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Summary of Significant Accounting Policies
 6 Months Ended
Dec. 02, 2023
Summary of Significant Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The
 
unaudited
 
condensed
 
consolidated
 
financial
 
statements
 
of
 
Cal-Maine
 
Foods,
 
Inc.
 
and
 
its
 
subsidiaries
 
(the
 
“Company,”
“we,” “us,” “our”)
 
have been prepared
 
in accordance with
 
the instructions to
 
Form 10-Q and
 
Article 10 of
 
Regulation S-X and
in
 
accordance
 
with generally
 
accepted
 
accounting
 
principles in
 
the
 
United
 
States of
 
America
 
(“GAAP”)
 
for
 
interim
 
financial
reporting and
 
should be
 
read in
 
conjunction with
 
our Annual
 
Report on
 
Form 10-K
 
for the fiscal
 
year ended
 
June 3,
 
2023 (the
“2023
 
Annual
 
Report”).
 
These
 
statements
 
reflect
 
all
 
adjustments
 
that
 
are,
 
in
 
the
 
opinion
 
of
 
management,
 
necessary
 
to
 
a
 
fair
statement of the results for
 
the interim periods presented
 
and, in the opinion of
 
management, consist of adjustments
 
of a normal
recurring nature.
 
Operating results for
 
the interim periods
 
are not necessarily
 
indicative of operating
 
results for the
 
entire fiscal
year.
Fiscal Year
The Company’s
 
fiscal year
 
ends on
 
the Saturday
 
closest to
 
May 31.
 
Each of
 
the three-month
 
periods and
 
year-to-date periods
ended on December 2, 2023 and November 26, 2022 included
13 weeks
 
and
26 weeks
, respectively.
Use of Estimates
The preparation of the
 
consolidated financial statements in
 
conformity with GAAP requires management
 
to make estimates and
assumptions
 
that affect
 
the amounts
 
reported in
 
the consolidated
 
financial statements
 
and accompanying
 
notes. Actual
 
results
could differ from those estimates.
Investment Securities
The Company
 
has determined
 
that its
 
debt securities
 
are available-for-sale
 
investments. We
 
classify these
 
securities as
 
current
because the
 
amounts invested
 
are available
 
for current
 
operations. Available
 
-for-sale
 
securities are
 
carried at
 
fair value,
 
based
on quoted market prices
 
as of the balance sheet
 
date, with unrealized gains
 
and losses recorded in other
 
comprehensive income.
The
 
amortized
 
cost
 
of
 
debt
 
securities
 
is
 
adjusted
 
for
 
amortization
 
of
 
premiums
 
and
 
accretion
 
of
 
discounts
 
to
 
maturity
 
and
 
is
recorded in interest
 
income. The Company regularly
 
evaluates changes to the
 
rating of its debt
 
securities by credit agencies
 
and
economic conditions
 
to assess and
 
record any
 
expected credit
 
losses through
 
allowance for
 
credit losses,
 
limited to
 
the amount
that fair value was less than the amortized cost basis.
 
Investments
 
in
 
mutual
 
funds
 
are
 
recorded
 
at
 
fair
 
value
 
and
 
are
 
classified
 
as
 
“Other
 
long-term
 
assets”
 
in
 
the
 
Company’s
Condensed
 
Consolidated
 
Balance
 
Sheets.
 
Unrealized
 
gains
 
and
 
losses
 
for
 
equity
 
securities
 
are
 
recorded
 
in
 
other
 
income
(expenses) as Other, net in the Company’s
 
Condensed Consolidated Statements of Income.
The cost
 
basis for
 
realized gains
 
and losses
 
on available-for-sale
 
securities is
 
determined by
 
the specific
 
identification method.
Gains
 
and
 
losses
 
are
 
recognized
 
in
 
other
 
income
 
(expenses)
 
as
 
Other,
 
net
 
in
 
the
 
Company’s
 
Condensed
 
Consolidated
Statements of Income. Interest and dividends on securities classified as available-for-sale
 
are recorded in interest income.
Trade Receivables
 
Trade receivables are stated at their carrying
 
values, which include a reserve for credit losses. As of December
 
2, 2023 and June
3,
 
2023,
 
reserves
 
for
 
credit
 
losses
 
were
 
$
536
 
thousand
 
and
 
$
579
 
thousand,
 
respectively.
 
The
 
Company
 
extends
 
credit
 
to
customers based on
 
an evaluation of each
 
customer’s financial condition
 
and credit history.
 
Collateral is generally
 
not required.
The
 
Company
 
minimizes
 
exposure
 
to
 
counter
 
party
 
credit
 
risk
 
through
 
credit
 
analysis
 
and
 
approvals,
 
credit
 
limits,
 
and
monitoring
 
procedures.
 
In
 
determining
 
our
 
reserve
 
for
 
credit
 
losses,
 
receivables
 
are
 
assigned
 
an
 
expected
 
loss
 
based
 
on
historical loss information adjusted as needed for economic and
 
other forward-looking factors.
Goodwill
Goodwill
 
represents
 
the
 
excess
 
of
 
the
 
purchase
 
price
 
over
 
the
 
fair
 
value
 
of
 
the
 
identifiable
 
net
 
assets
 
acquired.
 
Goodwill
 
is
evaluated
 
for
 
impairment
 
annually
 
by
 
first
 
performing
 
a
 
qualitative
 
assessment
 
to
 
determine
 
whether
 
a
 
quantitative
 
goodwill
test is
 
necessary.
 
After assessing
 
the totality
 
of events
 
or circumstances,
 
if we
 
determine it
 
is more
 
likely than
 
not that
 
the fair
value
 
of
 
a
 
reporting
 
unit
 
is
 
less
 
than
 
its
 
carrying
 
amount,
 
then
 
we
 
perform
 
additional
 
quantitative
 
tests
 
to
 
determine
 
the
magnitude of any impairment.
 
