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
February 26,August 27, 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.
(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
 
1934 during the preceding
 
preceding 12 months (or
 
for such
shorter period that
 
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
 
mark whether the
registrant has submitted
 
submitted electronically every
Interactive Data File
 
File required to be
 
submitted
pursuant to
 
Rule 405 of
 
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
 
check mark
whether the registrant
 
registrant is a large
 
large accelerated filer,
 
an accelerated filer,
 
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
44,140,28344,135,851
 
shares of Common
 
Common Stock, $0.01 par
 
$0.01 par value,
and
4,800,000
 
shares of Class
 
A Common Stock,
 
$0.01 Stock, $0.01
par
value, outstanding as of March 29,September 27, 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)
 
February 26,August 27, 2022
May 29, 202128, 2022
Assets
Current assets:
Cash and cash equivalents
$
15,589136,021
$
57,35259,084
Investment securities available-for-sale
81,125145,784
112,158115,429
Trade and other receivables, net
138,654178,217
84,123177,257
Income tax receivable
41,38342,147
42,51642,147
Inventories
240,087265,754
218,375263,316
Prepaid expenses and other current assets
5,87210,965
5,4074,286
Total current
assets
522,710778,888
519,931661,519
Property, plant &
equipment, net
671,373688,656
589,417
Finance lease right-of-use asset, net
409
525
Operating lease right-of-use asset, net
1,168
1,724677,796
Investments in unconsolidated entities
15,79415,674
54,94115,530
Goodwill
44,006
35,52544,006
Intangible assets, net
18,68617,592
20,34118,131
Other long-term assets
7,8499,913
6,77010,507
Total Assets
$
1,281,9951,554,729
$
1,229,1741,427,489
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
$
120,665188,689
$
89,191148,018
Current portion of finance lease obligationDividends payable
22241,742
215
Current portion of operating lease obligation
486
69136,656
Total current
liabilities
121,373230,431
90,097
Long-term finance lease obligation
271
438
Long-term operating lease obligation
682
1,034184,674
Other noncurrent liabilities
10,6739,706
10,41610,274
Deferred income taxes, net
118,753126,629
114,408128,196
Total liabilities
251,752366,766
216,393323,144
Commitments and contingencies - see Note 1311
—
—
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
66,90969,017
64,04467,989
Retained earnings
992,5231,149,399
975,9771,065,854
Accumulated other comprehensive loss, net of tax
(1,413)(2,350)
(558)(1,596)
Common stock in treasury at cost –
26,12126,125
 
shares at February 26,August 27, 2022 and
26,20226,121
shares
at May 29, 202128, 2022
(28,439)(28,495)
(27,433)(28,447)
Total Cal-Maine Foods,
Inc. stockholders’ equity
1,030,3311,188,322
1,012,7811,104,551
Noncontrolling interest in consolidated entity
(88)(359)
0(206)
Total stockholders’
equity
1,030,2431,187,963
1,012,7811,104,345
Total Liabilities and Stockholders’
Equity
$
1,281,9951,554,729
$
1,229,1741,427,489
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of IncomeOperations
(inIn thousands, except per share amounts)
(unaudited)
(Unaudited)
 
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
February 26,August 27, 2022
February 27, 2021
February 26, 2022
February 27,August 28, 2021
Net sales
$
477,485658,344
$
359,080
$
1,184,195
$
999,189324,986
Cost of sales
385,903440,854
311,563
1,042,221
876,457318,341
Gross profit
91,582217,490
47,517
141,974
122,7326,645
Selling, general and administrative
52,68653,607
47,656
146,991
135,49446,525
(Gain) loss on disposal of fixed assets
(674)33
354
(2,855)
476(213)
Operating income (loss)
39,570163,850
(493)
(2,162)
(13,238)(39,667)
Other income (expense):
Interest income, net
79903
591
440
2,181232
Royalty income
326428
321
877
906
Patronage dividends
10,120
9,004
10,120
9,004273
Equity income of unconsolidated entities
1,809144
1,872
2,208
1,886135
Other, net
1,144155
537
8,169
1,4855,163
Total other income, net
13,4781,630
12,325
21,814
15,4625,803
Income (loss) before income taxes
53,048165,480
11,832
19,652
2,224(33,864)
Income tax expense (benefit)
13,59440,346
(1,716)
(2,921)
(4,080)(15,838)
Net income (loss)
39,454125,134
13,548
22,573
6,304(18,026)
Less: Loss attributable to noncontrolling interest
(63)(153)
0
(91)
0—
Net income (loss) attributable to Cal-Maine Foods, Inc.
$
39,517125,287
$
13,548
$
22,664
$
6,304(18,026)
Net income (loss) per common share:
Basic
$
0.812.58
$
0.28
$
0.46
$
0.13(0.37)
Diluted
$
0.812.57
$
0.28
$
0.46
$
0.13(0.37)
Weighted average
shares outstanding:
Basic
48,88648,623
48,530
48,888
48,51148,858
Diluted
49,03648,811
48,659
49,035
48,64948,858
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
Thirty-nine Weeks Ended
February 26,August 27, 2022
February 27, 2021
February 26, 2022
February 27,August 28, 2021
Net income (loss)
$
39,454125,134
 
$
13,548
 
$
22,573
$
6,304(18,026)
Other comprehensive income (loss), before tax:
Unrealized holding loss on available-for-sale
securities, net of reclassification
adjustments
(551)(997)
(378)
(1,130)
(283)(224)
Income tax benefit related to items of other
comprehensive income
134243
92
275
6954
Other comprehensive loss, net of tax
(417)(754)
(286)
(855)
(214)(170)
Comprehensive income (loss)
39,037124,380
13,262
21,718
6,090(18,196)
Less: Comprehensive loss attributable to the
noncontrolling interest
(63)(153)
0
(91)
0—
Comprehensive income (loss) attributable to Cal-Maine
Foods, Inc.
$
39,100124,533
$
13,262
$
21,809
$
6,090(18,196)
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(inIn thousands)
(unaudited)(Unaudited)
 
Thirteen Weeks
 
Thirty-nine Weeks Ended
February 26,August 27, 2022
February 27,August 28, 2021
Cash flows from operating activities:
Net income (loss)
$
22,573125,134
$
6,304(18,026)
Depreciation and amortization
50,99617,312
44,39117,389
Deferred income taxes
(3,861)(1,324)
9,970(15,838)
Other adjustments, net
(48,884)31,690
(45,936)(7,637)
Net cash provided by (used in) operations
20,824172,812
14,729(24,112)
Cash flows from investing activities:
Purchases of investment securities
(47,135)(51,834)
(59,415)(1,388)
Sales and maturities of investment securities
76,37720,296
85,202
Investment in unconsolidated entities
(3,000)
039,388
Distributions from unconsolidated entities
400—
5,813400
Acquisition of business, net of cash acquired
(44,823)—
0(44,823)
Purchases of property,
plant and equipment
(49,170)(27,662)
(73,796)(11,233)
Net proceeds from disposal of property,
plant and equipment
6,04178
3,2731,171
Net cash used in investing activities
(61,310)(59,122)
(38,923)(16,485)
Cash flows from financing activities:
Payments of dividends
(36,653)
—
Purchase of common stock by treasury
(1,120)(45)
(871)(18)
Principal payments on finance lease
(160)(55)
(153)
Contributions
3
5(53)
Net cash used in financing activities
(1,277)(36,753)
(1,019)(71)
Net change in cash and cash equivalents
(41,763)76,937
(25,213)(40,668)
Cash and cash equivalents at beginning of period
57,35259,084
78,13057,352
Cash and cash equivalents at end of period
$
15,589136,021
$
52,917
Supplemental Information:
Cash paid for operating leases
$
625
$
703
Interest paid
$
230
$
19316,684
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, necessary to a fair
 
statement of the results for the interim periods presentedadjustments
that
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's fiscal
 
fiscal year
ends on
 
the Saturday closest
 
closest to
May 31.
 
Each of
the three-month
 
periods andended on
 
year-to-date periodsAugust 27, 2022
ended on February 26, 2022 and February 27,August 28, 2021 included
13 weeks and 39 weeks, respectively
.
Use of Estimates
The preparation of the
consolidated financial statements in
conformity with GAAP requires management
to make
estimates and
assumptions that
 
that affect the
 
the amounts reported
 
reported in the
 
the consolidated financial
 
financial statements and
 
and accompanying notes.
 
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
 
for in accordance
 
accordance with ASC
 
ASC 320, “Investments
 
“Investments - Debt
 
Debt and Equity
 
Equity Securities” (“
(“ASC
320”).
 
The
 
Company
 
considers
 
all
 
its
 
debt
 
securities
 
for
 
which
 
there
 
is
 
a
 
determinable
 
fair
 
market
 
value,
 
and
 
there
 
are
 
no
restrictions
 
on
 
the
 
Company's
 
ability
 
to
 
sell
 
within
 
the
 
next
 
12
 
months,
 
as
 
available-for-sale.
 
We
 
classify
 
these
 
securities
 
as
current, because the
amounts invested are available for
 
for current operations.
Available-for-sale
 
securities are carried at
fair value,
with unrealized
 
gains and
 
losses reported
 
as a
 
separate
component
 
of stockholders’
 
equity.
 
The Company
 
regularly
evaluates
changes to the
 
the rating of its
 
its debt securities
by credit
 
agencies and economic conditions
 
conditions to assess and
 
and record
any expected credit
losses through the
 
the allowance
for credit
 
losses, limited
to the amount
that fair value
was less than
 
the amount thatamortized
 
fair value was
less than the
amortized cost basis.
The
cost
 
basis
 
for
 
realized
 
gains
 
and
 
losses
 
on
 
available-for-sale
 
securities
 
is
 
determined
 
by
 
the
 
specific
 
identification
 
method.
Gains and losses are recognized in other income
(expenses) as Other, net in the Company's
Condensed Consolidated Statements
of Income.
Operations.
 
Investments
in
 
mutual
funds
 
are
classified
 
as “Other
“Other
 
long-term
assets”
 
in
the
 
Company’s
 
Condensed Consolidated
Consolidated Balance Sheets.
Trade Receivables
 
Trade receivables
 
receivables are
stated at
 
their carrying
 
values, which
 
include a reserve
 
reserve for
credit losses.
 
At FebruaryAs of August
 
26,27, 2022
 
and May
29,28,
 
2021,2022,
 
reserves
 
for
 
credit
 
losses
 
were
 
$
725716
 
thousand
 
and
 
$
795775
 
thousand,
 
respectively.
 
The
 
Company
 
extends
 
credit
 
to
customers based on an
 
an evaluation of
each customer's financial
 
condition and credit
history.
 
Collateral is generally
not required.
The
 
Company
 
minimizes
 
exposure
 
to
 
counter
 
party
 
credit
 
risk
 
through
 
credit
 
analysis
 
and
 
approvals,
 
credit
 
limits,
 
and
monitoring
 
procedures.
 
In
 
determining
 
our
 
reserve
 
for
 
credit
 
losses,
 
receivables
 
are
 
assigned
 
an
 
expected
 
loss
 
based
 
on
historical loss information adjusted as needed for economic and
other forward-looking factors.
Business Combinations
The
Company applies
fair value
accounting guidance
to measure
non-financial assets
and
liabilities associated
with business
acquisitions. These
assets and
liabilities are
measured at
fair value
for
the initial
purchase price
allocation.
The fair
value of
8
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
guidance on
a modified
retrospective basis
through a
cumulative effect
adjustment to
retained earnings
as of
the beginning
of
the period of
adoption. The Company evaluated
its current methodology of
estimating allowance for doubtful
accounts and the
risk
profile
of
its
receivables
portfolio
and
developed
a
model
that
includes
the
qualitative
and
forecasting
aspects
of
the
“expected
loss”
model
under
the
amended
guidance.
The
Company
finalized
its
assessment
of
the
impact
of
the
amended
guidance and recorded a $
422
thousand cumulative increase to retained earnings at May 31, 2020.
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.
 
liabilities. During the
 
the Company’s
 
third quarter
 
quarter of fiscal
 
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-ownedother wholly
-owned subsidiaries
 
of the
 
Company in
 
in its first
 
first and second
 
second quarter 2022
 
2022 Condensed
Consolidated
Statements
of Income.
Operations.
The
errors
resulted
in
 
an
overstatement of Net Sales and Cost
 
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
0
impact
to
Operating
income
(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
Income
for
the third
quarter
ended February 26, 2022. Accordingly, we have reflected the correction of the immaterial errors as a reduction of Net Sales and
Cost of Sales in the accompanying Condensed Consolidated Statements of Income for the thirty-nine weeks ended February 26,
2022.
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.
9
The
following
table
summarizes
the
consideration
paid
for
Red
River
and
the
amounts
of
the
assets
acquired
and
liabilities
assumed recognized at the acquisition date:
Cash consideration paid
$
48,500
Fair value of the Company's equity interest in Red River held before the business combination
48,500
$
97,000
Recognized amounts of identifiable assets acquired and liabilities assumed
Cash
$
3,677
Accounts receivable, net
1,980
Inventory
8,789
Property, plant and equipment
85,002
Liabilities assumed
(2,448)
Deferred income taxes
(8,481)
Total identifiable net assets
88,519
Goodwill
8,481
$
97,000
Cash and
accounts receivable
acquired along
with liabilities
assumed were
valued at
their carrying
value which
approximates
fair value due to the short maturity of these instruments.
Inventory consisted primarily
of flock, feed
ingredients, packaging, and
egg inventory.
Flock inventory was
valued at carrying
value as management believes that their carrying value
best approximates their fair value.
Feed ingredients, packaging and egg
inventory were all valued based on market prices as of May 30, 2021.
Property,
plant and
equipment were valued
utilizing the
cost approach which
is based on
replacement or reproduction
costs of
the assets and subtracting any depreciation resulting from physical deterioration and/or functional or economic obsolescence.
The Company
recognized a
gain of
$
4.5
million as
a result
of remeasuring
to fair
value its
50
% equity
interest in
Red River
held before the business combination. The gain was recorded in other income and expense under the heading “Other, net” in the
Company’s
Condensed Consolidated
Statements of
Income. The
acquisition of
Red River
resulted in
a discrete
tax benefit
of
$
8.3
million, which
includes a
$
7.3
million decrease
in deferred
income tax
expense related
to the
outside-basis of
our equity
investment
in
Red
River,
with
a
corresponding
non-recurring,
non-cash
$
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
an
$
8.5
million
deferred
tax
liability
for
the
difference
in
the
inside-basis
of
the
acquired
assets
and
liabilities
assumed. The recognition
of deferred tax
liabilities resulted in
the recognition of
goodwill. None of
the goodwill recognized is
expected to be deductible for income tax purposes.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
108
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
for
the
first
quarter
of
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 32 - Investment
Securities
The following represents the Company’s
investment securities as of February 26,August 27, 2022 and May 29, 202128, 2022 (in
thousands):
February 26,August 27, 2022
Amortized
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
51415,032
$
0—
$
3155
$
51114,877
Commercial paper
9,98015,936
0—
2353
9,95715,883
Corporate bonds
61,63481,711
0—
3441,237
61,29080,474
Certificates of deposits
1,2683,263
0—
1248
1,2563,215
US government and agency obligations
8,190
—
87
8,103
Asset backed securities
8,20515,620
0—
94227
8,11115,393
Treasury bills
7,870
—
31
7,839
Total current
investment securities
$
81,601147,622
$
0—
$
4761,838
$
81,125145,784
Mutual funds
$
2,9673,467
$
0—
$
53130
$
2,9143,337
Total noncurrent
investment securities
$
2,9673,467
$
0—
$
53130
$
2,9143,337
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 $
76.420.3
 
million and
 
$
85.239.4
 
million during
 
the
thirty-nine weeks ended Februarythirteen
 
26, weeks
ended August
27,
2022
and
 
February 27, August
28,
2021,
 
respectively.
 
