10-Q 1 calm-20240302.htm FORM 10Q calm-20240302
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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
March 2, 2024
 
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
 
during the preceding
 
12 months (or
 
for such
 
shorter period that
 
the registrant was
 
required to
file such reports), and (2) has been subject to such filing requirements for the past
 
90 days.
Yes
 
No
Indicate by check
 
mark whether the
 
registrant has submitted
 
electronically every
 
Interactive Data File
 
required to be
 
submitted
pursuant to
 
Rule 405
 
of Regulation
 
S-T (§232.405
 
of this
 
chapter) during
 
the preceding
 
12 months
 
(or for
 
such shorter
 
period
that the registrant was required to submit such files).
Yes
 
No
Indicate by
 
check mark
 
whether the registrant
 
is a large
 
accelerated filer,
 
an accelerated
 
filer, a
 
non-accelerated filer,
 
a smaller
reporting
 
company,
 
or
 
an
 
emerging
 
growth
 
company.
 
See
 
the
 
definitions
 
of
 
“large
 
accelerated
 
filer,”
 
“accelerated
 
filer,”
“smaller reporting company,”
 
and “emerging growth company” in Rule 12b-2 of
 
the Exchange Act.
Large Accelerated filer
Accelerated filer
 
Non – Accelerated filer
 
Smaller reporting company
 
Emerging growth company
 
If
 
an
 
emerging
 
growth
 
company,
 
indicate
 
by
 
check
 
mark
 
if
 
the
 
registrant
 
has
 
elected
 
not
 
to
 
use
 
the
 
extended
transition
 
period
 
for
 
complying
 
with
 
any
 
new
 
or
 
revised
 
financial
 
accounting
 
standards
 
provided
 
pursuant
 
to
Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined
 
in Rule 12b-2 of the Exchange Act).
Yes
 
No
There were
44,238,326
 
shares of
 
Common Stock,
 
$0.01 par value,
 
and
4,800,000
 
shares of Class
 
A Common
 
Stock, $0.01
 
par
value, outstanding as of April 2, 2024.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
PART
 
I.
 
FINANCIAL
INFORMATION
ITEM 1.
 
FINANCIAL STATEMENTS
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except for par value amounts)
 
(Unaudited)
 
 
March 2, 2024
June 3, 2023
Assets
Current assets:
Cash and cash equivalents
$
367,123
$
292,824
Investment securities available-for-sale
327,720
355,090
Trade and other receivables, net
212,851
120,247
Income tax receivable
33,771
66,966
Inventories
269,244
284,418
Prepaid expenses and other current assets
6,883
5,380
Total current
 
assets
1,217,592
1,124,925
Property, plant &
 
equipment, net
826,573
744,540
Investments in unconsolidated entities
16,388
14,449
Goodwill
45,776
44,006
Intangible assets, net
16,534
15,897
Other long-term assets
10,666
10,708
Total Assets
$
2,133,529
$
1,954,525
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
95,610
$
82,590
Accrued wages and benefits
25,721
38,733
Accrued income taxes payable
30,113
8,288
Dividends payable
48,891
37,130
Accrued expenses and other liabilities
15,354
15,990
Total current
 
liabilities
215,689
182,731
Other noncurrent liabilities
30,740
9,999
Deferred income taxes, net
166,141
152,212
Total liabilities
412,570
344,942
Commitments and contingencies - see Note 10
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
75,226
72,112
Retained earnings
1,680,886
1,571,112
Accumulated other comprehensive loss, net of tax
(1,514)
(2,886)
Common stock in treasury at cost –
26,022
 
shares at March 2, 2024 and
26,077
 
shares
at June 3, 2023
(31,597)
(30,008)
Total Cal-Maine Foods,
 
Inc. stockholders’ equity
1,723,752
1,611,081
Noncontrolling interest in consolidated entity
(2,793)
(1,498)
Total stockholders’
 
equity
1,720,959
1,609,583
Total Liabilities and Stockholders’
 
Equity
$
2,133,529
$
1,954,525
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
 
 
Thirteen Weeks
 
Ended
Thirty-nine Weeks Ended
March 2, 2024
February 25, 2023
March 2, 2024
February 25, 2023
Net sales
$
703,076
$
997,493
$
1,685,654
$
2,457,537
Cost of sales
484,504
534,467
1,330,519
1,459,172
Gross profit
218,572
463,026
355,135
998,365
Selling, general and administrative
66,020
58,489
194,844
170,048
Gain on involuntary conversions
(9,929)
(3,220)
(9,929)
(3,220)
(Gain) loss on disposal of fixed assets
(306)
(26)
(44)
36
Operating income
162,787
407,783
170,264
831,501
Other income (expense):
Interest income, net
7,554
6,126
21,887
8,959
Royalty income
436
426
1,086
1,198
Patronage dividends
11,298
10,239
11,298
10,239
Equity income of unconsolidated entities
2,666
1,786
2,225
943
Other, net
418
(1,473)
1,250
(205)
Total other income, net
22,372
17,104
37,746
21,134
Income before income taxes
185,159
424,887
208,010
852,635
Income tax expense
38,796
102,118
44,658
206,438
Net income
146,363
322,769
163,352
646,197
Less: Loss attributable to noncontrolling
interest
(349)
(450)
(1,295)
(896)
Net income attributable to Cal-Maine Foods,
Inc.
$
146,712
$
323,219
$
164,647
$
647,093
Net income per common share:
Basic
$
3.01
$
6.64
$
3.38
$
13.31
Diluted
$
3.00
$
6.62
$
3.37
$
13.25
Weighted average
 
shares outstanding:
Basic
48,727
48,653
48,702
48,634
Diluted
48,884
48,842
48,865
48,832
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
Comprehensive Income
(In thousands)
(Unaudited)
Thirteen Weeks
 
Ended
Thirty-nine Weeks Ended
March 2, 2024
February 25, 2023
March 2, 2024
February 25, 2023
Net income
$
146,363
$
322,769
$
163,352
$
646,197
Other comprehensive income (loss), before
tax:
Unrealized holding gain (loss) on available-
for-sale securities, net of reclassification
adjustments
132
26
1,813
(1,945)
Income tax benefit (expense) related to
items of other comprehensive income
(32)
(6)
(441)
474
Other comprehensive income (loss), net of tax
100
20
1,372
(1,471)
Comprehensive income
146,463
322,789
164,724
644,726
Less: Comprehensive loss attributable to the
noncontrolling interest
(349)
(450)
(1,295)
(896)
Comprehensive income attributable to Cal-
Maine Foods, Inc.
$
146,812
$
323,239
$
166,019
$
645,622
See Notes to Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
Thirty-nine Weeks Ended
March 2, 2024
February 25, 2023
Cash flows from operating activities:
Net income
$
163,352
$
646,197
Depreciation and amortization
59,151
53,198
Deferred income taxes
13,488
7,098
Other adjustments, net
1,613
16
Net cash provided by operations
237,604
706,509
Cash flows from investing activities:
Purchases of investment securities
(243,518)
(442,583)
Sales and maturities of investment securities
273,915
132,686
Investment in unconsolidated entities
(363)
(1,673)
Distributions from unconsolidated entities
1,000
Acquisition of business
(53,746)
Purchases of property,
 
plant and equipment
(95,969)
(86,168)
Net proceeds from disposal of property,
 
plant and equipment
243
118
Net cash used in investing activities
(118,438)
(397,620)
Cash flows from financing activities:
Payments of dividends
(42,965)
(144,559)
Purchase of common stock by treasury
(1,688)
(1,633)
Principal payments on finance lease
(214)
(167)
Net cash used in financing activities
(44,867)
(146,359)
Net change in cash and cash equivalents
74,299
162,530
Cash and cash equivalents at beginning of period
292,824
59,084
Cash and cash equivalents at end of period
$
367,123
$
221,614
See Notes to Condensed Consolidated Financial Statements.
7
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The
 
unaudited
 
condensed
 
consolidated
 
financial
 
statements
 
of
 
Cal-Maine
 
Foods,
 
Inc.
 
and
 
its
 
subsidiaries
 
(the
 
“Company,”
“we,” “us,” “our”)
 
have been prepared
 
in accordance with
 
the instructions to
 
Form 10-Q and
 
Article 10 of
 
Regulation S-X and
in
 
accordance
 
with generally
 
accepted
 
accounting
 
principles in
 
the
 
United
 
States of
 
America
 
(“GAAP”)
 
for
 
interim
 
financial
reporting and
 
should be
 
read in
 
conjunction with
 
our Annual
 
Report on
 
Form 10-K
 
for the fiscal
 
year ended
 
June 3,
 
2023 (the
“2023
 
Annual
 
Report”).
 
These
 
statements
 
reflect
 
all
 
adjustments
 
that
 
are,
 
in
 
the
 
opinion
 
of
 
management,
 
necessary
 
to
 
a
 
fair
statement of the results for
 
the interim periods presented
 
and, in the opinion of
 
management, consist of adjustments
 
of a normal
recurring nature.
 
