Cal-Maine Foods Inc 10-Q for FY2024 Q1
Cal-Maine Foods Inc (CALM)
10-Q
2023-10-03
For: 2023-09-02
View Original
Added on
April 11, 2026
About this 10-Q
Cal-Maine Foods Inc filed this 10-Q on October 3, 2023, covering the quarter ended September 2, 2023 (FY2024 Q1).
Headline figures
Quarter ended September 2, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $459.34M
- down 30.2% from $658.34M a year earlier
- Net income
- $926K
- down 99.3% from net income of $125.29M a year earlier
- Diluted EPS
- $0.02
- down 99.2% from $2.57 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 October 3, 2023.
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.
, and Issuer Purchases of
Equity Securities
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)
September 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 and accrued expenses
$
$
Accrued income taxes payable
Dividends payable
Total current liabilities
Other noncurrent liabilities
Deferred income taxes, net
Total liabilities
Commitments and contingencies - see Note 9
—
—
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
(2,291 )
(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
(2,013 )
(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
September 2, 2023
August 27, 2022
Net sales
$
$
Cost of sales
Gross profit
Selling, general and administrative
(Gain) loss on disposal of fixed assets
(56 )
Operating income (loss)
(6,757 )
Other income (expense):
Interest income, net
Royalty income
Equity income (loss) of unconsolidated entities
(470 )
Other, net
Total other income, net
Income before income taxes
Income tax expense
Net income
Less: Loss attributable to noncontrolling interest
(515 )
(153 )
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
September 2, 2023
August 27, 2022
Net income
$
Other comprehensive income (loss), before tax:
Unrealized holding gain (loss) on available-for-sale securities, net of reclassification
adjustments
(997 )
Income tax benefit (expense) related to items of other comprehensive income
(191 )
Other comprehensive income (loss), net of tax
(754 )
Comprehensive income
Less: Comprehensive loss attributable to the noncontrolling interest
(515 )
(153 )
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)
Thirteen Weeks Ended
September 2, 2023
August 27, 2022
Cash flows from operating activities:
Net income
$
$
Depreciation and amortization
Deferred income taxes
(1,324 )
Other adjustments, net
Net cash provided by operations
Cash flows from investing activities:
Purchases of investment securities
(28,296 )
(51,834 )
Sales and maturities of investment securities
Purchases of property, plant and equipment
(26,666 )
(27,662 )
Net proceeds from disposal of property, plant and equipment
Net cash provided by (used in) investing activities
(59,122 )
Cash flows from financing activities:
Payments of dividends
(36,983 )
(36,653 )
Purchase of common stock by treasury
(5 )
(45 )
Principal payments on finance lease
(58 )
(55 )
Net cash used in financing activities
(37,046 )
(36,753 )
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 ended on September 2,
2023 and August 27, 2022 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
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 September 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.
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
8
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.
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 September 2, 2023 and June 3, 2023 (in thousands):
September 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 $
thirteen weeks ended September 2, 2023 and August 27, 2022, respectively. Gross realized gains for the thirteen weeks ended
September 2, 2023 and August 27, 2022 were $
2023 and August 27, 2022 were $
September 2, 2023 and June 3, 2023.
9
Actual maturities may differ from contractual maturities as some borrowers have the right to call or prepay obligations with or
without penalties. Contractual maturities of current investments at September 2, 2023 are as follows (in thousands):
Estimated Fair Value
Within one year
$
1-5 years
Total
$
Noncurrent
There were
2022.
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.
