1
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington,
 
DC
 
20549
FORM
10-Q
 
☑
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
 
Act of 1934
For the quarterly period ended
August 28, 202127, 2022
 
or
☐
 
Transition report
pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number:
 
001-38695
 
CAL-MAINE FOODS, INC
.INC.
(Exact name of registrant as specified in its charter)
Delaware
 
64-0500378
(State or other jurisdiction of incorporation or organization)
 
(I.R.S Employer Identification No.)
1052 Highland Colony Pkwy
,
Suite 200
,
Ridgeland
,
Mississippi
 
39157
 
(Address of principal executive offices)
 
(Zip Code)
(
601
)
948-6813
 
(Registrant’s telephone number,
 
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
CALM
The
NASDAQ
 
Global Select Market
Indicate
 
by
 
check
 
mark
 
whether
 
the
 
registrant:
 
(1)
 
has
 
filed
 
all
 
reports
 
required
 
to
 
be
 
filed
 
by
 
Section
 
13
 
or
 
15(d)
 
of
 
the
Securities Exchange
 
Act of 1934
 
during the preceding
 
12 months (or
 
for such
 
shorter period that
 
the registrant was
 
required to
file such reports), and (2) has been subject to such filing requirements for the past
 
90 days.
Yes
☑
 
No
☐
Indicate by check
 
mark whether the
 
registrant has submitted
 
electronically every
 
Interactive Data File
 
required to be
 
submitted
pursuant to
 
Rule 405
 
of Regulation
 
S-T (§232.405
 
of this
 
chapter) during
 
the preceding
 
12 months
 
(or for
 
such shorter
 
period
that the registrant was required to submit such files).
Yes
☑
 
No
☐
Indicate by
 
check mark
 
whether the registrant
 
is a large
 
accelerated filer,
 
an accelerated
 
filer, a
 
non-accelerated filer,
 
a smaller
reporting
 
company,
 
or
 
an
 
emerging
 
growth
 
company.
 
See
 
the
 
definitions
 
of
 
“large
 
accelerated
 
filer,”
 
“accelerated
 
filer”,
“smaller reporting company”, and “emerging growth
 
company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer
☑
Accelerated filer
 
☐
Non – Accelerated filer
 
☐
Smaller reporting company
 
☐
Emerging growth company
 
☐
If
 
an
 
emerging
 
growth
 
company,
 
indicate
 
by
 
check
 
mark
 
if
 
the
 
registrant
 
has
 
elected
 
not
 
to
 
use
 
the
 
extended
transition
 
period
 
for
 
complying
 
with
 
any
 
new
 
or
 
revised
 
financial
 
accounting
 
standards
 
provided
 
pursuant
 
to
Section 13(a) of the Exchange Act
☐
Indicate by check mark whether the registrant is a shell company (as defined
 
in Rule 12b-2 of the Exchange Act).
Yes
☐
 
No
☑
There were
44,057,32944,135,851
 
shares of Common
 
Common Stock, $0.01 par
 
$0.01 par value,
and
4,800,000
 
shares of Class A
 
A Common
Stock, $0.01
 
par
value,
outstanding as of September 28, 2021.27, 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
PART
 
I.
 
FINANCIAL
INFORMATION
ITEM 1.
 
FINANCIAL STATEMENTS
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(inIn thousands, except for par value amounts)
 
(Unaudited)
 
August 28, 202127, 2022
May 29, 202128, 2022
Assets
Current assets:
Cash and cash equivalents
$
16,684136,021
$
57,35259,084
Investment securities available-for-sale
73,666145,784
112,158115,429
Trade and other receivables, net
134,400178,217
126,639177,257
Income tax receivable
42,147
42,147
Inventories
226,470265,754
218,375263,316
Prepaid expenses and other current assets
9,24910,965
5,4074,286
Total current
 
assets
460,469778,888
519,931661,519
Property, plant &
 
equipment, net
667,963688,656
589,417
Finance lease right-of-use asset, net
486
525
Operating lease right-of-use asset, net
1,533
1,724677,796
Investments in unconsolidated entities
10,72215,674
54,94115,530
Goodwill
44,006
35,52544,006
Intangible assets, net
19,79817,592
20,34118,131
Other long-term assets
6,7539,913
6,77010,507
Total Assets
$
1,211,7301,554,729
$
1,229,1741,427,489
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
96,709188,689
$
89,191148,018
Current portion of finance lease obligationDividends payable
21741,742
215
Current portion of operating lease obligation
617
69136,656
Total current
 
liabilities
97,543230,431
90,097
Long-term finance lease obligation
383
438
Long-term operating lease obligation
916
1,034184,674
Other noncurrent liabilities
10,3259,706
10,41610,274
Deferred income taxes, net
106,996126,629
114,408128,196
Total liabilities
216,163366,766
216,393323,144
Commitments and contingencies - see Note 11
Note 13—
0
0
—
Stockholders’ equity:
Common stock ($
0.01
 
par value):
Common stock - authorized
120,000
 
shares, issued
70,261
 
shares
703
703
Class A convertible common stock - authorized and issued
4,800
 
shares
48
48
Paid-in capital
65,04469,017
64,04467,989
Retained earnings
957,9511,149,399
975,9771,065,854
Accumulated other comprehensive loss, net of tax
(728)(2,350)
(558)(1,596)
Common stock in treasury at cost –
26,20326,125
 
shares at August 28, 202127, 2022 and
26,20226,121
 
shares
at May 29, 202128, 2022
(27,451)(28,495)
(27,433)(28,447)
Total Cal-Maine Foods,
Inc. stockholders’ equity
1,188,322
1,104,551
Noncontrolling interest in consolidated entity
(359)
(206)
Total stockholders’
 
equity
995,5671,187,963
1,012,7811,104,345
Total Liabilities and Stockholders’
 
Equity
$
1,211,7301,554,729
$
1,229,1741,427,489
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(inIn thousands, except per share amounts)
(unaudited)
(Unaudited)
 
Thirteen Weeks
 
Ended
August 28, 202127, 2022
August 29, 202028, 2021
Net sales
$
331,704658,344
$
292,782324,986
Cost of sales
325,059440,854
276,017318,341
Gross profit
6,645217,490
16,7656,645
Selling, general and administrative
46,52553,607
43,96546,525
(Gain) loss on disposal of fixed assets
(213)33
23(213)
Operating lossincome (loss)
163,850
(39,667)
(27,223)
Other income (expense):
Interest income, net
232903
925232
Royalty income
273428
305273
Equity income (loss) of unconsolidated entities
135144
(44)135
Other, net
5,163155
5125,163
Total other
income, net
1,630
5,803
1,698
LossIncome (loss) before income taxes
(33,864)165,480
(25,525)(33,864)
Income tax benefitexpense (benefit)
40,346
(15,838)
(6,126)Net income (loss)
125,134
(18,026)
Less: Loss attributable to noncontrolling interest
(153)
—
Net lossincome (loss) attributable to Cal-Maine Foods, Inc.
$
125,287
$
(18,026)
$
(19,399)
Net lossincome (loss) per common share:
Basic
$
(0.37)2.58
$
(0.40)(0.37)
Diluted
$
(0.37)2.57
$
(0.40)(0.37)
Weighted average
 
shares outstanding:
Basic
48,85848,623
48,50148,858
Diluted
48,85848,811
48,50148,858
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
Comprehensive LossIncome (Loss)
(inIn thousands)
(unaudited)
(Unaudited)
Thirteen Weeks
 
Ended
August 27, 2022
August 28, 2021
August 29, 2020
Net lossincome (loss)
$
(18,026)125,134
 
$
 
(19,399)(18,026)
Other comprehensive income (loss), before tax:
Unrealized holding gain (loss)loss on available-for-sale securities, net
of reclassification
adjustments
(224)(997)
468(224)
Income tax benefit (expense) related to items of other comprehensive income
54243
(114)54
Other comprehensive income (loss),loss, net of tax
(170)(754)
354(170)
Comprehensive income (loss)
124,380
(18,196)
Less: Comprehensive loss attributable to the noncontrolling interest
(153)
—
Comprehensive income (loss) attributable to Cal-Maine Foods, Inc.
$
124,533
$
(18,196)
$
(19,045)
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(inIn thousands)
(unaudited)
(Unaudited)
 
Thirteen Weeks
 
Ended
August 27, 2022
August 28, 2021
August 29, 2020
OperatingCash flows from operating activities:
Net lossincome (loss)
$
125,134
$
(18,026)
$
(19,399)
Depreciation and amortization
17,38917,312
14,74417,389
Deferred income taxes
(15,838)(1,324)
(6,126)(15,838)
Other adjustments, net
(7,637)31,690
(4,019)(7,637)
Net cash used inprovided by (used in) operations
172,812
(24,112)
(14,800)
InvestingCash flows from investing activities:
Purchases of investment securities
(1,388)(51,834)
(24,195)(1,388)
Sales and maturities of investment securities
39,38820,296
28,23139,388
Distributions from unconsolidated entities
400—
650400
Acquisition of business, net of cash acquired
(44,823)—
0(44,823)
Purchases of property,
 
plant and equipment
(11,233)(27,662)
(25,338)(11,233)
Net proceeds from disposal of property,
 
plant and equipment
1,17178
1811,171
Net cash used in investing activities
(59,122)
(16,485)
(20,471)Cash flows from financing activities:
Financing activities:Payments of dividends
(36,653)
—
Purchase of common stock by treasury
(18)(45)
0(18)
Principal payments on finance lease
(53)(55)
(50)(53)
Net cash used in financing activities
(71)(36,753)
(50)(71)
Net change in cash and cash equivalents
(40,668)76,937
(35,321)(40,668)
Cash and cash equivalents at beginning of period
57,35259,084
78,13057,352
Cash and cash equivalents at end of period
$
16,684
$
42,809
Supplemental Information:
Cash paid for operating leases136,021
$
217
$
237
Interest paid
$
62
$
6516,684
See Notes to Condensed Consolidated Financial Statements.
7
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)(Unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The
 
unaudited
 
condensed
 
consolidated
 
financial
 
statements
 
of
 
Cal-Maine
 
Foods,
 
Inc.
 
and
 
its
 
subsidiaries
 
(the
 
"“Company,"”
"“we,"
"us,"
"our"” “us,” “our”)
 
have
been
prepared
 
in accordance with
the instructions
to Form 10-Q
and Article 10
of Regulation S-X
and
in
 
accordance
 
with generally
accepted
accounting
principles in
 
the
 
instructions
to
Form
10-Q
and
Article
10
of
Regulation
S-X.
Therefore, they
do not
include all of
the information
and footnotes
required by
generally accepted
accounting principles
in the
United
 
States
of
 
America
 
("GAAP"(“GAAP”)
 
for
 
completeinterim
 
financial
statements
reporting and
should
 
be
read
in
conjunction
 
with
our
Annual
Report
 
on
Form
10-K
 
for
the
fiscal
year
 
ended May 28,
 
May2022 (the
29,
2021
(the
"2021“2022
 
Annual
 
Report"Report”).
 
These
 
statements
 
reflect
 
all
adjustments that are, in
 
the opinion of management, necessaryadjustments
 
to a fair statement ofthat
 
the results for the interim
periods presented
and,are,
 
in
 
the
 
opinion
 
of
 
management,
 
consistnecessary
 
of
adjustments
ofto
 
a
 
normalfair
statement of the results for
 
recurringthe interim periods presented
 
and, in the opinion of
management, consist of adjustments
of a normal
recurring nature.
 
Operating
results
for
 
the interim periods
 
interim
periods are not necessarily
indicative of operating
results for the
entire fiscal
year.
Fiscal Year
The Company's fiscal
 
year ends on
 
the Saturday closest
 
to May 31.
 
Each of the three-month
 
periods ended on
 
August 28, 202127, 2022
and August 29, 202028, 2021 included
13 weeks.weeks
.
Use of Estimates
The preparation of the
 
consolidated financial statements in
 
conformity with GAAP 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.
The severity,
magnitude and duration, as well as
the economic consequences of the COVID-19
pandemic, are uncertain, rapidly
changing
and
difficult
to
predict.
Therefore,
our
accounting
estimates
and
assumptions
might
change
materially
in
future
periods in response to COVID-19.
Investment Securities
Our investment
 
securities are
 
accounted
 
for in
 
accordance with
 
ASC 320,
 
“Investments -
 
Debt and
 
Equity Securities”
 
(“ASC
320”).
 
The
 
Company
 
considers
 
all
 
its
 
debt
 
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.
 
We
 
classify
 
these
 
securities
 
as
current, because the
 
amounts invested are available
 
for current operations.
 
Available-for-sale
 
securities are carried at
 
fair value,
with unrealized
 
gains and
 
losses reported
 
as a
 
separate
 
component
 
of stockholders’
 
equity.
 
The Company
 
regularly
 
evaluates
changes to
 
the rating of
 
its debt securities
 
by credit
 
agencies and economic
 
conditions to assess
 
and record
 
any expected cre
ditcredit
losses through
the allowance
 
for credit losses,
 
losses, limited
to the amount
 
amount that fair value
 
was less than the
 
the amortized
cost basis. The
cost
 
costbasis
for
basis for
realized
gains
and
 
losses
on
available-for-sale
securities
is
 
determined
by
the
specific
identification
 
method.
Gains and losses are recognized in other income
(expenses) as Other, net in the Company's
Condensed Consolidated Statements
lossesof
Operations.
Investments
in
mutual
funds
 
are
 
recognized
in
other
income
(expenses)classified
 
as
 
“Other
 
netlong-term
assets”
 
in
 
the
 
Company's
Condensed
Consolidated
Statements
of
Operations. Investments
in mutual
funds are
classified as
“Other long-term
assets” in
the Company’s
 
Condensed Consolidated
Consolidated Balance Sheets.
Trade Receivables
 
Trade receivables
 
are stated at their
 
their carrying
values, which
 
include a reserve
for credit losses.
As of August
27, 2022
and May
28,
2022,
reserves
for
 
credit losses. At August
 
28, 2021 and Maylosses
 
29,
2021, reserves for credit losses were
 
$
583716
 
thousand and $
795
thousand, respectively.
The Company extends credit to
customers
based
on
an
evaluation
of
each
customer's
financial
condition
 
and
 
$
775
thousand,
respectively.
The
Company
extends
credit
to
customers based on
an evaluation of
each customer's financial
condition and credit
 
history.
 
