CAL-MAINE FOODS INC - Quarter Report: 2022 November (Form 10-Q)
1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
10-Q
☑
For the quarterly period ended
November 26, 2022
or
☐
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
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
☑
☐
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
☑
☐
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
☐
☑
There were
44,130,149
4,800,000
value, outstanding as of December 28, 2022.
2
INDEX
Page
Number
Part I.
Financial Information
Item 1.
Item 2.
Item 3.
Item 4.
Part
II.
Other Information
Item 1.
Item 1A.
Item 2.
Item 6.
3
PART I. FINANCIAL
INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except for par value amounts)
(Unaudited)
November 26, 2022
May 28, 2022
Assets
Current assets:
Cash and cash equivalents
$
178,635
$
59,084
Investment securities available-for-sale
200,714
115,429
Trade and other receivables, net
262,964
177,257
Income tax receivable
42,147
42,147
Inventories
280,582
263,316
Prepaid expenses and other current assets
8,968
4,286
Total current assets
974,010
661,519
Property, plant & equipment, net
703,882
677,796
Investments in unconsolidated entities
14,687
15,530
Goodwill
44,006
44,006
Intangible assets, net
17,037
18,131
Other long-term assets
9,818
10,507
Total Assets
$
1,763,440
$
1,427,489
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
154,624
$
122,331
Accrued income taxes payable
85,723
25,687
Dividends payable
66,202
36,656
Total current liabilities
306,549
184,674
Other noncurrent liabilities
9,410
10,274
Deferred income taxes, net
127,176
128,196
Total liabilities
443,135
323,144
Commitments and contingencies - see Note 9
—
—
Stockholders’ equity:
Common stock ($
0.01
Common stock - authorized
120,000
70,261
703
703
Class A convertible common stock - authorized and issued
4,800
48
48
Paid-in capital
70,005
67,989
Retained earnings
1,281,784
1,065,854
Accumulated other comprehensive loss, net of tax
(3,087)
(1,596)
Common stock in treasury at cost –
26,126
26,121
shares at May 28, 2022
(28,496)
(28,447)
Total Cal-Maine Foods, Inc. stockholders’ equity
1,320,957
1,104,551
Noncontrolling interest in consolidated entity
(652)
(206)
Total stockholders’ equity
1,320,305
1,104,345
Total Liabilities and Stockholders’ Equity
$
1,763,440
$
1,427,489
See Notes to Condensed Consolidated Financial Statements.
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended
Twenty-six Weeks Ended
November 26, 2022
November 27, 2021
November 26, 2022
November 27, 2021
Net sales
$
801,700
$
381,723
$
1,460,044
$
706,709
Cost of sales
483,851
337,976
924,705
656,317
Gross profit
317,849
43,747
535,339
50,392
Selling, general and administrative
57,952
47,780
111,559
94,305
(Gain) loss on disposal of fixed assets
29
(1,968)
62
(2,181)
Operating income (loss)
259,868
(2,065)
423,718
(41,732)
Other income (expense):
Interest income, net
1,930
129
2,833
361
Royalty income
344
278
772
551
Equity income (loss) of unconsolidated
entities
(987)
264
(843)
399
Other, net
1,113
1,862
1,268
7,025
Total other income, net
2,400
2,533
4,030
8,336
Income (loss) before income taxes
262,268
468
427,748
(33,396)
Income tax expense (benefit)
63,974
(677)
104,320
(16,515)
Net income (loss)
198,294
1,145
323,428
(16,881)
Less: Loss attributable to noncontrolling
interest
(293)
(28)
(446)
(28)
Net income (loss) attributable to Cal-Maine
Foods, Inc.
$
198,587
$
1,173
$
323,874
$
(16,853)
Net income (loss) per common share:
Basic
$
4.08
$
0.02
$
6.66
$
(0.34)
Diluted
$
4.07
$
0.02
$
6.63
$
(0.34)
Weighted average shares outstanding:
Basic
48,624
48,857
48,624
48,859
Diluted
48,840
49,016
48,827
48,859
See Notes to Condensed Consolidated Financial Statements.
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
Comprehensive Income (Loss)
(In thousands)
(Unaudited)
Thirteen Weeks Ended
Twenty-six Weeks Ended
November 26, 2022
November 27, 2021
November 26, 2022
November 27, 2021
Net income (loss)
$
198,294
1,145
323,428
(16,881)
Other comprehensive income (loss), before
tax:
Unrealized holding loss on available-for-
sale securities, net of reclassification
adjustments
(974)
(355)
(1,971)
(579)
Income tax benefit related to items of other
comprehensive income
237
87
480
141
Other comprehensive loss, net of tax
(737)
(268)
(1,491)
(438)
Comprehensive income (loss)
197,557
877
321,937
(17,319)
Less: Comprehensive loss attributable to the
noncontrolling interest
(293)
(28)
(446)
(28)
Comprehensive income (loss) attributable to
Cal-Maine Foods, Inc.
$
197,850
$
905
$
322,383
$
(17,291)
See Notes to Condensed Consolidated Financial Statements.
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Twenty-six Weeks Ended
November 26, 2022
November 27, 2021
Cash flows from operating activities:
Net income (loss)
$
323,428
$
(16,881)
Depreciation and amortization
34,729
33,969
Deferred income taxes
(540)
(15,995)
Other adjustments, net
(12,830)
(16,585)
Net cash provided by (used in) operations
344,787
(15,492)
Cash flows from investing activities:
Purchases of investment securities
(152,365)
(26,387)
Sales and maturities of investment securities
65,279
67,864
Distributions from unconsolidated entities
—
400
Acquisition of business, net of cash acquired
—
(44,823)
Purchases of property, plant and equipment
(59,709)
(28,647)
Net proceeds from disposal of property, plant and equipment
92
5,338
Net cash used in investing activities
(146,703)
(26,255)
Cash flows from financing activities:
Payments of dividends
(78,394)
—
Purchase of common stock by treasury
(45)
(18)
Principal payments on finance lease
(94)
(106)
Contributions
—
3
Net cash used in financing activities
(78,533)
(121)
Net change in cash and cash equivalents
119,551
(41,868)
Cash and cash equivalents at beginning of period
59,084
57,352
Cash and cash equivalents at end of period
$
178,635
$
15,484
See Notes to Condensed Consolidated Financial Statements.
7
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements of Cal-Maine Foods, Inc. and its subsidiaries (the “Company,”
“we,” “us,” “our”) have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and
in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial
reporting and should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended May 28, 2022 (the
“2022 Annual Report”). These statements reflect all adjustments that are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented and, in the opinion of management, consist of adjustments of a normal
recurring nature. Operating results for the interim periods are not necessarily indicative of operating results for the entire fiscal
year.
Fiscal Year
The Company’s fiscal year ends on the Saturday closest to May 31. Each of the three-month periods and year-to-date periods
ended on November 26, 2022 and November 27, 2021 included
13 weeks
26 weeks
, respectively.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
Investment Securities
Our investment securities are accounted for in accordance with ASC 320, “Investments - Debt and Equity Securities” (“ASC
320”). The Company considers all its debt securities for which there is a determinable fair market value, and there are no
restrictions on the Company’s ability to sell within the next 12 months, as available-for-sale. We classify these securities as
current, because the amounts invested are available for current operations. Available-for-sale securities are carried at fair value,
with unrealized gains and losses reported in other comprehensive income until realized. The total of other comprehensive
income for the period is presented as a component of stockholders' equity separately from retained earnings and additional paid-
in capital. The Company regularly evaluates changes to the rating of its debt securities by credit agencies and economic
conditions to assess and record any expected credit losses through the allowance for credit losses, limited to the amount that fair
value was less than the amortized cost basis. The cost basis for realized gains and losses on available-for-sale securities is
determined by the specific identification method. Gains and losses are recognized in other income (expenses) as Other, net in
the Company’s Condensed Consolidated Statements of Operations. Investments in mutual funds are classified as “Other long-
term assets” in the Company’s Condensed Consolidated Balance Sheets.
Trade Receivables
Trade receivables are stated at their carrying values, which include a reserve for credit losses. As of November 26, 2022 and
May 28, 2022, reserves for credit losses were $
838
775
customers based on an evaluation of each customer's financial condition and credit history. Collateral is generally not required.
The Company minimizes exposure to counter party credit risk through credit analysis and approvals, credit limits, and
monitoring procedures. In determining our reserve for credit losses, receivables are assigned an expected loss based on
historical loss information adjusted as needed for economic and other forward-looking factors.
Dividends Payable
We accrue dividends at the end of each quarter according to the Company’s dividend policy adopted by its Board of Directors.
