1
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington,
 
DC
 
20549
FORM
10-Q
 
☑
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
 
Act of 1934
For the quarterly period ended
August 28,November 27, 2021
 
or
☐
 
Transition report
pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number:
 
001-38695
 
CAL-MAINE FOODS, INC
.
(Exact name of registrant as specified in its charter)
Delaware
 
64-0500378
(State or other jurisdiction of incorporation or organization)
 
(I.R.S Employer Identification No.)
1052 Highland Colony Pkwy
,
Suite 200
,
Ridgeland
,
Mississippi
 
39157
 
(Address of principal executive offices)
 
(Zip Code)
(
601
)
948-6813
 
(Registrant’s telephone number,
 
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
CALM
The
NASDAQ
 
Global Select Market
Indicate
 
by
 
check
 
mark
 
whether
 
the
 
registrant:
 
(1)
 
has
 
filed
 
all
 
reports
 
required
 
to
 
be
 
filed
 
by
 
Section
 
13
 
or
 
15(d)
 
of
 
the
Securities Exchange
 
Act of 1934
 
during the preceding
 
12 months (or
 
for such
 
shorter period that
 
the registrant was
 
required to
file such reports), and (2) has been subject to such filing requirements for the past
 
90 days.
Yes
☑
 
No
☐
Indicate by check
 
mark whether the
 
registrant has submitted
 
electronically every
 
Interactive Data File
 
required to be
 
submitted
pursuant to
 
Rule 405
 
of Regulation
 
S-T (§232.405
 
of this
 
chapter) during
 
the preceding
 
12 months
 
(or for
 
such shorter
 
period
that the registrant was required to submit such files).
Yes
☑
 
No
☐
Indicate by
 
check mark
 
whether the registrant
 
is a large
 
accelerated filer,
 
an accelerated
 
filer, a
 
non-accelerated filer,
 
a smaller
reporting
 
company,
 
or
 
an
 
emerging
 
growth
 
company.
 
See
 
the
 
definitions
 
of
 
“large
 
accelerated
 
filer,”
 
“accelerated
 
filer”,
“smaller reporting company”, and “emerging growth
 
company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer
☑
Accelerated filer
 
☐
Non – Accelerated filer
 
☐
Smaller reporting company
 
☐
Emerging growth company
 
☐
If
 
an
 
emerging
 
growth
 
company,
 
indicate
 
by
 
check
 
mark
 
if
 
the
 
registrant
 
has
 
elected
 
not
 
to
 
use
 
the
 
extended
transition
 
period
 
for
 
complying
 
with
 
any
 
new
 
or
 
revised
 
financial
 
accounting
 
standards
 
provided
 
pursuant
 
to
Section 13(a) of the Exchange Act
☐
Indicate by check mark whether the registrant is a shell company (as defined
 
in Rule 12b-2 of the Exchange Act).
Yes
☐
 
No
☑
There were
44,057,32944,056,599
 
shares of Common
 
Common Stock, $0.01 par
 
$0.01 par value,
and
4,800,000
 
shares of Class A
 
A Common
Stock, $0.01
 
par
value,
outstanding as of SeptemberDecember 28, 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
PART
 
I.
 
FINANCIAL
INFORMATION
ITEM 1.
 
FINANCIAL STATEMENTS
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except for par value amounts)
 
 
August 28,November 27, 2021
May 29, 2021
Assets
Current assets:
Cash and cash equivalents
$
16,68415,484
$
57,352
Investment securities available-for-sale
73,66669,672
112,158
Trade and other receivables, net
134,400152,958
126,639
Inventories
226,470236,201
218,375
Prepaid expenses and other current assets
9,2496,814
5,407
Total current
 
assets
460,469481,129
519,931
Property, plant &
 
equipment, net
667,963667,250
589,417
Finance lease right-of-use asset, net
486448
525
Operating lease right-of-use asset, net
1,5331,347
1,724
Investments in unconsolidated entities
10,72210,985
54,941
Goodwill
44,006
35,525
Intangible assets, net
19,79819,241
20,341
Other long-term assets
6,7537,588
6,770
Total Assets
$
1,211,7301,231,994
$
1,229,174
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
96,709115,619
$
89,191
Current portion of finance lease obligation
217219
215
Current portion of operating lease obligation
617550
691
Total current
 
liabilities
97,543116,388
90,097
Long-term finance lease obligation
383327
438
Long-term operating lease obligation
916797
1,034
Other noncurrent liabilities
10,32510,306
10,416
Deferred income taxes
106,996106,753
114,408
Total liabilities
216,163234,571
216,393
Commitments and contingencies - see
Note 13
0—
0
—
Stockholders’ equity:
Common stock ($
0.01
 
par value):
Common stock - authorized
120,000
 
shares, issued
70,261
 
shares
703
703
Class A convertible common stock - authorized and issued
4,800
 
shares
48
48
Paid-in capital
65,04466,019
64,044
Retained earnings
957,951959,124
975,977
Accumulated other comprehensive loss, net of tax
(728)(996)
(558)
Common stock in treasury at cost –
26,20326,204
 
shares at August 28,November 27, 2021 and
26,202
shares
at May 29, 2021
(27,451)(27,450)
(27,433)
Total Cal-Maine Foods,
Inc. stockholders’ equity
997,448
1,012,781
Noncontrolling interest in consolidated entity
(25)
0
Total stockholders’
 
equity
995,567997,423
1,012,781
Total Liabilities and Stockholders’
 
Equity
$
1,211,7301,231,994
$
1,229,174
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
 
Thirteen Weeks
 
Ended
August 28, Twenty-six Weeks
Ended
November 27,
2021
August 29, November 28,
2020
November 27,
2021
November 28,
2020
Net sales
$
331,704390,903
$
292,782347,328
$
722,607
$
640,110
Cost of sales
325,059347,156
276,017288,877
672,215
564,894
Gross profit
6,64543,747
16,76558,451
50,392
75,216
Selling, general and administrative
46,52547,780
43,96543,873
94,305
87,838
(Gain) loss on disposal of fixed assets
(213)(1,968)
2399
(2,181)
122
Operating lossincome (loss)
(39,667)(2,065)
(27,223)14,479
(41,732)
(12,744)
Other income (expense):
Interest income, net
232129
925664
361
1,589
Royalty income
273278
305280
551
585
Equity income (loss) of unconsolidated entities
135264
(44)58
399
14
Other, net
5,1631,862
512436
7,025
948
Total other
income, net
5,8032,533
1,6981,438
Loss8,336
3,136
Income (loss) before income taxes
(33,864)468
(25,525)15,917
(33,396)
(9,608)
Income tax benefit(benefit) expense
(15,838)(677)
(6,126)3,762
(16,515)
(2,364)
Net lossincome (loss)
1,145
12,155
(16,881)
(7,244)
Less: Loss attributable to noncontrolling interest
(28)
0
(28)
0
Net income (loss) attributable to Cal-Maine Foods,
Inc.
$
(18,026)1,173
$
(19,399)12,155
$
(16,853)
$
(7,244)
Net lossincome (loss) per common share:
Basic
$
(0.37)0.02
$
(0.40)0.25
$
(0.34)
$
(0.15)
Diluted
$
(0.37)0.02
$
(0.40)0.25
$
(0.34)
$
(0.15)
Weighted average
 
shares outstanding:
Basic
48,85848,857
48,501
48,859
48,501
Diluted
48,85849,016
48,645
48,859
48,501
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
Comprehensive LossIncome (Loss)
(in thousands)
(unaudited)
Thirteen Weeks
 
Ended
August 28, Twenty-six Weeks
Ended
November 27,
2021
August 29, November 28,
2020
November 27,
2021
November 28,
2020
Net lossincome (loss)
$
(18,026)1,145
 
$
12,155
 
$
(19,399)(16,881)
$
(7,244)
Other comprehensive income (loss), before tax:
Unrealized holding gain (loss) on available-for-sale
securities, net
of reclassification
adjustments
(224)(355)
468(373)
(579)
95
Income tax benefit (expense) related to items of other
comprehensive income
5487
(114)91
141
(23)
Other comprehensive income (loss), net of tax
(170)(268)
354(282)
(438)
72
Comprehensive income (loss)
877
11,873
(17,319)
(7,172)
Less: Comprehensive loss attributable to the
noncontrolling interest
(28)
0
(28)
0
Comprehensive income (loss) attributable to Cal-Maine
Foods, Inc.
$
(18,196)905
$
(19,045)11,873
$
(17,291)
$
(7,172)
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
ThirteenTwenty-six Weeks
 
Ended
AugustNovember 27, 2021
November 28, 2021
August 29, 2020
OperatingCash flows from operating activities:
Net loss
$
(18,026)(16,881)
$
(19,399)(7,244)
Depreciation and amortization
17,38933,969
14,74429,305
Deferred income taxes
(15,838)(15,995)
(6,126)(2,364)
Other adjustments, net
(7,637)(16,585)
(4,019)(30,348)
Net cash used in operations
(24,112)(15,492)
(14,800)(10,651)
InvestingCash flows from investing activities:
Purchases of investment securities
(1,388)(26,387)
(24,195)(29,637)
Sales and maturities of investment securities
39,38867,864
28,23159,077
Distributions from unconsolidated entities
400
6502,650
Acquisition of business, net of cash acquired
(44,823)
0
Purchases of property,
 
plant and equipment
(11,233)(28,647)
(25,338)(52,373)
Net proceeds from disposal of property,
 
plant and equipment
1,1715,338
181253
Net cash used in investing activities
(16,485)(26,255)
(20,471)(20,030)
FinancingCash flows from financing activities:
Purchase of common stock by treasury
(18)
0(45)
Principal payments on finance lease
(53)(106)
(50)(101)
Contributions
3
5
Net cash used in financing activities
(71)(121)
(50)(141)
Net change in cash and cash equivalents
(40,668)(41,868)
(35,321)(30,822)
Cash and cash equivalents at beginning of period
57,352
78,130
Cash and cash equivalents at end of period
$
16,68415,484
$
42,80947,308
Supplemental Information:
Cash paid for operating leases
$
217425
$
237
Interest paid
$
62125
$
65129
See Notes to Condensed Consolidated Financial Statements.
7
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The
 
unaudited
 
condensed
 
consolidated
 
financial
 
statements
 
of
 
Cal-Maine
 
Foods,
 
Inc.
 
and
 
its
 
subsidiaries
 
(the
 
"Company,"
"we,"
 
"us,"
 
"our")
 
have
 
been
 
prepared
 
in
 
accordance
 
with
 
the
 
instructions
 
to
 
Form
 
10-Q
 
and
 
Article
 
10
 
of
 
Regulation
 
S-X.
Therefore, they
 
do not
 
include all of
 
the information
 
and footnotes
 
required by
 
generally accepted
 
accounting principles
 
in the
United
 
States
 
of
 
America
 
("GAAP")
 
for
 
complete
 
financial
 
statements
 
and
 
should
 
be
 
read
 
in
 
conjunction
 
with
 
our
 
Annual
Report
 
on
 
Form
 
10-K
 
for
 
the
 
fiscal
 
year
 
ended
 
May
 
29,
 
2021
 
(the
 
"2021
 
Annual
 
Report").
 
These
 
statements
 
reflect
 
all
adjustments that are, in
 
the opinion of management, necessary
 
to a fair statement of
 
the results for the interim
 
periods presented
and,
 
in
 
the
 
opinion
 
of
 
management,
 
consist
 
of
 
adjustments
 
of
 
a
 
normal
 
recurring
 
nature.
 
Operating
 
results
 
for
 
the
 
interim
periods are not necessarily indicative of operating results for the entire fiscal
 
year.
Fiscal Year
The Company's fiscal
 
fiscal year
ends on
 
the Saturday closest
 
closest to
May 31.
 
Each of
the three-month
 
periods and
year-to-date
periods
ended on November 27, 2021 and November 28, 2020 included
 
August 28, 2021
13 weeks and August 29, 2020 included 13 weeks.26 weeks, respectively.
Use of Estimates
The preparation of the
 
consolidated financial statements in
 
conformity with GAAP requires management
 
to make estimates and
assumptions
 
that affect
 
the amounts
 
reported in
 
the consolidated
 
financial statements
 
and accompanying
 
notes. Actual
 
results
could differ from those estimates.
The severity,
 
magnitude and duration, as well as
 
the economic consequences of the COVID-19
 
pandemic, are uncertain, rapidly
changing
 
and
 
difficult
 
to
 
predict.
 
Therefore,
 
our
 
accounting
 
estimates
 
and
 
assumptions
 
might
 
change
 
materially
 
in
 
future
periods in response to COVID-19.
Investment Securities
Our investment
 
securities are
 
accounted
 
for in
 
accordance with
 
ASC 320,
 
“Investments -
 
Debt and
 
Equity Securities”
 
(“ASC
320”).
 
The
 
Company
 
considers
 
all
 
its
 
debt
 
securities
 
for
 
which
 
there
 
is
 
a
 
determinable
 
fair
 
market
 
value,
 
and
 
there
 
are
 
no
restrictions
 
on
 
the
 
Company's
 
ability
 
to
 
sell
 
within
 
the
 
next
 
12
 
months,
 
as
 
available-for-sale.
 
We
 
classify
 
these
 
securities
 
as
current, because the
 
amounts invested are available
 
for current operations.
 
Available-for-sale
 
securities are carried at
 
fair value,
with unrealized
 
gains and
 
losses reported
 
as a
 
separate
 
component
 
of stockholders’
 
equity.
 
The Company
 
regularly
 
evaluates
changes to
 
the rating of
 
its debt securities
 
by credit
 
agencies and economic
 
conditions to assess
 
and record
 
any expected cre
ditcredit
losses through
the allowance
 
for credit losses,
 
losses, limited
to the amount
 
amount that fair value
 
was less than the
 
the amortized
cost basis. The
cost
 
costbasis
for
basis for
realized
gains
and
 
losses
on
available-for-sale
securities
is
 
determined
by
the
specific
identification
 
method.
Gains and losses are recognized in other income
(expenses) as Other, net in the Company's
Condensed Consolidated Statements
lossesof
Operations.
Investments
in
mutual
funds
 
are
 
recognized
in
other
income
(expenses)classified
 
as
 
“Other
 
netlong-term
assets”
 
in
 
the
 
Company's
Condensed
Consolidated
Statements
of
Operations. Investments
in mutual
funds are
classified as
“Other long-term
assets” in
the Company’s
 
Condensed Consolidated
Consolidated Balance Sheets.
Trade Receivables
 
Trade receivables
 
are stated at their
 
their carrying values, which
 
which include a
reserve for credit
losses. At November
27, 2021 and
May
29,
2021,
reserves
for
 
credit losses. At August
 
28, 2021 and Maylosses
 
29,
2021, reserves for credit losses were
 
$
5831.1
 
thousand million
and
$
795
 
thousand,
respectively.
 
The Company extends credit to
 
customers
basedCompany
 
extends
credit
to
customers based on
 
an
evaluation
of
 
each
customer's
financial
 
condition
and
credit
 
history.
 
Collateral
is
generally
 
not required.
The
 
required.
The
Company
 
minimizes
exposure
 
to
counter
 
party
credit
 
risk
through
 
credit
analysis
 
and
approvals,
 
credit
limits,
 
and monitoring
monitoring
procedures.
 
In
determining
 
our
 
reserve
for
 
credit losses,
 
receivables
 
are
pooled
 
according
 
to
age,
 
with
 
each pool
 
pool
assigned
 
an
expected
expected
loss
based
on
historical
loss
information
adjusted
as
needed
for
economic
 
and
other
forward-looking
factors.
 
8
Business Combinations
The
 
Company
 
applies fair
 
value
 
accounting
 
guidance
 
to
 
measure
 
non-financial
 
assets and
 
liabilities
 
associated
 
with
 
business
acquisitions.
 
These
 
assets
 
and
 
liabilities
 
are
 
measured
 
at
 
fair
 
value
 
for
 
the
 
initial
 
purchase price
 
allocation.
 
The
 
fair
 
value
 
of
non-financial assets acquired is determined internally.
 
Our internal valuation methodology for non-financial assets considers the
8
non-financial
assets
acquired
is
determined
internally. Our
internal
valuation
methodology
for
non-financial
assets
takes
into
account the remaining estimated life of the assets acquired and what management
 
believes is the market value for those assets.
Change in Accounting Principle
Effective
 
May
 
31,
 
2020,
 
the
 
Company
 
adopted
 
ASU
 
2016-13,
 
Financial
 
Instruments
 
–
 
Credit
 
Losses
 
(Topic
 
326),
 
which
 
is
intended
 
to
 
improve
 
financial
 
reporting
 
by
 
requiring
 
more
 
timely
 
recording
 
of
 
credit
 
losses
 
on
 
loans
 
and
 
other
 
financial
instruments held by financial institutions and other organizations.
 
