UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(mark one)
|X| Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended February 27, 1999
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission file number: 000-04892
CAL-MAINE FOODS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 64-0500378
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
3320 WOODROW WILSON AVENUE, JACKSON, MISSISSIPPI 39209
(Address of principal executive offices) (Zip Code)
(601) 948-6813
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares outstanding of each of the issuer's classes of common
stock (exclusive of treasury shares), as of April 5, 1999.
Common Stock, $0.01 par value 11,603,688 shares
Class A Common Stock, $0.01 par value 1,200,000 shares
1
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CAL-MAINE FOODS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION NUMBER
<S> <C> <C>
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
February 27, 1999 and May 30, 1998 3
Condensed Consolidated Statements of Income -
Three Months and Nine Months Ended
February 27, 1999 and February 28, 1998 4
Condensed Consolidated Statements of Cash Flow -
Nine Months Ended February 27, 1999 and
February 28, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About 12
Market Risk
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAL-MAINE FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
February 27, 1999 May 30, 1998
----------------- ------------
(unaudited) (note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 54,825 $ 41,126
Accounts receivable, net 14,210 13,691
Recoverable federal and state income taxes - 218
Inventories 36,625 41,437
Prepaid expenses and other current assets 608 791
---------- -----------
Total current assets 106,268 97,263
Notes receivable and investments 6,832 5,373
Other assets 1,859 1,183
Property, plant and equipment 169,653 170,912
Less accumulated depreciation (73,725) (71,543)
---------- -----------
95,928 99,369
---------- -----------
TOTAL ASSETS $ 210,887 $ 203,188
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable and accrued expenses $ 26,300 $ 25,756
Current maturities of long-term debt 5,049 4,540
Current deferred income taxes 10,376 10,376
---------- -----------
Total current liabilities 41,725 40,672
Long-term debt, less current maturities 73,052 70,958
Deferred expenses 1,654 1,716
Deferred income taxes 10,295 10,295
---------- -----------
Total liabilities 126,726 123,641
Stockholders' equity:
Common stock $0.01 par value per share:
Authorized shares - 30,000,000
Issued and outstanding shares - 17,565,200 at February 27,
1999 and May 30, 1998 176 176
Class A common stock $0.01 par value: authorized, issued
and outstanding 1,200,000 shares 12 12
Paid-in capital 18,784 18,784
Retained earnings 72,740 67,031
Common stock in treasury - 5,832,012 shares at February
27, 1999 and 5,608, 212 shares at May 30, 1998 (7,551) (6,456)
---------- -----------
Total stockholders' equity 84,161 79,547
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 210,887 $ 203,188
========== ==========
</TABLE>
3
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CAL-MAINE FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
UNAUDITED
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
February 27, 1999 February 28, 1998 February 27, 1999 February 28, 1998
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 77,861 $ 89,344 $ 224,594 $ 232,502
Cost of sales 62,170 74,416 185,519 196,668
-------------------------------------------------------------------------
Gross profit 15,691 14,928 39,075 35,834
Selling, general and
administrative 8,700 9,509 26,921 25,093
-------------------------------------------------------------------------
Operating income 6,991 5,419 12,154 10,741
Other income (expense):
Interest expense, net (934) (446) (2,426) (2,146)
Other 275 839 120 1,095
-------------------------------------------------------------------------
(659) 393 (2,306) (1,051)
-------------------------------------------------------------------------
Income before income taxes 6,332 5,812 9,848 9,690
Income tax expense 2,353 2,109 3,702 3,480
-------------------------------------------------------------------------
NET INCOME $ 3,979 $ 3,703 $ 6,146 $ 6,210
=========================================================================
Net income per common share:
Basic $ .31 $ .28 $ .47 $ .47
=========================================================================
Diluted $ .30 $ .28 $ .46 $ .46
=========================================================================
Weighted average shares
Outstanding:
Basic 13,019 13,194 13,094 13,192
=========================================================================
Diluted 13,134 13,422 13,234 13,436
=========================================================================
</TABLE>
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CAL-MAINE FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
39 Weeks Ended
February 27, 1999 February 28, 1998
------------------ -----------------
<S> <C> <C>
Cash flows provided by operating activities $ 19,373 $ 17,404
Cash flows from investing activities:
Purchases of property, plant and equipment (3,103) (6,361)
Construction of production facilities (6,592) (5,578)
Purchases of shell egg production and processing business - (2,037)
Payments received on notes receivable and from investments 370 93
(Increase) decrease in note receivable, investments and other
assets (1,830) 521
Net proceeds from sale of property, plant and equipment 4,411 832
------------------------------------
Net cash used in investing activities (6,744) (12,530)
Cash flows from financing activities:
Long-term borrowings 6,350 35,500
Principal payments on long-term debt and capital leases (3,747) (23,160)
Purchases of common stock for treasury (1,096) (78)
Sale of common stock from treasury - 79
Redemption of fractional shares of common stock - (1)
Payment of dividends (437) -
------------------------------------
Net cash provided by financing activities 1,070 12,340
------------------------------------
Increase in cash and cash equivalents 13,699 17,214
Cash and cash equivalents at beginning of period 41,126 23,737
------------------------------------
Cash and cash equivalents at end of period $ 54,825 $ 40,951
====================================
</TABLE>
See notes to condensed consolidated financial statements.