Collateral
is
generally
 
not required.
The
 
required.
The
Company
 
minimizes
exposure
 
to
counter
 
party
credit
 
risk
through
 
credit
analysis
 
and
approvals,
 
credit
limits,
 
and monitoring
monitoring
procedures.
 
In
determining
 
our
 
reserve
for
 
credit
losses,
 
receivables
 
are pooled
according
to age,
with
each pool
 
assigned
 
an
expected
loss
based
on
expected loss based on historical loss information adjusted as needed for economic and
 
and other forward-looking factors.
Business Combinations
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.
The
fair
value
of
8
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.
Change in Accounting Principle
Effective
May
31,
2020,
the
Company
adopted
ASU
2016-13,
Financial
Instruments
–
Credit
Losses
(Topic
326),
which
is
intended
to
improve
financial
reporting
by
requiring
more
timely
recording
of
credit
losses
on
loans
and
other
financial
instruments held by financial institutions and other organizations.
The guidance replaces the prior “incurred loss” approach with
an “expected
loss” model
and requires
measurement of
all expected
credit losses
for financial
assets held
at the
reporting date
based
on
historical
experience,
current
conditions,
and
reasonable
and
supportable
forecasts.
The
Company
adopted
the
guidance on
a modified
retrospective basis
through a
cumulative effect
adjustment
to retained
earnings as
of the
beginning of
the period of
adoption. The Company
evaluated its current
methodology of
estimating allowance for
doubtful accounts and
the
risk
profile
of
its
receivables
portfolio
and
developed
a
model
that
includes
the
qualitative
and
forecasting
aspects
of
the
“expected
loss”
model
under
the
amended
guidance.
The
Company
finalized
its
assessment
of
the
impact
of
the
amended
guidance and recorded a $
422
thousand cumulative increase to retained earnings at May 31, 2020.
Note 2 – Acquisitions
Immaterial Error Correction
Effective
 
on
 
May
 
30,
 
2021,
 
the
 
Company
 
acquired
 
the
 
remaining
50
%
 
membership
 
interest
 
in
 
Red
 
River
 
Valley
 
Egg
 
Farm,
LLC (“Red River”)
 
River”),
 
including
certain
 
liabilities. As a
result of
the acquisition, the
entity became a
wholly owned
subsidiary of
the Company.
Red River owns and
operates a specialty
shell egg production
complex with approximately
1.7
million cage-free
laying
hens,
cage-free
pullet
capacity,
feed
mill,
processing
plant,
related
offices
and
outbuildings
and
related
equipment
located on approximately
400
acres near Bogata, Texas.
Pending the
finalization ofDuring
 
the Company’s
 
valuation,third
quarter of
fiscal 2022,
management
determined
that
it
had
not
properly
eliminated
select
intercompany
sales
and
cost
of
sales
transactions
between
Red
River
and
the
corresponding
other wholly
-owned subsidiaries
of the
 
following tableCompany
 
summarizes thein its
 
consideration paid
for Red
River and
the amounts of the assets acquired and liabilities assumed recognized at
the acquisition date:
Cash consideration paid
$
48,500
Fair value of the Company's equity interest in Red River held before the business combination
48,500
$
97,000
Recognized amounts of identifiable assets acquiredfirst and
 
liabilities assumed
Cash
$
3,677
Accounts receivables, net
1,980
Inventory
8,789
Property, plant and equipment
85,002
Liabilities assumed
(2,448)
Deferred income taxes
(8,481)
Total identifiablesecond quarter
 
net assets
88,519
Goodwill
8,481
$
97,000
2022 Condensed
 
Consolidated
Statements
of
Cash
Operations.
The
errors
resulted
in
an
overstatement
of
Net
Sales and
 
accounts receivables
acquired along
with liabilities
assumed were
valued at
their carrying
value which
approximates
fair value due to the short maturity of these instruments.
Inventory consisted
primarilyCost of
 
flock and feed
ingredients. Inventory
and property,
plant and equipment
were valued
utilizing
the cost approach.
The Company
recognized
a gainSales
 
of
$
4.56.7
 
million
 
as a
result of
remeasuring
to fair
value its
50
% equity
interest in
Red
River
held before the business combination. The gain
was recorded in other income and expense under the
 
heading “Other, net” in thefirst
Company’s
Condensed Consolidated
Statements of
Operations. The
acquisition of
Red River
resulted in
a discrete
tax benefit
of $
8.3
million which
includes $
7.3
million decrease
in deferred
income tax
expense related
to the
outside-basis of
our equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
98
investment
quarter of fiscal 2022
and $
9.2
million in the second
quarter of fiscal 2022.
There was
no
impact to Operating
loss, Net income
(loss) or Net income (loss) per share.
We
evaluated
the
errors
quantitatively
and
qualitatively
 
in
 
Red
River,accordance
 
with
 
aStaff
 
correspondingAccounting
 
non-recurring,Bulletin
("SAB") No. 99 Materiality,
 
non-cashand
 
$
954,000
SAB No. 108 Considering
 
reductionthe
Effects
of
Prior
Year
Misstatements
when
Quantifying
Misstatements
in
the
Current
Year
Financial
Statements, and
determined
that
the
related
impact
was not material
 
to
 
incomeour
condensed
 
taxesconsolidated
 
expensefinancial statements
 
onfor
 
the
non-taxable first
 
remeasurementor second
 
gainquarters
 
associatedof fiscal
 
with2022,
but that
correcting
 
the cumulative
acquisition.
As
partimpact
 
of
 
the
 
acquisitionerrors
 
accounting,would
be
relevant
to
our
Condensed
Consolidated
Statements
of
Operations
for
the third
quarter
ended February
26,
2022. Accordingly,
we
have
reflected
 
the
 
Companycorrection
 
also
recorded a $
8.5
of
 
million deferred tax liabilitythe
immaterial
error
 
for the difference
 
the
first
quarter
of
fiscal
2022 as a reduction of Net Sales and Cost of Sales in the inside-basisaccompanying Condensed
 
Consolidated Statements of the acquiredOperations.
New Accounting Pronouncements and Policies
No new accounting pronouncement issued or effective
 
assets and liabilities assumed.
The recognitionduring the fiscal year had or is expected to have a material
 
of deferred
tax liabilities resulted
in the
recognition of
goodwill. None
of the goodwill
recognized is
expectedimpact on our
to be deductible for income tax purposes.Consolidated Financial Statements.
Note 32 - Investment
Securities
The following represents the Company’s
 
investment securities as of August 28, 202127, 2022 and May 29, 202128, 2022 (in
 
thousands):
August 28, 202127, 2022
Amortized
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
16,82815,032
$
102—
$
0155
$
16,93014,877
Commercial paper
1,99915,936
0—
053
1,99915,883
Corporate bonds
45,54581,711
334—
01,237
45,87980,474
Certificates of deposits
03,263
0—
048
03,215
US government and agency obligations
8,190
—
87
8,103
Asset backed securities
8,86515,620
0—
7227
8,85815,393
Treasury bills
7,870
—
31
7,839
Total current
 
investment securities
$
73,237147,622
$
436—
$
71,838
$
73,666145,784
Mutual funds
$
2,3063,467
$
1,810—
$
0130
$
4,1163,337
Total noncurrent
 
investment securities
$
2,3063,467
$
1,810—
$
0130
$
4,1163,337
May 29, 202128, 2022
Amortized
 
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
16,42410,136
$
56—
$
032
$
16,48010,104
Commercial paper
1,99814,940
0—
072
1,99814,868
Corporate bonds
80,09274,167
608—
0483
80,70073,684
Certificates of deposits
1,0771,263
0—
118
1,0761,245
US government and agency obligations
2,205
4
—
2,209
Asset backed securities
11,91413,456
0—
10137
11,90413,319
Total current
 
investment securities
$
111,505116,167
$
6644
$
11742
$
112,158115,429
Mutual funds
$
2,3063,826
$
1,810—
$
074
$
4,1163,752
Total noncurrent
 
investment securities
$
2,3063,826
$
1,810—
$
074
$
4,1163,752
Available-for-sale
Proceeds from
 
sales and
 
maturities of
 
investment securities
 
available-for-sale
 
were $
39.420.3
 
million and
 
$
28.239.4
 
million during
 
the
thirteen
 
weeks
 
ended August
 
28,27,
 
20212022
 
and
 
August
 
29,28,
 
2020,2021,
 
respectively.
 
Gross
 
realized
 
gains
 
for
 
the
 
thirteen
 
weeks
 
ended
August 28, 2021 27, 2022
and August 29, 202028,
2021 were $
1272
 
thousand and $
28127
 
thousand, respectively.
 
Gross realized
losses for the thirteen
weeks
ended
August
27,
2022
and
August
 
28,
2021
were
$
27
thousand
and
 
$
60
 
thousand. thousand,
respectively.
There
were
0no
allowances
 
gross realized losses
for the thirteen
weeks ended August
29,
2020. There were
0
allowances for credit losses at August 28, 202127, 2022 and May 29, 2021.28, 2022.
 
9
Actual maturities
 
may differ
 
from contractual
 
maturities as some
 
borrowers have
 
the right to
 
call or prepay
 
obligations with
 
or
without penalties. Contractual maturities of current investments at August
 
28, 202127, 2022 are as follows (in thousands):
Estimated Fair Value
Within one year
$
30,39564,148
1-5 years
43,27181,636
Total
$
73,666145,784
Noncurrent
 
There were
Proceedsno
 
sales of noncurrent
investment securities during
the thirteen weeks
ended August 27,
2022. Proceeds from
 
sales
and
maturities
of
noncurrent
 
investment
securities
were
$
385
 
thousand
during
the
thirteen
 
weeks
ended August 28, 2021.
 
Gross
realized gains for
 
the thirteen weeks ended
 
ended August 28, 2021 were
 
were $
130
 
thousand. There were
0no
realized losses for
the thirteen
weeks ended August 28, 2021.
Note 3 - Fair Value
Measurements
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,
including:
◦
Quoted prices for similar assets or liabilities in active markets
◦
Quoted prices for identical or similar assets in non-active markets
◦
Inputs other than quoted prices that are observable for the asset or liability
◦
Inputs derived principally from or corroborated by other observable market
data
•
Level 3
- Unobservable inputs for the asset or liability that are
supported by little or no market activity and that
are
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are 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.
Lease obligations:
The carrying value of the Company’s lease obligations
is at its present value which approximates fair value.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Index
10
sales of
noncurrent
investment securities
during
the thirteen
weeks ended
August 29,
2020. There
were
0
realized losses
for
the thirteen weeks ended August 28, 2021 and August 29, 2020.
Note 4 - Fair Value
Measurements
 
 
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,
including:
◦
Quoted prices for similar assets or liabilities in active markets
◦
Quoted prices for identical or similar assets in non-active markets
◦
Inputs other than quoted prices that are observable for the asset or liability
◦
Inputs derived principally from or corroborated by other observable market
data
•
Level 3
- Unobservable inputs for the asset or liability that are
supported by little or no market activity and that
are
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are 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.
 
 
Lease obligations:
The carrying value of the Company’s lease obligations
is at its present value which approximates fair value.
 
 
10
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
 
financial
 
assets and
liabilities measured at fair value on a recurring basis as of August 28, 202127, 2022 and May 29,28,
 
20212022 (in thousands):
August 28, 202127, 2022
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
0—
$
16,93014,877
$
0—
$
16,93014,877
Commercial paper
0—
1,99915,883
0—
1,99915,883
Corporate bonds
0—
45,87980,474
0—
45,87980,474
Certificates of deposits
0—
03,215
0—
03,215
US government and agency obligations
—
8,103
—
8,103
Asset backed securities
0—
8,85815,393
0—
8,85815,393
Treasury bills
—
7,839
—
7,839
Mutual funds
4,1163,337
0—
0—
4,1163,337
Total assets measured at fair
 
value
$
4,1163,337
$
73,666145,784
$
0—
$
77,782149,121
May 29, 202128, 2022
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
0—
$
16,48010,104
$
0—
$
16,48010,104
Commercial paper
0—
1,99814,868
0—
1,99814,868
Corporate bonds
0—
80,70073,684
0—
80,70073,684
Certificates of deposits
0—
1,0761,245
0—
1,0761,245
US government and agency obligations
—
2,209
—
2,209
Asset backed securities
0—
11,90413,319
0—
11,90413,319
Mutual funds
4,1163,752
0—
0—
4,1163,752
Total assets measured at fair
 
value
$
4,1163,752
$
112,158115,429
$
0—
$
116,274119,181
Investment
 
securities
 
–
 
available-for-sale
 
classified
 
as Level
 
2
 
consist
 
of
 
securities
 
with maturities
 
of
 
three
 
months
 
or longer
when purchased. We
 
classified these securities as
 
current because amounts
 
invested are readily available
 
for current operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
11
Note 54 - Inventories
Inventories consisted of the following as of August 28, 202127, 2022 and May 29,28,
 
20212022 (in thousands):
 
August 28, 202127, 2022
May 29, 202128, 2022
Flocks, net of amortization
$
139,870152,264
$
123,860144,051
Eggs and egg products
20,86924,548
21,08426,936
Feed and supplies
65,73188,942
73,43192,329
$
226,470265,754
$
218,375263,316
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
 
August
27, 2022 and May
28, 20212022 consisted of
approximately
10.311.4
million and
11.5
 
million pullets and breeders
and
40.841.1
 
million layers.and
42.2
 
million layers, respectively.
Note 65 - Accrued Dividends Payable and Dividends per Common
 
