
$
518,898
59.4
%
Specialty
145,210
41.5
%
125,019
37.2
%
408,537
42.0
%
352,118
40.3
%
Egg sales, net
348,399
99.5
%
335,348
99.7
%
968,834
99.5
%
871,016
99.7
%
Other
1,583
0.5
%
1,028
0.3
%
4,619
0.5
%
3,050
0.3
%
Net shell egg sales
$
349,982
100.0
%
$
336,376
100.0
%
$
973,453
100.0
%
$
874,066
100.0
%
Net shell egg sales as a
percent of total net sales
97.5
%
97.3
%
97.4
%
97.3
%
Dozens sold:
Conventional
203,070
72.6
%
205,307
75.7
%
599,625
73.4
%
599,788
76.2
%
Specialty
76,645
27.4
%
65,970
24.3
%
217,735
26.6
%
186,939
23.8
%
Total dozens sold
279,715
100.0
%
271,277
100.0
%
817,360
100.0
%
786,727
100.0
%
Net average selling price per
dozen:
Conventional
$
1.001
$
1.024
$
0.934
$
0.865
Specialty
$
1.895
$
1.895
$
1.876
$
1.884
All shell eggs
$
1.246
$
1.236
$
1.185
$
1.107
 
Conventional
 
shell eggs
 
include all
 
shell egg
 
sales not
 
specifically identified
 
as specialty
 
shell egg
 
sales. Comparing
 
the third
quarters
 
ended February 27, 2021 and
 
February 29, 2020,
 
conventional egg dozens sold
 
decreased 1.1% and the
 
average selling
price
 
per
 
dozen
 
decreased
 
2.2%
 
to
 
$1.001
 
from
 
$1.024.
 
Comparing
 
the
 
thirty-nine
 
weeks
 
ended
 
February
 
27,
 
2021
 
and
February
 
29,
 
2020,
 
conventional
 
shell
 
egg
 
dozens
 
sold
 
remained
 
relatively
 
flat
 
while
 
the
 
average
 
selling
 
price
 
per
 
dozen
increased 8.0%
 
to $0.934 from $0.865.
 
Specialty
 
eggs,
 
which
 
include nutritionally
 
enhanced,
 
cage-free,
 
organic
 
and
 
brown
 
eggs, continued
 
to
 
make
 
up
 
a significant
portion of
 
our total
 
shell egg
 
revenue and
 
dozens sold. Specialty
 
egg retail
 
prices are
 
less cyclical
 
than conventional
 
shell egg
prices and are
 
generally higher due
 
to consumer willingness
 
to pay more
 
for specialty eggs.
 
For the third
 
quarter of fiscal
 
2021
and
 
2020,
 
specialty
 
shell
 
egg
 
dozens
 
sold
 
increased
 
16.2%,
 
and
 
the
 
average
 
selling
 
price
 
per
 
dozen
 
remained
 
the
 
same
 
at
$1.895.
 
For the
 
thirty-nine
 
weeks ended
 
February 27,
 
2021, specialty
 
shell egg
 
dozens sold
 
increased
 
16.5% and
 
the average
selling
 
price
 
decreased
 
0.4%
 
to
 
$1.876
 
from
 
$1.884
 
for
 
the
 
same
 
period
 
of
 
fiscal
 
2020.
 
In
 
the
 
third
 
quarter
 
of
 
fiscal
 
2021,
demand for specialty eggs
 
increased as consumers
 
opted for the specialty eggs
 
which is noted in the
 
Executive Overview above
along with increased
 
promotional spending. For
 
the thirty-nine weeks
 
ended February 27, 2021,
 
demand for specialty
 
eggs was
positively impacted by the higher conventional egg prices as compared
 
to the same period in the prior year.
 
The shell
 
egg sales
 
classified as
 
“Other” represent
 
sales of hard
 
cooked eggs,
 
hatching eggs,
 
and other
 
miscellaneous products
included with our shell egg operations.
 
 
Egg
 
products
 
are shell
 
eggs
 
that are
 
broken
 
and
 
sold
 
in liquid,
 
frozen,
 
or dried
 
form.
 
Our egg
 
products
 
are sold
 
through our
wholly-owned subsidiaries American
 
Egg Products, LLC
 
and Texas
 
Egg Products, LLC. Comparing
 
the third quarters
 
of fiscal
2021 and
 
2020,
 
pounds
 
sold decreased
 
11.3%; however,
 
the average
 
selling price
 
per pound
 
increased 11.2
 
%
 
to $0.584
 
from
$0.525. Comparing
 
the thirty-nine
 
weeks ended
 
February 27,
 
2021 and
 
February 29,
 
2020, pounds
 
sold decreased
 
8.9% while
the average selling price per pound increased 16.7% to $0.553
 
from $0.474.
 
 
COST OF SALES
 
Cost of sales consists
 
of costs directly
 
related to production, processing
 
and packing of shell
 
eggs, purchases of
 
shell eggs from
outside producers,
 
processing and
 
packing of
 
liquid and
 
frozen egg
 
products, and
 
other non-egg
 
costs.
 
Farm production
 
costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24
are
 
costs incurred
 
at
 
the
 
egg
 
production
 
facility,
 
including
 
feed,
 
facility,
 
hen
 
amortization,
 
and
 
other
 
related
 
farm
 
production
costs.
 