Gross
realized
gains
 
for
the thirty-nine
thirteen
 
weeks
ended
ended February 26,August 27, 2022
and February 27, August 28,
2021 were $
1812
 
thousand and $
116127
 
thousand, respectively.
Gross realized
losses for the thirteen
the thirty-nine weeks
ended February 26,
August
27,
2022
and February 27,
August
28,
2021
were
$
6727
 
thousand
and
$
1760
 
thousand,
respectively.
There
were
0no
allowances
 
allowances for credit losses at February 26,August 27, 2022 and May 29, 2021.28, 2022.
9
Actual maturities
may differ
 
from contractual
maturities as some
 
some borrowers have
 
the right to
 
call or prepay
 
obligations with
or
without penalties. Contractual maturities of current investments at February 26,August
27, 2022 are as follows (in thousands):
Estimated Fair Value
Within one year
$
52,39164,148
1-5 years
28,73481,636
Total
$
81,125145,784
Noncurrent
 
ProceedsThere were
no
 
sales of noncurrent
investment securities during
the thirteen weeks
ended August 27,
2022. Proceeds from
 
sales
and
maturities
of
noncurrent
 
investment
securities
were
$
4.9385
 
millionthousand during the thirteen
 
duringweeks ended August 28, 2021.
Gross
realized gains for
the thirteen weeks
ended August 28, 2021
were $
130
thousand. There were
no
realized losses for
the thirteen
weeks ended August 28, 2021.
Note 3 - Fair Value
Measurements
The Company
is required
to categorize
both financial
and nonfinancial
assets and
liabilities based
on the
following fair
value
hierarchy. The
fair value
of an
asset is
the price
at which
the asset
could be
sold in
an orderly
transaction between
unrelated,
knowledgeable, and willing
parties able to engage in
the transaction. A liability’s
fair value is defined
as the amount that would
be
paid
to
transfer
 
the
 
thirty-nineliability
 
weeks
ended Februaryto
 
26,a
 
2022.new
 
Grossobligor
 
realizedin
 
gainsa
 
fortransaction
between
such
parties,
not
 
the
 
thirty-nineamount
 
weeksthat
 
ended Februarywould
 
26,be paid
 
2022
were
$to
2.2settle the liability with the creditor.
•
Level 1
 
million. There- Quoted prices in active markets for identical assets or liabilities
were
no
realized
losses
for
the
thirty-nine
weeks
ended February
26,
2022.
There
were•
0Level 2
 
sales- Inputs
 
ofother than
 
noncurrentquoted
 
investmentprices included
in Level
1 that
are observable
for the
asset or
liability,
either
securities duringdirectly 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 thirty-nine weeks ended February 27, 2021.asset or liability
◦
Inputs derived principally from or corroborated by other observable market
data
•
Level 3
- Unobservable inputs for the asset or liability that are
supported by little or no market activity and that
are
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded
at cost are as follows:
Cash and cash equivalents, accounts receivable,
and accounts payable:
The carrying amount approximates fair value due to the
short maturity of these instruments.
Lease obligations:
The carrying value of the Company’s lease obligations
is at its present value which approximates fair value.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Index
11
Note 4 - Fair Value Measurements
The Company
is required
to categorize
both financial
and nonfinancial
assets and
liabilities based
on the
following fair
value
hierarchy. The
fair value
of an
asset is
the price
at which
the asset
could be
sold in
an orderly
transaction between
unrelated,
knowledgeable, and willing parties able to engage in the
transaction. A liability’s fair value
is defined as the amount that would
be paid
to transfer
the liability
to a
new obligor
in a
transaction between
such parties,
not
the amount
that would
be paid
to
settle the liability with the creditor.
•
Level 1
- Quoted prices in active markets for identical assets or liabilities
•
Level 2
- Inputs
other than
quoted prices
included in
Level 1
that are
observable for
the asset
or liability,
either
directly or indirectly, including:
◦
Quoted prices for similar assets or liabilities in active markets
◦
Quoted prices for identical or similar assets in non-active markets
◦
Inputs other than quoted prices that are observable for the asset or liability
◦
Inputs derived principally from or corroborated by other observable market data
•
Level 3
- Unobservable inputs for the asset or liability that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded at cost are as follows:
Cash and cash equivalents, accounts receivable, and accounts payable:
The carrying amount approximates fair value due to the
short maturity of these instruments.
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 February 26, 2022 and May 29, 2021 (in thousands):
February 26, 2022
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
0
$
511
$
0
$
511
Commercial paper
0
9,957
0
9,957
Corporate bonds
0
61,290
0
61,290
Certificates of deposits
0
1,256
0
1,256
Asset backed securities
0
8,111
0
8,111
Mutual funds
2,914
0
0
2,914
Total assets measured at fair value
$
2,914
$
81,125
$
0
$
84,039
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1210
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 August 27, 2022 and May 28,
2022 (in thousands):
August 27, 2022
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
14,877
$
—
$
14,877
Commercial paper
—
15,883
—
15,883
Corporate bonds
—
80,474
—
80,474
Certificates of deposits
—
3,215
—
3,215
US government and agency obligations
—
8,103
—
8,103
Asset backed securities
—
15,393
—
15,393
Treasury bills
—
7,839
—
7,839
Mutual funds
3,337
—
—
3,337
Total assets measured at fair
value
$
3,337
$
145,784
$
—
$
149,121
May 28, 2022
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
10,104
$
—
$
10,104
Commercial paper
—
14,868
—
14,868
Corporate bonds
—
73,684
—
73,684
Certificates of deposits
—
1,245
—
1,245
US government and agency obligations
—
2,209
—
2,209
Asset backed securities
—
13,319
—
13,319
Mutual funds
3,752
—
—
3,752
Total assets measured at fair
value
$
3,752
$
115,429
$
—
$
119,181
Investment
securities
–
available-for-sale
classified
as Level
2
consist
of
securities
with maturities
of
three
months
or longer
when purchased. We
classified these securities as
current because amounts
invested are readily available
for current operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
Note 54 - Inventories
Inventories consisted of the following as of February 26,August 27, 2022 and May 29, 202128,
2022 (in thousands):
 
February 26,August 27, 2022
May 29, 202128, 2022
Flocks, net of amortization
$
137,086152,264
$
123,860144,051
Eggs and egg products
24,15324,548
21,08426,936
Feed and supplies
78,84888,942
73,43192,329
$
240,087265,754
$
218,375263,316
We
 
grow
 
and
 
maintain
 
flocks
 
of
 
layers
 
(mature
 
female
 
chickens),
 
pullets
 
(female
 
chickens,
 
under
 
18
 
weeks
 
of
 
age),
 
and
breeders (male
and female
chickens used
to produce
fertile eggs to
 
to hatch
for egg
production flocks).
Our total
flock at February
August
26,27, 2022 and May
28, 2022 consisted of
approximately
9.411.4
million and
11.5
 
million pullets and breeders
and
42.741.1
 
million layers.and
42.2
 
million layers, respectively.
Note 65 - Accrued Dividends Payable and Dividends per Common
Share
We
 
accrue dividends at the
 
the end of
each quarter according
 
according to the Company’s
 
dividend policy adopted
by its Board
 
Board of Directors.
The Company
pays a dividend
to shareholders
of its Common
Stock and
Class A Common
Stock on
 
a dividend toquarterly basis
 
shareholders of its
Common Stock and Class
A Common Stock
on a quarterly
basis for each
quarter for
 
which the
 
Company reports net
 
net income attributable
 
attributable to Cal-Maine
 
Cal-Maine Foods, Inc.
 
Inc. computed in
 
in accordance with
 
with GAAP
in an amount equal
 
equal to one-third
(
1/3
) of such quarterly
 
quarterly income. Dividends
are paid to
 
to shareholders of record as
 
as of the 60th
day
following the last
 
last day of
 
of such quarter,
 
except for the
 
the fourth fiscal quarter.
 
quarter. For
the fourth quarter,
 
quarter, the Company
 
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.
For the third quarter
of fiscal 2022, we
will pay a
cash dividend
of approximately $
0.125
per share to holders
of our Common Stock
and Class A Common
Stock. The amount of
the accrual is
recorded in Accounts payable and accrued expenses in the Company’s Condensed Consolidated Balance Sheets.
On
our
Condensed
Consolidated
Statements
of
Income,
we
determine
dividends
per
common
share
in
accordance
with
the
computation in the following table (in thousands, except per share data):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
February 26, 2022
February 27, 2021
Net income attributable to Cal-Maine Foods,
Inc.
$
39,517
$
13,548
$
22,664
$
6,304
Cumulative losses to be recovered prior to
payment of divided at beginning of period
(21,097)
(8,614)
(4,244)
(1,370)
Net income available for dividend
$
18,420
$
4,934
$
18,420
$
4,934
1/3 of net income attributable to Cal-Maine
Foods, Inc. available for dividend
6,140
1,645
6,140
1,645
Common stock outstanding (shares)
44,140
44,056
Class A common stock outstanding (shares)
4,800
4,800
Total common stock outstanding (shares)
48,940
48,856
Dividends per common share*
$
0.125
$
0.034
$
0.125
$
0.034
*Dividends
per
common
share
=
1/3
of
Net
income
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
13
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 February 26,
2022,
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
default under the terms of the Credit Agreement. Further, under
the terms of the Credit Agreement, payment of dividends under
the
Company's
current
dividend
policy
of
one-third
of
the
Company's
net
income
computed
in
accordance
with
GAAP
and
payment of other dividends or
repurchases by the Company of
its capital stock is allowed,
as long 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 February 26, 2022, we were in compliance with the covenant requirements of the Credit Facility.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1411
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. For the first
quarter of fiscal 2023, we will pay a cash dividend of
approximately $
0.853
per share to holders of our Common Stock and Class A Common Stock.
On our
Condensed Consolidated
Statements 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
August 27, 2022
August 28, 2021
Net income (loss) attributable to Cal-Maine Foods, Inc.
$
125,287
$
(18,026)
Cumulative loss to be recovered prior to payment of divided at beginning of period
—
(4,244)
Net income available for dividend
$
125,287
$
—
1/3 of net income attributable to Cal-Maine Foods, Inc. available for dividend
41,762
—
Common stock outstanding (shares)
44,136
44,057
Class A common stock outstanding (shares)
4,800
4,800
Total common stock
outstanding (shares)
48,936
48,857
Dividends per common share*
$
0.853
$
—
*Dividends
per
common
share
=
1/3
of
Net
income
attributable
to
Cal-Maine
Foods,
Inc.
available
for
dividend
÷
Total
common
stock
outstanding (shares).
Note 86 - Equity
The following reflects equity activity for the thirteen weeks ended
 
thirteen and thirty-nine weeks ended February 26,
August 27, 2022 and February 27,August 28, 2021 (in
thousands):
Thirteen Weeks
Ended February 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at November
August 27, 2021
$
703
$
48
$
(27,450)
$
66,019
$
(996)
$
959,124
$
(25)
$
997,423
Other comprehensive
loss, net of tax
—
—
—
—
(417)
—
—
(417)
Stock compensation
plan transactions
—
—
(989)
890
—
—
—
(99)
Dividends
—
—
—
—
—
(6,118)
—
(6,118)
Net income (loss)
—
—
—
—
—
39,517
(63)
39,454
Balance at February
26, 2022
$
703
$
48
$
(28,439)
$
66,909
$
(1,413)
$
992,523
$
(88)
$
1,030,243
Thirteen Weeks Ended February 27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Accum.
Class A
Treasury
Paid In
Other Comp.
Retained
Amount
Amount
Amount
Capital
Income (Loss)
Earnings
Total
Balance at November 28, 2020
$
703
$
48
$
(26,723)
$
62,206
$
151
$
968,325
$
1,004,710
Other comprehensive loss, net of tax
—
—
—
—
(286)
—
(286)
Stock compensation plan transactions
—
—
(826)
964
—
—
138
Dividends
—
—
—
—
—
(1,661)
(1,661)
Net income
—
—
—
—
—
13,548
13,548
Balance at February 27, 2021
$
703
$
48
$
(27,549)
$
63,170
$
(135)
$
980,212
$
1,016,449
Thirty-nine Weeks Ended February 26, 2022
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 29,28,
2022
$
703
$
48
$
(28,447)
$
67,989
$
(1,596)
$
1,065,854
$
(206)
$
1,104,345
Other comprehensive
loss, net of tax
—
—
—
—
(754)
—
—
(754)
Stock compensation
plan transactions
—
—
(48)
1,028
—
—
—
980
Dividends
—
—
—
—
—
(41,742)
—
(41,742)
Net income (loss)
—
—
—
—
—
125,287
(153)
125,134
Balance at August
27, 2022
$
703
$
48
$
(28,495)
$
69,017
$
(2,350)
$
1,149,399
$
(359)
$
1,187,963
Thirteen Weeks
Ended August 28, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum. Other
Retained
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
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
—
—
—
—
(855)(170)
—
—
(855)(170)
Stock compensation
plan transactions
—
—
(1,006)(18)
2,8651,000
—
—
—982
1,859
ContributionsNet loss
—
—
—
—
—
—(18,026)
3
3
Dividends
—
—
—
—
—
(6,118)
—
(6,118)
Net income (loss)
—
—
—
—
—
22,664
(91)
22,573(18,026)
Balance at February
26, 2022August 28, 2021
$
703
$
48
$
(28,439)(27,451)
$
66,90965,044
$
(1,413)(728)
$
992,523957,951
$
(88)
$
1,030,243995,567
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15
Thirty-nine Weeks Ended February 27, 2021
Cal-Maine Foods, Inc. Stockholders
Common Stock
Accum.
Class A
Treasury
Paid In
Other Comp.
Retained
Amount
Amount
Amount
Capital
Income (Loss)
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 loss, net of tax
—
—
—
—
(214)
—
(214)
Stock compensation plan transactions
—
—
(875)
2,793
—
—
1,918
Contributions
—
—
—
5
—
—
5
Dividends
—
—
—
—
—
(1,661)
(1,661)
Net income
—
—
—
—
—
6,304
6,304
Balance at February 27, 2021
$
703
$
48
$
(27,549)
$
63,170
$
(135)
$
980,212
$
1,016,449
12
Note 97 - Net Income (Loss) per Common Share
 
