0000016160-15-000043.txt : 20151223 0000016160-15-000043.hdr.sgml : 20151223 20151223162503 ACCESSION NUMBER: 0000016160-15-000043 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 51 CONFORMED PERIOD OF REPORT: 20151128 FILED AS OF DATE: 20151223 DATE AS OF CHANGE: 20151223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAL-MAINE FOODS INC CENTRAL INDEX KEY: 0000016160 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - LIVESTOCK & ANIMAL SPECIALTIES [0200] IRS NUMBER: 640500378 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-04892 FILM NUMBER: 151306127 BUSINESS ADDRESS: STREET 1: 3320 WOODROW WILSON DRIVE CITY: JACKSON STATE: MS ZIP: 39209 BUSINESS PHONE: 6019486813 MAIL ADDRESS: STREET 1: 3320 WOODROW WILSON DR CITY: JACKSON STATE: MS ZIP: 39209 FORMER COMPANY: FORMER CONFORMED NAME: CAL MAINE FOODS INC DATE OF NAME CHANGE: 19961018 FORMER COMPANY: FORMER CONFORMED NAME: CHICKEN CHEF SYSTEMS INC DATE OF NAME CHANGE: 19710315 10-Q 1 calm-20151128x10q.htm 10-Q calm-20151128 Q2

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

 

FORM 10-Q

(mark one)

 

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended November 28, 2015

 

OR

 

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from ____________ to ____________

 

Commission File Number:  000-04892                                                                   

 

CAL-MAINE FOODS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware

 

64-0500378

(State or other jurisdiction of incorporation or organization)

 

(I.R.S Employer Identification No.)

 

3320 Woodrow Wilson Avenue, Jackson, Mississippi  39209

(Address of principal executive offices)(Zip Code)

 

(601) 948-6813

(Registrant’s telephone number, including area code)

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes       No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

Large Accelerated filer

Accelerated filer 

 

Non – Accelerated filer

(Do not check if a smaller reporting company)

 

 

Smaller reporting company

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 43,694,886 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 December 22, 2015.

 

 


 

CAL-MAINE FOODS, INC. AND SUBSIDIARIES

FORM 10-Q

INDEX

FOR THE QUARTER ENDED NOVEMBER 28, 2015

 

 

 

 

 

 

 

 

 

 

 

 

Page Number

Part I.

 

 

Financial Information

 

 

 

 

 

 

 

 

 

Item 1.

 

Condensed Consolidated Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets -
November 28, 2015 and May 30, 2015

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income -
Thirteen and Twenty-six Weeks Ended November 28, 2015 and November 29, 2014

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income -
Thirteen and Twenty-six Weeks Ended November 28, 2015 and November 29, 2014

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flow -
Twenty-six Weeks Ended November 28, 2015 and November 29, 2014

 

 

 

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

 

 

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of
Financial Condition and Results of Operations

 

13 

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

22 

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

22 

 

 

 

 

 

 

Part II.

 

 

Other Information

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

22 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

24 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

25 

 

 

 

 

 

 

 

Signatures

 

 

 

26 

 

 

 

 

 

 


 

 

PART I.  FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

CAL-MAINE FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

November 28, 2015

 

May 30, 2015

   

 

(unaudited)

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

15,030 

 

$

8,667 

Investment securities available-for-sale

 

 

405,301 

 

 

249,961 

Trade and other receivables (less allowance for doubtful accounts of

 

 

 

 

 

 

$815 and $513 at November 28, 2015 and May 30, 2015, respectively)

 

 

157,836 

 

 

101,977 

Inventories

 

 

158,121 

 

 

146,260 

Prepaid expenses and other current assets

 

 

3,258 

 

 

2,099 

Total current assets

 

 

739,546 

 

 

508,964 

   

 

 

 

 

 

 

Property, plant and equipment, net

 

 

372,207 

 

 

358,790 

Goodwill

 

 

29,196 

 

 

29,196 

Other investments

 

 

40,248 

 