The Company pays a dividend to shareholders of its Common Stock and Class A Common Stock on a quarterly basis for each
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
8
to shareholders of record on the 65th day after the quarter end. Dividends are payable on the 15th day following the record date.
Following a quarter for which the Company does not report net income attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend for a subsequent profitable quarter until the Company is profitable on a cumulative basis computed from the
date of the most recent quarter for which a dividend was paid.
Immaterial Error Correction
Effective on May 30, 2021, the Company acquired the remaining
50
% membership interest in Red River Valley Egg Farm,
LLC (“Red River”), including certain liabilities. During the Company’s third quarter of fiscal 2022, management determined
that it had not properly eliminated select intercompany sales and cost of sales transactions between Red River and the
corresponding other wholly -owned subsidiaries of the Company in its first and second quarter 2022 Condensed Consolidated
Statements of Operations. The errors resulted in an overstatement of Net Sales and Cost of Sales of $
6.7
quarter of fiscal 2022 and $
9.2
no
(loss) or Net income (loss) per share.
We evaluated the errors quantitatively and qualitatively in accordance with Staff Accounting Bulletin
("SAB") No. 99 Materiality, and SAB No. 108 Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in the Current Year Financial Statements, and determined that the related impact was not material to our
condensed consolidated financial statements for the first or second quarters of fiscal 2022, but that correcting the cumulative
impact of the errors would be relevant to our Condensed Consolidated Statements of Operations for the third quarter
ended February 26, 2022. Accordingly, we have reflected the correction of the immaterial error in fiscal 2022 as a reduction of
Net Sales and Cost of Sales in the accompanying Condensed Consolidated Statements of Operations.
New Accounting Pronouncements and Policies
No new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our
Consolidated Financial Statements.
Note 2 - Investment
Securities
The following represents the Company’s investment securities as of November 26, 2022 and May 28, 2022 (in thousands):
November 26, 2022
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
15,956
$
—
$
276
$
15,680
Commercial paper
33,058
—
53
33,005
Corporate bonds
81,218
—
1,709
79,509
US government and agency obligations
19,111
—
205
18,906
Asset backed securities
13,403
—
340
13,063
Treasury bills
40,644
—
93
40,551
Total current investment securities
$
203,390
$
—
$
2,676
$
200,714
Mutual funds
$
3,472
$
—
$
114
$
3,358
Total noncurrent investment securities
$
3,472
$
—
$
114
$
3,358
9
May 28, 2022
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
10,136
$
—
$
32
$
10,104
Commercial paper
14,940
—
72
14,868
Corporate bonds
74,167
—
483
73,684
Certificates of deposits
1,263
—
18
1,245
US government and agency obligations
2,205
4
—
2,209
Asset backed securities
13,456
—
137
13,319
Total current investment securities
$
116,167
$
4
$
742
$
115,429
Mutual funds
$
3,826
$
—
$
74
$
3,752
Total noncurrent investment securities
$
3,826
$
—
$
74
$
3,752
Available-for-sale
Proceeds from sales and maturities of investment securities available-for-sale were $
65.3
67.9
twenty-six weeks ended November 26, 2022 and November 27, 2021, respectively. Gross realized gains for the twenty-six
weeks ended November 26, 2022 and November 27, 2021 were $
2
165
losses for the twenty-six weeks ended November 26, 2022 and November 27, 2021 were $
63
67
respectively. There were
no
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 November 26, 2022 are as follows (in thousands):
Estimated Fair Value
Within one year
$
133,867
1-5 years
66,847
Total
$
200,714
Noncurrent
There were
no
sales and maturities of noncurrent investment securities were $
453
2021. Gross realized gains for the twenty-six weeks ended November 27, 2021 were $
165
no
losses for the twenty-six weeks ended November 27, 2021.
Note 3 - Fair Value Measurements
The Company is required to categorize both financial and nonfinancial assets and liabilities based on the following fair value
hierarchy. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated,
knowledgeable, and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would
be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to
settle the liability with the creditor.
•
Level 1
•
Level 2
directly or indirectly, including:
◦
Quoted prices for similar assets or liabilities in active markets
◦
Quoted prices for identical or similar assets in non-active markets
◦
Inputs other than quoted prices that are observable for the asset or liability
◦
Inputs derived principally from or corroborated by other observable market data
•
Level 3
significant to the fair value of the assets or liabilities
10
The disclosures of fair value of certain financial assets and liabilities that are recorded at cost are as follows:
Cash and cash equivalents, accounts receivable, and accounts payable:
short maturity of these instruments.
Lease obligations:
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 November 26, 2022 and May 28, 2022 (in thousands):
November 26, 2022
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
15,680
$
—
$
15,680
Commercial paper
—
33,005
—
33,005
Corporate bonds
—
79,509
—
79,509
US government and agency obligations
—
18,906
—
18,906
Asset backed securities
—
13,063
—
13,063
Treasury bills
—
40,551
—
40,551
Mutual funds
3,358
—
—
3,358
Total assets measured at fair value
$
3,358
$
200,714
$
—
$
204,072
May 28, 2022
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
10,104
$
—
$
10,104
Commercial paper
—
14,868
—
14,868
Corporate bonds
—
73,684
—
73,684
Certificates of deposits
—
1,245
—
1,245
US government and agency obligations
—
2,209
—
2,209
Asset backed securities
—
13,319
—
13,319
Mutual funds
3,752
—
—
3,752
Total assets measured at fair value
$
3,752
$
115,429
$
—
$
119,181
Investment securities – available-for-sale classified as Level 2 consist of securities with maturities of three months or longer
when purchased. We classified these securities as current because amounts invested are readily available for current operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
Note 4 - Inventories
Inventories consisted of the following as of November 26, 2022 and May 28, 2022 (in thousands):
November 26, 2022
May 28, 2022
Flocks, net of amortization
$
156,782
$
144,051
Eggs and egg products
28,343
26,936
Feed and supplies
95,457
92,329
$
280,582
$
263,316
We grow and maintain flocks of layers (mature female chickens), pullets (female chickens, under 18 weeks of age), and
breeders (male and female chickens used to produce fertile eggs to hatch for egg production flocks). Our total flock at
November 26, 2022 and May 28, 2022 consisted of approximately
10.4
11.5
43.7
million and
42.2
11
Note 5 - Equity
The following reflects equity activity for the thirteen and twenty-six weeks ended November 26, 2022 and November 27, 2021
(in thousands):
Thirteen Weeks Ended November 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at August
27, 2022
$
703
$
48
$
(28,495)
$
69,017
$
(2,350)
$
1,149,399
$
(359)
$
1,187,963
Other comprehensive
loss, net of tax
—
—
—
—
(737)
—
—
(737)
Stock compensation
plan transactions
—
—
(1)
988
—
—
—
987
Dividends ($
1.353
per share)
Common
—
—
—
—
—
(59,708)
—
(59,708)
Class A common
—
—
—
—
—
(6,494)
—
(6,494)
Net income (loss)
—
—
—
—
—
198,587
(293)
198,294
Balance at November
26, 2022
$
703
$
48
$
(28,496)
$
70,005
$
(3,087)
$
1,281,784
$
(652)
$
1,320,305
Thirteen Weeks Ended November 27, 2021
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 August
28, 2021
$
703
$
48
$
(27,451)
$
65,044
$
(728)
$
957,951
$
—
$
995,567
Other comprehensive
loss, net of tax
—
—
—
—
(268)
—
—
(268)
Stock compensation
plan transactions
—
—
1
975
—
—
—
976
Contributions
—
—
—
—
—
—
3
3
Net income (loss)
—
—
—
—
—
1,173
(28)
1,145
Balance at
November 27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
$
(25)
$
997,423
12
Twenty-six Weeks Ended November 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 28,
2022
$
703
$
48
$
(28,447)
$
67,989
$
(1,596)
$
1,065,854
$
(206)
$
1,104,345
Other comprehensive
loss, net of tax
—
—
—
—
(1,491)
—
—
(1,491)
Stock compensation
plan transactions
—
—
(49)
2,016
—
—
—
1,967
Dividends ($
2.206
per share)
Common
—
—
—
—
—
(97,355)
—
(97,355)
Class A common
—
—
—
—
—
(10,589)
—
(10,589)
Net income (loss)
—
—
—
—
—
323,874
(446)
323,428
Balance at
November 26, 2022
$
703
$
48
$
(28,496)
$
70,005
$
(3,087)
$
1,281,784
$
(652)
$
1,320,305
Twenty-six Weeks Ended November 27, 2021
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 29,
2021
$
703
$
48
$
(27,433)
$
64,044
$
(558)
$
975,977
$
—
$
1,012,781
Other comprehensive
loss, net of tax
—
—
—
—
(438)
—
—
(438)
Stock compensation
plan transactions
—
—
(17)
1,975
—
—
—
1,958
Contributions
—
—
—
—
—
—
3
3
Net loss
—
—
—
—
—
(16,853)
(28)
(16,881)
Balance at November
27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
(25)
$
997,423
Note 6 - Net Income (Loss) per Common Share
Basic net income (loss) per share is based on the weighted average Common Stock and Class A Common Stock outstanding.
