1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
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The aggregate market value, as reported by The NASDAQ Global Select Market, of the registrant’s Common Stock, $0.01 par value, held by
non-affiliates at December 2, 2023, which was the date of the last business day of the registrant’s most recently completed second fiscal quarter,
was $
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As of July 23, 2024,
Common Stock, $0.01 par value, were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III of this Form 10-K is incorporated herein by reference from the registrant’s Definitive Proxy Statement
for its 2024 annual meeting of stockholders which will be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal
year covered by this report.
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TABLE OF CONTENTS
Item
Page
Number
1.
1A.
1B.
1C.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
9C.
10.
11.
12.
13.
14.
15.
16.
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PART I.
FORWARD -LOOKING STATEMENTS
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 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 Israel-
Hamas conflict and attacks on shipping in the Red Sea. Readers are cautioned not to place undue reliance on forward-looking
statements because, while we believe the assumptions on which the forward-looking statements are based are reasonable, there
can be no assurance that these forward-looking statements will prove to be accurate. Further, forward-looking statements included
herein are only made as of the respective dates thereof, or if no date is stated, as of the date hereof. Except as otherwise required
by law, we disclaim any intent or obligation to update publicly these forward-looking statements, whether because of new
information, future events, or otherwise.
ITEM 1. BUSINESS
Our Business
We are the largest producer and distributor of shell eggs in the United States. Our mission is to be the most sustainable producer
and reliable supplier of consistent, high quality fresh shell eggs and egg products in the country, demonstrating a "Culture of
Sustainability" in everything we do, and creating value for our shareholders, customers, team members and communities. We sell
most of our shell eggs throughout the majority of the U.S. and aim to maintain efficient, state-of-the-art operations located close
to our customers. We were founded in 1957 by the late Fred R. Adams, Jr. and are headquartered in Ridgeland, Mississippi.
The Company has one reportable operating segment, which is the production, grading, packaging, marketing and distribution of
shell eggs. Our integrated operations consist of hatching chicks, growing and maintaining flocks of pullets, layers and breeders,
manufacturing feed, and producing, processing, packaging, and distributing shell eggs. Layers are mature female chickens, pullets
are female chickens usually less than 18 weeks of age, and breeders are male and female chickens used to produce fertile eggs to
be hatched for egg production flocks. Our total flock as of June 1, 2024 consisted of approximately 39.9 million layers and 11.8
million pullets and breeders.
Many of our customers rely on us to provide most of their shell egg needs, including specialty and conventional eggs. Specialty
eggs encompass a broad range of products. We classify cage-free, organic, brown, free-range, pasture-raised and nutritionally
enhanced eggs as specialty eggs for accounting and reporting purposes. We classify all other shell eggs as conventional products.
While we report separate sales information for these egg types, there are many cost factors that are not specifically available for
conventional or specialty eggs due to the nature of egg production. We manage our operations and allocate resources to these
types of eggs on a consolidated basis based on the demands of our customers.
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We believe that 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, brown, free-range, pasture-raised
and nutritionally-enhanced eggs, as well as egg products. While a small part of our current business, the free-range and pasture-
raised eggs we produce and sell continues to grow and represents 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.
Throughout the Company’s history, we have acquired other businesses in our industry. Since 1989, we have acquired and
integrated 24 businesses. Subsequent to the end of our 2024 fiscal year, we acquired our 25
th
substantially all the assets of ISE America, Inc. and certain of its affiliates, relating to their commercial shell egg production
and processing business. For information on our recent acquisitions, refer to
When we use “we,” “us,” “our,” or the “Company” in this report, we mean Cal-Maine Foods, Inc. and our consolidated
subsidiaries, unless otherwise indicated or the context otherwise requires. The Company’s fiscal year-end is on the Saturday
closest to May 31. Our fiscal year 2024 ended June 1, 2024, and the first three fiscal quarters of fiscal 2024 ended September 2,
2023, December 2, 2023, and March 2, 2024. All references herein to a fiscal year means our fiscal year and all references to a
year mean a calendar year.
Industry Background
According to the U.S. Department of Agriculture (“USDA”) Agricultural Marketing Service, in 2023 approximately 70% of table
eggs produced in the U.S. were sold as shell eggs, with 57% sold through food-at-home outlets such as grocery and convenience
stores, 11% sold to food-away-from home channels such as restaurants and 2% exported. The USDA estimated that in 2023
approximately 30% of eggs produced in the U.S. were sold as egg products (shell eggs broken and sold in liquid, frozen, or dried
form) to institutions (e.g. companies producing baked goods). For information about egg producers in the U.S., see “Competition”
below.
Our industry has been greatly impacted by the outbreaks of highly pathogenic avian influenza (“HPAI”) . For additional
information regarding HPAI and its impact on our industry and business, see
Given historical consumption trends, we believe that general demand for eggs in the U.S. increases basically in line with the
overall U.S. population growth; however, specific events can impact egg supply and consumption in a particular period, as
occurred with the 2015 HPAI outbreak, the COVID-19 pandemic (particularly during 2020), and the most recent HPAI outbreaks
starting in early 2022 and again in late 2023. For fiscal 2024, shell egg household penetration is approximately 97%. According
to the USDA’s Economic Research Service, estimated annual per capita consumption in the United States between 2019 and
2023 varied, ranging from 279 to 292 eggs which is directly impacted by available supply. The USDA calculates per capita
consumption by dividing total shell egg disappearance in the U.S. by the U.S. population.
