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
NovemberAugust 27, 20212022
 
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
44,056,59944,135,851
 
shares of
 
Common Stock,
 
$0.01 par value,
 
and
4,800,000
 
shares of Class
 
A Common
 
Stock, $0.01
 
par
value, outstanding as of December 28, 2021.September 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)
 
NovemberAugust 27, 20212022
May 29, 202128, 2022
Assets
Current assets:
Cash and cash equivalents
$
15,484136,021
$
57,35259,084
Investment securities available-for-sale
69,672145,784
112,158115,429
Trade and other receivables, net
152,958178,217
126,639177,257
Income tax receivable
42,147
42,147
Inventories
236,201265,754
218,375263,316
Prepaid expenses and other current assets
6,81410,965
5,4074,286
Total current
 
assets
481,129778,888
519,931661,519
Property, plant &
 
equipment, net
667,250688,656
589,417
Finance lease right-of-use asset, net
448
525
Operating lease right-of-use asset, net
1,347
1,724677,796
Investments in unconsolidated entities
10,98515,674
54,94115,530
Goodwill
44,006
35,52544,006
Intangible assets, net
19,24117,592
20,34118,131
Other long-term assets
7,5889,913
6,77010,507
Total Assets
$
1,231,9941,554,729
$
1,229,1741,427,489
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
115,619188,689
$
89,191148,018
Current portion of finance lease obligationDividends payable
21941,742
215
Current portion of operating lease obligation
550
69136,656
Total current
 
liabilities
116,388230,431
90,097
Long-term finance lease obligation
327
438
Long-term operating lease obligation
797
1,034184,674
Other noncurrent liabilities
10,3069,706
10,41610,274
Deferred income taxes, net
106,753126,629
114,408128,196
Total liabilities
234,571366,766
216,393323,144
Commitments and contingencies - see
Note 1311
—
—
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
66,01969,017
64,04467,989
Retained earnings
959,1241,149,399
975,9771,065,854
Accumulated other comprehensive loss, net of tax
(996)(2,350)
(558)(1,596)
Common stock in treasury at cost –
26,20426,125
 
shares at NovemberAugust 27, 20212022 and
26,20226,121
shares
at May 29, 202128, 2022
(27,450)(28,495)
(27,433)(28,447)
Total Cal-Maine Foods,
 
Inc. stockholders’ equity
997,4481,188,322
1,012,7811,104,551
Noncontrolling interest in consolidated entity
(25)(359)
0(206)
Total stockholders’
 
equity
997,4231,187,963
1,012,7811,104,345
Total Liabilities and Stockholders’
 
Equity
$
1,231,9941,554,729
$
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
Twenty-six Weeks
EndedAugust 27, 2022
November 27,
August 28, 2021
November 28,
2020
November 27,
2021
November 28,
2020
Net sales
$
390,903658,344
$
347,328
$
722,607
$
640,110324,986
Cost of sales
347,156440,854
288,877
672,215
564,894318,341
Gross profit
43,747217,490
58,451
50,392
75,2166,645
Selling, general and administrative
47,78053,607
43,873
94,305
87,83846,525
(Gain) loss on disposal of fixed assets
(1,968)33
99
(2,181)
122(213)
Operating income (loss)
(2,065)163,850
14,479
(41,732)
(12,744)(39,667)
Other income (expense):
Interest income, net
129903
664
361
1,589232
Royalty income
278428
280
551
585273
Equity income of unconsolidated entities
264144
58
399
14135
Other, net
1,862155
436
7,025
9485,163
Total other income, net
2,5331,630
1,438
8,336
3,1365,803
Income (loss) before income taxes
468165,480
15,917
(33,396)
(9,608)(33,864)
Income tax expense (benefit) expense
(677)40,346
3,762
(16,515)
(2,364)(15,838)
Net income (loss)
1,145125,134
12,155
(16,881)
(7,244)(18,026)
Less: Loss attributable to noncontrolling interest
(28)(153)
0
(28)
0—
Net income (loss) attributable to Cal-Maine Foods,
Inc.
$
1,173125,287
$
12,155
$
(16,853)
$
(7,244)(18,026)
Net income (loss) per common share:
Basic
$
0.022.58
$
0.25
$
(0.34)
$
(0.15)(0.37)
Diluted
$
0.022.57
$
0.25
$
(0.34)
$
(0.15)(0.37)
Weighted average
 
shares outstanding:
Basic
48,85748,623
48,501
48,859
48,50148,858
Diluted
49,01648,811
48,645
48,859
48,50148,858
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
Comprehensive Income (Loss)
(inIn thousands)
(unaudited)(Unaudited)
Thirteen Weeks
 
Ended
Twenty-six Weeks
EndedAugust 27, 2022
November 27,
August 28, 2021
November 28,
2020
November 27,
2021
November 28,
2020
Net income (loss)
$
1,145125,134
 
$
12,155
 
$
(16,881)
$
(7,244)(18,026)
Other comprehensive income (loss), before tax:
Unrealized holding gain (loss)loss on available-for-sale
securities, net of reclassification
adjustments
(355)(997)
(373)
(579)
95(224)
Income tax benefit (expense) related to items of other
comprehensive income
87243
91
141
(23)54
Other comprehensive income (loss),loss, net of tax
(268)(754)
(282)
(438)
72(170)
Comprehensive income (loss)
877124,380
11,873
(17,319)
(7,172)(18,196)
Less: Comprehensive loss attributable to the
noncontrolling interest
(28)(153)
0
(28)
0—
Comprehensive income (loss) attributable to Cal-Maine
Foods, Inc.
$
905124,533
$
11,873
$
(17,291)
$
(7,172)(18,196)
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(inIn thousands)
(unaudited)(Unaudited)
 
Twenty-sixThirteen Weeks
 
Ended
NovemberAugust 27, 20212022
NovemberAugust 28, 20202021
Cash flows from operating activities:
Net lossincome (loss)
$
(16,881)125,134
$
(7,244)(18,026)
Depreciation and amortization
33,96917,312
29,30517,389
Deferred income taxes
(15,995)(1,324)
(2,364)(15,838)
Other adjustments, net
(16,585)31,690
(30,348)(7,637)
Net cash used inprovided by (used in) operations
(15,492)172,812
(10,651)(24,112)
Cash flows from investing activities:
Purchases of investment securities
(26,387)(51,834)
(29,637)(1,388)
Sales and maturities of investment securities
67,86420,296
59,07739,388
Distributions from unconsolidated entities
400—
2,650400
Acquisition of business, net of cash acquired
(44,823)—
0(44,823)
Purchases of property,
 
plant and equipment
(28,647)(27,662)
(52,373)(11,233)
Net proceeds from disposal of property,
 
plant and equipment
5,33878
2531,171
Net cash used in investing activities
(26,255)(59,122)
(20,030)(16,485)
Cash flows from financing activities:
Payments of dividends
(36,653)
—
Purchase of common stock by treasury
(18)(45)
(45)(18)
Principal payments on finance lease
(106)(55)
(101)
Contributions
3
5(53)
Net cash used in financing activities
(121)(36,753)
(141)(71)
Net change in cash and cash equivalents
(41,868)76,937
(30,822)(40,668)
Cash and cash equivalents at beginning of period
57,35259,084
78,13057,352
Cash and cash equivalents at end of period
$
15,484136,021
$
47,308
Supplemental Information:
Cash paid for operating leases
$
425
$
237
Interest paid
$
125
$
12916,684
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
 
fiscal year
ends on
 
the Saturday closest
 
closest to
May 31.
 
Each of
the three-month
 
periods andended on
 
year-to-date
periodsAugust 27, 2022
ended on November 27,and August 28, 2021 and November 28, 2020 included
13 weeks and 26 weeks, respectively.
.
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 credit
losses through
 
the allowance
 
for credit
 
losses, limited
 
to the amount
 
that fair value
 
was less than
 
the amortized
 
cost basis. The
cost
 
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
of
 
Operations.
 
Investments
 
in
 
mutual
 
funds
 
are
 
classified
 
as
 
“Other
 
long-term
 
assets”
 
in
 
the
 
Company’s
 
Condensed
Consolidated Balance Sheets.
Trade Receivables
 
Trade receivables
 
are stated at
 
their carrying values,
 
values, which
include a reserve
 
reserve for credit losses.
 
losses. At NovemberAs of August
 
27, 2021 and2022
 
and May
29,28,
 
2021,2022,
 
reserves
 
for
 
credit
 
losses
 
were
 
$
1.1716
 
millionthousand
 
and
 
$
795775
 
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
 
Company
 
minimizes
 
exposure
 
to
 
counter
 
party
 
credit
 
risk
 
through
 
credit
 
analysis
 
and
 
approvals,
 
credit
 
limits,
 
and
monitoring
 
procedures.
 
In
 
determining
 
our
 
reserve
 
for
 
credit
losses,
 
receivables
 
are
 
pooled
according
to
age,
with
each
pool
assigned
 
an
 
expected
 
loss
 
based
 
on
historical
loss
information
adjusted
as
needed
for
economic
and
 
other
forward-looking
factors.
8
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
non-financial assets acquired is determined internally.
Our internal valuation methodology for non-financial assets considers 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 – AcquisitionImmaterial Error Correction
Effective
 
on
 
May
 
30,
 
2021,
 
the
 
Company
 
acquired
 
the
 
remaining
50
%
 
membership
 
interest
 
in
 
Red
 
River
 
Valley
 
Egg
 
Farm,
LLC (“Red
River”),
 
including certain liabilities.
 
