1
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
 
20549
FORM
10-K
 
☑
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year
Ended
May 29, 202128, 2022
 
☐
TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ____________
Commission file number:
 
001-38695
 
CAL-MAINE FOODS, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
64-0500378
(State or other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
1052 Highland Colony Pkwy, Suite 200
,
Ridgeland
,
Mississippi
39157
 
(Address of principal executive offices) (Zip Code)
(
601
)
948-6813
 
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class:
Trading Symbol(s)
Name of each exchange on which registered:
Common Stock, $0.01 par value per share
CALM
The
NASDAQ
 
Global Select Market
 
Securities registered pursuant to Section 12 (g) of the Act:
 
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.
 
Yes
☑
No
☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
 
Yes
☐
No
☑
Indicate by check mark whether the registrant (1)
 
(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
 
such reports), and (2) has been
 
been subject
to such filing requirements for the past 90 days.
 
Yes
☑
No
☐
Indicate by check mark whether
 
whether the registrant has submitted
electronically every Interactive Data
File required to be
 
submitted electronically every Interactive
Data File required to
be submitted pursuant to
Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit
 
such files).
 
Yes
☑
No
☐
Indicate
 
by
 
check
 
mark
 
whether
 
the
 
registrant
 
is
 
a
 
large
 
accelerated
 
filer,
 
an
 
accelerated
 
filer,
 
a
 
non-accelerated
 
filer,
 
a
 
smaller
 
reporting
company,
 
or an emerging
 
growth company.
 
See the definitions
 
of “large accelerated
 
filer,” “accelerated
 
filer”, “smaller reporting
 
company”,
and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an
 
emerging
 
growth company,
 
indicate by
 
check mark
 
if the
 
registrant has
 
elected not
 
not to use
 
use the extended
 
extended transition period
 
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
 
has filed
 
a report on
 
and attestation
 
to its management's
 
management's assessment of
 
the effectiveness
 
of its
internal control over
 
financial reporting under
 
Section 404(b) of
 
the Sarbanes-Oxley Act
 
(15 U.S.C. 7262(b))
 
7262(b)) by the registered
 
registered public accounting
firm that prepared or issued its audit report.
☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
 
Yes
☐
No
☑
The aggregate market value, as reported
 
reported by The NASDAQ Global Select Market,
 
Market, of the registrant’s
 
Common Stock, $0.01 par value,
 
held by
non-affiliates
 
at November 28,26,
 
2020,2021, which
 
was the
 
date of
 
the last
 
business day
 
of the
 
registrant’s
 
most recently
 
completed second
 
fiscal
quarter, was $
1,512,923,9671,428,527,739
.
As of
 
July 19, 2021,
2022,
44,058,46344,139,524
 
shares of
 
the registrant’s
 
Common Stock,
 
$0.01 par value,
 
value, and
4,800,000
 
shares of the
 
the registrant’s
 
Class A
Common Stock, $0.01 par value, were outstanding.
DOCUMENTS INCORPORATED
BY REFERENCE
The information called
 
for by Part III
 
III of this Form 10-K
 
10-K is incorporated herein
 
herein by reference
from the registrant’s
 
registrant’s Definitive
Proxy Statement
for its 20212022
 
annual meeting of
 
stockholders which will be
 
filed pursuant to Regulation
 
Regulation 14A not later than
 
than 120 days
after the end
 
end of the
fiscal
year covered by this report.
 
 
 
3
PART
 
I.
 
FORWARD
 
-LOOKING STATEMENTS
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
 
Section 21Eto, among other things,
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 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,COVID-19 pandemic,
 
potential future
corn and
soybean price
trends, potential
future impact
 
on our
business of
the
coronavirus
(“COVID-19”)
pandemic,
potential
future
impact
on
our
business
 
of
new
legislation,
 
rules
or
policies,
 
potential
outcomes
of
legal
proceedings,
 
and
 
projected operating data, resultsother
 
of operations and financialprojected
 
condition. Such forward-looking
statementsoperating
 
aredata,
 
identifiedincluding
 
byanticipated
 
the
useresults
 
of
 
wordsoperations
 
suchand
 
financial
condition. Such forward-looking statements are identified by the use of words such as
“believes, “believes,”
“intends, “intends,”
“expects, “expects,”
 
“hopes,”
“may,”
 
“should,” “plans,”
 
“plans,”
“projected,” “contemplates,” “anticipates,”
 
“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-
forward-looking
statements.
The
forward-looking
looking statements
 
areinclude, among
 
based
on
management’s
current
intent,
belief,
expectations,
estimates, and
projections regardingothers, (i)
 
the Companyrisk
factors set
forth in
Item 1A
Risk Factors
 
and itselsewhere
 
industry.in this
 
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 Item 1A Risk Factors and elsewhere in this report as
well
 
as those
included
in other
reports
we file
from time
to time
with the Securities and Exchange Commission (the
 
“SEC”Securities
and
Exchange
Commission
(the “SEC”) (including
(including our Quarterly Reports on Form
10-Q and Current Reports
 
Reports on Form
8-K), (ii) the
risks and hazards inherent
 
inherent in the shell
egg business (including disease, pests, weather conditions, and potential for product recall), including but not limited to the most
recent outbreak of highly pathogenic avian influenza (“HPAI”)
 
shell egg businessaffecting poultry in the U.S., Canada and other countries that was
first detected in commercial
 
(including disease, pests,
weather conditions,flocks in the U.S. in
 
and potential
for product
recall),February 2022, (iii)
changes in
 
the demand for and market
 
for prices of shell eggs
and feed costs, (iv)
 
market pricesour ability to
 
of shellpredict and meet
 
eggs and
feed
costs, (iv) our
ability to predict
and meet demand
for cage-free and
 
other specialty eggs, (v)
 
(v) risks, changes, or obligations
that
 
or obligations thatcould
result
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
in February
2022, (vii)
our ability
to completingretain
existing customers,
acquire new
customers and
grow our
product
a pending acquisition not to be met, (vi) risks relating to the evolving COVID-19 pandemic,mix, and (vii)(viii) adverse results
in pending
litigation matters. Readers
 
Readers are
cautioned not
to place
 
undue reliance
on forward-looking
statements because,
 
while we believe
 
believe
the assumptions on
which the forward-looking
 
forward-looking statements are based are
 
are reasonable, there
can be no
 
assurance that these forward-
looking
statements
will
prove
to
be
accurate. Further,
 
forward-looking statements will prove
 
includedto be accurate.
 
herein
are
only
made
as
of
theFurther, 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
by
law,
we
disclaim
any
intent
or
 
obligation
 
to
 
updatepublicly
 
publiclyupdate
 
these
 
forward-looking
 
statements,
 
whether
 
because
 
of
 
new
information,
future
events,
or
information, future events, or otherwise.
ITEM 1.
 
BUSINESS
 
Our Business
We are the largest
producer and distributor of shell eggs in the United States. Our mission is to be the most sustainable
producer
and reliable
 
supplier of
 
consistent, high
 
quality fresh
 
shell eggs
 
and egg
 
products in
 
in the
country,
 
demonstrating a
 
"Culture a "Culture
of
Sustainability" in everything
we do, and creating
 
creating value for our shareholders,
 
customers, team members
and communities. We sell
most of our shell
eggs in the southwestern,
 
the southwestern, southeastern, mid-western and
mid-Atlantic regions of the
 
the U.S. and aim to maintain
efficient, state-of-the-art operations located close to our customers. We
were founded in 1957 by the late Fred R. Adams, Jr. and
are headquartered in Ridgeland,
Mississippi.
The Company has one operating segment, which is the production, grading, packaging,
marketing and distribution of shell eggs.
Our
 
integrated
 
operations
 
consist
 
of
 
hatching
 
chicks,
 
growing
 
and
 
maintaining
 
flocks
 
of
 
pullets,
 
layers
 
and
 
breeders,
manufacturing feed, and
 
producing, processing, packaging, and producing,
 
processing, packaging,
and distributing
shell eggs.
 
Layers are mature
 
mature female
chickens, pullets
are female chickens usually underless than 18 weeks of
age, and breeders are male and female chickens
used to produce fertile eggs to be
be hatched for egg production flocks. Our total flock as of May 28, 2022 consisted of approximately 42.2 million layers and 11.5
million pullets and breeders.
Many of our customers rely
on us to provide most of their
 
their shell egg needs, including
specialty and conventional eggs.
Specialty
eggs encompass a
broad range of
products. We
classify nutritionally enhanced,
 
cage-free, organic,
free-range, pasture-raised and
brown eggs
as specialty
eggs for
accounting and
 
brown eggs asreporting purposes.
 
specialty
eggs for accounting and reporting purposes. We
 
classify all
other shell
eggs as
conventional products.
While
we report separate
sales information
for these egg types, there
are many cost factors that are
not specifically available for
conventional or specialty
eggs due
 
to thespecialty eggs
 
nature ofdue to
 
egg production.the nature
 
of egg
production. We
manage our
 
operations and
 
allocate resources
 
to these
types of
eggs on
a consolidated
basis based on the demands of our customers.
 
Over time, 4
Throughout the Company’s history,
we have acquired other companies in our industry.
Since 1989 through our fiscal year ended
May 29, 2021,28, 2022, we have
completed 22
23 acquisitions ranging
 
in size
from 160 thousand
layers to
7.5 million layers. Most recently,
effective on May 30, 2021, the Company acquired
 
In addition,
subsequent to
our fiscal
2021, we
acquired the
remaining 50%
membership interest
in Red
River Valley
 
Egg Farm, LLC
(“Red River”),
 
LLC, effectivewhich owns and
 
June 1,operates a specialty
 
2021.shell egg production
complex that includes
1.7 million cage-free
hens. For
further
 
description
 
of
 
this
 
transaction,
 
refer
 
to
 
Part
 
II.
 
Item
 
8.
 
Notes
 
to
 
the
 
Consolidated
 
Financial
 
Statements,
.
 
4In fiscal 2021,
we announced that
our Board of
Directors approved several
new capital projects
with an estimated
cost of $105
million to further
expand the Company’s
cage-free egg production
capabilities. These projects
include expanding
our cage-free
egg production at our
Okeechobee, Florida, production
facility. The
project is designed to include
the construction of two
cage-
free layer houses and one cage-free pullet house with capacity
for approximately 400 thousand cage-free hens and 210 thousand
pullets, respectively.
Construction is
well underway,
with the
first pullets
placed in
mid-May 2022,
the first
layer house
to be
finished by September 2022, and
with the second layer house and
project completion expected by January
2023. In Delta, Utah,
we
are
constructing
four
new
cage-free
layer
houses
and
two
pullet
house
conversions
with
capacity
for
approximately
810
thousand
cage-free
layer
hens,
which
is
expected
to
be
completed
by
fall
of
2023.
At
our
Guthrie,
Kentucky
farm,
we
are
converting existing facilities into nine
cage-free layer houses and
two pullet houses with
capacity for approximately 953 thousand
cage-free
hens,
which
is
expected
to
be
completed
by
spring
of
2025.
The
Company
plans
to
fund
these
projects
through
a
combination of available cash on hand, investments and operating cash flow.
In
October
2021,
we
announced
a
strategic
investment
in
MeadowCreek
Foods,
LLC,
that
will
specialize
in
high
value
commercial product solutions targeting specific needs in the food industry. For further description of this
transaction, refer to “—
Egg Products” below.
Effective December 5, 2021, we made an additional investment in our joint venture Southwest Specialty Eggs, LLC (“Southwest
Specialty”), to
acquire
warehouse
and
distribution
capability
to
expand
Southwest
Specialty’
customer
base
in the
southern
California, Arizona and Nevada markets.
Subsequent
to
the
end
of
fourth
quarter
2022,
the
Company’s
Board
of
Directors
approved
a
capital
project
to
expand
the
Company’s
cage-free production
capabilities. The
proposed project
at Chase,
Kansas will
convert
existing conventional
layer
capacity to cage-free capacity for
approximately 1.5 million cage-free hens
and include remodels of
all remaining pullet facilities.
Work is expected
to commence immediately with project completion expected by year-end
2025.
When
 
we
 
use
 
“we,”
 
“us,”
 
“our,”
 
or
 
the
 
“Company”
 
in
 
this
 
report,
 
we
 
mean
 
Cal-Maine
 
Foods,
 
Inc.
 
and
 
our
 
consolidated
subsidiaries, unless otherwise indicated or the
context otherwise requires. Our fiscal year
2021 2022 ended May 29, 2021,28, 2022, and
the first
three fiscal quarters of fiscal 2021
2022 ended August 29, 2020,28, 2021, November 28, 2020,
27, 2021, and February 27, 2021. All26, 2022.
 
All references herein to
a fiscal year means our fiscal year and all references to a year mean a calendar year.
 
Industry Background
According to the U.S.
 
U.S. Department of
Agriculture (“USDA”) Agricultural
 
Marketing Service in 2021,
 
2020, approximately 72%
71% of eggstable
eggs produced in the U.S.
 
were sold as shell
 
eggs, with 66%55.7% sold through food
 
to retailat home outlets (e.g.such
 
throughas grocery and convenience
stores, 11.9%
 
stores), 3%
sold to foodservice customersfood-away-from
home channels such as
restaurants and 3%3.7%
that are exported.
The remaining 28% USDA estimates that
29%
of
eggs
produced
in
the
U.S.
are
sold
as
egg
products
 
(shell
eggs
eggs
broken
and
 
sold
in
liquid,
 
frozen,
or
dried
 
form) to
 
to
institutions (e.g. companies
producing baked goods).
For information
about egg producers in the U.S., see “Competition” below.
 
Based We are closely monitoring the
latest outbreak of
highly pathogenic avian
influenza (“HPAI”) that was first
detected in commercial
flocks in the
U.S. in February
2022. According
to the U.S. Centers
for Disease Control
and Prevention, these
detections do not
present
an
immediate
public
health
concern.
There
have
been
no
positive
tests for
HPAI
at
any
Cal-Maine
Foods’
owned
or
contracted production facility as of July 19,
2022. The USDA division of Animal and
Plant Health Inspection Service (“APHIS”)
reported that approximately 30.7 million commercial layer hens
have been depopulated due to HPAI, representing approximately
9.5%
of
the
table
layer
flock
based
on
February
2022
reported
layer
numbers.
Pullets
impacted
comprise
approximately
1.0
million. According to APHIS,
the most recently reported
outbreaks
of HPAI affecting commercial layer hens and
pullets occurred
June 7,
2022 and
June 9, 2022,
respectively.
We
believe the
HPAI
outbreak will
continue to
impact the
overall supply
of eggs
until the layer
hen flock is
fully replenished. 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.
Given
historical
consumption
 
trends,
we believe
in the
U.S. that
general demand
 
for eggs
increases basically
 
in line
with the
overall U.S.
 
population
growth, averaging about 2% per year. growth.
 
Specific events
can impact
egg consumption
in a
particular period. period,
as occurred
with the
2015
calm-20210529_10Kp5i0
5
HPAI
outbreak,
the
pandemic,
and
the
most
recent
HPAI
outbreak.
For
 
example,
in
2015,
egg
consumption
decreased
egg consumption decreased approximately 4% over the prior year
3.4%
compared
with
2014,
primarily due
tied
to
a
shortage
of
eggs
 
resulting
from
an
outbreak
of avian influenza ("AI") in the spring of
 
that year.HPAI
 
in
U.S.
commercial flocks in 2014 and 2015. In 2016, consumption rebounded and increased 7% over
approximately 6.0% versus 2015 and 3% over2.5%
versus
the
pre-shortage
level
of
2014.
 
According
to
the USDA,
USDA’s
Economic
Research
Service,
estimated
annual
per
 
capita U.S.
consumption sincein the United States between 2016 and 2021 varied, ranging from
 
between 278 and
293271 to 288 eggs. In calendar year
 
year 2020,2021, per capita
U.S. consumption was estimated
to be 287280 eggs,
 
or approximately six
5.4 eggs per person
per week. Per
 
week. The USDA calculates per capita
consumption by dividing total
 
is determinedshell egg disappearance in the
 
by dividing
the total supply
of eggs by
the entire
population in
the U.S. (assuming
all eggs produced domestically by the eggU.S.
 
industry are consumed).
population. Sales prices of
eggs are dependent upon
many factors other
than consumption. For information about shell egg prices
see “Prices for Shell Eggs” below.
Prices for Shell Eggs
Wholesale shell egg
 
egg sales
prices are
 
a critical component
 
component of
revenue for
 
the Company.
 
Wholesale shell egg
 
egg prices
are volatile,
cyclical, and impacted
 
impacted by
a number
 
of factors, including
 
including consumer demand, seasonal
 
seasonal fluctuations, disease,the number
 
and by
the numberproductivity
and productivity of
laying hens
 
in the U.S.,
the pandemic and
outbreaks of HPAI
.
 
While we use
 
use several different
 
pricing mechanisms in
 
pricing
agreements with our customers,
 
our
customers, we believe the majority
 
majority of conventional shell eggs
 
sold in the U.S. in
 
in the retail and foodservice
foodservice channels are sold
at
prices
 
that
take
into
account,
in
 
varying
ways,
independently
quoted
 
wholesale
market
prices,
 
such as those
published by Urner Barry
 
published
by
Urner
Barry
Publications, Inc.
("UB") for
 
shell eggs.
We
 
sell the
majority of
 
our conventional
shell eggs
 
based on
formulas that take
 
formulas thatinto account,
 
take into
account, 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.
The weekly
average price for
 
for the southeast region
 
for large white
 
conventional shell
eggs as quoted
 
quoted by UB is
 
shown below for
the past three
 
fiscal years along
 
with the five-year average
 
average price. As further
 
As further discussed
in
Part II. Item 7. 7. Management’s Discussion
and Analysis – Resultsof Operations
, conventional shell
egg prices experienced a brief but significantrose in our
 
increase during the fourth
quarter of fiscal
2022, due to the
reduced
supply related
to the
HPAI
outbreak first
detected in
commercial flocks
in February
2022 and
steady shell
egg demand.
In the
fourth quarter
of fiscal 2020
there was a
brief but
significant increase
in shell egg
demand from
retail consumers
related to the
onset of
the COVID-19
pandemic. The
actual prices
that we realize
on any
 
given transaction
will not necessarily
equal quoted
market
prices because
 
of the
individualized
terms that
we negotiate
 
with individual
customers which
which are influenced
by many
factors.
 
calm-20210529_10Kp5i0.jpgcalm-20210529_10Kp6i0
 
5
6
Specialty
eggs
 
are typically
 
sold
at
 
prices
and
 
terms
negotiated
 
directly
with
 
customers. Historically,
 
Historically,prices for
specialty eggs
have
experienced
less
volatility
than
 
prices
 
for
 
specialtyconventional
shell
 
eggs
 
and
have
generally
experienced less volatility than prices for conventional shell eggs and have generally
been
higher
due
to
customer
 
and consumer
consumer willingness to pay more for specialty eggs.
Feed Costs for Shell Egg Production
Feed is a primary
cost component in the
 
the production of shell eggs and
 
and represented 58.2%61.9% of
our fiscal 20212022 farm
 
production costs.
We routinely fill our storage
bins during harvest
 
season when prices for
 
for feed ingredients
are generally lower.
To ensure continued
availability of feed
ingredients, we may
enter into contracts for
future purchases of
corn and soybean meal,
and as part of
these
contracts,
we
may
lock-in
the basis
portion
of
our
grain
purchases
several
months
in
advance.
Furthermore,
due
to
the more
limited
supply
for
organic
ingredients
 
we
may
commit
to
purchase
organic
ingredients
in
advance
to
help
assure
supply.
Ordinarily, we do not enter into long-term contracts
for future purchases of beyond a year to purchase 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. Ordinarily, we
do not enter long-
term contracts beyond
a year to
purchase corn and
soybean meal or
hedge against increases
in the priceprices
 
of corn and soybean meal. As the quality and composition
 
soybean meal.
As the
quality and
composition of
feed is
a critical
factor in
the nutritional
value of shell
shell eggs
and health
 
of our chickens,
 
chickens, we
formulate and produce
 
produce the vast majority
 
majority of our own
 
own feed at our
 
feed mills located
 
near our
production
plants. Our annual feed
requirements for fiscal 2022 were
1.9 million tons of finished
 
feed,
requirements for
fiscal 2021
were 1.8 million
tons of
finished feed,
of which
we manufactured
1.61.8 million tons.
 
We
 
currently have
have the capacity to
 
to store 152
174 thousand
tons of
 
corn and
soybean meal,
 
and we
replenish these
stores as needed throughout
the
year.
Our primary feed ingredients, corn
and soybean meal, are commodities and are subject
to volatile price changes due to
 
to weather, various
various supply and
 
demand factors,
 
transportation and storage
 
storage costs,
speculators and
 
agricultural, energy
 
and trade policies
 
policies in
the U.S.
and internationally. We purchaseinternationally and
most recently the vast majority of our Russia-Ukraine
war. While we
do not import
corn and soybean meal or soy directly
from the region, the
Russia-Ukraine
war has
had
a negative
impact on
the worldwide
supply of
grain, including
corn, putting
upward pressure
on
prices.
We
purchase
the
vast
majority
of
our
corn
and
soybean
meal
from
U.S
 
sources
but
may
be
forced
to
purchase
purchase internationally
 
when
U.S.
 
supplies are
 
not
readily
 
available.
Feed
 
grains
are
 
currently
available
 
from
an
 
adequate
number
of
of sources in
the U.S. As
a point of
 
reference, a multi-year
comparison of the
monthly average of
 
the average of daily closing prices per
 
per Chicago
Board of
Trade for each period in our fiscal calendar are
shown below for corn and soybean meal:
calm-20210529_10Kp6i0.jpg
 
6
7
Shell Egg Production
WeOur percentage of dozens produced approximatelyto sold was
 
90.5% of94.3%
 
of our total
shell eggs
sold in
fiscal 2021,2022,
 
with 91%91.7% of such production
coming from company-owned facilities,
 
of such
production coming
and 8.3% from company-
owned
facilities, and
9%
from
contract
 
producers.
Under
a
 
typical
arrangement
with
 
a contract producer,
contract
producer,
we
 
own
 
the
 
flock,
furnish all
 
furnish
all feed
and
 
critical
supplies,
 
own
the
 
shell
eggs
 
produced
and
 
assume
market
 
risks. The
 
The contract
producers
own and
operate their facilities
and are paid
a fee based on production
 
on production with
incentives for performance.
 
We purchased approximately 9.5%
of the total shell eggs we sold during fiscal 2021 from outside suppliers.
The commercial production of shell eggs
requires a source of baby chicks
for laying flock replacement. We producegrow the majority of
of
our
chicks
in
 
our
own
breeder
 
farms
and
hatcheries
 
in
a
 
computer-controlled
environment
and
 
obtain
the
balance
 
from commercial
commercial sources.
 
After the
eggs are
 
produced, they are
 
arecleaned, graded and
 
and packaged.
Substantially all
 
our farms have
 
have modern
“in-line” “in-line” facilities
 
which
mechanically
gather,
clean,
grade
 
and
package
 
the
eggs
 
at
the
 
same location
 
where
they
 
are
laid.
The
in-line
facilities
generate
significant efficiencies
and cost
savings compared
to the
cost of
eggs produced
from non-in-line
facilities, which
process eggs
that have
been laid
at another
location and
transported to
the facility.
 
The in-line
 
facilities generatealso
 
significant
efficiencies and cost savingsproduce a
 
compared to thehigher percentage
 
cost of eggs
produced from non-in-line
facilities, which process
eggs laid at
another
location and transported to the
facility. The in-line facilities also produce a higher
percentage of USDA Grade A
 
eggs, which
sell
at higher
prices. Eggs produced
on farms owned
by contractors are brought
 
brought to our
processing
plants to be graded and packaged.
Because shell eggs are perishable, we
 
we do not maintain
large egg inventories. Our egg
 
egg inventory
averaged
 
six days
of sales
 
over
the course ofduring fiscal 2021. We2022.
 
We believe our constant
focus on production
efficiencies and
automation throughout
the supply chain
enable us to be a low-cost supplier in our markets.
We
are proud
to have
created and
upheld
what we
believe is
a leading
poultry
Animal Welfare
Program
(“AWP”).
We
have
aligned our AWP with regulatory,
veterinary and our certifying bodies’ guidance to govern welfare of animals in our direct care,
our contract
farmers’ care
and our farmer-suppliers’
care. We
continually review
our program
to monitor and
evolve standards
that
guide
how we
hatch
chicks,
rear
pullets
and
nurture
breeder
and
layer
hens.
At each
stage
of
our
animals’
lives, we
are
dedicated
to providing
welfare
conditions
aligned
to our
commitment
to
the principles
of
the
internationally
recognized
Five
Freedoms of Animal Welfare
. Our standards apply to
our enterprise and are
tailored for our owned and
contract grower operations
with oversights and approvals from senior members of our compliance
team.
We
 
do not
 
use artificial
 
hormones in
 
the production
 
of our
 
eggs. Hormone
 
use in
 
the poultry
 
and egg
 
production industry
 
has
been
 
effectively
 
banned
in
 
the U.S.
 
since
the
 
1950s.
We
 
have
an
 
extensive
written
 
protocol
that
 
allows
the
 
use
of
 
medically
important
 
antibiotics
 
only
 
when
 
animal
 
health
 
is
 
at
 
risk,
 
consistent
 
with
 
guidance
 
from
 
the
 
United
 
States
 
Food
 
and
 
Drug
Administration
 
("FDA")
 
and
 
the
 
Guidance
 
for
 
Judicious
 
Therapeutic
 
Use
 
of
 
Antimicrobials
 
in
 
Poultry,
 
developed
 
by
 
the
American Association of
Avian Pathologists. When antibiotics are
medically necessary, a licensed veterinary
 
doctor will approve
and administer approved doses for a restricted
period. Our programs are designed to ensure
antibiotics are ordered and used only
when necessary and records of their usage – when and where – are maintained to monitor compliance with our protocols. We
 
protocols. We do
not use antibiotics for growth promotion or performance enhancement.
Specialty Eggs
We
 
are
 
one
 
of
 
the
 
largest
 
producers
 
and
 
marketers
 
of
 
value-added
 
specialty
 
shell
 
eggs
 
in
 
the
 
U.S.,
 
which
 
continues
 
to
 
be
 
a
significant and
growing segment
of the
 
market. We classify
nutritionally enhanced,
cage-free, organic,
 
free-range, pasture-raised,
and brown
 
eggs as
 
specialty
eggs for
accounting and
reporting purposes.
Specialty eggs
are intended
to meet
the demands
of
consumers who are
sensitive to
environmental, health and/or animal welfare
issues.
 
As defined by the USDA, eggs packed in USDA grade
marked consumer packages labeled as cage-free
are laid by hens that are
able to roam vertically and horizontally in indoor houses and have access to fresh food and water.
Cage-free systems must allow
hens to
exhibit natural
behaviors and
include enrichments
such as
scratch areas,
perches
and nests.
Hens must
have access
to
litter, protection from predators and be
able to move in a barn in a manner that promotes bird welfare.
A significant
number of
our customers
have 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. Additionally,
several states
have
passed
legislation
requiring
the
sale
and
production
of
only
cage-free
eggs
within
this
time
period
and
other
states
are
considering
such requirements.
We
have
monitored,
and will
continue
to monitor,
this legislation
and any
legal challenges
to
these
new
laws.
Recently,
the
Supreme
Court
of
the
U.S.
announced
that
in
October
2022
it
will
review
a
case
challenging
California’s
Proposition 12
that requires the
sale of only
cage-free eggs in
that state. Our
customers typically
do not commit
to
long-term purchases
of specific quantities
or types
of eggs with
us, and as
a result, it
is difficult
to accurately
predict customer
requirements for
cage-free eggs.
We
are, however,
engaging with
our customers
in an
effort to
achieve a
smooth transition
in
meeting their announced goals and needs. Sales of cage-free eggs represented approximately 22.1%
of our shell egg revenues for
fiscal year 2022. At the end of
our fiscal 2021, our production capacity for cage-free
eggs exceeded our customers’ requirements;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
78
however,
 
As defined by the USDA, eggs packed in USDA grade marked consumer packages labeled as cage-free are laid by hens that are
able to roam vertically and horizontallyour
 
in indoor houses, andcustomers have access
 
to fresh food and water. Cage-free systems must allow
henscontinued to
 
exhibit naturaltransition to
 
behaviorsmeet consumer
demand and
 
include enrichments
such as
scratch areas,
perches and
nests. Hens
must have
access to
litter, protection from predators and be able to move in a barn in a manner that promotes bird welfare.
A significant number
of our customers
have 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. Additionally,
several states
have
passed
legislation
requiring
the
sale
and
production
of
only
cage-free
eggs
within
this
time
period
and
other
states
are
considering such requirements.
Our customers typically
do not commit
to long-term purchases
of specific quantities
or type of
eggscomply with
 
us,their public
commitments
and evolving
legal requirements, and
 
as aHPAI
 
result, ithas adversely
 
impacted cage-free
flocks, we believe
current supply
and demand
for cage-free eggs is difficultmore
balanced and expect demand
for cage-free eggs to continue
 
to accurately
predict customer
requirements for
cage-free eggs.
We
are, however,
engaging with
our customers
in an
effort to
achieve a
smooth transition
in meeting
their announced
goals and
needs. Sales
of
cage-free
eggs
represented
approximately
23%
of
our
shell
egg
revenues
for
fiscal
year
2021,
and
currently
our
production
capacity exceeds customer requirements, which we believe positions us well, as our
customer base is primarily outside of states
that have mandated cage-free production and
salesincrease. 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, as
our customers
transition
to
meet
consumer
demand
and
comply
with
evolving
legal
requirements.
facilities. At
 
the
same
time,
we
understand
 
the
importance of our continued ability
 
ability to provide more affordable
conventional
eggs in order to provide
our customers with a variety of egg
 
of
egg choices and to address hunger in our communities.
We are a member of the Eggland’s
Best, Inc. cooperative (“EB”) and produce, market, distribute and sell
Egg-Land’s
Best®
 
and
Land O’
Lakes®
 
branded eggs are
produced and processed
 
under license from
 
Eggland's Best, Inc.from EB at
 
("EB")
at our facilities under
EB guidelines.
Land O’
Lakes®
 
branded eggs
are
produced by hens that
are fed a
whole-grain vegetarian
diet. Our
Farmhouse Eggs®Eggs
® brand eggs are produced at our
facilities by
cage-free hens
 
cage-free hens that are
provided with
a vegetarian diet.
We market
 
diet. We
market organic,
vegetarian and
omega-3 eggs
under our
4-Grain®
brand, which
 
brand, which consists of both caged
conventional and
cage-free eggs.
We
We
also produce,
market and
distribute private
label specialty
shell
eggs to several customers.
Egg Products
 
Egg products are shell eggs broken
and sold in liquid, frozen, or
dried form. We
 
sell liquid and frozen egg products
primarily to
the institutional,
foodservice and
 
food manufacturing sectors
 
sectors in
the U.S.
 
Our egg products
 
products are
sold through
 
our wholly
owned
subsidiaries American Egg Products, LLC located in Georgia and
Texas Egg Products, LLC located in
Texas.
During October
2021, we
announced
that our
Board of
Directors approved
a strategic
investment that
will specialize
in high-
value commercial product solutions targeting specific needs in the food
industry. The initial focus will include hard-cooked eggs.
The new entity, located in Neosho, Missouri, will operate as MeadowCreek Foods, LLC (“MeadowCreek”). We have committed
up to $18.5 million in debt and
equity capital to MeadowCreek for
the purchase of property and equipment
and to fund working
capital,
and
we
retained
a
controlling
interest
in
the venture.
We
will serve
as the
preferred
provider
to
supply
specialty and
conventional eggs that MeadowCreek needs to manufacture egg products. MeadowCreek’s
marketing plan is designed to extend
our reach in the foodservice and retail marketplace and bring new opportunities in the restaurant, institutional and industrial food
products arenas. We
anticipate that the MeadowCreek operation will initiate production
late in our fiscal 2023 second quarter.
Summary of Conventional and Specialty Shell Egg and Egg Product Sales
 
Sales
The
 
following
 
table
 
sets
 
forth
 
the
 
contribution
 
as
 
a
 
percentage
 
of
 
revenue
 
and
 
volumes
 
of
 
dozens
 
sold
 
of
 
conventional
 
and
specialty shell egg and egg product sales for the following fiscal years:
2022
2021
2020
2019
Revenue
Volume
Revenue
Volume
Revenue
Volume
Conventional Eggs
59.8
%
69.0
%
56.8
%
73.2
%
61.4
%
76.1
%
59.4
%
74.9
%
Specialty Eggs
Egg-Land’s Best®
19.2
%
15.9
%
20.9
%
13.5
%
19.2
%
12.7
%
19.9Other Specialty Eggs
17.3
%
13.515.1
%
Other Specialty Eggs
19.1
%
13.3
%
16.7
%
11.2
%
17.3Total Specialty Eggs
36.5
%
11.631.0
%
Total Specialty Eggs
40.0
%
26.8
%
35.9
%
23.9
%
37.2Egg Products
3.4
%
25.1
%
Egg Products
2.7
%
2.3
%
3.0
%
Marketing and Distribution
We
 
sell most of our
shell eggs in the
 
the southwestern, southeastern, mid-western
and mid-Atlantic regions of
 
of the U.S. through
our
extensive distribution network to a diverse group of customers, including
national and regional grocery store chains, club
stores,
companies servicing
 
servicing independent
supermarkets
 
in the
 
U.S., foodservice
 
distributors and
 
and egg product
 
product consumers. Some
 
Some of
our
sales are
 
completed
through
 
co-pack
agreements
 
–
 
a
common
 
practice
in
 
the
industry
 
whereby
production
 
and
processing
 
of
certain products is
are outsourced to another producer.
 
producer. Although
we face intense
competition from numerous other
 
other companies, we
believe that we have the
largest market share for the sale
 
of shell eggs in the
grocery segment, including large U.S.
food retailers.
We are a member of the Eggland’s
Best, Inc. cooperative and produce, market, distribute and sell EB and Land O'Lakes branded
eggs, directly and through our joint
ventures,
Specialty Eggs, LLC and Southwest Specialty
Eggs, LLC, under exclusive license
agreements in
Alabama, Arizona,
Florida, Georgia,
Louisiana, Mississippi
and Texas,
and in
portions of
Arkansas, California,
 
89
Nevada,
North
Carolina,
Oklahoma
and
South
Carolina.
We
 
are a memberalso
 
of the EBhave
 
cooperative and produce,
market and distribute
EB and Land
O'Lakes branded eggs,
both directly
and through our joint ventures Specialty Eggs, LLC and Southwest Specialty Eggs, LLC, underan
 
exclusive
license agreements
in
New
York
City
in
addition
to
Alabama, Arizona, Florida, Georgia, Louisiana, Mississippi, Nevada, and Texas; portions of statesexclusivity in California, North Carolina
Oklahoma, South Carolina, Utah, as well as the wholeselect New York City area.
 
metropolitan areas, including areas within New Jersey and Pennsylvania.
The majority of eggs sold are based on the daily
or short-term needs of our customers. Most sales to established
accounts are on
payment terms ranging from
 
from seven to 30
 
30 days. Although we
 
we have established
long-term relationships
 
with many of
 
of our customers,
most of them are free to acquire shell eggs from other sources.
The shell eggs we
 
we sell are
either delivered to
 
our customers’ warehouse or retail
 
or retail stores,
by our own
 
fleet or contracted
refrigerated
delivery trucks, or are picked up by our customers at our processing facilities.
Customers
Our top three
 
three customers
accounted for
 
an aggregate of
 
48.6%45.9%, 51.1% and48.6%
 
52.2%and 51.1% of net
 
net sales dollars for
 
for fiscal 2022
,
2021, and
2020,
 
andrespectively.
2019, respectively. Our largest
customer,
Walmart
Inc. (including
Sam's Club),
 
accounted for
29.5%, 29.8%,
and 32.1%
 
and 33.7%of net
sales dollars for fiscal
2022, 2021 2020, and 2019,2020, respectively.
 
In fiscal
 
2021, 2022,
approximately 90.5%87.5%
 
of our
 
revenue related
 
to sales to
 
to retail
customers, 6.8%9.1%
 
to sales to
 
to foodservice
providers
and 2.7% to3.4%
 
to egg products sales.
 
sales. Retail customers include
 
include primarily
national and
 
regional grocery store
 
store chains,
club stores,
and
companies
servicing
 
independent
supermarkets
 
in the
 
U.S. Foodservice
 
customers
include
 
primarily companies
 
companies that sell
 
sell food
products and related items to restaurants, healthcare and education facilities and
hotels.
Competition
The production, processing,
and distribution of shell
 
eggs is an intensely
competitive business, which
 
has traditionally attracted
large numbers of producers.
producers in the United
States. Shell egg competition
is generally based on
price, service and product quality.
 
quality.
The
shell
 
egg
production
 
industry
remains
 
highly
fragmented.
 
According
to
Egg Industry
 
IndustryMagazine
magazine
in
its
2021
survey,
66
producers, each owning
at least 500 thousand
layers, owned approximately
99% of total
industry layers. The, the
 
ten largest
producers
owned approximately
 
53% of
total industry
 
layers comparedtable egg layer
 
to 54%hens at year-end
 
in the
prior year.2021 and 2020.
 
We
 
believe industry
 
consolidation willmay
continue,
 
and
 
we
 
plan
 
to
 
capitalize
 
on
 
opportunities
 
as
 
they
 
arise.
 
We
 
believe
 
further
 
concentration
 
willcould
 
result
 
in
 
reduced
cyclicality of
shell egg
prices, but
no assurance
can be
given in
that regard.
A continuation
of this
trend could
create greater
competition among fewer producers.
Seasonality
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
 
the spring
and early summer.
 
Historically, shell
 
shell egg prices tend
to increase with the
 
with the start of the school
 
school year and tend to
 
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,
 
prices, sales volumes and net
 
income (and may
incur net losses) in
 
losses) in our first and
 
fourth fiscal
quarters ending in August/September and May/June, respectively. Accordingly, we generally expect our need for
 
working capital
to be highest during those quarters.
Growth Strategy
Our growth strategy is
focused on remaining a
 
low-cost provider of shell eggs located near
our customers, offering our customers
choices
that
meet
their
requirements
for
eggs
and
egg
products
and
continuing
to
grow
our
focus
on
specialty
eggs
and
egg
products.
For
example,
our
recent
investment
in
MeadowCreek,
discussed
above,
is
intended
to
extend
our
reach
in
the
foodservice and retail marketplace and bring
new opportunities in the restaurant,
institutional and industrial food products arenas.
In light
of the growing
customer demand
and increased
legal requirements
for cage-free
 
eggs, located near our customers.
In light of the
growing
customer
demand and
increased legal
requirements for
cage-free eggs,
we
 
intend to
 
continue to
 
closely
evaluate the
 
need to expand
 
to
expand through
selective acquisitions,
 
with a priority
 
priority on
those that
 
will facilitate our
 
our ability
to expand
 
our
cage-free shell egg production
 
shell egg
production capabilities
in key
locations and
 
markets. We will continue to closely evaluate
 
will continue
to closely
evaluate the
need to continue
continue to
 
expand and
convert our own facilities to increase production of cage-free eggs based on a timeline designed to meet the anticipated needs of
our customers and comply with
 
evolving legal requirements. As theand
 
ongoing production of cage-free eggs
is more costly than the
production
of
conventional
eggs,
aligningconvert
 
our
 
cage-freeown
facilities
to
increase
 
production
 
capabilities
with
changing
demand
forof
 
cage-free
 
eggs
 
based
on
a
timeline
designed
to
meet
the
anticipated needs of our customers and comply with evolving legal requirements. As the ongoing production of cage-free eggs is
more costly than
the production of
conventional eggs, aligning
our cage-free production
capabilities with changing
demand for
cage-free eggs is important to the success of our business.
 
