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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 August 31, 2019
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)
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 43,893,117 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 September 30, 2019.
CAL-MAINE FOODS, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
FOR THE QUARTER ENDED AUGUST 31, 2019
|
| | | | | |
| | | | | Page Number |
Part I. | | | | | |
| | | | | |
| Item 1. | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Item 2. | | | | |
| | | | | |
| Item 3. | | | | |
| | | | | |
| Item 4. | | | | |
| | | | | |
Part II. | | | | | |
| | | | | |
| Item 1. | | | | |
| | | | | |
| Item 1A. | | | | |
| | | | | |
| Item 2. | | | | |
| | | | | |
| Item 6. | | | | |
| | | | | |
| | | | | |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAL-MAINE FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for par value amounts) |
| | | | | | |
| | August 31, 2019 | | June 1, 2019 |
ASSETS | | (unaudited) | | |
Current assets: | | | | |
Cash and cash equivalents | | 46,386 |
| | 69,247 |
|
Investment securities available-for-sale | | 189,700 |
| | 250,181 |
|
Trade and other receivables (less allowance for doubtful accounts of | | |
| | |
|
$422 and $206 at August 31, 2019 and June 1, 2019, respectively) | | 78,359 |
| | 71,760 |
|
Inventories | | 182,396 |
| | 172,237 |
|
Prepaid expenses and other current assets | | 6,099 |
| | 4,328 |
|
Total current assets | | 502,940 |
| | 567,753 |
|
Property, plant and equipment, net | | 462,148 |
| | 455,347 |
|
Finance lease right-of-use asset, net | | 793 |
| | 947 |
|
Operating lease right-of-use asset, net | | 2,047 |
| | — |
|
Investments in unconsolidated entities | | 66,250 |
| | 67,554 |
|
Goodwill | | 35,525 |
| | 35,525 |
|
Other intangible assets, net | | 23,058 |
| | 23,762 |
|
Other long-lived assets | | 4,111 |
| | 5,390 |
|
TOTAL ASSETS | | 1,096,872 |
| | 1,156,278 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | | |
| | |
|
Current liabilities: | | |
| | |
|
Accounts payable and accrued expenses | | 73,913 |
| | 73,211 |
|
Current maturities of long-term debt | | 750 |
| | 1,500 |
|
Current portion of finance lease obligation | | 198 |
| | 196 |
|
Current portion of operating lease obligation | | 628 |
| | — |
|
Total current liabilities | | 75,489 |
| | 74,907 |
|
Long-term finance lease obligation | | 807 |
| | 858 |
|
Long-term operating lease obligation | | 1,420 |
| | — |
|
Other noncurrent liabilities | | 7,705 |
| | 8,110 |
|
Deferred income taxes | | 67,684 |
| | 82,597 |
|
Total liabilities | | 153,105 |
| | 166,472 |
|
Commitment and contingencies - see Note 11 | |
|
| |
|
|
Stockholders’ equity: | | |
| | |
|
Common stock, $0.01 par value, 120,000 authorized and 70,261 shares issued at | | | | |
August 31, 2019, and June 1, 2019, respectively, and 43,893 and 43,895 shares | | |
| | |
|
outstanding at August 31, 2019 and June 1, 2019, respectively | | 703 |
| | 703 |
|
Class A convertible common stock, $.01 par value, 4,800 shares authorized, issued | | |
| | |
|
and outstanding at August 31, 2019 and June 1, 2019 | | 48 |
| | 48 |
|
Paid-in capital | | 57,748 |
| | 56,857 |
|
Retained earnings | | 908,767 |
| | 954,527 |
|
Accumulated other comprehensive income (loss), net of tax | | (87 | ) | | 355 |
|
Common stock in treasury at cost – 26,367 and 26,366 shares at August 31, 2019 | | |
| | |
|
and June 1, 2019 | | (25,878 | ) | | (25,866 | ) |
Total Cal-Maine Foods, Inc. stockholders’ equity | | 941,301 |
| | 986,624 |
|
Noncontrolling interest in consolidated entities | | 2,466 |
| | 3,182 |
|
Total stockholders’ equity | | 943,767 |
| | 989,806 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | 1,096,872 |
| | 1,156,278 |
|
See Notes to Condensed Consolidated Financial Statements.
