CAL-MAINE FOODS, INC. The following should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of the Company's Annual Report on Form 10-K for its fiscal year endedMay 30, 2020 (the "2020 Annual Report"), and the accompanying financial statements and notes included in Part II, Item 8 of the 2020 Annual Report and in Part I, Item I of this Quarterly Report on Form 10-Q ("Quarterly Report"). This report contains numerous forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act") relating to our shell egg business, including estimated future production data, expected construction schedules, projected construction costs, potential future supply of and demand for our products, potential future corn and soybean price trends, potential future impact on our business of the COVID-19 pandemic, potential future impact on our business of new legislation, rules or policies, potential outcomes of legal proceedings, and other projected operating data, including anticipated results of operations and financial condition. Such forward-looking statements are identified by the use of words such as "believes," "intends," "expects," "hopes," "may," "should," "plans," "projected," "contemplates," "anticipates," or similar words. Actual outcomes or results could differ materially from those projected in the forward-looking statements. The forward-looking statements are based on management's current intent, belief, expectations, estimates, and projections regarding the Company and its industry. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions, and other factors that are difficult to predict and may be beyond our control. The factors that could cause actual results to differ materially from those projected in the forward-looking statements include, among others, (i) the risk factors set forth in Part I, Item 1A of the 2020 Annual Report (ii) the risks and hazards inherent in the shell egg business (including disease, pests, weather conditions, and potential for product recall), (iii) changes in the demand for and market prices of shell eggs and feed costs, (iv) our ability to predict and meet demand for cage-free and other specialty eggs, (v) risks, changes, or obligations that could result from our future acquisition of new flocks or businesses and risks or changes that may cause conditions to completing a pending acquisition not to be met, (vi) risks relating to the evolving COVID-19 pandemic, and (vii) adverse results in pending litigation matters. Readers are cautioned not to place undue reliance on forward-looking statements because, while we believe the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. Further, forward-looking statements included herein are only made as of the respective dates thereof, or if no date is stated, as of the date hereof. Except as otherwise required by law, we disclaim any intent or obligation to update publicly these forward-looking statements, whether because of new information, future events, or otherwise.
GENERAL
Cal-Maine Foods, Inc. is primarily engaged in the production, grading, packaging, marketing and distribution of fresh shell eggs. Our operations are fully integrated under one operating segment. We are the largest producer and distributor of fresh shell eggs inthe United States . Our total flock of approximately 40.8 million layers and 9.1 million pullets and breeders is the largest in theU.S. We sell most of our shell eggs to a diverse group of customers, including national and regional grocery store chains, club stores, companies servicing independent supermarkets in theU.S. , food service distributors, and egg product consumers in states across the southwestern, southeastern, mid-western and mid-Atlantic regions ofthe United States . Our operating results are materially impacted by market prices for eggs and feed grains (corn and soybean meal), which are highly volatile, independent of each other, and out of our control. Generally speaking, higher market prices for eggs have a positive impact on our financial results while higher market prices for feed grains have a negative impact on our financial results. Although we use a variety of pricing mechanisms in pricing agreements with our customers, we sell the majority of our conventional shell eggs based on formulas that take into account, in varying ways, independently quoted regional wholesale market prices for shell eggs or formulas related to our costs of production which include the cost of corn and soybean meal. As an example of the volatility in the market prices of shell eggs, the Urner-Barry Southeastern Regional Large Egg Market Price per dozen eggs ("UB southeastern large index") in fiscal year 2020 ranged from a low of$0.62 inJuly 2019 to a high of$3.18 inMarch 2020 . Generally, we purchase primary feed ingredients, mainly corn and soybean meal, at current market prices. Corn and soybean meal are commodities and are subject to volatile price changes due to weather, various supply and demand factors, transportation and storage costs, speculators, and agricultural, energy and trade policies in theU.S. and internationally. 16 -------------------------------------------------------------------------------- Index Specialty shell eggs have been a significant and growing portion of the market. In recent years, a significant number of large restaurant chains, food service companies and grocery chains, including our largest customers, announced goals to transition to an exclusively cage-free egg supply chain by specified future dates. Additionally, several states, representing 23% of theU.S. total population according to theU.S. Census Bureau , have passed legislation requiring cage-free eggs by specified future dates, and other states are considering such legislation. For additional information, see the 2020 Annual Report, Part I, Item 1, "Business - Growth Strategy" and "- Government Regulation," and the fifth risk factor in Part I, Item 1A, "Risk Factors." Retail sales of shell eggs historically have been highest during the fall and winter months and lowest during the summer months. Prices for shell eggs fluctuate in response to seasonal demand factors and a natural increase in egg production during the spring and early summer. Historically, shell egg prices tend to increase with the start of the school year and tend to be highest prior to holiday periods, particularlyThanksgiving , Christmas, and Easter. Consequently, and all other things being equal, we would expect to experience lower selling prices, sales volumes and net income (and may incur net losses) in our first and fourth fiscal quarters ending in August/September and May/June, respectively. Because of the seasonal and quarterly fluctuations, comparisons of our sales and operating results between different quarters within a single fiscal year are not necessarily meaningful comparisons.
