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Summary of Significant Accounting Policies
 6 Months Ended
Nov. 26, 2022
Summary of Significant Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The
 
unaudited
 
condensed
 
consolidated
 
financial
 
statements
 
of
 
Cal-Maine
 
Foods,
 
Inc.
 
and
 
its
 
subsidiaries
 
(the
 
“Company,”
“we,” “us,” “our”)
 
have been prepared
 
in accordance with
 
the instructions to
 
Form 10-Q and
 
Article 10 of
 
Regulation S-X and
in
 
accordance
 
with generally
 
accepted
 
accounting
 
principles in
 
the
 
United
 
States of
 
America
 
(“GAAP”)
 
for
 
interim
 
financial
reporting and should
 
be read in conjunction
 
with our Annual Report
 
on Form 10-K
 
for the fiscal year
 
ended May 28,
 
2022 (the
“2022
 
Annual
 
Report”).
 
These
 
statements
 
reflect
 
all
 
adjustments
 
that
 
are,
 
in
 
the
 
opinion
 
of
 
management,
 
necessary
 
to
 
a
 
fair
statement of the results for
 
the interim periods presented
 
and, in the opinion of
 
management, consist of adjustments
 
of a normal
recurring nature.
 
Operating results for
 
the interim periods
 
are not necessarily
 
indicative of operating
 
results for the
 
entire fiscal
year.
Fiscal Year
The Company’s
 
fiscal year
 
ends on
 
the Saturday
 
closest to
 
May 31.
 
Each of
 
the three-month
 
periods and
 
year-to-date periods
ended on November 26, 2022 and November 27, 2021 included
13 weeks
 
and
26 weeks
, respectively.
Use of Estimates
The preparation of the
 
consolidated financial statements in
 
conformity with GAAP requires management
 
to make estimates and
assumptions
 
that affect
 
the amounts
 
reported in
 
the consolidated
 
financial statements
 
and accompanying
 
notes. Actual
 
results
could differ from those estimates.
Investment Securities
Our investment
 
securities are
 
accounted
 
for in
 
accordance with
 
ASC 320,
 
“Investments -
 
Debt and
 
Equity Securities”
 
(“ASC
320”).
 
The
 
Company
 
considers
 
all
 
its
 
debt
 
securities
 
for
 
which
 
there
 
is
 
a
 
determinable
 
fair
 
market
 
value,
 
and
 
there
 
are
 
no
restrictions
 
on
 
the
 
Company’s
 
ability
 
to
 
sell
 
within
 
the
 
next
 
12
 
months,
 
as
 
available-for-sale.
 
We
 
classify
 
these
 
securities
 
as
current, because the
 
amounts invested are available
 
for current operations.
 
Available-for-sale
 
securities are carried at
 
fair value,
with
 
unrealized
 
gains
 
and
 
losses
 
reported
 
in
 
other
 
comprehensive
 
income
 
until
 
realized.
 
The
 
total
 
of
 
other
 
comprehensive
income for the period is presented as a component of stockholders' equity
 
separately from retained earnings and additional paid-
in
 
capital.
 
The
 
Company
 
regularly
 
evaluates
 
changes
 
to
 
the
 
rating
 
of
 
its
 
debt
 
securities
 
by
 
credit
 
agencies
 
and
 
economic
conditions to assess and record any expected credit
 
losses through the allowance for credit losses, limited to the amount
 
that fair
value
 
was
 
less
 
than
 
the
 
amortized
 
cost
 
basis.
 
The
 
cost
 
basis
 
for
 
realized
 
gains
 
and
 
losses
 
on
 
available-for-sale
 
securities
 
is
determined by
 
the specific
 
identification method.
 
Gains and
 
losses are
 
recognized in
 
other income
 
(expenses) as
 
Other,
 
net in
the Company’s
 
Condensed Consolidated
 
Statements of
 
Operations.
 
Investments in
 
mutual funds
 
are classified
 
as “Other
 
long-
term assets” in the Company’s Condensed
 
Consolidated Balance Sheets.
Trade Receivables
 
Trade
 
receivables
 
are stated
 
at their
 
carrying values,
 
which include
 
a reserve
 
for credit
 
losses. As
 
of November
 
26, 2022
 
and
May 28,
 
2022, reserves
 
for credit
 
losses were
 
$
838
 
thousand and
 
$
775
 
thousand, respectively.
 
The Company
 
extends credit
 
to
customers based on
 
an evaluation of
 
each customer's financial
 
condition and credit
 
history.
 