The guidance replaces the prior “incurred loss” approach with
an “expected
 
loss” model
 
and requires
 
measurement of
 
all expected
 
credit losses
 
for financial
 
assets held
 
at the
 
reporting date
based
 
on
 
historical
 
experience,
 
current
 
conditions,
 
and
 
reasonable
 
and
 
supportable
 
forecasts.
 
The
 
Company
 
adopted
 
the
guidance on
 
a modified
 
retrospective basis
 
through a
 
cumulative effect
 
adjustment to
 
to retained earnings
 
earnings as of
 
of the beginning
 
beginning of
the period of
 
adoption. The Company
 
evaluated its current
 
methodology of
 
estimating allowance for
 
doubtful accounts and
 
the
risk
 
profile
 
of
 
its
 
receivables
 
portfolio
 
and
 
developed
 
a
 
model
 
that
 
includes
 
the
 
qualitative
 
and
 
forecasting
 
aspects
 
of
 
the
“expected
 
loss”
 
model
 
under
 
the
 
amended
 
guidance.
 
The
 
Company
 
finalized
 
its
 
assessment
 
of
 
the
 
impact
 
of
 
the
 
amended
guidance and recorded a $
422
 
thousand cumulative increase to retained earnings at May 31, 2020.
Note 2 – Acquisitions
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.
 
liabilities. As a
result of
 
the acquisition, theRed River
 
entity became a
wholly owned
 
subsidiary of
the Company.
 
Red River owns and
 
operates a specialty
 
shell egg production
 
complex with approximately
1.7
 
million cage-free
laying
 
hens,
 
cage-free
 
pullet
 
capacity,
 
feed
 
mill,
 
processing
 
plant,
 
related
 
offices
 
and
 
outbuildings
 
and
 
related
 
equipment
located on approximately
400
 
acres near Bogata, Texas.
The
 
following
Pending
table
summarizes
the
 
finalization consideration
paid
for
Red
River
and
the
amounts
of
 
the Company’s
 
valuation, theassets
 
following tableacquired
 
summarizes theand
 
consideration paid
for Red
River andliabilities
the amounts of the assets acquired and liabilities assumed recognized at
the acquisition date:
Cash consideration paid
$
48,500
Fair value of the Company's equity interest in Red River held before the business combination
48,500
$
97,000
Recognized amounts of identifiable assets acquired and
liabilities assumed
Cash
$
3,677
Accounts receivables,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 receivablesreceivable
 
acquired along
 
along with liabilities
 
liabilities assumed were
 
were valued at
 
at their carrying
 
carrying value which
 
which approximates
fair value due to the short maturity of these instruments.
Inventory consisted primarily
 
primarily of flock,
 
flockfeed ingredients,
packaging, and feedegg
 
ingredients. Inventoryinventory.
Flock inventory was
valued at carrying
value as management believes
that their carrying value
best approximates their fair
value.
Feed ingredients, packaging
 
and property,egg
inventory were all valued based on market prices as of May 30, 2021.
 
plant and equipment
were valued
utilizing
the cost approach.
The Company
recognized
a gain
of $
4.5
million
as a
result of
remeasuring
to fair
value its
50
% equity
interest in
Red
River
held before the business combination. The gain
was recorded in other income and expense under the
heading “Other, net” in the
Company’s
Condensed Consolidated
Statements of
Operations. The
acquisition of
Red River
resulted in
a discrete
tax benefit
of $
8.3
million which
includes $
7.3
million decrease
in deferred
income tax
expense related
to the
outside-basis of
our equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9
Property,
plant and
equipment were
valued utilizing
the cost
approach which
is based
on replacement
or reproduction
costs of
the assets and subtracting any depreciation resulting from physical deterioration
and/or functional or economic obsolescence.
The Company
recognized
a gain
of $
4.5
million
as a
result of
remeasuring
to fair
value its
50
% equity
interest in
Red
River
held before the business combination. The gain
was recorded in other income and expense under the
heading “Other, net” in the
Company’s
Condensed Consolidated
Statements of
Operations. The
acquisition of
Red River
resulted in
a discrete
tax benefit
of $
8.3
million, which includes a $
7.3
million decrease in deferred income
tax expense related to the outside-basis
of our equity
investment
 
in
 
Red
 
River,
 
with
 
a
 
corresponding
 
non-recurring,
 
non-cash
 
$
954,000
 
reduction
 
to
 
income
 
taxes
 
expense
 
on
 
the
non-taxable
 
remeasurement
 
gain
 
associated
 
with
 
the
 
acquisition.
 
As
 
part
 
of
 
the
 
acquisition
 
accounting,
 
the
 
Company
 
also
recorded a $
8.5
 
million deferred tax liability
 
for the difference
 
in the inside-basis
 
of the acquired
 
assets and liabilities assumed.
The recognition
 
of deferred
 
tax liabilities resulted
 
in the
 
recognition of
 
goodwill. None
 
of the goodwill
 
recognized is
 
expected
to be deductible for income tax purposes.
Note 3 - Investment
Securities
The following represents the Company’s
 
investment securities as of August 28,November 27, 2021 and May 29, 2021 (in
 
(in thousands):
August 28,November 27, 2021
Amortized
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
16,828917
$
1024
$
0
$
16,930921
Commercial paper
1,9995,983
0
02
1,9995,981
Corporate bonds
45,54554,457
334110
0
45,879
Certificates of deposits
0
0
0
054,567
Asset backed securities
8,8658,239
0
736
8,8588,203
Total current
 
investment securities
$
73,23769,596
$
436114
$
738
$
73,66669,672
Mutual funds
$
2,3062,105
$
1,8101,951
$
0
$
4,1164,056
Total noncurrent
 
investment securities
$
2,3062,105
$
1,8101,951
$
0
$
4,1164,056
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 $
39.467.9
 
million and
 
$
28.259.1
 
million during
 
the
thirteentwenty-six
 
weeks
 
ended AugustNovember
 
28,27,
 
2021
 
and
 
AugustNovember
 
29,28,
 
2020,
 
respectively.
 
Gross
 
realized
 
gains
 
for
 
the
 
thirteentwenty-six
weeks ended
 
weeksNovember 27,
 
ended
August 28, 2021 and August 29,
November 28,
2020 were
$
127165
 
thousand and
$
2857
 
thousand, respectively.
 
Gross realized losses for the thirteen
weeks ended Augustlosses
 
28, for
the
twenty-six
weeks
ended
November
27,
2021
were
 
$
6067
 
thousand.
There
were
0
 
gross
realized
losses
 
for the thirteen
 
the
twenty-six weeks ended August
 
29,ended November
28, 2020.
2020.
There were
0
 
allowances for
credit losses at August 28, 2021 and May 29, 2021.
 
Actual maturitiesat November
 
may differ
from contractual
maturities as some
borrowers have
the right to
call or prepay
obligations with
or
without penalties. Contractual maturities of current investments at August
28,27, 2021 are as follows (in thousands):
Estimated Fair Value
Within one year
$
30,395
1-5 years
43,271
Total
$
73,666
Noncurrent
Proceeds
from
sales
 
and May
 
maturities
of
noncurrent
investment
securities
were
$29,
385
thousand
during
the
thirteen
weeks
ended August 28, 2021.
Gross realized gains for
the thirteen weeks ended
August 28, 2021 were
$
130
thousand. There were
0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10
Actual maturities
may differ
from contractual
maturities as some
borrowers have
the right to
call or
prepay obligations
with or
without penalties. Contractual maturities of current investments at November
27, 2021 are as follows (in thousands):
Estimated Fair Value
Within one year
$
41,326
1-5 years
28,346
Total
$
69,672
Noncurrent
Proceeds
from
sales
and
maturities
of
 
noncurrent
 
investment
securities
were
$
453
thousand
 
during
 
the thirteen
twenty-six
 
weeks
ended November
 
August 29,27,
 
2020. There2021.
 
Gross
realized
gains
for
the
twenty-six
weeks
ended November
27,
2021
were
$
165
thousand. There were
0
 
realized losses for the twenty-six
 
for
the thirteen weeks ended August November 27, 2021.
There were
0
sales of noncurrent
investment securities during the twenty-six weeks ended November
28, 2021 and August 29, 2020.
Note 4 - Fair Value
 
Measurements
The Company
 
is required
 
to categorize
 
both financial
 
and nonfinancial
 
assets and
 
liabilities based
 
on the
 
following fair
 
value
hierarchy. The
 
fair value
 
of an
 
asset is
 
the price
 
at which
 
the asset
 
could be
 
sold in
 
an orderly
 
transaction between
 
unrelated,
knowledgeable, and willing
 
parties able to engage in
 
the transaction. A liability’s
 
fair value is defined
 
as the amount that would
be
 
paid
 
to
 
transfer
 
the
 
liability
 
to
 
a
 
new
 
obligor
 
in
 
a
 
transaction
 
between
 
such
 
parties,
 
not
 
the
 
amount
 
that
 
would
 
be paid
 
to
settle the liability with the creditor.
•
Level 1
 
- Quoted prices in active markets for identical assets or liabilities
•
Level 2
 
- Inputs
 
other than
 
quoted
 
prices included
 
in Level
 
1 that
 
are observable
 
for the
 
asset or
 
liability,
 
either
directly or indirectly,
 
including:
◦
Quoted prices for similar assets or liabilities in active markets
◦
Quoted prices for identical or similar assets in non-active markets
◦
Inputs other than quoted prices that are observable for the asset or liability
◦
Inputs derived principally from or corroborated by other observable market
 
market data
•
Level 3
 
- Unobservable inputs for the asset or liability that are
 
supported by little or no market activity and that
 
are
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded
 
at cost are as follows:
Cash and cash equivalents, accounts receivable,
 
and accounts payable:
 
The carrying amount approximates fair value due to the
short maturity of these instruments.
Lease obligations:
 
The carrying value of the Company’s lease obligations
 
is at its present value which approximates fair value.
Assets and Liabilities Measured at Fair
 
Value
 
on a Recurring Basis
In
 
accordance
 
with
 
the
 
fair
 
value
 
hierarchy
 
described
 
above,
 
the
 
following
 
table
 
shows
 
the
 
fair
 
value
 
of
 
financial
 
assets and
liabilities measured at fair value on a recurring basis as of August 28,November 27, 2021 and May 29,
 
29, 2021 (in thousands):
August 28,November 27, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
0
$
16,930921
$
0
$
16,930921
Commercial paper
0
1,9995,981
0
1,9995,981
Corporate bonds
0
45,87954,567
0
45,879
Certificates of deposits
0
0
0
054,567
Asset backed securities
0
8,8588,203
0
8,8588,203
Mutual funds
4,1164,056
0
0
4,1164,056
Total assets measured at fair
 
value
$
4,1164,056
$
73,66669,672
$
0
$
77,78273,728
11
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.
11
Note 5 - Inventories
Inventories consisted of the following as of August 28,November 27, 2021
and May 29,
2021 (in thousands):
 
August 28,November 27, 2021
May 29, 2021
Flocks, net of amortization
$
139,870139,645
$
123,860
Eggs and egg products
20,86923,043
21,084
Feed and supplies
65,73173,513
73,431
$
226,470236,201
$
218,375
We
 
grow
 
and
 
maintain
 
flocks
 
of
 
layers
 
(mature
 
female
 
chickens),
 
pullets
 
(female
 
chickens,
 
under
 
18
 
weeks
 
of
 
age),
 
and
breeders (male
(male
 
and
female
 
chickens
used
 
to
produce
 
fertile
eggs
 
to
hatch
 
for
egg
 
production
flocks).
 
Our
total
 
flock at
 
Augustat
28,November 27, 2021 consisted of approximately
10.39.3
 
million pullets and breeders and
40.842.9
 
million layers.
 
Note 6 - Accrued Dividends Payable and Dividends per Common
 
Share
We
 
accrue dividends at
 
the end of
 
each quarter according
 
to the Company’s
 
dividend policy adopted
 
by its Board
 
of Directors.
The Company
 
pays a dividend
 
to shareholders
 
of its Common
 
Stock and
 
Class A Common
 
Stock on
 
a quarterly basis
 
for each
quarter for
 
which the
 
Company reports
 
net income
 
attributable to
 
Cal-Maine Foods,
 
Inc. computed
 
in accordance
 
with GAAP
in an amount
 
equal to one-third
 
(1/3) of such
 
quarterly income. Dividends
 
are paid to
 
shareholders of record
 
as of the 60th
 
day
following the
 
last day
 
of such quarter,
 
except for
 
the fourth fiscal
 
quarter. For
 
the fourth quarter,
 
the Company
 
pays dividends
to shareholders of record on the 65th day after the
 
quarter end. Dividends are payable on the 15th day following
 
the record date.
Following a quarter for which the Company does not report net income
 
attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend
 
for a subsequent profitable
 
quarter until the Company
 
is profitable on a cumulative
 
basis computed from the
date of
 
the lastmost
recent quarter
for which
a dividend
was paid.
At the
end of
the second
 
quarter forof
 
which a
dividend was
paid. Atfiscal 2022,
 
the endamount
 
of the
first quarter
of fiscal
2022, the
amount of
cumulative
cumulative losses to be recovered before payment of a dividend was $
22.321.1
 
million.
 
12
On
 
our
 
condensed
 
consolidated
 
statement
 
of
 
operations,
 
we
 
determine
 
dividends
 
per
 
common
 
share
 
in
 
accordance
 
with
 
the
computation in the following table (in thousands, except per share data):
Thirteen Weeks
 
Ended
AugustTwenty-six Weeks
Ended
November 27,
November 28, 2021
August 29, 2020November 27,
November 28,
Net lossincome (loss)
$
(18,026)1,173
$
(19,399)12,155
$
(16,853)
$
(7,244)
Cumulative losses to be recovered prior to
payment of divided at beginning
of period
(22,270)
(20,769)
(4,244)
(1,370)
Net income available for dividend
$
0
$
0
$
0
$
0
1/3 of net income attributable to Cal-Maine
Foods, Inc. available for dividend
0
Common stock outstanding (shares)
44,057
Class A common stock outstanding (shares)
4,800
Total common stock
 
outstanding (shares)
48,857
*Dividends per common share
 
= 1/3 of Net
 
income (loss) attributable to
 
Cal-Maine Foods, Inc. available
 
for dividend ÷ Total
 
common stock
outstanding (shares).
Note 7 – Credit Facility
On
November
15,
2021,
we
entered
into an
Amended
and
Restated
Credit
Agreement
(the
“Credit
Agreement”)
with a
five
-
year
term.
The
Credit
Agreement
amended
and
restated
the
Company’s
previously
existing
credit
agreement
dated
July
10,
2018.
The
Credit
Agreement
provides
for
an
increased
senior
secured
revolving
credit
facility
(the
“Credit
Facility”
or
“Revolver”),
in
an
initial
aggregate
principal
amount
of
up
to
$
250
million,
which
includes
a
$
15
million
sublimit
for
the
issuance
of
standby
letters
of
credit
and
a
$
15
million
sublimit
for
swingline
loans.
The
Credit
Facility
also
includes
an
accordion
feature
permitting,
with
the
consent
of
BMO
Harris
Bank
N.A.
(the
“Administrative
Agent”),
an
increase
in
the
Credit Facility
in the
aggregate up
to $
200
million by
adding one
or more
incremental senior
secured term
loans or
increasing
one or more times the revolving commitments under the Revolver.
As of November 27, 2021,
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
 
