CAL-MAINE FOODS INC
10-Ks and 10-Qs
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1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
DC
20549
FORM
For the quarterly period ended
or
For the transition period from ____________ to ____________
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S Employer Identification No.)
,
,
,
(Address of principal executive offices)
(Zip Code)
(
)
(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
The
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.
☑
☐
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).
☑
☐
Indicate by
check mark
whether the registrant
is a large
accelerated filer,
an accelerated
filer, a
non-accelerated filer,
a smaller
reporting
company,
or
an
emerging
growth
company.
See
the
definitions
of
“large
accelerated
filer,”
“accelerated
filer,”
“smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
☑
Accelerated filer
☐
Non – Accelerated filer
☐
Smaller reporting company
Emerging growth company
If
an
emerging
growth
company,
indicate
by
check
mark
if
the
registrant
has
elected
not
to
use
the
extended
transition
period
for
complying
with
any
new
or
revised
financial
accounting
standards
provided
pursuant
to
Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes
☐
☑
There were
value, outstanding as of January 3, 2024.
2
INDEX
Page
Number
Part I.
Financial Information
Item 1.
Item 2.
Item 3.
Item 4.
Part
II.
Other Information
Item 1.
Item 1A.
Item 2.
Item 6.
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)
December 2, 2023
June 3, 2023
Assets
Current assets:
Cash and cash equivalents
$
$
Investment securities available-for-sale
Trade and other receivables, net
Income tax receivable
Inventories
Prepaid expenses and other current assets
Total current
assets
Property, plant &
equipment, net
Investments in unconsolidated entities
Goodwill
Intangible assets, net
Other long-term assets
Total Assets
$
$
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
$
Accrued wages and benefits
Accrued income taxes payable
Dividends payable
Accrued expenses and other liabilities
Total current
liabilities
Other noncurrent liabilities
Deferred income taxes, net
Total liabilities
Commitments and contingencies - see Note 10
—
—
Stockholders’ equity:
Common stock ($
Common stock - authorized
Class A convertible common stock - authorized and issued
Paid-in capital
Retained earnings
Accumulated other comprehensive loss, net of tax
(
1,614
)
(
2,886
)
Common stock in treasury at cost –
shares at June 3, 2023
(
30,014
)
(
30,008
)
Total Cal-Maine Foods,
Inc. stockholders’ equity
Noncontrolling interest in consolidated entity
(
2,444
)
(
1,498
)
Total stockholders’
equity
Total Liabilities and Stockholders’
Equity
$
$
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
Twenty-six Weeks
Ended
December 2, 2023
November 26, 2022
December 2, 2023
November 26, 2022
Net sales
$
$
$
$
Cost of sales
Gross profit
Selling, general and administrative
Loss on disposal of fixed assets
Operating income
Other income (expense):
Interest income, net
Royalty income
Equity income (loss) of unconsolidated
entities
(
987
)
(
441
)
(
843
)
Other, net
Total other income, net
Income before income taxes
Income tax expense
Net income
Less: Loss attributable to noncontrolling
interest
(
431
)
(
293
)
(
946
)
(
446
)
Net income attributable to Cal-Maine Foods,
Inc.
$
$
$
$
Net income per common share:
Basic
$
$
$
$
Diluted
$
$
$
$
Weighted average
shares outstanding:
Basic
Diluted
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
Twenty-six Weeks
Ended
December 2, 2023
November 26, 2022
December 2, 2023
November 26, 2022
Net income
$
$
$
$
Other comprehensive income (loss), before
tax:
Unrealized holding gain (loss) on available-
for-sale securities, net of reclassification
adjustments
(
974
)
(
1,971
)
Income tax benefit (expense) related to
items of other comprehensive income
(
218
)
(
409
)
Other comprehensive income (loss), net of tax
(
737
)
(
1,491
)
Comprehensive income
Less: Comprehensive loss attributable to the
noncontrolling interest
(
431
)
(
293
)
(
946
)
(
446
)
Comprehensive income attributable to Cal-
Maine Foods, Inc.
$
$
$
$
See Notes to Condensed Consolidated Financial Statements.
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Twenty-six Weeks
Ended
December 2, 2023
November 26, 2022
Cash flows from operating activities:
Net income
$
$
Depreciation and amortization
Deferred income taxes
(
540
)
Other adjustments, net
(
12,830
)
Net cash provided by operations
Cash flows from investing activities:
Purchases of investment securities
(
43,569
)
(
152,365
)
Sales and maturities of investment securities
Investment in unconsolidated entities
(
363
)
Acquisition of business
(
53,746
)
Purchases of property,
plant and equipment
(
65,774
)
(
59,709
)
Net proceeds from disposal of property,
plant and equipment
Net cash provided by (used in) investing activities
(
146,703
)
Cash flows from financing activities:
Payments of dividends
(
37,276
)
(
78,394
)
Purchase of common stock by treasury
(
5
)
(
45
)
Principal payments on finance lease
(
214
)
(
94
)
Net cash used in financing activities
(
37,495
)
(
78,533
)
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
$
$
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 be
read in
conjunction with
our Annual
Report on
Form 10-K
for the fiscal
year ended
June 3,
2023 (the
“2023
Annual
Report”).
These
statements
reflect
all
adjustments
that
are,
in
the
opinion
of
management,
necessary
to
a
fair
statement of the results for
the interim periods presented
and, in the opinion of
management, consist of adjustments
of a normal
recurring nature.
Operating results for
the interim periods
are not necessarily
indicative of operating
results for the
entire fiscal
year.
Fiscal Year
The Company’s
fiscal year
ends on
the Saturday
closest to
May 31.
Each of
the three-month
periods and
year-to-date periods
ended on December 2, 2023 and November 26, 2022 included
13 weeks
26 weeks
, respectively.
Use of Estimates
The preparation of the
consolidated financial statements in
conformity with GAAP requires management
to make estimates and
assumptions
that affect
the amounts
reported in
the consolidated
financial statements
and accompanying
notes. Actual
results
could differ from those estimates.
Investment Securities
The 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
carried at
fair value,
based
on quoted market prices
as of the balance sheet
date, with unrealized gains
and losses recorded in other
comprehensive income.
The
amortized
cost
of
debt
securities
is
adjusted
for
amortization
of
premiums
and
accretion
of
discounts
to
maturity
and
is
recorded in interest
income. The Company regularly
evaluates changes to the
rating of its debt
securities by credit agencies
and
economic conditions
to assess and
record any
expected credit
losses through
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
value
and
are
classified
as
“Other
long-term
assets”
in
the
Company’s
Condensed
Consolidated
Balance
Sheets.