Share
We
 
accrue dividends at
 
the end of
 
each quarter according
 
to the Company’s
 
dividend policy adopted
 
by its Board
 
of Directors.
The Company
 
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
 
attributable to
 
Cal-Maine Foods,
 
Inc. computed
 
in accordance
 
with GAAP
in an amount
 
equal to one-third
 
(1/3)(
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
 
pays 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
 
attributable to Cal-Maine Foods, Inc., 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. At
the end
of the
first quarter
of fiscal
2022, the
amount of
cumulative
losses to be recovered before payment of a dividend was $
22.3
million.
On
our
condensed
consolidated
statement
of
operations,
we
determine
dividends
per
common
share
in
accordance
with
the
computation in the following table (in thousands, except per share data):
Thirteen Weeks
Ended
August 28, 2021
August 29, 2020
Net loss
$
(18,026)
$
(19,399)
Cumulative losses to be recovered prior to payment of divided at beginning
of period
(4,244)
(1,370)
Net income available for dividend
$
0
$
0
1/3 of net income attributable to Cal-Maine Foods, Inc. available for dividend
0
Common stock outstanding (shares)
44,057
Class A common stock outstanding (shares)
4,800
Total common stock
outstanding (shares)
48,857
*Dividends per common share
= 1/3 of Net
income (loss) attributable to
Cal-Maine Foods, Inc. available
for dividend ÷ Total
common stock
outstanding (shares).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
12
not pay a dividend
for a subsequent profitable
quarter until the Company
is profitable on a cumulative
basis computed from the
date of the most recent quarter for which a dividend was paid. For the first
quarter of fiscal 2023, we will pay a cash dividend of
approximately $
0.853
per share to holders of our Common Stock and Class A Common Stock.
On our
Condensed Consolidated
Statements of
Operations, we
determine dividends
per common
share in
accordance with
the
computation in the following table (in thousands, except per share data):
Thirteen Weeks
Ended
August 27, 2022
August 28, 2021
Net income (loss) attributable to Cal-Maine Foods, Inc.
$
125,287
$
(18,026)
Cumulative loss to be recovered prior to payment of divided at beginning of period
—
(4,244)
Net income available for dividend
$
125,287
$
—
1/3 of net income attributable to Cal-Maine Foods, Inc. available for dividend
41,762
—
Common stock outstanding (shares)
44,136
44,057
Class A common stock outstanding (shares)
4,800
4,800
Total common stock
outstanding (shares)
48,936
48,857
Dividends per common share*
$
0.853
$
—
*Dividends
per
common
share
=
1/3
of
Net
income
attributable
to
Cal-Maine
Foods,
Inc.
available
for
dividend
÷
Total
common
stock
outstanding (shares).
Note 76 - Equity
The following reflects equity activity for the thirteen weeks ended
 
August 28, 202127, 2022 and August 29, 202028, 2021 (in thousands):
Thirteen Weeks
Ended August 27, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 28,
2022
$
703
$
48
$
(28,447)
$
67,989
$
(1,596)
$
1,065,854
$
(206)
$
1,104,345
Other comprehensive
loss, net of tax
—
—
—
—
(754)
—
—
(754)
Stock compensation
plan transactions
—
—
(48)
1,028
—
—
—
980
Dividends
—
—
—
—
—
(41,742)
—
(41,742)
Net income (loss)
—
—
—
—
—
125,287
(153)
125,134
Balance at August
27, 2022
$
703
$
48
$
(28,495)
$
69,017
$
(2,350)
$
1,149,399
$
(359)
$
1,187,963
Thirteen Weeks
Ended August
28, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Total
Balance at May 29, 2021
$
703
$
48
$
(27,433)
$
64,044
$
(558)
$
975,977
$
1,012,781
Other comprehensive loss, net of tax
—
—
—
—
(170)
—
(170)
Stock compensation plan
transactions
—
—
(18)
1,000
—
—
982
Net loss
—
—
—
—
—
(18,026)
(18,026)
Balance at August 28, 2021
$
703
$
48
$
(27,451)
$
65,044
$
(728)
$
957,951
$
995,567
Thirteen Weeks Ended August
29, 2020
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Total
Balance at May 30, 2020
$
703
$
48
$
(26,674)
$
60,372
$
79
$
975,147
$
1,009,675
Impact of ASC 326, see
Note 1
—
—
—
—
—
422
422
Balance at May 31, 2020
703
48
(26,674)
60,372
79
975,569
1,010,097
Other comprehensive income, net of
tax
—
—
—
—
354
—
354
Stock compensation plan
transactions
—
—
(2)
895
—
—
893
Net loss
—
—
—
—
—
(19,399)
(19,399)
Balance at August 29, 2020
$
703
$
48
$
(26,676)
$
61,267
$
433
$
956,170
$
991,945
Note 8 - Net Loss per Common Share
Basic net loss per
share is based on
the weighted average
Common Stock and
Class A Common
Stock outstanding. Diluted
net
income per share
is based on
weighted-average common
shares outstanding
during the relevant
period adjusted
for the dilutive
effect of
share-based awards.
Restricted shares
of
131
thousand and
139
thousand were
antidilutive due
to the
net loss
for the
first quarters of fiscal 2022 and 2021, respectively.
These shares were not included in the diluted net loss per share calculation.
The
following
table
provides
a
reconciliation
of
the
numerators
and
denominators
used
to
determine
basic
and
diluted
net
income per common share (amounts in thousands, except per share data):
Thirteen Weeks
Ended
August 28, 2021
August 29, 2020
Numerator
Net loss
$
(18,026)
$
(19,399)
Denominator
Weighted-average
common shares outstanding, basic
48,858
48,501
Effect of dilutive restricted shares
0
0
Weighted-average
common shares outstanding, diluted
48,858
48,501
Net loss per common share attributable to Cal-Maine Foods, Inc.
Basic
$
(0.37)
$
(0.40)
Diluted
$
(0.37)
$
(0.40)
13
Note 9 - Revenue Recognition
Satisfaction of Performance Obligation
Most of the
Company’s revenue
is derived from
contracts with customers
based on the
customer placing an
order for products.
Pricing for
the most
part is
determined when
the Company
and the
customer agree
upon the
specific order,
which establishes
the contract for that order.
Revenues are
recognized in
an amount
that reflects
the net
consideration we
expect to
receive in
exchange for
the goods. Our
shell eggs
are sold
at prices
related to
independently
quoted wholesale
market prices,
negotiated prices
or formulas
related to
our
costs of
production.
The Company’s
sales predominantly
contain
a single
performance obligation.
We
recognize
revenue
upon satisfaction
of the performance
obligation with
the customer,
which typically occurs
within days of
the Company
and the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts
include a guaranteed sale
clause, pursuant to which
we credit the customer’s
account for product
that the
customer is unable
to sell before
expiration. The Company
records an estimate
of returns and
refunds by using
historical return
data
and
comparing
to current
period
sales and
accounts
receivable. The
allowance
is recorded
as a
reduction
in sales
with
a
corresponding reduction in trade accounts receivable.
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.’’
Disaggregation of Revenue
The following table provides revenue disaggregated by product category
(in thousands):
Thirteen Weeks
Ended
August 28, 2021
August 29, 2020
Conventional shell egg sales
$
182,549
$
155,384
Specialty shell egg sales
138,657
129,245
Egg products
9,366
6,705
Other
1,132
1,448
$
331,704
$
292,782
Contract Costs
The Company can incur costs to
obtain or fulfill a contract with a
customer. If the
amortization period of these costs is less
than
one year,
they are
expensed as
incurred. When
the amortization
period is
greater than
one year,
a contract
asset is
recognized
and
is
amortized
over
the
contract
life
as
a
reduction
in
net
sales.
As
of
August
28,
2021
the
balance
for
contract
assets
is
immaterial.
Contract Balances
The Company receives payment from customers based on specified terms that are
generally less than 30 days from
delivery. There are rarely
contract assets or liabilities related to performance under the contract.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12
Note 7 - Net Income (Loss) per Common Share
Basic net
income (loss)
per share
is based
on the
weighted average
Common Stock
and Class
A Common
Stock outstanding.
Diluted net income
per share
is based on
weighted-average common
shares outstanding
during the
relevant period adjusted
for
the
dilutive
effect
of share-based
awards.
Restricted
shares
of
131
thousand
were
antidilutive
due
to
the net
loss for
the first
quarter of fiscal 2022. These shares were not included in the diluted net
loss per share calculation.
The
following
table
provides
a
reconciliation
of
the
numerators
and
denominators
used
to
determine
basic
and
diluted
net
income (loss) per common share (amounts in thousands, except per share data):
Thirteen Weeks
Ended
August 27, 2022
August 28, 2021
Numerator
Net income (loss)
$
125,134
$
(18,026)
Less: Loss attributable to noncontrolling interest
(153)
—
Net income (loss) attributable to Cal-Maine Foods, Inc.
$
125,287
$
(18,026)
Denominator
Weighted-average
common shares outstanding, basic
48,623
48,858
Effect of dilutive restricted shares
188
—
Weighted-average
common shares outstanding, diluted
48,811
48,858
Net income (loss) per common share attributable to Cal-Maine Foods,
Inc.
Basic
$
2.58
$
(0.37)
Diluted
$
2.57
$
(0.37)
Note 8 – Revenue from Contracts with Customers
Satisfaction of Performance Obligation
The vast majority of the Company’s
revenue is derived from agreements with customers based on the customer
placing an order
for products. Pricing
for the most part
is determined when
the Company and
the customer agree
upon the specific
order, which
establishes the contract for that order.
Revenues are
recognized in
an amount
that reflects
the net
consideration we
expect to
receive in
exchange for
the goods.
Our
shell
eggs
are
sold
at
prices
related
to
independently
quoted
wholesale
market
prices
or
formulas
related
to
our
costs
of
production.
The
Company’s
sales
predominantly
contain
a
single
performance
obligation.
We
recognize
revenue
upon
satisfaction
of
the
performance
obligation
with
the
customer
which
typically
occurs
within
days
of
the
Company
and
the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts
include a guaranteed sale
clause, pursuant to which
we credit the customer’s
account for product
that the
customer
is
unable
to
sell
before
expiration.
The
Company
records
an
allowance
for
returns
and
refunds
by
using
historical
return
data
and
comparing
to current
period
sales and
accounts receivable.
The allowance
is recorded
as a
reduction
in sales
with a corresponding reduction in trade accounts receivable.
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 the
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.’’
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1413
Note 10 - LeasesDisaggregation of Revenue
The following table provides revenue disaggregated by product category
 
Expenses related
to operating
leases, amortization
of finance
leases, right-of-use
assets, and
finance lease
interest are
included
(in Cost of sales, Selling general and administrative expense, and Interest
income, net in the Condensed Consolidated Statements
of Operations. The Company’s lease cost consists
of the following (in thousands):
13Thirteen Weeks Ended
 
Ended
August 27, 2022
August 28, 2021
Operating Lease costConventional shell egg sales
$
217
Finance Lease cost
Amortization of right-of-use asset425,589
$
44182,030
Interest on lease obligationsSpecialty shell egg sales
200,820
132,458
Egg products
27,640
9,366
Other
4,295
1,132
$
7
Short term lease cost658,344
$
1,097324,986
Contract Costs
Future minimum lease payments under non-cancelable leases are as follows (inThe Company can incur costs to
 
thousands):obtain or fulfill a contract with a
customer. If the
amortization period of these costs is less
than
one year,
they are
expensed as
incurred. When
the amortization
period is
greater than
one year,
a contract
asset is
recognized
and
is amortized
over the
contract life
as a
reduction
in net
sales. As
of August
27,
2022 and
May 28,
2022,
the balance
for
contract assets is immaterial.
Contract Balances
The Company receives payment from customers based on specified terms that are
generally less than 30 days from delivery.
There are rarely contract assets or liabilities related to performance under the
contract.
As of August 28, 2021
Operating Leases
Finance Leases
Remainder fiscal 2022
$
586
$
181
2023
539
239
2024
380
217
2025
130
0
2026
26
0
2027
5
0
Total
1,666
637
Less imputed interest
(133)
(37)
Total
$
1,533
$
600
The
weighted-average
remaining
lease
term
and
discount
rate
for
lease
liabilities
included
in
our
Condensed
Consolidated
Balance Sheet are as follows:
As of August 28, 2021
Operating Leases
Finance Leases
Weighted-average
remaining lease term (years)
2.7
2.3
Weighted-average
discount rate
5.9
%
4.9
%
Note 119 - Stock Based Compensation
Total stock-based
 
compensation expense was $
1.0
 
million and $
893
thousand for the thirteen weeks ended August 27, 2022 and August 28, 2021 and
August 29, 2020,
respectively.
2021.
Unrecognized
 
compensation
 
expense
 
as a
 
result
 
of non
 
-vested
 
shares
 
of
 
restricted
 
stock outstanding
 
under
 
the
 
Amended
 
and
Restated 2012 Omnibus Long-Term
 
Incentive Plan at August 28, 202127, 2022 of $
5.65.9
 
million will be recorded over a weighted average
period
 
of
1.9
 
years.
 
Refer
 
to
 
Part
 
II
 
Item
 
8,
 
Notes
 
to
 
Consolidated
 
Financial
 
Statements
 
and
 
Supplementary
 
Data,
 
Note
 
16:
Stock Compensation Plans in our 20212022 Annual Report for further information
 
on our stock compensation plans.
The Company’s restricted share activity
 
for the thirteen weeks ended August 28, 202127, 2022 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 29, 202128, 2022
302,147317,844
$
39.3739.12
Vested
(1,359)(3,240)
40.3438.31
Forfeited
(730)(2,778)
37.7039.48
Outstanding, August 28, 202127, 2022
300,058311,826
$
39.3739.12
Note 10 – Income Taxes
For
the
first
quarters
of
fiscal
2023
and
2022,
the
Company
recorded
income
tax
expense
of
$
40.3
million
and
income
tax
benefit of $
15.8
million which reflects
an effective
tax rate of
24.4
% and
46.8
%, respectively.
Excluding the impact
of discrete
items
related
to
an
$
8.3
million
net
tax
benefit
recorded
in
the
first
quarter
of
fiscal
2022
in
connection
with
the
Red
River
Valley
Egg Farm, LLC acquisition, the adjusted effective
tax rate for the first quarter of fiscal 2022 is
22.4
%.
Our effective tax
rate differs from
the federal statutory income
tax rate due to
state income taxes, certain
federal tax credits and
certain
items
included
in
income
for
financial
reporting
purposes
that
are
not
included
in
taxable
income
for
income
tax
purposes,
including
tax
exempt
interest
income,
certain
nondeductible
expenses
and
net
income
or
loss
attributable
to
noncontrolling interest.
 
 
 
 
1514
Note 1311 - Commitments and Contingencies
Financial Instruments
The Company maintained
 
maintained standby letters of credit
 
letters of
credit ("LOC"(“LOCs”)
totaling $
4.1
 
million at August 27,
 
August 28,
20212022, which
were issued
 
under
the Company's Revolving Credit Facility.
 
