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
November 26, 2022December 2, 2023
 
or
☐
 
Transition report pursuant to Section 13 or 15(d)
 
of the Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number:
 
001-38695
 
CAL-MAINE FOODS, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
64-0500378
(State or other jurisdiction of incorporation or organization)
 
(I.R.S Employer Identification No.)
1052 Highland Colony Pkwy
,
Suite 200
,
Ridgeland
,
Mississippi
 
39157
 
(Address of principal executive offices)
 
(Zip Code)
(
601
)
948-6813
 
(Registrant’s telephone number,
 
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
CALM
The
NASDAQ
 
Global Select Market
Indicate
 
by
 
check
 
mark
 
whether
 
the
 
registrant:
(1)
 
has
 
filed
 
all
 
reports
 
required
 
to
 
be
 
filed
 
by
 
Section
 
13
 
or
 
15(d)
 
of
 
the
Securities Exchange
 
Act of 1934
 
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”,filer,”
“smaller reporting company”, 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 ActAct.
☐
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
44,130,14944,182,613
 
shares of
 
Common Stock,
 
$0.01 par value,
 
and
4,800,000
 
shares of Class
 
A Common
 
Stock, $0.01
 
par
value, outstanding as of December 28, 2022.January 3, 2024.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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)
 
November 26, 2022
May 28, 2022December 2, 2023
June 3, 2023
Assets
Current assets:
Cash and cash equivalents
$
178,635361,783
$
59,084292,824
Investment securities available-for-sale
200,714206,045
115,429355,090
Trade and other receivables, net
262,964165,391
177,257120,247
Income tax receivable
42,14733,771
42,14766,966
Inventories
280,582287,270
263,316284,418
Prepaid expenses and other current assets
8,9689,673
4,2865,380
Total current
 
assets
974,0101,063,933
661,5191,124,925
Property, plant &
 
equipment, net
703,882815,468
677,796744,540
Investments in unconsolidated entities
14,68714,370
15,53014,449
Goodwill
44,00645,776
44,006
Intangible assets, net
17,03717,074
18,13115,897
Other long-term assets
9,81810,184
10,50710,708
Total Assets
$
1,763,4401,966,805
$
1,427,4891,954,525
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
154,62498,144
$
122,33182,590
Accrued wages and benefits
20,164
38,733
Accrued income taxes payable
85,7238,445
25,6878,288
Dividends payable
66,2025,682
36,65637,130
Accrued expenses and other liabilities
21,352
15,990
Total current
 
liabilities
306,549153,787
184,674182,731
Other noncurrent liabilities
9,41030,571
10,2749,999
Deferred income taxes, net
127,176158,483
128,196152,212
Total liabilities
443,135342,841
323,144344,942
Commitments and contingencies - see Note 910
—
—
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
70,00574,214
67,98972,112
Retained earnings
1,281,7841,583,071
1,065,8541,571,112
Accumulated other comprehensive loss, net of tax
(3,087)(1,614)
(1,596)(2,886)
Common stock in treasury at cost –
26,12626,078
 
shares at November 26, 2022December 2, 2023 and
26,12126,077
shares at May 28, 2022June 3, 2023
(28,496)(30,014)
(28,447)(30,008)
Total Cal-Maine Foods,
 
Inc. stockholders’ equity
1,320,9571,626,408
1,104,5511,611,081
Noncontrolling interest in consolidated entity
(652)(2,444)
(206)(1,498)
Total stockholders’
 
equity
1,320,3051,623,964
1,104,3451,609,583
Total Liabilities and Stockholders’
 
Equity
$
1,763,4401,966,805
$
1,427,4891,954,525
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of OperationsIncome
(In thousands, except per share amounts)
(Unaudited)
 
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 26, 2022
November 27, 2021December 2, 2023
November 26, 2022
December 2, 2023
November 27, 202126, 2022
Net sales
$
523,234
$
801,700
$
381,723982,578
$
1,460,044
$
706,709
Cost of sales
432,104
483,851
337,976846,015
924,705
656,317
Gross profit
91,130
317,849
43,747136,563
535,339
50,392
Selling, general and administrative
76,578
57,952
47,780128,824
111,559
94,305
(Gain) lossLoss on disposal of fixed assets
318
29
(1,968)262
62
(2,181)
Operating income (loss)
14,234
259,868
(2,065)7,477
423,718
(41,732)
Other income (expense):
Interest income, net
6,987
1,930
12914,333
2,833
361
Royalty income
301
344
278650
772
551
Equity income (loss) of unconsolidated
entities
29
(987)
264(441)
(843)
399
Other, net
567
1,113
1,862832
1,268
7,025
Total other income, net
7,884
2,400
2,53315,374
4,030
8,336
Income (loss) before income taxes
22,118
262,268
46822,851
427,748
(33,396)
Income tax expense (benefit)
5,540
63,974
(677)5,862
104,320
(16,515)
Net income (loss)
16,578
198,294
1,14516,989
323,428
(16,881)
Less: Loss attributable to noncontrolling
interest
(431)
(293)
(28)(946)
(446)
(28)
Net income (loss) attributable to Cal-Maine Foods,
Foods, Inc.
$
17,009
$
198,587
$
1,17317,935
$
323,874
$
(16,853)
Net income (loss) per common share:
Basic
$
0.35
$
4.08
$
0.020.37
$
6.66
Diluted
$
(0.34)
Diluted0.35
$
4.07
$
0.020.37
$
6.63
$
(0.34)
Weighted average
 
shares outstanding:
Basic
48,624
48,85748,690
48,624
48,85948,691
48,624
Diluted
48,866
48,840
49,01648,854
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
Twenty-six Weeks
 
Ended
November 26, 2022
November 27, 2021December 2, 2023
November 26, 2022
December 2, 2023
November 27, 202126, 2022
Net income (loss)
$
16,578
$
198,294
$
1,14516,989
$
323,428
$
(16,881)
Other comprehensive income (loss), before
tax:
Unrealized holding lossgain (loss) on available-for-available-
salefor-sale securities, net of reclassification
adjustments
895
(974)
(355)1,681
(1,971)
(579)
Income tax benefit (expense) related to
items of other
comprehensive income
(218)
237
87(409)
480
141
Other comprehensive loss,income (loss), net of tax
677
(737)
(268)1,272
(1,491)
(438)
Comprehensive income (loss)
17,255
197,557
87718,261
321,937
(17,319)
Less: Comprehensive loss attributable to the
noncontrolling interest
(431)
(293)
(28)(946)
(446)
(28)
Comprehensive income (loss) attributable to Cal-
Cal-MaineMaine Foods, Inc.
$
17,686
$
197,850
$
90519,207
$
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)
 
Twenty-six Weeks
 
Ended
December 2, 2023
November 26, 2022
November 27, 2021
Cash flows from operating activities:
Net income (loss)
$
16,989
$
323,428
$
(16,881)
Depreciation and amortization
34,72939,394
33,96934,729
Deferred income taxes
(540)5,862
(15,995)(540)
Other adjustments, net
(12,830)11,407
(16,585)(12,830)
Net cash provided by (used in) operations
344,78773,652
(15,492)344,787
Cash flows from investing activities:
Purchases of investment securities
(152,365)(43,569)
(26,387)(152,365)
Sales and maturities of investment securities
196,104
65,279
67,864
Distributions fromInvestment in unconsolidated entities
—(363)
400—
Acquisition of business net of cash acquired
(53,746)
—
(44,823)
Purchases of property,
 
plant and equipment
(59,709)(65,774)
(28,647)(59,709)
Net proceeds from disposal of property,
 
plant and equipment
92150
5,33892
Net cash used inprovided by (used in) investing activities
(146,703)32,802
(26,255)(146,703)
Cash flows from financing activities:
Payments of dividends
(78,394)(37,276)
—(78,394)
Purchase of common stock by treasury
(45)(5)
(18)(45)
Principal payments on finance lease
(94)(214)
(106)
Contributions
—
3(94)
Net cash used in financing activities
(78,533)(37,495)
(121)(78,533)
Net change in cash and cash equivalents
119,55168,959
(41,868)119,551
Cash and cash equivalents at beginning of period
59,084292,824
57,35259,084
Cash and cash equivalents at end of period
$
178,635361,783
$
15,484178,635
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
 
Form 10-Q and
 
Article 10 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
 
should be
read in conjunction
 
conjunction with
our Annual Report
 
Report on
Form 10-K
 
for the fiscal year
 
year ended May 28,
 
2022June 3,
2023 (the
“20222023
 
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
 
fiscal year
 
ends on
 
the Saturday
 
closest to
 
May 31.
 
Each of
 
the three-month
 
periods and
 
year-to-date periods
ended on December 2, 2023 and November 26, 2022 and November 27, 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 investmentThe Company
has determined
that its
debt securities
are available-for-sale
investments. We
classify these
securities as
current
because the
amounts invested
are available
for current
operations. Available
-for-sale
 
securities are
 
accountedcarried at
 
for infair value,
 
accordance withbased
on quoted market prices
 
ASC 320,as of the balance sheet
 
“Investments -date, with unrealized gains
 
Debt and losses recorded in other
 
Equity Securities”
(“ASCcomprehensive income.
320”).
The
 
Companyamortized
 
considerscost
 
all
itsof
 
debt
 
securities
 
is
adjusted
for
 
whichamortization
 
thereof
premiums
and
accretion
of
discounts
to
maturity
and
 
is
recorded in interest
 
aincome. The Company regularly
 
determinableevaluates changes to the
rating of its debt
securities by credit agencies
and
economic conditions
to assess and
record any
expected credit
losses through
allowance for
credit losses,
limited to
the amount
that fair value was less than the amortized cost basis.
Investments
in
mutual
funds
are
recorded
at
 
fair
market
 
value
 
and
 
there
are
 
no
restrictionsclassified
 
onas
“Other
long-term
assets”
in
 
the
 
Company’s
Condensed
 
abilityConsolidated
 
toBalance
 
sellSheets.
 
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
unrealizedUnrealized
 
gains
 
and
 
losses
 
reportedfor
equity
securities
are
recorded
 
in
 
other
 
comprehensiveincome
(expenses) as Other, net in the Company’s
 
income
until
realized.
The
total
Condensed Consolidated Statements of
other
comprehensive Income.
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
to
the
rating
of
its
debt
securities
by
credit
agencies
and
economic
conditions to assess and record any expected credit
losses through the allowance for credit losses, limited to the amount
that fair
value
was
less
than
the
amortized
cost
basis.
The
cost
 
basis
for
 
realized
gains
 
and
losses
 
on
available-for-sale
 
securities is
 
is
determined by
 
the specific
 
identification method.
Gains
 
Gains and
 
losses
are
 
recognized
in
 
other
income
 
(expenses)
as
 
Other,
 
net
in
the
the
Company’s
 
Condensed Consolidated
 
Consolidated
Statements of
Operations.
Investments in
mutual funds Income. Interest and dividends on securities classified as available-for-sale
 
are classified
as “Other
long-
term assets”recorded in the Company’s Condensed
Consolidated Balance Sheets.interest income.
Trade Receivables
 
Trade receivables are stated at their carrying
 
receivablesvalues, which include a reserve for credit losses. As of December
 
are stated2, 2023 and June
3,
 
at their2023,
 
carrying values,
which include
a reserve
for credit
losses. As
of November
26, 2022
and
May 28,
2022, reserves
 
for
credit
 
losses
were
 
$
838536
 
thousand
and
 
$
775579
 
thousand,
respectively.
 
The
Company
 
extends
credit
 
to
customers based on
 
an evaluation of each
 
each customer'scustomer’s financial condition
 
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.
Goodwill
Goodwill
represents
the
excess
of
the
purchase
price
over
the
fair
value
of
the
identifiable
net
assets
acquired.
Goodwill
is
evaluated
for
impairment
annually
by
first
performing
a
qualitative
assessment
to
determine
whether
a
quantitative
goodwill
8
test is
necessary.
After assessing
the totality
of events
or circumstances,
if we
determine it
is more
likely than
not that
the fair
value
of
a
reporting
unit
is
less
than
its
carrying
amount,
then
we
perform
additional
quantitative
tests
to
determine
the
magnitude of any impairment.
Intangible Assets
Intangible
assets
are
initially
recorded
at
fair
value
in
business
acquisitions,
which
include
franchise
rights,
customer
relationships, non-compete
agreements, trademark
and right
of use
intangibles. They
are amortized
over their
estimated useful
lives
of
5
to
15
years. The
gross
cost
and
accumulated
amortization
of
intangible
assets
are
removed
when
the
recorded
amounts
are fully
amortized
and
the asset
is no
longer
in use
or the
contract has
expired.
When certain
events or
changes in
operating conditions
occur,
asset lives may
be adjusted
and an impairment
assessment may
be performed
on the recoverability
of the carrying amounts.
Indefinite life assets are recorded at fair value in business acquisitions and
represents water rights. They are not amortized, but
are reviewed for impairment at least annually or more frequently if
impairment indicators arise.
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
)(1/3) of such
 
quarterly income. Dividends
 
are paid to
 
shareholders of record
 
as of the 60th
 
day
following the
 
last day
 
of such quarter,
 
except for
 
the fourth fiscal
 
quarter.
 