Diluted net income per share is based on weighted-average common shares outstanding during the relevant period adjusted for
the dilutive effect of share-based awards. Restricted shares of
145
twenty-six weeks of fiscal 2022. These shares were not included in the diluted net loss per share calculation.
13
The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net
income (loss) per common share (amounts in thousands, except per share data):
Thirteen Weeks Ended
Twenty-six Weeks Ended
November 26,
2022
November 27,
2021
November 26,
2022
November 27,
2021
Numerator
Net income (loss)
$
198,294
$
1,145
$
323,428
$
(16,881)
Less: Loss attributable to noncontrolling
interest
(293)
(28)
(446)
(28)
Net income (loss) attributable to Cal-
Maine Foods, Inc.
$
198,587
$
1,173
$
323,874
$
(16,853)
Denominator
Weighted-average common shares
outstanding, basic
48,624
48,857
48,624
48,859
Effect of dilutive restricted shares
216
159
203
—
Weighted-average common shares
outstanding, diluted
48,840
49,016
48,827
48,859
Net income (loss) per common share
attributable to Cal-Maine Foods, Inc.
Basic
$
4.08
$
0.02
$
6.66
$
(0.34)
Diluted
$
4.07
$
0.02
$
6.63
$
(0.34)
Note 7 – Revenue from Contracts with Customers
Satisfaction of Performance Obligation
The vast majority of the Company’s revenue is derived from agreements with customers based on the customer placing an order
for products. Pricing for the most part is determined when the Company and the customer agree upon the specific order, which
establishes the contract for that order.
Revenues are recognized in an amount that reflects the net consideration we expect to receive in exchange for the goods. Our
shell eggs are sold at prices related to independently quoted wholesale market prices or formulas related to our costs of
production. The Company’s sales predominantly contain a single performance obligation. We recognize revenue upon
satisfaction of the performance obligation with the customer which typically occurs within days of the Company and the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts include a guaranteed sale clause, pursuant to which we credit the customer’s account for product that the
customer is unable to sell before expiration. The Company records an allowance for returns and refunds by using historical
return data and comparing to current period sales and accounts receivable. The allowance is recorded as a reduction in sales
with a corresponding reduction in trade accounts receivable.
Sales Incentives Provided to Customers
The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current
discount offers (e.g., percentage discounts off current purchases), inducement offers (e.g., offers for future discounts subject to
a minimum current purchase), and other similar offers. Current discount offers, when accepted by customers, are treated as a
reduction to the sales price of the related transaction, while inducement offers, when accepted by customers, are treated as a
reduction to the sales price based on estimated future redemption rates. Redemption rates are estimated using the Company’s
historical experience for similar inducement offers. Current discount and inducement offers are presented as a net amount in
‘‘Net sales.’’
14
Disaggregation of Revenue
The following table provides revenue disaggregated by product category (in thousands):
Thirteen Weeks Ended
Twenty-six Weeks Ended
November 26, 2022
November 27, 2021
November 26, 2022
November 27, 2021
Conventional shell egg sales
$
541,917
$
221,142
$
967,506
$
403,172
Specialty shell egg sales
227,778
146,917
428,598
279,375
Egg products
28,052
11,401
55,692
20,767
Other
3,953
2,263
8,248
3,395
$
801,700
$
381,723
$
1,460,044
$
706,709
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 November 26, 2022 and May 28, 2022, the balance for
contract assets was immaterial.
Contract Balances
The Company receives payment from customers based on specified terms that are generally less than 30 days from delivery.
There are rarely contract assets or liabilities related to performance under the contract.
Note 8 - Stock Based Compensation
Total stock-based compensation expense was $
2.0
27, 2021.
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 November 26, 2022 of $
4.9
average period of
1.8
16: Stock Compensation Plans in our 2022 Annual Report for further information on our stock compensation plans.
The Company’s restricted share activity for the twenty-six weeks ended November 26, 2022 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 28, 2022
317,844
$
39.12
Vested
(3,240)
38.31
Forfeited
(4,200)
39.44
Outstanding, November 26, 2022
310,404
$
39.12
Note 9 - Commitments and Contingencies
Financial Instruments
The Company maintained standby letters of credit (“LOCs”) totaling $
4.1
under the Company's senior secured revolving credit facility. The outstanding LOCs are for the benefit of certain insurance
companies and are not recorded as a liability on the consolidated balance sheets.
15
LEGAL PROCEEDINGS
State of Texas v. Cal-Maine Foods, Inc. d/b/a Wharton; and Wharton County Foods, LLC
On April 23, 2020, the Company and its subsidiary Wharton County Foods, LLC (“WCF”) were named as defendants in State
of Texas v. Cal-Maine Foods, Inc. d/b/a Wharton; and Wharton County Foods, LLC, Cause No. 2020-25427, in the District
Court of Harris County, Texas. The State of Texas (the “State”) asserted claims based on the Company’s and WCF’s alleged
violation of the Texas Deceptive Trade Practices—Consumer Protection Act, Tex. Bus. & Com. Code §§ 17.41-17.63
(“DTPA”). The State claimed that the Company and WCF offered shell eggs at excessive or exorbitant prices during the
COVID-19 state of emergency and made misleading statements about shell egg prices. The State sought temporary and
permanent injunctions against the Company and WCF to prevent further alleged violations of the DTPA, along with over
$
100,000
prejudice. On September 11, 2020, the State filed a notice of appeal, which was assigned to the Texas Court of Appeals for the
First District. On August 16, 2022, the appeals court reversed and remanded the case back to the trial court for further
proceedings. On October 31, 2022, the Company and WCF filed a petition for review to the Supreme Court of Texas appealing
the First District court’s decision. On November 30, 2022, the State of Texas waived its response to defendant’s petition for
review. The court has not issued a ruling. 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
250,000
each violation impacting anyone over 65 years old. On December 1, 2020, the Company and certain other defendants filed a
motion to dismiss the plaintiffs’ amended class action complaint. The plaintiffs subsequently filed a motion to strike, and the
motion to dismiss and related proceedings were referred to a United States magistrate judge. On July 14, 2021, the magistrate
judge issued a report and recommendation to the court that the defendants’ motion to dismiss be granted and the case be
dismissed without prejudice for lack of subject matter jurisdiction. On September 20, 2021, the court dismissed the case without
prejudice. On July 13, 2022, the court denied the plaintiffs’ motion to set aside or amend the judgment to amend their
complaint.
On March 15, 2022, plaintiffs filed a second suit against the Company and several defendants in Bell et al. v. Cal-Maine Foods
et al., Case No. 1:22-cv-246, in the Western District of Texas, Austin Division alleging the same assertions as laid out in the
first complaint. On August 12, 2022, the Company and other defendants in the case filed a motion to dismiss the plaintiffs’
class action complaint. On September 6, 2022, the plaintiffs’ filed their opposition to the motion to dismiss and the Company
and other defendants filed their reply on September 13, 2022. On December 7, 2022, 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 December 21, 2022, the plaintiffs filed Objections to the Magistrate’s Report and
Recommendation, but the court has not issued a ruling. Management believes the risk of material loss related to both matters to
be remote.
Kraft Foods Global, Inc. et al. v. United Egg Producers, Inc. et al.
As previously reported, on September 25, 2008, the Company was named as one of several defendants in numerous antitrust
cases involving the United States shell egg industry. The Company settled all of these cases, except for the claims of certain
plaintiffs who sought substantial damages allegedly arising from the purchase of egg products (as opposed to shell eggs). These
remaining plaintiffs are Kraft Food Global, Inc., General Mills, Inc., and Nestle USA, Inc. (the “Egg Products Plaintiffs”) and
The Kellogg Company.
On September 13, 2019, the case with the Egg Products Plaintiffs was remanded from a multi-district litigation proceeding in
the United States District Court for the Eastern District of Pennsylvania, In re Processed Egg Products Antitrust Litigation,
MDL No. 2002, to the United States District Court for the Northern District of Illinois, Kraft Foods Global, Inc. et al. v. United
Egg Producers, Inc. et al., Case No. 1:11-cv-8808, for trial. The Egg Products Plaintiffs allege that the Company and other
defendants violated Section 1 of the Sherman Act, 15. U.S.C. § 1, by agreeing to limit the production of eggs and thereby
illegally to raise the prices that plaintiffs paid for processed egg products. In particular, the Egg Products Plaintiffs are attacking
certain features of the United Egg Producers animal-welfare guidelines and program used by the Company and many other egg
producers. The Egg Products Plaintiffs seek to enjoin the Company and other defendants from engaging in antitrust violations
16
and seek treble money damages. On May 2, 2022, the court set trial for October 24, 2022, but on September 20, 2022, the court
cancelled the trial date due to COVID-19 protocols and converted the trial date to a status hearing to reschedule the jury trial.
