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
February 26, 202225, 2023
 
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.
(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
 
1934 during the preceding
 
preceding 12 months (or
 
for such
shorter period that
 
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
 
mark whether the
registrant has submitted
 
submitted electronically every
Interactive Data File
 
File required to be
 
submitted
pursuant to
 
Rule 405 of
 
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
 
check mark
whether the registrant
 
registrant is a large
 
large accelerated filer,
 
an accelerated filer,
 
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
44,140,28344,185,774
 
shares of Common
 
Common Stock, $0.01 par
 
$0.01 par value,
and
4,800,000
 
shares of Class
 
A Common Stock,
 
$0.01 Stock, $0.01
par
value, outstanding as of March 29, 2022.28, 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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)
 
February 26, 202225, 2023
May 29, 202128, 2022
Assets
Current assets:
Cash and cash equivalents
$
15,589221,614
$
57,35259,084
Investment securities available-for-sale
81,125423,418
112,158115,429
Trade and other receivables, net
138,654206,920
84,123177,257
Income tax receivable
41,38342,947
42,51642,147
Inventories
240,087290,869
218,375263,316
Prepaid expenses and other current assets
5,8727,599
5,4074,286
Total current
assets
522,7101,193,367
519,931661,519
Property, plant &
equipment, net
671,373712,512
589,417
Finance lease right-of-use asset, net
409
525
Operating lease right-of-use asset, net
1,168
1,724677,796
Investments in unconsolidated entities
15,79416,146
54,94115,530
Goodwill
44,006
35,52544,006
Intangible assets, net
18,68616,484
20,34118,131
Other long-term assets
7,8499,968
6,77010,507
Total Assets
$
1,281,9951,992,483
$
1,229,1741,427,489
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
120,665138,617
$
89,191122,331
Current portion of finance lease obligationAccrued income taxes payable
22266,723
21525,687
Current portion of operating lease obligationDividends payable
486107,720
69136,656
Total current
liabilities
121,373313,060
90,097
Long-term finance lease obligation
271
438
Long-term operating lease obligation
682
1,034184,674
Other noncurrent liabilities
10,6739,715
10,41610,274
Deferred income taxes, net
118,753134,820
114,408128,196
Total liabilities
251,752457,595
216,393323,144
Commitments and contingencies - see Note 139
—
—
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
66,90970,977
64,04467,989
Retained earnings
992,5231,497,325
975,9771,065,854
Accumulated other comprehensive loss, net of tax
(1,413)(3,067)
(558)(1,596)
Common stock in treasury at cost –
26,12126,075
 
shares at February 26, 202225, 2023 and
26,20226,121
shares at May 29, 202128, 2022
(28,439)(29,996)
(27,433)(28,447)
Total Cal-Maine Foods,
Inc. stockholders’ equity
1,030,3311,535,990
1,012,7811,104,551
Noncontrolling interest in consolidated entity
(88)(1,102)
0(206)
Total stockholders’
equity
1,030,2431,534,888
1,012,7811,104,345
Total Liabilities and Stockholders’
Equity
$
1,281,9951,992,483
$
1,229,1741,427,489
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(inIn thousands, except per share amounts)
(unaudited)
(Unaudited)
 
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 202125, 2023
February 26, 2022
February 27, 202125, 2023
February 26, 2022
Net sales
$
997,493
$
477,485
$
359,0802,457,537
$
1,184,195
$
999,189
Cost of sales
534,467
385,903
311,5631,459,172
1,042,221
876,457
Gross profit
463,026
91,582
47,517998,365
141,974
122,732
Selling, general and administrative
58,489
52,686
47,656170,048
146,991
135,494Gain on insurance recoveries
(3,220)
(1,095)
(3,220)
(3,225)
(Gain) loss on disposal of fixed assets
(674)(26)
354421
(2,855)36
476370
Operating income (loss)
407,783
39,570
(493)831,501
(2,162)
(13,238)
Other income (expense):
Interest income, net
6,126
79
5918,959
440
2,181
Royalty income
426
326
3211,198
877
906
Patronage dividends
10,120
9,00410,239
10,120
9,00410,239
10,120
Equity income of unconsolidated
entities
1,786
1,809
1,872943
2,208
1,886
Other, net
(1,473)
1,144
537(205)
8,169
1,485
Total other income, net
17,104
13,478
12,32521,134
21,814
15,462
Income before income taxes
424,887
53,048
11,832852,635
19,652
2,224
Income tax expense (benefit)
102,118
13,594
(1,716)206,438
(2,921)
(4,080)
Net income
322,769
39,454
13,548646,197
22,573
6,304
Less: Loss attributable to noncontrolling
interest
(450)
(63)
0(896)
(91)
0
Net income attributable to Cal-Maine
Foods, Inc.
$
323,219
$
39,517
$
13,548647,093
$
22,664
$
6,304
Net income per common share:
Basic
$
0.81
$
0.28
$
0.46
$
0.13
Diluted6.64
$
0.81
$
0.2813.31
$
0.46
Diluted
$
0.136.62
$
0.81
$
13.25
$
0.46
Weighted average
shares outstanding:
Basic
48,653
48,886
48,53048,634
48,888
48,511Diluted
Diluted48,842
49,036
48,65948,832
49,035
48,649
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
Comprehensive Income
(inIn thousands)
(unaudited)(Unaudited)
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 202125, 2023
February 26, 2022
February 27, 202125, 2023
February 26, 2022
Net income
$
322,769
$
39,454
 
$
13,548646,197
 
$
22,573
$
6,304
Other comprehensive income (loss), before
tax:
Unrealized holding lossgain (loss) on available-for-saleavailable-
for-sale securities, net of reclassification
adjustments
26
(551)
(378)(1,945)
(1,130)
(283)
Income tax benefit (expense) related to
items of other
comprehensive income
(6)
134
92474
275
69
Other comprehensive loss,income (loss), net of tax
20
(417)
(286)(1,471)
(855)
(214)
Comprehensive income
322,789
39,037
13,262644,726
21,718
6,090
Less: Comprehensive loss attributable to the
noncontrolling interest
(450)
(63)
0(896)
(91)
0
Comprehensive income attributable to Cal-MaineCal-
Maine Foods, Inc.
$
323,239
$
39,100
$
13,262645,622
$
21,809
$
6,090
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(inIn thousands)
(unaudited)
(Unaudited)
 
Thirty-nine Weeks Ended
February 26, 202225, 2023
February 27, 202126, 2022
Cash flows from operating activities:
Net income
$
22,573646,197
$
6,30422,573
Depreciation and amortization
50,99653,198
44,39150,996
Deferred income taxes
7,098
(3,861)
9,970Gain on insurance recoveries
(3,220)
(3,225)
Net proceeds from insurance settlement - business interruption
3,220
—
Other adjustments, net
(48,884)16
(45,936)(45,659)
Net cash provided by operations
20,824706,509
14,72920,824
Cash flows from investing activities:
Purchases of investment securities
(47,135)(442,583)
(59,415)(47,135)
Sales and maturities of investment securities
76,377132,686
85,20276,377
Investment in unconsolidated entities
(3,000)(1,673)
0(3,000)
Distributions from unconsolidated entities
400—
5,813400
Acquisition of business, net of cash acquired
(44,823)—
0(44,823)
Purchases of property,
plant and equipment
(86,168)
(49,170)
(73,796)Net proceeds from insurance settlement - property,
plant and equipment
—
5,380
Net proceeds from disposal of property,
plant and equipment
6,041118
3,273661
Net cash used in investing activities
(61,310)(397,620)
(38,923)(61,310)
Cash flows from financing activities:
Payments of dividends
(144,559)
—
Purchase of common stock by treasury
(1,120)(1,633)
(871)(1,120)
Principal payments on finance lease
(160)(167)
(153)(160)
Contributions
3—
53
Net cash used in financing activities
(1,277)(146,359)
(1,019)(1,277)
Net change in cash and cash equivalents
(41,763)162,530
(25,213)(41,763)
Cash and cash equivalents at beginning of period
57,35259,084
78,13057,352
Cash and cash equivalents at end of period
$
15,589221,614
$
52,917
Supplemental Information:
Cash paid for operating leases
$
625
$
703
Interest paid
$
230
$
19315,589
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, necessary to a fair
 
statement of the results for the interim periods presentedadjustments
that
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'sCompany’s
 
fiscal year
 
ends on
 
the Saturday
 
closest to
 
May 31.
 
Each of
 
the three-month
 
periods and
 
year-to-date periods
ended on February 25, 2023 and February 26, 2022 and February 27, 2021 included
13 weeks and 39 weeks, respectively
.
and
39 weeks
, respectively.
Use of Estimates
The preparation of the
consolidated financial statements in
conformity with GAAP requires management
to make
estimates and
assumptions that
 
that affect the
 
the amounts reported
 
reported in the
 
the consolidated financial
 
financial statements and
 
and accompanying notes.
 
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
 
for in accordance
 
accordance with ASC
 
ASC 320, “Investments
 
“Investments - Debt
 
Debt and Equity
 
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'sCompany’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
 
for current operations.
Available-for-sale
 
securities are carried at
fair value,
with
unrealized
 
gains
and
 
losses
reported
 
in
other
comprehensive
income
until
realized.
The
total
of
other
comprehensive
income
for
the
period
is
presented
as
a
 
separate component
 
of
stockholders’
 
equity.equity
 
The Companyseparately
 
regularly evaluatesfrom
retained
earnings
and
additional
paid-in
capital. The
Company regularly
evaluates changes
to the
 
rating of its
 
its debt
securities by credit
 
credit agencies
and economic
conditions
to assess and
record any expected credit
losses through the
 
the allowance for credit
losses, limited to
the amount that fair
value
 
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.
 
method.
Gains and
losses are
recognized in
other income
(expenses) as
Other,
net in
the Company's Company’s
Condensed Consolidated Statements
of Income.
 
Investments in mutual
 
mutual funds
are classified
 
as “Other long-term
assets” in the Company’s Condensed
 
long-term assets”
in the
Company’s
Condensed Consolidated
Balance Sheets.
Trade Receivables
 
Trade
receivables are
stated at
their carrying
 
values, which
include a
reserve for
credit losses.
At As of February
 
26, 2022
25, 2023 and May
29,28,
 
2021,2022,
 
reserves
 
for
 
credit
 
losses
 
were
 
$
725709
 
thousand
 
and
 
$
795775
 
thousand,
 
respectively.
 
The
 
Company
 
extends
 
credit
 
to
customers based on an
 
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
 
assigned
 
an
 
expected
 
loss
 
based
 
on
historical loss information adjusted as needed for economic and
other forward-looking factors.
Business Combinations
The
Company applies
fair value
accounting guidance
to measure
non-financial assets
and
liabilities associated
with business
acquisitions. These
assets and
liabilities are
measured at
fair value
for
the initial
purchase price
allocation.
The fair
value of
8
non-financial assets acquired is determined internally. Our internal valuation methodology for non-financial assets 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.
Immaterial Error Correction
Effective
on
May
30,
2021,
the
Company
acquired
the
remaining
50
%
membership
interest
in
Red
River
Valley
Egg
Farm,
LLC (“Red
River”), including
certain liabilities.
During the
Company’s
third quarter
of fiscal
2022, management
determined
that
it
had
not
properly
eliminated
select
intercompany
sales
and
cost
of
sales
transactions
between
Red
River
and
the
corresponding other
wholly-owned subsidiaries
of the
Company in
its first
and second
quarter 2022
Condensed Consolidated
Statements of Income. The errors resulted in
an overstatement of Net Sales and Cost
of Sales of $
6.7
million in the first quarter
of
fiscal
2022
and
$
9.2
million
in
the
second
quarter
of
fiscal
2022.
There
was
0
impact
to
Operating
income
(loss),
Net
income (loss) or Net income (loss) per share.Dividends Payable
 
We
 
evaluatedaccrue dividends at
 
the
errors
quantitatively
and
qualitatively
in
accordance
with
Staff
Accounting
Bulletin
("SAB") No. 99 Materiality, and
SAB No. 108 Considering
the
Effects
end of
 
Prior
Year
Misstatements
when
Quantifying
Misstatements
in
the
Current
Year
Financial
Statements, and
determined
that
the
related
impact
was not materialeach quarter according
 
to the Company’s
 
our
condensed consolidateddividend policy adopted
 
financial statements
for the
first or
second quartersby its Board
 
of fiscal
2022, but
that correcting
the cumulative
impact
of
the
errors
would
be
relevant
to
our
Condensed
Consolidated
Statements
of
Income
for
the third
quarter
ended February 26, 2022. Accordingly, we have reflected the correction of the immaterial errors as a reduction of Net Sales and
Cost of Sales in the accompanying Condensed Consolidated Statements of Income for the thirty-nine weeks ended February 26,
2022.
Note 2 – Acquisition
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 result of the
acquisition, Red River became a wholly owned
subsidiary of
the Company.
Red River owns and operates
a specialty shell egg production
complex with approximately
1.7
million cage-free
laying
hens,
cage-free
pullet
capacity,
feed
mill,
processing
plant,
related
offices
and
outbuildings
and
related
equipment
located on approximately
400
acres near Bogata, Texas.
9
The
following
table
summarizes
the
consideration
paid
for
Red
River
and
the
amounts
of
the
assets
acquired
and
liabilities
assumed recognized at the acquisition date:
Cash consideration paid
$
48,500
Fair value of the Company's equity interest in Red River held before the business combination
48,500
$
97,000
Recognized amounts of identifiable assets 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.
Property,
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.Directors.
The Company
 
recognizedpays a dividend
 
gain ofto shareholders
 
$
4.5
of its Common
 
million asStock and
Class A Common
Stock on
 
a resultquarterly 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 remeasuringsuch quarter,
 
to fairexcept for
 
value its
50
% equitythe fourth fiscal
 
interest inquarter.
 
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
Income. The
acquisition of
Red River
resulted in
a discrete
tax benefit
of
$
8.3
million, which
includes a
$
7.3
million decrease
in deferred
income tax
expense related
toFor the
 
outside-basis of
our equity
investment
in
Red
River,
with
a
corresponding
non-recurring,
non-cash
$
954,000
reduction
to
income
taxes
expense
on
the
non-taxable
remeasurement
gain
associated
with
the
acquisition.
As
part
of
the
acquisition
accounting,
the
Company
also
recorded
an
$
8.5
million
deferred
tax
liability
for
the
difference
in
the
inside-basis
of
the
acquired
assets
and
liabilities
assumed. The recognition
of deferred tax
liabilities resulted infourth quarter,
 
the recognition ofCompany
 
goodwill. None of
pays dividends
the goodwill recognized is
expected to be deductible for income tax purposes.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
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.
New Accounting Pronouncements and Policies
No new accounting pronouncement issued or effective
during the fiscal year had or is expected to have a material impact on
our
Consolidated Financial Statements.
Reclassification
Certain
reclassifications
were
made
to
the
fiscal
2022
financial
statements
to
conform
to
the
fiscal
2023
financial
statement
presentation. These reclassifications had no effect on
income.
Note 2 - Investment
Securities
The following represents the Company’s
investment securities as of February 25, 2023 and May 28, 2022 (in
thousands):
February 25, 2023
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
21,158
$
—
$
275
$
20,883
Commercial paper
95,612
—
122
95,490
Corporate bonds
138,004
—
1,664
136,340
US government and agency obligations
94,941
—
299
94,642
Asset backed securities
15,132
—
227
14,905
Treasury bills
61,215
—
57
61,158
Total current
investment securities
$
426,062
$
—
$
2,644
$
423,418
Mutual funds
$
2,162
$
—
$
136
$
2,026
Total noncurrent
investment securities
$
2,162
$
—
$
136
$
2,026
May 28, 2022
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
10,136
$
—
$
32
$
10,104
Commercial paper
14,940
—
72
14,868
Corporate bonds
74,167
—
483
73,684
Certificates of deposits
1,263
—
18
1,245
US government and agency obligations
2,205
4
—
2,209
Asset backed securities
13,456
—
137
13,319
Total current
investment securities
$
116,167
$
4
$
742
$
115,429
Mutual funds
$
3,826
$
—
$
74
$
3,752
Total noncurrent
investment securities
$
3,826
$
—
$
74
$
3,752
Available-for-sale
Proceeds from sales
and maturities of investment
securities available-for-sale
were $
132.7
million and $
76.4
million during the
thirty-nine weeks
ended February 25,
2023 and
February 26,
2022, respectively.
Gross realized
gains for
the thirty-nine
weeks
ended February
25, 2023
and February
26, 2022
were $
38
thousand and
$
181
thousand, respectively.
Gross realized
losses for
the thirty-nine weeks ended February 25, 2023 and
February 26, 2022 were $
64
thousand and $
67
thousand, respectively.
There
were
no
allowances for credit losses at February 25, 2023 and May 28, 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
109
Note 3 - Investment
Securities
The following represents the Company’s investment securities as of February 26, 2022 and May 29, 2021 (in thousands):
February 26, 2022
Amortized
Cost
UnrealizedActual maturities
 