For the
 
fourth quarter,
 
the Company
 
pays dividends
to shareholders of record on the 65th day after the
quarter end. Dividends are payable on the 15th day following
the record date.
Following a quarter for which the Company does not report net income
attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend
for a subsequent profitable
quarter until the Company
is profitable on a cumulative
basis computed from the
date of the most recent quarter
for which a dividend was paid.
The dividend policy is subject to
periodic review by the Board of
Directors.
Business Combinations
The Company applies the acquisition
method of accounting, which
requires that once control is obtained,
all the assets acquired
and liabilities assumed,
including amounts
attributable to noncontrolling
interests, are recorded
at their respective
fair values at
the date of acquisition. We
determine the fair values of identifiable assets and liabilities
internally,
which requires estimates and
the
use
of
various
valuation
techniques.
When
a
market
value
is
not
readily
available,
our
internal
valuation
methodology
considers the remaining estimated life of the assets acquired and what
management believes is the market value for those assets.
We
typically use the income
method approach for
intangible assets acquired in
a business combination. Significant
estimates in
valuing
certain
intangible
assets
include,
but
are
not
limited
to,
the
amount
and
timing
of
future
cash
flows,
growth
rates,
discount rates and
useful lives. The
excess of the purchase
price over fair values
of identifiable assets and
liabilities is recorded
as goodwill.
Loss Contingencies
Certain
conditions
may
exist
as
of
the
date
the
financial
statements
are
issued
that
may
result
in
a
loss
to
the
Company
but
which will
only be
resolved when
one or
more future
events occur
or fail
to occur.
The Company’s
management and
its legal
counsel
assess such
contingent
liabilities, and
such assessment
inherently
involves an
exercise
of judgment.
In assessing
loss
contingencies
related
to legal
proceedings
that are
pending against
the Company
or unasserted
claims that
may result
in such
proceedings, the Company’s
legal counsel evaluates
the perceived merits
of any legal
proceedings or unasserted
claims as well
as the perceived merits of the amount of relief sought or expected to be
sought therein.
If the assessment
of a contingency
indicates it is
probable that
a material loss
has been incurred
and the amount
of the liability
can be
estimated, the
estimated liability
would be accrued
in the Company’s
financial statements.
If the assessment
indicates a
potentially material loss contingency is
not probable, but is reasonably possible,
or is probable but cannot be estimated,
then the
nature of the
contingent liability,
together with an
estimate of the
range of possible
loss if determinable
and material, would
be
disclosed. Loss
contingencies considered
remote are
generally not
disclosed unless
they involve
guarantees, in
which case
the
nature of the guarantee would be disclosed.
The Company expenses the costs of litigation as they are incurred.
9
New Accounting Pronouncements and Policies
No new accounting pronouncement issued or effective
during the fiscal year had or is expected to have a material impact on
our
Consolidated Financial Statements.
Note 2 - Acquisition
Effective
September 30, 2023
, the Company
acquired the assets of
Fassio Egg Farms,
Inc. (“Fassio”), related
to its commercial
shell
egg
production
and
processing
business.
Fassio
owns
and
operates
commercial
shell
egg
production
and
processing
facilities with
a capacity
at the
time of
acquisition of
approximately
1.2
million
laying hens,
primarily
cage-free,
a feed
mill,
pullets, a
fertilizer production
and composting
operation and
land located
in Erda, Utah,
outside Salt
Lake City.
The Company
accounted for the acquisition as a business combination.
The following table summarizes the consideration paid
for Fassio and the amounts of the assets acquired and
liabilities assumed
recognized at the acquisition date (in thousands):
Cash consideration paid
$
53,746
Fair value of contingent consideration
1,000
Total estimated purchase
consideration
54,746
Recognized amounts of identifiable assets acquired and liabilities assumed
Inventory
$
6,164
Property, plant and equipment
44,540
Intangible assets
2,272
Other long-term assets
143
Liabilities assumed
(143)
Total identifiable
net assets
52,976
Goodwill
1,770
$
54,746
Inventory consisted
primarily of
flock, feed
ingredients,
packaging, and
egg inventory.
Flock inventory
was valued at
carrying
value
as
management
believes
that
its
carrying
value
best
approximates
its
fair
value.
Feed
ingredients,
packaging
and
egg
inventory were all valued based on market prices as of September 30, 2023.
Property,
plant and
equipment were
valued utilizing
the cost
approach which
is based
on replacement
or reproduction
costs of
the assets and subtracting any depreciation resulting from physical deterioration
and/or functional or economic obsolescence.
Intangible
assets
consisted
primarily
of
water
rights
within
the
property
acquired.
Water
rights
were
valued
using
the
sales
comparison approach.
Contingent
consideration
liability
was
recorded
and
represents
potential
future
cash
payment
to
the
sellers
contingent
on
the
acquired
business
meeting
certain
return
on
profitability
milestones over
a
three-year
period,
commencing
on
the date
of
the
acquisition.
The fair
value of
the contingent
consideration is
estimated using
a discounted
cash flow
model. Key
assumptions
and
unobservable
inputs that
require
significant judgement
used in
the estimate
include weighted
average cost
of capital,
egg
prices, projected revenue
and expenses over which
the contingent considered
is measured, and the
probability assessments with
respect to the
likelihood of achieving
the forecasted projections.
A range of
potential outcomes cannot
be reasonably estimated
due to market volatility of egg prices.
Goodwill
represents
the
excess
of
the
purchase
price
of
the
acquired
business
over
the
acquisition
date
fair
value
of
the
net
assets acquired.
Goodwill recorded
in connection
with the
Fassio acquisition
is primarily
attributable to
improved efficiencies
from integrating the assets of
Fassio with the operations
of the Company.
The Company recognized goodwill
of $1.8 million as
a result of the acquisition.
10
Note 3 - Investment
Securities
The following represents the Company’s
investment securities as of December 2, 2023 and June 3, 2023 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
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.
Accordingly,
we have reflected
the correction of
the immaterial error
in fiscal 2022
as a reduction
of
Net Sales and Cost of Sales in the accompanying Condensed 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
our
Consolidated Financial Statements.
NoteDecember 2, - Investment
Securities
The following represents the Company’s
investment securities as of November 26, 2022 and May 28, 2022
(in thousands):
November 26, 20222023
Amortized
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
15,9566,141
$
—
$
276108
$
15,6806,033
Commercial paper
33,0582,791
—
532
33,0052,789
Corporate bonds
81,21898,202
—
1,709535
79,50997,667
Certificates of deposits
1,125
—
6
1,119
US government and agency obligations
19,11188,470
—
205116
18,90688,354
Asset backed securities
13,40310,045
38
—
340
13,063
Treasury bills
40,644
—
93
40,55110,083
Total current
 
investment securities
$
203,390206,774
$
38
$
767
$
206,045
Mutual funds
$
2,190
$
—
$
2,67624
$
200,714
Mutual funds
$
3,472
$
—
$
114
$
3,3582,166
Total noncurrent
 
investment securities
$
3,4722,190
$
—
$
11424
$
3,3582,166
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9
May 28, 2022June 3, 2023
Amortized
 
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
10,13616,571
$
—
$
32275
$
10,10416,296
Commercial paper
14,94056,486
—
7277
14,86856,409
Corporate bonds
74,167139,979
—
4831,402
73,684138,577
Certificates of deposits
1,263675
—
18—
1,245675
US government and agency obligations
2,205
4101,240
—
2,209471
100,769
Asset backed securities
13,45613,459
—
137151
13,31913,308
Treasury bills
29,069
—
13
29,056
Total current
 
investment securities
$
116,167
$
4
$
742
$
115,429
Mutual funds
$
3,826357,479
$
—
$
742,389
$
3,752355,090
Mutual funds
$
2,172
$
—
$
91
$
2,081
Total noncurrent
 
investment securities
$
3,8262,172
$
—
$
7491
$
3,7522,081
Available-for-sale
Proceeds from sales
 
sales and maturities of investment
 
maturities of
investment securities
available-for-sale
 
were $
196.1
million and $
65.3
 
million andduring the
twenty-six weeks ended December 2, 2023
 
$
67.9
and November 26, 2022, respectively.
 
million during
Gross realized gains for the
twenty-six
 
weeks
ended December 2, 2023 and November
 
26,
2022
and
November
27,
2021,
respectively.
Gross
realized
gains
for
the
twenty-six
weeks ended
November 26,
2022 and
November 27,
2021 were
$
27
 
thousand
and $
1652
 
thousand, respectively.
 
Gross realized losses for the
losses
for
the
twenty-six
 
weeks
ended
 
NovemberDecember 2,
 
2023 and
November 26,
 
2022 were
 
and$
8
 
November
27,
2021
werethousand and
 
$
63
 
thousand, respectively.
 
and
$There
67
thousand,
respectively. There were
no
 
allowances for credit losses at November 26, 2022December 2, 2023 and May 28, 2022.June 3, 2023.
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 NovemberDecember
 
26, 20222, 2023 are as follows (in thousands):
Estimated Fair Value
Within one year
$
133,867145,788
1-5 years
66,84760,257
Total
$
200,714206,045
Noncurrent
 
There were
no
 
sales of
noncurrent investment
 
securities during the twenty-six
weeks ended November
26, 2022. Proceeds from
sales and maturities
of noncurrent
investment securities
were $
453
thousand during
 
the twenty-six
 
weeks ended November
 
27,
2021.December 2,
 
Gross2023 and
 
realized
gains
for
the
twenty-six
weeks
ended November
27,
2021
were
$
16526, 2022.
 
thousand. There
were
no
realized
losses for the twenty-six weeks ended November 27, 2021.
11
Note 34 - 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.
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 December 2, 2023 and June 3,
2023 (in thousands):
December 2, 2023
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
6,033
$
—
$
6,033
Commercial paper
—
2,789
—
2,789
Corporate bonds
—
97,667
—
97,667
Certificates of deposits
—
1,119
—
1,119
US government and agency obligations
—
88,354
—
88,354
Asset backed securities
—
10,083
—
10,083
Mutual funds
2,166
—
—
2,166
Total assets measured at fair
value
$
2,166
$
206,045
$
—
$
208,211
Liabilities
Contingent consideration
$
—
$
—
$
1,000
$
1,000
Total liabilities measured
at fair value
$
—
$
—
$
1,000
$
1,000
June 3, 2023
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
16,296
$
—
$
16,296
Commercial paper
—
56,409
—
56,409
Corporate bonds
—
138,577
—
138,577
Certificates of deposits
—
675
—
675
US government and agency obligations
—
100,769
—
100,769
Asset backed securities
—
13,308
—
13,308
Treasury bills
—
29,056
—
29,056
Mutual funds
2,081
—
—
2,081
Total assets measured at fair
value
$
2,081
$
355,090
$
—
$
357,171
12
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.
Contingent
consideration
classified
as
Level
3
consists
of
the
potential
obligation
to
pay
an
earnout
to
the
sellers
of
Fassio
contingent on the
acquired business meeting
certain return on
profitability milestones over
a
three-year
period, commencing on
the date of
the acquisition. The fair
value of the
contingent consideration is
estimated using a
discounted cash flow
model. Key
assumptions and
unobservable inputs
that require
significant judgement
used in
the estimate
include weighted
average cost
of
capital,
egg
prices,
projected
revenue
and
expenses
over
which
the
contingent
considered
is
measured,
and
the
probability
assessments
with
respect
to
the
likelihood
of
achieving
the
forecasted
projections.
See
further
discussion
in
Note 5 - Inventories
Inventories consisted of the following as of December 2, 2023 and June
3, 2023 (in thousands):
December 2, 2023
June 3, 2023
Flocks, net of amortization
$
162,323
$
164,540
Eggs and egg products
30,485
28,318
Feed and supplies
94,462
91,560
$
287,270
$
284,418
We
grow
and
maintain
flocks
of
layers
(mature
female
chickens),
pullets
(female
chickens,
under
18
weeks
of
age),
and
breeders
(male
and
female
chickens
used
to
produce
fertile
eggs
to
hatch
for
egg
production
flocks).
Our
total
flock
at
December
2,
2023
and
June 3,
2023
consisted
of
approximately
10.6
million
and
10.8
million
pullets
and
breeders
and
43.3
million and
41.2
million layers, respectively.
Note 6 - Equity
The following reflects equity activity for the thirteen weeks ended
December 2, 2023 and November 26, 2022 (in thousands):
Thirteen Weeks
Ended December 2, 2023
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at
September 2, 2023
$
703
$
48
$
(30,014)
$
73,153
$
(2,291)
$
1,571,744
$
(2,013)
$
1,611,330
Other comprehensive
income, net of tax
—
—
—
—
677
—
—
677
Stock compensation
plan transactions
—
—
—
1,061
—
—
—
1,061
Dividends ($
0.116
per share)
Common
—
—
—
—
—
(5,125)
—
(5,125)
Class A common
—
—
—
—
—
(557)
—
(557)
Net income (loss)
—
—
—
—
—
17,009
(431)
16,578
Balance at December
2, 2023
$
703
$
48
$
(30,014)
$
74,214
$
(1,614)
$
1,583,071
$
(2,444)
$
1,623,964
13
Thirteen 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
$
(28,495)
$
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
Twenty-six Weeks
Ended December 2, 2023
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at June 3,
2023
$
703
$
48
$
(30,008)
$
72,112
$
(2,886)
$
1,571,112
$
(1,498)
$
1,609,583
Other comprehensive
income, net of tax
—
—
—
—
1,272
—
—
1,272
Stock compensation
plan transactions
—
—
(6)
2,102
—
—
—
2,096
Dividends ($
0.122
per share)
Common
—
—
—
—
—
(5,390)
—
(5,390)
Class A common
—
—
—
—
—
(586)
—
(586)
Net income (loss)
—
—
—
—
—
17,935
(946)
16,989
Balance at December
2, 2023
$
703
$
48
$
(30,014)
$
74,214
$
(1,614)
$
1,583,071
$
(2,444)
$
1,623,964
14
Twenty-six Weeks
Ended November 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrollin
g
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 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
Contributions
—
—
—
—
—
—
—
—
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
Note 7 - Net Income per Common Share
Basic net income
per share is
based on the
weighted average Common
Stock and Class
A Common Stock
outstanding. Diluted
net
income
per
share
is
based
on
weighted-average
common
shares
outstanding
during
the
relevant
period
adjusted
for
the
dilutive effect of share-based awards.
The
following
table
provides
a
reconciliation
of
the
numerators
and
denominators
used
to
determine
basic
and
diluted
net
income per common share (amounts in thousands, except per share data):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
December 2, 2023
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 November 26, 2022 and May
28, 2022 (in thousands):
November 26, 2022
Level 1December 2, 2023
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
15,680
$
—
$
15,680
Commercial paper
—
33,005
—
33,005
Corporate bonds
—
79,509
—
79,509
US government and agency obligations
—
18,906
—
18,906
Asset backed securities
—
13,063
—
13,063
Treasury bills
—
40,551
—
40,551
Mutual funds
3,358
—
—
3,358
Total assets measured at fair
value
$
3,358
$
200,714
$
—
$
204,072
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 November 26, 2022
and May 28, 2022 (in thousands):
November 26, 2022
May 28, 2022Numerator
Flocks, net of amortizationNet income
$
156,78216,578
$
144,051
Eggs and egg products
28,343
26,936
Feed and supplies
95,457
92,329198,294
$
280,58216,989
$
263,316323,428
Less: Loss attributable to
noncontrolling interest
(431)
(293)
(946)
(446)
Net income attributable to Cal-Maine
Foods, Inc.
$
17,009
$
198,587
$
17,935
$
323,874
Denominator
Weighted-average
common shares
outstanding, basic
48,690
48,624
48,691
48,624
Effect of dilutive restricted shares
176
216
163
203
Weighted-average
common shares
outstanding, diluted
48,866
48,840
48,854
48,827
Net income per common share
attributable to Cal-Maine Foods, Inc.
Basic
$
0.35
$
4.08
$
0.37
$
6.66
Diluted
$
0.35
$
4.07
$
0.37
$
6.63
We
grow
and
maintain
flocks
of
layers
(mature
female
chickens),
pullets
(female
chickens,
under
18
weeks
of
age),
and
breeders
(male
and
female
chickens
used
to
produce
fertile
eggs
to
hatch
for
egg
production
flocks).
Our
total
flock
at
November 26,
2022 and
May 28,
2022 consisted
of approximately
10.4
million and
11.5
million pullets
and breeders
and
43.7
million and
42.2
million layers, respectively.
 