The following table presents the key variables affecting cost of
 
sales (in thousands, except cost per dozen data):
 
13 Weeks Ended
39 Weeks Ended
February 27, 2021
February 29, 2020
% Change
February 27, 2021
February 29, 2020
% Change
Cost of Sales:
Farm production
$
190,883
$
172,525
10.6
%
$
531,877
$
499,840
6.4
%
Processing,
packaging, and
warehouse
63,640
60,186
5.7
187,014
170,998
9.4
Egg purchases and
other (including
change in inventory)
50,443
56,179
(10.2)
137,001
146,754
(6.6)
Total shell eggs
304,966
288,890
5.6
855,892
817,592
4.7
Egg products
6,597
6,870
(4.0)
20,565
19,687
4.5
Other
2,919
(100.0)
Total
$
311,563
$
295,760
5.3
%
$
876,457
$
840,198
4.3
%
Farm production costs
(per dozen produced)
Feed
$
0.467
$
0.406
15.0
%
$
0.422
$
0.411
2.7
%
Other
$
0.313
$
0.323
(3.1)
%
$
0.318
$
0.328
(3.0)
%
Total
$
0.780
$
0.729
7.0
%
$
0.740
$
0.739
0.1
%
Outside egg purchases
(average cost per
dozen)
$
1.26
$
1.17
7.7
%
$
1.23
$
1.12
9.8
%
Dozens produced
248,130
239,072
3.8
%
731,205
684,837
6.8
%
Dozens sold
279,715
271,277
3.1
%
817,360
786,727
3.9
%
 
Cost of sales for
 
the third quarter of
 
fiscal 2021 was $311.6
 
million, an increase of
 
$15.8 million, or 5.3%,
 
from $295.8 million
for the
 
same period
 
of fiscal
 
2020. The
 
increase was
 
primarily driven
 
by the
 
increase in
 
farm production
 
costs and
 
processing
costs.
 
Farm production
 
costs were primarily
 
impacted by higher
 
feed costs
 
of $0.467
 
per dozen
 
produced compared
 
to $0.406
per dozen
 
produced for
 
the same
 
period in
 
the prior
 
year.
 
Other farm
 
production costs
 
per dozen
 
produced decreased
 
3.1% to
$0.313
 
for
 
the
 
quarter
 
ended
 
February
 
27,
 
2021,
 
compared
 
to
 
$0.323
 
for
 
the
 
same
 
period
 
of
 
last
 
year,
 
primarily
 
from
 
lower
facility costs
 
and amortization
 
expense.
 
The lower
 
feed costs in
 
prior periods
 
which are
 
capitalized in
 
our flocks
 
during pullet
production helped reduce amortization expense in the third
 
quarter of fiscal 2021 as compared to the same period in fiscal 2020.
Facility
 
costs
 
decreased
 
in
 
the
 
third
 
quarter
 
of
 
fiscal
 
2021
 
compared
 
to
 
the
 
same
 
period
 
in
 
fiscal
 
2020
 
due
 
to
 
improved
efficiencies
 
in
 
our
 
utilization
 
of
 
our
 
facilities
 
and
 
increased
 
volume
 
of
 
production.
 
Processing
 
costs
 
increased
 
due
 
to
 
a
 
3.2%
increase
 
in
 
the
 
volume
 
of
 
eggs
 
processed
 
compared
 
to
 
the
 
same
 
period
 
of
 
the
 
prior
 
year.
 
The
 
cost
 
of
 
packaging
 
materials
increased 2.0%
 
compared to
 
the prior
 
year period
 
as the
 
retail channel
 
demand increased
 
due to
 
the pandemic.
 
The pandemic
led to
 
an increase
 
in labor
 
costs. Dozens
 
produced increased
 
3.8% compared
 
to the
 
same period
 
of fiscal
 
2020.
 
Egg purchase
expenses decreased 10.2%,
 
primarily due to the
 
decrease in the volume
 
of outside egg purchases,
 
partially offset by
 
an increase
in the cost of these purchases.
 
Cost of sales for the thirty-nine weeks ended February
 
27, 2021 was $876.5 million, an increase of $36.3 million,
 
or 4.3%, from
$840.2 million
 
for the
 
same period
 
of fiscal
 
2020.
 
The increase
 
was primarily
 
driven by
 
the increase
 
in farm
 
production costs
and processing costs.
 
Processing costs increased due
 
to a 5.5% increase in
 
the volume of eggs processed
 
compared to the same
period of the prior year.
 
The cost of packaging materials
 
increased 2.8%
 
compared to the prior year
 
period as the retail channel
demand
 
increased due
 
to the
 
pandemic.
 
The pandemic
 
led to
 
an increase
 
in labor
 
costs. Farm
 
production
 
costs for
 
the thirty-
nine weeks
 
ended February
 
27, 2021
 
increased $32.0
 
million, which
 
was primarily
 
due to an
 
increase in production
 
volume of
6.8%
 
compared to the
 
same period of
 
fiscal 2020.
 
Feed cost per
 
dozen for the
 
thirty-nine weeks ended
 
February 27, 2021
 
was
$0.422,
 
compared to
 
$0.411
 
per dozen
 
for the
 
comparable period
 
of fiscal
 
2020,
 
an increase
 
of 2.7%.
 
Other farm
 
production
costs per dozen produced
 
decreased 3.0% to $0.318
 
for the thirty-nine weeks
 
ended February 27, 2021
 
,
 
compared to $0.328 for
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25
the same period
 
of last year,
 
primarily from lower
 
amortization and facility
 
expense.
 
In the prior
 
fiscal year we
 
incurred higher
amortization expense due
 
to selling flocks
 
early in fiscal
 
2020 in response
 
to market conditions.
 
