Unassociated Document
April 15,
2009
Ms. Lyn
Shenk
Accounting
Branch Chief
Division
of Corporation Finance
United
States Securities and Exchange Commission
100 F
Street, N.E., Stop 3561
Washington,
D.C. 20549
File No.
000-04892
Form
10-K: For the fiscal year ended May 31, 2008
Form
10-Q: For the quarterly period ended November 29, 2008
Schedule
14A filed August 28, 2008
Dear Ms.
Shenk;
This
letter serves as the response of Cal-Maine Foods, Inc. (the “Company”) to the
Staff of the Division of Corporation Finance of the Securities and Exchange
Commission (the “Commission”) contained in your comment letter dated March
20, 2009. The Staff comments have been reproduced in italics in
this letter and the response of the Company to each comment is set forth
immediately following the comment.
Form
10-K for the fiscal year ended May 31, 2008
Item
1A. Risk Factors
We
are controlled by a principal shareholder, page 15
1. We
note from your risk factor that your company’s Class A Common Stock provides ten
votes per share. Furthermore, we note that dividends paid on each
share of your company’s Class A Common Stock were less than those paid on each
share of your company’s ordinary Common Stock until October 2,
2008. Given that different rights and privileges have been ascribed
to your company’s Class A Common Stock and ordinary Common Stock, please
disclose all of the pertinent rights and privileges of each class of security in
a footnote to your financial statements. Refer to paragraph 4 of SFAS
No. 129 for further guidance.
Response: We will
revise all future filings to include the following disclosure related to our two
classes of capital stock. This disclosure will appear in our notes to
the consolidated financial statements in our future filings on Form
10-K.
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Company has two classes of capital stock: Common Stock and Class A Common
Stock. Holders of shares of the Company’s capital stock vote as a single
class on all matters submitted to a vote of the stockholders, with each
share of Common Stock entitled to one vote and each share of Class A
Common Stock entitled to ten votes. The Common Stock and Class
A Common Stock have equal liquidation rights. As of October 2,
2008, the Common Stock and Class A Common Stock have the same dividend
rights, whereas previously the Class A Common Stock received an amount
equal to 95% of any cash dividend payable on a share of Common
Stock. In the case of any stock dividend, holders of Common
Stock are entitled to receive the same percentage dividend (payable only
in shares of Common Stock) as the holders of Class A Common Stock receive
(payable only in shares of Class A Common Stock). Upon liquidation,
dissolution, or winding-up of the Company, the holders of Common Stock are
entitled to share ratably with the holders of Class A Common Stock in all
assets available for distribution after payment in full of creditors. The
Class A Common Stock may only be issued to Fred R. Adams, Jr., the
Company’s Chief Executive Officer, and members of his immediate family, as
defined.. In the event any share of Class A Common Stock, by operation of
law or otherwise is, or shall be deemed to be owned by any person other
than Mr. Adams or a member of his immediate family, the voting power of
such stock will be reduced from ten votes per share to one vote per share.
Also, shares of Class A Common Stock shall be automatically converted into
Common Stock on a share per share basis in the event the beneficial or
record ownership of any such share of Class A Common Stock is transferred
to any person other than Mr. Adams or a member of his immediate family.
Each share of Class A Common Stock is convertible, at the option of its
holder, into one share of Common Stock at any time. The holders of Common
Stock and Class A Common Stock are not entitled to preemptive or
subscription rights. In any merger, consolidation or business combination,
the consideration to be received per share by holders of Common Stock must
be identical to that received by holders of Class A Common Stock, except
that if any such transaction in which shares of Capital Stock are
distributed, such shares may differ as to voting rights to the extent that
voting rights now differ among the classes of Capital Stock. No class of
Capital Stock may be combined or subdivided unless the other classes of
Capital Stock are combined or subdivided in the same proportion. No
dividend may be declared and paid on Class A Common Stock unless the
dividend is payable only to the holders of Class A Common Stock and a
dividend payable to Common Stock is declared and paid concurrently in
respect of outstanding shares of Common Stock in the same number of shares
of Common Stock per outstanding share.
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Based on
our review of the requirements of paragraph 4 of SFAS No. 129, we believe the
above disclosure in addition to the current discussion already in our 10-K will
enhance our compliance to those requirements.
