1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For the quarterly period ended
or
For the transition period from ____________ to ____________
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S Employer Identification No.)
,
,
,
(Address of principal executive offices) (Zip Code)
(
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(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
The
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.
☑
☐
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).
☑
☐
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.
☑
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.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
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There were
value, outstanding as of October 1, 2024.
2
INDEX
Page
Number
Part I.
Financial Information
Item 1.
Item 2.
Item 3.
Item 4.
Part II.
Other Information
Item 1.
Item 1A.
Item 2.
Item 6.
3
PART I. FINANCIAL
INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except for par value amounts)
(Unaudited)
August 31, 2024
June 1, 2024
Assets
Current assets:
Cash and cash equivalents
$
$
Investment securities available-for-sale
Trade and other receivables, net
Income tax receivable
Inventories
Prepaid expenses and other current assets
Total current assets
Property, plant & equipment, net
Investments in unconsolidated entities
Goodwill
Intangible assets, net
Other long-term assets
Total Assets
$
$
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
$
Accrued wages and benefits
Accrued income taxes payable
Dividends payable
Accrued expenses and other liabilities
Total current liabilities
Other noncurrent liabilities
Deferred income taxes, net
Total liabilities
Commitments and contingencies - see Note 10
—
—
Stockholders’ equity:
Common stock ($
Common stock - authorized
Class A convertible common stock - authorized and issued
Paid-in capital
Retained earnings
Accumulated other comprehensive loss, net of tax
(474 )
(1,773 )
Common stock in treasury at cost –
shares at June 1, 2024
(31,632 )
(31,597 )
Total Cal-Maine Foods, Inc. stockholders’ equity
Noncontrolling interest in consolidated entity
(3,490 )
(3,104 )
Total stockholders’ equity
Total Liabilities and Stockholders’ Equity
$
$
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
August 31, 2024
September 2, 2023
Net sales
$
$
Cost of sales
Gross profit
Selling, general and administrative
Loss on involuntary conversions
Gain on disposal of fixed assets
(1,817 )
(56 )
Operating income (loss)
(6,757 )
Other income (expense):
Interest income, net
Other, net
Total other income, net
Income before income taxes
Income tax expense
Net income
Less: Loss attributable to noncontrolling interest
(386 )
(515 )
Net income attributable to Cal-Maine Foods, Inc.
$
$
Net income per common share:
Basic
$
$
Diluted
$
$
Weighted average shares outstanding:
Basic
Diluted
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
August 31, 2024
September 2, 2023
Net income
$
$
Other comprehensive income (loss), before tax:
Unrealized holding gain on available-for-sale securities, net of reclassification
adjustments
Income tax expense related to items of other comprehensive income
(416 )
(191 )
Other comprehensive income, net of tax
Comprehensive income
Less: Comprehensive loss attributable to the noncontrolling interest
(386 )
(515 )
Comprehensive income attributable to Cal-Maine Foods, Inc.
$
$
See Notes to Condensed Consolidated Financial Statements.
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Thirteen Weeks Ended
August 31, 2024
September 2, 2023
Cash flows from operating activities:
Net income
$
$
Depreciation and amortization
Deferred income taxes
(14,605 )
Other adjustments, net
(39,581 )
Net cash provided by operations
Cash flows from investing activities:
Purchases of investment securities
(202,196 )
(28,296 )
Sales and maturities of investment securities
Acquisition of business
(111,521 )
Purchases of property, plant and equipment
(35,773 )
(26,666 )
Net proceeds from disposal of property, plant and equipment
Net cash provided by (used in) investing activities
(135,871 )
Cash flows from financing activities:
Payments of dividends
(37,758 )
(36,983 )
Purchase of common stock by treasury
(34 )
(5 )
Principal payments on finance lease
(58 )
Net cash used in financing activities
(37,792 )
(37,046 )
Net change in cash and cash equivalents
(56,211 )
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
$
$
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 1, 2024 (the
“2024 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 ended on August 31, 2024
and September 2, 2023 included
13 weeks
.
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 Available-for-Sale
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.
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 August 31, 2024 and June
1, 2024, reserves for credit losses were $
customers based on an evaluation of each customer’s financial condition and credit history. Collateral is generally not required.
The Company minimizes exposure to counter party credit risk through credit analysis and approvals, credit limits, and
monitoring procedures. In determining our reserve for credit losses, receivables are assigned an expected loss based on
historical loss information adjusted as needed for economic and other forward-looking factors.
Dividends Payable
We accrue dividends at the end of each quarter according to the Company’s dividend policy adopted by its Board of Directors.
The Company pays a dividend to shareholders of its Common Stock and Class A Common Stock on a quarterly basis for each
quarter for which the Company reports net income attributable to Cal-Maine Foods, Inc. computed in accordance with GAAP
in an amount equal to one-third (1/3) of such quarterly income. Dividends are paid to shareholders of record as of the 60th day
following the last day of such quarter, except for the fourth fiscal quarter. For the fourth quarter, the Company pays dividends
to shareholders of record on the 65th day after the quarter end. Dividends are payable on the 15th day following the record date.
8
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.
