CAL-MAINE FOODS INC - Quarter Report: 2023 February (Form 10-Q)
1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
10-Q
☑
For the quarterly period ended
February 25, 2023
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
44,185,774
4,800,000
value, outstanding as of March 28, 2023.
2
INDEX
Page
Number
Part I.
Financial Information
Item 1.
Item 2.
Item 3.
Item 4.
Part
II.
Other Information
Item 1.
Item 1A.
Item 2.
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)
February 25, 2023
May 28, 2022
Assets
Current assets:
Cash and cash equivalents
$
221,614
$
59,084
Investment securities available-for-sale
423,418
115,429
Trade and other receivables, net
206,920
177,257
Income tax receivable
42,947
42,147
Inventories
290,869
263,316
Prepaid expenses and other current assets
7,599
4,286
Total current assets
1,193,367
661,519
Property, plant & equipment, net
712,512
677,796
Investments in unconsolidated entities
16,146
15,530
Goodwill
44,006
44,006
Intangible assets, net
16,484
18,131
Other long-term assets
9,968
10,507
Total Assets
$
1,992,483
$
1,427,489
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
138,617
$
122,331
Accrued income taxes payable
66,723
25,687
Dividends payable
107,720
36,656
Total current liabilities
313,060
184,674
Other noncurrent liabilities
9,715
10,274
Deferred income taxes, net
134,820
128,196
Total liabilities
457,595
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
70,977
67,989
Retained earnings
1,497,325
1,065,854
Accumulated other comprehensive loss, net of tax
(3,067)
(1,596)
Common stock in treasury at cost –
26,075
26,121
shares at May 28, 2022
(29,996)
(28,447)
Total Cal-Maine Foods, Inc. stockholders’ equity
1,535,990
1,104,551
Noncontrolling interest in consolidated entity
(1,102)
(206)
Total stockholders’ equity
1,534,888
1,104,345
Total Liabilities and Stockholders’ Equity
$
1,992,483
$
1,427,489
See Notes to Condensed Consolidated Financial Statements.
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 25, 2023
February 26, 2022
February 25, 2023
February 26, 2022
Net sales
$
997,493
$
477,485
$
2,457,537
$
1,184,195
Cost of sales
534,467
385,903
1,459,172
1,042,221
Gross profit
463,026
91,582
998,365
141,974
Selling, general and administrative
58,489
52,686
170,048
146,991
Gain on insurance recoveries
(3,220)
(1,095)
(3,220)
(3,225)
(Gain) loss on disposal of fixed assets
(26)
421
36
370
Operating income (loss)
407,783
39,570
831,501
(2,162)
Other income (expense):
Interest income, net
6,126
79
8,959
440
Royalty income
426
326
1,198
877
Patronage dividends
10,239
10,120
10,239
10,120
Equity income of unconsolidated
entities
1,786
1,809
943
2,208
Other, net
(1,473)
1,144
(205)
8,169
Total other income, net
17,104
13,478
21,134
21,814
Income before income taxes
424,887
53,048
852,635
19,652
Income tax expense (benefit)
102,118
13,594
206,438
(2,921)
Net income
322,769
39,454
646,197
22,573
Less: Loss attributable to noncontrolling
interest
(450)
(63)
(896)
(91)
Net income attributable to Cal-Maine
Foods, Inc.
$
323,219
$
39,517
$
647,093
$
22,664
Net income per common share:
Basic
$
6.64
$
0.81
$
13.31
$
0.46
Diluted
$
6.62
$
0.81
$
13.25
$
0.46
Weighted average shares outstanding:
Basic
48,653
48,886
48,634
48,888
Diluted
48,842
49,036
48,832
49,035
See Notes to Condensed Consolidated Financial Statements.
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
Comprehensive Income
(In thousands)
(Unaudited)
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 25, 2023
February 26, 2022
February 25, 2023
February 26, 2022
Net income
$
322,769
39,454
646,197
22,573
Other comprehensive income (loss), before
tax:
Unrealized holding gain (loss) on available-
for-sale securities, net of reclassification
adjustments
26
(551)
(1,945)
(1,130)
Income tax benefit (expense) related to
items of other comprehensive income
(6)
134
474
275
Other comprehensive income (loss), net of tax
20
(417)
(1,471)
(855)
Comprehensive income
322,789
39,037
644,726
21,718
Less: Comprehensive loss attributable to the
noncontrolling interest
(450)
(63)
(896)
(91)
Comprehensive income attributable to Cal-
Maine Foods, Inc.
$
323,239
$
39,100
$
645,622
$
21,809
See Notes to Condensed Consolidated Financial Statements.