 
13
default under the terms of
the Credit Agreement. Further,
under the terms of the Credit
Agreement, payment of dividends under
the
Company's
current
dividend
policy
of
one-third
of
the
Company's
net
income
computed
in
accordance
with
GAAP
and
payment of other
dividends or repurchases
by the Company
of its capital stock
is allowed, as long
as after giving
effect to such
dividend
payments or
repurchases no
default has
occurred and
is continuing
and
the sum
of cash
and cash
equivalents of
the
Company and its subsidiaries plus availability under the Credit Facility equals
at least $
50
million.
The Credit
Agreement also
includes customary
events of
default and
customary remedies
upon the
occurrence of
an event
of
default, including acceleration
of the amounts due
under the Credit Facility
and foreclosure of
the collateral securing
the Credit
Facility.
At November 27, 2021, we were in compliance with the covenant requirements of
the Credit Facility.
Note 8 - Equity
The following reflects
equity activity for
the thirteen and
twenty-six weeks ended
November 27, 2021
and November 28,
2020
(in thousands):
Thirteen Weeks
Ended November 27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at August 28,
2021
$
703
$
48
$
(27,451)
$
65,044
$
(728)
$
957,951
$
0
$
995,567
Other comprehensive
loss, net of tax
—
—
—
—
(268)
—
—
(268)
Stock compensation
plan transactions
—
—
1
975
—
—
—
976
Contributions
—
—
—
—
—
—
3
3
Net income (loss)
—
—
—
—
—
1,173
(28)
1,145
Balance at November
27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
$
(25)
$
997,423
Thirteen Weeks
Ended November 28, 2020
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Total
Balance at August 29, 2020
$
703
$
48
$
(26,676)
$
61,267
$
433
$
956,170
$
991,945
Other comprehensive loss, net of tax
—
—
—
—
(282)
—
(282)
Stock compensation plan
transactions
—
—
(47)
934
—
—
887
Contributions
—
—
—
5
—
—
5
Net income
—
—
—
—
—
12,155
12,155
Balance at November 28, 2020
$
703
$
48
$
(26,723)
$
62,206
$
151
$
968,325
$
1,004,710
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14
Twenty-six Weeks
Ended November 27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp.
Earnings
Interest
Total
Balance at May 29,
2021
$
703
$
48
$
(27,433)
$
64,044
$
(558)
$
975,977
$
0
$
1,012,781
Other comprehensive
loss, net of tax
—
—
—
—
(438)
—
—
(438)
Stock compensation
plan transactions
—
—
(17)
1,975
—
—
—
1,958
Contributions
—
—
—
—
—
—
3
3
Net loss
—
—
—
—
—
(16,853)
(28)
(16,881)
Balance at November
27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
$
(25)
$
997,423
Twenty-six Weeks
Ended November 28, 2020
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Total
Balance at May 30, 2020
$
703
$
48
$
(26,674)
$
60,372
$
79
$
975,147
$
1,009,675
Impact of ASC 326
—
—
—
—
—
422
422
Balance at May 31 2020
703
48
(26,674)
60,372
79
975,569
1,010,097
Other comprehensive income, net of
tax
—
—
—
—
72
—
72
Stock compensation plan
transactions
—
—
(49)
1,829
—
—
1,780
Contributions
—
—
—
5
—
—
5
Net loss
—
—
—
—
—
(7,244)
(7,244)
Balance at November 28, 2020
$
703
$
48
$
(26,723)
$
62,206
$
151
$
968,325
$
1,004,710
Note 9 - Net Income (Loss) per Common Share
Basic net
income (loss)
per share
is based
on the
weighted average
Common Stock
and Class
A Common
Stock outstanding.
Diluted net income
per share
is based on
weighted-average common
shares outstanding
during the
relevant period
adjusted for
the dilutive
effect of
share-based awards.
Restricted shares
of
145
thousand and
139
thousand were
antidilutive due
to the
net
losses for the first twenty-six weeks of fiscal 2022
and 2021, respectively. These
shares were not included in the diluted net loss
per share calculation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Index
12
Note 7 - Equity
The following reflects equity activity for the thirteen weeks ended
August 28, 2021 and August 29, 2020 (in thousands):
Thirteen Weeks Ended August
28, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Total
Balance at May 29, 2021
$
703
$
48
$
(27,433)
$
64,044
$
(558)
$
975,977
$
1,012,781
Other comprehensive loss, net of tax
—
—
—
—
(170)
—
(170)
Stock compensation plan
transactions
—
—
(18)
1,000
—
—
982
Net loss
—
—
—
—
—
(18,026)
(18,026)
Balance at August 28, 2021
$
703
$
48
$
(27,451)
$
65,044
$
(728)
$
957,951
$
995,567
Thirteen Weeks Ended August
29, 2020
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Total
Balance at May 30, 2020
$
703
$
48
$
(26,674)
$
60,372
$
79
$
975,147
$
1,009,675
Impact of ASC 326, see
Note 1
—
—
—
—
—
422
422
Balance at May 31, 2020
703
48
(26,674)
60,372
79
975,569
1,010,097
Other comprehensive income, net of
tax
—
—
—
—
354
—
354
Stock compensation plan
transactions
—
—
(2)
895
—
—
893
Net loss
—
—
—
—
—
(19,399)
(19,399)
Balance at August 29, 2020
$
703
$
48
$
(26,676)
$
61,267
$
433
$
956,170
$
991,945
Note 8 - Net Loss per Common Share
 
 
Basic net loss per
share is based on
the weighted average
Common Stock and
Class A Common
Stock outstanding. Diluted
net
income per share
is based on
weighted-average common
shares outstanding
during the relevant
period adjusted
for the dilutive
effect of
share-based awards.
Restricted shares
of
131
thousand and
139
thousand were
antidilutive due
to the
net loss
for the
first quarters of fiscal 2022 and 2021, respectively.
These shares were not included in the diluted net loss per share calculation.
 
��
15
The
 
following
 
table
 
provides
 
a
 
reconciliation
 
of
 
the
 
numerators
 
and
 
denominators
 
used
 
to
 
determine
 
basic
 
and
 
diluted
 
net
income per common share (amounts in thousands, except per share data):
Thirteen Weeks
 
Ended
August 28, Twenty-six Weeks
Ended
November 27,
2021
August 29, November 28,
2020
November 27,
2021
November 28,
2020
Numerator
Net lossincome (loss)
$
(18,026)1,145
$
(19,399)12,155
$
(16,881)
$
(7,244)
Less: Loss attributable to noncontrolling
interest
(28)
0
(28)
0
Net income (loss) attributable to Cal-
Maine Foods, Inc.
$
1,173
$
12,155
$
(16,853)
$
(7,244)
Denominator
Weighted-average
 
common shares
outstanding, basic
48,85848,857
48,501
48,859
48,501
Effect of dilutive restricted shares
0159
0144
—
—
Weighted-average
 
common shares
outstanding, diluted
48,85849,016
48,645
48,859
48,501
Net lossincome (loss) per common share
attributable to Cal-Maine Foods, Inc.
Basic
$
(0.37)0.02
$
(0.40)0.25
$
(0.34)
$
(0.15)
Diluted
$
(0.37)0.02
$
(0.40)0.25
$
(0.34)
$
(0.15)
13
Note 910 - Revenue Recognition
Satisfaction of Performance Obligation
Most of the
 
Company’s revenue
 
is derived from
 
contracts with customers
 
based on the
 
customer placing an
 
order for products.
Pricing for
 
the most
 
part is
 
determined when
 
the Company
 
and the
 
customer agree
 
upon the
 
specific order,
 
which establishes
the contract for that order.
Revenues are
 
recognized in
 
an amount
 
that reflects
 
the net
 
consideration we
 
expect to
 
receive in
 
exchange for
 
the goods. Our
shell eggs
 
are sold
 
at prices
 
related to
 
independently
 
quoted wholesale
 
market prices,
 
negotiated prices
 
or formulas
 
related to
our
 
costs of
 
production.
 
The Company’s
 
sales predominantly
 
contain
 
a single
 
performance obligation.
 
We
 
recognize
 
revenue
upon satisfaction
 
of the performance
 
obligation with
 
the customer,
 
which typically occurs
 
within days of
 
the Company
 
and the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts
 
include a guaranteed sale
 
clause, pursuant to which
 
we credit the customer’s
 
account for product
 
that the
customer is unable
 
to sell before
 
expiration. The Company
 
records an estimate
 
of returns and
 
refunds by using
 
historical return
data
 
and
 
comparing
 
to current
 
period
 
sales and
 
accounts
 
receivable. The
 
allowance
 
is recorded
 
as a
 
reduction
 
in sales
 
with
 
a
corresponding reduction in trade accounts receivable.
Sales Incentives Provided to Customers
The
 
Company
 
periodically
 
provides
 
incentive
 
offers
 
to
 
its
 
customers
 
to
 
encourage
 
purchases.
 
Such
 
offers
 
include
 
current
discount offers
 
(e.g., percentage
 
discounts off
 
current purchases), inducement
 
offers (e.g.,
 
offers for
 
future discounts subject
 
subject to
a minimum
 
current purchase),
 
and other
 
similar offers.
 
Current discount
 
offers,
 
when accepted
 
by customers,
 
are treated
 
as a
reduction
 
to
 
the sales
 
price
 
of the
 
related
 
transaction,
 
while inducement
 
offers,
 
when
 
accepted
 
by customers,
 
are
 
treated
 
as
a
reduction
 
to
 
sales
 
price
 
based
 
on
 
estimated
 
future
 
redemption
 
rates.
 
Redemption
 
rates
 
are
 
estimated
 
using
 
the
 
Company’s
historical
 
experience
 
for
 
similar
 
inducement
 
offers.
 
Current discount
 
and
 
inducement
 
offers
 
are
 
presented
 
as a
 
net amount
 
in
‘‘Net
sales.’’
 
16
Disaggregation of Revenue
The following table provides revenue disaggregated by product category
 
(in thousands):
Thirteen Weeks
 
Ended
AugustTwenty-six Weeks
Ended
November 27, 2021
November 28, 2020
November 27, 2021
August 29,November 28, 2020
Conventional shell egg sales
$
182,549223,258
$
155,384201,725
$
405,807
$
357,109
Specialty shell egg sales
138,657155,853
129,245134,082
294,510
263,327
Egg products
9,36611,401
6,7059,932
20,767
16,637
Other
1,132391
1,4481,589
1,523
3,037
$
331,704390,903
$
292,782347,328
$
722,607
$
640,110
Contract Costs
The Company can incur costs to
 
obtain or fulfill a contract with a
 
customer. If the
 
amortization period of these costs is less
 
than
one year,
 
they are
 
expensed as
 
incurred. When
 
the amortization
 
period is
 
greater than
 
one year,
 
a contract
 
asset is
 
recognized
and
is
 
amortized
over
 
the
contract
 
life
as
 
a
reduction
 
in
net
 
sales.
As
 
of November
 
August
28,
27, 2021,
 
the
balance
 
for
contract
 
assets
is
immaterial.
Contract Balances
The Company
receives payment
from
customers based
on specified
terms that are
 
are generally
less than
30 days
from
delivery.
delivery. There are rarely
contract assets or liabilities related to performance under
the contract.
Note 11 - Leases
Expenses related
to operating
leases, amortization
of finance
leases, right-of-use
assets, and
finance lease
interest are
included
in Cost of sales, Selling general and administrative expense, and
Interest income, net in the Condensed Consolidated Statements
of Operations. The Company’s lease cost consists
of the following (in thousands):
Thirteen Weeks
Ended
Twenty-six Weeks
Ended
November 27, 2021
November 27, 2021
Operating lease cost
$
208
$
425
Finance lease cost
Amortization of right-of-use asset
$
44
$
88
Interest on lease obligations
$
7
$
14
Short term lease cost
$
1,097
$
2,135
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14
Note 10 - Leases
Expenses related
to operating
leases, amortization
of finance
leases, right-of-use
assets, and
finance lease
interest are
included
in Cost of sales, Selling general and administrative expense, and Interest
income, net in the Condensed Consolidated Statements
of Operations. The Company’s lease cost consists
of the following (in thousands):
13 Weeks Ended
August 28, 2021
Operating Lease cost
$
217
Finance Lease cost
Amortization of right-of-use asset
$
44
Interest on lease obligations
$
7
Short term lease cost
$
1,097
17
Future minimum lease payments under non-cancelable leases are as follows (in
 
(in thousands):
As of August 28,November 27, 2021
Operating Leases
Finance Leases
Remainder fiscal 2022
$
586378
$
181120
2023
539
239
2024
380
217
2025
130
0
2026
26
0
2027
5
0
Total
1,6661,458
637576
Less imputed interest
(133)(111)
(37)(30)
Total
$
1,5331,347
$
600546
The
 
weighted-average
 
remaining
 
lease
 
term
 
and
 
discount
 
rate
 
for
 
lease
 
liabilities
 
included
 
in
 
our
 
Condensed
 
Consolidated
Balance Sheet are as follows:
As of August 28,November 27, 2021
Operating Leases
Finance Leases
Weighted-average
 
remaining lease term (years)
2.72.6
2.32.0
Weighted-average
 
discount rate
5.9
%
4.9
%
Note 1112 - Stock Based Compensation
Total stock-based
 
compensation expense was $
1.02.0
 
million and $
8931.8
 
thousandmillion for the thirteentwenty-six weeks ended August 28, 2021 and
August 29, 2020,
 
respectively.ended November 27, 2021
and November 28, 2020, respectively.
Unrecognized
 
compensation
 
expense
 
as a
 
result
 
of non
 
-vested
 
shares
 
of
 
restricted
 
stock outstanding
 
under
 
the
 
Amended
 
and
Restated
2012
Omnibus
Long-Term
 
Incentive
Plan
at August 28,
November
27,
2021
of
$
5.64.6
 
million will be recorded over a weighted average
period
 
will
be
recorded
over
a
weighted
average period of
1.91.7
 
years.
Refer
to
Part
 
II
Item
8,
 
Notes
to
Consolidated
 
Financial
Statements
and
 
Supplementary
Data,
Note
16:
16: Stock Compensation Plans in our 2021 Annual Report for further information
 
on our stock compensation plans.
The Company’s restricted share activity
 
for the thirteentwenty-six weeks ended August 28,November 27, 2021 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 29, 2021
302,147
$
39.37
Vested
(1,359)
40.34
Forfeited
(730)(1,460)
37.70
Outstanding, August 28,November 27, 2021
300,058299,328
$
39.3739.38
15
Note 13 - Commitments and Contingencies
Financial Instruments
The
 
The Company
 
maintained
standby
 
letters
of
 
credit
("LOC")
 
totaling
$
4.1
 
million
at
 
August 28,November
27,
 
2021
which
 
were issued
 
underissued
under
the
Company's Revolving
Credit
 
Facility.
The
 
outstanding
LOCs
are
for
 
the
benefit
of
certain
 
insurance
companies,
and
are
 
not
recorded as a liability on the consolidated balance sheets.
 
LEGAL PROCEEDINGS
State of Texas
 
v. Cal-Maine Foods, Inc. d/b/a Wharton;
 
and Wharton County Foods, LLC
 
On April
 
23, 2020,
 
the Company
 
and its subsidiary
 
Wharton County
 
Foods, LLC (“WCF”)
 
were named
 
as defendants in
 
State
of
 
Texas
 
v.
 
Cal-Maine
 
Foods,
 
Inc.
 
d/b/a
 
Wharton;
 
and
 
Wharton
 
County
 
Foods,
 
LLC,
 
Cause
 
No.
 
2020-25427,
 
in
 
the
 
District
18
Court of
 
Harris County,
 
Texas.
 
The State
 
of Texas
 
(the “State”)
 
asserted claims
 
based on
 
the Company’s
 
and WCF’s
 
alleged
violation
 
of
 
the
 
Texas
 
Deceptive
 
Trade
 
Practices—Consumer
 
Protection
 
Act,
 
Tex.
 
Bus.
 
&
 
Com.
 
Code
 
§§
 
17.41-17.63
(“DTPA”).
 
The
 
State
 
claimed
 
that
 
the
 
Company
 
and
 
WCF
 
offered
 
shell
 
eggs
 
at
 
excessive
 
or
 
exorbitant
 
prices
 
during
 
the
COVID-19
 
state
 
of
 
emergency
 
and
 
made
 
misleading
 
statements
 
about
 
shell
 
egg
 
prices.
 
The
 
State
 
sought
 
temporary
 
and
permanent
 
injunctions
 
against
 
the
 
Company
 
and
 
WCF
 
to
 
prevent
 
further
 
alleged
 
violations
 
of
 
the
 
DTPA,
 
along
 
with
 
over
$
100,000
 
in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the State’s
 
original petition with
prejudice. On September
 
11, 2020,
 
the State filed a
 
notice of appeal,
 
which was assigned to
 
the Texas
 
Court of Appeals
 
for the
First District. The
 
State filed its
 
opening brief
 
on December 7,
 
2020. The
 
Company and WCF
 
filed their response
 
on February
8, 2021. The
 
Texas
 
Court of Appeals
 
has not ruled
 
on these submissions.
 
