10-Q
Cal-Maine Foods Inc (CALM)
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Index
1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
DC
20549
FORM
10-Q
☑
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended
March 2, 2024
or
☐
Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number:
001-38695
CAL-MAINE FOODS, INC.
(Exact name of registrant as specified in its charter)
Delaware
64-0500378
(State or other jurisdiction of incorporation or organization)
(I.R.S Employer Identification No.)
1052 Highland Colony Pkwy
,
Suite 200
,
Ridgeland
,
Mississippi
39157
(Address of principal executive offices)
(Zip Code)
(
601
)
948-6813
(Registrant’s telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
CALM
The
NASDAQ
Global Select Market
Indicate
by
check
mark
whether
the
registrant: (1)
has
filed
all
reports
required
to
be
filed
by
Section
13
or
15(d)
of
the
Securities Exchange
Act of 1934
during the preceding
12 months (or
for such
shorter period that
the registrant was
required to
file such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes
☑
No
☐
Indicate by check
mark whether the
registrant has submitted
electronically every
Interactive Data File
required to be
submitted
pursuant to
Rule 405
of Regulation
S-T (§232.405
of this
chapter) during
the preceding
12 months
(or for
such shorter
period
that the registrant was required to submit such files).
Yes
☑
No
☐
Indicate by
check mark
whether the registrant
is a large
accelerated filer,
an accelerated
filer, a
non-accelerated filer,
a smaller
reporting
company,
or
an
emerging
growth
company.
See
the
definitions
of
“large
accelerated
filer,”
“accelerated
filer,”
“smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
Large Accelerated filer
☑
Accelerated filer
☐
Non – Accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If
an
emerging
growth
company,
indicate
by
check
mark
if
the
registrant
has
elected
not
to
use
the
extended
transition
period
for
complying
with
any
new
or
revised
financial
accounting
standards
provided
pursuant
to
Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes
☐
No
☑
There were
44,238,326
shares of
Common Stock,
$0.01 par value,
and
4,800,000
shares of Class
A Common
Stock, $0.01
par
value, outstanding as of April 2, 2024.
Index
2
INDEX
Page
Number
Part I.
Financial Information
Item 1.
Financial Statements
Condensed Consolidated Balance Sheets -
March 2, 2024 and June 3, 2023
3
Condensed Consolidated Statements of Income -
Thirteen and Thirty-nine Weeks Ended March 2, 2024 and February 25, 2023
4
Condensed Consolidated Statements of Comprehensive Income -
Thirteen and Thirty-nine Weeks Ended March 2, 2024 and February 25, 2023
5
Condensed Consolidated Statements of Cash Flows -
Thirty-nine Weeks Ended March 2, 2024 and February 25, 2023
6
Notes to Condensed Consolidated Financial Statements
7
Item 2.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
20
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
31
Item 4.
Controls and Procedures
31
Part II.
Other Information
Item 1.
Legal Proceedings
32
Item 1A.
Risk Factors
32
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
32
Item 6.
Exhibits
32
Signatures
33
Index
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)
March 2, 2024
June 3, 2023
Assets
Current assets:
Cash and cash equivalents
$
367,123
$
292,824
Investment securities available-for-sale
327,720
355,090
Trade and other receivables, net
212,851
120,247
Income tax receivable
33,771
66,966
Inventories
269,244
284,418
Prepaid expenses and other current assets
6,883
5,380
Total current
assets
1,217,592
1,124,925
Property, plant &
equipment, net
826,573
744,540
Investments in unconsolidated entities
16,388
14,449
Goodwill
45,776
44,006
Intangible assets, net
16,534
15,897
Other long-term assets
10,666
10,708
Total Assets
$
2,133,529
$
1,954,525
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
95,610
$
82,590
Accrued wages and benefits
25,721
38,733
Accrued income taxes payable
30,113
8,288
Dividends payable
48,891
37,130
Accrued expenses and other liabilities
15,354
15,990
Total current
liabilities
215,689
182,731
Other noncurrent liabilities
30,740
9,999
Deferred income taxes, net
166,141
152,212
Total liabilities
412,570
344,942
Commitments and contingencies - see Note 10
—
—
Stockholders’ equity:
Common stock ($
0.01
par value):
Common stock - authorized
120,000
shares, issued
70,261
shares
703
703
Class A convertible common stock - authorized and issued
4,800
shares
48
48
Paid-in capital
75,226
72,112
Retained earnings
1,680,886
1,571,112
Accumulated other comprehensive loss, net of tax
(1,514)
(2,886)
Common stock in treasury at cost –
26,022
shares at March 2, 2024 and
26,077
shares
at June 3, 2023
(31,597)
(30,008)
Total Cal-Maine Foods,
Inc. stockholders’ equity
1,723,752
1,611,081
Noncontrolling interest in consolidated entity
(2,793)
(1,498)
Total stockholders’
equity
1,720,959
1,609,583
Total Liabilities and Stockholders’
Equity
$
2,133,529
$
1,954,525
See Notes to Condensed Consolidated Financial Statements.
Index
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
March 2, 2024
February 25, 2023
March 2, 2024
February 25, 2023
Net sales
$
703,076
$
997,493
$
1,685,654
$
2,457,537
Cost of sales
484,504
534,467
1,330,519
1,459,172
Gross profit
218,572
463,026
355,135
998,365
Selling, general and administrative
66,020
58,489
194,844
170,048
Gain on involuntary conversions
(9,929)
(3,220)
(9,929)
(3,220)
(Gain) loss on disposal of fixed assets
(306)
(26)
(44)
36
Operating income
162,787
407,783
170,264
831,501
Other income (expense):
Interest income, net
7,554
6,126
21,887
8,959
Royalty income
436
426
1,086
1,198
Patronage dividends
11,298
10,239
11,298
10,239
Equity income of unconsolidated entities
2,666
1,786
2,225
943
Other, net
418
(1,473)
1,250
(205)
Total other income, net
22,372
17,104
37,746
21,134
Income before income taxes
185,159
424,887
208,010
852,635
Income tax expense
38,796
102,118
44,658
206,438
Net income
146,363
322,769
163,352
646,197
Less: Loss attributable to noncontrolling
interest
(349)
(450)
(1,295)
(896)
Net income attributable to Cal-Maine Foods,
Inc.
$
146,712
$
323,219
$
164,647
$
647,093
Net income per common share:
Basic
$
3.01
$
6.64
$
3.38
$
13.31
Diluted
$
3.00
$
6.62
$
3.37
$
13.25
Weighted average
shares outstanding:
Basic
48,727
48,653
48,702
48,634
Diluted
48,884
48,842
48,865
48,832
See Notes to Condensed Consolidated Financial Statements.
Index
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
Comprehensive Income
(In thousands)
(Unaudited)
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
March 2, 2024
February 25, 2023
March 2, 2024
February 25, 2023
Net income
$
146,363
$
322,769
$
163,352
$
646,197
Other comprehensive income (loss), before
tax:
Unrealized holding gain (loss) on available-
for-sale securities, net of reclassification
adjustments
132
26
1,813
(1,945)
Income tax benefit (expense) related to
items of other comprehensive income
(32)
(6)
(441)
474
Other comprehensive income (loss), net of tax
100
20
1,372
(1,471)
Comprehensive income
146,463
322,789
164,724
644,726
Less: Comprehensive loss attributable to the
noncontrolling interest
(349)
(450)
(1,295)
(896)
Comprehensive income attributable to Cal-
Maine Foods, Inc.
$
146,812
$
323,239
$
166,019
$
645,622
See Notes to Condensed Consolidated Financial Statements.
Index
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Thirty-nine Weeks Ended
March 2, 2024
February 25, 2023
Cash flows from operating activities:
Net income
$
163,352
$
646,197
Depreciation and amortization
59,151
53,198
Deferred income taxes
13,488
7,098
Other adjustments, net
1,613
16
Net cash provided by operations
237,604
706,509
Cash flows from investing activities:
Purchases of investment securities
(243,518)
(442,583)
Sales and maturities of investment securities
273,915
132,686
Investment in unconsolidated entities
(363)
(1,673)
Distributions from unconsolidated entities
1,000
—
Acquisition of business
(53,746)
—
Purchases of property,
plant and equipment
(95,969)
(86,168)
Net proceeds from disposal of property,
plant and equipment
243
118
Net cash used in investing activities
(118,438)
(397,620)
Cash flows from financing activities:
Payments of dividends
(42,965)
(144,559)
Purchase of common stock by treasury
(1,688)
(1,633)
Principal payments on finance lease
(214)
(167)
Net cash used in financing activities
(44,867)
(146,359)
Net change in cash and cash equivalents
74,299
162,530
Cash and cash equivalents at beginning of period
292,824
59,084
Cash and cash equivalents at end of period
$
367,123
$
221,614
See Notes to Condensed Consolidated Financial Statements.
Index
7
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The
unaudited
condensed
consolidated
financial
statements
of
Cal-Maine
Foods,
Inc.
and
its
subsidiaries
(the
“Company,”
“we,” “us,” “our”)
have been prepared
in accordance with
the instructions to
Form 10-Q and
Article 10 of
Regulation S-X and
in
accordance
with generally
accepted
accounting
principles in
the
United
States of
America
(“GAAP”)
for
interim
financial
reporting and
should be
read in
conjunction with
our Annual
Report on
Form 10-K
for the fiscal
year ended
June 3,
2023 (the
“2023
Annual
Report”).
These
statements
reflect
all
adjustments
that
are,
in
the
opinion
of
management,
necessary
to
a
fair
statement of the results for
the interim periods presented
and, in the opinion of
management, consist of adjustments
of a normal
recurring nature.
Operating results for
the interim periods
are not necessarily
indicative of operating
results for the
entire fiscal
year.
Fiscal Year
The Company’s
fiscal year
ends on
the Saturday
closest to
May 31.
Each of
the three-month
periods and
year-to-date periods
ended on March 2, 2024 and February 25, 2023 included
13 weeks
and
39 weeks
, respectively.
Use of Estimates
The preparation of the
consolidated financial statements in
conformity with GAAP requires management
to make estimates and
assumptions
that affect
the amounts
reported in
the consolidated
financial statements
and accompanying
notes. Actual
results
could differ from those estimates.
Investment Securities
The Company
has determined
that its
debt securities
are available-for-sale
investments. We
classify these
securities as
current
because the
amounts invested
are available
for current
operations. Available
-for-sale
securities are
carried at
fair value,
based
on quoted market prices
as of the balance sheet
date, with unrealized gains
and losses recorded in other
comprehensive income.
The
amortized
cost
of
debt
securities
is
adjusted
for
amortization
of
premiums
and
accretion
of
discounts
to
maturity
and
is
recorded in interest
income. The Company regularly
evaluates changes to the
rating of its debt
securities by credit agencies
and
economic conditions
to assess and
record any
expected credit
losses through
allowance for
credit losses,
limited to
the amount
that fair value was less than the amortized cost basis.
Investments
in
mutual
funds
are
recorded
at
fair
value
and
are
classified
as
“Other
long-term
assets”
in
the
Company’s
Condensed
Consolidated
Balance
Sheets.
Unrealized
gains
and
losses
for
equity
securities
are
recorded
in
other
income
(expenses) as Other, net in the Company’s
Condensed Consolidated Statements of Income.
