1
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington,
 
DC
 
20549
FORM
10-Q
 
☑
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
 
Act of 1934
For the quarterly period ended
February 25,December 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
44,185,77444,182,613
 
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 March 28, 2023.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)
 
February 25,
December 2, 2023
May 28, 2022June 3, 2023
Assets
Current assets:
Cash and cash equivalents
$
221,614361,783
$
59,084292,824
Investment securities available-for-sale
423,418206,045
115,429355,090
Trade and other receivables, net
206,920165,391
177,257120,247
Income tax receivable
42,94733,771
42,14766,966
Inventories
290,869287,270
263,316284,418
Prepaid expenses and other current assets
7,5999,673
4,2865,380
Total current
 
assets
1,193,3671,063,933
661,5191,124,925
Property, plant &
 
equipment, net
712,512815,468
677,796744,540
Investments in unconsolidated entities
16,14614,370
15,53014,449
Goodwill
44,00645,776
44,006
Intangible assets, net
16,48417,074
18,13115,897
Other long-term assets
9,96810,184
10,50710,708
Total Assets
$
1,992,4831,966,805
$
1,427,4891,954,525
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
138,61798,144
$
122,33182,590
Accrued wages and benefits
20,164
38,733
Accrued income taxes payable
66,7238,445
25,6878,288
Dividends payable
107,7205,682
36,65637,130
Accrued expenses and other liabilities
21,352
15,990
Total current
 
liabilities
313,060153,787
184,674182,731
Other noncurrent liabilities
9,71530,571
10,2749,999
Deferred income taxes, net
134,820158,483
128,196152,212
Total liabilities
457,595342,841
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
70,97774,214
67,98972,112
Retained earnings
1,497,3251,583,071
1,065,8541,571,112
Accumulated other comprehensive loss, net of tax
(3,067)(1,614)
(1,596)(2,886)
Common stock in treasury at cost –
26,07526,078
 
shares at February 25,December 2, 2023 and
26,12126,077
shares at May 28, 2022June 3, 2023
(29,996)(30,014)
(28,447)(30,008)
Total Cal-Maine Foods,
 
Inc. stockholders’ equity
1,535,9901,626,408
1,104,5511,611,081
Noncontrolling interest in consolidated entity
(1,102)(2,444)
(206)(1,498)
Total stockholders’
 
equity
1,534,8881,623,964
1,104,3451,609,583
Total Liabilities and Stockholders’
 
Equity
$
1,992,4831,966,805
$
1,427,4891,954,525
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
 
Thirteen Weeks
 
Ended
Thirty-nineTwenty-six Weeks
Ended
February 25,December 2, 2023
FebruaryNovember 26, 2022
February 25,December 2, 2023
FebruaryNovember 26, 2022
Net sales
$
997,493523,234
$
477,485801,700
$
2,457,537982,578
$
1,184,1951,460,044
Cost of sales
534,467432,104
385,903483,851
1,459,172846,015
1,042,221924,705
Gross profit
463,02691,130
91,582317,849
998,365136,563
141,974535,339
Selling, general and administrative
58,48976,578
52,68657,952
170,048128,824
146,991111,559
Gain on insurance recoveries
(3,220)
(1,095)
(3,220)
(3,225)
(Gain) lossLoss on disposal of fixed assets
(26)318
42129
36262
37062
Operating income (loss)
407,78314,234
39,570259,868
831,5017,477
(2,162)423,718
Other income (expense):
Interest income, net
6,1266,987
791,930
8,95914,333
4402,833
Royalty income
426301
326344
1,198650
877
Patronage dividends
10,239
10,120
10,239
10,120772
Equity income (loss) of unconsolidated
entities
1,78629
1,809(987)
943(441)
2,208(843)
Other, net
(1,473)567
1,1441,113
(205)832
8,1691,268
Total other income, net
17,1047,884
13,4782,400
21,13415,374
21,8144,030
Income before income taxes
424,88722,118
53,048262,268
852,63522,851
19,652427,748
Income tax expense (benefit)
102,1185,540
13,59463,974
206,4385,862
(2,921)104,320
Net income
322,76916,578
39,454198,294
646,19716,989
22,573323,428
Less: Loss attributable to noncontrolling
interest
(450)(431)
(63)(293)
(896)(946)
(91)(446)
Net income attributable to Cal-Maine Foods,
Foods, Inc.
$
323,21917,009
$
39,517198,587
$
647,09317,935
$
22,664323,874
Net income per common share:
Basic
$
6.640.35
$
0.814.08
$
13.310.37
$
0.466.66
Diluted
$
6.620.35
$
0.814.07
$
13.250.37
$
0.466.63
Weighted average
 
shares outstanding:
Basic
48,65348,690
48,88648,624
48,63448,691
48,88848,624
Diluted
48,84248,866
49,03648,840
48,83248,854
49,03548,827
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
Comprehensive Income
(In thousands)
(Unaudited)
Thirteen Weeks
 
Ended
Thirty-nineTwenty-six Weeks
Ended
February 25,December 2, 2023
FebruaryNovember 26, 2022
February 25,December 2, 2023
FebruaryNovember 26, 2022
Net income
$
322,76916,578
$
39,454198,294
$
646,19716,989
$
22,573323,428
Other comprehensive income (loss), before
tax:
Unrealized holding gain (loss) on available-
for-sale securities, net of reclassification
adjustments
26895
(551)(974)
(1,945)1,681
(1,130)(1,971)
Income tax benefit (expense) related to
items of other comprehensive income
(6)(218)
134237
474(409)
275480
Other comprehensive income (loss), net of tax
20677
(417)(737)
(1,471)1,272
(855)(1,491)
Comprehensive income
322,78917,255
39,037197,557
644,72618,261
21,718321,937
Less: Comprehensive loss attributable to the
noncontrolling interest
(450)(431)
(63)(293)
(896)(946)
(91)(446)
Comprehensive income attributable to Cal-
Maine Foods, Inc.
$
323,23917,686
$
39,100197,850
$
645,62219,207
$
21,809322,383
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Thirty-nine
Twenty-six Weeks
Ended
February 25,December 2, 2023
FebruaryNovember 26, 2022
Cash flows from operating activities:
Net income
$
646,19716,989
$
22,573323,428
Depreciation and amortization
53,19839,394
50,99634,729
Deferred income taxes
7,0985,862
(3,861)
Gain on insurance recoveries
(3,220)
(3,225)
Net proceeds from insurance settlement - business interruption
3,220
—(540)
Other adjustments, net
1611,407
(45,659)(12,830)
Net cash provided by operations
706,50973,652
20,824344,787
Cash flows from investing activities:
Purchases of investment securities
(442,583)(43,569)
(47,135)(152,365)
Sales and maturities of investment securities
132,686196,104
76,37765,279
Investment in unconsolidated entities
(1,673)
(3,000)
Distributions from unconsolidated entities(363)
—
400
Acquisition of business net of cash acquired
(53,746)
—
(44,823)
Purchases of property,
 
plant and equipment
(86,168)(65,774)
(49,170)
Net proceeds from insurance settlement - property,
plant and equipment
—
5,380(59,709)
Net proceeds from disposal of property,
 
plant and equipment
118150
66192
Net cash used inprovided by (used in) investing activities
(397,620)32,802
(61,310)(146,703)
Cash flows from financing activities:
Payments of dividends
(144,559)(37,276)
—(78,394)
Purchase of common stock by treasury
(1,633)(5)
(1,120)(45)
Principal payments on finance lease
(167)(214)
(160)
Contributions
—
3(94)
Net cash used in financing activities
(146,359)(37,495)
(1,277)(78,533)
Net change in cash and cash equivalents
162,53068,959
(41,763)119,551
Cash and cash equivalents at beginning of period
59,084292,824
57,35259,084
Cash and cash equivalents at end of period
$
221,614361,783
$
15,589178,635
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 February 25,December 2, 2023 and FebruaryNovember 26, 2022 included
13 weeks
 
and
3926 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
 
incomeCondensed Consolidated Statements of Income.
The cost
 
until
realized.
The
total
of
other
comprehensive
income
basis for
 
the
period
is
presented
as
a
component
of
stockholders’
equity
separately
from
retained
earningsrealized gains
 
and losses
 
additional
paid-in
capital. The
Company regularly
evaluates changes
to the
rating of
its debton available-for-sale
 
securities byis
 
credit agencies
and economic
conditions to assess and record any expected credit losses through
the allowance for credit losses, limited to the amount that fair
value
was
less
than
the
amortized
cost
basis.
The
cost
basis
for
realized
gains
and
losses
on
available-for-sale
securities
is
determined by
 
the specific
 
identification method.
Gains
 
Gains and
 
losses
are
 
recognized
in
 
other
income
 
(expenses)
as
 
Other,
 
net
in
the
the
Company’s
 
Condensed Consolidated Statements
of Income.
Investments in mutual
funds are classified
as “Other long-term
assets” in the Company’s Condensed
 
Consolidated Balance Sheets.
Statements of Income. Interest and dividends on securities classified as available-for-sale
are recorded in interest income.
Trade Receivables
 
Trade receivables are stated at their carrying
 
values, which include a reserve for credit losses. As of FebruaryDecember
 
25,2, 2023 and MayJune
28,3,
 
2022,2023,
 
reserves
 
for
 
credit
 
losses
 
were
 
$
709536
 
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):
December 2, 2023
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
6,141
$
—
$
108
$
6,033
Commercial paper
2,791
—
2
2,789
Corporate bonds
98,202
—
535
97,667
Certificates of deposits
1,125
—
6
1,119
US government and agency obligations
88,470
—
116
88,354
Asset backed securities
10,045
38
—
10,083
Total current
investment securities
$
206,774
$
38
$
767
$
206,045
Mutual funds
$
2,190
$
—
$
24
$
2,166
Total noncurrent
investment securities
$
2,190
$
—
$
24
$
2,166
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
to shareholders of record on the 65th day after the
quarter end. Dividends are payable on the 15th day following
the record date.
Following a quarter for which the Company does not report net income
attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend
for a subsequent profitable
quarter until the Company
is profitable on a cumulative
basis computed from the
date of the most recent quarter for which a dividend was paid.
New Accounting Pronouncements and Policies
No new accounting pronouncement issued or effective
during the fiscal year had or is expected to have a material impact on
our
Consolidated Financial Statements.
Reclassification
Certain
reclassifications
were
made
to
the
fiscal
2022
financial
statements
to
conform
to
the
fiscal
June 3, 2023
financial
statement
presentation. These reclassifications had no effect on
income.
Note 2 - Investment
Securities
The following represents the Company’s
investment securities as of February 25, 2023 and May 28, 2022 (in
thousands):
February 25, 2023
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
21,158
$
—
$
275
$
20,883
Commercial paper
95,612
—
122
95,490
Corporate bonds
138,004
—
1,664
136,340
US government and agency obligations
94,941
—
299
94,642
Asset backed securities
15,132
—
227
14,905
Treasury bills
61,215
—
57
61,158
Total current
investment securities
$
426,062
$
—
$
2,644
$
423,418
Mutual funds
$
2,162
$
—
$
136
$
2,026
Total noncurrent
investment securities
$
2,162
$
—
$
136
$
2,026
May 28, 2022
Amortized
 
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
10,13616,571
$
—
$
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
 
and maturities of investment
 
securities available-for-sale
 
were $
132.7196.1
 
million and $
76.465.3
 
million during the
thirty-ninetwenty-six weeks ended December 2, 2023
 
and November 26, 2022, respectively.
Gross realized gains for the twenty-six
weeks
ended February 25,December 2, 2023 and November
26, 2022 were $
7
thousand and $
2
thousand, respectively.
Gross realized losses for the
twenty-six
weeks ended
December 2,
 
2023 and
 
FebruaryNovember 26,
 
2022 respectively.were
 
Gross realized
gains for
the thirty-nine
weeks
ended February
25, 2023
and February
26, 2022
were $
388
 
thousand and
 
$
181
thousand, respectively.
Gross realized
losses for
the thirty-nine weeks ended February 25, 2023 and
February 26, 2022 were $
64
thousand and $
6763
 
thousand, respectively.
 