CAL-MAINE FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
|
| | | | | | | | |
| | 13 Weeks Ended |
| | August 31, 2019 | | September 1, 2018 |
Net sales | | $ | 241,166 |
| | $ | 340,583 |
|
Cost of sales | | 262,291 |
| | 283,455 |
|
Gross profit (loss) | | (21,125 | ) | | 57,128 |
|
Selling, general and administrative expense | | 42,475 |
| | 44,510 |
|
Gain on disposal of fixed assets | | (130 | ) | | (59 | ) |
Operating income (loss) | | (63,470 | ) | | 12,677 |
|
Other income (expense): | | |
| | |
|
Interest income, net | | 1,685 |
| | 1,785 |
|
Royalty income | | 411 |
| | 501 |
|
Equity in income (loss) of affiliates | | (454 | ) | | 1,429 |
|
Other, net | | 1,336 |
| | 101 |
|
Total other income | | 2,978 |
| | 3,816 |
|
| | | | |
Income (loss) before income taxes and noncontrolling interest | | (60,492 | ) | | 16,493 |
|
Income tax (benefit) expense | | (14,771 | ) | | 3,750 |
|
Net income (loss) before noncontrolling interest | | (45,721 | ) | | 12,743 |
|
Less: Net income attributable to noncontrolling interest | | 39 |
| | 338 |
|
Net income (loss) attributable to Cal-Maine Foods, Inc. | | $ | (45,760 | ) | | $ | 12,405 |
|
| | | | |
Net income (loss) per common share attributable to Cal-Maine Foods, Inc.: | | |
| | |
|
Basic | | $ | (0.94 | ) | | $ | 0.26 |
|
Diluted | | $ | (0.94 | ) | | $ | 0.26 |
|
Weighted average shares outstanding: | | |
| | |
|
Basic | | 48,446 |
| | 48,390 |
|
Diluted | | 48,446 |
| | 48,516 |
|
See Notes to Condensed Consolidated Financial Statements.
CAL-MAINE FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
|
| | | | | | | | |
| | 13 Weeks Ended |
| | August 31, 2019 | | September 1, 2018 |
Net income (loss), including noncontrolling interests | | $ | (45,721 | ) | | $ | 12,743 |
|
| | |
| | |
|
Other comprehensive income (loss), before tax: | | |
| | |
|
| | |
| | |
|
Unrealized holding gain (loss) on available-for-sale securities, net of reclassification adjustments | | (584 | ) | | 467 |
|
| | |
| | |
|
Income tax benefit (expense) related to items of other comprehensive loss | | 142 |
| | (114 | ) |
| | |
| | |
|
Other comprehensive income (loss), net of tax | | (442 | ) | | 353 |
|
| | |
| | |
|
Comprehensive income (loss) | | (46,163 | ) | | 13,096 |
|
| | |
| | |
|
Less: comprehensive income attributable to the noncontrolling interest | | 39 |
| | 338 |
|
| | |
| | |
|
Comprehensive income (loss) attributable to Cal-Maine Foods, Inc. | | $ | (46,202 | ) | | $ | 12,758 |
|
See Notes to Condensed Consolidated Financial Statements.
CAL-MAINE FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
| | | | | | | | |
| | 13 Weeks Ended |
| | August 31, 2019 | | September 1, 2018 |
Operating activities: | | | | |
Net income (loss) including noncontrolling interest | | $ | (45,721 | ) | | $ | 12,743 |
|
Depreciation and amortization | | 13,620 |
| | 13,547 |
|
Impairment loss on property, plant & equipment | | 2,919 |
| | — |
|
Other adjustments, net | | (31,496 | ) | | (5,108 | ) |
Net cash provided by (used in) operations | | (60,678 | ) | | 21,182 |
|
| | |
| | |
|
Investing activities: | | |
| | |
|
Purchases of investment securities | | (9,108 | ) | | (42,793 | ) |
Sales and maturities of investment securities | | 69,919 |
| | 52,980 |
|
Investment in unconsolidated entities | | — |
| | (4,272 | ) |
Distributions from unconsolidated entities | | 858 |
| | 1,000 |
|
Purchases of property, plant and equipment | | (23,670 | ) | | (9,199 | ) |
Net proceeds from disposal of property, plant and equipment | | 1,383 |
| | 93 |
|
Net cash provided by (used in) investing activities | | 39,382 |
| | (2,191 | ) |
| | |
| | |
|
Financing activities: | | |
| | |
|
Purchase of common stock by treasury | | (11 | ) | | — |
|
Distributions to noncontrolling interests | | (756 | ) | | — |
|
Principal payments on long-term debt | | (750 | ) | | (1,259 | ) |
Principal payments on finance lease | | (48 | ) | | (64 | ) |
Payment of dividends | | — |
| | (17,075 | ) |
Net cash used in financing activities | | (1,565 | ) | | (18,398 | ) |
| | | | |
Net change in cash and cash equivalents | | (22,861 | ) | | 593 |
|
| | |
| | |
|
Cash and cash equivalents at beginning of period | | 69,247 |
| | 48,431 |
|
Cash and cash equivalents at end of period | | $ | 46,386 |
| | $ | 49,024 |
|
| | | | |
Supplemental Information: | | | | |
Cash paid for operating leases | | $197 | | — |
|
See Notes to Condensed Consolidated Financial Statements.
CAL-MAINE FOODS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
August 31, 2019
(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 (GAAP) in the United States of America for complete financial statements and should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended June 1, 2019. 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-end is on the Saturday nearest May 31. Each of the three-month periods ended on August 31, 2019 and September 1, 2018 included 13 weeks.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that effect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
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 Condensed 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.
Nature of Leases
The company leases certain office spaces, trucks, processing machines, and equipment to support our operations under cancelable and non-cancelable contracts.
Corporate and Field Offices
We lease office space for administrative employees at some of our farms. These contracts are typically structured with initial non-cancelable terms of five to ten years. To the extent our corporate and field office contracts include renewal options, we evaluate whether we are reasonably certain to exercise those options on a contract by contract basis based on expected future office space needs.
