UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(mark one)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended August 30, 1997
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
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)
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_____
Number of shares outstanding of each of the issuer's classes of common
stock (exclusive of treasury shares), as of October 3, 1997.
Common Stock, $0.01 par value 11,994,388 shares
Class A Common Stock, $0.01 par value 1,200,000 shares
CAL-MAINE FOODS, INC.
INDEX
Page
Part I. Financial Information Number
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
August 30, 1997 (unaudited) and May 31, 1997 3
Condensed Consolidated Statements of Operations -
Three Months Ended August 30, 1997 (unaudited) and
August 31, 1996 (unaudited) 4
Condensed Consolidated Statements of Cash Flow -
Three Months Ended August 30, 1997 (unaudited) and
August 31, 1996 (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAL-MAINE FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
August 30, 1997 May 31, 1997
--------------- ------------
(unaudited) (note)
ASSETS
Current assets:
Cash and cash equivalents $ 16,852 $ 23,737
Accounts receivable, net 13,838 13,086
Recoverable federal and state income taxes 2,142 1,137
Inventories - note 2 41,401 42,594
Prepaid expenses and other current assets 1,410 986
--------- ---------
Total current assets 75,643 81,540
Notes receivable and investments 3,988 4,747
Other assets 1,168 661
Property, plant and equipment 166,087 161,117
Less accumulated depreciation (68,477) (65,771)
--------- ---------
97,610 95,346
--------- ---------
TOTAL ASSETS $ 178,409 $ 182,294
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 21,445 $ 21,695
Current maturities of long-term debt 5,067 4,540
Current deferred income taxes 9,915 9,915
--------- ---------
Total current liabilities 36,427 36,150
Long-term debt, less current maturities 57,471 59,896
Deferred expenses 1,654 1,655
Deferred income taxes 9,951 9,951
--------- ---------
Total liabilities 69,076 107,652
Stockholders' equity:
Common stock $0.01 par value per share:
Authorized shares - 30,000,000
Issued and outstanding shares -
17,588,200 at August 30, 1997
and 17,565,200 at May 31, 1997 176 176
Class A common stock $0.01 par value,
authorized and issued 1,200,000 shares 12 12
Paid-in capital 18,863 18,785
Retained earnings 60,166 61,903
Common stock in treasury - 5,593,812
shares at August 30, 1997
and 5,583,200 shares at May 31, 1997 (6,311) (6,234)
--------- ---------
Total stockholders' equity 72,906 74,642
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 178,409 $ 182,294
========= =========
See note next page. See notes to condensed consolidated financial statements.
CAL-MAINE FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
UNAUDITED
13 Weeks Ended
August 30, 1997 August 31, 1996
--------------- ---------------
Net sales $ 63,723 $ 65,563
Cost of sales 58,253 55,712
--------- ---------
Gross profit 5,470 9,851
Selling, general and administrative 7,461 7,140
--------- ---------
Operating income (loss) (1,991) 2,711
Other income (expense):
Interest expense, net (1,013) (1,116)
Other 194 199
--------- ---------
(819) (917)
--------- ---------
Income (loss) before income taxes (2,810) 1,794
Income tax expense (benefit) (1,073) 697
--------- ---------
NET INCOME (LOSS) $ (1,737) $ 1,097
========= =========
Net income (loss) per common share $ (.13) $ 0.10
========= =========
Weighted average shares outstanding 13,188 11,509
========= =========
Note: The balance sheet at May 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See notes to condensed consolidated financial statements.
CAL-MAINE FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
UNAUDITED
13 Weeks Ended
August 30, 1997 August 31, 1996
--------------- ---------------
Cash flows from operating activities $ 78 $ 3,147
Cash flows from investing activities:
Purchases of property, plant and equipment (1,792) (1,104)
Construction of production facilities (3,344) (1,008)
Payments received on notes receivable
and from investments 33 9
Net proceeds from sale of property,
plant and equipment 37 266
--------- ---------
Net cash used in investing activities (5,066) (1,837)
Cash flows from financing activities:
Additional long-term borrowings 0 1,000
Principal payments on long-term debt
and capital leases (1,898) (1,560)
Purchases of common stock for treasury (77) (21)
Proceeds from the exercise of stock options 78 0
--------- ---------
Net cash provided by (used in) financing
activities (1,897) (581)
--------- ---------
Increase (decrease) in cash and cash
equivalents (6,885) 729
Cash and cash equivalents at beginning of
period 23,737 3,959
--------- ---------
Cash and cash equivalents at end of period $ 16,852 $ 4,688
========= =========
See notes to condensed consolidated financial statements.
