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
☐
TransitionQuarterly report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended
February 26, 2022
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:
 
000-38695001-38695
 
CAL-MAINE FOODS, INC
.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 Avenue1052 Highland Colony Pkwy
,
JacksonSuite 200
,
Ridgeland
,
Mississippi
 
3920939157
 
(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
 
Act of 1934 during the
 
during the preceding
12 months (or
 
for such shorter period
 
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
 
mark whether the registrant has
 
registrant has submitted electronically every Interactive Data
 
electronically every
Interactive Data File
required to be
 
submitted
pursuant to
 
Rule 405 of
 
of Regulation
S-T (§232.405
 
of this
 
chapter) during
 
the preceding
 
12 months
 
(or for
 
such shorter
period
tha
tthat the registrant was required to submit such files).
Yes
☑
 
No
☐
Indicate by check
 
Indicate bymark whether the
 
check markregistrant is a
 
whether the registrant
is a large
accelerated filer,
 
an accelerated filer,
 
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
44,056,16344,140,283
 
shares of Common
 
Common Stock, $0.01 par
 
$0.01 par value,
and
4,800,000
 
shares of Class
 
A Common Stock,
 
Stock, $0.01
$0.01 par
value, outstanding as of March 29, 2021.2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 27,26, 2022
May 29, 2021
43981
Assets
Current assets:
Cash and cash equivalents
$
52,91715,589
$
78,13057,352
Investment securities available-for-sale
127,77181,125
154,163112,158
Trade and other receivables, net
130,314138,654
98,37584,123
Income tax receivable
41,383
42,516
Inventories
207,739240,087
187,216218,375
Prepaid expenses and other current assets
4,1625,872
4,3675,407
Total current
assets
522,903522,710
522,251519,931
Property, plant &
equipment, net
585,389671,373
557,375589,417
Finance lease right-of-use asset, net
563409
678525
Operating lease right-of-use asset, net
1,9221,168
2,5311,724
Investments in unconsolidated entities
57,05515,794
60,98254,941
Goodwill
35,52544,006
35,525
Intangible assets, net
22,25618,686
22,81620,341
Other long-term assets
5,6717,849
4,5366,770
Total Assets
$
1,231,2841,281,995
$
1,206,6941,229,174
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
99,851120,665
$
92,18289,191
Current portion of finance lease obligation
212222
205215
Current portion of operating lease obligation
741486
796691
Total current
liabilities
100,804121,373
93,18390,097
Long-term finance lease obligation
492271
652438
Long-term operating lease obligation
1,180682
1,7351,034
Other noncurrent liabilities
9,69010,673
8,68110,416
Deferred income taxes, net
102,669118,753
92,768114,408
Total liabilities
214,835251,752
197,019216,393
Commitments and contingencies - see
Note 1213
—
—
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
63,17066,909
60,37264,044
Retained earnings
980,212992,523
975,147975,977
Accumulated other comprehensive income (loss),loss, net of tax
(135)(1,413)
79(558)
Common stock in treasury at cost –
26,20526,121
 
shares at February 27, 202126, 2022 and
26,28726,202
shares at May 30, 202029, 2021
(27,549)(28,439)
(26,674)(27,433)
Total Cal-Maine Foods, Inc. stockholders’ equity
1,030,331
1,012,781
Noncontrolling interest in consolidated entity
(88)
0
Total stockholders’
equity
1,016,4491,030,243
1,009,6751,012,781
Total Liabilities and
Stockholders’ Equity
$
1,231,2841,281,995
$
1,206,6941,229,174
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of OperationsIncome
(in thousands, except per share amounts)
(unaudited)
 
 
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
EndedFebruary 26, 2022
February 27, 2021
February 29, 202026, 2022
February 27, 2021
February 29, 2020
Net sales
$
477,485
$
359,080
$
345,5881,184,195
$
999,189
$
898,276
Cost of sales
385,903
311,563
295,7601,042,221
876,457
840,198
Gross profit
91,582
47,517
49,828141,974
122,732
58,078
Selling, general and administrative
52,686
47,656
44,231146,991
135,494
132,434
Loss(Gain) loss on disposal of fixed assets
(674)
354
385(2,855)
476
467
Operating income (loss)
39,570
(493)
5,212(2,162)
(13,238)
(74,823)
Other income (expense):
Interest income, net
79
591
803440
2,181
3,628
Royalty income
326
321
414877
906
1,173
Patronage dividends
9,004
10,09610,120
9,004
10,09610,120
9,004
Equity income of unconsolidated entities
1,809
1,872
1,4452,208
1,886
537
Other, net
1,144
537
798,169
1,485
1,897
Total other income, net
net13,478
12,325
12,83721,814
15,462
17,331
Income (loss) before income taxes
53,048
11,832
18,04919,652
2,224
(57,492)
Income tax expense (benefit) expense
13,594
(1,716)
4,278(2,921)
(4,080)
(15,356)Net income
39,454
13,548
22,573
6,304
Less: Loss attributable to noncontrolling interest
(63)
0
(91)
0
Net income (loss)
13,548
13,771
6,304
(42,136)
Less: Income (loss) attributable to noncontrolling
interest
0
22
0
(64)
Net income (loss) attributable to Cal-Maine
Foods, Inc.
$
39,517
$
13,548
$
13,74922,664
$
6,304
$
(42,072)
Net income (loss) per common share attributable
to Cal-Maine Foods, Inc.:share:
Basic
$
0.81
$
0.28
$
0.280.46
$
0.13
Diluted
$
(0.87)
Diluted0.81
$
0.28
$
0.280.46
$
0.13
$
(0.87)
Weighted average
shares outstanding:
Basic
48,886
48,530
48,47348,888
48,511
48,455Diluted
Diluted49,036
48,659
48,58849,035
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
EndedFebruary 26, 2022
February 27, 2021
February 29, 202026, 2022
February 27, 2021
February 29, 2020Net income
Net profit (loss)$
39,454
$
13,548
 
$
13,77122,573
 
$
6,304
$
(42,136)
Other comprehensive income (loss), before tax:
Unrealized holding loss on available-for-sale
securities, net of reclassification adjustments
(551)
(378)
(38)(1,130)
(283)
(863)
Income tax benefit related to items of other
comprehensive income
134
92
9275
69
210
Other comprehensive loss, net of tax
(417)
(286)
(29)(855)
(214)
(653)Comprehensive income
39,037
13,262
21,718
6,090
Less: Comprehensive loss attributable to the
noncontrolling interest
(63)
0
(91)
0
Comprehensive income (loss)
13,262
13,742
6,090
(42,789)
Less: Comprehensive income (loss) attributable
to the noncontrolling interest
0
22
0
(64)
Comprehensive income (loss) attributable to Cal-Cal-Maine
Maine Foods, Inc.
$
39,100
$
13,262
$
13,72021,809
$
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
EndedFebruary 26, 2022
February 27, 2021
February 29, 2020
OperatingCash flows from operating activities:
Net income (loss)
$
22,573
$
6,304
$
(42,136)
Depreciation and amortization
44,39150,996
42,91144,391
Deferred income taxes
9,970(3,861)
(13,406)
Impairment loss on property,
plant & equipment
0
2,9199,970
Other adjustments, net
(45,936)(48,884)
(26,742)(45,936)
Net cash provided by (used in) operations
20,824
14,729
(36,454)
InvestingCash flows from investing activities:
Purchases of investment securities
(59,415)(47,135)
(12,100)(59,415)
Sales and maturities of investment securities
76,377
85,202
181,533Investment in unconsolidated entities
(3,000)
0
Distributions from unconsolidated entities
5,813400
6,1145,813
Acquisition of business, net of cash acquired
(44,823)
0
(44,515)
Purchases of property,
plant and equipment
(73,796)(49,170)
(94,600)(73,796)
Net proceeds from disposal of property,
plant and equipment
3,2736,041
1,8393,273
Net cash provided by (used in)used in investing activities
(61,310)
(38,923)
38,271
FinancingCash flows from financing activities:
Purchase of common stock by treasury
(871)(1,120)
(910)
Distributions to noncontrolling interests
0
(755)
Principal payments on long-term debt
0
(1,500)(871)
Principal payments on finance lease
(153)(160)
(146)(153)
Contributions
53
05
Net cash used in financing activities
(1,019)(1,277)
(3,311)(1,019)
Net change in cash and cash equivalents
(25,213)(41,763)
(1,494)(25,213)
Cash and cash equivalents at beginning of period
78,13057,352
69,24778,130
Cash and cash equivalents at end of period
$
52,91715,589
$
67,75352,917
Supplemental Information:
Cash paid for operating leases
$
703625
$
635703
Interest paid
$
193230
$
77193
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
 
do not include all
 
include all of
the information
 
and footnotes required
 
required by
generally accepted
 
accounting principles in
 
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
 
30,29,
 
20202021
 
(the
 
"20202021
 
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, 202126, 2022 and February 29, 202027, 2021 included 13 weeks
and 39 weeks, respectively.respectively
.
Use of Estimates
The preparation of the
consolidated financial statements in
conformity with GAAP requires management to make
 
to make estimates and
assumptions that
 
that affect the
 
the amounts reported
 
reported in the
 
the consolidated financial
 
financial statements and
 
and accompanying notes.
 
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
 
for in accordance
 
accordance with ASC
 
ASC 320, “Investments
 
“Investments - Debt
 
Debt and Equity
 
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
 
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
 
the rating of its
 
its debt securities
by credit
 
agencies and economic conditions
 
conditions to assess and
 
and record
any expected
credit
losses through allowancethe
 
allowance for credit
losses, limited to
 
to the amount that
 
that fair value was
 
was less than the
 
amortized cost basis.
 
The cost
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
inby
 
the
 
Company'sspecific
 
Condensedidentification
 
Consolidated
Statements
ofmethod.
Operations.Gains and losses are recognized in other income (expenses) as Other, net in the Company's Condensed Consolidated Statements
of Income.
 
Investments
in
 
mutual
funds
 
are
classified
 
as
“Other “Other
 
long-term
assets”
 
in
the
 
Company’s
 
Condensed Consolidated
Balance
Balance Sheets.
Trade Receivables
 
Trade
 
receivables are
 
stated at
 
their carrying
 
values, which
 
include a
 
reserve for
 
credit losses.
 
At February
 
27, 202126, 2022
 
and May
30,29,
 
2020,2021,
 
reserves
 
for
 
credit
 
losses
 
were
 
$
728725
 
thousand
 
and
 
$
744795
 
thousand,
 
respectively.
 
The
 
Company
 
extends
 
credit
 
to
customers based on an
 
an evaluation of
each customer's financial
 
condition and credit
history.
 
Collateral is generally
not required.
The
 
Company
 
minimizes
 
exposure
 
to
 
counter
 
party
 
credit
 
risk
 
through
 
credit
 
analysis
 
and
 
approvals,
 
credit
 
limits,
 
and
monitoring
 
procedures.
 
In
 
determining
 
our
 
reserve
 
for
 
credit
losses,
 
receivables
 
are
 
pooled
according
to
age,
with
each
pool
assigned
 
an
 
expected
 
loss
 
based
 
on
historical loss information adjusted as needed for economic and other forward-looking factors.
Business Combinations
The
 
historicalCompany applies
 
lossfair value
 
informationaccounting guidance
 
adjustedto measure
 
asnon-financial assets
 
neededand
liabilities associated
with business
acquisitions. These
assets and
liabilities are
measured at
fair value
 
for
 
economicthe initial
purchase price
allocation.
The fair
value of
8
non-financial assets acquired is determined internally. Our internal valuation methodology for non-financial assets considers the
remaining estimated life of the assets acquired and what management believes is the market value for those assets.
Change in Accounting Principle
Effective
May
31,
2020,
the
Company
adopted
ASU
2016-13,
Financial
Instruments
–
Credit
Losses
(Topic
326),
which
is
intended
to
improve
financial
reporting
by
requiring
more
timely
recording
of
credit
losses
on
loans
 
and
 
other
 
forward-lookingfinancial
factors.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.
Immaterial Error Correction
Effective
on
May
30,
2021,
the
Company
acquired
the
remaining
50
%
membership
interest
in
Red
River
Valley
Egg
Farm,
LLC (“Red
River”), including
certain liabilities.
During the
Company’s
third quarter
of fiscal
2022, management
determined
that
it
had
not
properly
eliminated
select
intercompany
sales
and
cost
of
sales
transactions
between
Red
River
and
the
corresponding other
wholly-owned subsidiaries
of the
Company in
its first
and second
quarter 2022
Condensed Consolidated
Statements of Income. The errors resulted in
an overstatement of Net Sales and Cost
of Sales of $
6.7
million in the first quarter
of
fiscal
2022
and
$
9.2
million
in
the
second
quarter
of
fiscal
2022.
There
was
0
impact
to
Operating
income
(loss),
Net
income (loss) or Net income (loss) per share.
We
evaluated
the
errors
quantitatively
and
qualitatively
in
accordance
with
Staff
Accounting
Bulletin
("SAB") No. 99 Materiality, and
SAB No. 108 Considering
the
Effects
of
Prior
Year
Misstatements
when
Quantifying
Misstatements
in
the
Current
Year
Financial
Statements, and
determined
that
the
related
impact
was not material
to
our
condensed consolidated
financial statements
for the
first or
second quarters
of fiscal
2022, but
that correcting
the cumulative
impact
of
the
errors
would
be
relevant
to
our
Condensed
Consolidated
Statements
of
Income
for
the third
quarter
ended February 26, 2022. Accordingly, we have reflected the correction of the immaterial errors as a reduction of Net Sales and
Cost of Sales in the accompanying Condensed Consolidated Statements of Income for the thirty-nine weeks ended February 26,
2022.
Note 2 – Acquisition
Effective
on
May
30,
2021,
the
Company
acquired
the
remaining
50
%
membership
interest
in
Red
River
Valley
Egg
Farm,
LLC (“Red River”),
including certain liabilities. As a result of the
acquisition, Red River became a wholly owned
subsidiary of
the Company.
Red River owns and operates
a specialty shell egg production
complex with approximately
1.7
million cage-free
laying
hens,
cage-free
pullet
capacity,
feed
mill,
processing
plant,
related
offices
and
outbuildings
and
related
equipment
located on approximately
400
acres near Bogata, Texas.
 
