-----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, GHPdheJKMCB4EfSfEoSqitDhPBBvjp+WeJLe59mgQzVB+55jfS6WPGZ1hr1cNlI0 D7zRGKAZlSAc2rcJ4m+HDg== /in/edgar/work/20000821/0000904456-00-000047/0000904456-00-000047.txt : 20000922 0000904456-00-000047.hdr.sgml : 20000922 ACCESSION NUMBER: 0000904456-00-000047 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000603 FILED AS OF DATE: 20000821 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAL MAINE FOODS INC CENTRAL INDEX KEY: 0000016160 STANDARD INDUSTRIAL CLASSIFICATION: [0200 ] IRS NUMBER: 640500378 STATE OF INCORPORATION: DE FISCAL YEAR END: 0529 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-04892 FILM NUMBER: 706678 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 10-K 1 0001.txt 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 JUNE 3, 2000 [ ] 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) As of August 10, 2000, 10,983,988 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 $11,466,400, 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 2000 Annual Meeting of Shareholders to be held on October 5, 2000, to be filed with the Securities and Exchange Commission on or about September 5, 2000. TABLE OF CONTENTS Part I Page Item Number - ---- ------ 1. Business................................................................3 2. Properties .............................................................7 3. Legal Proceedings ......................................................8 4. Submission of Matters to a Vote of Security Holders ....................8 Page II 5. Market for the Registrant's Common Stock and Related Stockholder Matters ................................. 9 6. Selected Financial Data ...............................................10 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ...............................................10 7A. Quantitative and Qualitative Disclosures About Market Risk ............15 8. Financial Statements and Supplementary Data ...........................15 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................................15 Part III 10. Directors and Executive Officers of the Registrant ....................16 11. Executive Compensation ................................................16 12. Security Ownership of Certain Beneficial Owners and Management.........16 13. Certain Relationships and Related Transactions ........................16 Part IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K .......16 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 98% of the Company's net sales in fiscal 2000 and 1999. Egg products operations, which accounted for approximately 4% of the Company's net sales in fiscal 1998, were discontinued in May 1998. The Company is the largest producer and distributor of fresh shell eggs in the United States and during fiscal 2000, had sales of approximately 526 million dozen shell eggs. This volume represents approximately 12.9% 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. Growth Strategy and Acquisitions The Company pursues an aggressive growth strategy, including 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 five new "in-line" shell egg production and processing facilities and one pullet growing facility, adding 5.0 million layers and 1.2 million growing pullets to its capacity. Each of the new shell egg production facilities generally provides for the processing of approximately 300 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 new "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 growth 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 19.2 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 428 million for the past five fiscal years. Net sales amounted to $287.1 million in fiscal 2000, more than four times 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. 3 ACQUISITIONS OF EGG PRODUCTION AND PROCESSING FACILITIES
Layers Purchase Fiscal Year(1) Seller Location Acquired Price -------------- ------ -------- -------- -------- 1989 Egg City, Inc. Arkansas 1,300,000 $ 6,716,000 1990 Sunny Fresh Foods, Inc. (2) 7,500,000 21,629,000 1991 Sunnyside Eggs, Inc. North Carolina 1,800,000 6,000,000 1994 Wayne Detling Farms Ohio 1,500,000 12,194,000 1995 A & G Farms Kentucky 1,000,000 2,883,000 1997 Sunbest Farms Arkansas 600,000 1,302,000 1997 Southern Empire Egg Farm, Inc. Georgia 1,300,000 10,654,000 1998 J&S Farms/Savannah Valley Egg Georgia 900,000 3,745,000 1999 Hudson Brothers, Inc. Kentucky 1,200,000 11,534,000 2000 Smith Farms Texas/Arkansas 3,900,000 36,205,000 ---------- ---------- Total 21,000,000 $ 112,862,000 ========== ============= (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 Approximate Completed Location Capacity Capacity Cost --------- -------- -------- -------- ----------- 1990 Mississippi 1,000,000 200,000 $ 10,000,000 1992 Louisiana 1,000,000 -- 10,000,000 1992 Mississippi -- 500,000 3,500,000 1994 Mississippi 1,000,000 -- 9,200,000 1996 Texas 1,000,000 250,000 14,000,000 1999 Kansas 1,250,000 250,000 21,500,000 --------- --------- ------------ Total 5,000,000 1,200,000 $ 68,200,000 ========= ========= ============
[FN] (1) Does not include construction in Waelder, Texas, commenced in fiscal 1998, and to be completed in fiscal 2001 at an estimated cost of approximately $18.7 million, adding approximately 1,300,000 layer and 300,000 pullet capacity. The Company proposes to continue a growth strategy calling 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 12.9% 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. 4 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 78% of its total fiscal 2000 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 Alabama, Arkansas, Georgia, 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 95% 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. Feed cost represents the largest element of the Company's farm egg production cost, ranging from 55% to 64% of total cost in the last five years, or an average of approximately 60%. 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. A small percentage of eggs are sold unprocessed to other processors. 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 which 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 526 million dozen shell eggs sold by the Company in the fiscal year ended June 3, 2000, 388 million were produced by Company flocks. 5 Sales of shell eggs primarily are made to national and regional supermarket chains that buy direct from the Company. During fiscal 2000, one customer, a major Texas grocery retailer, accounted for 10.5% of net sales, and the top 10 customers accounted for 53% 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 often losses, in its fourth and first fiscal quarters ending in May and August, respectively. The annual per capita consumption of shell eggs since 1990 has ranged from 235 to 256, averaging 240, with the peak consumption of 256 occurring in 1999. 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. Egg Products. The Company discontinued production of egg products in May 1998. Egg products accounted for approximately 4% of the Company's net sales in fiscal 1998. Specialty Eggs. The Company also produces specialty eggs such as Eggo land's Best(TM) and Farmhouse eggs. Eggo 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 Eggo land's Best(TM) eggs, under license from Eggo 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. Eggo land's Best(TM) eggs accounted for approximately 4.6% of the Company's net sales in fiscal 2000. "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 account for l% of net sales. They are intended to meet the demands of consumers who are sensitive to environmental and animal welfare issues. Livestock. The Company's livestock operations currently consist 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 2% of the Company's net sales in fiscal 2000. 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. 6 The shell egg production and processing industry has been characterized by a growing concentration of production. In 1999, 62 producers with one million or more layers owned 78% of the 270 million total U.S. layers, compared with the 56 producers with one million or more layers owning 63.6% of the 231.9 million total U.S. layers in 1990, and 61 producers with one million or more layers owning 56.2% 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 June 3, 2000, the Company had a total of approximately 1,840 employees of whom 1,640 worked in egg production, processing and marketing, 115 were engaged in feed mill operations, 50 in dairy activities, and 35 were administrative employees, including officers, at the Company's executive offices. About 7% of the Company's personnel is 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, 14 pullet growing facilities, 22 processing and packing facilities, two wholesale distribution facilities, and a dairy farm. Most of the Company's property is owned and encumbered. See Notes 5, 6, and 7 of the Notes to Consolidated Financial Statements of the Company. The Company operates 265 over-the-road tractors and 331 trailers, of which 168 and 204 are owned, respectively, and the balance are leased. At June 3, 2000, the Company owned approximately 15,700 acres of land and owned facilities to:
Operation Capacity - --------- -------- Hatch 16,000,000 - pullet chicks per year Grow (1) 11,000,000 - pullets per year House (2) 16,000,000 - 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 2.3 million pullets. (2) The Company controls approximately 20 million layers, of which 3.6 million are cared for by contract producers. (3) One case equals 30 dozen eggs.