CAL-MAINE FOODS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(in thousands, except share amounts)
August 30, 1997
(unaudited)
1. Presentation of Interim Information
The accompanying unaudited condensed consolidated financial statements
are presented in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
In the opinion of the management of Cal-Maine Foods, Inc. (the
"Company"), the accompanying unaudited condensed consolidated financial
statements include all normal adjustments considered necessary to present
fairly the financial position as of August 31, 1997, and the results of
operations for the thirteen weeks ended August 30, 1997 and August 31, 1996,
and the cash flows for the thirteen weeks ended August 30, 1997 and August
31, 1996. Interim results are not necessarily indicative of results for a
full year. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report.
2. Inventories
Inventories consisted of the following:
August 30, 1997 May 31, 1997
--------------- ------------
Flocks $ 26,759 $ 26,674
Eggs and egg products 3,661 4,030
Feed and supplies 7,831 8,377
Livestock 3,150 3,513
-------- --------
$ 41,401 $ 42,594
3. Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share", which is required to be adopted on
February 28, 1998. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effects of stock options will be excluded. The impact of
Statement 128 on the calculation of primary and fully diluted earnings per
share for the three months ended August 30, 1997 and August 31, 1996 is not
expected to be material.
ITEM 2. 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 and in the manufacture and sale of egg
products. The Company's fiscal year end is the Saturday closest to May 31.
The Company's operations are fully integrated. It owns facilities to
hatch chicks, grow pullets, manufacture feed, and produce, process,
manufacture and distribute shell eggs and egg products. The Company
currently is the largest producer and distributor of fresh shell eggs in the
United States. Shell eggs account for over 90% of the Company's net sales.
The Company primarily markets its shell eggs in the southwestern,
southeastern, mid-western and mid-Atlantic regions of the United States.
Shell eggs are sold directly by the Company primarily to national and
regional supermarket chains. Egg products are sold both on a direct basis
and through egg product brokers to institutional users, including
manufacturers of baked goods, mayonnaise and confections.
The Company currently uses contract producers for approximately 35% 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, some
shell eggs are purchased for resale by the Company from other, 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.
Management's discussion contains forward-looking statements which involve
risks and uncertainties and the Company's actual experience may differ
materially from that discussed as follows. 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.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the Company's Condensed Consolidated Statements of Income expressed as a
percentage of net sales.
Percentage of Net Sales
-----------------------
13 Weeks Ended
August 30, 1997 August 31, 1996
--------------- ---------------
Net sales 100.0% 100.0%
Cost of sales 91.4 85.0
------ ------
Gross profit 8.6 15.0
Selling, general & administrative 11.7 10.9
------ ------
Operating income (loss) (3.1) 4.1
Other expense (1.3) (1.4)
------ ------
Income (loss) before taxes (4.4) 2.7
Income tax expense (benefit) (1.7) 1.0
------ ------
Net income (loss) (2.7)% 1.7%
NET SALES
Net sales for the first quarter of fiscal 1998 were $63.7 million, a
decrease of $1.8 million, or 2.8%, as compared to the first quarter of fiscal
1997. Although dozens sold increased for the current quarter, a 9% decrease
in average shell egg market prices resulted in a decline in net sales. The
Company's net average selling price per dozen for the fiscal 1998 first
quarter was $.607, compared to $.682 for the first quarter last year, a
decrease of 11%. Differences in the product mix sold affect the difference
between the percentage change of average shell egg market price and the
Company's net average selling price. The Company's net average selling price
is the average selling price for all sizes and grades of shell eggs,
including non-graded egg sales, breaking stock and undergrades. Dozens sold
for the fiscal 1998 first quarter were 98.1 million, compared to 89.4
million, an increase of 10%. A production and processing facility purchased
in the fourth quarter of fiscal 1997 produced 6.6 million dozen. The balance
of the increase in dozens sold was from purchases from outside producers.
COST OF SALES
Total cost of sales for the first quarter ended August 30, 1997 was
$58.3 million, an increase of $2.5 million, or 4.6%, from the cost of sales
of $55.7 million in last year's first quarter. This increase is primarily
the net result of an increase in dozens sold and a decrease in feed cost per
dozen eggs sold. Feed cost for the first quarter ended August 30, 1997, was
$.25 per dozen, compared to $.32 per dozen for the comparable
period, a decrease of 22%. Last year, poor crop conditions in the Mid-West
resulted in higher cost of feed ingredients. For the current crop year,
industry projections indicate better crop conditions. The decrease in egg
selling prices and increases in cost of sales combined to decrease gross
profit from 15.0% of net sales in the quarter ended August 31, 1996 to 8.6%
for the current quarter ended August 30, 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expense for the first quarter ended
August 30, 1997 was $7.5 million, an increase of $300,000, or 4.5%, as
compared to the $7.1 million for the comparable period last year. For the
current quarter, approximately one-third of the increase is due to higher
promotional expenses in the Company's growing specialty egg business, and the
balance is due to additional delivery costs, due to increased dozens sold.