As a resultcertain
liabilities. During
the Company’s
third
quarter of
 
the acquisition, Red Riverfiscal 2022,
 
became a wholly ownedmanagement
 
subsidiary ofdetermined
the Company.that
 
Red River owns andit
 
operates a specialtyhad
 
shell egg productionnot
 
complex with approximately
1.7
properly
 
million cage-free
layingeliminated
 
hens,select
 
cage-freeintercompany
 
pullet
capacity,
feed
mill,
processing
plant,
related
officessales
 
and
 
outbuildingscost
 
andof
 
relatedsales
 
equipment
located on approximately
400
transactions
 
acres near Bogata, Texas.
The
following
table
summarizes
the
consideration
paid
forbetween
 
Red
 
River
 
and
 
the
corresponding
 
amountsother wholly
-owned subsidiaries
of the
Company
in its
first and
second quarter
2022 Condensed
Consolidated
Statements
 
of
 
Operations.
The
errors
resulted
in
an
overstatement
of
Net
Sales and
Cost of
Sales
of
$
6.7
million
in the
 
assets
first
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 acquired and liabilities assumed
Cash
$
3,677
Accounts receivable, net
1,980
Inventory
8,789
Property, plant and equipment
85,002
Liabilities assumed
(2,448)
Deferred income taxes
(8,481)
Total identifiable
net assets
88,519
Goodwill
8,481
$
97,000
Cash and
accounts receivable
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 primarily
of flock,
feed ingredients,
packaging, and egg
inventory.
Flock inventory was
valued at carrying
value as management believes
that their carrying value
best approximates their fair
value.
Feed ingredients, packaging
and egg
inventory were all valued based on market prices as of May 30, 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
98
Property,
quarter of fiscal 2022
 
plant and
equipment were
valued utilizing
the cost
approach which
is based
on replacement
or reproduction
costs of
the assets and subtracting any depreciation resulting from physical deterioration
and/or functional or economic obsolescence.
The Company
recognized
a gain
of $
4.5
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 the
Company’s
Condensed Consolidated
Statements of
Operations. The
acquisition of
Red River
resulted in
a discrete
tax benefit
of $
8.39.2
 
million which includes a $in the second
quarter of fiscal 2022.
There was
7.3no
 
million decrease in deferred incomeimpact to Operating
 
tax expense related to the outside-basisloss, Net income
(loss) or Net income (loss) per share.
We
 
of our equityevaluated
the
investment
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 NovemberAugust 27, 20212022 and May 29, 202128, 2022 (in
 
(in thousands):
NovemberAugust 27, 20212022
Amortized
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
91715,032
$
4—
$
0155
$
92114,877
Commercial paper
5,98315,936
0—
253
5,98115,883
Corporate bonds
54,45781,711
110—
01,237
54,56780,474
Certificates of deposits
3,263
—
48
3,215
US government and agency obligations
8,190
—
87
8,103
Asset backed securities
8,23915,620
0—
36227
8,20315,393
Treasury bills
7,870
—
31
7,839
Total current
 
investment securities
$
69,596147,622
$
114—
$
381,838
$
69,672145,784
Mutual funds
$
2,1053,467
$
1,951—
$
0130
$
4,0563,337
Total noncurrent
 
investment securities
$
2,1053,467
$
1,951—
$
0130
$
4,0563,337
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 $
67.920.3
 
million and
 
$
59.139.4
 
million during
 
the
twenty-sixthirteen
 
weeks
 
ended NovemberAugust
 
27,
 
20212022
 
and
 
NovemberAugust
 
28,
 
2020,2021,
 
respectively.
 
Gross
 
realized
 
gains
 
for
 
the
 
twenty-six
weeks endedthirteen
 
Novemberweeks
ended
August 27, 2022
and August 28,
 
2021 and
November 28,
2020 were
$
1652
 
thousand and
$
57127
 
thousand, respectively.
 
Gross realized
losses
 
losses for the thirteen
the
twenty-six
weeks
 
ended
 
NovemberAugust
 
27,
2022
and
August
28,
 
2021
 
were
 
$
6727
 
thousand.thousand
and
$
60
thousand,
respectively.
 
There
 
were
0no
gross
realized
lossesallowances
 
for
the
twenty-six weeks
ended November
28, 2020.
There were
0
allowances for
credit losses
at November
August 27, 2021
2022 and May
29,
2021. 28, 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
109
Actual maturities
 
may differ
 
from contractual
 
maturities as some
 
borrowers have
 
the right to
 
call or prepay
 
prepay obligations with
 
with or
without penalties. Contractual maturities of current investments at NovemberAugust
 
27, 20212022 are as follows (in thousands):
Estimated Fair Value
Within one year
$
41,32664,148
1-5 years
28,34681,636
Total
$
69,672145,784
Noncurrent
 
ProceedsThere were
no
 
sales of noncurrent
investment securities during
the thirteen weeks
ended August 27,
2022. Proceeds from
 
sales
and
maturities
of
noncurrent
 
investment
securities
were
$
453385
 
thousand
during
the
twenty-six thirteen
 
weeks
ended November
27,
August 28, 2021.
 
Gross
realized
gains
for
 
the
twenty-six
thirteen weeks
 
ended November
27,
August 28, 2021
 
were $
130
 
$
165
thousand. There were
0no
 
realized losses for the twenty-six
 
the thirteen
weeks ended November 27,August 28, 2021.
There were
0
sales of noncurrent
investment securities during the twenty-six weeks ended November
28, 2020.
Note 43 - 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
 
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.
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 November 27, 2021 and May
29, 2021 (in thousands):
November 27, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
0
$
921
$
0
$
921
Commercial paper
0
5,981
0
5,981
Corporate bonds
0
54,567
0
54,567
Asset backed securities
0
8,203
0
8,203
Mutual funds
4,056
0
0
4,056
Total assets measured at fair
value
$
4,056
$
69,672
$
0
$
73,728
11
May 29, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
0
$
16,480
$
0
$
16,480
Commercial paper
0
1,998
0
1,998
Corporate bonds
0
80,700
0
80,700
Certificates of deposits
0
1,076
0
1,076
Asset backed securities
0
11,904
0
11,904
Mutual funds
4,116
0
0
4,116
Total assets measured at fair
value
$
4,116
$
112,158
$
0
$
116,274
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.
Note 5 - Inventories
Inventories consisted of the following as of November 27, 2021
and May 29, 2021 (in thousands):
November 27, 2021
May 29, 2021
Flocks, net of amortization
$
139,645
$
123,860
Eggs and egg products
23,043
21,084
Feed and supplies
73,513
73,431
$
236,201
$
218,375
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
November 27, 2021 consisted of approximately
9.3
million pullets and breeders and
42.9
million layers.
Note 6 - 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) 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 most
recent quarter
for which
a dividend
was paid.
At the
end of
the second
quarter of
fiscal 2022,
the amount
of
cumulative losses to be recovered before payment of a dividend was $
21.1
million.
12
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
Twenty-six Weeks
Ended
November 27,
November 28,
November 27,
November 28,
Net income (loss)
$
1,173
$
12,155
$
(16,853)
$
(7,244)
Cumulative losses to be recovered prior to
payment of divided at beginning of period
(22,270)
(20,769)
(4,244)
(1,370)
Net income available for dividend
$
0
$
0
$
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).
Note 7 – Credit Facility
On
November
15,
2021,
we
entered
into an
Amended
and
Restated
Credit
Agreement
(the
“Credit
Agreement”)
with a
five
-
year
term.
The
Credit
Agreement
amended
and
restated
the
Company’s
previously
existing
credit
agreement
dated
July
10,
2018.
The
Credit
Agreement
provides
for
an
increased
senior
secured
revolving
credit
facility
(the
“Credit
Facility”
or
“Revolver”),
in
an
initial
aggregate
principal
amount
of
up
to
$
250
million,
which
includes
a
$
15
million
sublimit
for
the
issuance
of
standby
letters
of
credit
and
a
$
15
million
sublimit
for
swingline
loans.
The
Credit
Facility
also
includes
an
accordion
feature
permitting,
with
the
consent
of
BMO
Harris
Bank
N.A.
(the
“Administrative
Agent”),
an
increase
in
the
Credit Facility
in the
aggregate up
to $
200
million by
adding one
or more
incremental senior
secured term
loans or
increasing
one or more times the revolving commitments under the Revolver.
As of November 27, 2021,
0
amounts were borrowed under
the Credit Facility and $
4.1
million in standby letters of credit were issued under the Credit Facility.
The
interest
rate
in
connection
with
loans
made
under
the
Credit
Facility
is
based
on,
at
the
Company’s
election,
either
the
Eurodollar
Rate
plus
the
Applicable
Margin
or
the
Base
Rate
plus
the
Applicable
Margin.
The
“Eurodollar
Rate”
means
the
reserve adjusted
rate at
which Eurodollar
deposits in
the London
interbank market
for an
interest period
of
one
,
two
,
three
,
six
or
twelve
months (as
selected by
the Company)
are quoted.
The “Base
Rate” means
a fluctuating
rate per
annum equal
to the
highest
of
(a)
the
federal
funds
rate
plus
0.50
%
per
annum,
(b)
the
prime
rate
of
interest
established
by
the
Administrative
Agent, and (c) the Eurodollar Rate for
an interest period of
one
month plus
1
% per annum, subject to certain interest
rate floors.
The
“Applicable
Margin”
means
0.00
%
to
0.75
%
per
annum
for
Base
Rate
Loans
and
1.00
%
to
1.75
%
per
annum
for
Eurodollar
Rate
Loans,
in
each
case
depending
upon
the
Total
Funded
Debt
to
Capitalization
Ratio
for
the
Company
at
the
quarterly pricing
date. The
Company will pay
a commitment fee
on the unused
portion of the
Credit Facility
payable quarterly
from
0.15
%
to
0.25
%
in
each
case
depending
upon
the
Total
Funded
Debt
to
Capitalization
Ratio
for
the
Company
at
the
quarterly pricing date. The Credit Agreement contains customary provisions
regarding replacement of the Eurodollar Rate.
The
Credit
Facility
is
guaranteed
by
all the
current
and
future wholly
-owned
direct
and
indirect
domestic
subsidiaries
of
the
Company (the
“Guarantors”), and
is secured
by a
first-priority perfected
security interest
in substantially
all of
the Company’s
and
the
Guarantors’
accounts,
payment
intangibles,
instruments
(including
promissory
notes),
chattel
paper,
inventory
(including farm products) and deposit accounts maintained with the Administrative
Agent.
The
Credit
Agreement
for the
Credit
Facility
contains
customary
covenants,
including
restrictions
on
the incurrence
of
liens,
incurrence of
additional debt,
sales of
assets and
other fundamental
corporate changes
and investments.
The Credit
Agreement
requires maintenance
of two
financial covenants:
(i) a
maximum Total
Funded Debt
to Capitalization
Ratio tested
quarterly of
no greater than
50
%; and (ii) a requirement
to maintain Minimum Tangible
Net Worth
at all times of $
700
Million plus
50
% of
net
income
(if
net
income
is
positive)
less
permitted
restricted
payments
for
each
fiscal
quarter
after
November
27,
2021.
Additionally,
the Credit Agreement
requires that Fred
R. Adams Jr.’s
spouse, natural children,
sons-in-law or grandchildren,
or
any trust,
guardianship, conservatorship
or custodianship
for the primary
benefit of any
of the foregoing,
or any family
limited
partnership, similar limited liability
company or other entity
that
100
% of the voting control
of such entity is held
by any of the
foregoing, shall maintain
at least
50
% of the Company's
voting stock. Failure
to satisfy any of
these covenants will constitute
a
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1310
default under the terms ofAssets and Liabilities Measured at Fair
 
the Credit Agreement. Further,Value
 
under the terms of the Credit
Agreement, payment of dividends underon a Recurring Basis
the
Company's
current
dividend
policy
of
one-third
of
the
Company's
net
income
computed
inIn
 
accordance
 
with
 
GAAPthe
 
and
payment of otherfair
 
dividends or repurchasesvalue
 
by hierarchy
described
above,
the Company
following
table
shows
the
fair
value
 
of its capital stock
 
is allowed,financial
assets and
liabilities measured at fair value on a recurring basis as long
as after giving
effect to such
dividend
payments or
repurchases no
default has
occurredof August 27, 2022 and
is continuing
and
the sum
of cash
and cash
equivalents of
the
Company and its subsidiaries plus availability under the Credit Facility equals
at least $
50
million.
The Credit
Agreement also
includes customary
events of
default and
customary remedies
upon the
occurrence of
an event
of
default, including acceleration
of the amounts due
under the Credit Facility
and foreclosure of
the collateral securing
the Credit
Facility.
At November 27, 2021, we were in compliance with the covenant requirements of
the Credit Facility.
Note 8 - Equity
The following reflects
equity activity for
the thirteen and
twenty-six weeks ended
November 27, 2021
and November May 28,
 
