10-Q 1 calm2022q3.htm 10-Q calm2022q3
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1
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
 
20549
FORM
10-Q
 
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended
February 26, 2022
 
or
 
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number:
 
001-38695
 
CAL-MAINE FOODS, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
64-0500378
(State or other jurisdiction of incorporation or organization)
 
(I.R.S Employer Identification No.)
1052 Highland Colony Pkwy
,
Suite 200
,
Ridgeland
,
Mississippi
 
39157
 
(Address of principal executive offices)
 
(Zip Code)
(
601
)
948-6813
 
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
CALM
The
NASDAQ
 
Global Select Market
Indicate
 
by
 
check
 
mark
 
whether
 
the
 
registrant:
 
(1)
 
has
 
filed
 
all
 
reports
 
required
 
to
 
be
 
filed
 
by
 
Section
 
13
 
or
 
15(d)
 
of
 
the
Securities Exchange Act of
 
1934 during the
 
preceding 12 months (or
 
for such shorter period
 
that the registrant was
 
required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
 
No
Indicate by check mark
 
whether the registrant has
 
submitted electronically every Interactive Data
 
File required to be
 
submitted
pursuant to
 
Rule 405 of
 
Regulation S-T (§232.405
 
of this
 
chapter) during
 
the preceding
 
12 months
 
(or for
 
such shorter period
that the registrant was required to submit such files).
Yes
 
No
Indicate by check
 
mark whether the
 
registrant is a
 
large accelerated filer,
 
an accelerated filer,
 
a non-accelerated filer,
 
a smaller
reporting
 
company,
 
or
 
an
 
emerging
 
growth
 
company.
 
See
 
the
 
definitions
 
of
 
“large
 
accelerated
 
filer,”
 
“accelerated
 
filer”,
“smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer
Accelerated filer
 
Non – Accelerated filer
 
Smaller reporting company
 
Emerging growth company
 
If
 
an
 
emerging
 
growth
 
company,
 
indicate
 
by
 
check
 
mark
 
if
 
the
 
registrant
 
has
 
elected
 
not
 
to
 
use
 
the
 
extended
transition
 
period
 
for
 
complying
 
with
 
any
 
new
 
or
 
revised
 
financial
 
accounting
 
standards
 
provided
 
pursuant
 
to
Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
 
No
There were
44,140,283
 
shares of Common
 
Stock, $0.01 par
 
value, and
4,800,000
 
shares of Class
 
A Common Stock,
 
$0.01 par
value, outstanding as of March 29, 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
PART
 
I.
 
FINANCIAL
INFORMATION
ITEM 1.
 
FINANCIAL STATEMENTS
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except for par value amounts)
 
 
February 26, 2022
May 29, 2021
Assets
Current assets:
Cash and cash equivalents
$
15,589
$
57,352
Investment securities available-for-sale
81,125
112,158
Trade and other receivables, net
138,654
84,123
Income tax receivable
41,383
42,516
Inventories
240,087
218,375
Prepaid expenses and other current assets
5,872
5,407
Total current assets
522,710
519,931
Property, plant & equipment, net
671,373
589,417
Finance lease right-of-use asset, net
409
525
Operating lease right-of-use asset, net
1,168
1,724
Investments in unconsolidated entities
15,794
54,941
Goodwill
44,006
35,525
Intangible assets, net
18,686
20,341
Other long-term assets
7,849
6,770
Total Assets
$
1,281,995
$
1,229,174
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
120,665
$
89,191
Current portion of finance lease obligation
222
215
Current portion of operating lease obligation
486
691
Total current liabilities
121,373
90,097
Long-term finance lease obligation
271
438
Long-term operating lease obligation
682
1,034
Other noncurrent liabilities
10,673
10,416
Deferred income taxes, net
118,753
114,408
Total liabilities
251,752
216,393
Commitments and contingencies - see Note 13
Stockholders’ equity:
Common stock ($
0.01
 
par value):
Common stock - authorized
120,000
 
shares, issued
70,261
 
shares
703
703
Class A convertible common stock - authorized and issued
4,800
 
shares
48
48
Paid-in capital
66,909
64,044
Retained earnings
992,523
975,977
Accumulated other comprehensive loss, net of tax
(1,413)
(558)
Common stock in treasury at cost –
26,121
 
shares at February 26, 2022 and
26,202
shares at May 29, 2021
(28,439)
(27,433)
Total Cal-Maine Foods, Inc. stockholders’ equity
1,030,331
1,012,781
Noncontrolling interest in consolidated entity
(88)
Total stockholders’ equity
1,030,243
1,012,781
Total Liabilities and Stockholders’ Equity
$
1,281,995
$
1,229,174
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
 
 
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
February 26, 2022
February 27, 2021
Net sales
$
477,485
$
359,080
$
1,184,195
$
999,189
Cost of sales
385,903
311,563
1,042,221
876,457
Gross profit
91,582
47,517
141,974
122,732
Selling, general and administrative
52,686
47,656
146,991
135,494
(Gain) loss on disposal of fixed assets
(674)
354
(2,855)
476
Operating income (loss)
39,570
(493)
(2,162)
(13,238)
Other income (expense):
Interest income, net
79
591
440
2,181
Royalty income
326
321
877
906
Patronage dividends
10,120
9,004
10,120
9,004
Equity income of unconsolidated entities
1,809
1,872
2,208
1,886
Other, net
1,144
537
8,169
1,485
Total other income, net
13,478
12,325
21,814
15,462
Income before income taxes
53,048
11,832
19,652
2,224
Income tax expense (benefit)
13,594
(1,716)
(2,921)
(4,080)
Net income
39,454
13,548
22,573
6,304
Less: Loss attributable to noncontrolling interest
(63)
(91)
Net income attributable to Cal-Maine Foods, Inc.
$
39,517
$
13,548
$
22,664
$
6,304
Net income per common share:
Basic
$
0.81
$
0.28
$
0.46
$
0.13
Diluted
$
0.81
$
0.28
$
0.46
$
0.13
Weighted average shares outstanding:
Basic
48,886
48,530
48,888
48,511
Diluted
49,036
48,659
49,035
48,649
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
Comprehensive Income
(in thousands)
(unaudited)
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
February 26, 2022
February 27, 2021
Net income
$
39,454
 
