1
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington,
 
DC
 
20549
FORM
10-Q
 
☑
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
 
Act of 1934
For the quarterly period ended
August 27,November 26, 2022
 
or
☐
 
Transition report pursuant to Section 13 or 15(d)
 
of the Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number:
 
001-38695
 
CAL-MAINE FOODS, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
64-0500378
(State or other jurisdiction of incorporation or organization)
 
(I.R.S Employer Identification No.)
1052 Highland Colony Pkwy
,
Suite 200
,
Ridgeland
,
Mississippi
 
39157
 
(Address of principal executive offices)
 
(Zip Code)
(
601
)
948-6813
 
(Registrant’s telephone number,
 
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
CALM
The
NASDAQ
 
Global Select Market
Indicate
 
by
 
check
 
mark
 
whether
 
the
 
registrant:
 
(1)
 
has
 
filed
 
all
 
reports
 
required
 
to
 
be
 
filed
 
by
 
Section
 
13
 
or
 
15(d)
 
of
 
the
Securities Exchange
 
Act of 1934
 
during the preceding
 
12 months (or
 
for such
 
shorter period that
 
the registrant was
 
required to
file such reports), and (2) has been subject to such filing requirements for the past
 
90 days.
Yes
☑
 
No
☐
Indicate by check
 
mark whether the
 
registrant has submitted
 
electronically every
 
Interactive Data File
 
required to be
 
submitted
pursuant to
 
Rule 405
 
of Regulation
 
S-T (§232.405
 
of this
 
chapter) during
 
the preceding
 
12 months
 
(or for
 
such shorter
 
period
that the registrant was required to submit such files).
Yes
☑
 
No
☐
Indicate by
 
check mark
 
whether the registrant
 
is a large
 
accelerated filer,
 
an accelerated
 
filer, a
 
non-accelerated filer,
 
a smaller
reporting
 
company,
 
or
 
an
 
emerging
 
growth
 
company.
 
See
 
the
 
definitions
 
of
 
“large
 
accelerated
 
filer,”
 
“accelerated
 
filer”,
“smaller reporting company”, and “emerging growth
 
company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer
☑
Accelerated filer
 
☐
Non – Accelerated filer
 
☐
Smaller reporting company
 
☐
Emerging growth company
 
☐
If
 
an
 
emerging
 
growth
 
company,
 
indicate
 
by
 
check
 
mark
 
if
 
the
 
registrant
 
has
 
elected
 
not
 
to
 
use
 
the
 
extended
transition
 
period
 
for
 
complying
 
with
 
any
 
new
 
or
 
revised
 
financial
 
accounting
 
standards
 
provided
 
pursuant
 
to
Section 13(a) of the Exchange Act
☐
Indicate by check mark whether the registrant is a shell company (as defined
 
in Rule 12b-2 of the Exchange Act).
Yes
☐
 
No
☑
There were
44,135,85144,130,149
 
shares of
 
Common Stock,
 
$0.01 par value,
 
and
4,800,000
 
shares of Class
 
A Common
 
Stock, $0.01
 
par
value, outstanding as of September 27,December 28, 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
PART
 
I.
 
FINANCIAL
INFORMATION
ITEM 1.
 
FINANCIAL STATEMENTS
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except for par value amounts)
 
(Unaudited)
 
August 27,November 26, 2022
May 28, 2022
Assets
Current assets:
Cash and cash equivalents
$
136,021178,635
$
59,084
Investment securities available-for-sale
145,784200,714
115,429
Trade and other receivables, net
178,217262,964
177,257
Income tax receivable
42,147
42,147
Inventories
265,754280,582
263,316
Prepaid expenses and other current assets
10,9658,968
4,286
Total current
 
assets
778,888974,010
661,519
Property, plant &
 
equipment, net
688,656703,882
677,796
Investments in unconsolidated entities
15,67414,687
15,530
Goodwill
44,006
44,006
Intangible assets, net
17,59217,037
18,131
Other long-term assets
9,9139,818
10,507
Total Assets
$
1,554,7291,763,440
$
1,427,489
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
188,689154,624
$
148,018122,331
Accrued income taxes payable
85,723
25,687
Dividends payable
41,74266,202
36,656
Total current
 
liabilities
230,431306,549
184,674
Other noncurrent liabilities
9,7069,410
10,274
Deferred income taxes, net
126,629127,176
128,196
Total liabilities
366,766443,135
323,144
Commitments and contingencies - see Note 119
—
—
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
69,01770,005
67,989
Retained earnings
1,149,3991,281,784
1,065,854
Accumulated other comprehensive loss, net of tax
(2,350)(3,087)
(1,596)
Common stock in treasury at cost –
26,12526,126
 
shares at August 27,November 26, 2022 and
26,121
shares
at May 28, 2022
(28,495)(28,496)
(28,447)
Total Cal-Maine Foods,
 
Inc. stockholders’ equity
1,188,3221,320,957
1,104,551
Noncontrolling interest in consolidated entity
(359)(652)
(206)
Total stockholders’
 
equity
1,187,9631,320,305
1,104,345
Total Liabilities and Stockholders’
 
Equity
$
1,554,7291,763,440
$
1,427,489
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 
Thirteen Weeks
 
Ended
AugustTwenty-six Weeks
Ended
November 26, 2022
November 27, 2021
November 26, 2022
August 28,November 27, 2021
Net sales
$
658,344801,700
$
324,986381,723
$
1,460,044
$
706,709
Cost of sales
440,854483,851
318,341337,976
924,705
656,317
Gross profit
217,490317,849
6,64543,747
535,339
50,392
Selling, general and administrative
53,60757,952
46,52547,780
111,559
94,305
(Gain) loss on disposal of fixed assets
3329
(213)(1,968)
62
(2,181)
Operating income (loss)
163,850259,868
(39,667)(2,065)
423,718
(41,732)
Other income (expense):
Interest income, net
9031,930
232129
2,833
361
Royalty income
428344
273278
772
551
Equity income (loss) of unconsolidated
entities
144(987)
135264
(843)
399
Other, net
1551,113
5,1631,862
1,268
7,025
Total other income, net
1,6302,400
5,8032,533
4,030
8,336
Income (loss) before income taxes
165,480262,268
(33,864)468
427,748
(33,396)
Income tax expense (benefit)
40,34663,974
(15,838)(677)
104,320
(16,515)
Net income (loss)
125,134198,294
(18,026)1,145
323,428
(16,881)
Less: Loss attributable to noncontrolling
interest
(153)(293)
—(28)
(446)
(28)
Net income (loss) attributable to Cal-Maine
Foods, Inc.
$
125,287198,587
$
(18,026)1,173
$
323,874
$
(16,853)
Net income (loss) per common share:
Basic
$
2.584.08
$
(0.37)0.02
$
6.66
$
(0.34)
Diluted
$
2.574.07
$
(0.37)0.02
$
6.63
$
(0.34)
Weighted average
 
shares outstanding:
Basic
48,62348,624
48,85848,857
48,624
48,859
Diluted
48,81148,840
48,85849,016
48,827
48,859
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
Comprehensive Income (Loss)
(In thousands)
(Unaudited)
Thirteen Weeks
 
Ended
AugustTwenty-six Weeks
Ended
November 26, 2022
November 27, 2021
November 26, 2022
August 28,November 27, 2021
Net income (loss)
$
125,134198,294
 
$
 
(18,026)1,145
$
323,428
$
(16,881)
Other comprehensive income (loss), before
tax:
Unrealized holding loss on available-for-saleavailable-for-
sale securities, net of reclassification
adjustments
(997)(974)
(224)(355)
(1,971)
(579)
Income tax benefit related to items of other
comprehensive income
243237
5487
480
141
Other comprehensive loss, net of tax
(754)(737)
(170)(268)
(1,491)
(438)
Comprehensive income (loss)
124,380197,557
(18,196)877
321,937
(17,319)
Less: Comprehensive loss attributable to the
noncontrolling interest
(153)(293)
—(28)
(446)
(28)
Comprehensive income (loss) attributable to
Cal-Maine Foods, Inc.
$
124,533197,850
$
(18,196)905
$
322,383
$
(17,291)
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
ThirteenTwenty-six Weeks
 
Ended
August 27,November 26, 2022
August 28,November 27, 2021
Cash flows from operating activities:
Net income (loss)
$
125,134323,428
$
(18,026)(16,881)
Depreciation and amortization
17,31234,729
17,38933,969
Deferred income taxes
(1,324)(540)
(15,838)(15,995)
Other adjustments, net
31,690(12,830)
(7,637)(16,585)
Net cash provided by (used in) operations
172,812344,787
(24,112)(15,492)
Cash flows from investing activities:
Purchases of investment securities
(51,834)(152,365)
(1,388)(26,387)
Sales and maturities of investment securities
20,29665,279
39,38867,864
Distributions from unconsolidated entities
—
400
Acquisition of business, net of cash acquired
—
(44,823)
Purchases of property,
 
plant and equipment
(27,662)(59,709)
(11,233)(28,647)
Net proceeds from disposal of property,
 
plant and equipment
7892
1,1715,338
Net cash used in investing activities
(59,122)(146,703)
(16,485)(26,255)
Cash flows from financing activities:
Payments of dividends
(36,653)(78,394)
—
Purchase of common stock by treasury
(45)
(18)
Principal payments on finance lease
(55)(94)
(53)(106)
Contributions
—
3
Net cash used in financing activities
(36,753)(78,533)
(71)(121)
Net change in cash and cash equivalents
76,937119,551
(40,668)(41,868)
Cash and cash equivalents at beginning of period
59,084
57,352
Cash and cash equivalents at end of period
$
136,021178,635
$
16,68415,484
See Notes to Condensed Consolidated Financial Statements.
7
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(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”)
 
have been prepared
 
in accordance with
 
the instructions to
 
to Form 10-Q and
 
and Article 10 of
 
of Regulation S-X
and
in
 
accordance
 
with generally
 
accepted
 
accounting
 
principles in
 
the
 
United
 
States of
 
America
 
(“GAAP”)
 
for
 
interim
 
financial
reporting and should
 
be read in conjunction
 
with our Annual Report
 
on Form 10-K
 
for the fiscal year
 
ended May 28,
 
2022 (the
“2022
 
Annual
 
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 presented
 
and, in the opinion of
 
management, consist of adjustments
 
of a normal
recurring nature.
 
Operating results for
 
the interim periods
 
are not necessarily
 
indicative of operating
 
results for the
 
entire fiscal
year.
Fiscal Year
The Company's fiscalCompany’s
 
fiscal year
ends on
 
the Saturday closest
 
closest to
May 31.
 
Each of
the three-month
 
periods and
year-to-date periods
ended on
August November 26, 2022 and November 27, 2022
and August 28, 2021 included
13 weeks
.
and
26 weeks
, respectively.
Use of Estimates
The preparation of the
 
consolidated financial statements in
 
conformity with GAAP requires management
 
to make estimates and
assumptions
 
that affect
 
the amounts
 
reported in
 
the consolidated
 
financial statements
 
and accompanying
 
notes. Actual
 
results
could differ from those estimates.
Investment Securities
Our investment
 
securities are
 
accounted
 
for in
 
accordance with
 
ASC 320,
 
“Investments -
 
Debt and
 
Equity Securities”
 
(“ASC
320”).
 
The
 
Company
 
considers
 
all
 
its
 
debt
 
securities
 
for
 
which
 
there
 
is
 
a
 
determinable
 
fair
 
market
 
value,
 
and
 
there
 
are
 
no
restrictions
 
on
 
the
 
Company'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 current operations.
 
Available-for-sale
 
securities are carried at
 
fair value,
with
unrealized
 
gains
and
 
losses
reported
 
as ain
 
separateother
 
componentcomprehensive
income
until
realized.
The
total
 
of stockholders’
 
equity.other
comprehensive
income for the period is presented as a component of stockholders' equity
separately from retained earnings and additional paid-
in
capital.
 
The
Company
 
regularly
 
evaluates
changes
changes
to
 
the
rating
of
 
its
debt
securities
 
by
credit
 
agencies and economic
 
and
economic
conditions to assess
and record
any expected credit
losses through
the allowance
for credit
 
losses through the allowance for credit losses, limited
to the amount
 
that fair
value
 
was
less
than
 
the
amortized
 
cost
basis.
The
cost
 
basis
 
for
 
realized
 
gains
 
and
 
losses
 
on
 
available-for-sale
 
securities
 
is
determined
by
 
the
specific
 
identification method.
 
method.
Gains and
losses are
recognized in
other income
 
(expenses) as
Other,
net in
the Company'sCompany’s
 
Condensed Consolidated
Statements
of
 
Operations.
 
Investments
in
 
mutual
funds
 
are
classified
 
as “Other
 
“Otherlong-
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
 
at their carrying
 
carrying values, which
 
which include
a reserve
 
for credit losses.
 
losses. As of August
 
27,of November
26, 2022
 
and May
May 28,
 
2022,
reserves
 
for
credit
 
losses
were
 
$
716838
 
thousand
and
 
$
775
 
thousand,
respectively.
 
The
Company
 
extends
credit
 
to
customers based on
 
an evaluation of
 
each customer's financial
 
condition and credit
 
history.
 
Collateral is generally
 
not required.
The
 
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.
Dividends Payable
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
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.
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
 
Operations.
 
The
 
errors
 
resulted
 
in
 
an
 
overstatement
 
of
 
Net
 
Sales and
 
Cost of
 
Sales
 
of
 
$
6.7
 
million
 
in the
 
first
8
quarter of fiscal 2022
 
and $
9.2
 
million in the second
 
quarter of fiscal 2022.
 