The cost
basis for
realized gains
and losses
on available-for-sale
securities is
determined by
the specific
identification method.
Gains
and
losses
are
recognized
in
other
income
(expenses)
as
Other,
net
in
the
Company’s
Condensed
Consolidated
Statements of Income. Interest and dividends on securities classified as available-for-sale
are recorded in interest income.
Trade Receivables
Trade receivables
are stated at their
carrying values, which
include a reserve
for credit losses. As
of March 2,
2024 and June
3,
2023, reserves for credit losses were
$
605
thousand and $
579
thousand, respectively.
The Company extends credit to customers
based
on
an
evaluation
of
each
customer’s
financial
condition
and
credit
history.
Collateral
is
generally
not
required.
The
Company
minimizes exposure
to counter
party credit
risk through
credit analysis
and approvals,
credit limits,
and monitoring
procedures.
In
determining
our
reserve
for
credit
losses,
receivables
are
assigned
an
expected
loss
based
on
historical
loss
information adjusted as needed for economic and other forward-looking
factors.
Goodwill
Goodwill
represents
the
excess
of
the
purchase
price
over
the
fair
value
of
the
identifiable
net
assets
acquired.
Goodwill
is
evaluated
for
impairment
annually
by
first
performing
a
qualitative
assessment
to
determine
whether
a
quantitative
goodwill
Index
8
test is
necessary.
After assessing
the totality
of events
or circumstances,
if we
determine it
is more
likely than
not that
the fair
value
of
a
reporting
unit
is
less
than
its
carrying
amount,
then
we
perform
additional
quantitative
tests
to
determine
the
magnitude of any impairment.
Intangible Assets
Intangible
assets
are
initially
recorded
at
fair
value
in
business
acquisitions,
which
include
franchise
rights,
customer
relationships, non-compete
agreements, trademark
and right
of use
intangibles. They
are amortized
over their
estimated useful
lives
of
5
to
15
years. The
gross
cost
and
accumulated
amortization
of
intangible
assets
are
removed
when
the
recorded
amounts
are fully
amortized
and
the asset
is no
longer
in use
or the
contract has
expired.
When certain
events or
changes in
operating conditions
occur,
asset lives may
be adjusted
and an impairment
assessment may
be performed
on the recoverability
of the carrying amounts.
Indefinite life assets are recorded at fair value in business acquisitions and
represents water rights. They are not amortized, but
are reviewed for impairment at least annually or more frequently if
impairment indicators arise.
Dividends Payable
We
accrue dividends at
the end of
each quarter according
to the Company’s
dividend policy adopted
by its Board
of Directors.
The Company
pays a dividend
to shareholders
of its Common
Stock and
Class A Common
Stock on
a quarterly basis
for each
quarter for
which the
Company reports
net income
attributable to
Cal-Maine Foods,
Inc. computed
in accordance
with GAAP
in an amount
equal to one-third
(1/3) of such
quarterly income. Dividends
are paid to
shareholders of record
as of the 60th
day
following the
last day
of such quarter,
except for
the fourth fiscal
quarter.
For the
fourth quarter,
the Company
pays dividends
to shareholders of record on the 65th day after the
quarter end. Dividends are payable on the 15th day following
the record date.
Following a quarter for which the Company does not report net income
attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend
for a subsequent profitable
quarter until the Company
is profitable on a cumulative
basis computed from the
date of the most recent quarter
for which a dividend was paid.
The dividend policy is subject to
periodic review by the Board of
Directors.
Business Combinations
The Company applies the acquisition
method of accounting, which
requires that once control is obtained,
all the assets acquired
and liabilities assumed,
including amounts
attributable to noncontrolling
interests, are recorded
at their respective
fair values at
the date of acquisition. We
determine the fair values of identifiable assets and liabilities
internally,
which requires estimates and
the
use
of
various
valuation
techniques.
When
a
market
value
is
not
readily
available,
our
internal
valuation
methodology
considers the remaining estimated life of the assets acquired and what
management believes is the market value for those assets.
We
typically use the income
method approach for
intangible assets acquired in
a business combination. Significant
estimates in
valuing
certain
intangible
assets
include,
but
are
not
limited
to,
the
amount
and
timing
of
future
cash
flows,
growth
rates,
discount rates and
useful lives. The
excess of the purchase
price over fair values
of identifiable assets and
liabilities is recorded
as goodwill.
Gain on Involuntary Conversions
The Company
maintains insurance
for both
property damage
and business
interruption relating
to catastrophic
events, such
as
fires, hurricanes,
tornadoes
and other
acts of
God, and
is eligible
to participate
in U.S.
Department
of Agriculture
(“USDA”)
indemnity
and
compensation
programs
for
certain
losses
due
to
disease
outbreaks
such as
highly
pathogenic
avian
influenza
(“HPAI”).
Specifically,
the
Animal
Health
Protection
Act
authorizes
USDA to
provide
indemnity
payments
to
producers
for
birds and eggs
that must be
destroyed during a
disease response. Payments
received under these
programs are based
on the fair
market value
of the
poultry and/or
eggs at
the time
that HPAI
virus is
detected in
the flock.
Other covered
costs include
feed,
depopulation and disposal costs, and virus elimination costs. USDA does not
provide indemnity for income or production losses
suffered
due to
downtime or
other business
disruptions nor
for indirect
continuing expenses.
Recoveries received
for property
damage, business interruption and disease outbreaks in
excess of the net book value of damaged assets, clean-up and
demolition
costs,
and
other
direct
post-event
costs
are
recorded
within
“Gain
on
involuntary
conversions”
in
the
period
received
or
committed when all contingencies associated with the recoveries are resolved.
Loss Contingencies
Certain
conditions
may
exist
as
of
the
date
the
financial
statements
are
issued
that
may
result
in
a
loss
to
the
Company
but
which will
only be
resolved when
one or
more future
events occur
or fail
to occur.
The Company’s
management and
its legal
Index
9
counsel
assess such
contingent
liabilities, and
such assessment
inherently
involves an
exercise
of judgment.
In assessing
loss
contingencies
related
to legal
proceedings
that are
pending against
the Company
or unasserted
claims that
may result
in such
proceedings, the Company’s
legal counsel evaluates
the perceived merits
of any legal
proceedings or unasserted
claims as well
as the perceived merits of the amount of relief sought or expected to be
sought therein.
If the assessment
of a contingency
indicates it is
probable that
a material loss
has been incurred
and the amount
of the liability
can be
estimated, the
estimated liability
would be accrued
in the Company’s
financial statements.
If the assessment
indicates a
potentially material loss contingency is
not probable, but is reasonably possible,
or is probable but cannot be estimated,
then the
nature of the
contingent liability,
together with an
estimate of the
range of possible
loss if determinable
and material, would
be
disclosed. Loss
contingencies considered
remote are
generally not
disclosed unless
they involve
guarantees, in
which case
the
nature of the guarantee would be disclosed.
The Company expenses the costs of litigation as they are incurred.
New Accounting Pronouncements and Policies
No new accounting pronouncement issued or effective
during the fiscal year had or is expected to have a material
impact on our
Consolidated Financial Statements.
Note 2 - Acquisition
Effective
September 30, 2023
, the Company
acquired the assets of
Fassio Egg Farms,
Inc. (“Fassio”), related
to its commercial
shell
egg
production
and
processing
business.
Fassio
owns
and
operates
commercial
shell
egg
production
and
processing
facilities with
a capacity
at the
time of
acquisition of
approximately
1.2
million
laying hens,
primarily
cage-free,
a feed
mill,
pullets, a
fertilizer production
and composting
operation and
land located
in Erda, Utah,
outside Salt
Lake City.
The Company
accounted for the acquisition as a business combination.
The following
table summarizes
the consideration
paid for
the Fassio
assets and
the amounts
of assets
acquired and
liabilities
assumed recognized at the acquisition date (in thousands):
Cash consideration paid
$
53,746
Fair value of contingent consideration
1,000
Total estimated purchase
consideration
54,746
Recognized amounts of identifiable assets acquired and
liabilities assumed
Inventory
$
6,164
Property, plant and equipment
44,540
Intangible assets
2,272
Other long-term assets
143
Liabilities assumed
(143)
Total identifiable
net assets
52,976
Goodwill
1,770
$
54,746
Inventory consisted
primarily of
flock, feed
ingredients,
packaging, and
egg inventory.
Flock inventory
was valued at
carrying
value
as
management
believes
that
its
carrying
value
best
approximates
its
fair
value.
Feed
ingredients,
packaging
and
egg
inventory were all valued based on market prices as of September 30, 2023.
Property,
plant and
equipment were
valued utilizing
the cost
approach which
is based
on replacement
or reproduction
costs of
the assets and subtracting any depreciation resulting from physical deterioration
and/or functional or economic obsolescence.
Intangible
assets
consisted
primarily
of
water
rights
within
the
property
acquired.
Water
rights
were
valued
using
the
sales
comparison approach.
Index
10
Contingent
consideration
liability
was
recorded
and
represents
potential
future
cash
payment
to
the
sellers
contingent
on
the
acquired
business
meeting
certain
return
on
profitability
milestones over
a
three-year
period,
commencing
on
the date
of
the
acquisition.
The fair
value of
the contingent
consideration is
estimated using
a discounted
cash flow
model. Key
assumptions
and
unobservable
inputs that
require
significant judgement
used in
the estimate
include weighted
average cost
of capital,
egg
prices, projected revenue
and expenses over which
the contingent considered
is measured, and the
probability assessments with
respect to the
likelihood of achieving
the forecasted projections.
A range of
potential outcomes cannot
be reasonably estimated
due to market volatility of egg prices.
Goodwill
represents
the
excess
of
the
purchase
price
of
the
acquired
business
over
the
acquisition
date
fair
value
of
the
net
assets acquired.
Goodwill recorded
in connection
with the
Fassio acquisition
is primarily
attributable to
improved efficiencies
from integrating the assets of
Fassio with the operations
of the Company.
The Company recognized goodwill
of $
1.8
million as
a result of the acquisition.
Note 3 - Investment
Securities
The following represents the Company’s
investment securities as of March 2, 2024 and June 3, 2023 (in thousands):
March 2, 2024
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
6,147
$
—
$
63
$
6,084
Commercial paper
42,864
—
39
42,825
Corporate bonds
121,430
—
367
121,063
Certificates of deposits
1,830
—
2
1,828
US government and agency obligations
115,165
—
199
114,966
Asset backed securities
9,418
85
—
9,503
Treasury bills
31,455
—
4
31,451
Total current
investment securities
$
328,309
$
85
$
674
$
327,720
Mutual funds
$
1,108
$
16
$
—
$
1,124
Total noncurrent
investment securities
$
1,108
$
16
$
—
$
1,124
June 3, 2023
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
16,571
$
—
$
275
$
16,296
Commercial paper
56,486
—
77
56,409
Corporate bonds
139,979
—
1,402
138,577
Certificates of deposits
675
—
—
675
US government and agency obligations
101,240
—
471
100,769
Asset backed securities
13,459
—
151
13,308
Treasury bills
29,069
—
13
29,056
Total current
investment securities
$
357,479
$
—
$
2,389
$
355,090
Mutual funds
$
2,172
$
—
$
91
$
2,081
Total noncurrent
investment securities
$
2,172
$
—
$
91
$
2,081
Available-for-sale
Proceeds
from
sales and
maturities of
investment
securities available-for-sale
were $
273.9
million
and $
132.7
million
during
the thirty-nine
weeks ended March
2, 2024
and February
25, 2023,
respectively.