2020
(in2022 (in thousands):
Thirteen Weeks
Ended NovemberAugust 27, 20212022
Cal-Maine Foods, Inc. StockholdersLevel 1
Common StockLevel 2
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
TotalLevel 3
Balance at August 28,
2021Assets
Municipal bonds
$
703—
$
4814,877
$
(27,451)—
$
65,04414,877
$Commercial paper
(728)—
$15,883
957,951—
$15,883
0Corporate bonds
$—
995,56780,474
Other comprehensive—
loss, net80,474
Certificates of taxdeposits
—
3,215
—
3,215
US government and agency obligations
—
8,103
—
8,103
Asset backed securities
—
15,393
—
15,393
Treasury bills
—
7,839
—
7,839
Mutual funds
3,337
—
—
—3,337
Total assets measured at fair
value
$
3,337
$
145,784
$
—
(268)
—
—
(268)
Stock compensation
plan transactions
—
—
1
975
—
—
—
976
Contributions
—
—
—
—
—
—
3
3
Net income (loss)
—
—
—
—
—
1,173
(28)
1,145
Balance at November
27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
$
(25)
$
997,423149,121
Thirteen Weeks
Ended NovemberMay 28, 20202022
Cal-Maine Foods, Inc. StockholdersLevel 1
Common StockLevel 2
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Income
Earnings
TotalLevel 3
Balance at August 29, 2020
Assets
Municipal bonds
$
703—
$
4810,104
$
(26,676)—
$
61,26710,104
$Commercial paper
433—
$14,868
956,170—
$14,868
991,945Corporate bonds
Other comprehensive loss, net—
73,684
—
73,684
Certificates of taxdeposits
—
1,245
—
1,245
US government and agency obligations
—
2,209
—
2,209
Asset backed securities
—
13,319
—
13,319
Mutual funds
3,752
—
—
—3,752
Total assets measured at fair
value
$
3,752
$
115,429
$
—
(282)$
—119,181
(282)
Investment
securities
–
available-for-sale
classified
as Level
2
consist
of
securities
with maturities
of
three
months
or longer
Stock compensation planwhen purchased. We
classified these securities as
current because amounts
invested are readily available
for current operations.
transactionsObservable inputs for these securities are yields, credit risks, default rates, and volatility.
—
Note 4 - Inventories
—Inventories consisted of the following as of August 27, 2022 and May 28,
2022 (in thousands):
(47)
934
August 27, 2022
—May 28, 2022
—
887
Contributions
—
—
—
5
—
—
5
Net income
—
—
—
—
—
12,155
12,155
Balance at November 28, 2020Flocks, net of amortization
$
703152,264
$
48144,051
Eggs and egg products
24,548
26,936
Feed and supplies
88,942
92,329
$
(26,723)265,754
$
62,206263,316
$
We
grow
and
maintain
flocks
of
layers
(mature
female
chickens),
pullets
(female
chickens,
under
18
weeks
of
age),
and
151breeders (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, 2022 consisted of
approximately
968,32511.4
$
million and
1,004,71011.5
million pullets and breeders
and
41.1
million and
42.2
million layers, respectively.
Note 5 - 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
) 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1411
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):
Twenty-sixThirteen Weeks
 
Ended November
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 6 - Equity
The following reflects equity activity for the thirteen weeks ended
August 27, 2022 and August 28, 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 29,28,
20212022
$
703
$
48
$
(27,433)(28,447)
$
64,04467,989
$
(558)(1,596)
$
975,9771,065,854
$
0(206)
$
1,012,7811,104,345
Other comprehensive
loss, net of tax
—
—
—
—
(438)(754)
—
—
(438)(754)
Stock compensation
plan transactions
—
—
(17)(48)
1,9751,028
—
—
—
1,958980
ContributionsDividends
—
—
—
—
—
(41,742)
—
3
3(41,742)
Net lossincome (loss)
—
—
—
—
—
(16,853)125,287
(28)(153)
(16,881)125,134
Balance at NovemberAugust
27, 20212022
$
703
$
48
$
(27,450)(28,495)
$
66,01969,017
$
(996)(2,350)
$
959,1241,149,399
$
(25)(359)
$
997,4231,187,963
Twenty-sixThirteen Weeks
 
Ended NovemberAugust 28, 20202021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. IncomeLoss
Earnings
Total
Balance at May 30, 202029, 2021
$
703
$
48
$
(26,674)(27,433)
$
60,37264,044
$
79(558)
$
975,147975,977
$
1,009,675
Impact of ASC 326
—
—
—
—
—
422
422
Balance at May 31 2020
703
48
(26,674)
60,372
79
975,569
1,010,0971,012,781
Other comprehensive income,loss, net of
tax
—
—
—
—
72(170)
—
72(170)
Stock compensation plan
transactions
—
—
(49)(18)
1,8291,000
—
—
1,780
Contributions
—
—
—
5
—
—
5982
Net loss
—
—
—
—
—
(7,244)(18,026)
(7,244)(18,026)
Balance at NovemberAugust 28, 20202021
$
703
$
48
$
(26,723)(27,451)
$
62,20665,044
$
151(728)
$
968,325957,951
$
1,004,710995,567
Note 9 - 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
145
thousand and
139
thousand were
antidilutive due
to the
net
losses for the first twenty-six weeks of fiscal 2022
and 2021, respectively. These
shares were not included in the diluted net loss
per share calculation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
��
1512
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
Twenty-six Weeks
EndedAugust 27, 2022
November 27,
August 28, 2021
November 28,
2020
November 27,
2021
November 28,
2020
Numerator
Net income (loss)
$
1,145125,134
$
12,155
$
(16,881)
$
(7,244)(18,026)
Less: Loss attributable to noncontrolling
interest
(28)(153)
0
(28)
0—
Net income (loss) attributable to Cal-
MaineCal-Maine Foods, Inc.
$
1,173125,287
$
12,155
$
(16,853)
$
(7,244)(18,026)
Denominator
Weighted-average
 
common shares
outstanding, basic
48,85748,623
48,501
48,859
48,50148,858
Effect of dilutive restricted shares
159
144
—188
—
Weighted-average
 
common shares
outstanding, diluted
49,01648,811
48,645
48,859
48,50148,858
Net income (loss) per common share
attributable to Cal-Maine Foods,
Inc.
Basic
$
0.022.58
$
0.25
$
(0.34)
$
(0.15)(0.37)
Diluted
$
0.022.57
$
0.25
$
(0.34)
$
(0.15)(0.37)
Note 10 -8 – Revenue Recognitionfrom Contracts with Customers
Satisfaction of Performance Obligation
MostThe vast majority of the Company’s
 
Company’s revenue is derived from agreements with customers based on the customer
placing an order
for products. Pricing
for the most part
 
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
 
and the
customer agree
 
upon the specific
 
specific order,
which establishes
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
 
of
production.
 
The
Company’s
 
sales
predominantly
 
contain
 
a
single
 
performance
obligation.
 
We
 
recognize
 
revenue
upon
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 an
allowance
for
returns
and
 
refunds
by
using
 
historical return
return
data
 
and
 
comparing
 
to current
 
period
 
sales and
 
accounts receivable.
 
receivable. The
allowance
 
is recorded
 
as a
 
reduction
 
in sales
with
a
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.’’
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1613
Disaggregation of Revenue
The following table provides revenue disaggregated by product category
 
(in thousands):
Thirteen Weeks
 
Ended
Twenty-six Weeks
EndedAugust 27, 2022
November 27,August 28, 2021
November 28, 2020
November 27, 2021
November 28, 2020
Conventional shell egg sales
$
223,258425,589
$
201,725
$
405,807
$
357,109182,030
Specialty shell egg sales
155,853200,820
134,082
294,510
263,327132,458
Egg products
11,40127,640
9,932
20,767
16,6379,366
Other
3914,295
1,589
1,523
3,0371,132
$
390,903658,344
$
347,328
$
722,607
$
640,110324,986
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
 
is amortized over
 
over the contract
 
contract life as
 
as a
reduction
 
in net
 
sales. As
 
of NovemberAugust
 
27, 2021,
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
 
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
 
the contract.
Note 11 - Leases
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):
Thirteen Weeks
Ended
Twenty-six Weeks
Ended
November 27, 2021
November 27, 2021
Operating lease cost
$
208
$
425
Finance lease cost
Amortization of right-of-use asset
$
44
$
88
Interest on lease obligations
$
7
$
14
Short term lease cost
$
1,097
$
2,135
17
Future minimum lease payments under non-cancelable leases are as follows
(in thousands):
As of November 27, 2021
Operating Leases
Finance Leases
Remainder fiscal 2022
$
378
$
120
2023
539
239
2024
380
217
2025
130
0
2026
26
0
2027
5
0
Total
1,458
576
Less imputed interest
(111)
(30)
Total
$
1,347
$
546
The
weighted-average
remaining
lease
term
and
discount
rate
for
lease
liabilities
included
in
our
Condensed
Consolidated
Balance Sheet are as follows:
As of November 27, 2021
Operating Leases
Finance Leases
Weighted-average
remaining lease term (years)
2.6
2.0
Weighted-average
discount rate
5.9
%
4.9
%
Note 129 - Stock Based Compensation
Total stock-based
 
compensation expense was $
2.0
million and $
1.81.0
 
million for the twenty-sixthirteen weeks
ended NovemberAugust 27, 2021
2022 and NovemberAugust 28, 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
November
August 27,
2021
2022 of
$
4.65.9
 
million will be recorded over a weighted average
period
 
will
be
recorded
over
a
weighted
average period of
1.71.9
 
years.
Refer
to
Part
 
II
Item
8,
 
Notes
to
Consolidated
 
Financial
Statements
and
 
Supplementary
Data,
Note
16:
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 twenty-sixthirteen weeks ended NovemberAugust 27, 20212022 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
(1,460)(2,778)
37.7039.48
Outstanding, NovemberAugust 27, 20212022
299,328311,826
$
39.3839.12
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.
14
Note 1311 - Commitments and Contingencies
Financial Instruments
The
Company
maintained
 
standby
letters
of
credit
 
("LOC"(“LOCs”)
totaling
$
4.1
 
million
at
November
August 27,
 
20212022, which were issued
 
which
were
issuedunder
under
the
Company's
Credit
Facility.
 
