EDGAR 10-K Filing

Company CIK: 16160
Filing Year: 2021
Filename: 16160_10-K_2021_0001562762-21-000265.json

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ITEM 1. BUSINESS
ITEM 1.
BUSINESS
Our Business
We are the largest producer and distributor of shell eggs in the United States. Our mission is to be the most sustainable producer
and reliable
supplier of
consistent, high
quality fresh
shell eggs
and egg
products in
the country,
demonstrating a
"Culture of
Sustainability" in everything
we do, and creating
value for our shareholders,
customers, team members
and communities. We sell
most of our shell eggs in
the southwestern, southeastern, mid-western and mid-Atlantic regions of
the U.S. and aim to maintain
efficient, state-of-the-art operations located close to our customers. We were founded in 1957 by the late Fred R. Adams, Jr. and
are headquartered in Ridgeland,
Mississippi.
The Company has one operating segment, which is the production, grading, packaging, marketing and distribution of shell eggs.
Our
integrated
operations
consist
of
hatching
chicks,
growing
and
maintaining
flocks
of
pullets,
layers,
and
breeders,
manufacturing feed,
and producing,
processing, packaging,
and distributing
shell eggs.
Layers are
mature female
chickens, pullets
are female chickens usually under 18 weeks of
age, and breeders are male and female chickens
used to produce fertile eggs to be
hatched for egg production flocks.
Many of our customers rely on us to provide most of their
shell egg needs, including specialty and conventional eggs. Specialty
eggs encompass a
broad range of
products. We
classify nutritionally enhanced,
cage-free, organic and
brown eggs as
specialty
eggs for accounting and reporting purposes. We
classify all other shell eggs as conventional products. While
we report separate
sales information for these egg types, there are many cost factors that are not specifically available for conventional or specialty
eggs due
to the
nature of
egg production.
We manage our
operations and
allocate resources
to these
types of
eggs on
a consolidated
basis based on the demands of our customers.
Over time, we have acquired other companies in our industry.
Since 1989 through our fiscal year ended May 29, 2021, we have
completed 22
acquisitions ranging
in size
from 160 thousand
layers to
7.5 million layers.
In addition,
subsequent to
our fiscal
2021, we
acquired the
remaining 50%
membership interest
in Red
River Valley
Egg Farm,
LLC, effective
June 1,
2021. For
further
description
of
this
transaction,
refer
to
Part
II.
Item
8.
Notes
to
the
Consolidated
Financial
Statements,
Note 20 -
Subsequent Events.
When
we
use
“we,”
“us,”
“our,”
or
the
“Company”
in
this
report,
we
mean
Cal-Maine
Foods,
Inc.
and
our
consolidated
subsidiaries, unless otherwise indicated or the
context otherwise requires. Our fiscal year
2021 ended May 29, 2021, and
the first
three fiscal quarters of fiscal 2021 ended August 29, 2020, November 28, 2020, and February 27, 2021. All
references herein to
a fiscal year means our fiscal year and all references to a year mean a calendar year.
Industry Background
According to the
U.S. Department of
Agriculture (“USDA”) Agricultural
Marketing Service in
2020, approximately 72%
of eggs
produced in the U.S.
were sold as shell
eggs, with 66% sold
to retail outlets (e.g.
through grocery and convenience
stores), 3%
sold to foodservice customers and 3% exported. The remaining 28% of eggs produced in the U.S. are sold as egg products
(shell
eggs broken and
sold in liquid,
frozen, or dried
form) to
institutions (e.g. companies
producing baked goods).
For information
about egg producers in the U.S., see “Competition” below.
Based on historical consumption
trends, we believe general demand
for eggs increases basically
in line with overall
population
growth, averaging about 2% per year.
Specific events can impact egg consumption in a particular period. For
example, in 2015,
egg consumption decreased approximately 4% over the prior year primarily due to a shortage of eggs
resulting from an outbreak
of avian influenza ("AI") in the spring of
that year.
In 2016, consumption rebounded and increased 7% over
2015 and 3% over
the pre-shortage level of 2014.
According to the USDA, annual per
capita U.S. consumption since 2016 varied
between 278 and
293 eggs. In calendar
year 2020, per capita
U.S. consumption was estimated
to be 287 eggs,
or approximately six
eggs per person
per week. Per
capita consumption
is determined
by dividing
the total supply
of eggs by
the entire
population in
the U.S. (assuming
all eggs produced domestically by the egg
industry are consumed).
Sales prices of eggs are dependent upon
many factors other
than consumption. For information about shell egg prices see “Prices for Shell Eggs” below.
Prices for Shell Eggs
Wholesale shell egg
sales prices are
a critical component
of revenue for
the Company.
Wholesale shell egg
prices are volatile,
cyclical, and
impacted by
a number
of factors,
including consumer demand,
seasonal fluctuations, disease,
and by
the number
and productivity of
laying hens
in the U.S.
While we
use several different
pricing mechanisms in
pricing agreements with
our
customers, we believe the
majority of conventional shell eggs
sold in the U.S.
in the retail and
foodservice channels are sold
at
prices
that
take
into
account,
in
varying
ways,
independently
quoted
wholesale
market
prices
as
published
by
Urner
Barry
Publications, Inc.
("UB") for
shell eggs.
We
sell the
majority of
our conventional
shell eggs
based on
formulas that
take into
account, in varying ways, independently quoted regional
wholesale market prices for shell eggs or
formulas related to our costs
of production, which
include the cost
of corn and
soybean meal. We
do not sell
eggs directly to
consumers or set
the prices at
which eggs are sold to consumers.
The weekly average price
for the southeast region
for large white
conventional shell eggs as
quoted by UB is
shown below for
the past three
fiscal years along
with the five-year
average price.
As further discussed
in
Part II. Item 7. Management’s Discussion
and Analysis - Results of Operations
, conventional shell egg prices experienced a brief but significant
increase during the fourth
quarter of fiscal 2020 related to the onset of the COVID-19 pandemic. The actual prices that we realize on any
given transaction
will not necessarily equal quoted market prices because
of the individualized terms that we negotiate
with individual customers
which are influenced by many factors.
Specialty
eggs
are
sold
at
prices
and
terms
negotiated
directly
with
customers.
Historically,
prices
for
specialty
eggs
have
experienced less volatility than prices for conventional shell eggs and have generally been higher due to customer
and consumer
willingness to pay more for specialty eggs.
Feed Costs for Shell Egg Production
Feed is a primary
cost component in the
production of shell eggs
and represented 58.2% of
our fiscal 2021 farm
production costs.
We routinely fill our storage
bins during harvest
season when prices
for feed ingredients
are generally lower.
To ensure continued
availability of feed ingredients,
we may enter into contracts
for future purchases of corn
and soybean meal, and as
part of these
contracts, we may lock-in the basis portion
of our grain purchases several months in
advance. Ordinarily, we
do not enter long-
term contracts beyond
a year to
purchase corn and
soybean meal or
hedge against increases
in the price
of corn and
soybean meal.
As the
quality and
composition of
feed is
a critical
factor in
the nutritional
value of
shell eggs
and health
of our
chickens, we
formulate and produce
the vast majority
of our own
feed at our
feed mills located
near our production
plants. Our annual
feed
requirements for
fiscal 2021
were 1.8 million
tons of
finished feed,
of which
we manufactured
1.6 million tons.
We
currently
have the capacity to
store 152 thousand tons of
corn and soybean meal,
and we replenish these
stores as needed throughout
the
year.
Our primary feed ingredients, 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. We purchase the vast majority of our corn and soybean meal from U.S
sources but may be forced to
purchase internationally
when U.S.
supplies are
not readily
available. Feed
grains are
currently available
from an
adequate number
of sources in
the U.S. As
a point of
reference, a multi-year
comparison of the
monthly average of
daily closing prices
per Chicago
Board of Trade are shown below for corn and soybean meal:
Shell Egg Production
We produced approximately
90.5% of
our total
shell eggs
sold in
fiscal 2021,
with 91%
of such
production coming
from company-
owned
facilities, and
9%
from
contract
producers.
Under
a
typical
arrangement
with
a
contract
producer,
we
own
the
flock,
furnish all
feed and
critical supplies,
own the
shell eggs
produced and
assume market
risks. The
contract producers
own and
operate their facilities
and are paid
a fee based
on production with
incentives for performance.
We purchased approximately 9.5%
of the total shell eggs we sold during fiscal 2021 from outside suppliers.
The commercial production of shell eggs
requires a source of baby chicks
for laying flock replacement. We produce the majority
of
our
chicks
in
our
own
breeder
farms
and
hatcheries
in
a
computer-controlled
environment
and
obtain
the
balance
from
commercial sources.
After the
eggs are
produced, they
are graded
and packaged.
Substantially all
our farms
have modern
“in-line” facilities
which
mechanically gather, grade
and package
the eggs
at the
same location
where they
are laid.
The in-line
facilities generate
significant
efficiencies and cost savings
compared to the
cost of eggs
produced from non-in-line
facilities, which process
eggs laid at
another
location and transported to the
facility. The in-line facilities also produce a higher
percentage of USDA Grade A
eggs, which sell
at higher prices. Eggs produced on farms owned by contractors are brought
to our processing plants to be graded and packaged.
Because shell eggs are perishable,
we do not maintain
large egg inventories. Our
egg inventory averaged
six days of sales
over
the course of fiscal 2021. We
believe our constant focus on production efficiencies and
automation throughout the supply chain
enable us to be a low-cost supplier in our markets.
We
do not
use artificial
hormones in
the production
of our
eggs. Hormone
use in
the poultry
and egg
production industry
has
been
effectively
banned in
the U.S.
since the
1950s. We
have an
extensive written
protocol that
allows the
use of
medically
important
antibiotics
only
when
animal
health
is
at
risk,
consistent
with
guidance
from
the
United
States
Food
and
Drug
Administration
("FDA")
and
the
Guidance
for
Judicious
Therapeutic
Use
of
Antimicrobials
in
Poultry,
developed
by
the
American Association of
Avian Pathologists. When antibiotics are
medically necessary, a licensed veterinary
doctor will approve
and administer approved doses for a restricted
period. Our programs are designed to ensure
antibiotics are ordered and used only
when necessary and records of their usage - when and where - are maintained to monitor compliance with our
protocols. We do
not use antibiotics for growth promotion or performance enhancement.
Specialty Eggs
We
are
one
of
the
largest
producers
and
marketers
of
value-added
specialty
shell
eggs
in
the
U.S.,
which
continues
to
be
a
significant and
growing segment
of the
market. We classify
nutritionally enhanced,
cage-free, organic
and brown
eggs as
specialty
eggs for accounting and reporting purposes. Specialty eggs are intended to meet the demands of consumers who are
sensitive to
environmental, health and/or animal welfare issues.
As defined by the USDA, eggs packed in USDA grade marked consumer packages labeled as cage-free are laid by hens that are
able to roam vertically and horizontally
in indoor houses, and have access
to fresh food and water. Cage-free systems must allow
hens to
exhibit natural
behaviors and
include enrichments
such as
scratch areas,
perches and
nests. Hens
must have
access to
litter, protection from predators and be able to move in a barn in a manner that promotes bird welfare.
A significant number
of our customers
have announced goals
to offer
cage-free eggs exclusively
on or before
2026, subject in
most cases to availability of supply, affordability and customer demand, among other contingencies. Additionally,
several states
have
passed
legislation
requiring
the
sale
and
production
of
only
cage-free
eggs
within
this
time
period
and
other
states
are
considering such requirements.
Our customers typically
do not commit
to long-term purchases
of specific quantities
or type of
eggs with
us, and
as a
result, it
is difficult
to accurately
predict customer
requirements for
cage-free eggs.
We
are, however,
engaging with
our customers
in an
effort to
achieve a
smooth transition
in meeting
their announced
goals and
needs. Sales
of
cage-free
eggs
represented
approximately
23%
of
our
shell
egg
revenues
for
fiscal
year
2021,
and
currently
our
production
capacity exceeds customer requirements, which we believe positions us well, as our
customer base is primarily outside of states
that have mandated cage-free production and
sales We
have invested significant capital in recent
years to acquire and construct
cage-free facilities, and
we expect our
focus for future
expansion will continue to
include cage-free facilities, as
our customers
transition
to
meet
consumer
demand
and
comply
with
evolving
legal
requirements.
At
the
same
time,
we
understand
the
importance of our continued ability
to provide affordable conventional
eggs in order to provide
our customers with a variety
of
egg choices and to address hunger in our communities.
Egg-Land’s Best®
and
Land O’ Lakes®
branded eggs are
produced and processed
under license from
Eggland's Best, Inc.
("EB")
at our facilities under EB guidelines.
Land O’ Lakes®
branded eggs are produced by hens that
are fed a whole-grain vegetarian
diet. Our Farmhouse Eggs® brand eggs are produced at our facilities by
cage-free hens that are provided with a vegetarian diet.
We market
organic, vegetarian, and omega-3 eggs under our
4-Grain®
brand, which consists of both caged and cage-free eggs.
We also produce, market, and distribute private label specialty shell eggs to several customers.
Egg Products
Egg products are shell eggs broken and sold in liquid, frozen, or dried form. We
sell liquid and frozen egg products primarily to
the institutional, foodservice, and
food manufacturing sectors
in the U.S.
Our egg products
are sold through
our wholly owned
subsidiaries American Egg Products, LLC located in Georgia and Texas Egg Products, LLC located in Texas.
Summary of Conventional and Specialty Shell Egg and Egg Product Sales
The
following
table
sets
forth
the
contribution
as
a
percentage
of
revenue
and
volumes
of
dozens
sold
of
conventional
and
specialty shell egg and egg product sales for the following fiscal years:
Revenue
Volume
Revenue
Volume
Revenue
Volume
Conventional Eggs
56.8
%
73.2
%
61.4
%
76.1
%
59.4
%
74.9
%
Specialty Eggs
Egg-Land’s Best®
20.9
%
13.5
%
19.2
%
12.7
%
19.9
%
13.5
%
Other Specialty Eggs
19.1
%
13.3
%
16.7
%
11.2
%
17.3
%
11.6
%
Total Specialty Eggs
40.0
%
26.8
%
35.9
%
23.9
%
37.2
%
25.1
%
Egg Products
2.7
%
2.3
%
3.0
%
Marketing and Distribution
We
sell most of our shell eggs in
the southwestern, southeastern, mid-western and mid-Atlantic regions of
the U.S. through our
extensive distribution network to a diverse group of customers, including national and regional grocery store chains, club
stores,
companies servicing
independent supermarkets
in the
U.S., foodservice
distributors and
egg product
consumers. Some
of our
sales are
completed through
co-pack agreements
-
a common
practice in
the industry
whereby production
and processing
of
certain products is
outsourced to another
producer. Although
we face intense
competition from numerous other
companies, we
believe that we have the
largest market share for the sale
of shell eggs in the
grocery segment, including large U.S.
food retailers.
We
are a member
of the 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, Nevada, and Texas; portions of states in California, North Carolina
Oklahoma, South Carolina, Utah, as well as the whole New York City area.
The majority of eggs sold are based on the daily or short-term needs of our customers. Most sales to established accounts are on
payment terms ranging
from seven to
30 days. Although
we have established
long-term relationships
with many
of our customers,
most of them are free to acquire shell eggs from other sources.
The shell eggs
we sell are
either delivered to
our customers’ warehouse
or retail stores,
by our own
fleet or contracted
refrigerated
delivery trucks, or are picked up by our customers at our processing facilities.
Customers
Our top three
customers accounted for
an aggregate of
48.6%, 51.1% and
52.2% of net
sales dollars for
fiscal 2021, 2020,
and
2019, respectively. Our largest customer, Walmart Inc. (including Sam's Club),
accounted for 29.8%, 32.1%
and 33.7% for fiscal
2021, 2020, and 2019, respectively.
In fiscal
2021, approximately 90.5%
of our
revenue related
to sales to
retail customers, 6.8%
to sales to
foodservice providers
and 2.7% to
egg products sales.
Retail customers include
primarily national and
regional grocery store
chains, club stores,
and
companies servicing
independent supermarkets
in the
U.S. Foodservice
customers include
primarily companies
that sell
food
products and related items to restaurants, healthcare and education facilities, and hotels.
Competition
The production, processing, and distribution of shell
eggs is an intensely competitive business, which
has traditionally attracted
large numbers of producers. Shell egg competition is generally based on price, service, and product quality.
The
shell
egg
production
industry
remains
highly
fragmented.
According
to
Egg
Industry
magazine
in
its
survey,
producers, each owning
at least 500 thousand
layers, owned approximately
99% of total
industry layers. The
ten largest producers
owned approximately
53% of
total industry
layers compared
to 54%
in the
prior year.
We
believe industry
consolidation will
continue,
and
we
plan
to
capitalize
on
opportunities
as
they
arise.
We
believe
further
concentration
will
result
in
reduced
cyclicality of
shell egg
prices, but
no assurance
can be
given in
that regard.
A continuation
of this
trend could
create greater
competition among fewer producers.
Seasonality
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.
Growth Strategy
Our growth strategy is
focused on remaining a
low-cost provider of shell
eggs located near our customers.
In light of the
growing
customer
demand and
increased legal
requirements for
cage-free eggs,
we
intend to
continue to
closely
evaluate the
need
to
expand through
selective acquisitions,
with a
priority on
those that
will facilitate
our ability
to expand
our cage-free
shell egg
production capabilities
in key
locations and
markets. We
will continue
to closely
evaluate the
need to
continue to
expand and
convert our own facilities to increase production of cage-free eggs based on a timeline designed to meet the anticipated needs of
our customers and comply with
evolving legal requirements. As the
ongoing production of cage-free eggs
is more costly than the
production
of
conventional
eggs,
aligning
our
cage-free
production
capabilities
with
changing
demand
for
cage-free
eggs
is
important to the success of our business.
Trademarks and License Agreements
We own the trademarks
Farmhouse Eggs®
,
Sunups®
,
Sunny Meadow®
and
4Grain®
. We produce and
market Egg-Land's
Best®
and Land O’ Lakes® branded eggs under
license agreements with EB. We
believe these trademarks and license agreements are
important to our business.
Government Regulation
Our facilities and operations are
subject to regulation by various
federal, state, and local agencies, including,
but not limited to,
the FDA,
USDA, Environmental
Protection Agency
("EPA"),
Occupational Safety
and Health
Administration ("OSHA")
and
corresponding state agencies or laws. The applicable regulations relate to grading, quality control, labeling, sanitary
control and
reuse or disposal of
waste. Our shell egg
facilities are subject to
periodic USDA, FDA, EPA,
and OSHA inspections. Our
feed
production
facilities
are
subject
to
FDA
regulation
and
inspections.
We
maintain
our
own
inspection
program
to
monitor
compliance with our own standards and customer
specifications. It is possible that we will be
required to incur significant costs
for compliance with
such statutes and
regulations. In the
future, additional rules
could be proposed
that, if adopted,
could increase
our costs.
California, Colorado,
Massachusetts, Michigan,
Nevada, Oregon,
Rhode Island,
and Washington
have passed
minimum space
and/or cage-free
requirements, mandating
the sale
of only
cage-free eggs
in their
states, with
implementation of
these laws
ranging
from January 2022 to January
2026. These states represent approximately
24% of the U.S. total
population according to the 2020
U.S. Census.
While our
direct sales
into these
states have
not been
material, these
laws will
affect sourcing, production
and pricing
of eggs
(conventional as
well as
specialty) as
the national
demand for
cage-free production
could be
greater than
the current
supply which would
increase the price
of cage-free
eggs, unless more
cage-free production capacity
is constructed.
Likewise,
the national
supply for
eggs from
conventional production could
exceed consumer
demand which
would decrease
the price
of
conventional eggs.
Environmental Regulation
Our operations and facilities are subject to various federal, state, and local environmental, health and safety
laws and regulations
governing, among
other
things, the
generation, storage,
handling, use,
transportation, disposal,
and remediation
of
hazardous
materials. Under these laws and
regulations, we must obtain
permits from governmental authorities,
including, but not limited to,
wastewater discharge permits. We
have made, and will continue
to make, capital and other
expenditures relating to compliance
with existing environmental, health and safety
laws and regulations and permits.
We are not currently aware of any major capital
expenditures
necessary
to
comply
with
such
laws
and
regulations;
however,
as
environmental,
health
and
safety
laws
and
regulations are becoming increasingly more stringent, including those relating to
animal wastes and wastewater discharges, it is
possible that we will have to incur significant costs for compliance with such laws and regulations in the future.
Human Capital Resources
As of May
29, 2021, we
had 3,286 employees, of whom 2,642 worked
in egg production,
processing, and marketing,
188 worked
in feed
mill operations
and 456, including our
executive officers, were
administrative employees. Approximately
4.1% of
our
personnel
are
part-time, and we
utilize
temporary
employment
agencies
and
independent
contractors
to
augment
our
staffing needs when necessary. For fiscal 2021, the average monthly full-time equivalent
for contingent workers were 840. None
of our employees are covered by a collective bargaining agreement. We consider our relations with employees to be good.
Culture and Values
We
are
proud
to
be contributing corporate
citizens
where
we live
and
work and to
help to create healthy,
prosperous
communities. Our
colleagues
help
us
continue
to
enhance our community
contributions,
which are driven
by
our longstanding culture that strives to promote an environment that
upholds integrity and respect and provides opportunities for
each colleague to realize full potential.
Health and Safety
Our top priority is the health and safety of our employees, who
continue to produce high-quality, affordable
egg choices for our
customers and
contribute to a
stable food supply. Our
enterprise safety committee
comprises two corporate
safety managers,
eight
area
compliance
managers,
local
site
compliance
managers,
feed
mill
managers,
and
general
managers.
The
committee
oversees health
and
safety regularly
reviews
our
written policies
and
changes
to
OSHA
regulation
standards,
and
shares
information
as
it
relates
to
outcomes
from
incidents
in
order
to
improve
future
performance.
The
committee’s
goals
include
working to ensure that our
engagements with our consumers, customers, and regulators evidence our strong
commitment to our
workers’ health and safety.
Our commitment to our colleagues’ health includes a strong commitment to on-site worker safety, including a focus on accident
prevention and life safety.
Training and safety personnel conduct monthly multi-lingual training
that covers topics such
as slip-
and-fall
avoidance,
respiratory
protection,
prevention
of
hazardous
communication
of
chemicals,
the
proper
use
of
personal
protective equipment, hearing conservation,
emergency response, lockout tagout of
equipment, and forklift safety, among others.
To
help drive our
focus on colleague
safety, we
developed safety committees
at each of
our sites that
employee representation
from each department. We regularly provide health and safety information to employees via company bulletin boards. Our local
site
farm
and
feed
mill
management
has
an open-door policy
with
employees
to
discuss
improvement
ideas.
We
have
also
installed dry hydrogen peroxide biodefense
systems in
our processing facilities. New
colleagues undergo
a two-day orientation
period reviewing our
safety and health
programs and policies as
they relate to
their job tasks
and then are
placed with experienced
team members to learn
the job tasks.
At the 30-day anniversary of the
employees’ hire date,
their supervisor
has a one-on-one
meeting to discuss any questions the employee may still be unsure about as it relates to their job tasks, health and safety policies
and procedures, or any other matters.
We
review the
success of
our safety
programs on
a monthly
basis to
monitor their
effectiveness and
the development
of any
trends that need
to be addressed.
During fiscal year
2021 our recordable
incident rates decreased
by 21% compared
to fiscal 2020.
Diversity, Equity and Inclusion
Our
culture seeks
to
embrace the
diversity
and
inclusion
of
all
our
team
members.
This
culture is driven
by
our
board
and
executive management team.
Our board comprises seven members,
four of whom are independent.
Women comprise 29% of our
board and 14% of our board members identify as a racial or ethnic minority. As of May 29, 2021, our total workforce comprised
30% women and 52% of colleagues who identify
as racial or ethnic minorities. Our Policy
against Harassment, Discrimination,
Unlawful
or
Unethical
Conduct
and
Retaliation;
Reporting
Procedure affirms
our
commitment
to
supporting
our
employees
regardless of race, color, religion, sex, national origin or any other basis protected by applicable law.
Cal-Maine Foods
strives to
ensure that
our colleagues
are treated
equitably. We are an Equal
Opportunity Employer
that prohibits,
by policy and practice, any violation of
applicable federal, state, or local law regarding employment.
Discrimination because of
race, color, religion, sex, pregnancy,
age, national origin, citizenship status, veteran status, physical or mental disability, genetic
information, or any other
basis protected by applicable
law is prohibited. We value diversity
in our workplaces or
in work-related
situations. We maintain strong protocols to help our colleagues perform their jobs free from harassment and discrimination. Our
focus
on
equitable
treatment
extends
to
recruitment,
employment
applications,
hiring,
placement,
job
assignments,
career
development, training, remuneration, benefits, discharge
and other matters tied to
terms and conditions of employment. We
are
committed
to
offer
our
colleagues
opportunities
commensurate
with
our
operational
needs,
their
experiences,
goals
and
contributions.
Recruitment, Development and Retention
We
believe
in compensating
our
colleagues
with
fair
and competitive wages, in
addition
to offering
competitive benefits. Approximately 78%
of our
employees are
paid at
hourly rates,
with the
majority paid
at rates
above the
federal
minimum
wage
requirement.
Our annual average
weekly wage across
all employees for fiscal
year
2021 was $878.30. We
offer our
full-time eligible
employees a
range of
benefits including
company-paid life
insurance.
The
Company provides
a comprehensive
self-insured health
plan and pays
approximately 85%
of the costs
of the plan
for participating
employees and their
families as of
December 31, 2020. Recent
benchmarking of our health
plan indicates comparable benefits, at
lower
employee contributions, when compared to an applicable
Agriculture
and
Food Manufacturing sector
grouping,
as
well
as peer
group
data.
In addition, we
offer
employees
the
opportunity
to
purchase
an
extensive range
of other
group
plan benefits, such as dental,
vision, cancer,
disability and
voluntary life.
After one
year of
employment, full-time employees,
who
meet
eligibility
requirements, may
elect
to participate
in
our
KSOP retirement plan,
which
offers
a
range
of
investment
alternatives
and
includes
many positive features,
such
as
automatic enrollment with scheduled
automatic contribution
increases and loan
provisions. And, regardless of
the
employees’ election
to contribute
to
the
KSOP,
the
Company contributes shares
of Company
stock or
cash
equivalent
to 3%
of pre-tax earnings for
each
pay
period
that
hours
are worked.
We provide
extensive
training
and
development related
to
safety,
regulatory
compliance,
and
task
training. We invest
in
developing our future leaders through our Management Intern, Management Trainee,
and informal mentoring programs.
Sustainability
We
understand
that
a
healthy
environment
and
responsible
management
of
our
flocks
and
natural
resources
are
vital
to
the
production of high-quality
eggs and
egg products and
to the success of
our Company. We have engaged in
agricultural production
for more than
60 years. Our
agricultural practices continue
to evolve with
increased focus on
sustainability factors as we continue
to strive
to meet the
need for nutritious,
affordable foods to
feed a
growing population even as we
exercise responsible natural
resource stewardship. We plan to publish our
most recent Sustainability update in late July 2021, which will be available on our
website. Information contained in our website is not a part of this report.
COVID-19 Pandemic
For information
regarding our
response to
the COVID-19
pandemic, and
its impact
on our
business, see
Part I. Item 1A. Risk
Factors
and
Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
.
Our Corporate Information
We
maintain
a
website
at
www.calmainefoods.com
where
general
information
about our
business
and
corporate
governance
matters is
available. The
information contained
in our
website is
not a
part of
this report.
Our Annual
Reports on
Form 10-K,
Quarterly
Reports
on
Form
10-Q,
Current
Reports
on
Form
8-K,
proxy
statements,
and
all
amendments
to
those
reports
are
available, free of charge, through our website as soon as reasonably practicable after we file them with the SEC. In addition, the
SEC maintains
a website
at www.sec.gov that
contains reports,
proxy and
information statements,
and other
information regarding
issuers
that
file
electronically
with
the
SEC.
Information
concerning
corporate
governance
matters
is
also
available
on
our
website. Cal-Maine Foods, Inc. is a Delaware corporation, incorporated in 1969.

