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 September 2, 2000
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 October 1, 2000.
Common Stock, $0.01 par value 10,954,588 shares
Class A Common Stock, $0.01 par value 1,200,000 shares
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CAL-MAINE FOODS, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
September 2, 2000 (unaudited) and June 3, 2000 3
Condensed Consolidated Statements of Operations -
Three Months Ended September 2, 2000 (unaudited) and
August 28, 1999 (unaudited) 4
Condensed Consolidated Statements of Cash Flow -
Three Months Ended September 2, 2000 (unaudited) and
August 28, 1999 (unaudited) 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 of Market Risk
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
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>
SEPTEMBER 2, 2000 JUNE 3, 2000
----------------- ------------
(unaudited) (note1)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,119 $ 6,541
Accounts receivable and notes receivable from affiliate, net 19,103 14,570
Inventories - note 2 44,247 43,913
Prepaid expenses and other current assets 5,346 5,306
---------- ----------
Total current assets 76,815 70,330
Notes receivable and investments 7,855 7,932
Goodwill 3,329 3,390
Other assets 1,960 2,110
Property, plant and equipment 240,096 237,098
Less accumulated depreciation (92,868) (88,961)
---------- ----------
147,228 148,137
---------- ----------
TOTAL ASSETS $237,187 $ 231,899
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank $ 17,500 $ 7,500
Accounts payable and accrued expenses 27,482 25,953
Current maturities of long-term debt 6,605 7,105
Current deferred income taxes 11,287 11,287
---------- ----------
Total current liabilities 62,874 51,845
Long-term debt, less current maturities 111,283 112,631
Deferred expenses 1,489 1,489
Deferred income taxes 3,128 4,581
---------- ----------
Total liabilities 178,774 170,546
Stockholders' equity:
Common stock $0.01 par value per share:
Authorized shares - 30,000,000
Issued and outstanding shares - 17,565,200 at September 2, 2000 176 176
and at June 3, 2000
Class A common stock $0.01 part value, authorized, issued and
outstanding 1,200,000 shares 12 12
Paid-in capital 18,784 18,784
Retained earnings 50,758 53,535
Common stock in treasury-6,593,412 shares at September 2, 2000
and 6,550,912 shares at June 3, 2000 (11,317) (11,154)
---------- ----------
Total stockholders' equity 58,413 61,353
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $237,187 $ 231,899
========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
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
September 2, 2000 August 28, 1999
--------------------------------------------
<S> <C> <C>
Net Sales $ 75,518 $ 59,055
Cost of Sales 67,650 57,322
--------- ---------
Gross Profit 7,868 1,733
Selling, general and administrative 10,112 9,096
--------- ---------
Operating loss (2,244) (7,363)
Other income (expense):
Interest expense, net (2,156) (1,031)
Other 325 (111)
--------- ---------
(1,831) (1,142)
--------- ---------
Loss before income taxes (4,075) (8,505)
Income tax benefit (1,453) (3,141)
--------- ---------
NET LOSS $ (2,622) $ (5,364)
========= =========
Net loss per common share:
Basic $ (.22) $ (.43)
========= =========
Diluted $ (.22) $ (.43)
========= =========
Dividends per common share $ .0125 $ .0125
========= =========
Weighted average shares outstanding:
Basic 12,192 12,450
========= =========
Diluted 12,192 12,450
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
CAL-MAINE FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
13 Weeks Ended
September 2, 2000 August 28, 1999
--------------------------------------------
<S> <C> <C>
Cash used in operations $ (377) $ (8,653)
Investing Activities:
Purchases of property, plant and equipment (665) (2,387)
Construction of production and processing facilities (2,983) (2,684)
Payments received on notes receivable and from investments 194 75
Increase in notes receivable and investments (2,723) (328)
Net proceeds from disposal of property, plant and equipment 297 14
------- ---------
Net cash used in investing activities (5,880) (5,310)
Financing activities:
Net borrowings on note payable to bank 10,000 0
Long-term borrowings - 7,445
Principal payments on long-term debt and capital leases (1,848) (847)
Purchases of common stock for treasury (163) (487)
Payments of dividends (154) (154)
------- ---------
Net cash provided by financing activities 7,835 8,957
------- ---------
Increase (decrease) in cash and cash equivalents 1,578 (8,006)
Cash and cash equivalents at beginning of period 6,541 36,198
------- ---------
Cash and cash equivalents at end of period $8,119 $ 28,192
======= =========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
CAL-MAINE FOODS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(in thousands, except share amounts)
September 2, 2000
(unaudited)
1. Basis of Presentation
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 S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principals for complete financial statements. In the opinion of management,
all adjustments (consisting of normal occurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
three-month period ended September 2, 2000 are not necessarily indicative of
the results that may be expected for the year ended June 2, 2001.
