1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For The Fiscal Year Ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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The aggregate market value, as reported by The NASDAQ Global Select Market, of the registrant’s Common Stock, $0.01 par value, held by
non-affiliates at November 28, 2020, which was the date of the last business day of the registrant’s most recently completed second fiscal
quarter, was $
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As of July 19, 2021,
Common Stock, $0.01 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III of this Form 10-K is incorporated herein by reference from the registrant’s Definitive Proxy Statement
for its 2021 annual meeting of stockholders which will be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal
year covered by this report.
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TABLE OF CONTENTS
Item
Page
Number
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
10.
11.
12.
13.
14.
15.
16.
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PART I.
FORWARD -LOOKING STATEMENTS
This report contains numerous forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the
“Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) relating to our shell egg business,
including estimated future production data, expected construction schedules, projected construction costs, potential future supply
of and demand for our products, potential future corn and soybean price trends, potential future impact on our business of the
coronavirus (“COVID-19”) pandemic, potential future impact on our business of new legislation, rules or policies, potential
outcomes of legal proceedings, and projected operating data, 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 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 Risk Factors and elsewhere in this report as well as those included in other reports
we file from time to time with the Securities and Exchange Commission (the “SEC”) (including our Quarterly Reports on Form
10-Q and Current Reports on Form 8-K), (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, (vi) risks relating to the evolving COVID-19 pandemic, and (vii) 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.
ITEM 1. BUSINESS
Our Business
We are the largest producer and distributor of shell eggs in the United States. Our mission is to be the most sustainable producer
and reliable supplier of consistent, high quality fresh shell eggs and egg products in the country, demonstrating a "Culture of
Sustainability" in everything we do, and creating value for our shareholders, customers, team members and communities. We sell
most of our shell eggs in the southwestern, southeastern, mid-western and mid-Atlantic regions of the U.S. and aim to maintain
efficient, state-of-the-art operations located close to our customers. We were founded in 1957 by the late Fred R. Adams, Jr. and
are headquartered in Ridgeland, Mississippi.
The Company has one operating segment, which is the production, grading, packaging, marketing and distribution of shell eggs.
Our integrated operations consist of hatching chicks, growing and maintaining flocks of pullets, layers, and breeders,
manufacturing feed, and producing, processing, packaging, and distributing shell eggs. Layers are mature female chickens, pullets
are female chickens usually under 18 weeks of age, and breeders are male and female chickens used to produce fertile eggs to be
hatched for egg production flocks.
Many of our customers rely on us to provide most of their shell egg needs, including specialty and conventional eggs. Specialty
eggs encompass a broad range of products. We classify nutritionally enhanced, cage-free, organic and brown eggs as specialty
eggs for accounting and reporting purposes. We classify all other shell eggs as conventional products. While we report separate
sales information for these egg types, there are many cost factors that are not specifically available for conventional or specialty
eggs due to the nature of egg production. We manage our operations and allocate resources to these types of eggs on a consolidated
basis based on the demands of our customers.
Over time, we have acquired other companies in our industry. Since 1989 through our fiscal year ended May 29, 2021, we have
completed 22 acquisitions ranging in size from 160 thousand layers to 7.5 million layers. In addition, subsequent to our fiscal
2021, we acquired the remaining 50% membership interest in Red River Valley Egg Farm, LLC, effective June 1, 2021. For
further description of this transaction, refer to Part II. Item 8. Notes to the Consolidated Financial Statements,
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When we use “we,” “us,” “our,” or the “Company” in this report, we mean Cal-Maine Foods, Inc. and our consolidated
subsidiaries, unless otherwise indicated or the context otherwise requires. Our fiscal year 2021 ended May 29, 2021, and the first
three fiscal quarters of fiscal 2021 ended August 29, 2020, November 28, 2020, and February 27, 2021. All references herein to
a fiscal year means our fiscal year and all references to a year mean a calendar year.
Industry Background
According to the U.S. Department of Agriculture (“USDA”) Agricultural Marketing Service in 2020, approximately 72% of eggs
produced in the U.S. were sold as shell eggs, with 66% sold to retail outlets (e.g. through grocery and convenience stores), 3%
sold to foodservice customers and 3% exported. The remaining 28% of eggs produced in the U.S. are sold as egg products (shell
eggs broken and sold in liquid, frozen, or dried form) to institutions (e.g. companies producing baked goods). For information
about egg producers in the U.S., see “Competition” below.
Based on historical consumption trends, we believe general demand for eggs increases basically in line with overall population
growth, averaging about 2% per year. Specific events can impact egg consumption in a particular period. For example, in 2015,
egg consumption decreased approximately 4% over the prior year primarily due to a shortage of eggs resulting from an outbreak
of avian influenza ("AI") in the spring of that year. In 2016, consumption rebounded and increased 7% over 2015 and 3% over
the pre-shortage level of 2014. According to the USDA, annual per capita U.S. consumption since 2016 varied between 278 and
293 eggs. In calendar year 2020, per capita U.S. consumption was estimated to be 287 eggs, or approximately six eggs per person
per week. Per capita consumption is determined by dividing the total supply of eggs by the entire population in the U.S. (assuming
all eggs produced domestically by the egg industry are consumed). Sales prices of eggs are dependent upon many factors other
than consumption. For information about shell egg prices see “Prices for Shell Eggs” below.
Prices for Shell Eggs
Wholesale shell egg sales prices are a critical component of revenue for the Company. Wholesale shell egg prices are volatile,
cyclical, and impacted by a number of factors, including consumer demand, seasonal fluctuations, disease, and by the number
and productivity of laying hens in the U.S. While we use several different pricing mechanisms in pricing agreements with our
customers, we believe the majority of conventional shell eggs sold in the U.S. in the retail and foodservice channels are sold at
prices that take into account, in varying ways, independently quoted wholesale market prices as published by Urner Barry
Publications, Inc. ("UB") for shell eggs. We sell the majority of our conventional shell eggs based on formulas that take into
account, in varying ways, independently quoted regional wholesale market prices for shell eggs or formulas related to our costs
of production, which include the cost of corn and soybean meal. We do not sell eggs directly to consumers or set the prices at
which eggs are sold to consumers.
The weekly average price for the southeast region for large white conventional shell eggs as quoted by UB is shown below for
the past three fiscal years along with the five-year average price. As further discussed in
, conventional shell egg prices experienced a brief but significant increase during the fourth
quarter of fiscal 2020 related to the onset of the COVID-19 pandemic. The actual prices that we realize on any given transaction
will not necessarily equal quoted market prices because of the individualized terms that we negotiate with individual customers
which are influenced by many factors.
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Specialty eggs are sold at prices and terms negotiated directly with customers. Historically, prices for specialty eggs have
experienced less volatility than prices for conventional shell eggs and have generally been higher due to customer and consumer
willingness to pay more for specialty eggs.
Feed Costs for Shell Egg Production
Feed is a primary cost component in the production of shell eggs and represented 58.2% of our fiscal 2021 farm production costs.
We routinely fill our storage bins during harvest season when prices for feed ingredients are generally lower. To ensure continued
availability of feed ingredients, we may enter into contracts for future purchases of corn and soybean meal, and as part of these
contracts, we may lock-in the basis portion of our grain purchases several months in advance. Ordinarily, we do not enter long-
term contracts beyond a year to purchase corn and soybean meal or hedge against increases in the price of corn and soybean meal.
As the quality and composition of feed is a critical factor in the nutritional value of shell eggs and health of our chickens, we
formulate and produce the vast majority of our own feed at our feed mills located near our production plants. Our annual feed
requirements for fiscal 2021 were 1.8 million tons of finished feed, of which we manufactured 1.6 million tons. We currently
have the capacity to store 152 thousand tons of corn and soybean meal, and we replenish these stores as needed throughout the
year.
Our primary feed ingredients, corn and soybean meal, are commodities and are subject to volatile price changes due to weather,
various supply and demand factors, transportation and storage costs, speculators, and agricultural, energy and trade policies in
the U.S. and internationally. We purchase the vast majority of our corn and soybean meal from U.S sources but may be forced to
purchase internationally when U.S. supplies are not readily available. Feed grains are currently available from an adequate number
of sources in the U.S. As a point of reference, a multi-year comparison of the monthly average of daily closing prices per Chicago
Board of Trade are shown below for corn and soybean meal:
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Shell Egg Production
We produced approximately 90.5% of our total shell eggs sold in fiscal 2021, with 91% of such production coming from company-
owned facilities, and 9% from contract producers. Under a typical arrangement with a contract producer, we own the flock,
furnish all feed and critical supplies, own the shell eggs produced and assume market risks. The contract producers own and
operate their facilities and are paid a fee based on production with incentives for performance. We purchased approximately 9.5%
of the total shell eggs we sold during fiscal 2021 from outside suppliers.
The commercial production of shell eggs requires a source of baby chicks for laying flock replacement. We produce the majority
of our chicks in our own breeder farms and hatcheries in a computer-controlled environment and obtain the balance from
commercial sources.
After the eggs are produced, they are graded and packaged. Substantially all our farms have modern “in-line” facilities which
mechanically gather, grade and package the eggs at the same location where they are laid. The in-line facilities generate significant
efficiencies and cost savings compared to the cost of eggs produced from non-in-line facilities, which process eggs laid at another
location and transported to the facility. The in-line facilities also produce a higher percentage of USDA Grade A eggs, which sell
at higher prices. Eggs produced on farms owned by contractors are brought to our processing plants to be graded and packaged.
Because shell eggs are perishable, we do not maintain large egg inventories. Our egg inventory averaged six days of sales over
the course of fiscal 2021. We believe our constant focus on production efficiencies and automation throughout the supply chain
enable us to be a low-cost supplier in our markets.
We do not use artificial hormones in the production of our eggs. Hormone use in the poultry and egg production industry has
been effectively banned in the U.S. since the 1950s. We have an extensive written protocol that allows the use of medically
important antibiotics only when animal health is at risk, consistent with guidance from the United States Food and Drug
Administration ("FDA") and the Guidance for Judicious Therapeutic Use of Antimicrobials in Poultry, developed by the
American Association of Avian Pathologists. When antibiotics are medically necessary, a licensed veterinary doctor will approve
and administer approved doses for a restricted period. Our programs are designed to ensure antibiotics are ordered and used only
when necessary and records of their usage – when and where – are maintained to monitor compliance with our protocols. We do
not use antibiotics for growth promotion or performance enhancement.
Specialty Eggs
We are one of the largest producers and marketers of value-added specialty shell eggs in the U.S., which continues to be a
significant and growing segment of the market. We classify nutritionally enhanced, cage-free, organic and brown eggs as specialty
eggs for accounting and reporting purposes. Specialty eggs are intended to meet the demands of consumers who are sensitive to
environmental, health and/or animal welfare issues.
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As defined by the USDA, eggs packed in USDA grade marked consumer packages labeled as cage-free are laid by hens that are
able to roam vertically and horizontally in indoor houses, and have access to fresh food and water. Cage-free systems must allow
hens to exhibit natural behaviors and include enrichments such as scratch areas, perches and nests. Hens must have access to
litter, protection from predators and be able to move in a barn in a manner that promotes bird welfare.
A significant number of our customers have announced goals to offer cage-free eggs exclusively on or before 2026, subject in
most cases to availability of supply, affordability and customer demand, among other contingencies. Additionally, several states
have passed legislation requiring the sale and production of only cage-free eggs within this time period and other states are
considering such requirements. Our customers typically do not commit to long-term purchases of specific quantities or type of
eggs with us, and as a result, it is difficult to accurately predict customer requirements for cage-free eggs. We are, however,
engaging with our customers in an effort to achieve a smooth transition in meeting their announced goals and needs. Sales of
cage-free eggs represented approximately 23% of our shell egg revenues for fiscal year 2021, and currently our production
capacity exceeds customer requirements, which we believe positions us well, as our customer base is primarily outside of states
that have mandated cage-free production and sales We have invested significant capital in recent years to acquire and construct
cage-free facilities, and we expect our focus for future expansion will continue to include cage-free facilities, as our customers
transition to meet consumer demand and comply with evolving legal requirements. At the same time, we understand the
importance of our continued ability to provide affordable conventional eggs in order to provide our customers with a variety of
egg choices and to address hunger in our communities.