Operating results for
 
the interim periods
 
are not necessarily
 
indicative of operating
 
results for the
 
entire fiscal
year.
Fiscal Year
The Company’s
 
fiscal year
 
ends on
 
the Saturday
 
closest to
 
May 31.
 
Each of
 
the three-month
 
periods and
 
year-to-date periods
ended on March 2, 2024 and February 25, 2023 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 affect
 
the amounts
 
reported in
 
the consolidated
 
financial statements
 
and accompanying
 
notes. Actual
 
results
could differ from those estimates.
Investment Securities
The Company
 
has determined
 
that its
 
debt securities
 
are available-for-sale
 
investments. We
 
classify these
 
securities as
 
current
because the
 
amounts invested
 
are available
 
for current
 
operations. Available
 
-for-sale
 
securities are
 
carried at
 
fair value,
 
based
on quoted market prices
 
as of the balance sheet
 
date, with unrealized gains
 
and losses recorded in other
 
comprehensive income.
The
 
amortized
 
cost
 
of
 
debt
 
securities
 
is
 
adjusted
 
for
 
amortization
 
of
 
premiums
 
and
 
accretion
 
of
 
discounts
 
to
 
maturity
 
and
 
is
recorded in interest
 
income. The Company regularly
 
evaluates changes to the
 
rating of its debt
 
securities by credit agencies
 
and
economic conditions
 
to assess and
 
record any
 
expected credit
 
losses through
 
allowance for
 
credit losses,
 
limited to
 
the amount
that fair value was less than the amortized cost basis.
 
Investments
 
in
 
mutual
 
funds
 
are
 
recorded
 
at
 
fair
 
value
 
and
 
are
 
classified
 
as
 
“Other
 
long-term
 
assets”
 
in
 
the
 
Company’s
Condensed
 
Consolidated
 
Balance
 
Sheets.
 
Unrealized
 
gains
 
and
 
losses
 
for
 
equity
 
securities
 
are
 
recorded
 
in
 
other
 
income
(expenses) as Other, net in the Company’s
 
Condensed Consolidated Statements of Income.
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. Interest and dividends on securities classified as available-for-sale
 
are recorded in interest income.
Trade Receivables
 
Trade receivables
 
are stated at their
 
carrying values, which
 
include a reserve
 
for credit losses. As
 
of March 2,
 
2024 and June
 
3,
2023, reserves for credit losses were
 
$
605
 
thousand and $
579
 
thousand, respectively.
 
The Company extends credit to customers
based
 
on
 
an
 
evaluation
 
of
 
each
 
customer’s
 
financial
 
condition
 
and
 
credit
 
history.
 
Collateral
 
is
 
generally
 
not
 
required.
 
The
Company
 
minimizes exposure
 
to counter
 
party credit
 
risk through
 
credit analysis
 
and approvals,
 
credit limits,
 
and monitoring
procedures.
 
In
 
determining
 
our
 
reserve
 
for
 
credit
 
losses,
 
receivables
 
are
 
assigned
 
an
 
expected
 
loss
 
based
 
on
 
historical
 
loss
information adjusted as needed for economic and other forward-looking
 
factors.
Goodwill
Goodwill
 
represents
 
the
 
excess
 
of
 
the
 
purchase
 
price
 
over
 
the
 
fair
 
value
 
of
 
the
 
identifiable
 
net
 
assets
 
acquired.
 
Goodwill
 
is
evaluated
 
for
 
impairment
 
annually
 
by
 
first
 
performing
 
a
 
qualitative
 
assessment
 
to
 
determine
 
whether
 
a
 
quantitative
 
goodwill
8
test is
 
necessary.
 
After assessing
 
the totality
 
of events
 
or circumstances,
 
if we
 
determine it
 
is more
 
likely than
 
not that
 
the fair
value
 
of
 
a
 
reporting
 
unit
 
is
 
less
 
than
 
its
 
carrying
 
amount,
 
then
 
we
 
perform
 
additional
 
quantitative
 
tests
 
to
 
determine
 
the
magnitude of any impairment.
 
Intangible Assets
Intangible
 
assets
 
are
 
initially
 
recorded
 
at
 
fair
 
value
 
in
 
business
 
acquisitions,
 
which
 
include
 
franchise
 
rights,
 
customer
relationships, non-compete
 
agreements, trademark
 
and right
 
of use
 
intangibles. They
 
are amortized
 
over their
 
estimated useful
lives
 
of
5
 
to
15
 
years. The
 
gross
 
cost
 
and
 
accumulated
 
amortization
 
of
 
intangible
 
assets
 
are
 
removed
 
when
 
the
 
recorded
amounts
 
are fully
 
amortized
 
and
 
the asset
 
is no
 
longer
 
in use
 
or the
 
contract has
 
expired.
 
When certain
 
events or
 
changes in
operating conditions
 
occur,
 
asset lives may
 
be adjusted
 
and an impairment
 
assessment may
 
be performed
 
on the recoverability
of the carrying amounts.
Indefinite life assets are recorded at fair value in business acquisitions and
 
represents water rights. They are not amortized, but
are reviewed for impairment at least annually or more frequently if
 
impairment indicators arise.
Dividends Payable
 
We
 
accrue dividends at
 
the end of
 
each quarter according
 
to the Company’s
 
dividend policy adopted
 
by its Board
 
of Directors.
The Company
 
pays a dividend
 
to shareholders
 
of its Common
 
Stock and
 
Class A Common
 
Stock on
 
a quarterly basis
 
for each
quarter for
 
which the
 
Company reports
 
net income
 
attributable to
 
Cal-Maine Foods,
 
Inc. computed
 
in accordance
 
with GAAP
in an amount
 
equal to one-third
 
(1/3) of such
 
quarterly income. Dividends
 
are paid to
 
shareholders of record
 
as of the 60th
 
day
following the
 
last day
 
of such quarter,
 
except for
 
the fourth fiscal
 
quarter.
 
For the
 
fourth quarter,
 
the Company
 
pays dividends
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.
 
The dividend policy is subject to
 
periodic review by the Board of
Directors.
Business Combinations
The Company applies the acquisition
 
method of accounting, which
 
requires that once control is obtained,
 
all the assets acquired
and liabilities assumed,
 
including amounts
 
attributable to noncontrolling
 
interests, are recorded
 
at their respective
 
fair values at
the date of acquisition. We
 
determine the fair values of identifiable assets and liabilities
 
internally,
 
which requires estimates and
the
 
use
 
of
 
various
 
valuation
 
techniques.
 
When
 
a
 
market
 
value
 
is
 
not
 
readily
 
available,
 
our
 
internal
 
valuation
 
methodology
considers the remaining estimated life of the assets acquired and what
 
management believes is the market value for those assets.
 
We
 
typically use the income
 
method approach for
 
intangible assets acquired in
 
a business combination. Significant
 
estimates in
valuing
 
certain
 
intangible
 
assets
 
include,
 
but
 
are
 
not
 
limited
 
to,
 
the
 
amount
 
and
 
timing
 
of
 
future
 
cash
 
flows,
 
growth
 
rates,
discount rates and
 
useful lives. The
 
excess of the purchase
 
price over fair values
 
of identifiable assets and
 
liabilities is recorded
as goodwill.
 
Gain on Involuntary Conversions
 
The Company
 
maintains insurance
 
for both
 
property damage
 
and business
 
interruption relating
 
to catastrophic
 
events, such
 
as
fires, hurricanes,
 
tornadoes
 
and other
 
acts of
 
God, and
 
is eligible
 
to participate
 
in U.S.
 
Department
 
of Agriculture
 
(“USDA”)
indemnity
 
and
 
compensation
 
programs
 
for
 
certain
 
losses
 
due
 
to
 
disease
 
outbreaks
 
such as
 
highly
 
pathogenic
 
avian
 
influenza
(“HPAI”).
 
Specifically,
 
the
 
Animal
 
Health
 
Protection
 
Act
 
authorizes
 
USDA to
 
provide
 
indemnity
 
payments
 
to
 
producers
 
for
birds and eggs
 
that must be
 
destroyed during a
 
disease response. Payments
 
received under these
 
programs are based
 
on the fair
market value
 
of the
 
poultry and/or
 
eggs at
 
the time
 
that HPAI
 
virus is
 
detected in
 
the flock.
 
Other covered
 
costs include
 
feed,
depopulation and disposal costs, and virus elimination costs. USDA does not
 
provide indemnity for income or production losses
suffered
 
due to
 
downtime or
 
other business
 
disruptions nor
 
for indirect
 
continuing expenses.
 
Recoveries received
 
for property
damage, business interruption and disease outbreaks in
 
excess of the net book value of damaged assets, clean-up and
 
demolition
costs,
 
and
 
other
 
direct
 
post-event
 
costs
 
are
 
recorded
 
within
 
“Gain
 
on
 
involuntary
 
conversions”
 
in
 
the
 
period
 
received
 
or
committed when all contingencies associated with the recoveries are resolved.
 
