1
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington,
 
DC
 
20549
FORM
10-Q
 
☑
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
 
Act of 1934
For the quarterly period ended
November 27, 202126, 2022
 
or
☐
 
Transition report pursuant to Section 13 or 15(d)
 
of the Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number:
 
001-38695
 
CAL-MAINE FOODS, INC
.INC.
(Exact name of registrant as specified in its charter)
Delaware
 
64-0500378
(State or other jurisdiction of incorporation or organization)
 
(I.R.S Employer Identification No.)
1052 Highland Colony Pkwy
,
Suite 200
,
Ridgeland
,
Mississippi
 
39157
 
(Address of principal executive offices)
 
(Zip Code)
(
601
)
948-6813
 
(Registrant’s telephone number,
 
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
CALM
The
NASDAQ
 
Global Select Market
Indicate
 
by
 
check
 
mark
 
whether
 
the
 
registrant:
 
(1)
 
has
 
filed
 
all
 
reports
 
required
 
to
 
be
 
filed
 
by
 
Section
 
13
 
or
 
15(d)
 
of
 
the
Securities Exchange
 
Act of 1934
 
during the preceding
 
12 months (or
 
for such
 
shorter period that
 
the registrant was
 
required to
file such reports), and (2) has been subject to such filing requirements for the past
 
90 days.
Yes
☑
 
No
☐
Indicate by check
 
mark whether the
 
registrant has submitted
 
electronically every
 
Interactive Data File
 
required to be
 
submitted
pursuant to
 
Rule 405
 
of Regulation
 
S-T (§232.405
 
of this
 
chapter) during
 
the preceding
 
12 months
 
(or for
 
such shorter
 
period
that the registrant was required to submit such files).
Yes
☑
 
No
☐
Indicate by
 
check mark
 
whether the registrant
 
is a large
 
accelerated filer,
 
an accelerated
 
filer, a
 
non-accelerated filer,
 
a smaller
reporting
 
company,
 
or
 
an
 
emerging
 
growth
 
company.
 
See
 
the
 
definitions
 
of
 
“large
 
accelerated
 
filer,”
 
“accelerated
 
filer”,
“smaller reporting company”, and “emerging growth
 
company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer
☑
Accelerated filer
 
☐
Non – Accelerated filer
 
☐
Smaller reporting company
 
☐
Emerging growth company
 
☐
If
 
an
 
emerging
 
growth
 
company,
 
indicate
 
by
 
check
 
mark
 
if
 
the
 
registrant
 
has
 
elected
 
not
 
to
 
use
 
the
 
extended
transition
 
period
 
for
 
complying
 
with
 
any
 
new
 
or
 
revised
 
financial
 
accounting
 
standards
 
provided
 
pursuant
 
to
Section 13(a) of the Exchange Act
☐
Indicate by check mark whether the registrant is a shell company (as defined
 
in Rule 12b-2 of the Exchange Act).
Yes
☐
 
No
☑
There were
44,056,59944,130,149
 
shares of
 
Common Stock,
 
$0.01 par value,
 
and
4,800,000
 
shares of Class
 
A Common
 
Stock, $0.01
 
par
value, outstanding as of December 28, 2021.2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
PART
 
I.
 
FINANCIAL
INFORMATION
ITEM 1.
 
FINANCIAL STATEMENTS
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(inIn thousands, except for par value amounts)
 
(Unaudited)
 
November 27, 202126, 2022
May 29, 202128, 2022
Assets
Current assets:
Cash and cash equivalents
$
15,484178,635
$
57,35259,084
Investment securities available-for-sale
69,672200,714
112,158115,429
Trade and other receivables, net
152,958262,964
126,639177,257
Income tax receivable
42,147
42,147
Inventories
236,201280,582
218,375263,316
Prepaid expenses and other current assets
6,8148,968
5,4074,286
Total current
 
assets
481,129974,010
519,931661,519
Property, plant &
 
equipment, net
667,250703,882
589,417
Finance lease right-of-use asset, net
448
525
Operating lease right-of-use asset, net
1,347
1,724677,796
Investments in unconsolidated entities
10,98514,687
54,94115,530
Goodwill
44,006
35,52544,006
Intangible assets, net
19,24117,037
20,34118,131
Other long-term assets
7,5889,818
6,77010,507
Total Assets
$
1,231,9941,763,440
$
1,229,1741,427,489
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
115,619154,624
$
89,191122,331
Current portion of finance lease obligationAccrued income taxes payable
21985,723
21525,687
Current portion of operating lease obligationDividends payable
55066,202
69136,656
Total current
 
liabilities
116,388306,549
90,097
Long-term finance lease obligation
327
438
Long-term operating lease obligation
797
1,034184,674
Other noncurrent liabilities
10,3069,410
10,41610,274
Deferred income taxes, net
106,753127,176
114,408128,196
Total liabilities
234,571443,135
216,393323,144
Commitments and contingencies - see
Note 139
—
—
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
66,01970,005
64,04467,989
Retained earnings
959,1241,281,784
975,9771,065,854
Accumulated other comprehensive loss, net of tax
(996)(3,087)
(558)(1,596)
Common stock in treasury at cost –
26,20426,126
 
shares at November 27, 202126, 2022 and
26,20226,121
shares at May 29, 202128, 2022
(27,450)(28,496)
(27,433)(28,447)
Total Cal-Maine Foods,
 
Inc. stockholders’ equity
997,4481,320,957
1,012,7811,104,551
Noncontrolling interest in consolidated entity
(25)(652)
0(206)
Total stockholders’
 
equity
997,4231,320,305
1,012,7811,104,345
Total Liabilities and Stockholders’
 
Equity
$
1,231,9941,763,440
$
1,229,1741,427,489
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(inIn thousands, except per share amounts)
(unaudited)
(Unaudited)
 
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 27,26, 2022
November 27, 2021
November 28,
202026, 2022
November 27,
2021
November 28,
2020
Net sales
$
390,903801,700
$
347,328381,723
$
722,6071,460,044
$
640,110706,709
Cost of sales
347,156483,851
288,877337,976
672,215924,705
564,894656,317
Gross profit
317,849
43,747
58,451535,339
50,392
75,216
Selling, general and administrative
57,952
47,780
43,873111,559
94,305
87,838
(Gain) loss on disposal of fixed assets
29
(1,968)
9962
(2,181)
122
Operating income (loss)
259,868
(2,065)
14,479423,718
(41,732)
(12,744)
Other income (expense):
Interest income, net
1,930
129
6642,833
361
1,589
Royalty income
344
278
280772
551
585
Equity income (loss) of unconsolidated
entities
(987)
264
58(843)
399
14
Other, net
1,113
1,862
4361,268
7,025
948
Total other income, net
2,400
2,533
1,4384,030
8,336
3,136
Income (loss) before income taxes
262,268
468
15,917427,748
(33,396)
(9,608)
Income tax expense (benefit) expense
63,974
(677)
3,762104,320
(16,515)
(2,364)
Net income (loss)
198,294
1,145
12,155323,428
(16,881)
(7,244)
Less: Loss attributable to noncontrolling
interest
(293)
(28)
0(446)
(28)
0
Net income (loss) attributable to Cal-Maine Foods,
Foods, Inc.
$
198,587
$
1,173
$
12,155323,874
$
(16,853)
$
(7,244)
Net income (loss) per common share:
Basic
$
0.02
$
0.25
$
(0.34)
$
(0.15)
Diluted4.08
$
0.02
$
0.256.66
$
(0.34)
Diluted
$
(0.15)4.07
$
0.02
$
6.63
$
(0.34)
Weighted average
 
shares outstanding:
Basic
48,624
48,857
48,50148,624
48,859
48,501Diluted
Diluted48,840
49,016
48,64548,827
48,859
48,501
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
Comprehensive Income (Loss)
(inIn thousands)
(unaudited)(Unaudited)
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 27,26, 2022
November 27, 2021
November 28,
202026, 2022
November 27,
2021
November 28,
2020
Net income (loss)
$
198,294
$
1,145
 
$
12,155323,428
 
$
(16,881)
$
(7,244)
Other comprehensive income (loss), before
tax:
Unrealized holding gain (loss)loss on available-for-saleavailable-for-
sale securities, net of reclassification
adjustments
(974)
(355)
(373)(1,971)
(579)
95
Income tax benefit (expense) related to items of other
comprehensive income
237
87
91480
141
(23)
Other comprehensive income (loss),loss, net of tax
(737)
(268)
(282)(1,491)
(438)
72
Comprehensive income (loss)
197,557
877
11,873321,937
(17,319)
(7,172)
Less: Comprehensive loss attributable to the
noncontrolling interest
(28)
0(293)
(28)
0(446)
(28)
Comprehensive income (loss) attributable to Cal-Maine
Cal-Maine Foods, Inc.
$
197,850
$
905
$
11,873322,383
$
(17,291)
$
(7,172)
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(inIn thousands)
(unaudited)
(Unaudited)
 
Twenty-six Weeks
 
Ended
November 27, 202126, 2022
November 28, 202027, 2021
Cash flows from operating activities:
Net lossincome (loss)
$
323,428
$
(16,881)
$
(7,244)
Depreciation and amortization
33,96934,729
29,30533,969
Deferred income taxes
(15,995)(540)
(2,364)(15,995)
Other adjustments, net
(16,585)(12,830)
(30,348)(16,585)
Net cash used inprovided by (used in) operations
(15,492)344,787
(10,651)(15,492)
Cash flows from investing activities:
Purchases of investment securities
(26,387)(152,365)
(29,637)(26,387)
Sales and maturities of investment securities
67,86465,279
59,07767,864
Distributions from unconsolidated entities
400—
2,650400
Acquisition of business, net of cash acquired
(44,823)—
0(44,823)
Purchases of property,
 
plant and equipment
(28,647)(59,709)
(52,373)(28,647)
Net proceeds from disposal of property,
 
plant and equipment
5,33892
2535,338
Net cash used in investing activities
(26,255)(146,703)
(20,030)(26,255)
Cash flows from financing activities:
Payments of dividends
(78,394)
—
Purchase of common stock by treasury
(18)(45)
(45)(18)
Principal payments on finance lease
(106)(94)
(101)(106)
Contributions
3—
53
Net cash used in financing activities
(121)(78,533)
(141)(121)
Net change in cash and cash equivalents
(41,868)119,551
(30,822)(41,868)
Cash and cash equivalents at beginning of period
57,35259,084
78,13057,352
Cash and cash equivalents at end of period
$
15,484178,635
$
47,308
Supplemental Information:
Cash paid for operating leases
$
425
$
237
Interest paid
$
125
$
12915,484
See Notes to Condensed Consolidated Financial Statements.
7
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)(Unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The
 
unaudited
 
condensed
 
consolidated
 
financial
 
statements
 
of
 
Cal-Maine
 
Foods,
 
Inc.
 
and
 
its
 
subsidiaries
 
(the
 
"“Company,"”
"“we,"
"us,"
"our"” “us,” “our”)
 
have
been
prepared
 
in accordance with
the instructions to
Form 10-Q and
Article 10 of
Regulation S-X and
in
 
accordance
 
with generally
accepted
accounting
principles in
 
the
 
instructions
to
Form
10-Q
and
Article
10
of
Regulation
S-X.
Therefore, they
do not
include all of
the information
and footnotes
required by
generally accepted
accounting principles
in the
United
 
States
of
 
America
 
("GAAP"(“GAAP”)
 
for
 
completeinterim
 
financial
statements
reporting and
should
 
be
read
in
conjunction
 
with
our
Annual
Report
 
on
Form
10-K
 
for
the
fiscal
year
 
ended May 28,
 
May2022 (the
29,
2021
(the
"2021“2022
 
Annual
 
Report"Report”).
 
These
 
statements
 
reflect
 
all
adjustments that are, in
 
the opinion of management, necessaryadjustments
 
to a fair statement ofthat
 
the results for the interim
periods presented
and,are,
 
in
 
the
 
opinion
 
of
 
management,
 
consistnecessary
 
of
adjustments
ofto
 
a
 
normalfair
statement of the results for
 
recurringthe interim periods presented
 
and, in the opinion of
management, consist of adjustments
of a normal
recurring nature.
 
Operating
results
for
 
the interim periods
 
interim
periods are not necessarily
indicative of operating
results for the
entire fiscal
year.
Fiscal Year
The Company'sCompany’s
 
fiscal year
 
ends on
 
the Saturday
 
closest to
 
May 31.
 
Each of
 
the three-month
 
periods and
 
year-to-date
periods
ended on November 26, 2022 and November 27, 2021 and November 28, 2020 included
13 weeks
 
13 weeks and
26 weeks
, respectively.
Use of Estimates
The preparation of the
 
consolidated financial statements in
 
conformity with GAAP requires management
 
to make estimates and
assumptions
 
that affect
 
the amounts
 
reported in
 
the consolidated
 
financial statements
 
and accompanying
 
notes. Actual
 
results
could differ from those estimates.
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
might
change
materially
in
future
periods in response to COVID-19.
Investment Securities
Our investment
 
securities are
 
accounted
 
for in
 
accordance with
 
ASC 320,
 
“Investments -
 
Debt and
 
Equity Securities”
 
(“ASC
320”).
 
The
 
Company
 
considers
 
all
 
its
 
debt
 
securities
 
for
 
which
 
there
 
is
 
a
 
determinable
 
fair
 
market
 
value,
 
and
 
there
 
are
 
no
restrictions
 
on
 
the
 
Company'sCompany’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 ain
 
separateother
 
componentcomprehensive
income
until
realized.
The
total
 
of stockholders’
 
equity.other
comprehensive
income for the period is presented as a component of stockholders' equity
separately from retained earnings and additional paid-
in
capital.
 
The
Company
 
regularly
 
evaluates
changes
changes
to
 
the
rating
of
 
its
debt
securities
 
by
credit
 
agencies and economic
 
and
economic
conditions to assess
and record
any expected credit
losses through
the allowance
for credit
 
losses through the allowance for credit losses, limited
to the amount
 
that fair
value
 
was
less
than
 
the
amortized
 
cost
basis.
The
cost
 
basis
 
for
 
realized
 
gains
 
and
 
losses
 
on
 
available-for-sale
 
securities
 
is
determined
by
 
the
specific
 
identification method.
 
method.
Gains and
losses are
recognized in
other income
 
(expenses) as
Other,
net in
the Company'sCompany’s
 
Condensed Consolidated
Statements
of
 
Operations.
 
Investments
in
 
mutual
funds
 
are
classified
 
as “Other
 
“Otherlong-
term assets” in the Company’s Condensed
 
long-term
assets”
in
the
Company’s
Condensed
Consolidated Balance Sheets.
Trade Receivables
 
Trade
receivables
 
are stated at
 
at their
carrying values,
 
which include a
 
a reserve
for credit
 
losses. AtAs
of November
 
27, 2021 and26, 2022
 
Mayand
29,May 28,
 
2021,
2022, reserves
 
for
credit
 
losses
were
 
$
1.1838
 
million
thousand and
 
$
795775
 
thousand,
respectively.
 
The
Company
 
extends
credit
 
to
customers based on
 
an evaluation of
 
each customer's financial
 
condition and credit
 
history.
 
Collateral is generally
 
not required.
The
 
Company
 
minimizes
 
exposure
 
to
 
counter
 
party
 
credit
 
risk
 
through
 
credit
 
analysis
 
and
 
approvals,
 
credit
 
limits,
 
and
monitoring
 
procedures.
 
In
 
determining
 
our
 
reserve
 
for
 
credit
losses,
 
receivables
 
are
 
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.
Dividends Payable
 
We
 
accrue dividends at
 
the end of
 
each quarter according
 
to the Company’s
 
dividend policy adopted
 
by its Board
 
8
Business Combinationsof Directors.
The
Company
 
applies fair
value
accounting
guidancepays a dividend
 
to shareholders
 
measureof its Common
 
non-financial
assetsStock and
 
liabilitiesClass A Common
 
associated
with
business
acquisitions.
These
assets
and
liabilities
are
measured
at
fair
value
for
the
initial
purchase price
allocation.
The
fair
value
of
non-financial assets acquired is determined internally.
Our internal valuation methodology for non-financial assets considers the
remaining estimated life of the assets acquired and what management
believes is the market value for those assets.
Change in Accounting Principle
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 losses
for financial
assets held
at the
reporting date
based
on
historical
experience,
current
conditions,
and
reasonable
and
supportable
forecasts.
The
Company
adopted
the
guidanceStock on
 
a modified
retrospectivequarterly basis
 
through afor each
quarter for
 
cumulative effectwhich the
 
adjustmentCompany reports
net income
attributable to
 
retained earningsCal-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 beginningfourth fiscal
 
of
the period ofquarter.
 
adoption. TheFor the
fourth quarter,
the Company
 
evaluated its current
pays dividends
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.
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
to shareholders of record on the 65th day after the
quarter end. Dividends are payable on the 15th day
following the record date.
Following a quarter for which the Company does not report net income
attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend
for a subsequent profitable
quarter until the Company
is profitable on a
cumulative basis computed
from the
date of the most recent quarter for which a dividend was paid.
Immaterial Error Correction
Effective
on
May
30,
2021,
the
Company
acquired
the
remaining
50
%
membership
interest
in
Red
River
Valley
Egg
Farm,
LLC (“Red
River”),
including
certain
liabilities. During
the Company’s
third
quarter of
fiscal 2022,
management
determined
that
it
had
not
properly
eliminated
select
intercompany
sales
and
cost
of
sales
transactions
between
Red
River
and
the
corresponding
other wholly
-owned subsidiaries
of the
Company
in its
first and
second quarter
2022 Condensed
Consolidated
Statements
of
Operations.
The
errors
resulted
in
an
overstatement
of
Net
Sales and
Cost of
Sales
of
$
6.7
million
in the
first
quarter of fiscal 2022
and $
9.2
million in the second
quarter of fiscal 2022.
There was
no
impact to Operating
loss, Net income
(loss) or Net income (loss) per share.
We
evaluated
the
errors
quantitatively
and
qualitatively
in
accordance
with
Staff
Accounting
Bulletin
("SAB") No. 99 Materiality,
and
SAB No. 108 Considering
the
Effects
of
Prior
Year
Misstatements
when
Quantifying
Misstatements
in
the
Current
Year
Financial
Statements, and
determined
that
the
related
impact
was not material
to
our
condensed
consolidated
financial statements
for
the first
or second
quarters
of fiscal
2022,
but that
correcting
the cumulative
impact
of
the
errors
would
be
relevant
to
our
Condensed
Consolidated
Statements
of
Operations
for
the third
quarter
ended February 26, 2022.
Accordingly,
we have reflected
the correction of
the immaterial error
in fiscal 2022
as a reduction
of
Net Sales and Cost of Sales in the accompanying Condensed Consolidated
Statements of Operations.
New Accounting Pronouncements and Policies
No new accounting pronouncement issued or effective
during the fiscal year had or is expected to have a material impact on
our
Consolidated Financial Statements.
Note 2 - Investment
Securities
The following represents the Company’s
investment securities as of November 26, 2022 and May 28, 2022
(in thousands):
November 26, 2022
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
15,956
$
—
$
276
$
15,680
Commercial paper
33,058
—
53
33,005
Corporate bonds
81,218
—
1,709
79,509
US government and agency obligations
19,111
—
205
18,906
Asset backed securities
13,403
—
340
13,063
Treasury bills
40,644
—
93
40,551
Total current
investment securities
$
203,390
$
—
$
2,676
$
200,714
Mutual funds
$
3,472
$
—
$
114
$
3,358
Total noncurrent
investment securities
$
3,472
$
—
$
114
$
3,358
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9
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
Operations. 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
$
954,000
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 a $
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.
Note 3 - Investment
Securities
The following represents the Company’s
investment securities as of November 27, 2021 and May 29, 2021
(in thousands):
November 27, 2021
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
917
$
4
$
0
$
921
Commercial paper
5,983
0
2
5,981
Corporate bonds
54,457
110
0
54,567
Asset backed securities
8,239
0
36
8,203
Total current
investment securities
$
69,596
$
114
$
38
$
69,672
Mutual funds
$
2,105
$
1,951
$
0
$
4,056
Total noncurrent
investment securities
$
2,105
$
1,951
$
0
$
4,056
May 29, 202128, 2022
Amortized
 