The
outstanding
LOCs
are
for
the
 
benefit
of
certain
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
18
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
 
filed a motion
 
motion to strike,
 
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’
first
amended
class
action
complaint; thereafter,
the court
entered a
final judgment
in favor
of the
 
Company andplaintiffs’
class action
 
certain other
defendants dismissing
the
case without
prejudice.complaint. On
 
October 18,September 6,
 
2021, plaintiffs2022, the
 
plaintiffs’ filed a
their opposition
to the
 
motion to
 
alter ordismiss and
 
amend the Company
and other
 
final judgementdefendants filed
 
and allow
a filing
of
a
second
amended
complaint.
The
Company
responded
their reply on
 
NovemberSeptember 13,
 
1,
2021.
2022. The
 
court
has
not
 
ruledissued a ruling.
 
onManagement believes
 
the
plaintiffs’ risk
motion.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,
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
19
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
 
its affiliate, George’s,
Inc. and
 
its affiliate,
 
Peterson Farms, Inc.
 
and Simmons Foods,
 
Inc. The
 
State of Oklahoma
 
claims that through
 
the disposal of
chicken
 
litter the
 
defendants have
 
polluted the
 
Illinois River
 
Watershed.
 
This watershed
 
provides
 
water to
 
eastern Oklahoma.
The complaint
 
seeks injunctive
 
relief and
 
monetary damages,
 
but the
 
claim for
 
monetary damages
 
has been
 
dismissed by
 
the
court.
 
Cal-Maine
 
Foods,
 
Inc.
 
discontinued
 
operations
 
in
 
the
 
watershed.
 
Accordingly,
 
we
 
do
 
not
 
anticipate
 
that
 
Cal-Maine
Foods,
 
Inc.
 
will
 
be
 
materially
 
affected
 
by
 
the
 
request
 
for
 
injunctive
 
relief
 
unless
 
the
 
court
 
orders
 
substantial
 
affirmative
remediation. Since
 
the litigation
 
began, Cal-Maine
 
Foods, Inc.
 
purchased
100
% of the
 
membership interests
 
of Benton
 
County
Foods, LLC,
 
which is
 
an ongoing
 
commercial shell
 
egg operation
 
within the
 
Illinois River
 
Watershed.
 
Benton County
 
Foods,
LLC is not a defendant in the litigation.
The trial in the case
 
began in September 2009 and
 
concluded in February 2010. The
 
case was tried 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.
2016
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
 
in Part II Item
 
7 of the Company’s
 
Annual Report on
 
Form 10-K for its
 
fiscal year ended May
 
29, 202128, 2022
(the “2021“2022 Annual Report”), and the accompanying financial statements and
 
notes included in Part II Item 8 of the 20212022 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
 
changes
that
may
cause
conditions
to
 
completing
a
pending
acquisition not
to be
 
met, (vi) risks
risks relating
 
to
the
 
evolving
COVID-19
 
pandemic,
including
 
without
limitation
 
increased costs
and growing
 
inflationary costs
and
rising
inflation
and
interest
rates, andwhich
generally have been
exacerbated by Russia’s
invasion of Ukraine
starting February 2022,
 
(vii) our ability
to retain
existing
customers,
acquire
new
customers
and
grow
our
product
mix
and
(viii)
adverse
results
 
in
pending
 
litigation
matters. Readers
 
are
cautioned
 
not
to
place
 
undue
reliance
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-
forward-lookinglooking
 
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,
 
forward-
looking statements, whether because of
new information, future events,
 
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.
 
Our
 
operations
 
are
 
fully
 
integrated
 
under
 
one
 
operating
 
segment.
 
We
 
are
 
the
largest producer
 
and distributor
 
of fresh
 
shell eggs
 
in the
 
United States
 
(“U.S.”).
 
Our total flock
 
of approximately
 
42.941.1 million
layers
 
and
 
9.311.4
 
million
 
pullets
 
and
 
breeders
 
is
 
the
 
largest
 
in
 
the
 
U.S.
 
We
 
sell
 
most
 
of
 
our
 
shell
 
eggs
 
to
 
a
 
diverse
 
group
 
of
customers, including
 
national and
 
regional grocery
 
store chains,
 
club stores,
 
companies servicing
 
independent supermarkets
 
in
the U.S., food
 
service distributors, and
 
egg product consumers
 
in states across
 
the southwestern, southeastern,
 
mid-western and
mid-Atlantic regions of the U.S.
We
are
a
member
of
the
Eggland’s
Best,
Inc.
(“EB”)
cooperative
and
produce,
market
and
distribute
EB
and
Land
O'Lakes
branded
eggs,
both
directly
and
through
our
joint
ventures
Specialty
Eggs,
LLC
and
Southwest
Specialty
Eggs,
LLC,
under
exclusive
license
agreements
in
Alabama,
Arizona,
Florida,
Georgia,
Louisiana,
Mississippi
and
Texas,
and
in
portions
of
Arkansas, California,
Nevada, North
Carolina Oklahoma
and South
Carolina.
We
also have
an exclusive
license in
New York
City in addition to exclusivity in select New York
metropolitan areas, including areas within New Jersey and Pennsylvania.
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
White Large, Southeast
Regional Egg Market Price per
dozen eggs
(“UB southeast large
index”) for the first
half of fiscal year
2022
ranged from a low
of $1.00 in June
2021 to a high of
$1.66 in
November 2021.
21
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
 
offerings,
 
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
 
current
 
business,
 
the
 
free-range
 
and
 
pasture-raised
 
eggs
 
we
 
produce
 
and
 
sell
represent attractive offerings
 
to 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
approximately
24% 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.
In
California
and
Massachusetts, which represent about
14% of the total U.S. population
according to the 2020 U.S.
Census, cage-free legislation
goes into effect
January 1, 2022.
For additional information,
see the 2021
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.”
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.
COVID-19HPAI
Since earlyWe
 
2020, are
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,
 
479
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
each 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
 
aan
 
specialimpact
 
responsibilityon
the
overall
supply of
eggs through
the balance
of this
calendar year
and possibly
beyond. According
 
to LEAP
 
maintainMarket Analytics,
layer hen inventory is not projected to exceed the 320 million mark until October
 
ourof 2023.
While no
 
normalfarm is
 
workimmune from
 
schedule.
As
such,HPAI,
 
we believe
 
arewe have implemented
 
in
regular
communication with our managers across our operations and continue
 
to closely monitor the situation inmaintain
robust biosecurity
programs
across our facilities and in the
communities where we live and work.locations. We
 
have implemented procedures designed to protect our employees, takingare also working closely with federal, state and local government
 
into accountofficials and focused industry groups
guidelinesto mitigate the risk of this and future outbreaks and effectively manage
 
publishedour response, if needed.
CAGE-FREE EGGS
Ten
 
bystates
 
the Centershave
passed
legislation
or
regulations
mandating
minimum
space
or
cage-free
requirements
 
for
 
Disease Controlegg
production
or
mandated
the
sale
of
only
cage-free
eggs
 
and
 
otheregg
 
government
health
agencies,
and
we
have
strict sanitation
protocols
and
biosecurity
measuresproducts
 
in
 
placetheir
 
throughout
our
operationsstates,
 
with
 
restricted
access
to
visitors.
There
are
no known
indications that COVID-19 affects chickens 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
negative
impact
on our
business
through
disruptions in
the
supply chain such
as increased costs and
limited availability of packaging
supplies, and increased labor
costs and medical costs
and, more recently,
inflation.
In the
second quarters
of fiscal
2022 and
2021, we
spent approximately
$713 thousand
and $612
thousand (excluding
medical
insurance
claims) related
to the
pandemic
and its
effects,
respectively.
The majority
of these
expenses
in fiscal
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
related
to
COVID-19
paid
during
the
second
quarter of fiscal
2022 were an
additional $870
thousand as compared
to $529 thousand
paid in the
comparable quarter in
fiscal
2021.
22
In the
first half
of fiscal
2022 and
2021, we
spent approximately
$1.3 million
and $1.4
million
(excluding
medical insurance
claims)
related
to
the
pandemic
and
its
effects,
respectively.
The
majorityimplementation
 
of
 
these
 
expenseslaws
 
inranging
 
fiscalfrom
January
 
2022
 
resultedto
 
from
additionalJanuary
 
labor2026.
 
costsThese
 
andstates
 
increasedrepresent
 
costapproximately
27%
 
of
 
packaging
materials,
primarily
reflected
in
cost
of
sales.
In
fiscal
2021,
most
of
these
expenses
related
to
additional
labor
costs.
Medical
insurance
claims
related
to
COVID-19
paid
during
the
 
firstU.S.
 
halftotal
 
of
fiscal 2022 were an additional $1.1 million as compared to $818 thousand paidpopulation
 
in the comparable period in fiscal 2021.
EXECUTIVE OVERVIEW
For the second quarter of fiscal 2022,
we recorded a gross profit of $43.7 million compared to $58.5
million for the same period
of
fiscal
2021,
with
the
decrease
due
primarilyaccording
 
to
 
the 2020
U.S. Census.
 
higherIn California
 
costsand Massachusetts,
which
collectively represent
14% of
 
feedthe total
 
ingredientsU.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
 
higherpricing
 
processingof
 
costs.eggs (conventional
 
Ouras well
 
total
dozens soldas specialty)
 
increased 0.9%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 276.1availability
 
million dozenof 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
an
effort
to
achieve
a
smooth
transition
in meeting
their announced
goals and
needs.
Sales of
cage-free
eggs represented
approximately
19.4% of
our shell eggs
egg revenues
 