There was
no
 
impact to Operating
 
loss, Net income
(loss) or Net income (loss) per share.
We
 
evaluated
 
the
 
errors
 
quantitatively
 
and
 
qualitatively
 
in
 
accordance
 
with
 
Staff
 
Accounting
 
Bulletin
("SAB") No. 99 Materiality,
 
and
 
SAB No. 108 Considering
 
the
 
Effects
 
of
 
Prior
 
Year
 
Misstatements
 
when
 
Quantifying
Misstatements
 
in
 
the
 
Current
 
Year
 
Financial
 
Statements, and
 
determined
 
that
 
the
 
related
 
impact
 
was not material
 
to
 
our
condensed
 
consolidated
 
financial statements
 
for
 
the first
 
or second
 
quarters
 
of fiscal
 
2022,
 
but that
 
correcting
 
the cumulative
impact
 
of
 
the
 
errors
 
would
 
be
 
relevant
 
to
 
our
 
Condensed
 
Consolidated
 
Statements
 
of
 
Operations
 
for
 
the third
 
quarter
ended February 26, 2022.
 
26,
2022. Accordingly,
 
we
have
reflected
 
the
correction
of
 
the
immaterial
error
 
forin fiscal 2022
 
the
first
quarter
of
fiscal
2022 as a reduction
of
Net Sales and Cost of Sales in the accompanying Condensed Consolidated
 
Consolidated Statements of Operations.
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
 
impact on our
Consolidated Financial Statements.
Note 2 - Investment
Securities
The following represents the Company’s
 
investment securities as of August 27,November 26, 2022 and May 28, 2022 (in
 
(in thousands):
August 27,November 26, 2022
Amortized
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
15,03215,956
$
—
$
155276
$
14,87715,680
Commercial paper
15,93633,058
—
53
15,88333,005
Corporate bonds
81,71181,218
—
1,2371,709
80,474
Certificates of deposits
3,263
—
48
3,21579,509
US government and agency obligations
8,19019,111
—
87205
8,10318,906
Asset backed securities
15,62013,403
—
227340
15,39313,063
Treasury bills
7,87040,644
—
3193
7,83940,551
Total current
 
investment securities
$
147,622203,390
$
—
$
1,8382,676
$
145,784200,714
Mutual funds
$
3,4673,472
$
—
$
130114
$
3,3373,358
Total noncurrent
 
investment securities
$
3,4673,472
$
—
$
130114
$
3,3373,358
9
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 $
20.365.3
 
million and
 
$
39.467.9
 
million during
 
the
thirteentwenty-six
 
weeks
 
ended AugustNovember
 
27,26,
 
2022
 
and
 
AugustNovember
 
28,27,
 
2021,
 
respectively.
 
Gross
 
realized
 
gains
 
for
 
the
 
thirteentwenty-six
weeks ended
 
weeksNovember 26,
 
ended
August 27, 2022 and
 
and August 28,November 27,
 
2021 were
$
2
 
thousand
and $
127165
 
thousand, respectively.
 
Gross realized
losses
 
losses for
the thirteen
twenty-six
weeks
 
ended
 
AugustNovember
 
27,26,
 
2022
 
and
 
AugustNovember
 
28,27,
 
2021
 
were
 
$
2763
 
thousand
 
and
 
$
6067
 
thousand,
respectively.
There
were
no
allowances
 
allowances for credit losses at August 27,November 26, 2022 and May 28, 2022.
9
Actual maturities
 
may differ
 
from contractual
 
maturities as some
 
borrowers have
 
the right to
 
call or prepay
 
obligations with
 
or
without penalties. Contractual maturities of current investments at AugustNovember
 
27,26, 2022 are as follows (in thousands):
Estimated Fair Value
Within one year
$
64,148133,867
1-5 years
81,63666,847
Total
$
145,784200,714
Noncurrent
 
There were
no
 
sales of noncurrent investment
 
investment securities during the twenty-six
 
the thirteen weeks ended November
 
ended August 27,
26, 2022. Proceeds from
sales and maturities
 
sales
and maturities of noncurrent
 
investment securities
were $
385453
 
thousand during
the thirteentwenty-six
 
weeks ended August 28, November
27,
2021.
 
Gross
realized
realized
gains
for
 
the thirteen
twenty-six
weeks
 
ended August 28, November
27,
2021
 
were
$
130165
 
thousand. There
were
no
 
realized
losses for
the thirteen
twenty-six weeks ended August 28,November 27, 2021.
Note 3 - Fair Value
 
Measurements
The Company
 
is required
 
to categorize
 
both financial
 
and nonfinancial
 
assets and
 
liabilities based
 
on the
 
following fair
 
value
hierarchy. The
 
fair value
 
of an
 
asset is
 
the price
 
at which
 
the asset
 
could be
 
sold in
 
an orderly
 
transaction between
 
unrelated,
knowledgeable, and willing
 
parties able to engage in
 
the transaction. A liability’s
 
fair value is defined
 
as the amount that would
be
 
paid
 
to
 
transfer
 
the
 
liability
 
to
 
a
 
new
 
obligor
 
in
 
a
 
transaction
 
between
 
such
 
parties,
 
not
 
the
 
amount
 
that
 
would
 
be paid
 
to
settle the liability with the creditor.
•
Level 1
 
- Quoted prices in active markets for identical assets or liabilities
•
Level 2
 
- Inputs
 
other than
 
quoted
 
prices included
 
in Level
 
1 that
 
are observable
 
for the
 
asset or
 
liability,
 
either
directly or indirectly,
 
including:
◦
Quoted prices for similar assets or liabilities in active markets
◦
Quoted prices for identical or similar assets in non-active markets
◦
Inputs other than quoted prices that are observable for the asset or liability
◦
Inputs derived principally from or corroborated by other observable market
 
data
•
Level 3
 
- Unobservable inputs for the asset or liability that are
 
supported by little or no market activity and that
 
are
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded
at cost are as follows:
Cash and cash equivalents, accounts receivable,
and accounts payable:
The carrying amount approximates fair value due to the
short maturity of these instruments.
Lease obligations:
The carrying value of the Company’s lease obligations
is at its present value which approximates fair value.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10
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 August 27,November 26, 2022 and May 28,
 
28, 2022 (in thousands):
August 27,November 26, 2022
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
14,87715,680
$
—
$
14,87715,680
Commercial paper
—
15,88333,005
—
15,88333,005
Corporate bonds
—
80,47479,509
—
80,474
Certificates of deposits
—
3,215
—
3,21579,509
US government and agency obligations
—
8,10318,906
—
8,10318,906
Asset backed securities
—
15,39313,063
—
15,39313,063
Treasury bills
—
7,83940,551
—
7,83940,551
Mutual funds
3,3373,358
—
—
3,3373,358
Total assets measured at fair
 
value
$
3,3373,358
$
145,784200,714
$
—
$
149,121204,072
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 4 - Inventories
Inventories consisted of the following as of August 27,November 26, 2022
and May 28,
2022 (in thousands):
 
August 27,November 26, 2022
May 28, 2022
Flocks, net of amortization
$
152,264156,782
$
144,051
Eggs and egg products
24,54828,343
26,936
Feed and supplies
88,94295,457
92,329
$
265,754280,582
$
263,316
We
 
grow
 
and
 
maintain
 
flocks
 
of
 
layers
 
(mature
 
female
 
chickens),
 
pullets
 
(female
 
chickens,
 
under
 
18
 
weeks
 
of
 
age),
 
and
breeders (male
(male
 
and
female
 
chickens
used
 
to
produce
 
fertile
eggs
 
to
hatch
 
for
egg
 
production
flocks).
 
Our
total
 
flock at
 
Augustat
27, November 26,
2022 and May
 
May 28,
2022 consisted of
 
of approximately
11.410.4
 
million and
11.5
 
million pullets
and breeders
 
and
41.143.7
million and
42.2
 
million layers, respectively.
Note 5 - Accrued Dividends Payable and Dividends per Common
Share
We
accrue dividends at
the end of
each quarter according
to the Company’s
dividend policy adopted
by its Board
of Directors.
The Company
pays a dividend
to shareholders
of its Common
Stock and
Class A Common
Stock on
a quarterly basis
for each
quarter for
which the
Company reports
net income
attributable to
Cal-Maine Foods,
Inc. computed
in accordance
with GAAP
in an amount
equal to one-third
(
1/3
) of such
quarterly income. Dividends
are paid to
shareholders of record
as of the 60th
day
following the
last day
of such quarter,
except for
the fourth fiscal
quarter. For
the fourth quarter,
the Company
pays dividends
to shareholders of record on the 65th day after the
quarter end. Dividends are payable on the 15th day following
the record date.
Following a quarter for which the Company does not report net income
attributable to Cal-Maine Foods, Inc., the Company will
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
not pay a dividend
for a subsequent profitable
quarter until the Company
is profitable on a cumulative
basis computed from the
date of the most recent quarter for which a dividend was paid. For the first
quarter of fiscal 2023, we will pay a cash dividend of
approximately $
0.853
per share to holders of our Common Stock and Class A Common Stock.
On our
Condensed Consolidated
Statements of
Operations, we
determine dividends
per common
share in
accordance with
the
computation in the following table (in thousands, except per share data):
Thirteen Weeks
Ended
August 27, 2022
August 28, 2021
Net income (loss) attributable to Cal-Maine Foods, Inc.
$
125,287
$
(18,026)
Cumulative loss to be recovered prior to payment of divided at beginning of period
—
(4,244)
Net income available for dividend
$
125,287
$
—
1/3 of net income attributable to Cal-Maine Foods, Inc. available for dividend
41,762
—
Common stock outstanding (shares)
44,136
44,057
Class A common stock outstanding (shares)
4,800
4,800
Total common stock
outstanding (shares)
48,936
48,857
Dividends per common share*
$
0.853
$
—
*Dividends
per
common
share
=
1/3
of
Net
income
attributable
to
Cal-Maine
Foods,
Inc.
available
for
dividend
÷
Total
common
stock
outstanding (shares).
Note 65 - Equity
The following reflects
equity activity for
the thirteen and
twenty-six weeks ended
 
AugustNovember 26, 2022
and November 27, 2022 and August 28,
2021 (in
(in thousands):
Thirteen Weeks
 
Ended August 27,November 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 28,
2022
$
703
$
48
$
(28,447)
$
67,989
$
(1,596)
$
1,065,854
$
(206)
$
1,104,345
Other comprehensive
loss, net of tax
—
—
—
—
(754)
—
—
(754)
Stock compensation
plan transactions
—
—
(48)
1,028
—
—
—
980
Dividends
—
—
—
—
—
(41,742)
—
(41,742)
Net income (loss)
—
—
—
—
—
125,287
(153)
125,134
Balance at August
27, 2022
$
703
$
48
$
(28,495)
$
69,017
$
(2,350)
$
1,149,399
$
(359)
$
1,187,963
Other comprehensive
loss, net of tax
—
—
—
—
(737)
—
—
(737)
Stock compensation
plan transactions
—
—
(1)
988
—
—
—
987
Dividends ($
1.353
per share)
Common
—
—
—
—
—
(59,708)
—
(59,708)
Class A common
—
—
—
—
—
(6,494)
—
(6,494)
Net income (loss)
—
—
—
—
—
198,587
(293)
198,294
Balance at November
26, 2022
$
703
$
48
$
(28,496)
$
70,005
$
(3,087)
$
1,281,784
$
(652)
$
1,320,305
Thirteen Weeks
 
Ended August 28,November 27, 2021
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, 2021August
$
703
$
48
$
(27,433)
$
64,044
$
(558)
$
975,977
$
1,012,781
Other comprehensive loss, net of tax
—
—
—
—
(170)
—
(170)
Stock compensation plan transactions
—
—
(18)
1,000
—
—
982
Net loss
—
—
—
—
—
(18,026)
(18,026)
Balance at August 28, 2021
$
703
$
48
$
(27,451)
$
65,044
$
(728)
$
957,951
$
—
$
995,567
Other comprehensive
loss, net of tax
—
—
—
—
(268)
—
—
(268)
Stock compensation
plan transactions
—
—
1
975
—
—
—
976
Contributions
—
—
—
—
—
—
3
3
Net income (loss)
—
—
—
—
—
1,173
(28)
1,145
Balance at
November 27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
$
(25)
$
997,423
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12
Twenty-six Weeks
Ended November 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 28,
2022
$
703
$
48
$
(28,447)
$
67,989
$
(1,596)
$
1,065,854
$
(206)
$
1,104,345
Other comprehensive
loss, net of tax
—
—
—
—
(1,491)
—
—
(1,491)
Stock compensation
plan transactions
—
—
(49)
2,016
—
—
—
1,967
Dividends ($
2.206
per share)
Common
—
—
—
—
—
(97,355)
—
(97,355)
Class A common
—
—
—
—
—
(10,589)
—
(10,589)
Net income (loss)
—
—
—
—
—
323,874
(446)
323,428
Balance at
November 26, 2022
$
703
$
48
$
(28,496)
$
70,005
$
(3,087)
$
1,281,784
$
(652)
$
1,320,305
Twenty-six Weeks
Ended November 27, 2021
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
$
—
$
1,012,781
Other comprehensive
loss, net of tax
—
—
—
—
(438)
—
—
(438)
Stock compensation
plan transactions
—
—
(17)
1,975
—
—
—
1,958
Contributions
—
—
—
—
—
—
3
3
Net loss
—
—
—
—
—
(16,853)
(28)
(16,881)
Balance at November
27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
(25)
$
997,423
Note 76 - Net Income (Loss) per Common Share
 
Basic net
 
income (loss)
 
per share
 
is based
 
on the
 
weighted average
 
Common Stock
 
and Class
 
A Common
 
Stock outstanding.
Diluted net income
 
per share
 
is based on
 
weighted-average common
 
shares outstanding
 
during the
 
relevant period adjusted
 
adjusted for
the
 
dilutive
 
effect
 
of share-based
 
awards.
 