Gross realized
gains for
the thirty-nine
weeks
ended March
2, 2024
and February
25, 2023
were $
18
thousand and
$
38
thousand, respectively.
Gross realized
losses for
the
thirty-nine weeks ended March 2, 2024 and February
25, 2023 were $
8
thousand and $
64
thousand, respectively.
There were
no
allowances
for credit losses at March 2, 2024 and June 3, 2023.
Index
11
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 March
2, 2024 are as follows (in thousands):
Estimated Fair Value
Within one year
$
213,556
1-5 years
114,164
Total
$
327,720
Noncurrent
Proceeds from sales and maturities of noncurrent investment securities
were $
1.5
million and $
1.8
million during the thirty-nine
weeks ended March 2, 2024
and February 25, 2023, respectively.
Gross realized gains for the thirty-nine
weeks ended March 2,
2024 and February 25,
2023 were $
14
thousand and $
6
thousand, respectively.
There were
no
realized losses for the
thirty-nine
weeks ended March 2, 2024. Gross realized losses for the thirty-nine
weeks ended February 25, 2023 were $
66
thousand.
Note 4 - Fair Value
Measurements
The Company
is required
to categorize
both financial
and nonfinancial
assets and
liabilities based
on the
following fair
value
hierarchy. The
fair value
of an
asset is
the price
at which
the asset
could be
sold in
an orderly
transaction between
unrelated,
knowledgeable, and willing
parties able to engage in
the transaction. A liability’s
fair value is defined
as the amount that would
be
paid
to
transfer
the
liability
to
a
new
obligor
in
a
transaction
between
such
parties,
not
the
amount
that
would
be paid
to
settle the liability with the creditor.
•
Level 1
- Quoted prices in active markets for identical assets or liabilities
•
Level 2
- Inputs
other than
quoted
prices included
in Level
1 that
are observable
for the
asset or
liability,
either
directly or indirectly,
including:
◦
Quoted prices for similar assets or liabilities in active markets
◦
Quoted prices for identical or similar assets in non-active markets
◦
Inputs other than quoted prices that are observable for the asset or liability
◦
Inputs derived principally from or corroborated by other observable
market data
•
Level 3
- Unobservable inputs for the asset or liability that are
supported by little or no market activity and that
are
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded
at cost are as follows:
Cash and cash equivalents, accounts receivable,
and accounts payable:
The carrying amount approximates fair value due to the
short maturity of these instruments.
Index
12
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 March 2, 2024 and June
3, 2023 (in thousands):
March 2, 2024
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
6,084
$
—
$
6,084
Commercial paper
—
42,825
—
42,825
Corporate bonds
—
121,063
—
121,063
Certificates of deposits
—
1,828
—
1,828
US government and agency obligations
—
114,966
—
114,966
Asset backed securities
—
9,503
—
9,503
Treasury bills
—
31,451
—
31,451
Mutual funds
1,124
—
—
1,124
Total assets measured at fair
value
$
1,124
$
327,720
$
—
$
328,844
Liabilities
Contingent consideration
$
—
$
—
$
1,000
$
1,000
Total liabilities measured
at fair value
$
—
$
—
$
1,000
$
1,000
June 3, 2023
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
16,296
$
—
$
16,296
Commercial paper
—
56,409
—
56,409
Corporate bonds
—
138,577
—
138,577
Certificates of deposits
—
675
—
675
US government and agency obligations
—
100,769
—
100,769
Asset backed securities
—
13,308
—
13,308
Treasury bills
—
29,056
—
29,056
Mutual funds
2,081
—
—
2,081
Total assets measured at fair
value
$
2,081
$
355,090
$
—
$
357,171
Investment
securities
–
available-for-sale
classified
as Level
2
consist
of
securities
with maturities
of
three
months
or longer
when purchased. We
classified these securities as
current because amounts
invested are readily available
for current operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
Contingent
consideration
classified
as
Level
3
consists
of
the
potential
obligation
to
pay
an
earnout
to
the
sellers
of
Fassio
contingent on the
acquired business meeting
certain return on
profitability milestones over
a
three-year
period, commencing on
the date of
the acquisition. The fair
value of the
contingent consideration is
estimated using a
discounted cash flow
model. Key
assumptions and
unobservable inputs
that require
significant judgement
used in
the estimate
include weighted
average cost
of
capital,
egg
prices,
projected
revenue
and
expenses
over
which
the
contingent
considered
is
measured,
and
the
probability
assessments
with
respect
to
the
likelihood
of
achieving
the
forecasted
projections.
See
further
discussion
in
Note 2 -
Acquisition
.
Note 5 - Inventories
Inventories consisted of the following as of March 2, 2024 and June 3,
2023 (in thousands):
March 2, 2024
June 3, 2023
Flocks, net of amortization
$
150,441
$
164,540
Eggs and egg products
26,770
28,318
Feed and supplies
92,033
91,560
$
269,244
$
284,418
Index
13
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 March 2,
2024 and June
3, 2023 consisted of
approximately
10.9
million and
10.8
million pullets and breeders
and
42.2
million and
41.2
million layers, respectively.
Note 6 - Equity
The following reflects equity activity for the thirteen weeks ended
March 2, 2024 and February 25, 2023 (in thousands):
Thirteen Weeks
Ended March 2, 2024
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 December
2, 2023
$
703
$
48
$
(30,014)
$
74,214
$
(1,614)
$
1,583,071
$
(2,444)
$
1,623,964
Other comprehensive
income, net of tax
—
—
—
—
100
—
—
100
Stock compensation
plan transactions
—
—
(1,583)
1,012
—
—
—
(571)
Dividends ($
0.997
per share)
Common
—
—
—
—
—
(44,111)
—
(44,111)
Class A common
—
—
—
—
—
(4,786)
—
(4,786)
Net income (loss)
—
—
—
—
—
146,712
(349)
146,363
Balance at March 2,
2024
$
703
$
48
$
(31,597)
$
75,226
$
(1,514)
$
1,680,886
$
(2,793)
$
1,720,959
Thirteen Weeks
Ended February 25, 2023
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum.
Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at November
26, 2022
$
703
$
48
$
(28,496)
$
70,005
$
(3,087)
$
1,281,784
$
(652)
$
1,320,305
Other comprehensive
income, net of tax
—
—
—
—
20
—
—
20
Stock compensation
plan transactions
—
—
(1,500)
972
—
—
—
(528)
Dividends ($
2.199
per share)
Common
—
—
—
—
—
(97,123)
—
(97,123)
Class A common
—
—
—
—
—
(10,555)
—
(10,555)
Net income (loss)
—
—
—
—
—
323,219
(450)
322,769
Balance at February
25, 2023
$
703
$
48
$
(29,996)
$
70,977
$
(3,067)
$
1,497,325
$
(1,102)
$
1,534,888
Index
14
Thirty-nine Weeks Ended
March 2, 2024
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum.
Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at June 3,
2023
$
703
$
48
$
(30,008)
$
72,112
$
(2,886)
$
1,571,112
$
(1,498)
$
1,609,583
Other comprehensive
income, net of tax
—
—
—
—
1,372
—
—
1,372
Stock compensation
plan transactions
—
—
(1,589)
3,114
—
—
—
1,525
Dividends ($
1.119
per share)
Common
—
—
—
—
—
(49,501)
—
(49,501)
Class A common
—
—
—
—
—
(5,372)
—
(5,372)
Net income (loss)
—
—
—
—
—
164,647
(1,295)
163,352
Balance at March 2,
2024
$
703
$
48
$
(31,597)
$
75,226
$
(1,514)
$
1,680,886
$
(2,793)
$
1,720,959
Thirty-nine Weeks Ended
February 25, 2023
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum.
Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 28,
2022
$
703
$
48
$
(28,447)
$
67,989
$
(1,596)
$
1,065,854
$
(206)
$
1,104,345
Other comprehensive
loss, net of tax
—
—
—
—
(1,471)
—
—
(1,471)
Stock compensation
plan transactions
—
—
(1,549)
2,988
—
—
—
1,439
Dividends ($
4.403
per share)
Common
—
—
—
—
—
(194,478)
—
(194,478)
Class A common
—
—
—
—
—
(21,144)
—
(21,144)
Net income (loss)
—
—
—
—
—
647,093
(896)
646,197
Balance at February
25, 2023
$
703
$
48
$
(29,996)
$
70,977
$
(3,067)
$
1,497,325
(1,102)
$
1,534,888
Note 7 - Net Income per Common Share
Basic net income
per share is
based on the
weighted average Common
Stock and Class
A Common Stock
outstanding. Diluted
net
income
per
share
is
based
on
weighted-average
common
shares
outstanding
during
the
relevant
period
adjusted
for
the
dilutive effect of share-based awards.
Index
15
The
following
table
provides
a
reconciliation
of
the
numerators
and
denominators
used
to
determine
basic
and
diluted
net
income per common share (amounts in thousands, except per share data):
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
March 2, 2024
February 25, 2023
March 2, 2024
February 25, 2023
Numerator
Net income
$
146,363
$
322,769
$
163,352
$
646,197
Less: Loss attributable to
noncontrolling interest
(349)
(450)
(1,295)
(896)
Net income attributable to Cal-Maine
Foods, Inc.
$
146,712
$
323,219
$
164,647
$
647,093
Denominator
Weighted-average
common shares
outstanding, basic
48,727
48,653
48,702
48,634
Effect of dilutive restricted shares
157
189
163
198
Weighted-average
common shares
outstanding, diluted
48,884
48,842
48,865
48,832
Net income per common share
attributable to Cal-Maine Foods, Inc.
Basic
$
3.01
$
6.64
$
3.38
$
13.31
Diluted
$
3.00
$
6.62
$
3.37
$
13.25
Note 8 - Revenue from Contracts with Customers
Satisfaction of Performance Obligation
The vast majority of the Company’s
revenue is derived from agreements with customers based on the customer
placing an order
for products. Pricing
for the most part
is determined when
the Company and
the customer agree
upon the specific
order, which
establishes the contract for that order.
Revenues are
recognized in
an amount
that reflects
the net
consideration we
expect to
receive in
exchange for
the goods.
Our
shell
eggs
are
sold
at
prices
related
to
independently
quoted
wholesale
market
prices
or
formulas
related
to
our
costs
of
production.
The
Company’s
sales
predominantly
contain
a
single
performance
obligation.
We
recognize
revenue
upon
satisfaction
of
the
performance
obligation
with
the
customer,
which
typically
occurs
within
days
of
the
Company
and
the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts include a guaranteed sale clause, pursuant to which we
credit the customer’s account for product that the
customer is unable to sell before expiration. The Company records an allowance for
expected customer returns using historical
return data compared to current period sales and accounts receivable.
The allowance is recorded as a reduction of sales in the
same period the revenue is recognized.
Sales Incentives Provided to Customers
The
Company
periodically
provides
incentive
offers
to
its
customers
to
encourage
purchases.
Such
offers
include
current
discount offers
(e.g., percentage
discounts off
current purchases), inducement
offers (e.g.,
offers for
future discounts subject
to
a minimum
current purchase),
and other
similar offers.