The most significant shift in demand in recent years has been among specialty eggs, particularly cage-free eggs. For additional
information, see “Specialty Eggs.”
Prices for Shell Eggs
Wholesale shell egg sales prices are a critical component of revenue for the Company. We sell the majority of our conventional
shell eggs at prices based on formulas that take into account, 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.
Wholesale shell egg prices are volatile, cyclical, and impacted by a number of factors, including consumer demand, seasonal
fluctuations, the number and productivity of laying hens in the U.S. and outbreaks of agricultural diseases such as HPAI. We
believe the majority of conventional shell eggs sold in the U.S. in the retail and foodservice channels are sold at prices that take
into account, in varying ways, independently quoted wholesale market prices, such as those published by Urner Barry
Publications, Inc. (“UB”) or the USDA for shell eggs; however, grain-based or variations of cost plus arrangements are also
commonly utilized.
The weekly average price for the southeast region for large white conventional shell eggs as quoted by UB is shown below for
the past three fiscal years along with the five-year average price. The actual prices that we realize on any given transaction will
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not necessarily equal quoted market prices because of the individualized terms that we negotiate with individual customers which
are influenced by many factors. As further discussed in
, egg prices in fiscal 2022 through fiscal 2024 were significantly impacted by HPAI.
Wholesale prices for cage-free eggs are quoted by independent sources such as UB and USDA. There is no independently quoted
wholesale market price for other specialty eggs such as nutritionally enhanced, organic, pasture-raise and free-range eggs.
Specialty eggs are typically sold at prices and terms negotiated directly with customers and in the case of cage-free eggs, can be
sold at prices that take into account independently quoted markets. Historically, prices for specialty eggs have generally been
higher due to customer and consumer willingness to pay more for specialty eggs. We utilize several different pricing mechanisms;
however, the majority of our specialty eggs are typically sold at prices and terms negotiated directly with customers. As a result,
specialty egg prices do not fluctuate as much as conventional pricing.
Depending on market conditions, input costs and individualized contract terms, the price we receive per dozen eggs in any given
transaction may be more than or less than our farm production and other costs per dozen.
Feed Costs for Shell Egg Production
Feed is a primary cost component in the production of shell eggs and represented 56.0% of our fiscal 2024 farm production costs.
We routinely fill our storage bins during harvest season when prices for feed ingredients, primarily corn and to a lesser extent
soybean meal, 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. The
difference can be due to transportation costs, storage costs, supply and demand, local conditions and other factors. 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 assure 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. As the quality and composition
of feed is a critical factor in the nutritional value of shell eggs and health of our chickens, we formulate and produce the vast
majority of our own feed at our feed mills located near our production plants. Our annual feed requirements for fiscal 2024 were
1.9 million tons of finished feed, of which we manufactured 1.8 million tons. We currently have the capacity to store 210 thousand
tons of corn and soybean meal, and we replenish these stores as needed throughout the year.
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Our primary feed ingredients, corn and soybean meal, are commodities that 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. We purchase the vast majority of our corn and
soybean meal from U.S sources but may be forced to purchase internationally when U.S. supplies are not readily available. Feed
grains are currently available from an adequate number of sources in the U.S. As a point of reference, a multi-year comparison
of the average of daily closing prices per Chicago Board of Trade for each quarter in our fiscal years 2020-2024 are shown below
for corn and soybean meal:
Shell Egg Production
Our percentage of dozens produced to sold was 88.8% of our total shell eggs sold in fiscal 2024. We supplement our production
through purchases of eggs from others when needed. The quantity of eggs purchased will vary based on many factors such as
our own production capabilities and current market conditions. In fiscal 2024, 91.2% of our production came from company-
owned facilities, and 8.8% from contract producers. The majority of our contract production is with family-owned farms for
organic, pasture-raised and free-range eggs. Under a typical arrangement with a contract producer, we own the flock, furnish all
feed and critical supplies, own the shell eggs produced and assume market risks. The contract producers own and operate their
facilities and are paid a fee based on production with incentives for performance.
The commercial production of shell eggs requires a source of baby chicks for laying flock replacement. We supply the majority
of our chicks from our breeder farms and hatch them in our hatcheries in a computer-controlled environment and obtain the
balance from commercial sources. The chicks are grown in our own pullet farms and are placed into the laying flock once they
reach maturity.
After eggs are produced, they are cleaned, graded and packaged. Substantially all our farms have modern “in-line” facilities which
mechanically gather, clean, grade and package the eggs at the location where they are laid. The in-line facilities generate
significant efficiencies and cost savings compared to the cost of eggs produced from non-in-line facilities, which process eggs
that have been laid at another location and transported to the processing facility. The in-line facilities also produce a higher
percentage of USDA Grade A eggs, which sell at higher prices. Eggs produced on farms owned by contractors are brought to our
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processing plants to be graded and packaged. We maintain a Safe Quality Food (“SQF”) Management Program which is overseen
by our Food Safety Department and senior management team. As of June 1, 2024, every Company-owned processing plant is
SQF certified. Because shell eggs are perishable, we do not maintain large egg inventories. Our egg inventory averaged six days
of sales during fiscal 2024. We believe our constant focus on production efficiencies and automation throughout our vertical
integrated operations enable us to be a low-cost supplier in our markets.