Unrealized
gains
and
losses
for
equity
securities
are
recorded
in
other
income
(expenses) as Other, net in the Company’s
Condensed Consolidated Statements of Income.
The cost
basis for
realized gains
and losses
on available-for-sale
securities is
determined by
the specific
identification method.
Gains
and
losses
are
recognized
in
other
income
(expenses)
as
Other,
net
in
the
Company’s
Condensed
Consolidated
Statements of 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 December
2, 2023 and June
3,
2023,
reserves
for
credit
losses
were
$
customers based on
an evaluation of each
customer’s financial condition
and credit history.
Collateral is generally
not required.
The
Company
minimizes
exposure
to
counter
party
credit
risk
through
credit
analysis
and
approvals,
credit
limits,
and
monitoring
procedures.
In
determining
our
reserve
for
credit
losses,
receivables
are
assigned
an
expected
loss
based
on
historical loss information adjusted as needed for economic and
other forward-looking factors.
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) 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
, 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
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
$
Fair value of contingent consideration
Total estimated purchase
consideration
Recognized amounts of identifiable assets acquired and liabilities assumed
Inventory
$
Property, plant and equipment
Intangible assets
Other long-term assets
Liabilities assumed
(
143
)
Total identifiable
net assets
Goodwill
$
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
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
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
US government and agency obligations
Asset backed securities
Total current
investment securities
$
$
$
$
Mutual funds
$
$
$
$
Total noncurrent
investment securities
$
$
$
$
June 3, 2023
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
US government and agency obligations
Asset backed securities
Treasury bills
Total current
investment securities
$
$
$
$
Mutual funds
$
$
$
$
Total noncurrent
investment securities
$
$
$
$
Available-for-sale
Proceeds from sales
and maturities of investment
securities available-for-sale
were $
twenty-six weeks ended December 2, 2023
and November 26, 2022, respectively.
Gross realized gains for the twenty-six
weeks
ended December 2, 2023 and November
26, 2022 were $
twenty-six
weeks ended
December 2,
2023 and
November 26,
2022 were
$
were
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 December
2, 2023 are as follows (in thousands):
Estimated Fair Value
Within one year
$
1-5 years
Total
$
Noncurrent
There were
26, 2022.
11
Note 4 - Fair Value
Measurements
The Company
is required
to categorize
both financial
and nonfinancial
assets and
liabilities based
on the
following fair
value
hierarchy. The
fair value
of an
asset is
the price
at which
the asset
could be
sold in
an orderly
transaction between
unrelated,
knowledgeable, and willing
parties able to engage in
the transaction. A liability’s
fair value is defined
as the amount that would
be
paid
to
transfer
the
liability
to
a
new
obligor
in
a
transaction
between
such
parties,
not
the
amount
that
would
be paid
to
settle the liability with the creditor.
•
Level 1
•
Level 2
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
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:
short maturity of these instruments.
Assets and Liabilities Measured at Fair
Value
on a Recurring Basis
In
accordance
with
the
fair
value
hierarchy
described
above,
the
following
table
shows
the
fair
value
of
financial
assets and
liabilities measured at fair value on a recurring basis as of December 2, 2023 and June 3,
2023 (in thousands):
December 2, 2023
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
US government and agency obligations
Asset backed securities
Mutual funds
Total assets measured at fair
value
$
$
$
$
Liabilities
Contingent consideration
$
—
$
—
$
1,000
$
1,000
Total liabilities measured
at fair value
$
$
$
$
June 3, 2023
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
US government and agency obligations
Asset backed securities
Treasury bills
Mutual funds
Total assets measured at fair
value
$
$
$
$
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
the date of
the acquisition. The fair
value of the
contingent consideration is
estimated using a
discounted cash flow
model. Key
assumptions and
unobservable inputs
that require
significant judgement
used in
the estimate
include weighted
average cost
of
capital,
egg
prices,
projected
revenue
and
expenses
over
which
the
contingent
considered
is
measured,
and
the
probability
assessments
with
respect
to
the
likelihood
of
achieving
the
forecasted
projections.
See
further
discussion
in
Note 5 - Inventories
Inventories consisted of the following as of December 2, 2023 and June
3, 2023 (in thousands):
December 2, 2023
June 3, 2023
Flocks, net of amortization
$
$
Eggs and egg products
Feed and supplies
$
$
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
million and
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
$
$
$
(
30,014
)
$
$
(
2,291
)
$
$
(
2,013
)
$
Other comprehensive
income, net of tax
—
—
—
—
—
—
Stock compensation
plan transactions
—
—
—
—
—
—
Dividends ($
per share)
Common
—
—
—
—
—
(
5,125
)
—
(
5,125
)
Class A common
—
—
—
—
—
(
557
)
—
(
557
)
Net income (loss)
—
—
—
—
—
(
431
)
Balance at December
2, 2023
$
$
$
(
30,014
)
$
$
(
1,614
)
$
$
(
2,444
)
$
13
Thirteen Weeks
Ended November 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 28,
2022
$
$
$
(
28,495
)
$
$
(
2,350
)
$
$
(
359
)
$
Other comprehensive
loss, net of tax
—
—
—
—
(
737
)
—
—
(
737
)
Stock compensation
plan transactions
—
—
(
1
)
—
—
—
Dividends ($
per share)
Common
—
—
—
—
—
(
59,708
)
—
(
59,708
)
Class A common
—
—
—
—
—
(
6,494
)
—
(
6,494
)
Net income (loss)
—
—
—
—
—
(
293
)
Balance at November
26, 2022
$
$
$
(
28,496
)
$
$
(
3,087
)
$
$
(
652
)
$
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
$
$
$
(
30,008
)
$
$
(
2,886
)
$
$
(
1,498
)
$
Other comprehensive
income, net of tax
—
—
—
—
—
—
Stock compensation
plan transactions
—
—
(
6
)
—
—
—
Dividends ($
per share)
Common
—
—
—
—
—
(
5,390
)
—
(
5,390
)
Class A common
—
—
—
—
—
(
586
)
—
(
586
)
Net income (loss)
—
—
—
—
—
(
946
)
Balance at December
2, 2023
$
$
$
(
30,014
)
$
$
(
1,614
)
$
$
(
2,444
)
$
14
Twenty-six Weeks
Ended November 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrollin
g
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 28,
2022
$
$
$
(
28,447
)
$
$
(
1,596
)
$
$
(
206
)
$
Other comprehensive
loss, net of tax
—
—
—
—
(
1,491
)
—
—
(
1,491
)
Stock compensation
plan transactions
—
—
(
49
)
—
—
—
Contributions
—
—
—
—
—
—
—
—
Dividends ($
per share)
Common
—
—
—
—
—
(
97,355
)
—
(
97,355
)
Class A common
—
—
—
—
—
(
10,589
)
—
(
10,589
)
Net income (loss)
—
—
—
—
—
(
446
)
Balance at November
26, 2022
$
$
$
(
28,496
)
$
$
(
3,087
)
$
(
652
)
$
Note 7 - Net Income per Common Share
Basic net income
per share is
based on the
weighted average Common
Stock and Class
A Common Stock
outstanding. Diluted
net
income
per
share
is
based
on
weighted-average
common
shares
outstanding
during
the
relevant
period
adjusted
for
the
dilutive effect of share-based awards.