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 September 2, 2023 and June 3, 2023 (in thousands):
September 2, 2023
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
—
1,117
—
1,117
US government and agency obligations
Asset backed securities
Mutual funds
Total assets measured at fair value
$
$
$
$
10
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
$
$
$
$
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 September 2, 2023 and June 3, 2023 (in thousands):
September 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
September 2, 2023 and June 3, 2023 consisted of approximately
million and
Note 5 - Equity
The following reflects equity activity for the thirteen weeks ended September 2, 2023 and August 27, 2022 (in thousands):
Thirteen Weeks Ended September 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
—
—
—
—
—
(265 )
—
(265 )
Class A common
—
—
—
—
—
(29 )
—
(29 )
Net income (loss)
—
—
—
—
—
(515 )
Balance at
September 2, 2023
$
$
$
(30,014 )
$
$
(2,291 )
$
$
(2,013 )
$
11
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 ($
per share)
Common
—
—
—
—
—
(37,648 )
—
(37,648 )
Class A common
—
—
—
—
—
(4,094 )
—
(4,094 )
Net income (loss)
—
—
—
—
—
(153 )
Balance at August
27, 2022
$
$
$
(28,495 )
$
$
(2,350 )
$
$
(359 )
$
Note 6 - 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
September 2, 2023
August 27, 2022
Numerator
Net income
$
$
Less: Loss attributable to noncontrolling interest
(515 )
(153 )
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
$
$
Note 7 - 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
12
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 and comparing 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
September 2, 2023
August 27, 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 September 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 8 - Stock Based Compensation
Total stock-based compensation expense was $
2022.
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 September 2, 2023 of $
average period of
14 - Stock Compensation Plans in our 2023 Annual Report for further information on our stock compensation plans.
13
The Company’s restricted share activity for the thirteen weeks ended September 2, 2023 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, June 3, 2023
$
Vested
(305 )
Forfeited
(1,329 )
Outstanding, September 2, 2023
$
Note 9 - 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 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.
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.
14
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 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. A
preliminary pre-trial order was filed by the parties on August 22, 2023, and trial is now set for October 17, 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., 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.
15
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 Tenth Circuit
Chief Judge Deanell Reece Tacha and instructed the parties to file a joint status report 14 days following mediation. 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 negotiations and mediation with the State of
Oklahoma, 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 10 - Subsequent Events
Effective on September 28, 2023, the Company entered into a definitive agreement to acquire substantially all the assets of
Fassio Egg Farms, Inc. (“Fassio”), related to its commercial shell egg production and processing business. The assets to be
acquired, subject to the completion of this transaction, include commercial shell egg production and processing facilities with a
current capacity of approximately
composting operation and land located in Erda, Utah, outside Salt Lake City.
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 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
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 inflation and rising interest rates, 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 2023
Annual Report, the risk factors (if any) set forth in Part II Item 1A Risk Factors and elsewhere in this report as well as those
included in other reports we file from time to time with the Securities and Exchange Commission (the “SEC”) (including our
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K), (ii) the risks and hazards inherent in the shell egg business
(including disease, pests, weather conditions, and potential for product recall), including but not limited to the current outbreak
of highly pathogenic avian influenza (“HPAI”) affecting poultry in the United States (“U.S.”), Canada and other countries that
was first detected in commercial flocks in the U.S. in February 2022, (iii) changes in the 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, which began in response to market conditions caused in part by the COVID-19
pandemic and which generally have been exacerbated by the Russia-Ukraine War that began in 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 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 41.9
million layers and 10.0 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.
17
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 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.
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 in effect currently. In May 2023, the U.S. Supreme Court upheld as constitutional
California’s law that requires the sale of only cage-free eggs in that state and regardless of the state in which the eggs are
produced. 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 previously announced goals to offer cage-free eggs exclusively on or before 2026,
subject in most cases to availability of supply, affordability and consumer demand, among other contingencies. Some of these
customers have recently changed those goals to offer 70% cage-free eggs by the end of 2030. Our customers typically do not
commit to long-term purchases of specific quantities or types of eggs with us, and as a result, it is difficult to accurately predict
customer requirements for cage-free eggs. We are focused 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 33.0% of our total net shell egg revenue for the first 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.”
ACQUISITION
After the end of the fiscal quarter, we entered into a definitive agreement to acquire substantially all the assets of Fassio Egg
Farms, Inc. (“Fassio”), related to its commercial shell egg production and processing business. The assets to be acquired,
18
subject to the completion of the transaction, include 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. We expect the transaction to close during the
second quarter of fiscal 2024, subject to customary closing conditions. Once completed, the acquisition will expand our market
presence in Utah and the western United States.
HPAI; EGG SUPPLY OUTLOOK
The most recent outbreak of highly pathogenic avian influenza (“HPAI”) impacted our business and financial results primarily
during the fourth quarter of fiscal 2022 and continuing through the first part of our fourth quarter of fiscal 2023. 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.” While the last occurrence in a commercial egg laying flock was in December 2022, there have
been occurrences in other avian populations in the U.S. since then. HPAI is still present in the wild bird population and the
extent of possible future outbreaks, particularly during the upcoming fall migration season, cannot be predicted. There have
been no positive tests for HPAI at any of Cal-Maine Foods’ owned or contracted production facilities as of October 3, 2023.