for the
 
secondfirst quarter
 
of fiscal
 
2022 compared
to 273.7
million
dozen for
the same
period of
fiscal 2021.
For the
second quarter
of fiscal
2022, conventional
dozens sold
decreased 4.4%
and
specialty dozens sold
increased 15.7%
as compared to
the same quarter
in fiscal 2021.
Specialty dozens sold
increased as more
cage-free facilities came into production which helped increase our
cage-free egg sales.
The
daily
average
price
for
the
UB
southeast
large
index
for
the
second
quarter
of
fiscal
2022
increased
14.6%
from
the
comparable period
in the
prior year.
Our net
average selling
price per
dozen for
the second
quarter of
fiscal 2022
was $1.373
compared to $1.227
in the prior-year
period. Hen numbers
reported by the
USDA as of December
1, 2021, were
327.8 million,
which is approximately 913
thousand more hens than
the comparable period of
the prior year.
The USDA also reported
that the
hatch
from
July
2021
through
November
2021
decreased
2.0%
compared
to
the
prior-year
period.
As
of
December 1,
2021,
eggs in incubators were down 9% versus the prior-year period.
Our farm
production costs
per dozen
produced for
the second
quarter of
fiscal 2022
increased 21.6%,
or $0.156,
compared to
the second
quarter of
fiscal 2021.
This increase
was primarily
due to
increased prices
for feed
ingredients. Feed
costs started
trending
higher
midway
through
the
second
quarter
of
fiscal
2021
and
have
remained
elevated
compared
to
historical
costs.
Though these feed costs
began trending higher
in fiscal 2021, we initially
benefitted from filling our
storage bins at harvest and
locking in the
basis portion of
our grain purchases
several months in
advance,
which reduced our
feed costs in
fiscal 2021. We
did not
experience the
same benefits
in fiscal
2022 given
sustained elevated
feed costs
that increased
our feed
costs compared
to
the
comparable
fiscal
2021
period.
For
the
second
quarter
of
fiscal
2022,
the
average
Chicago
Board
of
Trade
(“CBOT”)
daily market
price was
$5.43 per
bushel for
corn and
$338 per
ton for
soybean meal,
representing an
increase of
38.4% and
a
decrease of
5.9%, respectively,
compared to
the average
daily CBOT
prices for
the comparable
period in
the prior
year.
Other
farm
production
costs for
the second
quarter
of
fiscal
2022
increased
11.9%
versus
the
comparable
period
in
the prior
fiscal
year, driven by higher flock amortization
and facility expense.
Effective
May
30,
2021,
we
acquired
the
remaining
50%
membership
interest
in
Red
River
Valley
Egg
Farm,
LLC
(“Red
River”). 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.
For additional
information,
see
of the
Notes to
Condensed
Consolidated Financial Statements included in this Quarterly Report.
During October
2021, we
announced
that our
Board of
Directors approved
a strategic
investment that
will specialize
in high-
value
commercial
product
solutions
targeting
specific
needs
in
the
food
industry.
The
initial
focus
will
include
hard-cooked
eggs.
The
new
entity,
located
in
Neosho,
Missouri,
will
operate
as
MeadowCreek
Foods,
LLC
(“MeadowCreek”).2023.
 
We
 
will
capitalize MeadowCreekhave invested
 
with upsignificant capital
 
to $18.5in recent
 
million inyears to
 
debtacquire and
 
equity to
purchase property
and equipment
and to
fund workingconstruct
capital,
cage-free facilities, and we
will retain
a controlling
interest in
the venture.
We
will serve
as the
preferred provider
to supply
specialty and
conventional
eggs
that
MeadowCreek
needs
to
manufacture
egg
products.
MeadowCreek’s
marketing
plan
is
designed
to
extend
our
reach
in
the
foodservice
and
retail
marketplace
and
bring
new
opportunities
in
the
restaurant,
institutional
and
industrial food products arenas.
Also during
October 2021,
 
we announcedexpect our focus
 
that ourfor future expansion will
 
Board of
Directors
approved a
$23.0 million
capital project
to expand
our
cage-free egg production
at our Okeechobee,
Florida, production facility.
The project is
designedcontinue to include
the construction of
two cage-free layer
houses and one cage-free
 
pullet house with capacityfacilities. At the same
 
for approximately 400,000
cage-free hens and 210,000
pullets, respectively.
Construction
has commenced,
with first
pullet placements
planned
by mid-May
2022 and
the first
layer
house planned
to be
finished by
October 1,
2022, with
the second
layer house
and project completion
expected by
February 1,
2023. The Company
plans to fund the
project through a combination
of available cash on
hand, investments and
operating cash
flow.
Effective December
5, 2021, we made
an additional investment
in our joint
venture Southwest Specialty
Eggs, LLC, to acquire
warehouse
and
distribution
capability
to
expand
Southwest
Specialty
Eggs,
LLC’s
customer
base
in the
southern
California, Arizona and Nevada markets.
time,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2318
we
understand
the
importance
of
our
continued
ability
to provide
more
affordable
conventional
eggs
in
order
to
provide
our
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
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. Layer
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,
2022,
however,
eggs
in
incubators were up 9.0% year-over-year,
indicating that layer flocks may increase in the future.
Our farm
production costs
per dozen
produced for
the first
quarter of
fiscal 2023
increased 16.5%,
or $0.148,
compared to
the
first quarter of fiscal 2022
.
This increase was primarily
due to increased prices for
feed ingredients and a higher
basis in corn in
most of
our production
areas.
For the
first quarter
of fiscal
2023, the
average Chicago
Board of
Trade (“CBOT”)
daily market
price
was
$6.65
per
bushel
for
corn
and
$456
per
ton
for
soybean
meal,
representing
increases
of
11.5%
and
25.4%,
respectively, compared
to the average daily CBOT prices for the comparable period in the prior
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
Twenty-six Weeks
EndedAugust 27, 2022
November 27,August 28, 2021
November 28, 2020
November 27, 2021
November 28, 2020
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
88.867.0
%
83.2
%
93.0
%
88.298.0
%
Gross profit
11.233.0
%
16.8
%
7.0
%
11.82.0
%
Selling, general and administrative
12.28.1
%
12.6
%
13.1
%
13.714.3
%
(Gain) loss on disposal of fixed assets
(0.5)
%
—
%
(0.3)
%
—(0.1)
%
Operating income (loss)
(0.5)24.9
%
4.2
%
(5.8)
%
(1.9)(12.2)
%
Total other income, net
0.60.2
%
0.4
%
1.2
%
0.51.8
%
Income (loss) before income taxes
0.125.1
%
4.6
%
(4.6)
%
(1.4)(10.4)
%
Income tax expense (benefit) expense
(0.2)6.1
%
1.1
%
(2.3)
%
(0.4)(4.9)
%
Net income (loss)
0.319.0
%
3.5
%
(2.3)
%
(1.0)(5.5)
%
NET SALES
Total
 
net
sales for
the
second quarter
of
fiscal
2022
were $390.9
million
compared
to $347.3
million
for
the same
period
of
fiscal 2021.
Net
shell
egg
sales
represented
97.1%
of
total
net
sales
for
the
second
quarters
of
fiscal
2022
and
2021.
Shell
egg
sales
classified
as “Other”
represent
sales of
hard-cooked
eggs,
hatching
eggs and
other
miscellaneous
products
included
with
our
shell egg operations.
Total
net
sales for
 
the twenty-sixfirst quarter
 
weeks
ended
November 27,
2021of fiscal 2023
 
were a record
 
$722.6658.3 million
 
compared
to $640.1$325.0
 
million for the
 
for
thesame period
comparable period of fiscal 2021.
Net
shell
egg
sales
represented
97.1%
and
97.4%
of
total
net
sales
for
the
twenty-six
weeks
ended
November
27,
2021
and
November 28, 2020, respectively.
2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 of hard-cooked
 
eggs and other
 
miscellaneous byproducts included
 
with our
shell egg operations.
 
The table below presents an analysis of our conventional and specialty shell egg
 
sales (in thousands, except percentage data):
Thirteen Weeks
 
Ended
August 27, 2022
August 28, 2021
Total net sales
$
658,344
$
324,986
Conventional
$
425,589
67.5
%
$
182,030
57.6
%
Specialty
200,820
31.8
%
132,458
42.0
%
Egg sales, net
626,409
99.3
%
314,488
99.6
%
Other
4,295
0.7
%
1,132
0.4
%
Net shell egg sales
$
630,704
100.0
%
$
315,620
100.0
%
Net shell egg sales as a percent of total net sales
95.8
%
97.1
%
Dozens sold:
Conventional
179,712
65.3
%
183,872
72.2
%
Specialty
95,605
34.7
%
70,750
27.8
%
Total dozens sold
275,317
100.0
%
254,622
100.0
%
Net average selling price per dozen:
Conventional
$
2.368
$
0.990
Specialty
$
2.101
$
1.872
All shell eggs
$
2.275
$
1.235
Egg products sales:
 
Egg products net sales
27,640
9,366
Pounds sold
16,502
15,269
Net average selling price per pound
1.675
0.613
Shell egg net sales
First Quarter – Fiscal 2023
 
vs. Fiscal 2022
-
In the
first quarter
of fiscal
2023,
conventional
egg sales
increased
$243.6 million,
or 133.8%,
compared to
the first
quarter of
fiscal 2022,
primarily due
to the
increase in
price for
conventional shell
eggs,
partially offset
by a decrease
in volume of
conventional eggs sold.
Changes in price
resulted in a
$247.6 million
increase and the
change in volume
resulted in a $4.1 million decrease in net sales, respectively.
-
We believe
prices for conventional eggs
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 further
increased in
the first
quarter of fiscal 2023 primarily due to decreased supply caused by the HPAI
outbreak, discussed above.
-
Conventional
egg
prices
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
reaching
near
historical
highs,
the
average
selling
price
for
conventional
eggs
exceeded
the
average selling price for specialty eggs in the first quarter of fiscal 2023.
-
Specialty egg sales increased $68.4 million, or
51.6%, in the first quarter of fiscal 2023
compared to the first quarter of
fiscal 2022,
primarily due
to a
35.1% increase
in the
volume of
specialty eggs
sold, which
resulted in
a $46.5
million
increase in net sales.
-
According
to
Information
Resources,
Inc.,
Total
US
–
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
this
increase in
demand was
positively impacted
by the
higher conventional
egg prices
as compared
to the
same period
in
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2420
The table below presents an analysis of our conventional and specialty shell egg
sales (in thousands, except percentage data):
Thirteen Weeks
Ended
Twenty-six Weeks
Ended
November 27, 2021
November 28, 2020
November 27, 2021
November 28, 2020
Total net sales
$
390,903
$
347,328
$
722,607
$
640,110
Conventional
$
223,258
58.8
%
$
201,725
59.8
%
$
405,807
57.8
%
$
357,109
57.3
%
Specialty
155,853
41.1
%
134,082
39.7
%
294,510
42.0
%
263,327
42.2
%
Egg sales, net
379,111
99.9
%
335,807
99.5
%
700,317
99.8
%
620,436
99.5
%
Other
391
0.1
%
1,589
0.5
%
1,523
0.2
%
3,037
0.5
%
Net shell egg sales
$
379,502
100.0
%
$
337,396
100.0
%
$
701,840
100.0
%
$
623,473
100.0
%
Net shell egg sales as a
percent of total net sales
97.1
%
97.1
%
97.1
%
97.4
%
Dozens sold:
Conventional
192,403
69.7
%
201,317
73.6
%
376,890
70.4
%
396,555
73.8
%
Specialty
83,705
30.3
%
72,334
26.4
%
158,603
29.6
%
141,090
26.2
%
Total dozens sold
276,108
100.0
%
273,651
100.0
%
535,493
100.0
%
537,645
100.0
%
Net average selling price per
dozen:
Conventional
$
1.160
$
1.002
$
1.077
$
0.901
Specialty
$
1.862
$
1.854
$
1.857
$
1.866
All shell eggs
$
1.373
$
1.227
$
1.308
$
1.154
Egg products sales:
Egg products net sales
11,401
9,932
20,767
16,637
Pounds sold
16,009
15,967
31,278
30,996
Net average selling price per
pound
0.712
0.622
0.664
0.537
Shell egg net sales
Second Quarter – Fiscal 2022 vs. Fiscal 2021
-
In the second quarter of fiscal
2022,
conventional egg sales increased $21.5
million, or 10.7%, compared to
the second
quarter of
fiscal 2021,
primarily due
to the
 