We are proud to have created and upheld what we believe is a leading poultry Animal Welfare Program (“AWP”). We have
aligned our AWP with regulatory, veterinary and our third-party certifying bodies’ guidance to govern the welfare of animals in
our direct care, our contract farmers’ care. We continually review our program to monitor and evolve standards that guide how
we hatch chicks, rear pullets and nurture breeder and layer hens. At each stage of our animals’ lives, we are dedicated to providing
welfare conditions aligned to our commitment to the principles of the internationally recognized
Five Freedoms of Animal
Welfare
.
We do not use artificial hormones in the production of our eggs. Hormone use in the poultry and egg production industry has
been effectively banned in the U.S. since the 1950s. We have an extensive written protocol that allows the use of medically
important antibiotics only when animal health is at risk, consistent with guidance from the United States Food and Drug
Administration (“FDA”) and the Guidance for Judicious Therapeutic Use of Antimicrobials in Poultry, developed by the
American Association of Avian Pathologists. When antibiotics are medically necessary, a licensed veterinary doctor will approve
and administer approved doses for a restricted period. We do not use antibiotics for growth promotion or performance
enhancement.
Specialty Eggs
We are one of the largest producers and marketers of value-added specialty shell eggs in the U.S., which continues to be a
significant and growing segment of the market. We classify cage-free, organic, brown, free-range, pasture-raised and nutritionally
enhanced as specialty eggs for accounting and reporting purposes. Specialty eggs are intended to meet the demands of consumers
sensitive to environmental, health and/or animal welfare issues and to comply with state requirements for 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 in effect currently.
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 29.5% of our total net shell egg sales for fiscal year 2024. At the
same time, we understand the importance of our continued ability to provide affordable conventional eggs in order to provide our
customers with a variety of egg choices and to address hunger in our communities.
Branded Eggs
We are a member of the Eggland’s Best, Inc. cooperative (“EB”) and produce, market, distribute and sell
Egg-Land’s Best®
Land O’ Lakes®
and offerings include nutritionally enhanced, cage-free, organic, pasture -raised and free-range eggs.
Land O’ Lakes®
eggs are produced by hens that are fed a whole-grain vegetarian diet and include brown, organic and cage-free eggs.
In 2023, EB was the third best-selling dairy brand in the U.S. The top two best-selling branded specialty egg SKUs in 2023 were
EB branded eggs and seven out of 10 best-selling SKUs are EB branded eggs. In 2023, our sales (including sales through affiliates)
represented approximately 50% of EB branded eggs and 45% of
Land O’ Lakes®
branded eggs nationwide.
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Our
Farmhouse Eggs
® brand eggs are produced at our facilities by hens that are provided with a vegetarian diet. Our offerings
of
Farmhouse Eggs
® include cage-free, organic and pasture raised eggs. We market organic, vegetarian and omega-3 eggs under
our
4-Grain®
Sunups®
Sunny Meadow®
brands are sold as
conventional eggs.
We also produce, market and distribute private label specialty and conventional shell eggs to several customers.
Egg Products
Egg products are shell eggs broken and sold in liquid, frozen, or dried form. We sell liquid and frozen egg products primarily to
the institutional, foodservice and food manufacturing sectors in the U.S. Our egg products are primarily sold through our wholly
owned subsidiaries American Egg Products, LLC located in Georgia and Texas Egg Products, LLC located in Texas. In fiscal
2024, egg product sales constituted approximately 3.8% of our revenue.
During March 2023, MeadowCreek Food, LLC (“Meadowcreek”), a majority-owned subsidiary, began operations with a focus
on being a leading provider of hard -cooked eggs. We serve as the preferred supplier of specialty and conventional eggs that
MeadowCreek needs to manufacture egg products. MeadowCreek’s marketing plan is designed to extend our reach in the
foodservice and retail marketplace and bring new opportunities in the restaurant, institutional and industrial food products arenas.
Summary of Conventional and Specialty Shell Egg and Egg Product Sales
The following table sets forth the contribution as a percentage of revenue and volumes of dozens sold of conventional and
specialty shell egg and egg product sales for the following fiscal years:
2024
2023
2022
Revenue
Volume
Revenue
Volume
Revenue
Volume
Conventional Eggs
Branded
4.3
%
4.9
%
6.6
%
6.4
%
6.5
%
7.1
%
Private-label
46.8
54.4
52.9
52.6
48.3
54.9
Other
4.4
5.8
5.7
6.3
5.0
7.0
Total Conventional Eggs
55.5
%
65.1
%
65.2
%
65.3
%
59.8
%
69.0
%
Specialty Eggs
Branded
20.3
%
17.4
%
18.0
%
20.4
%
24.2
20.0
%
Private-label
18.5
16.3
11.3
12.9
11.3
9.5
Other
1.0
1.2
1.1
1.4
1.0
1.5
Total Specialty Eggs
39.8
%
34.9
%
30.4
%
34.7
%
36.5
%
31.0
%
Egg Products
3.8
%
3.9
%
3.4
%
Marketing and Distribution
In fiscal 2024, we sold our shell eggs and egg products in 39 states through the southwestern, southeastern, mid-western, mid-
Atlantic and northeastern regions of the U.S. as well as Puerto Rico through our extensive distribution network 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 consumers. Some of our sales are completed through co-pack agreements – a
common practice in the industry whereby production and processing of certain products are outsourced to another producer.
The majority of eggs sold are based on the daily or short-term needs of our customers. Most sales to established accounts are on
payment terms ranging from seven to 30 days. Although we have established long-term relationships with many of our customers,
most of them are free to acquire shell eggs from other sources.