Egg-Land’s Best®
Land O’ Lakes®
at our facilities under EB guidelines.
Land O’ Lakes®
diet. Our Farmhouse Eggs® brand eggs are produced at our facilities by cage-free hens that are provided with a vegetarian diet.
We market organic, vegetarian, and omega-3 eggs under our
4-Grain®
We also produce, market, and distribute private label specialty shell eggs to several customers.
Egg Products
Egg products are shell eggs broken and sold in liquid, frozen, or dried form. We sell liquid and frozen egg products primarily to
the institutional, foodservice, and food manufacturing sectors in the U.S. Our egg products are sold through our wholly owned
subsidiaries American Egg Products, LLC located in Georgia and Texas Egg Products, LLC located in Texas.
Summary of Conventional and Specialty Shell Egg and Egg Product Sales
The following table sets forth the contribution as a percentage of revenue and volumes of dozens sold of conventional and
specialty shell egg and egg product sales for the following fiscal years:
2021
2020
2019
Revenue
Volume
Revenue
Volume
Revenue
Volume
Conventional Eggs
56.8
%
73.2
%
61.4
%
76.1
%
59.4
%
74.9
%
Specialty Eggs
Egg-Land’s Best®
20.9
%
13.5
%
19.2
%
12.7
%
19.9
%
13.5
%
Other Specialty Eggs
19.1
%
13.3
%
16.7
%
11.2
%
17.3
%
11.6
%
Total Specialty Eggs
40.0
%
26.8
%
35.9
%
23.9
%
37.2
%
25.1
%
Egg Products
2.7
%
2.3
%
3.0
%
Marketing and Distribution
We sell most of our shell eggs in the southwestern, southeastern, mid-western and mid-Atlantic regions of the U.S. through our
extensive distribution network to a diverse group of customers, including national and regional grocery store chains, club stores,
companies servicing independent supermarkets in the U.S., foodservice distributors and egg product consumers. Some of our
sales are completed through co-pack agreements – a common practice in the industry whereby production and processing of
certain products is outsourced to another producer. Although we face intense competition from numerous other companies, we
believe that we have the largest market share for the sale of shell eggs in the grocery segment, including large U.S. food retailers.
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We are a member of the EB cooperative and produce, market and distribute EB and Land O'Lakes branded eggs, both directly
and through our joint ventures Specialty Eggs, LLC and Southwest Specialty Eggs, LLC, under exclusive license agreements in
Alabama, Arizona, Florida, Georgia, Louisiana, Mississippi, Nevada, and Texas; portions of states in California, North Carolina
Oklahoma, South Carolina, Utah, as well as the whole New York City area.
The majority of eggs sold are based on the daily or short-term needs of our customers. Most sales to established accounts are on
payment terms ranging from seven to 30 days. Although we have established long-term relationships with many of our customers,
most of them are free to acquire shell eggs from other sources.
The shell eggs we sell are either delivered to our customers’ warehouse or retail stores, by our own fleet or contracted refrigerated
delivery trucks, or are picked up by our customers at our processing facilities.
Customers
Our top three customers accounted for an aggregate of 48.6%, 51.1% and 52.2% of net sales dollars for fiscal 2021, 2020, and
2019, respectively. Our largest customer, Walmart Inc. (including Sam's Club), accounted for 29.8%, 32.1% and 33.7% for fiscal
2021, 2020, and 2019, respectively.
In fiscal 2021, approximately 90.5% of our revenue related to sales to retail customers, 6.8% to sales to foodservice providers
and 2.7% to egg products sales. Retail customers include primarily national and regional grocery store chains, club stores, and
companies servicing independent supermarkets in the U.S. Foodservice customers include primarily companies that sell food
products and related items to restaurants, healthcare and education facilities, and hotels.
Competition
The production, processing, and distribution of shell eggs is an intensely competitive business, which has traditionally attracted
large numbers of producers. Shell egg competition is generally based on price, service, and product quality.
The shell egg production industry remains highly fragmented. According to
Egg Industry
producers, each owning at least 500 thousand layers, owned approximately 99% of total industry layers. The ten largest producers
owned approximately 53% of total industry layers compared to 54% in the prior year. We believe industry consolidation will
continue, and we plan to capitalize on opportunities as they arise. We believe further concentration will result in reduced
cyclicality of shell egg prices, but no assurance can be given in that regard. A continuation of this trend could create greater
competition among fewer producers.
Seasonality
Retail sales of shell eggs historically have been highest during the fall and winter months and lowest during the summer months.
Prices for shell eggs fluctuate in response to seasonal demand factors and a natural increase in egg production during the spring
and early summer. Historically, shell egg prices tend to increase with the start of the school year and tend to be highest prior to
holiday periods, particularly Thanksgiving, Christmas, and Easter. Consequently, and all other things being equal, we would
expect to experience lower selling prices, sales volumes and net income (and may incur net losses) in our first and fourth fiscal
quarters ending in August/September and May/June, respectively.
Growth Strategy
Our growth strategy is focused on remaining a low-cost provider of shell eggs located near our customers. In light of the growing
customer demand and increased legal requirements for cage-free eggs, we intend to continue to closely evaluate the need to
expand through selective acquisitions, with a priority on those that will facilitate our ability to expand our cage-free shell egg
production capabilities in key locations and markets. We will continue to closely evaluate the need to continue to expand and
convert our own facilities to increase production of cage-free eggs based on a timeline designed to meet the anticipated needs of
our customers and comply with evolving legal requirements. As the ongoing production of cage-free eggs is more costly than the
production of conventional eggs, aligning our cage-free production capabilities with changing demand for cage-free eggs is
important to the success of our business.
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Trademarks and License Agreements
We own the trademarks
Farmhouse Eggs®
,
Sunups®
,
Sunny Meadow®
4Grain®
. We produce and market Egg-Land's Best®
and Land O’ Lakes® branded eggs under license agreements with EB. We believe these trademarks and license agreements are
important to our business.
Government Regulation
Our facilities and operations are subject to regulation by various federal, state, and local agencies, including, but not limited to,
the FDA, USDA, Environmental Protection Agency ("EPA"), Occupational Safety and Health Administration ("OSHA") and
corresponding state agencies or laws. The applicable regulations relate to grading, quality control, labeling, sanitary control and
reuse or disposal of waste. Our shell egg facilities are subject to periodic USDA, FDA, EPA, and OSHA inspections. Our feed
production facilities are subject to FDA regulation and inspections. We maintain our own inspection program to monitor
compliance with our own standards and customer specifications. It is possible that we will be required to incur significant costs
for compliance with such statutes and regulations. In the future, additional rules could be proposed that, if adopted, could increase
our costs.
California, Colorado, Massachusetts, Michigan, Nevada, Oregon, Rhode Island, and Washington have passed minimum space
and/or cage-free requirements, mandating the sale of only cage-free eggs in their states, with implementation of these laws ranging
from January 2022 to January 2026. These states represent approximately 24% of the U.S. total population according to the 2020
U.S. Census. While our direct sales into these states have not been material, these laws will affect sourcing, production and pricing
of eggs (conventional as well as specialty) as the national demand for cage-free production could be greater than the current
supply which would increase the price of cage-free eggs, unless more cage-free production capacity is constructed. Likewise,
the national supply for eggs from conventional production could exceed consumer demand which would decrease the price of
conventional eggs.
Environmental Regulation
Our operations and facilities are subject to various federal, state, and local environmental, health and safety laws and regulations
governing, among other things, the generation, storage, handling, use, transportation, disposal, and remediation of hazardous
materials. Under these laws and regulations, we must obtain permits from governmental authorities, including, but not limited to,
wastewater discharge permits. We have made, and will continue to make, capital and other expenditures relating to compliance
with existing environmental, health and safety laws and regulations and permits. We are not currently aware of any major capital
expenditures necessary to comply with such laws and regulations; however, as environmental, health and safety laws and
regulations are becoming increasingly more stringent, including those relating to animal wastes and wastewater discharges, it is
possible that we will have to incur significant costs for compliance with such laws and regulations in the future.
Human Capital Resources
As of May 29, 2021, we had 3,286 employees, of whom 2,642 worked in egg production, processing, and marketing, 188 worked
in feed mill operations and 456, including our executive officers, were administrative employees. Approximately 4.1% of our
personnel are part-time, and we utilize temporary employment agencies and independent contractors to augment our
staffing needs when necessary. For fiscal 2021, the average monthly full-time equivalent for contingent workers were 840. None
of our employees are covered by a collective bargaining agreement. We consider our relations with employees to be good.
Culture and Values
We are proud to be contributing corporate citizens where we live and work and to help to create healthy, prosperous
communities. Our colleagues help us continue to enhance our community contributions, which are driven by
our longstanding culture that strives to promote an environment that upholds integrity and respect and provides opportunities for
each colleague to realize full potential.
Health and Safety
Our top priority is the health and safety of our employees, who continue to produce high-quality, affordable egg choices for our
customers and contribute to a stable food supply. Our enterprise safety committee comprises two corporate safety managers, eight
area compliance managers, 53 local site compliance managers, feed mill managers, and general managers. The committee
oversees health and safety regularly reviews our written policies and changes to OSHA regulation standards, and shares
information as it relates to outcomes from incidents in order to improve future performance. The committee’s goals include
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working to ensure that our engagements with our consumers, customers, and regulators evidence our strong commitment to our
workers’ health and safety.
Our commitment to our colleagues’ health includes a strong commitment to on-site worker safety, including a focus on accident
prevention and life safety. Training and safety personnel conduct monthly multi-lingual training that covers topics such as slip-
and-fall avoidance, respiratory protection, prevention of hazardous communication of chemicals, the proper use of personal
protective equipment, hearing conservation, emergency response, lockout tagout of equipment, and forklift safety, among others.
To help drive our focus on colleague safety, we developed safety committees at each of our sites that employee representation
from each department. We regularly provide health and safety information to employees via company bulletin boards. Our local
site farm and feed mill management has an open-door policy with employees to discuss improvement ideas. We have also
installed dry hydrogen peroxide biodefense systems in our processing facilities. New colleagues undergo a two-day orientation
period reviewing our safety and health programs and policies as they relate to their job tasks and then are placed with experienced
team members to learn the job tasks. At the 30-day anniversary of the employees’ hire date, their supervisor has a one-on-one
meeting to discuss any questions the employee may still be unsure about as it relates to their job tasks, health and safety policies
and procedures, or any other matters.
We review the success of our safety programs on a monthly basis to monitor their effectiveness and the development of any
trends that need to be addressed. During fiscal year 2021 our recordable incident rates decreased by 21% compared to fiscal 2020.
Diversity, Equity and Inclusion
Our culture seeks to embrace the diversity and inclusion of all our team members. This culture is driven by our board and
executive management team. Our board comprises seven members, four of whom are independent. Women comprise 29% of our
board and 14% of our board members identify as a racial or ethnic minority. As of May 29, 2021, our total workforce comprised
30% women and 52% of colleagues who identify as racial or ethnic minorities. Our Policy against Harassment, Discrimination,
Unlawful or Unethical Conduct and Retaliation; Reporting Procedure affirms our commitment to supporting our employees
regardless of race, color, religion, sex, national origin or any other basis protected by applicable law.