increase inprior
 
price year.
Demand
for
 
conventional shellspecialty
 
eggs
 
partially offsetwas
further
positively
affected
 
by a decrease
in volume
 
of conventionalCalifornia’s
 
eggs sold.
Changes in
price resulted
in a
$30.4 million
increase and
 
the changeMassachusetts’s
 
in volumecage-
resulted in a $10.3 million decrease in net sales, respectively.free mandates going into effect January 1, 2022, as well as more
retailers shifting to selling more cage-free products.
-
WeOur
 
believe prices
for conventional
eggs were
positively impacted
by a
decrease in
the conventional
production layer
hen
flock.
According
to
reports from
the
USDA,
as
of
November
1,
2021,
the
estimated
number
of
hens
producing
conventional
eggs decreased
11.3
million, or
4.6%, versus
the prior-year
comparable period.
In addition,
foodservice
demand
improved
compared
to
the
comparable
prior-year
period.
Lower
conventionalspecialty
 
egg
 
pricessales
 
in
 
the
 
prior-year
period were
primarily tied
to a
surplus of
conventional eggs
entering the
retail channel
from the
foodservice channel
during
the pandemic.
A stronger
export market
in our
second quarter
of fiscal
2022 also
supported
conventional egg
prices.
-
The
decrease
in
volume
of
conventional
eggs
sold
was
primarily
due
to
elevated
retail
demand
during
the
second
quarter
of fiscal
2021 given
consumers’
preferences
to purchase
eggs for
in-home
meal preparation
during
the more
restrictive
phases
of
governmental
and
business
shutdowns
due
to
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
$21.8
million,
or
16.2%,
in
the
secondfirst
 
quarter
 
of
 
fiscal
 
20222023
 
compared
toversus
 
the
 
second
quarter ofprior-year
 
fiscal 2021,
primarily due
to a
15.7% increase
in the
volume of
specialty eggs
sold, of
which resulted
in a
$21.2
million increase
in net
sales. Our
specialty egg
sales in
the second
quarter of
fiscal 2022
versus the
prior-year
period benefitted from our acquisition of the remaining 50% membership
interest in Red River, which helped drive
our
cage-free
egg
retail
sales.
Our
cage-free
sales
also
 
benefitted
 
from
 
the
strong
demand
for
specialty
eggs
as
we
placed
more
of
our
 
continuedcage-free
 
investmentfacilities
 
ininto
 
expanded
cage-free
25
capabilities as additional
cage-free production,
 
capacity came onlineand
 
during the quarter.we
better
utilized
our
existing cage-free production capacity.
 
Cage-free egg sales for the first
 
comprised
24.0%quarter of our total sales in second quarter fiscal 2022 and 23.8% of total sales fiscal year-to-date.
-
We
believe that
the demand
for specialty
eggs has increased
as consumers
have evolved
their preferences
to purchase
higher-priced
specialty
eggs for
at-home
meal preparation
and
as retailers
have
committed
to selling
more cage-free
products.
Twenty-six weeks – Fiscal 2022
vs. Fiscal 2021
-
For
the
twenty-six
weeks
ended
November
27,
2021,
conventional
egg
sales
increased
$48.7
million
or
13.6%
compared
to
the
same
period
of
fiscal
2021,
primarily
due
to
the
increase
in
price,
partially
offset
by
a
decrease
in
volume of conventional eggs
sold. Changes in price resulted in
a $66.3 million increase and
change in volume resulted
in a $21.2 million decrease in net sales, respectively.
-
We
believe prices
for conventional
eggs were
positively impacted
by a
decrease in
the conventional
production layer
hen
flock.
In
addition,
foodservice
demand
improved
compared
to
the
same
period
in
the
prior
year.
Lower
conventional
egg
prices
in
the prior
-year
period
were
primarily
due
to
conventional
eggs entering
the
retail
channel
from the foodservice channel due to the pandemic.
-
The decrease
in volume of
conventional eggs
sold was primarily
due to elevated
retail demand
during the
first half
of
fiscal
2021
due
to
consumers’
preferences
to
purchase
eggs for
in-home
meal
preparation
due
to
the
pandemic.
We
saw this
consumer preference
begin to
shift in
the fourth quarter2023 represented 19.4%
 
of fiscal
2021 as
consumers began
to resume
out-of-our
home dining and prepare fewer meals at home.
-
Specialtytotal net shell egg
 
sales increased
$31.2 million,
or 11.8%,versus 22.1%
 
for the same prior
 
twenty-six weeks
ended November
27, 2021
compared
to the
sameyear period
of fiscal
2021, primarily
due to
a 12.4%
increase in
 
the volumehigher conventional
 
egg prices. Cage-free
dozens sold increased 58% in the first of specialtyquarter of fiscal 2023 as compared
 
dozens sold,
partially
offset by a
decrease in specialty egg
prices. Changes in price
resulted in a $1.4
million decrease and
change in volume
resulted
in
a
$32.5
million
increase
in
net
sales,
respectively.
We
also
benefitted
from
our
additional
cage-free
production capacity.to the first quarter of fiscal 2022.
Egg products net sales
SecondFirst Quarter – Fiscal 2022 2023
vs. Fiscal 20212022
-
Egg
 
products
 
net
 
sales
increased
 
$1.518.3
 
million
 
or
 
14.8%195.1%
 
for
 
the
 
secondfirst
 
quarter
 
of
 
fiscal
 
20222023
 
compared
 
to
 
the
 
same
period of fiscal
 
2021, fiscal 2022,
primarily due
 
to a 14.5%
 
173.2% selling
price increase,
 
which had a
 
$1.4 a $17.5
million positive
 
impact on net
net sales.
-
Selling
prices
for
egg
products
in
the
second
quarter
of
fiscal
2021
were
negatively
impacted
by
a
decline
in
foodservice demand due to the pandemic.
Our egg products
net average selling
 
price increased in
the secondfirst quarter
 
of fiscal 2023,
compared to the
first quarter of
fiscal 2022 compared
as the supply decreased due to the same periodHPAI
 
outbreak that started in fiscal 2021February 2022. We
 
as foodservice channelbelieve 13.4 million of
the
 
demand has begun
to shift more
to pre-
pandemic levels.
Twenty-six weeks – Fiscal 2022
vs. Fiscal 2021
-
Egg products
net sales
increased $4.133.7
 
million or
 
24.8%, primarilylayers
 
due to
a 23.6%
selling price
increase compared
to
the first twenty-six weeks of fiscal 2021, which had a $4.0 million positive
impact on net sales.
-
Our egg products net average selling
price increased in the twenty-six
weeks end November 27, 2021, compared
to the
same
period
in
fiscal
2021culled
 
as
 
foodservicea
 
channelresult
 
demandof
 
hasthe
 
begunHPAI
outbreak
were
located
at
facilities
dedicated
 
to
 
shiftsupport
 
more
towards
pre-pandemic
levels.inline
Selling
prices
for
egg
products
breaking facilities in
the
twenty-six
weeks
ended
November
28,
2020
were
negatively
impacted
by
a
decline in
foodservice demand
during the
more restrictive
phases of
governmental Iowa and
business shutdowns
due to
the
pandemic. Ohio.
COST OF SALES
Costs
of
 
sales
for
 
the
second first
 
quarter
of
 
fiscal
2022 2023
 
were
$347.2 $440.9
 
million
compared
 
to
$288.9 $318.3
 
million
for
 
the
same
 
period
of
fiscal
2021.
For
the
twenty-six
weeks
ended
November
27,
2021
and
November
28,
2020,
total
cost
of
 
salesfiscal
2022.
 
were
$672.2
million and $564.9 million, respectively.
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.
26
The following table presents the key variables affecting our cost of
 
sales (in thousands, except cost per dozen data):
Thirteen Weeks
 
Ended
Twenty-six Weeks
EndedAugust 27, 2022
November 27,
August 28, 2021
November 28,%
2020
% Change
November 27,
2021
November 28,
2020
% Change
Cost of Sales:
Farm production
$
221,971266,651
$
179,131207,495
23.9
%
$
429,466
$
340,994
25.928.5
%
Processing, packaging, and
warehouse
69,47481,417
63,50565,059
9.4
134,533
123,374
9.025.1
Egg purchases and other (including
change in inventory)
46,03968,298
37,62537,973
22.4
90,730
86,558
4.879.9
Total shell eggs
337,484416,366
280,261310,527
20.4
654,729
550,926
18.834.1
Egg products
9,67224,488
8,6167,814
12.3
17,486
13,968
25.2213.4
Total
$
347,156440,854
$
288,877318,341
20.2
%
$
672,215
$
564,894
19.038.5
%
Farm production costs (per dozen
produced)
Feed
$
0.5290.667
$
0.4100.545
29.0
%
$
0.537
$
0.399
34.622.4
%
Other
$
0.3490.379
$
0.3120.353
11.9
%
$
0.351
$
0.320
9.77.4
%
Total
$
0.8781.046
$
0.7220.898
21.6
%
$
0.888
$
0.719
23.516.5
%
Outside egg purchases (average
cost per dozen)
$
1.562.57
$
1.241.35
25.8
%
$
1.45
$
1.13
28.390.4
%
Dozens produced
256,786257,654
251,914236,458
1.9
%
493,244
483,075
2.19.0
%
Percent produced to sold
93.0%93.6%
92.1%92.9%
1.0
%
92.1%
89.9%
2.40.8
%
Farm Production
SecondFirst Quarter – Fiscal 2022 2023
vs. Fiscal 20212022
-
Feed costs per dozen produced
 
produced increased 29.0%22.4% in
the second quarter of fiscal
2022 compared to the
second quarter of
fiscal 2021.
This increase was
primarily due
to increased prices
for corn,
our primary feed
ingredient. Feed
ingredient
costs started trending
higher midway
through the
secondfirst quarter
 
of fiscal 20212023
 
and have remained
elevated compared to the first quarter of fiscal
2022. This increase was primarily due to historical costs. Though these feed costs began trending
higher in fiscal 2021, we initially benefitted from
fillingincreased prices for corn, our
storage
bins
at
harvest
and
locking
in
the
basis
portion
of
our
grain
purchases
several
months
in
advance,
which
reduced our primary
 
feed costsingredient.
 