The balance sheet at June 3, 2000 has been derived from the audited
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.
For further information, refer to the consolidated financial
statements and footnotes thereto included in Cal-Maine Foods, Inc.'s annual
report on Form 10-K for the fiscal year ended June 3, 2000.
2. Inventories
<TABLE>
<CAPTION>
Inventories consisted of the following:
September 2, 2000 June 3, 2000
----------------- ------------
<S> <C> <C>
Flocks $29,461 $ 28,417
Eggs 3,375 2,417
Feed and supplies 8,373 10,028
Livestock 3,038 3,051
------- --------
$44,247 $ 43,913
======= ========
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'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. At its facilities it
hatches chicks, grows pullets, manufactures feed, and produces, processes, and
distributes shell eggs. The Company currently is the largest producer and
distributor of fresh shell eggs in the United States. Shell eggs account 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.
The Company currently uses contract producers for approximately 22% 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, shell eggs
are purchased from outside producers for resale, as needed, 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 a natural increase in egg
production during the spring and early summer.
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.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the Company's Condensed Consolidated Statements of Operations expressed
as a percentage of net sales.
PERCENTAGE OF NET SALES
13 Weeks Ended
September 2, 2000 August 28, 1999
----------------- ---------------
Net sales 100.0 % 100.0 %
Cost of sales 89.6 97.1
-------- -------
Gross profit 10.4 2.9
Selling, general 13.4 15.4
& administrative -------- -------
Operating loss ( 3.0) (12.5)
Other expense ( 2.4) ( 1.9)
--------- -------
Loss before taxes ( 5.4) (14.4)
Income tax benefit ( 1.9) ( 5.3)
--------- -------
Net loss (3.5)% ( 9.1)%
========= =========
7
<PAGE>
NET SALES
Net sales for the first quarter of fiscal 2001 were $75.5 million, an
increase of $16.4 million, or 27.9%, as compared to the first quarter of
fiscal 2000. Total eggs sold increased in the current quarter and egg selling
prices increased as compared with prices a year ago. Dozens sold for the
current quarter were 131.3 million dozen, an increase of 22.0 million dozen,
or 20.1%, as compared to the first quarter of last year. The increase in
dozens sold is mostly due to the purchase of Smith Farms in September 1999.
The Company's net average selling price per dozen for the fiscal 2001 first
quarter was $.546, compared to $.493 for the first quarter of last year, an
increase of 10.8%. The Company's net average selling is the blended price for
all sizes and grades of shell eggs, including non-graded egg sales, breaking
stock and undergrades. Although domestic demand for eggs was good and export
demand improved, the first quarter of the Company's fiscal year is usually a
weak quarter as to egg price and volume of sales.