7 Over the past five fiscal years, Cal-Maine's capital expenditures have totaled approximately $132.4 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 The Company is not a party to any 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 June 3, 2000. 8 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 June 3, 2000, there were approximately 214 record holders of the Company's Common Stock and approximately 1,200 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 1999 and fiscal 2000.
Sales Price ---------------- Cash Dividend Year Ended Fiscal Quarter High Low Declared ---------- -------------- ---- --- ------------- June 3, 2000 First Quarter $ 5 1/2 $ 4 3/8 $ .0125 Second Quarter 4 7/8 3 11/32 .0125 Third Quarter 4 3/8 2 1/2 .0125 Fourth Quarter 4 3/32 3 1/4 .0125 May 29, 1999 First Quarter $ 5 7/8 $ 4 $ .0100 Second Quarter 5 1/2 3 1/2 .0125 Third Quarter 5 7/16 4 1/8 .0125 Fourth Quarter 5 5/8 5 3/16 .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. 9 ITEM 6. SELECTED FINANCIAL DATA
Fiscal Years Ended ------------------ June 3, May 29, May 30, May 31, June 1, 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Net sales $ 287,055 $ 287,954 $ 309,071 $ 292,526 $ 282,844 Cost of sales 268,937 242,022 264,636 236,273 230,850 ---------- ---------- ---------- ---------- ---------- Gross profit 18,118 45,932 44,435 56,253 51,994 Selling, general and administrative 40,059 36,406 34,089 28,930 29,653 ---------- ---------- ---------- ---------- ---------- Operating income (loss) (21,941) 9,526 10,346 27,323 22,341 Other income (expense): Interest expense (7,726) (5,195) (4,583) (4,277) (5,487) Equity in income of affiliate 130 326 294 524 721 Other 2,525 3,330 2,268 783 (190) ---------- ---------- ---------- ---------- ---------- (5,071) (1,539) (2,021) (2,970) (4,956) ---------- ---------- ---------- ---------- ---------- Income (loss) before income taxes (27,012) 7,987 8,325 24,353 17,385 Income tax expense (benefit) (9,633) 2,907 2,946 9,508 6,460 ---------- ---------- ---------- ---------- ---------- Net income (loss) $ (17,379) $ 5,080 $ 5,379 $ 14,845 $ 10,925 ========== ========== ========== ========== ========== Net income (loss) per common share: Basic $ (1.41) $ 0.39 0.41 $ 1.21 $ 0.94 ========== ========== ========== ========== ========== Diluted $ (1.41) $ 0.39 $ 0.40 $ 1.18 $ 0.94 ========== ========== ========== ========== ========== Cash dividends declared per share $ 0 .048 $ 0.045 $ 0.020 $ .00 $ .00 ========== ========== ========== ========== ========== Weighted average shares outstanding: Basic 12,362 12,999 13,191 12,285 11,584 ========== ========== ========== ========== ========== Diluted 12,362 13,114 13,428 12,560 11,584 ========== ========== ========== ========== ========== Balance Sheet Data: Working capital $ 18,485 $ 48,501 $ 56,591 $ 45,390 $ 26,742 Total assets 231,899 213,682 203,188 182,294 149,991 Total debt (including current portion) 119,736 84,004 75,498 64,436 63,426 Total stockholders' equity 61,353 80,584 79,547 74,642 47,900
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 June 3, 2000 (53 weeks), May 29, 1999 (52 weeks) and May 30, 1998 (52 weeks) for the most recent three fiscal years. 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 over 98% of the Company's net sales in fiscal 2000 and 1999. The Company 10 primarily markets its shell eggs in the southwestern, southeastern, mid-western and mid-Atlantic regions of the United States. Shell eggs are sold directly by the Company primarily to national and regional supermarket chains. Egg products operations, which accounted for approximately 4% of the Company's net sales in fiscal 1998, were discontinued in May 1998. The Company currently uses contract producers for approximately 22% of its total egg production. Contract producers operate under agreements with the Company for the use of their facilities in the production of shell eggs by layers owned by the Company, which owns the eggs produced. Also, shell eggs are purchased, 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 60% of Cal-Maine's total farm egg production cost. Changes in feed costs result in changes in the Company's cost of goods sold. The cost of feed ingredients is affected by a number of supply and demand factors such as crop production and weather, and other factors, such as the level of grain exports, over which the Company has little or no control. RESULTS OF OPERATIONS The following table sets forth, for the 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 June 3, 2000 May 29, 1999 May 30, 1998 ------------ ------------ ------------ Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 93.7 84.0 85.6 85.6 ------- ------ ------ ------ Gross profit 6.3 16.0 14.4 14.4 Selling, general & administrative expenses 14.0 12.6 11.0 11.0 ------- ------ ------ ------ Operating income (loss) (7.7) 3.4 3.4 3.4 Other income (expense) (1.7) (0.6) (0.7) (0.7) ------- ------ ------ ------ Income (loss) before taxes (9.4) 2.8 2.7 2.7 Income tax expense (benefit) (3.3) 1.0 1.0 1.0 ------- ------ ------ ------ Net income (loss) (6.1)% 1.8% 1.7% 1.7% ======= ====== ====== ======
Fiscal Year Ended June 3, 2000 Compared to Fiscal Year Ended May 29, 1999 Net Sales. Net sales for the fiscal year ended June 3, 2000 were $287.1 million, a decrease of $899,000 from net sales of $288.0 million for the fiscal year ended May 29, 1999. The decrease resulted from a $4.9 million decrease in net sales of feed to outside producers, offset by $4.0 million 11 increase in sales of shell eggs. The increase in shell egg sales is attributable to a 23.7% increase in dozens sold and an 18.6% decrease in average selling price per dozen. Although domestic demand was good, increased egg supply and weak export demand caused egg market prices to decrease. In fiscal 2000, total dozens of shell eggs sold were 526.2 million, an increase of 100.7 million dozen, compared to 425.5 million dozen sold in fiscal 1999. Of the increased dozens sold, 70% resulted from the acquisition of the egg production and processing operations of Hudson Brothers in May 1999 and of Smith Farms in September 1999. The balance of the increase in dozens sold was purchased from outside egg producers. As a result of the decline in shell egg market prices, the Company's average selling price of shell eggs decreased from $.623 for fiscal 1999 to $.507 per dozen, a decrease of $.116 per dozen. Feed sales to outside producers decreased as a result of lower tons sold and slightly lower cost of feed ingredients during fiscal 2000 which reduced market prices for feed. Cost of Sales. The cost of sales in fiscal 2000 was $268.9 million, an increase of $26.9 million, or 11.1%, above