The
following
table
provides
a
reconciliation
of
the
numerators
and
denominators
used
to
determine
basic
and
diluted
net
income per common share (amounts in thousands, except per share data):
Thirteen Weeks
Ended
Twenty-six Weeks
Ended
December 2, 2023
November 26, 2022
December 2, 2023
November 26, 2022
Numerator
Net income
$
$
$
$
Less: Loss attributable to
noncontrolling interest
(
431
)
(
293
)
(
946
)
(
446
)
Net income attributable to Cal-Maine
Foods, Inc.
$
$
$
$
Denominator
Weighted-average
common shares
outstanding, basic
Effect of dilutive restricted shares
Weighted-average
common shares
outstanding, diluted
Net income per common share
attributable to Cal-Maine Foods, Inc.
Basic
$
$
$
$
Diluted
$
$
$
$
15
Note 8 - Revenue from Contracts with Customers
Satisfaction of Performance Obligation
The vast majority of the Company’s
revenue is derived from agreements with customers based on the customer
placing an order
for products. Pricing
for the most part
is determined when
the Company and
the customer agree
upon the specific
order, which
establishes the contract for that order.
Revenues are
recognized in
an amount
that reflects
the net
consideration we
expect to
receive in
exchange for
the goods.
Our
shell
eggs
are
sold
at
prices
related
to
independently
quoted
wholesale
market
prices
or
formulas
related
to
our
costs
of
production.
The
Company’s
sales
predominantly
contain
a
single
performance
obligation.
We
recognize
revenue
upon
satisfaction
of
the
performance
obligation
with
the
customer,
which
typically
occurs
within
days
of
the
Company
and
the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts include a guaranteed sale clause, pursuant to which we
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 using historical
return data compared to current period sales and accounts receivable.
The allowance is recorded as a reduction of sales in the
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
sales
price
based
on
estimated
future
redemption
rates.
Redemption
rates
are
estimated
using
the
Company’s
historical
experience
for
similar
inducement
offers.
Current discount
and
inducement
offers
are
presented
as a
net amount
in
‘‘Net sales.’’
Disaggregation of Revenue
The following table provides revenue disaggregated by product category
(in thousands):
Thirteen Weeks
Ended
Twenty-six Weeks
Ended
December 2, 2023
November 26, 2022
December 2, 2023
November 26, 2022
Conventional shell egg sales
$
$
$
$
Specialty shell egg sales
Egg products
Other
$
$
$
$
Contract Costs
The Company can incur costs to
obtain or fulfill a contract with a
customer. If the
amortization period of these costs is less
than
one year,
they are
expensed as
incurred. When
the amortization
period is
greater than
one year,
a contract
asset is
recognized
and
is amortized
over the
contract life
as a
reduction in
net sales.
As of
December 2,
2023 and
June 3,
2023, the
balance for
contract assets was immaterial.
Contract Balances
The Company receives payment from customers based on specified terms that are
generally less than 30 days from delivery.
There are rarely contract assets or liabilities related to performance under the
contract.
Note 9 - Stock Based Compensation
Total
stock-based
compensation
expense
was
$
November 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
December
2,
2023
of
$
average period of
14 - Stock Compensation Plans in our 2023 Annual Report for further information
on our stock compensation plans.
The Company’s restricted share activity
for the twenty-six weeks ended December 2, 2023 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, June 3, 2023
$
Vested
(
305
)
Forfeited
(
1,329
)
Outstanding, December 2, 2023
$
Note 10 - Commitments and Contingencies
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
$
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 appealed
the First District Court’s
decision to the Supreme Court
of
Texas.
On
September
29,
2023,
the
Supreme
Court
of
Texas
denied
the
Company’s
Petition
for
Review
so
the
case
will
be
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
of
eggs prior
to the
declaration
of the
state of
emergency
and damages
in the
amount
of $
each violation
impacting anyone
over 65
years old.
On December
1, 2020,
the Company
and
certain other
defendants filed
a
motion to
dismiss the
plaintiffs’
amended
class action
complaint. The
plaintiffs
subsequently filed
a motion
to strike,
and the
motion to
dismiss and
related proceedings
were referred
to a
United States
magistrate judge.
On July
14, 2021,
the magistrate
judge
issued
a
report
and
recommendation
to
the
court
that
the
defendants’
motion
to
dismiss
be
granted
and
the
case
be
dismissed without prejudice for lack of subject matter jurisdiction. On
September 20, 2021, the court dismissed the case without
prejudice.
On
July
13,
2022,
the
court
denied
the
plaintiffs’
motion
to
set
aside
or
amend
the
judgment
to
amend
their
complaint.
17
On March 15, 2022,
plaintiffs filed a
second suit against the
Company and several
defendants in Bell et
al. v.
Cal-Maine Foods
et al.,
Case No.
1:22-cv-246, in
the Western
District of
Texas,
Austin Division
alleging the
same assertions
as laid
out in
the
first
complaint.
On
August
12,
2022,
the
Company
and
other
defendants
in
the
case
filed
a
motion
to
dismiss
the
plaintiffs’
class action
complaint. On
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 filed
their respective appellate
briefs, but the
court has not
ruled on these
submissions.
Management believes the risk of material loss related to both matters to be remote.
Kraft Foods Global, Inc. et al. v.
United Egg Producers, Inc. et al.
As previously
reported, on
September 25,
2008, the
Company
was named
as one
of several
defendants
in numerous
antitrust
cases involving
the United
States shell
egg
industry.
The Company
settled all
of these
cases, except
for
the claims
of certain
plaintiffs who sought substantial
damages allegedly arising from
the purchase of egg products (as
opposed to shell eggs). These
remaining plaintiffs
are Kraft Food
Global, Inc.,
General Mills, Inc.,
and Nestle USA,
Inc. (the
“Egg Products
Plaintiffs”) and,
until a subsequent settlement was reached as described below,
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
alleged
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
attacked
certain features of
the United Egg
Producers animal-welfare guidelines
and program used by
the Company and
many other egg
producers.