Trucks
We assumed several non-cancelable operating leases for trucks from a prior acquisition. The initial terms on these leases ranged from five to seven years. We do not intend to exercise renewal options beyond the initial term.
Processing machines and other equipment
We lease a processing machine through a finance lease arrangement assumed in an acquisition. The lease contains a purchase option at the end of the term that we intend to exercise. The company leases various pieces of equipment such as forklifts, pallet jacks, and other items in support of operations. These leases are cancelable and non-cancelable with terms ranging from one month to five years.
Recently Adopted Accounting Standards
In February 2016, the FASB issued ASU 2016-02, Leases. The purpose of the standard is to improve transparency and comparability related to the accounting and reporting of leasing arrangements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.
The effective date for the new standard, for the Company, was June 2, 2019 and the Company adopted the new standard on that date. The Company elected a modified retrospective transition approach, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either its effective date or the beginning of the earliest comparative period presented in the financial statements as its date of initial application. We used June 2, 2019 as the date of initial application. If an entity chooses the second option, the transition requirements for existing leases apply to leases entered into between the date of initial application and the effective date. The entity must recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. Because the Company chose the first option, the Company has not recast its comparative period financial statements. In connection with adopting the new standard, the Company reclassified its presentation of finance lease obligations and property in the financial statements for all periods presented.
The new standard provides a number of optional practical expedients in transition. The Company elected practical expedients which permit us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs.
The new standard provides practical expedients for an entity’s initial and ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. For the leases that qualify, we do not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also elected the practical expedient to not separate lease and non-lease components for all of our leases.
Implementation of the new standard did not have a material effect on our financial statements. See Note 5 for additional information. Reclassification
Certain reclassifications have been made to the fiscal 2019 financial statements to conform to the fiscal 2020 financial statement presentation. These reclassifications had no effect on income
Note 2 - Inventories
Inventories consisted of the following (in thousands):
|
| | | | | | | | |
| | August 31, 2019 | | June 1, 2019 |
Flocks | | $ | 109,323 |
| | $ | 105,536 |
|
Eggs and egg products | | 16,873 |
| | 14,318 |
|
Feed and supplies | | 56,200 |
| | 52,383 |
|
| | $ | 182,396 |
| | $ | 172,237 |
|
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 August 31, 2019 consisted of approximately 9.6 million pullets and breeders and 36.5 million layers.
Note 3 - Investment Securities
The following represents the Company’s investment securities as of August 31, 2019 and June 1, 2019 (in thousands):
|
| | | | | | | | | | | | | | | | |
August 31, 2019 | | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Estimated Fair Value |
US government and agency obligations | | $ | 30,943 |
| | $ | 173 |
| | $ | — |
| | $ | 31,116 |
|
Municipal bonds | | 34,632 |
| | 200 |
| | — |
| | 34,832 |
|
Commercial paper | | 2,990 |
| | 1 |
| | — |
| | 2,991 |
|
Corporate bonds | | 116,061 |
| | 359 |
| | — |
| | 116,420 |
|
Certificates of deposits | | 1,004 |
| | — |
| | — |
| | 1,004 |
|
Asset backed securities | | 3,323 |
| | 14 |
| | — |
| | 3,337 |
|
Total current investment securities | | $ | 188,953 |
| | $ | 747 |
| | $ | — |
| | $ | 189,700 |
|
| | |
| | |
| | |
| | |
|
Mutual funds | | $ | 1,899 |
| | $ | 713 |
| | $ | — |
| | $ | 2,612 |
|
Total noncurrent investment securities | | $ | 1,899 |
| | $ | 713 |
| | $ | — |
| | $ | 2,612 |
|
|
| | | | | | | | | | | | | | | | |
June 1, 2019 | | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Estimated Fair Value |
US government and agency obligations | | $ | 30,896 |
| | $ | 78 |
| | $ | — |
| | $ | 30,974 |
|
Municipal bonds | | 50,220 |
| | 133 |
| | — |
| | 50,353 |
|
Certificates of deposits | | 6,149 |
| | — |
| | 1 |
| | 6,148 |
|
Commercial paper | | 9,953 |
| | — |
| | 8 |
| | 9,945 |
|
Corporate bonds | | 147,068 |
| | 94 |
| | — |
| | 147,162 |
|
Asset backed securities | | 5,589 |
| | 10 |
| | — |
| | 5,599 |
|
Total current investment securities | | $ | 249,875 |
| | $ | 315 |
| | $ | 9 |
| | $ | 250,181 |
|
| | |
| | |
| | |
| | |
|
Mutual funds | | $ | 2,331 |
| | $ | 1,026 |
| | $ | — |
| | $ | 3,357 |
|
Total noncurrent investment securities | | $ | 2,331 |
| | $ | 1,026 |
| | $ | — |
| | $ | 3,357 |
|
The mutual funds are classified as “Other long-lived assets” in the Company’s Condensed Consolidated Balance Sheets.
Proceeds from sales and maturities of investment securities were $69.9 million and $53.0 million during the thirteen weeks ended August 31, 2019 and September 1, 2018, respectively. Gross realized gains for the thirteen weeks ended August 31, 2019 and September 1, 2018 were $558,000 and $1,000, respectively. Gross realized losses for the thirteen weeks ended August 31, 2019 and September 1, 2018 were $0 and $8,000, respectively. For purposes of determining gross realized gains and losses, the cost of securities sold is based on the specific identification method.
