-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GUVz0IfEBoSmT7Z7d5dumojEdGCsp+2JHkijLIFL03KGsFVrMlPeryIgV81s8brH sPZg2ExBYymiQr68nodSyw== 0000897069-03-000875.txt : 20030812 0000897069-03-000875.hdr.sgml : 20030812 20030812112459 ACCESSION NUMBER: 0000897069-03-000875 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030531 FILED AS OF DATE: 20030812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAL MAINE FOODS INC CENTRAL INDEX KEY: 0000016160 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - LIVESTOCK & ANIMAL SPECIALTIES [0200] IRS NUMBER: 640500378 STATE OF INCORPORATION: DE FISCAL YEAR END: 0529 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-04892 FILM NUMBER: 03836412 BUSINESS ADDRESS: STREET 1: 3320 WOODROW WILSON DRIVE CITY: JACKSON STATE: MS ZIP: 39207 BUSINESS PHONE: 6019486813 MAIL ADDRESS: STREET 1: 3320 WOODROW WILSON DR CITY: JACKSON STATE: MS ZIP: 39209 FORMER COMPANY: FORMER CONFORMED NAME: CHICKEN CHEF SYSTEMS INC DATE OF NAME CHANGE: 19710315 10-K 1 sdc503.txt 10-K ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR FISCAL YEAR ENDED May 31, 2003 |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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) Securities registered pursuant to Section 12 (b) of the Act: NONE Securities registered pursuant to Section 12 (g) of the Act: Common Stock, $0.01 par value 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 ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X) Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes No X ----- ----- As of August 1, 2003, 10,564,388 shares of the registrant's Common Stock, $0.01 par value, and 1,200,000 shares of the registrant's Class A Common Stock, $0.01 par value, were outstanding. The aggregate market value of the common stock held by non-affiliates of the registrant on that date was $16,014,848, computed at the closing price on that date as reported by the National Association of Securities Dealers Automated Quotation System. DOCUMENTS INCORPORATED BY REFERENCE Pursuant to General Instruction G(3), the responses to Items, 10, 11, 12 and 13 of Part III of this report are incorporated herein by reference to the information contained in the Company's Proxy Statement for its 2003 Annual Meeting of Shareholders to be held on October 10, 2003, to be filed with the Securities and Exchange Commission on or about September 17, 2003. TABLE OF CONTENTS Page Item Number - ---- ------ Part I 1. Business 3 2. Properties 8 3. Legal Proceedings 9 4. Submission of Matters to a Vote of Security Holders 9 Part II 5. Market for the Registrant's Common Equity and Related Stockholder Matters 10 6. Selected Financial Data 11 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 7A. Quantitative and Qualitative Disclosures About Market Risk 18 8. Financial Statements and Supplementary Data 18 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 18 Part III 10. Directors and Executive Officers of the Registrant 19 11. Executive Compensation 19 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 19 13. Certain Relationships and Related Transactions 19 14. Controls and Procedures 19 Part IV 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 19 2 PART I ITEM 1. BUSINESS General Cal-Maine Foods, Inc. ("Cal-Maine" or the "Company") was incorporated in Delaware in 1969. The Company's primary business is the production, cleaning, grading, and packaging of fresh shell eggs for sale to shell egg retailers. Shell egg sales, including feed sales to outside egg producers, accounted for approximately 99% of the Company's net sales in fiscal 2003 and 98% in fiscal 2002. The Company is the largest producer and distributor of fresh shell eggs in the United States and during fiscal 2003, had sales of approximately 571 million dozen shell eggs. This volume represents approximately 13% of all shell eggs sold in the United States. The Company markets the majority of its eggs in 26 states, primarily in the southwestern, southeastern, mid-western and mid-Atlantic regions of the United States. The Company's principal executive offices are located at 3320 Woodrow Wilson Avenue, Jackson, Mississippi 39209, and its telephone number is 601-948-6813. Except as otherwise indicated by the context, references herein to "the Company" or "Cal-Maine" include all subsidiaries of the Company. Possible "Going Private" Transaction As reported in the Company's Form 8-K Current Report dated July 11, 2003, at a special meeting held on that date Cal-Maine's Board of Directors unanimously voted to explore the possibility of the Company becoming privately owned. At the same meeting, the Board also appointed a Special Committee comprised of three independent directors to consider the feasibility of "going private" and, in that regard, to ensure that the best interests of the Company and its shareholders would be served by such a course of action. The members of the Special Committee are W.B. Cox, Letitia C. Hughes and R. Faser Triplett, M.D. Following their appointment, the Committee members held an organizational meeting and elected Dr. Triplett as the Committee's Chairman. In addition, the Committee decided to interview certain investment banking firms for purposes of obtaining an opinion as to the fairness from a financial standpoint of the price to be paid by the Company for shares to be purchased in a going private transaction, as well as to assist the Committee in evaluating alternative methods of going private. In addition, the Committee selected and engaged its own independent counsel to advise and represent the Committee on related legal matters. On July 24, 2003, after considering several investment banking firms, the Special Committee engaged Houlihan Lokey Howard & Zukin Financial Advisors, Inc. ("Houlihan Lokey") to serve as investment adviser to the Committee in connection with the possible going private transaction. The selection of Houlihan Lokey was reported by the Committee to the full Board of Directors of the Company at a regular quarterly Directors meeting held the same day. Houlihan Lokey will report to the Special Committee and its final written opinion will be addressed to the full Board of Directors of the Company. All expenses of a going private transaction, including Houlihan Lokey's fee, will be paid by the Company. It is presently contemplated that a going private transaction would be effected by means of a "reverse split" of the Company's Common Stock. This would require an amendment of the Company's Certificate of Incorporation that would result in fractional shares that would be purchased by the Company for cash. If a going private transaction is effected, as to which the Company can make no representation or prediction, the reporting and other applicable requirements of the Securities Exchange Act of 1934 will no longer apply to the Company or to any officer, director or controlling stockholder of the Company. 3 Growth Strategy and Acquisitions The Company has for many years pursued a growth strategy focused on the acquisition of existing shell egg production and processing facilities, as well as the construction of new and more efficient facilities. Since the beginning of fiscal 1989, the Company has consummated ten acquisitions, adding an aggregate of 21 million layers to its capacity, and built six new "in-line" shell egg production and processing facilities and one pullet growing facility, adding 6.5 million layers and 1.5 million growing pullets to its capacity. Each of the new shell egg production facilities generally provides for the processing of approximately 400 cases of shell eggs per hour. These increases in capacity have been accompanied by the retirement of older and less efficient facilities and a reduction in eggs produced by contract producers. The "in-line" facilities result in the gathering, cleaning, grading and packaging of shell eggs by less labor-intensive, more efficient, mechanical means. As a result of the Company's strategy, the Company's total flock, including pullets, layers and breeders, has increased from approximately 6.8 million at May 28, 1988 to an average of approximately 22.7 million for each of the past five fiscal years. Also, the number of dozens of shell eggs sold has increased from approximately 117 million in the fiscal year ended May 28, 1988 to an average of approximately 525.3 million over the past five fiscal years. Net sales amounted to $387.5 million in fiscal 2003 compared to net sales of $69.9 million in fiscal 1988. The Company's acquisitions and construction of larger facilities, described in the tables below, reflect the continuing concentration of shell egg production in the United States in a decreasing number of shell egg producers. The Company believes that a continuation of that concentration trend may result in the reduced cyclicality of shell egg prices, but no assurance can be given in that regard. 4 Acquisitions of Egg Production and Processing Facilities Fiscal Layers Year (1) Seller Location Acquired -------- ------ -------- -------- 1989 Egg City, Inc. Arkansas 1,300,000 1990 Sunny Fresh Foods, Inc. (2) 7,500,000 1991 Sunnyside Eggs, Inc. North Carolina 1,800,000 1994 Wayne Detling Farms Ohio 1,500,000 1995 A & G Farms Kentucky 1,000,000 1997 Sunbest Farms Arkansas 600,000 1997 Southern Empire Egg Farm, Inc. Georgia 1,300,000 1998 J&S Farms / Savannah Valley Egg Georgia 900,000 1999 Hudson Brothers, Inc. Kentucky 1,200,000 2000 Smith Farms Texas/Arkansas 3,900,000 ---------- Total 21,000,000 ========== (1) The Company's fiscal year ends on the Saturday closest to May 31. (2) New Mexico, Kansas, Texas, Alabama, Oklahoma, Arkansas and North Carolina Construction of Egg Production, Pullet Growing and Processing Facilities (1) Fiscal Year Layer Pullet Completed Location Capacity Capacity ----------- -------- -------- -------- 1990 Mississippi 1,000,000 200,000 1992 Louisiana 1,000,000 -- 1992 Mississippi -- 500,000 1994 Mississippi 1,000,000 -- 1996 Texas 1,000,000 250,000 1999 Kansas 1,250,000 250,000 2001 Texas 1,300,000 300,000 ---------- ---------- Total 6,550,000 1,500,000 ========== ========== (1) Does not include construction in Guthrie, Kentucky, commenced in fiscal 2001, and to be completed in the first or second quarter of fiscal 2004 at an estimated cost of $18.0 million, adding approximately 1,500,000 layer capacity. Although it has made no acquisitions in the past three fiscal years, the Company proposes to continue to pursue opportunities for the acquisition of other companies engaged in the production and sale of shell eggs. Federal anti-trust laws require regulatory approval of acquisitions that exceed certain threshold levels of significance. Also, the Company is subject to federal and state laws generally prohibiting anti-competitive conduct. Because the shell egg production and distribution industry is so fragmented, the Company believes that its sales of shell eggs during its last fiscal year represented only approximately 13% of domestic shell egg sales notwithstanding that it is the largest producer and distributor of shell eggs in the United States based on independently prepared industry statistics. The Company believes that regulatory approval of any future acquisitions either will not be required, or, if required, that such approvals will be obtained. The construction of new, more efficient production and processing facilities is an integral part of the Company's growth strategy. Any such construction will require compliance with applicable environmental laws and regulations, including the receipt of permits, that could cause schedule delays, although the Company has not experienced any significant delays in the past. 5 Shell Eggs Production. The Company's operations are fully integrated. At its facilities, it hatches chicks, grows pullets, manufactures feed and produces and distributes shell eggs. Company-owned facilities accounted for approximately 87% of its total fiscal 2003 egg production, with the balance attributable to contract producers used by the Company. Under Cal-Maine's arrangements with its contract producers, the