Current discount
offers,
when accepted
by customers,
are treated
as a
reduction
to
the sales
price
of the
related
transaction,
while inducement
offers,
when
accepted
by customers,
are
treated
as
a
reduction
to
sales
price
based
on
estimated
future
redemption
rates.
Redemption
rates
are
estimated
using
the
Company’s
historical
experience
for
similar
inducement
offers.
Current discount
and
inducement
offers
are
presented
as a
net amount
in
‘‘Net sales.’’
Index
16
Disaggregation of Revenue
The following table provides revenue disaggregated by product category
(in thousands):
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
March 2, 2024
February 25, 2023
March 2, 2024
February 25, 2023
Conventional shell egg sales
$
413,619
$
689,022
$
919,498
$
1,656,528
Specialty shell egg sales
262,293
272,205
688,879
700,803
Egg products
21,759
32,582
63,994
88,274
Other
5,405
3,684
13,283
11,932
$
703,076
$
997,493
$
1,685,654
$
2,457,537
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
March
2,
2024
and
June
3,
2023,
the
balance
for
contract assets was immaterial.
Contract Balances
The Company receives payment from customers based on specified terms that are
generally less than 30 days from delivery.
There are rarely contract assets or liabilities related to performance under the
contract.
Note 9 - Stock Based Compensation
Total
stock-based
compensation
expense
was
$
3.2
and
$
3.1
million
for
the
thirty-nine
weeks
ended
March
2,
2024
and
February 25, 2023, respectively.
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 March 2,
2024 of
$
8.6
million will be
recorded over
a weighted average
period
of
2.2
years.
Refer
to
Part
II
Item
8,
Notes
to
Consolidated
Financial
Statements
and
Supplementary
Data,
Note 14
-
Stock Compensation Plans in our 2023 Annual Report for further information
on our stock compensation plans.
The Company’s restricted share activity
for the thirty-nine weeks ended March 2, 2024 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, June 3, 2023
294,140
$
43.72
Granted
86,363
54.91
Vested
(99,360)
37.70
Forfeited
(1,329)
44.68
Outstanding, March 2, 2024
279,814
$
49.31
Index
17
Note 10 - Commitments and Contingencies
LEGAL PROCEEDINGS
State of Texas
v. Cal-Maine Foods, Inc. d/b/a Wharton;
and Wharton County Foods, LLC
On April
23, 2020,
the Company
and its subsidiary
Wharton County
Foods, LLC (“WCF”)
were named
as defendants in
State
of
Texas
v.
Cal-Maine
Foods,
Inc.
d/b/a
Wharton;
and
Wharton
County
Foods,
LLC,
Cause
No.
2020-25427,
in
the
District
Court of
Harris County,
Texas.
The State
of Texas
(the “State”)
asserted claims
based on
the Company’s
and WCF’s
alleged
violation
of
the
Texas
Deceptive
Trade
Practices—Consumer
Protection
Act,
Tex.
Bus.
&
Com.
Code
§§
17.41-17.63
(“DTPA”).
The
State
claimed
that
the
Company
and
WCF
offered
shell
eggs
at
excessive
or
exorbitant
prices
during
the
COVID-19
state
of
emergency
and
made
misleading
statements
about
shell
egg
prices.
The
State
sought
temporary
and
permanent
injunctions
against
the
Company
and
WCF
to
prevent
further
alleged
violations
of
the
DTPA,
along
with
over
$
100,000
in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the State’s
original petition with
prejudice. On September
11, 2020,
the State filed a
notice of appeal,
which was assigned to
the Texas
Court of Appeals
for the
First
District.
On
August
16,
2022,
the
appeals
court
reversed
and
remanded
the
case
back
to
the
trial
court
for
further
proceedings. On October 31, 2022,
the Company and WCF appealed
the First District Court’s
decision to the Supreme Court
of
Texas.
On
September
29,
2023,
the
Supreme
Court
of
Texas
denied
the
Company’s
Petition
for
Review
so
the
case
will
be
remanded to the
trial court for further
proceedings. The district
court has set
a case management conference
for April 12, 2024.
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 $
10,000
per violation,
or $
250,000
for
each violation
impacting anyone
over 65
years old.
On December
1, 2020,
the Company
and
certain other
defendants filed
a
motion to
dismiss the
plaintiffs’
amended
class action
complaint. The
plaintiffs
subsequently filed
a motion
to strike,
and the
motion to
dismiss and
related proceedings
were referred
to a
United States
magistrate judge.
On July
14, 2021,
the magistrate
judge
issued
a
report
and
recommendation
to
the
court
that
the
defendants’
motion
to
dismiss
be
granted
and
the
case
be
dismissed without prejudice for lack of subject matter jurisdiction. On
September 20, 2021, the court dismissed the case without
prejudice.
On
July
13,
2022,
the
court
denied
the
plaintiffs’
motion
to
set
aside
or
amend
the
judgment
to
amend
their
complaint.
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. On February
12, 2024, the court affirmed the judgment of the district court.
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.
Index
18
On September
13, 2019,
the case
with the
Egg Products
Plaintiffs was
remanded from
a multi-district
litigation proceeding
in
the
United
States
District
Court
for
the
Eastern
District
of
Pennsylvania,
In
re
Processed
Egg
Products
Antitrust
Litigation,
MDL No. 2002, to
the United States District Court
for the Northern District
of Illinois, Kraft Foods Global,
Inc. et al. v.
United
Egg
Producers,
Inc.
et
al., Case
No.
1:11-cv-8808,
for
trial. The
Egg
Products
Plaintiffs
alleged
that
the
Company
and
other
defendants
violated
Section
1
of
the
Sherman
Act,
15.
U.S.C.
§
1,
by
agreeing
to
limit
the
production
of
eggs
and
thereby
illegally
to
raise
the
prices
that
plaintiffs
paid
for
processed
egg
products.
In
particular,
the
Egg
Products
Plaintiffs
attacked
certain features of
the United Egg
Producers animal-welfare guidelines
and program used by
the Company and
many other egg
producers.
On October 24, 2019,
the Company entered into
a confidential settlement agreement
with The Kellogg Company
dismissing all
claims against the
Company for an
amount that did
not have a
material impact on
the Company’s
financial condition or
results
of operations.
On November
11,
2019, a
stipulation
for dismissal
was filed
with the
court, and
on March
28, 2022,
the court
dismissed the Company with prejudice.
The trial of this case began
on October 17, 2023. On December
1, 2023, the jury returned a decision
awarding the Egg Products
Plaintiffs
$
17.8
million
in damages.
If the
jury’s
decision
is ultimately
upheld,
the defendants
would
be jointly
and
severally
liable
for
treble
damages,
or
$
53.3
million,
subject
to
credit
for
the
Kellogg
settlement
described
above
and
certain
other
settlements with
previous
settling defendants,
plus the
Egg Product
Plaintiffs’
reasonable
attorneys’
fees. This
decision is
not
final and
remains subject
to the
defendants’ motion
for a
directed verdict
noted below
and appeals
by the
parties. During
our
second fiscal quarter
of 2024, we
recorded an accrued
expense of $
19.6
million in selling,
general and
administrative expenses
in
the
Company’s
Condensed
Consolidated
Statements
of
Income
and
classified
as
other
noncurrent
liabilities
in
the
Company’s
Condensed Consolidated
Balance Sheets. The
accrual represents
our estimate of
the Company’s
proportional share
of the reasonably
possible ultimate damages
award, excluding the Egg
Product Plaintiffs’ attorneys’
fees that we believe
would
be
approximately
offset
by the
credits
noted above.
We
have
entered
into a
judgment
allocation
and joint
defense
agreement
with
the
other
major
producer
defendant
remaining
in
the
case,
and
are
in
discussions
with
other
defendants
regarding
their
contributions. Our accrual may change in the future
based on the outcome of those discussions. Our accrual
may also be revised
in whole or in
part in the future
to the extent we
are successful in further
proceedings in the litigation.
On November 29, 2023,
the
defendants,
including
the
Company,
filed
a
motion
for
judgment
as
a
matter
of
law
in
their
favor,
known
as
a
directed
verdict, notwithstanding
the jury’s
decision. The
Company intends
to continue
to vigorously
defend the
claims asserted
by the
Egg Products Plaintiffs.
State of Oklahoma Watershed Pollution
Litigation
On June
18, 2005,
the State
of Oklahoma
filed suit,
in the
United States
District Court
for the
Northern District
of Oklahoma,
against Cal-Maine
Foods,
Inc. and
Tyson
Foods,
Inc., Cobb-Vantress,
Inc., Cargill,
Inc., George’s,
Inc., Peterson
Farms, Inc.
and
Simmons
Foods,
Inc.,
and
certain
of
their
affiliates.
The
State
of
Oklahoma
claims
that
through
the
disposal
of
chicken
litter the
defendants polluted
the Illinois
River Watershed.
This watershed
provides water
to eastern
Oklahoma. The
complaint
sought
injunctive
relief
and
monetary
damages,
but
the
claim
for
monetary
damages
was dismissed
by
the
court.
Cal-Maine
Foods,
Inc.
discontinued
operations
in
the
watershed
in
or
around
2005.
Since
the
litigation
began,
Cal-Maine
Foods,
Inc.
purchased
100
%
of
the
membership
interests
of
Benton
County
Foods,
LLC,
which
is
an
ongoing
commercial
shell
egg
operation within
the Illinois
River Watershed.
Benton County
Foods, LLC
is not
a defendant
in the
litigation. We
also have
a
number of small contract producers that operate in the area.
The non-jury trial in the case began in September 2009
and concluded in February 2010. On January 18, 2023, the court entered
findings of
fact and
conclusions of
law in favor
of the
State of
Oklahoma, but
no penalties
were assessed.
The court
found the
defendants
liable
for
state
law
nuisance,
federal
common
law
nuisance,
and
state
law
trespass.
The
court
also
found
the
producers
vicariously
liable
for
the
actions
of
their
contract
producers.
The
court
directed
the
parties
to
confer
in
attempt
to
reach agreement
on appropriate
remedies. On
June 12,
2023, the
court ordered
the parties
to mediate
before the
retired Tenth
Circuit Chief Judge Deanell
Reece Tacha.
On October 26, 2023, the parties
filed separate status reports informing
the court that
the mediation
was unsuccessful.
Also on
October 26,
2023, the
defendants filed
a post-trial
motion to
dismiss and
supporting
brief arguing
that the
case should
be dismissed
due to
the state record
before the
court, the resulting
mootness of
the case,
and
violation
of
due
process.
On
November
10,
2023,
the
State
of
Oklahoma
filed
its
response
in
opposition
to
the
motion
to
dismiss and on
November 17, 2023,
the defendants filed
their reply.
The court has not
ruled on the motion.
While management
believes there
is a
reasonable
possibility of
a material
loss from
the case,
at the
present time,
it is
not possible
to estimate
the
amount
of
monetary
exposure,
if
any,
to
the
Company
due
to
a
range
of
factors,
including
the
following,
among
others:
uncertainties
inherent
in
any
assessment
of
potential
costs
associated
with
injunctive
relief
or
other
penalties
based
on
a
decision in a
case tried over
13 years ago based
on environmental conditions
that existed at the
time, the lack
of guidance from
the court as to what
might be considered appropriate
remedies, the ongoing litigation
with the State of Oklahoma
and motion to
dismiss before
the court, and
uncertainty regarding
what our proportionate
share of any
remedy would be,
although we believe
that our share compared to the other defendants is small.