Based on USDA data, we believe that the U.S. layer hen flock, which declined as a result of flock depletions due to HPAI, has
largely recovered but remains slightly lower than the five-year average.
Layer hen numbers reported by the USDA as of September 1, 2023, were 318.2 million, which represents an increase of 3.1%
compared with the layer hen inventory a year ago. The USDA also reported that the hatch from April 2023 through August
2023 increased 2.0% as compared with the prior-year period, indicating that layer flocks may continue to increase in the future.
EXECUTIVE OVERVIEW
For the first quarter of fiscal 2024, we recorded a gross profit of $45.4 million compared to $217.5 million for the same period
of fiscal 2023, with the decrease due primarily to lower conventional shell egg prices and increased labor costs, partially offset
by lower farm production costs due to the decrease in feed ingredient prices.
Our net average selling price per dozen for the first quarter of fiscal 2024 was $1.589 compared to $2.275 in the prior-year
period. Conventional egg prices per dozen were $1.241 compared to $2.368 for the prior-year period, and specialty egg prices
per dozen were $2.278 compared to $2.101 for the prior-year period. Conventional egg prices were lower in the first quarter of
fiscal 2024 compared to the prior-year period as overall egg supply recovers from the most recent HPAI outbreak. The daily
average price for the Urner Barry southeast large index for the first quarter of fiscal 2024 decreased 48.7% from the comparable
period in the prior year. In the first quarter of fiscal 2024, specialty egg prices exceeded conventional egg prices as opposed to
the first quarter of fiscal 2023, returning to a historically normal relative position. Conventional egg prices generally respond
more quickly to market conditions because we sell the majority of our conventional shell eggs based on formulas that adjust
periodically and take into account, in varying ways, independently quoted regional wholesale market prices for shell eggs or
formulas related to our costs of production. The majority of our specialty eggs are typically sold at prices and terms negotiated
directly with customers and therefore do not fluctuate as much as conventional pricing. For information about historical shell
egg prices, see Part I Item I of our 2023 Annual Report.
Our total dozens sold decreased 0.8% to 273.1 million dozen shell eggs for the first quarter of fiscal 2024 compared to 275.3
million dozen for the same period of fiscal 2023. For the first quarter of fiscal 2024, conventional dozens sold increased 1.0%
and specialty dozens sold decreased 4.2% as compared to the same quarter in fiscal 2023. Demand for specialty eggs decreased
in the first 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 prior four quarters.
Our farm production costs per dozen produced for the first quarter of fiscal 2024 decreased 1.0%, or $0.01, compared to the
first quarter of fiscal 2023. However, feed costs per dozen produced decreased 10.5% or $0.07 compared to the first quarter of
fiscal 2023 primarily due to reduced corn prices, our primary feed ingredient. For the first quarter of fiscal 2024, the average
Chicago Board of Trade (“CBOT”) daily market price was $5.30 per bushel for corn and $422 per ton for soybean meal,
representing decreases of 20.2% and 7.4%, respectively, compared to the average daily CBOT prices for the comparable period
in the prior year. For information about historical corn and soybean meal prices, see Part I Item I of our 2023 Annual Report.
19
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
September 2, 2023
August 27, 2022
Net sales
100.0
%
100.0
%
Cost of sales
90.1
%
67.0
%
Gross profit
9.9
%
33.0
%
Selling, general and administrative
11.3
%
8.1
%
Operating income (loss)
(1.4)
%
24.9
%
Total other income, net
1.6
%
0.2
%
Income before income taxes
0.2
%
25.1
%
Income tax expense
0.1
%
6.1
%
Net income
0.1
%
19.0
%
Less: Loss attributable to noncontrolling interest
(0.1)
%
—
%
Net income attributable to Cal-Maine Foods, Inc.
0.2
%
19.0
%
NET SALES
Total net sales for the first quarter of fiscal 2024 were $459.3 million compared to $658.3 million for the same period of fiscal
2023.