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
514
$
0
$
3
$
511
Commercial paper
9,980
0
23
9,957
Corporate bonds
61,634
0
344
61,290
Certificates of deposits
1,268
0
12
1,256
Asset backed securities
8,205
0
94
8,111
Total current investment securities
$
81,601
$
0
$
476
$
81,125
Mutual funds
$
2,967
$
0
$
53
$
2,914
Total noncurrent investment securities
$
2,967
$
0
$
53
$
2,914
May 29, 2021
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
16,424
$
56
$
0
$
16,480
Commercial paper
1,998
0
0
1,998
Corporate bonds
80,092
608
0
80,700
Certificates of deposits
1,077
0
1
1,076
Asset backed securities
11,914
0
10
11,904
Total current investment securities
$
111,505
$
664
$
11
$
112,158
Mutual funds
$
2,306
$
1,810
$
0
$
4,116
Total noncurrent investment securities
$
2,306
$
1,810
$
0
$
4,116
Available-for-sale
Proceeds from
sales and
maturities of
investment securities available-for-sale
were $
76.4
million and
$
85.2
million during
the
thirty-nine weeks ended February
26, 2022 and
February 27, 2021,
respectively.
Gross realized gains
for the thirty-nine
weeks
ended February 26, 2022 and February 27, 2021 were $
181
thousand and $
116
thousand, respectively. Gross realized losses for
the thirty-nine weeks ended February 26, 2022 and February 27, 2021 were $
67
thousand and $
17
thousand, respectively. There
were
0
allowances for credit losses at February 26, 2022 and May 29, 2021.
Actual maturities may differ
 
from contractual
maturities as some
 
some borrowers have
 
the right to
 
call or prepay
 
obligations with
or
without penalties. Contractual maturities of current investments at February 26, 2022
25, 2023 are as follows (in thousands):
Estimated Fair Value
Within one year
$
52,391345,765
1-5 years
28,73477,653
Total
$
81,125423,418
Noncurrent
 
Proceeds
from
sales
and
maturities
of
noncurrent
investment
securities
 
were $
1.8
 
million and $
4.9
 
million during the thirty-nine
weeks
 
duringended
 
theFebruary
 
thirty-nine25,
 
weeks2023
and
ended
February
 
26,
 
2022.2022,
respectively.
 
Gross
 
realized
 
gains
 
for
 
the
 
thirty-nine
 
weeks
ended February 25,
 
ended2023 and February
 
26,
2022
 
were $
6
thousand and
 
$
2.2
 
million. Theremillion, respectively.
Gross realized
losses for
the
thirty-nine
weeks
ended February
25,
2023
were
 
$
66
thousand.
There
were
no
 
realized
 
losses
 
for
 
the
 
thirty-nine
 
weeks
ended February 26, 2022.
Note 3 - Fair Value
 
ended FebruaryMeasurements
The Company
 
26,is required
 
2022.to categorize
 
Thereboth financial
 
wereand nonfinancial
assets and
liabilities based
on the
following fair
value
0hierarchy. 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
 
sales- Quoted prices in active markets for identical assets or liabilities
•
Level 2
 
of- Inputs
 
noncurrentother than
 
investmentquoted
prices included
in Level
1 that
are observable
for the
asset or
liability,
either
securities duringdirectly 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 thirty-nine weeks ended February 27, 2021.asset or liability
◦
Inputs derived principally from or corroborated by other observable market
data
•
Level 3
- Unobservable inputs for the asset or liability that are
supported by little or no market activity and that
are
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded
at cost are as follows:
Cash and cash equivalents, accounts receivable,
and accounts payable:
The carrying amount approximates fair value due to the
short maturity of these instruments.
Lease obligations:
The carrying value of the Company’s lease obligations
is at its present value which approximates fair value.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Index
11
Note 4 - Fair Value Measurements
The Company
is required
to categorize
both financial
and nonfinancial
assets and
liabilities based
on the
following fair
value
hierarchy. The
fair value
of an
asset is
the price
at which
the asset
could be
sold in
an orderly
transaction between
unrelated,
knowledgeable, and willing parties able to engage in the
transaction. A liability’s fair value
is defined as the amount that would
be paid
to transfer
the liability
to a
new obligor
in a
transaction between
such parties,
not
the amount
that would
be paid
to
settle the liability with the creditor.
•
Level 1
- Quoted prices in active markets for identical assets or liabilities
•
Level 2
- Inputs
other than
quoted prices
included in
Level 1
that are
observable for
the asset
or liability,
either
directly or indirectly, including:
◦
Quoted prices for similar assets or liabilities in active markets
◦
Quoted prices for identical or similar assets in non-active markets
◦
Inputs other than quoted prices that are observable for the asset or liability
◦
Inputs derived principally from or corroborated by other observable market data
•
Level 3
- Unobservable inputs for the asset or liability that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded at cost are as follows:
Cash and cash equivalents, accounts receivable, and accounts payable:
The carrying amount approximates fair value due to the
short maturity of these instruments.
Lease obligations:
The carrying value of the Company’s lease obligations is at its present value which approximates fair value.
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 February 26, 2022 and May 29, 2021 (in thousands):
February 26, 2022
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
0
$
511
$
0
$
511
Commercial paper
0
9,957
0
9,957
Corporate bonds
0
61,290
0
61,290
Certificates of deposits
0
1,256
0
1,256
Asset backed securities
0
8,111
0
8,111
Mutual funds
2,914
0
0
2,914
Total assets measured at fair value
$
2,914
$
81,125
$
0
$
84,039
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1210
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 February 25, 2023 and May 28,
2022 (in thousands):
February 25, 2023
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
20,883
$
—
$
20,883
Commercial paper
—
95,490
—
95,490
Corporate bonds
—
136,340
—
136,340
US government and agency obligations
—
94,642
—
94,642
Asset backed securities
—
14,905
—
14,905
Treasury bills
—
61,158
—
61,158
Mutual funds
2,026
—
—
2,026
Total assets measured at fair
value
$
2,026
$
423,418
$
—
$
425,444
May 28, 2022
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
10,104
$
—
$
10,104
Commercial paper
—
14,868
—
14,868
Corporate bonds
—
73,684
—
73,684
Certificates of deposits
—
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
$
—
$
119,181
Investment
securities
–
available-for-sale
classified
as Level
2
consist
of
securities
with maturities
of
three
months
or longer
when purchased. We
classified these securities as
current because amounts
invested are readily available
for current operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
Note 54 - Inventories
Inventories consisted of the following as of February 26,25, 2023 and
May 28, 2022 and May 29, 2021 (in thousands):
 
February 26, 202225, 2023
May 29, 202128, 2022
Flocks, net of amortization
$
137,086158,209
$
123,860144,051
Eggs and egg products
24,15327,925
21,08426,936
Feed and supplies
78,848104,735
73,43192,329
$
240,087290,869
$
218,375263,316
We
 
grow
 
and
 
maintain
 
flocks
 
of
 
layers
 
(mature
 
female
 
chickens),
 
pullets
 
(female
 
chickens,
 
under
 
18
 
weeks
 
of
 
age),
 
and
breeders (male and female
chickens used to produce
fertile eggs to hatch for
 
hatch for egg production flocks). Our
total flock at February
26,25, 2023
and May
28, 2022
consisted of
approximately
9.49.9
million and
11.5
 
million pullets
and breeders
and
42.743.3
 
million layers.
and
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.
For the third quarter
of fiscal 2022, we
will pay a
cash dividend
of approximately $
0.125
per share to holders
of our Common Stock
and Class A Common
Stock. The amount of
the accrual is
recorded in Accounts payable and accrued expenses in the Company’s Condensed Consolidated Balance Sheets.
On
our
Condensed
Consolidated
Statements
of
Income,
we
determine
dividends
per
common
share
in
accordance
with
the
computation in the following table (in thousands, except per share data):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
February 26, 2022
February 27, 2021
Net income attributable to Cal-Maine Foods,
Inc.
$
39,517
$
13,548
$
22,664
$
6,304
Cumulative losses to be recovered prior to
payment of divided at beginning of period
(21,097)
(8,614)
(4,244)
(1,370)
Net income available for dividend
$
18,420
$
4,934
$
18,420
$
4,934
1/3 of net income attributable to Cal-Maine
Foods, Inc. available for dividend
6,140
1,645
6,140
1,645
Common stock outstanding (shares)
44,140
44,056
Class A common stock outstanding (shares)
4,800
4,800
Total common stock outstanding (shares)
48,940
48,856
Dividends per common share*
$
0.125
$
0.034
$
0.125
$
0.034
*Dividends
per
common
share
=
1/3
of
Net
income
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
13
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 $
20042.2
 
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 February 26,
2022,
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
default under the terms of the Credit Agreement. Further, under
the terms of the Credit Agreement, payment of dividends under
the
Company's
current
dividend
policy
of
one-third
of
the
Company's
net
income
computed
in
accordance
with
GAAP
and
payment of other dividends or
repurchases by the Company of
its capital stock is allowed,
as long as after giving
effect to such
dividend payments
or repurchases
no default
has occurred
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 February 26, 2022, we were in compliance with the covenant requirements of the Credit Facility.layers, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1411
Note 85 - Equity
The following reflects
equity activity for the
 
thirteen and thirty-nine
weeks ended February 25,
2023 and February 26,
 
2022 and February 27, 2021 (in
thousands):
Thirteen Weeks
Ended February 25, 2023
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 November
26, 2022
$
703
$
48
$
(28,496)
$
70,005
$
(3,087)
$
1,281,784
$
(652)
$
1,320,305
Other comprehensive
income, net of tax
—
—
—
—
20
—
—
20
Stock compensation
plan transactions
—
—
(1,500)
972
—
—
—
(528)
Dividends ($
2.199
per share)
Common
—
—
—
—
—
(97,123)
—
(97,123)
Class A common
—
—
—
—
—
(10,555)
—
(10,555)
Net income (loss)
—
—
—
—
—
323,219
(450)
322,769
Balance at February
25, 2023
$
703
$
48
$
(29,996)
$
70,977
$
(3,067)
$
1,497,325
$
(1,102)
$
1,534,888
Thirteen Weeks
Ended February 26, 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 November
27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
$
(25)
$
997,423
Other comprehensive
loss, net of tax
—
—
—
—
(417)
—
—
(417)
Stock compensation
plan transactions
—
—
(989)
890
—
—
—
(99)
Dividends ($
0.125
per share)
Common
—
—
—
—
—
(6,118)(5,518)
—
(6,118)(5,518)
Class A common
—
—
—
—
—
(600)
—
(600)
Net income (loss)
—
—
—
—
—
39,517
(63)
39,454
Balance at February
26, 2022
$
703
$
48
$
(28,439)
$
66,909
$
(1,413)
$
992,523
$
(88)
$
1,030,243
Thirteen Weeks Ended February 27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Accum.
Class A
Treasury
Paid In
Other Comp.
Retained
Amount
Amount
Amount
Capital
Income (Loss)
Earnings
Total
Balance at November 28, 2020
$
703
$
48
$
(26,723)
$
62,206
$
151
$
968,325
$
1,004,710
Other comprehensive loss, net of tax
—
—
—
—
(286)
—
(286)
Stock compensation plan transactions
—
—
(826)
964
—
—
138
Dividends
—
—
—
—
—
(1,661)
(1,661)
Net income
—
—
—
—
—
13,548
13,548
Balance at February 27, 2021
$
703
$
48
$
(27,549)
$
63,170
$
(135)
$
980,212
$
1,016,449
Thirty-nine Weeks Ended February 26, 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,
2021
$
703
$
48
$
(27,433)
$
64,044
$
(558)
$
975,977
$
0
$
1,012,781
Other comprehensive
loss, net of tax
—
—
—
—
(855)
—
—
(855)
Stock compensation
plan transactions
—
—
(1,006)
2,865
—
—
—
1,859
Contributions
—
—
—
—
—
—
3
3
Dividends
—
—
—
—
—
(6,118)
—
(6,118)
Net income (loss)
—
—
—
—
—
22,664
(91)
22,573
Balance at February
26, 2022
$
703
$
48
$
(28,439)
$
66,909
$
(1,413)
$
992,523
$
(88)
$
1,030,243
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1512
Thirty-nine Weeks Ended
February 27, 202125, 2023
Cal-Maine Foods, Inc. Stockholders
Common Stock
Accum.
Class A
Treasury
Paid In
Accum. Other Comp.
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Income (Loss)Comp. Loss
Earnings
Interest
Total
Balance at May 30, 202028,
2022
$
703
$
48
$
(26,674)(28,447)
$
60,37267,989
$
79(1,596)
$
975,1471,065,854
$
1,009,675(206)
Impact of ASC 326$
—
—
—
—
—
422
422
Balance at May 31 2020
703
48
(26,674)
60,372
79
975,569
1,010,0971,104,345
Other comprehensive
loss, net of tax
—
—
—
—
(214)(1,471)
—
(214)—
(1,471)
Stock compensation
plan transactions
—
—
(875)(1,549)
2,793
—
—
1,918
Contributions2,988
—
—
—
5
—
—
51,439
Dividends ($
5.756
per share)
Common
—
—
—
—
—
(1,661)(194,478)
(1,661)—
Net income(194,478)
Class A common
—
—
—
—
—
6,304(21,144)
6,304—
(21,144)
Net income (loss)
—
—
—
—
—
647,093
(896)
646,197
Balance at February 27, 2021
25, 2023
$
703
$
48
$
(27,549)(29,996)
$
63,17070,977
$
(135)(3,067)
$
980,2121,497,325
$
1,016,449(1,102)
$
1,534,888
Thirty-nine Weeks Ended
February 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrollin
g
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 29,
2021
$
703
$
48
$
(27,433)
$
64,044
$
(558)
$
975,977
$
—
$
1,012,781
Other comprehensive
loss, net of tax
—
—
—
—
(855)
—
—
(855)
Stock compensation
plan transactions
—
—
(1,006)
2,865
—
—
—
1,859
Contributions
—
—
—
—
—
—
3
3
Dividends ($
0.125
per share)
Common
—
—
—
—
—
(5,518)
—
(5,518)
Class A common
—
—
—
—
—
(600)
—
(600)
Net income (loss)
—
—
—
—
—
22,664
(91)
22,573
Balance at February
26, 2022
$
703
$
48
$
(28,439)
$
66,909
$
(1,413)
$
992,523
(88)
$
1,030,243
Note 96 - Net Income per Common Share
 
