Item 2. Management’s Discussion and Analysis
ITEM
2.
MANAGEMENT’S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND
RESULTS
OF
OPERATIONS
The following
should be
read in
conjunction
with Management’s
Discussion and
Analysis of
Financial Condition
and Results
of Operations
included in
Item 7
of the
Company’s
Annual Report
on Form
10-K for
its fiscal
year ended
May 29,
2021 (the
“2021
Annual
Report”),
and
the accompanying
financial
statements
and
notes included
in Part
II
Item 8
of
the 2021
Annual
Report and in
Part
I Item I
of this Quarterly Report on Form 10-Q (“Quarterly Report”).
This
report
contains
numerous
forward-looking
statements
within
the
meaning
of
Section
27A
of
the
Securities
Act
of
1933
(the “Securities
Act”) and
Section 21E
of the
Securities Exchange
Act of
1934 (the
“Exchange Act”)
relating to
our shell
egg
business,
including
estimated
future
production
data,
expected
construction
schedules,
projected
construction
costs,
potential
future
supply
of and
demand
for
our
products,
potential
future
corn
and
soybean price
trends,
potential
future
impact
on
our
business
of
the
COVID-19
pandemic,
potential
future
impact
on
our
business
of
new
legislation,
rules
or
policies,
potential
outcomes
of
legal
proceedings,
and
other
projected
operating
data,
including
anticipated
results
of
operations
and
financial
condition.
Such
forward-looking
statements
are
identified
by
the
use
of
words
such
as
“believes,”
“intends,”
“expects,”
“hopes,”
“may,”
“should,”
“plans,”
“projected,”
“contemplates,”
“anticipates,”
or
similar
words.
Actual
outcomes
or
results
could
differ
materially
from
those
projected
in
the
forward-looking
statements. The
forward-looking
statements
are
based
on
management’s
current
intent,
belief,
expectations,
estimates,
and
projections
regarding
the
Company
and
its
industry. These
statements
are
not
guarantees
of
future
performance
and
involve
risks,
uncertainties,
assumptions,
and
other
factors
that
are
difficult
to predict
and
may be
beyond
our
control. The
factors
that
could cause
actual results
to
differ
materially
from those
projected
in the
forward-looking
statements include,
among others,
(i) the
risk factors
set forth
in Part
I, Item
1A of
the 2021
Annual
Report
(ii)
the
risks
and
hazards
inherent
in
the
shell egg
business
(including
disease, pests,
weather
conditions,
and
potential for
product recall),
(iii) changes
in the
demand for
and market
prices of
shell eggs
and feed
costs, (iv)
our ability
to
predict
and
meet
demand
for
cage-free
and
other
specialty
eggs,
(v)
risks,
changes,
or
obligations
that
could
result
from
our
future
acquisition
of
new
flocks
or
businesses
and
risks
or
changes
that
may
cause
conditions
to
completing
a
pending
acquisition not to
be met, (vi) risks
relating to the
evolving COVID-19 pandemic,
and (vii) adverse
results in pending litigation
matters. Readers
are
cautioned
not
to
place
undue
reliance
on
forward-looking
statements
because,
while
we
believe
the
assumptions on
which the
forward-looking statements
are based
are reasonable,
there can
be no
assurance that
these forward-
looking
statements
will
prove
to
be
accurate. Further,
forward-looking statements
included
herein
are
only
made
as
of
the
respective
dates
thereof,
or
if
no
date
is
stated,
as
of
the date
hereof. Except
as
otherwise
required
by
law,
we
disclaim
any
intent or obligation
to update publicly
these forward-looking statements,
whether because of
new information, future
events, or
otherwise.
GENERAL
Cal-Maine
Foods,
Inc.
is
primarily
engaged
in
the
production,
grading,
packaging,
marketing
and
distribution
of
fresh
shell
eggs. Our operations are fully integrated
under one operating segment.
We are
the largest producer and
distributor of fresh shell
eggs in the
United States (“U.S.”).
Our total flock
of approximately 40.8
million layers and
10.3 million pullets
and breeders is
the largest
in the
U.S. We
sell most
of our
shell eggs
to a
diverse group
of customers,
including national
and regional
grocery
store chains,
club stores, companies
servicing independent
supermarkets in
the U.S., food
service distributors,
and egg product
consumers in states across the southwestern, southeastern, mid-western
and mid-Atlantic regions of the U.S.