 
 
 
 
 
 
 
11
Note 5 - Equity
The following reflects
equity activity for
the thirteen and
twenty-six weeks ended
November 26, 2022
and November 27,
2021
(in thousands):
Thirteen 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 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 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 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
15
 
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 6 - Net Income (Loss) per Common Share
Basic net
income (loss)
per share
is based
on the
weighted average
Common Stock
and Class
A Common
Stock outstanding.
Diluted net income
per share
is based on
weighted-average common
shares outstanding
during the
relevant period
adjusted for
the
dilutive
effect
of share-based
awards.
Restricted
shares
of
145
thousand
were
antidilutive
due
to
the net
loss for
the first
twenty-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
Twenty-six Weeks
Ended
November 26,
2022
November 27,
2021
November 26,
2022
November 27,
2021
Numerator
Net income (loss)
$
198,294
$
1,145
$
323,428
$
(16,881)
Less: Loss attributable to noncontrolling
interest
(293)
(28)
(446)
(28)
Net income (loss) attributable to Cal-
Maine Foods, Inc.
$
198,587
$
1,173
$
323,874
$
(16,853)
Denominator
Weighted-average
common shares
outstanding, basic
48,624
48,857
48,624
48,859
Effect of dilutive restricted shares
216
159
203
—
Weighted-average
common shares
outstanding, diluted
48,840
49,016
48,827
48,859
Net income (loss) per common share
attributable to Cal-Maine Foods, Inc.
Basic
$
4.08
$
0.02
$
6.66
$
(0.34)
Diluted
$
4.07
$
0.02
$
6.63
$
(0.34)
Note 7 –8 - Revenue from Contracts with Customers
Satisfaction of Performance Obligation
The vast majority of the Company’s
 
revenue is derived from agreements with customers based on the customer
 
placing an order
for products. Pricing
 
for the most part
 
is determined when
 
the Company and
 
the customer agree
 
upon the specific
 
order, which
establishes the contract for that order.
Revenues are
 
recognized in
 
an amount
 
that reflects
 
the net
 
consideration we
 
expect to
 
receive in
 
exchange for
 
the goods.
 
Our
shell
 
eggs
 
are
 
sold
 
at
 
prices
 
related
 
to
 
independently
 
quoted
 
wholesale
 
market
 
prices
 
or
 
formulas
 
related
 
to
 
our
 
costs
 
of
production.
 
The
 
Company’s
 
sales
 
predominantly
 
contain
 
a
 
single
 
performance
 
obligation.
 
We
 
recognize
 
revenue
 
upon
satisfaction
 
of
 
the
 
performance
 
obligation
 
with
 
the
 
customer,
 
which
 
typically
 
occurs
 
within
 
days
 
of
 
the
 
Company
 
and
 
the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts
include a guaranteed sale
clause, pursuant to which we
 
we credit the customer’s
account for product
that the
customer
is
unable
to
sell
before
expiration.
The
Company
records
an
allowance
for
 
expected customer returns
and
refunds
by
using
historical
return
data
and
comparing
compared to current
period
sales and
accounts receivable.
 
The allowance
is recorded
as a
reduction
of sales in salesthe
with a corresponding reduction in trade accounts receivable.same period the revenue is recognized.
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.’’
Disaggregation of Revenue
The following table provides revenue disaggregated by product category
(in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14
Disaggregation of Revenue
The following table provides revenue disaggregated by product category
(in thousands):
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 26, 2022
November 27, 2021December 2, 2023
November 26, 2022
December 2, 2023
November 27, 202126, 2022
Conventional shell egg sales
$
280,599
$
541,917
$
221,142505,879
$
967,506
$
403,172
Specialty shell egg sales
217,905
227,778
146,917426,586
428,598
279,375
Egg products
20,012
28,052
11,40142,235
55,692
20,767Other
Other4,718
3,953
2,2637,878
8,248
3,395$
523,234
$
801,700
$
381,723982,578
$
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
 
net sales.
As of
 
November 26, 2022December 2,
 
2023 and May 28,
 
2022, the balanceJune 3,
 
2023, the
balance for
contract assets was immaterial.
Contract Balances
The Company receives payment from customers based on specified terms that are
 
generally less than 30 days from delivery.
There are rarely contract assets or liabilities related to performance under the
 
the contract.
Note 89 - Stock Based Compensation
Total
 
stock-based
compensation
 
expense
was
$
2.1
and
 
$
2.0
 
million
for
 
the
twenty-six
 
weeks
ended
 
December
2,
2023
and
November 26, 2022, respectively.
 
2022 and
 
November
27, 2021.
16
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
 
NovemberDecember
 
26,2,
 
20222023
 
of
 
$
4.95.0
 
million
 
will
 
be
 
recorded
 
over
 
a
 
weighted
average period of
1.81.7
 
years. Refer to Part
 
II Item 8,
 
Notes to Consolidated
 
Financial Statements and
 
Supplementary Data, Note
16:14 - Stock Compensation Plans in our 20222023 Annual Report for further information
 
on our stock compensation plans.
The Company’s restricted share activity
 
for the twenty-six weeks ended November 26, 2022December 2, 2023 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 28, 2022June 3, 2023
317,844294,140
$
39.1243.72
Vested
(3,240)(305)
38.3137.70
Forfeited
(4,200)(1,329)
39.4444.68
Outstanding, November 26, 2022December 2, 2023
310,404292,506
$
39.1243.72
Note 910 - Commitments and Contingencies
Financial Instruments
The
Company
maintained
standby
letters
of credit
(“LOCs”)
totaling
$
4.1
million
at
November
26, 2022,
which
were issued
under
the
Company's
senior
secured
revolving
credit
facility.
The
outstanding
LOCs
are
for
the
benefit
of
certain
insurance
companies and are not recorded as a liability on the consolidated balance sheets.
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
 
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
31, 2022, the Company
and WCF filed a
petition for review to
 
the Company and WCF appealed
the First District Court’s
decision to the Supreme Court
of
Texas.
On
September
29,
2023,
the
Supreme
Court
of
 
Texas
 
appealingdenied
the
 
First DistrictCompany’s
 
court’sPetition
 
decision.for
 
On NovemberReview
 
30,so
 
2022, the
 
State ofcase
 
Texaswill
 
waivedbe
its responseremanded
 
to defendant’sthe
 
petitiontrial court
 
for
review. The court further
 
has not issued a ruling. proceedings.
Management believes
the risk
of material
loss related to this matter
 
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
 
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.
17
On March 15, 2022,
 
plaintiffs filed a
 
second suit against the
 
Company and several
 
defendants in Bell et
 
al. v.
 
Cal-Maine Foods
et al.,
 
Case No.
 
1:22-cv-246, in
 
the Western
 
District of
 
Texas,
 
Austin Division
 
alleging the
 
same assertions
 
as laid
 
out in
 
the
first
 
complaint.
 
On
 
August
 
12,
 
2022,
 
the
 
Company
 
and
 
other
 
defendants
 
in
 
the
 
case
 
filed
 
a
 
motion
 
to
 
dismiss
 
the
 
plaintiffs’
class action
 
complaint. On
 
September 6,January 9,
 
2022,2023, the
 
plaintiffs’ filedcourt entered
 
their oppositionan order
and final
judgement granting
the Company’s
motion to
dismiss.
On February
8, 2023,
the plaintiffs
appealed
the lower
court’s
judgement
 
to the
 
motion toUnited States
 
dismiss andCourt of
Appeals for
 
the CompanyFifth
and otherCircuit, Case No.
 
defendants23-50112.
The parties filed
 
their replyrespective appellate
 
on September
13, 2022.
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,briefs, but the
 
court has not issued a
 
ruling. ruled on these
submissions.
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
 
Food Global, Inc.,
 
Inc., General
Mills, Inc.,
 
and Nestle USA,
 
USA, Inc. (the
 
(the “Egg“Egg Products
 
Products Plaintiffs”) and,
until a subsequent settlement was reached as described below,
 
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
Egg
 
Producers,
 
Inc.
 
et
 
al.,
Case
 
No.
 
1:11-cv-8808,
 
for
 
trial.
The
 
Egg
 
Products
 
Plaintiffs
 
allegealleged
 
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
 
attackingEgg
Products
Plaintiffs
attacked
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.
On
December
8,
2022,
the
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
 
Kellogg Companydismissing all
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,
 
court, and
on March
28, 2022,
2022, the court
dismissed the Company with prejudice.
The Company intends totrial of this case began
 
continue to defendon October 17, 2023. On December
1, 2023, the remainingjury returned a decision
 
case withawarding the Egg Products
Plaintiffs
 
as vigorously as possible$
17.8
 
based
onmillion
 
defensesin damages.
 
whichIf the
jury’s
decision
is ultimately
upheld,
the defendants
would
be jointly
and
severally
liable
for
treble
damages,
or
$
53.3
million,
subject
to
credit
for
 
the
 
CompanyKellogg
 
believessettlement
 
aredescribed
 
meritoriousabove
 
and
 
provable.certain
 
Adjustments,other
settlements with
 
ifprevious
 
any,settling defendants,
 
whichplus the
 
mightEgg Product
 
resultPlaintiffs’
 
fromreasonable
attorneys’
fees. This
decision is
not
final and
remains subject
to the
defendants’ motion
for a
directed verdict
noted below
and appeals
by the
parties. During
our
second fiscal quarter
of 2024, we
recorded an accrued
expense of $
19.6
million in
selling, general and
administrative expenses
in
the
Company’s
Condensed
Consolidated
Statements
of
Income
and
classified
as
other
noncurrent
liabilities
in
 
the
resolutionCompany’s
Condensed Consolidated
Balance Sheets. The
accrual represents
our estimate of
 
this remainingthe Company’s
 
matter withproportional share
of the reasonably
 
possible ultimate damages
award, excluding the Egg
 
Products PlaintiffsProduct Plaintiffs’ attorneys’
 
have notfees that we believe
 
been reflectedwould
be approximately offset
by the credits noted
above. We
and the other
defendants are discussing
apportionment, and our
accrual
may change in
the future based on
the outcome of
those discussions. Our
accrual may also
be revised in
whole or in
part in the
future to the extent we
are successful in further proceedings
in the litigation.
On November 29, 2023, the
defendants, including
the Company,
filed a
motion for
judgment as
a matter
of law
in their
favor,
known as
a directed
verdict, notwithstanding
the
jury’s decision. The Company intends
to continue to vigorously defend the claims asserted by the Egg Products Plaintiffs.
State of Oklahoma Watershed Pollution
Litigation
On June
18, 2005,
the State
of Oklahoma
filed suit,
 
in the
 
financial statements.United States
 
While
managementDistrict Court
 
believesfor the
Northern District
of Oklahoma,
against Cal-Maine
Foods,
Inc. and
Tyson
Foods,
Inc., Cobb-Vantress,
Inc., Cargill,
Inc., George’s,
Inc., Peterson
Farms, Inc.
and
Simmons
Foods,
Inc.,
and
certain
of
their
affiliates.
The
State
of
Oklahoma
claims
 