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Thirty-nine Weeks Ended
February 25, 2023
February 26, 2022
Cash flows from operating activities:
Net income
$
646,197
$
22,573
Depreciation and amortization
53,198
50,996
Deferred income taxes
7,098
(3,861)
Gain on insurance recoveries
(3,220)
(3,225)
Net proceeds from insurance settlement - business interruption
3,220
—
Other adjustments, net
16
(45,659)
Net cash provided by operations
706,509
20,824
Cash flows from investing activities:
Purchases of investment securities
(442,583)
(47,135)
Sales and maturities of investment securities
132,686
76,377
Investment in unconsolidated entities
(1,673)
(3,000)
Distributions from unconsolidated entities
—
400
Acquisition of business, net of cash acquired
—
(44,823)
Purchases of property, plant and equipment
(86,168)
(49,170)
Net proceeds from insurance settlement - property, plant and equipment
—
5,380
Net proceeds from disposal of property, plant and equipment
118
661
Net cash used in investing activities
(397,620)
(61,310)
Cash flows from financing activities:
Payments of dividends
(144,559)
—
Purchase of common stock by treasury
(1,633)
(1,120)
Principal payments on finance lease
(167)
(160)
Contributions
—
3
Net cash used in financing activities
(146,359)
(1,277)
Net change in cash and cash equivalents
162,530
(41,763)
Cash and cash equivalents at beginning of period
59,084
57,352
Cash and cash equivalents at end of period
$
221,614
$
15,589
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 February 25, 2023 and February 26, 2022 included
13 weeks
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
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 Income. 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 February 25, 2023 and May
28, 2022, reserves for credit losses were $
709
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.
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.
Reclassification
Certain reclassifications were made to the fiscal 2022 financial statements to conform to the fiscal 2023 financial statement
presentation. These reclassifications had no effect on income.
Note 2 - Investment
Securities
The following represents the Company’s investment securities as of February 25, 2023 and May 28, 2022 (in thousands):
February 25, 2023
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
21,158
$
—
$
275
$
20,883
Commercial paper
95,612
—
122
95,490
Corporate bonds
138,004
—
1,664
136,340
US government and agency obligations
94,941
—
299
94,642
Asset backed securities
15,132
—
227
14,905
Treasury bills
61,215
—
57
61,158
Total current investment securities
$
426,062
$
—
$
2,644
$
423,418
Mutual funds
$
2,162
$
—
$
136
$
2,026
Total noncurrent investment securities
$
2,162
$
—
$
136
$
2,026
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 $
132.7
76.4
thirty-nine weeks ended February 25, 2023 and February 26, 2022, respectively. Gross realized gains for the thirty-nine weeks
ended February 25, 2023 and February 26, 2022 were $
38
181
the thirty-nine weeks ended February 25, 2023 and February 26, 2022 were $
64
67
were
no
9
Actual maturities may differ from contractual maturities as some borrowers have the right to call or prepay obligations with or
without penalties. Contractual maturities of current investments at February 25, 2023 are as follows (in thousands):
Estimated Fair Value
Within one year
$
345,765
1-5 years
77,653
Total
$
423,418
Noncurrent
Proceeds from sales and maturities of noncurrent investment securities were $
1.8
4.9
weeks ended February 25, 2023 and February 26, 2022, respectively. Gross realized gains for the thirty-nine weeks
ended February 25, 2023 and February 26, 2022 were $
6
2.2
thirty-nine weeks ended February 25, 2023 were $
66
no
ended February 26, 2022.
Note 3 - Fair Value Measurements
The Company is required to categorize both financial and nonfinancial assets and liabilities based on the following fair value
hierarchy. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated,
knowledgeable, and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would
be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to
settle the liability with the creditor.
•
Level 1
•
Level 2
directly or indirectly, including:
◦
Quoted prices for similar assets or liabilities in active markets
◦
Quoted prices for identical or similar assets in non-active markets
◦
Inputs other than quoted prices that are observable for the asset or liability
◦
Inputs derived principally from or corroborated by other observable market data
•
Level 3
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded at cost are as follows:
Cash and cash equivalents, accounts receivable, and accounts payable:
short maturity of these instruments.
Lease obligations:
10
Assets and Liabilities Measured at Fair Value on a Recurring Basis
In accordance with the fair value hierarchy described above, the following table shows the fair value of financial assets and
liabilities measured at fair value on a recurring basis as of February 25, 2023 and May 28, 2022 (in thousands):
February 25, 2023
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
20,883
$
—
$
20,883
Commercial paper
—
95,490
—
95,490
Corporate bonds
—
136,340
—
136,340
US government and agency obligations
—
94,642
—
94,642
Asset backed securities
—
14,905
—
14,905
Treasury bills
—
61,158
—
61,158
Mutual funds
2,026
—
—
2,026
Total assets measured at fair value
$
2,026
$
423,418
$
—
$
425,444
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 February 25, 2023 and May 28, 2022 (in thousands):
February 25, 2023
May 28, 2022
Flocks, net of amortization
$
158,209
$
144,051
Eggs and egg products
27,925
26,936
Feed and supplies
104,735
92,329
$
290,869
$
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 February
25, 2023 and May 28, 2022 consisted of approximately
9.9
11.5
43.3
42.2
11
Note 5 - Equity
The following reflects equity activity for the thirteen and thirty-nine weeks ended February 25, 2023 and February 26, 2022 (in
thousands):
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
Thirteen Weeks Ended February 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 November
27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
$
(25)
$
997,423
Other comprehensive
loss, net of tax
—
—
—
—
(417)
—
—
(417)
Stock compensation
plan transactions
—
—
(989)
890
—
—
—
(99)
Dividends ($
0.125
per share)
Common
—
—
—
—
—
(5,518)
—
(5,518)
Class A common
—
—
—
—
—
(600)
—
(600)
Net income (loss)
—
—
—
—
—
39,517
(63)
39,454
Balance at February
26, 2022
$
703
$
48
$
(28,439)
$
66,909
$
(1,413)
$
992,523
$
(88)
$
1,030,243
12
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 ($
5.756
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
Thirty-nine Weeks Ended February 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrollin
g
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 29,
2021
$
703
$
48
$
(27,433)
$
64,044
$
(558)
$
975,977
$
—
$
1,012,781
Other comprehensive
loss, net of tax
—
—
—
—
(855)
—
—
(855)
Stock compensation
plan transactions
—
—
(1,006)
2,865
—
—
—
1,859
Contributions
—
—
—
—
—
—
3
3
Dividends ($
0.125
per share)
Common
—
—
—
—
—
(5,518)
—
(5,518)
Class A common
—
—
—
—
—
(600)
—
(600)
Net income (loss)
—
—
—
—
—
22,664
(91)
22,573
Balance at February
26, 2022
$
703
$
48
$
(28,439)
$
66,909
$
(1,413)
$
992,523
(88)
$
1,030,243
Note 6 - Net Income per Common Share
Basic net income per share is based on the weighted average Common Stock and Class A Common Stock outstanding. Diluted
net income per share is based on weighted-average common shares outstanding during the relevant period adjusted for the
dilutive effect of share-based awards.