Facility costs decreased
 
due to
improved
 
efficiencies
 
in
 
our
 
utilization
 
of
 
our
 
facilities
 
and
 
increased
 
volume
 
of
 
our
 
production.
 
Egg
 
purchase
 
expenses
decreased 6.6%, primarily
 
due to the decrease in the
 
volume of outside egg
 
purchases, partially offset
 
by an increase in the
 
cost
of these purchases.
 
Included
 
in
 
cost
 
of
 
sales
 
for
 
the
 
thirty-nine
 
weeks
 
ended
 
February
 
29,
 
2020
 
is
 
a
 
$2.9
 
million
 
impairment
 
charge
 
related
 
to
decommissioning
 
older,
 
less
 
efficient
 
production
 
facilities
 
as
 
we
 
invest
 
in
 
new
 
facilities
 
to
 
meet
 
the
 
increasing
 
demand
 
for
specialty eggs and reduce production costs.
 
Feed costs started trending higher
 
midway through the second quarter of
 
fiscal 2021.
 
For the third quarter, the
 
average Chicago
Board of Trade
 
(“CBOT”) daily market price was $4.97
 
per bushel for corn and $422.61
 
per ton for soybean meal,
 
representing
an increase
 
of 29.9%
 
and
 
42.4%, respectively,
 
compared
 
to the
 
daily average
 
CBOT prices
 
for
 
the same
 
period
 
last year.
 
As
feed
 
ingredient
 
prices
 
rose
 
through
 
the
 
second
 
and
 
third
 
quarters
 
of
 
fiscal
 
2021,
 
we
 
benefited
 
from
 
our
 
normal
 
operating
practices of filling our
 
storage bins at harvest
 
and locking in the basis
 
portion of our grain
 
purchases several months
 
in advance
to
 
help
 
ensure
 
availability
 
of feed
 
ingredients.
 
Most
 
of
 
this benefit
 
has
 
been
 
realized
 
in
 
our
 
second
 
and
 
third
 
fiscal
 
quarters,
however,
 
during our
 
fourth fiscal
 
quarter we
 
will be
 
exposed more
 
directly to
 
price movements
 
in the
 
feed ingredient
 
market.
We
 
expect to
 
see continued
 
price volatility
 
for the remainder
 
of fiscal
 
2021 as
 
increased export
 
demand for
 
both soybeans
 
and
corn
 
is
 
placing
 
pressure
 
on
 
domestic
 
supplies
 
and
 
carryout
 
inventories
 
are
 
projected
 
to
 
be
 
lower.
 
Additionally,
 
the
 
ongoing
uncertainties and
 
supply chain
 
disruptions related
 
to the
 
COVID-19 outbreak,
 
weather fluctuations
 
and geopolitical
 
issues will
continue to affect market prices for our primary feed ingredients.
 
GROSS PROFIT
 
 
Gross profit for the
 
third quarter of fiscal 2021
 
was $47.5 million compared to
 
$49.8 million for the
 
same period of fiscal 2020.
The decrease
 
of $2.3
 
million was
 
primarily
 
due to
 
increased farm
 
production cost
 
and processing
 
costs, partially
 
offset
 
by an
increase in dozens sold for specialty eggs.
 
For
 
the
 
thirty-nine
 
weeks
 
ended
 
February
 
27,
 
2021
 
gross
 
profit
 
was
 
$122.7
 
million
 
compared
 
to
 
$58.1
 
million
 
for
 
the
 
same
period of
 
fiscal 2020.
 
The increase
 
of $64.7
 
million was
 
primarily due
 
to the
 
increase in
 
conventional
 
shell egg
 
selling prices
and an increase in dozens sold for specialty eggs.
 
SELLING, GENERAL, AND ADMINISTRATIVE
 
EXPENSES
 
Selling,
 
general,
 
and
 
administrative
 
(“SGA”)
 
expenses
 
include
 
costs
 
of
 
marketing,
 
distribution,
 
accounting,
 
and
 
corporate
overhead.
 
The following table presents an analysis of our SGA expenses (in thousands):
 
13 Weeks Ended
February 27, 2021
February 29, 2020
$ Change
% Change
Specialty egg expense
$
16,162
$
12,581
$
3,581
28.5
%
Delivery expense
13,359
13,309
50
0.4
%
Payroll, taxes and benefits
10,195
10,639
(444)
(4.2)
%
Stock compensation expense
964
886
78
8.8
%
Other expenses
6,976
6,816
160
2.3
%
Total
$
47,656
$
44,231
$
3,425
7.7
%
 
For the
 
third quarter
 
of fiscal
 
2021,
 
SGA expenses
 
increased 7.7%
 
to $47.7
 
million from
 
$44.2 million
 
for the
 
same period
 
in
fiscal 2020.
 
Specialty egg expense
 
increased $3.6 million,
 
or 28.5%, compared
 
to the same
 
period of the
 
prior year.
 
Specialty
egg expense,
 
which includes
 
franchise fees
 
and advertising expense,
 
typically fluctuates
 
with specialty
 
egg dozens
 
sold, which
increased 16.2% for the third quarter ended February 27, 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26
39 Weeks Ended
February 27, 2021
February 29, 2020
$ Change
% Change
Specialty egg expense
$
42,898
$
35,995
$
6,903
19.2
%
Delivery expense
38,905
39,341
(436)
(1.1)
%
Payroll, taxes and benefits
31,526
31,391
135
0.4
%
Stock compensation expense
2,789
2,680
109
4.1
%
Other expenses
19,376
23,027
(3,651)
(15.9)
%
Total
$
135,494
$
132,434
$
3,060
2.3
%
 
For the thirty-nine weeks
 
ended February 27, 2021,
 
SGA expense increased 2.3% to
 
$135.5 million from $132.4
 
million for the
same period
 
in fiscal
 
2020.
 