COVID-19
Since early 2020, the coronavirus ("COVID-19") outbreak, characterized as a
pandemic by the World Health Organization on March 11, 2020 , has caused
significant disruptions in international and U.S. economies and markets. We
understand the challenges and difficult economic environment facing the families
in the communities where we live and work, and we are committed to helping where
we can. One way we can do this is by providing food assistance to those in need,
and Cal-Maine Foods has donated over 900,000 dozen eggs in the first quarter of
2021. We believe we are taking all reasonable precautions in the management of
our operations in response to the COVID-19 pandemic. Our top priority is the
health and safety of our employees, who work hard every day to produce eggs for
our customers. As part of the nation's food supply, we work in a critical
infrastructure industry, and believe we have a special responsibility to
maintain our normal work schedule. As such, we are in regular communication with
our managers across our operations and continue to closely monitor the situation
in our facilities and in the communities where we live and work. We have
implemented procedures designed to protect our employees, taking into account
guidelines published by the Centers for Disease Control and other government
health agencies, and we have strict sanitation protocols and biosecurity
measures in place throughout our operations with restricted access to visitors.
All non-essential corporate travel has been suspended. There are no known
indications that COVID-19 affects hens or can be transferred through the food
supply.
We continue to proactively monitor and manage operations during the COVID-19
pandemic, including additional related costs that we have incurred or may incur
in the future. In the thirteen weeks ended August 29, 2020 , we spent an
additional $832 thousand related to the pandemic. The majority of the expenses
were related to additional labor, primarily reflected in cost of sales.
EXECUTIVE OVERVIEW
For the first quarter of fiscal 2021, we recorded a gross profit of$16.8 million compared to a gross loss of$21.1 million for the first quarter of fiscal 2020. This largely resulted from an increase in our net average selling price for shell eggs, which was$1.078 and$0.915 for the first quarters of fiscal 2021 and 2020, respectively. Demand has steadied since the spike that occurred during our fourth quarter of fiscal 2020 when consumers purchased more eggs in anticipation of preparing more meals at home due to the COVID-19 pandemic, although retail demand remains higher in comparison to the first quarter of fiscal 2020. Our total dozens sold increased 3.8% to 264.0 million dozen shell eggs for the first quarter of fiscal 2021 compared to 254.4 million dozen shell eggs for the first quarter of fiscal 2020. 17 -------------------------------------------------------------------------------- Index For the first quarter of our fiscal year 2020, an oversupply of eggs negatively affected the price of conventional eggs, and demand for specialty eggs was negatively impacted by the low conventional egg prices. The daily average for the UB southeastern large index for first quarter of fiscal 2021 increased 13.1% from the same period in the prior year. Hen numbers reported by theUSDA as ofSeptember 1, 2020 , were 317.4 million, which is 15.1 million fewer hens than reported a year ago. TheUSDA reported that the hatch from January throughAugust 2020 decreased 2.7 percent as compared to the same period last year, which will likely further reduce future egg supply levels. However, demand for eggs in foodservice is still down due to the pandemic brought by COVID-19, which we believe has kept the price of shell eggs lower in the retail market due to the extra supply that has entered the retail channel from foodservice. Our farm production costs per dozen produced for the first quarter of fiscal 2021 decreased 4.3% or$0.032 compared to first quarter of fiscal 2020. The decrease was primarily due to lower feed costs and lower amortization of flocks due to selling flocks early in fiscal 2020 in response to market conditions. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain items from our Condensed Consolidated Statements of Operations expressed as a percentage of net sales. 