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CAL-MAINE FOODS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(in thousands, except share amounts)
February 27, 1999
(unaudited)
1. Presentation of Interim Information
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
article 10 of regulation 5-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the management of
Cal-Maine Foods, Inc. (the "Company"), the accompanying unaudited condensed
consolidated financial statements include all normal adjustments considered
necessary to present fairly the financial position as of February 27, 1999,
and the results of operations for the thirteen and thirty-nine weeks ended
February 27, 1999 and February 28, 1998, and the cash flows for the
thirty-nine weeks ended February 27, 1999 and February 28, 1998. Interim
results are not necessarily indicative of results for a full year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on form 10-K.
The consolidated balance sheet at May 30, 1998 has been derived from the
audited consolidated financial statements at that date but does not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements.
2. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
February 27, 1999 May 30, 1998
---------------------------------------
<S> <C> <C>
Flocks $ 22,862 $ 26,866
Eggs and egg products 2,730 2,683
Feed and supplies 7,791 8,736
Livestock 3,242 3,152
-----------------------------------
$ 36,625 $ 41,437
===================================
</TABLE>
3. Subsequent Event
On April 7, 1999, the Company announced an agreement to purchase all of the
outstanding stock of Hudson Brothers, Inc. of Guthrie, Kentucky. Hudson
Brothers, Inc., with capacity for approximately 1.2 million laying hens,
markets shell eggs primarily in Kentucky and Tennessee. The agreement is
contingent upon the successful completion of due diligence procedures and
other customary closing conditions.
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ITEM 2. MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company is primarily engaged in the production, cleaning, grading,
packing and sale of fresh shell eggs. The Company's fiscal year end is the
Saturday closest to May 31.
The Company's operations are fully integrated. It owns facilities to
hatch chicks, grow pullets, manufacture feed, and produce, process and
distribute shell eggs. The Company currently is the largest producer and
distributor of fresh shell eggs in the United States. The shell egg segment
sales, including feed sales to outside egg producers, accounted for 98% of the
Company's net sales. The Company primarily markets its shell eggs in the
southwestern, southeastern, mid-western and mid-Atlantic regions of the United
States. Shell eggs are sold directly by the Company primarily to national and
regional supermarket chains. Egg products operations, which were not material
to the Company's operations, were discontinued in May 1998.
The Company currently uses contract producers for approximately 31% of
its total egg production. Contract producers operate under agreements with the
Company for the use of their facilities in the production of shell eggs by
layers owned by the Company, which owns the eggs produced. Also, some shell
eggs are purchased, as needed, from outside producers for resale by the
Company.
The Company's operating income or loss is significantly affected by
wholesale shell egg market prices, which can fluctuate widely and are outside
of the Company's control. Retail sales of shell eggs are greatest during the
fall and winter months and lowest during the summer months. Prices for shell
eggs fluctuate in response to seasonal factors and an increase in egg demand
during the winter months.
The Company's cost of production is materially affected by feed costs,
which average about 60% of Cal-Maine's total farm egg production cost. Changes
in feed costs result in changes in the Company's cost of goods sold. The cost
of feed ingredients is affected by a number of supply and demand factors such
as crop production and weather, and other factors, such as the level of grain
exports, over which the Company has little or no control.
