UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(mark one)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended November 27, 2004
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 Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| 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
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes No X
Number of shares outstanding of each of the issuer's classes of common stock (exclusive of treasury shares), as of November 27, 2004.
| Common Stock, $0.01 par value | 21,282,891 shares |
| Class A Common Stock, $0.01 par value | 2,400,000 shares |
| Page Number |
||
|---|---|---|
| Part I | Financial Information | |
Item 1 |
Condensed Consolidated Financial Statements (Unaudited) | |
Condensed Consolidated Balance Sheets - | ||
| November 27, 2004 and May 29, 2004 | 3 | |
Condensed Consolidated Statements of Operations - | ||
| Three Months and Six Months Ended | ||
| November 27, 2004 and November 29, 2003 | 4 | |
Condensed Consolidated Statements of Cash Flows - | ||
| Six Months Ended November 27, 2004 and | ||
| November 29, 2003 | 5 | |
Notes to Condensed Consolidated Financial Statements |
6 | |
Item 2 |
Management's Discussion and Analysis of | |
| Financial Condition and Results of Operations | 8 | |
Item 3 |
Quantitative and Qualitative Disclosures About Market Risk | 13 |
Item 4 |
Controls and Procedures | 13 |
Part II |
Other Information | |
Item 1 |
Legal Proceedings | 13 |
Item 2 |
Unregistered Sales of Equity Securities and Use of Proceeds | 13 |
Item 6 |
Exhibits | 14 |
Signatures |
15 |
2
| November 27, 2004 |
May 29, 2004 | |||||||
|---|---|---|---|---|---|---|---|---|
| (unaudited) | (note1) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 52,998 | $ | 36,629 | ||||
| Investments | 5,576 | 36,352 | ||||||
| Trade and other receivables | 25,561 | 22,360 | ||||||
| Recoverable federal income taxes | 9,338 | 5,007 | ||||||
| Inventories | 48,330 | 49,896 | ||||||
| Prepaid expenses and other current assets | 1,237 | 1,695 | ||||||
| Total current assets | 143,040 | 151,939 | ||||||
Notes receivable and investments | 12,440 | 12,455 | ||||||
| Goodwill | 3,147 | 3,147 | ||||||
| Other assets | 1,948 | 1,960 | ||||||
Property, plant and equipment | 277,704 | 275,622 | ||||||
| Less accumulated depreciation | (148,431 | ) | (143,564 | ) | ||||
| 129,273 | 132,058 | |||||||
| TOTAL ASSETS | $ | 289,848 | $ | 301,559 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 44,925 | $ | 39,363 | ||||
| Current maturities of long-term debt | 9,598 | 9,597 | ||||||
| Deferred income taxes | 9,640 | 10,030 | ||||||
| Total current liabilities | 64,163 | 58,990 | ||||||
Long-term debt, less current maturities | 75,481 | 80,434 | ||||||
| Other non-current liabilities | 1,900 | 1,900 | ||||||
| Deferred income taxes | 20,880 | 20,070 | ||||||
| Total liabilities | 162,424 | 161,394 | ||||||
Stockholders' equity: | ||||||||
| Common stock $0.01 par value per share: | ||||||||
| Authorized shares - 60,000 | ||||||||
| Issued and outstanding shares - 35,130 at November 27, 2004 | ||||||||
| and May 29, 2004 | 351 | 351 | ||||||
| Class A common stock $0.01 par value, authorized, issued and | ||||||||
| outstanding 2,400 shares at November 27, 2004 and May 29, 2004 | 24 | 24 | ||||||
| Paid-in capital | 26,539 | 26,308 | ||||||
| Retained earnings | 119,083 | 125,908 | ||||||
| Common stock in treasury-13,848 shares at November 27, 2004 | ||||||||
| and 13,307 at May 29, 2004 | (18,573 | ) | (12,426 | ) | ||||
| Total stockholders' equity | 127,424 | 140,165 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 289,848 | $ | 301,559 | ||||
See notes to condensed consolidated financial statements.