Basic net income per
 
per share is
based on the
 
the weighted average Common
Stock and Class
A 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.
The
 
following
table
provides
a
reconciliation
of
the
numerators
and
denominators
used
to
determine
basic
and
diluted
net
income per common share (amounts in thousands, except per share data):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
February 26, 2022
February 27, 2021
Numerator
Net income
$
39,454
$
13,548
$
22,573
$
6,304
Less: Loss attributable to noncontrolling
interest
(63)
0
(91)
0
Net income attributable to Cal-Maine
Foods, Inc.
$
39,517
$
13,548
$
22,664
$
6,304
Denominator
Weighted-average common shares
outstanding, basic
48,886
48,530
48,888
48,511
Effect of dilutive restricted shares
150
129
147
138
Weighted-average common shares
outstanding, diluted
49,036
48,659
49,035
48,649
Net income per common share attributable to
Cal-Maine Foods, Inc.
Basic
$
0.81
$
0.28
$
0.46
$
0.13
Diluted
$
0.81
$
0.28
$
0.46
$
0.13
Note 10 - Revenue Recognition
Satisfaction of Performance Obligation
Most of the Company’s
revenue is derived from
contracts with customers based on
the customer placing an
order for products.
Pricing for
the most
part is
determined when
the Company
and the
customer agree
upon the
specific order,
which establishes
the contract for that order.
16
Revenues are
recognized in
an amount
that reflects
the net
consideration we
expect to
receive in
exchange for
the goods. Our
shell eggs
are sold
at prices
related to
independently quoted
wholesale market
prices, negotiated
prices or
formulas related
to
our costs
of production.
The Company’s
sales predominantly
contain a
single performance
obligation. We
recognize revenue
upon satisfaction of the
performance obligation with the
customer, which typically
occurs within days of
the Company and the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts include a guaranteed
sale clause, pursuant to which we
credit the customer’s account for product that
the
customer is unable to
sell before expiration. The Company records
an estimate of returns and
refunds by using historical
return
data and
comparing to
current period
sales and
accounts receivable. The
allowance is
recorded as
a reduction
in sales
with a
corresponding reduction in trade accounts receivable.
Sales Incentives Provided to Customers
The
Company
periodically
provides
incentive
offers
to
its
customers
to
encourage
purchases.
Such
offers
include
current
discount offers (e.g.,
percentage discounts off
current purchases), inducement offers
(e.g., offers for
future discounts subject
to
a minimum
current purchase),
and other
similar offers.
Current discount
offers, when
accepted by
customers, are
treated as
a
reduction to
the sales
price of
the related
transaction, while
inducement offers,
when accepted
by customers,
are treated
as a
reduction
to
sales
price
based
on
estimated
future
redemption
rates.
Redemption
rates
are
estimated
using
the
Company’s
historical experience
for similar
inducement offers.
Current discount
and inducement
offers
are presented
as a
net amount
in
‘‘Net sales.’’
Disaggregation of Revenue
The following table provides revenue disaggregated by product category (in thousands):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
February 26, 2022
February 27, 2021
Conventional shell egg sales
$
280,633
$
203,189
$
685,678
$
560,297
Specialty shell egg sales
182,945
145,210
462,319
408,537
Egg products
12,749
9,098
33,516
25,736
Other
1,158
1,583
2,682
4,619
$
477,485
$
359,080
$
1,184,195
$
999,189
Contract Costs
The Company can incur costs to obtain or fulfill a contract with a customer.
If the amortization period of these costs is less than
one year,
they are
expensed as
incurred. When
the amortization
period is
greater than
one year,
a contract
asset is
recognized
and is amortized
over the contract
life as a
reduction in net
sales. As of
February 26, 2022
and February 27,
2021, the balance
for contract assets is immaterial.
Contract Balances
The Company
receives payment
from customers
based on
specified terms
that are
generally less
than 30
days from
delivery.
There are rarely contract assets or liabilities related to performance under the contract.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1713
The
following
table
provides
a
reconciliation
of
the
numerators
and
denominators
used
to
determine
basic
and
diluted
net
income per common share (amounts in thousands, except per share data):
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
February 25, 2023
February 26, 2022
February 25, 2023
February 26, 2022
Numerator
Net income
$
322,769
$
39,454
$
646,197
$
22,573
Less: Loss attributable to noncontrolling
interest
(450)
(63)
(896)
(91)
Net income attributable to Cal-Maine
Foods, Inc.
$
323,219
$
39,517
$
647,093
$
22,664
Denominator
Weighted-average
common shares
outstanding, basic
48,653
48,886
48,634
48,888
Effect of dilutive restricted shares
189
150
198
147
Weighted-average
common shares
outstanding, diluted
48,842
49,036
48,832
49,035
Net income per common share attributable to
Cal-Maine Foods, Inc.
Basic
$
6.64
$
0.81
$
13.31
$
0.46
Diluted
$
6.62
$
0.81
$
13.25
$
0.46
Note 11 - Leases7 – Revenue from Contracts with Customers
Expenses Satisfaction of Performance Obligation
The vast majority of the Company’s
revenue is derived from agreements with customers based on the customer
placing an order
for products. Pricing
for the most part
is determined when
the Company and
the customer agree
upon the specific
order, which
establishes the contract for that order.
Revenues are
recognized in
an amount
that reflects
the net
consideration we
expect to
receive in
exchange for
the goods.
Our
shell eggs
are primarily
sold at prices
related to
 
operating leases, amortizationindependently quoted
wholesale market
prices or
formulas related
to our costs
of
production.
The
Company’s
sales
predominantly
contain
a
single
performance
obligation.
We
recognize
revenue
upon
satisfaction
of
the
performance
obligation
with
the
customer
which
typically
occurs
within
days
of
the
Company
and
the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts
include a guaranteed sale
clause, pursuant to which
we credit the customer’s
account for product
that the
customer
is
unable
to
sell
before
expiration.
The
Company
records
an
allowance
for
returns
and
refunds
by
using
historical
return
data
and
comparing
to current
period
sales and
accounts receivable.
The allowance
is recorded
as a
reduction
in sales
with a corresponding reduction in trade accounts receivable.
Sales Incentives Provided to Customers
The
Company
periodically
provides
incentive
offers
to
its
customers
to
encourage
purchases.
Such
offers
include
current
discount offers
(e.g., percentage
discounts off
current purchases), inducement
offers (e.g.,
offers for
future discounts subject
to
a minimum
current purchase),
and other
similar offers.
Current discount
offers,
when accepted
by customers,
are treated
as a
reduction
to
the sales
price
 
of finance leases,the
 
right-of-use assets, 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
 
finance lease interestinducement
offers
 
are included
presented
as a
net amount
in
in Cost‘‘Net sales.’’
14
Disaggregation of sales, Selling general and administrative expense, and Interest income, net in the Condensed Consolidated StatementsRevenue
of Income. The Company’s lease cost consists of the following (intable provides revenue disaggregated by product category
(in thousands):
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
February 26, 202225, 2023
February 26, 2022
Operating lease costFebruary 25, 2023
February 26, 2022
Conventional shell egg sales
$
200689,022
$
625
Finance lease cost
Amortization of right-of-use asset280,633
$
441,656,528
$
132683,805
Interest on lease obligationsSpecialty shell egg sales
272,205
182,945
700,803
462,320
Egg products
32,582
12,749
88,274
33,516
Other
3,684
1,158
11,932
4,554
$
6997,493
$
20
Short term lease cost477,485
$
1,0862,457,537
$
3,2211,184,195
Future minimum lease paymentsContract Costs
The Company can incur costs to
obtain or fulfill a contract with a
customer. If the
amortization period of these costs is less
than
one year,
they are
expensed as
incurred. When
the amortization
period is
greater than
one year,
a contract
asset is
recognized
and is
amortized over
the contract
life as
a reduction
in net
sales. As
of February
25, 2023
and May
28, 2022,
the balance
for
contract assets was immaterial.
Contract Balances
The Company receives payment from customers based on specified terms that
are generally less than 30 days from delivery.
There are rarely contract assets or liabilities related to performance under non-cancelable leases are as follows (in thousands):the
contract.
As of February 26, 2022
Operating Leases
Finance Leases
Remainder fiscal 2022
$
180
$
60
2023
539
240
2024
380
217
2025
130
0
2026
26
0
2027
5
0
Total
1,260
517
Less imputed interest
(92)
(24)
Total
$
1,168
$
493
The
weighted-average
remaining
lease
term
and
discount
rate
for
lease
liabilities
included
in
our
Condensed
Consolidated
Balance Sheet are as follows:
As of February 26, 2022
Operating Leases
Finance Leases
Weighted-average remaining lease term (years)
2.4
1.8
Weighted-average discount rate
5.9
%
4.9
%
Note 128 - Stock Based Compensation
Total
 
stock-based
compensation
expense
 
was
$
3.1
and
$
3.0
 
million and $
2.8
 
million for
the
 
thirty-nine
weeks
ended
 
February
25,
2023
and
February 26, 2022,
and February 27, 2021, respectively.
Unrecognized
compensation
 
expense as
 
as a
result
 
of non-vestednon
-vested
 
shares
of
 
restricted stock
 
stock outstanding
under
 
the
Amended
 
and
Restated
 
2012
 
Omnibus
 
Long-Term
 
Incentive
 
Plan
 
at
 
February
 
26,25,
 
20222023
 
of
 
$
8.18.4
 
million
 
will
 
be
 
recorded
 
over
 
a
 
weighted
average period of
2.3
 
years. Refer to Part II
 
II Item 8,
Notes to Consolidated
 
Financial Statements and
Supplementary Data, Note
16: Stock Compensation Plans in our 20212022 Annual Report for further informationinformat
ion on our stock compensation plans.
18
The Company’s restricted share activity
for the thirty-nine weeks ended February 26, 202225, 2023 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 29, 2021
302,147
$
39.37
Granted
113,142
41.13
Vested
(90,778)
42.53
Forfeited
(3,932)
37.81
Outstanding, February 26,28, 2022
320,579317,844
$
39.12
Granted
84,969
54.10
Vested
(97,954)
38.25
Forfeited
(8,480)
39.22
Outstanding, February 25, 2023
296,379
$
43.70
Note 139 - Commitments and Contingencies
Financial Instruments
The
 
Company
 
maintained
 
standby
 
letters
 
of
 
credit
 
(“LOCs”)
 
totaling
 
$
4.1
 
million
 
at
 
February
 
26,25,
 
2022,2023,
 
which
 
were
 
issued
under
 
the
 
Company's
 
Creditsenior
 
Facility.secured
revolving
credit
facility.
 
The
 
outstanding
 
LOCs
 
are
 
for
 
the
 
benefit
 
of
 
certain
 
insurance
companies
and
are
not
companies and are not recorded as a liability on the consolidated balance
sheets.
 
15
LEGAL PROCEEDINGS
State of Texas v.
 
v. Cal-Maine Foods, Inc. d/b/a Wharton;
and Wharton County Foods, LLC
 
On April 23,
 
23, 2020,
the Company
 
and its subsidiary
 
Wharton County Foods,
 
Foods, LLC (“WCF”) were
 
were named
as defendants in
 
in State
of
 
Texas
 
v.
 
Cal-Maine
Foods,
 
Inc.
d/b/a
 
Wharton;
and
 
Wharton
County
 
Foods,
LLC,
 
Cause
No.
 
2020-25427,
 
in
the
 
District
Court of
 
Harris County,
 
Texas.
 
The State
 
of Texas
 
(the “State”)
 
asserted claims
 
based on
 
the Company’s
 
and WCF’s
 
alleged
violation
 
of
 
the
 
Texas
 
Deceptive
 
Trade
 
Practices—Consumer
 
Protection
 
Act,
 
Tex.
 
Bus.
 
&
 
Com.
 
Code
 
§§
 
17.41-17.63
(“DTPA”).
 
The
 
State
 
claimed
 
that
 
the
 
Company
 
and
 
WCF
 
offered
 
shell
 
eggs
 
at
 
excessive
 
or
 
exorbitant
 
prices
 
during
 
the
COVID-19
 
state
 
of
 
emergency
 
and
 
made
 
misleading
 
statements
 
about
 
shell
 
egg
 
prices.
 
The
 
State
 
sought
 
temporary
 
and
permanent
 
injunctions
 
against
 
the
 
Company
 
and
 
WCF
 
to
 
prevent
 
further
 
alleged
 
violations
 
of
 
the
 
DTPA,
 
along
 
with
 
over
$
100,000
 
in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the
State’s original petition with
prejudice. On September 11,
 
11, 2020,
the State filed a
 
notice of appeal,
which was assigned to
 
assigned to the Texas
 
Court of Appeals
for the
First District. The
 
State filed itsDistrict.
 
opening brief onOn
 
December 7, 2020.August
 
The Company 16,
2022,
the
appeals
court
reversed
and
 
remanded
the
case
back
to
the
trial
court
for
further
proceedings. On October
31, 2022, the Company
and WCF filed theira
 
response on February
8,petition for review to
 
2021.the Supreme Court of
Texas
appealing
the
First
District
court’s
decision.
 
On
 
February
 
11,6,
 
2022,2023,
 
the
 
Texas
CourtState
 
of
 
AppealsTexas
 
heardfiled
 
oraltheir
 
argumentresponse
 
butto
 
hasdefendant’s
 
notpetition
 
issuedfor
review.
 
aOn
 
ruling.February
 
Management21,
2023,
the
Company
and
WCF
filed
their
reply
brief
in
support
of
defendant’s
petition
for
review.
Appellate briefs are not yet due. 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
 
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
 
eggs during
the
 
COVID-19 state
 
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
 
other defendants from selling eggs
at a price more than
 
than 10% greater than the
price of
eggs prior
 
to the
 
declaration
of the
state of
 
the state
of emergency
 
and damages
 
in the
 
amount of
 
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
 
certain other
defendants
 
filed a
motion to
 
dismiss the
 
plaintiffs’
amended
 
class action
 
complaint. The
 
plaintiffs subsequently
 
subsequently filed a
 
a motion to
 
to strike, and
 
and the
motion to
 
dismiss and
 
related proceedings were
 
were referred to
 
to a United
 
United States magistrate
 
magistrate judge. On
 
On July 14,
 
14, 2021, the
 
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. On
September 20, 2021, the court dismissed the case without
prejudice.
 
On September 20,
 
2021, July
13,
2022,
the
 
court adopted
denied
the
 
magistrate’splaintiffs’
motion
to
set
aside
or
amend
the
judgment
to
amend
their
reportcomplaint.
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
Texas,
Austin Division
alleging the
same assertions
as laid
out in
the
first
complaint.
On
August
12,
2022,
the
Company
 
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 othercomplaint. On
 
defendants dismissingJanuary 9,
 
2023, the
case without prejudice.
 
On October 18,court entered
 
2021, plaintiffsan order
 
filed a motion
to alter or
amend theand final
 
judgement and allowgranting
 
a filingthe Company’s
motion to
dismiss.
On February
8, 2023,
the plaintiffs
appealed
the lower
court’s
judgement
to the
United States
Court of
 
aAppeals for
 
secondthe Fifth
Circuit,
 
amendedCase
 
complaint.No.
23-50112.
 
The
 
Companyparties
 
respondedare
 
onto
 
Novemberfile
 
1,their
 
2021.respective
 
Theappellate
 
courtbriefs,
 
hasbut
they
are
 
not
 
ruledyet
 
ondue.
 
the
plaintiffs’Management
motion.believes the risk of material loss related to both matters to be remote.
19
Kraft Foods Global, Inc. et al. v.
United Egg Producers, Inc. et al.
 
As previously
 
reported, on
 
September 25,
 
2008, the
 
Company was
 
was named as
 
as one of
 
of several
defendants
 
in numerous
 
antitrust
cases involving
 
the United
 
States shell
 
egg
industry.
 
The Company
 
settled all
 
of these
 
cases, except
 
for the
 
the claims of
 
of certain
plaintiffs who sought substantial
damages allegedly arising from
the purchase of egg products (as
 
(as opposed to shell eggs). These
remaining plaintiffs
 
are Kraft Food
 
Food Global,
Inc., General
 
Mills, Inc., and
 
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
 
for the Northern District
of Illinois, Kraft Foods Global,
Inc. et al. v.
 
al. v. United
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
16
producers. The
 
Egg Producers animal-welfare guidelines and programProducts
 
used by Plaintiffs seek
to enjoin
the Company and many
 
other egg
producers. The Egg
Products Plaintiffs
seek to
enjoin the
Company and other
 
defendants from engaging
 
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.
On
 
instructedDecember
 
the8,
 
parties
to
jointly
submit
a
second
status
report
to2022,
 
the
 
court
 
that
includedheld
 
a
 
status
hearing.
The
parties
subsequently
submitted
an
updated
proposed
 
schedule
forpre-trial
preparing a final pretrial order. On
August 25, 2021,schedule and the parties filed a joint status report, and on
August 26, 2021,Court has set 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.for October 16, 2023.
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,
 
November 11, 2019, a
stipulation for dismissal was filed with
the court, but the court,
 
hasand on March 28,
not yet entered a judgment on2022, the filing.court dismissed the Company with prejudice.
The Company intends to
continue to defend the remaining
case with the Egg Products Plaintiffs
 
Plaintiffs as vigorously as
possible based
on
 
defenses
 
which
 
the
 
Company
 
believes
 
are
 
meritorious
 
and
 
provable.
 
Adjustments,
 
if
 
any,
 
which
 
might
 
result
 
from
 
the
resolution of
 
this remaining
 
matter with
 
the Egg
 
Products Plaintiffs
 
have not
 
been reflected
 
in the
 
financial statements.
 
While
management
 
believes
 
that
 
there
 
is
 
still
 
a
 
reasonable
 
possibility
 
of
 
a
 
material
 
adverse
 
outcome
 
from
 
the
 
case
 
with
 
the
 
Egg
Products Plaintiffs,
 
at the present
 
present time,
it is not
 
not possible to
 
estimate the amount
 
amount of
monetary exposure,
 
if any,
 
to the
Company
due
to
a
range
of
factors,
including
the
following,
among
 
others: the matter is in the early stages of preparing for
 
trial following
remand;two
 
anyearlier
 
trials
based
on
substantially
the
same
facts
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
 
Oklahoma filed suit,
 
suit, in
the United
 
States District
 
Court for
 
the Northern District
 
District of
Oklahoma,
against Cal-Maine
Foods,
Inc. and Tyson Foods, Inc. and affiliates,
 
Tyson
Foods,
Inc., Cobb-Vantress,
 
Inc., Cargill, Inc. and its affiliate, George’s,
Inc. and its
affiliate, Peterson Farms,
 
Inc., George’s,
Inc., Peterson
Farms, Inc.
and
Simmons
Foods,
 
Inc.,
and
certain
of
their
affiliates.
The
State
of
 
Oklahoma
claims
that
through
 
the disposal of
chicken litter
 
the defendantsdisposal
 
haveof
chicken
litter the
defendants polluted
 
the Illinois
 
River Watershed.
 
