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 41.5 million layers and 9.9 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. 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. 18 -------------------------------------------------------------------------------- Index 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 approximately 1 million dozen eggs in the first
two quarters 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 incurred or may incur in
the future. In the twenty-six weeks ended November 28, 2020 , we spent $1.4
million (excluding medical costs) related to the pandemic, of which $612
thousand was spent in the second fiscal quarter of 2021. The majority of such
expenses for both periods were related to additional labor, primarily reflected
in cost of sales. Medical costs related to COVID-19 paid during the twenty-six
weeks ended November 28, 2020 were an additional $818 thousand of which $529
thousand were in the second fiscal quarter of 2021.
EXECUTIVE OVERVIEW
For the second quarter of fiscal 2021, we recorded a gross profit of$58.5 million compared to$29.4 million for the same period of fiscal 2020. This largely resulted from an increase in our net average selling price for shell eggs, which was$1.227 and$1.160 for the second quarters of fiscal 2021 and 2020, respectively. Demand for shell eggs remain favorable, primarily at the retail level as consumers continue to prepare more meals at home during the COVID-19 pandemic. According to data provided byInformational Resources, Inc. ("IRI") for the latest 12 weeks endingNovember 15, 2020 , the time period which most closely aligns to our second quarter of fiscal 2021, dozens sold in the Total US -Multi Outlet channel for conventional eggs increased 4.3% and specialty eggs increased 15.9% compared to the same period in the prior year. Our total dozens sold during the second quarter of fiscal 2021 was the highest of any second quarter period, and our ratio of total dozens produced to total dozens sold during the second quarter of fiscal 2021 was the highest of any quarterly period. Our total dozens sold increased 4.8% to 273.7 million dozen shell eggs for the second quarter of fiscal 2021 compared to 261.0 million dozen for the same period of fiscal 2020. This is largely due to an increase in specialty egg dozens sold of 17.7%. For the second 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 price for the UB southeastern large index for second quarter of fiscal 2021 increased 3.5% from the same period in the prior year. We did not experience a typical seasonal spike in market prices aroundThanksgiving as the UB southeastern large index peaked onOctober 8, 2020 , at$1.30 and then declined to$1.20 at quarter close.The United States Department of Agriculture ("USDA") reported that the hatch from July throughNovember 2020 decreased 1.5 percent as compared to the same period last year, and hen numbers reported by theUSDA as ofDecember 1, 2020 , were 325.2 million, which represents 15.6 million less hens than 19 -------------------------------------------------------------------------------- Index reported a year ago. Demand for eggs in foodservice remains lower due to the COVID-19 pandemic. We believe this has depressed the price of shell eggs in the retail market due to the extra supply entering the retail channel from foodservice. Our farm production costs per dozen produced for the second quarter of fiscal 2021 decreased 2.6% or$0.019 compared to second quarter of fiscal 2020. This decrease was primarily due to lower feed costs and reductions in flock amortization and facility expenses.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items from
our Condensed Consolidated Statements of Operations expressed as a percentage of
net sales.
13 Weeks Ended 26 Weeks Ended
November 28, 2020 November 30, 2019 November 28, 2020 November 30, 2019
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 83.2 % 90.6 % 88.2 % 98.5 %
Gross profit 16.8 % 9.4 % 11.8 % 1.5 %
Selling, general and administrative 12.6 % 14.7 % 13.7 % 16.0 %
Loss on disposal of fixed assets - % 0.1 % - % - %
Operating income (loss) 4.2 % (5.4) % (1.9) % (14.5) %
Total other income, net 0.4 % 0.5 % 0.5 % 0.8 %
Income (loss) before income taxes 4.6 % (4.9) % (1.4) % (13.7) %
Income tax expense (benefit) 1.1 % (1.6) % (0.4) % (3.6) %
Net income (loss) 3.5 % (3.3) % (1.0) % (10.1) %
NET SALES
Net sales for the second quarter ended November 28, 2020 were $347.3 million , an
increase of $35.8 million , or 11.5%, compared to net sales of $311.5 million for
the same period of fiscal 2020. The increase was primarily due to a 5.8%
increase in egg selling prices which accounted for a $17.5 million increase in
net sales. The net average selling price per dozen of shell eggs for the second
quarters ended November 28, 2020 and November 30, 2019 was $1.227 and $1.160 ,
respectively.