Item
6. Selected Financial Data, page 20
2. Please
revise “Item 6” of your future filings on Form 10-K to briefly describe or cross
reference to factors such as accounting changes, business combinations, or
dispositions of business operations that materially affect the comparability of
the information reflected in your table of selected financial
data. For example, your disclosure in “Item 6” should describe or
cross-reference to discussions of your company’s acquisitions of Hillandale,
LLC, Zephyr Egg, LLC, and Tampa Farms, LLC. Refer to
Instruction 2 to Item 301 of Regulation S-K for further guidance. In
addition, please consider whether similar disclosure should accompany your table
of “Quarterly Financial Data” provided in Note 12 to your financial
statements. Refer to Item 302(a)(3) of Regulation S-K for
further Guidance.
Response: In all future
filings on Form 10-K we will briefly describe or make the cross-references
necessary in Item 6, as required by Item 301 of Regulation S-K, factors that may
materially affect the comparability of the information reflected in our table of
selected financial data. In addition, we will make similar disclosure
in our table of quarterly financial data provided in note 12 to our financial
statements as required by Item 302(a)(3). The addition of the cross-references
will assist readers of our future filings comprehend the most relevant factors
affecting the comparability of the information reflected in “Item 6.” and the
“Quarterly Financial Data” note disclosure appearing in the footnotes to the
consolidated financial statements.
Item
7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Overview,
page 21
3. Please
revise your disclosure to discuss and analyze the existence of and reasons for
major trends in your company’s results of operations over the last three years –
such as, the significant sales volume and unit price growth that have been
realized. In addition, discuss whether you expect such trends to
continue. For example, we believe that it would be useful if
your overview explained in summary form why your company’s results of operations
changed from a $1 million loss in fiscal year 2006 to a $152 million profit in
fiscal year 2008.
Response: In our Form 10-Q for
the period ended February 28, 2009, we added the following disclosure to our
MD&A. We believe the following disclosure effectively
encapsulates the volatility in the shell egg industry and the impact this has on
our financial results. In future filings on Form 10-K and Form 10-Q
we will disclose the following in our MD&A discussion. We believe
the following additional disclosure adequately describes the primary cause of
fluctuations in our financial results both historically and
prospectively.
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Our
operating results are directly tied to egg prices, which are highly
volatile and subject to wide fluctuations, and are outside of our control.
The shell egg industry has traditionally been subject to periods of high
profitability followed by periods of significant loss. In the past, during
periods of high profitability, shell egg producers have tended to increase
the number of layers in production with a resulting increase in the supply
of shell eggs, which generally has caused a drop in shell egg prices until
supply and demand return to balance. As a result, our financial
results from year to year may vary significantly. Prices for
shell eggs fluctuate in response to seasonal factors and a natural
increase in shell egg production during the spring and early
summer. Shell egg prices tend to increase with the start of the
school year and are highest prior to holiday periods, particularly
Thanksgiving, Christmas and Easter. Consequently, we generally
experience lower sales and net income in our first and fourth fiscal
quarters ending in August and May, respectively. As a result of these
seasonal and quarterly fluctuations, comparisons of our sales and
operating results between different quarters within a single fiscal year
are not necessarily meaningful comparisons.
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We will
make all necessary disclosures in the event that there are any significant
trends in the overall marketplace other than changes to egg prices, which
significantly impacts the comparability of our financial results for all current
and previous periods presented in our future Form 10-K and Form 10-Q
filings.
Results
of Operations, page 22
4. Your
MD&A disclosure regarding shell egg revenue, the quantity of shell eggs
sold, and the average selling price of shell eggs appears to place significant
emphasis on the aggregate sales of non-specialty and specialty shell eggs and
their blended average selling price, without providing a detailed analysis of
the quantity of non-specialty and specialty shell eggs sold and their average
selling prices on an individual basis. However, we note the following
with regard to your company’s sales of non-specialty shell eggs, specialty shell
eggs, and shell eggs sales in the aggregate:
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Although the quantity of
non-specialty shell eggs sold, as well as the aggregate number of shell
eggs sold, declined in fiscal year 2008, the quantity of specialty shell
eggs sold during fiscal year 2008 increased
significantly.