3
| 13 Weeks Ended | 26 Weeks Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| November 27, 2004 |
November 29, 2003 |
November 27, 2004 |
November 29, 2003 | |||||||||||
| Net sales | $ | 90,730 | $ | 149,948 | $ | 192,747 | $ | 264,324 | ||||||
| Cost of sales | 85,744 | 99,170 | 177,080 | 186,871 | ||||||||||
| Gross profit | 4,986 | 50,778 | 15,667 | 77,453 | ||||||||||
Selling, general and | ||||||||||||||
| administrative | 12,430 | 23,176 | 24,091 | 36,431 | ||||||||||
| Operating income (loss) | (7,444 | ) | 27,602 | (8,424 | ) | 41,022 | ||||||||
| Other income (expense): | ||||||||||||||
| Interest expense, net | (1,179 | ) | (2,217 | ) | (2,307 | ) | (4,130 | ) | ||||||
| Other | 211 | 2,123 | 922 | 2,815 | ||||||||||
| (968 | ) | (94 | ) | (1,385 | ) | (1,315 | ) | |||||||
| Income (loss) before | ||||||||||||||
| income taxes | (8,412 | ) | 27,508 | (9,809 | ) | 39,707 | ||||||||
| Income tax expense | ||||||||||||||
| (benefit) | (3,070 | ) | 9,903 | (3,580 | ) | 14,331 | ||||||||
| Net income (loss) | $ | (5,342 | ) | $ | 17,605 | $ | (6,229 | ) | $ | 25,376 | ||||
| Net income (loss) per | ||||||||||||||
| common share: | ||||||||||||||
| Basic | $ | (0.23 | ) | $ | 0.74 | $ | (0.26 | ) | $ | 1.08 | ||||
| Diluted | $ | (0.23 | ) | $ | 0.72 | $ | (0.26 | ) | $ | 1.05 | ||||
| Weighted average | ||||||||||||||
| shares outstanding: | ||||||||||||||
| Basic | 23,737 | 23,632 | 23,951 | 23,594 | ||||||||||
| Diluted | 23,737 | 24,356 | 23,951 | 24,212 | ||||||||||
See notes to condensed consolidated financial statements.
4
| 26 Weeks Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| November 27, 2004 |
November 29, 2003 | |||||||
| Cash provided by operations | $ | 1,508 | $ | 28,400 | ||||
| Investing activities: | ||||||||
| Net decrease in investments | 30,776 | -- | ||||||
| Purchases of property, plant and equipment | (5,464 | ) | (2,406 | ) | ||||
| Construction of production and processing facilities | -- | (1,882 | ) | |||||
| Payments received on notes receivable and from investments | 815 | 39 | ||||||
| Increase in notes receivable and investments | (225 | ) | (29 | ) | ||||
| Net proceeds from disposal of property, plant and equipment | 423 | 289 | ||||||
| Net cash provided by (used in) investing activities | 26,325 | (3,989 | ) | |||||
| Financing activities: | ||||||||
| Purchases of common stock for treasury | (6,168 | ) | -- | |||||
| Proceeds from issuance of common stock from treasury | 252 | 2,092 | ||||||
| Long-term borrowings | -- | 5,000 | ||||||
| Principal payments on long-term debt | (4,952 | ) | (17,265 | ) | ||||
| Payments of dividends | (596 | ) | (295 | ) | ||||
| Net cash used in financing activities | (11,464 | ) | (10,468 | ) | ||||
| Net change in cash and cash equivalents | 16,369 | 13,943 | ||||||
| Cash and cash equivalents at beginning of period | 36,629 | 6,092 | ||||||
| Cash and cash equivalents at end of period | $ | 52,998 | $ | 20,035 | ||||
See notes to condensed consolidated financial statements.
5
CAL-MAINE FOODS, INC.
AND SUBSIDIARIES
Notes to Condensed
Consolidated Financial Statements
(in thousands, except
share amounts)
November 27, 2004
(unaudited)
| 1. | Presentation of Interim Information |
The accompanying unaudited condensed consolidated financial statements have been prepared 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 management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Operating results for the three-month and six-month periods ended November 27, 2004 are not necessarily indicative of the results that may be expected for the year ending May 28, 2005.
The balance sheet at May 29, 2004 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.
For further information, refer to the consolidated financial statements and footnotes thereto included in Cal-Maine Foods, Inc.‘s annual report on Form 10-K for the fiscal year ended May 29, 2004.