Management believes the
 
risk of material
 
loss related
to this matter to be remote.
Bell et al. v. Cal-Maine Foods et al.
 
On
 
April
 
30, 2020,
 
the Company
 
was named
 
as one
 
of several
 
defendants
 
in
 
Bell et
 
al. v.
 
Cal-Maine
 
Foods et
 
al.,
 
Case No.
1:20-cv-461,
 
in
 
the
 
Western
 
District
 
of
 
Texas,
 
Austin
 
Division.
 
The
 
defendants
 
include
 
numerous
 
grocery
 
stores,
 
retailers,
producers, and farms. Plaintiffs assert that defendants
 
violated the DTPA
 
by allegedly demanding exorbitant or
 
excessive prices
for
 
eggs during
 
the
 
COVID-19
 
state of
 
emergency.
 
Plaintiffs
 
request
 
certification
 
of a
 
class of
 
all consumers
 
who purchased
eggs
 
in
 
Texas
 
sold,
 
distributed,
 
produced,
 
or
 
handled
 
by
 
any
 
of
 
the
 
defendants
 
during
 
the
 
COVID-19
 
state
 
of
 
emergency.
Plaintiffs seek to enjoin
 
the Company and other
 
defendants from selling eggs
 
at a price more than
 
10% greater than the price
 
of
eggs prior
 
to the
 
declaration
 
of the
 
state of
 
emergency
 
and damages
 
in the
 
amount
 
of
$
10,000
 
per violation,
 
or $
250,000
 
for
each violation
 
impacting anyone
 
over 65
 
years old.
 
On December
 
1, 2020,
 
the Company
 
and
 
certain other
 
defendants filed
 
a
motion to
 
dismiss the
 
plaintiffs’
 
amended
 
class action
 
complaint. The
 
plaintiffs
 
subsequently filed
 
filed a motion
 
motion to strike,
 
strike, and
the
motion to
 
dismiss and
 
related proceedings
 
were referred
 
to a
 
United States
 
magistrate judge.
 
On July
 
14, 2021,
 
the magistrate
judge
 
issued
 
a
 
report
 
and
 
recommendation
 
to
 
the
 
court
 
that
 
the
 
defendants’
 
motion
 
to
 
dismiss
 
be
 
granted
 
and
 
the
 
case
 
be
dismissed without
 
prejudice for
 
lack of
 
subject matter
 
jurisdiction. On
 
September 20,
 
2021, the
 
court adopted
 
the magistrate’s
report
 
and
 
recommendation
 
in
 
its
 
entirety
 
and
 
granted
 
defendants’
 
motion
 
to
 
dismiss
 
plaintiffs’
 
first
 
amended
 
class
 
action
complaint;
thereafter,
 
the court
 
entered a
 
final judgment
 
in favor
 
of the
 
Company and
 
certain other
 
defendants dismissing
 
the
case without
prejudice. On
October 18,
2021, plaintiffs
filed a
motion to
alter or
amend the
final judgement
and allow
a filing
of
a
second
amended
complaint.
The
Company
responded
on
November
1,
2021.
The
court
has
not
ruled
on
the
plaintiffs’
motion.
Kraft Foods Global, Inc. et al. v.
 
United Egg Producers, Inc. et al.
 
As previously
 
reported, on
 
September 25,
 
2008, the
 
Company
 
was named
 
as one
 
of several
 
defendants
 
in numerous
 
antitrust
cases involving
 
the United
 
States shell
 
egg
 
industry.
 
The Company
 
settled all
 
of these
 
cases, except
 
for
 
the claims
 
of certain
plaintiffs who sought
 
substantial damages allegedly arising
 
from the purchase of egg
 
products (as opposed to shell
 
eggs). These
remaining plaintiffs
 
are Kraft
 
Food Global,
 
Inc., General
 
Mills, Inc.,
 
and Nestle
 
USA, Inc.
 
(the “Egg
 
Products Plaintiffs”)
 
and
The Kellogg Company.
On September
 
13, 2019,
 
the case
 
with the
 
Egg Products
 
Plaintiffs was
 
remanded from
 
a multi-district
 
litigation proceeding
 
in
the
 
United
 
States
 
District
 
Court
 
for
 
the
 
Eastern
 
District
 
of
 
Pennsylvania,
 
In
 
re
 
Processed
 
Egg
 
Products
 
Antitrust
 
Litigation,
MDL No. 2002, to
 
the United States District Court
 
for the Northern District
 
of Illinois, Kraft Foods Global,
 
Inc. et al. v.
 
United
Egg
 
Producers,
 
Inc.
 
et
 
al.,
 
Case
 
No.
 
1:11-cv-8808,
 
for
 
trial.
 
The
 
Egg
 
Products
 
Plaintiffs
 
allege
 
that
 
the
 
Company
 
and
 
other
defendants
 
violated
 
Section
 
1
 
of
 
the
 
Sherman
 
Act,
 
15.
 
U.S.C.
 
§
 
1,
 
by
 
agreeing
 
to
 
limit
 
the
 
production
 
of
 
eggs
 
and
 
thereby
illegally to raise the prices that plaintiffs
 
paid for processed egg products. In particular,
 
the Egg Products Plaintiffs are
 
attacking
certain features of
 
the United Egg
 
Producers animal-welfare guidelines
 
and program used by
 
the Company and
 
many other egg
producers. The
 
Egg Products
 
Plaintiffs seek
 
to enjoin
 
the Company
 
and other
 
defendants from
 
engaging in
 
antitrust violations
and seek
 
treble money
 
damages. The
 
parties filed
 
a joint
 
status report
 
on May
 
18, 2020.
 
On August
 
4, 2021,
 
by docket
 
entry,
16
the
 
court
 
instructed
 
the
 
parties
 
to
 
jointly
 
submit
 
a
 
second
 
status
 
report
 
to
 
the
 
court
 
that
 
included
 
a
 
proposed
 
schedule
 
for
preparing a final pretrial
 
order. On August
 
25, 2021, the parties filed a
 
joint status report, and
 
on August 26, 2021, the
 
court, by
docket entry, informed
 
the parties that the need to discuss issues was no longer
 
necessary and that a scheduled August 30, 2021,
status hearing was stricken. No trial schedule has yet been entered by the
 
court.
In addition,
 
on October
 
24, 2019,
 
the Company
 
entered into
 
a confidential
 
settlement agreement
 
with The
 
Kellogg Company
dismissing
 
all
 
claims
 
against
 
the
 
Company
 
for
 
an
 
amount
 
that
 
did
 
not
 
have
 
a
 
material
 
impact
 
on
 
the
 
Company’s
 
financial
condition or results
 
of operations. On
 
November 11,
 
2019, a stipulation
 
for dismissal was filed
 
with the court,
 
but the court
 
has
not yet entered a judgment on the filing.
The Company intends to
 
continue to defend the remaining
 
case with the Egg Products Plaintiffs
 
as vigorously as possible based
on
 
defenses
 
which
 
the
 
Company
 
believes
 
are
 
meritorious
 
and
 
provable.
 
Adjustments,
 
if
 
any,
 
which
 
might
 
result
 
from
 
the
19
resolution of
 
this remaining
 
matter with
 
the Egg
 
Products Plaintiffs
 
have not
 
been reflected
 
in the
 
financial statements.
 
While
management
 
believes
 
that
 
there
 
is
 
still
 
a
 
reasonable
 
possibility
 
of
 
a
 
material
 
adverse
 
outcome
 
from
 
the
 
case
 
with
 
the
 
Egg
Products Plaintiffs,
 
at the
 
present time,
 
it is not
 
possible to
 
estimate the
 
amount of
 
monetary exposure,
 
if any,
 
to the
 
Company
due to a range of
 
factors, including the following,
 
among others: the matter is in
 
the early stages of preparing
 
for trial following
remand;
 
any
 
trial
 
will
 
be
 
before
 
a
 
different
 
judge
 
and
 
jury
 
in
 
a
 
different
 
court
 
than
 
prior
 
related
 
cases;
 
there
 
are
 
significant
factual issues
 
to be
 
resolved; and
 
there are
 
requests for
 
damages other
 
than compensatory
 
damages (i.e.,
 
injunction and
 
treble
money damages).
State of Oklahoma Watershed Pollution
 
Litigation
On June 18,
 
2005, the
 
State of
 
Oklahoma filed
 
suit, in
 
the United
 
States District
 
Court for
 
the Northern
 
District of
 
Oklahoma,
against Cal-Maine Foods, Inc. and
 
Tyson Foods,
 
Inc. and affiliates, Cobb-Vantress,
 
Inc., Cargill, Inc. and its
 
its affiliate, George’s,
Inc. and
 
its affiliate,
 
Peterson Farms, Inc.
 
and Simmons Foods,
 
Inc. The
 
State of Oklahoma
 
claims that through
 
the disposal of
chicken
 
litter the
 
defendants have
 
polluted the
 
Illinois River
 
Watershed.
 
This watershed
 
provides
 
water to
 
eastern Oklahoma.
The complaint
 
seeks injunctive
 
relief and
 
monetary damages,
 
but the
 
claim for
 
monetary damages
 
has been
 
dismissed by
 
the
court.
 
Cal-Maine
 
Foods,
 
Inc.
 
discontinued
 
operations
 
in
 
the
 
watershed.
 
Accordingly,
 
we
 
do
 
not
 
anticipate
 
that
 
Cal-Maine
Foods,
 
Inc.
 
will
 
be
 
materially
 
affected
 
by
 
the
 
request
 
for
 
injunctive
 
relief
 
unless
 
the
 
court
 
orders
 
substantial
 
affirmative
remediation. Since
 
the litigation
 
began, Cal-Maine
 
Foods, Inc.
 
purchased 100%
100
% of the
membership interests
 
of the membershipBenton
 
interests of
Benton County
Foods, LLC,
 
which is
 
an ongoing
 
commercial shell
 
egg operation
 
within the
 
Illinois River
 
Watershed.
 
Benton County
 
Foods,
LLC is not a defendant in the litigation.
The trial in the case
 
began in September 2009 and
 
concluded in February 2010. The
 
case was tried without a jury,
 
and the court
has not yet issued its ruling. Management believes the risk of material loss related
 
to this matter to be remote.
Other Matters
In addition to
 
the above, the Company
 
is involved in
 
various other claims
 
and litigation incidental
 
to its business. Although
 
the
outcome of
 
these matters
 
cannot be
 
determined with
 
certainty,
 
management, upon
 
the advice
 
of counsel,
 
is of
 
the opinion
 
that
the final outcome should not have a material effect on the Company’s
 
consolidated results of operations or financial position.
Note 14 - Related Party Transaction
On
 
August
 
24,
 
2020,
 
Mrs.
 
Jean
 
Reed
 
Adams,
 
the
 
wife
 
of
 
the
 
Company’s
 
late
 
founder
 
Fred
 
R.
 
Adams,
 
Jr.,
 
and
 
the
 
Fred
 
R.
Adams,
 
Jr.
 
Daughters’
 
Trust,
 
dated
 
July
 
20,
 
2018
 
(the
 
“Daughters’
 
Trust”),
 
of
 
which
 
the
 
daughters
 
of
 
Mr.
 
Adams
 
are
beneficiaries
 
(together,
 
the
 
“Selling
 
Stockholders”),
 
completed
 
a
 
registered
 
secondary
 
public
 
offering
 
of
6,900,000
 
shares
 
of
Common Stock held by them, pursuant to a previously
 
disclosed Agreement Regarding Common Stock (the “Agreement”)
 
filed
as an exhibit to our 2021 Annual Report. Mrs. Adams and
 
the Daughters’ Trust advised the Company that
 
they were conducting
the
 
offering
 
in
 
order
 
to
 
pay
 
estate
 
taxes
 
related
 
to
 
the
 
settlement
 
of
 
Mr.
 
Adam’s
 
estate
 
and
 
to
 
obtain
 
liquidity.
 
The
 
public
offering
 
was
 
made
 
pursuant
 
to
 
the
 
Company’s
 
effective
 
shelf
 
registration
 
statement
 
on
 
Form
 
S-3
 
(File
 
No.
 
333-227742),
including the Prospectus
 
contained therein dated
 
October 9, 2018, and
 
a related Prospectus Supplement
 
dated August 19,
 
2020,
each of
 
which is on
 
file with the
 
Securities and
 
Exchange Commission.
 
The public offering
 
involved only
 
the sale of
 
shares of
Common
 
Stock
 
that
 
were
 
already
 
outstanding,
 
and
 
thus
 
the
 
Company
 
did
 
not
 
issue
 
any
 
new
 
shares
 
or
 
raise
 
any
 
additional
capital
 
in
 
the
 
offering.
 
The
 
expenses
 
of
 
the
 
offering
 
(not
 
including
 
the
 
underwriting
 
discount
 
and
 
legal
 
fees
 
and
 
expenses
 
of
legal
 
counsel
 
for
 
the
 
Selling
 
Stockholders,
 
which
 
were
 
paid
 
by
 
the
 
Selling
 
Stockholders)
 
paid
 
by
 
the
 
Company
 
were
 
$
1.1
million. Pursuant to the Agreement, the Selling Stockholders reimbursed
 
the Company $
551
 
thousand.
 
1720
ITEM
 
2.
 
MANAGEMENT’S
DISCUSSION
AND
 
ANALYSIS
 
OF
 
FINANCIAL
 
CONDITION
 
AND
 
RESULTS
 
OF
OPERATIONS
The following
 
should be
 
read in
 
conjunction
 
with Management’s
 
Discussion and
 
Analysis of
 
Financial Condition
 
and Results
of Operations included
 
included in Part II Item
 
Item 7
of the
Company’s
 
Annual Report on
 
on Form 10-K for its
 
10-K forfiscal year ended May
 
its fiscal
year ended
May 29,
2021 (the
“2021
(the “2021 Annual
Report”),
and
the accompanying
financial
statements
and
 
notes included
in Part
II
Item 8
of
the 2021
Annual
Report and in
Part
 
of this Quarterly Report on Form 10-Q (“Quarterly Report”).
This
 
report
 
contains
 
numerous
 
forward-looking
 
statements
 
within
 
the
 
meaning
 
of
 
Section
 
27A
 
of
 
the
 
Securities
 
Act
 
of
 
1933
(the “Securities
 
Act”) and
 
Section 21E
 
of the
 
Securities Exchange
 
Act of
 
1934 (the
 
“Exchange Act”)
 
relating to
 
our shell
 
egg
business,
 
including
 
estimated
 
future
 
production
 
data,
 
expected
 
construction
 
schedules,
 
projected
 
construction
 
costs,
 
potential
future
 
supply
 
of and
 
demand
 
for
 
our
 
products,
 
potential
 
future
 
corn
 
and
 
soybean price
 
trends,
 
potential
 
future
 
impact
 
on
 
our
business
 
of
 
the
 
COVID-19
 
pandemic,
 
potential
 
future
 
impact
 
on
 
our
 
business
 
of
 
new
 
legislation,
 
rules
 
or
 
policies,
 
potential
outcomes
 
of
 
legal
 
proceedings,
 
and
 
other
 
projected
 
operating
 
data,
 
including
 
anticipated
 
results
 
of
 
operations
 
and
 
financial
condition.
 
Such
 
forward-looking
 
statements
 
are
 
identified
 
by
 
the
 
use
 
of
 
words
 
such
 
as
 
“believes,”
 
“intends,”
 
“expects,”
“hopes,”
 
“may,”
 
“should,”
 
“plans,”
 
“projected,”
 
“contemplates,”
 
“anticipates,”
 
or
 
similar
 
words.
 