Restricted
 
shares
 
of
131145
 
thousand
 
were
 
antidilutive
 
due
 
to
 
the net
 
loss for
 
the first
quartertwenty-six weeks of fiscal 2022. These shares were not included in the diluted net
 
loss per share calculation.
13
The
 
following
 
table
 
provides
 
a
 
reconciliation
 
of
 
the
 
numerators
 
and
 
denominators
 
used
 
to
 
determine
 
basic
 
and
 
diluted
 
net
income (loss) per common share (amounts in thousands, except per share data):
Thirteen Weeks
 
Ended
August 27, Twenty-six Weeks
Ended
November 26,
2022
August 28, November 27,
2021
November 26,
2022
November 27,
2021
Numerator
Net income (loss)
$
125,134198,294
$
(18,026)1,145
$
323,428
$
(16,881)
Less: Loss attributable to noncontrolling
interest
(153)(293)
—(28)
(446)
(28)
Net income (loss) attributable to Cal-MaineCal-
Maine Foods, Inc.
$
125,287198,587
$
(18,026)1,173
$
323,874
$
(16,853)
Denominator
Weighted-average
 
common shares
outstanding, basic
48,62348,624
48,85848,857
48,624
48,859
Effect of dilutive restricted shares
188216
159
203
—
Weighted-average
 
common shares
outstanding, diluted
48,81148,840
48,85849,016
48,827
48,859
Net income (loss) per common share
attributable to Cal-Maine Foods,
Inc.
Basic
$
2.584.08
$
(0.37)0.02
$
6.66
$
(0.34)
Diluted
$
2.574.07
$
(0.37)0.02
$
6.63
$
(0.34)
Note 87 – Revenue from Contracts with Customers
Satisfaction of Performance Obligation
The vast majority of the Company’s
 
revenue is derived from agreements with customers based on the customer
 
placing an order
for products. Pricing
 
for the most part
 
is determined when
 
the Company and
 
the customer agree
 
upon the specific
 
order, which
establishes the contract for that order.
Revenues are
 
recognized in
 
an amount
 
that reflects
 
the net
 
consideration we
 
expect to
 
receive in
 
exchange for
 
the goods.
 
Our
shell
 
eggs
 
are
 
sold
 
at
 
prices
 
related
 
to
 
independently
 
quoted
 
wholesale
 
market
 
prices
 
or
 
formulas
 
related
 
to
 
our
 
costs
 
of
production.
 
The
 
Company’s
 
sales
 
predominantly
 
contain
 
a
 
single
 
performance
 
obligation.
 
We
 
recognize
 
revenue
 
upon
satisfaction
 
of
 
the
 
performance
 
obligation
 
with
 
the
 
customer
 
which
 
typically
 
occurs
 
within
 
days
 
of
 
the
 
Company
 
and
 
the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts
 
include a guaranteed sale
 
clause, pursuant to which
 
we credit the customer’s
 
account for product
 
that the
customer
 
is
 
unable
 
to
 
sell
 
before
 
expiration.
 
The
 
Company
 
records
 
an
 
allowance
 
for
 
returns
 
and
 
refunds
 
by
 
using
 
historical
return
 
data
 
and
 
comparing
 
to current
 
period
 
sales and
 
accounts receivable.
 
The allowance
 
is recorded
 
as a
 
reduction
 
in sales
with a corresponding reduction in trade accounts receivable.
Sales Incentives Provided to Customers
The
 
Company
 
periodically
 
provides
 
incentive
 
offers
 
to
 
its
 
customers
 
to
 
encourage
 
purchases.
 
Such
 
offers
 
include
 
current
discount offers
 
(e.g., percentage
 
discounts off
 
current purchases), inducement
 
offers (e.g.,
 
offers for
 
future discounts subject
 
to
a minimum
 
current purchase),
 
and other
 
similar offers.
 
Current discount
 
offers,
 
when accepted
 
by customers,
 
are treated
 
as a
reduction
 
to
 
the sales
 
price
 
of the
 
related
 
transaction,
 
while inducement
 
offers,
 
when
 
accepted
 
by customers,
 
are
 
treated
 
as
 
a
reduction
 
to the
 
sales price
 
based on
 
estimated future
 
redemption rates.
 
Redemption
 
rates are
 
estimated using
 
the Company’s
historical
 
experience
 
for
 
similar
 
inducement
 
offers.
 
Current discount
 
and
 
inducement
 
offers
 
are
 
presented
 
as a
 
net amount
 
in
‘‘Net sales.’’
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1314
Disaggregation of Revenue
The following table provides revenue disaggregated by product category
 
(in thousands):
Thirteen Weeks
 
Ended
AugustTwenty-six Weeks
Ended
November 26, 2022
November 27, 2021
November 26, 2022
August 28,November 27, 2021
Conventional shell egg sales
$
425,589541,917
$
182,030221,142
$
967,506
$
403,172
Specialty shell egg sales
200,820227,778
132,458146,917
428,598
279,375
Egg products
27,64028,052
9,36611,401
55,692
20,767
Other
4,2953,953
1,1322,263
8,248
3,395
$
658,344801,700
$
324,986381,723
$
1,460,044
$
706,709
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
 
contract life
as a
 
reduction
in net
 
sales. As of
 
of AugustNovember 26, 2022
 
27,
2022 and
May 28,
 
2022,
the balance
 
for
contract assets iswas 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
 
the contract.
Note 98 - Stock Based Compensation
Total stock-based
 
stock-based compensation
expense was
$
1.02.0
 
million for
the thirteen twenty-six
weeks ended August 27,
November 26,
2022 and August 28,
November
27, 2021.
Unrecognized
 
compensation
 
expense
 
as a
 
result
 
of non
 
-vested
 
shares
 
of
 
restricted
 
stock outstanding
 
under
 
the
 
Amended
 
and
Restated
2012
Omnibus
Long-Term
 
Incentive
Plan
at August 27,
November
26,
2022
of
$
5.94.9
 
million will be recorded over a weighted average
period
 
will
be
recorded
over
a
weighted
average period of
1.91.8
 
years.
Refer
to
Part
 
II
Item
8,
 
Notes
to
Consolidated
 
Financial
Statements
and
 
Supplementary
Data,
Note
16:
16: Stock Compensation Plans in our 2022 Annual Report for further information
 
on our stock compensation plans.
The Company’s restricted share activity
 
for the thirteentwenty-six weeks ended August 27,November 26, 2022 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 28, 2022
317,844
$
39.12
Vested
(3,240)
38.31
Forfeited
(2,778)(4,200)
39.4839.44
Outstanding, August 27,November 26, 2022
311,826310,404
$
39.12
Note 10 – Income Taxes
For
the
first
quarters
of
fiscal
2023
and
2022,
the
Company
recorded
income
tax
expense
of
$
40.3
million
and
income
tax
benefit of $
15.8
million which reflects
an effective
tax rate of
24.4
% and
46.8
%, respectively.
Excluding the impact
of discrete
items
related
to
an
$
8.3
million
net
tax
benefit
recorded
in
the
first
quarter
of
fiscal
2022
in
connection
with
the
Red
River
Valley
Egg Farm, LLC acquisition, the adjusted effective
tax rate for the first quarter of fiscal 2022 is
22.4
%.
Our effective tax
rate differs from
the federal statutory income
tax rate due to
state income taxes, certain
federal tax credits and
certain
items
included
in
income
for
financial
reporting
purposes
that
are
not
included
in
taxable
income
for
income
tax
purposes,
including
tax
exempt
interest
income,
certain
nondeductible
expenses
and
net
income
or
loss
attributable
to
noncontrolling interest.
14
Note 119 - Commitments and Contingencies
Financial Instruments
The
Company
maintained
 
standby
letters
of credit
 
(“LOCs”)
totaling
$
4.1
 
million at August 27,
 
at
November
26, 2022,
which
were issued
under
 
underthe
Company's
the Company's Credit Facility.
senior
secured
revolving
credit
facility.
 
The
outstanding
LOCs
are
for
the
 
benefit of certain insurance companies
 
of
certain
insurance
companies and are not recorded as
a liability on the consolidated balance sheets.
 
15
LEGAL PROCEEDINGS
State of Texas
 
v. Cal-Maine Foods, Inc. d/b/a Wharton;
 
and Wharton County Foods, LLC
 
On April
 
23, 2020,
 
the Company
 
and its subsidiary
 
Wharton County
 
Foods, LLC (“WCF”)
 
were named
 
as defendants in
 
State
of
 
Texas
 
v.
 
Cal-Maine
 
Foods,
 
Inc.
 
d/b/a
 
Wharton;
 
and
 
Wharton
 
County
 
Foods,
 
LLC,
 
Cause
 
No.
 
2020-25427,
 
in
 
the
 
District
Court of
 
Harris County,
 
Texas.
 
The State
 
of Texas
 
(the “State”)
 
asserted claims
 
based on
 
the Company’s
 
and WCF’s
 
alleged
violation
 
of
 
the
 
Texas
 
Deceptive
 
Trade
 
Practices—Consumer
 
Protection
 
Act,
 
Tex.
 
Bus.
 
&
 
Com.
 
Code
 
§§
 
17.41-17.63
(“DTPA”).
 
The
 
State
 
claimed
 
that
 
the
 
Company
 
and
 
WCF
 
offered
 
shell
 
eggs
 
at
 
excessive
 
or
 
exorbitant
 
prices
 
during
 
the
COVID-19
 
state
 
of
 
emergency
 
and
 
made
 
misleading
 
statements
 
about
 
shell
 
egg
 
prices.
 
The
 
State
 
sought
 
temporary
 
and
permanent
 
injunctions
 
against
 
the
 
Company
 
and
 
WCF
 
to
 
prevent
 
further
 
alleged
 
violations
 
of
 
the
 
DTPA,
 
along
 
with
 
over
$
100,000
 
in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the State’s
 
original petition with
prejudice. On September
 
11, 2020,
 
the State filed a
 
notice of appeal,
 
which was assigned to
 
to the Texas
 
Court of Appeals
 
for the
First
 
District.
 
On
 
August
 
16,
 
2022,
 
the
 
appeals
 
court
 
reversed
 
and
 
remanded
 
the
 
case
 
back
 
to
 
the
 
trial
 
court
 
for
 
further
proceedings. On October
 
The
31, 2022, the Company
 
and WCF filed a
 
WCF
are
considering
whether
petition for review to
 
appealthe Supreme Court of
 
thisTexas
 
decisionappealing
from
the
 
First District
 
District.court’s
 
Managementdecision.
On November
30,
2022, the
State of
Texas
waived
its response
to defendant’s
petition
for
review. The court
has not issued a ruling. Management believes the risk of material loss related to this matter
to be remote.
Bell et al. v. Cal-Maine Foods et al.
 
On
 
April
 
30, 2020,
 
the Company
 
was named
 
as one
 
of several
 
defendants
 
in
 
Bell et
 
al. v.
 
Cal-Maine
 
Foods et
 
al.,
 
Case No.
1:20-cv-461,
 
in
 
the
 
Western
 
District
 
of
 
Texas,
 
Austin
 
Division.
 
The
 
defendants
 
include
 
numerous
 
grocery
 
stores,
 
retailers,
producers, and farms. Plaintiffs assert that defendants
 
violated the DTPA
 
by allegedly demanding exorbitant or
 
excessive prices
for
 
eggs during
 
the
 
COVID-19
 
state of
 
emergency.
 
Plaintiffs
 
request
 
certification
 
of a
 
class of
 
all consumers
 
who purchased
eggs
 
in
 
Texas
 
sold,
 
distributed,
 
produced,
 
or
 
handled
 
by
 
any
 
of
 
the
 
defendants
 
during
 
the
 
COVID-19
 
state
 
of
 
emergency.
Plaintiffs seek to enjoin
 
the Company and other
 
defendants from selling eggs
 
at a price more than
 
10% greater than the price
 
of
eggs prior
 
to the
 
declaration
 
of the
 
state of
 
emergency
 
and damages
 
in the
 
amount
 
of $
10,000
 
per violation,
 
or $
250,000
 
for
each violation
 
impacting anyone
 
over 65
 
years old.
 
On December
 
1, 2020,
 
the Company
 
and
 
certain other
 
defendants filed
 
a
motion to
 
dismiss the
 
plaintiffs’
 
amended
 
class action
 
complaint. The
 
plaintiffs
 
subsequently filed
 
a motion
 
to strike,
 
and the
motion to
 
dismiss and
 
related proceedings
 
were referred
 
to a
 
United States
 
magistrate judge.
 
On July
 
14, 2021,
 
the magistrate
judge
 
issued
 
a
 
report
 
and
 
recommendation
 
to
 
the
 
court
 
that
 
the
 
defendants’
 
motion
 
to
 
dismiss
 
be
 
granted
 
and
 
the
 
case
 
be
dismissed without prejudice for lack of subject matter jurisdiction. On
 
On September 20, 2021, the court dismissed the case without
prejudice.
 
On
 
July
 
13,
 
2022,
 
the
 
court
 
denied
 
the
 
plaintiffs’
 
motion
 
to
 
set
 
aside
 
or
 
amend
 
the
 
judgment
 
to
 
amend
 
their
complaint.
On March 15, 2022,
 
plaintiffs filed a
 
filed a second suit against the
 
against the Company and several
 
several defendants in Bell et
 
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
 
other
 
defendants
 
in
 
the
 
case
 
filed
 
a
 
motion
 
to
 
dismiss
 
the
 
plaintiffs’
class action
 
complaint. On
 
September 6,
 
2022, the
 
plaintiffs’ filed
 
their opposition
 
to the
 
motion to
 
dismiss and
 
the Company
and other
 
defendants filed
 
their reply on
 
on September 13,
 
13, 2022. The
On December
7, 2022,
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
December
21,
2022,
the
plaintiffs
filed
Objections
to
the
Magistrate’s
Report
and
Recommendation, but the
 
court has not issued a
 
issued a ruling.
Management believes
 
the risk
of material loss
related to both matters
to
be remote.
Kraft Foods Global, Inc. et al. v.
 
United Egg Producers, Inc. et al.
 
As previously
 
reported, on
 
September 25,
 
2008, the
 
Company
 
was named
 
as one
 
of several
 
defendants
 
in numerous
 
antitrust
cases involving
 
the United
 
States shell
 
egg
 
industry.
 