910
Trademarks
and License Agreements
We own the trademarks
Farmhouse Eggs®
,
Sunups®
,
Sunny Meadow®
 
and
4Grain®
. We produce and
 
market
Egg-Land's Best
Best®®
and
Land O’ Lakes®Lakes
® branded eggs under
 
license agreements with
EB. We
 
believe these trademarks
and license agreements
are
important to our business.
 
Government Regulation
Our facilities and
operations are subject
 
subject to regulation by various
 
various federal, state,
and local agencies, including,
 
including, but not
limited to,
the FDA,
 
USDA, Environmental
 
Protection
Agency
 
("EPA"),
 
Occupational Safety
 
Safety and Health
 
Health Administration
("OSHA")
and
corresponding state agencies or
laws. The applicable regulations relate
to grading, quality control,
labeling, sanitary
control and
reuse or
disposal of
 
waste. Our
shell egg
 
facilities are
subject to
 
periodic USDA,
FDA, EPA
 
and OSHA
inspections. Our
 
feed
production
facilities
are
 
subject
to
FDA,
 
EPA
and OSHA regulation
 
and
inspections.
We
 
maintain our own
inspection program
to
monitor
compliance
with
 
our
 
own
 
inspectionstandards
 
programand
customer
specifications.
It
is
possible
that
we
will
be
required
 
to
 
monitorincur
compliance with our own standards and customersignificant
 
specifications. It is possible that we will becosts
 
required to incur significant costsfor
compliance
for compliance
with
 
such
statutes
and
 
regulations.
In
the
 
future,
additional
rules
 
could
be
proposed
 
that, if adopted,
 
if
adopted, could increase
our costs.
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 Colorado,and
 
Massachusetts, Michigan,which collectively represent
 
Nevada, Oregon,14% of the
 
Rhode Island,total U.S. population
 
and Washingtonaccording to the
 
have passed2020 U.S. Census,
cage-free legislation
 
minimum space
and/or cage-freewent into
 
requirements, mandatingeffect January
 
the sale1, 2022.
 
of only
cage-free eggs
in their
states, with
implementation ofHowever,
 
these laws
 
ranging
from January 2022 to Januaryare subject
 
2026. These states represent approximatelyto judicial
 
24%challenge,
and the
Supreme
Court of the U.S. totalrecently announced that in
 
population according to the 2020
U.S. Census.October 2022 it will review a case
 
While ourchallenging California’s law that requires the sale
of only cage-free eggs in that state.
 
direct salesThese laws have already effected
 
into these
states have
not been
material, these
lawsand, if upheld, will continue to
 
affect sourcing, production
and pricing
of eggs
(conventional (conventional as
well as
specialty) as
the national
 
demand for cage-free production could be greater than the
current
 
cage-free productionsupply,
 
could bewhich
 
greater than
the current
supply which would
 
increase
the
price
 
of
cage-free
 
eggs,
unless
more
 
cage-free
production
capacity
 
is constructed.
 
Likewise,constructed.
Likewise, the national
supply for
 
eggs from
conventional production could
 
exceed consumer
demand which
 
would decrease
the price
of
price of conventional eggs.
Environmental Regulation
Our operations and facilities are subject to various federal, state, and local environmental, health and safety
laws and regulations
governing,
among
 
other
 
things,
the
 
generation,
storage,
 
handling,
use,
 
transportation,
disposal,
 
and
remediation
 
of
 
hazardous
materials. Under these laws and
regulations, we must obtain
permits from governmental authorities, including, but
 
including, but not limited to,
wastewater discharge
permits. We
 
have made, and
will continue to make,
 
to make, capital and other expenditures
 
expenditures relating to compliance
with existing environmental, health and safety
laws and regulations and permits.
We are not currently aware of any major capital
expenditures
 
necessary
 
to
 
comply
 
with
 
such
 
laws
 
and
 
regulations;
 
however,
 
as
 
environmental,
 
health
 
and
 
safety
 
laws
 
and
regulations are becoming increasingly
more stringent, including
those relating to animal wastes
 
animal wastes and wastewater discharges,
it is
possible that we will have to incur significant costs for compliance with such
laws and regulations in the future.
Human Capital Resources
 
 
As of May 28, 2022,
 
29, 2021, we
had 3,2862,985 employees, of whom 2,6422,346 worked in egg
 
in egg production,
processing, and marketing, 197
 
188 worked
in
feed
 
mill operations
 
and 456,442, including
our
 
executive officers,
were
 
administrative
employees. Approximately
 
4.1%4.7% of
 
our
personnel
 
are
 
part-time, and we
 
utilize
 
temporary
 
employment
 
agencies
 
and
 
independent
 
contractors
 
to
 
augment
 
our
staffing needs when necessary. For fiscal 2021,2022, the average monthly full-time equivalent
 
equivalent for contingent workers were 840.was
1,046. None
of our employees are covered by a collective bargainingbargain
ing agreement. We consider
our relations with employees to be good.
 
Culture and Values
 
 
We
 
are
 
proud
 
to
 
be contributing corporate
 
citizens
 
where
 
we live
 
and
 
work and to
 
help to create healthy,
 
prosperous
communities. Our
 
colleagues
 
help
 
us
 
continue
 
to
 
enhance our community
 
contributions,
 
which are driven
 
by
our longstanding culture that strives to promote an environment that
upholds integrity and respect and provides opportunities for
each colleague to
realize full
potential. These commitments are
encapsulated in the
Cal-Maine Foods Code
of Ethics
for Directors,
Officers and Employees and in our
Human Rights Statement
.
 
11
Health and Safety
 
 
Our top priority is the
health and safety of our
employees, who
continue to produce
high-quality, affordable
 
egg choices for our
customers and contribute to
 
contribute to a stable food
 
stable food supply. Our
enterprise safety committee
 
comprises two corporate
safety managers,
 
eight
area
compliance
 
managers,
53 55
 
local
site
 
compliance
managers,
 
feed
mill
 
managers
and
 
general
managers.
 
The committee
 
committeethat
oversees health
 
and
 
safety regularly
 
reviews
 
our
 
written policies
 
and
 
changes
 
to
 
OSHA
 
regulation
 
standards
 
and
 
shares
information
 
as
 
it
 
relates
 
to
 
outcomes
 
from
 
incidents
 
in
 
order
 
to
 
improve
 
future
 
performance.
 
The
 
committee’s
 
goals
 
include
10
working to help ensure that our
engagements with our consumers, customers, and regulators evidence
our strong
commitment to our
our workers’ health and safety.
 
Our commitment to our colleagues’ health includes a strong
commitment to on-site worker safety,
including a focus on accident
prevention and life safety.
 
TrainingOur Safety and Health Program
is designed to promote best
practices that help prevent
and minimize
workplace accidents and illnesses. The scope of our Safety and Health
Program applies to all enterprise colleagues. Additionally,
to
help
protect
the health
and well-being
of
our
colleagues and
people
in our
value
chain,
we
require
that any
contractors
or
vendors
acknowledge
and
agree
to
comply
with
the
guidelines
governed
by
our
Safety
and
Health
Program.
At
each
of
our
locations, our
general managers
are expected
to uphold
and implement
our Employee
Safety and
Health Program
in alignment
with OSHA requirements. We believe that this program, which is
reviewed annually by our senior management team,
contributes
to strong
safety personnel outcomes. As
part of our
Safety and Health
Program, we
conduct monthly multi-lingual training
 
that covers topics such
 
such
as slip-
and-fallslip-and-fall
 
avoidance,
 
respiratory
 
protection,
 
prevention
 
of
 
hazardous
 
communication
 
of
 
chemicals,
 
the
 
proper
 
use
 
of
personal protective
 
personal
protective equipment, hearing conservation,
 
conservation, emergency
response, lockout
and tagout of
 
equipment and forklift
safety,
among others.
We
To
have also installed dry
hydrogen peroxide biodefense
systems in our
processing facilities to
 
help protect our
colleagues’ respiratory health.
To help
drive our focus on
 
focus on colleague safety,
 
safety, we
developed safety committees
 
at each of
our sites that
with employee representation
from each department. We regularly provide health and safety information to employees via company bulletin boards. Our local
site
farm
and
feed
mill
management
has
an open-door policy
with
employees
to
discuss
improvement
ideas.
We
have
also
installed dry hydrogen peroxide biodefense
systems in
our processing facilities. New
colleagues undergo
a two-day orientation
period reviewing our
safety and health
programs and policies as
they relate to
their job tasks
and then are
placed with experienced
team members to learn
the job tasks.
At the 30-day anniversary of the
employees’ hire date,
their supervisor
has a one-on-one
meeting to discuss any questions the employee may still be unsure about as it relates to their job tasks, health and safety policies
and procedures, or any other matters.
 
We
 
review the
 
the success of
 
of our safety
 
safety programs on
 
on a monthly
 
monthly basis to
 
to monitor their
 
their effectiveness
and
 
the development
 
of any
trends that need
to be addressed.
During fiscal year
2021 2022 our recordable
incident rates decreased
by 21%6% compared
to fiscal 2020.2021.
 
Diversity, Equity and Inclusion
 
 
Our
 
culture seeks
 
to
 
embrace the
 
diversity
 
and
 
inclusion
 
of
 
all
 
our
 
team
 
members.
 
This
 
culture is driven
 
by
 
our
 
board
 
and
executive management team.
Our board comprises seven members, four of
 
four of whom are independent.
Women comprise 29% of our
board and 14% of our board members identify as a racial or ethnic minority.
As of May 29, 2021,28, 2022, our total workforce comprised
30%29% women and 52%
of colleagues who identify
 
identify as racial or
ethnic minorities. Our Policy
 
against Harassment, Discrimination,
Unlawful
 
or
 
Unethical
 
Conduct
 
and
 
Retaliation;
 
Reporting
 
Procedure affirms
 
our
 
commitment
 
to
 
supporting
 
our
 
employees
regardless of race, color, religion, sex, national
origin or any other basis protected by applicable law.
 
 
Cal-Maine Foods strives
 
strives to
ensure that
 
our colleagues are
 
are treated
equitably. We are an Equal
 
Opportunity Employer
that prohibits,
by policy and practice,
any violation of applicable
 
applicable federal, state, or local
law regarding employment.
 
Discrimination because of
race, color, religion,
sex, pregnancy, age,
 
age, national origin, citizenship status, veteran
status, physical or mental disability,
genetic
information, or any other
basis protected by applicable law
 
law is prohibited. We value diversity
in our workplaces or in
 
in work-related
situations. We maintain
strong protocols to help our colleagues perform
their jobs free from harassment and discrimination. Our
focus
 
on
 
equitable
 
treatment
 
extends
 
to
 
recruitment,
 
employment
 
applications,
 
hiring,
 
placement,
 
job
 
assignments,
 
career
development, training, remuneration,
benefits, discharge
 
and other matters
tied to terms and
 
terms and conditions of employment.
We
 
are
committed
 
to
 
offer
 
our
 
colleagues
 
opportunities
 
commensurate
 
with
 
our
 
operational
 
needs,
 
their
 
experiences,
 
goals
 
and
contributions.
 
 
Recruitment, Development and Retention
 
 
We
 
believe
 
in compensating
 
our
 
colleagues
 
with
 
fair
 
and competitive wages, in
 
addition
 
to offering
competitive benefits. Approximately 78%
 
76% of our
 
our employees
are paid
at hourly
rates, with
the majority
 
paid at
 
hourly rates above
 
with the
majority paid
at rates
above the
federal
minimum
wage
 
requirement.
Our annual average
weekly wage across
all employees for fiscal
year
2021 was $878.30. We
 
offer our full-time
 
full-time eligible employees a range
 
employees aof benefits,
 
range of
benefits including
company-paid life
insurance.
The
insurance. The Company provides
a comprehensive
self-insured health
plan and pays
approximately 85%
of the costs
of the plan
for
 
for participating
employees
employees
and
their
 
families
as
of
 
December
31, 2020.
2021. Recent
 
benchmarking
of
our health
 
plan
indicates comparable
benefits, at
lower
 
employee contributions, when compared
to an applicable
 
Agriculture
 
and
Food Manufacturing sector
grouping,
as
well
as peer
group
data.
 
In addition, we offer employees the opportunity to purchase an
extensive range of other group
 
offer
employees
the
opportunity
to
purchase
an
extensive range
of other
group
plan benefits, such as dental, vision,
 
vision, cancer,accident, critical illness, disability
 
disability and
voluntary life.
 
After
one
 
year
of
 
employment, full-time employees
who
 
meet
 
eligibility
 
requirements may
 
elect
 
to participate
 
in
 
our
KSOP retirement plan,
 
which
 
offers
 
a
 
range
 
of
 
investment
alternatives
 
and
 
includes
 
many positive features,
 
such
 
as
automatic enrollment with scheduled
 
automatic contribution
increases and loan
 
provisions. And, regardlessRegardless of
 
the
 
12
employees’ electionelections
 
to contribute
 
to
 
the
 
KSOP,
 
the
Company contributes shares
 
of Company
 
stock or
 
cash
 
equivalent
 
to 3%
of pre-tax earnings for
each
pay
period
that
hours
are worked.
 
We provide
 
extensive
 
training
 
and
 
development related
 
to
 
safety,
 
regulatory
 
compliance,
 
and
 
task
 
training. We invest
 
in
developing our future leaders through our Management Intern, Management Trainee,
 
Trainee and informal mentoring programs.
11
Sustainability
We
understand
that
a
healthy
environment
climate, and
 
responsiblethe potential consequences of climate change, freshwater availability and preservation of global
biodiversity, in addition to
 
responsible management
of
 
our
flocks,
and
natural
resources
are
 
vital
to
 
the
production of high-quality
 
high-quality eggs and
 
egg products
and
to the success of our
 
our Company. We have engaged in agricultural production for
 
agricultural production
for more than 60
 
60 years. Our
agricultural practices
continue
to evolve with
increased focus on
sustainability factors as we continue
to strive
to meet the
need for nutritious,
affordable foods to
feed a
growing population even as
we
exercise responsible natural
resource stewardship. We
plan to publish our
most recent Sustainabilitysustainability update inon or around late
July 2021,2022, which will be available on our
website. Information contained
in our website is not a part of this report.
 
COVID-19 Pandemic
For information
 
regarding our
 
response to
 
the COVID-19
 
pandemic, and
 
its impact
 
on our
 
business, see
 
and
Our Corporate Information
We
 
maintain
 
a
 
website
 
at
 
www.calmainefoods.com
 
where
 
general
 
information
 
about
our
 
business
 
and
 
corporate
 
governance
matters is
 
available. The
 
information contained
 
in our
 
website is
 
not a
 
part of
 
this report.
 
Our Annual
 
Reports on
 
Form 10-K,
Quarterly
 
Reports
 
on
 
Form
 
10-Q,
 
Current
 
Reports
 
on
 
Form
 
8-K,
 
proxy
 
statements,
 
and
 
all
 
amendments
 
to
 
those
 
reports
 
are
available, free of charge, through our
website as soon as reasonably practicable
after we file them with the SEC. In addition, the
SEC maintains
 
a website
 
at www.sec.gov that contains
 
contains reports, proxy
 
proxy and
information statements,
 
and other information
 
information regarding
issuers
 
that
 
file
 
electronically
 
with
 
the
 
SEC.
 
Information
 
concerning
 
corporate
 
governance
 
matters
 
is
 
also
 
available
 
on
 
our
website. Cal-Maine Foods, Inc. is a Delaware corporation, incorporated
in 1969.
 
ITEM 1A.
 
RISK FACTORS
 
Our
 
business
 
and
 
results
 
of
 
operations
 
are
 
subject
 
to
 
numerous
 
risks
 
and
 
uncertainties,
 
many
 
of
 
which
 
are
 
beyond
 
our
control. The following is a description of
the known factors that
may materially affect our
 
our business, financial condition or
results
of operations. They should
 
should be considered
 
carefully,
 
in addition to
 
to the information set
 
set forth elsewhere
 
elsewhere in
this Annual
 
Report on
Form
10-K,
including
under
Part
II.
Item 7.
 
Management’s
 
Discussion
and
Analysis
of
Financial
Condition
 
and
Results
of Operations,
Operations,
in
making
any
investment
decisions
with
respect
to
our
securities. Additional risks or uncertainties that are not currently
 
knownrisks
or
uncertainties
that
are
not
currently known
to us,
 
or that we
 
we are aware
 
aware of but
 
but currently deem
 
deemto be
immaterial or
that could
apply to
 
be immaterial
or thatany company
 
could apply
to any
company could
also materially
adversely affect our business, financial condition or results
of operations.
INDUSTRY RISK FACTORS
Market prices of
 
of wholesale
shell eggs
 
are volatile,
 
and decreases
 
in these prices
 
prices can
adversely impact
 
our revenues
 
and
profits.
Our operating results are significantly
affected by wholesale shell egg
market prices, which fluctuate widely and
are outside our
control. As a
 
a result, our
 
our prior
performance
 
should not
 
be presumed
 
to be
 
an accurate
 
indication of
 
future performance.
 
Under
certain circumstances,
small increases
 
in production,
or small
 
decreases in demand, within
 
within the industry might
 
might have a
large adverse
effect on shell egg prices. Low shell egg prices adversely affect
our revenues and profits.
Market prices for
wholesale shell eggs
 
eggs have been volatile and
 
and cyclical. Shell
egg prices have
 
risen in the past
 
past during periods
of
high demand such as the initial outbreak of
the COVID-19 pandemic and periods when high protein
diets are popular. Shell egg
prices
have
also
 
risen in the past
 
during
periods
of
 
constrained
supply,
 
such
as
the
 
latest
highly
pathogenic
avian
influenza
(“HPAI”)
outbreak
that
was
first
detected
in
 
2015, which we
believe, based on published industrydomestic
 
commercial
flocks
in
February
2022.
We
believe,
based
on
published
industry
estimates, that the HPAI outbreak has impacted approximately 12% of30.7 million
 
the national flock of laying hens in 2022 through
 
hens.June. During times when
when prices are
 
high, the egg
 
egg industry
has typically
 
geared up
to produce
 
more eggs, primarily
 
primarily by
increasing the
 
number of
layers,
which historically has ultimately resultingresulted in an oversupply of eggs, which was subsequently followed by
leading to a period of lower prices.
 
13
As discussed
 
above under
 
the heading
 
“Seasonality” in
 
Part I.
 
Item 1.
 
Business, seasonal
 
fluctuations impact
 
shell egg
 
prices.
Therefore, comparisons of our sales
 
our sales and
operating results between
different quarters within a
 
a single fiscal year
 
are not necessarily
meaningful comparisons.
A decline in consumer demand for shell eggs can negatively impact our business.
 
business.
We
 
believe the
 
increase in
 
meals prepared
 
at home
 
due to
 
COVID-19 pandemic,
 
high proteinhigh-protein diet
 
diet trends, industry
 
industry advertising
campaigns
and
the
improved nutritional
reputation
of
eggs (related have
all contributed
at
one
time or
another
to
 
better scientific understanding of the role of cholesterol in
increased
 
12
diets) have all contributed to shell egg
demand. However,
 
it is possible that the
demand for shell eggs will
 
will decline in the future.
Adverse publicity relating
 
relating to health or
safety
 
health concerns
 
and
changes
 
in
the
 
perception
of
 
the
nutritional
 
value of
shell eggs,
changes in
consumer views
regarding consumption
 
of animal-based
products, as
well as
movement away
from high
protein diets,
could
adversely
affect
demand
for
 
shell
 
eggs,
 
whichchanges
 
wouldin
 
haveconsumer
 
aviews
 
materialregarding
consumption of
 
adverseanimal-based products,
 
effectas well
 
onas movement
 
away from
high protein
diets, could
adversely affect
demand for
shell eggs, which would have a material adverse effect on our
 
future
results
of
operations
and
financial condition.
Feed costs are volatile and increases in these costs can
adversely impact our results of operations.
Feed costs are the
largest element of our shell
 
shell egg (farm) production
cost, ranging from 55%
 
to 58%62% of total
farm production cost
in the lastprior five fiscal
years. Although feed ingredients, primarily corn
and soybean meal, are
 
meal, are available from a number of
sources,
we do
not have
 
control over
the prices
 
of the
ingredients we
 
purchase, which
are affected by
 
by weather,
various global
and U.S.
supply and demand
factors,
 
factors, transportation
 
and
storage
costs,
 
speculators,
and
 
agricultural,
energy
 
and
trade
policies
 
in the U.S.
and internationally and
most recently the Russia-Ukraine
war. While we
do not import
corn or soy directly
from the region, the
Russia-Ukraine
war has
had
a negative
impact on
 
the worldwide
 
U.S.supply of
 
andgrain, including
corn, putting
upward pressure
on
internationally. prices.
Increases in feed costs
unaccompanied by increases
 
in the selling price of
 
eggs can have a material
 
adverse effect
on the
results of our
 
results ofoperations and cash flow.
 
our operations
and cash
flow. Alternatively,
 
low feed
costs can
 
encourage industry overproduction,
 
overproduction, possibly resulting
resulting in lower egg prices and lower revenue.
 
Shell
 
eggs
 
and
 
shell
 
egg
 
products
 
are
 
susceptible
to
 
microbial
 
contamination,
and
 
we
 
may
 
be
 
required
 
to,
 
or
we
 
may
voluntarily, recall
contaminated products.
Shell eggs
 
and shell
 
egg products
 
are vulnerable
 
to contamination
 
by pathogens
 
such as
 
Salmonella. The Company
 
Company maintains
policies and procedures designed to comply with the complex rules and regulations
governing egg production, such as The Final
Egg Rule issued
 
issued by the
 
the FDA "Prevention
 
"Prevention of
Salmonella Enteritidis
 
in Shell
 
Eggs During Production,
 
Production, Storage, and
 
and Transportation,”
and the
FDA’s Food Safety Modernization Act.
 
Shipment of contaminated
 
contaminated products,
even if
 
inadvertent, could result
 
result in a
 
a violation
of law and
 
and lead
to increased
 
risk of exposure
 
exposure to
product liability
 
claims, product recalls
 
recalls and
scrutiny by
 
federal and state
 
state regulatory
agencies. In
 
addition,
 
products
 
purchased
 
from
 
other
 
producers
 
could
 
contain
 
contaminants
 
that
 
might
 
be
 
inadvertently
redistributed by
us. As such,
we might
decide or be required
 
required to recall
a product
if we, our customers
 
or regulators
believe it poses
a potential
 
a potential
health risk.
Any product
recall could
 
result in
a loss
of consumer
 
confidence in
our products, adversely
 
adversely affect
our reputation with
reputation
with existing
and potential
customers and
 
have a
material adverse effect on
 
effect
on our
business, results
of operations
 
and
financial condition.
Agricultural risks, including outbreaks of avian
disease, could harm our business.
 
Our shell egg
production activities are
 
are subject to a variety
 
of agricultural risks.
Unusual or extreme
 
extreme weather conditions, disease
and pests
can materially
and adversely
affect the
quality and
quantity of
shell eggs
 
we produce
and distribute. TheOutbreaks of avian
influenza among poultry occur periodically
 
Companyworldwide and have occurred sporadically
in the U.S. Most recently,
an outbreak of
HPAI,
which
was
first
detected
in
February
2022,
impacted
the
industry.
Prior
to
2022,
there
was
another
significant
HPAI
outbreak in the U.S. impacting poultry during 2015. There have been no positive tests for HPAI
at any Cal-Maine Foods’ owned
or contracted facility as
of July 19,
2022. The Company maintains
controls and procedures designed
 
to reduce the
risk of exposing
exposing our flocks to harmful
 
diseases; however, despite
these efforts,
outbreaks of avian disease can
and do still occur and
may adversely impact the health
of our flocks. An outbreak of avian
 
disease can and do
still occur and may
adversely
impact the
health of
our flocks.
An outbreak
of avian
disease could
have a material
 
material adverse
impact on our
 
our financial
results by
increasing
 
government
restrictions
on
the
 
sale
and
distribution
of
of
our
products
 
and
requiring
us
 
to
euthanize
the
 
affected
layers.
Negative publicity from
an outbreak within our
 
our industry can
negatively impact customer perception, even if
 
even if the outbreak
does
 
outbreak does not
 
directly
impact
our flocks.
 
If a substantial
 
a
substantial portion
of
our
layers
layers
or production
facilities are
affected
by
any
of these
factors
in any given quarter or year, our business, financial condition,
and results of operations could be materially and adversely affected.
affected.
BUSINESS AND OPERATIONAL
RISK FACTORS
 
14
The COVID-19 pandemic has had an adverse impact on our business and operations
Since early
 
2020, the
 
coronavirus ("COVID-19") outbreak,
 
outbreak, characterized as
 
as a pandemic
 
pandemic by the
 
the World
 
Health Organization
 
on
March 11, 2020, has
 
has caused significant
disruptions in international
 
and U.S. economies
and markets. The
 
The effects of COVID-19
have had,
and may
continue to
 
have if (if
a significant
resurgence occurs
including due
to variants
or related
strains of
the virus
become prevalent)
 
a negative impact on our businessbusiness. Negative impacts have included, and
 
through disruptionsmay include in the supplyfuture, disruptions
in
the
supply
chain such as
resulting
in
increased
costs
 
and
decreased
availability
of
packaging
 
supplies; the pandemic has alsosupplies,
 
increased
labor
costs
and
increased medical costs.
 
During the initial outbreak
of COVID-19, we saw
an increase in
demand for eggs
as consumers prepared more
meals at home.
Egg prices initially rose during the fourth quarter of fiscal 2020, but prices quickly decreased as the demand shock subsided and
eggs that normally
would go to foodservice
businesses (e.g. restaurants)
entered the retail
market (e.g. grocery stores).
As a result
of the pandemic,
the foodservice market
for shell eggs
was depressed for
most of fiscal
2021. As vaccination
rates continue to
rise and governmental
restrictions are lifted,
foodservice demand may
increase and demand
in retail channels,
where we sell
most
of our eggs, could decrease.
13
Our acquisition growth strategy subjects us to various risks.
As discussed in
, we plan
 
to pursue a
 
growth strategy that includes
 
includes selective acquisitions
of other
 
companies engaged
 
in the
 
production and
 
sale of
 
shell eggs,
 
with a
 
priority on
 
those that
 
will facilitate
 
our ability
 
to
expand our cage-free shell egg production capabilities in key locations and markets. We may over-estimate or under-estimate the
demand
for
 
cage-free shell
 
egg productioneggs,
 
capabilities inwhich
 
key locationscould
cause
our
acquisition
strategy
to
be
less-than-optimal
for
our
future
growth
 
and markets.
profitability.
 
The
number
 
of existing
 
companies
with
cage-free
cage-free
capacity
that
 
we
may
be
able
 
to
purchase
is
limited,
 
as most production
 
most
production of shell
eggs by other companies
 
other companies in our markets currently
 
markets
currently does not meet customer
demands or legal requirements
to
be designated
as cage-free.
Conversely,
if we
acquire cage-free
production capacity,
which is
more expensive
to purchase
and
operate, and customer
demands or legal
requirements for cage-free
eggs were to change,
the resulting lack
of demand for
cage-
free eggs may result in higher costs and lower profitability.
Acquisitions require capital resources and
can divert management’s attention from our existing
business. Acquisitions also entail
an inherent risk that we
 
we could become
subject to contingent or
 
or other liabilities,
including liabilities arising from
 
from events or
conduct
prior to
 
our acquisition
 
of a
 
business that
 
were unknown
 
to us
 
at the
 
time of
 
acquisition. We
 
could incur
 
significantly greater
expenditures in integrating an acquired business than we anticipated at the
time of its purchase. We may over-estimate or under-
estimate the demand for cage-free eggs, which could cause our acquisition strategy to be less-than-optimal
for our future growth
and profitability.
We cannot assure
you that we:
●
will identify suitable acquisition candidates;
●
can consummate acquisitions on acceptable terms;
●
can successfully integrate an acquired business into our operations;
or
●
can successfully manage the operations of an acquired business.
No
 
assurance
can
 
be
 
given
 
that
 
companies
 
we
 
acquire
 
in
 
the
 
future
 
will
 
contribute
 
positively
 
to
 
our
 
results
 
of
 
operations
or
financial condition.
 
In addition,
 
federal antitrust
 
laws require
 
regulatory approval
 
of acquisitions
 
that exceed
 
certain threshold
levels of significance, and we cannot guarantee that such approvals would
be obtained.
The consideration
we pay in
 
in connection with any
 
acquisition affects
our financial results.
 
results. If we pay
 
cash, we could be
 
be required
to
use
a
 
portion
of
our
 
available
cash
or
credit
facility
to
 
consummate
the
acquisition.
 
To
the
extent
we
 
issue
shares
 
of our Common
 
our
Common Stock, existing
stockholders may be diluted. In addition, acquisitions
may result in additional debt.
Our largest customers have accounted
for a significant portion of
our net sales volume. Accordingly, our business
may be
adversely affected by the loss of, or reduced purchases by,
one or more of our large customers.
Our top three
 
three customers
accounted for
 
an aggregate of
 
48.6%45.9%, 51.1%48.6% and
 
52.2%51.1% of net
 
sales dollars for
 
fiscal 2021, 2020,2022,
 
2021, and
2019,2020, respectively.
 
Our largest
 
customer,
Walmart
 
Inc. (including Sam's
 
Sam's Club),
accounted for
 
29.8%29.5%, 32.1% and29.8%
 
33.7% and 32.1%
of net
sales dollars
 
for fiscal
 
2022, 2021,
and 2020,
 
and 2019, respectively. Although
 
Although we have
 
have established long-term
 
long-term relationships with
 
most of
our customers who
 
who continue
to purchase
 
from us based
 
based on
our ability
 
to service their
 
their needs,
they are
 
generally free
to acquire
shell eggs
 
shell eggs
from other
sources. If, for
any reason, one
or more
of our
large customers
were to
purchase significantly
less of
our
shell eggs
in the
the future or terminate
 
terminate their
purchases from
 
us, and
we were
 
not able to
 
to sell
our shell
 
eggs to
new customers
 
at
comparable levels,
it would have a material adverse effect
on our business, financial condition, and results of operations.
Our business is highly competitive.
The
 
production
 
and
 
sale
 
of
 
fresh
 
shell
 
eggs,
 
which
 
accounted
 
for
 
virtually
 
all
 
of
 
our
 
net
 
sales
 
in
 
recent
 
years,
 
is
 
intensely
competitive. We
compete with
a large
number of
competitors that may
 
may prove
to be
more successful
than we
are in
producing,
marketing and
selling shell
eggs. We
cannot provide
assurance that
 
we are in marketing andwill
selling shell eggs. We cannot provide assurance that we will be able
to compete
successfully with
any or
all of
these companies.
 
Increased competition could
result in price reductions, greater
 
reductions, greater cyclicality, reduced margins
 
margins and loss
of market
share,
which would
negatively affect our business, results of operations,
and financial condition.
 
15
We
 
are
 
dependent
 
on
 
our
 
management
 
team,
 
and
 
the
 
loss
 
of
 
any
 
key
 
member
 
of
 
this
 
team
 
may
 
adversely
 
affect
 
the
implementation of our business plan in a timely manner.
Our success depends
 
depends largely upon
 
upon the
continued service
 
of our senior
 
senior management
team. The
 
loss or interruption
 
of service
of
one or more of
 
of our key
executive officers
 
could adversely affect our
 
our ability to
manage our operations
 
operations effectively and/or
pursue
our growth strategy.
 
We
 
have not entered
 
into any employment
 
or non-compete agreements
 
agreements with any of
our executive officers
nor do we
carry any significant
key-man life insurance
coverage on any
 
such persons.of our executive
 
officers.
Competition could
cause us to
lose talented
employees,
and
unplanned
turnover
could
deplete
institutional
knowledge
 
and
result
in
increased
costs
due
to
increased
in increased costs due to increased competition for employees.
 
14
Our
 
business
 
is
 
dependent
 
on
 
our
 
information
 
technology
 
systems
 
and
 
software,
 
and
 
failure
 
to
 
protect
 
against
 
or
effectively respond to
cyber-attacks, security
 
breaches, or other
incidents involving those systems,
could adversely
affect
day-to-day operations and decision making processes and
have an adverse effect on our performance and reputation.
The efficient operation of our business depends
on our information technology systems, which we rely
on to effectively manage
our
 
business
 
data,
 
communications,
 
logistics,
 
accounting,
 
regulatory
 
and
 
other
 
business
 
processes.
 
If
 
we
 
do
 
not
 
allocate
 
and
effectively manage the resources necessary
to build and sustain an
appropriate technology environment, our
business, reputation,
or financial results could be negatively impacted.
In addition, our information technology systems may be vulnerable
to damage
or
 
interruption
 
from
 
circumstances
 
beyond
 
our
 
control,
 
including
 
systems
 
failures,
 
natural
 
disasters,
 
terrorist
 
attacks,
viruses, ransomware, security breaches
or cyber incidents. Cyber-attacks
are becoming more sophisticated and
 
and are increasing in
the number of attempts and frequency by groups and individuals with a wide range
of motives.
A security breach
 
of
 
sensitive
 
information
 
could
 
result
 
in
 
damage
 
to
 
our
 
reputation
 
and
 
our
 
relations
 
with
 
our
 
customers
 
or
employees.
Any such damage or interruption could have a material adverse effect on
our business.
 
Labor shortages or increases in labor costs could adversely
impact our business and results of operations.
Labor is a primary component of our farm production costs. Our success is dependent
upon recruiting, motivating,
and retaining
staff to operate our farms.
Approximately 78%76% of our employees are paid at hourly rates, often in entry-level positions. While all
our employees are paid at
 
hourly rates often in
entry-level positions. Whileabove the
majority
are
paid
at
rates
above
the
federal
minimum
wage
 
requirements,
any
significant
increase
 
in
local,
state
or
federal
minimum wage
requirements could
 
increase our labor
 
labor costs.
In addition,
 
any regulatory changes
 
changes requiring
us to
 
provide additional
employee
 
benefits
 
or
 
mandating
 
increases
 
in
 
other
 
employee-related
 
costs,
 
such
 
as
 
unemployment
 
insurance
 
or
 
workers
compensation, would increase our
 
our costs. A shortage
 
shortage in the labor
 
labor pool,
which may be
 
caused by competition from
 
from other employers,
the remote
locations of many
 
many of
our farms, or changes
 
in government provided supportdecreased
 
labor participation
rates or
changes in
government-provided
support or
immigration laws, particularly in
times
of lower unemployment,
could adversely affect our business and results of operations.
 
A
shortage of labor
available to
us could
cause our
farms to
operate with
reduced staff, which
could negatively impact
our production
capacity and efficienciesefficiencies.
In fiscal 2021 and could2022, our labor costs increased primarily due to the pandemic
and its effects, which
requirecaused us
 
to increase wages
 
to attractwages in
 
labor.response to
labor shortages,
and these
trends may
continue.
 
Accordingly,
 
any significant labor
 
labor
shortages or
increases in our
labor costs could
have a material adverse effect
on our results of operations.
We
 
are controlled
 
by the
 
family of
 
our late
 
founder,
 
Fred R.
 
Adams, Jr.,
 
and Adolphus
 
B. Baker,
 
our Chief
 
Executive
Officer and Chairman of our Board of Directors controls
the vote of 100% of our outstanding Class A Common Stock.
Fred R. Adams, Jr.,
 
Jr., our
Founder and Chairman Emeritus
died on March 29,
 
March 29, 2020. Mr.
 
Adams’ son-in-law, Adolphus
 
Adolphus B. Baker,
our
Chief
Executive Officer
 
and
Chairman of
our
board
 
of
directors, Mr.
 
Baker’s
spouse and
her
 
three sisters (Mr.
 
(who
are
Mr.Adams’ four
Adams’
four
daughters)
 
beneficially
 
own,
 
directly
 
or
 
indirectly
 
through
related
 
entities,
 
100%
 
of
our
 
outstanding
 
Class
 
A
Common Stock (which
 
Common
Stock
(which has 10 votes per
 
per share), controlling approximately 52.1%
 
approximately 52.1% of
our total voting power.
 
power. Additionally,
 
such
persons and Jean
Jean Reed
Adams (“Mrs.
 
Adams”), the
 
wifewidow of
 
our late
founder,
Fred R.Mr.
 
Adams, Jr.,
 
also have
 
additional voting
power due to
 
beneficial ownership of our
Common Stock (which has
one vote per
share), directly or
indirectly through related
entities, resulting in
family voting control
 
of approximately 57.7%our
Common Stock
 
(which has one
vote per share),
directly or indirectly
through related entities,
resulting in family
voting control
of approximately
57.5% of
our total
 
voting power.
Mr.
Baker controls the
 
the vote
of 100%
of our
outstanding Class
A Common Stock.
Stock.
We
 
understand that the
Adams and Baker
 
Baker families intend to
retain ownership of
 
of a sufficient amount
 
of our Common
Stock and
our Class A Common
 
Common Stock
to assure continued
 
ownership of
more than 50%
 
50% of the voting
 
power of our outstanding
 
outstanding shares
of
capital stock.
 
As a
 
result of
 
this ownership,
 
the Adams
 
and Baker
 
families have
 
the ability
 
to exert
 
substantial influence
 
over
matters requiring action by
our stockholders, including amendments
to our certificate of incorporation and
 
and by-laws, the election
and
 
removal
 
of
 
directors,
 
and
 
any
 
merger,
 
consolidation,
 
or
 
sale
 
of
 
all
 
or
 
substantially
 
all
 
of
 
our
 
assets,
 
or
 
other
 
corporate
transactions. Delaware law
 
law provides that
 
that the
holders of
a majority
 
of athe
 
majority ofvoting power
 
the votingof shares
 
power of
shares entitled to
 
vote must
 
approve
certain fundamental
corporate transactions such
 
such as a merger,
 
consolidation and
sale of all
or substantially
 
all or substantially allof a
 
of a corporation’s
assets; accordingly,
 
such a transaction
involving us and
 
and requiring stockholder approval cannot
 
cannot be effected
without the
approval
of
 
the
 
Adams
 
and
 
Baker
 
families.
 