Facility. The
outstanding LOCs are for the
 
the benefit of certain insurance companies
 
insurance companies, and are
not
recorded as
a liability on the consolidated balance sheets.
 
LEGAL PROCEEDINGS
State of Texas
 
v. Cal-Maine Foods, Inc. d/b/a Wharton;
 
and Wharton County Foods, LLC
 
On April
 
23, 2020,
 
the Company
 
and its subsidiary
 
Wharton County
 
Foods, LLC (“WCF”)
 
were named
 
as defendants in
 
State
of
 
Texas
 
v.
 
Cal-Maine
 
Foods,
 
Inc.
 
d/b/a
 
Wharton;
 
and
 
Wharton
 
County
 
Foods,
 
LLC,
 
Cause
 
No.
 
2020-25427,
 
in
 
the
 
District
Court of
 
Harris County,
 
Texas.
 
The State
 
of Texas
 
(the “State”)
 
asserted claims
 
based on
 
the Company’s
 
and WCF’s
 
alleged
violation
 
of
 
the
 
Texas
 
Deceptive
 
Trade
 
Practices—Consumer
 
Protection
 
Act,
 
Tex.
 
Bus.
 
&
 
Com.
 
Code
 
§§
 
17.41-17.63
(“DTPA”).
 
The
 
State
 
claimed
 
that
 
the
 
Company
 
and
 
WCF
 
offered
 
shell
 
eggs
 
at
 
excessive
 
or
 
exorbitant
 
prices
 
during
 
the
COVID-19
 
state
 
of
 
emergency
 
and
 
made
 
misleading
 
statements
 
about
 
shell
 
egg
 
prices.
 
The
 
State
 
sought
 
temporary
 
and
permanent
 
injunctions
 
against
 
the
 
Company
 
and
 
WCF
 
to
 
prevent
 
further
 
alleged
 
violations
 
of
 
the
 
DTPA,
 
along
 
with
 
over
$
100,000
 
in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the State’s
 
original petition with
prejudice. On September
 
11, 2020,
 
the State filed a
 
notice of appeal,
 
which was assigned to
 
to the Texas
 
Court of Appeals
 
for the
First District. The
 
State filed itsDistrict.
 
opening briefOn
 
on December 7,August
 
2020. 16,
2022,
the
appeals
court
reversed
and
remanded
the
case
back
to
the
trial
court
for
further
proceedings.
The
 
Company
and
WCF
 
filed their responseare
 
on February
8, 2021. Theconsidering
 
Texaswhether
 
Court of Appealsto
 
has not ruledappeal
 
on these submissions.this
decision
from
the
First
District.
 
Management
believes the
risk of material
loss related
to this matter to be remote.
Bell et al. v. Cal-Maine Foods et al.
 
On
 
April
 
30, 2020,
 
the Company
 
was named
 
as one
 
of several
 
defendants
 
in
 
Bell et
 
al. v.
 
Cal-Maine
 
Foods et
 
al.,
 
Case No.
1:20-cv-461,
 
in
 
the
 
Western
 
District
 
of
 
Texas,
 
Austin
 
Division.
 
The
 
defendants
 
include
 
numerous
 
grocery
 
stores,
 
retailers,
producers, and farms. Plaintiffs assert that defendants
 
violated the DTPA
 
by allegedly demanding exorbitant or
 
excessive prices
for
 
eggs during
 
the
 
COVID-19
 
state of
 
emergency.
 
Plaintiffs
 
request
 
certification
 
of a
 
class of
 
all consumers
 
who purchased
eggs
 
in
 
Texas
 
sold,
 
distributed,
 
produced,
 
or
 
handled
 
by
 
any
 
of
 
the
 
defendants
 
during
 
the
 
COVID-19
 
state
 
of
 
emergency.
Plaintiffs seek to enjoin
 
the Company and other
 
defendants from selling eggs
 
at a price more than
 
10% greater than the price
 
of
eggs prior
 
to the
 
declaration
 
of the
 
state of
 
emergency
 
and damages
 
in the
 
amount
 
of $
10,000
 
per violation,
 
or $
250,000
 
for
each violation
 
impacting anyone
 
over 65
 
years old.
 
On December
 
1, 2020,
 
the Company
 
and
 
certain other
 
defendants filed
 
a
motion to
 
dismiss the
 
plaintiffs’
 
amended
 
class action
 
complaint. The
 
plaintiffs
 
subsequently filed
 
a motion
 
to strike,
 
and the
motion to
 
dismiss and
 
related proceedings
 
were referred
 
to a
 
United States
 
magistrate judge.
 
On July
 
14, 2021,
 
the magistrate
judge
 
issued
 
a
 
report
 
and
 
recommendation
 
to
 
the
 
court
 
that
 
the
 
defendants’
 
motion
 
to
 
dismiss
 
be
 
granted
 
and
 
the
 
case
 
be
dismissed without prejudice for lack of subject matter jurisdiction.
 
prejudice forOn September 20, 2021, the court dismissed the case without
prejudice.
 
lackOn
July
13,
2022,
the
court
denied
the
plaintiffs’
motion
to
set
aside
or
amend
the
judgment
to
amend
their
complaint.
On March 15, 2022,
plaintiffs
filed a second suit
against the Company and
several defendants in
Bell et al. v.
Cal-Maine Foods
et al.,
Case No.
1:22-cv-246, in
the Western
District of
 
subject matterTexas,
 
jurisdiction. Austin Division
alleging the
same assertions
as laid
out in
the
first
complaint.
On
 
September 20,August
 
2021, 12,
2022,
the
 
court adopted
the magistrate’s
reportCompany
 
and
 
recommendationother
defendants
 
in
 
itsthe
 
entiretycase
 
andfiled
 
granted
defendants’a
 
motion
 
to
 
dismiss
 
plaintiffs’the
 
firstplaintiffs’
class action
 
amendedcomplaint. On
 
classSeptember 6,
 
action
complaint;2022, the
 
thereafter,plaintiffs’ filed
their opposition
to the
motion to
dismiss and
 
the courtCompany
entered a
final judgment
in favor
of the
Company and
certain other
 
defendants dismissingfiled
their reply on
September 13,
2022. The
court has not
issued a ruling.
Management believes
 
the risk
case without prejudice.
of material loss related to both matters to be remote.
Kraft Foods Global, Inc. et al. v.
 
United Egg Producers, Inc. et al.
 
As previously
 
reported, on
 
September 25,
 
2008, the
 
Company
 
was named
 
as one
 
of several
 
defendants
 
in numerous
 
antitrust
cases involving
 
the United
 
States shell
 
egg
 
industry.
 
The Company
 
settled all
 
of these
 
cases, except
 
for
 
the claims
 
of certain
plaintiffs who sought substantial
 
substantial damages allegedly arising from
 
from the purchase of egg products (as
 
products (as opposed to shell
eggs). These
remaining plaintiffs
 
are Kraft
 
Food Global,
 
Inc., General
 
Mills, Inc.,
 
and Nestle
 
USA, Inc.
 
(the “Egg
 
Products Plaintiffs”)
 
and
The Kellogg Company.
On September
 
13, 2019,
 
the case
 
with the
 
Egg Products
 
Plaintiffs was
 
remanded from
 
a multi-district
 
litigation proceeding
 
in
the
 
United
 
States
 
District
 
Court
 
for
 
the
 
Eastern
 
District
 
of
 
Pennsylvania,
 
In
 
re
 
Processed
 
Egg
 
Products
 
Antitrust
 
Litigation,
MDL No. 2002, to
 
the United States District Court
 
for the Northern District
 
of Illinois, Kraft Foods Global,
 
Inc. et al. v.
 
United
15
Egg
 
Producers,
 
Inc.
 
et
 
al.,
 
Case
 
No.
 
1:11-cv-8808,
 
for
 
trial.
 
The
 
Egg
 
Products
 
Plaintiffs
 
allege
 
that
 
the
 
Company
 
and
 
other
defendants
 
violated
 
Section
 
1
 
of
 
the
 
Sherman
 
Act,
 
15.
 
U.S.C.
 
§
 
1,
 
by
 
agreeing
 
to
 
limit
 
the
 
production
 
of
 
eggs
 
and
 
thereby
illegally to raise the prices that plaintiffs
 
paid for processed egg products. In particular,
 
the Egg Products Plaintiffs are
 
attacking
certain features of
 
the United Egg
 
Producers animal-welfare guidelines
 
and program used by
 
the Company and
 
many other egg
producers. The
 
Egg Products
 
Plaintiffs seek
 
to enjoin
 
the Company
 
and other
 
defendants from
 
engaging in
 
antitrust violations
and seek treble money damages.
 
treble moneyOn May 2, 2022,
 
damages. Thethe court set trial for October
 
parties filed24, 2022, but on September
20, 2022, the court
cancelled the
trial date
due to
COVID-19 protocols
and converted
the trial
date to
 
a jointstatus
 
status reporthearing to
 
on May
18, 2020.
On August
4, 2021,
by docket
entry,
16
reschedule the
 
courtjury trial.
instructed
We anticipate the
 
partiestrial being rescheduled for the first or second calendar quarter of 2023.
 
to
jointly
submit
a
second
status
report
to
the
court
that
included
a
proposed
schedule
for
preparing a final pretrial
order. On August
25, 2021, the parties filed a
joint status report, and
on August 26, 2021, the
court, by
docket entry, informed
the parties that the need to discuss issues was no longer
necessary and that a scheduled August 30, 2021,
status hearing was stricken. No trial schedule has yet been entered by the
court.
In addition,
 
on October
 
24, 2019,
 
the Company
 
entered into
 
a confidential
 
settlement agreement
 
with The
 
Kellogg Company
dismissing
 
all
 
claims
 
against
 
the
 
Company
 
for
 
an
 
amount
 
that
 
did
 
not
 
have
 
a
 
material
 
impact
 
on
 
the
 
Company’s
 
financial
condition or results
of operations. On
November 11,
 
2019, a stipulation
for dismissal was filed
with the court,
 
butand on March 28,
2022, the court
has
not yet entered a judgment on dismissed the filing.
Company with prejudice.
The Company intends to
 
continue to defend the remaining
 
case with the Egg Products Plaintiffs
 
as vigorously as possible based
on
 
defenses
 
which
 
the
 
Company
 
believes
 
are
 
meritorious
 
and
 
provable.
 
Adjustments,
 
if
 
any,
 
which
 
might
 
result
 
from
 
the
resolution of
 
this remaining
 
matter with
 
the Egg
 
Products Plaintiffs
 
have not
 
been reflected
 
in the
 
financial statements.
 
While
management
 
believes
 
that
 
there
 
is
 
still
 
a
 
reasonable
 
possibility
 
of
 
a
 
material
 
adverse
 
outcome
 
from
 
the
 
case
 
with
 
the
 
Egg
Products Plaintiffs,
 
at the
 
present time,
 
it is not
 
possible to
 
estimate the
 
amount of
 
monetary exposure,
 
if any,
 
to the
 
Company
due
to
a
range
of
 
factors,
including
the
following,
 
among
others: the matter is in
two
earlier
trials
based
on
substantially
 
the early stages of preparing
 
for trial following
remand;same
 
anyfacts
 
and
legal arguments
resulted
in findings
of no
conspiracy
and/or damages;
this trial
 
will
be
 
before
 
a
different
 
judge
and
 
jury
in
 
a
different
 
court
 
than
 
prior
related
 
cases;
there
 
are significant
 
significant
factual issues
 
issues to
be
 
resolved; and
 
there are
 
are requests for
 
for damages
other
than compensatory
damages (i.e.,
injunction and
treble
money damages).
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%
100
% of the
membership interests
 
of the membershipBenton
 
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 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.
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.
Note 14 - Related Party Transaction
On
August
24,
2020,
Mrs.
Jean
Reed
Adams,
the
wife
of
the
Company’s
late
founder
Fred
R.
Adams,
Jr.,
and
the
Fred
R.
Adams,
Jr.
Daughters’
Trust,
dated
July
20,
2018
(the
“Daughters’
Trust”),
of
which
the
daughters
of
Mr.
Adams
are
beneficiaries
(together,
the
“Selling
Stockholders”),
completed
a
registered
secondary
public
offering
of
6,900,000
shares
of
Common Stock held by them, pursuant to a previously
disclosed Agreement Regarding Common Stock (the “Agreement”)
filed
as an exhibit to our 2021 Annual Report. Mrs. Adams and
the Daughters’ Trust advised the Company that
they were conducting
the
offering
in
order
to
pay
estate
taxes
related
to
the
settlement
of
Mr.
Adam’s
estate
and
to
obtain
liquidity.
The
public
offering
was
made
pursuant
to
the
Company’s
effective
shelf
registration
statement
on
Form
S-3
(File
No.
333-227742),
including the Prospectus
contained therein dated
October 9, 2018, and
a related Prospectus Supplement
dated August 19,
2020,
each of
which is on
file with the
Securities and
Exchange Commission.
The public offering
involved only
the sale of
shares of
Common
Stock
that
were
already
outstanding,
and
thus
the
Company
did
not
issue
any
new
shares
or
raise
any
additional
capital
in
the
offering.
The
expenses
of
the
offering
(not
including
the
underwriting
discount
and
legal
fees
and
expenses
of
legal
counsel
for
the
Selling
Stockholders,
which
were
paid
by
the
Selling
Stockholders)
paid
by
the
Company
were
$
1.1
million. Pursuant to the Agreement, the Selling Stockholders reimbursed
the Company $
551
thousand.
1716
ITEM
 
2.
 