Revenue Recognition
The Company recognizes revenue through sale of its products to customers through retail, foodservice and other distribution
channels. The majority of the Company’s revenue is derived from agreements or contracts with customers based upon the
customer ordering its products with a single performance obligation of delivering the product. The Company believes the
performance obligation is met upon delivery and acceptance of the product by our customers, which generally occurs upon
shipment or delivery to a customer based on terms of the sale. Costs paid to third party brokers to obtain agreements are
expensed as the Company’s agreements are generally less than one year.
Revenues are recognized in an amount that reflects the net consideration we expect to receive in exchange for delivery of the
products. The Company periodically offers sales incentives or other programs such as rebates, discounts, coupons, volume-
based incentives, guaranteed sales and other programs. The Company records an estimated allowance for costs associated with
these programs, which is recorded as a reduction in revenue at the time of sale using historical trends and projected redemption
rates of each program. The Company regularly reviews these estimates and any difference between the estimated costs and
actual realization of these programs would be recognized the subsequent period.
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.
Loss Contingencies
Certain conditions may exist as of the date the consolidated 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 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 consolidated 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.
9
Note 2 - Acquisition
Effective
, the Company acquired substantially all of the commercial shell egg production, processing and egg
products breaking facilities of ISE America, Inc. and certain of its affiliates (“ISE”). The assets acquired included commercial
shell egg production and processing facilities with a capacity at the time of acquisition of approximately
hens, including
egg products breaking facility. The acquired assets also include an extensive customer distribution network across the Northeast
and Mid-Atlantic states, and production operations in Maryland, New Jersey, Delaware and South Carolina. The Company
accounted for the acquisition as a business combination.
Pending the finalization of the Company’s valuation, the following table summarizes the consideration paid for the ISE assets
and the amounts of assets acquired and liabilities assumed recognized at the acquisition date (in thousands):
Cash consideration paid
$
Recognized amounts of identifiable assets acquired and liabilities assumed
Inventories
$
Property, plant and equipment
Intangible assets
Liabilities assumed
(308 )
Total identifiable net assets
$
Inventories 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 June 28, 2024.
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 customer lists acquired. Customers lists were valued using the income method
approach.
Note 3 - Investment
Securities
The following represents the Company’s investment securities as of August 31, 2024 and June 1, 2024 (in thousands):
August 31, 2024
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
US government and agency obligations
Asset backed securities
Treasury bills
Total current investment securities
$
$
$
$
10
June 1, 2024
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
US government and agency obligations
Asset backed securities
Treasury bills
Total current investment securities
$
$
$
$
Available-for-sale
Proceeds from sales and maturities of investment securities available-for-sale were $
the thirteen weeks ended August 31, 2024 and September 2, 2023, respectively. Gross realized gains for the thirteen weeks
ended August 31, 2024 and September 2, 2023 were $
losses for the thirteen weeks ended August 31, 2024. Gross realized losses for the thirteen weeks ended September 2, 2023 were
$
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 August 31, 2024 are as follows (in thousands):
Estimated Fair Value
Within one year
$
1-5 years
Total
$
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
•
Level 2
directly or indirectly, including:
◦
Quoted prices for similar assets or liabilities in active markets
◦
Quoted prices for identical or similar assets in non-active markets
◦
Inputs other than quoted prices that are observable for the asset or liability
◦
Inputs derived principally from or corroborated by other observable market data
•
Level 3
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded at cost are as follows:
Cash and cash equivalents, accounts receivable, and accounts payable:
short maturity of these instruments.
11
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 31, 2024 and June 1, 2024 (in thousands):
August 31, 2024
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
US government and agency obligations
Asset backed securities
Treasury bills
Total assets measured at fair value
$
$
$
$
Liabilities
Contingent consideration
$
$
$
$
Total liabilities measured at fair value
$
$
$
$
June 1, 2024
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
US government and agency obligations
Asset backed securities
Treasury bills
Total assets measured at fair value
$
$
$
$
Liabilities
Contingent consideration
$
$
$
$
Total liabilities measured at fair value
$
$
$
$
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 Egg
Farms, Inc. contingent on the acquired business meeting certain return on profitability milestones over a
three-year
commencing on the date of the acquisition in the second quarter of fiscal 2024. 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.
12
Note 5 - Inventories
Inventories consisted of the following as of August 31, 2024 and June 1, 2024 (in thousands):
August 31, 2024
June 1, 2024
Flocks, net of amortization
$
$
Eggs and egg products
Feed and supplies
$
$
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 August
31, 2024 and June 1, 2024 consisted of approximately
Note 6 - Equity
The following reflects equity activity for the thirteen weeks ended August 31, 2024 and September 2, 2023 (in thousands):
Thirteen Weeks Ended August 31, 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 1,
2024
$
$
$
(31,597 )
$
$
(1,773 )
$
$
(3,104 )
$
Other comprehensive
income, net of tax
—
—
—
—
—
—
Stock compensation
plan transactions
(35 )
—
—
—
Dividends ($
per share)
Common
—
—
—
—
—
(45,075 )
—
(45,075 )
Class A common
—
—
—
—
—
(4,891 )
—
(4,891 )
Net income (loss)
—
—
—
—
—
(386 )
Balance at August 31,
2024
$
$
$
(31,632 )
$
$
(474 )
$
$
(3,490 )
$
13
Thirteen Weeks Ended September 2, 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 June 3,
2023
$
$
$
(30,008 )
$
$
(2,886 )
$
$
(1,498 )
$
Other comprehensive
income, net of tax
—
—
—
—
—
—
Stock compensation
plan transactions
(6 )
—
—
—
Dividends ($
per share)
Common
—
—
—
—
—
(265 )
—
(265 )
Class A common
—
—
—
—
—
(29 )
—
(29 )
Net income (loss)
—
—
—
—
—
(515 )
Balance at September
2, 2023
$
$
$
(30,014 )
$
$
(2,291 )
$
$
(2,013 )
$
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.