Net shell egg sales of $337.4 million and $303.7 million made up approximately
97.1% and 97.5% of net sales for the second quarters ended November 28, 2020 and
November 30, 2019 , respectively. Dozens sold for the second quarter ended
November 28, 2020 were 273.7 million, a 4.8% increase from 261.0 million dozen
for the same period of fiscal 2020. The total volume increase accounted for a
$15.5 million increase in net sales.
The acquisition in the second quarter of fiscal 2020 of Mahard Egg Farm
("Mahard") had a positive impact on our conventional shell egg volumes and
continued growth of our customer base. For the second quarter of fiscal 2021,
this acquisition increased total and conventional shell egg dozens sold by 4.8%
and 5.6%, respectively, compared to the second quarter of fiscal 2020.
Furthermore, the acquisition opened up opportunities to streamline aspects of
our logistics, thereby reducing costs and creating efficiencies as we integrated
Mahard into our operations.
Egg products accounted for 2.9% and 2.5% of net sales for the second quarters
ended November 28, 2020 and November 30, 2019 , respectively. These revenues were
$9.9 million for the second quarter ended November 28, 2020 , compared to
$7.8 million for the same period in fiscal 2020, primarily due to higher prices
slightly offset by decreased volume.
Net sales for the twenty-six weeks ended November 28, 2020 were $640.1 million ,
an increase of $87.4 million , or 15.8%, compared to net sales of $552.7 million
for the same period of fiscal 2020. The increase was primarily due to an 11.1%
increase in egg selling prices which accounted for a $59.3 million increase in
net sales. The net average selling price per dozen of shell eggs for the
twenty-six weeks ended November 28, 2020 and November 30, 2019 was $1.154 and
$1.039 , respectively.
Net shell egg sales of $623.5 million and $537.7 million made up approximately
97.4% and 97.3% of net sales for the twenty-six weeks ended November 28, 2020
and November 30, 2019 , respectively. Dozens sold for the twenty-six weeks ended
20
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November 28, 2020 were 537.6 million, a 4.3% increase from 515.5 million dozen
for the same period of fiscal 2020. The total volume increase accounted for a
$25.6 million increase in net sales.
Egg products accounted for 2.6% and 2.7% of net sales for the twenty-six weeks
ended November 28, 2020 and November 30, 2019 , respectively. These revenues were
$16.6 million for the twenty-six weeks ended November 28, 2020 , compared to
$15.0 million for the same period in fiscal 2020, primarily due to higher prices
slightly offset by decreased volume.