Net shell egg sales represented 95.2% and 95.8% of total net sales for the first 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.
20
The table below presents an analysis of our conventional and specialty shell egg sales (in thousands, except percentage data):
Thirteen Weeks Ended
September 2, 2023
August 27, 2022
Total net sales
$
459,344
$
658,344
Conventional
$
225,280
51.6
%
$
425,589
67.5
%
Specialty
208,681
47.7
%
200,820
31.8
%
Egg sales, net
433,961
99.3
%
626,409
99.3
%
Other
3,160
0.7
%
4,295
0.7
%
Net shell egg sales
$
437,121
100.0
%
$
630,704
100.0
%
Net shell egg sales as a percent of total net sales
95.2
%
95.8
%
Dozens sold:
Conventional
181,530
66.5
%
179,712
65.3
%
Specialty
91,596
33.5
%
95,605
34.7
%
Total dozens sold
273,126
100.0
%
275,317
100.0
%
Net average selling price per dozen:
Conventional
$
1.241
$
2.368
Specialty
$
2.278
$
2.101
All shell eggs
$
1.589
$
2.275
Egg products sales:
Egg products net sales
$
22,223
$
27,640
Pounds sold
19,353
16,502
Net average selling price per pound
$
1.148
$
1.675
Shell egg net sales
First Quarter – Fiscal 2024 vs. Fiscal 2023
-
In the first quarter of fiscal 2024, conventional egg sales decreased $200.3 million, or 47.1%, compared to the first
quarter of fiscal 2023, primarily due to a 47.6% decrease in the prices for conventional eggs, which resulted in a
$204.6 million decrease in net sales, partially offset by a 1.0% increase in the volume of conventional eggs sold, which
resulted in a $4.3 million increase in net sales.
-
Conventional egg prices decreased in the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 as the
U.S. egg supply recovers from the most recent HPAI outbreak that impacted our results primarily during the fourth
quarter of fiscal 2022 and continuing through the first part of our fourth quarter of fiscal 2023.
-
Specialty egg sales increased $7.9 million, or 3.9%, in the first quarter of fiscal 2024 compared to the first quarter of
fiscal 2023, primarily due to an 8.4% increase in the prices for specialty eggs, which resulted in a $16.2 million
increase in net sales, partially offset by a 4.2% decrease in the volume of specialty eggs sold, which resulted in a $8.4
million decrease in net sales.
-
Net average selling prices of specialty eggs increased in response to higher input costs and market conditions.
-
Demand for specialty eggs decreased as conventional egg prices were significantly lower in the first quarter of fiscal
2024 compared to the first quarter of fiscal 2023.
-
Cage-free egg revenue for the first quarter of fiscal 2024 represented 33.0% of our total net shell egg revenue versus
19.4% 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.
21
Egg products net sales
First Quarter – Fiscal 2024 vs. Fiscal 2023
-
Egg products net sales decreased $5.4 million, or 19.6%, for the first quarter of fiscal 2024 compared to the same
period of fiscal 2023, primarily due to a 31.5% selling price decrease, which had a $10.2 million negative impact on
net sales.
-
Our egg products net average selling price decreased in the first quarter of fiscal 2024, compared to the first quarter of
fiscal 2023 as the supply of shell eggs used to produce egg products recovers from the most recent HPAI outbreak.
COST OF SALES
Costs of sales for the first quarter of fiscal 2024 were $413.9 million compared to $440.9 million for the same period of fiscal
2023.
The following table presents the key variables affecting our cost of sales (in thousands, except cost per dozen data):
Thirteen Weeks Ended
September 2, 2023
August 27, 2022
%
Change
Cost of Sales:
Farm production
$
253,507
$
266,651
(4.9)
%
Processing, packaging, and warehouse
81,906
81,417
0.6
Egg purchases and other (including change in inventory)
60,797
68,298
(11.0)
Total shell eggs
396,210
416,366
(4.8)
Egg products
17,701
24,488
(27.7)
Total
$
413,911
$
440,854
(6.1)
%
Farm production costs (per dozen produced)
Feed
$
0.597
$
0.667
(10.5)
%
Other
$
0.439
$
0.379
15.8
%
Total
$
1.036
$
1.046
(1.0)
%
Outside egg purchases (average cost per dozen)
$
1.65
$
2.57
(35.8)
%
Dozens produced
250,356
257,654
(2.8)
%
Percent produced to sold
91.7%
93.6%
(2.0)
%
Farm Production
First Quarter – Fiscal 2024 vs. Fiscal 2023
-
Feed costs per dozen produced decreased 10.5% in the first quarter of fiscal 2024 compared to the first 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 first fiscal quarter. The decrease in feed
cost per dozen resulted in a decrease in cost of sales of $17.5 million for the first quarter of fiscal 2024 compared to
the prior period quarter.