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
16,42410,136
$
56—
$
032
$
16,48010,104
Commercial paper
1,99814,940
0—
072
1,99814,868
Corporate bonds
80,09274,167
608—
0483
80,70073,684
Certificates of deposits
1,0771,263
0—
118
1,0761,245
US government and agency obligations
2,205
4
—
2,209
Asset backed securities
11,91413,456
0—
10137
11,90413,319
Total current
 
investment securities
$
111,505116,167
$
6644
$
11742
$
112,158115,429
Mutual funds
$
2,3063,826
$
1,810—
$
074
$
4,1163,752
Total noncurrent
 
investment securities
$
2,3063,826
$
1,810—
$
074
$
4,1163,752
Available-for-sale
Proceeds from
 
sales and
 
maturities of
 
investment securities
 
available-for-sale
 
were $
67.965.3
 
million and
 
$
59.167.9
 
million during
 
the
twenty-six
 
weeks
 
ended November
 
27,26,
 
20212022
 
and
 
November
 
28,27,
 
2020,2021,
 
respectively.
 
Gross
 
realized
 
gains
 
for
 
the
 
twenty-six
weeks ended
 
November 27,26,
 
20212022 and
 
November 28,27,
 
20202021 were
 
$
1652
 
thousand and
 
and $
57165
 
thousand, respectively.
 
Gross realized
losses
 
for
 
the
 
twenty-six
 
weeks
 
ended
 
November
 
26,
2022
and
November
27,
 
2021
 
were
 
$
63
thousand
and
$
67
 
thousand.
There
werethousand,
0
gross
realized
losses
for
the
twenty-six weeks
ended November
28, 2020.
respectively. There were
0no
 
allowances for
credit losses
at November
27, 2021
26, 2022 and May
28, 2022.
29,
2021.
10
Actual maturities
 
may differ
 
from contractual
 
maturities as some
 
borrowers have
 
the right to
 
call or prepay
 
prepay obligations with
 
with or
without penalties. Contractual maturities of current investments at November
 
27, 202126, 2022 are as follows (in thousands):
Estimated Fair Value
Within one year
$
41,326133,867
1-5 years
28,34666,847
Total
$
69,672200,714
Noncurrent
 
ProceedsThere were
no
from
 
sales of noncurrent investment
 
andsecurities during the twenty-six
 
weeks ended November
26, 2022. Proceeds from
sales and maturities
 
of
noncurrent
 
investment
securities
 
were
$
453
 
thousand
during
 
the
twenty-six
 
weeks
ended November
 
27,
2021.
 
Gross
 
realized
 
gains
 
for
 
the
 
twenty-six
 
weeks
 
ended November
 
27,
 
2021
 
were
 
$
165
thousand. There
were
0no
 
realized
losses for the twenty-six
weeks ended November 27, 2021.
There were
0
sales of noncurrent
investment securities during the twenty-six weeks ended November
28, 2020.
Note 43 - Fair Value
 
Measurements
The Company
 
is required
 
to categorize
 
both financial
 
and nonfinancial
 
assets and
 
liabilities based
 
on the
 
following fair
 
value
hierarchy. The
 
fair value
 
of an
 
asset is
 
the price
 
at which
 
the asset
 
could be
 
sold in
 
an orderly
 
transaction between
 
unrelated,
knowledgeable, and willing
 
parties able to engage in
 
the transaction. A liability’s
 
fair value is defined
 
as the amount that would
be
 
paid
 
to
 
transfer
 
the
 
liability
 
to
 
a
 
new
 
obligor
 
in
 
a
 
transaction
 
between
 
such
 
parties,
 
not
 
the
 
amount
 
that
 
would
 
be paid
 
to
settle the liability with the creditor.
•
Level 1
 
- Quoted prices in active markets for identical assets or liabilities
•
Level 2
 
- Inputs
 
other than
 
quoted
 
prices included
 
in Level
 
1 that
 
are observable
 
for the
 
asset or
 
liability,
 
either
directly or indirectly,
 
including:
◦
Quoted prices for similar assets or liabilities in active markets
◦
Quoted prices for identical or similar assets in non-active markets
◦
Inputs other than quoted prices that are observable for the asset or liability
◦
Inputs derived principally from or corroborated by other observable market
 
market data
•
Level 3
 
- Unobservable inputs for the asset or liability that are
 
supported by little or no market activity and that
 
are
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded
at cost are as follows:
Cash and cash equivalents, accounts receivable,
and accounts payable:
The carrying amount approximates fair value due to the
short maturity of these instruments.
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
financial
assets and
liabilities measured at fair value on a recurring basis as of November 27, 2021 and May
29, 2021 (in thousands):
November 27, 2021
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
0
$
921
$
0
$
921
Commercial paper
0
5,981
0
5,981
Corporate bonds
0
54,567
0
54,567
Asset backed securities
0
8,203
0
8,203
Mutual funds
4,056
0
0
4,056
Total assets measured at fair
value
$
4,056
$
69,672
$
0
$
73,728
11
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
Investment
securities
–
available-for-sale
classified
as Level
2
consist
of
securities
with maturities
of
three
months
or longer
when purchased. We
classified these securities as
current because amounts
invested are readily available
for current operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
Note 5 - Inventories
Inventories consisted of the following as of November 27, 2021
and May 29, 2021 (in thousands):
November 27, 2021
May 29, 2021
Flocks, net of amortization
$
139,645
$
123,860
Eggs and egg products
23,043
21,084
Feed and supplies
73,513
73,431
$
236,201
$
218,375
We
grow
and
maintain
flocks
of
layers
(mature
female
chickens),
pullets
(female
chickens,
under
18
weeks
of
age),
and
breeders
(male
and
female
chickens
used
to
produce
fertile
eggs
to
hatch
for
egg
production
flocks).
Our
total
flock
at
November 27, 2021 consisted of approximately
9.3
million pullets and breeders and
42.9
million layers.
Note 6 - Accrued Dividends Payable and Dividends per Common
Share
We
accrue dividends at
the end of
each quarter according
to the Company’s
dividend policy adopted
by its Board
of Directors.
The Company
pays a dividend
to shareholders
of its Common
Stock and
Class A Common
Stock on
a quarterly basis
for each
quarter for
which the
Company reports
net income
attributable to
Cal-Maine Foods,
Inc. computed
in accordance
with GAAP
in an amount
equal to one-third
(1/3) of such
quarterly income. Dividends
are paid to
shareholders of record
as of the 60th
day
following the
last day
of such quarter,
except for
the fourth fiscal
quarter. For
the fourth quarter,
the Company
pays dividends
to shareholders of record on the 65th day after the
quarter end. Dividends are payable on the 15th day following
the record date.
Following a quarter for which the Company does not report net income
attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend
for a subsequent profitable
quarter until the Company
is profitable on a cumulative
basis computed from the
date of
the most
recent quarter
for which
a dividend
was paid.
At the
end of
the second
quarter of
fiscal 2022,
the amount
of
cumulative losses to be recovered before payment of a dividend was $
21.1
million.
12
On
our
condensed
consolidated
statement
of
operations,
we
determine
dividends
per
common
share
in
accordance
with
the
computation in the following table (in thousands, except per share data):
Thirteen Weeks
Ended
Twenty-six Weeks
Ended
November 27,
November 28,
November 27,
November 28,
Net income (loss)
$
1,173
$
12,155
$
(16,853)
$
(7,244)
Cumulative losses to be recovered prior to
payment of divided at beginning of period
(22,270)
(20,769)
(4,244)
(1,370)
Net income available for dividend
$
0
$
0
$
0
$
0
1/3 of net income attributable to Cal-Maine
Foods, Inc. available for dividend
0
Common stock outstanding (shares)
44,057
Class A common stock outstanding (shares)
4,800
Total common stock
outstanding (shares)
48,857
*Dividends per common share
= 1/3 of Net
income (loss) attributable to
Cal-Maine Foods, Inc. available
for dividend ÷ Total
common stock
outstanding (shares).
Note 7 – Credit Facility
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
$
250
million,
which
includes
a
$
15
million
sublimit
for
the
issuance
of
standby
letters
of
credit
and
a
$
15
million
sublimit
for
swingline
loans.
The
Credit
Facility
also
includes
an
accordion
feature
permitting,
with
the
consent
of
BMO
Harris
Bank
N.A.
(the
“Administrative
Agent”),
an
increase
in
the
Credit Facility
in the
aggregate up
to $
200
million by
adding one
or more
incremental senior
secured term
loans or
increasing
one or more times the revolving commitments under the Revolver.
As of November 27, 2021,
0
amounts were borrowed under
the Credit Facility and $
4.1
million in standby letters of credit were issued under the Credit Facility.
The
interest
rate
in
connection
with
loans
made
under
the
Credit
Facility
is
based
on,
at
the
Company’s
election,
either
the
Eurodollar
Rate
plus
the
Applicable
Margin
or
the
Base
Rate
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
or
twelve
months (as
selected by
the Company)
are quoted.
The “Base
Rate” means
a fluctuating
rate per
annum equal
to the
highest
of
(a)
the
federal
funds
rate
plus
0.50
%
per
annum,
(b)
the
prime
rate
of
interest
established
by
the
Administrative
Agent, and (c) the Eurodollar Rate for
an interest period of
one
month plus
1
% per annum, subject to certain interest
rate floors.
The
“Applicable
Margin”
means
0.00
%
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
Total
Funded
Debt
to
Capitalization
Ratio
for
the
Company
at
the
quarterly pricing
date. The
Company will pay
a commitment fee
on the unused
portion of the
Credit Facility
payable quarterly
from
0.15
%
to
0.25
%
in
each
case
depending
upon
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
Credit
Facility
is
guaranteed
by
all the
current
and
future wholly
-owned
direct
and
indirect
domestic
subsidiaries
of
the
Company (the
“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.
The
Credit
Agreement
for the
Credit
Facility
contains
customary
covenants,
including
restrictions
on
the incurrence
of
liens,
incurrence of
additional debt,
sales of
assets and
other fundamental
corporate changes
and investments.
The Credit
Agreement
requires maintenance
of two
financial covenants:
(i) a
maximum Total
Funded Debt
to Capitalization
Ratio tested
quarterly of
no greater than
50
%; and (ii) a requirement
to maintain Minimum Tangible
Net Worth
at all times of $
700
Million plus
50
% of
net
income
(if
net
income
is
positive)
less
permitted
restricted
payments
for
each
fiscal
quarter
after
November
27,
2021.
Additionally,
the Credit Agreement
requires that Fred
R. Adams Jr.’s
spouse, natural children,
sons-in-law or grandchildren,
or
any trust,
guardianship, conservatorship
or custodianship
for the 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, shall maintain
at least
50
% of the Company's
voting stock. Failure
to satisfy any of
these covenants will constitute
a
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1310
default under the termsThe disclosures of fair value of certain financial assets and liabilities that are recorded
 
the Credit Agreement. Further,at cost are as follows:
Cash and cash equivalents, accounts receivable,
 
under the terms of the Credit
Agreement, payment of dividends under
the
Company's
current
dividend
policy
of
one-thirdand 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
 
Company'sis at its present value which approximates fair value.
Assets and Liabilities Measured at Fair
 
netValue
 
incomeon a Recurring Basis
computed
inIn
 
accordance
 
with
 
GAAPthe
 
and
payment of otherfair
 
dividends or repurchasesvalue
 
by hierarchy
described
above,
the Company
following
table
shows
the
fair
value
 
of its capital stock
 
is allowed,financial
assets and
liabilities measured at fair value on a recurring basis as longof November 26, 2022 and May
 
as 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 Facility equals
at least $
50
million.
The Credit
Agreement also
includes customary
events of
default and
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 securing
the Credit
Facility.
At November 27, 2021, we were in compliance with the covenant requirements of
the Credit Facility.
Note 8 - Equity
The following reflects
equity activity for
the thirteen and
twenty-six weeks ended
November 27, 2021
and November 28,
2020
(in 2022 (in thousands):
Thirteen Weeks
Ended November 27, 202126, 2022
Cal-Maine Foods, Inc. StockholdersLevel 1
Common StockLevel 2
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
TotalLevel 3
Balance at August 28,
2021Assets
Municipal bonds
$
703—
$
4815,680
$
(27,451)—
$
65,04415,680
$Commercial paper
(728)—
$33,005
957,951—
$33,005
0Corporate bonds
$—
995,56779,509
Other comprehensive—
loss, net of tax79,509
US government and agency obligations
—
18,906
—
18,906
Asset backed securities
—
13,063
—
13,063
Treasury bills
—
40,551
—
40,551
Mutual funds
3,358
—
—
—3,358
Total assets measured at fair
value
$
3,358
$
200,714
$
—
(268)
—
—
(268)
Stock compensation
plan transactions
—
—
1
975
—
—
—
976
Contributions
—
—
—
—
—
—
3
3
Net income (loss)
—
—
—
—
—
1,173
(28)
1,145
Balance at November
27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
$
(25)
$
997,423204,072
Thirteen Weeks
Ended NovemberMay 28, 20202022
Cal-Maine Foods, Inc. StockholdersLevel 1
Common StockLevel 2
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Income
Earnings
TotalLevel 3
Balance at August 29, 2020
Assets
Municipal bonds
$
703—
$
4810,104
$
(26,676)—
$
61,26710,104
$Commercial paper
433—
$14,868
956,170—
$14,868
991,945Corporate bonds
Other comprehensive loss, net—
73,684
—
73,684
Certificates of taxdeposits
—
1,245
—
1,245
US government and agency obligations
—
2,209
—
2,209
Asset backed securities
—
13,319
—
13,319
Mutual funds
3,752
—
—
—3,752
Total assets measured at fair
value
$
3,752
$
115,429
$
—
(282)$
—119,181
(282)
Investment
securities
–
available-for-sale
classified
as Level
2
consist
of
securities
with maturities
of
three
months
or longer
Stock compensation planwhen purchased. We
classified these securities as
current because amounts
invested are readily available
for current operations.
transactionsObservable inputs for these securities are yields, credit risks, default rates, and volatility.
—
Note 4 - Inventories
—Inventories consisted of the following as of November 26, 2022
and May 28, 2022 (in thousands):
(47)
934
November 26, 2022
—May 28, 2022
—
887
Contributions
—
—
—
5
—
—
5
Net income
—
—
—
—
—
12,155
12,155
Balance at November 28, 2020Flocks, net of amortization
$
703156,782
$
48144,051
Eggs and egg products
28,343
26,936
Feed and supplies
95,457
92,329
$
(26,723)280,582
$
62,206263,316
$
We
grow
and
maintain
flocks
of
layers
(mature
female
chickens),
pullets
(female
chickens,
under
18
weeks
of
age),
and
151breeders
(male
and
female
chickens
used
to
produce
fertile
eggs
to
hatch
for
egg
production
flocks).
Our
total
flock
at
$November 26,
2022 and
May 28,
2022 consisted
of approximately
968,32510.4
$
million and
1,004,71011.5
million pullets
and breeders
and
43.7
million and
42.2
million layers, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
Note 5 - Equity
The following reflects
equity activity for
the thirteen and
twenty-six weeks ended
November 26, 2022
and November 27,
2021
(in thousands):
Thirteen Weeks
Ended November 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at August
27, 2022
$
703
$
48
$
(28,495)
$
69,017
$
(2,350)
$
1,149,399
$
(359)
$
1,187,963
Other comprehensive
loss, net of tax
—
—
—
—
(737)
—
—
(737)
Stock compensation
plan transactions
—
—
(1)
988
—
—
—
987
Dividends ($
1.353
per share)
Common
—
—
—
—
—
(59,708)
—
(59,708)
Class A common
—
—
—
—
—
(6,494)
—
(6,494)
Net income (loss)
—
—
—
—
—
198,587
(293)
198,294
Balance at November
26, 2022
$
703
$
48
$
(28,496)
$
70,005
$
(3,087)
$
1,281,784
$
(652)
$
1,320,305
Thirteen Weeks
Ended November 27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at August
28, 2021
$
703
$
48
$
(27,451)
$
65,044
$
(728)
$
957,951
$
—
$
995,567
Other comprehensive
loss, net of tax
—
—
—
—
(268)
—
—
(268)
Stock compensation
plan transactions
—
—
1
975
—
—
—
976
Contributions
—
—
—
—
—
—
3
3
Net income (loss)
—
—
—
—
—
1,173
(28)
1,145
Balance at
November 27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
$
(25)
$
997,423
 
 
 
 
 
1412
Twenty-six Weeks
Ended November 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 28,
2022
$
703
$
48
$
(28,447)
$
67,989
$
(1,596)
$
1,065,854
$
(206)
$
1,104,345
Other comprehensive
loss, net of tax
—
—
—
—
(1,491)
—
—
(1,491)
Stock compensation
plan transactions
—
—
(49)
2,016
—
—
—
1,967
Dividends ($
2.206
per share)
Common
—
—
—
—
—
(97,355)
—
(97,355)
Class A common
—
—
—
—
—
(10,589)
—
(10,589)
Net income (loss)
—
—
—
—
—
323,874
(446)
323,428
Balance at
November 26, 2022
$
703
$
48
$
(28,496)
$
70,005
$
(3,087)
$
1,281,784
$
(652)
$
1,320,305
Twenty-six Weeks
 
Ended November 27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 29,
2021
$
703
$
48
$
(27,433)
$
64,044
$
(558)
$
975,977
$
0—
$
1,012,781
Other comprehensive
loss, net of tax
—
—
—
—
(438)
—
—
(438)
Stock compensation
plan transactions
—
—
(17)
1,975
—
—
—
1,958
Contributions
—
—
—
—
—
—
3
3
Net loss
—
—
—
—
—
(16,853)
(28)
(16,881)
Balance at November
27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
$
(25)
$
997,423
Twenty-six Weeks
Ended November 28, 2020
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Income
Earnings
Total
Balance at May 30, 2020
$
703
$
48
$
(26,674)
$
60,372
$
79
$
975,147
$
1,009,675
Impact of ASC 326
—
—
—
—
—
422
422
Balance at May 31 2020
703
48
(26,674)
60,372
79
975,569
1,010,097
Other comprehensive income, net of
tax
—
—
—
—
72
—
72
Stock compensation plan
transactions
—
—
(49)
1,829
—
—
1,780
Contributions
—
—
—
5
—
—
5
Net loss
—
—
—
—
—
(7,244)
(7,244)
Balance at November 28, 2020
$
703
$
48
$
(26,723)
$
62,206
$
151
$
968,325
$
1,004,710
Note 96 - Net Income (Loss) per Common Share
 
Basic net
 
income (loss)
 
per share
 
is based
 
on the
 
weighted average
 
Common Stock
 
and Class
 
A Common
 
Stock outstanding.
Diluted net income
 
per share
 
is based on
 
weighted-average common
 
shares outstanding
 
during the
 
relevant period
 
adjusted for
the
dilutive
 
effect of
 
of share-based
awards.
 