$
13,548
 
$
22,573
 
$
6,304
Other comprehensive income (loss), before tax:
Unrealized holding loss on available-for-sale
securities, net of reclassification adjustments
(551)
(378)
(1,130)
(283)
Income tax benefit related to items of other
comprehensive income
134
92
275
69
Other comprehensive loss, net of tax
(417)
(286)
(855)
(214)
Comprehensive income
39,037
13,262
21,718
6,090
Less: Comprehensive loss attributable to the
noncontrolling interest
(63)
(91)
Comprehensive income attributable to Cal-Maine
Foods, Inc.
$
39,100
$
13,262
$
21,809
$
6,090
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
Cash flows from operating activities:
Net income
$
22,573
$
6,304
Depreciation and amortization
50,996
44,391
Deferred income taxes
(3,861)
9,970
Other adjustments, net
(48,884)
(45,936)
Net cash provided by operations
20,824
14,729
Cash flows from investing activities:
Purchases of investment securities
(47,135)
(59,415)
Sales and maturities of investment securities
76,377
85,202
Investment in unconsolidated entities
(3,000)
Distributions from unconsolidated entities
400
5,813
Acquisition of business, net of cash acquired
(44,823)
Purchases of property, plant and equipment
(49,170)
(73,796)
Net proceeds from disposal of property, plant and equipment
6,041
3,273
Net cash used in investing activities
(61,310)
(38,923)
Cash flows from financing activities:
Purchase of common stock by treasury
(1,120)
(871)
Principal payments on finance lease
(160)
(153)
Contributions
3
5
Net cash used in financing activities
(1,277)
(1,019)
Net change in cash and cash equivalents
(41,763)
(25,213)
Cash and cash equivalents at beginning of period
57,352
78,130
Cash and cash equivalents at end of period
$
15,589
$
52,917
Supplemental Information:
Cash paid for operating leases
$
625
$
703
Interest paid
$
230
$
193
See Notes to Condensed Consolidated Financial Statements.
7
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The
 
unaudited
 
condensed
 
consolidated
 
financial
 
statements
 
of
 
Cal-Maine
 
Foods,
 
Inc.
 
and
 
its
 
subsidiaries
 
(the
 
"Company,"
"we,"
 
"us,"
 
"our")
 
have
 
been
 
prepared
 
in
 
accordance
 
with
 
the
 
instructions
 
to
 
Form
 
10-Q
 
and
 
Article
 
10
 
of
 
Regulation
 
S-X.
Therefore, they do
 
not include all
 
of the information
 
and footnotes required
 
by generally accepted
 
accounting principles in
 
the
United
 
States
 
of
 
America
 
("GAAP")
 
for
 
complete
 
financial
 
statements
 
and
 
should
 
be
 
read
 
in
 
conjunction
 
with
 
our
 
Annual
Report
 
on
 
Form
 
10-K
 
for
 
the
 
fiscal
 
year
 
ended
 
May
 
29,
 
2021
 
(the
 
"2021
 
Annual
 
Report").
 
These
 
statements
 
reflect
 
all
adjustments that are, in the opinion of management, necessary to a fair
 
statement of the results for the interim periods presented
and,
 
in
 
the
 
opinion
 
of
 
management,
 
consist
 
of
 
adjustments
 
of
 
a
 
normal
 
recurring
 
nature.
 
Operating
 
results
 
for
 
the
 
interim
periods are not necessarily indicative of operating results for the entire fiscal year.
Fiscal Year
The Company's
 
fiscal year
 
ends on
 
the Saturday
 
closest to
 
May 31.
 
Each of
 
the three-month
 
periods and
 
year-to-date periods
ended on February 26, 2022 and February 27, 2021 included 13 weeks and 39 weeks, respectively
.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make
 
estimates and
assumptions that
 
affect the
 
amounts reported
 
in the
 
consolidated financial
 
statements and
 
accompanying notes.
 
Actual results
could differ from those estimates.
The severity, magnitude and duration, as well as the economic consequences of the COVID-19 pandemic, are uncertain, rapidly
changing
 
and
 
difficult
 
to
 
predict.
 
Therefore,
 
our
 
accounting
 
estimates
 
and
 
assumptions
 
might
 
change
 
materially
 
in
 
future
periods in response to COVID-19.
Investment Securities
Our investment
 
securities are
 
accounted for
 
in accordance
 
with ASC
 
320, “Investments
 
- Debt
 
and Equity
 
Securities” (“ASC
320”).
 
The
 
Company
 
considers
 
all
 
its
 
debt
 
securities
 
for
 
which
 
there
 
is
 
a
 
determinable
 
fair
 
market
 
value,
 
and
 
there
 
are
 
no
restrictions
 
on
 
the
 
Company's
 
ability
 
to
 
sell
 
within
 
the
 
next
 
12
 
months,
 
as
 
available-for-sale.
 
We
 
classify
 
these
 
securities
 
as
current, because the amounts invested are available for
 
current operations. Available-for-sale
 
securities are carried at fair value,
with unrealized
 
gains and
 
losses reported
 
as a
 
separate component
 
of stockholders’
 
equity.
 
The Company
 
regularly evaluates
changes to the
 
rating of its
 
debt securities by credit
 
agencies and economic conditions
 
to assess and
 
record any expected credit
losses through the
 
allowance for credit
 
losses, limited to
 
the amount that
 
fair value was
 
less than the
 
amortized cost basis.
 
The
cost
 
basis
 
for
 
realized
 
gains
 
and
 
losses
 
on
 
available-for-sale
 
securities
 
is
 
determined
 
by
 
the
 
specific
 
identification
 
method.
Gains and losses are recognized in other income (expenses) as Other, net in the Company's Condensed Consolidated Statements
of Income.
 
Investments in
 
mutual funds
 
are classified
 
as “Other
 
long-term assets”
 
in the
 
Company’s
 
Condensed Consolidated
Balance Sheets.
Trade Receivables
 
Trade
 
receivables are
 
stated at
 
their carrying
 
values, which
 
include a
 
reserve for
 
credit losses.
 
At February
 
26, 2022
 
and May
29,
 
2021,
 
reserves
 
for
 
credit
 
losses
 
were
 
$
725
 
thousand
 
and
 
$
795
 
thousand,
 
respectively.
 
The
 
Company
 
extends
 
credit
 
to
customers based on an
 
evaluation of each customer's financial
 
condition and credit history.
 
Collateral is generally not required.
The
 
Company
 
minimizes
 
exposure
 
to
 
counter
 
party
 
credit
 
risk
 
through
 
credit
 
analysis
 
and
 
approvals,
 
credit
 
limits,
 
and
monitoring
 
procedures.
 
In
 
determining
 
our
 
reserve
 
for
 
credit
 
losses,
 
receivables
 
are
 
assigned
 
an
 
expected
 
loss
 
based
 
on
historical loss information adjusted as needed for economic and other forward-looking factors.
Business Combinations
The
 
Company applies
 
fair value
 
accounting guidance
 
to measure
 
non-financial assets
 
and
 
liabilities associated
 
with business
acquisitions. These
 
assets and
 
liabilities are
 
measured at
 
fair value
 
for
 
the initial
 
purchase price
 
allocation.
 
The fair
 
value of
8
non-financial assets acquired is determined internally. Our internal valuation methodology for non-financial assets considers the
remaining estimated life of the assets acquired and what management believes is the market value for those assets.
Change in Accounting Principle
Effective
 
May
 
31,
 
2020,
 
the
 
Company
 
adopted
 
ASU
 
2016-13,
 
Financial
 
Instruments
 
 
Credit
 
Losses
 
(Topic
 
326),
 
which
 
is
intended
 
to
 
improve
 
financial
 
reporting
 
by
 
requiring
 
more
 
timely
 
recording
 
of
 
credit
 
losses
 
on
 
loans
 
and
 
other
 
financial
instruments held by financial institutions and other organizations. The guidance replaces the prior “incurred loss” approach with
an “expected
 
loss” model and
 
requires measurement of
 
all expected credit
 
losses for
 
financial assets held
 
at the
 
reporting date
based
 
on
 
historical
 
experience,
 
current
 
conditions,
 
and
 
reasonable
 
and
 
supportable
 
forecasts.
 