13
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
February 25, 2023
February 26, 2022
February 25, 2023
February 26, 2022
Numerator
Net income
$
322,769
$
39,454
$
646,197
$
22,573
Less: Loss attributable to noncontrolling
interest
(450)
(63)
(896)
(91)
Net income attributable to Cal-Maine
Foods, Inc.
$
323,219
$
39,517
$
647,093
$
22,664
Denominator
Weighted-average common shares
outstanding, basic
48,653
48,886
48,634
48,888
Effect of dilutive restricted shares
189
150
198
147
Weighted-average common shares
outstanding, diluted
48,842
49,036
48,832
49,035
Net income per common share attributable to
Cal-Maine Foods, Inc.
Basic
$
6.64
$
0.81
$
13.31
$
0.46
Diluted
$
6.62
$
0.81
$
13.25
$
0.46
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 primarily 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
Thirty-nine Weeks Ended
February 25, 2023
February 26, 2022
February 25, 2023
February 26, 2022
Conventional shell egg sales
$
689,022
$
280,633
$
1,656,528
$
683,805
Specialty shell egg sales
272,205
182,945
700,803
462,320
Egg products
32,582
12,749
88,274
33,516
Other
3,684
1,158
11,932
4,554
$
997,493
$
477,485
$
2,457,537
$
1,184,195
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 February 25, 2023 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 $
3.1
3.0
February 26, 2022, 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 February 25, 2023 of $
8.4
average period of
2.3
16: Stock Compensation Plans in our 2022 Annual Report for further informat ion on our stock compensation plans.
The Company’s restricted share activity for the thirty-nine weeks ended February 25, 2023 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 28, 2022
317,844
$
39.12
Granted
84,969
54.10
Vested
(97,954)
38.25
Forfeited
(8,480)
39.22
Outstanding, February 25, 2023
296,379
$
43.70
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 February 6, 2023, the State of Texas filed their response to defendant’s petition for
review. On February 21, 2023, the Company and WCF filed their reply brief in support of defendant’s petition for review.
Appellate briefs are not yet due. 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 January 9, 2023, the court entered an order and final judgement granting the Company’s motion to
dismiss.
On February 8, 2023, the plaintiffs appealed the lower court’s judgement to the United States Court of Appeals for the Fifth
Circuit, Case No. 23-50112. The parties are to file their respective appellate briefs, but they are not yet due. 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
16
producers. The Egg Products Plaintiffs seek to enjoin the Company and other defendants from engaging in antitrust violations
and seek treble money damages. On May 2, 2022, the court set trial for October 24, 2022, but on September 20, 2022, the court
cancelled the trial date due to COVID-19 protocols and converted the trial date to a status hearing to reschedule the jury trial.
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., 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 by March 17, 2023. On March 17, 2023, a status hearing was held, and the court
extended the time period by which the parties must reach an agreement to June 16, 2023. The defendants have been conferring
with the State regarding appropriate remedies. 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 early stage
of negotiations with the State on appropriate remedies, and uncertainty regarding what our proportionate share of any remedy
would be, although we believe that our share compared to the other defendants is small.
Other Matters
In addition to the above, the Company is involved in various other claims and litigation incidental to its business. Although the
outcome of these matters cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that
the final outcome should not have a material effect on the Company’s consolidated results of operations or financial position.