9
The
following
table
summarizes
the
consideration
paid
for
Red
River
and
the
amounts
of
the
assets
acquired
and
liabilities
assumed recognized at the acquisition date:
Cash consideration paid
$
48,500
Fair value of the Company's equity interest in Red River held before the business combination
48,500
$
97,000
Recognized amounts of identifiable assets acquired and liabilities assumed
Cash
$
3,677
Accounts receivable, net
1,980
Inventory
8,789
Property, plant and equipment
85,002
Liabilities assumed
(2,448)
Deferred income taxes
(8,481)
Total identifiable net assets
88,519
Goodwill
8,481
$
97,000
Cash and
accounts receivable
acquired along
with liabilities
assumed were
valued at
their carrying
value which
approximates
fair value due to the short maturity of these instruments.
Inventory consisted primarily
of flock, feed
ingredients, packaging, and
egg inventory.
Flock inventory was
valued at carrying
value as management believes that their carrying value
best approximates their fair value.
Feed ingredients, packaging and egg
inventory were all valued based on market prices as of May 30, 2021.
Property,
plant and
equipment were valued
utilizing the
cost approach which
is based on
replacement or reproduction
costs of
the assets and subtracting any depreciation resulting from physical deterioration and/or functional or economic obsolescence.
The Company
recognized a
gain of
$
4.5
million as
a result
of remeasuring
to fair
value its
50
% equity
interest in
Red River
held before the business combination. The gain was recorded in other income and expense under the heading “Other, net” in the
Company’s
Condensed Consolidated
Statements of
Income. The
acquisition of
Red River
resulted in
a discrete
tax benefit
of
$
8.3
million, which
includes a
$
7.3
million decrease
in deferred
income tax
expense related
to the
outside-basis of
our equity
investment
in
Red
River,
with
a
corresponding
non-recurring,
non-cash
$
954,000
reduction
to
income
taxes
expense
on
the
non-taxable
remeasurement
gain
associated
with
the
acquisition.
As
part
of
the
acquisition
accounting,
the
Company
also
recorded
an
$
8.5
million
deferred
tax
liability
for
the
difference
in
the
inside-basis
of
the
acquired
assets
and
liabilities
assumed. The recognition
of deferred tax
liabilities resulted in
the recognition of
goodwill. None of
the goodwill recognized is
expected to be deductible for income tax purposes.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Index
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
$
0
$
16,209
Commercial paper
6,345
0
0
6,345
Corporate bonds
92,256
1,062
0
93,318
Certificates of deposits
2,084
0
7
2,077
Asset backed securities
9,823
0
1
9,822
Total current
investment securities
$
126,665
$
1,114
$
8
$
127,771
Mutual funds
$
2,293
$
1,424
$
0
$
3,717
Total noncurrent
investment securities
$
2,293
$
1,424
$
0
$
3,717
43981
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
16,093
$
86
$
0
$
16,179
Commercial paper
6,965
17
0
6,982
Corporate bonds
125,594
1,274
0
126,868
Certificates of deposits
1,492
0
0
1,492
Asset backed securities
2,629
13
0
2,642
Total current
investment securities
$
152,773
$
1,390
$
0
$
154,163
Mutual funds
$
2,005
$
744
$
0
$
2,749
Total noncurrent
investment securities
$
2,005
$
744
$
0
$
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
0
allowance for credit losses at February 27, 2021 and May 30, 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
910
Note 3 - Investment
Securities
The following represents the Company’s investment securities as of February 26, 2022 and May 29, 2021 (in thousands):
February 26, 2022
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
514
$
0
$
3
$
511
Commercial paper
9,980
0
23
9,957
Corporate bonds
61,634
0
344
61,290
Certificates of deposits
1,268
0
12
1,256
Asset backed securities
8,205
0
94
8,111
Total current investment securities
$
81,601
$
0
$
476
$
81,125
Mutual funds
$
2,967
$
0
$
53
$
2,914
Total noncurrent investment securities
$
2,967
$
0
$
53
$
2,914
May 29, 2021
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
16,424
$
56
$
0
$
16,480
Commercial paper
1,998
0
0
1,998
Corporate bonds
80,092
608
0
80,700
Certificates of deposits
1,077
0
1
1,076
Asset backed securities
11,914
0
10
11,904
Total current investment securities
$
111,505
$
664
$
11
$
112,158
Mutual funds
$
2,306
$
1,810
$
0
$
4,116
Total noncurrent investment securities
$
2,306
$
1,810
$
0
$
4,116
Available-for-sale
Proceeds from
sales and
maturities of
investment securities available-for-sale
were $
76.4
million and
$
85.2
million during
the
thirty-nine weeks ended February
26, 2022 and
February 27, 2021,
respectively.
Gross realized gains
for the thirty-nine
weeks
ended February 26, 2022 and February 27, 2021 were $
181
thousand and $
116
thousand, respectively. Gross realized losses for
the thirty-nine weeks ended February 26, 2022 and February 27, 2021 were $
67
thousand and $
17
thousand, respectively. There
were
0
allowances for credit losses at February 26, 2022 and May 29, 2021.
Actual maturities
may differ
 
from contractual maturities as
 
maturities as some
borrowers have
 
the right to
 
call or prepay
 
obligations with
or
without penalties.
Contractual maturities of current investments at February 27, 202126, 2022 are
as follows (in thousands):
Estimated Fair Value
Within one year
$
44,86252,391
1-5 years
82,90928,734
Total
$
127,77181,125
Noncurrent
 
There were
0
Proceeds
 
sales offrom
 
noncurrent investment
securities during
the thirty-nine
weeks ended February
27, 2021.
Proceeds from
sales
 
and
 
maturities
 
of
 
noncurrent
 
investment
 
securities
 
were
 
$
1.24.9
 
million
 
during
 
the
 
thirty-nine
 
weeks
ended February
 
29,26,
2020.2022.
 
Gross
 
realized
 
gains
 
for
 
the
 
thirty-nine
 
weeks
 
ended February
 
29,26,
 
20202022
 
were
 
$
6112.2
 
thousand.million. There
were
no
realized
losses
for
the
thirty-nine
weeks
ended February
26,
2022.
 
There
 
were
0
 
realizedsales
of
noncurrent
investment
losses forsecurities during 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
$
0
$
16,209
$
0
$
16,209
Commercial paper
0
6,345
0
6,345
Corporate bonds
0
93,318
0
93,318
Certificates of deposits
0
2,077
0
2,077
Asset backed securities
0
9,822
0
9,822
Mutual funds
3,717
0
0
3,717
Total assets measured at fair
value
$
3,717
$
127,771
$
0
$
131,488
10
43981
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
0
$
16,179
$
0
$
16,179
Commercial paper
0
6,982
0
6,982
Corporate bonds
0
126,868
0
126,868
Certificates of deposits
0
1,492
0
1,492
Asset backed securities
0
2,642
0
2,642
Mutual funds
2,749
0
0
2,749
Total assets measured at fair
value
$
2,749
$
154,163
$
0
$
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.
2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
Note 4 - Fair Value Measurements
The Company
is required
to categorize
both financial
and nonfinancial
assets and
liabilities based
on the
following fair
value
hierarchy. The
fair value
of an
asset is
the price
at which
the asset
could be
sold in
an orderly
transaction between
unrelated,
knowledgeable, and willing parties able to engage in the
transaction. A liability’s fair value
is defined as the amount that would
be paid
to transfer
the liability
to a
new obligor
in a
transaction between
such parties,
not
the amount
that would
be paid
to
settle the liability with the creditor.
•
Level 1
- Quoted prices in active markets for identical assets or liabilities
•
Level 2
- Inputs
other than
quoted prices
included in
Level 1
that are
observable for
the asset
or liability,
either
directly or indirectly, including:
◦
Quoted prices for similar assets or liabilities in active markets
◦
Quoted prices for identical or similar assets in non-active markets
◦
Inputs other than quoted prices that are observable for the asset or liability
◦
Inputs derived principally from or corroborated by other observable market data
•
Level 3
- Unobservable inputs for the asset or liability that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded at cost are as follows:
Cash and cash equivalents, accounts receivable, and accounts payable:
The carrying amount approximates fair value due to the
short maturity of these instruments.
Lease obligations:
The carrying value of the Company’s lease obligations is at its present value which approximates fair value.
Assets and Liabilities Measured at Fair Value
on a Recurring Basis
In
accordance with
the
fair value
hierarchy described
above, the
following
table shows
the
fair value
of
financial assets
and
liabilities measured at fair value on a recurring basis as of February 26, 2022 and May 29, 2021 (in thousands):
February 26, 2022
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
0
$
511
$
0
$
511
Commercial paper
0
9,957
0
9,957
Corporate bonds
0
61,290
0
61,290
Certificates of deposits
0
1,256
0
1,256
Asset backed securities
0
8,111
0
8,111
Mutual funds
2,914
0
0
2,914
Total assets measured at fair value
$
2,914
$
81,125
$
0
$
84,039
May 29, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
0
$
16,480
$
0
$
16,480
Commercial paper
0
1,998
0
1,998
Corporate bonds
0
80,700
0
80,700
Certificates of deposits
0
1,076
0
1,076
Asset backed securities
0
11,904
0
11,904
Mutual funds
4,116
0
0
4,116
Total assets measured at fair value
$
4,116
$
112,158
$
0
$
116,274
Investment securities
–
available-for-sale
classified as
Level 2
consist of
securities with
maturities of
three months
or longer
when purchased. We
classified these securities as current because amounts invested are readily available
for current operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1112
Note 5 - Inventories
Inventories consisted of the following as of February 26, 2022 and May 29, 2021 (in thousands):
February 26, 2022
May 29, 2021
Flocks, net of amortization
$
137,086
$
123,860
Eggs and egg products
24,153
21,084
Feed and supplies
78,848
73,431
$
240,087
$
218,375
We
grow
and
maintain
flocks
of
layers
(mature
female
chickens),
pullets
(female
chickens,
under
18
weeks
of
age),
and
breeders (male and female chickens used to produce fertile eggs to
hatch for egg production flocks). Our total flock at February
26, 2022 consisted of approximately
9.4
million pullets and breeders and
42.7
million layers.
Note 6 - Accrued Dividends Payable and Dividends per Common Share
We
accrue dividends at the
end of each quarter
according to the Company’s
dividend policy adopted by its
Board of Directors.
The Company pays
a dividend to
shareholders of its
Common Stock and Class
A Common Stock
on a quarterly
basis for each
quarter for
which the
Company reports net
income attributable
to Cal-Maine
Foods, Inc.
computed in
accordance with
GAAP
in an amount equal
to one-third (
1/3
) of such quarterly
income. Dividends are paid
to shareholders of record as
of the 60th day
following the last
day of
such quarter,
except for the
fourth fiscal quarter.
For the fourth
quarter, the
Company pays dividends
to shareholders of record on the 65th day after the quarter end. Dividends are payable on the 15th day following the record date.
Following a quarter for which the Company does not report net income attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend for a subsequent
profitable quarter until the Company is profitable on
a cumulative basis computed from the
date of the most
recent quarter for which
a dividend was paid.
For the third quarter
of fiscal 2022, we
will pay a
cash dividend
of approximately $
0.125
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.
On
 
our
 
condensedCondensed
 
consolidatedConsolidated
 
statementStatements
 
of
 
operations,Income,
 
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
EndedFebruary 26, 2022
February 27, 2021
February 29, 202026, 2022
February 27, 2021
February 29, 2020
Net income (loss) attributable to Cal-Maine Foods,
Foods, Inc.
$
39,517
$
13,548
$
13,74922,664
$
6,304
$
(42,072)
Cumulative losses to be recovered prior to
payment of divided at beginning of period
(21,097)
(8,614)
(75,582)(4,244)
(1,370)
(19,761)
Net income attributable to Cal-Maine Foods,
Inc. available for dividend
$
4,934
$
018,420
$
4,934
$
018,420
$
4,934
1/3 of net income attributable to Cal-Maine
Foods, Inc. available for dividend
6,140
1,645
6,140
1,645
Common stock outstanding (shares)
44,140
44,056
Class A common stock outstanding (shares)
4,800
4,800
Total common stock
outstanding (shares)
48,940
48,856
Dividends per common share*
$
0.125
$
0.034
$
0.125
$
0.034
*
*Dividends
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 - Equity7 – Credit Facility
On November
 