COST OF SALES
Total cost of sales for the first quarter ended September 2, 2000 was
$67.6 million, an increase of $10.3 million, or 18.0%, as compared to the cost
of sales of $57.3 million for last year's first quarter. The increase is due
to the 20.1% increase in dozens sold in the current quarter. Feed cost
remained about the same as last year. Feed cost per dozen for the quarter
ended September 2, 2000 was $.186, compared to $.184 per dozen for the
comparable fiscal 2000 first quarter. Other operating costs also remained in
the same ranges for both the current and last year first fiscal quarter. The
increases in dozens sold and improved egg selling prices resulted in an
increase in gross profit from 2.9% for the quarter ended August 28, 1999 to
10.4% of net sales for the current quarter ended September 2, 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expense for the first quarter ended
September 2, 2000 was $10.1 million, an increase of $1.0 million, or 11.2%, as
compared to the expense of $9.1 million for the comparable period last year.
The increase is due to increased payroll and related expenses from the
acquisition of Smith Farms in September 1999 and due to increased delivery
costs from the increased dozens sold. On a cost per dozen sold basis, selling,
general and administrative expense decreased from $.083 per dozen for the
first quarter of fiscal 2000 to $.077 per dozen for the comparable period of
fiscal 2001, a decrease of $.006 per dozen sold, or 7.2%. As a percent of net
sales, selling, general and administrative expense decreased from 15.4% for
fiscal 2000 to 13.4% for the current fiscal year.
OPERATING LOSS
As the result of the above, an operating loss of $2.2 million was
incurred for the first quarter ended September 2, 2000, as compared to an
operating loss of $7.4 million for last fiscal year's first quarter. As a
percent of sales, the current fiscal 2001 quarter had a 3.0% operating loss,
compared to an operating loss of 12.5% for last year.
OTHER EXPENSE
Other expenses for the first quarter ended September 2, 2000 were $1.8
million, compared to $1.1 million for last year's first quarter. The current
quarter increase of $700,000 is due to an increase in net interest expense of
$1.1 million and an increase in other income of $400,000. Net interest expense
increased as the result of increased borrowing in fiscal 2000. Long and short
term debt at September 2, 2000 was $135.4 million, as compared to $90.3
million at August 28, 1999. Other income increased primarily from an insurance
claim pertaining to fire damage at a production and processing facility. As a
percent of net sales, other expense increased from 1.9% for last year's first
quarter to 2.4% for the current first quarter.
INCOME TAXES
As a result of the above, the Company had a pre-tax loss of $4.1 million
for the quarter ended September 2, 2000, compared to pre-tax loss of $8.5
million for the quarter ended August 28, 1999. For the current first quarter,
an income tax benefit of $1.5 million was recorded with an effective tax rate
of 35.7%, as compared to an income tax benefit of $3.1 million with an
effective tax rate of 36.9% for last year's first quarter.
8
<PAGE>
NET LOSS
As a result of the above, the net loss for the first quarter ended
September 2, 2000 was $2.6 million, or $.22 per basic and diluted share,
compared to net loss of $5.4 million, or $.43 per basic and diluted share for
the quarter ended August 28, 1999.
CAPITAL RESOURCES AND LIQUIDITY
The Company's working capital at September 2, 2000 was $13.9 million
compared to $18.5 million at June 3, 2000. The Company's current ratio was
1.22 at September 2, 2000 as compared with 1.36 at June 3, 2000. The Company's
need for working capital generally is highest in the last and first fiscal
quarters ending in May and August, respectively, when egg prices are normally
at seasonal lows. Seasonal borrowing needs frequently are higher during these
quarters than during other fiscal quarters. The Company has a $35.0 million
line of credit with three banks of which $17.5 million was outstanding at
September 2, 2000. The Company's long-term debt at September 2, 2000,
including current maturities, amounted to $117.9 million, as compared to
$119.7 million at June 3, 2000.
For the thirteen weeks ended September 2, 2000, $377,000 in net cash was
used in operating activities. This compares to net cash used of $8.7 million
for the comparable period last year. In the current fiscal quarter, $665,000
was used for purchases of property, plant and equipment, $297,000 was received
from sales of property, and $3.0 million used for construction projects. Net
cash of $2.7 million was used for additions to notes receivable and
investments. Approximately $163,000 was used for purchase of common stock for
the treasury and $154,000 used for payments of dividends on the common stock.