On December 8, 2022, the court held a status hearing. The parties subsequently submitted an updated proposed pre-trial
schedule and the Court has set the trial for October 16, 2023.
In addition, on October 24, 2019, the Company entered into a confidential settlement agreement with The Kellogg Company
dismissing all claims against the Company for an amount that did not have a material impact on the Company’s financial
condition or results of operations. On November 11, 2019, a stipulation for dismissal was filed with the court, and on March 28,
2022, the court dismissed the Company with prejudice.
The Company intends to continue to defend the remaining case with the Egg Products Plaintiffs as vigorously as possible based
on defenses which the Company believes are meritorious and provable. Adjustments, if any, which might result from the
resolution of this remaining matter with the Egg Products Plaintiffs have not been reflected in the financial statements. While
management believes that there is still a reasonable possibility of a material adverse outcome from the case with the Egg
Products Plaintiffs, at the present time, it is not possible to estimate the amount of monetary exposure, if any, to the Company
due to a range of factors, including the following, among others: two earlier trials based on substantially the same facts and
legal arguments resulted in findings of no conspiracy and/or damages; this trial will be before a different judge and jury in a
different court than prior related cases; there are significant factual issues to be resolved; and there are requests for damages
other than compensatory damages (i.e., injunction and treble money damages).
State of Oklahoma Watershed Pollution Litigation
On June 18, 2005, the State of Oklahoma filed suit, in the United States District Court for the Northern District of Oklahoma,
against Cal-Maine Foods, Inc. and Tyson Foods, Inc. and affiliates, Cobb-Vantress, Inc., Cargill, Inc. and its affiliate, George’s,
Inc. and its affiliate, Peterson Farms, Inc. and Simmons Foods, Inc. The State of Oklahoma claims that through the disposal of
chicken litter the defendants have polluted the Illinois River Watershed. This watershed provides water to eastern Oklahoma.
The complaint seeks injunctive relief and monetary damages, but the claim for monetary damages has been dismissed by the
court. Cal-Maine Foods, Inc. discontinued operations in the watershed. Accordingly, we do not anticipate that Cal-Maine
Foods, Inc. will be materially affected by the request for injunctive relief unless the court orders substantial affirmative
remediation. Since the litigation began, Cal-Maine Foods, Inc. purchased
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.
The trial in the case began in September 2009 and concluded in February 2010. The case was tried without a jury, and the court
has not yet issued its ruling. Management believes the risk of material loss related to this matter to be remote.
Other Matters
In addition to the above, the Company is involved in various other claims and litigation incidental to its business. Although the
outcome of these matters cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that
the final outcome should not have a material effect on the Company’s consolidated results of operations or financial position.
17
ITEM 2. MANAGEMENT’S
DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results
of Operations included in Part II Item 7 of the Company’s Annual Report on Form 10-K for its fiscal year ended May 28, 2022
(the “2022 Annual Report”), and the accompanying financial statements and notes included in Part II Item 8 of the 2022 Annual
Report and in
This report contains numerous forward-looking statements within the meaning of Section 27A of the Securities Act of 1933
(the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) relating to our shell egg
business, including estimated future production data, expected construction schedules, projected construction costs, potential
future supply of and demand for our products, potential future corn and soybean price trends, potential future impact on our
business of the COVID-19 pandemic, potential future impact on our business of new legislation, rules or policies, potential
outcomes of legal proceedings, and other projected operating data, including anticipated results of operations and financial
condition. Such forward-looking statements are identified by the use of words such as “believes,” “intends,” “expects,”
“hopes,” “may,” “should,” “plans,” “projected,” “contemplates,” “anticipates,” or similar words. Actual outcomes or results
could differ materially from those projected in the forward-looking statements. The forward-looking statements are based on
management’s current intent, belief, expectations, estimates, and projections regarding the Company and its industry. These
statements are not guarantees of future performance and involve risks, uncertainties, assumptions, and other factors that are
difficult to predict and may be beyond our control. The factors that could cause actual results to differ materially from those
projected in the forward-looking statements include, among others, (i) the risk factors set forth in Part I Item 1A of the 2022
Annual Report (ii) the risks and hazards inherent in the shell egg business (including disease, pests, weather conditions, and
potential for product recall), including but not limited to the current outbreak of highly pathogenic avian influenza (“HPAI”)
affecting poultry in the United States (“U.S.”), Canada and other countries that was first detected in commercial flocks in the
U.S. in February 2022, (iii) changes in the demand for and market prices of shell eggs and feed costs, (iv) our ability to predict
and meet demand for cage-free and other specialty eggs, (v) risks, changes, or obligations that could result from our future
acquisition of new flocks or businesses and risks or changes that may cause conditions to completing a pending acquisition not
to be met, (vi) risks relating to the evolving COVID-19 pandemic, including without limitation increased costs and rising
inflation and interest rates, which generally have been exacerbated by Russia’s invasion of Ukraine starting February 2022, (vii)
our ability to retain existing customers, acquire new customers and grow our product mix and (viii) adverse results in pending
litigation matters. Readers are cautioned not to place undue reliance on forward-looking statements because, while we believe
the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these
forward-looking statements will prove to be accurate. Further, forward-looking statements included herein are only made as of
the respective dates thereof, or if no date is stated, as of the date hereof. Except as otherwise required by law, we disclaim any
intent or obligation to update publicly these forward-looking statements, whether because of new information, future events, or
otherwise.
GENERAL
Cal-Maine Foods, Inc. (the “Company,” “we,” “us,” “our”) is primarily engaged in the production, grading, packaging,
marketing and distribution of fresh shell eggs. Our operations are fully integrated under one operating segment. We are the
largest producer and distributor of fresh shell eggs in the U.S. Our total flock of approximately 43.7 million layers and 10.4
million pullets and breeders is the largest in the U.S. We sell most of our shell eggs to a diverse group of customers, including
national and regional grocery store chains, club stores, companies servicing independent supermarkets in the U.S., food service
distributors, and egg product consumers in states across the southwestern, southeastern, mid-western and mid-Atlantic regions
of the U.S.
Our operating results are materially impacted by market prices for eggs and feed grains (corn and soybean meal), which are
highly volatile, independent of each other, and out of our control. Generally, higher market prices for eggs have a positive
impact on our financial results while higher market prices for feed grains have a negative impact on our financial results.
Although we use a variety of pricing mechanisms in pricing agreements with our customers, we sell most of our conventional
shell eggs based on formulas that consider, in varying ways, independently quoted regional wholesale market prices for shell
eggs or formulas related to our costs of production which include the cost of corn and soybean meal.
We routinely fill our storage bins during harvest season when prices for feed ingredients are generally lower. To ensure
continued availability of feed ingredients, we may enter into contracts for future purchases of corn and soybean meal, and as
part of these contracts, we may lock-in the basis portion of our grain purchases several months in advance. 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
18
date. Furthermore, due to the more limited supply for organic ingredients, we may commit to purchase organic ingredients in
advance to help ensure supply. Ordinarily, we do not enter into long-term contracts beyond a year to purchase corn and soybean
meal or hedge against increases in the prices of corn and soybean meal. Corn and soybean meal are commodities and are
subject to volatile price changes due to weather, various supply and demand factors, transportation and storage costs,
speculators, agricultural, energy and trade policies in the U.S. and internationally and most recently the Russia-Ukraine war.
An important competitive advantage for Cal-Maine Foods is our ability to meet our customers’ evolving needs with a favorable
product mix of conventional and specialty eggs, including cage-free, organic and other specialty offerings, as well as egg
products. We have also enhanced our efforts to provide free-range and pasture-raised eggs that meet consumers’ evolving
choice preferences. While a small part of our current business, the free-range and pasture-raised eggs we produce and sell
represent attractive offerings to a subset of consumers, and therefore our customers, and help us continue to serve as the trusted
provider of quality food choices.