Company owns the entire flock, furnishes all feed and supplies, owns the shell eggs produced, and assumes all market risks. The contract producers own their facilities and are paid a fee based on production with incentives for performance. The commercial production of shell eggs requires a source of baby chicks for laying flock replacement. The Company produces approximately 98% of its chicks in its own hatcheries and obtains the balance from commercial sources. Feed for the laying flocks is produced by Company-owned and operated mills located in Arkansas, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, Ohio, Oklahoma, South Carolina, Tennessee, and Texas. All ingredients necessary for feed production are readily available in the open market and most are purchased centrally from Jackson, Mississippi. Approximately 97% of the feed for Company flocks is manufactured at feed mills owned and operated by the Company. Poultry feed is formulated using a computer model to determine the least-cost ration to meet the nutritional needs of the flocks. Although most feed ingredients are purchased on an as-needed basis, from time-to-time, when deemed advantageous, the Company purchases ingredients in advance with a delayed delivery of several weeks or a few months. Feed cost represents the largest element of the Company's farm egg production cost, ranging from 54% to 56% of total cost in the last five years, or an average of approximately 55%. Although feed ingredients are available from a number of sources, the Company has little, if any, control over the prices of the ingredients it purchases, which are affected by weather and by various supply and demand factors. Increases in feed costs not accompanied by increases in the selling price of eggs can have a material adverse effect on the results of the Company's operations. However, higher feed costs may encourage producers to reduce production, possibly resulting in higher egg prices. Alternatively, low feed costs can encourage industry overproduction, possibly resulting in lower egg prices. Historically, the Company has tended to have higher profit margins when feed costs are higher. However, this may not be the case in the future. After the eggs are produced, they are cleaned, graded, and packaged. Substantially all of the Company-owned farms have modern "in-line" facilities that mechanically gather, clean, grade and package the eggs produced. The increased use of in-line facilities has generated significant cost savings as compared to the cost of eggs produced from non-in-line facilities. In addition to greater efficiency, the in-line facilities produce a higher percentage of grade A eggs, which sell at higher prices. Eggs produced on farms owned by contractors are brought to the Company's processing plants where they are cleaned, graded and packaged. The Company's egg production activities are subject to risks inherent in the agriculture industry, such as weather conditions and disease factors. These risks are not within the Company's control and could have a material adverse effect on its operations. Also, the marketability of the Company's shell eggs is subject to risks such as possible changes in food consumption opinions and practices reflecting perceived health concerns. The Company operates in a cyclical industry with total demand that is generally level and a product that is price-inelastic. Thus, small increases in production or decreases in demand can have a large adverse effect on prices and vice-versa. However, economic conditions in the egg industry are expected to exhibit less cyclicality in the future. The industry is concentrating into fewer but stronger hands, which should help lessen the extreme cyclicality of the past. Marketing. Of the 571 million dozen shell eggs sold by the Company in the fiscal year ended May 31, 2003, 441 million were produced by Company flocks. 6 Sales of shell eggs primarily are made to national and regional supermarket chains that buy direct from the Company. During fiscal 2003, two customers accounted for more than 10% of net sales. A major Texas grocery retailer, H.E.Butt Grocery Company, accounted for 12.8% of net sales and two affiliated national retailers, Wal-Mart and Sam's Club, on a combined basis accounted for 21.3% of net sales. The top 10 customers accounted for 63% of net sales in the aggregate. The majority of eggs sold are merchandised on a daily or short-term basis. Most sales to established accounts are on open account with terms ranging from seven to 30 days. Although the Company has established long-term relationships with many of its customers, they are free to acquire shell eggs from other sources. The Company sells its shell eggs at prices generally related to independently quoted wholesale market prices. Wholesale prices are subject to wide fluctuations. The prices of its shell eggs reflect fluctuations in the quoted market, and the results of the Company's shell egg operations are materially affected by changes in market quotations. Egg prices reflect a number of economic conditions, such as the supply of eggs and the level of demand, which, in turn, are influenced by a number of factors that the Company cannot control. No representation can be made as to the future level of prices. Shell eggs are perishable. Consequently, the Company maintains very low shell egg inventories, usually consisting of approximately four days of production. 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 demand factors and a natural increase in egg production during the spring and early summer. The Company generally experiences lower sales and net income, and generally losses, in its fourth and first fiscal quarters ending in May and August, respectively. According to U.S. Department of Agriculture reports, the annual per capita consumption of shell eggs in the United States since 1990 has ranged from 234 to 253, averaging 240, with the peak consumption of 253 occurring in 2001. While the Company believes that increased fast food restaurant consumption, reduced egg cholesterol levels and industry advertising campaigns may result in a continuance of the recent increases in current per capita egg consumption levels, no assurance can be given that per capita consumption will not decline in the future. The Company sells the majority of its shell eggs in approximately 26 states across the southwest, southeast, mid-west and mid-Atlantic regions of the United States. Cal-Maine is a major factor in egg marketing in a majority of these states. Many states in Cal-Maine's market area are egg deficit regions; that is, production of fresh shell eggs is less than total consumption. Competition from other producers in specific market areas is generally based on price, service, and quality of product. Strong competition exists in each of the Company's markets. Specialty Eggs. The Company also produces specialty eggs such as Eggo land's Best(TM) and Farmhouse eggs. Egg*land's Best(TM) eggs are patented eggs that are believed by its developers, based on scientific studies, to cause no increase in serum cholesterol when eaten as part of a low fat diet. Cal-Maine produces and processes Egg*land's Best(TM) eggs, under license from Egg*land's Best, Inc. ("EB"), at its existing facilities, under EB guidelines. The product is marketed to the Company's established base of customers at prices that reflect a premium over ordinary shell eggs. Egg*land's Best(TM) eggs accounted for approximately 6.1% of the Company's net sales in fiscal 2003. "Farmhouse" brand eggs are produced at Company facilities by hens that are not caged, and are provided with a diet of natural grains and drinking water that is free of hormones or other chemical additives. Farmhouse eggs accounted for 2.5% of net sales in fiscal 2003. They are intended to meet the demands of consumers who are sensitive to environmental and animal welfare issues. Livestock. The Company's livestock operations consist primarily of the operation of a 1,440 head dairy facility, from which milk sales are made to a major milk processor. Milk and cattle sales were approximately 1% of the Company's net sales in fiscal 2003. Competition. The production, processing, and distribution of shell eggs is an intensely competitive business, which, traditionally, has attracted large numbers of producers. Shell egg competition is generally based on price, service, and quality of production. Although the Company is the largest combined producer, processor, and distributor of shell eggs in the United States, it does not occupy a controlling market position in any area where its eggs are sold. 7 The shell egg production and processing industry has been characterized by a growing concentration of production. In 2002, 62 producers with one million or more layers owned 79% of the 279 million total U.S. layers, compared with the 56 producers with one million or more layers owning 64% of the 232 million total U.S. layers in 1990, and 61 producers with one million or more layers owning 56% of the 248.0 million total U.S. layers in 1985. The Company believes that a continuation of that concentration trend may result in the reduced cyclicality of shell egg prices, but no assurance can be given in that regard. Patents and Tradenames. The Company does not own any patents or proprietary technologies, but does market products under tradenames including Rio Grande, Farmhouse, and Sunups. Cal-Maine produces and processes Eggoland's Best(TM) eggs, under license from EB, as indicated above. Government Regulation. The Company is subject to federal and state regulations relating to grading, quality control, labeling, sanitary control, and waste disposal. As a fully integrated egg producer, the Company's shell egg facilities are subject to USDA and FDA regulation. The Company's shell egg facilities are subject to periodic USDA inspections. Cal-Maine maintains its own inspection program to assure compliance with the Company's own standards and customer specifications. Cal-Maine is subject to federal and state environmental laws and regulations and has all necessary permits. Employees. As of May 31, 2003, the Company had a total of approximately 1,534 employees of whom 1,355 worked in egg production, processing and marketing, 92 were engaged in feed mill operations, 40 in dairy activities, and 47 were administrative employees, including officers, at the Company's executive offices. About 9% of the Company's personnel are part-time. None of the Company's employees are covered by a collective bargaining agreement. The Company considers its relations with employees to be good. ITEM 2. PROPERTIES The Company owns or leases farms, processing plants, hatcheries, feed mills, warehouses, offices and other property located in Alabama, Arkansas, Georgia, Kansas, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, and Texas, as follows: two breeding facilities, two hatcheries, 15 feed mills, 19 production facilities, 19 pullet growing facilities, 20 processing and packing facilities, three wholesale distribution facilities, and a dairy farm. Most of the Company's property is owned and encumbered. See Notes 4, 5, and 6 of the Notes to Consolidated Financial Statements of the Company. The Company operates 332 over-the-road tractors and 411 trailers, of which 241 and 293 are owned, respectively, and the balance is financed with TRAC leases. At May 31, 2003, the Company owned approximately 16,000 acres of land and owned facilities to: Operation Capacity --------- -------- Hatch 16,000,000 - pullet chicks per year Grow (1) 12,000,000 - pullets per year House (2) 19,000,000 - hens Produce 700 - tons of feed per hour Process (3) 7,000 - cases of eggs per hour (1) The Company uses contract growers for the production of an additional 1.1 million pullets. (2) The Company controls approximately 22 million layers, of which 3.0 million are cared for by contract producers. (3) One case equals 30 dozen eggs. 8 Over the past five fiscal years, Cal-Maine's capital expenditures have totaled approximately $128.2 million, including the acquisition of the operations of other businesses. The Company's facilities currently are maintained in good operable condition and are insured to an extent the Company deems adequate. ITEM 3. LEGAL PROCEEDINGS On December 26, 2002, Cal-Maine Farms, Inc.