FORWARD LOOKING STATEMENTS. Management's discussion contains
forward-looking statements, which involve risks, and uncertainties and the
Company's actual experience may differ materially from that discussed as
follows. Factors that may cause such a difference include, but are not limited
to, those discussed in "Factors Affecting Future Performance", below, as well
as future events that have the effect of reducing the Company's available cash
balances, such as unanticipated operating losses or capital expenditures
related to possible future acquisitions. Readers are cautioned not to place
undue reliance on forward-looking statements, which reflect management's
analysis only as the date hereof. The Company assumes no obligation to update
forward-looking statements. See also the Company's reports as filed from time
to time with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934.
FACTORS AFFECTING FUTURE PERFORMANCE. The Company's future operating
results may be affected by various trends and factors, which are beyond the
Company's control. These include adverse changes in shell egg prices and in
the grain market, as well as the number of laying hens in the nation.
Accordingly, past trends should not be used to anticipate future results and
trends. Further, the Company's prior performance should not be presumed to be
an accurate indication of future performance.
7
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RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the Company's Condensed Consolidated Statements of Income expressed as a
percentage of net sales.
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------
13 Weeks Ended 39 Weeks Ended
Feb. 27, 1999 Feb. 28, 1998 Feb. 27, 1999 Feb. 28, 1998
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 79.8 83.3 82.6 84.6
------------------------------------------------------------------------
Gross profit 20.2 16.7 17.4 15.4
Selling, general &
administrative 11.2 10.6 12.0 10.8
------------------------------------------------------------------------
Operating income 9.0 6.1 5.4 4.6
Other income (expense) (.9) .4 (1.0) (0.4)
------------------------------------------------------------------------
Income before taxes 8.1 6.5 4.4 4.2
Income tax expense 3.0 2.4 1.7 1.5
------------------------------------------------------------------------
Net income 5.1% 4.1% 2.7% 2.7%
========================================================================
</TABLE>
NET SALES
Net sales for the third quarter of fiscal 1999 were $77.9 million, a
decrease of $11.5 million, or 12.9%, as compared to net sales for the third
quarter of fiscal 1998. This decrease is the net result of decreases in dozens
sold, price per dozen sold, and feed sales to outside egg producers. In
addition to these decreases, the Company's egg products division, which
accounted for $1.6 million in sales during the third quarter of fiscal 1998,
closed in May 1998, and therefore did not contribute to net sales for the
current third quarter. Dozens of shell eggs sold for the quarter were 107.5
million dozens, a decrease of 4.7 million dozen, or 4.2%, as compared to the
third quarter of fiscal 1998. The closed egg products division, and the sale
of contract production operations in Missouri during the second current fiscal
quarter accounted for the reduction in dozens sold. For the current quarter of
fiscal 1999, the Company's net average selling price per dozen was $.679 per
dozen, compared to $.706 per dozen for the comparable quarter last fiscal
year, a decrease of $.027 per dozen, or 3.8%. The selling price decrease is
due to increased production and egg supply within the industry, and reduced
export demand. The Company's feed sales to outside egg producers decreased
$2.8 million for the current quarter as compared to the same quarter of last
year. The decrease is due to lower tons sold and selling price per ton. The
lower selling price per ton results from lower cost of feed ingredients as
discussed below in Cost of Sales.
Net sales for the thirty-nine weeks ended February 27, 1999 were $224.6
million, a decrease from last year of $7.9 million, or 3.4%. The decrease
resulted from increases in dozens sold and feed sales, offset by a decrease in
egg selling prices and lack of sales from the closed egg products division. In
comparing the thirty-nine week periods, the egg products division contributed
$4.9 million in net sales during last fiscal year. For the current fiscal
year, dozens sold were 321.1 million dozen, an increase over last fiscal year
of 7.5 million dozen, or 2.4%. The increase in dozens sold was mostly from a
Georgia operation that was acquired in the second quarter of last fiscal year
and an increase in dozens of eggs purchased from outside sources. The
acquisition also accounted for a current year increase of $4.8 million in feed
sales to outside egg producers. For the current period, the Company's net
average selling price per dozen was $.638, compared to $.675 per dozen last
fiscal year, a decrease of $.037 per dozen, or 5.5%. Average large shell egg
market prices also decreased approximately $.037 per dozen for the current
fiscal year as compared to last year's thirty-nine week period. The same egg
market conditions mentioned above for the current quarter caused the decline
in market prices.