We are also focused on additional ways to enhance its product mix and support new opportunities in the restaurant, institutional
and industrial food products arena. On October 4, 2021, Cal-Maine Foods announced a strategic investment of $18.5 million in
debt and equity in Meadow Creek Foods, LLC (“MeadowCreek”), an egg products operation located in Neosho, Missouri,
focused on offering hard-cooked eggs. Cal-Maine Foods serves as the preferred provider of specialty and conventional eggs for
MeadowCreek to manufacture egg products. On December 13, 2022, our Board of Directors approved an additional $13.8
million investment to expand the Company’s controlling interest and fund additional equipment and working capital needs to
support growth opportunities for MeadowCreek. As demand for hard-cooked eggs continues to grow, the funds will be used for
additional refrigerated storage space and expanded capacity for cooking and packaging to better serve MeadowCreek’s
customers. Due to delays caused by supply chain issues and plans for expansion, MeadowCreek is now expected to be fully
operational by or before March 2023.
The Company has joined in the formation of a new egg farmer cooperative in the western United States. ProEgg, Inc.
(“ProEgg”) is comprised of leading egg production companies, including Cal-Maine Foods, servicing retail and foodservice
shell egg customers in 13 western states. ProEgg is a producer-owned cooperative organized under the Capper-Volstead Act.
Our membership in ProEgg is expected to provide benefits for its customers, including supply chain stability and enhanced
reliability. Initially, Cal-Maine Foods’ customer relationships and customer support are expected to remain the same. At some
point in the future, it is anticipated that each producer member will sell through ProEgg the shell eggs it produces for sale in the
western states covered by the cooperative. Customers would have a single point of contact for their shell egg purchases, as
ProEgg would have a dedicated team to market and sell the members’ combined egg production in the region.
The Company’s top priority in joining as a member of ProEgg is serving our valued customers in this important market region.
During this initial phase, we will continue our work to confirm that our participation in this new cooperative is in the best
interest of our customers and aligns with our long-term interests. This consideration will take place before moving to the next
phase of membership, and we expect this process to be completed on or before the end of our fiscal year 2023.
Retail sales of shell eggs historically have been highest during the fall and winter months and lowest during the summer
months. Prices for shell eggs fluctuate in response to seasonal demand factors and a natural increase in egg production during
the spring and early summer. Historically, shell egg prices tend to increase with the start of the school year and tend to be
highest prior to holiday periods, particularly Thanksgiving, Christmas and Easter. Consequently, and all other things being
equal, we would expect to experience lower selling prices, sales volumes and net income (and may incur net losses) in our first
and fourth fiscal quarters ending in August/September and May/June, respectively. Because of the seasonal and quarterly
fluctuations, comparisons of our sales and operating results between different quarters within a single fiscal year are not
necessarily meaningful comparisons.
HPAI
We are closely monitoring the current outbreak of HPAI that was first detected in commercial flocks in the U.S. in February
2022. Outbreaks in commercial flocks in the U.S. have most recently occurred during each month from September to December
2022. The current HPAI epidemic has surpassed the prior 2014-2015 outbreak in terms of the number of affected hens in the
U.S., and HPAI continues to circulate throughout the wild bird population in the U.S. and abroad. According to the U.S.
Centers for Disease Control and Prevention, these detections do not present an immediate public health concern. There have
been no positive tests for HPAI at any Cal-Maine Foods’ owned or contracted production facility as of December 28, 2022. The
USDA division of Animal and Plant Health Inspection Service (“APHIS”) reported on December 27, 2022 that approximately
43.3 million commercial layer hens and 1.0 million pullets have been depopulated due to HPAI this year. We believe the HPAI
outbreak will continue to exert downward pressure on the overall supply of eggs, and the duration of those effects will depend
19
in part on the timing of replenishment of the U.S. layer hen flock. Prior to the outbreak of HPAI in February 2022, the layer hen
flock five-year average from 2017 through 2021 was comprised of approximately 328 million hens. According to a LEAP
Market Analytics report dated December 8, 2022, the layer hen inventory is not projected to exceed this 328 million mark again
until December of 2023. Layer hen numbers reported by the USDA as of December 1, 2022 were 308.3 million, which
represents a decrease of 5.8% compared with the layer hen inventory a year ago. However, the USDA reported that the hatch
from July 2022 through November 2022 increased 5.8% as compared with the prior-year period.
While no farm is immune from HPAI, we believe we have implemented and continue to maintain robust biosecurity programs
across our locations. We are also working closely with federal, state and local government officials and focused industry groups
to mitigate the risk of this and future outbreaks and effectively manage our response, if needed.
CAGE-FREE EGGS
Ten states have passed legislation or regulations mandating minimum space or cage-free requirements for egg production or
mandated the sale of only cage-free eggs and egg products in their states, with implementation of these laws ranging from
January 2022 to January 2026. These states represent approximately 27% of the U.S. total population according to the 2020
U.S. Census. In California and Massachusetts, which collectively represent 14% of the total U.S. population according to the
2020 U.S. Census, cage-free legislation went into effect January 1, 2022. However, these laws are subject to judicial challenge,
and in October 2022 the Supreme Court of the U.S. heard oral arguments in a case challenging California’s law that requires the
sale of only cage-free eggs in that state. A decision in that case is expected next year. These laws have already affected and, if
upheld, will continue to affect sourcing, production and pricing of eggs (conventional as well as specialty) as the national
demand for cage-free production could be greater than the current supply, which would increase the prices of cage-free eggs,
unless more cage-free production capacity is constructed. Likewise, the national supply for eggs from conventional production
could exceed consumer demand which would decrease the prices of conventional eggs.
A significant number of our customers have previously announce d goals to offer cage-free eggs exclusively on or before 2026,
subject in most cases to availability of supply, affordability and customer demand, among other contingencies. Some of these
customers have recently changed those goals to offer 70% cage-free eggs by the end of 2030. Our customers typically do not
commit to long-term purchases of specific quantities or types of eggs with us, and as a result, it is difficult to accurately predict
customer requirements for cage-free eggs. We are, however, engaging with our customers in an effort to achieve a smooth
transition in meeting their announced goals and needs. We have invested significant capital in recent years to acquire and
construct cage-free facilities, and we expect our focus for future expansion will continue to include cage-free facilities. At the
same time, 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 2022 Annual Report, Part I Item 1, “Business – Specialty Eggs,” “Business – Growth
Strategy” and “Business – Government Regulation,” and the first risk factor in Part I Item 1A, “Risk Factors” under the sub-
heading “Legal and Regulatory Risk Factors.”
EXECUTIVE OVERVIEW
For the second quarter of fiscal 2023, we recorded a gross profit of $317.8 million compared to $43.7 million for the same
period of fiscal 2022, with the increase due primarily to higher shell egg prices, partially offset by the increased cost of feed
ingredients and processing, packaging and warehouse costs.
Our net average selling price per dozen for the second quarter of fiscal 2023 was $2.709 compared to $1.365 in the prior-year
period. Conventional egg prices per dozen were $2.883 compared to $1.151 for the prior-year period, and specialty egg prices
per dozen were $2.370 compared to $1.898 for the prior-year period. Conventional egg prices increased in the second quarter of
fiscal 2023 primarily due to decreased supply caused by the HPAI outbreak combined with good customer demand. See the
discussion under the heading “HPAI” above. The daily average price for the UB southeast large index for the second quarter of
fiscal 2023 increased 154.8% from the comparable period in the prior year, reaching near-record highs. Conventional egg prices
exceeding specialty egg prices has occurred for the past three quarters but is atypical historically. Conventional egg prices
generally respond more quickly to market conditions because we sell the majority of our conventional shell eggs based on
formulas that adjust periodically and take into account, in varying ways, independently quoted regional wholesale market prices
for shell eggs or formulas related to our costs of production. The majority of our specialty eggs are typically sold at prices and
terms negotiated directly with customers and therefore do not fluctuate as much as conventional pricing. For information about
historical shell egg prices, see Part I Item I of our 2022 Annual Report.
Our total dozens sold increased 5.4% to 284.1 million dozen shell eggs for the second quarter of fiscal 2023 compared to 269.6
million dozen for the same period of fiscal 2022. For the second quarter of fiscal 2023, conventional dozens sold decreased
20
2.2% and specialty dozens sold increased 24.1% as compared to the same quarter in fiscal 2022. Demand for specialty eggs
increased in the second quarter of fiscal 2023 compared to the same prior year period due primarily to the higher prices for
conventional eggs. Further, demand for specialty eggs continued to increase as retailers continued to shift to selling cage-free
products and cage-free legislation went into full effect in California and Massachusetts on January 1, 2022.
Our farm production costs per dozen produced for the second quarter of fiscal 2023 increased 22.0%, or $0.193, compared to
the second quarter of fiscal 2022. This increase was primarily due to increased prices for feed ingredients and a higher basis in
corn in most of our production areas, which added to our expense. For the second quarter of fiscal 2023, the average Chicago
Board of Trade (“CBOT”) daily market price was $6.78 per bushel for corn and $423 per ton for soybean meal, representing
increases of 24.8% and 25.5%, respectively, compared to the average daily CBOT prices for the comparable period in the prior
year. For information about historical corn and soybean meal prices, see Part I Item I of our 2022 Annual Report.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items from our Condensed Consolidated Statements of
Operations expressed as a percentage of net sales.