Restricted
shares
 
of
145
 
thousand and
139
 
thousand were
 
antidilutive
due
 
to the
 
the net
loss for
losses for
the first
twenty-six weeks of fiscal 2022
and 2021, respectively.2022. These
shares were not included in the diluted net
loss
per share calculation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
��
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1513
The
 
following
 
table
 
provides
 
a
 
reconciliation
 
of
 
the
 
numerators
 
and
 
denominators
 
used
 
to
 
determine
 
basic
 
and
 
diluted
 
net
income (loss) per common share (amounts in thousands, except per share data):
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 27,26,
2021
November 28,
20202022
November 27,
2021
November 28,26,
20202022
November 27,
2021
Numerator
Net income (loss)
$
198,294
$
1,145
$
12,155323,428
$
(16,881)
$
(7,244)
Less: Loss attributable to noncontrolling
interest
(28)
0(293)
(28)
0(446)
(28)
Net income (loss) attributable to Cal-
Maine Foods, Inc.
$
198,587
$
1,173
$
12,155323,874
$
(16,853)
$
(7,244)
Denominator
Weighted-average
 
common shares
outstanding, basic
48,624
48,857
48,50148,624
48,859
48,501
Effect of dilutive restricted shares
216
159
144
—203
—
Weighted-average
 
common shares
outstanding, diluted
48,840
49,016
48,64548,827
48,859
48,501
Net income (loss) per common share
attributable to Cal-Maine Foods, Inc.
Basic
$
0.02
$
0.25
$
(0.34)
$
(0.15)
Diluted4.08
$
0.02
$
0.256.66
$
(0.34)
Diluted
$
(0.15)4.07
$
0.02
$
6.63
$
(0.34)
Note 10 -7 – Revenue Recognitionfrom Contracts with Customers
Satisfaction of Performance Obligation
MostThe vast majority of the Company’s
 
Company’s revenue is derived from agreements with customers based on the customer
placing an order
for products. Pricing
for the most part
 
is derived from
contracts with customers
based on the
customer placing an
order for products.
Pricing for
the most
part is
determined when
 
the Company and
 
and the
customer agree
 
upon the specific
 
specific order,
which establishes
establishes the contract for that order.
Revenues are
 
recognized in
 
an amount
 
that reflects
 
the net
 
consideration we
 
expect to
 
receive in
 
exchange for
 
the goods.
Our
shell
eggs
 
are
sold
 
at
prices
 
related
to
 
independently
 
quoted
wholesale
 
market prices,
 
negotiated prices
 
or
formulas
 
related
to
our
 
costs of
 
of
production.
 
The
Company’s
 
sales
predominantly
 
contain
 
a
single
 
performance
obligation.
 
We
 
recognize
 
revenue
upon
upon satisfaction
 
of
the
performance
 
obligation
with
 
the
customer
 
which
typically
occurs
 
within
days
of
 
the
Company
 
and
the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts
 
include a guaranteed sale
 
clause, pursuant to which
 
we credit the customer’s
 
account for product
 
that the
customer
is
unable
 
to
sell
before
 
expiration.
The
Company
 
records an estimate
 
of an
allowance
for
returns
and
 
refunds
by
using
 
historical return
return
data
 
and
 
comparing
 
to current
 
period
 
sales and
 
accounts receivable.
 
receivable. The
allowance
 
is recorded
 
as a
 
reduction
 
in sales
with
a
with a corresponding reduction in trade accounts receivable.
Sales Incentives Provided to Customers
The
 
Company
 
periodically
 
provides
 
incentive
 
offers
 
to
 
its
 
customers
 
to
 
encourage
 
purchases.
 
Such
 
offers
 
include
 
current
discount offers
 
(e.g., percentage
 
discounts off
 
current purchases), inducement
 
offers (e.g.,
 
offers for
 
future discounts subject
 
to
a minimum
 
current purchase),
 
and other
 
similar offers.
 
Current discount
 
offers,
 
when accepted
 
by customers,
 
are treated
 
as a
reduction
 
to
 
the sales
 
price
 
of the
 
related
 
transaction,
 
while inducement
 
offers,
 
when
 
accepted
 
by customers,
 
are
 
treated
 
as
 
a
reduction
 
to the
 
sales
price
 
based
on
 
estimated
future
 
redemption
rates.
 
Redemption
 
rates
are
 
estimated
using
 
the
Company’s
historical
 
experience
 
for
 
similar
 
inducement
 
offers.
 
Current discount
 
and
 
inducement
 
offers
 
are
 
presented
 
as a
 
net amount
 
in
‘‘Net sales.’’
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1614
Disaggregation of Revenue
The following table provides revenue disaggregated by product category
 
(in thousands):
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 27, 2021
November 28, 202026, 2022
November 27, 2021
November 28, 202026, 2022
November 27, 2021
Conventional shell egg sales
$
223,258541,917
$
201,725221,142
$
405,807967,506
$
357,109403,172
Specialty shell egg sales
155,853227,778
134,082146,917
294,510428,598
263,327279,375
Egg products
28,052
11,401
9,93255,692
20,767
16,637
Other
3913,953
1,5892,263
1,5238,248
3,0373,395
$
390,903801,700
$
347,328381,723
$
722,6071,460,044
$
640,110706,709
Contract Costs
The Company can incur costs to
 
obtain or fulfill a contract with a
 
customer. If the
 
amortization period of these costs is less
 
than
one year,
 
they are
 
expensed as
 
incurred. When
 
the amortization
 
period is
 
greater than
 
one year,
 
a contract
 
asset is
 
recognized
and is amortized
 
amortized over
the contract
 
life as a
 
a reduction
in net
 
sales. As of
 
of November 26, 2022
 
27, 2021,and May 28,
 
2022, the balance
 
for
contract
assets is
was immaterial.
Contract Balances
The Company receives payment from customers based on specified terms that are
 
receives payment
from
customers based
on specified
terms that
are generally
less than
30 days
from
delivery.
There are rarely contract assets or liabilities related to performance under
 
the contract.
Note 11 - Leases
Expenses related
to operating
leases, amortization
of finance
leases, right-of-use
assets, and
finance lease
interest are
included
in Cost of sales, Selling general and administrative expense, and
Interest income, net in the Condensed Consolidated Statements
of Operations. The Company’s lease cost consists
of the following (in thousands):
Thirteen Weeks
Ended
Twenty-six Weeks
Ended
November 27, 2021
November 27, 2021
Operating lease cost
$
208
$
425
Finance lease cost
Amortization of right-of-use asset
$
44
$
88
Interest on lease obligations
$
7
$
14
Short term lease cost
$
1,097
$
2,135
17
Future minimum lease payments under non-cancelable leases are as follows
(in thousands):
As of November 27, 2021
Operating Leases
Finance Leases
Remainder fiscal 2022
$
378
$
120
2023
539
239
2024
380
217
2025
130
0
2026
26
0
2027
5
0
Total
1,458
576
Less imputed interest
(111)
(30)
Total
$
1,347
$
546
The
weighted-average
remaining
lease
term
and
discount
rate
for
lease
liabilities
included
in
our
Condensed
Consolidated
Balance Sheet are as follows:
As of November 27, 2021
Operating Leases
Finance Leases
Weighted-average
remaining lease term (years)
2.6
2.0
Weighted-average
discount rate
5.9
%
4.9
%
Note 128 - Stock Based Compensation
Total stock-based
 
stock-based compensation
expense was
$
2.0
 
million and $
1.8
for
 
million for the twenty-six weeks
 
weeks ended
November 26,
2022 and
November
27, 2021
and November 28, 2020, respectively.2021.
Unrecognized
 
compensation
 
expense
 
as a
 
result
 
of non
 
-vested
 
shares
 
of
 
restricted
 
stock outstanding
 
under
 
the
 
Amended
 
and
Restated
 
2012
 
Omnibus
 
Long-Term
 
Incentive
 
Plan
 
at
 
November
 
27,26,
 
20212022
 
of
 
$
4.64.9
 
million
 
will
 
be
 
recorded
 
over
 
a
 
weighted
average period of
1.71.8
 
years. Refer to Part
 
II Item 8,
 
Notes to Consolidated
 
Financial Statements and
 
Supplementary Data, Note
16: Stock Compensation Plans in our 20212022 Annual Report for further information
 
on our stock compensation plans.
The Company’s restricted share activity
 
for the twenty-six weeks ended November 27, 202126, 2022 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 29, 202128, 2022
302,147317,844
$
39.3739.12
Vested
(1,359)(3,240)
40.3438.31
Forfeited
(1,460)(4,200)
37.7039.44
Outstanding, November 27, 202126, 2022
299,328310,404
$
39.3839.12
Note 139 - Commitments and Contingencies
Financial Instruments
The
 
Company
 
maintained
 
standby
 
letters
 
of
credit
 
("LOC"(“LOCs”)
 
totaling
 
$
4.1
 
million
 
at
 
November
 
27,
202126, 2022,
 
which
 
were
issued
under
 
the
 
Company's
 
Creditsenior
 
Facility.secured
revolving
credit
facility.
 
The
 
outstanding
 
LOCs
 
are
 
for
 
the
 
benefit
 
of
 
certain
 
insurance
companies,
and
are
not
companies and are not recorded as a liability on the consolidated balance sheets.
 
15
LEGAL PROCEEDINGS
State of Texas
 
v. Cal-Maine Foods, Inc. d/b/a Wharton;
 
and Wharton County Foods, LLC
 
On April
 
23, 2020,
 
the Company
 
and its subsidiary
 
Wharton County
 
Foods, LLC (“WCF”)
 
were named
 
as defendants in
 
State
of
 
Texas
 
v.
 
Cal-Maine
 
Foods,
 
Inc.
 
d/b/a
 
Wharton;
 
and
 
Wharton
 
County
 
Foods,
 
LLC,
 
Cause
 
No.
 
2020-25427,
 
in
 
the
 
District
18
Court of
 
Harris County,
 
Texas.
 
The State
 
of Texas
 
(the “State”)
 
asserted claims
 
based on
 
the Company’s
 
and WCF’s
 
alleged
violation
 
of
 
the
 
Texas
 
Deceptive
 
Trade
 
Practices—Consumer
 
Protection
 
Act,
 
Tex.
 
Bus.
 
&
 
Com.
 
Code
 
§§
 
17.41-17.63
(“DTPA”).
 
The
 
State
 
claimed
 
that
 
the
 
Company
 
and
 
WCF
 
offered
 
shell
 
eggs
 
at
 
excessive
 
or
 
exorbitant
 
prices
 
during
 
the
COVID-19
 
state
 
of
 
emergency
 
and
 
made
 
misleading
 
statements
 
about
 
shell
 
egg
 
prices.
 
The
 
State
 
sought
 
temporary
 
and
permanent
 
injunctions
 
against
 
the
 
Company
 
and
 
WCF
 
to
 
prevent
 
further
 
alleged
 
violations
 
of
 
the
 
DTPA,
 
along
 
with
 
over
$
100,000
 
in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the State’s
 
original petition with
prejudice. On September
 
11, 2020,
 
the State filed a
 
notice of appeal,
 
which was assigned to
 
the Texas
 
Court of Appeals
 
for the
First District. The
 
StateDistrict.
On
August
16,
2022,
the
appeals
court
reversed
and
remanded
the
case
back
to
the
trial
court
for
further
proceedings. On October
31, 2022, the Company
and WCF filed itsa
 
opening briefpetition for review to
 
on December 7,
2020. The
Company and WCF
filed their response
on February
8, 2021. Thethe Supreme Court of
 
Texas
 
Courtappealing
the
First District
court’s
decision.
On November
30,
2022, the
State of Appeals
Texas
waived
its response
to defendant’s
petition
for
review. The court
 
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
 
Division.
 
The
 
defendants
 
include
 
numerous
 
grocery
 
stores,
 
retailers,
producers, and farms. Plaintiffs assert that defendants
 
violated the DTPA
 
by allegedly demanding exorbitant or
 
excessive prices
for
 
eggs during
 
the
 
COVID-19
 
state of
 
emergency.
 
Plaintiffs
 
request
 
certification
 
of a
 
class of
 
all consumers
 
who purchased
eggs
 
in
 
Texas
 
sold,
 
distributed,
 
produced,
 
or
 
handled
 
by
 
any
 
of
 
the
 
defendants
 
during
 
the
 
COVID-19
 
state
 
of
 
emergency.
Plaintiffs seek to enjoin
 
the Company and other
 
defendants from selling eggs
 
at a price more than
 
10% greater than the price
 
of
eggs prior
 
to the
 
declaration
 
of the
 
state of
 
emergency
 
and damages
 
in the
 
amount
 
of
$
10,000
 
per violation,
 
or $
250,000
 
for
each violation
 
impacting anyone
 
over 65
 
years old.
 
On December
 
1, 2020,
 
the Company
 
and
 
certain other
 
defendants filed
 
a
motion to
 
dismiss the
 
plaintiffs’
 
amended
 
class action
 
complaint. The
 
plaintiffs
 
subsequently filed
 
filed a motion
 
motion to strike,
 
strike, and
the
motion to
 
dismiss and
 
related proceedings
 
were referred
 
to a
 
United States
 
magistrate judge.
 
On July
 
14, 2021,
 
the magistrate
judge
 
issued
 
a
 
report
 
and
 
recommendation
 
to
 
the
 
court
 
that
 
the
 
defendants’
 
motion
 
to
 
dismiss
 
be
 
granted
 
and
 
the
 
case
 
be
dismissed without
prejudice for
lack of
subject matter
jurisdiction. On
 
September 20, 2021, the court dismissed the case without
prejudice.
 
2021, On
July
13,
2022,
the
 
court adopted
denied
the
plaintiffs’
motion
to
set
aside
or
amend
the
judgment
to
amend
their
complaint.
On March 15, 2022,
plaintiffs filed a
second suit against the
Company and several
defendants in Bell et
al. v.
Cal-Maine Foods
et al.,
Case No.
1:22-cv-246, in
 
the magistrate’sWestern
District of
Texas,
Austin Division
alleging the
same assertions
as laid
out in
the
reportfirst
complaint.
On
August
12,
2022,
the
Company
 
and
 
recommendationother
defendants
 
in
 
itsthe
 
entiretycase
 
andfiled
 
granted
defendants’a
 
motion
 
to
 
dismiss
 
plaintiffs’
first
amended
class
action
complaint; thereafter,
the court
entered a
final judgment
in favor
of the
 
Company andplaintiffs’
class action
 
certain other
defendants dismissing
the
case without
prejudice.complaint. On
 
October 18,September 6,
 
2021, plaintiffs2022, the
 
plaintiffs’ filed a
their opposition
to the
 
motion to
 
alter ordismiss and
 
amendthe Company
and other
defendants filed
their reply
on September
13, 2022.
On December
7, 2022,
the magistrate
judge issued
a report
and
recommendation to
the court that
the defendants’ motion
to dismiss be
granted and the
 
final judgementcase be dismissed
 
and allowwithout prejudice for
lack
 
a filing
of
 
asubject
 
secondmatter
 
amendedjurisdiction.
 
complaint.On
 
TheDecember
 
Company21,
 
responded
on
November
1,
2021.
The
court
has
not
ruled
on2022,
 
the
 
plaintiffs’plaintiffs
filed
Objections
to
the
Magistrate’s
Report
and
motion.Recommendation, but the
court has not issued a
ruling. Management believes
the risk of material loss
related to both matters
to
be remote.
Kraft Foods Global, Inc. et al. v.
 
United Egg Producers, Inc. et al.
 
As previously
 
reported, on
 
September 25,
 
2008, the
 
Company
 
was named
 
as one
 
of several
 
defendants
 
in numerous
 
antitrust
cases involving
 
the United
 
States shell
 
egg
 
industry.
 
The Company
 
settled all
 
of these
 
cases, except
 
for
 
the claims
 
of certain
plaintiffs who sought substantial
 
substantial damages allegedly arising from
 
from the purchase of egg products (as
 
products (as opposed to shell
eggs). These
remaining plaintiffs
 
are Kraft
 
Food Global,
 
Inc., General
 
Mills, Inc.,
 
and Nestle
 
USA, Inc.
 