fiscal 1999 cost of sales of $242.0 million. The increase is the net result of an increase in dozens sold and a slight decrease in feed cost per dozen produced. As discussed above, dozens sold for fiscal 2000 increased 100.7 million dozen, or 23.7%. Of the increase in dozens sold, 27.7 million dozens were purchased from outside egg producers, an increase of 25.0% above last fiscal year. During weak egg market conditions as described above, the Company is able to purchase outside eggs at more favorable net prices which mitigates the normally higher cost of purchasing eggs from outside sources. A good 1999 corn and soybean harvest resulted in slight decreases in cost of feed ingredients. Feed cost for fiscal 2000 was $.188 per dozen, compared to $.195 per dozen for last fiscal year, a decrease of $.007 per dozen, or 3.6%. Decreased feed cost and cost of outside egg purchases were not enough to offset the 18.6% drop in egg selling prices, and the net result was a decrease in gross profit from 16.0% of net sales for fiscal 1999 to 6.3% for fiscal 2000. Selling, General and Administrative Expenses. Selling, general, and administrative expense in fiscal 2000 was $40.1 million, an increase of $3.7 million, or 10.0%, as compared to $36.4 million for fiscal 1999. The increase is due to increased payroll and related expenses from the acquisitions of Hudson Brothers in May 1999 and Smith Farms in September 1999 and due to increased delivery costs from the increased dozens sold. On a cost per dozen sold basis, selling, general and administrative expense decreased from $.086 per dozen for fiscal 1999 to $.076 per dozen for fiscal 2000, a decrease of $.01 per dozen sold, or 11.6%. As a percent of net sales, selling, general and administrative expense increased from 12.6% from fiscal 1999 to 14.0% for fiscal 2000. Operating Income (Loss) . As a result of the above, the Company's operating loss was $21.9 million, as compared to an operating income of $9.5 million for fiscal 1999. As a percent of net sales, the operating loss for fiscal 2000 was 7.7%, as compared to an operating income of 3.4% for fiscal 1999. Other Income (Expense). Other expense for fiscal 2000 was $5.1 million, an increase of $3.6 million, as compared to other expense of $1.5 million for fiscal 1999. For fiscal 2000, interest expense increased $2.5 million and net other income decreased $1.0 million. Interest expense increased due to increased borrowings. Other income decreased primarily from a decrease in interest earned due to lower cash equivalent investments. As a percent of net sales, other expense was 1.7% for fiscal 2000, compared to 0.6% for fiscal 1999. Income Taxes. As a result of the above, the Company's pre-tax loss was $27.0 million, compared to pre-tax income of $8.0 million for fiscal 1999. For fiscal 2000, the Company's income tax benefit totaled $9.6 million with an effective rate of 35.7%, as compared to income tax expense of $2.9 million with an effective rate of 36.4% for fiscal 1999. Net Income (Loss). As a result of the above, net loss for fiscal 2000 was $17.4 million or $1.41 per basic and diluted share, compared to net income of $5.1 million, or $.039 per basic and diluted share for fiscal 1999. Fiscal Year Ended May 29, 1999 Compared to Fiscal Year Ended May 30, 1998 Net Sales. Net sales in the fiscal year ended May 29, 1999 were $288.0 million, a decrease of $21.1 million, or 6.8%, from net sales of $309.1 million in the fiscal year ended May 30, 1998. The closure of the egg products division, in fiscal 1998, accounted for $12.9 million of the decrease in net 12 sales for fiscal 1999. The balance of the decrease was the result of lower selling prices for eggs. Due to increased egg supplies and lower exports, average shell egg market prices declined approximately 5.4%. In response to declining market prices, Cal-Maine's net average selling price of shell eggs decreased from $.657 per dozen for fiscal 1998 to $.623, a decrease of $.034 per dozen, or 5.2%. Total dozens of eggs sold remained about the same for both fiscal years, 425.5 million dozen for fiscal 1999, compared to 424 million for fiscal 1998, an increase of 1.5 million dozens. Outside feed sales increased $2.4 million, or approximately 15.0%, for fiscal 1999. The increase was the net result of an increase of 43.0% in tons of feed sold to outside producers, offset by a decrease of 20.0% in the net selling price per ton. Lower cost of feed ingredients resulted in lower market prices for feed. Cost of Sales. The cost of sales in fiscal 1999 was $242.0 million, a decrease of $22.6 million, or 8.5%, under the fiscal 1998 cost of sales of $264.6 million. The closed egg products division accounted for $13.0 million of the fiscal 1999 decrease. The balance of the decrease was mostly due to decreases in cost of feed ingredients, and lower shell egg market prices. The lower cost of feed ingredients was the result of a large 1998 corn and soybean harvest and indications of continued favorable feed prices as the 1999 crop season began. Feed cost per dozen eggs produced during fiscal 1999 was $.195, compared to $.248 per dozen in fiscal 1998, a decrease of 21.4%. During fiscal 1999, the Company purchased 116.0 million dozens from outside sources, compared to 101.8 million dozen during fiscal 1998, an increase of 13.9%. Due to decreased egg market prices, as discussed above, the Company was able to purchase outside eggs at more favorable net prices. Lower shell egg market prices, offset by improvements in egg production and purchased egg costs, resulted in an increase in gross profit from 14.4% of net sales for fiscal 1998 to 16.0% of net sales for fiscal 1999. Selling, General and Administrative Expenses. Selling, general, and administrative expenses in fiscal 1999 were $36.4 million, an increase of $2.3 million, or 6.7%, as compared to $34.1 million for fiscal 1998. The increases are mostly in payroll and payroll related expenses, including cash payments to certain employees to terminate stock options and employee health insurance costs. During the second quarter of fiscal 1999, the Company, in accordance with FASB Statement 121, incurred an impairment change of $500,000 on a facility, including feed mill and production and distribution properties, that was closed. In fiscal 1999, franchise fees increased almost $500,000 as the Company expands its markets for specialty brands of eggs, primarily Eggland's Best. Sales of the specialty brands for fiscal 1999 were 5.2% of net sales, as compared to 3.4% for fiscal 1998, and 1.0% for fiscal 1997. Other costs, including delivery, remained approximately the same during both fiscal years. As a percent of net