Loss Contingencies
Certain
 
conditions
 
may
 
exist
 
as
 
of
 
the
 
date
 
the
 
financial
 
statements
 
are
 
issued
 
that
 
may
 
result
 
in
 
a
 
loss
 
to
 
the
 
Company
 
but
which will
 
only be
 
resolved when
 
one or
 
more future
 
events occur
 
or fail
 
to occur.
 
The Company’s
 
management and
 
its legal
 
 
9
counsel
 
assess such
 
contingent
 
liabilities, and
 
such assessment
 
inherently
 
involves an
 
exercise
 
of judgment.
 
In assessing
 
loss
contingencies
 
related
 
to legal
 
proceedings
 
that are
 
pending against
 
the Company
 
or unasserted
 
claims that
 
may result
 
in such
proceedings, the Company’s
 
legal counsel evaluates
 
the perceived merits
 
of any legal
 
proceedings or unasserted
 
claims as well
as the perceived merits of the amount of relief sought or expected to be
 
sought therein.
If the assessment
 
of a contingency
 
indicates it is
 
probable that
 
a material loss
 
has been incurred
 
and the amount
 
of the liability
can be
 
estimated, the
 
estimated liability
 
would be accrued
 
in the Company’s
 
financial statements.
 
If the assessment
 
indicates a
potentially material loss contingency is
 
not probable, but is reasonably possible,
 
or is probable but cannot be estimated,
 
then the
nature of the
 
contingent liability,
 
together with an
 
estimate of the
 
range of possible
 
loss if determinable
 
and material, would
 
be
disclosed. Loss
 
contingencies considered
 
remote are
 
generally not
 
disclosed unless
 
they involve
 
guarantees, in
 
which case
 
the
nature of the guarantee would be disclosed.
 
The Company expenses the costs of litigation as they are incurred.
New Accounting Pronouncements and Policies
No new accounting pronouncement issued or effective
 
during the fiscal year had or is expected to have a material
 
impact on our
Consolidated Financial Statements.
Note 2 - Acquisition
Effective
September 30, 2023
, the Company
 
acquired the assets of
 
Fassio Egg Farms,
 
Inc. (“Fassio”), related
 
to its commercial
shell
 
egg
 
production
 
and
 
processing
 
business.
 
Fassio
 
owns
 
and
 
operates
 
commercial
 
shell
 
egg
 
production
 
and
 
processing
facilities with
 
a capacity
 
at the
 
time of
 
acquisition of
 
approximately
1.2
 
million
 
laying hens,
 
primarily
 
cage-free,
 
a feed
 
mill,
pullets, a
 
fertilizer production
 
and composting
 
operation and
 
land located
 
in Erda, Utah,
 
outside Salt
 
Lake City.
 
The Company
accounted for the acquisition as a business combination.
 
The following
 
table summarizes
 
the consideration
 
paid for
 
the Fassio
 
assets and
 
the amounts
 
of assets
 
acquired and
 
liabilities
assumed recognized at the acquisition date (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash consideration paid
$
53,746
Fair value of contingent consideration
1,000
Total estimated purchase
 
consideration
54,746
Recognized amounts of identifiable assets acquired and
 
liabilities assumed
Inventory
$
6,164
Property, plant and equipment
44,540
Intangible assets
2,272
Other long-term assets
143
Liabilities assumed
(143)
Total identifiable
 
net assets
52,976
Goodwill
1,770
$
54,746
Inventory consisted
 
primarily of
 
flock, feed
 
ingredients,
 
packaging, and
 
egg inventory.
 
Flock inventory
 
was valued at
 
carrying
value
 
as
 
management
 
believes
 
that
 
its
 
carrying
 
value
 
best
 
approximates
 
its
 
fair
 
value.
 
Feed
 
ingredients,
 
packaging
 
and
 
egg
inventory were all valued based on market prices as of September 30, 2023.
 
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.
Intangible
 
assets
 
consisted
 
primarily
 
of
 
water
 
rights
 
within
 
the
 
property
 
acquired.
 
Water
 
rights
 
were
 
valued
 
using
 
the
 
sales
comparison approach.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10
Contingent
 
consideration
 
liability
 
was
 
recorded
 
and
 
represents
 
potential
 
future
 
cash
 
payment
 
to
 
the
 
sellers
 
contingent
 
on
 
the
acquired
 
business
 
meeting
 
certain
 
return
 
on
 
profitability
 
milestones over
 
a
three-year
 
period,
 
commencing
 
on
 
the date
 
of
 
the
acquisition.
 
The fair
 
value of
 
the contingent
 
consideration is
 
estimated using
 
a discounted
 
cash flow
 
model. Key
 
assumptions
and
 
unobservable
 
inputs that
 
require
 
significant judgement
 
used in
 
the estimate
 
include weighted
 
average cost
 
of capital,
 
egg
prices, projected revenue
 
and expenses over which
 
the contingent considered
 
is measured, and the
 
probability assessments with
respect to the
 
likelihood of achieving
 
the forecasted projections.
 
A range of
 
potential outcomes cannot
 
be reasonably estimated
due to market volatility of egg prices.
Goodwill
 
represents
 
the
 
excess
 
of
 
the
 
purchase
 
price
 
of
 
the
 
acquired
 
business
 
over
 
the
 
acquisition
 
date
 
fair
 
value
 
of
 
the
 
net
assets acquired.
 
Goodwill recorded
 
in connection
 
with the
 
Fassio acquisition
 
is primarily
 
attributable to
 
improved efficiencies
from integrating the assets of
 
Fassio with the operations
 
of the Company.
 
The Company recognized goodwill
 
of $
1.8
 
million as
a result of the acquisition.
 
Note 3 - Investment
Securities
The following represents the Company’s
 
investment securities as of March 2, 2024 and June 3, 2023 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 2, 2024
Amortized
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
6,147
$
$
63
$
6,084
Commercial paper
42,864
39
42,825
Corporate bonds
121,430
367
121,063
Certificates of deposits
1,830
2
1,828
US government and agency obligations
115,165
199
114,966
Asset backed securities
9,418
85
9,503
Treasury bills
31,455
4
31,451
Total current
 
investment securities
$
328,309
$
85
$
674
$
327,720
Mutual funds
$
1,108
$
16
$
$
1,124
Total noncurrent
 
investment securities
$
1,108
$
16
$
$
1,124
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 3, 2023
Amortized
 
Cost
Unrealized
 
Gains
Unrealized
Losses
Estimated
 
Fair Value
Municipal bonds
$
16,571
$
$
275
$
16,296
Commercial paper
56,486
77
56,409
Corporate bonds
139,979
1,402
138,577
Certificates of deposits
675
675
US government and agency obligations
101,240
471
100,769
Asset backed securities
13,459
151
13,308
Treasury bills
29,069
13
29,056
Total current
 
investment securities
$
357,479
$
$
2,389
$
355,090
Mutual funds
$
2,172
$
$
91
$
2,081
Total noncurrent
 
investment securities
$
2,172
$
$
91
$
2,081
Available-for-sale
Proceeds
 
from
 
sales and
 
maturities of
 
investment
 
securities available-for-sale
 
were $
273.9
 
million
 
and $
132.7
 
million
 
during
the thirty-nine
 
weeks ended March
 
2, 2024
 
and February
 
25, 2023,
 
respectively.
 
Gross realized
 
gains for
 
the thirty-nine
 
weeks
ended March
 
2, 2024
 
and February
 
25, 2023
 
were $
18
 
thousand and
 
$
38
 
thousand, respectively.
 
Gross realized
 
losses for
 
the
thirty-nine weeks ended March 2, 2024 and February
 
25, 2023 were $
8
 
thousand and $
64
 
thousand, respectively.
 
There were
no
allowances
 
for credit losses at March 2, 2024 and June 3, 2023.
 
 
11
Actual maturities
 
may differ
 
from contractual
 
maturities as some
 
borrowers have
 
the right to
 
call or prepay
 
obligations with
 
or
without penalties. Contractual maturities of current investments at March
 
2, 2024 are as follows (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
Estimated Fair Value
Within one year
$
213,556
1-5 years
114,164
Total
$
327,720
Noncurrent
 
Proceeds from sales and maturities of noncurrent investment securities
 
were $
1.5
 
million and $
1.8
 
million during the thirty-nine
weeks ended March 2, 2024
 
and February 25, 2023, respectively.
 
Gross realized gains for the thirty-nine
 
weeks ended March 2,
2024 and February 25,
 
2023 were $
14
 
thousand and $
6
 
thousand, respectively.
 
