Cal-Maine Foods Inc 10-Q for FY2023 Q1
Cal-Maine Foods Inc (CALM)
10-Q
2022-09-27
For: 2022-08-27
View Original
Added on
April 11, 2026
About this 10-Q
Cal-Maine Foods Inc filed this 10-Q on September 27, 2022, covering the quarter ended August 27, 2022 (FY2023 Q1).
Headline figures
Quarter ended August 27, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $658.34M
- up 102.6% from $324.99M a year earlier
- Net income
- $125.29M
- compared with a net loss of $18.03M a year earlier
- Diluted EPS
- $2.57
- compared with -$0.37 a year earlier
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 September 27, 2022.
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)
August 27, 2022
May 28, 2022
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 and accrued expenses
$
$
Dividends payable
Total current liabilities
Other noncurrent liabilities
Deferred income taxes, net
Total liabilities
Commitments and contingencies - see Note 11
—
—
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
(2,350 )
(1,596 )
Common stock in treasury at cost –
at May 28, 2022
(28,495 )
(28,447 )
Total Cal-Maine Foods, Inc. stockholders’ equity
Noncontrolling interest in consolidated entity
(359 )
(206 )
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 Operations
(In thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended
August 27, 2022
August 28, 2021
Net sales
$
$
Cost of sales
Gross profit
Selling, general and administrative
(Gain) loss on disposal of fixed assets
(213 )
Operating income (loss)
(39,667 )
Other income (expense):
Interest income, net
Royalty income
Equity income of unconsolidated entities
Other, net
Total other income, net
Income (loss) before income taxes
(33,864 )
Income tax expense (benefit)
(15,838 )
Net income (loss)
(18,026 )
Less: Loss attributable to noncontrolling interest
(153 )
Net income (loss) attributable to Cal-Maine Foods, Inc.
$
$
(18,026 )
Net income (loss) per common share:
Basic
$
$
(0.37 )
Diluted
$
$
(0.37 )
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 (Loss)
(In thousands)
(Unaudited)
Thirteen Weeks Ended
August 27, 2022
August 28, 2021
Net income (loss)
$
(18,026 )
Other comprehensive income (loss), before tax:
Unrealized holding loss on available-for-sale securities, net of reclassification
adjustments
(997 )
(224 )
Income tax benefit related to items of other comprehensive income
Other comprehensive loss, net of tax
(754 )
(170 )
Comprehensive income (loss)
(18,196 )
Less: Comprehensive loss attributable to the noncontrolling interest
(153 )
Comprehensive income (loss) attributable to Cal-Maine Foods, Inc.
$
$
(18,196 )
See Notes to Condensed Consolidated Financial Statements.
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Thirteen Weeks Ended
August 27, 2022
August 28, 2021
Cash flows from operating activities:
Net income (loss)
$
$
(18,026 )
Depreciation and amortization
Deferred income taxes
(1,324 )
(15,838 )
Other adjustments, net
(7,637 )
Net cash provided by (used in) operations
(24,112 )
Cash flows from investing activities:
Purchases of investment securities
(51,834 )
(1,388 )
Sales and maturities of investment securities
Distributions from unconsolidated entities
Acquisition of business, net of cash acquired
(44,823 )
Purchases of property, plant and equipment
(27,662 )
(11,233 )
Net proceeds from disposal of property, plant and equipment
Net cash used in investing activities
(59,122 )
(16,485 )
Cash flows from financing activities:
Payments of dividends
(36,653 )
Purchase of common stock by treasury
(45 )
(18 )
Principal payments on finance lease
(55 )
(53 )
Net cash used in financing activities
(36,753 )
(71 )
Net change in cash and cash equivalents
(40,668 )
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 May 28, 2022 (the
“2022 Annual Report”). These statements reflect all adjustments that are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented and, in the opinion of management, consist of adjustments of a normal
recurring nature. Operating results for the interim periods are not necessarily indicative of operating results for the entire fiscal
year.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to May 31. Each of the three-month periods ended on August 27, 2022
and August 28, 2021 included
13 weeks
.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
Investment Securities
Our investment securities are accounted for in accordance with ASC 320, “Investments - Debt and Equity Securities” (“ASC
320”). The Company considers all its debt securities for which there is a determinable fair market value, and there are no
restrictions on the Company's ability to sell within the next 12 months, as available-for-sale. We classify these securities as
current, because the amounts invested are available for current operations. Available-for-sale securities are carried at fair value,
with unrealized gains and losses reported as a separate component of stockholders’ equity. The Company regularly evaluates
changes to the rating of its debt securities by credit agencies and economic conditions to assess and record any expected credit
losses through the allowance for credit losses, limited to the amount that fair value was less than the amortized cost basis. The
cost basis for realized gains and losses on available-for-sale securities is 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 Operations. Investments in mutual funds are classified as “Other long-term assets” in the Company’s Condensed
Consolidated Balance Sheets.
Trade Receivables
Trade receivables are stated at their carrying values, which include a reserve for credit losses. As of August 27, 2022 and May
28, 2022, 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.
Immaterial Error Correction
Effective on May 30, 2021, the Company acquired the remaining
% membership interest in Red River Valley Egg Farm,
LLC (“Red River”), including certain liabilities. During the Company’s third quarter of fiscal 2022, management determined
that it had not properly eliminated select intercompany sales and cost of sales transactions between Red River and the
corresponding other wholly -owned subsidiaries of the Company in its first and second quarter 2022 Condensed Consolidated
Statements of Operations. The errors resulted in an overstatement of Net Sales and Cost of Sales of $
8
quarter of fiscal 2022 and $
(loss) or Net income (loss) per share.
We evaluated the errors quantitatively and qualitatively in accordance with Staff Accounting Bulletin
("SAB") No. 99 Materiality, and SAB No. 108 Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in the Current Year Financial Statements, and determined that the related impact was not material to our
condensed consolidated financial statements for the first or second quarters of fiscal 2022, but that correcting the cumulative
impact of the errors would be relevant to our Condensed Consolidated Statements of Operations for the third quarter
ended February 26, 2022. Accordingly, we have reflected the correction of the immaterial error for the first quarter of fiscal
2022 as a reduction of Net Sales and Cost of Sales in the accompanying Condensed Consolidated Statements of Operations.