Thirteen Weeks Ended
Twenty-six Weeks Ended
November 26,
2022
November 27,
2021
November 26,
2022
November 27,
2021
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
60.4
%
88.5
%
63.3
%
92.9
%
Gross profit
39.6
%
11.5
%
36.7
%
7.1
%
Selling, general and administrative
7.2
%
12.5
%
7.6
%
13.3
%
(Gain) loss on disposal of fixed assets
—
%
(0.5)
%
—
%
(0.3)
%
Operating income (loss)
32.4
%
(0.5)
%
29.1
%
(5.9)
%
Total other income, net
0.3
%
0.7
%
0.3
%
1.2
%
Income (loss) before income taxes
32.7
%
0.2
%
29.4
%
(4.7)
%
Income tax expense (benefit)
8.0
%
(0.2)
%
7.1
%
(2.3)
%
Net income (loss)
24.7
%
0.4
%
22.3
%
(2.4)
%
NET SALES
Total net sales for the second quarter of fiscal 2023 were a record $801.7 million compared to $381.7 million for the same
period of fiscal 2022.
Net shell egg sales represented 96.5% and 97.0% of total net sales for the second quarters of fiscal 2023 and 2022, respectively.
Shell egg sales classified as “Other” represent sales of hard-cooked eggs and other miscellaneous byproducts included with our
shell egg operations.
Total net sales for the twenty-six weeks ended November 26, 2022 were $1.46 billion, compared to $706.7 million for the
comparable period of fiscal 2022.
Net shell egg sales represented 96.2% and 97.1% of total net sales for the twenty-six weeks ended November 26, 2022 and
November 27, 2021, respectively.
21
The table below presents an analysis of our conventional and specialty shell egg sales (in thousands, except percentage data):
Thirteen Weeks Ended
Twenty-six Weeks Ended
November 26, 2022
November 27, 2021
November 26, 2022
November 27, 2021
Total net sales
$
801,700
$
381,723
$
1,460,044
$
706,709
Conventional
$
541,917
70.1
%
$
221,142
59.7
%
$
967,506
69.0
%
$
403,172
58.8
%
Specialty
227,778
29.4
%
146,917
39.7
%
428,598
30.5
%
279,375
40.7
%
Egg sales, net
769,695
99.5
%
368,059
99.4
%
1,396,104
99.5
%
682,547
99.5
%
Other
3,953
0.5
%
2,263
0.6
%
8,248
0.6
%
3,395
0.5
%
Net shell egg sales
$
773,648
100.0
%
$
370,322
100.0
%
$
1,404,352
100.1
%
$
685,942
100.0
%
Net shell egg sales as a
percent of total net sales
96.5
%
97.0
%
96.2
%
97.1
%
Dozens sold:
Conventional
187,976
66.2
%
192,135
71.3
%
367,688
65.7
%
376,003
71.7
%
Specialty
96,110
33.8
%
77,420
28.7
%
191,715
34.3
%
148,171
28.3
%
Total dozens sold
284,086
100.0
%
269,555
100.0
%
559,403
100.0
%
524,174
100.0
%
Net average selling price
per dozen:
Conventional
$
2.883
$
1.151
$
2.631
$
1.072
Specialty
$
2.370
$
1.898
$
2.236
$
1.885
All shell eggs
$
2.709
$
1.365
$
2.496
$
1.302
Egg products sales:
Egg products net sales
28,052
11,401
55,692
20,767
Pounds sold
15,702
16,009
32,204
31,278
Net average selling price
per pound
1.787
0.712
1.729
0.664
Shell egg net sales
Second Quarter – Fiscal 2023 vs. Fiscal 2022
-
In the second quarter of fiscal 2023, conventional egg sales increased $320.8 million, or 145.0%, compared to the
second quarter of fiscal 2022, primarily due to the increase in the price s for conventional shell eggs, slightly offset by
a decrease in volume of conventional shell eggs sold. Changes in prices resulted in a $325.6 million increase and the
change in volume resulted in a $4.8 million decrease in net sales, respectively.
-
Conventional egg prices increased in the second quarter of fiscal 2023 primarily due to decreased supply caused by the
HPAI outbreak, discussed above, while we experienced continued good customer demand (and typical seasonal
consumer demand).
-
As a result of the independently quoted wholesale market prices for conventional eggs reaching near-record highs, the
average selling price for conventional eggs exceeded the average selling price for specialty eggs in the second quarter
of fiscal 2023, which has occurred for the past three quarters but is atypical historically. Conventional egg prices
generally respond more quickly to market conditions as we sell the majority of our conventional shell eggs based on
formulas that adjust periodically and take into account, in varying ways, independently quoted regional wholesale
market prices for shell eggs or formulas related to our costs of production. The majority of our specialty eggs are
typically sold at prices and terms negotiated directly with customers and therefore do not fluctuate as much as
conventional pricing.
-
Specialty egg sales increased $80.9 million, or 55.0%, in the second quarter of fiscal 2023 compared to the second
quarter of fiscal 2022, primarily due to a 24.9% increase in the prices for specialty eggs, which resulted in a $45.4
million increase in net sales and a 24.1% increase in the volume of specialty eggs sold, which resulted in a $35.5
million increase in net sales.
22
-
Net average selling price of specialty eggs increased in response to rising feed and other input costs as well as current
market conditions due to HPAI.
-
Demand for specialty eggs increased as conventional egg prices rose. Our sales volume benefited as we produced 11%
more specialty eggs in the second quarter of fiscal 2023 versus the prior-year period, through use of our higher cage-
free production capacity and better utilization of that capacity.
-
Cage-free egg sales for the second quarter of fiscal 2023 represented 18.2% of our total net shell egg sales versus
22.4% for the same prior year period due to the higher conventional egg prices. Cage-free dozens sold increased
47.4% in the second quarter of fiscal 2023 as compared to the second quarter of fiscal 2022.
Twenty-six weeks – Fiscal 2023 vs. Fiscal 2022
-
For the twenty-six weeks ended November 26, 2022, conventional egg sales increased $564.3 million or 140.0%
compared to the same period of fiscal 2022, primarily due to the increase in the prices for conventional shell eggs,
slightly offset by the decrease in the volume of conventional eggs sold. Changes in prices resulted in a $573.2 million
increase and the change in volume resulted in a $9.0 million decrease in net sales, respectively.
-
Specialty egg sales increased $149.2 million, or 53.4%, for the twenty-six weeks ended November 26, 2022 compared
to the same period of fiscal 2022, primarily due to a 29.4% increase in the volume of specialty dozens sold. The
volume of specialty dozens sold increased mainly due to the higher conventional egg prices. Change in volume
resulted in a $82.1 million increase and changes in specialty egg price resulted in a $67.3 million increase in net sales,
respectively.
Egg products net sales
Second Quarter – Fiscal 2023 vs. Fiscal 2022
-
Egg products net sales increased $16.7 million or 146.0% for the second quarter of fiscal 2023 compared to the same
period of fiscal 2022, primarily due to a 151.0% selling price increase, which had a $16.9 million positive impact on
net sales.
-
Our egg products net average selling price increased in the second quarter of fiscal 2023, compared to the second
quarter of fiscal 2022 as the supply of shell eggs used to produce egg products decreased due to the HPAI outbreak
that started in February 2022.
Twenty-six weeks – Fiscal 2023 vs. Fiscal 2022
-
Egg products net sales increased $34.9 million or 168.2%, primarily due to a 160.4% selling price increase compared
to the first twenty-six weeks of fiscal 2022, which had a $34.3 million positive impact on net sales.
-
Our egg products net average selling price increased in the twenty-six weeks ended November 26, 2022, compared to
the same period in fiscal 2022 as the supply of shell eggs used to produce egg products decreased due to the HPAI
outbreak that started in February 2022.
COST OF SALES
Costs of sales for the second quarter of fiscal 2023 were $483.9 million compared to $338.0 million for the same period of
fiscal 2022.
Cost of sales consists of costs directly related to producing, processing and packing shell eggs, purchases of shell eggs from
outside producers, processing and packing of liquid and frozen egg products and other non-egg costs. Farm production costs are
those costs incurred at the egg production facility, including feed, facility, hen amortization and other related farm production
costs.