 

18,843 

Other intangible assets

 

 

6,134 

 

 

7,560 

Other assets

 

 

4,976 

 

 

5,300 

TOTAL ASSETS

 

$

1,192,307 

 

$

928,653 

   

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

85,551 

 

$

70,821 

Accrued dividends payable

 

 

36,410 

 

 

15,372 

Current maturities of long-term debt

 

 

6,159 

 

 

10,065 

Income taxes payable

 

 

88,902 

 

 

5,288 

Deferred income taxes

 

 

27,648 

 

 

30,391 

Total current liabilities

 

 

244,670 

 

 

131,937 

   

 

 

 

 

 

 

Long-term debt, less current maturities

 

 

22,611 

 

 

40,795 

Other noncurrent liabilities

 

 

5,916 

 

 

5,745 

Deferred income taxes

 

 

43,963 

 

 

45,614 

Total liabilities

 

 

317,160 

 

 

224,091 

 

 

 

 

 

 

 

Commitments and Contingencies - see Note 4

 

 

 

 

 

 

   

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.01 par value, 120,000 shares authorized, 70,261 shares issued,

 

 

 

 

 

 

and 43,695  and 43,698 shares outstanding, at November 28, 2015 and May 30, 2015, respectively

 

 

703 

 

 

703 

Class A common stock, $0.01 par value, 4,800 shares authorized,

 

 

 

 

 

 

issued and outstanding at November 28,  2015 and May 30, 2015

 

 

48 

 

 

48 

Paid-in capital

 

 

44,802 

 

 

43,304 

Retained earnings

 

 

848,109 

 

 

679,969 

Accumulated other comprehensive income (loss), net of tax

 

 

(256)

 

 

22 

Common stock in treasury at cost – 26,566 and 26,563 shares at November 28, 2015

 

 

 

 

 

 

and May 30, 2015, respectively

 

 

(20,545)

 

 

(20,482)

Total Cal-Maine Foods, Inc. stockholders’ equity

 

 

872,861 

 

 

703,564 

Noncontrolling interests in consolidated entities

 

 

2,286 

 

 

998 

Total stockholders’ equity

 

 

875,147 

 

 

704,562 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

1,192,307 

 

$

928,653 

See Notes to Condensed Consolidated Financial Statements.

2

 


 

CAL-MAINE FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13 Weeks Ended

 

26 Weeks Ended

   

 

November 28, 2015

 

November 29, 2014

 

November 28, 2015

 

November 29, 2014

Net sales

 

$

545,975 

 

$

378,617 

 

$

1,155,870 

 

$

735,561 

Cost of sales

 

 

334,378 

 

 

285,908 

 

 

681,202 

 

 

561,751 

Gross profit

 

 

211,597 

 

 

92,709 

 

 

474,668 

 

 

173,810 

Selling, general, and administrative expense

 

 

45,438 

 

 

37,112 

 

 

88,401 

 

 

77,050 

Operating income

 

 

166,159 

 

 

55,597 

 

 

386,267 

 

 

96,760 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

616 

 

 

(477)

 

 

643 

 

 

(1,011)

Royalty income

 

 

298 

 

 

1,452 

 

 

905 

 

 

2,024 

Equity in income of affiliates

 

 

1,302 

 

 

335 

 

 

2,031 

 

 

645 

Other, net

 

 

(366)

 

 

(398)

 

 

(1,180)

 

 

877 

   

 

 

1,850 

 

 

912 

 

 

2,399 

 

 

2,535 

   

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes and noncontrolling interest

 

 

168,009 

 

 

56,509 

 

 

388,666 

 

 

99,295 

Income tax expense

 

 

58,099 

 

 

19,648 

 

 

134,666 

 

 

34,249 

Net income before noncontrolling interest

 

 

109,910 

 

 

36,861 

 

 

254,000 

 

 

65,046 

Less: Net income attributable to noncontrolling interest

 

 

680 

 

 

258 

 

 

1,747 

 

 

788 

Net income attributable to Cal-Maine Foods, Inc.