---

ITEM 1A. RISK FACTORS
ITEM 1A.
RISK FACTORS
Our
business
and
results
of
operations
are
subject
to
numerous
risks
and
uncertainties,
many
of
which
are
beyond
our
control. The following is a description of
the known factors that
may materially affect our
business, financial condition or
results
of operations. They should
be considered
carefully,
in addition to
the information set
forth elsewhere
in this Annual
Report on
Form 10-K, including under Item 7.
Management’s
Discussion and Analysis of Financial Condition
and Results of Operations,
in making any investment decisions with respect to our securities. Additional risks or uncertainties that are not currently
known
to us,
or that
we are
aware of
but currently
deem to
be immaterial
or that
could apply
to any
company could
also materially
adversely affect our business, financial condition or results of operations.
INDUSTRY RISK FACTORS
Market prices of
wholesale shell eggs
are volatile,
and decreases
in these prices
can adversely impact
our revenues
and
profits.
Our operating results are significantly affected by wholesale shell egg market prices, which fluctuate widely and are outside our
control. As a
result, our
prior performance
should not
be presumed
to be
an accurate
indication of
future performance.
Under
certain circumstances,
small increases
in production,
or small
decreases in demand,
within the industry
might have a
large adverse
effect on shell egg prices. Low shell egg prices adversely affect our revenues and profits.
Market prices for wholesale shell
eggs have been volatile and
cyclical. Shell egg prices have
risen in the past
during periods of
high demand such as the initial outbreak of the COVID-19 pandemic and periods when high protein diets are popular. Shell egg
prices have also
risen in the past
during periods of
constrained supply,
such as the
avian influenza outbreak in
2015, which we
believe, based on published industry
estimates, impacted approximately 12% of
the national flock of laying
hens. During times
when prices are
high, the egg
industry has typically
geared up to produce
more eggs primarily
by increasing the
number of layers,
ultimately resulting in an oversupply of eggs, which was subsequently followed by a period of lower prices.
As discussed
above under
the heading
“Seasonality” in
Part I.
Item 1.
Business, seasonal
fluctuations impact
shell egg
prices.
Therefore, comparisons of
our sales and
operating results between
different quarters within a
single fiscal year
are not necessarily
meaningful comparisons.
A decline in consumer demand for shell eggs can negatively impact our business.
We
believe the
increase in
meals prepared
at home
due to
COVID-19 pandemic,
high protein
diet trends,
industry advertising
campaigns, and the improved nutritional reputation of eggs (related to
better scientific understanding of the role of cholesterol in
diets) have all contributed to shell egg demand. However,
it is possible that the demand for shell eggs will
decline in the future.
Adverse publicity
relating to
health concerns
and changes
in the
perception of
the nutritional
value of
shell eggs,
changes in
consumer views
regarding consumption
of animal-based
products, as
well as
movement away
from high
protein diets,
could
adversely
affect
demand
for
shell
eggs,
which
would
have
a
material
adverse
effect
on
our
future
results
of
operations
and
financial condition.
Feed costs are volatile and increases in these costs can adversely impact our results of operations.
Feed costs are the
largest element of our
shell egg (farm) production
cost, ranging from 55%
to 58% of total
farm production cost
in the last five fiscal years. Although feed ingredients, primarily corn and soybean
meal, are available from a number of sources,
we do not have
control over the prices
of the ingredients we
purchase, which are affected by
weather, various supply and demand
factors,
transportation
and
storage
costs,
speculators,
and
agricultural,
energy
and
trade
policies
in
the
U.S.
and
internationally. Increases in feed costs unaccompanied by increases
in the selling price of
eggs can have a material
adverse effect
on the
results of
our operations
and cash
flow. Alternatively,
low feed
costs can
encourage industry
overproduction, possibly
resulting in lower egg prices and lower revenue.
Shell
eggs
and
shell
egg
products
are
susceptible to
microbial
contamination, and
we
may
be
required
to,
or
we
may
voluntarily, recall contaminated products.
Shell eggs
and shell
egg products
are vulnerable
to contamination
by pathogens
such as
Salmonella. The Company
maintains
policies and procedures designed to comply with the complex rules and regulations
governing egg production, such as The Final
Egg Rule
issued by
the FDA
"Prevention of
Salmonella Enteritidis
in Shell
Eggs During
Production, Storage,
and Transportation,”
and the
FDA’s Food Safety Modernization Act.
Shipment of
contaminated products,
even if
inadvertent, could
result in
a violation
of law
and lead
to increased
risk of
exposure to
product liability
claims, product
recalls and
scrutiny by
federal and
state regulatory
agencies. In
addition,
products
purchased
from
other
producers
could
contain
contaminants
that
might
be
inadvertently
redistributed by
us. As such,
we might
decide or be
required to recall
a product
if we
or regulators
believe it poses
a potential
health risk. Any product recall could
result in a loss of consumer
confidence in our products, adversely
affect our reputation with
existing and potential customers and
have a material adverse effect on
our business, results of operations
and financial condition.
Agricultural risks, including outbreaks of avian disease, could harm our business.
Our shell egg production activities
are subject to a variety
of agricultural risks. Unusual or
extreme weather conditions, disease
and pests
can materially
and adversely
affect the
quality and
quantity of
shell eggs
we produce
and distribute. The
Company
maintains controls and procedures
to reduce the risk of
exposing our flocks to harmful
diseases; however, despite
these efforts,
outbreaks of avian disease can
and do still occur and
may adversely impact the health
of our flocks. An outbreak of avian
disease
could have a material
adverse impact on our
financial results by increasing
government restrictions on the
sale and distribution
of our products
and requiring us
to euthanize the
affected layers.
Negative publicity from
an outbreak within
our industry can
negatively impact customer perception,
even if the
outbreak does not
directly impact our flocks.
If a substantial
portion of our
layers or production facilities are affected by any of these factors
in any given quarter or year, our business, financial condition,
and results of operations could be materially and adversely affected.
BUSINESS AND OPERATIONAL RISK FACTORS
The COVID-19 pandemic has had an adverse impact on our business and operations
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.
The effects of COVID-19
have had, and may continue to
have if a resurgence occurs,
a negative impact on our business
through disruptions in the supply
chain such as increased costs
and decreased availability of packaging
supplies; the pandemic has also
increased labor costs and
medical costs.
During the initial outbreak
of COVID-19, we saw
an increase in
demand for eggs
as consumers prepared more
meals at home.
Egg prices initially rose during the fourth quarter of fiscal 2020, but prices quickly decreased as the demand shock subsided and
eggs that normally
would go to foodservice
businesses (e.g. restaurants)
entered the retail
market (e.g. grocery stores).
As a result
of the pandemic,
the foodservice market
for shell eggs
was depressed for
most of fiscal
2021. As vaccination
rates continue to
rise and governmental
restrictions are lifted,
foodservice demand may
increase and demand
in retail channels,
where we sell
most
of our eggs, could decrease.
Our acquisition growth strategy subjects us to various risks.
As discussed in
Part I. Item I. Business - Growth Strategy
, we plan
to pursue a
growth strategy that
includes selective acquisitions
of other
companies engaged
in the
production and
sale of
shell eggs,
with a
priority on
those that
will facilitate
our ability
to
expand our
cage-free shell
egg production
capabilities in
key locations
and markets.
The number
of existing
companies with
cage-free capacity that
we may be able
to purchase is limited,
as most production
of shell eggs by
other companies in our
markets
currently does not meet customer or legal requirements to be designated as cage-free.
Acquisitions require capital resources and
can divert management’s attention from our existing
business. Acquisitions also entail
an inherent risk that
we could become
subject to contingent
or other liabilities,
including liabilities arising
from events or
conduct
prior to
our acquisition
of a
business that
were unknown
to us
at the
time of
acquisition. We
could incur
significantly greater
expenditures in integrating an acquired business than we anticipated at the time of its purchase. We may over-estimate or under-
estimate the demand for cage-free eggs, which could cause our acquisition strategy to be less-than-optimal
for our future growth
and profitability.
We cannot assure you that we:
●
will identify suitable acquisition candidates;
●
can consummate acquisitions on acceptable terms;
●
can successfully integrate an acquired business into our operations; or
●
can successfully manage the operations of an acquired business.
No
assurance can
be
given
that
companies
we
acquire
in
the
future
will
contribute
positively
to
our
results
of
operations or
financial condition.
In addition,
federal antitrust
laws require
regulatory approval
of acquisitions
that exceed
certain threshold
levels of significance, and we cannot guarantee that such approvals would be obtained.
The consideration we pay
in connection with any
acquisition affects our financial
results. If we pay
cash, we could be
required
to use a
portion of our
available cash to
consummate the acquisition.
To the extent we
issue shares
of our Common
Stock, existing
stockholders may be diluted. In addition, acquisitions may result in additional debt.
Our largest customers have accounted
for a significant portion of
our net sales volume. Accordingly, our business
may be
adversely affected by the loss of, or reduced purchases by, one or more of our large customers.
Our top three
customers accounted for
an aggregate of
48.6%, 51.1% and
52.2% of net
sales dollars for
fiscal 2021, 2020,
and
2019, respectively.
Our largest
customer, Walmart
Inc. (including Sam's
Club), accounted for
29.8%, 32.1% and
33.7% of net
sales dollars
for fiscal
2021, 2020,
and 2019, respectively.
Although we
have established
long-term relationships with
most of
our customers who
continue to purchase
from us based
on our ability
to service their
needs, they are
free to acquire
shell eggs
from other sources. If, for any reason, one or more of our large customers were to purchase significantly less of our shell eggs in
the future or terminate
their purchases from
us, and we were
not able to
sell our shell
eggs to new customers
at comparable levels,
it would have a material adverse effect on our business, financial condition, and results of operations.
Our business is highly competitive.
The
production
and
sale
of
fresh
shell
eggs,
which
accounted
for
virtually
all
of
our
net
sales
in
recent
years,
is
intensely
competitive. We compete with a large number of competitors that may
prove to be more successful than
we are in marketing and
selling shell eggs. We cannot provide assurance that we will be able to compete successfully with any or all of these companies.
Increased competition could
result in price
reductions, greater cyclicality, reduced
margins and loss
of market share,
which would
negatively affect our business, results of operations, and financial condition.
We
are
dependent
on
our
management
team,
and
the
loss
of
any
key
member
of
this
team
may
adversely
affect
the
implementation of our business plan in a timely manner.
Our success depends
largely upon
the continued service
of our senior
management team. The
loss or interruption
of service of
one or more of
our key executive officers
could adversely affect our
ability to manage our
operations effectively and/or pursue
our growth strategy.
We
have not entered
into any employment
or non-compete agreements
with any of
our executive officers
nor do we
carry any significant
key-man life insurance
coverage on any
such persons.
Competition could
cause us to
lose talented
employees,
and
unplanned
turnover
could
deplete
institutional
knowledge
and
result
in
increased
costs
due
to
increased
competition for employees.
Our
business
is
dependent
on
our
information
technology
systems
and
software,
and
failure
to
protect
against
or
effectively respond to cyber-attacks, security
breaches, or other incidents involving those systems, could adversely
affect
day-to-day operations and decision making processes and have an adverse effect on our performance and reputation.
The efficient operation of our business depends on our information technology systems, which we rely on to effectively manage
our
business
data,
communications,
logistics,
accounting,
regulatory
and
other
business
processes.
If
we
do
not
allocate
and
effectively manage the resources necessary
to build and sustain an
appropriate technology environment, our
business, reputation,
or financial results could be negatively impacted. In addition, our information technology systems may be vulnerable to damage
or
interruption
from
circumstances
beyond
our
control,
including
systems
failures,
natural
disasters,
terrorist
attacks,
viruses, ransomware, security breaches or cyber incidents. Cyber-attacks are becoming more sophisticated and
are increasing in
the number of attempts and frequency by groups and individuals with a wide range of motives.
A security breach
of
sensitive
information
could
result
in
damage
to
our
reputation
and
our
relations
with
our
customers
or
employees. Any such damage or interruption could have a material adverse effect on our business.
Labor shortages or increases in labor costs could adversely impact our business and results of operations.
Labor is a primary component of our farm production costs. Our success is dependent upon recruiting, motivating,
and retaining
staff to operate our farms.
Approximately 78% of our
employees are paid at
hourly rates, often in
entry-level positions. While the
majority
are
paid
at
rates
above
the
federal
minimum
wage
requirements,
any
significant
increase
in
local,
state
or
federal
minimum wage
requirements could
increase our
labor costs.
In addition,
any regulatory
changes requiring
us to
provide additional
employee
benefits
or
mandating
increases
in
other
employee-related
costs,
such
as
unemployment
insurance
or
workers
compensation, would increase
our costs. A
shortage in the
labor pool,
which may be
caused by competition
from other employers,
the remote locations of many
of our farms, or changes
in government provided support
or immigration laws, particularly in
times
of lower unemployment, could adversely affect our business and results of operations.
A shortage of labor available to us could
cause our farms to operate with reduced staff, which could negatively impact our production capacity and efficiencies and could
require us
to increase wages
to attract
labor.
Accordingly,
any significant labor
shortages or
increases in our
labor costs could
have a material adverse effect on our results of operations.
We
are controlled
by the
family of
our late
founder,
Fred R.
Adams, Jr.,
and Adolphus
B. Baker,
our Chief
Executive
Officer and Chairman of our Board of Directors controls the vote of 100% of our outstanding Class A Common Stock.
Fred R. Adams, Jr.,
our Founder and Chairman Emeritus died on
March 29, 2020. Mr.
Adams’ son-in-law, Adolphus
B. Baker,
our
Chief
Executive Officer
and
Chairman of
our
board
of
directors, Mr.
Baker’s
spouse and
her
three sisters
(who
are
Mr.
Adams’
four
daughters)
beneficially
own,
directly
or
indirectly
through
related
entities,
100%
of
our
outstanding
Class
A
Common Stock (which
has 10 votes
per share), controlling
approximately 52.1% of
our total voting
power. Additionally,
such
persons and
Jean Reed
Adams (“Mrs.
Adams”), the
wife of
our late
founder,
Fred R.
Adams, Jr.,
also have
additional voting
power due to
beneficial ownership of our
Common Stock (which has
one vote per
share), directly or
indirectly through related
entities, resulting in
family voting control
of approximately 57.7%
of our total
voting power. Mr. Baker controls the
vote of 100%
of our outstanding Class A Common Stock.
We
understand that the Adams and
Baker families intend to retain ownership
of a sufficient amount
of our Common Stock and
our Class A Common
Stock to assure continued
ownership of more than
50% of the voting
power of our outstanding
shares of
capital stock.
As a
result of
this ownership,
the Adams
and Baker
families have
the ability
to exert
substantial influence
over
matters requiring action by our stockholders, including amendments to our certificate of incorporation and
by-laws, the election
and
removal
of
directors,
and
any
merger,
consolidation,
or
sale
of
all
or
substantially
all
of
our
assets,
or
other
corporate
transactions. Delaware law
provides that
the holders
of a
majority of
the voting
power of
shares entitled to
vote must
approve
certain fundamental corporate transactions
such as a merger,
consolidation and sale of
all or substantially all
of a corporation’s
assets; accordingly,
such a transaction involving us
and requiring stockholder approval cannot
be effected without the
approval
of
the
Adams
and
Baker
families.
Such
ownership
will
make
an
unsolicited
acquisition
of
our
Company
more
difficult
and
discourage certain
types of
transactions involving
a change
of control
of our
Company, including transactions
in which
the holders
of our Common Stock
might otherwise receive a
premium for their shares
over then current market
prices. The Adams and
Baker
families’ controlling ownership of our capital stock may adversely affect the market price of our Common Stock.
The
price
of
our
Common
Stock
may
be
affected
by
the
availability
of
shares
for
sale
in
the
market,
and
you
may
experience significant dilution
as a result of
future issuances of our
securities, which could
materially and adversely
affect
the market price of our Common Stock.
The sale or
availability for sale of
substantial amounts of our
Common Stock could adversely
impact its price. As
described in
Note 19 - Related Party Transaction
of Part
II. Item
8. Notes
to the
Consolidated Financial
Statements, in
August 2020
Mrs.
Adams and the
Daughters’ Trust (of which
the daughters of
our late founder
are beneficiaries) sold
6.9 million shares
of Common
Stock in a secondary
public offering pursuant to
a previously disclosed
Agreement Regarding Common Stock
(the “Agreement”)
filed as an exhibit to this report. After
the sale, approximately 5.0 million shares (the “Subject Shares”)
remain registered under
a shelf
registration statement
and prospectus
dated October
9, 2018
for potential
resale, which
shares are
subject to
the Agreement.
The Agreement generally
provides that if
a holder of
Subject Shares intends
to sell any
of the Subject
Shares, such party
must
give the Company
a right of
first refusal to
purchase all or
any of such
shares. The price
payable by the
Company to purchase
shares pursuant to the exercise of the right
of first refusal will reflect a 6% discount
to the then-current market price based on the
20 business-day volume
weighted average price.
If the Company
does not exercise
its right of
first refusal and
purchase the shares
offered, such
party will,
subject to
the approval
of a
special committee
of independent
directors of
the Board
of Directors,
be
permitted to
sell the
shares not
purchased by
the Company
pursuant to
a Company
registration statement,
Rule 144
under the
Securities Act of 1933, or another manner of sale agreed to by the Company. Although pursuant to the Agreement the Company
will have a
right of first
refusal to purchase
all or any
of those shares,
the Company may
elect not to
exercise its rights
of first
refusal, and if so
such shares would be
eligible for sale pursuant
to the registration rights
in the Agreement or
pursuant to Rule
144 under the Securities Act of 1933. Sales, or the availability for sale, of a large number of shares of our Common Stock could
result in a decline in the market price of our Common Stock.
In addition, our
articles of incorporation
authorize us to
issue 120,000,000 shares
of our Common
Stock. As of
May 29, 2021,
there were 44,058,463
shares of our
Common Stock outstanding.
Accordingly,
a substantial number
of shares of
our Common
Stock
are
outstanding
and
are,
or
could
become,
available
for
sale
in
the
market.
In
addition,
we
may
be
obligated
to
issue
additional shares of our Common Stock in connection with employee benefit plans (including equity incentive plans).
In the
future, we
may decide
to raise
capital through
offerings of
our Common
Stock, additional
securities convertible
into or
exchangeable for Common Stock,
or rights to acquire
these securities or our
Common Stock. The issuance
of additional shares
of our Common Stock or additional securities
convertible into or exchangeable for our Common
Stock could result in dilution of
existing stockholders’ equity interests in us. Issuances of substantial amounts of our Common Stock, or the perception that such
issuances could occur,
may adversely affect
prevailing market prices
for our
Common Stock, and
we cannot predict
the effect
this dilution may have on the price of our Common Stock.
LEGAL AND REGULATORY
RISK FACTORS
Pressure from animal rights groups regarding the treatment
of animals may subject
us to additional costs to
conform our
practices
to
comply
with
developing
standards
or
subject
us
to
marketing
costs
to
defend
challenges
to
our
current
practices and protect our
image with our customers. In
particular,
changes in customer preferences
and new legislation
have accelerated an increase in demand for cage-free eggs, which increases uncertainty in our business
and increases our
costs.
We and many of our customers face
pressure from animal rights
groups, such as People
for the Ethical Treatment of
Animals and
the Humane Society
of the United
States, to require
companies that supply
food products to operate
their business in
a manner
that
treats
animals
in
conformity
with
certain
standards
developed
or
approved
by
these
groups.
In
general,
we
may
incur
additional costs to conform
our practices to address
these standards or to
defend our existing practices
and protect our image
with
our customers. The
standards promoted by
these groups change
over time, but
typically require minimum
cage space for
hens,
among other requirements, and some of these groups have led successful legislative efforts to
ban any form of caged housing in
various states.
As discussed
in Part
I. Item
1. Business
- Government
Regulation, several
states have
passed minimum
space
and/or cage-free
requirements for
hens, and
other states
are considering
such requirements.
In addition,
in recent
years, many
large restaurant chains,
foodservice companies and
grocery chains, including
our largest customers,
announced goals to
transition
to an
exclusively cage-free
egg supply
chain by
specified future
dates, in
some cases
subject to
available supply,
affordability
and consumer demand.
Changing our infrastructure and operating procedures to conform to consumer preferences, customer
demands and new laws has
resulted and will
continue to result
in additional costs,
including capital and
operating cost increases. The
USDA reported that
the
estimated
cage-free
flock
is 86.0 million hens
as
of June 1, 2021, which
is
approximately
27%
of
the
total
U.S.
hen
population.
According to the USDA Agricultural Marketing Service approximately 66% of the U.S. laying flock would have to
be in cage-free production
by 2026 to
meet projected demand from
the retailers, foodservice providers
and food manufacturers
that have made
promises to transition
to cage-free eggs.
The United Egg
Producers, a nation-wide
egg farmer cooperative,
has
estimated that the cost to build farms compliant with
cage-free standards is $45 a bird. Based on
that figure, such an increase in
the size of the cage-free flock would require an estimated industry-wide investment of approximately $5.5 billion.
In
response
to
our
customers'
announced
goals
and
increased
legal
requirements
for
cage-free
eggs,
we
increased
capital
expenditures
to
increase
our
cage-free
production
capacity.
We
are
also
enhancing
our
focus
on
cage-free
capacity
when
considering acquisition
opportunities. Our
customers typically
do not
commit to
long-term purchases
of specific
quantities or
type of eggs with
us, and as a
result, we cannot predict
with any certainty which
types of eggs they
will require us to
supply in
future periods.
The ongoing
production of
cage-free eggs
is more
costly than
the production
of conventional
eggs, and
these
higher production
costs contribute
to the
higher prices
of cage-free
eggs compared
with conventional
eggs. Many
consumers
prefer to
buy less
expensive conventional shell
eggs. These
consumer preferences may
in turn
influence our customers’
future
needs for
cage-free eggs.
Due to
these uncertainties,
we may
over-estimate future
demand for
cage-free eggs,
which could
increase
our costs unnecessarily, or we may under-estimate future demand for cage-free eggs, which could harm us competitively.
Failure
to
comply
with
applicable
governmental
regulations,
including
environmental
regulations,
could
harm
our
operating results,
financial condition, and
reputation.
Further,
we may incur
significant costs to
comply with any
such
regulations.
We are subject to federal,
state and local
regulations relating to
grading, quality control,
labeling, sanitary control,
waste disposal,
and other
areas of
our business.
As a
fully-integrated shell
egg producer,
our shell
egg facilities
are subject
to regulation
and
inspection by
the USDA,
EPA,
and FDA,
as well
as state
and local
health and
agricultural agencies,
among others.
All of
our
shell egg production and feed mill facilities are
subject to FDA regulation and inspections. In addition, rules
are often proposed
that, if adopted as proposed, could increase our costs.
Our operations and facilities are subject to various federal, state and local environmental, health, and safety
laws and regulations
governing, among
other
things, the
generation, storage,
handling, use,
transportation, disposal,
and remediation
of
hazardous
materials. Under these laws and regulations, we are required to obtain permits from governmental authorities, including, but not
limited to pollution/wastewater discharge permits.
If we
fail to
comply with
applicable laws or
regulations, or fail
to obtain necessary
permits, we could
be subject
to significant
fines and penalties or other sanctions, our reputation could be harmed, and our
operating results and financial condition could be
materially adversely
affected.
In addition,
because these
laws and
regulations are
becoming increasingly
more stringent,
it is
possible that we will be required to incur significant costs for compliance with such laws and regulations in the future.
Current and future litigation could expose us to significant liabilities and adversely affect our business reputation.
We and certain of our subsidiaries are involved in various legal proceedings. Litigation is
inherently unpredictable, and although
we
believe
we
have
meaningful
defenses
in
these
matters,
we
may
incur
liabilities
due
to
adverse
judgments
or
enter
into
settlements of claims
that could have
a material adverse
effect on our
results of operations,
cash flow and
financial condition.
For
a
discussion of
legal proceedings
see Part
I.
Item 3.
Legal Proceedings
below. Such
lawsuits
are expensive
to defend,
divert
management’s
attention, and
may result
in significant
adverse judgments
or settlements. Legal
proceedings may
expose us
to
negative publicity, which could adversely affect our business reputation and customer preference for our products and brands.
FINANCIAL AND ECONOMIC RISK FACTORS
The
loss
of
any
registered
trademark
or
other
intellectual
property
could
enable
other
companies
to
compete
more
effectively with us.
We
utilize intellectual property
in our business.
For example, we
own the trademarks
Farmhouse Eggs®
,
4Grain®, Sunups®
,
and
Sunny Meadow®
.
We produce and market
Egg-Land’s
Best®
and
Land O’ Lakes
® under license agreements with EB.
We
have invested a
significant amount of
money in establishing
and promoting our
trademarked brands.
The loss or
expiration of
any intellectual property
could enable our
competitors to compete
more effectively
with us by
allowing them to
make and sell
products substantially
similar to
those we
offer.
This could
negatively impact
our ability
to produce
and sell
those products,
thereby adversely affecting our operations.
Impairment in the
carrying value of
goodwill or other
assets could negatively
affect our results of
operations or net
worth.
Goodwill
represents
the
excess
of
the
cost
of
business
acquisitions
over
the
fair
value
of
the
identifiable
net
assets
acquired.
Goodwill
is
reviewed
at
least
annually
for
impairment
by
assessing
qualitative
factors
to
determine
whether
the
existence of events or circumstances leads to a determination that it is
more likely than not that the fair value of a reporting unit
is less than its carrying amount.
As of May 29, 2021, we had $35.5
million of goodwill.
While we believe the current carrying
value of this goodwill is
not impaired, future goodwill impairment
charges could adversely affect our results of
operations in any
particular period or our net worth.
Events
beyond
our
control
such
as
pandemics,
extreme
weather
and
natural
disasters
could
negatively
impact
our
business.
Pandemics such as COVID-19, or similar disease outbreaks in the future, may depress demand for shell eggs due to quarantines
or restrictions
on public
interactions that
would limit
the ability
of consumers
to purchase
shell eggs.
Pandemics, or
similar disease
outbreaks in the future,
may disrupt our supply
chain and operations at
our facilities. If a significant
percentage of our workforce,
or the workforce of our suppliers or transportation providers, is
unable to work because of illness or government restrictions,
our
operations would
be negatively
impacted, potentially
materially.
Pandemics or
disease outbreaks
may also
impact hens
or the
food supply.
Fire, bioterrorism, pandemic, extreme weather or natural disasters, including droughts,
floods, excessive cold or heat, hurricanes
or other storms, (some of which may be believed to be the result of or
intensified by climate change), could impair the health or
growth of
our flocks,
decrease production
or availability
of feed
ingredients, or
interfere with
our operations
due to
power outages,
fuel shortages, discharges from overtopped or breached wastewater treatment lagoons, damage to our production and processing
facilities, labor shortages or
disruption of transportation channels,
among other things. Any
of these factors could
have a material
adverse effect on our financial results.
Weak or unstable economic conditions could negatively impact our business.
Weak or unstable economic conditions, including higher inflation, may adversely affect our business by:
●
Limiting our access to capital markets or increasing the cost of capital we may need to grow our business;
●
Changing consumer spending and habits and demand for eggs, particularly higher-priced specialty eggs;
●
Restricting the supply of energy sources or increasing our cost to procure energy; or
●
Reducing the availability
of feed ingredients,
packaging material, and
other raw materials,
or increasing the
cost of these
items.
Deterioration of economic conditions could also negatively impact:
●
The financial condition of our suppliers, which may make it more difficult for them to supply raw materials;
●
The financial condition of our customers, which may decrease demand for eggs or increase our bad debt expense; or
●
The financial condition of our insurers, which
could increase our cost to obtain insurance,
and/or make it difficult for or
insurers to meet their obligations in the event we experience a loss due to an insured peril.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B.
UNRESOLVED STAFF
COMMENTS
None.