that
 
therethrough
the
disposal
of
chicken
litter the
defendants polluted
the Illinois
River Watershed.
This watershed
provides water
to eastern
Oklahoma. The
complaint
sought
injunctive
relief
and
monetary
damages,
but
the
claim
for
monetary
damages
was dismissed
by
the
court.
Cal-Maine
Foods,
Inc.
discontinued
operations
in
the
watershed
in
or
around
2005.
Since
the
litigation
began,
Cal-Maine
Foods,
Inc.
purchased
100
%
of
the
membership
interests
of
Benton
County
Foods,
LLC,
which
 
is
 
stillan
 
ongoing
commercial
shell
egg
operation within
the Illinois
River Watershed.
Benton County
Foods, LLC
is not
a defendant
in the
litigation. We
also have
a
number of small contract producers that operate in the area.
18
The non-jury trial in the case began in September 2009
and concluded in February 2010. On January 18, 2023, the court entered
findings of
fact and
conclusions of
law in favor
of the
State of
Oklahoma, but
no penalties
were assessed.
The court
found the
defendants
liable
for
state
law
nuisance,
federal
common
law
nuisance,
and
state
law
trespass.
The
court
also
found
the
producers
vicariously
liable
for
the
actions
of
their
contract
producers.
The
court
directed
the
parties
to
confer
in
attempt
to
reach agreement
on appropriate
remedies. On
June 12,
2023, the
court ordered
the parties
to mediate
before the
retired Tenth
Circuit Chief Judge Deanell
Reece Tacha.
On October 26, 2023, the parties
filed separate status reports informing
the court that
the mediation
was unsuccessful.
Also on
October 26,
2023, the
defendants filed
a post-trial
motion to
dismiss and
supporting
brief arguing
that the
case should
be dismissed
due to
the state record
before the
court, the resulting
mootness of
the case,
and
violation
of
due
process.
On
November
10,
2023,
the
State
of
Oklahoma
filed
its
response
in
opposition
to
the
motion
to
dismiss and on
November 17, 2023,
the defendants filed
their reply.
The court has not
ruled on the motion.
While management
believes there
is a
 
reasonable
 
possibility
of
 
a
material
 
adverse
outcome
loss from
 
the
case,
with
the
Egg
Products Plaintiffs,
 
at the
 
present time,
 
it is not
 
not possible to
 
to estimate the
 
the
amount
of
 
monetary
exposure,
 
if
any,
 
to
the
 
Company
due
 
to
 
a
 
range
 
of
 
factors,
 
including
 
the
 
following,
 
among
 
others:
uncertainties
 
twoinherent
 
earlierin
 
trialsany
assessment
of
potential
costs
associated
with
injunctive
relief
or
other
penalties
 
based
 
on
 
substantiallya
decision in a
 
case tried over
13 years ago based
on environmental conditions
that existed at the
 
same
facts
and
legal arguments
resulted
in findingstime, the lack
 
of noguidance from
the court as to what
 
conspiracymight be considered appropriate
 
and/or damages;remedies, the ongoing litigation
 
this trial
will be
before
a different
judge and
jury
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,with 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 throughand motion to
dismiss before
 
the disposal of
chicken
litter the
defendants have
polluted the
Illinois River
Watershed.
This watershed
provides
water to
eastern Oklahoma.
The complaint
seeks injunctive
reliefcourt, and
 
monetary damages,uncertainty regarding
 
but thewhat our proportionate
 
claim forshare of any
 
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
remedy would be,
 
materially
affected
by
the
request
for
injunctive
relief
unless
the
court
orders
substantial
affirmativealthough we believe
remediation. Since
that our share compared to the litigation
began, Cal-Maine
Foods, Inc.
purchased
100
% of the
membership interests
of Benton
County
Foods, LLC,
whichother defendants 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. small.
Other Matters
In addition to
the above, the Company
is involved in
various other claims
and litigation incidental
 
to its business.
Although the
outcome of
these matters
cannot be
determined with
certainty,
 
management, upon
the advice
of counsel,
is of
the opinion
that
the final outcome should not have a material effect on the Company’s
 
consolidated results of operations or financial position.
Note 11 - Subsequent Events
On
December
12,
2023,
the
Company
reported
that
one
of
the
Company’s
facilities
in
Kansas
experienced
an
outbreak
of
highly pathogenic
avian influenza
(“HPAI”),
affecting
approximately
684,000
laying hens.
Subsequent
to the
initial outbreak,
nearby
facilities
in
Kansas
experienced
an outbreak
of
HPAI,
affecting
approximately
an additional
842,000
laying
hens and
240,000
pullets. The total of the combined outbreaks represented
3.3
% of our total flock as of December 2, 2023.
The
Company
has
and
continues
to
follow
all
guidelines
provided
by
the
United
States
Department
of
Agriculture
(the
“USDA”)
and
other
regulatory
agencies
to
depopulate
and
sanitize
the
facilities.
As
such,
Cal-Maine
will
be
eligible
to
participate
in
the
USDA
indemnity
program
and
other
programs
designed
to
compensate
for
the
loss of
birds
and
eggs.
The
Company’s
plans
are
to
repopulate
the
facilities
and
resume
normal
operations
at
the
facilities
within
3
-
5 months
.
Due
to
volatility in
the market
prices of
eggs and
uncertain future
supply,
demand and
other market
conditions, an
estimate of
the net
income effect cannot be reasonably made.
1719
ITEM
 
2.
 
MANAGEMENT’S
DISCUSSION
AND
 
ANALYSIS
 
OF
 
FINANCIAL
 
CONDITION
 
AND
 
RESULTS
 
OF
OPERATIONS
The following
 
should be
 
read in
 
conjunction
 
with Management’s
 
Discussion and
 
Analysis of
 
Financial Condition
 
and Results
of Operations included
 
included in Part
II Item 7
 
7 of the Company’s
 
Annual Report on
 
on Form 10-K
for its fiscal
 
fiscal year ended May
 
28, 2022June 3, 2023
(the “2022“2023 Annual Report”), and the accompanying financial statements and
 
notes included in Part II Item 8 of the 20222023 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
and egg
products business,
 
including
estimated
 
future
production
 
data,
expected
 
construction
schedules,
 
projected construction
costs, potential
 
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-19recent
 
pandemic,resurgence
in
United
States
(“U.S.”)
commercial
table
egg
layer
flocks
of
the
highly
pathogenic
avian
influenza
(“HPAI”)
outbreak,
 
potential
 
future
 
impact
 
on
 
our
 
business
 
of
 
new
legislation,
rules
or
policies,
potential
outcomes
of
legal
proceedings,inflation
 
and
 
rising
interest
rates,
potential future
impact on our
business of new
legislation, rules
or policies,
potential outcomes
of legal proceedings
,
including
loss contingency
accruals and
factors
that may
result in
changes in
the amounts
recorded,
and other
 
projected
 
operating data,
data,
including
anticipated
results
 
of
operations
and
 
financial
condition.
Such
 
forward-looking
statements
are
 
identified
by
the
use
 
of
words
such
 
as
“believes, “believes,”
 
“intends,”
“expects,”
“hopes, “expects,”
 
“may,hopes,” “may,”
 
“should,”
“plans, “plans,”
 
“projected,”
“contemplates, “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
 
actual results
to
 
differ
 
materially
 
from
those
projected
 
in the
 
forward-looking
 
statements include,
 
among others,
 
others, (i) the
 
the
risk
factors
 
set forth
 
in
Part
 
I
Item
 
1A of
 
the 2022
Annual
Report
(ii)of
 
the
 
2023
Annual Report,
the
risk
factors
(if
any)
set forth
in
Part
II
Item
1A Risk
Factors and
elsewhere in this
report as well
as those included
in other reports
we file from
time to time
with the Securities
and
Exchange Commission (the “SEC”)
(including our Quarterly Reports
on Form 10-Q and Current
Reports on Form 8-K), (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
 
limited to
the current
 
outbreak of HPAI
 
of highlyaffecting poultry
 
pathogenic
avian
influenza
(“HPAI”)
affecting
poultry in
the United
States (“U.S.”),
 
Canada and other
 
other countries that
was first
 
that was
first detected
in commercial
flocks in
 
the
U.S. in February
2022, (iii) changescommercial flocks
 
in the demand
 
for and marketU.S. in
 
prices of shellFebruary 2022
 
eggs and feedthat
 
costs, (iv) ourfirst impacted
 
ability to predictour flock
in December
2023, (iii)
changes in the
demand for and
 
market prices of
shell eggs and
feed costs, (iv)
our ability to
predict and meet
 
demand for cage-
for
cage-free
free and
 
other
 
specialty
eggs,
 
(v)
 
risks,
changes,
 
or
obligations
 
that
could
 
result
from
 
our future
 
futureacquisition
acquisition of new
 
flocks or
businesses and risks
or changes that
may cause conditions
to completing a
pending acquisition not
to be met,
(vi) risks relating
to increased
costs and
 
risks or changeshigher and
 
that may causepotentially further
 
conditions to completingincreases in,
 
a pending acquisitioninflation and
 
notinterest rates,
(vii) our
ability to
 
beretain existing
customers,
 
met,acquire
 
(vi)new
 
risks
relating
to
the
evolving
COVID-19
pandemic,
including
without
limitation
increased
costscustomers
 
and
 
rising
inflation and interest rates, which generally have been exacerbatedgrow
 
by Russia’s invasion of Ukraine startingour
 
February 2022, (vii)
our abilityproduct
 
to retainmix,
 
existing customers,(viii)
 
acquire newadverse
 
customersresults
in
pending
litigation
matters,
(ix)
global
instability,
including as
a result of
the wars in
Ukraine and
 
grow ourIsrael and
 
product mix
and (viii)
adverse resultsattacks on shipping
 
in pendingthe Red
Sea, and (x)
any potential
litigation matters.resurgence of
COVID-19. Readers
 
are cautioned
 
not to place
 
place undue reliance
 
relianceon forward-looking
statements because,
while we
believe the assumptions on
 
forward-looking statements
because, while
we believe
which the
assumptions
on
which
the
forward-looking
 
statements
are
based
are
reasonable,
 
there
can
be
no
 
assurance
that
these
forward-looking statements
 
will prove
 
to be accurate.
 
accurate. Further, forward
 
forward-looking-looking statements included
 
included herein are
 
are only made
 
as of
the respective
 
dates thereof,
 
or if no
 
date is stated,
 
as of the date
 
date hereof.
Except as otherwise
 
otherwise required by
 
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
 
underand we
have
 
one
 
operating
 
and
reportable
segment.
 
We
 
are
 
the
largest
 
producer
 
and
 
distributor
 
of
fresh
 
shell
 
eggs
 
in
 
the
U.S.
 
Our
 
total
 
flock
 
of
 
approximately
 
43.743.3
million layers
 
millionand 10.6
 
layers and
10.4
million pullets
 
and breeders
 
is the largest
 
in the U.S.
 
U.S. We
 
sell most of
 
our shell eggs
 
eggs to a diverse
 
diverse group
of customers,
 
customers, including national
national and regional
 
grocery store chains,
 
chains, club
stores, companies
 
servicing independent supermarkets
 
supermarkets
in
the
U.S.,
food
 
service
distributors,
distributors,
and
 
egg
product
 
consumers
located
primarily
in
 
states
across
 
the southwestern,
 
southwestern,
southeastern, mid-western
and mid-Atlantic
regions
of the U.S.
Our
 
operating
 
results
 
are
 
materially
 
impacted
 
by
 
market
 
prices for
 
eggs
 
and
 
feed
 
grains
 
(corn
 
and
 
soybean
 
meal),
 
which
 
are
highly
 
volatile,
 
independent
 
of
 
each
 
other,
 
and
 
out
 
of
 
our
 
control.
 
Generally,
 
higher
 
market
 
prices
 
for
 
eggs
 
have
 
a
 
positive
impact
 
on
 
our
 
financial
 
results
 
while
 
higher
 
market
 
prices
 
for
 
feed
 
grains
 
have
 
a
 
negative
 
impact
 
on
 
our
 
financial
 
results.
Although we
 
use a
 
variety of
 
pricing mechanisms
 
in pricing
 
agreements with
 
our customers,
 
we sell
 
most of
 
our conventional
shell eggs
 
based on
 
formulas that
 
consider,
 
in varying
 
ways, independently
 
quoted regional
 
wholesale
 
market prices
 
for shell
eggs
or
formulas
related
to
our
costs
of
production
which
include
the
cost
of
corn
and
soybean
 
meal.
 
We
do
not
sell
eggs
directly to consumers or set the prices at which eggs are sold to consumers.
20
Retail
sales
of
shell
eggs
historically
have
been
highest
during
the
fall
and
winter
months
and
lowest
during
the
summer
months. Prices
for shell
eggs fluctuate
in response
to seasonal
demand factors
and a
natural increase
in egg
production during
the
spring
and
early
summer.
Historically,
shell
egg
prices
tend
to
increase
with
the
start
of
the
school
year
and
tend
to
be
highest
prior
to
holiday
periods,
particularly
Thanksgiving,
Christmas
and
Easter.
Consequently,
and
all
other
things
being
equal, we would
expect to experience
lower selling prices, sales
volumes and net
income (and may incur
net losses) in our
first
and
fourth
fiscal
quarters
ending
in
August/September
and
May/June,
respectively.
Because
of
the
seasonal
and
quarterly
fluctuations,
comparisons
of
our
sales
and
operating
results
between
different
quarters
within
a
single
fiscal
year
are
not
necessarily meaningful comparisons.
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
 
purchases
 
several
 
months
 
in
 
advance.
 