-
For the first quarter of fiscal 2024, the average daily CBOT market price was $5.30 per bushel for corn and $422 per
ton of soybean meal, representing decreases of 20.2% and 7.4%, respectively, as compared to the average daily CBOT
prices for the first quarter of fiscal 2023.
-
Other farm production costs increased primarily due to higher flock amortization and facility costs. Flock amortization
increased primarily from higher capitalized feed costs as well as higher amortization costs from an increase in our
cage-free production. Cage-free dozens sold increased 12.6% in the first quarter of fiscal 2024 compared to the first
quarter of fiscal 2023.
22
-
Facility costs increased due primarily to increased labor costs. Labor costs increased 16.5% compared to the first
quarter of fiscal 2023 primarily due to increase in contract labor in response to labor shortages.
Current indications for corn project an overall better stocks-to-use ratio; however, until this year’s harvest is complete and as
long as outside factors remain uncertain (including weather patterns and the Russia-Ukraine war and its effect on export
markets), volatility could remain. Soybean meal supply has remained tight relative to demand in the first quarter of fiscal 2024.
Processing, packaging, and warehouse
First Quarter – Fiscal 2024 vs. Fiscal 2023
-
Processing, packaging, and warehouse costs remained relatively consistent compared to the first quarter of fiscal 2023.
On a per dozen basis, costs in this category increased due to the decrease in processing volume.
Egg purchases and other (including change in inventory)
First 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 35.8% compared to first quarter of fiscal 2023. The decrease was partially offset by an increase in
the volume of outside egg purchases, causing the percentage of produced to sold to decrease to 91.7% from 93.6%.
GROSS PROFIT
Gross profit for the first quarter of fiscal 2024 was $45.4 million compared to $217.5 million for the same period of fiscal 2023.
The decrease of $172.1 million was primarily due to lower conventional egg prices and increased labor costs, partially offset by
lower farm production costs due to the decrease in feed ingredient prices.
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
September 2, 2023
August 27, 2022
$ Change
% Change
Specialty egg expense
$
12,005
$
13,067
$
(1,062)
(8.1)
%
Delivery expense
17,691
19,916
(2,225)
(11.2)
%
Payroll, taxes and benefits
12,066
10,987
1,079
9.8
%
Stock compensation expense
1,040
1,025
15
1.5
%
Other expenses
9,444
8,612
832
9.7
%
Total
$
52,246
$
53,607
$
(1,361)
(2.5)
%
First Quarter – Fiscal 2024 vs. Fiscal 2023
Specialty egg expense
-
Specialty egg expense decreased primarily due to a reduction in franchise fees to Eggland’s Best, Inc. as well as
reduced sales volume of specialty eggs.
Delivery expense
-
The decreased delivery expense is primarily due to a decrease in fuel and contract trucking expenses in the first quarter
of fiscal 2024 compared to the first quarter of fiscal 2023.
Payroll, taxes and benefits expense
-
The increase in payroll, taxes and benefits expense is due to an increase in salaries and wages compared to the first
quarter of fiscal year 2023.
Other expense
-
The increase in other expense is primarily due an increase in legal fees in the first quarter of fiscal 2024 compared to
the first quarter of fiscal 2023.
23
OPERATING INCOME (LOSS)
For the first quarter of fiscal 2024, we recorded operating loss of $6.8 million compared to operating income of $163.9 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 first quarter of fiscal 2024, we earned $7.5 million of interest income compared to $1.1 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 $142 thousand and $148 thousand for the first quarters ended September 2, 2023 and August 27,
2022, respectively.