("Cal-Maine Farms"), a Delaware corporation and a wholly owned subsidiary of the Company, was served with process in a civil complaint filed in the Circuit Court of the First Judicial District of Hinds County, Mississippi, on behalf of four plaintiffs, Hunter McWhorter, a minor, his two parents, and Michael Green, an adult. In addition to Cal-Maine Farms, Fred Adams, Dolph Baker, Charlie Collins, R. K. Looper and B. J. Raines, officers of the Company, are also named as defendants. Six other named defendants include Cargill, Incorporated, George's Farms, Inc., Peterson Farms, Inc., Simmons Foods, Inc., Simmons Poultry Farms, Inc., and Tyson Foods, Inc., each of which is engaged in the broiler business. Additional individual defendants with affiliations to the other corporate defendants were also named. The suit alleges the original plaintiffs have suffered medical problems resulting from living near land upon which "litter" from the flocks of hens owned by certain of the defendants was spread as fertilizer. The suit specifically addresses conditions alleged to exist in Washington County, Arkansas, where there is a relatively high concentration of broiler farms. Cal-Maine Farms is not engaged in any broiler production and, compared to the broiler producers, only has a very small portion of the hens located in Washington County, Arkansas. The suit alleges actual damages in the amount of $55,000,000 and requests punitive damages in the amount of $100,000,000. On December 31, 2002, an Amended Complaint was filed, bringing the total number of plaintiffs to 93, of which 67 are alleged to be ill and three are deceased. The damages sought were not amended. An answer has been filed on behalf of Cal-Maine Farms denying the plaintiffs claim but no discovery has taken place. At this time, motions to dismiss on behalf of certain defendants, including Cal-Maine Farms, are pending, but not yet scheduled for hearing. At this stage, it is impossible to evaluate the potential exposure, if any, of Cal-Maine Farms to damages in this suit. The Company is not a party to any other litigation, which, in the opinion of management, is likely to have a material adverse effect on the Company's consolidated financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter ended May 31, 2003. 9 PART II. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The Company's Common Stock is traded on the NASDAQ National Market under the symbol CALM. At May 31, 2003, there were approximately 289 record holders of the Company's Common Stock and approximately 756 beneficial owners whose shares were held by nominees or broker dealers. The following table sets forth the high and low daily sale prices and dividends for four quarters of fiscal 2003 and fiscal 2002. Sales Price Cash ------------------ Dividend Year Ended Fiscal Quarter High Low Declared ---------- -------------- -------- ------- -------- May 31, 2003 First Quarter $ 4.36 $ 3.20 $ .0125 Second Quarter 3.83 2.79 .0125 Third Quarter 4.22 3.17 .0125 Fourth Quarter 5.60 3.20 .0125 June 1, 2002 First Quarter $ 5.07 $ 3.35 $ .0125 Second Quarter 4.64 3.50 .0125 Third Quarter 4.05 2.48 .0125 Fourth Quarter 4.15 2.95 .0125 There is no public trading market for the Class A Common Stock, the majority outstanding shares of which are owned by Fred R. Adams, Jr., Chairman of the Board of Directors and Chief Executive Officer of the Company. The Company's current cash dividend is $.0125 per share on Common Stock, representing an annual cash dividend of $.05 per share. The cash dividend is $.011875 per share on Class A Common Stock, representing an annual cash dividend of $.0475 per share. Under the terms of the Company's agreements with its principal lenders, Cal-Maine is subject to various financial covenants limiting its ability to pay dividends. The Company is required to maintain minimum levels of working capital and net worth, to limit capital expenditures, leasing transactions and additional long-term borrowings, and to maintain various current and cash-flow coverage ratios, among other restrictions. For the foreseeable future, the Company expects to retain the majority of earnings for use in its business. 10 ITEM 6. SELECTED FINANCIAL DATA Fiscal Years Ended
May 31, June 1, June 2, June 3, May 29, 2003 2002 2001 2000 1999 ---------- ---------- ---------- ---------- ---------- (Amounts in thousands, except per share data) Statement of Operations Data: Net sales $ 387,462 $ 326,171 $ 358,412 $ 287,055 $ 287,954 Cost of sales 315,169 291,767 299,417 268,937 242,022 --------- --------- --------- --------- --------- Gross profit 72,293 34,404 58,995 18,118 45,932 Selling, general and administrative 46,029 42,332 42,337 40,059 36,406 --------- --------- --------- --------- --------- Operating income (loss) 26,264 (7,928) 16,658 (21,941) 9,526 Other income (expense): Interest expense (net) (8,096) (8,503) (8,736) (7,726) (5,195) Equity in income (loss) of affiliates 442 (480) 415 130 326 Other 527 547 2,378 2,525 3,330 --------- --------- --------- --------- --------- (7,127) (8,436) (5,943) (5,071) (1,539) --------- --------- --------- --------- --------- Income (loss) before income tax 19,137 (16,364) 10,715 (27,012) 7,987 Income tax expense (benefit) 6,925 (5,790) 3,891 (9,633) 2,907 --------- --------- --------- --------- --------- Net income (loss) $ 12,212 $ (10,574) $ 6,824 $(17,379) $ 5,080 ========= ========= ========= ========= ========= Net income (loss) per common share: Basic $ 1.04 $ (.90) $ .57 $ (1.41) $ 0.39 ========= ========= ========= ========= ========= Diluted $ 1.03 $ (.90) $ .56 $ (1.41) $ 0.39 ========= ========= ========= ========= ========= Cash dividends declared per share $ 0.050 $ 0.050 $ 0.050 $ 0.048 $ 0.045 ========= ========= ========= ========= ========= Weighted average shares outstanding: Basic 11,764 11,764 12,051 12,362 12,999 ========= ========= ========= ========= ========= Diluted 11,862 11,764 12,120 12,362 13,114 ========= ========= ========= ========= ========= Balance Sheet Data: Working capital $ 27,749 $ 17,310 $ 28,386 $ 18,485 $ 48,501 Total assets 235,392 229,654 234,752 231,899 213,682 Total debt (including current portion) 108,244 118,362 118,340 119,736 84,004 Total stockholders' equity 66,085 54,460 66,196 61,353 80,584
ITEM 7. 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 nearest to May 31 which was May 31, 2003 (52 weeks) June 1, 2002 (52 weeks) and June 2, 2001 (52 weeks) for the most recent three fiscal years. 11 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 accounted for 99% of the Company's net sales in fiscal 2003 and 98% in fiscal 2002. 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 13% 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, as needed, for resale by the Company from outside producers. 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 55% 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 years indicated, certain items from the Company's consolidated statements of operations expressed as a percentage of net sales. Percentage of Net Sales Fiscal Years Ended May 31, 2003 June 1, 2002 June 2, 2001 ------------ ------------ ------------ Net sales 100.0% 100.0% 100.0% Cost of sales 81.3 89.5 83.5 ----- ----- ----- Gross profit 18.7 10.5 16.5 Selling, general & administrative expenses 11.9 12.9 11.8 ----- ----- ----- Operating income (loss) 6.8 (2.4) 4.7 Other income (expense) (1.9) (2.6) (1.7) ----- ----- ----- Income (loss) before taxes 4.9 (5.0) 3.0 Income tax expense (benefit) 1.8 (1.8) 1.1 ----- ----- ----- Net income (loss) 3.1% (3.2)% 1.9% ===== ===== ===== 12 Fiscal Year Ended May 31, 2003 Compared to Fiscal Year Ended June 1, 2002 Net Sales. Net sales for the fiscal year ended May 31, 2003 were $387.5 million, an increase of $61.3 million, or 18.8%, from net sales of $326.2 million for fiscal 2002. Total dozens of eggs sold increased in fiscal 2003 and egg selling prices increased as compared with prices in fiscal 2002. In fiscal 2003, total dozens of shell eggs sold were 570.7 million, an increase of 8.9 million dozen, or 1.6%, compared to 561.8 million dozen sold in fiscal 2002. Consumer demand was good and egg supply was balanced, which resulted in higher egg selling prices during fiscal 2003. The Company's average selling price of shell eggs increased from $.549 per dozen for fiscal 2002 to $.645 per dozen for fiscal 2003, an increase of $.096 per dozen, or 17.5%. Cost of Sales. Cost of sales for the fiscal year ended May 31, 2003 was $315.2 million, an increase of $23.4 million, or 8.0%, as compared to cost of sales of $291.8 million for last fiscal year. While dozens sold increased, cost of purchases from outside egg producers and cost of feed ingredients increased, offset by the Company's $9.5 million recovery share of a class action feed ingredient lawsuit. The 1.6 % increase in dozens sold was from increases in dozens produced in Company facilities and in the number of dozens purchased from outside egg producers. The increase in the cost of the eggs purchased from outside producers was due to higher egg market selling prices. Feed cost for fiscal 2003 was $.213 per dozen, compared to $.193 per dozen for last fiscal year, an increase of 10.4%. A 17.5% increase in egg selling prices, offset by higher feed ingredient costs and higher cost of purchases from outside egg producers, resulted in an increase in gross profit from 10.5% of net sales for fiscal 2002 to 18.7% of net sales for fiscal 2003. Selling, General and Administrative Expenses. Selling, general and administrative expense was $46.0 million in fiscal 2003, an increase of $3.7 million, or 8.7%, as compared to an expense of $42.3 million for fiscal 2002. The increase is due to increases in insurance expense, bad debt reserves and value of the Company's stock option plan. Due to overall increases in the insurance market during fiscal 2003, the cost of general business and property insurance increased $1.0 million. In the fourth quarter of fiscal 2003, a customer, Fleming Inc., filed for bankruptcy and the Company adjusted its bad debt allowance for $1.1 million. Due to the increase in the market quote of the Company's stock, from $3.78 per share at June 2, 2002 to $5.24 per share at May 31,2003, the increased value of $1.1 million of the Company's stock option plan liability was recorded. Other selling, general and administrative expenses, including delivery, have increased approximately $500,000. As a percent of net sales, selling, general and administrative expense decreased from 12.9% for fiscal 2002 to 11.9% for fiscal 2003 due to higher average egg selling prices in fiscal 2003. Operating Income (Loss). As a result of the above, the Company's operating income was $26.2 million for fiscal 2003, as compared to an operating loss of $7.9 million for fiscal 2002. As a percent of net sales, the operating income for fiscal 2003 was 6.8%, as compared to an operating loss of 2.4% for fiscal 2002. Other Income (Expense). Other expense for fiscal 2003 was $7.1 million, a decrease of $1.3 million, as compared to other expense of $8.4 million for fiscal 2002. For fiscal 2003, equity in income of affiliates amounted to $442,000 of income as compared to a loss of $480,000 in fiscal 2002. Interest expense decreased $407,000, or 4.8% in fiscal 2003. As a percent of net sales, other expense was 1.9 % in fiscal 2003 and 2.6% in fiscal 2002. Income Taxes. As a result of the above, the Company's pre-tax income was $19.1 million for the fiscal 2003 year, compared to pre-tax loss of $16.4 million for fiscal 2002. The Company had an income tax expense of $6.9 million in fiscal 2003 with an effective tax rate of 36.2%, as compared to income tax benefit of $5.8 million with an effective rate of 35.4% for fiscal 2002. Net Income (Loss). As a result of the above, net income for fiscal 2003 was $12.2 million or $1.03 per diluted share, compared to