There were
no
 
realized losses for the
 
thirty-nine
weeks ended March 2, 2024. Gross realized losses for the thirty-nine
 
weeks ended February 25, 2023 were $
66
 
thousand.
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12
 
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 March 2, 2024 and June
 
3, 2023 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 2, 2024
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
6,084
$
$
6,084
Commercial paper
42,825
42,825
Corporate bonds
121,063
121,063
Certificates of deposits
1,828
1,828
US government and agency obligations
114,966
114,966
Asset backed securities
9,503
9,503
Treasury bills
31,451
31,451
Mutual funds
1,124
1,124
Total assets measured at fair
 
value
$
1,124
$
327,720
$
$
328,844
Liabilities
Contingent consideration
$
$
$
1,000
$
1,000
Total liabilities measured
 
at fair value
$
$
$
1,000
$
1,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 3, 2023
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
16,296
$
$
16,296
Commercial paper
56,409
56,409
Corporate bonds
138,577
138,577
Certificates of deposits
675
675
US government and agency obligations
100,769
100,769
Asset backed securities
13,308
13,308
Treasury bills
29,056
29,056
Mutual funds
2,081
2,081
Total assets measured at fair
 
value
$
2,081
$
355,090
$
$
357,171
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.
Contingent
 
consideration
 
classified
 
as
 
Level
 
3
 
consists
 
of
 
the
 
potential
 
obligation
 
to
 
pay
 
an
 
earnout
 
to
 
the
 
sellers
 
of
 
Fassio
contingent on the
 
acquired business meeting
 
certain return on
 
profitability milestones over
 
a
three-year
 
period, commencing on
the date of
 
the acquisition. The fair
 
value of the
 
contingent consideration is
 
estimated using a
 
discounted cash flow
 
model. Key
assumptions and
 
unobservable inputs
 
that require
 
significant judgement
 
used in
 
the estimate
 
include weighted
 
average cost
 
of
capital,
 
egg
 
prices,
 
projected
 
revenue
 
and
 
expenses
 
over
 
which
 
the
 
contingent
 
considered
 
is
 
measured,
 
and
 
the
 
probability
assessments
 
with
 
respect
 
to
 
the
 
likelihood
 
of
 
achieving
 
the
 
forecasted
 
projections.
 
See
 
further
 
discussion
 
in
Note 5 - Inventories
Inventories consisted of the following as of March 2, 2024 and June 3,
 
2023 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 2, 2024
June 3, 2023
Flocks, net of amortization
$
150,441
$
164,540
Eggs and egg products
26,770
28,318
Feed and supplies
92,033
91,560
$
269,244
$
284,418
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13
We
 
grow
 
and
 
maintain
 
flocks
 
of
 
layers
 
(mature
 
female
 
chickens),
 
pullets
 
(female
 
chickens,
 
under
 
18
 
weeks
 
of
 
age),
 
and
breeders (male and female
 
chickens used to produce fertile
 
eggs to hatch for egg
 
production flocks). Our total
 
flock at March 2,
2024 and June
 
3, 2023 consisted of
 
approximately
10.9
 
million and
10.8
 
million pullets and breeders
 
and
42.2
 
million and
41.2
million layers, respectively.
Note 6 - Equity
The following reflects equity activity for the thirteen weeks ended
 
March 2, 2024 and February 25, 2023 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thirteen Weeks
 
Ended March 2, 2024
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 December
2, 2023
$
703
$
48
$
(30,014)
$
74,214
$
(1,614)
$
1,583,071
$
(2,444)
$
1,623,964
Other comprehensive
income, net of tax
100
100
Stock compensation
plan transactions
(1,583)
1,012
(571)
Dividends ($
0.997
per share)
Common
(44,111)
(44,111)
Class A common
(4,786)
(4,786)
Net income (loss)
146,712
(349)
146,363
Balance at March 2,
2024
$
703
$
48
$
(31,597)
$
75,226
$
(1,514)
$
1,680,886
$
(2,793)
$
1,720,959
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thirteen Weeks
 
Ended February 25, 2023
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum.
Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at November
26, 2022
$
703
$
48
$
(28,496)
$
70,005
$
(3,087)
$
1,281,784
$
(652)
$
1,320,305
Other comprehensive
income, net of tax
20
20
Stock compensation
plan transactions
(1,500)
972
(528)
Dividends ($
2.199
per share)
Common
(97,123)
(97,123)
Class A common
(10,555)
(10,555)
Net income (loss)
323,219
(450)
322,769
Balance at February
25, 2023
$
703
$
48
$
(29,996)
$
70,977
$
(3,067)
$
1,497,325
$
(1,102)
$
1,534,888
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thirty-nine Weeks Ended
 
March 2, 2024
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 June 3,
2023
$
703
$
48
$
(30,008)
$
72,112
$
(2,886)
$
1,571,112
$
(1,498)
$
1,609,583
Other comprehensive
income, net of tax
1,372
1,372
Stock compensation
plan transactions
(1,589)
3,114
1,525
Dividends ($
1.119
per share)
Common
(49,501)
(49,501)
Class A common
(5,372)
(5,372)
Net income (loss)
164,647
(1,295)
163,352
Balance at March 2,
2024
$
703
$
48
$
(31,597)
$
75,226
$
(1,514)
$
1,680,886
$
(2,793)
$
1,720,959
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thirty-nine Weeks Ended
 
February 25, 2023
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum.
Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at May 28,
2022
$
 
703
$
 
48
$
 
(28,447)
$
 
67,989
$
 
(1,596)
$
 
1,065,854
$
 
(206)
$
 
1,104,345
Other comprehensive
loss, net of tax
(1,471)
(1,471)
Stock compensation
plan transactions
(1,549)
2,988
1,439
Dividends ($
4.403
per share)
Common
(194,478)
(194,478)
Class A common
(21,144)
(21,144)
Net income (loss)
647,093
(896)
646,197
Balance at February
25, 2023
$
703
$
48
$
(29,996)
$
70,977
$
(3,067)
$
1,497,325
(1,102)
$
1,534,888
 
Note 7 - Net Income per Common Share
 
Basic net income
 
per share is
 
based on the
 
weighted average Common
 
Stock and Class
 
A Common Stock
 
outstanding. Diluted
net
 
income
 
per
 
share
 
is
 
based
 
on
 
weighted-average
 
common
 
shares
 
outstanding
 
during
 
the
 
relevant
 
period
 
adjusted
 
for
 
the
dilutive effect of share-based awards.
 
 
 
15
The
 
following
 
table
 
provides
 
a
 
reconciliation
 
of
 
the
 
numerators
 
and
 
denominators
 
used
 
to
 
determine
 
basic
 
and
 
diluted
 
net
income per common share (amounts in thousands, except per share data):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thirteen Weeks
 
Ended
Thirty-nine Weeks Ended
March 2, 2024
February 25, 2023
March 2, 2024
February 25, 2023
Numerator
Net income
$
146,363
$
322,769
$
163,352
$
646,197
Less: Loss attributable to
noncontrolling interest
(349)
(450)
(1,295)
(896)
Net income attributable to Cal-Maine
Foods, Inc.
$
146,712
$
323,219
$
164,647
$
647,093
Denominator
Weighted-average
 
common shares
outstanding, basic
48,727
48,653
48,702
48,634
Effect of dilutive restricted shares
157
189
163
198
Weighted-average
 
common shares
outstanding, diluted
48,884
48,842
48,865
48,832
Net income per common share
attributable to Cal-Maine Foods, Inc.
Basic
$
3.01
$
6.64
$
3.38
$
13.31
Diluted
$
3.00
$
6.62
$
3.37
$
13.25
 
 
Note 8 - Revenue from Contracts with Customers
Satisfaction of Performance Obligation
The vast majority of the Company’s
 
revenue is derived from agreements with customers based on the customer
 
placing an order
for products. Pricing
 
for the most part
 
is determined when
 
the Company and
 
the customer agree
 
upon the specific
 
order, which
establishes the contract for that order.
Revenues are
 
recognized in
 
an amount
 
that reflects
 
the net
 
consideration we
 
expect to
 
receive in
 
exchange for
 
the goods.
 
Our
shell
 
eggs
 
are
 
sold
 
at
 
prices
 
related
 
to
 
independently
 
quoted
 
wholesale
 
market
 
prices
 
or
 
formulas
 
related
 
to
 
our
 
costs
 
of
production.
 
The
 
Company’s
 
sales
 
predominantly
 
contain
 
a
 
single
 
performance
 
obligation.
 
We
 
recognize
 
revenue
 
upon
satisfaction
 
of
 
the
 
performance
 
obligation
 
with
 
the
 
customer,
 
which
 
typically
 
occurs
 
within
 
days
 
of
 
the
 
Company
 
and
 
the
customer agreeing upon the order.
Returns and Refunds
Some of our contracts include a guaranteed sale clause, pursuant to which we
 
credit the customer’s account for product that the
customer is unable to sell before expiration. The Company records an allowance for
 
expected customer returns using historical
return data compared to current period sales and accounts receivable.
 
The allowance is recorded as a reduction of sales in the
same period the revenue is recognized.
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.’’
 