New Accounting Pronouncements and Policies
No new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our
Consolidated Financial Statements.
Note 2 - Investment
Securities
The following represents the Company’s investment securities as of August 27, 2022 and May 28, 2022 (in thousands):
August 27, 2022
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
$
$
$
$
May 28, 2022
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
$
$
$
$
Available-for-sale
Proceeds from sales and maturities of investment securities available-for-sale were $
thirteen weeks ended August 27, 2022 and August 28, 2021, respectively. Gross realized gains for the thirteen weeks ended
August 27, 2022 and August 28, 2021 were $
weeks ended August 27, 2022 and August 28, 2021 were $
allowances for credit losses at August 27, 2022 and May 28, 2022.
9
Actual maturities may differ from contractual maturities as some borrowers have the right to call or prepay obligations with or
without penalties. Contractual maturities of current investments at August 27, 2022 are as follows (in thousands):
Estimated Fair Value
Within one year
$
1-5 years
Total
$
Noncurrent
There were
and maturities of noncurrent investment securities were $
realized gains for the thirteen weeks ended August 28, 2021 were $
weeks ended August 28, 2021.
Note 3 - Fair Value Measurements
The Company is required to categorize both financial and nonfinancial assets and liabilities based on the following fair value
hierarchy. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated,
knowledgeable, and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would
be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to
settle the liability with the creditor.
•
Level 1
•
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.
Lease obligations:
10
Assets and Liabilities Measured at Fair Value on a Recurring Basis
In accordance with the fair value hierarchy described above, the following table shows the fair value of financial assets and
liabilities measured at fair value on a recurring basis as of August 27, 2022 and May 28, 2022 (in thousands):
August 27, 2022
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
$
$
$
$
May 28, 2022
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
$
$
$
$
Investment securities – available-for-sale classified as Level 2 consist of securities with maturities of three months or longer
when purchased. We classified these securities as current because amounts invested are readily available for current operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
Note 4 - Inventories
Inventories consisted of the following as of August 27, 2022 and May 28, 2022 (in thousands):
August 27, 2022
May 28, 2022
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 August
27, 2022 and May 28, 2022 consisted of approximately
Note 5 - Accrued Dividends Payable and Dividends per Common Share
We accrue dividends at the end of each quarter according to the Company’s dividend policy adopted by its Board of Directors.
The Company pays a dividend to shareholders of its Common Stock and Class A Common Stock on a quarterly basis for each
quarter for which the Company reports net income attributable to Cal-Maine Foods, Inc. computed in accordance with GAAP
in an amount equal to one-third (
1/3
) of such quarterly income. Dividends are paid to shareholders of record as of the 60th day
following the last day of such quarter, except for the fourth fiscal quarter. For the fourth quarter, the Company pays dividends
to shareholders of record on the 65th day after the quarter end. Dividends are payable on the 15th day following the record date.
Following a quarter for which the Company does not report net income attributable to Cal-Maine Foods, Inc., the Company will
11
not pay a dividend for a subsequent profitable quarter until the Company is profitable on a cumulative basis computed from the
date of the most recent quarter for which a dividend was paid. For the first quarter of fiscal 2023, we will pay a cash dividend of
approximately $
On our Condensed Consolidated Statements of Operations, we determine dividends per common share in accordance with the
computation in the following table (in thousands, except per share data):
Thirteen Weeks Ended
August 27, 2022
August 28, 2021
Net income (loss) attributable to Cal-Maine Foods, Inc.
$
$
(18,026 )
Cumulative loss to be recovered prior to payment of divided at beginning of period
(4,244 )
Net income available for dividend
$
$
1/3 of net income attributable to Cal-Maine Foods, Inc. available for dividend
Common stock outstanding (shares)
Class A common stock outstanding (shares)
Total common stock outstanding (shares)
Dividends per common share*
$
$
*Dividends per common share =
1/3
outstanding (shares).
Note 6 - Equity
The following reflects equity activity for the thirteen weeks ended August 27, 2022 and August 28, 2021 (in thousands):
Thirteen Weeks Ended August 27, 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
$
$
$
(28,447 )
$
$
(1,596 )
$
$
(206 )
$
Other comprehensive
loss, net of tax
—
—
—
—
(754 )
—
—
(754 )
Stock compensation
plan transactions
—
—
(48 )
—
—
—
Dividends
—
—
—
—
—
(41,742 )
—
(41,742 )
Net income (loss)
—
—
—
—
—
(153 )
Balance at August
27, 2022
$
$
$
(28,495 )
$
$
(2,350 )
$
$
(359 )
$
Thirteen Weeks Ended August 28, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Total
Balance at May 29, 2021
$
$
$
(27,433 )
$
$
(558 )
$
$
Other comprehensive loss, net of tax
—
—
—
—
(170 )
—
(170 )
Stock compensation plan transactions
—
—
(18 )
—
—
Net loss
—
—
—
—
—
(18,026 )
(18,026 )
Balance at August 28, 2021
$
$
$
(27,451 )
$
$
(728 )
$
$
12
Note 7 - Net Income (Loss) per Common Share
Basic net income (loss) per share is based on the weighted average Common Stock and Class A Common Stock outstanding.
Diluted net income per share is based on weighted-average common shares outstanding during the relevant period adjusted for
the dilutive effect of share-based awards. Restricted shares of
quarter of fiscal 2022. These shares were not included in the diluted net loss per share calculation.
The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net
income (loss) per common share (amounts in thousands, except per share data):
Thirteen Weeks Ended
August 27, 2022
August 28, 2021
Numerator
Net income (loss)
$
$
(18,026 )
Less: Loss attributable to noncontrolling interest
(153 )
Net income (loss) attributable to Cal-Maine Foods, Inc.
$
$
(18,026 )
Denominator
Weighted-average common shares outstanding, basic
Effect of dilutive restricted shares
Weighted-average common shares outstanding, diluted
Net income (loss) per common share attributable to Cal-Maine Foods, Inc.