15, 2021,
we entered
into an
Amended and
Restated Credit
Agreement (the
“Credit Agreement”)
with a
five
-
year
term.
The following reflects
Credit
Agreement
amended
and
restated
the equity activity,
Company’s
previously
existing
credit
agreement
dated
July
10,
2018.
The
Credit
Agreement
provides
 
for the thirteen and thirty-nine weeks ended February 27,
 
2021 and February 29, 2020
(in thousands):
an
 
Thirteen Weeks Ended Februaryincreased
 
27, 2021senior
secured
revolving
credit
facility
(the
“Credit
Facility”
or
Cal-Maine Foods, Inc. Stockholders“Revolver”),
in
Common Stock
an
Class A
initial
Treasury
aggregate
Paid In
principal
Accum. Other
amount
Retained
of
Amount
up
Amount
to
Amount
Capital
Comp. Income
Earnings
Total
Balance at November 28, 2020
$
703250
million,
which
includes
a
$
4815
$
million
(26,723)
sublimit
$
for
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
$
1,016,449the
13
issuance
of
standby
letters
of
credit
and
a
$
15
million
sublimit
for
swingline
loans.
The
Credit
Facility
also
includes
an
accordion
feature
permitting,
with
the
consent
of
BMO
Harris
Bank
N.A.
(the
“Administrative
Agent”),
an
increase
in
the
Credit Facility in
the aggregate up
to $
200
million by
adding one or
more incremental senior
secured term loans
or increasing
one or more times
the revolving commitments under
the Revolver.
As of February 26,
2022,
0
amounts were borrowed under
the Credit Facility and $
4.1
million in standby letters of credit were issued under the Credit Facility.
The
interest
rate
in
connection
with
loans
made
under
the
Credit
Facility
is
based
on,
at
the
Company’s
election,
either
the
Eurodollar Rate
plus
the Applicable
Margin
or
the
Base Rate
plus
the Applicable
Margin.
The “Eurodollar
Rate” means
the
reserve adjusted rate
at which Eurodollar
deposits in the
London interbank market
for an interest
period of
one
,
two
,
three
,
six
or
twelve
months (as
selected by
the Company)
are quoted.
The “Base
Rate” means
a fluctuating
rate per
annum equal
to the
highest
of
(a)
the
federal
funds
rate
plus
0.50
%
per
annum,
(b)
the
prime
rate
of
interest
established
by
the
Administrative
Agent, and (c) the Eurodollar Rate for an interest period of
one
month plus
1
% per annum, subject to certain interest rate floors.
The
“Applicable
Margin”
means
0.00
%
to
0.75
%
per
annum
for
Base
Rate
Loans
and
1.00
%
to
1.75
%
per
annum
for
Eurodollar
Rate
Loans,
in
each
case
depending
upon
the
Total
Funded
Debt
to
Capitalization Ratio
for
the
Company
at
the
quarterly pricing date.
The Company will
pay a commitment
fee on the
unused portion of
the Credit Facility
payable quarterly
from
0.15
%
to
0.25
%
in
each
case
depending
upon
the
Total
Funded
Debt
to
Capitalization
Ratio
for
the
Company
at
the
quarterly pricing date. The Credit Agreement contains customary provisions regarding replacement of the Eurodollar Rate.
The
Credit Facility
is
guaranteed by
all the
current and
future wholly-owned
direct and
indirect domestic
subsidiaries of
the
Company (the “Guarantors”),
and is secured
by a first-priority
perfected security interest
in substantially all
of the Company’s
and
the
Guarantors’
accounts,
payment
intangibles,
instruments
(including
promissory
notes),
chattel
paper,
inventory
(including farm products) and deposit accounts maintained with the Administrative Agent.
The Credit
Agreement for
the Credit
Facility contains
customary covenants,
including restrictions
on the
incurrence of
liens,
incurrence of additional
debt, sales of
assets and other
fundamental corporate changes
and investments. The
Credit Agreement
requires maintenance of
two financial covenants:
(i) a maximum
Total
Funded Debt to
Capitalization Ratio tested
quarterly of
no greater than
50
%; and (ii) a requirement to maintain Minimum Tangible
Net Worth
at all times of $
700
Million plus
50
% of
net
income
(if
net
income
is
positive)
less
permitted
restricted
payments
for
each
fiscal
quarter
after
November
27,
2021.
Additionally, the
Credit Agreement requires that Fred
R. Adams Jr.’s
spouse, natural children, sons-in-law or grandchildren,
or
any trust, guardianship,
conservatorship or custodianship for
the primary benefit of
any of the
foregoing, or any
family limited
partnership, similar limited liability company or other entity
that
100
% of the voting control of such
entity is held by any of the
foregoing, shall maintain at least
50
% of the Company's voting
stock. Failure to satisfy any
of these covenants will constitute
a
default under the terms of the Credit Agreement. Further, under
the terms of the Credit Agreement, payment of dividends under
the
Company's
current
dividend
policy
of
one-third
of
the
Company's
net
income
computed
in
accordance
with
GAAP
and
payment of other dividends or
repurchases by the Company of
its capital stock is allowed,
as long as after giving
effect to such
dividend payments
or repurchases
no default
has occurred
and is
continuing and
the sum
of cash
and cash
equivalents of
the
Company and its subsidiaries plus availability under the Credit Facility equals at least $
50
million.
The Credit
Agreement also
includes customary
events of
default and
customary remedies
upon the
occurrence of
an event
of
default, including acceleration of the amounts
due under the Credit Facility and
foreclosure of the collateral securing the
Credit
Facility.
At February 26, 2022, we were in compliance with the covenant requirements of the Credit Facility.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Index
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14
13
Note 8 - Equity
The following reflects equity activity for the
thirteen and thirty-nine weeks ended February 26,
2022 and February 27, 2021 (in
thousands):
Thirty-nineThirteen Weeks Ended February 29, 202026, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. IncomeLoss
Earnings
Interest
Total
Balance at June 01, 2019November
27, 2021
$
703
$
48
$
(25,866)(27,450)
$
56,85766,019
$
355(996)
$
954,527959,124
$
3,182(25)
$
989,806997,423
Other comprehensive
loss, net of tax
—
—
—
—
(653)(417)
—
—
(653)(417)
Restricted stockStock compensation
forfeituresplan transactions
—
—
102(989)
(102)890
—
—
—
(99)
Dividends
—
—
—
—
Purchase of company—
stock(6,118)
—
—(6,118)
(910)Net income (loss)
—
—
—
—
(910)—
Distributions to39,517
noncontrolling interest(63)
partners39,454
Balance at February
26, 2022
$
703
$
48
$
(28,439)
$
66,909
$
(1,413)
$
992,523
$
(88)
$
1,030,243
Thirteen Weeks Ended February 27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Accum.
Class A
Treasury
Paid In
Other Comp.
Retained
Amount
Amount
Amount
Capital
Income (Loss)
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)
Stock compensation plan transactions
—
—
(826)
964
—
—
138
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
Thirty-nine Weeks Ended February 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 29,
2021
$
703
$
48
$
(27,433)
$
64,044
$
(558)
$
975,977
$
0
$
1,012,781
Other comprehensive
loss, net of tax
—
—
—
—
(855)
—
—
(855)
Stock compensation
plan transactions
—
—
(1,006)
2,865
—
—
—
1,859
Contributions
—
—
—
—
—
—
(755)3
(755)3
Reclass of equity portion
of Texas Egg Products,
LLC in connection with
acquisitionDividends
—
—
—
—
—
1,779
(1,779)(6,118)
—
Restricted stock
compensation
—
—
—
2,680
—
—
—
2,680(6,118)
Net lossincome (loss)
—
—
—
—
—
(42,072)22,664
(64)(91)
(42,136)22,573
Balance at February 29,
202026, 2022
$
703
$
48
$
(26,674)(28,439)
$
59,43566,909
$
(298)(1,413)
$
914,234992,523
$
584(88)
$
948,0321,030,243
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1415
Thirty-nine Weeks Ended February 27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Accum.
Class A
Treasury
Paid In
Other Comp.
Retained
Amount
Amount
Amount
Capital
Income (Loss)
Earnings
Total
Balance at May 30, 2020
$
703
$
48
$
(26,674)
$
60,372
$
79
$
975,147
$
1,009,675
Impact of ASC 326
—
—
—
—
—
422
422
Balance at May 31 2020
703
48
(26,674)
60,372
79
975,569
1,010,097
Other comprehensive loss, net of tax
—
—
—
—
(214)
—
(214)
Stock compensation plan transactions
—
—
(875)
2,793
—
—
1,918
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
Note 9 - Net Income per Common Share
Basic net income per
share is based on
the weighted average Common Stock
and Class A Common
Stock outstanding. Diluted
net
income
per
share
is
based
on
weighted-average
common
shares
outstanding
during
the
relevant
period
adjusted
for
the
dilutive effect of share-based awards.
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(amounts in thousands, except per share data):
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
EndedFebruary 26, 2022
February 27, 2021
February 29, 202026, 2022
February 27, 2021
February 29, 2020
Numerator
Net income (loss)
$
39,454
$
13,548
$
13,77122,573
$
6,304
$
(42,136)
Less: Income (loss)Loss attributable to noncontrolling
noncontrolling interest
(63)
0
22(91)
0
(64)
Net income (loss) attributable to Cal-Cal-Maine
Maine Foods, Inc.
$
39,517
$
13,548
$
13,74922,664
$
6,304
$
(42,072)
Denominator
Weighted-average
common shares
outstanding, basic
48,886
48,530
48,47348,888
48,511
48,455
Effect of dilutive restricted shares
150
129
115147
138
0
Weighted-average
common shares
outstanding, diluted
49,036
48,659
48,58849,035
48,649
48,455
Net income (loss) per common share
attributable to
Cal-Maine Foods, Inc.
Basic
$
0.280.81
$
0.28
$
0.130.46
$
(0.87)0.13
Diluted
$
0.81
$
0.28
$
0.280.46
$
0.13
$
(0.87)
Note 810 - Revenue Recognition
Satisfaction of Performance Obligation
The vast
majorityMost of
the Company’s
 
revenue is
derived from
 
contracts with customers based on
 
customers basedthe customer placing an
 
onorder for products.
Pricing for
the most
part is
determined when
the Company
and the
 
customer placingagree
 
an order
for products.
Pricing for the most part
is determined whenupon the
 
Company and the customerspecific order,
 
agree upon the specific
order, which establishes
establishes the contract for that order.
 
16
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
 
quoted wholesale market
 
market prices, negotiated
 
negotiated prices or
 
or formulas related
 
related to
our costs
 
of production.
 
The Company’s
 
sales predominantly
 
contain a
 
single performance
 
obligation.
We
 
recognize revenue
upon satisfaction of the
 
ofperformance obligation with the performance
 
obligation withcustomer, which typically
 
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
 
sale clause, pursuant to which we
 
we credit the customer’s
account for product that
 
that the
customer is unable to
 
sell before expiration.
The Company records an
 
an estimate of returns and
 
refunds by using historical
return
data and
 
comparing to
 
current period
 
sales and
 
accounts receivable. The
 
The allowance is
 
is recorded as
 
as a reduction
 
reduction in sales
 
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.,
 
(e.g., percentage
discounts off
 
current purchases), inducement offers
 
offers (e.g.(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
 
the sales
 
price
 
of based
on
estimated
future
redemption
rates.
Redemption
rates
are
estimated
using
the
 
relatedCompany’s
historical experience
 
transaction,for similar
 
whileinducement offers.
Current discount
and inducement
 
offers
 
when
accepted
by
customers,
are
treated presented
 
as a
net amount
in
‘‘Net sales.’’
Disaggregation of Revenue
The following table provides revenue disaggregated by product category (in thousands):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
February 26, 2022
February 27, 2021
Conventional shell egg sales
$
280,633
$
203,189
$
685,678
$
560,297
Specialty shell egg sales
182,945
145,210
462,319
408,537
Egg products
12,749
9,098
33,516
25,736
Other
1,158
1,583
2,682
4,619
$
477,485
$
359,080
$
1,184,195
$
999,189
Contract Costs
The Company can incur costs to obtain or fulfill a contract with a customer.
If the amortization period of these costs is less than
one year,
they are
expensed as
incurred. When
the amortization
period is
greater than
one year,
a contract
asset is
recognized
and is amortized
over the contract
life as a
reduction to sales price in net
sales. As of
February 26, 2022
and February 27,
2021, the balance
for contract assets is immaterial.
Contract Balances
The Company
receives payment
from customers
based on estimated future redemption rates.
specified terms
that are
generally less
than 30
days from
delivery.
There are rarely contract assets or liabilities related to performance under the contract.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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.
17
Note 911 - Leases
Expenses related to
 