On October 24, 2019,
the Company entered into
a confidential settlement agreement
with The Kellogg Company
dismissing all
claims against the
Company for an
amount that did
not have a
material impact on
the Company’s
financial condition or
results
of operations.
On November
11,
2019, a
stipulation
for dismissal
was filed
with the
court, and
on March
28, 2022,
the court
dismissed the Company with prejudice.
The trial of this case began
on October 17, 2023. On December
1, 2023, the jury returned a decision
awarding the Egg Products
Plaintiffs
$
liable
for
treble
damages,
or
$
settlements with
previous
settling defendants,
plus the
Egg Product
Plaintiffs’
reasonable
attorneys’
fees. This
decision is
not
final and
remains subject
to the
defendants’ motion
for a
directed verdict
noted below
and appeals
by the
parties. During
our
second fiscal quarter
of 2024, we
recorded an accrued
expense of $
in
the
Company’s
Condensed
Consolidated
Statements
of
Income
and
classified
as
other
noncurrent
liabilities
in
the
Company’s
Condensed Consolidated
Balance Sheets. The
accrual represents
our estimate of
the Company’s
proportional share
of the reasonably
possible 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
the outcome of
those discussions. Our
accrual may also
be revised in
whole or in
part in the
future to the extent we
are successful in further proceedings
in the litigation.
On November 29, 2023, the
defendants, including
the Company,
filed a
motion for
judgment as
a matter
of law
in their
favor,
known as
a directed
verdict, notwithstanding
the
jury’s decision. The Company intends
to continue to vigorously defend the claims asserted by the Egg Products Plaintiffs.
State of Oklahoma Watershed Pollution
Litigation
On June
18, 2005,
the State
of Oklahoma
filed suit,
in the
United States
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
%
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
remedies. On
June 12,
2023, the
court ordered
the parties
to mediate
before the
retired Tenth
Circuit Chief Judge Deanell
Reece Tacha.
On October 26, 2023, the parties
filed separate status reports informing
the court that
the mediation
was unsuccessful.
Also on
October 26,
2023, the
defendants filed
a post-trial
motion to
dismiss and
supporting
brief arguing
that the
case should
be dismissed
due to
the state record
before the
court, the resulting
mootness of
the case,
and
violation
of
due
process.
On
November
10,
2023,
the
State
of
Oklahoma
filed
its
response
in
opposition
to
the
motion
to
dismiss and on
November 17, 2023,
the defendants filed
their reply.
The court has not
ruled on the motion.
While management
believes there
is a
reasonable
possibility of
a material
loss 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
range
of
factors,
including
the
following,
among
others:
uncertainties
inherent
in
any
assessment
of
potential
costs
associated
with
injunctive
relief
or
other
penalties
based
on
a
decision in a
case tried over
13 years ago based
on environmental conditions
that existed at the
time, the lack
of guidance from
the court as to what
might be considered appropriate
remedies, the ongoing litigation
with the State of Oklahoma
and motion to
dismiss before
the court, and
uncertainty regarding
what our proportionate
share of 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
nearby
facilities
in
Kansas
experienced
an outbreak
of
HPAI,
affecting
approximately
an additional
% 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.
19
ITEM
2.
MANAGEMENT’S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND
RESULTS
OF
OPERATIONS
The following
should be
read in
conjunction
with Management’s
Discussion and
Analysis of
Financial Condition
and Results
of Operations
included in Part
II Item 7
of the Company’s
Annual Report
on Form 10-K
for its fiscal
year ended
June 3, 2023
(the “2023 Annual Report”), and the accompanying financial statements and
notes included in Part II Item 8 of the 2023 Annual
Report and in
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
future supply
of and
demand for
our products,
potential future
corn and
soybean price
trends, potential
future
impact
on
our
business
of
the
recent
resurgence
in
United
States
(“U.S.”)
commercial
table
egg
layer
flocks
of
the
highly
pathogenic
avian
influenza
(“HPAI”)
outbreak,
potential
future
impact
on
our
business
of
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,
including anticipated results
of operations and
financial condition. Such
forward-looking statements are
identified by the use
of
words such
as “believes,”
“intends,” “expects,”
“hopes,” “may,”
“should,” “plans,”
“projected,” “contemplates,”
“anticipates,”
or
similar
words.
Actual
outcomes
or
results
could
differ
materially
from
those
projected
in
the
forward-looking
statements.
The
forward-looking
statements
are
based
on
management’s
current
intent,
belief,
expectations,
estimates,
and
projections
regarding
the
Company
and
its
industry.
These
statements
are
not
guarantees
of
future
performance
and
involve
risks,
uncertainties, assumptions,
and other factors
that are difficult
to predict
and may be
beyond our
control. The
factors that
could
cause actual
results to
differ
materially
from
those projected
in the
forward-looking
statements include,
among
others, (i)
the
risk
factors
set forth
in
Part
I
Item
1A
of
the
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 HPAI
affecting poultry
in the U.S.,
Canada and other
countries 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 ability to
predict and meet
demand for cage-
free and
other
specialty eggs,
(v)
risks, changes,
or obligations
that could
result from
our future
acquisition
of new
flocks or
businesses and risks
or changes that
may cause conditions
to completing a
pending acquisition not
to be met,
(vi) risks relating
to increased
costs and
higher and
potentially further
increases in,
inflation and
interest rates,
(vii) our
ability to
retain existing
customers,
acquire
new
customers
and
grow
our
product
mix,
(viii)
adverse
results
in
pending
litigation
matters,
(ix)
global
instability,
including as
a result of
the wars in
Ukraine and
Israel and
attacks on shipping
in the Red
Sea, and (x)
any potential
resurgence of
COVID-19. Readers
are cautioned
not to place
undue reliance
on forward-looking
statements because,
while we
believe the assumptions on
which the forward-looking
statements are based are reasonable,
there can be no
assurance that these
forward-looking statements
will prove
to be accurate.
Further, forward
-looking statements
included herein
are only made
as of
the respective
dates thereof,
or if no
date is stated,
as of the
date hereof.
Except as otherwise
required by
law,
we disclaim
any
intent or obligation
to update publicly
these forward-looking statements,
whether because of
new information, future
events, or
otherwise.
GENERAL
Cal-Maine
Foods,
Inc.
(the
“Company,”
“we,”
“us,”
“our”)
is
primarily
engaged
in
the
production,
grading,
packaging,
marketing
and
distribution
of
fresh
shell
eggs.
Our
operations
are
fully
integrated
and we
have
one
operating
and
reportable
segment.
We
are
the
largest
producer
and
distributor
of
fresh
shell
eggs
in
the
U.S.