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 August 31, 2019, are as follows (in thousands):
|
| | | | |
| | Estimated Fair Value |
Within one year | | $ | 127,143 |
|
1-5 years | | 62,557 |
|
Total | | $ | 189,700 |
|
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 |
| |
• | 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: 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. The fair value and carrying value of the Company’s borrowings under its long-term debt were as follows (in thousands):
|
| | | | | | | | | | | | | | | | |
| | August 31, 2019 | | June 1, 2019 |
| | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
Note payable | | $ | 750 |
| | $ | 751 |
| | $ | 1,500 |
| | $ | 1,501 |
|
Finance lease obligations | | 1,005 |
| | 910 |
| | 1,054 |
| | 940 |
|
| | $ | 1,755 |
| | $ | 1,661 |
| | $ | 2,554 |
| | $ | 2,441 |
|
Assets and Liabilities Measured at Fair Value on a Recurring Basis
In accordance with the fair value hierarchy described above, the following table shows the fair value of financial assets and liabilities measured at fair value on a recurring basis as of August 31, 2019 and June 1, 2019 (in thousands):
|
| | | | | | | | | | | | | | | |
| | | | | | | | Total |
August 31, 2019 | | Level 1 | | Level 2 | | Level 3 | | Balance |
Assets | | |
| | |
| | |
| | |
|
US government and agency obligations | | — |
| | $ | 31,116 |
| | — |
| | $ | 31,116 |
|
Municipal bonds | | — |
| | 34,832 |
| | — |
| | 34,832 |
|
Commercial paper | | — |
| | 2,991 |
| | — |
| | 2,991 |
|
Corporate bonds | | — |
| | 116,420 |
| | — |
| | 116,420 |
|
Certificates of deposits | | — |
| | 1,004 |
| | — |
| | 1,004 |
|
Asset backed securities | | — |
| | 3,337 |
| | — |
| | 3,337 |
|
Mutual funds | | 2,612 |
| | — |
| | — |
| | 2,612 |
|
Total assets measured at fair value | | $ | 2,612 |
| | $ | 189,700 |
| | — |
| | $ | 192,312 |
|
|
| | | | | | | | | | | | | | | | |
| | | | | | | | Total |
June 1, 2019 | | Level 1 | | Level 2 | | Level 3 | | Balance |
Assets | | |
| | |
| | |
| | |
|
US government and agency obligations | | $ | — |
| | $ | 30,974 |
| | $ | — |
| | $ | 30,974 |
|
Municipal bonds | | — |
| | 50,353 |
| | — |
| | 50,353 |
|
Certificates of deposits | | — |
| | 6,148 |
| | — |
| | 6,148 |
|
Commercial paper | | — |
| | 9,945 |
| | — |
| | 9,945 |
|
Corporate bonds | | — |
| | 147,162 |
| | — |
| | 147,162 |
|
Asset backed securities | | — |
| | 5,599 |
| | — |
| | 5,599 |
|
Mutual funds | | 3,357 |
| | — |
| | — |
| | 3,357 |
|
Total assets measured at fair value | | $ | 3,357 |
| | $ | 250,181 |
| | $ | — |
| | $ | 253,538 |
|
Investment securities – available-for-sale have maturities of three months or longer when purchased, and are classified as current, because they are available for current operations. Observable inputs for these securities are yields, credit risks, default rates, and volatility.
Note 5 - 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 income, net in the Condensed Consolidated Statements of Operations. The Company’s lease cost consists of the following (in thousands):
|
| |
| Thirteen weeks ended August 31, 2019 |
Operating Lease cost | $197 |
Finance Lease cost | |
Amortization of right-of-use asset | $38 |
Interest on lease obligations | $12 |
Short term lease cost | $434 |
Future minimum lease payments under non-cancelable leases are as follows (in thousands):
|
| | | | | | |
| | As of August 31, 2019 |
| | Operating Leases | | Finance Leases |
Remainder fiscal 2020 | | $563 | | $180 |
2021 | | 685 |
| | 239 |
|
2022 | | 554 |
| | 239 |
|
2023 | | 403 |
| | 239 |
|
2024 | | 44 |
| | 218 |
|
Thereafter | | 31 |
| | — |
|
Total | | 2,280 |
| | 1,115 |
|
Less imputed interest | | (232 | ) | | (110 | ) |
Total | | $2,048 | | $1,005 |
The weighted-average remaining lease term and discount rate for lease liabilities included in our Condensed Consolidated Balance Sheet are as follows:
|
| | | | | | |
| | As of August 31, 2019 |
| | Operating Leases | | Finance Leases |
Weighted-average remaining lease term (years) | | 3.5 |
| | 5.0 |
|
Weighted-average discount rate | | 5.9 | % | | 4.9 | % |
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 last quarter for which a dividend was paid. At the end of the first quarter of fiscal 2020 on August 31, 2019, the amount of cumulative losses to be recovered before payment of a dividend was $65.6 million.