Specialty egg
 
expense increased
 
$6.9 million,
 
or 19.2%,
 
compared to
 
the same
 
period of
 
the prior
year.
 
Specialty
 
egg
 
expense
 
typically
 
fluctuates
 
with
 
specialty
 
egg
 
dozens
 
sold,
 
which
 
increased
 
16.5%
 
for
 
the
 
thirty-nine
weeks ended
 
February 27,
 
2021. Other
 
expenses decreased
 
$3.7
 
million or
 
15.9% compared
 
to the
 
same period
 
in fiscal
 
2020.
 
This decrease is primarily due to the legal settlement paid in the second
 
quarter of fiscal 2020 and the first quarter of fiscal 2021
return
 
of
 
brokerage
 
commissions
 
on
 
property
 
and
 
casualty
 
insurance
 
placements
 
refunded
 
after
 
final
 
reconciliation
 
of
 
all
brokerage service agreements.
 
Included in Other expenses is
 
approximately $551 thousand relating
 
to the secondary public offering
 
completed in August 2020
by the wife of our late founder and a trust of which his
 
daughters are beneficiaries. For more information, see
 
– Related
Party Transaction of the Notes to Condensed
 
Consolidated Financial Statements included in this Quarterly Report.
 
OPERATING
 
INCOME (LOSS)
 
For the
 
third quarter
 
of fiscal
 
2021,
 
we recorded
 
an operating
 
loss of
 
$493 thousand
 
compared to
 
an operating
 
income of
 
$5.2
million for the same period of fiscal 2020.
 
For the
 
thirty-nine weeks
 
ended February
 
27, 2021,
 
we recorded
 
an operating
 
loss of
 
$13.2 million
 
compared to
 
an operating
loss of $74.8 million for the same period of fiscal 2020.
 
OTHER INCOME (EXPENSE)
 
 
Total
 
other
 
income
 
(expense)
 
consists
 
of
 
items
 
not
 
directly
 
charged
 
or
 
related
 
to
 
operations,
 
such
 
as
 
interest
 
income
 
and
expense, royalty income, equity in income or loss of unconsolidated entities,
 
and patronage income, among other items.
 
 
For
 
the
 
third
 
quarter
 
of
 
fiscal
 
2021,
 
we
 
earned
 
$661
 
thousand
 
of
 
interest
 
income
 
compared
 
to
 
$880
 
thousand
 
for
 
the
 
same
period of fiscal
 
2020.
 
For the thirty-nine
 
weeks ended February
 
27, 2021,
 
we earned $2.4 million
 
of interest income
 
compared
to $3.9 million for
 
the same period of fiscal
 
2020. The decrease for
 
both periods resulted from
 
significantly lower interest rates.
The Company
 
recorded interest expense
 
of $70
 
thousand and $77
 
thousand for the
 
third quarters
 
ended February
 
27, 2021 and
February
 
29, 2020
 
,
 
respectively.
 
For the
 
thirty-nine
 
weeks ended
 
February
 
27, 2021
 
and February
 
29,
 
2020
 
interest expense
was $205 thousand and $258 thousand, respectively.
 
Patronage
 
dividends, which
 
represent distributions
 
from our
 
membership
 
in Eggland’s
 
Best, Inc.
 
were $9.0
 
million and
 
$10.1
million
 
for
 
the
 
thirteen
 
and
 
thirty-nine
 
weeks
 
ended
 
February
 
27,
 
2021
 
and
 
February
 
29,
 
2020,
 
respectively.
 
Patronage
dividends are paid once a year based on the profits of Eggland’s
 
Best as well as its available cash.
 
For the
 
third quarter
 
of fiscal
 
2021, equity
 
income of
 
unconsolidated entities
 
was $1.9
 
million compared
 
to $1.4
 
million in
 
the
prior
 
year
 
period.
 
For
 
the
 
thirty-nine
 
weeks
 
ended
 
February
 
27,
 
2021,
 
equity
 
income
 
of
 
unconsolidated
 
entities
 
was
 
$1.9
million compared
 
to $537
 
thousand for
 
the prior
 
year period.
 
The increase
 
for both
 
periods is
 
primarily due
 
to the
 
increase in
egg selling prices positively impacting the profitability of our joint
 
ventures.
 
Other,
 
net for
 
the third
 
quarter ended
 
February 27,
 
2021, was
 
income of
 
$537 thousand
 
compared to
 
income of
 
$79 thousand
for the same period of fiscal 2020.
 
 
Other, net
 
for the
 
thirty-nine weeks
 
ended February
 
27, 2021,
 
was income of
 
$1.5 million
 
compared to
 
income of $1.9
 
million
for
 
the
 
same
 
period
 
of
 
fiscal
 
2020.
 
The
 
decrease
 
is
 
primarily
 
driven
 
by
 
lower
 
realized
 
and
 
unrealized
 
gains
 
in
 
investment
securities available-for-sale.
 
 
 
27
INCOME TAXES
 
On
 
March
 
27,
 
2020,
 
the
 
Coronavirus
 
Aid,
 
Relief,
 
and
 
Economic
 
Security
 
Act
 
(the
 
“CARES
 
Act”)
 
was
 
enacted.
 
The
 
most
significant provision
 
of the
 
CARES Act that
 
materially affected
 
the Company’s
 
income taxes
 
included the
 
five-year carryback
allowance for taxable net operating losses generated in the tax years
 
2018 through 2020, our fiscal years 2019 through 2021.
 