Basic
$
$
(0.37 )
Diluted
$
$
(0.37 )
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 returns and refunds by using historical
return data and comparing to current period sales and accounts receivable. The allowance is recorded as a reduction in sales
with a corresponding reduction in trade accounts receivable.
Sales Incentives Provided to Customers
The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current
discount offers (e.g., percentage discounts off current purchases), inducement offers (e.g., offers for future discounts subject to
a minimum current purchase), and other similar offers. Current discount offers, when accepted by customers, are treated as a
reduction to the sales price of the related transaction, while inducement offers, when accepted by customers, are treated as a
reduction to the sales price based on estimated future redemption rates. Redemption rates are estimated using the Company’s
historical experience for similar inducement offers. Current discount and inducement offers are presented as a net amount in
‘‘Net sales.’’
13
Disaggregation of Revenue
The following table provides revenue disaggregated by product category (in thousands):
Thirteen Weeks Ended
August 27, 2022
August 28, 2021
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 August 27, 2022 and May 28, 2022, the balance for
contract assets is immaterial.
Contract Balances
The Company receives payment from customers based on specified terms that are generally less than 30 days from delivery.
There are rarely contract assets or liabilities related to performance under the contract.
Note 9 - Stock Based Compensation
Total stock-based compensation expense was $
Unrecognized compensation expense as a result of non -vested shares of restricted stock outstanding under the Amended and
Restated 2012 Omnibus Long-Term Incentive Plan at August 27, 2022 of $
period of
Stock Compensation Plans in our 2022 Annual Report for further information on our stock compensation plans.
The Company’s restricted share activity for the thirteen weeks ended August 27, 2022 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 28, 2022
$
Vested
(3,240 )
Forfeited
(2,778 )
Outstanding, August 27, 2022
$
Note 10 – Income Taxes
For the first quarters of fiscal 2023 and 2022, the Company recorded income tax expense of $
benefit of $
% and
%, respectively. Excluding the impact of discrete
items related to an $
Valley Egg Farm, LLC acquisition, the adjusted effective tax rate for the first quarter of fiscal 2022 is
%.
Our effective tax rate differs from the federal statutory income tax rate due to state income taxes, certain federal tax credits and
certain items included in income for financial reporting purposes that are not included in taxable income for income tax
purposes, including tax exempt interest income, certain nondeductible expenses and net income or loss attributable to
noncontrolling interest.
14
Note 11 - Commitments and Contingencies
Financial Instruments
The Company maintained standby letters of credit (“LOCs”) totaling $
the Company's 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.
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. The Company and WCF are considering whether to appeal this decision from the First District. 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.
On March 15, 2022, plaintiffs filed a second suit against the Company and several defendants in Bell et al. v. Cal-Maine Foods
et al., Case No. 1:22-cv-246, in the Western District of Texas, Austin Division alleging the same assertions as laid out in the
first complaint. On August 12, 2022, the Company and other defendants in the case filed a motion to dismiss the plaintiffs’
class action complaint. On September 6, 2022, the plaintiffs’ filed their opposition to the motion to dismiss and the Company
and other defendants filed their reply on September 13, 2022. The court has not issued a ruling. Management believes the risk
of material loss related to both matters to be remote.
Kraft Foods Global, Inc. et al. v. United Egg Producers, Inc. et al.
As previously reported, on September 25, 2008, the Company was named as one of several defendants in numerous antitrust
cases involving the United States shell egg industry. The Company settled all of these cases, except for the claims of certain
plaintiffs who sought substantial damages allegedly arising from the purchase of egg products (as opposed to shell eggs). These
remaining plaintiffs are Kraft Food Global, Inc., General Mills, Inc., and Nestle USA, Inc. (the “Egg Products Plaintiffs”) and
The Kellogg Company.
On September 13, 2019, the case with the Egg Products Plaintiffs was remanded from a multi-district litigation proceeding in
the United States District Court for the Eastern District of Pennsylvania, In re Processed Egg Products Antitrust Litigation,
MDL No. 2002, to the United States District Court for the Northern District of Illinois, Kraft Foods Global, Inc. et al. v. United
15
Egg Producers, Inc. et al., Case No. 1:11-cv-8808, for trial. The Egg Products Plaintiffs allege that the Company and other
defendants violated Section 1 of the Sherman Act, 15. U.S.C. § 1, by agreeing to limit the production of eggs and thereby
illegally to raise the prices that plaintiffs paid for processed egg products. In particular, the Egg Products Plaintiffs are attacking
certain features of the United Egg Producers animal-welfare guidelines and program used by the Company and many other egg
producers. The Egg Products Plaintiffs seek to enjoin the Company and other defendants from engaging in antitrust violations
and seek treble money damages. On May 2, 2022, the court set trial for October 24, 2022, but on September 20, 2022, the court
cancelled the trial date due to COVID-19 protocols and converted the trial date to a status hearing to reschedule the jury trial.
We anticipate the trial being rescheduled for the first or second calendar quarter of 2023.
In addition, on October 24, 2019, the Company entered into a confidential settlement agreement with The Kellogg Company
dismissing all claims against the Company for an amount that did not have a material impact on the Company’s financial
condition or results of operations. On November 11, 2019, a stipulation for dismissal was filed with the court, and on March 28,
2022, the court dismissed the Company with prejudice.
The Company intends to continue to defend the remaining case with the Egg Products Plaintiffs as vigorously as possible based
on defenses which the Company believes are meritorious and provable. Adjustments, if any, which might result from the
resolution of this remaining matter with the Egg Products Plaintiffs have not been reflected in the financial statements. While
management believes that there is still a reasonable possibility of a material adverse outcome from the case with the Egg
Products Plaintiffs, at the present time, it is not possible to estimate the amount of monetary exposure, if any, to the Company
due to a range of factors, including the following, among others: two earlier trials based on substantially the same facts and
legal arguments resulted in findings of no conspiracy and/or damages; this trial will be before a different judge and jury in a
different court than prior related cases; there are significant factual issues to be resolved; and there are requests for damages
other than compensatory damages (i.e., injunction and treble money damages).