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 inflation and rising interest rates, potential future impact on our business of new legislation, rules or policies,
potential outcomes of legal proceedings, and other projected operating data, including anticipated results of operations and
financial condition. Such forward-looking statements are identified by the use of words such as “believes,” “intends,”
“expects,” “hopes,” “may,” “should,” “plans,” “projected,” “contemplates,” “anticipates,” or similar words. Actual outcomes or
results could differ materially from those projected in the forward-looking statements. The forward-looking statements are
based on management’s current intent, belief, expectations, estimates, and projections regarding the Company and its
industry. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions, and other
factors that are difficult to predict and may be beyond our control. The factors that could cause actual results to differ materially
from those projected in the forward-looking statements include, among others, (i) the risk factors set forth in Part I Item 1A of
the 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 increased costs, rising inflation and rising 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, (viii) adverse results in pending litigation matters and (ix) risks relating to
the evolving COVID-19 pandemic. 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 reportable segment. We are the
largest producer and distributor of fresh shell eggs in the U.S. Our total flock of approximately 43.3 million layers and 9.9
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 customers 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.
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
18
equal, we would expect to experience lower selling prices, sales volumes and net income (and may incur net losses) in our first
and fourth fiscal quarters ending in August/September and May/June, respectively. Because of the seasonal and quarterly
fluctuations, comparisons of our sales and operating results between different quarters within a single fiscal year are not
necessarily meaningful comparisons.
We routinely fill our storage bins during harvest season when prices for feed ingredients are generally lower. To ensure
continued availability of feed ingredients, we may enter into contracts for future purchases of corn and soybean meal, and as
part of these contracts, we may lock-in the basis portion of our grain purchases several months in advance. Basis is the
difference between the local cash price for grain and the applicable futures price. A basis contract is a common transaction in
the grain market that allows us to lock-in a basis level for a specific delivery period and wait to set the futures price at a later
date. Furthermore, due to the more limited supply for organic ingredients, we may commit to purchase organic ingredients in
advance to help ensure supply. Ordinarily, we do not enter into long-term contracts beyond a year to purchase corn and soybean
meal or hedge against increases in the prices of corn and soybean meal. Corn and soybean meal are commodities and are
subject to volatile price changes due to weather, various supply and demand factors, transportation and storage costs,
speculators, agricultural, energy and trade policies in the U.S. and internationally and most recently the Russia-Ukraine war.
An important competitive advantage for Cal-Maine Foods is our ability to meet our customers’ evolving needs with a favorable
product mix of conventional and specialty eggs, including cage-free, organic and other specialty offerings, as well as egg
products. We have also enhanced our efforts to provide free-range and pasture-raised eggs that meet consumers’ evolving
choice preferences. While a small part of our current business, the free-range and pasture-raised eggs we produce and sell
represent attractive offerings to a subset of consumers, and therefore our customers, and help us continue to serve as the trusted
provider of quality food choices.
We are also focused on additional ways to enhance our 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 used by 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. MeadowCreek began operations during the third quarter of fiscal 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 calendar year 2023.
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 March
2023. The current HPAI epidemic has surpassed the prior 2014-2015 outbreak in terms of its duration and 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
March 28, 2023. The USDA division of Animal and Plant Health Inspection Service (“APHIS”) reported on March 27, 2023
that approximately 43.3 million commercial layer hens and 1.0 million pullets have been depopulated due to HPAI since
February 2022. We believe the HPAI outbreak will continue to exert downward pressure on the overall supply of eggs, and the
19
duration of those effects will depend 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 March 21, 2023, the layer hen inventory is not projected to
exceed this 328 million mark again until January of 2024. Layer hen numbers reported by the USDA as of March 1, 2023 were
312.9 million, which represents a decrease of 3.8% compared with the layer hen inventory a year ago. However, the USDA
reported that the hatch from October 2022 through February 2023 increased 4.5% as compared with the prior-year period,
indicating that layer flocks may increase in the future.
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 U.S. Supreme Court 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 in the summer of 2023. 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 announced goals to offer cage-free eggs exclusively on or before 2026,
subject in most cases to availability of supply, affordability and customer demand, among other contingencies. Some of these
customers have recently changed those goals to offer 70% cage-free eggs by the end of 2030. Our customers typically do not
commit to long-term purchases of specific quantities or types of eggs with us, and as a result, it is difficult to accurately predict
customer requirements for cage-free eggs. We are, however, engaging with our customers in an effort to achieve a smooth
transition in meeting their announced goals and needs. 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 third quarter of fiscal 2023, we recorded a gross profit of $463.0 million compared to $91.6 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 other farm production costs as well as increased processing , packaging and warehouse costs.
Our net average selling price per dozen for the third quarter of fiscal 2023 was $3.298 compared to $1. 612 in the prior-year
period. Conventional egg prices per dozen were $3.678 compared to $1.458 for the prior-year period, and specialty egg prices
per dozen were $2.616 compared to $1.923 for the prior-year period. Conventional egg prices increased in the third quarter of
fiscal 2023 primarily due to decreased supply caused by the HPAI outbreak combined with robust customer demand, which was
bolstered by the peak winter holiday season. See the discussion under the heading “HPAI” above. The daily average price for
the Urner Barry southeast large index for the third quarter of fiscal 2023 increased 129.8% from the comparable period in the
prior year. Conventional egg prices exceeding specialty egg prices has occurred for the past four 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.
20
Our total dozens sold increased 1.3% to 291.4 million dozen shell eggs for the third quarter of fiscal 2023 compared to 287.7
million dozen for the same period of fiscal 2022. For the third quarter of fiscal 2023, conventional dozens sold decreased 2.7%
and specialty dozens sold increased 9.4% as compared to the same quarter in fiscal 2022. Demand for specialty eggs increased
in the third 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.
