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

August 27, 2022

or

☐

 Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____________ to ____________

Commission File Number: 

001-38695

CAL-MAINE FOODS, INC.

(Exact name of registrant as specified in its charter)

Delaware

64-0500378

(State or other jurisdiction of incorporation or organization)

(I.R.S Employer Identification No.)

1052 Highland Colony Pkwy

,

Suite 200

,

Ridgeland

,

Mississippi

39157

(Address of principal executive offices) (Zip Code)

(

601

)

948-6813

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

CALM

The

NASDAQ

 Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the

Securities Exchange Act of 1934 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

44,135,851

 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 September 27, 2022.

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 27, 2022

May 28, 2022

Assets

Current assets:

Cash and cash equivalents

$

136,021

$

59,084

Investment securities available-for-sale

145,784

115,429

Trade and other receivables, net

178,217

177,257

Income tax receivable

42,147

42,147

Inventories

265,754

263,316

Prepaid expenses and other current assets

10,965

4,286

Total current assets

778,888

661,519

Property, plant & equipment, net

688,656

677,796

Investments in unconsolidated entities

15,674

15,530

Goodwill

44,006

44,006

Intangible assets, net

17,592

18,131

Other long-term assets

9,913

10,507

Total Assets

$

1,554,729

$

1,427,489

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable and accrued expenses

$

188,689

$

148,018

Dividends payable

41,742

36,656

Total current liabilities

230,431

184,674

Other noncurrent liabilities

9,706

10,274

Deferred income taxes, net

126,629

128,196

Total liabilities

366,766

323,144

Commitments and contingencies - see Note 11

—

—

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

69,017

67,989

Retained earnings

1,149,399

1,065,854

Accumulated other comprehensive loss, net of tax

(2,350)

(1,596)

Common stock in treasury at cost –

26,125

 shares at August 27, 2022 and

26,121

 shares

at May 28, 2022

(28,495)

(28,447)

Total Cal-Maine Foods, Inc. stockholders’ equity

1,188,322

1,104,551

Noncontrolling interest in consolidated entity

(359)

(206)

Total stockholders’ equity

1,187,963

1,104,345

Total Liabilities and Stockholders’ Equity

$

1,554,729

$

1,427,489

See Notes to Condensed Consolidated Financial Statements.

4

Cal-Maine Foods, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

Thirteen Weeks Ended

August 27, 2022

August 28, 2021

Net sales

$

658,344

$

324,986

Cost of sales

440,854

318,341

Gross profit

217,490

6,645

Selling, general and administrative

53,607

46,525

(Gain) loss on disposal of fixed assets

33

(213)

Operating income (loss)

163,850

(39,667)

Other income (expense):

Interest income, net

903

232

Royalty income

428

273

Equity income of unconsolidated entities

144

135

Other, net

155

5,163

Total other income, net

1,630

5,803

Income (loss) before income taxes

165,480

(33,864)

Income tax expense (benefit)

40,346

(15,838)

Net income (loss)

125,134

(18,026)

Less: Loss attributable to noncontrolling interest

(153)

—

Net income (loss) attributable to Cal-Maine Foods, Inc.

$

125,287

$

(18,026)

Net income (loss) per common share:

Basic

$

2.58

$

(0.37)

Diluted

$

2.57

$

(0.37)

Weighted average shares outstanding:

Basic

48,623

48,858

Diluted

48,811

48,858

See Notes to Condensed Consolidated Financial Statements.

5

Cal-Maine Foods, Inc. and Subsidiaries

Condensed Consolidated Statements of

Comprehensive Income (Loss)

(In thousands)

(Unaudited)

Thirteen Weeks Ended

August 27, 2022

August 28, 2021

Net income (loss)

$

125,134

 $ 

(18,026)

Other comprehensive income (loss), before tax:

Unrealized holding loss on available-for-sale securities, net of reclassification

adjustments

(997)

(224)

Income tax benefit related to items of other comprehensive income

243

54

Other comprehensive loss, net of tax

(754)

(170)

Comprehensive income (loss)

124,380

(18,196)

Less: Comprehensive loss attributable to the noncontrolling interest

(153)

—

Comprehensive income (loss) attributable to Cal-Maine Foods, Inc.

$

124,533

$

(18,196)

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 27, 2022

August 28, 2021

Cash flows from operating activities:

Net income (loss)

$

125,134

$

(18,026)

Depreciation and amortization

17,312

17,389

Deferred income taxes

(1,324)

(15,838)

Other adjustments, net

31,690

(7,637)

Net cash provided by (used in) operations

172,812

(24,112)

Cash flows from investing activities:

Purchases of investment securities

(51,834)

(1,388)

Sales and maturities of investment securities

20,296

39,388

Distributions from unconsolidated entities

—

400

Acquisition of business, net of cash acquired

—

(44,823)

Purchases of property, plant and equipment

(27,662)

(11,233)

Net proceeds from disposal of property, plant and equipment

78

1,171

Net cash used in investing activities

(59,122)

(16,485)

Cash flows from financing activities:

Payments of dividends

(36,653)

—

Purchase of common stock by treasury

(45)

(18)

Principal payments on finance lease

(55)

(53)

Net cash used in financing activities

(36,753)

(71)

Net change in cash and cash equivalents

76,937

(40,668)

Cash and cash equivalents at beginning of period

59,084

57,352

Cash and cash equivalents at end of period

$

136,021

$

16,684

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 May 28, 2022 (the

“2022 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 27, 2022

and August 28, 2021 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

Our investment securities are accounted for in accordance with ASC 320, “Investments - Debt and Equity Securities” (“ASC

320”). The Company considers all its debt securities for which there is a determinable fair market value, and there are no

restrictions on the Company's ability to sell within the next 12 months, as available-for-sale. We classify these securities as

current, because the amounts invested are available for current operations. Available-for-sale securities are carried at fair value,

with unrealized gains and losses reported as a separate component of stockholders’ equity. The Company regularly evaluates

changes to the rating of its debt securities by credit agencies and economic conditions to assess and record any expected credit

losses through the allowance for credit losses, limited to the amount that fair value was less than the amortized cost basis. The

cost basis for realized gains and losses on available-for-sale securities is determined by the specific identification method.

Gains and losses are recognized in other income (expenses) as Other, net in the Company's Condensed Consolidated Statements

of Operations. Investments in mutual funds are classified as “Other long-term assets” in the Company’s Condensed

Consolidated Balance Sheets.

Trade Receivables 

Trade receivables are stated at their carrying values, which include a reserve for credit losses. As of August 27, 2022 and May

28, 2022, reserves for credit losses were $

716

 thousand and $

775

 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.