Index
19
Other Matters
In addition to the above, the Company is involved in various other claims and litigation incidental
to its business. Although the
outcome of these matters cannot be determined with certainty,
management, upon the advice of counsel, is of the opinion that
the final outcome should not have a material effect on the Company’s
consolidated results of operations or financial position.
Note 11 - Subsequent Events
On March
14, 2024,
the Company
completed the
previously announced
acquisition from
Tyson
Foods, Inc.
of a
closed broiler
processing plant, hatchery and feed mill in Dexter,
Missouri.
On
April
1,
2024,
one
of
the
Company’s
facilities
located
in
Parmer
County,
Texas,
tested
positive
for
HPAI,
affecting
approximately
1.6
million laying hens
and
337,000
pullets, or approximately
3.6
% of the Company’s
total flock as of
March 2,
2024.
The
Company
has
and
continues
to
follow
all
guidelines
provided
by
the
United
States
Department
of
Agriculture
(the
“USDA”)
and
other
regulatory
agencies
to
depopulate
and
sanitize
the
facilities.
As
such,
Cal-Maine
will
be
eligible
to
participate
in
the
USDA
indemnity
program
and
other
programs
designed
to
compensate
for
the
loss of
birds
and
eggs.
The
Company’s
plans
are
to
repopulate
the
facilities
and
resume
normal
operations
at
the
facilities
within
6-8
months.
Due
to
volatility in
the market
prices of
eggs and
uncertain future
supply,
demand and
other market
conditions, an
estimate of
the net
income effect cannot be reasonably made.
Index
20
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
Part I Item 1
of this Quarterly Report on Form 10-Q (“Quarterly Report”).
This
report
contains
numerous
forward-looking
statements
within
the
meaning
of
Section
27A
of
the
Securities
Act
of
1933
(the “Securities
Act”) and
Section 21E
of the
Securities Exchange
Act of
1934 (the
“Exchange Act”)
relating to
our shell
egg
and egg
products business,
including estimated
future production
data, expected
construction schedules,
projected construction
costs, potential
future supply
of and
demand for
our products,
potential future
corn and
soybean price
trends, potential
future
impact
on
our
business
of
the
recent
resurgence
in
United
States
(“U.S.”)
commercial
table
egg
layer
flocks
of
the
highly
pathogenic avian
influenza (“HPAI”)
outbreak, potential
future impact
on our business
of inflation
and changing
interest rates,
potential future
impact on our
business of new
legislation, rules
or policies,
potential outcomes
of legal proceedings
,
including
loss contingency
accruals and
factors
that may
result in
changes in
the amounts
recorded,
and other
projected
operating data,
including anticipated results
of operations and
financial condition. Such
forward-looking statements are
identified by the use
of
words such
as “believes,”
“intends,” “expects,”
“hopes,” “may,”
“should,” “plans,”
“projected,” “contemplates,”
“anticipates,”
or
similar
words.
Actual
outcomes
or
results
could
differ
materially
from
those
projected
in
the
forward-looking
statements.
The
forward-looking
statements
are
based
on
management’s
current
intent,
belief,
expectations,
estimates,
and
projections
regarding
the
Company
and
its
industry.
These
statements
are
not
guarantees
of
future
performance
and
involve
risks,
uncertainties, assumptions,
and other factors
that are difficult
to predict
and may be
beyond our
control. The
factors that
could
cause actual
results to
differ
materially
from
those projected
in the
forward-looking
statements include,
among
others, (i)
the
risk
factors
set forth
in
Part
I
Item
1A
of
the
2023
Annual Report,
the
risk
factors
(if
any)
set forth
in
Part
II
Item
1A Risk
Factors and
elsewhere in this
report as well
as those included
in other reports
we file from
time to time
with the Securities
and
Exchange Commission (the “SEC”)
(including our Quarterly Reports
on Form 10-Q and Current
Reports on Form 8-K), (ii)
the
risks
and
hazards
inherent
in
the
shell
egg
business
(including
disease,
pests,
weather
conditions,
and
potential
for
product
recall), including
but not limited
to the current
outbreak of HPAI
affecting poultry
in the U.S.,
Canada and other
countries that
was first
detected in
commercial flocks
in the
U.S. in
February 2022
and that
first impacted
our flock
in December
2023, (iii)
changes in the
demand for and
market prices of
shell eggs and
feed costs, (iv)
our ability to
predict and meet
demand for cage-
free and
other
specialty eggs,
(v)
risks, changes,
or obligations
that could
result from
our future
acquisition
of new
flocks or
businesses and risks
or changes that
may cause conditions
to completing a
pending acquisition not
to be met,
(vi) risks relating
to increased
costs and
higher and
potentially further
increases in,
inflation and
interest rates,
(vii) our
ability to
retain existing
customers, acquire new customers
and grow our product
mix, (viii) adverse results
in pending litigation matters,
and (ix) global
instability,
including
as
a
result
of
the
war
in
Ukraine,
the
Israel-Hamas
conflict
and
attacks
on
shipping
in
the
Red
Sea.
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
42.2
million layers
and 10.9
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.
Index
21
Retail
sales
of
shell
eggs
historically
have
been
highest
during
the
fall
and
winter
months
and
lowest
during
the
summer
months. Prices
for shell
eggs fluctuate
in response
to seasonal
demand factors
and a
natural increase
in egg
production during
the
spring
and
early
summer.
Historically,
shell
egg
prices
tend
to
increase
with
the
start
of
the
school
year
and
tend
to
be
highest
prior
to
holiday
periods,
particularly
Thanksgiving,
Christmas
and
Easter.
Consequently,
and
all
other
things
being
equal, we would
expect to experience
lower selling prices, sales
volumes and net
income (and may incur
net losses) in our
first
and
fourth
fiscal
quarters
ending
in
August/September
and
May/June,
respectively.
Because
of
the
seasonal
and
quarterly
fluctuations,
comparisons
of
our
sales
and
operating
results
between
different
quarters
within
a
single
fiscal
year
are
not
necessarily meaningful comparisons.
We
routinely
fill
our
storage
bins
during
harvest
season
when
prices
for
feed
ingredients
are
generally
lower.
To
ensure
continued
availability of
feed ingredients,
we may
enter into
contracts for
future purchases
of corn
and soybean
meal, and
as
part
of
these
contracts,
we
may
lock-in
the
basis
portion
of
our
grain
purchases
several
months
in
advance.
Basis
is
the
difference
between the
local cash
price for
grain and
the applicable
futures price.
A basis
contract is
a common
transaction in
the grain
market that
allows us
to lock-in
a basis
level for
a specific
delivery period
and wait
to set
the futures
price at
a later
date. Furthermore,
due to
the more
limited supply
for organic
ingredients,
we may
commit to
purchase organic
ingredients in
advance to help ensure supply.
Ordinarily, we do
not enter into long-term contracts beyond a year to purchase
corn and soybean
meal
or
hedge
against
increases
in
the
prices
of
corn
and
soybean
meal.
Corn
and
soybean
meal
are
commodities
and
are
subject
to
volatile
price
changes
due
to
weather,
various
supply
and
demand
factors,
transportation
and
storage
costs,
speculators,
agricultural, energy
and trade
policies in
the U.S.
and internationally
,
and global
instability that
could disrupt
the
supply chain.
An important competitive advantage
for Cal-Maine Foods is
our ability to meet
our customers’ evolving needs
with a favorable
product
mix
of
conventional
and
specialty
eggs,
including
cage-free,
organic
and
other
specialty
offerings,
as
well
as
egg
products.
We
have
also
enhanced
our
efforts
to
provide
free-range
and
pasture-raised
eggs
that
meet
consumers’
evolving
choice
preferences.
While
a
small
part
of
our
current
business,
the
free-range
and
pasture-raised
eggs
we
produce
and
sell
represent attractive offerings
to a subset of
consumers,
and therefore our customers,
and help us continue
to serve as the trusted
provider of quality food choices.
CAGE-FREE EGGS
Ten
states
have
passed
legislation
or
regulations
mandating
minimum
space
or
cage-free
requirements
for
egg
production
or
mandated
the
sale
of
only
cage-free
eggs
and
egg
products
in
their
states,
with
implementation
of
these
laws
ranging
from
January
2022
to
January
2026.
These
states
represent
approximately
27%
of
the
U.S.
total
population
according
to
the 2020
U.S.
Census.
California,
Massachusetts,
Colorado,
Oregon,
Washington,
and
Nevada,
which
collectively
represent
approximately
20% of
the total
estimated
U.S.
population,
have
cage-free
legislation
currently
in effect
.
Although
we do
not
sell the majority of our eggs in these ten states, these state laws have impacted egg production
practices nationally.
A significant number of
our customers have announced
goals to either exclusively offer
cage-free eggs or significantly
increase
the
volume
of
cage-free
egg
sales
in
the
future,
subject
in
most
cases
to
availability
of
supply,
affordability
and
consumer
demand,
among
other
contingencies.
Our
customers
typically
do
not
commit
to
long-term
purchases
of
specific
quantities or
types
of
eggs
with
us,
and
as
a
result,
it
is
difficult
to
accurately
predict
customer
requirements
for
cage-free
eggs.
We
are
focused
on
adjusting
our
cage-free
production
capacity
with
a
goal
of
meeting
the
future
needs
of
our
customers
in
light
of
changing state requirements
and our
customer’s goals.
As always, we
strive to offer
a product
mix that aligns
with current
and
anticipated
customer
purchase
decisions.
We
are
engaging
with
our
customers
to
help
them
meet
their
announced
goals
and
needs. We
have invested significant capital
in recent years to acquire
and construct cage-free facilities, and
we expect our focus
for future
expansion will
continue to
include cage-free
facilities. Our
volume of
cage-free egg
sales has
continued to
increase
and account for a larger share of our
product mix. Cage-free egg revenue represented approximately
27.9% of our total net shell
egg revenue for the third quarter of fiscal year
- 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.”
ACQUISITIONS
During the second
quarter of fiscal
2024,
we acquired
the assets of
Fassio Egg Farms,
Inc. (“Fassio”) related
to its commercial
shell
egg
production
and
processing
business.
The
assets
acquired
included
commercial
shell
egg
production
and
processing
facilities with
a capacity
at the
time of
acquisition of
approximately
1.2 million
laying hens,
primarily
cage-free,
a feed
mill,
Index
22
pullets,
a
fertilizer
production
and
composting
operation
and
land
located
in
Erda,
Utah,
outside
Salt
Lake
City.
See
further
discussion
in
Note 2 – Acquisition
of
the
Notes
to
Condensed
Consolidated
Financial
Statements
included
in
this
Quarterly
Report.
Following the
end of
the third
quarter,
we announced
that we
completed
the acquisition
from Tyson
Foods, Inc.
of a
recently
closed broiler
processing plant,
hatchery and
feed mill
located in
Dexter,
Missouri. We
plan to
repurpose the
assets for
use in
egg and egg products production.
HPAI
Since the HPAI
outbreaks in 2015, there were no reported significant outbreaks of HPAI
in the commercial table egg layer
flocks until the February – December 2022 time period. During this time approximately
43 million commercial layers and 1.0
million pullets were depopulated resulting in significant pressure on
the supply of eggs. Thereafter, there were no HPAI
cases
affecting commercial layers until November 2023.