Basis
 
is
 
the
difference
 
between the
 
local cash
 
price for
 
grain and
 
the applicable
 
futures price.
 
A basis
 
contract is
 
a common
 
transaction in
the grain
 
market that
 
allows us
 
to lock-in
 
a basis
 
level for
 
a specific
 
delivery period
 
and wait
 
to set
 
the futures
 
price at
 
a later
18
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,
 
agricultural, energy
and trade
policies in
the U.S.
and internationally
 
,
and most recently global
instability that
could disrupt
the Russia-Ukraine war.
supply chain.
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 net losses) in
our first
and
fourth
fiscal
quarters
ending
in
August/September
and
May/June,
respectively.
Because
of
the
seasonal
and
quarterly
fluctuations,
comparisons
of
our
sales
and
operating
results
between
different
quarters
within
a
single
fiscal
year
are
not
necessarily meaningful comparisons.
HPAI
We
are closely
monitoring
the current
outbreak of
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.
and
abroad.
According
to
the
U.S.
Centers
for
Disease Control
and
Prevention,
these
detections
do
not present
an immediate
public
health
concern.
There have
been no positive tests for HPAI
at any Cal-Maine Foods’ owned or contracted production
facility as of December 28, 2022. The
USDA division
of Animal
and Plant
Health Inspection
Service (“APHIS”)
reported on
December 27,
2022 that
approximately
43.3 million commercial
layer hens and 1.0
million pullets have been
depopulated due to HPAI
this year.
We believe
the HPAI
outbreak will
continue to 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
a
LEAP
Market Analytics report dated December
8, 2022, the layer hen inventory
is not projected to exceed this 328 million
mark again
until
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, Massachusetts,
 
and Massachusetts,Colorado,
 
which collectively
 
collectively represent approximately
 
14%16% of
 
the total
 
estimated
U.S.
population,
 
according to
the
2020 U.S. Census,have
 
cage-free legislation went
 
into effect Januarylegislation
 
1, 2022. However,
these laws are subject
to judicial challenge,
and in October 2022 the Supreme Court of the U.S. heard oral argumentscurrently
 
in a case challenging California’s
 
law that requireseffect.
Oregon,
Washington
and
Nevada
have
cage-free
legislation
going into
effect starting
January 1,
2024, which
represents an
additional 5%
of the
total estimated
U.S. population.
Although
salewe do not sell the majority of onlyour eggs in these ten states, these state laws have impacted
egg production practices nationally.
A significant number of
our customers have announced
goals to either exclusively offer
 
cage-free eggs or significantly
increase
the
volume
of
cage-free
egg
sales
in
 
that state. Athe
 
decision in thatfuture,
 
case is expectedsubject
 
next year.in
 
These laws havemost
 
already affected
and, if
upheld,
will
continuecases
 
to
 
affectavailability
 
sourcing,of
 
productionsupply,
affordability
 
and
 
pricingconsumer
demand,
among
other
contingencies.
Our
customers
typically
do
not
commit
to
long-term
purchases
of
specific
quantities or
types
 
of
 
eggs
 
(conventionalwith
us,
and
 
as
 
wella
 
asresult,
 
specialty)it
 
asis
 
the
national
demand
for cage-free
production could
be greater
than the
current supply,
which would
increase the
prices
of cage-free
eggs,
unless more
cage-free production
capacity is constructed.
Likewise, the national
supply for
eggs from
conventional production
could exceed consumer demand which would decrease the prices
of conventional eggs.
A significant number
of our customers
have previously announce
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
focused
 
however,on
adjusting
our
cage-free
production
capacity
with
a
goal
of
meeting
the
future
needs
of
our
customers
in
light
of
changing state requirements
and our
customer’s goals.
As always, we
strive to offer
a product
mix that aligns
with current
and
anticipated
customer
purchase
decisions.
We
are
 
engaging
 
with
 
our
 
customers
 
in
an
effort
to
 
achievehelp
 
athem
 
smooth
transition
in
meetingmeet
 
their
 
announced
 
goals
 
and
needs.
We
 
have
invested
significant
capital
 
in
recent
years
to
acquire
 
and
construct cage-free
facilities, and
 
we expect
our focus
for future
 
expansion will
 
continue to
 
include cage-free
 
facilities. AtOur
 
the
samevolume of
 
time,cage-free egg
 
wesales has
 
continued to
increase
and account for a larger share of our
product mix. Cage-free egg revenue represented approximately
30.4% of our total net shell
egg revenue for the second
quarter of fiscal year 2024.
At the same time, we understand
 
the importance of our continued ability
importance
of
our
continued
ability
to
 
provide
 
conventional
 
eggs
 
in
 
order
 
to
 
provide
 
our
customers
with
a
variety
of
egg
choices
and
to
address
hunger
in
our
customers with a variety of egg choices and to address hunger in our communities.
 
For
 
additional
 
information,
 
see
 
the
 
20222023
 
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.”
21
ACQUISITIONS
During the second
quarter of fiscal
2024,
we acquired
the assets of
Fassio Egg Farms,
Inc. (“Fassio”) related
to its commercial
shell
egg
production
and
processing
business.
The
assets
acquired
included
commercial
shell
egg
production
and
processing
facilities with
a current
capacity of
approximately 1.2
million laying
hens, primarily
cage-free, a
feed mill,
pullets, a
fertilizer
production and composting
operation and land
located in Erda, Utah,
outside Salt Lake
City.
See further discussion
in
of the Notes to Condensed Consolidated Financial Statements included
in this Quarterly Report.
Following
the
end
of the
second
quarter,
we
announced
a definitive
agreement
to
acquire
from
Tyson
Foods,
Inc.
a recently
closed broiler
processing plant,
hatchery
and feed
mill located
in Dexter,
Missouri.
We
expect
to complete
the acquisition
in
our third fiscal quarter and to repurpose the assets for use in egg and egg products production.
HPAI
Outbreaks
of
HPAI
continue
to
occur
in
U.S.
poultry
flocks.
Prior
to
November
2023,
there
were
no
reported
significant
outbreaks
of
HPAI
in
commercial
table
egg
layer
flocks
since
December
2022.
On
January
3,
2024,
the
USDA
division
of
Animal and
Plant Health
Inspection Service
(“APHIS”) reported
that approximately
12.9 million
commercial table
egg layers
and
1.5
million
commercial
table
egg
pullets
have
been
depopulated
as
a
result
of
HPAI
outbreaks
since
the
beginning
of
November 2023.
Cal-Maine
Foods experienced
HPAI
outbreaks
within our
facilities in
Kansas, resulting
in depopulation
of approximately
1.5
million
layers
and
240
thousand
pullets,
or
approximately
3.3%
of
our
total
flock
as
of
December
2,
2023,
subsequent
to
period-end.
Cal-Maine
Foods
believes
that
we
can
mitigate
the
loss
of
production
through
flock
rotations.
Cal-Maine
Foods
remains dedicated
to robust
biosecurity programs
across our
locations;
however,
no farm
is immune
from HPAI.
HPAI
is still
present in the wild bird population
and the extent of possible future
outbreaks, particularly during the
migration seasons, cannot
be predicted.
According to
the U.S.
Centers for
Disease Control
and Prevention,
these detections
do not
present an
immediate
public health
concern. For
additional information,
see the
2023 Annual
Report, Part
II Item
7 “Management’s
Discussion and
Analysis of Financial Condition and Results of Operations – HPAI.”
We
believe the
HPAI
outbreak will
continue to
impact the overall
supply of
eggs until the
layer hen
flock is
fully replenished.
The layer hen
flock five-year average
for the month
of December from
2018 through 2022
is 330.1 million
hens. According
to
the USDA, the U.S. flock
consisted of 321.6 million
layers producing table or
market type eggs as of
December 1, 2023, which
is 2.6% below the five-year average.
EXECUTIVE OVERVIEW
For
the
second
quarter
and
first two
quarters
of
fiscal
2024,
we
recorded
a
gross profit
of
$91.1
million
and
$136.6 million,
respectively,
compared
to
$317.8
million
and
$535.3
million,
respectively,
for
the
same
periods
of
fiscal
2023,
with
the
decreases
due primarily
to lower
conventional shell
egg prices.
The decrease
in gross
profit was
partially offset
by lower
feed
ingredient prices
in the
second quarter
and first
two quarters
of fiscal
2024 compared
to the
same periods
of fiscal
2023. Our
operating
income
and
net
income
for
 
the
 
second
 
quarter
 
of
 
fiscal
 
2023,2024
 
wewere
 
recordedimpacted
by
 
a
 
gross$19.6
 
profitmillion
litigation
loss
contingency accrual for
pending anti-trust litigation,
reflected in selling,
general and administrative
expenses in the
Company’s
Condensed
Consolidated
Statements
 
of
 
$317.8Income
 
millionand
 
comparedclassified
 
toas
 
$43.7accrued
 
millionexpenses
 
forand
other
liabilities
in
 
the
 
sameCompany’s
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.Condensed Consolidated Balance Sheets.
Our net
 
average selling
 
price per
 
dozen for
 
the second
 
quarter of
 
fiscal 20232024
 
was $2.709$1.730
 
compared to
 
$1.3652.709 in
 
the prior-year
period. Conventional
 
egg prices
 
per dozen
 
were $2.883$1.458
 
compared to
 
$1.1512.883 for
 
the prior-year
 
period, and
 
specialty egg
 
prices
per dozen were $2.370
$2.277 compared to $1.898 for
 
$2.370 for the
prior-year period.
Conventional egg prices increased
were lower in
 
the second quarter of
of fiscal
 
2023
primarily
due2024 compared
 
to decreasedthe
prior-year period
as the
U.S. egg
 
supply started
 
causedto recover
 
byfrom outbreaks
of HPAI.
There has
been a
resurgence of
HPAI
starting in
November 2023,
and although
prices rose
in November
2023 they
remained lower
than
comparable 2022
prices. Our net
average selling
price per
dozen for
the first two
quarters of fiscal
2024 was
$1.661 compared
to
$2.469
in
 
the
 
HPAIprior-year
 
outbreak
combined
with
good
customer
demand.
See
the
discussion under the
heading “HPAI”
above. The daily
average price for the
UB southeast large
index for the second
quarter of
fiscal 2023 increased 154.8% from the comparable period
in the prior year, reaching near-record
highs. Conventional egg prices
exceeding
specialty
egg
prices
has
occurred
for
the
past
three
quarters
but
is
atypical
historically.period.
 
Conventional
 
egg
 
prices
generally
 
respondper
 
moredozen
 
quicklywere
$1.353
compared
 
to
 
market$2.631
 
conditions
because
we
sellfor
 
the
 
majorityprior-year
period, and
 
ofspecialty egg
 
ourprices per
 
conventionaldozen were
 
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$2.277 compared
 
to our costs$2.236
for the
prior-year
period. The
daily average
price
for the
Urner Barry
southeast large
index for
the second
quarter of
fiscal 2024
and first
two quarters
 
of production.fiscal
 
The majority2024 decreased
49.6% and 49.2%, respectively,
 
of our specialtyfrom the comparable periods in the
 
eggs are typicallyprior year. For
 
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 20222023 Annual Report.
 
Our total dozens
 
sold increased 5.4%1.4% to
 
284.1288.2 million dozen shell
 
eggs for the second
 
quarter of fiscal 20232024
 
compared to 269.6284.1
million
dozen for
the same
period of
fiscal 2023.
For the
year-to-date
period,
total dozens
sold increased
slightly from
559.4
million
 
dozen
 
forto
 
the561.3
 
samemillion
 
period
of
fiscal
2022.dozen.
 
For
 
the
second
 
quarter
 
of
 
fiscal
 
2023,2024,
 
conventional
 
dozens
 
sold
 
decreasedincreased
2.4%
and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2022
2.2%
and
specialty
dozens
 
sold decreased
 
increased0.4% as
 
24.1%
as compared
to
 
the
same
 
quarter
in
 
fiscal
2022. 2023.
 
Demand
for
 
specialty eggs
 
eggsdecreased in
increased
in
the
 
second
 
quarter
 
of
 
fiscal
 
20232024
 
compared
 
to
 
the
 
same
 
prior
 
year
 
period
 
due
 
primarily
 
to
 
the
 
higherlarge
decrease
in
 
prices
 
for
conventional
 
eggs. Further,
demand for
specialty eggs
 
continued compared
to
 
increase asthe
 
retailers continuedsame
 
to shiftprior
 
to sellingyear
 
cage-free
products and cage-free legislation went into full effect in Californiaperiod.
 