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
August 31, 2024
September 2, 2023
Numerator
Net income
$
$
Less: Loss attributable to noncontrolling interest
(386 )
(515 )
Net income attributable to Cal-Maine Foods, Inc.
$
$
Denominator
Weighted-average common shares outstanding, basic
Effect of dilutive restricted shares
Weighted-average common shares outstanding, diluted
Net income per common share attributable to Cal-Maine Foods, Inc.
Basic
$
$
Diluted
$
$
14
Note 8 - Revenue from Contracts with Customers
Net revenue is primarily generated through the sales of shell eggs and egg products. The Company’s shell egg product offerings
include specialty and conventional shell eggs. Specialty shell eggs include cage-free, organic, brown, free-range, pasture-raised
and nutritionally enhanced eggs. Conventional shell egg sales represent all other shell egg sales not sold as specialty shell eggs.
The Company’s egg products offerings include liquid and frozen egg products and hard-cooked eggs. Liquid and frozen egg
products are primarily sold to the institutional, foodservice and food manufacturing sectors. Hard-cooked eggs are sold
primarily within the foodservice and retail channels.
The following table provides revenue disaggregated by product category (in thousands):
Thirteen Weeks Ended
August 31, 2024
September 2, 2023
Conventional shell egg sales
$
$
Specialty shell egg sales
Egg products
Other
$
$
Note 9 - Stock Based Compensation
Total stock-based compensation expense was $
September 2, 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 August 31, 2024 of $
period of
Stock Compensation Plans in our 2024 Annual Report for further information on our stock compensation plans.
The Company’s restricted share activity for the thirteen weeks ended August 31, 2024 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, June 1, 2024
$
Vested
(2,057 )
Forfeited
(1,682 )
Outstanding, August 31, 2024
$
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
$
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
15
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 and remanded to the
trial court for further proceedings. The district court entered a pre-trial order scheduling pre-trial proceedings and tentatively
setting a trial date for August 11, 2025. Management believes the risk of material loss related to this matter to be remote.
Kraft Foods Global, Inc. et al. v. United Egg Producers, Inc. et al.
As previously reported, on September 25, 2008, the Company was named as one of several defendants in numerous antitrust
cases involving the United States shell egg industry. The Company settled all of these cases, except for the claims of certain
plaintiffs who sought substantial damages allegedly arising from the purchase of egg products (as opposed to shell eggs). These
remaining plaintiffs are Kraft Food Global, Inc., General Mills, Inc., and Nestle USA, Inc. (the “Egg Products Plaintiffs”) and,
until a subsequent settlement was reached as described below, The Kellogg Company.
On September 13, 2019, the case with the Egg Products Plaintiffs was remanded from a multi-district litigation proceeding in
the United States District Court for the Eastern District of Pennsylvania, In re Processed Egg Products Antitrust Litigation,
MDL No. 2002, to the United States District Court for the Northern District of Illinois, Kraft Foods Global, Inc. et al. v. United
Egg Producers, Inc. et al., Case No. 1:11-cv-8808, for trial. The Egg Products Plaintiffs 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 $
liable for treble damages, or $
settlements with previous settling defendants, plus the Egg Product Plaintiffs’ reasonable attorneys’ fees. This decision is not
final and remains subject to appeals by the parties. During our second fiscal quarter of 2024, we recorded an accrued expense of
$
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 court denied this motion on
September 30, 2024. The Company is evaluating the court’s September 30, 2024 order and 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
% 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 retired Tenth
16
Circuit Chief Judge Deanell Reece Tacha, but the mediation was unsuccessful. On June 26, 2024, the district court denied
defendants’ motion to dismiss the case. On September 13, 2024, a status hearing was held and the court scheduled an
evidentiary hearing for December 3, 2024, to determine whether any legal remedy is available based on the now 14 year old
record and changed circumstances of the Illinois River watershed. On September 20, 2024, the defendants filed motions to
certify an interlocutory appeal and stay further proceedings pending appeal to the United States Court of Appeals for the Tenth
Circuit. The court has not ruled on these motions. 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 14 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 uncertainty regarding what our proportionate share of any remedy would be,
although we believe that our share compared to the other defendants is small.
Other Matters
In addition to the above, the Company is involved in various other claims and litigation incidental to its business. Although the
outcome of these matters cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that
the final outcome should not have a material effect on the Company’s consolidated results of operations or financial position.