Such
 
ownership
 
will
 
make
 
an
 
unsolicited
 
acquisition
 
of
 
our
 
Company
 
more
 
difficult
 
and
16
discourage certain types
 
types of
transactions involving
 
a change
 
of control of
 
of our
Company, including transactions
 
in which the
 
the holders
of our Common Stock
might otherwise receive a
 
premium for their shares
over then current market
 
market prices. The Adams and
Baker
families’ controlling ownership of our capital stock may adversely affect
the market price of our Common Stock.
The
 
price
 
of
 
our
 
Common
 
Stock
 
may
 
be
 
affected
 
by
 
the
 
availability
 
of
 
shares
 
for
 
sale
 
in
 
the
 
market,
 
and
 
you
 
may
experience significant dilution
as a result of future issuances
 
future issuances of our
securities, which could materially and
 
materially and adversely
affect
the market price of our Common Stock.
The sale or
 
availability for
sale of substantial
amounts of
 
substantial amounts of our Common
 
Common Stock could adversely
 
impact its price. As
 
As described
in
 
of Part
 
II. Item
 
8. Notes
 
to the
 
Consolidated
Financial
 
Statements, in
 
August 2020
 
Mrs.
15
Adams and the
Daughters’ Trust (of which
 
which the daughters of our
 
our late founder are beneficiaries)
 
are beneficiaries) sold
6.9 million shares of
 
of Common
Stock in a secondary
public offering pursuant to a
 
a previously disclosed
Agreement Regarding Common Stock
(the (the “Agreement”)
filed as an exhibit
to this report. After
 
After the sale,
approximately 5.0 million shares (the
(the “Subject Shares”) remain subject
 
remain registeredto potential
sale under
the Agreement. The Agreement generally provides that if a shelfholder
 
registration statementof Subject Shares intends to sell any of the Subject
Shares, such party must give
 
and prospectusthe Company a right of first
 
dated Octoberrefusal to purchase all or
 
9, 2018any of such shares. The
 
for potentialprice payable by the
Company to
 
resale, whichpurchase shares
 
shares are
subjectpursuant to
 
the Agreement.
The Agreement generallyexercise
 
provides that ifof the
right of
first refusal
will reflect
 
a holder6%
discount to
the then-current
market price
based on
the 20
business-day
volume-weighted average
price. If
the Company
does not
exercise its
right of
 
Subject Shares intendsfirst
refusal and purchase
the shares offered,
such party will, subject
to the approval
of a special committee
of independent directors
of the
Board
of Directors,
be permitted
 
to sell any
the
shares not
purchased
by the
Company pursuant
to a
Company
registration
statement, Rule 144
under the Securities
Act of 1933,
or another manner
 
of the Subjectsale agreed
 
Shares, such partyto by the
 
mustCompany.
Although pursuant
giveto the Agreement the Company
will have a right of
 
first refusal to
purchase all or
any of suchthose
 
shares. The priceshares, the Company may elect not
to
 
payable by the
Company to purchase
shares pursuant to the exercise of the right
of first refusal will reflect a 6% discount
to the then-current market price based on the
20 business-day volume
weighted average price.
If the Company
does not exercise
 
its right rights
of
 
first refusal,
and
 
purchase the shares
offered, suchif
 
party will,
subject to
the approval
of a
special committee
of independent
directors of
the Board
of Directors,
be
permitted to
sell the
shares not
purchased by
the Company
pursuant to
a Company
registration statement,
Rule 144
under the
Securities Act of 1933, or another manner of sale agreed to by the Company. Although pursuant to the Agreement the Company
will have a
right of first
refusal to purchase
all or any
of those shares,
the Company may
elect not to
exercise its rights
of first
refusal, and if so
 
such shares would be
 
would
be eligible
for
sale pursuant
 
to
the registration rights
 
rights in
the
Agreement or
pursuant to Rule
144 under the Securities
Act of 1933. Sales,
or the availability for
sale, of a large
number of shares
of our Common Stock could
result in a decline in the market price of our Common Stock.
 
Stock.
In addition, our
 
our articles
of incorporation
 
authorize us to
 
to issue
120,000,000 shares
 
of our Common
 
Stock. As of
 
of May 29, 2021,
28, 2022,
there were 44,058,463
 
44,139,524 shares
of our
 
Common Stock outstanding.
 
outstanding. Accordingly,
 
a substantial number
 
number of
shares of
 
our Common
Stock
 
are
 
outstanding
 
and
 
are,
 
or
 
could
 
become,
 
available
 
for
 
sale
 
in
 
the
 
market.
 
In
 
addition,
 
we
 
may
 
be
 
obligated
 
to
 
issue
additional shares of our Common Stock in connection with employee benefit
plans (including equity incentive plans).
In the
 
future, we
 
may decide
 
to raise
 
capital through
 
offerings of
 
our Common
 
Stock, additional
 
securities convertible
 
into or
exchangeable for
Common Stock, or
 
or rights to acquire
 
these securities or our
 
our Common Stock.
The issuance of
 
of additional shares
of our Common Stock or additional securities
convertible into or exchangeable for our Common
Stock could result in dilution of
existing stockholders’ equity interests in
us. Issuances of substantial amounts of
our Common Stock, or the perception
that such
issuances could
occur,
 
may adversely affect
 
affect prevailing
market prices
 
for our
 
Common Stock, and
 
and we
cannot predict
 
the effect
this dilution may have on the price of our Common Stock.
LEGAL AND REGULATORY
 
RISK FACTORS
Pressure from animal rights groups regarding the treatment
of animals may subject
us to additional costs to
conform our
practices
 
to
 
comply
 
with
 
developing
 
standards
 
or
 
subject
 
us
 
to
 
marketing
 
costs
 
to
 
defend
 
challenges
 
to
 
our
 
current
practices and protect our
 
our image with
our customers. In
 
particular,
 
changes in customer preferences
 
preferences and
new legislation
have accelerated an increase in demand for cage-free eggs, which increases uncertainty
in our business
and increases our
costs.
We and many of our customers face
pressure from animal rights groups, such
 
groups, such as People
for the Ethical Treatment of
Animals and
the Humane Society
 
Society of
the United States,
 
States, to require
 
companies that supply
 
food products
to operate
 
their business in
 
a manner
that
 
treats
 
animals
 
in
 
conformity
 
with
 
certain
 
standards
 
developed
 
or
 
approved
 
by
 
these
 
groups.
 
In
 
general,
 
we
 
may
 
incur
additional costs to conform
our practices to address
 
these standards or to
defend our existing practices
 
practices and protect our image
with
our customers. The
 
The standards promoted by
 
by these groups change
 
change over time, but
 
but typically
require minimum
 
cage space for
 
for hens,
among other requirements, and some
of these groups have led successful
legislative efforts to ban
 
ban any form of caged housing
in
various states.
 
states. As
discussed
 
in Part
 
I. Item
 
1. Business
 
-
Government
 
Regulation, several
 
several states
have
 
passed minimum
 
space
and/or cage-free
 
requirements for
 
hens, and
 
other states
 
are considering
 
such requirements.
 
In addition,
 
in recent
 
years, many
large restaurant chains,
foodservice companies and grocery
 
grocery chains, including
our largest customers,
 
announced goals to
transition
to an
 
exclusively cage-free
 
egg supply
 
chain by
 
specified future
 
dates, in
 
some cases
 
subject to
 
available supply,
 
affordability
and consumer demand.
While we anticipate that
our retail and foodservice
customers will continue to
transition to selling cage-
free eggs given
public commitments, there
is no
assurance that this
transition will take
place or take
place according to
the timeline
of current cage-free commitments. For example, customers may accelerate their transition to stocking cage-free eggs, which
may
challenge our
ability to
meet the
cage-free
volume needs
of those
customers and
result in
a loss
of shell
egg
sales. Similarly,
customers who
commit to
stock greater
proportional quantities
of cage-free
eggs are
under no
obligation to
continue to
do so,
which may
result in an
oversupply of
cage-free eggs and
result in lower
specialty egg
prices. In
addition,
legislation passed
by
17
states requiring
cage-free
sale of
eggs is
facing and
may continue
to face
legal challenges
and could
be stayed
or overturned.
These or other judicial
outcomes could also
lead to an
oversupply of cage-free eggs and
result in lower
specialty egg prices, which
could reduce the return on our capital investment in cage-free production.
Changing our infrastructure and operating procedures to conform to consumer preferences, customer demands and
 
demands and new laws has
resulted and will
 
will continue
to result
 
in additional costs,
 
costs, including
capital and
 
operating cost
increases. The
 
USDA reported
that
the estimated cage-free
 
estimatedflock is 103.6 million hens
as of July 1,
2022, which is
approximately 34.8% of
the total U.S. table
egg
layer hen population. These numbers reflect recent cage-free layer hen losses due to the HPAI outbreak. According to the USDA
Agricultural
Marketing
Service, approximately
221 million
hens,
or about
74.0% of
the U.S.
non-organic
laying flock
would
have
to
be
in
 
cage-free
 
flockproduction
 
is 86.0 million hensby
 
as2026
 
of June 1, 2021, whichto
 
ismeet
 
approximatelyprojected
 
27%demand
 
offrom
 
the
 
totalretailers,
 
U.S.foodservice
 
hen
population.
According to the USDA Agricultural Marketing Service approximately 66% of the U.S. laying flock would have to
be in cage-free production
by 2026 to
meet projected demand from
the retailers, foodservice providers
 
and
food manufacturers
manufacturers that have made
promises to transition
to cage-free eggs.
 
The United Egg
Producers, a nation-wide
egg farmer cooperative,
has
estimated that the cost to build farms compliant with
cage-free standards is $45 a bird. Based on
that figure, such an increase in
the size of the cage-free flock would require an estimated industry-wide investment of approximately $5.5 billion.
In
 
response
 
to
 
our
 
customers'
 
announced
 
goals
 
and
 
increased
 
legal
 
requirements
 
for
 
cage-free
 
eggs,
 
we
 
increased
 
capital
expenditures
 
to
 
increase
 
our
 
cage-free
 
production
 
capacity.
 
We
 
are
 
also
 
enhancing
 
our
 
focus
 
on
 
cage-free
 
capacity
 
when
considering acquisition
 
acquisition opportunities. Our
 
Our customers typically
 
typically do not
 
not commit to
 
to long-term purchases
 
purchases of specific
 
specific quantities or
 
16or
type of eggs with
 
with us, and
as a result,
 
result, we cannot predict
 
with any certainty which
 
which types of
eggs they will
 
will require us to
 
supply in
future
periods.
 
The ongoing
 
production
of
 
cage-free eggs
 
eggs is
more
 
costly
than
 
the production
 
of conventional
 
eggs,
and
 
these
higher
production
 
costs contribute
 
to the
 
higher prices
 
of cage-free
 
eggs compared
 
with conventional
 
eggs.
Many
 
consumers
prefer to
 
buy less
 
expensive conventional shell
 
shell eggs. These
 
These consumer
preferences may
 
in turn
 
influence our customers’
 
customers’ future
needs for cage-free
 
cage-free eggs. Due
 
Due to these
 
these uncertainties,
we may
 
over-estimate future demand
 
demand for cage-free
 
cage-free eggs,
which could
 
increase
our costs unnecessarily,
or we may under-estimate
future demand for cage-free
eggs, which could harm us competitively.
 
If our
competitors obtain non-cancelable long-term contracts to
provide cage-free eggs to our
existing or potential customers, then
there
may be decreased
demand for our
cage-free eggs due
to these lost
potential sales. If
we and our
competitors increase
cage-free
egg
production
and
there
is
no
commensurate
increase
in
demand
for
cage-free
eggs,
this
overproduction
could
lead
to
an
oversupply
of
cage-free
eggs,
reducing
the
sales
price
for
specialty
eggs
and
our
return
on
capital
investments
in
cage-free
production.
Failure
 
to
 
comply
 
with
 
applicable
 
governmental
 
regulations,
 
including
 
environmental
 
regulations,
 
could
 
harm
 
our
operating results,
 
financial condition, and
 
and reputation.
 
Further,
 
we may incur
 
incur significant
costs to
 
comply with any
 
any such
regulations.
We are subject to federal,
state and local
 
regulations relating to grading, quality
 
grading, quality control,
labeling, sanitary control, waste
 
waste disposal,
and other
 
areas of
 
our business.
 
As a
 
fully-integrated shell
 
shell egg
producer,
 
our shell
 
egg facilities
 
are subject
 
to regulation
 
and
inspection by
the USDA,
OSHA, EPA
 
and FDA,
as well
as state
and local
health and
agricultural agencies,
among others.
All of
our
our shell egg production and
feed mill facilities are subject
 
subject to FDA, EPA and OSHA regulation and inspections. In addition, rules
are often proposed
that, if adopted as proposed, could increase our costs.
 
Our operations and facilities are subject to various federal, state and local environmental, health, and safety
laws and regulations
governing,
among
 
other
 
things,
the
 
generation,
storage,
 
handling,
use,
 
transportation,
disposal,
 
and
remediation
 
of
 
hazardous
materials. Under these laws and
regulations, we are required to obtain permits
from governmental authorities, including, but
not
limited to pollution/wastewater discharge permits.
permits and manure
 
and litter land applications.
If we
 
fail to
 
comply with
 
applicable laws or
 
or regulations,
or fail
 
to obtain necessary
 
necessary permits,
we could
 
be subject
 
to significant
fines and penalties or other sanctions, our reputation could be harmed, and our
operating results and financial condition could be
materially
adversely
 
affected.
 
In
addition,
 
because
these
 
laws and
 
regulations
are
 
becoming
increasingly
 
more
stringent,
 
it is
possible that we will be required to incur significant costs for compliance
with such laws and regulations in the future.
Climate change and legal or regulatory responses
may have an adverse impact on our business and results of
operations.
Extreme
weather
events,
such
as derechos,
wildfires,
drought,
tornadoes,
hurricanes,
storms,
floods
or
other
natural
disasters
could materially and adversely affect our operating
results and financial condition. In fact, derechos, fires, floods,
tornadoes and
hurricanes have affected our facilities or the facilities of other egg producers in the past. Increased global temperatures
and more
frequent occurrences
of extreme
weather events,
which may
be exacerbated
by climate
change, may
cause crop
and livestock
areas to
become unsuitable,
including due
to water
scarcity or
high or
unpredictable
temperatures,
which may
result in
much
greater stress on food systems and more pronounced food
insecurity globally. Lower
global crop production, including corn and
soy,
which are
the primary
feed ingredients
that support
the health
of our
animals, may
result in
significantly higher
prices for
these commodity inputs, impact our ability
to source the commodities we
use to feed our flocks,
and negatively impact our ability
to maintain
or grow
our operations.
Climate change
may increasingly
expose workers
and animals
to high
heat and
humidity
stressors that adversely
impact poultry
production. Increased
greenhouse gas
emissions may
also negatively
impact air quality,
soil quality
and water
quality,
which may
hamper our
ability to
support our
operations, particularly
in higher
water-
and soil-
stressed regions.
18
Increasing
frequency of
severe weather
events, whether
tied to
climate change
or any
other cause,
may negatively
impact our
ability to raise
poultry and
produce eggs profitably
or to
operate our transportation
and logistics
supply chains. Regulatory
controls
and
market
pricing may
continue
to drive
the costs
of fossil
-based
fuels higher,
which
could negatively
impact
our ability
to
source commodities
necessary to
operate our
farms or
plants and
our current
fleet of
vehicles. These
changes may
cause us
to
change, significantly, our day-to-day
business operations and our strategy. Climate change and extreme weather events may also
impact demand for our products
given evolution of consumer food preferences.
Even if we take
measures to position our business
in anticipation
of such
changes, future
compliance
with legal
or regulatory
requirements may
require significant
management
time, oversight and enterprise expense. We
may also incur significant expense tied to regulatory fines if laws and regulations are
interpreted and applied
in a manner that
is inconsistent with our
business practices. We
can make no
assurances that our efforts
to prepare
for these
adverse events
will be
in line
with future
market and
regulatory expectations
and our
access to
capital to
support our business may also be adversely impacted.
Current and future litigation could expose us to significant
liabilities and adversely affect our business reputation.
We and certain of our subsidiaries are involved in various legal proceedings. Litigation is
 
is inherently unpredictable, and although
we
 
believe
 
we
 
have
 
meaningful
 
defenses
 
in
 
these
 
matters,
 
we
 
may
 
incur
 
liabilities
 
due
 
to
 
adverse
 
judgments
 
or
 
enter
 
into
settlements of claims that
 
that could have a material
 
a material adverse
effect on our
 
results of operations, cash flow
 
cash flow and
financial condition.
 
For
a
discussion of our ongoing
 
legal proceedings
see Part
 
I. Item 3. Legal
 
Item 3.Proceedings below. Such lawsuits are expensive to defend,
divert management’s attention, and may result in significant adverse
 
Legal Proceedings
below. Such
lawsuits
are expensive
to defend,
divert
management’s
attention, and
may result
in significant
adverse judgments
or settlements. Legal
proceedings may
expose us
to
to negative publicity, which could adversely affect
our business reputation and customer preference for our products and brands.
FINANCIAL AND ECONOMIC RISK FACTORS
Weak or unstable economic conditions,
including higher inflation, could negatively impact our business.
Weak or unstable
economic conditions, including higher inflation, may adversely affect
our business by:
●
Limiting our access to capital markets or increasing the cost of capital
we may need to grow our business;
●
Changing consumer spending and habits and demand for eggs, particularly
higher-priced specialty eggs;
●
Restricting the supply of energy sources or increasing our cost to procure
energy; or
●
Reducing the availability of feed
ingredients, packaging material, and other raw
materials, or increasing the cost
of these
items.
Deterioration of economic conditions could also negatively
impact:
●
The financial condition of our suppliers, which may make
it more difficult for them to supply raw materials;
●
The financial condition of our customers, which may decrease demand
for eggs or increase our bad debt expense; or
●
The financial condition of our insurers, which could increase our cost to obtain insurance, and/or make it difficult for or
insurers to meet their obligations in the event we experience a loss due to an insured
peril.
According
to
the
U.S.
Bureau
of
Labor
Statistics,
from
May
2021
to
May
2022,
the
Consumer
Price Index for
All
Urban
Consumers increased 8.6 percent, the largest 12-month
increase since the period ending December 1981. Inflationary costs have
increased our input costs, and if
we are unable to pass these costs through
to the customer it could have an adverse
effect on our
business.
The
 
loss
 
of
 
any
 
registered
 
trademark
 
or
 
other
 
intellectual
 
property
 
could
 
enable
 
other
 
companies
 
to
 
compete
 
more
effectively with us.
We
 
utilize intellectual property
 
property in
our business. For
 
For example, we
 
own the
trademarks
Farmhouse Eggs®
,
4Grain®, Sunups®
,
and
Sunny Meadow®
. We
 
We produce and market
Egg-Land’s
 
Best®
 
and
Land O’ Lakes
® under license
agreements with EB.
We
have invested a
significant amount of
 
money in establishing and promoting
 
and promoting our
trademarked brands.
The loss or
 
expiration of any
any intellectual property could
 
could enable our competitors
 
competitors to compete more
 
more effectively with us
 
with us by allowing them
 
allowing them to make and
 
make and sell products
products substantially
 
similar
to
 
those
we
 
offer. This
 
This could
 
negatively
impact
 
our
ability
 
to
produce
 
and
sell
 
those
products,
thereby
thereby adversely affecting our operations.
Impairment in the carrying value
 
carrying value of
goodwill or other assets
 
assets could negatively
affect our results of
 
operations or net
worth.
Goodwill
 
represents
 
the
 
excess
 
of
 
the
 
cost
 
of
 
business
 
acquisitions
 
over
 
the
 
fair
 
value
 
of
 
the
 
identifiable
 
net
 
assets
acquired.
Goodwill
 
is
 
reviewed
 
at
 
least
 
annually
 
for
 
impairment
 
by
 
assessing
 
qualitative
 
factors
 
to
 
determine
 
whether
 
the
existence of events or circumstances leads to a determination that it is
more likely than not that the fair value of a reporting unit
is less than its carrying amount.
As of May 29, 2021, we had $35.5
million of goodwill.
While we believe the current carrying
value of this goodwill is
not impaired, future goodwill impairment
charges could adversely affect our results of
operations in any
particular period or our net worth.
 
 
1719
existence of events or circumstances
leads to a determination that
it is more likely than not
that the fair value of
a reporting unit
is less than
its carrying
amount. As of
May 28, 2022,
we had $44.0
million of
goodwill. While we
believe the
current carrying
value of this goodwill is not impaired, future goodwill impairment charges could adversely affect our results of operations in any
particular period and our net worth.
Events
 
beyond
 
our
 
control
 
such
 
as
 
pandemics,
 
extreme
 
weather
 
and
 
natural
 
disasters
 
could
 
negatively
 
impact
 
our
business.
 
Pandemics such as COVID-19, or
similar disease outbreaks in the future,
may depress demand for shell eggs
due to quarantines
or restrictions on
 
on public
interactions that
 
would limit the
 
the ability
of consumers
 
to purchase shell
 
shell eggs.
Pandemics, or
 
similar disease
outbreaks in the future,
may disrupt our supply chain and
 
chain and operations at
our facilities. If a significant percentage of
 
percentage of our workforce,
or the workforce of our suppliers or transportation providers, is
unable to work because of illness or government restrictions,
our
operations would
 
would be negatively
 
negatively impacted, potentially
 
potentially materially.
 
Pandemics or
 
disease outbreaks
 
may also
 
impact hens
 
or the
food supply.
Fire,
 
bioterrorism,
Fire, bioterrorism, pandemic,
pandemics,
extreme
weather
or natural
disasters, including
droughts,
 
floods,
excessive
cold
or
heat, hurricaneswater
rights restrictions, hurricanes or other storms, (some of which may be believed to be the result of or
intensified by climate change), could impair the health or
growth of our flocks, decrease production or availability
of feed ingredients, or interfere
 
our flocks,
decrease production
or availability
of feed
ingredients, or
interfere with
our operations
due to
 
power outages,
fuel shortages, discharges from
overtopped or breached
wastewater treatment lagoons, damage to our production and processing
facilities, labor shortages or
disruption of transportation
channels,
among other things. Any
of these factors could
have a material adverse
adverse effect on our financial results.
ITEM 1B.
 
UNRESOLVED
Weak or unstable economic conditions could negatively impact our business.
STAFF COMMENTS
 
Weak or unstable economic conditions, including higher inflation, may adversely affect our business by:None.
ITEM 2.
 
●
Limiting our access to capital markets or increasing the cost of capital we may need to grow our business;
●
Changing consumer spending and habits and demand for eggs, particularly higher-priced specialty eggs;
●
Restricting the supply of energy sources or increasing our cost to procure energy; or
●
Reducing the availability
of feed ingredients,
packaging material, and
other raw materials,
or increasing the
cost of these
items.
Deterioration of economic conditions could also negatively impact:
●PROPERTIES
 
The financial condition of our suppliers, which may make it more difficult for them to supply raw materials;
●
table
 
The financial condition of our customers, which may decrease demand for eggs or increase our bad debt expense; or
●
below provides
 
The financial condition of our insurers, whichsummary
 
could increase our cost to obtain insurance,information
 
and/or make it difficultabout the
primary
operational facilities
we use
in our
business as
of May
28,
2022.
Type
Quantity
(a)
Owned
Leased
Production Capacity
Location
Breeding Facilities
3
3
—
House up to 255,000 hens
GA, MS
Distribution Centers
4
4
—
NA
FL, GA, NC, TX
Feed Mills
25
24
1
Production capacity of 859 tons
of feed per hour
AL, AR, FL, GA, KS, KY,
LA,
MS, OH, OK, SC, TN, TX, UT
Hatcheries
2
1
1
Hatch up to 407,600 chicks per
week
FL, MS
Processing and
Packaging
43
42
1
Approximately 596,700 dozen
shell eggs per hour
AL, AR, FL, GA, KS, KY,
LA,
MS, OH, OK, SC, TX, UT
Pullet Facilities
28
27
1
Grow 27.2 million pullets
annually
AR, FL, GA, KS, KY,
MS, OH,
SC, TX, UT
Shell Egg Production
42
42
—
House up to 48.8 million hens
AL, AR, FL, GA, KS, KY,
LA,
MS, OH, OK, SC, TX, UT
Egg Products Processing
Facilities
2
2
—
Production capacity of 72.8
million lbs. per year
GA, TX
(a)
Does not include idled facilities.
Our affiliate, MeadowCreek Foods, LLC (“MeadowCreek”) owns our new egg products facility that is
currently being retrofitted
and upgraded for or
future production. The
facility is expected
to be operational
late in our
fiscal 2023 second
quarter.
Once fully
insurers operational, MeadowCreek
will have
the capacity
to meet their obligations in produce
approximately
500 thousand
pounds of
weekly hard-cooked
egg
products.
We
also
have
ongoing
construction
projects
to
further
expand
the
Company’s
cage-free
egg
production
capabilities.
These
projects include expanding our cage-free egg production at our Okeechobee, Florida, production facility.
The project is designed
to include
the event we experience a loss due construction
of two
cage-free
layer houses
and one
cage-free pullet
house with
capacity for
approximately 400
thousand cage-free hens and 210 thousand pullets, respectively.
Construction has commenced, with the first layer house planned
to an insured peril.be finished
by October 1,
2022, with the
second layer house
and project completion
expected by February
1, 2023. In
Delta,
 
 
 
 
UNRESOLVED STAFF
20
Utah, we
 
COMMENTSare constructing
four new
cage-free layer
houses and
two pullet
houses conversions
with capacity
for approximately
810 thousand
cage-free layer
hens which
is expected
to be
completed by
fall of
2023. At
our Guthrie,
Kentucky farm,
we are
converting nine
existing houses
to cage-free
layer houses
and two
pullet houses
with capacity
for approximately
953 thousand
cage-free hens which is expected to be completed by spring of 2025.
Subsequent
to
the
end
of
fourth
quarter
2022,
the
Company’s
Board
of
Directors
approved
a
capital
project
to
expand
the
Company’s
cage-free production
capabilities. The
proposed project
at Chase,
Kansas will
convert
existing conventional
layer
capacity to cage-free capacity for
approximately 1.5 million cage-free hens
and include remodels of
all remaining pullet facilities.
Work is expected
to commence immediately with project completion expected by year-end
2025.
As of
May
28,
2022,
we
owned
approximately
28.0 thousand
acres
of land.
There
are no
material
mortgages
or liens
on our
properties.
ITEM 3.
LEGAL PROCEEDINGS
 
None.Refer to the description of certain legal proceedings pending against us under Part II.
Item 8. Notes to the Consolidated Financial
Statements,
, which discussion is incorporated herein by reference.
ITEM 4.
MINE SAFETY DISCLOSURES
 
Not applicable.
PART
II.
ITEM
5.
MARKET
FOR
REGISTRANT’S
COMMON
EQUITY,
RELATED
STOCKHOLDER
MATTERS
AND
ISSUER PURCHASES OF EQUITY SECURITIES
We have two classes of
capital stock, Common Stock and Class A Common Stock. Our Common Stock trades on the NASDAQ
Global Select Market under the symbol “CALM”. There is no publ
ic trading market for the Class A Common Stock.
All outstanding
Class A
shares are
owned by
a limited
liability company
of which
Adolphus
Baker,
our Chairman
and Chief
Executive Officer,
is the
sole managing
member and
will be
voted at
the direction
of Mr.
Baker.
At July 12,
2022, there
were
approximately 324 record holders of our Common Stock and
approximately 28,419 beneficial owners whose shares were held by
nominees or broker dealers. For
additional information about our capital
structure, see
in Part II. Item 8. Notes
to the Consolidated Financial Statements.
Dividends
Cal-Maine has a
variable dividend policy
adopted by its
Board of Directors.
Pursuant to the
policy,
Cal-Maine 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 will pay dividends
to shareholders of record on
the 65th day after the
quarter end. Dividends are payable
on the 15th day following
the record date. Following a
quarter for which
the
Company
does
not
report
net
income
attributable
to
Cal-Maine
Foods,
Inc.,
the
Company
will
not
pay
a
dividend
for
a
subsequent profitable quarter until the Company is profitable on a
cumulative basis computed from the date of the
last quarter for
which
a
dividend
was
paid. Under
the
Company's
Credit
Facility,
dividends
are
restricted
to
the
amount
permitted
under
the
Company’s
current dividend policy,
and may not
be paid if
a default exists
or will arise
after giving effect
to the dividend
or if
the sum of
cash and cash
equivalents of
the Company and
its subsidiaries plus
availability under
the Credit Facility
equals less
than $50 million.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table of Contents
18
ITEM 2.
PROPERTIES
 
The table below provides summary information about the primary operational facilities we use in our business.
 
Type
Quantity
Owned
Leased
Production Capacity
Location
Breeding Facilities
3
3
—
House up to 255,000 hens
MS, GA
Distribution Centers
3
2
1
NA
FL, NC, TX
Feed Mills
25
24
1
Production capacity of 814 tons of
feed per hour
AL, AR, FL, GA, KS, KY,
LA,
MS, OH, OK, SC, TN, TX, UT
Hatcheries
2
1
1
Hatch up to 407,600 chicks per
week
MS, FL
Processing and Packaging
44
43
1
Approximately 565,800 dozen
shell eggs per hour
AL, AR, FL, GA, KS, KY,
LA,
MS, OH, OK, SC, TX, UT
Pullet Facilities
24
24
—
Grow 24.4 Million pullets
annually
AR, FL, GA, KS, KY,
OH, SC,
TX, UT
Shell Egg Production
41
40
1
As of May 29, 2021, 37.8 million
layers in Company owned
facilities
AL, AR, FL, GA, KS, KY,
LA,
MS, OH, OK, SC, TX, UT
Egg Products Processing
Facilities
2
2
—
Capable of producing 60 million
lbs. per year
GA, TX
 
As of
May 29,
2021, we owned
approximately 28.3 thousand
acres of
land. There
are no
material encumbrances
on our
properties.
 
ITEM 3.
LEGAL PROCEEDINGS
 
Refer to the description of
certain legal proceedings pending
against us under Part II.
Item 8. Notes to the
Consolidated Financial
Statements,
, which discussion is incorporated herein by reference.
 
ITEM 4.
MINE SAFETY DISCLOSURES
 
Not applicable.
 
PART
II.
 
ITEM
5.
MARKET
FOR
REGISTRANT’S
COMMON
EQUITY,
RELATED
STOCKHOLDER
MATTERS
AND
ISSUER PURCHASES OF EQUITY SECURITIES
 
We have two classes of capital stock, Common Stock and Class A Common Stock. Our Common Stock trades on the NASDAQ
Global Select Market under the symbol “CALM”. There is no public trading market for the Class A Common Stock.
All outstanding
Class A
shares are
owned by
a limited
liability company
of which
Adolphus Baker,
our Chairman
and Chief
Executive Officer,
is the
sole managing
member and
will be
voted at
the direction
of Mr.
Baker.
At July 14,
2021, there
were
approximately 322 record holders
of our Common Stock
and approximately 39,079 beneficial
owners whose shares were
held by
nominees or broker dealers. For additional information about our capital structure, see
in Part II. Item 8. Notes
to the Consolidated Financial Statements.
Dividends
Cal-Maine has a variable
dividend policy adopted by
its Board of Directors. Pursuant
to the policy,
Cal-Maine 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 will pay dividends to shareholders of record
on
the 65th day after
the quarter end.
Dividends are payable
on the 15th day
following the record
date. Following a
quarter for which
the
Company
does
not
report
net
income
attributable
to
Cal-Maine
Foods,
Inc.,
the
Company
will
not
pay
a
dividend
for
a
subsequent profitable quarter until
the Company is profitable
on a cumulative basis
computed from the date
of the last quarter for
which a
dividend was
paid. Under the
Company's Revolving
Credit Facility,
dividends are
restricted to
the amount
permitted
under
the
Company’s
current dividend
policy,
and
may
not
be
paid
if
a
default
exists
or
will
arise
after
giving
effect
to
the
calm-20210529_10Kp19i0.jpgcalm-20210529_10Kp21i0
 
19
dividend.
At
the
end
of
fiscal
2021,
the
amount
of
cumulative
losses
to
be
recovered
before
payment
of
a
dividend
was
$4.2 million.
21
Stock Performance Graph
 
The following graphIn fiscal year
 
shows a comparison2021, the Company
 
of cumulative total
shareholder return, calculated
on a dividend
reinvested basis, for
the Company,utilized the NASDAQ
 
Composite Total Return, and
the NASDAQ
 
100 Total
Return indexes to
benchmark the
Company’s
total
shareholder
return.
We
are
replacing
these
indexes
with
the
(i)
Russell
2000
Total
Return,
and
(ii)
S&P
Composite
1500
Food
Products
Industry
Index.
The
Company
is
a
member
of
each
of
these
indexes
and
believes
the
other
companies included
in these indexes
provide products and
services similar to
Cal-Maine Foods.
The NASDAQ Composite
and
NASDAQ 100
Total
Return index
performances are
presented below
on the
performance graph
for comparison
purpose in
the
transitional year.
Beginning in
fiscal year
2023, only
 
the five yearsRussell
 
ended May 29, 2021.2000 Total
Return and
S&P Composite
1500 Food
Products
Industry indexes will be used as a
comparison for total shareholder return. The graph assumes $100 was
invested on May 28, 2016 June 2, 2017
in the stock or index and dividends were reinvested.
 
index. Each date plotted indicates the last day of a fiscal
quarter.June 2, 2017
June 1, 2018
May 31, 2019
May 29, 2020
May 28, 2021
May 27, 2022
Cal-Maine Foods, Inc.
$
100.00
$
121.40
$
97.94
$
117.89
$
92.44
$
127.83
NASDAQ Composite
100.00
125.88
150.49
154.80
189.32
276.83
NASDAQ 100 Total Return
100.00
121.74
123.82
167.72
242.04
225.88
Russell 2000 Total Return
100.00
118.77
107.08
103.40
170.16
143.16
S&P Composite 1500 Food
Products Industry Index
100.00
85.03
87.52
93.92
113.97
119.33
Issuer Purchases of Equity Securities
There were
 
no purchases
 
of our
 
Common Stock
 
made by
 
or on
 
behalf of
 
our Company
 
or any
 
affiliated purchaser
 
during our
fiscal 2021 2022
fourth quarter.
Recent Sales of Unregistered Securities
No sales of securities without registration under the Securities Act of 1933
occurred during our fiscal year ended May 29, 2021.
28, 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2022
Securities Authorized for Issuance under Equity Compensation Plans
Equity Compensation Plan Information
(a)
(b)
(c)
Number of
 
securities to be
 
issued upon exercise
 
of outstanding
 
options, warrants
 
and rights
Weighted average
 
exercise price of
 
outstanding
 
options, warrants
 
and rights
Number of securities
 
remaining available for future
 
issuance under equity
 
compensation plans (excluding
 
securities reflected in column
 
(a))
Equity compensation plans
approved by shareholders
—
$
—
302,147317,844
Equity compensation plans not
approved by shareholders
—
—
—
Total
—
$
—
302,147317,844
(a)
 
There were no outstanding options,
 
outstanding options, warrants
or rights as
 
of
May
28, 2022. There were 1,016,573
 
29
, 202
1
.
There were
1,125,188
shares of restricted
stock outstanding under our Amended and Restated 2012 Omnibus Long-Term
Incentive Plan as of May 29, 2021.28, 2022.
(b)
 
There were no outstanding options, warrants or rights as of
May
28,
 
292022.
, 202
1
.
(c)
 
(c)
Reflects shares available
 
Reflects s
hares available for future issuance
 
issuance as of
May
28,
 
29
, 202
1
2022
 
under our Amended
Amended and Restated 2012
2012 Omnibus
Long-Term Incentive
Plan.
 
For
 
additional
information,
 
see
 
in
 
Part
 
II.
 
Item
8.
 
Notes
 
to
 
the
Consolidated
 
Financial
Statements.
 
ITEM 6.
 
SELECTED FINANCIAL DATA
This Item
is reserved
as a
result of
the Company’s
early adoption
of Item
301 of
Regulation S-K,
as deleted
pursuant to
SEC
Release
No.
33-10890;
34-90459
(Management’s
Discussion
and
Analysis;
Selected
Financial
Data,
and
Supplementary
Financial Information) adopted by the Securities and Exchange Commission on November 19, 2020.RESERVED
 
 
 
2123
ITEM
 
7.
 
MANAGEMENT’S
 
DISCUSSION
 
AND
 
ANALYSIS
 
OF
 
FINANCIAL
 
CONDITION
AND RESULTS
OF OPERATIONS
RISK FACTORS;
FORWARD
 
-LOOKING STATEMENTS
For
 
information
 
relating
 
to
 
important
 
risks
 
and
 
uncertainties
 
that
 
could
 
materially
 
adversely
 
affect
 
our
 
business,
 
securities,
financial
 
condition,
 
or
operating
 
results,
or
cash
flow,
 
reference
 
is
 
made
to
 
the
 
disclosure
 
set
 
forth
 
under
. In
addition, because
the following
discussion includes
numerous forward
-looking statements
relating to
our business,
securities, financial condition, operating results and cash flow, reference is made to the disclosure set forth under
.
In
addition, because the
following discussion
includes numerous
forward-looking statements relating
to us, our
results of operations,
financial condition
 
and business,
 
reference is
made to
 
the
information
 
set
forth
 
in
the
 
section
of
 
Part
I
 
immediately
preceding
Item
1
above
under
the
caption
Item 1 above under the caption “
.”
COMPANY
 
COMPANY OVERVIEW
Cal-Maine Foods, Inc. is primarily
engaged in the production, grading,
packaging, marketing and distribution of
 
of fresh shell eggs.
Our fiscal
 
year end
 
is the
 
Saturday closest to
 
to May 31. The
 
The Company,
 
which is
 
headquartered in
 
Ridgeland, Mississippi, is
 
is the
largest
 
producer
and
 
distributor
of
 
fresh shell
eggs in
the United
States. In
fiscal 2021,
we sold
approximately 1,073.2 million
dozen
 
shell
 
eggs
 
whichin
the
United
States
(“U.S”).
In
fiscal
2022,
 
we
 
sold
approximately
1,083.8 million dozen shell eggs, which we believe
 
represented
approximately
19%
20% of
domestic
shell
egg
consumption.
 
Our
total
flock
of
flock as of May 28, 2022 of approximately 37.842.2 million layers and 10.811.5 million
pullets and breeders is the
largest in the U.S. We
sell most
 
sell most of our
shell eggs
to a
diverse
 
group of customers,
 
customers, including national and
 
regional grocery storenational
 
and regional
grocery
store chains,
club stores,
companies
 
foodserviceservicing 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.
The
 
Company
 
has
 
one
 
operating
 
segment,
 
which
 
is
 
the
 
production,
 
grading,
 
packaging,
 
marketing
 
and
 
distribution
 
of
 
shell
eggs. Many of
 
of our
customers
 
rely
on
 
us
 
to
provide
 
most of
 
of their
shell
 
egg
needs,
 
including
specialty
 
and
conventional
 
eggs.
Specialty eggs
 
represent a
 
broad range
 
of products. We
 
classify nutritionally
 
enhanced, cage-free,
 
organic, and
 
free-range, pasture-
raised and brown eggs
 
eggs as
specialty productseggs
 
for accounting
and reporting
 
purposes. We
 
classify all
other shell
 
eggs as conventional
eggs.
 
conventional products. While
 
we
report
report
separate
sales
information
 
for
these
types
of
 
eggs,
there
are
a
 
number
of
cost
factors
 
which
are
not
specifically
 
available
for
for
conventional
or
specialty
eggs due
to
the
 
nature
of egg
production.
We
manage
our
operations
and
allocate resources to these
 
these
types of eggs on a consolidated
 
a consolidated basis
based on the demands
 
of our customers. For
further description
of
our business, refer to
HPAI
We
 
are
closely
monitoring
the outbreaks
of
highly
pathogenic
avian
influenza
(“HPAI”)
,
the
latest of
which
was
detected
in
commercial
flocks
in
the
U.S.
in
February
2022.
According
to
the
U.S.
Centers
for
Disease
Control
and
Prevention,
these
detections
do not
present
an immediate
public
health
concern.
There
have
been
no positive
tests for
HPAI
at
any
Cal-Maine
Foods’ owned or
contracted production facility
as of July 19,
2022. The USDA division
of Animal and
Plant Health Inspection
Service (“APHIS”), reported that approximately 30.7 million commercial layer hens have
been depopulated due to HPAI. Pullets
impacted
comprise
approximately
1.0
million.
According
to
APHIS,
the
most
recently
reported
outbreaks
of
HPAI
affecting
commercial
layer hens
and pullets
occurred
June 7,
2022 and
June 9,
2022,
respectively.
We
believe
the HPAI
outbreak
will
continue to impact the overall supply of eggs until the layer hen flock is fully replenished. 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.
COVID-19
Since early
 
2020, the
 
coronavirus (“COVID-19”) outbreak,
 
outbreak, characterized as
 
as a pandemic
 
pandemic by the
 
the World
 
Health Organization
 
on
March
 
11,
 
2020,
 
has
 
caused
 
significant
 
disruptions
 
in
 
international
 
and
 
U.S.
 
economies
 
and
 
markets.
 