For
the
year-to-date
period,
conventional
dozens
sold
increased
1.7% and Massachusetts on January 1, 2022.specialty dozens sold decreased 2.3% compared to the prior year period.
Our farm
 
production costs
 
per dozen
 
produced for
 
the second
 
quarter and
first two
quarters of
 
fiscal 20232024
 
increased 22.0%decreased 8.0%,
 
or $0.193,
compared to
the second quarter
of fiscal 2022.
This increase was
primarily due to
increased prices for
feed ingredients$0.86, and
 
a higher basis4.6%, or
 
in
corn in
most of
our production
areas,
which added
to our
expense. For
the second
quarter 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%,$0.05, respectively,
 
compared to the average
 
daily CBOT pricesthe prior
 
for the comparableyear periods,
 
period in primarily due
to lower
feed costs.
Feed costs
per
dozen produced decreased 19.1%,
or $0.13, compared to
the priorsecond quarter of fiscal
2023 primarily due to reduced
corn prices,
year. our
primary
feed
ingredient.
For
information
about
 
historical
corn
and
soybean
meal
prices,
see
Part
I
Item
I
of
our 2022
2023
Annual Report.
RESULTS OF
 
OPERATIONS
The
following
 
table
sets
forth,
 
for
the
periods
 
indicated,
certain
 
items
from
 
our
Condensed
Consolidated
 
Statements
of Income
Operations expressed as a percentage of net sales.
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 26,
2022
November 27,
2021December 2, 2023
November 26, 2022
2022December 2, 2023
November 27,
202126, 2022
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
82.6
%
60.4
%
88.586.1
%
63.3
%
92.9Gross profit
17.4
%
Gross profit
39.6
%
11.513.9
%
36.7
%
7.1
%
Selling, general and administrative
14.5
%
7.2
%
12.513.1
%
7.6
%
13.3
%
(Gain) lossLoss on disposal of fixed assets
—
%
(0.5)0.1
%
—
%
(0.3)—
%
—
%
Operating income (loss)
2.8
%
32.4
%
(0.5)0.8
%
29.1
%
(5.9)
%
Total other income, net
0.3
%
0.71.5
%
0.3
%
1.21.6
%
0.3
%
Income (loss) before income taxes
4.3
%
32.7
%
0.22.4
%
29.4
%
(4.7)
%
Income tax expense (benefit)
1.1
%
8.0
%
(0.2)0.6
%
7.1
%
(2.3)Net income
3.2
%
Net income (loss)
24.7
%
0.41.8
%
22.3
%
(2.4)Less: Loss attributable to noncontrolling
interest
(0.1)
%
—
%
(0.1)
%
—
%
Net income attributable to Cal-Maine
Foods, Inc.
3.3
%
24.7
%
1.9
%
22.3
%
NET SALES
Total
 
net
 
sales
for
 
the
 
second
quarter
 
of
 
fiscal
 
20232024
 
were
a
record
$801.7 $523.2
 
million
 
compared
 
to
$381.7 $801.7
 
million
 
for
 
the same
 
sameperiod
of
period of fiscal 2022.2023.
Net shell egg sales represented
 
96.5%96.2% and 97.0%96.5% of total net sales
 
for the second quarters of fiscal
 
20232024 and 2022,2023, respectively.
Shell
egg
sales classified
 
as “Other”
represent
 
sales of hard-cooked
 
eggs and otherof
 
miscellaneous
byproducts
and
resale products
included
 
with our
shell
shell egg operations.
 
Total
 
net
 
sales
 
for
 
the
 
twenty-six
 
weeks
 
ended
 
NovemberDecember
 
26,2,
 
20222023
 
were
 
$1.46982.6
 
billion,million,
 
compared
 
to
 
$706.71.46
 
millionbillion
 
for
 
the
comparable period of fiscal 2022.2023.
Net
 
shell
 
egg
 
sales
 
represented
 
96.2%95.7%
 
and
 
97.1%96.2%
 
of
 
total
 
net
 
sales
 
for
 
the
 
twenty-six
 
weeks
 
ended
 
NovemberDecember
 
26,2,
 
20222023
 
and
November 27, 2021,26, 2022, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2123
The table below presents an analysis of our conventional and specialty shell egg
 
sales (in thousands, except percentage data):
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 26, 2022
November 27, 2021December 2, 2023
November 26, 2022
December 2, 2023
November 27, 202126, 2022
Total net sales
$
523,234
$
801,700
$
381,723982,578
$
1,460,044
Conventional
$
706,709280,599
Conventional55.8
%
$
541,917
70.1
%
$
221,142505,879
59.753.8
%
$
967,506
69.0
%
$
403,172
58.868.9
%
Specialty
217,905
43.3
%
227,778
29.4
%
146,917426,586
39.745.4
%
428,598
30.5
%
279,375
40.7
%
Egg sales, net
498,504
99.1
%
769,695
99.5
%
368,059932,465
99.2
%
1,396,104
99.4
%
1,396,104Other
99.54,718
0.9
%
682,547
99.5
%
Other
3,953
0.5
%
2,2637,878
0.60.8
%
8,248
0.6
%
3,395
0.5
%
Net shell egg sales
$
503,222
100.0
%
$
773,648
100.0
%
$
370,322940,343
100.0
%
$
1,404,352
100.1
%
$
685,942
100.0
%
Net shell egg sales as a
percent of total net sales
96.2
%
96.5
%
97.095.7
%
96.2
%
97.1
%
Dozens sold:
Conventional
192,462
66.8
%
187,976
66.2
%
192,135373,992
71.366.6
%
367,688
65.7
%
376,003Specialty
71.795,711
33.2
%
Specialty
96,110
33.8
%
77,420187,307
28.733.4
%
191,715
34.3
%
148,171
28.3
%
Total dozens sold
288,173
100.0
%
284,086
100.0
%
269,555561,299
100.0
%
559,403
100.0
%
524,174
100.0
%
Net average selling price
per dozen:
Conventional
$
1.458
$
2.883
$
1.1511.353
$
2.631
Specialty
$
1.072
Specialty2.277
$
2.370
$
1.8982.277
$
2.236
$
1.885
All shell eggs
$
1.730
$
2.709
$
1.3651.661
$
2.496
$
1.302
Egg products sales:
 
Egg products net sales
$
20,012
$
28,052
11,401$
42,235
$
55,692
20,767
Pounds sold
16,998
15,702
16,00936,351
32,204
31,278
Net average selling price
per pound
$
1.177
$
1.787
0.712$
1.162
$
1.729
0.664
Shell egg net sales
Second Quarter – Fiscal 20232024
 
vs. Fiscal 20222023
-
In
 
the
 
second
 
quarter
 
of
 
fiscal
 
2023,2024,
 
conventional
 
egg
 
sales
 
increaseddecreased
 
$320.8261.3
 
million,
 
or
 
145.0%48.2%,
 
compared
 
to
 
the
second quarter of
 
of fiscal 2022,2023, primarily
 
primarily due to a 49.4%
 
to the increase
decrease in the price
sprices
 
for conventional shelleggs,
 
eggs, slightlywhich resulted in
a
 
offset by$274.3
million
a
decrease
 
in
net
sales,
partially
offset
by
a
2.4%
increase
in
the
volume
 
of
conventional
 
shell eggs
 
sold. Changes
in prices
resulted in
a $325.6
million increase
and thesold,
change in volumewhich resulted in a $4.8$12.9 million decreaseincrease in net sales, respectively.sales.
-
Conventional egg prices increased in the second
 
quarter of fiscal 2023
primarily due to decreased supply caused by
the
HPAI
outbreak,
discussed
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
eggswere lower in the
 
second quarter
of fiscal
 
2024 compared to the
second quarter of fiscal
 
2023
which
has
occurred
for
as the
 
past
three
quarters
but
is
atypical
historically.
Conventional
U.S. egg
 
prices
generally respondsupply
 
more quicklystarted
 
to marketrecover
 
conditions as
we sell
the majorityfrom outbreaks
 
of ourHPAI.
 
conventional shellThere
 
eggs basedhas been
 
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
costsa resurgence
 
of HPAI
 
production.starting in
November 2023, and although prices rose in November 2023,
 
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.
they remained lower than comparable 2022 prices.
-
Specialty
 
egg
 
sales
 
increaseddecreased
 
$80.99.9
 
million,
 
or
 
55.0%4.3%,
 
in
 
the
 
second
 
quarter
 
of
 
fiscal
 
20232024
 
compared
 
to
 
the
 
second
quarter
 
of
 
fiscal
 
2022,2023,
 
primarily
 
due
 
to
 
a
 
24.9%3.9%
 
increasedecrease
 
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
$35.59.3
million increasedecrease 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 our
higher cage-
free production capacity
and better utilization of that capacity.
-
Cage-free
 
egg
 
salesrevenue
 
for
 
the
 
second
 
quarter
 
of
 
fiscal
 
20232024
 
represented
 
18.2%30.4%
 
of
 
our
 
total
 
net
 
shell
 
egg
 
salesrevenue
versus
 
versus
22.4%18.2%
 
for
 
the
 
same
 
prior
 
year
 
period
 
due
 
to
 
the
 
higherlower
 
conventional
 
egg
 
prices.prices
 
Cage-freecausing
 
dozensconventional
 
soldegg
revenue to represent a smaller proportion of our total sales.
 
increased
47.4% in the second quarter of fiscal 2023 as compared to the second
quarter of fiscal 2022.
Twenty-six weeks –
 
Fiscal 20232024 vs. Fiscal 20222023
-
For
 
the
 
twenty-six
 
weeks
 
ended
 
NovemberDecember
 
26,2,
 
2022,2023,
 
conventional
 
egg
 
sales
 
increaseddecreased
 
$564.3461.6
 
million,
 
or
 
140.0%47.7%,
compared
 
to
the
 
same
 
period
of
 
fiscal
 
2022,2023,
 
primarily
 
due
 
to
 
the
 
increasedecrease
 
in
 
the
 
prices
for
 
conventional
 
shell
 
eggs,eggs.
slightly offsetChanges in
 
by the decreaseprices resulted
 
in the volume
of conventional eggs
sold. Changes
in prices
resulted in a
 
$573.2 million
increase and the change in volume resulted in a $9.0 million decrease in net
sales, respectively.
-
Specialty egg sales
increased $149.2478.0 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
decrease 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 $16.7partially offset
 
million or
146.0% for
the second
quarter of
fiscal 2023
compared to
the same
period of
fiscal 2022,
primarily due
toby a
 
151.0% selling
price1.7% increase
which had
a $16.9
million positive
impact on
net sales.
-
Our
egg
products
net
average
selling
price
increased
in
the
second
quarter
of
fiscal
2023,
compared
to
the
second
quarter of
fiscal 2022
as the
supply of
shell eggs
used to
produce
egg products
decreased
due
to the
HPAI
outbreak
that started in February 2022.
Twenty-six weeks –
Fiscal 2023 vs. Fiscal 2022
-
Egg products
net 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 endedvolume
of conventional eggs sold, which resulted in a $16.6 million increase in net
 
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
second
quarter
of
fiscal
2023
were
$483.9
million
compared
to
$338.0
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.sales.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2324
Egg products net sales
Second Quarter – Fiscal 2024
vs. Fiscal 2023
-
Egg products
net sales
decreased $8.0
million, or
28.7%, for
the second
quarter of
fiscal 2024
compared to
the same
period of
fiscal 2023,
primarily due
to a
34.1% selling
price decrease,
which had
a $10.4
million negative
impact on
net sales.
-
Our
egg
products
net
average
selling
price
decreased
in
the
second
quarter
of
fiscal
2024,
compared
to
the
second
quarter of fiscal 2023 as the supply of shell eggs used to produce egg products
increased.
Twenty-six weeks –
Fiscal 2024 vs. Fiscal 2023
-
Egg products net sales decreased
$13.5 million, or 24.2%, primarily
due to a 32.8% selling price
decrease compared to
the first twenty-six weeks of fiscal 2023, which had a $20.6 million negative
impact on net sales.
COST OF SALES
Costs
of
sales
for
the
second
quarter
of
fiscal
2024
were
$432.1
million
compared
to
$483.9
million
for
the
same
period
of
fiscal 2023. Costs of sales for the year-to-date period were $846.0
million compared to $924.7 million for the prior year period.
The following table presents the key variables affecting our cost of
 
sales (in thousands, except cost per dozen data):
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 26,December 2,
2022
November 27,
2021
%
Change2023
November 26,
2022
%
Change
December 2,
2023
November 27,26,
20212022
%
Change
Cost of Sales:
Farm production
$
276,008258,367
$
221,971276,008
24.3(6.4)
%
$
542,659511,874
$
429,466542,659
26.4(5.7)
%
Processing, packaging, and
and warehouse
84,767
83,639
69,4741.3
20.4166,673
165,056
134,533
22.71.0
Egg purchases and other
(including change in
inventory)
71,654
97,973
36,859(26.9)
165.8132,451
166,271
74,832
122.2(20.3)
Total shell eggs
414,788
457,620
328,304(9.4)
39.4810,998
873,986
638,831
36.8(7.2)
Egg products
17,316
26,231
9,672(34.0)
171.235,017
50,719
17,486
190.1(31.0)
Total
$
483,851432,104
$
337,976483,851
43.2(10.7)
%
$
924,705846,015
$
656,317924,705
40.9(8.5)
%
Farm production costs (per
(per dozen produced)
Feed
$
0.6850.554
$
0.5290.685
29.5(19.1)
%
$
0.6760.575
$
0.5370.676
25.9(14.9)
%
Other
$
0.3860.431
$
0.3490.386
10.611.7
%
$
0.3830.435
$
0.3510.383
9.113.6
%
Total
$
1.0710.985
$
0.8781.071
22.0(8.0)
%
$
1.0591.010
$
0.8881.059
19.3(4.6)
%
Outside egg purchases
(average cost per dozen)
$
3.142.03
$
1.563.14
101.3(35.4)
%
$
2.881.84
$
1.452.88
98.6(36.1)
%
Dozens produced
265,101
261,358
256,786
1.81.4
%
515,457
519,012
493,244
5.2(0.7)
%
Percent produced to sold
92.0%
95.3%92.0%
(3.5)—
%
91.8%
92.8%
94.1%
(1.4)(1.1)
%
Farm Production
Second Quarter – Fiscal 20232024
 
vs. Fiscal 20222023
-
Feed costs per dozen produced decreased 19.1
 
produced increased 29.5% in%
 
in the second quarter of fiscal 2024
 
2023 compared to the
second quarter of
fiscal 2022.
2023.
This increase
decrease
was
primarily
due
to increased
lower
prices
for
corn,
our
primary
 
feed
ingredient.
Basis
levels
for
-corn
and
soybean
meal
were lower
in
our
areas
of operations
compared
to our
prior
year
second
fiscal
quarter.
The
Fordecrease in
feed cost
per dozen
resulted in
a decrease
in cost of
sales of
$34.7 million
for the
 
second quarter
 
of fiscal
2024 compared to the prior period quarter.
25
-
For the second
quarter of fiscal
2024, the average
Chiago Board of
Trade (“CBOT”)
daily market price
was $4.79 per
bushel
for
corn
and
$417
per
ton
of
soybean
meal,
representing
decreases
of
29.3%
and
1.6%,
respectively,
as
compared to the average CBOT daily market prices for the second quarter of
fiscal 2023.
-
Other farm production costs
increased primarily due to
higher flock amortization and facility
costs. Flock amortization
increased primarily
due to
the increased
capitalized value
of our
flocks. This
is primarily
due to
the higher
feed costs
incurred during the growing phase of the flocks.
-
Facility costs
increased
due
primarily
to increased
labor costs.
Labor
costs increased
12.5% compared
to the
second
quarter of fiscal 2023 primarily due to an increase in contract labor in response
to labor shortages.
Twenty-six weeks –
Fiscal 2024 vs. Fiscal 2023
-
Feed
costs per
dozen
produced
decreased
14.9%
in
the
twenty-six
weeks
ended
December
2,
 