The
 
Company
 
adopted
 
the
guidance on
 
a modified
 
retrospective basis
 
through a
 
cumulative effect
 
adjustment to
 
retained earnings
 
as of
 
the beginning
 
of
the period of
 
adoption. The Company evaluated
 
its current methodology of
 
estimating allowance for doubtful
 
accounts and the
risk
 
profile
 
of
 
its
 
receivables
 
portfolio
 
and
 
developed
 
a
 
model
 
that
 
includes
 
the
 
qualitative
 
and
 
forecasting
 
aspects
 
of
 
the
“expected
 
loss”
 
model
 
under
 
the
 
amended
 
guidance.
 
The
 
Company
 
finalized
 
its
 
assessment
 
of
 
the
 
impact
 
of
 
the
 
amended
guidance and recorded a $
422
 
thousand cumulative increase to retained earnings at May 31, 2020.
Immaterial Error Correction
Effective
 
on
 
May
 
30,
 
2021,
 
the
 
Company
 
acquired
 
the
 
remaining
50
%
 
membership
 
interest
 
in
 
Red
 
River
 
Valley
 
Egg
 
Farm,
LLC (“Red
 
River”), including
 
certain liabilities.
 
During the
 
Company’s
 
third quarter
 
of fiscal
 
2022, management
 
determined
that
 
it
 
had
 
not
 
properly
 
eliminated
 
select
 
intercompany
 
sales
 
and
 
cost
 
of
 
sales
 
transactions
 
between
 
Red
 
River
 
and
 
the
corresponding other
 
wholly-owned subsidiaries
 
of the
 
Company in
 
its first
 
and second
 
quarter 2022
 
Condensed Consolidated
Statements of Income. The errors resulted in
 
an overstatement of Net Sales and Cost
 
of Sales of $
6.7
 
million in the first quarter
of
 
fiscal
 
2022
 
and
 
$
9.2
 
million
 
in
 
the
 
second
 
quarter
 
of
 
fiscal
 
2022.
 
There
 
was
no
 
impact
 
to
 
Operating
 
income
 
(loss),
 
Net
income (loss) or Net income (loss) per share.
 
We
 
evaluated
 
the
 
errors
 
quantitatively
 
and
 
qualitatively
 
in
 
accordance
 
with
 
Staff
 
Accounting
 
Bulletin
("SAB") No. 99 Materiality, and
 
SAB No. 108 Considering
 
the
 
Effects
 
of
 
Prior
 
Year
 
Misstatements
 
when
 
Quantifying
Misstatements
 
in
 
the
 
Current
 
Year
 
Financial
 
Statements, and
 
determined
 
that
 
the
 
related
 
impact
 
was not material
 
to
 
our
condensed consolidated
 
financial statements
 
for the
 
first or
 
second quarters
 
of fiscal
 
2022, but
 
that correcting
 
the cumulative
impact
 
of
 
the
 
errors
 
would
 
be
 
relevant
 
to
 
our
 
Condensed
 
Consolidated
 
Statements
 
of
 
Income
 
for
 
the third
 
quarter
ended February 26, 2022. Accordingly, we have reflected the correction of the immaterial errors as a reduction of Net Sales and
Cost of Sales in the accompanying Condensed Consolidated Statements of Income for the thirty-nine weeks ended February 26,
2022.
 
 
Note 2 – Acquisition
Effective
 
on
 
May
 
30,
 
2021,
 
the
 
Company
 
acquired
 
the
 
remaining
50
%
 
membership
 
interest
 
in
 
Red
 
River
 
Valley
 
Egg
 
Farm,
LLC (“Red River”),
 
including certain liabilities. As a result of the
 
acquisition, Red River became a wholly owned
 
subsidiary of
the Company.
 
Red River owns and operates
 
a specialty shell egg production
 
complex with approximately
1.7
 
million cage-free
laying
 
hens,
 
cage-free
 
pullet
 
capacity,
 
feed
 
mill,
 
processing
 
plant,
 
related
 
offices
 
and
 
outbuildings
 
and
 
related
 
equipment
located on approximately
400
 
acres near Bogata, Texas.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9
The
 
following
 
table
 
summarizes
 
the
 
consideration
 
paid
 
for
 
Red
 
River
 
and
 
the
 
amounts
 
of
 
the
 
assets
 
acquired
 
and
 
liabilities
assumed recognized at the acquisition date:
Cash consideration paid
$
48,500
Fair value of the Company's equity interest in Red River held before the business combination
48,500
$
97,000
Recognized amounts of identifiable assets acquired and liabilities assumed
Cash
$
3,677
Accounts receivable, net
1,980
Inventory
8,789
Property, plant and equipment
85,002
Liabilities assumed
(2,448)
Deferred income taxes
(8,481)
Total identifiable net assets
88,519
Goodwill
8,481
$
97,000
Cash and
 
accounts receivable
 
acquired along
 
with liabilities
 
assumed were
 
valued at
 
their carrying
 
value which
 
approximates
fair value due to the short maturity of these instruments.
Inventory consisted primarily
 
of flock, feed
 
ingredients, packaging, and
 
egg inventory.
 
Flock inventory was
 
valued at carrying
value as management believes that their carrying value
 
best approximates their fair value.
 
Feed ingredients, packaging and egg
inventory were all valued based on market prices as of May 30, 2021.
 
Property,
 
plant and
 
equipment were valued
 
utilizing the
 
cost approach which
 
is based on
 
replacement or reproduction
 
costs of
the assets and subtracting any depreciation resulting from physical deterioration and/or functional or economic obsolescence.
The Company
 
recognized a
 
gain of
 
$
4.5
 
million as
 
a result
 
of remeasuring
 
to fair
 
value its
50
% equity
 
interest in
 
Red River
held before the business combination. The gain was recorded in other income and expense under the heading “Other, net” in the
Company’s
 
Condensed Consolidated
 
Statements of
 
Income. The
 
acquisition of
 
Red River
 
resulted in
 
a discrete
 
tax benefit
 
of
$
8.3
 
million, which
 
includes a
 
$
7.3
 
million decrease
 
in deferred
 
income tax
 
expense related
 
to the
 
outside-basis of
 
our equity
investment
 
in
 
Red
 
River,
 
with
 
a
 
corresponding
 
non-recurring,
 
non-cash
 
$
954,000
 
reduction
 
to
 
income
 
taxes
 
expense
 
on
 
the
non-taxable
 
remeasurement
 
gain
 
associated
 
with
 
the
 
acquisition.
 