Basic net income per
 
income (loss)
per share
is based on
 
on the
weighted average
Common Stock
 
and Class
A Common
 
Stock outstanding. Diluted
Diluted net
income
 
per
share
 
is
based
on
 
weighted-average common
 
commonshares outstanding
during the
relevant period adjusted
for
the
dilutive
effect
of share-based
awards.
Restricted
 
shares
 
outstandingof
131
 
duringthousand
were
antidilutive
due
to
 
the net
 
relevant
period
adjusted
loss for
 
the first
dilutive effectquarter of share-based awards.fiscal 2022. These shares were not included in the diluted net
loss per share calculation.
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
Thirty-nine Weeks Ended
February 26,August 27, 2022
February 27, 2021
February 26, 2022
February 27,August 28, 2021
Numerator
Net income (loss)
$
39,454125,134
$
13,548
$
22,573
$
6,304(18,026)
Less: Loss attributable to noncontrolling
interest
(63)(153)
0
(91)
0—
Net income (loss) attributable to Cal-Maine
Foods, Inc.
$
39,517125,287
$
13,548
$
22,664
$
6,304(18,026)
Denominator
Weighted-average
common shares
outstanding, basic
48,88648,623
48,530
48,888
48,51148,858
Effect of dilutive restricted shares
150188
129
147
138—
Weighted-average
common shares
outstanding, diluted
49,03648,811
48,659
49,035
48,64948,858
Net income (loss) per common share attributable to
Cal-Maine Foods,
Inc.
Basic
$
0.812.58
$
0.28
$
0.46
$
0.13(0.37)
Diluted
$
0.812.57
$
0.28
$
0.46
$
0.13(0.37)
Note 10 -8 – Revenue Recognitionfrom Contracts with Customers
Satisfaction of Performance Obligation
MostThe vast majority of the Company’s
 
revenue is derived from
contracts agreements with customers based on the customer
 
the customer placing an order
for products. Pricing
 
order for products.
Pricing forthe most part
 
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
or
formulas
related
to
our
costs
of
production.
The
Company’s
sales
predominantly
contain
a
single
performance
obligation.
We
recognize
revenue
upon
satisfaction
of
the
performance
obligation
with
the
customer
which
typically
occurs
within
days
of
the
Company
and
the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts
include a guaranteed sale
clause, pursuant to which
we credit the customer’s
account for product
that the
customer
is
unable
to
sell
before
expiration.
The
Company
records
an
allowance
for
returns
and
refunds
by
using
historical
return
data
and
comparing
to current
period
sales and
accounts receivable.
The allowance
is recorded
as a
reduction
in sales
with a corresponding reduction in trade accounts receivable.
Sales Incentives Provided to Customers
The
Company
periodically
provides
incentive
offers
to
its
customers
to
encourage
purchases.
Such
offers
include
current
discount offers
(e.g., percentage
discounts off
current purchases), inducement
offers (e.g.,
offers for
future discounts subject
to
a minimum
current purchase),
and other
similar offers.
Current discount
offers,
when accepted
by customers,
are treated
as a
reduction
to
the sales
price
of the
related
transaction,
while inducement
offers,
when
accepted
by customers,
are
treated
as
a
reduction
to the
sales price
based on
estimated future
redemption rates.
Redemption
rates are
estimated using
the Company’s
historical
experience
for
similar
inducement
offers.
Current discount
and
inducement
offers
are
presented
as a
net amount
in
‘‘Net sales.’’
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1613
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 production.
The Company’s
sales predominantly
contain a
single performance
obligation. We
recognize revenue
upon satisfaction of the
performance obligation with the
customer, which typically
occurs within days of
the Company and the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts include a guaranteed
sale clause, pursuant to which we
credit the customer’s account for product that
the
customer is unable to
sell before expiration. The Company records
an estimate of returns and
refunds by using historical
return
data and
comparing to
current period
sales and
accounts receivable. The
allowance is
recorded as
a reduction
in sales
with a
corresponding reduction in trade accounts receivable.
Sales Incentives Provided to Customers
The
Company
periodically
provides
incentive
offers
to
its
customers
to
encourage
purchases.
Such
offers
include
current
discount offers (e.g.,
percentage discounts off
current purchases), inducement offers
(e.g., offers for
future discounts subject
to
a minimum
current purchase),
and other
similar offers.
Current discount
offers, when
accepted by
customers, are
treated as
a
reduction to
the sales
price of
the related
transaction, while
inducement offers,
when accepted
by customers,
are treated
as a
reduction
to
sales
price
based
on
estimated
future
redemption
rates.
Redemption
rates
are
estimated
using
the
Company’s
historical experience
for similar
inducement offers.
Current discount
and inducement
offers
are presented
as a
net amount
in
‘‘Net sales.’’
Disaggregation of Revenue
The following table provides revenue disaggregated by product category (in
(in thousands):
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
February 26,August 27, 2022
February 27, 2021
February 26, 2022
February 27,August 28, 2021
Conventional shell egg sales
$
280,633425,589
$
203,189
$
685,678
$
560,297182,030
Specialty shell egg sales
182,945200,820
145,210
462,319
408,537132,458
Egg products
12,74927,640
9,098
33,516
25,7369,366
Other
1,1584,295
1,583
2,682
4,6191,132
$
477,485658,344
$
359,080
$
1,184,195
$
999,189324,986
Contract Costs
The Company can incur costs to
obtain or fulfill a contract with a customer.
 
customer. If the
amortization period of these costs is less
than
one year,
 
they are
 
expensed as
 
incurred. When
 
the amortization
 
period is
 
greater than
 
one year,
 
a contract
 
asset is
 
recognized
and
is amortized
 
over the contract
 
contract life
as a
 
reduction
in net
 
sales. As of
 
February 26, of August
27,
2022 and
May 28,
2022,
 
and February 27,the balance
 
2021, the balancefor
for contract assets is immaterial.
Contract Balances
The Company
receives payment
from customers
based on
specified terms
that are
 
generally less
than 30
days from
delivery.
There are rarely contract assets or liabilities related to performance under the
contract.
17
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 Income. The Company’s lease cost consists of the following (in thousands):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26, 2022
February 26, 2022
Operating lease cost
$
200
$
625
Finance lease cost
Amortization of right-of-use asset
$
44
$
132
Interest on lease obligations
$
6
$
20
Short term lease cost
$
1,086
$
3,221
Future minimum lease payments under non-cancelable leases are as follows (in thousands):
As of February 26, 2022
Operating Leases
Finance Leases
Remainder fiscal 2022
$
180
$
60
2023
539
240
2024
380
217
2025
130
0
2026
26
0
2027
5
0
Total
1,260
517
Less imputed interest
(92)
(24)
Total
$
1,168
$
493
The
weighted-average
remaining
lease
term
and
discount
rate
for
lease
liabilities
included
in
our
Condensed
Consolidated
Balance Sheet are as follows:
As of February 26, 2022
Operating Leases
Finance Leases
Weighted-average remaining lease term (years)
2.4
1.8
Weighted-average discount rate
5.9
%
4.9
%
Note 129 - Stock Based Compensation
Total stock-based
 
stock-based compensation expense
was $
3.0
million and $
2.81.0
 
million for the thirteen weeks ended August 27, 2022 and August 28, 2021.
Unrecognized
 
thirty-nine weeks ended
February 26, 2022
and February 27, 2021, respectively.
Unrecognized compensation
 
expense as
 
as a
result
 
of non-vestednon
-vested
 
shares
of
 
restricted stock
 
stock outstanding
under
 
the
Amended
 
and
Restated
2012
Omnibus
Long-Term
 
Incentive
Plan
at
February
26,
August 27, 2022
of
$
8.15.9
 
million will be recorded over a weighted average
period
 
will
be
recorded
over
a
weighted
average period of
2.31.9
 
years.
Refer
to
Part
II
 
Item
8,
Notes
to
Consolidated
 
Financial
Statements
and
Supplementary
Data,
Note
16:
16: Stock Compensation Plans in our 20212022 Annual Report for further information
on our stock compensation plans.
18
The Company’s restricted share activity
for the thirty-ninethirteen weeks ended February 26,August 27, 2022 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, May 29, 202128, 2022
302,147317,844
$
39.37
Granted
113,142
41.1339.12
Vested
(90,778)(3,240)
42.5338.31
Forfeited
(3,932)(2,778)
37.8139.48
Outstanding, February 26,August 27, 2022
320,579311,826
$
39.12
Note 10 – Income Taxes
For
the
first
quarters
of
fiscal
2023
and
2022,
the
Company
recorded
income
tax
expense
of
$
40.3
million
and
income
tax
benefit of $
15.8
million which reflects
an effective
tax rate of
24.4
% and
46.8
%, respectively.
Excluding the impact
of discrete
items
related
to
an
$
8.3
million
net
tax
benefit
recorded
in
the
first
quarter
of
fiscal
2022
in
connection
with
the
Red
River
Valley
Egg Farm, LLC acquisition, the adjusted effective
tax rate for the first quarter of fiscal 2022 is
22.4
%.
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
noncontrolling interest.
14
Note 1311 - Commitments and Contingencies
Financial Instruments
The
Company
maintained
 
standby
letters
of
credit
 
(“LOCs”)
totaling
$
4.1
 
million
at
February
26, August 27,
 
2022, which were issued
 
which
were
issuedunder
under
the
Company's
Credit
Facility.
 
The
outstanding
LOCs
are
for
the
 
benefit
of
certain
insurance
companies
 
and
are
not
recorded as
a liability on the consolidated balance sheets.
 
LEGAL PROCEEDINGS
State of Texas v.
 
v. Cal-Maine Foods, Inc. d/b/a Wharton;
and Wharton County Foods, LLC
 
On April 23,
 
23, 2020,
the Company
 
and its subsidiary
 
Wharton County Foods,
 
Foods, LLC (“WCF”) were
 
were named
as defendants in
 
in State
of
 
Texas
 
v.
 
Cal-Maine
Foods,
 
Inc.
d/b/a
 
Wharton;
and
 
Wharton
County
 
Foods,
LLC,
 
Cause
No.
 
2020-25427,
 
in
the
 
District
Court of
 
Harris County,
 
Texas.
 
The State
 
of Texas
 
(the “State”)
 
asserted claims
 
based on
 
the Company’s
 
and WCF’s
 
alleged
violation
 
of
 
the
 
Texas
 
Deceptive
 
Trade
 
Practices—Consumer
 
Protection
 
Act,
 
Tex.
 
Bus.
 
&
 
Com.
 
Code
 
§§
 
17.41-17.63
(“DTPA”).
 
The
 
State
 
claimed
 
that
 
the
 
Company
 
and
 
WCF
 
offered
 
shell
 
eggs
 
at
 
excessive
 
or
 
exorbitant
 
prices
 
during
 
the
COVID-19
 
state
 
of
 
emergency
 
and
 
made
 
misleading
 
statements
 
about
 
shell
 
egg
 
prices.
 
The
 
State
 
sought
 
temporary
 
and
permanent
 
injunctions
 
against
 
the
 
Company
 
and
 
WCF
 
to
 
prevent
 
further
 
alleged
 
violations
 
of
 
the
 
DTPA,
 
along
 
with
 
over
$
100,000
 
in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the State’s
original petition with
prejudice. On September 11,
 
11, 2020,
the State filed a
 
notice of appeal,
which was assigned
 
assigned to the Texas
 
Court of Appeals
for the
First District. The
 
State filed its
opening brief on
December 7, 2020.
The Company and
WCF filed their
response on February
8,
2021.District.
 
On
 
FebruaryAugust
 
11,16,
 
2022,
 
the
 
Texasappeals
 
Courtcourt
 
ofreversed
 
Appealsand
 
heardremanded
 
oralthe
 
argumentcase
 
butback
 
hasto
 
notthe
 
issuedtrial
 
acourt
 
ruling.for
further
proceedings.
The
Company
and
WCF
are
considering
whether
to
appeal
this
decision
from
the
First
District.
 
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
 
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
 
eggs during
the
 
COVID-19 state
 
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
 
other defendants from selling eggs
at a price more than
 
than 10% greater than the price
of
eggs prior
 
to the
 
declaration
of the
state of
 
the state
of emergency
 
and damages
 
in the
 
amount of
 
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
 
certain other defendants
 
defendants filed
a
motion to
 
dismiss the
 
plaintiffs’
amended
 
class action
 
complaint. The
 
plaintiffs subsequently
 
subsequently filed a
 
a motion to
 
to strike, and
 
and the
motion to
 
dismiss and
 
related proceedings were
 
were referred to
 
to a United
 
United States magistrate
 
magistrate judge. On
 
On July 14,
 
14, 2021, the
 
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
 
magistrate’splaintiffs’
motion
to
set
aside
or
amend
the
judgment
to
amend
their
reportcomplaint.
On March 15, 2022,
plaintiffs
filed a second suit
against the Company and
several defendants in
Bell et al. v.
Cal-Maine Foods
et al.,
Case No.
1:22-cv-246, in
the Western
District of
Texas,
Austin Division
alleging the
same assertions
as laid
out in
the
first
complaint.
On
August
12,
2022,
the
Company
 
and
 
recommendationother
defendants
 
in
 
itsthe
 
entiretycase
 
andfiled
 
granted
defendants’a
 
motion
 
to
 
dismiss
 
plaintiffs’the
 
firstplaintiffs’
class action
 
amendedcomplaint. On
 
classSeptember 6,
 
action2022, the
plaintiffs’ filed
complaint; thereafter,
their opposition
to the
motion to
dismiss and
 
the courtCompany
entered a
final judgment
in favor
of the
Company and
certain other
 
defendants dismissingfiled
 
the
case without prejudice.
On October 18,
2021, plaintiffs
filed a motion
to alter or
amend the final
judgement and allow
a filing
of
a
second
amended
complaint.
The
Company
responded
their reply on
 
NovemberSeptember 13,
 
1,
2021.
2022. The
 
court
has
not
 
ruledissued a ruling.
 
onManagement believes
 
the
plaintiffs’ risk
motion.of material loss related to both matters to be remote.
19
Kraft Foods Global, Inc. et al. v.
United Egg Producers, Inc. et al.
 
