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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.