As
 
part
 
of
 
the
 
acquisition
 
accounting,
 
the
 
Company
 
also
recorded
 
an
 
$
8.5
 
million
 
deferred
 
tax
 
liability
 
for
 
the
 
difference
 
in
 
the
 
inside-basis
 
of
 
the
 
acquired
 
assets
 
and
 
liabilities
assumed. The recognition
 
of deferred tax
 
liabilities resulted in
 
the recognition of
 
goodwill. None of
 
the goodwill recognized is
expected to be deductible for income tax purposes.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10
Note 3 - Investment
Securities
The following represents the Company’s investment securities as of February 26, 2022 and May 29, 2021 (in thousands):
February 26, 2022
Amortized
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
514
$
$
3
$
511
Commercial paper
9,980
23
9,957
Corporate bonds
61,634
344
61,290
Certificates of deposits
1,268
12
1,256
Asset backed securities
8,205
94
8,111
Total current investment securities
$
81,601
$
$
476
$
81,125
Mutual funds
$
2,967
$
$
53
$
2,914
Total noncurrent investment securities
$
2,967
$
$
53
$
2,914
May 29, 2021
Amortized
 
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
16,424
$
56
$
$
16,480
Commercial paper
1,998
1,998
Corporate bonds
80,092
608
80,700
Certificates of deposits
1,077
1
1,076
Asset backed securities
11,914
10
11,904
Total current investment securities
$
111,505
$
664
$
11
$
112,158
Mutual funds
$
2,306
$
1,810
$
$
4,116
Total noncurrent investment securities
$
2,306
$
1,810
$
$
4,116
Available-for-sale
Proceeds from
 
sales and
 
maturities of
 
investment securities available-for-sale
 
were $
76.4
 
million and
 
$
85.2
 
million during
 
the
thirty-nine weeks ended February
 
26, 2022 and
 
February 27, 2021,
 
respectively.
 
Gross realized gains
 
for the thirty-nine
 
weeks
ended February 26, 2022 and February 27, 2021 were $
181
 
thousand and $
116
 
thousand, respectively. Gross realized losses for
the thirty-nine weeks ended February 26, 2022 and February 27, 2021 were $
67
 
thousand and $
17
 
thousand, respectively. There
were
no
 
allowances for credit losses at February 26, 2022 and May 29, 2021.
Actual maturities may differ
 
from contractual maturities as
 
some borrowers have
 
the right to
 
call or prepay
 
obligations with or
without penalties. Contractual maturities of current investments at February 26, 2022 are as follows (in thousands):
Estimated Fair Value
Within one year
$
52,391
1-5 years
28,734
Total
$
81,125
Noncurrent
 
Proceeds
 
from
 
sales
 
and
 
maturities
 
of
 
noncurrent
 
investment
 
securities
 
were
 
$
4.9
 
million
 
during
 
the
 
thirty-nine
 
weeks
ended February
 
26,
 
2022.
 
Gross
 
realized
 
gains
 
for
 
the
 
thirty-nine
 
weeks
 
ended February
 
26,
 
2022
 
were
 
$
2.2
 
million. There
were
 
no
 
realized
 
losses
 
for
 
the
 
thirty-nine
 
weeks
 
ended February
 
26,
 
2022.
 
There
 
were
no
 
sales
 
of
 
noncurrent
 
investment
securities during the thirty-nine weeks ended February 27, 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
Note 4 - Fair Value Measurements
The Company
 
is required
 
to categorize
 
both financial
 
and nonfinancial
 
assets and
 
liabilities based
 
on the
 
following fair
 
value
hierarchy. The
 
fair value
 
of an
 
asset is
 
the price
 
at which
 
the asset
 
could be
 
sold in
 
an orderly
 
transaction between
 
unrelated,
knowledgeable, and willing parties able to engage in the
 
transaction. A liability’s fair value
 
is defined as the amount that would
be paid
 
to transfer
 
the liability
 
to a
 
new obligor
 
in a
 
transaction between
 
such parties,
 
not
 
the amount
 
that would
 
be paid
 
to
settle the liability with the creditor.
Level 1
 
- Quoted prices in active markets for identical assets or liabilities
Level 2
 
- Inputs
 
other than
 
quoted prices
 
included in
 
Level 1
 
that are
 
observable for
 
the asset
 
or liability,
 
either
directly or indirectly, including:
Quoted prices for similar assets or liabilities in active markets
Quoted prices for identical or similar assets in non-active markets
Inputs other than quoted prices that are observable for the asset or liability
Inputs derived principally from or corroborated by other observable market data
Level 3
 
- Unobservable inputs for the asset or liability that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded at cost are as follows:
Cash and cash equivalents, accounts receivable, and accounts payable:
 
The carrying amount approximates fair value due to the
short maturity of these instruments.
Lease obligations:
 
The carrying value of the Company’s lease obligations is at its present value which approximates fair value.
Assets and Liabilities Measured at Fair Value
 
on a Recurring Basis
In
 
accordance with
 
the
 
fair value
 
hierarchy described
 
above, the
 
following
 
table shows
 
the
 
fair value
 
of
 
financial assets
 
and
liabilities measured at fair value on a recurring basis as of February 26, 2022 and May 29, 2021 (in thousands):
February 26, 2022
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
511
$
$
511
Commercial paper
9,957
9,957
Corporate bonds
61,290
61,290
Certificates of deposits
1,256
1,256
Asset backed securities
8,111
8,111
Mutual funds
2,914
2,914
Total assets measured at fair value
$
2,914
$
81,125
$
$
84,039
May 29, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
16,480
$
$
16,480
Commercial paper
1,998
1,998
Corporate bonds
80,700
80,700
Certificates of deposits
1,076
1,076
Asset backed securities
11,904
11,904
Mutual funds
4,116
4,116
Total assets measured at fair value
$
4,116
$
112,158
$
$
116,274
Investment securities
 
 
available-for-sale
 
classified as
 
Level 2
 
consist of
 
securities with
 
maturities of
 
three months
 
or longer
when purchased. We
 
classified these securities as current because amounts invested are readily available
 
for current operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12
Note 5 - Inventories
Inventories consisted of the following as of February 26, 2022 and May 29, 2021 (in thousands):
 
February 26, 2022
May 29, 2021
Flocks, net of amortization
$
137,086
$
123,860
Eggs and egg products
24,153
21,084
Feed and supplies
78,848
73,431
$
240,087
$
218,375
We
 
grow
 
and
 
maintain
 
flocks
 
of
 
layers
 
(mature
 
female
 
chickens),
 
pullets
 
(female
 
chickens,
 
under
 
18
 
weeks
 
of
 
age),
 
and
breeders (male and female chickens used to produce fertile eggs to
 
hatch for egg production flocks). Our total flock at February
26, 2022 consisted of approximately
9.4
 
million pullets and breeders and
42.7
 
million layers.
 
Note 6 - Accrued Dividends Payable and Dividends per Common Share
We
 
accrue dividends at the
 
end of each quarter
 
according to the Company’s
 
dividend policy adopted by its
 
Board of Directors.
The Company pays
 
a dividend to
 
shareholders of its
 
Common Stock and Class
 
A Common Stock
 
on a quarterly
 
basis for each
quarter for
 
which the
 
Company reports net
 
income attributable
 
to Cal-Maine
 
Foods, Inc.
 
computed in
 
accordance with
 
GAAP
in an amount equal
 
to one-third (
1/3
) of such quarterly
 
income. Dividends are paid
 
to shareholders of record as
 
of the 60th day
following the last
 
day of
 
such quarter,
 
except for the
 
fourth fiscal quarter.
 