Immaterial Error Correction

Effective on May 30, 2021, the Company acquired the remaining

50

% membership interest in Red River Valley Egg Farm,

LLC (“Red River”), including certain liabilities. During the Company’s third quarter of fiscal 2022, management determined

that it had not properly eliminated select intercompany sales and cost of sales transactions between Red River and the

corresponding other wholly -owned subsidiaries of the Company in its first and second quarter 2022 Condensed Consolidated

Statements of Operations. The errors resulted in an overstatement of Net Sales and Cost of Sales of $

6.7

 million in the first

8

quarter of fiscal 2022 and $

9.2

 million in the second quarter of fiscal 2022. There was

no

 impact to Operating loss, Net income

(loss) or Net income (loss) per share.

We evaluated the errors quantitatively and qualitatively in accordance with Staff Accounting Bulletin

("SAB") No. 99 Materiality, and SAB No. 108 Considering the Effects of Prior Year Misstatements when Quantifying

Misstatements in the Current Year Financial Statements, and determined that the related impact was not material to our

condensed consolidated financial statements for the first or second quarters of fiscal 2022, but that correcting the cumulative

impact of the errors would be relevant to our Condensed Consolidated Statements of Operations for the third quarter

ended February 26, 2022. Accordingly, we have reflected the correction of the immaterial error for the first quarter of fiscal

2022 as a reduction of Net Sales and Cost of Sales in the accompanying Condensed Consolidated Statements of Operations.

New Accounting Pronouncements and Policies

No new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our

Consolidated Financial Statements.

Note 2 - Investment

Securities

The following represents the Company’s investment securities as of August 27, 2022 and May 28, 2022 (in thousands):

August 27, 2022

Amortized

Cost

Unrealized 

Gains

Unrealized

Losses

Estimated 

Fair Value

Municipal bonds

$

15,032

$

—

$

155

$

14,877

Commercial paper

15,936

—

53

15,883

Corporate bonds

81,711

—

1,237

80,474

Certificates of deposits

3,263

—

48

3,215

US government and agency obligations

8,190

—

87

8,103

Asset backed securities

15,620

—

227

15,393

Treasury bills

7,870

—

31

7,839

Total current investment securities

$

147,622

$

—

$

1,838

$

145,784

Mutual funds

$

3,467

$

—

$

130

$

3,337

Total noncurrent investment securities

$

3,467

$

—

$

130

$

3,337

May 28, 2022

Amortized 

Cost

Unrealized 

Gains

Unrealized

Losses

Estimated 

Fair Value

Municipal bonds

$

10,136

$

—

$

32

$

10,104

Commercial paper

14,940

—

72

14,868

Corporate bonds

74,167

—

483

73,684

Certificates of deposits

1,263

—

18

1,245

US government and agency obligations

2,205

4

—

2,209

Asset backed securities

13,456

—

137

13,319

Total current investment securities

$

116,167

$

4

$

742

$

115,429

Mutual funds

$

3,826

$

—

$

74

$

3,752

Total noncurrent investment securities

$

3,826

$

—

$

74

$

3,752

Available-for-sale

Proceeds from sales and maturities of investment securities available-for-sale were $

20.3

 million and $

39.4

 million during the

thirteen weeks ended August 27, 2022 and August 28, 2021, respectively. Gross realized gains for the thirteen weeks ended

August 27, 2022 and August 28, 2021 were $

2

 thousand and $

127

 thousand, respectively. Gross realized losses for the thirteen

weeks ended August 27, 2022 and August 28, 2021 were $

27

 thousand and $

60

 thousand, respectively. There were

no

allowances for credit losses at August 27, 2022 and May 28, 2022.

9

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 27, 2022 are as follows (in thousands):

Estimated Fair Value

Within one year

$

64,148

1-5 years

81,636

Total

$

145,784

Noncurrent 

There were

no

 sales of noncurrent investment securities during the thirteen weeks ended August 27, 2022. Proceeds from sales

and maturities of noncurrent investment securities were $

385

 thousand during the thirteen weeks ended August 28, 2021. Gross

realized gains for the thirteen weeks ended August 28, 2021 were $

130

 thousand. There were

no

 realized losses for the thirteen

weeks ended August 28, 2021.

Note 3 - Fair Value Measurements

The Company is required to categorize both financial and nonfinancial assets and liabilities based on the following fair value

hierarchy. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated,

knowledgeable, and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would

be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to

settle the liability with the creditor.

•

Level 1

 - Quoted prices in active markets for identical assets or liabilities

•

Level 2

 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either

directly or indirectly, including:

◦

Quoted prices for similar assets or liabilities in active markets

◦

Quoted prices for identical or similar assets in non-active markets

◦

Inputs other than quoted prices that are observable for the asset or liability

◦

Inputs derived principally from or corroborated by other observable market data

•

Level 3

 - Unobservable inputs for the asset or liability that are supported by little or no market activity and that are

significant to the fair value of the assets or liabilities

The disclosures of fair value of certain financial assets and liabilities that are recorded at cost are as follows:

Cash and cash equivalents, accounts receivable, and accounts payable:

 The carrying amount approximates fair value due to the

short maturity of these instruments.

Lease obligations:

 The carrying value of the Company’s lease obligations is at its present value which approximates fair value.

10

Assets and Liabilities Measured at Fair Value on a Recurring Basis

In accordance with the fair value hierarchy described above, the following table shows the fair value of financial assets and

liabilities measured at fair value on a recurring basis as of August 27, 2022 and May 28, 2022 (in thousands):

August 27, 2022

Level 1

Level 2

Level 3

Balance

Assets

Municipal bonds

$

—

$

14,877

$

—

$

14,877

Commercial paper

—

15,883

—

15,883

Corporate bonds

—

80,474

—

80,474

Certificates of deposits

—

3,215

—

3,215

US government and agency obligations

—

8,103

—

8,103

Asset backed securities

—

15,393

—

15,393

Treasury bills

—

7,839

—

7,839

Mutual funds

3,337

—

—

3,337

Total assets measured at fair value

$

3,337

$

145,784

$

—

$

149,121

May 28, 2022

Level 1

Level 2

Level 3

Balance

Assets

Municipal bonds

$

—

$

10,104

$

—

$

10,104

Commercial paper

—

14,868

—

14,868

Corporate bonds

—

73,684

—

73,684

Certificates of deposits

—

1,245

—

1,245

US government and agency obligations

—

2,209

—

2,209

Asset backed securities

—

13,319

—

13,319

Mutual funds

3,752

—

—

3,752

Total assets measured at fair value

$

3,752

$

115,429

$

—

$

119,181

Investment securities – available-for-sale classified as Level 2 consist of securities with maturities of three months or longer

when purchased. We classified these securities as current because amounts invested are readily available for current operations.

Observable inputs for these securities are yields, credit risks, default rates, and volatility.

Note 4 - Inventories

Inventories consisted of the following as of August 27, 2022 and May 28, 2022 (in thousands):

August 27, 2022

May 28, 2022

Flocks, net of amortization

$

152,264

$

144,051

Eggs and egg products

24,548

26,936

Feed and supplies

88,942

92,329

$

265,754

$

263,316

We grow and maintain flocks of layers (mature female chickens), pullets (female chickens, under 18 weeks of age), and

breeders (male and female chickens used to produce fertile eggs to hatch for egg production flocks). Our total flock at August

27, 2022 and May 28, 2022 consisted of approximately

11.4

 million and

11.5

 million pullets and breeders and

41.1

 million and

42.2

 million layers, respectively.