The table below presents an analysis of our conventional and specialty shell egg sales (in thousands, except percentage data):
13 Weeks Ended 26 Weeks Ended
November 28, 2020 November 30, 2019 November 28, 2020 November 30, 2019
Net Sales $ 347,328 $ 311,522 $ 640,110 $ 552,688
Conventional $ 201,725 59.8 % $ 186,960 61.6 % $ 357,109 57.3 % $ 308,569 57.4 %
Specialty 134,082 39.7 % 115,891 38.2 % 263,327 42.2 % 227,099 42.2 %
Egg sales, net 335,807 99.5 % 302,851 99.8 % 620,436 99.5 % 535,668 99.6 %
Other 1,589 0.5 % 874 0.3 % 3,037 0.5 % 2,022 0.4 %
Net shell egg sales $ 337,396 100.0 % $
303,725 100.1 %
Shell egg sales as a percent of net sales 97.1 % 97.5 % 97.4 % 97.3 % Dozens sold: Conventional 201,317 73.6 % 199,570 76.5 % 396,555 73.8 % 394,446 76.5 % Specialty 72,334 26.4 % 61,456 23.5 % 141,090 26.2 % 121,004 23.5 % Total 273,651 100.0 % 261,026 100.0 % 537,645 100.0 % 515,450 100.0 % Net average selling price per dozen: Conventional$ 1.002 $ 0.937 $ 0.901 $ 0.782 Specialty$ 1.854 $ 1.886 $ 1.866 $ 1.877 All shell eggs$ 1.227 $ 1.160 $ 1.154 $ 1.039 Conventional shell eggs include all shell egg sales not specifically identified as specialty shell egg sales. Comparing the second quarter endedNovember 28, 2020 andNovember 30, 2019 , conventional egg dozens sold increased 0.9% and the average selling price increased 6.9% to$1.002 from$0.937 . Comparing the twenty-six weeks endedNovember 28, 2020 andNovember 30, 2019 , conventional shell egg dozens sold increased 0.5% and the average selling price increased 15.2% to$0.901 from$0.782 . 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. 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. For the second quarter endedNovember 28, 2020 andNovember 30, 2019 , specialty shell egg dozens sold increased 17.7%, and the average selling price decreased 1.7% to$1.854 from$1.886 . For the twenty-six weeks endedNovember 28, 2020 , specialty shell egg dozens sold increased 16.6% and the average selling price decreased 0.6% to$1.866 from$1.877 compared to the same period of fiscal 2020. In both the second quarter and year-to-date fiscal 2021 periods, demand for specialty eggs was positively impacted by the higher conventional egg prices as compared to the same period in the prior year. The shell egg sales classified as "Other" represent sales of hard cooked eggs, hatching eggs, and other miscellaneous products included with our shell egg operations. 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 subsidiariesAmerican Egg Products, LLC andTexas Egg Products, LLC . Comparing the second quarter endedNovember 28, 2020 andNovember 30, 2019 , pounds sold decreased 1.5%; however, the average selling price per pound increased 29.3% to$0.622 from$0.481 . Comparing the twenty-six weeks endedNovember 28, 2020 andNovember 30, 2019 , pounds sold decreased 7.6% while the average selling price increased 20.1% to$0.537 from$0.447 . 21 -------------------------------------------------------------------------------- Index
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 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 26 Weeks Ended
November 28, November 30, November 28, November 30,
2020 2019 % Change 2020 2019 % Change
Cost of Sales:
Farm production $ 179,131 $ 169,735 5.5 % $ 340,994 $ 327,315 4.2 %
Processing, packaging, and
warehouse 63,505 56,890 11.6 % 123,374 110,812 11.3 %
Egg purchases and other
(including change in
inventory) 37,625 48,055 (21.7) % 86,558 90,575 (4.4) %
Total shell eggs 280,261 274,680 2.0 % 550,926 528,702 4.2 %
Egg products 8,616 7,467 15.4 % 13,968 12,817 9.0 %
Other - - - % - 2,919 (100.0) %
Total $ 288,877 $ 282,147 2.4 % $ 564,894 $ 544,438 3.8 %
Farm production costs (per
dozen produced)
Feed $ 0.410 $ 0.416 (1.4) % $ 0.399 $ 0.413 (3.4) %
Other $ 0.312 $ 0.325 (4.0) % $ 0.320 $ 0.332 (3.6) %
Total $ 0.722 $ 0.741 (2.6) % $ 0.719 $ 0.745 (3.5) %
Outside egg purchases
(average cost per dozen) $ 1.24 $ 1.28 (3.1) % $ 1.13 $ 1.06 6.6 %