sales, general and administrative expenses increased from 11.0% for fiscal 1998 to 12.6% for fiscal 1999. Operating Income. As a result of the above, the Company's operating income was $9.5 million in fiscal 1999, a decrease of $800,000 or 7.9%, as compared to operating income of $10.3 million for fiscal 1998. As a percent of net sales, operating income for fiscal 1999 was 3.4%, the same as for fiscal 1998. Other Income (Expense). Other expense for fiscal 1999 was $1.5 million, a decrease of $482,000, or 23.8%, as compared to other expense of $2.0 million for fiscal 1998. The decrease in net other expense is due to an increase in interest income of $831,000 offset by an increase in interest expense of $611,000 and an increase in other income of $263,000. As a percent of net sales, other expenses were 0.6% for fiscal 1999 compared to 0.7% for fiscal 1998. Income Taxes. As a result of the above, the Company's pre-tax income was $8.0 million in fiscal 1999, compared to pre-tax income of $8.3 million for fiscal 1998. For fiscal 1999, income tax expense totaled $2.9 million with an effective rate of 36.4% as compared to income tax expense of $2.9 million with an effective rate of 35.4% for fiscal 1998. The increase in the effective rate is primarily due to a decrease in tax-exempt interest income as a percentage of income before income taxes. Net Income. As a result of the above, net income for fiscal 1999 was $5.1 million, or $0.39 per basic share, compared to net income of $5.4 million, or $0.41 per basic share for fiscal 1998. Capital Resources and Liquidity. The Company's working capital at June 3, 2000 was $18.5 million compared to $48.5 million at May 29, 1999. The Company's current ratio was 1.36 at June 3, 2000 as compared with 2.17 at May 29, 1999. 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 13 are higher during these quarters than during other fiscal quarters. The Company has a $35.0 million line of credit with three banks of which $7.5 million was outstanding at June 3, 2000. The Company's long-term debt at June 3, 2000, including current maturities, amounted to $119.7 million, as compared to $84.0 million at May 29, 1999. For the fiscal year ended June 3, 2000, $11.1 million was used in operating activities. The Company had $7.5 million in net borrowings under its line of credit, additional long-term borrowings of $40.3 million, $1.7 net proceeds from the disposal of property, plant and equipment and $3.0 million net proceeds from notes receivable and investments. In the 2000 fiscal year, $35.6 million was used in the acquisition of a shell egg production and processing business, $15.5 million was used for construction projects, and $12.4 million for purchases of property, plant and equipment. Approximately $1.2 million was used for purchases of common stock for treasury and $611,000 for dividend payments on the common stock. Principal payments of $4.6 million were made on long-term debt. The net result of these activities was a decrease in cash and cash equivalents of $29.7 million for fiscal 2000. Certain key industry indicators for shell eggs are currently favorable for fiscal 2001. Baby chicks placed during the first six months of calendar 2000 are down over 5% compared to the same period last year. This will tend to reduce the nationwide laying flock size in the year ahead. Current projections for total laying flock size in the U. S. during the Company's fiscal 2001 are only slightly larger than last fiscal year. With anticipated improved demand by the egg industry, this should result in higher selling prices for eggs. Current industry indications and projections are for a big corn and soybean crop in the fall of 2000. This should ensure favorable cost of feed for the fiscal 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 June 3, 2000, the Company did not meet certain of these provisions on its line of credit agreement and substantially all of its long-term debt agreements. The Company has obtained amendments to the loan agreements or waivers of these requirements through fiscal 2001. The Company is in compliance with the amended or waived provisions. Under certain of the loan agreements, the lenders have the option to require the prepayment of any outstanding borrowings in the event of a change in the control of the Company. At June 3, 2000 the Company had $9.6 million in construction-in-process which primarily represents construction of new shell egg production and processing facilities in Waelder, Texas and a feed mill in Chase, Kansas. The estimated cost to complete construction of the Waelder facility and Chase feed mill in fiscal 2001 is approximately $3.4 million. The Company has a commitment from an insurance company to receive $13.4 million in long-term borrowings applicable to the Waelder facility. In addition to the completion of the Waelder facility and Chase feed mill, the Company has projected capital expenditures of $15.0 million fiscal 2001, which will be funded by cash flows from operations and additional long-term borrowings. As part of the Smith Farms purchase in September 1999, the Company is continuing the construction of egg production and processing facilities in Searcy, Arkansas and Flatonia, Texas. The projects are being funded by a leasing company. Total cost of the Searcy facility is approximately $20.0 million and completion is expected in the last quarter of fiscal 2001. Total cost of the Flatonia facility is approximately $16.0 million and completion is anticipated in the second quarter of fiscal 2002. These facilities will be leased with seven year terms and accounted for as operating leases. The Company has $2.9 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 $2.9 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. 14 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 11 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-15. Quarterly Financial Data: (unaudited , amounts in thousands, except per share data)