Note 5 - Accrued Dividends Payable and Dividends per Common Share

We accrue dividends at the end of each quarter according to the Company’s dividend policy adopted by its Board of Directors.

The Company pays a dividend to shareholders of its Common Stock and Class A Common Stock on a quarterly basis for each

quarter for which the Company reports net income attributable to Cal-Maine Foods, Inc. computed in accordance with GAAP

in an amount equal to one-third (

1/3

) of such quarterly income. Dividends are paid to shareholders of record as of the 60th day

following the last day of such quarter, except for the fourth fiscal quarter. For the fourth quarter, the Company pays dividends

to shareholders of record on the 65th day after the quarter end. Dividends are payable on the 15th day following the record date.

Following a quarter for which the Company does not report net income attributable to Cal-Maine Foods, Inc., the Company will

11

not pay a dividend for a subsequent profitable quarter until the Company is profitable on a cumulative basis computed from the

date of the most recent quarter for which a dividend was paid. For the first quarter of fiscal 2023, we will pay a cash dividend of

approximately $

0.853

 per share to holders of our Common Stock and Class A Common Stock. 

On our Condensed Consolidated Statements of Operations, we determine dividends per common share in accordance with the

computation in the following table (in thousands, except per share data):

Thirteen Weeks Ended

August 27, 2022

August 28, 2021

Net income (loss) attributable to Cal-Maine Foods, Inc.

$

125,287

$

(18,026)

Cumulative loss to be recovered prior to payment of divided at beginning of period

—

(4,244)

Net income available for dividend

$

125,287

$

—

1/3 of net income attributable to Cal-Maine Foods, Inc. available for dividend

41,762

—

Common stock outstanding (shares)

44,136

44,057

Class A common stock outstanding (shares)

4,800

4,800

Total common stock outstanding (shares)

48,936

48,857

Dividends per common share*

$

0.853

$

—

*Dividends per common share =

1/3

 of Net income attributable to Cal-Maine Foods, Inc. available for dividend ÷ Total common stock

outstanding (shares).

Note 6 - Equity

The following reflects equity activity for the thirteen weeks ended August 27, 2022 and August 28, 2021 (in thousands):

Thirteen Weeks Ended August 27, 2022

Cal-Maine Foods, Inc. Stockholders

Common Stock

Class A

Treasury

Paid In

Accum. Other

Retained

Noncontrolling

Amount

Amount

Amount

Capital

Comp. Loss

Earnings

Interest

Total

Balance at May 28,

2022

$

703

$

48

$

(28,447)

$

67,989

$

(1,596)

$

1,065,854

$

(206)

$

1,104,345

Other comprehensive

loss, net of tax

—

—

—

—

(754)

—

—

(754)

Stock compensation

plan transactions

—

—

(48)

1,028

—

—

—

980

Dividends

—

—

—

—

—

(41,742)

—

(41,742)

Net income (loss)

—

—

—

—

—

125,287

(153)

125,134

Balance at August

27, 2022

$

703

$

48

$

(28,495)

$

69,017

$

(2,350)

$

1,149,399

$

(359)

$

1,187,963

Thirteen Weeks Ended August 28, 2021

Cal-Maine Foods, Inc. Stockholders

Common Stock

Class A

Treasury

Paid In

Accum. Other

Retained

Amount

Amount

Amount

Capital

Comp. Loss

Earnings

Total

Balance at May 29, 2021

$

703

$

48

$

(27,433)

$

64,044

$

(558)

$

975,977

$

1,012,781

Other comprehensive loss, net of tax

—

—

—

—

(170)

—

(170)

Stock compensation plan transactions

—

—

(18)

1,000

—

—

982

Net loss

—

—

—

—

—

(18,026)

(18,026)

Balance at August 28, 2021

$

703

$

48

$

(27,451)

$

65,044

$

(728)

$

957,951

$

995,567

12

Note 7 - Net Income (Loss) per Common Share

Basic net income (loss) per share is based on the weighted average Common Stock and Class A Common Stock outstanding.

Diluted net income per share is based on weighted-average common shares outstanding during the relevant period adjusted for

the dilutive effect of share-based awards. Restricted shares of

131

 thousand were antidilutive due to the net loss for the first

quarter of fiscal 2022. These shares were not included in the diluted net loss per share calculation.

The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net

income (loss) per common share (amounts in thousands, except per share data):

Thirteen Weeks Ended

August 27, 2022

August 28, 2021

Numerator

Net income (loss)

$

125,134

$

(18,026)

Less: Loss attributable to noncontrolling interest

(153)

—

Net income (loss) attributable to Cal-Maine Foods, Inc.

$

125,287

$

(18,026)

Denominator

Weighted-average common shares outstanding, basic

48,623

48,858

Effect of dilutive restricted shares

188

—

Weighted-average common shares outstanding, diluted

48,811

48,858

Net income (loss) per common share attributable to Cal-Maine Foods, Inc.

Basic

$

2.58

$

(0.37)

Diluted

$

2.57

$

(0.37)

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 returns and refunds by using historical

return data and comparing to current period sales and accounts receivable. The allowance is recorded as a reduction in sales

with a corresponding reduction in trade accounts receivable.

Sales Incentives Provided to Customers

The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current

discount offers (e.g., percentage discounts off current purchases), inducement offers (e.g., offers for future discounts subject to

a minimum current purchase), and other similar offers. Current discount offers, when accepted by customers, are treated as a

reduction to the sales price of the related transaction, while inducement offers, when accepted by customers, are treated as a

reduction to the sales price based on estimated future redemption rates. Redemption rates are estimated using the Company’s

historical experience for similar inducement offers. Current discount and inducement offers are presented as a net amount in

‘‘Net sales.’’

13

Disaggregation of Revenue

The following table provides revenue disaggregated by product category (in thousands):

Thirteen Weeks Ended

August 27, 2022

August 28, 2021

Conventional shell egg sales

$

425,589

$

182,030

Specialty shell egg sales

200,820

132,458

Egg products

27,640

9,366

Other

4,295

1,132

$

658,344

$

324,986

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 August 27, 2022 and May 28, 2022, the balance for

contract assets is immaterial.

Contract Balances

The Company receives payment from customers based on specified terms that are generally less than 30 days from delivery.

There are rarely contract assets or liabilities related to performance under the contract.

Note 9 - Stock Based Compensation

Total stock-based compensation expense was $

1.0

 million for the thirteen weeks ended August 27, 2022 and August 28, 2021.

Unrecognized compensation expense as a result of non -vested shares of restricted stock outstanding under the Amended and

Restated 2012 Omnibus Long-Term Incentive Plan at August 27, 2022 of $

5.9

 million will be recorded over a weighted average

period of

1.9

 years. Refer to Part II Item 8, Notes to Consolidated Financial Statements and Supplementary Data, Note 16:

Stock Compensation Plans in our 2022 Annual Report for further information on our stock compensation plans.