Expenses related
to operating
leases, amortization
 
of finance leases,
 
leases, right-of-use
assets, and
 
finance lease interest
 
interest are
included
in Cost of sales, Selling general and administrative expense, and Interest
income, net in the Condensed Consolidated Statements
of Operations.Income. The Company’s lease cost
consists of the following (in thousands):
13Thirteen Weeks Ended
February 27, 2021
39Thirty-nine Weeks Ended
February 27, 202126, 2022
February 26, 2022
Operating Leaselease cost
$
233200
$
703625
Finance Leaselease cost
Amortization of right-of-use asset
$
44
$
125132
Interest on lease obligations
$
96
$
2720
Short term lease cost
$
8571,086
$
2,7143,221
16
Future minimum lease payments under non-cancelable leases are as follows (in
thousands):
As of February 27, 202126, 2022
Operating Leases
Finance Leases
Remainder fiscal 20212022
$
224180
$
68
2022
802
23960
2023
539
239240
2024
380
218217
2025
130
0
2026
26
0
Thereafter2027
5
0
Total
2,1061,260
764517
Less imputed interest
(185)(92)
(60)(24)
Total
$
1,9211,168
$
704493
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, 202126, 2022
Operating Leases
Finance Leases
Weighted-average
remaining lease term (years)
3.02.4
2.81.8
Weighted-average
discount rate
5.9
%
4.9
%
Note 1012 - 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
 
expense was $
3.0
 
million and $
2.8
 
million andfor the
 
$
2.7
million for
the thirty-nine
weeks ended
 
February 27,
202126, 2022
and February 29, 2020,27, 2021, respectively.
Unrecognized compensation
 
compensation expense as
 
as a result
 
result of
non-vested
 
shares of
 
restricted stock
 
outstanding under
 
the Amended
and
Restated
2012
 
Omnibus
Long-Term
 
Incentive
Plan
 
at
February
 
27, 202126,
2022
 
of
$
7.58.1
 
million
will
 
be
recorded
 
over
a
 
weighted
average
period of
2.3
 
years. Refer to Part II
 
ReferItem 8, Notes to Consolidated
 
to
Financial Statements and Supplementary Data, Note
16
of
our
audited
financial
statements
in
our
2020
16: Stock Compensation Plans in our 2021 Annual
Report
for
further
information
on
our
stock
compensation plans.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1718
The Company’s restricted share activity
for the thirty-nine weeks ended February 27, 202126, 2022 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 30, 202029, 2021
273,046302,147
$
41.3639.37
Granted
110,560113,142
37.7141.13
Vested
(79,328)(90,778)
43.9642.53
Forfeited
(4,431)(3,932)
40.1237.81
Outstanding, February 27, 202126, 2022
299,847320,579
$
39.3539.12
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 1213 - Commitments and Contingencies
Financial Instruments
The
 
Company
The Company
maintained
 
standby
letters
of
credit
 
("LOC"(“LOCs”)
totaling
$
4.1
 
million at February 27,
 
2021 which were issuedat
 
underFebruary
26,
2022,
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.
 
v. Cal-Maine Foods, Inc. d/b/a Wharton;
and Wharton County Foods, LLC
 
On April 23,
 
23, 2020,
the Company
 
and its subsidiary
 
Wharton County Foods,
 
Foods, LLC (“WCF”) were
 
were named as defendants
 
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,
 
11, 2020,
the State filed a
 
notice of appeal, which was
 
which was assigned to
the Texas
 
Court of Appeals
for the
First District. The
 
State filed its
 
opening brief on
 
on December 7, 2020.
 
2020. The
Company and
 
WCF filed their
 
response on February
8,
2021.
On
 
February
11,
8, 2021.
2022,
the
Texas
Court
of
Appeals
heard
oral
argument
but
has
not
issued
a
ruling.
 
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
 
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
 
eggs during
the
 
COVID-19 state
 
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
 
other defendants from selling eggs
at a price more than
 
than 10% greater than the price
of
eggs prior
 
to the
 
declaration of
the state
 
of the
state of
emergency
 
and damages
 
in the
 
amount
of
 
$
10,000
 
per violation,
 
or $
250,000
 
for
each violation
impacting anyone over
 
over 65
years old.
On December
 
1, 2020,
the Company
and certain
 
other defendants
filed theira
motion to
dismiss the
plaintiffs’ amended
class action
complaint. The
plaintiffs subsequently
filed a
motion to
strike, and
the
motion to
dismiss and
related proceedings were
referred to
a United
States magistrate
judge. On
July 14,
2021, the
magistrate
judge
issued
a
report
and
recommendation
to
the
court
that
the
defendants’
motion
 
to
 
dismiss
 
be
granted
and
the
case
be
dismissed without prejudice
for lack of
subject matter jurisdiction.
On September 20,
2021, the
court adopted the
magistrate’s
report
and
recommendation
in
its
entirety
and
granted
defendants’
motion
to
dismiss
 
plaintiffs’
 
first
 
amended
 
class
 
action
complaint; thereafter,
the court
entered a
final judgment
in favor
of the
Company and
certain other
defendants dismissing
the
case without prejudice.
On October 18,
2021, plaintiffs
filed a motion
to alter or
amend the final
judgement and allow
a filing
of
a
second
amended
 
complaint.
The
Company
responded
on
November
1,
2021.
 
The
 
court
 
has
 
not
 
ruled
 
on
 
thisthe
 
motionplaintiffs’
motion.
 
to
dismiss.
Management believes the risk of material loss related to this matter to be remote.
 
19
Kraft Foods Global, Inc. et al. v.
United Egg Producers, Inc. et al.
 
As previously
 
reported, on
 
September 25,
 
2008, the
 
Company was
 
was named as
 
as one of
 
of several
defendants
 
in numerous
 
antitrust
cases involving
 
the United
 
States shell
 
egg
industry.
 
The Company
 
settled all
 
of these
 
cases, except
 
for the
 
the claims of
 
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
 
Food Global,
Inc., General
 
Mills, Inc., and
 
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
 
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
 
the United Egg
Producers animal-welfare guidelines and program
 
and program used by
the Company and many
 
many other egg
producers. The Egg
 
Egg Products Plaintiffs
 
Plaintiffs seek to
 
to enjoin the
 
the Company
and other
 
defendants from engaging
 
engaging in
antitrust violations
and seek
treble money
damages. The
parties filed
a joint
status report
on May
18, 2020.
On August
4, 2021,
by docket
entry,
the
court
instructed
the
parties
to
jointly
submit
a
second
status
report
to
the
court
that
included
a
proposed
schedule
for
preparing a final pretrial order. On
August 25, 2021, the parties filed a joint status report, and on
 
report on May 18, 2020, butAugust 26, 2021, the court, by
docket entry, informed the parties that the need to discuss issues was no longer necessary and that a scheduled August 30, 2021,
status hearing was stricken. No trial schedule has
yet been entered by
the court. 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
 
2019, a stipulation
for dismissal was filed with
 
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
 
present time, it is
 
it is not
possible to
 
estimate the amount
 
amount of
monetary exposure,
 
if any,
 
to the
Company
due to a range of
factors, including the following, among
 
among others: the matter is in
the early stages of preparing for
 
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.,
 
(i.e., injunction and
 
and treble
money damages).
State of Oklahoma Watershed Pollution
Litigation
On June 18,
 
18, 2005, the
 
the State
of Oklahoma
 
filed suit,
 
in the United
 
United States District
 
District Court for
 
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
 
its affiliate, Peterson Farms,
 
Peterson Farms, Inc.
and Simmons Foods,
 
Inc. The State of
 
State of Oklahoma
claims that through
 
the disposal of
chicken litter
 
litter the defendants
 
defendants have polluted
 
polluted the Illinois
 
Illinois River
Watershed.
 
This watershed
 
provides water
 
water to eastern
 
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
 
the litigation
began, Cal-Maine
 
Foods, Inc. purchased
100
% of the
 
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
 
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 above, the Company
is involved in
 
various other claims and litigation
 
and litigation incidental
to its business. Although
 
the
outcome of
 
these matters
 
cannot be determined
 
determined with
certainty,
 
management, upon the
 
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.
20
Note 1314 - 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 20202021 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
 
October 9, 2018, and a related
 
a related Prospectus Supplement
dated August 19,
2020,
each of which
 
which is on file
 
file with the
Securities and
 
Exchange Commission. The public
 
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
$
1,102,0001.1
.million. Pursuant to the Agreement, the Selling Stockholders reimbursed the Company $
551
 
$
551,000
.thousand.
2021
ITEM
 
2.
 
MANAGEMENT’S
DISCUSSION
AND
 
ANALYSIS
 
OF
 
FINANCIAL
 
CONDITION
 
AND
 
RESULTS
 
OF
OPERATIONS
The following
 
should be
 
read in
 
conjunction with
 
with Management’s
 
Discussion and
 
Analysis of
 
Financial Condition
 
and Results
of Operations
included in Part II
 
Item 7
of the
Company’s
 
Annual Report
on Form
10-K for
 
its fiscal year ended May 29,
 
year ended
May 30,
2020 (the2021
“2020
(the “2021 Annual Report”),
and
the accompanying
financial statements
and
notes included
in Part
II Item
8 of
the 2020
2021 Annual
Report and in
 
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
 
Act of 1934
 
1934 (the(the “Exchange
 
“Exchange Act”) relating
 
relating to our
 
our shell
egg
business,
 
including
 
estimated
 
future
 
production
 
data,
 
expected
 
construction
 
schedules,
 
projected
 
construction
 
costs,
 
potential
future
supply
 
of and
 
and demand
 
for
our
 
products,
potential
 
future
corn
 
and
��
soybean price
 
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
 
projected in the
 
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
 
The factors that
 
that could cause
 
cause actual results
 
results to
differ
 
materially from
 
those
projected in
 
in the
forward-looking
 
statements include,
 
among others,
 
(i) the
 
risk factors
 
set forth
 
in Part
 
I Item
 
1A of
 
the 20202021
Annual
Report
 
(ii)
the
 
risks
and
 
hazards
inherent
 
in
the
 
shell egg
 
business
(including (including
 
disease, pests,
 
weather
 
conditions,
and
potential
for
 
product
recall),
 
(iii) changesincluding
but
not
limited
to
the
current
outbreak
of
highly
pathogenic
avian
influenza
(HPAI)
affecting poultry
 
in the
 
demand forU.S., Canada
 
and marketother
 
prices ofcountries (iii)
 
shell eggschanges in
 
and feedthe demand
 
for and
market prices
of shell
eggs and
feed costs, (iv)
 
our ability to
 
to
predict
and
meet
 
demand
for
cage-free
 
and
other
specialty
 
eggs,
(v)
risks,
 
changes, or obligations
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
acquisition
not
to
 
be
met,
(vi)
risks
 
relating
to
the
 
evolving
COVID-19
pandemic,
including
without
limitation increased costs
 
and rising
inflation and interest
rates, and
(vii) adverse
 
results in pending litigation
matters.
 
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 basedbecause, while
 
are reasonable,we believe
 
there canthe assumptions
 
be no
assurance that
these forward-on which
lookingthe forward-looking
 
statements are
 
willbased are
 
provereasonable, there
 
to
can be
 
accurate.no assurance
 
that these
forward-looking statements will
prove to be accurate. Further,
 
forward-looking statements included herein are only made as of
 
includedthe respective dates thereof, or if
no
 
hereindate
 
areis
 
only
madestated,
 
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
intent
or
obligation
 
to update publicly
 
update
publicly these forward-looking statements,
whether because of
new information, future
events, or
otherwise.
GENERAL
Cal-Maine
 
Foods,
 
Inc.
(the
“Company,”
“we,”
“us,”
“our”)
 
is
 
primarily
 
engaged
 
in
 
the
 
production,
 
grading,
 
packaging,
marketing
 
and
 
distribution
 
of
 
fresh
 
shell
eggs.
eggs.
Our
operations
are
fully
integrated
 
under
one
operating
segment.
 
We
are
 
the
largest producer and distributor
 
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 in
 
to athe United States
 
diverse(“U.S.”). Our total
 
groupflock of approximately
 
customers, including42.7 million
layers
 
national and
 
regional grocery9.4
 
store chains,million
 
club stores,
companiespullets
 
servicingand
 
independentbreeders
 
supermarketsis
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
 
distributors,egg product consumers
in states across
the southwestern, southeastern, mid-western
and
mid-Atlantic regions of the U.S.
We
are a
member of
the Eggland’s
Best, Inc.
(“EB”) cooperative
and produce,
market, and
distribute EB
and Land
O'Lakes
branded
eggs,
both
directly
 
and
 
eggthrough
 
productour
 
consumersjoint
ventures
Specialty
Eggs,
LLC
and
Southwest
Specialty
Eggs,
LLC,
under
exclusive
license
agreements
 
in
 
states
across the southwestern, southeastern, mid-western and midAlabama,
 
-Atlantic regions of the United States.
Arizona,
 
OurFlorida,
 
Georgia,
Louisiana,
Mississippi
and
Texas
and
in
portions
of
Arkansas, California, Nevada,
North Carolina,
Oklahoma and South
Carolina.
We
also have an
exclusive license in
New York
City in addition to exclusivity in select New York metropolitan areas, including areas within New Jersey and Pennsylvania.
Our operating
 
results
are
 
materially
impacted
 
by
market
 
prices for
 
eggs
and
 
feed
grains
 
(corn
 
and
soybean
 
meal),
which
 
are
highly
 
volatile,
 
independent
 
of
 
each
 
other,
 
and
 
out
 
of
 
our
 
control.
 
Generally,
 
speaking,
higher
 
market
 
prices
 
for
 
eggs
 
have
 
a
positive
 
positive
impact
 
on
 
our
 
financial
 
results
 
while
 
higher
 
market
 
prices
 
for
 
feed
 
grains
 
have
 
a
 
negative
 
impact
 
on
 
our
 
financial
results.
results. Although we
 
use a
variety of pricing
 
pricing mechanisms in pricing
 
agreements with our customers,
 
customers, we sell the majority
 
most of our
conventional
 
our conventional
shell
eggs
 
based
on
 
formulas
that
 
take
into
account,consider,
 
in
varying
 
ways,
independently
 
quoted
regional
 
wholesale market
market prices for
 
shell
eggs or formulas
 
or
formulas related
to our
 
costs of
production which
 
include the cost
 
of corn and soybeanthe
 
meal. As
an examplecost of
 
of the volatilitycorn
 
and
soybean meal.
As
an
example of
the
volatility in the market
prices of shell
eggs, the UrnerUrner-Barry White
 
-Barry Southeastern
Large, Southeast Regional Large
Egg Market Price
per dozen eggs
(“UB southeastern
southeast large index”) in
for the first three quarters of fiscal year 2020
2022 ranged from a
low of $0.62
$1.00 in July 2019
June 2021 to a high
of $3.18
$2.06 in March 2020.February 2022.
22
Generally,
 
we purchase
 
primary feed
 
ingredients, mainly
 
mainly corn and
 
and soybean meal,
 
meal, at current
 
current market prices.
 
prices. Corn and
 
and soybean
meal
 
are
 
commodities
 
and
 
are
 
subject
 
to
 
volatile
 
price
 
changes
 
due
 
to
 
weather,
 
various
 
supply
 
and
 
demand
 
factors,
transportation and storage costs, speculators, and agricultural, energy
and trade policies in the U.S. and internationally.
 