Actual
 
outcomes
 
or
 
results
could
 
differ
 
materially
 
from
 
those
 
projected
 
in
 
the
 
forward-looking
 
statements. The
 
forward-looking
 
statements
 
are
 
based
 
on
management’s
 
current
 
intent,
 
belief,
 
expectations,
 
estimates,
 
and
 
projections
 
regarding
 
the
 
Company
 
and
 
its
 
industry. These
statements
 
are
 
not
 
guarantees
 
of
 
future
 
performance
 
and
 
involve
 
risks,
 
uncertainties,
 
assumptions,
 
and
 
other
 
factors
 
that
 
are
difficult
 
to predict
 
and
 
may be
 
beyond
 
our
 
control. The
 
factors
 
that
 
could cause
 
actual results
 
to
 
differ
 
materially
 
from those
projected
 
in the
 
forward-looking
 
statements include,
 
among others,
 
(i) the
 
risk factors
 
set forth
 
in Part
 
I, Item
 
1A of
 
the 2021
Annual
 
Report
 
(ii)
 
the
 
risks
 
and
 
hazards
 
inherent
 
in
 
the
 
shell egg
 
business
 
(including
 
disease, pests,
 
weather
 
conditions,
 
and
potential for
 
product recall),
 
(iii) changes
 
in the
 
demand for
 
and market
 
prices of
 
shell eggs
 
and feed
 
costs, (iv)
 
our ability
 
to
predict
 
and
 
meet
 
demand
 
for
 
cage-free
 
and
 
other
 
specialty
 
eggs,
 
(v)
 
risks,
 
changes,
 
or
 
obligations
 
that
 
could
 
result
 
from
 
our
future
 
acquisition
 
of
 
new
 
flocks
 
or
 
businesses
 
and
 
risks
 
or
 
changes
 
that
 
may
 
cause
 
conditions
 
to
 
completing
 
a
 
pending
acquisition not to
 
to be
met, (vi) risks
 
risks relating
to the
 
evolving COVID-19 pandemic,
 
pandemic, including
without limitation
increased costs
and growing
inflationary rates, and
(vii) adverse results
 
results in pending
litigation
matters. Readers
 
are
cautioned
 
not
to
place
 
undue
reliance
on
forward-looking
statements
because,
 
while
we
believe
the
assumptions on
 
which the
forward-looking statements are
are based
 
are
reasonable,
 
there
can
 
be
no
 
assurance
that
 
these forward-
lookingforward-looking
 
statements
 
will
 
prove
 
to
 
be
 
accurate. Further,
forward-looking statements
 
included
 
herein
 
are
 
only
 
made
 
as
 
of
 
the
respective
 
dates
 
thereof,
 
or
 
if
 
no
 
date
 
is
 
stated,
 
as
 
of
the date
 
hereof. Except
 
as
 
otherwise
 
required
 
by
 
law,
 
we
 
disclaim
 
any
intent
intent
or
obligation
 
to
update
publicly
 
these forward-looking statements,
 
forward-
looking statements, whether because of
new information, future events,
 
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
 
and distributor
of fresh
shell eggs
eggs in the
 
United States
(“U.S.”).
 
Our total flock
 
of approximately 40.8
42.9 million
layers
and
9.3
 
million layers and
 
10.3 million pullets
 
and
breeders
is
the
the
largest
 
in
the
 
U.S.
We
 
sell
most
 
of
our
 
shell
eggs
 
to
a
 
diverse
group
 
of
customers, including
 
including national and
 
and regional grocery
 
grocery
store chains,
 
club stores, companies
 
companies servicing independent
 
independent supermarkets in
 
in
the U.S., food
 
service distributors, and
 
and egg product consumers
consumers in states across
the southwestern, southeastern, mid-western
 
mid-western and
mid-Atlantic regions of the U.S.
We
are
a
member
of
the
Eggland’s
Best,
Inc.
(“EB”)
cooperative
and
produce,
market
and
distribute
EB
and
Land
O'Lakes
branded
eggs,
both
directly
and
through
our
joint
ventures
Specialty
Eggs,
LLC
and
Southwest
Specialty
Eggs,
LLC,
under
exclusive
license
agreements
in
Alabama,
Arizona,
Florida,
Georgia,
Louisiana,
Mississippi
and
Texas,
and
in
portions
of
Arkansas, California,
Nevada, North
Carolina Oklahoma
and South
Carolina.
We
also have
an exclusive
license in
New York
City in addition to exclusivity in select New York
metropolitan areas, including areas within New Jersey and Pennsylvania.
Our
 
operating
 
results
 
are
 
materially
 
impacted
 
by
 
market
 
prices for
 
eggs
 
and
 
feed
 
grains
 
(corn
 
and
 
soybean
 
meal),
 
which
 
are
highly
 
volatile,
 
independent
 
of
 
each
 
other,
 
and
 
out
 
of
 
our
 
control.
 
Generally,
 
higher
 
market
 
prices
 
for
 
eggs
 
have
 
a
 
positive
impact
 
on
 
our
 
financial
 
results
 
while
 
higher
 
market
 
prices
 
for
 
feed
 
grains
 
have
 
a
 
negative
 
impact
 
on
 
our
 
financial
 
results.
Although we
 
use a
 
variety of
 
pricing mechanisms
 
in pricing
 
agreements with
 
our customers,
 
we sell
 
most of
 
our conventional
shell eggs
 
based on
 
formulas that
 
consider,
 
in varying
 
ways, independently
 
quoted regional
 
wholesale
 
market prices
 
for shell
eggs
 
or
 
formulas
 
related
 
to
 
our
 
costs
 
of
 
production
 
which
 
include
 
the
 
cost
 
of
 
corn
 
and
 
soybean
 
meal.
 
As
 
an
 
example
 
of
 
the
volatility
in
the
market
prices
 
of
shell
eggs,
the
Urner-Barry
 
SoutheasternWhite Large, Southeast
 
Regional
Large
Egg
Market
Price
per
 
dozen
eggs
(“UB southeasternsoutheast large
index”) infor the first
half of fiscal year 2021 ranged
 
2022
ranged from a low
of $0.87$1.00 in July 2020June
2021 to a high of $1.63
$1.66 in March
November 2021.
21
Generally,
 
we purchase
 
primary feed
 
ingredients,
 
mainly corn
 
and soybean
 
meal, at
 
current market
 
prices. Corn
 
and soybean
meal
 
are
 
commodities
 
and
 
are
 
subject
 
to
 
volatile
 
price
 
changes
 
due
 
to
 
weather,
 
various
 
supply
 
and
 
demand
 
factors,
transportation and storage costs, speculators, and agricultural, energy
 
and trade policies in the U.S. and internationally.
 
An important competitive advantage
 
for Cal-Maine Foods is
 
our ability to meet
 
our customers’ evolving needs
 
with a favorable
product
mix
 
of
conventional
 
and
specialty
eggs,
including
cage-free,
organic
 
and
other
 
specialty eggs
 
and eggofferings,
 
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
 
18
current
 
business,
 
the
 
free-range
 
and
 
pasture-raised
 
eggs
 
we
 
produce
 
and
 
sell
represent
attractive
offerings
 
to a subset of
 
a
subset
of
consumers,
 
and therefore our customers,
and help us continue
to serve as the trusted
provider of quality
food choices.
Specialty shell
 
eggs have
 
been a
 
significant and
 
growing portion
 
of the
 
market. In
 
recent years,
 
a significant
 
number of
 
large
restaurant chains, food
 
service companies and
 
grocery chains, including
 
our largest customers,
 
announced goals to
 
transition to
an
exclusively
 
cage-free
egg
 
supply
chain
 
by
specified
 
future
dates.
 
Additionally,
 
several
states,
 
representing 2
 
4%approximately
24% of
the U.S.
total population
 
according to
the 2020
U.S. Census,
 
have passed
legislation requiring
 
that all eggs
sold in those
those states
 
must
be
cage-free
 
eggs
by
 
specified
 
future
dates,
 
and
 
other
states
 
are
 
considering
 
such
legislation.
In
California
and
Massachusetts, which represent about
14% of the total U.S. population
according to the 2020 U.S.
Census, cage-free legislation
goes into effect
January 1, 2022.
 
For additional information,
 
information, see the 2021
 
the
2021 Annual
Report, Part
 
I, Item 1,
 
1, “Business“Business – Specialty
Eggs,”
“Business
 
–
Growth
 
Strategy”
and
 
“Business
–
Government
 
Regulation,”
and
 
the
first
 
risk
factor
 
in
Part
I
Item
1A,
Part I Item 1A, “Risk“Risk Factors” under the sub-heading “Legal and Regulatory
Risk Factors.”
Retail
 
sales
 
of
 
shell
 
eggs
 
historically
 
have
 
been
 
highest
 
during
 
the
 
fall
 
and
 
winter
 
months
 
and
 
lowest
 
during
 
the
 
summer
months. Prices
 
for shell
 
eggs fluctuate
 
in response
 
to seasonal
 
demand factors
 
and a
 
natural increase
 
in egg
 
production during
the
 
spring
 
and
 
early
 
summer.
 
Historically,
 
shell
 
egg
 
prices
 
tend
 
to
 
increase
 
with
 
the
 
start
 
of
 
the
 
school
 
year
 
and
 
tend
 
to
 
be
highest
 
prior
 
to
 
holiday
 
periods,
 
particularly
 
Thanksgiving,
 
Christmas,
 
and
 
Easter.
 
Consequently,
 
and
 
all
 
other
 
things
 
being
equal, we would
 
expect to experience
 
lower selling prices, sales
 
volumes and net
 
income (and may incur
 
net losses) in our
 
first
and
 
fourth
 
fiscal
 
quarters
 
ending
 
in
 
August/September
 
and
 
May/June,
 
respectively.
 
Because
 
of
 
the
 
seasonal
 
and
 
quarterly
fluctuations,
 
comparisons
 
of
 
our
 
sales
 
and
 
operating
 
results
 
between
 
different
 
quarters
 
within
 
a
 
single
 
fiscal
 
year
 
are
 
not
necessarily meaningful comparisons.
COVID-19
Since early
 
2020, the
 
coronavirus (“COVID-19”)
 
outbreak, characterized
 
as a
 
pandemic by
 
the World
 
Health Organization
 
on
March
 
11,
 
2020,
 
has
 
caused
 
significant
 
disruptions
 
in
 
international
 
and
 
U.S.
 
economies
 
and
 
markets.
 
We
 
understand
 
the
challenges
 
and
 
difficult
 
economic
 
environment
 
facing
 
families
 
in
 
the
 
communities
 
where
 
we
 
live
 
and
 
work,
 
and
 
we
 
are
committed
 
to
 
helping
 
where
 
we
 
can.
 
We
 
have
 
provided
 
food
 
assistance
 
to
 
those
 
in
 
need
 
by
 
donating
 
approximately
 
239479
thousand
 
dozen
 
eggs
 
to
 
date
 
in
 
fiscal
 
2022.
 
We
 
believe
 
we
 
are
 
taking
 
all
 
reasonable
 
precautions
 
in
 
the
 
management
 
of
 
our
operations in
 
response to
 
the COVID-19
 
pandemic. Our
 
top priority
 
is the
 
health and
 
safety of
 
our employees,
 
who work
 
hard
everyeach day
 
to produce
 
eggs for our
 
our customers. As
 
As part
of the
 
nation’s
 
food supply,
 
we work
 
in a critical
 
critical infrastructure
industry,
and
 
we
 
believe
 
we
 
have
 
a
 
special
 
responsibility
 
to
 
maintain
 
our
 
normal
 
work
 
schedule.
 
As
 
such,
 
we
 
are
 
in
 
regular
communication with our managers across our operations and continue
 
continue to closely monitor the situation in our facilities and
in the
communities where we live and work. We
 
have implemented procedures designed to protect our employees, taking
into account
guidelines
 
published
 
by
 
the Centers
 
for
 
Disease Control
 
and
 
other
 
government
 
health
 
agencies,
 
and
 
we
 
have
 
strict sanitation
protocols
 
and
 
biosecurity
 
measures
 
in
 
place
 
throughout
 
our
 
operations
 
with
 
restricted
 
access
to
 
visitors.
 
There
 
are
 
no known
indications that COVID-19 affects henschickens or
can be transferred
through the food supply.
 
We
 
continue to
 
proactively monitor
 
and manage
 
operations during
 
the COVID-19 pandemic,
 
including additional
 
related costs
that
 
we
 
incurred
 
or
 
may
 
incur
 
in
 
the
 
future.
 
The pandemic
 
had
 
a
 
negative
 
impact
 
on our
 
business
 
through
 
disruptions
in
 
the
supply chain such
as increased costs and
limited availability of packaging
 
supplies, and increased labor
costs and medical costs.costs
and, more recently,
inflation.
In the
 
firstsecond quarters
 
of fiscal
 
2022 and
 
2021, we
 
we spent approximately
 
$553713 thousand
 
and $832$612
 
thousand (excluding
 
medical
insurance
 
claims) related
to the
pandemic
and its
effects,
respectively.
The majority
of these
expenses
in fiscal
2022 resulted
from additional
labor costs
and increased
cost of
packaging materials,
primarily reflected
in cost
of sales.
In fiscal
2021, most
of
these
expenses
related
to
additional
labor
costs.
Medical
insurance
claims
related
to
COVID-19
paid
during
the
second
quarter of fiscal
2022 were an
additional $870
thousand as compared
to $529 thousand
paid in the
comparable quarter in
fiscal
2021.
22
In the
first half
of fiscal
2022 and
2021, we
spent approximately
$1.3 million
and $1.4
million
(excluding
medical insurance
claims)
related
 
to
 
the
 
pandemic
and
its
effects,
 
respectively.
 
The
 
majority
 
of
 
these
 
expenses
 
in
 
fiscal
 
2022
 
resulted
 
from
additional
 
labor
 
costs
and
increased
 
cost
 
of
 
packaging
 
materials,
 
primarily
 
reflected
 
in
 
cost
 
of
 
sales.
 
In
 
fiscal
 
2021,
 
most
 
of
these
 
expenses
 
related
 
to
additional
 
labor
 
costs.
 
Medical
 
insurance
 
claims
 
related
 
to
 
COVID-19
 
paid
 
during
 
the
 
first
 
quarterhalf
 
of
fiscal
2022
were
an
fiscal 2022 were an additional $267 thousand$1.1 million as compared to $324$818 thousand paid
in the
same quarter comparable period in fiscal 2021.
EXECUTIVE OVERVIEW
For the first
second quarter of fiscal
2022,
 
we recorded a
gross profit of $6.6$43.7 million compared to $58.5
 
million compared to
$16.8 million for
the same period
of
 
offiscal
fiscal 2021,
 
with
the
decrease
due
primarily
to
the
higher
costs of
feed
 
ingredients and higher processing costs. Our total
 
dozens
sold decreasedand
 
1.7%higher
processing
costs.
Our
total
dozens sold
increased 0.9%
 
to 259.4276.1
 
million dozen
 
shell eggs
 
for the
 
firstsecond quarter
 
of fiscal
 
2022 compared
 
to 264.0273.7
 
million
dozen for
 
for
the
same
 
period
of
 
fiscal
2021.
 
For
the
 
first
second quarter
 
of
fiscal
 
2022,
conventional
 
dozens
sold
 
decreased
5.5% 4.4%
 
and
specialty
specialty dozens sold
 
increased 8.9%15.7%
 
as compared to
 
to the
same quarter
 
in fiscal 2021.
 