Cal-Maine Foods strives to ensure that our colleagues are treated equitably. We are an Equal Opportunity Employer that prohibits,
by policy and practice, any violation of applicable federal, state, or local law regarding employment. Discrimination because of
race, color, religion, sex, pregnancy, age, national origin, citizenship status, veteran status, physical or mental disability, genetic
information, or any other basis protected by applicable law is prohibited. We value diversity in our workplaces or in work-related
situations. We maintain strong protocols to help our colleagues perform their jobs free from harassment and discrimination. Our
focus on equitable treatment extends to recruitment, employment applications, hiring, placement, job assignments, career
development, training, remuneration, benefits, discharge and other matters tied to terms and conditions of employment. We are
committed to offer our colleagues opportunities commensurate with our operational needs, their experiences, goals and
contributions.
Recruitment, Development and Retention
We believe in compensating our colleagues with fair and competitive wages, in addition to offering
competitive benefits. Approximately 78% of our employees are paid at hourly rates, with the majority paid at rates above the
federal minimum wage requirement. Our annual average weekly wage across all employees for fiscal year
2021 was $878.30. We offer our full-time eligible employees a range of benefits including company-paid life insurance. The
Company provides a comprehensive self-insured health plan and pays approximately 85% of the costs of the plan for participating
employees and their families as of December 31, 2020. Recent benchmarking of our health plan indicates comparable benefits, at
lower employee contributions, when compared to an applicable Agriculture and Food Manufacturing sector grouping, as well
as peer group data. In addition, we offer employees the opportunity to purchase an extensive range of other group
plan benefits, such as dental, vision, cancer, disability and voluntary life. After one year of employment, full-time employees,
who meet eligibility requirements, may elect to participate in our KSOP retirement plan, which offers a range of investment
alternatives and includes many positive features, such as automatic enrollment with scheduled automatic contribution
increases and loan provisions. And, regardless of the employees’ election to contribute to the KSOP, the
Company contributes shares of Company stock or cash equivalent to 3% of pre-tax earnings for each pay period that hours
are worked.
We provide extensive training and development related to safety, regulatory compliance, and task training. We invest in
developing our future leaders through our Management Intern, Management Trainee, and informal mentoring programs.
11
Sustainability
We understand that a healthy environment and responsible management of our flocks and natural resources are vital to the
production of high-quality eggs and egg products and to the success of our Company. We have engaged in agricultural production
for more than 60 years. Our agricultural practices continue to evolve with increased focus on sustainability factors as we continue
to strive to meet the need for nutritious, affordable foods to feed a growing population even as we exercise responsible natural
resource stewardship. We plan to publish our most recent Sustainability update in late July 2021, which will be available on our
website. Information contained in our website is not a part of this report.
COVID-19 Pandemic
For information regarding our response to the COVID-19 pandemic, and its impact on our business, see
Our Corporate Information
We maintain a website at www.calmainefoods.com where general information about our business and corporate governance
matters is available. The information contained in our website is not a part of this report. Our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and all amendments to those reports are
available, free of charge, through our website as soon as reasonably practicable after we file them with the SEC. In addition, the
SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC. Information concerning corporate governance matters is also available on our
website. Cal-Maine Foods, Inc. is a Delaware corporation, incorporated in 1969.
ITEM 1A. RISK FACTORS
Our business and results of operations are subject to numerous risks and uncertainties, many of which are beyond our
control. The following is a description of the known factors that may materially affect our business, financial condition or results
of operations. They should be considered carefully, in addition to the information set forth elsewhere in this Annual Report on
Form 10-K, including under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,
in making any investment decisions with respect to our securities. Additional risks or uncertainties that are not currently known
to us, or that we are aware of but currently deem to be immaterial or that could apply to any company could also materially
adversely affect our business, financial condition or results of operations.
INDUSTRY RISK FACTORS
Market prices of wholesale shell eggs are volatile, and decreases in these prices can adversely impact our revenues and
profits.
Our operating results are significantly affected by wholesale shell egg market prices, which fluctuate widely and are outside our
control. As a result, our prior performance should not be presumed to be an accurate indication of future performance. Under
certain circumstances, small increases in production, or small decreases in demand, within the industry might have a large adverse
effect on shell egg prices. Low shell egg prices adversely affect our revenues and profits.
Market prices for wholesale shell eggs have been volatile and cyclical. Shell egg prices have risen in the past during periods of
high demand such as the initial outbreak of the COVID-19 pandemic and periods when high protein diets are popular. Shell egg
prices have also risen in the past during periods of constrained supply, such as the avian influenza outbreak in 2015, which we
believe, based on published industry estimates, impacted approximately 12% of the national flock of laying hens. During times
when prices are high, the egg industry has typically geared up to produce more eggs primarily by increasing the number of layers,
ultimately resulting in an oversupply of eggs, which was subsequently followed by a period of lower prices.
As discussed above under the heading “Seasonality” in Part I. Item 1. Business, seasonal fluctuations impact shell egg prices.
Therefore, comparisons of our sales and operating results between different quarters within a single fiscal year are not necessarily
meaningful comparisons.
A decline in consumer demand for shell eggs can negatively impact our business.
We believe the increase in meals prepared at home due to COVID-19 pandemic, high protein diet trends, industry advertising
campaigns, and the improved nutritional reputation of eggs (related to better scientific understanding of the role of cholesterol in
12
diets) have all contributed to shell egg demand. However, it is possible that the demand for shell eggs will decline in the future.
Adverse publicity relating to health concerns and changes in the perception of the nutritional value of shell eggs, changes in
consumer views regarding consumption of animal-based products, as well as movement away from high protein diets, could
adversely affect demand for shell eggs, which would have a material adverse effect on our future results of operations and
financial condition.
Feed costs are volatile and increases in these costs can adversely impact our results of operations.
Feed costs are the largest element of our shell egg (farm) production cost, ranging from 55% to 58% of total farm production cost
in the last five fiscal years. Although feed ingredients, primarily corn and soybean meal, are available from a number of sources,
we do not have control over the prices of the ingredients we purchase, which are affected by weather, various supply and demand
factors, transportation and storage costs, speculators, and agricultural, energy and trade policies in the U.S. and
internationally. Increases in feed costs unaccompanied by increases in the selling price of eggs can have a material adverse effect
on the results of our operations and cash flow. Alternatively, low feed costs can encourage industry overproduction, possibly
resulting in lower egg prices and lower revenue.
Shell eggs and shell egg products are susceptible to microbial contamination, and we may be required to, or we may
voluntarily, recall contaminated products.
Shell eggs and shell egg products are vulnerable to contamination by pathogens such as Salmonella. The Company maintains
policies and procedures designed to comply with the complex rules and regulations governing egg production, such as The Final
Egg Rule issued by the FDA "Prevention of Salmonella Enteritidis in Shell Eggs During Production, Storage, and Transportation,”
and the FDA’s Food Safety Modernization Act. Shipment of contaminated products, even if inadvertent, could result in a violation
of law and lead to increased risk of exposure to product liability claims, product recalls and scrutiny by federal and state regulatory
agencies. In addition, products purchased from other producers could contain contaminants that might be inadvertently
redistributed by us. As such, we might decide or be required to recall a product if we or regulators believe it poses a potential
health risk. Any product recall could result in a loss of consumer confidence in our products, adversely affect our reputation with
existing and potential customers and have a material adverse effect on our business, results of operations and financial condition.
Agricultural risks, including outbreaks of avian disease, could harm our business.
Our shell egg production activities are subject to a variety of agricultural risks. Unusual or extreme weather conditions, disease
and pests can materially and adversely affect the quality and quantity of shell eggs we produce and distribute. The Company
maintains controls and procedures to reduce the risk of exposing our flocks to harmful diseases; however, despite these efforts,
outbreaks of avian disease can and do still occur and may adversely impact the health of our flocks. An outbreak of avian disease
could have a material adverse impact on our financial results by increasing government restrictions on the sale and distribution
of our products and requiring us to euthanize the affected layers. Negative publicity from an outbreak within our industry can
negatively impact customer perception, even if the outbreak does not directly impact our flocks. If a substantial portion of our
layers or production facilities are affected by any of these factors in any given quarter or year, our business, financial condition,
and results of operations could be materially and adversely affected.
BUSINESS AND OPERATIONAL RISK FACTORS
The COVID-19 pandemic has had an adverse impact on our business and operations
Since early 2020, the coronavirus ("COVID-19") outbreak, characterized as a pandemic by the World Health Organization on
March 11, 2020, has caused significant disruptions in international and U.S. economies and markets. The effects of COVID-19
have had, and may continue to have if a resurgence occurs, a negative impact on our business through disruptions in the supply
chain such as increased costs and decreased availability of packaging supplies; the pandemic has also increased labor costs and
medical costs.
During the initial outbreak of COVID-19, we saw an increase in demand for eggs as consumers prepared more meals at home.
Egg prices initially rose during the fourth quarter of fiscal 2020, but prices quickly decreased as the demand shock subsided and
eggs that normally would go to foodservice businesses (e.g. restaurants) entered the retail market (e.g. grocery stores). As a result
of the pandemic, the foodservice market for shell eggs was depressed for most of fiscal 2021. As vaccination rates continue to
rise and governmental restrictions are lifted, foodservice demand may increase and demand in retail channels, where we sell most
of our eggs, could decrease.
13
Our acquisition growth strategy subjects us to various risks.
As discussed in
, we plan to pursue a growth strategy that includes selective acquisitions
of other companies engaged in the production and sale of shell eggs, with a priority on those that will facilitate our ability to
expand our cage-free shell egg production capabilities in key locations and markets. The number of existing companies with
cage-free capacity that we may be able to purchase is limited, as most production of shell eggs by other companies in our markets
currently does not meet customer or legal requirements to be designated as cage-free.
Acquisitions require capital resources and can divert management’s attention from our existing business. Acquisitions also entail
an inherent risk that we could become subject to contingent or other liabilities, including liabilities arising from events or conduct
prior to our acquisition of a business that were unknown to us at the time of acquisition. We could incur significantly greater
expenditures in integrating an acquired business than we anticipated at the time of its purchase. We may over-estimate or under-
estimate the demand for cage-free eggs, which could cause our acquisition strategy to be less-than-optimal for our future growth
and profitability.
We cannot assure you that we:
●
will identify suitable acquisition candidates;
●
can consummate acquisitions on acceptable terms;
●
can successfully integrate an acquired business into our operations; or
●
can successfully manage the operations of an acquired business.
No assurance can be given that companies we acquire in the future will contribute positively to our results of operations or
financial condition. In addition, federal antitrust laws require regulatory approval of acquisitions that exceed certain threshold
levels of significance, and we cannot guarantee that such approvals would be obtained.
The consideration we pay in connection with any acquisition affects our financial results. If we pay cash, we could be required
to use a portion of our available cash to consummate the acquisition. To the extent we issue shares of our Common Stock, existing
stockholders may be diluted. In addition, acquisitions may result in additional debt.
Our largest customers have accounted for a significant portion of our net sales volume. Accordingly, our business may be
adversely affected by the loss of, or reduced purchases by, one or more of our large customers.
Our top three customers accounted for an aggregate of 48.6%, 51.1% and 52.2% of net sales dollars for fiscal 2021, 2020, and
2019, respectively. Our largest customer, Walmart Inc. (including Sam's Club), accounted for 29.8%, 32.1% and 33.7% of net
sales dollars for fiscal 2021, 2020, and 2019, respectively. Although we have established long-term relationships with most of
our customers who continue to purchase from us based on our ability to service their needs, they are free to acquire shell eggs
from other sources. If, for any reason, one or more of our large customers were to purchase significantly less of our shell eggs in
the future or terminate their purchases from us, and we were not able to sell our shell eggs to new customers at comparable levels,
it would have a material adverse effect on our business, financial condition, and results of operations.
Our business is highly competitive.
The production and sale of fresh shell eggs, which accounted for virtually all of our net sales in recent years, is intensely
competitive. We compete with a large number of competitors that may prove to be more successful than we are in marketing and
selling shell eggs. We cannot provide assurance that we will be able to compete successfully with any or all of these companies.
Increased competition could result in price reductions, greater cyclicality, reduced margins and loss of market share, which would
negatively affect our business, results of operations, and financial condition.