13 Weeks Ended August 29, 2020 August 31, 2019 Net sales 100.0 % 100.0 % Cost of sales 94.3 % 108.8 % Gross profit 5.7 % (8.8) % Selling, general and administrative 15.0 % 17.6 % (Gain) loss on disposal of fixed assets - % (0.1) % Operating loss (9.3) % (26.3) % Total other income, net 0.6 % 1.2 % Loss before income taxes (8.7) % (25.1) % Income tax benefit (2.1) % (6.1) % Net loss (6.6) % (19.0) % Less: Income attributable to noncontrolling interest - % - % Net loss attributable to Cal-Maine Foods, Inc. (6.6) % (19.0) % NET SALES Net sales for the first quarter endedAugust 29, 2020 were$292.8 million , an increase of$51.6 million , or 21.4%, compared to net sales of$241.2 million for the same period of fiscal 2020. The increase was primarily due to a 17.8% increase in egg selling prices which accounted for a$41.5 million increase in net sales. The net average selling price per dozen of shell eggs for the first quarters endedAugust 29, 2020 andAugust 31, 2019 was$1.078 and$0.915 , respectively. Net shell egg sales of$286.1 million and$234.0 million made up approximately 97.7% and 97.0% of net sales for the first quarters endedAugust 29, 2020 andAugust 31, 2019 , respectively. Dozens sold for the first quarter endedAugust 29, 2020 were 264.0 million, a 3.8% increase from 254.4 million dozen for the same period of fiscal 2020. The total volume increase accounted for a$10.3 million increase in net sales. During the second quarter of fiscal 2020, we lost a portion of our conventional eggs sales to a major customer in the Southeast region. For the first quarter of fiscal 2021, the loss in business accounted for a decrease of 5.1% of total shell egg dozens and 6.9% of conventional shell egg dozens compared to the first quarter of fiscal 2020. We expect our new capacity additions and the decommissioning of older, less efficient facilities that occurred during fiscal 2020 will help optimize our operations, improve our sales mix, and better align our production and sales within the region. The acquisition in the second quarter of fiscal 2020 ofMahard Egg Farm ("Mahard") had a positive impact on our conventional shell egg volumes and continued growth of our customer base. For the first quarter of fiscal 2021, this acquisition increased total shell egg dozens sold by 6.4% and conventional shell egg dozens sold by 8.2% compared to the first quarter of fiscal 2020. 18 -------------------------------------------------------------------------------- Index Furthermore, the acquisition opened up opportunities to streamline aspects of our operations, reduce costs and create efficiencies as we integrated Mahard into our operations. Egg products accounted for 2.3% and 3.0% of net sales for the first quarters endedAugust 29, 2020 andAugust 31, 2019 , respectively. These revenues were$6.7 million for the first quarter endedAugust 29, 2020 , compared to$7.2 million for the same period in fiscal 2020, primarily due to decreased volume offset slightly by higher prices.
The table below presents an analysis of our conventional and specialty shell egg sales (in thousands, except percentage data):
13 Weeks Ended
August 29, 2020 August 31, 2019
Total net sales $ 292,782 $ 241,166
Conventional $ 155,384 54.3 % $ 121,609 52.0 %
Specialty 129,245 45.2 % 111,208 47.5 %
Egg sales, net 284,629 99.5 % 232,817 99.5 %
Other 1,448 0.5 % 1,148 0.5 %
Net shell egg sales $ 286,077 100.0 % $ 233,965 100.0 %
Net shell egg sales as a percent of total net
sales 97.7 % 97.0 %
Dozens sold:
Conventional 195,238 74.0 % 194,915 76.6 %
Specialty 68,756 26.0 % 59,509 23.4 %
Total dozens sold 263,994 100.0 % 254,424 100.0 %
Net average selling price per dozen:
Conventional $ 0.796 $ 0.624
Specialty $ 1.880 $ 1.869
All shell eggs $ 1.078 $ 0.915
Conventional shell eggs include all shell egg sales not specifically identified
as specialty shell egg sales. In the first quarter ended August 29, 2020 ,
conventional shell eggs represented approximately 54.3% of our shell egg
revenue, compared to 52.0% for the same period of fiscal 2020. Sales of
conventional shell eggs accounted for approximately 74.0% and 76.6% of total
shell egg volume in the first quarters ended August 29, 2020 and August 31,
2019 , respectively. In the first quarter ended August 29, 2020 , revenue from
conventional egg sales increased by $33.8 million compared to the same period in
fiscal 2020, primarily due to an increase in net average selling prices. For the
first quarters ended August 29, 2020 and August 31, 2019 , our net average
selling price for conventional eggs per dozen was $0.796 and $0.624 ,
respectively.