INCOME TAXES
For the first quarter of fiscal 2024, pre-tax income was $733 thousand compared to $165.5 million for the same period of fiscal
2023. We recorded income tax expense of $322 thousand for the first quarter of fiscal 2024, which reflects an effective tax rate
of 43.9%. Income tax expense was $40.3 million for the comparable period of fiscal 2023, which reflects an effective tax rate
of 24.4%. The increase in the effective tax rate for first quarter of fiscal 2024 is primarily due to the loss attributable to our
noncontrolling interest. Taxable income for the first quarter of fiscal 2024 was $1.2 million and excludes the loss attributable to
noncontrolling interest of $515 thousand, which represents an effective tax rate of 25.7%.
At September 2, 2023, the Company had an income tax receivable of $33.8 million compared to an income tax receivable of
$67.0 million at June 3, 2023. The change is primarily due to receipt during the first quarter of fiscal 2024 of a $33.2 million
federal tax refund plus associated federal interest income related to the carryback of fiscal 2021 taxable net operating losses.
Our effective tax rate differs from the federal statutory income tax rate due to state income taxes, certain federal tax credits and
certain items included in income for financial reporting purposes that are not included in taxable income for income tax
purposes, including tax exempt interest income, certain nondeductible expenses and net income or loss attributable to our
noncontrolling interest.
NET INCOME ATTRIBUTABLE TO CAL-MAINE FOODS, INC.
Net income attributable to Cal-Maine Foods, Inc. for the first quarter ended September 2, 2023, was $926 thousand, or $0.02
per basic and diluted common share, compared to net income attributable to Cal-Maine Foods, Inc. of $125.3 million or $2.58
per basic and $2.57 per diluted common share for the same period of fiscal 2023.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital and Current Ratio
Our working capital at September 2, 2023 was $937.7 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 8.4 at September 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 thirteen weeks ended September 2, 2023, $23.7 million in net cash was provided by operating activities, compared to
$172.8 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
We continue to invest in our facilities, with $26.7 million used to purchase or construct property, plant and equipment for the
thirteen weeks ended September 2, 2023, compared to $27.7 million in the same period of fiscal 2023. Sales and maturities of
investment securities were $135.8 million in the first quarter of fiscal 2024, compared to $20.3 million in fiscal 2023. The
24
increase in sales and maturities of investment securities is primarily due to the maturities of short-term investments during the
period.
Cash Flows from Financing Activities
We paid dividends of $37.0 million for the thirteen weeks ended September 2, 2023 compared to $36.7 million in the same
prior-year period.
As of September 2, 2023, cash increased $67.5 million since June 3, 2023, compared to an increase of $76.9 million during the
same period of fiscal 2023.
Credit Facility
We had no long-term debt outstanding at September 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 September 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.
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 September 2, 2023 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of
September 2, 2023
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses
Fiscal 2024
54,702
23,221
31,481
Cage-Free Layer & Pullet Houses
Fiscal 2025
40,099
29,471
10,628
Feed Mill
Fiscal 2025
10,800
36
10,764
Cage-Free Layer & Pullet Houses
Fiscal 2026
38,883
24,623
14,260
Cage-Free Layer & Pullet Houses
Fiscal 2027
56,923
24,311
32,612
$
201,407
$
101,662
$
99,745
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 September 2, 2023 from
the information provided in Part II Item 7A Quantitative and Qualitative Disclosures About Market Risk in our 2023 Annual
Report.
25
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 September 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 September 2, 2023
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
26
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
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 2023 Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES
OF EQUITY SECURITIES
The following table is a summary of our first quarter 2024 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
06/04/23 to 07/01/23
—
$
—
—
—
07/02/23 to 07/29/23
106
44.75
—
—
07/30/23 to 09/02/23
—
—
—
—
106
$
44.75
—
—
(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.
27
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:
October 3, 2023
/s/ Max P. Bowman
Max P. Bowman
Vice President, Chief Financial Officer
(Principal Financial Officer)
Date:
October 3, 2023
/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, Sherman L. Miller, 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/ Sherman L. Miller
Sherman L. Miller
President and Chief Executive Officer
Date:
October 3, 2023
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:
October 3, 2023
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
September 2, 2023 (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/ Sherman L. Miller
Sherman L. Miller
President and Chief Executive Officer
/s/ Max P. Bowman
Max P. Bowman
Vice President and Chief Financial Officer
Date:
October 3, 2023