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 |
| | August 31, 2019 | | September 1, 2018 |
Net income (loss) attributable to Cal-Maine Foods, Inc. available for dividend | | $ | (45,760 | ) | | $ | 12,405 |
|
| | | | |
1/3 of net income attributable to Cal-Maine Foods, Inc. available for dividend | | $ | — |
| | $ | 4,135 |
|
| | | | |
Common stock outstanding (shares) | | 43,893 |
| | 43,831 |
|
Class A common stock outstanding (shares) | | 4,800 |
| | 4,800 |
|
Total common stock outstanding (shares) | | 48,693 |
| | 48,631 |
|
| | | | |
Dividends per common share* | | $ | — |
| | $ | 0.085 |
|
*Dividends per common share = 1/3 of Net income (loss) attributable to Cal-Maine Foods, Inc. available for dividend ÷ Total common stock outstanding (shares).
Note 7 - Equity
The following reflects the equity activity, including our noncontrolling interest, for the thirteen weeks ended August 31, 2019 and September 1, 2018 (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Thirteen Weeks Ended August 31, 2019 |
| | Cal-Maine Foods, Inc. Stockholders | | | | |
| | Common Stock | | | | | | | | |
| | |
| | Class A | | Treasury | | Paid In | | Accum. Other | | Retained | | Noncontrolling | | |
| | Amount |
| | Amount | | Amount | | Capital | | Comp. Income (Loss) | | Earnings | | Interest | | Total |
Balance at June 1, 2019 | | $ | 703 |
| | $ | 48 |
| | $ | (25,866 | ) | | $ | 56,857 |
| | $ | 355 |
| | $ | 954,527 |
| | $ | 3,182 |
| | $ | 989,806 |
|
Other comprehensive loss, net of tax | | — |
| | — |
| | — |
| | — |
| | (442 | ) | | — |
| | — |
| | (442 | ) |
Grant of restricted stock, net of forfeitures | | — |
| | — |
| | (1 | ) | | 1 |
| | — |
| | — |
| | — |
| | — |
|
Purchase of company stock to satisfy withholding obligations in connection with the vesting of restricted stock | | — |
| | — |
| | (11 | ) | | — |
| | — |
| | — |
| | — |
| | (11 | ) |
Distributions to noncontrolling interest partners | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (755 | ) | | (755 | ) |
Restricted stock compensation | | — |
| | — |
| | — |
| | 890 |
| | — |
| | — |
| | — |
| | 890 |
|
Net income (loss) | | — |
| | — |
| | — |
| | — |
| | — |
| | (45,760 | ) | | 39 |
| | (45,721 | ) |
Balance at August 31, 2019 | | $ | 703 |
| | $ | 48 |
| | $ | (25,878 | ) | | $ | 57,748 |
| | $ | (87 | ) | | $ | 908,767 |
| | $ | 2,466 |
| | $ | 943,767 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Thirteen Weeks Ended September 1, 2018 |
| | 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 June 2, 2018 | | $ | 703 |
| | $ | 48 |
| | $ | (24,966 | ) | | $ | 53,323 |
| | $ | (693 | ) | | $ | 924,918 |
| | $ | 2,349 |
| | $ | 955,682 |
|
Other comprehensive income, net of tax | | — |
| | — |
| | — |
| | — |
| | 353 |
| | — |
| | — |
| | 353 |
|
Restricted stock compensation | | — |
| | — |
| | — |
| | 903 |
| | — |
| | — |
| | — |
| | 903 |
|
Dividends | | — |
| | — |
| | — |
| | — |
| | — |
| | (4,117 | ) | | — |
| | (4,117 | ) |
Net income | | — |
| | — |
| | — |
| | — |
| | — |
| | 12,405 |
| | 338 |
| | 12,743 |
|
September 31, 2018 | | $ | 703 |
| | $ | 48 |
| | $ | (24,966 | ) | | $ | 54,226 |
| | $ | (340 | ) | | $ | 933,206 |
| | $ | 2,687 |
| | $ | 965,564 |
|
Note 8 - Revenue Recognition
Satisfaction of Performance Obligation
The vast majority of the Company’s revenue is derived from contracts with customers based on the customer placing an order for products. Pricing for the most part is determined when the Company and the customer agree upon the specific order, which establishes the contract for that order.
Revenues are recognized in an amount that reflects the net consideration we expect to receive in exchange for the goods. Our shell eggs are sold at prices related to Urner Barry Spot Egg Market Quotations, 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.
Disaggregation of Revenue
The following table provides revenue disaggregated by product category (in thousands):
|
| | | | | | | | |
| | 13 Weeks Ended |
| | August 31, 2019 | | September 1, 2018 |
Non-specialty shell egg sales | | $ | 121,609 |
| | $ | 208,162 |
|
Specialty shell egg sales | | 105,069 |
| | 112,263 |
|
Co-pack specialty shell egg sales | | 6,139 |
| | 6,366 |
|
Egg products | | 7,201 |
| | 12,054 |
|
Other | | 1,148 |
| | 1,738 |
|
| | $ | 241,166 |
| | $ | 340,583 |
|
Contract Costs
The Company can incur costs to obtain or fulfill a contract with a customer. The amortization period of these costs is less than one year; therefore, they are expensed as incurred.
Contract Balances
The Company receives payment from customers based on specified terms that are generally less than 30 days from delivery. There are rarely contract assets or liabilities related to performance under the contract.