State of Oklahoma Watershed Pollution Litigation
On June 18, 2005, the State of Oklahoma filed suit, in the United States District Court for the Northern District of Oklahoma,
against Cal-Maine Foods, Inc. and Tyson Foods, Inc. and affiliates, Cobb-Vantress, Inc., Cargill, Inc. and its affiliate, George’s,
Inc. and its affiliate, Peterson Farms, Inc. and Simmons Foods, Inc. The State of Oklahoma claims that through the disposal of
chicken litter the defendants have polluted the Illinois River Watershed. This watershed provides water to eastern Oklahoma.
The complaint seeks injunctive relief and monetary damages, but the claim for monetary damages has been dismissed by the
court. Cal-Maine Foods, Inc. discontinued operations in the watershed. Accordingly, we do not anticipate that Cal-Maine
Foods, Inc. will be materially affected by the request for injunctive relief unless the court orders substantial affirmative
remediation. Since the litigation began, Cal-Maine Foods, Inc. purchased
% of the membership interests of Benton County
Foods, LLC, which is an ongoing commercial shell egg operation within the Illinois River Watershed. Benton County Foods,
LLC is not a defendant in the litigation.
The trial in the case began in September 2009 and concluded in February 2010. The case was tried without a jury, and the court
has not yet issued its ruling. Management believes the risk of material loss related to this matter to be remote.
Other Matters
In addition to the above, the Company is involved in various other claims and litigation incidental to its business. Although 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.
16
ITEM 2. MANAGEMENT’S
DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results
of Operations included in Part II Item 7 of the Company’s Annual Report on Form 10-K for its fiscal year ended May 28, 2022
(the “2022 Annual Report”), and the accompanying financial statements and notes included in Part II Item 8 of the 2022 Annual
Report and in
This report contains numerous forward-looking statements within the meaning of Section 27A of the Securities Act of 1933
(the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) relating to our shell egg
business, including estimated future production data, expected construction schedules, projected construction costs, potential
future supply of and demand for our products, potential future corn and soybean price trends, potential future impact on our
business of the COVID-19 pandemic, potential future impact on our business of new legislation, rules or policies, potential
outcomes of legal proceedings, and other projected operating data, including anticipated results of operations and financial
condition. Such forward-looking statements are identified by the use of words such as “believes,” “intends,” “expects,”
“hopes,” “may,” “should,” “plans,” “projected,” “contemplates,” “anticipates,” or similar words. Actual outcomes or results
could differ materially from those projected in the forward-looking statements. The forward-looking statements are based on
management’s current intent, belief, expectations, estimates, and projections regarding the Company and its industry. These
statements are not guarantees of future performance and involve risks, uncertainties, assumptions, and other factors that are
difficult to predict and may be beyond our control. The factors that could cause actual results to differ materially from those
projected in the forward-looking statements include, among others, (i) the risk factors set forth in Part I Item 1A of the 2022
Annual Report (ii) the risks and hazards inherent in the shell egg business (including disease, pests, weather conditions, and
potential for product recall), including but not limited to the current outbreak of highly pathogenic avian influenza (HPAI)
affecting poultry in the U.S., Canada and other countries that was first detected in commercial flocks in the U.S. in February
2022, (iii) changes in 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 the evolving COVID-19 pandemic, including without limitation increased costs and rising inflation and 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 product mix and (viii) adverse results in pending litigation
matters. Readers are cautioned not to place undue reliance on forward-looking statements because, while we believe the
assumptions on which the forward-looking statements 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 under one operating segment. We are the
largest producer and distributor of fresh shell eggs in the United States (“U.S.”). Our total flock of approximately 41.1 million
layers and 11.4 million pullets and breeders is the 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 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 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. 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
17
increases in the prices of corn and soybean meal. Corn and soybean meal are commodities and are subject to volatile price
changes due to weather, various supply and demand factors, transportation and storage costs, speculators and agricultural,
energy and trade policies in the U.S. and internationally and most recently the Russia-Ukraine war.
An important competitive advantage for Cal-Maine Foods is our ability to meet our customers’ evolving needs with a favorable
product mix of conventional and specialty eggs, including cage-free, organic and other specialty offerings, as well as egg
products. We have also enhanced our efforts to provide free-range and pasture-raised eggs that meet consumers’ evolving
choice preferences. While a small part of our current business, the free-range and pasture-raised eggs we produce and sell
represent attractive offerings to a subset of consumers, and therefore our customers, and help us continue to serve as the trusted
provider of quality food choices.
Retail sales of shell eggs historically have been highest during the fall and winter months and lowest during the summer
months. Prices for shell eggs fluctuate in response to seasonal demand factors and a natural increase in egg production during
the spring and early summer. Historically, shell egg prices tend to increase with the start of the school year and tend to be
highest prior to holiday periods, particularly Thanksgiving, Christmas and Easter. Consequently, and all other things being
equal, we would expect to experience lower selling prices, sales volumes and net income (and may incur net losses) in our first
and fourth fiscal quarters ending in August/September and May/June, respectively. Because of the seasonal and quarterly
fluctuations, comparisons of our sales and operating results between different quarters within a single fiscal year are not
necessarily meaningful comparisons.
HPAI
We are closely monitoring the current outbreak of highly pathogenic avian influenza (“HPAI”), that was first detected in
commercial flocks in the U.S. in February 2022 and which was most recently detected in commercial flocks in the U.S. in
September 2022. 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 September 27, 2022. The USDA division of Animal and Plant Health Inspection Service (“APHIS”)
reported that approximately 35.6 million commercial layer hens and 1.0 million pullets have been depopulated due to HPAI.
According to APHIS, the most recently reported outbreaks of HPAI affecting commercial layer hens and pullets occurred
September 21, 2022 and June 9, 2022, respectively. We believe the HPAI outbreak will continue to have an impact on the
overall supply of eggs through the balance of this calendar year and possibly beyond. According to LEAP Market Analytics,
layer hen inventory is not projected to exceed the 320 million mark until October of 2023.
While no farm is immune from HPAI, we believe we have implemented and continue to maintain robust biosecurity programs
across our locations. We are also working closely with federal, state and local government officials and focused industry groups
to mitigate the risk of this and future outbreaks and effectively manage our response, if needed.
