Notes to Consolidated Financial Statements
June 3, 2017
1. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Cal-Maine Foods, Inc. and its subsidiaries (“we,” “us,” “our,” or the “Company”). All significant intercompany transactions and accounts have been eliminated in consolidation.
Business
The Company is principally engaged in the production, processing and distribution of shell eggs. The Company’s operations are significantly affected by the market price fluctuation of its principal product, shell eggs, and the costs of its principal feed ingredients, corn, soybean meal, and other grains.
The Company sells shell eggs to a diverse group of customers, including national and local grocery store chains, club stores, foodservice distributors, and egg product consumers. The Company’s sales are primarily 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.
Two
customers, Wal-Mart and Sam’s Club, on a combined basis, accounted for
28.9%
,
28.9%
and
25.7%
of the Company’s net sales in fiscal years
2017
,
2016
, and
2015
, respectively.
Fiscal Year
The Company’s fiscal year-end is on the Saturday nearest May 31, which was
June 3, 2017
(53 weeks),
May 28, 2016
(52 weeks), and
May 30, 2015
(52 weeks) for the most recent three fiscal years.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. We maintain bank accounts that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to
$250,000
. At
June 3, 2017
and routinely throughout these years, the Company maintained cash balances with certain financial institutions in excess of federally insured amounts. The Company has not experienced any losses in such accounts. The Company manages this risk through maintaining cash deposits and other highly liquid investments in high quality financial institutions.
We primarily utilize a cash management system with a series of separate accounts consisting of lockbox accounts for receiving cash, concentration accounts where funds are moved to, and zero-balance disbursement accounts for funding payroll and accounts payable. Checks issued, but not presented to the banks for payment, may result in negative book cash balances, which are included in accounts payable. At
June 3, 2017
, and
May 28, 2016
, checks outstanding in excess of related book cash balances totaled
$2.0 million
and
zero
, respectively.
Investment Securities
Our investment securities are accounted for in accordance with ASC 320, “Investments-Debt and Equity Securities” (“ASC 320”). The Company considers all of its investment securities for which there is a determinable fair market value and there are no restrictions on the Company's ability to sell within the next 12 months as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported as a separate component of stockholders' equity. We had unrealized gains, net of tax, of
$473,000
and
$363,000
at
June 3, 2017
and
May 28, 2016
, respectively, which are included in the line item “Accumulated other comprehensive income (loss), net of tax” on our Consolidated Balance Sheet. Realized gains and losses are included in other income. The cost basis for realized gains and losses on available-for-sale securities is determined on the specific identification method.
At
June 3, 2017
and
May 28, 2016
, we had
$138.5 million
and
$360.5 million
, respectively, of current investment securities available-for-sale consisting of commercial paper, U.S. government obligations, government agency bonds, taxable municipal bonds, tax-exempt municipal bonds, zero coupon municipal bonds and corporate bonds with maturities of three months or longer when purchased. We classified these securities as current, because the amounts invested are available for current operations. At
June 3, 2017
and
May 28, 2016
we had
$2.5 million
and
$1.9 million
, respectively, of investments in mutual funds which are considered long term and are a part of “Other Investments” in the Consolidated Balance Sheet.
Investment in Affiliates
The equity method of accounting is used when the Company has a 20% to 50% interest in other entities or when the Company exercises significant influence over the entity. Under the equity method, original investments are recorded at cost and adjusted by the Company’s share of undistributed earnings or losses of these entities. Nonmarketable investments in which the Company has less than a 20% interest and in which it does not have the ability to exercise significant influence over the investee are initially recorded at cost, and periodically reviewed for impairment.
Trade Receivables and Allowance for Doubtful Accounts
Trade receivables are comprised primarily of amounts owed to the Company from customers, which amounted to
$61.3 million
at
June 3, 2017
and
$62.0 million
at
May 28, 2016
. They are presented net of an allowance for doubtful accounts of
$386,000
at
June 3, 2017
and
$727,000
at
May 28, 2016
. The Company extends credit to customers based upon an evaluation of each customer’s financial condition and credit history. Although credit risks associated with our customers are considered minimal, we routinely review our accounts receivable balances and make provisions for probable doubtful accounts. In circumstances where management is aware of a specific customer’s inability to meet its financial obligations to us (e.g., bankruptcy filings), a reserve is recorded to reduce the receivable to the amount expected to be collected. For all other customers, we recognize reserves for bad debt based on the length of time the receivables are past due, generally
100%
for amounts more than
60
days past due. Collateral is generally not required. Credit losses have consistently been within management’s expectations. At both
June 3, 2017
and
May 28, 2016
two
customers accounted for approximately
27%
and
29%
of the Company’s trade accounts receivable, respectively.
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 22 weeks. Flock costs are amortized to cost of sales over the productive lives of the flocks, generally one to two years. Flock mortality is charged to cost of sales as incurred.
The Company does not disclose the gross cost and accumulated amortization with respect to its flock inventories since this information is not utilized by management in the operation of the Company.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is provided by the straight-line method over the estimated useful lives, which are
15
to
25
years for buildings and improvements and
3
to
12
years for machinery and equipment. Repairs and maintenance are expensed as incurred. Expenditures that increase the value or productive capacity of assets are capitalized. When property, plant, and equipment are retired, sold, or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. The Company capitalizes interest cost incurred on funds used to construct property, plant, and equipment as part of the asset to which it relates, and is amortized over the asset’s estimated useful life.
Impairment of Long-Lived Assets
The Company reviews the carrying value of long-lived assets, other than goodwill, for impairment whenever events and circumstances indicate the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where expected future cash flows (undiscounted and without interest charges) are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors.
Intangible Assets
Included in other intangible assets are separable intangible assets acquired in business acquisitions, which include franchise fees, non-compete agreements and customer relationship intangibles, and are amortized over their estimated useful lives of
3
to
25
years. The gross cost and accumulated amortization of intangible assets are removed when the recorded amounts have been fully amortized and the asset is no longer in use or the contract has expired. Included in other long-lived assets are loan acquisition costs, which are amortized over the life of the related loan.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired. Goodwill is evaluated for impairment annually by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. After assessing the totality of events or circumstances, if we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we perform additional quantitative tests to determine the magnitude of any impairment.
Accrued Self Insurance
We use a combination of insurance and self-insurance mechanisms to provide for the potential liabilities for health and welfare, workers’ compensation, auto liability and general liability risks. Liabilities associated with our risks retained are estimated, in part, by considering claims experience, demographic factors, severity factors and other actuarial assumptions.
Dividends
Cal-Maine pays a dividend to shareholders of its Common Stock and Class A Common Stock on a quarterly basis for each quarter for which the Company reports net income computed in accordance with generally accepted accounting principles in an amount equal to one-third (1/3) of such quarterly income. Dividends are paid to shareholders of record as of the 60th day following the last day of such quarter, except for the fourth fiscal quarter. For the fourth quarter, the Company will pay dividends to shareholders of record on the 65th day after the quarter end. Dividends are payable on the 15th day following the record date. Following a quarter for which the Company does not report net income, the Company will not pay a dividend for a subsequent profitable quarter until the Company is profitable on a cumulative basis computed from the date of the last quarter for which a dividend was paid. Dividends payable, which would represent accrued unpaid dividends applicable to the Company's fourth quarter, were
zero
at
June 3, 2017
and
May 28, 2016
. At
June 3, 2017
, cumulative losses that must be recovered prior to paying a dividend were
$74.7 million
.
Treasury Stock
Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. The grant of restricted stock through the Company’s share-based compensation plans is funded through the issuance of treasury stock. Gains and losses on the subsequent reissuance of shares in accordance with the Company’s share-based compensation plans are credited or charged to paid-in capital in excess of par value using the average-cost method.
Revenue Recognition and Delivery Costs
The Company recognizes revenue only when all of the following criteria have been met:
|
|
•
|
Persuasive evidence of an arrangement exists;
|
|
|
•
|
The fee for the arrangement is determinable; and
|
|
|
•
|
Collectability is reasonably assured.
|
The Company believes the above criteria are met upon delivery and acceptance of the product by our customers. Costs to deliver product to customers are included in selling, general and administrative expenses in the accompanying Consolidated Statements of Operations and totaled
$53.3 million
,
$49.6 million
, and
$47.0 million
in fiscal years
2017
,
2016
, and
2015
, respectively. Sales revenue reported in the accompanying consolidated statements of income is reduced to reflect estimated returns and allowances. The Company records an estimated sales allowance for returns and discounts at the time of sale using historical trends based on actual sales returns and sales.