On April 14, 2004, the shareholders of the Company approved amendments to the Certificate of Incorporation to facilitate a two-for-one stock split approved by the Board of Directors on January 26, 2004. The split was effected in the form of a stock dividend paid on April 23, 2004 to stockholders of record on April 14, 2004. All share and per share data in the financial statements have been adjusted to reflect this stock split.
We account for stock option grants in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees.”
The following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock- Based Compensation,” which require compensation cost for all stock-based employee compensation plans to be recognized based on the use of a fair value method (in thousands, except per share amounts):
| 13 Weeks Ended | 26 Weeks Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Nov. 27, 2004 |
Nov. 29, 2003 |
Nov. 27, 2004 |
Nov. 29, 2003 | |||||||||||
| Net income (loss) | $ | (5,342 | ) | $ | 17,605 | $ | (6,229 | ) | $ | 25,376 | ||||
| Add: Stock-based employee | ||||||||||||||
| compensation expense included in | ||||||||||||||
| reported net income (loss) | 636 | 7,604 | (225 | ) | 9,381 | |||||||||
| Deduct: Total stock-based employee | ||||||||||||||
| compensation expense determined | ||||||||||||||
| under fair value-based method for | ||||||||||||||
| all awards | (312 | ) | (2,213 | ) | 99 | (3,442 | ) | |||||||
| Pro forma net income (loss) | $ | (5,018 | ) | $ | 22,996 | $ | (6,355 | ) | $ | 31,315 | ||||
| Earnings (loss) per share: | ||||||||||||||
| Basic-as reported | $ | (0.23 | ) | $ | 0.74 | $ | (0.26 | ) | $ | 1.08 | ||||
| Basis-pro forma | $ | (0.21 | ) | $ | 0.97 | $ | (0.27 | ) | $ | 1.33 | ||||
| Diluted-as reported | $ | (0.23 | ) | $ | 0.72 | $ | (0.26 | ) | $ | 1.05 | ||||
| Diluted-pro forma | $ | (0.21 | ) | $ | 0.94 | $ | (0.27 | ) | $ | 1.30 | ||||
6
The fair value of our stock options were estimated as of the date of the grant using a Black-Scholes option pricing model with the following weighted-average assumptions for the prior year grants: risk-free interest rate of 3.00%; a dividend yield of 1.00%; expected volatility of 39.2%; and a weighted average expected life of the options of 5 years.
| 2. | Inventories |
Inventories consisted of the following:
| November 27, 2004 |
May 29, 2004 | |||||||
|---|---|---|---|---|---|---|---|---|
| Flocks | $ | 33,472 | $ | 34,011 | ||||
| Eggs | 2,953 | 2,831 | ||||||
| Feed and supplies | 11,639 | 12,781 | ||||||
| Livestock | 266 | 273 | ||||||
| $ | 48,330 | $ | 49,896 | |||||
| 3. | Stockholders’Equity |
Stock Repurchase Program
On August 3, 2004, our Board of Directors approved a repurchase program whereby we may purchase up to 2,000,000 shares of our common stock. The repurchase program will expire on July 31, 2005. We do not have any other stock repurchase programs.
The following table sets forth the share repurchase activity for the second quarter ended November 27, 2004:
| Thirteen Weeks August 29, 2004 to November 27, 2004 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total Number of Shares Purchased |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of a Publicly Announced Program |
Maximum Number of Shares that May Yet Be Repurchased Under the Program | |||||||||||
| August 29, 2004 - September 25, 2004 | 70,000 | $ | 10.72 | 70,000 | 1,522,497 | |||||||||
| September 26, 2004 - October 23, 2004 | 35,000 | 10.83 | 35,000 | 1,487,497 | ||||||||||
| October 24, 2004 - November 27, 2004 | 50,000 | 10.38 | 50,000 | 1,437,497 | ||||||||||
| Total | 155,000 | $ | 10.64 | 155,000 | 1,437,497 | |||||||||
| 4. | Legal Proceedings |
We are defendants in certain legal actions. It is our opinion, based on advice of legal counsel, that the outcome of these actions will not have a material adverse effect on our consolidated financial position or operations. Please refer to Part II, Item 1, of this report for a description of certain pending legal proceedings.
| 5. | Net Income (Loss) per Common Share |