Our farm production costs per dozen produced for the third quarter of fiscal 2023 increased 18.2%, or $0.166, compared to the
third quarter of fiscal 2022. This increase was primarily due to increased feed ingredient costs as well as increased facility costs
and higher amortization of our flocks. For the third quarter of fiscal 2023, the average Chicago Board of Trade (“CBOT”) daily
market price was $6.67 per bushel for corn and $473 per ton for soybean meal, representing increases of 8.8% and 14.8%,
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 Income
expressed as a percentage of net sales.
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 25, 2023
February 26, 2022
February 25, 2023
February 26, 2022
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
53.6
%
80.8
%
59.4
%
88.0
%
Gross profit
46.4
%
19.2
%
40.6
%
12.0
%
Selling, general and administrative
5.9
%
11.0
%
6.9
%
12.4
%
Gain on insurance recoveries
(0.3)
%
(0.2)
%
(0.1)
%
(0.3)
%
(Gain) loss on disposal of fixed assets
—
%
0.1
%
—
%
—
%
Operating income (loss)
40.8
%
8.3
%
33.8
%
(0.1)
%
Total other income, net
1.7
%
2.8
%
0.9
%
1.8
%
Income before income taxes
42.5
%
11.1
%
34.7
%
1.7
%
Income tax expense (benefit)
10.2
%
2.8
%
8.4
%
(0.2)
%
Net income
32.3
%
8.3
%
26.3
%
1.9
%
NET SALES
Total net sales for the third quarter of fiscal 2023 were $997.5 million compared to $477.5 million for the same period of fiscal
2022.
Net shell egg sales represented 96. 7% and 97.3% of total net sales for the third quarters of fiscal 2023 and 2022, 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 February 25, 2023 were $2.46 billion, compared to $1.18 billion for the
comparable period of fiscal 2022.
Net shell egg sales represented 96.4% and 97.2% of total net sales for the thirty-nine weeks ended February 25, 2023 and
February 26, 2022, respectively.
21
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
February 25, 2023
February 26, 2022
February 25, 2023
February 26, 2022
Total net sales
$
997,493
$
477,485
$
2,457,537
$
1,184,195
Conventional
$
689,022
71.4
%
$
280,633
60.4
%
$
1,656,528
69.9
%
$
683,805
59.4
%
Specialty
272,205
28.2
%
182,945
39.4
%
700,803
29.6
%
462,320
40.2
%
Egg sales, net
961,227
99.6
%
463,578
99.8
%
2,357,331
99.5
%
1,146,125
99.6
%
Other
3,684
0.4
%
1,158
0.2
%
11,932
0.5
%
4,554
0.4
%
Net shell egg sales
$
964,911
100.0
%
$
464,736
100.0
%
$
2,369,263
100.0
%
$
1,150,679
100.0
%
Net shell egg sales as a
percent of total net sales
96.7
%
97.3
%
96.4
%
97.2
%
Dozens sold:
Conventional
187,357
64.3
%
192,511
66.9
%
555,045
65.2
%
568,511
70.0
%
Specialty
104,059
35.7
%
95,140
33.1
%
295,774
34.8
%
243,310
30.0
%
Total dozens sold
291,416
100.0
%
287,651
100.0
%
850,819
100.0
%
811,821
100.0
%
Net average selling price
per dozen:
Conventional
$
3.678
$
1.458
$
2.984
$
1.203
Specialty
$
2.616
$
1.923
$
2.369
$
1.900
All shell eggs
$
3.298
$
1.612
$
2.771
$
1.412
Egg products sales:
Egg products net sales
32,582
12,749
88,274
33,516
Pounds sold
16,796
15,947
49,000
47,225
Net average selling price
per pound
1.940
0.799
1.802
0.710
Shell egg net sales
Third Quarter – Fiscal 2023 vs. Fiscal 2022
-
In the third quarter of fiscal 2023, conventional egg sales increased $408.4 million, or 145.5%, compared to the third
quarter of fiscal 2022, primarily due to the increase in the prices for conventional shell eggs, slightly offset by a
decrease in volume of conventional shell eggs sold. Changes in prices resulted in a $415.9 million increase and the
change in volume resulted in a $7.5 million decrease in net sales, respectively.
-
Conventional egg prices increased in the third quarter of fiscal 2023 primarily due to decreased supply caused by the
HPAI outbreak, discussed above, while customer demand, bolstered by the peak winter holiday season, remained
robust.
-
Specialty egg sales increased $89.3 million, or 48.8%, in the third quarter of fiscal 2023 compared to the third quarter
of fiscal 2022, primarily due to a 36.0% increase in the prices for specialty eggs, which resulted in a $72.1 million
increase in net sales, and a 9.4% increase in the volume of specialty eggs sold, which resulted in a $17.2 million
increase in net sales.
-
Net average selling prices 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 sold 9.4%
more specialty eggs by volume in the third quarter of fiscal 2023 versus the prior-year period, through use of our
higher cage-free production capacity.