Additional borrowings of $10.0 million was received on the note payable to
bank, and $1.8 million was used for repayments on long-term debt. The net
result of these current activities was an increase in cash of $1.6 million
since June 3, 2000.
In the first quarter ended August 28, 1999, $2.4 million was used for
purchases of property, plant, and equipment, and $2.7 million used for
construction projects. Approximately $487,000 was used for purchase of common
stock and $154,000 used for dividend payments. Additional long-term borrowings
of $7.4 million were received and repayments of $847,000 were made. The net
result was a decrease of $8.0 million in cash from May 29, 1999 to August 28,
1999.
Certain key industry indicators for shell eggs are currently favorable
for fiscal 2001. Baby chicks placed during the first eight months of calendar
2000 are down over 5% compared to the same period last year. This will tend to
reduce the nationwide laying flock size in the year ahead. Current projections
for total laying flock size in the U. S. during the Company's fiscal 2001 are
only slightly larger than last fiscal year. With anticipated improved demand
by the egg industry, this should result in higher selling prices for eggs.
Current industry indications are for a good corn and soybean crop for 2000.
This should ensure favorable cost of feed for the current fiscal year.
Substantially all trade receivables and inventories 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. At June 3, 2000, the
Company did not meet certain of these provisions on its line of credit
agreement and substantially all of its long-term debt agreements and obtained
amendments to the loan agreements or waivers of these requirements through
fiscal 2001. As of September 2, 2000, the Company did not meet one of these
provisions on one loan agreement and received a waiver on the covenant. The
Company is in compliance with the amended or waived provisions of all loan
agreements. Under certain of the loan agreements, the lenders have the option
to require the prepayment of any outstanding borrowings in the event of a
change in the control of the Company.
At September 2, 2000 the Company had $9.6 million in
construction-in-progress which primarily represents construction of new shell
egg production and processing facilities in Waelder, Tesas and a feed mill in
Chase, Kansas. The estimated cost to complete construction of the Waelder
facility and Chase feed mill in fiscal 2001 is approximately $3.4 million. The
Company has a commitment from an insurance company to receive $13.4 million in
long-term borrowings applicable to the Waelder facility, of which $4.8 million
was funded as of September 2, 2000. In addition to the completion of the
Waelder facility and Chase feed mill, the Company has projected capital
expenditures of $15.0 million in fiscal 2001, which will be funded by cash
flows from operations and additional long-term borrowings.
9
<PAGE>
As part of the Smith Farms purchase in September 1999, the Company is
continuing the construction of egg production and processing facilities in
Searcy, Arkansas and Flatonia, Texas. The projects are being funded by a
leasing company. Total cost of the Searcy facility is approximately $20.0
million and completion is expected in the last quarter of fiscal 2001. Total
cost of the Flatonia facility is approximately $16.0 million and completion is
anticipated in the second quarter of fiscal 2002. These facilities will be
leased with seven year terms and accounted for as operating leases.
FORWARD LOOKING STATEMENTS. The foregoing statements contain
forward-looking statements, which involve risks, and uncertainties and the
Company's actual experience may differ materially from that discussed above.
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 to be 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 beyond the Company's
control. These include adverse changes in shell egg prices and in the grain
markets. 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.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
There have been no material changes in the market risk reported in the
Company's fiscal 2000 annual report on Form 10-K.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit
Number Exhibit
27 Financial data schedule
b. Reports on Form 8-K
No current report on Form 8K was filed by the Company covering an event during
the third quarter of fiscal 2001.
11
<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: October 12, 2000 /s/BOBBY J. RAINES
------------------
Bobby J. Raines
Vice President/Treasurer
(Principal Financial Officer)
Date: October 12, 2000 /s/CHARLES F. COLLINS
---------------------
Charles F. Collins
Vice President/Controller
(Principal Accounting Officer)
12