MANAGEMENT’S
DISCUSSION
AND
 
ANALYSIS
 
OF
 
FINANCIAL
 
CONDITION
 
AND
 
RESULTS
 
OF
OPERATIONS
The following
 
should be
 
read in
 
conjunction
 
with Management’s
 
Discussion and
 
Analysis of
 
Financial Condition
 
and Results
of Operations included
 
included in Part II Item
 
Item 7
of the
Company’s
 
Annual Report on
 
on Form 10-K for its
 
10-K forfiscal year ended May
 
its fiscal
year ended
May 29,
2021 (the28, 2022
“2021
(the “2022 Annual
Report”),
and
the accompanying
financial
statements
and
 
notes included
in Part
II
Item 8
of
the 2021
2022 Annual
Report and in
 
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 20212022
Annual
 
Report
 
(ii)
 
the
 
risks
 
and
 
hazards
 
inherent
 
in
 
the
 
shell egg
 
business
 
(including
 
disease, pests,
 
weather
 
conditions,
 
and
potential
for
 
product
recall),
 
(iii) changesincluding
but
not
limited
to
the
current
outbreak
of
highly
pathogenic
avian
influenza
(HPAI)
affecting
poultry
 
in the
 
demand forU.S., Canada
 
and marketother
 
countries that
was first
detected in
commercial
flocks in
the U.S.
in February
2022, (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
 
businesseschanges that may cause conditions to
completing a pending acquisition not to be
met, (vi) risks
relating
to
the
evolving
COVID-19
pandemic,
including
without
limitation
increased
costs
 
and
 
risksrising
 
orinflation
 
changesand
 
thatinterest
rates, which
 
maygenerally have been
 
causeexacerbated by Russia’s
 
conditionsinvasion of Ukraine
starting February 2022,
(vii) our ability
 
to retain
existing
 
completingcustomers,
 
aacquire
 
pending
acquisition not tonew
 
be met, (vi) risks
relating to the
evolving COVID-19 pandemic,customers
 
and (vii)
grow
our
product
mix
and
(viii)
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.
(the
“Company,”
“we,”
“us,”
“our”)
 
is
 
primarily
 
engaged
 
in
 
the
 
production,
 
grading,
 
packaging,
marketing
 
and
 
distribution
 
of
 
fresh
 
shell
eggs.
eggs.
Our
operations
are
fully
integrated
 
under
one
operating
segment.
 
We
are
 
the
largest producer and
 
and distributor
of fresh
shell eggs
eggs in the
 
United States
(“U.S.”).
 
Our total flock
 
of approximately 40.8
41.1 million
layers
and
11.4
 
million layers and
 
10.3 million pullets
 
and
breeders
is
the
the
largest
 
in
the
 
U.S.
We
 
sell
most
 
of
our
 
shell
eggs
 
to
a
 
diverse
group
 
of
customers, including
 
including national and
 
and regional grocery
 
grocery
store chains,
 
club stores, companies
 
companies servicing independent
 
independent supermarkets in
 
in
the U.S., food
 
service distributors, and
 
and egg product consumers
consumers in states across
the southwestern, southeastern, mid-western
 
mid-western and
mid-Atlantic regions of the U.S.
Our
 
operating
 
results
 
are
 
materially
 
impacted
 
by
 
market
 
prices for
 
eggs
 
and
 
feed
 
grains
 
(corn
 
and
 
soybean
 
meal),
 
which
 
are
highly
 
volatile,
 
independent
 
of
 
each
 
other,
 
and
 
out
 
of
 
our
 
control.
 
Generally,
 
higher
 
market
 
prices
 
for
 
eggs
 
have
 
a
 
positive
impact
 
on
 
our
 
financial
 
results
 
while
 
higher
 
market
 
prices
 
for
 
feed
 
grains
 
have
 
a
 
negative
 
impact
 
on
 
our
 
financial
 
results.
Although we
 
use a
 
variety of
 
pricing mechanisms
 
in pricing
 
agreements with
 
our customers,
 
we sell
 
most of
 
our conventional
shell eggs
 
based on
 
formulas that
 
consider,
 
in varying
 
ways, independently
 
quoted regional
 
wholesale
 
market prices
 
for shell
eggs or formulas related to our costs of production which include the cost of corn and soybean
 
ormeal.
 
formulas
We
 
relatedroutinely
fill
our
storage
bins
during
harvest
season
when
prices
for
feed
ingredients
are
generally
lower.
To
ensure
continued
availability of
feed ingredients,
we may
enter into
contracts for
future purchases
of corn
and soybean
meal, and
as
part of these contracts,
we may lock-in
the basis portion of
our grain purchases
several months in
advance. Furthermore, due
to
the
more
limited
supply
for
organic
ingredients,
we
may
commit
 
to
 
ourpurchase
 
costsorganic
 
ofingredients
 
productionin
 
whichadvance
 
includeto
help
ensure
supply.
Ordinarily,
we do not enter
into long-term contracts
beyond a year
to purchase corn and
soybean meal or hedge
against
17
increases
in
 
the
 
costprices
 
of
 
corn
 
and
 
soybean
 
meal.
 
As
an
example
of
the
volatility
in
the
market
prices
of
shell
eggs,
the
Urner-Barry
Southeastern
Regional
Large
Egg
Market
Price
per
dozen
eggs
(“UB southeastern large index”) in fiscal year 2021 ranged
from a low of $0.87 in July 2020 to a high of $1.63 in March 2021.
Generally,
we purchase
primary feed
ingredients,
mainly corn
and soybean
meal, at
current market
prices. Corn
 
and
soybean
meal
 
are
 
commodities
 
and
 
are
 
subject
 
to
 
volatile
 
price
changes
 
due
 
to
 
weather,
 
various
 
supply
 
and
 
demand
 
factors,
transportation and storage costs, speculators, and agricultural, energy
 
transportation
and
storage
costs,
speculators
and
agricultural,
energy and trade policies in the U.S. and internationally.internationally
 
and most recently the Russia-Ukraine war.
An important competitive advantage
 
for Cal-Maine Foods is
 
our ability to meet
 
our customers’ evolving needs
 
with a favorable
product
mix
 
of
conventional
 
and
specialty
eggs,
including
cage-free,
organic
 
and
other
 
specialty eggs
 
and eggofferings,
 
as
well
as
egg
products.
We
 
have
also
 
enhanced
our
 
efforts
to
 
provide
 
free-range
 
and
 
pasture-raised
 
eggs
 
that
 
meet
 
consumers’
 
evolving
choice
 
preferences.
 
While
 
a
 
small
 
part
 
of
 
our
 
18
current
 
business,
 
the
 
free-range
 
and
 
pasture-raised
 
eggs
 
we
 
produce
 
and
 
sell
represent
attractive
offerings
 
to a subset of
 
a
subset
of
consumers,
 
and therefore our customers,
and help us continue
to serve as the trusted
provider of quality
food choices.
Specialty shell
eggs have
been a
significant and
growing portion
of the
market. In
recent years,
a significant
number of
large
restaurant chains, food
service companies and
grocery chains, including
our largest customers,
announced goals to
transition to
an exclusively
cage-free egg
supply chain
by specified
future dates.
Additionally,
several states,
representing 2
4% of
the U.S.
total population
according to
the 2020
U.S. Census,
have passed
legislation requiring
that all eggs
sold in
those states
must be
cage-free
eggs by
specified
future dates,
and
other states
are
considering
such legislation.
For additional
information, see
the
2021 Annual
Report, Part
I, Item
1, “Business
– Growth
Strategy” and
“– Government
Regulation,” and
the first
risk factor
in
Part I Item 1A, “Risk Factors” under the sub-heading “Legal and Regulatory
Risk Factors.”
Retail
 
sales
 
of
 
shell
 
eggs
 
historically
 
have
 
been
 
highest
 
during
 
the
 
fall
 
and
 
winter
 
months
 
and
 
lowest
 
during
 
the
 
summer
months. Prices
 
for shell
 
eggs fluctuate
 
in response
 
to seasonal
 
demand factors
 
and a
 
natural increase
 
in egg
 
production during
the
 
spring
 
and
 
early
 
summer.
 
Historically,
 
shell
 
egg
 
prices
 
tend
 
to
 
increase
 
with
 
the
 
start
 
of
 
the
 
school
 
year
 
and
 
tend
 
to
 
be
highest
 
prior
 
to
 
holiday
 
periods,
 
particularly
 
Thanksgiving,
 
Christmas
 
and
 
Easter.
 
Consequently,
 
and
 
all
 
other
 
things
 
being
equal, we would
 
expect to experience
 
lower selling prices, sales
 
volumes and net
 
income (and may incur
 
net losses) in our
 
first
and
 
fourth
 
fiscal
 
quarters
 
ending
 
in
 
August/September
 
and
 
May/June,
 
respectively.
 
Because
 
of
 
the
 
seasonal
 
and
 
quarterly
fluctuations,
 
comparisons
 
of
 
our
 
sales
 
and
 
operating
 
results
 
between
 
different
 
quarters
 
within
 
a
 
single
 
fiscal
 
year
 
are
 
not
necessarily meaningful comparisons.
HPAI
COVID-19
We
 
Since earlyare
 
2020, closely
monitoring
the
 
coronavirus (“COVID-19”)current
 
outbreak characterized
 
as aof
 
pandemic byhighly
 
the Worldpathogenic
 
Health Organizationavian
 
on
Marchinfluenza
 
11,(“HPAI”),
 
2020,that
 
haswas
 
causedfirst
 
significant
disruptionsdetected
 
in
commercial
 
international
and
U.S.
economies
and
markets.
We
understand
the
challenges
and
difficult
economic
environment
facing
familiesflocks
 
in
 
the
 
communitiesU.S.
 
wherein
 
weFebruary
 
live2022
 
and
 
work,which
was
most
recently
detected
in
commercial
flocks
in
the
U.S.
in
September
2022.
According
to
the
U.S.
Centers
for
Disease
Control
 
and
 
wePrevention,
 
arethese
detections
do
not
present
an
committedimmediate
public
health
concern.
There
have
been
no
positive
tests for
HPAI
at
any
Cal-Maine
Foods’
owned
or contracted
production
facility as
of September
27, 2022.
The USDA
division
of Animal
and Plant
Health Inspection
Service (“APHIS”)
reported
that approximately
35.6 million
commercial
layer hens
and 1.0
million
pullets have
been
depopulated
due
to HPAI.
According
 
to
 
helpingAPHIS,
 
wherethe
 
wemost
 
can.recently
 
Wereported
 
haveoutbreaks
 
providedof
 
foodHPAI
 
assistanceaffecting
 
tocommercial
 
thoselayer
 
inhens
 
needand
 
bypullets
 
donatingoccurred
September
 
approximately21,
 
239
thousand2022
 
dozenand
 
eggsJune
 
to9,
 
date2022,
 
in
fiscal
2022.respectively.
 
We
 
believe
 
we
are
taking
all
reasonable
precautions
in
the
 
managementHPAI
 
ofoutbreak
 
our
operations inwill
 
response to
the COVID-19
pandemic. Our
top priority
is the
health and
safety of
our employees,
who work
hard
every daycontinue
 
to produce
eggs for our
customers. As
part of the
nation’s
food supply,
we work
in a critical
infrastructure industry,
and
we
believe
we
 
have
 
a
special
responsibility
to
maintain
our
normal
work
schedule.
As
such,
we
are
in
regular
communication with our managers across our operations and
continue to closely monitor the situation in our facilities and
in the
communities where we live and work. We
have implemented procedures designed to protect our employees, taking into account
guidelines
published
by
the Centers
for
Disease Control
and
other
government
health
agencies,
and
we
have
strict sanitation
protocols
and
biosecurity
measures
in
place
throughout
our
operations
with
restricted
access to
visitors.
There
are
no known
indications that COVID-19 affects hens or can be transferred
through the food supply.
We
continue to
proactively monitor
and manage
operations during
the COVID-19 pandemic,
including additional
related costs
that
we
incurred
or
may
incur
in
the
future.
The pandemic
had
a
negativean
 
impact
 
on our
 
businessthe
overall
 
supply of
eggs through
 
disruptionsthe balance
of this
calendar year
and possibly
beyond. According
to LEAP
Market Analytics,
layer hen inventory is not projected to exceed the 320 million mark until October
of 2023.
While no
farm is
immune from
HPAI,
we believe
we have implemented
and continue
to maintain
robust biosecurity
programs
across our locations. We
are also working closely with federal, state and local government
officials and focused industry groups
to mitigate the risk of this and future outbreaks and effectively manage
our response, if needed.
CAGE-FREE EGGS
Ten
states
have
passed
legislation
or
regulations
mandating
minimum
space
or
cage-free
requirements
for
egg
production
or
mandated
the
sale
of
only
cage-free
eggs
and
egg
products
 
in
 
the
supply chain such as increased costs and limited availability of packagingtheir
 
supplies, and increased labor costs and medical costs.
states,
 
In thewith
 
first quarters
of fiscal
2022 and
2021,
we spent
$553 thousand
and $832
thousand (excluding
medical insurance
claims)
related
to
the
pandemic,
respectively.
The
majorityimplementation
 
of
 
these
 
expenseslaws
ranging
from
January
2022
to
January
2026.
These
states
represent
approximately
27%
of
the
U.S.
total
population
according
to
the 2020
U.S. Census.
In California
and Massachusetts,
which
collectively represent
14% of
the total
U.S. population
according to
the
2020 U.S. Census,
cage-free legislation went
into effect January
1, 2022. However,
these laws are subject
to judicial challenge,
and the
Supreme Court
of the U.S.
recently announced
that in
October 2022
it will
review a
case challenging
California’s
law
that requires the sale of only
cage-free eggs in that state. These laws
have already affected and,
if upheld, will continue to affect
sourcing,
production
and
pricing
of
eggs (conventional
as well
as specialty)
as the
national
demand
for
cage-free
production
could
be greater
than the
current supply,
which
would increase
the price
of cage-free
eggs, unless
more
cage-free production
capacity
is constructed.
Likewise, the
national supply
for eggs
from conventional
production
could exceed
consumer demand
which would decrease the price of conventional eggs.
A significant number
of our customers
have previously announced
goals to offer
cage-free eggs exclusively
on or before
2026,
subject in
most cases
to availability
of supply,
affordability and
customer demand,
among other
contingencies. Some
of these
customers have
recently changed
those goals
to offer
70% cage-free
eggs by
the end
of 2030.
Our customers
typically do
not
commit to long-term
purchases of specific quantities
or types of eggs
with us, and as
a result, it is difficult
to accurately predict
customer
requirements
for
cage-free
eggs.
We
are,
however,
engaging
with
our
customers
 
in
 
fiscalan
 
2022
resulted
from
additional
labor
costs and
increased
cost
of
packaging
materials,
primarily
reflected
in
cost
of
sales.
In
fiscal
2021,
most
of
these
expenses
related
to
additional
labor
costs.
Medical
insurance
claims
relatedeffort
 
to
 
COVID-19achieve
 
paida
 
duringsmooth
transition
 
thein meeting
 
firsttheir announced
 
quartergoals and
 
needs.
Sales of
 
fiscalcage-free
 
2022eggs represented
 
wereapproximately
 
an
additional $267 thousand as compared to $324 thousand paid in the19.4% of
 
same quarter in fiscal 2021.our shell
EXECUTIVE OVERVIEW
For the first
quarter of fiscal
2022,
we recorded a
gross profit of $6.6
million compared to
$16.8 million for
the same period
of
fiscal 2021,
with the decrease due primarily to the higher costs of feed
ingredients and higher processing costs. Our total
dozens
sold decreased
1.7%
to 259.4
million dozen
shell eggsegg revenues
 
for the
 
first quarter
 
of fiscal
 
2022 compared2023.
 