 
 
 
 
 
 
 
 
 
 
 
16
Disaggregation of Revenue
The following table provides revenue disaggregated by product category
 
(in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thirteen Weeks
 
Ended
Thirty-nine Weeks Ended
March 2, 2024
February 25, 2023
March 2, 2024
February 25, 2023
Conventional shell egg sales
$
413,619
$
689,022
$
919,498
$
1,656,528
Specialty shell egg sales
262,293
272,205
688,879
700,803
Egg products
21,759
32,582
63,994
88,274
Other
5,405
3,684
13,283
11,932
$
703,076
$
997,493
$
1,685,654
$
2,457,537
Contract Costs
The Company can incur costs to
 
obtain or fulfill a contract with a
 
customer. If the
 
amortization period of these costs is less
 
than
one year,
 
they are
 
expensed as
 
incurred. When
 
the amortization
 
period is
 
greater than
 
one year,
 
a contract
 
asset is
 
recognized
and
 
is
 
amortized
 
over
 
the
 
contract
 
life
 
as
 
a
 
reduction
 
in
 
net
 
sales.
 
As
 
of
 
March
 
2,
 
2024
 
and
 
June
 
3,
 
2023,
 
the
 
balance
 
for
contract assets was immaterial.
Contract Balances
The Company receives payment from customers based on specified terms that are
 
generally less than 30 days from delivery.
There are rarely contract assets or liabilities related to performance under the
 
contract.
Note 9 - Stock Based Compensation
Total
 
stock-based
 
compensation
 
expense
 
was
 
$
3.2
 
and
 
$
3.1
 
million
 
for
 
the
 
thirty-nine
 
weeks
 
ended
 
March
 
2,
 
2024
 
and
February 25, 2023, respectively.
Unrecognized
 
compensation
 
expense
 
as a
 
result
 
of non
 
-vested
 
shares
 
of
 
restricted
 
stock outstanding
 
under
 
the
 
Amended
 
and
Restated 2012
 
Omnibus Long-Term
 
Incentive Plan
 
at March 2,
 
2024 of
 
$
8.6
 
million will be
 
recorded over
 
a weighted average
period
 
of
2.2
 
years.
 
Refer
 
to
 
Part
 
II
 
Item
 
8,
 
Notes
 
to
 
Consolidated
 
Financial
 
Statements
 
and
 
Supplementary
 
Data,
 
Note 14
 
-
Stock Compensation Plans in our 2023 Annual Report for further information
 
on our stock compensation plans.
The Company’s restricted share activity
 
for the thirty-nine weeks ended March 2, 2024 follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, June 3, 2023
294,140
$
43.72
Granted
86,363
54.91
Vested
(99,360)
37.70
Forfeited
(1,329)
44.68
Outstanding, March 2, 2024
279,814
$
49.31
 
17
 
 
 
 
Note 10 - Commitments and Contingencies
LEGAL PROCEEDINGS
State of Texas
 
v. Cal-Maine Foods, Inc. d/b/a Wharton;
 
and Wharton County Foods, LLC
 
On April
 
23, 2020,
 
the Company
 
and its subsidiary
 
Wharton County
 
Foods, LLC (“WCF”)
 
were named
 
as defendants in
 
State
of
 
Texas
 
v.
 
Cal-Maine
 
Foods,
 
Inc.
 
d/b/a
 
Wharton;
 
and
 
Wharton
 
County
 
Foods,
 
LLC,
 
Cause
 
No.
 
2020-25427,
 
in
 
the
 
District
Court of
 
Harris County,
 
Texas.
 
The State
 
of Texas
 
(the “State”)
 
asserted claims
 
based on
 
the Company’s
 
and WCF’s
 
alleged
violation
 
of
 
the
 
Texas
 
Deceptive
 
Trade
 
Practices—Consumer
 
Protection
 
Act,
 
Tex.
 
Bus.
 
&
 
Com.
 
Code
 
§§
 
17.41-17.63
(“DTPA”).
 
The
 
State
 
claimed
 
that
 
the
 
Company
 
and
 
WCF
 
offered
 
shell
 
eggs
 
at
 
excessive
 
or
 
exorbitant
 
prices
 
during
 
the
COVID-19
 
state
 
of
 
emergency
 
and
 
made
 
misleading
 
statements
 
about
 
shell
 
egg
 
prices.
 
The
 
State
 
sought
 
temporary
 
and
permanent
 
injunctions
 
against
 
the
 
Company
 
and
 
WCF
 
to
 
prevent
 
further
 
alleged
 
violations
 
of
 
the
 
DTPA,
 
along
 
with
 
over
$
100,000
 
in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the State’s
 
original petition with
prejudice. On September
 
11, 2020,
 
the State filed a
 
notice of appeal,
 
which was assigned to
 
the Texas
 
Court of Appeals
 
for the
First
 
District.
 
On
 
August
 
16,
 
2022,
 
the
 
appeals
 
court
 
reversed
 
and
 
remanded
 
the
 
case
 
back
 
to
 
the
 
trial
 
court
 
for
 
further
proceedings. On October 31, 2022,
 
the Company and WCF appealed
 
the First District Court’s
 
decision to the Supreme Court
 
of
Texas.
 
On
 
September
 
29,
 
2023,
 
the
 
Supreme
 
Court
 
of
 
Texas
 
denied
 
the
 
Company’s
 
Petition
 
for
 
Review
 
so
 
the
 
case
 
will
 
be
remanded to the
 
trial court for further
 
proceedings. The district
 
court has set
 
a case management conference
 
for April 12, 2024.
Management believes the risk of material loss related to this matter to be remote.
Bell et al. v. Cal-Maine Foods et al.
 
On
 
April
 
30, 2020,
 
the Company
 
was named
 
as one
 
of several
 
defendants
 
in
 
Bell et
 
al. v.
 
Cal-Maine
 
Foods et
 
al.,
 
Case No.
1:20-cv-461,
 
in
 
the
 
Western
 
District
 
of
 
Texas,
 
Austin
 
Division.
 
The
 
defendants
 
include
 
numerous
 
grocery
 
stores,
 
retailers,
producers, and farms. Plaintiffs assert that defendants
 
violated the DTPA
 
by allegedly demanding exorbitant or
 
excessive prices
for
 
eggs during
 
the
 
COVID-19
 
state of
 
emergency.
 
Plaintiffs
 
request
 
certification
 
of a
 
class of
 
all consumers
 
who purchased
eggs
 
in
 
Texas
 
sold,
 
distributed,
 
produced,
 
or
 
handled
 
by
 
any
 
of
 
the
 
defendants
 
during
 
the
 
COVID-19
 
state
 
of
 
emergency.
Plaintiffs seek to enjoin
 
the Company and other
 
defendants from selling eggs
 
at a price more than
 
10% greater than the price
 
of
eggs prior
 
to the
 
declaration
 
of the
 
state of
 
emergency
 
and damages
 
in the
 
amount
 
of $
10,000
 
per violation,
 
or $
250,000
 
for
each violation
 
impacting anyone
 
over 65
 
years old.
 
On December
 
1, 2020,
 
the Company
 
and
 
certain other
 
defendants filed
 
a
motion to
 
dismiss the
 
plaintiffs’
 
amended
 
class action
 
complaint. The
 
plaintiffs
 
subsequently filed
 
a motion
 
to strike,
 
and the
motion to
 
dismiss and
 
related proceedings
 
were referred
 
to a
 
United States
 
magistrate judge.
 
On July
 
14, 2021,
 
the magistrate
judge
 
issued
 
a
 
report
 
and
 
recommendation
 
to
 
the
 
court
 
that
 
the
 
defendants’
 
motion
 
to
 
dismiss
 
be
 
granted
 
and
 
the
 
case
 
be
dismissed without prejudice for lack of subject matter jurisdiction. On
 
September 20, 2021, the court dismissed the case without
prejudice.
 
On
 
July
 
13,
 
2022,
 
the
 
court
 
denied
 
the
 
plaintiffs’
 
motion
 
to
 
set
 
aside
 
or
 
amend
 
the
 
judgment
 
to
 
amend
 
their
complaint.
On March 15, 2022,
 
plaintiffs filed a
 
second suit against the
 
Company and several
 
defendants in Bell et
 
al. v.
 
Cal-Maine Foods
et al.,
 
Case No.
 
1:22-cv-246, in
 
the Western
 
District of
 
Texas,
 
Austin Division
 
alleging the
 
same assertions
 
as laid
 
out in
 
the
first
 
complaint.
 
On
 
August
 
12,
 
2022,
 
the
 
Company
 
and
 
other
 
defendants
 
in
 
the
 
case
 
filed
 
a
 
motion
 
to
 
dismiss
 
the
 
plaintiffs’
class action
 
complaint. On
 
January 9,
 
2023, the
 
court entered
 
an order
 
and final
 
judgement granting
 
the Company’s
 
motion to
dismiss.
 