---

ITEM 2. PROPERTIES
ITEM 2.
PROPERTIES
The table below provides summary information about the primary operational facilities we use in our business.
Type
Quantity
Owned
Leased
Production Capacity
Location
Breeding Facilities
-
House up to 255,000 hens
MS, GA
Distribution Centers
NA
FL, NC, TX
Feed Mills
Production capacity of 814 tons of
feed per hour
AL, AR, FL, GA, KS, KY,
LA,
MS, OH, OK, SC, TN, TX, UT
Hatcheries
Hatch up to 407,600 chicks per
week
MS, FL
Processing and Packaging
Approximately 565,800 dozen
shell eggs per hour
AL, AR, FL, GA, KS, KY,
LA,
MS, OH, OK, SC, TX, UT
Pullet Facilities
-
Grow 24.4 Million pullets
annually
AR, FL, GA, KS, KY,
OH, SC,
TX, UT
Shell Egg Production
As of May 29, 2021, 37.8 million
layers in Company owned
facilities
AL, AR, FL, GA, KS, KY,
LA,
MS, OH, OK, SC, TX, UT
Egg Products Processing
Facilities
-
Capable of producing 60 million
lbs. per year
GA, TX
As of
May 29,
2021, we owned
approximately 28.3 thousand
acres of
land. There
are no
material encumbrances
on our
properties.

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3.
LEGAL PROCEEDINGS
Refer to the description of
certain legal proceedings pending
against us under Part II.
Item 8. Notes to the
Consolidated Financial
Statements,
Note - 18 Commitments and Contingencies
, which discussion is incorporated herein by reference.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
PART
II.

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM
5.
MARKET
FOR
REGISTRANT’S
COMMON
EQUITY,
RELATED
STOCKHOLDER
MATTERS
AND
ISSUER PURCHASES OF EQUITY SECURITIES
We have two classes of capital stock, Common Stock and Class A Common Stock. Our Common Stock trades on the NASDAQ
Global Select Market under the symbol “CALM”. There is no public trading market for the Class A Common Stock.
All outstanding
Class A
shares are
owned by
a limited
liability company
of which
Adolphus Baker,
our Chairman
and Chief
Executive Officer,
is the
sole managing
member and
will be
voted at
the direction
of Mr.
Baker.
At July 14,
2021, there
were
approximately 322 record holders
of our Common Stock
and approximately 39,079 beneficial
owners whose shares were
held by
nominees or broker dealers. For additional information about our capital structure, see
Note 12 - Equity
in Part II. Item 8. Notes
to the Consolidated Financial Statements.
Dividends
Cal-Maine has a variable
dividend policy adopted by
its Board of Directors. Pursuant
to the policy,
Cal-Maine 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 will pay dividends to shareholders of record
on
the 65th day after
the quarter end.
Dividends are payable
on the 15th day
following the record
date. Following a
quarter for which
the
Company
does
not
report
net
income
attributable
to
Cal-Maine
Foods,
Inc.,
the
Company
will
not
pay
a
dividend
for
a
subsequent profitable quarter until
the Company is profitable
on a cumulative basis
computed from the date
of the last quarter for
which a
dividend was
paid. Under the
Company's Revolving
Credit Facility,
dividends are
restricted to
the amount
permitted
under
the
Company’s
current dividend
policy,
and
may
not
be
paid
if
a
default
exists
or
will
arise
after
giving
effect
to
the
dividend.
At
the
end
of
fiscal
2021,
the
amount
of
cumulative
losses
to
be
recovered
before
payment
of
a
dividend
was
$4.2 million.
Stock Performance Graph
The following graph
shows a comparison
of cumulative total
shareholder return, calculated
on a dividend
reinvested basis, for
the Company, the NASDAQ
Composite Total Return, and
the NASDAQ
100 Total Return for
the five years
ended May 29, 2021.
The graph assumes $100 was invested on May 28, 2016 in the stock or
index. Each date plotted indicates the last day of a fiscal
quarter.
Issuer Purchases of Equity Securities
There were
no purchases
of our
Common Stock
made by
or on
behalf of
our Company
or any
affiliated purchaser
during our
fiscal 2021 fourth quarter.
Recent Sales of Unregistered Securities
No sales of securities without registration under the Securities Act of 1933 occurred during our fiscal year ended May 29, 2021.
Securities Authorized for Issuance under Equity Compensation Plans
Equity Compensation Plan Information
(a)
(b)
(c)
Number of
securities to be
issued upon exercise
of outstanding
options, warrants
and rights
Weighted average
exercise price of
outstanding
options, warrants
and rights
Number of securities
remaining available for future
issuance under equity
compensation plans (excluding
securities reflected in column
(a)
Equity compensation plans
approved by shareholders
-
$
-
302,147
Equity compensation plans not
approved by shareholders
-
-
-
Total
-
$
-
302,147
(a)
There were no
outstanding options, warrants
or rights as
of
May
, 202
.
There were
1,125,188
shares of restricted
stock outstanding under our Amended and Restated 2012 Omnibus Long-Term Incentive Plan as of May 29, 2021.
(b)
There were no outstanding options, warrants or rights as of
May
, 202
.
(c)
Reflects s
hares available for future
issuance as of
May
, 202
under our
Amended and Restated
2012 Omnibus
Long-Term Incentive Plan.
For
additional information,
see
Note 16 - Stock Compensation Plans
in
Part
II.
Item 8.
Notes
to
the Consolidated
Financial
Statements.

---

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6.
SELECTED FINANCIAL DATA
This Item
is reserved
as a
result of
the Company’s
early adoption
of Item
301 of
Regulation S-K,
as deleted
pursuant to
SEC
Release
No.
33-10890;
34-90459
(Management’s
Discussion
and
Analysis;
Selected
Financial
Data,
and
Supplementary
Financial Information) adopted by the Securities and Exchange Commission on November 19, 2020.