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Although the average selling
price of non-specialty shell eggs, as well as the blended average selling
price of all shell eggs, was significantly higher in fiscal year 2008 than
in fiscal year 2007, the average selling price of specialty shell eggs did
not increase significantly in fiscal year
2008.
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Although the average selling
price of non-specialty shell eggs, as well as the blended average selling
price of all shell eggs, increased significantly lower than the average
selling price of specialty shell eggs during fiscal year
2008
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Based
upon the aforementioned information, it appears that the quantities of specialty
eggs sold and non-specialty eggs sold have fluctuated independent of each other,
the average selling price of specialty shell eggs is less volatile than the
average selling price of non-specialty eggs, and the average selling price of
specialty eggs continues to be significantly higher than the average selling
price of non-specialty eggs. As such, we believe that your
MD&A disclosure should be expanded to separately discuss the revenue
generated by specialty shell eggs and non-specialty shell eggs, as well as the
underlying trends or factors (e.g. changes in quantities sold or price)
impacting the revenue generated by each.
Response: Since we are the
nation’s largest domestic shell egg producer and the only publicly traded
company in the shell egg industry, for competitive reasons we are concerned that
segregating our shell egg sales by type and providing a detailed analysis of the
quantity of non-specialty and specialty shell eggs sold and their average
selling prices by type could put us in an unfair advantage against our
competitors. The shell egg industry is fiercely competitive and we
believe that providing the level of detail called for in the Staff’s comment
will allow our competitors to easily determine the prices we charge our
customers which could leave the Company at a competitive disadvantage.
In future filings on Form 10-K and Form 10-Q, we will enhance our
discussion of the specialty and non-specialty egg sales, but for competitive
reasons specific disclosures related to dozens sold and average selling prices
by type of product sold will not be made. Our enhanced disclosures in
future filings will reflect that specialty eggs prices are not tied to the
prices of our non-specialty or generic eggs which are tied to the commodity
prices of eggs, and prices for specialty eggs are more stable; whereas prices
for our generic eggs are highly volatile and subject to wide fluctuations, and
are outside of our control. We believe that our existing disclosures along with
the enhanced disclosures described above will allow the readers to understand
the impact of quantities sold and pricing on our net sales for the periods
presented.
5. We
note that your MD&A discussion of “Cost of sales” focuses primarily on
changes in your company’s feed costs and the impact of such changes on the
amount of expense recognized. However, eggs purchased from outside
producers, as well as “other operating costs,” appear to be material components
of cost of sales, which also impact the amount of expense
recognized. We believe that you should quantify and discuss the
extent to which changes in your company’s cost of sales have resulted from each
material component. In this regard, please consider enhancing your
disclosure by:
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utilizing a table to list and
quantify the amount of expense attributable to each material component of
cost of sales (e.g., feed cost, eggs purchased from outside producers,
etc.) for each reporting period discussed in
MD&A;
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expanding your narrative
disclosure to provide a detailed discussion and analysis of each component
of cost of sales that has been identified in the table referenced above –
including the factors or trends impacting those
components;
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ensuring that the expense
recognized for each material component of costs of sales is discussed in
terms of both price and volume, as applicable (e.g., consider quantifying
changes in the unit price of eggs purchased from outside producers, as
well as the changes in the volume
purchased).
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In
addition, we believe that you should (i) consider utilizing tables to list and
quantify the material components of your company’s selling, general, and
administrative expenses (e.g., franchise fees, equity compensation expense,
administrative payroll expenses, employee insurance costs, etc.) and (ii) expand
your narrative disclosure to discuss the factors or trends resulting in changes
to each material component, as appropriate.
Response: In all future
filings where we feel that the utilization of tables will enhance disclosure we
will provide the necessary tables. We were in receipt of this letter
prior to filing our Form 10-Q for the period ended February 28,
2009. The Form 10-Q for the period ended February 28,
2009 was filed with the Commission on April 1, 2009. In that Form
10-Q, we did utilize tables to enhance the disclosure of the changes in our
selling, general, and administrative expenses, and will continue to provide
similar tables in future filings. We will also enhance
our narrative disclosure for the above named areas in all future filings where
there are factors or trends having a significant impact on each material
component in the abovementioned areas.