This watershed
 
provides water
 
to eastern
 
Oklahoma.
The complaint
 
seeks complaint
sought
injunctive
 
relief
and
 
monetary
damages,
 
but
the
 
claim
for
 
monetary
damages
 
has beenwas dismissed
 
dismissed by
 
the
court.
 
Cal-Maine
Foods,
 
Inc.
 
discontinued
 
operations
 
in
 
the
 
watershed.watershed
 
Accordingly,in
 
weor
 
doaround
 
not2005.
 
anticipate
that
Cal-Maine
Foods,
Inc.
will
be
materially
affected
bySince
 
the
 
requestlitigation
 
forbegan,
 
injunctiveCal-Maine
 
reliefFoods,
 
unlessInc.
purchased
100
%
of
 
the
 
courtmembership
 
ordersinterests
 
substantial
affirmative
remediation. Since the
litigation began, Cal-Maine
Foods, Inc. purchased
100
% of the
membership interests of
 
Benton
County
Foods,
Foods,
LLC,
 
which
is
 
an
ongoing
 
commercial
shell
 
egg
operation within
 
within the Illinois
 
Illinois River
Watershed.
 
Benton County
 
Foods, LLC
LLC is not
a defendant
in the
litigation. We
also have
a
number of small contract producers that operate in the litigation.area.
The non-jury trial in the case began in September 2009
and concluded in February 2010. On January 18, 2023, the court entered
findings of
fact and
conclusions of
law in favor
of the
State of
Oklahoma, but
no penalties
were assessed.
 
The court
found the
defendants
liable
for
state
law
nuisance,
federal
common
law
nuisance,
and
state
law
trespass.
The
court
also
found
the
producers
vicariously
liable
for
the
actions
of
their
contract
producers.
The
court
directed
the
parties
to
confer
in
attempt
to
reach
agreement
on
appropriate
remedies
by
March
17,
2023.
On
March
17,
2023,
a
status
hearing
was
held,
and
the
court
extended the
time period by
which the parties
must reach an
agreement to June
16, 2023. The
defendants have been
conferring
with the
State regarding
appropriate remedies.
While management
believes there
is a
reasonable
possibility of
a material
loss
from the case, wasat 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:
uncertainties inherent in
any assessment of
potential costs associated
with injunctive relief or
other penalties based on a
decision in a case tried without a jury,
over 13 years ago
based on environmental conditions
that existed at the time, the lack of guidance from
the court as to what might be considered appropriate remedies,
the early stage
of negotiations
with the
State on
appropriate remedies,
 
and uncertainty
regarding what
our proportionate
share of
any remedy
would be, although we believe that our share compared to the court
has not yet issued its ruling. Management believes the risk of material loss related to this matter to be remote.other defendants is small.
Other Matters
In addition to the above,
 
the above, the Company
is involved in
 
various other claims
and litigation incidental
 
incidental to its business. Although
 
the
outcome of
 
these matters
 
cannot be determined
 
determined with
certainty,
 
management, upon the
 
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.
20
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.
2117
ITEM
 
2.
 
MANAGEMENT’S
DISCUSSION
AND
 
ANALYSIS
 
OF
 
FINANCIAL
 
CONDITION
 
AND
 
RESULTS
 
OF
OPERATIONS
The following
 
should be
 
read in
 
conjunction with
 
with Management’s
 
Discussion and
 
Analysis of
 
Financial Condition
 
and Results
of Operations included
in Part II Item
 
Item 7 of the Company’s
 
Annual Report on
Form 10-K for its
 
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
 
Act of 1934
 
(the “Exchange1934 (the
 
“Exchange Act”) relating
 
relating to our
 
our shell
egg
business,
 
including
 
estimated
 
future
 
production
 
data,
 
expected
 
construction
 
schedules,
 
projected
 
construction
 
costs,
 
potential
future
supply
 
of and
 
and demand
 
for
our
 
products,
potential
 
future
corn
 
and soybean
 
soybean price
trends,
 
potential
future
 
impact
on
 
our
business
 
of
 
theinflation
 
COVID-19and
 
pandemic,rising
interest
rates,
 
potential
 
future
 
impact
 
on
 
our
 
business
 
of
 
new
 
legislation,
 
rules
 
or
 
policies,
potential
 
potential
outcomes
 
of
 
legal
 
proceedings,
 
and
 
other
 
projected
 
operating
 
data,
 
including
 
anticipated
 
results
 
of
 
operations
 
and
financial
 
financial
condition.
 
Such
 
forward-looking
 
statements
 
are
 
identified
 
by
 
the
 
use
 
of
 
words
 
such
 
as
 
“believes,”
 
“intends,”
“expects,”
“hopes, “hopes,”
“may, “may,”
 
“should,”
“plans, “plans,”
“projected, “projected,”
“contemplates, “contemplates,”
 
“anticipates,”
or
similar
words.
 
Actual outcomes or
results
 
outcomescould
 
or
results
could differ
 
materially
from
 
those
 
projected
in
 
the
forward-looking
 
statements. The
forward-looking
 
statements are
 
based onare
based
on
management’s
 
current
 
intent,
 
belief,
 
expectations,
 
estimates,
 
and
 
projections
 
regarding
 
the
 
Company
 
and
 
its
industry. These
 
industry. These
statements
 
are
 
not
 
guarantees
 
of
 
future
 
performance
 
and
 
involve
 
risks,
 
uncertainties,
 
assumptions,
 
and
 
other
factors
that
are
factors that are difficult
to predict
and may
 
be beyond
our control. The
factors that
could cause
actual results
 
to differ materially
from those
 
materially fromprojected in the
 
thoseforward-looking statements
include, among
projected in
others, (i)
 
the forward-looking
statements include,
among others,
(i) the
risk factors
 
set forth in
 
in Part
I Item
 
1A of
the
 
the 20212022
Annual
Annual
Report
 
(ii)
the
 
risks
and
 
hazards
inherent
 
in
the
 
shell
egg
 
business (including
(including
 
disease,
pests,
 
weather
conditions,
 
conditions, and
potential
 
for
 
product
 
recall),
 
including
 
but
 
not
 
limited
 
to
 
the
 
current
 
outbreak
 
of
 
highly
 
pathogenic
 
avian
influenza
 
(HPAI)(“HPAI”)
affecting
poultry
in
the
United
States
(“U.S.”),
Canada
and
other
countries
that
was
first
detected
in
affecting poultrycommercial flocks in
the U.S. in February
2022, (iii) changes
 
in the demand
 
U.S., Canadafor and market prices
of shell eggs
and feed costs,
(iv) our
ability to
predict and
meet demand
for cage-free
 
and other
 
countries (iii)specialty eggs,
 
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
 
resultour future
 
fromacquisition of
new flocks
or businesses
and risks
or changes
that may
cause conditions
to completing
a
pending acquisition not
to be met, (vi) risks
relating to increased costs,
rising inflation and rising
interest rates, which generally
have
been
exacerbated
by
Russia’s
invasion
of
Ukraine
starting
February
2022,
(vii)
 
our
 
future
acquisition
of
new
flocks
or
businesses
and
risks
or
changes
that
may
cause
conditions
to
completing
a
pending
acquisition
notability
 
to
 
beretain
 
met,existing
 
(vi)customers,
acquire new
 
risks
relating
to
the
evolving
COVID-19
pandemic,
including
without
limitation increased costs
and rising
inflation and interest
rates,customers and
 
(vii)grow our
product mix,
(viii) adverse
 
results in pending
 
pending litigation matters. Readers
matters and
(ix) risks
relating to
the evolving
COVID-19 pandemic. Readers
are cautioned
 
not to
 
place undue
 
reliance on
 
forward-looking statements
 
because,
while
we believe
 
the assumptions on
 
on which
the forward-looking
 
statements are based
 
based are
reasonable, there
 
can be no assurance
that
 
no assurance
that these
 
forward-looking
statements will
prove
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 respective dates thereof, or if
nodate hereof.
 
date
is
stated,
as
of
the date
hereof. Except
as
 
otherwise
required
 
by
law,
 
we
disclaim
 
any
 
intent
 
or
 
obligation
 
to
 
update
publicly
these
forward-looking
statements,
whether
because
of
new
information,
publicly these forward-looking statements, whether because of new information, future events, or otherwise.
GENERAL
Cal-Maine
 
Foods,
 
Inc.
 
(the
 
“Company,”
 
“we,”
 
“us,”
 
“our”)
 
is
 
primarily
 
engaged
 
in
 
the
 
production,
 
grading,
 
packaging,
marketing
 
and
 
distribution
 
of
fresh
 
shell
 
eggs.
 
Our
 
operations
 
are
 
fully
 
integrated
 
under
 
one
 
operatingreportable
 
segment.
 
We
 
are
 
the
largest producer and
 
distributor of fresh
shell eggs in
the United States
(“U.S.”). Our total
flock of approximately
42.7 million
layersproducer
 
and
 
9.4distributor
 
millionof
 
pulletsfresh
 
andshell
 
breeders
is
the
largesteggs
 
in
 
the
 
U.S.
 
WeOur
 
selltotal
 
mostflock
 
of
 
ourapproximately
 
shell43.3
 
million
layers
and
9.9
million pullets
and breeders
is the largest
in the U.S.
We
sell most of
our shell eggs
 
to
a
diverse
 
group of
 
of
customers, including
national and regional
 
and regional grocery store chains,
 
store chains, club stores, companies
 
stores, companies servicing independent supermarkets
 
independent supermarkets in
the U.S., food
 
service
distributors, and
 
and egg
product consumerscustomers
 
in states across
 
across the
southwestern,
southeastern, mid-western
 
and mid-Atlantic
regions
mid-Atlantic regions of the U.S.
WeOur
 
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
 
pricing mechanisms
in pricing
 
agreements with our
 
our customers,
we sell
 
most of
 
our conventional
shell eggs
 
based on
 
formulas that
 
consider,
 
in varying
 
ways, independently
 
quoted regional
 
wholesale market
 
market prices for
 
for shell
eggs
 
or
 
formulas
related
 
to
our
 
costs
of
 
production
which
 
include
 
the
 
cost
of
 
corn
 
and
 
soybean meal.
 
As
an
example of
the
volatility in the market prices of shell eggs, the Urner-Barry White
Large, Southeast Regional Egg Market Price per dozen eggs
(“UB southeast large index”) for the first three quarters of fiscal year 2022 ranged from a low of $1.00 in June 2021 to a high of
$2.06 in February 2022.
22
Generally,
we purchase
primary feed
ingredients, mainly
corn and
soybean meal,
at current
market prices.
Corn and
soybean
meal
are
commodities
and
are
subject
to
volatile
price
changes
due
to
weather,
various
supply
and
demand
factors,
transportation and storage costs, speculators, and agricultural, energy and trade policies in the U.S. and internationally.
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.meal.
 
We
 
havedo
 
alsonot
 
enhanced
our
efforts
to
provide
free-range
and
pasture-raisedsell
 
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 offeringsdirectly to a subset
of consumers and therefore our customers, and help
us continueor set the prices at which eggs are sold 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
went 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.”consumers.
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
18
equal, we would
expect to experience
 
experience lower selling prices, sales volumes
 
volumes and net
income (and may
 
incur net losses) in our
 
our first
and
 
fourth
 
fiscal
 
quarters
 
ending
 
in
 
August/September
 
and
 
May/June,
 
respectively.
 
Because
 
of
 
the
 
seasonal
 
and
 
quarterly
fluctuations,
 
comparisons
 
of
 
our
 
sales
 
and
 
operating
 
results
 
between
 
different
 
quarters
 
within
 
a
 
single
 
fiscal
 
year
 
are
 
not
necessarily meaningful comparisons.
COVID-19
Since earlyWe
 
2020, routinely
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
 
coronavirus (“COVID-19”) outbreak,basis
 
characterized asportion
 
a pandemicof
 
by theour
 
Worldgrain
 
Health Organizationpurchases
 
on
Marchseveral
 
11,
2020,
has
caused
significant
disruptionsmonths
 
in
 
internationaladvance.
 
andBasis
 
U.S.
economies
and
markets.
We
understandis
 
the
challengesdifference
between the
local cash
price for
grain and
the applicable
futures price.
A basis
contract is
a common
transaction in
the grain
market that
allows us
to lock-in
a basis
level for
a specific
delivery period
 
and wait
 
difficultto set
 
economicthe futures
 
environmentprice at
 
facinga later
date. Furthermore,
 
familiesdue to
the more
limited supply
for organic
ingredients, we
may commit
to purchase
organic
ingredients in
advance to help ensure supply.
Ordinarily, we do
not enter into long-term contracts beyond a year to purchase
corn and soybean
meal
or
hedge
against
increases
 
in
 
the
 
communitiesprices
 
whereof
 
we
livecorn
 
and
 
work,soybean
meal.
Corn
 
and
 
wesoybean
meal
are
commodities
and
 
are
committedsubject
 
to
 
helpingvolatile
 
whereprice
 
wechanges
 
can.due
to
weather,
various
supply
and
demand
factors,
transportation
and
storage
costs,
speculators,
agricultural, energy and trade policies in the U.S. and 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
 
providedalso
 
foodenhanced
 
assistanceour
efforts
 
to
 
thoseprovide
 
infree-range
 
needand
 
by
donating
approximately
679
thousand
dozenpasture-raised
 
eggs
 
tothat
 
datemeet
 
inconsumers’
 
fiscalevolving
choice
 
2022.preferences.
 
WeWhile
 
believea
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.
We
are
 
takingalso
 
allfocused
 
reasonableon
 
precautionsadditional
ways
to
enhance
our
product
mix
and
support
new
opportunities
 
in
 
the
 
managementrestaurant,
institutional
and
industrial
food
products
arena.
On
October
4,
2021,
Cal-Maine
Foods
announced
a
strategic
investment
of
$18.5
million
in
debt
and
equity
in
Meadow
Creek
Foods,
LLC
(“MeadowCreek”),
an
egg
products
operation
located
in
Neosho,
Missouri,
focused
on offering
hard-cooked
eggs.
Cal-Maine
Foods
serves
as
the
preferred
provider
 
of
 
ourspecialty and
operations in responseconventional
eggs
used
by
MeadowCreek
 
to the COVID-19
 
pandemic. Our topmanufacture
 
priority isegg
products.
On
December
13,
2022,
our
Board
of
Directors
approved
an additional
$13.8 million
investment to
expand the
 
health and safetyCompany’s
 
of ourcontrolling interest
 
employees, who workand fund
 
hard
each day
to produce
eggs for
our customers.
As part
of the
nation’s
food supply,
we work
in a
critical infrastructure industry,additional equipment
and
 
weworking
 
believecapital
 
weneeds
to support
growth
opportunities
for
MeadowCreek.
As demand
for
hard-cooked
eggs
continues to
grow,
the
funds
will
be
used
for
additional
refrigerated
storage
space
and
expanded
capacity
for
cooking
and
packaging
to
better serve MeadowCreek’s
customers. MeadowCreek began operations during the third quarter of fiscal 2023.
The
Company
has
joined
in
the
formation
of
a
new
egg
farmer
cooperative
in
the
western
United
States.
ProEgg,
Inc.
(“ProEgg”)
is
comprised
of
leading
egg
production
companies,
including
Cal-Maine
Foods,
servicing
retail
and
foodservice
shell egg customers in 13 western states. ProEgg is a producer-owned
cooperative organized under the Capper-Volstead
Act.
Our
membership
in
ProEgg
is
expected
to
provide
benefits
for
its
customers,
including
supply
chain
stability
and
enhanced
reliability.
Initially,
Cal-Maine Foods’
customer relationships
and customer
support are
expected to
remain the
same. At some
point in the future, it is anticipated
that each producer member will sell
through ProEgg the shell eggs
it produces for sale in the
western
states
covered
by
the
cooperative.
Customers
would
 
have
 
a
 
specialsingle
 
responsibilitypoint
of
contact
for
their
shell
egg
purchases,
as
ProEgg would have a dedicated team to market and sell the members’ combined
egg production in the region.
The Company’s
top priority in joining
as a member of
ProEgg is serving
our valued customers in
this important market
region.
During
this
initial
phase,
we
will
continue
our
work
 
to
 
maintainconfirm
that
 
our
 
normal
work
schedule.
As
such,
we
areparticipation
 
in
 
regularthis
new
cooperative
is
in
the
best
communication interest of
our customers
and aligns
with our managers across our operations
long-term interests.
This consideration
will take
place before
moving to
the next
phase of membership, and continuewe expect this process to closely monitorbe completed on
or before the situation end of calendar year 2023.
HPAI
We
are closely
monitoring
the current
outbreak of
HPAI
that was
first detected
in our facilities and commercial
flocks in
the U.S.
in February
2022.
Outbreaks in
commercial flocks
in the
communities where we live and work. We have implemented procedures designed to protect our employees, taking into account
guidelines published
 
by U.S. have
most recently
occurred
during
each month
from September
to March
2023.
The
current
HPAI
epidemic
has
surpassed
the
prior
2014-2015
outbreak
in
terms
of
its
duration
and
the
number
of
affected
hens
in
the
U.S.,
and
HPAI
continues
to
circulate
throughout
the
wild
bird
population
in
the
U.S.
and
abroad.
According to
the U.S.
 