We
 
understand
 
the
challenges and difficult economic
 
difficult economic environment
facing families
 
in the communities
 
where we live
 
and work, and
 
and we
are committed
to helping where we can. We
have provided food assistance to
those in
need by donating approximately 2.5 million dozen829 thousand
 
dozen eggs
in
fiscal
 
2021.2022.
 
We
 
believe
we
 
are
taking
 
all
reasonable
 
precautions
in
 
the
 
management
of
 
our
operations
 
in
response
 
to
the
COVID-19 pandemic.
Our top priority is
 
is the health
and safety of
 
of our
employees, who
work hard every
 
each day
to produce eggs
for
our customers. As part
of the nation’s food supply, we work in a critical
infrastructure industry, and we believe we have
a special
responsibility to maintain
 
maintain our
normal work
 
schedule. As such,
 
such, we are
 
are in
regular communication
 
with our
 
managers across
our
operations and
 
and continue to
 
to closely
monitor the
situation in
our facilities
and in
 
the situationcommunities
 
in ourwhere we
 
facilitieslive and
 
in the
communities where
we live
and work.
 
We
have implemented
 
procedures designed
 
to protect
 
our employees,
 
taking into
 
account guidelines
 
published by
 
by the Centers
 
Centers for
Disease Control and other government health agencies, and we have strict
sanitation protocols and biosecurity measures in place
throughout our operations with restricted access to
visitors. All non-essential corporate travel has been suspended.
There are no
known indications that COVID-19 affects hens or can be transferred through the food supply.
We
continue to proactively monitor
and manage operations during
the COVID-19 pandemic, including
additional related costs
that we incurred
or may incur
in the future.
The pandemic had
a negative impact
on our business
through disruptions in
the supply
chain such as increased costs and availability of packaging supplies, increased labor costs and medical costs.
In fiscal 2021, we spent $2.3 million (excluding medical insurance claims) related to the pandemic.
The majority these expenses
resulted from additional labor and
increased cost of packaging materials, primarily
reflected in cost of
sales. Medical insurance
claims related to COVID-19 paid during fiscal 2021 were an additional $1.4 million.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2224
throughout our operations
with restricted access
to visitors. There
are no known
indications that COVID-19
affects chickens
or
can be transferred through the food supply.
We
continue to
proactively monitor
and manage
operations during
the COVID-19 pandemic,
including additional
related costs
that we incurred or
may incur in the
future. The pandemic had
a negative impact on
our business through disruptions in
the supply
chain such as
increased costs and
limited availability of
packaging supplies, increased
labor costs, increased
medical costs and,
more recently, inflation.
In fiscal
2022 and
2021, we
spent $2.2
million and
$2.3 million
(excluding medical
insurance claims)
related to
the pandemic
and
its
effects,
respectively.
The
majority
of
these
expenses
resulted
from
additional
labor
and
increased
cost
of
packaging
materials, which are
primarily reflected in cost
of sales. Medical insurance
claims related to COVID-19
paid during fiscal 2022
and 2021 were an additional $2.4 million and $1.4 million, respectively.
Executive Overview of Results – Fiscal Years
Ended May 28, 2022, May 29, 2021 and May 30, 2020 and June 1, 2019
Fiscal Years
Ended
May 28, 2022
May 29, 2021
May 30, 2020
June 1, 2019
Net sales (in thousands)
$
1,777,159
$
1,348,987
$
1,351,609
$
1,361,188
Gross profit (in thousands)
$
337,059
$
160,661
$
179,588
$
222,859
Net average shell egg price
(a)
$
1.579
$
1.217
$
1.231
$
1.265
Average UB Southeast
Region - Shell Eggs - White Large
 
$
1.712
$
1.155
$
1.220
$
1.229
Feed costs per dozen produced
$
0.571
$
0.446
$
0.409
$
0.415
(a) The net average
shell egg selling price
 
selling price is the blended price for
 
for all sizes and
grades of shell eggs,
 
eggs, including non-graded
shell egg sales, breaking stock and undergrades.
In fiscal 2019, an increase in the U.S flock size
resulted in an oversupply of eggs, particularly from the start of our
third quarter
of fiscal
2019 through
the end
of the
third quarter
of fiscal
2020. This
led to
lower selling
prices for
conventional eggs,
and
demand for specialty eggs was negatively impacted by the low conventional egg prices.
Our net sales
for fiscal 2021
decreased $2.6 million
compared to fiscal
2020, primarily due
to the decrease
in the selling
price
and volume
of conventional
eggs, partially
offset by
the increased
volume of
specialty eggs
sold. We
sell the
majority of
our
conventional eggs at prices that
take into account, in varying
ways, independently quoted wholesale market
prices as published
by UB
for shell
eggs.
The daily
average of
the UB
Southeast Region
– Shell
Eggs –
White Large
decreased 5.3%
during our
fiscal 2021 as compared to fiscal 2020.
The total number of shell
eggs produced in the U.S. for
fiscal 2021 was 2.0% less than
the same period last year
as reported by
the United
States Department
of Agriculture
(“USDA”). Hen
numbers reported
by the
USDA as
of June
1, 2021,
were 315.7
million, which represents 5.3 million fewer hens than a year ago. Notably, this is the lowest national supply of laying hens since
October 2016. However, we believe
the decreased demand in foodservice seen throughoutThroughout the
 
first three quarters
of our
fiscal year 2020,
an oversupply
of eggs negatively
affected the
price of
conventional
eggs and demand
for specialty eggs
was negatively impacted
by the low
conventional egg prices.
For the first
three quarters of
fiscal 2020,
the average UB
southeastern large
index price was
down 21.9%
compared with the
prior-year period.
However, in
the fourth quarter of fiscal 20212020, the average UB southeastern large index price was 62.4% higher than the average price through
the first three quarters in fiscal 2020 due to increased demand related to the pandemic contributed toonset of
 
the depressed price of shell eggs
in the retail market due to
the extra supply entering the retail
channel from the foodservice channel.
The pandemic, continues to affect the demand for shell eggs. During the
early restrictive phase of the pandemic, which occurred
during our fourth
quarter of fiscal
2020, demand increased substantially
as consumers werepurchased more
eggs in anticipation of preparing for more
meals at home.
Consumer demand maintained a steady growth throughout our first three
quarters of fiscal 2021 but began trending down during
our fourth quarter of fiscal 2021
 
fourthas consumers started to resume pre-pandemic
 
quarteractivities. Our net sales for fiscal 2021 decreased
$2.6 million compared to fiscal 2020,
primarily due to the decrease
in the selling price and
volume of conventional eggs, partially
offset by the increased volume of specialty
eggs sold. We
believe the decreased demand in foodservice
seen throughout the first
three
quarters of
fiscal 2021
due
to the
pandemic
contributed to
the depressed
price
of shell
eggs for
fiscal 2021
in the
retail
market due to the extra supply entering the retail channel from the foodservice
channel.
For
 
fiscal
 
20212022,
 
aswe
 
consumers startedbelieve
 
to
resume
pre-pandemic activities.
Foodservice demand
has
started
to
improve, though it has remained below pre-pandemic
levels. Our experience appears consistent with industry trends during
this
period. According
to data
provided by
Informational Resources,
Inc. (“IRi”),
IRi’s
Total
US –
Multi Outlet
for all
shell eggs
demand increased
by approximately
6% for
the first
three quarters
during our
fiscal year
and decreased
approximately 20%
during
our fourth fiscal quarter as compared to the same periods in fiscal 2020.
According
to
IRi
Total
U.S.
–
Multi
Outlet
data,
for
the
52
weeks
ended
May
30,
2021,
dozens
soldprices
 
for
 
conventional
 
eggs
decreased 3.4%, while dozens sold
 
for specialty eggs increased 8.6%were
 
as compared to the same periodpositively
 
in the prior year. Similarly,
our total dozensimpacted
 
sold for conventional
eggs decreased 3.4%,
while our total
dozens sold for
specialty eggs increased
12.5%, as
compared to fiscal
2020. Specialty egg
demand has historically
been impacted by
 
the price a
better
alignment
of
 
the conventional egg.
 
When the
price of
conventional eggs
is low
the demand
for specialty
eggs declines
and as
the pricesize
 
of conventional
eggs increases
 
the
demand for specialty eggs increase. Weconventional
 
have also seen demand for specialty eggs increasesproduction
 
during holiday seasons. Welayer
 
believe
that the increasehen
 
in demand forflock
 
specialty eggsand
 
has been affectedcustomer
 
since and
consumer
demand
through
the onset
first
three
fiscal
quarters
 
of the pandemic
 
as consumers have2022.
Conventional egg
 
been preparing
more meals at home rather than going out to eat, and therefore they have been more willing to spend money on specialty eggs.
Gross profit decreased $18.9 million to $160.7
million in fiscal 2021. The decrease
resulted primarily from lower selling prices
for conventional
eggs, as
discussed above,
and from further
 
increased feed
costs. For
fiscal year
2021, the
average Chicago
Board of
Trade (“CBOT”) daily market price was $3.77 per bushel for corn and $300.62 per ton for soybean meal, representing increases
of 21.1% and 23.0%,
respectively, compared to the daily average CBOT
prices for fiscal 2020.
Feed costs started trending higher
midway throughin
 
the secondfourth
 
quarter of
 
fiscal 2021.2022
 
Increased exportprimarily due
 
demand forto decreased
 
both soybeanssupply caused
 
and corn,by the
HPAI
outbreak
compounded
with
good
customer
demand.
Throughout
fiscal
2022
the
hen
numbers
reported
by
the
USDA
remained below
the five-year
average. As
of July 17,
2022, APHIS
reported that
approximately 30.7
million commercial
table
egg layer
hens, or
approximately 9.5%
of the
table egg
layer flock
based on
February 2022
reported layer
numbers, have
been
depopulated due
to HPAI.
Hen numbers
reported by
the USDA
 
as of
June 1,
2022, were
297.5 million,
which represents
18.3
million fewer hens than a year ago.
According to
Information Resources,
Inc. (“IRI”),
for the
52 weeks
ended June
5, 2022,
which approximately
aligns with
our
fiscal year
2022, conventional
egg dozens
sold in
the U.S.
at multi-retail
outlets decreased
14.3%, while
specialty egg
dozens
sold increased 13.2% versus the prior-year comparable period.
Our conventional eggs dozens sold decreased 3.4% and specialty
egg dozens sold increased 12.5% as compared to fiscal 2021.
Gross profit increased $176.4 million to $337.1 million in fiscal 2022. The increase resulted primarily from higher
selling prices
for
conventional
eggs
as
well
 
as weather-
related shortfalls
 
in productionthe
 
and yields,increased
 
have placed
additional pressure
on domestic
supplies, resulting
in higher
and more
volatile prices.
We
continue
to
execute
our
growth
strategyvolume
 
of
 
remainingspecialty
 
aeggs
 
low-costsold,
 
providerpartially
offset
by
the
increased
cost
 
of
 
shellfeed
ingredients, increased processing costs and the decline in the volume of conventional eggs
 
sold. For fiscal year 2022, the average
Chicago
Board
of Trade
(“CBOT”)
daily
market
price
was $6.31
per bushel
for
corn and
 
growth$392.06
 
throughper ton
 
selective
acquisitions,for
 
with
a
focus
on
expanding
cage-free
capacity.
Subsequent
to
fiscal
2021,
we
acquired
the
remaining
50%soybean meal,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2325
representing increases of
38.3% and 6.1%, respectively,
compared to the daily
average CBOT prices for fiscal
2021. Feed costs
started trending
higher midway
through the
second quarter
of fiscal
2021 and
then again
near the
end of
the second
quarter of
fiscal
2022.
Beginning
in
August
2020,
the
grain
markets,
particularly
corn,
have
been
negatively
affected
by
many
factors,
including weather-related production and yield shortfalls, increased export demand and ongoing disruptions from the COVID-19
global pandemic.
These factors continued into our fiscal 2022 and
as other factors such as the
Russia-Ukraine war, increased fuel
costs, transportation and fertilizers prices
and strong export demand and restrictions
further compounded the existing issues that
contributed
to
near-historical
low
stocks-to-use
ratios
for
corn
worldwide
and
overall
higher
feed
ingredient
cost
and
price
volatility.
We continue
to execute our growth strategy of remaining a low-cost provider
of shell eggs and growth of our specialty eggs and
egg
products
through
additional
investments
in
cage-free
facilities and
selective
acquisitions.
In
fiscal
2022,
we
acquired
the
remaining 50%
membership interest
 
in Red
 
River Valley
Egg Farm,
 
LLC (“Red
 
River”), which
 
owns and
 
operates a
 
specialty
shell
 
egg
production
complex
complex
with
 
approximately
1.7
 
million
cage-free
 
laying
hens,
 
cage-free
pullet
 
capacity,
 
a
feed
 
mill,
processing
plant, related
offices and outbuildings and related equipment located on approximately 400 acres near Bogata, Texas.
Texa
 
s.
We
 
also
announced
new
capital
projects
with
estimated
costs of
$105
million
that
will
expand
our
cage-free
production
and
capacity by 2.2 million cage-free hens. For additional information,
see
RESULTS
OF OPERATIONS
The following table sets forth, for the fiscal years indicated, certain items from our consolidated
statements of income expressed
as a percentage of net sales.
Fiscal Year
Ended
May 28, 2022
May 29, 2021
May 30, 2020
Net sales
100.0
%
100.0
%
Cost of sales
88.181.0
%
86.788.1
%
Gross profit
11.919.0
%
13.311.9
%
Selling, general and administrative
11.2
%
13.6
%
13.2
%
Loss(Gain) loss on disposal of fixed assets
0.2(0.3)
%
—0.2
%
Operating income (loss)
(1.9)8.1
%
0.1(1.9)
%
Total other income
1.21.3
%
1.41.2
%
Income (loss) before income taxes
(0.7)9.4
%
1.5(0.7)
%
Income tax expense (benefit)
(0.9)1.9
%
0.1(0.9)
%
Net income
7.5
%
0.2
%
1.4Less:
Net loss attributable to noncontrolling interest
—
%
—
%
Net income attributable to Cal-Maine Foods, Inc.
7.5
%
0.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2426
Fiscal Year
Ended May 28, 2022 Compared to Fiscal Year
 
Ended May 29, 2021 Compared to Fiscal Year Ended May 30, 2020
NET SALES
Total net sales for fiscal
2022 were $1,777.2 million compared to $1,349.0 million for fiscal 2021.
Net shell egg sales represented 96.6% and 97.3% of total net sales
 
97.3% and 97.7% of total
net sales for the fiscal year 2022
 
yearand 2021, and 2020, respectively. Shell egg sales
classified as “Other”
“Other”
 
represent sales of
 
of hard cooked eggs,
 
-cooked
eggs, hatching
eggs, and
 
other miscellaneous
 
products
included with
 
our shell
shell egg
operations.
The
table
below
presents
an
analysis
of
our
conventional and
specialty shell
egg
sales
(in
(in thousands, except
percentage data):
May 28, 2022
May 29, 2021
May 30, 2020
Total net sales
$
1,348,9871,777,159
$
1,351,6091,348,987
Conventional
$
1,061,995
61.8
%
$
766,284
58.4
%
$Specialty
830,278648,838
62.937.8
%
Specialty
539,780
41.1
%
485,465
36.8
%
Egg sales, net
1,710,833
99.6
%
1,306,064
99.5
%
1,315,743Other
99.76,322
0.4
%
Other
6,190
0.5
%
4,452
0.3
%
Net shell egg sales
$
1,312,2541,717,155
100.0
%
$
1,320,1951,312,254
100.0
%
Dozens sold:
Conventional
747,914
69.0
%
785,446
73.2
%
813,255Specialty
76.1335,875
31.0
%
Specialty
287,765
26.8
%
255,895
23.9
%
Total dozens sold
1,073,2111,083,789
100.0
%
1,069,1501,073,211
100.0
%
Net average selling price per dozen:
Conventional
$
0.9761.420
$
1.0210.976
Specialty
$
1.8761.932
$
1.8971.876
All shell eggs
$
1.2171.579
$
1.2311.217
Egg products sales:
 
Egg products net sales
$
36,73360,004
$
31,41436,733
Pounds sold
63,62763,968
65,98563,627
Net average selling price per pound
$
0.5770.938
$
0.476
0.577
Shell egg net sales
-
Conventional egg salesFor fiscal 2022,
 
decreased $64.0 millionconventional egg
 
or 7.7%, comparedsales increased $295.7
 
to fiscal 2020,million, or 38.6%,
 
primarily duecompared to
 
decreases in price
and volumefiscal 2021, primarily
 
due to
the increase
in conventional
egg prices,
partially offset
by a
4.8% decrease
in the
volume of
conventional
 
eggs sold.
Changes in price resulted in a $332.1
 
Changesmillion increase and change in
price and
volume resulted
 
in a
$35.3 $36.6 million
and a
$27.1 million
decrease in net
sales, respectively.
-
We believe
 
prices for conventional eggs
The decrease in volume
were positively impacted by
a better alignment of the
size of the conventional
production
layer
hen
flock
and
 
price of conventional eggs incustomer
 
fiscal 2021 compared to fiscaland
 
2020 was due to the
significant
increase
in
retailconsumer
 
demand
 
that
occurred
inthroughout
 
the
 
fourthfirst
 
quarterthree
quarters
 
of
 
fiscal
 
20202022.
Conventional egg prices further
 
relatedincreased in the fourth quarter
of fiscal 2022 primarily due
 
to decreased supply caused
by the HPAI
 
theoutbreak,
 
onsetdiscussed above.
-
We believe lower
 
ofconventional egg prices in the prior-year period were primarily
 
tied to a surplus of conventional eggs
entering the retail channel from the foodservice channel exceeding
 
pandemic,
asretail demand during this phase of the pandemic.
consumers purchased-
more eggsThe decrease
 
in anticipation
of preparing
more meals at
home. Additionally, the extra
supply entering
the retail
channel from
the foodservice
further depressed
pricesvolume of
 
conventional shell
eggs throughout
the first
three
quarters of fiscal 2021.
-
Specialty egg sales increased $54.3
million or 11.2%,
primarily due to increased volume
of 12.5% which resulted
in a
$59.8
million
increase
in
net
sales.
More
cage-free
facilities
came
into
production
and
we
increased
promotional
spending, both of which helped increase our cage-free sales.
-
We believe that the
increase in
demand for
specialty eggs
 
has been affected
since the
onset of the
pandemic as
consumers
have been preparing
more meals at
home rather than
going out to
eat, and therefore
they have been
more willing to
spend
money on specialty eggs.
Egg products net sales
-
Egg products net sales increased
$5.3 million or 16.9%,sold was primarily
 
due to an increase in sellingelevated
 
price of 21.2% compared
to fiscal 2020, which had a $6.4 million positive impact on net sales.
-
retail demand
 
Fiscal 2020
net average
selling prices
were negatively
impacted by
an oversupply
of eggs
throughoutduring the
 
first three
quarters inhalf
 
of
fiscal 2020,2021 given consumers’ preferences
 
followed byto purchase eggs for in-home meal
 
a declinepreparation due to the pandemic.
We saw
these consumer preferences begin to shift
 
in foodservice
demand in
the fourth
quarter of
 
fiscal 2020,2021 as consumers began
to resume out-of-home
dining and prepared fewer meals at home.
-
Specialty egg sales
increased $109.1 million, or
20.2%, for fiscal
2022 compared to
fiscal 2021, primarily
 
due to a
 
the16.7%
pandemic. Our net average
selling price has increased
in fiscal 2021 as
demand has started to
increase in the foodservicevolume of specialty dozens sold and a 3.0% increase in specialty egg prices. Changes in price resulted in
channel.a $18.8 million
 
increase and change
in volume
resulted in a
$90.3 million increase
in net
sales, respectively. Our specialty
egg sales
also benefitted
from our
additional cage-free
production capacity.
Cage-free egg
sales for
fiscal 2022
were
22.1% of our total net shell egg sales.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2527
Egg products net sales
-
Egg products
net sales increased
$23.3 million
or 63.4%, primarily
due to a
62.6% selling
price increase
compared to
fiscal 2021, which had a $23.1 million positive impact on net sales.
-
Our
egg products
net average
selling
price
increased
in fiscal
2022,
compared
to fiscal
2021
as foodservice
channel
demand has
begun to
shift more
towards pre-pandemic
levels. This
coincided
with the
HPAI
outbreak
that started
in
February 2022, in which
we believe 10.4 of
the 30.7 million culled birds
were located at facilities dedicated
to support
inline breaking facilities in Iowa.
-
Selling prices for
egg products in fiscal
2021 were negatively
impacted by a
decline in foodservice
demand during the
more restrictive phases of governmental and business shutdowns due to the pandemic.
COST OF SALES
Cost of sales for fiscal 2022 were $1,440.1 million compared to $1,188.3
million for fiscal 2021.
Cost of
 
sales consistsconsi
 
sts of costs
 
costs directly
related
 
to producing,
 
processing
and
 
packing shell
 
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
 
incurred at
the egg
 
production facility,
 
including feed,
facility,
 
hen amortization and
 
and other
related farm
 
production
costs.
The following table presents the key variables affecting our cost of
sales (in thousands,
 
except cost per dozen data):
Fiscal Year
Ended
May 28, 2022
May 29, 2021
May 30, 2020
% Change
Cost of Sales:
Farm production
$
730,902927,806
$
677,181730,902
7.926.9
%
Processing, packaging, and warehouse
289,056
250,058
234,243
6.815.6
Egg purchases and other (including change in inventory)
172,034
177,634
232,027
(23.4)(3.2)
Total shell eggs
1,388,896
1,158,594
1,143,451
1.319.9
Egg products
51,204
29,536
25,651
15.173.4
Other
—
196
2,919
(93.3)(100.0)
Total
$
1,188,3261,440,100
$
1,172,0211,188,326
1.421.2
%
Farm production costs (per dozen produced)
Feed
$
0.4460.571
$
0.4090.446
9.028.0
%
Other
$
0.3200.352
$
0.3290.320
(2.7)10.0
%
Total
$
0.7660.923
$
0.7380.766
3.820.5
%
Outside egg purchases (average cost per dozen)
$
1.221.72
$
1.261.22
(3.2)41.0
%
Dozens produced
1,022,327
970,837
927,799
4.65.3
%
Percent produced to sold
94.3%
90.5%
86.8%
4.34.2
%
Farm Production
-
Feed costs
per dozen
produced increased
 
$53.7 million, primarily28.0% in
 
due to increasedfiscal 2022
 
export demand, ascompared to
 
well as weather-relatedfiscal 2021,
 
shortfalls inprimarily due
to higher
feed
production and yields, which have placed additional pressure on domestic supplies.ingredient prices,
discussed above.
-
Other
 
farm
 
production
 
costs
decreased increased
 
due
 
to higher
 
lowerflock amortization,
 
facility
expense,
resultingprimarily
 
from an
 
improved
efficienciesincrease
 
in
 
our
utilization and from increased volume of eggs produced.
-
 
cage-free
We also had lower amortization expense, due
to the lowerproduction, which has higher capitalized costs. Also, higher feed costs,
which began to rise in prior periods, whichour third quarter of fiscal
2021, are capitalized in our
flocks
during pullet production. In fiscal 2020 we incurred higher production and increased our
amortization expense.
-
We had higher
facility expense due to selling flocks early in response
to market conditions.
as more cage-free facilities came into production.
Processing, packaging, and warehouse
-
Cost of packaging materials increased 11.9% compared to fiscal 2021 as supply chain constraints initially caused by the
Processing costs increased due to a 3.2% increase in the volume of eggs processed.
-
Cost
of
pac
kaging
materialspandemic
 
increased
 
3.0%costs
 
asfor
 
thepackaging
 
retailproducts
 
channeland
 
demandmanufacturers
 
increased
due
to
theimplemented
 
pandemic
 
surcharges.
and
Costs
also
manufacturers increased prices and implemented pandemic surcharges.due to rising inflation.
-
Labor costs increased 7.2%14.4% due to the pandemic,
due to crisis pay and wage increases in response to labor shortages.
 
Egg purchases and other (including change in inventory)
-
Costs in this category decreased
labor shortages, primarily due to the decreasepandemic and its
effects.
-
Dozens processed increased 5.0% compared to fiscal 2021, which resulted
 
in the volume of outside
egg purchases, as our percentage
of produced to sold increased to 90.5%, as well as a decreasean $11.4 million increase in the cost of these purchases.
Looking forward to fiscal 2022, we believe with the ongoing uncertainties and continued supply
chain disruptions related to the
COVID-19 outbreak, weather fluctuations, increase
demand for exports and geopolitical issues,
that feed ingredients will remain
higher in
the near
future and
expect to
see price
volatility throughout
the year.
We
do not
anticipate problems
in securing
an
adequate amount of feed ingredients for fiscal 2022.
costs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2628
Egg purchases and other (including change in inventory)
-
Costs in this category decreased primarily due to the decrease in the volume of
outside egg purchases, as our percentage
of produced to sold increased to 94.3% in fiscal 2022 from 90.5% in fiscal 2021,
partially offset by higher egg prices.
Looking
forward
to
fiscal
2023,
market
indications
point
to
higher
corn
and
soybean
prices and
greater
volatility
tied
to
the
Russia-Ukraine war and higher export demand.
GROSS PROFIT
Gross profit,
as a percentage
 
percentage of net sales, was
 
11.9% for fiscal
2021, compared to 13.3%was 19.0% for
 
fiscal 2020. 2022,
compared to 11.9%
for fiscal 2021.
The decreaseincrease resulted
primarily from lowerhigher selling prices for conventional eggs as well as the increased volume of
specialty eggs sold, partially offset
by the increased cost of feed ingredients,
increased processing costs and increased feed costs.
the decline in the volume of conventional eggs sold.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
 
EXPENSES
Selling,
 
general,
 
and
 
administrative
 
expenses
 
("SGA")
 
include
 
costs
 
of
 
marketing,
 
distribution,
 
accounting,
 
and
 
corporate
overhead. SG&A increased $14.7
 
million to $198.6 million
in fiscal 2022. The following
table presents an analysis of
our SGA
expenses (in thousands):
Fiscal Year
Ended
May 28, 2022
May 29, 2021
May 30, 2020
$ Change
% Change
Specialty egg expense
$
59,830
$
59,294
$
49,237536
$
10,057
20.40.9
%
Delivery expense
62,677
52,670
52,23010,007
440
0.819.0
%
Payroll, taxes and benefits
43,954
43,327
44,156627
(829)
(1.9)1.4
%
Stock compensation expense
4,063
3,778
3,617285
161
4.57.5
%
Other expenses
28,107
24,874
28,9973,233
(4,123)
(14.2)13.0
%
Total
$
198,631
$
183,943
$
178,23714,688
$
5,706
3.28.0
%
Specialty egg expense
-
AdvertisingSpecialty egg
 
andexpense which
 
includes franchise
 
fees, advertising
 
and promotion
costs generally
tracks with
specialty
egg
volumes,
which
were
up
16.7%
for
fiscal
2022
compared
to
fiscal
2021.
However,
our
specialty
egg
expense
increased
only
0.9%,
primarily
 
due
 
to
 
the
increased
volume
of
specialty
eggs
 
sales
 
ofto
 
12.5%other
 
alongEggland’s
 
withBest,
Inc.
(“EB”)
franchisees,
including
increased promotional spending throughout unconsolidated
affiliates,
Specialty
Eggs,
LLC
and
Southwest
Specialty
Eggs,
LLC,
that
were
responsible
for
the
franchise fees,
advertising and
promotion costs
associated with
those sales
resulting in
reduced costs
for us.
Also, the
strong conventional market diminished
the yearneed to promote specialty eggs;
and as compareda 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 same period increase
in the prior year.fuel
and labor
costs for
both our
fleet and
contract
trucking.
Other expenses
-
Other expenses decreased due to a legal settlement paid in the secondThe increase
 
quarter of fiscal 2020, in an amount that was not
material.
-
other expenses
 
Inis primarily due
 
addition,to property losses
incurred that
were not covered
by insurance
as well
as increased
premiums
 
for
fiscal
2021
we
received
a
return
of
brokerage
commissions
on
 
property
 
and
casualty
 
insurance programs.
We
also
accrued an
additional
$1.1 million
in
placements.
property taxes due to the Red River acquisition.
OPERATING
 
INCOME (LOSS)
As a result
of the above,
our operating
 
lossincome was $26.3$143.5 million
for fiscal 2021, 2022,
compared to operating income of
 
$1.3loss of $26.3 million for
for fiscal 2020.
2021.
OTHER INCOME (EXPENSE)
Total
 
other
 
income
 
(expense)
 
consists
 
of
 
items
 
not
 
directly
 
charged
 
to,
 
or
 
related
 
to,
operations
 
such
 
as
 
interest
 
income
 
and
expense, equity in income or loss of unconsolidated entities, and patronage dividends,
among other items.
 
 
29
The Company
 
recorded interest income
 
income of $988 thousand
 
$2.8 in fiscal 2022,
compared to $2.8
million in
 
fiscal 2021,
compared to
$5.0 million in
fiscal 2020.
2021. We
 
recorded
interest
expense of
$213
$403 thousand and
$498 $213 thousand
 
in fiscal 2022 and 2021, respectively, primarily related to commitment fees
on our Credit Facility described below.
Patronage
 
2021dividends,
 
and 2020,which
 
respectively. Therepresent
 
decrease distributions
from
our
membership
in
 
interest income
resulted from significantly lower investment balances and lower interest rates.
EB,
 
Patronage dividends, which represent distributions from our membership in Eggland's Best,increased
 
Inc. ("EB"), decreased $1.1 $1.1
million
or
12.5%.
Patronage
or 10.8%. Patronage dividends are paid once a year based on EB’s
profits and its available cash.
Equity in income
from unconsolidated entities
for fiscal 20212022 was
$1.9 million compared
to $622 thousand compared for
fiscal 2021, due
to $534 thousandincreased specialty
egg prices
as well
as increased sales
volume resulting from
our additional investment
in Southwest
Specialty
to expand its operations.
Other,
net for fiscal
 
2020.2022 was
 
Other, net for fiscal 2021
was income of
 
$4.19.8 million compared
to $4.1 million
for fiscal 2021.
The majority of
the increase is
due to our
acquisition of the
remaining 50% membership
interest in Red
River as we
recognized a
$4.5 million
gain due to
 
the
remeasurement of
our equity investment,
along with the
$3.71.6 million for fiscalpayments
 
2020. The increaserelated to review
 
was primarily drivenand adjustment of
our various
by realized and unrealized gains in investment securities available-for-sale.
marketing agreements.
INCOME TAXES
On
March
27,
2020,
For the
Coronavirus
Aid,
Relief,
and
Economic
Security
Act
(the
“CARES
Act”)
was
enacted.
The
most
significant provision of
the CARES Act
that materially affected
the Company’s
income taxes included
the five-year carryback
allowance for taxable net operating losses generated in the tax years 2018 through 2020, our fiscal years 2019 through 2021.
27
The Tax Cut and Jobs Act enacted in December 2017 disallowed the carrying back of taxable net operating losses to offset prior
years’ taxable income. The
CARES Act allows us
to carry those losses
generated or that may
be generated during our
fiscal years
2019 through 2021 back to offset taxable income recognized
during the prior five years. The Company is electing to
utilize that
provision, which will
provide additional liquidity
in the form
of an
income tax refund
currently estimated to
be approximately
$36.5 million. We
believe we will
receive the refund
during our
third fiscal quarter
of 2022.
Additionally,
we recorded
a total
income tax
benefit of
approximately $12.4
million related
to the
carryback provisions
during our
 
fiscal year
 
2021. Forended May
 
more
information regarding the income tax effects of the CARES Act, refer to Part II. Item 8. Notes to the Financial Statements,
28, 2022,
 
For the fiscal year ended
May 29, 2021, our pre-tax
 
income was
$166.0 million,
compared to
pre-tax loss
of $9.9
million for
fiscal 2021. Income
tax expense of
$33.6 million was
recorded for fiscal
2022 with an
effective tax rate
of 20.2%.
Included in
fiscal 2022
income tax
expense is
the discrete
tax benefit
of $8.3
million discussed
in
of Part
II. Item
8.
Notes to
Condensed
Consolidated
Financial
Statements in
this Annual
Report.
Excluding the
discrete tax
benefit,
income tax
expense was $9.9$41.9
million with an
adjusted effective
tax rate of
25.2%. For
fiscal 2021, income
tax benefit was
$12.0 million.
Excluding the impact
of discrete items
related to a
$12.4 million net
tax benefit recorded
during fiscal 2021
in connection with
the Coronavirus Aid,
Relief, and Economic Security
Act (the “CARES Act”),
our income tax benefit
for the comparable period
of fiscal 2021 was $2.2 million, which reflects an adjusted effective
tax rate of 22.7%.
At May 28, 2022, the
Company had an income tax
receivable of $42.1 million compared
 
to pre-tax income of $20.1$42.5 million at May 29,
 
million for fiscal2021. The
2020.income tax receivable is related
 
Weto the Company’s
 
recorded
an
income
tax
benefit
of
$12.0
million
for
fiscal
2021,
which
includes
the
tax
benefit
of
$12.4
million
described above.
Our fiscal 2021
effective tax
rate increaseddecision to
120.8% from 8.6%
in carryback fiscal 2020
 
driven primarily by
the net
operating loss
carryback provisions
allowed under
the CARES
Act. Excluding
the effects
of the
CARES Act,
our income
tax
benefit was $2.2 million
forand fiscal 2021 with
an adjusted effective tax
rate of 22.7%.
Income tax expense was
$4.8 million for
the comparable period of fiscal 2020, which reflects an adjusted effective tax rate of approximately 24.1%.
At May 29, 2021,
the Company had an
income tax receivable of
$42.5 million compared to
$9.9 million at May
30, 2020. During
fiscal 2021,
the Company
recorded an
income tax
receivable of
$36.5 million
related to
the decision
to carryback
fiscal 2021
taxable net operating losses to recover a portion of taxes paid in
fiscal 2016.
Additionally, we received $1.4 million
in state tax
refunds related to claims for refund previously filed with state taxing authorities.
For the thirteen weeks ended May 29, 2021, our pretax loss was $12.2 million,
and our income tax benefit was $7.9 million with
an effective tax rate of 65.1%, including the impact of the CARES Act. Our income tax provision for the fourth quarter of fiscal
2021 reflects the carryback
of taxable net operating
 
losses generated during periods
to recover a
portion of taxes paid
 
in which the statutoryfiscal 2015
 
federal income tax rate
was 21%and fiscal 2016.
 
to periods
in whichDuring fiscal 2022,
 
the statutoryCompany filed
 
both federal incomecarryback
tax returns,
 
tax rate
was 35%,
as permitted
byand we believe we will receive the
CARES Act.
Excluding the
effects refunds during our third fiscal quarter of the
CARES Act,
our income
tax expense
was $1.8
million with
an adjusted
effective tax
rate of
15.4%. The
low effective
rate was
primarily related
to a
$7.4 million
income tax
benefit recorded
during the
fourth quarter
of fiscal
2021 in
connection
with the CARES Act.
2023.
Items causing
 
our effective
 
tax rate
 
to differ
 
from the
 
federal statutory
 
income tax
 
rate of
 
21% are
 
state income
 
taxes, certain
federal tax credits
 
credits and
certain items included
 
in income or
 
loss for financial reporting
 
reporting purposes that are
 
are not included
in taxable
income or loss
 
loss for income tax
 
tax purposes, including
tax exempt interest
 
interest income, certain nondeductible
 
nondeductible expenses,
and net
income
or loss attributable to noncontrolling interest.
NET INCOME (LOSS)LOSS ATTRIBUTABLE
 
TO NONCONTROLLING INTEREST
Net
income
(loss)
loss attributable
 
to noncontrolling interest was
 
noncontrolling
interest
$209 thousand for
fiscal
 
20202022 compared to
 
was
ano such income or
 
loss
of
$63 thousand.
During
for fiscal
2020,
we
acquired the remaining 27.9% interest in our majority-owned subsidiary TEP.
2021.
NET INCOME ATTRIBUTABLE
 
TO CAL-MAINE FOODS, INC.
As
a
result
of
the
above,
net
 
income attributable to Cal-Maine Foods, Inc.
 
for
fiscal
2021
2022 was
$2.1 $132.7 million,
or
$0.04 $2.73
 
per
basic
and
diluted
share,
compared
to
$18.4and $2.72 per diluted share, compared to $2.1 million, or $0.38 $0.04
per basic and diluted share for fiscal 2020.2021.
Fiscal Year
 
Ended May 29, 2021 Compared to Fiscal Year
 
Ended May 30, 2020 Compared to Fiscal Year Ended June 1, 2019
The discussion of our results
 
of our
results of
operations for
the fiscal
 
year ended May 30, 2020
 
May 29,
2021 compared
to the fiscal
 
fiscal year
ended June 1, 2019May
30,
2020 can be found in Part II.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results
of Operations in
the
the Company's fiscal 20202021 Annual Report on Form 10-K.
LIQUIDITY AND CAPITAL
 
CAPITAL RESOURCES AND LIQUIDITY
Working
Capital and Current Ratio
Our
 
working
 
capital
 
at
 
May
 
29,28,
 
20212022
 
was
 
$303.5476.8 million,
 
compared
 
to
 
$429.1429.8 million
 
at
 
May
 
30,29,
 
2020.2021.
 