We are dependent on our management team, and the loss of any key member of this team may adversely affect the
implementation of our business plan in a timely manner.
Our success depends largely upon the continued service of our senior management team. The loss or interruption of service of
one or more of our key executive officers could adversely affect our ability to manage our operations effectively and/or pursue
our growth strategy. We have not entered into any employment or non-compete agreements with any of our executive officers
nor do we carry any significant key-man life insurance coverage on any such persons. Competition could cause us to lose talented
employees, and unplanned turnover could deplete institutional knowledge and result in increased costs due to increased
competition for employees.
14
Our business is dependent on our information technology systems and software, and failure to protect against or
effectively respond to cyber-attacks, security breaches, or other incidents involving those systems, could adversely affect
day-to-day operations and decision making processes and have an adverse effect on our performance and reputation.
The efficient operation of our business depends on our information technology systems, which we rely on to effectively manage
our business data, communications, logistics, accounting, regulatory and other business processes. If we do not allocate and
effectively manage the resources necessary to build and sustain an appropriate technology environment, our business, reputation,
or financial results could be negatively impacted. In addition, our information technology systems may be vulnerable to damage
or interruption from circumstances beyond our control, including systems failures, natural disasters, terrorist attacks,
viruses, ransomware, security breaches or cyber incidents. Cyber-attacks are becoming more sophisticated and are increasing in
the number of attempts and frequency by groups and individuals with a wide range of motives.
A security breach of sensitive information could result in damage to our reputation and our relations with our customers or
employees. Any such damage or interruption could have a material adverse effect on our business.
Labor shortages or increases in labor costs could adversely impact our business and results of operations.
Labor is a primary component of our farm production costs. Our success is dependent upon recruiting, motivating, and retaining
staff to operate our farms. Approximately 78% of our employees are paid at hourly rates, often in entry-level positions. While the
majority are paid at rates above the federal minimum wage requirements, any significant increase in local, state or federal
minimum wage requirements could increase our labor costs. In addition, any regulatory changes requiring us to provide additional
employee benefits or mandating increases in other employee-related costs, such as unemployment insurance or workers
compensation, would increase our costs. A shortage in the labor pool, which may be caused by competition from other employers,
the remote locations of many of our farms, or changes in government provided support or immigration laws, particularly in times
of lower unemployment, could adversely affect our business and results of operations. A shortage of labor available to us could
cause our farms to operate with reduced staff, which could negatively impact our production capacity and efficiencies and could
require us to increase wages to attract labor. Accordingly, any significant labor shortages or increases in our labor costs could
have a material adverse effect on our results of operations.
We are controlled by the family of our late founder, Fred R. Adams, Jr., and Adolphus B. Baker, our Chief Executive
Officer and Chairman of our Board of Directors controls the vote of 100% of our outstanding Class A Common Stock.
Fred R. Adams, Jr., our Founder and Chairman Emeritus died on March 29, 2020. Mr. Adams’ son-in-law, Adolphus B. Baker,
our Chief Executive Officer and Chairman of our board of directors, Mr. Baker’s spouse and her three sisters (who are Mr.
Adams’ four daughters) beneficially own, directly or indirectly through related entities, 100% of our outstanding Class A
Common Stock (which has 10 votes per share), controlling approximately 52.1% of our total voting power. Additionally, such
persons and Jean Reed Adams (“Mrs. Adams”), the wife of our late founder, Fred R. Adams, Jr., also have additional voting
power due to beneficial ownership of our Common Stock (which has one vote per share), directly or indirectly through related
entities, resulting in family voting control of approximately 57.7% of our total voting power. Mr. Baker controls the vote of 100%
of our outstanding Class A Common Stock.
We understand that the Adams and Baker families intend to retain ownership of a sufficient amount of our Common Stock and
our Class A Common Stock to assure continued ownership of more than 50% of the voting power of our outstanding shares of
capital stock. As a result of this ownership, the Adams and Baker families have the ability to exert substantial influence over
matters requiring action by our stockholders, including amendments to our certificate of incorporation and by-laws, the election
and removal of directors, and any merger, consolidation, or sale of all or substantially all of our assets, or other corporate
transactions. Delaware law provides that the holders of a majority of the voting power of shares entitled to vote must approve
certain fundamental corporate transactions such as a merger, consolidation and sale of all or substantially all of a corporation’s
assets; accordingly, such a transaction involving us and requiring stockholder approval cannot be effected without the approval
of the Adams and Baker families. Such ownership will make an unsolicited acquisition of our Company more difficult and
discourage certain types of transactions involving a change of control of our Company, including transactions in which the holders
of our Common Stock might otherwise receive a premium for their shares over then current market prices. The Adams and Baker
families’ controlling ownership of our capital stock may adversely affect the market price of our Common Stock.
The price of our Common Stock may be affected by the availability of shares for sale in the market, and you may
experience significant dilution as a result of future issuances of our securities, which could materially and adversely affect
the market price of our Common Stock.
The sale or availability for sale of substantial amounts of our Common Stock could adversely impact its price. As described in
15
Adams and the Daughters’ Trust (of which the daughters of our late founder are beneficiaries) sold 6.9 million shares of Common
Stock in a secondary public offering pursuant to a previously disclosed Agreement Regarding Common Stock (the “Agreement”)
filed as an exhibit to this report. After the sale, approximately 5.0 million shares (the “Subject Shares”) remain registered under
a shelf registration statement and prospectus dated October 9, 2018 for potential resale, which shares are subject to the Agreement.
The Agreement generally provides that if a holder of Subject Shares intends to sell any of the Subject Shares, such party must
give the Company a right of first refusal to purchase all or any of such shares. The price payable by the Company to purchase
shares pursuant to the exercise of the right of first refusal will reflect a 6% discount to the then-current market price based on the
20 business-day volume weighted average price. If the Company does not exercise its right of first refusal and purchase the shares
offered, such party will, subject to the approval of a special committee of independent directors of the Board of Directors, be
permitted to sell the shares not purchased by the Company pursuant to a Company registration statement, Rule 144 under the
Securities Act of 1933, or another manner of sale agreed to by the Company. Although pursuant to the Agreement the Company
will have a right of first refusal to purchase all or any of those shares, the Company may elect not to exercise its rights of first
refusal, and if so such shares would be eligible for sale pursuant to the registration rights in the Agreement or pursuant to Rule
144 under the Securities Act of 1933. Sales, or the availability for sale, of a large number of shares of our Common Stock could
result in a decline in the market price of our Common Stock.
In addition, our articles of incorporation authorize us to issue 120,000,000 shares of our Common Stock. As of May 29, 2021,
there were 44,058,463 shares of our Common Stock outstanding. Accordingly, a substantial number of shares of our Common
Stock are outstanding and are, or could become, available for sale in the market. In addition, we may be obligated to issue
additional shares of our Common Stock in connection with employee benefit plans (including equity incentive plans).
In the future, we may decide to raise capital through offerings of our Common Stock, additional securities convertible into or
exchangeable for Common Stock, or rights to acquire these securities or our Common Stock. The issuance of additional shares
of our Common Stock or additional securities convertible into or exchangeable for our Common Stock could result in dilution of
existing stockholders’ equity interests in us. Issuances of substantial amounts of our Common Stock, or the perception that such
issuances could occur, may adversely affect prevailing market prices for our Common Stock, and we cannot predict the effect
this dilution may have on the price of our Common Stock.
LEGAL AND REGULATORY RISK FACTORS
Pressure from animal rights groups regarding the treatment of animals may subject us to additional costs to conform our
practices to comply with developing standards or subject us to marketing costs to defend challenges to our current
practices and protect our image with our customers. In particular, changes in customer preferences and new legislation
have accelerated an increase in demand for cage-free eggs, which increases uncertainty in our business and increases our
costs.
We and many of our customers face pressure from animal rights groups, such as People for the Ethical Treatment of Animals and
the Humane Society of the United States, to require companies that supply food products to operate their business in a manner
that treats animals in conformity with certain standards developed or approved by these groups. In general, we may incur
additional costs to conform our practices to address these standards or to defend our existing practices and protect our image with
our customers. The standards promoted by these groups change over time, but typically require minimum cage space for hens,
among other requirements, and some of these groups have led successful legislative efforts to ban any form of caged housing in
various states. As discussed in Part I. Item 1. Business - Government Regulation, several states have passed minimum space
and/or cage-free requirements for hens, and other states are considering such requirements. In addition, in recent years, many
large restaurant chains, foodservice companies and grocery chains, including our largest customers, announced goals to transition
to an exclusively cage-free egg supply chain by specified future dates, in some cases subject to available supply, affordability
and consumer demand.
Changing our infrastructure and operating procedures to conform to consumer preferences, customer demands and new laws has
resulted and will continue to result in additional costs, including capital and operating cost increases. The USDA reported that
the estimated cage-free flock is 86.0 million hens as of June 1, 2021, which is approximately 27% of the total U.S. hen
population. According to the USDA Agricultural Marketing Service approximately 66% of the U.S. laying flock would have to
be in cage-free production by 2026 to meet projected demand from the retailers, foodservice providers and food manufacturers
that have made promises to transition to cage-free eggs. The United Egg Producers, a nation-wide egg farmer cooperative, has
estimated that the cost to build farms compliant with cage-free standards is $45 a bird. Based on that figure, such an increase in
the size of the cage-free flock would require an estimated industry-wide investment of approximately $5.5 billion.
In response to our customers' announced goals and increased legal requirements for cage-free eggs, we increased capital
expenditures to increase our cage-free production capacity. We are also enhancing our focus on cage-free capacity when
considering acquisition opportunities. Our customers typically do not commit to long-term purchases of specific quantities or
16
type of eggs with us, and as a result, we cannot predict with any certainty which types of eggs they will require us to supply in
future periods. The ongoing production of cage-free eggs is more costly than the production of conventional eggs, and these
higher production costs contribute to the higher prices of cage-free eggs compared with conventional eggs. Many consumers
prefer to buy less expensive conventional shell eggs. These consumer preferences may in turn influence our customers’ future
needs for cage-free eggs. Due to these uncertainties, we may over-estimate future demand for cage-free eggs, which could increase
our costs unnecessarily, or we may under-estimate future demand for cage-free eggs, which could harm us competitively.
Failure to comply with applicable governmental regulations, including environmental regulations, could harm our
operating results, financial condition, and reputation. Further, we may incur significant costs to comply with any such
regulations.
We are subject to federal, state and local regulations relating to grading, quality control, labeling, sanitary control, waste disposal,
and other areas of our business. As a fully-integrated shell egg producer, our shell egg facilities are subject to regulation and
inspection by the USDA, EPA, and FDA, as well as state and local health and agricultural agencies, among others. All of our
shell egg production and feed mill facilities are subject to FDA regulation and inspections. In addition, rules are often proposed
that, if adopted as proposed, could increase our costs.
Our operations and facilities are subject to various federal, state and local environmental, health, and safety laws and regulations
governing, among other things, the generation, storage, handling, use, transportation, disposal, and remediation of hazardous
materials. Under these laws and regulations, we are required to obtain permits from governmental authorities, including, but not
limited to pollution/wastewater discharge permits.
If we fail to comply with applicable laws or regulations, or fail to obtain necessary permits, we could be subject to significant
fines and penalties or other sanctions, our reputation could be harmed, and our operating results and financial condition could be
materially adversely affected. In addition, because these laws and regulations are becoming increasingly more stringent, it is
possible that we will be required to incur significant costs for compliance with such laws and regulations in the future.
Current and future litigation could expose us to significant liabilities and adversely affect our business reputation.
We and certain of our subsidiaries are involved in various legal proceedings. Litigation is inherently unpredictable, and although
we believe we have meaningful defenses in these matters, we may incur liabilities due to adverse judgments or enter into
settlements of claims that could have a material adverse effect on our results of operations, cash flow and financial condition. For
a discussion of legal proceedings see Part I. Item 3. Legal Proceedings below. Such lawsuits are expensive to defend, divert
management’s attention, and may result in significant adverse judgments or settlements. Legal proceedings may expose us to
negative publicity, which could adversely affect our business reputation and customer preference for our products and brands.