Capital
Resources and Liquidity, page 25
6. In
each of your last two annual reports on Form 10-K, you have stated that your
company’s need for working capital and seasonal borrowings are generally higher
in the first and second fiscal quarters, which end in August and November,
respectively. However, in each of your Form 10-Qs filed during the
last two years, you have stated that your company’s need for working capital and
seasonal borrowings is generally higher in the first and last fiscal quarters,
which end in August and May, respectively. Please reconcile your
disclosure.
Response: We will
reconcile this disclosure in future filings, on Form 10-Q and Form 10-K, and in
the absence of any changes will state the following:
Our
need for working capital generally is highest in the last and first fiscal
quarters ending in May and August, respectively, when egg prices are
normally at seasonal lows. Seasonal borrowing needs frequently
are higher during these quarters than during other fiscal
quarters.
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Item
8. Financial Statements and Supplementary Data
Notes
to Consolidated Financial Statements
General
7. You
have discussed your company’s material legal proceeding in “Item 3” of your Form
10-K. However, you have not discussed those legal proceedings in the
footnotes to your financial statements to your financial
statements. In this regard, please revise your footnotes to disclose
all material contingencies for which it is at least reasonably possible that a
loss may have been incurred. Refer to paragraph 10 of SFAS No.
5 for further guidance.
Response: In making our
assessments for disclosure of material contingencies related to our legal
proceedings we reviewed paragraphs 1, 8 & 10 of SFAS No. 5.
As
required by paragraph 10 of SFAS 5, we will include in future filings a
discussion of the legal proceedings as they appear in “Item. 3” of our Form 10-K
filings, because of the reasonable possibility that a loss may have been
incurred.
Note
1. Significant Accountant Policies
Revenue
Recognition and Delivery Costs, page 42
8. Please
revise your disclosure to not only state the criteria that must be met prior to
revenue recognition, but when specifically these criteria are met in your
business. In other words, if revenue is recognized when products are
shipped or delivered to customers, please state so.
Response: In our
Form 10-K annual report we state the following:
The
Company recognizes revenue only when all of the following criteria have been
met:
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Persuasive
evidence of an arrangement exists;
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Delivery
has occurred;
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The
fee for the arrangement is determinable; and
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Collectibility
is reasonably assured.
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For
future filings on Form 10-K we will add that the above criteria are typically
met upon delivery of product to our customers.
Note 2. Acquisitions, page
45
9. We
note that on July 28, 2005, your company entered into an agreement with
Hillandale Farms, Inc. and Hillandale Farms of Florida, Inc. Pursuant
to such agreement, it
appears (i) the aforementioned entities transferred identified assets and
liabilities to Hillandale, LLC (i.e. a newly formed entity) in exchange for 100
percent of that entity's initial membership interests and (ii) your company has
agreed to acquire 100 percent of the membership interests in Hillandale, LLC
through a series of acquisition installments, which have already begun and
continue through your 2010 fiscal year. Based upon your footnote, it
appears that (a) your company initially acquired 51 percent of the membership
interest of Hillandale, LLC on October 12, 2005 for approximately $27,000
million, (b) your company has subsequently acquired an additional 25 percent of
the membership interest of Hillandale, LLC based upon the book value of the
membership interest, as measured shortly before each of the subsequent
acquisition dates, and (c) your company plans to acquire the remaining 24
percent of the membership interest of Hillandale, LLC based upon the book value
measure shortly before each of the remaining two acquisition
dates. However, it appears that you may be accounting for the
acquisition of Hillandale, LLC, as if your company owned 100 percent of the
entity since the initial acquisition date. In this regard, please
address the following items, so that we may gain a better understanding of the
Hillandale Acquisition, as well as your accounting treatment:
(1) Tell
us the underlying business reason why 100 percent of the membership interest of
Hillandale, LLC is being acquired through periodic installments, as opposed to acquiring 100 percent
of the membership interest upon consummation of the
transaction.