2023
compared
to
the
same period of
fiscal 2023, primarily
due to lower
feed ingredient prices.
The decrease in
feed cost per
dozen resulted
in a decrease in cost of sales of $52.1 million compared to the prior year period.
-
For the
 
year-to-date period
,
the average daily
 
CBOT marketdaily
 
market price was
 
$6.78was $5.05 per
 
bushel for
 
corn and $420
 
$423
per ton
 
ton offor
soybean meal,
 
soybean
meal representing
increases decreases
 
of 24.8%
 
and 4.6%,
 
25.5%, respectively,
 
as compared
to
 
the average
 
CBOT daily
market
CBOT prices for the second quarter of fiscal 2022.
comparable period in the prior year.
-
Other
farm
 
production costs
 
costs increased
due
 
to
higher
 
facility
costs
and
 
flock
amortization,
 
primarily fromfor
 
higher feedthe
 
costs,
whichreasons
 
began todescribed
above.
 
rise in
Current
 
our thirdindications
 
quarter offor
 
fiscal 2021corn
 
due toproject
 
increasedan
overall
better
stocks-to-use
ratio
implying
potentially
lower
 
prices discussed
above,
and which
remained
high
 
in
 
the
 
secondnear
 
quarterterm;
however, as long
 
ofas outside factors remain uncertain
 
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(including weather patterns and
 
flock amortization,
primarily from
higher feed
costs,global supply chain disruptions), volatility
which
begancould remain. Soybean meal supply has remained tight relative 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
first two quarters 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.
2024.
Processing, packaging, and warehouse
Second Quarter – Fiscal 20232024
 
vs. Fiscal 20222023
-
Cost ofProcessing, packaging,
 
materials increased 38.3and warehouse
 
%costs increased
 
1.3% compared
to the
 
second quarter of
 
of fiscal 2022
 
2023, primarily
due to rising
 
inflation and
labor costs.
-
Labor costs increased 49.2%to an
 
due to wage increases and increased use of contract labor in response to labor shortagesincrease
 
.
-
Dozensin dozens
 
processed
 
in the
second quarter
of fiscal
2024 compared
to the
second quarter
of fiscal
2023.
Twenty-six weeks –
Fiscal 2024 vs. Fiscal 2023
-
Processing,
packaging,
and
warehouse
costs
increased
 
5.4%1.0%
 
compared
 
to
 
the
 
secondfirst
 
quartertwo
quarters
 
of
 
fiscal
 
2022,2023,
primarily due
 
which
resultedan increase
 
in labor
 
a
$4.0
million
increase in costs.
Twenty-six weeks –
Fiscal 2023 vs. Fiscal 2022
-
Cost
costs of
 
packaging
materials
increased
26.7%
compared
to
the
twenty-six
weeks
ended
November
27,
2021
4.2% due
 
to
rising inflation and labor costs.
-
Labor costs wage
 
increased 30.3%increases in
 
dueresponse to
 
wage increaseslabor shortages,
 
partially offset
by decrease 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.dozens processed.
Egg purchases and other (including change in inventory)
Second Quarter – Fiscal 20232024
 
vs. Fiscal 20222023
-
Costs in this
 
this category increased
 
decreased primarily
due to
 
higher lower shell
egg prices
 
as well asthe
 
an increase inaverage cost
 
the volume ofper dozen
 
of outside
egg
purchases causing the percentagedecreased 35.4% compared to second quarter of produced to sold to decrease to 92.0% fromfiscal 2023
 
95.3%.
Twenty-six weeks –
 
Fiscal 20232024 vs. Fiscal 20222023
-
Costs in this
 
this category increased
 
decreased primarily
due to
 
higher lower shell
egg prices
 
as well asthe
 
an increase inaverage cost
 
the volume ofper dozen
 
of outside
egg
purchases as our percentagedecreased 36.1% compared to fiscal 2023, partially offset
by an increase of produced to sold decreased to 92.8% from 94.1%.13.0% in dozens purchased.
GROSS PROFIT
 
Gross profit
 
for the
 
second quarter
 
of fiscal
 
20232024 was
 
$317.891.1 million
 
compared to
 
$43.7317.8 million
 
for the
 
same period
 
of fiscal
2022.2023.
 
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 NovemberDecember
 
26, 20222, 2023
 
was $535.3$136.6
 
million compared
 
to $50.4$535.3
 
million for
 
the same
period of fiscalsame
 
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
costsperiod
 
of
 
marketing,2023.
 
distribution,The
 
accountingdecrease
 
andfor
 
corporate
overhead. The following table presents an analysis of our SGA expenses (in thousands):
Thirteen Weeksboth
 
Endedperiods
was
primarily
due
to
lower
conventional
egg
prices,
partially
offset
by
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
%lower feed ingredient prices.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2526
Second Quarter – Fiscal 2023SELLING, GENERAL, AND ADMINISTRATIVE
 
vs. Fiscal 2022EXPENSES
Specialty egg expense
-
Specialty eggSelling,
 
expense, which includes
franchise fees, advertisinggeneral,
 
and promotion
administrative
(“SGA”)
expenses
include
 
costs generally
 
aligns with specialty
egg volumes,
which were
up 24.1% for
the second
quarter of
 
fiscal 2023marketing,
 
compared todistribution,
 
the same
period of fiscal
2022.
However, our
specialty egg expense
only increased by
2.9%, primarily due
to increased sales
to other Eggland’s
Best,
Inc. (“EB”) franchisees, including
unconsolidated affiliates, Specialty
Eggs, LLC and Southwest Specialty
Eggs, LLC.
These franchisees were
responsible for the
franchise fees, advertisingaccounting
 
and promotion costs associated
 
with those sales,corporate
which resulted in reduced costs for us.
overhead. The following table presents an analysis of our SGA expenses (in thousands):
Delivery expense
-
The increased delivery 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 approximately $2.6 million
in the second
quarter of fiscal 2023 compared to the second quarter of fiscal 2022.
Twenty-sixThirteen Weeks
 
Ended
December 2, 2023
November 26, 2022
November 27, 2021
$ Change
% Change
Specialty egg expense
$
27,74015,924
$
27,97714,673
$
(237)1,251
(0.8)8.5
%
Delivery expense
38,09117,706
28,33118,175
9,760(469)
34.4(2.6)
%
Payroll, taxes and benefits
24,81411,076
21,24213,827
3,572(2,751)
16.8(19.9)
%
Stock compensation expense
2,0121,061
1,976987
3674
1.87.5
%
Litigation loss contingency accrual
19,648
—
19,648
N.M
Other expenses
18,90211,163
14,77910,290
4,123873
27.98.5
%
Total
$
111,55976,578
$
94,30557,952
$
17,25418,626
18.332.1
%
Twenty-six weeksN.M. – Not Meaningful
Second Quarter – Fiscal 2024
 
Fiscal 2022 vs. Fiscal 20212023
Specialty egg expense
-
Specialty eggDuring the second
 
expense, which includes
franchise fees, advertising
and promotion
costs, generally
aligns with specialty
egg
volumes,
which
were
up
29.4%
for
part of fiscal year
 
2023, the higher
 
compared
to
fiscal
2022.
However,
our
specialty
egg
expense
decreased
by
0.8%,
primarily
due
to
increased
sales
to
other
Eggland’s
Best,
Inc.
(“EB”)
franchisees,
including
unconsolidated affiliates, Specialty
Eggs, LLC and Southwest Specialty
Eggs, LLC. Additionally,
the higher prices for
conventional
 
eggs
and
the
 
comparatively lower prices
lower
prices
for
 
specialty
eggs
 
diminished
 
the
need
 
to
promote
 
specialty
eggs; eggs
 
as.
During the
second quarter
of fiscal
year
2024, we
significantly
increased
promotional
programs,
resulting
in
higher
advertising
fees.
This
was
partially
offset
by
 
a
decrease
 
result,in a reduction in franchise fees to Eggland’s
 
EB
temporarily
reduced
the
related
franchise
fees
for
certain
specialty
egg
products
to
encourage
continued production of these products.
Best, Inc.
 
Delivery expense
-
The increased
decreased
 
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
 
ana
decrease
in
fuel
and
contract
trucking
expenses
in
the
second
quarter of fiscal 2024 compared to the second quarter of fiscal 2023.
Payroll, taxes and benefits expense
-
The decrease
in payroll,
taxes and
benefits expense
is due
to a
decrease
in accrued
bonuses compared
to the
second
quarter of fiscal year 2023.
Litigation loss contingency accrual
-
The
litigation
loss
contingency
accrual
of
$19.6
million
relates
to
a
jury
decision
returned
on
December
1,
2023
in
pending
anti-trust
litigation.
See
further
discussion
in
of
the
Notes
to
Condensed Consolidated Financial Statements included in this Quarterly
Report.
Other expense
-
The
 
increase
 
in
 
other
expense
is
primarily
due
to
increased
legal
costs
incurred
compared
to
the
 
accrualsecond
 
forquarter
 
anticipatedof
performance-based bonusesfiscal 2023.
Twenty-six Weeks
Ended
December 2, 2023
November 26, 2022
$ Change
% Change
Specialty egg expense
$
27,929
$
27,740
$
189
0.7
%
Delivery expense
35,397
38,091
(2,694)
(7.1)
%
Payroll, taxes and benefits
23,142
24,814
(1,672)
(6.7)
%
Stock compensation expense
2,101
2,012
89
4.4
%
Litigation loss contingency accrual
19,648
—
19,648
N.M.
Other expenses
20,607
18,902
1,705
9.0
%
Total
$
128,824
$
111,559
$
17,265
15.5
%
N.M. - Not Meaningful
Twenty-six weeks –
Fiscal 2024 vs. Fiscal 2023
27
Specialty egg expense
-
Specialty egg
expense increased wages for all employees
by 0.7%,
as advertising
expense increased
in fiscal 2024
as discussed above
and was
offset by the reduction in franchise fees to Eggland’s
Best, Inc.
Delivery expense
-
The decreased delivery expense is primarily due to a decrease in fuel
and contract trucking expenses in fiscal 2024.
Payroll, taxes and benefits expense
-
The decrease
in payroll,
taxes and
benefits expense
is primarily
 
due to
a decrease
in accrued
bonuses in
the inflationary market.first
two
quarters of fiscal 2024 compared to the prior year period.
Litigation loss contingency accrual
-
The increase relates to the litigation loss contingency accrual discussed above.
Other expenses
-
The increase in other expense is primarily due to increased legal costs incurred
 
legal expenses of approximately $3.5 million.in the year-to-date period.
OPERATING
 
INCOME (LOSS)
For
the
second
 
quarter
of
fiscal
 
2023,2024,
 
we
recorded
operating
 
income
of
$259.9 $14.2
 
million
compared
 
to
operating
loss income
 
of
$2.1 $259.9
million for the same period of fiscal 2022.
262023.
For
the
twenty-six
 
weeks ended December
 
ended
November
26,
2022,
2, 2023, we
recorded
 
an
operating
income
 
of
$423.7
$7.5 million
 
compared
to
an operating
operating lossincome of $41.7$423.7 million for the same period of fiscal 2022.2023.
OTHER INCOME (EXPENSE)
 
Total
 
other
 
income
 
(expense)
 
consists
 
of
 
items
 
not
 
directly
 
charged
 
or
 
related
 
to
 
operations,
 
such
 
as
 
interest
 
income
 
and
expense, royalty income, equity income or loss of unconsolidated
 
entities, and patronage income, among other items.
For the
second quarter
of fiscal 2023,
 
we earned $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, 2022,2024,
 
we earned
 
$3.17.1 million
 
of interest
 
income compared
 
to $497$2.1
 
million for
the
 
the same
 
period
of
 
fiscal
 
2022.2023.
 
The
 
increase
 
resulted
 
from
 
significantly
 
higher
 
investment
 
balances.balances
and
higher
interest
rates.
 