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM
7.
MANAGEMENT’S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
RISK FACTORS; FORWARD
-LOOKING STATEMENTS
For
information
relating
to
important
risks
and
uncertainties
that
could
materially
adversely
affect
our
business,
securities,
financial
condition
or
operating
results,
reference
is
made to
the
disclosure
set
forth
under
Part I. Item 1A. Risk Factors
.
In
addition, because the
following discussion
includes numerous
forward-looking statements relating
to us, our
results of operations,
financial condition
and business,
reference is
made to
the information
set forth
in the
section of
Part I
immediately preceding
Item 1 above under the caption “
Forward-Looking Statements
.”
COMPANY OVERVIEW
Cal-Maine Foods, Inc. is primarily
engaged in the production, grading,
packaging, marketing and distribution
of fresh shell eggs.
Our fiscal
year end
is the
Saturday closest to
May 31. The
Company,
which is
headquartered in
Ridgeland, Mississippi, is
the
largest
producer and
distributor of
fresh shell
eggs in
the United
States. In
fiscal 2021,
we sold
approximately 1,073.2 million
dozen
shell
eggs,
which
we
believe
represented
approximately
19%
of
domestic
shell
egg
consumption.
Our
total
flock
of
approximately 37.8 million layers and 10.8 million
pullets and breeders is the
largest in the U.S. We
sell most of our shell eggs
to a diverse
group of customers,
including national and
regional grocery store
chains, club stores,
foodservice distributors, and
egg product consumers in states across the southwestern, southeastern, mid-western and mid-Atlantic regions of the U.S.
The
Company
has
one
operating
segment,
which
is
the
production,
grading,
packaging,
marketing
and
distribution
of
shell
eggs. Many of
our customers
rely on
us
to provide
most of
their shell
egg needs,
including specialty
and conventional
eggs.
Specialty eggs
represent a
broad range
of products. We
classify nutritionally
enhanced, cage-free,
organic and
brown eggs
as
specialty products
for accounting
and reporting
purposes. We
classify all
other shell
eggs as
conventional products. While
we
report separate sales information
for these types of
eggs, there are a
number of cost factors
which are not specifically
available
for conventional or specialty eggs due to the
nature of egg production. We manage our operations and allocate resources to
these
types of eggs on
a consolidated basis
based on the demands
of our customers. For
further description of
our business, refer to
Part
I. Item I. Business
.
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 2.5 million dozen
eggs
in fiscal
2021.
We
believe we
are taking
all reasonable
precautions in
the
management of
our operations
in response
to the
COVID-19 pandemic. Our top priority is
the health and safety of
our employees, who work hard every
day to produce eggs for
our customers. As part
of the nation’s food supply, we work in a critical
infrastructure industry, and we believe we have
a special
responsibility to maintain
our normal work
schedule. As such,
we are
in regular communication
with our
managers across our
operations and
continue to
closely monitor
the situation
in our
facilities and
in the
communities where
we live
and work.
We
have implemented
procedures designed
to protect
our employees,
taking into
account guidelines
published by
the Centers
for
Disease Control and other government health agencies, and we have strict
sanitation protocols and biosecurity measures in place
throughout our operations with restricted access to
visitors. All non-essential corporate travel has been suspended.
There are no
known indications that COVID-19 affects hens or can be transferred through the food supply.
We
continue to proactively monitor
and manage operations during
the COVID-19 pandemic, including
additional related costs
that we incurred
or may incur
in the future.
The pandemic had
a negative impact
on our business
through disruptions in
the supply
chain such as increased costs and availability of packaging supplies, increased labor costs and medical costs.
In fiscal 2021, we spent $2.3 million (excluding medical insurance claims) related to the pandemic.
The majority these expenses
resulted from additional labor and
increased cost of packaging materials, primarily
reflected in cost of
sales. Medical insurance
claims related to COVID-19 paid during fiscal 2021 were an additional $1.4 million.
Executive Overview of Results - Fiscal Years Ended May 29, 2021, May 30, 2020 and June 1, 2019
Fiscal Years Ended
May 29, 2021
May 30, 2020
June 1, 2019
Net sales (in thousands)
$
1,348,987
$
1,351,609
$
1,361,188
Gross profit (in thousands)
$
160,661
$
179,588
$
222,859
Net average shell egg price
(a)
$
1.217
$
1.231
$
1.265
Average UB Southeast Region - Shell Eggs - White Large
$
1.155
$
1.220
$
1.229
Feed costs per dozen produced
$
0.446
$
0.409
$
0.415
(a) The net average shell egg
selling price is the blended price for
all sizes and grades of shell
eggs, including non-graded
shell egg sales, breaking stock and undergrades.
In fiscal 2019, an increase in the U.S flock size
resulted in an oversupply of eggs, particularly from the start of our
third quarter
of fiscal
2019 through
the end
of the
third quarter
of fiscal
2020. This
led to
lower selling
prices for
conventional eggs,
and
demand for specialty eggs was negatively impacted by the low conventional egg prices.
Our net sales
for fiscal 2021
decreased $2.6 million
compared to fiscal
2020, primarily due
to the decrease
in the selling
price
and volume
of conventional
eggs, partially
offset by
the increased
volume of
specialty eggs
sold. We
sell the
majority of
our
conventional eggs at prices that
take into account, in varying
ways, independently quoted wholesale market
prices as published
by UB
for shell
eggs.
The daily
average of
the UB
Southeast Region
- Shell
Eggs -
White Large
decreased 5.3%
during our
fiscal 2021 as compared to fiscal 2020.
The total number of shell
eggs produced in the U.S. for
fiscal 2021 was 2.0% less than
the same period last year
as reported by
the United
States Department
of Agriculture
(“USDA”). Hen
numbers reported
by the
USDA as
of June
1, 2021,
were 315.7
million, which represents 5.3 million fewer hens than a year ago. Notably, this is the lowest national supply of laying hens since
October 2016. However, we believe
the decreased demand in foodservice seen throughout the
first three quarters of fiscal 2021
due to the pandemic contributed to
the depressed price of shell eggs
in the retail market due to
the extra supply entering the retail
channel from the foodservice channel.
The pandemic continues to affect the demand for shell eggs. During the
early restrictive phase of the pandemic, which occurred
during our fourth
quarter of fiscal
2020, demand increased substantially
as consumers were
preparing for more
meals at home.
Consumer demand maintained a steady growth throughout our first three
quarters of fiscal 2021 but began trending down during
our
fourth
quarter of
fiscal
as
consumers started
to
resume
pre-pandemic activities.
Foodservice demand
has
started
to
improve, though it has remained below pre-pandemic
levels. Our experience appears consistent with industry trends during
this
period. According
to data
provided by
Informational Resources,
Inc. (“IRi”),
IRi’s
Total
US -
Multi Outlet
for all
shell eggs
demand increased
by approximately
6% for
the first
three quarters
during our
fiscal year
and decreased
approximately 20%
during
our fourth fiscal quarter as compared to the same periods in fiscal 2020.
According
to
IRi
Total
U.S.
-
Multi
Outlet
data,
for
the
weeks
ended
May
30,
2021,
dozens
sold
for
conventional
eggs
decreased 3.4%, while dozens sold
for specialty eggs increased 8.6%
as compared to the same period
in the prior year. Similarly,
our total dozens
sold for conventional
eggs decreased 3.4%,
while our total
dozens sold for
specialty eggs increased
12.5%, as
compared to fiscal
2020. Specialty egg
demand has historically
been impacted by
the price of
the conventional egg.
When the
price of
conventional eggs
is low
the demand
for specialty
eggs declines
and as
the price
of conventional
eggs increases
the
demand for specialty eggs increase. We
have also seen demand for specialty eggs increases
during holiday seasons. We
believe
that the increase
in demand for
specialty eggs
has been affected
since the onset
of the pandemic
as consumers have
been preparing
more meals at home rather than going out to eat, and therefore they have been more willing to spend money on specialty eggs.
Gross profit decreased $18.9 million to $160.7
million in fiscal 2021. The decrease
resulted primarily from lower selling prices
for conventional
eggs, as
discussed above,
and from
increased feed
costs. For
fiscal year
2021, the
average Chicago
Board of
Trade (“CBOT”) daily market price was $3.77 per bushel for corn and $300.62 per ton for soybean meal, representing increases
of 21.1% and 23.0%,
respectively, compared to the daily average CBOT
prices for fiscal 2020.
Feed costs started trending higher
midway through
the second
quarter of
fiscal 2021.
Increased export
demand for
both soybeans
and corn,
as well
as weather-
related shortfalls
in production
and yields,
have placed
additional pressure
on domestic
supplies, resulting
in higher
and more
volatile prices.
We
continue
to
execute
our
growth
strategy
of
remaining
a
low-cost
provider
of
shell
eggs
and
growth
through
selective
acquisitions,
with
a
focus
on
expanding
cage-free
capacity.
Subsequent
to
fiscal
2021,
we
acquired
the
remaining
50%
membership interest
in Red
River Valley Egg Farm,
LLC (“Red
River”), which
owns and
operates a
specialty shell
egg production
complex with
approximately 1.7
million cage-free
laying hens,
cage-free pullet
capacity,
a feed
mill, processing
plant, related
offices and outbuildings and related equipment located on approximately 400 acres near Bogata, Texas.
RESULTS OF OPERATIONS
The following table sets forth, for the fiscal years indicated, certain items from our consolidated statements of income expressed
as a percentage of net sales.
Fiscal Year Ended
May 29, 2021
May 30, 2020
Net sales
100.0
%
100.0
%
Cost of sales
88.1
%
86.7
%
Gross profit
11.9
%
13.3
%
Selling, general and administrative
13.6
%
13.2
%
Loss on disposal of fixed assets
0.2
%
-
%
Operating income (loss)
(1.9)
%
0.1
%
Total other income
1.2
%
1.4
%
Income (loss) before income taxes
(0.7)
%
1.5
%
Income tax expense (benefit)
(0.9)
%
0.1
%
Net income
0.2
%
1.4
%
Fiscal Year
Ended May 29, 2021 Compared to Fiscal Year Ended May 30, 2020
NET SALES
Net shell egg sales represented
97.3% and 97.7% of total
net sales for the fiscal
year 2021 and 2020, respectively. Shell egg sales
classified as “Other”
represent sales of
hard cooked eggs,
hatching eggs, and
other miscellaneous
products included with
our shell
egg
operations.
The
table
below
presents
an
analysis
of
our
conventional and
specialty shell
egg
sales
(in
thousands, except
percentage data):
May 29, 2021
May 30, 2020
Total net sales
$
1,348,987
$
1,351,609
Conventional
$
766,284
58.4
%
$
830,278
62.9
%
Specialty
539,780
41.1
%
485,465
36.8
%
Egg sales, net
1,306,064
99.5
%
1,315,743
99.7
%
Other
6,190
0.5
%
4,452
0.3
%
Net shell egg sales
$
1,312,254
100.0
%
$
1,320,195
100.0
%
Dozens sold:
Conventional
785,446
73.2
%
813,255
76.1
%
Specialty
287,765
26.8
%
255,895
23.9
%
Total dozens sold
1,073,211
100.0
%
1,069,150
100.0
%
Net average selling price per dozen:
Conventional
$
0.976
$
1.021
Specialty
$
1.876
$
1.897
All shell eggs
$
1.217
$
1.231
Egg products sales:
Egg products net sales
$
36,733
$
31,414
Pounds sold
63,627
65,985
Net average selling price per pound
$
0.577
$
0.476
Shell egg net sales
-
Conventional egg sales
decreased $64.0 million
or 7.7%, compared
to fiscal 2020,
primarily due to
decreases in price
and volume
of conventional
eggs sold.
Changes in
price and
volume resulted
in a
$35.3 million
and a
$27.1 million
decrease in net sales, respectively.
-
The decrease in volume and
price of conventional eggs in
fiscal 2021 compared to fiscal
2020 was due to the
significant
increase
in
retail
demand
that
occurred
in
the
fourth
quarter
of
fiscal
related
to
the
onset
of
the
pandemic,
as
consumers purchased
more eggs
in anticipation
of preparing
more meals at
home. Additionally, the extra
supply entering
the retail
channel from
the foodservice
further depressed
prices of
conventional shell
eggs throughout
the first
three
quarters of fiscal 2021.
-
Specialty egg sales increased $54.3
million or 11.2%,
primarily due to increased volume
of 12.5% which resulted
in a
$59.8
million
increase
in
net
sales.
More
cage-free
facilities
came
into
production
and
we
increased
promotional
spending, both of which helped increase our cage-free sales.
-
We believe that the
increase in
demand for
specialty eggs
has been affected
since the
onset of the
pandemic as
consumers
have been preparing
more meals at
home rather than
going out to
eat, and therefore
they have been
more willing to
spend
money on specialty eggs.
Egg products net sales
-
Egg products net sales increased
$5.3 million or 16.9%, primarily
due to an increase in selling
price of 21.2% compared
to fiscal 2020, which had a $6.4 million positive impact on net sales.
-
Fiscal 2020
net average
selling prices
were negatively
impacted by
an oversupply
of eggs
throughout the
first three
quarters in
fiscal 2020,
followed by
a decline
in foodservice
demand in
the fourth
quarter of
fiscal 2020,
due to
the
pandemic. Our net average
selling price has increased
in fiscal 2021 as
demand has started to
increase in the foodservice
channel.
COST OF SALES
Cost of
sales consists
of costs
directly related
to producing,
processing and
packing shell
eggs, purchases
of shell
eggs from
outside producers, processing and packing of liquid and frozen egg products and other non-egg costs. Farm production costs are
those costs incurred
at the egg
production facility,
including feed, facility,
hen amortization, and
other related farm
production
costs.
The following table presents the key variables affecting our cost of sales (in thousands,
except cost per dozen data):
Fiscal Year Ended
May 29, 2021
May 30, 2020
% Change
Cost of Sales:
Farm production
$
730,902
$
677,181
7.9
%
Processing, packaging, and warehouse
250,058
234,243
6.8
Egg purchases and other (including change in inventory)
177,634
232,027
(23.4)
Total shell eggs
1,158,594
1,143,451
1.3
Egg products
29,536
25,651
15.1
Other
2,919
(93.3)
Total
$
1,188,326
$
1,172,021
1.4
%
Farm production costs (per dozen produced)
Feed
$
0.446
$
0.409
9.0
%
Other
$
0.320
$
0.329
(2.7)
%
Total
$
0.766
$
0.738
3.8
%
Outside egg purchases (average cost per dozen)
$
1.22
$
1.26
(3.2)
%
Dozens produced
970,837
927,799
4.6
%
Percent produced to sold
90.5%
86.8%
4.3
%
Farm Production
-
Feed costs increased
$53.7 million, primarily
due to 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
decreased
due
to
lower
facility
expense,
resulting
from
improved
efficiencies
in
our
utilization and from increased volume of eggs produced.
-
We also had lower amortization expense, due
to the lower feed costs
in prior periods, which
are capitalized in our
flocks
during pullet production. In fiscal 2020 we incurred higher amortization expense due to selling flocks early in response
to market conditions.
Processing, packaging, and warehouse
-
Processing costs increased due to a 3.2% increase in the volume of eggs processed.
-
Cost
of
pac
kaging
materials
increased
3.0%
as
the
retail
channel
demand
increased
due
to
the
pandemic
and
manufacturers increased prices and implemented pandemic surcharges.
-
Labor costs increased 7.2% due to the pandemic,
due to crisis pay and wage increases in response to labor shortages.
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 90.5%, as well as a decrease in the cost of these purchases.
Looking forward to fiscal 2022, we believe with the ongoing uncertainties and continued supply
chain disruptions related to the
COVID-19 outbreak, weather fluctuations, increase
demand for exports and geopolitical issues,
that feed ingredients will remain
higher in
the near
future and
expect to
see price
volatility throughout
the year.
We
do not
anticipate problems
in securing
an
adequate amount of feed ingredients for fiscal 2022.
GROSS PROFIT
Gross profit, as a
percentage of net sales, was
11.9% for fiscal
2021, compared to 13.3% for
fiscal 2020. The decrease resulted
primarily from lower selling prices for conventional eggs and increased feed 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):
Fiscal Year Ended
May 29, 2021
May 30, 2020
$ Change
% Change
Specialty egg expense
$
59,294
$
49,237
$
10,057
20.4
%
Delivery expense
52,670
52,230
0.8
%
Payroll, taxes and benefits
43,327
44,156
(829)
(1.9)
%
Stock compensation expense
3,778
3,617
4.5
%
Other expenses
24,874
28,997
(4,123)
(14.2)
%
Total
$
183,943
$
178,237
$
5,706
3.2
%
Specialty egg expense
-
Advertising
and
franchise
fees
increased
due
to
the
increased
volume
of
specialty
eggs
sales
of
12.5%
along
with
increased promotional spending throughout the year as compared to the same period in the prior year.
Other expenses
-
Other expenses decreased due to a legal settlement paid in the second
quarter of fiscal 2020, in an amount that was not
material.
-
In
addition,
for
fiscal
we
received
a
return
of
brokerage
commissions
on
property
and
casualty
insurance
placements.
OPERATING
INCOME (LOSS)
As a result of the above, our operating
loss was $26.3 million for fiscal 2021, compared to operating income of
$1.3 million for
fiscal 2020.
OTHER INCOME (EXPENSE)
Total
other
income
(expense)
consists
of
items
not
directly
charged
to,
or
related
to, operations
such
as
interest
income
and
expense, equity in income or loss of unconsolidated entities, and patronage dividends, among other items.
The Company
recorded interest
income of
$2.8 million in
fiscal 2021,
compared to
$5.0 million in
fiscal 2020.
We
recorded
interest
expense of
$213
thousand and
$498 thousand
in fiscal
and 2020,
respectively. The
decrease in
interest income
resulted from significantly lower investment balances and lower interest rates.
Patronage dividends, which represent distributions from our membership in Eggland's Best,
Inc. ("EB"), decreased $1.1 million
or 10.8%. Patronage dividends are paid once a year based on EB’s profits and its available cash.
Equity in income from unconsolidated entities for fiscal 2021 was $622 thousand compared to $534 thousand for fiscal
2020.
Other, net for fiscal 2021
was income of
$4.1 million compared to
$3.7 million for fiscal
2020. The increase
was primarily driven
by realized and unrealized gains in investment securities available-for-sale.
INCOME TAXES
On
March
27,
2020,
the
Coronavirus
Aid,
Relief,
and
Economic
Security
Act
(the
“CARES
Act”)
was
enacted.
The
most
significant provision of
the CARES Act
that materially affected
the Company’s
income taxes included
the five-year carryback
allowance for taxable net operating losses generated in the tax years 2018 through 2020, our fiscal years 2019 through 2021.
The Tax Cut and Jobs Act enacted in December 2017 disallowed the carrying back of taxable net operating losses to offset prior
years’ taxable income. The
CARES Act allows us
to carry those losses
generated or that may
be generated during our
fiscal years
2019 through 2021 back to offset taxable income recognized
during the prior five years. The Company is electing to
utilize that
provision, which will
provide additional liquidity
in the form
of an
income tax refund
currently estimated to
be approximately
$36.5 million. We
believe we will
receive the refund
during our
third fiscal quarter
of 2022.
Additionally,
we recorded
a total
income tax
benefit of
approximately $12.4
million related
to the
carryback provisions
during our
fiscal year
2021. For
more
information regarding the income tax effects of the CARES Act, refer to Part II. Item 8. Notes to the Financial Statements,
Note
17 - Income Taxes
.
For the fiscal year ended
May 29, 2021, our pre-tax
loss was $9.9 million, compared
to pre-tax income of $20.1
million for fiscal
2020.
We
recorded
an
income
tax
benefit
of
$12.0
million
for
fiscal
2021,
which
includes
the
tax
benefit
of
$12.4
million
described above.
Our fiscal 2021
effective tax
rate increased to
120.8% from 8.6%
in fiscal 2020,
driven primarily by
the net
operating loss
carryback provisions
allowed under
the CARES
Act. Excluding
the effects
of the
CARES Act,
our income
tax
benefit was $2.2 million
for fiscal 2021 with
an adjusted effective tax
rate of 22.7%.
Income tax expense was
$4.8 million for
the comparable period of fiscal 2020, which reflects an adjusted effective tax rate of approximately 24.1%.
At May 29, 2021,
the Company had an
income tax receivable of
$42.5 million compared to
$9.9 million at May
30, 2020. During
fiscal 2021,
the Company
recorded an
income tax
receivable of
$36.5 million
related to
the decision
to carryback
fiscal 2021
taxable net operating losses to recover a portion of taxes paid in
fiscal 2016.
Additionally, we received $1.4 million
in state tax
refunds related to claims for refund previously filed with state taxing authorities.
For the thirteen weeks ended May 29, 2021, our pretax loss was $12.2 million,
and our income tax benefit was $7.9 million with
an effective tax rate of 65.1%, including the impact of the CARES Act. Our income tax provision for the fourth quarter of fiscal
2021 reflects the carryback
of taxable net operating
losses generated during periods
in which the statutory
federal income tax rate
was 21%
to periods
in which
the statutory
federal income
tax rate
was 35%,
as permitted
by the
CARES Act.
Excluding the
effects of the
CARES Act,
our income
tax expense
was $1.8
million with
an adjusted
effective tax
rate of
15.4%. The
low effective
rate was
primarily related
to a
$7.4 million
income tax
benefit recorded
during the
fourth quarter
of fiscal
2021 in
connection
with the CARES Act.
Items causing
our effective
tax rate
to differ
from the
federal statutory
income tax
rate of
21% are
state income
taxes, certain
federal tax credits
and certain items included
in income or
loss for financial reporting
purposes that are
not included in taxable
income or loss
for income tax
purposes, including tax exempt
interest income, certain nondeductible
expenses, and net
income
or loss attributable to noncontrolling interest.
NET INCOME (LOSS) ATTRIBUTABLE
TO NONCONTROLLING INTEREST
Net
income
(loss)
attributable
to
noncontrolling
interest
for
fiscal
was
a
loss
of
$63 thousand.
During
fiscal
2020,
we
acquired the remaining 27.9% interest in our majority-owned subsidiary TEP.
NET INCOME ATTRIBUTABLE
TO CAL-MAINE FOODS, INC.
As
a
result
of
the
above,
net
income
for
fiscal
was
$2.1 million,
or
$0.04
per
basic
and
diluted
share,
compared
to
$18.4 million, or $0.38 per basic and diluted share for fiscal 2020.
Fiscal Year
Ended May 30, 2020 Compared to Fiscal Year Ended June 1, 2019
The discussion of our results
of operations for the fiscal
year ended May 30, 2020
compared to the fiscal
year ended June 1, 2019
can be found in Part II.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations in
the
Company's fiscal 2020 Annual Report on Form 10-K.
CAPITAL RESOURCES AND LIQUIDITY
Our
working
capital
at
May
29,
was
$303.5 million,
compared
to
$429.1 million
at
May
30,
2020.
The
calculation
of
working capital is defined as current assets less current liabilities. Our current ratio
was 5.77 at May 29, 2021 compared to 5.60
at May 30, 2020. The
current ratio is calculated
by dividing current assets by
current liabilities. Due to seasonal
factors described
Part I. Item I. Business - Seasonality
, we generally expect our need for working capital to be highest in
the fourth and first fiscal
quarters ending in May/June and August/September, respectively.
We
had no
long-term debt outstanding
at the
end of
fiscal 2021
and 2020.
On July 10,
2018, we
entered into a
$100.0 million
Senior Secured
Revolving Credit
Facility (the
“Revolving Credit
Facility”). As
of May
29, 2021,
no amounts
were borrowed
under the Revolving Credit Facility.
We have
$4.1 million in outstanding standby letters of credit, which were
issued under our
Revolving
Credit
Facility
for
the
benefit
of
certain
insurance
companies.
Refer
to
Part
II.
Item
8.
Notes
to
the
Financial
Statements,
Note 10 - Credit Facility
for further information regarding our long-term debt.
Net cash provided
by operating activities
was $26.1 million
for fiscal year
2021 compared with
$73.6 million for fiscal
year 2020.
Decreased gross profit margins resulting primarily from lower selling prices for shell
eggs, and increased feed costs contributed
greatly to
our decrease
in cash
flow from
operations. The
increase in
accounts receivables
balance at
fiscal 2021
compared to
prior fiscal
2020 is
due to
the income
tax receivable
related to
the CARES
Act, which
is expected
to be
received in
our third
quarter of fiscal 2022.
For fiscal 2021,
approximately $129.1 million was provided
from the sale
and maturity of
investments securities available-for-
sale, $88.3 million
was used
to purchase
short-term investments
and net
payments of
$6.7 million were
received from
investments
in unconsolidated entities. Approximately $95.1 million was
used to purchase or
construct property, plant
and equipment, most
of
which
related
to
the
expansion
of
our
cage-free
shell
egg
production
capacity. Refer
to
the
table
of
material
construction
projects presented
below for
additional information
on purchases
and construction
of property,
plant and
equipment. The
net
result of these and other activities as of May 29, 2021 was a decrease in cash of $20.8 million from May 30, 2020.
For fiscal 2020, approximately
$204.3 million was provided
from the sale and
maturity of investments securities
available-for-
sale,
$107.2
million
was
used
to
purchase
short-term
investments
and
net
payments
of
$7.1
million
were
received
from
investments
i
n
unconsolidated
entities.
We
used
$44.7
million
to
acquire
Mahard
and
the
remaining
interest
in
TEP.
Approximately $124.2
million was
used to
purchase or
construct property,
plant and
equipment, most
of which
related to
the
expansion of our cage-free shell
egg production capacity. Refer to the table of material construction
projects presented below for
additional
information
on
purchases
and
construction
of
property,
plant
and
equipment.
We
used
$1.5
million
for
principal
payments on long-term
debt. The net
result of these
and other activities
as of May
30, 2020 was
an increase in
cash of $8.9
million
from June 1, 2019.
We
continue to
monitor the
increasing demand
for cage-free
eggs and
to engage
with our
customers in
an effort
to achieve
a
smooth
transition
to
meet
their
announced
commitment
timeline
for
cage-free
egg
sales.
We
have
invested
approximately
$476 million in facilities, equipment and
related operations to expand our
cage-free production starting with our
first facility in
2008, which includes
the $48.5 million
acquisition of the
remaining 50% interest
in Red River
discussed in
Note 20 -
Subsequent
Events
in
Part
II.
Item
8.
Notes
to
the
Consolidated
Financial
Statements.
The
following
table
presents
current
material
construction projects approved as of May 29, 2021 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of
May 29, 2021
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2022
$
140,876
$
93,612
$
47,264
$
140,876
$
93,612
$
47,264
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,
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.
CONTRACTUAL OBLIGATIONS
The
following
table
summarizes
by
fiscal
year
the
future
estimated
cash
payments,
in
thousands,
to
be
made
under
existing
contractual obligations as of
May 29, 2021. Further information
on debt obligations is
contained in
Note 10 - Credit Facility
, and
on lease obligations in
Note 15 - Leases
, each in Part II. Item 8. Notes to the Consolidated Financial Statements. As of May 29,
2021, we had no outstanding long-term debt.
Payments due by period
Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
Finance leases
$
$
$
$
-
$
-
Operating leases
1,882
1,049
-
Purchase obligations:
Feed ingredients and fuel
(a)
89,779
89,779
-
-
-
Construction contracts and other equipment
38,063
38,063
-
-
-
Red River
(b)
48,500
48,500
-
-
-
Total
$
178,921
$
177,383
$
1,507
$
$
-
(a)
Actual purchase obligations may change based on the contractual terms and agreements
(b)
Represents the cash paid for the acquisition of Red River
IMPACT OF RECENTLY
ISSUED ACCOUNTING STANDARDS
For information on changes in accounting principles and new accounting principles, see “
New Accounting Pronouncements and
Policies
” in Part II. Item 8. Notes to Consolidated Financial Statements,
Note 1 - Summary of Significant Accounting Policies
.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements
in accordance with U.S. GAAP
requires management to make estimates
and assumptions
that affect the
reported amounts
of assets
and liabilities
at the
date of
the financial
statements and
the reported
amounts of
revenues
and expenses during the
reporting period. Actual results could
differ from these estimates.
Critical accounting estimates
are those
estimates made
in accordance
with GAAP that
involve a significant
level of estimation
uncertainty and
have had
or are reasonably
likely to have a
material impact on the
financial condition or
results of operations. Our
critical accounting estimates
are described
below.
INVESTMENTS IN SECURITIES
Our investment
securities are
accounted for
in accordance
with ASC
320, “Investments
- Debt
and Equity
Securities” (“ASC
320”). The
Company considers
all of
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
months,
as
available-for-sale.
We
classify
these
securities
as
current, because the amounts invested are available for
current operations. Available-for-sale
securities are carried at fair value,
with unrealized
gains and
losses reported
as a
separate component
of stockholders’
equity.
The Company
regularly evaluates
changes to the
rating of its
debt securities by credit
agencies and economic conditions
to assess and
record any expected credit
losses through allowance for credit losses,
limited to the amount that fair
value was less than the
amortized cost basis. The cost
basis for realized gains and losses on available-for-sale securities is determined by the specific identification method. Gains and
losses are recognized
in other income
(expenses) as Other, net
in the Company's
Consolidated Statements of
Income. Investments
in mutual funds are classified as “Other long-term assets” in the Company’s Consolidated Balance Sheets.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Trade receivables
are stated
at their
carrying values,
which include
a reserve
for credit
losses. The
Company extends credit
to
customers based on an
evaluation of each customer's financial
condition and credit history.
Collateral is generally not required.
The Company minimizes
exposure to counter
party credit risk
through credit analysis
and approvals, credit
limits, and monitoring
procedures. In
determining our
reserve for
credit losses,
receivables are
pooled according
to age,
with each
pool assigned
an
expected loss based on historical loss information adjusted as needed for economic and other forward-looking factors.
INVENTORIES
Inventories of
eggs, feed, supplies
and flocks
are valued principally
at the
lower of cost
(first-in, first-out
method) or
net realizable
value. If market
prices for
eggs and
feed grains
move substantially
lower,
we record
adjustments to
write down
the carrying
values of eggs
and feed inventories
to fair market
value. The cost
associated with flock
inventories, consisting
principally of chick
purchases, feed, labor, contractor payments and overhead costs, are accumulated during the growing period of approximately 22
weeks. Capitalized flock costs are then amortized over the flock’s
productive life, generally one to two years. Flock mortality is
charged to cost of sales as incurred. High mortality from disease or extreme temperatures will result in abnormal write-downs to
flock inventories. Management continually monitors each flock
and attempts to take appropriate actions
to minimize the risk of
mortality loss.
LONG-LIVED ASSETS
Depreciable long-lived
assets are
primarily comprised
of buildings,
improvements, machinery
and equipment. Depreciation
is
provided by the
straight-line method over
the estimated useful
lives, which are
15 to 25
years for buildings
and improvements
and 3 to 12 years for machinery and equipment. An increase or decrease in the
estimated useful lives would result in changes to
depreciation expense. When property and equipment are retired, sold, or otherwise disposed of,
the asset’s carrying amount and
related accumulated depreciation are removed
from the accounts and
any gain or loss
is included in operations. We
continually
reevaluate the carrying value
of our long-lived assets,
for events or changes
in circumstances which indicate the
carrying value
may not be recoverable from the estimated future cash flows expected to result
from its use and eventual disposition. If the sum
of the expected future
cash flows (undiscounted and
without interest charges) are
less than the carrying amount
of the asset, an
impairment loss is recognized to reduce the carrying value of the asset to its estimated fair value.
INTANGIBLE ASSETS
Included in other intangible assets are
separable intangible assets acquired in
business acquisitions, which include franchise
fees,
non-compete agreements and customer
relationship intangibles. They are
amortized over their
estimated useful lives of
5 to 15
years. The
gross
cost
and
accumulated
amortization
of
intangible
assets
are
removed
when
the
recorded
amounts
are
fully
amortized and the asset is no longer in use.
EQUITY AND COST METHOD INVESTMENTS
We have invested in
other companies
engaged in
the production,
processing and
distribution of
shell eggs
and egg
products. These
investments are recorded
using the cost
or equity
method, and
are not consolidated
in our financial
statements. Changes in the
ownership
percentages
of
these
investments
might
alter
the
accounting
methods
currently
used.
Our
investment
in
these
companies is shown on the Company’s Consolidated Balance Sheet in the amounts presented for "Investment in unconsolidated
entities" and “Other long-term assets”.
GOODWILL
Goodwill is evaluated for impairment
annually by first performing a
qualitative assessment to determine whether a
quantitative
goodwill test is necessary.
After assessing the totality of events
or circumstances, if we determine it
is more likely than not that
the fair value of
a reporting unit is
less than its carrying
amount, then we perform
additional quantitative tests to
determine the
magnitude of any impairment.
At May 29, 2021, goodwill represented 2.9% of total assets and
3.5% of stockholders’ equity. Goodwill relates
to the following
(in thousands):
Fiscal Year
Description
Amount
Acquisition of Hudson Brothers, Inc.
$
3,147
Acquisition of Hillandale Farms, LLC
Acquisition of Green Forest Foods, LLC
Revised Hillandale incremental purchase price
9,257
Revised Hillandale incremental purchase price
2,527
Acquisition of Zephyr Egg, LLC
1,876
Acquisition of Tampa Farms, LLC
4,600
Revised Hillandale incremental purchase price
(338)
Acquisition of Maxim Production Co., Inc.
2,300
Purchase of joint venture partner’s 50% in Delta Egg
4,779
Acquisition of Foodonics International, Inc.
3,389
Acquisition of Happy Hen Egg Farms, Inc.
2,940
Total Goodwill
$
35,525
REVENUE RECOGNITION AND DELIVERY COSTS
Revenue recognition is completed
upon satisfaction of the
performance obligation to the
customer, which typically occurs within
days of the Company and customer agreeing upon the order. See
Note 14 - Revenue Recognition
in Part II. Item 8. Notes to the
Consolidated Financial Statements for further discussion of the policy.
The Company believes the performance
obligation is met upon delivery
and acceptance of the product
by our customers. Costs
to deliver product
to customers are
included in selling,
general and administrative
expenses in the
accompanying Consolidated
Statements
of
Income. Sales
revenue
reported
in
the
accompanying
Consolidated
Statements
of
Income
is
reduced
to
reflect
estimated returns
and allowances. The
Company records
an estimated
sales allowance
for returns
and discounts
at the
time of
sale using historical trends based on actual sales returns and sales.
SALES INCENTIVES PROVIDED TO CUSTOMERS
The Company periodically
provides incentive
offers to its
customers to encourage
purchases. Such
offers include current
discount
offers (e.g., percentage
discounts off current purchases),
inducement offers (e.g.,
offers for future discounts
subject to a
minimum
current purchase), and other similar offers. Current
discount offers, when accepted by customers,
are treated as a reduction to the
sales price
of the
related transaction, while
inducement offers,
when accepted
by customers, are
treated as
a reduction to
sales
price based on estimated future redemption rates. Redemption rates are estimated using the Company’s historical experience for
similar inducement offers.
Current discount and inducement offers are presented as a net amount in ‘‘Net sales.’’
STOCK BASED COMPENSATION
We
account
for
share-based
compensation
in
accordance
with
ASC
718,
“Compensation-Stock
Compensation”
(“ASC
718”). ASC 718 requires
all share-based payments
to employees, including
grants of employee
stock options, restricted
stock and
performance-based shares to be recognized in the statement of
income based on their fair values. ASC 718 requires
the benefits
of
tax
deductions
in
excess
of
recognized
compensation
cost
to
be
reported
as
a
financing
cash
flow. See
Note 16 - Stock
Compensation Plans
in Part II. Item 8. Notes to the Consolidated Financial Statements for more information.
INCOME TAXES
We
determine our effective tax
rate by estimating our
permanent differences resulting from
differing treatment of
items for tax
and
accounting
purposes. We
are
periodically
audited
by
taxing
authorities. Any
audit
adjustments
affecting
permanent
differences could have an impact on our effective tax rate.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A.
QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISKS
COMMODITY PRICE RISK
Our primary exposure to
market risk arises from
changes in the prices
of conventional eggs, which
are subject to significant
price
fluctuations that are largely beyond our control. We