There
were
no
 
allowances for credit losses at February 25,December 2, 2023 and May 28, 2022.June 3, 2023.
9
Actual maturities
 
may differ
 
from contractual
 
maturities as some
 
borrowers have
 
the right to
 
call or prepay
 
obligations with
 
or
without penalties. Contractual maturities of current investments at FebruaryDecember
 
25,2, 2023 are as follows (in thousands):
Estimated Fair Value
Within one year
$
345,765145,788
1-5 years
77,65360,257
Total
$
423,418206,045
Noncurrent
 
Proceeds from sales and maturities of noncurrent investment securities
were $
1.8
million and $
4.9
million during the thirty-nine
weeks
ended
February
25,
2023
and
February
26,
2022,
respectively.
Gross
realized
gains
for
the
thirty-nine
weeks
ended February 25,
2023 and February
26, 2022
were $
6
thousand and
$
2.2
million, respectively.
Gross realized
losses for
the
thirty-nine
weeks
ended February
25,
2023
were
$
66
thousand.
There
were
no
 
realizedsales of
 
lossesnoncurrent investment
 
forsecurities during
 
the
thirty-nine twenty-six
 
weeks ended
December 2,
2023 and
November
ended February 26, 2022.
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.
Lease obligations:
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 carrying fair
value of the Company’s lease obligations
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 at its present value which approximates fair value.
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1013
Assets and Liabilities Measured at Fair
Value
on a Recurring Basis
In
accordance
with
the
fair
value
hierarchy
described
above,
the
following
table
shows
the
fair
value
of
financial
assets and
liabilities measured at fair value on a recurring basis as of February 25, 2023 and May 28,
2022 (in thousands):
February 25, 2023
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
20,883
$
—
$
20,883
Commercial paper
—
95,490
—
95,490
Corporate bonds
—
136,340
—
136,340
US government and agency obligations
—
94,642
—
94,642
Asset backed securities
—
14,905
—
14,905
Treasury bills
—
61,158
—
61,158
Mutual funds
2,026
—
—
2,026
Total assets measured at fair
value
$
2,026
$
423,418
$
—
$
425,444
May 28, 2022
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
10,104
$
—
$
10,104
Commercial paper
—
14,868
—
14,868
Corporate bonds
—
73,684
—
73,684
Certificates of deposits
—
1,245
—
1,245
US government and agency obligations
—
2,209
—
2,209
Asset backed securities
—
13,319
—
13,319
Mutual funds
3,752
—
—
3,752
Total assets measured at fair
value
$
3,752
$
115,429
$
—
$
119,181
Investment
securities
–
available-for-sale
classified
as Level
2
consist
of
securities
with maturities
of
three
months
or longer
when purchased. We
classified these securities as
current because amounts
invested are readily available
for current operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
Note 4 - Inventories
Inventories consisted of the following as of February 25, 2023 and
May 28, 2022 (in thousands):
February 25, 2023
May 28, 2022
Flocks, net of amortization
$
158,209
$
144,051
Eggs and egg products
27,925
26,936
Feed and supplies
104,735
92,329
$
290,869
$
263,316
We
grow
and
maintain
flocks
of
layers
(mature
female
chickens),
pullets
(female
chickens,
under
18
weeks
of
age),
and
breeders (male and female
chickens used to produce
fertile eggs to hatch for
egg production flocks). Our
total flock at February
25, 2023
and May
28, 2022
consisted of
approximately
9.9
million and
11.5
million pullets
and breeders
and
43.3
million and
42.2
million layers, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
Note 5 - Equity
The following reflects
equity activity for the
thirteen and thirty-nine
weeks ended February 25,
2023 and February 26,
2022 (in
thousands):
Thirteen Weeks
 
Ended February 25, 2023
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at November
26, 2022
$
703
$
48
$
(28,496)
$
70,005
$
(3,087)
$
1,281,784
$
(652)
$
1,320,305
Other comprehensive
income, net of tax
—
—
—
—
20
—
—
20
Stock compensation
plan transactions
—
—
(1,500)
972
—
—
—
(528)
Dividends ($
2.199
per share)
Common
—
—
—
—
—
(97,123)
—
(97,123)
Class A common
—
—
—
—
—
(10,555)
—
(10,555)
Net income (loss)
—
—
—
—
—
323,219
(450)
322,769
Balance at February
25, 2023
$
703
$
48
$
(29,996)
$
70,977
$
(3,067)
$
1,497,325
$
(1,102)
$
1,534,888
Thirteen Weeks
Ended February 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at NovemberMay 28,
27, 20212022
$
703
$
48
$
(27,450)(28,495)
$
66,01969,017
$
(996)(2,350)
$
959,1241,149,399
$
(25)(359)
$
997,4231,187,963
Other comprehensive
loss, net of tax
—
—
—
—
(417)(737)
—
—
(417)(737)
Stock compensation
plan transactions
—
—
(989)(1)
890988
—
—
—
(99)987
Dividends ($
0.1251.353
per share)
Common
—
—
—
—
—
(5,518)(59,708)
—
(5,518)(59,708)
Class A common
—
—
—
—
—
(600)(6,494)
—
(600)(6,494)
Net income (loss)
—
—
—
—
—
39,517198,587
(63)(293)
39,454198,294
Balance at FebruaryNovember
26, 2022
$
703
$
48
$
(28,439)(28,496)
$
66,90970,005
$
(1,413)(3,087)
$
992,5231,281,784
$
(88)(652)
$
1,030,2431,320,305
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
12
Thirty-nine Weeks Ended
February 25, 2023
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 28,
2022
$
703
$
48
$
(28,447)
$
67,989
$
(1,596)
$
1,065,854
$
(206)
$
1,104,345
Other comprehensive
loss, net of tax
—
—
—
—
(1,471)
—
—
(1,471)
Stock compensation
plan transactions
—
—
(1,549)
2,988
—
—
—
1,439
Dividends ($
5.756
per share)
Common
—
—
—
—
—
(194,478)
—
(194,478)
Class A common
—
—
—
—
—
(21,144)
—
(21,144)
Net income (loss)
—
—
—
—
—
647,093
(896)
646,197
Balance at February
25, 2023
$
703
$
48
$
(29,996)
$
70,977
$
(3,067)
$
1,497,325
$
(1,102)
$
1,534,888
Thirty-nine Weeks Ended
February 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 29,28,
20212022
$
 
703
$
 
48
$
 
(27,433)(28,447)
$
 
64,04467,989
$
 
(558)(1,596)
$
 
975,9771,065,854
$
 
—(206)
$
 
1,012,7811,104,345
Other comprehensive
loss, net of tax
—
—
—
—
(855)(1,491)
—
—
(855)(1,491)
Stock compensation
plan transactions
—
—
(1,006)(49)
2,8652,016
—
—
—
1,8591,967
Contributions
—
—
—
—
—
—
3—
3—
Dividends ($
0.1252.206
per share)
Common
—
—
—
—
—
(5,518)(97,355)
—
(5,518)(97,355)
Class A common
—
—
—
—
—
(600)(10,589)
—
(600)(10,589)
Net income (loss)
—
—
—
—
—
22,664323,874
(91)(446)
22,573323,428
Balance at FebruaryNovember
26, 2022
$
703
$
48
$
(28,439)(28,496)
$
66,90970,005
$
(1,413)(3,087)
$
992,5231,281,784
(88)(652)
$
1,030,2431,320,305
Note 67 - 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):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13
The
following
table
provides
a
reconciliation
of
the
numerators
and
denominators
used
to
determine
basic
and
diluted
net
income per common share (amounts in thousands, except per share data):
Thirteen Weeks
 
Ended
Thirty-nineTwenty-six Weeks
Ended
February 25,December 2, 2023
FebruaryNovember 26, 2022
February 25,December 2, 2023
FebruaryNovember 26, 2022
Numerator
Net income
$
322,76916,578
$
39,454198,294
$
646,19716,989
$
22,573323,428
Less: Loss attributable to noncontrolling
noncontrolling interest
(450)(431)
(63)(293)
(896)(946)
(91)(446)
Net income attributable to Cal-Maine
Foods, Inc.
$
323,21917,009
$
39,517198,587
$
647,09317,935
$
22,664323,874
Denominator
Weighted-average
 
common shares
outstanding, basic
48,65348,690
48,88648,624
48,63448,691
48,88848,624
Effect of dilutive restricted shares
189176
150216
198163
147203
Weighted-average
 
common shares
outstanding, diluted
48,84248,866
49,03648,840
48,83248,854
49,03548,827
Net income per common share
attributable to
Cal-Maine Foods, Inc.
Basic
$
6.640.35
$
0.814.08
$
13.310.37
$
0.466.66
Diluted
$
6.620.35
$
0.814.07
$
13.250.37
$
0.466.63
15
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 primarily
 
sold
at
prices
 
related
to
 
independently
quoted
 
wholesale
market
 
prices
or
 
formulas
related
 
to our costs
of
 
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
Thirty-nineTwenty-six Weeks
Ended
February 25,December 2, 2023
FebruaryNovember 26, 2022
February 25,December 2, 2023
FebruaryNovember 26, 2022
Conventional shell egg sales
$
689,022280,599
$
280,633541,917
$
1,656,528505,879
$
683,805967,506
Specialty shell egg sales
272,205217,905
182,945227,778
700,803426,586
462,320428,598
Egg products
32,58220,012
12,74928,052
88,27442,235
33,51655,692
Other
3,6844,718
1,1583,953
11,9327,878
4,5548,248
$
997,493523,234
$
477,485801,700
$
2,457,537982,578
$
1,184,1951,460,044
Contract Costs
The Company can incur costs to
 
obtain or fulfill a contract with a
 
customer. If the
 
amortization period of these costs is less
 
than
one year,
 
they are
 
expensed as
 
incurred. When
 
the amortization
 
period is
 
greater than
 
one year,
 
a contract
 
asset is
 
recognized
and is
 
is amortized over
 
over the contract
 
contract life as
 
as a reduction
 
reduction in net
 
net sales. As
 
As of February
 
25, 2023December 2,
 
2023 and May
 
28, 2022,June 3,
 
2023, the balance
 
balance for
contract assets was immaterial.
Contract Balances
The Company receives payment from customers based on specified terms that are
 
are generally less than 30 days from delivery.
There are rarely contract assets or liabilities related to performance under the
 
contract.
Note 89 - Stock Based Compensation
Total
 
stock-based
 
compensation
 
expense
 
was
 
$
3.12.1
 
and
 
$
3.02.0
 
million
 
for
 
the
 
thirty-ninetwenty-six
 
weeks
 
ended
 
FebruaryDecember
 
25,2,
 
2023
 
and
FebruaryNovember 26, 2022, respectively.
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
 