On February
 
8, 2023,
 
the plaintiffs
 
appealed
 
the lower
 
court’s
 
judgement
 
to the
 
United States
 
Court of
 
Appeals for
 
the Fifth
Circuit, Case No. 23-50112. On February
 
12, 2024, the court affirmed the judgment of the district court.
Kraft Foods Global, Inc. et al. v.
 
United Egg Producers, Inc. et al.
 
As previously
 
reported, on
 
September 25,
 
2008, the
 
Company
 
was named
 
as one
 
of several
 
defendants
 
in numerous
 
antitrust
cases involving
 
the United
 
States shell
 
egg
 
industry.
 
The Company
 
settled all
 
of these
 
cases, except
 
for
 
the claims
 
of certain
plaintiffs who sought substantial
 
damages allegedly arising from
 
the purchase of egg products (as
 
opposed to shell eggs). These
remaining plaintiffs
 
are Kraft Food
 
Global, Inc.,
 
General Mills, Inc.,
 
and Nestle USA,
 
Inc. (the
 
“Egg Products
 
Plaintiffs”) and,
until a subsequent settlement was reached as described below,
 
The Kellogg Company.
18
 
On September
 
13, 2019,
 
the case
 
with the
 
Egg Products
 
Plaintiffs was
 
remanded from
 
a multi-district
 
litigation proceeding
 
in
the
 
United
 
States
 
District
 
Court
 
for
 
the
 
Eastern
 
District
 
of
 
Pennsylvania,
 
In
 
re
 
Processed
 
Egg
 
Products
 
Antitrust
 
Litigation,
MDL No. 2002, to
 
the United States District Court
 
for the Northern District
 
of Illinois, Kraft Foods Global,
 
Inc. et al. v.
 
United
Egg
 
Producers,
 
Inc.
 
et
 
al., Case
 
No.
 
1:11-cv-8808,
 
for
 
trial. The
 
Egg
 
Products
 
Plaintiffs
 
alleged
 
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
 
attacked
certain features of
 
the United Egg
 
Producers animal-welfare guidelines
 
and program used by
 
the Company and
 
many other egg
producers.
 
On October 24, 2019,
 
the Company entered into
 
a confidential settlement agreement
 
with The Kellogg Company
 
dismissing all
claims against the
 
Company for an
 
amount that did
 
not have a
 
material impact on
 
the Company’s
 
financial condition or
 
results
of operations.
 
On November
 
11,
 
2019, a
 
stipulation
 
for dismissal
 
was filed
 
with the
 
court, and
 
on March
 
28, 2022,
 
the court
dismissed the Company with prejudice.
The trial of this case began
 
on October 17, 2023. On December
 
1, 2023, the jury returned a decision
 
awarding the Egg Products
Plaintiffs
 
$
17.8
 
million
 
in damages.
 
If the
 
jury’s
 
decision
 
is ultimately
 
upheld,
 
the defendants
 
would
 
be jointly
 
and
 
severally
liable
 
for
 
treble
 
damages,
 
or
 
$
53.3
 
million,
 
subject
 
to
 
credit
 
for
 
the
 
Kellogg
 
settlement
 
described
 
above
 
and
 
certain
 
other
settlements with
 
previous
 
settling defendants,
 
plus the
 
Egg Product
 
Plaintiffs’
 
reasonable
 
attorneys’
 
fees. This
 
decision is
 
not
final and
 
remains subject
 
to the
 
defendants’ motion
 
for a
 
directed verdict
 
noted below
 
and appeals
 
by the
 
parties. During
 
our
second fiscal quarter
 
of 2024, we
 
recorded an accrued
 
expense of $
19.6
 
million in selling,
 
general and
 
administrative expenses
in
 
the
 
Company’s
 
Condensed
 
Consolidated
 
Statements
 
of
 
Income
 
and
 
classified
 
as
 
other
 
noncurrent
 
liabilities
 
in
 
the
Company’s
 
Condensed Consolidated
 
Balance Sheets. The
 
accrual represents
 
our estimate of
 
the Company’s
 
proportional share
of the reasonably
 
possible ultimate damages
 
award, excluding the Egg
 
Product Plaintiffs’ attorneys’
 
fees that we believe
 
would
be
 
approximately
 
offset
 
by the
 
credits
 
noted above.
 
We
 
have
 
entered
 
into a
 
judgment
 
allocation
 
and joint
 
defense
 
agreement
with
 
the
 
other
 
major
 
producer
 
defendant
 
remaining
 
in
 
the
 
case,
 
and
 
are
 
in
 
discussions
 
with
 
other
 
defendants
 
regarding
 
their
contributions. Our accrual may change in the future
 
based on the outcome of those discussions. Our accrual
 
may also be revised
in whole or in
 
part in the future
 
to the extent we
 
are successful in further
 
proceedings in the litigation.
 
On November 29, 2023,
the
 
defendants,
 
including
 
the
 
Company,
 
filed
 
a
 
motion
 
for
 
judgment
 
as
 
a
 
matter
 
of
 
law
 
in
 
their
 
favor,
 
known
 
as
 
a
 
directed
verdict, notwithstanding
 
the jury’s
 
decision. The
 
Company intends
 
to continue
 
to vigorously
 
defend the
 
claims asserted
 
by the
Egg Products Plaintiffs.
State of Oklahoma Watershed Pollution
 
Litigation
On June
 
18, 2005,
 
the State
 
of Oklahoma
 
filed suit,
 
in the
 
United States
 
District Court
 
for the
 
Northern District
 
of Oklahoma,
against Cal-Maine
 
Foods,
 
Inc. and
 
Tyson
 
Foods,
 
Inc., Cobb-Vantress,
 
Inc., Cargill,
 
Inc., George’s,
 
Inc., Peterson
 
Farms, Inc.
and
 
Simmons
 
Foods,
 
Inc.,
 
and
 
certain
 
of
 
their
 
affiliates.
 
The
 
State
 
of
 
Oklahoma
 
claims
 
that
 
through
 
the
 
disposal
 
of
 
chicken
litter the
 
defendants polluted
 
the Illinois
 
River Watershed.
 
This watershed
 
provides water
 
to eastern
 
Oklahoma. The
 
complaint
sought
 
injunctive
 
relief
 
and
 
monetary
 
damages,
 
but
 
the
 
claim
 
for
 
monetary
 
damages
 
was dismissed
 
by
 
the
 
court.
 
Cal-Maine
Foods,
 
Inc.
 
discontinued
 
operations
 
in
 
the
 
watershed
 
in
 
or
 
around
 
2005.
 
Since
 
the
 
litigation
 
began,
 
Cal-Maine
 
Foods,
 
Inc.
purchased
100
%
 
of
 
the
 
membership
 
interests
 
of
 
Benton
 
County
 
Foods,
 
LLC,
 
which
 
is
 
an
 
ongoing
 
commercial
 
shell
 
egg
operation within
 
the Illinois
 
River Watershed.
 
Benton County
 
Foods, LLC
 
is not
 
a defendant
 
in the
 
litigation. We
 
also have
 
a
number of small contract producers that operate in the area.
The non-jury trial in the case began in September 2009
 
and concluded in February 2010. On January 18, 2023, the court entered
findings of
 
fact and
 
conclusions of
 
law in favor
 
of the
 
State of
 
Oklahoma, but
 
no penalties
 
were assessed.
 
The court
 
found the
defendants
 
liable
 
for
 
state
 
law
 
nuisance,
 
federal
 
common
 
law
 
nuisance,
 
and
 
state
 
law
 
trespass.
 
The
 
court
 
also
 
found
 
the
producers
 
vicariously
 
liable
 
for
 
the
 
actions
 
of
 
their
 
contract
 
producers.
 
The
 
court
 
directed
 
the
 
parties
 
to
 
confer
 
in
 
attempt
 
to
reach agreement
 
on appropriate
 
remedies. On
 
June 12,
 
2023, the
 
court ordered
 
the parties
 
to mediate
 
before the
 
retired Tenth
Circuit Chief Judge Deanell
 
Reece Tacha.
 
On October 26, 2023, the parties
 
filed separate status reports informing
 
the court that
the mediation
 
was unsuccessful.
 
Also on
 
October 26,
 
2023, the
 
defendants filed
 
a post-trial
 
motion to
 
dismiss and
 
supporting
brief arguing
 
that the
 
case should
 
be dismissed
 
due to
 
the state record
 
before the
 
court, the resulting
 
mootness of
 
the case,
 
and
violation
 
of
 
due
 
process.
 
On
 
November
 
10,
 
2023,
 
the
 
State
 
of
 
Oklahoma
 
filed
 
its
 
response
 
in
 
opposition
 
to
 
the
 
motion
 
to
dismiss and on
 
November 17, 2023,
 
the defendants filed
 
their reply.
 
The court has not
 
ruled on the motion.
 