Sales Incentives provided to Customers
The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current discount offers (e.g., percentage discounts off current purchases), inducement offers (e.g., offers for future discounts subject to a minimum current purchase), and other similar offers. Current discount offers, when accepted by customers, are treated as a reduction to the sales price of the related transaction, while inducement offers, when accepted by customers, are treated as a reduction to sales price based on estimated future redemption rates. Redemption rates are estimated using the Company’s historical experience for similar inducement offers. Current discount and inducement offers are presented as a net amount in ‘‘Net sales.’’
Advertising Costs
The Company expensed advertising costs as incurred of
$12.1 million
,
$10.3 million
, and
$9.3 million
in fiscal
2017
,
2016
, and
2015
, respectively.
Income Taxes
Income taxes are 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. The Company’s policy with respect to evaluating uncertain tax positions is based upon whether management believes it is more likely than not the uncertain tax positions will be sustained upon review by the taxing authorities. The tax positions must meet the more-likely-than-not recognition threshold with consideration given to the amounts and probabilities of the outcomes that could be realized upon settlement using the facts, circumstances and information at the reporting date. The Company will reflect only the portion of the tax benefit that will be sustained upon resolution of the position and applicable interest on the portion of the tax benefit not recognized. The Company shall initially and subsequently measure the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. Based upon management’s assessment, there are no uncertain tax positions expected to have a material impact on the Company’s consolidated financial statements.
Stock Based Compensation
We account for share-based compensation in accordance with ASC 718, “Compensation-Stock Compensation” (“ASC 718”). ASC 718 requires all share-based payments to employees, including grants of employee stock options, restricted stock and performance-based shares to be recognized in the statement of operations based on their fair values. ASC 718 requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow. See Note 11: Stock Compensation Plans for more information.
Net Income (Loss) per Common Share
Basic net income per share is based on the weighted average common and Class A shares outstanding. Diluted net income per share includes any dilutive effects of stock options outstanding and unvested restricted shares.
Basic net income per share was calculated by dividing net income by the weighted-average number of common and Class A shares outstanding during the period. Diluted net income per share was calculated by dividing net income by the weighted-average number of common shares outstanding during the period plus the dilutive effects of stock options and unvested restricted shares. Due to the net loss in the year ended
June 3, 2017
, restricted shares in the amount of
131,292
were excluded from the calculation of diluted earnings per share because their inclusion would have been antidilutive. The computations of basic net income per share and diluted net income per share are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 3, 2017
|
|
May 28, 2016
|
|
May 30, 2015
|
Net income (loss) attributable to Cal-Maine Foods, Inc.
|
|
$
|
(74,278
|
)
|
|
$
|
316,041
|
|
|
$
|
161,254
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average common shares (including Class A)
|
|
48,362
|
|
|
48,195
|
|
|
48,136
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
Common stock options and restricted stock
|
|
—
|
|
|
170
|
|
|
301
|
|
Dilutive potential common shares
|
|
48,362
|
|
|
48,365
|
|
|
48,437
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.54
|
)
|
|
$
|
6.56
|
|
|
$
|
3.35
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(1.54
|
)
|
|
$
|
6.53
|
|
|
$
|
3.33
|
|
Contingencies
Certain conditions may exist as of the date the financial statements are issued that may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
The Company expenses the costs of litigation as they are incurred.
Impact of Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09). The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer in an amount that reflects the consideration that is expected to be received for those goods or services. In August 2015, FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 until annual reporting periods beginning after December 15, 2017. Early adoption is not permitted. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. To date the Company’s assessments efforts include evaluation of certain revenue contracts with customers and the method of retrospective application, either full or modified. We currently expect to utilize the full retrospective transition on date of adoption. Based on the findings to date, the Company does not
expect
ASU 2014-09
to have a material impact
on the results of operations or financial position; however, the Company’s assessment is not complete. The Company plans to complete its review and method of adoption in fiscal 2018.
In February 2016, the FASB issued ASU 2016-02,
Leases
. The purpose of the standard is to improve transparency and comparability related to the accounting and reporting of leasing arrangements. The guidance will require balance sheet recognition for assets and liabilities associated with rights and obligations created by leases with terms greater than twelve months. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. Based on the findings to date, the Company does not
expect
ASU 2016-02
to have a material impact
on the results of operations or financial position; however, the Company’s assessment is not complete.
In March 2016, the FASB issued ASU 2016-09,
Improvements to Employee Share-Based Compensation Accounting
. ASU
2016-09 requires recording excess tax benefits on the statement of operations as opposed to additional paid-in-capital, and treated as an operating activity on the statement of cash flows. ASU 2016-09 also allows companies to make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. ASU 2016-09
is effective for annual reporting periods beginning after December 15, 2017 with early adoption permitted. The Company adopted ASU 2016-09 during the third quarter of fiscal 2017 and it did not have a material impact on the consolidated financial statement presentation.
In January 2017, the FASB issued ASU 2017-04,
Simplifying the Test for Goodwill Impairment
, which removes step 2 from the goodwill impairment test. As a result, an entity should perform its annual, or interim, goodwill impairment
test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units' fair value. The guidance is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, our fiscal 2021. Early adoption is permitted for annual or interim goodwill impairment tests performed on testing dates after January 1, 2017, and the prospective transition method should be applied. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
Reclassification
Certain prior period amounts have been reclassified to conform with current presentation. Such reclassifications had no impact on previously reported net income or shareholders' equity.
2. Acquisition
Foodonics Acquisition
On October 16, 2016, the Company acquired substantially all of the egg production assets and assumed certain liabilities of Foodonics International, Inc. and its related entities doing business as Dixie Egg Company (collectively, "Foodonics") for
$68.6 million
of cash and
$3.0 million
of deferred purchase price. The acquired assets include commercial egg production and processing facilities with capacity for
1.6 million
laying hens, contract grower arrangements for an additional
1.5 million
laying hens, and related feed production, milling and distribution facilities in Georgia, Alabama, and Florida. The Company also acquired Foodonics' interest in American Egg Products, LLC ("AEP") and the Eggland's Best franchise with licensing rights for certain markets in Alabama, Florida, and Georgia as well as Puerto Rico, Bahamas and Cuba. The Company now owns
100%
of AEP. The acquired operations of Foodonics are included in the accompanying financial statements as of October 16, 2016.
The following table presents the final fair values of the assets acquired and liabilities assumed (in thousands):
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Inventory
|
|
$
|
7,669
|
|
Property, plant and equipment
|
|
38,590
|
|
Intangible assets
|
|
24,000
|
|
Liabilities assumed
|
|
(2,034
|
)
|
Total identifiable net assets
|
|
68,225
|
|
Goodwill
|
|
3,389
|
|
Purchase price
|
|
71,614
|
|
Deferred purchase price
|
|
(3,000
|
)
|
Cash consideration paid
|
|
$
|
68,614
|
|
Happy Hen Acquisition
On February 19, 2017, the Company acquired substantially all of the egg production, processing and distribution assets of Happy Hen Egg Farms, Inc. and its affiliates (collectively, "Happy Hen"). The assets include commercial egg production and processing facilities with current capacity for
350,000
laying hens and related distribution facilities located near Harwood and Wharton, Texas. The site is designed for capacity of up to
1.2 million
laying hens. The operations of Happy Hen are included in the accompanying financial statements as of February 19, 2017. The Company closed this acquisition on March 3, 2017.
The following table presents the final fair values of the assets acquired (in thousands):
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|
|
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Inventory
|
|
$
|
609
|
|
Property, plant and equipment
|
|
11,259
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|
Intangible assets
|
|
2,400
|
|
Total identifiable net assets
|
|
14,268
|
|
Goodwill
|
|
2,940
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|
Cash consideration paid
|
|
$
|
17,208
|
|
These fair value measurements were primarily based on significant inputs that are not observable in the markets. The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was utilized for certain property, plant and equipment. The cost to replace given assets reflects the estimated reproduction or replacement cost of the asset, less an allowance for loss in value due to depreciation. The market approach, which indicates value for a subject asset based on available market pricing for comparable assets, was utilized for inventory and the Eggland's Best franchise of Foodonics. The cost of the Eggland's Best franchise will be amortized over a period of
15 years
. Customer relationships and trademarks will be amortized over a period of
8 years
. Non-compete agreements will be amortized over a period of
10 years
. Goodwill on business combination recognizes the difference in the fair value of the assets acquired and liabilities assumed, net of the acquisition price. Goodwill associated with the acquisition is tax deductible over
15 years
.