23
The following table presents the key variables affecting our cost of sales (in thousands, except cost per dozen data):
Thirteen Weeks Ended
Twenty-six Weeks Ended
November 26,
2022
November 27,
2021
%
Change
November 26,
2022
November 27,
2021
%
Change
Cost of Sales:
Farm production
$
276,008
$
221,971
24.3
%
$
542,659
$
429,466
26.4
%
Processing, packaging,
and warehouse
83,639
69,474
20.4
165,056
134,533
22.7
Egg purchases and other
(including change in
inventory)
97,973
36,859
165.8
166,271
74,832
122.2
Total shell eggs
457,620
328,304
39.4
873,986
638,831
36.8
Egg products
26,231
9,672
171.2
50,719
17,486
190.1
Total
$
483,851
$
337,976
43.2
%
$
924,705
$
656,317
40.9
%
Farm production costs
(per dozen produced)
Feed
$
0.685
$
0.529
29.5
%
$
0.676
$
0.537
25.9
%
Other
$
0.386
$
0.349
10.6
%
$
0.383
$
0.351
9.1
%
Total
$
1.071
$
0.878
22.0
%
$
1.059
$
0.888
19.3
%
Outside egg purchases
(average cost per dozen)
$
3.14
$
1.56
101.3
%
$
2.88
$
1.45
98.6
%
Dozens produced
261,358
256,786
1.8
%
519,012
493,244
5.2
%
Percent produced to sold
92.0%
95.3%
(3.5)
%
92.8%
94.1%
(1.4)
%
Farm Production
Second Quarter – Fiscal 2023 vs. Fiscal 2022
-
Feed costs per dozen produced increased 29.5% in the second quarter of fiscal 2023 compared to the second quarter of
fiscal 2022. This increase was primarily due to increased prices for corn, our primary feed ingredient.
-
For the second quarter of fiscal 2023, the average daily CBOT market price was $6.78 per bushel for corn and $423
per ton of soybean meal representing increases of 24.8% and 25.5%, respectively, as compared to the average daily
CBOT prices for the second quarter of fiscal 2022.
-
Other farm production costs increased due to higher facility and flock amortization, primarily from higher feed costs,
which began to rise in our third quarter of fiscal 2021 due to increased prices discussed above, and which remained
high in the second quarter of fiscal 2023. Feed costs are capitalized in our flocks during pullet production and
increased our amortization expense.
Twenty-six weeks – Fiscal 2023 vs. Fiscal 2022
-
Feed costs per dozen produced increased 25.9% in the twenty-six weeks ended November 26, 2022 compared to the
same period of fiscal 2021, primarily due to higher feed ingredient prices.
-
Other farm production costs increased due to higher facility and flock amortization, primarily from higher feed costs,
which began to rise in our third quarter of fiscal 2021 due to increased prices discussed above, and which remained
high in the second quarter of fiscal 2023. Feed costs are capitalized in our flocks during pullet production and
increased our amortization expense.
Supplies of corn and soybean remained tight relative to demand in the second quarter of fiscal 2023, as evidenced by a low
stock-to-use ratio for corn, as a result of weather-related shortfalls in production and yields, ongoing disruptions related to the
COVID-19 global pandemic and the Russia-Ukraine war and its impact on the export markets . Additionally, basis levels for
corn ran significantly higher in our area of operations compared to our prior year second fiscal quarter, adding to our expense.
24
For fiscal 2023, we expect continued corn and soybean upward pricing pressures and further market volatility to affect feed
costs.
Processing, packaging, and warehouse
Second Quarter – Fiscal 2023 vs. Fiscal 2022
-
Cost of packaging materials increased 38.3 % compared to the second quarter of fiscal 2022 due to rising inflation and
labor costs.
-
Labor costs increased 49.2% due to wage increases and increased use of contract labor in response to labor shortages .
-
Dozens processed increased 5.4% compared to the second quarter of fiscal 2022, which resulted in a $4.0 million
increase in costs.
Twenty-six weeks – Fiscal 2023 vs. Fiscal 2022
-
Cost of packaging materials increased 26.7% compared to the twenty-six weeks ended November 27, 2021 due to
rising inflation and labor costs.
-
Labor costs increased 30.3% due to wage increases in response to labor shortages, primarily due to the pandemic and
its effects.
-
Dozens processed increased 7.0% compared to the twenty-six weeks ended November 27, 2021, which resulted in a
$9.9 million increase in costs.
Egg purchases and other (including change in inventory)
Second Quarter – Fiscal 2023 vs. Fiscal 2022
-
Costs in this category increased primarily due to higher egg prices as well as an increase in the volume of outside egg
purchases, causing the percentage of produced to sold to decrease to 92.0% from 95.3%.
Twenty-six weeks – Fiscal 2023 vs. Fiscal 2022
-
Costs in this category increased primarily due to higher egg prices as well as an increase in the volume of outside egg
purchases, as our percentage of produced to sold decreased to 92.8% from 94.1%.
GROSS PROFIT
Gross profit for the second quarter of fiscal 2023 was $317.8 million compared to $43.7 million for the same period of fiscal
2022. The increase of $274.1 million was primarily due to higher egg prices as well as the increased volume of specialty eggs
sold, partially offset by the increased cost of feed ingredients and processing, packaging and warehouse costs.
Gross profit for the twenty-six weeks ended November 26, 2022 was $535.3 million compared to $50.4 million for the same
period of fiscal 2022. The increase of $484.9 million was primarily due to higher egg prices as well as the increased volume of
specialty eggs sold, partially offset by the increased cost of feed ingredients and processing, packaging and warehouse costs.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses ("SGA") include costs of marketing, distribution, accounting and corporate
overhead. The following table presents an analysis of our SGA expenses (in thousands):
Thirteen Weeks Ended
November 26, 2022
November 27, 2021
$ Change
% Change
Specialty egg expense
$
14,673
$
14,262
$
411
2.9
%
Delivery expense
18,175
14,395
3,780
26.3
%
Payroll, taxes and benefits
13,827
11,303
2,524
22.3
%
Stock compensation expense
987
975
12
1.2
%
Other expenses
10,290
6,845
3,445
50.3
%
Total
$
57,952
$
47,780
$
10,172
21.3
%
25
Second Quarter – Fiscal 2023 vs. Fiscal 2022
Specialty egg expense
-
Specialty egg expense, which includes franchise fees, advertising and promotion costs, generally aligns with specialty
egg volumes, which were up 24.1% for the second quarter of fiscal 2023 compared to the same period of fiscal 2022.
However, our specialty egg expense only increased by 2.9%, primarily due to increased sales to other Eggland’s Best,
Inc. (“EB”) franchisees, including unconsolidated affiliates, Specialty Eggs, LLC and Southwest Specialty Eggs, LLC.
These franchisees were responsible for the franchise fees, advertising and promotion costs associated with those sales,
which resulted in reduced costs for us.
Delivery expense
-
The increased delivery expense is primarily due to the increase in contract trucking.
Payroll, taxes and benefits expense
-
The increase in payroll, taxes and benefits expense is due to an increase in the accrual for anticipated performance-
based bonuses.
Other expense
-
The increase in other expense is primarily due to increased legal expenses of approximately $2.6 million in the second
quarter of fiscal 2023 compared to the second quarter of fiscal 2022.
Twenty-six Weeks Ended
November 26, 2022
November 27, 2021
$ Change
% Change
Specialty egg expense
$
27,740
$
27,977
$
(237)
(0.8)
%
Delivery expense
38,091
28,331
9,760
34.4
%
Payroll, taxes and benefits
24,814
21,242
3,572
16.8
%
Stock compensation expense
2,012
1,976
36
1.8
%
Other expenses
18,902
14,779
4,123
27.9
%
Total
$
111,559
$
94,305
$
17,254
18.3
%
Twenty-six weeks – Fiscal 2022 vs. Fiscal 2021
Specialty egg expense
-
Specialty egg expense, which includes franchise fees, advertising and promotion costs, generally aligns with specialty
egg volumes, which were up 29.4% for fiscal 2023 compared to fiscal 2022. However, our specialty egg expense
decreased by 0.8%, primarily due to increased sales to other Eggland’s Best, Inc. (“EB”) franchisees, including
unconsolidated affiliates, Specialty Eggs, LLC and Southwest Specialty Eggs, LLC. Additionally, the higher prices for
conventional eggs and the comparatively lower prices for specialty eggs diminished the need to promote specialty
eggs; as a result, EB temporarily reduced the related franchise fees for certain specialty egg products to encourage
continued production of these products.
Delivery expense
-
The increased delivery expense is primarily due to the increase in fuel and labor costs for both our fleet and contract
trucking.
Payroll, taxes and benefits expense
-
The increase in payroll, taxes and benefits expense is primarily due to an increase in the accrual for anticipated
performance-based bonuses and increased wages for all employees due to the inflationary market.
Other expenses
-
The increase in other expense is primarily due to increased legal expenses of approximately $3.5 million.