FebruaryDecember
 
25,2,
 
2023
 
of
 
$
8.45.0
 
million
 
will
 
be
 
recorded
 
over
 
a
 
weighted
average period of
2.31.7
 
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 informatinformation
 
ion on our stock compensation plans.
The Company’s restricted share activity
 
for the thirty-ninetwenty-six weeks ended February 25,December 2, 2023 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 28, 2022June 3, 2023
317,844294,140
$
39.12
Granted
84,969
54.1043.72
Vested
(97,954)(305)
38.2537.70
Forfeited
(8,480)(1,329)
39.2244.68
Outstanding, February 25,December 2, 2023
296,379292,506
$
43.7043.72
Note 910 - Commitments and Contingencies
Financial Instruments
The
Company
maintained
standby
letters
of
credit
(“LOCs”)
totaling
$
4.1
million
at
February
25,
2023,
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
 
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
appealingof
the
First
District
court’s
decision.Texas.
 
On
 
FebruarySeptember
 
6,29,
 
2023,
 
the
 
StateSupreme
Court
 
of
 
Texas
 
filed
their
response
to
defendant’s
petition
for
review.
On
February
21,
2023,denied
 
the
 
CompanyCompany’s
 
and
WCF
filed
their
reply
brief
in
support
of
defendant’s
petitionPetition
 
for
 
review.Review
so
the
case
will
be
Appellate briefs are not yet due. remanded
to the
trial court
for further
proceedings.
Management believes
the risk
of material
loss related
 
to this
matter to
be
remote.
Bell et al. v. Cal-Maine Foods et al.
 
On
 
April
 
30, 2020,
 
the Company
 
was named
 
as one
 
of several
 
defendants
 
in
 
Bell et
 
al. v.
 
Cal-Maine
 
Foods et
 
al.,
 
Case No.
1:20-cv-461,
 
in
 
the
 
Western
 
District
 
of
 
Texas,
 
Austin
 
Division.
 
The
 
defendants
 
include
 
numerous
 
grocery
 
stores,
 
retailers,
producers, and farms. Plaintiffs assert that defendants
 
violated the DTPA
 
by allegedly demanding exorbitant or
 
excessive prices
for
 
eggs during
 
the
 
COVID-19
 
state of
 
emergency.
 
Plaintiffs
 
request
 
certification
 
of a
 
class of
 
all consumers
 
who purchased
eggs
 
in
 
Texas
 
sold,
 
distributed,
 
produced,
 
or
 
handled
 
by
 
any
 
of
 
the
 
defendants
 
during
 
the
 
COVID-19
 
state
 
of
 
emergency.
Plaintiffs seek to enjoin
 
the Company and other
 
defendants from selling eggs
 
at a price more than
 
10% greater than the price
 
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
 
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
 
January 9,
 
2023, the
 
court entered
 
an 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
 
United States
 
Court of
 
Appeals for
 
the Fifth
Circuit,
Case
No.
 
23-50112.
 
The
parties
are
to
file filed
 
their
respective
appellate
 
briefs, but the
 
but
they
are
court has not
 
yetruled on these
 
due.
Managementsubmissions.
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.
16
producers. The
Egg Products
Plaintiffs seek
to enjoin
the Company
and other
defendants from
engaging in
antitrust violations
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
 
Plaintiffs as vigorously as$
17.8
 
possible 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,
if
any,
which
might
result
from
theother
resolution of
this remaining
mattersettlements with
 
the Eggprevious
 
Products Plaintiffssettling defendants,
 
have not
been reflected
inplus the
 
financial statements.Egg Product
 
While
management
believes
that
there
is
still
aPlaintiffs’
 
reasonable
 
possibilityattorneys’
 
offees. This
 
adecision is
 
materialnot
final and
 
adverse
outcome
from
the
case
with
the
Egg
Products Plaintiffs,
at the
present time,
it is not
possible to
estimate the
amount of
monetary exposure,
if any,remains subject
 
to the
 
Company
duedefendants’ motion
 
to
for a
 
rangedirected 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
 
factors,Income
 
includingand
classified
as
other
noncurrent
liabilities
in
 
the
Company’s
 
following,Condensed Consolidated
 
amongBalance Sheets. The
 
others:accrual represents
 
twoour estimate of
 
earlierthe Company’s
 
trialsproportional share
of the reasonably
 
basedpossible ultimate damages
 
award, excluding the Egg
Product Plaintiffs’ attorneys’
fees that we believe
would
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
 
substantiallythe outcome of
 
thethose discussions. Our
 
sameaccrual may also
 
factsbe revised in
 
and
legal argumentswhole or in
 
resultedpart in the
future to the extent we
are successful in further proceedings
 
in findingsthe litigation.
On November 29, 2023, the
defendants, including
the Company,
filed a
motion for
judgment as
a matter
 
of nolaw
 
conspiracyin their
 
and/or damages;favor,
 
this trial
will be
beforeknown as
 
a differentdirected
 
judge andverdict, notwithstanding
 
jury inthe
jury’s decision. The Company intends
 
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). continue to vigorously defend the claims asserted by the Egg Products Plaintiffs.
State of Oklahoma Watershed Pollution
 
Litigation
On June 18,
 
18, 2005,
the State
of Oklahoma
filed suit,
in the
 
State ofUnited States
 
Oklahoma filedDistrict Court
 
suit, infor the
 
the United
StatesNorthern District
 
Court for
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
 
through
 
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
 
an
 
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
 
remediesremedies. On
 
byJune 12,
 
March2023, the
 
17,court ordered
 
2023.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
 
MarchNovember
 
17,10,
 
2023,
 
athe
 
statusState
 
hearingof
 
wasOklahoma
 
held,filed
 
andits
response
in
opposition
to
 
the
 
court
extended themotion
 
time period byto
dismiss and on
 
which the partiesNovember 17, 2023,
 
must reach anthe defendants filed
 
agreement to Junetheir reply.
 
16, 2023. The court has not
 
defendants have been
conferring
withruled on the
State regarding
appropriate remedies. motion.
 
While management
believes there
 
is a
 
reasonable
 
possibility of
 
a material
 
loss from
from the case,
at the
 
present time,
it is
not possible
 
to estimate
the
amount
of
 
monetary
exposure,
if
any,
 
to
the
Company
due
to
a
a
range
of
 
factors,
including
the
 
following, among others:
 
among
others:
uncertainties
inherent
in
 
any
assessment
of
 
potential
costs
associated
with
with
injunctive
relief
or
 
other
penalties
based
on
a
decision in a
 
decision in a case tried over
 
over 13 years ago based
 
based on environmental conditions
that existed at the
time, the lack
of guidance from
the court as to what
might be considered appropriate remedies,
 
remedies, the early stage
of negotiationsongoing litigation
 
with the
State on
appropriate remedies,of Oklahoma
 
and uncertaintymotion to
dismiss before
 
regarding whatthe court, and
 
uncertainty regarding
what our proportionate
 
share of any
 
any remedy
would be,
although we believe
that our share compared to the other defendants is 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
 
inflationthe
 
andrecent
 
risingresurgence
 
interestin
 
rates,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
 
operations
and
financial
condition.
Such
 
forward-looking
statements
are
 
identified
by
the
use
 
of
words
such
 
as
“believes, “believes,”
 
“intends,” “expects,”
“expects,” “hopes,hopes,” “may,”
 
“should,” “plans,” “projected,
“projected,” “contemplates,”
 
“anticipates,”
or
similar
words.
 
Actual
outcomes
or
results
 
could
 
differ
 
materially
 
from
 
those
 
projected
 
in
 
the
 
forward-looking
 
statements.
The
 
forward-looking
 
statements
 
are
based
 
on
 
management’s
 
current
 
intent,
 
belief,
 
expectations,
 
estimates,
 
and
 
projections
regarding
 
the
 
Company
 
and
 
its
industry.
industry.
These
 
statements
 
are
 
not
 
guarantees
 
of
 
future
 
performance
 
and
 
involve
 
risks,
uncertainties,
assumptions,
 
and other factors
 
other
factors that are difficult to predict and may
be beyond our control. The factors that could cause actual results
 
to differ materially
from thosepredict
 
and may be
beyond our
control. The
factors that
could
cause actual
results to
differ
materially
from
those projected
in the
 
forward-looking statements
 
statements include,
among
 
others, (i)
 
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
 
to
the
current
 
outbreak
of
highly
pathogenic
avian
influenza
(“HPAI”) HPAI
 
affecting
poultry
in
the
United
States
(“U.S.”),
Canada
and
other
countries
that
was
first
detected
in
commercial flocks in
the U.S. in February
2022, (iii) changes
 
in the demandU.S.,
 
forCanada and market pricesother
 
of shell eggscountries that
was first
detected in
commercial flocks
in the
U.S. in
February 2022
 
and that
first impacted
our flock
in December
2023, (iii)
changes in the
demand for and
market prices of
shell eggs and
feed costs,
(iv) our
 
our ability to
 
predict and meet
 
meet demand for cage-
free and
 
for cage-free
and other
 
specialty eggs,
 
(v) risks,
 
risks, changes, or
 
or obligations that
 
that could
result from
 
our future
 
acquisition of
 
of new flocks
 
flocks or
businesses
and risks
 
or changes that
 
that may
cause conditions
 
to completing a
 
a
pending acquisition not
 
to be met,
(vi) risks relating
to increased
 
relating to increased costs and
 
rising higher and
potentially further
increases in,
inflation and rising
 
interest rates, which generally
have
been
exacerbated
by
Russia’s
invasion
of
Ukraine
starting
February
2022,
 
(vii) our
ability to
retain existing
customers,
acquire
new
customers
and
grow
 
our
 
abilityproduct
 
tomix,
 
retain(viii)
 
existingadverse
 
customers,
acquire newresults
 
customersin
pending
litigation
matters,
(ix)
global
instability,
including as
a result of
the wars in
Ukraine and
 
grow our
product mix,
(viii) adverse
results in
pending litigation
mattersIsrael and
 
(ix) risksattacks on shipping
 
relating to
in the evolvingRed
 
COVID-19 pandemic.Sea, and (x)
any potential
resurgence of
COVID-19. Readers
 
are cautioned
 
not to place
 
place undue reliance
 
reliance on forward-looking
 
forward-looking statements because,
 
because,
while we
believe
the assumptions on
 
which the forward-looking
 
statements are based are reasonable,
 
are reasonable, there
can be no assurance
that
 
assurance that these
forward-looking statements
 
forward-looking
statements will
prove
 
to be accurate.
 
accurate. Further, forward
 
forward-looking-looking statements
 
included
herein
 
are only
made as
 
as of
the respective
 
respective dates
thereof,
 
or if no
 
no date
is stated,
 
as of the
 
the 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
 
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
 
reportableoperating
 
and
reportable
segment.
 
