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
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
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
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
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
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
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
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
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
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
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
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