The
 
calculation
 
of
working capital is defined
as current assets less current
liabilities. Our current ratio was
 
was3.58 at May 28, 2022
compared to 5.77
30
at May 29, 2021 compared to 5.60
at May 30, 2020.2021. The
current ratio is calculated
 
calculated by dividing current assets by
current liabilities. Due to seasonal
factors described
in
, we
generally expect
our need
for working
capital to
be highest in
 
in the
fourth and
first fiscal
fiscal quarters ending in May/June and August/September,
respectively.
Cash Flows from Operating Activities
Net cash
provided by
operating activities
was $126.2
million for
fiscal year
2022 compared
with $26.1 million
for fiscal
year
2021.
The increase in cash flow from operations
resulted primarily from higher selling prices for conventional eggs
as well as the
increased volume of
specialty eggs, partially
offset by
the increased cost
of feed ingredients
and processing costs.
The increase
in accounts payables,
accrued expenses and
other liabilities is
primarily due
to $62.3 million
balance for dividends
and income
tax payables as of May 28, 2022.
Cash Flows from Investing Activities
We
continue
to
invest
in
our
facilities,
with
$72.4
million
used
to
purchase
property,
plant
and
equipment
for
fiscal
2022,
compared to
$95.1 million
in fiscal
2021. Proceeds from
the sale
of property,
plant and
equipment was
$8.3 million
for fiscal
2022, compared to $3.4 million for in fiscal 2021. We also acquired the remaining 50% membership interest in Red River during
our first quarter of fiscal
2022 for $44.8 million, net
of cash acquired. Purchases of
investments were $98.2 million in fiscal
2022,
compared
to
$88.3
million
in
fiscal
2021.
Sales
and
maturities
of
investment
securities
were
$92.7
million
for
fiscal
2022,
compared to $129.1 million for fiscal
2021. We received $400 thousand in distributions from unconsolidated entity in
fiscal 2022
compared to $6.7 million for fiscal 2021.
Cash Flows from Financing Activities
We
paid dividends
totaling $6.1 million
and $1.7 million
in fiscal 2022
and 2021, respectively.
Purchases of common
stock by
treasury of $1.1
million and $871
thousand were made
to satisfy tax
withholding obligations
for employees
in connection with
the vesting of restricted common stock. Cash payments of $215 thousand
and $205 thousand were made on our finance lease.
As of May 28, 2022,
cash increased $1.7 million since
May 29, 2021, compared to a
decrease of $20.8 million during fiscal
2021.
Credit Facility
We had no
long-term debt outstanding at the end of fiscal 2022
and 2021. On November 15, 2021, we entered
into an Amended
and Restated Credit Agreement (the “Credit Agreement”) with a five-year term. The Credit Agreement amended and restated the
Company’s
previously
existing credit
agreement dated
July 10,
2018. The
Credit Agreement
provides for
an increased
senior
secured revolving credit facility (the “Credit Facility”), in an initial aggregate principal amount of up to $250 million. As of May
28, 2022,
no amounts
were borrowed
under the
Credit Facility.
We
have $4.1
million in
outstanding standby
letters of
credit,
which were issued under our Credit
Facility for the benefit of
certain insurance companies. Refer to
Part II. Item 8. Notes to
the
Financial Statements,
for further information regarding our long-term debt.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table of Contents
28
We
had no
long-term debt outstanding
at the
end of
fiscal 2021
and 2020.
On July 10,
2018, we
entered into a
$100.0 million
Senior Secured
Revolving Credit
Facility (the
“Revolving Credit
Facility”). As
of May
29, 2021,
no amounts
were borrowed
under the Revolving Credit Facility.
We have
$4.1 million in outstanding standby letters of credit, which were
issued under our
Revolving
Credit
Facility
for
the
benefit
of
certain
insurance
companies.
Refer
to
Part
II.
Item
8.
Notes
to
the
Financial
Statements,
for further information regarding our long-term debt.
 
 
Net cash provided
by operating activities
was $26.1 million
for fiscal year
2021 compared with
$73.6 million for fiscal
year 2020.
Decreased gross profit margins resulting primarily from lower selling prices for shell
eggs, and increased feed costs contributed
greatly to
our decrease
in cash
flow from
operations. The
increase in
accounts receivables
balance at
fiscal 2021
compared to
prior fiscal
2020 is
due to
the income
tax receivable
related to
the CARES
Act, which
is expected
to be
received in
our third
quarter of fiscal 2022.
 
 
For fiscal 2021,
approximately $129.1 million was provided
from the sale
and maturity of
investments securities available-for-
sale, $88.3 million
was used
to purchase
short-term investments
and net
payments of
$6.7 million were
received from
investments
in unconsolidated entities. Approximately $95.1 million was
used to purchase or
construct property, plant
and equipment, most
of
which
related
to
the
expansion
of
our
cage-free
shell
egg
production
capacity. Refer
to
the
table
of
material
construction
projects presented
below for
additional information
on purchases
and construction
of property,
plant and
equipment. The
net
result of these and other activities as of May 29, 2021 was a decrease in cash of $20.8 million from May 30, 2020.
 
 
For fiscal 2020, approximately
$204.3 million was provided
from the sale and
maturity of investments securities
available-for-
sale,
$107.2
million
was
used
to
purchase
short-term
investments
and
net
payments
of
$7.1
million
were
received
from
investments
i
n
unconsolidated
entities.
We
used
$44.7
million
to
acquire
Mahard
and
the
remaining
interest
in
TEP.
Approximately $124.2
million was
used to
purchase or
construct property,
plant and
equipment, most
of which
related to
the
expansion of our cage-free shell
egg production capacity. Refer to the table of material construction
projects presented below for
additional
information
on
purchases
and
construction
of
property,
plant
and
equipment.
We
used
$1.5
million
for
principal
payments on long-term
debt. The net
result of these
and other activities
as of May
30, 2020 was
an increase in
cash of $8.9
million
from June 1, 2019.
We
continue to
monitor the
increasing demand
for cage-free
eggs and
to engage
with our
customers in
an effort
to achieve
a
smooth
transition
to
meet
their
announced
commitment
timeline
for
cage-free
egg
sales.
We
have
invested
approximately
$476 million in facilities, equipment and
related operations to expand our
cage-free production starting with our
first facility in
2008, which includes
the $48.5 million
acquisition of the
remaining 50% interest
in Red River
discussed in
Note 20 –
Subsequent
Events
in
Part
II.
Item
8.
Notes
to
the
Consolidated
Financial
Statements.
The
following
table
presents
current
material
construction projects approved as of May 29, 2021 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of
May 29, 2021
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2022
$
140,876
$
93,612
$
47,264
$
140,876
$
93,612
$
47,264
We believe
our current cash balances, investments, cash flows from
operations, and Revolving Credit Facility will be sufficient
to fund our current capital needs. As we monitor the demand for cage-free eggs and
our growth strategy described in
there may be a need for long-term
debt financing. We
believe with our strong balance sheet that
we will have adequate access to capital markets if that need arises.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2931
CONTRACTUAL OBLIGATIONSMaterial Cash Requirements
Material cash requirements for
operating activities consist of
feed ingredients, employee related
costs, and other general
operating
expenses, which we expect to be paid from our cash from operations.
We
continue
to monitor
the increasing
demand for
cage-free eggs
and to
engage with
our customers
in an
effort
to achieve
a
smooth transition
to meet
their announced
commitment timeline
for cage-free
egg sales. As
of May
28, 2022,
we had
invested
approximately $516 million
in facilities, equipment
and related operations
to expand our
cage-free production starting
with our
first facility in 2008. The following table
presents current material construction projects approved as of
May 28, 2022, along with
our $55.3
million capital
project approved
subsequent to
the end
of the
fourth quarter
2022 to
convert existing
capacity at
our
Chase, Kansas production facility to house approximately
1.5 million cage-free hens and include
remodels of all remaining pullet
facilities (in thousands):
Project(s) Type
Projected
 
Completion
TheProjected Cost
Spent as of
 
following
May 28, 2022
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2023
$
131,974
$
113,386
$
18,588
Cage-Free Layer & Pullet Houses
 
table
Fiscal 2023
24,171
14,201
9,970
Cage-Free Layer & Pullet Houses
 
summarizes
Fiscal 2024
42,591
107
42,484
Cage-Free Layer & Pullet Houses
 
by
Fiscal 2025
94,183
144
94,039
$
292,919
$
127,838
$
165,081
For additional information, see
 
The following table summarizes by fiscal
year
the
 
future estimated cash
estimated
cash
payments,
 
in
 
thousands,
 
to
 
be
 
made
 
under
 
existing
contractual
contractual
obligations
as
of
 
May 29, 2021.
28,
2022.
Further
information
 
on
debt
obligations is
contained in
, and
on lease obligations in
, each in Part II. Item 8.
Notes
to the Consolidated Financial Statements. As of May 29,28, 2022,
2021, we had no outstanding long-term debt.
Payments due by period
Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
Finance leases
$
697457
$
239
$
458218
$
—
$
—
Operating leases
1,8821,080
802539
1,049536
315
—
Purchase obligations:
Feed ingredients and fuel
(a)
89,779172,132
89,779172,132
—
—
—
Construction contracts and other equipment
38,06327,568
38,06319,281
—
—
—
Red River
(b)
48,500
48,500
—8,287
—
—
Total
$
178,921201,237
$
177,383192,191
$
1,5079,041
$
315
$
—
(a)
Actual purchase obligations may change based on the contractual terms and
agreements
(b)
We believe our
 
current cash balances, investments, cash flows from operations, and
Represents
Credit Facility will be sufficient to fund our
capital needs for at least the cash paid for the acquisition of Red River
next 12 months.
IMPACT OF
RECENTLY
 
ISSUED ACCOUNTING STANDARDS
For information on changes in accounting
principles and new accounting principles,
see “
New Accounting Pronouncements
and
Policies
” in Part II. Item 8. Notes to Consolidated Financial Statements,
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements
in accordance with U.S. GAAP
requires management to make estimates
 
and assumptions
that affect the
 
reported amounts of
 
of assets
and liabilities
 
at the date
 
date of
the financial
 
statements and the
 
the reported
amounts of
 
revenues
and expenses during the
reporting period. Actual results could
 
differ from these estimates.
Critical accounting estimates are
 
are those
estimates made in
 
in accordance with GAAP
 
with GAAP that involve a
 
involve a significant
level of estimation
 
uncertainty and
have had
 
or are reasonably
likely to have a material impact
 
material impact on the
financial condition or results
 
results of operations. Our
critical accounting estimates
are described
below.
INVESTMENTS IN SECURITIES
Our investment
securities are
accounted for
in accordance
with ASC
320, “Investments
- Debt
and Equity
Securities” (“ASC
320”). The
Company considers
all of
its debt
securities for
which there
is a
determinable fair
market value,
and there
are no
restrictions
on
the
Company's
ability
to
sell
within
the
next
12
months,
as
available-for-sale.
We
classify
these
securities
as
current, because the amounts invested are available for
current operations. Available-for-sale
securities are carried at fair value,
with unrealized
gains and
losses reported
as a
separate component
of stockholders’
equity.
The Company
regularly evaluates
changes to the
rating of its
debt securities by credit
agencies and economic conditions
to assess and
record any expected credit
losses through 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
Consolidated Statements of
Income. Investments
in mutual funds are classified as “Other long-term assets” in the Company’s Consolidated Balance Sheets.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Trade receivables
are stated
at their
carrying values,
which include
a reserve
for credit
losses. The
Company extends credit
to
customers based on an
evaluation of each customer's financial
condition and credit history.
Collateral is generally not required.
The Company minimizes
exposure to counter
party credit risk
through credit analysis
and approvals, credit
limits, and monitoring
procedures. In
determining our
reserve for
credit losses,
receivables are
pooled according
to age,
with each
pool assigned
an
expected loss based on historical loss information adjusted as needed for economic and other forward-looking factors.
 
3032
BUSINESS COMBINATION
S
The Company applies the acquisition
method of accounting, which
requires that once control is
obtained, all the assets acquired
and liabilities assumed,
including amounts
attributable to noncontrolling
interests, are recorded
at their respective
fair values at
the
date
of acquisition.
The
excess
of
the
purchase
price
over
fair
values
of
identifiable
assets
and
liabilities
is
recorded
as
goodwill.
We
typically
use the
income method
approach for
intangible assets
acquired
in a
business combination.
Significant
judgment
exists in valuing certain
intangible assets. and the
most significant assumptions requiring judgment
involve estimating the
amount
and timing of
future cash flows,
growth rates,
discount rates selected
to measure
the risks inherent
in the future
cash flows and
the asset’s expected useful lives.
The fair values of
identifiable assets and liabilities
is determined internally and requires
estimates and the use
of various valuation
techniques. When a market value
is not readily available, our internal
valuation methodology considers the
remaining estimated
life of the assets acquired and significant judgment is required as management
determines the fair market value for those assets.
Due
to
inherent
industry
uncertainties
including
volatile
egg
prices
and
feed
costs,
unanticipated
market
changes,
events,
or
circumstances may occur that could affect the estimates and assumptions
used, which could result in subsequent impairments.
INVENTORIES
 
Inventories of eggs, feed,
 
eggs, feed, supplies
and flocks
 
are valued principally
 
at the lower
 
lower of cost (first-in,
 
(first-in, first-out method) or net
 
method) or
net realizable
value. If
market
 
prices
for
 
eggs and
 
feed
grains
 
move
substantially
 
lower,
 
we
record
 
adjustments
to
 
write
down
 
the
carrying
values of eggs
 
and feed inventories
 
to fair market
 
value. The cost
 
associated with flock inventories,
 
inventories, consisting
principally of chick
purchases, feed, labor, contractor payments and
overhead costs, are accumulated during the growing period of approximately 22
weeks. Capitalized flock costs are then amortized over the flock’s productive
 
productive life, generally one to two years. Judgment exists in
determining
the flock’s
productive life
including
factors such
as laying
rate and
egg size,
molt cycles,
and customer
demand.
Furthermore, other factors such as
hen type or weather conditions could affect
the productive life. These factors could
make our
estimates of productive life differ from actual results. Flock mortality is
charged to cost of sales as incurred. High mortality from
disease or extreme temperatures will
result in abnormal write-downs to
flock inventories. Management continually monitors each
flock
and attempts to take appropriate actions
to minimize the risk of mortality
mortality loss.
GOODWILL
LONG-LIVED ASSETS
As a
 
Depreciable long-livedresult of
 
assets areacquiring
 
primarily comprisedbusinesses, the
Company
has $44.0
million
 
of buildings,goodwill
 
improvements, machineryon May
 
and equipment. Depreciation28, 2022.
Goodwill is
evaluated
for
impairment
annually
by
first
performing
a
qualitative
assessment
to
determine
whether
a
quantitative
goodwill
test
 
is
provided by thenecessary. After
 
straight-line method over
the estimated useful
lives, which are
15 to 25
years for buildings
and improvements
and 3 to 12 years for machinery and equipment. An increase or decrease in the
estimated useful lives would result in changes to
depreciation expense. When property and equipment are retired, sold, or otherwise disposed of,
the asset’s carrying amount and
related accumulated depreciation are removed
from the accounts and
any gain or loss
is included in operations. We
continually
reevaluate the carrying value
of our long-lived assets,
for events or changes
in circumstances which indicate the
carrying value
may not be recoverable from the estimated future cash flows expected to result
from its use and eventual disposition. If the sum
of the expected future
cash flows (undiscounted and
without interest charges) are
less than the carrying amount
of the asset, an
impairment loss is recognized to reduce the carrying value of the asset to its estimated fair value.
INTANGIBLE ASSETS
Included in other intangible assets are
separable intangible assets acquired in
business acquisitions, which include franchise
fees,
non-compete agreements and customer
relationship intangibles. They are
amortized over their
estimated useful lives of
5 to 15
years. The
gross
cost
and
accumulated
amortization
of
intangible
assets
are
removed
when
the
recorded
amounts
are
fully
amortized and the asset is no longer in use.
EQUITY AND COST METHOD INVESTMENTS
We have invested in
other companies
engaged in
the production,
processing and
distribution of
shell eggs
and egg
products. These
investments are recorded
using the cost
or equity
method, and
are not consolidated
in our financial
statements. Changes in the
ownership
percentages
of
these
investments
might
alter
the
accounting
methods
currently
used.
Our
investment
in
these
companies is shown on the Company’s Consolidated Balance Sheet in the amounts presented for "Investment in unconsolidated
entities" and “Other long-term assets”.
GOODWILL
Goodwill is evaluated for impairment
annually by first performing a
qualitative assessment to determine whether a
quantitative
goodwill test is necessary.
After assessing the totality of events or
 
or circumstances, if we determine it
 
is more likely than not that the
the fair value of
a reporting unit is
less than its carrying
 
amount, then we perform
additional quantitative tests to
 
determine the
magnitude of any
impairment.
The
Company
has
determined
that
all
of
our
locations
share
similar
economic
characteristics
and
support
each
other
in
the
production of eggs and customer support. Therefore, we aggregate all our locations as a single reporting unit for testing goodwill
for
impairment.
When
the
Company
acquires
a
new
location,
we
determine
whether
it
should
be
integrated
into
our
single
reporting unit or
treated as a
separate reporting unit. Historically, we
have concluded that
acquired operations should be
integrated
into our single reporting unit due to the operational changes, redistribution of customers, and significant changes in management
that occur when we acquire businesses, which result in the acquired operations sharing
similar economic characteristics with the
rest of our locations. Once goodwill associated with acquired operations becomes part of goodwill of our single reporting unit, it
no longer represents the particular
acquired operations that gave rise to the
goodwill. We
may conclude that a business acquired
in the future should be treated as a separate reporting unit, in which case it would be tested separately
for goodwill
impairment.
At May 28, 2022, goodwill represented 3.1% of total assets and 2.9% of
stockholders’ equity.
Judgment exists in management’s evaluation
of the qualitative factors which include macroeconomic conditions, the current egg
industry environment,
cost inputs such as
feed ingredients and overall financial performance. Furthermore, judgment
exists in the
evaluation
of the
threshold of
whether it
is more
likely than
not that
the fair
value of
a reporting
unit is
less than
its carrying
amount. Uncertainty exists due to uncontrollable events that could occur
that could negatively affect our operating conditions.
During our
annual impairment
test in fiscal
2022, we
determined that
goodwill passed
the qualitative
assessment and
therefore
no quantitative analysis of goodwill impairment was necessary.
 
31
At May 29, 2021, goodwill represented 2.9% of total assets and
3.5% of stockholders’ equity. Goodwill relates
to the following
(in thousands):
Fiscal Year
Description
Amount
1999
Acquisition of Hudson Brothers, Inc.
$
3,147
2006
Acquisition of Hillandale Farms, LLC
869
2007
Acquisition of Green Forest Foods, LLC
179
2008
Revised Hillandale incremental purchase price
9,257
2009
Revised Hillandale incremental purchase price
2,527
2009
Acquisition of Zephyr Egg, LLC
1,876
2009
Acquisition of Tampa Farms, LLC
4,600
2010
Revised Hillandale incremental purchase price
(338)
2013
Acquisition of Maxim Production Co., Inc.
2,300
2014
Purchase of joint venture partner’s 50% in Delta Egg
4,779
2017
Acquisition of Foodonics International, Inc.
3,389
2017
Acquisition of Happy Hen Egg Farms, Inc.
2,940
Total Goodwill
$
35,525
33
REVENUE RECOGNITION AND DELIVERY COSTS
Revenue recognition is completed
upon satisfaction of the
performance obligation to the
customer, which typically occurs within
days of the Company and customer
agreeing upon the order.
See
 
in Part II. Item 8. Notes to the
Consolidated Financial Statements for further discussion of the policy.
The Company believes
the performance obligation
 
obligation is met upon delivery
 
and acceptance of
the product by
 
by our customers. Costs
to deliver product
 
product to
customers are
 
included in selling,
 
general and administrative
 
administrative expenses
in the
 
accompanying Consolidated
Statements
 
of
 
Income. Sales
 
revenue
 
reported
 
in
 
the
 
accompanying
 
Consolidated
 
Statements
 
of
 
Income
 
is
 
reduced
 
to
 
reflect
estimated returns
 
and allowances. The
 
Company records
 
an estimated
 
sales allowance
 
for returns
 
and discounts
 
at the
 
time of
sale using historical trends based on actual sales returns and sales.
SALES INCENTIVES PROVIDED TO CUSTOMERS
The Company periodically provides
 
provides incentive
offers to its
 
customers to encourage purchases.
 
purchases. Such
offers include current
 
discount
offers (e.g., percentage
discounts off current purchases), inducement
 
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
 
while inducement offers,
 
offers, when accepted
 
accepted by
customers, are
 
treated as
 
a reduction to
 
to sales
price based on estimated future redemption rates.
Redemption rates are estimated using the Company’s
historical experience for
similar inducement offers.
Current discount and inducement offers
are presented as a net amount in ‘‘Net
sales.’’
STOCK BASED COMPENSATION
As the
 
Weestimates noted
 
accountabove are
based on
historical information,
we do
not believe
that there
will be
a material
change in
the
estimates and assumptions used
to recognize revenue. However,
if actual results varied significantly
from our estimates it could
expose us to material gains or losses.
LOSS CONTINGENCIES
The Company evaluates
whether a loss contingency
exists, and if the
assessment of a contingency
indicates it is probable
that a
material loss has
been incurred and
the amount of
the loss can
be reasonably estimated,
the estimated loss
would be accrued
in
the Company’s financial statements.
The Company expenses the costs of litigation as they are incurred.
There
were
no
loss
contingency
reserves
 
for
 
share-basedthe
 
compensationpast
 
inthree
 
accordancefiscal
 
withyears.
 
ASCOur
 
718,
“Compensation-Stock
Compensation”
(“ASC
718”). ASC 718 requires
all share-based payments
to employees, including
grants of employee
stock options, restricted
stock and
performance-based shares to be recognized in the statement of
income based on their fair values. ASC 718 requires
the benefits
of
tax
deductions
in
excessevaluation
 
of
 
recognizedwhether
 
compensationloss
 
costcontingencies
exist
primarily relates to
litigation matters. The
outcome of litigation
is uncertain due
 
to, among other
things, uncertainties regarding
the facts will be established
during the proceedings, uncertainties
regarding how the law will
 
be
reported
as
a
financing
cash
flow. See
in Part II. Item 8. Notes applied to the Consolidated Financial Statementsfacts
established,
and uncertainties
regarding the
calculation of
any potential
damages or
the costs
of any
potential injunctive
relief. If
the facts
discovered or the Company’s
assumptions change, future reserves for more information.
loss contingencies may be required.
Results of operations
may be materially affected by losses or a loss contingency reserve
resulting from adverse legal proceedings.
INCOME TAXES
We
 
determine our
effective tax
 
rate by estimating our
 
our permanent differences
resulting from differing
 
differing treatment of items
 
items for tax
and accounting purposes. Judgment and uncertainty exist with management’s application of tax regulations
 
accountingand evaluation of the
purposes.more-likely-than-not recognition and measurement thresholds. We
 
are
periodically
audited
by
taxing
authorities. Any
audit
adjustments
affecting
permanentAn adverse tax
differencessettlement could have ana negative impact on our effective tax rate.rate
 
and our results of operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3234
ITEM 7A.
 
QUANTITATIVE
 
AND QUALITATIVE
 
DISCLOSURES ABOUT MARKET RISKS
 
COMMODITY PRICE RISK
Our primary exposure to
market risk arises from changes
 
changes in the prices
of conventional eggs, which
 
which are subject to significant
price
fluctuations that are largely
beyond our control. We
 
are focused on growing our
specialty shell egg business because
the selling
prices
of
 
specialty
shell
 
eggs are
 
generally not
 
as volatilenot
 
as
 
volatile
as conventional
shell
 
egg
prices. Our
 
exposure
to
 
market
risk
 
also
includes changes in
the prices of corn
 
of corn and soybean meal,
 
which are commodities
subject to significant
 
price fluctuations due
to
market conditions
 
that are
 
largely beyond
 
our control.
 
To
 
ensure continued
 
availability of
 
feed ingredients,
 
we may
 
enter into
contracts for future
purchases of corn
and soybean meal,
and as part of
 
corn and soybean meal, andthese contracts, we
 
as part of these contracts,may lock-in
 
we may lock-in the basis portion
 
portion of our
grain purchases several months in advance. Ordinarily,
 
advance and commit to purchase
organic ingredients to help
assure supply.
Ordinarily, we
do
not enter
long-term contracts
 
beyond a
year to
purchase corn
 
and soybean
soybean meal or
hedge against
increases in
the price
of corn
and soybean meal.
The following table
outlines the impact
of price changes
for corn and
 
soybean meal. The following table outlines the impact of price
changes for corn and soybean meal on
feed costs per
dozen
as feed ingredient pricing varies:
Change in price per bushel of corn
$
(0.87)(0.84)
$
(0.58)(0.56)
$
(0.29)(0.28)
$
0.00
$
0.290.28
$
0.580.56
$
0.870.84
Change
 
in price
per ton
Soybean
Meal
$
(82.50)(76.50)
0.3860.511
0.3960.521
0.4060.531
0.4160.541
0.4260.551
0.4360.561
0.4460.571
$
(55.00)(51.00)
0.3960.521
0.4060.531
0.4160.541
0.4260.551
0.4360.561
0.4460.571
0.4560.581
$
(27.50)(25.50)
0.4060.531
0.4160.541
0.4260.551
0.4360.561
0.4460.571
0.4560.581
0.4660.591
$
0.00
0.4160.541
0.4260.551
0.4360.561
0.4460.571
(a)
0.4560.581
0.4660.591
0.4760.601
$
27.5025.50
0.4260.551
0.4360.561
0.4460.571
0.4560.581
0.4660.591
0.4760.601
0.4860.611
$
55.0051.00
0.4360.561
0.4460.571
0.4560.581
0.4660.591
0.4760.601
0.4860.611
0.4960.621
$
82.5076.50
0.4460.571
0.4560.581
0.4660.591
0.4760.601
0.4860.611
0.4960.621
0.506
0.631
(a)
Based on 2021 2022
actual costs, table flexes feed cost inputs to show $0.01 impacts to per dozen egg feed production costs.
 
costs.
INTEREST RATE
 
RISK
The fair value of our debt is sensitive
 
fairto changes in the general level of U.S.
 
valueinterest rates. In November 2021, we entered
 
ofinto a
$250 million Credit Facility which bears interest at a variable rate. No amounts were outstanding under that facility during fiscal
2022.
Under
 
our
 
debtcurrent
 
ispolicies,
 
sensitivewe
do
not
use
interest
rate
derivative
instruments
 
to
 
changesmanage
 
inour
 
theexposure
 
general
level
of
U.S.to
 
interest
 
rates. In
July
2018,
we
entered
into
arate
$100.0 million Senior
Secured Revolving
Credit Facility
which bears
interest at
a variable
rate. No
amounts were
outstanding
under that facility during
fiscal 2021. Under our
current policies, we do
not use interest rate
derivative instruments to manage
our
exposure to interest rate changes.
FIXED INCOME SECURITIES RISK
At May 29, 2021,
28, 2022, the effective maturity of
our cash equivalents and
 
investment securities available
for sale was 11.29.5 months,
and
the composite credit rating of the holdings are A-A / A3A2 / A-A (S&P / Moody’s
/ Fitch).
CONCENTRATION
 
OF CREDIT RISK
Our financial instruments exposed to concentrations of
credit risk consist primarily of trade receivables.
Concentrations of credit
risk with respect
 
respect to
receivables are
 
limited due to
 
to our large
 
large number
of customers
 
and their dispersion
 
dispersion across
geographic areas,
except that at May 29, 202128,
2022 and May 29,
 
30, 2020,2021, 27.9% and 23.8% and 29.5%,
respectively,
 
of our net accounts receivable
balance was due
from
 
Walmart
 
Inc.
 
(including
 
Sam’s
 
Club).
 
No
 
other
 
single
 
customer
 
or
 
customer
 
group
 
represented
 
10%
 
or
 
greater
 
of
 
net
accounts receivable.
 
 
 
 
 
3335
ITEM 8.
 
FINANCIAL STATEMENTS
 
AND SUPPLEMENTARY
DATA
 
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Cal-Maine Foods, Inc. and Subsidiaries
Ridgeland, Mississippi
Opinion on the Consolidated Financial Statements
We
 
have audited
 
auditedthe accompanying
consolidated balance
sheets of
Cal-Maine Foods,
Inc. and Subsidiaries
as of
May
28, 2022 and May 29,
2021, the related consolidated statements
of income, comprehensive income, stockholders’ equity
and cash
flows for each of the
three years in the period ended
May 28, 2022, and the related
consolidated notes and schedule listed
in the
Index
at
Item
15(a)(1)
and
15(a)(2)
(collectively
referred
to
as
 
the
 
accompanying
“consolidated
 
balancefinancial
 
sheetsstatements”).
In
our
opinion,
the
consolidated
financial
statements
present
fairly,
in
all
material
respects,
the
financial
position
 
of
 
Cal-Maine
 
Foods,
 
Inc.
 
and
Subsidiaries as of May
 
Subsidiaries
(the
“Company”)
as
of
28, 2022 and May
 
29, 2021, and the
 
2021results of their operations
 
and
May
30,
2020,
the
related
consolidated
statements of
income,
comprehensive income,
stockholders’ equity and
their cash flows for
 
each of the three
three years in
 
the period ended
 
ended May 29, 2021,
 
and the related28,
 
consolidated2022,
in conformity
notes and schedule listed
with accounting
principles
generally
accepted
 
in the Index at
 
Item 15(1) (collectively referredUnited
 
to as the “consolidated
financial statements”).
In our
opinion, the
consolidated financial
statements present
fairly,
in all
material respects,
the financial
position of
the Company
at
May 29, 2021
and May 30, 2020,
and the results of
its operations and
its cash flows
for each of the
three years in
the period ended
May 29, 2021, in conformity with accounting principles generally accepted in the United States of America.
America.
We
 
also have
 
audited, in
 
accordance with
 
the standards
 
of the
 
Public Company
 
Accounting Oversight
 
Board (United
States) (“PCAOB”), the
 
Company’s the Cal-Maine
Foods, Inc.
and Subsidiaries’
internal control
over financial
 
reporting as
of May
 
29, 2021, 28, 2022,
based
on
 
the
criteria
established
in
2013
 
Internal
 
Control
 
–
 
Integrated
 
Framework
 
issued
 
by
 
the
 
Committee
 
of
 
Sponsoring
Organizations of the Treadway
 
Organizations
of
the
Treadway
Commission and our report dated July 19, 20212022 expressed an unqualified opinion.
 
opinion.
Basis for Opinion
These
 
consolidated
These consolidated
financial
statements
are
 
the
responsibility
of
the Company’s
entities’
 
management.
 
Our
responsibility
is
to
express an opinion
 
opinion on
these consolidated
 
financial statements based
 
based on
our audits.
 
We
 
are a public
 
public accounting
firm registered
with the PCAOB and
are required to be
independent with respect to
 
the CompanyCal-Maine Foods, Inc.
and Subsidiaries in accordance
with the U.S. federal securities
the
U.S.
federal
securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our
audits in
accordance with
 
the standards
applicable
rules
and
regulations
 
of the
 
Securities and
Exchange
Commission
and
the
PCAOB.
We
conducted
our audits
in accordance
with the
standards of
the PCAOB.
 
Those standards
 
standards require that
 
that we plan
 
plan and
perform
 
the
 
audit
 
to
 
obtain
 
reasonable
 
assurance
 
about
 
whether
 
the
 
consolidated
 
financial
 
statements
 
are
 
free
 
of
 
material
misstatement,
 
whether
 
due
 
to
 
error
 
or
 
fraud.
 
Our
 
audits
 
included
 
performing
 
procedures
 
to
 
assess
 
the
 
risks
 
of
 
material
misstatement of the
consolidated financial statements,
whether due to error
 
to error or fraud, and performing procedures
 
procedures that respond
to
those
 
risks.
 
Such
 
procedures
 
included
 
examining,
 
on
 
a
 
test
 
basis,
 
evidence
 
regarding
 
the
 
amounts
 
and
 
disclosures
 
in
 
the
consolidated financial statements.
 
statements. Our
audits also
 
included evaluating the
 
the accounting
principles used and
 
and significant
estimates
made by
 
by management, as
 
as well as
 
as evaluating the
 
the overall
presentation
 
of the
 
consolidated financial
 
statements.
We
 
believe
our
audits provide a reasonable
basis for our opinion.
Critical Audit Matters
Matter
The
 
critical
 
audit
 
matter
 
communicated
 
below
 
is
 
a
 
matter
 
arising
 
from
 
the
 
current
 
period
 
audit
 
of
 
the
consolidated
consolidated financial
statements
that
were
communicated
or
required
to
be
communicated
 
to
the
Audit
Committee
and
that:
(1)
relate
to
that: (1) relate to accounts
or disclosures
that are
material
 
to the
consolidated
financial
statements and
(2) involved
our especially
challenging,
especially challenging, subjective or
complex judgments.
 
The communication
of the critical
audit matters matter
does not
alter in
any way
our opinion
on the
consolidated financial statements, taken as
a whole, and we are not, by communicating the
critical audit matter below,
providing
a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.
Contingent Liabilities – Litigation and Claims – Refer to Note 18 in the Consolidated
Financial Statements
Critical Audit Matter Description
The Company records
Cal-Maine Foods, Inc. and Subsidiaries record liabilities for legal
proceedings and claims
in those instances
where it they
can reasonably
estimate the
amount of the loss
and when the
liability is probable.
 
Where the reasonable
estimate of the probable
probable loss is
a range, theCal-Maine
 
Company
records theFoods, Inc. and Subsidiaries record
 
the most likely
estimate of
 
the loss,
or the
low end
of the
range if
there is
no one
best estimate.
The Company
either
discloses the
amount of
 
a possible
loss or
the range of
loss in
excess of
established accruals
if estimable,
or states
that such
an estimate
cannot be
made.
The Company
discloses significant
legal proceedings
and claims
even where
liability is
not probable
or the
amount of the liability is not estimable, or both, if the Company believes there is at least a reasonable possibility that a loss may
be incurred.
 
3436
there is no one best estimate.
Cal-Maine Foods, Inc. and Subsidiaries either disclose the
amount of a possible loss or
range of loss
in
excess
of
established
accruals
if
estimable,
or
states
that
such
an
estimate
cannot
be
made.
Cal-Maine
Foods,
Inc.
and
Subsidiaries disclose significant
legal proceedings and
claims even where
liability is not
probable or the
amount of the
liability
is not
estimable, or
both, if
Cal-Maine Foods,
Inc. and
Subsidiaries believe
there is
at least
a reasonable
possibility that
a loss
may be incurred.
We identified litigation and claims
as a critical
 
audit matter because
of the challenges
 
auditing management’s judgments
applied
 
in
 
determining
 
the
 
likelihood
 
of
 
loss
 
related
 
to
 
the
 
resolution
 
of
 
such
 
claims.
 
Specifically,
 
auditing
 
management’s
determination of
 
whether any
 
contingent loss
 
arising from
 
the related
 
litigation and
 
claims is
 
probable, reasonably
 
possible or
remote, and the related disclosures, is subjective and requires significant judgment
due to the sensitivity of the issue.
How the Critical Audit Matter was addressed during
the Audit
Addressing the
 
matter involved
 
performing procedures
 
and evaluating
 
audit evidence
 
in connection
 
with forming
 
our
overall
opinion
 
on
 
the
consolidated
 
financial
statements.
 
These
procedures
 
included
testing
 
the
 
effectiveness
 
of
 
the
controls
relating to the Company’s
Cal-Maine Foods, Inc.
and Subsidiaries’ evaluation
of the
liability related
to legal
proceedings and claims, including controls
 
including
controls over determining
the likelihood of
 
of a loss and
 
and whether the amount
 
of loss can be
 
be reasonably estimated, as well
 
as well asfinancial
financial statement disclosures
over the legal proceedings and claims.
 
These procedures also included obtaining and evaluating
the letters
of audit inquiry with external
external legal counsel, evaluating
the reasonableness of the
 
Company’sCal-Maine Foods, Inc. and Subsidiaries’ assessment
regarding
whether
an
unfavorable
outcome
 
is
reasonably
reasonably
possible
 
or
probable
 
and
reasonably
 
estimable,
evaluating
 
the
sufficiency
 
of theCal-Maine
 
Company’sFoods, Inc.
and Subsidiaries’
 
disclosures
related
 
to legal
legal proceedings and
claims and
evaluating
the
completeness and accuracy of the Company’sCal-Maine Foods, Inc. and Subsidiaries’ legal
contingencies.
 