Fiscal Year 2000 ---------------- First Second Third Fourth Quarter Quarter Quarter Quarter --------------------------------------------------- Net sales $ 59,055 $ 71,054 $ 79,191 $ 77,755 Gross profit 1,733 6,667 6,547 3,171 Net loss (5,364) (2,732) (3,997) (5,286) Net loss per share: Basic $ (.43) $ (.22) $ (.32) $ (.43) Diluted $ (.43) $ (.22) $ (.32) $ (.43) Fiscal Year 1999 ---------------- First Second Third Fourth Quarter Quarter Quarter Quarter --------------------------------------------------- Net sales $ 68,785 $ 77,948 $ 77,861 $ 63,360 Gross profit 6,081 17,303 15,691 6,857 Net income (loss) (2,087) 4,254 3,979 (1,066) Net income per share: Basic $ (.16) $ .32 $ .31 $ (.08) Diluted $ (.16) $ .32 $ .30 $ (.08)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 15 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 2000 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 2000 Annual Meeting of Shareholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information concerning security ownership of certain beneficial owners and management 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 2000 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 2000 Annual Meeting of Shareholders. PART IV ITEM 14. 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. (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 2000. No amendments to previously filed Forms 8-K were filed during the fourth quarter of fiscal 2000. (c) Exhibits Required by Item 601 of Regulation S-K The following exhibits are filed herewith or incorporated by reference: Exhibit Exhibit Number ------- - ------- 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 be the rights of holders of the Registrant's common stock. 4.2 Form of Warrant Agreement (including form of Common Stock Purchase Warrant).* 16 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 *****+ 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 27 Financial Data Schedule + Management contract or compensatory plan. * Incorporated by reference to the same exhibit number in Registrant's Form S-1 Registration Statement No. 333-14809. 17 ** 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. 18 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 17th day of August, 2000. 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 17, 2000 --------------------- Chief Executive Officer Fred R. Adams, Jr (Principal Executive Officer) /s/RICHARD K. LOOPER Vice Chairman of the Board August 17, 2000 -------------------- and Director Richard K. Looper /s/ADOLPHUS B. BAKER President and Director August 17, 2000 -------------------- Adolphus B. Baker /s/BOBBY J. RAINES Vice President, Chief Financial August 17, 2000 ------------------ Officer, Treasurer, Secretary Bobby J. Raines and Director (Principal Financial Officer) /s/CHARLES F. COLLINS Vice President, Controller August 17, 2000 --------------------- and Director Charles F. Collins (Principal Accounting Officer) /s/JACK B. SELF Vice President and Director August 17, 2000 --------------- Jack B. Self /s/JOE M. WYATT Vice President and Director August 17, 2000 --------------- Joe M. Wyatt Director August 17, 2000 ------------ D. Cox Director August 17, 2000 -------------------- Faser Triplett 19 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page ---- Report of Independent Auditors.............................................F-2 Consolidated Balance Sheets as of June 3, 2000, and May 29, 1999............F-3 Consolidated Statements of Operations for the years ended June 3, 2000, May 29, 1999 and May 30, 1998.............................................F-4 Consolidated Statements of Stockholders' Equity for the years ended June 3, 2000, May 29, 1999 and May 30, 1998...............................F-5 Consolidated Statements of Cash Flows for the years ended June 3, 2000, May 29, 1999, and May 30, 1998............................................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 June 3, 2000 and May 29, 1999, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended June 3, 2000. 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 June 3, 2000 and May 29, 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 3, 2000, 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 14, 2000 F-2 Cal-Maine Foods, Inc. and Subsidiaries
June 3 May 29 2000 1999 ------------------------- Assets Current assets: Cash and cash equivalents $ 6,541 $ 36,198 Receivables: Trade receivables, less allowance for doubtful accounts of $305 in 2000 and $52 in 1999 13,075 11,667 Note receivable from affiliate 271 2,500 Other 1,224 450 --------- ---------- 14,570 14,617 Recoverable federal and state income taxes 4,509 - Inventories 43,913 38,353 Prepaid expenses and other current assets 797 771 --------- ---------- Total current assets 70,330 89,939 Other assets: Notes receivable and investments 7,932 7,468 Goodwill 3,390 4,260 Other 2,110 2,104 --------- ---------- 13,432 13,832 Property, plant and equipment, less accumulated depreciation 148,137 109,911 --------- ---------- Total assets $231,899 $ 213,682 ========= ========= Liabilities and stockholders' equity Current liabilities: Note payable to bank $ 7,500 $ - Trade accounts payable 17,113 16,597 Federal and state income taxes payable - 1,484 Accrued wages and benefits 4,962 4,975 Accrued expenses and other liabilities 3,878 3,970 Current maturities of long-term debt 7,105 4,118 Deferred income taxes 11,287 10,294 --------- ---------- Total current liabilities 51,845 41,438 Long-term debt, less current maturities 112,631 79,886 Other noncurrent liabilities 1,489 1,489 Deferred income taxes 4,581 10,285 --------- ---------- Total liabilities 170,546 133,098 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 53,535 71,525 Common stock in treasury (6,550,912 shares in 2000 and 6,257,712 shares in 1999) (11,154) (9,913) --------- ---------- Total stockholders' equity 61,353 80,584 --------- ---------- Total liabilities and stockholders' equity $ 231,899 $ 213,682 ========== ==========
SEE ACCOMPANYING NOTES. F-3 Cal-Maine Foods, Inc. and Subsidiaries Consolidated Statements of Operations (in thousands, except per share amounts)
Fiscal Year Ended ----------------------------------------- June 3 May 29 May 30 2000 1999 1998 ----------------------------------------- Net sales $ 287,055 $ 287,954 $ 309,071 Cost of sales 268,937 242,022 264,636 ----------- ---------- ---------- Gross profit 18,118 45,932 44,435 Selling, general and administrative 40,059 36,406 34,089 ----------- ---------- ---------- Operating income (loss) (21,941) 9,526 10,346 Other income (expense): Interest expense (7,726) (5,195) (4,583) Interest income 748 2,202 1,371 Equity in income of affiliates 130 357 294 Other, net 1,777 1,097 897 ----------- ---------- ---------- (5,071) (1,539) (2,021) ----------- ----------- ---------- Income (loss) before income taxes (27,012) 7,987 8,325 Income tax expense (benefit) (9,633) 2,907 2,946 ----------- ----------- ---------- Net income (loss) $ (17,379) $ 5,080 $ 5,379 =========== =========== ========== Net income (loss) per share: Basic $ (1.41) $ .39 $ .41 =========== =========== ========== Diluted $ (1.41) $ .39 $ .40 =========== =========== ========== Weighted average shares outstanding: Basic 12,362 12,999 13,191 =========== =========== ========== Diluted 12,362 13,114 13,428 =========== =========== ==========