Centers for
 
Disease Control
 
and otherPrevention,
 
government healththese detections
 
agencies, anddo not
 
we present an
immediate public
health
concern.
There
have
 
strict sanitation
protocols and
biosecurity measures
in place
throughout our
operations with
restricted access
to visitors.
There arebeen
 
no known
indications that COVID-19 affects chickens or can be transferred through the food supply.positive
 
Wetests for
 
continue to proactively monitorHPAI
at
any
Cal-Maine
Foods’
owned
or contracted
production
facility as
of
March 28,
2023. The
USDA division
of Animal
 
and manage operations duringPlant
 
the COVID-19 pandemic, includingHealth Inspection
 
additional related costsService (“APHIS”)
reported
on March
27, 2023
that
 
we incurredapproximately
 
or may43.3
 
incur inmillion
 
the future.commercial
 
The pandemiclayer
 
had a
negative impact
on our
business through
disruptions in
the
supply chain such as increased costshens
 
and limited availability of packaging supplies,
 
and increased labor costs and medical costs
and, more recently, inflation.
In1.0
 
the thirdmillion
 
quarters ofpullets
 
fiscal 2022have
 
and 2021,been
 
we spentdepopulated
 
approximately $534
thousand and
$397 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
relateddue
 
to
 
additionalHPAI
 
laborsince
February 2022. We
 
costs,believe the HPAI
 
primarilyoutbreak will continue
 
reflectedto exert downward
 
inpressure on the
 
cost
overall supply of
 
sales.
Medical
insurance
claims
related
to
COVID-19 paid duringeggs, and the third quarter of
fiscal 2022 were an additional $424 thousand as
compared to $322 thousand paid in
the comparable quarter in fiscal 2021.
2319
Forduration of those
effects will depend
in part on the
timing of replenishment
of the U.S.
layer hen flock.
Prior to the outbreak
of
HPAI
in February
2022,
the layer
hen flock
five-year
average from
2017 through
2021 was
comprised
of approximately
328
million hens.
According to
a LEAP Market
Analytics report
dated March
21, 2023,
the layer
hen inventory
is not
projected to
exceed this 328
million mark again until
January of 2024.
Layer hen numbers reported
by the USDA as
of March 1, 2023
were
312.9
million,
which
represents
a
decrease
of
3.8%
compared
with
 
the
 
thirty-ninelayer
 
weekshen
 
endedinventory
a
year
ago.
However,
the
USDA
reported
that
the
hatch
from
October
 
2022
 
andthrough
 
2021,February
2023
increased
4.5%
as
compared
with
the
prior-year
period,
indicating that layer flocks may increase in the future.
While no
farm is
immune from
HPAI,
 
we believe
 
spent
approximately
$1.8
million
(excluding
medical
insurance
claims)
related to
the pandemicwe have implemented
 
and itscontinue
 
effects. Theto maintain
 
majority ofrobust biosecurity
 
these expensesprograms
across our locations. We
 
in fiscalare also working closely with federal, state and local government
 
2022 resultedofficials and focused industry groups
to mitigate the risk of this and future outbreaks and effectively manage
 
from additionalour response, if needed.
CAGE-FREE EGGS
Ten
 
labor costsstates
 
and
increasedhave
 
costpassed
legislation
or
regulations
mandating
minimum
space
or
cage-free
requirements
for
egg
production
or
mandated
the
sale
 
of
 
packagingonly
 
materials,cage-free
 
primarilyeggs
 
reflectedand
egg
products
 
in
 
costtheir
 
ofstates,
 
sales.with
 
In
fiscal
2021,
mostimplementation
 
of
 
these
 
expenseslaws
 
relatedranging
from
January
2022
 
to
additional labor costs, primarily reflected in cost of sales. Medical insurance claims related to COVID-19 paid during the thirty-
nine
 
weeksJanuary
 
ended 20222026.
 
wereThese
states
represent
approximately
27%
of
the
U.S.
total
population
according
to
the 2020
U.S. Census.
In California
and Massachusetts,
which
collectively represent
14% of
the total
U.S. population
according to
the
2020 U.S. Census,
cage-free legislation went
into effect January
1, 2022. However,
these laws are subject
to judicial challenge,
and in October
2022 the U.S.
Supreme Court
heard oral arguments
in a case
challenging California’s
law that requires
the sale
of only cage-free eggs in
that state. A decision in that case
is expected in the summer of 2023.
These laws have already affected
and,
if
upheld,
will
continue
to
affect
sourcing,
production
and
pricing
of
eggs
(conventional
as
well
as
specialty)
as
the
national demand for cage-free production
could be greater than the
current supply,
which would increase the prices
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
prices
of conventional eggs.
A significant number
of our customers
have previously announced
goals to offer
cage-free eggs exclusively
on or before
2026,
subject in
most cases
to availability
of supply,
affordability and
customer demand,
among other
contingencies. Some
of these
customers have
recently changed
those goals
to offer
70% cage-free
eggs by
the end
of 2030.
Our customers
typically do
not
commit to long-term
purchases of specific quantities
or types of eggs
with us, and as
a result, it is difficult
to accurately predict
customer
requirements
for
cage-free
eggs.
We
are,
however,
engaging
with
our
customers
in
 
an
 
additional $1.6
million
as comparedeffort
 
to $1.1
 
million paidachieve
a
smooth
transition
 
in
 
the comparablemeeting
 
periodtheir
announced
goals
and
needs.
We
have
invested
significant
capital
 
in
 
fiscalrecent
years
to
acquire
and
2021.construct cage-free
facilities, and
we expect
our focus
for future
expansion will
continue to
include cage-free
facilities. At
the
same
time,
we
understand
the
importance
of
our
continued
ability
to
provide
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 third
quarter of fiscal
2022, we recorded
a gross profit
 
of $91.6fiscal 2023,
we recorded a gross
profit of $463.0 million
 
compared to $47.5$91.6 million
 
million for the
same period
of
 
fiscal
 
2021,2022,
 
with
 
the
 
increase
 
due
 
primarily
 
to
 
higher
 
shell
 
egg
 
prices,
 
andpartially
offset
by
the
 
increased
 
volumecost
 
of
 
specialtyfeed
ingredients and other farm production costs as well as increased processing
 
eggs.,
 
packaging and warehouse costs.
Our
 
totalnet
average selling
price per
dozen for
the
third quarter
of fiscal
2023
was $3.298
compared
to $1.
612
in
the prior-year
dozens soldperiod. Conventional
egg prices
per dozen
were $3.678
compared to
$1.458 for
the prior-year
period, and
specialty egg
prices
per dozen
were $2.616
compared to
$1.923 for
the prior-year
period. Conventional
egg prices
 
increased 2.8%
to 287.7
million dozen
shell eggs
forin
 
the third
 
quarter of
fiscal 2023 primarily due to decreased supply caused by the HPAI
 
fiscal 2022outbreak combined with robust customer demand,
 
compared to
279.7
millionwhich was
dozen for
the same
period of
fiscal
2021. For
the third
quarter of
fiscal 2022,
conventional dozens
sold decreased
5.2%
and
specialty dozens sold increased 24.1%
as compared to the same
quarter in fiscal 2021. Specialty
dozens sold increased as more
cage-free facilities came into production, retailers continue shift to selling cage-free products and cage-free legislation went into
full effect in California on January 1, 2022.
The
daily
average
price
for
the
UB
southeast
large
index
for
the
third
quarter
of
fiscal
2022
increased
46.8%
from
the
comparable period
in
the
prior year.
Our
net
average
selling price
per
dozen
for
the
third
quarter
of
fiscal
2022
was
$1.612
compared
to $1.246
in the
prior-year
period.
Hen numbers
reportedbolstered by
 
the USDApeak
 
as ofwinter holiday
 
March 1,
2022, were
322.7 million,
which is
approximately 5.4
million less
hens thanseason. See
 
the comparablediscussion
 
period of
the prior
year.
The USDA
also reported
that the
hatch
from
October
2021
through
February
2022
decreased
5.5%
compared
to
under the
 
prior-yearheading “HPAI”
 
period.above. The
 
Asdaily average
 
ofprice for
the Urner
 
MarchBarry southeast
 
1,large index
 
2022,
table-type eggs in incubators totaled 55.4 million, a decrease of 7.6% versus the prior-year period.
We
are
closely
monitoringfor the
 
recently reported
outbreaks of
highly pathogenic
avian influenza
(“HPAI”).
According
to
the
U.S.
Centers for
Disease Control
and Prevention,
these detections
.
There
have been no positive tests for HPAI
at any Cal-Maine Foods’ owned or contracted production facility to date. As
of March 28,
2022, the USDA
division of Animal
and Plant Health
Inspection Service (“APHIS”),
reported that approximately
11.5 million
commercial layer
hens or
about 3.6%
of the
table egg
layer flock
based on
February 2022
reported layer
numbers, have
been
depopulated due to
HPAI.
Pullets impacted comprise
approximately 830,000, or
about 0.7 percent
of the February
2022 pullet
inventory. We
believe we have implemented and continue to maintain robust biosecurity programs across our
locations. We are
also working
closely with
federal, state
and local
government officials
and focused
industry groups to
mitigate the
risk of
this
and future outbreaks and effectively manage our response, if needed.
Our farm production costs
per dozen produced for
the third quarter of
fiscal 2022 increased 16.9%,
or $0.132, compared to
the
third quarter
 
of fiscal
 
2021. This
increase was
primarily due
to2023 increased
 
prices for
feed ingredients.
For the
third quarter
of
fiscal 2022, the average
Chicago Board of Trade
(“CBOT”) daily market price
was $6.13 per
bushel for corn and
$412 per ton
for soybean meal, representing an increase of 23.5% and a decrease of 2.5%, respectively, compared to the average daily CBOT
prices for129.8% from
 
the comparable
 
period in
 
the
prior
 
year.
 
Other farmConventional
 
productionegg
 
costs forprices
 
the thirdexceeding
 
quarter ofspecialty
 
fiscal 2022egg
 
increased
11.8% versus the comparable period in the prior fiscal year, driven by higher flock amortization and facility expense.
Effectiveprices
 
Mayhas
 
30,occurred
 
2021,
we
acquiredfor
 
the
 
remainingpast
 
50%four
 
membershipquarters
 
interestbut
 
inis
 
Redatypical
historically.
 
RiverConventional egg
 
Valleyprices generally
 
Eggrespond more
 
Farm,quickly to
 
LLCmarket conditions
 
(“Red
River”). Red River owns and operates a specialty shell egg production complex with approximately 1.7 million cage-free laying
hens, cage-freebecause we
 
pullet capacity,sell the
 
feed mill,majority of
 
processing plant,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 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 Octoberour
 
2021, wecosts of
 
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.production.
 
The
 
initialmajority
 
focusof our
 
willspecialty
eggs
 
includeare
 
hard-cooked
eggs.typically
 
Thesold
 
newat
 
entity,prices
 
locatedand
 
interms
 
Neosho,negotiated
 
Missouri,directly
 
willwith
 
operatecustomers
and
therefore
do
not
fluctuate
 
as
 
MeadowCreekmuch
 
Foods,as
conventional pricing. For information about historical shell egg prices,
 
LLCsee Part I Item I of our 2022 Annual Report.
 
(“MeadowCreek”).
We
will
capitalize MeadowCreek with
up to $18.5
million in debt
and equity to
purchase property and
equipment and to
fund working
capital, 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 announced
that our
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 designed
to include the construction of
two cage-free layer houses and one cage-free
pullet house with capacity 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2420
house planned to be finished by October 1, 2022, with 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,Our total
 
2021, we madedozens sold
 
an additional investmentincreased 1.3%
 
in our jointto 291.4
 
venture Southwest Specialty Eggs,million dozen
 
LLC shell eggs
for the
third quarter
of fiscal
2023 compared
to acquire287.7
warehousemillion dozen for
the same period
of fiscal 2022.
For the third quarter
of fiscal 2023,
conventional dozens sold
decreased 2.7%
and specialty
dozens sold increased
9.4% as compared
to the same
quarter in fiscal
2022. Demand
for specialty eggs
increased
in the
third 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.
Our farm production
costs per dozen
produced for the
third quarter of
fiscal 2023 increased
18.2%, or $0.166,
compared to the
third quarter of fiscal 2022.
This increase was primarily due
to increased feed ingredient
costs as well as increased facility
costs
and higher amortization
of our flocks.
For the third quarter of
fiscal 2023, the average
Chicago Board of Trade
(“CBOT”) daily
market
price
was
$6.67
per
bushel
for
corn
 
and
 
distribution$473
 
capabilityper
ton
for
soybean
meal,
representing
increases
of
8.8%
and
14.8%,
respectively,
compared
 
to
 
expandthe average
 
Southwestdaily
 
Specialty
Eggs,
LLC’s
customer
base
in the
southern
California, Arizona and Nevada
markets. This strategic investment
is proving to
be incrementally
accretive as additional
cases
of
specialty
and
cage-free
eggs
began
distribution
through
the
warehouse
in
early
December
as
customers
preparedCBOT prices
 
for
 
the
comparable
period
in
the prior
year.
For
information
about
California’s January 1,historical corn and soybean meal prices, see Part I Item I of our 2022 cage-free mandate.Annual
Report.
RESULTS OF
OPERATIONS
The following
table sets forth,
 
forth, for the periods
 
indicated, certain
items from
 
our Condensed Consolidated Statements
 
Statements of Income
expressed as a percentage of net sales.
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 202125, 2023
February 26, 2022
February 27, 202125, 2023
February 26, 2022
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
53.6
%
80.8
%
86.859.4
%
88.0
%
87.7Gross profit
46.4
%
Gross profit
19.2
%
13.240.6
%
12.0
%
12.3
%
Selling, general and administrative
5.9
%
11.0
%
13.36.9
%
12.4
%
13.6Gain on insurance recoveries
(0.3)
%
(0.2)
%
(0.1)
%
(0.3)
%
(Gain) loss on disposal of fixed assets
(0.1)—
%
0.1
%
(0.2)—
%
—
%
Operating income (loss)
40.8
%
8.3
%
(0.2)33.8
%
(0.2)
%
(1.3)(0.1)
%
Total other income, net
1.7
%
2.8
%
3.40.9
%
1.8
%
1.5
%
Income before income taxes
42.5
%
11.1
%
3.234.7
%
1.6
%
0.21.7
%
Income tax expense (benefit)
10.2
%
2.8
%
(0.5)8.4
%
(0.2)
%
(0.4)Net income
32.3
%
Net income
8.3
%
3.726.3
%
1.8
%
0.61.9
%
NET SALES
Total
net sales for the
third quarter of fiscal
2023 were $997.5 million
compared to $477.5 million
for the same period
of fiscal
2022.
Net shell
egg sales
represented 96.
7% and
97.3% of
total net
 
sales for
the third quarter of
 
fiscal 2022 were $477.5 million comparedquarters
 
to $359.1 million for the sameof fiscal
 
period of fiscal
2021.
Net shell egg
sales represented 97.3%
and 97.5% of
total net sales
for the
third quarters of
fiscal 20222023 and
 
2021,2022, respectively.
Shell
 
egg
 
sales
classified
 
as
“Other” “Other”
 
represent
 
sales
 
of
 
hard-cookedmiscellaneous
 
eggs,
hatching
eggsbyproducts
 
and
 
otherresale products
 
miscellaneousincluded
 
products
included with our
shell
egg operations.
 