The shell eggs we sell are either delivered to our customers’ warehouse or retail stores, by our own fleet or contracted refrigerated
delivery trucks, or are picked up by our customers at our processing facilities.
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We are a member of the Eggland’s Best, Inc. cooperative and produce, market, distribute and sell
Egg-Land’s Best®
Land
O’ Lakes®
exclusive license agreements in Alabama, Arizona, Florida, Georgia, Louisiana, Mississippi and Texas, and in portions of
Arkansas, California, Nevada, North Carolina, Oklahoma and South Carolina. We also have an exclusive license in New York
City in addition to exclusivity in select New York metropolitan areas, including areas within New Jersey and Pennsylvania. As
discussed above under “Branded Eggs,” we also sell our own
Farmhouse Eggs
® and
4-Grain
® branded eggs.
In 2022, we joined as a member during the formation of ProEgg, Inc. (“ProEgg”), a new egg farmer cooperative in the western
United States. During 2024, after careful review and full analysis we decided to withdraw our membership in ProEgg. The
withdrawal from ProEgg did not affect any of our existing customer relationships.
Customers
Our top three customers accounted for an aggregate of 49.0%, 50.1% and 45.9% of net sales dollars for fiscal 2024, 2023, and
2022, respectively. Our largest customer, Walmart Inc. (including Sam's Club), accounted for 34.0%, 34.2% and 29.5% of net
sales dollars for fiscal 2024, 2023 and 2022, respectively.
For shell egg sales in fiscal 2024 , approximately 89% of our revenue related to sales to retail customers and 11% to sales to
foodservice providers. Retail customers include primarily national and regional grocery store chains, club stores, and companies
servicing independent supermarkets in the U.S. Foodservice customers include primarily companies that sell food products and
related items to restaurants, healthcare and education facilities and hotels.
Competition
The production, processing, and distribution of shell eggs is an intensely competitive business, which has traditionally attracted
large numbers of producers in the U.S. Shell egg competition is generally based on price, service and product quality. The shell
egg production industry remains highly fragmented. According to
Egg Industry Magazine
, the ten largest producers owned
approximately 54% and 53% of industry table egg layer hens at calendar year-end 2023 and 2022, respectively.
Seasonality
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. Accordingly, we generally expect our need for working capital
to be highest during those quarters.
Growth Strategy
Our growth strategy is centered on growth through strategic acquisitions, organic growth, and expansion of our value-added
products business. We believe that we can continue to expand our market reach through strategic acquisitions and achieve
favorable returns through our proven operating model emphasizing synergies and efficient operations. Organic growth is
grounded in our culture of operational excellence to optimize everything we can control. We are committed to investing in our
existing operations to increase sales, profitability and customer service. We have continued to increase our production of cage-
free shell eggs and other higher value specialty eggs such as pasture-raised, free-range and organic shell eggs. We believe there
is long-term growth potential in value-added products such as hard-cooked eggs, which will enable us to leverage our existing
distribution channels, expand our reach in foodservice and retail marketplaces and bring new opportunities in the restaurant,
institutional and industrial food products arenas.
Trademarks and License Agreements
We own the trademarks
Farmhouse Eggs®
,
Sunups®
,
Sunny Meadow®
4Grain®
. We produce and market
Egg-Land's Best
®
and
Land O’ Lakes
® branded eggs under license agreements with EB. We believe these trademarks and license agreements are
important to our business.
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Government Regulation
Our facilities and operations are subject to regulation by various federal, state, and local agencies, including, but not limited to,
the FDA, USDA, Environmental Protection Agency (“EPA ”), Occupational Safety and Health Administration ("OSHA") and
corresponding state agencies. The applicable regulations relate to grading, quality control, labeling, sanitary control and reuse or
disposal of waste. Our shell egg facilities are subject to periodic USDA, FDA, EPA and OSHA inspections. Our feed production
facilities are subject to FDA, EPA and OSHA regulation and inspections. We maintain inspection programs and in certain cases
utilize independent third-party certification bodies to monitor compliance with regulations, our own standards and customer
specifications. It is possible that we will be required to incur significant costs for compliance with such statutes and regulations.
In the future, additional rules could be proposed that, if adopted, could increase our costs.
A number of states have passed legislation or regulations mandating minimum space or cage-free requirements for egg production
or have mandated the sale of only cage-free eggs and egg products in their states. For further information refer to the heading
“Specialty Eggs” within this section.
Environmental Regulation
Our operations and facilities are subject to various federal, state, and local environmental, health and safety laws and regulations
governing, among other things, the generation, storage, handling, use, transportation, disposal, and remediation of hazardous
materials. Under these laws and regulations, we must obtain permits from governmental authorities, including, but not limited to,
wastewater discharge permits. We have made, and will continue to make, capital and other expenditures relating to compliance
with existing environmental, health and safety laws and regulations and permits. We are not currently aware of any material
capital expenditures necessary to comply with such laws and regulations; however, as environmental, health and safety laws and
regulations are becoming increasingly more stringent, including those relating to animal wastes and wastewater discharges, it is
possible that we will have to incur significant costs for compliance with such laws and regulations in the future.
Human Capital Resources
As of June 1, 2024, we had 3,067 employees, of whom 2,370 worked in egg production, processing, and marketing, 204 worked
in feed mill operations and 493, including our executive officers, were administrative employees. Approximately 4.5% of our
personnel are part-time, and we utilize temporary employment agencies and independent contractors to augment our
staffing needs when necessary. For fiscal 2024, we had 1,962 average monthly contingent workers. As of June 1, 2024, none of
our employees were covered by a collective bargaining agreement. We consider our relations with employees to be good.