net loss of $10.6 million, or $0.90 per basic and diluted share for fiscal 2002 13 Fiscal Year Ended June 1, 2002 Compared to Fiscal Year Ended June 2, 2001 Net Sales. Net sales for the fiscal year ended June 1, 2002 were $326.2 million, a decrease of $32.2 million, or 9.0%, from net sales of $358.4 million for fiscal 2001. Total dozens of eggs sold increased in fiscal 2002 and egg selling prices decreased as compared with prices in fiscal 2001. In fiscal 2002, total dozens of shell eggs sold were 561.8 million, an increase of 16.7 million dozen, or 3.1%, compared to 545.1 million dozen sold in fiscal 2001. Although consumer demand was good, increased egg supply resulted in lower egg selling prices during fiscal 2002. The Company's average selling price of shell eggs decreased from $.625 per dozen for fiscal 2001 to $.549 per dozen for fiscal 2002, a decrease of $.076 per dozen, or 12.2%. Cost of Sales. Cost of sales for the fiscal year ended June 1, 2002 was $291.8 million, a decrease of $7.6 million, or 2.5%, as compared to cost of sales of $299.4 million for fiscal 2001. Although dozens sold increased, cost of purchases from outside egg producers and cost of feed ingredients decreased. The 3.1% increase in dozens sold was from increases in dozens produced in Company facilities and in the number of dozens purchased from outside egg producers. The decrease in the cost of the eggs purchased from outside producers was due to lower egg market selling prices. Feed cost for fiscal 2002 was $.193 per dozen, compared to $.197 per dozen for fiscal 2001, a decrease of 2.0%. A 12.2% decrease in egg selling prices, offset by lower feed ingredient costs and lower cost of purchases from outside egg producers, resulted in a decrease in gross profit from 16.5% of net sales for fiscal 2001 to 10.5% of net sales for fiscal 2002. Selling, General and Administrative Expenses. Selling, general and administrative expense was $42.3 million in fiscal 2002 and 2001. On a cost per dozen sold basis, selling, general and administrative remained approximately the same, $.075 per dozen for fiscal 2002, as compared to $.078 per dozen for fiscal 2001. As a percent of net sales, selling, general and administrative expense increased from 11.8% for fiscal 2001 to 12.9% for fiscal 2002 due to lower average egg selling prices in fiscal 2002. Operating Income (Loss). As a result of the above, the Company's operating loss was $7.9 million for fiscal 2002, as compared to operating income of $16.7 million for fiscal 2001. As a percent of net sales, the operating loss for fiscal 2002 was 2.4%, as compared to operating income of 4.7% for fiscal 2001. Other Income (Expense). Other expense for fiscal 2002 was $8.4 million, an increase of $2.5 million as compared to other expense of $5.9 million for fiscal 2001. Income from the settlement of an insurance claim in fiscal 2001 accounted for $1.4 million of the change in other expense in fiscal 2002 as compared to fiscal 2001. For fiscal 2002, equity in income of affiliates was a loss of $480,000 as compared to income of $415,000 in fiscal 2001. Interest expense decreased $232,000, or 2.7% in fiscal 2002. As a percent of net sales, other expense was 2.6 % in fiscal 2002 and 1.7% in fiscal 2001. Income Taxes. As a result of the above, the Company's pre-tax loss was $16.4 million for the fiscal 2002 year, compared to pre-tax income of $10.7 million for fiscal 2001. The Company had an income tax benefit of $5.8 million in fiscal 2002 with an effective tax rate of 35.4%, as compared to income tax expense of $3.9 million with an effective rate of 36.3% for fiscal 2001. Net Income (Loss). As a result of the above, net loss for fiscal 2002 was $10.6 million or $0.90 per basic and diluted share, compared to net income of $6.8 million, or $0.57 per basic share and $0.56 per diluted share for fiscal 2001 14 Capital Resources and Liquidity. The Company's working capital at May 31, 2003 was $27.7 million compared to $17.3 million at June 1, 2002. The Company's current ratio was 1.48 at May 31, 2003 as compared with 1.30 at June 1, 2002. 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, none of which was utilized at May 31, 2003. The Company's long-term debt at May 31, 2003, including current maturities, amounted to $108.2 million, as compared to $118.4 million at June 1, 2002. For the fiscal year ended May 31, 2003, $30.7 million was provided by operating activities. The Company received $529,000 net proceeds from disposal of property, plant and equipment and $205,000 in net cash activities covering notes receivable and investments. In fiscal 2003, $7.5 million was used for construction projects and $5.0 million for purchases of property, plant and equipment. Approximately $587,000 was used for dividend payments on the common stock. Principal payments of $10.1 million were made on long-term debt and $7.0 million was repaid on borrowings on the line of credit. The net result of these activities was an increase in cash and cash equivalents of $1.2 million for fiscal 2003. As discussed in Item 1. Business, the Company is exploring the possibility of becoming privately owned. Proposed funding for the transaction would be provided by a $6.9 million income tax refund receivable, an additional $5.0 million long-term borrowing from an insurance company, and short term borrowings under the Company's bank line of credit. According to U.S. Department of Agriculture reports, the chick hatch for the first six months of calendar 2003 was lower than in the same six-month period in 2002. The projected hen numbers for the balance 2003 and the first half of 2004 should be no greater than the year earlier. This could result in a better egg supply-demand balance in the year ahead. Current projections for the fall 2003 corn and soybean crop are good and could result in reasonable feed ingredient cost for the year ahead. 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 May 31, 2003, the Company is in compliance with the provisions of all loan agreements, including any provisions waived or amended. 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. In fiscal 2001, the Company began construction of a new shell egg production and processing facility in Guthrie, Kentucky, with completion of the facility originally expected in fiscal 2003. Due to weather related construction delays, completion is now expected during the first or second quarter of fiscal 2004. The total cost of the facility is approximately $18.0 million, of which $14.6 million was incurred through May 31, 2003. The Company has commitments from an insurance company to receive $5.0 million in long-term borrowings and from a leasing company to receive $7.5 million applicable to the Guthrie facility. In addition to the construction, the Company has projected capital expenditures of $11.0 million in fiscal 2004, which will be funded by cash flows from operations and additional long-term borrowings. The Company has $2.5 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 20 years beginning in fiscal 1999 or in the first fiscal year in which there is a change in ownership control. Payment of the $2.5 million deferred tax liability would reduce the Company's cash, but would not impact the Company's consolidated statement of operations or stockholders' equity, as these taxes have been accrued and are reflected on the Company's consolidated balance sheet. See Note 10 of Notes to Consolidated Financial Statements. 15 Critical Accounting Policies. The preparation of financial statements in accordance with accounting standards generally accepted in the United States 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. Management suggests that the Company's Summary of Significant Accounting Policies, as described in Note 1 of the Notes to Consolidated Financial Statements, be read in conjunction with this Management's Discussion and Analysis of Financial Condition and Results of Operations. The Company believes the critical accounting policies that most impact the Company's consolidated financial statements are described below. Allowance for Doubtful Accounts. In the normal course of business, the Company extends credit to its customers on a short-term basis. Although credit risks associated with our customers are considered minimal, the Company routinely reviews its accounts receivable balances and makes provisions for probable doubtful accounts. In circumstances where management is aware of a specific customer's inability to meet its financial obligations to the Company (e.g. bankruptcy filings), a specific reserve is recorded to reduce the receivable to the amount expected to be collected. For all other customers, the Company recognizes reserves for bad debts based on the length of time the receivables are past due, generally 100% for amounts more than 60 days past due. Inventories. Inventories of eggs, feed, supplies and livestock are valued principally at the lower of cost (first-in, first-out method) or market. If market prices for eggs and feed grains move substantially lower, the Company would 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 18 weeks. Capitalized flock costs are then amortized over the productive lives of the flocks, generally one to two years. Flock mortality is charged to cost of sales as incurred. High mortality from disease or extreme temperatures would result in abnormal adjustments to write-down 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 and improvements and 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. The Company continually reevaluates the carrying value of its long-lived assets, for events or changes in circumstances, which indicate that the carrying value may not be recoverable. As part of this reevaluation, the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposal. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized to reduce the carrying value of the long-lived asset to the estimated fair value of the asset. Investment in Affiliates. The Company has invested in other companies engaged in the production, processing and distribution of shell eggs and egg products. The Company's ownership percentages in these companies range from less than 20% to 50%. Therefore, these investments are recorded using the cost or the equity method, and accordingly, not consolidated in the Company's financial statements. Changes in the ownership percentages of these investments might alter the accounting methods currently used. The combined total assets and total liabilities of these companies were approximately $51 million and $30 million, respectively, at May 31, 2003. The Company is a guarantor of approximately $7.2 million of long-term debt of one of the affiliates. Goodwill. At May 31, 2003, the Company's goodwill balance represented 1.3% of total assets and 4.8% of stockholders' equity. Goodwill primarily relates to the fiscal 1999 acquisition of Hudson Brothers, Inc. The Company elected to adopt, as of June 3, 2001, Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). Under SFAS 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually, or more frequently if impairment indicators arise, for impairment. An impairment loss would be recorded if the recorded goodwill exceeds its implied fair value. 