The Company’s restricted share activity for the thirteen weeks ended August 27, 2022 follows:

Number of

Shares

Weighted

Average Grant

Date Fair Value

Outstanding, May 28, 2022

317,844

$

39.12

Vested

(3,240)

38.31

Forfeited

(2,778)

39.48

Outstanding, August 27, 2022

311,826

$

39.12

Note 10 – Income Taxes

For the first quarters of fiscal 2023 and 2022, the Company recorded income tax expense of $

40.3

 million and income tax

benefit of $

15.8

 million which reflects an effective tax rate of

24.4

% and

46.8

%, respectively. Excluding the impact of discrete

items related to an $

8.3

 million net tax benefit recorded in the first quarter of fiscal 2022 in connection with the Red River

Valley Egg Farm, LLC acquisition, the adjusted effective tax rate for the first quarter of fiscal 2022 is

22.4

%. 

Our effective tax rate differs from the federal statutory income tax rate due to state income taxes, certain federal tax credits and

certain items included in income for financial reporting purposes that are not included in taxable income for income tax

purposes, including tax exempt interest income, certain nondeductible expenses and net income or loss attributable to

noncontrolling interest.

14

Note 11 - Commitments and Contingencies

Financial Instruments

The Company maintained standby letters of credit (“LOCs”) totaling $

4.1

 million at August 27, 2022, which were issued under

the Company's Credit Facility. The outstanding LOCs are for the benefit of certain insurance companies and are not recorded as

a liability on the consolidated balance sheets.

LEGAL PROCEEDINGS

State of Texas v. 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. The Company and WCF are considering whether to appeal this decision from the First District. Management

believes the risk of material loss related to this matter to be remote.

Bell et al. v. Cal-Maine Foods et al. 

On April 30, 2020, the Company was named as one of several defendants in Bell et al. v. Cal-Maine Foods 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 September 6, 2022, the plaintiffs’ filed their opposition to the motion to dismiss and the Company

and other defendants filed their reply on September 13, 2022. The court has not issued a ruling. Management believes the risk

of material loss related to both matters to be remote.

Kraft Foods Global, Inc. et al. v. United Egg Producers, Inc. et al. 

As previously reported, on September 25, 2008, the Company was named as one of several defendants in numerous antitrust

cases involving the United States shell egg industry. The Company settled all of these cases, except for the claims of certain

plaintiffs who sought substantial 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

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

15

Egg Producers, Inc. et al., Case No. 1:11-cv-8808, for trial. The Egg Products Plaintiffs allege that the Company and other

defendants violated Section 1 of the Sherman Act, 15. U.S.C. § 1, by agreeing to limit the production of eggs and thereby

illegally to raise the prices that plaintiffs paid for processed egg products. In particular, the Egg Products Plaintiffs are attacking

certain features of the United Egg Producers animal-welfare guidelines and program used by the Company and many other egg

producers. The Egg Products Plaintiffs seek to enjoin the Company and other defendants from engaging in antitrust violations

and seek treble money damages. On May 2, 2022, the court set trial for October 24, 2022, but on September 20, 2022, the court

cancelled the trial date due to COVID-19 protocols and converted the trial date to a status hearing to reschedule the jury trial.

We anticipate the trial being rescheduled for the first or second calendar quarter of 2023. 

In addition, on October 24, 2019, the Company entered into a confidential settlement agreement with The Kellogg Company

dismissing all claims against the Company for an amount that did not have a material impact on the Company’s financial

condition or results of operations. On November 11, 2019, a stipulation for dismissal was filed with the court, and on March 28,

2022, the court dismissed the Company with prejudice.

The Company intends to continue to defend the remaining case with the Egg Products Plaintiffs as vigorously as possible based

on defenses which the Company believes are meritorious and provable. Adjustments, if any, which might result from the

resolution of this remaining matter with the Egg Products Plaintiffs have not been reflected in the financial statements. While

management believes that there is still a reasonable possibility of a material adverse outcome from the case with the Egg

Products Plaintiffs, at the present 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: two earlier trials based on substantially the same facts and

legal arguments resulted in findings of no conspiracy and/or damages; this trial will be before a different judge and jury in a

different court than prior related cases; there are significant factual issues to be resolved; and there are requests for damages

other than compensatory damages (i.e., injunction and treble money damages).

State of Oklahoma Watershed Pollution Litigation

On June 18, 2005, the State of Oklahoma filed suit, in the United States District Court for the Northern District of Oklahoma,

against Cal-Maine Foods, Inc. and Tyson Foods, Inc. and affiliates, Cobb-Vantress, Inc., Cargill, Inc. and its affiliate, George’s,

Inc. and its affiliate, Peterson Farms, Inc. and Simmons Foods, Inc. The State of Oklahoma claims that through the disposal of

chicken litter the defendants have polluted the Illinois River Watershed. This watershed provides water to eastern Oklahoma.

The complaint seeks injunctive relief and monetary damages, but the claim for monetary damages has been dismissed by the

court. Cal-Maine Foods, Inc. discontinued operations in the watershed. Accordingly, we do not anticipate that Cal-Maine

Foods, Inc. will be materially affected by the request for injunctive relief unless the court orders substantial affirmative

remediation. Since the litigation began, Cal-Maine Foods, Inc. purchased

100

% of the membership interests of Benton County

Foods, LLC, which is an ongoing commercial shell egg operation within the Illinois River Watershed. Benton County Foods,

LLC is not a defendant in the litigation.

The trial in the case began in September 2009 and concluded in February 2010. The case was tried without a jury, and the court

has not yet issued its ruling. Management believes the risk of material loss related to this matter to be remote.

Other Matters

In addition to the above, the Company is involved in various other claims and litigation incidental to its business. Although 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.

16

ITEM 2. MANAGEMENT’S

DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

The following should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results

of Operations included in Part II Item 7 of the Company’s Annual Report on Form 10-K for its fiscal year ended May 28, 2022

(the “2022 Annual Report”), and the accompanying financial statements and notes included in Part II Item 8 of the 2022 Annual

Report and in

 of this Quarterly Report on Form 10-Q (“Quarterly Report”).