-
Cage-free egg sales for the third quarter of fiscal 2023 represented 17.8% of our total net shell egg sales versus 24.0%
for the same prior year period due to the higher conventional egg prices causing conventional egg sales to represent a
22
higher proportion of our total sales. Cage-free dozens sold increased 14.9% in the third quarter of fiscal 2023 as
compared to the third quarter of fiscal 2022 as the higher conventional egg prices drove demand for specialty eggs and
we utilized our expanded cage-free production capacity.
Thirty-nine weeks – Fiscal 2023 vs. Fiscal 2022
-
For the thirty-nine weeks ended February 25, 2023, conventional egg sales increased $972.7 million, or 142.3%,
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 $988.5 million
increase and the change in volume resulted in a $16.2 million decrease in net sales, respectively.
-
Specialty egg sales increased $238.5 million, or 51.6%, for the thirty-nine weeks ended February 25, 2023 compared
to the same period of fiscal 2022, primarily due to a 24.7% increase in the prices for specialty eggs. Additionally, the
volume of specialty dozens sold increased 21.6% compared to the same prior year period, mainly due to the higher
conventional egg prices. Changes in specialty egg prices resulted in a $138.7 million increase in net sales and changes
in volume resulted in a $99.7 million increase, respectively.
Egg products net sales
Third Quarter – Fiscal 2023 vs. Fiscal 2022
-
Egg products net sales increased $19.8 million, or 155.6%, for the third quarter of fiscal 2023 compared to the same
period of fiscal 2022, primarily due to a 142.8% selling price increase, which had a $19.2 million positive impact on
net sales.
-
Our egg products net average selling price increased in the third quarter of fiscal 2023, compared to the third 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.
Thirty-nine weeks – Fiscal 2023 vs. Fiscal 2022
-
Egg products net sales increased $54.8 million or 163.4%, primarily due to a 153.8% selling price increase compared
to the first thirty-nine weeks of fiscal 2022, which had a $53.5 million positive impact on net sales.
-
Our egg products net average selling price increased in the thirty-nine weeks ended February 25, 2023 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 third quarter of fiscal 2023 were $534.5 million compared to $385.9 million for the same period of fiscal
2022. Cost of sales for the thirty-nine weeks ended February 25, 2023 were $1,459.2 million compared to $1,042.2 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
Thirty-nine Weeks Ended
February 25, 2023
February 26, 2022
%
Change
February 25, 2023
February 26, 2022
%
Change
Cost of Sales:
Farm production
$
280,384
$
239,389
17.1
%
$
823,043
$
668,855
23.1
%
Processing, packaging,
and warehouse
87,037
77,116
12.9
252,093
211,649
19.1
Egg purchases and other
(including change in
inventory)
135,003
59,135
128.3
301,274
133,968
124.9
Total shell eggs
502,424
375,640
33.8
1,376,410
1,014,472
35.7
Egg products
32,043
10,263
212.2
82,762
27,749
198.3
Total
$
534,467
$
385,903
38.5
%
$
1,459,172
$
1,042,221
40.0
%
Farm production costs
(per dozen produced)
Feed
$
0.679
$
0.562
20.8
%
$
0.677
$
0.546
24.0
%
Other
$
0.399
$
0.350
14.0
%
$
0.388
$
0.350
10.9
%
Total
$
1.078
$
0.912
18.2
%
$
1.065
$
0.896
18.9
%
Outside egg purchases
(average cost per dozen)
$
3.72
$
1.75
112.6
%
$
3.20
$
1.57
103.8
%
Dozens produced
263,174
264,433
(0.5)
%
782,186
757,677
3.2
%
Percent produced to sold
90.3%
91.9%
(1.7)
%
91.9%
93.3%
(1.5)
%
Farm Production
Third Quarter – Fiscal 2023 vs. Fiscal 2022
-
Feed costs per dozen produced increased 20.8% in the third quarter of fiscal 2023 compared to the third quarter of
fiscal 2022. This increase was primarily due to increased prices for corn, our primary feed ingredient. Basis levels for
corn and soybean meal ran significantly higher in our area of operations compared to our prior year third fiscal quarter,
adding to our expense.
-
For the third quarter of fiscal 2023, the average daily CBOT market price was $6.67 per bushel for corn and $473 per
ton of soybean meal, representing increases of 8.8% and 14.8%, respectively, as compared to the average daily CBOT
prices for the third quarter of fiscal 2022.
-
Other farm production costs increased due to higher facility and flock amortization. Facility costs increased due
primarily to increased labor costs. Labor costs increased 36% due to increased use of contract labor and increased
wages raised in response to labor shortages.
-
Flock amortization increased primarily from higher feed costs, which began to rise in our third quarter of fiscal 2021
due to increased feed ingredient prices discussed above, and which remained high in the third quarter of fiscal 2023.
Feed costs are capitalized in our flocks during pullet production and increased our amortization expense. We also
experienced higher amortization costs from an increase in our cage-free production, which has higher capitalized costs.
Thirty-nine weeks – Fiscal 2023 vs. Fiscal 2022
-
Feed costs per dozen produced increased 24.0% in the thirty-nine weeks ended February 25, 2023 compared to the
same period of fiscal 2022, primarily due to higher feed ingredient prices . Basis levels for corn and soybean meal ran
significantly higher in our area of operations compared to our prior year third fiscal quarter, adding to our expense.