Dozen produced 251,914 231,467
8.8 % 483,075 445,765 8.4 %
Dozen sold 273,651 261,026 4.8 % 537,645 515,450 4.3 %
Cost of sales for the second quarter of fiscal 2021 was $288.9 million , an
increase of $6.7 million , or 2.4%, from $282.1 million for the same period of
fiscal 2020. The increase was primarily driven by the increase in farm
production costs and processing costs. Processing costs increased due to a 6.7%
increase in the volume of eggs processed compared to the same period of the
prior year. The cost of packaging materials increased 5.8% 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
second quarter ended November 28, 2020 increased $9.4 million , primarily due to
an increase in production volume. Dozens produced increased by 8.8% compared to
the same period of fiscal 2020. Feed cost per dozen for the quarter ended
November 28, 2020 was $0.410 , compared to $0.416 per dozen for the comparable
period of fiscal 2020, a decrease of 1.4%. Other farm production costs per dozen
produced decreased 4.0% to $0.312 for the quarter ended November 28, 2020 ,
compared to $0.325 for the same period of last year, primarily from lower
facility and amortization expense. Facility costs decreased in the second
quarter of fiscal 2021 compared to the same period in fiscal 2020 due to
improved utilization and increased production. In the prior fiscal year we
incurred higher amortization expense due to selling flocks early in fiscal 2020
in response to market conditions. Lower feed costs which are capitalized in our
flocks during pullet production also helped reduce amortization expense in the
second quarter of fiscal 2021 as compared to the same period in fiscal 2020. Egg
purchase expenses decreased 21.7%, primarily due to the decrease in the volume
of outside egg purchases as well as a slight decrease in the cost of these
purchases.
Cost of sales for the twenty-six weeks ended November 28, 2020 was $564.9
million , an increase of $20.5 million , or 3.8%, from $544.4 million for the same
period of fiscal 2020. The increase was primarily driven by the increase in farm
production
22
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Index
costs and processing costs. Processing costs increased due to a 6.7% increase in
the volume of eggs processed compared to the same period of the prior year. The
cost of packaging materials increased 3.3% 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 twenty-six weeks
ended November 28, 2020 increased $9.4 million , which is primarily due to an
increase in production volume. Dozens produced increased by 8.4% compared to the
same period of fiscal 2020. Feed cost per dozen for the twenty-six weeks ended
November 28, 2020 was $0.399 , compared to $0.413 per dozen for the comparable
period of fiscal 2020, a decrease of 3.4%. Other farm production costs per dozen
produced decreased 3.6% to $0.320 for the twenty-six weeks ended November 28,
2020 , compared to $0.332 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. Egg purchase expenses decreased 4.4%, primarily due to the decrease
in the volume of outside egg purchases, partially offset by an increase in the
cost of these purchases.
Included in cost of sales for the twenty-six weeks ended November 30, 2019 is a
$2.9 million impairment charge related to decommissioning older, less efficient
production facilities as we invest in new facilities to meet the increasing
demand for specialty eggs and reduce production costs.
Feed costs started trending higher midway through the second quarter and
continued volatility is expected for the remainder of fiscal 2021 as increased
export demand for both soybeans and corn is placing pressure on domestic
supplies. Additionally, the ongoing uncertainties and supply chain disruptions
related to the COVID-19 outbreak, weather fluctuations and geopolitical issues
surrounding trade agreements and international tariffs will continue to affect
market prices for our primary feed ingredients.