Note 11 - Subsequent Events
Effective on September 9, 2024, the Company completed a strategic investment with Crepini LLC, establishing a new egg
products and prepared foods venture. Crepini LLC, founded in 2007, grew its brand throughout the United States and Mexico
featuring egg wraps, protein pancakes, crepes, and wrap-ups, which are sold online and in over
entity, located in Hopewell Junction, New York, operates as Crepini Foods LLC (“Crepini”). The Company capitalized Crepini
with approximately $
exchange for a
% interest in the new venture. Crepini LLC contributed its existing assets and business in exchange for a
%
interest in the new venture.
17
ITEM 2. MANAGEMENT’S
DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results
of Operations included in Part II Item 7 of the Company’s Annual Report on Form 10-K for its fiscal year ended June 1, 2024
(the “2024 Annual Report”), and the accompanying financial statements and notes included in Part II Item 8 of the 2024 Annual
Report and in
This report contains numerous forward-looking statements within the meaning of Section 27A of the Securities Act of 1933
(the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) relating to our shell egg
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 resurgence in United States (“U.S.”) commercial table egg layer flocks of highly pathogenic avian
influenza (“HPAI”), 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 Risk Factors of the 2024 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 flocks 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 recent or 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 changes 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 conflicts in Israel and surrounding areas 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 46.7
million layers and 10.9 million pullets and breeders is the largest in the U.S. We sell our shell eggs and egg products to a
diverse group of customers, including national and regional grocery store chains, club stores, companies servicing independent
supermarkets in the U.S., foodservice distributors and egg product customers throughout the majority of the U.S. and aim to
maintain efficient, state-of-the-art operations located close to our customers.
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.
18
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
mix of branded and private-label products of conventional and specialty eggs, including cage-free, organic, brown, free-range,
pasture-raised and nutritionally-enhanced eggs as well as egg products.
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 2030. 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.
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 cage-free production capacity with a goal of meeting the future needs of our customers in light of
changing state requirements and our customer’s goals. As always, we strive to offer a product mix that aligns with current and
anticipated customer purchase decisions. We are engaging with our customers to help them meet their announced goals and
needs. We have invested significant capital in recent years to acquire and construct cage-free facilities, and we expect our focus
for future expansion will continue to include cage-free facilities. Our volume of cage-free egg sales has continued to increase
and account for a larger share of our product mix. Cage-free egg revenue represented approximately 25.6% of our total net shell
egg revenue for the first quarter of fiscal year 2025. At the same time, we understand the importance of our continued ability to
provide conventional eggs in order to provide our customers with a variety of egg choices and to address hunger in our
communities.
For additional information, see the 2024 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.”
ACQUISITIONS
During the first quarter of fiscal 2025, we acquired substantially all the commercial shell egg production, processing and egg
products breaking assets of ISE America, Inc. and certain of its affiliates (“ISE”). The assets acquired included commercial
shell egg production and processing facilities with a capacity at the time of acquisition of approximately 4.7 million laying
hens, including 1.0 million cage-free, and 1.2 million pullets, feed mills, approximately 4,000 acres of land, inventories and an
egg products breaking facility. The acquired assets also include an extensive customer distribution network across the Northeast
and Mid-Atlantic states, and production operations in Maryland, New Jersey, Delaware and South Carolina. These production
assets are our first in Maryland, New Jersey and Delaware. We believe this acquisition provides us with an opportunity to
19
significantly enhance our market reach in the Northeast and Mid-Atlantic states. See further discussion in
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report.
In second quarter 2024, we acquired the assets of Fassio Egg Farms, Inc.(“Fassio”), related to its commercial shell egg
production and processing business. Fassio owned and operated 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. This acquisition provided
us with an opportunity to expand our market presence in Utah and the western U.S., particularly for cage-free eggs. In fourth
quarter 2024, we acquired a broiler processing plant, hatchery and feed mill in Dexter, Missouri that were closed by Tyson
Foods, Inc. in 2023 and that we are repurposing for use in shell egg and egg products production.
Following the end of first quarter 2025, we announced that we completed a strategic investment with Crepini, LLC, establishing
a new egg products and prepared foods venture. See further discussion in Note 11 – Subsequent Events of the Notes to
Condensed Consolidated Financial Statements included in this Quarterly Report
HPAI
Outbreaks of HPAI have continued to occur in U.S. poultry flocks. From the resurgence beginning in November 2023 until the
last reported case in commercial layer hens in July 2024, approximately 33.1 million commercial laying hens and pullets have
been depopulated.
During the third and fourth quarters of fiscal 2024, we experienced HPAI outbreaks within our facilities located in Kansas and
Texas, resulting in total depopulation of approximately 3.1 million laying hens and 577,000 pullets. Both locations have been
cleared by the USDA to resume operations. Repopulation began during the first quarter of fiscal 2025 and is expected to be
completed before calendar year end.