From November 2023 until the last reported case in commercial layer hens
in January 2024, approximately 15.7 million commercial laying
hens and pullets were depopulated.
During the third quarter of fiscal 2024, Cal-Maine
Foods experienced an HPAI
outbreak within its facilities in Kansas, resulting
in depopulation
of approximately
1.5 million
laying hens
and 240,000
pullets, or
approximately 3.3%
of our
total flock
at the
time. Following the end of
the third quarter, on
April 1, 2024, one of the Company’s
facilities located in Parmer County,
Texas,
tested
positive
for
HPAI,
resulting
in
depopulation
of
approximately
1.6
million
laying
hens
and
337,000
pullets,
or
approximately 3.6% of
the Company’s
total flock as of
March 2, 2024.
Production at the facility
has temporarily ceased
as the
Company follows the protocols prescribed by the USDA. Cal-Maine
Foods is working to secure production from other facilities
to minimize disruption to its customers.
The Company
remains dedicated
to robust
biosecurity programs
across its
locations; however,
no farm
is immune from
HPAI.
HPAI
is
still
present
in
the
wild
bird
population
and
the
extent
of
possible
future
outbreaks,
with
heightened
risk
during
the
migration
seasons, cannot
be predicted.
According to
the U.S.
Centers for
Disease Control
and Prevention,
the human
health
risk to
the U.S. public
from HPAI
viruses is
considered to
be low.
Also, according
to the USDA,
HPAI
cannot be
transmitted
through
safely
handled
and
properly
cooked
eggs.
There
is
no
known
risk
related
to
HPAI
associated
with
eggs
that
are
currently in
the market and
no eggs have
been recalled.
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.”
EXECUTIVE OVERVIEW
For
the
third quarter
and
first three
quarters
of fiscal
2024,
we
recorded
a
gross profit
of $218.6
million
and
$355.1 million,
respectively,
compared
to
$463.0
million
and
$998.4
million,
respectively,
for
the
same
periods
of
fiscal
2023,
with
the
decreases
due primarily
to lower
conventional shell
egg prices.
The decrease
in gross
profit was
partially offset
by lower
feed
ingredient prices in the third quarter and first three quarters of fiscal
2024 compared to the same periods
of fiscal 2023.
Our
net
average selling
price per
dozen for
the
third quarter
of fiscal
2024
was $2.247
compared
to $3.298
in
the prior-year
period. Conventional
egg prices
per dozen
were $2.152
compared to
$3.678 for
the prior-year
period, and
specialty egg
prices
per dozen were $2.415 compared to $2.616 for the prior-year
period. Egg prices in the third quarter of fiscal 2023
were elevated
compared to historical averages prior
to fiscal 2023 primarily due to
the resurgence of HPAI
outbreaks and other market factors
in November 2023
through January 2024,
as described above and
herein. Although egg
prices in the third
quarter of 2024 were
lower than
in the
prior-year period,
they were
elevated above
historical averages
due to
the resurgence
of HPAI
in November
- According to the USDA,
the five-year average of the monthly
average size of the layer hen flock
from December through
February
(which
most
closely
aligns
with
our
third
fiscal
quarter)
through
2023
is
330.2
million
hens.
The
monthly
average
layer
hen
flock
from
December
2023
through
February
2024
was
312.2
million,
which
is 18.0
million
or
5.5%
less than
the
five-year average.
During both
the third
quarters of
2023 and
2024, supply
constraints as
well as
seasonal demand
during the
holidays put upward pressure on the price of shell eggs.
Our net
average selling
price per
dozen for
the first
three quarters
of fiscal
2024 was
$1.866 compared
to $2.771
in the
prior-
year
period.
Conventional
egg
prices per
dozen
were $1.624
compared
to $2.984
for the
prior-year
period,
and
specialty egg
prices
per
dozen
were
$2.328
compared
to
$2.369
for
the
prior-year
period.
The
daily
average
price
for
the
Urner
Barry
southeast
large
index
for
the third
quarter
of
fiscal
2024
and
first
three
quarters
of
fiscal
2024
decreased
35.2%
and
43.7%,
respectively, from
the comparable periods
in the prior year. For information
about historical shell egg prices, see Part I Item I of
our 2023 Annual Report.
In the third quarter of
2024, we achieved record
quarterly sales volume of total
dozens sold and specialty dozens
sold. Our total
dozens
sold
increased
3.2%
to
300.8
million
dozen
shell
eggs for
the
third
quarter
of fiscal
2024
compared
to
291.4
million
dozen
for
the
same
period
of
fiscal
2023.
For
the
year-to-date
period,
total
dozens
sold
increased
1.3%
from
850.8
million
Index
23
dozen
to
862.0
million
dozen.
For
the
third
quarter
of
fiscal
2024,
conventional
dozens
sold
increased
2.6%
and
specialty
dozens sold
increased 4.4%
as compared
to the
same quarter
in fiscal
2023.
Demand for
specialty eggs
increased in
the third
quarter of
fiscal 2024
compared to
the same
prior year
period due
primarily to
cage-free requirements
becoming effective
for
Nevada, Oregon and Washington
on January 1, 2024. For
the year-to-date period,
conventional dozens sold increased
2.0% and
specialty dozens sold remained consistent compared to the prior year period.
Our farm
production costs
per dozen
produced for
the third
quarter and
first three
quarters of
fiscal 2024
decreased 10.5%,
or
$0.11,
and 6.6%,
or $0.07,
respectively,
compared to
the prior
year periods,
primarily due
to lower
feed costs.
Feed costs
per
dozen produced decreased
19.9%, or $0.14,
compared to the third
quarter of fiscal
2023 and 16.7%,
or $0.11,
for the first three
quarters of
fiscal 2023,
primarily due
to lower
feed ingredient
prices. For
information about
historical corn
and soybean
meal
prices, see Part I Item I of our 2023
Annual Report.
RESULTS OF
OPERATIONS
The following
table sets forth,
for the periods
indicated, certain
items from
our Condensed Consolidated
Statements of Income
expressed as a percentage of net sales.
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
March 2, 2024
February 25, 2023
March 2, 2024
February 25, 2023
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
68.9
%
53.6
%
78.9
%
59.4
%
Gross profit
31.1
%
46.4
%
21.1
%
40.6
%
Selling, general and administrative
9.3
%
5.9
%
11.6
%
6.9
%
Gain on involuntary conversions
(1.4)
%
(0.3)
%
(0.6)
%
(0.1)
%
Operating income
23.2
%
40.8
%
10.1
%
33.8
%
Total other income, net
3.2
%
1.7
%
2.2
%
0.9
%
Income before income taxes
26.4
%
42.5
%
12.3
%
34.7
%
Income tax expense
5.5
%
10.2
%
2.6
%
8.4
%
Net income
20.9
%
32.3
%
9.7
%
26.3
%
Less: Loss attributable to noncontrolling
interest
—
%
—
%
(0.1)
%
—
%
Net income attributable to Cal-Maine
Foods, Inc.
20.9
%
32.3
%
9.8
%
26.3
%
NET SALES
Total
net sales for the
third quarter of fiscal
2024 were $703.1
million compared to
$997.5 million for the
same period of fiscal
2023.
Net shell
egg sales
represented 96.
9% and
96.7% of
total net
sales for
the third
quarters
of fiscal
2024 and
2023, respectively.
Shell
egg
sales classified
as “Other”
represent
sales
of
miscellaneous
byproducts
and
resale products
included
with our
shell
egg operations.
Total
net sales
for the
thirty-nine weeks
ended March
2, 2024
were $1.7
billion, compared
to $2.5
billion for
the comparable
period of fiscal 2023.
Net shell egg sales
represented 96.2% and
96.4% of total net
sales for the thirty-nine
weeks ended March 2,
2024 and February
25, 2023, respectively.
Index
24
The table below presents an analysis of our conventional and specialty shell egg
sales (in thousands, except percentage data):
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
March 2, 2024
February 25, 2023
March 2, 2024
February 25, 2023
Total net sales
$
703,076
$
997,493
$
1,685,654
$
2,457,537
Conventional
$
413,619
60.7
%
$
689,022
71.4
%
$
919,498
56.7
%
$
1,656,528
69.9
%
Specialty
262,293
38.5
%
272,205
28.2
%
688,879
42.5
%
700,803
29.6
%
Egg sales, net
675,912
99.2
%
961,227
99.6
%
1,608,377
99.2
%
2,357,331
99.5
%
Other
5,405
0.8
%
3,684
0.4
%
13,283
0.8
%
11,932
0.5
%
Net shell egg sales
$
681,317
100.0
%
$
964,911
100.0
%
$
1,621,660
100.0
%
$
2,369,263
100.0
%
Net shell egg sales as a
percent of total net sales
96.9
%
96.7
%
96.2
%
96.4
%
Dozens sold:
Conventional
192,182
63.9
%
187,357
64.3
%
566,174
65.7
%
555,045
65.2
%
Specialty
108,597
36.1
%
104,059
35.7
%
295,904
34.3
%
295,774
34.8
%
Total dozens sold
300,779
100.0
%
291,416
100.0
%
862,078
100.0
%
850,819
100.0
%
Net average selling price
per dozen:
Conventional
$
2.152
$
3.678
$
1.624
$
2.984
Specialty
$
2.415
$
2.616
$
2.328
$
2.369
All shell eggs
$
2.247
$
3.298
$
1.866
$
2.771
Egg products sales:
Egg products net sales
$
21,759
$
32,582
$
63,994
$
88,274
Pounds sold
18,745
16,796
55,096
49,000
Net average selling price
per pound
$
1.161
$
1.940
$
1.161
$
1.802
Shell egg net sales
Third Quarter – Fiscal 2024
vs. Fiscal 2023
-
In the
third quarter
of fiscal
2024, conventional
egg sales
decreased $275.4
million, or
40.0%, compared
to the
third
quarter
of
fiscal
2023,
primarily
due
to
a
41.5%
decrease
in
the
prices
for
conventional
eggs,
which
resulted
in
a
$293.3 million decrease in net sales, partially offset
by a 2.6% increase in the volume of conventional
eggs sold, which
resulted in a $17.7 million increase in net sales.
-
Conventional
egg
prices
reached
record
highs
in
third
quarter
fiscal
2023
due
to
HPAI
outbreaks
experienced
throughout calendar
year 2022 as
well seasonal
demand during
the winter
holidays. Prices
were lower in
the first
half
of fiscal 2024
compared to
the same period
of fiscal 2023
as the U.S.
egg supply
started to
recover from
outbreaks of
HPAI.
There has
been a
resurgence
of HPAI
starting in
November 2023,
and continuing
through the
third quarter
of
fiscal 2024, which increased prices due
to supply constraints.
However, prices remained
lower than the third quarter of
fiscal 2023.
-
Specialty egg sales decreased
$9.9 million, or 3.6%,
in the third quarter
of fiscal 2024
compared to the third
quarter of
fiscal
2023,
primarily
due
to
a
7.7%
decrease
in
the
prices
for
specialty
eggs,
which
resulted
in
a
$11.9
million
decrease in net sales.
-
Our total dozens
sold and specialty
dozens sold during
the third quarter
of fiscal 2024
were records for
our Company.