Specialty dozens sold
 
sold increased
as more
cage-free
cage-free facilities came into production which helped increase our cage-free
 
cage-free egg sales.
The
 
daily
 
average
 
price
 
for
 
the
 
UB
 
southeasternsoutheast
 
large
 
index
 
for
 
firstthe
second
 
quarter
 
of
 
fiscal
 
2022
 
increased
 
41.2%14.6%
 
from
 
the
comparable period
in the
prior year.
Our net
average selling
price per
dozen for
the second
quarter of
fiscal 2022
was $1.373
compared to $1.227
in the prior-year
period. Hen numbers
reported by the
USDA as of December
1, 2021, were
327.8 million,
which is approximately 913
thousand more hens than
the comparable period of
the prior year.
The USDA also reported
that the
hatch
from
July
2021
through
November
2021
decreased
2.0%
compared
to
the
prior-year
period.
As
of
December 1,
2021,
eggs in incubators were down 9% versus the prior-year period.
Our farm
production costs
per dozen
produced for
the second
quarter of
fiscal 2022
increased 21.6%,
or $0.156,
compared to
the second
quarter of
fiscal 2021.
This increase
was primarily
due to
increased prices
for feed
ingredients. Feed
costs started
trending
higher
midway
through
the
second
quarter
of
fiscal
2021
and
have
remained
elevated
compared
to
historical
costs.
Though these feed costs
began trending higher
in fiscal 2021, we initially
benefitted from filling our
storage bins at harvest and
locking in the
basis portion of
our grain purchases
several months in
advance,
which reduced our
feed costs in
fiscal 2021. We
did not
experience the
 
same benefits
in fiscal
2022 given
sustained elevated
feed costs
that increased
our feed
costs compared
to
the
comparable
fiscal
2021
period.
For
the
second
quarter
of
fiscal
2022,
the
average
Chicago
Board
of
Trade
(“CBOT”)
daily market
price was
$5.43 per
bushel for
corn and
$338 per
ton for
soybean meal,
representing an
increase of
38.4% and
a
decrease of
5.9%, respectively,
compared to
the average
daily CBOT
prices for
the comparable
period in
the prior
year.
Other
farm
production
costs for
the second
quarter
of
fiscal
2022
increased
11.9%
versus
the
comparable
period
 
in
 
the prior
 
year.fiscal
year, driven by higher flock amortization
 
Our netand facility expense.
Effective
 
averageMay
 
selling30,
 
price2021,
 
per dozenwe
 
foracquired
 
the
 
firstremaining
 
quarter50%
membership
interest
in
Red
River
Valley
Egg
Farm,
LLC
(“Red
River”). Red River owns and operates a specialty shell egg
production complex with approximately 1.7 million
cage-free laying
hens,
cage-free
pullet capacity,
feed
mill, processing
plant, related
offices
and outbuildings
and
related
equipment located
on
approximately 400
acres near
Bogata, Texas.
For additional
information,
see
 
of fiscalthe
Notes to
Condensed
Consolidated Financial Statements included in this Quarterly Report.
During October
 
2021, we
 
wasannounced
 
$1.238that our
 
comparedBoard of
 
toDirectors approved
a strategic
investment that
will specialize
in high-
$1.078value
commercial
product
solutions
targeting
specific
needs
 
in
 
the
 
priorfood
 
yearindustry.
 
period.The
 
Heninitial
 
numbersfocus
 
reportedwill
include
hard-cooked
eggs.
The
new
entity,
located
in
Neosho,
Missouri,
will
operate
as
MeadowCreek
Foods,
LLC
(“MeadowCreek”).
We
will
capitalize MeadowCreek
with up
to $18.5
million in
debt and
equity to
purchase property
and equipment
and to
fund working
capital,
and we
will retain
a controlling
interest in
the venture.
We
will serve
as the
preferred provider
to supply
specialty and
conventional
eggs
that
MeadowCreek
needs
to
manufacture
egg
products.
MeadowCreek’s
marketing
plan
is
designed
to
extend
our
reach
in
the
foodservice
and
retail
marketplace
and
bring
new
opportunities
in
the
restaurant,
institutional
and
industrial food products arenas.
Also during
October 2021,
we announced
that our
Board of
Directors
approved a
$23.0 million
capital project
to expand
our
cage-free egg production
at our Okeechobee,
Florida, production facility.
The project is
designed to include
the construction of
two cage-free layer
houses and one cage-free
pullet house with capacity
for approximately 400,000
cage-free hens and 210,000
pullets, respectively.
Construction
has commenced,
with first
pullet placements
planned
 
by themid-May
 
USDA as
of
September
1, 2021,
were 319.5
million,
which
is
approximately2022 and
 
the samefirst
 
number oflayer
house planned
 
hens into be
 
same periodfinished by
 
forOctober 1,
2022, with
the second
layer house
and project completion
expected by
February 1,
2023. The Company
plans to fund the
 
prior year.project through a combination
 
The USDAof available cash on
 
also reportedhand, investments and
 
thatoperating 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
 
hatch fromsouthern
California, Arizona and Nevada markets.
 
April
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19
2021 through August 2021 increased 2.1%
compared to the prior-year period. As of September 1, 2021, eggs in incubators were
down 4.9% versus the prior-year period.
Our farm
production costs
per dozen
produced for
the first
quarter of
fiscal 2022
increased 25.4%
or $0.182
compared to
the
first quarter
of fiscal 2021
.
This increase was
primarily due
to increased
prices for
feed ingredients
caused by
increased export
demand,
as
well
as
weather-related
shortfalls
in
production
and
yields,
which
have
placed
additional
pressure
on
domestic
supplies. For the
first quarter,
the average Chicago
Board of Trade
(“CBOT”) daily market
price was $5.96
per bushel for
corn
and $364
per ton
for soybean
meal, representing
an increase of
81.8%
and 26.1%,
respectively,
compared to
the average
daily
CBOT prices for
the first quarter
of fiscal 2021.
Other farm production
costs for the
first quarter of
fiscal 2022 increased
7.6%
compared to the same period in the prior fiscal year due to higher flock amortization
and facility expenses.
23
RESULTS OF
 
OPERATIONS
The
 
following
 
table
 
sets
 
forth,
 
for
 
the
 
periods
 
indicated,
 
certain
 
items
 
from
 
our
 
Condensed
 
Consolidated
 
Statements
 
of
Operations expressed as a percentage of net sales.
Thirteen Weeks
 
13 Weeks Ended
AugustTwenty-six Weeks
Ended
November 27, 2021
November 28, 2020
November 27, 2021
August 29,November 28, 2020
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
98.088.8
%
94.383.2
%
93.0
%
88.2
%
Gross profit
2.011.2
%
5.716.8
%
7.0
%
11.8
%
Selling, general and administrative
14.012.2
%
15.012.6
%
13.1
%
13.7
%
(Gain) loss on disposal of fixed assets
(0.1)(0.5)
%
—
%
(0.3)
%
—
%
Operating lossincome (loss)
(11.9)(0.5)
%
(9.3)4.2
%
(5.8)
%
(1.9)
%
Total other income, net
1.7
%
0.6
%
Loss0.4
%
1.2
%
0.5
%
Income (loss) before income taxes
(10.2)0.1
%
(8.7)4.6
%
(4.6)
%
(1.4)
%
Income tax benefit(benefit) expense
(4.8)(0.2)
%
(2.1)1.1
%
(2.3)
%
(0.4)
%
Net lossincome (loss)
(5.4)0.3
%
(6.6)3.5
%
(2.3)
%
(1.0)
%
NET SALES
Total
net
sales for
the
second quarter
of
fiscal
2022
were $390.9
million
compared
to $347.3
million
for
the same
period
of
fiscal 2021.
Net
shell
egg
sales
represented
97.1%
of
total
net
sales
for
the
second
quarters
of
fiscal
2022
and
2021.
Shell
egg
sales
classified
as “Other”
represent
sales of
hard-cooked
eggs,
hatching
eggs and
other
miscellaneous
products
included
with
our
shell egg operations.
Total
net
sales for
the twenty-six
weeks
ended
November 27,
2021
were
$722.6 million,
compared
to $640.1
million
for
the
comparable period of fiscal 2021.
Net
shell
egg
sales
represented
97.1%
and
97.4%
of
total
net
sales
for
the
twenty-six
weeks
ended
November
27,
2021
and
November 28, 2020, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24
20
NET SALES
Total
net sales for the
first quarterThe table below presents an analysis of fiscal
2022 were $331.7
million, compared to
$292.8 million for
the same period of
fiscal
2021.
Netour conventional and specialty shell
egg
 
sales represented
97.2% and
97.7% of
total net
sales for
the first
quarter of
fiscal 2022
and 2021,
respectively.
Shell
egg
sales
classified
as
“Other”
represent
sales
of
hard
cooked
eggs,
hatching
eggs,
and
other
miscellaneous
products
included with
our shell
egg operations.
The table
below presents
an analysis
of our
conventional and
specialty shell
egg sales
(in(in thousands, except percentage data):
Thirteen Weeks
 
13 Weeks Ended
AugustTwenty-six Weeks
Ended
November 27, 2021
November 28, 2020
November 27, 2021
August 29,November 28, 2020
Total net sales
$
331,704390,903
$
292,782347,328
$
722,607
$
640,110
Conventional
$
182,549223,258
56.658.8
%
$
155,384201,725
54.359.8
%
$
405,807
57.8
%
$
357,109
57.3
%
Specialty
138,657155,853
43.041.1
%
129,245134,082
45.239.7
%
294,510
42.0
%
263,327
42.2
%
Egg sales, net
321,206379,111
99.699.9
%
284,629335,807
99.5
%
700,317
99.8
%
620,436
99.5
%
Other
1,132391
0.40.1
%
1,4481,589
0.5
%
1,523
0.2
%
3,037
0.5
%
Net shell egg sales
$
322,338379,502
100.0
%
$
286,077337,396
100.0
%
$
701,840
100.0
%
$
623,473
100.0
%
Net shell egg sales as a
percent of total net sales
97.297.1
%
97.797.1
%
97.1
%
97.4
%
Dozens sold:
Conventional
184,487192,403
71.169.7
%
195,238201,317
74.073.6
%
376,890
70.4
%
396,555
73.8
%
Specialty
74,89883,705
28.930.3
%
68,75672,334
26.026.4
%
158,603
29.6
%
141,090
26.2
%
Total dozens sold
259,385276,108
100.0
%
263,994273,651
100.0
%
535,493
100.0
%
537,645
100.0
%
Net average selling price per
dozen:
Conventional
$
0.9891.160
$
0.7961.002
$
1.077
$
0.901
Specialty
$
1.8511.862
$
1.8801.854
$
1.857
$
1.866
All shell eggs
$
1.2381.373
$
1.0781.227
$
1.308
$
1.154
Egg products sales:
 
Egg products net sales
9,36611,401
6,7059,932
20,767
16,637
Pounds sold
15,26916,009
15,03015,967
31,278
30,996
Net average selling price per
pound
0.6130.712
0.4460.622
0.664
0.537
Shell egg net sales
Second Quarter – Fiscal 2022 vs. Fiscal 2021
-
In
the
first
second quarter
of
fiscal
 
2022,
 
conventional
egg
sales
increased
$27.2 $21.5
 
million,
or
17.5% 10.7%,
compared
to
 
the
first second
quarter of
 
fiscal 2021,
 
primarily due
 
to the
 
increase in
 
price partiallyfor
 
offset byconventional shell
 
eggs,
partially offset
by a decrease
in volume
 
of conventional
eggs
 
eggs sold.
 
Changes
in
 
price
resulted
 
in
a
 
$35.6
30.4 million
 
increase
and
 
the change
 
in
volume
resulted
in
a
$10.6
million
resulted in a $10.3 million decrease in net sales, respectively.
-
We
 
believe prices
Higher quarter-over-quarter
for conventional
 
eggs were
positively impacted
by a
decrease in
the conventional
production layer
hen
flock.
According
to
reports from
the
USDA,
as
of
November
1,
2021,
the
estimated
number
of
hens
producing
conventional
eggs decreased
11.3
million, or
4.6%, versus
the prior-year
comparable period.
In addition,
foodservice
demand
improved
compared
to
the
comparable
prior-year
period.
Lower
conventional
egg
prices
in
the
prior-year
period were
primarily duetied
 
to depressed prices in the firsta
 
quartersurplus of fiscal
2021,
 
whichconventional eggs
 
resultedentering the
retail channel
 
from the
foodservice channel
during
the pandemic.
A stronger
export market
in our
second quarter
of fiscal
2022 also
supported
conventional egg
prices.
-
The
decrease
in
volume
of
 
conventional
 
eggs
 
entering
the
retail
channel
from
the
foodservice
channel
due
to
the
pandemic.
-
The decrease
in volume
of conventional
eggs sold
 
was primarily
due to
the first
quarter of
fiscal 2021
elevated retail
demand due
to consumers’
preferences to
purchase eggs
for in-home
meal preparation
due to
the pandemic.
We
saw
this consumer preference
begin to shift in
the fourth quarter of
fiscal 2021 as consumers
began
to resume out-of-home
dining and prepare
fewer meals at home.
-
Specialty
egg
sales increased
$9.4
million,
or 7.3
%,
 
primarily
 
due
 
to
 
elevated
retail
demand
during
the
second
quarter
of fiscal
2021 given
consumers’
preferences
to purchase
eggs for
in-home
meal preparation
during
the more
restrictive
phases
of
governmental
and
business
shutdowns
due
to
the
pandemic.
We
saw
this
consumer
preference
begin to shift
in the fourth quarter
of fiscal 2021
as consumers began
to resume out-of-home
dining and prepare
fewer
meals at home.
-
Specialty
egg
sales
increased
$21.8
million,
or
16.2%,
in
the
second
quarter
of
fiscal
2022
compared
to
the
second
quarter of
fiscal 2021,
primarily due
to a
15.7% increase
in the
 
volume of
 
8.9%specialty eggs
sold, of
 
which resulted
 
in a
$21.2
million increase
in net
sales. Our
specialty egg
sales in
the second
quarter of
fiscal 2022
versus the
prior-year
period benefitted from our acquisition of the remaining 50% membership
interest in Red River, which helped drive
our
cage-free
egg
retail
sales.
Our
cage-free
sales
also
benefitted
from
our
continued
investment
in
expanded
cage-free
25
capabilities as additional
cage-free production
capacity came online
during the quarter.
Cage-free egg sales
comprised
24.0% of our total sales in second quarter fiscal 2022 and 23.8% of total sales fiscal year-to-date.
-
We
believe that
the demand
for specialty
eggs has increased
as consumers
have evolved
their preferences
to purchase
higher-priced
specialty
eggs for
at-home
meal preparation
and
as retailers
have
committed
to selling
more cage-free
products.
Twenty-six weeks – Fiscal 2022
vs. Fiscal 2021
-
For
the
twenty-six
weeks
ended
November
27,
2021,
conventional
egg
sales
increased
$48.7
million
or
13.6%
compared
to
the
same
period
of
fiscal
2021,
primarily
due
to
the
increase
in
price,
partially
offset
by
a
decrease
in
volume of conventional eggs
sold. Changes in price resulted in
a $66.3 million increase and
change in volume resulted
in a $21.2 million decrease in net sales, respectively.
-
We
believe prices
for conventional
eggs were
positively impacted
by a
decrease in
the conventional
production layer
hen
flock.
In
addition,
foodservice
demand
improved
compared
to
the
same
period
in
the
prior
year.
Lower
conventional
egg
prices
in
the prior
-year
period
were
primarily
due
to
conventional
eggs entering
the
retail
channel
from the foodservice channel due to the pandemic.
-
The decrease
in volume of
conventional eggs
sold was primarily
due to elevated
retail demand
during the
first half
of
fiscal
2021
due
to
consumers’
preferences
to
purchase
eggs for
in-home
meal
preparation
due
to
the
pandemic.
We
saw this
consumer preference
begin to
shift in
the fourth quarter
of fiscal
2021 as
consumers began
to resume
out-of-
home dining and prepare fewer meals at home.
-
Specialty egg
sales increased
$31.2 million,
or 11.8%,
for the
twenty-six weeks
ended November
27, 2021
compared
to the
same period
of fiscal
2021, primarily
due to
a 12.4%
increase in
the volume
of specialty
dozens sold,
partially
offset by a
decrease in specialty egg
prices. Changes in price
resulted in a $1.4
million decrease and
change in volume
resulted
 
in
 
a
$32.5
$11.4
million
 
increase in net sales.
 
More cage-free facilitiesin
 
came into productionnet
 
which helped increase oursales,
 
cage-free
egg sales.
-
We believe that
higher demand for specialty eggs has been driven by the pandemic
,
as consumers prepared more meals
for in-home
consumption rather
than dining
out.respectively.
 