Specialty eggs, which include nutritionally enhanced, cage-free, organic and
brown eggs, continued to make up a significant portion of our total shell egg
revenue and dozens sold. For the first quarters ended August 29, 2020 and August
31, 2019 , specialty eggs accounted for 45.2% and 47.5% of shell egg revenue,
respectively. Specialty eggs accounted for 26.0% and 23.4% of shell egg volume
in the first quarters ended August 29, 2020 and August 31, 2019 ,
respectively. Revenue from specialty egg sales increased by $18.0 million for
the first quarter ended August 29, 2020 compared to the same period in fiscal
2020 due to both a 15.5% increase in volume of specialty eggs sold and a slight
increase in net average selling price. Demand for specialty eggs was positively
impacted by the higher conventional egg prices as compared to same period in the
prior year. Specialty egg retail prices are less cyclical than conventional
shell egg prices and are generally higher due to consumer willingness to pay
more for specialty eggs.
The shell egg sales classified as "Other" represent sales of hard cooked eggs,
hatching eggs, and other miscellaneous products, which are included with our
shell egg operations.
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Index
Egg products are shell eggs that are broken and sold in liquid, frozen, or dried
form. Our egg products are sold through our wholly-owned subsidiaries American
Egg Products, LLC and Texas Egg Products, LLC .
For the first quarter of fiscal 2021, egg product sales were $6.7 million , a
decrease of $500 thousand , or 6.9%, compared to $7.2 million for the same period
of fiscal 2020. Pounds sold for the first quarter ended August 29, 2020 were
15.0 million, a decrease of 2.3 million, or 13.3%, compared to the same period
of fiscal 2020. The selling price per pound for the first quarter ended August
29, 2020 was $0.446 compared to $0.415 for the same period of fiscal 2020, an
increase of $0.031 or 7.5%.
COST OF SALES
Cost of sales consists of costs directly related to production, processing and
packing of shell eggs, purchases of shell eggs from outside producers,
processing and packing of liquid and frozen egg products, and other non-egg
costs. Farm production costs are those costs incurred at the egg production
facility, including feed, facility, hen amortization, and other related farm
production costs.
The following table presents the key variables affecting cost of sales (in thousands, except cost per dozen data).
13 Weeks Ended
August 29, 2020 August 31, 2019 % Change
Cost of Sales:
Farm production $ 161,863 $ 157,580 2.7 %
Processing, packaging, and warehouse 59,869 53,922 11.0 %
Egg purchases and other (including change in
inventory) 48,933 42,520 15.1 %
Total shell eggs 270,665 254,022 6.6 %
Egg products 5,352 5,350 - %
Other - 2,919 (100.0) %
Total $ 276,017 $ 262,291 5.2 %
Farm production costs (per dozen produced)
Feed $ 0.388 $ 0.411 (5.6) %
Other $ 0.328 $ 0.337 (2.7) %
Total $ 0.716 $ 0.748 (4.3) %
Outside egg purchases (average cost per
dozen) $ 1.04 $ 0.88 18.2 %
Dozen produced 231,161 214,298 7.9 %
Dozen sold 263,994 254,424 3.8 %
Cost of sales for the first quarter of fiscal 2021 was $276.0 million , an
increase of $13.7 million , or 5.2%, from $262.3 million for the same period of
fiscal 2020. Outside egg purchase expense increased due to purchasing a larger
volume at an increased cost in the first quarter of fiscal 2021. Processing
costs increased due to a 6.6% increase in the volume of eggs processed compared
to the same period of the prior year. The cost of packaging materials increased
compared to the prior year period as the retail channel demand increased due to
the pandemic. The pandemic also led to an increase in labor costs. Farm
production costs for the first quarter ended August 29, 2020 was $161.9 million ,
compared to $157.6 million for the comparable period of fiscal 2020, an increase
of $4.3 million , which is primarily due to an increase in production volume.