Response: There
were several underlying business reasons why 100 percent of the membership
interest in Hillandale, LLC (“Hillandale”) is being acquired through periodic
installments. First and foremost, the Company was able to obtain
control of Hillandale on July 28, 2005 (the “Acquisition Date”). In
its negotiations with the selling members of Hillandale, the Company agreed to
purchase 51 percent of the membership interests on October 12, 2005 and the
remaining 49 percent over the next four years based upon the fair value of the
tangible assets of Hillandale as of the Acquisition Date. In
addition, the Company agreed to adjust the purchase price of the remaining 49
percent based upon the earnings or losses of Hillandale in the four years
subsequent to the Acquisition Date, effectively providing an earn-out to the
selling members. The president of Hillandale Farms, Inc. and
Hillandale Farms of Florida, Inc., who was also the majority shareholder,
desired to continue employment with Hillandale for at least the next four years
following the Acquisition Date. His continued employment aided in the
integration of Hillandale into the Company’s
business. Accordingly, the structure of the Hillandale
Acquisition was also designed to facilitate the president’s continuing
involvement in Hillandale.
(2) Tell
us whether or not your initial purchase price allocation is based upon your
company's proportionate share of the estimated fair value of the acquired Hillandale, LLC assets and
liabilities (i.e., the 51 percent of the membership interest initially
acquired). If not, please tell us the basis for your purchase price
allocation and cite the accounting literature that you believe supports your
accounting treatment.
(3) Tell
us whether or not you are accounting for your company's subsequent purchase
installments as acquisitions of a portion of the non-controlling interest in the Hillandale, LLC
(e.g., a step-acquisition). Refer to paragraph 14 of SFAS
141. If each installment is not being accounted for similar to a
step-acquisition, please tell us how you are accounting for the subsequent
purchases and cite the accounting literature that you believe supports your
accounting treatment.
(4) Tell
us why you believe that it was appropriate to base your initial purchase price
allocation on the sum of your company's initial cash investment and your estimate of the aggregate
installment payments required to acquire the remaining 49 percent of Hillandale,
LLC – particularly, as the minority interest holders appear to maintain the
risks and rewards associated with their remaining beneficial ownership until
such ownership is subsequently acquired.
(5) Explain
to us why you believe it was appropriate to record a liability for the estimated
remaining acquisition payments upon consummation of the transaction.
Response (items (2) through (5)):
The initial purchase price allocation is based on the purchase price of
the 51 percent of the membership interest initially acquired plus the present
value of the purchase obligation for the remaining 49 percent of membership
interest over the next four years. Accordingly, subsequent purchases of
membership interests are reported as reductions to the purchase obligation
rather than as acquisitions of non-controlling interests. Because the
Company obtained control of Hillandale on the Acquisition Date and had an
unconditional obligation to acquire the remaining 49 percent of the membership
interests, and the members had an unconditional obligation to sell their
membership interests to the Company, the Company recorded its purchase
obligation at the fair value as of the Acquisition Date in accordance with
paragraphs 4, 5 and 6 of SFAS 141. Paragraph 4 of SFAS 141 states, in part, “If
the consideration given is in the form of liabilities incurred or equity
interests issued, the liabilities incurred and equity interests issued are
initially recognized at the date of the acquisition.” Paragraph 6 of SFAS
specifies that the measurement is based on the fair value of the consideration
given or the fair value of net assets acquired, whichever is more clearly
evident. The Company determined the fair value of the purchase
obligation based on the discounted cash flows without regard to possible future
increases or decreases to the obligation. Such increases or decreases
to the purchase obligation are accounted for as contingent consideration based
upon the provisions of paragraphs 25 through 28 of SFAS
141. Accordingly, subsequent increases or decreases to the purchase
obligation are recorded as increases or decreases to the cost of the acquired
entity (i.e., adjustment to the purchase price).