For the fourth
 
quarter, the
 
Company pays dividends
to shareholders of record on the 65th day after the quarter end. Dividends are payable on the 15th day following the record date.
Following a quarter for which the Company does not report net income attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend for a subsequent
 
profitable quarter until the Company is profitable on
 
a cumulative basis computed from the
date of the most
 
recent quarter for which
 
a dividend was paid.
 
For the third quarter
 
of fiscal 2022, we
 
will pay a
 
cash dividend
of approximately $
0.125
 
per share to holders
 
of our Common Stock
 
and Class A Common
 
Stock. The amount of
 
the accrual is
recorded in Accounts payable and accrued expenses in the Company’s Condensed Consolidated Balance Sheets.
On
 
our
 
Condensed
 
Consolidated
 
Statements
 
of
 
Income,
 
we
 
determine
 
dividends
 
per
 
common
 
share
 
in
 
accordance
 
with
 
the
computation in the following table (in thousands, except per share data):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
February 26, 2022
February 27, 2021
Net income attributable to Cal-Maine Foods,
Inc.
$
39,517
$
13,548
$
22,664
$
6,304
Cumulative losses to be recovered prior to
payment of divided at beginning of period
(21,097)
(8,614)
(4,244)
(1,370)
Net income available for dividend
$
18,420
$
4,934
$
18,420
$
4,934
1/3 of net income attributable to Cal-Maine
Foods, Inc. available for dividend
6,140
1,645
6,140
1,645
Common stock outstanding (shares)
44,140
44,056
Class A common stock outstanding (shares)
4,800
4,800
Total common stock outstanding (shares)
48,940
48,856
Dividends per common share*
$
0.125
$
0.034
$
0.125
$
0.034
*Dividends
 
per
 
common
 
share
 
=
1/3
 
of
 
Net
 
income
 
attributable
 
to
 
Cal-Maine
 
Foods,
 
Inc.
 
available
 
for
 
dividend
 
÷
 
Total
 
common
 
stock
outstanding (shares).
Note 7 – Credit Facility
On November
 
15, 2021,
 
we entered
 
into an
 
Amended and
 
Restated Credit
 
Agreement (the
 
“Credit Agreement”)
 
with a
five
-
year
 
term.
 
The
 
Credit
 
Agreement
 
amended
 
and
 
restated
 
the
 
Company’s
 
previously
 
existing
 
credit
 
agreement
 
dated
 
July
 
10,
2018.
 
The
 
Credit
 
Agreement
 
provides
 
for
 
an
 
increased
 
senior
 
secured
 
revolving
 
credit
 
facility
 
(the
 
“Credit
 
Facility”
 
or
“Revolver”),
 
in
 
an
 
initial
 
aggregate
 
principal
 
amount
 
of
 
up
 
to
 
$
250
 
million,
 
which
 
includes
 
a
 
$
15
 
million
 
sublimit
 
for
 
the
13
issuance
 
of
 
standby
 
letters
 
of
 
credit
 
and
 
a
 
$
15
 
million
 
sublimit
 
for
 
swingline
 
loans.
 
The
 
Credit
 
Facility
 
also
 
includes
 
an
accordion
 
feature
 
permitting,
 
with
 
the
 
consent
 
of
 
BMO
 
Harris
 
Bank
 
N.A.
 
(the
 
“Administrative
 
Agent”),
 
an
 
increase
 
in
 
the
Credit Facility in
 
the aggregate up
 
to $
200
 
million by
 
adding one or
 
more incremental senior
 
secured term loans
 
or increasing
one or more times
 
the revolving commitments under
 
the Revolver.
 
As of February 26,
 
2022,
no
 
amounts were borrowed under
the Credit Facility and $
4.1
 
million in standby letters of credit were issued under the Credit Facility.
The
 
interest
 
rate
 
in
 
connection
 
with
 
loans
 
made
 
under
 
the
 
Credit
 
Facility
 
is
 
based
 
on,
 
at
 
the
 
Company’s
 
election,
 
either
 
the
Eurodollar Rate
 
plus
 
the Applicable
 
Margin
 
or
 
the
 
Base Rate
 
plus
 
the Applicable
 
Margin.
 
The “Eurodollar
 
Rate” means
 
the
reserve adjusted rate
 
at which Eurodollar
 
deposits in the
 
London interbank market
 
for an interest
 
period of
one
,
two
,
three
,
six
or
twelve
 
months (as
 
selected by
 
the Company)
 
are quoted.
 
The “Base
 
Rate” means
 
a fluctuating
 
rate per
 
annum equal
 
to the
highest
 
of
 
(a)
 
the
 
federal
 
funds
 
rate
 
plus
0.50
%
 
per
 
annum,
 
(b)
 
the
 
prime
 
rate
 
of
 
interest
 
established
 
by
 
the
 
Administrative
Agent, and (c) the Eurodollar Rate for an interest period of
one
 
month plus
1
% per annum, subject to certain interest rate floors.
The
 
“Applicable
 
Margin”
 
means
0.00
%
 
to
0.75
%
 
per
 
annum
 
for
 
Base
 
Rate
 
Loans
 
and
1.00
%
 
to
1.75
%
 
per
 
annum
 
for
Eurodollar
 
Rate
 
Loans,
 
in
 
each
 
case
 
depending
 
upon
 
the
 
Total
 
Funded
 
Debt
 
to
 
Capitalization Ratio
 
for
 
the
 
Company
 
at
 
the
quarterly pricing date.
 
The Company will
 
pay a commitment
 
fee on the
 
unused portion of
 
the Credit Facility
 
payable quarterly
from
0.15
%
 
to
0.25
%
 
in
 
each
 
case
 
depending
 
upon
 
the
 
Total
 
Funded
 
Debt
 
to
 
Capitalization
 
Ratio
 
for
 
the
 
Company
 
at
 
the
quarterly pricing date. The Credit Agreement contains customary provisions regarding replacement of the Eurodollar Rate.
The
 
Credit Facility
 
is
 
guaranteed by
 
all the
 
current and
 
future wholly-owned
 
direct and
 
indirect domestic
 
subsidiaries of
 
the
Company (the “Guarantors”),
 
and is secured
 
by a first-priority
 
perfected security interest
 
in substantially all
 
of the Company’s
and
 
the
 
Guarantors’
 
accounts,
 
payment
 
intangibles,
 
instruments
 
(including
 
promissory
 
notes),
 
chattel
 
paper,
 
inventory
(including farm products) and deposit accounts maintained with the Administrative Agent.
The Credit
 
Agreement for
 
the Credit
 
Facility contains
 
customary covenants,
 
including restrictions
 
on the
 
incurrence of
 
liens,
incurrence of additional
 
debt, sales of
 
assets and other
 
fundamental corporate changes
 
and investments. The
 
Credit Agreement
requires maintenance of
 
two financial covenants:
 
(i) a maximum
 
Total
 
Funded Debt to
 
Capitalization Ratio tested
 
quarterly of
no greater than
50
%; and (ii) a requirement to maintain Minimum Tangible
 