-
Other farm production costs increased due to higher facility and flock amortization. Facility costs increased due
primarily to increased labor costs. Labor costs increased 28% due to increased use of contract labor and increased
wages raised in response to labor shortages.
24
-
Flock amortization increa sed primarily from higher capitalized feed costs as well as higher amortization costs from an
increase in our cage-free production.
Supplies of corn and soybean remained tight relative to demand in the third 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 supply chain disruptions and the
Russia-Ukraine war and its impact on the export markets. For fiscal 2023, we expect continued corn and soybean upward
pricing pressures and further market volatility to affect feed costs.
Processing, packaging, and warehouse
Third Quarter – Fiscal 2023 vs. Fiscal 2022
-
Cost of packaging materials increased 10.9% compared to the third quarter of fiscal 2022 due to rising inflation and
labor costs.
-
Labor costs increased 14.2% due to wage increases and increased use of contract labor in response to labor shortages .
Thirty-nine weeks – Fiscal 2023 vs. Fiscal 2022
-
Cost of packaging materials increased 15.5% compared to the thirty-nine weeks ended February 26, 2022 due to rising
inflation and labor costs.
-
Labor costs increased 13.7% due to wage increases in response to labor shortages, primarily due to the pandemic and
its effects.
-
Dozens processed increased 3.2% compared to the thirty-nine weeks ended February 26, 2022, which resulted in a
$7.3 million increase in costs.
Egg purchases and other (including change in inventory)
Third 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 90.3% from 91.9%.
Thirty-nine 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 91.9% from 93.3%.
GROSS PROFIT
Gross profit for the third quarter of fiscal 2023 was $463.0 million compared to $91.6 million for the same period of fiscal
2022. The increase of $371.4 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 and the decreased
volume of conventional egg sales.
Gross profit for the thirty-nine weeks ended February 25, 2023 was $998.4 million compared to $142.0 million for the same
period of fiscal 2022. The increase of $856.4 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 and
the decreased volume of conventional egg sales.
25
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
February 25, 2023
February 26, 2022
$ Change
% Change
Specialty egg expense
$
15,689
$
17,318
$
(1,629)
(9.4)
%
Delivery expense
19,453
16,440
3,013
18.3
%
Payroll, taxes and benefits
14,325
11,398
2,927
25.7
%
Stock compensation expense
1,059
1,007
52
5.2
%
Other expenses
7,963
6,523
1,440
22.1
%
Total
$
58,489
$
52,686
$
5,803
11.0
%
Third Quarter – Fiscal 2023 vs. Fiscal 2022
Specialty egg expense
-
Specialty egg expense decreased primarily due to a significant reduction in advertising costs. The higher prices for
conventional eggs and the comparatively lower prices for specialty eggs diminished the need to promote specialty eggs
in the third quarter of fiscal 2023.
Delivery expense
-
The increased delivery expense is primarily due to an increase in contract trucking expenses of approximately $2.0
million in the third quarter of fiscal 2023 compared to the third quarter of fiscal 2022.
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 inflationary pressure increasing costs.
Thirty-nine Weeks Ended
February 25, 2023
February 26, 2022
$ Change
% Change
Specialty egg expense
$
43,429
$
45,295
$
(1,866)
(4.1)
%
Delivery expense
57,544
44,771
12,773
28.5
%
Payroll, taxes and benefits
39,139
32,640
6,499
19.9
%
Stock compensation expense
3,071
2,983
88
3.0
%
Other expenses
26,865
21,302
5,563
26.1
%
Total
$
170,048
$
146,991
$
23,057
15.7
%
Thirty-nine weeks – 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 21.6% for fiscal 2023 compared to fiscal 2022. However, our specialty egg expense
decreased by 4.1%, primarily due to a significant reduction in advertising expense as well as 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.
26
Delivery expense
-
The increased delivery expense is primarily due to an increase in fuel and labor costs for both our fleet and contract
trucking. Compared to fiscal 2022, contract trucking and labor expenses increased approximately $9.2 million for
fiscal 2023.
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 $3.6 million.
OPERATING INCOME (LOSS)
For the third quarter of fiscal 2023, we recorded operating income of $407.8 million compared to $39.6 million for the same
period of fiscal 2022.
For the thirty-nine weeks ended February 25, 2023, we recorded operating income of $831.5 million compared to an operating
loss of $2.2 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 third quarter of fiscal 2023, we earned $6.3 million of interest income compared to $205 thousand for the same period
of fiscal 2022. The increase resulted from significantly higher investment balances and higher interest rates. The Company
recorded interest expense of $143 thousand and $126 thousand for the third quarters ended February 25, 2023 and February 26,
2022, respectively.
For the thirty-nine weeks ended February 25, 2023, we earned $9.4 million of interest income compared to $702 thousand for
the same period of fiscal 2022. The increase resulted from significantly higher investment balances and higher interest rates.
The Company recorded interest expense of $433 thousand and $262 thousand for the thirty-nine weeks ended February 25,
2023 and February 26, 2022, respectively.
Other, net for the third quarter ended February 25, 2023 was an expense of $1.5 million compared to income of $1.1 million for
the same period of fiscal 2022. The majority of the decrease is due to a $2 million impairment of an investment in an
unconsolidated entity in the third quarter of fiscal 2023.