are focused on growing our specialty shell egg business because the selling
prices of
specialty shell
eggs are
generally not
as volatile
as
conventional shell
egg prices. Our
exposure to
market risk
also
includes changes in the prices
of corn and soybean meal,
which are commodities subject to significant
price fluctuations due to
market conditions
that are
largely beyond
our control.
To
ensure continued
availability of
feed ingredients,
we may
enter into
contracts for future purchases of
corn and soybean meal, and
as part of these contracts,
we may lock-in the basis
portion of our
grain purchases several months in advance. Ordinarily,
we do not enter long-term contracts
beyond a year to purchase corn
and
soybean meal or hedge against increases in the price of corn and
soybean meal. The following table outlines the impact of price
changes for corn and soybean meal on feed costs per dozen as feed ingredient pricing varies:
Change in price per bushel of corn
$
(0.87)
$
(0.58)
$
(0.29)
$
0.00
$
0.29
$
0.58
$
0.87
Change
in price
per ton
Soybean
Meal
$
(82.50)
0.386
0.396
0.406
0.416
0.426
0.436
0.446
$
(55.00)
0.396
0.406
0.416
0.426
0.436
0.446
0.456
$
(27.50)
0.406
0.416
0.426
0.436
0.446
0.456
0.466
$
0.00
0.416
0.426
0.436
0.446
(a)
0.456
0.466
0.476
$
27.50
0.426
0.436
0.446
0.456
0.466
0.476
0.486
$
55.00
0.436
0.446
0.456
0.466
0.476
0.486
0.496
$
82.50
0.446
0.456
0.466
0.476
0.486
0.496
0.506
(a)
Based on 2021 actual costs, table flexes feed cost inputs to show $0.01 impacts to per dozen egg feed production costs.
INTEREST RATE
RISK
The
fair
value
of
our
debt
is
sensitive
to
changes
in
the
general
level
of
U.S.
interest
rates. In
July
2018,
we
entered
into
a
$100.0 million Senior
Secured Revolving
Credit Facility
which bears
interest at
a variable
rate. No
amounts were
outstanding
under that facility during
fiscal 2021. Under our
current policies, we do
not use interest rate
derivative instruments to manage
our
exposure to interest rate changes.
FIXED INCOME SECURITIES RISK
At May 29, 2021,
the effective maturity of
our cash equivalents and
investment securities available
for sale was 11.2 months,
and
the composite credit rating of the holdings are A- / A3 / A- (S&P / Moody’s / Fitch).
CONCENTRATION
OF CREDIT RISK
Our financial instruments exposed to concentrations of
credit risk consist primarily of trade receivables.
Concentrations of credit
risk with respect
to receivables are
limited due to
our large
number of customers
and their dispersion
across geographic areas,
except that at May 29, 2021 and May
30, 2020, 23.8% and 29.5%, respectively,
of our net accounts receivable balance was due
from
Walmart
Inc.
(including
Sam’s
Club).
No
other
single
customer
or
customer
group
represented
10%
or
greater
of
net
accounts receivable.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8.
FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Cal-Maine Foods, Inc. and Subsidiaries
Ridgeland, Mississippi
Opinion on the Consolidated Financial Statements
We
have
audited
the
accompanying
consolidated
balance
sheets
of
Cal-Maine
Foods,
Inc.
and
Subsidiaries
(the
“Company”)
as
of
May
29,
and
May
30,
2020,
the
related
consolidated
statements of
income,
comprehensive income,
stockholders’ equity and
cash flows for
each of the
three years in
the period ended
May 29, 2021,
and the related
consolidated
notes and schedule listed
in the Index at
Item 15(1) (collectively referred
to as the “consolidated
financial statements”).
In our
opinion, the
consolidated financial
statements present
fairly,
in all
material respects,
the financial
position of
the Company
at
May 29, 2021
and May 30, 2020,
and the results of
its operations and
its cash flows
for each of the
three years in
the period ended
May 29, 2021, in conformity with accounting principles generally accepted in the United States of America.
We
also have
audited, in
accordance with
the standards
of the
Public Company
Accounting Oversight
Board (United
States) (“PCAOB”), the
Company’s internal control over financial
reporting as of May
29, 2021, based on
the criteria established
in
Internal
Control
-
Integrated
Framework
issued
by
the
Committee
of
Sponsoring
Organizations
of
the
Treadway
Commission and our report dated July 19, 2021 expressed an unqualified opinion.
Basis for Opinion
These consolidated financial statements are
the responsibility of the Company’s
management.
Our responsibility is to
express an opinion
on these consolidated
financial statements based
on our audits.
We
are a public
accounting firm registered
with the PCAOB and are required to be independent with respect to
the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our
audits in
accordance with
the standards
of the
PCAOB.
Those standards
require that
we plan
and
perform
the
audit
to
obtain
reasonable
assurance
about
whether
the
consolidated
financial
statements
are
free
of
material
misstatement,
whether
due
to
error
or
fraud.
Our
audits
included
performing
procedures
to
assess
the
risks
of
material
misstatement of the consolidated financial statements, whether due
to error or fraud, and performing procedures
that respond to
those
risks.
Such
procedures
included
examining,
on
a
test
basis,
evidence
regarding
the
amounts
and
disclosures
in
the
consolidated financial statements.
Our audits also
included evaluating the
accounting principles used and
significant estimates
made by
management, as
well as
evaluating the
overall presentation
of the
consolidated financial
statements.
We
believe our
audits provide a reasonable basis for our opinion.
Critical Audit Matters
The
critical
audit
matter
communicated
below
is
a
matter
arising
from
the
current
period
audit
of
the
consolidated financial statements that were communicated or required to be communicated
to the Audit Committee and
that: (1) relate to accounts or disclosures that are material
to the consolidated financial statements and (2) involved our
especially challenging, subjective or complex judgments.
The communication of critical audit matters does not alter in
any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the
critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.
Contingent Liabilities - Litigation and Claims - Refer to Note 18 in the Consolidated Financial Statements
Critical Audit Matter Description
The Company records
liabilities for legal
proceedings and claims
in those instances
where it can reasonably
estimate the
amount of the loss
and when the
liability is probable.
Where the reasonable
estimate of the
probable loss is
a range, the
Company
records the
most likely
estimate of
the loss,
or the
low end
of the
range if
there is
no one
best estimate.
The Company
either
discloses the
amount of
a possible
loss or
range of
loss in
excess of
established accruals
if estimable,
or states
that such
an estimate
cannot be
made.
The Company
discloses significant
legal proceedings
and claims
even where
liability is
not probable
or the
amount of the liability is not estimable, or both, if the Company believes there is at least a reasonable possibility that a loss may
be incurred.
We identified litigation and claims
as a critical
audit matter because
of the challenges
auditing management’s judgments
applied
in
determining
the
likelihood
of
loss
related
to
the
resolution
of
such
claims.
Specifically,
auditing
management’s
determination of
whether any
contingent loss
arising from
the related
litigation and
claims is
probable, reasonably
possible or
remote, and the related disclosures, is subjective and requires significant judgment due to the sensitivity of the issue.
How the Critical Audit Matter was addressed during the Audit
Addressing the
matter involved
performing procedures
and evaluating
audit evidence
in connection
with forming
our
overall opinion
on
the consolidated
financial statements.
These procedures
included testing
the
effectiveness
of
the controls
relating to the Company’s evaluation of the liability related to legal proceedings and claims, including controls
over determining
the likelihood of
a loss and
whether the amount
of loss can
be reasonably estimated,
as well as
financial statement disclosures
over the legal proceedings and claims.
These procedures also included obtaining and evaluating the letters of audit inquiry with
external legal counsel, evaluating
the reasonableness of the
Company’s assessment regarding whether an unfavorable outcome
is
reasonably possible
or probable
and reasonably
estimable, evaluating
the sufficiency
of the
Company’s
disclosures related
to
legal proceedings and claims and evaluating the completeness and accuracy of the Company’s legal contingencies.
/s/ Frost, PLLC
We have served as the Company’s
auditor since 2007.
Little Rock, Arkansas
July 19, 2021
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except for par value amounts)
May 29, 2021
May 30, 2020
Assets
Current assets:
Cash and cash equivalents
$
57,352
$
78,130
Investment securities available-for-sale
112,158
154,163
Receivables:
Trade receivables, net
79,066
84,976
Income tax receivable
42,516
9,884
Other
5,057
3,515
Total receivables, net
126,639
98,375
Inventories, net
218,375
187,216
Prepaid expenses and other current assets
5,407
4,367
Total current assets
519,931
522,251
Property, plant & equipment, net
589,417
557,375
Finance lease right-of-use asset, net
Operating lease right-of-use asset, net
1,724
2,531
Investments in unconsolidated entities
54,941
60,982
Goodwill
35,525
35,525
Intangible assets, net
20,341
22,816
Other long-term assets
6,770
4,536
Total assets
$
1,229,174
$
1,206,694
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable
$
52,784
$
55,904
Accrued wages and benefits
23,812
23,277
Accrued expenses and other liabilities
12,595
13,001
Current portion of finance lease obligation
Current portion of operating lease obligation
Total current liabilities
90,097
93,183
Long-term finance lease obligation
Long-term operating lease obligation
1,034
1,735
Other noncurrent liabilities
10,416
8,681
Deferred income taxes
114,408
92,768
Total liabilities
216,393
197,019
Commitments and contingencies - see
Note 18
-
-
Stockholders’ equity:
Common stock ($
0.01
par value):
Common stock - authorized
120,000
shares, issued
70,261
shares
Class A convertible common stock - authorized and issued
4,800
shares
Paid-in capital
64,044
60,372
Retained earnings
975,977
975,147
Accumulated other comprehensive income (loss), net of tax
(558)
Common stock in treasury, at cost -
26,202
and
26,287
shares in 2021 and 2020,
respectively
(27,433)
(26,674)
Total stockholders’ equity
1,012,781
1,009,675
Total liabilities and stockholders’ equity
$
1,229,174
$
1,206,694
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands, except per share amounts)
Fiscal years ended
May 29, 2021
May 30, 2020
June 1, 2019
52 weeks
52 weeks
52 weeks
Net sales
$
1,348,987
$
1,351,609
$
1,361,188
Cost of sales
1,188,326
1,172,021
1,138,329
Gross profit
160,661
179,588
222,859
Selling, general and administrative
183,943
178,237
177,045
Loss on disposal of fixed assets
2,982
Operating income (loss)
(26,264)
1,269
45,781
Other income (expense):
Interest expense
(213)
(498)
(644)
Interest income
2,828
4,962
7,978
Patronage dividends
9,004
10,096
10,482
Equity in income of unconsolidated entities
4,776
Other, net
4,074
3,696
2,432
Total other income
16,315
18,790
25,024
Income (loss) before income taxes
(9,949)
20,059
70,805
Income tax expense (benefit)
(12,009)
1,731
15,743
Net income
2,060
18,328
55,062
Less:
Net income (loss) attributable to noncontrolling interest
-
(63)
Net income attributable to Cal-Maine Foods, Inc.
$
2,060
$
18,391
$
54,229
Net income per share attributable to Cal-Maine Foods, Inc.:
Basic
$
0.04
$
0.38
$
1.12
Diluted
$
0.04
$
0.38
$
1.12
Weighted average shares outstanding:
Basic
48,522
48,467
48,467
Diluted
48,656
48,584
48,589
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Statements of
Comprehensive Income
(in thousands)
Fiscal years ended
Net income
$
2,060
$
18,328
$
55,062
Other comprehensive income (loss), before tax:
Unrealized holding gain (loss) available-for-sale securities, net of reclassification
adjustments
(736)
1,719
Increase in accumulated post-retirement benefits obligation, net of reclassification
adjustments
(137)
(445)
(349)
Other comprehensive income (loss), before tax
(873)
(386)
1,370
Income tax expense (benefit) related to items of other comprehensive income (loss)
(236)
(110)
Other comprehensive income (loss), net of tax
(637)
(276)
1,048
Comprehensive income
1,423
18,052
56,110
Less: comprehensive income (loss) attributable to the noncontrolling interest
-
(63)
Comprehensive income attributable to Cal-Maine Foods, Inc.
$
1,423
$
18,115
$
55,277
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(in thousands)
Common Stock
Shares
Amount
Class A
Shares
Class A
Amount
Treasury
Shares
Treasury
Amount
Paid In
Capital
Retained
Earnings
Accum.
Other
Comp.
Income
(loss)
Noncontrolling
Interest
Total
Balance at June 2, 2018
70,261
$
4,800
$
26,430
$
(24,966)
$
53,323
$
924,918
$
(693)
$
2,349
955,682
Stock compensation plan transactions
-
-
-
-
(64)
(900)
3,534
-
-
-
2,570
Dividends
-
-
-
-
-
-
-
(24,620)
-
-
(24,620)
Net income
-
-
-
-
-
-
-
54,229
-
55,062
Other comprehensive income, net of tax
-
-
-
-
-
-
-
-
1,048
-
1,048
Balance at June 1, 2019
70,261
4,800
-
26,366
(25,866)
56,857
954,527
3,182
989,806
Stock compensation plan transactions
-
-
-
-
(79)
(808)
3,515
-
-
2,628
Distributions to noncontrolling interest
partners
-
-
-
-
-
-
-
-
-
(755)
(755)
Acquisition of noncontrolling interest in
Texas Egg Products, LLC
-
-
-
-
-
-
-
2,229
-
(2,364)
(135)
Net income
-
-
-
-
-
-
-
18,391
-
(63)
18,328
Other comprehensive loss, net of tax
-
-
-
-
-
-
-
-
(276)
(276)
Balance at May 30, 2020
70,261
4,800
26,287
(26,674)
60,372
975,147
-
1,009,675
Impact of ASC 326, see Note 1
-
-
-
-
-
-
-
-
-
Balance at May 31, 2020
70,261
4,800
26,287
(26,674)
60,372
975,569
-
1,010,097
Stock compensation plan transactions
-
-
-
-
(85)
(759)
3,667
-
-
-
2,823
Dividends
-
-
-
-
-
-
-
(1,652)
-
-
(1,652)
Contributions
-
-
-
-
-
-
-
-
-
Net income
-
-
-
-
-
-
-
2,060
-
-
2,060
Other comprehensive loss, net of tax
-
-
-
-
-
-
-
-
(637)
-
(637)
Balance at May 29, 2021
70,261
$
4,800
$
26,202
$
(27,433)
$
64,044
$
975,977
$
(558)
$
-
$
1,012,781
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Fiscal year ended
May 29, 2021
May 30, 2020
June 1, 2019
Cash flows from operating activities:
Net income
$
2,060
$
18,328
$
55,062
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
59,477
58,103
54,650
Deferred income taxes
22,351
10,281
6,123
Equity in income of affiliates
(622)
(534)
(4,776)
Loss on disposal of property, plant and equipment
2,982
Impairment loss on fixed assets
2,919
-
Stock compensation expense, net of amounts paid
3,778
3,617
3,619
Unrealized losses on investments
1,810
-
Gains on sales of investments
(22)
(611)
-
Purchases of equity securities
(334)
(275)
-
Sales of equity securities
1,212
-
Amortization of investments
Other
(427)
(248)
Change in operating assets and liabilities, net of effects from acquisitions:
(Increase) decrease in receivables and other assets
(33,487)
(28,300)
16,012
Increase in inventories
(31,159)
(9,704)
(2,285)
(Increase) decrease in accounts payable, accrued expenses and other
liabilities
(1,412)
17,679
(14,338)
Net cash provided by operating activities
26,136
73,609
115,085
Cash flows from investing activities:
Purchases of investments
(88,283)
(107,234)
(176,951)
Sales of investments
129,108
204,277
209,806
Acquisition of businesses, net of cash acquired
-
(44,650)
(17,889)
Investment in unconsolidated entities
-
-
(4,273)
Distributions from unconsolidated entities
6,663
7,114
7,904
Purchases of property, plant and equipment
(95,069)
(124,178)
(67,989)
Net proceeds from disposal of property, plant and equipment
3,390
3,306
1,575
Net cash used in investing activities
(44,191)
(61,365)
(47,817)
Cash flows from financing activities:
Principal payments on long-term debt
-
(1,500)
(3,754)
Principal payments on finance lease
(205)
(196)
-
Distributions to noncontrolling interest partners
-
(755)
-
Purchase of common stock by treasury
(871)
(910)
(985)
Payments of dividends
(1,652)
-
(41,713)
Contributions
-
-
Net cash used in financing activities
(2,723)
(3,361)
(46,452)
Increase (decrease) in cash and cash equivalents
(20,778)
8,883
20,816
Cash and cash equivalents at beginning of year
78,130
69,247
48,431
Cash and cash equivalents at end of year
$
57,352
$
78,130
$
69,247
Supplemental information:
Cash paid for operating leases
$
$
$
-
Income taxes paid (refunds received)
$
(1,618)
$
(8,443)
$
36,312
Interest paid
$
$
$
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Nature of Operations
Cal-Maine Foods,
Inc. (“we,”
“us,” “our,” or
the “Company”)
is primarily
engaged in
the production,
grading, packing
and sale of
fresh
shell eggs,
including
cage-free,
organic,
and
nutritionally-enhanced
eggs.
The Company,
which
is
headquartered
in Ridgeland, Mississippi, is the largest producer and distributor of fresh shell eggs in the United States and sells the majority of
its shell eggs in states across the southwestern, southeastern, mid-western and mid-Atlantic regions of the United States.
Principles of Consolidation
The consolidated
financial statements
include the
accounts of
all wholly-owned
subsidiaries, and
majority-owned subsidiaries
over which we exercise control. All significant intercompany transactions and accounts have been eliminated in consolidation.
Fiscal Year
The Company’s fiscal year-end is on the Saturday closest to May 31. Each of
the year-to-date periods ended
May 29, 2021
, May
30, 2020, and June 1, 2019, included
weeks.
Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles ("GAAP")
in the United States of America 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
may
change over
time in
response to
COVID-19 and may change materially in future periods.
Cash Equivalents
The
Company
considers
all
highly
liquid
investments
with
a
maturity
of
three
months
or
less
when
purchased
to
be
cash
equivalents.
We
maintain
bank
accounts
that
are
insured
by
the
Federal
Deposit
Insurance
Corporation
up
to
$250,000. The
Company
routinely
maintains
cash
balances
with
certain
financial
institutions
in
excess
of
federally
insured
amounts.
The
Company has not experienced any loss in such
accounts. The Company manages this risk through maintaining
cash deposits and
other highly liquid investments in high quality financial institutions.
We
primarily utilize a cash management
system with a series of
separate accounts consisting of lockbox accounts
for receiving
cash, concentration accounts to which
funds are moved, and zero-balance
disbursement accounts for funding accounts
payable.
Checks issued,
but not
presented to
the banks
for payment,
may result
in negative
book cash
balances, which
are included
in
accounts
payable.
At May
29,
and May
30,
2020,
checks
outstanding
in
excess
of
related
book
cash
balances
totaled
$
7.5
million and $
11.2
million, respectively.
Investment Securities
Our investment
securities are
accounted for
in accordance
with ASC
320, “Investments
- Debt
and Equity
Securities” (“ASC
320”). The Company considers
its debt securities for
which there is a
determinable fair market value,
and there are no
restrictions
on the Company's ability to sell within the next 12 months, as available-for-sale. We classify these securities as current, because
the amounts invested
are available for current
operations. Available-for-sale
securities are carried
at fair value,
with unrealized
gains and losses
reported as a
separate component of
stockholders’ equity. The Company
regularly evaluates changes
to the rating
of its
debt securities
by credit
agencies and
economic conditions
to assess
and record
any expected
credit losses
through allowance
for credit losses, limited
to the amount that
fair value was less
than the amortized cost
basis.
The cost basis for
realized gains and
losses on available-for-sale
securities is
determined by
the specific
identification method.
Gains and losses
are recognized
in other
income (expenses) as
Other, net in the
Company's Consolidated Statements
of Income. Investments
in mutual funds
are classified
as “Other long-term assets” in the Company’s Consolidated Balance Sheets.
Trade Receivables
Trade
receivables are
stated at
their carrying
values, which
include a
reserve for
credit losses.
At May
29, 2021
and May
30,
2020, reserves for credit losses were $
thousand and $
thousand, respectively. The Company extends credit to customers
based
on
an
evaluation
of
each
customer's
financial
condition
and
credit
history.
Collateral
is
generally
not
required.
The
Company minimizes
exposure to
counter party
credit risk
through credit
analysis and
approvals, credit
limits, and
monitoring
procedures. In
determining our
reserve for
credit losses,
receivables are
pooled according
to age,
with each
pool assigned
an
expected loss based
on historical loss
information adjusted as
needed for economic
and other forward-looking
factors. At both
May 29, 2021 and May 30, 2020 one customer accounted for approximately
23.8
% and
29.5
% of the Company’s trade accounts
receivable, respectively.
Inventories
Inventories of
eggs, feed, supplies
and flocks
are valued principally
at the
lower of cost
(first-in, first-out
method) or
net realizable
value.
The
cost
associated
with
flocks,
consisting
principally
of
chicks,
feed,
labor,
contractor
payments
and
overhead
costs,
are
accumulated during a growing period of approximately
weeks. Flock costs are amortized to cost of sales over
the productive
lives of the flocks, generally
one
to
two years
. Flock mortality is charged to cost of sales as incurred.
The
Company
does
not
disclose
the
gross
cost
and
accumulated
amortization
with
respect
to
its
flock
inventories
since
this
information is not utilized by management in the operation of the Company.
Property, Plant and Equipment
Property, plant
and equipment are stated
at cost. Depreciation is
provided by the straight-line
method over the estimated
useful
lives, which
are
to
years for
buildings and
improvements and
to
years for
machinery and
equipment. Repairs
and
maintenance are expensed
as incurred. Expenditures
that increase the
value or productive
capacity of assets
are capitalized. When
property,
plant, and equipment
are retired, sold,
or otherwise disposed
of, the asset’s
carrying amount and
related accumulated
depreciation are removed from the
accounts and any gain or
loss is included in operations.
The Company capitalizes interest cost
incurred on funds used to
construct property, plant,
and equipment as part of the
asset to which it relates, and
is amortized over
the asset’s estimated useful life.
Leases
The Company determines
if an arrangement
is a lease
at inception of
the arrangement and
classifies it as
an operating lease
or
finance lease. We recognize the right to use an underlying asset for
the lease term as a right-of-use ("ROU")
asset on our balance
sheet. A lease liability is
recorded to represent our obligation
to make lease payments over
the term of the lease.
These assets and
liabilities are included in our Consolidated Balance Sheet
in Finance lease right-of-use asset, Operating lease
right-of-use asset,
Current portion of
finance lease obligation,
Current portion of
operating lease obligation,
Long-term finance lease
obligation, and
Long-term operating lease obligation.
The Company records ROU assets and lease obligations based on
the discounted future minimum lease payments over the term
of the lease. When the rate implicit in the lease is
not easily determinable, the Company’s incremental borrowing rate
is used to
calculate the present value of
the future lease payments. The
Company elected not to recognize
ROU assets and lease obligations
for leases with an initial term of 12 months or less. Lease expense for operating leases is recognized on a straight-line basis over
the lease term.
Investments in Unconsolidated Entities
The equity method of
accounting is used when
the Company has a
20% to 50% interest
in other entities or
when the Company
exercises significant influence
over the entity.
Under the equity
method, original investments
are recorded at
cost and adjusted
by the Company’s share of undistributed earnings or losses of these entities. Nonmarketable investments in which the Company
has less than
a 20% interest
and in which
it does not
have the ability
to exercise significant
influence over the
investee are initially
recorded at cost, and periodically reviewed for impairment.
Goodwill
Goodwill
represents
the
excess
of
the
purchase
price
over
the
fair
value
of
the
identifiable
net
assets
acquired.
Goodwill
is
evaluated for impairment annually by first performing a qualitative assessment to determine whether a
quantitative goodwill test
is necessary. After
assessing the totality of events or circumstances, if we
determine it is more likely than not that
the fair value
of a reporting unit
is less than its
carrying amount, then we
perform additional quantitative tests
to determine the magnitude
of
any impairment.
Intangible Assets
Included in other intangible assets are
separable intangible assets acquired in
business acquisitions, which include franchise
fees,
non-compete agreements and customer
relationship intangibles. They are
amortized over their estimated
useful lives of
to
years. The
gross
cost
and
accumulated
amortization
of
intangible
assets
are
removed
when
the
recorded
amounts
are
fully
amortized and the asset is no longer in use or the contract has expired.
Accrued Self Insurance
We use
a combination of insurance and self-insurance mechanisms to provide for the potential liabilities for health
and welfare,
workers’ compensation,
auto liability
and general
liability risks.
Liabilities associated
with our
risks retained
are estimated,
in
part, by considering claims experience, demographic factors, severity factors and other actuarial assumptions.
Treasury Stock
Treasury stock
purchases are accounted
for under the
cost method whereby
the entire cost
of the acquired
stock is recorded
as
treasury
stock. The
grant
of
restricted
stock
through
the
Company’s
share-based
compensation
plans
is
funded
through
the
issuance of
treasury stock. Gains
and losses
on the
subsequent reissuance
of shares
in accordance
with the
Company’s
share-
based compensation plans are credited or charged to paid-in capital in excess of par value using the average-cost method.
Revenue Recognition and Delivery Costs
Revenue recognition is completed
upon satisfaction of the performance
obligation to the customer, which typically
occurs within
days of
the Company and
customer agreeing upon
the order.
See
Note 14 - Revenue Recognition
for further discussion
of the
policy.
The Company believes the performance
obligation is met upon delivery
and acceptance of the product
by our customers. Costs
to deliver product
to customers are
included in selling,
general and administrative
expenses in the
accompanying Consolidated
Statements
of
Income.
Sales
revenue
reported
in
the
accompanying
consolidated
statements
of
income
is
reduced
to
reflect
estimated returns
and allowances.
The Company
records an
estimated sales
allowance for
returns and
discounts at
the time
of
sale using historical trends based on actual sales returns and sales.
Advertising Costs
The Company expensed
advertising costs as
incurred of $
11.7
million, $
6.0
million, and $
7.3
million in fiscal
2021, 2020, and
2019, respectively.
Income Taxes
Income taxes are provided using the
liability method. Deferred income taxes reflect
the net tax effects of
temporary differences
between
the
carrying
amounts
of
assets
and
liabilities
for
financial
reporting
purposes
and
the
amounts
used
for
income
tax
purposes. The Company’s policy with respect to evaluating uncertain
tax positions is based upon whether management believes
it is
more likely
than not
the uncertain
tax positions
will be
sustained upon
review by
the taxing
authorities. The tax
positions
must
meet
the
more-likely-than-not
recognition
threshold
with
consideration
given
to
the
amounts
and
probabilities
of
the
outcomes
that
could
be
realized
upon
settlement
using
the
facts,
circumstances
and
information
at
the
reporting
date. The
Company will
reflect only
the portion
of the
tax benefit
that will
be sustained
upon resolution
of the
position and
applicable
interest on the portion of the tax benefit not recognized. The Company
initially and subsequently measures the largest amount of
tax benefit
that is
greater than
50% likely
to be
realized upon
settlement with a
taxing authority that
has full
knowledge of
all
relevant information. Based
upon management’s
assessment, there
are no
uncertain tax
positions expected
to have
a material
impact on the Company’s consolidated financial statements.
Stock Based Compensation
We account for share-based compensation in accordance with
ASC 718, Compensation-Stock Compensation
(“ASC 718”). ASC
requires
all
share-based
payments
to
employees,
including
grants
of
employee
stock
options,
restricted
stock
and
performance-based shares, to be recognized in the statement of income based on their fair values. ASC 718 requires the benefits
of
tax
deductions
in
excess
of
recognized
compensation
cost
to
be
reported
as
a
financing
cash
flow. See
Note 16 - Stock
Compensation Plans
for more information.
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
and are
subject to
recurring
revaluations.
The
fair
value
of
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.
Loss Contingencies
Certain conditions may exist as of the date
the financial statements are issued that may
result in a loss to the Company but
which
will only be resolved
when one or more
future events occur or fail
to occur.
The Company’s
management and its legal
counsel
assess
such
contingent
liabilities,
and
such
assessment
inherently
involves
an
exercise
of
judgment.
In
assessing
loss
contingencies related
to legal
proceedings that
are pending
against the
Company or
unasserted claims
that may
result in
such
proceedings, the Company’s
legal counsel evaluates the
perceived merits of any
legal proceedings or unasserted claims
as well
as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment
of a contingency
indicates it is
probable that a
material loss has
been incurred and
the amount of
the liability
can be estimated,
the estimated liability
would be accrued
in the Company’s
financial statements. If
the assessment indicates
a
potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the
nature of the contingent
liability, together
with an estimate of
the range of possible
loss if determinable and
material, would be
disclosed. Loss
contingencies considered
remote are
generally not
disclosed unless
they involve
guarantees, in
which case
the
nature of the guarantee would be disclosed.
The Company expenses the costs of litigation as they are incurred.
New Accounting Pronouncements and Policies
Effective
May
31,
2020,
the
Company
adopted
ASU
2016-13,
Financial
Instruments
-
Credit
Losses
(Topic
326),
which
is
intended
to
improve
financial
reporting
by
requiring
more
timely
recording
of
credit
losses
on
loans
and
other
financial
instruments held by financial institutions and other organizations. The guidance replaces the prior “incurred loss” approach with
an “expected
loss” model
and requires
measurement of
all expected credit
losses for
financial assets held
at the
reporting date
based on historical experience,
current conditions, and reasonable
and supportable forecasts. The
Company adopted the guidance
on a modified retrospective basis through
a cumulative effect adjustment to retained
earnings as of the beginning of
the period of
adoption. The Company evaluated its current methodology of estimating allowance for doubtful accounts and the risk profile
of
its receivables portfolio and developed a
model that includes the qualitative and
forecasting aspects of the “expected loss”
model
under the amended guidance. The Company finalized
its assessment of the impact of the
amended guidance and recorded a $
thousand cumulative increase to retained earnings at May 31, 2020.
No other new accounting
pronouncement issued or effective
during the fiscal year
had or is expected
to have a material
impact
on our Consolidated Financial Statements.
Reclassification
Certain
reclassifications
were
made
to
the
fiscal
financial
statements
to
conform
to
the
fiscal
financial
statement
presentation. These reclassifications had no effect on income.
Note 2 - Acquisitions
Effective on October 20, 2019, the Company acquired certain
assets of Mahard Egg Farm ("Mahard"),
relating to its commercial
shell
egg
production,
processing,
distribution
and
sales
for
$
45.5
million.
The
acquired
assets
include
facilities
with
current
capacity for
approximately
3.9
million laying hens
and permitted capacity
for up
to
8.0
million laying hens,
a feed mill,
pullet
raising facilities
and related
production facilities located
in Chillicothe,
Texas,
and Nebo, Oklahoma,
a distribution
warehouse
located in
Gordonville, Texas
and an
equity interest
in Texas
Egg Products,
LLC ("TEP").
As a
result of
the acquisition,
the
Company
acquired
a
21.1
%
equity
interest
in
TEP
which
brought
our
total
ownership
to
93.2
%.
The
acquired
operations of
Mahard are included in the accompanying financial statements as of October 20, 2019. Acquisition related costs incurred during
the period were immaterial to the financial statements.
The following table summarizes the aggregate purchase price allocation for Mahard (in thousands):
Inventory
$
5,276
Property, plant and equipment
38,433
Customer list and non-compete agreement
2,000
Liabilities assumed
(194)
Total purchase price
$
45,515
Effective
March 28, 2020,
the Company
acquired from
Feathercrest Farms,
Inc. the
remaining
6.8
% interest
in our
majority-
owned subsidiary TEP for $
thousand.
Note 3 - Investment Securities
The following presents the Company’s investment securities as of May 29, 2021 and May 30, 2020 (in thousands):
May 29, 2021
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated Fair
Value
Municipal bonds
$
16,424
$
$
-
$
16,480
Commercial paper
1,998
-
-
1,998
Corporate bonds
80,092
-
80,700
Certificates of deposits
1,077
-
1,076
Asset backed securities
11,914
-
11,904
Total current investment securities
$
111,505
$
$
$
112,158
Mutual funds
$
2,306
$
1,810
$
-
$
4,116
Total noncurrent investment securities
$
2,306
$
1,810
$
-
$
4,116
May 30, 2020
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated Fair
Value
Municipal bonds
$
16,093
$
$
-
$
16,179
Commercial paper
6,965
-
6,982
Corporate bonds
125,594
1,274
-
126,868
Certificates of deposits
1,492
-
-
1,492
Asset backed securities
2,629
-
2,642
Total current investment securities
$
152,773
$
1,390
$
-
$
154,163
Mutual funds
$
2,005
$
$
-
$
2,749
Total noncurrent investment securities
$
2,005
$
$
-
$
2,749
Available-for-sale
Proceeds from
the sales
and maturities
of available-for-sale
securities were
$
129.1
million, $
204.3
million, and
$
209.7
million
during fiscal 2021, 2020, and 2019, respectively. Gross realized gains for
fiscal 2021, 2020, and 2019 were $
thousand, $
thousand, and $
thousand, respectively. Gross realized losses for fiscal
2021, 2020, and 2019 were $
thousand, $
thousand,
and $
thousand, respectively. There were
no
allowance for credit losses at May 29, 2021 and May 30, 2020.
Actual maturities may
differ from contractual maturities
because some borrowers
have the right to
call or prepay
obligations with
or
without
call
or
prepayment
penalties.
Contractual
maturities
of
investment
securities
at
May
29,
are
as
follows
(in
thousands):
Estimated Fair Value
Within one year
$
33,899
1-5 years
78,259
Total
$
112,158
Noncurrent
Proceeds from sales
and maturities of
noncurrent investment securities
were $
thousand, $
1.2
million, and $
thousand during
fiscal 2021,
2020 and
2019, respectively.
Gross realized
gains on
those sales and
maturities during fiscal
2020 and
2019 were
$
thousand, and $
thousand, respectively. There were
no
realized losses for fiscal 2021, 2020, and 2019.
Note 4 - Fair Value Measures
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:
o
Quoted prices for similar assets or liabilities in active markets
o
Quoted prices for identical or similar assets in non-active markets
o
Inputs other than quoted prices that are observable for the asset or liability
o
Inputs derived principally from or corroborated by other observable market data
●
Level 3
- Unobservable inputs for
the asset or liability
supported by little or
no market activity and
are significant
to the fair value of the assets or liabilities
The disclosure of fair value of certain financial assets and liabilities 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 our financial assets and
liabilities that are required to
be measured at fair value
on a recurring basis as
of May 29, 2021 and
May 30, 2020 (in thousands):
May 29, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
-
$
16,480
$
-
$
16,480
Commercial paper
-
1,998
-
1,998
Corporate bonds
-
80,700
-
80,700
Certificates of deposits
-
1,076
-
1,076
Asset backed securities
-
11,904
-
11,904
Mutual funds
4,116
-
-
4,116
Total assets measured at fair value
$
4,116
$
112,158
$
-
$
116,274
May 30, 2020
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
-
$
16,179
$
-
$
16,179
Commercial paper
-
6,982
-
6,982
Corporate bonds
-
126,868
-
126,868
Certificates of deposits
-
1,492
-
1,492
Asset backed securities
-
2,642
-
2,642
Mutual funds
2,749
-
-
2,749
Total assets measured at fair value
$
2,749
$
154,163
$
-
$
156,912
Our 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
available
for
current
operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
Note 5 - Inventories
Inventories consisted of the following (in thousands):
May 29, 2021
May 30, 2020
Flocks, net of amortization
$
123,860
$
110,198
Eggs and egg products
21,084
18,487
Feed and supplies
73,431
58,531
$
218,375
$
187,216
We grow and maintain flocks of layers (mature female chickens), pullets (female chickens under 18 weeks of age), and breeders
(male and
female chickens
used to
produce fertile
eggs to
hatch for
egg production
flocks). Our
total flock
at May
29, 2021,
consisted of approximately
10.8
million pullets and breeders and
37.8
million layers.
The Company expensed amortization and mortality associated with the flocks to cost of sales as follows (in thousands):
May 29, 2021
May 30, 2020
June 1, 2019
Amortization
$
133,448
$
133,379
$
119,658
Mortality
6,769
5,823
5,161
Total flock costs charged to cost of sales
$
140,217
$
139,202
$
124,819
Note 6 - Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