The Company
 
settled all
 
of these
 
cases, except
 
for
 
the claims
 
of certain
plaintiffs who sought substantial
 
damages allegedly arising from
 
the purchase of egg products (as
 
opposed to shell eggs). These
remaining plaintiffs
 
are Kraft
 
Food Global,
 
Inc., General
 
Mills, Inc.,
 
and Nestle
 
USA, Inc.
 
(the “Egg
 
Products Plaintiffs”)
 
and
The Kellogg Company.
On September
 
13, 2019,
 
the case
 
with the
 
Egg Products
 
Plaintiffs was
 
remanded from
 
a multi-district
 
litigation proceeding
 
in
the
 
United
 
States
 
District
 
Court
 
for
 
the
 
Eastern
 
District
 
of
 
Pennsylvania,
 
In
 
re
 
Processed
 
Egg
 
Products
 
Antitrust
 
Litigation,
MDL No. 2002, to
 
the United States District Court
 
for the Northern District
 
of Illinois, Kraft Foods Global,
 
Inc. et al. v.
 
United
15
Egg
 
Producers,
 
Inc.
 
et
 
al.,
 
Case
 
No.
 
1:11-cv-8808,
 
for
 
trial.
 
The
 
Egg
 
Products
 
Plaintiffs
 
allege
 
that
 
the
 
Company
 
and
 
other
defendants
 
violated
 
Section
 
1
 
of
 
the
 
Sherman
 
Act,
 
15.
 
U.S.C.
 
§
 
1,
 
by
 
agreeing
 
to
 
limit
 
the
 
production
 
of
 
eggs
 
and
 
thereby
illegally to raise the prices that plaintiffs
 
paid for processed egg products. In particular,
 
the Egg Products Plaintiffs are
 
attacking
certain features of
 
the United Egg
 
Producers animal-welfare guidelines
 
and program used by
 
the Company and
 
many other egg
producers. The
 
Egg Products
 
Plaintiffs seek
 
to enjoin
 
the Company
 
and other
 
defendants from
 
engaging in
 
antitrust violations
16
and seek treble money damages.
 
On May 2, 2022,
 
the court set trial for October
 
24, 2022, but on September
 
20, 2022, the court
cancelled the
 
trial date
 
due to
 
COVID-19 protocols
 
and converted
 
the trial
 
date to
 
a status
 
hearing to
 
reschedule the
 
jury trial.
We anticipate On
December
8,
2022,
the
 
trial being rescheduled for the first or second calendar quarter of 2023.court
 
held
a
status
hearing.
The
parties
subsequently
submitted
an
updated
proposed
pre-trial
schedule and the Court has set the trial 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,
 
2019, a stipulation for dismissal was filed with the court,
 
and on March 28,
2022, the court dismissed the Company with prejudice.
The Company intends to
 
continue to defend the remaining
 
case with the Egg Products Plaintiffs
 
as vigorously as possible
based
on
 
defenses
 
which
 
the
 
Company
 
believes
 
are
 
meritorious
 
and
 
provable.
 
Adjustments,
 
if
 
any,
 
which
 
might
 
result
 
from
 
the
resolution of
 
this remaining
 
matter with
 
the Egg
 
Products Plaintiffs
 
have not
 
been reflected
 
in the
 
financial statements.
 
While
management
 
believes
 
that
 
there
 
is
 
still
 
a
 
reasonable
 
possibility
 
of
 
a
 
material
 
adverse
 
outcome
 
from
 
the
 
case
 
with
 
the
 
Egg
Products Plaintiffs,
 
at the
 
present time,
 
it is not
 
possible to
 
estimate the
 
amount of
 
monetary exposure,
 
if any,
 
to the
 
Company
due
 
to
 
a
 
range
 
of
 
factors,
 
including
 
the
 
following,
 
among
 
others:
 
two
 
earlier
 
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
 
in a
different
 
court
 
than
 
prior related
 
cases; there
 
are significant
 
factual
 
issues to
 
be
 
resolved; and
 
there
 
are requests
 
for damages
other than compensatory damages (i.e., injunction and treble money damages).
State of Oklahoma Watershed Pollution
 
Litigation
On June 18,
 
2005, the
 
State of
 
Oklahoma filed
 
suit, in
 
the United
 
States District
 
Court for
 
the Northern
 
District of
 
Oklahoma,
against Cal-Maine Foods, Inc. and
 
Tyson Foods,
 
Inc. and affiliates, Cobb-Vantress,
 
Inc., Cargill, Inc. and its
 
affiliate, George’s,
Inc. and
 
its affiliate,
 
Peterson Farms, Inc.
 
and Simmons Foods,
 
Inc. The
 
State of Oklahoma
 
claims that through
 
the disposal of
chicken
 
litter the
 
defendants have
 
polluted the
 
Illinois River
 
Watershed.
 
This watershed
 
provides
 
water to
 
eastern Oklahoma.
The complaint
 
seeks injunctive
 
relief and
 
monetary damages,
 
but the
 
claim for
 
monetary damages
 
has been
 
dismissed by
 
the
court.
 
Cal-Maine
 
Foods,
 
Inc.
 
discontinued
 
operations
 
in
 
the
 
watershed.
 
Accordingly,
 
we
 
do
 
not
 
anticipate
 
that
 
Cal-Maine
Foods,
 
Inc.
 
will
 
be
 
materially
 
affected
 
by
 
the
 
request
 
for
 
injunctive
 
relief
 
unless
 
the
 
court
 
orders
 
substantial
 
affirmative
remediation. Since
 
the litigation
 
began, Cal-Maine
 
Foods, Inc.
 
purchased
100
% of the
 
membership interests
 
of Benton
 
County
Foods, LLC,
 
which is
 
an ongoing
 
commercial shell
 
egg operation
 
within the
 
Illinois River
 
Watershed.
 
Benton County
 
Foods,
LLC is not a defendant in the litigation.
The trial in the case
 
began in September 2009 and
 
concluded in February 2010. The
 
case was tried without a jury,
 
and the court
has not yet issued its ruling. Management believes the risk of material loss related
 
to this matter to be remote.
Other Matters
In addition to
 
the above, the Company
 
is involved in
 
various other claims
 
and litigation incidental
 
to its business. Although
 
Although the
outcome of
 
these matters
 
cannot be
 
determined with
 
certainty,
 
management, upon
 
the advice
 
of counsel,
 
is of
 
the opinion
 
that
the final outcome should not have a material effect on the Company’s
 
consolidated results of operations or financial position.
1617
ITEM
 
2.
 
MANAGEMENT’S
DISCUSSION
AND
 
ANALYSIS
 
OF
 
FINANCIAL
 
CONDITION
 
AND
 
RESULTS
 
OF
OPERATIONS
The following
 
should be
 
read in
 
conjunction
 
with Management’s
 
Discussion and
 
Analysis of
 
Financial Condition
 
and Results
of Operations included
 
in Part II Item
 
7 of the Company’s
 
Annual Report on
 
Form 10-K for its
 
fiscal year ended May
 
28, 2022
(the “2022 Annual Report”), and the accompanying financial statements and
 
notes included in Part II Item 8 of the 2022 Annual
Report and in
 
of this Quarterly Report on Form 10-Q (“Quarterly Report”).
This
 
report
 
contains
 
numerous
 
forward-looking
 
statements
 
within
 
the
 
meaning
 
of
 
Section
 
27A
 
of
 
the
 
Securities
 
Act
 
of
 
1933
(the “Securities
 
Act”) and
 
Section 21E
 
of the
 
Securities Exchange
 
Act of
 
1934 (the
 
“Exchange Act”)
 
relating to
 
our shell
 
egg
business,
 
including
 
estimated
 
future
 
production
 
data,
 
expected
 
construction
 
schedules,
 
projected
 
construction
 
costs,
 
potential
future
 
supply
 
of and
 
demand
 
for
 
our
 
products,
 
potential
 
future
 
corn
 
and
 
soybean price
 
trends,
 
potential
 
future
 
impact
 
on
 
our
business
 
of
 
the
 
COVID-19
 
pandemic,
 
potential
 
future
 
impact
 
on
 
our
 
business
 
of
 
new
 
legislation,
 
rules
 
or
 
policies,
 
potential
outcomes
 
of
 
legal
 
proceedings,
 
and
 
other
 
projected
 
operating
 
data,
 
including
 
anticipated
 
results
 
of
 
operations
 
and
 
financial
condition.
 
Such
 
forward-looking
 
statements
 
are
 
identified
 
by
 
the
 
use
 
of
 
words
 
such
 
as
 
“believes,”
 
“intends,”
 
“expects,”
“hopes,”
 
“may,”
 
“should,”
 
“plans,”
 
“projected,”
 
“contemplates,”
 
“anticipates,”
 
or
 
similar
 
words.
 
Actual
 
outcomes
 
or
 
results
could
 
differ
 
materially
 
from
 
those
 
projected
 
in
 
the
 
forward-looking
 
statements. The
 
forward-looking
 
statements
 
are
 
based
 
on
management’s
 
current
 
intent,
 
belief,
 
expectations,
 
estimates,
 
and
 
projections
 
regarding
 
the
 
Company
 
and
 
its
 
industry. These
statements
 
are
 
not
 
guarantees
 
of
 
future
 
performance
 
and
 
involve
 
risks,
 
uncertainties,
 
assumptions,
 
and
 
other
 
factors
 
that
 
are
difficult
 
to predict
 
and
 
may be
 
beyond
 
our
 
control. The
 
factors
 
that
 
could cause
 
actual results
 
to
 
differ
 
materially
 
from those
projected
 
in the
 
forward-looking
 
statements include,
 
among others,
 
(i) the
 
risk factors
 
set forth
 
in Part
 
I Item
 
1A of
 
the 2022
Annual
 
Report
 
(ii)
 
the
 
risks
 
and
 
hazards
 
inherent
 
in
 
the
 
shell egg
 
business
 
(including
 
disease, pests,
 
weather
 
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 the
U.S., Canada
and other
countries that
was first
detected in
commercial
 
flocks in
 
the
U.S. in February
2022, (iii) changes
 
in February
2022, (iii) changes in the demand
 
demand for and market
prices of shell
 
shell eggs and feed
costs, (iv) our
 
our ability to predict
and
meet
 
demand
for
 
cage-free
 
and
 
other
 
specialty
 
eggs,
 
(v)
 
risks,
 
changes,
 
or
 
obligations
 
that
 
could
 
result
 
from
 
our
 
future
acquisition of new
 
acquisition
of
new
flocks or businesses and
risks or changes
 
changes that may cause
conditions to completing
 
completing a pending acquisition
not
to
be
 
met,
(vi)
risks
relating
 
to
 
the
 
evolving
 
COVID-19
 
pandemic,
 
including
 
without
 
limitation
 
increased
 
costs
 
and
 
rising
inflation
and
interest
inflation and interest rates, which
generally have been exacerbated
 
exacerbated by Russia’s
invasion of Ukraine starting
 
starting February 2022, (vii)
(vii) our ability
 
to retain
existing
 
existing customers,
 
acquire
new
 
customers
and
 
grow
our
 
product
mix
 
and
(viii)
 
adverse
results
 
in
pending
litigation
litigation matters. Readers
 
are
cautioned
 
not
to
 
place
undue
 
reliance on
forward-looking statements
because, while
we believe
the
assumptions
 
on
which
the
 
forward-looking
 
statements
 
because,are
 
whilebased
 
weare
 
believereasonable,
 
the
assumptions onthere
 
which thecan
 
be
no
assurance
that
these
forward-looking statements
 
are based
are reasonable,
there can
be no
assurance that
these forward-
looking
statements
will
prove
 
to
be
 
accurate. Further,
 
forward-looking statements
included
 
herein
are
 
only
made
 
as
of
the
the respective
 
dates
thereof,
 
or
if
no
 
date
is
stated,
 
as
of
the date
 
hereof. Except
as
 
otherwise
required
 
by
law,
 
we
disclaim
 
any
intent or obligation
 
to update publicly
 
these forward-looking statements,
 
whether because of
 
new information, future
 
events, or
otherwise.
GENERAL
Cal-Maine
 
Foods,
 
Inc.
 
(the
 
“Company,”
 
“we,”
 
“us,”
 
“our”)
 
is
 
primarily
 
engaged
 
in
 
the
 
production,
 
grading,
 
packaging,
marketing
 
and
 
distribution
 
of
 
fresh
 
shell
 
eggs.
 
Our
 
operations
 
are
 
fully
 
integrated
 
under
 
one
 
operating
 
segment.
 
We
 
are
 
the
largest
producer
 
and
distributor
 
of fresh
 
shell eggs
 
in the
United States
(“U.S.”).
Our total flock
of approximately
41.1 million
layers
and
11.4
million
pullets
and
breeders
is
the
largesteggs
 
in
 
the U.S.
 
Our
total
flock
of
approximately
43.7
million
layers and
10.4
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
 
national and
regional grocery
store chains,
 
club stores, companies
 
companies servicing
independent supermarkets
 
in
the U.S., food
 
service
distributors, and
 
egg product consumers
 
consumers in
states across
 
the southwestern, southeastern,
 
southeastern, mid-western
and mid-Atlantic
regions
mid-Atlantic regions of the U.S.
Our
 
operating
 
results
 
are
 
materially
 
impacted
 
by
 
market
 
prices for
 
eggs
 
and
 
feed
 
grains
 
(corn
 
and
 
soybean
 
meal),
 
which
 
are
highly
 
volatile,
 
independent
 
of
 
each
 
other,
 
and
 
out
 
of
 
our
 
control.
 
Generally,
 
higher
 
market
 
prices
 
for
 
eggs
 
have
 
a
 
positive
impact
 
on
 
our
 
financial
 
results
 
while
 
higher
 
market
 
prices
 
for
 
feed
 
grains
 
have
 
a
 
negative
 
impact
 
on
 
our
 
financial
 
results.
Although we
 
use a
 
variety of
 
pricing mechanisms
 
in pricing
 
agreements with
 
our customers,
 
we sell
 
most of
 
our conventional
shell eggs
 
based on
 
formulas that
 
consider,
 
in varying
 
ways, independently
 
quoted regional
 
wholesale
 
market prices
 
for shell
eggs or formulas related to our costs of production which include the cost of corn and soybean
 
meal.
 