The
 
Company
recorded
recorded interest expense
 
of $291
$134 thousand and
 
$136143 thousand
for the
 
twenty-six weekssecond quarters ended December
 
ended2, 2023 and November
26, 2022,
and November
27,
2021, respectively.
Other,
net for
the second
quarter ended
November 26,
2022, was
income
of $1.1
million compared
to income
of $1.9
million
for the same period of fiscal 2022.
Other, net for
For the twenty-six weeks ended NovemberDecember 2, 2023, we earned
 
26, 2022, was$14.6 million of interest income of $1.3
million compared to income of $7.0
$3.1 million
for the
same period
 
of fiscal
 
2022.2023. The
 
majority ofincrease resulted
 
the decreasefrom significantly
 
is duehigher investment
 
to ourbalances and
 
acquisition inhigher interest
 
fiscal 2022rates. The
Company
 
of the
remaining 50%
membershiprecorded
 
interest
 
in
Red
River
Valley
Egg
Farm,
LLC
(“Red
River”)
as
we
recognized
a
$4.5
million
gain
due
to
the
remeasurementexpense
 
of $276
 
ourthousand
 
equityand $291
 
investment,thousand
 
along
withfor
 
the
 
$1.4twenty-six
 
millionweeks
 
paymentended
 
receivedDecember 2,
 
in
fiscal
2022
related
to
review
and2023
adjustment of our various marketing agreements.and November 26, 2022, respectively.
INCOME TAXES
For
the
 
second
quarter
 
of
fiscal
 
2023,2024,
 
pre-tax
income
 
was $262.2$22.1
 
million
 
compared
to
 
$468 thousand262.2
million
 
for
the
 
same
period
 
of
fiscal 2022.2023.
 
We
 
recorded income
 
tax expense
 
of $64$5.5
 
million for
 
the second
 
quarter of
 
fiscal 2023,2024,
 
which reflects
 
an effective
tax
rate
 
of
24.4% 25.0%.
 
We
recorded
an
income
Income tax
 
benefitexpense was $64.0
 
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
$427.7 million
compared to
a pre-tax
loss of
$33.4
million for
 
the samecomparable
 
period of fiscal
 
fiscal 2022.
We
recorded income
tax expense
of $104.3
million2023, which
 
reflects an
effective tax
rate
of
24.4%.
We
recorded an
income
tax benefit
of $16.5
million
in
the prior
year
period,
which
includes
the discrete
tax
benefit of $8.3
million in connection
with the Red
River acquisition.
Excluding the discrete
tax benefit, income
tax benefit for
the comparable period of fiscal 2022 was $8.2 million with an adjusted
effective tax rate of 24.6%24.4%.
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
 
our
noncontrolling interest.
NET INCOME ATTRIBUTABLE
 
TO CAL-MAINE FOODS, INC.
Net
income
attributable
to
Cal-Maine
Foods,
Inc.
for
the
second
quarter
ended
November
26,
2022,
was
$198.6
million,
or
$4.08
per
basic
and
$4.07
per
diluted
common
share,
compared
to
net
income
attributable
to
Cal-Maine
Foods,
Inc.
of
$1.2
million or $0.02 per basic and diluted common share for the same period of
fiscal 2022.
Net income
 
attributable to
 
Cal-Maine Foods,
 
Inc. for the
second quarter
ended December 2,
2023, was
$17.0 million,
or $0.35
per basic and
diluted common share,
compared to net
income attributable to
Cal-Maine Foods, Inc.
of $198.6 million,
or $4.08
per basic and $4.07 per diluted common share for the same period of fiscal
2023.
28
Net income attributable to
Cal-Maine Foods, Inc. for the
twenty-six weeks ended December 2,
2023, was $17.9 million, or
$.37
per basic
and diluted
common share,
compared to
net income
attributable to
Cal-Maine Foods,
Inc. of
$323.9 million
or $6.66
per basic and $6.63 per diluted common share, for the same period of fiscal 2023.
LIQUIDITY AND CAPITAL
RESOURCES
Working
Capital and Current Ratio
Our working
capital at
December 2,
2023 was $910.1
million, compared
to $942.2
million at
June 3,
2023. The
calculation of
working
capital
is defined
as current
assets less
current
liabilities. Our
current
ratio
was 6.9
at December
2, 2023,
compared
with 6.2 at June 3, 2023. The current ratio is calculated by dividing current
assets by current liabilities.
Cash Flows from Operating Activities
For the twenty-six weeks
ended December 2, 2023,
$74.0 million in net cash
was provided by operating
activities, compared to
$344.8
million
provided
by
operating
activities
for
the
comparable
period
in
fiscal
2023.
The
decrease
in
cash
flow
from
operating activities resulted primarily from lower selling prices for
conventional eggs compared to the prior-year period.
Cash Flows from Investing Activities
For
the
twenty-six
weeks
ended
December
2,
2023,
$32.4
million
was
provided
by
investing
activities,
primarily
due
to
the
sales
and
maturities
of
investment
securities,
partially
offset
by
the
acquisition
of
assets
of
Fassio
Egg
Farms,
Inc.
This
compares
to
$146.7
million
used
in
investing
activities
in
the
same
period
of
fiscal
2023,
primarily
due
to
purchases
of
investment
securities.
Sales
and
maturities
of
investment
securities
were
$196.1
million
in
first
two
quarters
of
fiscal
2024,
compared to
$65.3 million
in the
first two
quarters fiscal
2023. The
increase in
sales and
maturities of
investment securities
is
primarily
due
to the
maturities of
short-term
investments
during
the period.
Purchases of
property,
plant and
equipment were
$66.2 million
and $59.7 million
in the first
two quarters
of fiscal 2024
and 2023,
respectively,
primarily reflecting
progress on
our construction projects.
Cash Flows from Financing Activities
We
paid dividends
of $37.3
million for
 
the twenty-six
 
weeks ended
 
November 26,December 2,
 
2022, was2023 compared
 
$323.9 million,to $78.4
 
or
$6.66 permillion in
 
basic andthe same
prior-year period.
As of December 2, 2023, cash
 
$6.63 perincreased $69.0 million since June
 
diluted share,
3, 2023, compared to
net loss an increase
 
of $16.9$119.6 million during
 
million or
$0.34 per
basic and
diluted share
for the
same period of fiscal 2022.2023.
Credit Facility
We
had no
long-term debt
outstanding at
December 2,
2023 or
June 3,
2023. On
November 15,
2021, we
entered into
a credit
agreement
that
provides
for
a
senior
secured
revolving
credit facility
(the
“Credit
Facility”),
in
an
initial
aggregate
principal
amount
of
up
to
$250
million
with
a
five-year
term.
As
of
December
2,
2023,
no
amounts
were
borrowed
under
the
Credit
Facility. We
have $4.3 million
in outstanding standby
letters of credit issued
under our Credit
Facility for the
benefit of certain
insurance companies.
Refer to
Part II
Item 8,
Notes to
Consolidated
Financial Statements
and Supplementary
Data, Note
10 -
Credit Facility included in our 2023
Annual Report for further information regarding our long-term debt.
Dividends
In
accordance
with
our
variable
dividend
policy,
we
will
pay
a
cash
dividend
totaling
approximately
$5.7
million,
or
approximately $0.116
per share to holders
of our common
and Class A common
stock with respect
to our second
fiscal quarter
of 2024.
The amount
paid per
share will
vary based
on the
number of
outstanding
shares on
the record
date. The
dividend is
payable on February 15, 2024 to holders of record on January 31, 2024.
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 their
announced timelines
for cage-free
egg sales.
The following
table presents
material construction
projects approved as of December 2, 2023 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
27
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
and
processing,
packaging
and
warehouse
costs
compared to the prior-year period..
Cash Flows from Investing Activities
We
continue
to invest
in our
facilities,
with
$59.7
million used
to purchase
property,
plant
and
equipment
for
the
twenty-six
weeks ended November
26, 2022, compared
to $28.6 million in
the same period of
fiscal 2022.
Purchases of investments were
$152.4
million
in
the
second
quarter
of
fiscal
2023,
compared
to
$26.4
million
in
fiscal
2022.
The
increase
in
purchases
of
investments is primarily due to the increased cash provided by operating
activities noted above.
Cash Flows from Financing Activities
We
paid dividends of
$78.4 million for the
twenty-six weeks ended
November 26, 2022 compared
to no dividends for
the prior
year period.
As of
November 26,
2022, cash
increased $119.6
million since
May 28,
2022, compared
to a decrease
of $41.9
million during
the same period of fiscal 2022.
Credit Facility
We
had
no
long-term
debt
outstanding
at
November
26,
2022
or
May
28,
2022.
On
November
15,
2021,
we
entered
into
a
credit
agreement
that
provides
for
a
senior
secured
revolving
credit
facility
(the
“Credit
Facility”),
in
an
initial
aggregate
principal amount
of up to
$250 million with
a five-year
term. As of
November 26, 2022,
no amounts were
borrowed under
the
Credit Facility.
We
have $4.1 million
in outstanding standby
letters of credit,
issued under our
Credit Facility for
the benefit of
certain insurance
companies. Refer
to Part
II Item
8, Notes
to the
Financial Statements,
Note 10
– Credit
Facility included
in
our 2022 Annual Report for further information regarding our long-term
debt.
Material Cash Requirements
We
continue
to
monitor
the
increasing
demand
for
cage-free
eggs
and
to
engage
with
our
customers
in
efforts
to
achieve
a
smooth transition
toward their
announced timelines
for cage-free
egg sales.
The following
table presents
material construction
projects approved as of November 26, 2022 (in thousands):29
Project(s) Type
Projected
 
Completion
Projected Cost
Spent as of November
26, 2022December 2, 2023
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
FacilityHouses
Fiscal 20232025
$54,702
131,93236,370
117,05618,332
14,876Feed Mill
Fiscal 2025
10,486
2,486
8,000
Cage-Free Layer & Pullet Houses
Fiscal 20232026
24,64078,982
23,32559,000
1,31519,982
Cage-Free Layer & Pullet Houses
Fiscal 20242027
42,59156,732
2,05729,334
40,534
Cage-Free Layer & Pullet Houses
Fiscal 2025
95,806
22,526
73,28027,398
$
294,969200,902
$
164,964127,190
$
130,00573,712
We believe our
 
current cash balances, investments, cash flows from operations, and Credit Facility will be sufficient
 
to fund our
current cash needs for at least the 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.
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
20222023 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
 
twenty-sixthirteen weeks ended November 26, 2022December 2, 2023 from
from the information provided in Part II Item 7A, Quantitative and Qualitative Disclosures About
 
Disclosures About Market Risk in our 20222023 Annual
Annual Report.
ITEM 4.
 
CONTROLS
AND
PROCEDURES
Disclosure Controls and Procedures
Our disclosure
 
controls and
 
procedures are
 
designed to
 
provide reasonable
 
assurance that
 
information required
 
to be
 
disclosed
by us in the reports
 
we file or submit
 
under the Exchange Act
 
is recorded, processed, summarized
 
and reported, within the
 
time
periods
 
specified
 
in
 
the
 
Securities and
 
Exchange
 
Commission’s
 
rules
 
and
 
forms. Disclosure
 
controls
 
and
 
procedures
 
include,
without limitation, controls and
 
procedures designed to ensure that
 
information required to be disclosed
 
by us in the reports that
we file or submit
 
submit under the Exchange
 
Exchange Act is accumulated and
 
and communicated to management,
 
management, including our principal
 
principal executive
and
 
principal
 
financial
 
officers,
 
or
 
persons
 
performing
 
similar
 
functions,
 
as
 
appropriate
 
to
 
allow
 
timely
 
decisions
 
regarding
required disclosure. Based on an evaluation of our disclosure controls
 
controls and procedures conducted by our Chief Executive Officer
and
 
Chief
 
Financial
 
Officer,
 
together
 
with
 
other
 
financial
 
officers,
 
such
 
officers
 
concluded
 
that
 
our
 
disclosure
 
controls
 
and
procedures were effective as of November 26, 2022December 2, 2023 at the reasonable
 
assurance level.
Changes in Internal Control Over Financial Reporting
There was
no change
 
in our
internal control
 
over financial reporting
 
reporting that
occurred during the
 
the quarter ended November
 
26, 2022ended December
2, 2023
that has materially affected, or is reasonably likely to materially affect,
 
our internal control over financial reporting.
 
 
 
 
 
 
 
 
 
 
 
 
 
2930
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
 
20222023
 
Annual
Report,
 
Part
 
I
 
Item
 
3
 
Legal
 
Proceedings,
 
and
 
Part
 
II
 
Item 8,
 
Notes
 
to
 
Consolidated
 
Financial
 
Statements
 
and
 
Supplementary
Data,
Note
 
18: 16
-
Commitments
 
and
Contingencies,
 
and
(ii)
 
in
this
Quarterly
 
Report
in
of
the
Notes
to
Condensed
Consolidated
Financial
Statements,
which
discussions
are
incorporated
 
herein
by
reference.
ITEM 1A.
 
RISK
FACTORS
There have
been no
material changes
in the risk
factors previously
disclosed in the
 
the Company’s 2022
2023 Annual
 
Report.Report, except
as
reported herein in Part I Item 2 under the heading “HPAI.”
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
 
PROCEEDS
 
There were no purchases of Common Stock made by or
 
no purchaseson behalf of our Company or any affiliated purchaser
 
of our
Common Stock
made by
or on
behalf of
our Company
or any
affiliated
purchaser during
the second
second quarter of fiscal 2023.2024.
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.
 
 
3031
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:
 
December 28, 2022January 3, 2024
/s/ Max P.
 
Bowman
Max P.
 
Bowman
Vice President, Chief Financial
 
Officer
(Principal Financial Officer)
໿
Date:
 
December 28, 2022January 3, 2024
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)
໿