CAGE-FREE EGGS
Ten states have passed legislation or regulations mandating minimum space or cage-free requirements for egg production or
mandated the sale of only cage-free eggs and egg products in their states, with implementation of these laws ranging from
January 2022 to January 2026. These states represent approximately 27% of the U.S. total population according to the 2020
U.S. Census. In California and Massachusetts, which collectively represent 14% of the total U.S. population according to the
2020 U.S. Census, cage-free legislation went into effect January 1, 2022. However, these laws are subject to judicial challenge,
and the Supreme Court of the U.S. recently announced that in October 2022 it will review a case challenging California’s law
that requires the sale of only cage-free eggs in that state. These laws have already affected and, if upheld, will continue to affect
sourcing, production and pricing of eggs (conventional as well as specialty) as the national demand for cage-free production
could be greater than the current supply, which would increase the price of cage-free eggs, unless more cage-free production
capacity is constructed. Likewise, the national supply for eggs from conventional production could exceed consumer demand
which would decrease the price of conventional eggs.
A significant number of our customers have previously announced goals to offer cage-free eggs exclusively on or before 2026,
subject in most cases to availability of supply, affordability and customer demand, among other contingencies. Some of these
customers have recently changed those goals to offer 70% cage-free eggs by the end of 2030. Our customers typically do not
commit to long-term purchases of specific quantities or types of eggs with us, and as a result, it is difficult to accurately predict
customer requirements for cage-free eggs. We are, however, engaging with our customers in an effort to achieve a smooth
transition in meeting their announced goals and needs. Sales of cage-free eggs represented approximately 19.4% of our shell
egg revenues for the first quarter of fiscal 2023. We have invested significant capital in recent years to acquire and construct
cage-free facilities, and we expect our focus for future expansion will continue to include cage-free facilities. At the same time,
18
we understand the importance of our continued ability to provide more affordable conventional eggs in order to provide our
customers with a variety of egg choices and to address hunger in our communities.
For additional information, see the 2022 Annual Report, Part I, Item 1, “Business – Specialty Eggs,” “Business – Growth
Strategy” and “Business – Government Regulation,” and the first risk factor in Part I Item 1A, “Risk Factors” under the sub-
heading “Legal and Regulatory Risk Factors.”
EXECUTIVE OVERVIEW
For the first quarter of fiscal 2023, we recorded a gross profit of $217.5 million compared to $6.6 million for the same period of
fiscal 2022, with the increase due primarily to higher shell egg prices and increased volume of specialty eggs sold, partially
offset by the increased cost of feed ingredients and processing, packaging and warehouse costs. Our total dozens sold increased
8.1% to 275.3 million dozen shell eggs for the first quarter of fiscal 2023 compared to 254.6 million dozen for the same period
of fiscal 2022. For the first quarter of fiscal 2023, conventional dozens sold decreased 2.3% and specialty dozens sold increased
35.1% as compared to the same quarter in fiscal 2022. Demand for specialty eggs increased in the first quarter of fiscal 2023
compared to the same prior year period due primarily to the higher prices for conventional eggs. Further, demand for specialty
eggs continued to increase as retailers continued to shift to selling cage-free products and cage-free legislation went into full
effect in California and Massachusetts on January 1, 2022. We benefited from the strong demand for specialty eggs as we
placed more of our cage-free facilities into production and better utilized our existing cage-free production capacity.
Conventional egg prices increased in the first quarter of fiscal 2023 primarily due to decreased supply caused by the HPAI
outbreak compounded with good customer demand. See the discussion under the heading “HPAI” above. The daily average
price for the UB southeast large index for the first quarter of fiscal 2023 increased 133.8% from the comparable period in the
prior year. Our net average selling price per dozen for the first quarter of fiscal 2023 was $2.275 compared to $1.235 in the
prior-year period. Layer hen numbers reported by the USDA as of September 21, 2022, were 305.3 million, which represents a
decrease of 4.6% compared with the layer hen inventory a year ago. The USDA also reported that the hatch from April 2022
through August 2022 decreased 0.5% as compared with the prior-year period. As of September 1, 2022, however, eggs in
incubators were up 9.0% year-over-year, indicating that layer flocks may increase in the future.
Our farm production costs per dozen produced for the first quarter of fiscal 2023 increased 16.5%, or $0.148, compared to the
first quarter of fiscal 2022 . This increase was primarily due to increased prices for feed ingredients and a higher basis in corn in
most of our production areas. For the first quarter of fiscal 2023, the average Chicago Board of Trade (“CBOT”) daily market
price was $6.65 per bushel for corn and $456 per ton for soybean meal, representing increases of 11.5% and 25.4%,
respectively, compared to the average daily CBOT prices for the comparable period in the prior year.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items from our Condensed Consolidated Statements of
Operations expressed as a percentage of net sales.
Thirteen Weeks Ended
August 27, 2022
August 28, 2021
Net sales
100.0
%
100.0
%
Cost of sales
67.0
%
98.0
%
Gross profit
33.0
%
2.0
%
Selling, general and administrative
8.1
%
14.3
%
(Gain) loss on disposal of fixed assets
—
%
(0.1)
%
Operating income (loss)
24.9
%
(12.2)
%
Total other income, net
0.2
%
1.8
%
Income (loss) before income taxes
25.1
%
(10.4)
%
Income tax expense (benefit)
6.1
%
(4.9)
%
Net income (loss)
19.0
%
(5.5)
%
NET SALES
Total net sales for the first quarter of fiscal 2023 were a record $658.3 million compared to $325.0 million for the same period
of fiscal 2022.
19
Net shell egg sales represented 95.8% and 97.1% of total net sales for the first quarters of fiscal 2023 and 2022, respectively.
Shell egg sales classified as “Other” represent sales of hard-cooked eggs and other miscellaneous byproducts included with our
shell egg operations.