An important competitive advantage for Cal-Maine Foods is our ability to meet
our customers’ evolving needs with a favorable
product
mix
of
conventional
and
specialty
eggs,
including
cage-free,
organic
and
other
specialty
offerings,
as
well
as
egg
products.
We
have
also
enhanced
our
efforts
to
provide
free-range
and
pasture-raised
eggs
that
meet
consumers’
evolving
choice
preferences.
While
a
small
part
of
our
current
business,
the
free-range
and
pasture-raised
eggs
we
produce
and
sell
represent attractive offerings to a subset
of consumers, and therefore our customers, and help
us continue to serve as the trusted
provider of quality food choices.
Specialty shell
 
eggs have
 
been a
 
significant and
 
growing portion
 
of the
 
market. In
 
recent years,
 
a significant
 
number of
 
large
restaurant chains, food service companies
 
service companies and
grocery chains, including our
 
our largest customers,
announced goals to
 
transition to
an
exclusively
 
cage-free
egg
 
supply
chain
 
by
specified
 
future
dates.
 
Additionally,
 
several
states,
 
representing 23%
 
approximately
24% of the
U.S.
21
total population according to the 2020 U.S. Census, Bureau,
have passed legislation requiring that all eggs
 
sold in those states must be
states
must
be
cage-free
 
eggs
by
 
specified
 
future
dates,
 
and
 
other
states
 
are
 
considering
 
such
legislation.
 
In
California
and
Massachusetts,
which represent about 14% of the total U.S. population according to the 2020
U.S. Census, cage-free legislation
went into effect January
1, 2022. For additional
 
information, see the 2021
 
the
2020 Annual
Report, Part I,
 
Item 1, “Business –
Specialty
Eggs,”
“Business
 
–
Growth
 
Strategy”
and
 
“Business
–
Government
 
Regulation,”
and
 
the fifth
first
risk
 
factor in
Part I, Item 1A, “Risk Factors.”
 
in
Part
I
Item
1A,
“Risk Factors” under the sub-heading “Legal and Regulatory Risk Factors.”
Retail
 
sales
 
of
 
shell
 
eggs
 
historically
 
have
 
been
 
highest
 
during
 
the
 
fall
 
and
 
winter
 
months
 
and
 
lowest
 
during
 
the
 
summer
months. Prices
 
for shell
 
eggs fluctuate
 
in response
 
to seasonal
 
demand factors
 
and a
 
natural increase
 
in egg
 
production during
the
 
spring
 
and
 
early
 
summer.
 
Historically,
 
shell
 
egg
 
prices
 
tend
 
to
 
increase
 
with
 
the
 
start
 
of
 
the
 
school
 
year
 
and
 
tend
 
to
 
be
highest
 
prior
 
to
 
holiday
 
periods,
 
particularly
 
Thanksgiving,
 
Christmas
 
and
 
Easter.
 
Consequently,
 
and
 
all
 
other
 
things
 
being
equal, we would expect to
 
expect to experience
lower selling prices, sales volumes
 
volumes and net
income (and may incur
 
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
 
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 wayWe
 
we have
 
done this
is by providingprovided
 
food
assistance
 
to
those
 
in need.
 
Cal-Maineneed
by
Foods has donated
donating
 
approximately 1.5 million
679
thousand
 
dozen eggs in the
 
first threeeggs
 
quarters of to
date
in
fiscal 2021.
2022.
 
We
 
believe
we
are
taking
 
all
reasonable
 
precautions
 
in
 
the
 
management
 
of
 
our
operations
in
response
 
to
the
COVID-19
 
pandemic. Our top
 
Ourpriority is the
 
top priorityhealth and safety
 
isof our
 
the
health and
safety of
our employees,
who work
 
hard every
each day
 
day to produce
 
produce eggs for
 
for our customers.
 
customers. As part
 
part of the
 
the nation’s
 
food
supply,
 
we work
 
in a critical
 
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,
andbelieve
 
we
 
have
 
stricta
 
sanitationspecial
 
protocolsresponsibility
 
andto
 
biosecuritymaintain
 
measuresour
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
 
with
restricted
access
 
to
visitors.
 
All
non-essential
corporate
travel
has
been
suspended.
There
are
 
no
known
indications
that
indications that COVID-19 affects henschickens or can be transferred through the food supply.
 
We
 
continue to
proactively monitor
 
and manage
operations during
 
the COVID-19 pandemic, including
 
including additional
related costs
that
we incurred or
 
or may
incur in
the future.
 
In the thirty-nine weeks endedThe pandemic
 
February 27, 2021,had a
 
we spent $1.8negative impact
 
million (excluding
medical insuranceon our
 
claims) relatedbusiness through
 
to thedisruptions in
 
pandemic, ofthe
supply chain such as increased costs
 
which $397and limited availability of packaging supplies,
 
thousand wasand increased labor costs and medical costs
and, more recently, inflation.
spent in
In
 
the third
 
quarterquarters of
 
fiscal 2021.2022
and 2021,
we spent
approximately $534
thousand and
$397 thousand
(excluding medical
insurance claims)
related to
the pandemic
and its
effects,
respectively.
 
The
majority
 
of
such these
 
expenses in
 
forfiscal 2022
 
bothresulted
from additional labor
 
periodscosts and increased
 
werecost of packaging
materials, primarily reflected
in cost of
sales. In
fiscal 2021, most
of
these
expenses
 
related
 
to
 
additional
 
labor
costs,
 
primarily
 
reflected
 
in
 
cost
 
of
 
sales.
 
Medical
insurance
 
claims
 
related
 
to
COVID-19 paid during the third quarter of
 
COVID-19fiscal 2022 were an additional $424 thousand as
 
compared to $322 thousand paid in
the comparable quarter in fiscal 2021.
during
23
For
 
the
 
thirty-nine
 
weeks
 
ended
 
February2022
 
27,and
 
2021,
we
spent
approximately
$1.8
million
(excluding
medical
insurance
claims)
related to
the pandemic
and its
effects. The
majority of
these expenses
in fiscal
2022 resulted
from additional
labor costs
and
increased
cost
of
packaging
materials,
primarily
reflected
in
cost
of
sales.
In
fiscal
2021,
most
of
these
expenses
related
to
additional labor costs, primarily reflected in cost of sales. Medical insurance claims related to COVID-19 paid during the thirty-
nine
weeks
ended 2022
 
were
 
an
 
additional $1.6
 
$1.1
million of which $322 thousand were incurred in the third fiscal quarter of
 
2021.as compared
 
to $1.1
million paid
in
the comparable
period
in
fiscal
2021.
EXECUTIVE OVERVIEW
For the third
 
third quarter
of fiscal
 
2021,
2022, we recorded
 
a gross profit
 
profit of $91.6 million
compared to $47.5
 
million comparedfor the
 
to $49.8
million for
the same period
of
fiscal
 
2020.2021,
 
Demand forwith
the
increase
due
primarily
to
higher
shell
egg
prices
and
increased
volume
of
specialty
eggs.
Our
total
dozens sold
increased 2.8%
to 287.7
million dozen
 
shell eggs
 
remained favorable,
primarily atfor
 
the retailthird
 
level as consumersquarter of
 
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%fiscal 2022
 
compared to the
 
same period in279.7
million
dozen for
 
the calendar year.same
 
Our totalperiod of
fiscal
2021. For
the third
quarter of
fiscal 2022,
conventional dozens
 
sold increased
3.1% to 279.7 milliondecreased
 
dozen shell eggs for the5.2%
 
third quarter of fiscal 2021and
specialty dozens sold increased 24.1%
 
as compared to 271.3 millionthe same
 
dozen for the same period
ofquarter in fiscal 2020.2021. Specialty
 
This is due to an increase in specialty egg dozens sold of 16.2%.increased as more
cage-free facilities came into production, retailers continue shift to selling cage-free products and cage-free legislation went into
full effect in California on January 1, 2022.
The
 
daily
 
average
 
price
 
for
 
the
 
UB
 
southeasternsoutheast
 
large
 
index
 
for
the
 
third
 
quarter
 
of
 
fiscal
 
20212022
 
increased
 
4.3%46.8%
 
from
 
the
same
comparable period
 
in
the
 
prior
year.
 
Our
net
 
average
 
selling price
 
per
dozen
 
for
 
the
third
 
quarter
of
fiscal
2022
was
$1.612
compared
to $1.246
in the
prior-year
period.
Hen numbers
reported by
the USDA
as of
March 1,
2022, were
322.7 million,
which is
approximately 5.4
million less
hens than
the comparable
period of
the prior
year.
The USDA
also reported
that the
hatch
from
October
2021
through
February
2022
decreased
5.5%
compared
to
the
prior-year
period.
As
of
March
1,
2022,
table-type eggs in incubators totaled 55.4 million, a decrease of 7.6% versus the prior-year period.
We
are
closely
monitoring the
recently reported
outbreaks of
highly pathogenic
avian influenza
(“HPAI”).
According
to
the
U.S.
Centers for
Disease Control
and Prevention,
these detections
.
There
have been no positive tests for HPAI
at any Cal-Maine Foods’ owned or contracted production facility to date. As
of March 28,
2022, the USDA
division of Animal
and Plant Health
Inspection Service (“APHIS”),
reported that approximately
11.5 million
commercial layer
hens or
about 3.6%
of the
table egg
layer flock
based on
February 2022
reported layer
numbers, have
been
depopulated due to
HPAI.
Pullets impacted comprise
approximately 830,000, or
about 0.7 percent
of the February
2022 pullet
inventory. We
believe we have implemented and continue to maintain robust biosecurity programs across our
locations. We are
also working
closely with
federal, state
and local
government officials
and focused
industry groups to
mitigate the
risk of
this
and future outbreaks and effectively manage our response, if needed.
Our farm production costs
per dozen produced for
the third quarter of
fiscal 2022 increased 16.9%,
or $0.132, compared to
the
third quarter
 
of fiscal
 
20212021. This
increase was
 
$1.246primarily due
 
to increased
prices for
feed ingredients.
For the
third quarter
of
fiscal 2022, the average
Chicago Board of Trade
(“CBOT”) daily market price
was $6.13 per
bushel for corn and
$412 per ton
for soybean meal, representing an increase of 23.5% and a decrease of 2.5%, respectively, compared to the average daily CBOT
$1.236prices for
the comparable
period in
the prior
 
year period.year.
 
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.
OurOther farm
 
production costs
 
per dozen
producedcosts for
 
the third
 
quarter of
 
fiscal 2022
increased
11.8% versus the comparable period in the prior fiscal year, driven by higher flock amortization and facility expense.
Effective
May
30,
2021,
 
increased 7.0%we
 
or $0.051acquired
 
compared tothe
 
third
quarter ofremaining
 
fiscal 2020.50%
 
This increasemembership
 
was primarilyinterest
 
due to higherin
Red
River
Valley
Egg
Farm,
LLC
(“Red
River”). Red River owns and operates a specialty shell egg production complex with approximately 1.7 million cage-free laying
hens, cage-free
pullet capacity,
 
feed costsmill,
processing plant,
related offices
and outbuildings
and related
equipment located
on
approximately 400
acres near
Bogata, Texas.
For additional
information, see
of the
Notes to
Condensed
Consolidated Financial Statements included in this Quarterly Report.
During October
2021, we
announced that
our Board
of Directors
approved a
strategic investment
that will
specialize in
high-
value
commercial
product
solutions
targeting
specific
needs
 
in
the
 
third quarterfood
industry.
The
initial
focus
will
include
hard-cooked
eggs.
The
new
entity,
located
in
Neosho,
Missouri,
will
operate
as
MeadowCreek
Foods,
LLC
(“MeadowCreek”).
We
will
capitalize MeadowCreek with
up to $18.5
million in debt
and equity to
purchase property and
equipment and to
fund working
capital, and we
will retain a
controlling interest in
the venture. We
will serve as
the preferred provider
to supply specialty
and
conventional
eggs
that
MeadowCreek
needs
to
manufacture
egg
products.
MeadowCreek’s
marketing
plan
is
designed
to
extend
our
reach
in
the
foodservice
and
retail
marketplace
and
bring
new
opportunities
in
the
restaurant,
institutional
and
industrial food products arenas.
Also, during
October 2021,
we announced
that our
Board of
 
fiscal 2021Directors approved
 
compareda $23.0
million capital
project to
 
expand our
cage-free egg production at our
Okeechobee, Florida, production facility.
The project is designed
to include the construction of
two cage-free layer houses and one cage-free
pullet house with capacity for approximately 400,000
cage-free hens and 210,000
pullets, respectively.
Construction has
commenced, with
first pullet
placements planned
by mid-May
2022 and
the first
layer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24
22house planned to be finished by October 1, 2022, with project completion expected by February 1, 2023. The Company plans to
same periodfund the project through a combination of available cash on hand, investments and operating cash flow.
Effective December 5,
2021, we made
an additional investment
in our joint
venture Southwest Specialty Eggs,
LLC to acquire
warehouse
and
distribution
capability
to
expand
Southwest
Specialty
Eggs,
LLC’s
customer
base
 