As previously
 
reported, on
 
September 25,
 
2008, the
 
Company was
 
was named as
 
as one of
 
of several
defendants
 
in numerous
 
antitrust
cases involving
 
the United
 
States shell
 
egg
industry.
 
The Company
 
settled all
 
of these
 
cases, except
 
for the
 
the claims of
 
of certain
plaintiffs who sought substantial
damages allegedly arising from
the purchase of egg products (as
 
(as opposed to shell eggs). These
remaining plaintiffs
 
are Kraft Food
 
Food Global,
Inc., General
 
Mills, Inc., and
 
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
 
for the Northern District
of Illinois, Kraft Foods Global,
Inc. et al. v.
 
al. v. United
15
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
 
Egg Producers animal-welfare guidelines
and program used by
 
used by the Company and many
 
many other egg
producers. The Egg
 
Egg Products Plaintiffs
 
Plaintiffs seek to
 
to enjoin the
 
the Company
and other
 
defendants from engaging
 
engaging in
antitrust violations
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.
instructed
We anticipate the
 
partiestrial being rescheduled for the first or second calendar quarter of 2023.
 
to
jointly
submit
a
second
status
report
to
the
court
that
included
a
proposed
schedule
for
preparing a final pretrial order. On
August 25, 2021, the parties filed a joint status report, and on
August 26, 2021, 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.
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,
 
November 11, 2019, a
stipulation for dismissal was filed with
the court, but the court,
 
hasand on March 28,
not yet entered a judgment on2022, the filing.court dismissed the Company with prejudice.
The Company intends to
continue to defend the remaining
case with the Egg Products Plaintiffs
 
as vigorously as possible based
on
 
defenses
 
which
 
the
 
Company
 
believes
 
are
 
meritorious
 
and
 
provable.
 
Adjustments,
 
if
 
any,
 
which
 
might
 
result
 
from
 
the
resolution of
 
this remaining
 
matter with
 
the Egg
 
Products Plaintiffs
 
have not
 
been reflected
 
in the
 
financial statements.
 
While
management
 
believes
 
that
 
there
 
is
 
still
 
a
 
reasonable
 
possibility
 
of
 
a
 
material
 
adverse
 
outcome
 
from
 
the
 
case
 
with
 
the
 
Egg
Products Plaintiffs,
 
at the present
 
present time,
it is not
 
not possible to
 
estimate the amount
 
amount of
monetary exposure,
 
if any,
 
to the
Company
due
to
a
range
of
factors,
including
the
following,
among
 
others: the matter is in the early stages of preparing for
 
trial following
remand;two
 
anyearlier
 
trials
based
on
substantially
the
same
facts
and
legal arguments
resulted
in findings
of no
conspiracy
and/or damages;
this trial
 
will
be
 
before
 
a
different
 
judge
and
 
jury
in
 
a
different
 
court
 
than
 
prior
related
 
cases;
there
 
are significant
 
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
 
Oklahoma filed suit,
 
suit, in
the United
 
States District
 
Court for
 
the Northern District
 
District of
Oklahoma,
against Cal-Maine Foods, Inc. and
Tyson Foods,
Inc. and affiliates,
Cobb-Vantress,
 
Inc., Cargill, Inc. and its
affiliate, George’s,
Inc. and its
 
its affiliate,
Peterson Farms, Inc.
 
Inc. and Simmons Foods,
 
Inc. The
State of Oklahoma
 
Oklahoma claims that through
 
the disposal of
chicken litter
 
litter the defendants
 
defendants have polluted
 
polluted the Illinois
 
Illinois River
Watershed.
 
This watershed
 
provides water
 
water to eastern
 
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
 
the litigation
began, Cal-Maine
 
Foods, Inc.
purchased
100
% of the
 
membership interests of
 
of Benton
County
Foods, LLC,
 
which is
 
an ongoing
 
commercial shell
 
egg operation
 
within the
 
Illinois River
 
Watershed.
 
Benton County
 
Foods,
LLC is not a defendant in the litigation.
The trial in the case
began in September 2009 and
concluded in February 2010. The
 
The case was tried without a jury,
 
and the court
has not yet issued its ruling. Management believes the risk of material loss related
to this matter to be remote.
Other Matters
In addition to the above,
 
the above, the Company
is involved in
 
various other claims
and litigation incidental
 
incidental to its business. Although
 
the
outcome of
 
these matters
 
cannot be determined
 
determined with
certainty,
 
management, upon the
 
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.
20
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.
2116
ITEM
 
2.
 
MANAGEMENT’S
DISCUSSION
AND
 
ANALYSIS
 
OF
 
FINANCIAL
 
CONDITION
 
AND
 
RESULTS
 
OF
OPERATIONS
The following
 
should be
 
read in
 
conjunction with
 
with Management’s
 
Discussion and
 
Analysis of
 
Financial Condition
 
and Results
of Operations included
in Part II Item
 
Item 7 of the Company’s
 
Annual Report on
Form 10-K for its
 
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
 
Act of 1934
 
(the “Exchange1934 (the
 
“Exchange Act”) relating
 
relating to our
 
our shell
egg
business,
 
including
 
estimated
 
future
 
production
 
data,
 
expected
 
construction
 
schedules,
 
projected
 
construction
 
costs,
 
potential
future
supply
 
of and
 
and demand
 
for
our
 
products,
potential
 
future
corn
 
and soybean
 
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
 
may be
beyond
 
our
control. The
 
factors
that
 
could cause
 
actual results
 
to
differ
 
materially from
 
from those
projected in
 
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
(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
 
U.S., Canada
 
and other
 
countries (iii)that
 
changeswas first
detected in
commercial
flocks in
 
the demandU.S.
 
in February
2022, (iii) changes in the
demand for and market prices of
 
market prices
of shell
eggs and
feed costs, (iv)
 
our ability to
predict and meet
 
demand
for
cage-free
 
and
other
specialty
 
eggs,
(v)
risks,
 
changes,
or
obligations
that
 
could
 
result
 
from
 
our
 
future
 
acquisition
 
of
 
new
flocks
or
businesses
and
risks
or
 
changes
that
may
cause
conditions
to
completing
a
pending
acquisition
not
to
 
completing a pending acquisition not to be
 
met, (vi) risks
(vi)
risks
relating
 
to
 
the
 
evolving
 
COVID-19
 
pandemic,
 
including
 
without
limitation
limitation
increased
costs
 
and
rising
 
inflation and interest
 
and
interest
rates, andwhich
generally have been
exacerbated by Russia’s
invasion of Ukraine
starting February 2022,
 
(vii) our ability
to retain
existing
customers,
acquire
new
customers
and
grow
our
product
mix
and
(viii)
adverse
 
results
in
pending
 
litigation
matters. Readers
are
are
cautioned
 
not
to
 
place
undue
 
reliance
on
forward-looking
statements
because,
while
we
believe
the
assumptions on
which the
 
forward-looking statements
 
because, whileare based
 
we believeare reasonable,
 
the assumptionsthere can
 
on whichbe no
assurance that
these forward-
the forward-lookinglooking
 
statements are
 
based arewill
 
reasonable, thereprove
 
can to
be
 
no assurance
that these
forward-looking statements will
prove to be accurate. Further,
 
forward-looking statements
included
herein
are
only
made
as
of
 
the respective dates thereof, or if
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
 
update
publicly these forward-looking statements,
whether because of
new information, future
events, or
otherwise.
GENERAL
Cal-Maine
 
Foods,
 
Inc.
 
(the
 
“Company,”
 
“we,”
 
“us,”
 
“our”)
 
is
 
primarily
 
engaged
 
in
 
the
 
production,
 
grading,
 
packaging,
marketing
 
and
 
distribution
 
of
 
fresh
 
shell
 
eggs.
 
Our
 
operations
 
are
 
fully
 
integrated
 
under
 
one
 
operating
 
segment.
 
We
 
are
 
the
largest producer and
 
and distributor
of fresh
 
shell eggs in
 
in the
United States
 
(“U.S.”).
Our total flock
 
flock of approximately
 
42.741.1 million
layers
 
and
 
9.411.4
 
million
 
pullets
 
and
 
breeders
 
is
 
the
 
largest
 
in
 
the
 
U.S.
 
We
 
sell
 
most
 
of
 
our
 
shell
 
eggs
 
to
 
a
 
diverse
 
group
 
of
customers, including national
 
national and
regional grocery
 
store chains, club
 
club stores,
companies servicing
 
independent supermarkets
in
the U.S., food
 
service distributors, and
 
egg product consumers
 
in states across
 
the southwestern, southeastern, mid-western
 
mid-western and
mid-Atlantic regions of the U.S.
WeOur
 
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
 
pricing mechanisms
in pricing
 
agreements with our
 
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
 
shell
eggsfeed
 
oringredients
 
formulas relatedare
generally
lower.
To
ensure
continued
availability of
feed ingredients,
we may
enter into
contracts for
future purchases
of corn
and soybean
meal, and
as
part of these contracts,
we may lock-in
the basis portion of
our grain purchases
several months in
advance. Furthermore, due
to
the
more
limited
supply
for
organic
ingredients,
we
may
commit
to
purchase
organic
ingredients
in
advance
to
help
ensure
supply.
Ordinarily,
we do not enter
into long-term contracts
beyond a year
 
to ourpurchase corn and
 
costs ofsoybean meal or hedge
 
production whichagainst
17
increases
 
includein
 
the
 
cost prices
of
 
corn
 
and
 
soybean
meal.
 
AsCorn
 
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 three quarters of fiscal year 2022 ranged from a low of $1.00 in June 2021 to a high of
$2.06 in February 2022.
22
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,
speculators
and
agricultural,
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
 
of consumers,
and therefore our customers,
and help us continue
 
us continue to serve as the trusted
provider of quality food choices.
Specialty shell
eggs have
been a
significant and
growing portion
of the
market. In
recent years,
a significant
number of
large
restaurant chains, food service companies
and grocery chains, including our
largest customers, announced goals to
transition to
an
exclusively
cage-free
egg
supply
chain
by
specified
future
dates.
Additionally,
several
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
eggs
by
specified
future
dates,
and
other
states
are
considering
such
legislation.
In
California
and
Massachusetts,
which represent about 14% of the total U.S. population according to the 2020
U.S. Census, cage-free legislation
went into effect January
1, 2022. For additional
information, see the 2021
Annual Report, Part I,
Item 1, “Business –
Specialty
Eggs,”
“Business
–
Growth
Strategy”
and
“Business
–
Government
Regulation,”
and
the
first
risk
factor
in
Part
I
Item
1A,
“Risk Factors” under the sub-heading “Legal and Regulatory Risk Factors.”
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
 
experience lower selling prices, sales volumes
 
volumes and net
income (and may incur
 
incur net losses) in our
 
first
and
 
fourth
 
fiscal
 
quarters
 
ending
 
in
 
August/September
 
and
 
May/June,
 
respectively.
 
Because
 
of
 
the
 
seasonal
 
and
 
quarterly
fluctuations,
 
comparisons
 
of
 
our
 
sales
 
and
 
operating
 
results
 
between
 
different
 
quarters
 
within
 
a
 
single
 
fiscal
 
year
 
are
 
not
necessarily meaningful comparisons.
COVID-19
Since early
2020, the
coronavirus (“COVID-19”) outbreak,
characterized as
a pandemic
by the
World
Health Organization
on
March
11,
2020,
has
caused
significant
disruptions
in
international
and
U.S.
economies
and
markets.
We
understand
the
challenges
and
difficult
economic
environment
facing
families
in
the
communities
where
we
live
and
work,
and
we
are
committed
to
helping
where
we
can.
We
have
provided
food
assistance
to
those
in
need
by
donating
approximately
679
thousand
dozen
eggs
to
date
in
fiscal
2022.
We
believe
we
are
taking
all
reasonable
precautions
in
the
management
of
our
operations in response
to the COVID-19
pandemic. Our top
priority is 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 other
government health
agencies, and
we have
strict sanitation
protocols and
biosecurity measures
in place
throughout our
operations with
restricted access
to visitors.
There are
no known
indications that COVID-19 affects chickens or can be transferred through the food supply.
We
continue to proactively monitor
and manage operations during
the COVID-19 pandemic, including
additional related costs
that
we incurred
or may
incur in
the future.
The pandemic
had a
negative impact
on our
business through
disruptions in
the
supply chain such as increased costs
and limited availability of packaging supplies,
and increased labor costs and medical costs
and, more recently, inflation.
In
the third
quarters of
fiscal 2022
and 2021,
we spent
approximately $534
thousand and
$397 thousand
(excluding medical
insurance claims)
related to
the pandemic
and its
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,
primarily
reflected
in
cost
of
sales.
Medical
insurance
claims
related
to
COVID-19 paid during the third quarter of
fiscal 2022 were an additional $424 thousand as
compared to $322 thousand paid in
the comparable quarter in fiscal 2021.
23
For
the
thirty-nine
weeks
ended
2022
and
2021,
we
spent
approximately
$1.8
million
(excluding
medical
insurance
claims)
related to
the pandemic
and its
effects. 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, primarily reflected in cost of sales. Medical insurance claims related to COVID-19 paid during the thirty-
nine
weeks
ended 2022
were
an
additional $1.6
million
as compared
to $1.1
million paid
in
the comparable
period
in
fiscal
2021.
EXECUTIVE OVERVIEW
For the third
quarter of fiscal
2022, we recorded
a gross profit
of $91.6 million
compared to $47.5
million for the
same period
of
fiscal
2021,
with
the
increase
due
primarily
to
higher
shell
egg
prices
and
increased
volume
of
specialty
eggs.
Our
total
dozens sold
increased 2.8%
to 287.7
million dozen
shell eggs
for
the third
quarter of
fiscal 2022
compared to
279.7
million
dozen for
the same
period of
fiscal
2021. For
the third
quarter of
fiscal 2022,
conventional dozens
sold decreased
5.2%
and
specialty dozens sold increased 24.1%
as compared to the same
quarter in fiscal 2021. Specialty
dozens sold increased as more
cage-free facilities came into production, retailers continue shift to selling cage-free products and cage-free legislation went into
full effect in California on January 1, 2022.
The
daily
average
price
for
the
UB
southeast
large
index
for
the
third
quarter
of
fiscal
2022
increased
46.8%
from
the
comparable period
in
the
prior year.
Our
net
average
selling price
per
dozen
for
the
third
quarter
of
fiscal
2022
was
$1.612
compared
to $1.246
in the
prior-year
period.
Hen numbers
reported by
the USDA
as of
March 1,
2022, were
322.7 million,
which is
approximately 5.4
million less
hens than
the comparable
period of
the prior
year.
The USDA
also reported
that the
hatch
from
October
2021
through
February
2022
decreased
5.5%
compared
to
the
prior-year
period.
As
of
March
1,
2022,
table-type eggs in incubators totaled 55.4 million, a decrease of 7.6% versus the prior-year period.HPAI
We
 
are
 
closely
 
monitoring
the
 
recently reportedcurrent
 
outbreaks outbreak
of
 
highly
pathogenic
 
avian
influenza
 
(“HPAI”).,
that
was
first
detected
in
commercial
flocks
in
the
U.S.
in
February
2022
and
which
was
most
recently
detected
in
commercial
flocks
in
the
U.S.
in
September
2022.
 