in fiscal
2021. As
feed costs
have remained
elevated entering
into our
second quarter
of fiscal
2022, we
did not
experience the
same benefits,
which increased
our feed
costs compared
to the
same period
of fiscal
2021.
-
Other
farm
production
costs increased
due
to higher
flock amortization
,
primarily
from an
increase
in
our
cage-free
production, which
has higher capitalized
costs. Also, our
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.
Twenty-six weeks – Fiscal 2022
vs. Fiscal 2021
-
Feed costs
per dozen
produced increased
34.6% in
the twenty-six
weeks ended
November 27,
2021 compared
to the
same period
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
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2721
-
For the
first quarter
of fiscal
2023, the
average daily
Chicago Board
of Trade
(“CBOT”) market
price was
$6.65 per
bushel
for
corn
and
$456
per
ton
of
soybean
meal
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
in the first
quarter of
fiscal 2023 as
evidenced by a
low stock-
to-use
ratio
for
corn,
as
a
result
of
weather-related
shortfalls
in
production
and
yields,
ongoing
disruptions
related
to
the
COVID-19
global
pandemic
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 soybean upward pricing pressures and further market
volatility to affect feed costs.
Processing, packaging, and warehouse
SecondFirst Quarter – Fiscal 2022 2023
vs. Fiscal 20212022
-
Cost of packaging
materials increased
5.3% 16.1% compared
to the secondfirst quarter of
 
quarter of fiscal
2021 as supply
chain constraints
caused by the pandemic increased costs for packaging products and manufacturer
s
implemented pandemic surcharges. 2022 due to rising inflation.
-
Labor costs
increased 18.4%24.4%
 
due to wage increases and increased use of contract labor in response to labor shortages
 
wage increases.
-
in response
Dozens processed increased 8.6% compared to labor
shortages, primarily
due to
the pandemic
and
its effects.
Twenty-six weeks – Fiscalfirst quarter of fiscal 2022,
 
vs. Fiscal 2021which resulted in a $2.2 million increase
-
Cost of
packaging
materials increased
7.0%
compared
to the
twenty-six
weeks ended
November 27,
2021 as
supply
chain
constraints
caused
by
the
pandemic
increased
costs
for
packaging
products
and
manufacturers
implemented
pandemic surcharges.
-
Labor costs
increased 14.8%
due to
wage increases
in response
to labor
shortages, primarily
due to
the pandemic
and
its effects.costs.
Egg purchases and other (including change in inventory)
SecondFirst Quarter – Fiscal 2022 2023
vs. Fiscal 20212022
-
Costs
in
 
this category
 
increased
 
primarily
 
due
 
to
higher
 
egg
prices,
 
partially offset
 
slightly
by
the
 
decrease
 
in
the
 
volume
of
outside egg purchases, as our percentage of produced to sold increased
 
to 93.0%93.6% from 92.9%.
Twenty-six weeks – Fiscal 2022
vs. Fiscal 2021
-
Costs
in
this category
increased
primarily
due
to
higher
egg
prices,
offset
slightly
by
the
decrease
in
the
volume
of
outside egg purchases, as our percentage of produced to sold increased
to 92.1%.
Looking
forward
throughout
the
rest
of
fiscal
2022,
corn
and
soybean
supplies
remained
tight
relative
to
demand,
primarily
related
to
lower
carry-out
stock.
We
expect
market
prices
to
remain
volatile
given
the
ongoing
disruptions
related
to
the
COVID-19 global pandemic, weather fluctuations and geopolitical
issues.
GROSS PROFIT
 
Gross
profit
for
 
the second
first quarter
 
of fiscal 2023
 
2022 was
$43.7
$217.5 million
 
compared
to $58.5$6.6
 
million for the
 
for
the same
period of
 
fiscal 2022.
2021.The increase
 
The decrease of $14.7 $210.9
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
 
ingredients and processing, costs.
Gross
 
profit
for
the
twenty-six
weeks
ended
November
27,
2021
was
$50.4
million
compared
to
$75.2
million
for
the
same
period of fiscal
2021. The decrease
of $24.8 million
was primarily due
to the increased
cost of feed
ingredientspackaging and
processing
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
NovemberAugust 27, 20212022
NovemberAugust 28, 20202021
$ Change
% Change
Specialty egg expense
$
14,26213,067
$
14,03913,715
$
223(648)
1.6(4.7)
%
Delivery expense
14,39519,916
13,05213,936
1,3435,980
10.342.9
%
Payroll, taxes and benefits
11,30310,987
10,0309,939
1,2731,048
12.710.5
%
Stock compensation expense
9751,025
9311,001
4424
4.72.4
%
Other expenses
6,8458,612
5,8217,934
1,024678
17.68.5
%
Total
$
47,78053,607
$
43,87346,525
$
3,9077,082
8.915.2
%
SecondFirst Quarter – Fiscal 2022 2023
vs. Fiscal 20212022
Specialty egg expense
-
Advertising andSpecialty egg
expense, which includes
 
franchise fees, advertising
 
and promotion
costs, generally
aligns with specialty
egg
volumes,
which
were
up
35.1%
for
the
first
quarter
of fiscal
2023
compared
to
the
same
period
of
fiscal
2022.
However,
our specialty egg
expense decreased by
4.7%, primarily due
to increased insales
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 secondfranchise
 
quarter offees, advertising
 
fiscal 2022and promotion
 
compared tocosts 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 diminished
 
the secondneed to promote specialty eggs;
 
quarter ofas a result, EB temporarily reduced
 
fiscalthe related
2021,franchise fees for certain specialty egg products to encourage continued production
 
due to increased
advertising expense.
of these products.
 
 
 
 
2822
Delivery expense
-
The increased
 
delivery expense
 
is primarily
 
due to
 
the increase
 
in fuel
 
and labor
 
costs for
 
both our
 
fleet and
 
contract
trucking.
Payroll, taxes and benefits expense
-
The increase in payroll, taxes and benefits is primarily due to an increase
 
in employee health insurance costs.
Other expenses
-
Thepayroll,
 
increase
in
other
expenses
is
primarily
due
to
increased
premiums
for
property
taxes and
 
casualty
insurance
due
to
insurance market conditions.
Twenty-six Weeks
Ended
November 27, 2021
November 28, 2020
$ Change
% Change
Specialty egg expense
$
27,977
$
26,736
$
1,241
4.6
%
Delivery expense
28,331
25,546
2,785
10.9
%
Payroll, taxes and benefits
21,242
21,331
(89)
(0.4)
%
Stock compensation expense
1,976
1,824
152
8.3
%
Other expenses
14,779
12,401
2,378
19.2
%
Total
$
94,305
$
87,838
$
6,467
7.4
%
Twenty-six weeks –
Fiscal 2022 vs. Fiscal 2021
Specialty egg expense
-
Advertising
and
franchise
fees
increased
in
the
twenty-six
weeks
ended
November
27,
2021
compared
to
the
same
period of fiscal 2021 due to increased
advertising expense.
Delivery expense
-
The increased
delivery expense
 
is primarily
 
due to
 
the increaseto increased
 
in fuel
and labor
costswages for
 
both ourall employees
 
fleet and
contract
trucking.
Other expenses
-
The increase
in other expenses
is primarily due
 
to property losses
incurred that
were not covered
by insurance
as wellthe
as increased premiums for property and casualty insurance market
conditions.inflationary market.
OPERATING
 
INCOME (LOSS)
For
the
second
first quarter
of fiscal
2022, 2023,
 
we
recorded
an operating
loss income of
$2.1 $163.9 million
 
compared
to operating
income loss of
$14.5 $39.7 million
million for the same period of fiscal 2021.
For the twenty-six
weeks ended
November 27,
2021, we recorded
an operating loss
of $41.7
million compared
to an operating
loss of $12.7 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 income or loss of unconsolidated
 
entities, and patronage income, among other items.
For
the
second
first quarter
of fiscal
 
2022,
2023, we
earned
$207 thousand
$1.1 million of interest
 
income
compared
to $727
$290 thousand
for
 
the same period of
period
of
fiscal
 
2021.2022.
 
The
 
decreaseincrease
 
resulted
 
from
 
significantly
 
lowerhigher
 
investment
 
balances.
 
The
 
Company
 
recorded
 
interest
expense
 
of
$148 thousand and $58 thousand for the first quarters
 
$78ended August 27, 2022 and August 28, 2021, respectively.
Other,
 
thousand
and
$64
thousand
net for
 
the first
 
second
quarters
quarter ended
 
November
August 27,
 
20212022, was
 
andincome of
 
November
28,
2020,
respectively.
For the twenty-six
weeks ended November 27,
2021, we earned $497
$155 thousand of interest income
 
compared to $1.7
income of
$5.2 million
 
for
the
same
period
of
fiscal
2021.
The
decrease
resulted
from
significantly
lower
investment
balances.
The
Company
recorded
interest expense
of $136
thousand and
$135 thousand
for the
twenty-six weeks
ended November
27, 2021
and November
28,
2020, respectively.
29
For the second quarter of fiscal 2022, equity
income of unconsolidated entities was $264 thousand
compared to $58 thousand in
the prior-year period.
For the twenty-six
weeks ended November
27, 2021, equity
income of unconsolidated
entities was $399
thousand compared
to
$14 thousand in the prior-year period.
Other, net
for the second quarter
ended November 27, 2021,
was income of $1.9
million compared to income
of $436 thousand
for
the same
 
period of
 
fiscal 2021,2022.
 
which isThe decrease
 
is primarily
 
due to
 
a $1.4
million payment
related to
review
and adjustmentour acquisition
 
of our
various marketing agreements.
Other,the
 
netremaining 50%
 
formembership interest
in
Red
River
in
 
the
 
twenty-sixfirst
 
weeks
ended
November
27,
2021,
was
income
of
$7.0
million
compared
to
income
of
$948
thousand
for
the
same
periodquarter
 
of
 
fiscal
 
2021.
The
majority
of
the
increase
is
due
to
our
acquisition
of
the
remaining
50%
membership
interest
in
Red
River2022
 
as
 
we
 
recognized
 
a
 
$4.5
 
million
 
gain
 
due
 
to
 
the
 
remeasurement
 
of
 
our
 
equity
investment,
along with the $1.4 million payment related to review and adjustment of our
various marketing agreements.investment.
INCOME TAXES
As of November 27, 2021, we remain under
audit by the Internal Revenue Service (IRS) for the fiscal years
2013 through 2015.
The IRS
has proposed
adjustments related
toFor the
 
Company’sfirst quarter
 
research andof fiscal
 
development credits2023, pre-tax
 
claimed duringincome was
$165.5 million
compared to
pre-tax loss
of $33.9
million for
 
the yearssame
period of
 
under
audit. Management is continuing to evaluate those proposed adjustmentsfiscal 2022.
 