Our
operating
results
are
materially
impacted
by
market
prices for
eggs
and
feed
grains
(corn
and
soybean
meal),
which
are
highly
volatile,
independent
of
each
other,
and
out
of
our
control.
Generally,
higher
market
prices
for
eggs
have
a
positive
impact
on
our
financial
results
while
higher
market
prices
for
feed
grains
have
a
negative
impact
on
our
financial
results.
Although we
use a
variety of
pricing mechanisms
in pricing
agreements with
our customers,
we sell
most of
our conventional
shell eggs
based on
formulas that
consider,
in varying
ways, independently
quoted regional
wholesale
market prices
for shell
eggs
or
formulas
related
to
our
costs
of
production
which
include
the
cost
of
corn
and
soybean
meal.
As
an
example
of
the
volatility
in
the
market
prices
of
shell
eggs,
the
Urner-Barry
Southeastern
Regional
Large
Egg
Market
Price
per
dozen
eggs
(“UB southeastern large index”) in fiscal year 2021 ranged
from a low of $0.87 in July 2020 to a high of $1.63 in March 2021.
Generally,
we purchase
primary feed
ingredients,
mainly corn
and soybean
meal, at
current market
prices. Corn
and soybean
meal
are
commodities
and
are
subject
to
volatile
price
changes
due
to
weather,
various
supply
and
demand
factors,
transportation and storage costs, speculators, and agricultural, energy
and trade policies in the U.S. and internationally.
An important competitive advantage
for Cal-Maine Foods is
our ability to meet
our customers’ evolving needs
with a favorable
product mix
of conventional,
cage-free, organic
and other
specialty eggs
and egg
products. We
have also
enhanced our
efforts
to
provide
free-range
and
pasture-raised
eggs
that
meet
consumers’
evolving
choice
preferences.
While
a
small
part
of
our
Index
18
current
business,
the
free-range
and
pasture-raised
eggs
we
produce
and
sell
represent
attractive
offerings
to
a
subset
of
consumers,
and therefore our customers, and help us continue to serve as the trusted provider of quality
food choices.
Specialty shell
eggs have
been a
significant and
growing portion
of the
market. In
recent years,
a significant
number of
large
restaurant chains, food
service companies and
grocery chains, including
our largest customers,
announced goals to
transition to
an exclusively
cage-free egg
supply chain
by specified
future dates.
Additionally,
several states,
representing 2
4% of
the U.S.
total population
according to
the 2020
U.S. Census,
have passed
legislation requiring
that all eggs
sold in
those states
must be
cage-free
eggs by
specified
future dates,
and
other states
are
considering
such legislation.
For additional
information, see
the
2021 Annual
Report, Part
I, Item
1, “Business
– Growth
Strategy” and
“– Government
Regulation,” and
the first
risk factor
in
Part I Item 1A, “Risk Factors” under the sub-heading “Legal and Regulatory
Risk Factors.”
Retail
sales
of
shell
eggs
historically
have
been
highest
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.
Historically,
shell
egg
prices
tend
to
increase
with
the
start
of
the
school
year
and
tend
to
be
highest
prior
to
holiday
periods,
particularly
Thanksgiving,
Christmas,
and
Easter.
Consequently,
and
all
other
things
being
equal, we would
expect to experience
lower selling prices, sales
volumes and net
income (and may incur
net losses) in our
first
and
fourth
fiscal
quarters
ending
in
August/September
and
May/June,
respectively.
Because
of
the
seasonal
and
quarterly
fluctuations,
comparisons
of
our
sales
and
operating
results
between
different
quarters
within
a
single
fiscal
year
are
not
necessarily meaningful comparisons.
COVID-19
Since early
2020, the
coronavirus (“COVID-19”)
outbreak, characterized
as a
pandemic by
the World
Health Organization
on
March
11,
2020,
has
caused
significant
disruptions
in
international
and
U.S.
economies
and
markets.
We
understand
the
challenges
and
difficult
economic
environment
facing
families
in
the
communities
where
we
live
and
work,
and
we
are
committed
to
helping
where
we
can.
We
have
provided
food
assistance
to
those
in
need
by
donating
approximately
239
thousand
dozen
eggs
to
date
in
fiscal
2022.