8
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COST OF SALES
Total cost of sales for the third quarter ended February 27, 1999 was
$62.2 million, a decrease of $12.2 million, or 16.5%, as compared to a cost of
sales of $74.4 million for the same period last year. The closed egg products
division accounted for $ 1.7 million of the decrease. Lower cost of feed
ingredients, for shell egg production and outside feed sales, and, due to
lower shell egg market prices, lower cost of outside dozens purchased made up
the balance of the decrease. Feed cost per dozen for the third quarter ended
February 27, 1999 was $.197 as compared to a cost per dozen of $.245 for the
third quarter of last fiscal year, a decrease of 19.6%. The lower cost of feed
ingredients is the result of a large 1998 corn and soybean harvest. As the
1999 crop season begins, industry reports currently indicate continuing
favorable feed prices. During the current quarter, the Company purchased
approximately 2% less dozens of outside eggs as compared to last year. Lower
shell egg market prices, offset by improvements in egg production and
purchased egg costs, resulted in an increase in gross profit from 16.7% of net
sales in the quarter ended February 28, 1998 to 20.2% of net sales for the
current quarter.
For the thirty-nine week period ended February 27, 1999, total cost of
sales was $185.5 million, a decrease of $11.2 million, or 5.7%, as compared to
a cost of sales of $196.7 million for last year. The closed egg products
division accounted for $5.3 million of the current decrease. Although, in the
current period, cost of sales was increased by an increase in tons of outside
feed sales, a net decrease in overall cost of sales resulted from lower cost
of feed ingredients and lower cost of dozens of eggs purchased from outside
sources. Feed cost per dozen for the current year was $.198 per dozen, a
decrease of $.056 per dozen, or 22.0%, as compared to last year's cost per
dozen of $.254. As discussed above, the decrease in feed ingredients was the
result of the 1998 crop year. Although dozens of eggs purchased from outside
sources increased, the Company was able to purchase all outside dozens at more
favorable net prices, as discussed above. As in the current quarter
discussion, a decrease in egg selling prices was offset by improvements in egg
production and purchased egg costs for the current thirty-nine week period.
The net result was an increase in gross profit from 15.4% of net sales for the
period ended February 28, 1998, to 17.4% of net sales for the current quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expense for the third quarter ended
February 27, 1999 was $8.7 million, a decrease of $809,000, or 8.5%, as
compared to an expense of $9.5 million for the comparable period last year.
During the third quarter last year, the Company expended approximately
$500,000 in fees, promotions and commissions in developing and expanding
markets, including New York City, for specialty brand eggs. There were no such
extra expenditures this year. Although expenses decreased this fiscal year by
$809,000, selling, general and administrative expense for this current quarter
was 11.2% of net sales, as compared to 10.6% for last year, an increase of
.6%.
For the thirty-nine weeks ended February 27, 1999, selling, general and
administrative expense was $26.9 million, an increase of $1.8 million, or
7.3%, as compared to $25.1 million for the same period last fiscal year.
During the second quarter of the current fiscal year, the Company under FASB
Statement 121, incurred an impairment charge of $500,000 on a facility,
including feed mill and production and distribution properties, that was
closed. For the current period, payroll and overhead increased $554,000 and
employee health benefits are up $740,000. As a percent of net sales, selling,
general and administrative expenses for the current thirty-nine weeks was
12.0%, an increase of 1.2%, as compared to 10.8% of net sales for last fiscal
year.
OPERATING INCOME
As the result of the above, operating income was $7.0 million for the
second quarter ended February 27, 1999, as compared to $5.4 million for last
fiscal year's comparable quarter. As a percent of net sales, the fiscal 1999
quarter had a 9.0% operating income, compared to 6.1% for last fiscal year.
For the thirty-nine weeks ended February 27, 1999, operating income was
$12.2 million, compared to $10.7 million for last fiscal year. As a percent of
net sales, operating income increased from 4.6% for the last fiscal year, to
5.4% for the current year.
9
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OTHER EXPENSE
Other expense for the third quarter ended February 27, 1999 was
$659,000, as compared to other income of $393,000 for the same period last
fiscal year. Net interest expense increased $488,000 and other income
decreased $564,000 for the current quarter as compared to the same quarter
last year. In December 1997, the Company borrowed $20 million in working
capital and, in the current fiscal year, had additional borrowings of $6.4
million. During the third quarter last year, the Company received $540,000
from two insurance claims. As a percent of net sales, other expense has
increased from an income of .4% to an expense of .9% of net sales.