to 264.0We
 
million dozenhave invested
 
for
the
same
period
of
fiscal
2021.
For
the
first
quarter
of
fiscal
2022,
conventional
dozens
sold
decreased
5.5%
and
specialty
dozens sold
increased 8.9%
as compared
to the
same quartersignificant capital
 
in fiscal 2021.recent
 
Specialty dozensyears to
 
sold increasedacquire and
 
as moreconstruct
cage-free facilities, and
 
cage-freewe expect our focus
for future expansion will
facilities came into production which helped increase our
continue to include cage-free
 
egg sales.
The
daily
average
price
for
the
UB
southeastern
large
index
for
first
quarter
of
fiscal
2022
increased
41.2%
from
the
same
period
in
the prior
year.
Our net
average
selling
price
per dozen
for
the
first
quarter
of fiscal
2021
was
$1.238
compared
to
$1.078
in
the
prior
year
period.
Hen
numbers
reported
by the
USDA as
of
September
1, 2021,
were 319.5
million,
which
is
approximately
facilities. At the same
 
number of
hens in
same period
for the
prior year.
The USDA
also reported
that the
hatch from
Apriltime,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18
19we
understand
the
importance
of
our
continued
ability
to provide
more
affordable
conventional
eggs
in
order
to
provide
our
2021 through August 2021 customers with a variety of egg choices and to address hunger in our
communities.
For
additional
information,
see
the
2022
Annual
Report,
Part
I,
Item
1,
“Business
–
Specialty
Eggs,”
“Business
–
Growth
Strategy” and
“Business –
Government
Regulation,” and
the first
risk factor
in Part
I Item
1A, “Risk
Factors” under
the sub-
heading “Legal and Regulatory Risk Factors.”
EXECUTIVE OVERVIEW
For the first quarter of fiscal
2023, we recorded a gross profit of
$217.5 million compared to $6.6 million
for the same period of
fiscal
2022,
with
the
increase
due
primarily
to
higher
shell
egg
prices
and
increased 2.1%
volume
of
specialty
eggs
sold,
partially
offset by the increased
cost of feed ingredients
and processing, packaging
and warehouse costs. Our
total dozens sold increased
8.1% to 275.3
million dozen shell
eggs for the
first quarter of
fiscal 2023 compared
to 254.6 million
dozen for the
same period
of fiscal 2022. For the first
quarter of fiscal 2023, conventional
dozens sold decreased 2.3% and specialty
dozens sold increased
35.1% as
 
compared to
the same
quarter in
fiscal 2022.
Demand for
specialty eggs
increased in
the first
quarter of
fiscal 2023
compared to
the same prior
year period due
primarily to the
higher prices for
conventional eggs.
Further,
demand for specialty
eggs continued
to increase
as retailers
continued
to shift
to selling
cage-free
products
and
cage-free
legislation
went into
full
effect
in
California
and
Massachusetts
on
January
1,
2022.
We
benefited
from
the
strong
demand
for
specialty
eggs
as
we
placed more of our cage-free facilities into production and better utilized
our existing cage-free production capacity.
Conventional
egg
prices
increased
in
the
first
quarter
of
fiscal
2023
primarily
due
to
decreased
supply
caused
by
the
HPAI
outbreak
compounded
with
good
customer
demand.
See
the
discussion
under
the
heading
“HPAI”
above.
The
daily
average
price for
the UB
southeast large
index for
the first
quarter of
fiscal 2023
increased 133.8%
from the
comparable period
in the
prior
year.
Our net
average
selling price
per dozen
for
the first
quarter
of fiscal
2023
was $2.275
compared
to $1.235
in
the
prior-year period. AsLayer
hen numbers reported
by the USDA
as of September
21, 2022, were
305.3 million, which
represents a
decrease of
4.6% compared
with the
layer hen
inventory a
year ago.
The USDA
also reported
that the
hatch from
April 2022
through
August
2022
decreased
0.5%
as
compared
with
the
prior-year
period.
As
of
September
1, 2021,
2022,
however,
eggs
in
incubators were up 9.0% year-over-year,
indicating that layer flocks may increase in incubators were
down 4.9% versus the prior-year period.
future.
Our farm
 
production costs
 
per dozen
 
produced for
 
the first
 
quarter of
 
fiscal 20222023
 
increased 25.4%16.5%,
 
or $0.182$0.148,
 
compared to
 
the
first quarter
of fiscal 20212022
 
.
 
This increase was primarily
 
primarily due
to increased
prices for
 
feed ingredients and a higher
 
caused bybasis in corn in
most of
 
increased export
demand,
as
well
as
weather-related
shortfalls
in
our production
 
andareas.
 
yields,
which
have
placed
additional
pressure
on
domestic
supplies. For the
 
first quarter
 
of fiscal
2023, the
average Chicago
 
Board of Trade
 
Trade (“CBOT”)
daily market
price
 
price was $5.96
$6.65
 
per
bushel
for
 
corn
and
and $364
$456
 
per
ton
 
for
soybean
 
meal,
representing
 
an increase increases
of
 
81.8%11.5%
 
and 26.1%,
 
25.4%,
respectively, compared
 
compared to
the average
daily
CBOT prices for
the first quarter
of fiscal 2021.
Other farm production
costs for the
first quarter of
fiscal 2022 increased
7.6%
compared to the samecomparable period in the prior fiscal year due to higher flock amortization
 
and facility expenses.
year.
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.
Thirteen Weeks
 
Ended
13 Weeks EndedAugust 27, 2022
August 28, 2021
August 29, 2020
Net sales
100.0
%
100.0
%
Cost of sales
98.067.0
%
94.398.0
%
Gross profit
2.033.0
%
5.72.0
%
Selling, general and administrative
14.08.1
%
15.014.3
%
(Gain) loss on disposal of fixed assets
(0.1)—
%
—(0.1)
%
Operating lossincome (loss)
(11.9)24.9
%
(9.3)(12.2)
%
Total other income, net
1.70.2
%
0.61.8
%
LossIncome (loss) before income taxes
(10.2)25.1
%
(8.7)(10.4)
%
Income tax benefitexpense (benefit)
(4.8)6.1
%
(2.1)(4.9)
%
Net lossincome (loss)
(5.4)19.0
%
(6.6)(5.5)
%
NET SALES
Total
net sales for
the first quarter
of fiscal 2023
were a record
$658.3 million
compared to $325.0
million for the
same period
of fiscal 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20
NET SALES
Total
net sales for the
first quarter of fiscal
2022 were $331.7
million, compared to
$292.8 million for
the same period of
fiscal
2021.
19
Net shell
 
egg sales
represented 95.8%
and 97.1%
of total
net sales
for the
first quarters
of fiscal
2023 and
2022, respectively.
Shell egg sales classified
as “Other” represent
 
sales represented
97.2% and
97.7% of
total net
sales for
the first
quarter of
fiscal 2022
and 2021,
respectively.
Shell
egg
sales
classified
as
“Other”
represent
sales
of
hard
cooked hard-cooked
 
eggs
hatching
eggs,
and
other
 
miscellaneous byproducts included
 
productswith our
included with
our shell
egg operations.
 
The table below presents an analysis of our conventional and specialty shell egg
 
below presents
an analysis
of our
conventional and
specialty shell
egg sales
(in (in thousands, except percentage data):
Thirteen Weeks
 
Ended
13 Weeks EndedAugust 27, 2022
August 28, 2021
August 29, 2020
Total net sales
$
331,704658,344
$
292,782324,986
Conventional
$
182,549425,589
56.667.5
%
$
155,384182,030
54.357.6
%
Specialty
138,657200,820
43.031.8
%
129,245132,458
45.242.0
%
Egg sales, net
321,206626,409
99.3
%
314,488
99.6
%
284,629Other
99.54,295
0.7
%
Other
1,132
0.4
%
1,448
0.5
%
Net shell egg sales
$
322,338630,704
100.0
%
$
286,077315,620
100.0
%
Net shell egg sales as a percent of total net sales
97.295.8
%
97.797.1
%
Dozens sold:
Conventional
184,487179,712
71.165.3
%
195,238183,872
74.072.2
%
Specialty
74,89895,605
28.934.7
%
68,75670,750
26.027.8
%
Total dozens sold
259,385275,317
100.0
%
263,994254,622
100.0
%
Net average selling price per dozen:
Conventional
$
0.9892.368
$
0.7960.990
Specialty
$
1.8512.101
$
1.8801.872
All shell eggs
$
1.2382.275
$
1.0781.235
Egg products sales:
 
Egg products net sales
9,36627,640
6,7059,366
Pounds sold
15,26916,502
15,03015,269
Net average selling price per pound
0.6131.675
0.446
0.613
Shell egg net sales
First Quarter – Fiscal 2023
vs. Fiscal 2022
-
In
the
 
first
quarter
 
of
fiscal
 
2022,2023,
 
conventional
 
egg
sales
 
increased
 
$27.2
243.6 million,
 
or
17.5% 133.8%,
 
compared
to
 
the
first
quarter of
 
fiscal 2021,2022,
 
primarily due
 
to the
 
increase in
 
price partiallyfor
 
offset byconventional shell
 
a decrease
in volume
of conventional
eggs,
 
partially offset
by a decrease
in volume of
conventional eggs sold.
 
Changes
in
price
 
resulted
in
a
 
$35.6
247.6 million
 
increase
and the
 
change
in
volume
resulted
in
a
$10.6
million
resulted in a $4.1 million decrease in net sales, respectively.
-
We believe
 
prices for conventional eggs
Higher quarter-over-quarter
were positively impacted by
a better alignment of the
size of the conventional
production layer
hen flock
and customer
and consumer
demand. Conventional
 
egg prices were primarily duefurther
 
to depressed pricesincreased in
the first
quarter of fiscal
2021, 2023 primarily due to decreased supply caused by the HPAI
 
whichoutbreak, discussed above.
-
Conventional
 
resultedegg
 
fromprices
generally
respond
more
quickly
to
market
conditions
as
we
sell
the
majority
of
our
conventional
shell
eggs
based
on
formulas
that
adjust
periodically
and
take
into
account,
in
varying
ways,
independently
quoted regional
wholesale
market
prices for
shell eggs
or formulas
related to
our
costs of
production.
The
majority
of
our
specialty
eggs
are
typically
sold
at
prices
and
terms
negotiated
directly
with
customers
and
therefore do
not fluctuate
as much
as conventional
pricing. As
a result
of these
independently
quoted
whole markets
for
 
conventional
 
eggs
 
enteringreaching
near
historical
highs,
 
the
 
retailaverage
 
channelselling
 
fromprice
 
thefor
 
foodserviceconventional
 
channeleggs
 
due
toexceeded
 
the
pandemic.average selling price for specialty eggs in the first quarter of fiscal 2023.
-
The decreaseSpecialty egg sales increased $68.4 million, or
 
51.6%, in volumethe first quarter of fiscal 2023
 
compared to the first quarter of conventional
fiscal 2022,
 
eggs sold
was primarily
due to
the first
quarter of
fiscal 2021
elevated retail
demand due
 
to consumers’a
 
preferences to35.1% increase
 
purchase eggs
for in-home
meal preparation
due to
in the pandemic.
We
saw
this consumer preference
begin to shift in
the fourth quarter of
fiscal 2021 as consumers
began
to resume out-of-home
dining and prepare
fewer meals at home.
-
Specialty
egg
sales increased
$9.4
million,
or 7.3
%,
primarily
due
to
increased
 
volume of
 
8.9%specialty eggs
 
sold, which
 
resulted
in
 
a
$11.4 million $46.5
 
million
increase in net sales.
 
More cage-free facilities
came into production
which helped increase our
cage-free
egg sales.
-
We believe thatAccording
 
higher demand for specialty eggs has been driven by the pandemicto
 
Information
Resources,
Inc.,
 
as consumers prepared more meals
for in-homeTotal
 
consumption ratherUS
 
than dining–
 
out.Multi
Outlet
for
the
latest
13
weeks
ended
August
27,
2022,
cage-free
eggs
dozens
sold
(including
free-range,
pasture-raised
and
organic)
increased
34.9%.
 
We
 
believe higher
 
at-home mealthis
increase in
 
preparation hasdemand was
 
driven apositively impacted
 
consumerby the
higher conventional
preference
egg prices
as compared
to purchase higher-priced specialty eggs.
the
 
same period
in
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20
21the
prior
year.
Demand
for
specialty
eggs
was
further
positively
affected
by
California’s
and
Massachusetts’s
cage-
free mandates going into effect January 1, 2022, as well as more
retailers shifting to selling more cage-free products.
-
Our
specialty
egg
sales
in
the
first
quarter
of
fiscal
2023
versus
the
prior-year
period
benefitted
from
the
strong
demand
for
specialty
eggs
as
we
placed
more
of
our
cage-free
facilities
into
production,
and
we
better
utilized
our
existing cage-free production capacity.
Cage-free egg sales for the first
quarter of fiscal 2023 represented 19.4%
of our
total net shell egg
sales versus 22.1%
for the same prior
year period due
the higher conventional
egg prices. Cage-free
dozens sold increased 58% in the first of quarter of fiscal 2023 as compared
to the first quarter of fiscal 2022.
Egg products net sales
First Quarter – Fiscal 2023
vs. Fiscal 2022
-
Egg
 
Egg products
 
net
sales
 
increased $2.7
$18.3
million
or
195.1%
for
the
first
quarter
of
fiscal
2023
compared
to
the
same
period of
fiscal 2022,
primarily due
to a
173.2% selling
price increase,
which had
a $17.5
 
million orpositive
 
39.7%, primarily
due to
a 37.4%
selling price
increase compared
toimpact on
the first quarter of fiscal 2021, which had a $1.6 million positive impact
on net sales.
-
Selling prices forOur egg products
 
egg productsnet average selling
price increased in
 
the first quarter
 
of fiscal 20212023,
compared to the
first quarter of
fiscal 2022 as the supply decreased due to the HPAI
outbreak that started in February 2022. We
believe 13.4 million of
the
33.7
million
layers
culled
as
a
result
of
the
HPAI
outbreak
 
were negatively impacted
 
by a declinelocated
 
in foodservice
demandat
 
due facilities
dedicated
to
 
the pandemic.support
 
Our egg
products net
average selling
price
increased in
the first
quarter of
fiscal 2022inline
compared to
the same
periodbreaking facilities in
fiscal 2021
as foodservice
channel demand
has begun
to shift
more to
pre-pandemic
levels.
Iowa and Ohio.
COST OF SALES
Costs of
 
sales for
 
the first
 
quarter of
 
fiscal 20222023
 
were $325.1$440.9
 
million compared
 
to $276.0$318.3
 
million for
 
the same
 
period of
 
fiscal
2021.
2022.
 