We
considered the applicability of certain other accounting literature to the
accounting for the Hillandale Acquisition. Paragraph 14 of SFAS 141
specifies that the acquisition of some or all of the noncontrolling interests
shall be accounted for using the purchase method (e.g., a step acquisition). By
obtaining control of Hillandale and incurring an unconditional obligation to
acquire the noncontrolling interests, as well as the noncontrolling interest
holders incurring an unconditional obligation to sell, management believes that
the Company had substantially all of the risks and rewards of ownership of
Hillandale on the Acquisition Date. While the minority interest holders
participate in the earnings and losses of Hillandale, they do not participate in
market value changes in the underlying value of their membership
interests. Accordingly, subsequent payments for the membership
interests in Hillandale are accounted for as a reduction to the purchase
obligation rather than as a step acquisition as described in paragraph 14 of
SFAS 141. We also considered whether the forward purchase obligation represents
a derivative financial instrument in accordance with SFAS 133 and thus
remeasured at fair value at each reporting period. Based upon the terms of the
purchase obligation, it cannot be settled net. Accordingly, SFAS 133 does not
apply. SFAS 150 and EITF 00-6 are applicable only to freestanding financial
instruments. Since the forward purchase contracts were entered into
in connection with the agreement to acquire 100 percent of the membership
interest in Hillandale, the purchase obligations are not considered freestanding
and SFAS 150 and EITF 00-6 do not apply. The guidance in EITF 00-4 specifies the
appropriate accounting for a fixed-price forward purchase contract to acquire
noncontrolling interests in a business entered into in connection with the
acquisition of a controlling majority interest of that business. The guidance of
EITF 00-4 is consistent with the fact pattern in the Hillandale Acquisition,
except that the Company’s forward purchase obligation is not at a fixed price.
Accordingly EITF 00-4 does not apply. The conclusion in EITF 00-4 is
that the forward purchase contract should be accounted for as a financing of the
purchase of the noncontrolling interest. While EITF 00-4 is not
applicable to the Hillandale Acquision, the Company determined that the
appropriate accounting is similar to that described in EITF 00-4.
(6) Tell
us why you believe that it is appropriate to adjust the purchase obligation
recorded on your balance sheet for changes in your estimate of your
company's remaining acquisition installments. As part of your
response, also explain why you believe that changes in your estimate of future
purchase installments should be recorded as additional purchase price (i.e.
goodwill). Please cite the accounting literature that you believe
supports your accounting treatment.
Response: In August 2006 and
2007, the Company acquired a total of 25 percent of the noncontrolling interests
in Hillandale in accordance with the terms of the acquisition agreement. The
cash paid for the 25 percent noncontrolling interest approximated the recorded
amount of the purchase obligation and the difference was recorded as an
adjustment to the purchase price in accordance with paragraph 28 of SFAS 141. In
the Company’s fiscal year ended May 31, 2008, Hillandale experienced a
significant increase in earnings which substantially increased the amount of the
purchase obligation that would be paid in August 2008. While the purchase
obligation for 12 percent of the membership interest in August 2008 was based
upon earnings of Hillandale through July 26, 2008, the Company determined it was
appropriate to increase the purchase obligation to the estimated amount that
would be paid so as not to understate the purchase obligation in its May 31,
2008 financial statements. By the time the Company filed its 2008 Form 10-K on
August 5, 2008, the amount of the August 2008 purchase obligation was reasonably
determinable.
(7) Tell
us whether your financial statements reflect the recognition of minority
interest related to the portion of Hillandale, LLC's income and/or losses that
will be allocated to the non-controlling members of Hillandale,
LLC. If not, please explain why you believe that the recognition of
minority interest is not necessary and tell us how much such minority interest
would be if recognized. As part of your response, please cite the accounting
literature that you believe supports your accounting
treatment.
Response: The Company’s
financial statements do not reflect the recognition of minority interest related
to Hillandale’s income and/or losses. An explanation of why we
believe that the recognition of minority interest is not appropriate is
described in our response to comments (2) through (5) above. The
amount of minority interest income (expense) that would be recognized had the
Company accounted for the noncontrolling interest in Hillandale as minority
interests rather than as a purchase obligation was approximately $2,143,000,
$1,214,000 and ($13,201,000) for the years ended June 3, 2006, June 2, 2007 and
May 31, 2008, respectively.
Exhibits
31.1 and 31.2
10. We
note that the identification of the certifying individual at the beginning of
the certification required by Exchange Act Rule 13a-14(a) also includes the
title of the certifying individual. In future filings, the identification of the
certifying individual at the beginning of the certification should be revised so
as not to include the individual’s title.
Response: In future filings we
will not include the title on the certifying individual on the certification
required by Exchange Act Rule 13a-14(a).