(the “Egg
 
Products Plaintiffs”)
 
and
The Kellogg Company.
On September
 
13, 2019,
 
the case
 
with the
 
Egg Products
 
Plaintiffs was
 
remanded from
 
a multi-district
 
litigation proceeding
 
in
the
 
United
 
States
 
District
 
Court
 
for
 
the
 
Eastern
 
District
 
of
 
Pennsylvania,
 
In
 
re
 
Processed
 
Egg
 
Products
 
Antitrust
 
Litigation,
MDL No. 2002, to
 
the United States District Court
 
for the Northern District
 
of Illinois, Kraft Foods Global,
 
Inc. et al. v.
 
United
Egg
 
Producers,
 
Inc.
 
et
 
al.,
 
Case
 
No.
 
1:11-cv-8808,
 
for
 
trial.
 
The
 
Egg
 
Products
 
Plaintiffs
 
allege
 
that
 
the
 
Company
 
and
 
other
defendants
 
violated
 
Section
 
1
 
of
 
the
 
Sherman
 
Act,
 
15.
 
U.S.C.
 
§
 
1,
 
by
 
agreeing
 
to
 
limit
 
the
 
production
 
of
 
eggs
 
and
 
thereby
illegally to raise the prices that plaintiffs
 
paid for processed egg products. In particular,
 
the Egg Products Plaintiffs are
 
attacking
certain features of
 
the United Egg
 
Producers animal-welfare guidelines
 
and program used by
 
the Company and
 
many other egg
producers. The
 
Egg Products
 
Plaintiffs seek
 
to enjoin
 
the Company
 
and other
 
defendants from
 
engaging in
 
antitrust violations
16
and seek treble money damages.
 
treble moneyOn May 2, 2022,
 
damages. Thethe court set trial for October
 
parties filed24, 2022, but on September
20, 2022, the court
cancelled the
trial date
due to
COVID-19 protocols
and converted
the trial
date to
 
a jointstatus
 
status reporthearing to
 
on May
18, 2020.
On August
4, 2021,
by docket
entry,
reschedule the
 
courtjury trial.
On
 
instructedDecember
 
the8,
 
parties
to
jointly
submit
a
second
status
report
to2022,
 
the
 
court
 
that
includedheld
 
a
 
status
hearing.
The
parties
subsequently
submitted
an
updated
proposed
 
schedule
forpre-trial
preparing a final pretrial
order. On August
25, 2021,schedule and the parties filed a
joint status report, and
on August 26, 2021,Court has set the
court, by
docket entry, informed
the parties that the need to discuss issues was no longer
necessary and that a scheduled August 30, 2021,
status hearing was stricken. No trial schedule has yet been entered by the
court.for October 16, 2023.
In addition,
 
on October
 
24, 2019,
 
the Company
 
entered into
 
a confidential
 
settlement agreement
 
with The
 
Kellogg Company
dismissing
 
all
 
claims
 
against
 
the
 
Company
 
for
 
an
 
amount
 
that
 
did
 
not
 
have
 
a
 
material
 
impact
 
on
 
the
 
Company’s
 
financial
condition or results
of operations. On
November 11,
 
2019, a stipulation
for dismissal was filed
with the court,
 
butand on March 28,
2022, the court
has
not yet entered a judgment on dismissed 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
19
resolution of
 
this remaining
 
matter with
 
the Egg
 
Products Plaintiffs
 
have not
 
been reflected
 
in the
 
financial statements.
 
While
management
 
believes
 
that
 
there
 
is
 
still
 
a
 
reasonable
 
possibility
 
of
 
a
 
material
 
adverse
 
outcome
 
from
 
the
 
case
 
with
 
the
 
Egg
Products Plaintiffs,
 
at the
 
present time,
 
it is not
 
possible to
 
estimate the
 
amount of
 
monetary exposure,
 
if any,
 
to the
 
Company
due
to
a
range
of
 
factors,
including
the
following,
 
among
others: the matter is in
two
earlier
trials
based
on
substantially
 
the early stages of preparing
 
for trial following
remand;same
 
anyfacts
 
and
legal arguments
resulted
in findings
of no
conspiracy
and/or damages;
this trial
 
will
be
 
before
 
a
different
 
judge
and
 
jury
 
in a
a
different
 
court
 
than
 
prior
related
 
cases;
there
 
are significant
 
significant
factual issues
 
issues to
be
 
resolved; and
 
there are
 
are requests for
 
for damages
other
than compensatory
damages (i.e.,
injunction and
treble
money damages).
State of Oklahoma Watershed Pollution
 
Litigation
On June 18,
 
2005, the
 
State of
 
Oklahoma filed
 
suit, in
 
the United
 
States District
 
Court for
 
the Northern
 
District of
 
Oklahoma,
against Cal-Maine Foods, Inc. and
 
Tyson Foods,
 
Inc. and affiliates, Cobb-Vantress,
 
Inc., Cargill, Inc. and its
 
its affiliate, George’s,
Inc. and
 
its affiliate,
 
Peterson Farms, Inc.
 
and Simmons Foods,
 
Inc. The
 
State of Oklahoma
 
claims that through
 
the disposal of
chicken
 
litter the
 
defendants have
 
polluted the
 
Illinois River
 
Watershed.
 
This watershed
 
provides
 
water to
 
eastern Oklahoma.
The complaint
 
seeks injunctive
 
relief and
 
monetary damages,
 
but the
 
claim for
 
monetary damages
 
has been
 
dismissed by
 
the
court.
 
Cal-Maine
 
Foods,
 
Inc.
 
discontinued
 
operations
 
in
 
the
 
watershed.
 
Accordingly,
 
we
 
do
 
not
 
anticipate
 
that
 
Cal-Maine
Foods,
 
Inc.
 
will
 
be
 
materially
 
affected
 
by
 
the
 
request
 
for
 
injunctive
 
relief
 
unless
 
the
 
court
 
orders
 
substantial
 
affirmative
remediation. Since
 
the litigation
 
began, Cal-Maine
 
Foods, Inc.
 
purchased
100
% of the
 
membership interests
 
of Benton
 
County
Foods, LLC,
 
which is
 
an ongoing
 
commercial shell
 
egg operation
 
within the
 
Illinois River
 
Watershed.
 
Benton County
 
Foods,
LLC is not a defendant in the litigation.
The trial in the case
 
began in September 2009 and
 
concluded in February 2010. The
 
case was tried without a jury,
 
and the court
has not yet issued its ruling. Management believes the risk of material loss related
 
to this matter to be remote.
Other Matters
In addition to
 
the above, the Company
 
is involved in
 
various other claims
 
and litigation incidental
 
to its business. Although
 
Although the
outcome of
 
these matters
 
cannot be
 
determined with
 
certainty,
 
management, upon
 
the advice
 
of counsel,
 
is of
 
the opinion
 
that
the final outcome should not have a material effect on the Company’s
 
consolidated results of operations or financial position.
Note 14 - Related Party Transaction
On
August
24,
2020,
Mrs.
Jean
Reed
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
Stockholders”),
completed
a
registered
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”)
filed
as an exhibit to our 2021 Annual Report. Mrs. Adams and
the Daughters’ Trust advised the Company that
they were conducting
the
offering
in
order
to
pay
estate
taxes
related
to
the
settlement
of
Mr.
Adam’s
estate
and
to
obtain
liquidity.
The
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 August 19,
2020,
each of
which is on
file with the
Securities and
Exchange Commission.
The public offering
involved only
the sale of
shares of
Common
Stock
that
were
already
outstanding,
and
thus
the
Company
did
not
issue
any
new
shares
or
raise
any
additional
capital
in
the
offering.
The
expenses
of
the
offering
(not
including
the
underwriting
discount
and
legal
fees
and
expenses
of
legal
counsel
for
the
Selling
Stockholders,
which
were
paid
by
the
Selling
Stockholders)
paid
by
the
Company
were
$
1.1
million. Pursuant to the Agreement, the Selling Stockholders reimbursed
the Company $
551
thousand.
2017
ITEM
 
2.
 
MANAGEMENT’S
DISCUSSION
AND
 
ANALYSIS
 
OF
 
FINANCIAL
 
CONDITION
 
AND
 
RESULTS
 
OF
OPERATIONS
The following
 
should be
 
read in
 
conjunction
 
with Management’s
 
Discussion and
 
Analysis of
 
Financial Condition
 
and Results
of Operations included
 
in Part II Item
 
7 of the Company’s
 
Annual Report on
 
Form 10-K for its
 
fiscal year ended May
 
29, 202128, 2022
(the “2021“2022 Annual Report”), and the accompanying financial statements and
 
notes included in Part II Item 8 of the 20212022 Annual
Report and in
 
of this Quarterly Report on Form 10-Q (“Quarterly Report”).
This
 
report
 
contains
 
numerous
 
forward-looking
 
statements
 
within
 
the
 
meaning
 
of
 
Section
 
27A
 
of
 
the
 
Securities
 
Act
 
of
 
1933
(the “Securities
 
Act”) and
 
Section 21E
 
of the
 
Securities Exchange
 
Act of
 
1934 (the
 
“Exchange Act”)
 
relating to
 
our shell
 
egg
business,
 
including
 
estimated
 
future
 
production
 
data,
 
expected
 
construction
 
schedules,
 
projected
 
construction
 
costs,
 
potential
future
 
supply
 
of and
 
demand
 
for
 
our
 
products,
 
potential
 
future
 
corn
 
and
 
soybean price
 
trends,
 
potential
 
future
 
impact
 
on
 
our
business
 
of
 
the
 
COVID-19
 
pandemic,
 
potential
 
future
 
impact
 
on
 
our
 
business
 
of
 
new
 
legislation,
 
rules
 
or
 
policies,
 
potential
outcomes
 
of
 
legal
 
proceedings,
 
and
 
other
 
projected
 
operating
 
data,
 
including
 
anticipated
 
results
 
of
 
operations
 
and
 
financial
condition.
 
Such
 
forward-looking
 
statements
 
are
 
identified
 
by
 
the
 
use
 
of
 
words
 
such
 
as
 
“believes,”
 
“intends,”
 
“expects,”
“hopes,”
 
“may,”
 
“should,”
 
“plans,”
 
“projected,”
 
“contemplates,”
 
“anticipates,”
 
or
 
similar
 
words.
 
Actual
 
outcomes
 
or
 
results
could
 
differ
 
materially
 
from
 
those
 
projected
 
in
 
the
 
forward-looking
 
statements. The
 
forward-looking
 
statements
 
are
 
based
 
on
management’s
 
current
 
intent,
 
belief,
 
expectations,
 
estimates,
 
and
 
projections
 
regarding
 
the
 
Company
 
and
 
its
 
industry. These
statements
 
are
 
not
 
guarantees
 
of
 
future
 
performance
 
and
 
involve
 
risks,
 
uncertainties,
 
assumptions,
 
and
 
other
 
factors
 
that
 
are
difficult
 
to predict
 
and
 
may be
 
beyond
 
our
 
control. The
 
factors
 
that
 
could cause
 
actual results
 
to
 
differ
 
materially
 
from those
projected
 
in the
 
forward-looking
 
statements include,
 
among others,
 
(i) the
 
risk factors
 
set forth
 
in Part
 
I Item
 
1A of
 
the 20212022
Annual
 
Report
 
(ii)
 
the
 
risks
 
and
 
hazards
 
inherent
 
in
 
the
 
shell egg
 
business
 
(including
 
disease, pests,
 
weather
 
conditions,
 
and
potential
for
 
product recall),
 
including
but not
limited to
the current
outbreak
of highly
pathogenic
avian
influenza
(“HPAI”)
affecting
poultry in
the United
States (“U.S.”),
Canada and
other countries
that was
first detected
in commercial
flocks in
the
U.S. in February
2022, (iii) changes
 
in the demand
 
demand for
and market
 
prices of shell
 
shell eggs
and feed
 
costs, (iv) our
 
our ability
to predict
predict
and
 
meet
 
demand
 
for
 
cage-free
 
and
 
other
 
specialty
 
eggs,
 
(v)
 
risks,
 
changes,
 
or
 
obligations
 
that
 
could
 
result
 
from
 
our
future
 
future
acquisition
of
new
 
flocks or businesses and
 
risks or changes
 
businessesthat 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
 
risksrising
inflation and interest rates, which generally have been exacerbated
 
orby Russia’s invasion of Ukraine starting
 
changes
that
may
cause
conditions
to
completing
a
pendingFebruary 2022, (vii)
acquisition notour ability
 
to beretain
 
met, (vi)existing customers,
 
risks relatingacquire new
 
to the
evolving COVID-19
pandemic, including
without limitation
increased costs
and growing
inflationary rates,customers and
 
(vii) grow our
product mix
and (viii)
adverse results
 
in pending
litigation matters. Readers
 
are cautioned
 
not to place
 
place undue
reliance on forward-looking statements because,
 
while we believe the assumptionsreliance on
 
which the forward-looking statements are
because, while
we believe
the
assumptions
on
which
the
forward-looking
statements
are
based
 
are
 
reasonable,
 
there
 
can
 
be
 
no
 
assurance
 
that
 
these
forward-looking
statements
will
prove
to
be
accurate. Further,
forward-looking statements
 
will prove
to be
accurate. Further,
forward-looking statements included
 
herein
are
 
only
made
 
as of
of
the
respective
 
dates
thereof,
 
or
if
no
 
date
is
stated,
 
as
of
the date
 
hereof. Except
as
 
otherwise
required
 
by
law,
 
we
disclaim
 
any
intent
or
obligation
 
to
update
publicly
 
these forward-looking statements,
 
forward-
looking statements, whether because of
new information, future events,
 
events, or
otherwise.
GENERAL
Cal-Maine
 
Foods,
 
Inc.
 
(the
 
“Company,”
 
“we,”
 
“us,”
 
“our”)
 
is
 
primarily
 
engaged
 
in
 
the
 
production,
 
grading,
 
packaging,
marketing
 
and
 
distribution
 
of
 
fresh
 
shell
 
eggs.
 
Our
 
operations
 
are
 
fully
 
integrated
 
under
 
one
 
operating
 
segment.
 
We
 
are
 
the
largest
producer
 
and
distributor
 
of fresh
 
shell eggs
 
in the
United States
(“U.S.”).
Our total flock
of approximately
42.9 million
layers
and
9.3
million
pullets
and
breeders
is
the
largesteggs
 
in
 
the U.S.
 
Our
total
flock
of
approximately
43.7
million
layers and
10.4
million pullets
and breeders
is the largest
in the U.S.
 
We
 
sell
most
of
 
our
shell
eggs
 
to
a
diverse
 
group of
 
of
customers, including
national and regional
 
national and
regional grocery
store chains,
 
club stores, companies
 
companies servicing
independent supermarkets
 
in
the U.S., food
 
service
distributors, and
 
egg product consumers
 
consumers in
states across
 
the southwestern, southeastern,
 
southeastern, mid-western
and mid-Atlantic
regions
mid-Atlantic regions of the U.S.
We
are
a
member
of
the
Eggland’s
Best,
Inc.
(“EB”)
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,
under
exclusive
license
agreements
in
Alabama,
Arizona,
Florida,
Georgia,
Louisiana,
Mississippi
and
Texas,
and
in
portions
of
Arkansas, California,
Nevada, North
Carolina Oklahoma
and South
Carolina.
We
also have
an exclusive
license in
New York
City in addition to exclusivity in select New York
metropolitan areas, including areas within New Jersey and Pennsylvania.
Our
 
operating
 
results
 
are
 
materially
 
impacted
 
by
 
market
 
prices for
 
eggs
 
and
 
feed
 
grains
 
(corn
 
and
 
soybean
 
meal),
 
which
 
are
highly
 
volatile,
 
independent
 
of
 
each
 
other,
 
and
 
out
 
of
 
our
 
control.
 
Generally,
 
higher
 
market
 
prices
 
for
 
eggs
 
have
 
a
 
positive
impact
 
on
 
our
 
financial
 
results
 
while
 
higher
 
market
 
prices
 
for
 
feed
 
grains
 
have
 
a
 
negative
 
impact
 
on
 
our
 
financial
 
results.
Although we
 
use a
 
variety of
 
pricing mechanisms
 
in pricing
 
agreements with
 
our customers,
 
we sell
 
most of
 
our conventional
shell eggs
 
based on
 
formulas that
 
consider,
 
in varying
 
ways, independently
 
quoted regional
 
wholesale
 
market prices
 
for shell
eggs or formulas related to our costs of production which include the cost of corn and soybean
meal.
We
routinely
fill
our
storage
bins
during
harvest
season
when
prices
for
feed
ingredients
are
generally
lower.
To
ensure
continued
availability of
feed ingredients,
we may
enter into
contracts for
future purchases
of corn
and soybean
meal, and
as
part
of
these
contracts,
we
may
lock-in
the
basis
portion
of
our
grain
purchases
several
months
in
advance.
Basis
is
the
difference
between the
local cash
price for
grain and
the applicable
futures price.
A basis
contract is
a common
transaction in
the grain
market that
allows us
to lock-in
a basis
level for
a specific
delivery period
and wait
to set
the futures
price at
a later
18
date. Furthermore,
due to
the more
limited supply
for organic
ingredients,
we may
commit to
purchase organic
ingredients in
advance to help ensure supply.
Ordinarily, we do
not enter into long-term contracts beyond a year to purchase
corn and soybean
meal
 
or
 
formulashedge
 
relatedagainst
 
toincreases
 
our
costs
of
production
which
includein
 
the
 
costprices
 
of
 
corn
 
and
 
soybean
 
meal.
 
As
an
example
of
the
volatility in the market prices
of shell eggs, the Urner-Barry
White Large, Southeast
Regional Egg Market Price per
dozen eggs
(“UB southeast large
index”) for the first
half of fiscal year
2022
ranged from a low
of $1.00 in June
2021 to a high of
$1.66 in
November 2021.
21
Generally,
we purchase
primary feed
ingredients,
mainly corn
and soybean
meal, at
current market
prices. Corn
 
and
soybean
meal
 
are
 
commodities
 
and
 
are
subject
 
to
 
volatile
 
price
 
changes
 
due
 
to
 
weather,
 
various
 
supply
 
and
 
demand
 
factors,
transportation
and
storage
costs,
transportation and storage costs, speculators, and
agricultural, energy
and trade policies in the U.S. and internationally.internationally
 
and most recently the Russia-Ukraine war.
An important competitive advantage
 
for Cal-Maine Foods is
 
our ability to meet
 
our customers’ evolving needs
 
with a favorable
product
 
mix
 
of
 
conventional
 
and
 
specialty
 
eggs,
 
including
 
cage-free,
 
organic
 
and
 
other
 
specialty
 
offerings,
 
as
 
well
 
as
 
egg
products.
 