in the
 
prior fiscalsouthern
California, Arizona and Nevada
 
year duemarkets. This strategic investment
 
is proving to increased
 
prices forbe incrementally
 
corn andaccretive as additional
 
soybeans causedcases
of
 
by increased
export demand,
global
weather
conditionsspecialty
 
and
 
geopoliticalcage-free
 
issues.eggs
 
Otherbegan
 
farmdistribution
 
productionthrough
 
coststhe
warehouse
in
early
December
as
customers
prepared
 
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.
California’s January 1, 2022 cage-free mandate.
RESULTS OF
OPERATIONS
The
following
table
sets
 
forth,
for
the
periods
 
indicated,
certain
items
from
 
our
Condensed
Consolidated
Statements
 
of Income
Operations expressed as a percentage of net sales.
13Thirteen Weeks Ended
39Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
February 29, 202026, 2022
February 27, 2021
February 29, 2020
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
80.8
%
86.8
%
85.688.0
%
87.7
%
93.5Gross profit
19.2
%
Gross profit
13.2
%
14.412.0
%
12.3
%
6.5
%
Selling, general and administrative
11.0
%
13.3
%
12.812.4
%
13.6
%
14.7
%
Loss(Gain) loss on disposal of fixed assets
0.1(0.1)
%
0.1
%
—(0.2)
%
0.1—
%
Operating income (loss)
8.3
%
(0.2)
%
1.5(0.2)
%
(1.3)
%
(8.3)
%
Total other income, net
2.8
%
3.4
%
1.8
%
1.5
%
Income before income taxes
11.1
%
3.2
%
1.6
%
0.2
%
Income tax expense (benefit)
2.8
%
(0.5)
%
(0.2)
%
(0.4)
%
Net income
8.3
%
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
%
4.01.8
%
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
Total net
sales for the third quarter of
fiscal 2022 were $477.5 million compared
to $359.1 million for the same
period of fiscal
2021.
Net shell egg
sales represented 97.3%
and 97.5% of
total net sales
 
for the
 
third quarterquarters of
 
of fiscal 2022 and
 
2021, wererespectively.
Shell
 
$359.1 million, anegg
 
increase sales
classified
as
“Other”
represent
sales
of
 
$13.5 million, or 3.9%,hard-cooked
 
compared toeggs,
hatching
eggs
and
other
miscellaneous
products
included with our shell egg operations.
Total
 
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 quarterthirty-nine weeks
 
ended February 27,
26, 2022
2021
were 279.7 $1,184.2
million, compared
to 271.3 $999.2
million for the same period
 
the
comparable period of fiscal 2020.
2021.
Net
 
shell
 
egg
 
sales
 
ofrepresented
 
$350.0 million97.2%
 
and
 
$336.4 million
made
up
approximately
97.5% and
97.3%97.4%
 
of
 
net
sales for
the
third
quarters
ended February 27, 2021
and February 29, 2020,
respectively. Thetotal
 
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
 
27,26,
 
20212022
 
were
$999.2 million,
an
increase
of
$100.9 million,
or 11.2%,and
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
Total
conventional
dozens
 
sold
 
for
 
the
 
thirty-ninefirst,
 
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, 2021second
 
and
 
Februarythird
 
29,
2020,
respectively.
These
revenuesquarters
 
were
 
$25.7 183.9
million,
192.1
million
and
192.5
million,
respectively.
Total
specialty
dozens
sold
 
for
 
the
 
thirty-ninefirst,
 
weekssecond
 
endedand
 
Februarythird
 
27,quarters
 
2021,were
 
compared70.8
 
to
$24.2 million, for the same period in fiscal 2020,
 
primarily due to higher selling prices slightly offset by decreased volume.77.4
million
and
95.1
million, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23
25
The table below presents an analysis of our conventional and specialty shell egg
sales (in thousands, except percentage data):
13Thirteen Weeks Ended
39Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
February 29, 202026, 2022
February 27, 2021
February 29, 2020
Total net sales
$
477,485
$
359,080
$
345,5881,184,195
$
999,189
Conventional
$
898,276280,633
Conventional60.4
%
$
203,189
58.0
%
$
210,329685,678
62.559.6
%
$
560,297
57.5
%
$Specialty
518,898182,945
59.439.4
%
Specialty
145,210
41.5
%
125,019462,319
37.240.2
%
408,537
42.0
%
352,118
40.3
%
Egg sales, net
463,578
99.8
%
348,399
99.5
%
335,3481,147,997
99.799.8
%
968,834
99.5
%
871,016Other
99.71,158
0.2
%
Other
1,583
0.5
%
1,0282,682
0.30.2
%
4,619
0.5
%
3,050
0.3
%
Net shell egg sales
$
464,736
100.0
%
$
349,982
100.0
%
$
336,3761,150,679
100.0
%
$
973,453
100.0
%
$
874,066
100.0
%
Net shell egg sales as a
percent of total net sales
97.3
%
97.5
%
97.397.2
%
97.4
%
97.3
%
Dozens sold:
Conventional
192,511
66.9
%
203,070
72.6
%
205,307568,511
75.770.0
%
599,625
73.4
%
599,788Specialty
76.295,140
33.1
%
Specialty
76,645
27.4
%
65,970243,310
24.330.0
%
217,735
26.6
%
186,939
23.8
%
Total dozens sold
287,651
100.0
%
279,715
100.0
%
271,277811,821
100.0
%
817,360
100.0
%
786,727
100.0
%
Net average selling price per
dozen:
Conventional
$
1.458
$
1.001
$
1.0241.206
$
0.934
Specialty
$
0.865
Specialty1.923
$
1.895
$
1.8951.900
$
1.876
$
1.884
All shell eggs
$
1.612
$
1.246
$
1.2361.414
$
1.185
$Egg products sales:
1.107Egg products net sales
12,749
9,098
33,516
25,736
Pounds sold
15,947
15,569
47,225
46,565
Net average selling price per
pound
0.799
0.584
0.710
0.553
Shell egg net sales
Third Quarter – Fiscal 2022 vs. Fiscal 2021
-
In
the
third
quarter of
fiscal 2022,
conventional
egg
sales
increased
$77.4
million,
or
38.1%,
compared
to
the
third
quarter of fiscal
2021, primarily due
to the increase
in price for
conventional shell eggs,
partially offset
by a decrease
in volume
of conventional
eggs sold.
Changes in
price resulted
in a
$88.0 million
increase and
the change
in volume
resulted in a $10.6 million decrease in net sales, respectively.
-
We believe prices for conventional eggs were positively impacted by a better alignment of the conventional production
layer
hen
flock
and
customer
and
consumer
demand.
According
to
reports
from
the
USDA,
the
average
number
of
hens producing
white and
brown conventional
eggs for
February 2022
decreased 31.7
million, or
13.1%, versus
the
prior-year
comparable period.
USDA Agriculture
Marketing
Service reported
shell
eggs
broken for
foodservice and
further processing
increased 7.9% compared
to the
comparable prior-year
period. We
believe lower
conventional egg
prices in the prior-year period were primarily tied to a surplus of conventional eggs entering the retail channel from the
foodservice channel exceeding demand during this phase of the pandemic.
-
Conventional
 
egg
volume
sales
decreased
5.2%.
We
believe
many
consumers
have
evolved
their
preferences
to
purchase higher-priced specialty eggs for at-home meal preparation due to the perceived health and
welfare benefits of
specialty eggs, various state laws
mandating the sale of cage-free
and the public commitments by
most retailers to sell
more cage-free
products. Per
Information Resources,
Inc. (“IRI”),
Total
US –
Multi Outlet,
conventional white
shell
egg
dozens
sales
decreased
13.7%
during
the
latest
13
weeks
ended
February
27,
2022
versus
the
prior-year
comparable period.
-
Specialty egg sales increased
$37.7 million, or 26.0%,
in the third quarter
of fiscal 2022 compared
to the third quarter
of
fiscal
2021,
primarily
due
to
a
24.1%
increase
in
the
volume
of
specialty
eggs
 
include allsold,
 
shell eggwhich
 
sales notresulted
 
specifically identifiedin
 
as specialtya
 
shell egg$35.0
million increase in
 
net sales. ComparingPer
 
IRI, Total
US – Multi
Outlet for the third
quarterslatest 13 weeks
 
ended February 27, 2021 and
 
February 29, 2020,2022, cage-
free eggs
 
conventional egg dozens sold
 
decreased 1.1%(including free-range,
pasture-raised and
organic) increased
21.3%. We
believe this
increase in
26
demand is due
to California’s
cage-free mandate going
into-effect January
1, 2022,
as well
as more retailers’
shifting
to selling more cage-free products.
-
Our specialty egg
sales in
the third quarter
of fiscal
2022 versus
the prior-year
period benefitted from
our acquisition
of
the remaining
50% membership
interest in
Red River,
which helped
drive our
cage-free egg
sales. Our
cage-free
sales
also
benefitted
from
our
continued
investment
in
expanded
cage-free
capabilities
as
additional
cage-free
production capacity came online during the quarter. Cage-free egg sales for the first, second and third quarters of fiscal
2022 were 22.3%, 22.4% and 24.1% of our total net shell egg sales, respectively.
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
-
For
the
 
average selling
pricethirty-nine
 
perweeks
 
dozenended
 
decreasedFebruary
 
2.2%26,
2022,
conventional
egg
sales
increased
$125.4
million
or
22.4%
compared
 
to
 
$1.001the
 
fromsame period
of
fiscal 2021,
primarily
due
to
the
increase in
price,
partially
offset
by
a
decrease in
volume
of
conventional
eggs
sold.
Changes
in
price
resulted
in
a
 
$1.024.154.6
 
Comparingmillion
increase
and
change
in
volume
resulted in a $29.1 million decrease in net sales, respectively.
-
We believe prices for conventional eggs were positively impacted by a better alignment of the conventional production
layer hen flock and customer and consumer demand.
USDA Agriculture Marketing Service reported shell eggs broken
for
foodservice
and
further
processing
increased
10.2%
compared
to
the
comparable
prior-year
period.
We
believe
lower conventional
egg prices
in the
prior-year period
were primarily
tied to
a surplus
of conventional
eggs entering
the retail channel from the foodservice channel exceeding demand during this phase of the pandemic.
-
The decrease in
volume of conventional
eggs sold was
primarily due to
elevated retail demand
during the first
half of
fiscal 2021
due to
consumers’ preferences
to purchase
eggs for
in-home meal
preparation due
to the
pandemic. We
saw this consumer
preference begin to
shift in the
fourth quarter of
fiscal 2021 as
consumers began to
resume out-of-
home
dining
and
prepare
fewer
meals
at
home.
Per
Information
Resources,
Inc.
(“IRI”),
Total
US
–
Multi
Outlet,
conventional white shell egg dozens sales decreased 12.6% during the latest 39
weeks ended February 27, 2022 versus
the prior-year comparable period.
-
Specialty egg sales increased $53.8
million, or 13.2%, for the
thirty-nine weeks ended February 26, 2022
compared to
the same period of
fiscal 2021, primarily due
to an 11.7%
increase in the volume
of specialty dozens sold
and a slight
increase in specialty egg prices. Changes in price resulted in a $5.8 million increase and change in volume resulted in a
$48.0 million increase in net sales,
respectively. We
also benefitted from our additional cage-free
production capacity.
Cage-free egg sales for the thirty-nine weeks ended February 26, 2022 were 23.0% of our total net shell egg sales.
Egg products net sales
Third Quarter – Fiscal 2022 vs. Fiscal 2021
-
Egg
products
net
sales
increased
$3.7
million
or
40.1%
for
the
third
quarter
of
fiscal
2022
compared
to
the
same
period of fiscal 2021,
primarily due to a
36.8% selling price increase,
which had a $3.4
million positive impact on
net
sales.
-
Selling prices for egg products in
the third quarter of fiscal 2021
were negatively impacted by a decline in
foodservice
demand due
to the
pandemic. Our
egg products
net average
selling price
increased in
the third
quarter of
fiscal 2022
compared to
the same
period in
fiscal 2021
as foodservice
channel demand
has begun
to shift
more to
pre-pandemic
levels.
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
-
Egg products
net sales
increased $7.8
million or
30.2%, primarily
due to
a 28.4%
selling price
increase compared
to
the first thirty-nine weeks of fiscal 2021, which had a $7.4 million positive impact on net sales.
-
Our egg products
net average selling
price increased in
the thirty-nine weeks
end February 26,
2022, compared to
the
same
period
in
fiscal
2021
as
foodservice
channel
demand
has
begun
to
shift
more
towards
pre-pandemic
levels.
Selling
prices
for
egg
products
in
 
the
 
thirty-nine
 
weeks
 
ended
 
February
 
27,
 
2021
 
and
Februarywere
 
29,negatively
 
2020,impacted
 
conventionalby
 
shella
decline in foodservice
 
egg
dozens
sold
remained
relatively
flat
while
demand during the
 
averagemore restrictive phases
 
selling
price
per
dozen
increased 8.0%
to $0.934 from $0.865.
Specialty
eggs,
which
include nutritionally
enhanced,
cage-free,
organic
of governmental 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 higherbusiness shutdowns 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
costspandemic.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
27
24COST OF SALES
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
%
CostCosts of sales for
 
the third quarter of
 
fiscal 2021 was2022 were $385.9
million compared to $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 inof fiscal
2021. For the
 