We
 
are
 
the
largest
 
producer
 
and
 
distributor
 
of
 
fresh
 
shell
 
eggs
 
in
 
the
 
U.S.
 
Our
 
total
 
flock
 
of
 
approximately
 
43.3
million
layers
 
and 10.6
 
9.9
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,
 
and
egg
 
product customers
consumers
located
primarily
 
in
states
 
across
the
 
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
18
equal, we would
 
expect to experience
 
lower selling prices, sales
 
volumes and net
 
income (and may incur
 
incur net losses) in our
 
our first
and
 
fourth
 
fiscal
 
quarters
 
ending
 
in
 
August/September
 
and
 
May/June,
 
respectively.
 
Because
 
of
 
the
 
seasonal
 
and
 
quarterly
fluctuations,
 
comparisons
 
of
 
our
 
sales
 
and
 
operating
 
results
 
between
 
different
 
quarters
 
within
 
a
 
single
 
fiscal
 
year
 
are
 
not
necessarily meaningful comparisons.
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
date. Furthermore,
 
due to
 
the more
 
limited supply
 
for organic
 
ingredients, we
 
we may commit
 
commit to purchase
 
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
our
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
used
by
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. MeadowCreek began operations during the third quarter of fiscal 2023.
The
Company
has
joined
in
the
formation
of
a
new
egg
farmer
cooperative
in
the
western
United
States.
ProEgg,
Inc.
(“ProEgg”)
is
comprised
of
leading
egg
production
companies,
including
Cal-Maine
Foods,
servicing
retail
and
foodservice
shell egg customers in 13 western states. ProEgg is a producer-owned
cooperative organized under the Capper-Volstead
Act.
Our
membership
in
ProEgg
is
expected
to
provide
benefits
for
its
customers,
including
supply
chain
stability
and
enhanced
reliability.
Initially,
Cal-Maine Foods’
customer relationships
and customer
support are
expected to
remain the
same. At some
point in the future, it is anticipated
that each producer member will sell
through ProEgg the shell eggs
it produces for sale in the
western
states
covered
by
the
cooperative.
Customers
would
have
a
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 calendar year 2023.
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 March
2023.
The
current
HPAI
epidemic
has
surpassed
the
prior
2014-2015
outbreak
in
terms
of
its
duration
and
the
number
of
affected
hens
in
the
U.S.,
and
HPAI
continues
to
circulate
throughout
the
wild
bird
population
in
the
U.S.
and
abroad.
According to
the U.S.
Centers for
Disease Control
and 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
March 28,
2023. The
USDA division
of Animal
and Plant
Health Inspection
Service (“APHIS”)
reported
on March
27, 2023
that
approximately
43.3
million
commercial
layer
hens
and
1.0
million
pullets
have
been
depopulated
due
to
HPAI
since
February 2022. We
believe the HPAI
outbreak will continue
to exert downward
pressure on the
overall supply of
eggs, and the
19
duration of those
effects will depend
in part on the
timing of replenishment
of the U.S.
layer hen flock.
Prior to the outbreak
of
HPAI
in February
2022,
the layer
hen flock
five-year
average from
2017 through
2021 was
comprised
of approximately
328
million hens.
According to
a LEAP Market
Analytics report
dated March
21, 2023,
the layer
hen inventory
is not
projected to
exceed this 328
million mark again until
January of 2024.
Layer hen numbers reported
by the USDA as
of March 1, 2023
were
312.9
million,
which
represents
a
decrease
of
3.8%
compared
with
the
layer
hen
inventory
a
year
ago.
However,
the
USDA
reported
that
the
hatch
from
October
2022
through
February
2023
increased
4.5%
as
compared
with
the
prior-year
period,
indicating that layer flocks may increase in the future.
While no
farm is
immune from
HPAI,
we believe
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 tohave
 
thecage-free
legislation
currently
in
effect.
Oregon,
Washington
and
Nevada
have
cage-free
legislation
2020 going into
effect starting
January 1,
2024, which
represents an
additional 5%
of the
total estimated
U.S. Census,population.
Although
we do not sell the majority of our 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 legislation wenteggs or significantly
 
into effect Januaryincrease
the
 
1, 2022. However,volume
 
these laws are of
cage-free
egg
sales
in
the
future,
subject
 
to judicial challenge,
and in October
2022 the U.S.
Supreme Court
heard oral arguments
in a case
challenging California’s
law that requires
the sale
of only cage-free eggs in
 
that state. A decision in that casemost
 
is expected in the summer of 2023.
These laws have 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)
as
the
national demand for cage-free production
could be greater than the
current supply,
which would increase the prices
of cage-free
eggs,
unless
more
cage-free
production
capacityit
 
is
 
constructed.
Likewise,
the
national
supply
for
eggs
from
conventional
production could exceed consumer demand, which would decrease the
prices
of conventional eggs.
A significant number
of our customers
have previously announced
goals to offer
cage-free eggs exclusively
on or before
2026,
subject in
most cases
to availability
of supply,
affordability and
customer demand,
among other
contingencies. Some
of these
customers have
recently changed
those goals
to offer
70% cage-free
eggs by
the end
of 2030.
Our customers
typically do
not
commit to long-term
purchases of specific quantities
or types of eggs
with us, and as
a result, it is difficult
 
to
accurately
predict
customer
 
requirements
 
for
 
cage-free
 
eggs.
 
We
 
are
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.”
EXECUTIVE OVERVIEW
For
21
ACQUISITIONS
During the third quartersecond
 
quarter of fiscal 2023,
2024,
 
we recorded a grossacquired
 
profit of $463.0 million
compared to $91.6 million
for the same period
assets of
 
fiscalFassio Egg Farms,
 
2022,
with
the
increase
due
primarilyInc. (“Fassio”) related
 
to its commercial
shell
 
higheregg
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
 
partiallyin the
 
offsetsecond 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
2024
were
impacted
 
by
 
a
$19.6
million
litigation
loss
contingency accrual for
pending anti-trust litigation,
reflected in selling,
general and administrative
expenses in the
 
increasedCompany’s
Condensed
 
costConsolidated
Statements
 
of
 
feed
ingredients and other farm production costs as well as increased processingIncome
 
,and
 
packaging and warehouse costs.classified
 
as
accrued
expenses
and
other
liabilities
in
the
Company’s
Condensed Consolidated Balance Sheets.
Our
net
 
average selling
 
price per
 
dozen for
 
the second
 
third quarter of
 
of fiscal
2023 2024
 
was $3.298$1.730
 
compared to
 
to $1.
612
$2.709 in
 
the prior-year
period. Conventional
 
egg prices
 
per dozen
 
were $3.678$1.458
 
compared to
 
$1.4582.883 for
 
the prior-year
 
period, and
 
specialty egg
 
prices
per dozen were
 
were $2.616
$2.277 compared to
 
$1.9232.370 for the
prior-year period.
Conventional egg prices
were lower in
the second quarter
of fiscal
2024 compared
to the
prior-year period
as the
U.S. egg
supply started
to recover
from 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 prior-yearfirst two
 
period. Conventional
egg prices
increased in
the third
quarter of
fiscal 2023 primarily due to decreased supply caused by the HPAI
outbreak combined with robust customer demand,
which was
bolstered by
the peak
winter holiday
season. See
the discussion
under the
heading “HPAI”
above. The
daily average
price for
the Urner
Barry southeast
large index
for the
third quarter
quarters of fiscal
 
2023 increased2024 was
 
129.8% from$1.661 compared
to
 
the comparable$2.469
 
period in
 
the
prior
 
year.prior-year
period.
 
Conventional
 
egg
 
prices
 
exceedingper
 
specialtydozen
 
eggwere
 
prices$1.353
 
hascompared
 
occurredto
$2.631
 
for
 
the
 
pastprior-year
period, and
 
four
quarters
but
is
atypical
historically.
Conventionalspecialty egg
 
prices generallyper
 
respond moredozen were
 
quickly to$2.277 compared
 
market conditionsto $2.236
 
because we
sellfor the
 
majorityprior-year
period. The
daily average
price
for the
Urner Barry
southeast large
index for
the second
quarter of
 
our
conventional shell eggs based onfiscal 2024
 
formulas that adjust periodically and take intofirst
 
account, in varying ways, independently quoted
regional
wholesale
market
prices for
shell
eggs
or
formulas
related
to
our
costs of
production.
The
majoritytwo quarters
 
of ourfiscal
 
specialty2024 decreased
eggs49.6% and 49.2%, respectively,
 
arefrom the comparable periods in the
 
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,
 
prices,
see Part I Item I of our 20222023 Annual Report.
 