We
 
have
 
also
 
enhanced
 
our
 
efforts
 
to
 
provide
 
free-range
 
and
 
pasture-raised
 
eggs
 
that
 
meet
 
consumers’
 
evolving
choice
 
preferences.
 
While
 
a
 
small
 
part
 
of
 
our
 
current
 
business,
 
the
 
free-range
 
and
 
pasture-raised
 
eggs
 
we
 
produce
 
and
 
sell
represent attractive offerings
 
to a subset of
 
consumers,
 
and therefore our customers,
 
and help us continue
 
to serve as the trusted
provider of quality food choices.
Specialty shellWe are
 
eggs havealso focused on additional ways
 
beento enhance its product mix
and support new opportunities in the
restaurant, institutional
and industrial food
products arena. On
October 4, 2021, Cal-Maine
Foods announced a
 
significant strategic investment of $18.5
million in
debt
and
 
growing portionequity
in
Meadow
Creek
Foods,
LLC
(“MeadowCreek”),
an
egg
products
operation
located
in
Neosho,
Missouri,
focused on offering
hard-cooked eggs. Cal-Maine
Foods serves as the preferred
provider of specialty and
conventional eggs for
MeadowCreek
to
manufacture
egg
products.
On
December
13,
2022,
our
Board
 
of the
 
market. InDirectors
 
recent years,approved
 
a significantan
 
number ofadditional
 
large$13.8
restaurant chains, foodmillion investment
 
service companies to expand
the Company’s
controlling interest
and fund
additional equipment
and working
capital needs
to
support growth opportunities for
MeadowCreek. As demand for
hard-cooked eggs continues to grow,
the funds will be used for
additional
refrigerated
storage
space
and
 
grocery chains, includingexpanded
 
our largest customers,capacity
 
announced goals for
cooking
and
packaging
to
 
transition to
anbetter
 
exclusivelyserve
 
cage-freeMeadowCreek’s
customers.
 
eggDue
to
delays
caused
by
 
supply
 
chain
 
byissues and
 
specifiedplans
 
futurefor
 
dates.expansion,
 
Additionally,MeadowCreek
 
severalis
now
expected
to be
fully
operational by or before March 2023.
The
Company
has
joined
in
the
formation
of
a
new
egg
farmer
cooperative
in
the
western
United
States.
ProEgg,
Inc.
(“ProEgg”)
is
comprised
of
leading
egg
production
companies,
including
Cal-Maine
Foods,
servicing
retail
and
foodservice
shell egg customers in 13 western states. ProEgg is a producer-owned
cooperative organized under the Capper-Volstead
Act.
Our
membership
in
ProEgg
is
expected
to
provide
benefits
for
its
customers,
including
supply
chain
stability
and
enhanced
reliability.
Initially,
Cal-Maine Foods’
customer relationships
and customer
support are
expected to
remain the
same. At some
point in the future, it is anticipated
that each producer member will sell
through ProEgg the shell eggs
it produces for sale in the
western
 
states
 
representing
approximately
24% of the U.S. total population
according to the 2020 U.S. Census,
have passed legislation requiring
that all eggs sold in those
states
must
be
cage-free
eggscovered
 
by
 
specifiedthe
 
futurecooperative.
 
dates,Customers
 
andwould
 
otherhave
 
statesa
 
aresingle
 
consideringpoint
 
suchof
 
legislation.contact
 
Infor
 
Californiatheir
 
and
Massachusetts, which represent aboutshell
 
14% of the total U.S. populationegg
 
accordingpurchases,
as
ProEgg would have a dedicated team to market and sell the 2020 U.S.members’ combined
 
Census, cage-free legislationegg production in the region.
goes into effectThe Company’s
 
January 1, 2022.top priority in joining
 
For additional information,as a member of
 
see the 2021ProEgg is serving
 
Annual Report, Partour valued customers in
 
I, Item 1,this important market
 
“Business – Specialtyregion.
Eggs,”During
 
“Businessthis
 
–initial
 
Growthphase,
 
Strategy”we
 
andwill
 
“Businesscontinue
 
–our
 
Governmentwork
 
Regulation,”to
 
andconfirm
that
our
participation
in
this
new
cooperative
is
in
 
the
 
firstbest
interest of
 
riskour customers
 
factorand aligns
 
inwith our
 
Partlong-term interests.
 
IThis consideration
 
Itemwill take
 
1A,place before
moving to
the next
“Risk Factors” underphase of membership, and we expect this process to be completed on
or before the sub-heading “Legal and Regulatory Risk Factors.”end of our fiscal year 2023.
Retail
 
sales
 
of
 
shell
 
eggs
 
historically
 
have
 
been
 
highest
 
during
 
the
 
fall
 
and
 
winter
 
months
 
and
 
lowest
 
during
 
the
 
summer
months. Prices
 
for shell
 
eggs fluctuate
 
in response
 
to seasonal
 
demand factors
 
and a
 
natural increase
 
in egg
 
production during
the
 
spring
 
and
 
early
 
summer.
 
Historically,
 
shell
 
egg
 
prices
 
tend
 
to
 
increase
 
with
 
the
 
start
 
of
 
the
 
school
 
year
 
and
 
tend
 
to
 
be
highest
 
prior
 
to
 
holiday
 
periods,
 
particularly
 
Thanksgiving,
 
Christmas
 
and
 
Easter.
 
Consequently,
 
and
 
all
 
other
 
things
 
being
equal, we would
 
expect to experience
 
lower selling prices, sales
 
volumes and net
 
income (and may incur
 
incur net losses) in our
 
our first
and
 
fourth
 
fiscal
 
quarters
 
ending
 
in
 
August/September
 
and
 
May/June,
 
respectively.
 
Because
 
of
 
the
 
seasonal
 
and
 
quarterly
fluctuations,
 
comparisons
 
of
 
our
 
sales
 
and
 
operating
 
results
 
between
 
different
 
quarters
 
within
 
a
 
single
 
fiscal
 
year
 
are
 
not
necessarily meaningful comparisons.
COVID-19HPAI
Since earlyWe
 
2020,are closely
monitoring
the current
outbreak of
HPAI
that was
first detected
in commercial
flocks in
the U.S.
in February
2022. Outbreaks in commercial flocks in the U.S. have most recently
occurred during each month from September to December
2022. The
current HPAI
epidemic has
surpassed the
 
coronavirus (“COVID-19”)prior 2014-2015
 
outbreak characterizedin
 
as a
pandemic byterms of
 
the Worldnumber
 
Health Organizationof affected
 
on
March
11,
2020,
has
caused
significant
disruptions
hens in
 
internationalthe
U.S.,
 
and
 
U.S.HPAI
 
economiescontinues
 
andto
 
markets.circulate
 
We
understandthroughout
 
the
challenges
 
andwild
 
difficultbird
 
economic
environment
facing
familiespopulation
 
in
 
the
 
communities
where
we
liveU.S.
 
and
 
work,abroad.
 
and
we
are
committedAccording
 
to
 
helping
where
we
can.
We
have
provided
food
assistance
to
those
in
need
by
donating
approximately
479
thousand
dozen
eggs
to
date
in
fiscal
2022.
We
believe
we
are
taking
all
reasonable
precautions
in
the
 
management
of
ourU.S.
operations in
response to
the COVID-19
pandemic. Our
top priority
is the
health and
safety of
our employees,
who work
hard
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
our
normal
work
schedule.
As
such,
we
are
in
regular
communication with our managers across our operations and continue
to closely monitor the situation in our facilities and in the
communities where we live and work. We
have implemented procedures designed to protect our employees, taking
into account
guidelines
published
by
the Centers
 
for
 
Disease Control
 
and
 
otherPrevention,
 
governmentthese
detections
do
not present
an immediate
public
 
health
 
agencies,concern.
There have
been no positive tests for HPAI
at any Cal-Maine Foods’ owned or contracted production
facility as of December 28, 2022. The
USDA division
of Animal
 
and Plant
 
weHealth Inspection
 
haveService (“APHIS”)
 
strict sanitation
protocolsreported on
 
andDecember 27,
 
biosecurity2022 that
 
measuresapproximately
43.3 million commercial
 
inlayer hens and 1.0
 
placemillion pullets have been
 
throughoutdepopulated due to HPAI
 
ourthis year.
 
operationsWe believe
 
with
restricted
access
to
visitors.
There
are
no knownthe HPAI
indications that COVID-19 affects chickens or
can be transferred through the food supply.
Weoutbreak will
 
continue to exert
 
proactively monitordownward pressure
on the overall
supply of eggs,
 
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, and increased labor
costs and medical costs
and, more recently,
inflation.
In the
second quartersduration
 
of fiscal
2022 and
2021, we
spent approximately
$713 thousand
and $612
thousand (excluding
medical
insurance
claims) related
to the
pandemic
and its
those effects
 
respectively.
The majority
of these
expenses
in fiscal
2022 resulted
from additional
labor costs
and increased
cost of
packaging materials,
primarily reflected
in cost
of sales.
In fiscal
2021, most
of
these
expenses
related
to
additional
labor
costs.
Medical
insurance
claims
related
to
COVID-19
paid
during
the
second
quarter of fiscal
2022 were an
additional $870
thousand as compared
to $529 thousand
paid in the
comparable quarter in
fiscal
2021.will depend
2219
Inin part on the timing of replenishment of the U.S. layer
 
first halfhen flock. Prior to the outbreak of HPAI
in February 2022, the layer hen
flock
five-year
average
from
2017
through
2021
was
comprised
 
of fiscal
 
2022 and
2021, we
spent approximately
 
$1.3 million
and $1.4328
 
million
 
(excludinghens.
 
medical insurance
claims)
relatedAccording
 
to
 
a
LEAP
Market Analytics report dated December
8, 2022, the layer hen inventory
is not projected to exceed this 328 million
mark again
until
December
of
2023.
Layer
hen
numbers
reported
by
the
 
pandemicUSDA
as
of
December
1,
2022
were
308.3
million,
which
represents a
decrease of
5.8% compared
with the
layer hen
inventory a
year ago.
However,
the USDA
reported that
the hatch
from July 2022 through November 2022 increased 5.8% as compared
with the prior-year period.
While no
farm is
immune from
HPAI,
we believe
we have implemented
and continue
to maintain
robust biosecurity
programs
across our locations. We
are also working closely with federal, state and local government
officials and focused industry groups
to mitigate the risk of this and future outbreaks and effectively manage
our response, if needed.
CAGE-FREE EGGS
Ten
states
have
passed
legislation
or
regulations
mandating
minimum
space
or
cage-free
requirements
for
egg
production
or
mandated
the
sale
of
only
cage-free
eggs
 
and
 
itsegg
 
effects,products
 
respectively.in
 
Thetheir
 
majoritystates,
with
implementation
 
of
 
these
 
expenseslaws
ranging
from
January
2022
to
January
2026.
These
states
represent
approximately
27%
of
the
U.S.
total
population
according
to
the 2020
U.S. Census.
In California
and Massachusetts,
which
collectively represent
14% of
the total
U.S. population
according to
the
2020 U.S. Census,
cage-free legislation went
into effect January
1, 2022. However,
these laws are subject
to judicial challenge,
and in October 2022 the Supreme Court of the U.S. heard oral arguments
in a case challenging California’s
law that requires the
sale of only
cage-free eggs in
that state. A
decision in that
case is expected
next year.
These laws have
already affected
and, if
upheld,
will
continue
to
affect
sourcing,
production
and
pricing
of
eggs
(conventional
as
well
as
specialty)
as
the
national
demand
for cage-free
production could
be greater
than the
current supply,
which would
increase the
prices
of cage-free
eggs,
unless more
cage-free production
capacity is constructed.
Likewise, the national
supply for
eggs from
conventional production
could exceed consumer demand which would decrease the prices
of conventional eggs.
A significant number
of our customers
have previously announce
d
goals to offer
cage-free eggs exclusively
on or before
2026,
subject in
most cases
to availability
of supply,
affordability and
customer demand,
among other
contingencies. Some
of these
customers have
recently changed
those goals
to offer
70% cage-free
eggs by
the end
of 2030.
Our customers
typically do
not
commit to long-term
purchases of specific quantities
or types of eggs
with us, and as
a result, it is difficult
to accurately predict
customer
requirements
for
cage-free
eggs.
We
are,
however,
engaging
with
our
customers
 
in
 
fiscalan
effort
to
achieve
a
smooth
transition
in
meeting
their
announced
goals
and
needs.
We
have
invested
significant
capital
in
recent
years
to
acquire
and
construct cage-free
facilities, and
we expect
our focus
for future
expansion will
continue to
include cage-free
facilities. At
the
same
time,
we
understand
the
importance
of
our
continued
ability
to
provide
conventional
eggs
in
order
to
provide
our
customers with a variety of egg choices and to address hunger in our communities.
For
additional
information,
see
the
 
2022
 
resultedAnnual
 
from
additionalReport,
 
laborPart
 
costsI
 
Item
1,
“Business
–
Specialty
Eggs,”
“Business
–
Growth
Strategy” and
 
increased“Business –
 
costGovernment
 
of
packaging
materials,
primarily
reflected
in
cost
of
sales.
In
fiscal
2021,
most
of
these
expenses
related
to
additional
labor
costs.
Medical
insurance
claims
related
to
COVID-19
paid
duringRegulation,” and
 
the
first
 
half
of
fiscal 2022 were an additional $1.1 million as compared to $818 thousand paidrisk factor
 
in Part
I Item
1A, “Risk
Factors” under
the comparable period in fiscal 2021.sub-
heading “Legal and Regulatory Risk Factors.”
EXECUTIVE OVERVIEW
For the second quarter of fiscal 2022,
we recorded a gross profit of $43.7 million compared to $58.5
million for the same period
of
fiscal
2021,
with
the
decrease
due
primarily
to
the
higher
costs of
feed
ingredients
and
higher
processing
costs.
Our
total
dozens sold
increased 0.9%
to 276.1
million dozen
shell eggs
for the
second quarter
of fiscal
2022 compared
to 273.7
million
dozen for
the same
period of
fiscal 2021.
For the
second quarter
of fiscal
2022, conventional
dozens sold
decreased 4.4%
and
specialty dozens sold
increased 15.7%
as compared to
the same quarter
in fiscal 2021.
Specialty dozens sold
increased as more
cage-free facilities came into production which helped increase our
cage-free egg sales.
The
daily
average
price
for
the
UB
southeast
large
index
for
 
the
 
second
 
quarter
 
of
 
fiscal
 
2023,
we
recorded
a
gross
profit
of
$317.8
million
compared
to
$43.7
million
for
the
same
period of
fiscal 2022,
with the
increase
due primarily
to higher
shell egg
prices, partially
offset
by the
 
increased
 
14.6%cost of
 
from
thefeed
comparable periodingredients and processing, packaging and warehouse costs.
in the
prior year.
Our net
 
average selling
 
price per
 
dozen for
 
the second
 
quarter of
 
fiscal 20222023
 
was $1.373$2.709
compared to $1.227
 
$1.365 in the prior-year
period. Hen numbers
reported by the
USDA as of December
1, 2021, were
327.8 million,
which is approximately 913
thousand more hens than
 
the comparable period ofprior-year
period. Conventional
 
the prior year.
The USDA also reported
that the
hatch
from
July
2021
through
November
2021
decreased
2.0%
compared
to
the
prior-year
period.
As
of
December 1,
2021,
eggs in incubators were down 9% versus the prior-year period.
Our farm
production costsegg prices
 
per dozen
 
producedwere $2.883
compared to
$1.151 for
 
the prior-year
period, and
specialty egg
prices
per dozen were $2.370 compared to $1.898 for
the prior-year period. Conventional egg prices increased in
the second quarter of
fiscal
2023
primarily
due
to decreased
supply
caused
by
the
HPAI
outbreak
combined
with
good
customer
demand.
See
the
discussion under the
heading “HPAI”
above. The daily
average price for the
UB southeast large
index for the second
 
quarter of
fiscal 2023 increased 154.8% from the comparable period
 
fiscal 2022in the prior year, reaching near-record
 
increased 21.6%,highs. Conventional egg prices
exceeding
specialty
egg
prices
has
occurred
for
the
past
three
quarters
but
is
atypical
historically.
Conventional
egg
prices
generally
respond
more
quickly
to
market
conditions
because
we
sell
the
majority
of
our
conventional
shell
eggs
based
on
formulas that adjust periodically and take into account,
in varying ways, independently quoted regional wholesale
market prices
for shell eggs
 
or $0.156,formulas related
 
compared to our costs
of production.
The majority
of our specialty
eggs are typically
sold at prices
and
terms negotiated directly
with customers and
therefore do not
fluctuate as much
as conventional pricing.
For information about
historical shell egg prices, see Part I Item I of our 2022 Annual Report.
Our total dozens
sold increased 5.4% to
284.1 million dozen shell
eggs for the second
 
quarter of fiscal 2023
 
fiscal 2021.compared to 269.6
million
 
This increase
was primarily
due to
increased pricesdozen
 
for feed
ingredients. Feed
costs started
trending
higher
midway
through
 
the
 
secondsame
 
quarterperiod
 
of
 
fiscal
 
2021
and
have
remained
elevated
compared
to
historical
costs.
Though these feed costs
began trending higher
in fiscal 2021, we initially
benefitted from filling our
storage bins at harvest and
locking in the
basis portion of
our grain purchases
several months in
advance,
which reduced our
feed costs in
fiscal 2021. We
did not
experience the
same benefits
in fiscal
2022 given
sustained elevated
feed costs
that increased
our feed
costs compared
to
the
comparable
fiscal
2021
period.2022.
 