The Company
 
is electing
 
to utilize
 
that provision,
 
which will
 
provide additional
 
liquidity in
 
the form
 
of an
 
income tax
 
refund
currently
 
estimated
 
to
 
be
 
approximately
 
$14.6
 
million.
 
We
 
anticipate
 
we
 
will
 
receive
 
the
 
refund
 
during
 
fiscal
 
year
 
2022.
 
Additionally, we recorded
 
an income tax benefit of approximately $5.0 million related to the carryback
 
provision.
 
For the third quarter of fiscal 2021, pre-tax
 
income was $11.8 million compared to
 
pre-tax income of $18.0 million for the same
period of fiscal 2020.
 
We recorded
 
an income tax benefit of $1.7 million
 
for the third quarter of fiscal 2021, which
 
includes the
discrete tax
 
benefit
 
of $5.0
 
million described
 
above.
 
Excluding the
 
tax benefit,
 
income tax
 
expense
 
was $2.9
 
million for
 
the
third
 
quarter
 
of
 
fiscal
 
2021
 
with
 
an
 
adjusted
 
effective
 
tax
 
rate
 
of
 
24.6%.
 
Income
 
tax
 
expense
 
was
 
$4.3
 
million
 
for
 
the
comparable period of fiscal 2020, which reflects an effective
 
tax rate of 23.7%.
 
 
For the thirty-nine
 
weeks ended February
 
27, 2021, pre-tax
 
income was $2.2
 
million compared
 
to pre-tax loss
 
of $57.5 million
for the same period of fiscal 2020. We
 
recorded an income tax benefit of $4.1 million,
 
which includes the discrete tax benefit of
$5.0 million
 
described above.
 
Excluding the
 
tax benefit,
 
income tax
 
expense of
 
$543 thousand
 
was recorded
 
with an
 
adjusted
effective tax
 
rate of 24.3%.
 
Income tax benefit
 
of $15.4
 
million was
 
recorded for
 
the comparable period
 
of fiscal
 
2020, which
reflects an effective tax rate of 26.7%.
 
At February 27,
 
2021, trade and other
 
receivables included income
 
taxes receivables of
 
$23.6 million compared
 
to $9.9 million
at May 30, 2020.
 
 
Our effective tax
 
rate differs from
 
the federal statutory income
 
tax rate due to
 
state income taxes, certain
 
federal tax credits and
certain
 
items
 
included
 
in
 
income
 
for
 
financial
 
reporting
 
purposes
 
that
 
are
 
not
 
included
 
in
 
taxable
 
income
 
for
 
income
 
tax
purposes,
 
including
 
tax
 
exempt
 
interest
 
income,
 
certain
 
nondeductible
 
expenses
 
and
 
net
 
income
 
or
 
loss
 
attributable
 
to
noncontrolling interest.
 
Results for the current
 
quarter were favorably
 
impacted by a $5.0 million
 
discrete tax benefit related
 
to
the
 
CARES
 
Act,
 
as
 
discussed
 
above
 
and
 
in
Note
 
11
 
 
Income
 
Taxes
 
of
 
the
 
Notes
 
to
 
Condensed
 
Consolidated
 
Financial
Statements in this Quarterly Report.
 
NET INCOME (LOSS) ATTRIBUTABLE
 
TO CAL-MAINE FOODS, INC.
 
Net income for
 
the third quarter
 
ended February 27,
 
2021 was $13.5
 
million, or $0.28
 
per basic and
 
diluted share, compared
 
to
net income of $13.7
 
million or $0.28 per basic and diluted share for the same period of fiscal 2020.
 
Net income for the thirty-nine
 
weeks ended February 27, 2021
 
was $6.3 million, or $0.13 per basic
 
and diluted share, compared
to a net loss of $42.1 million or $0.87 per basic and diluted share for the same period
 
of fiscal 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28
CAPITAL RESOURCES
 
AND LIQUIDITY
 
Our working capital
 
at February 27,
 
2021 was $422.0 million,
 
compared to $429.1
 
million at May 30,
 
2020. The calculation
 
of
working capital
 
is defined
 
as current
 
assets less
 
current liabilities.
 
Our current
 
ratio was
 
5.19 at
 
February 27,
 
2021, compared
with 5.60 at May 30, 2020.
 
 
We
 
had
 
no
 
long-term
 
debt
 
outstanding
 
at
 
February
 
27,
 
2021
 
or
 
May
 
30,
 
2020.
 
On
 
July
 
10,
 
2018,
 
we
 
entered
 
into
 
a $100.0
million Senior Secured Revolving
 
Credit Facility (the “Revolving Credit
 
Facility”).
 
As of February 27, 2021,
 
no amounts were
borrowed under
 
the Revolving
 
Credit Facility.
 
We
 
have $4.1
 
million in outstanding
 
standby letters
 
of credit,
 
issued under our
Revolving Credit
 
Facility for
 
the benefit
 
of certain
 
insurance companies.
 
Refer to
 
Note 10
 
of our
 
audited financial
 
statements
included in our 2020 Annual Report for further information regarding
 
our long-term debt.
 
For the thirty-nine weeks
 
ended February 27, 2021
 
,
 
$14.7 million in net cash
 
was provided by operating
 
activities, compared to
$36.4 million
 
used in
 
operating activities
 
for the
 
comparable period
 
in fiscal
 
2020. This
 
is primarily
 
due to
 
an increase
 
in egg
selling prices compared to the prior year period.
 