 

$

109,230 

 

$

36,603 

 

$

252,253 

 

$

64,258 

   

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share attributable to Cal-Maine Foods, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

    Basic

 

$

2.27 

 

$

0.76 

 

$

5.24 

 

$

1.34 

    Diluted

 

$

2.26 

 

$

0.76 

 

$

5.22 

 

$

1.33 

Dividends per common share

 

$

0.751 

 

$

0.252 

 

$

1.734 

 

$

0.443 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

    Basic

 

 

48,164 

 

 

48,136 

 

 

48,164 

 

 

48,133 

    Diluted

 

 

48,361 

 

 

48,404 

 

 

48,354 

 

 

48,400 

 

 

 

See Notes to Condensed Consolidated Financial Statements.

 

3

 


 

CAL-MAINE FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13 Weeks Ended

 

26 Weeks Ended

 

 

November 28, 2015

 

November 29, 2014

 

November 28, 2015

 

November 29, 2014

Net income, including noncontrolling interests

 

$

109,910 

 

$

36,861 

 

$

254,000 

 

$

65,046 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss, before tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding loss on available-for-sale securities, net of reclassification adjustments

 

 

(158)

 

 

(57)

 

 

(458)

 

 

(73)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit related to items of other comprehensive income

 

 

60 

 

 

22 

 

 

180 

 

 

28 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss, net of  tax

 

 

(98)

 

 

(35)

 

 

(278)

 

 

(45)

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

109,812 

 

 

36,826 

 

 

253,722 

 

 

65,001 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: comprehensive income attributable to the noncontrolling interest

 

 

680 

 

 

258 

 

 

1,747 

 

 

788 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to Cal-Maine Foods, Inc.

 

$

109,132 

 

$

36,568 

 

$

251,975 

 

$

64,213 

 

 

 

See Notes to Condensed Consolidated Financial Statements.

4

 


 

CAL-MAINE FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26 Weeks Ended

 

 

November 28, 2015

 

November 29, 2014

Operating activities:

 

 

 

 

 

 

Net income including noncontrolling interest

 

$

254,000 

 

$

65,046 

Depreciation and amortization

 

 

22,107 

 

 

19,984 

Other adjustments, net

 

 

24,345 

 

 

(16,961)

Net cash provided by operations

 

 

300,452 

 

 

68,069 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

Purchase of investments

 

 

(260,242)

 

 

(69,172)

Sales of investments

 

 

104,503 

 

 

72,247 

Investment in joint ventures

 

 

(19,709)

 

 

(8,160)

Purchases of property, plant and equipment

 

 

(34,028)

 

 

(43,035)

Payments received on notes receivable and from affiliates

 

 

853 

 

 

783 

Net proceeds from disposal of property, plant and equipment

 

 

219 

 

 

145 

Net cash used in investing activities

 

 

(208,404)

 

 

(47,192)

 

 

 

 

 

 

 

Financing activities:  

 

 

 

 

 

 

Proceeds from issuance of common stock from treasury, net (including tax benefit on nonqualifying disposition of incentive stock options)

 

 

 -

 

 

60 

Purchase of company stock

 

 

(62)

 

 

 -

Distributions to noncontrolling interests

 

 

(459)

 

 

(655)

Principal payments on long-term debt

 

 

(22,090)

 

 

(5,201)

Payments of dividends

 

 

(63,074)

 

 

(19,718)

Net cash used in financing activities

 

 

(85,685)

 

 

(25,514)

Net change in cash and cash equivalents

 

 

6,363 

 

 

(4,637)

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

8,667 

 

 

14,521 

Cash and cash equivalents at end of period

 

$

15,030 

 

$

9,884 

 

 

See Notes to Condensed Consolidated Financial Statements.