the priorthirty-nine weeks ended
 
year.February 26, 2022
 
Otherand February 27,
2021, total cost
of sales were
$1,042.2 million and
$876.5 million, respectively.
Cost of
sales consists
of costs
directly related
to producing,
processing and
packing shell
eggs, purchases
of shell
eggs from
outside producers, processing and packing of liquid and frozen egg products and other non-egg costs. Farm production costs are
those costs incurred
at the egg
production facility,
including feed, facility,
hen amortization, and
other related farm
 
production
costs.
The following table presents the key variables affecting our cost of sales (in thousands, except cost per dozen data):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26,
2022
February 27,
2021
%
Change
February 26,
2022
February 27,
2021
%
Change
Cost of Sales:
Farm production
$
239,389
$
190,883
25.4
%
$
668,855
$
531,877
25.8
%
Processing, packaging, and warehouse
77,116
63,640
21.2
211,649
187,014
13.2
Egg purchases and other (including
change in inventory)
59,135
50,443
17.2
133,968
137,001
(2.2)
Total shell eggs
375,640
304,966
23.2
1,014,472
855,892
18.5
Egg products
10,263
6,597
55.6
27,749
20,565
34.9
Total
$
385,903
$
311,563
23.9
%
$
1,042,221
$
876,457
18.9
%
Farm production costs (per dozen
produced)
Feed
$
0.562
$
0.467
20.3
%
$
0.546
$
0.422
29.4
%
Other
$
0.350
$
0.313
11.8
%
$
0.350
$
0.318
10.1
%
Total
$
0.912
$
0.780
16.9
%
$
0.896
$
0.740
21.1
%
Outside egg purchases (average cost per
dozen)
$
1.75
$
1.26
38.9
%
$
1.57
$
1.23
27.6
%
Dozens produced
264,433
248,130
6.6
%
757,677
731,205
3.6
%
Percent produced to sold
91.9%
88.7%
3.6
%
93.3%
89.5%
4.2
%
Farm Production
Third Quarter – Fiscal 2022 vs. Fiscal 2021
-
Feed
 
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
decreasedincreased 20.3%
 
in
 
the
 
third
 
quarter
 
of
 
fiscal
 
2022
compared
to
the third
quarter of
fiscal 2021.
This increase
was primarily
due
to
increased prices
for
corn, our
primary feed
ingredient. For
the
third
quarter
of
fiscal 2022,
the
average
daily
Chicago
Board
of
Trade
(“CBOT”) market
price
was
$6.13 per
bushel
for
corn representing an increase of 23.5 percent compared to the average
daily CBOT prices for the third quarter of fiscal
2021.
-
Other farm
production costs
increased due
to higher
flock amortization,
primarily from
an increase
in our
cage-free
production, which has
higher capitalized costs. Also,
our higher feed
costs, which began to
rise in our
third quarter of
fiscal 2021, are capitalized in our flocks during pullet production and increased our amortization expense.
-
We had higher facility expense as more cage-free facilities came into production.
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
-
Feed
costs per
dozen
produced
increased
29.4%
in
the
thirty-nine weeks
ended
February 26,
2022
compared
to
the
same period
of fiscal
2021, primarily
due to
higher feed
ingredient prices
resulting from
weather-related shortfalls
in
production and yields, which have placed additional pressure on domestic supplies.
-
Other farm
production costs
increased due
to higher
flock amortization,
primarily from
an increase
in our
cage-free
production,
which
has
higher
capitalized
costs.
Also,
higher
feed
costs,
which
began
to
rise
in
our
third
quarter
of
fiscal 2021, are capitalized in our flocks during pullet production and increased our amortization expense.
28
-
We had higher facility expense as more cage-free facilities came into production.
Processing, packaging, and warehouse
Third Quarter – Fiscal 2022 vs. Fiscal 2021
-
Cost of
packaging materials
increased 17.7%
compared to
the third
quarter of
fiscal 2021
as supply
chain constraints
initially
caused
by
the
pandemic
increased
costs
for
packaging
products
and
manufacturers
implemented
pandemic
surcharges.
Costs also increased due to rising inflation.
-
Labor costs increased
16.3% due to
wage increases in
response to labor
shortages, primarily due
to the pandemic
and
its effects.
-
Dozens
processed
increased
6.6%
 
compared
 
to
 
the
 
samethird
 
periodquarter
of
fiscal
2021,
which
resulted
 
in
 
fiscala
 
2020$4.5
million
increase in costs.
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
-
Cost of
packaging materials
increased 10.8%
compared to
the thirty-nine
weeks ended
February 27,
2021 as
supply
chain
constraints
initially
caused
by
the
pandemic
increased
costs
for
packaging
products
and
manufacturers
implemented pandemic surcharges.
Costs also increased due to rising inflation.
-
Labor costs increased
15.3% due to
wage increases in
response to labor
shortages, primarily due
to the pandemic
and
its effects.
-
Dozens processed increased 3.2%
compared to the thirty-nine
weeks ended February 27,
2021, which resulted in
$6.1
million increase in costs.
Egg purchases and other (including change in inventory)
Third Quarter – Fiscal 2022 vs. Fiscal 2021
-
Costs in
this category
increased primarily
due to
higher egg
prices, partially
offset
by the
decrease in
the volume
of
outside egg purchases, as our percentage of produced to sold increased to 91.9% from 88.7%.
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
-
Costs
in
this
category
decreased
primarily
 
due
 
to
 
improved
efficienciesthe
 
in
our
utilization
of
our
facilities
and
increased
volume
of
production.
Processing
costs
increased
due
to
a
3.2%
increasedecrease
 
in
 
the
 
volume
 
of
 
eggsoutside
 
processedegg
 
comparedpurchases,
as
our
percentage of produced to sold increased to 93.3% from 89.5%, partially offset by higher egg prices.
Looking
forward
throughout
the
rest
of
fiscal
2022,
market
indications
point
 
to
 
thehigher
 
samecorn
 
periodand
 
ofsoybean
 
theprices
 
priorand
 
year.higher
volatility tied to the Russia-Ukraine war and higher export demand.
GROSS PROFIT
 
The
Gross profit for the third quarter of fiscal 2022
 
cost
of
packaging
materials
increased 2.0%
was $91.6 million 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 $47.5 million for the
 
same period
of fiscal
2020.
Egg purchase 2021.
expenses decreased 10.2%,
The increase of $44.1 million was primarily due to the
decrease inhigher egg prices as well as the increased volume
of outside egg purchases,specialty eggs, partially
partially offset by
an increase
in the increased cost of these purchases.feed ingredients and processing costs.
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 millionGross profit
 
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-
ninethirty-nine weeks
 
ended February
 
27, 202126, 2022
 
increased $32.0was $142.0
 
million whichcompared
to $122.7
million for
the same
period of fiscal
2021. The increase
of $19.3 million
 
was primarily due
 
due to anhigher egg
 
increase in productionprices as well
as the increased
 
volume of
6.8%
compared tospecialty eggs, partially offset by the
same period increased cost 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 feed ingredients and processing costs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Index
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
29
26SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
39Selling,
general,
and
administrative
expenses
("SGA")
include
costs
of
marketing,
distribution,
accounting
and
corporate
overhead. The following table presents an analysis of our SGA expenses (in thousands):
Thirteen Weeks Ended
February 27, 202126, 2022
February 29, 202027, 2021
$ Change
% Change
Specialty egg expense
$
42,89817,318
$
35,99516,162
$
6,9031,156
19.27.2
%
Delivery expense
38,90516,440
39,34113,359
(436)3,081
(1.1)23.1
%
Payroll, taxes and benefits
31,52611,398
31,39110,195
1351,203
0.411.8
%
Stock compensation expense
2,7891,007
2,680964
10943
4.14.5
%
Other expenses
19,3766,523
23,0276,976
(3,651)(453)
(15.9)(6.5)
%
Total
$
135,49452,686
$
132,43447,656
$
3,0605,030
2.310.6
%
Third Quarter – Fiscal 2022 vs. Fiscal 2021
For the thirty-nine weeks
ended February 27, 2021,
SGASpecialty egg expense increased 2.3% to
$135.5 million from $132.4
million for the
same period-
in fiscal
2020.
Specialty egg
 
expense increasedwhich
 
$6.9 million,includes franchise
 
or 19.2%,fees, advertising
 
compared toand promotion
 
the samecosts generally
 
period of
the prior
year.
Specialty
egg
expense
typically
fluctuates
tracks with
 
specialty
egg
dozens
sold, volumes
 
which were
 
increased
16.5%up 24.1%
 
for
the
 
thirty-nine
weeks endedthird quarter
 
February 27,of fiscal
 
2021. Other
expenses decreased
$3.7
million or
15.9%2022 compared
 
to the
 
same period
 
inof fiscal
 
2020.2021.
 
This decrease Specialty dozens
sold to
outside distributors
including unconsolidated
affiliates, Specialty
Eggs, LLC
and Southwest
Specialty Eggs, LLC, increased which reduced related costs that we generally incur for specialty egg sales to retailers.
Delivery expense
-
The increased
delivery expense
is primarily
due to
the increase
in fuel
and labor
costs for
both our
fleet and
contract
trucking.
Payroll, taxes and benefits expense
-
The increase in payroll, taxes and benefits
is primarily due to the legal settlement paid in the secondincreased wages for standard annual
 
quarterraises as well as the
addition of fiscal 2020Red River. The accrual for anticipated performance-based bonuses also increased.
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
$ Change
% Change
Specialty egg expense
$
45,295
$
42,898
$
2,397
5.6
%
Delivery expense
44,771
38,905
5,866
15.1
%
Payroll, taxes and the first quarter of fiscalbenefits
32,640
31,526
1,114
3.5
%
Stock compensation expense
2,983
2,789
194
7.0
%
Other expenses
21,302
19,376
1,926
9.9
%
Total
$
146,991
$
135,494
$
11,497
8.5
%
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
returnSpecialty egg expense
-
Specialty egg
 
ofexpense which
 
brokerageincludes franchise
 
commissions
on
propertyfees, advertising
 
and promotion
 
casualtycosts generally
 
insurancetracks with
 
placementsspecialty
egg volumes
 
refundedwhich were
 
afterup 11.7%
 
finalfor the
 
reconciliationthirty-nine weeks end
 
ofFebruary 26,
 
all
brokerage service agreements.
Included in Other expenses is
approximately $551 thousand relating2022, compared
 
to the secondary public offering
 
completed in August 2020
by the wife of our late founder and a trust of which hissame period
 
daughters are beneficiaries. For more information, seeof
fiscal 2021.
Specialty dozens sold to outside distributors including unconsolidated affiliates,
Specialty Eggs, LLC and
Southwest Specialty Eggs,
LLC, increased which
reduced related costs
that we generally
incur for specialty
egg sales
to retailers.
Delivery expense
-
The increased
delivery expense
is primarily
due to
the increase
in fuel
and labor
costs for
both our
fleet and
contract
trucking.
Other expenses
-
The increase in other
expenses is primarily due
to property losses
incurred that were not
covered by insurance as
well
as increased premiums for property and casualty insurance programs.
– Related
Party Transaction of the Notes to Condensed
Consolidated Financial Statements included in this Quarterly Report.
30
OPERATING
 
INCOME (LOSS)
For
 
For the
 
third
quarter
 
of
fiscal
 
2021,2022,
 
we
recorded
 
an operating
income
of
$39.6
million
compared
to
operating
 
loss
of
 
$493
thousand for the same period of fiscal 2021.
For the thirty-nine weeks ended February 26, 2022, we recorded an operating loss of $2.2 million compared to
an operating
income of
$5.2 loss
of $13.2 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.
2021.
OTHER INCOME (EXPENSE)
 
Total
 
other
 
income
 
(expense)
 
consists
 
of
 
items
 
not
 
directly
 
charged
 
or
 
related
 
to
 
operations,
 
such
 
as
 
interest
 
income
 
and
expense, royalty income, equity in income or loss of unconsolidated entities,
and patronage income, among other items.
For
 
the
 
third
 
quarter
 
of
 
fiscal
 
2021,2022,
 
we
 
earned
 
$661205
 
thousand
 
of
 
interest
 
income
 
compared
 
to
 
$880661
 
thousand
 
for
 
the
 
same
period
of
fiscal
 
2020.2021.
 