According
 
to
 
the
U.S.
 
Centers
for
 
Disease
Control
 
and
Prevention,
 
these
detections
do
not
present
an
donotpresent animmediate
public
healthconcern
.concern.
 
There
have
have
been
no
positive
tests for
HPAI
 
at
any
Cal-Maine
Foods’
owned
or contracted
production
facility to date. Asas
 
of March 28,September
27, 2022.
2022, the
The USDA
 
division
of Animal
 
and Plant Health
 
Health Inspection
Service (“APHIS”),
reported
 
reported that approximately
 
11.535.6 million
commercial
layer hens
and 1.0
million
pullets have
been
depopulated
due
to HPAI.
According
to
APHIS,
the
most
recently
reported
outbreaks
of
HPAI
affecting
commercial
layer
 
hens or
 
about 3.6%and
pullets
occurred
September
21,
2022
and
June
9,
2022,
respectively.
We
believe
the
HPAI
outbreak
will
continue
to
have
an
impact
on
the
overall
supply of
eggs through
the balance
 
of thethis
 
table eggcalendar year
 
layer flockand possibly
 
based onbeyond. According
 
February 2022to LEAP
 
reported layer
numbers, have
beenMarket Analytics,
depopulated duelayer hen inventory is not projected to
HPAI.
Pullets impacted comprise
approximately 830,000, or
about 0.7 percent exceed the 320 million mark until October
 
of the February2023.
While no
 
2022 pulletfarm is
immune from
HPAI,
we believe
we have implemented
and continue
to maintain
robust biosecurity
programs
inventory.across our locations. We
 
believe we have implementedare also working closely with federal, state and continue to maintain robust biosecurity programs across ourlocal government
 
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
 
Our farm production costsstates
 
per dozen produced have
passed
legislation
or
regulations
mandating
minimum
space
or
cage-free
requirements
for
egg
production
or
mandated
the
sale
of
only
cage-free
eggs
and
egg
products
in
their
states,
with
implementation
of
these
laws
ranging
from
January
2022
to
January
2026.
These
states
represent
approximately
27%
of
the
U.S.
total
population
according
to
 
the third quarter2020
U.S. Census.
In California
and Massachusetts,
which
collectively represent
14% of
 
fiscal 2022 increased 16.9%,the total
 
or $0.132, comparedU.S. population
according to
 
the
third2020 U.S. Census,
cage-free legislation went
into effect January
1, 2022. However,
these laws are subject
to judicial challenge,
and the
Supreme Court
of the U.S.
recently announced
that in
October 2022
it will
review a
case challenging
California’s
law
that requires the sale of only
cage-free eggs in that state. 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 price
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 price of conventional eggs.
A significant number
of our customers
have previously announced
goals to offer
cage-free eggs exclusively
on or before
2026,
subject in
most cases
to availability
of supply,
affordability and
customer demand,
among other
contingencies. Some
of these
customers have
recently changed
those goals
to offer
70% cage-free
eggs by
the end
of 2030.
Our customers
typically do
not
commit to long-term
purchases of specific quantities
or types of eggs
with us, and as
a result, it is difficult
to accurately predict
customer
requirements
for
cage-free
eggs.
We
are,
however,
engaging
with
our
customers
in
an
effort
to
achieve
a
smooth
transition
in meeting
their announced
goals and
needs.
Sales of
cage-free
eggs represented
approximately
19.4% of
our shell
egg revenues
for the
first quarter
 
of fiscal
 
2021. This
increase was
primarily due
to increased
prices for
feed ingredients.
For the
third quarter
of
fiscal 2022, the average
Chicago Board of Trade
(“CBOT”) daily market price
was $6.13 per
bushel for corn and
$412 per ton
for soybean meal, representing an increase of 23.5% and a decrease of 2.5%, respectively, compared to the average daily CBOT
prices for
the comparable
period in
the prior
year.
Other farm
production
costs for
the third
quarter of
fiscal 2022
increased
11.8% 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”).2023.
 
We
 
will
capitalize MeadowCreek withhave invested
 
up to $18.5significant capital
 
million in debtrecent
 
and equityyears to
 
purchase propertyacquire and
 
equipmentconstruct
cage-free facilities, 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
eggs
that
MeadowCreek
needs
to
manufacture
egg
products.
MeadowCreek’s
marketing
plan
is
designed
to
extend
our
reach
in
the
foodservice
and
retail
marketplace
and
bring
new
opportunities
in
the
restaurant,
institutional
and
industrial food products arenas.
Also, during
October 2021,
 
we announcedexpect our focus
 
that ourfor future expansion will
 
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
continue to include the construction of
two cage-free layer houses and one cage-free
 
pullet house with capacity for approximately 400,000facilities. At the same
 
cage-free hens and 210,000
pullets, respectively.
Construction has
commenced, with
first pullet
placements planned
by mid-May
2022 and
the first
layertime,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2418
house planned to be finished by October 1, 2022, with 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,we
 
2021, we madeunderstand
 
an additional investmentthe
importance
of
our
continued
ability
to provide
more
affordable
conventional
eggs
 
in our joint
 
venture Southwest Specialty Eggs,
LLC to acquire
warehouse
and
distribution
capabilityorder
 
to
 
expandprovide
 
Southwestour
customers with a variety of egg choices and to address hunger in our
communities.
For
additional
information,
see
the
2022
Annual
Report,
Part
I,
Item
1,
“Business
–
 
Specialty
 
Eggs,”
 
LLC’s“Business
 
customer–
 
baseGrowth
Strategy” and
“Business –
Government
Regulation,” and
the first
risk factor
 
in Part
I Item
1A, “Risk
Factors” under
the sub-
heading “Legal and Regulatory Risk Factors.”
EXECUTIVE OVERVIEW
For the first quarter of fiscal
2023, we recorded a gross profit of
$217.5 million compared to $6.6 million
for the same period of
fiscal
2022,
with
the
 
southern
California, Arizona and Nevadaincrease
 
markets. This strategic investmentdue
 
is proving primarily
to
 
be incrementallyhigher
 
accretive as additionalshell
 
casesegg
prices
and
increased
volume
of
 
specialty
eggs
sold,
partially
offset by the increased
cost of feed ingredients
and processing, packaging
and warehouse costs. Our
total dozens sold increased
8.1% to 275.3
million dozen shell
eggs for the
first quarter of
fiscal 2023 compared
to 254.6 million
dozen for the
same period
of fiscal 2022. For the first
quarter of fiscal 2023, conventional
dozens sold decreased 2.3% and specialty
dozens sold increased
35.1% as
compared to
the same
quarter in
fiscal 2022.
Demand for
specialty eggs
increased in
the first
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
 
eggslegislation
 
beganwent into
 
distributionfull
effect
 
throughin
California
and
Massachusetts
on
January
1,
2022.
We
benefited
from
 
the
 
warehousestrong
demand
for
specialty
eggs
as
we
placed more of our cage-free facilities into production and better utilized
our existing cage-free production capacity.
Conventional
egg
prices
increased
 
in
 
earlythe
 
Decemberfirst
 
asquarter
 
customersof
 
preparedfiscal
2023
primarily
due
to
decreased
supply
caused
by
the
HPAI
outbreak
compounded
with
good
customer
demand.
See
the
discussion
under
the
heading
“HPAI”
above.
The
daily
average
price for
the UB
southeast large
index for
the first
quarter of
fiscal 2023
increased 133.8%
from the
comparable period
in the
prior
year.
Our net
average
selling price
per dozen
 
for
 
the first
quarter
of fiscal
2023
was $2.275
compared
to $1.235
in
the
California’s January 1,prior-year period. Layer
hen numbers reported
by the USDA
as of September
21, 2022, cage-free mandate.were
305.3 million, which
represents a
decrease of
4.6% compared
with the
layer hen
inventory a
year ago.
The USDA
also reported
that the
hatch from
April 2022
through
August
2022
decreased
0.5%
as
compared
with
the
prior-year
period.
As
of
September
1,
2022,
however,
eggs
in
incubators were up 9.0% year-over-year,
indicating that layer flocks may increase in the future.
Our farm
production costs
per dozen
produced for
the first
quarter of
fiscal 2023
increased 16.5%,
or $0.148,
compared to
the
first 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.
For the
first quarter
of fiscal
2023, the
average Chicago
Board of
Trade (“CBOT”)
daily market
price
was
$6.65
per
bushel
for
corn
and
$456
per
ton
for
soybean
meal,
representing
increases
of
11.5%
and
25.4%,
respectively, compared
to the average daily CBOT prices for the comparable period in the prior
year.
RESULTS OF
OPERATIONS
The
following
table
sets
 
forth,
for
the
periods
 
indicated,
certain
items
from
 
our
Condensed
Consolidated
Statements
 
of Income
Operations expressed as a percentage of net sales.
Thirteen Weeks
Ended
Thirty-nine Weeks Ended
February 26,August 27, 2022
February 27, 2021
February 26, 2022
February 27,August 28, 2021
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
80.867.0
%
86.8
%
88.0
%
87.798.0
%
Gross profit
19.233.0
%
13.2
%
12.0
%
12.32.0
%
Selling, general and administrative
11.08.1
%
13.3
%
12.4
%
13.614.3
%
(Gain) loss on disposal of fixed assets
(0.1)—
%
0.1
%
(0.2)
%
—(0.1)
%
Operating income (loss)
8.324.9
%
(0.2)
%
(0.2)
%
(1.3)(12.2)
%
Total other income, net
2.8
%
3.40.2
%
1.8
%
1.5
%
Income (loss) before income taxes
11.125.1
%
3.2
%
1.6
%
0.2(10.4)
%
Income tax expense (benefit)
2.86.1
%
(0.5)
%
(0.2)
%
(0.4)(4.9)
%
Net income (loss)
8.319.0
%
3.7
%
1.8
%
0.6(5.5)
%
NET SALES
Total net
 
net sales for the third quarter of
 
fiscal 2022 were $477.5 million comparedthe first quarter
 
to $359.1 million for the sameof fiscal 2023
 
period of fiscal
2021.
Net shell eggwere a record
 
sales represented 97.3%$658.3 million
 
and 97.5% ofcompared to $325.0
 
total net sales
million for the
 
third quarters of
fiscal 2022 and
2021, respectively.same period
Shell
egg
sales
classified
as
“Other”
represent
sales
of
hard-cooked
eggs,
hatching
eggs
and
other
miscellaneous
products
included with our shell egg operations.
Total
net sales
for the
thirty-nine weeks
ended February
26, 2022
were $1,184.2
million, compared
to $999.2
million for
the
comparable period of fiscal 2021.
Net
shell
egg
sales
represented
97.2%
and
97.4%
of
total
net
sales
for
the
thirty-nine
weeks
ended
February
26,
2022
and
February 27, 2021, respectively.
Total
conventional
dozens
sold
for
the
first,
second
and
third
quarters
were
183.9
million,
192.1
million
and
192.5
million,
respectively.
Total
specialty
dozens
sold
for
the
first,
second
and
third
quarters
were
70.8
million,
77.4
million
and
95.1
million, respectively.2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19
Net shell
 
egg sales
 
represented 95.8%
 
and 97.1%
 
of total
 
net sales
 
for the
 
first quarters
 
of fiscal
 
2023 and
 
2022, respectively.
Shell egg sales classified
 
as “Other” represent
 
sales of hard-cooked
 
eggs and other
 
miscellaneous byproducts included
 
with our
shell egg operations.
 
The table below presents an analysis of our conventional and specialty shell egg
 
sales (in thousands, except percentage data):
Thirteen Weeks
 
Ended
August 27, 2022
August 28, 2021
Total net sales
$
658,344
$
324,986
Conventional
$
425,589
67.5
%
$
182,030
57.6
%
Specialty
200,820
31.8
%
132,458
42.0
%
Egg sales, net
626,409
99.3
%
314,488
99.6
%
Other
4,295
0.7
%
1,132
0.4
%
Net shell egg sales
$
630,704
100.0
%
$
315,620
100.0
%
Net shell egg sales as a percent of total net sales
95.8
%
97.1
%
Dozens sold:
Conventional
179,712
65.3
%
183,872
72.2
%
Specialty
95,605
34.7
%
70,750
27.8
%
Total dozens sold
275,317
100.0
%
254,622
100.0
%
Net average selling price per dozen:
Conventional
$
2.368
$
0.990
Specialty
$
2.101
$
1.872
All shell eggs
$
2.275
$
1.235
Egg products sales:
 