We remain dedicated to robust biosecurity programs across our locations; however, no farm is immune from HPAI. HPAI is
currently widespread in the wild bird population worldwide. The extent of possible future outbreaks, with heightened risk
during the migration seasons, and more recent HPAI events, which have been directly linked to dairy cattle operations, cannot
be predicted. According to the U.S. Centers for Disease Control and Prevention, the human health risk to the U.S. public from
the HPAI virus is considered to be low. Also, according to the USDA, HPAI cannot be transmitted through safely handled and
properly cooked eggs. There is no known risk related to HPAI associated with eggs that are currently in the market and no eggs
have been recalled. For additional information, see the 2024 Annual Report, Part II Item 7 “Management’s Discussion and
Analysis of Financial Condition and Results of Operations – HPAI.”
EXECUTIVE OVERVIEW
For the first quarter of fiscal 2025, we recorded a gross profit of $247.2 million, compared to $45.4 million, for the same period
of fiscal 2024, primarily driven by an increase in the net average selling price of shell eggs as well as an increase in total dozens
sold. In the first quarter of fiscal 2025, we sold a record amount of total shell eggs and specialty shell eggs, reflecting favorable
demand for shell eggs during most of the quarter. Our results were also positively impacted by lower feed costs and our recent
acquisitions discussed above.
Our net average selling price per dozen for the first quarter of fiscal 2025 was $2.392 compared to $1.589 in the prior-year
period. Conventional egg prices per dozen were $2.424 compared to $1.241 for the prior-year period, and specialty egg prices
per dozen were $2.335 compared to $2.278 for the prior-year period. Egg prices in the first quarter of fiscal 2025 were elevated
compared to the prior-year period primarily due to the resurgence of HPAI outbreaks, which decreased supply, among other
factors. According to the USDA, the monthly average size of the layer hen flock from June through August (which most
closely aligns with our first fiscal quarter) 2024 was approximately 305 million hens, which was a decrease of 9 million layers ,
or 2.9%, compared to the same period in the prior year. The daily average price for the Urner Barry southeast large index for
the first quarter of fiscal 2025 increased 125.6% from the comparable period in the prior year and was volatile during the
quarter with a low of $2.54 and a high of $4.63 at the end of the quarter. Subsequent to quarter-end, prices have dropped
significantly. For more information about historical shell egg prices, see Part I Item I of our 2024 Annual Report.
Our dozens sold for the first quarter of fiscal 2025 increased 13.5% compared to fiscal 2024. We had an increase in production
capacity with the acquisitions of the commercial shell egg production and processing business of ISE during the first quarter of
fiscal 2025 and Fassio during the second quarter of fiscal 2024, which was partially offset by the temporary decrease in
production due to the HPAI outbreaks at our facilities in Kansas and Texas during the third and fourth quarters of fiscal 2024.
20
Our farm production costs per dozen produced for the first quarter of fiscal 2025 decreased 11.7%, or $0.12 compared to the
prior year period, primarily due to lower feed costs. Feed costs per dozen produced decreased 17.3%, or $0.10, compared to the
first quarter of fiscal 2024, primarily due to lower feed ingredient prices. For information about historical corn and soybean
meal prices, see Part I Item I of our 2024 Annual Report. Our egg purchases and other (including changes in inventory) costs
increased $107.7 million quarter-over-quarter, primarily due to higher shell egg prices as well as an increase in dozens
purchased due to the loss of production caused by the HPAI outbreaks at our facilities as described above .
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items from our Condensed Consolidated Statements of Income
expressed as a percentage of net sales.
Thirteen Weeks Ended
August 31, 2024
September 2, 2023
Net sales
100.0
%
100.0
%
Cost of sales
68.5
%
90.1
%
Gross profit
31.5
%
9.9
%
Selling, general and administrative
7.9
%
11.3
%
Gain on disposal of fixed assets
(0.2)
%
—
%
Operating income (loss)
23.8
%
(1.4)
%
Total other income, net
1.4
%
1.6
%
Income before income taxes
25.2
%
0.2
%
Income tax expense
6.2
%
0.1
%
Net income
19.0
%
0.1
%
Less: Loss attributable to noncontrolling interest
—
%
(0.1)
%
Net income attributable to Cal-Maine Foods, Inc.
19.0
%
0.2
%
NET SALES
Total net sales for the first quarter of fiscal 2025 were $785.9 million compared to $459.3 million for the same period of fiscal
2024.
Net shell egg sales represented 95.5% and 95.2% of total net sales for the first quarters of fiscal 2025 and 2024, respectively.
The Company’s shell egg offerings , for both branded and private-label products, include specialty and conventional shell eggs.
Specialty shell eggs include cage-free, organic, brown, free-range, pasture-raised and nutritionally enhanced eggs. Conventional
shell eggs sales represent all other shell egg sales not sold as specialty shell eggs. Shell egg sales classified as “Other” represent
sales of miscellaneous byproducts and resale products included with our shell egg operations.
The Company’s egg products offerings include liquid and frozen egg products and hard-cooked eggs.