 
We
 
continue
 
to
 
invest
 
in
 
our
 
facilities
 
with
 
$73.8
 
million
 
used
 
to
 
purchase
 
property,
 
plant
 
and
 
equipment
 
for
 
the
 
thirty-nine
weeks
 
ended
 
February
 
27,
 
2021
 
compared
 
to
 
$94.6
 
million
 
in
 
the
 
same
 
period
 
of
 
fiscal
 
2020.
 
Sales
 
and
 
maturities
 
of
investment
 
securities,
 
net
 
of
 
purchases,
 
were
 
$25.8
 
million
 
for
 
the
 
thirty-nine
 
weeks
 
ended
 
February
 
27,
 
2021
 
compared
 
to
$169.4 million
 
for the comparable
 
period in fiscal
 
2020.
 
We
 
received $5.8 million
 
in distributions from
 
unconsolidated entities
during the first three quarters
 
of fiscal 2021 compared to
 
$6.1 million for the same peri
 
od fiscal of 2020.
 
During the thirty-nine
weeks ended February 29, 2020, we used $44.5
 
million in cash in connection with our purchase of certain
 
assets of Mahard Egg
Farm.
 
We
 
used $153
 
thousand for
 
principal payments
 
on finance
 
leases in
 
the first
 
three quarters
 
of fiscal
 
2021 compared
 
to
$1.6 million for principal payments on long-term debt and finance
 
leases for the same period of fiscal 2020.
 
 
As of
 
February 27,
 
2021,
 
cash decreased
 
$25.2 million
 
since May
 
30, 2020
 
compared to
 
a decrease
 
of $1.5
 
million during
 
the
same period of fiscal 2020.
 
We
 
continue to
 
take aggressive
 
steps to
 
position Cal-Maine
 
Foods to
 
meet the
 
expected future
 
demand for
 
cage-free eggs.
 
We
have
 
invested
 
approximately
 
$418
 
million
 
in
 
facilities,
 
equipment
 
and
 
related
 
operations
 
to
 
expand
 
our
 
cage-free
 
production
starting with
 
our first
 
facility in
 
2008. The
 
following table
 
presents material
 
construction projects
 
approved as
 
of February
 
27,
2021 (in thousands):
 
Project(s) Type
Projected
 
Completion
Projected Cost
Spent as of
 
February 27, 2021
Remaining
Projected Cost
Convertible/Cage-Free Layer Houses & Pullet
Houses
Fiscal 2021
$
46,950
$
10,337
$
36,613
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2022
94,632
79,558
15,074
$
141,582
$
89,895
$
51,687
 
We
 
believe our current
 
cash balances, investments,
 
cash flows from operations,
 
and Revolving Credit Facility
 
will be sufficient
to fund our current and projected capital needs for at least the next twelve months.
 
RECENTLY
 
ISSUED/ADOPTED ACCOUNTING STANDARDS
 
For
 
information
 
on
 
changes
 
in
 
accounting
 
principles
 
and
 
new
 
accounting
 
policies,
 
see
 
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
2020 Annual Report.
 
29
ITEM 4.
 
CONTROLS
 
AND
 
PROCEDURES
 
Disclosure Controls and Procedures
 
Our disclosure
 
controls and
 
procedures are
 
designed to
 
provide reasonable
 
assurance that
 
information required
 
to be
 
disclosed
by us in the reports
 
we file or submit
 
under the Exchange Act
 
is recorded, processed, summarized
 
and reported, within the
 
time
periods
 
specified in
 
the Securities
 
and
 
Exchange
 
Commission’s
 
rules and
 
forms.
 
Disclosure controls
 
and procedures
 
include,
without limitation, controls and
 
procedures designed to ensure that
 
information required to be disclosed
 
by us in the reports that
we file or
 
submit under the
 
Exchange Act is accumulated
 
and communicated to
 
management, including our
 
principal executive
and
 
principal
 
financial
 
officers,
 
or
 
persons
 
performing
 
similar
 
functions,
 
as
 
appropriate
 
to
 
allow
 
timely
 
decisions
 
regarding
required disclosure. Based on an evaluation of our disclosure
 
controls and procedures conducted by our Chief Executive Officer
and
 
Chief
 
Financial
 
Officer,
 
together
 
with
 
other
 
financial
 
officers,
 
such
 
officers
 
concluded
 
that
 
our
 
disclosure
 
controls
 
and
procedures were effective as of February 27, 2021 at the reasonable
 
assurance level.
 
Changes in Internal Control Over Financial Reporting
 
There was
 
no change
 
in our
 
internal control
 
over financial
 
reporting that
 
occurred during
 
the quarter
 
ended February
 
27, 2021
that has materially affected, or is reasonably likely to materially affect,
 
our internal control over financial reporting.
 
ITEM 1A.
 
RISK
 
FACTORS
 
Except
 
as
 
set
 
forth
 
below,
 
there
 
have
 
been
 
no
 
material
 
changes
 
in
 
the
 
risk
 
factors
 
previously
 
disclosed
 
in
 
the
 
2020
 
Annual
Report.
 
We
 
are controlled
 
by the
 
family of
 
our late
 
founder,
 
Fred R.
 
Adams, Jr.,
 
and Adolphus
 
B. Baker,
 
our Chief
 
Executive
Officer and Chairman of our Board of Directors controls
 
the vote of 100% of our outstanding Class A Common Stock.
 
 
Fred R. Adams,
 
Jr., our
 
Founder and Chairman Emeritus
 
died on March 29,
 
2020. Mr.
 
Adams’ son-in-law,
 
Adolphus B. Baker,
our
 
Chief
 
Executive
 
Officer
 
and
 
Chairman
 
of
 
our
 
board
 
of
 
directors,
 
Mr.
 