Intangible Assets
Intangible
 
assets
 
are
 
initially
 
recorded
 
at
 
fair
 
value
 
in
 
business
 
acquisitions,
 
which
 
include
 
franchise
 
rights,
 
customer
relationships, non-compete
 
agreements, trademark
 
and right
 
of use
 
intangibles. They
 
are amortized
 
over their
 
estimated useful
lives
 
of
 
5
 
to
 
15
 
years. The
 
gross
 
cost
 
and
 
accumulated
 
amortization
 
of
 
intangible
 
assets
 
are
 
removed
 
when
 
the
 
recorded
amounts
 
are fully
 
amortized
 
and
 
the asset
 
is no
 
longer
 
in use
 
or the
 
contract has
 
expired.
 
When certain
 
events or
 
changes in
operating conditions
 
occur,
 
asset lives may
 
be adjusted
 
and an impairment
 
assessment may
 
be performed
 
on the recoverability
of the carrying amounts.
Indefinite life assets are recorded at fair value in business acquisitions and
 
represents water rights. They are not amortized, but
are reviewed for impairment at least annually or more frequently if
 
impairment indicators arise.
Dividends Payable
 
We
 
accrue dividends at
 
the end of
 
each quarter according
 
to the Company’s
 
dividend policy adopted
 
by its Board
 
of Directors.
The Company
 
pays a dividend
 
to shareholders
 
of its Common
 
Stock and
 
Class A Common
 
Stock on
 
a quarterly basis
 
for each
quarter for
 
which the
 
Company reports
 
net income
 
attributable to
 
Cal-Maine Foods,
 
Inc. computed
 
in accordance
 
with GAAP
in an amount
 
equal to one-third
 
(1/3) of such
 
quarterly income. Dividends
 
are paid to
 
shareholders of record
 
as of the 60th
 
day
following the
 
last day
 
of such quarter,
 
except for
 
the fourth fiscal
 
quarter.
 
For the
 
fourth quarter,
 
the Company
 
pays dividends
to shareholders of record on the 65th day after the
 
quarter end. Dividends are payable on the 15th day following
 
the record date.
Following a quarter for which the Company does not report net income
 
attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend
 
for a subsequent profitable
 
quarter until the Company
 
is profitable on a cumulative
 
basis computed from the
date of the most recent quarter
 
for which a dividend was paid.
 
The dividend policy is subject to
 
periodic review by the Board of
Directors.
Business Combinations
The Company applies the acquisition
 
method of accounting, which
 
requires that once control is obtained,
 
all the assets acquired
and liabilities assumed,
 
including amounts
 
attributable to noncontrolling
 
interests, are recorded
 
at their respective
 
fair values at
the date of acquisition. We
 
determine the fair values of identifiable assets and liabilities
 
internally,
 
which requires estimates and
the
 
use
 
of
 
various
 
valuation
 
techniques.
 
When
 
a
 
market
 
value
 
is
 
not
 
readily
 
available,
 
our
 
internal
 
valuation
 
methodology
considers the remaining estimated life of the assets acquired and what
 
management believes is the market value for those assets.
 
We
 
typically use the income
 
method approach for
 
intangible assets acquired in
 
a business combination. Significant
 
estimates in
valuing
 
certain
 
intangible
 
assets
 
include,
 
but
 
are
 
not
 
limited
 
to,
 
the
 
amount
 
and
 
timing
 
of
 
future
 
cash
 
flows,
 
growth
 
rates,
discount rates and
 
useful lives. The
 
excess of the purchase
 
price over fair values
 
of identifiable assets and
 
liabilities is recorded
as goodwill.
 
Loss Contingencies
Certain
 
conditions
 
may
 
exist
 
as
 
of
 
the
 
date
 
the
 
financial
 
statements
 
are
 
issued
 
that
 
may
 
result
 
in
 
a
 
loss
 
to
 
the
 
Company
 
but
which will
 
only be
 
resolved when
 
one or
 
more future
 
events occur
 
or fail
 
to occur.
 
The Company’s
 
management and
 
its legal
counsel
 
assess such
 
contingent
 
liabilities, and
 
such assessment
 
inherently
 
involves an
 
exercise
 
of judgment.
 
In assessing
 
loss
contingencies
 
related
 
to legal
 
proceedings
 
that are
 
pending against
 
the Company
 
or unasserted
 
claims that
 
may result
 
in such
proceedings, the Company’s
 
legal counsel evaluates
 
the perceived merits
 
of any legal
 
proceedings or unasserted
 
claims as well
as the perceived merits of the amount of relief sought or expected to be
 
sought therein.
If the assessment
 
of a contingency
 
indicates it is
 
probable that
 
a material loss
 
has been incurred
 
and the amount
 
of the liability
can be
 
estimated, the
 
estimated liability
 
would be accrued
 
in the Company’s
 
financial statements.
 
If the assessment
 
indicates a
potentially material loss contingency is
 
not probable, but is reasonably possible,
 
or is probable but cannot be estimated,
 
then the
nature of the
 
contingent liability,
 
together with an
 
estimate of the
 
range of possible
 
loss if determinable
 
and material, would
 
be
disclosed. Loss
 
contingencies considered
 
remote are
 
generally not
 
disclosed unless
 
they involve
 
guarantees, in
 
which case
 
the
nature of the guarantee would be disclosed.
 
The Company expenses the costs of litigation as they are incurred.
New Accounting Pronouncements and Policies
No new accounting pronouncement issued or effective
 
during the fiscal year had or is expected to have a material impact on
 
our
Consolidated Financial Statements.