We
believe
we
are
taking
all
reasonable
precautions
in
the
management
of
our
operations in
response to
the COVID-19
pandemic. Our
top priority
is the
health and
safety of
our employees,
who work
hard
every day
to produce
eggs for our
customers. As
part of the
nation’s
food supply,
we work
in a critical
infrastructure industry,
and
we
believe
we
have
a
special
responsibility
to
maintain
our
normal
work
schedule.
As
such,
we
are
in
regular
communication with our managers across our operations and
continue to closely monitor the situation in our facilities and
in the
communities where we live and work. We
have implemented procedures designed to protect our employees, taking into account
guidelines
published
by
the Centers
for
Disease Control
and
other
government
health
agencies,
and
we
have
strict sanitation
protocols
and
biosecurity
measures
in
place
throughout
our
operations
with
restricted
access to
visitors.
There
are
no known
indications that COVID-19 affects hens or can be transferred
through the food supply.
We
continue to
proactively monitor
and manage
operations during
the COVID-19 pandemic,
including additional
related costs
that
we
incurred
or
may
incur
in
the
future.
The pandemic
had
a
negative
impact
on our
business
through
disruptions
in
the
supply chain such as increased costs and limited availability of packaging
supplies, and increased labor costs and medical costs.
In the
first quarters
of fiscal
2022 and
2021,
we spent
$553 thousand
and $832
thousand (excluding
medical insurance
claims)
related
to
the
pandemic,
respectively.
The
majority
of
these
expenses
in
fiscal
2022
resulted
from
additional
labor
costs and
increased
cost
of
packaging
materials,
primarily
reflected
in
cost
of
sales.
In
fiscal
2021,
most
of
these
expenses
related
to
additional
labor
costs.
Medical
insurance
claims
related
to
COVID-19
paid
during
the
first
quarter
of
fiscal
2022
were
an
additional $267 thousand as compared to $324 thousand paid in the
same quarter in fiscal 2021.
EXECUTIVE OVERVIEW
For the first
quarter of fiscal
2022,
we recorded a
gross profit of $6.6
million compared to
$16.8 million for
the same period
of
fiscal 2021,
with the decrease due primarily to the higher costs of feed
ingredients and higher processing costs. Our total
dozens
sold decreased
1.7%
to 259.4
million dozen
shell eggs
for the
first quarter
of fiscal
2022 compared
to 264.0
million dozen
for
the
same
period
of
fiscal
2021.
For
the
first
quarter
of
fiscal
2022,
conventional
dozens
sold
decreased
5.5%
and
specialty
dozens sold
increased 8.9%
as compared
to the
same quarter
in fiscal 2021.
Specialty dozens
sold increased
as more
cage-free
facilities came into production which helped increase our cage-free
egg sales.
The
daily
average
price
for
the
UB
southeastern
large
index
for
first
quarter
of
fiscal
2022
increased
41.2%
from
the
same
period
in
the prior
year.
Our net
average
selling
price
per dozen
for
the
first
quarter
of fiscal
2021
was
$1.238
compared
to
$1.078
in
the
prior
year
period.
Hen
numbers
reported
by the
USDA as
of
September
1, 2021,
were 319.5
million,
which
is
approximately
the same
number of
hens in
same period
for the
prior year.
The USDA
also reported
that the
hatch from
April
Index
19
2021 through August 2021 increased 2.1%
compared to the prior-year period. As of September 1, 2021, eggs in incubators were
down 4.9% versus the prior-year period.
Our farm
production costs
per dozen
produced for
the first
quarter of
fiscal 2022
increased 25.4%
or $0.182
compared to
the
first quarter
of fiscal 2021
.
This increase was
primarily due
to increased
prices for
feed ingredients
caused by
increased export
demand,
as
well
as
weather-related
shortfalls
in
production
and
yields,
which
have
placed
additional
pressure
on
domestic
supplies. For the
first quarter,
the average Chicago
Board of Trade
(“CBOT”) daily market
price was $5.96
per bushel for
corn
and $364
per ton
for soybean
meal, representing
an increase of
81.8%
and 26.1%,
respectively,
compared to
the average
daily
CBOT prices for
the first quarter
of fiscal 2021.
Other farm production
costs for the
first quarter of
fiscal 2022 increased
7.6%
compared to the same period in the prior fiscal year due to higher flock amortization
and facility expenses.