Other, net for the thirty-nine weeks ended February 25, 2023 was an expense of $205 thousand compared to income of $8.2
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. Additionally, the Company recorded a $2 million impairment of an
investment in an unconsolidated entity in the third quarter of fiscal 2023.
INCOME TAXES
For the third quarter of fiscal 2023, pre-tax income was $424.9 million compared to $53.0 million for the same period of fiscal
2022. We recorded income tax expense of $102.1 million for the third quarter of fiscal 2023, which reflects an effective tax rate
of 24.0%. Income tax expense was $13.6 million for the comparable period of fiscal 2022, which reflects an effective tax rate
of 25.6%.
For the thirty-nine weeks ended February 25, 2023, pre-tax income was $852.6 million compared to $19.7 million for the same
period of fiscal 2022. We recorded income tax expense of $206.4 million, which reflects an effective tax rate of 24.2%. We
recorded an income tax benefit of $2.9 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 expense for the comparable period of
fiscal 2022 was $5.3 million with an adjusted effective tax rate of 27.3%.
27
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 third quarter ended February 25, 2023, was $323.2 million, or $6.64
per basic and $6.62 per diluted common share, compared to net income attributable to Cal-Maine Foods, Inc. of $39.5 million
or $0.81 per basic and diluted common share for the same period of fiscal 2022.
Net income attributable to Cal-Maine Foods, Inc. for the thirty-nine weeks ended February 25, 2023, was $647.1 million, or
$13.31 per basic and $13.25 per diluted share, compared to net income attributable to Cal-Maine Foods, Inc. of $22.6 million or
$0.46 per basic and diluted share for the same period of fiscal 2022.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital and Current Ratio
Our working capital at February 25, 2023 was $880.3 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 3.8 at February 25, 2023, 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 thirty-nine weeks ended February 25, 2023, $706.5 million in net cash was provided by operating activities, compared
to $20.8 million provided 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 $86.2 million used to purchase property, plant and equipment for the thirty-nine
weeks ended February 25, 2023, compared to $49.2 million in the same period of fiscal 2022. Purchases of investment
securities were $442.6 million in the third quarter of fiscal 2023, compared to $47.1 million in fiscal 2022. The increase in
purchases of investment securities is primarily due to the utilization of increased liquidity resulting from increased cash flows
provided by operating activities noted above. During the thirty-nine weeks ended February 26, 2022, we acquired the remaining
50% membership interest in Red River for $48.5 million.
Cash Flows from Financing Activities
We paid dividends of $144.6 million for the thirty-nine weeks ended February 25, 2023.
As of February 25, 2023, cash increased $162.5 million since May 28, 2022, compared to a decrease of $41.8 million during the
same period of fiscal 2022.
Credit Facility
We had no long-term debt outstanding at February 25, 2023 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 February 25, 2023, 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.
28
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 February 25, 2023 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of February
25, 2023
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses
Fiscal 2024
42,591
4,830
37,761
Cage-Free Layer & Pullet Houses
Fiscal 2025
40,099
26,350
13,749
Cage-Free Layer & Pullet Houses
Fiscal 2026
38,883
15,894
22,989
Cage-Free Layer & Pullet Houses
Fiscal 2027
56,923
13,617
43,306
$
178,496
$
60,691
$
117,805
We believe our current cash balances, investments, cash flows from operations, and Credit Facility will be sufficient to fund our
current cash needs for at least the next 12 months.
IMPACT OF RECENTLY ISSUED/ADOPTED ACCOUNTING STANDARDS
For information on changes in accounting principles and new accounting policies, see
CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates are those estimates made in accordance with U.S. generally accepted accounting principles that
involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our
financial condition or results of operations. There have been no changes to our critical accounting estimates identified in our
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 thirty-nine weeks ended February 25, 2023 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 February 25, 2023 at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended February 25, 2023
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
The following table is a summary of our third quarter 2023 share repurchases:
Issuer Purchases of Equity Securities
Total Number of
Maximum Number
Shares Purchased
of Shares that
Total Number
Average
as Part of Publicly
May Yet Be
of Shares
Price Paid
Announced Plans
Purchased Under the
Period
Purchased (1)
per Share
Or Programs
Plans or Programs
11/27/22 to 12/24/22
—
$
—
—
—
12/25/22 to 01/21/23
(29,344)
54.10
—
—
01/22/23 to 02/25/23
—
—
—
—
(29,344)
$
54.10
—
—
(1) As permitted under our Amended and Restated 2012 Omnibus Long-Term Incentive Plan, these shares were withheld by us to satisfy tax withholding
ITEM 6. EXHIBITS
Exhibits
No.
Description
3.1
3.2
31.1*
31.2*
32**
101.SCH*+
Inline XBRL Taxonomy Extension Schema Document
101.CAL*+
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*+
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*+
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*+
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Filed herewith as an Exhibit.
**
Furnished herewith as an Exhibit.
+
Submitted electronically with this Quarterly Report.
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:
March 28, 2023
/s/ Max P. Bowman
Max P. Bowman
Vice President, Chief Financial Officer
(Principal Financial Officer)
Date:
March 28, 2023
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)