Pro-forma information, which is usually presented for information purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been completed as of an earlier time, was not material to the Company's Consolidated Financial Statements.
3. Investment in Affiliates
The Company has several in non-consolidated affiliates that are accounted for using the equity method of accounting. As of
June 3, 2017
, the Company owns
50%
of each of Red River Valley Egg Farm, LLC, Specialty Eggs, LLC, Southwest Specialty, LLC, and Dallas Reinsurance, Co., LTD. Investment in affiliates are included in “Other Investments” in the accompanying Consolidated Balance Sheets and totaled
$62.8 million
and
$47.5 million
at
June 3, 2017
and at
May 28, 2016
, respectively.
Equity in income of affiliates of
$1.4 million
,
$5.0 million
, and
$2.7 million
from these entities has been included in the Consolidated Statements of Operations for fiscal
2017
,
2016
, and
2015
, respectively.
The condensed consolidated financial information for the Company's unconsolidated joint ventures was as follows:
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For the fiscal year ended
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|
June 3, 2017
|
|
May 28, 2016
|
|
May 30, 2015
|
Net sales
|
|
86,072
|
|
|
91,320
|
|
|
61,632
|
|
Net income
|
|
2,804
|
|
|
10,090
|
|
|
5,323
|
|
Total assets
|
|
131,871
|
|
|
100,700
|
|
|
30,739
|
|
Total liabilities
|
|
6,543
|
|
|
5,697
|
|
|
4,659
|
|
Total equity
|
|
125,328
|
|
|
95,003
|
|
|
26,080
|
|
The Company is also a member of Eggland’s Best, Inc. (“EB”), which is a cooperative. At
June 3, 2017
and
May 28, 2016
, “Other Investments” as shown on the Company’s Consolidated Balance Sheet includes the cost of the Company’s investment in EB plus any qualified written allocations. The Company cannot exert significant influence over EB’s operating and financial activities; therefore, the Company accounts for this investment using the cost method. The carrying value of this investment at
June 3, 2017
and
May 28, 2016
was
$2.9 million
and
$3.5 million
, respectively.
The Company regularly transacts business with its cost and equity method affiliates. The following relates to the Company’s transactions with these unconsolidated affiliates (in thousands):
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For the fiscal year ended
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|
June 3, 2017
|
|
May 28, 2016
|
|
May 30, 2015
|
Sales to affiliates
|
|
$
|
59,073
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|
|
$
|
61,094
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|
|
$
|
46,989
|
|
Purchases from affiliates
|
|
73,713
|
|
|
79,419
|
|
|
62,659
|
|
Dividends from affiliates
|
|
6,581
|
|
|
4,550
|
|
|
1,250
|
|
|
|
|
|
|
|
|
|
|
|
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|
June 3, 2017
|
|
May 28, 2016
|
Accounts receivable from affiliates
|
|
$
|
4,643
|
|
|
$
|
3,483
|
|
Accounts payable to affiliates
|
|
3,617
|
|
|
1,464
|
|
4. Inventories
Inventories consisted of the following (in thousands):
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|
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|
June 3, 2017
|
|
May 28, 2016
|
Flocks, net of accumulated amortization
|
|
$98,059
|
|
$94,312
|
Eggs
|
|
14,911
|
|
11,519
|
Feed and supplies
|
|
47,722
|
|
48,968
|
|
|
$160,692
|
|
$154,799
|
We grow and maintain flocks of layers (mature female chickens), pullets (female chickens, under 18 weeks of age), and breeders (male and female chickens used to produce fertile eggs to hatch for egg production flocks). Our total flock at
June 3, 2017
, consisted of approximately
9.5 million
pullets and breeders and
36.1 million
layers.
The Company expensed amortization and mortality associated with the flocks to cost of sales as follows (in thousands):
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|
|
June 3, 2017
|
|
May 28, 2016
|
|
May 30, 2015
|
Amortization
|
|
$
|
118,859
|
|
|
$
|
106,459
|
|
|
$
|
108,570
|
|
Mortality
|
|
5,213
|
|
|
3,665
|
|
|
3,803
|
|
Total flock costs charge to cost of sales
|
|
$
|
124,072
|
|
|
$
|
110,124
|
|
|
$
|
112,373
|
|
5. Goodwill and Other Intangible Assets
Goodwill and other intangibles consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Intangibles
|
|
|
|
|
Franchise
|
|
Customer
|
|
Non-compete
|
|
Right of use
|
|
Water
|
|
|
|
Total other
|
|
|
Goodwill
|
|
rights
|
|
relationships
|
|
agreements
|
|
intangible
|
|
rights
|
|
Trademark
|
|
intangibles
|
Balance May 30, 2015
|
|
$
|
29,196
|
|
|
$
|
870
|
|
|
$
|
5,773
|
|
|
$
|
48
|
|
|
$
|
149
|
|
|
$
|
720
|
|
|
$
|
—
|
|
|
$
|
7,560
|
|
Additions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization
|
|
—
|
|
|
(473
|
)
|
|
(2,088
|
)
|
|
(20
|
)
|
|
(21
|
)
|
|
—
|
|
|
—
|
|
|
(2,602
|
)
|
Balance May 28, 2016
|
|
29,196
|
|
|
397
|
|
|
3,685
|
|
|
28
|
|
|
128
|
|
|
720
|
|
|
—
|
|
|
4,958
|
|
Additions
|
|
6,329
|
|
|
24,000
|
|
|
1,900
|
|
|
100
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|
26,400
|
|
Amortization
|
|
—
|
|
|
(1,183
|
)
|
|
(925
|
)
|
|
(24
|
)
|
|
(62
|
)
|
|
—
|
|
|
(15
|
)
|
|
(2,209
|
)
|
Balance June 3, 2017
|
|
$
|
35,525
|
|
|
$
|
23,214
|
|
|
$
|
4,660
|
|
|
$
|
104
|
|
|
$
|
66
|
|
|
$
|
720
|
|
|
$
|
385
|
|
|
$
|
29,149
|
|
For the Other Intangibles listed above, the gross carrying amounts and accumulated amortization are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 3, 2017
|
|
May 28, 2016
|
|
|
Gross carrying
|
|
Accumulated
|
|
Gross carrying
|
|
Accumulated
|
|
|
amount
|
|
amortization
|
|
amount
|
|
amortization
|
Other intangible assets:
|
|
|
|
|
|
|
|
|
Franchise rights
|
|
$
|
29,284
|
|
|
$
|
(6,070
|
)
|
|
$
|
5,284
|
|
|
$
|
(4,887
|
)
|
Customer relationships
|
|
19,544
|
|
|
(14,884
|
)
|
|
17,644
|
|
|
(13,959
|
)
|
Non-compete agreements
|
|
200
|
|
|
(96
|
)
|
|
100
|
|
|
(72
|
)
|
Right of use intangible
|
|
191
|
|
|
(125
|
)
|
|
191
|
|
|
(63
|
)
|
Water rights *
|
|
720
|
|
|
—
|
|
|
720
|
|
|
—
|
|
Trademark
|
|
400
|
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
50,339
|
|
|
$
|
(21,190
|
)
|
|
$
|
23,939
|
|
|
$
|
(18,981
|
)
|
|
|
*
|
Water rights are an indefinite life intangible asset.
|
No significant residual value is estimated for these intangible assets. Aggregate amortization expense for the fiscal years ended
2017
,
2016
, and
2015
totaled
$2.2 million
,
$2.6 million
, and
$2.9 million
, respectively. The following table represents the total estimated amortization of intangible assets for the five succeeding years (in thousands):
|
|
|
|
|
|
For fiscal period
|
|
Estimated amortization expense
|
2018
|
|
$
|
2,818
|
|
2019
|
|
2,790
|
|
2020
|
|
2,765
|
|
2021
|
|
2,228
|
|
2022
|
|
1,864
|
|
Thereafter
|
|
15,964
|
|
Total
|
|
$
|
28,429
|
|
6. Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 3,
2017
|
|
May 28,
2016
|
Land and improvements
|
|
$
|
87,276
|
|
|
$
|
80,775
|
|
Buildings and improvements
|
|
342,933
|
|
|
291,888
|
|
Machinery and equipment
|
|
460,218
|
|
|
399,804
|
|
Construction-in-progress
|
|
36,752
|
|
|
50,178
|
|
|
|
927,179
|
|
|
822,645
|
|
Less: accumulated depreciation
|
|
468,995
|
|
|
430,371
|
|
|
|
$
|
458,184
|
|
|
$
|
392,274
|
|
Depreciation expense was
$48.8 million
,
$41.4 million
and
$37.3 million
in fiscal years
2017
,
2016
and
2015
, respectively.