Demand
for
specialty
eggs
increased
in
the
third
quarter
of
fiscal
2024
compared
to
the
same
prior
year
period,
primarily due
to cage-free
requirements becoming
effective for
Nevada, Oregon
and Washington
effective January
1,
2024.
Index
25
Thirty-nine weeks – Fiscal 2024 vs. Fiscal 2023
-
For the thirty-nine
weeks ended March 2,
2024, conventional egg
sales decreased $737.0 million,
or 44.5%, compared
to the
same period
of fiscal
2023, primarily
due to
the decrease
in the
prices for
conventional shell
eggs. Changes
in
prices
resulted
in
a
$770.0
million
decrease
in
net
sales,
partially
offset
by
a
2.0%
increase
in
the
volume
of
conventional eggs sold, which resulted in a $33.2 million increase in net sales.
-
During
the
first
three
quarters
of
fiscal
2024,
the
U.S.
egg
supply
was
recovering
from
the
earlier
HPAI
outbreaks,
leading to lower egg prices than the prior year period,
although as noted above there was a resurgence
in HPAI
starting
in November 2023.
Egg products net sales
Third Quarter – Fiscal 2024
vs. Fiscal 2023
-
Egg
products
net sales
decreased
$10.8
million,
or 33.2%,
for
the third
quarter of
fiscal 2024
compared to
the same
period of
fiscal 2023,
primarily due
to a
40.2%
selling price
decrease, which
had a
$14.6 million
negative impact
on
net sales.
-
Our egg
products net
average selling
price decreased
in the
third quarter
of fiscal
2024, compared
to the
third quarter
of fiscal 2023
as the supply of shell eggs used to produce egg products increased.
Thirty-nine weeks – Fiscal 2024 vs. Fiscal 2023
-
Egg products net sales decreased
$24.3 million, or 27.5%, primarily
due to a 35.6% selling price
decrease compared to
the first thirty-nine weeks of fiscal 2023, which had a $35.3 million
negative impact on net sales.
-
Our egg
products
net average
selling price
decreased
in the
first three
quarters of
fiscal 2024,
compared
to the
prior
year period as the supply of shell eggs used to produce egg products increased.
Index
26
COST OF SALES
Costs of sales
for the
third quarter of
fiscal 2024
were $484.5 million
compared to $534.5
million for the
same period of
fiscal
- Costs of sales for the year-to-date period were $1.3 billion
compared to $1.5 billion for the prior year period.
The following table presents the key variables affecting our cost of
sales (in thousands, except cost per dozen data):
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
March 2, 2024
February 25,
2023
%
Change
March 2, 2024
February 25,
2023
%
Change
Cost of Sales:
Farm production
$
248,650
$
280,384
(11.3)
%
$
760,525
$
823,043
(7.6)
%
Processing, packaging, and
warehouse
86,423
87,037
(0.7)
253,096
252,093
0.4
Egg purchases and other
(including change in
inventory)
127,925
135,003
(5.2)
260,375
301,274
(13.6)
Total shell eggs
462,998
502,424
(7.8)
1,273,996
1,376,410
(7.4)
Egg products
21,506
32,043
(32.9)
56,523
82,762
(31.7)
Total
$
484,504
$
534,467
(9.3)
%
$
1,330,519
$
1,459,172
(8.8)
%
Farm production costs (per
dozen produced)
Feed
$
0.544
$
0.679
(19.9)
%
$
0.564
$
0.677
(16.7)
%
Other
$
0.421
$
0.399
5.5
%
$
0.431
$
0.388
11.1
%
Total
$
0.965
$
1.078
(10.5)
%
$
0.995
$
1.065
(6.6)
%
Outside egg purchases
(average cost per dozen)
$
2.44
$
3.72
(34.4)
%
$
2.09
$
3.20
(34.7)
%
Dozens produced
259,527
263,174
(1.4)
%
774,984
782,186
(0.9)
%
Percent produced to sold
86.3%
90.3%
(4.4)
%
89.9%
91.9%
(2.2)
%
Farm Production
Third Quarter – Fiscal 2024
vs. Fiscal 2023
-
Feed
costs per
dozen
produced
decreased
19.9%
in
the
third
quarter
of fiscal
2024
compared
to
the
third
quarter
of
fiscal 2023. This
decrease was primarily
due to lower
prices for corn
and soybean meal,
our primary feed
ingredients.
The decrease in feed cost per dozen resulted
in a decrease in cost of sales of $35.0 million for
the third quarter of fiscal
2024 compared to the prior period quarter.
-
For the
third quarter
of fiscal
2024, the
average Chicago
Board of
Trade (“CBOT”)
daily market
price was
$4.51 per
bushel
for
corn
and
$370
per
ton
of
soybean
meal,
representing
decreases
of
32.4%
and
21.8%,
respectively,
as
compared
to
the
average
CBOT
daily
market
prices
for
the
third
quarter
of
fiscal
2023.
Basis
levels
for
corn
and
soybean meal were lower in our areas of operations compared to our prior year
third fiscal quarter.
-
Other
farm
production
costs
increased
primarily
due
to
higher
flock
amortization
and,
to
a
lesser
extent,
increased
facility
costs.
Flock
amortization
increased
primarily
due
to
the
increased
capitalized
value
of
our
flocks.
This
is
primarily due to the higher feed costs in earlier periods incurred during
the growing phase of the flocks.
-
Facility costs increased
due to higher
repairs and maintenance
costs in the third
quarter of fiscal 2024
compared to the
third quarter of fiscal 2023.
Thirty-nine weeks – Fiscal 2024 vs. Fiscal 2023
-
Feed costs
per dozen
produced decreased
16.7% in
the thirty-nine
weeks ended
March 2,
2024 compared
to the
same
period of
fiscal 2023,
primarily due
to lower
feed ingredient
prices. The
decrease in
feed cost
per dozen
resulted in
a
decrease in cost of sales of $87.6 million compared to the prior year period
.
Index
27
-
For the
year-to-date period,
the average
CBOT daily
market price
was $4.87 per
bushel for
corn and $403
per ton
for
soybean meal, representing
decreases of 27.3%
and 10.5%, respectively,
compared to the
average CBOT daily
market
prices for
the comparable
period in
the prior
year.
In addition,
basis levels
for corn
and soybean
meal were
lower for
the thirty-nine weeks ended March 2, 2024 compared to the same period of
fiscal 2023.
-
Other farm
production costs
increased due
primarily to
higher flock
amortization,
for the
reasons described
above, as
well as increased facility costs.
-
Facility
costs
increased
due
primarily
to
increased
contract
labor
in
response
to
labor
shortages,
as
well
as
higher
repairs
and
maintenance
costs for
the thirty-nine
weeks ended
March
2, 2024
compared to
the same
period
of fiscal
2023.
Current
indications
for
corn
project
an
overall
better
stocks-to-use
ratio
implying
potentially
lower
prices
in
the
near
term;
however, as long
as outside factors remain uncertain
(including weather patterns and
global supply chain disruptions), volatility
could remain. Soybean meal supply has remained tight relative to demand
in the first three quarters
of fiscal 2024.
Processing, packaging, and warehouse
Third Quarter – Fiscal 2024
vs. Fiscal 2023
-
Processing,
packaging,
and
warehouse
costs
decreased
0.7%
compared
to
the
third
quarter
of
fiscal
2023
as
we
processed fewer
dozens primarily
due to
the HPAI
outbreak at
our Kansas
facilities. The
decrease was
slightly offset
by inflationary costs in the third quarter of fiscal 2024 compared to the
third quarter of fiscal 2023.
Thirty-nine weeks – Fiscal 2024 vs. Fiscal 2023
-
Processing,
packaging,
and
warehouse
costs
increased
0.4%
compared
to
the
first
three
quarters
of
fiscal
2023,
primarily
due
to
an
increase
in
costs
due
to
inflationary
pressure,
partially
offset
by
a
reduction
in
the
volume
of
processed dozens.
Egg purchases and other (including change in inventory)
Third 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 34.4% compared
to third quarter of fiscal 2023,
partially offset by an
increase of 36.4% in dozens
purchased due to
the loss of
production caused by
the HPAI
outbreak at our
Kansas facilities as
well as an
increase in
sales volume.
Thirty-nine weeks – Fiscal 2024 vs. Fiscal 2023
-
Costs in
this category
decreased primarily
due to
lower shell
egg prices
as the
average cost
per dozen
of outside
egg
purchases decreased
34.7% compared
to fiscal
2023, partially
offset by
an increase
of 21.9%
in dozens
purchased for
the reasons discussed above.
GROSS PROFIT
Gross profit
for
the third
quarter of
fiscal 2024
was $218.6
million
compared
to $463.0
million
for
the same
period of
fiscal
2023.
Gross profit for
the thirty-nine weeks
ended March 2,
2024 was $355.1
million compared
to $998.4 million
for the same
period of 2023. The decrease for
both periods was primarily due to lower
conventional egg prices,
partially offset by lower feed
ingredient prices.
Index
28
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
March 2, 2024
February 25, 2023
$ Change
% Change
Specialty egg expense
$
20,173
$
15,689
$
4,484
28.6
%
Delivery expense
18,832
19,453
(621)
(3.2)
%
Payroll, taxes and benefits
13,134
14,325
(1,191)
(8.3)
%
Stock compensation expense
1,111
1,059
52
4.9
%
Other expenses
12,770
7,963
4,807
60.4
%
Total
$
66,020
$
58,489
$
7,531
12.9
%
Third Quarter – Fiscal 2024
vs. Fiscal 2023
Specialty egg expense
-
During the second
part of fiscal year
2023, the higher
prices for conventional
eggs and the
comparatively lower prices
for
specialty
eggs
diminished
the
need
to
promote
specialty
eggs.
During
the
third
quarter
of
fiscal
year
2024,
we
significantly
increased
promotional
programs,
resulting
in
higher
advertising
fees.
This
was
partially
offset
by
a
reduction in franchise fees paid to Eggland’s
Best, Inc.
Delivery expense
-
The
decreased
delivery
expense
is
primarily
due
to
a
decrease
in
fuel
and
contract
trucking
expenses
in
the
third
quarter of fiscal 2024 compared to the third quarter of fiscal 2023.
Payroll, taxes and benefits expense
-
The
decrease
in
payroll,
taxes
and
benefits
expense
is
due
to
a
decrease
in
accrued
bonuses
compared
to
the
third
quarter
of fiscal
2023
as well
as a
reduction
in employee
insurance
expenses
compared to
the
third quarter
of fiscal
2023.
Other expense
-
The increase
in other
expense is primarily
due to increased
legal costs incurred
compared to the
third quarter
of fiscal
2023.
Thirty-nine Weeks Ended
March 2, 2024
February 25, 2023
$ Change
% Change
Specialty egg expense
$
48,102
$
43,429
$
4,673
10.8
%
Delivery expense
54,229
57,544
(3,315)
(5.8)
%
Payroll, taxes and benefits
36,276
39,139
(2,863)
(7.3)
%
Stock compensation expense
3,212
3,071
141
4.6
%
Litigation loss contingency accrual
19,648
—
19,648
N.M.
Other expenses
33,377
26,865
6,512
24.2
%
Total
$
194,844
$
170,048
$
24,796
14.6
%
N.M. - Not Meaningful
Thirty-nine weeks – Fiscal 2024 vs. Fiscal 2023
Specialty egg expense
-
Specialty egg expense increased
by 10.8%, as advertising
expense increased in fiscal 2024
as discussed above and was
partially offset by the reduction in franchise fees paid to Eggland’s
Best, Inc.