Our
total
flock
of
approximately
43.3
million layers
and 10.6
million pullets
and breeders
is the largest
in the
U.S. We
sell most of
our shell
eggs to a
diverse group
of customers,
including national
and regional
grocery store
chains, club
stores, companies
servicing independent
supermarkets
in
the
U.S.,
food
service
distributors,
and
egg
product
consumers
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
equal, we would
expect to experience
lower selling prices, sales
volumes and net
income (and may incur
net losses) in our
first
and
fourth
fiscal
quarters
ending
in
August/September
and
May/June,
respectively.
Because
of
the
seasonal
and
quarterly
fluctuations,
comparisons
of
our
sales
and
operating
results
between
different
quarters
within
a
single
fiscal
year
are
not
necessarily meaningful comparisons.
We
routinely
fill
our
storage
bins
during
harvest
season
when
prices
for
feed
ingredients
are
generally
lower.
To
ensure
continued
availability of
feed ingredients,
we may
enter into
contracts for
future purchases
of corn
and soybean
meal, and
as
part
of
these
contracts,
we
may
lock-in
the
basis
portion
of
our
grain
purchases
several
months
in
advance.
Basis
is
the
difference
between the
local cash
price for
grain and
the applicable
futures price.
A basis
contract is
a common
transaction in
the grain
market that
allows us
to lock-in
a basis
level for
a specific
delivery period
and wait
to set
the futures
price at
a later
date. Furthermore,
due to
the more
limited supply
for organic
ingredients,
we may
commit to
purchase organic
ingredients in
advance to help ensure supply.
Ordinarily, we do
not enter into long-term contracts beyond a year to purchase
corn and soybean
meal
or
hedge
against
increases
in
the
prices
of
corn
and
soybean
meal.
Corn
and
soybean
meal
are
commodities
and
are
subject
to
volatile
price
changes
due
to
weather,
various
supply
and
demand
factors,
transportation
and
storage
costs,
speculators,
agricultural, energy
and trade
policies in
the U.S.
and internationally
,
and global
instability that
could disrupt
the
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.
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.
California, Massachusetts,
and Colorado,
which collectively
represent approximately
16% of
the total
estimated
U.S.
population,
have
cage-free
legislation
currently
in
effect.
Oregon,
Washington
and
Nevada
have
cage-free
legislation
going into
effect starting
January 1,
2024, which
represents an
additional 5%
of the
total estimated
U.S. population.
Although
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 eggs or significantly
increase
the
volume
of
cage-free
egg
sales
in
the
future,
subject
in
most
cases
to
availability
of
supply,
affordability
and
consumer
demand,
among
other
contingencies.
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
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
to
help
them
meet
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. Our
volume of
cage-free egg
sales 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
to
provide
conventional
eggs
in
order
to
provide
our
customers
with
a
variety
of
egg
choices
and
to
address
hunger
in
our
communities.
For
additional
information,
see
the
2023
Annual
Report,
Part
I
Item
1,
“Business
–
Specialty
Eggs,”
“Business
–
Growth
Strategy” and
“Business –
Government
Regulation,” and
the first
risk factor
in Part
I Item
1A, “Risk
Factors” under
the sub-
heading “Legal and Regulatory Risk Factors.”
21
ACQUISITIONS
During the second
quarter of fiscal
2024,
we acquired
the assets of
Fassio Egg Farms,
Inc. (“Fassio”) related
to its commercial
shell
egg
production
and
processing
business.
The
assets
acquired
included
commercial
shell
egg
production
and
processing
facilities with
a current
capacity of
approximately 1.2
million laying
hens, primarily
cage-free, a
feed mill,
pullets, a
fertilizer
production and composting
operation and land
located in Erda, Utah,
outside Salt Lake
City.
See further discussion
in
Following
the
end
of the
second
quarter,
we
announced
a definitive
agreement
to
acquire
from
Tyson
Foods,
Inc.
a recently
closed broiler
processing plant,
hatchery
and feed
mill located
in Dexter,
Missouri.
We
expect
to complete
the acquisition
in
our third fiscal quarter and to repurpose the assets for use in egg and egg products production.
HPAI
Outbreaks
of
HPAI
continue
to
occur
in
U.S.
poultry
flocks.
Prior
to
November
2023,
there
were
no
reported
significant
outbreaks
of
HPAI
in
commercial
table
egg
layer
flocks
since
December
2022.
On
January
3,
2024,
the
USDA
division
of
Animal and
Plant Health
Inspection Service
(“APHIS”) reported
that approximately
12.9 million
commercial table
egg layers
and
1.5
million
commercial
table
egg
pullets
have
been
depopulated
as
a
result
of
HPAI
outbreaks
since
the
beginning
of
November 2023.
Cal-Maine
Foods experienced
HPAI
outbreaks
within our
facilities in
Kansas, resulting
in depopulation
of approximately
1.5
million
layers
and
240
thousand
pullets,
or
approximately
3.3%
of
our
total
flock
as
of
December
2,
2023,
subsequent
to
period-end.
Cal-Maine
Foods
believes
that
we
can
mitigate
the
loss
of
production
through
flock
rotations.
Cal-Maine
Foods
remains dedicated
to robust
biosecurity programs
across our
locations;
however,
no farm
is immune
from HPAI.
HPAI
is still
present in the wild bird population
and the extent of possible future
outbreaks, particularly during the
migration seasons, cannot
be predicted.
According to
the U.S.
Centers for
Disease Control
and Prevention,
these detections
do not
present an
immediate
public health
concern. For
additional information,
see the
2023 Annual
Report, Part
II Item
7 “Management’s
Discussion and
Analysis of Financial Condition and Results of Operations – HPAI.”
We
believe the
HPAI
outbreak will
continue to
impact the overall
supply of
eggs until the
layer hen
flock is
fully replenished.
The layer hen
flock five-year average
for the month
of December from
2018 through 2022
is 330.1 million
hens. According
to
the USDA, the U.S. flock
consisted of 321.6 million
layers producing table or
market type eggs as of
December 1, 2023, which
is 2.6% below the five-year average.
EXECUTIVE OVERVIEW
For
the
second
quarter
and
first two
quarters
of
fiscal
2024,
we
recorded
a
gross profit
of
$91.1
million
and
$136.6 million,
respectively,
compared
to
$317.8
million
and
$535.3
million,
respectively,
for
the
same
periods
of
fiscal
2023,
with
the
decreases
due primarily
to lower
conventional shell
egg prices.