The Company maintains insurance for both property damage and business interruption relating to catastrophic events, such as fires. Insurance recoveries received for property damage and business interruption in excess of the net book
value of damaged assets, clean-up and demolition costs, and post-event costs are recognized as income in the period received or committed when all contingencies associated with the recoveries are resolved. Gains on insurance recoveries related to business interruption are recorded within “Cost of sales” and any gains or losses related to property damage are recorded within “Other income (expense).” Insurance recoveries related to business interruption are classified as operating cash flows and recoveries related to property damage are classified as investing cash flows in the statement of cash flows. Insurance claims incurred or finalized during the fiscal years ended
2017
,
2016
, and
2015
are discussed below.
In the second quarter of fiscal
2015
, a
contract producer owned pullet
complex
in Florida
was damaged by fire. The fire destroyed
two
contract producer owned pullet houses that contained the Company’s flocks. In the third quarter of fiscal
2015
, the
Company’s
Shady Dale, Georgia complex was damaged by a fire. The fire destroyed
two
pullet houses. These claims were resolved in fiscal
2016
and did not have a material impact on the Company’s results of operations.
7. 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, 2017
are as follows (in thousands):
|
|
|
|
|
|
2018
|
|
$
|
502
|
|
2019
|
|
208
|
|
2020
|
|
162
|
|
2021
|
|
160
|
|
2022
|
|
150
|
|
Total minimum lease payments
|
|
$
|
1,182
|
|
Substantially all of the leases require the Company to pay taxes, maintenance, insurance and certain other operating expenses applicable to the leased assets. Vehicle rent expense totaled
$475,000
,
$190,000
and
$101,000
in fiscal
2017
,
2016
and
2015
, respectively. Rent expense excluding vehicle rent was
$3.5 million
,
$3.9 million
, and
$3.0 million
in fiscal
2017
,
2016
and
2015
, respectively, primarily for the lease of certain operating facilities and equipment.
8. Credit Facilities and Long-Term Debt
Long-term debt consisted of the following (in thousands except interest rate and installment data):
|
|
|
|
|
|
|
|
|
|
|
|
June 3,
2017
|
|
May 28,
2016
|
Note payable at 6.20%, due in monthly principal installments of $250,000, plus interest, maturing in fiscal 2020
|
|
$
|
7,500
|
|
|
$
|
10,500
|
|
Note payable at 6.35%, due in monthly principal installments of $100,000, plus interest, paid off in fiscal 2017
|
|
—
|
|
|
9,100
|
|
Note payable at 5.40%, due in monthly principal installments of $125,000, plus interest, maturing in fiscal 2019
|
|
1,750
|
|
|
3,250
|
|
Note payable at 6.40%, due in monthly principal installments of $35,000, plus interest, paid off in fiscal 2017
|
|
—
|
|
|
2,720
|
|
Capital lease obligations
|
|
1,689
|
|
|
—
|
|
Total debt
|
|
10,939
|
|
|
25,570
|
|
Less: current maturities
|
|
4,826
|
|
|
16,320
|
|
Long-term debt, less current maturities
|
|
$
|
6,113
|
|
|
$
|
9,250
|
|
The aggregate annual fiscal year maturities of long-term debt at
June 3, 2017
are as follows (in thousands):
|
|
|
|
|
|
2018
|
|
$
|
4,826
|
|
2019
|
|
3,533
|
|
2020
|
|
1,696
|
|
2021
|
|
205
|
|
2022
|
|
215
|
|
Thereafter
|
|
464
|
|
|
|
$
|
10,939
|
|
Certain property, plant, and equipment is pledged as collateral on our notes payable and senior secured notes. Unless otherwise approved by our lenders, we are required by provisions of our loan agreements to (1) maintain minimum levels of working capital (ratio of not less than 1.25 to 1) and net worth (minimum of $90.0 million tangible net worth, plus 45% of cumulative net income); (2) limit dividends paid in any given quarter to not exceed an amount equal to one third of the previous quarter’s consolidated net income (allowed if no events of default), (3) maintain minimum total funded debt to total capitalization (debt to total tangible capitalization not to exceed 55%); and (4) maintain various current and cash-flow coverage ratios (1.25 to 1), among other restrictions. At
June 3, 2017
, we were in compliance with the financial covenant requirements of all loan agreements. Under certain of the loan agreements, the lenders have the option to require the prepayment of any outstanding borrowings in the event we undergo a change in control, as defined in the applicable loan agreement. Our debt agreements require Fred R. Adams, Jr., the Company’s Founder and Chairman Emeritus, or his family, to maintain ownership of Company shares representing not less than 50% of the outstanding voting power of the Company. We are in compliance with those covenants at
June 3, 2017
.
Interest, net of amount capitalized,
of
$317,000
,
$1.1 million
, and
$2.3 million
was paid during fiscal
2017
,
2016
and
2015
, respectively. Interest of
$1.1 million
,
$1.1 million
and
$1.2 million
was capitalized for construction of certain facilities during fiscal
2017
,
2016
and
2015
, respectively.
9. Employee Benefit Plans
The Company maintains a medical plan that is qualified under Section 401(a) of the Internal Revenue Code and is not subject to tax under present income tax laws. The plan is funded by contributions from the Company and its employees. Under its plan, the Company self-insures its portion of medical claims for substantially all full-time employees. The Company uses stop-loss insurance to limit its portion of medical claims to
$225,000
per occurrence. The Company's expenses including accruals for incurred but not reported claims were approximately
$14.0 million
,
$11.8 million
, and
$9.6 million
in fiscal years
2017
,
2016
and
2015
, respectively. The liability recorded for incurred but not reported claims was
$900,000
as of
June 3, 2017
and
$770,000
as of
May 28, 2016
.
The Company has a KSOP plan that covers substantially all employees (“the Plan”). The Company makes cash contributions to the Plan at a rate of 3% of participants' eligible compensation, plus an additional amount determined at the discretion of the Board of Directors. Contributions can be made in cash or the Company's common stock, and vest immediately. The Company's cash contributions to the Plan were
$3.2 million
,
$2.9 million
, and
$2.8 million
in fiscal years
2017
,
2016
and
2015
, respectively. The Company did not make direct contributions of the Company’s common stock in fiscal years
2017
,
2016
, or
2015
. Dividends on the Company’s common stock are paid to the Plan in cash. The Plan acquires the Company’s common stock, which is listed on the NASDAQ, by using the dividends and the Company’s cash contribution to purchase shares in the public markets. The Plan sold common stock on the NASDAQ to pay benefits to Plan participants. Participants may make contributions to the Plan up to the maximum allowed by the Internal Revenue Service regulations. The Company does not match participant contributions.
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 the agreements are based upon deferred compensation earned over the estimated remaining service period of each officer. Payments made under the plan were
$110,000
,
$102,000
, and
$97,000
in fiscal years
2017
,
2016
, and
2015
, respectively. The liability recorded related to these agreements was
$1.6 million
at
June 3, 2017
and
May 28, 2016
.
In December 2006, the Company adopted an additional deferred compensation plan to provide deferred compensation to named officers of the Company. The awards issued under this plan were
$290,000
,
$284,000
, and
$241,000
in fiscal
2017
,
2016
and
2015
, respectively. Payments made under the plan were
$147,000
and
$128,000
in fiscal
2017
and
2016
, respectively. The liability recorded related to these agreements was
$2.5 million
and
$1.9 million
at
June 3, 2017
and
May 28, 2016
, respectively.
Deferred compensation expense for both plans totaled
$616,000
,
$347,000
and
$470,000
in fiscal
2017
,
2016
and
2015
, respectively.
Postretirement Medical Plan
The Company maintains an unfunded postretirement medical plan to provide limited health benefits to certain qualified retired employees and officers. Retired non-officers and spouses are eligible for coverage until attainment of Medicare eligibility, at which time coverage ceases. Retired officers and spouses are eligible for lifetime benefits under the plan. Officers and their spouses, who retired prior to May 1, 2012, must participate in Medicare Plans A and B. Officers, and their spouses, who retire on or after May 1, 2012 must participate in Medicare Plans A, B, and D.
The plan is accounted for in accordance with ASC 715, “Compensation – Retirement Benefits”, whereby an employer recognizes the funded status of a defined benefit postretirement plan as an asset or liability, and recognizes changes in the funded status in the year the change occurs through comprehensive income. Additionally, this expense is recognized on an accrual basis over the employees’ approximate period of employment. The liability associated with the plan was
$2.3 million
and
$1.8 million
as of
June 3, 2017
and
May 28, 2016
, respectively. The remaining disclosures associated with ASC 715 are immaterial to the Company’s financial statements.