Net Worth
 
at all times of $
700
 
Million plus
50
% of
net
 
income
 
(if
 
net
 
income
 
is
 
positive)
 
less
 
permitted
 
restricted
 
payments
 
for
 
each
 
fiscal
 
quarter
 
after
 
November
 
27,
 
2021.
Additionally, the
 
Credit Agreement requires that Fred
 
R. Adams Jr.’s
 
spouse, natural children, sons-in-law or grandchildren,
 
or
any trust, guardianship,
 
conservatorship or custodianship for
 
the primary benefit of
 
any of the
 
foregoing, or any
 
family limited
partnership, similar limited liability company or other entity
 
that
100
% of the voting control of such
 
entity is held by any of the
foregoing, shall maintain at least
50
% of the Company's voting
 
stock. Failure to satisfy any
 
of these covenants will constitute
 
a
default under the terms of the Credit Agreement. Further, under
 
the terms of the Credit Agreement, payment of dividends under
the
 
Company's
 
current
 
dividend
 
policy
 
of
one-third
 
of
 
the
 
Company's
 
net
 
income
 
computed
 
in
 
accordance
 
with
 
GAAP
 
and
payment of other dividends or
 
repurchases by the Company of
 
its capital stock is allowed,
 
as long as after giving
 
effect to such
dividend payments
 
or repurchases
 
no default
 
has occurred
 
and is
 
continuing and
 
the sum
 
of cash
 
and cash
 
equivalents of
 
the
Company and its subsidiaries plus availability under the Credit Facility equals at least $
50
 
million.
The Credit
 
Agreement also
 
includes customary
 
events of
 
default and
 
customary remedies
 
upon the
 
occurrence of
 
an event
 
of
default, including acceleration of the amounts
 
due under the Credit Facility and
 
foreclosure of the collateral securing the
 
Credit
Facility.
At February 26, 2022, we were in compliance with the covenant requirements of the Credit Facility.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14
Note 8 - Equity
The following reflects equity activity for the
 
thirteen and thirty-nine weeks ended February 26,
 
2022 and February 27, 2021 (in
thousands):
Thirteen Weeks Ended February 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at November
27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
$
(25)
$
997,423
Other comprehensive
loss, net of tax
(417)
(417)
Stock compensation
plan transactions
(989)
890
(99)
Dividends
(6,118)
(6,118)
Net income (loss)
39,517
(63)
39,454
Balance at February
26, 2022
$
703
$
48
$
(28,439)
$
66,909
$
(1,413)
$
992,523
$
(88)
$
1,030,243
Thirteen Weeks Ended February 27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Accum.
Class A
Treasury
Paid In
Other Comp.
Retained
Amount
Amount
Amount
Capital
Income (Loss)
Earnings
Total
Balance at November 28, 2020
$
703
$
48
$
(26,723)
$
62,206
$
151
$
968,325
$
1,004,710
Other comprehensive loss, net of tax
(286)
(286)
Stock compensation plan transactions
(826)
964
138
Dividends
(1,661)
(1,661)
Net income
13,548
13,548
Balance at February 27, 2021
$
703
$
48
$
(27,549)
$
63,170
$
(135)
$
980,212
$
1,016,449
Thirty-nine Weeks Ended February 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 29,
2021
$
703
$
48
$
(27,433)
$
64,044
$
(558)
$
975,977
$
$
1,012,781
Other comprehensive
loss, net of tax
(855)
(855)
Stock compensation
plan transactions
(1,006)
2,865
1,859
Contributions
3
3
Dividends
(6,118)
(6,118)
Net income (loss)
22,664
(91)
22,573
Balance at February
26, 2022
$
703
$
48
$
(28,439)
$
66,909
$
(1,413)
$
992,523
$
(88)
$
1,030,243
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15
Thirty-nine Weeks Ended February 27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Accum.
Class A
Treasury
Paid In
Other Comp.
Retained
Amount
Amount
Amount
Capital
Income (Loss)
Earnings
Total
Balance at May 30, 2020
$
703
$
48
$
(26,674)
$
60,372
$
79
$
975,147
$
1,009,675
Impact of ASC 326
422
422
Balance at May 31 2020
703
48
(26,674)
60,372
79
975,569
1,010,097
Other comprehensive loss, net of tax
(214)
(214)
Stock compensation plan transactions
(875)
2,793
1,918
Contributions
5
5
Dividends
(1,661)
(1,661)
Net income
6,304
6,304
Balance at February 27, 2021
$
703
$
48
$
(27,549)
$
63,170
$
(135)
$
980,212
$
1,016,449
Note 9 - Net Income per Common Share
 
Basic net income per
 
share is based on
 
the weighted average Common Stock
 
and Class A Common
 
Stock outstanding. Diluted
net
 
income
 
per
 
share
 
is
 
based
 
on
 
weighted-average
 
common
 
shares
 
outstanding
 
during
 
the
 
relevant
 
period
 
adjusted
 
for
 
the
dilutive effect of share-based awards.
The
 
following
 
table
 
provides
 
a
 
reconciliation
 
of
 
the
 
numerators
 
and
 
denominators
 
used
 
to
 
determine
 
basic
 
and
 
diluted
 
net
income per common share (amounts in thousands, except per share data):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
February 26, 2022
February 27, 2021
Numerator
Net income
$
39,454
$
13,548
$
22,573
$
6,304
Less: Loss attributable to noncontrolling
interest
(63)
(91)
Net income attributable to Cal-Maine
Foods, Inc.
$
39,517
$
13,548
$
22,664
$
6,304
Denominator
Weighted-average common shares
outstanding, basic
48,886
48,530
48,888
48,511
Effect of dilutive restricted shares
150
129
147
138
Weighted-average common shares
outstanding, diluted
49,036
48,659
49,035
48,649
Net income per common share attributable to
Cal-Maine Foods, Inc.
Basic
$
0.81
$
0.28
$
0.46
$
0.13
Diluted
$
0.81
$
0.28
$
0.46
$
0.13
Note 10 - Revenue Recognition
Satisfaction of Performance Obligation
Most of the Company’s
 
revenue is derived from
 
contracts with customers based on
 
the customer placing an
 
order for products.
Pricing for
 
the most
 
part is
 
determined when
 
the Company
 
and the
 
customer agree
 
upon the
 
specific order,
 
which establishes
the contract for that order.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16
Revenues are
 
recognized in
 
an amount
 
that reflects
 
the net
 
consideration we
 
expect to
 
receive in
 
exchange for
 
the goods. Our
shell eggs
 
are sold
 
at prices
 
related to
 
independently quoted
 
wholesale market
 
prices, negotiated
 
prices or
 
formulas related
 
to
our costs
 
of production.
 
The Company’s
 
sales predominantly
 
contain a
 
single performance
 
obligation. We
 
recognize revenue
upon satisfaction of the
 
performance obligation with the
 
customer, which typically
 
occurs within days of
 
the Company and the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts include a guaranteed
 
sale clause, pursuant to which we
 
credit the customer’s account for product that
 
the
customer is unable to
 
sell before expiration. The Company records
 
an estimate of returns and
 
refunds by using historical
 
return
data and
 
comparing to
 
current period
 
sales and
 
accounts receivable. The
 
allowance is
 
recorded as
 
a reduction
 
in sales
 
with a
corresponding reduction in trade accounts receivable.
Sales Incentives Provided to Customers
The
 
Company
 
periodically
 
provides
 
incentive
 
offers
 
to
 
its
 
customers
 
to
 
encourage
 
purchases.
 