Cost of
 
sales consists
 
of
 
costs directly
 
related
 
to producing,
 
processing
 
and
 
packing
 
shell eggs,
 
purchases
 
of
 
shell
 
eggs from
outside producers, processing and packing of liquid
 
and frozen egg products and other non-egg costs. Farm
 
production costs are
those costs
 
incurred at
 
the egg production
 
production facility,
 
including feed,
 
facility,
 
hen amortization
 
and other
 
related farm
 
production
costs.
The following table presents the key variables affecting our cost of
 
sales (in thousands, except cost per dozen data):
Thirteen Weeks
 
Ended
13 Weeks EndedAugust 27, 2022
August 28, 2021
August 29, 2020%
% Change
Cost of Sales:
Farm production
$
207,495266,651
$
161,863207,495
28.228.5
%
Processing, packaging, and warehouse
81,417
65,059
59,869
8.725.1
Egg purchases and other (including change in inventory)
44,69168,298
48,93337,973
(8.7)79.9
Total shell eggs
317,245416,366
270,665310,527
17.234.1
Egg products
24,488
7,814
5,352
46.0213.4
Total
$
325,059440,854
$
276,017318,341
17.838.5
%
Farm production costs (per dozen produced)
Feed
$
0.5450.667
$
0.3880.545
40.522.4
%
Other
$
0.3530.379
$
0.3280.353
7.67.4
%
Total
$
0.8981.046
$
0.7160.898
25.416.5
%
Outside egg purchases (average cost per dozen)
$
1.352.57
$
1.041.35
29.890.4
%
Dozens produced
257,654
236,458
231,161
2.39.0
%
DozensPercent produced to sold
259,38593.6%
263,99492.9%
(1.7)0.8
%
Farm Production
-First Quarter – Fiscal 2023
vs. Fiscal 2022
-
Feed costs per dozen produced
 
increased 40.5%22.4% in the first quarter of
 
of fiscal 2022 2023
compared to the first
quarter of fiscal
2021,
primarily
due
to
higher
feed
ingredient
prices
resulting
from
increased
export
demand,
as
well
as
weather-
related shortfalls in production and yields, which have placed additional
pressure on domestic supplies.
-
Other
farm
production
costs increased
due
to higher
flock amortization
,
primarily
from an
2022. This increase
in
our
cage-free
production,
which
has
higher
capitalized
costs.
Also,
higher
feed
costs,
which
began
to
rise
in
our
third
quarter
of
fiscal 2021, are capitalized in our flocks during pullet production and
increased our amortization expense.
-
We had higher
facility expense as more cage-free facilities came into production.
Processing, packaging, and warehouse
-
Cost
of
packaging
materials
increased
8.9%
compared
to
the
first
quarter
of
fiscal
2021
as
demand
for
packaging
products
increased
due
to
pandemic
supply
chain
constraints
and
manufacturers
increased
prices
and
implemented
pandemic surcharges.
-
Labor costs increased 11.1% due to wage
increases in response to labor shortages, was primarily due to the pandemic.
increased prices for corn, our primary
 
Egg purchases and other (including change in inventory)
-
feed ingredient.
 
Costs
in
this
category
decreased
primarily
due
to
the
decrease
in
the
volume
of
outside
egg
purchases,
as
our
percentage of produced to sold increased to 91.2%, partially offset
by an increase in the cost of these purchases.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21
22-
Looking
forward
throughout
For the
 
restfirst quarter
 
of
fiscal
 
2022,2023, the
average daily
Chicago Board
of Trade
(“CBOT”) market
price was
$6.65 per
bushel
for
 
corn
 
and
 
$456
per
ton
of
soybean
 
suppliesmeal
representing
increases
of
11.5%
and
25.4%,
respectively,
as
compared to the average daily CBOT prices for the first quarter of fiscal 202
2.
Supplies of
corn and soybean
 
remained
tight
 
relative
to
demand
 
primarily
relatedin the first
 
toquarter of
 
higherfiscal 2023 as
 
exportevidenced by a
 
demand,low stock-
to-use
ratio
for
corn,
 
as
 
wella
 
asresult
of
 
weather-related
 
shortfalls
 
in
 
production
 
and
 
yields.
We
expect
market
prices
to
remain elevated
and volatile
relative to
historical prices
at least
for the
short term
given theyields,
 
ongoing
disruptions
 
related
to
 
the
COVID-19
global
pandemic weather fluctuations
and
the
Russia-Ukraine
war
and
its
impact
on
the
export
markets.
Basis
levels
for
corn
ran
significantly
higher
in
our
area
of
operations
compared
to
our
prior
year
first
fiscal
quarter.
For
fiscal
2023,
we
expect
continued corn and geopolitical issues.soybean upward pricing pressures and further market
volatility to affect feed costs.
Processing, packaging, and warehouse
First Quarter – Fiscal 2023
vs. Fiscal 2022
-
Cost of packaging materials increased 16.1% compared to the first quarter of
fiscal 2022 due to rising inflation.
-
Labor costs increased 24.4%
due to wage increases and increased use of contract labor in response to labor shortages
.
-
Dozens processed increased 8.6% compared to the first quarter of fiscal 2022,
which resulted in a $2.2 million increase
in costs.
Egg purchases and other (including change in inventory)
First Quarter – Fiscal 2023
vs. Fiscal 2022
-
Costs in
this category
increased
primarily
due
to higher
egg prices,
partially offset
by the
decrease
in the
volume of
outside egg purchases, as our percentage of produced to sold increased
to 93.6% from 92.9%.
GROSS PROFIT
 
Gross profit for
 
for the
first quarter
 
of fiscal 2023
 
2022 was
$6.6 $217.5 million
 
compared to $6.6
 
$16.8 million
for the
 
same period of
fiscal 2022.
The increase
 
of fiscal$210.9
 
2021.
The decrease of $10.1 million was
primarily due
to higher
egg prices
as well
as the
increased volume
of specialty
eggs sold,
partially offset by the increased cost of feed ingredients
 
and processing,
packaging and warehouse costs.
SELLING, GENERAL, AND ADMINISTRATIVE
 
EXPENSES
Selling,
 
general,
 
and
 
administrative
 
expenses
 
("SGA")
 
include
 
costs
 
of
 
marketing,
 
distribution,
 
accounting
 
and
 
corporate
overhead. The following table presents an analysis of our SGA expenses (in thousands):
Thirteen Weeks
 
Ended
13 Weeks EndedAugust 27, 2022
August 28, 2021
August 29, 2020
$ Change
% Change
Specialty egg expense
$
13,067
$
13,715
$
12,697(648)
$
1,018
8.0(4.7)
%
Delivery expense
19,916
13,936
12,4945,980
1,442
11.542.9
%
Payroll, taxes and benefits
10,987
9,939
11,3011,048
(1,362)
(12.1)10.5
%
Stock compensation expense
1,025
1,001
89324
108
12.12.4
%
Other expenses
8,612
7,934
6,580678
1,354
20.68.5
%
Total
$
53,607
$
46,525
$
43,9657,082
$
2,560
5.815.2
%
First Quarter – Fiscal 2023
vs. Fiscal 2022
Specialty egg expense
-
Specialty egg
 
Advertising andexpense, which includes
 
franchise fees, increasedadvertising
 
in and promotion
costs, generally
aligns with specialty
egg
volumes,
which
were
up
35.1%
for
the
first
 
quarter of
 
fiscal 2022 compared
to the first
quarter of fiscal
 
2021,2023
compared
to
the
same
period
of
fiscal
2022.
However,
our specialty egg
expense decreased by
4.7%, primarily due
to increased sales
to other
Eggland’s Best,
Inc.
(“EB”)
franchisees,
including
unconsolidated
affiliates,
Specialty
Eggs,
LLC
and
Southwest
Specialty
Eggs,
LLC.
These franchisees
that were
responsible for
the 8.9% increased volume offranchise
fees, advertising
and promotion
costs associated
with those
sales, which resulted in reduced costs for us. Also, the higher prices for
conventional eggs and the comparatively lower
prices for specialty eggs sales.diminished
the need to promote specialty eggs;
as a result, EB temporarily reduced
the related
franchise fees for certain specialty egg products to encourage continued production
of these products.
 
22
Delivery expense
-
The increased
 
delivery expense
is primarily
due to
the increase
in fuel costs.
 
and labor
 
costs for
both our
fleet and
contract
trucking.
Payroll, taxes and benefits expense
-
The
decrease increase
 
in payroll,
 
taxes and
 
benefits expense
 
is primarily
 
due
 
to increased
 
a decreasewages for
 
in bonus
accruals as
well
as a
decrease
in
expense associated with the deferred compensation plan.
Other expenses
-
The increase in
other expenses is primarilyall employees
 
due to increased premiums
 
for property and casualty
insurance due to
hard the
market conditions driven by industry high loss ratios and low investment income
returns to offset losses.
inflationary market.
OPERATING
 
INCOME (LOSS)
For
the
first
quarter
of
fiscal
2022, 2023,
 
we
recorded
an
operating
loss
income of
$39.7
$163.9 million
 
compared
to
an
operating
loss
of
$27.2 $39.7 million
million for the same period of fiscal 2021.
2022.
OTHER INCOME (EXPENSE)
 
Total
 
other
 
income
 
(expense)
 
consists
 
of
 
items
 
not
 
directly
 
charged
 
or
 
related
 
to
 
operations,
 
such
 
as
 
interest
 
income
 
and
expense, royalty income, equity in income or loss of unconsolidated
entities, and
patronage income, among other items.
For the first quarter of fiscal
 
fiscal 2022,
2023, we earned $290 thousand$1.1 million of interest
 
interest income compared to $996$290 thousand for
 
thousand for the same period of
of fiscal 2021
 
.2022.
 
The decrease
increase
resulted
 
from
significantly
 
lower higher
investment
 
balances.
 
The
Company
 
recorded
interest
 
expense
of
$58148 thousand and $71$58 thousand for the first quarters
 
ended August 27, 2022 and August 28, 2021, and August 29, 2020,respectively.
Other,
 
respectively.
net for
 
the first
For
quarter ended
August 27,
2022, was
income of
$155 thousand
compared to
income of
$5.2 million
for
the same
period of
fiscal 2022.
The decrease
is primarily
due to
our acquisition
of the
remaining 50%
membership interest
in
Red
River
in
 
the
 
first
 
quarter
 
of
 
fiscal
 
2022
 
equityas
 
incomewe
recognized
a
$4.5
million
gain
due
to
the
remeasurement
 
of
 
unconsolidatedour
 
entitiesequity
investment.
INCOME TAXES
For the
 
first quarter
of fiscal
2023, pre-tax
income was
 
$135
thousand165.5 million
 
compared
to
 
a
pre-tax loss
 
of $33.9
 
$44
thousand in the prior year period.
million for
 
the same
period of
 
23
Other,fiscal 2022.
 
netWe
recorded income
tax expense
of $40.3
million for
 
the first
 
quarter endedof
 
August 28,fiscal 2023,
 
2021, waswhich reflects
an
effective
tax
rate
of
24.4%,
compared
to
an
 
income
tax
benefit
of
 
$5.2 million
compared to
income of
$512 thousand
for
the same period
of fiscal 2021. The
increase is due
to the acquisition of
Red River Valley
Egg Farm, LLC
(“Red River”) as we
recognized a $4.5 million gain due to the remeasurement of our equity investmen
t.
INCOME TAXES
For the first quarter
of fiscal 2022, pre-tax loss
was $33.9 million compared
to $25.5 million for the same
period of fiscal 2021.
We recorded
an income tax benefit of $15.8 million for the first quarter of fiscal 2022,
which includes the discrete tax benefit of
$8.315.8
 
million
 
as
discussed
in
Note
2
–
Acquisitions
of
 
the
 
Notesprior
 
year
period,
which
reflects
an
effective tax
rate of 46.8%.
Excluding the
impact of discrete
items related to
 
Condenseda $8.3
 
Consolidated
Financial
Statements
in
this
Quarterly Report. Excluding the discrete tax benefit, income
tax benefit was $7.6 million for the first quarter of fiscal 2022
with
an adjusted
effective
tax rate
of 22.4%.
Incomenet
 
tax benefit
 
was $6.1
million
forrecorded in the
 
first
quarter of
fiscal 2022
in connection
with the
Red River
Valley
Egg Farm,
LLC (“Red
River”) acquisition,
income tax
benefit
for the comparable period of fiscal 2022 was $7.6 million, which reflects an
 
of fiscal
2021,
which
reflects anadjusted effective tax rate of 24.0%22.4%.
 