Our total dozens
sold increased 1.4% to
288.2 million dozen shell
eggs for the second
quarter of fiscal 2024
compared to 284.1
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
to
561.3
million
dozen.
For
the
second
quarter
of
fiscal
2024,
conventional
dozens
sold
increased
2.4%
and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2022
Our totalspecialty dozens
 
dozens sold decreased
 
increased 1.3%0.4% as
 
compared to 291.4
 
million dozen
shell eggs
for the
third quarter
of fiscal
2023 compared
to 287.7
million dozen for
the same period
of fiscal 2022.
For the third quarter
of fiscal 2023,
conventional dozens sold
decreased 2.7%
and specialty
dozens sold increased
9.4% as compared
to the same
 
quarter in fiscal
 
2022. Demandfiscal 2023.
 
Demand for
specialty eggs
 
increaseddecreased in
in the
 
third quartersecond
 
of fiscal
2023 compared
to the
same prior
year period
due primarily
to the
higher prices
for conventional
eggs. Further, demand for specialty eggs continued
to increase as retailers continued to shift to selling cage-free products.
Our farm production
costs per dozen
produced for the
third quarter of
fiscal 2023 increased
18.2%, or $0.166,
compared to the
third quarter of fiscal 2022.
This increase was primarily due
to increased feed ingredient
costs as well as increased facility
costs
and higher amortization
of our flocks.
For the third quarter of
fiscal 2023, the average
Chicago Board of Trade
(“CBOT”) daily
market
price
was
$6.67
per
bushel
for
corn
and
$473
per
ton
for
soybean
meal,
representing
increases
 
of
 
8.8%fiscal
 
and
14.8%,
respectively,2024
 
compared
 
to
 
the average
 
dailysame
 
CBOT pricesprior
 
foryear
period
due
primarily
to
 
the
 
comparablelarge
decrease
in
prices
for
conventional
eggs
compared
to
the
same
prior
year
period.
For
the
year-to-date
 
period,
 
inconventional
dozens
sold
increased
1.7% and 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 2024
decreased 8.0%,
or
$0.86, and
4.6%, or
$0.05, respectively,
compared to
 
the prior
 
year.year periods,
primarily due
to lower
feed costs.
Feed costs
per
dozen produced decreased 19.1%,
or $0.13, compared to
the second quarter of fiscal
2023 primarily due to reduced
corn prices,
our
primary
feed
ingredient.
 
For
 
information
 
about
historical corn and soybean meal prices, see Part I Item I of our 2022 Annual
 
historical
corn
and
soybean
meal
prices,
see
Part
I
Item
I
of
our
2023
Annual Report.
RESULTS OF
 
OPERATIONS
The following
 
table sets forth,
 
for the periods
 
indicated, certain
 
items from
 
our Condensed Consolidated
 
Statements of Income
expressed as a percentage of net sales.
Thirteen Weeks
 
Ended
Thirty-nineTwenty-six Weeks
Ended
February 25,December 2, 2023
FebruaryNovember 26, 2022
February 25,December 2, 2023
FebruaryNovember 26, 2022
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
53.682.6
%
80.860.4
%
59.486.1
%
88.063.3
%
Gross profit
46.417.4
%
19.239.6
%
40.613.9
%
12.036.7
%
Selling, general and administrative
5.914.5
%
11.07.2
%
6.913.1
%
12.47.6
%
Gain on insurance recoveries
(0.3)
%
(0.2)
%
(0.1)
%
(0.3)
%
(Gain) lossLoss on disposal of fixed assets
—
%
0.1
%
—
%
—
%
Operating income (loss)
40.8—
%
8.3Operating income
2.8
%
33.832.4
%
(0.1)0.8
%
29.1
%
Total other income, net
1.71.5
%
2.80.3
%
0.91.6
%
1.80.3
%
Income before income taxes
42.54.3
%
11.132.7
%
34.72.4
%
1.729.4
%
Income tax expense (benefit)
10.21.1
%
2.88.0
%
8.40.6
%
(0.2)7.1
%
Net income
32.33.2
%
8.324.7
%
26.31.8
%
22.3
%
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
third quarter of fiscal
2023 were $997.5 million
compared to $477.5 million
for the same period
of fiscal
2022.
Net shell
egg sales
represented 96.
7% and
97.3% of
total net
 
sales for
 
the third
 
quarterssecond quarter
 
of
fiscal
2024
were $523.2
million
compared
to $801.7
million
for
the same
period
of
fiscal 2023.
Net shell egg sales represented
96.2% and 96.5% of total net sales
for the second quarters of fiscal
 
2024 and 2023, and
2022, respectively.
Shell
 
egg
 
sales classified
 
as “Other”
 
represent
 
sales
 
of
 
miscellaneous
 
byproducts
 
and
 
resale products
 
included
 
with our
 
shell
egg operations.
 
Total
 
net
 
sales
 
for
 
the
 
thirty-ninetwenty-six
 
weeks
 
ended
 
FebruaryDecember
 
25,2,
 
2023
 
were
 
$2.46982.6
 
billion,million,
 
compared
 
to
 
$1.181.46
 
billion
 
for
 
the
comparable period of fiscal 2022.2023.
Net
 
shell
 
egg
 
sales
 
represented
 
96.4%95.7%
 
and
 
97.2%96.2%
 
of
 
total
 
net
 
sales
 
for
 
the
 
thirty-ninetwenty-six
 
weeks
 
ended
 
FebruaryDecember
 
25,2,
 
2023
 
and
FebruaryNovember 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
Thirty-nineTwenty-six Weeks
Ended
February 25,December 2, 2023
FebruaryNovember 26, 2022
February 25,December 2, 2023
FebruaryNovember 26, 2022
Total net sales
$
997,493523,234
$
477,485801,700
$
2,457,537982,578
$
1,184,1951,460,044
Conventional
$
689,022280,599
71.455.8
%
$
280,633541,917
60.470.1
%
$
1,656,528505,879
69.953.8
%
$
683,805967,506
59.468.9
%
Specialty
272,205217,905
28.243.3
%
182,945227,778
39.429.4
%
700,803426,586
29.645.4
%
462,320428,598
40.230.5
%
Egg sales, net
961,227498,504
99.699.1
%
463,578
99.8
%
2,357,331769,695
99.5
%
1,146,125932,465
99.699.2
%
1,396,104
99.4
%
Other
3,6844,718
0.40.9
%
1,158
0.2
%
11,9323,953
0.5
%
4,5547,878
0.40.8
%
8,248
0.6
%
Net shell egg sales
$
964,911503,222
100.0
%
$
464,736773,648
100.0
%
$
2,369,263940,343
100.0
%
$
1,150,6791,404,352
100.0
%
Net shell egg sales as a
percent of total net sales
96.796.2
%
97.396.5
%
96.495.7
%
97.296.2
%
Dozens sold:
Conventional
187,357192,462
64.366.8
%
192,511187,976
66.966.2
%
555,045373,992
65.266.6
%
568,511367,688
70.065.7
%
Specialty
104,05995,711
35.733.2
%
95,14096,110
33.133.8
%
295,774187,307
34.833.4
%
243,310191,715
30.034.3
%
Total dozens sold
291,416288,173
100.0
%
287,651284,086
100.0
%
850,819561,299
100.0
%
811,821559,403
100.0
%
Net average selling price
per dozen:
Conventional
$
3.678
$
1.458
$
2.9842.883
$
1.2031.353
$
2.631
Specialty
$
2.6162.277
$
1.9232.370
$
2.3692.277
$
1.9002.236
All shell eggs
$
3.2981.730
$
1.6122.709
$
2.7711.661
$
1.4122.496
Egg products sales:
 
Egg products net sales
32,582$
12,74920,012
88,274$
33,51628,052
$
42,235
$
55,692
Pounds sold
16,79616,998
15,94715,702
49,00036,351
47,22532,204
Net average selling price
per pound
1.940$
0.7991.177
1.802$
0.7101.787
$
1.162
$
1.729
Shell egg net sales
ThirdSecond Quarter – Fiscal 20232024
 
vs. Fiscal 20222023
-
In
the
 
third quartersecond
 
of fiscal
2023,
conventional egg
sales increased
$408.4 million,
or 145.5%,
compared to
the third
quarter
 
of
 
fiscal
 
2022,2024,
 
primarilyconventional
 
dueegg
sales
decreased
$261.3
million,
or
48.2%,
compared
 
to
 
the
second quarter of
fiscal 2023, primarily
due to a 49.4%
decrease in the prices
for conventional eggs,
which resulted in
a
$274.3
million
decrease
in
net
sales,
partially
offset
by
a
2.4%
 
increase
 
in
 
the
 
prices
for
conventional
shell
eggs,
slightly
offset
by
a
decrease
in
volume
 
of
 
conventional
 
shell
eggs
 
sold.
Changes
in
prices
resulted
in
a
$415.9
million
increase
and
thesold,
change in volumewhich resulted in a $7.5$12.9 million decreaseincrease in net sales, respectively.sales.
-
Conventional egg prices
 
prices increased
were lower in the
 
thirdsecond quarter
of fiscal
 
2023
primarily due
2024 compared to decreased
supply caused
by the
HPAI
outbreak,
discussed
above,
while
customer
demand,
bolstered
by
the
 
peak
winter
holiday
season,
remained
robust.
-
Specialty egg
sales increased $89.3
million, or 48.8%,
in the third
second quarter of fiscal
 
2023 compared
as the
U.S. egg
supply
started
to recover
from 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.
-
Specialty
egg
sales
decreased
$9.9
million,
or
4.3%,
in
 
the third
second
quarter
of
 
fiscal
 
2022,2024
compared
to
the
second
quarter
of
fiscal
2023,
 
primarily
 
due
 
to
 
a
 
36.0%3.9%
 
increasedecrease
 
in
 
the
 
prices
 
for
 
specialty
 
eggs,
 
which
 
resulted
 
in
 
a
 
$72.1
million9.3
increase
in
net
sales,
and
a
9.4%
increase
in
the
volume
of
specialty
eggs
sold,
which
resulted
in
a
$17.2
million
increase decrease in net sales.
 
-
Net average selling pricesCage-free
 
of specialty eggs increasedegg
 
in response to rising feed
and other input costs as well
as current
market conditions due to HPAI.
-
Demandrevenue
 
for
 
specialty
eggs
increased
as
conventional
egg
prices
rose.
Our
sales
volume
benefited
as
we
sold
9.4%
more
specialty
eggs
by
volume
in
the
 
thirdsecond
 
quarter
 
of
 
fiscal
 
20232024
 
versus
the
prior-year
period,
through
use
of
our
higher cage-free production capacity.
-
Cage-free egg sales
for the third quarter
of fiscal 2023 represented
 
17.8%
of our total net
shell egg sales versus
24.0%
for the
same prior year
period due
to the higher
conventional egg
prices causing
conventional egg
sales to represent
a
22
higher
proportion30.4%
 
of
 
our
 
total
 
sales.net
 
Cage-free
dozens
sold
increased
14.9%
in
the
third
quarter
of
fiscal
2023
as
compared to the third quarter
of fiscal 2022 as the
higher conventional egg prices drove
demand for specialty eggs
and
we utilized our expanded cage-free production capacity.
Thirty-nine weeks – Fiscal 2023 vs. Fiscal 2022
-
For
the
thirty-nine
weeks
ended
February
25,
2023,
conventionalshell
 
egg
 
salesrevenue
versus
 
increased
$972.7
million,
or
142.3%,
compared
to
the
same
period
of
fiscal
2022,
primarily
due
to
the
increase
in
the
prices18.2%
 
for
conventional
shell
eggs,
slightly offset
by the decrease
in the volume
of conventional eggs
sold. Changes in
prices
resulted in a
$988.5 million
increase and the change in volume resulted in a $16.2 million decrease in net
sales, respectively.
-
Specialty egg
sales increased
$238.5 million,
or 51.6%,
for the
thirty-nine weeks
ended February
25, 2023
compared
to the
same period of
fiscal 2022,
primarily due
to a 24.7%
increase in
the prices
for specialty
eggs.
Additionally,
the
volume
of specialty
dozens
sold
increased
21.6%
compared
to
 
the
 
same
 
prior
 
year
 
period
 
mainly
due
 
to
 
the higher
conventional egg prices.
 