Total
 
net
sales
 
for
the
 
thirty-nine
weeks
 
ended
February
 
26, 202225,
2023
 
were $1,184.2
 
million, $2.46
billion,
compared
 
to $999.2
 
million $1.18
billion
for
 
the
comparable period of fiscal 2021.2022.
Net
 
shell
 
egg
 
sales
 
represented
 
97.2%96.4%
 
and
 
97.4%97.2%
 
of
 
total
 
net
 
sales
 
for
 
the
 
thirty-nine
 
weeks
 
ended
 
February
 
26,25,
 
20222023
 
and
February 27, 2021,26, 2022, respectively.
 
Total
conventional
dozens
sold
for
the
first,
second
and
third
quarters
were
183.9
million,
192.1
million
and
192.5
million,
respectively.
Total
specialty
dozens
sold
for
the
first,
second
and
third
quarters
were
70.8
million,
77.4
million
and
95.1
million, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2521
The table below presents an analysis of our conventional and specialty shell egg
sales (in thousands, except percentage data):
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 202125, 2023
February 26, 2022
February 27, 202125, 2023
February 26, 2022
Total net sales
$
997,493
$
477,485
$
359,0802,457,537
$
1,184,195
Conventional
$
999,189689,022
Conventional71.4
%
$
280,633
60.4
%
$
203,1891,656,528
58.069.9
%
$
685,678683,805
59.6
%
$
560,297
57.559.4
%
Specialty
272,205
28.2
%
182,945
39.4
%
145,210700,803
41.529.6
%
462,319462,320
40.2
%
408,537
42.0
%
Egg sales, net
961,227
99.6
%
463,578
99.8
%
348,3992,357,331
99.5
%
1,147,9971,146,125
99.8
%
968,834
99.599.6
%
Other
3,684
0.4
%
1,158
0.2
%
1,58311,932
0.5
%
2,6824,554
0.2
%
4,619
0.50.4
%
Net shell egg sales
$
964,911
100.0
%
$
464,736
100.0
%
$
349,9822,369,263
100.0
%
$
1,150,679
100.0
%
$
973,453
100.0
%
Net shell egg sales as a
percent of total net sales
96.7
%
97.3
%
97.596.4
%
97.2
%
97.4
%
Dozens sold:
Conventional
187,357
64.3
%
192,511
66.9
%
203,070555,045
72.665.2
%
568,511
70.0
%
599,625Specialty
73.4104,059
35.7
%
Specialty
95,140
33.1
%
76,645295,774
27.434.8
%
243,310
30.0
%
217,735
26.6
%
Total dozens sold
291,416
100.0
%
287,651
100.0
%
279,715850,819
100.0
%
811,821
100.0
%
817,360
100.0
%
Net average selling price per
per dozen:
Conventional
$
3.678
$
1.458
$
1.0012.984
$
1.2061.203
Specialty
$
0.934
Specialty2.616
$
1.923
$
1.8952.369
$
1.900
$
1.876
All shell eggs
$
3.298
$
1.612
$
1.2462.771
$
1.414
$
1.1851.412
Egg products sales:
 
Egg products net sales
32,582
12,749
9,09888,274
33,516
25,736
Pounds sold
16,796
15,947
15,56949,000
47,225
46,565
Net average selling price per
per pound
1.940
0.799
0.5841.802
0.710
0.553
Shell egg net sales
Third Quarter – Fiscal 2022 2023
vs. Fiscal 20212022
-
In
the
 
third quarter
 
of fiscal
2023,
conventional egg
sales increased
$408.4 million,
or 145.5%,
compared to
the third
quarter
of
 
fiscal
2022,
 
conventionalprimarily
 
egg
sales
increased
$77.4
million,
or
38.1%,
compareddue
 
to
 
the
 
third
quarter of fiscal
2021, primarily due
to the increase
 
in price
the
prices
for
 
conventional
shell
eggs,
 
partially slightly
offset
 
by
a decrease
decrease
in
volume
 
of
conventional
 
shell
eggs
sold.
 
Changes
in
 
price prices
resulted
 
in
a
 
$88.0 415.9
million
 
increase
and
 
the
change
in volume
resulted in a $10.6$7.5 million decrease in net sales, respectively.
-
We believe prices for conventional eggs were positively impacted by a better alignment of the conventional production
layerConventional egg
 
henprices increased
 
flockin the
 
andthird quarter
of fiscal
2023
primarily due
to decreased
supply caused
by the
HPAI
outbreak,
discussed
above,
while
 
customer
 
anddemand,
 
consumerbolstered
 
demand.
According
to
reports
fromby
 
the
 
USDA,peak
 
thewinter
 
averageholiday
 
numberseason,
 
ofremained
hens producing
white and
brown conventional
eggs for
February 2022
decreased 31.7
million, or
13.1%, versus
the
prior-year
comparable period.
USDA Agriculture
Marketing
Service reported
shell
eggs
broken for
foodservice and
further processing
increased 7.9% compared
to the
comparable prior-year
period. We
believe lower
conventional egg
prices in the prior-year period were primarily tied to a surplus of conventional eggs entering the retail channel from the
foodservice channel exceeding demand during this phase of the pandemic.
-
Conventional
egg
volume
sales
decreased
5.2%.
We
believe
many
consumers
have
evolved
their
preferences
to
purchase higher-priced specialty eggs for at-home meal preparation due to the perceived health and
welfare benefits of
specialty eggs, various state laws
mandating the sale of cage-free
and the public commitments by
most retailers to sell
more cage-free
products. Per
Information Resources,
Inc. (“IRI”),
Total
US –
Multi Outlet,
conventional white
shell
egg
dozens
sales
decreased
13.7%
during
the
latest
13
weeks
ended
February
27,
2022
versus
the
prior-year
comparable period.robust.
-
Specialty egg
sales increased $89.3
 
$37.7 million, or 26.0%48.8%,
 
in the third quarter
 
quarter of fiscal 2022 compared
 
2023 compared to
the third quarter
of
 
fiscal
 
2021,2022,
 
primarily
 
due
 
to
 
a
 
24.1%36.0%
increase
in
the
prices
for
specialty
eggs,
which
resulted
in
a
$72.1
million
increase
in
net
sales,
and
a
9.4%
 
increase
 
in
 
the
 
volume
 
of
 
specialty
 
eggs
 
sold,
 
which
 
resulted
 
in
 
a
 
$35.017.2
million
million increase in net sales.
-
Net average selling prices
of specialty eggs increased
in response to rising feed
and other input costs as well
as current
market conditions due to HPAI.
-
Demand
for
specialty
eggs
increased
as
conventional
egg
prices
rose.
Our
sales
volume
benefited
as
we
sold
9.4%
more
specialty
eggs
by
volume
in
 
net sales. Perthe
 
IRI, Totalthird
 
US – Multiquarter
 
Outlet of
fiscal
2023
versus
the
prior-year
period,
through
use
of
our
higher cage-free production capacity.
-
Cage-free egg sales
for the third quarter
of fiscal 2023 represented
17.8%
of our total net
shell egg sales versus
24.0%
for the
 
latest 13 weekssame prior year
 
ended February 27,period due
 
2022, cage-
free eggsto the higher
 
dozens soldconventional egg
 
(including free-range,prices causing
 
pasture-raised andconventional egg
 
organic) increasedsales to represent
 
21.3%. We
believe this
increase ina
 
2622
higher
proportion
of
our
total
sales.
Cage-free
dozens
sold
increased
14.9%
in
the
third
quarter
of
fiscal
2023
as
compared to the third quarter
of fiscal 2022 as the
higher conventional egg prices drove
demand isfor specialty eggs
and
we utilized our expanded cage-free production capacity.
Thirty-nine weeks – Fiscal 2023 vs. Fiscal 2022
-
For
the
thirty-nine
weeks
ended
February
25,
2023,
conventional
egg
sales
increased
$972.7
million,
or
142.3%,
compared
to
the
same
period
of
fiscal
2022,
primarily
due
to
the
increase
in
the
prices
for
conventional
shell
eggs,
slightly offset
by the decrease
in the volume
of conventional eggs
sold. Changes in
prices
resulted in a
$988.5 million
increase and the change in volume resulted in a $16.2 million decrease in net
sales, respectively.
-
Specialty egg
sales increased
$238.5 million,
or 51.6%,
for the
thirty-nine weeks
ended February
25, 2023
compared
to the
same period of
fiscal 2022,
primarily due
 
to California’sa 24.7%
 
cage-free mandate goingincrease in
 
into-effect Januarythe prices
 
1,for specialty
eggs.
Additionally,
the
volume
of specialty
dozens
sold
increased
21.6%
compared
to
the
same
prior
year
period,
mainly
due
to
the higher
conventional egg prices.
Changes in specialty
egg prices resulted
in a $138.7 million
increase in net sales
and changes
in volume resulted in a $99.7 million increase,
respectively.
Egg products net sales
Third Quarter – Fiscal 2023
vs. Fiscal 2022
-
Egg products
net sales
increased $19.8
million, or
155.6%, for
the third
quarter of
fiscal 2023
compared to
the same
period of
fiscal 2022,
 
as wellprimarily due
 
as more retailers’to a
 
shifting142.8% selling
price increase,
which had
a $19.2
million positive
impact on
to selling more cage-free products.net sales.
-
Our specialty egg products net average selling price increased in the third quarter
of fiscal 2023, compared to the third quarter of
fiscal 2022 as the supply of shell eggs
used to produce egg products decreased
due to the HPAI
outbreak that started in
February 2022.
Thirty-nine weeks – Fiscal 2023 vs. Fiscal 2022
-
Egg products
net sales
increased $54.8
million or
163.4%, primarily
due to
a 153.8%
selling price
increase compared
to the first thirty-nine weeks of fiscal 2022, which had a $53.5 million
positive impact on net sales.
-
Our egg products net average selling price increased
in the thirty-nine weeks ended February 25, 2023
compared to the
same
period
in
fiscal
2022
as
the
supply
of
shell
eggs
used
to
produce
egg
products
decreased
due
to
the
HPAI
outbreak that started in February 2022.
COST OF SALES
Costs of sales
for the
third quarter of
fiscal 2023
were $534.5 million
compared to $385.9
million for the
same period of
fiscal
2022. Cost of
 
sales for the
thirty-nine weeks
ended February 25,
2023 were $1,459.2
million compared
to $1,042.2 million
for
the same period of fiscal 2022.
Cost of
sales consists
of
costs directly
related
to producing,
processing
and
packing
shell eggs,
purchases
of
shell
eggs from
outside producers, processing and packing
of liquid and frozen egg products and other non-egg
costs. Farm production costs are
those costs
incurred at
the egg
production facility,
including feed,
facility,
hen amortization
and other
related farm
production
costs.
��
23
The following table presents the
key variables affecting our cost of sales (in thousands, except cost per
dozen data):
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
February 25, 2023
February 26, 2022
%
Change
February 25, 2023
February 26, 2022
%
Change
Cost of Sales:
Farm production
$
280,384
$
239,389
17.1
%
$
823,043
$
668,855
23.1
%
Processing, packaging,
and warehouse
87,037
77,116
12.9
252,093
211,649
19.1
Egg purchases and other
(including change in
inventory)
135,003
59,135
128.3
301,274
133,968
124.9
Total shell eggs
502,424
375,640
33.8
1,376,410
1,014,472
35.7
Egg products
32,043
10,263
212.2
82,762
27,749
198.3
Total
$
534,467
$
385,903
38.5
%
$
1,459,172
$
1,042,221
40.0
%
Farm production costs
(per dozen produced)
Feed
$
0.679
$
0.562
20.8
%
$
0.677
$
0.546
24.0
%
Other
$
0.399
$
0.350
14.0
%
$
0.388
$
0.350
10.9
%
Total
$
1.078
$
0.912
18.2
%
$
1.065
$
0.896
18.9
%
Outside egg purchases
(average cost per dozen)
$
3.72
$
1.75
112.6
%
$
3.20
$
1.57
103.8
%
Dozens produced
263,174
264,433
(0.5)
%
782,186
757,677
3.2
%
Percent produced to sold
90.3%
91.9%
(1.7)
%
91.9%
93.3%
(1.5)
%
Farm Production
Third Quarter – Fiscal 2023
vs. Fiscal 2022
-
Feed
costs
per
dozen
produced
increased
20.8%
in
 
the
third
quarter
of
fiscal
2023
compared
to
the
third
quarter
of
fiscal 2022.
This increase was
primarily due
to increased
prices for corn,
our primary feed
ingredient.
Basis levels for
corn and soybean meal ran significantly higher in our area of operations
compared to our prior year third fiscal quarter,
adding to our expense.
-
For the third
quarter of fiscal
2023, the average
daily CBOT
market price was
$6.67 per bushel
for corn and
$473 per
ton of soybean
meal, representing increases
of 8.8% and
14.8%, respectively,
as compared to the
average daily CBOT
prices for the third quarter of fiscal 2022.
-
Other
farm
production
costs
increased
due
to
higher
facility
and
flock
amortization.
Facility
costs
increased
due
primarily
to
increased
labor
costs.
Labor
costs
increased
36%
due
to
increased
use
of
contract
labor
and
increased
wages raised in response to labor shortages.
-
Flock amortization
increased primarily
from higher
feed costs,
which began
to rise
in our
third quarter
 
of fiscal
 
2022 versus2021
due to
 
the prior-yearincreased feed
 
period benefitted fromingredient prices
 
our acquisition
ofdiscussed above,
 
the remainingand which
 
50% membershipremained high
 
interest in the
 
Red River,third quarter
 
which helpedof fiscal
 
drive our2023.
Feed
 
cage-free eggcosts
 
sales. Ourare
 
cage-free
salescapitalized
 
also
benefitted
fromin
 
our
 
continuedflocks
 
investmentduring
 
inpullet
 
expandedproduction
 
and
increased
our
amortization
expense.
We
also
experienced higher amortization costs from an increase in our cage-free
 
capabilities
as
additional
cage-free
production, capacity came online during the quarter. Cage-free egg sales for the first, second and third quarters of fiscal
2022 were 22.3%, 22.4% and 24.1% of our total net shell egg sales, respectively.which has higher capitalized costs.
Thirty-nine weeks – Fiscal 20222023 vs. Fiscal 20212022
-
Feed
costs
per
dozen
produced
increased
24.0%
in
the
thirty-nine
weeks
ended
February
25,
2023
compared
to
the
same period
of fiscal
2022, primarily
due to higher
feed ingredient prices
.
Basis levels for
corn and soybean
meal ran
significantly higher in our area of operations compared to our prior year third
fiscal quarter, adding to our expense.
-
Other
farm
production
costs
increased
due
to
higher
facility
and
flock
amortization.
Facility
costs
increased
due
primarily
to
increased
labor
costs.
Labor
costs
increased
28%
due
to
increased
use
of
contract
labor
and
increased
wages raised in response to labor shortages.
24
-
Flock amortization increa
sed primarily from
higher capitalized feed
costs as well as
higher amortization
costs from an
increase in our cage-free production.
Supplies of corn and
soybean remained tight relative to
demand in the third 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
supply chain disruptions and
the
Russia-Ukraine
war
and
its
impact
on
the
export
markets.
For
fiscal
2023,
we
expect
continued
corn
and
soybean
upward
pricing pressures and further market volatility to affect
feed costs.
Processing, packaging, and warehouse
Third Quarter – Fiscal 2023
vs. Fiscal 2022
-
Cost of
packaging materials
increased 10.9%
compared to
the third
quarter of
fiscal 2022
due to
rising inflation
and
labor costs.
-
Labor costs increased 14.2%
due to wage increases and increased use of contract labor in response to labor shortages
.
Thirty-nine weeks – Fiscal 2023 vs. Fiscal 2022
-
Cost of packaging materials
increased 15.5%
compared to the thirty-nine
weeks ended February 26, 2022
due to rising
inflation and labor costs.
-
Labor costs
increased 13.7%
due to
wage increases
in response
to labor
shortages, primarily
due to
the pandemic
and
its effects.
-
Dozens
processed
increased
3.2%
compared
to
 
the
 
thirty-nine
 
weeks
 
ended
 
February
 
26,
 
2022,
 
conventional
egg
sales
increased
$125.4
million
or
22.4%
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
pricewhich
 
resulted
 
in
 
a
$7.3 million increase in costs.
Egg purchases and other (including change in inventory)
Third Quarter – Fiscal 2023
 
$154.6
million
increase
and
change
in
volume
resulted in a $29.1 million decrease in net sales, respectively.vs. Fiscal 2022
-
We believe prices for conventional eggs were positively impacted by a better alignment of the conventional production
layer hen flock and customer and consumer demand.Costs in this
 