FINANCIAL AND ECONOMIC RISK FACTORS
The loss of any registered trademark or other intellectual property could enable other companies to compete more
effectively with us.
We utilize intellectual property in our business. For example, we own the trademarks
Farmhouse Eggs®
,
4Grain®, Sunups®
,
and
Sunny Meadow®
. We produce and market
Egg-Land’s Best®
Land O’ Lakes
® under license agreements with EB. We
have invested a significant amount of money in establishing and promoting our trademarked brands. The loss or expiration of
any intellectual property could enable our competitors to compete more effectively with us by allowing them to make and sell
products substantially similar to those we offer. This could negatively impact our ability to produce and sell those products,
thereby adversely affecting our operations.
Impairment in the carrying value of goodwill or other assets could negatively affect our results of operations or net worth.
Goodwill represents the excess of the cost of business acquisitions over the fair value of the identifiable net assets
acquired. Goodwill is reviewed at least annually for impairment by assessing qualitative factors to determine whether the
existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit
is less than its carrying amount. As of May 29, 2021, we had $35.5 million of goodwill. While we believe the current carrying
value of this goodwill is not impaired, future goodwill impairment charges could adversely affect our results of operations in any
particular period or our net worth.
17
Events beyond our control such as pandemics, extreme weather and natural disasters could negatively impact our
business.
Pandemics such as COVID-19, or similar disease outbreaks in the future, may depress demand for shell eggs due to quarantines
or restrictions on public interactions that would limit the ability of consumers to purchase shell eggs. Pandemics, or similar disease
outbreaks in the future, may disrupt our supply chain and operations at our facilities. If a significant percentage of our workforce,
or the workforce of our suppliers or transportation providers, is unable to work because of illness or government restrictions, our
operations would be negatively impacted, potentially materially. Pandemics or disease outbreaks may also impact hens or the
food supply.
Fire, bioterrorism, pandemic, extreme weather or natural disasters, including droughts, floods, excessive cold or heat, hurricanes
or other storms, (some of which may be believed to be the result of or intensified by climate change), could impair the health or
growth of our flocks, decrease production or availability of feed ingredients, or interfere with our operations due to power outages,
fuel shortages, discharges from overtopped or breached wastewater treatment lagoons, damage to our production and processing
facilities, labor shortages or disruption of transportation channels, among other things. Any of these factors could have a material
adverse effect on our financial results.
Weak or unstable economic conditions could negatively impact our business.
Weak or unstable economic conditions, including higher inflation, may adversely affect our business by:
●
Limiting our access to capital markets or increasing the cost of capital we may need to grow our business;
●
Changing consumer spending and habits and demand for eggs, particularly higher-priced specialty eggs;
●
Restricting the supply of energy sources or increasing our cost to procure energy; or
●
Reducing the availability of feed ingredients, packaging material, and other raw materials, or increasing the cost of these
items.
Deterioration of economic conditions could also negatively impact:
●
The financial condition of our suppliers, which may make it more difficult for them to supply raw materials;
●
The financial condition of our customers, which may decrease demand for eggs or increase our bad debt expense; or
●
The financial condition of our insurers, which could increase our cost to obtain insurance, and/or make it difficult for or
insurers to meet their obligations in the event we experience a loss due to an insured peril.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
18
ITEM 2. PROPERTIES
The table below provides summary information about the primary operational facilities we use in our business.
Type
Quantity
Owned
Leased
Production Capacity
Location
Breeding Facilities
3
3
—
House up to 255,000 hens
MS, GA
Distribution Centers
3
2
1
NA
FL, NC, TX
Feed Mills
25
24
1
Production capacity of 814 tons of
feed per hour
AL, AR, FL, GA, KS, KY, LA,
MS, OH, OK, SC, TN, TX, UT
Hatcheries
2
1
1
Hatch up to 407,600 chicks per
week
MS, FL
Processing and Packaging
44
43
1
Approximately 565,800 dozen
shell eggs per hour
AL, AR, FL, GA, KS, KY, LA,
MS, OH, OK, SC, TX, UT
Pullet Facilities
24
24
—
Grow 24.4 Million pullets
annually
AR, FL, GA, KS, KY, OH, SC,
TX, UT
Shell Egg Production
41
40
1
As of May 29, 2021, 37.8 million
layers in Company owned
facilities
AL, AR, FL, GA, KS, KY, LA,
MS, OH, OK, SC, TX, UT
Egg Products Processing
Facilities
2
2
—
Capable of producing 60 million
lbs. per year
GA, TX
As of May 29, 2021, we owned approximately 28.3 thousand acres of land. There are no material encumbrances on our properties.
ITEM 3. LEGAL PROCEEDINGS
Refer to the description of certain legal proceedings pending against us under Part II. Item 8. Notes to the Consolidated Financial
Statements,
, which discussion is incorporated herein by reference.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
We have two classes of capital stock, Common Stock and Class A Common Stock. Our Common Stock trades on the NASDAQ
Global Select Market under the symbol “CALM”. There is no public trading market for the Class A Common Stock.
All outstanding Class A shares are owned by a limited liability company of which Adolphus Baker, our Chairman and Chief
Executive Officer, is the sole managing member and will be voted at the direction of Mr. Baker. At July 14, 2021, there were
approximately 322 record holders of our Common Stock and approximately 39,079 beneficial owners whose shares were held by
nominees or broker dealers. For additional information about our capital structure, see
to the Consolidated Financial Statements.
Dividends
Cal-Maine has a variable dividend policy adopted by its Board of Directors. Pursuant to the policy, Cal-Maine pays a dividend
to shareholders of its Common Stock and Class A Common Stock on a quarterly basis for each quarter for which the Company
reports net income attributable to Cal-Maine Foods, Inc. computed in accordance with GAAP in an amount equal to one-third
(1/3) of such quarterly income. Dividends are paid to shareholders of record as of the 60th day following the last day of such
quarter, except for the fourth fiscal quarter. For the fourth quarter, the Company will pay dividends to shareholders of record on
the 65th day after the quarter end. Dividends are payable on the 15th day following the record date. Following a quarter for which
the Company does not report net income attributable to Cal-Maine Foods, Inc., the Company will not pay a dividend for a
subsequent profitable quarter until the Company is profitable on a cumulative basis computed from the date of the last quarter for
which a dividend was paid. Under the Company's Revolving Credit Facility, dividends are restricted to the amount permitted
under the Company’s current dividend policy, and may not be paid if a default exists or will arise after giving effect to the
19
dividend. At the end of fiscal 2021, the amount of cumulative losses to be recovered before payment of a dividend was
$4.2 million.
Stock Performance Graph
The following graph shows a comparison of cumulative total shareholder return, calculated on a dividend reinvested basis, for
the Company, the NASDAQ Composite Total Return, and the NASDAQ 100 Total Return for the five years ended May 29, 2021.
The graph assumes $100 was invested on May 28, 2016 in the stock or index. Each date plotted indicates the last day of a fiscal
quarter.
Issuer Purchases of Equity Securities
There were no purchases of our Common Stock made by or on behalf of our Company or any affiliated purchaser during our
fiscal 2021 fourth quarter.
Recent Sales of Unregistered Securities
No sales of securities without registration under the Securities Act of 1933 occurred during our fiscal year ended May 29, 2021.
20
Securities Authorized for Issuance under Equity Compensation Plans
Equity Compensation Plan Information
(a)
(b)
(c)
Number of
securities to be
issued upon exercise
of outstanding
options, warrants
and rights
Weighted average
exercise price of
outstanding
options, warrants
and rights
Number of securities
remaining available for future
issuance under equity
compensation plans (excluding
securities reflected in column
(a)
Equity compensation plans
approved by shareholders
—
$
—
302,147
Equity compensation plans not
approved by shareholders
—
—
—
Total
—
$
—
302,147
(a)
There were no outstanding options, warrants or rights as of
May
29
, 202
1
.
There were
1,125,188
shares of restricted
stock outstanding under our Amended and Restated 2012 Omnibus Long-Term Incentive Plan as of May 29, 2021.
(b)
There were no outstanding options, warrants or rights as of
May
29
, 202
1
.
(c)
Reflects s
hares available for future issuance as of
May
29
, 202
1
under our
Amended and Restated
2012 Omnibus
Long-Term Incentive Plan.
For additional information, see
Statements.
ITEM 6. SELECTED FINANCIAL DATA
This Item is reserved as a result of the Company’s early adoption of Item 301 of Regulation S-K, as deleted pursuant to SEC
Release No. 33-10890; 34-90459 (Management’s Discussion and Analysis; Selected Financial Data, and Supplementary
Financial Information) adopted by the Securities and Exchange Commission on November 19, 2020.
21
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RISK FACTORS; FORWARD -LOOKING STATEMENTS
For information relating to important risks and uncertainties that could materially adversely affect our business, securities,
financial condition or operating results, reference is made to the disclosure set forth under
. In
addition, because the following discussion includes numerous forward-looking statements relating to us, our results of operations,
financial condition and business, reference is made to the information set forth in the section of Part I immediately preceding
Item 1 above under the caption “
.”
COMPANY OVERVIEW
Cal-Maine Foods, Inc. is primarily engaged in the production, grading, packaging, marketing and distribution of fresh shell eggs.
Our fiscal year end is the Saturday closest to May 31. The Company, which is headquartered in Ridgeland, Mississippi, is the
largest producer and distributor of fresh shell eggs in the United States. In fiscal 2021, we sold approximately 1,073.2 million
dozen shell eggs, which we believe represented approximately 19% of domestic shell egg consumption. Our total flock of
approximately 37.8 million layers and 10.8 million pullets and breeders is the largest in the U.S. We sell most of our shell eggs
to a diverse group of customers, including national and regional grocery store chains, club stores, foodservice distributors, and
egg product consumers in states across the southwestern, southeastern, mid-western and mid-Atlantic regions of the U.S.
The Company has one operating segment, which is the production, grading, packaging, marketing and distribution of shell
eggs. Many of our customers rely on us to provide most of their shell egg needs, including specialty and conventional eggs.
Specialty eggs represent a broad range of products. We classify nutritionally enhanced, cage-free, organic and brown eggs as
specialty products for accounting and reporting purposes. We classify all other shell eggs as conventional products. While we
report separate sales information for these types of eggs, there are a number of cost factors which are not specifically available
for conventional or specialty eggs due to the nature of egg production. We manage our operations and allocate resources to these
types of eggs on a consolidated basis based on the demands of our customers. For further description of our business, refer to
COVID-19
Since early 2020, the coronavirus (“COVID-19”) outbreak, characterized as a pandemic by the World Health Organization on
March 11, 2020, has caused significant disruptions in international and U.S. economies and markets. We understand the
challenges and difficult economic environment facing families in the communities where we live and work, and we are committed
to helping where we can. We have provided food assistance to those in need by donating approximately 2.5 million dozen eggs
in fiscal 2021. We believe we are taking all reasonable precautions in the management of our operations in response to the
COVID-19 pandemic. Our top priority is the health and safety of our employees, who work hard every day to produce eggs for
our customers. As part of the nation’s food supply, we work in a critical infrastructure industry, and we believe we have a special
responsibility to maintain our normal work schedule. As such, we are in regular communication with our managers across our
operations and continue to closely monitor the situation in our facilities and in the communities where we live and work. We
have implemented procedures designed to protect our employees, taking into account guidelines published by the Centers for
Disease Control and other government health agencies, and we have strict sanitation protocols and biosecurity measures in place
throughout our operations with restricted access to visitors. All non-essential corporate travel has been suspended. There are no
known indications that COVID-19 affects hens or can be transferred through the food supply.