The decrease
in gross
profit was
partially offset
by lower
feed
ingredient prices
in the
second quarter
and first
two quarters
of fiscal
2024 compared
to the
same periods
of fiscal
2023. Our
operating
income
and
net
income
for
the
second
quarter
of
fiscal
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
Company’s
Condensed
Consolidated
Statements
of
Income
and
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
quarter of
fiscal 2024
was $1.730
compared to
$2.709 in
the prior-year
period. Conventional
egg prices
per dozen
were $1.458
compared to
$2.883 for
the prior-year
period, and
specialty egg
prices
per dozen were
$2.277 compared to
$2.370 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 first two
quarters of fiscal
2024 was
$1.661 compared
to
$2.469
in
the
prior-year
period.
Conventional
egg
prices
per
dozen
were
$1.353
compared
to
$2.631
for
the
prior-year
period, and
specialty egg
prices per
dozen were
$2.277 compared
to $2.236
for the
prior-year
period. The
daily average
price
for the
Urner Barry
southeast large
index for
the second
quarter of
fiscal 2024
and first
two quarters
of fiscal
2024 decreased
49.6% and 49.2%, respectively,
from the comparable periods in the
prior year. For
information about historical shell egg
prices,
see Part I Item I of our 2023 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
22
specialty dozens
sold decreased
0.4% as
compared to
the same
quarter in
fiscal 2023.
Demand for
specialty eggs
decreased in
the
second
quarter
of
fiscal
2024
compared
to
the
same
prior
year
period
due
primarily
to
the
large
decrease
in
prices
for
conventional
eggs
compared
to
the
same
prior
year
period.
For
the
year-to-date
period,
conventional
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 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
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
Twenty-six Weeks
Ended
December 2, 2023
November 26, 2022
December 2, 2023
November 26, 2022
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
82.6
%
60.4
%
86.1
%
63.3
%
Gross profit
17.4
%
39.6
%
13.9
%
36.7
%
Selling, general and administrative
14.5
%
7.2
%
13.1
%
7.6
%
Loss on disposal of fixed assets
0.1
%
—
%
—
%
—
%
Operating income
2.8
%
32.4
%
0.8
%
29.1
%
Total other income, net
1.5
%
0.3
%
1.6
%
0.3
%
Income before income taxes
4.3
%
32.7
%
2.4
%
29.4
%
Income tax expense
1.1
%
8.0
%
0.6
%
7.1
%
Net income
3.2
%
24.7
%
1.8
%
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
second 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, 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
twenty-six
weeks
ended
December
2,
2023
were
$982.6
million,
compared
to
$1.46
billion
for
the
comparable period of fiscal 2023.
Net
shell
egg
sales
represented
95.7%
and
96.2%
of
total
net
sales
for
the
twenty-six
weeks
ended
December
2,
2023
and
November 26, 2022, respectively.
23
The table below presents an analysis of our conventional and specialty shell egg
sales (in thousands, except percentage data):
Thirteen Weeks
Ended
Twenty-six Weeks
Ended
December 2, 2023
November 26, 2022
December 2, 2023
November 26, 2022
Total net sales
$
523,234
$
801,700
$
982,578
$
1,460,044
Conventional
$
280,599
55.8
%
$
541,917
70.1
%
$
505,879
53.8
%
$
967,506
68.9
%
Specialty
217,905
43.3
%
227,778
29.4
%
426,586
45.4
%
428,598
30.5
%
Egg sales, net
498,504
99.1
%
769,695
99.5
%
932,465
99.2
%
1,396,104
99.4
%
Other
4,718
0.9
%
3,953
0.5
%
7,878
0.8
%
8,248
0.6
%
Net shell egg sales
$
503,222
100.0
%
$
773,648
100.0
%
$
940,343
100.0
%
$
1,404,352
100.0
%
Net shell egg sales as a
percent of total net sales
96.2
%
96.5
%
95.7
%
96.2
%
Dozens sold:
Conventional
192,462
66.8
%
187,976
66.2
%
373,992
66.6
%
367,688
65.7
%
Specialty
95,711
33.2
%
96,110
33.8
%
187,307
33.4
%
191,715
34.3
%
Total dozens sold
288,173
100.0
%
284,086
100.0
%
561,299
100.0
%
559,403
100.0
%
Net average selling price
per dozen:
Conventional
$
1.458
$
2.883
$
1.353
$
2.631
Specialty
$
2.277
$
2.370
$
2.277
$
2.236
All shell eggs
$
1.730
$
2.709
$
1.661
$
2.496
Egg products sales:
Egg products net sales
$
20,012
$
28,052
$
42,235
$
55,692
Pounds sold
16,998
15,702
36,351
32,204
Net average selling price
per pound
$
1.177
$
1.787
$
1.162
$
1.729
Shell egg net sales
Second Quarter – Fiscal 2024
vs. Fiscal 2023
-
In
the
second
quarter
of
fiscal
2024,
conventional
egg
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
volume
of
conventional
eggs
sold,
which resulted in a $12.9 million increase in net sales.
-
Conventional egg prices
were lower in the
second quarter of fiscal
2024 compared to the
second quarter of fiscal
2023
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
second
quarter
of
fiscal
2024
compared
to
the
second
quarter
of
fiscal
2023,
primarily
due
to
a
3.9%
decrease
in
the
prices
for
specialty
eggs,
which
resulted
in
a
$9.3
million decrease in net sales.
-
Cage-free
egg
revenue
for
the
second
quarter
of
fiscal
2024
represented
30.4%
of
our
total
net
shell
egg
revenue
versus
18.2%
for
the
same
prior
year
period
due
to
the
lower
conventional
egg
prices
causing
conventional
egg
revenue to represent a smaller proportion of our total sales.
Twenty-six weeks –
Fiscal 2024 vs. Fiscal 2023
-
For
the
twenty-six
weeks
ended
December
2,
2023,
conventional
egg
sales
decreased
$461.6
million,
or
47.7%,
compared
to the
same
period of
fiscal
2023,
primarily
due
to
the
decrease
in
the
prices for
conventional
shell
eggs.
Changes in
prices resulted
in a
$478.0 million
decrease in
net sales,
partially offset
by a
1.7% increase
in the
volume
of conventional eggs sold, which resulted in a $16.6 million increase in net
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”)
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
December 2, 2023
November 26, 2022
$ Change
% Change
Specialty egg expense
$
15,924
$
14,673
$
1,251
8.5
%
Delivery expense
17,706
18,175
(469)
(2.6)
%
Payroll, taxes and benefits
11,076
13,827
(2,751)
(19.9)
%
Stock compensation expense
1,061
987
74
7.5
%
Litigation loss contingency accrual
19,648
—
19,648
Other expenses
11,163
10,290
873
8.5
%
Total
$
76,578
$
57,952
$
18,626
32.1
%
N.M. – Not Meaningful
Second Quarter – Fiscal 2024
vs. Fiscal 2023
Specialty egg expense
-
During the second
part of fiscal year
2023, the higher
prices for conventional
eggs and the
comparatively lower prices
for
specialty eggs
diminished
the need
to promote
specialty eggs
.