For the thirty-nine weeks ended February 27, 1999, other expense was
$2.3 million, an increase of $1.3 million as compared to $1.1 million for last
fiscal year. Interest expense increased $280,000, for the current year, due to
the debt increase mentioned above. Other income decreased $975,000 for the
current year due to prior year's insurance proceeds of $706,000 and a loss on
disposal of assets during the current year. As a percent of net sales, other
expense was 1% for this year, as compared to .4% for last year.
INCOME TAXES
As a result of the above, the Company's pre-tax income was $6.3 million
for the quarter ended February 27, 1999, compared to pre-tax income of $5.8
million for last year's quarter. For the current quarter, an income tax
expense of $2.4 million was recorded with an effective tax rate of 37.2%, as
compared to an income tax expense of $2.1 million with and effective rate of
36.3% for last year's comparable quarter.
The Company's pre-tax income for the thirty-nine week period ended
February 27, 1999 was $9.8 million, compared to $9.7 million for last year.
For the current thirty-nine week period, an income tax expense of $3.7 million
was recorded with an effective rate of 37.6%, as compared to an income tax
expense of $3.5 million with an effective rate of 35.9% for last year's
comparable period.
The increase in the Company's effective rate for the current year's
quarter and year-to-date, as compared to the effective rate for the Company's
comparable period, is due primarily to the decrease in tax-exempt interest
income.
NET INCOME
Net income for the third quarter ended February 27, 1999 was $4.0
million, or $.30 per diluted share, compared to net income of $3.7 million, or
$.28 per diluted share for last fiscal year's third quarter.
For the thirty-nine week period ended February 27, 1999, net income was
$6.1 million, or $.46 per diluted share, compared to last fiscal year's income
of $6.2 million, or $.46 per diluted share.
CAPITAL RESOURCES AND LIQUIDITY
The Company's working capital at February 27, 1999 was $64.5 million,
compared to $56.6 million at May 30, 1998. The Company's need for working
capital generally is highest in the first and last fiscal quarters ending in
August and May, respectively, when egg prices are normally at seasonal lows.
Seasonal borrowing needs frequently are higher during these periods than
during other fiscal periods. The Company had an unused $35 million line of
credit with three banks at February 27, 1999. The Company's long-term debt at
that date, including current maturities and capitalized lease obligations,
totaled $78.1 million.
10
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Substantially all trade receivables collateralize the Company's line of
credit, and property, plant and equipment collateralize the Company's
long-term debt. The Company is required by certain provisions of these loan
agreements to (1) maintain minimum levels of working capital and net worth;
(2) limit dividends, capital expenditures, lease obligations and additional
long-term borrowings; and (3) maintain various current and cash-flow coverage
ratios, among other restrictions. The Company was in compliance with these
provisions at February 27, 1999.
For the thirty-nine weeks ended February 27, 1999, $19.4 million in net
cash was provided by operating activities. This compares to $17.4 million
provided by operating activities for the comparable period last fiscal year.
For the current thirty-nine week period, $3.1 million was used for purchases
of property, plant and equipment, and $6.6 million used for construction
projects in Chase, Kansas and Waelder, Texas. The Company, as a 50% member,
invested $1.5 million in construction of a joint venture egg operation in
Utah, Delta Egg Farm, LLC. Net cash of $4.4 million was received from sales of
property, plant and equipment. Additional long-term borrowings of $6.4 million
were received and repayments of $3.8 million were made. Approximately $1.5
million was used in payment of stock dividends and purchases of treasury
stock. The net result was an increase in cash of $13.7 million.
At February 27, 1999, the Company had expended, since the start of the
project, approximately $20.0 million in the construction of new shell egg
production, processing and feed mill facilities in Chase, Kansas. The Company
is financing $13.5 million of the estimated $24.0 million total project cost
through fixed rate industrial revenue bonds maturing in fiscal 2011. Also, as
of that date, the Company had expended, since the start of the project,
approximately $4.1 million for construction of new shell egg production and
processing facilities in Waelder, Texas. The estimated cost of construction is
approximately $15.2 million with anticipated borrowings of approximately $10.4
million from an insurance company.