21
The table below presents an analysis of our conventional and specialty shell egg sales (in thousands, except percentage data):
Thirteen Weeks Ended
August 31, 2024
September 2, 2023
Total net sales
$
785,871
$
459,344
Conventional
$
484,736
64.6
%
$
225,280
51.6
%
Specialty
256,777
34.2
%
208,681
47.7
%
Egg sales, net
741,513
98.8
%
433,961
99.3
%
Other
9,183
1.2
%
3,160
0.7
%
Net shell egg sales
$
750,696
100.0
%
$
437,121
100.0
%
Net shell egg sales as a percent of total net sales
95.5
%
95.2
%
Dozens sold:
Conventional
199,989
64.5
%
181,530
66.5
%
Specialty
109,990
35.5
%
91,596
33.5
%
Total dozens sold
309,979
100.0
%
273,126
100.0
%
Net average selling price per dozen:
Conventional
$
2.424
$
1.241
Specialty
$
2.335
$
2.278
All shell eggs
$
2.392
$
1.589
Egg products sales:
Egg products net sales
$
35,175
$
22,223
Pounds sold
21,051
19,353
Net average selling price per pound
$
1.671
$
1.148
Shell egg net sales
First Quarter – Fiscal 2025 vs. Fiscal 2024
-
In the first quarter of fiscal 2025, conventional egg sales increased $259.5 million, or 115.2%, compared to the first
quarter of fiscal 2024, primarily due to a 95.3% increase in the prices for conventional eggs, which resulted in a
$236.6 million increase in net sales, and a 10.2% increase in the volume of conventional eggs sold, which resulted in a
$22.9 million increase in net sales. Results for the first quarter of 2025 were positively impacted by our recent
acquisitions discussed above.
-
Specialty egg sales increased $48.1 million, or 23.0%, in the first quarter of fiscal 2025 compared to the first quarter of
fiscal 2024, primarily due to an 20.1% increase in the volume of specialty eggs sold, which resulted in a $41.9 million
increase in net sales and a 2.5% increase in prices for specialty eggs, which resulted in a $6.3 million increase in net
sales.
-
Demand for specialty eggs increased in the first quarter of fiscal 2025 as conventional egg prices rose. Our sales
volume benefited as we sold 20.1% more specialty eggs by volume in the first quarter of fiscal 2025 versus the prior-
year period. Additionally, demand continues to be impacted by cage-free requirements becoming effective for Nevada,
Oregon and Washington on January 1, 2024.
-
See “Executive Overview” above for additional discussion.
Egg products net sales
First Quarter – Fiscal 2025 vs. Fiscal 2024
-
Egg products net sales increased $13.0 million, or 58.3%, for the first quarter of fiscal 2025 compared to the same
period of fiscal 2024, primarily due to a 45.6% selling price increase, which had a $11.0 million positive impact on net
sales.
22
-
Our egg products net average selling price increased in the first quarter of fiscal 2025, compared to the first quarter of
fiscal 2024, as the supply of shell eggs used to produce egg products was lower due to the impact of HPAI .
COST OF SALES
Cost of sales consists of costs directly related to producing, processing and packing shell eggs, purchases of shell eggs from
outside sources, 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 (including labor), 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
August 31, 2024
September 2, 2023
%
Change
Cost of Sales:
Farm production
$
241,701
$
253,507
(4.7)
%
Processing, packaging, and warehouse
91,711
81,906
12.0
Egg purchases and other (including change in inventory)
168,449
60,797
177.1
Total shell eggs
501,861
396,210
26.7
Egg products
36,792
17,701
107.9
Total
$
538,653
$
413,911
30.1
%
Farm production costs (per dozen produced)
Feed
$
0.494
$
0.597
(17.3)
%
Other
$
0.421
$
0.439
(4.1)
%
Total
$
0.915
$
1.036
(11.7)
%
Outside egg purchases (average cost per dozen)
$
2.83
$
1.65
71.5
%
Dozens produced
266,839
250,365
6.6
%
Percent produced to sold
86.1%
91.7%
(6.1)
%
Farm Production
First Quarter – Fiscal 2025 vs. Fiscal 2024
-
Feed costs per dozen produced decreased 17.3% in the first quarter of fiscal 2025 compared to the first quarter of fiscal
2024. This decrease was primarily due to lower prices for corn and soybean meal, our primary feed ingredients. The
decrease in feed cost per dozen resulted in a decrease in cost of sales of $27.5 million for the first quarter of fiscal
2025 compared to the prior period quarter.
-
For the first quarter of fiscal 2025, the average Chicago Board of Trade (“CBOT”) daily market price was $4.03 per
bushel for corn and $340 per ton of soybean meal, representing decreases of 24.0% and 19.5%, respectively, as
compared to the average CBOT daily market prices for the first quarter of fiscal 2024.
-
Other farm production costs decreased primarily due to lower flock amortization. Feed costs reached their peak in the
second quarter of fiscal 2023 and have since trended downward. Lower costs result in lower capitalized values of the
flocks during the grow out phase, which reduced amortization cost over time.
Current indications for corn project an overall better stocks-to-use ratio implying potentially lower prices in the near term;
however, as long as outside factors remain uncertain (including weather patterns and global supply chain disruptions), volatility
could remain.
Processing, packaging, and warehouse
First Quarter – Fiscal 2025 vs. Fiscal 2024
-
Processing, packaging, and warehouse costs increased 12.0 % compared to the first quarter of fiscal 2024 due to a 7.5%
increase in the volume of processed dozens as well as an increase in costs of packaging materials.