May 29, 2021
May 30, 2020
Land and improvements
$
101,174
$
91,865
Buildings and improvements
454,332
393,195
Machinery and equipment
584,778
531,545
Construction-in-progress
72,879
126,061
1,213,163
1,142,666
Less: accumulated depreciation
623,746
585,291
$
589,417
$
557,375
Depreciation expense was $
56.5
million, $
54.5
million and $
51.7
million in the fiscal years ended May 29, 2021, May 30, 2020,
and June 1, 2019, respectively.
The Company
maintains insurance
for both
property damage
and business
interruption relating
to catastrophic
events, such
as
fires. Insurance recoveries received
for property damage
and business interruption
in excess of
the net book
value of
damaged
assets, clean-up and demolition
costs, and post-event costs
are recognized as income
in the period received or
committed when
all contingencies associated with
the recoveries are
resolved. Gains on
insurance recoveries related to
business interruption are
recorded within “Cost of
sales” and any gains
or losses related to
property damage are recorded
within “Loss on disposal
of fixed
assets.”
Insurance
recoveries
related
to
business
interruption
are
classified
as
operating
cash
flows
and
recoveries
related
to
property damage
are classified
as investing
cash flows
in the
statement of
cash flows. Insurance
claims incurred
or
finalized
during the
fiscal years ended
May 29, 2021,
May 30, 2020,
and June 1,
2019 did
not have
a material effect
on the
Company's
consolidated financial statements.
Included in cost
of sales for
fiscal 2021 and
2020 is a
non-cash impairment
loss on fixed
assets of $
thousand and
$
2.9
million,
respectively,
related to
decommissioning some
older, less
efficient production
facilities as
the Company
continues to
invest in
new facilities to meet the increasing demand for specialty eggs and to reduce production costs.
Note 7 - Investment in Unconsolidated Entities
At May 29, 2021,
the Company had several
investments in unconsolidated entities
that are accounted for
using the equity method
of accounting. Red River Valley
Egg Farm, LLC ("Red River") operates a cage-free shell egg production complex near Bogota,
Texas. Specialty Eggs,
LLC ("Specialty Eggs") owns the Egg-Land's Best franchise for most
of Georgia and South Carolina, as
well as a portion of western North Carolina and eastern Alabama. Southwest Specialty Eggs, LLC
("Southwest Specialty Eggs")
owns the
Egg-Land's Best
franchise for
Arizona, southern
California and
Clark County,
Nevada (including
Las Vegas).
As of
May 29,
2021, the
Company owned
% in
Red River, Specialty
Eggs, and
Southwest Specialty
Eggs. Equity
method investments
are
included
in
“Investments
in
unconsolidated
entities”
in
the
accompanying
Consolidated
Balance
Sheets
and
totaled
$
49.9
million and $
54.7
million at May 29, 2021 and May 30, 2020, respectively.
Equity
in
income
of
unconsolidated
entities
of
$
thousand,
$
thousand,
and
$
4.8
million
from
these
entities
has
been
included in the Consolidated Statements of Income for fiscal 2021, 2020, and 2019, respectively.
The condensed
consolidated financial
information for
the Company's
unconsolidated joint
ventures was
as follows
(in thousands):
For the fiscal year ended
May 29, 2021
May 30, 2020
June 1, 2019
Net sales
$
119,853
$
188,922
$
112,396
Net income
1,596
1,064
9,490
Total assets
106,592
113,513
128,470
Total liabilities
5,850
4,655
7,600
Total equity
100,742
108,858
120,870
The
Company
is
a
member
of
Eggland’s
Best,
Inc.
(“EB”),
which
is
a
cooperative. At
May
29,
and
May
30,
2020,
“Investments
in
unconsolidated
entities”
as
shown
on
the
Company’s
Consolidated
Balance
Sheet
includes
the
cost
of
the
Company’s investment in
EB plus any qualified written allocations. The
Company cannot exert significant influence over EB’s
operating and financial activities;
therefore, the Company accounts
for this investment using
the cost method. The carrying
value
of this investment at May 29, 2021 and May 30, 2020 was $
thousand and $
2.0
million, respectively.
The following relates to the Company’s transactions with these unconsolidated affiliates (in thousands):
For the fiscal year ended
May 29, 2021
May 30, 2020
June 1, 2019
Sales to unconsolidated entities
$
56,765
$
54,559
$
58,093
Purchases from unconsolidated entities
76,059
71,475
81,685
Distributions from unconsolidated entities
6,663
7,114
7,904
May 29, 2021
May 30, 2020
Accounts receivable from unconsolidated entities
2,404
$
4,935
Accounts payable to unconsolidated entities
4,161
5,706
Note 8 - Goodwill and Other Intangible Assets
Goodwill and other intangibles consisted of the following (in thousands):
Other Intangibles
Franchise
Customer
Non-compete
Right of
Water
Total
Goodwill
rights
relationships
agreements
Use
rights
Trademark
intangibles
Balance June 1, 2019
$
35,525
$
19,955
$
2,504
$
$
-
$
$
$
59,287
Additions
-
-
1,000
1,000
-
-
-
2,000
Amortization
-
(1,628)
(1,150)
(118)
-
-
(50)
(2,946)
Balance May 30, 2020
35,525
18,327
2,354
1,179
-
58,341
Additions
-
-
-
-
-
-
Amortization
-
(1,628)
(666)
(160)
(10)
-
(50)
(2,514)
Balance May 29, 2021
$
35,525
$
16,699
$
1,688
$
1,019
$
$
$
$
55,866
For the Other Intangibles listed above, the gross carrying amounts and accumulated amortization are as follows (in thousands):
May 29, 2021
May 30, 2020
Gross carrying
Accumulated
Gross carrying
Accumulated
amount
amortization
amount
amortization
Other intangible assets:
Franchise rights
$
29,284
$
(12,585)
$
29,284
$
(10,957)
Customer relationships
9,644
(7,956)
20,544
(18,190)
Non-compete agreements
1,450
(431)
1,450
(271)
Right of use intangible
(200)
(191)
Water rights *
-
-
Trademark
(214)
(164)
Total
$
41,727
$
(21,386)
$
52,589
$
(29,773)
*
Water rights are an indefinite life intangible asset.
No significant residual value
is estimated for these
intangible assets. Aggregate amortization
expense for fiscal years
2021, 2020,
and 2019 totaled $
2.5
million, $
2.9
million, and $
2.8
million, respectively.
The following table presents the total estimated amortization of intangible assets for the five succeeding years (in thousands):
For fiscal year
Estimated amortization expense
$
2,220
2,206
2,170
2,040
2,015
Thereafter
8,970
Total
$
19,621
Note 9 - Employee Benefit Plans
The Company maintains a medical plan that is qualified under Section 401(a) of the Internal Revenue Code and is not subject to
tax under present income tax laws. The plan is
funded by contributions from the Company and its
employees. Under its plan, the
Company
self-insures
its
portion
of
medical
claims
for
substantially
all
full-time
employees. The
Company
uses
stop-loss
insurance
to
limit
its
portion
of
medical
claims
to
$
225,000
per
occurrence. The
Company's
expenses
including
accruals
for
incurred but not reported claims were approximately $
21.7
million, $
17.8
. million, and $
18.1
million in fiscal years 2021, 2020,
and 2019, respectively.
The liability recorded for
incurred but not reported
claims was $
2.4
million and $
1.7
million as of May
29, 2021 and May 30, 2020, respectively.
The Company has
a KSOP plan
that covers substantially
all employees (the
“Plan”). The Company makes
contributions to the
Plan at a rate of
% of participants' eligible compensation,
plus an additional amount determined
at the discretion of the
Board of
Directors. Contributions
can
be
made
in
cash
or
the
Company's
common
stock,
and
vest
immediately. The
Company's
cash
contributions to the Plan were
$
3.8
million in fiscal years 2021 and
2020, and $
3.7
million in fiscal year 2019.
The Company did
no
t make direct contributions of
the Company’s common stock in fiscal years 2021,
2020, or 2019. Dividends on
the Company’s
common stock are paid
to the Plan in
cash. The Plan acquires the
Company’s common stock,
which is listed on
the NASDAQ,
by using
the dividends and
the Company’s
cash contribution to
purchase shares in
the public markets. The
Plan sells
common
stock on the NASDAQ to pay benefits to Plan participants. Participants may make contributions to the Plan up
to the maximum
allowed by the Internal Revenue Service regulations. The Company does not match participant contributions.
The
Company
has
deferred
compensation
agreements
with
certain
officers
for
payments
to
be
made
over
specified
periods
beginning when the officers reach age
or over as specified in the agreements. Amounts accrued for the agreements are based
upon deferred
compensation earned
over the
estimated remaining
service period
of
each officer.
Payments made
under
these
agreements
were
$
thousand, $
thousand,
and
$
thousand in
fiscal
years
2021,
2020,
and
2019,
respectively. The
liability recorded related to these agreements was $
1.4
million at May 29, 2021 and May 30, 2020.
In December 2006, the Company adopted an additional deferred compensation plan to provide deferred compensation to named
officers of
the Company.
The awards
issued under
this plan
were $
thousand, $
thousand, and
$
thousand in
fiscal
2021, 2020, and 2019, respectively. Payments made under the plan were $
thousand and $
1.2
million in fiscal 2021 and 2020,
respectively. The
liability
recorded
for
this
plan
was
$
4.1
million
and
$
2.7
million
at
May
29,
and
May
30,
2020,
respectively.
Deferred compensation expense for both plans totaled $
1.6
million, $
thousand and $
thousand in fiscal 2021, 2020, and
2019, respectively.
Postretirement Medical Plan
The Company maintains
an unfunded postretirement medical
plan to provide
limited health benefits
to certain qualified
retired
employees and
officers. Retired non-officers
and spouses
are eligible
for coverage
until attainment
of Medicare
eligibility,
at
which
time
coverage
ceases. Retired
officers
and
spouses
are
eligible
for
lifetime
benefits
under
the
plan. Officers
and
their
spouses, who retired prior to
May 1, 2012, must participate in
Medicare Plans A and B. Officers, and
their spouses, who retire
on
or after May 1, 2012 must participate in Medicare Plans A, B, and D.
The plan is
accounted for in
accordance with ASC
715, Compensation -
Retirement Benefits (“ASC
715”), whereby an
employer
recognizes the funded status
of a defined benefit
postretirement plan as an
asset or liability, and recognizes changes in
the funded
status in the year the change occurs through comprehensive income. Additionally, this expense is recognized on an accrual basis
over the employees’ approximate period of employment.
The liability associated with the plan was
$
3.4
million at May 29, 2021
and May 30, 2020. The remaining disclosures associated with ASC 715 are immaterial to the Company’s financial statements.
Note 10 - Credit Facility
For fiscal years 2021, 2020 and 2019, interest was $
thousand, $
thousand, and $
thousand, respectively.
On July 10, 2018,
we entered into
a $
100.0
million Senior Secured
Revolving Credit Facility (the
“Revolving Credit Facility”)
with
a
five
-year
term.
The
credit
agreement
for
the
Revolving
Credit
Facility
includes
an
accordion
feature
permitting
the
Company,
with
the
consent
of
the
administrative
agent,
to
increase
the
revolving
commitments
in
the
aggregate
up
to
$
125.0
million.
No
amounts were
borrowed
under
the
facility
as
of
May
29,
or
during
fiscal
2021.
The
Company
had
$
4.1
million of outstanding standby letters of credit issued under the Revolving Credit Facility at May 29, 2021.
The interest rate is based, at the Company’s
election, on 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
0.5
% 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
1.00
% per annum, subject to certain interest rate floors. The “Applicable Margin” means
% 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 average outstanding balance
at the quarterly pricing date. The Company will pay a commitment fee of
0.2
% on the unused portion of the facility.
The Revolving Credit Facility is guaranteed by all the current and future wholly-owned direct and
indirect domestic subsidiaries
of
the
Company
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 Revolving Credit Facility contains customary covenants, including
restrictions on the incurrence of
liens, and additional
debt, sales of
assets and
other fundamental
corporate changes and
investments. The
credit agreement
requires
maintenance of
two
financial covenants (i)
a minimum
working capital ratio
of
2.00
to 1.00 and
(ii) an
annual limit on
capital
expenditures of $
150.0
million. Additionally, the credit
agreement requires that Fred R. Adams Jr.,
his 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
% of the Company’s
voting stock. Failure to satisfy
any of
these
covenants
will
constitute
a
default
under
the
terms
of
the
credit
agreement.
Further,
dividends
are
restricted
to
the
Company’s
current
dividend
policy
of
one-third
of
the
Company’s
net
income
computed
in
accordance
with
GAAP.
The
Company is allowed to
repurchase up to $
75.0
million of its capital
stock in any year provided
there is no default
under the credit
agreement and the Company has availability of at least $
20.0
million under the facility.
The credit agreement
for the Revolving
Credit Facility includes
customary events of
default and customary
remedies upon the
occurrence of an event of default, including acceleration of the amounts due and foreclosure of the collateral.
At May 29, 2021, we were in compliance with the covenant requirements of the Revolving Credit Facility.
Note 11 - Accrued Dividends Payable and Dividends per Common Share
We accrue dividends at
the end of
each quarter
according to
our dividend policy
adopted by
our 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
th 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
th day after the
quarter end. Dividends are
payable on the
th day following the
record date. Following a
quarter for
which the Company does not report net income attributable
to Cal-Maine Foods, Inc., the Company will not pay a
dividend for a
subsequent profitable quarter until
the Company is profitable
on a cumulative basis
computed from the date
of the last quarter
for
which a
dividend was
paid. At
the end
of fiscal
2021, the
amount of
cumulative losses
to be
recovered before
payment of
a
dividend was $
4.2
million.
On our consolidated statement of income, we determine dividends per common share in accordance with the computation in the
following table (in thousands, except per share data):
13 Weeks Ended
52 Weeks Ended
May 29, 2021
May 30, 2020
May 29, 2021
May 30, 2020
Net income (loss) attributable to Cal-Maine Foods, Inc.
$
(4,244)
$
60,463
$
2,060
$
18,391
Cumulative losses to be recovered prior to payment of
divided at beginning of period
-
(61,833)
(1,370)
(19,761)
Net income attributable to Cal-Maine Foods, Inc.
available for dividend
$
-
$
-
$
-
$
-
1/3 of net income attributable to Cal-Maine Foods, Inc.
available for dividend
$
-
Common stock outstanding (shares)
44,058
Class A common stock outstanding (shares)
4,800
Total common stock outstanding (shares)
48,858
Dividends per common share*
$
-
$
-
$
0.034
$
-
*Dividends per
common share
=
1/3
of Net
income (loss)
attributable to
Cal-Maine Foods,
Inc. available
for dividend ÷
Total
common stock outstanding (shares).
Note 12 - Equity
The Company has
two
classes of capital stock:
Common Stock and Class
A Common Stock. Except
as otherwise required by
law
or the Company's
certificate of
incorporation, holders
of shares of
the Company’s capital stock
vote as a
single class
on all matters
submitted to a
vote of the
stockholders, with
each share of
Common Stock
entitled to
one
vote and each
share of Class
A Common
Stock entitled to
ten
votes. Holders of capital stock have the
right of cumulative voting in the election
of directors. The Common
Stock and Class
A Common Stock
have equal liquidation
rights and the
same dividend rights. In
the case of
any dividend payable
in stock,
holders of
Common Stock
are entitled
to receive
the same
percentage dividend
(payable only
in shares
of Common
Stock) as the holders of
Class A Common Stock receive (payable
only in shares of Class
A Common Stock). Upon liquidation,
dissolution, or winding-up of the Company, the holders
of Common Stock are entitled to share ratably with the holders of Class
A Common
Stock in
all assets
available for
distribution after
payment in
full of
creditors. The
holders of
Common Stock
and
Class
A
Common Stock
are
not
entitled
to
preemptive or
subscription
rights.
No
class of
capital
stock
may
be
combined or
subdivided unless
the other
classes of
capital stock
are combined
or subdivided
in the
same proportion.
No dividend
may be
declared and paid on Class A Common Stock
unless the dividend is payable only to the
holders of Class A Common Stock and a
dividend is declared and paid to Common Stock concurrently.
Each share of
Class A Common
Stock is convertible,
at the option
of its holder,
into
one
share of Common
Stock at any
time.
The
Company’s
Second
Restated
Certificate
of
Incorporation
(“Restated
Charter”)
identifies
family
members
of
Mr.
Adams
(“Immediate Family Members”) and arrangements and
entities that are permitted to receive and
hold shares of Class A Common
Stock, with
ten
votes per share,
without such shares
converting into shares
of Common Stock,
with
one
vote per share
(“Permitted
Transferees”).
The
Permitted
Transferees
include
arrangements
and
entities
such
as
revocable
trusts
and
limited
liability
companies that
could hold
Class A Common
Stock for
the benefit
of Immediate
Family Members.
Each Permitted
Transferee
must have a relationship, specifically
defined in the Restated Charter, with
another Permitted Transferee or an Immediate
Family
Member.
A
share
of
Class
A
Common
Stock
transferred
to
a
person
other
than
a
Permitted
Transferee
would
automatically
convert into Common Stock with one
vote per share. Additionally,
the Restated Charter includes a sunset
provision pursuant to
which all
of the
outstanding Class
A Common
Stock will
automatically convert
to Common
Stock if:
(a) less
than
4,300,000
shares of
Class A
Common Stock,
in the
aggregate, are
beneficially owned
by Immediate
Family Members
and/or Permitted
Transferees, or (b) if less than
4,600,000
shares of Class A
Common Stock and Common
Stock, in the aggregate,
are beneficially
owned by Immediate Family Members and/or Permitted Transferees.
Note 13 - Net Income per Common Share
Basic net income per share attributable
to Cal-Maine Foods, Inc. is based on
the weighted average Common Stock and Class
A
Common Stock
outstanding. Diluted
net income
per share
attributable to
Cal-Maine Foods,
Inc. is
based on
weighted-average
common shares outstanding during the relevant period adjusted for the dilutive effect of share-based awards.
The following table provides
a reconciliation of the
numerators and denominators
used to determine basic
and diluted net income
per common share attributable to Cal-Maine Foods, Inc. (amounts in thousands, except per share data):
May 29, 2021
May 30, 2020
June 1, 2019
Numerator
Net income
$
2,060
$
18,328
$
55,062
Less: Net income (loss) attributable to noncontrolling interest
-
(63)
Net income attributable to Cal-Maine Foods, Inc.
$
2,060
$
18,391
$
54,229
Denominator
Weighted-average common shares outstanding, basic
48,522
48,467
48,467
Effect of dilutive securities of restricted shares
Weighted-average common shares outstanding, diluted
48,656
48,584
48,589
Net income per common share attributable to Cal-Maine Foods, Inc.
Basic
$
0.04
$
0.38
$
1.12
Diluted
$
0.04
$
0.38
$
1.12
Note 14 - Revenue Recognition
Satisfaction of Performance Obligation
The vast majority of the Company’s revenue is derived from agreements 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 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.
Costs
to
deliver
product
to
customers
are
included
in
selling,
general
and
administrative
expenses
in
the
accompanying
Consolidated Statements of
Income and totaled
$
52.7
million, $
52.2
million, and $
53.6
million in fiscal
years 2021, 2020,
and
2019, respectively.
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 allowance of returns
and refunds by using historical return
data and
comparing to
current period
sales and
accounts receivable.
The allowance
is recorded
as a
reduction in
sales with
a
corresponding reduction in trade accounts receivable.
Sales Incentives Provided to Customers
The Company periodically
provides incentive
offers to its
customers to encourage
purchases. Such
offers include current
discount
offers (e.g., percentage
discounts off current
purchases), inducement offers
(e.g., offers for future
discounts subject to
a minimum
current purchase), and other similar offers. Current
discount offers, when accepted by customers,
are treated as a reduction to the
sales price
of the
related transaction, while
inducement offers,
when accepted
by customers, are
treated as
a reduction to
sales
price based on estimated future redemption rates. Redemption rates are estimated using the Company’s historical experience for
similar inducement offers. Current discount and inducement offers are presented as a net amount in ‘‘Net sales.’’
Disaggregation of Revenue
The following table provides revenue disaggregated by product category (in thousands):
13 Weeks Ended
52 Weeks Ended
May 29, 2021
May 30, 2020
May 29, 2021
May 30, 2020
Conventional shell egg sales
$
205,987
$
311,380
$
766,284
$
830,278
Specialty shell egg sales
131,243
133,347
539,780
485,465
Egg products
10,997
7,204
36,733
31,414
Other
1,571
1,402
6,190
4,452
$
349,798
$
453,333
$
1,348,987
$
1,351,609
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 May 29, 2021 the balance for contract assets is immaterial.
Contract Balances
The Company receives payment from customers based on specified terms that are generally
less than 30 days from
delivery. There are rarely contract assets or liabilities related to performance under the contract.
Concentration of Credit Risks
Our largest customer, Walmart
Inc. (including Sam's Club) accounted for
29.8
%,
32.1
% and
33.7
% of net sales dollars for fiscal
2021, 2020, and 2019, respectively. H-E-B, LP accounted for
10.1
% of net sales dollars for fiscal 2020.
Note 15 - Leases
Expenses related to operating leases, amortization of finance lease ROU assets and finance lease interest are included in Cost of
sales, Selling general and administrative expense, and Interest expense in the Consolidated Statements of Income.
The Company’s lease cost consists of the following (in thousands):
13 Weeks Ended
May 29, 2021
52 Weeks Ended
May 30, 2020
Operating Lease cost
$
$
Finance Lease cost
Amortization of right-of-use asset
$
$
Interest on lease obligations
$
$
Short term lease cost
$
1,057
$
3,771
Future minimum lease payments under non-cancelable leases are as follows (in thousands):
As of May 29, 2021
Operating Leases
Finance Leases
$
$
-
-
Thereafter
-
Total
1,882
Less imputed interest
(157)
(44)
Total
$
1,725
$
The weighted-average
remaining lease
term and
discount rate
for lease
liabilities included
in our
Condensed Consolidated
Balance
Sheet are as follows:
As of May 29, 2021
Operating Leases
Finance Leases
Weighted-average remaining lease term (years)
2.8
2.5
Weighted-average discount rate
5.9
%
4.9
%
Note 16 - Stock Compensation Plans
On
October
2,
2020,
shareholders
approved
the
Amended
and
Restated
Cal-Maine
Foods,
Inc.
Omnibus
Long-Term
Incentive Plan
(the “LTIP
Plan”). The
purpose of
the LTIP
Plan is
to assist
us and
our subsidiaries
in attracting
and retaining
selected individuals who are expected to contribute to our long-term success. The maximum number of shares of common stock
available for
awards under
the LTIP
Plan is
2,000,000
of which
1,126,188
shares remain
available for
issuance, and
may be
authorized
but
unissued
shares
or
treasury
shares.
Awards
may
be
granted
under
the
LTIP
Plan
to
any
employee,
any
non-
employee member of the Company’s Board of Directors, and any consultant who
is a natural person and provides services to us
or one of our subsidiaries (except for incentive stock options, which may be granted only to our employees).
The only outstanding awards under the LTIP
Plan are restricted stock awards. The restricted stock vests one
to three years from
the grant date, or upon death or disability, change in control, or retirement (subject to certain requirements). The restricted stock
contains no other service or performance conditions. Restricted stock is awarded in the name of the recipient and, except for the
right of disposal, constitutes
issued and outstanding shares
of the Company’s common stock for
all corporate purposes during
the
period of
restriction including the
right to
receive dividends. Compensation
expense is a
fixed amount based
on the
grant date
closing price and is amortized on a straight-line basis over the vesting period. Forfeitures are recognized as they occur.
Total
stock-based
compensation
expense
was
$
3.8
million,
$
3.6
million,
and
$
3.6
million
in
fiscal
2021,
2020,
and
2019,
respectively.
Our unrecognized compensation expense as a result of non-vested shares
was $
6.6
million and at May 29, 2021 and $
6.3
million
May 30, 2020. The
unrecognized compensation expense
will be amortized
to stock compensation
expense over a
period of
2.1
years.
A summary of our equity award activity and related information for our restricted stock is as follows:
Number of
Shares
Weighted Average
Grant
Date Fair Value
Outstanding, June 1, 2019
248,412
$
42.20
Granted
104,566
38.25
Vested
(77,801)
43.00
Forfeited
(2,131)
43.20
Outstanding, May 30, 2020
273,046
$
41.36
Granted
112,860
37.82
Vested
(79,328)
43.96
Forfeited
(4,431)
40.12
Outstanding, May 29, 2021
302,147
$
39.37
Note 17 - Income Taxes
Income tax expense (benefit) consisted of the following:
Fiscal year ended
May 29, 2021
May 30, 2020
June 1, 2019
Current:
Federal
$
(35,090)
$
(6,750)
$
8,160
State
(1,800)
1,460
(34,360)
(8,550)
9,620
Deferred:
Federal
21,658
8,872
4,843
State
1,409
1,280
22,351
10,281
6,123
$
(12,009)
$
1,731
$
15,743
Significant components of the Company’s deferred tax liabilities and assets were as follows:
May 29, 2021
May 30, 2020
Deferred tax liabilities:
Property, plant and equipment
$
82,508
$
60,645
Inventories
31,501
28,075
Investment in affiliates
7,670
8,099
Other comprehensive income
-
Other
5,648
5,002
Total deferred tax liabilities
127,327
102,035
Deferred tax assets:
Accrued expenses
3,728
3,376
State operating loss carryforwards
3,416
Other comprehensive income
-
Other
5,278
5,099
Total deferred tax assets
12,919
9,267
Net deferred tax liabilities
$
114,408
$
92,768
The differences between income tax expense (benefit) at the Company’s effective income tax rate and income tax expense at the
statutory federal income tax rate were as follows:
Fiscal year end
May 29, 2021
May 30, 2020
June 1, 2019
Statutory federal income tax
$
(2,087)
$
4,226
$
14,694
State income taxes, net
1,124
(309)
2,164
Domestic manufacturers deduction
3,566
-
Enacted net operating loss carryback provision
(16,014)
(3,041)
-
Tax exempt interest income
(50)
(111)
(197)
Other, net
1,452
(918)
$
(12,009)
$
1,731
$
15,743
On March 27, 2020, the Coronavirus Aid, Relief,
and Economic Security Act (the “CARES Act”)
was enacted. The CARES Act
contains several income
tax provisions, as
well as other
measures, that are
intended to assist
businesses impacted by
the economic
effects of the COVID-19 pandemic. The most significant provision of the CARES Act that materially affects our accounting for
income taxes includes a five-year
carryback allowance for taxable
net operating losses generated
in tax years 2018 through
2020,
our fiscal years 2019 through 2021.
Our financial statements for the fiscal year ended May 29, 2021 were materially affected by the changes enacted by the CARES
Act. As a result of the
applicable accounting guidance and the provisions enacted by the
CARES Act, our income tax provision
for fiscal
2021 reflects
the carryback
of taxable
net operating
losses generated
during periods
in which
the statutory
federal income
tax rate was 21% to periods in which the statutory federal income tax rate was 35%.
Due to the difference in statutory rates, we
recorded a
$
16.0
million discrete
income tax
benefit related
to the
carryback provisions
during the
fiscal year
ended May
29,
2021. Because
the net
operating losses
were carried
back to
years in
which we
initially reduced
our taxable
income using
the
Domestic Production
Activities Deduction,
we recorded
a partially
offsetting $
3.6
million discrete
income tax
expense during
fiscal 2021 to account for the reduced taxable income.
Federal and state
income taxes of
$
thousand, $
thousand, and $
37.4
million were paid
in fiscal years
2021, 2020, and
2019,
respectively.
Federal and state income
taxes of $
2.6
million, $
8.4
million, and $
thousand were refunded in
fiscal years 2021,
2020, and 2019, respectively.
The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the technical merits
of the position. The Company measures
the tax
benefits recognized
based on
the largest
benefit that
has a
greater than
50% likelihood
of being
realized upon
ultimate
resolution.
As of May 29, 2021, we are under audit by the Internal Revenue Service (IRS) for the fiscal years 2013 through 2015. Although
we are subject to income tax
in many jurisdictions within the
U.S., we were not under audit
by any state and local tax
authorities.
As
of May
29, 2021,
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.
However,
the
Company
believes
it
is
reasonably possible that an additional decrease
of up to $
1.4
million in previously recognized tax benefits
related to research and
development credits may be necessary within the coming year.
Tax periods for all years beginning
with fiscal year 2013 remain
open to examination by federal and state taxing jurisdictions to which we are subject.
Note 18 - Commitments and Contingencies
Financial Instruments
The Company maintained standby letters of credit
("LOC") totaling $
4.1
million at May 29, 2021, which
were issued under the
Company's Revolving
Credit Facility.
The outstanding
LOCs are
for the
benefit of
certain insurance
companies. None
of the
LOCs are recorded as a liability on the Consolidated Balance Sheets.
State of Texas v.
Cal-Maine Foods, Inc. d/b/a Wharton; and Wharton County Foods, LLC
On April 23, 2020, the Company
and its subsidiary Wharton County Foods,
LLC (“WCF”) were named as defendants
in State of
Texas v.
Cal-Maine Foods, Inc. d/b/a Wharton; and Wharton
County Foods, LLC, Cause No. 2020-25427, in
the District Court
of Harris County, Texas.
The State of Texas (the “State”) asserted claims based on the Company’s
and WCF’s alleged violation
of the
Texas
Deceptive Trade
Practices-Consumer Protection
Act, Tex.
Bus. &
Com. Code
§§ 17.41-17.63
(“DTPA”).
The
State claimed
that the
Company and
WCF offered
shell eggs
at excessive
or exorbitant
prices during
the COVID-19
state of
emergency and made
misleading statements
about shell
egg prices.
The State
sought temporary
and permanent
injunctions against
the Company and WCF to prevent further alleged violations of the DTPA, along with over $
100,000
in damages. On August 13,
2020, the
court granted the
defendants’ motion to
dismiss the State’s
original petition with
prejudice. On September
11, 2020,
the State
filed a
notice of
appeal, which
was assigned
to the
Texas
Court of
Appeals for
the First
District. The
State filed
its
opening
brief
on
December 7,
2020.
The Company
and
WCF
filed
their response
on
February
8,
2021.
The
Texas
Court
of
Appeals has not ruled on these submissions. Management believes the risk of material loss related to this matter to be remote.
Bell et al. v. Cal-Maine Foods et al.
On April 30, 2020, the Company was named
as one of several defendants in Bell
et al. v. Cal-Maine Foods et al., Case No. 1:20-
cv-461, in the Western District of Texas,
Austin Division. The defendants include numerous grocery stores, retailers, producers,
and farms.
Plaintiffs assert
that defendants
violated the
DTPA
by allegedly
demanding exorbitant
or excessive
prices for
eggs
during the COVID-19 state
of emergency. Plaintiffs request certification of
a class of all
consumers who purchased
eggs in Texas
sold, distributed,
produced, or
handled by
any of
the defendants
during the
COVID-19 state
of emergency.
Plaintiffs
seek to
enjoin the Company and other
defendants from selling eggs at a
price more than 10% greater
than the price of eggs
prior to the
declaration
of
the
state
of
emergency
and
damages
in
the
amount
of
$
10,000
per
violation,
or
$
250,000
for
each
violation
impacting anyone
over 65
years
old. On
December 1,
2020,
the Company
and certain
other defendants
filed
their motion
to
dismiss
the
plaintiffs’
first
amended class
action
complaint. The
court
has
not
ruled on
this
motion
to
dismiss. Management
believes the risk of material loss related to this matter to be remote.
Kraft Foods Global, Inc. et al. v. United Egg Producers, Inc. et al.
As previously
reported, on
September 25,
2008, the
Company was
named as
one of
several defendants
in numerous
antitrust
cases involving
the United
States shell
egg industry.
The Company
settled all
of these
cases, except
for the
claims of
certain
plaintiffs who sought substantial damages allegedly arising from the purchase of egg products
(as opposed to shell eggs). These
remaining plaintiffs
are Kraft Food
Global, Inc.,
General Mills, Inc.,
and Nestle USA,
Inc. (the “Egg
Products Plaintiffs”)
and
The Kellogg Company.
On September 13, 2019, the
case with the Egg Products
Plaintiffs was remanded from a multi-district
litigation proceeding in the
United States District
Court for the
Eastern District of
Pennsylvania, In re
Processed Egg Products
Antitrust Litigation, MDL
No.
2002,
to
the
United
States
District
Court
for
the
Northern
District
of
Illinois,
Kraft
Foods
Global,
Inc.
et
al.
v.
United
Egg
Producers, Inc. et al.,
Case No. 1:11-cv-8808, for trial. The
Egg Products Plaintiffs allege that
the Company and other
defendants
violated Section 1 of the
Sherman Act, 15. U.S.C. §
1, by agreeing to limit
the production of eggs and
thereby illegally to raise
the prices that plaintiffs paid
for processed egg products. In particular,
the Egg Products Plaintiffs are
attacking certain features
of the United Egg
Producers animal-welfare guidelines and program
used by the Company
and many other egg producers.
The
Egg Products Plaintiffs
seek to
enjoin the Company
and other defendants
from engaging in
antitrust violations and
seek treble
money damages.
The parties
filed a
joint status
report on
May 18,
2020, but
no schedule
has yet
been entered
by the
court. It
appears that the case will not be tried until later in 2021 or 2022.
In addition,
on October
24, 2019,
the Company
entered into
a confidential
settlement agreement
with The
Kellogg Company
dismissing all
claims against
the Company
for an
amount that
did not
have a
material impact
on the
Company’s financial condition
or results
of operations.
On November
11,
2019, a
stipulation for
dismissal was
filed with
the court,
but the
court has
not yet
entered a judgment on the filing.
The Company intends to continue to defend the remaining case with the Egg Products Plaintiffs
as vigorously as possible based
on
defenses
which
the
Company
believes
are
meritorious
and
provable.
Adjustments,
if
any,
which
might
result
from
the
resolution of
this remaining
matter with
the Egg
Products Plaintiffs
have not
been reflected
in the
financial statements.
While
management believes that
there is still
a reasonable possibility
of a material
adverse outcome from
the case with
the Egg Products
Plaintiffs, at
the present
time, it
is not
possible to
estimate the
amount of
monetary exposure,
if any,
to the
Company due
to a
range of factors, including the following, among others: the matter is in the early stages of preparing for trial following
remand;
any trial will be before a
different judge and jury in
a different court than prior
related cases; there are significant factual issues
to be resolved; and
there are requests for
damages other than compensatory
damages (i.e., injunction and
treble money damages).
State of Oklahoma Watershed Pollution Litigation
On June 18,
2005, the
State of Oklahoma
filed suit,
in the United
States District
Court for
the Northern District
of Oklahoma,
against Cal-Maine Foods, Inc. and Tyson Foods, Inc. and affiliates,
Cobb-Vantress,
Inc., Cargill, Inc. and its affiliate, George’s,
Inc. and its
affiliate, Peterson Farms,
Inc. and Simmons Foods,
Inc. The State of
Oklahoma claims that through
the disposal of
chicken litter the
defendants have polluted
the Illinois River
Watershed. This watershed provides water
to eastern Oklahoma.
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
% of the membership interests
of Benton County Foods, LLC,
which
is an ongoing commercial shell egg
operation within the Illinois River Watershed. Benton County Foods,
LLC is not a defendant
in the litigation.
The trial in the case began in September 2009 and concluded in February 2010.
The case was tried without a jury,
and the court
has not yet issued its ruling. Management believes the risk of material loss related to this matter to be remote.
Other Matters
In addition to the above,
the Company is involved in
various other claims and litigation
incidental to its business. Although
the
outcome of these matters
cannot be determined with
certainty, management, upon the advice of
counsel, is of the
opinion that the
final outcome should not have a material effect on the Company’s consolidated results of operations or financial position.
Note 19 - 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,
(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
this 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 $
thousand.
Note 20 - Subsequent Events
Effective on
May 30, 2021,
the Company paid
$
48.5
million to acquire
the remaining
% membership interest
in Red
River,
including certain
liabilities. As
a result
of the
acquisition, the
entity became
a wholly
owned subsidiary
of the
Company.
Red
River owns and
operates a specialty
shell egg production
complex with approximately
1.7
million cage-free laying hens,
cage-
free pullet capacity, feed mill, processing plant, related offices and outbuildings and
related equipment located on approximately
acres near Bogata, Texas.
SCHEDULE II - VALUATION
AND QUALIFYING ACCOUNTS
Fiscal Years
ended May 29, 2021, May 30, 2020, and June 1, 2019
(in thousands)
Description
Balance at
Beginning of Period
Charged to Cost
and Expense
Write-off
of Accounts
Balance at
End of Period
Year ended May 29, 2021
Allowance for doubtful accounts
$
$
$
$
Year ended May 30, 2020
Allowance for doubtful accounts
$
$
$
$
Year ended June 1, 2019
Allowance for doubtful accounts
$
$
$
$