Delivery expense
-
The decreased delivery expense is primarily due to a decrease in fuel
and contract trucking expenses in fiscal 2024.
Index
29
Payroll, taxes and benefits expense
-
The decrease
in payroll, taxes
and benefits expense
is primarily due
to a decrease
in accrued bonuses
in the first
three
quarters of fiscal 2024 compared to the prior year period.
Litigation loss contingency accrual
-
The
litigation
loss
contingency
accrual
of
$19.6
million
relates
to
a
jury
decision
returned
on
December
1,
2023
in
pending
anti-trust
litigation.
See
further
discussion
in
Note 10 - Commitments and Contingencies
of
the
Notes
to
Condensed Consolidated Financial Statements included in this Quarterly
Report.
Other expenses
-
The increase in other expense is primarily due to increased legal costs incurred
in the year-to-date period.
GAIN ON INVOLUNTARY
CONVERSIONS
For
the
third
quarter
of
fiscal
2024
and
2023,
we
recorded
a
gain
of
$9.9
million
and
$3.2
million,
respectively,
due
to
recoveries under indemnity and insurance programs
that exceeded the amortized book value of the covered
assets and our direct
costs.
OPERATING
INCOME (LOSS)
For the
third quarter
of fiscal
2024,
we recorded
operating income
of $162.8
million compared
to operating
income of
$407.8
million for the same period of fiscal 2023.
For the
thirty-nine weeks
ended March
2, 2024,
we recorded
an operating
income of
$170.3 million
compared to
an operating
income of $831.5 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 third
quarter of fiscal
2024,
we earned $7.8
million of interest
income compared
to $6.3 million
for the same
period of
fiscal 2023.
The increase
resulted from
higher investment
balances and
interest rates.
The Company
recorded interest
expense
of $247 thousand and $143 thousand for the third quarters ended March
2, 2024 and February 25, 2023, respectively.
For the
thirty-nine
weeks ended
March 2,
2024, we
earned $22.4
million of
interest income
compared
to $9.4
million for
the
same period
of fiscal
- The
increase resulted
from significantly
higher investment
balances and
higher interest
rates. The
Company
recorded
interest expense
of $523
thousand and
$433 thousand
for the
thirty-nine weeks
ended March
2, 2024
and
February 25, 2023, respectively.
INCOME TAXES
For the third quarter of fiscal 2024,
pre-tax income was $185.2 million compared
to $424.9 million for the same period of
fiscal
- We
recorded income tax
expense of $38.8
million for the
third quarter of
fiscal 2024, which
reflects an effective
tax rate
of 21.0%. This
includes the discrete
tax benefit of
$6.4 million associated
with the fiscal
2023 provision-to-return
adjustments.
Excluding the
discrete tax
benefit, income
tax expense
was $45.2
million for
the third
quarter of
fiscal 2024
with an
adjusted
effective tax rate of
24.4%.
Income tax expense was $102.1
million for the comparable
period of fiscal 2023, which
reflects an
effective tax rate of 24.0%.
For the
thirty-nine
weeks ended
March 2,
2024, pre-tax
income was
$208.0
million compared
to $852.6
million for
the same
period
of
fiscal
2023.
We
recorded
income
tax
expense
of $44.
7
million,
which
reflects
an
effective
tax
rate
of
21.5%. This
includes the
discrete tax benefit
of $6.4
million associated
with the fiscal
2023 provision-to-return
adjustments.
Excluding the
discrete tax
benefit, income
tax expense
was $51.0
million with
an adjusted
effective
tax rate
of 24.5%.
We
recorded income
tax expense of $206.4 million in the prior year period, which reflects an effective
tax rate of 24.2%.
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.
Index
30
NET INCOME ATTRIBUTABLE
TO CAL-MAINE FOODS, INC.
Net income
attributable to
Cal-Maine Foods,
Inc. for
the third
quarter ended
March 2,
2024, was
$146.7 million,
or $3.01
per
basic and $3.00
per diluted common
share, compared to
net income attributable
to Cal-Maine Foods,
Inc. of $323.2
million, or
$6.64 per basic and $6.62 per diluted common share for the same period of
fiscal 2023.
Net income
attributable to
Cal-Maine Foods, Inc.
for the thirty-nine
weeks ended March
2, 2024,
was $164.6 million,
or $3.38
per basic and
$3.37 per diluted common
share, compared to net
income attributable to
Cal-Maine Foods, Inc.
of $647.1 million
or $13.31 per basic and $13.25 per diluted common share, for the same
period of fiscal 2023.
LIQUIDITY AND CAPITAL
RESOURCES
Working
Capital and Current Ratio
Our working capital at
March 2, 2024 was $1.0 billion, compared
to $942.2 million at June 3,
- The calculation of working
capital is defined as current
assets less current liabilities. Our
current ratio was 5.7
at March 2, 2024, 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
thirty-nine weeks
ended March
2, 2024,
$237.6 million
in net
cash was
provided by
operating activities,
compared to
$706.5
million
provided
by
operating
activities
for
the
comparable
period
in
fiscal
2023.
The
decrease
in
cash
flow
from
operating activities resulted primarily from lower selling prices for
conventional eggs compared to the prior-year period.
Cash Flows from Investing Activities
For the thirty-nine
weeks ended March
2, 2024,
$118.4 million
was used in
investing activities,
primarily due
to the purchases
of investment
securities, the
acquisition of
assets of
Fassio Egg
Farms, Inc.,
and purchases
of property,
plant and
equipment.
This
compares
to $397.6
million
used in
investing
activities
in
the same
period
of fiscal
2023,
primarily
due
to purchases
of
investment securities and purchases of
property, plant
and equipment.
Sales and maturities of investment securities
were $273.9
million in
first three
quarters of
fiscal 2024,
compared to
$132.7 million
in the
first three
quarters fiscal
- The
increase in
sales
and
maturities
of
investment
securities
is
primarily
due
to
the
maturities
of
short-term
investments
during
the
period.
Purchases of
property,
plant and
equipment were
$96.0 million
and $86.2
million in
the first
three quarters
of fiscal
2024 and
2023, respectively, primarily
reflecting progress on our construction projects.
Cash Flows from Financing Activities
We
paid
dividends
of
$43.0
million
for
the
thirty-nine
weeks
ended
March
2, 2024
compared
to
$144.6
million
in
the
same
prior-year period.
As of
March 2,
2024, cash
increased $74.3
million
since June
3, 2023,
compared to
an increase
of $162.5
million during
the
same period of fiscal 2023.
Credit Facility
We
had
no
long-term
debt
outstanding
at
March
2,
2024
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 March 2,
2024, no amounts were
borrowed under the Credit
Facility.
We have $4.3
million in outstanding standby letters of credit issued under our
Credit Facility for the benefit of certain insurance
companies.
Refer
to
Part
II
Item
8,
Notes
to
Consolidated
Financial
Statements
and
Supplementary
Data,
Note
10
-
Credit
Facility included in our 2023 Annual Report for further information
regarding our long-term debt.
Dividends
In
accordance
with
our
variable
dividend
policy,
we
will
pay
a
cash
dividend
totaling
approximately
$48.9
million,
or
approximately $0.997 per
share to holders of our
common and Class A common
stock with respect to
our third fiscal quarter
of
2024.
The
amount
paid
per
share
will
vary
based
on
the
number
of
outstanding
shares
on
the
record
date.
The
dividend
is
payable on May 16, 2024 to holders of record on May 1, 2024.
Index
31
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 March 2, 2024 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of March 2,
2024
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses
Fiscal 2025
72,915
49,379
23,536
Feed Mill
Fiscal 2025
10,479
3,165
7,314
Dexter, MO Renovations
Fiscal 2025
11,000
-
11,000
Cage-Free Layer & Pullet Houses
Fiscal 2026
82,298
66,823
15,475
Cage-Free Layer & Pullet Houses
Fiscal 2027
56,923
32,991
23,932
$
233,615
$
152,358
$
81,257
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
Note 1 - Summary of Significant
Accounting Policies
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly
Report.
CRITICAL ACCOUNTING ESTIMATES
Critical accounting
estimates
are those
estimates
made
in accordance
with U.S.
generally
accepted
accounting
principles that
involve
a
significant
level
of
estimation
uncertainty
and
have
had
or
are
reasonably
likely
to
have
a
material
impact
on
our
financial
condition
or results
of operations.
There
have been
no changes
to our
critical accounting
estimates identified
in our
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
thirty-nine weeks ended March 2, 2024 from the
information provided in Part II Item 7A, Quantitative and Qualitative Disclosures About
Market Risk in our 2023 Annual
Report.
ITEM 4.
CONTROLS
AND
PROCEDURES
Disclosure Controls and Procedures
Our disclosure
controls and
procedures are
designed to
provide reasonable
assurance that
information required
to be
disclosed
by us in the reports
we file or submit
under the Exchange Act
is recorded, processed, summarized
and reported, within the
time
periods
specified
in
the
Securities and
Exchange
Commission’s
rules
and
forms. Disclosure
controls
and
procedures
include,
without limitation, controls and
procedures designed to ensure that
information required to be disclosed
by us in the reports that
we file or submit
under the Exchange
Act is accumulated and
communicated to management,
including our principal
executive
and
principal
financial
officers,
or
persons
performing
similar
functions,
as
appropriate
to
allow
timely
decisions
regarding
required disclosure. Based on an evaluation of our disclosure controls
and procedures conducted by our Chief Executive Officer
and
Chief
Financial
Officer,
together
with
other
financial
officers,
such
officers
concluded
that
our
disclosure
controls
and
procedures were effective as of March 2, 2024 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
March 2, 2024
that
has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
Index
32
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
Note 10
- Commitments and
Contingencies
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, except
as
reported herein in Part I Item 2 under the heading “HPAI.”
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
The following table is a summary of our third 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
12/03/23 to 12/30/23
—
$
—
—
—
12/31/23 to 01/27/24
30,650
54.91
—
—
01/28/24 to 03/02/24
—
—
—
—
30,650
$
54.91
—
—
(1)
As permitted under our Amended and Restated 2012
Omnibus Long-Term Incentive Plan, these shares were withheld by us to satisfy
tax withholding
obligations for employees in connection with the vesting of restricted
common stock.
ITEM 6. EXHIBITS
Exhibits
No.
Description
3.1
Exhibit 3.1 in the Registrant’s Form 8-K, filed July 20, 2018)
3.2
for the quarter ended March 2, 2013, filed April 5, 2013)
31.1*
Rule 13a-14(a) Certification of the Chief Executive Officer
31.2*
Rule 13a-14(a) Certification of the Chief Financial Officer
32**
Section 1350 Certification of the Chief Executive Officer and the Chief Financial Officer
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.
Index
33
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:
April 2, 2024
/s/ Max P.
Bowman
Max P.
Bowman
Vice President, Chief Financial
Officer
(Principal Financial Officer)
Date:
April 2, 2024
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)
exhibit311
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)
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/ Sherman L. Miller
Sherman L. Miller
President and Chief Executive Officer
Date:
April 2, 2024
exhibit312
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:
April 2, 2024
exhibit32
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 March
2, 2024 (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:
April 2, 2024