10. Stock Compensation Plans
On October 5, 2012, shareholders approved the Cal-Maine Foods, Inc. 2012 Omnibus Long-Term Incentive Plan (“2012 Plan”). The purpose of the 2012 Plan is to assist us and our subsidiaries in attracting and retaining selected individuals who, serving as our employees, outside directors and consultants, are expected to contribute to our success and to achieve long-term objectives which will benefit our shareholders through the additional incentives inherent in the awards under the 2012 Plan. The maximum number of shares of common stock that are available for awards under the 2012 Plan is
1,000,000
shares issuable from the Company’s treasury stock. Awards may be granted under the 2012 Plan to any employee, any non-employee member of the Company’s Board of Directors, and any consultant who is a natural person and provides services to us or one of our subsidiaries (except for incentive stock options which may be granted only to our employees).
In January 2017, the Company granted
86,215
restricted shares from treasury. The restricted shares vest
three years
from the grant date, or upon death or disability, change in control, or retirement (subject to certain requirements). The restricted shares contain no other service or performance conditions. Restricted stock is awarded in the name of the recipient and except for the right of disposal, constitutes issued and outstanding shares of the Company’s common stock for all corporate purposes during the period of restriction including the right to receive dividends. Compensation expense is a fixed amount based on the grant date closing price and is amortized over the vesting period.
Our unrecognized compensation expense as a result of non-vested shares was
$5.9 million
as of
June 3, 2017
and
$5.6 million
as of
May 28, 2016
. The unrecognized compensation expense will be amortized to stock compensation expense over a period of
2.1 years
.
The Company recognized stock compensation expense of
$3.4 million
,
$1.7 million
, and
$2.3 million
for equity awards in fiscal
2017
,
2016
, and
2015
, respectively.
A summary of our equity award activity and related information for our restricted stock is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Number
|
|
Average
|
|
|
of
|
|
Grant Date
|
|
|
Shares
|
|
Fair Value
|
Outstanding, May 30, 2015
|
|
335,140
|
|
|
$
|
27.24
|
|
Granted
|
|
78,560
|
|
|
49.39
|
|
Vested
|
|
(122,140
|
)
|
|
20.76
|
|
Forfeited
|
|
(2,660
|
)
|
|
31.29
|
|
Outstanding, May 28, 2016
|
|
288,900
|
|
|
$
|
35.97
|
|
Granted
|
|
86,215
|
|
|
43.00
|
|
Vested
|
|
(121,148
|
)
|
|
26.90
|
|
Forfeited
|
|
(6,232
|
)
|
|
39.66
|
|
Outstanding, June 3, 2017
|
|
247,735
|
|
|
$
|
42.76
|
|
On July 28, 2005, the Company’s Board of Directors approved the Cal-Maine Foods, Inc. Stock Appreciation Rights Plan (the "Rights Plan"). The Rights Plan covers
2,000,000
shares of Common Stock of the Company. Stock Appreciation Rights ("SARs") were granted to employees or non-employee members of the Board of Directors. Upon exercise of a SAR, the holder received cash equal to the difference between the fair market value of a single share of Common Stock at the time of exercise and the strike price which is equal to the fair market value of a single share of Common Stock on the date of the grant. The SARs had a
ten
year term and vested over
five years
. The last remaining SARs were exercised during fiscal
2016
which effectively terminated this plan.
A summary of our liability award activity and related information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
Number
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
Of
|
|
Strike Price
|
|
Contractual
|
|
Intrinsic
|
|
|
Rights
|
|
Per Right
|
|
Life (in Years)
|
|
Value
|
Outstanding, May 30, 2015
|
|
26,900
|
|
|
$
|
3.40
|
|
|
|
|
|
|
|
Granted
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
Exercised
|
|
(26,900
|
)
|
|
3.40
|
|
|
|
|
|
|
|
Forfeited
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
Outstanding, May 28, 2016
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Total payments for liability awards exercised totaled
zero
,
$1.4 million
, and
$373,000
for fiscal
2017
,
2016
and
2015
, respectively.
11. Income Taxes
Income tax expense (benefit) consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended
|
|
|
June 3,
2017
|
|
May 28,
2016
|
|
May 30,
2015
|
Current:
|
|
|
|
|
|
|
Federal
|
|
$
|
(48,030
|
)
|
|
$
|
132,250
|
|
|
$
|
70,900
|
|
State
|
|
(6,670
|
)
|
|
17,560
|
|
|
8,260
|
|
|
|
(54,700
|
)
|
|
149,810
|
|
|
79,160
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
13,076
|
|
|
17,096
|
|
|
4,503
|
|
State
|
|
1,757
|
|
|
2,296
|
|
|
605
|
|
|
|
14,833
|
|
|
19,392
|
|
|
5,108
|
|
|
|
$
|
(39,867
|
)
|
|
$
|
169,202
|
|
|
$
|
84,268
|
|
Significant components of the Company’s deferred tax liabilities and assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
June 3,
2017
|
|
May 28,
2016
|
Deferred tax liabilities:
|
|
|
|
|
|
|
Property, plant and equipment
|
|
$
|
68,830
|
|
|
$
|
60,998
|
|
Inventories
|
|
38,270
|
|
|
39,068
|
|
Investment in affiliates
|
|
8,563
|
|
|
1,438
|
|
Other comprehensive income
|
|
290
|
|
|
223
|
|
Other
|
|
4,656
|
|
|
4,343
|
|
Total deferred tax liabilities
|
|
120,609
|
|
|
106,070
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Accrued expenses
|
|
4,308
|
|
|
3,374
|
|
Other
|
|
6,019
|
|
|
7,314
|
|
Total deferred tax assets
|
|
10,327
|
|
|
10,688
|
|
Net deferred tax liabilities
|
|
$
|
110,282
|
|
|
$
|
95,382
|
|
The differences between income tax expense (benefit) at the Company’s effective income tax rate and income tax expense at the statutory federal income tax rate were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year end
|
|
|
June 3,
2017
|
|
May 28,
2016
|
|
May 30,
2015
|
|
|
|
|
|
|
|
Statutory federal income tax (benefit)
|
|
$
|
(39,950
|
)
|
|
$
|
169,835
|
|
|
$
|
85,933
|
|
State income tax (benefit)
|
|
(3,193
|
)
|
|
12,906
|
|
|
5,762
|
|
Domestic manufacturers deduction
|
|
4,095
|
|
|
(13,332
|
)
|
|
(7,308
|
)
|
Tax exempt interest income
|
|
(206
|
)
|
|
(233
|
)
|
|
(184
|
)
|
Other, net
|
|
(613
|
)
|
|
26
|
|
|
65
|
|
|
|
$
|
(39,867
|
)
|
|
$
|
169,202
|
|
|
$
|
84,268
|
|
We had no significant unrecognized tax benefits at
June 3, 2017
or at
May 28, 2016
. Accordingly, we do not have any accrued interest or penalties related to uncertain tax positions. However, if interest or penalties were to be incurred related to uncertain tax positions, such amounts would be recognized in income tax expense.
We are under a limited scope audit by the IRS for the fiscal years 2013 through 2015. We are subject to income tax in many jurisdictions within the U.S., and certain jurisdictions are under audit by state and local tax authorities. The resolutions of these audits are not expected to be material to our consolidated financial statements. Tax periods for all years after fiscal year 2013 remain open to examination by the federal and state taxing jurisdictions to which we are subject.
12. Contingencies
Financial Instruments
The Company maintains standby letters of credit (“LOC”) with a bank totaling
$3.7 million
at
June 3, 2017
. These LOCs are collateralized with cash. The cash that collateralizes the LOCs is included in the line item “Other assets” in the consolidated balance sheets. The outstanding LOCs are for the benefit of certain insurance companies. None of the LOCs are recorded as a liability on the Consolidated Balance Sheets.