 

5

 


 

 

CAL-MAINE FOODS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

November 28, 2015

(unaudited)

1.   Presentation of Interim Information

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the results for the interim periods presented have been included. The preparation of condensed consolidated financial statements requires us to make estimates and assumptions. These estimates and assumptions affected reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and assumptions.  Operating results for the thirteen and twenty-six weeks ended November 28, 2015 are not necessarily indicative of the results that may be expected for the year ending May 28, 2016.  

 

The condensed consolidated balance sheet at May 30, 2015 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. 

 

For further information, refer to the consolidated financial statements and footnotes thereto included in Cal-Maine Foods, Inc.'s annual report on Form 10-K for the fiscal year ended May 30, 2015. References to “we,” “us,” “our,” or the “Company” refer to Cal-Maine Foods, Inc.

 

2.   Stock Based Compensation

 

Total stock based compensation expense for the twenty-six weeks ended November 28, 2015 and November 29, 2014 was $1.5 million and $1.2 million, respectively. 

 

Liabilities associated with Stock Appreciation Rights as of November 28, 2015 and May 30, 2015 were zero and $1.4 million, respectively. The liabilities for our 2005 Stock Appreciation Rights are included in the line item “Accounts payable and accrued expenses” in our Condensed Consolidated Balance Sheets. 

 

Unrecognized compensation expense as a result of non-vested shares of the 2012 Omnibus Long-Term Incentive Plan at November 28, 2015 was $3.6 million and will be recorded over a weighted average period of 1.7 years.  Refer to Note 11 of our May 30, 2015 audited financial statements for further information on our stock compensation plans.

 

At November 28, 2015, there were 329,240 restricted shares outstanding.  The restricted shares have a weighted average grant date fair value of $27.25 per share. 

6

 


 

 

A summary of the Company’s restricted share activity for the twenty-six weeks ended November 28, 2015 follows:

 

 

 

 

 

 

 

 

 

Number of Shares

 

Weighted Average Grant Date Fair Value

Outstanding, May 30, 2015

 

335,140 

 

$

27.24 

Granted

 

 -

 

 

 -

Vested

 

(4,050)

 

 

25.21 

Forfeited

 

(1,850)

 

 

30.76 

Outstanding, November 28, 2015

 

329,240 

 

$

27.25 

 

 

 

 

3.   Inventories

 

Inventories consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

November 28, 2015

 

May 30, 2015

Flocks

 

$

92,750 

 

$

87,280 

Eggs

 

 

16,992 

 

 

15,507 

Feed and supplies

 

 

48,379 

 

 

43,473 

 

 

$

158,121 

 

$

146,260 

 

 

4.   Contingencies

 

Financial Instruments

 

The Company maintained cash collateralized standby letters of credit (“LOC”) for the benefit of certain insurance companies totaling $3.7 million at November 28, 2015.  The cash collateralizing the LOCs is included in the line item “Other assets” in the Condensed Consolidated Balance Sheets.    As a result, none of the LOCs are recorded as a liability on the consolidated balance sheets.

 

Legal Contingencies

 

The Company is a defendant in certain legal actions, and intends to vigorously defend its position in these actions.  If the Company’s assessment of a contingency indicates it is probable a material loss has been incurred and the amount of the liability can be reasonably estimated, the estimated liability is accrued in the Company’s financial statements.    If the assessment indicates a potential material loss contingency is not probable, but is reasonably possible, or probable but cannot be reasonably estimated, then the nature of the contingent liability, together with an estimate of the possible loss or range of possible loss will be disclosed, or a statement will be made that such an estimate cannot be made.

 

These legal actions are discussed in detail at Part II, Item 1, of this report.

 

7

 


 

5.   Net Income per Common Share  

 

Basic net income per share was calculated by dividing net income by the weighted-average number of common shares outstanding during the period.  Diluted net income per share was calculated by dividing net income by the weighted-average number of common shares outstanding during the period plus the dilutive effects of options and restricted stock.  The computations of basic and diluted net income per share attributable to the Company are as follows (in thousands, except per share data):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13 Weeks Ended

 

26 Weeks Ended

 

November 28, 2015

 

November 29, 2014

 

November 28, 2015

 

November 29, 2014

Net income attributable to

 

 

 

 

 

 

 

 

 

 

 

Cal-Maine Foods, Inc.