This report contains numerous forward-looking statements within the meaning of Section 27A of the Securities Act of 1933

(the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) relating to our shell egg

business, including estimated future production data, expected construction schedules, projected construction costs, potential

future supply of and demand for our products, potential future corn and soybean price trends, potential future impact on our

business of the COVID-19 pandemic, potential future impact on our business of new legislation, rules or policies, potential

outcomes of legal proceedings, and other projected operating data, including anticipated results of operations and financial

condition. Such forward-looking statements are identified by the use of words such as “believes,” “intends,” “expects,”

“hopes,” “may,” “should,” “plans,” “projected,” “contemplates,” “anticipates,” or similar words. Actual outcomes or results

could differ materially from those projected in the forward-looking statements. The forward-looking statements are based on

management’s current intent, belief, expectations, estimates, and projections regarding the Company and its industry. These

statements are not guarantees of future performance and involve risks, uncertainties, assumptions, and other factors that are

difficult to predict and may be beyond our control. The factors that could cause actual results to differ materially from those

projected in the forward-looking statements include, among others, (i) the risk factors set forth in Part I Item 1A of the 2022

Annual Report (ii) the risks and hazards inherent in the shell egg business (including disease, pests, weather conditions, and

potential for product recall), including but not limited to the current outbreak of highly pathogenic avian influenza (HPAI)

affecting poultry in the U.S., Canada and other countries that was first detected in commercial flocks in the U.S. in February

2022, (iii) changes in the demand 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 the evolving COVID-19 pandemic, including without limitation increased costs and rising inflation and interest

rates, which generally have been exacerbated by Russia’s invasion of Ukraine starting February 2022, (vii) our ability to retain

existing customers, acquire new customers and grow our product mix and (viii) adverse results in pending litigation

matters. Readers are 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 under one operating segment. We are the

largest producer and distributor of fresh shell eggs in the United States (“U.S.”). Our total flock of approximately 41.1 million

layers and 11.4 million pullets and breeders is the largest in the U.S. We sell most of our shell eggs to a diverse group of

customers, including national and regional grocery store chains, club stores, companies servicing independent supermarkets in

the U.S., food service distributors, and egg product consumers in states across the southwestern, southeastern, mid-western 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 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. 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

17

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 and agricultural,

energy and trade policies in the U.S. and internationally and most recently the Russia-Ukraine war.

An important competitive advantage for Cal-Maine Foods is our ability to meet our customers’ evolving needs with a favorable

product mix of conventional and specialty eggs, including cage-free, organic and other specialty offerings, as well as egg

products. We have also enhanced our efforts to provide free-range and pasture-raised eggs that meet consumers’ evolving

choice preferences. While a small part of our current business, the free-range and pasture-raised eggs we produce and sell

represent attractive offerings to a subset of consumers, and therefore our customers, and help us continue to serve as the trusted

provider of quality food choices.

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.

HPAI

We are closely monitoring the current outbreak of highly pathogenic avian influenza (“HPAI”), that was first detected in

commercial flocks in the U.S. in February 2022 and which was most recently detected in commercial flocks in the U.S. in

September 2022. According to the U.S. Centers for Disease Control and Prevention, these detections do not present an

immediate public health concern. There have been no positive tests for HPAI at any Cal-Maine Foods’ owned or contracted

production facility as of September 27, 2022. The USDA division of Animal and Plant Health Inspection Service (“APHIS”)

reported that approximately 35.6 million commercial layer hens and 1.0 million pullets have been depopulated due to HPAI.

According to APHIS, the most recently reported outbreaks of HPAI affecting commercial layer hens and pullets occurred

September 21, 2022 and June 9, 2022, respectively. We believe the HPAI outbreak will continue to have an impact on the

overall supply of eggs through the balance of this calendar year and possibly beyond. According to LEAP Market Analytics,

layer hen inventory is not projected to exceed the 320 million mark until October of 2023.

While no farm is immune from HPAI, we believe we have implemented and continue to maintain robust biosecurity programs

across our locations. We are also working closely with federal, state and local government officials and focused industry groups

to mitigate the risk of this and future outbreaks and effectively manage our response, if needed.

CAGE-FREE EGGS

Ten states have passed legislation or regulations mandating minimum space or cage-free requirements for egg production or

mandated the sale of only cage-free eggs and egg products in their states, with implementation of these laws ranging from

January 2022 to January 2026. These states represent approximately 27% of the U.S. total population according to the 2020

U.S. Census. In California and Massachusetts, which collectively represent 14% of the total U.S. population according to the

2020 U.S. Census, cage-free legislation went into effect January 1, 2022. However, these laws are subject to judicial challenge,

and the Supreme Court of the U.S. recently announced that in October 2022 it will review a case challenging California’s law

that requires the sale of only cage-free eggs in that state. These laws have already affected and, if upheld, will continue to affect

sourcing, production and pricing of eggs (conventional as well as specialty) as the national demand for cage-free production

could be greater than the current supply, which would increase the price of cage-free eggs, unless more cage-free production

capacity is constructed. Likewise, the national supply for eggs from conventional production could exceed consumer demand

which would decrease the price of conventional eggs.

A significant number of our customers have previously announced goals to offer cage-free eggs exclusively on or before 2026,

subject in most cases to availability of supply, affordability and customer demand, among other contingencies. Some of these

customers have recently changed those goals to offer 70% cage-free eggs by the end of 2030. Our customers typically do not

commit to long-term purchases of specific quantities or types of eggs with us, and as a result, it is difficult to accurately predict

customer requirements for cage-free eggs. We are, however, engaging with our customers in an effort to achieve a smooth

transition in meeting their announced goals and needs. Sales of cage-free eggs represented approximately 19.4% of our shell

egg revenues for the first quarter of fiscal 2023. We have invested significant capital in recent years to acquire and construct

cage-free facilities, and we expect our focus for future expansion will continue to include cage-free facilities. At the same time,

18

we understand the importance of our continued ability to provide more affordable conventional eggs in order to provide our

customers with a variety of egg choices and to address hunger in our communities. 

For additional information, see the 2022 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.”

EXECUTIVE OVERVIEW

For the first quarter of fiscal 2023, we recorded a gross profit of $217.5 million compared to $6.6 million for the same period of

fiscal 2022, with the increase due primarily to higher shell egg prices and increased volume of specialty eggs sold, partially

offset by the increased cost of feed ingredients and processing, packaging and warehouse costs. Our total dozens sold increased

8.1% to 275.3 million dozen shell eggs for the first quarter of fiscal 2023 compared to 254.6 million dozen for the same period

of fiscal 2022. For the first quarter of fiscal 2023, conventional dozens sold decreased 2.3% and specialty dozens sold increased

35.1% as compared to the same quarter in fiscal 2022. Demand for specialty eggs increased in the first quarter of fiscal 2023

compared to the same prior year period due primarily to the higher prices for conventional eggs. Further, demand for specialty

eggs continued to increase as retailers continued to shift to selling cage-free products and cage-free legislation went into full

effect in California and Massachusetts on January 1, 2022. We benefited from the strong demand for specialty eggs as we

placed more of our cage-free facilities into production and better utilized our existing cage-free production capacity.