We
 
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 basis portion of
 
our grain purchasesthese
 
several months in
advance. Furthermore, due
to
the
more
limited
supply
for
organic
ingredients,contracts,
 
we
 
may
 
commitlock-in
 
tothe
 
purchasebasis
 
organicportion
 
ingredientsof
our
grain
purchases
several
months
 
in
 
advanceadvance.
 
toBasis
 
helpis
 
ensurethe
supply.difference
 
Ordinarily,between the
 
we do not enterlocal cash
 
into long-term contractsprice for
 
beyond grain and
the applicable
futures price.
A basis
contract is
a yearcommon
transaction in
the grain
market that
allows us
 
to purchase corn andlock-in
 
soybean meal or hedgea basis
 
againstlevel for
a specific
delivery period
and wait
to set
the futures
price at
a later
1718
date. Furthermore,
due 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
 
prices
 
of
 
corn
 
and
 
soybean
 
meal.
 
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
 
and most recently the Russia-Ukraine war.
An important competitive advantage
 
for Cal-Maine Foods is
 
our ability to meet
 
our customers’ evolving needs
 
with a favorable
product
 
mix
 
of
 
conventional
 
and
 
specialty
 
eggs,
 
including
 
cage-free,
 
organic
 
and
 
other
 
specialty
 
offerings,
 
as
 
well
 
as
 
egg
products.
 
We
 
have
 
also
 
enhanced
 
our
 
efforts
 
to
 
provide
 
free-range
 
and
 
pasture-raised
 
eggs
 
that
 
meet
 
consumers’
 
evolving
choice
 
preferences.
 
While
 
a
 
small
 
part
 
of
 
our
 
current
 
business,
 
the
 
free-range
 
and
 
pasture-raised
 
eggs
 
we
 
produce
 
and
 
sell
represent attractive offerings
 
to a subset of
 
consumers,
 
and therefore our customers,
 
and help us continue
 
to serve as the trusted
provider of quality food choices.
We are
also focused on additional ways
to enhance its product mix
and support new opportunities in the
restaurant, 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 specialty and
conventional eggs for
MeadowCreek
to
manufacture
egg
products.
On
December
13,
2022,
our
Board
of
Directors
approved
an
additional
$13.8
million investment
to expand
the Company’s
controlling interest
and fund
additional equipment
and working
capital needs
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.
Due
to
delays
caused
by
supply
chain
issues and
plans
for
expansion,
MeadowCreek
is
now
expected
to be
fully
operational by or before March 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
single
point
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
confirm
that
our
participation
in
this
new
cooperative
is
in
the
best
interest of
our customers
and aligns
with our
long-term interests.
This consideration
will take
place before
moving to
the next
phase of membership, and we expect this process to be completed on
or before the end of our fiscal year 2023.
Retail
 
sales
 
of
 
shell
 
eggs
 
historically
 
have
 
been
 
highest
 
during
 
the
 
fall
 
and
 
winter
 
months
 
and
 
lowest
 
during
 
the
 
summer
months. Prices
 
for shell
 
eggs fluctuate
 
in response
 
to seasonal
 
demand factors
 
and a
 
natural increase
 
in egg
 
production during
the
 
spring
 
and
 
early
 
summer.
 
Historically,
 
shell
 
egg
 
prices
 
tend
 
to
 
increase
 
with
 
the
 
start
 
of
 
the
 
school
 
year
 
and
 
tend
 
to
 
be
highest
 
prior
 
to
 
holiday
 
periods,
 
particularly
 
Thanksgiving,
 
Christmas
 
and
 
Easter.
 
Consequently,
 
and
 
all
 
other
 
things
 
being
equal, we would
 
expect to experience
 
lower selling prices, sales
 
volumes and net
 
income (and may incur
 
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.
HPAI
We
 
are
closely
 
monitoring
 
the
current
 
outbreak
of
 
highly
pathogenic
avian
influenza
(“HPAI”),HPAI
 
that
was
 
first
detected
 
in
commercial
 
flocks in
the U.S.
in February
2022. Outbreaks in commercial flocks in the U.S. have most recently
occurred during each month from September to December
2022. The
current HPAI
epidemic has
surpassed the
prior 2014-2015
outbreak in
terms of
the number
of affected
hens in
the
U.S.,
and
HPAI
continues
to
circulate
throughout
the
wild
bird
population
 
in
 
the
 
U.S.
 
in
February
2022
and
 
which
was
most
recently
detected
in
commercial
flocks
in
the
U.S.
in
September
2022.abroad.
 
According
 
to
 
the
 
U.S.
Centers
 
for
 
Disease
Control
 
and
 
Prevention,
 
these
 
detections
 
do
 
not
present
 
an
immediate
 
public
 
health
 
concern.
 
There have
have
been
no
positive
tests for
HPAI
 
at
any
Cal-Maine
Foods’
owned
or contracted
production
 
facility as
of SeptemberDecember 28, 2022. The
27, 2022.
The USDA
division
 
of Animal
 
and Plant
 
Health Inspection
 
Service (“APHIS”)
reported
 
that approximatelyreported on
 
35.6 millionDecember 27,
 
2022 that
approximately
43.3 million commercial
 
layer hens
and 1.0
 
million
pullets have
been
 
depopulated due to HPAI
 
duethis year.
 
We believe
the HPAI
outbreak will
continue to HPAI.exert
downward pressure
on the overall
supply of eggs,
and the duration
of those effects
will depend
19
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
 
APHIS,a
 
theLEAP
Market Analytics report dated December
 
most
recently
reported
outbreaks
of
HPAI
affecting
commercial
layer
hens
and
pullets
occurred
September
21,
8, 2022,
and
June
9,
2022,
respectively.
We
believe
the
HPAI
outbreak
will
continue
to
have
an
impact
on
the
overall
supply of
eggs through
the balance
of this
calendar year
and possibly
beyond. According
to LEAP
Market Analytics,
layer hen inventory
is not projected to exceed the 320this 328 million
mark again
until October
December
 
of
2023.
Layer
hen
numbers
reported
by
the
USDA
as
of
December
1,
2022
were
308.3
million,
which
represents a
decrease of
5.8% compared
with the
layer hen
inventory a
year ago.
However,
the USDA
reported that
the hatch
from July 2022 through November 2022 increased 5.8% as compared
with the prior-year period.
While no
 
farm is
 
immune from
 
HPAI,
 
we believe
 
we have implemented
 
and continue
 
to maintain
 
robust biosecurity
 
programs
across our locations. We
 
are also working closely with federal, state and local government
 
officials and focused industry groups
to mitigate the risk of this and future outbreaks and effectively manage
 
our response, if needed.
CAGE-FREE EGGS
Ten
 
states
 
have
 
passed
 
legislation
 
or
 
regulations
 
mandating
 
minimum
 
space
 
or
 
cage-free
 
requirements
 
for
 
egg
 
production
 
or
mandated
 
the
 
sale
 
of
 
only
 
cage-free
 
eggs
 
and
 
egg
 
products
 
in
 
their
 
states,
 
with
 
implementation
 
of
 
these
 
laws
 
ranging
 
from
January
 
2022
 
to
 
January
 
2026.
 
These
 
states
 
represent
 
approximately
 
27%
 
of
 
the
 
U.S.
 
total
 
population
 
according
 
to
 
the 2020
U.S. Census.
 
In California
 
and Massachusetts,
 
which
 
collectively represent
 
14% of
 
the total
 
U.S. population
 
according to
 
the
2020 U.S. Census,
 
cage-free legislation went
 
into effect January
 
1, 2022. However,
 
these laws are subject
 
to judicial challenge,
and in October 2022 the
Supreme Court
of the U.S. heard oral arguments
 
recently announced
that in
October 2022
it will
review a
case challenging
California’s
 
law
that requires the
sale of only
 
cage-free eggs in
that state. A
decision in that
case is expected
next year.
These laws have
 
have already affected and,
 
and, if upheld, will continue to affect
upheld,
will
continue
to
affect
sourcing,
 
production
 
and
 
pricing
 
of
 
eggs (conventional
(conventional
 
as
well
 
as
specialty)
 
as
the
 
national
demand
 
for
cage-free
 
production
could
 
be greater
 
than the
 
current supply,
 
which would
 
would increase the
 
the priceprices
 
of cage-free
 
eggs,
unless
more
 
cage-free production
capacity
 
capacity is constructed.
 
Likewise, the national
 
national supply for
 
for eggs from
 
from conventional production
production
could exceed
consumer demand
which would decrease the price prices
of conventional eggs.
A significant number
 
of our customers
 
have previously announcedannounce
d
 
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
 
effort
 
to
 
achieve
 
a
 
smooth
transition
 
in
meeting
 
their
announced
 
goals
and
 
needs.
 
Sales of
cage-free
eggs represented
approximately
19.4% of
our shell
egg revenues
for the
first quarter
of fiscal
2023.
We
 
have
invested
 
significant
capital
 
in
recent
 
years
to
 
acquire and
 
constructand
construct cage-free
facilities, and
 
we expect
our focus
 
for future
expansion will
 
continue to
include cage-free
 
facilities. At
the
same
 
time,
 
18
we
 
understand
 
the
 
importance
 
of
 
our
 
continued
 
ability
 
to provide
 
more
affordableprovide
 
conventional
 
eggs
 
in
 
order
 
to
 
provide
 
our
customers with a variety of egg choices and to address hunger in our
communities.
 
For
 
additional
 
information,
 
see
 
the
 
2022
 
Annual
 
Report,
 
Part
 
I
 
Item
 
1,
 
“Business
 
–
 
Specialty
 
Eggs,”
 
“Business
 
–
 
Growth
Strategy” and
 
“Business –
 
Government
 
Regulation,” and
 
the first
 
risk factor
 
in Part
 
I Item
 
1A, “Risk
 
Factors” under
 
the sub-
heading “Legal and Regulatory Risk Factors.”
EXECUTIVE OVERVIEW
For the first quarter of fiscal
2023, we recorded a gross profit of
$217.5 million compared to $6.6 million
for the same period of
fiscal
2022,
with
 
the
 
increase
due
primarily
to
higher
shell
egg
prices
and
increased
volume
of
specialty
eggs
sold,
partially
offset by the increased
cost of feed ingredients
and processing, packaging
and warehouse costs. Our
total dozens sold increased
8.1% to 275.3
million dozen shell
eggs for the
first quarter of
fiscal 2023 compared
to 254.6 million
dozen for the
same period
of fiscal 2022. For the first
quarter of fiscal 2023, conventional
dozens sold decreased 2.3% and specialty
dozens sold increased
35.1% as
compared to
the same
quarter in
fiscal 2022.
Demand for
specialty eggs
increased in
the first
quarter of
fiscal 2023
compared to
the same prior
year period due
primarily to the
higher prices for
conventional eggs.
Further,
demand for specialty
eggs continued
to increase
as retailers
continued
to shift
to selling
cage-free
products
and
cage-free
legislation
went into
full
effect
in
California
and
Massachusetts
on
January
1,
2022.
We
benefited
from
the
strong
demand
for
specialty
eggs
as
we
placed more of our cage-free facilities into production and better utilized
our existing cage-free production capacity.
Conventional
egg
prices
increased
in
the
firstsecond
 
quarter
 
of
 
fiscal
 
2023,
 
we
recorded
a
gross
profit
of
$317.8
million
compared
to
$43.7
million
for
the
same
period of
fiscal 2022,
with the
increase
due primarily
to higher
shell egg
prices, partially
offset
by the
increased
cost of
feed
ingredients and processing, packaging and warehouse costs.
Our net
average selling
price per
dozen for
the second
quarter of
fiscal 2023
was $2.709
compared to
$1.365 in
the prior-year
period. Conventional
egg prices
per dozen
were $2.883
compared to
$1.151 for
the prior-year
period, and
specialty egg
prices
per dozen were $2.370 compared to $1.898 for
the prior-year period. Conventional egg prices increased in
the second quarter of
fiscal
2023
primarily
 
due
 
to
decreased
 
supply
 
caused
 
by
 
the
 
HPAI
outbreak
 
compoundedcombined
 
with
 
good
 
customer
 
demand.
 
See
 
the
discussion
under
the
 
heading
“HPAI” “HPAI”
 
above.
The
daily
 
average
price for the
 
the UB
southeast large
 
index for
the firstsecond
 
quarter of
fiscal 2023
increased 133.8%
154.8% from the
comparable period
 
in the
prior year, reaching near-record
 
year.highs. Conventional egg prices
exceeding
 
Our netspecialty
 
averageegg
 
selling priceprices
 
per has
occurred
for
the
past
three
quarters
but
is
atypical
historically.
Conventional
egg
prices
generally
respond
more
quickly
to
market
conditions
because
we
sell
the
majority
of
our
conventional
shell
eggs
based
on
formulas that adjust periodically and take into account,
in varying ways, independently quoted regional wholesale
market prices
for shell eggs
or formulas related
to our costs
of production.
The majority
of our specialty
eggs are typically
sold at prices
and
terms negotiated directly
with customers and
therefore do not
fluctuate as much
as conventional pricing.
For information about
historical shell egg prices, see Part I Item I of our 2022 Annual Report.
Our total dozens
sold increased 5.4% to
284.1 million dozen shell
eggs for the second
quarter of fiscal 2023
compared to 269.6
million
dozen
 
for
 
the first
same
period
of
fiscal
2022.
For
the second
 
quarter
 
of
fiscal
 
2023,
 
was $2.275conventional
dozens
sold
decreased
20
2.2%
and
specialty
dozens
sold
increased
24.1%
as compared
to
the
same
quarter
in
fiscal
2022.
Demand
for
specialty
eggs
increased
in
the
second
quarter
of
fiscal
2023
 
compared
 
to $1.235
in
the
prior-year period. Layer
hen numbers reported
by the USDA
as of September
21, 2022, were
305.3 million, which
represents a
decrease of
4.6% compared
with the
layer hen
inventory a
year ago.
The USDA
also reported
that the
hatch from
April 2022
through
August
2022
decreased
0.5%
as
compared
with
 
the
 
prior-yearsame
 
period.prior
 
Asyear
 
ofperiod
 
Septemberdue
 
1,primarily
 
2022,to
 
however,the
 
higher
prices
for
conventional
eggs. Further,
demand for
specialty eggs
 
in
incubators were up 9.0% year-over-year,continued to
 
indicating that layer flocks may increase as
retailers continued
to shift
to selling
cage-free
products and cage-free legislation went into full effect in the future.California
and Massachusetts on January 1, 2022.
Our farm
 
production costs
 
per dozen
 
produced for
 
the firstsecond
 
quarter of
 
fiscal 2023
 
increased 16.5%22.0%,
 
or $0.148,$0.193,
 
compared to
the second quarter
 
the
first quarter of fiscal 2022
.2022.
 