Changes in specialtylower
conventional
 
egg prices resulted
 
inprices
causing
conventional
egg
revenue to represent a $138.7 million
increase in net sales
and changes
in volume resulted in a $99.7 million increase,
respectively.smaller proportion of our total sales.
 
Egg products net salesTwenty-six weeks –
Third Quarter –Fiscal 2024 vs. Fiscal 2023
vs. Fiscal 2022
-
Egg productsFor
 
net the
twenty-six
weeks
ended
December
2,
2023,
conventional
egg
sales
 
increased $19.8decreased
$461.6
 
million,
or
 
155.6%47.7%, for
compared
 
to the third
 
quarter ofsame
 
fiscal 2023
compared to
the same
period of
 
fiscal 2022,
2023,
 
primarily due
to a
142.8% selling
price increase,
which had
a $19.2
million positive
impact on
net sales.
-
Our egg products net average selling price increased in the third quarter
of fiscal 2023, compared to the third quarter of
fiscal 2022 as the supply of shell eggs
used to produce egg products decreased
due to the HPAI
outbreak that started in
February 2022.
Thirty-nine weeks – Fiscal 2023 vs. Fiscal 2022
-
Egg products
net sales
increased $54.8
million or
163.4%, primarily
due to
a 153.8%
selling price
increase compared
to the first thirty-nine weeks of fiscal 2022, which had a $53.5 million
positive impact on net sales.
-
Our egg products net average selling price increased
in the thirty-nine weeks ended February 25, 2023
compared to the
same
period
in
fiscal
2022
as
the
supply
of
shell
eggs
used
to
produce
egg
products
decreased
 
due
 
to
 
the
 
HPAI
outbreak that started in February 2022.
COST OF SALES
Costs of sales
for the
third quarter of
fiscal 2023
were $534.5 million
compared to $385.9
million for the
same period of
fiscal
2022. Cost of
sales for the
thirty-nine weeks
ended February 25,
2023 were $1,459.2
million compared
to $1,042.2 million
for
the same period of fiscal 2022.
Cost of
sales consists
of
costs directly
related
to producing,
processing
and
packing
shell eggs,
purchases
of
shell
eggs from
outside producers, processing and packing
of liquid and frozen egg products and other non-egg
costs. Farm production costs are
those costs
incurred at
the egg
production facility,
including feed,
facility,
hen amortization
and other
related farm
production
costs.
��
23
The following table presents the
key variables affecting our cost of sales (in thousands, except cost per
dozen data):
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
February 25, 2023
February 26, 2022
%
Change
February 25, 2023
February 26, 2022
%
Change
Cost of Sales:
Farm production
$
280,384
$
239,389
17.1
%
$
823,043
$
668,855
23.1
%
Processing, packaging,
and warehouse
87,037
77,116
12.9
252,093
211,649
19.1
Egg purchases and other
(including change in
inventory)
135,003
59,135
128.3
301,274
133,968
124.9
Total shell eggs
502,424
375,640
33.8
1,376,410
1,014,472
35.7
Egg products
32,043
10,263
212.2
82,762
27,749
198.3
Total
$
534,467
$
385,903
38.5
%
$
1,459,172
$
1,042,221
40.0
%
Farm production costs
(per dozen produced)
Feed
$
0.679
$
0.562
20.8
%
$
0.677
$
0.546
24.0
%
Other
$
0.399
$
0.350
14.0
%
$
0.388
$
0.350
10.9
%
Total
$
1.078
$
0.912
18.2
%
$
1.065
$
0.896
18.9
%
Outside egg purchases
(average cost per dozen)
$
3.72
$
1.75
112.6
%
$
3.20
$
1.57
103.8
%
Dozens produced
263,174
264,433
(0.5)
%
782,186
757,677
3.2
%
Percent produced to sold
90.3%
91.9%
(1.7)
%
91.9%
93.3%
(1.5)
%
Farm Production
Third Quarter – Fiscal 2023
vs. Fiscal 2022
-
Feed
costs
per
dozen
produced
increased
20.8%decrease
 
in
 
the
 
thirdprices for
 
quarterconventional
 
ofshell
 
fiscal
2023
compared
to
the
third
quarter
ofeggs.
fiscal 2022.
This increase was
primarily due
to increasedChanges in
 
prices for corn,
our primary feed
ingredient.
Basis levels for
corn and soybean meal ran significantly higher in our area of operations
compared to our prior year third fiscal quarter,
adding to our expense.
-
For the third
quarter of fiscal
2023, the average
daily CBOT
market price was
$6.67 per bushel
for corn and
$473 per
ton of soybean
meal, representing increases
of 8.8% and
14.8%, respectively,
as compared to the
average daily CBOT
prices for the third quarter of fiscal 2022.
-
Other
farm
production
costs
increased
due
to
higher
facility
and
flock
amortization.
Facility
costs
increased
due
primarily
to
increased
labor
costs.
Labor
costs
increased
36%
due
to
increased
use
of
contract
labor
and
increased
wages raised in response to labor shortages.
-
Flock amortization
increased primarily
from higher
feed costs,
which began
to riseresulted
 
in oura
 
third quarter$478.0 million
 
of fiscaldecrease in
 
2021
due tonet sales,
 
increased feedpartially offset
 
ingredient pricesby a
 
discussed above,
and which
remained high1.7% increase
 
in the
 
third quartervolume
of fiscal
2023.
Feed
costs
are
capitalized
in
our
flocks
during
pullet
production
and
increased
our
amortization
expense.
We
also
experienced higher amortization costs from an increaseconventional eggs sold, which resulted in our cage-free
production, which has higher capitalized costs.
Thirty-nine weeks – Fiscal 2023 vs. Fiscal 2022
-
Feed
costs
per
dozen
produced
increased
24.0%
in
the
thirty-nine
weeks
ended
February
25,
2023
compared
to
the
same period
of fiscal
2022, primarily
due to higher
feed ingredient prices
.
Basis levels for
corn and soybean
meal ran
significantly higher in our area of operations compared to our prior year third
fiscal quarter, adding to our expense.
-
Other
farm
production
costs
increased
due
to
higher
facility
and
flock
amortization.
Facility
costs
increased
due
primarily
to
increased
labor
costs.
Labor
costs
increased
28%
due
to
increased
use
of
contract
labor
and
increased
wages raised in response to labor shortages.
24
-
Flock amortization increa
sed primarily from
higher capitalized feed
costs as well as
higher amortization
costs from an
increase in our cage-free production.
Supplies of corn and
soybean remained tight relative to
demand in the third quarter
of fiscal 2023,
as evidenced by a low stock-
to-use ratio for corn,
as a result of
weather-related shortfalls in
production and yields, ongoing
supply chain disruptions and
the
Russia-Ukraine
war
and
its
impact
on
the
export
markets.
For
fiscal
2023,
we
expect
continued
corn
and
soybean
upward
pricing pressures and further market volatility to affect
feed costs.
Processing, packaging, and warehouse
Third Quarter – Fiscal 2023
vs. Fiscal 2022
-
Cost of
packaging materials
increased 10.9%
compared to
the third
quarter of
fiscal 2022
due to
rising inflation
and
labor costs.
-
Labor costs increased 14.2%
due to wage increases and increased use of contract labor in response to labor shortages
.
Thirty-nine weeks – Fiscal 2023 vs. Fiscal 2022
-
Cost of packaging materials
increased 15.5%
compared to the thirty-nine
weeks ended February 26, 2022
due to rising
inflation and labor costs.
-
Labor costs
increased 13.7%
due to
wage increases
in response
to labor
shortages, primarily
due to
the pandemic
and
its effects.
-
Dozens
processed
increased
3.2%
compared
to
the
thirty-nine
weeks
ended
February
26,
2022,
which
resulted
in
a
$7.3$16.6 million increase in costs.
Egg purchases and other (including change in inventory)
Third Quarter – Fiscal 2023net
 