Culture and Values
We are proud to be contributing corporate citizens where we live and work and to help create healthy, prosperous
communities. Our colleagues help us continue to enhance our community contributions, which are driven by
our longstanding culture that strives to promote an environment that upholds integrity and respect and provides opportunities for
each colleague to realize full potential. These commitments are encapsulated in the
Cal-Maine Foods Code of Ethics and Business
Conduct
Human Rights Statement
.
Health and Safety
Our top priority is the health and safety of our employees, who continue to produce high-quality, affordable egg choices for our
customers and contribute to a stable food supply. Our enterprise safety committee is comprised of two corporate safety managers,
nine area compliance managers (three specifically for worker health and safety), and 55 local site compliance managers, feed mill
managers and general managers. The committee that oversees health and safety regularly reviews our written policies and
changes to OSHA regulation standards and shares information as it relates to outcomes from incidents in order to improve future
performance and our health and safety practices. The committee’s goals include working to help ensure that our engagements
with our consumers, customers, and regulators evidence our strong commitment to our workers’ health and safety.
Our commitment to our colleagues’ health includes a strong commitment to on-site worker safety, including a focus on accident
prevention and life safety. Our Safety and Health Program is designed to promote best practices that help prevent and minimize
workplace accidents and illnesses. The scope of our Safety and Health Program applies to all enterprise colleagues. Additionally,
to help protect the health and well-being of our colleagues and people in our value chain, we require that any contractors or
vendors acknowledge and agree to comply with the guidelines governed by our Safety and Health Program. At each of our
locations, our general managers are expected to uphold and implement our Safety and Health Program in alignment with OSHA
requirements. We believe that this program, which is reviewed annually by our senior management team, contributes to strong
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safety outcomes. As part of our Safety and Health Program, we conduct multi-lingual training that covers topics such as slip-and-
fall avoidance, respiratory protection, prevention of hazardous communication of chemicals, the proper use of personal protective
equipment, hearing conservation, emergency response, lockout and tagout of equipment and forklift safety, among others. We
have also installed dry hydrogen peroxide biodefense systems in our processing facilities to help protect our colleagues’
respiratory health. To help drive our focus on colleague safety, we developed safety committees at each of our sites with employee
representation from each department.
We review the success of our safety programs on a monthly basis to monitor their effectiveness and the development of any
trends that need to be addressed. During fiscal year 2024 our recordable incident rates decreased by 20% compared to fiscal 2023.
People
Our strength as a company comes from our employees at all levels and we have a long-established culture that values each
individual’s contributions and encourages productivity and growth. This culture is driven by our board and executive
management team. Our board is comprised of seven members, four of whom are independent, two of whom are women, one of
whom is of a racial or ethnic minority. As of June 1, 2024, our total workforce was comprised of 31% women and 56% individuals
who identify as racial or ethnic minorities. Our Policy against Harassment, Discrimination, Unlawful or Unethical Conduct and
Retaliation; Reporting Procedure affirms our commitment to supporting our employees regardless of race, color, religion, sex,
national origin or any other basis protected by applicable law.
We are an Equal Opportunity Employer that prohibits any violation of applicable federal, state, or local law regarding
employment. Discrimination on any basis protected by applicable law is prohibited. We maintain strong protocols to help our
colleagues perform their jobs free from harassment and discrimination. We are committed to offering our colleagues opportunities
commensurate with our operational needs and their experiences, goals and contributions.
Recruitment, Development and Retention
We believe in compensating our colleagues with fair and competitive wages, in addition to offering
competitive benefits. Approximately 76% of our employees are paid at hourly rates, which are all paid at rates above the federal
minimum wage requirement. We offer our full-time eligible employees a range of benefits, including company-paid life
insurance. The Company provides a comprehensive self-insured health plan and pays approximately 82% of the costs of the plan
for participating employees and their families as of December 31, 2023. Recent benchmarking of our health plan
indicates comparable benefits, at lower employee contributions, when compared to an applicable Agriculture and
Food Manufacturing sector grouping, as well as peer group data. In addition, we offer employees the opportunity to purchase an
extensive range of other group plan benefits, such as dental, vision, accident, critical illness, disability and voluntary life. After
one year of employment, full-time employees who meet eligibility requirements may elect to participate in our
KSOP retirement plan, which offers a range of investment alternatives and includes many positive features, such as
automatic enrollment with scheduled automatic contribution increases and loan provisions. Regardless of the
employees’ elections to contribute to the KSOP, the Company contributes shares of Company stock or cash equivalent to 3%
of participants’ eligible compensation for each pay period that hours are worked.
We
provide extensive training and development related to safety, regulatory compliance, and task training.
We
invest in
developing our future leaders through our Management Intern, Management Trainee and informal mentoring programs.
Sustainability
We understand that climate, and the potential consequences of climate change, freshwater availability and preservation of global
biodiversity, in addition to responsible management of our flocks, are vital to the production of high-quality eggs and egg products
and to the success of our Company. We have engaged in agricultural production for more than 60 years. Our agricultural practices
continue to evolve as we continue to strive to meet the need for nutritious, affordable foods to feed a growing population even as
we exercise responsible natural resource stewardship and conservation. We published our most recent sustainability report for
our fiscal 2023 in July 2024, which is available on our website. Information contained on our website is not a part of this report
on Form 10-K.