Conventional egg prices increased in the first quarter of fiscal 2023 primarily due to decreased supply caused by the HPAI

outbreak compounded with good customer demand. See the discussion under the heading “HPAI” above. The daily average

price for the UB southeast large index for the first quarter of fiscal 2023 increased 133.8% from the comparable period in the

prior year. Our net average selling price per dozen for the first quarter of fiscal 2023 was $2.275 compared to $1.235 in the

prior-year period. Layer hen numbers reported by the USDA as of September 21, 2022, were 305.3 million, which represents a

decrease of 4.6% compared with the layer hen inventory a year ago. The USDA also reported that the hatch from April 2022

through August 2022 decreased 0.5% as compared with the prior-year period. As of September 1, 2022, however, eggs in

incubators were up 9.0% year-over-year, indicating that layer flocks may increase in the future.

Our farm production costs per dozen produced for the first quarter of fiscal 2023 increased 16.5%, or $0.148, compared to the

first quarter of fiscal 2022 . This increase was primarily due to increased prices for feed ingredients and a higher basis in corn in

most of our production areas. For the first quarter of fiscal 2023, the average Chicago Board of Trade (“CBOT”) daily market

price was $6.65 per bushel for corn and $456 per ton for soybean meal, representing increases of 11.5% and 25.4%,

respectively, compared to the average daily CBOT prices for the comparable period in the prior year.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain items from our Condensed Consolidated Statements of

Operations expressed as a percentage of net sales.

Thirteen Weeks Ended

August 27, 2022

August 28, 2021

Net sales

100.0

%

100.0

%

Cost of sales

67.0

%

98.0

%

Gross profit

33.0

%

2.0

%

Selling, general and administrative

8.1

%

14.3

%

(Gain) loss on disposal of fixed assets

—

%

(0.1)

%

Operating income (loss)

24.9

%

(12.2)

%

Total other income, net

0.2

%

1.8

%

Income (loss) before income taxes

25.1

%

(10.4)

%

Income tax expense (benefit)

6.1

%

(4.9)

%

Net income (loss)

19.0

%

(5.5)

%

NET SALES

Total net sales for the first quarter of fiscal 2023 were a record $658.3 million compared to $325.0 million for the same period

of fiscal 2022.

19

Net shell egg sales represented 95.8% and 97.1% of total net sales for the first quarters of fiscal 2023 and 2022, respectively.

Shell egg sales classified as “Other” represent sales of hard-cooked eggs and other miscellaneous byproducts included with our

shell egg operations. 

The table below presents an analysis of our conventional and specialty shell egg sales (in thousands, except percentage data):

Thirteen Weeks Ended

August 27, 2022

August 28, 2021

Total net sales

$

658,344

$

324,986

Conventional

$

425,589

67.5

%

$

182,030

57.6

%

Specialty

200,820

31.8

%

132,458

42.0

%

Egg sales, net

626,409

99.3

%

314,488

99.6

%

Other

4,295

0.7

%

1,132

0.4

%

Net shell egg sales

$

630,704

100.0

%

$

315,620

100.0

%

Net shell egg sales as a percent of total net sales

95.8

%

97.1

%

Dozens sold:

Conventional

179,712

65.3

%

183,872

72.2

%

Specialty

95,605

34.7

%

70,750

27.8

%

Total dozens sold

275,317

100.0

%

254,622

100.0

%

Net average selling price per dozen:

Conventional

$

2.368

$

0.990

Specialty

$

2.101

$

1.872

All shell eggs

$

2.275

$

1.235

Egg products sales: 

Egg products net sales

27,640

9,366

Pounds sold

16,502

15,269

Net average selling price per pound

1.675

0.613

Shell egg net sales

First Quarter – Fiscal 2023 vs. Fiscal 2022

-

In the first quarter of fiscal 2023, conventional egg sales increased $243.6 million, or 133.8%, compared to the first

quarter of fiscal 2022, primarily due to the increase in price for conventional shell eggs, partially offset by a decrease

in volume of conventional eggs sold. Changes in price resulted in a $247.6 million increase and the change in volume

resulted in a $4.1 million decrease in net sales, respectively.

-

We believe prices for conventional eggs were positively impacted by a better alignment of the size of the conventional

production layer hen flock and customer and consumer demand. Conventional egg prices further increased in the first

quarter of fiscal 2023 primarily due to decreased supply caused by the HPAI outbreak, discussed above.

-

Conventional egg prices generally respond more quickly to market conditions as we sell the majority of our

conventional shell eggs based on formulas that adjust periodically and take into account, in varying ways,

independently quoted regional wholesale market prices for shell eggs or formulas related to our costs of production.

The majority of our specialty eggs are typically sold at prices and terms negotiated directly with customers and

therefore do not fluctuate as much as conventional pricing. As a result of these independently quoted whole markets

for conventional eggs reaching near historical highs, the average selling price for conventional eggs exceeded the

average selling price for specialty eggs in the first quarter of fiscal 2023.

-

Specialty egg sales increased $68.4 million, or 51.6%, in the first quarter of fiscal 2023 compared to the first quarter of

fiscal 2022, primarily due to a 35.1% increase in the volume of specialty eggs sold, which resulted in a $46.5 million

increase in net sales. 

-

According to Information Resources, Inc., Total US – Multi Outlet for the latest 13 weeks ended August 27, 2022,

cage-free eggs dozens sold (including free-range, pasture-raised and organic) increased 34.9%. We believe this

increase in demand was positively impacted by the higher conventional egg prices as compared to the same period in

20

the prior year. Demand for specialty eggs was further positively affected by California’s and Massachusetts’s cage-

free mandates going into effect January 1, 2022, as well as more retailers shifting to selling more cage-free products.

-

Our specialty egg sales in the first quarter of fiscal 2023 versus the prior-year period benefitted from the strong

demand for specialty eggs as we placed more of our cage-free facilities into production, and we better utilized our

existing cage-free production capacity. Cage-free egg sales for the first quarter of fiscal 2023 represented 19.4% of our

total net shell egg sales versus 22.1% for the same prior year period due the higher conventional egg prices. Cage-free

dozens sold increased 58% in the first of quarter of fiscal 2023 as compared to the first quarter of fiscal 2022.

Egg products net sales

First Quarter – Fiscal 2023 vs. Fiscal 2022

-

Egg products net sales increased $18.3 million or 195.1% for the first quarter of fiscal 2023 compared to the same

period of fiscal 2022, primarily due to a 173.2% selling price increase, which had a $17.5 million positive impact on

net sales.

-

Our egg products net average selling price increased in the first quarter of fiscal 2023, compared to the first quarter of

fiscal 2022 as the supply decreased due to the HPAI outbreak that started in February 2022. We believe 13.4 million of

the 33.7 million layers culled as a result of the HPAI outbreak were located at facilities dedicated to support inline

breaking facilities in Iowa and Ohio.

COST OF SALES

Costs of sales for the first quarter of fiscal 2023 were $440.9 million compared to $318.3 million for the same period of fiscal

2022. 

Cost of sales consists of costs directly related to producing, processing and packing shell eggs, purchases of shell eggs from

outside producers, processing and packing of liquid and frozen egg products and other non-egg costs. Farm production costs are

those costs incurred at the egg production facility, including feed, facility, hen amortization and other related farm production

costs.