GROSS PROFIT
Gross profit for the second quarter of fiscal 2021 was$58.5 million compared to$29.4 million for the same period of fiscal 2020. For the twenty-six weeks endedNovember 28, 2020 gross profit was$75.2 million compared to$8.3 million for the same period of fiscal 2020. The increase for both periods was primarily due to the increase in conventional shell egg selling prices and an increase in dozens sold for specialty eggs.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative ("SGA") expenses include costs of marketing, distribution, accounting, and corporate overhead. The following table presents an analysis of our SGA expenses (in thousands):
13 Weeks Ended
November 28, 2020 November 30, 2019 $ Change % Change
Specialty egg expense $ 14,039 $ 11,939 $ 2,100 17.6 %
Delivery expense 13,052 13,524 (472) (3.5) %
Payroll, taxes and benefits 10,030 10,257 (227) (2.2) %
Stock compensation expense 931 903 28 3.1 %
Other expenses 5,821 9,105 (3,284) (36.1) %
Total $ 43,873 $ 45,728 $ (1,855) (4.1) %
For the second quarter of fiscal 2021, SGA expenses decreased 4.1% to $43.9
million from $45.7 million for the same period in fiscal 2020. Specialty egg
expense increased $2.1 million , or 17.6%, compared to the same period of the
prior year. Specialty egg expense typically fluctuates with specialty egg dozens
sold, which increased 17.7% for the second quarter ended November 28, 2020 .
Other expenses decreased $3.3 million or 36.1% compared to the same period in
fiscal 2020. This decrease is primarily due to a legal settlement paid in the
second quarter of fiscal 2020.
23
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Index
26 Weeks Ended
November 28, 2020 November 30, 2019 $ Change % Change
Specialty egg expense $ 26,736 $ 23,414 $ 3,322 14.2 %
Delivery expense 25,546 26,032 (486) (1.9) %
Payroll, taxes and benefits 21,331 20,752 579 2.8 %
Stock compensation expense 1,824 1,794 30 1.7 %
Other expenses 12,401 16,211 (3,810) (23.5) %
Total $ 87,838 $ 88,203 $ (365) (0.4) %
For the twenty-six weeks ended November 28, 2020 , SGA expense decreased 0.4% to
$87.8 million from $88.2 million for the same period in fiscal 2020. Specialty
egg expense increased $3.3 million , or 14.2%, compared to the same period of the
prior year. Specialty egg expense typically fluctuates with specialty egg dozens
sold, which increased 16.6% for the twenty-six weeks ended November 28, 2020 .
Other expenses decreased $3.8 million or 23.5% compared to the same period in
fiscal 2020. This decrease is primarily due to the legal settlement paid in the
second quarter of fiscal 2020 and the first quarter of fiscal 2021 return of
brokerage commissions on property and casualty insurance placements refunded
after final reconciliation of all brokerage service agreements.
Included in Other expenses is approximately
OPERATING INCOME (LOSS)
For the second quarter of fiscal 2021, we recorded operating income of$14.5 million compared to an operating loss of$16.6 million for the same period of fiscal 2020. For the twenty-six weeks endedNovember 28, 2020 , we recorded an operating loss of$12.7 million compared to an operating loss of$80.0 million for the same period of fiscal 2020. OTHER INCOME (EXPENSE) Total other income (expense) consists of items not directly charged or related to operations, such as interest income and expense, royalty income, equity in income or loss of unconsolidated entities, and patronage income, among other items. For the second quarter of fiscal 2021, we earned$727 thousand of interest income compared to$1.2 million for the same period of fiscal 2020. For the twenty-six weeks endedNovember 28, 2020 , we earned$1.7 million of interest income compared to$3.0 million for the same period of fiscal 2020. The decrease for both periods resulted from significantly lower interest rates. The Company recorded interest expense of$64 thousand and$91 thousand for the second quarters endedNovember 28, 2020 andNovember 30, 2019 , respectively. For the twenty-six weeks endedNovember 28, 2020 andNovember 30, 2019 interest expense was$135 thousand and$181 thousand , respectively. For the second quarter and the twenty-six weeks endedNovember 28, 2020 , the increase in income from our equity investments of unconsolidated entities was$512 thousand and$922 thousand , respectively. The increase for both periods is primarily due to the increase in egg selling prices positively impacting the profitability of our joint ventures.
Other, net for the twenty-six weeks ended
Other, net for the second quarter endedNovember 28, 2020 , was income of$948 thousand compared to income of$1.8 million for the same period of fiscal 2020. The decrease is primarily driven by lower realized and unrealized gains in investment securities available-for-sale.