We continue to proactively monitor and manage operations during the COVID-19 pandemic, including additional related costs
that we incurred or may incur in the future. The pandemic had a negative impact on our business through disruptions in the supply
chain such as increased costs and availability of packaging supplies, increased labor costs and medical costs.
In fiscal 2021, we spent $2.3 million (excluding medical insurance claims) related to the pandemic. The majority these expenses
resulted from additional labor and increased cost of packaging materials, primarily reflected in cost of sales. Medical insurance
claims related to COVID-19 paid during fiscal 2021 were an additional $1.4 million.
22
Executive Overview of Results – Fiscal Years Ended May 29, 2021, May 30, 2020 and June 1, 2019
Fiscal Years Ended
May 29, 2021
May 30, 2020
June 1, 2019
Net sales (in thousands)
$
1,348,987
$
1,351,609
$
1,361,188
Gross profit (in thousands)
$
160,661
$
179,588
$
222,859
Net average shell egg price
(a)
$
1.217
$
1.231
$
1.265
Average UB Southeast Region - Shell Eggs - White Large
$
1.155
$
1.220
$
1.229
Feed costs per dozen produced
$
0.446
$
0.409
$
0.415
(a) The net average shell egg selling price is the blended price for all sizes and grades of shell eggs, including non-graded
shell egg sales, breaking stock and undergrades.
In fiscal 2019, an increase in the U.S flock size resulted in an oversupply of eggs, particularly from the start of our third quarter
of fiscal 2019 through the end of the third quarter of fiscal 2020. This led to lower selling prices for conventional eggs, and
demand for specialty eggs was negatively impacted by the low conventional egg prices.
Our net sales for fiscal 2021 decreased $2.6 million compared to fiscal 2020, primarily due to the decrease in the selling price
and volume of conventional eggs, partially offset by the increased volume of specialty eggs sold. We sell the majority of our
conventional eggs at prices that take into account, in varying ways, independently quoted wholesale market prices as published
by UB for shell eggs. The daily average of the UB Southeast Region – Shell Eggs – White Large decreased 5.3% during our
fiscal 2021 as compared to fiscal 2020.
The total number of shell eggs produced in the U.S. for fiscal 2021 was 2.0% less than the same period last year as reported by
the United States Department of Agriculture (“USDA”). Hen numbers reported by the USDA as of June 1, 2021, were 315.7
million, which represents 5.3 million fewer hens than a year ago. Notably, this is the lowest national supply of laying hens since
October 2016. However, we believe the decreased demand in foodservice seen throughout the first three quarters of fiscal 2021
due to the pandemic contributed to the depressed price of shell eggs in the retail market due to the extra supply entering the retail
channel from the foodservice channel.
The pandemic continues to affect the demand for shell eggs. During the early restrictive phase of the pandemic, which occurred
during our fourth quarter of fiscal 2020, demand increased substantially as consumers were preparing for more meals at home.
Consumer demand maintained a steady growth throughout our first three quarters of fiscal 2021 but began trending down during
our fourth quarter of fiscal 2021 as consumers started to resume pre-pandemic activities. Foodservice demand has started to
improve, though it has remained below pre-pandemic levels. Our experience appears consistent with industry trends during this
period. According to data provided by Informational Resources, Inc. (“IRi”), IRi’s Total US – Multi Outlet for all shell eggs
demand increased by approximately 6% for the first three quarters during our fiscal year and decreased approximately 20% during
our fourth fiscal quarter as compared to the same periods in fiscal 2020.
According to IRi Total U.S. – Multi Outlet data, for the 52 weeks ended May 30, 2021, dozens sold for conventional eggs
decreased 3.4%, while dozens sold for specialty eggs increased 8.6% as compared to the same period in the prior year. Similarly,
our total dozens sold for conventional eggs decreased 3.4%, while our total dozens sold for specialty eggs increased 12.5%, as
compared to fiscal 2020. Specialty egg demand has historically been impacted by the price of the conventional egg. When the
price of conventional eggs is low the demand for specialty eggs declines and as the price of conventional eggs increases the
demand for specialty eggs increase. We have also seen demand for specialty eggs increases during holiday seasons. We believe
that the increase in demand for specialty eggs has been affected since the onset of the pandemic as consumers have been preparing
more meals at home rather than going out to eat, and therefore they have been more willing to spend money on specialty eggs.
Gross profit decreased $18.9 million to $160.7 million in fiscal 2021. The decrease resulted primarily from lower selling prices
for conventional eggs, as discussed above, and from increased feed costs. For fiscal year 2021, the average Chicago Board of
Trade (“CBOT”) daily market price was $3.77 per bushel for corn and $300.62 per ton for soybean meal, representing increases
of 21.1% and 23.0%, respectively, compared to the daily average CBOT prices for fiscal 2020. Feed costs started trending higher
midway through the second quarter of fiscal 2021. Increased export demand for both soybeans and corn, as well as weather-
related shortfalls in production and yields, have placed additional pressure on domestic supplies, resulting in higher and more
volatile prices.
We continue to execute our growth strategy of remaining a low-cost provider of shell eggs and growth through selective
acquisitions, with a focus on expanding cage-free capacity. Subsequent to fiscal 2021, we acquired the remaining 50%
23
membership interest in Red River Valley Egg Farm, LLC (“Red River”), which owns and operates a specialty shell egg production
complex with approximately 1.7 million cage-free laying hens, cage-free pullet capacity, a feed mill, processing plant, related
offices and outbuildings and related equipment located on approximately 400 acres near Bogata, Texas.
RESULTS OF OPERATIONS
The following table sets forth, for the fiscal years indicated, certain items from our consolidated statements of income expressed
as a percentage of net sales.
Fiscal Year Ended
May 29, 2021
May 30, 2020
Net sales
100.0
%
100.0
%
Cost of sales
88.1
%
86.7
%
Gross profit
11.9
%
13.3
%
Selling, general and administrative
13.6
%
13.2
%
Loss on disposal of fixed assets
0.2
%
—
%
Operating income (loss)
(1.9)
%
0.1
%
Total other income
1.2
%
1.4
%
Income (loss) before income taxes
(0.7)
%
1.5
%
Income tax expense (benefit)
(0.9)
%
0.1
%
Net income
0.2
%
1.4
%
24
Fiscal Year Ended May 29, 2021 Compared to Fiscal Year Ended May 30, 2020
NET SALES
Net shell egg sales represented 97.3% and 97.7% of total net sales for the fiscal year 2021 and 2020, respectively. Shell egg sales
classified as “Other” represent sales of hard cooked eggs, hatching eggs, and other miscellaneous products included with our shell
egg operations. The table below presents an analysis of our conventional and specialty shell egg sales (in thousands, except
percentage data):
May 29, 2021
May 30, 2020
Total net sales
$
1,348,987
$
1,351,609
Conventional
$
766,284
58.4
%
$
830,278
62.9
%
Specialty
539,780
41.1
%
485,465
36.8
%
Egg sales, net
1,306,064
99.5
%
1,315,743
99.7
%
Other
6,190
0.5
%
4,452
0.3
%
Net shell egg sales
$
1,312,254
100.0
%
$
1,320,195
100.0
%
Dozens sold:
Conventional
785,446
73.2
%
813,255
76.1
%
Specialty
287,765
26.8
%
255,895
23.9
%
Total dozens sold
1,073,211
100.0
%
1,069,150
100.0
%
Net average selling price per dozen:
Conventional
$
0.976
$
1.021
Specialty
$
1.876
$
1.897
All shell eggs
$
1.217
$
1.231
Egg products sales:
Egg products net sales
$
36,733
$
31,414
Pounds sold
63,627
65,985
Net average selling price per pound
$
0.577
$
0.476
Shell egg net sales
-
Conventional egg sales decreased $64.0 million or 7.7%, compared to fiscal 2020, primarily due to decreases in price
and volume of conventional eggs sold. Changes in price and volume resulted in a $35.3 million and a $27.1 million
decrease in net sales, respectively.
-
The decrease in volume and price of conventional eggs in fiscal 2021 compared to fiscal 2020 was due to the significant
increase in retail demand that occurred in the fourth quarter of fiscal 2020 related to the onset of the pandemic, as
consumers purchased more eggs in anticipation of preparing more meals at home. Additionally, the extra supply entering
the retail channel from the foodservice further depressed prices of conventional shell eggs throughout the first three
quarters of fiscal 2021.
-
Specialty egg sales increased $54.3 million or 11.2%, primarily due to increased volume of 12.5% which resulted in a
$59.8 million increase in net sales. More cage-free facilities came into production and we increased promotional
spending, both of which helped increase our cage-free sales.
-
We believe that the increase in demand for specialty eggs has been affected since the onset of the pandemic as consumers
have been preparing more meals at home rather than going out to eat, and therefore they have been more willing to spend
money on specialty eggs.
Egg products net sales
-
Egg products net sales increased $5.3 million or 16.9%, primarily due to an increase in selling price of 21.2% compared
to fiscal 2020, which had a $6.4 million positive impact on net sales.
-
Fiscal 2020 net average selling prices were negatively impacted by an oversupply of eggs throughout the first three
quarters in fiscal 2020, followed by a decline in foodservice demand in the fourth quarter of fiscal 2020, due to the
pandemic. Our net average selling price has increased in fiscal 2021 as demand has started to increase in the foodservice
channel.
25
COST OF SALES
Cost of sales consists of costs directly related to producing, processing and packing shell eggs, purchases of shell eggs from
outside producers, processing and packing of liquid and frozen egg products and other non-egg costs. Farm production costs are
those costs incurred at the egg production facility, including feed, facility, hen amortization, and other related farm production
costs.
The following table presents the key variables affecting our cost of sales (in thousands, except cost per dozen data):
Fiscal Year Ended
May 29, 2021
May 30, 2020
% Change
Cost of Sales:
Farm production
$
730,902
$
677,181
7.9
%
Processing, packaging, and warehouse
250,058
234,243
6.8
Egg purchases and other (including change in inventory)
177,634
232,027
(23.4)
Total shell eggs
1,158,594
1,143,451
1.3
Egg products
29,536
25,651
15.1
Other
196
2,919
(93.3)
Total
$
1,188,326
$
1,172,021
1.4
%
Farm production costs (per dozen produced)
Feed
$
0.446
$
0.409
9.0
%
Other
$
0.320
$
0.329
(2.7)
%
Total
$
0.766
$
0.738
3.8
%
Outside egg purchases (average cost per dozen)
$
1.22
$
1.26
(3.2)
%
Dozens produced
970,837
927,799
4.6
%
Percent produced to sold
90.5%
86.8%
4.3
%
Farm Production
-
Feed costs increased $53.7 million, primarily due to increased export demand, as well as weather-related shortfalls in
production and yields, which have placed additional pressure on domestic supplies.
-
Other farm production costs decreased due to lower facility expense, resulting from improved efficiencies in our
utilization and from increased volume of eggs produced.
-
We also had lower amortization expense, due to the lower feed costs in prior periods, which are capitalized in our flocks
during pullet production. In fiscal 2020 we incurred higher amortization expense due to selling flocks early in response
to market conditions.
Processing, packaging, and warehouse
-
Processing costs increased due to a 3.2% increase in the volume of eggs processed.
-
Cost of pac
kaging materials increased 3.0% as the retail channel demand increased due to the pandemic
and
manufacturers increased prices and implemented pandemic surcharges.
-
Labor costs increased 7.2% due to the pandemic, due to crisis pay and wage increases in response to labor shortages.
Egg purchases and other (including change in inventory)
-
Costs in this category decreased primarily due to the decrease in the volume of outside egg purchases, as our percentage
of produced to sold increased to 90.5%, as well as a decrease in the cost of these purchases.
Looking forward to fiscal 2022, we believe with the ongoing uncertainties and continued supply chain disruptions related to the
COVID-19 outbreak, weather fluctuations, increase demand for exports and geopolitical issues, that feed ingredients will remain
higher in the near future and expect to see price volatility throughout the year. We do not anticipate problems in securing an
adequate amount of feed ingredients for fiscal 2022.