$

109,230 

 

$

36,603 

 

$

252,253 

 

$

64,258 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted-average common shares

 

48,164 

 

 

48,136 

 

 

48,164 

 

 

48,133 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

Restricted shares

 

197 

 

 

245 

 

 

190 

 

 

245 

Common stock options

 

 

 

23 

 

 

 

 

22 

Dilutive potential common shares

 

48,361 

 

 

48,404 

 

 

48,354 

 

 

48,400 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

attributable to Cal-Maine Foods, Inc.:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

2.27 

 

$

0.76 

 

$

5.24 

 

$

1.34 

Diluted

$

2.26 

 

$

0.76 

 

$

5.22 

 

$

1.33 

 

 

 

 

8

 


 

6.   Accrued Dividends Payable and Dividends per Common Share

 

We make an accrual of dividends payable at the end of each quarter according to the Company’s dividend policy adopted by its Board of Directors. According to the policy, 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 generally accepted accounting principles 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. The amount of the accrual appears on the Condensed Consolidated Balance Sheets as “Accrued dividends payable.”

 

On our condensed 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

 

26 Weeks Ended

 

November 28, 2015

 

November 29, 2014

 

November 28, 2015

 

November 29, 2014

Net income attributable to Cal-Maine Foods, Inc. available for dividend

$

109,230 

 

$

36,603 

 

$

252,253 

 

$

64,258 

 

 

 

 

 

 

 

 

 

 

 

 

1/3 of net income attributable to Cal-Maine Foods, Inc.

 

36,410 

 

 

12,201 

 

 

84,084 

 

 

21,419 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock outstanding (shares)

 

43,695 

 

 

43,582 

 

 

 

 

 

 

Class A common stock outstanding (shares)

 

4,800 

 

 

4,800 

 

 

 

 

 

 

Total common stock outstanding (shares)

 

48,495 

 

 

48,382 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per common share*

$

0.751 

 

$

0.252 

 

$

1.734 

 

$

0.443 

 

*Dividends per common share = 1/3 of Net income (loss) attributable to Cal-Maine Foods, Inc. available for dividend ÷ Total common stock outstanding (shares)

 

 

 

 

7.   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

·

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 disclosure of fair value of certain financial assets and liabilities that are recorded at cost are as follows:

9

 


 

Cash and cash equivalents: The carrying amount approximates fair value due to the short maturity of these instruments.

 

Long-term debt: The carrying value of the Company’s long-term debt is at its stated value.  We have not elected to carry our long-term debt at fair value.  Fair values for debt are based on quoted market prices or published forward interest rate curves, which are level 2 inputs.  Estimated fair values are management’s estimate, which is a level 3 input; however, when there is no readily available market data, the estimated fair values may not represent the amounts that could be realized in a current transaction, and the fair values could change significantly. The fair value and carrying value of the Company’s borrowings under its credit facilities and long-term debt were as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

November 28, 2015

 

May 30, 2015

 

Carrying Value

 

Fair Value

 

Carrying Value

 

Fair Value

2.0%6.84% Notes payable

$

28,770 

 

$

28,994 

 

$

44,549 

 

$

45,158 

Series A Senior Secured Notes at 5.45%

 

 -

 

 

 -

 

 

6,311 

 

 

6,312 

 

$

28,770 

 

$

28,994 

 

$

50,860 

 

$

51,470 

 

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 November 28, 2015 and May 30, 2015 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

Total

November 28, 2015

 

Level 1

 

Level 2

 

Level 3

 

Balance

Assets

 

 

 

 

 

 

 

 

 

 

 

 

US government and agency obligations

 

$

 -

 

$

29,336 

 

$

 -

 

$

29,336 

Municipal bonds

 

 

 -

 

 

81,064 

 

 

 -

 