For
the
second
quarter
of
fiscal
2022,
the
average
Chicago
Board
of
Trade
(“CBOT”)
daily market
price was
$5.43 per
bushel for
corn and
$338 per
ton for
soybean meal,
representing an
increase of
38.4% and
a
decrease of
5.9%, respectively,
compared to
the average
daily CBOT
prices for
the comparable
period in
the prior
year.
Other
farm
production
costs for
 
the second
 
quarter
 
of
 
fiscal
 
20222023,
 
increased
11.9%
versus
the
comparable
period
in
the prior
fiscal
year, driven by higher flock amortization
and facility expense.
Effective
May
30,
2021,
we
acquired
the
remaining
50%
membership
interest
in
Red
River
Valley
Egg
Farm,
LLC
(“Red
River”). 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.
For additional
information,
see
of the
Notes to
Condensed
Consolidated Financial Statements included in this Quarterly Report.
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
will
capitalize MeadowCreek
with up
to $18.5
million in
debt and
equity to
purchase property
and equipment
and to
fund working
capital,
and we
will retain
a controlling
interest in
the venture.
We
will serve
as the
preferred provider
to supply
specialty and
conventional
 
eggsdozens
 
thatsold
 
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.
Also during
October 2021,
we announced
that our
Board of
Directors
approved a
$23.0 million
capital project
to expand
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 400,000
cage-free hens and 210,000
pullets, respectively.
Construction
has commenced,
with first
pullet placements
planned
by mid-May
2022 and
the first
layer
house planned
to be
finished by
October 1,
2022, with
the second
layer house
and project completion
expected by
February 1,
2023. The Company
plans to fund the
project through a combination
of available cash on
hand, investments and
operating cash
flow.
Effective December
5, 2021, we made
an additional investment
in our joint
venture Southwest Specialty
Eggs, LLC, to acquire
warehouse
and
distribution
capability
to
expand
Southwest
Specialty
Eggs,
LLC’s
customer
base
in the
southern
California, Arizona and Nevada markets.
decreased
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2320
2.2%
and
specialty
dozens
sold
increased
24.1%
as compared
to
the
same
quarter
in
fiscal
2022.
Demand
for
specialty
eggs
increased
in
the
second
quarter
of
fiscal
2023
compared
to
the
same
prior
year
period
due
primarily
to
the
higher
prices
for
conventional
eggs. Further,
demand for
specialty eggs
continued to
increase as
retailers continued
to shift
to selling
cage-free
products and cage-free legislation went into full effect in California
and Massachusetts on January 1, 2022.
Our farm
production costs
per dozen
produced for
the second
quarter of
fiscal 2023
increased 22.0%,
or $0.193,
compared to
the second quarter
of fiscal 2022.
This increase was
primarily due to
increased prices for
feed ingredients and
a higher basis
in
corn in
most of
our production
areas,
which added
to our
expense. For
the second
quarter of
fiscal 2023,
the average
Chicago
Board of
Trade
(“CBOT”) daily
market price
was $6.78
per bushel
for corn
and $423
per ton
for soybean
meal, representing
increases
of 24.8% and
25.5%, respectively,
compared to the average
daily CBOT prices
for the comparable
period in the prior
year. For information about
historical corn and soybean meal prices, see Part I Item I of our 2022 Annual Report.
RESULTS OF
 
OPERATIONS
The
 
following
 
table
 
sets
 
forth,
 
for
 
the
 
periods
 
indicated,
 
certain
 
items
 
from
 
our
 
Condensed
 
Consolidated
 
Statements
 
of
Operations expressed as a percentage of net sales.
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 26,
2022
November 27,
2021
November 28, 202026,
2022
November 27, 2021
November 28, 20202021
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
88.860.4
%
83.288.5
%
93.063.3
%
88.292.9
%
Gross profit
11.239.6
%
16.811.5
%
7.036.7
%
11.87.1
%
Selling, general and administrative
12.27.2
%
12.612.5
%
13.17.6
%
13.713.3
%
(Gain) loss on disposal of fixed assets
—
%
(0.5)
%
—
%
(0.3)
%
—
%
Operating income (loss)
32.4
%
(0.5)
%
4.229.1
%
(5.8)
%
(1.9)(5.9)
%
Total other income, net
0.60.3
%
0.40.7
%
0.3
%
1.2
%
0.5
%
Income (loss) before income taxes
0.132.7
%
4.60.2
%
(4.6)29.4
%
(1.4)(4.7)
%
Income tax expense (benefit) expense
8.0
%
(0.2)
%
1.17.1
%
(2.3)
%
(0.4)
%
Net income (loss)
0.324.7
%
3.50.4
%
(2.3)22.3
%
(1.0)(2.4)
%
NET SALES
Total
net
sales for
the
second quarter
of
fiscal
2022
were $390.9
million
compared
to $347.3
million
for
the same
period
of
fiscal 2021.
Net
shell
egg
sales
represented
97.1%
of
total
 
net
 
sales
 
for
 
the
 
second
 
quartersquarter
 
of
 
fiscal
 
20222023
 
andwere
 
2021.a
 
Shellrecord
 
egg$801.7
 
salesmillion
compared
to
$381.7
million
for
the
same
period of fiscal 2022.
Net shell egg sales represented
96.5% and 97.0% of total net sales
for the second quarters of fiscal
2023 and 2022, respectively.
Shell egg sales classified
 
as “Other”
represent
 
sales of
hard-cooked
eggs,
hatching
 
eggs and
other
 
miscellaneous
products
byproducts included
 
with
our
shell egg operations.
 
Total
 
net
 
sales
for
 
the
twenty-six
 
weeks
 
ended
 
November 27,
 
202126,
2022
 
were
 
$722.6 million,1.46
billion,
 
compared
 
to $640.1
$706.7
 
million
 
for
 
the
comparable period of fiscal 2021.2022.
Net
 
shell
 
egg
 
sales
 
represented
 
97.1%96.2%
 
and
 
97.4%97.1%
 
of
 
total
 
net
 
sales
 
for
 
the
 
twenty-six
 
weeks
 
ended
 
November
 
27,26,
 
20212022
 
and
November 28, 2020,27, 2021, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2421
The table below presents an analysis of our conventional and specialty shell egg
 
sales (in thousands, except percentage data):
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 27, 2021
November 28, 202026, 2022
November 27, 2021
November 28, 202026, 2022
November 27, 2021
Total net sales
$
390,903801,700
$
347,328381,723
$
722,6071,460,044
$
640,110706,709
Conventional
$
223,258541,917
70.1
%
$
221,142
59.7
%
$
967,506
69.0
%
$
403,172
58.8
%
$Specialty
201,725227,778
59.829.4
%
$
405,807
57.8
%
$
357,109
57.3
%
Specialty
155,853
41.1
%
134,082146,917
39.7
%
294,510428,598
42.030.5
%
263,327279,375
42.240.7
%
Egg sales, net
379,111
99.9
%
335,807769,695
99.5
%
700,317368,059
99.899.4
%
620,4361,396,104
99.5
%
682,547
99.5
%
Other
391
0.1
%
1,5893,953
0.5
%
1,5232,263
0.20.6
%
3,0378,248
0.6
%
3,395
0.5
%
Net shell egg sales
$
379,502773,648
100.0
%
$
337,396370,322
100.0
%
$
701,8401,404,352
100.0100.1
%
$
623,473685,942
100.0
%
Net shell egg sales as a
percent of total net sales
97.196.5
%
97.0
%
96.2
%
97.1
%
97.1
%
97.4
%
Dozens sold:
Conventional
192,403187,976
69.766.2
%
201,317192,135
73.671.3
%
376,890367,688
70.465.7
%
396,555376,003
73.871.7
%
Specialty
83,70596,110
30.333.8
%
72,33477,420
26.428.7
%
158,603191,715
29.634.3
%
141,090148,171
26.228.3
%
Total dozens sold
276,108284,086
100.0
%
273,651269,555
100.0
%
535,493559,403
100.0
%
537,645524,174
100.0
%
Net average selling price per
per dozen:
Conventional
$
1.1602.883
$
1.0021.151
$
1.0772.631
$
0.9011.072
Specialty
$
1.8622.370
$
1.8541.898
$
1.8572.236
$
1.8661.885
All shell eggs
$
1.3732.709
$
1.2271.365
$
1.3082.496
$
1.1541.302
Egg products sales:
 
Egg products net sales
28,052
11,401
9,93255,692
20,767
16,637
Pounds sold
15,702
16,009
15,96732,204
31,278
30,996
Net average selling price per
per pound
1.787
0.712
0.6221.729
0.664
0.537
Shell egg net sales
Second Quarter – Fiscal 2022 2023
vs. Fiscal 20212022
-
In
the
second
quarter
of
fiscal
 
2022,2023,
 
conventional
egg
sales
increased $21.5
$320.8
 
million,
or 10.7%
145.0%,
compared
to
 
the second
second quarter of
 
of fiscal 2021,2022,
 
primarily due
 
to the increase
 
increase in the price
 
price fors
 
for conventional shell
 
eggs, slightly
 
partially offset by
a decrease
 
by a decrease
in volume
 
of conventional
 
shell eggs sold.
 
sold. Changes
in prices
resulted in
 
price resulteda $325.6
 
in amillion increase
 
$30.4 millionand the
increase and
the change
in volume
resulted in a $10.3$4.8 million decrease in net sales, respectively.
-
WeConventional egg prices increased in the second
 
believequarter of fiscal 2023
primarily due to decreased supply caused by
the
HPAI
outbreak,
discussed
above,
while
we
experienced
continued
good
customer
demand
(and
typical
seasonal
consumer demand).
-
As a result of
the independently quoted
wholesale market prices
 
for conventional
 
eggs werereaching near-record
 
positively impactedhighs, the
average selling
 
by aprice for conventional
 
decrease ineggs exceeded
 
the conventionalaverage selling
 
production layer
henprice for specialty
 
flock.eggs in the
 
Accordingsecond quarter
of
 
tofiscal
 
reports from2023,
which
has
occurred
for
 
the
 
USDA,past
 
asthree
 
ofquarters
 
Novemberbut
 
1,is
 
2021,atypical
 
thehistorically.
 
estimated
number
of
hens
producing
conventional
eggs decreased
11.3
million, or
4.6%, versus
the prior-year
comparable period.
In addition,
foodservice
demand
improved
compared
to
the
comparable
prior-year
period.
Lower
conventionalConventional
 
egg
 
prices
generally respond
more quickly
to market
conditions as
we sell
the majority
of our
conventional shell
eggs based
on
formulas
that
adjust
periodically
and
take
into
account,
 
in
 
thevarying
 
prior-year
period wereways,
 
primarily tiedindependently
quoted
regional
wholesale
market
prices
for
shell
eggs
or
formulas
related
 
to a
 
surplus of
conventional eggs
entering the
retail channel
from the
foodservice channel
during
the pandemic.
A stronger
export market
in our
 
second quarter
of fiscal
2022 also
supported
conventional egg
prices.
-
The
decrease
in
volumecosts
 
of
 
conventionalproduction.
The
majority
of
our
specialty
 
eggs
 
are
typically
sold
 
wasat
 
primarily
due
to
elevated
retail
demand
during
the
second
quarter
of fiscal
2021 given
consumers’
preferences
to purchase
eggs for
in-home
meal preparation
during
the more
restrictive
phases
of
governmentalprices
 
and
 
businessterms
 
shutdownsnegotiated
 
duedirectly
 
towith
 
thecustomers
 
pandemic.and
 
Wetherefore
 
sawdo
 
thisnot
 
consumer
preference
begin to shift
in the fourth quarter
of fiscal 2021fluctuate
 
as consumers began
 
to resume out-of-homemuch
 
dining and prepareas
conventional pricing.
 
fewer
meals at home.
-
Specialty
 
egg
 
sales
 
increased
 
$21.880.9
 
million,
 
or
 
16.2%55.0%,
 
in
 
the
 
second
 
quarter
 
of
 
fiscal
 
20222023
 
compared
 
to
 
the
 
second
quarter
of
 
fiscal 2021,
2022,
 
primarily
due
 
to
a
 
15.7% 24.9%
increase
 
in
the
prices
for
specialty
eggs,
which
resulted
in
a
$45.4
million
increase
in
net
sales
and
a
24.1%
increase
in
the
 
volume
of
specialty
eggs
sold,
which
resulted
in
a
$35.5
million increase in net sales.
22
-
Net average
selling price of
 
specialty eggs
sold, of
which resulted increased
 
in a
$21.2response to
 
million increaserising feed and
 
in netother input costs
 
sales. Ouras well as
 
current
market conditions due to HPAI.
-
Demand for specialty eggeggs
 
increased as conventional egg prices
rose. Our sales volume
benefited as we produced 11%
more specialty
eggs in
 
the second
 
quarter of
 
fiscal 20222023
 
versus the
 
prior-year
period, benefitted from our acquisition of the remaining 50% membership
 
interest in Red River, which helped drivethrough use
 
of our
higher cage-
cage-freefree production capacity
and better utilization of that capacity.
-
Cage-free
 
egg
 
retailsales
 
sales.for
 
Ourthe
 
cage-freesecond
quarter
of
fiscal
2023
represented
18.2%
of
our
total
net
shell
egg
 
sales
 
alsoversus
22.4%
 
benefittedfor
 
fromthe
 
oursame
 
continuedprior
 
investmentyear
 
inperiod
 
expandeddue
 
cage-free
to
 
25
capabilities as additionalthe
 
cage-free productionhigher
 
capacity came onlineconventional
 
during the quarter.egg
prices.
 
Cage-free egg sales
 
compriseddozens
sold
increased
24.0% of our total sales47.4% in the second quarter of fiscal 2022 and 23.8% of total sales fiscal year-to-date.
-
We2023 as compared to the second
 
believe that
the demand
for specialty
eggs has increased
as consumers
have evolved
their preferences
to purchase
higher-priced
specialty
eggs for
at-home
meal preparation
and
as retailers
have
committed
to selling
more cage-free
products.quarter of fiscal 2022.
Twenty-six weeks –
Fiscal 2023 vs. Fiscal 2022
vs. Fiscal 2021
-
For
 
the
 
twenty-six
 
weeks
 
ended
 
November
 
27,26,
 
2021,2022,
 
conventional
 
egg
 
sales
 
increased
 
$48.7564.3
 
million
 
or
 
13.6%140.0%
compared
 
to
 
the
 
same
 
period
 
of
 
fiscal
 
2021,2022,
 
primarily
 
due
 
to
 
the
 
increase
 
in
 
price,the
 
partiallyprices
 
for
conventional
shell
eggs,
slightly offset
 
by
a
the decrease
 
in the volume
volume of conventional eggs
 
sold. Changes
in price prices
resulted in a
 
a $66.3$573.2 million
increase and
the change in volume resulted
in a $21.2$9.0 million decrease in net
sales, respectively.
-
WeSpecialty egg sales
 
believe pricesincreased $149.2 million,
 
or 53.4%, for conventionalthe
 
eggs weretwenty-six weeks ended
 
positively impacted
by a
decrease in
the conventional
production layerNovember 26, 2022 compared
hen
flock.
In
addition,
foodservice
demand
improved
compared
to
 
the
 
same
 
period
 
inof
 
thefiscal
 
prior
year.
Lower
conventional
egg
prices
in
the prior
-year
period
were2022,
 
primarily
 
due
 
to
 
conventionala
 
eggs entering29.4%
increase
in
 
the
 
retailvolume
 
channel
from the foodservice channel due to the pandemic.
-
The decrease
in volume of
 
conventional eggsspecialty
dozens
sold.
The
volume
of
specialty
dozens
 
sold was primarily
 
due to elevatedincreased
 
retail demand
during the
first half
of
fiscal
2021
due
to
consumers’
preferences
to
purchase
eggs for
in-home
meal
preparationmainly
 
due
 
to
 
the
 
pandemic.higher
 
We
saw thisconventional
 
consumer preference
begin to
shift in
the fourth quarter
of fiscal
2021 as
consumers began
to resume
out-of-
home dining and prepare fewer meals at home.
-
Specialty egg
sales increased
$31.2 million,
or 11.8%,
for the
twenty-six weeks
ended November
27, 2021
compared
to the
same period
of fiscal
2021, primarily
due to
a 12.4%
increase in
the volume
of specialty
dozens sold,
partially
offset by a
decrease in specialty egg
 
prices. Changes in price
 
resulted in a $1.4
million decrease and
change in volume
resultedChange
 
in
 
volume
resulted in a
 
$32.582.1 million increase
 
and changes in
specialty egg price resulted
in a $67.3 million
 
increase in net sales,
in
net
sales,
respectively.
 
We
also
benefitted
from
our
additional
cage-free
production capacity.
Egg products net sales
Second Quarter – Fiscal 2022 2023
vs. Fiscal 20212022
-
Egg products
net sales
increased $16.7
million or
146.0% for
the second
quarter of
fiscal 2023
compared to
the same
period of
fiscal 2022,
primarily due
to a
151.0% selling
price increase,
which had
a $16.9
million positive
impact on
net sales.
-
Our
egg
 
products
 
net
 
sales increased
$1.5
million
or
14.8%
for
the
second
quarter
of
fiscal
2022
compared
to
the
same
period of fiscal
2021, primarily due
to a 14.5%average
 
selling price increase,
 
which had aprice
 
$1.4 million positive
impact on net
sales.
-
Selling
prices
for
egg
productsincreased
 
in
 
the
 
second
 
quarter
 
of
 
fiscal
 
20212023,
 
werecompared
 
negativelyto
 
impactedthe
 
bysecond
quarter of
 
afiscal 2022
 
declineas the
 
in
foodservice demand due to the pandemic.supply of
 
Our shell eggs
used to
produce
egg products net average selling
 
price increased in the second quarterdecreased
 
of
fiscal 2022 compareddue
 
to the same period
 
in fiscal 2021HPAI
 
as foodservice channeloutbreak
that started in February 2022.
 
demand has begun
to shift more
to pre-
pandemic levels.
Twenty-six weeks –
Fiscal 2023 vs. Fiscal 2022
vs. Fiscal 2021
-
Egg products
 
net sales
 
increased $4.1$34.9
 
million or
 
24.8%168.2%, primarily
 
due to
 
a 23.6%160.4%
 
selling price
 
increase compared
to
to the first twenty-six weeks of fiscal 2021,2022, which had a $4.0$34.3 million positive
 
positive impact on net sales.
-
Our egg
products net average selling
 
selling price increased
in the twenty-six
 
weeks end ended
November 27, 2021,26,
2022, compared
 
to the
the
same
 
period
 
in
fiscal
 
2021
2022 as
foodservice
channel
demand
has
begun
to
shift
more
towards
pre-pandemic
levels.
Selling
prices
for
egg
products
in
 
the
 
twenty-sixsupply of
 
weeksshell
 
endedeggs used
 
Novemberto produce
 
28,egg products
 
2020decreased
 
weredue
 
negatively
impacted
by
a
decline in
foodservice demand
duringto the
 
more restrictive
phases of
governmental and
business shutdowns
due to
theHPAI
pandemic.outbreak that started in February 2022.
COST OF SALES
Costs
 
of
 
sales
 
for
 
the
 
second
 
quarter
 
of
 
fiscal
 
20222023
 
were
 
$347.2483.9
 
million
 
compared
 
to
 
$288.9338.0
 
million
 
for
 
the
 
same
 
period
 
of
fiscal 2022.
 