The table below presents an analysis of our conventional and specialty shell egg sales (in thousands, except percentage data):
Thirteen Weeks Ended
August 27, 2022
August 28, 2021
Total net sales
$
658,344
$
324,986
Conventional
$
425,589
67.5
%
$
182,030
57.6
%
Specialty
200,820
31.8
%
132,458
42.0
%
Egg sales, net
626,409
99.3
%
314,488
99.6
%
Other
4,295
0.7
%
1,132
0.4
%
Net shell egg sales
$
630,704
100.0
%
$
315,620
100.0
%
Net shell egg sales as a percent of total net sales
95.8
%
97.1
%
Dozens sold:
Conventional
179,712
65.3
%
183,872
72.2
%
Specialty
95,605
34.7
%
70,750
27.8
%
Total dozens sold
275,317
100.0
%
254,622
100.0
%
Net average selling price per dozen:
Conventional
$
2.368
$
0.990
Specialty
$
2.101
$
1.872
All shell eggs
$
2.275
$
1.235
Egg products sales:
Egg products net sales
27,640
9,366
Pounds sold
16,502
15,269
Net average selling price per pound
1.675
0.613
Shell egg net sales
First Quarter – Fiscal 2023 vs. Fiscal 2022
-
In the first quarter of fiscal 2023, conventional egg sales increased $243.6 million, or 133.8%, compared to the first
quarter of fiscal 2022, primarily due to the increase in price for conventional shell eggs, partially offset by a decrease
in volume of conventional eggs sold. Changes in price resulted in a $247.6 million increase and the change in volume
resulted in a $4.1 million decrease in net sales, respectively.
-
We believe prices for conventional eggs were positively impacted by a better alignment of the size of the conventional
production layer hen flock and customer and consumer demand. Conventional egg prices further increased in the first
quarter of fiscal 2023 primarily due to decreased supply caused by the HPAI outbreak, discussed above.
-
Conventional egg prices generally respond more quickly to market conditions as we sell the majority of our
conventional shell eggs based on formulas that adjust periodically and take into account, in varying ways,
independently quoted regional wholesale market prices for shell eggs or formulas related to our costs of production.
The majority of our specialty eggs are typically sold at prices and terms negotiated directly with customers and
therefore do not fluctuate as much as conventional pricing. As a result of these independently quoted whole markets
for conventional eggs reaching near historical highs, the average selling price for conventional eggs exceeded the
average selling price for specialty eggs in the first quarter of fiscal 2023.
-
Specialty egg sales increased $68.4 million, or 51.6%, in the first quarter of fiscal 2023 compared to the first quarter of
fiscal 2022, primarily due to a 35.1% increase in the volume of specialty eggs sold, which resulted in a $46.5 million
increase in net sales.
-
According to Information Resources, Inc., Total US – Multi Outlet for the latest 13 weeks ended August 27, 2022,
cage-free eggs dozens sold (including free-range, pasture-raised and organic) increased 34.9%. We believe this
increase in demand was positively impacted by the higher conventional egg prices as compared to the same period in
20
the prior year. Demand for specialty eggs was further positively affected by California’s and Massachusetts’s cage-
free mandates going into effect January 1, 2022, as well as more retailers shifting to selling more cage-free products.
-
Our specialty egg sales in the first quarter of fiscal 2023 versus the prior-year period benefitted from the strong
demand for specialty eggs as we placed more of our cage-free facilities into production, and we better utilized our
existing cage-free production capacity. Cage-free egg sales for the first quarter of fiscal 2023 represented 19.4% of our
total net shell egg sales versus 22.1% for the same prior year period due the higher conventional egg prices. Cage-free
dozens sold increased 58% in the first of quarter of fiscal 2023 as compared to the first quarter of fiscal 2022.
Egg products net sales
First Quarter – Fiscal 2023 vs. Fiscal 2022
-
Egg products net sales increased $18.3 million or 195.1% for the first quarter of fiscal 2023 compared to the same
period of fiscal 2022, primarily due to a 173.2% selling price increase, which had a $17.5 million positive impact on
net sales.
-
Our egg products net average selling price increased in the first quarter of fiscal 2023, compared to the first quarter of
fiscal 2022 as the supply decreased due to the HPAI outbreak that started in February 2022. We believe 13.4 million of
the 33.7 million layers culled as a result of the HPAI outbreak were located at facilities dedicated to support inline
breaking facilities in Iowa and Ohio.
COST OF SALES
Costs of sales for the first quarter of fiscal 2023 were $440.9 million compared to $318.3 million for the same period of fiscal
2022.
Cost of sales consists of costs directly related to producing, processing and packing shell eggs, purchases of shell eggs from
outside producers, processing and packing of liquid and frozen egg products and other non-egg costs. Farm production costs are
those costs incurred at the egg production facility, including feed, facility, hen amortization and other related farm production
costs.
The following table presents the key variables affecting our cost of sales (in thousands, except cost per dozen data):
Thirteen Weeks Ended
August 27, 2022
August 28, 2021
%
Change
Cost of Sales:
Farm production
$
266,651
$
207,495
28.5
%
Processing, packaging, and warehouse
81,417
65,059
25.1
Egg purchases and other (including change in inventory)
68,298
37,973
79.9
Total shell eggs
416,366
310,527
34.1
Egg products
24,488
7,814
213.4
Total
$
440,854
$
318,341
38.5
%
Farm production costs (per dozen produced)
Feed
$
0.667
$
0.545
22.4
%
Other
$
0.379
$
0.353
7.4
%
Total
$
1.046
$
0.898
16.5
%
Outside egg purchases (average cost per dozen)
$
2.57
$
1.35
90.4
%
Dozens produced
257,654
236,458
9.0
%
Percent produced to sold
93.6%
92.9%
0.8
%
Farm Production
First Quarter – Fiscal 2023 vs. Fiscal 2022
-
Feed costs per dozen produced increased 22.4% in the first quarter of fiscal 2023 compared to the first quarter of fiscal
2022. This increase was primarily due to increased prices for corn, our primary feed ingredient.
21
-
For the first quarter of fiscal 2023, the average daily Chicago Board of Trade (“CBOT”) market price was $6.65 per
bushel for corn and $456 per ton of soybean meal representing increases of 11.5% and 25.4%, respectively, as
compared to the average daily CBOT prices for the first quarter of fiscal 202 2.