Egg products net sales
27,640
9,366
Pounds sold
16,502
15,269
Net average selling price per pound
1.675
0.613
Shell egg net sales
First Quarter – Fiscal 2023
 
vs. Fiscal 2022
-
In the
 
first quarter
 
of fiscal
 
2023,
 
conventional
 
egg sales
 
increased
 
$243.6 million,
 
or 133.8%,
compared to
the first
quarter of
fiscal 2022,
primarily due
to the
increase in
price for
conventional shell
eggs,
partially offset
by a decrease
in volume of
conventional eggs sold.
Changes in price
resulted in a
$247.6 million
increase and the
change in volume
resulted in a $4.1 million decrease in net sales, respectively.
-
We believe
prices for conventional eggs
were positively impacted by
a better alignment of the
size of the conventional
production layer
hen flock
and customer
and consumer
demand. Conventional
egg prices further
increased in
the first
quarter of fiscal 2023 primarily due to decreased supply caused by the HPAI
outbreak, discussed above.
-
Conventional
egg
prices
generally
respond
more
quickly
to
market
conditions
as
we
sell
the
majority
of
our
conventional
shell
eggs
based
on
formulas
that
adjust
periodically
and
take
into
account,
in
varying
ways,
independently
quoted regional
wholesale
market
prices for
shell eggs
or formulas
related to
our
costs of
production.
The
majority
of
our
specialty
eggs
are
typically
sold
at
prices
and
terms
negotiated
directly
with
customers
and
therefore do
not fluctuate
as much
as conventional
pricing. As
a result
of these
independently
quoted
whole markets
for
conventional
eggs
reaching
near
historical
highs,
the
average
selling
price
for
conventional
eggs
exceeded
the
average selling price for specialty eggs in the first quarter of fiscal 2023.
-
Specialty egg sales increased $68.4 million, or
51.6%, in the first quarter of fiscal 2023
compared to the first quarter of
fiscal 2022,
primarily due
to a
35.1% increase
in the
volume of
specialty eggs
sold, which
resulted in
a $46.5
million
increase in net sales.
-
According
to
Information
Resources,
Inc.,
Total
US
–
Multi
Outlet
for
the
latest
13
weeks
ended
August
27,
2022,
cage-free
eggs
dozens
sold
(including
free-range,
pasture-raised
and
organic)
increased
34.9%.
We
believe
this
increase in
demand was
positively impacted
by the
higher conventional
egg prices
as compared
to the
same period
in
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2520
The table below presents an analysis of our conventional and specialty shell egg sales (in thousands, except percentage data):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
February 26, 2022
February 27, 2021
Total net sales
$
477,485
$
359,080
$
1,184,195
$
999,189
Conventional
$
280,633
60.4
%
$
203,189
58.0
%
$
685,678
59.6
%
$
560,297
57.5
%
Specialty
182,945
39.4
%
145,210
41.5
%
462,319
40.2
%
408,537
42.0
%
Egg sales, net
463,578
99.8
%
348,399
99.5
%
1,147,997
99.8
%
968,834
99.5
%
Other
1,158
0.2
%
1,583
0.5
%
2,682
0.2
%
4,619
0.5
%
Net shell egg sales
$
464,736
100.0
%
$
349,982
100.0
%
$
1,150,679
100.0
%
$
973,453
100.0
%
Net shell egg sales as a
percent of total net sales
97.3
%
97.5
%
97.2
%
97.4
%
Dozens sold:
Conventional
192,511
66.9
%
203,070
72.6
%
568,511
70.0
%
599,625
73.4
%
Specialty
95,140
33.1
%
76,645
27.4
%
243,310
30.0
%
217,735
26.6
%
Total dozens sold
287,651
100.0
%
279,715
100.0
%
811,821
100.0
%
817,360
100.0
%
Net average selling price per
dozen:
Conventional
$
1.458
$
1.001
$
1.206
$
0.934
Specialty
$
1.923
$
1.895
$
1.900
$
1.876
All shell eggs
$
1.612
$
1.246
$
1.414
$
1.185
Egg products sales:
Egg products net sales
12,749
9,098
33,516
25,736
Pounds sold
15,947
15,569
47,225
46,565
Net average selling price per
pound
0.799
0.584
0.710
0.553
Shell egg net sales
Third Quarter – Fiscal 2022 vs. Fiscal 2021
-
In
the
 
thirdprior
 
quarter ofyear.
 
fiscal 2022,Demand
 
conventional
egg
sales
increased
$77.4
million,
or
38.1%,
compared
to
the
third
quarter of fiscal
2021, primarily due
to the increase
in price for
conventional shell eggs,
partially offset
by a decrease
in volume
of conventional
eggs sold.
Changes in
price resulted
in a
$88.0 million
increase and
the change
in volume
resulted in a $10.6 million decrease in net sales, respectively.
-
We believe prices for conventional eggs were positively impacted by a better alignment of the conventional production
layer
hen
flock
and
customer
and
consumer
demand.
According
to
reports
from
the
USDA,
the
average
number
of
hens producing
white and
brown conventional
eggs for
February 2022
decreased 31.7
million, or
13.1%, versus
the
prior-year
comparable period.
USDA Agriculture
Marketing
Service reported
shell
eggs
broken for
foodservice and
further processing
increased 7.9% compared
to the
comparable prior-year
period. We
believe lower
conventional egg
prices in the prior-year period were primarily tied to a surplus of conventional eggs entering the retail channel from the
foodservice channel exceeding demand during this phase of the pandemic.
-
Conventional
egg
volume
sales
decreased
5.2%.
We
believe
many
consumers
have
evolved
their
preferences
to
purchase higher-priced specialty eggs for at-home meal preparation due to the perceived health and
welfare benefits of
specialty eggs, various state laws
mandating the sale of cage-free
and the public commitments by
most retailers to sell
more cage-free
products. Per
Information Resources,
Inc. (“IRI”),
Total
US –
Multi Outlet,
conventional white
shell
egg
dozens
sales
decreased
13.7%
during
the
latest
13
weeks
ended
February
27,
2022
versus
the
prior-year
comparable period.
-
Specialty egg sales increased
$37.7 million, or 26.0%,
in the third quarter
of fiscal 2022 compared
to the third quarter
of
fiscal
2021,
primarily
due
to
a
24.1%
increase
in
the
volume
of
 
specialty
 
eggs
 
sold,was
 
whichfurther
 
resultedpositively
 
inaffected
 
aby
 
$35.0
million increase inCalifornia’s
 
net sales. Perand
 
IRI, TotalMassachusetts’s
 
US – Multi
Outlet for the
latest 13 weeks
ended February 27,
2022, cage-
free eggsmandates going into effect January 1, 2022, as well as more
 
dozens sold
(including free-range,
pasture-raised and
organic) increased
21.3%. We
believe this
increase in
26
demand is due
to California’s
cage-free mandate going
into-effect January
1, 2022,
as well
as more retailers’
retailers shifting
to selling more cage-free products.
-
Our
specialty
egg
 
sales
in
 
the third
first
quarter
 
of
fiscal
 
2022 2023
versus
 
the
prior-year
 
period benefitted from
our acquisition
of
the remaining
50% membership
interest in
Red River,
which helped
drive our
cage-free egg
sales. Our
cage-free
sales
also
 
benefitted
 
from
 
ourthe
 
continuedstrong
demand
 
investmentfor
 
inspecialty
 
expandedeggs
as
we
placed
more
of
our
 
cage-free
 
capabilitiesfacilities
 
asinto
 
additionalproduction,
 
cage-freeand
we
better
utilized
our
existing cage-free production capacity came online during the quarter. capacity.
Cage-free egg sales for the first second and third quarters
quarter of fiscal 2023 represented 19.4%
2022 were 22.3%, 22.4% and 24.1% of our
total net shell egg
sales respectively.versus 22.1%
for the same prior
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
-
Foryear period due
 
the
thirty-nine
weeks
ended
February
26,
2022,
conventional
egg
sales
increased
$125.4
million
or
22.4%
compared
to
the
same period
of
fiscal 2021,
primarily
due
to
the
increase in
price,
partially
offset
by
a
decrease in
volume
of
conventional
eggs
sold.
Changes
in
price
resulted
in
a
$154.6
million
increase
and
change
in
volume
resulted in a $29.1 million decrease in net sales, respectively.
-
We believe prices for conventional eggs were positively impacted by a better alignment of the conventional production
layer hen flock and customer and consumer demand.
USDA Agriculture Marketing Service reported shell eggs broken
for
foodservice
and
further
processing
increased
10.2%
compared
to
the
comparable
prior-year
period.
We
believe
lower higher conventional
 
egg pricesprices. Cage-free
dozens sold increased 58% in the
prior-year period
were primarily
tied to
a surplus
first of conventional
eggs entering
the retail channel from the foodservice channel exceeding demand during this phasequarter of the pandemic.
-
The decrease in
volume of conventional
eggs sold was
primarily due to
elevated retail demand
during the first
half of
fiscal 2021
due to
consumers’ preferences
to purchase
eggs for
in-home meal
preparation due2023 as compared
 
to the
pandemic. We
saw this consumer
preference begin to
shift in the
fourth first quarter of
fiscal 2021 as
consumers began to
resume out-of-
home
dining
and
prepare
fewer
meals
at
home.
Per
Information
Resources,
Inc.
(“IRI”),
Total
US
–
Multi
Outlet,
conventional white shell egg dozens sales decreased 12.6% during the latest 39
weeks ended February 27, 2022 versus
the prior-year comparable period.
-
Specialty egg sales increased $53.8
million, or 13.2%, for the
thirty-nine weeks ended February 26, 2022
compared to
the same period of
fiscal 2021, primarily due
to an 11.7%
increase in the volume
of specialty dozens sold
and a slight
increase in specialty egg prices. Changes in price resulted in a $5.8 million increase and change in volume resulted in a
$48.0 million increase in net sales,
respectively. We
also benefitted from our additional cage-free
production capacity.
Cage-free egg sales for the thirty-nine weeks ended February 26, 2022 were 23.0% of our total net shell egg sales.2022.
Egg products net sales
ThirdFirst Quarter – Fiscal 2022 2023
vs. Fiscal 20212022
-
Egg
 
products
 
net
 
sales
 
increased
 
$3.718.3
 
million
 
or
 
40.1%195.1%
 
for
 
the
 
thirdfirst
 
quarter
 
of
 
fiscal
 
20222023
 
compared
 
to
 
the
 
same
period of
fiscal 2021,2022,
 
primarily due
to a
 
36.8%173.2% selling
price increase,
 
which had
a $3.4$17.5
 
million positive
impact on
net
sales.
-
Selling prices for egg products in
the third quarter of fiscal 2021
were negatively impacted by a decline in
foodservice
demand due
to the
pandemic. Our
egg products
net average
selling price
increased in
the third
quarter of
fiscal 2022
compared to
the same
period in
fiscal 2021
as foodservice
channel demand
has begun
to shift
more to
pre-pandemic
levels.
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
-
Egg products
net sales
increased $7.8
million or
30.2%, primarily
due to
a 28.4%
selling price
increase compared
to
the first thirty-nine weeks of fiscal 2021, which had a $7.4 million positive impact on net sales.
-
Our egg products
 
net average selling
 
price increased in
 
the thirty-nine weeksfirst quarter
 
endof fiscal 2023,
compared to the
first quarter of
fiscal 2022 as the supply decreased due to the HPAI
outbreak that started in February 26,2022. We
 
2022, compared tobelieve 13.4 million of
the
 
the
same33.7
 
periodmillion
 
inlayers
 
fiscal
2021culled
 
as
 
foodservicea
 
channelresult
 
demandof
 
hasthe
 
begunHPAI
outbreak
were
located
at
facilities
dedicated
 
to
 
shiftsupport
 
moreinline
breaking facilities in Iowa and Ohio.
COST OF SALES
Costs of
 
towards
pre-pandemic
levels.
Selling
prices
sales for
 
the first
quarter of
fiscal 2023
were $440.9
million compared
to $318.3
million for
the same
period of
fiscal
2022.
Cost of
sales consists
of
costs directly
related
to producing,
processing
and
packing
shell eggs,
purchases
of
shell
eggs from
outside producers, processing and packing of liquid
and frozen egg products and other non-egg costs. Farm
production costs are
those costs
incurred at
the egg
 
productsproduction facility,
 
inincluding feed,
 
thefacility,
 
thirty-ninehen amortization
 
weeksand other
 
endedrelated farm
 
Februaryproduction
costs.
The following table presents the key variables affecting our cost of
 
27,sales (in thousands, except cost per dozen data):
Thirteen Weeks
 
Ended
August 27, 2022
August 28, 2021
%
Change
Cost of Sales:
Farm production
$
266,651
$
207,495
28.5
%
Processing, packaging, and warehouse
81,417
65,059
25.1
Egg purchases and other (including change in inventory)
68,298
37,973
79.9
Total shell eggs
416,366
310,527
34.1
Egg products
24,488
7,814
213.4
Total
$
440,854
$
318,341
38.5
%
Farm production costs (per dozen produced)
Feed
$
0.667
$
0.545
22.4
%
Other
$
0.379
$
0.353
7.4
%
Total
$
1.046
$
0.898
16.5
%
Outside egg purchases (average cost per dozen)
$
2.57
$
1.35
90.4
%
Dozens produced
257,654
236,458
9.0
%
Percent produced to sold
93.6%
92.9%
0.8
%
Farm Production
First Quarter – Fiscal 2023
 
werevs. Fiscal 2022
-
Feed costs per dozen produced
 
negatively
impacted
by
a
declineincreased 22.4% in foodservice
demand during the
more restrictive phases first quarter
 
of governmental andfiscal 2023
 
business shutdownscompared to the first quarter of fiscal
2022. This increase was primarily due to increased prices for corn, our primary
 
to thefeed ingredient.
pandemic.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21
-
For the
first quarter
of fiscal
2023, the
average daily
Chicago Board
of Trade
(“CBOT”) market
price was
$6.65 per
bushel
for
corn
and
$456
per
ton
of
soybean
meal
representing
increases
of
11.5%
and
25.4%,
respectively,
as
compared to the average daily CBOT prices for the first quarter of fiscal 202
2.
Supplies of
corn and soybean
remained tight
relative to demand
in the first
quarter of
fiscal 2023 as
evidenced by a
low stock-
to-use
ratio
for
corn,
as
a
result
of
weather-related
shortfalls
in
production
and
yields,
ongoing
disruptions
related
to
the
COVID-19
global
pandemic
and
the
Russia-Ukraine
war
and
its
impact
on
the
export
markets.
Basis
levels
for
corn
ran
significantly
higher
in
our
area
of
operations
compared
to
our
prior
year
first
fiscal
quarter.
For
fiscal
2023,
we
expect
continued corn and soybean upward pricing pressures and further market
volatility to affect feed costs.
Processing, packaging, and warehouse
First Quarter – Fiscal 2023
vs. Fiscal 2022
-
Cost of packaging materials increased 16.1% compared to the first quarter of
fiscal 2022 due to rising inflation.
-
Labor costs increased 24.4%
due to wage increases and increased use of contract labor in response to labor shortages
.
-
Dozens processed increased 8.6% compared to the first quarter of fiscal 2022,
which resulted in a $2.2 million increase
in costs.
Egg purchases and other (including change in inventory)
First Quarter – Fiscal 2023
vs. Fiscal 2022
-
Costs in
this category
increased
primarily
due
to higher
egg prices,
partially offset
by the
decrease
in the
volume of
outside egg purchases, as our percentage of produced to sold increased
to 93.6% from 92.9%.
GROSS PROFIT
Gross profit for
the first quarter
of fiscal 2023
was $217.5 million
compared to $6.6
million for the
same period of
fiscal 2022.
The increase
of $210.9
million was
primarily due
to higher
egg prices
as well
as the
increased volume
of specialty
eggs sold,
partially offset by the increased cost of feed ingredients
and processing,
packaging and warehouse costs.
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES
Selling,
general,
and
administrative
expenses
("SGA")
include
costs
of
marketing,
distribution,
accounting
and
corporate
overhead. The following table presents an analysis of our SGA expenses (in thousands):
Thirteen Weeks
Ended
August 27, 2022
August 28, 2021
$ Change
% Change
Specialty egg expense
$
13,067
$
13,715
$
(648)
(4.7)
%
Delivery expense
19,916
13,936
5,980
42.9
%
Payroll, taxes and benefits
10,987
9,939
1,048
10.5
%
Stock compensation expense
1,025
1,001
24
2.4
%
Other expenses
8,612
7,934
678
8.5
%
Total
$
53,607
$
46,525
$
7,082
15.2
%
First 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
35.1%
for
the
first
quarter
of fiscal
2023
compared
to
the
same
period
of
fiscal
2022.
However,
our specialty egg
expense decreased by
4.7%, 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
that were
responsible for
the franchise
fees, advertising
and promotion
costs associated
with those
sales, which resulted in reduced costs for us. Also, 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.
 