This increase was primarily
 
primarily due to
increased prices for
 
feed ingredients and
a higher basis
 
basis in
corn in
most of
 
our production
 
areas.areas,
 
For thewhich added
 
first quarterto our
 
of fiscalexpense. For
 
2023, the second
 
average Chicagoquarter of
 
fiscal 2023,
the average
Chicago
Board of
 
Trade
(“CBOT”) daily
market price
was $6.78
per bushel
for corn
and $423
per ton
for soybean
meal, representing
increases
of 24.8% and
25.5%, respectively,
compared to the average
 
daily market
priceCBOT prices
 
was
$6.65
per
bushel
for
corn
and
$456
per
ton
for
soybean
meal,
representing
increases
of
11.5%
and
25.4%,
respectively, compared
to the average daily CBOT prices for the comparable
period in the prior
year. For information about
 
year.historical corn and soybean meal prices, see Part I Item I of our 2022 Annual Report.
RESULTS OF
 
OPERATIONS
The
 
following
 
table
 
sets
 
forth,
 
for
 
the
 
periods
 
indicated,
 
certain
 
items
 
from
 
our
 
Condensed
 
Consolidated
 
Statements
 
of
Operations expressed as a percentage of net sales.
Thirteen Weeks
 
Ended
August 27, Twenty-six Weeks
Ended
November 26,
2022
August 28, November 27,
2021
November 26,
2022
November 27,
2021
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
67.060.4
%
98.088.5
%
63.3
%
92.9
%
Gross profit
33.039.6
%
2.011.5
%
36.7
%
7.1
%
Selling, general and administrative
8.17.2
%
14.312.5
%
7.6
%
13.3
%
(Gain) loss on disposal of fixed assets
—
%
(0.1)(0.5)
%
—
%
(0.3)
%
Operating income (loss)
24.932.4
%
(12.2)(0.5)
%
29.1
%
(5.9)
%
Total other income, net
0.20.3
%
1.80.7
%
0.3
%
1.2
%
Income (loss) before income taxes
25.132.7
%
(10.4)0.2
%
29.4
%
(4.7)
%
Income tax expense (benefit)
6.18.0
%
(4.9)(0.2)
%
7.1
%
(2.3)
%
Net income (loss)
19.024.7
%
(5.5)0.4
%
22.3
%
(2.4)
%
NET SALES
Total
 
net
sales
for
 
the first
second
quarter
 
of
fiscal
2023
 
were
a
record
 
$658.3 801.7
million
 
compared
to $325.0
$381.7
 
million
for
the
 
same period
period of fiscal 2022.
Net shell egg sales represented
96.5% and 97.0% of total net sales
for the second quarters of fiscal
2023 and 2022, respectively.
Shell egg sales classified
as “Other” represent
sales of hard-cooked
eggs and other
miscellaneous byproducts included
with our
shell egg operations.
Total
net
sales
for
the
twenty-six
weeks
ended
November
26,
2022
were
$1.46
billion,
compared
to
$706.7
million
for
the
comparable period of fiscal 2022.
Net
shell
egg
sales
represented
96.2%
and
97.1%
of
total
net
sales
for
the
twenty-six
weeks
ended
November
26,
2022
and
November 27, 2021, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19
Net shell
egg sales
represented 95.8%
and 97.1%
of total
net sales
for the
first quarters
of fiscal
2023 and
2022, respectively.
Shell egg sales classified
as “Other” represent
sales of hard-cooked
eggs and other
miscellaneous byproducts included
with our
shell egg operations.
21
The table below presents an analysis of our conventional and specialty shell egg
 
sales (in thousands, except percentage data):
Thirteen Weeks
 
Ended
AugustTwenty-six Weeks
Ended
November 26, 2022
November 27, 2021
November 26, 2022
August 28,November 27, 2021
Total net sales
$
658,344801,700
$
324,986381,723
$
1,460,044
$
706,709
Conventional
$
425,589541,917
67.570.1
%
$
182,030221,142
57.659.7
%
$
967,506
69.0
%
$
403,172
58.8
%
Specialty
200,820227,778
31.829.4
%
132,458146,917
42.039.7
%
428,598
30.5
%
279,375
40.7
%
Egg sales, net
626,409769,695
99.399.5
%
314,488368,059
99.699.4
%
1,396,104
99.5
%
682,547
99.5
%
Other
4,2953,953
0.70.5
%
1,1322,263
0.40.6
%
8,248
0.6
%
3,395
0.5
%
Net shell egg sales
$
630,704773,648
100.0
%
$
315,620370,322
100.0
%
$
1,404,352
100.1
%
$
685,942
100.0
%
Net shell egg sales as a
percent of total net sales
95.896.5
%
97.0
%
96.2
%
97.1
%
Dozens sold:
Conventional
179,712187,976
65.366.2
%
183,872192,135
72.271.3
%
367,688
65.7
%
376,003
71.7
%
Specialty
95,60596,110
34.733.8
%
70,75077,420
27.828.7
%
191,715
34.3
%
148,171
28.3
%
Total dozens sold
275,317284,086
100.0
%
254,622269,555
100.0
%
559,403
100.0
%
524,174
100.0
%
Net average selling price
per dozen:
Conventional
$
2.3682.883
$
0.9901.151
$
2.631
$
1.072
Specialty
$
2.1012.370
$
1.8721.898
$
2.236
$
1.885
All shell eggs
$
2.2752.709
$
1.2351.365
$
2.496
$
1.302
Egg products sales:
 
Egg products net sales
27,64028,052
9,36611,401
55,692
20,767
Pounds sold
16,50215,702
15,26916,009
32,204
31,278
Net average selling price
per pound
1.6751.787
0.6130.712
1.729
0.664
Shell egg net sales
FirstSecond Quarter – Fiscal 2023
 
vs. Fiscal 2022
-
In
the
 
first second
quarter
 
of
fiscal
 
2023,
 
conventional
 
egg
sales
 
increased
 
$243.6 320.8
million,
 
or 133.8%
145.0%,
 
compared
to
 
the first
second quarter of
 
of fiscal 2022,
 
primarily due
 
to the increase
 
increase in the price
 
price fors
 
for conventional shell
 
eggs, slightly
 
partially offset by
a decrease
 
by a decrease
in volume of
 
of conventional eggs sold.
 
shell eggs
sold. Changes
in priceprices
 
resulted in a
 
$247.6 milliona $325.6
 
million increase
and the
change in volume
resulted in a $4.1$4.8 million decrease in net sales, respectively.
-
We believe
prices for conventional eggs
were positively impacted by
a better alignment of the
size of the conventional
production layer
hen flock
and customer
and consumer
demand. Conventional
egg prices furtherincreased in the second
 
increased in
the first
quarter of fiscal 2023
primarily due to decreased supply caused by
the
HPAI
 
outbreak,
discussed above.
above,
while
we
experienced
continued
good
customer
demand
(and
typical
seasonal
consumer demand).
-
As a result of
the independently quoted
wholesale market prices
for conventional
eggs reaching near-record
highs, the
average selling
price for conventional
eggs exceeded
the average selling
price for specialty
eggs in the
second quarter
of
fiscal
2023,
which
has
occurred
for
the
past
three
quarters
but
is
atypical
historically.
Conventional
 
egg
 
prices
generally
respond
 
more
quickly
 
to
market
 
conditions
as
 
we
sell
 
the
majority
 
of our
 
our
conventional
shell
 
eggs
based
 
on
formulas
 
that
 
adjust
 
periodically
 
and
 
take
 
into
 
account,
 
in
 
varying
 
ways,
independently
 
quoted
regional
 
wholesale
market
 
prices
for
 
shell
eggs
 
or
formulas
 
related
to
 
our
 
costs
of
 
production.
The
 
majority
 
of
 
our
 
specialty
 
eggs
 
are
typically
 
sold
 
at
 
prices
 
and
 
terms
 
negotiated
 
directly
 
with
 
customers
 
and
therefore
therefore
do
 
not
fluctuate
 
as
much
 
as
conventional pricing.
 
pricing. As
-
Specialty
egg
sales
increased
$80.9
million,
or
55.0%,
in
the
second
quarter
of
fiscal
2023
compared
to
the
second
quarter
of
fiscal
2022,
primarily
due
to
 
a result
24.9%
increase
in
the
prices
for
specialty
eggs,
which
resulted
in
a
$45.4
million
increase
in
net
sales
and
a
24.1%
increase
in
the
volume
of
specialty
eggs
sold,
which
resulted
in
a
$35.5
million increase in net sales.
22
-
Net average
selling price 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 produced 11%
more specialty
eggs in
the second
quarter of
fiscal 2023
versus the
prior-year period,
through use
 
of theseour
 
independentlyhigher cage-
free production capacity
 
quotedand better utilization of that capacity.
-
Cage-free
 
whole marketsegg
sales
for
the
second
quarter
of
fiscal
2023
represented
18.2%
of
our
total
net
shell
egg
sales
versus
22.4%
for
the
same
prior
year
period
due
to
the
higher
 
conventional
 
eggsegg
 
reachingprices.
 
nearCage-free
 
historicaldozens
 
highs,sold
increased
47.4% in the second quarter of fiscal 2023 as compared to the second
quarter of fiscal 2022.
Twenty-six weeks –
Fiscal 2023 vs. Fiscal 2022
-
For
 
the
 
averagetwenty-six
 
sellingweeks
 
priceended
November
26,
2022,
conventional
egg
sales
increased
$564.3
million
or
140.0%
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
 
exceededsold. Changes
 
thein prices
resulted in a
$573.2 million
average selling price for specialty eggsincrease and the change in the first quarter of fiscal 2023.volume resulted in a $9.0 million decrease in net
sales, respectively.
-
Specialty egg sales
increased $68.4 $149.2 million,
or 53.4%, for the
twenty-six weeks ended
November 26, 2022 compared
to
the
same
period
of
fiscal
2022,
primarily
due
to
a
29.4%
increase
in
the
volume
of
specialty
dozens
sold.
The
volume
of
specialty
dozens
sold
increased
mainly
due
to
the
higher
conventional
egg
prices.
Change
in
volume
resulted in a
$82.1 million increase
and changes in
specialty egg price resulted
in a $67.3 million
increase in net sales,
respectively.
Egg products net sales
Second Quarter – Fiscal 2023
vs. Fiscal 2022
-
Egg products
net sales
increased $16.7
million or
 
51.6%, in 146.0% for
the first second
quarter of
fiscal 2023
 
compared to
the first quartersame
period of
fiscal 2022,
 
primarily due
 
to a
 
35.1%151.0% selling
price increase,
 
in the
volume of
specialty eggs
sold, which
resulted in had
 
a $46.5$16.9
 
million positive
impact on
increase in net sales.
-
AccordingOur
egg
products
net
average
selling
price
increased
in
the
second
quarter
of
fiscal
2023,
compared
 
to
 
Informationthe
 
Resources,second
quarter of
 
Inc.,fiscal 2022
 
Totalas the
 
USsupply of
 
shell eggs
used to
produce
egg products
decreased
due
to the
HPAI
outbreak
that started in February 2022.
Twenty-six weeks –
 