Our Corporate Information
We maintain a website at www.calmainefoods.com where general information about our business and corporate governance
matters is available. The information contained in our website is not a part of this report. Our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and all amendments to those reports filed or
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furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, through our website as soon as
reasonably practicable after we file them with, or furnish them to, the SEC. In addition, the SEC maintains a website at
www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC. Cal-Maine Foods, Inc. is a Delaware corporation, incorporated in 1969.
ITEM 1A. RISK FACTORS
Our business and results of operations are subject to numerous risks and uncertainties, many of which are beyond our
control. The following is a description of the known factors that may materially affect our business, financial condition or results
of operations. They should be considered carefully, in addition to the information set forth elsewhere in this Annual Report on
Form 10-K, including under Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations, in making any investment decisions with respect to our securities. Additional risks or uncertainties that are not
currently known to us, or that we are aware of but currently deem to be immaterial or that could apply to any company could
also materially adversely affect our business, financial condition or results of operations.
INDUSTRY RISK FACTORS
Market prices of wholesale shell eggs are volatile, and decreases in these prices can adversely impact our revenues and
profits.
Our operating results are significantly affected by wholesale shell egg market prices, which fluctuate widely and are outside our
control. As a result, our prior performance should not be presumed to be an accurate indication of future performance. Under
certain circumstances, small increases in production, or small decreases in demand, within the industry might have a large adverse
effect on shell egg prices. Low shell egg prices adversely affect our revenues and profits.
Market prices for wholesale shell eggs have been volatile and cyclical. Shell egg prices have risen in the past during periods of
high demand such as the initial outbreak of the COVID-19 pandemic and periods when high protein diets are popular. Shell egg
prices have also risen during periods of constrained supply, such as the latest highly pathogenic avian influenza (“HPAI”)
outbreak that was first detected in domestic commercial flocks in February 2022. During times when prices are high, the egg
industry has typically geared up to produce more eggs, primarily by increasing the number of layers, which historically has
ultimately resulted in an oversupply of eggs, leading to a period of lower prices.
As discussed above in
, seasonal fluctuations impact shell egg prices. Therefore, comparisons
of our sales and operating results between different quarters within a single fiscal year are not necessarily meaningful
comparisons.
A decline in consumer demand for shell eggs can negatively impact our business.
We believe high -protein diet trends, industry advertising campaigns, the improved nutritional reputation of eggs and an increase
in at-home consumption of eggs during the COVID-19 pandemic, have all contributed at one time or another to increased shell
egg demand. However, it is possible that the demand for shell eggs will decline in the future. Adverse publicity relating to health
or safety concerns and changes in the perception of the nutritional value of shell eggs, changes in consumer views regarding
consumption of animal-based products, as well as movement away from high protein diets, could adversely affect demand for
shell eggs, which could have a material adverse effect on our future results of operations and financial condition.
Feed costs are volatile and increases in these costs can adversely impact our results of operations.
Feed costs are the largest element of our shell egg (farm) production cost, ranging from 55% to 63% of total farm production cost
in the last five fiscal years.
Although feed ingredients, primarily corn and soybean meal, are available from a number of sources, we do not have control over
the prices of the ingredients we purchase, which are affected by weather, various global and U.S. supply and demand factors,
transportation and storage costs, speculators, and agricultural, energy and trade policies in the U.S. and internationally. For
example, while feed costs declined during fiscal 2024, we saw higher prices for corn and soybean meal in fiscal 2022 and 2023
as a result of weather-related shortfalls in production and yields, ongoing supply chain disruptions and the Russia-Ukraine War
and its impact on the export markets. Our costs for corn and soybean meal are also affected by local basis prices.
Increases in feed costs unaccompanied by increases in the selling price of eggs can have a material adverse effect on the results
of our operations and cash flow. Alternatively, low feed costs can encourage egg industry overproduction, possibly resulting in
lower egg prices and lower revenue.
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Agricultural risks, including outbreaks of avian diseases such as HPAI, have harmed and in the future could harm our
business.
Our shell egg production activities are subject to a variety of agricultural risks. Unusual or extreme weather conditions, disease
and pests can materially and adversely affect the quality and quantity of shell eggs we produce and distribute. Outbreaks of avian
influenza among poultry occur periodically worldwide and have occurred sporadically in the U.S. Since the HPAI outbreaks in
2015, there were no reported significant outbreaks of HPAI in the commercial table egg layer flocks in the U.S. until the February
– December 2022 time period and then again beginning in November 2023. During the third and fourth quarters of our fiscal
2024, we experienced HPAI outbreaks within our facilities located in Kansas and Texas, resulting in total depopulation of 3.1
million laying hens and 577,000 pullets. Both locations have been cleared by the USDA to resume operations and repopulation
is expected to be completed before calendar year end. As of July 5, 2024, the U.S. Centers for Disease Control and Prevention
(“CDC”) reported outbreaks in 138 dairy herds in 12 states and five cases in the U.S. in persons who were exposed to infected
cows or poultry. The CDC has not reported any case of human-to-human transmission. The CDC considers that the overall risk
to the general U.S. public posed by the virus remains low; however, as a precautionary measure, the U.S. Department of Health
and Human Services has awarded funding to Moderna to develop a human vaccine against avian influenza. For additional
information, refer to
We maintain controls and procedures designed to reduce the risk of exposing our flocks and employees to harmful diseases;
however, despite these efforts, outbreaks of avian diseases can and do still occur and have adversely impacted, and may in the
future adversely impact, the health of our flocks and could in the future adversely impact the health of our employees. Continued
or intensified spread of HPAI could have a material adverse impact on our financial results by increasing government restrictions
on the sale and distribution of our products and requiring us to euthanize the affected layers. Negative publicity from outbreaks
within our industry can negatively impact customer perception. If a substantial portion of our layers or production facilities are
affected by any of these factors in any given quarter or year, our business, financial condition, and results of operations could be
materially and adversely affected.