 
 
 
22
Delivery expense
-
The increased
 
delivery expense
 
is primarily
 
due to
 
the increase
 
in fuel
 
and labor
 
costs for
 
both our
 
fleet and
 
contract
trucking.
Payroll, taxes and benefits expense
-
The increase
 
in payroll,
 
taxes and
 
benefits expense
 
is primarily
 
due
 
to increased
 
wages for
 
all employees
 
due
 
to the
inflationary market.
OPERATING
 
INCOME (LOSS)
For the first quarter of fiscal 2023,
 
we recorded operating income of $163.9 million
 
compared to operating loss of $39.7 million
for the same period of fiscal 2022.
OTHER INCOME (EXPENSE)
 
Total
 
other
 
income
 
(expense)
 
consists
 
of
 
items
 
not
 
directly
 
charged
 
or
 
related
 
to
 
operations,
 
such
 
as
 
interest
 
income
 
and
expense, royalty income, equity income or loss of unconsolidated
 
entities, and patronage income, among other items.
For the first quarter of fiscal
 
2023, we earned $1.1 million of interest
 
income compared to $290 thousand for
 
the same period of
fiscal
 
2022.
The
increase
resulted
from
significantly
higher
investment
balances.
The
Company
recorded
interest
expense
of
$148 thousand and $58 thousand for the first quarters
ended August 27, 2022 and August 28, 2021, respectively.
Other,
net for
the first
quarter ended
August 27,
2022, was
income of
$155 thousand
compared to
income of
$5.2 million
for
the same
period of
fiscal 2022.
The decrease
is primarily
due to
our acquisition
of the
remaining 50%
membership interest
in
Red
River
in
the
first
quarter
of
fiscal
2022
as
we
recognized
a
$4.5
million
gain
due
to
the
remeasurement
of
our
equity
investment.
INCOME TAXES
For the
first quarter
of fiscal
2023, pre-tax
income was
$165.5 million
compared to
pre-tax loss
of $33.9
million for
the same
period of
fiscal 2022.
We
recorded income
tax expense
of $40.3
million for
the first
quarter of
fiscal 2023,
which reflects
an
effective
tax
rate
of
24.4%,
compared
to
an
income
tax
benefit
of
$15.8
million
in
the
prior
year
period,
which
reflects
an
effective tax
rate of 46.8%.
Excluding the
impact of discrete
items related to
a $8.3
million net
tax benefit
recorded in the
first
quarter of
fiscal 2022
in connection
with the
Red River
Valley
Egg Farm,
LLC (“Red
River”) acquisition,
income tax
benefit
for the comparable period of fiscal 2022 was $7.6 million, which reflects an
adjusted effective tax rate of 22.4%.
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
noncontrolling interest.
NET INCOME ATTRIBUTABLE
TO CAL-MAINE FOODS, INC.
Net income
attributable to Cal-Maine
Foods, Inc. for
the first quarter
ended August 27,
2022, was $125.3
million, or $2.58
per
basic and $2.57 per diluted
common share, compared to net
loss attributable to Cal-Maine
Foods, Inc. of $18.0 million
or $0.37
per basic and diluted common share for the same period of fiscal 2022.
LIQUIDITY AND CAPITAL
RESOURCES
Working
Capital and Current Ratio
Our working
capital at
August 27,
2022 was $548.5
million, compared
to $476.8
million at
May 28,
2022. The
calculation of
working capital is
defined as current
assets less current liabilities.
Our current ratio
was 3.4 at August
27, 2022, compared with
3.6 at May 28, 2022. The current ratio is calculated by dividing current
assets by current liabilities.
Cash Flows from Operating Activities
For
the thirteen
weeks
ended August
27, 2022,
$172.8
million
in net
cash
was
provided by
operating
activities,
compared
to
$24.1
million used
by operating
activities for
the comparable
period in
fiscal 2022.
The increase
in cash
flow from
operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2723
COST OF SALESactivities
resulted
Costs of sales
primarily
from
higher
selling
prices
for
 
the third quarter conventional
and
specialty
eggs
as
well
as
increased
volume
of
specialty
egg
sales,
partially
offset
by
increased
costs
of
 
fiscal 2022 were $385.9feed
ingredients
compared
to
the
prior-year
period.
The
increase
in
Other adjustments, net is primarily due to a $67.4 million balance for
income taxes payable as of August 27, 2022.
Cash Flows from Investing Activities
We continue
to invest in our facilities, with $27.7
 
million comparedused to $311.6purchase property,
plant and equipment for the thirteen
weeks
ended
August
27,
2022,
compared
to
$11.2
 
million for the same
period of fiscal
2021. For the
thirty-nine weeks ended
February 26, 2022
and February 27,
2021, total cost
of sales were
$1,042.2 million and
$876.5 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 facility,
including feed, facility,
hen amortization, and
other related farm
production
costs.
The following table presents the key variables affecting our cost of sales (in thousands, except cost per dozen data):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
February 26,
2022
February 27,
2021
%
Change
February 26,
2022
February 27,
2021
%
Change
Cost of Sales:
Farm production
$
239,389
$
190,883
25.4
%
$
668,855
$
531,877
25.8
%
Processing, packaging, and warehouse
77,116
63,640
21.2
211,649
187,014
13.2
Egg purchases and other (including
change in inventory)
59,135
50,443
17.2
133,968
137,001
(2.2)
Total shell eggs
375,640
304,966
23.2
1,014,472
855,892
18.5
Egg products
10,263
6,597
55.6
27,749
20,565
34.9
Total
$
385,903
$
311,563
23.9
%
$
1,042,221
$
876,457
18.9
%
Farm production costs (per dozen
produced)
Feed
$
0.562
$
0.467
20.3
%
$
0.546
$
0.422
29.4
%
Other
$
0.350
$
0.313
11.8
%
$
0.350
$
0.318
10.1
%
Total
$
0.912
$
0.780
16.9
%
$
0.896
$
0.740
21.1
%
Outside egg purchases (average cost per
dozen)
$
1.75
$
1.26
38.9
%
$
1.57
$
1.23
27.6
%
Dozens produced
264,433
248,130
6.6
%
757,677
731,205
3.6
%
Percent produced to sold
91.9%
88.7%
3.6
%
93.3%
89.5%
4.2
%
Farm Production
Third Quarter – Fiscal 2022 vs. Fiscal 2021
-
Feed
costs per
dozen
produced
increased 20.3%
 
in
 
the
 
thirdsame
period
of
fiscal
2022. In
the
first
 
quarter
 
of
 
fiscal
 
2022,
 
compared
to
the third
quarter ofwe
fiscal 2021.
This increase
was primarily
due
to
increased prices
for
corn, our
primary feed
ingredient. For
acquired the
 
third
quarterremaining 50%
 
of
fiscal 2022,
the
average
daily
Chicago
Board
of
Trade
(“CBOT”) market
price
was
$6.13 per
bushel
for
corn representing an increase of 23.5 percent compared to the average
daily CBOT prices for the third quarter of fiscal
2021.
-
Other farm
production costs
increased due
to higher
flock amortization,
primarily from
an increasemembership interest
 
in ourRed
 
cage-free
production, which hasRiver Valley
 
higher capitalized costs. Also,Egg Farm,
 
our higher feedLLC for
 
costs, which began to$44.8 million,
 
rise in ournet of
 
third quarter ofcash acquired.
fiscal 2021, 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.
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
-
FeedPurchases
 
costs perof investments
 
dozenwere $51.8
 
produced
increased
29.4%million
 
in
 
the first
 
thirty-nine weeksquarter
 
of fiscal
2023,
compared to
$1.4
million
in fiscal
2022.
The
increase in
purchases of
investments is
primarily due
to the
increased cash
provided by
operating activities
noted above.
Sales
and
maturities of
investment
securities were
$20.3
million
for
the thirteen
weeks ended
 
February 26,August
27,
 
2022,
 
compared
 
to $39.4
million for the comparable period in fiscal 2022.
Cash Flows from Financing Activities
We paid dividends
of $36.7 million in the first quarter of fiscal 2023.
As of
August 27,
2022,
cash increased
$76.9 million
since May
28, 2022,
compared to
a decrease
of $40.7
million during
 
the
same period of fiscal 2022.
Credit Facility
We
 
of fiscalhad no
long-term debt
outstanding at
August 27,
2022 or
May 28,
2022. On
November 15,
 
2021, primarilywe
 
due toentered into
 
higher feeda credit
agreement
 
ingredient pricesthat
 
resulting fromprovides
 
weather-related shortfallsfor
a
senior
secured
revolving
credit facility
(the
“Credit
Facility”),
 
in
production and yields, which have placed additional pressure on domestic supplies.
-
Other farm
production costs
increased due
to higher
flock amortization,
primarily from
 
an increase
 
in ourinitial
 
cage-free
production,aggregate
 
whichprincipal
amount
 
hasof
 
higher
capitalized
costs.
Also,
higher
feed
costs,
which
beganup
 
to
 
rise$250
million
with
a
five-year
term.
As
of
August
27,
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
 
ourefforts
 
third
quarter
of
fiscal 2021, are capitalized in our flocks during pullet production and increased our amortization expense.
28
-
We had higher facility expense as more cage-free facilities came into production.
Processing, packaging, and warehouse
Third Quarter – Fiscal 2022 vs. Fiscal 2021
-
Cost of
packaging materials
increased 17.7%
compared to
 
the thirdachieve
 
a
smooth transition toward
their announced commitment
timeline for cage-free
egg sales. As previously
reported, during the
first
quarter of
 
fiscal 20212023, our
 
as supplyBoard of Directors
 
chain constraints
initiallyapproved another
 
causedcapital project
 
byto expand our
 
thecage-free production
 
pandemiccapabilities.
The
 
increasedproject
 
costsat
Chase,
Kansas
will
convert
existing
conventional
layer
capacity
to
cage-free
capacity
 
for
 
packagingapproximately
 
products1.5
million cage-free hens and include remodels of all remaining pullet facilities. Project
completion is expected by year-end 2025.
The following table presents material construction projects approved
as of August 27, 2022 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of August
27, 2022
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2023
$
132,161
115,343
16,818
Cage-Free Layer & Pullet Houses
Fiscal 2023
24,923
19,548
5,375
Cage-Free Layer & Pullet Houses
Fiscal 2024
42,591
383
42,208
Cage-Free Layer & Pullet Houses
Fiscal 2025
94,183
7,729
86,454
$
293,858
$
143,003
$
150,855
We believe our
current cash balances, investments, cash flows from operations, and Credit Facility will be sufficient
to fund our
current capital needs for at least the next 12 months.
IMPACT OF
RECENTLY
ISSUED/ADOPTED ACCOUNTING STANDARDS
For
information
on
changes
in
accounting
principles
 
and
 
manufacturersnew
 
implementedaccounting
 
pandemic
surcharges.policies,
 
Costs also increased duesee
of the Notes to rising inflation.
-
Labor costs increasedCondensed Consolidated Financial Statements included in this Quarterly
 
16.3% due toReport.
24
CRITICAL ACCOUNTING ESTIMATES
 
wage increases in
Critical accounting
 
response to laborestimates
 
shortages, primarily dueare those
 
to the pandemicestimates
made
in accordance
with U.S.
generally
accepted
accounting
principles that
involve
a
significant
level
of
estimation
uncertainty
 
and
its effects.
-
Dozens
 
processedhave
 
increasedhad
 
6.6%or
 
comparedare
reasonably
likely
 
to
 
the
third
quarter
of
fiscal
2021,
which
resulted
inhave
 
a
 
$4.5material
 
million
increase in costs.
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
-
Cost ofimpact
 
packaging materialson
 
increased 10.8%our
financial
 
comparedcondition
or results
of operations.
There
have been
no changes
to our
critical accounting
estimates identified
in our
2022 Annual Report.
ITEM 3. QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk during
the thirteen weeks ended August 27, 2022 from the
information provided in Item 7A. Quantitative and Qualitative Disclosures
About Market Risk in our 2022 Annual Report.
ITEM 4.
CONTROLS
AND
PROCEDURES
Disclosure Controls and Procedures
Our disclosure
controls and
procedures are
designed to
 
the thirty-nineprovide reasonable
 
weeks endedassurance that
 
February 27,
2021 as
supply
chain
constraints
initially
caused
by
the
pandemic
increased
costs
for
packaging
products
and
manufacturers
implemented pandemic surcharges.
Costs also increased due to rising inflation.
-
Labor costs increased
15.3% due to
wage increases in
response to labor
shortages, primarily dueinformation required
 
to be
disclosed
by us in the pandemicreports
we file or submit
under the Exchange Act
is recorded, processed, summarized
 
and
its effects.
-
Dozens processed increased 3.2%
compared to the thirty-nine
weeks ended February 27,
2021, which resulted in
$6.1
million increase in costs.
Egg purchases and other (including change in inventory)
Third Quarter – Fiscal 2022 vs. Fiscal 2021
-
Costs in
this category
increased primarily
due to
higher egg
prices, partially
offset
by reported, within the
 
decrease intime
periods
 
the volume
of
outside egg purchases, as our percentage of produced to sold increased to 91.9% from 88.7%.
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
-
Costs
in
this
category
decreased
primarily
due
to
the
decreasespecified
 
in
 
the
 
volumeSecurities and
 
ofExchange
 
outsideCommission’s
 
eggrules
 
purchases,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
 
our
percentage of produced to sold increased to 93.3% from 89.5%, partially offset by higher egg prices.
Looking
forward
throughout
the
rest
of
fiscal
2022,
market
indications
pointappropriate
 
to
 
higherallow
 
corntimely
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 August 27, 2022 at the reasonable
 
soybean
prices
and
higherassurance level.
volatility tied to the Russia-Ukraine war and higher export demand.Changes in Internal Control Over Financial Reporting
GROSS PROFIT
Gross profit for the third quarter of fiscal 2022There
 