While management
believes there
 
is a
 
reasonable
 
possibility of
 
a material
 
loss from
 
the case,
 
at the
 
present time,
 
it is
 
not possible
 
to estimate
 
the
amount
 
of
 
monetary
 
exposure,
 
if
 
any,
 
to
 
the
 
Company
 
due
 
to
 
a
 
range
 
of
 
factors,
 
including
 
the
 
following,
 
among
 
others:
uncertainties
 
inherent
 
in
 
any
 
assessment
 
of
 
potential
 
costs
 
associated
 
with
 
injunctive
 
relief
 
or
 
other
 
penalties
 
based
 
on
 
a
decision in a
 
case tried over
 
13 years ago based
 
on environmental conditions
 
that existed at the
 
time, the lack
 
of guidance from
the court as to what
 
might be considered appropriate
 
remedies, the ongoing litigation
 
with the State of Oklahoma
 
and motion to
dismiss before
 
the court, and
 
uncertainty regarding
 
what our proportionate
 
share of any
 
remedy would be,
 
although we believe
that our share compared to the other defendants is small.
19
 
Other Matters
In addition to the above, the Company is involved in various other claims and litigation incidental
 
to its business. Although the
outcome of these matters cannot be determined with certainty,
 
management, upon the advice of counsel, is of the opinion that
the final outcome should not have a material effect on the Company’s
 
consolidated results of operations or financial position.
Note 11 - Subsequent Events
On March
 
14, 2024,
 
the Company
 
completed the
 
previously announced
 
acquisition from
 
Tyson
 
Foods, Inc.
 
of a
 
closed broiler
processing plant, hatchery and feed mill in Dexter,
 
Missouri.
On
 
April
 
1,
 
2024,
one
 
of
 
the
 
Company’s
 
facilities
 
located
 
in
 
Parmer
 
County,
 
Texas,
 
tested
 
positive
 
for
 
HPAI,
 
affecting
approximately
1.6
 
million laying hens
 
and
337,000
 
pullets, or approximately
3.6
% of the Company’s
 
total flock as of
 
March 2,
2024.
 
The
 
Company
 
has
 
and
 
continues
 
to
 
follow
 
all
 
guidelines
 
provided
 
by
 
the
 
United
 
States
 
Department
 
of
 
Agriculture
 
(the
“USDA”)
 
and
 
other
 
regulatory
 
agencies
 
to
 
depopulate
 
and
 
sanitize
 
the
 
facilities.
 
As
 
such,
 
Cal-Maine
 
will
 
be
 
eligible
 
to
participate
 
in
 
the
 
USDA
 
indemnity
 
program
 
and
 
other
 
programs
 
designed
 
to
 
compensate
 
for
 
the
 
loss of
 
birds
 
and
 
eggs.
 
The
Company’s
 
plans
 
are
 
to
 
repopulate
 
the
 
facilities
 
and
 
resume
 
normal
 
operations
 
at
 
the
 
facilities
 
within
 
6-8
 
months.
 
Due
 
to
volatility in
 
the market
 
prices of
 
eggs and
 
uncertain future
 
supply,
 
demand and
 
other market
 
conditions, an
 
estimate of
 
the net
income effect cannot be reasonably made.
 
20
ITEM
 
2.
 
MANAGEMENT’S
DISCUSSION
AND
 
ANALYSIS
 
OF
 
FINANCIAL
 
CONDITION
 
AND
 
RESULTS
 
OF
OPERATIONS
The following
 
should be
 
read in
 
conjunction
 
with Management’s
 
Discussion and
 
Analysis of
 
Financial Condition
 
and Results
of Operations
 
included in Part
 
II Item 7
 
of the Company’s
 
Annual Report
 
on Form 10-K
 
for its fiscal
 
year ended
 
June 3, 2023
(the “2023 Annual Report”), and the accompanying financial statements and
 
notes included in Part II Item 8 of the 2023 Annual
Report and in
 
of this Quarterly Report on Form 10-Q (“Quarterly Report”).
This
 
report
 
contains
 
numerous
 
forward-looking
 
statements
 
within
 
the
 
meaning
 
of
 
Section
 
27A
 
of
 
the
 
Securities
 
Act
 
of
 
1933
(the “Securities
 
Act”) and
 
Section 21E
 
of the
 
Securities Exchange
 
Act of
 
1934 (the
 
“Exchange Act”)
 
relating to
 
our shell
 
egg
and egg
 
products business,
 
including estimated
 
future production
 
data, expected
 
construction schedules,
 
projected construction
costs, potential
 
future supply
 
of and
 
demand for
 
our products,
 
potential future
 
corn and
 
soybean price
 
trends, potential
 
future
impact
 
on
 
our
 
business
 
of
 
the
 
recent
 
resurgence
 
in
 
United
 
States
 
(“U.S.”)
 
commercial
 
table
 
egg
 
layer
 
flocks
 
of
 
the
 
highly
pathogenic avian
 
influenza (“HPAI”)
 
outbreak, potential
 
future impact
 
on our business
 
of inflation
 
and changing
 
interest rates,
potential future
 
impact on our
 
business of new
 
legislation, rules
 
or policies,
 
potential outcomes
 
of legal proceedings
 
,
 
including
loss contingency
 
accruals and
 
factors
 
that may
 
result in
 
changes in
 
the amounts
 
recorded,
 
and other
 
projected
 
operating data,
including anticipated results
 
of operations and
 
financial condition. Such
 
forward-looking statements are
 
identified by the use
 
of
words such
 
as “believes,”
 
“intends,” “expects,”
 
“hopes,” “may,”
 
“should,” “plans,”
 
“projected,” “contemplates,”
 
“anticipates,”
or
 
similar
 
words.
 
Actual
 
outcomes
 
or
 
results
 
could
 
differ
 
materially
 
from
 
those
 
projected
 
in
 
the
 
forward-looking
 
statements.
The
 
forward-looking
 
statements
 
are
 
based
 
on
 
management’s
 
current
 
intent,
 
belief,
 
expectations,
 
estimates,
 
and
 
projections
regarding
 
the
 
Company
 
and
 
its
 
industry.
 
These
 
statements
 
are
 
not
 
guarantees
 
of
 
future
 
performance
 
and
 
involve
 
risks,
uncertainties, assumptions,
 
and other factors
 
that are difficult
 
to predict
 
and may be
 
beyond our
 
control. The
 
factors that
 
could
cause actual
 
results to
 
differ
 
materially
 
from
 
those projected
 
in the
 
forward-looking
 
statements include,
 
among
 
others, (i)
 
the
risk
 
factors
 
set forth
 
in
 
Part
 
I
 
Item
 
1A
 
of
 
the
 
2023
 
Annual Report,
 
the
 
risk
 
factors
 
(if
 
any)
 
set forth
 
in
 
Part
 
II
 
Item
 
1A Risk
Factors and
 
elsewhere in this
 
report as well
 
as those included
 
in other reports
 
we file from
 
time to time
 
with the Securities
 
and
Exchange Commission (the “SEC”)
 
(including our Quarterly Reports
 
on Form 10-Q and Current
 
Reports on Form 8-K), (ii)
 
the
risks
 
and
 
hazards
 
inherent
 
in
 
the
 
shell
 
egg
 
business
 
(including
 
disease,
 
pests,
 
weather
 
conditions,
 
and
 
potential
 
for
 
product
recall), including
 
but not limited
 
to the current
 
outbreak of HPAI
 
affecting poultry
 
in the U.S.,
 
Canada and other
 
countries that
was first
 
detected in
 
commercial flocks
 
in the
 
U.S. in
 
February 2022
 
and that
 
first impacted
 
our flock
 
in December
 
2023, (iii)
changes in the
 
demand for and
 
market prices of
 
shell eggs and
 
feed costs, (iv)
 
our ability to
 
predict and meet
 
demand for cage-
free and
 
other
 
specialty eggs,
 
(v)
 
risks, changes,
 
or obligations
 
that could
 
result from
 
our future
 
acquisition
 
of new
 
flocks or
businesses and risks
 
or changes that
 
may cause conditions
 
to completing a
 
pending acquisition not
 
to be met,
 
(vi) risks relating
to increased
 
costs and
 
higher and
 
potentially further
 
increases in,
 
inflation and
 
interest rates,
 
(vii) our
 
ability to
 
retain existing
customers, acquire new customers
 
and grow our product
 
mix, (viii) adverse results
 
in pending litigation matters,
 
and (ix) global
instability,
 
including
 
as
 
a
 
result
 
of
 
the
 
war
 
in
 
Ukraine,
 
the
 
Israel-Hamas
 
conflict
 
and
 
attacks
 
on
 
shipping
 
in
 
the
 
Red
 
Sea.
Readers are cautioned
 
not to place undue
 
reliance on forward-looking
 
statements because, while
 
we believe the assumptions
 
on
which the forward-looking statements are based are reasonable,
 
there can be no assurance that these forward-looking
 
statements
will prove to
 
be accurate. Further,
 
forward-looking statements included
 
herein are only
 
made as of the
 
respective dates thereof,
or if no date
 
is stated, as of the
 
date hereof. Except as
 
otherwise required by
 
law, we
 
disclaim any intent or
 
obligation to update
publicly these forward-looking statements, whether because of
 
new information, future events, or otherwise.
GENERAL
Cal-Maine
 
Foods,
 
Inc.
 