USDA Agriculture Marketing Service reported shell eggs broken
for
foodservice
and
further
processing
category increased
10.2%
compared
to
the
comparable
prior-year
period.
We
believe
lower conventional
egg prices
in the
prior-year period
were primarily
tied to
a surplus
of conventional
eggs entering
the retail channel from the foodservice channel exceeding demand during this phase of the pandemic.
-
The decrease in
volume of conventional
eggs sold was
 
primarily due to
 
elevated retail demandhigher egg prices
 
during the firstas well as
 
half of
fiscal 2021an increase in
 
the volume of
outside egg
purchases, causing the percentage of produced to sold to decrease to 90.3%
from 91.9%.
Thirty-nine weeks – Fiscal 2023 vs. Fiscal 2022
-
Costs in this
category increased
primarily due to
 
consumers’ preferenceshigher egg prices
 
to purchaseas well as
 
eggs foran increase in
 
in-home meal
preparation due
to the
pandemic. We
saw this consumer
preference begin to
shift in the
fourth quarter volume of
 
fiscal 2021outside egg
purchases, as our percentage of produced to sold decreased to 91.9% from 93.3%.
GROSS PROFIT
 
consumers began to
Gross
 
resume out-of-
home
dining
and
prepare
fewer
meals
at
home.
Per
Information
Resources,
Inc.
(“IRI”),
Total
US
–
Multi
Outlet,
conventional white shell egg dozens sales decreased 12.6% during the latest 39
weeks ended February 27, 2022 versus
the prior-year comparable period.
-
Specialty egg sales increased $53.8
million, or 13.2%, for the
thirty-nine weeks ended February 26, 2022
compared to
the same period of
fiscal 2021, primarily due
to an 11.7%
increase in the volume
of specialty dozens sold
and a slight
increase in specialty egg prices. Changes in price resulted in a $5.8 million increase and change in volume resulted in a
$48.0 million increase in net sales,
respectively. We
also benefitted from our additional cage-free
production capacity.
Cage-free egg sales for the thirty-nine weeks ended February 26, 2022 were 23.0% of our total net shell egg sales.
Egg products net sales
Third Quarter – Fiscal 2022 vs. Fiscal 2021
-
Egg
products
net
sales
increased
$3.7
million
or
40.1%profit
 
for
 
the
 
third
 
quarter
 
of
 
fiscal
 
20222023
was
$463.0
million
 
compared
 
to
 
$91.6
million
for
the
same
period
of
fiscal
2022.
The increase
of $371.4
million was
primarily due
to higher
egg prices
as well
as the
increased volume
of specialty
eggs
sold, partially offset
by the increased cost of
feed ingredients and processing,
packaging and warehouse costs
and the decreased
volume of conventional egg sales.
Gross profit
for
the thirty-nine
weeks ended
February
25, 2023
was $998.4
million
compared
to $142.0
million
for the
 
same
period of fiscal 2021,
 
primarily due to a
36.8% selling price2022. The increase
 
which had a $3.4of $856.4 million
 
million positive impact on
net
sales.
-
Selling prices for egg products in
the third quarter of fiscal 2021
were negatively impacted by a decline in
foodservice
demandwas primarily due
 
to thehigher egg
 
pandemic. Our
egg products
net average
selling price
increased inprices as well as
 
the thirdincreased volume
 
quarter of
specialty eggs sold, partially offset by the increased
 
fiscal 2022
compared to
the same
period in
fiscal 2021
as foodservice
channel demand
has begun
to shift
more to
pre-pandemic
levels.
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
-
Egg products
net sales
increased $7.8
million or
30.2%, primarily
due to
a 28.4%
selling price
increase compared
tocost of feed ingredients and processing, packaging and warehouse costs and
the first thirty-nine weeksdecreased volume of fiscal 2021, which had a $7.4 million positive impact on netconventional egg sales.
-
Our egg products
net average selling
price increased in
the thirty-nine weeks
end February 26,
2022, compared to
the
same
period
in
fiscal
2021
as
foodservice
channel
demand
has
begun
to
shift
more
towards
pre-pandemic
levels.
Selling
prices
for
egg
products
in
the
thirty-nine
weeks
ended
February
27,
2021
were
negatively
impacted
by
a
decline in foodservice
demand during the
more restrictive phases
of governmental and
business shutdowns due
to the
pandemic.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES
Selling,
general,
and
administrative
("SGA")
expenses
include
costs
of
marketing,
distribution,
accounting
and
corporate
overhead. The following table presents an analysis of our SGA expenses (in thousands):
Thirteen Weeks
Ended
February 25, 2023
February 26, 2022
$ Change
% Change
Specialty egg expense
$
15,689
$
17,318
$
(1,629)
(9.4)
%
Delivery expense
19,453
16,440
3,013
18.3
%
Payroll, taxes and benefits
14,325
11,398
2,927
25.7
%
Stock compensation expense
1,059
1,007
52
5.2
%
Other expenses
7,963
6,523
1,440
22.1
%
Total
$
58,489
$
52,686
$
5,803
11.0
%
Third Quarter – Fiscal 2023
vs. Fiscal 2022
Specialty egg expense
-
Specialty
egg
expense
decreased
primarily
due
to
a
significant
reduction
in
advertising
costs.
The
higher
prices
for
conventional eggs and the comparatively lower prices for specialty
eggs diminished the need to promote specialty eggs
in the third quarter of fiscal 2023.
Delivery expense
-
The
increased
delivery
expense
is
primarily
due
to
an
increase
in
contract
trucking
expenses
of
approximately
$2.0
million in the third quarter of fiscal 2023 compared to the third quarter of fiscal 2022.
Payroll, taxes and benefits expense
-
The
increase
in payroll,
taxes and
benefits
expense
is due
to
an
increase
in
the accrual
for
anticipated
performance-
based bonuses.
Other expense
-
The increase in other expense is primarily due to inflationary pressure increasing
costs.
Thirty-nine Weeks Ended
February 25, 2023
February 26, 2022
$ Change
% Change
Specialty egg expense
$
43,429
$
45,295
$
(1,866)
(4.1)
%
Delivery expense
57,544
44,771
12,773
28.5
%
Payroll, taxes and benefits
39,139
32,640
6,499
19.9
%
Stock compensation expense
3,071
2,983
88
3.0
%
Other expenses
26,865
21,302
5,563
26.1
%
Total
$
170,048
$
146,991
$
23,057
15.7
%
Thirty-nine weeks – Fiscal 2023 vs. Fiscal 2022
Specialty egg expense
-
Specialty egg
expense, which includes
franchise fees, advertising
and promotion
costs, generally
aligns with specialty
egg
volumes,
which
were
up
21.6%
for
fiscal
2023
compared
to
fiscal
2022.
However,
our
specialty
egg
expense
decreased by
4.1%, primarily
due to
a significant
reduction in
advertising expense
as well
as increased
sales to
other
Eggland’s
Best,
Inc.
(“EB”)
franchisees,
including
unconsolidated
affiliates,
Specialty
Eggs,
LLC
and
Southwest
Specialty
Eggs,
LLC.
Additionally,
the
higher
prices
for
conventional
eggs
and
the
comparatively
lower
prices
for
specialty eggs diminished the
need to promote specialty
eggs; as a result, EB temporarily
reduced the related franchise
fees for certain specialty egg products to encourage continued production of
these products.
26
Delivery expense
-
The increased
delivery expense
is primarily
due to
an increase
in fuel
and labor
costs for
both our
fleet and
contract
trucking.
Compared
to
fiscal
2022,
contract
trucking
and
labor
expenses
increased
approximately
$9.2
million
for
fiscal 2023.
Payroll, taxes and benefits expense
-
The
increase
in
payroll,
taxes
and
benefits
expense
is
primarily
due
to
an
increase
in
the
accrual
for
anticipated
performance-based bonuses and increased wages for all employees
due to the inflationary market.
Other expenses
-
The increase in other expense is primarily due to increased
legal expenses of approximately $3.6 million.
OPERATING
INCOME (LOSS)
For the
third quarter
of fiscal
2023, we
recorded operating
income of
$407.8 million
compared to
$39.6 million
for the
same
period of fiscal 2022.
For the thirty-nine
weeks ended February
25, 2023, we
recorded operating
income of $831.5
million compared
to an operating
loss of $2.2 million for the same period of fiscal 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
third quarter
of fiscal
2023,
we earned
$6.3 million
of interest
income compared
to $205
thousand for
the same
period
of
fiscal
2022.
The
increase
resulted
from
significantly
higher
investment
balances
and
higher
interest
rates.
The
Company
recorded interest expense of
$143 thousand and
$126 thousand for the
third quarters ended February
25, 2023 and February
26,
2022,
respectively.
For the
thirty-nine weeks
ended February
25, 2023,
we earned
$9.4 million
of interest
income compared
to $702
thousand for
the
same
period of
fiscal
2022.
The
increase
resulted
from significantly
higher
investment
balances
and higher
interest rates.
The
Company
recorded
interest
expense
of
$433
thousand
and
$262
thousand
for
the
thirty-nine
weeks
ended
February
25,
2023 and February 26, 2022, respectively.
Other, net for the
third quarter ended February 25, 2023
was an expense of $1.5 million
compared to income of $1.1 million
for
the
same
period
of
fiscal
2022.
The
majority
of
the
decrease
is
due
to
a
$2
million
impairment
of
an
investment
in
an
unconsolidated entity in the third quarter of fiscal 2023.
Other,
net for
the thirty-nine
weeks ended
February
25, 2023
was an
expense
of $205
thousand
compared
to income
of $8.2
million for the same
period of fiscal 2022. The majority
of the decrease is due
to our acquisition in fiscal 2022
of the remaining
50% membership
interest in
Red River
Valley
Egg Farm,
LLC (“Red
River”) as
we recognized
a $4.5
million gain
due to
the
remeasurement
of
our
equity
investment,
along
with
the
$1.4
million
payment
received
in
fiscal
2022
related
to
review
and
adjustment
of
our
various
marketing
agreements.
Additionally,
the
Company
recorded
a
$2
million
impairment
of
an
investment in an unconsolidated entity in the third quarter of fiscal 2023.
INCOME TAXES
For the third
quarter of fiscal
2023, pre-tax income
was $424.9 million
compared to $53.0
million for the
same period of
fiscal
2022. We
recorded income tax expense of $102.1
million for the third quarter of fiscal
2023, which reflects an effective
tax rate
of 24.0%.
Income tax
expense was $13.6
million for
the comparable
period of fiscal
2022, which
reflects an effective
tax rate
of 25.6%.
For the thirty-nine
weeks ended February
25, 2023, pre-tax income
was $852.6 million
compared to $19.7 million
for the same
period of
fiscal 2022.
We
recorded income
tax expense
of $206.4
million, which
reflects an
effective
tax rate
of 24.2%.
We
recorded an income tax benefit of $2.9 million
in the prior year period, which includes the discrete
tax benefit of $8.3 million in
connection with the Red River
acquisition.
Excluding the discrete tax benefit, income
tax expense for the comparable period
of
fiscal 2022 was $5.3 million with an adjusted effective tax
rate of 27.3%.
 
 
 
 
27
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 INCOME ATTRIBUTABLE
TO CAL-MAINE FOODS, INC.
Net income
attributable to
Cal-Maine Foods,
Inc. for
the third
quarter ended
February 25,
2023,
was $323.2
million, or
$6.64
per basic
and $6.62
per diluted
common share,
compared to
net income
attributable to
Cal-Maine Foods,
Inc. of
$39.5 million
or $0.81 per basic and diluted common share for the same period of fiscal
2022.
Net
income
attributable
to
Cal-Maine
Foods,
Inc.
for
the thirty-nine
weeks
ended February
25,
2023,
was $647.1
million,
or
$13.31 per basic and $13.25 per diluted share, compared
to net income attributable to Cal-Maine Foods, Inc.
of $22.6 million or
$0.46 per basic and diluted share for the same period of fiscal 2022.
LIQUIDITY AND CAPITAL
RESOURCES
Working
Capital and Current Ratio
Our working capital
at February 25,
2023 was $880.3 million,
compared to $476.8
million at May 28,
2022. The calculation
of
working
capital
is defined
as current
assets less
current
liabilities. Our
current
ratio
was 3.8
at February
25, 2023,
compared
with 3.6 at May 28, 2022. The current ratio is calculated by dividing
current assets by current liabilities.
Cash Flows from Operating Activities
For the
thirty-nine weeks
ended February
25, 2023,
$706.5 million
in net
cash was
provided by
operating activities,
compared
to
$20.8
million
provided
by
operating
activities
for
the
comparable
period
in
fiscal
2022.
The
increase
in
cash
flow
from
operating
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
and processing,
packaging and
warehouse
costs compared to the prior-year period.
Cash Flows from Investing Activities
We
continue
to invest
in our
facilities,
with
$86.2
million used
to purchase
property,
plant and
equipment
for
the
thirty-nine
weeks
ended
February
25,
2023,
compared
to
$49.2
million
in
the
same
period
of
fiscal
2022.
Purchases
of
investment
securities
were
$442.6
million
in
the
third
quarter
of
fiscal
2023,
compared
to
$47.1
million
in
fiscal
2022.
The
increase
in
purchases of
investment securities
is primarily
due to
the utilization
of increased
liquidity resulting
from increased
cash flows
provided by operating activities noted above.
During the thirty-nine weeks ended February 26,
2022, we acquired the remaining
50% membership interest in Red River for $48.5 million.
Cash Flows from Financing Activities
We paid dividends
of $144.6 million for the thirty-nine weeks ended February 25, 2023.
As of February 25, 2023, cash increased $162.5 million since May 28,
2022, compared to a decrease of $41.8 million during the
same period of fiscal 2022.
Credit Facility
We
had no long-term
debt outstanding at
February 25, 2023
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
February
25,
2023,
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2728
COST OF SALESMaterial Cash Requirements
Costs of sales We
continue
to
monitor
the
increasing
demand
for
 
cage-free
eggs
and
to
engage
with
our
customers
in
efforts
to
achieve
a
smooth transition
toward their
announced timelines
for cage-free
egg sales.
The following
table presents
material construction
projects approved as of February 25, 2023 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of February
25, 2023
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses
Fiscal 2024
42,591
4,830
37,761
Cage-Free Layer & Pullet Houses
Fiscal 2025
40,099
26,350
13,749
Cage-Free Layer & Pullet Houses
Fiscal 2026
38,883
15,894
22,989
Cage-Free Layer & Pullet Houses
Fiscal 2027
56,923
13,617
43,306
$
178,496
$
60,691
$
117,805
We believe our
current cash balances, investments, cash flows from operations, and Credit Facility will be sufficient
to fund our
current cash needs for at least the third quarter 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.
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
 
fiscal 2022 were $385.9estimation
 
million compared to $311.6uncertainty
 
million for the sameand
 
period have
had
or
are
reasonably
likely
to
have
a
material
impact
on
our
financial
condition
or results
of fiscaloperations.
There
have been
no changes
to our
critical accounting
estimates identified
in our
2021. For2022 Annual Report.
ITEM 3. QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk during the
 
thirty-nine weeks ended February 25, 2023 from
the information provided in Part II Item 7A Quantitative and Qualitative Disclosures About
 
February 26,Market Risk in our 2022 Annual
Report.
ITEM 4.
CONTROLS
AND
PROCEDURES
Disclosure Controls and Procedures
Our disclosure
controls and
procedures are
designed to
provide reasonable
assurance that
information required
to be
disclosed
by us in the reports
we file or submit
under the Exchange Act
is recorded, processed, summarized
 
and February 27,reported, within the
 
2021, total costtime
periods
 
of sales were
$1,042.2 million and
$876.5 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 facility,
including feed, facility,
hen amortization, and
other related farm
production
costs.
The following table presents the key variables affecting our cost of sales (in thousands, except cost per dozen data):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26,
2022
February 27,
2021
%
Change
February 26,
2022
February 27,
2021
%
Change
Cost of Sales:
Farm production
$
239,389
$
190,883
25.4
%
$
668,855
$
531,877
25.8
%
Processing, packaging, and warehouse
77,116
63,640
21.2
211,649
187,014
13.2
Egg purchases and other (including
change in inventory)
59,135
50,443
17.2
133,968
137,001
(2.2)
Total shell eggs
375,640
304,966
23.2
1,014,472
855,892
18.5
Egg products
10,263
6,597
55.6
27,749
20,565
34.9
Total
$
385,903
$
311,563
23.9
%
$
1,042,221
$
876,457
18.9
%
Farm production costs (per dozen
produced)
Feed
$
0.562
$
0.467
20.3
%
$
0.546
$
0.422
29.4
%
Other
$
0.350
$
0.313
11.8
%
$
0.350
$
0.318
10.1
%
Total
$
0.912
$
0.780
16.9
%
$
0.896
$
0.740
21.1
%
Outside egg purchases (average cost per
dozen)
$
1.75
$
1.26
38.9
%
$
1.57
$
1.23
27.6
%
Dozens produced
264,433
248,130
6.6
%
757,677
731,205
3.6
%
Percent produced to sold
91.9%
88.7%
3.6
%
93.3%
89.5%
4.2
%
Farm Production
Third Quarter – Fiscal 2022 vs. Fiscal 2021
-
Feed
costs per
dozen
produced
increased 20.3%specified
 
in
 
the
 
thirdSecurities and
 
quarterExchange
 
ofCommission’s
 
fiscalrules
 
2022and
 
comparedforms. 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
 
the thirdallow
 
quarter of
fiscal 2021.timely
 
This increasedecisions
 
was primarilyregarding
required disclosure. Based on an evaluation of our disclosure
 
duecontrols and procedures conducted by our Chief Executive Officer
and
 
toChief
 
increased pricesFinancial
 
forOfficer,
 
corn, together
with
other
financial
officers,
such
officers
concluded
that
our
 
primary feeddisclosure
 
ingredient. Forcontrols
 
and
procedures were effective as of February 25, 2023 at the reasonable
 
thirdassurance level.
quarterChanges in Internal Control Over Financial Reporting
of
fiscal 2022,
the
average
daily
Chicago
Board
of
Trade
(“CBOT”) market
price
There was
 