At August 28, 2021 and May 29, 2021, trade and other receivables, net included
income taxes receivables of $42.5 million.
Our effective tax
 
rate differs from
 
the federal statutory income
 
tax rate due to
 
state income taxes, certain
 
federal tax credits and
certain
 
items
 
included
 
in
 
income
 
for
 
financial
 
reporting
 
purposes
 
that
 
are
 
not
 
included
 
in
 
taxable
 
income
 
for
 
income
 
tax
purposes,
 
including
 
tax
 
exempt
 
interest
 
income,
 
certain
 
nondeductible
 
expenses
 
and
 
net
 
income
 
or
 
loss
 
attributable
 
to
noncontrolling interest.
NET INCOME ATTRIBUTABLE
 
interest.TO CAL-MAINE FOODS, INC.
Net income
 
Resultsattributable to Cal-Maine
 
Foods, Inc. for
 
the
current
quarter
were
favorably
impacted
by
a
$8.3
million
discrete
tax
benefit
as
discussed in Note 2 – Acquisitions of the Notes to Condensed Consolidated Finan
cial Statements in this Quarterly Report.
NET LOSS
Net loss
for the
first quarter
 
ended August 27,
 
28, 2021,
2022, was $18.0$125.3
 
million, or $2.58
 
$0.37 per
basic and $2.57 per diluted
 
basic andcommon share, compared to net
 
diluted share,loss attributable to Cal-Maine
 
compared toFoods, Inc. of $18.0 million
 
netor $0.37
loss of $19.4 million or $0.40 per basic and diluted common share for the same period of fiscal 2022.
LIQUIDITY AND CAPITAL
 
2021.
CAPITAL RESOURCES
 
AND LIQUIDITY
Working
Capital and Current Ratio
Our working
 
capital at
 
August 28,27,
 
2021,
2022 was $362.9$548.5
 
million, compared
 
to $429.8$476.8
 
million at
 
May 29,28,
 
2021.2022. The
 
calculation of
working
capital
is
 
defined
as curr
entcurrent
 
assets
less
current
liabilities.
 
Our
current
ratio
 
was
4.72
3.4 at
August
 
28,
2021,
27, 2022, compared with
with 5.773.6 at May 29, 2021.
28, 2022. The current ratio is calculated by dividing current
 
We had
no long-term debt outstanding at
August 28, 2021 or May 29, 2021.
On July 10, 2018, we entered into
a $100.0 millionassets by current liabilities.
Senior Secured Revolving Credit
Facility (the “Revolving Credit
Facility”). As of August
28, 2021, no amounts were
borrowedCash Flows from Operating Activities
under the
Revolving Credit
Facility.
We
have $4.1
million in outstanding
standby letters of
credit, issued under
our Revolving
Credit
Facility
forFor
 
the
benefit
of
certain
insurance
companies.
Refer
to
Part
II
Item
8,
Notes
to
Consolidated
Financial
Statements
and
Supplementary
Data,
Note
10:
Credit
Facility
included
in
our
2021
Annual
Report
for
further
information
regarding our long-term debt.
For the
thirteen
 
weeks ended
 
ended August
 
28, 2021
,27, 2022,
 
$24.1 172.8
million
 
in net
 
cash
was
 
used inprovided by
 
operating
activities,
 
compared
 
to $14.8
$24.1
million used in
by operating
 
activities for
the comparable
 
period in fiscal 2021
 
.fiscal 2022.
 
This is primarily due
to the increased costs
of feed
ingredients compared to the prior year period.
We
continue to investThe increase
 
in our facilities withcash
 
$11.2 million
used to purchase property,
plant and equipment for
the thirteen weeks
ended
August
28,
2021,
compared
to
$25.3
million
in
the
same
period
of
fiscal
2021.
We
also
acquired
the
remaining
50%
membership
interest in
Red River
during our
first quarter
of fiscal
2022 for
$48.5 million.
Sales and
maturities of
investment
securities, net of
purchases, were $38.0
million for the thirteen
weeks ended August
28, 2021,
compared to $4.0 million
for the
comparable period
in fiscal 2021.
We
received $400 thousand
in distributionsflow from
 
an unconsolidated entity
in the first
quarter
of fiscal 2022
compared to $650
thousand for the
same period fiscal
of 2021.
We
used $53 thousand
for principal payments
on
finance leases in the first quarter of fiscal 2022 compared to $50
thousand for the same period of fiscal 2021.
As of
August 28,
2021,
cash decreased
$40.7 million
since May
29, 2021,
compared to
a decrease
of $35.3
million during
the
same period of fiscal 2021.operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23
24activities
resulted
primarily
from
higher
selling
prices
for
conventional
and
specialty
eggs
as
well
as
increased
volume
of
specialty
egg
sales,
partially
offset
by
increased
costs
of
feed
ingredients
compared
to
the
prior-year
period.
The
increase
in
Other adjustments, net is primarily due to a $67.4 million balance for
income taxes payable as of August 27, 2022.
Cash Flows from Investing Activities
We continue
to invest in our facilities, with $27.7
million used to purchase property,
plant and equipment for the thirteen
weeks
ended
August
27,
2022,
compared
to
$11.2
million
in
the
same
period
of
fiscal
2022. In
the
first
quarter
of
fiscal
2022,
we
acquired the
remaining 50%
membership interest
in Red
River Valley
Egg Farm,
LLC for
$44.8 million,
net of
cash acquired.
Purchases
of investments
were $51.8
million
in
the first
quarter
of fiscal
2023,
compared to
$1.4
million
in fiscal
2022.
The
increase in
purchases of
investments is
primarily due
to the
increased cash
provided by
operating activities
noted above.
Sales
and
maturities of
investment
securities were
$20.3
million
for
the thirteen
weeks ended
August
27,
2022,
compared
to $39.4
million for the comparable period in fiscal 2022.
Cash Flows from Financing Activities
We paid dividends
of $36.7 million in the first quarter of fiscal 2023.
As of
August 27,
2022,
cash increased
$76.9 million
since May
28, 2022,
compared to
a decrease
of $40.7
million during
the
same period of fiscal 2022.
Credit Facility
We
had no
long-term debt
outstanding at
August 27,
2022 or
May 28,
2022. On
November 15,
2021, we
entered into
a credit
agreement
that
provides
for
a
senior
secured
revolving
credit facility
(the
“Credit
Facility”),
in
an
initial
aggregate
principal
amount
of
up
to
$250
million
with
a
five-year
term.
As
of
August
27,
2022,
no
amounts
were
borrowed
under
the
Credit
Facility. We
have $4.1 million in
outstanding standby letters of
credit, issued under our
Credit Facility for the benefit
of certain
insurance companies. Refer
to Part II Item
8. Notes to the
Financial Statements, Note
10 – Credit
Facility included
in our 2022
Annual Report for further information regarding our long-term debt.
Material Cash Requirements
We
 
continue
 
to
monitor
 
the increasin
 
gincreasing
 
demand
for
 
cage-free
eggs
 
and
to
 
engage
with
 
our
customers
 
in an
 
effortefforts
 
to
achieve
 
a
smooth transition totoward
 
meet their announced commitment
 
commitment timeline for cage-free
 
cage-free egg sales. As previously
 
Wereported, during the
 
have invested approximatelyfirst
quarter of
 
$482
million in facilities, equipmentfiscal 2023, our
 
and related operations toBoard of Directors
 
approved another
capital project
to expand our
cage-free production
 
starting with our first facilitycapabilities.
The
 
in 2008.project
at
Chase,
Kansas
will
convert
existing
conventional
layer
capacity
to
cage-free
capacity
for
approximately
1.5
million cage-free hens and include remodels of all remaining pullet facilities. Project
completion is expected by year-end 2025.
The following table presents material construction projects approved
 
as of August 28, 202127, 2022 (in thousands):
Project(s) Type
Projected
 
Completion
Projected Cost
Spent as of
August
August 28, 202127, 2022
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2022
138,724
99,380
39,3442023
$
138,724132,161
115,343
16,818
Cage-Free Layer & Pullet Houses
Fiscal 2023
24,923
19,548
5,375
Cage-Free Layer & Pullet Houses
Fiscal 2024
42,591
383
42,208
Cage-Free Layer & Pullet Houses
Fiscal 2025
94,183
7,729
86,454
$
99,380293,858
$
39,344143,003
$
150,855
We believe our
 
current cash balances, investments, cash flows from operations, and Revolving Credit Facility
will be sufficient
to fund our
current capital needs. As we monitorneeds for at least the demand for cage-freenext 12 months.
 
eggs and our growth strategy described in Part I Item
I “Business – Growth Strategy” in our 2021 Annual Report,IMPACT OF
 
there may be a need for long-term debt financing. We
believe with
our strong balance sheet that we will have adequate access to capital markets if that need
arises.
RECENTLY
 
ISSUED/ADOPTED ACCOUNTING STANDARDS
For
 
information
 
on
 
changes
 
in
 
accounting
 
principles
 
and
 
new
 
accounting
 
policies,
 
see
 
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly
 
Report.
24
CRITICAL ACCOUNTING ESTIMATES
 
Critical accounting
 
estimates
 
are those
 
estimates
 
made
 
in accordance
 
with U.S.
 
generally
 
accepted
 
accounting
 
principles that
involve
 
a
 
significant
 
level
 
of
 
estimation
 
uncertainty
 
and
 
have
 
had
 
or
 
are
 
reasonably
 
likely
 
to
 
have
 
a
 
material
 
impact
 
on
 
our
financial
 
condition
 
or results
 
of operations.
 
There
 
have been
 
no changes
 
to our
 
critical
accounting
 
estimates identified
 
in our
20212022 Annual Report.
ITEM 3. QUANTITATIVE
 
AND QUALITATIVE
 
DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk during
 
the thirteen weeks ended August 27, 2022 from the
information provided in Item 7A. Quantitative and Qualitative Disclosures
 
25About Market Risk in our 2022 Annual Report.
ITEM 4.
 
CONTROLS
AND
PROCEDURES
 
Disclosure Controls and Procedures
Our disclosure
 
controls and
 
procedures are
 
designed to
 
provide reasonable
 
assurance that
 
information required
 
to be
 
disclosed
by us in the reports
 
we file or submit
 
under the Exchange Act
 
is recorded, processed, summarized
 
and reported, within the
 
time
periods
 
specified
 
in
 
the
 
Securities and
 
Exchange
 
Commission’s
 
rules
 
and
 
forms. Disclosure
 
controls
 
and
 
procedures
 
include,
without limitation, controls and
 
procedures designed to ensure that
 
information required to be disclosed
 
by us in the reports that
we file or submit
 
submit under the Exchange
 
Exchange Act is accumulated and
 
and communicated to management,
 
management, including our principal
 
principal executive
and
 
principal
 
financial
 
officers,
 
or
 
persons
 
performing
 
similar
 
functions,
 
as
 
appropriate
 
to
 
allow
 
timely
 
decisions
 
regarding
required disclosure. Based on an evaluation of our disclosure controls
 
controls and procedures conducted by our Chief Executive Officer
and
 
Chief
 
Financial
 
Officer,
 
together
 
with
 
other
 
financial
 
officers,
 
such
 
officers
 
concluded
 
that
 
our
 
disclosure
 
controls
 
and
procedures were effective as of August 28, 202127, 2022 at the reasonable
 
assurance level.
Changes in Internal Control Over Financial Reporting
There
 
was no
 
change
 
in our
 
internal control
 
over financial
 
reporting
 
that occurred
 
during the
 
quarter
 
ended
 
August
 
28, 202127, 2022
that has materially affected, or is reasonably likely to materially affect,
 
our internal control over financial reporting.
 
ITEM 3. QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
 
There have been no material changes in our exposure to market risk during the
 
thirteen weeks ended August 28, 2021 from the
information provided in Item 7A. Quantitative and Qualitative Disclosure
 
s
 
About Market Risk in our 2021 Annual Report.
 
 
25
PART
 
II. OTHER INFORMATION
ITEM 1.
 
LEGAL PROCEEDINGS
Refer
 
to
 
the
 
discussion
 
of
 
certain
 
legal
 
proceedings
 
involving
 
the
 
Company
 
and/or
 
its
 
subsidiaries
 
in
 
(i)
 
our
 
20212022
 
Annual
Report,
 
Part
I
 
Item 3:
3
 
Legal
Proceedings,
 
and
 
Part
II
 
Item 8,
 
Notes
to
 
Consolidated
 
Financial
 
Statements
and
 
Supplementary
Data, Note 18: Commitments
 
and Contingencies, and
 
(ii) in this Quarterly
 
Report in
of the Notes to Condensed Consolidated Financial Statements, which discussions are incorporated
 
herein by reference.
ITEM 1A.
 
RISK
FACTORS
 
There have been no material changes in the risk factors previously disclosed in the
 
Company’s 20212022 Annual
 
Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
 
PROCEEDS
 
The following table is a summary of our first quarter 20222023 share repurchases:
Issuer Purchases of Equity Securities
Total
 
Number of
Maximum Number
Shares Purchased
of Shares that
Total
 
Number
Average
as Part of Publicly
May Yet
 
Be
of Shares
Price Paid
Announced Plans
Purchased Under the
Period
Purchased (1)
per Share
Or Programs
Plans or Programs
05/30/2129/22 to 06/26/2125/22
—286
$
—47.04
—
—
06/27/2126/22 to 07/24/2123/22
404609
36.3452.48
—
—
07/25/2124/22 to 08/28/2127/22
—
—
—
—
404895
$
36.3450.74
—
—
(1)
 
As permitted under our Amended and Restated 2012
Omnibus Long
-
termLong-Term Incentive Plan, these sha
resshares were withheld
by us to satisfy
tax withholding
obligations for employees in connection with
the vesting of restricted
common stock.
26
ITEM 6. EXHIBITS
 
Exhibits
No.
Description
3.1
3.2
31.1*
31.2*
32**
101.SCH*+
Inline XBRL Taxonomy
 
Extension Schema Document
101.CAL*+
Inline XBRL Taxonomy
 
Extension Calculation Linkbase Document
101.DEF*+
Inline XBRL Taxonomy
 
Extension Definition Linkbase Document
101.LAB*+
Inline XBRL Taxonomy
 
Extension Label Linkbase Document
101.PRE*+
Inline XBRL Taxonomy
 
Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained
 
in Exhibit 101)
 
*
Filed herewith as an Exhibit.
 
**
Furnished herewith as an Exhibit.
+
Submitted electronically with this Quarterly Report.
 
26
SIGNATURES
 
Pursuant to
 
the requirements
 
of the Securities
 
Exchange Act
 
of 1934,
 
the registrant has
 
duly caused
 
this report
 
to be signed
 
on
its behalf by the undersigned, thereunto duly authorized.
CAL-MAINE FOODS, INC.
(Registrant)
Date:
 
September 28, 202127, 2022
/s/ Max P.
 
Bowman
Max P.
 
Bowman
Vice President, Chief Financial
 
Officer
(Principal Financial Officer)
໿
Date:
 
September 28, 202127, 2022
/s/ Michael D. CastleberryMatthew S. Glover
Michael D. CastleberryMatthew S. Glover
Vice President Controller– Accounting
(Principal Accounting Officer)
໿