Litigation
The Company is a defendant in certain legal actions, and intends to vigorously defend its position in these actions. The Company assesses the likelihood of material adverse judgments or outcomes to the extent losses are reasonably estimable. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be reasonably estimated, the estimated liability is accrued in the Company’s financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
Egg Antitrust Litigation
Since September 25, 2008, the Company has been named as one of several defendants in numerous antitrust cases involving the United States shell egg industry. In some of these cases, the named plaintiffs allege that they purchased eggs or egg products directly from a defendant and have sued on behalf of themselves and a putative class of others who claim to be similarly situated. In other cases, the named plaintiffs allege that they purchased shell eggs and egg products directly from one or more of the defendants but sue only for their own alleged damages and not on behalf of a putative class. In the remaining cases, the named plaintiffs are individuals or companies who allege that they purchased shell eggs indirectly from one or more of the defendants - that is, they purchased from retailers that had previously purchased from defendants or other parties - and have sued on behalf of themselves and a putative class of others who claim to be similarly situated.
The Judicial Panel on Multidistrict Litigation consolidated all of the putative class actions (as well as certain other cases in which the Company was not a named defendant) for pretrial proceedings in the United States District Court for the Eastern District of Pennsylvania. The Pennsylvania court organized the putative class actions around two groups (direct purchasers and indirect purchasers) and named interim lead counsel for the named plaintiffs in each group.
The Direct Purchaser Putative Class Action
. The direct purchaser putative class cases were consolidated into In re: Processed Egg Products Antitrust Litigation, No. 2:08-md-02002-GP, in the United States District Court for the Eastern District of Pennsylvania. As previously reported, in November 2014, the Court approved the Company’s settlement with the direct purchaser plaintiff class and entered final judgment dismissing with prejudice the class members’ claims against the Company.
The Indirect Purchaser Putative Class Action
. The indirect purchaser putative class cases were consolidated into In re: Processed Egg Products Antitrust Litigation, No. 2:08-md-02002-GP, in the United States District Court for the Eastern District of Pennsylvania. On April 20-21, 2015, the Court held an evidentiary hearing on the indirect purchaser
plaintiffs’ motion for class certification. On September 18, 2015, the Court denied the indirect purchaser plaintiffs’ motion for class certification of
21
separate classes seeking damages under the laws of
21
states, holding that the plaintiffs were not able to prove that their purported method for ascertaining class membership was reliable or administratively feasible, that common questions would predominate, or that their proposed class approach would be manageable in a single trial. In addition to barring any right to pursue a class monetary remedy under state law, the Court also denied indirect purchaser plaintiffs’ request for certification of an injunctive-relief class under federal law. However, the court allowed the indirect purchaser plaintiffs to renew their motion for class certification seeking a federal injunction. The plaintiffs filed their renewed motion to certify an injunctive-relief class on October 23, 2015. The Company joined the other defendants in opposing that motion on November 20. The plaintiffs filed their reply memorandum on December 11, 2015, and on March 7, 2017, the Court heard arguments on the renewed motion for injunctive class certification. On June 27, 2017, the Court denied plaintiffs’ renewed motion for injunctive class certification. The plaintiffs also filed a petition with the United States Court of Appeals for the Third Circuit, asking the court to hear an immediate appeal of the trial court’s denial of the motion to certify
21
state-law damages classes. On December 3, 2015, the Third Circuit entered an order staying its consideration of the plaintiffs’ request for an immediate appeal of the damages-class ruling pending the trial court’s resolution of the plaintiffs’ renewed motion to certify an injunctive-relief class. On July 11, 2017 the plaintiffs filed a petition with the Third Circuit asking the court to hear an appeal of the June 27 order denying plaintiffs’ renewed motion for injunctive class certification. On July 21, 2017, the Company joined other defendants in a response filed with the Third Circuit opposing the plaintiffs' petition.
The Non-Class Cases
.
Six
of the cases in which plaintiffs do not seek to certify a class have been consolidated with the putative class actions into In re: Processed Egg Products Antitrust Litigation, No. 2:08-md-02002-GP, in the United States District Court for the Eastern District of Pennsylvania. The court granted with prejudice the defendants’ renewed motion to dismiss the non-class plaintiffs’ claims for damages arising before September 24, 2004. On July 2, 2015, the Company filed and joined several motions for summary judgment that sought either dismissal of all of the claims in all of these cases or, in the alternative, dismissal of portions of these cases. On July 2, 2015, the non-class plaintiffs filed a motion for summary judgment seeking dismissal of certain affirmative defenses based on statutory immunities from federal antitrust law. The Court heard oral argument on the motions for summary judgment on February 22 and 23, 2016. On September 6, 2016, the Court granted the defendants’ motion for summary judgment against the plaintiffs’ claims arising from their purchases of egg products, dismissing those claims with prejudice. On September 9, 2016, the Court granted in part the Company’s motion for summary judgment on liability, dismissing as a matter of law the plaintiffs’ allegations of a side agreement to cease construction of new facilities and ruling that the plaintiffs’ allegations against United Egg Producers (UEP) animal-welfare guidelines must be evaluated at trial under the rule of reason. On September 12, 2016, the Court granted in part the Company’s motion for summary judgment on damages, ruling that plaintiffs cannot recover damages on purchases of eggs from non-defendants and cannot recover any relief on eggs and egg products produced or sold in Arizona after October 1, 2009, the date that Arizona mandated that all eggs sold or produced in that state must be produced in compliance with the 2008 version of the UEP animal-welfare guidelines. On September 13, 2016, the Court granted in part the plaintiffs’ motion for summary judgment as to the applicability of the Capper-Volstead defense, ruling that United States Egg Marketers (an industry cooperative of which the Company is a member) may invoke the defense at trial but that UEP (another industry cooperative of which the Company is a member) cannot. The Capper-Volstead defense is a defense pursuant to the Capper-Volstead Act (the Co-operative Marketing Associations Act), enacted by Congress in 1922, which gives certain associations of farmers certain exemptions from antitrust laws. On October 4, 2016, certain direct action plaintiffs (Kraft Food Global, Inc., General Mills, Inc., Nestle USA, Inc., and The Kellogg Company) filed an appeal to the United States Court of Appeals for the Third Circuit from the District Court’s Order dated September 6, 2016, granting defendants’ motion for summary judgment and dismissing with prejudice all claims based on the purchase of egg products. These plaintiffs filed their opening brief on March 7, 2017. The defendants filed their response brief on April 20. These plaintiffs filed their reply brief on May 18. The court of appeals heard oral argument on July 11, 2017, but has not issued a ruling. On November 22, 2016, the non-class plaintiffs filed a motion asking the Court to hold a status conference and asking the court to set the non-class cases for trial in June of 2017. The parties in all of the remaining class and non-class cases submitted several different proposed trial schedules to the court, and a status conference was held on February 9, 2017. A trial date has not yet been set.
Allegations in Each Case
. In all of the cases described above, the plaintiffs allege that the Company and certain other large domestic egg producers conspired to reduce the domestic supply of eggs in a concerted effort to raise the price of eggs to artificially high levels. In each case, plaintiffs allege that all defendants agreed to reduce the domestic supply of eggs by: (a) agreeing to limit production; (b) manipulating egg exports; and (c) implementing industry-wide animal welfare guidelines that reduced the number of hens and eggs.
The named plaintiffs in the remaining indirect purchaser putative class action seek treble damages under the statutes and common-law of various states and injunctive relief under the Sherman Act on behalf of themselves and all other putative class members in the United States. Although plaintiffs allege a class period starting in October, 2006 and running “through the present,” the Court denied the plaintiffs’ motion to certify classes seeking damages under the laws of
21
states and denied without prejudice the plaintiffs’ motion to certify an injunctive-relief class, although the plaintiffs have filed a renewed motion to certify an injunctive-relief class, as discussed above.
Five
of the original
six
non-class cases remain pending against the Company. The principal plaintiffs in these cases are: The Kroger Co.; Publix Super Markets, Inc.; SUPERVALU, Inc.; Safeway, Inc.; Albertsons LLC; H.E. Butt Grocery Co.; The Great Atlantic & Pacific Tea Company, Inc.; Walgreen Co.; Hy-Vee, Inc.; and Giant Eagle, Inc. In
four
of these remaining non-class cases, the plaintiffs seek treble damages and injunctive relief under the Sherman Act. In
one
of those
four
cases, the plaintiffs purchased only egg products, and as noted above, the Court dismissed with prejudice all claims arising from the purchase of egg products. On October 4, 2016, the
four
plaintiffs in that case (Kraft Food Global, Inc., General Mills, Inc., Nestle USA, Inc., and The Kellogg Company) appealed that decision to the United States Court of Appeals for the Third Circuit. In the fifth remaining non-class case, the plaintiff seeks treble damages and injunctive relief under the Sherman Act and the Ohio antitrust act (known as the Valentine Act).