RESULTS OF
OPERATIONS
The
following
table
sets
forth,
for
the
periods
indicated,
certain
items
from
our
Condensed
Consolidated
Statements
of
Operations expressed as a percentage of net sales.
13 Weeks Ended
August 28, 2021
August 29, 2020
Net sales
100.0
%
100.0
%
Cost of sales
98.0
%
94.3
%
Gross profit
2.0
%
5.7
%
Selling, general and administrative
14.0
%
15.0
%
(Gain) loss on disposal of fixed assets
(0.1)
%
—
%
Operating loss
(11.9)
%
(9.3)
%
Total other income, net
1.7
%
0.6
%
Loss before income taxes
(10.2)
%
(8.7)
%
Income tax benefit
(4.8)
%
(2.1)
%
Net loss
(5.4)
%
(6.6)
%
Index
20
NET SALES
Total
net sales for the
first quarter of fiscal
2022 were $331.7
million, compared to
$292.8 million for
the same period of
fiscal
2021.
Net shell
egg
sales represented
97.2% and
97.7% of
total net
sales for
the first
quarter of
fiscal 2022
and 2021,
respectively.
Shell
egg
sales
classified
as
“Other”
represent
sales
of
hard
cooked
eggs,
hatching
eggs,
and
other
miscellaneous
products
included with
our shell
egg operations.
The table
below presents
an analysis
of our
conventional and
specialty shell
egg sales
(in thousands, except percentage data):
13 Weeks Ended
August 28, 2021
August 29, 2020
Total net sales
$
331,704
$
292,782
Conventional
$
182,549
56.6
%
$
155,384
54.3
%
Specialty
138,657
43.0
%
129,245
45.2
%
Egg sales, net
321,206
99.6
%
284,629
99.5
%
Other
1,132
0.4
%
1,448
0.5
%
Net shell egg sales
$
322,338
100.0
%
$
286,077
100.0
%
Net shell egg sales as a percent of total net sales
97.2
%
97.7
%
Dozens sold:
Conventional
184,487
71.1
%
195,238
74.0
%
Specialty
74,898
28.9
%
68,756
26.0
%
Total dozens sold
259,385
100.0
%
263,994
100.0
%
Net average selling price per dozen:
Conventional
$
0.989
$
0.796
Specialty
$
1.851
$
1.880
All shell eggs
$
1.238
$
1.078
Egg products sales:
Egg products net sales
9,366
6,705
Pounds sold
15,269
15,030
Net average selling price per pound
0.613
0.446
Shell egg net sales
-
In
the
first
quarter
of
fiscal
2022,
conventional
egg
sales
increased
$27.2
million
or
17.5%,
compared
to
the
first
quarter of
fiscal 2021,
primarily due
to the
increase in
price, partially
offset by
a decrease
in volume
of conventional
eggs
sold.
Changes
in
price
resulted
in
a
$35.6
million
increase
and
change
in
volume
resulted
in
a
$10.6
million
decrease in net sales, respectively.
-
Higher quarter-over-quarter conventional
egg prices were primarily due
to depressed prices in the first
quarter of fiscal
2021,
which
resulted
from
conventional
eggs
entering
the
retail
channel
from
the
foodservice
channel
due
to
the
pandemic.
-
The decrease
in volume
of conventional
eggs sold
was primarily
due to
the first
quarter of
fiscal 2021
elevated retail
demand due
to consumers’
preferences to
purchase eggs
for in-home
meal preparation
due to
the pandemic.
We
saw
this consumer preference
begin to shift in
the fourth quarter of
fiscal 2021 as consumers
began
to resume out-of-home
dining and prepare
fewer meals at home.
-
Specialty
egg
sales increased
$9.4
million,
or 7.3
%,
primarily
due
to
increased
volume of
8.9%
which
resulted
in
a
$11.4 million
increase in net sales.
More cage-free facilities
came into production
which helped increase our
cage-free
egg sales.
-
We believe that
higher demand for specialty eggs has been driven by the pandemic
,
as consumers prepared more meals
for in-home
consumption rather
than dining
out.
We
believe higher
at-home meal
preparation has
driven a
consumer
preference to purchase higher-priced specialty eggs.