Shell eggs and shell egg products are susceptible to microbial contamination, and we may be required to, or we may
voluntarily, recall contaminated products.
Shell eggs and shell egg products are vulnerable to contamination by pathogens such as Salmonella. The Company maintains
policies and procedures designed to comply with the complex rules and regulations governing egg production, such as The Final
Egg Rule issued by the FDA “Prevention of Salmonella Enteritidis in Shell Eggs During Production, Storage, and
Transportation,” and the FDA’s Food Safety Modernization Act. Shipment of contaminated products, even if inadvertent, could
result in a violation of law and lead to increased risk of exposure to product liability claims, product recalls and scrutiny by federal
and state regulatory agencies. We have little, if any, control over proper handling once the product has been shipped or
delivered. In addition, products purchased from other producers could contain contaminants that might be inadvertently
redistributed by us. As such, we might decide or be required to recall a product if we, our customers or regulators believe it poses
a potential health risk. Any product recall could result in a loss of consumer confidence in our products, adversely affect our
reputation with existing and potential customers and have a material adverse effect on our business, results of operations and
financial condition. We currently maintain insurance with respect to certain of these risks, including product liability insurance,
business interruption insurance, product recall insurance and general liability insurance, but in many cases such insurance is
expensive, difficult to obtain and no assurance can be given that such insurance can be maintained in the future on acceptable
terms, or in sufficient amounts to protect us against losses due to any such events, or at all.
Our profitability may be adversely impacted by increases in other input costs such as packaging materials and delivery
expenses, including as a result of inflation.
In addition to feed ingredient costs, other significant input costs include costs of packaging materials and delivery expenses. Our
costs of packing materials increased during the past three fiscal years due to inflation and higher labor costs, and during 2022
also as a result of supply chain constraints initially caused by the pandemic, and these costs may continue to increase. We also
experienced increases in delivery expenses during fiscal 2023 and 2022 due to increases in fuel and labor costs for both our fleet
and contract trucking, and these costs may continue to increase. Increases in these costs are largely outside of our control and
have an adverse effect on our profitability and cash flow.
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BUSINESS AND OPERATIONAL RISK FACTORS
Our acquisition growth strategy subjects us to various risks.
As discussed in
, we plan to continue to pursue a growth strategy that includes, in part,
selective acquisitions of other businesses engaged in the production and sale of shell eggs, with a priority on those that will
facilitate our ability to expand our cage-free shell egg production capabilities in key locations and markets. We may over-estimate
or under-estimate the demand for cage-free eggs, which could cause our acquisition strategy to be less-than-optimal for our future
growth and profitability. The number of existing businesses with cage-free capacity that we may be able to purchase is limited,
as most production of shell eggs by other companies in our markets currently does not meet customer demands or legal
requirements to be designated as cage-free. Conversely, if we acquire cage-free production capacity, which is more expensive to
purchase and operate, and customer demands or legal requirements for cage-free eggs were to change, the resulting lack of
demand for cage-free eggs may result in higher costs and lower profitability .
Acquisitions require capital resources and can divert management’s attention from our existing business. Acquisitions also entail
an inherent risk that we could become subject to contingent or other liabilities, including liabilities arising from events or conduct
prior to our acquisition of a business that were unknown to us at the time of acquisition. We could incur significantly greater
expenditures in integrating an acquired business than we anticipated at the time of its purchase.
We cannot assure you that we:
●
will identify suitable acquisition candidates;
●
can consummate acquisitions on acceptable terms;
●
can successfully integrate an acquired business into our operations; or
●
can successfully manage the operations of an acquired business.
No assurance can be given that businesses we acquire in the future will contribute positively to our results of operations or
financial condition. In addition, federal antitrust laws require regulatory approval of acquisitions that exceed certain threshold
levels of significance, and we cannot guarantee that such approvals would be obtained.
The consideration we pay in connection with any acquisition affects our financial results. If we pay cash, we could be required
to use a portion of our available cash or credit facility to consummate the acquisition. To the extent we issue shares of our
Common Stock, existing stockholders may be diluted. In addition, acquisitions may result in additional debt. Our ability to access
any additional capital that may be needed for an acquisition may be adversely impacted by higher interest rates and economic
uncertainty.
Global or regional health crises including pandemics or epidemics could have an adverse impact on our business and
operations.
The effects of global or regional pandemics or epidemics can significantly impact our operations. Although demand for our
products could increase as a result of restrictions such as travel bans and restrictions, quarantines, shelter-in-place orders, and
business and government shutdowns, which can prompt more consumers to eat at home, these restrictions could also significantly
increase our cost of doing business due to labor shortages, supply-chain disruptions, increased costs and decreased availability of
packaging supplies or feed, and increased medical and other costs. We experienced these impacts as a result of the COVID-19
pandemic, primarily during our fiscal years 2020 and 2021. The pandemic recovery also contributed to higher inflation and
interest rates, which persist and may continue to persist. The impacts of health crises are difficult to predict and depend on
numerous factors including the severity, length and geographic scope of the outbreak, resurgences of the disease and variants,
availability and acceptance of vaccines, and governmental, business and individuals’ responses. A resurgence of COVID-19
and/or variants, or any future major public health crisis, would disrupt our business and could have a material adverse effect on
our financial results.