The Pennsylvania court has entered a series of orders related to case management, discovery, class certification, summary judgment, and scheduling. The Court has also denied all
four
motions that the plaintiffs filed to exclude testimony from certain expert witnesses retained by the defendants. The Pennsylvania court has not set a trial date for any of the Company’s remaining consolidated cases (non-class and indirect purchaser cases). As noted above, the court held a hearing on the parties’ proposed trial schedules but has not yet set a trial date.
The Company intends to continue to defend the remaining cases as vigorously as possible based on defenses which the Company believes are meritorious and provable. While management believes that the likelihood of a material adverse outcome in the overall egg antitrust litigation has been significantly reduced as a result of the settlements and rulings described above, there is still a reasonable possibility of a material adverse outcome in the remaining egg antitrust litigation. At the present time, however, it is not possible to estimate the amount of monetary exposure, if any, to the Company because of these cases. Accordingly, adjustments, if any, which might result from the resolution of these remaining legal matters, have not been reflected in the financial statements.
State of Oklahoma Watershed Pollution Litigation
On June 18, 2005, the State of Oklahoma filed suit, in the United States District Court for the Northern District of Oklahoma, against Cal-Maine Foods, Inc. and Tyson Foods, Inc. and affiliates, Cobb-Vantress, Inc., Cargill, Inc. and its affiliate, George’s, Inc. and its affiliate, Peterson Farms, Inc. and Simmons Foods, Inc. The State of Oklahoma claims that through the disposal of chicken litter the defendants have polluted the Illinois River Watershed. This watershed provides water to eastern Oklahoma. The complaint seeks injunctive relief and monetary damages, but the claim for monetary damages has been dismissed by the court. Cal-Maine Foods, Inc. discontinued operations in the watershed. Accordingly, we do not anticipate that Cal-Maine Foods, Inc. will be materially affected by the request for injunctive relief unless the court orders substantial affirmative remediation. Since the litigation began, Cal-Maine Foods, Inc. purchased
100%
of the membership interests of Benton County Foods, LLC, which is an ongoing commercial shell egg operation within the Illinois River Watershed. Benton County Foods, LLC is not a defendant in the litigation.
The trial in the case began in September 2009 and concluded in February 2010. The case was tried to the court without a jury and the court has not yet issued its ruling. Management believes the risk of material loss related to this matter to be remote.
Florida Civil Investigative Demand
On November 4, 2008, the Company received an antitrust civil investigative demand from the Attorney General of the State of Florida. The demand seeks production of documents and responses to interrogatories relating to the production and sale of eggs and egg products. The Company is cooperating with this investigation and has, on
three
occasions, entered into an agreement with the State of Florida tolling the statute of limitations applicable to any supposed claims the State is investigating. No allegations of wrongdoing have been made against the Company in this matter.
Other Matters
In addition to the above, the Company is involved in various other claims and litigation incidental to its business. Although the outcome of these matters cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome should not have a material effect on the Company’s consolidated results of operations or financial position.
At this time, it is not possible for us to predict the ultimate outcome of the matters set forth above.
13. Description of Rights and Privileges of Capital Stock—Capital Structure Consists of Common
Stock and Class A Common
Stock
The Company has
two
classes of capital stock: Common Stock and Class A Common Stock. Holders of shares of the Company’s capital stock vote as a single class on all matters submitted to a vote of the stockholders, with each share of Common Stock entitled to
one
vote and each share of Class A Common Stock entitled to
ten
votes. The Common Stock and Class A Common Stock have equal liquidation rights and the same dividend rights. In the case of any stock dividend, holders of Common Stock are entitled to receive the same percentage dividend (payable only in shares of Common Stock) as the holders of Class A Common Stock receive (payable only in shares of Class A Common Stock). Upon liquidation, dissolution, or winding-up of the Company, the holders of Common Stock are entitled to share ratably with the holders of Class A Common Stock in all assets available for distribution after payment in full of creditors. The Class A Common Stock may only be issued to Fred R. Adams, Jr., the Company’s Founder and Chairman Emeritus, and members of his immediate family, as defined in the Company's articles of incorporation. In the event any share of Class A Common Stock, by operation of law or otherwise is, or shall be deemed to be owned by any person other than Mr. Adams or a member of his immediate family, the voting power of such stock will be reduced from
ten
votes per share to
one
vote per share. Also, shares of Class A Common Stock shall be automatically converted into Common Stock on a share per share basis in the event the beneficial or record ownership of any such share of Class A Common Stock is transferred to any person other than Mr. Adams or a member of his immediate family. Each share of Class A Common Stock is convertible, at the option of its holder, into
one
share of Common Stock at any time. The holders of Common Stock and Class A Common Stock are not entitled to preemptive or subscription rights. In any merger, consolidation or business combination, the consideration to be received per share by holders of Common Stock must be identical to that received by holders of Class A Common Stock, except that if any such transaction in which shares of Capital Stock are distributed, such shares may differ as to voting rights to the extent that voting rights now differ among the classes of capital stock. No class of capital stock may be combined or subdivided unless the other classes of capital stock are combined or subdivided in the same proportion. No dividend may be declared and paid on Class A Common Stock unless the dividend is payable only to the holders of Class A Common Stock and a dividend is declared and paid to Common Stock concurrently.
On July 25, 2014, the Board of Directors approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to authorize an additional
60,000,000
shares of common stock and an additional
2,400,000
shares of Class A common stock. The primary purpose of the amendment was to provide a sufficient number of authorized shares in order to effect a
2
-for-1 stock split of the Company’s common stock and Class A common stock. The amendment was approved by the Company’s stockholders at the Company’s annual meeting on October 3, 2014 and the Board of Directors approved the
2
-for-1 stock split on the same day. The new shares were distributed on October 31, 2014 to shareholders of record at the close of business on October 17, 2014.
Unless otherwise noted, all prior period share and per share information contained in this report was adjusted to reflect the effect of the stock split.
14. Fair Value Measures
The Company is required to categorize both financial and nonfinancial assets and liabilities based on the following fair value hierarchy. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated, knowledgeable, and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to settle the liability with the creditor.
|
|
•
|
Level 1 - Quoted prices in active markets for identical assets or liabilities.
|
|
|
•
|
Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.
|
|
|
•
|
Level 3 - Unobservable inputs for the asset or liability supported by little or no market activity and are significant to the fair value of the assets or liabilities.
|
The disclosure of fair value of certain financial assets and liabilities recorded at cost are as follows:
Cash and cash equivalents, accounts receivable, and accounts payable:
The carrying amount approximates fair value due to the short maturity of these instruments.
Long-term debt:
The carrying value of the Company’s long-term debt is at its stated value. We have not elected to carry our long-term debt at fair value. Fair values for debt are based on quoted market prices or published forward interest rate curves, which are level 2 inputs. Estimated fair values are management’s estimates, which is a level 3 input; however, when there is no readily available market data, the estimated fair values may not represent the amounts that could be realized in a current transaction, and the fair values could change significantly. The fair value of the Company’s debt is sensitive to changes in the general level of U.S. interest rates. The Company maintains all 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 (i.e. decrease) in interest rates would adversely affect the net fair value of the Company’s debt by
$144,000
at
June 3, 2017
. The fair value and carrying value of the Company’s long-term debt were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 3, 2017
|
|
May 28, 2016
|
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
5.40 – 6.40% Notes payable
|
|
$
|
9,250
|
|
|
$
|
9,295
|
|
|
$
|
25,570
|
|
|
$
|
25,824
|
|
Long-term leases
|
|
1,689
|
|
|
1,520
|
|
|
—
|
|
|
—
|
|
|
|
$
|
10,939
|
|
|
$
|
10,815
|
|
|
$
|
25,570
|
|
|
$
|
25,824
|
|
Assets and Liabilities Measured at Fair Value on a Recurring Basis
In accordance with the fair value hierarchy described above, the following table shows the fair value of our financial assets and liabilities that are required to be measured at fair value on a recurring basis as of
June 3, 2017
and
May 28, 2016
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 3, 2017
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
in Active
|
|
Significant
|
|
|
|
|
|
|
Markets for
|
|
Other
|
|
Significant
|
|
|
|
|
Identical
|
|
Observable
|
|
Unobservable
|
|
|
|
|
Instruments
|
|
Inputs
|
|
Inputs
|
|
Total
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Balance
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
US government and agency obligations
|
|
$
|
—
|
|
|
$
|
20,216
|
|
|
$
|
—
|
|
|
$
|
20,216
|
|
Municipal bonds
|
|
—
|
|
|
36,873
|
|
|
—
|
|
|
36,873
|
|
Corporate bonds
|
|
—
|
|
|
75,790
|
|
|
—
|
|
|
75,790
|
|
Asset backed securities
|
|
—
|
|
|
5,583
|
|
|
—
|
|
|
5,583
|
|
Mutual funds
|
|
2,459
|
|
|
—
|
|
|
—
|
|
|
2,459
|
|
Total assets measured at fair value
|
|
$
|
2,459
|
|
|
$
|
138,462
|
|
|
$
|
—
|
|
|
$
|
140,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 28, 2016
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
in Active
|
|
Significant
|
|
|
|
|
|
|
Markets for
|
|
Other
|
|
Significant
|
|
|
|
|
Identical
|
|
Observable
|
|
Unobservable
|
|
|
|
|
Instruments
|
|
Inputs
|
|
Inputs
|
|
Total
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Balance
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
US government and agency obligations
|
|
$
|
—
|
|
|
$
|
18,814
|
|
|
$
|
—
|
|
|
$
|
18,814
|
|
Municipal bonds
|
|
—
|
|
|
79,643
|
|
|
—
|
|
|
79,643
|
|
Corporate bonds
|
|
—
|
|
|
240,537
|
|
|
—
|
|
|
240,537
|
|
Foreign government obligations
|
|
—
|
|
|
2,046
|
|
|
—
|
|
|
2,046
|
|
Asset backed securities
|
|
—
|
|
|
15,893
|
|
|
—
|
|
|
15,893
|
|
Mutual funds
|
|
5,503
|
|
|
—
|
|
|
—
|
|
|
5,503
|
|
Total assets measured at fair value
|
|
$
|
5,503
|
|
|
$
|
356,933
|
|
|
$
|
—
|
|
|
$
|
362,436
|
|
Our investment securities – available-for-sale classified as level 2 consist of U.S. government and agency obligations, taxable and tax exempt municipal bonds, zero coupon municipal bonds, asset-backed securities, foreign government obligations, and corporate bonds with maturities of three months or longer when purchased. We classified these securities as current, because amounts invested are available for current operations. Observable inputs for these securities are yields, credit risks, default rates, and volatility.