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 May 31, 1997 17,565 $176 1,200 $12 5,583 $ (6,234) $18,785 $ 61,903 $ 74,642 Redemption of fractional shares of common stock - - - - - - (1) - (1) Purchases of common stock for - - - - 50 (311) - - (311) treasury Sale of common stock from treasury - - - - (25) 89 - - 89 Cash dividends paid ($.020 per common share) - - - - - - - (251) (251) Net income for fiscal 1998 - - - - - - - 5,379 5,379 ------------------------------------------------------------------------------------------------ Balance at May 30, 1998 17,565 176 1,200 12 5,608 (6,456) 18,784 67,031 79,547 Purchases of common stock for treasury - - - - 650 (3,457) - - (3,457) Cash dividends paid ($.045 per - - - - - - - (586) (586) common share) Net income for fiscal 1999 - - - - - - 5,080 5,080 ------------------------------------------------------------------------------------------------ Balance at May 29, 1999 17,565 176 1,200 12 6,258 (9,913) 18,784 71,525 80,584 Purchases of common stock for treasury - - - - 293 (1,241) (1,241) Cash dividends paid ($.048 per common share) (611) (611) Net loss for fiscal 2000 (17,379) (17,379) ------------------------------------------------------------------------------------------------ Balance at June 3, 2000 17,565 $176 1,200 $12 6,551 $(11,154) $18,784 $ 53,535 $ 61,353 ================================================================================================
SEE ACCOMPANYING NOTES. F-5 Cal-Maine Foods, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands)
Fiscal year ended ------------------------------------- June 3 May 29 May 30 2000 1999 1998 ------------------------------------- Cash flows from operating activities Net income (loss) $(17,379) $ 5,080 $ 5,379 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 15,806 12,199 12,017 Provision for doubtful accounts 430 51 361 Deferred income taxes (4,711) (92) 805 Equity in income of affiliates (130) (357) (294) Gain on disposal of property, plant and equipment (1,537) (355) (27) Change in operating assets and liabilities, net of effects from purchases of shell egg production and processing businesses: Receivables and other assets (3,821) 1,891 (321) Inventories 1,420 5,967 3,675 Accounts payable, accrued expenses and deferred expenses (1,144) (317) 3,312 ------------------------------------- Net cash provided by (used in) operating activities (11,066) 24,067 24,907 Cash flows from investing activities Purchases of property, plant and equipment (27,922) (15,911) (14,831) Purchases of shell egg production and processing businesses (35,578) (12,161) (3,745) Payments received on notes receivable and from investments 2,995 798 297 Increase in notes receivable and investments (1,134) (4,603) (725) Net proceeds from disposal of property, plant and equipment 1,668 5,122 898 ------------------------------------- Net cash used in investing activities (59,971) (26,755) (18,106) Cash flows from financing activities Net borrowings on note payable to bank 7,500 - - Long-term borrowings 40,295 13,135 35,800 Principal payments on long-term debt and capital leases (4,563) (11,332) (24,738) Purchases of common stock for treasury (1,241) (3,457) (311) Sales of common stock from treasury - - 89 Payments of dividends (611) (586) (251) Redemption of fractional shares of common stock - - (1) ------------------------------------- Net cash provided by (used in) financing activities 41,380 (2,240) 10,588 ------------------------------------- Increase (decrease) in cash and cash equivalents (29,657) (4,928) 17,389 Cash and cash equivalents at beginning of year 36,198 41,126 23,737 ------------------------------------- Cash and cash equivalents at end of year $ 6,541 $ 36,198 $ 41,126 =====================================
SEE ACCOMPANYING NOTES. F-6 Cal-Maine Foods, Inc. and Subsidiaries Notes to Consolidated Financial Statements ( in thousands, except share and per share amounts) June 3, 2000 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 10.5% of the Company's net sales in fiscal 2000 and no single customer accounted for more than 10% of the Company's net sales in fiscal 1999 or 1998. Use of Estimates The preparation of the consolidated financial statements in conformity with general accepted accounting principles 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 is stated at cost. Depreciation is provided by the straight-line method over the estimated useful lives, which is 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. Revenue Recognition Revenue is recognized when product is shipped to customers. 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". Net Income (Loss) per Common Share Basic net income (loss) per share is based on the weighted average common shares outstanding. Diluted net income (loss) per share includes any dilutive effects of options and warrants. Impact of Recently Issued Accounting Standards In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133). The provisions of SFAS No. 133 and related amendments require all derivatives to be recorded on the balance sheet at fair value. SFAS No. 133 establishes "special accounting" for derivatives that are hedges. Derivatives that are not hedges must be adjusted to fair value through income. Management has not determined the effect of the adoption of this statement on the earnings and financial position of the Company when it becomes effective for fiscal 2002. F-8 Fiscal Year The Company's fiscal year-end is on the Saturday nearest May 31 which was June 3, 2000 (53 weeks), May 29, 1999 (52 weeks) and May 30, 1998 (52 weeks), for the most recent three fiscal years. 2. Acquisitions In September 1999, the Company purchased substantially all of the assets and assumed certain liabilities of Smith Farms, Inc. and certain related companies ("Smith Farms") for cash of $36,205. The assets purchased were Smith Farms' egg production and processing businesses in Texas and Arkansas, and included approximately 3.9 million laying hens and growing pullets. The purchase price was allocated to the assets acquired and consisted primarily of accounts receivable, inventories and property, plant and equipment. In May 1999, The Company purchased all of the issued and outstanding common stock of a shell egg production and processing business for $12,161, net of cash acquired. The purchase price was reduced by $627 in fiscal 2000 based upon the final tax accounting of the company acquired for the period prior to the acquisition. The purchase price was allocated based upon the fair value of the assets acquired and liabilities assumed resulting in goodwill of $3,633, which is being amortized on the straight-line method over 15 years. In November 1997, the Company purchased certain operating assets of a shell egg production and processing business for $3,745. Unaudited pro forma results of operations of the Company, including the companies acquired in fiscal 1999 and 2000, for the periods prior to its acquisition by the Company were as follows:
FISCAL YEAR ENDED JUNE 3 MAY 29 2000 1999 Net sales $298,392 $362,507 Net income (loss) (18,644) 5,334 Net income (loss) per basic share (1.51) .41 Net income (loss) per diluted share (1.51) .41
Pro forma results do not purport to be indicative of actual results had the acquisition been made at May 31, 1998 or the results that may occur in the future. These acquisitions were accounted for by the purchase method of accounting. The operating results of these businesses acquired are included in the consolidated statements of operations of the Company for the periods subsequent to the acquisition dates. 3. Investment in Affiliates The Company owns 50% of Cumberland Mills JV, Specialty Eggs LLC and Delta Eggs LLC and 41.5% of American Egg Products, Inc. at June 3, 2000. 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 $5,449 and $4,109 at June 3, 2000 and May 29, 1999, respectively. Equity in earnings of $130, $357 and $284, from these entities have been included in the consolidated statements of operations for fiscal 2000, 1999 and 1998, respectively. The Company purchased $2,589, $4,863 and $5,189 of eggs from BCM during each of those fiscal years, which represented a significant percentage of BCM's sales. Note receivable from affiliate at June 3, 2000 and May 29, 1999 consisted of a $271 and $2,500, respectively, demand note receivable from Delta Eggs LLC accruing interest at prime minus 1.00%. F-9 4. Inventories Inventories consisted of the following:
JUNE 3 MAY 29 2000 1999 Flocks $ 28,417 $ 24,662 Eggs 2,417 2,471 Feed and supplies 10,028 7,847 Livestock 3,051 3,373 ------------------------------ $ 43,913 $ 38,353 ==============================
5. Property, Plant and Equipment Property, plant and equipment consisted of the following:
JUNE 3 MAY 29 2000 1999 Land and improvements $ 31,074 $ 23,635 Buildings and improvements 81,989 65,985 Machinery and equipment 114,408 85,320 Construction-in-progress 9,627 9,414 ------------------------------ 237,098 184,354 Less accumulated depreciation 88,961 74,443 ------------------------------ $ 148,137 $ 109,911 ==============================
Depreciation expense was $15,349, $11,958 and $11,595 in fiscal 2000, 1999 and 1998, respectively. 6. Leases Future minimum payments under non-cancelable operating leases that have initial or remaining non-cancelable terms in excess of one year at June 3, 2000 are as follows: 2001 $ 6,102 2002 5,348 2003 4,231 2004 3,995 2005 3,697 Thereafter 4,308 ----- Total minimum lease payments $ 27,681 ==========
F-10 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 $7,044, $3,824 and $3,979 in fiscal 2000, 1999 and 1998, respectively. Included in rent expense are vehicle rents totaling $2,729, $1,777 and $1,876 in fiscal 2000, 1999 and 1998, respectively. 7. Credit Facilities and Long-Term Debt Long-term debt consisted of the following:
June 3 May 29 2000 1999 Note payable at 6.7%; due in monthly installments of $100, plus interest, maturing in 2009 $ 16,800 $18,000 Note payable at a variable rate (8.36% at June 3, 2000; due in quarterly installments of $350, plus interest, maturing in 2007 13,650 - Note payable at 8.26%; due in monthly installments of $155 beginning in 2004, including interest, maturing in 2015 16,000 - Series A Senior Secured Notes at 6.87%; due in annual principal installments of $1,917 beginning on December 2002 through 2009 with interest due semi-annually 11,500 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 12,656 13,191 Note payable at 7.64%; due in monthly installments of $114, including interest, maturing in 2004 8,578 9,269 Note payable at 7.75%; due in monthly installments of $55, plus interest, maturing in 2004 6,070 6,675 Note payable at 8.25%; due in monthly installments of $79, including interest, maturing in 2004 3,086 3,747 Note payable at 7.64%; due in monthly installments of $75 beginning in July 2001, plus interest, maturing in 2009 8,550 2,850 Note payable at 7%; due in quarterly installments of $107, plus interest, maturing in 2009 6,000 1,405 Other 1,846 2,367 ---------------------------- 119,736 84,004 Less current maturities 7,105 4,118 ---------------------------- $ 112,631 $79,886 ============================
F-11 The aggregate annual fiscal year maturities of long-term debt at June 3, 2000 are as follows: 2001 $ 7,105 2002 7,354 2003 9,396 2004 20,443 2005 9,797 Thereafter 65,641 ---------- $119,736 ==========
The Company has a $35,000 line of credit with three banks of which $7,500 was outstanding at June 3, 2000. The line of credit is limited in availability based upon the levels of accounts receivable and inventories. The Company had $22,500 available to borrow under the line of credit at June 3, 2000. Borrowings under the line of credit bear interest at 1.5% above the federal funds rate or 1.5% above LIBOR, at the Company's option (8% at June 3, 2000). Facilities fees of 0.25% 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 and debt-to-equity 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. At June 3, 2000 the Company did not meet certain financial covenant requirements of its line of credit agreement and substantially all of its long-term debt agreements. The Company has obtained amendments to the loan agreements or waivers of these requirements through June 3, 2001. Interest of $8,770, $6,061 and $4,402 was paid during fiscal 2000, 1999 and 1998, respectively. Interest of $372, $450 and $615 was capitalized for construction of certain facilities during fiscal 2000, 1999 and 1998, respectively. 8. 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 $60 for each occurrence. The Company's expenses, including accruals for incurred but not reported claims, were approximately $2,610, $3,702 and $2,579 in fiscal 2000, 1999, and 1998, 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 has historically made 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. The Company's contributions to the plan were $932, $1,335 and $970 in fiscal 2000, 1999 and 1998, respectively. F-12 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, discounted over the estimated remaining service life of each officer. Deferred compensation expense totaled $50 in fiscal 2000, 1999 and 1998. 9. Stock Option Plans 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 FASB Statement No. 123, Accounting for Stock-Based Compensation, 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 FASB Statement 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 2000: risk-free interest rate of 7%; dividend yield of 1%; volatility factor of the expected market price of the Company's common stock of .289, and a weighted-average expected life of the options of 5 years. The weighted-average fair value of options granted during fiscal 1999 was $1.05. No options were granted in fiscal 1999 or 1998. The pro forma effect of the estimated fair value of the options granted in fiscal 2000 was insignificant to the consolidated net income (loss) and net income (loss) per share of the Company. A summary of the Company's stock option activity and related information is as follows:
Weighted-Average Shares Exercise Price ------ ---------------- Outstanding at June 1, 1997 528,000 $3.46 Exercised (23,000) 3.42 --------- Outstanding at May 30, 1998 505,000 3.47 Terminated (471,000) 3.42 --------- Outstanding at May 29, 1999 34,000 4.06 Granted 500,000 3.00 Terminated (10,000) 3.42 Forfeited (10,000) 3.00 --------- Outstanding at June 3, 2000 514,000 3.06 =========
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 June 3, 2000 and May 29, 1999, 272,000 shares, respectively, 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 TSAR, the related option is terminated 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 of $95 applicable to the TSARs was recognized in fiscal 2000. F-13 During fiscal 1999, the Company and certain employees agreed to terminate stock options to purchase an aggregate of 471,000 shares of the Company's common stock. In connection with the termination of the options, the Company paid $870 to those employees, which is recognized as compensation expense in fiscal 1999, based upon the difference between the fair value of the Company's common stock and the exercise price of the option. The weighted average remaining contractual life of the options outstanding was 9 years at June 3, 2000. At June 3, 2000, 14,400 options, were exercisable. 10. Income Taxes Income tax expense (benefit) consisted of the following:
Fiscal year ended June 3 May 29 May 30 2000 1999 1998 Current: Federal $(4,599) $ 2,749 $ 1,967 State (323) 250 174 --------------------------------------- (4,922) 2,999 2,141 Deferred: Federal (4,478) (80) 696 State (233) (12) 109 ---------------------------------------- (4,711) (92) 805 ---------------------------------------- $(9,633) $ 2,907 $ 2,946 =========================================
Significant components of the Company's deferred tax liabilities were as follows:
June 3 May 29 2000 1999 Deferred tax liabilities: Property, plant and equipment $ 8,940 $ 7,450 Cash basis temporary differences 2,875 3,030 Inventories 11,464 10,057 Other 1,009 301 ------------------------ Total deferred tax liabilities 24,288 20,838 Deferred tax assets: Federal and state net operating loss carryforwards 7,797 - Other 623 259 ------------------------ Total deferred tax assets 8,420 259 ------------------------ Net deferred tax liabilities $ 15,868 $20,579 ========================
F-14 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. 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 ------------------------------------- June 3 May 29 May 30 2000 1999 1998 ------------------------------------- Statutory federal income tax $(9,184) $2,715 $2,830 State income taxes (benefit), net (367) 156 187 Other, net (benefit) (82) 36 (71) --------------------------------------- $(9,633) $2,907 $2,946 =======================================
Federal and state income taxes of $1,342, $1,524 and $7,989 were paid in fiscal 2000, 1999 and 1998, respectively. Federal and state income taxes of $271, $237 and $1,090 were refunded in fiscal 2000, 1999 and 1998, respectively. The Company had net operating loss carryforwards of $21,600 at June 3, 2000 which expire in fiscal 2020. 11. Other Matters The carrying amounts in the consolidated balance sheet for cash and cash equivalents, accounts receivable, notes receivable, investments and accounts payable approximate their fair value. 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 aggregate fair value of the long-term debt at June 3, 2000 was $114,750, as compared to its carrying value of $119,736. 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 $5.0 million at June 3, 2000. The Company is a party to no other market risk sensitive instruments requiring disclosure. The Company issued warrants in fiscal 1997 to purchase 220,000 shares of its common stock to the underwriter of the initial public offering of the Company's common stock. The warrants are exercisable at $8.40 per share through December 2001. 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. F-15 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Years ended June 3, 2000, May 29, 1999 and May 30, 1998 (in thousands)
Balance at Charged to Write-off Balance at Beginning of Cost and of End of Description Period Expense Accounts Period ----------------------------------------------------------------------------------------- Year ended June 3, 2000: Allowance for doubtful accounts $ 52 $430 $177 $305 ==== ==== ==== ==== Year ended May 29, 1999: Allowance for doubtful accounts $361 $ 51 $360 $ 52 ==== ==== ==== ==== Year ended May 30, 1998: Allowance for doubtful accounts $ 62 $361 $ 62 $361 ==== ==== ==== ====
S-1 CAL-MAINE FOODS, INC. Form 10-K for the fiscal year Ended June 3, 2000 EXHIBIT INDEX Exhibit Number Exhibit 21 Subsidiaries of Cal-Maine Foods, Inc. 23 Consent of Independent Auditors 27 Financial Data Schedule. EX-21 2 0002.txt Exhibit 21
Subsidiaries of Cal-Maine Foods, Inc. Percentage of Outstanding Stock Place of Incorporation or Ownership Interest Held Name of Subsidiary or Organization 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 3 0003.txt Exhibit 23 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-20169) pertaining to the Cal-Maine Foods, Inc. 1993 Stock Option Plan, (Form S-8 No. 333-39940) pertaining to the Cal-Maine Foods, Inc. 1999 Stock Option Plan, and in the Post-Effective Amendment No.1 to Form S-1 on Form S-3 (No. 333-14809) and related Prospectus pertaining to shares underlying common stock purchase warrants of Cal-Maine Foods, Inc., of our report dated July 14, 2000, 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 June 3, 2000. /s/ ERNST & YOUNG LLP Jackson, Mississippi August 16, 2000 EX-27 4 0004.txt
5 0000016160 EX27.EDG 1,000 12-MOS JUN-03-2000 MAY-30-1999 JUN-03-2000 6,541 0 14,750 305 43,913 70,330 237,098 88,961 231,899 51,845 0 0 0 176 61,177 231,899 287,055 287,055 268,937 308,996 0 0 7,726 (27,012) (9,633) (17,379) 0 0 0 (17,379) (1.41) (1.41)
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