Index
21
Egg products net sales
-
Egg products
net sales
increased $2.7
million or
39.7%, primarily
due to
a 37.4%
selling price
increase compared
to
the first quarter of fiscal 2021, which had a $1.6 million positive impact
on net sales.
-
Selling prices for
egg products in
the first quarter
of fiscal 2021
were negatively impacted
by a decline
in foodservice
demand
due to
the pandemic.
Our egg
products net
average selling
price
increased in
the first
quarter of
fiscal 2022
compared to
the same
period in
fiscal 2021
as foodservice
channel demand
has begun
to shift
more to
pre-pandemic
levels.
COST OF SALES
Costs of
sales for
the first
quarter of
fiscal 2022
were $325.1
million compared
to $276.0
million for
the same
period of
fiscal
2021.
Cost of
sales consists
of
costs directly
related
to producing,
processing
and
packing
shell eggs,
purchases
of
shell
eggs from
outside producers, processing and packing of liquid
and frozen egg products and other non-egg costs. Farm
production costs are
those costs
incurred at
the egg production
facility,
including feed,
facility,
hen amortization,
and other
related farm
production
costs.
The following table presents the key variables affecting our cost of
sales (in thousands, except cost per dozen data):
13 Weeks Ended
August 28, 2021
August 29, 2020
% Change
Cost of Sales:
Farm production
$
207,495
$
161,863
28.2
%
Processing, packaging, and warehouse
65,059
59,869
8.7
Egg purchases and other (including change in inventory)
44,691
48,933
(8.7)
Total shell eggs
317,245
270,665
17.2
Egg products
7,814
5,352
46.0
Total
$
325,059
$
276,017
17.8
%
Farm production costs (per dozen produced)
Feed
$
0.545
$
0.388
40.5
%
Other
$
0.353
$
0.328
7.6
%
Total
$
0.898
$
0.716
25.4
%
Outside egg purchases (average cost per dozen)
$
1.35
$
1.04
29.8
%
Dozens produced
236,458
231,161
2.3
%
Dozens sold
259,385
263,994
(1.7)
%
Farm Production
-
Feed costs per dozen produced
increased 40.5% in the first quarter of
fiscal 2022 compared to the first
quarter of fiscal
2021,
primarily
due
to
higher
feed
ingredient
prices
resulting
from
increased
export
demand,
as
well
as
weather-
related shortfalls in production and yields, which have placed additional
pressure on domestic supplies.
-
Other
farm
production
costs increased
due
to higher
flock amortization
,
primarily
from an
increase
in
our
cage-free
production,
which
has
higher
capitalized
costs.
Also,
higher
feed
costs,
which
began
to
rise
in
our
third
quarter
of
fiscal 2021, are capitalized in our flocks during pullet production and
increased our amortization expense.
-
We had higher
facility expense as more cage-free facilities came into production.
Processing, packaging, and warehouse
-
Cost
of
packaging
materials
increased
8.9%
compared
to
the
first
quarter
of
fiscal
2021
as
demand
for
packaging
products
increased
due
to
pandemic
supply
chain
constraints
and
manufacturers
increased
prices
and
implemented
pandemic surcharges.
-
Labor costs increased 11.1% due to wage
increases in response to labor shortages, primarily due to the pandemic.
Egg purchases and other (including change in inventory)
-
Costs
in
this
category
decreased
primarily
due
to
the
decrease
in
the
volume
of
outside
egg
purchases,
as
our
percentage of produced to sold increased to 91.2%, partially offset
by an increase in the cost of these purchases.
Index
22
Looking
forward
throughout
the
rest
of
fiscal
2022,
corn
and
soybean
supplies
remained
tight
relative
to
demand,
primarily
related
to
higher
export
demand,
as
well
as
weather-related
shortfalls
in
production
and
yields.
We
expect
market
prices
to
remain elevated
and volatile
relative to
historical prices
at least
for the
short term
given the
ongoing disruptions
related to
the
COVID-19 global pandemic, weather fluctuations and geopolitical issues.
GROSS PROFIT
Gross profit
for the
first quarter
of fiscal
2022 was
$6.6 million
compared to
$16.8 million
for the
same period
of fiscal
2021.
The decrease of $10.1 million was primarily due to the increased cost of feed ingredients
and processing costs.