During the
second quarter
of fiscal
year
2024, we
significantly
increased
promotional
programs,
resulting
in
higher
advertising
fees.
This
was
partially
offset
by
a
decrease
in a reduction in franchise fees to Eggland’s
Best, Inc.
Delivery expense
-
The
decreased
delivery
expense
is
primarily
due
to
a
decrease
in
fuel
and
contract
trucking
expenses
in
the
second
quarter of fiscal 2024 compared to the second quarter of fiscal 2023.
Payroll, taxes and benefits expense
-
The decrease
in payroll,
taxes and
benefits expense
is due
to a
decrease
in accrued
bonuses compared
to the
second
quarter of fiscal year 2023.
Litigation loss contingency accrual
-
The
litigation
loss
contingency
accrual
of
$19.6
million
relates
to
a
jury
decision
returned
on
December
1,
2023
in
pending
anti-trust
litigation.
See
further
discussion
in
Condensed Consolidated Financial Statements included in this Quarterly
Report.
Other expense
-
The
increase
in
other
expense
is
primarily
due
to
increased
legal
costs
incurred
compared
to
the
second
quarter
of
fiscal 2023.
Twenty-six Weeks
Ended
December 2, 2023
November 26, 2022
$ Change
% Change
Specialty egg expense
$
27,929
$
27,740
$
189
0.7
%
Delivery expense
35,397
38,091
(2,694)
(7.1)
%
Payroll, taxes and benefits
23,142
24,814
(1,672)
(6.7)
%
Stock compensation expense
2,101
2,012
89
4.4
%
Litigation loss contingency accrual
19,648
—
19,648
Other expenses
20,607
18,902
1,705
9.0
%
Total
$
128,824
$
111,559
$
17,265
15.5
%
N.M. - Not Meaningful
Twenty-six weeks –
Fiscal 2024 vs. Fiscal 2023
27
Specialty egg expense
-
Specialty egg
expense increased
by 0.7%,
as advertising
expense increased
in fiscal 2024
as discussed above
and was
offset by the reduction in franchise fees to Eggland’s
Best, Inc.
Delivery expense
-
The decreased delivery expense is primarily due to a decrease in fuel
and contract trucking expenses in fiscal 2024.
Payroll, taxes and benefits expense
-
The decrease
in payroll,
taxes and
benefits expense
is primarily
due to
a decrease
in accrued
bonuses in
the first
two
quarters of fiscal 2024 compared to the prior year period.
Litigation loss contingency accrual
-
The increase relates to the litigation loss contingency accrual discussed above.
Other expenses
-
The increase in other expense is primarily due to increased legal costs incurred
in the year-to-date period.
OPERATING
INCOME (LOSS)
For the second
quarter of fiscal
2024,
we recorded operating
income of $14.2
million compared
to operating income
of $259.9
million for the same period of fiscal 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
second quarter
of fiscal
2024,
we earned
$7.1 million
of interest
income compared
to $2.1
million for
the same
period
of
fiscal
2023.
The
increase
resulted
from
significantly
higher
investment
balances
and
higher
interest
rates.
The
Company
recorded interest expense
of $134 thousand and
$143 thousand for the
second quarters ended December
2, 2023 and November
26, 2022, respectively.
For the twenty-six weeks ended December 2, 2023, we earned
$14.6 million of interest income compared to $3.1 million for the
same period
of fiscal
2023. The
increase resulted
from significantly
higher investment
balances and
higher interest
rates. The
Company
recorded
interest
expense
of $276
thousand
and $291
thousand
for
the
twenty-six
weeks
ended
December 2,
2023
and November 26, 2022, respectively.
INCOME TAXES
For
the
second
quarter
of
fiscal
2024,
pre-tax
income
was $22.1
million
compared
to
$262.2
million
for
the
same
period
of
fiscal 2023.
We
recorded income
tax expense
of $5.5
million for
the second
quarter of
fiscal 2024,
which reflects
an effective
tax rate
of 25.0%.
Income tax
expense was $64.0
million for
the comparable
period of fiscal
2023, which
reflects an effective
tax rate of 24.4%.
Our effective tax
rate differs from
the federal statutory income
tax rate due to
state income taxes, certain
federal tax credits and
certain
items
included
in
income
for
financial
reporting
purposes
that
are
not
included
in
taxable
income
for
income
tax
purposes,
including
tax
exempt
interest
income,
certain
nondeductible
expenses
and
net
income
or
loss
attributable
to
our
noncontrolling interest.
NET INCOME ATTRIBUTABLE
TO CAL-MAINE FOODS, INC.
Net income
attributable to
Cal-Maine Foods,
Inc. for the
second quarter
ended December 2,
2023, was
$17.0 million,
or $0.35
per basic and
diluted common share,
compared to net
income attributable to
Cal-Maine Foods, Inc.
of $198.6 million,
or $4.08
per basic and $4.07 per diluted common share for the same period of fiscal
2023.
28
Net income attributable to
Cal-Maine Foods, Inc. for the
twenty-six weeks ended December 2,
2023, was $17.9 million, or
$.37
per basic
and diluted
common share,
compared to
net income
attributable to
Cal-Maine Foods,
Inc. of
$323.9 million
or $6.66
per basic and $6.63 per diluted common share, for the same period of fiscal 2023.
LIQUIDITY AND CAPITAL
RESOURCES
Working
Capital and Current Ratio
Our working
capital at
December 2,
2023 was $910.1
million, compared
to $942.2
million at
June 3,
2023. The
calculation of
working
capital
is defined
as current
assets less
current
liabilities. Our
current
ratio
was 6.9
at December
2, 2023,
compared
with 6.2 at June 3, 2023. The current ratio is calculated by dividing current
assets by current liabilities.
Cash Flows from Operating Activities
For the twenty-six weeks
ended December 2, 2023,
$74.0 million in net cash
was provided by operating
activities, compared to
$344.8
million
provided
by
operating
activities
for
the
comparable
period
in
fiscal
2023.
The
decrease
in
cash
flow
from
operating activities resulted primarily from lower selling prices for
conventional eggs compared to the prior-year period.
Cash Flows from Investing Activities
For
the
twenty-six
weeks
ended
December
2,
2023,
$32.4
million
was
provided
by
investing
activities,
primarily
due
to
the
sales
and
maturities
of
investment
securities,
partially
offset
by
the
acquisition
of
assets
of
Fassio
Egg
Farms,
Inc.