was $91.6 million compared to $47.5 million forno
change
in our
internal control
over financial
reporting
that occurred
during the
 
same period of fiscal 2021.
The increase of $44.1 million was primarily due to higher egg prices as well as the increased volume of specialty eggs, partially
offset by the increased cost of feed ingredients and processing costs.
Gross profit
for the
thirty-nine weeksquarter
 
ended February
 
26, 2022August
 
was $142.027, 2022
that has materially affected, or is reasonably likely to materially affect,
 
million compared
to $122.7
million for
the same
period of fiscal
2021. The increase
of $19.3 million
was primarily due
to higher egg
prices as well
as the increased
volume of
specialty eggs, partially offset by the increased cost of feed ingredients and processing costs.our internal control over financial reporting.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
29
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
February 26, 2022
February 27, 2021
$ Change
% Change
Specialty egg expense
$
17,318
$
16,162
$
1,156
7.2
%
Delivery expense
16,440
13,359
3,081
23.1
%
Payroll, taxes and benefits
11,398
10,195
1,203
11.8
%
Stock compensation expense
1,007
964
43
4.5
%
Other expenses
6,523
6,976
(453)
(6.5)
%
Total
$
52,686
$
47,656
$
5,030
10.6
%
Third Quarter – Fiscal 2022 vs. Fiscal 2021
Specialty egg expense
-
Specialty egg
expense which
includes franchise
fees, advertising
and promotion
costs generally
tracks with
specialty
egg volumes
which were
up 24.1%
for the
third quarter
of fiscal
2022 compared
to the
same period
of fiscal
2021.
Specialty dozens
sold to
outside distributors
including unconsolidated
affiliates, Specialty
Eggs, LLC
and Southwest
Specialty Eggs, LLC, increased which reduced related costs that we generally incur for specialty egg sales to retailers.
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 increased wages for standard annual
raises as well as the
addition of Red River. The accrual for anticipated performance-based bonuses also increased.
Thirty-nine Weeks Ended
February 26, 2022
February 27, 2021
$ Change
% Change
Specialty egg expense
$
45,295
$
42,898
$
2,397
5.6
%
Delivery expense
44,771
38,905
5,866
15.1
%
Payroll, taxes and benefits
32,640
31,526
1,114
3.5
%
Stock compensation expense
2,983
2,789
194
7.0
%
Other expenses
21,302
19,376
1,926
9.9
%
Total
$
146,991
$
135,494
$
11,497
8.5
%
Thirty-nine weeks – Fiscal 2022 vs. Fiscal 2021
Specialty egg expense
-
Specialty egg
expense which
includes franchise
fees, advertising
and promotion
costs generally
tracks with
specialty
egg volumes
which were
up 11.7%
for the
thirty-nine weeks end
February 26,
2022, compared
to the
same period
of
fiscal 2021.
Specialty dozens sold to outside distributors including unconsolidated affiliates,
Specialty Eggs, LLC and
Southwest Specialty Eggs,
LLC, increased which
reduced related costs
that we generally
incur for specialty
egg sales
to retailers.
Delivery expense
-
The increased
delivery expense
is primarily
due to
the increase
in fuel
and labor
costs for
both our
fleet and
contract
trucking.
Other expenses
-
The increase in other
expenses is primarily due
to property losses
incurred that were not
covered by insurance as
well
as increased premiums for property and casualty insurance programs.
30
OPERATING
INCOME (LOSS)
For
the
third
quarter
of
fiscal
2022,
we
recorded
operating
income
of
$39.6
million
compared
to
operating
loss
of
$493
thousand for the same period of fiscal 2021.
For the thirty-nine weeks ended February 26, 2022, we recorded an operating loss of $2.2 million compared to an operating loss
of $13.2 million for the same period of fiscal 2021.
OTHER INCOME (EXPENSE)
Total
other
income
(expense)
consists
of
items
not
directly
charged
or
related
to
operations,
such
as
interest
income
and
expense, royalty income, equity income or loss of unconsolidated entities, and patronage income, among other items.
For
the
third
quarter
of
fiscal
2022,
we
earned
$205
thousand
of
interest
income
compared
to
$661
thousand
for
the
same
period
of
fiscal
2021.
The
decrease
resulted
from
significantly
lower
investment
balances.
The
Company
recorded
interest
expense
of
$126
thousand
and
$70
thousand
for
the
third
quarters
ended
February
26,
2022
and
February
27,
2021,
respectively.
For the
thirty-nine weeks ended
February 26, 2022,
we earned
$702 thousand
of interest
income compared to
$2.4 million
for
the
same
period
of
fiscal
2021.
The
decrease
resulted
from
significantly lower
investment balances.
The
Company
recorded
interest
expense
of
$262
thousand
and
$205
thousand
for
the
thirty-nine
weeks
ended
February
26,
2022
and
February
27,
2021, respectively.
Patronage dividends, which represent distributions from our membership in Eggland’s Best, Inc. were $10.1 million and $9.0
million for the thirteen and thirty-nine weeks ended February 26, 2022 and February 27, 2021, respectively. Patronage
dividends are paid once a year based on the profits of Eggland’s Best as well as its available cash.
For the third
quarter of fiscal
2022, equity income
of unconsolidated entities
was $1.8 million
compared to $1.9
million in the
prior-year period.
For the thirty-nine weeks ended February 26, 2022, equity income of unconsolidated entities was $2.2 million compared to $1.9
million in the prior-year period.
Other, net for
the third quarter ended February 26, 2022,
was income of $1.1 million compared
to income of $537 thousand for
the same period of fiscal 2021.
Other, net
for the thirty-nine
weeks ended February
26, 2022, was
income of $8.2
million compared to
income of $1.5
million
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
as we
recognized a
$4.5 million
gain due
to the
remeasurement of our
equity investment,
along with
the
$1.4 million payment related to review and adjustment of our various marketing agreements.
INCOME TAXES
For the
third quarter of
fiscal 2022,
pre-tax income was
$53.0 million compared
to $11.8
million for the
same period of
fiscal
2021. We
recorded income tax expense
of $13.6 million for
the third quarter of
fiscal 2022, which reflects
an effective tax
rate
of 25.6%.
Excluding the impact of discrete
items related to a
$5.0 million net tax
benefit recorded in the
third quarter of fiscal
2021 in connection
with the Coronavirus
Aid, Relief, and
Economic Security Act
(the “CARES Act”),
income tax expense
for
the comparable period of fiscal 2021 was $3.3 million, which reflects an adjusted effective tax rate of 27.9%.
For the
thirty-nine weeks
ended February
26, 2022,
pre-tax income
was $19.7
million compared
to $2.2
million for
the same
period of fiscal 2021. We
recorded an income tax benefit of $2.9 million, which includes the discrete tax benefit of $8.3 million
as discussed
in
of the
Notes to
Condensed Consolidated
Financial Statements
in this
Quarterly Report.
Excluding the discrete tax benefit, income tax
expense was $5.3 million with an
adjusted effective tax rate of 27.3%,
compared
to income tax expense
of $934 thousand for the
comparable period of fiscal 2021,
which reflects an effective
tax rate of 41.8%
excluding the impact of the $5.0 million discrete net tax benefit recorded in connection with the CARES Act.
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
31
purposes,
including
tax
exempt
interest
income,
certain
nondeductible
expenses
and
net
income
or
loss
attributable
to
our
noncontrolling interest.
NET INCOME ATTRIBUTABLE
TO CAL-MAINE FOODS, INC.
Net income attributable to Cal-Maine Foods, Inc. for the third quarter ended February 26, 2022, was $39.5 million, or $0.81 per
basic and
diluted common
share, compared
to net
income attributable
to Cal-Maine
Foods, Inc.
of $13.5
million or
$0.28 per
basic and diluted common share for the same period of fiscal 2021.
Net
income
attributable
to
Cal-Maine
Foods,
Inc.
for
the
thirty-nine
weeks
ended
February
26,
2022,
was
$22.7
million,
or
$0.46 per
basic and
diluted common
share, compared
to net
income attributable
to Cal-Maine
Foods, Inc.
of $6.3
million or
$0.13 per basic and diluted common share for the same period of fiscal 2021.
CAPITAL RESOURCES AND LIQUIDITY
Our working capital at February
26, 2022 was $401.3 million,
compared to $429.8 million at
May 29, 2021. The
calculation of
working capital
is defined
as current
assets less
current liabilities.
Our current
ratio was
4.31 at
February 26,
2022, compared
with 5.77 at May 29, 2021.
We
had
no
long-term
debt
outstanding
at
February
26,
2022
or
May
29,
2021.
On
November
15,
2021,
we
entered
into
an
Amended and Restated Credit Agreement (the
“Credit Agreement”) with a five-year
term. The Credit Agreement amended
and
restated
the
Company’s
previously
existing
credit
agreement
dated
July
10,
2018.
The
Credit
Agreement
provides
for
an
increased senior secured
revolving credit facility
(the “Credit Facility”),
in an
initial aggregate principal
amount of up
to $250
million. As
of February
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.
For
additional
information,
see
of
the
Notes
to
Condensed
Consolidated
Financial
Statements
included
in
this
Quarterly Report.
For the thirty-nine weeks ended February 26, 2022,
$20.8 million in net cash was provided by
operating activities, compared to
$14.7 million provided
by operating activities
for the comparable
period in fiscal
2021. This is
primarily due to
the higher egg
prices partially offset by increased costs of feed ingredients compared to the prior-year period.
We
continue to
invest in
our facilities,
with $49.2
million used
to purchase
property,
plant and
equipment for
the thirty-nine
weeks ended February
26, 2022, compared
to $73.8 million
in the same
period of fiscal
2021. We
also acquired the
remaining
50%
membership
interest
in
Red
River
during
our
first
quarter
of
fiscal
2022
for
$48.5
million.
Sales
and
maturities
of
investment
securities,
net
of
purchases,
were
$29.2
million
for
the
thirty-nine
weeks
ended
February
26,
2022,
compared
to
$25.8
million
for
the
comparable period
in
fiscal
2021.
We
received
$400
thousand
in
distributions
from
an
unconsolidated
entity in the first three quarters of fiscal 2022 compared to $5.8 million for the same period fiscal of 2021.
As of February 26, 2022, cash decreased $41.8 million
since May 29, 2021, compared to a decrease of
$25.2 million during the
same period of fiscal 2021.
We
continue to
monitor the
increasing demand
for cage-free
eggs and
to engage
with our
customers in
an effort
to achieve
a
smooth transition to meet their
announced commitment timeline for cage-free
egg sales. We
have invested approximately $502
million in facilities, equipment and related operations to expand our cage-free production
starting with our first facility in 2008.
The following table presents material construction projects approved as of February 26, 2022 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of February
26, 2022
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses/Processing
Facility
Fiscal 2022
$
130,918
108,579
22,339
Cage-Free Layer & Pullet Houses
Fiscal 2023
24,752
6,262
18,490
$
155,670
$
114,841
$
40,829
We believe our current cash balances, investments, cash flows from operations, and Credit Facility will be sufficient to fund our
current capital needs.
32
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
2021 Annual Report.
33
ITEM 3. QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk during the thirty-six weeks ended February 26, 2022 from
the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2021 Annual Report.
ITEM 4.
CONTROLS
AND
PROCEDURES
Disclosure Controls and Procedures
Our disclosure controls
and procedures are
designed to
provide reasonable assurance
that information required
to be disclosed
by us in the reports we file
or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time
periods specified
in the
Securities and
Exchange Commission’s
rules and
forms. Disclosure controls
and procedures
include,
without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports
that
we file or submit under
the Exchange Act is accumulated and
communicated to management, including our principal
executive
and
principal
financial
officers,
or
persons
performing
similar
functions,
as
appropriate
to
allow
timely
decisions
regarding
required disclosure. Based on an evaluation of our disclosure controls and procedures conducted by our Chief Executive Officer
and
Chief
Financial
Officer,
together
with
other
financial
officers,
such
officers
concluded
that
our
disclosure
controls
and
procedures were effective as of February 26, 2022 at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no
change in our
internal control over
financial reporting that
occurred during the
quarter ended February
26, 2022
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.25
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
 
Legal
Proceedings,
 
and
Part
 
II
 
Item 8,
 
Notes
 
to
Consolidated
 
Financial
 
Statements
and
 
Supplementary
Data, Note 18: Commitments
and Contingencies, and (ii)
 
(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 2021 Annual Report.
 
Company’s 2022 Annual
Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
 
The following table is a summary of our thirdfirst quarter 20222023 share repurchases:
Issuer Purchases of Equity Securities
Total
Number of
Maximum Number
Shares Purchased
of Shares that
Total
Number
Average
as Part of Publicly
May Yet
 
Be
of Shares
Price Paid
Announced Plans
Purchased Under the
Period
Purchased (1)
per Share
Or Programs
Plans or Programs
11/28/2105/29/22 to 12/06/25/2122
206286
$
36.3247.04
—
—
12/06/26/2122 to 01/22/07/23/22
26,780609
41.0052.48
—
—
01/23/07/24/22 to 02/26/08/27/22
—
—
—
—
26,986895
$
40.9650.74
—
—
(1)
 
As permitted under our Amended and Restated 2012
Omnibus Long-Term
Incentive Plan, these shares were withheld by us to satisfy
tax withholding
 
 
obligations for employees in connection with the vesting of restricted
common stock.
34
ITEM 6. EXHIBITS
Exhibits
No.
Description
3.1
3.2
31.1*
31.2*
32**
101.SCH*+
Inline XBRL Taxonomy
Extension Schema Document
101.CAL*+
Inline XBRL Taxonomy
Extension Calculation Linkbase Document
101.DEF*+
Inline XBRL Taxonomy
Extension Definition Linkbase Document
101.LAB*+
Inline XBRL Taxonomy
Extension Label Linkbase Document
101.PRE*+
Inline XBRL Taxonomy
Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained
in Exhibit 101)
 
*
Filed herewith as an Exhibit.
 
**
Furnished herewith as an Exhibit.
+
Submitted electronically with this Quarterly Report.
 
26
SIGNATURES
Pursuant to the
 
the requirements
of the Securities
 
Securities Exchange Act
 
of 1934, the
 
the registrant has duly
 
duly caused
this report
 
to be signed
 
on
its behalf by the undersigned, thereunto duly authorized.
CAL-MAINE FOODS, INC.
(Registrant)
Date:
 
March 29,September 27, 2022
/s/ Max P.
 
Bowman
Max P.
 
Bowman
Vice President, Chief Financial
Officer
(Principal Financial Officer)
໿
Date:
 
March 29,September 27, 2022
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)
໿