2021.
For
the
twenty-six
weeks
ended
November
27,
2021
and
November
28,
2020,
total
cost
of
sales
were
$672.2
million and $564.9 million, respectively.
Cost of
 
sales consists
 
of
 
costs directly
 
related
 
to producing,
 
processing
 
and
 
packing
 
shell eggs,
 
purchases
 
of
 
shell
 
eggs from
outside producers, processing and packing of liquid
 
and frozen egg products and other non-egg costs. Farm
 
production costs are
those costs
 
incurred at
 
the egg production
 
production facility,
 
including feed,
 
facility,
 
hen amortization
 
and other
 
related farm
 
production
costs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2623
The following table presents the key variables affecting our cost of
 
sales (in thousands, except cost per dozen data):
Thirteen Weeks
 
Ended
Twenty-six Weeks
 
Ended
November 27,26,
2021
November 28,
2020
% Change2022
November 27,
2021
%
Change
November 28,26,
20202022
November 27,
2021
%
Change
Cost of Sales:
Farm production
$
221,971276,008
$
179,131221,971
23.924.3
%
$
429,466542,659
$
340,994429,466
25.926.4
%
Processing, packaging, and
and warehouse
83,639
69,474
63,50520.4
9.4165,056
134,533
123,374
9.022.7
Egg purchases and other (including
(including change in
inventory)
46,03997,973
37,62536,859
22.4165.8
90,730166,271
86,55874,832
4.8122.2
Total shell eggs
337,484457,620
280,261328,304
20.439.4
654,729873,986
550,926638,831
18.836.8
Egg products
26,231
9,672
8,616171.2
12.350,719
17,486
13,968
25.2190.1
Total
$
347,156483,851
$
288,877337,976
20.243.2
%
$
672,215924,705
$
564,894656,317
19.040.9
%
Farm production costs (per
(per dozen
produced)
Feed
$
0.5290.685
$
0.4100.529
29.029.5
%
$
0.5370.676
$
0.3990.537
34.625.9
%
Other
$
0.3490.386
$
0.3120.349
11.910.6
%
$
0.3510.383
$
0.3200.351
9.79.1
%
Total
$
0.8781.071
$
0.7220.878
21.622.0
%
$
0.8881.059
$
0.7190.888
23.519.3
%
Outside egg purchases (average
(average cost per dozen)
$
1.563.14
$
1.241.56
25.8101.3
%
$
1.452.88
$
1.131.45
28.398.6
%
Dozens produced
261,358
256,786
251,914
1.91.8
%
519,012
493,244
483,075
2.15.2
%
Percent produced to sold
93.0%92.0%
92.1%95.3%
1.0(3.5)
%
92.1%92.8%
89.9%94.1%
2.4(1.4)
%
Farm Production
Second Quarter – Fiscal 2022 2023
vs. Fiscal 20212022
-
Feed costs per dozen
 
produced increased 29.0%29.5% in
 
the second quarter of fiscal
 
20222023 compared to the
 
second quarter of
fiscal 2021.
2022. This increase was
primarily due
to increased prices for corn, our primary
 
for corn,
our primary feed
ingredient. Feed
ingredient
costs started trending-
higher midway
throughFor the
 
second quarter
 
of fiscal 2021
 
and have remained2023, the
 
elevated compared
to historical costs. Though these feed costs began trendingaverage daily
 
higher in fiscal 2021, we initially benefitted fromCBOT market
 
filling our
storageprice was
 
bins$6.78 per
 
atbushel for
 
harvestcorn and
$423
per
ton of
soybean
meal representing
increases
of 24.8%
 
and
 
locking25.5%, respectively,
 
in
the
basis
portion
of
our
grain
purchases
several
months
in
advance,
which
reduced our
feed costs
in fiscal
2021. As
feed costs
have remained
elevated entering
into our
second quarter
of fiscal
2022, we
did not
experience the
same benefits,
which increased
our feed
costsas compared
 
to the
 
same periodthe average
 
daily
CBOT prices for the second quarter of fiscal 2022.
2021.
-
Other
farm
 
production costs
 
costs increased
due
 
to higher
 
facility and
flock amortization,
 
,
primarily
from an
increase
in
our
cage-free
production, which
has higher capitalized
costs. Also, our
 
higher feed
 
costs,
which began
 
began to
rise in
 
our third
 
quarter of
fiscal 2021 are capitalized in our flocks during pullet production and
 
due to
increased
prices discussed
above,
and which
remained
high
in
the
second
quarter
of
fiscal
2023.
Feed
costs
are
capitalized
in
our
flocks
during
pullet
production
and
increased our amortization expense.
-
We had higher
facility expense as more cage-free facilities came into production.
Twenty-six weeks –
Fiscal 2023 vs. Fiscal 2022
vs. Fiscal 2021
-
Feed costs
 
per dozen
 
produced increased
 
34.6%25.9% in
 
the twenty-six
 
weeks ended
 
November 27,26,
 
20212022 compared
 
to the
same period
of fiscal
2021, primarily
due to
higher feed
ingredient prices
resulting from
increased export
demand, as
well
as
weather-related
shortfalls
in
production
and
yields,
which
have
placed
additional
pressure
on
domestic
supplies.prices.
-
Other
farm
 
production costs
 
costs increased
due
 
to higher
 
facility and
flock amortization,
 
primarily from
 
from anhigher feed
 
increasecosts,
which
began to
rise in
our third
quarter of
fiscal 2021
due to
increased
prices discussed
above,
and which
remained
high
in
the
second
quarter
of
fiscal
2023.
Feed
costs
are
capitalized
 
in
 
our
 
cage-freeflocks
during
pullet
production
 
which
has
higher
capitalized
costs.
Also,
higher
feed
costs,
which
began
to
rise
in
our
third
quarter
ofand
fiscal 2021, are capitalized in our flocks during pullet production and
increased our amortization expense.
-Supplies
of
corn
and
soybean
remained
tight
relative
to
demand
in
the
second
quarter
of fiscal
2023,
as evidenced
by a
low
We hadstock-to-use ratio
for corn,
as a
result of
weather-related shortfalls
in production
and yields,
ongoing disruptions
related to
the
COVID-19
global
pandemic
and
the
Russia-Ukraine
war
and
its impact
on
the
export markets
.
Additionally,
basis
levels
for
corn ran
significantly higher
 
facility expense as more cage-free facilities came into production.in our area
of operations
compared to
our prior
year second
fiscal quarter,
adding to
our expense.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2724
For
fiscal
2023,
we
expect
continued
corn
and
soybean
upward
pricing
pressures
and
further
market
volatility
to
affect
feed
costs.
Processing, packaging, and warehouse
Second Quarter – Fiscal 2022 2023
vs. Fiscal 20212022
-
Cost of packaging
 
materials increased 38.3
 
5.3% %
compared to the
second quarter of
fiscal 2022
due to rising
inflation and
labor costs.
-
Labor costs increased 49.2%
due to wage increases and increased use of contract labor in response to labor shortages
.
-
Dozens
processed
increased
5.4%
compared
 
to
the
second
 
quarter
of
fiscal
 
2021 as supply2022,
 
chain constraints
caused by the pandemic increased costs for packaging products and manufacturerwhich
 
sresulted
 
implemented pandemic surcharges.in
a
$4.0
million
increase in costs.
Twenty-six weeks –
Fiscal 2023 vs. Fiscal 2022
-
Cost
of
packaging
materials
increased
26.7%
compared
to
the
twenty-six
weeks
ended
November
27,
2021
due
to
rising inflation and labor costs.
-
Labor costs
 
increased 18.4%30.3%
 
due to
 
wage increases
 
in response
 
to labor
 
shortages, primarily
 
due to
 
the pandemic
 
and
its effects.
Twenty-six weeks – Fiscal 2022-
Dozens processed
 
vs. Fiscal 2021
-
Cost of
packaging
materials increased
7.0%
 
compared
 
to the
 
twenty-six weeks
 
weeks ended November
 
November 27, 2021,
 
2021 as
supply
chain
constraints
caused
by
the
pandemic
increased
costs
for
packaging
products
and
manufacturers
implemented
pandemic surcharges.
-
Labor costs
increased 14.8%
due to
wage increaseswhich resulted
 
in response
to labor
shortages, primarily
due to
the pandemic
anda
its effects.$9.9 million increase in costs.
Egg purchases and other (including change in inventory)
Second Quarter – Fiscal 2022 2023
vs. Fiscal 20212022
-
Costs in this
 
in
this category
increased
 
primarily
due
to
 
higher
egg
prices
 
offsetas well as
 
slightly
by
the
decrease
an increase in
 
the volume of
 
volumeoutside egg
purchases, causing the percentage of produced to sold to decrease to 92.0% from
 
of95.3%.
Twenty-six weeks –
Fiscal 2023 vs. Fiscal 2022
-
Costs in this
category increased
primarily due to
higher egg prices
as well as
an increase in
the volume of
outside egg
purchases, as our percentage of produced to sold increased
decreased to 93.0%92.8% from 94.1%.
Twenty-six weeks – Fiscal 2022
vs. Fiscal 2021
-
Costs
in
this category
increased
primarily
due
to
higher
egg
prices,
offset
slightly
by
the
decrease
in
the
volume
of
outside egg purchases, as our percentage of produced to sold increased
to 92.1%.
Looking
forward
throughout
the
rest
of
fiscal
2022,
corn
and
soybean
supplies
remained
tight
relative
to
demand,
primarily
related
to
lower
carry-out
stock.
We
expect
market
prices
to
remain
volatile
given
the
ongoing
disruptions
related
to
the
COVID-19 global pandemic, weather fluctuations and geopolitical
issues.
GROSS PROFIT
 
Gross
profit
 
for the
 
the second
quarter
 
of fiscal
 
20222023 was
 
$43.7
317.8 million
 
compared to
$43.7 million
for the
same period
of fiscal
2022.
The increase
of $274.1
million was
primarily due
 
to $58.5higher
 
millionegg prices
 
foras well
 
as the same
 
period ofincreased volume
 
fiscal
2021.of specialty
 
The decrease of $14.7 million was primarily due toeggs
sold, partially offset by the increased cost of feed ingredients and
 
ingredientsprocessing, packaging and processingwarehouse costs.
Gross
profit
 
for
the
 
twenty-six
weeks
 
ended
November
 
27,
202126, 2022
 
was
$50.4 $535.3
 
million
compared
 
to
$75.2 $50.4
 
million
for
 
the
same
period of fiscal
 
2021.2022. The decreaseincrease
 
of $24.8$484.9 million
 
was primarily due
 
to higher egg
prices as well as
the increased volume
 
of
specialty eggs sold, partially offset by the increased cost of feed ingredients
 
ingredients and
processing,
packaging and warehouse costs.
SELLING, GENERAL, AND ADMINISTRATIVE
 
EXPENSES
Selling,
 
general,
 
and
 
administrative
 
expenses
 
("SGA")
 
include
 
costs
 
of
 
marketing,
 
distribution,
 
accounting
 
and
 
corporate
overhead. The following table presents an analysis of our SGA expenses (in
thousands):
Thirteen Weeks
 
Ended
November 27, 202126, 2022
November 28, 202027, 2021
$ Change
% Change
Specialty egg expense
$
14,673
$
14,262
$
14,039411
$
223
1.62.9
%
Delivery expense
18,175
14,395
13,0523,780
1,343
10.326.3
%
Payroll, taxes and benefits
13,827
11,303
10,0302,524
1,273
12.722.3
%
Stock compensation expense
987
975
93112
44
4.71.2
%
Other expenses
10,290
6,845
5,8213,445
1,024
17.650.3
%
Total
$
57,952
$
47,780
$
43,87310,172
$
3,907
8.921.3
%
Second Quarter – Fiscal 2022 vs. Fiscal 2021
Specialty egg expense
-
Advertising and
franchise fees
increased in
the second
quarter of
fiscal 2022
compared to
the second
quarter of
fiscal
2021,
due to increased
advertising expense.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2825
Second Quarter – Fiscal 2023
vs. Fiscal 2022
Specialty egg expense
-
Specialty egg
expense, which includes
franchise fees, advertising
and promotion
costs, generally
aligns with specialty
egg volumes,
which were
up 24.1% for
the second
quarter of
fiscal 2023
compared to
the same
period of fiscal
2022.
However, our
specialty egg expense
only increased by
2.9%, primarily due
to increased sales
to other Eggland’s
Best,
Inc. (“EB”) franchisees, including
unconsolidated affiliates, Specialty
Eggs, LLC and Southwest Specialty
Eggs, LLC.
These franchisees were
responsible for the
franchise fees, advertising
and promotion costs associated
with those sales,
which resulted in reduced costs for us.
Delivery expense
-
The increased delivery expense is primarily due to the increase in contract trucking.
Payroll, taxes and benefits expense
-
The
increase
in payroll,
taxes and
benefits
expense
is due
to
an
increase
in
the accrual
for
anticipated
performance-
based bonuses.
Other expense
-
The increase in other
expense is primarily due
to increased legal expenses
of approximately $2.6 million
in the second
quarter of fiscal 2023 compared to the second quarter of fiscal 2022.
Twenty-six Weeks
Ended
November 26, 2022
November 27, 2021
$ Change
% Change
Specialty egg expense
$
27,740
$
27,977
$
(237)
(0.8)
%
Delivery expense
38,091
28,331
9,760
34.4
%
Payroll, taxes and benefits
24,814
21,242
3,572
16.8
%
Stock compensation expense
2,012
1,976
36
1.8
%
Other expenses
18,902
14,779
4,123
27.9
%
Total
$
111,559
$
94,305
$
17,254
18.3
%
Twenty-six weeks –
Fiscal 2022 vs. Fiscal 2021
Specialty egg expense
-
Specialty egg
expense, which includes
franchise fees, advertising
and promotion
costs, generally
aligns with specialty
egg
volumes,
which
were
up
29.4%
for
fiscal
2023
compared
to
fiscal
2022.
However,
our
specialty
egg
expense
decreased
by
0.8%,
primarily
due
to
increased
sales
to
other
Eggland’s
Best,
Inc.
(“EB”)
franchisees,
including
unconsolidated affiliates, Specialty
Eggs, LLC and Southwest Specialty
Eggs, LLC. Additionally,
the higher prices for
conventional
eggs
and
the
comparatively
lower
prices
for
specialty
eggs
diminished
the
need
to
promote
specialty
eggs;
as
a
result,
EB
temporarily
reduced
the
related
franchise
fees
for
certain
specialty
egg
products
to
encourage
continued production of these products.
Delivery expense
-
The increased
 
delivery expense
 
is primarily
 
due to
 
the increase
 
in fuel
 
and labor
 
costs for
 
both our
 
fleet and
 
contract
trucking.
Payroll, taxes and benefits expense
-
The increase in payroll, taxes and benefits is primarily due to an increase
in employee health insurance costs.
Other expenses
-
The
 
increase
 
in
 
otherpayroll,
 
expensestaxes
and
benefits
expense
 
is
 
primarily
 
due
 
to
 
increasedan
 
premiums
for
property
and
casualty
insurance
due
to
insurance market conditions.
Twenty-six Weeks
Ended
November 27, 2021
November 28, 2020
$ Change
% Change
Specialty egg expense
$
27,977
$
26,736
$
1,241
4.6
%
Delivery expense
28,331
25,546
2,785
10.9
%
Payroll, taxes and benefits
21,242
21,331
(89)
(0.4)
%
Stock compensation expense
1,976
1,824
152
8.3
%
Other expenses
14,779
12,401
2,378
19.2
%
Total
$
94,305
$
87,838
$
6,467
7.4
%
Twenty-six weeks –
Fiscal 2022 vs. Fiscal 2021
Specialty egg expense
-
Advertising
and
franchise
fees
increasedincrease
 
in
 
the
 
twenty-sixaccrual
 
weeksfor
 
ended
November
27,
2021
compared
to
the
sameanticipated
period of fiscal 2021 due toperformance-based bonuses and increased
advertising expense.
Delivery expense
-
The increased
delivery expense
is primarily wages for all employees
 
due to
the increase
in fuel
and labor
costs for
both our
fleet and
contract
trucking.inflationary market.
Other expenses
-
The increase
in other expenses
expense is primarily due to increased
 
to property losses
incurred that
were not covered
by insurance
as well
as increased premiums for property and casualty insurance market
conditions.legal expenses of approximately $3.5 million.
OPERATING
 
INCOME (LOSS)
For
 
the
 
second
 
quarter
 
of
fiscal
2023,
we
recorded
operating
income
of
$259.9
million
compared
to
operating
loss
of
$2.1
million for the same period of fiscal 2022.
26
For
the
twenty-six
weeks
ended
November
26,
 
2022,
 
we
 
recorded
 
an
operating
 
loss income
of
 
$2.1 423.7
million
 
compared
 
to operating
 
incomean
operating loss of
$14.5
$41.7 million for the same period of fiscal 2021.
For the twenty-six
weeks ended
November 27,
2021, we recorded
an operating loss
of $41.7
million compared
to an operating
loss of $12.7 million for the same period of fiscal 2021.2022.
OTHER INCOME (EXPENSE)
 
Total
 
other
 
income
 
(expense)
 
consists
 
of
 
items
 
not
 
directly
 
charged
 
or
 
related
 
to
 
operations,
 
such
 
as
 
interest
 
income
 
and
expense, royalty income, equity income or loss of unconsolidated
 
entities, and patronage income, among other items.
For the second quarter of fiscal 2023,
 
we earned $2.1 million of interest income compared to $207 thousand
for the same period
of fiscal 2022.
The increase resulted
from significantly
higher investment balances.
The Company recorded
interest expense of
$143 thousand and $78 thousand for the second quarters ended November
26, 2022 and November 27, 2021, respectively.
For the
 
secondtwenty-six weeks
 
quarterended November
 
of fiscal
26, 2022,
 
we
earned
 
$207 thousand3.1 million
 
of interest
 
income
compared
 
to $727
thousand
for
the same
period
of
fiscal
2021.
The
decrease
resulted
from
significantly
lower
investment
balances.
The
Company
recorded
interest
expense
of
$78
thousand
and
$64
thousand
for
the
second
quarters
ended
November
27,
2021
and
November
28,
2020,
respectively.
For the twenty-six
weeks ended November 27,
2021, we earned $497
 
thousand of interest income
compared to $1.7 million
for
the
 
same
 
period
 
of
 
fiscal
 
2021.2022.
 
The
 
decreaseincrease
 
resulted
 
from
 
significantly
 
lowerhigher
 
investment
 
balances.
 