Supplies of corn and soybean remained tight relative to demand in the first quarter of fiscal 2023 as evidenced by a low stock-
to-use ratio for corn, as a result of weather-related shortfalls in production and yields, ongoing disruptions related to the
COVID-19 global pandemic and the Russia-Ukraine war and its impact on the export markets. Basis levels for corn ran
significantly higher in our area of operations compared to our prior year first fiscal quarter. For fiscal 2023, we expect
continued corn and soybean upward pricing pressures and further market volatility to affect feed costs.
Processing, packaging, and warehouse
First Quarter – Fiscal 2023 vs. Fiscal 2022
-
Cost of packaging materials increased 16.1% compared to the first quarter of fiscal 2022 due to rising inflation.
-
Labor costs increased 24.4% due to wage increases and increased use of contract labor in response to labor shortages .
-
Dozens processed increased 8.6% compared to the first quarter of fiscal 2022, which resulted in a $2.2 million increase
in costs.
Egg purchases and other (including change in inventory)
First Quarter – Fiscal 2023 vs. Fiscal 2022
-
Costs in this category increased primarily due to higher egg prices, partially offset by the decrease in the volume of
outside egg purchases, as our percentage of produced to sold increased to 93.6% from 92.9%.
GROSS PROFIT
Gross profit for the first quarter of fiscal 2023 was $217.5 million compared to $6.6 million for the same period of fiscal 2022.
The increase of $210.9 million was primarily due to higher egg prices as well as the increased volume of specialty eggs sold,
partially offset by the increased cost of feed ingredients and processing, packaging and warehouse costs.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses ("SGA") include costs of marketing, distribution, accounting and corporate
overhead. The following table presents an analysis of our SGA expenses (in thousands):
Thirteen Weeks Ended
August 27, 2022
August 28, 2021
$ Change
% Change
Specialty egg expense
$
13,067
$
13,715
$
(648)
(4.7)
%
Delivery expense
19,916
13,936
5,980
42.9
%
Payroll, taxes and benefits
10,987
9,939
1,048
10.5
%
Stock compensation expense
1,025
1,001
24
2.4
%
Other expenses
8,612
7,934
678
8.5
%
Total
$
53,607
$
46,525
$
7,082
15.2
%
First Quarter – Fiscal 2023 vs. Fiscal 2022
Specialty egg expense
-
Specialty egg expense, which includes franchise fees, advertising and promotion costs, generally aligns with specialty
egg volumes, which were up 35.1% for the first quarter of fiscal 2023 compared to the same period of fiscal 2022.
However, our specialty egg expense decreased by 4.7%, primarily due to increased sales to other Eggland’s Best, Inc.
(“EB”) franchisees, including unconsolidated affiliates, Specialty Eggs, LLC and Southwest Specialty Eggs, LLC.
These franchisees that were responsible for the franchise fees, advertising and promotion costs associated with those
sales, which resulted in reduced costs for us. Also, the higher prices for conventional eggs and the comparatively lower
prices for specialty eggs 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.
22
Delivery expense
-
The increased delivery expense is primarily due to the increase in fuel and labor costs for both our fleet and contract
trucking.
Payroll, taxes and benefits expense
-
The increase in payroll, taxes and benefits expense is primarily due to increased wages for all employees due to the
inflationary market.
OPERATING INCOME (LOSS)
For the first quarter of fiscal 2023, we recorded operating income of $163.9 million compared to operating loss of $39.7 million
for the same period of fiscal 2022.
OTHER INCOME (EXPENSE)
Total other income (expense) consists of items not directly charged or related to operations, such as interest income and
expense, royalty income, equity income or loss of unconsolidated entities, and patronage income, among other items.
For the first quarter of fiscal 2023, we earned $1.1 million of interest income compared to $290 thousand for the same period of
fiscal 2022. The increase resulted from significantly higher investment balances. The Company recorded interest expense of
$148 thousand and $58 thousand for the first quarters ended August 27, 2022 and August 28, 2021, respectively.
Other, net for the first quarter ended August 27, 2022, was income of $155 thousand compared to income of $5.2 million for
the same period of fiscal 2022. The decrease is primarily due to our acquisition of the remaining 50% membership interest in
Red River in the first quarter of fiscal 2022 as we recognized a $4.5 million gain due to the remeasurement of our equity
investment.
INCOME TAXES
For the first quarter of fiscal 2023, pre-tax income was $165.5 million compared to pre-tax loss of $33.9 million for the same
period of fiscal 2022. We recorded income tax expense of $40.3 million for the first quarter of fiscal 2023, which reflects an
effective tax rate of 24.4%, compared to an income tax benefit of $15.8 million in the prior year period, which reflects an
effective tax rate of 46.8%. Excluding the impact of discrete items related to a $8.3 million net tax benefit recorded in the first
quarter of fiscal 2022 in connection with the Red River Valley Egg Farm, LLC (“Red River”) acquisition, income tax benefit
for the comparable period of fiscal 2022 was $7.6 million, which reflects an adjusted effective tax rate of 22.4%.
Our effective tax rate differs from the federal statutory income tax rate due to state income taxes, certain federal tax credits and
certain items included in income for financial reporting purposes that are not included in taxable income for income tax
purposes, including tax exempt interest income, certain nondeductible expenses and net income or loss attributable to
noncontrolling interest.
NET INCOME ATTRIBUTABLE TO CAL-MAINE FOODS, INC.
Net income attributable to Cal-Maine Foods, Inc. for the first quarter ended August 27, 2022, was $125.3 million, or $2.58 per
basic and $2.57 per diluted common share, compared to net loss attributable to Cal-Maine Foods, Inc. of $18.0 million or $0.37
per basic and diluted common share for the same period of fiscal 2022.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital and Current Ratio
Our working capital at August 27, 2022 was $548.5 million, compared to $476.8 million at May 28, 2022. The calculation of
working capital is defined as current assets less current liabilities. Our current ratio was 3.4 at August 27, 2022, compared with
3.6 at May 28, 2022. The current ratio is calculated by dividing current assets by current liabilities.