(the
 
“Company,”
 
“we,”
 
“us,”
 
“our”)
 
is
 
primarily
 
engaged
 
in
 
the
 
production,
 
grading,
 
packaging,
marketing
 
and
 
distribution
 
of
 
fresh
 
shell
 
eggs.
 
Our
 
operations
 
are
 
fully
 
integrated
 
and we
 
have
 
one
 
operating
 
and
 
reportable
segment.
 
We
 
are
 
the
 
largest
 
producer
 
and
 
distributor
 
of
 
fresh
 
shell
 
eggs
 
in
 
the
 
U.S.
 
Our
 
total
 
flock
 
of
 
approximately
 
42.2
million layers
 
and 10.9
 
million pullets
 
and breeders
 
is the largest
 
in the
 
U.S. We
 
sell most of
 
our shell
 
eggs to a
 
diverse group
of customers,
 
including national
 
and regional
 
grocery store
 
chains, club
 
stores, companies
 
servicing independent
 
supermarkets
in
 
the
 
U.S.,
 
food
 
service
 
distributors,
 
and
 
egg
 
product
 
consumers
 
located
 
primarily
 
in
 
states
 
across
 
the
 
southwestern,
southeastern, mid-western and mid-Atlantic regions of the U.S.
 
Our
 
operating
 
results
 
are
 
materially
 
impacted
 
by
 
market
 
prices for
 
eggs
 
and
 
feed
 
grains
 
(corn
 
and
 
soybean
 
meal),
 
which
 
are
highly
 
volatile,
 
independent
 
of
 
each
 
other,
 
and
 
out
 
of
 
our
 
control.
 
Generally,
 
higher
 
market
 
prices
 
for
 
eggs
 
have
 
a
 
positive
impact
 
on
 
our
 
financial
 
results
 
while
 
higher
 
market
 
prices
 
for
 
feed
 
grains
 
have
 
a
 
negative
 
impact
 
on
 
our
 
financial
 
results.
Although we
 
use a
 
variety of
 
pricing mechanisms
 
in pricing
 
agreements with
 
our customers,
 
we sell
 
most of
 
our conventional
shell eggs
 
based on
 
formulas that
 
consider,
 
in varying
 
ways, independently
 
quoted regional
 
wholesale
 
market prices
 
for shell
eggs
 
or
 
formulas
 
related
 
to
 
our
 
costs
 
of
 
production
 
which
 
include
 
the
 
cost
 
of
 
corn
 
and
 
soybean
 
meal.
 
We
 
do
 
not
 
sell
 
eggs
directly to consumers or set the prices at which eggs are sold to consumers.
21
Retail
 
sales
 
of
 
shell
 
eggs
 
historically
 
have
 
been
 
highest
 
during
 
the
 
fall
 
and
 
winter
 
months
 
and
 
lowest
 
during
 
the
 
summer
months. Prices
 
for shell
 
eggs fluctuate
 
in response
 
to seasonal
 
demand factors
 
and a
 
natural increase
 
in egg
 
production during
the
 
spring
 
and
 
early
 
summer.
 
Historically,
 
shell
 
egg
 
prices
 
tend
 
to
 
increase
 
with
 
the
 
start
 
of
 
the
 
school
 
year
 
and
 
tend
 
to
 
be
highest
 
prior
 
to
 
holiday
 
periods,
 
particularly
 
Thanksgiving,
 
Christmas
 
and
 
Easter.
 
Consequently,
 
and
 
all
 
other
 
things
 
being
equal, we would
 
expect to experience
 
lower selling prices, sales
 
volumes and net
 
income (and may incur
 
net losses) in our
 
first
and
 
fourth
 
fiscal
 
quarters
 
ending
 
in
 
August/September
 
and
 
May/June,
 
respectively.
 
Because
 
of
 
the
 
seasonal
 
and
 
quarterly
fluctuations,
 
comparisons
 
of
 
our
 
sales
 
and
 
operating
 
results
 
between
 
different
 
quarters
 
within
 
a
 
single
 
fiscal
 
year
 
are
 
not
necessarily meaningful comparisons.
We
 
routinely
 
fill
 
our
 
storage
 
bins
 
during
 
harvest
 
season
 
when
 
prices
 
for
 
feed
 
ingredients
 
are
 
generally
 
lower.
 
To
 
ensure
continued
 
availability of
 
feed ingredients,
 
we may
 
enter into
 
contracts for
 
future purchases
 
of corn
 
and soybean
 
meal, and
 
as
part
 
of
 
these
 
contracts,
 
we
 
may
 
lock-in
 
the
 
basis
 
portion
 
of
 
our
 
grain
 
purchases
 
several
 
months
 
in
 
advance.
 
Basis
 
is
 
the
difference
 
between the
 
local cash
 
price for
 
grain and
 
the applicable
 
futures price.
 
A basis
 
contract is
 
a common
 
transaction in
the grain
 
market that
 
allows us
 
to lock-in
 
a basis
 
level for
 
a specific
 
delivery period
 
and wait
 
to set
 
the futures
 
price at
 
a later
date. Furthermore,
 
due to
 
the more
 
limited supply
 
for organic
 
ingredients,
 
we may
 
commit to
 
purchase organic
 
ingredients in
advance to help ensure supply.
 
Ordinarily, we do
 
not enter into long-term contracts beyond a year to purchase
 
corn and soybean
meal
 
or
 
hedge
 
against
 
increases
 
in
 
the
 
prices
 
of
 
corn
 
and
 
soybean
 
meal.
 
Corn
 
and
 
soybean
 
meal
 
are
 
commodities
 
and
 
are
subject
 
to
 
volatile
 
price
 
changes
 
due
 
to
 
weather,
 
various
 
supply
 
and
 
demand
 
factors,
 
transportation
 
and
 
storage
 
costs,
speculators,
 
agricultural, energy
 
and trade
 
policies in
 
the U.S.
 
and internationally
 
,
 
and global
 
instability that
 
could disrupt
 
the
supply chain.
An important competitive advantage
 
for Cal-Maine Foods is
 
our ability to meet
 
our customers’ evolving needs
 
with a favorable
product
 
mix
 
of
 
conventional
 
and
 
specialty
 
eggs,
 
including
 
cage-free,
 
organic
 
and
 
other
 
specialty
 
offerings,
 
as
 
well
 
as
 
egg
products.
 
We
 
have
 
also
 
enhanced
 
our
 
efforts
 
to
 
provide
 
free-range
 
and
 
pasture-raised
 
eggs
 
that
 
meet
 
consumers’
 
evolving
choice
 
preferences.
 
While
 
a
 
small
 
part
 
of
 
our
 
current
 
business,
 
the
 
free-range
 
and
 
pasture-raised
 
eggs
 
we
 
produce
 
and
 
sell
represent attractive offerings
 
to a subset of
 
consumers,
 
and therefore our customers,
 
and help us continue
 
to serve as the trusted
provider of quality food choices.
CAGE-FREE EGGS
Ten
 
states
 
have
 
passed
 
legislation
 
or
 
regulations
 
mandating
 
minimum
 
space
 
or
 
cage-free
 
requirements
 
for
 
egg
 
production
 
or
mandated
 
the
 
sale
 
of
 
only
 
cage-free
 
eggs
 
and
 
egg
 
products
 
in
 
their
 
states,
 
with
 
implementation
 
of
 
these
 
laws
 
ranging
 
from
January
 
2022
 
to
 
January
 
2026.
 
These
 
states
 
represent
 
approximately
 
27%
 
of
 
the
 
U.S.
 
total
 
population
 
according
 
to
 
the 2020
U.S.
 
Census.
 
California,
 
Massachusetts,
 
Colorado,
 
Oregon,
 
Washington,
 
and
 
Nevada,
 
which
 
collectively
 
represent
approximately
 
20% of
 
the total
 
estimated
 
U.S.
 
population,
 
have
 
cage-free
 
legislation
 
currently
 
in effect
 
.
 
Although
 
we do
 
not
sell the majority of our eggs in these ten states, these state laws have impacted egg production
 
practices nationally.
A significant number of
 
our customers have announced
 
goals to either exclusively offer
 
cage-free eggs or significantly
 
increase
the
 
volume
 
of
 
cage-free
 
egg
 
sales
 
in
 
the
 
future,
 
subject
 
in
 
most
 
cases
 
to
 
availability
 
of
 
supply,
 
affordability
 
and
 
consumer
demand,
 
among
 
other
 
contingencies.
 
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
focused
 
on
 
adjusting
 
our