vs. Fiscal 2022
-
Costs in this
category increased
primarily due to
higher egg prices
as well as
an increase in
the volume of
outside egg
purchases, causing the percentage of produced to sold to decrease to 90.3%
from 91.9%.
Thirty-nine weeks – Fiscal 2023 vs. Fiscal 2022
-
Costs in this
category increased
primarily due to
higher egg prices
as well as
an increase in
the volume of
outside egg
purchases, as our percentage of produced to sold decreased to 91.9% from 93.3%.
GROSS PROFIT
Gross
profit
for
the
third
quarter
of
fiscal
2023
was
$463.0
million
compared
to
$91.6
million
for
the
same
period
of
fiscal
2022.
The increase
of $371.4
million was
primarily due
to higher
egg prices
as well
as the
increased volume
of specialty
eggs
sold, partially offset
by the increased cost of
feed ingredients and processing,
packaging and warehouse costs
and the decreased
volume of conventional egg sales.
Gross profit
for
the thirty-nine
weeks ended
February
25, 2023
was $998.4
million
compared
to $142.0
million
for the
same
period of fiscal
2022. The increase
of $856.4 million
was primarily due
to higher egg
prices as well as
the increased volume
of
specialty eggs sold, partially offset by the increased
cost of feed ingredients and processing, packaging and warehouse costs and
the decreased volume of conventional egg sales.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24
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
December 2,
2023
November 26,
2022
%
Change
December 2,
2023
November 26,
2022
%
Change
Cost of Sales:
Farm production
$
258,367
$
276,008
(6.4)
%
$
511,874
$
542,659
(5.7)
%
Processing, packaging, and
warehouse
84,767
83,639
1.3
166,673
165,056
1.0
Egg purchases and other
(including change in
inventory)
71,654
97,973
(26.9)
132,451
166,271
(20.3)
Total shell eggs
414,788
457,620
(9.4)
810,998
873,986
(7.2)
Egg products
17,316
26,231
(34.0)
35,017
50,719
(31.0)
Total
$
432,104
$
483,851
(10.7)
%
$
846,015
$
924,705
(8.5)
%
Farm production costs (per
dozen produced)
Feed
$
0.554
$
0.685
(19.1)
%
$
0.575
$
0.676
(14.9)
%
Other
$
0.431
$
0.386
11.7
%
$
0.435
$
0.383
13.6
%
Total
$
0.985
$
1.071
(8.0)
%
$
1.010
$
1.059
(4.6)
%
Outside egg purchases
(average cost per dozen)
$
2.03
$
3.14
(35.4)
%
$
1.84
$
2.88
(36.1)
%
Dozens produced
265,101
261,358
1.4
%
515,457
519,012
(0.7)
%
Percent produced to sold
92.0%
92.0%
—
%
91.8%
92.8%
(1.1)
%
Farm Production
Second Quarter – Fiscal 2024
vs. Fiscal 2023
-
Feed costs per dozen produced decreased 19.1
%
in the second quarter of fiscal 2024
compared to the second quarter of
fiscal
2023.
This
decrease
was
primarily
due
to
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
decrease 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
CBOT daily
market price
was $5.05 per
bushel for
corn and $420
per ton
for
soybean meal,
representing decreases
of 24.8%
and 4.6%,
respectively,
compared to
the average
CBOT daily
market
prices for the comparable period in the prior year.
-
Other
farm
production
costs increased
due
to
higher
facility
costs
and
flock
amortization,
for
the
reasons
described
above.
Current
indications
for
corn
project
an
overall
better
stocks-to-use
ratio
implying
potentially
lower
prices
in
the
near
term;
however, as long
as outside factors remain uncertain
(including weather patterns and
global supply chain disruptions), volatility
could remain. Soybean meal supply has remained tight relative to demand
in the first two quarters of fiscal 2024.
Processing, packaging, and warehouse
Second Quarter – Fiscal 2024
vs. Fiscal 2023
-
Processing, packaging,
and warehouse
costs increased
1.3% compared
to the
second quarter
of fiscal
2023, primarily
due
to an
increase
in 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
1.0%
compared
to
the
first
two
quarters
of
fiscal
2023,
primarily due
an increase
in labor
costs of
4.2% due
to wage
increases in
response to
labor shortages,
partially offset
by decrease in dozens processed.
Egg purchases and other (including change in inventory)
Second Quarter – Fiscal 2024
vs. Fiscal 2023
-
Costs in
this category
decreased primarily
due to
lower shell
egg prices
as the
average cost
per dozen
of outside
egg
purchases decreased 35.4% compared to second quarter of fiscal 2023
.
Twenty-six weeks –
Fiscal 2024 vs. Fiscal 2023
-
Costs in
this category
decreased primarily
due to
lower shell
egg prices
as the
average cost
per dozen
of outside
egg
purchases decreased 36.1% compared to fiscal 2023, partially offset
by an increase of 13.0% in dozens purchased.
GROSS PROFIT
Gross profit
for the
second quarter
of fiscal
2024 was
$91.1 million
compared to
$317.8 million
for the
same period
of fiscal
2023.
Gross profit
for the
twenty-six weeks
ended December
2, 2023
was $136.6
million compared
to $535.3
million for
the
same
period
of
2023.
The
decrease
for
both
periods
was
primarily
due
to
lower
conventional
egg
prices,
partially
offset
by
lower feed ingredient prices.
26
SELLING, GENERAL, AND ADMINISTRATIVE
 
EXPENSES
Selling,
 
general,
 
and
 
administrative
 
("SGA"(“SGA”)
 
expenses
 
include
 
costs
 
of
 
marketing,
 
distribution,
 
accounting
 
and
 
corporate
overhead. The following table presents an analysis of our SGA expenses (in thousands):
Thirteen Weeks
 
Ended
February 25,December 2, 2023
FebruaryNovember 26, 2022
$ Change
% Change
Specialty egg expense
$
15,68915,924
$
17,31814,673
$
(1,629)1,251
(9.4)8.5
%
Delivery expense
19,45317,706
16,44018,175
3,013(469)
18.3(2.6)
%
Payroll, taxes and benefits
14,32511,076
11,39813,827
2,927(2,751)
25.7(19.9)
%
Stock compensation expense
1,0591,061
1,007987
5274
5.27.5
%
Litigation loss contingency accrual
19,648
—
19,648
N.M
Other expenses
7,96311,163
6,52310,290
1,440873
22.18.5
%
Total
$
58,48976,578
$
52,68657,952
$
5,80318,626
11.032.1
%
ThirdN.M. – Not Meaningful
Second Quarter – Fiscal 20232024
 
vs. Fiscal 20222023
Specialty egg expense
-
SpecialtyDuring the second
 
eggpart of fiscal year
 
expense2023, the higher
 
decreasedprices for conventional
 
primarilyeggs and the
 
duecomparatively lower prices
for
specialty eggs
diminished
the need
 
to promote
 
aspecialty eggs
 
significant.
 
reductionDuring the
second quarter
of fiscal
year
2024, we
significantly
increased
promotional
programs,
resulting
 
in
 
higher
advertising
 
costs.fees.
 
TheThis
 
higherwas
 
pricespartially
 
for
conventional eggs and the comparatively lower prices for specialtyoffset
 
eggs diminished the needby
a
decrease
in a reduction in franchise fees to promote specialty eggsEggland’s
Best, Inc.
in the third quarter of fiscal 2023.
Delivery expense
-
The
 
increaseddecreased
 
delivery
 
expense
 
is
 
primarily
 
due
 
to
 
ana
 
increasedecrease
 
in
fuel
and
 
contract
 
trucking
 
expenses
 
ofin
 
approximatelythe
 
$2.0second
million in the third quarter of fiscal 20232024 compared to the thirdsecond quarter of fiscal 2022.2023.
Payroll, taxes and benefits expense
-
The
increase decrease
 
in payroll,
 
taxes and
 
benefits
expense
 
is due
 
to a
 
andecrease
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
 
the accrualother
 
forexpense
 
anticipatedis
 
performance-
based bonuses.
Other expense
-
The increase in other expense is primarily due to inflationary pressure increasing
 
costs.due
to
increased
legal
costs
incurred
compared
to
the
second
quarter
of
Thirty-ninefiscal 2023.
Twenty-six Weeks
Ended
February 25,December 2, 2023
FebruaryNovember 26, 2022
$ Change
% Change
Specialty egg expense
$
43,42927,929
$
45,29527,740
$
(1,866)189
(4.1)0.7
%
Delivery expense
57,54435,397
44,77138,091
12,773(2,694)
28.5(7.1)
%
Payroll, taxes and benefits
39,13923,142
32,64024,814
6,499(1,672)
19.9(6.7)
%
Stock compensation expense
3,0712,101
2,9832,012
8889
3.04.4
%
Litigation loss contingency accrual
19,648
—
19,648
N.M.
Other expenses
26,86520,607
21,30218,902
5,5631,705
26.19.0
%
Total
$
170,048128,824
$
146,991111,559
$
23,05717,265
15.715.5
%
Thirty-nineN.M. - Not Meaningful
Twenty-six weeks –
Fiscal 2024 vs. Fiscal 2023 vs. Fiscal 2022
27
Specialty egg expense
-
Specialty egg
 
expense which includesincreased
 
franchise fees,by 0.7%,
as advertising
expense increased
in fiscal 2024
as discussed above
 
and promotion
costs, generally
aligns with specialtywas
egg
volumes,
which
were
up
21.6%
for
fiscal
2023
compared
to
fiscal
2022.
However,
our
specialty
egg
expense
decreasedoffset by
4.1%, primarily
due to
a significant
the reduction in
advertising expense
as well
as increased
sales franchise fees to
other
Eggland’s
 
Best,
Inc.
(“EB”)
franchisees,
including
unconsolidated
affiliates,
Specialty
Eggs,
LLC
and
Southwest
Specialty
Eggs,
LLC.
Additionally,
the
higher
prices
for
conventional
eggs
and
the
comparatively
lower
prices
for
specialty eggs diminished the
need to promote specialty
eggs; as a result, EB temporarily
reduced the related franchise
fees for certain specialty egg products to encourage continued production of
these products.
26
Delivery expense
-
The increaseddecreased delivery expense is primarily due to a decrease in fuel
 
deliveryand contract trucking expenses in fiscal 2024.
Payroll, taxes and benefits expense
-
The decrease
in payroll,
taxes and
benefits expense
 
is primarily
 
due to
 
an increasea decrease
 
in fuelaccrued
 
and laborbonuses in
 
costs forthe first
 
both our
fleet and
contracttwo
trucking.
Compared
quarters of fiscal 2024 compared to
fiscal
2022,
contract
trucking
and
labor
expenses
increased
approximately
$9.2
million
for the prior year period.
fiscal 2023.
Payroll, taxes and benefits expenseLitigation loss contingency accrual
-
The
increase
in
payroll,
taxes
and
benefits
expense
is
primarily
due
to
an
increase
in
the
accrual
for
anticipated
performance-based bonuses and increased wages for all employees
due relates to the inflationary market.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 $3.6 million.in the year-to-date period.
OPERATING
 
INCOME (LOSS)
For the second
 
third quarter
of fiscal
 
2023, we2024,
 
recorded operating
income of
$407.8 million
compared to
$39.6 million
for the
same
period of fiscal 2022.
For the thirty-nine
weeks ended February
25, 2023, we
recorded operating
 
income of $831.5$14.2
 
million compared
 
to an operating income
of $259.9
loss of $2.2 million for the same period of fiscal 2022.2023.
For the twenty-six
weeks ended December
2, 2023, we recorded
an operating income
of $7.5 million
compared to an operating
income of $423.7 million for the same period of fiscal 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
 
thirdsecond quarter
 
of fiscal
 
2023,2024,
 
we earned
 
$6.37.1 million
 
of interest
 
income compared
 
to $205$2.1
 
thousandmillion for
 
the same
 
period
of
 
fiscal
 
2022.2023.
 
The
 
increase
 
resulted
 
from
 
significantly
 
higher
 
investment
 
balances
 
and
 
higher
 
interest
 
rates.
 