Baker’s
 
spouse
 
and
 
her
 
three
 
sisters
 
(who
 
are
 
Mr.
Adams’
 
four
 
daughters)
 
beneficially
 
own,
 
directly
 
or
 
indirectly
 
through
 
related
 
entities,
 
100%
 
of
 
our
 
outstanding
 
Class
 
A
Common Stock,
 
controlling approximately
 
52.2% of
 
our total
 
voting power.
 
Additionally,
 
such persons
 
and Jean
 
Reed Adams
(“Mrs.
 
Adams”),
 
the
 
wife
 
of
 
our
 
late
 
founder,
 
Fred
 
R.
 
Adams,
 
Jr.,
 
also
 
have
 
additional
 
voting
 
power
 
due
 
to
 
beneficial
ownership
 
of
 
our
 
Common
 
Stock,
 
directly
 
or
 
indirectly
 
through
 
related
 
entities,
 
resulting
 
in
 
family
 
voting
 
control
 
of
approximately
 
57.7%
 
of
 
our
 
total
 
voting
 
power.
 
Mr.
 
Baker
 
controls
 
the
 
vote
 
of
 
100%
 
of
 
our
 
outstanding
 
Class
 
A
 
Common
Stock.
 
We
 
understand that the
 
Adams and Baker
 
families intend to
 
retain ownership of
 
a sufficient amount
 
of our Common
 
Stock and
our Class A
 
Common Stock
 
to assure continued
 
ownership of
 
more than 50%
 
of the voting
 
power of our
 
outstanding shares of
capital stock.
 
As a
 
result of
 
this ownership,
 
the Adams
 
and Baker
 
families have
 
the ability
 
to exert
 
substantial influence
 
over
matters requiring action by
 
our stockholders, including amendments
 
to our certificate of incorporation
 
and by-laws, the election
and
 
removal
 
of
 
directors,
 
and
 
any
 
merger,
 
consolidation,
 
or
 
sale
 
of
 
all
 
or
 
substantially
 
all
 
of
 
our
 
assets,
 
or
 
other
 
corporate
transactions. Delaware
 
law provides
 
that the
 
holders of
 
a majority
 
of the
 
voting power
 
of shares
 
entitled to
 
vote must
 
approve
certain fundamental
 
corporate transactions such
 
as a merger,
 
consolidation and
 
sale of all
 
or substantially
 
all of a
 
corporation’s
assets; accordingly,
 
such a transaction
 
involving us and
 
requiring stockholder approval
 
cannot be effected
 
without the approval
of
 
the
 
Adams
 
and
 
Baker
 
families.
 
Such
 
ownership
 
will
 
make
 
an
 
unsolicited
 
acquisition
 
of
 
our
 
Company
 
more
 
difficult
 
and
discourage
 
certain
 
types
 
of
 
transactions
 
involving
 
a
 
change
 
of
 
control
 
of
 
our
 
Company,
 
including
 
transactions
 
in
 
which
 
the
holders of our
 
Common Stock might
 
otherwise receive a
 
premium for their
 
shares over then
 
current market prices.
 
The Adams
and Baker families’ controlling ownership of our capital stock may
 
adversely affect the market price of our Common Stock.
 
The
 
price
 
of
 
our
 
Common
 
Stock
 
may
 
be
 
affected
 
by
 
the
 
availability
 
of
 
shares
 
for
 
sale
 
in
 
the
 
market,
 
and
 
you
 
may
experience
 
significant
 
dilution
 
as
 
a
 
result
 
of
 
future
 
issuances
 
of
 
our
 
securities,
 
which
 
could
 
materially
 
and
 
adversely
affect the market price of our Common Stock.
 
 
The sale
 
or availability
 
for sale
 
of substantial
 
amounts of
 
our Common
 
Stock could
 
adversely impact
 
its price.
 
Our articles
 
of
incorporation
 
authorize
 
us to
 
issue 120,000,000
 
shares of
 
our Common
 
Stock.
 
As of
 
March
 
29,
 
2021,
 
there
 
were 44,056,163
shares of
 
our Common
 
Stock outstanding.
 
Accordingly,
 
a substantial
 
number of
 
shares of
 
our Common
 
Stock are
 
outstanding
and
 
are, or
 
could become,
 
available for
 
sale in
 
the market.
 
In addition,
 
we may
 
be obligated
 
to issue
 
additional shares
 
of our
Common Stock in connection with employee benefit plans (including
 
equity incentive plans).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30
In the
 
future, we
 
may decide
 
to raise
 
capital through
 
offerings of
 
our Common
 
Stock, additional
 
securities convertible
 
into or
exchangeable for
 
Common Stock, or
 
rights to acquire
 
these securities or
 
our Common Stock.
 
The issuance of
 
additional shares
of our
 
Common Stock
 
or additional
 
securities convertible
 
into or
 
exchangeable for
 
our Common
 
Stock could
 
result in
 
dilution
of existing
 
stockholders’ equity
 
interests in
 
us. Issuances
 
of substantial
 
amounts of
 
our Common
 
Stock, or
 
the perception
 
that
such issuances
 
could occur,
 
may
 
adversely affect
 
prevailing
 
market prices
 
for our
 
Common Stock,
 
and we
 
cannot predict
 
the
effect this dilution may have on the price of our Common
 
Stock.
 