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM
9.
CHANGES IN
AND DISAGREEMENTS
WITH
ACCOUNTANTS
ON
ACCOUNTING AND
FINANCIAL
DISCLOSURE
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A.
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
Securities Exchange
Act of
1934, as
amended (the
“Exchange Act”)
is recorded,
processed, summarized and reported,
within the time periods
specified in the Securities
and Exchange Commission’s
rules and
forms. Disclosure
controls
and
procedures
include,
without
limitation,
controls
and
procedures
designed
to
ensure
that
information
required
to be
disclosed
by
us
in
the
reports
that
we
file
or
submit
under
the
Exchange Act
is
accumulated and
communicated to management, including our principal executive
and principal financial officers, or persons
performing similar
functions, as
appropriate to
allow timely
decisions regarding
required disclosure.
Based on
an evaluation
of our
disclosure controls
and procedures conducted
by our Chief
Executive Officer and
Chief Financial Officer, together
with other financial
officers, such
officers concluded
that our
disclosure controls
and procedures
were effective
as of
May 29,
2021 at
the reasonable
assurance
level.
Internal Control Over Financial Reporting
(a)
Management’s Report on Internal Control Over Financial Reporting
The following sets
forth, in accordance
with Section 404(a)
of the Sarbanes-Oxley
Act of 2002
and Item 308
of the Securities
and Exchange Commission’s Regulation S-K, the report of management on our internal control over financial reporting.
1.
Our management is responsible for establishing and maintaining adequate internal control
over financial reporting.
“Internal control over
financial reporting” is
a process designed
by, or under the supervision
of, our Chief
Executive
Officer and Chief Financial Officer,
together with other financial officers, and
effected by our Board of Directors,
management and
other personnel,
to provide
reasonable assurance
regarding the
reliability of
financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:
●
Pertain to the maintenance of records that
in reasonable detail accurately and fairly reflect
the transactions
and dispositions of our assets;
●
Provide reasonable assurance that transactions
are recorded as necessary to
permit preparation of financial
statements
in
accordance
with
generally
accepted
accounting
principles,
and
that
our
receipts
and
expenditures are being made
only in accordance with
authorizations of our management
and directors; and
●
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the financial statements.
2.
Our management,
in accordance
with Rule
13a
-
15(c)
under the
Exchange Act
and with
the participation
of our
Chief
Executive
Officer
and
Chief
Financial
Officer,
together
with
other
financial
officers,
evaluated
the
effectiveness
of
our
internal
control
over
financial
reporting
as
of
May
29,
2021. The
framework
on
which
management’s
evaluation
of
our
internal
control
over
financial
reporting
is
based
is
the
“Internal
Control
-
Integrated
Framework”
published
in
by
the
Committee
of
Sponsoring
Organizations
(“COSO”)
of
the
Treadway Commission.
3.
Management has determined that our internal control over financial reporting as of
May 29, 2021
is effective. It is
noted
that
internal
control
over
financial
reporting
cannot
provide
absolute
assurance
of
achieving
financial
reporting objectives, but rather reasonable assurance of achieving such objectives.
4.
The attestation report of FROST, PLLC on our internal control over financial reporting, which includes that firm’s
opinion on the effectiveness of our internal control over financial reporting, is set forth below.
(b)
Attestation
Report of the Registrant’s Public Accounting Firm
Report of Independent Registered Public Accounting Firm
on Internal Control Over Financial Reporting
Board of Directors and Stockholders
Cal-Maine Foods, Inc. and Subsidiaries
Ridgeland, Mississippi
Opinion on Internal Control Over Financial Reporting
We have
audited Cal-Maine Foods, Inc. and Subsidiaries’ (the “Company”) internal control over
financial reporting as
of May
29, 2021,
based on
criteria established
in
2013 Internal
Control
- Integrated
Framework
issued by
the Committee
of
Sponsoring Organizations
of the
Treadway Commission
(“COSO”).
In our
opinion, the
Company maintained,
in all
material
respects, effective internal
control over
financial reporting
as May
29, 2021, based
on criteria
established in
2013 Internal
Control
- Integrated Framework
issued by the COSO.
We
also have
audited, in
accordance with
the standards
of the
Public Company
Accounting Oversight
Board (United
States) (“PCAOB”), the consolidated balance sheets and the related
consolidated statements of income, comprehensive income,
stockholders’ equity and cash flows of the Company and our report dated July 19, 2021 expressed an unqualified opinion.
Basis for Opinion
The Company’s management is responsible
for maintaining effective internal
control over financial reporting
and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal
Control Over
Financial Reporting
in Item
9A.
Our responsibility
is to
express an
opinion on
the entity’s
internal
control over financial reporting
based on our audit.
We are a public accounting firm registered
with the PCAOB and
are required
to be independent with
respect to the Company
in accordance with the U.S.
federal securities laws and the
applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our
audit in
accordance with
the standards
of the
PCOAB.
Those standards
require that
we plan
and
perform the audit to
obtain reasonable assurance about
whether effective internal control
over financial reporting was
maintained
in all
material respects.
Our audit
of internal
control over
financial reporting
included obtaining
an understanding
of internal
control over
financial reporting,
assessing the
risk that
a material
weakness exists,
and testing
and evaluating
the design
and
operating effectiveness of internal control based on the assessed risk.
Our audit also included performing such other procedures
as we considered necessary in the circumstances.
We believe our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
An entity’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting
and the preparation of
consolidated financial statements for
external purposes in accordance
with
accounting principles generally
accepted in the
United States of
America.
An entity’s
internal control over
financial reporting
includes those
policies and
procedures that
(1) pertain
to the
maintenance of
records that,
in reasonable
detail, accurately
and
fairly reflect
the transactions and
dispositions of the
assets of
the entity; (2)
provide reasonable assurance
that transactions
are
recorded
as
necessary
to
permit
preparation
of
consolidated
financial
statements
in
accordance
with
accounting
principles
generally
accepted
in
the
United
States
of
America,
and
that
receipts
and
expenditures
of
the
entity
are
being
made
only
in
accordance
with
authorizations
of
management
and
directors
of
the
entity;
and
(3)
provide
reasonable
assurance
regarding
prevention or
timely detection
of unauthorized
acquisition, use,
or disposition
of the
entity’s
assets that
could have
a material
effect on the consolidated financial statements.
Because of
its inherent
limitations, internal
control over
financial reporting
may not
prevent or
detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Frost, PLLC
Little Rock, Arkansas
July 19, 2021
(c)
Changes in
Internal Control Over Financial Reporting
In
connection
with
its
evaluation
of
the
effectiveness,
as
of
May
29,
2021,
of
our
internal
control
over
financial
reporting,
management determined that there was no change in our internal control over financial reporting that occurred during the fourth
quarter ended
May 29,
2021, that
has materially
affected, or
is reasonably
likely to
materially affect,
our internal
control over
financial reporting.