Such
 
offers
 
include
 
current
discount offers (e.g.,
 
percentage discounts off
 
current purchases), inducement offers
 
(e.g., offers for
 
future discounts subject
 
to
a minimum
 
current purchase),
 
and other
 
similar offers.
 
Current discount
 
offers, when
 
accepted by
 
customers, are
 
treated as
 
a
reduction to
 
the sales
 
price of
 
the related
 
transaction, while
 
inducement offers,
 
when accepted
 
by customers,
 
are treated
 
as a
reduction
 
to
 
sales
 
price
 
based
 
on
 
estimated
 
future
 
redemption
 
rates.
 
Redemption
 
rates
 
are
 
estimated
 
using
 
the
 
Company’s
historical experience
 
for similar
 
inducement offers.
 
Current discount
 
and inducement
 
offers
 
are presented
 
as a
 
net amount
 
in
‘‘Net sales.’’
Disaggregation of Revenue
The following table provides revenue disaggregated by product category (in thousands):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
February 26, 2022
February 27, 2021
Conventional shell egg sales
$
280,633
$
203,189
$
685,678
$
560,297
Specialty shell egg sales
182,945
145,210
462,319
408,537
Egg products
12,749
9,098
33,516
25,736
Other
1,158
1,583
2,682
4,619
$
477,485
$
359,080
$
1,184,195
$
999,189
Contract Costs
The Company can incur costs to obtain or fulfill a contract with a customer.
 
If the amortization period of these costs is less than
one year,
 
they are
 
expensed as
 
incurred. When
 
the amortization
 
period is
 
greater than
 
one year,
 
a contract
 
asset is
 
recognized
and is amortized
 
over the contract
 
life as a
 
reduction in net
 
sales. As of
 
February 26, 2022
 
and February 27,
 
2021, the balance
for contract assets is immaterial.
Contract Balances
The Company
 
receives payment
 
from customers
 
based on
 
specified terms
 
that are
 
generally less
 
than 30
 
days from
 
delivery.
There are rarely contract assets or liabilities related to performance under the contract.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17
Note 11 - Leases
Expenses related to
 
operating leases, amortization
 
of finance leases,
 
right-of-use assets, and
 
finance lease interest
 
are included
in Cost of sales, Selling general and administrative expense, and Interest income, net in the Condensed Consolidated Statements
of Income. The Company’s lease cost consists of the following (in thousands):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26, 2022
February 26, 2022
Operating lease cost
$
200
$
625
Finance lease cost
Amortization of right-of-use asset
$
44
$
132
Interest on lease obligations
$
6
$
20
Short term lease cost
$
1,086
$
3,221
Future minimum lease payments under non-cancelable leases are as follows (in thousands):
As of February 26, 2022
Operating Leases
Finance Leases
Remainder fiscal 2022
$
180
$
60
2023
539
240
2024
380
217
2025
130
2026
26
2027
5
Total
1,260
517
Less imputed interest
(92)
(24)
Total
$
1,168
$
493
The
 
weighted-average
 
remaining
 
lease
 
term
 
and
 
discount
 
rate
 
for
 
lease
 
liabilities
 
included
 
in
 
our
 
Condensed
 
Consolidated
Balance Sheet are as follows:
As of February 26, 2022
Operating Leases
Finance Leases
Weighted-average remaining lease term (years)
2.4
1.8
Weighted-average discount rate
5.9
%
4.9
%
Note 12 - Stock Based Compensation
Total
 
stock-based compensation expense
 
was $
3.0
 
million and $
2.8
 
million for the
 
thirty-nine weeks ended
 
February 26, 2022
and February 27, 2021, respectively.
Unrecognized compensation
 
expense as
 
a result
 
of non-vested
 
shares of
 
restricted stock
 
outstanding under
 
the Amended
 
and
Restated
 
2012
 
Omnibus
 
Long-Term
 
Incentive
 
Plan
 
at
 
February
 
26,
 
2022
 
of
 
$
8.1
 
million
 
will
 
be
 
recorded
 
over
 
a
 
weighted
average period of
2.3
 
years. Refer to Part II
 
Item 8, Notes to Consolidated
 
Financial Statements and Supplementary Data, Note
16: Stock Compensation Plans in our 2021 Annual Report for further information on our stock compensation plans.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18
The Company’s restricted share activity for the thirty-nine weeks ended February 26, 2022 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 29, 2021
302,147
$
39.37
Granted
113,142
41.13
Vested
(90,778)
42.53
Forfeited
(3,932)
37.81
Outstanding, February 26, 2022
320,579
$
39.12
Note 13 - Commitments and Contingencies
Financial Instruments
The
 
Company
 
maintained
 
standby
 
letters
 
of
 
credit
 
(“LOCs”)
 
totaling
 
$
4.1
 
million
 
at
 
February
 
26,
 
2022,
 
which
 
were
 
issued
under
 
the
 
Company's
 
Credit
 
Facility.
 
The
 
outstanding
 
LOCs
 
are
 
for
 
the
 
benefit
 
of
 
certain
 
insurance
 
companies
 
and
 
are
 
not
recorded as a liability on the consolidated balance sheets.
 
LEGAL PROCEEDINGS
State of Texas v.
 
Cal-Maine Foods, Inc. d/b/a Wharton; and Wharton County Foods, LLC
 
On April 23,
 
2020, the Company
 
and its subsidiary
 
Wharton County Foods,
 
LLC (“WCF”) were
 
named as defendants
 
in State
of
 
Texas
 
v.
 
Cal-Maine Foods,
 
Inc. d/b/a
 
Wharton; and
 
Wharton County
 
Foods, LLC,
 
Cause No.
 
2020-25427,
 
in the
 
District
Court of
 
Harris County,
 
Texas.
 
The State
 
of Texas
 
(the “State”)
 
asserted claims
 
based on
 
the Company’s
 
and WCF’s
 
alleged
violation
 
of
 
the
 
Texas
 
Deceptive
 
Trade
 
Practices—Consumer
 
Protection
 
Act,
 
Tex.
 
Bus.
 
&
 
Com.
 
Code
 
§§
 
17.41-17.63
(“DTPA”).
 
The
 
State
 
claimed
 
that
 
the
 
Company
 
and
 
WCF
 
offered
 
shell
 
eggs
 
at
 
excessive
 
or
 
exorbitant
 
prices
 
during
 
the
COVID-19
 
state
 
of
 
emergency
 
and
 
made
 
misleading
 
statements
 
about
 
shell
 
egg
 
prices.
 
The
 
State
 
sought
 
temporary
 
and
permanent
 
injunctions
 
against
 
the
 
Company
 
and
 
WCF
 
to
 
prevent
 
further
 
alleged
 
violations
 
of
 
the
 
DTPA,
 
along
 
with
 
over
$
100,000
 
in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the State’s original petition with
prejudice. On September 11,
 
2020, the State filed a
 
notice of appeal, which was
 
assigned to the Texas
 
Court of Appeals for the
First District. The
 
State filed its
 
opening brief on
 
December 7, 2020.
 
The Company and
 
WCF filed their
 
response on February
8,
 
2021.
 