This
compares
to
$146.7
million
used
in
investing
activities
in
the
same
period
of
fiscal
2023,
primarily
due
to
purchases
of
investment
securities.
Sales
and
maturities
of
investment
securities
were
$196.1
million
in
first
two
quarters
of
fiscal
2024,
compared to
$65.3 million
in the
first two
quarters fiscal
2023. The
increase in
sales and
maturities of
investment securities
is
primarily
due
to the
maturities of
short-term
investments
during
the period.
Purchases of
property,
plant and
equipment were
$66.2 million
and $59.7 million
in the first
two quarters
of fiscal 2024
and 2023,
respectively,
primarily reflecting
progress on
our construction projects.
Cash Flows from Financing Activities
We
paid dividends
of $37.3
million for
the twenty-six
weeks ended
December 2,
2023 compared
to $78.4
million in
the same
prior-year period.
As of December 2, 2023, cash
increased $69.0 million since June
3, 2023, compared to an increase
of $119.6 million during
the
same period of fiscal 2023.
Credit Facility
We
had no
long-term debt
outstanding at
December 2,
2023 or
June 3,
2023. On
November 15,
2021, we
entered into
a credit
agreement
that
provides
for
a
senior
secured
revolving
credit facility
(the
“Credit
Facility”),
in
an
initial
aggregate
principal
amount
of
up
to
$250
million
with
a
five-year
term.
As
of
December
2,
2023,
no
amounts
were
borrowed
under
the
Credit
Facility. We
have $4.3 million
in outstanding standby
letters of credit issued
under our Credit
Facility for the
benefit of certain
insurance companies.
Refer to
Part II
Item 8,
Notes to
Consolidated
Financial Statements
and Supplementary
Data, Note
10 -
Credit Facility included in our 2023
Annual Report for further information regarding our long-term debt.
Dividends
In
accordance
with
our
variable
dividend
policy,
we
will
pay
a
cash
dividend
totaling
approximately
$5.7
million,
or
approximately $0.116
per share to holders
of our common
and Class A common
stock with respect
to our second
fiscal quarter
of 2024.
The amount
paid per
share will
vary based
on the
number of
outstanding
shares on
the record
date. The
dividend is
payable on February 15, 2024 to holders of record on January 31, 2024.
Material Cash Requirements
We
continue
to
monitor
the
increasing
demand
for
cage-free
eggs
and
to
engage
with
our
customers
in
efforts
to
achieve
a
smooth transition
toward their
announced timelines
for cage-free
egg sales.
The following
table presents
material construction
projects approved as of December 2, 2023 (in thousands):
29
Project(s) Type
Projected
Completion
Projected Cost
Spent as of
December 2, 2023
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses
Fiscal 2025
54,702
36,370
18,332
Feed Mill
Fiscal 2025
10,486
2,486
8,000
Cage-Free Layer & Pullet Houses
Fiscal 2026
78,982
59,000
19,982
Cage-Free Layer & Pullet Houses
Fiscal 2027
56,732
29,334
27,398
$
200,902
$
127,190
$
73,712
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
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
2023 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
thirteen weeks ended December 2, 2023 from
the information provided in Part II Item 7A, Quantitative and Qualitative Disclosures About
Market Risk in our 2023 Annual
Report.
ITEM 4.
CONTROLS
AND
PROCEDURES
Disclosure Controls and Procedures
Our disclosure
controls and
procedures are
designed to
provide reasonable
assurance that
information required
to be
disclosed
by us in the reports
we file or submit
under the Exchange Act
is recorded, processed, summarized
and reported, within the
time
periods
specified
in
the
Securities and
Exchange
Commission’s
rules
and
forms. Disclosure
controls
and
procedures
include,
without limitation, controls and
procedures designed to ensure that
information required to be disclosed
by us in the reports that
we file or submit
under the Exchange
Act is accumulated and
communicated to management,
including our principal
executive
and
principal
financial
officers,
or
persons
performing
similar
functions,
as
appropriate
to
allow
timely
decisions
regarding
required disclosure. Based on an evaluation of our disclosure controls
and procedures conducted by our Chief Executive Officer
and
Chief
Financial
Officer,
together
with
other
financial
officers,
such
officers
concluded
that
our
disclosure
controls
and
procedures were effective as of 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 December
2, 2023
that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
30
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
2023
Annual
Report,
Part
I
Item
3
Legal
Proceedings,
and
Part
II
Item 8,
Notes
to
Consolidated
Financial
Statements
and
Supplementary
Data,
Note
16
-
Commitments
and
Contingencies,
and
(ii)
in
this
Quarterly
Report
in
reference.
ITEM 1A.
RISK
FACTORS
There have
been no
material changes
in the risk
factors previously
disclosed in
the Company’s
2023 Annual
Report, except
as
reported herein in Part I Item 2 under the heading “HPAI.”
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
There were no purchases of Common Stock made by or
on behalf of our Company or any affiliated purchaser
during the second
quarter of fiscal 2024.
ITEM 6. EXHIBITS
Exhibits
No.
Description
3.1
3.2
31.1*
31.2*
32**
101.SCH*+
Inline XBRL Taxonomy
Extension Schema Document
101.CAL*+
Inline XBRL Taxonomy
Extension Calculation Linkbase Document
101.DEF*+
Inline XBRL Taxonomy
Extension Definition Linkbase Document
101.LAB*+
Inline XBRL Taxonomy
Extension Label Linkbase Document
101.PRE*+
Inline XBRL Taxonomy
Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained
in Exhibit 101)
*
Filed herewith as an Exhibit.
**
Furnished herewith as an Exhibit.
+
Submitted electronically with this Quarterly Report.
31
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:
January 3, 2024
/s/ Max P.
Bowman
Max P.
Bowman
Vice President, Chief Financial
Officer
(Principal Financial Officer)
Date:
January 3, 2024
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)
TABLE OF CONTENTS
Part I. FinancialItem 1. Financial StatementsNote 1 - Summary Of Significant Accounting PoliciesNote 2 - AcquisitionNote 3 - InvestmentNote 4 - Fair Value MeasurementsNote 5 - Inventories Inventories Consisted Of The Following As Of December 2, 2023 and June 3, 2023 (in Thousands):Note 5 - InventoriesNote 6 - EquityNote 7 - Net Income Per Common ShareNote 8 - Revenue From Contracts with CustomersNote 9 - Stock Based CompensationNote 10 - Commitments and ContingenciesNote 11 - Subsequent EventsItem 2. Management SItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. ControlsPart II. Other InformationItem 1. Legal ProceedingsItem 1A. RiskItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 6. Exhibits