---

ITEM 9B. OTHER INFORMATION
ITEM 9B.
OTHER INFORMATION
Not applicable.
PART
III.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Except as set forth below, the information concerning
directors, executive officers and corporate
governance required by Item 10
is
incorporated
by
reference
from
our
definitive
proxy
statement
which
is
to
be
filed
pursuant
to
Regulation
14A
under
the
Securities Exchange Act of 1934 in connection with our 2021 Annual Meeting of Shareholders.
We have adopted a
Code of
Conduct and
Ethics for
Directors, Officers and
Employees, including
the chief
executive and
principal
financial and accounting officers of the Company.
We will provide a copy of
the code free of charge to any person that requests
a copy by writing to:
Cal-Maine Foods, Inc.
P.O.
Box 2960
Jackson, Mississippi 39207
Attn.:
Investor Relations
Requests can be made by phone at (601) 948-6813.
A copy is also available
at our website www.calmainefoods.com. We intend to disclose any amendments
to, or waivers from, the
Code
of
Conduct and
Ethics
for
Directors, Officers
and Employees
on
our
website promptly
following the
date
of
any
such
amendment or waiver. Information contained on our website is not a part of this report.

---

ITEM 11. EXECUTIVE COMPENSATION
ITEM 11.
EXECUTIVE COMPENSATION
The information concerning executive compensation required by Item 11 is incorporated by reference from our definitive proxy
statement which is
to be filed
pursuant to Regulation
14A under the
Securities Exchange Act
of 1934 in
connection with our
Annual Meeting of Shareholders.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM
12.
SECURITY
OWNERSHIP
OF
CERTAIN
BENEFICIAL
OWNERS
AND MANAGEMENT
AND
RELATED STOCKHOLDER MATTERS
The information
concerning security
ownership of
certain beneficial
owners and
management and
related stockholder
matters
required by Item 12 is incorporated by reference from our definitive proxy statement which is to be filed pursuant to Regulation
14A under the Securities Exchange Act of 1934 in connection with our 2021 Annual Meeting of Shareholders.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13.
CERTAIN
RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The
information
concerning
certain
relationships
and
related
transactions,
and
director
independence
required
by
Item
is
incorporated by
reference from
our definitive
proxy statement
which is
to be
filed pursuant
to Regulation
14A under the
Securities
Exchange Act of 1934 in connection with our 2021 Annual Meeting of Shareholders.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information
concerning principal
accounting fees
and services
required by
Item 14
is incorporated
by reference
from our
definitive
proxy
statement
which
is
to
be
filed
pursuant
to
Regulation
14A
under
the
Securities
Exchange
Act
of
in
connection with our 2021 Annual Meeting of Shareholders.
PART
IV.

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES
(a)(1)
Financial Statements
The following consolidated financial statements
and notes thereto of Cal-Maine Foods,
Inc. and subsidiaries are included
in Item
8 and are filed herewith:
Report of Independent Registered Public Accounting Firm.
Consolidated Balance Sheets - May 29, 2021 and May 30, 20
Consolidated Statements of Income - Fiscal Years Ended May 29, 2021, May 30, 2020, and June 1, 2019
Consolidated Statements of Comprehensive Income - Fiscal Years Ended May 29, 2021, May 30, 2020, and
June 1, 2019
Consolidated Statements of Changes in Stockholders' Equity for the Fiscal Years Ended May 29, 2021,
May 30,
2020, and June 1, 2019
Consolidated Statements of Cash Flows for the Fiscal Years Ended
May 29, 2021,
May 30,
2020, and
June 1,
Notes to Consolidated Financial Statements
(a)(2)
Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
All other schedules are
omitted either because
they are not applicable
or required, or because
the required information
is included
in the financial statements or notes thereto.
(a)(3)
Exhibits Required by Item 601 of Regulation S
-
K
See Part (b) of this Item 15.
(b)
Exhibits Required by Item 601 of Regulation S
-
K
The following exhibits are filed herewith or incorporated by reference:
Exhibit
Number
Exhibit
3.1
Second Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to
Exhibit 3.1 in the Registrant’s Form 8-K, filed July 20, 2018)
3.2
Composite Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 in the Registrant’s Form 10-Q
for the quarter ended March 2, 2013, filed April 5, 2013)
4.1**
Description of Registrant's Securities Registered Under Section 12 of the Exchange Act
10.1
Underwriting Agreement, dated August 19, 2020, among the Company, the Selling Stockholders and BofA
Securities Inc., as representative of the several underwriters named therein (incorporated by reference to
Exhibit 1.1 in the Registrant’s Form 8-K, filed August 24, 2020)
10.2
Agreement Regarding Common Stock, including Registration Rights Exhibit (attached) (incorporated by
reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed June 5, 2018)
10.3*
Deferred Compensation Plan, dated December 28, 2006 (incorporated by reference to Exhibit 10.15 in the
Registrant’s Form 8-K, filed January 4, 2007)
10.4
Credit Agreement, dated July 10, 2018, among the Registrant and BMO Harris Bank N.A., as Administrative
Agent, Swingline Lender and L/C Issuer, BMO Harris Bank N.A. and Greenstone Farm Credit Services, ACA,
as lenders, and BMO Capital Markets, as the sole Lead Arranger and sole Book Runner (incorporated by
reference to Exhibit 10.1 in the Registrant's Form 8-K filed July 10, 2018)
10.5*
Cal-Maine Foods, Inc. KSOP, as amended and restated, effective April 1, 2012 (incorporated by reference to
Exhibit 4.4 in the Registrant’s Form S-8, filed March 30, 2012)
10.6*
Cal-Maine Foods, Inc. KSOP Trust, as amended and restated, effective April 1, 2012 (incorporated by
reference to Exhibit 4.5 in the Registrant’s Form S-8, filed March 30, 2012)
10.7*
Amended and Restated Cal-Maine Foods, Inc. 2012 Omnibus Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.1 to the Company’s Form 8-K filed October 2, 2020).
10.8*
Form of Restricted Stock Agreement for 2012 Omnibus Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.13 in the Registrant’s Form 10-K for the year ended May 31, 2014, filed July 28, 2014)
21**
Subsidiaries of the Registrant
23.1**
Consent of FROST, PLLC
31.1**
Rule 13a-14(a) Certification of Chief Executive Officer
31.2**
Rule 13a-14(a) Certification of Chief Financial Officer
32***
Section 1350 Certifications of the Chief Executive Officer and the Chief Financial Officer
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
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Management contract or compensatory plan or arrangement
**
Filed herewith as an Exhibit
***
Furnished herewith as an Exhibit
†
Submitted electronically with this Annual
Report on Form 10
-
K
(c)
Financial Statement Schedules Required by Regulation S
-
X
The financial statement schedule required by
Regulation S-X is filed at page 58. All
other schedules for which provision is
made
in the
applicable accounting
regulations of
the Securities
and Exchange
Commission are
not required
under the
related instructions
or are inapplicable and therefore have been omitted.