We
 
believe higheralso
 
at-home mealbenefitted
 
preparation from
our
additional
cage-free
production capacity.
Egg products net sales
Second Quarter – Fiscal 2022 vs. Fiscal 2021
-
Egg
products
net
sales increased
$1.5
million
or
14.8%
for
the
second
quarter
of
fiscal
2022
compared
to
the
same
period of fiscal
2021, primarily due
to a 14.5%
selling price increase,
which had a
$1.4 million positive
impact on net
sales.
-
Selling
prices
for
egg
products
in
the
second
quarter
of
fiscal
2021
were
negatively
impacted
by
a
decline
in
foodservice demand due to the pandemic.
Our egg products net average selling
price increased in the second quarter
of
fiscal 2022 compared
to the same period
in fiscal 2021
as foodservice channel
demand has begun
to shift more
to pre-
pandemic levels.
Twenty-six weeks – Fiscal 2022
vs. Fiscal 2021
-
Egg products
net sales
increased $4.1
million or
24.8%, primarily
due to
a 23.6%
selling price
increase compared
to
the first twenty-six weeks of fiscal 2021, which had a $4.0 million positive
impact on net sales.
-
Our egg products net average selling
price increased in the twenty-six
weeks end November 27, 2021, compared
to the
same
period
in
fiscal
2021
as
foodservice
channel
demand
has
 
driven abegun
 
consumerto
shift
more
towards
pre-pandemic
levels.
preferenceSelling
prices
for
egg
products
in
the
twenty-six
weeks
ended
November
28,
2020
were
negatively
impacted
by
a
decline in
foodservice demand
during the
more restrictive
phases of
governmental and
business shutdowns
due to purchase higher-priced specialty eggs.
the
pandemic.
COST OF SALES
Costs
of
sales
for
the
second
quarter
of
fiscal
2022
were
$347.2
million
compared
to
$288.9
million
for
the
same
period
of
fiscal
2021.
For
the
twenty-six
weeks
ended
November
27,
2021
and
November
28,
2020,
total
cost
of
sales
were
$672.2
million and $564.9 million, respectively.
Cost of
sales consists
of
costs directly
related
to producing,
processing
and
packing
shell eggs,
purchases
of
shell
eggs from
outside producers, processing and packing of liquid
and frozen egg products and other non-egg costs. Farm
production costs are
those costs
incurred at
the egg production
facility,
including feed,
facility,
hen amortization,
and other
related farm
production
costs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21
Egg products net sales
-
Egg products
net sales
increased $2.7
million or
39.7%, primarily
due to
a 37.4%
selling price
increase compared
to
the first quarter of fiscal 2021, which had a $1.6 million positive impact
on net sales.
-
Selling prices for
egg products in
the first quarter
of fiscal 2021
were negatively impacted
by a decline
in foodservice
demand
due to
the pandemic.
Our egg
products net
average selling
price
increased in
the first
quarter of
fiscal 2022
compared to
the same
period in
fiscal 2021
as foodservice
channel demand
has begun
to shift
more to
pre-pandemic
levels.
COST OF SALES
Costs of
sales for
the first
quarter of
fiscal 2022
were $325.1
million compared
to $276.0
million for
the same
period of
fiscal
2021.
Cost of
sales consists
of
costs directly
related
to producing,
processing
and
packing
shell eggs,
purchases
of
shell
eggs from
outside producers, processing and packing of liquid
and frozen egg products and other non-egg costs. Farm
production costs are
those costs
incurred at
the egg production
facility,
including feed,
facility,
hen amortization,
and other
related farm
production
costs.
26
The following table presents the key variables affecting our cost of
 
sales (in thousands, except cost per dozen data):
Thirteen Weeks
 
13 Weeks Ended
August 28, Twenty-six Weeks
Ended
November 27,
2021
August 29, November 28,
2020
% Change
November 27,
2021
November 28,
2020
% Change
Cost of Sales:
Farm production
$
207,495221,971
$
161,863179,131
28.223.9
%
$
429,466
$
340,994
25.9
%
Processing, packaging, and
warehouse
65,05969,474
59,86963,505
8.79.4
134,533
123,374
9.0
Egg purchases and other (including
change in inventory)
44,69146,039
48,93337,625
(8.7)22.4
90,730
86,558
4.8
Total shell eggs
317,245337,484
270,665280,261
17.220.4
654,729
550,926
18.8
Egg products
7,8149,672
5,3528,616
46.012.3
17,486
13,968
25.2
Total
$
325,059347,156
$
276,017288,877
17.820.2
%
$
672,215
$
564,894
19.0
%
Farm production costs (per dozen
produced)
Feed
$
0.5450.529
$
0.3880.410
40.529.0
%
$
0.537
$
0.399
34.6
%
Other
$
0.3530.349
$
0.3280.312
7.611.9
%
$
0.351
$
0.320
9.7
%
Total
$
0.8980.878
$
0.7160.722
25.421.6
%
$
0.888
$
0.719
23.5
%
Outside egg purchases (average
cost per dozen)
$
1.351.56
$
1.041.24
29.825.8
%
$
1.45
$
1.13
28.3
%
Dozens produced
236,458256,786
231,161251,914
2.31.9
%
Dozens sold493,244
259,385483,075
263,994
(1.7)2.1
%
Percent produced to sold
93.0%
92.1%
1.0
%
92.1%
89.9%
2.4
%
Farm Production
-Second Quarter – Fiscal 2022 vs. Fiscal 2021
-
Feed costs per dozen produced
 
produced increased 40.5%29.0% in
the firstsecond quarter of fiscal
 
fiscal 2022 compared to the first
 
second quarter of
fiscal 2021.
This increase was
primarily due
to increased prices
for corn,
our primary feed
ingredient. Feed
ingredient
costs started trending
higher midway
through the
second quarter
of fiscal 2021
and have remained
elevated compared
to historical costs. Though these feed costs began trending
higher in fiscal 2021, we initially benefitted from
filling our
storage
bins
at
harvest
and
locking
in
the
basis
portion
of
our
grain
purchases
several
months
in
advance,
which
reduced our
feed costs
in fiscal
2021. As
feed costs
have remained
elevated entering
into our
second quarter
of fiscal
2021,2022, we
 
primarilydid not
 
dueexperience the
same benefits,
which increased
our feed
costs compared
 
to the
 
highersame period
 
feed
ingredient
prices
resulting
from
increased
export
demand,
as
well
as
weather-of fiscal
related shortfalls in production and yields, which have placed additional
pressure on domestic supplies.2021.
-
Other
 
farm
 
production
 
costs increased
 
due
 
to higher
 
flock amortization
 
,
primarily
from an
increase
in
our
cage-free
production, which
has higher capitalized
costs. Also, our
higher feed
costs, which began
to rise in
our third
quarter of
fiscal 2021, are capitalized in our flocks during pullet production and
increased our amortization expense.
-
We had higher
facility expense as more cage-free facilities came into production.
Twenty-six weeks – Fiscal 2022
vs. Fiscal 2021
-
Feed costs
per dozen
produced increased
34.6% in
the twenty-six
weeks ended
November 27,
2021 compared
to the
same period
of fiscal
2021, primarily
due to
higher feed
ingredient prices
resulting from
increased export
demand, as
well
as
weather-related
shortfalls
in
production
and
yields,
which
have
placed
additional
pressure
on
domestic
supplies.
-
Other
farm
production
costs increased
due
to higher
flock amortization,
 
primarily
 
from an
 
increase
 
in
 
our
 
cage-free
production,
 
which
 
has
 
higher
 
capitalized
 
costs.
 
Also,
 
higher
 
feed
 
costs,
 
which
 
began
 
to
 
rise
 
in
 
our
 
third
 
quarter
 
of
fiscal 2021, are capitalized in our flocks during pullet production and
 
increased our amortization expense.
-
We had higher
 
facility expense as more cage-free facilities came into production.
Processing, packaging, and warehouse
-
Cost
of
packaging
materials
increased
8.9%
compared
to
the
first
quarter
of
fiscal
2021
as
demand
for
packaging
products
increased
due
to
pandemic
supply
chain
constraints
and
manufacturers
increased
prices
and
implemented
pandemic surcharges.
-
Labor costs increased 11.1% due to wage
increases in response to labor shortages, primarily due to the pandemic.
Egg purchases and other (including change in inventory)
-
Costs
in
this
category
decreased
primarily
due
to
the
decrease
in
the
volume
of
outside
egg
purchases,
as
our
percentage of produced to sold increased to 91.2%, partially offset
by an increase in the cost of these purchases.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
27
22Processing, packaging, and warehouse
Second Quarter – Fiscal 2022 vs. Fiscal 2021
-
Cost of packaging
materials increased
5.3% compared
to the second
quarter of fiscal
2021 as supply
chain constraints
caused by the pandemic increased costs for packaging products and manufacturer
s
implemented pandemic surcharges.
-
Labor costs
increased 18.4%
due to
wage increases
in response
to labor
shortages, primarily
due to
the pandemic
and
its effects.
Twenty-six weeks – Fiscal 2022
vs. Fiscal 2021
-
Cost of
packaging
materials increased
7.0%
compared
to the
twenty-six
weeks ended
November 27,
2021 as
supply
chain
constraints
caused
by
the
pandemic
increased
costs
for
packaging
products
and
manufacturers
implemented
pandemic surcharges.
-
Labor costs
increased 14.8%
due to
wage increases
in response
to labor
shortages, primarily
due to
the pandemic
and
its effects.
Egg purchases and other (including change in inventory)
Second Quarter – Fiscal 2022 vs. Fiscal 2021
-
Costs
in
this category
increased
primarily
due
to
higher
egg
prices,
offset
slightly
by
the
decrease
in
the
volume
of
outside egg purchases, as our percentage of produced to sold increased
to 93.0%.
Twenty-six weeks – Fiscal 2022
vs. Fiscal 2021
-
Costs
in
this category
increased
primarily
due
to
higher
egg
prices,
offset
slightly
by
the
decrease
in
the
volume
of
outside egg purchases, as our percentage of produced to sold increased
to 92.1%.
Looking
 
forward
 
throughout
 
the
 
rest
 
of
 
fiscal
 
2022,
 
corn
 
and
 
soybean
 
supplies
 
remained
 
tight
 
relative
 
to
 
demand,
 
primarily
related
 
to
 
higherlower
 
exportcarry-out
 
demand,
as
well
as
weather-related
shortfalls
in
production
and
yields.stock.
 
We
 
expect
 
market
 
prices
 
to
remain elevated
 
and remain
volatile
 
relative togiven
 
historical prices
at least
for the
short term
given the
 
ongoing
disruptions
 
related
to
 
the
COVID-19 global pandemic, weather fluctuations and geopolitical issues.
 
issues.
GROSS PROFIT
 
Gross
 
Gross profit
 
for the
 
first the second
quarter
 
of fiscal
 
2022 was
 
$6.6 43.7
million
 
compared to
 
$16.8 to $58.5
million
 
for the
 
the same period
 
period of fiscal
 
2021.fiscal
2021.
The decrease of $10.1$14.7 million was primarily due to the increased cost of feed ingredients
 
ingredients and processing costs.
Gross
profit
for
the
twenty-six
weeks
ended
November
27,
2021
was
$50.4
million
compared
to
$75.2
million
for
the
same
period of fiscal
2021. The decrease
of $24.8 million
was primarily due
to the increased
cost of feed
ingredients and
processing
costs.
SELLING, GENERAL, AND ADMINISTRATIVE
 
EXPENSES
Selling,
 
general,
 
and
 
administrative
 
expenses
 
("SGA")
 
include
 
costs
 
of
 
marketing,
 
distribution,
 
accounting,
 
and
 
corporate
overhead. The following table presents an analysis of our SGA expenses (in
thousands):
Thirteen Weeks
 
13 Weeks Ended
August 28,November 27, 2021
August 29,November 28, 2020
$ Change
% Change
Specialty egg expense
$
13,71514,262
$
12,69714,039
$
1,018223
8.01.6
%
Delivery expense
13,93614,395
12,49413,052
1,4421,343
11.510.3
%
Payroll, taxes and benefits
9,93911,303
11,30110,030
(1,362)1,273
(12.1)12.7
%
Stock compensation expense
1,001975
893931
10844
12.14.7
%
Other expenses
7,9346,845
6,5805,821
1,3541,024
20.617.6
%
Total
$
46,52547,780
$
43,96543,873
$
2,5603,907
5.88.9
%
Second Quarter – Fiscal 2022 vs. Fiscal 2021
Specialty egg expense
-
Advertising and
 
franchise fees increased
 
increased in
the firstsecond
 
quarter of
 
fiscal 2022 compared
 
compared to
the firstsecond
 
quarter of fiscal
 
2021,fiscal
2021,
due to the 8.9% increased volume of specialty eggs sales.
advertising expense.
 
28
Delivery expense
-
The increased
 
delivery expense
is primarily
due to
the increase
in fuel
and labor
costs for
both our
fleet and
contract
trucking.
Payroll, taxes and benefits expense
-
The increase in payroll, taxes and benefits is primarily due to thean increase
in fuelemployee health insurance costs.
Payroll, taxes and benefitsOther expenses
-
The
 
decreaseincrease
 
in payroll,
 
taxes andother
 
benefitsexpenses
 
is
primarily
 
due
 
to
 
a decreaseincreased
premiums
for
property
and
casualty
insurance
due
to
insurance market conditions.
Twenty-six Weeks
Ended
November 27, 2021
November 28, 2020
$ Change
% Change
Specialty egg expense
$
27,977
$
26,736
$
1,241
4.6
%
Delivery expense
28,331
25,546
2,785
10.9
%
Payroll, taxes and benefits
21,242
21,331
(89)
(0.4)
%
Stock compensation expense
1,976
1,824
152
8.3
%
Other expenses
14,779
12,401
2,378
19.2
%
Total
$
94,305
$
87,838
$
6,467
7.4
%
Twenty-six weeks –
Fiscal 2022 vs. Fiscal 2021
Specialty egg expense
-
Advertising
and
franchise
fees
increased
in
the
twenty-six
weeks
ended
November
27,
2021
compared
to
the
same
period of fiscal 2021 due to increased
advertising expense.
Delivery expense
-
The increased
delivery expense
is primarily
due to
the increase
 
in bonusfuel
 
accruals asand labor
 
wellcosts for
 
as aboth our
 
decreasefleet and
 
incontract
expense associated with the deferred compensation plan.
trucking.
Other expenses
-
The increase in
 
in other expenses
is primarily due
 
due to property losses
incurred that
were not covered
by insurance
as well
as increased premiums
for property and casualty insurance market
 
insurance due to
hard
market conditions driven by industry high loss ratios and low investment income
returns to offset losses.
conditions.
OPERATING
 
INCOME (LOSS)
For
 
the
 
firstsecond
 
quarter
 
of
fiscal
 
2022,
 
we
 
recorded
 
an
operating
 
loss
of
 
$39.7
2.1 million
 
compared
 
to
an
operating
 
loss
income of
 
$27.214.5
million for the same period of fiscal 2021.
For the twenty-six
weeks ended
November 27,
2021, we recorded
an operating loss
of $41.7
million compared
to an operating
loss of $12.7 million for the same period of fiscal 2021.
OTHER INCOME (EXPENSE)
 
Total
 
other
 
income
 
(expense)
 
consists
 
of
 
items
 
not
 
directly
 
charged
 
or
 
related
 
to
 
operations,
 
such
 
as
 
interest
 
income
 
and
expense, royalty income, equity in income or loss of unconsolidated
entities, and
patronage income, among other items.
For
 
the
For
second
quarter
of fiscal
2022,
we
earned
$207 thousand
of interest
income
compared
to $727
thousand
for
the first quarter same
period
of
 
fiscal 2022,
 
we earned $290 thousand of
interest income compared to $996
thousand for the same period
of fiscal 2021
.2021.
 
The
decrease
resulted
 
from
significantly
 
lower
investment
 
balances.
 