/s/ Frost, PLLC
We have served
as the Company’s
auditor since 2007.
Little Rock, Arkansas
July 19, 20212022
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3537
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except for par value amounts)
May 29, 202128, 2022
May 30, 202029, 2021
Assets
Current assets:
Cash and cash equivalents
$
57,35259,084
$
78,13057,352
Investment securities available-for-sale
112,158115,429
154,163112,158
Receivables:
Trade receivables, net
79,066169,109
84,97679,066
Income tax receivable
42,51642,147
9,88442,516
Other
5,0578,148
3,5155,057
Total receivables,
net
126,639219,404
98,375126,639
Inventories, net
218,375263,316
187,216218,375
Prepaid expenses and other current assets
5,4074,286
4,3675,407
Total current
assets
519,931661,519
522,251519,931
Property, plant &
equipment, net
589,417677,796
557,375589,417
Finance lease right-of-use asset, net
525371
678525
Operating lease right-of-use asset, net
1,7241,005
2,5311,724
Investments in unconsolidated entities
54,94115,530
60,98254,941
Goodwill
35,52544,006
35,525
Intangible assets, net
20,34118,131
22,81620,341
Other long-term assets
6,7709,131
4,5366,770
Total assets
$
1,229,1741,427,489
$
1,206,6941,229,174
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable
$
52,78482,049
$
55,90452,784
Dividends payable
36,656
0
Accrued wages and benefits
26,059
23,812
23,277Income tax payable
25,687
0
Accrued expenses and other liabilities
12,59513,527
13,00112,595
Current portion of finance lease obligation
215224
205215
Current portion of operating lease obligation
691472
796691
Total current
liabilities
90,097184,674
93,18390,097
Long-term finance lease obligation
438214
652438
Long-term operating lease obligation
1,034533
1,7351,034
Other noncurrent liabilities
10,4169,527
8,68110,416
Deferred income taxes
114,408128,196
92,768114,408
Total liabilities
216,393323,144
197,019216,393
Commitments and contingencies - see
Note 18
—
—
Stockholders’ equity:
Common stock ($
0.01
 
par value):
Common stock – authorized
120,000
 
shares, issued
70,261
 
shares
703
703
Class A convertible common stock – authorized and issued
4,800
 
shares
48
48
Paid-in capital
64,04467,989
60,37264,044
Retained earnings
975,9771,065,854
975,147975,977
Accumulated other comprehensive income (loss), net of tax
(558)(1,596)
79(558)
Common stock in treasury,
at cost –
26,20226,121
 
and
26,28726,202
 
shares in 20212022 and 2020,2021,
respectively
(28,447)
(27,433)
(26,674)Total Cal-Maine Foods,
Inc. stockholders’ equity
1,104,551
1,012,781
Noncontrolling interest in consolidated equity
(206)
0
Total stockholders’
equity
1,012,7811,104,345
1,009,6751,012,781
Total liabilities and stockholders’
equity
$
1,427,489
$
1,229,174
$
1,206,694See Notes to Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3638
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands, except per share amounts)
Fiscal years ended
May 28, 2022
May 29, 2021
May 30, 2020
June 1, 2019
52 weeks
52 weeks
52 weeks
Net sales
$
1,777,159
$
1,348,987
$
1,351,609
$
1,361,188
Cost of sales
1,440,100
1,188,326
1,172,021
1,138,329
Gross profit
337,059
160,661
179,588
222,859
Selling, general and administrative
198,631
183,943
178,237
177,045
Loss(Gain) loss on disposal of fixed assets
(5,109)
2,982
82
33
Operating income (loss)
143,537
(26,264)
1,269
45,781
Other income (expense):
Interest expense
(403)
(213)
(498)
(644)
Interest income
988
2,828
4,962
7,978
Patronage dividends
10,130
9,004
10,096
10,482
Equity in income of unconsolidated entities
1,943
622
534
4,776
Other, net
9,820
4,074
3,696
2,432
Total other income
22,478
16,315
18,790
25,024
Income (loss) before income taxes
166,015
(9,949)
20,059
70,805
Income tax expense (benefit)
33,574
(12,009)
1,731
15,743
Net income
132,441
2,060
18,328
55,062
Less:
 
Net income (loss)loss attributable to noncontrolling interest
(209)
0
(63)
833
Net income attributable to Cal-Maine Foods, Inc.
$
132,650
$
2,060
$
18,391
$
54,229
Net income per share attributable to Cal-Maine Foods, Inc.:
Basic
$
0.04
$
0.38
$
1.12
Diluted2.73
$
0.04
$
0.38
Diluted
$
1.122.72
$
0.04
$
0.38
Weighted average
shares outstanding:
Basic
48,52248,581
48,46748,522
48,467
Diluted
48,734
48,656
48,584
48,589See Notes to Consolidated Financial Statements.
39
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Statements of
Comprehensive Income
(in thousands)
Fiscal years ended
May 28, 2022
May 29, 2021
May 30, 2020
Net income
$
132,441
$
2,060
$
18,328
Other comprehensive loss, before tax:
Unrealized holding gain (loss) available-for-sale securities, net of
reclassification adjustments
(1,398)
(736)
59
Increase in accumulated post-retirement benefits obligation, net of
reclassification adjustments
(9)
(137)
(445)
Other comprehensive loss, before tax
(1,407)
(873)
(386)
Income tax benefit related to items of other comprehensive loss
(369)
(236)
(110)
Other comprehensive loss, net of tax
(1,038)
(637)
(276)
Comprehensive income
131,403
1,423
18,052
Less: comprehensive loss attributable to the noncontrolling interest
(209)
0
(63)
Comprehensive income attributable to Cal-Maine Foods, Inc.
$
131,612
$
1,423
$
18,115
See Notes to Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table of Contents
37
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Statements of
 
Comprehensive Income
(in thousands)
 
Fiscal years ended
2021
2020
2019
Net income
$
2,060
$
18,328
$
55,062
Other comprehensive income (loss), before tax:
Unrealized holding gain (loss) available-for-sale securities, net of reclassification
adjustments
(736)
59
1,719
Increase in accumulated post-retirement benefits obligation, net of reclassification
adjustments
(137)
(445)
(349)
Other comprehensive income (loss), before tax
(873)
(386)
1,370
Income tax expense (benefit) related to items of other comprehensive income (loss)
(236)
(110)
322
Other comprehensive income (loss), net of tax
(637)
(276)
1,048
Comprehensive income
1,423
18,052
56,110
Less: comprehensive income (loss) attributable to the noncontrolling interest
0
(63)
833
Comprehensive income attributable to Cal-Maine Foods, Inc.
$
1,423
$
18,115
$
55,277
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3840
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(in thousands)
Common Stock
Shares
Amount
Class A
Shares
Class A
Amount
Treasury
Shares
Treasury
Amount
Paid In
Capital
Retained
Earnings
Accum.
Other
Comp.
Income
(loss)
Noncontrolling
Interest
Total
Balance at June 2, 20181, 2019
70,261
$
703
4,800
$
48
26,43026,366
$
(24,966)(25,866)
$
53,32356,857
$
924,918954,527
$
(693)355
$
2,349
955,682
Stock compensation plan transactions
—
—
—
—
(64)
(900)
3,534
—
—
—
2,570
Dividends
—
—
—
—
—
—
—
(24,620)
—
—
(24,620)
Net income
—
—
—
—
—
—
—
54,229
—
833
55,062
Other comprehensive income, net of tax
—
—
—
—
—
—
—
—
1,048
—
1,048
Balance at June 1, 2019
70,261
703
4,800
—
48
26,366
(25,866)
56,857
954,527
355
3,182
989,806
Stock compensation plan transactions
—
—
—
—
(79)
(808)
3,515
—
—
2,628—
2,707
Distributions to noncontrolling interest
partners
—
—
—
—
—
—
—
—
—
(755)
(755)
Acquisition of noncontrolling interest in
Texas Egg Products,
LLC
—
—
—
—
—
—
—
2,229
—
(2,364)
(135)
Net income (loss)
—
—
—
—
—
—
—
18,391
—
(63)
18,328
Other comprehensive loss, net of tax
—
—
—
—
—
—
—
—
(276)
—
(276)
Balance at May 30, 2020
70,261
703
4,800
—
48
26,287
(26,674)
60,372
975,147
79
0—
1,009,675
Impact of ASC 326, see Note 1
—
—
—
—
—
—
—
422
—
—
422
Balance at May 31, 2020
70,261
703
4,800
48
26,287
(26,674)
60,372
975,569
79
0—
1,010,097
Stock compensation plan transactions
—
—
—
—
(85)
(759)
3,667
—
—
—
2,8232,908
Dividends
—
—
—
—
—
—
—
(1,652)
—
—
(1,652)
Contributions
—
—
—
—
—
—
5
—
—
—
5
Net income
—
—
—
—
—
—
—
2,060
—
0—
2,060
Other comprehensive loss, net of tax
—
—
—
—
—
—
—
—
(637)
—
(637)
Balance at May 29, 2021
70,261
703
4,800
48
26,202
(27,433)
64,044
975,977
(558)
0
1,012,781
Stock compensation plan transactions
—
—
—
—
(81)
(1,014)
3,945
—
—
—
2,931
Dividends
—
—
—
—
—
—
—
(42,773)
—
—
(42,773)
Contributions
—
—
—
—
—
—
—
—
—
3
3
Net income (loss)
—
—
—
—
—
—
—
132,650
—
(209)
132,441
Other comprehensive loss, net of tax
—
—
—
—
—
—
—
—
(1,038)
—
(1,038)
Balance at May 28, 2022
70,261
$
703
4,800
$
48
26,20226,121
$
(27,433)(28,447)
$
64,04467,989
$
975,9771,065,854
$
(558)(1,596)
$
0(206)
$
1,012,7811,104,345
See Notes to Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3941
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Fiscal year ended
May 28, 2022
May 29, 2021
May 30, 2020
June 1, 2019
Cash flows from operating activities:
Net income
$
132,441
$
2,060
$
18,328
$
55,062
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
68,395
59,477
58,103
54,650
Deferred income taxes
5,676
22,351
10,281
6,123
Equity in income of affiliates
(1,943)
(622)
(534)
(4,776)
(Gain) Loss on disposal of property,
plant and equipment
(5,109)
2,982
82
33
Impairment loss on fixed assets
0
196
2,919
0
Stock compensation expense, net of amounts paid
4,063
3,778
3,617
3,619
Unrealized losses on investments
(745)
1,810
744
0
Gains on sales of investments
(2,208)
(22)
(611)
0
Purchases of equity securities
3,469
(334)
(275)
0
Sales of equity securities
 
4,939
55
1,212
0
Amortization of investments
977
890
316
962Gain on change in fair value of investment in affiliates
(4,545)
0
0
Other
(109)
(427)
(248)
23
Change in operating assets and liabilities, net of effects from acquisitions:
(Increase) decreaseIncrease in receivables and other assets
(97,722)
(33,487)
(28,300)
16,012
Increase in inventories
(36,152)
(31,159)
(9,704)
(2,285)
(Increase) decreaseIncrease (decrease) in accounts payable, accrued expenses and other
liabilities
54,782
(1,412)
17,679
(14,338)
Net cash provided by operating activities
126,209
26,136
73,609
115,085
Cash flows from investing activities:
Purchases of investments
(98,243)
(88,283)
(107,234)
(176,951)
Sales of investments
92,703
129,108
204,277
209,806
Acquisition of businesses, net of cash acquired
(44,823)
0
(44,650)
(17,889)
Investment in unconsolidated entities
0(3,000)
0
(4,273)0
Distributions from unconsolidated entities
400
6,663
7,114
7,904
Purchases of property,
plant and equipment
(72,399)
(95,069)
(124,178)
(67,989)
Net proceeds from disposal of property,
plant and equipment
8,341
3,390
3,306
1,575
Net cash used in investing activities
(117,021)
(44,191)
(61,365)
(47,817)
Cash flows from financing activities:
Principal payments on long-term debt
0
(1,500)0
(3,754)(1,500)
Principal payments on finance lease
(215)
(205)
(196)
0
Distributions to noncontrolling interest partners
0
(755)0
0(755)
Purchase of common stock by treasury
(1,127)
(871)
(910)
(985)
Payments of dividends
(6,117)
(1,652)
0
(41,713)
Contributions
 
53
05
0
Net cash used in financing activities
(7,456)
(2,723)
(3,361)
(46,452)
Increase (decrease) in cash and cash equivalents
1,732
(20,778)
8,883
20,816
Cash and cash equivalents at beginning of year
57,352
78,130
69,247
48,431
Cash and cash equivalents at end of year
$
59,084
$
57,352
$
78,130
$
69,247
Supplemental information:
Cash paid for operating leases
$
805
$
929
$
871
$
0
Income taxes paid (refunds received)
$
(1,618)2,214
$
(8,443)995
$
36,31232
Interest paid
$
379
$
508
$
498
$
644See Notes to Consolidated Financial Statements.
 
4042
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Nature of Operations
Cal-Maine Foods,
Inc. (“we,”
 
“us,” “our,” or the
 
the “Company”“Company”)
is primarily
 
engaged in the
 
the production, grading, packing and
 
grading, packing
and sale of
fresh
shell eggs,
including
nutritionally-enhanced, cage-free,
 
organic,
free-range, pasture-raised and
nutritionally-enhanced brown
 
eggs. The Company,
which is headquartered
 
The Company,
which
is
headquartered
in Ridgeland, Mississippi, is the
largest producer
and distributor of fresh
shell eggs in the
United States
and sells the majority
of
its shell
eggs in states
across the
southwestern, southeastern,
mid-western and
mid-Atlantic regions
of
the United States.
 
Principles of Consolidation
The consolidated financial statements include
 
financial statements
include the
accounts of
all wholly-owned
 
subsidiaries and
of majority-owned subsidiaries
over which we exercise control. All significant intercompany transactions and
accounts have been eliminated in consolidation.
Fiscal Year
The Company’s fiscal year-end is on the Saturday closest to May 31. Each of
the year-to-date periods
ended
May 29, 202128, 2022
, May
29, 2021, and May 30, 2020, and June 1, 2019, included
52
 
weeks.
Use of Estimates
The preparation of the consolidated
financial statements in conformity with
generally accepted accounting principles
("GAAP")
in the United States of America 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.
The severity, magnitude and duration, as well as the economic consequences of the COVID-19 pandemic, are uncertain, rapidly
changing
and difficult
to predict.
Therefore, our
accounting estimates
and assumptions
may
change over
time in
response to
COVID-19 and may change materially in future periods.
 
Cash Equivalents
The
 
Company
 
considers
 
all
 
highly
 
liquid
 
investments
 
with
 
a
 
maturity
 
of
 
three
 
months
 
or
 
less
 
when
 
purchased
 
to
 
be
 
cash
equivalents.
 
We
 
maintain
 
bank
 
accounts
 
that
 
are
 
insured
 
by
 
the
 
Federal
 
Deposit
 
Insurance
 
Corporation
 
up
 
to
 
$250,000. The
Company
 
routinely
 
maintains
 
cash
 
balances
 
with
 
certain
 
financial
 
institutions
 
in
 
excess
 
of
 
federally
 
insured
 
amounts.
 
The
Company has not experienced any loss in such
accounts. The Company manages this risk through maintaining
cash deposits and
other highly liquid investments in high quality financial institutions.
We
 
primarily utilize a
cash management system
 
system with a series of
 
separate accounts consisting
of lockbox accounts
 
for receiving
cash, concentration
accounts to which
 
funds are moved,
and zero-balance disbursement
 
disbursement accounts for funding accounts
 
accounts payable.
Checks issued,
 
but not
 
presented to
 
the banks
 
for payment,
 
may result
 
in negative
 
book cash
 
balances, which
 
which are included
 
included in
accounts
payable.
At May
29,
 
2021,
and May
30,
2020,
checks
outstanding
in
excess
 
of
related
book
cash
 
balances
totaled
$
7.5
million and $
11.2
 
million, respectively.
Investment Securities
Our investment
 
securities are
 
accounted for
 
for in accordance
 
accordance with ASC
 
ASC 320, “Investments
 
“Investments - Debt
 
Debt and Equity
 
Equity Securities” (“
(“ASC
320”). The Company considers
its debt securities for
 
which there is a
determinable fair market value,
 
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
 
invested are
available for current
 
operations. Available-for-saleAvailable
 
-for-sale securities are carried
 
carried at fair value,
 
value, with unrealized
gains and losses
 
reported as a separate
 
separate component of
stockholders’ equity. The Company regularly
 
regularly evaluates changes to the
 
to the rating
of its debt
 
debt securities
by credit
 
agencies and economic
 
economic conditions
to assess
 
and record any
 
any expected
credit losses
 
through 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
 
securities is determined by the
 
determined byspecific identification method. Gains
 
the specificand losses are
 
identification method.
Gains and losses
are recognized
in other
income (expenses) as
Other, net in the
 
Company's Consolidated Statements
of Income. Investments
 
in mutual funds
are classified
as “Other long-term assets” in the Company’s
Consolidated Balance Sheets.
 
41
Trade Receivables
 
Trade
 
receivables are
 
stated at
 
their carrying
 
values, which
 
include a
 
reserve for
 
credit losses.
 
At May
 
29, 202128, 2022
 
and May
 
30,29,
2020,2021, reserves for credit losses
were $
775
thousand and $
795
 
thousand, and $
744
respectively.
 
thousand, respectively. The Company extends credit to customers
43
based
 
on
 
an
 
evaluation
 
of
 
each
 
customer's
 
financial
 
condition
 
and
 
credit
 
history.
 
Collateral
 
is
 
generally
 
not
 
required.
 
The
Company minimizes
 
minimizes exposure to
 
to counter
party credit
risk through
 
credit riskanalysis
 
through creditand approvals,
 
analysis andcredit limits,
 
approvals, credit
limits, and
monitoring
procedures.
In
 
determining
our
 
reserve
for
 
credit
losses,
 
receivables
are
 
pooled according
to age,
with each
pool assigned
 
an
expected
expected
loss
based
 
on historical loss
 
historical
loss
information
adjusted
as
 
needed
for
economic
 
and
other
forward-looking
 
factors.
At both
May
28,
2022
and
May
29,
2021,
May 29, 2021 and May 30, 2020 one 1
customer accounted for approximately
23.827.9
% and
29.523.8
% of the Company’s trade accounts
receivable, respectively.
 
respectively.
Inventories
Inventories of eggs, feed,
 
eggs, feed, supplies
and flocks
 
are valued principally
 
at the lower
 
lower of cost (first-in,
 
(first-in, first-out
method) or
 
net realizable
value.
The
 
cost
 
associated
 
with
 
flocks,
 
consisting
 
principally
 
of
 
chicks,
 
feed,
 
labor,
 
contractor
 
payments
 
and
 
overhead
 
costs,
 
are
accumulated during a growing period
of approximately
22
 
weeks. Flock costs are amortized
to cost of sales over
 
the productive
lives of the flocks, generally
one
 
to
two years
. Flock mortality is charged to cost of sales as incurred.
The
 
Company
 
does
 
not
 
disclose
 
the
 
gross
 
cost
 
and
 
accumulated
 
amortization
 
with
 
respect
 
to
 
its
 
flock
 
inventories
 
since
 
this
information is not utilized by management in the operation of the Company.
Property,
 
Property, Plant and Equipment
Property, plant
 
plant and equipment
are stated at
 
at cost. Depreciation is
 
provided by the straight-line
 
straight-line method over
the estimated
useful
lives, which
 
are
15
 
to
25
 
years for
 
buildings and
 
improvements
and
3
 
to
12
 
years for
 
machinery and
 
equipment. Repairs
 
and
maintenance are expensed as incurred.
 
as incurred. Expenditures
that increase the
 
value or productive capacity of
 
capacity of assets
are capitalized. When
property,
 
plant, and equipment
 
equipment are
retired, sold,
 
or otherwise disposed
 
disposed of,
the asset’s
 
carrying amount and
 
and related
accumulated
depreciation are removed from the
accounts and any gain or
loss is included in operations.
The Company capitalizes interest cost
incurred on funds used to
construct property, plant, and equipment
 
and equipment as part of the
asset to which it relates and amortizes such cost
over the asset’s
 
is amortized over
the asset’s estimated useful life. When
certain events or changes
in operating conditions occur,
asset lives may be adjusted
and an impairment assessment may be performed on the recoverability
of the carrying amounts.
Leases
The Company determines
 
determines if
an arrangement
 
is a lease
 
at inception of
 
of the
arrangement and
 
classifies it as
 
an operating lease
 
lease or
finance lease. We recognize the right to use an underlying
asset for
the lease term as a right-of-use ("ROU")
asset on our balance
sheet. A lease liability is
recorded to represent our obligation to
 
to make lease payments over
the term of the lease. These
 
These assets and
liabilities are included
in our Consolidated Balance Sheet
 
Sheet in Finance lease
right-of-use asset, Operating lease
 
lease right-of-use asset,
Current portion of
finance lease obligation,
Current portion of
operating lease obligation,
Long-term finance lease
 
obligation, Current portion of operating lease
obligation, Long-term finance lease obligation, and
Long-term operating lease obligation.
The Company records ROU
assets and lease obligations
based on the discounted
 
the discounted future minimum lease payments
over the term
of the lease. When the
rate implicit in the lease is
 
not easily determinable,
the Company’s incremental
borrowing rate
is used to
calculate the present value of
the future lease payments. The
Company elected not to recognize
 
recognize ROU assets and lease obligations
for leases with an initial term of 12 months or less. Lease expense for operating
leases is recognized on a straight-line basis over
the lease term.
Investments in Unconsolidated Entities
The equity method of
 
of accounting is
used when the
 
the Company has a
 
20% to 50% interest
 
interest in other
entities or when
 
when the Company
exercises significant influence
 
influence over
the entity.
 
Under the equity
 
equity method,
original investments
 
are recorded at
 
at cost and
adjusted
by the Company’s
share of undistributed earnings or losses of these entities. Nonmarketable
investments in which the Company
has less than a
 
a 20% interest and in
 
and in which
it does not
 
have the ability to
 
to exercise significant
influence over the
 
investee are initially
recorded at cost, and periodically reviewed for impairment.
42
Goodwill
Goodwill
 
represents
 
the
 
excess
 
of
 
the
 
purchase
 
price
 
over
 
the
 
fair
 
value
 
of
 
the
 
identifiable
 
net
 
assets
 
acquired.
 
Goodwill
 
is
evaluated for impairment annually by first performing a qualitative assessment to determine whether a
quantitative goodwill test
is necessary. After
 
After assessing the totality
of events or circumstances,
if we
determine it is
more likely than not that
 
that the fair value
of a reporting unit
 
unit is less
than its carrying
 
carrying amount, then we
 
perform additional
quantitative tests to
 
to determine the magnitude
 
magnitude of
any impairment.
 
44
Intangible Assets
Included in other intangible assets are
separable intangible assets acquired in
business acquisitions, which include franchise
fees,
non-compete agreements
and customer
 
relationship intangibles.
They are
 
amortized over
their estimated useful
 
useful lives of
5
 
to
15
years. The
 
gross
 
cost
 
and
 
accumulated
 
amortization
 
of
 
intangible
 
assets
 
are
 
removed
 
when
 
the
 
recorded
 
amounts
 
are
 
fully
amortized and
the asset is
no longer
in use or
the contract
has expired.
When certain
events or changes
in operating
conditions
occur, asset lives may
be adjusted and an
impairment assessment may be
performed on the recoverability
of the carrying amounts.
Accrued Self Insurance
We use
 
a combination of insurance
and self-insurance mechanisms to provide
for the potential liabilities for health
 
health and welfare,
workers’ compensation,
 
auto liability
 
and general
 
liability risks.
 
Liabilities associated
 
with our
 
risks retained
 
are estimated,
 
in
part, by considering claims experience, demographic factors, severity
factors and other actuarial assumptions.
Treasury Stock
Treasury stock
 
stock purchases
are accounted
 
for under the
 
the cost
method whereby
 
the entire cost
 
cost of
the acquired
 
stock is recorded
 
recorded as
treasury
 
stock. The
 
grant
 
of
 
restricted
 
stock
 
through
 
the
 
Company’s
 
share-based
 
compensation
 
plans
 
is
 
funded
 
through
 
the
issuance of
 
treasury stock. Gains
 
and losses
 
on the
 
subsequent reissuance
 
of shares
 
in accordance
 
with the
 
Company’s
 
share-
based compensation plans are credited or charged to paid-in
capital in excess of par value using the average-cost method.
Revenue Recognition and Delivery Costs
Revenue recognition is completed
upon satisfaction of the performance
obligation to the customer, which typically
occurs within
days of
 
the Company and
 
and customer
agreeing upon
 
the order.
 
See
 
for further discussion
 
discussion of
the
policy.
The Company believes
the performance obligation
 
obligation is met upon delivery
 
and acceptance of
the product by
 
by our customers. Costs
to deliver product
 
product to
customers are
 
included in selling,
 
general and administrative
 
administrative expenses
in the
 
accompanying Consolidated
Statements
 
of
 
Income.
 
Sales
 
revenue
 
reported
 
in
 
the
 
accompanying
 
consolidated
 
statements
 
of
 
income
 
is
 
reduced
 
to
 
reflect
estimated returns
 
and allowances.
 
The Company
 
records an
 
estimated sales
 
allowance for
 
returns and
 
discounts at
 
the time
 
of
sale using historical trends based on actual sales returns and sales.
Advertising Costs
The Company expensed advertising
 
advertising costs as incurred of $
12.6
 
incurred ofmillion, $
11.7
 
million, $
6.0
million, and $
7.39.0
 
million in fiscal 2022, 2021,
 
2021, 2020, and
2019,2020, respectively.
Income Taxes
Income
 
taxes
Income taxes
are provided
accounted
for
using
the
 
liability
method.
Deferred
income
taxes
reflect
 
the
net
tax
effects
of
 
temporary differences
differences
between
 
the
 
carrying
 
amounts
 
of
 
assets
 
and
 
liabilities
 
for
 
financial
 
reporting
 
purposes
 
and
 
the
 
amounts
 
used
 
for
income tax purposes. The
 
income
tax
purposes. The Company’s policy with respect
to evaluating uncertain
 
uncertain tax
positions is
based upon whether management believes
it is
 
more likelymanagement
believes it
 
than notis more
 
likely than
not the
uncertain
 
tax positions
 
will be
 
sustained upon
 
review by
 
the taxing
 
authorities. The tax
 
positionstax
positions must
meet
the
more-likely-than-not
 
recognition
threshold
with
consideration
 
given
to
the
amounts
and
 
probabilities
of
the
the outcomes
 
that
could
 
be
realized
 
upon
settlement
 
using
the
 
facts,
circumstances
 
and
information
 
at
the
 
reporting
 
date. The
Company will
 
will reflect
only
 
the portion
 
of the
 
tax benefit
 
that will
 
be
sustained
 
upon resolution
 
of the
 
position
and
 
applicable
interest on the portion of the tax benefit not recognized. The Company
initially and subsequently measures the largest
amount of
tax benefit
 
that is
 
greater than
 
50% likely
 
to be
 
realized upon
 
settlement with a
 
a taxing
authority that
 
has full
 
knowledge of
 
all
relevant
information. The
Company
records
interest
and
penalties on
uncertain
tax
positions
as
a
component
of
income
tax
expense. Based
 
upon management’s
 
assessment, there
 
are no uncertain
 
uncertain tax
positions expected
 
to have a
 
a material
impact on
the
Company’s consolidated
financial statements.
Stock Based Compensation
We account for share-based compensation in accordance with ASC 718, Compensation-Stock Compensation (“ASC 718”). ASC
718 requires
all share-based
payments to
employees and
directors, including
grants of
employee stock
options, restricted
stock
and
performance-based
shares, to
be
recognized
in
the statement
of income
based
on their
fair
values.
ASC 718
requires the
 
4345
Stock Based Compensation
We account for share-based compensation in accordance with
ASC 718, Compensation-Stock Compensation
(“ASC 718”). ASC
718
requires
all
share-based
payments
to
employees,
including
grants
of
employee
stock
options,
restricted
stock
and
performance-based shares, to be recognized in the statementbenefits of income based on their fair values. ASC 718 requires the benefits
of
tax
deductions
in
 
excess
of
recognized
compensation
cost
to
 
be
reported
as
a
financing
cash
 
flow. See
 
for more information.
Business Combinations
The Company applies the acquisition
 
Company appliesmethod of accounting, which
requires that once control is obtained,
all the assets acquired
and liabilities assumed,
including amounts
attributable to noncontrolling
interests, are recorded
at their respective
 
fair valuevalues at
the date of
 
accounting guidanceacquisition. The
 
to measurefair values of
 
non-financialidentifiable assets
 
and
liabilities associated
with business
acquisitions. These
assets and
liabilities are
 
measured at
fair value
for the
initial purchase
price allocationdetermined internally
 
and arerequires
 
subject toestimates and
recurringthe
 
revaluations.use
 
Theof
 
fairvarious
valuation
techniques.
When
a
market
 
value
 
of
non-financial
assets
acquired
is
 
determinednot
 
internally. Ourreadily
available,
our
 
internal
 
valuation
methodology for non-financial
 
assets takes intomethodology
accountconsiders the remaining
estimated life of
the assets acquired and
 
and what management
believes is the market value for those assets.
We
typically use the income
method approach for
intangible assets acquired in
a business combination. Significant
estimates in
valuing certain intangible assets include, but
are not limited to,
the amount and timing of
future cash flows, growth rates,
discount
rates and useful
lives. The excess
of the purchase
price over fair
values of identifiable
assets and liabilities
is recorded as
goodwill.
 
Loss Contingencies
Certain conditions may exist as of the date
the financial statements are issued that may
result in a loss to the Company but
which
will only be resolved
 
resolved when one
or more future
 
future events occur or fail
 
fail to occur.
 
The Company’s
 
management and
its legal
counsel
assess
 
such
 
contingent
 
liabilities,
 
and
 
such
 
assessment
 
inherently
 
involves
 
an
 
exercise
 
of
 
judgment.
 
In
 
assessing
 
loss
contingencies
related
 
to legal
 
proceedings
that are
pending against
the Company
or unasserted
claims that
 
are pendingmay result
 
against the
Company or
unasserted claims
that may
result in
such
proceedings, the Company’s
 
legal counsel evaluates the
 
the perceived merits
of any legal
 
legal proceedings or unasserted claims
 
claims as well
as the perceived merits of the amount of relief sought or expected to be
sought therein.
If the assessment
 
of a contingency
 
indicates it is
 
probable that a
 
a material loss has
 
has been incurred and
 
and the amount of
 
of the liability
can be estimated,
 
estimated, the
estimated liability
 
would be accrued
 
in the Company’s
 
financial statements. If
 
If the assessment indicates
 
indicates a
potentially material loss contingency is
not probable, but is reasonably possible,
or is probable but cannot be estimated,
then the
nature of the contingent
 
contingent liability, together
 
together with an
estimate of the
 
the range of possible
 
loss if determinable and
 
and material, would
be
disclosed. Loss
 
contingencies considered
 
remote are
 
generally not
 
disclosed unless
 
they involve
 
guarantees, in
 
which case
 
the
nature of the guarantee would be disclosed.
 
The Company expenses the costs of litigation as they are incurred.
New Accounting Pronouncements and Policies
Effective
 
May
 
31,
 
2020,
 
the
 
Company
 
adopted
 
ASU
 
2016-13,
 
Financial
 
Instruments
 
–
 
Credit
 
Losses
 
(Topic
 
326),
 
which
 
is
intended
 
to
 
improve
 
financial
 
reporting
 
by
 
requiring
 
more
 
timely
 
recording
 
of
 
credit
 
losses
 
on
 
loans
 
and
 
other
 
financial
instruments held by financial institutions and other organizations.
The guidance replaces the prior “incurred loss” approach with
an “expected
 
loss” model
 
and requires
 
measurement of
 
all expected credit
 
credit losses for
 
for financial
assets held
 
at the
 
reporting date
based on historical experience,
current conditions, and reasonable
and supportable forecasts. The
 
Company adopted the guidance
on a modified retrospective basis through
a cumulative effect adjustment to retained
earnings as of the beginning of
the period of
adoption. The Company evaluated
its current methodology of estimating
allowance for doubtful accounts and
the risk profile
of
its receivables portfolio and developed a
model that includes the qualitative and
forecasting aspects of the “expected loss”
model
under the amended guidance. The Company finalized
its assessment of the impact of the
amended guidance and recorded a $
422
thousand cumulative increase to retained earnings at May 31, 2020.
No other new accounting
 
accounting pronouncement
issued or effective
 
during the fiscal year
 
year had or
is expected to
 
to have a material
 
impact
on our Consolidated Financial Statements.
Reclassification
Certain
reclassifications
were
made
to
the
fiscal
2020
financial
statements
to
conform
to
the
fiscal
2021
financial
statement
presentation. These reclassifications had no effect on income.
Note 2 – Acquisitions
Effective on October 20, 2019, the Company acquired certain
assets of Mahard Egg Farm ("Mahard"),
relating to its commercial
shell
egg
production,
processing,
distribution
and
sales
for
$
45.5
million.
The
acquired
assets
include
facilities
with
current
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
46
Note 2 – Acquisition
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. As
a result
of the
acquisition, Red
River became
a wholly
owned subsidiary
of the
Company. Red River owns and
operates a specialty
shell egg production
complex with approximately
1.7
million cage-free laying
hens,
cage-free
pullet capacity,
feed
mill, processing
plant, related
offices
and outbuildings
and
related
equipment located
on
approximately
400
acres near Bogata, Texas.
The
following
table
summarizes
the
consideration
paid
for
Red
River
and
the
amounts
of
the
assets
acquired
and
liabilities
assumed recognized at the acquisition date:
Cash consideration paid
$
48,500
Fair value of the Company's equity interest in Red River held before the business combination
48,500
$
97,000
Recognized amounts of identifiable assets acquired and liabilities assumed
Cash
$
3,677
Accounts receivable, net
1,980
Inventory
8,789
Property, plant and equipment
85,002
Liabilities assumed
(2,448)
Deferred income taxes
(8,481)
Total identifiable
net assets
88,519
Goodwill
8,481
$
97,000
Cash and accounts receivable acquired along with liabilities
assumed were valued at their carrying
value which approximates fair
value due to the short maturity of these instruments.
Inventory consisted
primarily of
flock, feed
ingredients, packaging,
and egg
inventory.
Flock inventory
was valued at
carrying
value as management
believes that their
carrying value best
approximates their
fair value. Feed
ingredients, packaging
and egg
inventory were all valued based on market prices as of May 30, 2021.
Property,
plant and
equipment were
valued utilizing
the cost
approach which
is based
on replacement
or reproduction
costs of
the assets and subtracting any depreciation resulting from physical deterioration
and/or functional or economic obsolescence.
The Company recognized a gain of $
4.5
million as a result of remeasuring to fair value its
50
% equity interest in Red River held
before
the
business
combination.
The
gain
was
recorded
in
other
income
and
expense
under
the
heading
“Other,
net”
in
the
Company’s Condensed Consolidated Statements of Income. The acquisition
of Red River resulted
in a discrete tax
benefit of $
8.3
million,
which
includes
a
$
7.3
million
decrease
in
deferred
income
tax
expense
related
to
the
outside-basis
of
our
equity
investment in Red River, with a corresponding non-recurring,
non-cash $
955,000
reduction to income taxes expense on the non-
taxable remeasurement gain associated with the acquisition. As part of the acquisition accounting, the Company also
recorded an
$
8.5
million
deferred
tax
liability
for
the
difference
in
the
inside-basis
of
the
acquired
assets
and
liabilities
assumed.
The
recognition of deferred
tax liabilities resulted in
the recognition of goodwill.
None of the goodwill
recognized is expected
to be
deductible for income tax purposes.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4447
capacity for
approximately
3.9
million laying hens
and permitted capacity
for up
to
8.0
million laying hens,
a feed mill,
pullet
raising facilities
and related
production facilities located
in Chillicothe,
Texas,
and Nebo, Oklahoma,
a distribution
warehouse
located in
Gordonville, Texas
and an
equity interest
in Texas
Egg Products,
LLC ("TEP").
As a
result of
the acquisition,
the
Company
acquired
a
21.1
%
equity
interest
in
TEP
which
brought
our
total
ownership
to
93.2
%.
The
acquired
operations of
Mahard are included in the accompanying financial statements as of October 20, 2019. Acquisition related costs incurred during
the period were immaterial to the financial statements.
The following table summarizes the aggregate purchase price allocation for Mahard (in thousands):
Inventory
$
5,276
Property, plant and equipment
38,433
Customer list and non-compete agreement
2,000
Liabilities assumed
(194)
Total purchase price
$
45,515
Effective
March 28, 2020,
the Company
acquired from
Feathercrest Farms,
Inc. the
remaining
6.8
% interest
in our
majority-
owned subsidiary TEP for $
135
thousand.
Note 3 - Investment Securities
The following presents the Company’s
investment securities as of May 29, 202128, 2022 and May 30, 202029, 2021 (in thousands):
May 29, 202128, 2022
Amortized
 
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated Fair
Value
Municipal bonds
$
10,136
$
0
$
32
$
10,104
Commercial paper
14,940
0
72
14,868
Corporate bonds
74,167
0
483
73,684
Certificates of deposits
1,263
0
18
1,245
US government and agency obligations
2,205
4
0
2,209
Asset backed securities
13,456
0
137
13,319
Total current
investment securities
$
116,167
$
4
$
742
$
115,429
Mutual funds
$
3,826
$
0
$
74
$
3,752
Total noncurrent
investment securities
$
3,826
$
0
$
74
$
3,752
May 29, 2021
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated Fair
Value
Municipal bonds
$
16,424
$
56
$
0
$
16,480
Commercial paper
1,998
0
0
1,998
Corporate bonds
80,092
608
0
80,700
Certificates of deposits
1,077
0
1
1,076
Asset backed securities
11,914
0
10
11,904
Total current
investment securities
$
111,505
$
664
$
11
$
112,158
Mutual funds
$
2,306
$
1,810
$
0
$
4,116
Total noncurrent
investment securities
$
2,306
$
1,810
$
0
$
4,116
May 30, 2020
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated Fair
Value
Municipal bonds
$
16,093
$
86
$
0
$
16,179
Commercial paper
6,965
17
0
6,982
Corporate bonds
125,594
1,274
0
126,868
Certificates of deposits
1,492
0
0
1,492
Asset backed securities
2,629
13
0
2,642
Total current investment securities
$
152,773
$
1,390
$
0
$
154,163
Mutual funds
$
2,005
$
744
$
0
$
2,749
Total noncurrent investment securities
$
2,005
$
744
$
0
$
2,749
Available-for-sale
Proceeds
 
Proceeds from
 
the sales
 
sales and
maturities
 
of
available-for-sale
 
securities
were
$
92.7
million,
 
$
129.1
 
million,
and $
204.3
million, and
$
209.7
 
million
during fiscal 2022, 2021, 2020, and 2019,2020, respectively. Gross realized gains for
fiscal 2022, 2021, 2020, and 20192020 were $
456181
 
thousand, $
278
456
thousand,
and
$
9278
 
thousand,
respectively.
Gross
realized
losses
for
fiscal
 
2022,
2021,
and
2020 and 2019
were
$
76
thousand,
$
19
thousand, and $
6
 
thousand,
and $
33
respectively. There
 
thousand, respectively. There werewas
0
 
allowance for credit losses at May 29, 202128, 2022 and May 30, 2020.29, 2021.
45
Actual maturities may
differ from contractual maturities because some
 
because some borrowers
have the right to
 
call or prepay
obligations with
or
 
without
 
call
 
or
 
prepayment
 
penalties.
 
Contractual
 
maturities
 
of
 
investment
 
securities
 
at
 
May
 
29,28,
 
20212022
 
are
 
as
 
follows
 
(in
thousands):
Estimated Fair Value
Within one year
$
33,89958,970
1-5 years
78,25956,459
Total
$
112,158115,429
Noncurrent
 
Proceeds from sales
and maturities of
noncurrent investment securities were $
4.9
 
weremillion, $
54
 
thousand, and $
1.2
 
million, and $
84
thousand during
fiscal 2022,
2021 and
 
2020, and
2019, respectively.
 
Gross realized
 
gains on
 
those sales and
 
and maturities
during fiscal
 
20202022 and
 
20192021 were
$
2.2
million and $
611
 
thousand, and $
48
respectively.
 
thousand, respectively. There were
0
 
realized losses for fiscal 2022, 2021, 2020, and 2019.2020.
 