$6.13 per
bushel
for
corn representing an increase of 23.5 percent compared to the average
daily CBOT prices for the third quarter of fiscal
2021.
-
Other farm
production costs
increased due
to higher
flock amortization,
primarily from
an increaseno change
 
in our
 
cage-free
production, which hasinternal control
 
higher capitalized costs. Also,over financial
 
our higher feedreporting that
 
costs, which began to
rise in our
third quarter of
fiscal 2021, are capitalized in our flocksoccurred during pullet production and increased our amortization expense.
-
We had higher facility expense as more cage-free facilities came into production.
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
-
Feed
costs per
dozen
produced
increased
29.4%
in
the
thirty-nine weeks
ended
February 26,
2022
compared
to
the
same period
of fiscal
2021, primarily
due to
higher feed
ingredient prices
resulting from
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.
28
-
We had higher facility expense as more cage-free facilities came into production.
Processing, packaging, and warehouse
Third Quarter – Fiscal 2022 vs. Fiscal 2021
-
Cost of
packaging materials
increased 17.7%
compared to
 
the third
quarter of
fiscal 2021
as supply
chain constraints
initially
caused
by
the
pandemic
increased
costs
for
packaging
products
and
manufacturers
implemented
pandemic
surcharges.
Costs also increased due to rising inflation.
-
Labor costs increased
16.3% due to
wage increases in
response to labor
shortages, primarily due
to the pandemic
and
its effects.
-
Dozens
processed
increased
6.6%
compared
to
the
third
quarter
of
fiscal
2021,
which
resulted
in
a
$4.5
million
increase in costs.
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
-
Cost of
packaging materials
increased 10.8%
compared to
the thirty-nine
weeks ended
February 27,
2021 as
supply
chain
constraints
initially
caused
by
the
pandemic
increased
costs
for
packaging
products
and
manufacturers
implemented pandemic surcharges.
Costs also increased due to rising inflation.
-
Labor costs increased
15.3% due to
wage increases in
response to labor
shortages, primarily due
to the pandemic
and
its effects.
-
Dozens processed increased 3.2%
compared to the thirty-nine
weeks ended February 27,
2021, which resulted in
$6.1
million increase in costs.
Egg purchases and other (including change in inventory)
Third Quarter – Fiscal 2022 vs. Fiscal 2021
-
Costs in
this category
increased primarily
due to
higher egg
prices, partially
offset
by the
decrease in
the volume
of
outside egg purchases, as our percentage of produced to sold increased to 91.9% from 88.7%.
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
-
Costs
in
this
category
decreased
primarily
due
to
the
decrease
in
the
volume
of
outside
egg
purchases,
as
our
percentage of produced to sold increased to 93.3% from 89.5%, partially offset by higher egg prices.
Looking
forward
throughout
the
rest
of
fiscal
2022,
market
indications
point
to
higher
corn
and
soybean
prices
and
higher
volatility tied to the Russia-Ukraine war and higher export demand.
GROSS PROFIT
Gross profit for the third quarter of fiscal 2022
was $91.6 million compared to $47.5 million for the
same period of fiscal 2021.
The increase of $44.1 million was primarily due to higher egg prices as well as the increased volume of specialty eggs, partially
offset by the increased cost of feed ingredients and processing costs.
Gross profit
for the
thirty-nine weeks
 
ended February
 
26, 202225, 2023
that has materially affected, or is reasonably likely to materially affect,
 
was $142.0
million compared
to $122.7
million for
the same
period of fiscal
2021. The increase
of $19.3 million
was primarily due
to higher egg
prices as well
as the increased
volume of
specialty eggs, partially offset by the increased cost of feed ingredients and processing costs.our internal control over financial reporting.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
29
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
February 26, 2022
February 27, 2021
$ Change
% Change
Specialty egg expense
$
17,318
$
16,162
$
1,156
7.2
%
Delivery expense
16,440
13,359
3,081
23.1
%
Payroll, taxes and benefits
11,398
10,195
1,203
11.8
%
Stock compensation expense
1,007
964
43
4.5
%
Other expenses
6,523
6,976
(453)
(6.5)
%
Total
$
52,686
$
47,656
$
5,030
10.6
%
Third Quarter – Fiscal 2022 vs. Fiscal 2021
Specialty egg expense
-
Specialty egg
expense which
includes franchise
fees, advertising
and promotion
costs generally
tracks with
specialty
egg volumes
which were
up 24.1%
for the
third quarter
of fiscal
2022 compared
to the
same period
of fiscal
2021.
Specialty dozens
sold to
outside distributors
including unconsolidated
affiliates, Specialty
Eggs, LLC
and Southwest
Specialty Eggs, LLC, increased which reduced related costs that we generally incur for specialty egg sales to retailers.
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 increased wages for standard annual
raises as well as the
addition of Red River. The accrual for anticipated performance-based bonuses also increased.
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
$ Change
% Change
Specialty egg expense
$
45,295
$
42,898
$
2,397
5.6
%
Delivery expense
44,771
38,905
5,866
15.1
%
Payroll, taxes and benefits
32,640
31,526
1,114
3.5
%
Stock compensation expense
2,983
2,789
194
7.0
%
Other expenses
21,302
19,376
1,926
9.9
%
Total
$
146,991
$
135,494
$
11,497
8.5
%
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
Specialty egg expense
-
Specialty egg
expense which
includes franchise
fees, advertising
and promotion
costs generally
tracks with
specialty
egg volumes
which were
up 11.7%
for the
thirty-nine weeks end
February 26,
2022, compared
to the
same period
of
fiscal 2021.
Specialty dozens sold to outside distributors including unconsolidated affiliates,
Specialty Eggs, LLC and
Southwest Specialty Eggs,
LLC, increased which
reduced related costs
that we generally
incur for specialty
egg sales
to retailers.
Delivery expense
-
The increased
delivery expense
is primarily
due to
the increase
in fuel
and labor
costs for
both our
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
well
as increased premiums for property and casualty insurance programs.
30
OPERATING
INCOME (LOSS)
For
the
third
quarter
of
fiscal
2022,
we
recorded
operating
income
of
$39.6
million
compared
to
operating
loss
of
$493
thousand for the same period of fiscal 2021.
For the thirty-nine weeks ended February 26, 2022, we recorded an operating loss of $2.2 million compared to an operating loss
of $13.2 million for the same period of fiscal 2021.
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
third
quarter
of
fiscal
2022,
we
earned
$205
thousand
of
interest
income
compared
to
$661
thousand
for
the
same
period
of
fiscal
2021.
The
decrease
resulted
from
significantly
lower
investment
balances.
The
Company
recorded
interest
expense
of
$126
thousand
and
$70
thousand
for
the
third
quarters
ended
February
26,
2022
and
February
27,
2021,
respectively.
For the
thirty-nine weeks ended
February 26, 2022,
we earned
$702 thousand
of interest
income compared to
$2.4 million
for
the
same
period
of
fiscal
2021.
The
decrease
resulted
from
significantly lower
investment balances.
The
Company
recorded
interest
expense
of
$262
thousand
and
$205
thousand
for
the
thirty-nine
weeks
ended
February
26,
2022
and
February
27,
2021, respectively.
Patronage dividends, which represent distributions from our membership in Eggland’s Best, Inc. were $10.1 million and $9.0
million for the thirteen and thirty-nine weeks ended February 26, 2022 and February 27, 2021, respectively. Patronage
dividends are paid once a year based on the profits of Eggland’s Best as well as its available cash.
For the third
quarter of fiscal
2022, equity income
of unconsolidated entities
was $1.8 million
compared to $1.9
million in the
prior-year period.
For the thirty-nine weeks ended February 26, 2022, equity income of unconsolidated entities was $2.2 million compared to $1.9
million in the prior-year period.
Other, net for
the third quarter ended February 26, 2022,
was income of $1.1 million compared
to income of $537 thousand for
the same period of fiscal 2021.
Other, net
for the thirty-nine
weeks ended February
26, 2022, was
income of $8.2
million compared to
income of $1.5
million
for the
same period
of fiscal
2021.
The majority
of the
increase is
due
to our
acquisition of
the remaining
50% membership
interest in
Red River
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.
INCOME TAXES
For the
third quarter of
fiscal 2022,
pre-tax income was
$53.0 million compared
to $11.8
million for the
same period of
fiscal
2021. We
recorded income tax expense
of $13.6 million for
the third quarter of
fiscal 2022, which reflects
an effective tax
rate
of 25.6%.
Excluding the impact of discrete
items related to a
$5.0 million net tax
benefit recorded in the
third quarter of fiscal
2021 in connection
with the Coronavirus
Aid, Relief, and
Economic Security Act
(the “CARES Act”),
income tax expense
for
the comparable period of fiscal 2021 was $3.3 million, which reflects an adjusted effective tax rate of 27.9%.
For the
thirty-nine weeks
ended February
26, 2022,
pre-tax income
was $19.7
million compared
to $2.2
million for
the same
period of fiscal 2021. We
recorded an income tax benefit of $2.9 million, which includes the discrete tax benefit of $8.3 million
as discussed
in
of the
Notes to
Condensed Consolidated
Financial Statements
in this
Quarterly Report.
Excluding the discrete tax benefit, income tax
expense was $5.3 million with an
adjusted effective tax rate of 27.3%,
compared
to income tax expense
of $934 thousand for the
comparable period of fiscal 2021,
which reflects an effective
tax rate of 41.8%
excluding the impact of the $5.0 million discrete net tax benefit recorded in connection with the CARES Act.
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
31
purposes,
including
tax
exempt
interest
income,
certain
nondeductible
expenses
and
net
income
or
loss
attributable
to
our
noncontrolling interest.
NET INCOME ATTRIBUTABLE
TO CAL-MAINE FOODS, INC.
Net income attributable to Cal-Maine Foods, Inc. for the third quarter ended February 26, 2022, was $39.5 million, or $0.81 per
basic and
diluted common
share, compared
to net
income attributable
to Cal-Maine
Foods, Inc.
of $13.5
million or
$0.28 per
basic and diluted common share for the same period of fiscal 2021.
Net
income
attributable
to
Cal-Maine
Foods,
Inc.
for
the
thirty-nine
weeks
ended
February
26,
2022,
was
$22.7
million,
or
$0.46 per
basic and
diluted common
share, compared
to net
income attributable
to Cal-Maine
Foods, Inc.
of $6.3
million or
$0.13 per basic and diluted common share for the same period of fiscal 2021.
CAPITAL RESOURCES AND LIQUIDITY
Our working capital at February
26, 2022 was $401.3 million,
compared to $429.8 million at
May 29, 2021. The
calculation of
working capital
is defined
as current
assets less
current liabilities.
Our current
ratio was
4.31 at
February 26,
2022, compared
with 5.77 at May 29, 2021.
We
had
no
long-term
debt
outstanding
at
February
26,
2022
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 February
26, 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.
For
additional
information,
see
of
the
Notes
to
Condensed
Consolidated
Financial
Statements
included
in
this
Quarterly Report.
For the thirty-nine weeks ended February 26, 2022,
$20.8 million in net cash was provided by
operating activities, compared to
$14.7 million provided
by operating activities
for the comparable
period in fiscal
2021. This is
primarily due to
the higher egg
prices partially offset by increased costs of feed ingredients compared to the prior-year period.
We
continue to
invest in
our facilities,
with $49.2
million used
to purchase
property,
plant and
equipment for
the thirty-nine
weeks ended February
26, 2022, compared
to $73.8 million
in the same
period of fiscal
2021. We
also acquired the
remaining
50%
membership
interest
in
Red
River
during
our
first
quarter
of
fiscal
2022
for
$48.5
million.
Sales
and
maturities
of
investment
securities,
net
of
purchases,
were
$29.2
million
for
the
thirty-nine
weeks
ended
February
26,
2022,
compared
to
$25.8
million
for
the
comparable period
in
fiscal
2021.
We
received
$400
thousand
in
distributions
from
an
unconsolidated
entity in the first three quarters of fiscal 2022 compared to $5.8 million for the same period fiscal of 2021.
As of February 26, 2022, cash decreased $41.8 million
since May 29, 2021, compared to a decrease of
$25.2 million during the
same period of fiscal 2021.
We
continue to
monitor the
increasing demand
for cage-free
eggs and
to engage
with our
customers in
an effort
to achieve
a
smooth transition to meet their
announced commitment timeline for cage-free
egg sales. We
have invested approximately $502
million in facilities, equipment and related operations to expand our cage-free production
starting with our first facility in 2008.
The following table presents material construction projects approved as of February 26, 2022 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of February
26, 2022
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2022
$
130,918
108,579
22,339
Cage-Free Layer & Pullet Houses
Fiscal 2023
24,752
6,262
18,490
$
155,670
$
114,841
$
40,829
We believe our current cash balances, investments, cash flows from operations, and Credit Facility will be sufficient to fund our
current capital needs.
32
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.
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
2021 Annual Report.
33
ITEM 3. QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk during the thirty-six weeks ended February 26, 2022 from
the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2021 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 February 26, 2022 at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no
change in our
internal control over
financial reporting that
occurred during the
quarter ended February
26, 2022
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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
 
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 2021 Annual Report.
 
Company’s 2022 Annual
Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
 
The following table is a summary of our third quarter 20222023 share repurchases:
Issuer Purchases of Equity Securities
Total
Number of
Maximum Number
Shares Purchased
of Shares that
Total
Number
Average
as Part of Publicly
May Yet
 
Be
of Shares
Price Paid
Announced Plans
Purchased Under the
Period
Purchased (1)
per Share
Or Programs
Plans or Programs
11/28/2127/22 to 12/25/2124/22
206—
$
36.32—
—
—
12/26/2125/22 to 01/22/2221/23
26,780(29,344)
41.0054.10
—
—
01/23/2222/23 to 02/26/2225/23
—
—
—
—
26,986(29,344)
$
40.9654.10
—
—
(1)
 
As permitted under our Amended and Restated 2012
Omnibus Long-Term
Incentive Plan, these shares were withheld by us to satisfy
tax withholding
 
 
obligations for employees in connection with the vesting of restricted
common stock.
34
ITEM 6. EXHIBITS
Exhibits
No.
Description
3.1
3.2
31.1*
31.2*
32**
101.SCH*+
Inline XBRL Taxonomy
Extension Schema Document
101.CAL*+
Inline XBRL Taxonomy
Extension Calculation Linkbase Document
101.DEF*+
Inline XBRL Taxonomy
Extension Definition Linkbase Document
101.LAB*+
Inline XBRL Taxonomy
Extension Label Linkbase Document
101.PRE*+
Inline XBRL Taxonomy
Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained
in Exhibit 101)
 
*
Filed herewith as an Exhibit.
 
**
Furnished herewith as an Exhibit.
+
Submitted electronically with this Quarterly Report.
 
30
SIGNATURES
Pursuant to the
 
the requirements
of the Securities
 
Securities Exchange Act
 
of 1934, the
 
the registrant has duly
 
duly caused
this report
 
to be signed
 
on
its behalf by the undersigned, thereunto duly authorized.
CAL-MAINE FOODS, INC.
(Registrant)
Date:
 
March 29, 202228, 2023
/s/ Max P.
 
Bowman
Max P.
 
Bowman
Vice President, Chief Financial
Officer
(Principal Financial Officer)
໿
Date:
 
March 29, 202228, 2023
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)
໿