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES
Selling,
general,
and
administrative
expenses
("SGA")
include
costs
of
marketing,
distribution,
accounting,
and
corporate
overhead. The following table presents an analysis of our SGA expenses (in thousands):
13 Weeks Ended
August 28, 2021
August 29, 2020
$ Change
% Change
Specialty egg expense
$
13,715
$
12,697
$
1,018
8.0
%
Delivery expense
13,936
12,494
1,442
11.5
%
Payroll, taxes and benefits
9,939
11,301
(1,362)
(12.1)
%
Stock compensation expense
1,001
893
108
12.1
%
Other expenses
7,934
6,580
1,354
20.6
%
Total
$
46,525
$
43,965
$
2,560
5.8
%
Specialty egg expense
-
Advertising and
franchise fees increased
in the first
quarter of
fiscal 2022 compared
to the first
quarter of fiscal
2021,
due to the 8.9% increased volume of specialty eggs sales.
Delivery expense
-
The increased
delivery expense is primarily due to the increase in fuel costs.
Payroll, taxes and benefits
-
The
decrease
in payroll,
taxes and
benefits
is primarily
due
to
a decrease
in bonus
accruals as
well
as a
decrease
in
expense associated with the deferred compensation plan.
Other expenses
-
The increase in
other expenses is primarily
due to increased premiums
for property and casualty
insurance due to
hard
market conditions driven by industry high loss ratios and low investment income
returns to offset losses.
OPERATING
INCOME (LOSS)
For
the
first
quarter
of
fiscal
2022,
we
recorded
an
operating
loss
of
$39.7
million
compared
to
an
operating
loss
of
$27.2
million for the same period of fiscal 2021.
OTHER INCOME (EXPENSE)
Total
other
income
(expense)
consists
of
items
not
directly
charged
or
related
to
operations,
such
as
interest
income
and
expense, royalty income, equity in income or loss of unconsolidated entities, and
patronage income, among other items.
For the first quarter of
fiscal 2022,
we earned $290 thousand of
interest income compared to $996
thousand for the same period
of fiscal 2021
.
The decrease resulted
from significantly
lower investment
balances.
The Company
recorded interest
expense of
$58 thousand and $71 thousand for the first quarters
ended August 28, 2021 and August 29, 2020,
respectively.
For
the
first
quarter
of
fiscal
2022,
equity
income
of
unconsolidated
entities
was
$135
thousand
compared
to
a
loss
of
$44
thousand in the prior year period.
Index
23
Other,
net for
the first
quarter ended
August 28,
2021, was
income of
$5.2 million
compared to
income of
$512 thousand
for
the same period
of fiscal 2021. The
increase is due
to the acquisition of
Red River Valley
Egg Farm, LLC
(“Red River”) as we
recognized a $4.5 million gain due to the remeasurement of our equity investmen
t.
INCOME TAXES
For the first quarter
of fiscal 2022, pre-tax loss
was $33.9 million compared
to $25.5 million for the same
period of fiscal 2021.
We recorded
an income tax benefit of $15.8 million for the first quarter of fiscal 2022,
which includes the discrete tax benefit of
$8.3
million
as
discussed
in
Note
2
–
Acquisitions
of
the
Notes
to
Condensed
Consolidated
Financial
Statements
in
this
Quarterly Report. Excluding the discrete tax benefit, income
tax benefit was $7.6 million for the first quarter of fiscal 2022
with
an adjusted
effective
tax rate
of 22.4%.
Income
tax benefit
was $6.1
million
for the
comparable period
of fiscal
2021,
which
reflects an effective tax rate of 24.0%.
At August 28, 2021 and May 29, 2021, trade and other receivables, net included
income taxes receivables of $42.5 million.
Our effective tax
rate differs from
the federal statutory income
tax rate due to
state income taxes, certain
federal tax credits and
certain
items
included
in
income
for
financial
reporting
purposes
that
are
not
included
in
taxable
income
for
income
tax
purposes,
including
tax
exempt
interest
income,
certain
nondeductible
expenses
and
net
income
or
loss
attributable
to
noncontrolling
interest.
Results
for
the
current
quarter
were
favorably
impacted
by
a
$8.3
million
discrete
tax
benefit
as
discussed in Note 2 – Acquisitions of the Notes to Condensed Consolidated Finan
cial Statements in this Quarterly Report.