26
GROSS PROFIT
Gross profit, as a percentage of net sales, was 11.9% for fiscal 2021, compared to 13.3% for fiscal 2020. The decrease resulted
primarily from lower selling prices for conventional eggs and increased feed costs.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses ("SGA") include costs of marketing, distribution, accounting, and corporate
overhead. The following table presents an analysis of our SGA expenses (in thousands):
Fiscal Year Ended
May 29, 2021
May 30, 2020
$ Change
% Change
Specialty egg expense
$
59,294
$
49,237
$
10,057
20.4
%
Delivery expense
52,670
52,230
440
0.8
%
Payroll, taxes and benefits
43,327
44,156
(829)
(1.9)
%
Stock compensation expense
3,778
3,617
161
4.5
%
Other expenses
24,874
28,997
(4,123)
(14.2)
%
Total
$
183,943
$
178,237
$
5,706
3.2
%
Specialty egg expense
-
Advertising and franchise fees increased due to the increased volume of specialty eggs sales of 12.5% along with
increased promotional spending throughout the year as compared to the same period in the prior year.
Other expenses
-
Other expenses decreased due to a legal settlement paid in the second quarter of fiscal 2020, in an amount that was not
material.
-
In addition, for fiscal 2021 we received a return of brokerage commissions on property and casualty insurance
placements.
OPERATING INCOME (LOSS)
As a result of the above, our operating loss was $26.3 million for fiscal 2021, compared to operating income of $1.3 million for
fiscal 2020.
OTHER INCOME (EXPENSE)
Total other income (expense) consists of items not directly charged to, or related to, operations such as interest income and
expense, equity in income or loss of unconsolidated entities, and patronage dividends, among other items.
The Company recorded interest income of $2.8 million in fiscal 2021, compared to $5.0 million in fiscal 2020. We recorded
interest expense of $213 thousand and $498 thousand in fiscal 2021 and 2020, respectively. The decrease in interest income
resulted from significantly lower investment balances and lower interest rates.
Patronage dividends, which represent distributions from our membership in Eggland's Best, Inc. ("EB"), decreased $1.1 million
or 10.8%. Patronage dividends are paid once a year based on EB’s profits and its available cash.
Equity in income from unconsolidated entities for fiscal 2021 was $622 thousand compared to $534 thousand for fiscal 2020.
Other, net for fiscal 2021 was income of $4.1 million compared to $3.7 million for fiscal 2020. The increase was primarily driven
by realized and unrealized gains in investment securities available-for-sale.
INCOME TAXES
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted. The most
significant provision of the CARES Act that materially affected the Company’s income taxes included the five-year carryback
allowance for taxable net operating losses generated in the tax years 2018 through 2020, our fiscal years 2019 through 2021.
27
The Tax Cut and Jobs Act enacted in December 2017 disallowed the carrying back of taxable net operating losses to offset prior
years’ taxable income. The CARES Act allows us to carry those losses generated or that may be generated during our fiscal years
2019 through 2021 back to offset taxable income recognized during the prior five years. The Company is electing to utilize that
provision, which will provide additional liquidity in the form of an income tax refund currently estimated to be approximately
$36.5 million. We believe we will receive the refund during our third fiscal quarter of 2022. Additionally, we recorded a total
income tax benefit of approximately $12.4 million related to the carryback provisions during our fiscal year 2021. For more
information regarding the income tax effects of the CARES Act, refer to Part II. Item 8. Notes to the Financial Statements,
For the fiscal year ended May 29, 2021, our pre-tax loss was $9.9 million, compared to pre-tax income of $20.1 million for fiscal
2020. We recorded an income tax benefit of $12.0 million for fiscal 2021, which includes the tax benefit of $12.4 million
described above. Our fiscal 2021 effective tax rate increased to 120.8% from 8.6% in fiscal 2020, driven primarily by the net
operating loss carryback provisions allowed under the CARES Act. Excluding the effects of the CARES Act, our income tax
benefit was $2.2 million for fiscal 2021 with an adjusted effective tax rate of 22.7%. Income tax expense was $4.8 million for
the comparable period of fiscal 2020, which reflects an adjusted effective tax rate of approximately 24.1%.
At May 29, 2021, the Company had an income tax receivable of $42.5 million compared to $9.9 million at May 30, 2020. During
fiscal 2021, the Company recorded an income tax receivable of $36.5 million related to the decision to carryback fiscal 2021
taxable net operating losses to recover a portion of taxes paid in fiscal 2016. Additionally, we received $1.4 million in state tax
refunds related to claims for refund previously filed with state taxing authorities.
For the thirteen weeks ended May 29, 2021, our pretax loss was $12.2 million, and our income tax benefit was $7.9 million with
an effective tax rate of 65.1%, including the impact of the CARES Act. Our income tax provision for the fourth quarter of fiscal
2021 reflects the carryback of taxable net operating losses generated during periods in which the statutory federal income tax rate
was 21% to periods in which the statutory federal income tax rate was 35%, as permitted by the CARES Act. Excluding the
effects of the CARES Act, our income tax expense was $1.8 million with an adjusted effective tax rate of 15.4%. The low effective
rate was primarily related to a $7.4 million income tax benefit recorded during the fourth quarter of fiscal 2021 in connection
with the CARES Act.
Items causing our effective tax rate to differ from the federal statutory income tax rate of 21% are state income taxes, certain
federal tax credits and certain items included in income or loss for financial reporting purposes that are not included in taxable
income or loss for income tax purposes, including tax exempt interest income, certain nondeductible expenses, and net income
or loss attributable to noncontrolling interest.
NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST
Net income (loss) attributable to noncontrolling interest for fiscal 2020 was a loss of $63 thousand. During fiscal 2020, we
acquired the remaining 27.9% interest in our majority-owned subsidiary TEP.
NET INCOME ATTRIBUTABLE TO CAL-MAINE FOODS, INC.
As a result of the above, net income for fiscal 2021 was $2.1 million, or $0.04 per basic and diluted share, compared to
$18.4 million, or $0.38 per basic and diluted share for fiscal 2020.
Fiscal Year Ended May 30, 2020 Compared to Fiscal Year Ended June 1, 2019
The discussion of our results of operations for the fiscal year ended May 30, 2020 compared to the fiscal year ended June 1, 2019
can be found in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the
Company's fiscal 2020 Annual Report on Form 10-K.
CAPITAL RESOURCES AND LIQUIDITY
Our working capital at May 29, 2021 was $303.5 million, compared to $429.1 million at May 30, 2020. The calculation of
working capital is defined as current assets less current liabilities. Our current ratio was 5.77 at May 29, 2021 compared to 5.60
at May 30, 2020. The current ratio is calculated by dividing current assets by current liabilities. Due to seasonal factors described
, we generally expect our need for working capital to be highest in the fourth and first fiscal
quarters ending in May/June and August/September, respectively.
28
We had no long-term debt outstanding at the end of fiscal 2021 and 2020. On July 10, 2018, we entered into a $100.0 million
Senior Secured Revolving Credit Facility (the “Revolving Credit Facility”). As of May 29, 2021, no amounts were borrowed
under the Revolving Credit Facility. We have $4.1 million in outstanding standby letters of credit, which were issued under our
Revolving Credit Facility for the benefit of certain insurance companies. Refer to Part II. Item 8. Notes to the Financial
Statements,
Net cash provided by operating activities was $26.1 million for fiscal year 2021 compared with $73.6 million for fiscal year 2020.
Decreased gross profit margins resulting primarily from lower selling prices for shell eggs, and increased feed costs contributed
greatly to our decrease in cash flow from operations. The increase in accounts receivables balance at fiscal 2021 compared to
prior fiscal 2020 is due to the income tax receivable related to the CARES Act, which is expected to be received in our third
quarter of fiscal 2022.
For fiscal 2021, approximately $129.1 million was provided from the sale and maturity of investments securities available-for-
sale, $88.3 million was used to purchase short-term investments and net payments of $6.7 million were received from investments
in unconsolidated entities. Approximately $95.1 million was used to purchase or construct property, plant and equipment, most
of which related to the expansion of our cage-free shell egg production capacity. Refer to the table of material construction
projects presented below for additional information on purchases and construction of property, plant and equipment. The net
result of these and other activities as of May 29, 2021 was a decrease in cash of $20.8 million from May 30, 2020.
For fiscal 2020, approximately $204.3 million was provided from the sale and maturity of investments securities available-for-
sale, $107.2 million was used to purchase short-term investments and net payments of $7.1 million were received from
investments i
n unconsolidated entities. We used $44.7 million to acquire Mahard and the remaining interest in
TEP.
Approximately $124.2 million was used to purchase or construct property, plant and equipment, most of which related to the
expansion of our cage-free shell egg production capacity. Refer to the table of material construction projects presented below for
additional information on purchases and construction of property, plant and equipment. We used $1.5 million for principal
payments on long-term debt. The net result of these and other activities as of May 30, 2020 was an increase in cash of $8.9 million
from June 1, 2019.
We continue to monitor the increasing demand for cage-free eggs and to engage with our customers in an effort to achieve a
smooth transition to meet their announced commitment timeline for cage-free egg sales. We have invested approximately
$476 million in facilities, equipment and related operations to expand our cage-free production starting with our first facility in
2008, which includes the $48.5 million acquisition of the remaining 50% interest in Red River discussed in
Note 20 – Subsequent
Events
construction projects approved as of May 29, 2021 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of
May 29, 2021
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2022
$
140,876
$
93,612
$
47,264
$
140,876
$
93,612
$
47,264
We believe our current cash balances, investments, cash flows from operations, and Revolving Credit Facility will be sufficient
to fund our current capital needs. As we monitor the demand for cage-free eggs and our growth strategy described in
we will have adequate access to capital markets if that need arises.
29
CONTRACTUAL OBLIGATIONS
The following table summarizes by fiscal year the future estimated cash payments, in thousands, to be made under existing
contractual obligations as of May 29, 2021. Further information on debt obligations is contained in
, and
on lease obligations in
, each in Part II. Item 8. Notes to the Consolidated Financial Statements. As of May 29,
2021, we had no outstanding long-term debt.
Payments due by period
Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
Finance leases
$
697
$
239
$
458
$
—
$
—
Operating leases
1,882
802
1,049
31
—
Purchase obligations:
Feed ingredients and fuel
(a)
89,779
89,779
—
—
—
Construction contracts and other equipment
38,063
38,063
—
—
—
Red River
(b)
48,500
48,500
—
—
—
Total
$
178,921
$
177,383
$
1,507
$
31
$
—
(a)
Actual purchase obligations may change based on the contractual terms and agreements
(b)
Represents the cash paid for the acquisition of Red River
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
For information on changes in accounting principles and new accounting principles, see “
New Accounting Pronouncements and
Policies
” in Part II. Item 8. Notes to Consolidated Financial Statements,
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from these estimates. Critical accounting estimates are those
estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably
likely to have a material impact on the financial condition or results of operations. Our critical accounting estimates are described
below.
INVESTMENTS IN SECURITIES
Our investment securities are accounted for in accordance with ASC 320, “Investments - Debt and Equity Securities” (“ASC
320”). The Company considers all of its debt securities for which there is a determinable fair market value, and there are no
restrictions on the Company's ability to sell within the next 12 months, as available-for-sale. We classify these securities as
current, because the amounts invested are available for current operations. Available-for-sale securities are carried at fair value,
with unrealized gains and losses reported as a separate component of stockholders’ equity. The Company regularly evaluates
changes to the rating of its debt securities by credit agencies and economic conditions to assess and record any expected credit
losses through allowance for credit losses, limited to the amount that fair value was less than the amortized cost basis. The cost
basis for realized gains and losses on available-for-sale securities is determined by the specific identification method. Gains and
losses are recognized in other income (expenses) as Other, net in the Company's Consolidated Statements of Income. Investments
in mutual funds are classified as “Other long-term assets” in the Company’s Consolidated Balance Sheets.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Trade receivables are stated at their carrying values, which include a reserve for credit losses. The Company extends credit to
customers based on an evaluation of each customer's financial condition and credit history. Collateral is generally not required.