OPERATING INCOME (LOSS)
For the second quarter of fiscal 2023, we recorded operating income of $259.9 million compared to operating loss of $2.1
million for the same period of fiscal 2022.
26
For the twenty-six weeks ended November 26, 2022, we recorded an operating income of $423.7 million compared to an
operating loss of $41.7 million for the same period of fiscal 2022.
OTHER INCOME (EXPENSE)
Total other income (expense) consists of items not directly charged or related to operations, such as interest income and
expense, royalty income, equity income or loss of unconsolidated entities, and patronage income, among other items.
For the second quarter of fiscal 2023, we earned $2.1 million of interest income compared to $207 thousand for the same period
of fiscal 2022. The increase resulted from significantly higher investment balances. The Company recorded interest expense of
$143 thousand and $78 thousand for the second quarters ended November 26, 2022 and November 27, 2021, respectively.
For the twenty-six weeks ended November 26, 2022, we earned $3.1 million of interest income compared to $497 million for
the same period of fiscal 2022. The increase resulted from significantly higher investment balances. The Company recorded
interest expense of $291 thousand and $136 thousand for the twenty-six weeks ended November 26, 2022 and November 27,
2021, respectively.
Other, net for the second quarter ended November 26, 2022, was income of $1.1 million compared to income of $1.9 million
for the same period of fiscal 2022.
Other, net for the twenty-six weeks ended November 26, 2022, was income of $1.3 million compared to income of $7.0 million
for the same period of fiscal 2022. The majority of the decrease is due to our acquisition in fiscal 2022 of the remaining 50%
membership interest in Red River Valley Egg Farm, LLC (“Red River”) as we recognized a $4.5 million gain due to the
remeasurement of our equity investment, along with the $1.4 million payment received in fiscal 2022 related to review and
adjustment of our various marketing agreements.
INCOME TAXES
For the second quarter of fiscal 2023, pre-tax income was $262.2 million compared to $468 thousand for the same period of
fiscal 2022. We recorded income tax expense of $64 million for the second quarter of fiscal 2023, which reflects an effective
tax rate of 24.4%. We recorded an income tax benefit of $677 thousand in the prior year period which includes a $520
thousand discrete tax benefit related to the Internal Revenue Service (IRS) adjustments associated with the Company’s
previously recognized research and development tax benefits.
For the twenty-six weeks ended November 26, 2022, pre-tax income was $427.7 million compared to a pre-tax loss of $33.4
million for the same period of fiscal 2022. We recorded income tax expense of $104.3 million which reflects an effective tax
rate of 24.4%. We recorded an income tax benefit of $16.5 million in the prior year period, which includes the discrete tax
benefit of $8.3 million in connection with the Red River acquisition. Excluding the discrete tax benefit, income tax benefit for
the comparable period of fiscal 2022 was $8.2 million with an adjusted effective tax rate of 24.6%.
Our effective tax rate differs from the federal statutory income tax rate due to state income taxes, certain federal tax credits and
certain items included in income for financial reporting purposes that are not included in taxable income for income tax
purposes, including tax exempt interest income, certain nondeductible expenses and net income or loss attributable to our
noncontrolling interest.
NET INCOME ATTRIBUTABLE TO CAL-MAINE FOODS, INC.
Net income attributable to Cal-Maine Foods, Inc. for the second quarter ended November 26, 2022, was $198.6 million, or
$4.08 per basic and $4.07 per diluted common share, compared to net income attributable to Cal-Maine Foods, Inc. of $1.2
million or $0.02 per basic and diluted common share for the same period of fiscal 2022.
Net income attributable to Cal-Maine Foods, Inc. for the twenty-six weeks ended November 26, 2022, was $323.9 million, or
$6.66 per basic and $6.63 per diluted share, compared to net loss of $16.9 million or $0.34 per basic and diluted share for the
same period of fiscal 2022.
27
LIQUIDITY AND CAPITAL RESOURCES
Working Capital and Current Ratio
Our working capital at November 26, 2022 was $667.5 million, compared to $476.8 million at May 28, 2022. The calculation
of working capital is defined as current assets less current liabilities. Our current ratio was 3.2 at November 26, 2022, compared
with 3.6 at May 28, 2022. The current ratio is calculated by dividing current assets by current liabilities.
Cash Flows from Operating Activities
For the twenty-six weeks ended November 26, 2022, $344.8 million in net cash was provided by operating activities, compared
to $15.5 million used by operating activities for the comparable period in fiscal 2022. The increase in cash flow from operating
activities resulted primarily from higher selling prices for conventional and specialty eggs as well as increased volume of
specialty egg sales, partially offset by increased costs of feed ingredients and processing, packaging and warehouse costs
compared to the prior-year period..
Cash Flows from Investing Activities
We continue to invest in our facilities, with $59.7 million used to purchase property, plant and equipment for the twenty-six
weeks ended November 26, 2022, compared to $28.6 million in the same period of fiscal 2022. Purchases of investments were
$152.4 million in the second quarter of fiscal 2023, compared to $26.4 million in fiscal 2022. The increase in purchases of
investments is primarily due to the increased cash provided by operating activities noted above.
Cash Flows from Financing Activities
We paid dividends of $78.4 million for the twenty-six weeks ended November 26, 2022 compared to no dividends for the prior
year period.
As of November 26, 2022, cash increased $119.6 million since May 28, 2022, compared to a decrease of $41.9 million during
the same period of fiscal 2022.
Credit Facility
We had no long-term debt outstanding at November 26, 2022 or May 28, 2022. On November 15, 2021, we entered into a
credit agreement that provides for a senior secured revolving credit facility (the “Credit Facility”), in an initial aggregate
principal amount of up to $250 million with a five-year term. As of November 26, 2022, no amounts were borrowed under the
Credit Facility. We have $4.1 million in outstanding standby letters of credit, issued under our Credit Facility for the benefit of
certain insurance companies. Refer to Part II Item 8, Notes to the Financial Statements, Note 10 – Credit Facility included in
our 2022 Annual Report for further information regarding our long-term debt.
Material Cash Requirements
We continue to monitor the increasing demand for cage-free eggs and to engage with our customers in efforts to achieve a
smooth transition toward their announced timelines for cage-free egg sales. The following table presents material construction
projects approved as of November 26, 2022 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of November
26, 2022
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2023
$
131,932
117,056
14,876
Cage-Free Layer & Pullet Houses
Fiscal 2023
24,640
23,325
1,315
Cage-Free Layer & Pullet Houses
Fiscal 2024
42,591
2,057
40,534
Cage-Free Layer & Pullet Houses
Fiscal 2025
95,806
22,526
73,280
$
294,969
$
164,964
$
130,005
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.
28
IMPACT OF RECENTLY ISSUED/ADOPTED ACCOUNTING STANDARDS
For information on changes in accounting principles and new accounting policies, see
CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates are those estimates made in accordance with U.S. generally accepted accounting principles that
involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our
financial condition or results of operations. There have been no changes to our critical accounting estimates identified in our
2022 Annual Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk during the twenty-six weeks ended November 26, 2022
from the information provided in Part II Item 7A Quantitative and Qualitative Disclosures About Market Risk in our 2022
Annual Report.
ITEM 4. CONTROLS
AND
PROCEDURES
Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed
by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that
we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive
and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding
required disclosure. Based on an evaluation of our disclosure controls and procedures conducted by our Chief Executive Officer
and Chief Financial Officer, together with other financial officers, such officers concluded that our disclosure controls and
procedures were effective as of November 26, 2022 at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended November 26, 2022
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
29
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to the discussion of certain legal proceedings involving the Company and/or its subsidiaries in (i) our 2022 Annual
Report, Part I Item 3 Legal Proceedings, and Part II Item 8, Notes to Consolidated Financial Statements and Supplementary
Data, Note 18: Commitments and Contingencies, and (ii) in this Quarterly Report in
of the Notes to Condensed Consolidated Financial Statements, which discussions are incorporated herein by reference.
ITEM 1A. RISK
FACTORS
There have been no material changes in the risk factors previously disclosed in the Company’s 2022 Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no purchases of our Common Stock made by or on behalf of our Company or any affiliated purchaser during the
second quarter of fiscal 2023.
ITEM 6. EXHIBITS
Exhibits
No.
Description
3.1
3.2
31.1*
31.2*
32**
101.SCH*+
Inline XBRL Taxonomy Extension Schema Document
101.CAL*+
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*+
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*+
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*+
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Filed herewith as an Exhibit.
**
Furnished herewith as an Exhibit.
+
Submitted electronically with this Quarterly Report.
30
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:
December 28, 2022
/s/ Max P. Bowman
Max P. Bowman
Vice President, Chief Financial Officer
(Principal Financial Officer)
Date:
December 28, 2022
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)