The following table presents the key variables affecting our cost of sales (in thousands, except cost per dozen data):

Thirteen Weeks Ended

August 27, 2022

August 28, 2021

%

Change

Cost of Sales:

Farm production

$

266,651

$

207,495

28.5

%

Processing, packaging, and warehouse

81,417

65,059

25.1

Egg purchases and other (including change in inventory)

68,298

37,973

79.9

Total shell eggs

416,366

310,527

34.1

Egg products

24,488

7,814

213.4

Total

$

440,854

$

318,341

38.5

%

Farm production costs (per dozen produced)

Feed

$

0.667

$

0.545

22.4

%

Other

$

0.379

$

0.353

7.4

%

Total

$

1.046

$

0.898

16.5

%

Outside egg purchases (average cost per dozen)

$

2.57

$

1.35

90.4

%

Dozens produced

257,654

236,458

9.0

%

Percent produced to sold

93.6%

92.9%

0.8

%

Farm Production

First Quarter – Fiscal 2023 vs. Fiscal 2022

-

Feed costs per dozen produced increased 22.4% in the first quarter of fiscal 2023 compared to the first quarter of fiscal

2022. This increase was primarily due to increased prices for corn, our primary feed ingredient. 

21

-

For the first quarter of fiscal 2023, the average daily Chicago Board of Trade (“CBOT”) market price was $6.65 per

bushel for corn and $456 per ton of soybean meal representing increases of 11.5% and 25.4%, respectively, as

compared to the average daily CBOT prices for the first quarter of fiscal 202 2. 

Supplies of corn and soybean remained tight relative to demand in the first quarter of fiscal 2023 as evidenced by a low stock-

to-use ratio for corn, as a result of weather-related shortfalls in production and yields, ongoing disruptions related to the

COVID-19 global pandemic and the Russia-Ukraine war and its impact on the export markets. Basis levels for corn ran

significantly higher in our area of operations compared to our prior year first fiscal quarter. For fiscal 2023, we expect

continued corn and soybean upward pricing pressures and further market volatility to affect feed costs. 

Processing, packaging, and warehouse

First Quarter – Fiscal 2023 vs. Fiscal 2022

-

Cost of packaging materials increased 16.1% compared to the first quarter of fiscal 2022 due to rising inflation.

-

Labor costs increased 24.4% due to wage increases and increased use of contract labor in response to labor shortages .

-

Dozens processed increased 8.6% compared to the first quarter of fiscal 2022, which resulted in a $2.2 million increase

in costs.

Egg purchases and other (including change in inventory)

First Quarter – Fiscal 2023 vs. Fiscal 2022

-

Costs in this category increased primarily due to higher egg prices, partially offset by the decrease in the volume of

outside egg purchases, as our percentage of produced to sold increased to 93.6% from 92.9%.

GROSS PROFIT 

Gross profit for the first quarter of fiscal 2023 was $217.5 million compared to $6.6 million for the same period of fiscal 2022.

The increase of $210.9 million was primarily due to higher egg prices as well as the increased volume of specialty eggs sold,

partially offset by the increased cost of feed ingredients and processing, packaging and warehouse costs.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

Selling, general, and administrative expenses ("SGA") include costs of marketing, distribution, accounting and corporate

overhead. The following table presents an analysis of our SGA expenses (in thousands):

Thirteen Weeks Ended

August 27, 2022

August 28, 2021

$ Change

% Change

Specialty egg expense

$

13,067

$

13,715

$

(648)

(4.7)

%

Delivery expense

19,916

13,936

5,980

42.9

%

Payroll, taxes and benefits

10,987

9,939

1,048

10.5

%

Stock compensation expense

1,025

1,001

24

2.4

%

Other expenses

8,612

7,934

678

8.5

%

Total

$

53,607

$

46,525

$

7,082

15.2

%

First Quarter – Fiscal 2023 vs. Fiscal 2022

Specialty egg expense

-

Specialty egg expense, which includes franchise fees, advertising and promotion costs, generally aligns with specialty

egg volumes, which were up 35.1% for the first quarter of fiscal 2023 compared to the same period of fiscal 2022.

However, our specialty egg expense decreased by 4.7%, primarily due to increased sales to other Eggland’s Best, Inc.

(“EB”) franchisees, including unconsolidated affiliates, Specialty Eggs, LLC and Southwest Specialty Eggs, LLC.

These franchisees that were responsible for the franchise fees, advertising and promotion costs associated with those

sales, which resulted in reduced costs for us. Also, the higher prices for conventional eggs and the comparatively lower

prices for specialty eggs diminished the need to promote specialty eggs; as a result, EB temporarily reduced the related

franchise fees for certain specialty egg products to encourage continued production of these products.

22

Delivery expense

-

The increased delivery expense is primarily due to the increase in fuel and labor costs for both our fleet and contract

trucking.

Payroll, taxes and benefits expense

-

The increase in payroll, taxes and benefits expense is primarily due to increased wages for all employees due to the

inflationary market.

OPERATING INCOME (LOSS)

For the first quarter of fiscal 2023, we recorded operating income of $163.9 million compared to operating loss of $39.7 million

for the same period of fiscal 2022.

OTHER INCOME (EXPENSE) 

Total other income (expense) consists of items not directly charged or related to operations, such as interest income and

expense, royalty income, equity income or loss of unconsolidated entities, and patronage income, among other items.

For the first quarter of fiscal 2023, we earned $1.1 million of interest income compared to $290 thousand for the same period of

fiscal 2022. The increase resulted from significantly higher investment balances. The Company recorded interest expense of

$148 thousand and $58 thousand for the first quarters ended August 27, 2022 and August 28, 2021, respectively.

Other, net for the first quarter ended August 27, 2022, was income of $155 thousand compared to income of $5.2 million for

the same period of fiscal 2022. The decrease is primarily due to our acquisition of the remaining 50% membership interest in

Red River in the first quarter of fiscal 2022 as we recognized a $4.5 million gain due to the remeasurement of our equity

investment.

INCOME TAXES

For the first quarter of fiscal 2023, pre-tax income was $165.5 million compared to pre-tax loss of $33.9 million for the same

period of fiscal 2022. We recorded income tax expense of $40.3 million for the first quarter of fiscal 2023, which reflects an

effective tax rate of 24.4%, compared to an income tax benefit of $15.8 million in the prior year period, which reflects an

effective tax rate of 46.8%. Excluding the impact of discrete items related to a $8.3 million net tax benefit recorded in the first

quarter of fiscal 2022 in connection with the Red River Valley Egg Farm, LLC (“Red River”) acquisition, income tax benefit

for the comparable period of fiscal 2022 was $7.6 million, which reflects an adjusted effective tax rate of 22.4%. 

Our effective tax rate differs from the federal statutory income tax rate due to state income taxes, certain federal tax credits and

certain items included in income for financial reporting purposes that are not included in taxable income for income tax

purposes, including tax exempt interest income, certain nondeductible expenses and net income or loss attributable to

noncontrolling interest.