The
Company
 
recorded interest
 
expense ofinterest
expense
of
$58 78
thousand
and $71
$64
thousand
for
the first
second
quarters
 
ended August 28, 2021 and August 29, 2020,
 
November
27,
2021
and
November
28,
2020,
respectively.
For the twenty-six
weeks ended November 27,
2021, we earned $497
thousand of interest income
compared to $1.7 million
for
the
same
period
of
fiscal
2021.
The
decrease
resulted
from
significantly
lower
investment
balances.
The
Company
recorded
interest expense
of $136
thousand and
$135 thousand
for the
twenty-six weeks
ended November
27, 2021
and November
28,
2020, respectively.
29
For the second quarter of fiscal 2022, equity
income of unconsolidated entities was $264 thousand
compared to $58 thousand in
the prior-year period.
For the twenty-six
weeks ended November
27, 2021, equity
income of unconsolidated
entities was $399
thousand compared
to
$14 thousand in the prior-year period.
Other, net
for the second quarter
ended November 27, 2021,
was income of $1.9
million compared to income
of $436 thousand
for
the same
period of
fiscal 2021,
which is
primarily
due to
a $1.4
million payment
related to
review
and adjustment
of our
various marketing agreements.
Other,
net
for
the
twenty-six
weeks
ended
November
27,
2021,
was
income
of
$7.0
million
compared
to
income
of
$948
thousand
for
the
same
period
of
fiscal
2021.
The
majority
of
the
increase
is
due
to
our
acquisition
of
the
remaining
50%
membership
interest
in
Red
River
as
we
recognized
a
$4.5
million
gain
due
to
the
remeasurement
of
our
equity
investment,
along with the $1.4 million payment related to review and adjustment of our
various marketing agreements.
INCOME TAXES
As of November 27, 2021, we remain under
audit by the Internal Revenue Service (IRS) for the fiscal years
2013 through 2015.
The IRS
has proposed
adjustments related
to the
Company’s
research and
development credits
claimed during
the years
under
audit. Management is continuing to evaluate those proposed adjustments
and does not anticipate the adjustments would result in
a
material
change
to
its
consolidated
financial
statements.
Using
the
facts,
circumstances
and
information
known
at
the
reporting date, the Company believes
it is reasonably possible an
adjustment to the previously recognized
tax benefits related to
the research
and development
credits is
necessary.
As such,
we recorded
a tax
benefit of
approximately $520
thousand during
the second quarter of fiscal 2022.
For
 
the
 
firstsecond
 
quarter
 
of
 
fiscal
 
2022,
 
equitypre-tax
 
income
of
unconsolidated
entities
 
was
 
$135468
 
thousand
 
compared
 
to
 
a$15.9
 
lossmillion
for
the
same
period
of
fiscal
2021.
We
recorded
an
income
tax
benefit
 
of
 
$44
thousand in the prior year period.
677
 
thousand
 
23
Other,
net for
 
the first
second
 
quarter ended
 
August 28,of
 
2021, wasfiscal
2022,
which
includes
the
discrete tax
benefit described
above. Excluding
the discrete
tax benefit,
 
income oftax
benefit was
 
$5.2 million
compared to
income of
$512157 thousand
 
for
the same period
 
of fiscal 2021. The
increase is due
to the acquisition of
Red River Valley
Egg Farm, LLC
(“Red River”) as wesecond
recognized a $4.5 million gain due to the remeasurement of our equity investmen
t.
INCOME TAXES
For the first quarter
 
of fiscal
2022 pre-tax loss
with an
adjusted
effective
tax rate
of
33.5%.
Income
tax expense
 
was $33.9 million compared
to $25.5 million for the same
period of fiscal 2021.
We recorded
an income tax benefit of $15.8 million for the first quarter of fiscal 2022,
which includes the discrete tax benefit of
$8.3$3.8
 
million
 
asfor
 
the comparable
period of fiscal 2021, which reflects an effective tax rate of 23.6%.
For
the
twenty-six
weeks
ended
November
27,
2021,
pre-tax
loss
was
$33.4
million
compared
to
$9.6
million
for
the
same
period
of
fiscal
2021.
We
recorded
an
income
tax
benefit
of
$16.5
million,
which
includes
the
discrete
tax
benefit
of
$8.3
million
as discussed
 
in
Note
 
2
–
 
Acquisitions
 
of
the
 
Notes
to
 
Condensed
Consolidated
 
Financial
 
Statements
in
 
this Quarterly
Quarterly Report.
Excluding
the discrete
tax
benefit,
income
 
tax benefit
was $7.6 $8.2
million for the first quarter of fiscal 2022
 
with
an adjusted
 
effective
 
tax rate
 
of 22.4%.24.6%,
Income
tax benefit
was $6.1
compared to $2.4 million
for the
comparable period
of fiscal
2021,
 
which
reflects an effective tax rate of 24.0%24.6%.
At August 28,November
27, 2021
and May
29, 2021,
trade and
other receivables net included
 
included income
taxes receivables of $42.5 million.
 
of $42.8
million and
$42.5 million, respectively.
Our effective tax
 
rate differs from
 
the federal statutory income
 
tax rate due to
 
state income taxes, certain
 
federal tax credits and
certain
 
items
 
included
 
in
 
income
 
for
 
financial
 
reporting
 
purposes
 
that
 
are
 
not
 
included
 
in
 
taxable
 
income
 
for
 
income
 
tax
purposes,
 
including
 
tax
 
exempt
 
interest
 
income,
 
certain
 
nondeductible
 
expenses
 
and
 
net
 
income
 
or
 
loss
 
attributable
 
to
our
noncontrolling
interest.
 
Results
for
the
current
quarter
were
favorably
impacted
by
a
$8.3
million
discrete
tax
benefit
as
discussed in Note 2 – Acquisitions of the Notes to Condensed Consolidated Finan
cial Statements in this Quarterly Report.
NET LOSS
Net income for
the second quarter ended
November 27, 2021, was
$1.2 million, or $0.02
per basic and diluted
share, compared
to net income of $12.2 million or $0.25 per basic and diluted share for the same
period of fiscal 2021.
Net loss for the twenty-six
 
for the
first quarter
weeks ended August
28,November 27, 2021,
was $18.0
million, or
 
$0.3716.9 million, or $0.34 per
 
basic and
diluted share,
compared to
net
to net loss of $19.4$7.2 million or $0.40$0.15 per basic and diluted share for the same period of fiscal
2021.
CAPITAL RESOURCES
 
AND LIQUIDITY
Our working
 
capital at
 
August 28,November 27,
 
2021
was $362.9$364.7
 
million, compared
 
to $429.8
 
million at
 
May 29,
 
2021. The
 
calculation of
of
working
 
capital
 
is
 
defined
 
as curr
 
entcurrent
 
assets
 
less
 
current
 
liabilities.
 
Our
 
current
 
ratio
 
was
 
4.724.13
 
at
 
AugustNovember
 
28,27,
 
2021,
compared
compared with 5.77 at May 29, 2021.
We had
no long-term debt outstanding at
August 28, 2021 or May 29, 2021.
On July 10, 2018, we entered into
a $100.0 million
Senior Secured Revolving Credit
Facility (the “Revolving Credit
Facility”). As of August
28, 2021, no amounts were
borrowed
under the
Revolving Credit
Facility.
We
have $4.1
million in outstanding
standby letters of
credit, issued under
our Revolving
Credit
Facility
for
the
benefit
of
certain
insurance
companies.
Refer
to
Part
II
Item
8,
Notes
to
Consolidated
Financial
Statements
and
Supplementary
Data,
Note
10:
Credit
Facility
included
in
our
2021
Annual
Report
for
further
information
regarding our long-term debt.
For the
thirteen
weeks ended
August
28, 2021
,
$24.1 million
in net
cash was
used in
operating activities,
compared
to $14.8
million used in operating
activities for the comparable
period in fiscal 2021
.
This is primarily due
to the increased costs
of feed
ingredients compared to the prior year period.
We
continue to invest
in our facilities with
$11.2 million
used to purchase property,
plant and equipment for
the thirteen weeks
ended
August
28,
2021,
compared
to
$25.3
million
in
the
same
period
of
fiscal
2021.
We
also
acquired
the
remaining
50%
membership
interest in
Red River
during our
first quarter
of fiscal
2022 for
$48.5 million.
Sales and
maturities of
investment
securities, net of
purchases, were $38.0
million for the thirteen
weeks ended August
28, 2021,
compared to $4.0 million
for the
comparable period
in fiscal 2021.
We
received $400 thousand
in distributions from
an unconsolidated entity
in the first
quarter
of fiscal 2022
compared to $650
thousand for the
same period fiscal
of 2021.
We
used $53 thousand
for principal payments
on
finance leases in the first quarter of fiscal 2022 compared to $50
thousand for the same period of fiscal 2021.
As of
August 28,
2021,
cash decreased
$40.7 million
since May
29, 2021,
compared to
a decrease
of $35.3
million during
the
same period of fiscal 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30
24We
had
no long
-term
debt
outstanding
at
November
27,
2021
or May
29,
2021.
On November
15, 2021,
we
entered
into an
Amended and Restated
Credit Agreement (the
“Credit Agreement”) with
a five-year term.
The Credit Agreement
amended and
restated
the
Company’s
previously
existing
credit
agreement
dated
July
10,
2018.
The
Credit
Agreement
provides
for
an
increased senior
secured revolving
credit facility
(the “Credit Facility”),
in an
initial aggregate
principal amount
of up
to $250
million. As
of November
27, 2021,
no amounts
were borrowed
under the
Credit Facility.
We
have $4.1
million in
outstanding
standby
letters
of
credit,
issued
under
our
Credit
Facility
for
the
benefit
of
certain
insurance
companies.
For
additional
information,
see
Note
7
–
Credit
Facility
of
the
Notes
to
Condensed
Consolidated
Financial
Statements
included
in
this
Quarterly Report.
For the
twenty-six
weeks ended
November
27,
2021, $15.5
million
in net
cash was
used
in operating
activities, compared
to
$10.7 million
used in
operating activities
for the
comparable period
in fiscal
2021.
This is
primarily due
to the
increased costs
of feed ingredients compared to the prior-year period.
We
continue
to invest
in our
facilities,
with
$28.6
million used
to purchase
property,
plant and
equipment
for
the
twenty-six
weeks ended November 27,
2021, compared to $52.4 million
in the same period of fiscal
2021.
We also
acquired the remaining
50%
membership
interest
in
Red
River
during
our
first
quarter
of
fiscal
2022
for
$48.5
million.
Sales
and
maturities
of
investment
securities, net
of purchases,
were $41.5
million for
the twenty-six
weeks ended
November 27,
2021, compared
to
$29.4
million
for
the
comparable
period
in
fiscal
2021.
We
received
$400
thousand
in
distributions
from
an
unconsolidated
entity in the first two quarters of fiscal 2022 compared to $2.70 million for
the same period fiscal of 2021.
As of
November 27,
2021, cash
decreased $41.9
million since
May 29,
2021, compared
to a
decrease of
$30.8 million
during
the same period of fiscal 2021.
We
 
continue
 
to monitor
 
the increasin
gincreasing
 
demand for
 
cage-free eggs
 
and to
 
engage with
 
our customers
 
in an
 
effort
 
to achieve
 
a
smooth transition to
 
meet their announced
 
commitment timeline for
 
cage-free egg sales.
 
We
 
have invested approximately
 
$482488
million in facilities, equipment
 
and related operations to
 
expand our cage-free production
 
starting with our first facility
 
in 2008.
During
October
2021,
we
announced
a
new
$23.0
million
capital
project
to
expand
our
cage-free
egg
production
at
our
Okeechobee,
Florida,
production
facility,
and
a
new
planned
$18.5
million
strategic
investment
that
will
specialize
in
high
value
commercial
product
solutions
targeting
specific
needs
in
the
food
industry.
See
“
”
for
additional
information. The following table presents material construction
projects approved
as of August 28,November 27, 2021 (in thousands):
Project(s) Type
Projected
 
Completion
Projected Cost
Spent as of
 
August 28,November 27, 2021
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2022
138,724132,443
99,380104,477
39,34427,966
Cage-Free Layer & Pullet Houses
Fiscal 2023
23,771
11
23,760
$
138,724156,214
$
99,380104,488
$
39,344
51,726
We believe our
 
current cash balances, investments, cash flows from operations, and Revolving Credit Facility
will be sufficient
to fund our
current capital needs. As we monitor the demand for cage-free
 
eggs and our growth strategy described in Part I Item
I “Business – Growth Strategy” in our 2021 Annual Report,
there may be a need for long-term debt financing. We
believe with
our strong balance sheet that we will have adequate access to capital markets if that need
arises.
RECENTLY
 
ISSUED/ADOPTED ACCOUNTING STANDARDS
For
 
information
 
on
 
changes
 
in
 
accounting
 
principles
 
and
 
new
 
accounting
 
policies,
 
see
 
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly
 
Report.
CRITICAL ACCOUNTING ESTIMATES
 
Critical accounting
 
estimates
 
are those
 
estimates
 
made
 
in accordance
 
with U.S.
 
generally
 
accepted
 
accounting
 
principles that
involve
 
a
 
significant
 
level
 
of
 
estimation
 
uncertainty
 
and
 
have
 
had
 
or
 
are
 
reasonably
 
likely
 
to
 
have
 
a
 
material
 
impact
 
on
 
our
financial
 
condition
 
or results
 
of operations.
 
There
 
have been
 
no changes
 
to our
 
critical
accounting
 
estimates identified
 
in our
2021 Annual Report.
31
25ITEM 3. QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk during the
twenty-six weeks ended November 27, 2021
from the information provided in Item 7A. Quantitative and Qualitative
Disclosures About Market Risk in our 2021 Annual
Report.
ITEM 4.
 
CONTROLS
AND
PROCEDURES
Disclosure Controls and Procedures
Our disclosure
 
controls and
 
procedures are
 
designed to
 
provide reasonable
 
assurance that
 
information required
 
to be
 
disclosed
by us in the reports
 
we file or submit
 
under the Exchange Act
 
is recorded, processed, summarized
 
and reported, within the
 
time
periods
 
specified
 
in
 
the
 
Securities and
 
Exchange
 
Commission’s
 
rules
 
and
 
forms. Disclosure
 
controls
 
and
 
procedures
 
include,
without limitation, controls and
 
procedures designed to ensure that
 
information required to be disclosed
 
by us in the reports that
we file or submit
 
submit under the Exchange
 
Exchange Act is accumulated and
 
and communicated to management,
 
management, including our principal
 
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
 
controls and procedures conducted by our Chief Executive Officer
and
 
Chief
 
Financial
 
Officer,
 
together
 
with
 
other
 
financial
 
officers,
 
such
 
officers
 
concluded
 
that
 
our
 
disclosure
 
controls
 
and
procedures were effective as of August 28,November 27, 2021 at the reasonable
 
assurance level.
Changes in Internal Control Over Financial Reporting
There
was no
change
 
in our
internal control
 
over financial
reporting
 
that occurred
during the
 
quarter ended November
 
ended
August
28,27, 2021
that has materially affected, or is reasonably likely to materially affect,
 
our internal control over financial reporting.
ITEM 3. QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk during the
thirteen weeks ended August 28, 2021 from the
information provided in Item 7A. Quantitative and Qualitative Disclosure
s
About Market Risk in our 2021 Annual Report.
PART
 
II. OTHER INFORMATION
ITEM 1.
 
LEGAL PROCEEDINGS
Refer
 
to
 
the
 
discussion
 
of
 
certain
 
legal
 
proceedings
 
involving
 
the
 
Company
 
and/or
 
its
 
subsidiaries
 
in
 
(i)
 
our
 
2021
 
Annual
Report,
 
Part I
 
Item 3:
 
Legal Proceedings,
 
and
 
Part II
 
Item 8,
 
Notes to
 
Consolidated
 
Financial
 
Statements and
 
Supplementary
Data, Note 18: Commitments
 
and Contingencies, and
 
(ii) in this Quarterly
 
Report in
of the Notes to Condensed Consolidated Financial Statements, which discussions are incorporated
 
herein by reference.
 
ITEM 1A.
 
RISK
FACTORS
There have been no material changes in the risk factors previously disclosed in the
 
Company’s 2021 Annual
 
Report.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
 
PROCEEDS
 
The following table is a summary There were
no purchases
of our first quarter 2022 share repurchases:
 
TotalCommon Stock
 
Number of
Maximum Number
Shares Purchased
of Shares that
Totalmade by
 
Number
Average
as Part of Publicly
May Yetor on
 
Be
behalf of Shares
Price Paid
Announced Plans
Purchased Under the
Period
Purchased (1)
per Share
Or Programs
Plans or Programs
05/30/21 to 06/26/21
—
$
—
—
—
06/27/21 to 07/24/21
404
36.34
—
—
07/25/21 to 08/28/21
—
—
—
—
404
$
36.34
—
—
 
(1)
our Company
 
or any
 
affiliated
As permitted under our Amended and Restated 2012 Omnibus Long
-
term Incentive Plan, these sha
res were withheld
by us to satisfy tax withholding obligations for employees in connection withpurchaser during
 
the vesting
second quarter of restricted common stock.
fiscal 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32
26
ITEM 6. EXHIBITS
Exhibits
No.
Description
3.1
3.2
10.1
10.2
31.1*
31.2*
32**
101.SCH*+
Inline XBRL Taxonomy
 
Extension Schema Document
101.CAL*+
Inline XBRL Taxonomy
 
Extension Calculation Linkbase Document
101.DEF*+
Inline XBRL Taxonomy
 
Extension Definition Linkbase Document
101.LAB*+
Inline XBRL Taxonomy
 
Extension Label Linkbase Document
101.PRE*+
Inline XBRL Taxonomy
 
Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained
 
in Exhibit 101)
 
*
Filed herewith as an Exhibit.
 
**
Furnished herewith as an Exhibit.
+
Submitted electronically with this Quarterly Report.
 
SIGNATURES
Pursuant to
 
the requirements
 
of the Securities
 
Exchange Act
 
of 1934,
 
the registrant has
 
duly caused
 
this report
 
to be signed
 
on
its behalf by the undersigned, thereunto duly authorized.
CAL-MAINE FOODS, INC.
(Registrant)
Date:
 
SeptemberDecember 28, 2021
/s/ Max P.
 
Bowman
Max P.
 
Bowman
Vice President, Chief Financial
 
Officer
(Principal Financial Officer)
໿
Date:
 
SeptemberDecember 28, 2021
/s/ Michael D. CastleberryMatthew S. Glover
Michael D. CastleberryMatthew S. Glover
Vice President Controller– Accounting
(Principal Accounting Officer)
໿