As described in
Note 13
 
– Related Party
 
Transaction of
 
the Notes to Condensed
 
Consolidated Financial
 
Statements included
 
in
this Quarterly
 
Report,
 
in August
 
2020
 
Mrs. Adams
 
and the
 
Daughters’
 
Trust
 
(of
 
which
 
the daughters
 
of our
 
late founder
 
are
beneficiaries)
 
sold
 
6.9
 
million
 
shares
 
of
 
Common
 
Stock
 
in
 
a
 
secondary
 
public
 
offering
 
pursuant
 
to
 
a
 
previously
 
disclosed
Agreement
 
Regarding
 
Common
 
Stock
 
(the
 
“Agreement”)
 
filed
 
as
 
an
 
exhibit
 
to
 
our
 
2020
 
Annual
 
Report.
 
After
 
the
 
sale,
approximately
 
5.0 million
 
shares (the
 
“Subject Shares”)
 
remain registered
 
under a
 
shelf registration
 
statement and
 
prospectus
dated October 9, 2018 for
 
potential resale, which shares are subject
 
to the Agreement. The Agreement
 
generally provides that if
a holder of Subject
 
Shares intends to sell any
 
of the Subject Shares,
 
such party must give
 
the Company a right
 
of first refusal to
purchase all or any of such
 
shares. The price payable by the Company
 
to purchase shares pursuant to the exercise
 
of the right of
first refusal
 
will reflect
 
a 6% discount
 
to the
 
then-current market
 
price based
 
on the 20
 
business-day volume
 
weighted average
price. If
 
the Company
 
does not
 
exercise its
 
right of
 
first refusal
 
and purchase
 
the shares offered,
 
such party
 
will, subject
 
to the
approval of a special committee of independent directors of the Board
 
of Directors, be permitted to sell the shares not purchased
by the
 
Company pursuant
 
to a
 
Company registration
 
statement, Rule
 
144 under
 
the Securities
 
Act of
 
1933, or
 
another manner
of
 
sale
 
agreed
 
to
 
by
 
the
 
Company.
 
Although
 
pursuant
 
to
 
the
 
Agreement
 
the
 
Company
 
will
 
have
 
a
 
right
 
of
 
first
 
refusal
 
to
purchase all or any of
 
those shares, the Company may
 
elect not to exercise its rights
 
of first refusal, and if so
 
such shares would
be eligible for sale pursuant to the registration rights in the Agreement or pursuant
 
to Rule 144 under the Securities Act of 1933.
Sales, or the availability for
 
sale, of a large number
 
of shares of our Common
 
Stock could result in a decline
 
in the market price
of our Common Stock.
 
PART
 
II. OTHER INFORMATION
 
ITEM 1.
 
LEGAL PROCEEDINGS
 
Refer
 
to
 
the
 
discussion
 
of
 
certain
 
legal
 
proceedings
 
involving
 
the
 
Company
 
and/or
 
its
 
subsidiaries
 
in
 
(i)
 
our
 
2020
 
Annual
Report,
 
Part I
 
Item 3:
 
Legal Proceedings,
 
and
 
Part II
 
Item 8,
 
Notes to
 
Consolidated
 
Financial
 
Statements and
 
Supplementary
Data, Note 18: Commitments
 
and Contingencies, and
 
(ii) in this Quarterly
 
Report in
 
of the Notes to Condensed Consolidated Financial Statements, which discussions are incorporated
 
herein by reference.
 
 
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
 
PROCEEDS
 
The following table is a summary of our third quarter 2021 share repurchases:
 
Total
 
Number of
Maximum Number
Shares Purchased
of Shares that
Total
 
Number
Average
as Part of Publicly
May Yet
 
Be
of Shares
Price Paid
Announced Plans
Purchased Under the
Period
Purchased (1)
per Share
Or Programs
Plans or Programs
11/29/20 to 12/26/20
$
12/27/20 to 01/23/21
01/24/21 to 02/27/21
22,628
36.47
22,628
$
36.47
 
(1)
 
 
As permitted under our Amended and Restated 2012 Omnibus Long
-
term Incentive Plan,
these shares were withheld
by us to satisfy tax withholding obligations for employees in connection with
 
the vesting of restricted common stock.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31
ITEM 6. EXHIBITS
 
Exhibits
No.
Description
3.1
3.2
31.1*
31.2*
32**
101.SCH*+
Inline XBRL Taxonomy
 
Extension Schema Document
101.CAL*+
Inline XBRL Taxonomy
 
Extension Calculation Linkbase Document
101.DEF*+
Inline XBRL Taxonomy
 
Extension Definition Linkbase Document
101.LAB*+
Inline XBRL Taxonomy
 
Extension Label Linkbase Document
101.PRE*+
Inline XBRL Taxonomy
 
Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained
 
in Exhibit 101)
 
*
Filed herewith as an Exhibit.
 
**
Furnished herewith as an Exhibit.
+
Submitted electronically with this Quarterly Report.
 
 
SIGNATURES
 
Pursuant to
 
the requirements
 
of the Securities
 
Exchange Act
 
of 1934,
 
the registrant has
 
duly caused
 
this report
 
to be signed
 
on
its behalf by the undersigned, thereunto duly authorized.
 
CAL-MAINE FOODS, INC.
(Registrant)
 
Date:
 
March 29, 2021
/s/ Max P.
 
Bowman
Max P.
 
Bowman
Vice President, Chief Financial
 
Officer
(Principal Financial Officer)
໿
Date:
 
March 29, 2021
/s/ Michael D. Castleberry
Michael D. Castleberry
Vice President, Controller
(Principal Accounting Officer)
໿