The
 
Company
 
recorded
interest expense
 
of $136$291
 
thousand and
 
$135136 thousand
 
for the
 
twenty-six weeks
 
ended November
 
27, 202126, 2022
 
and November
 
28,27,
2020,2021, respectively.
Other,
net for
29
For the second
quarter ended
November 26,
2022, was
income
of $1.1
million compared
to income
of $1.9
million
for the same period of fiscal 2022, equity2022.
 
income of unconsolidated entities was $264 thousand
Other, net for
 
compared to $58 thousand in
the prior-year period.
For the twenty-six
weeks ended November
 
27, 2021, equity
income of unconsolidated
entities was $399
thousand compared
to
$14 thousand in the prior-year period.
Other, net
for the second quarter
ended November 27, 2021,
26, 2022, was income of $1.9$1.3
 
million compared to income of $7.0
million
for the
same period
 
of $436 thousandfiscal
2022. The
for
majority of
 
the samedecrease
 
period ofis due
to our
acquisition in
 
fiscal 2021,
which is
primarily
due to
a $1.4
million payment
related to
review
and adjustment2022
 
of our
various marketing agreements.
Other,
net
for
the
twenty-six
weeks
ended
November
27,
2021,
was
income
of
$7.0
million
compared
to
income
of
$948
thousand
for
the
same
period
of
fiscal
2021.
The
majority
of
the
increase
is
due
to
our
acquisition
of
the
 
remaining
50%
membership
 
interest
 
in
 
Red
 
River
Valley
Egg
Farm,
LLC
(“Red
River”)
 
as
 
we
 
recognized
 
a
 
$4.5
 
million
 
gain
 
due
 
to
 
the
remeasurement
 
of
 
our
 
equity
 
investment,
along
with
the
$1.4
million
payment
received
in
fiscal
2022
related
to
review
and
along with the $1.4 million payment related to review and adjustment of our
various marketing agreements.
INCOME TAXES
As of November 27, 2021, we remain under
audit by the Internal Revenue Service (IRS) for the fiscal years
2013 through 2015.
The IRS
has proposed
adjustments related
toFor the
 
Company’s
research and
development credits
claimed during
the years
under
audit. Management is continuing to evaluate those proposed adjustments
and does not anticipate the adjustments would result in
a
material
change
to
its
consolidated
financial
statements.
Using
the
facts,
circumstances
and
information
known
at
the
reporting date, the Company believes
it is reasonably possible an
adjustment to the previously recognized
tax benefits related to
the research
and development
credits is
necessary.
As such,
we recorded
a tax
benefit of
approximately $520
thousand during
the second quarter of fiscal 2022.
For
the
second
quarter
 
of
fiscal
 
2022,2023,
 
pre-tax
income
 
was
$468
thousand
compared
to
$15.9 $262.2
 
million
 
forcompared to
 
$468 thousand
for the
 
same
period
 
of
fiscal 2022.
 
2021.We
recorded income
tax expense
of $64
million for
the second
quarter of
fiscal 2023,
which reflects
an effective
tax
rate
of
24.4%.
 
We
 
recorded
 
an
 
income
 
tax
 
benefit
 
of
 
$677
 
thousand
 
forin
 
the
 
secondprior
 
quarteryear
 
of
fiscal
2022,period
 
which
 
includes
 
the
discrete tax
benefit described
above. Excluding
the discrete
tax benefit,
income tax
benefit wasa
 
$157 thousand
for the
second520
quarter
of fiscal
2022
with an
adjusted
effective
tax rate
of
33.5%.
Income
tax expense
was $3.8
million
for
the comparable
period of fiscal 2021, which reflects an effective tax rate of 23.6%.
For
the
twenty-six
weeks
ended
November
27,
2021,
pre-tax
loss
was
$33.4
million
compared
to
$9.6
million
for
the
same
period
of
fiscal
2021.
We
recorded
an
income
tax
benefit
of
$16.5
million,
which
includes
thethousand
 
discrete
 
tax
 
benefit
 
related
to
the
Internal
Revenue
Service
(IRS)
adjustments
associated
with
the
Company’s
previously recognized research and development tax benefits.
For the
twenty-six
weeks ended
November 26,
2022, pre-tax
income was
$427.7 million
compared to
a pre-tax
loss of
 
$8.333.4
million for
 
as discussedthe same
 
in Noteperiod of
 
2 –fiscal 2022.
 
AcquisitionsWe
recorded income
tax expense
 
of the$104.3
 
Notes tomillion which
 
Condensed Consolidatedreflects an
 
Financialeffective tax
rate
 
Statements inof
 
this Quarterly
Report.24.4%.
 
ExcludingWe
 
the discrete
tax
benefit,recorded an
 
income
 
tax benefit
 
was $8.2of $16.5
 
million
 
within
 
an adjustedthe prior
 
effectiveyear
period,
which
includes
the discrete
tax
benefit of $8.3
million in connection
with the Red
River acquisition.
Excluding the discrete
 
tax ratebenefit, income
 
of 24.6%,tax benefit for
compared to $2.4 million for the comparable period of fiscal 2021,2022 was $8.2 million with an adjusted
 
which reflects an effective tax rate of 24.6%.
At November
27, 2021
and May
29, 2021,
trade and
other receivables
included income
taxes receivables
of $42.8
million and
$42.5 million, respectively.
Our effective tax
 
rate differs from
 
the federal statutory income
 
tax rate due to
 
state income taxes, certain
 
federal tax credits and
certain
 
items
 
included
 
in
 
income
 
for
 
financial
 
reporting
 
purposes
 
that
 
are
 
not
 
included
 
in
 
taxable
 
income
 
for
 
income
 
tax
purposes,
 
including
 
tax
 
exempt
 
interest
 
income,
 
certain
 
nondeductible
 
expenses
 
and
 
net
 
income
 
or
 
loss
 
attributable
 
to
 
our
noncontrolling interest.
NET LOSSINCOME ATTRIBUTABLE
TO CAL-MAINE FOODS, INC.
Net
income
attributable
to
Cal-Maine
Foods,
Inc.
for
 
the
second
quarter
ended
 
November 27, 2021,
26,
2022,
was
 
$198.6
million,
or
$4.08
per
basic
and
$4.07
per
diluted
common
share,
compared
to
net
income
attributable
to
Cal-Maine
Foods,
Inc.
of
$1.2
million or $0.02
per basic and diluted
share, compared
to net income of $12.2 million or $0.25 per basic and diluted share for the same
period of fiscal 2021.
Net loss for the twenty-six
weeks ended November 27, 2021, was
$16.9 million, or $0.34 per
basic and diluted share, compared
to net loss of $7.2 million or $0.15 per basic and dilutedcommon share for the same period of fiscal 2021.
CAPITAL RESOURCES
 
AND LIQUIDITYfiscal 2022.
Our workingNet income
 
capital atattributable to
Cal-Maine Foods,
Inc. for
the twenty-six
weeks ended
 
November 27,26,
 
20212022, was $364.7
$323.9 million,
or
$6.66 per
basic and
$6.63 per
diluted share,
compared to
net loss
of $16.9
 
million comparedor
 
to $429.8$0.34 per
 
million atbasic and
 
May 29,diluted share
 
2021. The
calculationfor the
same period of
working
capital
is
defined
as
current
assets
less
current
liabilities.
Our
current
ratio
was
4.13
at
November
27,
2021,
compared with 5.77 at May 29, 2021. fiscal 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3027
WeLIQUIDITY AND CAPITAL
 
hadRESOURCES
 
no long
Working
 
-termCapital and Current Ratio
Our working
 
debt
outstanding
capital at
 
November 26,
 
27,2022 was $667.5
 
2021million, compared
 
or Mayto $476.8
 
29,million at
 
2021.May 28,
 
On2022. The
calculation
of working capital is defined as current assets less current
liabilities. Our current ratio was 3.2 at November
 
15, 2021,26, 2022, compared
with 3.6 at May 28, 2022. The current ratio is calculated by dividing
 
we
entered
into ancurrent assets by current liabilities.
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 November
27, 2021,
no amounts
were borrowed
under the
Credit Facility.
We
have $4.1
million in
outstanding
standby
letters
of
credit,
issued
under
our
Credit
Facility
for
the
benefit
of
certain
insurance
companies.
For
additional
information,
see
Note
7
–
Credit
Facility
of
the
Notes
to
Condensed
Consolidated
Financial
Statements
included
in
this
Quarterly Report.
Cash Flows from Operating Activities
For the twenty-six weeks
 
twenty-sixended November 26, 2022,
 
weeks ended$344.8 million in net cash
 
November
27,
2021, $15.5
million
in net
cash was
used
in provided by operating
 
activities, compared
to
$10.7to $15.5 million
 
used in
by operating activities
 
for the comparable
 
comparable period in fiscal 2022.
 
The increase in fiscalcash
 
2021.flow from operating
activities
 
This isresulted
 
primarily due
 
to thefrom
higher
selling
prices
for
conventional
and
specialty
eggs
as
well
as
 
increased
volume
of
specialty
egg
sales,
partially
offset
by
increased
costs
of
feed
ingredients
and
processing,
packaging
and
warehouse
costs
of feed ingredients compared to the prior-year period.period..
Cash Flows from Investing Activities
We
 
continue
 
to invest
 
in our
 
facilities,
 
with
 
$28.659.7
 
million used
 
to purchase
 
property,
 
plant
and
 
equipment
 
for
 
the
 
twenty-six
weeks ended November 27,
 
2021,26, 2022, compared to $52.4 million
 
to $28.6 million in
the same period of fiscal
 
2021.fiscal 2022.
 
We alsoPurchases of investments were
$152.4
 
acquired the remaining
50%
membership
interestmillion
 
in
 
Redthe
 
River
during
our
firstsecond
 
quarter
 
of
 
fiscal
 
20222023,
 
for
$48.5
million.
Sales
and
maturities
of
investment
securities, net
of purchases,
were $41.5
million for
the twenty-six
weeks ended
November 27,
2021, compared
 
to
$29.426.4
 
million
for
the
comparable
period
 
in
 
fiscal
 
2021.2022.
 
WeThe
 
received
$400
thousandincrease
 
in
 
distributionspurchases
 
fromof
investments is primarily due to the increased cash provided by operating
 
anactivities noted above.
 
unconsolidated
entity inCash Flows from Financing Activities
We
paid dividends of
$78.4 million for the first two quarters of fiscal
twenty-six weeks ended
November 26, 2022 compared
to $2.70 millionno dividends for
 
the same period fiscal of 2021.prior
year period.
As of
 
November 27,26,
 
2021,2022, cash
 
decreased $41.9increased $119.6
 
million since
 
May 29,28,
 
2021,2022, compared
 
to a decrease
 
decrease of $41.9
 
$30.8 million
during
the same period of fiscal 2021.2022.
Credit Facility
We
had
no
long-term
debt
outstanding
at
November
26,
2022
or
May
28,
2022.
On
November
15,
2021,
we
entered
into
a
credit
agreement
that
provides
for
a
senior
secured
revolving
credit
facility
(the
“Credit
Facility”),
in
an
initial
aggregate
principal amount
of up to
$250 million with
a five-year
term. As of
November 26, 2022,
no amounts were
borrowed under
the
Credit Facility.
We
have $4.1 million
in outstanding standby
letters of credit,
issued under our
Credit Facility for
the benefit of
certain insurance
companies. Refer
to Part
II Item
8, Notes
to the
Financial Statements,
Note 10
– Credit
Facility included
in
our 2022 Annual Report for further information regarding our long-term
debt.
Material Cash Requirements
We
 
continue
 
to
monitor
 
the
increasing
 
demand
for
 
cage-free
eggs
 
and
to
 
engage
with
 
our
customers
 
in an
 
effortefforts
 
to
achieve
 
a
smooth transition to
 
meettoward their announced
 
commitment timeline forannounced timelines
 
for cage-free
egg sales.
 
WeThe following
 
have invested approximatelytable presents
 
$488
million in facilities, equipment
and related operations to
expand our cage-free production
starting with our first facility
in 2008.
During
October
2021,
we
announced
a
new
$23.0
million
capital
project
to
expand
our
cage-free
egg
production
at
our
Okeechobee,
Florida,
production
facility,
and
a
new
planned
$18.5
million
strategic
investment
that
will
specialize
in
high
value
commercial
product
solutions
targeting
specific
needs
in
the
food
industry.
See
“
”
for
additional
information. The following table presents material construction
projects approved as of November 27, 202126, 2022 (in thousands):
Project(s) Type
Projected
 
Completion
Projected Cost
Spent as of
November
November 27, 202126, 2022
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 20222023
132,443$
104,477131,932
27,966117,056
14,876
Cage-Free Layer & Pullet Houses
Fiscal 2023
23,77124,640
1123,325
23,7601,315
Cage-Free Layer & Pullet Houses
Fiscal 2024
42,591
2,057
40,534
Cage-Free Layer & Pullet Houses
Fiscal 2025
95,806
22,526
73,280
$
156,214294,969
$
104,488164,964
$
51,726130,005
We believe our
 
current cash balances, investments, cash flows from operations, and Credit Facility will be sufficient
 
to fund our
current capital needs.cash needs for at least the next 12 months.
 
28
IMPACT OF
RECENTLY
 
ISSUED/ADOPTED ACCOUNTING STANDARDS
For
 
information
 
on
 
changes
 
in
 
accounting
 
principles
 
and
 
new
 
accounting
 
policies,
 
see
 
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly
 
Report.
CRITICAL ACCOUNTING ESTIMATES
 
Critical accounting
 
estimates
 
are those
 
estimates
 
made
 
in accordance
 
with U.S.
 
generally
 
accepted
 
accounting
 
principles that
involve
 
a
 
significant
 
level
 
of
 
estimation
 
uncertainty
 
and
 
have
 
had
 
or
 
are
 
reasonably
 
likely
 
to
 
have
 
a
 
material
 
impact
 
on
 
our
financial
 
condition
 
or results
 
of operations.
 
There
 
have been
 
no changes
 
to our
 
critical accounting
 
estimates identified
 
in our
20212022 Annual Report.
31
ITEM 3. QUANTITATIVE
 
AND QUALITATIVE
 
DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk during the
 
twenty-six weeks ended November 27, 202126, 2022
from the information provided in Part II Item 7A.7A Quantitative and Qualitative
 
Disclosures About Market Risk in our 2021 Annual2022
Annual Report.
ITEM 4.
 
CONTROLS
AND
PROCEDURES
Disclosure Controls and Procedures
Our disclosure
 
controls and
 
procedures are
 
designed to
 
provide reasonable
 
assurance that
 
information required
 
to be
 
disclosed
by us in the reports
 
we file or submit
 
under the Exchange Act
 
is recorded, processed, summarized
 
and reported, within the
 
time
periods
 
specified
 
in
 
the
 
Securities and
 
Exchange
 
Commission’s
 
rules
 
and
 
forms. Disclosure
 
controls
 
and
 
procedures
 
include,
without limitation, controls and
 
procedures designed to ensure that
 
information required to be disclosed
 
by us in the reports that
we file or
 
submit under the
 
Exchange Act is accumulated
 
and communicated to
 
management, including our
 
principal executive
and
 
principal
 
financial
 
officers,
 
or
 
persons
 
performing
 
similar
 
functions,
 
as
 
appropriate
 
to
 
allow
 
timely
 
decisions
 
regarding
required disclosure. Based on an evaluation of our disclosure
 
controls and procedures conducted by our Chief Executive Officer
and
 
Chief
 
Financial
 
Officer,
 
together
 
with
 
other
 
financial
 
officers,
 
such
 
officers
 
concluded
 
that
 
our
 
disclosure
 
controls
 
and
procedures were effective as of November 27, 202126, 2022 at the reasonable
 
assurance level.
Changes in Internal Control Over Financial Reporting
There was no change
 
in our internal control
 
over financial reporting
 
that occurred during the
 
quarter ended November
 
27, 202126, 2022
that has materially affected, or is reasonably likely to materially affect,
 
our internal control over financial reporting.
29
PART
 
II. OTHER INFORMATION
ITEM 1.
 
LEGAL PROCEEDINGS
Refer
 
to
 
the
 
discussion
 
of
 
certain
 
legal
 
proceedings
 
involving
 
the
 
Company
 
and/or
 
its
 
subsidiaries
 
in
 
(i)
 
our
 
20212022
 
Annual
Report,
 
Part
I
 
Item 3:
3
 
Legal
Proceedings,
 
and
 
Part
II
 
Item 8,
 
Notes
to
 
Consolidated
 
Financial
 
Statements
and
 
Supplementary
Data, Note
18: Commitments
 
and Contingencies, and
 
and (ii)
in this Quarterly
 
Report in
of the Notes to Condensed Consolidated Financial Statements, which discussions are incorporated
 
herein by reference.
ITEM 1A.
 
RISK
FACTORS
There have been no material changes in the risk factors previously disclosed in the
 
Company’s 20212022 Annual
 
Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
 
PROCEEDS
 
There were
 
no purchases
 
of our
 
Common Stock
 
made by
 
or on
 
behalf of
 
our Company
 
or any
 
affiliated
 
purchaser during
 
the
second quarter of fiscal 2022.2023.
32
ITEM 6. EXHIBITS
Exhibits
No.
Description
3.1
3.2
10.1
10.2
31.1*
31.2*
32**
101.SCH*+
Inline XBRL Taxonomy
 
Extension Schema Document
101.CAL*+
Inline XBRL Taxonomy
 
Extension Calculation Linkbase Document
101.DEF*+
Inline XBRL Taxonomy
 
Extension Definition Linkbase Document
101.LAB*+
Inline XBRL Taxonomy
 
Extension Label Linkbase Document
101.PRE*+
Inline XBRL Taxonomy
 
Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained
 
in Exhibit 101)
 
*
Filed herewith as an Exhibit.
 
**
Furnished herewith as an Exhibit.
+
Submitted electronically with this Quarterly Report.
 
30
SIGNATURES
Pursuant to
 
the requirements
 
of the Securities
 
Securities Exchange Act
 
Act of 1934,
 
the registrant has
 
duly caused
 
this report
 
to be signed
 
on
its behalf by the undersigned, thereunto duly authorized.
CAL-MAINE FOODS, INC.
(Registrant)
Date:
 
December 28, 20212022
/s/ Max P.
 
Bowman
Max P.
 
Bowman
Vice President, Chief Financial
 
Officer
(Principal Financial Officer)
໿
Date:
 
December 28, 20212022
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)
໿