On
 
February
 
11,
 
2022,
 
the
 
Texas
 
Court
 
of
 
Appeals
 
heard
 
oral
 
argument
 
but
 
has
 
not
 
issued
 
a
 
ruling.
 
Management
believes the risk of material loss related to this matter to be remote.
Bell et al. v. Cal-Maine Foods et al.
 
On April
 
30, 2020,
 
the Company
 
was named
 
as one
 
of several
 
defendants in
 
Bell et
 
al. v.
 
Cal-Maine Foods
 
et al.,
 
Case No.
1:20-cv-461,
 
in
 
the
 
Western
 
District
 
of
 
Texas,
 
Austin
 
Division.
 
The
 
defendants
 
include
 
numerous
 
grocery
 
stores,
 
retailers,
producers, and farms. Plaintiffs assert that defendants violated the DTPA
 
by allegedly demanding exorbitant or excessive prices
for eggs
 
during the
 
COVID-19 state
 
of emergency.
 
Plaintiffs
 
request certification
 
of a
 
class of
 
all consumers
 
who purchased
eggs
 
in
 
Texas
 
sold,
 
distributed,
 
produced,
 
or
 
handled
 
by
 
any
 
of
 
the
 
defendants
 
during
 
the
 
COVID-19
 
state
 
of
 
emergency.
Plaintiffs seek to enjoin the Company and
 
other defendants from selling eggs at a price more
 
than 10% greater than the price of
eggs prior
 
to the
 
declaration of
 
the state
 
of emergency
 
and damages
 
in the
 
amount of
 
$
10,000
 
per violation,
 
or $
250,000
 
for
each violation
 
impacting anyone
 
over 65
 
years old.
 
On December
 
1, 2020,
 
the Company
 
and certain
 
other defendants
 
filed a
motion to
 
dismiss the
 
plaintiffs’ amended
 
class action
 
complaint. The
 
plaintiffs subsequently
 
filed a
 
motion to
 
strike, and
 
the
motion to
 
dismiss and
 
related proceedings were
 
referred to
 
a United
 
States magistrate
 
judge. On
 
July 14,
 
2021, the
 
magistrate
judge
 
issued
 
a
 
report
 
and
 
recommendation
 
to
 
the
 
court
 
that
 
the
 
defendants’
 
motion
 
to
 
dismiss
 
be
 
granted
 
and
 
the
 
case
 
be
dismissed without prejudice
 
for lack of
 
subject matter jurisdiction.
 
On September 20,
 
2021, the
 
court adopted the
 
magistrate’s
report
 
and
 
recommendation
 
in
 
its
 
entirety
 
and
 
granted
 
defendants’
 
motion
 
to
 
dismiss
 
plaintiffs’
 
first
 
amended
 
class
 
action
complaint; thereafter,
 
the court
 
entered a
 
final judgment
 
in favor
 
of the
 
Company and
 
certain other
 
defendants dismissing
 
the
case without prejudice.
 
On October 18,
 
2021, plaintiffs
 
filed a motion
 
to alter or
 
amend the final
 
judgement and allow
 
a filing
of
 
a
 
second
 
amended
 
complaint.
 
The
 
Company
 
responded
 
on
 
November
 
1,
 
2021.
 
The
 
court
 
has
 
not
 
ruled
 
on
 
the
 
plaintiffs’
motion.
 
 
 
19
Kraft Foods Global, Inc. et al. v. United Egg Producers, Inc. et al.
 
As previously
 
reported, on
 
September 25,
 
2008, the
 
Company was
 
named as
 
one of
 
several defendants
 
in numerous
 
antitrust
cases involving
 
the United
 
States shell
 
egg industry.
 
The Company
 
settled all
 
of these
 
cases, except
 
for the
 
claims of
 
certain
plaintiffs who sought substantial damages allegedly arising from the purchase of egg products
 
(as opposed to shell eggs). These
remaining plaintiffs
 
are Kraft Food
 
Global, Inc., General
 
Mills, Inc., and
 
Nestle USA, Inc.
 
(the “Egg
 
Products Plaintiffs”)
 
and
The Kellogg Company.
On September
 
13, 2019,
 
the case
 
with the
 
Egg Products
 
Plaintiffs was
 
remanded from
 
a multi-district
 
litigation proceeding
 
in
the
 
United
 
States
 
District
 
Court
 
for
 
the
 
Eastern
 
District
 
of
 
Pennsylvania,
 
In
 
re
 
Processed
 
Egg
 
Products
 
Antitrust
 
Litigation,
MDL No. 2002, to the United States District Court for
 
the Northern District of Illinois, Kraft Foods Global, Inc. et
 
al. v. United
Egg
 
Producers,
 
Inc.
 
et
 
al.,
 
Case
 
No.
 
1:11-cv-8808,
 
for
 
trial.
 
The
 
Egg
 
Products
 
Plaintiffs
 
allege
 
that
 
the
 
Company
 
and
 
other
defendants
 
violated
 
Section
 
1
 
of
 
the
 
Sherman
 
Act,
 
15.
 
U.S.C.
 
§
 
1,
 
by
 
agreeing
 
to
 
limit
 
the
 
production
 
of
 
eggs
 
and
 
thereby
illegally to raise the prices that plaintiffs paid for processed egg products. In particular, the Egg Products Plaintiffs are
 
attacking
certain features of the United
 
Egg Producers animal-welfare guidelines and program
 
used by the Company and many
 
other egg
producers. The Egg
 
Products Plaintiffs
 
seek to
 
enjoin the
 
Company and other
 
defendants from engaging
 
in antitrust violations
and seek
 
treble money
 
damages. The
 
parties filed
 
a joint
 
status report
 
on May
 
18, 2020.
 
On August
 
4, 2021,
 
by docket
 
entry,
the
 
court
 
instructed
 
the
 
parties
 
to
 
jointly
 
submit
 
a
 
second
 
status
 
report
 
to
 
the
 
court
 
that
 
included
 
a
 
proposed
 
schedule
 
for
preparing a final pretrial order. On
 
August 25, 2021, the parties filed a joint status report, and on
 
August 26, 2021, the court, by
docket entry, informed the parties that the need to discuss issues was no longer necessary and that a scheduled August 30, 2021,
status hearing was stricken. No trial schedule has yet been entered by the court.
In addition,
 
on October
 
24, 2019,
 
the Company
 
entered into
 
a confidential
 
settlement agreement
 
with The
 
Kellogg Company
dismissing
 
all
 
claims
 
against
 
the
 
Company
 
for
 
an
 
amount
 
that
 
did
 
not
 
have
 
a
 
material
 
impact
 
on
 
the
 
Company’s
 
financial
condition or results of operations. On
 
November 11, 2019, a
 
stipulation for dismissal was filed with
 
the court, but the court
 
has
not yet entered a judgment on the filing.
The Company intends to continue to defend the remaining case with the Egg Products Plaintiffs
 
as vigorously as possible based
on
 
defenses
 
which
 
the
 
Company
 
believes
 
are
 
meritorious
 
and
 
provable.
 
Adjustments,
 
if
 
any,
 
which
 
might
 
result
 
from
 
the
resolution of
 
this remaining
 
matter with
 
the Egg
 
Products Plaintiffs
 
have not
 
been reflected
 
in the
 
financial statements.
 
While