The
 
Company
recorded interest expense
of $134 thousand and
 
$143 thousand and
$126 thousand for the
 
thirdsecond quarters ended FebruaryDecember
 
25,2, 2023 and February
26,November
26, 2022,
respectively.
For the
thirty-nine twenty-six weeks
ended February
25,December 2, 2023,
we earned
 
$9.414.6 million of interest income compared to $3.1 million for the
same period
 
of interest
income compared
to $702
thousand for
the
same
period of
fiscal
 
2022.
2023. The
 
increase
resulted
 
from significantly
 
higher
investment
 
balances and
 
and higher interest
 
interest rates. The
The
Company
 
recorded
 
interest
 
expense
 
of
$433 $276
 
thousand
 
and
$262 $291
 
thousand
 
for
 
the
 
thirty-ninetwenty-six
 
weeks
 
ended
 
FebruaryDecember 2,
 
25,2023
2023 and FebruaryNovember 26, 2022, respectively.
Other, net for INCOME TAXES
For
the
 
third second
quarter ended February 25, 2023
of
fiscal
2024,
pre-tax
income
 
was an expense of $1.5 $22.1
million
 
compared
to income of $1.1
$262.2
million
 
for
the
 
same
 
period
 
of
fiscal 2023.
 
fiscalWe
 
2022.recorded income
 
The
majoritytax expense
 
of
the
decrease
is
due
to
a
$2 $5.5
 
million
impairment
of
an
investment
in
an
unconsolidated entity in the third quarter of fiscal 2023.
Other,
net for
 
the thirty-nine
weeks ended
February
25, 2023
was an
expense
of $205
thousand
compared
to income
of $8.2
million for the same
period of fiscal 2022. The majority
of the decrease is due
to our acquisition in fiscal 2022
of the remaining
50% membership
interest in
Red River
Valley
Egg Farm,
LLC (“Red
River”) as
we recognized
a $4.5
million gain
due to
the
remeasurement
of
our
equity
investment,
along
with
the
$1.4
million
payment
received
in
fiscal
2022
related
to
review
and
adjustment
of
our
various
marketing
agreements.
Additionally,
the
Company
recorded
a
$2
million
impairment
of
an
investment in an unconsolidated entity in the third quarter of fiscal 2023.
INCOME TAXES
For the thirdsecond
 
quarter of fiscal
2023, pre-tax income
was $424.9 million
compared to $53.0
million for the
same period of
 
fiscal
2022. We 2024,
 
recorded income tax expense of $102.1which reflects
 
million for the third quarter of fiscalan effective
tax rate
 
2023, which reflects an effective
tax rate
of 24.0%25.0%.
 
Income tax
 
expense was $13.6$64.0
 
million for
 
the comparable
 
period of fiscal
 
2022,2023, which
 
reflects an effective
tax rate
of 25.6%24.4%.
 
For the thirty-nine
weeks ended February
25, 2023, pre-tax income
was $852.6 million
compared to $19.7 million
for the same
period of
fiscal 2022.
We
recorded income
tax expense
of $206.4
million, which
reflects an
effective
tax rate
of 24.2%.
We
recorded an income tax benefit of $2.9 million
in the prior year period, which includes the discrete
tax benefit of $8.3 million in
connection with the Red River
acquisition.
Excluding the discrete tax benefit, income
tax expense for the comparable period
of
fiscal 2022 was $5.3 million with an adjusted effective tax
rate of 27.3%.
27
Our effective tax
 
rate differs from
 
the federal statutory income
 
tax rate due to
 
state income taxes, certain
 
federal tax credits and
certain
 
items
 
included
 
in
 
income
 
for
 
financial
 
reporting
 
purposes
 
that
 
are
 
not
 
included
 
in
 
taxable
 
income
 
for
 
income
 
tax
purposes,
 
including
 
tax
 
exempt
 
interest
 
income,
 
certain
 
nondeductible
 
expenses
 
and
 
net
 
income
 
or
 
loss
 
attributable
 
to
 
our
noncontrolling interest.
NET INCOME ATTRIBUTABLE
 
TO CAL-MAINE FOODS, INC.
Net income
 
attributable to
 
Cal-Maine Foods,
 
Inc. for the
 
the thirdsecond quarter
 
quarter ended
February 25, December 2,
 
2023, was
 
was $323.2$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
 
$6.64.37
per basic
 
and $6.62
per diluted
 
common share,
 
compared to
 
net income
 
attributable to
 
Cal-Maine Foods,
 
Inc. of
 
$39.5323.9 million
or $6.66
or $0.81 per basic and $6.63 per diluted common share, for the same period of fiscal
2022.
Net
income
attributable
to
Cal-Maine
Foods,
Inc.
for
the thirty-nine
weeks
ended February
25,
2023,
was $647.1
million,
or
$13.31 per basic and $13.25 per diluted share, compared
to net income attributable to Cal-Maine Foods, Inc.
of $22.6 million or
$0.46 per basic and diluted share for the same period of fiscal 2022. 2023.
LIQUIDITY AND CAPITAL
 
RESOURCES
 
Working
 
Capital and Current Ratio
Our working capital
 
capital at February 25,
December 2,
 
2023 was $880.3 million,$910.1
 
million, compared
to $476.8$942.2
 
million at May 28,
 
2022. The calculationJune 3,
 
2023. The
calculation of
working
 
capital
 
is defined
 
as current
 
assets less
 
current
 
liabilities. Our
 
current
 
ratio
 
was 3.86.9
 
at FebruaryDecember
 
25,2, 2023,
 
compared
with 3.66.2 at May 28, 2022.June 3, 2023. The current ratio is calculated by dividing current
 
current assets by current liabilities.
Cash Flows from Operating Activities
For the
thirty-nine twenty-six weeks
 
ended February
25,December 2, 2023,
 
$706.574.0 million in net cash
 
in netwas provided by operating
 
cash was
provided by
operating activities,
compared to
to
$20.8344.8
 
million
 
provided
 
by
 
operating
 
activities
 
for
 
the
 
comparable
 
period
 
in
 
fiscal
 
2022.2023.
 
The
 
increasedecrease
 
in
 
cash
 
flow
 
from
operating
activities
resulted
primarily
from
higher
lower selling
prices
for
 
conventional
and
specialty
eggs
as
well
as
increased
volume of
specialty egg
sales, partially
offset by
increased costs of
feed ingredients
and processing,
packaging and
warehouse
costs compared to the prior-year period.
Cash Flows from Investing Activities
We
continue
to invest
in our
facilities,
with
$86.2
million used
to purchase
property,
plant and
equipment
forFor
 
the
 
thirty-ninetwenty-six
weeks
 
ended
 
FebruaryDecember
 
25,2,
 
2023,
 
compared$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
 
$49.2146.7
 
million
used
in
investing
activities
 
in
 
the
 
same
 
period
 
of
 
fiscal
 
2022.2023,
 
Purchasesprimarily
due
to
purchases
of
investment
securities.
Sales
and
maturities
 
of
 
investment
securities
 
were
 
$442.6196.1
 
million
 
in
 
thefirst
 
thirdtwo
 
quarterquarters
 
of
 
fiscal
 
2023,2024,
compared
to
 
$47.1
65.3 million
 
in the
 
first two
quarters fiscal
 
2022.
2023. The
 
increase in
 
insales and
purchasesmaturities of
 
investment securities
 
is
primarily
 
due
to the
maturities of
short-term
investments
during
 
the utilizationperiod.
Purchases of
property,
plant and
equipment were
$66.2 million
and $59.7 million
in the first
two quarters
 
of increasedfiscal 2024
 
liquidity resultingand 2023,
 
from increasedrespectively,
 
cash flows
provided by operating activities noted above.primarily reflecting
 
During the thirty-nine weeks ended February 26,
2022, we acquired the remainingprogress on
50% membership interest in Red River for $48.5 million.our construction projects.
Cash Flows from Financing Activities
We
paid dividends
 
of $144.6 $37.3
million for
the thirty-nine twenty-six
weeks ended February 25, 2023.
December 2,
2023 compared
to $78.4
million in
the same
prior-year period.
As of February 25,December 2, 2023, cash
increased $162.5$69.0 million since May 28,June
 
2022,3, 2023, compared to a decrease an increase
of $41.8$119.6 million during
the
same period of fiscal 2022.2023.
Credit Facility
We
 
had no long-term
 
long-term debt
outstanding at
 
February 25, 2023December 2,
 
2023 or May 28,
 
2022. On NovemberJune 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
 
FebruaryDecember
 
25,2,
 
2023,
 
no
 
amounts
 
were
 
borrowed
 
under
 
the
 
Credit
Facility. We
 
have $4.1$4.3 million
 
in outstanding standby
 
letters of credit issued
 
under our Credit
 
Facility for the
 
benefit of certain
insurance companies. Refer
 
Refer to
Part II Item
 
Item 8,
Notes to
 
the Consolidated
Financial Statements
 
Note 10 –and Supplementary
 
Data, Note
10 -
Credit Facility included
in our 20222023
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):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28
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 February 25, 2023 (in thousands):29
Project(s) Type
Projected
 
Completion
Projected Cost
Spent as of February
25,December 2, 2023
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses
Fiscal 20242025
42,59154,702
4,83036,370
37,76118,332
Cage-Free Layer & Pullet HousesFeed Mill
Fiscal 2025
40,09910,486
26,3502,486
13,7498,000
Cage-Free Layer & Pullet Houses
Fiscal 2026
38,88378,982
15,89459,000
22,98919,982
Cage-Free Layer & Pullet Houses
Fiscal 2027
56,92356,732
13,61729,334
43,30627,398
$
178,496200,902
$
60,691127,190
$
117,80573,712
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.
 
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
 
thirty-ninethirteen weeks ended February 25,December 2, 2023 from
the information provided in Part II Item 7A, Quantitative and Qualitative Disclosures About
 
Market Risk in our 20222023 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 February 25,December 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 that
 
occurred during
 
the quarter
 
ended FebruaryDecember
 
25,2, 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
 
The following table is a summaryThere were no purchases of Common Stock made by or
on behalf of our third quarter 2023 share repurchases:
Issuer Purchases of Equity Securities
TotalCompany or any affiliated purchaser
 
Numberduring the second
quarter of fiscal 2024.
Maximum Number
Shares Purchased
of Shares that
Total
Number
Average
as Part of Publicly
May Yet
Be
of Shares
Price Paid
Announced Plans
Purchased Under the
Period
Purchased (1)
per Share
Or Programs
Plans or Programs
11/27/22 to 12/24/22
—
$
—
—
—
12/25/22 to 01/21/23
(29,344)
54.10
—
—
01/22/23 to 02/25/23
—
—
—
—
(29,344)
$
54.10
—
—
(1)
As permitted under our Amended and Restated 2012
Omnibus Long-Term Incentive Plan, these shares were withheld by us to satisfy
tax withholding
obligations for employees in connection with the vesting of restricted
common stock.
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
 
Exchange Act
 
of 1934,
 
the registrant has
 
duly caused
 
this report
 
to be signed
 
on
its behalf by the undersigned, thereunto duly authorized.
CAL-MAINE FOODS, INC.
(Registrant)
Date:
 
March 28, 2023January 3, 2024
/s/ Max P.
 
Bowman
Max P.
 
Bowman
Vice President, Chief Financial
 
Officer
(Principal Financial Officer)
໿
Date:
 
March 28, 2023January 3, 2024
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)
໿