16 The Company has only one operating segment, which is its sole reporting unit. Accordingly, goodwill is tested for impairment at the entity level. Significant adverse industry or economic changes, or other factors not anticipated could result in an impairment charge to reduce recorded goodwill. Income Taxes. The Company determines its effective tax rate by estimating its permanent differences resulting from differing treatment of items for tax and accounting purposes. The Company is periodically audited by taxing authorities. Any audit adjustments affecting permanent differences could have an impact on the Company's effective tax rate. Impact of Recently Issued Accounting Standards. The Company adopted the provisions of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133) in the first quarter of fiscal 2002. Because the Company is not a party to derivative financial instruments, the adoption of SFAS No. 133 had no effect on the consolidated financial statements of the Company upon adoption. Effective June 3, 2001, the Company adopted Financial Accounting Standards No. 141, "Business Combinations" (SFAS No. 141). SFAS No. 141 eliminates the pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. SFAS No. 141 also includes new criteria to recognize intangible assets separately from goodwill. The requirements of SFAS 141 are effective for any business combination accounted for by the purchase method that is completed after June 30, 2001. The Company also adopted Statement of Financial Accounting Standards No.142, "Goodwill and Other Intangible Assets"(SFAS No 142), effective June 3, 2001. Under SFAS No. 142, goodwill is no longer amortized but reviewed for impairment annually, or more frequently if certain indicators arise. The Company completed its transitional impairment test in the quarter ended December 1, 2001 and no impairment loss resulted. In the first quarter of fiscal 2003, the Company adopted Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). SFAS No. 144 supersedes Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of," (SFAS No. 121), however, it retains the fundamental provisions of SFAS No. 121 related to the recognition and measurement of the impairment of long-lived assets to be "held and used." In addition, SFAS No. 144 provides more guidance on estimating cash flows when performing a recoverability test, requires that a long-lived asset to be disposed other than by sale (e.g., abandoned) be classified as "held and used" until it is disposed of, and establishes more restrictive criteria to classify an asset as "held for sale." The adoption of SFAS No. 144 had no effect on the Company's consolidated results of operations or financial position. In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51" (the Interpretation). The Interpretation requires the consolidation of entities in which an enterprise absorbs a majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently, entities are generally consolidated by an enterprise when it has a controlling financial interest through ownership of a majority voting interest in the entity. The Company has investments in various affiliates (see Note 2) established for the purpose of production, processing, and distribution of shell eggs. These entities are primarily funded with financing from third party lenders, which is secured by first liens on the assets of the entities. The creditors of the entities do not have recourse to the Company, except for one entity for which the Company guarantees 50% of its debt. The Company accounts for these investments on the equity method of accounting, recording its share of the net income or loss. The Company has the ability to exercise significant influence over operating and financial policies. However, the Company does not have a controlling interest in the respective entities. At May 31, 2003, the Company's aggregate net investment in these entities totaled $6 million. The portion of the debt guaranteed was $7.2 million at May 31, 2003. These amounts represent the Company's maximum exposure to loss at May 31, 2003 as a result of its involvement with these entities. The Company is currently evaluating the effects of the issuance of the Interpretation on the accounting for its ownership interests in these entities. 17 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 which are 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS See Note 10 to the Company's Consolidated Financial Statements. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements, schedules, and supplementary data required by this item are listed in Item 14(a) of this report and included at pages F-1 through F-16 and S-1. Quarterly Financial Data: (unaudited, amounts in thousands, except per share data) Fiscal Year 2003 ------------------------------------------------ First Second Third Fourth Quarter Quarter Quarter Quarter --------- --------- --------- --------- Net sales $ 82,218 $ 94,984 $106,822 $103,438 Gross profit 10,071 15,355 24,808 22,059 Net income (loss) (1,712) 2,009 7,605 4,310 Net income (loss) per share: Basic $ (.15) $ .17 $ .65 $ .37 Diluted $ (.15) $ .17 $ .64 $ .36 Fiscal Year 2002 ------------------------------------------------ First Second Third Fourth Quarter Quarter Quarter Quarter --------- --------- --------- --------- Net sales $ 72,428 $ 83,759 $ 86,927 $ 83,057 Gross profit 2,697 9,394 12,019 10,294 Net loss (6,100) (2,059) (551) (1,864) Net loss per share: Basic $ (.52) $ (.18) $ (.05) $ (.16) Diluted $ (.52) $ (.18) $ (.05) $ (.16) ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 18 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information concerning directors and executive officers is incorporated by reference from the Company's definitive proxy statement which is to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 in connection with the Company's 2003 Annual Meeting of Shareholders. ITEM 11. EXECUTIVE COMPENSATION The information concerning executive compensation is incorporated by reference from the Company's definitive proxy statement which is to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 in connection with the Company's 2003 Annual Meeting of Shareholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information concerning security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference from the Company's definitive proxy statement which is to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 in connection with the Company's 2003 Annual Meeting of Shareholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information concerning certain relationships and related transactions is incorporated by reference from the Company's definitive proxy statement which is to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 in connection the Company's 2003 Annual Meeting of Shareholders. ITEM 14. CONTROLS AND PROCEDURES The Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective based on their evaluation of such controls and procedures as of May 31, 2003. There was no change in the Company's internal control over financial reporting during the fiscal quarter ended May 31, 2003 that materially affected, or is reasonably likely to materially affect, the internal control over financial reporting. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements The consolidated financial statements of the Company listed on the accompanying index to consolidated financial statements are filed as part of this report. The financial schedule required by Regulation S-X is filed at page S-1. (b) Reports on Form 8-K No Current Report on Form 8-K was filed by the Company covering an event during the fourth quarter of Fiscal 2003. No amendments to previously filed Forms 8-K were filed during the fourth quarter of fiscal 2003. 19 (c) Exhibits Required by Item 601 of Regulation S-K The following exhibits are filed herewith or incorporated by reference: Exhibit Number Exhibit - ------- ------- 2 Sale and exchange agreements dated September 13, 1999, by and among B & N Poultry, et al., and Cal-Maine Foods, Inc. (Omitted exhibits will be furnished supplementally to the Commission upon request) ******* 3.1 Amended and Restated Certificate of Incorporation of the Registrant.* 3.2 By-Laws of the Registrant, as amended.* 4.1 See Exhibits 3.1 and 3.2 as to the rights of holders of the Registrant's common stock. 10.1 Amended and Restated Term Loan Agreement, dated as of May 29, 1990, between Cal-Maine Foods, Inc. and Cooperative Centrale Raiffeisen - Boerenleenbank B.A., "Rabobank Nederland," New York Branch, and Amended and Restated Revolving Credit Agreement among Cal-Maine Foods, Inc., and Barclays Banks PLD (New York) and Cooperatieve Centrale Raiffeisen-Borenleenbank B.A., dated as of 29 May 1990, and amendments thereto (without exhibits).* 10.1(a) Amendment to Term Loan Agreement (see Exhibit 10.1) dated as of June 3, 1997 (without exhibits). ** 10.2 Note Purchase Agreement, dated as of November 10, 1993, between John Hancock Mutual Life Insurance Company and Cal-Maine Foods, Inc., and amendments thereto (without exhibits).* 10.3 Loan Agreement, dated as of May 1, 1991, between Metropolitan Life Insurance Corporation and Cal-Maine Foods, Inc., and amendments thereto (without exhibits).* 10.4 Employee Stock Ownership Plan, as Amended and Restated.* + 10.5 1993 Stock Option Plan, as Amended.* + 10.6 Wage Continuation Plan, dated as of January1, 1986, among R.K. Looper, B.J. Raines, and the Registrant.* + 10.6(a) Amendment dated October 29, 1997 to Wage Continuation Plan, dated as of January 1, 1986, between B.J. Raines and the Registrant. ****+ 10.7 Wage Continuation Plan, dated as of July 1, 1986, between Jack Self and the Registrant, as amended on September 2, 1994.* + 10.8 Wage Continuation Plan, dated as of April 15, 1988, between Joe Wyatt and the Registrant.* + 10.9 Redemption Agreement, dated March 7, 1994, between the Registrant and Fred R. Adams, Jr.* 10.10 Note Purchase Agreement, dated December 18, 1997, among Cal-Maine Foods, Inc., Cal-Maine Farms, Inc., Cal-Maine Egg Products, Inc., Cal-Maine Partnership, LTD, CMF of Kansas LLC and First South Production Credit Association and Metropolitan Life Insurance Company (without exhibits, except names of guarantors and forms of notes) *** 10.11 Wage Continuation Plan, dated as of January 14, 1999, among Stephen Storm, Charles F. Collins, Bob Scott, and the Registrant *****+ 20 10.12 Secured note purchase agreement dated September 28, 1999 among Cal-Maine Foods, Inc., Cal-Maine Partnership, LTD, and John Hancock Mutual Life Insurance Company, and John Hancock Variable Life Insurance Company (without exhibits, annexes and disclosure schedules) ****** 10.13 1999 Stock Option Plan *********+ 21 Subsidiaries of the Registrant 23 Consent of Independent Auditors 99.1 Certification of The Chief Executive Officer 99.2 Certification of The Chief Financial Officer 99.3 Written statement of The Chief Executive Officer and The Chief Financial Officer ________________________________ + Management contract or compensatory plan. * Incorporated by reference to the same exhibit number in Registrant's Form S-1 Registration Statement No. 333-14809. ** Incorporated by reference to the same exhibit number in Registrant's Form 10-K for fiscal year ended May 31,1997. *** Incorporated by reference to the same exhibit number in Registrant's Form 10-Q for the quarter ended November 29, 1997. **** Incorporated by reference to the same exhibit number in Registrant's Form 10-K for fiscal year ended May 30, 1998. ***** Incorporated by reference to the same exhibit number in Registrant's Form 10-K for fiscal year ended May 29, 1999. ****** Incorporated by reference to the same exhibit number in Registrant's Form 10-Q for the quarter ended November 27, 1999. ******* Incorporated by reference to the same exhibit number in Registrant's Form 8-K, dated September 30, 1999. ******** Incorporated by reference to Registrant's form S-8 Registration Statement No. 333-39940, dated June 23, 2000. The Company agrees to file with the Securities and Exchange Commission, upon request, copies of any instrument defining the rights of the holders of its consolidated long-term debt. (d) Financial Statement Schedules Required by Regulation S-X The financial statement schedule required by Regulation S-X is filed at page S-1. All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, in Jackson, Mississippi, on this 12th day of August, 2003. CAL-MAINE FOODS, INC. /s/ Fred R. Adams, Jr. --------------------------------- Fred R. Adams, Jr. Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date --------- ----- ---- /s/ Fred R. Adams, Jr. Chairman of the Board and August 12, 2003 - ----------------------- Chief Executive Officer Fred R. Adams, Jr. (Principal Executive Officer) /s/ Richard K. Looper Vice Chairman of the Board August 12, 2003 - ----------------------- and Director Richard K. Looper /s/ Adolphus B. Baker President and Director August 12, 2003 - ----------------------- Adolphus B. Baker /s/ Bobby J. Raines Vice President, Chief Financial August 12, 2003 - ----------------------- Officer, Treasurer, Secretary Bobby J. Raines and Director (Principal Financial Officer) /s/ Charles F. Collins Vice President, Controller August 12, 2003 - ----------------------- and Director Charles F. Collins (Principal Accounting Officer) /s/ Jack B. Self Vice President and Director August 12, 2003 - ----------------------- Jack B. Self /s/ Joe M. Wyatt Vice President and Director August 12, 2003 - ----------------------- Joe M. Wyatt /s/ W. D. Cox Director August 12, 2003 - ----------------------- W. D. Cox /s/ R. Faser Triplett Director August 12, 2003 - ----------------------- R. Faser Triplett /s/ Letitia C. Hughes Director August 12, 2003 - ----------------------- Letitia C. Hughes 22 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page ---- Report of Independent Auditors.............................................. F-2 Consolidated Balance Sheets as of May 31, 2003 and June 1, 2002............. F-3 Consolidated Statements of Operations for the years ended May 31, 2003, June 1, 2002 and June 2, 2001................................ F-4 Consolidated Statements of Stockholders' Equity for the years ended May 31, 2003, June 1, 2002 and June 2, 2001.......................... F-5 Consolidated Statements of Cash Flows for the years ended May 31, 2003, June 1, 2002 and June 2, 2001................................ F-6 Notes to Consolidated Financial Statements.................................. F-7 F-1 Report of Independent Auditors The Board of Directors and Stockholders Cal-Maine Foods, Inc. We have audited the accompanying consolidated balance sheets of Cal-Maine Foods, Inc. and subsidiaries as of May 31, 2003 and June 1, 2002, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended May 31, 2003. Our audits also included the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cal-Maine Foods, Inc. and subsidiaries at May 31, 2003 and June 1, 2002, and the consolidated results of their operations and their cash flows for each of the three years in the period ended May 31, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP Jackson, Mississippi July 18, 2003 F-2 Cal-Maine Foods, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands, except share amounts) May 31 June 1 2003 2002 ------------------------ Assets Current assets: Cash and cash equivalents $ 6,092 $ 4,878 Receivables: Trade receivables, less allowance for doubtful accounts of $1,158 in 2003 and $175 in 2002 18,914 15,536 Other 579 1,844 ------------------------ 19,493 17,380 Recoverable federal income taxes 6,860 6,031 Inventories 51,005 46,108 Prepaid expenses and other current assets 1,729 911 ------------------------ Total current assets 85,179 75,308 Other assets: Notes receivable and investments 7,254 7,116 Goodwill 3,147 3,147 Other 1,620 1,865 ------------------------ 12,021 12,128 Property, plant and equipment, less accumulated depreciation 138,192 142,218 ------------------------ Total assets $ 235,392 $ 229,654 ======================== Liabilities and stockholders' equity Current liabilities: Note payable to bank $ -- $ 7,000 Trade accounts payable 21,386 18,467 Accrued wages and benefits 5,642 5,621 Accrued expenses and other liabilities 6,004 4,779 Current maturities of long-term debt 12,592 10,364 Deferred income taxes 11,806 11,767 ------------------------ Total current liabilities 57,430 57,998 Long-term debt, less current maturities 95,652 107,998 Other noncurrent liabilities 1,481 1,450 Deferred income taxes 14,744 7,748 ------------------------ Total liabilities 169,307 175,194 Stockholders' equity: Common stock, $.01 par value: Authorized shares - 30,000,000 Issued and outstanding shares - 17,565,200 176 176 Class A common stock, $.01 par value: Authorized shares - 1,200,000 Issued and outstanding shares - 1,200,000 12 12 Paid-in capital 18,784 18,784 Retained earnings 60,212 48,587 Common stock in treasury (7,000,812 shares in 2003 and 2002) (13,099) (13,099) ------------------------ Total stockholders' equity 66,085 54,460 ------------------------ Total liabilities and stockholders' equity $ 235,392 $ 229,654 ======================== See accompanying notes. F-3 Cal-Maine Foods, Inc. and Subsidiaries Consolidated Statements of Operations (in thousands, except per share amounts) Fiscal year ended ------------------------------------ May 31 June 1 June 2 2003 2002 2001 ------------------------------------ Net sales $ 387,462 $ 326,171 $ 358,412 Cost of sales 315,169 291,767 299,417 ------------------------------------ Gross profit 72,293 34,404 58,995 Selling, general and administrative 46,029 42,332 42,337 ------------------------------------ Operating income (loss) 26,264 (7,928) 16,658 Other income (expense): Interest expense (8,272) (8,580) (9,072) Interest income 176 77 336 Equity in income (loss) of affiliates 442 (480) 415 Other, net 527 547 2,378 ------------------------------------ (7,127) (8,436) (5,943) ------------------------------------ Income (loss) before income taxes 19,137 (16,364) 10,715 Income tax expense (benefit) 6,925 (5,790) 3,891 ------------------------------------ Net income (loss) $ 12,212 $ (10,574) $ 6,824 ==================================== Net income (loss) per share: Basic $ 1.04 $ (.90) $ .57 ==================================== Diluted $ 1.03 $ (.90) $ .56 ==================================== Weighted average shares outstanding: Basic 11,764 11,764 12,051 ==================================== Diluted 11,862 11,764 12,120 ==================================== See accompanying notes. F-4 Cal-Maine Foods, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity (in thousands, except per share amounts)
Common Stock ------------------------------------------------------------ Class A Class A Treasury Treasury Paid-in Retained Shares Amount Shares Amount Shares Amount Capital Earnings Total ------------------------------------------------------------------------------------------------ Balance at June 3, 2000 17,565 $176 1,200 $12 6,551 $(11,154) $18,784 $53,535 $61,353 Purchases of common stock for treasury -- -- -- -- 313 (1,374) -- -- (1,374) Cash dividends paid ($.05 per common share) -- -- -- -- -- -- -- (607) (607) Net income for fiscal 2001 -- -- -- -- -- -- -- 6,824 6,824 ------------------------------------------------------------------------------------------------ Balance at June 2, 2001 17,565 176 1,200 12 6,864 (12,528) 18,784 59,752 66,196 Purchases of common stock For treasury -- -- -- -- 137 (571) -- -- (571) Cash dividends paid ($.05 per Common share) -- -- -- -- -- -- -- (591) (591) Net loss for fiscal 2002 -- -- -- -- -- -- -- (10,574) (10,574) ------------------------------------------------------------------------------------------------ Balance at June 1, 2002 17,565 176 1,200 12 7,001 (13,099) 18,784 48,587 54,460 Cash dividends paid ($.05 per Common share) (587) (587) Net income for fiscal 2003 12,212 12,212 ------------------------------------------------------------------------------------------------ Balance at May 31, 2003 17,565 $176 1,200 $12 7,001 $(13,099) $18,784 $60,212 $66,085 ================================================================================================
See accompanying notes. F-5 Cal-Maine Foods, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) Fiscal year ended --------------------------------- May 31 June 1 June 2 2003 2002 2001 --------------------------------- Cash flows from operating activities Net income (loss) $ 12,212 $(10,574) $ 6,824 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 16,624 17,310 17,542 Deferred income taxes 7,035 241 3,406 Equity in (income) loss of affiliates (442) 480 (415) Gain on disposal of property, plant and equipment (327) (185) (201) Change in operating assets and liabilities: Receivables and other assets (3,670) (7,397) 2,976 Inventories (4,897) 1,014 (3,209) Accounts payable, accrued expenses and other liabilities 4,196 (625) 3,500 --------------------------------- Net cash provided by operating activities 30,731 264 30,423 Cash flows from investing activities Purchases of property, plant and equipment (12,546) (15,552) (14,060) Payments received on notes receivable and from investments 420 456 1,697 Increase in notes receivable and investments (215) (379) (1,331) Net proceeds from disposal of property, plant and equipment 529 1,100 736 --------------------------------- Net cash used in investing activities (11,812) (14,375) (12,958) Cash flows from financing activities Net borrowings (payments) on note payable to bank (7,000) 7,000 (7,500) Long-term borrowings -- 9,000 5,040 Principal payments on long-term debt (10,118) (8,978) (6,436) Purchases of common stock for treasury -- (571) (1,374) Payments of dividends (587) (591) (607) --------------------------------- Net cash provided by (used in) financing activities (17,705) 5,860 (10,877) --------------------------------- Increase (decrease) in cash and cash equivalents 1,214 (8,251) 6,588 Cash and cash equivalents at beginning of year 4,878 13,129 6,541 --------------------------------- Cash and cash equivalents at end of year $ 6,092 $ 4,878 $ 13,129 ================================= See accompanying notes. F-6 Cal-Maine Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements (in thousands, except share and per share amounts) May 31, 2003 1. Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Cal-Maine Foods, Inc. and its subsidiaries (the "Company") all of which are wholly-owned. All significant intercompany transactions and accounts have been eliminated in consolidation. Business The Company is engaged in the production, processing and distribution of shell eggs and livestock operations. The Company's operations are significantly affected by the market price fluctuation of its principal products sold, shell eggs, and the costs of its principal feed ingredients, corn and other grains. Primarily all of the Company's sales are to wholesale egg buyers in the southeastern, southwestern, mid-western and mid-Atlantic regions of the United States. Credit is extended based upon an evaluation of each customer's financial condition and credit history and generally collateral is not required. Credit losses have consistently been within management's expectations. One customer accounted for 12.8%, 13.3%, and 13.2% of the Company's net sales in fiscal 2003, 2002 and 2001, respectively. Another customer accounted for 21.3% and 19.2% of the Company's net sales in fiscal 2003 and 2002, respectively. Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles general accepted in the United States requires management to make estimates and assumptions that affect the amount reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Inventories Inventories of eggs, feed, supplies and livestock are valued principally at the lower of cost (first-in, first-out method) or market. The cost associated with flocks, consisting principally of chick purchases, feed, labor, contractor payments and overhead costs, are accumulated during a growing period of approximately 18 weeks. Flock costs are amortized over the productive lives of the flocks, generally one to two years. F-7 Property, Plant and Equipment Property, plant and equipment are stated at cost. 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. Impairment of Long-Lived Assets The Company continually reevaluates the carrying value of its long-lived assets for events or changes in circumstances which indicate that the carrying value may not be recoverable. As part of this reevaluation, the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposal. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized through a charge to operations. Intangible Assets Included in other assets are loan acquisition costs which are amortized over the life of the related loan and franchise fees which are amortized over ten years. Goodwill The Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), effective June 3, 2001. Under SFAS 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually, or more frequently if impairment indicators arise, for impairment. Accordingly, the Company ceased amortization of goodwill in fiscal 2002. Had the Company accounted for goodwill under SFAS No. 142 for fiscal 2001, the Company's net income and income per share would have been $6,980 and $.58, respectively. Revenue Recognition and Delivery Costs Revenue is recognized when product is delivered to customers. Costs to deliver product to customers are included in selling, general and administrative expenses in the accompanying consolidated statements of operations and totaled $18,234, $17,954 and $19,036 in fiscal 2003, 2002 and 2001, respectively. Income Taxes Income taxes have been provided using the liability method. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Stock Based Compensation The Company accounts for stock option grants in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees". F-8 The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," which require compensation cost for all stock-based employee compensation plans to be recognized based on the use of a fair value method (in thousands, except per share amounts): Fiscal year ended ----------------------------------- May 31 June 1 June 2 2003 2002 2001 ----------------------------------- Net income (loss) $ 12,212 $ (10,574) $ 6,824 Add: Stock-based employee compensation expense included in reported net income 716 (154) 243 Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards 422 8 239 ----------------------------------- Pro forma net income (loss) $ 12,506 $ (10,736) $ 6,828 =================================== Earnings per share: Basic-- as reported $ 1.04 $ (.90) $ .57 =================================== Basic-- pro forma 1.06 (.91) .57 =================================== Diluted-- as reported $ 1.03 $ (.90) $ .56 =================================== Diluted-- pro forma 1.05 (.91) .56 =================================== Net Income (Loss) per Common Share Basic earnings (loss) per share are based on the weighted average common shares outstanding. Diluted earnings (loss) per share include any dilutive effects of options and warrants. Impact of Recently Issued Accounting Standards In the first quarter of fiscal 2003, the Company adopted Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). SFAS No. 144 supersedes Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of," (SFAS No. 121), however, it retains the fundamental provisions of SFAS No. 121 related to the recognition and measurement of the impairment of long-lived assets to be "held and used." In addition, SFAS No. 144 provides more guidance on estimating cash flows when performing a recoverability test, requires that a long-lived asset to be disposed other than by sale (e.g., abandoned) be classified as "held and used" until it is disposed of, and establishes more restrictive criteria to classify an asset as "held for sale." The adoption of SFAS No. 144 had no effect on the Company's consolidated results of operations or financial position. In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51" (the Interpretation). The Interpretation requires the consolidation of entities in which an enterprise absorbs a majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently, entities are generally consolidated by an enterprise when it has a controlling financial interest through ownership of a majority voting interest in the entity. F-9 The Company has investments in various affiliates (see Note 2) established for the purpose of production, processing, and distribution of shell eggs. These entities are primarily funded with financing from third party lenders, which is secured by first liens on the assets of the entities. The creditors of the entities do not have recourse to the Company, except for one entity for which the Company guarantees 50% of its debt. The Company accounts for these investments on the equity method of accounting, recording its share of the net income or loss. The Company has the ability to exercise significant influence over operating and financial policies. However, the Company does not have a controlling interest in the respective entities. At May 31, 2003, the Company's aggregate net investment in these entities totaled $6 million. The portion of the debt guaranteed was $7.2 million at May 31, 2003. These amounts represent the Company's maximum exposure to loss at May 31, 2003 as a result of its involvement with these entities. The Company is currently evaluating the effects of the issuance of the Interpretation on the accounting for its ownership interests in these entities. Fiscal Year The Company's fiscal year-end is on the Saturday nearest May 31, which was May 31, 2003, June 1, 2002 (52 weeks) and June 2, 2001 (52 weeks),for the most recent three fiscal years. 2. Investment in Affiliates The Company owns 50% of Cumberland Milling JV, Specialty Eggs LLC and Delta Egg Farm, LLC ("Delta Egg") and 44% of American Egg Products, Inc. at May 31, 2003. The Company owned 50% of BCM Egg Company ("BCM") a partnership, through May 2000, at which time the Company acquired the other 50% partnership interest. Investment in affiliates, recorded using the equity method of accounting, totaled $6,042 and $5,230 at May 31, 2003 and June 1, 2002, respectively. Equity in income or (loss) of $442, ($480) and $415, from these entities have been included in the consolidated statements of operations for fiscal 2003, 2002 and 2001, respectively. The Company is a guarantor of 50% of Delta Egg's long-term debt, which totaled approximately $14.4 million at May 31, 2003. Delta Egg's long-term debt is secured by substantially all fixed assets of Delta Egg and is due in monthly installments through fiscal 2009. Delta Egg is engaged in the production, processing and distribution of shell eggs. The other 50% owner also guarantees the debt. The guarantee arose when Delta Egg borrowed funds to construct its production and processing facility in 1999. The guarantee would be required if Delta Egg is not able to pay the debt. Management of the Company believes this possibility is unlikely because Delta Egg is profitable and is now well capitalized. 3. Inventories Inventories consisted of the following: May 31 June 1 2003 2002 ------------------------ Flocks $ 33,070 $ 30,836 Eggs 2,752 2,257 Feed and supplies 12,597 10,073 Livestock 2,586 2,942 ------------------------ $ 51,005 $ 46,108 ======================== F-10 4. Property, Plant and Equipment Property, plant and equipment consisted of the following: May 31 June 1 2003 2002 ------------------------ Land and improvements $ 33,285 $ 32,846 Buildings and improvements 97,175 91,567 Machinery and equipment 129,893 128,675 Construction-in-progress 7,318 5,608 ------------------------ 267,671 258,696 Less accumulated depreciation 129,479 116,478 ------------------------ $ 138,192 $ 142,218 ======================== Depreciation expense was $16,370, $17,067 and $17,014 in fiscal 2003, 2002 and 2001, respectively. 5. Leases Future minimum payments under noncancelable operating leases that have initial or remaining noncancelable terms in excess of one year at May 31, 2003 are as follows: 2004 $ 9,064 2005 8,433 2006 7,996 2007 7,606 2008 5,744 Thereafter 2,687 --------- Total minimum lease payments $ 41,530 ========= Substantially all of the leases provide that the Company pay taxes, maintenance, insurance and certain other operating expenses applicable to the leased assets. The Company has guaranteed under certain operating leases the residual value of transportation equipment at the expiration of the leases. Rent expense was $9,457, $9,122 and $9,622 in fiscal 2003, 2002 and 2001, respectively. Included in rent expense are vehicle rents totaling $2,336, $2,444 and $2,892 in fiscal 2003, 2002 and 2001, respectively. F-11 6. Credit Facilities and Long-Term Debt Long-term debt consisted of the following: May 31 June 1 2003 2002 ------------------------- Note payable at 6.7%; due in monthly installments of $100, plus interest, maturing in 2009 $ 13,200 $ 14,400 Note payable at a variable rate of 4.75% at June 1, 2002; due in quarterly installments of $350, plus interest, maturing in 2007 9,329 10,850 Note payable at 8.26%; due in monthly installments of $155 beginning in 2004, including interest, maturing in 2015 16,000 16,000 Series A Senior Secured Notes at 6.87%; due in annual principal installments of $1,917 beginning in December 2002 through 2009 with interest due semi-annually 9,583 11,500 Series B Senior Secured Notes at 7.18%; due in annual principal installments of $2,143 beginning in December 2003 through 2009 with interest due semi-annually 15,000 15,000 Industrial revenue bonds at 7.21%; due in monthly installments of $120, including interest, maturing in 2011 10,853 11,528 Note payable at 7.64%; due in monthly installments of $114, including interest, maturing in 2015 6,159 7,028 Note payable at 7.75%; due in monthly installments of $55, plus interest, maturing in 2009 3,800 4,460 Note payable at 8.25%; due in monthly installments of $79, including interest, maturing in 2004 751 1,596 Note payable at 7.56%; due in monthly installments of $75 beginning in July 2001, plus interest, maturing in 2009 11,600 12,500 Note payable at 7%; due in quarterly installments of $107, plus interest, maturing in 2009 4,716 5,143 Note payable at 7.1%; due in quarterly installments of $214, plus interest, maturing in 2008 4,502 5,358 Note payable at 7.5%; due in monthly installments of $50, including interest, maturing in 2011 2,614 2,841 Other 137 158 ------------------------- 108,244 118,362 Less current maturities 12,592 10,364 ------------------------- $ 95,652 $ 107,998 ========================= F-12 The aggregate annual fiscal year maturities of long-term debt at May 31, 2003 are as follows: 2004 $ 12,592 2005 12,723 2006 12,566 2007 16,354 2008 12,363 Thereafter 41,646 --------- $108,244 ========= The Company has a $35,000 line of credit with three banks. The line of credit, which expires on December 31, 2005, is limited in availability based upon accounts receivable and inventories. The Company had $33.4 million available to borrow under the line of credit at May 31, 2003. Borrowings under the line of credit bear interest at 3% above the federal funds rate. Facilities fees of 0.5% per annum are payable quarterly on the unused portion of the line. Substantially all trade receivables and inventories collateralize the line of credit and property, plant and equipment collateralize the long-term debt. The Company is required, by certain provisions of the loan agreements, to maintain minimum levels of working capital and net worth; to limit dividends, capital expenditures and additional long-term borrowings; and to maintain various current, debt-to-equity and interest coverage ratios. Additionally, the chief executive officer of the Company, or his family, must maintain ownership of not less than 50% of the outstanding voting stock of the Company. Subsequent to May 31, 2003, the Company obtained amendments to revise certain financial covenant requirements of its debt agreements and expects to be in compliance with such requirements through fiscal 2004. Interest of $8,435, $8,915 and $8,966 was paid during fiscal 2003, 2002 and 2001, respectively. Interest of $419, $316 and $347 was capitalized for construction of certain facilities during fiscal 2003, 2002 and 2001, respectively. 