 

81,064 

Commercial paper

 

 

 -

 

 

999 

 

 

 -

 

 

999 

Corporate bonds

 

 

 -

 

 

261,809 

 

 

 -

 

 

261,809 

Foreign government obligations

 

 

 -

 

 

2,059 

 

 

 -

 

 

2,059 

Asset backed securities

 

 

 -

 

 

26,473 

 

 

 -

 

 

26,473 

Mutual Funds

 

 

5,279 

 

 

 -

 

 

 -

 

 

5,279 

Total assets measured at fair value

 

$

5,279 

 

401,740 

 

$

 -

 

$  

407,019 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

 -

 

$

 -

 

$

1,024 

 

$

1,024 

Total liabilities measured at fair value

 

$

 -

 

$

 -

 

$

1,024 

 

$

1,024 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

Total

May 30, 2015

 

Level 1

 

Level 2

 

Level 3

 

Balance

Assets

 

 

 

 

 

 

 

 

 

 

 

 

US government and agency obligations

 

$

 -

 

$

9,630 

 

$

 -

 

$

9,630 

Municipal bonds

 

 

 -

 

 

76,311 

 

 

 -

 

 

76,311 

Certificates of deposit

 

 

 -

 

 

2,002 

 

 

 -

 

 

2,002 

Commercial paper

 

 

 -

 

 

7,496 

 

 

 -

 

 

7,496 

Corporate bonds

 

 

 -

 

 

136,364 

 

 

 -

 

 

136,364 

Foreign government obligations

 

 

 -

 

 

1,045 

 

 

 -

 

 

1,045 

Asset backed securities

 

 

 -

 

 

14,352 

 

 

 -

 

 

14,352 

Mutual Funds

 

 

4,508 

 

 

 -

 

 

 -

 

 

4,508 

Commodity contracts

 

 

 -

 

 

82 

 

 

 -

 

 

82 

Total assets measured at fair value

 

$

4,508 

 

247,282 

 

$

 -

 

$  

251,790 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

 -

 

$

 -

 

$

1,024 

 

$

1,024 

Total liabilities measured at fair value

 

$

 -

 

$

 -

 

$

1,024 

 

$

1,024 

10

 


 

 

Our investment securities – available-for-sale classified as level 2 consist of certificates of deposit,  U.S. government and agency obligations, taxable and tax exempt municipal bonds, zero coupon municipal bonds, foreign government obligations, asset backed securities and corporate bonds with maturities of three months or longer when purchased. We classify 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.

 

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 based on their highest and best use.  Liabilities for contingent consideration (earn-outs) take into account commodity prices based on published forward commodity price curves, projected future egg prices as of the date of the estimate, and projected future cash flows expected to be received as a result of a business acquisition (Refer to Note 2 in the Annual Report on Form 10-K).  Given the unobservable nature of these inputs, they are deemed to be Level 3 fair value measurements.  During the twenty-six weeks ended November 28, 2015, there were no payments made or gains/losses recognized in earnings related to contingent consideration. 

 

8.   Investment Securities

 

The following represents the Company’s investment securities as of November 28, 2015 and May 30, 2015 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

November 28, 2015

Amortized Cost

 

Unrealized Gains

 

Unrealized Losses

 

Estimated Fair Value

US government and agency obligations

$

29,373 

 

$

 -

 

$

37 

 

$

29,336 

Municipal bonds

 

80,814 

 

 

250 

 

 

 -

 

 

81,064 

Commercial paper

 

999 

 

 

 -

 

 

 -

 

 

999 

Corporate bonds

 

262,327 

 

 

 -

 

 

518 

 

 

261,809 

Foreign government obligations

 

2,068 

 

 

 -

 

 

 

 

2,059 

Asset backed securities

 

26,525 

 

 

 -

 

 

52 

 

 

26,473 

Mutual funds

 

3,561 

 

 

 -

 

 

 -

 

 

3,561 

Total current investment securities

$

405,667 

 

$

250 

 