The Company has $3.2 million of deferred tax liability due to a
subsidiary's change from a cash basis to an accrual basis taxpayer on May 29,
1988. THE TAXPAYER RELIEF ACT OF 1997 provides that the taxes on the cash
basis temporary differences as of that date are generally payable over the
next 20 years beginning in fiscal 1999 or in the first fiscal year in which
there is a change in ownership control. Payment of the $3.2 million deferred
tax liability would reduce the Company's cash, but would not impact the
Company's statement of operations or reduce the stockholders' equity, as these
taxes have been accrued and reflected on the Company's balance sheet.
YEAR 2000 ISSUE
The Company currently has a program underway to ensure that all
significant computer systems are substantially Year 2000 compliant by fiscal
year ending May 29, 1999. The program is divided into three major components:
(1) identification of all information technology systems ("IT Systems") and
non-information technology systems ("Non-IT Systems") that are not Year 2000
compliant; (2) repair or replacement of the identified non-compliant systems;
and (3) testing of the repaired or replaced systems. The Company has no "in
house" developed or proprietary IT Systems. The Company uses commercially
developed software, the majority of which is periodically upgraded through
existing maintenance contracts. For part (1), identification, the initial
review phase has been completed. Identification will continue as new
equipment, software and upgrades are installed and as the Company goes through
the testing phase of the program. Review of accounting and financial reporting
systems is substantially finished and the Company is continuing to review
Non-IT Systems that have embedded microprocessors in various types of
equipment. Part (2), repairing and replacing, continues primarily under
maintenance contracts with the Company's software vendors. While most of the
Company's major systems are year 2000 compliant, the software vendors continue
to send new programs, upgrades and patches as they get into final testing
stages of their product. None of the vendors have, to date, indicated any
serious problems or delays in becoming Year 2000 compliant. Part (3), testing,
has begun and will continue until vendors have completed all upgrades and
patches. Testing should be substantially complete in the first quarter ending
in August 1999.
The Company has been contacting key suppliers and customers about the
Year 2000 issue. While no assurances can be given that key suppliers and
business partners will remedy their own Year 2000 issues, the Company, to
date, has not identified any material impact on its ability to continue normal
11
<PAGE>
business operations with suppliers or other third parties who fail to address
the issue.
Actual costs associated with implementation of the Company's Year 2000
program are expected to be insignificant to the Company's consolidated
operations and financial condition. Costs of $50,000 to $100,000, primarily
for hardware, are expected to be incurred. Significantly, all of these costs
are expected to be capitalized since the hardware would have been replaced
even if there were no Year 2000 issue.
The Company will continue to monitor and evaluate the impact of the Year
2000 issue on its operations. Until the Company is into the final testing part
of its program, the risks for potential Year 2000 failures cannot be fully
assessed. Thus, the Company cannot now finalize contingency plans until such
testing is complete. These plans will be developed as potential Year 2000
failures are identified in the final testing stages.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
The following Part I exhibit is filed herewith:
Exhibit
Number Exhibit
------- -------
27 Financial data schedule
b. Reports on Form 8-K
No Current Report on Form 8-K was filed by the Company covering an event
during the third quarter of fiscal 1999.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CAL-MAINE FOODS, INC.
(Registrant)
Date: April 9, 1999 /s/BOBBY J. RAINES
------------------
Bobby J. Raines
Vice President/Treasurer
(Principal Financial Officer)
Date: April 9, 1999 /s/CHARLES F. COLLINS
---------------------
Charles F. Collins
Vice President/Controller
(Principal Accounting Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000016160
<NAME> CAL-MAINE FOODS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-29-1999
<PERIOD-END> FEB-27-1999
<CASH> 54,825
<SECURITIES> 0
<RECEIVABLES> 14,210
<ALLOWANCES> 0
<INVENTORY> 36,625
<CURRENT-ASSETS> 106,268
<PP&E> 169,653
<DEPRECIATION> 73,725
<TOTAL-ASSETS> 210,887
<CURRENT-LIABILITIES> 41,725
<BONDS> 0
0
0
<COMMON> 188
<OTHER-SE> 83,973
<TOTAL-LIABILITY-AND-EQUITY> 210,887
<SALES> 224,594
<TOTAL-REVENUES> 224,594
<CGS> 185,519
<TOTAL-COSTS> 185,519
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,426
<INCOME-PRETAX> 9,848
<INCOME-TAX> 3,702
<INCOME-CONTINUING> 6,146
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,146
<EPS-PRIMARY> .47
<EPS-DILUTED> .46
</TABLE>