and does not anticipate the adjustments would result in
aWe
 
material
change
to
its
consolidated
financial
statements.
Using
the
facts,
circumstances
and
information
known
at
the
reporting date, the Company believes
it is reasonably possible an
adjustment to the previously recognizedrecorded income
 
tax benefits related to
the researchexpense
 
and developmentof $40.3
 
credits ismillion for
 
necessary.the first
 
As such,quarter of
 
we recordedfiscal 2023,
 
a which reflects
an
effective
tax
 
benefit of
approximately $520
thousand during
the second quarter of fiscal 2022.
For
the
second
quarterrate
 
of
 
fiscal
2022,
pre-tax
income
was
$468
thousand24.4%,
 
compared
 
to
$15.9
million
for
the
same
period
of
fiscal
2021.
We
recorded
 
an
 
income
 
tax
 
benefit
 
of
 
$67715.8
 
thousandmillion
 
forin
 
the
 
secondprior
 
quarteryear
 
of
fiscal
2022,period,
 
which
 
includesreflects
 
thean
discreteeffective tax
 
benefit describedrate of 46.8%.
 
above. Excluding the
 
theimpact of discrete
items related to
a $8.3
million net
 
tax benefit
recorded in the
first
quarter of
fiscal 2022
in connection
with the
Red River
Valley
Egg Farm,
LLC (“Red
River”) acquisition,
 
income tax
 
benefit was
$157 thousand
for the
second
quarter
of fiscal
2022
with an
adjusted
effective
tax rate
of
33.5%.
Income
tax expense
was $3.8
million
for
the comparable
period of fiscal 2021, which reflects an effective tax rate of 23.6%.
For
the
twenty-six
weeks
ended
November
27,
2021,
pre-tax
loss
was
$33.4
million
compared
to
$9.6
million
for
the
same
period
of
fiscal
2021.
We
recorded
an
income
tax
benefit
of
$16.5
million,
which
includes
the
discrete
tax
benefit
of
$8.3
million
as discussed
in Note
2 –
Acquisitions
of the
Notes to
Condensed Consolidated
Financial
Statements in
this Quarterly
Report.
Excluding
the discrete
tax
benefit,
income
tax benefit
was $8.2
million
with
an adjusted
effective
tax rate
of 24.6%,
compared to $2.4 million for the comparable period of fiscal 2021,
2022 was $7.6 million, which reflects an
adjusted effective tax rate of 24.6%22.4%.
At November
 
27, 2021
and May
29, 2021,
trade and
other receivables
included income
taxes receivables
of $42.8
million and
$42.5 million, respectively.
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
our
noncontrolling interest.
NET LOSSINCOME ATTRIBUTABLE
TO CAL-MAINE FOODS, INC.
Net income
attributable to Cal-Maine
Foods, Inc. for
 
the secondfirst quarter ended
 
Novemberended August 27, 2021, was
 
$1.2 2022, was $125.3
million, or $0.02$2.58
 
per
basic and $2.57 per diluted
 
common share, compared
to net income
loss attributable to Cal-Maine
Foods, Inc. of $12.2$18.0 million
or $0.25 $0.37
per basic and diluted share for the same
period of fiscal 2021.
Net loss for the twenty-six
weeks ended November 27, 2021, was
$16.9 million, or $0.34 per
basic and diluted share, compared
to net loss of $7.2 million or $0.15 per basic and dilutedcommon share for the same period of fiscal 2021.2022.
LIQUIDITY AND CAPITAL
RESOURCES
 
AND LIQUIDITY
Working
Capital and Current Ratio
Our working
 
capital at
 
NovemberAugust 27,
 
20212022 was $364.7$548.5
 
million, compared
 
to $429.8$476.8
 
million at
 
May 29,28,
 
2021.2022. The
 
calculation of
of
working
capital
is
 
defined
as
current
 
assets
less
current
liabilities.
 
Our current ratio
 
was 3.4 at August
27, 2022, compared with
3.6 at May 28, 2022. The current ratio is calculated by dividing current
 
ratioassets by current liabilities.
Cash Flows from Operating Activities
For
the thirteen
weeks
ended August
27, 2022,
$172.8
million
in net
cash
 
was
 
4.13provided by
 
atoperating
 
Novemberactivities,
 
27,compared
 
2021,to
compared with 5.77 at May 29, 2021.$24.1
million used
by operating
activities for
the comparable
period in
fiscal 2022.
The increase
in cash
flow from
operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3023
activities
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
 
hadto invest in our facilities, with $27.7
 
no longmillion used to purchase property,
 
-termplant and equipment for the thirteen
 
debtweeks
ended
 
outstanding
at
NovemberAugust
 
27,
 
20212022,
 
or May
29,
2021.
On November
15, 2021,
we
entered
into an
Amended and Restated
Credit Agreement (the
“Credit Agreement”) with
a five-year term.
The Credit Agreement
amended and
restated
the
Company’s
previously
existing
credit
agreement
dated
July
10,
2018.
The
Credit
Agreement
provides
for
an
increased senior
secured revolving
credit facility
(the “Credit Facility”),
in an
initial aggregate
principal amount
of up
to $250
million. As
of November
27, 2021,
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.
For
additional
information,
see
Note
7
–
Credit
Facility
of
the
Notescompared
 
to
 
Condensed
Consolidated
Financial
Statements
included
in
this
Quarterly Report.
For the
twenty-six
weeks ended
November
27,
2021, $15.5$11.2
 
million
 
in net
cash was
used
in operating
activities, compared
to
$10.7 million
used in
operating activities
for the
comparable period
in fiscal
2021.
This is
primarily due
to the
increased costs
of feed ingredients compared to the prior-year period.
We
continue
to invest
in our
facilities,
with
$28.6
million used
to purchase
property,
plant and
equipment
for
 
the
 
twenty-six
weeks ended November 27,same
 
2021, compared to $52.4 millionperiod
 
in the same period of
fiscal
 
2021.2022. In
 
We also
acquired the remaining
50%
membership
interest
in
Red
River
during
our
 
first
 
quarter
 
of
 
fiscal
 
2022,
 
we
acquired the
remaining 50%
membership interest
in Red
River Valley
Egg Farm,
LLC for
 
$48.544.8 million,
 
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
 
of
investment
 
securities netwere
 
of purchases,
were $41.5
million for
the twenty-six
weeks ended
November 27,
2021, compared
to
$29.420.3
 
million
 
for
 
the thirteen
 
comparableweeks ended
 
periodAugust
 
in27,
 
fiscal2022,
 
2021.compared
 
Weto $39.4
million for the comparable period in fiscal 2022.
 
received
Cash Flows from Financing Activities
We paid dividends
 
$400
thousand
in
distributions
from
an
unconsolidated
entityof $36.7 million in the first two quartersquarter of fiscal 2022 compared to $2.70 million for
the same period fiscal of 2021.
2023.
As of
 
NovemberAugust 27,
 
2021, cash2022,
 
decreased $41.9cash increased
$76.9 million
since May
28, 2022,
compared to
a decrease
of $40.7
 
million sinceduring
 
May 29,
2021, compared
to a
decrease of
$30.8 million
duringthe
the same period of fiscal 2021.2022.
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
increasing
 
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
 
$488
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 facility
in 2008.capabilities.
During
October
2021,
we
announced
a
new
$23.0
million
capitalThe
 
project
 
toat
 
expandChase,
 
ourKansas
will
convert
existing
conventional
layer
capacity
to
 
cage-free
 
egg
production
at
our
Okeechobee,
Florida,
production
facility,
and
a
new
planned
$18.5
million
strategic
investment
that
will
specialize
in
high
value
commercial
product
solutions
targeting
specific
needs
in
the
food
industry.
See
“
”capacity
 
for
 
additionalapproximately
1.5
information. 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
 
projects approved as of NovemberAugust 27, 20212022 (in thousands):
Project(s) Type
Projected
 
Completion
Projected Cost
Spent as of
August
November 27, 20212022
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 20222023
132,443$
104,477132,161
27,966115,343
16,818
Cage-Free Layer & Pullet Houses
Fiscal 2023
23,77124,923
1119,548
23,7605,375
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
$
156,214293,858
$
104,488143,003
$
51,726150,855
We believe our
 
current cash balances, investments, cash flows from operations, and Credit Facility will be sufficient
 
to fund our
current capital needs.needs for at least the next 12 months.
 
IMPACT OF
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.
31
ITEM 3. QUANTITATIVE
 
AND QUALITATIVE
 
DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk during the
 
twenty-sixthe thirteen weeks ended NovemberAugust 27, 2021
2022 from the
information provided in Item 7A. Quantitative and Qualitative Disclosures
 
Disclosures About Market Risk in our 20212022 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 under the
 
Exchange Act is accumulated
 
and communicated to
 
management, including our
 
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 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 NovemberAugust 27, 20212022 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 November
August
 
27, 20212022
that has materially affected, or is reasonably likely to materially affect,
 
our internal control over financial reporting.
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
 
There wereThe following table is a summary of our first quarter 2023 share repurchases:
Issuer Purchases of Equity Securities
Total
 
no purchasesNumber of
Maximum Number
Shares Purchased
of Shares that
Total
 
Number
Average
as Part of ourPublicly
May Yet
 
Common StockBe
of Shares
Price Paid
Announced Plans
Purchased Under the
Period
Purchased (1)
per Share
Or Programs
Plans or Programs
05/29/22 to 06/25/22
286
$
47.04
—
—
06/26/22 to 07/23/22
609
52.48
—
—
07/24/22 to 08/27/22
—
—
—
—
895
$
50.74
—
—
(1)
 
made byAs permitted under our Amended and Restated 2012
 
or onOmnibus Long-Term Incentive Plan, these shares were withheld by us to satisfy
 
behalf oftax withholding
 
our Company
or any
affiliated
purchaser during
the
second quarter of fiscal 2022.
obligations for employees in connection with the vesting of restricted
 
common stock.
Index
32
ITEM 6. EXHIBITS
Exhibits
No.
Description
3.1
Second Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to
Exhibit 3.1 in the Registrant’s Form 8-K, filed July 20, 2018)
3.2
Composite Bylaws of the Company (incorporated by reference to Exhibit 3.2 in the Registrant’s Form 10-Q
for the quarter ended March 2, 2013, filed April 5, 2013)
10.1
Credit Agreement, dated November 15, 2021, among Cal-Maine Foods,Inc., the Guarantors, BMO Harris
Bank N.A., as Administrative Agent, and the Lenders (incorporated byreference to Exhibit 10.1 in the
Registrant’s Form 8-K, filed November19, 2021)
10.2
Deferred Compensation Plan, dated November 15, 2021 (incorporatedby reference to Exhibit 10.2 in the
Registrant’s Form 8-K, filed November19, 2021)
31.1*
Rule 13a-14(a) Certification of the Chief Executive Officer
31.2*
Rule 13a-14(a) Certification of the Chief Financial Officer
32**
Section 1350 Certification of the Chief Executive Officer and the Chief Financial Officer
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:
 
December 28, 2021September 27, 2022
/s/ Max P.
 
Bowman
Max P.
 
Bowman
Vice President, Chief Financial
 
Officer
(Principal Financial Officer)
໿
Date:
 
December 28, 2021September 27, 2022
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)
໿