Note 4 - Fair Value Measures
 
Measures
The Company
 
is required
 
to categorize
 
both financial
 
and nonfinancial
 
assets and
 
liabilities based
 
on the
 
following fair
 
value
hierarchy. The
 
fair value
 
of an
 
asset is
 
the price
 
at which
 
the asset
 
could be
 
sold in
 
an orderly
 
transaction between
 
unrelated,
knowledgeable, and willing parties able to engage in the
transaction. A liability’s fair value
is defined as the amount that would
be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount
that would be paid to settle
the liability with the creditor.
●
Level 1
- Quoted prices in active markets for identical assets or liabilities
●
Level 2
- Inputs
other than
quoted prices
included in
Level 1
that are
observable for
the asset
or liability,
either
directly or indirectly, including:
o
Quoted prices for similar assets or liabilities in active markets
o
Quoted prices for identical or similar assets in non-active markets
o
Inputs other than quoted prices that are observable for the asset or liability
o
Inputs derived principally from or corroborated by other observable market data
●
Level 3
- Unobservable inputs for
the asset or liability
supported by little or
no market activity and
are significant
to the fair value of the assets or liabilities
The disclosure of fair value of certain financial assets and liabilities recorded at cost are as follows:
Cash and cash equivalents, accounts receivable, and accounts payable:
The carrying amount approximates fair value due to the
short maturity of these instruments.
Lease obligations:
The carrying value of the Company’s lease obligations is at its present value which approximates fair value.
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 our financial assets and
liabilities that are required to
be measured at fair value
on a recurring basis as
of May 29, 2021 and
May 30, 2020 (in thousands):
May 29, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
0
$
16,480
$
0
$
16,480
Commercial paper
0
1,998
0
1,998
Corporate bonds
0
80,700
0
80,700
Certificates of deposits
0
1,076
0
1,076
Asset backed securities
0
11,904
0
11,904
Mutual funds
4,116
0
0
4,116
Total assets measured at fair value
$
4,116
$
112,158
$
0
$
116,274
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4648
knowledgeable, and willing
parties able to engage in
the transaction. A liability’s
fair value is defined
as the amount that would
be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be
paid to settle
the liability with the creditor.
●
Level 1
- Quoted prices in active markets for identical assets or liabilities
●
Level 2
- Inputs
other than
quoted
prices included
in Level
1 that
are observable
for the
asset or
liability,
either
directly or indirectly,
including:
o
Quoted prices for similar assets or liabilities in active markets
o
Quoted prices for identical or similar assets in non-active markets
o
Inputs other than quoted prices that are observable for the asset or liability
o
Inputs derived principally
from or corroborated by other observable market data
●
Level 3
- Unobservable inputs
for the asset
or liability supported
by little or
no market activity
and are significant
to the fair value of the assets or liabilities
The disclosure of fair value of certain financial assets and liabilities recorded
at cost are as follows:
Cash and cash equivalents, accounts receivable,
and accounts payable:
The carrying amount approximates fair value due to the
short maturity of these instruments.
Lease obligations:
The carrying value of the Company’s lease obligations
is at its present value which approximates fair value.
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 our
financial assets and
liabilities that are required to be measured at fair value on a recurring basis
as of May 28, 2022 and May 29, 2021 (in thousands):
May 30, 202028, 2022
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
0
$
16,17910,104
$
0
$
16,17910,104
Commercial paper
0
6,98214,868
0
6,98214,868
Corporate bonds
0
126,86873,684
0
126,86873,684
Certificates of deposits
0
1,4921,245
0
1,4921,245
US government and agency obligations
0
2,209
0
2,209
Asset backed securities
0
2,64213,319
0
2,64213,319
Mutual funds
2,7493,752
0
0
2,7493,752
Total assets measured at fair
value
$
2,7493,752
$
154,163115,429
$
0
$
156,912119,181
May 29, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
0
$
16,480
$
0
$
16,480
Commercial paper
0
1,998
0
1,998
Corporate bonds
0
80,700
0
80,700
Certificates of deposits
0
1,076
0
1,076
Asset backed securities
0
11,904
0
11,904
Mutual funds
4,116
0
0
4,116
Total assets measured at fair
value
$
4,116
$
112,158
$
0
$
116,274
Our investmentInvestment securities – available-for-sale
classified as Level
2 consist of
securities with maturities of
 
of three months or longer
when
 
when
purchased.
We
 
classified
these
 
securities
as
 
current,
because
 
amounts
invested
 
are
available
 
for
current
 
operations. Observable
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
 
Note 5 - Inventories
 
Inventories consisted of the following (in thousands):
 
May 29, 2021
May 30, 2020
Flocks, net of amortization
$
123,860
$
110,198
Eggs and egg products
21,084
18,487
Feed and supplies
73,431
58,531
$
218,375
$
187,216
 
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 May
29, 2021,
consisted of approximately
10.8
million pullets and breeders and
37.8
million layers.
 
The Company expensed amortization and mortality associated with the flocks to cost of sales as follows (in thousands):
 
May 29, 2021
May 30, 2020
June 1, 2019
Amortization
$
133,448
$
133,379
$
119,658
Mortality
6,769
5,823
5,161
Total flock costs charged to cost of sales
$
140,217
$
139,202
$
124,819
 
Note 6 - Property, Plant and Equipment
 
Property, plant and equipment consisted of the following (in thousands):
 
May 29, 2021
May 30, 2020
Land and improvements
$
101,174
$
91,865
Buildings and improvements
454,332
393,195
Machinery and equipment
584,778
531,545
Construction-in-progress
72,879
126,061
1,213,163
1,142,666
Less: accumulated depreciation
623,746
585,291
$
589,417
$
557,375
 
Depreciation expense was $
56.5
million, $
54.5
million and $
51.7
million in the fiscal years ended May 29, 2021, May 30, 2020,
and June 1, 2019, respectively.
 
The Company
 
maintains insurance
 
for both
 
property damage
 
and business
 
interruption relating
 
to catastrophic
 
events, such
 
as
fires. Insurance recoveries received
 
for property damage
 
and business interruption
 
in excess of
 
the net book
 
value of
 
damaged
assets, clean-up and demolition
costs, and post-event costs
are recognized as income
in the period received or
committed when
all contingencies associated with
the recoveries are
resolved. Gains on
insurance recoveries related to
business interruption are
recorded within “Cost of
sales” and any gains
or losses related to
property damage are recorded
within “Loss on disposal
of fixed
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4749
assets.”Note 5 - Inventories
Inventories consisted of the following (in thousands):
May 28, 2022
May 29, 2021
Flocks, net of amortization
$
144,051
$
123,860
Eggs and egg products
26,936
21,084
Feed and supplies
92,329
73,431
$
263,316
$
218,375
We grow and maintain
 
Insuranceflocks of layers (mature female chickens), pullets (female chickens under 18 weeks of age), and breeders
recoveries
related(male and female chickens used
 
to produce fertile eggs to
 
businesshatch for egg production flocks).
 
interruptionOur total flock at May
 
are28, 2022 and
May 29, 2021,
 
classifiedconsisted of approximately
11.5
 
asmillion and
10.8
 
operating
cash
flows
million pullets and
 
recoveriesbreeders and
42.2
 
relatedmillion and
37.8
million
layers, respectively.
The Company expensed amortization and mortality associated with the
flocks to cost of sales as follows (in thousands):
May 28, 2022
May 29, 2021
May 30, 2020
Amortization
$
160,107
$
133,448
$
133,379
Mortality
8,011
6,769
5,823
Total flock costs charged
 
to cost of sales
$
168,118
$
140,217
$
139,202
Note 6 - Property,
Plant and Equipment
Property, plant and equipment
consisted of the following (in thousands):
May 28, 2022
May 29, 2021
Land and improvements
$
109,833
$
101,174
Buildings and improvements
517,859
454,332
Machinery and equipment
655,925
584,778
Construction-in-progress
71,967
72,879
1,355,584
1,213,163
Less: accumulated depreciation
677,788
623,746
$
677,796
$
589,417
Depreciation expense was $
65.8
million, $
56.5
million and $
54.5
million in the fiscal years ended May 28, 2022, May 29, 2021,
and May 30, 2020, respectively.
The Company
maintains insurance
for both
property damage
 
and business
interruption relating
to catastrophic
events, such
as
fires. Insurance recoveries
received for
property damage
and business
interruption in
excess of
the net
book value
of damaged
assets, clean-up and
demolition costs, and
post-event costs are
recognized as income
in the period
received or committed
when
all contingencies
associated with the
recoveries are
resolved. Gains on
insurance recoveries
related to business
interruption are
recorded within “Cost of sales” and any gains or losses related to property damage are recorded
within “(Gains) loss on disposal
of fixed assets.” Insurance recoveries related to business interruption are classified as
operating cash flows and recoveries related
to property
damage are classified
 
as investing cash
 
cash flows in
 
in the
statement of
 
cash flows. Insurance
 
claims incurred
 
or
finalized
during the fiscal
 
fiscal years ended May
 
28, 2022, May
29, 2021, and
 
May 30, 2020
 
and June 1,
2019 did
not have
 
a material effect
 
on the
Company's
consolidated financial statements.
Included in cost
of sales for
fiscal 2021 and
2020 is a
non-cash impairment
loss on fixed
assets of $
196
thousand and
$
2.9
million,
respectively,
related to
decommissioning some
older, less
efficient production
facilities as
the Company
continues to
invest in
new facilities to meet the increasing demand for specialty eggs and to reduce production costs.
Note 7 - Investment in Unconsolidated Entities
At May 29, 2021,As of
 
the Company had severalMay 28,
 
investments in unconsolidated entities
that are accounted for
using the equity method
of accounting. Red River Valley
Egg Farm, LLC ("Red River") operates a cage-free shell egg production complex near Bogota,
Texas. Specialty Eggs,
LLC ("Specialty Eggs") owns the Egg-Land's Best franchise for most
of Georgia and South Carolina, as
well as a portion of western North Carolina and eastern Alabama. Southwest Specialty Eggs, LLC
("Southwest Specialty Eggs")
owns the
Egg-Land's Best
franchise for
Arizona, southern
California2022 and
 
Clark County,
Nevada (including
Las Vegas).
As of
May 29,
 
2021, the
 
Company owned
50
% in
 
Red River,Specialty Eggs,
LLC ("Specialty
Eggs") and
Southwest
Specialty Eggs,
LLC ("Southwest
Specialty Eggs"),
which are
accounted for
using the
equity method
of accounting.
Specialty
Eggs owns the Egg-Land's Best franchise for most of Georgia and South Carolina, as well as
a portion of western North Carolina
and eastern Alabama. Southwest Specialty
 
Eggs andowns the Egg-Land's Best franchise
 
Southwest Specialty
Eggs. Equity
method investments
are
included
in
“Investments
in
unconsolidated
entities”
in
the
accompanying
Consolidated
Balance
Sheetsfor Arizona, southern California
 
and Clark
County, Nevada (including
 
totaled
$
49.9
Las Vegas).
 
million and $
54.7
million at May 29, 2021 and May 30, 2020, respectively.
Equity
in
income
of
unconsolidated
entities
of
$
622
thousand,
$
534
thousand,
and
$
4.8
million
from
these
entities
has
been
included in the Consolidated Statements of Income for fiscal 2021, 2020, and 2019, respectively.
The condensed
consolidated financial
information for
the Company's
unconsolidated joint
ventures was
as follows
(in thousands):
For the fiscal year ended
May 29, 2021
May 30, 2020
June 1, 2019
Net sales
$
119,853
$
188,922
$
112,396
Net income
1,596
1,064
9,490
Total assets
106,592
113,513
128,470
Total liabilities
5,850
4,655
7,600
Total equity
100,742
108,858
120,870
The
Company
is
a
member
of
Eggland’s
Best,
Inc.
(“EB”),
which
is
a
cooperative. At
May
29,
2021
and
May
30,
2020,
“Investments
in
unconsolidated
entities”
as
shown
on
the
Company’s
Consolidated
Balance
Sheet
includes
the
cost
of
the
Company’s investment in
EB plus any qualified written allocations. The
Company cannot exert significant influence over EB’s
operating and financial activities;
therefore, the Company accounts
for this investment using
the cost method. The carrying
value
of this investment at May 29, 2021 and May 30, 2020 was $
768
thousand and $
2.0
million, respectively.
The following relates to the Company’s transactions with these unconsolidated affiliates (in thousands):
For the fiscal year ended
May 29, 2021
May 30, 2020
June 1, 2019
Sales to unconsolidated entities
$
56,765
$
54,559
$
58,093
Purchases from unconsolidated entities
76,059
71,475
81,685
Distributions from unconsolidated entities
6,663
7,114
7,904
May 29, 2021
May 30, 2020
Accounts receivable from unconsolidated entities
2,404
$
4,935
Accounts payable to unconsolidated entities
4,161
5,706
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4850
As of May
29, 2021, the
Company owned
50
% in Red
River which was
acquired at the
beginning of
fiscal 2022 (see
). The Company accounted for Red River using the equity method of
accounting in fiscal 2021.
Equity method investments are included
in “Investments in unconsolidated entities”
in the accompanying Consolidated Balance
Sheets and totaled $
10.5
million and $
49.9
million at May 28, 2022 and May 29, 2021, respectively.
Equity
in
income
of
unconsolidated
entities
of
$
1.9
million,
$
622
thousand,
and
$
534
thousand
from
these
entities
has
been
included in the Consolidated Statements of Income for fiscal 2022
,
2021, and 2020, respectively.
The condensed consolidated financial
information for the
Company's unconsolidated joint
ventures was as
follows (in thousands):
For the fiscal year ended
May 28, 2022
May 29, 2021
May 30, 2020
Net sales
$
145,281
$
119,853
$
188,922
Net income
3,942
1,596
1,064
Total assets
42,971
106,592
113,513
Total liabilities
21,892
5,850
4,655
Total equity
21,079
100,742
108,858
The
Company
is
a
member
of
Eggland’s
Best,
Inc.
(“EB”),
which
is
a
cooperative. At
May
28,
2022
and
May
29,
2021,
“Investments
in
unconsolidated
entities”
as
shown
on
the
Company’s
Consolidated
Balance
Sheet
includes
the
cost
of
the
Company’s
investment in EB plus
any qualified written
allocations. The Company
cannot exert significant
influence over EB’s
operating
and financial
activities; therefore,
the Company
accounts for
this investment
using the
cost method.
As of
May 28,
2022 and May 29, 2021, the carrying value of this investment was $
768
thousand.
The following relates to the Company’s
transactions with these unconsolidated affiliates (in thousands):
For the fiscal year ended
May 28, 2022
May 29, 2021
May 30, 2020
Sales to unconsolidated entities
$
94,311
$
56,765
$
54,559
Purchases from unconsolidated entities
60,016
76,059
71,475
Distributions from unconsolidated entities
400
6,663
7,114
May 28, 2022
May 29, 2021
Accounts receivable from unconsolidated entities
10,815
$
2,404
Accounts payable to unconsolidated entities
4,678
4,161
Note 8 - Goodwill and Other Intangible Assets
Goodwill and other intangibles consisted of the following (in thousands):
Other Intangibles
Franchise
Customer
Non-compete
Right of
Water
Total
Goodwill
rights
relationships
agreements
Use
rights
Trademark
intangibles
Balance June 1, 2019May 30, 2020
$
35,525
$
19,95518,327
$
2,5042,354
$
2971,179
$
0
$
720
$
286236
$
59,287
Additions
—
0
1,000
1,000
0
—
—
2,000
Amortization
—
(1,628)
(1,150)
(118)
0
—
(50)
(2,946)
Balance May 30, 2020
35,525
18,327
2,354
1,179
0
720
236
58,341
Additions
—
0
0
0
39
—
—0
39
Amortization
—
(1,628)
(666)
(160)
(10)
—
(50)
(2,514)
Balance May 29, 2021
$35,525
35,52516,699
1,688
1,019
29
720
186
55,866
Additions
8,481
0
0
0
10
—
0
8,491
Amortization
—
(1,628)
(362)
(159)
(21)
—
(50)
(2,220)
Balance May 28, 2022
$
16,69944,006
$
1,68815,071
$
1,0191,326
$
29860
$
18
$
720
$
186136
$
55,86662,137
51
For the Other Intangibles listed above, the gross carrying amounts and
accumulated amortization are as follows (in thousands):
May 29, 202128, 2022
May 30, 202029, 2021
Gross carrying
Accumulated
Gross carrying
Accumulated
amount
amortization
amount
amortization
Other intangible assets:
Franchise rights
$
29,284
$
(12,585)(14,213)
$
29,284
$
(10,957)
Customer relationships
9,644
(7,956)(8,318)
20,544
(18,190)
Non-compete agreements
1,450
(431)(590)
1,450
(271)
Right of use intangible
229239
(200)(221)
191
(191)
Water rights *
720
—
720
—
Trademark
400
(214)(264)
400
(164)
Total
$
41,72741,737
$
(21,386)(23,606)
$
52,589
$
(29,773)
*
 
Water rights are
an indefinite life intangible asset.
No significant residual value
is estimated for these
 
intangible assets. Aggregate amortization
expense for fiscal years
2022, 2021, 2020,
and 20192020 totaled $
2.2
million, $
2.5
 
million, and $
2.9
 
million, and $
2.8
million, respectively.
 
The following table presents the total estimated amortization of intangible
assets for the five succeeding years (in thousands):
For fiscal year
Estimated amortization expense
20222023
$
2,220
2023
2,2062,216
2024
2,170
2025
2,0402,041
2026
2,0152,008
2027
1,703
Thereafter
8,9707,273
Total
$
19,62117,411
Note 9 - Employee Benefit Plans
The Company maintains a medical plan that is qualified under Section
401(a) of the Internal Revenue Code and is not subject to
tax under present income tax laws. The plan is
funded by contributions from the Company and its
employees. Under its plan, the
Company
 
self-insures
 
its
 
portion
 
of
 
medical
 
claims
 
for
 
substantially
 
all
 
full-time
 
employees. The
 
Company
 
uses
 
stop-loss
insurance
 
to
 
limit
 
its
 
portion
 
of
 
medical
 
claims
 
to
 
$
225,000
 
per
 
occurrence. The
 
Company's
 
expenses
 
including
 
accruals
 
for
incurred but not
reported claims were approximately
$
24.6
million, $
21.7
 
million, $
17.8
. million, and $
18.117.8
 
million in fiscal years
2022, 2021, 2020,
and 2019,2020, respectively.
 
The liability recorded for
 
for incurred but
not reported claims
 
claims was $
2.8
million and $
2.4
 
million and $
1.7
as of
 
million as of May
28,
2022
and
May
29,
2021,
respectively
and May 30, 2020, respectively.
are
classified
as
“Accrued
expenses
and
other
liabilities”
in
the
Company’s
Consolidated Balance Sheets.
The Company has
 
has a KSOP plan
 
plan that
covers substantially
 
all employees (the
 
“Plan”(the “Plan”). The
Company makes
 
contributions to
the
Plan at a rate of
3
% of participants' eligible compensation,
plus an additional amount determined
at the discretion of the
 
Board of
49
Directors. Contributions
 
can
 
be
 
made
 
in
 
cash
 
or
 
the
 
Company's
 
commonCommon
 
stock,Stock,
 
and
 
vest
 
immediately. The
 
Company's
 
cash
contributions to the Plan were $
3.9
 
million in fiscal year 2022
and $
3.8
 
million in both fiscal years
2021 and
2020, and $
3.7
million in fiscal year 2019.
2020. The Company
did
0
t
make
direct
contributions
of
 
the
Company’s common stock
Common
Stock
in
fiscal
years
2022,
2021,
 
2020, or 2019.
2020.
Dividends
on
 
the Company’s
common stockCompany’s Common Stock are paid
to the Plan in
cash. The Plan acquires the
Company’s common stock,
Common Stock, which is listed on
the NASDAQ,
NASDAQ, by using
the dividends and
the Company’s
 
cash contribution to
purchase shares in
the public markets. The
 
The Plan sells
Common Stock on
 
common
stock on the NASDAQ to pay
benefits to Plan participants.
Participants may make
contributions to the Plan up
 
up to the maximum
maximum allowed by the Internal Revenue Service regulations. The
Company does not match participant contributions.
The
 
Company
 
has
 
deferred
 
compensation
 
agreements
 
with
 
certain
 
officers
 
for
 
payments
 
to
 
be
 
made
 
over
 
specified
 
periods
beginning when the officers
reach age
65
 
or over as specified in the
agreements. Amounts accrued for
the agreements are based
upon
deferred
 
compensation
earned
 
over
the
 
estimated
remaining
 
service
period
 
of
 
each officer.
 
Payments
made
 
under
 
these
agreements
 
were
$
170
 
thousand, in fiscal
years 2022
and 2021,
and $
150
 
thousand
and
$
129
thousand in
fiscal
 
yearsyear
 
2021,2020. The liability
 
2020,
and
2019,
respectively. Therecorded
liability recorded related to these agreements was $
1.1
million and $
1.4
 
million at May 28, 2022 and May 29, 2021, and May 30, 2020.respectively.
 
In December 2006, the Company adopted an additional deferred compensation plan to provide deferred compensation to namedTable of Contents
officers of
52
Effective
December
1,
2021,
 
the Company.
Company
amended
and
restated
its
deferred
compensation
plan
(the
“Amended
DC Plan”).
The Amended DC Plan,
expanded eligibility for participation
from named officers only
to a select
group of management or
highly
compensated employees of the
Company,
expanded the investment options
available and added the
ability of participants to
make
elective deferrals.
 
The awards
 
issued under
 
this planthe Amended
DC Plan
 
were $
279340
 
thousand, $
266279
 
thousand, and
 
$
267266
 
thousand in
fiscal 2022,
 
fiscal
2021, 2020, and 2019, 2020,
respectively. Payments
made under
the planAmended
DC Plan were
$
55480
 
thousand and $
1.255
thousand
in fiscal 2022 and 2021, respectively. The liability
recorded for the Amended DC Plan was $
4.5
 
million in fiscal 2021 and 2020,
respectively. The
liability
recorded
for
this
plan
was
$
4.1
 
million
and
$ at May
2.7
million
at
28, 2022 and May
29,
2021,
and
May
30,
2020,
respectively.
Deferred compensation expense for
both plans totaled $
258
thousand, $
1.6
 
million and $
621
 
thousand and $
377
thousand in fiscal 2022,
2021, 2020, and
2019, respectively.
2020,
 
respectively.
Postretirement Medical Plan
The Company maintains
 
maintains an
unfunded postretirement medical
 
medical plan to provide
 
provide limited
health benefits to
 
to certain qualified
 
retired
employees and
 
and officers.
Retired non-officers
 
and spouses
 
spouses are eligible
 
eligible for
coverage
 
until attainment
 
of Medicare
 
eligibility,
 
at
which
time
coverage
 
ceases. Retired
officers
 
and
spouses
 
are
eligible
for
 
lifetime
benefits
under
 
the
plan. Officers,
 
and
their
spouses, who retired
prior to
May 1, 2012 and their spouses must participate in Medicare
 
Medicare Plans A and B. Officers, and
their spouses, who retire
on
or after May 1, 2012
and their spouses must participate in Medicare Plans A, B, and D.
 
The plan is accounted for
 
accounted for in
accordance with ASC
 
715, Compensation –
Retirement Benefits (“ASC
 
715”), whereby an
employer
recognizes the funded status
of a defined benefit
postretirement plan as an
 
an asset or liability, and recognizes changes in
the funded
status in the year the change occurs through comprehensive income. Additionally,
this expense is recognized on an accrual basis
over the employees’ approximate period of employment.
The liability associated with the plan was $
2.9
 
million and $
3.4
 
million at May 29, 2021
at
May
28,
2022
and
May 30, 2020.
29,
2021,
respectively.
The
remaining
disclosures
associated
with
ASC
715
are
immaterial
to
the
Company’s financial statements.
Note 10 - Credit Facility
 
For fiscal years 2022, 2021 2020 and 2019,2020, interest was $
403
thousand, $
213
 
thousand, and $
498
 
thousand, respectively.
On November 15, 2021, we entered into an Amended and Restated Credit Agreement (the “Credit
Agreement”) with a
five
-year
term. The Credit Agreement amended and restated the Company’s previously existing credit agreement dated July 10, 2018. The
Credit Agreement
provides for an
increased senior
secured revolving credit
facility (the
“Credit Facility” or
“Revolver”), in
an
initial aggregate principal amount of up to $
644250
 
thousand, respectively.million, which includes a $
15
 
million sublimit for the issuance of standby letters
On July 10, 2018,
we entered intoof credit and
 
a $
100.015
 
million Senior Securedsublimit for
 
Revolving swingline loans. The
Credit Facility also
includes an accordion
feature permitting, with
the consent
of BMO
Harris Bank
N.A. (the
 
“Revolving Credit Facility”Administrative Agent”)
with,
 
a
five
-yearan increase
 
term.
The
credit
agreement
for
in the
 
Revolving
Credit
Facility
 
includes
an
accordion
feature
permitting
the
Company,
with
the
consent
of
the
administrative
agent,
to
increase
the
revolving
commitments
in
the
 
aggregate
up
 
to
$
125.0200
 
million.million
by
adding
one
or
more
incremental
senior
secured
term
loans
or
increasing
one
or
more
times
the
revolving
commitments under the
Revolver.
NaN
 
amounts were
borrowed
under
 
the facility as of May
 
facility
as
of
28, 2022 or May
 
29,
2021
or
during
fiscal
2021.
The
Company
had
fiscal 2022 or fiscal 2021. The Company had $
4.1
 
million of outstanding standby letters of credit issued under the Revolving Credit Facility
at May 29, 2021.28, 2022.
The
 
interest
The interest
rate
in
connection
with
loans
made
under
the
Credit
Facility
is
based
on,
at
the
Company’s
 
election, on
either
the
Eurodollar
Rate
plus
the
Applicable
Margin
or
the
Base
 
Rate
plus
plus
the
Applicable
Margin.
The
 
“Eurodollar
Rate”
means
the
reserve adjusted
rate at which Eurodollar deposits in
the London
interbank market for
an interest period of
one
,
two
,
three
,
six
 
of one,or
twelve
 
two, three,months (as selected by the
 
six orCompany) are quoted. The “Base
 
twelve months (as
selected by
the Company) are
quoted. The
“Base Rate” means
a fluctuating rate
 
per annum equal to the
 
to the highest
of (a) the
federal funds rate
plus
0.50.50
% per annum,
(b) the
prime rate of interest established
by the administrative agent,Administrative Agent, and (c)
(c) the Eurodollar Rate for an
 
an interest period of
one
 
month plus
1.001
% per annum, subject to
certain interest rate floors. The “Applicable
“Applicable
Margin” means
00.00
% to
0.75
% per annum
for Base Rate
Loans and
1.00
% to
1.75
% per annum
for Eurodollar Rate
Loans, in
each
case
depending
upon
the average outstanding balanceTotal
Funded
Debt
to
Capitalization
Ratio
for
the
Company
at
the
quarterly
pricing
date. The
Company will pay a commitment fee of
0.2
% on the unused portion of the facility.
The Revolving Credit Facility is guaranteed by all the current and future wholly-owned direct andpayable quarterly from
0.15
% to
0.25
% in each
case depending
 
indirect domestic subsidiariesupon the
Total
Funded Debt
to Capitalization
Ratio for
the Company
at the
quarterly pricing
date. The
Credit
Agreement contains customary provisions regarding replacement of
 
the Eurodollar Rate.
The
 
CompanyCredit
Facility
is
guaranteed
by
all the
current
 
and
 
isfuture wholly-owned
 
secureddirect
 
byand
 
aindirect
 
first-prioritydomestic
 
perfected
security
interest
in
substantially
allsubsidiaries
 
of
 
the
Company (the
 
Company’s
“Guarantors”), and
 
is secured
by a
first-priority perfected
security interest
in substantially
all of
the Company’s
and the Guarantors’ accounts, payment intangibles, instruments (including promissory notes), chattel paper, inventory (including
farm products) and deposit accounts maintained with the Administrative Agent.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5053
guarantors’ accounts,The
 
payment intangibles,Credit
 
instruments (includingAgreement
 
promissory notes),for the
 
chattel paper,Credit
 
inventory (includingFacility
 
farm
products) and deposit accounts maintained with the administrative agent.
contains
 
customary
The credit agreement for the Revolving Credit Facility contains customary
covenants,
including
 
restrictions
on
the incurrence of
liens, and additional
 
of
liens,
incurrence of
additional debt,
sales of
 
assets and
 
other fundamental
 
corporate changes and
 
and investments. The
 
credit agreementThe Credit
 
requiresAgreement
requires maintenance of two financial covenants: (i) a maximum Total Funded Debt to Capitalization Ratio tested
quarterly of no
2greater than
50
%; and (ii) a requirement to maintain Minimum
Tangible Net
Worth at
all times of $
700
 
financial covenants (i)Million plus
50
% of net
income
 
a minimum(if
 
working capital rationet
 
of
2.00
income
 
to 1.00 andis
 
(ii) anpositive)
 
annual limit onless
 
capital
expenditures of $
150.0
permitted
 
million. Additionally, the creditrestricted
 
agreement payments
for
each
fiscal
quarter
after
November
27,
2021.
Additionally,
the Credit Agreement
requires that Fred
R. Adams Jr.,’s
 
his spouse, natural children,
sons-in-law or grandchildren,
 
or
any trust,
 
guardianship, conservatorship or
 
or custodianship
for the primary
 
primary benefit of any
 
of the foregoing,
or any family
limited
partnership, similar limited liability
company or other entity
that
100
% of the voting control
of such entity is held
by any of the
foregoing, or any family limited partnership, similar limited liability company or
other entity that 100% of the voting control of
such entity is held by
any of the foregoing, shall maintain
 
at least
50
% of the Company’sCompany's
 
voting stock. Failure
to satisfy any of
 
any of
these
covenants
will
constitute
 
a
default
under
the
terms
of
 
the
credit
agreement.
Credit Agreement. Further,
 
dividendsunder the terms of the Credit
 
areAgreement, payment of dividends under
the
 
restricted
to
the
Company’sCompany's
 
current
 
dividend
 
policy
 
of
 
one-third
 
of
 
the
 
Company’sCompany's
 
net
 
income
 
computed
 
in
 
accordance
 
with
 
GAAP.GAAP
 
Theand
Company is allowed topayment of other
 
repurchase up to $
75.0
dividends or repurchases
 
million by the Company
of its capital stock
 
stock in any year providedis allowed, as long
 
there is no defaultas after giving
 
effect to such
dividend
payments or
repurchases no
default has
occurred and
is continuing
and
the sum
of cash
and cash
equivalents of
the
Company and its subsidiaries plus availability under the credit
agreement and the Company has availability ofCredit Facility equals at least $
20.0
$50
 
million under the facility.
million.
The credit agreementCredit
 
for the RevolvingAgreement also
 
Credit Facility includes customary
 
customary events of
 
default and customary
 
customary remedies
upon the
occurrence of
an event
of
default, including acceleration
of the amounts
due under the Credit
Facility and foreclosure
of the collateral.collateral
securing the Credit
Facility.
At May 29, 2021,28, 2022, we were in compliance with the covenant requirements of
the Revolving Credit Facility.
Note 11 - Accrued Dividends
Payable and Dividends per Common Share
We accrue dividends at the end
 
the end of
each quarter
 
according to our
 
our dividend policy
adopted by
 
our Board of
 
of Directors. The
Company
pays a dividend to shareholders
of its Common Stock and Class
 
Class A Common Stock on
a quarterly basis for each
quarter for which
the Company reports net
income attributable to Cal-Maine Foods,
 
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
60
th day following the last
day
of such quarter, except for the fourth
fiscal quarter. For the fourth quarter, the Company pays dividends to
shareholders of record
on the
65
th day after the
 
the quarter end.
Dividends are payable
 
payable on the
15
th day following the
 
the record date.
Following a quarter
 
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
 
on a cumulative basis
computed from the date
of the last quarter
 
quarter for
which a
dividend was
paid. At
the end
of fiscal
2021, the
amount of
cumulative losses
to be
recovered before
payment of
a
dividend was $
4.2
million.
paid.
On our consolidated statement of
income, we determine dividends per
common share in accordance with the computation
in the
following table (in thousands, except per share data):
13 Weeks Ended
52 Weeks Ended
May 29, 2021
May 30, 202028, 2022
May 29, 2021
May 30, 202028, 2022
May 29, 2021
Net income (loss) attributable to Cal-Maine Foods, Inc.
$
109,986
$
(4,244)
$
60,463132,650
$
2,060
$
18,391
Cumulative losses to be recovered prior to payment of
divided at beginning of period
0
(61,833)0
(4,244)
(1,370)
(19,761)
Net income attributable to Cal-Maine Foods, Inc.
available for dividend
$
0109,986
$
0
$
0
$
0
1/3 of net income attributable to Cal-Maine Foods, Inc.
available for dividend
$
36,662
0
Common stock outstanding (shares)
44,140
44,058
Class A common stock outstanding (shares)
4,800
4,800
Total common stock
outstanding (shares)
48,940
48,858
Dividends per common share*
$
00.749
$
0
$
0.0340.874
$
00.034
*Dividends per
 
common share
 
=
1/3
 
of Net
 
income (loss)
 
attributable to
 
Cal-Maine Foods,
 
Inc. available
 
for dividend ÷
 
Total
common stock outstanding (shares).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5154
Note 12 - Equity
 
The Company has
2
 
classes of capital stock:
Common Stock and Class
 
A Common Stock. Except
as otherwise required by
 
law
or the Company's Second Restated Certificate of Incorporation
 
certificate(“Restated Charter”), holders of shares of the Company’s
 
incorporation, holderscapital
stock vote as
 
of sharesa single class on
all matters submitted
to a vote of
 
the Company’s capital stock
vote as a
single class
on all matters
submitted to a
vote of the
stockholders, with
 
each share of
 
Common Stock
entitled to
1
 
vote and each
 
each share
of Class A
 
A Common Stock
Stock entitled to
10
 
votes. Holders of capital stock have the
right of cumulative voting in the election
 
of capital
stock have
the right
of cumulative
voting in
the election of
directors. The
Common Stock
Stock and Class A
 
A Common Stock
 
have equal liquidation
 
rights and the
 
same
dividend rights. In the
 
the case of
 
any dividend payable
in stock,
 
holders of Common
 
Common Stock
are entitled
 
to receive the
 
the same percentage
percentage dividend
(payable (payable only
in shares
of Common
Stock) as the holders of
Class A Common Stock receive (payable only
 
only in shares of
Class A Common
 
A Common Stock). Upon liquidation,
dissolution, or winding-up
of the Company, the
holders of Common
Stock are entitled
to share ratably
with the holders
 
of Common Stock are entitled to share ratably with the holders of Class
A Common
 
Common Stock in
 
all assets available
 
available for distribution after payment
 
distribution after
payment in
full of
 
creditors.
The holders
 
holders of Common
 
Common Stock and
 
and
Class
A
 
Common Stock
 
Stock are
 
not
entitled
 
to preemptive
 
preemptive or
subscription
 
rights.
No
 
class of
capital
stock
 
may
be
 
combined or
subdivided unless
 
the other
 
classes of
 
capital stock
 
are combined
 
or subdivided
 
in the
 
same
proportion.
No dividend
may be
declared and paid on Class A Common Stock
 
Stock unless the dividend is payable only to the holders
holders of Class A Common Stock and a
dividend is declared and paid to Common Stock concurrently.
 
concurrently.
Each share of
 
of Class A Common
 
Common Stock
is convertible,
 
at the option
 
of its
holder,
 
into
1
 
share of Common
 
Common Stock
at any
 
time.
The
Company’s
 
Second
Restated
Certificate
of
Incorporation
(“Restated
Charter”) Charter
 
identifies
family
 
members
of
 
Mr.
 
Adams (“Immediate
(“Immediate Family Members”)
and arrangements
and
entities that are permitted to
receive and
hold shares of Class
A Common
Stock, with
10
 
votes per share,
without such shares
converting into shares of Common
 
ofStock, with one vote per share (“Permitted
Transferees”). The Permitted
Transferees include
arrangements and entities such as revocable trusts and limited liability companies that could hold Class A Common Stock
 
withfor the
1
vote per share
(“Permitted
Transferees”).
The
Permitted
Transferees
include
arrangements
and
entities
such
as
revocable
trusts
and
limited
liability
companies that
could hold
Class A Common
Stock for
the benefit
of Immediate
Family Members.
Each Permitted
 
Transferee
must have a relationship, specifically
 
specifically defined in the Restated
Charter, with
 
another Permitted Transferee
or an Immediate Family
 
FamilyMember.
A share of Class A
Common Stock transferred
to
Member.a person other
than a
Permitted Transferee would automatically
convert into Common
Stock with
one vote per
share. Additionally,
the
Restated
Charter
includes
a
sunset
provision
pursuant
to
which
all
of
the
outstanding
Class
 
A
 
shareCommon
Stock
will
automatically
convert
to
Common
Stock
if:
(a)
less
than
4,300,000
shares
 
of
 
Class
 
A
 
Common
 
Stock,
 
transferredin
 
to
a
person
other
than
a
Permitted
Transferee
would
automatically
convert into Common Stock with one
vote per share. Additionally,
the Restated Charter includes a sunset
provision pursuant to
which all
of the
outstanding Class
A Common
Stock will
automatically convert
to Common
Stock if:
(a) less
than
4,300,000
shares of
Class A
Common Stock,
in the
 
aggregate, are
 
are
beneficially owned by Immediate Family
 
by Immediate
Family Members
and/or Permitted Transferees,
Transferees, or (b) if less than
4,600,000
 
shares of Class A
Common Stock
 
and Common Stock, and Common
 
Stock, in the aggregate,
 
are beneficially owned
owned by Immediate Family
Members and/or Permitted
Transferees.
Note 13 - Net Income per Common Share
Basic net income
per share attributable
 
to Cal-Maine Foods, Inc.
is based on the
 
the weighted average Common
Stock and Class
A
Common Stock
 
outstanding. Diluted
 
net income
 
per share
 
attributable to
 
Cal-Maine Foods,
 
Inc. is
 
based on
 
weighted-average
common shares outstanding during the relevant period adjusted for the dilutive
effect of share-based awards.
 
The following table provides
a reconciliation of the
 
numerators and denominators
used to determine basic and
 
and diluted net income
per common share attributable to Cal-Maine Foods, Inc. (amounts in
thousands, except per share data):
May 28, 2022
May 29, 2021
May 30, 2020
June 1, 2019
Numerator
Net income
$
132,441
$
2,060
$
18,328
$
55,062
Less: Net income (loss) attributable to noncontrolling interest
(209)
0
(63)
833
Net income attributable to Cal-Maine Foods, Inc.
$
132,650
$
2,060
$
18,391
$
54,229
Denominator
Weighted-average
common shares outstanding, basic
48,52248,581
48,46748,522
48,467
Effect of dilutive securities of restricted shares
153
134
117
122Weighted-average
Weighted-average common shares outstanding, diluted
48,734
48,656
48,584
48,589
Net income per common share attributable to Cal-Maine Foods, Inc.
Basic
$
0.04
$
0.38
$
1.12
Diluted2.73
$
0.04
$
0.38
Diluted
$
1.122.72
$
0.04
$
0.38
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5255
Note 14 - Revenue Recognition
 
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
 
for the most part is
 
is determined when
the Company and
 
the customer agree
upon the specific
 
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
 
at prices
related to
 
independently quoted wholesale
 
wholesale market
prices or
 
formulas related to
 
to our
costs of
 
production.
The
Company’s
 
sales predominantly
 
contain
a
 
single
performance
 
obligation.
We
 
recognize
revenue
 
upon satisfaction
 
satisfaction of
the
performance obligation
with the customer
 
customer which typically occurs
 
within days of
 
the Company
and the customer
 
customer agreeing upon
the order.
Costs
 
to
 
deliver
 
product
 
to
 
customers
 
are
 
included
 
in
 
selling,
 
general
 
and
 
administrative
 
expenses
 
in
 
the
 
accompanying
Consolidated Statements of
 
of Income
and totaled
 
$
62.7
million, $
52.7
 
million, and
$
52.2
 
million and $
53.6
in
 
million in fiscal years
 
years2022, 2021, 2020,
 
and
2019, respectively.
2020,
 
respectively.
Returns and Refunds
Some of our contracts
include a guaranteed sale
 
sale clause, pursuant to which we
 
we credit the customer’s
account for product that
 
that the
customer is unable to sell before expiration.
The Company records an allowance of returns
and refunds by using historical return
data and
 
comparing to
 
to current
period
 
sales and
 
accounts
receivable.
 