23
Egg purchases and other (including change in inventory)
First Quarter – Fiscal 2025 vs. Fiscal 2024
-
Costs in this category increased primarily due to higher shell egg prices as the average cost per dozen of outside egg
purchases increased 71.5% compared to first quarter of fiscal 2024, as well as an increase of 67.5% in dozens
purchased due to the loss of production caused by the HPAI outbreaks at our facilities in Kansas and Texas in the third
and fourth quarters of fiscal 2024.
GROSS PROFIT
Gross profit, as a percentage of net sales, was 31.5% for the first quarter of fiscal 2025 compared to 9.9% for the same period of
fiscal 2024. The increase was primarily due to higher net average selling price as well as lower feed ingredient prices, partially
offset by the increase in volume and price of outside egg purchases .
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative (“SGA”) expenses include costs of delivery, marketing, and other general and
administrative expenses. Delivery expense includes contract trucking expense and all costs to maintain and operate our fleet of
trucks to deliver products to customers including the related payroll expenses. Marketing expense includes franchise fees that
are submitted to Eggland’s Best, Inc. to support the EB brand, brokerage and commission fees, and other general marketing
expenses such as payroll expenses for our in-house sales team. Other general and administrative expenses include corporate
payroll related expenses and other general corporate overhead costs. The following table presents an analysis of our SGA
expenses (in thousands):
Thirteen Weeks Ended
August 31, 2024
September 2, 2023
$ Change
% Change
Delivery expense
$
21,064
$
17,691
$
3,373
19.1
%
Marketing expense
14,352
12,463
1,889
15.2
%
Other general and administrative expenses
26,516
22,092
4,424
20.0
%
Total
$
61,932
$
52,246
$
9,686
18.5
%
First Quarter – Fiscal 2025 vs. Fiscal 2024
Delivery expense
-
The increased delivery expense is primarily due to an increase in dozens sold in the first quarter of fiscal 2025
compared to the first quarter of fiscal 2024.
Marketing expense
-
The increase in marketing expense is primarily due to an increase in franchise fees as specialty egg sales increased
compared to the first quarter of fiscal 2024.
Other general and administrative expense
-
The increase in other general and administrative expense is primarily due to costs associated with the acquisition of
ISE assets that occurred during the first quarter of fiscal 2025 as well as an increase in insurance costs.
OPERATING INCOME (LOSS)
For the first quarter of fiscal 2025, we recorded operating income of $187.0 million compared to an operating loss of $6.8
million for the same period of fiscal 2024.
OTHER INCOME (EXPENSE)
Total other income (expense) consists of items not directly charged or related to operations, such as interest income and
expense, equity in income or loss of unconsolidated entities, and patronage income, among other items. Patronage dividends are
paid to us from our membership in the EB cooperative.
24
For the first quarter of fiscal 2025, we earned $9.9 million of interest income compared to $7.5 million for the same period of
fiscal 2024, primarily due to higher average cash and cash equivalents and investment securities available-for-sale balances and
yields. The Company recorded interest expense of $160 thousand and $142 thousand for the first quarters ended August 31,
2024 and September 2, 2023, respectively.
INCOME TAXES
For the first quarter of fiscal 2025, our pre-tax income was $198.0 million, compared to $733 thousand for the first quarter of
fiscal 2024. Income tax expense of $48.4 million was recorded for first quarter 2025 with an effective tax rate of 24.4%. For
first quarter 2024, income tax expense was $322 thousand with an effective tax rate of 43.9%. The higher effective tax rate for
first quarter of fiscal 2024 is primarily due to the loss attributable to our noncontrolling interest. Taxable income for the first
quarter of fiscal 2024 was $1.2 million and excludes the loss attributable to noncontrolling interest of $515 thousand, which
represents an effective tax rate of 25.7%.
Items causing our effective tax rate to differ from the federal statutory income tax rate of 21% are state income taxes, certain
federal tax credits and certain items included in income or loss for financial reporting purposes that are not included in taxable
income or loss 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 31, 2024 was $150.0 million, or $3.08 per
basic and $3.06 per diluted common share, compared to net income attributable to Cal-Maine Foods, Inc. of $926 thousand, or
$0.02 per basic and diluted common share, for the same period of fiscal 2024.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital and Current Ratio
Our working capital was $1.0 billion at both August 31, 2024 and June 1, 2024. The calculation of working capital is defined as
current assets less current liabilities. Our current ratio was 4.1 at August 31, 2024, compared with 5.5 at June 1, 2024. The
current ratio is calculated by dividing current assets by current liabilities.
Cash Flows from Operating Activities
For the thirteen weeks ended August 31, 2024, $117.5 million in net cash was provided by operating activities, compared to
$23.7 million provided by operating activities for the comparable period in fiscal 2024. The increase in cash flow from
operating activities resulted primarily from higher net average selling prices per dozen as well as a decrease in feed ingredient
costs compared to the prior-year period.