For the thirty-nineThe
 
weeks ended Februarydecrease
 
27, 2021,resulted
 
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.
investment
balances.
The
Company
 
recorded
interest
expense
 
of $70
$126
 
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
 
$10.170
millionthousand
 
for
 
the
 
thirteenthird
quarters
ended
February
26,
2022
 
and
February
27,
2021,
respectively.
For the
thirty-nine weeks ended
February 26, 2022,
we earned
$702 thousand
of interest
income compared to
$2.4 million
for
the
same
period
of
fiscal
2021.
The
decrease
resulted
from
significantly lower
investment balances.
The
Company
recorded
interest
expense
of
$262
thousand
and
$205
thousand
for
the
 
thirty-nine
 
weeks
 
ended
 
February
 
27,26,
 
20212022
 
and
 
February
 
29,27,
2021, respectively.
2020,
Patronage dividends, which represent distributions from our membership in Eggland’s Best, Inc. were $10.1 million and $9.0
million for the thirteen and thirty-nine weeks ended February 26, 2022 and February 27, 2021, 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
2022, equity income
of unconsolidated entities
was $1.8 million
compared to $1.9
million in the
prior-year period.
For the thirty-nine weeks ended February 26, 2022, equity income of unconsolidated entities was $2.2 million compared to $1.9
million in the prior-year period.
Other, net for
the third quarter ended February 26, 2022,
was income of $1.1 million compared
to income of $537 thousand for
the same period of fiscal 2021.
Other, net
for the thirty-nine
weeks ended February
26, 2022, was
income of $8.2
million compared to
income of $1.5
million
for the
same period
of fiscal
2021.
The majority
of the
increase is
due
to our
acquisition of
the remaining
50% membership
interest in
Red River
as we
recognized a
$4.5 million
gain due
to the
remeasurement of our
equity investment,
along with
the
$1.4 million payment related to review and adjustment of our various marketing agreements.
INCOME TAXES
For the
 
third quarter
of fiscal
2021, equity
income of
 
unconsolidated entitiesfiscal 2022,
 
pre-tax income was $1.9
 
$53.0 million compared
 
to $1.4$11.8
 
million in
the
prior
year
period.
For
for the
 
thirty-ninesame period of
 
weeksfiscal
2021. We
 
ended
February
27,
2021,
equity
recorded income tax expense
 
of
unconsolidated
entities
was
$1.9
$13.6 million compared
to $537
thousand for
 
the priorthird quarter of
 
year period.fiscal 2022, which reflects
 
The increasean effective tax
 
for bothrate
of 25.6%.
 
periods isExcluding the impact of discrete
 
primarily dueitems related to a
 
to$5.0 million net tax
benefit recorded in the
 
increasethird quarter of fiscal
2021 in
egg selling prices positively impacting the profitability of our joint connection
 
ventures.
with the Coronavirus
 
Other,Aid, Relief, and
 
net forEconomic Security Act
 
(the third
quarter ended
February 27,
2021, was“CARES Act”),
 
income oftax expense
 
$537 thousand
compared to
income of
$79 thousandfor
for the samecomparable period of fiscal 2020.
2021 was $3.3 million, which reflects an adjusted effective tax rate of 27.9%.
Other, net
forFor 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 to26, 2022,
 
pre-tax income of $18.0
was $19.7
million compared
to $2.2
million for
the same
period of fiscal 2020.2021. We
 
We recorded
an income tax benefit of $1.7$2.9 million, which includes the discrete tax benefit of $8.3 million
as discussed
 
for the third quarter of fiscal 2021, which
includes thein
benefit
 
of $5.0
million described
above.
Excluding the
 
Notes to
Condensed Consolidated
Financial Statements
in this
Quarterly Report.
Excluding the discrete tax benefit,
income tax
 
expense
was $2.9
$5.3 million for
the
third
quarter
of
fiscal
2021
with
an
 
adjusted effective tax rate of 27.3%,
 
effectivecompared
to income tax
rate expense
 
of $934 thousand for the
 
24.6%.
Income
tax
expense
was
$4.3
million
for
the
comparable period of fiscal 2020, 2021,
which reflects an effective
 
tax rate of 23.7%.41.8%
excluding the impact of the $5.0 million discrete net tax benefit recorded in connection with the CARES Act.
 
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 anOur effective tax rate of 26.7%.
differs
 
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
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31
28purposes,
including
tax
exempt
interest
income,
certain
nondeductible
expenses
and
net
income
or
loss
attributable
to
our
noncontrolling interest.
NET INCOME ATTRIBUTABLE
TO CAL-MAINE FOODS, INC.
Net income attributable to Cal-Maine Foods, Inc. for the third quarter ended February 26, 2022, was $39.5 million, or $0.81 per
basic and
diluted common
share, compared
to net
income attributable
to Cal-Maine
Foods, Inc.
of $13.5
million or
$0.28 per
basic and diluted common share for the same period of fiscal 2021.
Net
income
attributable
to
Cal-Maine
Foods,
Inc.
for
the
thirty-nine
weeks
ended
February
26,
2022,
was
$22.7
million,
or
$0.46 per
basic and
diluted common
share, compared
to net
income attributable
to Cal-Maine
Foods, Inc.
of $6.3
million or
$0.13 per basic and diluted common share for the same period of fiscal 2021.
CAPITAL RESOURCES
AND LIQUIDITY
Our working capital at February
 
at February 27,
202126, 2022 was $422.0$401.3 million,
 
compared to $429.1$429.8 million at
 
million at May 30,29, 2021. The
 
2020. The calculation
of
working capital
 
is defined
 
as current
 
assets less
 
current liabilities.
 
Our current
 
ratio was
 
5.194.31 at
 
February 27,26,
 
2021,2022, compared
with 5.605.77 at May 30, 2020.
29, 2021.
We
 
had
 
no
 
long-term
 
debt
 
outstanding
 
at
 
February
 
27,26,
 
20212022
 
or
 
May
 
30,29,
 
2020.2021.
 
On
 
JulyNovember
 
10,15,
 
2018,2021,
 
we
 
entered
 
into
 
an
Amended and Restated Credit Agreement (the
“Credit Agreement”) with a $100.0five-year
term. The Credit Agreement amended
and
million Senior Secured Revolvingrestated
the
Company’s
previously
existing
credit
agreement
dated
July
10,
2018.
The
 
Credit Facility (the “Revolving Credit
 
Facility”).Agreement
 
Asprovides
for
an
increased senior secured
revolving credit facility
(the “Credit Facility”),
in an
initial aggregate principal
amount of up
to $250
million. As
of February 27, 2021,
26, 2022,
 
no amounts were
borrowed under
 
were borrowed
under the Revolving
 
Credit Facility.
 
We
 
have $4.1
 
million in outstanding
 
outstanding
standby
letters
 
of
credit,
 
issued
under
our
Revolving Credit
 
Facility
for
 
the
benefit
 
of
certain
 
insurance
companies.
 
Refer For
additional
information,
see
of
the
Notes
to
 
Note 10Condensed
 
of ourConsolidated
 
audited financialFinancial
 
statements
included in our 2020 Annual Report for further information regardingStatements
 
our long-term debt.included
in
this
Quarterly Report.
 
For the thirty-nine weeks
ended February 27, 2021
,26, 2022,
 
$14.720.8 million in net cash
was provided by operating
 
operating activities, compared to
$36.414.7 million provided
 
used in
by operating activities
 
for the comparable
 
comparable period
in fiscal
 
2020.2021. This is
 
is primarily
due to
 
an increase
inthe higher egg
selling prices partially offset by increased costs of feed ingredients compared to the prior yearprior-year period.
We
 
continue
to
 
invest
in
 
our
facilities,
 
with
$73.8 $49.2
 
million
used
 
to
purchase
 
property,
 
plant
and
 
equipment
for
 
the
thirty-nine
weeks
ended
February
 
27,
2021
26, 2022, compared
 
to $73.8 million
 
$94.6in the same
 
millionperiod of fiscal
2021. We
also acquired the
remaining
50%
membership
interest
 
in
 
theRed
 
sameRiver
 
periodduring
our
first
quarter
 
of
 
fiscal
 
2020.2022
for
$48.5
million.
 
Sales
 
and
 
maturities
 
of
investment
 
securities,
 
net
 
of
 
purchases,
 
were
 
$25.829.2
 
million
 
for
 
the
 
thirty-nine
 
weeks
 
ended
 
February
 
27,26,
 
20212022,
 
compared
 
to
$169.4 25.8
million
 
for the comparable
 
the
comparable period
in
fiscal
 
2020.2021.
 
We
 
received $5.8 million
$400
thousand
 
in
distributions
from
 
an
unconsolidated entities
duringentity in the first three quarters
of fiscal 20212022 compared to
$6.1 $5.8 million for the same peri
odperiod 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 2020.2021.
 
As of February 26, 2022, cash decreased $41.8 million
 
February 27,
since May 29, 2021,
cash decreased compared to a decrease of
 
$25.2 million
since May
30, 2020
compared to
a decrease
of $1.5
million during
the
same period of fiscal 2020.
2021.
We
 
continue to
 
take aggressive
steps to
position Cal-Maine
Foods to
meetmonitor the
 
expected futureincreasing demand
 
demand for cage-free
 
cage-free eggs.eggs and
 
We
haveto engage
 
investedwith our
 
approximately
$418
million
customers in
 
facilities,
equipment
and
related
operationsan effort
 
to achieve
 
expanda
smooth transition to meet their
 
our
announced commitment timeline for cage-free
 
productionegg sales. We
have invested approximately $502
million in facilities, equipment and related operations to expand our cage-free production
starting with
our first
facility in 2008.
2008. The
following table
presents material
construction projects
approved as
of February
27,
2021 26, 2022 (in thousands):
Project(s) Type
Projected
 
Completion
Projected Cost
Spent as of
February
February 27, 202126, 2022
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$
79,558130,918
15,074108,579
22,339
Cage-Free Layer & Pullet Houses
Fiscal 2023
24,752
6,262
18,490
$
141,582155,670
$
89,895114,841
$
51,687
40,829
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.
needs.
 
32
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
 
are those
estimates
 
made in
 
in accordance with
 
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
20202021 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).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33
30ITEM 3. QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
InThere have been no material changes in our exposure to market risk during the thirty-six weeks ended February 26, 2022 from
the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2021 Annual Report.
ITEM 4.
CONTROLS
AND
PROCEDURES
Disclosure Controls and Procedures
Our disclosure controls
and procedures are
designed to
provide reasonable assurance
that information required
to be disclosed
by us in the reports we file
or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time
periods specified
in the
 
future, weSecurities and
 
may decideExchange Commission’s
 
to raiserules and
 
capital throughforms. Disclosure controls
 
offerings ofand procedures
 
our Common
Stock, additional
securities convertible
into orinclude,
exchangeable for
Common Stock, or
rightswithout limitation, controls and procedures designed 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
resultensure that information required to be disclosed by us in
dilution
of existing
stockholders’ equity
interests in
us. Issuances
of substantial
amounts of
our Common
Stock, or
the perceptionreports
 
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 file or submit under
 
the NotesExchange Act is accumulated and
communicated to Condensedmanagement, including our principal
 
Consolidated Financialexecutive
and
 
Statements includedprincipal
 
in
this Quarterlyfinancial
 
Report,officers,
 
in Augustor
 
2020persons
 
Mrs. Adamsperforming
 
and thesimilar
 
Daughters’functions,
 
Trustas
 
(of
which
the daughters
of our
late founder
are
beneficiaries)
sold
6.9
million
shares
of
Common
Stock
in
a
secondary
public
offering
pursuantappropriate
 
to
 
aallow
 
previouslytimely
 
disclosed
Agreementdecisions
 
Regardingregarding
required disclosure. Based on an evaluation of our disclosure controls and procedures conducted by our Chief Executive Officer
and
 
CommonChief
 
StockFinancial
 
(theOfficer,
 
“Agreement”)together
 
filedwith
 
asother
 
anfinancial
 
exhibitofficers,
 
tosuch
officers
concluded
that
 
our
 
2020disclosure
 
Annualcontrols
 
Report.and
procedures were effective as of February 26, 2022 at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no
 
Afterchange in our
 
internal control over
financial reporting that
occurred during the
 
sale,
approximatelyquarter ended February
 
5.0 million
shares (the
“Subject Shares”)
remain registered
under a
shelf registration
statement and
prospectus26, 2022
dated October 9, 2018 for
potential resale, which shares are subject
that has materially affected, or is reasonably likely 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 ofmaterially affect, our Common
Stock could result in a decline
in the market price
of our Common Stock.
internal control over financial reporting.
PART
 
II. OTHER INFORMATION
ITEM 1.
 
LEGAL PROCEEDINGS
Refer
 
to
 
the
 
discussion
 
of
 
certain
 
legal
 
proceedings
 
involving
 
the
 
Company
 
and/or
 
its
 
subsidiaries
 
in
 
(i)
 
our
 
20202021
 
Annual
Report,
 
Part I
 
Item 3:3
 
Legal Proceedings,
 
and Part
 
Part II
 
Item 8,
 
Notes to
 
to Consolidated
 
Financial
 
Statements and
 
Supplementary
Data, Note 18: Commitments
and Contingencies, and (ii)
 
(ii) in this Quarterly
Report in
of the Notes to Condensed Consolidated Financial Statements, which discussions are incorporated
herein by reference.
ITEM 1A.
RISK
FACTORS
There have been no material changes in the risk factors previously disclosed in the Company’s 2021 Annual Report.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
 
The following table is a summary of our third quarter 20212022 share repurchases:
Issuer Purchases of Equity Securities
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
11/29/2028/21 to 12/26/2025/21
—206
$
—36.32
—
—
12/27/2026/21 to 01/22/22
26,780
41.00
—
—
01/23/2122 to 02/26/22
—
—
—
—
01/24/21 to 02/27/2126,986
22,628$
36.4740.96
—
—
22,628
$
36.47
—
—
(1)
 
(1)
As permitted under our Amended and Restated 2012 Omnibus LongLong-Term
-
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
34
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 requirements
 
of the Securities
Exchange Act
 
of 1934, the
 
the registrant has duly
 
duly caused
this report
 
to be signed
 
on
its behalf by the undersigned, thereunto duly authorized.
CAL-MAINE FOODS, INC.
(Registrant)
Date:
 
March 29, 20212022
/s/ Max P.
 
Bowman
Max P.
 
Bowman
Vice President, Chief Financial
Officer
(Principal Financial Officer)
໿
Date:
 
March 29, 20212022
/s/ Michael D. CastleberryMatthew S. Glover
Michael D. CastleberryMatthew S. Glover
Vice President Controller– Accounting
(Principal Accounting Officer)
໿