The Company applies fair value accounting guidance to measure non-financial assets and liabilities associated with business acquisitions. These assets and liabilities are measured at fair value for the initial purchase price allocation and are subject to recurring revaluations. The fair value of non-financial assets acquired is determined internally. Our internal valuation methodology for non-financial assets takes into account the remaining estimated life of the assets acquired and what management believes is the market value for those assets.
15.
Investment
Securities
Investment securities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 3, 2017
|
|
|
|
|
Gains in
|
|
Losses in
|
|
|
|
|
|
|
Accumulated
|
|
Accumulated
|
|
Estimated
|
|
|
Amortized
|
|
Other
|
|
Other
|
|
Fair
|
|
|
Cost
|
|
Comprehensive
|
|
Comprehensive
|
|
Value
|
|
|
|
|
Income
|
|
Income
|
|
|
US government and agency obligations
|
|
$
|
20,259
|
|
|
$
|
—
|
|
|
43
|
|
|
$
|
20,216
|
|
Municipal bonds
|
|
36,839
|
|
|
34
|
|
|
—
|
|
|
36,873
|
|
Corporate bonds
|
|
75,769
|
|
|
21
|
|
|
—
|
|
|
75,790
|
|
Asset backed securities
|
|
5,583
|
|
|
—
|
|
|
—
|
|
|
5,583
|
|
Mutual funds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total current investment securities
|
|
$
|
138,450
|
|
|
$
|
55
|
|
|
$
|
43
|
|
|
$
|
138,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
1,706
|
|
|
753
|
|
|
—
|
|
|
2,459
|
|
Total noncurrent investment securities
|
|
$
|
1,706
|
|
|
$
|
753
|
|
|
—
|
|
|
$
|
2,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 28, 2016
|
|
|
|
|
Gains in
|
|
Losses in
|
|
|
|
|
|
|
Accumulated
|
|
Accumulated
|
|
Estimated
|
|
|
Amortized
|
|
Other
|
|
Other
|
|
Fair
|
|
|
Cost
|
|
Comprehensive
|
|
Comprehensive
|
|
Value
|
|
|
|
|
Income
|
|
Income
|
|
|
US government and agency obligations
|
|
$
|
18,809
|
|
|
$
|
5
|
|
|
—
|
|
|
$
|
18,814
|
|
Municipal bonds
|
|
79,481
|
|
|
162
|
|
|
—
|
|
|
79,643
|
|
Corporate bonds
|
|
240,593
|
|
|
—
|
|
|
56
|
|
|
240,537
|
|
Foreign government obligations
|
|
2,044
|
|
|
2
|
|
|
—
|
|
|
2,046
|
|
Asset backed securities
|
|
15,908
|
|
|
—
|
|
|
15
|
|
|
15,893
|
|
Mutual funds
|
|
3,565
|
|
|
1
|
|
|
—
|
|
|
3,566
|
|
Total current investment securities
|
|
$
|
360,400
|
|
|
$
|
170
|
|
|
$
|
71
|
|
|
$
|
360,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
1,448
|
|
|
489
|
|
|
—
|
|
|
1,937
|
|
Total noncurrent investment securities
|
|
$
|
1,448
|
|
|
$
|
489
|
|
|
—
|
|
|
$
|
1,937
|
|
Proceeds from the sales of available-for-sale securities were
$251.7 million
,
$292.5 million
, and
$146.8 million
during fiscal
2017
,
2016
, and
2015
, respectively. Gross realized gains on those sales during fiscal
2017
,
2016
,
and
2015
were
$231,000
,
$131,000
, and
$82,000
, respectively. Gross realized losses on those sales during fiscal
2017
,
2016
, and
2014
were
$7,000
,
$110,000
, and
$7,000
, respectively. For purposes of determining gross realized gains and losses, the cost of securities sold is based on the specific identification method.
Unrealized holding gains and (losses), net of taxes, for fiscal
2017
,
2016
, and
2015
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 3, 2017
|
|
|
May 28, 2016
|
|
|
May 30, 2015
|
|
Current Investments
|
|
(54
|
)
|
|
22
|
|
|
(146
|
)
|
Noncurrent Investments
|
|
164
|
|
|
(31
|
)
|
|
59
|
|
Total unrealized holding gains (losses)
|
|
110
|
|
|
(9
|
)
|
|
(87
|
)
|
Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Contractual maturities of investment securities at
June 3, 2017
, are as follows (in thousands):
|
|
|
|
|
|
|
|
Estimated Fair Value
|
Within one year
|
|
$
|
82,331
|
|
1-3 years
|
|
56,131
|
|
|
|
$
|
138,462
|
|
16. Quarterly Financial Data:
(unaudited, amount in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2017
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
Net sales
|
|
$
|
239,845
|
|
|
$
|
253,544
|
|
|
$
|
306,540
|
|
|
$
|
274,584
|
|
Gross profit
|
|
(9,569
|
)
|
|
3,948
|
|
|
39,165
|
|
|
12,006
|
|
Net income (loss) attributable to Cal-Maine Foods, Inc.
|
|
(30,936
|
)
|
|
(23,010
|
)
|
|
4,139
|
|
|
(24,471
|
)
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.64
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
0.09
|
|
|
$
|
(0.51
|
)
|
Diluted
|
|
$
|
(0.64
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
0.09
|
|
|
$
|
(0.51
|
)
|
During the Company's fourth quarter of fiscal 2017, we decided to carry back fiscal 2017 net operating losses to recover taxes paid in fiscal 2015, which affects the comparability between quarters. The net operating loss carryback resulted in a
$4.1 million
decrease in the income tax benefit, as the carryback reduced prior year taxable income and as a result reduced the benefit of prior year domestic manufacturers deductions, a portion of which were therefore reversed in the fourth quarter of fiscal 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2016
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
Net sales
|
|
$
|
609,895
|
|
|
$
|
545,975
|
|
|
$
|
449,760
|
|
|
$
|
303,020
|
|
Gross profit
|
|
263,071
|
|
|
211,597
|
|
|
132,726
|
|
|
40,680
|
|
Net income (loss) attributable to Cal-Maine Foods, Inc.
|
|
143,023
|
|
|
109,230
|
|
|
64,164
|
|
|
(376
|
)
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.97
|
|
|
$
|
2.27
|
|
|
$
|
1.33
|
|
|
$
|
(0.01
|
)
|
Diluted
|
|
$
|
2.95
|
|
|
$
|
2.26
|
|
|
$
|
1.33
|
|
|
$
|
(0.01
|
)
|