Note 9 - Stock Based Compensation
Total stock based compensation expense for the thirteen weeks ended August 31, 2019 and September 1, 2018 was $890,000 and $903,000, respectively.
Unrecognized compensation expense as a result of non-vested shares of the 2012 Omnibus Long-Term Incentive Plan at August 31, 2019 was $5.1 million, and will be recorded over a weighted average period of 1.9 years. Refer to Note 10 of our June 1, 2019 audited financial statements for further information on our stock compensation plans.
At August 31, 2019, there were 246,561 restricted shares outstanding, with a weighted average grant date fair value of $43.20 per share. The Company’s restricted share activity for the thirteen weeks ended August 31, 2019 follows:
|
| | | | | | | |
| | Number of Shares | | Weighted Average Grant Date Fair Value |
Outstanding, June 1, 2019 | | 248,412 |
| | $ | 43.20 |
|
Granted | | — |
| | — |
|
Vested | | (1,000 | ) | | 43.30 |
|
Forfeited | | (851 | ) | | 43.12 |
|
Outstanding, August 31, 2019 | | 246,561 |
| | $ | 43.20 |
|
Note 10 - Net Income (Loss) per Common Share
Basic net loss per share was calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss 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. Due to the net loss in the thirteen weeks ended August 31, 2019, restricted shares were excluded from the calculation of diluted net loss per share because their inclusion would have been antidilutive. The computations of basic and diluted net loss per share attributable to the Company are as follows (in thousands, except per share data):
|
| | | | | | | | |
| | 13 Weeks Ended |
| | August 31, 2019 | | September 1, 2018 |
Net income (loss) attributable to Cal-Maine Foods, Inc. | | $ | (45,760 | ) | | $ | 12,405 |
|
| | |
| | |
|
Basic weighted-average common shares | | 48,446 |
| | 48,390 |
|
Effect of dilutive securities: | | | | |
Restricted shares | | — |
| | 126 |
|
Dilutive potential common shares | | 48,446 |
| | 48,516 |
|
| | | | |
Antidilutive securities excluded from computation of earnings per share | | 110 |
| | — |
|
| | | | |
Net income (loss) per common share attributable to Cal-Maine Foods, Inc.: | | |
| | |
|
Basic | | $ | (0.94 | ) | | $ | 0.26 |
|
Diluted | | $ | (0.94 | ) | | $ | 0.26 |
|
Note 11 - Commitment and Contingencies
Financial Instruments
The Company maintained standby letters of credit (“LOC”) totaling $4.2 million at August 31, 2019 that were issued under our Revolving Credit Facility. The outstanding LOCs are for the benefit of certain insurance companies, and are not recorded as a liability on the consolidated balance sheets.
Egg Antitrust Litigation
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 cases were consolidated into In re: Processed Egg Products Antitrust Litigation, No. 2:08-md-02002-GP, in the United States District Court for the Eastern District of Pennsylvania (the “District Court”), in three groups of cases - the “Direct Purchaser Putative Class Action”, the “Indirect Purchaser Putative Class Action” and the “Non-Class Cases.” As previously reported, the Company settled all of the Direct Purchaser Putative Class Action cases and the Indirect Purchaser Putative Class Action cases, and all Non-Class 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). As previously reported, the Company settled all
claims brought by one of these plaintiffs, Conopco, Inc. The Court entered a final judgment dismissing Conopco’s claims against the Company on November 21, 2018. The remaining plaintiffs are Kraft Food Global, Inc., General Mills, Inc., Nestle USA, Inc., and The Kellogg Company (“Egg Products Plaintiffs”). The Egg Products Plaintiffs seek treble damages and injunctive relief under the Sherman Act and are attacking certain features of the UEP animal-welfare guidelines and program used by the Company and many other egg producers. On July 2, 2019 the Egg Products Plaintiffs filed a motion to remand, and on September 13, 2019 the case was remanded 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, No. 1:11-cv-08808 (DP), where it was initially filed, for trial. The Illinois court has not issued a case management order or any other directive.
The Company intends to continue to defend the remaining case as vigorously as possible based on defenses which the Company believes are meritorious and provable. While management believes that the likelihood of a material adverse outcome in the overall egg antitrust litigation has been significantly reduced as a result of the settlements and rulings described above, there is still a reasonable possibility of a material adverse outcome in the remaining egg antitrust litigation. At the present time, however, it is not possible to estimate the amount of monetary exposure, if any, to the Company because of this remaining case. Adjustments, if any, which might result from the resolution of these remaining legal matters, have not been reflected in the financial statements.