MultiFiscal 2023 vs. Fiscal 2022
-
Egg products
 
Outletnet sales
increased $34.9
million or
168.2%, primarily
due to
a 160.4%
selling price
increase compared
to the first twenty-six weeks of fiscal 2022, which had a $34.3 million
positive impact on net sales.
-
Our egg
products net average
selling price increased
in the twenty-six
weeks ended
November 26,
2022, 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
 
latestsecond
 
13quarter
 
weeksof
 
endedfiscal
 
August2023
 
27,were
 
2022,
cage-free$483.9
 
eggsmillion
 
dozenscompared
 
soldto
 
(including$338.0
 
free-range,million
 
pasture-raisedfor
the
same
period
of
fiscal 2022.
Cost of
sales consists
of
costs directly
related
to producing,
processing
 
and
 
organic)packing
 
increasedshell eggs,
 
34.9%.purchases
 
Weof
 
believeshell
 
thiseggs from
increase inoutside producers, processing and packing of liquid
 
demand wasand frozen egg products and other non-egg costs. Farm
 
positively impactedproduction costs are
those costs
 
by theincurred at
 
higher conventionalthe egg
 
egg pricesproduction facility,
 
as comparedincluding feed,
 
to thefacility,
 
same periodhen amortization
 
inand other
related farm
production
costs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20
the
prior
year.
Demand
for
specialty
eggs
was
further
positively
affected
by
California’s
and
Massachusetts’s
cage-
free mandates going into effect January 1, 2022, as well as more
retailers shifting to selling more cage-free products.
-
Our
specialty
egg
sales
in
the
first
quarter
of
fiscal
2023
versus
the
prior-year
period
benefitted
from
the
strong
demand
for
specialty
eggs
as
we
placed
more
of
our
cage-free
facilities
into
production,
and
we
better
utilized
our
existing cage-free production capacity.
Cage-free egg sales for the first
quarter of fiscal 2023 represented 19.4%
of our
total net shell egg
sales versus 22.1%
for the same prior
year period due
the higher conventional
egg prices. Cage-free
dozens sold increased 58% in the first of quarter of fiscal 2023 as compared
to the first quarter of fiscal 2022.
Egg products net sales
First Quarter – Fiscal 2023
vs. Fiscal 2022
-
Egg
products
net
sales
increased
$18.3
million
or
195.1%
for
the
first
quarter
of
fiscal
2023
compared
to
the
same
period of
fiscal 2022,
primarily due
to a
173.2% selling
price increase,
which had
a $17.5
million positive
impact on
net sales.
-
Our egg products
net average selling
price increased in
the first quarter
of fiscal 2023,
compared to the
first quarter of
fiscal 2022 as the supply decreased due to the HPAI
outbreak that started in February 2022. We
believe 13.4 million of
the
33.7
million
layers
culled
as
a
result
of
the
HPAI
outbreak
were
located
at
facilities
dedicated
to
support
inline
breaking facilities in Iowa and Ohio.
COST OF SALES
Costs of
sales for
the first
quarter of
fiscal 2023
were $440.9
million compared
to $318.3
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
August 27, Twenty-six Weeks
Ended
November 26,
2022
August 28, November 27,
2021
%
Change
November 26,
2022
November 27,
2021
%
Change
Cost of Sales:
Farm production
$
266,651276,008
$
207,495221,971
28.524.3
%
$
542,659
$
429,466
26.4
%
Processing, packaging,
and warehouse
81,41783,639
65,05969,474
25.120.4
165,056
134,533
22.7
Egg purchases and other (including
(including change in
inventory)
68,29897,973
37,97336,859
79.9165.8
166,271
74,832
122.2
Total shell eggs
416,366457,620
310,527328,304
34.139.4
873,986
638,831
36.8
Egg products
24,48826,231
7,8149,672
213.4171.2
50,719
17,486
190.1
Total
$
440,854483,851
$
318,341337,976
38.543.2
%
$
924,705
$
656,317
40.9
%
Farm production costs (per
(per dozen produced)
Feed
$
0.6670.685
$
0.5450.529
22.429.5
%
$
0.676
$
0.537
25.9
%
Other
$
0.3790.386
$
0.3530.349
7.410.6
%
$
0.383
$
0.351
9.1
%
Total
$
1.0461.071
$
0.8980.878
16.522.0
%
$
1.059
$
0.888
19.3
%
Outside egg purchases (average
(average cost per dozen)
$
2.573.14
$
1.351.56
90.4101.3
%
$
2.88
$
1.45
98.6
%
Dozens produced
257,654261,358
236,458256,786
9.01.8
%
519,012
493,244
5.2
%
Percent produced to sold
93.6%92.0%
92.9%95.3%
0.8(3.5)
%
92.8%
94.1%
(1.4)
%
Farm Production
FirstSecond Quarter – Fiscal 2023
 
vs. Fiscal 2022
-
Feed costs per dozen produced
 
produced increased 22.4%29.5% in the first quarter
 
the second quarter of fiscal 2023
 
2023 compared to the first
second quarter of fiscal
fiscal 2022. This increase was primarily due to increased prices for corn, our primary
 
feed ingredient.
-
For the
 
second quarter
of fiscal
2023, the
average daily
CBOT market
price was
$6.78 per
bushel for
corn and
$423
per
ton of
soybean
meal representing
increases
of 24.8%
and
25.5%, respectively,
as compared
to
the average
daily
CBOT prices for the second quarter of fiscal 2022.
-
Other farm
production costs
increased due
to higher
facility and
flock amortization,
primarily from
higher feed
costs,
which
began to
rise in
our third
quarter of
fiscal 2021
due to
increased
prices discussed
above,
and which
remained
high
in
the
second
quarter
of
fiscal
2023.
Feed
costs
are
capitalized
in
our
flocks
during
pullet
production
and
increased our amortization expense.
Twenty-six weeks –
Fiscal 2023 vs. Fiscal 2022
-
Feed costs
per dozen
produced increased
25.9% in
the twenty-six
weeks ended
November 26,
2022 compared
to the
same period of fiscal 2021, primarily due to higher feed ingredient prices.
-
Other farm
production costs
increased due
to higher
facility and
flock amortization,
primarily from
higher feed
costs,
which
began to
rise in
our third
quarter of
fiscal 2021
due to
increased
prices discussed
above,
and which
remained
high
in
the
second
quarter
of
fiscal
2023.
Feed
costs
are
capitalized
in
our
flocks
during
pullet
production
and
increased our amortization expense.
Supplies
of
corn
and
soybean
remained
tight
relative
to
demand
in
the
second
quarter
of fiscal
2023,
as evidenced
by a
low
stock-to-use ratio
for corn,
as a
result of
weather-related shortfalls
in production
and yields,
ongoing disruptions
related to
the
COVID-19
global
pandemic
and
the
Russia-Ukraine
war
and
its impact
on
the
export markets
.
Additionally,
basis
levels
for
corn ran
significantly higher
in our area
of operations
compared to
our prior
year second
fiscal quarter,
adding to
our expense.
24
For
fiscal
2023,
we
expect
continued
corn
and
soybean
upward
pricing
pressures
and
further
market
volatility
to
affect
feed
costs.
Processing, packaging, and warehouse
Second Quarter – Fiscal 2023
vs. Fiscal 2022
-
Cost of packaging
materials increased 38.3
%
compared to the
second quarter of
fiscal 2022
due to rising
inflation and
labor costs.
-
Labor costs increased 49.2%
due to wage increases and increased use of contract labor in response to labor shortages
.
-
Dozens
processed
increased
5.4%
compared
to
the
second
quarter
of
fiscal
2022,
which
resulted
in
a
$4.0
million
increase in costs.
Twenty-six weeks –
Fiscal 2023 vs. Fiscal 2022
-
Cost
of
packaging
materials
increased
26.7%
compared
to
the
twenty-six
weeks
ended
November
27,
2021
due
to
rising inflation and labor costs.
-
Labor costs
increased 30.3%
due to
wage increases
in response
to labor
shortages, primarily
due to
the pandemic
and
its effects.
-
Dozens processed
increased 7.0%
compared
to the
twenty-six weeks
ended November
27, 2021,
which resulted
in a
$9.9 million increase in costs.
Egg purchases and other (including change in inventory)
Second Quarter – Fiscal 2023
vs. Fiscal 2022
-
Costs in this
category increased
primarily due to
higher egg prices
as well as
an increase in
the volume of
outside egg
purchases, causing the percentage of produced to sold to decrease to 92.0% from
95.3%.
Twenty-six weeks –
Fiscal 2023 vs. Fiscal 2022
-
Costs in this
category increased
primarily due to
higher egg prices
as well as
an increase in
the volume of
outside egg
purchases, as our percentage of produced to sold decreased to 92.8% from 94.1%.
GROSS PROFIT
Gross profit
for the
second quarter
of fiscal
2023 was
$317.8 million
compared to
$43.7 million
for the
same period
of fiscal
2022.
The increase
of $274.1
million was
primarily due
to higher
egg prices
as well
as the
increased volume
of specialty
eggs
sold, partially offset by the increased cost of feed ingredients and
processing, packaging and warehouse costs.
Gross profit
for the
twenty-six weeks
ended November
26, 2022
was $535.3
million compared
to $50.4
million for
the same
period of fiscal
2022. The increase
of $484.9 million
was primarily due
to higher egg
prices as well as
the increased volume
of
specialty eggs sold, partially offset by the increased cost of feed ingredients
and processing, packaging and warehouse costs.
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES
Selling,
general,
and
administrative
expenses
("SGA")
include
costs
of
marketing,
distribution,
accounting
and
corporate
overhead. The following table presents an analysis of our SGA expenses (in thousands):
Thirteen Weeks
Ended
November 26, 2022
November 27, 2021
$ Change
% Change
Specialty egg expense
$
14,673
$
14,262
$
411
2.9
%
Delivery expense
18,175
14,395
3,780
26.3
%
Payroll, taxes and benefits
13,827
11,303
2,524
22.3
%
Stock compensation expense
987
975
12
1.2
%
Other expenses
10,290
6,845
3,445
50.3
%
Total
$
57,952
$
47,780
$
10,172
21.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2125
-
For the
first quarter
of fiscal
2023, the
average daily
Chicago Board
of Trade
(“CBOT”) market
price was
$6.65 per
bushel
for
corn
and
$456
per
ton
of
soybean
meal
representing
increases
of
11.5%
and
25.4%,
respectively,
as
compared to the average daily CBOT prices for the first quarter of fiscal 202
2.
Supplies of
corn and soybean
remained tight
relative to demand
in the first
quarter of
fiscal 2023 as
evidenced by a
low stock-
to-use
ratio
for
corn,
as
a
result
of
weather-related
shortfalls
in
production
and
yields,
ongoing
disruptions
related
to
the
COVID-19
global
pandemic
and
the
Russia-Ukraine
war
and
its
impact
on
the
export
markets.
Basis
levels
for
corn
ran
significantly
higher
in
our
area
of
operations
compared
to
our
prior
year
first
fiscal
quarter.
For
fiscal
2023,
we
expect
continued corn and soybean upward pricing pressures and further market
volatility to affect feed costs.
Processing, packaging, and warehouse
FirstSecond Quarter – Fiscal 2023
 
vs. Fiscal 2022
Specialty egg expense
-
Cost of packaging materials increased 16.1% compared to Specialty egg
expense, which includes
franchise fees, advertising
and promotion
costs, generally
aligns with specialty
egg volumes,
which were
up 24.1% for
the first second
quarter of
 
fiscal 2022 due to rising inflation.
-
Labor costs increased 24.4%
due to wage increases and increased use of contract labor in response to labor shortages
.
-
Dozens processed increased 8.6% compared to the first quarter of fiscal 2022,
which resulted in a $2.2 million increase
in costs.
Egg purchases and other (including change in inventory)
First Quarter – Fiscal 2023
vs. Fiscal 2022
-
Costs in
this category
increased
primarily
due
to higher
egg prices,
partially offset
by the
decrease
in the
volume of
outside egg purchases, as our percentage of produced to sold increased
to 93.6% from 92.9%.
GROSS PROFIT
Gross profit for
the first quarter
of fiscal 2023
was $217.5 million
 
compared to $6.6
 
million for the same
 
same period of fiscal
 
fiscal 2022.
The increaseHowever, our
 
of $210.9specialty egg expense
 
million wasonly increased by
 
2.9%, primarily due
 
to higherincreased sales
 
egg pricesto other Eggland’s
 
as wellBest,
Inc. (“EB”) franchisees, including
 
asunconsolidated affiliates, Specialty
Eggs, LLC and Southwest Specialty
Eggs, LLC.
These franchisees were
responsible for the
 
franchise fees, advertising
and promotion costs associated
with those sales,
which resulted in reduced costs for us.
Delivery expense
-
The increased volumedelivery expense is primarily due to the increase in contract trucking.
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 increased legal expenses
 
of specialtyapproximately $2.6 million
 
eggs sold,in the second
partially offset byquarter of fiscal 2023 compared to the increased costsecond quarter of feed ingredients
and processing,
packaging and warehouse costs.fiscal 2022.
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):
ThirteenTwenty-six Weeks
 
Ended
August 27,November 26, 2022
August 28,November 27, 2021
$ Change
% Change
Specialty egg expense
$
13,06727,740
$
13,71527,977
$
(648)(237)
(4.7)(0.8)
%
Delivery expense
19,91638,091
13,93628,331
5,9809,760
42.934.4
%
Payroll, taxes and benefits
10,98724,814
9,93921,242
1,0483,572
10.516.8
%
Stock compensation expense
1,0252,012
1,0011,976
2436
2.41.8
%
Other expenses
8,61218,902
7,93414,779
6784,123
8.527.9
%
Total
$
53,607111,559
$
46,52594,305
$
7,08217,254
15.218.3
%
First QuarterTwenty-six weeks – Fiscal 2023
 
Fiscal 2022 vs. Fiscal 20222021
Specialty egg expense
-
Specialty egg
 
expense, which includes
 
franchise fees, advertising
 
and promotion
 
costs, generally
 
aligns with specialty
egg
 
volumes,
 
which
 
were
 
up
 
35.1%29.4%
 
for
 
the
first
quarter
of fiscal
 
2023
 
compared
 
to
 
the
same
period
of
fiscal
 
2022.
However,
 
our
specialty
egg
 
expense
decreased
by
 
4.7%0.8%,
primarily
due
 
to
increased
sales
 
to
other
 
Eggland’s
Best,
 
Inc.
(“EB”)
 
franchisees,
 
including
unconsolidated
affiliates,
Specialty
 
Eggs, LLC and Southwest Specialty
 
LLCEggs, LLC. Additionally,
the higher prices for
conventional
eggs
 
and
 
Southwestthe
 
Specialtycomparatively
 
Eggs,lower
 
LLC.
These franchiseesprices
 
that were
responsible for
 
specialty
eggs
diminished
the
need
to
promote
specialty
eggs;
as
a
result,
EB
temporarily
reduced
the
related
franchise
 
fees advertising
 
and promotion
costs associated
with those
sales, which resulted in reduced costs for us. Also, the higher prices for
 
conventional eggs and the comparatively lower
prices for specialty eggs diminishedcertain
 
the need to promote specialty eggs;
 
as a result, EB temporarily reducedegg
 
the relatedproducts
to
encourage
franchise fees for certain specialty egg products to encourage continued production
of these products.
 