The Company minimizes exposure to counter party credit risk through credit analysis and approvals, credit limits, and monitoring
procedures. In determining our reserve for credit losses, receivables are pooled according to age, with each pool assigned an
expected loss based on historical loss information adjusted as needed for economic and other forward-looking factors.
30
INVENTORIES
Inventories of eggs, feed, supplies and flocks are valued principally at the lower of cost (first-in, first-out method) or net realizable
value. If market prices for eggs and feed grains move substantially lower, we record adjustments to write down the carrying
values of eggs and feed inventories to fair market value. The cost associated with flock inventories, consisting principally of chick
purchases, feed, labor, contractor payments and overhead costs, are accumulated during the growing period of approximately 22
weeks. Capitalized flock costs are then amortized over the flock’s productive life, generally one to two years. Flock mortality is
charged to cost of sales as incurred. High mortality from disease or extreme temperatures will result in abnormal write-downs to
flock inventories. Management continually monitors each flock and attempts to take appropriate actions to minimize the risk of
mortality loss.
LONG-LIVED ASSETS
Depreciable long-lived assets are primarily comprised of buildings, improvements, machinery and equipment. Depreciation is
provided by the straight-line method over the estimated useful lives, which are 15 to 25 years for buildings and improvements
and 3 to 12 years for machinery and equipment. An increase or decrease in the estimated useful lives would result in changes to
depreciation expense. When property and equipment are retired, sold, or otherwise disposed of, the asset’s carrying amount and
related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. We continually
reevaluate the carrying value of our long-lived assets, for events or changes in circumstances which indicate the carrying value
may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. If the sum
of the expected future cash flows (undiscounted and without interest charges) are less than the carrying amount of the asset, an
impairment loss is recognized to reduce the carrying value of the asset to its estimated fair value.
INTANGIBLE ASSETS
Included in other intangible assets are separable intangible assets acquired in business acquisitions, which include franchise fees,
non-compete agreements and customer relationship intangibles. They are amortized over their estimated useful lives of 5 to 15
years. The gross cost and accumulated amortization of intangible assets are removed when the recorded amounts are fully
amortized and the asset is no longer in use.
EQUITY AND COST METHOD INVESTMENTS
We have invested in other companies engaged in the production, processing and distribution of shell eggs and egg products. These
investments are recorded using the cost or equity method, and are not consolidated in our financial statements. Changes in the
ownership percentages of these investments might alter the accounting methods currently used. Our investment in these
companies is shown on the Company’s Consolidated Balance Sheet in the amounts presented for "Investment in unconsolidated
entities" and “Other long-term assets”.
GOODWILL
Goodwill is evaluated for impairment annually by first performing a qualitative assessment to determine whether a quantitative
goodwill test is necessary. After assessing the totality of events or circumstances, if we determine it is more likely than not that
the fair value of a reporting unit is less than its carrying amount, then we perform additional quantitative tests to determine the
magnitude of any impairment.
31
At May 29, 2021, goodwill represented 2.9% of total assets and 3.5% of stockholders’ equity. Goodwill relates to the following
(in thousands):
Fiscal Year
Description
Amount
1999
Acquisition of Hudson Brothers, Inc.
$
3,147
2006
Acquisition of Hillandale Farms, LLC
869
2007
Acquisition of Green Forest Foods, LLC
179
2008
Revised Hillandale incremental purchase price
9,257
2009
Revised Hillandale incremental purchase price
2,527
2009
Acquisition of Zephyr Egg, LLC
1,876
2009
Acquisition of Tampa Farms, LLC
4,600
2010
Revised Hillandale incremental purchase price
(338)
2013
Acquisition of Maxim Production Co., Inc.
2,300
2014
Purchase of joint venture partner’s 50% in Delta Egg
4,779
2017
Acquisition of Foodonics International, Inc.
3,389
2017
Acquisition of Happy Hen Egg Farms, Inc.
2,940
Total Goodwill
$
35,525
REVENUE RECOGNITION AND DELIVERY COSTS
Revenue recognition is completed upon satisfaction of the performance obligation to the customer, which typically occurs within
days of the Company and customer agreeing upon the order. See
Consolidated Financial Statements for further discussion of the policy.
The Company believes the performance obligation is met upon delivery and acceptance of the product by our customers. Costs
to deliver product to customers are included in selling, general and administrative expenses in the accompanying Consolidated
Statements of Income. Sales revenue reported in the accompanying Consolidated Statements of Income is reduced to reflect
estimated returns and allowances. The Company records an estimated sales allowance for returns and discounts at the time of
sale using historical trends based on actual sales returns and sales.
SALES INCENTIVES PROVIDED TO CUSTOMERS
The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current discount
offers (e.g., percentage discounts off current purchases), inducement offers (e.g., offers for future discounts subject to a minimum
current purchase), and other similar offers. Current discount offers, when accepted by customers, are treated as a reduction to the
sales price of the related transaction, while inducement offers, when accepted by customers, are treated as a reduction to sales
price based on estimated future redemption rates. Redemption rates are estimated using the Company’s historical experience for
similar inducement offers. Current discount and inducement offers are presented as a net amount in ‘‘Net sales.’’
STOCK BASED COMPENSATION
We account for share-based compensation in accordance with ASC 718, “Compensation-Stock Compensation” (“ASC
718”). ASC 718 requires all share-based payments to employees, including grants of employee stock options, restricted stock and
performance-based shares to be recognized in the statement of income based on their fair values. ASC 718 requires the benefits
of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow. See
INCOME TAXES
We determine our effective tax rate by estimating our permanent differences resulting from differing treatment of items for tax
and accounting purposes. We are periodically audited by taxing authorities. Any audit adjustments affecting permanent
differences could have an impact on our effective tax rate.
32
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
COMMODITY PRICE RISK
Our primary exposure to market risk arises from changes in the prices of conventional eggs, which are subject to significant price
fluctuations that are largely beyond our control. We are focused on growing our specialty shell egg business because the selling
prices of specialty shell eggs are generally not as volatile as conventional shell egg prices. Our exposure to market risk also
includes changes in the prices of corn and soybean meal, which are commodities subject to significant price fluctuations due to
market conditions that are largely beyond our control. To ensure continued availability of feed ingredients, we may enter into
contracts for future purchases of corn and soybean meal, and as part of these contracts, we may lock-in the basis portion of our
grain purchases several months in advance. Ordinarily, we do not enter long-term contracts beyond a year to purchase corn and
soybean meal or hedge against increases in the price of corn and soybean meal. The following table outlines the impact of price
changes for corn and soybean meal on feed costs per dozen as feed ingredient pricing varies:
Change in price per bushel of corn
$
(0.87)
$
(0.58)
$
(0.29)
$
0.00
$
0.29
$
0.58
$
0.87
Change
per ton
Soybean
Meal
$
(82.50)
0.386
0.396
0.406
0.416
0.426
0.436
0.446
$
(55.00)
0.396
0.406
0.416
0.426
0.436
0.446
0.456
$
(27.50)
0.406
0.416
0.426
0.436
0.446
0.456
0.466
$
0.00
0.416
0.426
0.436
0.446
(a)
0.456
0.466
0.476
$
27.50
0.426
0.436
0.446
0.456
0.466
0.476
0.486
$
55.00
0.436
0.446
0.456
0.466
0.476
0.486
0.496
$
82.50
0.446
0.456
0.466
0.476
0.486
0.496
0.506
(a)
Based on 2021 actual costs, table flexes feed cost inputs to show $0.01 impacts to per dozen egg feed production costs.
INTEREST RATE RISK
The fair value of our debt is sensitive to changes in the general level of U.S. interest rates. In July 2018, we entered into a
$100.0 million Senior Secured Revolving Credit Facility which bears interest at a variable rate. No amounts were outstanding
under that facility during fiscal 2021. Under our current policies, we do not use interest rate derivative instruments to manage our
exposure to interest rate changes.
FIXED INCOME SECURITIES RISK
At May 29, 2021, the effective maturity of our cash equivalents and investment securities available for sale was 11.2 months, and
the composite credit rating of the holdings are A- / A3 / A- (S&P / Moody’s / Fitch).
CONCENTRATION OF CREDIT RISK
Our financial instruments exposed to concentrations of credit risk consist primarily of trade receivables. Concentrations of credit
risk with respect to receivables are limited due to our large number of customers and their dispersion across geographic areas,
except that at May 29, 2021 and May 30, 2020, 23.8% and 29.5%, respectively, of our net accounts receivable balance was due
from Walmart Inc. (including Sam’s Club). No other single customer or customer group represented 10% or greater of net
accounts receivable.
33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Cal-Maine Foods, Inc. and Subsidiaries
Ridgeland, Mississippi
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Cal-Maine Foods, Inc. and Subsidiaries (the
“Company”) as of May 29, 2021 and May 30, 2020, the related consolidated statements of income, comprehensive income,
stockholders’ equity and cash flows for each of the three years in the period ended May 29, 2021, and the related consolidated
notes and schedule listed in the Index at Item 15(1) (collectively referred to as the “consolidated financial statements”). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at
May 29, 2021 and May 30, 2020, and the results of its operations and its cash flows for each of the three years in the period ended
May 29, 2021, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the Company’s internal control over financial reporting as of May 29, 2021, based on the criteria established
in
2013 Internal Control – Integrated Framework
Commission and our report dated July 19, 2021 expressed an unqualified opinion.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe our
audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that were communicated or required to be communicated to the Audit Committee and
that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in
any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the
critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.
Contingent Liabilities – Litigation and Claims – Refer to Note 18 in the Consolidated Financial Statements
Critical Audit Matter Description
The Company records liabilities for legal proceedings and claims in those instances where it can reasonably estimate the
amount of the loss and when the liability is probable. Where the reasonable estimate of the probable loss is a range, the Company
records the most likely estimate of the loss, or the low end of the range if there is no one best estimate. The Company either
discloses the amount of a possible loss or range of loss in excess of established accruals if estimable, or states that such an estimate
cannot be made. The Company discloses significant legal proceedings and claims even where liability is not probable or the
amount of the liability is not estimable, or both, if the Company believes there is at least a reasonable possibility that a loss may
be incurred.
34
We identified litigation and claims as a critical audit matter because of the challenges auditing management’s judgments
applied in determining the likelihood of loss related to the resolution of such claims. Specifically, auditing management’s
determination of whether any contingent loss arising from the related litigation and claims is probable, reasonably possible or
remote, and the related disclosures, is subjective and requires significant judgment due to the sensitivity of the issue.
How the Critical Audit Matter was addressed during the Audit
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of the controls
relating to the Company’s evaluation of the liability related to legal proceedings and claims, including controls over determining
the likelihood of a loss and whether the amount of loss can be reasonably estimated, as well as financial statement disclosures
over the legal proceedings and claims. These procedures also included obtaining and evaluating the letters of audit inquiry with
external legal counsel, evaluating the reasonableness of the Company’s assessment regarding whether an unfavorable outcome is
reasonably possible or probable and reasonably estimable, evaluating the sufficiency of the Company’s disclosures related to
legal proceedings and claims and evaluating the completeness and accuracy of the Company’s legal contingencies.
/s/ Frost, PLLC
We have served as the Company’s auditor since 2007.
Little Rock, Arkansas
July 19, 2021
35
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except for par value amounts)
May 29, 2021
May 30, 2020
Assets
Current assets:
Cash and cash equivalents
$
$
Investment securities available-for-sale
Receivables:
Trade receivables, net
Income tax receivable
Other
Total receivables, net
Inventories, net
Prepaid expenses and other current assets
Total current assets
Property, plant & equipment, net
Finance lease right-of-use asset, net
Operating lease right-of-use asset, net
Investments in unco