7. Employee Benefit Plans The Company maintains a medical plan that is qualified under Section 401(a) of the Internal Revenue Code and not subject to tax under present income tax laws. Under its plan, the Company self-insures, in part, coverage for substantially all full-time employees with coverage by insurance carriers for certain stop-loss provisions for losses greater than $100 for each occurrence. The Company's expenses, including accruals for incurred but not reported claims, were approximately $6,258, $4,790 and $4,570 in fiscal 2003, 2002, and 2001, respectively. The Company has a 401(k) plan which covers substantially all employees. Participants in the Plan may contribute up to the maximum allowed by Internal Revenue Service regulations. The Company does not make contributions to the 401(k)plan. The Company has an employee stock ownership plan (ESOP) that covers substantially all employees. The Company makes contributions to the ESOP of 3% of participants' compensation, plus an additional amount determined at the discretion of the Board of Directors. Contributions may be made in cash or the Company's common stock. The contributions vest 20% annually beginning with the participant's third year of service. Beginning in January 2001, company contributions to the ESOP vest immediately. The Company's contributions to the plan were $2,056, $1,183 and $968 in fiscal 2003, 2002 and 2001, respectively. The Company has deferred compensation agreements with certain officers for payments to be made over specified periods beginning when the officers reach age 65 or over as specified in the agreements. Amounts accrued for these agreements are based upon deferred compensation earned over the estimated remaining service life of each officer. Deferred compensation expense totaled approximately $50 in fiscal 2003, 2002 and 2001. F-13 8. Stock Option Plan The Company has elected to follow APB No. 25 and related Interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", (SFAS No. 123), requires use of option valuation models that were not developed for use in valuing employee stock options. Pro forma information regarding net income and net income per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for fiscal 2003 and 2001: risk-free interest rate of 3% and 7%, respectively; dividend yield of 1%; volatility factor of the expected market price of the Company's common stock of .39 and .29, respectively, and a weighted-average expected life of the options of 5 years. No options were granted by the Company during fiscal 2002. The weighted-average fair value of options granted during fiscal 2003 and 2001 was $1.43 and $1.05, respectively. A summary of the Company's stock option activity and related information is as follows: Weighted-Average Shares Exercise Price --------- ---------------- Outstanding at June 3, 2000 514,000 3.06 Granted 15,000 4.19 Exercised (26,000) 3.00 Forfeited (10,000) 3.00 -------- Outstanding at June 2, 2001 493,000 3.10 Exercised (4,000) 3.00 Forfeited (8,000) 3.00 -------- Outstanding at June 1, 2002 481,000 3.10 Granted 71,000 4.05 Exercised (8,400) 3.38 -------- Outstanding at May 31, 2003 543,600 3.22 ======== The Company has reserved 800,000 shares under its 1993 Stock Option Plan. The options have ten-year terms and vest annually over five years beginning one year from the grant date. At May 31, 2003, no shares were available for grant under the 1993 plan. The Company has reserved 500,000 shares under its 1999 Stock Option Plan, all of which were granted to officers and key employees in fiscal 2000. Each stock option granted under the 1999 Stock Option Plan was accompanied by the grant of a Tandem Stock Appreciation Right ("TSAR"). The options and TSARs have ten-year terms and vest annually over five years beginning one year from the grant date. Upon exercise of a stock option, the related TSAR is also considered to be exercised, and the holder will receive a cash payment from the Company equal to the excess of the fair market value of the Company's common stock and the option exercise price. Compensation expense (benefit) of $1,119, $(240) and $380 applicable to this plan was recognized in fiscal 2003, 2002 and 2001, respectively. The weighted average remaining contractual life of the options outstanding was 7 years at May 31, 2003, 6 years at June 1, 2002 and 8 years at June 2, 2001. Of the total options outstanding, 275,600, 203,800 and 110,000 were exercisable at May 31, 2003, June 1, 2002 and June 2, 2001, respectively. F-14 9. Income Taxes Income tax expense (benefit) consisted of the following: Fiscal year ended ----------------------------------------- May 31 June 1 June 2 2003 2002 2001 ----------------------------------------- Current: Federal $ (81) $(6,031) $ 485 State (29) - - ----------------------------------------- (110) (6,031) 485 Deferred: Federal 6,579 395 3,053 State 456 (154) 353 ----------------------------------------- 7,035 241 3,406 ----------------------------------------- $ 6,925 $(5,790) $ 3,891 ========================================= Significant components of the Company's deferred tax liabilities were as follows: May 31 June 1 2003 2002 ------------------------- Deferred tax liabilities: Property, plant and equipment $ 12,697 $ 12,151 Cash basis temporary differences 2,389 2,548 Inventories 12,837 12,145 Other 2,683 1,842 ------------------------- Total deferred tax liabilities 30,606 28,686 Deferred tax assets: Federal and state net operating loss carryforwards 416 5,994 Other 3,640 3,177 ------------------------- Total deferred tax assets 4,056 9,171 ------------------------- Net deferred tax liabilities $ 26,550 $ 19,515 ========================= Effective May 29, 1988, the Company could no longer use cash basis accounting for its farming subsidiary because of tax law changes. The Taxpayer Relief Act of 1997 provides that taxes on the cash basis temporary differences as of that date are generally payable over 20 years beginning in fiscal 1999 or in full in the first fiscal year in which there is a change in ownership control. The Company uses the farm-price method for valuing inventories for income tax purposes. F-15 The differences between income tax expense (benefit) at the Company's effective income tax rate and income tax expense (benefit) at the statutory federal income tax rate were as follows: Fiscal year ended ----------------------------------- May 31 June 1 June 2 2003 2002 2001 ----------------------------------- Statutory federal income tax (benefit) $ 6,507 $(5,564) $ 3,643 State income taxes (benefit), net 301 (102) 233 Other, net (benefit) 117 (124) 15 ----------------------------------- $ 6,925 $(5,790) $ 3,891 =================================== Federal and state income taxes of $1,610, $100 and $219 were paid in fiscal 2003, 2002 and 2001, respectively. Federal and state income taxes of $1,377, $164 and $4,409 were refunded in fiscal 2003, 2002 and 2001, respectively. The Company has net operating loss carryforwards for state income tax purposes of $37,300, which expire at various dates in fiscal 2015 through 2022. 10. Other Matters The carrying amounts in the consolidated balance sheet for cash and cash equivalents, accounts receivable, notes receivable and investments and accounts payable approximate their fair values. The fair value of the Company's long-term debt is estimated to be $111.2 million. The fair values for notes receivable and long-term debt are estimated using discounted cash flow analysis, based on the Company's current incremental borrowing rates for similar arrangements. The Company's interest expense is sensitive to changes in the general level of U.S. interest rates. The Company maintains certain of its debt as fixed rate in nature to mitigate the impact of fluctuations in interest rates. Under its current policies, the Company does not use interest rate derivative instruments to manage its exposure to interest rate changes. A one percent (1%) adverse move (decrease) in interest rates would adversely affect the net fair value of the Company's debt by $4.1 million at May 31, 2003. The Company is a party to no other market risk sensitive instruments requiring disclosure. The Company is the defendant in certain legal actions. It is the opinion of management, based on advice of legal counsel, that the outcome of these actions will not have a material adverse effect on the Company's consolidated financial position or operations. In Fiscal 2003 and 2002, the Company recognized $9,466 and $1,862, respectively, in vendor settlements pertaining to overcharges for vitamins purchased by the Company over a number of years. The settlements are reflected in the accompanying consolidated financial statements as a reduction of cost of sales. On July 11, 2003, Cal-Maine's Board of Directors voted to explore the possibility of the Company becoming privately held. F-16 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Years ended May 31, 2003, June 1, 2002 and June 2, 2001 (in thousands) Balance Balance at Charged to Write-off at Beginning Cost and of End of Description of Period Expense Accounts Period - -------------------------------------------------------------------------------- Year ended May 31, 2003: Allowance for doubtful accounts $175 $1,279 $296 $1,158 Year ended June 1, 2002: Allowance for doubtful accounts $590 $(5) $410 $175 Year ended June 2, 2001: Allowance for doubtful accounts $305 $678 $393 $590 S-1 CAL-MAINE FOODS, INC. Form 10-K for the fiscal year Ended May 31, 2003 EXHIBIT INDEX Exhibit Number Exhibit ------- ------- 21 Subsidiaries of Cal-Maine Foods, Inc 23 Consent of Independent Auditors 31.1 Certification of The Chief Executive Officer 31.2 Certification of The Chief Financial Officer 32 Written Statement of The Chief Executive Officer and Chief Financial Officer EX-21 3 sdc503a.txt SUBSIDIARIES OF CAL MAINE FOODS Exhibit 21 Percentage of Place of Outstanding Stock or Incorporation Ownership Interest Name of Subsidiary or Organization Held by Registrant - ------------------ --------------- -------------------- Cal-Maine Farms, Inc. Delaware 100% Southern Equipment Distributors, Inc. Mississippi 100% South Texas Applicators, Inc. Delaware 100% Cal-Maine Partnership, Ltd. Texas (1) CMF of Kansas, LLC Delaware (2) - ----------------------- (1) Limited partnership in which Cal-Maine Foods, Inc. has a 1% General Partner interest and Cal-Maine Farms, Inc. has a 99% Limited Partner interest. (2) Limited liability company of which Cal-Maine Foods, Inc. and Cal-Maine Farms, Inc. are members and have 99% and 1% interests, respectively. EX-23 4 sdc503b.txt CONSENT OF INDEPENDENT AUDITORS Exhibit 23 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-20169) pertaining to the Cal-Maine Foods, Inc. 1993 Stock Option Plan and in the Registration Statement (Form S-8 No. 333-29940) pertaining to the Cal-Maine Foods, Inc. 1999 Stock Option Plan of our report dated July 18, 2003, with respect to the consolidated financial statements and schedule of Cal-Maine Foods, Inc. included in this Annual Report (Form 10-K) for the year ended May 31, 2003. /s/ ERNST & YOUNG LLP Jackson, Mississippi August 8, 2003 EX-31.1 5 sdc503c.txt CERTIFICATION OF CEO Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934 I, Fred R. Adams, Jr., CEO , certify that: 1. I have reviewed this Annual Report on Form 10-K of Cal-Maine Foods, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information ; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Fred R. Adams, Jr. - ------------------------------------------------- Fred R. Adams, Jr. Chairman of the Board and Chief Executive Officer Date : August 12, 2003 EX-31.2 6 sdc503d.txt CERTIFICATION OF CFO Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934 I, Bobby J. Raines, CFO , certify that: 1. I have reviewed this Annual Report on Form 10-K of Cal-Maine Foods, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information ; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Bobby J. Raines - ------------------------------------------------- Bobby J. Raines Vice President, Chief Financial Officer, Treasurer and Secretary Date: August 12, 2003 EX-32 7 sdc503e.txt WRITTEN STATEMENT OF CEO AND CFO Exhibit 32 Written Statement of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and Chief Financial Officer of Cal-Maine Foods, Inc.(the "Company"), hereby certify, based on their knowledge, that the Annual Report on Form 10-K of the Company for the year ended May 31, 2003 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Fred R. Adams, Jr. - --------------------------------------- Fred R. Adams, Jr. Chief Executive Officer /s/ Bobby J. Raines - --------------------------------------- Bobby J. Raines Chief Financial Officer Date: August 12, 2003 -----END PRIVACY-ENHANCED MESSAGE-----