INCOME TAXES
For the second quarter of fiscal 2021, pre-tax income was$15.9 million compared to a pre-tax loss of$15.0 million for the same period of fiscal 2020. Income tax expense of$3.8 million was recorded for the second quarter of fiscal 2021 with an 24 -------------------------------------------------------------------------------- Index
effective tax rate of 23.6%, compared to a benefit of
For the twenty-six weeks endedNovember 28, 2020 , pre-tax loss was$9.6 million compared to$75.5 million for the same period of fiscal 2020. Income tax benefit of$2.4 million was recorded with an effective tax rate of 24.6%, compared to$19.6 million for the comparable period of fiscal 2020, which reflects an effective tax rate of 26.0%.
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. Results for the second quarter of fiscal 2020 were favorably impacted by a$1.5 million state income tax benefit recorded for a claim for a refund filed during the period.
NET INCOME (LOSS) ATTRIBUTABLE TO CAL-
Net income for the second quarter endedNovember 28, 2020 was$12.2 million , or$0.25 per basic and diluted share, compared to a loss of$10.1 million or$0.21 per basic and diluted share for the same period of fiscal 2020. Net loss for the twenty-six weeks endedNovember 28, 2020 was$7.2 million , or$0.15 per basic and diluted share, compared to$55.8 million or$1.15 per basic and diluted share for the same period of fiscal 2020.
CAPITAL RESOURCES AND LIQUIDITY
Our working capital atNovember 28, 2020 was$399.7 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 5.25 atNovember 28, 2020 , compared with 5.60 atMay 30, 2020 . We had no long-term debt outstanding atNovember 28, 2020 orMay 30, 2020 . OnJuly 10, 2018 , we entered into a$100.0 million Senior Secured Revolving Credit Facility (the "Revolving Credit Facility"). As ofNovember 28, 2020 , no amounts were borrowed under the Revolving Credit Facility. We have$4.3 million in outstanding standby letters of credit, 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 twenty-six weeks endedNovember 28, 2020 ,$10.7 million in net cash was used in operating activities, compared to$74.3 million used in operating activities for the comparable period in fiscal 2020. This is primarily due to an increase in egg selling prices compared to the prior year period, which contributed to the decrease in cash used in operations. We continue to invest in our facilities with$52.4 million used to purchase property, plant and equipment for the twenty-six weeks endedNovember 28, 2020 compared to$68.1 million in the same period of fiscal 2020. Sales and maturities of investment securities, net of purchases, were$29.4 million for the twenty-six weeks endedNovember 28, 2020 compared to$127.0 million for the comparable period in fiscal 2020. We received$2.7 million in distributions from unconsolidated entities during the first two quarters of fiscal 2021 compared to$2.4 million for the same period fiscal of 2020. We used$101 thousand for principal payments on finance leases in the first two quarters of fiscal 2021 compared to$1.6 million for principal payments on long-term debt and finance leases for the same period of fiscal 2020.
As of
We continue to take aggressive steps to positionCal-Maine Foods to meet the expected future demand for cage-free eggs. We have invested approximately$405 million in facilities, equipment and related operations to expand our cage-free production starting with our first facility in 2008. The following table presents material construction projects approved as ofNovember 28, 2020 , along with our$40.1 million capital project announced inDecember 2020 to convert existing conventional capacity at 25 -------------------------------------------------------------------------------- Index
our
Spent as of November 28,
Project(s) Type Projected Completion Projected Cost 2020 Remaining Projected Cost
Convertible/Cage-Free Layer Houses & Pullet
Houses Fiscal 2021 38,032 35,042 2,990
Cage-Free Layer & Pullet Houses/Processing
Facility Fiscal 2022 127,304 72,527 54,777
165,336 107,569 57,767
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, 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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