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.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains numerous forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) relating to our shell egg business, including estimated future production data, expected construction schedules, projected construction costs, potential future supply of and demand for our products, potential future corn and soybean price trends, potential future impact on our business of new legislation, rules or policies, potential outcomes of legal proceedings, and other projected operating data, including anticipated results of operations and financial condition. Such forward-looking statements are identified by the use of words such as “believes,” “intends,” “expects,” “hopes,” “may,” “should,” “plans,” “projected,” “contemplates,” “anticipates,” or similar words. Actual outcomes or results could differ materially from those projected in the forward-looking statements. The forward-looking statements are based on management’s current intent, belief, expectations, estimates, and projections regarding the Company and its industry. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions, and other factors that are difficult to predict and may be beyond our control. The factors that could cause actual results to differ materially from those projected in the forward-looking statements include, among others, (i) the risk factors set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 1, 2019, as updated by our subsequent Quarterly Reports on Form 10-Q, (ii) the risks and hazards inherent in the shell egg business (including disease, pests, weather conditions, and potential for product recall), (iii) changes in the demand for and market prices of shell eggs and feed costs, (iv) our ability to predict and meet demand for cage-free and other specialty eggs, (v) risks, changes, or obligations that could result from our future acquisition of new flocks or businesses and risks or changes that may cause conditions to completing a pending acquisition not to be met, and (vi) adverse results in pending litigation matters. Readers are cautioned not to place undue reliance on forward-looking statements because, while we believe the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. Further, forward-looking statements included herein are only made as of the respective dates thereof, or if no date is stated, as of the date hereof. Except as otherwise required by law, we disclaim any intent or obligation to update publicly these forward-looking statements, whether because of new information, future events, or otherwise.
OVERVIEW
Cal-Maine Foods, Inc. (“we,” “us,” “our,” or the “Company”) 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.
Our operations are fully integrated. At our facilities we hatch chicks, grow and maintain flocks of pullets (young female chickens, under 18 weeks of age), layers (mature female chickens) and breeders (male and female birds used to produce fertile eggs to hatch for egg production flocks), manufacture feed, and produce, process, and distribute shell eggs. We are the largest producer and marketer of shell eggs in the United States (“U.S.”). We market the majority of our shell eggs in the southwestern, southeastern, mid-western, and mid-Atlantic regions of the U.S. We market shell eggs through an extensive distribution network to a diverse group of customers, including national and regional grocery store chains, club stores, foodservice distributors, and egg product consumers.
The Company has one operating segment, which is the production, grading, packaging, marketing and distribution of shell eggs. The majority of our customers rely on us to provide most of their shell egg needs, including specialty and non-specialty 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 non-specialty 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 non-specialty 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.
Our operating results are directly tied to egg prices, which are highly volatile and subject to wide fluctuations, and are outside of our control. For example, the Urner-Barry Southeastern Regional Large Egg Market Price per dozen eggs (“UB southeastern large index”) for our fiscal years 2016-2019 ranged from a low of $0.58 in fiscal year 2016 to a high of $3.00 in fiscal year 2018. The shell egg industry has traditionally been subject to periods of high profitability followed by periods of significant loss. In the past, during periods of high profitability, shell egg producers tended to increase the number of layers in production with a resulting increase in the supply of shell eggs, which generally caused a drop in shell egg prices until supply and demand returned to balance. As a result, our financial results from year to year may vary significantly. Shorter term, retail sales of shell eggs historically have been greatest during the fall and winter months and lowest during the summer months. Prices for shell eggs fluctuate in response to seasonal factors and a natural increase in shell egg production in the spring and early summer. Historically, shell egg prices have increased with the start of the school year and are highest prior to holiday periods, particularly Thanksgiving, Christmas, and Easter. Consequently, we generally experience lower sales and net income in our first and fourth fiscal quarters. Because of the seasonal and quarterly fluctuations, comparisons of our sales and operating results between different quarters within a single fiscal year are not necessarily meaningful comparisons.
For the first quarter, the average UB southeastern large index price was down 40.7% compared with the prior-year period. At the same time our net average selling price for all shell eggs for the thirteen weeks ended August 31, 2019 was down 30.0% to $0.92 compared with $1.31 for the corresponding period of fiscal 2019. While demand trends have been strong in the first quarter of 2020, particularly for our specialty egg business, we believe supply concerns have affected market prices. The most recent USDA Chickens and Eggs Report showed 331.4 million laying hens as of September 1, 2019, which was approximately 800,000 more hens than a year ago. These numbers continue to trend upwards, which could negatively affect average market prices for our second fiscal quarter and throughout fiscal 2020.
We are one of the largest producers and marketers of value-added specialty shell eggs in the U.S. Specialty shell eggs have been a significant and growing portion of the market. In recent years, a significant number of large restaurant chains, food service companies and grocery chains, including our largest customers, announced goals to transition to a cage-free egg supply chain by specified future dates. We are working with our customers to achieve smooth progress in meeting their goals. Our focus for future expansion at our farms will be environments that are cage-free or with equipment convertible to cage-free, based on a timeline to meet our customer’s needs.
Additionally, in November 2018 California passed Proposition 12, which provides for minimum space requirements per hen beginning in 2020 and mandates that all eggs or egg products sold in California must be cage-free by 2022. While our direct sales into California have not been material, we expect Proposition 12 will affect sourcing and production of eggs in California, as well as future supply and pricing in other areas of the country. In response to these developments, on March 29, 2019, our Board of Directors approved a major expansion of the cage-free capacity at the Company’s Delta, Utah facility. This expansion includes new facilities for 2.0 million cage-free hens, pullets and a processing plant, as well as renovation of existing capacity for cage-free hens. Final completion of these additions and renovations is expected by early 2022 and will add approximately 3.4 million cage-free hens.