As a percent of net sales, selling, general and administrative expenses have
increased for the current quarter to 11.7% from last year's first quarter of
10.9%.
OPERATING INCOME (LOSS)
As the result of the above, an operating loss of $2.0 million was
incurred for the first quarter ended August 30, 1997, as compared to an
operating income of $2.7 million for last year's first quarter. As a percent
of net sales, the current fiscal 1998 quarter had a 3.1% operating loss,
compared to 4.1% operating income for last year.
OTHER EXPENSE
Other expenses for the first quarter ended August 30, 1997 were
$800,000, compared to $900,000 for last year's first quarter. The current
year reduction of $100,000 is due to lower net interest expense. As a
percent of net sales, both quarters were a fraction above 1%.
INCOME TAXES
As a result of above, the Company had a pre-tax loss of $2.8 million for
the quarter ended August 30, 1997, compared to pre-tax income of $1.8 million
for the quarter ended August 31, 1996. For the fiscal 1998 first quarter, an
income tax benefit of $1.1 million was recorded with an effective tax rate of
38.2%, as compared to an income tax expense of $700,000 with an effective
rate of 38.9% for last year's comparable quarter.
NET INCOME
As a result of the above, the net loss for the first quarter ended
August 30, 1997 was $1.7 million, or a loss of $.13 per share, compared to
net income of $1.1 million, or $.10 per share for the quarter ended August
31, 1996.
CAPITAL RESOURCES AND LIQUIDITY
The Company's working capital at August 30, 1997 was $39.2 million
compared to $45.4 million at May 31, 1997. The Company's need for working
capital generally is highest in the first and last fiscal quarters ending in
August and May, respectively, when egg prices are normally at seasonal lows.
Seasonal borrowing needs frequently are higher during these periods than
during other fiscal periods. The Company had an unused $35 million line of
credit with three banks at August 30, 1997. The Company's long-term debt at
that date, including current maturities and capitalized lease obligations,
totaled $62.5 million.
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. The Company was in
compliance with these provisions at August 30, 1997.
For the thirteen weeks ended August 30, 1997, $78,000 in net cash was
provided by operating activities. This compares to net cash from operating
activities of $3.1 million for the comparable period last year. For the
current fiscal first quarter, $1.8 million was used for purchases of
property, plant and equipment, and $3.3 million was used for construction of
the Chase, Kansas facility. Repayment of long-term debt in the amount of
$1.9 million was made. The net result of these current activities was a
decrease in cash of $6.9 million since May 31, 1997.
For the first quarter ended August 31, 1996, $1.1 million was used for
purchases of property, plant and equipment, and $1.0 million was used for
construction of new facilities. Additional long-term borrowings of $1.0
million were received and repayments of $1.6 million were made. Including
the $3.1 million net cash from operating activities, the net result was an
increase in cash of $700,000 during the first quarter beginning June 1, 1996.
At August 30, 1997, the Company had expended, since the start of the
project, approximately $14.3 million in the construction of new shell egg
production, processing and feed mill facilities in Chase, Kansas. The
Company is financing approximately $13.5 million of the estimated $16.0
million to complete the project through industrial revenue bonds maturing in
2011. Borrowings under the industrial revenue bond agreement totaled $1.0
million at August 30, 1997. In the second quarter of fiscal 1998, the
Company plans to commence construction of new shell egg production and
processing facilities in Waelder, Texas. The estimated cost of construction
is approximately $13.9 million with financing plans of approximately $10.4
million borrowing from an insurance company.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
The following Part I exhibit is filed herewith:
Exhibit
Number Exhibit
------- -------
27 Financial data schedule
b. Reports on Form 8-K
No Current Report on Form 8-K was filed by the Company covering an event
during the first quarter of fiscal 1998.
SIGNATURES
Pursuant to the requirements 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.
CAL-MAINE FOODS, INC.
(Registrant)
Date: October 6, 1997 /s/ Bobby J. Raines
------------------------------
Bobby J. Raines
Vice President/Treasurer
(Principal Financial Officer)
Date: October 6, 1997 /s/ Charles F. Collins
------------------------------
Charles F. Collins
Vice President/Controller
(Principal Accounting Officer)