NET INCOME ATTRIBUTABLE TO CAL-MAINE FOODS, INC.

Net income attributable to Cal-Maine Foods, Inc. for the first quarter ended August 27, 2022, was $125.3 million, or $2.58 per

basic and $2.57 per diluted common share, compared to net loss attributable to Cal-Maine Foods, Inc. of $18.0 million or $0.37

per basic and diluted common share for the same period of fiscal 2022.

LIQUIDITY AND CAPITAL RESOURCES 

Working Capital and Current Ratio

Our working capital at August 27, 2022 was $548.5 million, compared to $476.8 million at May 28, 2022. The calculation of

working capital is defined as current assets less current liabilities. Our current ratio was 3.4 at August 27, 2022, compared with

3.6 at May 28, 2022. The current ratio is calculated by dividing current assets by current liabilities.

Cash Flows from Operating Activities

For the thirteen weeks ended August 27, 2022, $172.8 million in net cash was provided by operating activities, compared to

$24.1 million used by operating activities for the comparable period in fiscal 2022. The increase in cash flow from operating

23

activities resulted primarily from higher selling prices for conventional and specialty eggs as well as increased volume of

specialty egg sales, partially offset by increased costs of feed ingredients compared to the prior-year period. The increase in

Other adjustments, net is primarily due to a $67.4 million balance for income taxes payable as of August 27, 2022.

Cash Flows from Investing Activities

We continue to invest in our facilities, with $27.7 million used to purchase property, plant and equipment for the thirteen weeks

ended August 27, 2022, compared to $11.2 million in the same period of fiscal 2022. In the first quarter of fiscal 2022, we

acquired the remaining 50% membership interest in Red River Valley Egg Farm, LLC for $44.8 million, net of cash acquired.

Purchases of investments were $51.8 million in the first quarter of fiscal 2023, compared to $1.4 million in fiscal 2022. The

increase in purchases of investments is primarily due to the increased cash provided by operating activities noted above. Sales

and maturities of investment securities were $20.3 million for the thirteen weeks ended August 27, 2022, compared to $39.4

million for the comparable period in fiscal 2022. 

Cash Flows from Financing Activities

We paid dividends of $36.7 million in the first quarter of fiscal 2023.

As of August 27, 2022, cash increased $76.9 million since May 28, 2022, compared to a decrease of $40.7 million during the

same period of fiscal 2022.

Credit Facility

We had no long-term debt outstanding at August 27, 2022 or May 28, 2022. On November 15, 2021, we entered into a credit

agreement that provides for a senior secured revolving credit facility (the “Credit Facility”), in an initial aggregate principal

amount of up to $250 million with a five-year term. As of August 27, 2022, no amounts were borrowed under the Credit

Facility. We have $4.1 million in outstanding standby letters of credit, issued under our Credit Facility for the benefit of certain

insurance companies. Refer to Part II Item 8. Notes to the Financial Statements, Note 10 – Credit Facility included in our 2022

Annual Report for further information regarding our long-term debt.

Material Cash Requirements

We continue to monitor the increasing demand for cage-free eggs and to engage with our customers in efforts to achieve a

smooth transition toward their announced commitment timeline for cage-free egg sales. As previously reported, during the first

quarter of fiscal 2023, our Board of Directors approved another capital project to expand our cage-free production capabilities.

The project at Chase, Kansas will convert existing conventional layer capacity to cage-free capacity for approximately 1.5

million cage-free hens and include remodels of all remaining pullet facilities. Project completion is expected by year-end 2025.

The following table presents material construction projects approved as of August 27, 2022 (in thousands):

Project(s) Type

Projected 

Completion

Projected Cost

Spent as of August

27, 2022

Remaining

Projected Cost

Cage-Free Layer & Pullet Houses/Processing

Facility

Fiscal 2023

$

132,161

115,343

16,818

Cage-Free Layer & Pullet Houses

Fiscal 2023

24,923

19,548

5,375

Cage-Free Layer & Pullet Houses

Fiscal 2024

42,591

383

42,208

Cage-Free Layer & Pullet Houses

Fiscal 2025

94,183

7,729

86,454

$

293,858

$

143,003

$

150,855

We believe our current cash balances, investments, cash flows from operations, and Credit Facility will be sufficient to fund our

current capital needs for at least the next 12 months. 

IMPACT OF RECENTLY ISSUED/ADOPTED ACCOUNTING STANDARDS

For information on changes in accounting principles and new accounting policies, see

 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report.

24

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

2022 Annual Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our exposure to market risk during the thirteen weeks ended August 27, 2022 from the

information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2022 Annual Report.

ITEM 4. CONTROLS

AND

PROCEDURES

Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to 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 27, 2022 at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended August 27, 2022

that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

25

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to the discussion of certain legal proceedings involving the Company and/or its subsidiaries in (i) our 2022 Annual

Report, Part I Item 3 Legal Proceedings, and Part II Item 8, Notes to Consolidated Financial Statements and Supplementary

Data, Note 18: Commitments and Contingencies, and (ii) in this Quarterly Report in

of the Notes to Condensed Consolidated Financial Statements, which discussions are incorporated herein by reference.

ITEM 1A. RISK

FACTORS

There have been no material changes in the risk factors previously disclosed in the Company’s 2022 Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table is a summary of our first quarter 2023 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

05/29/22 to 06/25/22

286

$

47.04

—

—

06/26/22 to 07/23/22

609

52.48

—

—

07/24/22 to 08/27/22

—

—

—

—

895

$

50.74

—

—

(1) As permitted under our Amended and Restated 2012 Omnibus Long-Term Incentive Plan, these shares were withheld by us to satisfy tax withholding 

 obligations for employees in connection with the vesting of restricted common stock.

ITEM 6. EXHIBITS

Exhibits

No.

Description

3.1

Second Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to

Exhibit 3.1 in the Registrant’s Form 8-K, filed July 20, 2018)

3.2

Composite Bylaws of the Company (incorporated by reference to Exhibit 3.2 in the Registrant’s Form 10-Q

for the quarter ended March 2, 2013, filed April 5, 2013)

31.1*

Rule 13a-14(a) Certification of the Chief Executive Officer

31.2*

Rule 13a-14(a) Certification of the Chief Financial Officer

32**

Section 1350 Certification of the Chief Executive Officer and the Chief Financial Officer

101.SCH*+

Inline XBRL Taxonomy Extension Schema Document

101.CAL*+

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*+

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*+

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*+

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*

Filed herewith as an Exhibit. 

**

Furnished herewith as an Exhibit.

+

Submitted electronically with this Quarterly Report.

26

SIGNATURES

Pursuant to the 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: 

September 27, 2022

/s/ Max P. Bowman

Max P. Bowman

Vice President, Chief Financial Officer

(Principal Financial Officer)

໿

Date: 

September 27, 2022

/s/ Matthew S. Glover

Matthew S. Glover

Vice President – Accounting

(Principal Accounting Officer)

໿