Cash Flows from Investing Activities
For the thirteen weeks ended August 31, 2024, $135.9 million was used in investing activities, primarily due to the acquisition
of assets of ISE, and purchases of property, plant and equipment. This compares to $80.9 million provided by investing
activities in the same period of fiscal 2024, primarily due to sales and maturities of investment securities. Sales and maturities
of investment securities were $209.7 million in first quarter of fiscal 2025 and purchases of investment securities were $202.2
million during the period. Sales and maturities of investment securities were $135.8 million in the first quarter fiscal 2024 while
purchases of investment securities were $28.3 million during the period. The increase in sales and maturities of investment
securities is primarily due to the maturities of short-term investments during first quarter 2025. Purchases of property, plant and
equipment were $35.8 million and $26.7 million in the first quarters of fiscal 2025 and 2024, respectively, primarily reflecting
progress on our construction projects.
Cash Flows from Financing Activities
We paid dividends of $37.8 million for the thirteen weeks ended August 31, 2024 compared to $37.0 million in the same prior-
year period.
25
As of August 31, 2024, cash decreased $56.2 million since June 1, 2024, compared to an increase of $67.5 million during the
same period of fiscal 2024. The decrease is primarily due to the acquisition of assets of ISE during the first quarter of fiscal
2025.
Credit Facility
We had no long-term debt outstanding at August 31, 2024 or June 1, 2024. On November 15, 2021, we entered into a credit
agreement that provides for a senior secured revolving credit facility (the “Credit Facility”), in an initial aggregate principal
amount of up to $250 million with a five-year term. As of August 31, 2024, no amounts were borrowed under the Credit
Facility. We have $4.7 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 Consolidated Financial Statements and Supplementary Data, Note 10 -
Credit Facility included in our 2024 Annual Report for further information regarding our long-term debt.
Dividends
In accordance with our variable dividend policy, we will pay a cash dividend totaling approximately $50.0 million, or
approximately $1.019 per share, to holders of our Common Stock and Class A Common Stock with respect to our first fiscal
quarter of 2025. The amount paid per share will vary based on the number of outstanding shares on the record date. The
dividend is payable on November 14, 2024 to holders of record on October 30, 2024.
Material Cash Requirements
Material cash requirements for operating activities primarily consist of feed ingredients, processing, packaging and warehouse
costs, employee related costs, and other general operating expenses, which we expect to be paid from our cash from operations
and cash and investment securities on hand for at least the next 12 months. While volatile egg prices and feed ingredient costs,
among other things, make long-term predictions difficult, we have substantial liquid assets and availability under our Credit
Facility to fund future operating requirements.
Our material cash requirements for capital expenditures consist primarily of our construction projects to increase our cage-free
production capacity. We continue to monitor the increasing demand for cage-free eggs and to engage with our customers in
efforts to achieve a smooth transition toward their announced timelines for cage-free egg sales. The following table presents
material construction projects approved as of August 31, 2024 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of August
31, 2024
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses
Fiscal 2025
$
81,429
$
73,945
$
7,484
Dexter, MO Processing and Hatchery Renovations
Fiscal 2025
6,204
4,704
1,500
Feed Mills
Fiscal 2026
16,593
4,565
12,028
Cage-Free Layer & Pullet Houses
Fiscal 2026
135,905
115,420
20,485
$
240,131
$
198,634
$
41,497
We believe our current cash balances, investments, projected cash flows from operations, and available borrowings under our
Credit Facility will be sufficient to fund our capital expenditure cash needs for at least the next 12 months and to fund our
capital commitments currently in place thereafter.
IMPACT OF RECENTLY ISSUED/ADOPTED ACCOUNTING STANDARDS
For information on changes in accounting principles and new accounting policies, see
CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates are those estimates made in accordance with U.S. generally accepted accounting principles that
involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our
financial condition or results of operations. There have been no changes to our critical accounting estimates identified in our
2024 Annual Report.
26
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 31, 2024 from the
information provided in Part II Item 7A, Quantitative and Qualitative Disclosures About Market Risk in our 2024 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 August 31, 2024 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 August 31, 2024
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
27
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 2024 Annual
Report, Part I Item 3 Legal Proceedings, and Part II Item 8, Notes to Consolidated Financial Statements and Supplementary
Data, Note 16 - Commitments and Contingencies, and (ii) in this Quarterly Report in
reference.
ITEM 1A. RISK
FACTORS
There have been no material changes in the risk factors previously disclosed in the Company’s 2024 Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table is a summary of our first quarter 2025 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
06/02/24 to 06/29/24
—
$
—
—
—
06/30/24 to 07/27/24
502
66.86
—
—
07/28/24 to 08/31/24
—
—
—
—
502
$
66.86
—
—
(1) As permitted under our Amended and Restated 2012 Omnibus Long-Term Incentive Plan, these shares were withheld by us to satisfy tax withholding
ITEM 6. EXHIBITS
Exhibits
No.
Description
3.1
3.2
31.1*
31.2*
32**
101.SCH*+
Inline XBRL Taxonomy Extension Schema Document
101.CAL*+
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*+
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*+
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*+
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Filed herewith as an Exhibit.
**
Furnished herewith as an Exhibit.
+
Submitted electronically with this Quarterly Report.
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CAL-MAINE FOODS, INC.
(Registrant)
Date:
October 1, 2024
/s/ Max P. Bowman
Max P. Bowman
Vice President, Chief Financial Officer
(Principal Financial Officer)
Date:
October 1, 2024
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)