The allowance
 
is recorded
 
as a
 
reduction in
 
in sales with
 
with a
corresponding reduction in trade accounts receivable.
Sales Incentives Provided to Customers
The Company periodically provides
 
provides incentive
offers to its
 
customers to encourage purchases.
 
purchases. Such
offers include current
 
discount
offers (e.g., percentage
discounts off current purchases),
 
purchases), inducement offers
(e.g. (e.g., offers for future discounts
 
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
 
while inducement offers,
 
offers, when accepted
 
accepted by
customers, are
 
treated as
 
a reduction to
 
to sales
price based on estimated future redemption rates.
Redemption rates are estimated using the Company’s
historical experience for
similar inducement offers. Current discount and inducement offers
are presented
as a net amount in ‘‘Net sales.’’
Disaggregation of Revenue
The following table provides revenue disaggregated by product category (in
(in thousands):
13 Weeks Ended
52 Weeks Ended
May 29, 2021
May 30, 202028, 2022
May 29, 2021
May 30, 202028, 2022
May 29, 2021
Conventional shell egg sales
$
378,190
$
205,987
$
311,3801,061,995
$
766,284
$
830,278
Specialty shell egg sales
186,518
131,243
133,347648,838
539,780
485,465
Egg products
26,488
10,997
7,20460,004
36,733
31,414Other
Other1,768
1,571
1,4026,322
6,190
4,452$
592,964
$
349,798
$
453,3331,777,159
$
1,348,987
$
1,351,609
Contract Costs
The Company can incur costs to
obtain or fulfill a contract with
a customer. If
 
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
May 28,
2022 and
May 29,
2021, the
balance for
contract
assets is immaterial.
Contract Balances
The Company receives payment from customers based on specified terms that are generally
 
generally less than 30 days from
delivery. There
are rarely contract assets or liabilities related to performance under the contract.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5356
Concentration of Credit Risks
Our largest customer, Walmart
 
Inc. (including Sam's Club) accounted for
29.829.5
%,
32.129.8
% and
33.732.1
% of net sales dollars for fiscal
2022, 2021, and 2020, and 2019, respectively.
H-E-B, LP accounted for
10.1
% of net sales dollars for fiscal 2020.
 
2020.
Note 15 - Leases
 
Expenses related to operating leases, amortization of finance lease ROUleases, right-of-use assets, and finance lease interest are included in
Cost of
sales, Selling
general and
administrative expense,
and Interest expense
income, net
in the
Consolidated Statements
of Income.
The Company’s lease cost consists of the
following (in thousands):
13 Weeks Ended
 
May 29, 202128, 2022
52 Weeks Ended
 
May 30, 202028, 2022
Operating Lease cost
$
226180
$
929805
Finance Lease cost
Amortization of right-of-use asset
$
4346
$
168178
Interest on lease obligations
$
75
$
3425
Short term lease cost
$
1,0571,409
$
3,7714,630
Future minimum lease payments under non-cancelable leases are as follows (in
thousands):
As of May 29, 202128, 2022
Operating Leases
Finance Leases
20222023
$
802539
$
239
2023
539
239
2024
380
219218
2025
130
0
2026
26
0
Thereafter2027
5
0
Thereafter
0
0
Total
1,8821,080
697457
Less imputed interest
(157)(75)
(44)(19)
Total
$
1,7251,005
$
653438
The weighted-average
remaining lease
term and
discount rate
for lease
liabilities included
in our
Condensed Consolidated
Balance
Sheet are
as follows:
As of May 29, 202128, 2022
Operating Leases
Finance Leases
Weighted-average
remaining lease term (years)
2.82.3
2.51.5
Weighted-average
discount rate
5.9
%
4.9
%
Note 16 - Stock Compensation Plans
 
On
 
October
 
2,
 
2020,
 
shareholders
 
approved
 
the
 
Amended
 
and
 
Restated
 
Cal-Maine
 
Foods,
 
Inc.
 
2012
 
Omnibus
 
Long-Term
Incentive Plan
 
(the “LTIPPlan (the
“LTIP
 
Plan”). The
 
purpose of
 
the LTIP
 
Plan is
 
to assist
 
us and
 
our subsidiaries
 
in attracting
 
and retaining
selected individuals who are expected to contribute to our long-term success. The maximum number of
shares of common stockCommon Stock
available
for
 
awards under
 
the LTIP
 
Plan
is
2,000,000
 
of which
1,126,1881,016,573
 
shares remain
 
available
for
 
issuance, and
 
and may
be
authorized
 
but
 
unissued
 
shares
 
or
 
treasury
 
shares.
 
Awards
 
may
 
be
 
granted
 
under
 
the
 
LTIP
 
Plan
 
to
 
any
 
employee,
 
any
 
non-
employee member of the Company’s
Board of Directors, and any consultant who
 
who is a natural person and
provides services to us
or one of our subsidiaries (except for incentive stock options, which may be granted only
to our employees).
The only outstanding awards under
the LTIP
Plan are restricted stock awards.
The restricted stock vests one
 
to three years from the
grant
the grant date, or upon death or
disability, change
in control, or retirement (subject
to certain requirements). The
restricted stock contains
contains no other service
or performance conditions.
Restricted stock is awarded
in the name of
the recipient and,
except for the right
of
right of disposal, constitutes
issued and outstanding shares
of the Company’s common stockCommon Stock for all
 
all corporate purposes during the period
of restriction
 
including the right
to receive
dividends. Compensation
expense is a
fixed amount
based on the
grant date closing
price and is amortized on a straight-line basis over the vesting period. Forfeitures are
recognized as they occur.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5457
period of
restriction including the
right to
receive dividends. Compensation
expense is a
fixed amount based
on the
grant date
closing price and is amortized on a straight-line basis over the vesting period. Forfeitures are recognized as they occur.
Total
 
stock-based
 
compensation
 
expense
 
was
 
$
3.84.1
 
million,
 
$
3.63.8
 
million,
 
and
 
$
3.6
 
million
 
in
 
fiscal
 
2021,2022,
 
2020,2021,
 
and
 
2019,2020,
respectively.
Our unrecognized
compensation expense
as a result
of non-vested shares
 
was $
7.0
million at May
28, 2022 and
$
6.6
 
million and at May 29, 2021 and $
6.3
million
May 30, 2020. The29,
 
2021. The unrecognized
compensation expense
 
will be amortized
 
amortized to
stock compensation
 
expense over a
 
a period
of
2.1
years.
A summary of our equity award activity and related information for our
restricted stock is as follows:
Number of
 
Shares
Weighted Average
 
Grant
Date Fair Value
Outstanding, June 1, 2019
248,412
$
42.20
Granted
104,566
38.25
Vested
(77,801)
43.00
Forfeited
(2,131)
43.20
Outstanding, May 30, 2020
273,046
$
41.36
Granted
112,860
37.82
Vested
(79,328)
43.96
Forfeited
(4,431)
40.12
Outstanding, May 29, 2021
302,147
$
39.37
Granted
113,142
41.13
Vested
(92,918)
42.45
Forfeited
(4,527)
38.01
Outstanding, May 28, 2022
317,844
$
39.12
Note 17 - Income Taxes
Income tax expense (benefit) consisted of the following:
 
Fiscal year ended
May 28, 2022
May 29, 2021
May 30, 2020
June 1, 2019
Current:
Federal
$
24,228
$
(35,090)
$
(6,750)
$State
8,160
State3,670
730
(1,800)
1,46027,898
(34,360)
(8,550)
9,620
Deferred:
Federal
2,716
21,658
8,872
4,843State
State2,960
693
1,409
1,2805,676
22,351
10,281
6,123$
33,574
$
(12,009)
$
1,731
$
15,743
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5558
Significant components of the Company’s
deferred tax liabilities and assets were as follows:
May 29, 202128, 2022
May 30, 202029, 2021
Deferred tax liabilities:
Property, plant and equipment
$
82,508100,250
$
60,64582,508
Inventories
31,50131,987
28,07531,501
Investment in affiliates
7,67065
8,099
Other comprehensive income
0
2147,670
Other
5,6485,713
5,0025,648
Total deferred
tax liabilities
127,327138,015
102,035127,327
Deferred tax assets:
Accrued expenses
3,7284,041
3,3763,728
State operating loss carryforwards
3,416470
7923,416
Other comprehensive income
497866
0497
Other
5,2784,442
5,0995,278
Total deferred
tax assets
12,9199,819
9,26712,919
Net deferred tax liabilities
$
114,408128,196
$
92,768114,408
The differences between income tax expense (benefit) at the Company’s
effective income tax rate and income tax expense at the
statutory federal income tax rate were as follows:
Fiscal year end
May 28, 2022
May 29, 2021
May 30, 2020
June 1, 2019
Statutory federal income tax
$
34,907
$
(2,087)
$
4,226
$
14,694
State income taxes, net
5,237
1,124
(309)
2,164
Domestic manufacturers deduction
0
3,566
684
0
Enacted net operating loss carryback provision
0
(16,014)
(3,041)
0
Tax exempt
interest income
(9)
(50)
(111)
(197)Reversal of outside basis in equity investment Red River
(7,310)
0
0
Non-taxable remeasurement gain Red River
(955)
0
0
Other, net
1,704
1,452
282
(918)$
33,574
$
(12,009)
$
1,731
$
15,743
On March 27, 2020, the Coronavirus Aid, Relief,
Federal and Economic Security Act (the “CARES Act”)
was enacted. The CARES Act
contains several income
tax provisions, as
well as other
measures, that are
intended to assist
businesses impacted by
the economic
effects of the COVID-19 pandemic. The most significant provision of the CARES Act that materially affects our accounting for
state income taxes includes a five-year
carryback allowance for taxable
net operating losses generated
in tax years 2018 through
2020,
our fiscal years 2019 through 2021.
Our financial statements for the fiscal year ended May 29, 2021 were materially affected by the changes enacted by the CARES
Act. As a result of the
applicable accounting guidance and the provisions enacted by the
CARES Act, our income tax provision
for fiscal
2021 reflects
the carryback
of taxable
net operating
losses generated
during periods
in which
the statutory
federal income
tax rate was 21% to periods in which the statutory federal income tax rate was 35%.
Due to the difference in statutory rates, we
recorded a
$
16.02.2
 
million, discrete
income tax
benefit related
to the
carryback provisions
during the
fiscal year
ended May
29,
2021. Because
the net
operating losses
were carried
back to
years in
which we
initially reduced
our taxable
income using
the
Domestic Production
Activities Deduction,
we recorded
a partially
offsetting $
3.6
million discrete
income tax
expense during
fiscal 2021 to account for the reduced taxable income.
Federal and state
income taxes of
$
995
thousand, $
32
 
thousand, and $
37.432
 
millionthousand were paid
in fiscal years
2022, 2021, and 2020, and
2019,
respectively.
Federal and state income taxes of $
373
 
taxes ofthousand, $
2.6
 
million, and $
8.4
 
million were refunded in fiscal years 2022,
2021, and 2020, respectively.
In
fiscal
2022,
the
Company
recognized
$
418467
 
thousand were refunded
in
 
fiscal years 2021,
2020, and 2019, respectively.
interest
 
and
The
penalties.
As
of
May
28,
2022,
the
Company may recognize the tax benefit from an
had
0
accrued interest and penalties related to uncertain tax position only if it is more likely than not that the tax positionpositions.
will be sustained on examination by the taxing authorities, based on the technical merits
of the position. The Company measures
the tax
benefits recognized
based on
the largest
benefit that
has a
greater than
50% likelihood
of being
realized upon
ultimate
resolution.
56
As of May 29, 2021,28,
2022, we are underhad completed
the audit by the Internal
Revenue Service (IRS) for
the fiscal years 2013
through 2015. Although
we are subject to income taxFinal
 
in many jurisdictions within the
U.S., we were not under audit
by any state and local tax
authorities.
As
of May
29, 2021,
the IRS
has proposed
adjustments related
to
the
Company’s
research
and development
credits claimed
during
the
years
under
audit.
Management
is
continuing
to
evaluate
those
proposed
 
adjustments
 
and
doesdid
 
not
anticipate
the
adjustments
would
 
result
 
in
 
a
 
material
 
change
 
to
 
itsthe
 
consolidated
 
financial
 
statements.
 
However,From
management’s
perspective, the years are closed
and are only open with respect
to any net operating loss carryback
to those years.
Although we
are
subject
to
income
tax
in
many
jurisdictions
within
 
the
 
CompanyU.S.,
 
believeswe
 
itare
 
is
reasonably possible that an additional decreasecurrently
 
of up to $
1.4
not
 
million in previously recognized tax benefitsunder
 
related to research audit
by
any
state
and
local
tax
development credits may be necessary within the coming year.authorities.
 
Tax
periods for
all years
beginning
 
with fiscal
year 2013
2019 remain
open
open
to examination
by federal
and state
taxing
jurisdictions to which we are subject.
Note 18 - Commitments and Contingencies
 
Financial Instruments
The Company maintained standby letters of credit
("LOC") totaling $
4.1
million at May 29, 2021, which
were issued under the
Company's Revolving
Credit Facility.
The outstanding
LOCs are
for the
benefit of
certain insurance
companies. None
of the
LOCs are recorded as a liability on the Consolidated Balance Sheets.
State of Texas v.
 
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
 
Wharton County Foods,
LLC, Cause No. 2020-25427, in
 
in the District Court
of Harris County, Texas.
 
Texas. The State
of Texas (the
(the “State”) asserted claims based on the Company’s
 
Company’s and
WCF’s alleged violation
of the
 
the Texas
 
Deceptive
Trade
 
Practices—Consumer
Protection
 
Act, Tex.
 
Bus. &
 
& Com. Code
 
§§ Code §§
17.41-17.63
 
(“DTPA”).
 
The
59
State claimed
 
that the
 
the Company
and
 
WCF offered
 
shell eggs
 
at
excessive
 
or exorbitant
 
prices
during
 
the
COVID-19
 
state of
emergency and made misleading
 
misleading statements
about shell
 
egg prices. The
 
The State sought temporary and
 
sought temporary
and permanent
injunctions against
the Company and WCF to prevent further alleged violations of the DTPA,
along with over $
100,000
 
in damages. On August 13,
2020, the
 
court granted the
 
the defendants’
motion to
 
dismiss the
State’s
 
original petition with
 
with prejudice.
On September
 
11, 2020,
the State
 
filed a
 
notice of
 
appeal, which
 
was assigned
 
to the
 
Texas
 
Court of
 
Appeals for
 
the First
 
District. The
 
State filed
 
its
opening
brief
 
on December
 
December 7,
2020.
 
The Company
 
and
WCF
filed
 
their response
 
on
February
 
8,
2021.
 
TheOn February
11, 2022,
the Texas
Court of
Appeals heard
oral argument,
but as
of the
date of
this Annual
Report the
 
Texas
 
Court of
 
of
Appeals has
not ruled on these submissions.
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
 
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
 
of emergency. Plaintiffs request certification of
a class of all consumers who
 
consumers who purchased
eggs in Texas
sold,
distributed,
 
produced, or
 
or handled by
 
by any
of the
defendants
during
the COVID-19
state of
 
the defendants
during the
COVID-19 state
of emergency.
 
Plaintiffs
 
seek
to
enjoin the Company
and other defendants from
 
defendants from selling eggs at a
 
price more than
10% greater than
 
than the price of eggs
 
prior to the
declaration
 
of
 
the
 
state
 
of
 
emergency
 
and
 
damages
 
in
 
the
 
amount
 
of
 
$
10,000
 
per
 
violation,
 
or
 
$
250,000
 
for
 
each
 
violation
impacting anyone over 65 years old. On December
 
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
 
theirthe court that
the defendants’ motion
 
to dismiss be
granted and the
case be dismissed
without prejudice for
dismisslack 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’plaintiffs filed a
 
firstsecond suit against the
 
amended classCompany and several
 
actiondefendants 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. The
court
Company has
not
 
ruled onyet filed a responsive
 
thispleading and there is
 
motioncurrently no deadline to do
 
to
dismiss.so. Management believes
believes the risk of material loss related to this matterboth 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
 
was named as
 
as one of
 
of several
defendants
 
in numerous
 
antitrust
cases involving
 
the United
 
States shell
 
egg
industry.
 
The Company
 
settled all
 
of these
 
cases, except
 
for the
 
the claims of
 
of certain
plaintiffs who sought substantial
damages allegedly arising from
the purchase of egg products (as
 
(as opposed to shell eggs). These
remaining plaintiffs
 
are Kraft Food
 
Food Global, Inc.,
 
Inc., General
Mills, Inc.,
 
and Nestle USA,
 
USA, Inc. (the
(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
 
Court for the
Eastern District of Pennsylvania, In
 
Pennsylvania, In re
Processed Egg Products Antitrust
 
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
 
Egg Products Plaintiffs allege that
the Company and other
defendants
violated Section 1
of the Sherman Act,
 
Sherman Act, 15. U.S.C. §
 
1, by agreeing
to limit the
 
the production of eggs and
 
and thereby illegally
to raise
the prices that
plaintiffs paid for
 
for processed egg products.
In particular,
 
the Egg Products Plaintiffs are
 
are attacking certain
features
of the United Egg
 
Egg Producers animal-welfare
guidelines and program
 
used by the Company
 
Company and many
other egg producers.
 
The
57
Egg Products Plaintiffs
 
Plaintiffs seek to
 
to enjoin
the Company
 
and other defendants
 
defendants from
engaging in
 
antitrust violations and
 
and seek
treble
money damages. On May 2, 2022, the court set trial for October 24, 2022.
 
The parties
filed a
joint status
report on
May 18,
2020, but
no schedule
has yet
been entered
by the
court. It
appears that the case will not be tried until later in 2021 or 2022.
In addition,
 
on October
 
24, 2019,
 
the Company
 
entered into
 
a confidential
 
settlement agreement
 
with The
 
Kellogg Company
dismissing all
 
claims against the
 
the Company
for an
 
amount that did
 
did not
have a
 
material impact on
 
on the
Company’s financial condition
or results
of operations.
On November
 
11,
2019, a
stipulation for
 
dismissal was
filed with
the court,
 
butand on March 28, 2022, the
court has
not yet
entered a judgment ondismissed the filing.
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
 
there is still
a reasonable possibility of a
 
of a material
adverse outcome from the
 
the case with the Egg
 
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: the matter is in the early stages of preparing for trial following
 
remand;two earlier trials
based on substantially
the same
facts and
legal arguments
any
60
resulted in findings of
no conspiracy and/or damages;
this trial will be before a
different judge and jury in
 
a different judge
and jury in a different
court than
prior
related cases; there are significant factual issues to
to be resolved; and
there are requests for damages
 
damages other than compensatory
damages (i.e., injunction and
treble money damages).
State of Oklahoma WatershedWater
shed Pollution Litigation
On June 18,
 
2005, the
 
State of Oklahoma
 
Oklahoma filed suit,
 
suit, in
the United
 
States District
 
Court for
 
the Northern District
 
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
 
its affiliate,
Peterson Farms, Inc.
 
Inc. and Simmons Foods,
 
Inc. The
State of Oklahoma
 
Oklahoma claims that through
 
the disposal of
chicken litter the
defendants have polluted
 
the Illinois River
Watershed. This watershed provides water to
 
to eastern Oklahoma.
The
complaint seeks
injunctive relief
 
and monetary
damages, but the
 
the claim for
 
monetary damages has
 
has been dismissed by
 
by the court.
Cal-Maine Foods,
Inc. discontinued
 
operations in the
 
watershed. Accordingly,
 
we do not
 
anticipate that Cal-Maine
 
Cal-Maine Foods,
Inc.
will be materially affected
 
affected by the request for
injunctive relief unless
 
the request
for injunctive
relief unless the
court orders
 
substantial affirmative remediation.
 
remediation. Since
the litigation began,
Cal-Maine Foods, Inc.
 
purchased
100
% of the membership interests
 
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
 
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 above, the Company
is involved in
 
various other claims
and litigation incidental
 
incidental to its business. Although
 
the
outcome of these matters
cannot be determined with
certainty, management, upon the advice of counsel,
 
counsel, is of the
opinion that the
final outcome should not have a material effect on the Company’s
consolidated results of operations or financial position.
Note 19 - Related Party Transaction
On August 24, 2020,
Mrs. Jean Reed Adams,
 
Adams, the wife of the
 
Company’s late founder Fred R.
Adams, Jr., and the Fred R.
Adams,
Jr.
 
Daughters’
 
Trust,
 
dated
 
July
 
20,
 
2018
 
(the
 
“Daughters’
 
Trust”),
 
of
 
which
 
the
 
daughters
 
of
 
Mr.
 
Adams
 
are
 
beneficiaries
(together, the “Selling
 
“Selling Stockholders”),
completed a registered secondary
 
secondary public offering
of
6,900,000
 
shares of Common
Stock
held by them, pursuant
to a previously disclosed Agreement
Regarding Common Stock (the “Agreement”
“Agreement”) filed as an
 
as an exhibit to
this report. Mrs.
 
Mrs. Adams
and the
 
Daughters’ Trust
 
advised the Company
 
Company that
they were
 
conducting the offering
 
offering in
order to
 
pay
estate taxes related to the
settlement of Mr.
 
Adam’s estate
and to obtain liquidity.
 
obtain liquidity. The public offering
 
public offering was made pursuant to the
Company’s effective shelf registration statement on Form S-3 (File
No. 333-227742), including the Prospectus
contained therein
dated October 9, 2018,
and a related Prospectus Supplement dated
 
dated August 19, 2020,
each of which is on file
 
file with the Securities
and Exchange Commission. The public
 
The public offering
involved only the
sale of shares
 
of shares of Common Stock
 
Stock that were already
 
outstanding,
and thus the Company
 
Company did not
issue any new
 
new shares or raise
 
any additional capital in
 
in the offering.
The expenses of
 
of the offering
(not including the
 
the underwriting
discount and legal
 
legal fees and
expenses of
 
legal counsel for the
 
the Selling Stockholders,
which were
paid by the Selling
Stockholders) paid by the
 
the Company were $
1.1
 
million. Pursuant to
the Agreement, the Selling
 
Stockholders
reimbursed the Company $
551
 
thousand.
58
Note 20 – Subsequent Events
Effective on
May 30, 2021,
the Company paid
$
48.5
million to acquire
the remaining
50
% membership interest
in Red
River,
including certain
liabilities. As
a result
of the
acquisition, the
entity became
a wholly
owned subsidiary
of the
Company.
Red
River owns and
operates a specialty
shell egg production
complex with approximately
1.7
million cage-free laying hens,
cage-
free pullet capacity, feed mill, processing plant, related offices and outbuildings and
related equipment located on approximately
400
acres near Bogata, Texas.
SCHEDULE II - VALUATION
 
AND QUALIFYING ACCOUNTS
Fiscal Years
 
ended May 28, 2022, May 29, 2021, and May 30, 2020 and June 1, 2019
 
(in thousands)
Description
Balance at
 
Beginning of Period
Charged to Cost
 
and Expense
Write-off
 
of Accounts
Balance at
 
End of Period
Year
ended May 28, 2022
Allowance for doubtful accounts
$
795
$
30
$
50
$
775
Year
ended May 29, 2021
Allowance for doubtful accounts
$
743
$
135
$
83
$
795
Year
ended May 30, 2020
Allowance for doubtful accounts
$
206
$
550
$
13
$
743
Year ended June 1, 2019
Allowance for doubtful accounts
$
268
$
42
$
104
$
206
 
 
 
 
5961
ITEM
 
9.
 
CHANGES
IN
 
AND
DISAGREEMENTS
 
WITH
 
ACCOUNTANTS
 
ON
 
ACCOUNTING
AND
 
FINANCIAL
DISCLOSURE
None.
 
ITEM 9A.
 
CONTROLS AND PROCEDURES
 
Disclosure Controls and Procedures
Our disclosure controls and
procedures are designed to
provide reasonable assurance that information
 
information required to be
disclosed by
us in
 
the reports
 
we file
 
or submit
 
under the
 
Securities Exchange
 
Act of
 
1934, as
 
amended (the
 
“Exchange Act”)
 
is recorded,
processed, summarized
and reported,
 
within the time periods
 
periods specified in
the Securities and
 
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
 
executive and principal
financial officers, or persons
 
persons performing similar
functions, as appropriate
 
appropriate to allow
 
allow timely
decisions regarding
 
required disclosure. Based
 
Based on an
 
an evaluation of
 
of our
disclosure controls
and procedures conducted by our
 
by ourChief Executive Officer and Chief
 
Executive Officer and
Chief Financial Officer, together
with other financial
officers, such
officers concluded
 
concluded that our
 
our disclosure controls
 
controls and procedures
 
procedures were
effective
 
as of
 
May 29,28,
 
20212022 at
 
the reasonable
 
assurance
level.
Internal Control Over Financial Reporting
(a)
 
Management’s Report
on Internal Control Over Financial Reporting
The following
 
The following sets forth,
 
forth, in accordance
 
with Section 404(a)
 
404(a) of
the Sarbanes-Oxley
 
Act of 2002
 
2002 and
Item 308
 
of the
Securities
and Exchange Commission’s Regulation
S-K, the report of management on our internal control over financial reporting.
1.
Our management is responsible for establishing and maintaining adequate internal control over financial
 
over financial reporting.
“Internal control over financial reporting”
 
financial reporting” is
a process designed
 
by, or under the supervision of, our
 
of, our Chief
Executive
Officer and Chief
Financial Officer,
 
together with other financial
officers, and effected
 
effected by our Board of
Directors,
management and
 
and other personnel,
 
personnel, to provide
 
provide reasonable
assurance
 
regarding the
 
reliability of
 
financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting
principles and includes those policies and procedures that:
●
Pertain to the maintenance of records that
in reasonable detail accurately and fairly reflect
the transactions
and dispositions of our assets;
●
Provide reasonable assurance that transactions
are recorded as necessary to
permit preparation of financial
statements
 
in
 
accordance
 
with
 
generally
 
accepted
 
accounting
 
principles,
 
and
 
that
 
our
 
receipts
 
and
expenditures are being made
only in accordance with
 
authorizations of our management
and directors; and
●
Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the financial
statements.
2.
 
Our
Our
management,
 
in
accordance
 
with
Rule
 
13a
-
15(c)13a-15(c)
 
under the
 
Exchange
Act
 
and with
 
with the
participation
 
of
our
Chief
 
Executive
 
Officer
 
and
 
Chief
 
Financial
 
Officer,
 
together
 
with
 
other
 
financial
 
officers,
 
evaluated
 
the
effectiveness
 
of
 
our
 
internal
 
control
 
over
 
financial
 
reporting
 
as
 
of
 
May
 
29,28,
 
2021.2022. The
 
framework
 
on
 
which
management’s
 
evaluation
 
of
 
our
 
internal
 
control
 
over
 
financial
 
reporting
 
is
 
based
 
is
 
the
 
“Internal
 
Control
 
–
Integrated
 
Framework”
published
 
in
 
2013
 
by
 
the
 
Committee
 
of
 
Sponsoring
 
Organizations
 
(“COSO”)
 
of
 
the
Treadway Commission.
3.
 
Management has determined
that our internal control over
financial reporting as of
May 29, 2021
 
May 28, 2022 is effective.
It is
noted
 
that
 
internal
 
control
 
over
 
financial
 
reporting
 
cannot
 
provide
 
absolute
 
assurance
 
of
 
achieving
 
financial
reporting objectives, but rather reasonable assurance of achieving
such objectives.
4.
 
The attestation report of FROST,
PLLC on our internal control over financial reporting,
which includes that firm’s
opinion on the effectiveness of our internal control over financial
reporting, is set forth below.
(b)
 
Attestation
Report of the Registrant’s
Public Accounting Firm
 
 
 
 
 
 
 
6062
Report of Independent Registered Public Accounting Firm
on Internal Control Over Financial Reporting
Board of Directors and Stockholders
Cal-Maine Foods, Inc. and Subsidiaries
Ridgeland, Mississippi
Opinion on Internal Control Over Financial Reporting
We have
 
audited Cal-Maine Foods, Inc.
and Subsidiaries’ (the “Company”) internal control over
 
financial reporting as
of May
 
29, 2021,May 28, 2022,
based
 
based on
 
criteria
established
 
in
2013
Internal
 
Control
 
–
Integrated
 
Framework
 
issued
by
 
the
Committee
 
of
Sponsoring Organizations
 
Sponsoring
Organizations of the
 
Treadway Commission
 
(“COSO”).
 
In our opinion, Cal-Maine
 
opinion, theFoods, Inc. and Subsidiaries
 
Company maintained, in
all material
 
in allrespects, effective
 
material
respects, effective internal control
 
control over financial
 
financial reporting as
 
as May 28,
 
29, 2021,2022, based
 
on criteria
 
established in
2013 Internal
Control
Internal Control – Integrated Framework
 
issued by the COSO.
We
 
also have
 
audited, in
 
accordance with
 
the standards
 
of the
 
Public Company
 
Accounting Oversight
 
Board (United
States) (“PCAOB”), the consolidated
balance sheets and the related
 
related consolidated statements of
income, comprehensive income,
stockholders’ equity and
cash flows of the CompanyCal-Maine
Foods, Inc. and
Subsidiaries and our report
dated July 19, 2021 2022
expressed an
unqualified opinion.
Basis for Opinion
Cal-Maine
 
Foods,
The Company’s
Inc.
and
Subsidiaries’
management
is
responsible
 
for
maintaining
effective
internal
 
control
over
financial
reporting
 
and
for its
their
assessment
of
the
effectiveness
of
internal
control
over
financial
reporting,
included
in
the
assessment ofaccompanying Management’s
Report on Internal Control Over
Financial Reporting in Item 9A.
Our responsibility is to express
an opinion on the effectiveness of entities’
internal control over financial reporting included in the accompanying Management’s Report
on Internalbased
 
Control Over
Financial Reporting
in Item
9A.
Our responsibility
is to
express an
opinion on
the entity’s
internal
control over financial reporting
based on our audit.
 
We are a public accounting firm registered
with the PCAOB and
 
are required
to be
independent with respect to
 
respect to the CompanyCal-Maine Foods, Inc.
 
and Subsidiaries in accordance
with
the
U.S.
 
federal
securities
laws and
the
 
applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
 
Werules
 
conducted ourand
 
audit in
accordance with
the standardsregulations
 
of the
 
Securities and
Exchange
Commission
and
the
PCAOB.
We
conducted
our audit
in accordance
with the
standards of
the PCOAB.
 
Those standards
 
standards require that
 
that we
plan
 
and
perform the audit to
obtain reasonable assurance about
whether effective internal control over financial
 
over financial reporting was
maintained
in all
 
material respects.
 
Our audit
 
of internal
 
control over
 
financial reporting
 
included obtaining
 
an understanding
 
of internal
control
over
 
financial
reporting,
 
assessing the
 
risk
that
 
a
material
 
weakness
exists,
 
and
testing
 
and
evaluating
 
the design
 
and
operating effectiveness of internal control
based on the assessed risk.
 
Our audit also included performing such other
procedures
as we considered necessary in the circumstances.
 
We believe our audit provides
a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
An entity’sentities’ internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting
and the preparation of
 
consolidated financial statements for
external purposes in accordance
with
accounting principles generally
 
generally accepted
in the United
 
United States of
America.
 
An entity’sentities’ internal
 
internal control over financial
 
financial reporting
includes those
 
policies and
 
procedures that
 
(1) pertain
 
to the
 
maintenance of
 
of records that,
 
that, in reasonable
 
reasonable detail, accurately
 
accurately and
fairly reflect the
transactions and dispositions of
 
the transactions and
dispositionsassets of the
 
assets ofentities; (2) provide reasonable
 
the entity; (2)
provide reasonable assurance
that transactions
are
recorded
 
as
 
necessary
 
to
 
permit
 
preparation
 
of
 
consolidated
 
financial
 
statements
 
in
 
accordance
 
with
 
accounting
 
principles
generally
 
accepted
 
in
the
 
United
States
 
of
America,
 
and
 
that
receipts
 
and
 
expenditures
 
of
the
 
entity
entities are
 
being
 
made
only
 
in
accordance
 
with
 
authorizations
 
of
 
management
 
and
 
directors
 
of
 
the
 
entity;entities;
 
and
 
(3)
 
provide
 
reasonable
 
assurance
 
regarding
prevention or
 
timely detection
 
of unauthorized
 
acquisition, use,
 
or disposition
 
of the
 
entity’sentities’ assets
 
assets that could
 
could have a
 
a material
effect on the consolidated financial statements.
Because of
 
its inherent
 
limitations, internal
 
control over
 
financial reporting
 
may not
 
prevent or
 
detect misstatements.
 
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
 
/s/
Frost, PLLC
Little Rock, Arkansas
 
July 19, 2021
2022
 
 
 
 
 
 
 
 
6163
(c)
 
Changes in
Internal Control Over Financial Reporting
In
 
connection
 
with
 
its
 
evaluation
 
of
 
the
 
effectiveness,
 
as
 
of
 
May
 
29,28,
 
2021,2022,
 
of
 
our
 
internal
 
control
 
over
 
financial
 
reporting,
management determined that there was no change
in our internal control over financial reporting that
occurred during the fourth
quarter ended
 
May 29,28,
 
2021,2022, that
 
has materially
 
affected, or
 
or is reasonably
 
reasonably likely to
 
to materially affect,
 
affect, our internal
 
internal control
over
financial reporting.
 
ITEM 9B.
 
OTHER INFORMATION
 
Not applicable.
 
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS
Not applicable.
PART
 
III.
 
ITEM 10.
 
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
GOVERNANCE
Except as set forth below, the information concerning
directors, executive officers and corporate
governance required by Item 10
is
 
incorporated
 
by
 
reference
 
from
 
our
 
definitive
 
proxy
 
statement
 
which
 
is
 
to
 
be
 
filed
 
pursuant
 
to
 
Regulation
 
14A
 
under
 
the
Securities Exchange Act of 1934 in connection with our 20212022 Annual
Meeting of Shareholders.
We have adopted a Code
 
Code of
Conduct and
 
Ethics for Directors,
 
Directors, Officers and
Employees, including
 
the chief executive
 
executive and
principal
financial and accounting officers
of the Company.
 
We will
provide a copy of the code
 
the code free of charge to any person
that requests
a copy by writing to:
Cal-Maine Foods, Inc.
P.O.
 
Box 2960
Jackson, Mississippi 39207
Attn.:
 
Investor Relations
Requests can be made by phone at (601) 948-6813.
A copy is also available
at our website
www.calmainefoods.com.
We intend to disclose any amendments
to, or waivers from, the
Code
 
of
 
Conduct
and
 
Ethics
 
for
 
Directors,
Officers
 
and
Employees
 
on
 
our
 
website
promptly
 
following
the
 
date
 
of
 
any
 
such
amendment or waiver. Information
contained on our website is not a part of this report.
 
ITEM 11.
 
EXECUTIVE COMPENSATION
 
The information concerning executive
compensation required by Item 11
is incorporated by reference from our
definitive proxy
statement which is to
 
to be filed
pursuant to Regulation
 
14A under the Securities
 
Securities Exchange Act
of 1934 in
 
connection with our
2021 2022
Annual Meeting of Shareholders.
 
ITEM
 
12.
 
SECURITY
 
OWNERSHIP
 
OF
 
CERTAIN
 
BENEFICIAL
 
OWNERS
 
AND MANAGEMENT
 
AND
RELATED STOCKHOLDER MATTERS
 
MATTERS
The information
 
concerning security
 
ownership of
 
certain beneficial
 
owners and
 
management and
 
related stockholder
 
matters
required by Item 12 is incorporated
by reference from our definitive proxy
statement which is to be filed pursuant
to Regulation
14A under the Securities Exchange Act of 1934 in connection with our 2021 2022
Annual Meeting of Shareholders.
 
ITEM 13.
 
CERTAIN
 
RELATIONSHIPS
AND RELATED TRANSACTIONS,
 
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
The
 
information
 
concerning
 
certain
 
relationships
 
and
 
related
 
transactions,
 
and
 
director
 
independence
 
required
 
by
 
Item
 
13
 
is
incorporated by
reference from
 
our definitive proxy
 
proxy statement
which is
 
to be filed
 
filed pursuant
to Regulation
 
14A under the
 
Securities
Exchange Act of 1934 in connection with our 20212022 Annual Meeting of Shareholders.
 
 
64
ITEM 14.
 
PRINCIPAL ACCOUNTING
FEES AND SERVICES
 
The information
 
concerning principal
 
accounting fees
 
and services
 
required by
 
Item 14
 
is incorporated
 
by reference
 
from our
definitive
 
proxy
 
statement
 
which
 
is
 
to
 
be
 
filed
 
pursuant
 
to
 
Regulation
 
14A
 
under
 
the
 
Securities
 
Exchange
 
Act
 
of
 
1934
 
in
connection with our 20212022 Annual Meeting of Shareholders.
 
62
PART
 
IV.
 
ITEM 15. EXHIBITS,EXHIBIT AND FINANCIAL STATEMENT
 
SCHEDULES
 
(a)(1)
 
Financial Statements
The following consolidated financial statements
and notes thereto of Cal-Maine Foods,
Inc. and subsidiaries are included
in Item
8 and are filed herewith:
 
(PCAOB
5348
)
20
May 28,2022, May 29,2021,
andMay 30,
2020, and
(a)(2)
 
Financial Statement Schedule
All other schedules are
omitted either because they
 
they are not applicable
or required, or because
 
because the required information
is included
in the financial statements or notes thereto.
(a)(3)
 
Exhibits Required by Item 601 of Regulation S
-
K
S-K
See Part (b) of this Item 15.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6365
(b)
 
Exhibits Required by Item 601 of Regulation S
-
K
S-K
 
The following exhibits are filed herewith or incorporated by reference:
Exhibit
Number
Exhibit
3.1
3.2
4.1**
10.1
10.2
10.3*
10.4
10.5*
10.6*
10.7*
10.8*
21**
23.1**
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)
*
 
Management contract or compensatory plan or arrangement
**
 
Filed herewith as an Exhibit
***
 
Furnished herewith as an Exhibit
†
 
Submitted electronically with this Annual
Report on Form 1010-K
-
K
(c)
 
(c)
Financial Statement Schedules Required by Regulation S
-
X
S-X
The financial statement schedule required by
Regulation S-X is filed at page 58.60. All
other schedules for which provision is
made
in the
 
applicable accounting regulations
 
regulations of the
 
the Securities and
 
and Exchange
Commission are
 
not required
 
under the
 
related instructions
or are inapplicable and therefore have been omitted.
 
ITEM 16. FORM 10-K SUMMARY
 
Not applicable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6466
SIGNATURES
 
Pursuant to
the requirements of
 
of Section 13 or
 
15(d) of the Securities
 
Securities Exchange
Act of 1934,
 
the registrant has duly
 
duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in Ridgeland,
Mississippi.
CAL-MAINE FOODS, INC.
/s/ Adolphus B. Baker
Adolphus B. Baker
Chief Executive Officer and Chairman of the Board
Date:
July 19, 2021
2022
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
 
Date
 
 
 
/s/
 
Adolphus B. Baker
 
Chief Executive Officer and
 
July 19, 20212022
Adolphus B. Baker
 
Chairman of the Board
 
 
(Principal Executive Officer)
 
 
 
 
/s/
 
Max P.
 
Bowman
 
Vice President, Chief Financial
 
July 19, 20212022
Max P.
 
Bowman
 
Officer and Director
 
 
(Principal Financial Officer)
 
 
 
 
/s/
Michael D. Castleberry Matthew S. Glover
 
Vice President, ControllerAccounting
 
July 19, 20212022
Michael D. CastleberryMatthew S. Glover
 
(Principal Accounting Officer)
 
 
 
 
/s/
 
Sherman L. Miller
 
President, Chief Operating
 
July 19, 20212022
Sherman L. Miller
 
Officer and Director
 
 
 
 
/s/
 
Letitia C. Hughes
 
Director
 
July 19, 20212022
Letitia C. Hughes
 
 
 
 
 
 
/s/
 
James E. Poole
 
Director
 
July 19, 20212022
James E. Poole
 
 
 
 
 
 
/s/
 
Steve W. Sanders
 
Director
 
July 19, 20212022
Steve W. Sanders
 
 
 
 
/s/
 
Camille S. Young
 
Director
July 19, 20212022
Camille S. Young