Other approved expansion projects to meet the increasing demands for cage-free eggs include adding cage-free layers in Pittsburg, TX; Harwood, TX; Bushnell, FL; Lake City, FL; and Zephyrhills, FL. We are also adding cage-free pullet capacity in Pittsburg, TX and Zephyrhills, FL. The total projected investment in current projects including Delta to expand cage-fee egg capacity is $187.5 million of which remaining projected spending is $131.8 million. See the table under “Capital Resources and Liquidity” later in this section for further information on capital expenditure projects.
For the thirteen weeks ended August 31, 2019 and September 1, 2018, we produced approximately 84% of the total number of shell eggs we sold. For the thirteen weeks ended August 31, 2019 and September 1, 2018, approximately 9% of such production was provided by contract producers who utilize their facilities in the production of shell eggs by layers owned by us. We own the shell eggs produced under these arrangements.
Our cost of production is materially affected by feed costs. Feed costs averaged 54.9% and 56.5% of our total farm egg production cost for the thirteen weeks ended August 31, 2019 and September 1, 2018, respectively. Changes in market prices for corn and soybean meal, the primary ingredients in the feed we use, result in changes in our cost of goods sold. The cost of feed ingredients, which are commodities, are subject to factors over which we have little or no control such as volatile price changes caused by weather, size of harvest, transportation, storage costs, demand, and the agricultural and energy policies of the U.S. and foreign governments. Based on the USDA’s current yield and harvest estimates for the calendar 2019 corn and soybean crops, we expect to have an adequate supply of both grains in fiscal 2020. However, ongoing uncertainties and geopolitical issues surrounding trade agreements and international tariffs could create more price volatility in the coming year.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items from our Condensed Consolidated Statements of Operations expressed as a percentage of net sales.
|
| | | | | | |
| | 13 Weeks Ended |
| | August 31, 2019 | | September 1, 2018 |
Net sales | | 100.0 | % | | 100.0 | % |
Cost of sales | | 108.8 | % | | 83.2 | % |
Gross profit (loss) | | (8.8 | )% | | 16.8 | % |
Selling, general, and administrative expense | | 17.6 | % | | 13.1 | % |
Gain on disposal of fixed assets | | (0.1 | )% | | — | % |
Operating income (loss) | | (26.3 | )% | | 3.7 | % |
Other income, net | | 1.2 | % | | 1.1 | % |
Income (loss) before income taxes and noncontrolling interest | | (25.1 | )% | | 4.8 | % |
Income tax (benefit) expense | | (6.1 | )% | | 1.1 | % |
Net income (loss) before noncontrolling interest | | (19.0 | )% | | 3.7 | % |
Less: Net income attributable to noncontrolling interest | | — | % | | 0.1 | % |
Net income (loss) attributable to Cal-Maine Foods, Inc. | | (19.0 | )% | | 3.6 | % |
NET SALES
Net sales for the thirteen weeks ended August 31, 2019 were $241.2 million, a decrease of $99.4 million, or 29.2%, compared to net sales of $340.6 million for the thirteen weeks ended September 1, 2018. The decrease was primarily due to a 30.0% decrease in egg selling prices.
Net shell egg sales of $232.8 million and $326.8 million made up approximately 97.0% and 96.5% of net sales for the thirteen weeks ended August 31, 2019 and September 1, 2018, respectively. Dozens sold for the thirteen weeks ended August 31, 2019 were 254.4 million, a 1.7% increase from 250.1 million dozen for the same period of fiscal 2019. The volume increase accounted for a $4.0 million increase in net sales.
Net average selling price per dozen of shell eggs was $0.915 for the thirteen weeks ended August 31, 2019, compared to $1.307 for the thirteen weeks ended September 1, 2018. The 30.0% decrease in average selling price accounted for a $98.0 million decrease in net sales.
Egg products accounted for 3.0% and 5.8% of net sales for the thirteen weeks ended August 31, 2019 and September 1, 2018, respectively. These revenues were $7.2 million for the thirteen weeks ended August 31, 2019, compared to $12.1 million for the thirteen weeks September 1, 2018.
The table below represents an analysis of our non-specialty and specialty shell egg sales (in thousands, except percentage data). Following the table is a discussion of the information presented in the table.
|
| | | | | | | | | | | | | | |
| | 13 Weeks Ended |
| | August 31, 2019 | | September 1, 2018 |
Total net sales | | $ | 241,166 |
| | | | $ | 340,583 |
| | |
| | | | | | | | |
Non-specialty shell eggs | | $ | 121,609 |
| | 52.0 | % | | $ | 208,162 |
| | 63.4 | % |
Specialty shell eggs | | 105,069 |
| | 44.9 | % | | 112,263 |
| | 34.2 | % |
Co-pack specialty shell eggs | | 6,139 |
| | 2.6 | % | | 6,366 |
| | 1.9 | % |
Egg sales, net | | 232,817 |
| | 99.5 | % | | 326,791 |
| | 99.5 | % |
Other | | 1,148 |
| | 0.5 | % | | 1,738 |
| | 0.5 | % |
Net shell egg sales | | $ | 233,965 |
| | 100.0 | % | | $ | 328,529 |
| | 100.0 | % |
| | | | | | | | |