NET LOSS
Net loss
for the
first quarter
ended August
28, 2021,
was $18.0
million, or
$0.37 per
basic and
diluted share,
compared to
net
loss of $19.4 million or $0.40 per basic and diluted share for the same period of fiscal
2021.
CAPITAL RESOURCES
AND LIQUIDITY
Our working
capital at
August 28,
2021,
was $362.9
million, compared
to $429.8
million at
May 29,
2021. The
calculation of
working
capital
is
defined
as curr
ent
assets
less
current
liabilities.
Our
current
ratio
was
4.72
at
August
28,
2021,
compared
with 5.77 at May 29, 2021.
We had
no long-term debt outstanding at
August 28, 2021 or May 29, 2021.
On July 10, 2018, we entered into
a $100.0 million
Senior Secured Revolving Credit
Facility (the “Revolving Credit
Facility”). As of August
28, 2021, no amounts were
borrowed
under the
Revolving Credit
Facility.
We
have $4.1
million in outstanding
standby letters of
credit, issued under
our Revolving
Credit
Facility
for
the
benefit
of
certain
insurance
companies.
Refer
to
Part
II
Item
8,
Notes
to
Consolidated
Financial
Statements
and
Supplementary
Data,
Note
10:
Credit
Facility
included
in
our
2021
Annual
Report
for
further
information
regarding our long-term debt.
For the
thirteen
weeks ended
August
28, 2021
,
$24.1 million
in net
cash was
used in
operating activities,
compared
to $14.8
million used in operating
activities for the comparable
period in fiscal 2021
.
This is primarily due
to the increased costs
of feed
ingredients compared to the prior year period.
We
continue to invest
in our facilities with
$11.2 million
used to purchase property,
plant and equipment for
the thirteen weeks
ended
August
28,
2021,
compared
to
$25.3
million
in
the
same
period
of
fiscal
2021.
We
also
acquired
the
remaining
50%
membership
interest in
Red River
during our
first quarter
of fiscal
2022 for
$48.5 million.
Sales and
maturities of
investment
securities, net of
purchases, were $38.0
million for the thirteen
weeks ended August
28, 2021,
compared to $4.0 million
for the
comparable period
in fiscal 2021.
We
received $400 thousand
in distributions from
an unconsolidated entity
in the first
quarter
of fiscal 2022
compared to $650
thousand for the
same period fiscal
of 2021.
We
used $53 thousand
for principal payments
on
finance leases in the first quarter of fiscal 2022 compared to $50
thousand for the same period of fiscal 2021.
As of
August 28,
2021,
cash decreased
$40.7 million
since May
29, 2021,
compared to
a decrease
of $35.3
million during
the
same period of fiscal 2021.
Index
24
We
continue
to monitor
the increasin
g
demand for
cage-free eggs
and to
engage with
our customers
in an
effort
to achieve
a
smooth transition to
meet their announced
commitment timeline for
cage-free egg sales.
We
have invested approximately
$482
million in facilities, equipment
and related operations to
expand our cage-free production
starting with our first facility
in 2008.
The following table presents material construction projects approved
as of August 28, 2021 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of
August 28, 2021
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2022
138,724
99,380
39,344
$
138,724
$
99,380
$
39,344
We believe our
current cash balances, investments, cash flows from operations, and Revolving Credit Facility
will be sufficient
to fund our current capital needs. As we monitor the demand for cage-free
eggs and our growth strategy described in Part I Item
I “Business – Growth Strategy” in our 2021 Annual Report,
there may be a need for long-term debt financing. We
believe with
our strong balance sheet that we will have adequate access to capital markets if that need
arises.
RECENTLY
ISSUED/ADOPTED ACCOUNTING STANDARDS
For
information
on
changes
in
accounting
principles
and
new
accounting
policies,
see
Note 1 - Summary of Significant
Accounting Policies
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly
Report.
CRITICAL ACCOUNTING ESTIMATES
Critical accounting
estimates
are those
estimates
made
in accordance
with U.S.
generally
accepted
accounting
principles that
involve
a
significant
level
of
estimation
uncertainty
and
have
had
or
are
reasonably
likely
to
have
a
material
impact
on
our
financial
condition
or results
of operations.
There
have been
no changes
to our
critical
accounting
estimates identified
in our
2021 Annual Report.
Index
25
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.