22
Delivery expense
-
The increased
 
delivery expense
 
is primarily
 
due to
 
the increase
 
in fuel
 
and labor
 
costs for
 
both our
 
fleet and
 
contract
trucking.
Payroll, taxes and benefits expense
-
The
increase
 
in
payroll,
 
taxes
and
 
benefits
expense
 
is
primarily
 
due
 
to increased
 
wages 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
 
to the
inflationary market.legal expenses of approximately $3.5 million.
OPERATING
 
INCOME (LOSS)
For
the
second
quarter
of
fiscal
2023,
we
recorded
operating
income
of
$259.9
million
compared
to
operating
loss
of
$2.1
million for the first quartersame period of fiscal 2023,2022.
26
For
the
twenty-six
weeks
ended
November
26,
2022,
 
we
recorded
an
operating
income
of $163.9
$423.7
million
 
compared
to
an
operating loss of $39.7$41.7 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 firstsecond quarter of fiscal 2023,
 
2023, we earned $1.1$2.1 million of interest income compared to $207 thousand
for the same period
of fiscal 2022.
The increase resulted
from significantly
higher investment balances.
The Company recorded
interest expense of
$143 thousand and $78 thousand for the second quarters ended November
26, 2022 and November 27, 2021, respectively.
For the
twenty-six weeks
ended November
26, 2022,
we earned
$3.1 million
of interest
 
income compared to $290 thousand for
 
the same period ofto $497
million for
the
same
period
of
fiscal
 
2022.
 
The
 
increase
 
resulted
 
from
 
significantly
 
higher
 
investment
 
balances.
 
The
 
Company
 
recorded
interest
expense
 
of $291
$148 thousand and $58
$136 thousand
for the first quarters
twenty-six weeks
 
ended August 27,November
26, 2022
and August 28, November
27,
2021, respectively.
Other,
 
net for
 
the firstsecond
 
quarter ended
 
August 27,November 26,
 
2022, was
 
income of
 
$155 thousandof $1.1
 
million compared to
 
to income of
 
$5.2 millionof $1.9
 
formillion
for the same
period of
fiscal 2022.
 
Other, net for
the twenty-six weeks ended November
26, 2022, was income of $1.3
million compared to income of $7.0
million
for the
same period
of fiscal
2022. The
majority of
the decrease
 
is primarilydue
 
due to our
 
our acquisition in
fiscal 2022
 
of the
 
remaining 50%
membership
 
membership interest
 
in
Red
 
River
 
inValley
 
theEgg
 
firstFarm,
 
quarterLLC
 
of(“Red
 
fiscal
2022River”)
 
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
investment.adjustment of our various marketing agreements.
INCOME TAXES
For the
 
firstsecond quarter
 
of fiscal
 
2023,
pre-tax income
was $262.2
million
compared to
$468 thousand
for the
same period
of
fiscal 2022.
We
recorded income
tax expense
of $64
million for
the second
quarter of
fiscal 2023,
which reflects
an effective
tax
rate
of
24.4%.
We
recorded
an
income
tax
benefit
of
$677
thousand
in
the
prior
year
period
which
includes
a
$520
thousand
discrete
tax
benefit
related
to
the
Internal
Revenue
Service
(IRS)
adjustments
associated
with
the
Company’s
previously recognized research and development tax benefits.
For the
twenty-six
weeks ended
November 26,
2022, pre-tax
 
income was
 
$165.5427.7 million
 
compared to
 
a pre-tax loss
 
loss of $33.9
 
$33.4
million for
 
the same
period of
 
fiscal 2022.
 
We
 
recorded income
 
tax expense
 
of $40.3$104.3
 
million forwhich
 
the firstreflects an
 
quarter of
fiscal 2023,
which reflects
aneffective tax
effective
tax
rate
 
of
 
24.4%,.
 
comparedWe
 
to
recorded an
 
income
 
tax
benefit
 
of
$15.8 $16.5
 
million
 
in
 
the
prior
 
year
 
period,
 
which
 
reflectsincludes
 
an
effective tax
rate of 46.8%.
Excluding the
impact of discrete
 
items related totax
abenefit of $8.3
 
million net
tax benefit
recorded in the
first
quarter of
fiscal 2022
in connection
 
with the
Red River
Valley
Egg Farm,
LLC (“Red
 
River”) acquisition,River acquisition.
 
income taxExcluding the discrete
 
tax benefit, income
tax benefit for
for the comparable period of fiscal 2022 was $7.6$8.2 million which reflectswith an adjusted
 
adjusted effective tax rate of 22.4%24.6%.
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 first
second
quarter
 
ended August 27,
November
26,
 
2022,
was $125.3
$198.6
 
million,
or $2.58
$4.08
 
per
basic
basic
and $2.57
$4.07
per
diluted
 
common
share,
compared
to
net
 
loss income
attributable
to
Cal-Maine
 
Foods, Inc. of $18.0 million
 
Inc.
of
$1.2
million or $0.37
$0.02 per basic and diluted common share for the same period of
fiscal 2022.
LIQUIDITY AND CAPITALNet income
 
RESOURCESattributable to
 
WorkingCal-Maine Foods,
 
Capital and Current Ratio
Our workingInc. for
 
capital atthe twenty-six
 
August 27,weeks ended
November 26,
 
2022, was $548.5
$323.9 million,
or
$6.66 per
basic and
$6.63 per
diluted share,
compared to
net loss
of $16.9
 
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 3.4 at August
27, 2022, 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 thirteen
weeks
ended August
27, 2022,or
 
$172.80.34 per
 
millionbasic and
 
in netdiluted share
 
cash
was
provided by
operating
activities,
compared
tofor the
$24.1
million used
by operating
activities for
the comparable
same period in
of fiscal 2022.
The increase
in cash
flow from
operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2327
LIQUIDITY AND CAPITAL
RESOURCES
Working
Capital and Current Ratio
Our working
capital at
November 26,
2022 was $667.5
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 3.2 at November
26, 2022, 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 twenty-six weeks
ended November 26, 2022,
$344.8 million in net cash
was provided by operating
activities, compared
to $15.5 million
used 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
 
comparedand
 
toprocessing,
 
thepackaging
 
prior-yearand
 
period.warehouse
 
The
increase
incosts
Other adjustments, net is primarily duecompared to a $67.4 million balance for
income taxes payable as of August 27, 2022.the prior-year period..
Cash Flows from Investing Activities
We
continue
 
to invest
in our
facilities,
with $27.7
$59.7
 
million used
to purchase
property,
 
plant and equipment for the thirteen
 
weeks
endedand
 
Augustequipment
 
27,for
 
2022,the
 
twenty-six
weeks ended November
26, 2022, compared
 
to $28.6 million in
 
the same period of
fiscal 2022.
Purchases of investments were
$11.2152.4
 
million
 
in
 
the
 
same
period
of
fiscal
2022. In
the
firstsecond
 
quarter
 
of
 
fiscal
 
2022,2023,
 
we
acquired thecompared
 
remaining 50%
membership interest
in Red
River Valley
Egg Farm,
LLC forto
 
$44.8 million,
net of
cash acquired.
Purchases
of investments
were $51.826.4
 
million
 
in
 
the first
quarter
of fiscal
2023,
compared to
$1.4
million
in fiscal
 
2022.
 
The
increase
increase
in
 
purchases of
 
of
investments is primarily due to the increased cash provided by operating
 
primarily due
to the
increased cash
provided by
operating activities
noted above.
Sales
and
maturities of
investment
securities were
$20.3
million
for
the thirteen
weeks ended
August
27,
2022,
compared
to $39.4
million for the comparable period in fiscal 2022.
 
Cash Flows from Financing Activities
We
paid dividends of
 
of $36.7$78.4 million infor the first quarter of fiscal 2023.
twenty-six weeks ended
November 26, 2022 compared
to no dividends for
the prior
year period.
As of
 
August 27,November 26,
 
2022, cash
 
cash increased $119.6
 
$76.9 million since
 
since May 28,
 
28, 2022, compared
 
compared to
a decrease
 
of $40.7$41.9
 
million during
the
the same period of fiscal 2022.
Credit Facility
We
 
had
no
 
long-term
debt
 
outstanding
at
 
August 27,November
26,
 
2022
or
 
May
28,
 
2022.
On
 
November
15,
 
2021,
we
 
entered
into
 
a credit
credit
agreement
 
that
 
provides
 
for
 
a
 
senior
 
secured
 
revolving
 
credit
facility
 
(the
 
“Credit
 
Facility”),
 
in
 
an
 
initial
 
aggregate
principal
principal amount
 
of
up
to
 
$250
million
with
 
a
five-year
 
term.
As
of
 
August
27,
November 26, 2022,
 
no
amounts
were
 
borrowed
under
 
the
Credit Facility.
 
Credit
Facility. We
 
have $4.1 million in
 
in outstanding standby
letters of credit,
 
credit, issued under our
 
Credit Facility for
the benefit of
certain insurance
 
of certain
insurance companies. Refer
 
to Part
II Item
 
8.8, Notes
to the
 
Financial Statements, Note
 
Note 10
– Credit
 
Facility included
 
in
our 2022
Annual Report for further information regarding our long-term
debt.
Material Cash Requirements
We
 
continue
 
to
 
monitor
 
the
 
increasing
 
demand
 
for
 
cage-free
 
eggs
 
and
 
to
 
engage
 
with
 
our
 
customers
 
in
 
efforts
 
to
 
achieve
 
a
smooth transition toward
 
toward their announced commitment
 
timeline announced timelines
for cage-free
 
egg sales. As previously
 
reported, during theThe following
 
first
quarter oftable presents
 
fiscal 2023, our
Board of Directors
approved another
capital project
to expand our
cage-free production
capabilities.
The
project
at
Chase,
Kansas
will
convert
existing
conventional
layer
capacity
to
cage-free
capacity
for
approximately
1.5
million cage-free hens and include remodels of all remaining pullet facilities. Project
completion is expected by year-end 2025.
The following table presents material construction
projects approved
as of August 27,November 26, 2022 (in thousands):
Project(s) Type
Projected
 
Completion
Projected Cost
Spent as of AugustNovember
27,26, 2022
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2023
$
132,161131,932
115,343117,056
16,81814,876
Cage-Free Layer & Pullet Houses
Fiscal 2023
24,92324,640
19,54823,325
5,3751,315
Cage-Free Layer & Pullet Houses
Fiscal 2024
42,591
3832,057
42,20840,534
Cage-Free Layer & Pullet Houses
Fiscal 2025
94,18395,806
7,72922,526
86,45473,280
$
293,858294,969
$
143,003164,964
$
150,855130,005
We believe our
 
current cash balances, investments, cash flows from operations, and Credit Facility will be sufficient
 
to fund our
current capitalcash needs for at least the next 12 months.
 
28
IMPACT OF
 
RECENTLY
 
ISSUED/ADOPTED ACCOUNTING STANDARDS
For
 
information
 
on
 
changes
 
in
 
accounting
 
principles
 
and
 
new
 
accounting
 
policies,
 
see
 
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly
 
Report.
24
CRITICAL ACCOUNTING ESTIMATES
 
Critical accounting
 
estimates
 
are those
 
estimates
 
made
 
in accordance
 
with U.S.
 
generally
 
accepted
 
accounting
 
principles that
involve
 
a
 
significant
 
level
 
of
 
estimation
 
uncertainty
 
and
 
have
 
had
 
or
 
are
 
reasonably
 
likely
 
to
 
have
 
a
 
material
 
impact
 
on
 
our
financial
 
condition
 
or results
 
of operations.
 
There
 
have been
 
no changes
 
to our
 
critical accounting
 
estimates identified
 
in our
2022 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
 
the thirteentwenty-six weeks ended August 27,November 26, 2022
from the
information provided in Part II Item 7A.7A Quantitative and Qualitative Disclosures
 
Disclosures About Market Risk in our 2022
Annual Report.
ITEM 4.
 
CONTROLS
AND
PROCEDURES
 
Disclosure Controls and Procedures
Our disclosure
 
controls and
 
procedures are
 
designed to
 
provide reasonable
 
assurance that
 
information required
 
to be
 
disclosed
by us in the reports
 
we file or submit
 
under the Exchange Act
 
is recorded, processed, summarized
 
and reported, within the
 
time
periods
 
specified
 
in
 
the
 
Securities and
 
Exchange
 
Commission’s
 
rules
 
and
 
forms. Disclosure
 
controls
 
and
 
procedures
 
include,
without limitation, controls and
 
procedures designed to ensure that
 
information required to be disclosed
 
by us in the reports that
we file or
 
submit 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 August 27,November 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 November
 
ended
August
27,26, 2022
that has materially affected, or is reasonably likely to materially affect,
 
our internal control over financial reporting.
 
 
 
 
 
 
 
 
 
 
 
 
 
2529
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
 
2022
 
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
 
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 2022 Annual
 
Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
 
PROCEEDS
 
The following table is a summary There were
no purchases
of our first
Common Stock
made by
or on
behalf of
our Company
or any
affiliated
purchaser during
the
second quarter 2023 share repurchases:
Issuer Purchases of Equity Securitiesfiscal 2023.
Total
Number of
Maximum Number
Shares Purchased
of Shares that
Total
Number
Average
as Part of Publicly
May Yet
Be
of Shares
Price Paid
Announced Plans
Purchased Under the
Period
Purchased (1)
per Share
Or Programs
Plans or Programs
05/29/22 to 06/25/22
286
$
47.04
—
—
06/26/22 to 07/23/22
609
52.48
—
—
07/24/22 to 08/27/22
—
—
—
—
895
$
50.74
—
—
(1)
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.
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.
 
 
2630
SIGNATURES
 
Pursuant to
 
the requirements
 
of the Securities
 
Securities Exchange Act
 
Act of 1934,
 
the registrant has
 
duly caused
 
this report
 
to be signed
 
on
its behalf by the undersigned, thereunto duly authorized.
CAL-MAINE FOODS, INC.
(Registrant)
Date:
 
September 27,December 28, 2022
/s/ Max P.
 
Bowman
Max P.
 
Bowman
Vice President, Chief Financial
 
Officer
(Principal Financial Officer)
໿
Date:
 
September 27,December 28, 2022
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)
໿