$

616 

 

$

405,301 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

1,197 

 

 

521 

 

 

 -

 

 

1,718 

Total noncurrent investment securities

$

1,197 

 

$

521 

 

$

 -

 

$

1,718 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 30, 2015

Amortized Cost

 

Unrealized Gains

 

Unrealized Losses

 

Estimated Fair Value

US government and agency obligations

$

9,609 

 

$

21 

 

$

 -

 

$

9,630 

Municipal bonds

 

76,228 

 

 

83 

 

 

 -

 

 

76,311 

Certificates of deposit

 

2,001 

 

 

 

 

 -

 

 

2,002 

Commercial paper

 

7,491 

 

 

 

 

 -

 

 

7,496 

Corporate bonds

 

136,411 

 

 

 -

 

 

47 

 

 

136,364 

Foreign government obligations

 

1,042 

 

 

 

 

 -

 

 

1,045 

Asset backed securities

 

14,356 

 

 

 -

 

 

 

 

14,352 

Mutual funds

 

2,758 

 

 

 

 

 -

 

 

2,761 

Total current investment securities

$

249,896 

 

$

116 

 

$

51 

 

$

249,961 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

1,199 

 

 

548 

 

 

 -

 

 

1,747 

Total noncurrent investment securities

$

1,199 

 

$

548 

 

$

 -

 

$

1,747 

 

Proceeds from sales of available-for-sale securities were $104.5 million and $72.2 million during the twenty-six weeks ended November 28, 2015 and November 29, 2014, respectively. Gross realized gains on those sales during the twenty-six weeks ended November 28, 2015 and November 29, 2014 were $18,000 and $60,000, respectively.  Gross

11

 


 

realized losses on those sales during the twenty-six weeks ended November 28, 2015 and November 29, 2014 were $36,000 and $4,000, respectively. For purposes of determining gross realized gains and losses, the cost of securities sold is based on the specific identification method.

 

Unrealized holding losses, net of tax, on available-for-sale securities classified as current in the amount of  $267,000 and $79,000 were recorded in other comprehensive income (loss) for the twenty-six weeks ended November 28, 2015 and November 29, 2014, respectively.    Unrealized holding gains (losses), net of tax, on long-term available-for-sale securities of $(11,000) and $35,000 were recorded in other comprehensive income (loss) for the twenty-six weeks ended November 28, 2015 and November 29, 2014, respectively.

 

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 at November 28, 2015, are as follows (in thousands):

 

 

 

 

 

 

 

 

 

Estimated Fair Value

Within one year       

$

188,364 

1-5 years

 

213,376 

5-10 years

 

 -

Total

$

401,740 

 

 

9.   Equity

 

The following reflects the equity activity, including our noncontrolling interest, for the twenty-six weeks ended November 28, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cal-Maine Foods, Inc. Stockholders

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

Treasury

 

Paid In

 

Accum. Other

 

Retained

 

Noncontrolling

 

 

 

 

Amount

 

Amount

 

Amount

 

Capital

 

Comp. Loss

 

Earnings

 

Interests

 

Total

Balance at May 30, 2015

$

703 

$

48 

$

(20,482)

$

43,304 

$

22 

$

679,969 

$

998 

$

704,562 

Dividends

 

 -

 

 -

 

 -

 

 -

 

 -

 

(84,113)

 

 -

 

(84,113)

Other comprehensive loss, net of tax

 

 -

 

 -

 

 -

 

 -

 

(278)

 

 -

 

 -

 

(278)

Purchase of Company stock

 

 -

 

 -

 

(62)

 

 -

 

 -

 

 -

 

 

 

(62)

Forfeiture of restricted stock

 

 -

 

 -

 

(1)

 

 

 -

 

 -

 

 

 

 -

Distribution to noncontrolling interest partners

 

 -

 

 -

 

 -

 

 -

 

 -

 

 -

 

(459)

 

(459)

Restricted stock compensation

 

 -

 

 -

 

 -

 

1,497