11. We
note that the certifications of your Principal Executive Officer and Principal
Financial Officer exclude the language in paragraph 4, which refers to the
certifying officers’ responsibility for establishing and maintaining internal
control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)), as well as the language required by Item 601 (b)(31)(i)(4)(b) of
Regulation S-K. In this regard, please confirm to us that your
certifying officers have designed, established, and maintained internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)). In addition, please ensure that the certifications
provided in your future filings fully comply with the requirements of Item 601
(b)(31) of Regulation S-K.
Response: In all
future certifications of the Principal Executive Officer (“PEO”) and Principal
Financial Officer (“PFO”) we will include the language in paragraph
4. The PEO and PFO have designed, established, and maintained
internal control over financial reporting. In all future filings paragraph 4 of
the abovementioned certifications will read as follows:
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4.
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The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
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a)
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Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
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b)
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Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
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c)
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Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
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d)
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Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
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Form
10-Q: For the quarterly period ended November 29, 2008
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Item
1.
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Financial
Statements
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Condensed
Consolidated Statements of Cash Flows, page 5
12. Per
your statement of cash flows, it appears that your company received $26 million
from debt issued during the 26-week period ended November 29,
2008. In this regard, we note that your company’s total outstanding
debt balance increased approximately 22.1% subsequent to the fiscal year ended
May 31, 2008. However, you have not discussed the terms of your
company’s additional borrowings in the footnotes to your financial
statements. In future filings, please revise your footnote
disclosure to discuss significant new borrowings obtained during your
company’s interim periods. Refer to Rule 10-01(a)(5) of Regulation
S-X for further guidance.
Response: In future
filings we will include in our footnotes disclosure of any significant new
borrowings obtained during the interim periods. We made
disclosure of the significant new borrowings in note 11 of Form 10-Q for the
interim period ended February 28, 2009 which was filed April 1,
2009.
Schedule
14A filed August 28, 2008
Compensation
Discussion and Analysis
Bonus
Plans, page 9
13. In
future filings, please quantify all performance targets under the general bonus
program that must be achieved in order for your executive officers to earn their
incentive compensation. To the extent you believe that disclosure of
the targets is not required because it would result in competitive harm such
that the targets could be excluded under Instruction 4 to Item 402(b) of
Regulation S-K, please provide on a supplemental basis a detailed explanation
for such conclusion. Please also note that to the extent that you
have an appropriate basis for omitting the specific targets, you must discuss
how difficult it would be for the named executive officers or how likely it will
be for you to achieve the undisclosed target levels or other
factors. General statements regarding the level of difficulty, or
ease, associated with achieving performance goals either corporately or
individually are not sufficient. Please provide insight into
the factors considered by the committee prior to the awarding of
performance-based compensation such as historical analyses prior to the granting
of these awards or correlations between historical bonus practice and the
incentive parameters set for the relevant fiscal period.
Response: In future filings,
we will comply with recommendations set forth in the Staff’s
comments.
14. In
this regard, in future filings please revise your discussion to clarify how you
calculate named executive officer’s bonuses, or advise. We note your
disclosure on page 9 that each of your named executive officers may earn a bonus
of up to fifty percent of his base salary. However, the bonus amounts
to Mr. Paramore and Mr. Hardin disclosed in the summary compensation table
appear to be substantially more than fifty percent of their respective base
salaries.
Response: In future filings,
we will comply with recommendations set forth in the Staff’s
comments.
Summary
Compensation Table, page 11
15. We
note that your summary compensation table only discloses named executive officer
compensation for your most recent fiscal year. In future filings,
please revise the summary compensation table to provide information for your
three most recent fiscal years. Refer to Item 402(c) of Regulation
S-K and Securities Act Release No. 33-8732A (Nov. 7, 2006).
Response: In future filings,
we will comply with recommendations set forth in the Staff’s
comments.
We hereby
acknowledge the following:
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The
Company is responsible for the adequacy and accuracy of the disclosures in
their filings;
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Staff
comments or changes, if any, to disclosure in response to staff comments
do not foreclose the Commission from taking any action with respect to our
filings; and
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The
Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
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We hope
that our responses address the issues raised in your letter and would be happy
to discuss with you any remaining questions or concerns you may have. Please
contact me at (601) 718-4220 should you have any questions or require
further information.
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Very
truly yours,
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/s/
Timothy A. Dawson
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Timothy
A. Dawson
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Vice
President, Chief Financial Officer, and Treasurer
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