Dozens produced increased by 7.9% compared to the same period of fiscal 2020.
Feed cost per dozen for the quarter ended August 29, 2020 was $0.388 , compared
to $0.411 per dozen for the comparable period of fiscal 2020, a decrease of
5.6%. Other farm production costs per dozen produced decreased 2.7% to $0.328
for the quarter ended August 29, 2020 , compared to $0.337 for the same period of
last year primarily from lower amortization expense. In the prior fiscal year we
incurred higher amortization expense due to selling flocks early in fiscal 2020
in response to market conditions.
20
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Index
Included in cost of sales for the quarter ended August 31, 2019 is a $2.9
million impairment charge related to decommissioning some of our older, less
efficient production facilities as we continue to invest in new facilities to
meet the increasing demand for specialty eggs and reduce production costs.
Looking forward to the end of fiscal 2021, according to USDA reports, current
supplies of corn and soybeans are favorable, and we believe we will continue to
have an adequate supply of both grains throughout fiscal 2021. However, current
ongoing uncertainties and supply chain disruptions related to the COVID-19
outbreak, weather and geopolitical issues surrounding trade agreements and
international tariffs may lead to further price volatility.
GROSS PROFIT (LOSS)
Gross profit for the first quarter of fiscal 2021 was$16.8 million compared to a gross loss of$21.1 million for the same period of fiscal 2020. This increase was primarily due to the increase in shell egg selling prices.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses ("SGA") include costs of marketing, distribution, accounting, and corporate overhead. The following table presents an analysis of our SGA expenses (in thousands):
13 Weeks Ended
August 29, 2020 August 31, 2019 $ Change % Change
Specialty egg expense $ 12,697 $ 11,475 $ 1,222 10.6 %
Delivery expense 12,494 12,508 (14) (0.1) %
Payroll, taxes and benefits 11,301 10,495 806 7.7 %
Stock compensation expense 893 891 2 0.2 %
Other expenses 6,580 7,106 (526) (7.4) %
Total $ 43,965 $ 42,475 $ 1,490 3.5 %
For the first quarter of fiscal 2021, selling, general, and administrative
expense was $44.0 million compared to $42.5 million for the first quarter ended
August 31, 2019 . Specialty egg expense increased $1.2 million , or 10.6%,
compared to the same period of the prior year. Specialty egg expense typically
fluctuates with specialty egg dozens sold, which increased 15.5% for the first
quarter ended August 29, 2020 . Payroll, taxes and benefits increased $806
thousand or 7.7% compared to the same period in the prior year primarily due to
increases in salary and bonus expenses.
Other expenses decreased $526 thousand or 7.4% compared to same period in fiscal
2020. This decrease is primarily due to return of brokerage commissions on
property and casualty insurance placements refunded after final reconciliation
of all brokerage service agreements.
Included in Other expenses of approximately
OPERATING LOSS
For the thirteen weeks endedAugust 29, 2020 , we recorded an operating loss of$27.2 million compared to an operating loss of$63.5 million for the same period of fiscal 2020. OTHER INCOME (EXPENSE)
Total other income (expense) consists of items not directly charged to, or related to, operations such as interest income and expense, royalty income, equity in income or loss of unconsolidated entities, and patronage income, among other items.
For the first quarter of fiscal 2021, we earned$996 thousand of interest income compared to$1.8 million for the same period of fiscal 2020. The decrease resulted from lower investable balances and significantly lower interest rates. The Company recorded interest expense of$71 thousand and$90 thousand for the first quarters endedAugust 29, 2020 andAugust 31, 2019 , respectively. 21 -------------------------------------------------------------------------------- Index Equity loss of unconsolidated entities for the first quarter endedAugust 29, 2020 was$44 thousand compared to$454 thousand for the same period of fiscal 2020. The increase in income of$410 thousand is primarily due to the increase in egg selling prices impacting the profitability of our joint ventures.