Cash Flows from Operating Activities
For the thirteen weeks ended August 27, 2022, $172.8 million in net cash was provided by operating activities, compared to
$24.1 million used by operating activities for the comparable period in fiscal 2022. The increase in cash flow from operating
23
activities resulted primarily from higher selling prices for conventional and specialty eggs as well as increased volume of
specialty egg sales, partially offset by increased costs of feed ingredients compared to the prior-year period. The increase in
Other adjustments, net is primarily due to a $67.4 million balance for income taxes payable as of August 27, 2022.
Cash Flows from Investing Activities
We continue to invest in our facilities, with $27.7 million used to purchase property, plant and equipment for the thirteen weeks
ended August 27, 2022, compared to $11.2 million in the same period of fiscal 2022. In the first quarter of fiscal 2022, we
acquired the remaining 50% membership interest in Red River Valley Egg Farm, LLC for $44.8 million, net of cash acquired.
Purchases of investments were $51.8 million in the first quarter of fiscal 2023, compared to $1.4 million in fiscal 2022. The
increase in purchases of investments is primarily due to the increased cash provided by operating activities noted above. Sales
and maturities of investment securities were $20.3 million for the thirteen weeks ended August 27, 2022, compared to $39.4
million for the comparable period in fiscal 2022.
Cash Flows from Financing Activities
We paid dividends of $36.7 million in the first quarter of fiscal 2023.
As of August 27, 2022, cash increased $76.9 million since May 28, 2022, compared to a decrease of $40.7 million during the
same period of fiscal 2022.
Credit Facility
We had no long-term debt outstanding at August 27, 2022 or May 28, 2022. On November 15, 2021, we entered into a credit
agreement that provides for a senior secured revolving credit facility (the “Credit Facility”), in an initial aggregate principal
amount of up to $250 million with a five-year term. As of August 27, 2022, no amounts were borrowed under the Credit
Facility. We have $4.1 million in outstanding standby letters of credit, issued under our Credit Facility for the benefit of certain
insurance companies. Refer to Part II Item 8. Notes to the Financial Statements, Note 10 – Credit Facility included in our 2022
Annual Report for further information regarding our long-term debt.
Material Cash Requirements
We continue to monitor the increasing demand for cage-free eggs and to engage with our customers in efforts to achieve a
smooth transition toward their announced commitment timeline for cage-free egg sales. As previously reported, during the first
quarter of fiscal 2023, our Board of Directors approved another capital project to expand our cage-free production capabilities.
The project at Chase, Kansas will convert existing conventional layer capacity to cage-free capacity for approximately 1.5
million cage-free hens and include remodels of all remaining pullet facilities. Project completion is expected by year-end 2025.
The following table presents material construction projects approved as of August 27, 2022 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of August
27, 2022
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2023
$
132,161
115,343
16,818
Cage-Free Layer & Pullet Houses
Fiscal 2023
24,923
19,548
5,375
Cage-Free Layer & Pullet Houses
Fiscal 2024
42,591
383
42,208
Cage-Free Layer & Pullet Houses
Fiscal 2025
94,183
7,729
86,454
$
293,858
$
143,003
$
150,855
We believe our current cash balances, investments, cash flows from operations, and Credit Facility will be sufficient to fund our
current capital 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
24
CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates are those estimates made in accordance with U.S. generally accepted accounting principles that
involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our
financial condition or results of operations. There have been no changes to our critical accounting estimates identified in our
2022 Annual Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk during the thirteen weeks ended August 27, 2022 from the
information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2022 Annual Report.
ITEM 4. CONTROLS
AND
PROCEDURES
Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed
by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that
we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive
and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding
required disclosure. Based on an evaluation of our disclosure controls and procedures conducted by our Chief Executive Officer
and Chief Financial Officer, together with other financial officers, such officers concluded that our disclosure controls and
procedures were effective as of August 27, 2022 at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended August 27, 2022
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
25
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to the discussion of certain legal proceedings involving the Company and/or its subsidiaries in (i) our 2022 Annual
Report, Part I Item 3 Legal Proceedings, and Part II Item 8, Notes to Consolidated Financial Statements and Supplementary
Data, Note 18: Commitments and Contingencies, and (ii) in this Quarterly Report in
of the Notes to Condensed Consolidated Financial Statements, which discussions are incorporated herein by reference.
ITEM 1A. RISK
FACTORS
There have been no material changes in the risk factors previously disclosed in the Company’s 2022 Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table is a summary of our first quarter 2023 share repurchases:
Issuer Purchases of Equity Securities
Total Number of
Maximum Number
Shares Purchased
of Shares that
Total Number
Average
as Part of Publicly
May Yet Be
of Shares
Price Paid
Announced Plans
Purchased Under the
Period
Purchased (1)
per Share
Or Programs
Plans or Programs
05/29/22 to 06/25/22
286
$
47.04
—
—
06/26/22 to 07/23/22
609
52.48
—
—
07/24/22 to 08/27/22
—
—
—
—
895
$
50.74
—
—
(1) As permitted under our Amended and Restated 2012 Omnibus Long-Term Incentive Plan, these shares were withheld by us to satisfy tax withholding
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.
26
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:
September 27, 2022
/s/ Max P. Bowman
Max P. Bowman
Vice President, Chief Financial Officer
(Principal Financial Officer)
Date:
September 27, 2022
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)
Exhibit 31.1
1
Certification
Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934,
As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Adolphus B. Baker, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Cal-Maine Foods, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d)
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
/s/ Adolphus B. Baker
Adolphus B. Baker
Chief Executive Officer and Chairman of the Board
Date:
September 27, 2022
Exhibit 31.2
1
Certification
Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934,
As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Max P. Bowman, certify that
1.
I have reviewed this Quarterly Report on Form 10-Q of Cal-Maine Foods, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
/s/ Max P. Bowman
Max P. Bowman
Vice President and Chief Financial Officer
Date:
September 27, 2022
Exhibit 32
1
Certifications Pursuant to 18 U.S.C. §1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Solely for the purposes of complying with 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, we, the undersigned Chief Executive Officer and Chief Financial Officer of Cal-Maine Foods, Inc. (the “Company”),
hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended August
27, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ Adolphus B. Baker
Adolphus B. Baker
Chief Executive Officer and Chairman of the Board
/s/ Max P. Bowman
Max P. Bowman
Vice President and Chief Financial Officer
Date:
September 27, 2022