Collateral is generally
 
not required.
The
 
Company
 
minimizes
 
exposure
 
to
 
counter
 
party
 
credit
 
risk
 
through
 
credit
 
analysis
 
and
 
approvals,
 
credit
 
limits,
 
and
monitoring
 
procedures.
 
In
 
determining
 
our
 
reserve
 
for
 
credit
 
losses,
 
receivables
 
are
 
assigned
 
an
 
expected
 
loss
 
based
 
on
historical loss information adjusted as needed for economic and
 
other forward-looking factors.
Dividends Payable
 
We
 
accrue dividends at
 
the end of
 
each quarter according
 
to the Company’s
 
dividend policy adopted
 
by its Board
 
of Directors.
The Company
 
pays a dividend
 
to shareholders
 
of its Common
 
Stock and
 
Class A Common
 
Stock on
 
a quarterly basis
 
for each
quarter for
 
which the
 
Company reports
 
net income
 
attributable to
 
Cal-Maine Foods,
 
Inc. computed
 
in accordance
 
with GAAP
in an amount
 
equal to one-third
 
(
1/3
) of such
 
quarterly income. Dividends
 
are paid to
 
shareholders of record
 
as of the 60th
 
day
following the
 
last day
 
of such quarter,
 
except for
 
the fourth fiscal
 
quarter.
 
For the
 
fourth quarter,
 
the Company
 
pays dividends
to shareholders of record on the 65th day after the
 
quarter end. Dividends are payable on the 15th day
 
following the record date.
Following a quarter for which the Company does not report net income
 
attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend
 
for a subsequent profitable
 
quarter until the Company
 
is profitable on a
 
cumulative basis computed
 
from the
date of the most recent quarter for which a dividend was paid.
Immaterial Error Correction
Effective
 
on
 
May
 
30,
 
2021,
 
the
 
Company
 
acquired
 
the
 
remaining
50
%
 
membership
 
interest
 
in
 
Red
 
River
 
Valley
 
Egg
 
Farm,
LLC (“Red
 
River”),
 
including
 
certain
 
liabilities. During
 
the Company’s
 
third
 
quarter of
 
fiscal 2022,
 
management
 
determined
that
 
it
 
had
 
not
 
properly
 
eliminated
 
select
 
intercompany
 
sales
 
and
 
cost
 
of
 
sales
 
transactions
 
between
 
Red
 
River
 
and
 
the
corresponding
 
other wholly
 
-owned subsidiaries
 
of the
 
Company
 
in its
 
first and
 
second quarter
 
2022 Condensed
 
Consolidated
Statements
 
of
 
Operations.
 
The
 
errors
 
resulted
 
in
 
an
 
overstatement
 
of
 
Net
 
Sales and
 
Cost of
 
Sales
 
of
 
$
6.7
 
million
 
in the
 
first
quarter of fiscal 2022
 
and $
9.2
 
million in the second
 
quarter of fiscal 2022.
 
There was
no
 
impact to Operating
 
loss, Net income
(loss) or Net income (loss) per share.
We
 
evaluated
 
the
 
errors
 
quantitatively
 
and
 
qualitatively
 
in
 
accordance
 
with
 
Staff
 
Accounting
 
Bulletin
("SAB") No. 99 Materiality,
 
and
 
SAB No. 108 Considering
 
the
 
Effects
 
of
 
Prior
 
Year
 
Misstatements
 
when
 
Quantifying
Misstatements
 
in
 
the
 
Current
 
Year
 
Financial
 
Statements, and
 
determined
 
that
 
the
 
related
 
impact
 
was not material
 
to
 
our
condensed
 
consolidated
 
financial statements
 
for
 
the first
 
or second
 
quarters
 
of fiscal
 
2022,
 
but that
 
correcting
 
the cumulative
impact
 
of
 
the
 
errors
 
would
 
be
 
relevant
 
to
 
our
 
Condensed
 
Consolidated
 
Statements
 
of
 
Operations
 
for
 
the third
 
quarter
ended February 26, 2022.
 
Accordingly,
 
we have reflected
 
the correction of
 
the immaterial error
 
in fiscal 2022
 
as a reduction
 
of
Net Sales and Cost of Sales in the accompanying Condensed Consolidated
 
Statements of Operations.
New Accounting Pronouncements and Policies
No new accounting pronouncement issued or effective
 
during the fiscal year had or is expected to have a material impact on
 
our
Consolidated Financial Statements.