Other, net for the first quarter ended
INCOME TAXES
For the first quarter of fiscal 2021, pre-tax loss was$25.5 million compared to$60.5 million for the same period of fiscal 2020. For the first quarter endedAugust 29, 2020 , an income tax benefit of$6.1 million was recorded with an effective tax rate of 24.0%, compared to$14.8 million for the comparable period of fiscal 2020, which reflects an effective tax rate of 24.4%.
At
Our effective rate differs from the federal statutory income tax rate due to state income taxes, certain federal tax credits and certain items included in income for financial reporting purposes that are not included in taxable income for income tax purposes, including tax exempt interest income, certain nondeductible expenses and net income or loss attributable to noncontrolling interest.
NET LOSS ATTRIBUTABLE TO CAL-
Net loss for the first quarter endedAugust 29, 2020 was$19.4 million , or$0.40 per basic and diluted share, compared to$45.8 million or$0.94 per basic and diluted share for the same period of fiscal 2020.
CAPITAL RESOURCES AND LIQUIDITY
Our working capital atAugust 29, 2020 was$395.3 million , compared to$429.1 million atMay 30, 2020 . The calculation of working capital is defined as current assets less current liabilities. Our current ratio was 6.08 atAugust 29, 2020 , compared with 5.60 atMay 30, 2020 . We had no long-term debt outstanding atAugust 29, 2020 orMay 20, 2020 . OnJuly 10, 2018 , we entered into a$100.0 million Senior Secured Revolving Credit Facility ("the Revolving Credit Facility"). As ofAugust 29, 2020 , no amounts were borrowed under the Revolving Credit Facility. We have$4.3 million in outstanding standby letters of credit, which were issued under our Revolving Credit Facility for the benefit of certain insurance companies. Refer to Note 10 of our audited financial statements included in our 2020 Annual Report for further information regarding our long-term debt. For the first quarter of fiscal 2021,$14.8 million in net cash was used in operating activities, compared to$60.7 million used in operating activities for the comparable period in fiscal 2020. An increase in egg selling prices compared to the prior year period contributed to our increase in cash used in operations. Other adjustments, net increased primarily due to the decrease in trade receivable balances. We continue to invest in our facilities with$25.3 million used to purchase property, plant and equipment for the first quarter endedAugust 29, 2020 compared to$23.7 million in the same period of fiscal 2020. Sales and maturities of investment securities, net of purchases, were$4.0 million for the first quarter of fiscal 2021 compared to$60.8 million for the first quarter of fiscal 2020. We received$650 thousand in distributions from unconsolidated entities during the first quarter endedAugust 29, 2020 compared to$858 thousand for the same period fiscal of 2020. We used$50 thousand for principal payments on finance leases in the first quarter of fiscal 2021 compared to$798 thousand for principal payments on long-term debt and finance leases for the same period of fiscal 2020.
As of
22
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Index
We continue to monitor the increasing demand for cage-free, organic and other
specialty eggs in order to meet our customers' demand. We have invested over
$389.9 million in facilities, equipment and related operations to expand our
cage-free production starting with our first facility in 2008. The following
table presents current material construction projects approved as of August 29,
2020 (in thousands):
Spent as of August 29,
Project(s) Type Projected Completion Projected Cost 2020 Remaining Projected Cost
Convertible/Cage-Free Layer Houses & Pullet
Houses Fiscal 2021 38,032 31,328 6,704
Cage-Free Layer & Pullet Houses/Processing
Facility Fiscal 2022 87,204 63,386 23,818
125,236 94,714 30,522
We believe our current cash balances, investments, cash flows from operations, and Revolving Credit Facility will be sufficient to fund our current and projected capital needs for at least the next twelve months.
RECENTLY ISSUED/ADOPTED ACCOUNTING STANDARDS
For information on changes in accounting principles and new accounting policies, see Note 1 - Summary of Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report.
CRITICAL ACCOUNTING POLICIES
We suggest our Summary of Significant Accounting Policies, as described in Note 1 of the Notes to Consolidated Financial Statements included our 2020 Annual Report, and as described in Note 1 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included in such 2020 Annual Report and this Quarterly Report. Except for the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), there have been no changes to our significant accounting policies described in our 2020 Annual Report. In addition, there have been no changes to our critical accounting policies identified in our 2020 Annual Report.
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