Our largest customers have accounted for a significant portion of our net sales volume. Accordingly, our business may be
adversely affected by the loss of, or reduced purchases by, one or more of our large customers.
Our customers, such as supermarkets, warehouse clubs and food distributors, have continued to consolidate and consolidation is
expected to continue. These consolidations have produced larger customers and potential customers with increased buying power
that are more capable of operating with reduced inventories, opposing price increases, and demanding lower pricing, increased
promotional programs and specifically tailored products. Because of these trends, our volume growth could slow or we may need
to lower prices or increase promotional spending for our products, any of which could adversely affect our financial results.
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Our top three customers accounted for an aggregate of 49.0%, 50.1% and 45.9% of net sales dollars for fiscal 2024, 2023, and
2022, respectively. Our largest customer, Walmart Inc. (including Sam's Club), accounted for 33.8%, 34.2% and 29.5% of net
sales dollars for fiscal 2024, 2023 and 2022, respectively. Although we have established long-term relationships with most of our
customers who continue to purchase from us based on our ability to service their needs, they are generally free to acquire shell
eggs from other sources. If, for any reason, one or more of our large customers were to purchase significantly less of our shell
eggs in the future or terminate their purchases from us, and we were not able to sell our shell eggs to new customers at comparable
levels, it would have a material adverse effect on our business, financial condition, and results of operations.
Our business is highly competitive.
The production and sale of fresh shell eggs, which accounted for 96.1% to 96.6% of our net sales in our last three fiscal years, is
intensely competitive. We compete with a large number of competitors that may prove to be more successful than we are in
producing, marketing and selling shell eggs. We cannot provide assurance that we will be able to compete successfully with any
or all of these companies. Increased competition could result in price reductions, greater cyclicality, reduced margins and loss of
market share, which would negatively affect our business, results of operations, and financial condition.
We are dependent on our management team, and the loss of any key member of this team may adversely affect the
implementation of our business plan in a timely manner.
Our success depends largely upon the continued service of our senior management team. The loss or interruption of service of
one or more of our key executive officers could adversely affect our ability to manage our operations effectively and/or pursue
our growth strategy. We have not entered into any employment or non-compete agreements with any of our executive officers.
Competition could cause us to lose talented employees, and unplanned turnover could deplete institutional knowledge and result
in increased costs due to increased competition for employees.
Our business is dependent on our information technology systems and software, and failure to protect against or
effectively respond to cyber-attacks, security breaches, or other incidents involving those systems, could adversely affect
day-to-day operations and decision making processes and have an adverse effect on our performance and reputation.
The efficient operation of our business depends on our information technology systems, which we rely on to effectively manage
our business data, communications, logistics, accounting, regulatory and other business processes. If we do not allocate and
effectively manage the resources necessary to build and sustain an appropriate technology environment, our business, reputation,
or financial results could be negatively impacted. In addition, our information technology systems may be vulnerable to damage
or interruption from circumstances beyond our control, including systems failures, natural disasters, terrorist attacks,
viruses, ransomware, security breaches or cyber incidents. Cyber-attacks are becoming more sophisticated and are increasing in
the number of attempts and frequency by groups and individuals with a wide range of motives. We have experienced and expect
to continue to experience attempted cyber-attacks of our information technology systems or networks.
We regularly engage with third-party service providers as part of our operations to provide a high level of service to our customers.
We have implemented certain practices and policies to minimize the potential risks associated with the exchange of information
with contracted vendors. Despite these practices and policies, we cannot guarantee that information technology systems of our
third-party service providers will prevent and detect all cybersecurity breaches and incidents. Although we require third-party
service providers to notify us upon a potential breach or incident, there is a potential risk that our business, reputation, or financial
results could be negatively impacted by cybersecurity incidents at their businesses .
Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity
risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated systems
and technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or
integrated businesses, and it may be difficult to integrate businesses into our information technology environment and security
program.
Our information technology systems also subject us to numerous data privacy obligations. We may at times fail (or be perceived
to have failed) in our efforts to comply with our data privacy obligations. If we or the third parties on which we rely fail, or are
perceived to have failed, to address or comply with applicable data privacy obligations, we could face significant consequences,
including but not limited to government enforcement actions and litigation. A security breach of sensitive information could result
in damage to our reputation and our relations with our customers or employees. Any such damage or interruption could have a
material adverse effect on our business.
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Technology and related business and regulatory requirements continue to change rapidly. Failure to update or replace legacy
systems to address these changes could result in increased costs, including remediation costs, system downtime, third party
litigation, regulatory actions or cyber security vulnerabilities which could have a material adverse effect on our business.
Labor shortages or increases in labor costs could adversely impact our business and results of operations.
Our success is dependent upon recruiting, motivating, and retaining staff to operate our farms. Approximately 76% of our
employees are paid at hourly rates, often in entry-level positions. While all our employees are paid at rates above the federal
minimum wage requirements, any significant increase in local, state or federal minimum wage requirements could increase our
labor costs. In addition, any regulatory changes requiring us to provide additional employee benefits or mandating increases in
other employee-related costs, such as unemployment insurance or workers compensation, would increase our costs. A shortage
in the labor pool, which may be caused by competition from other employers, the remote locations of many of our farms,
decreased labor participation rates or changes in government-provided support or immigration laws, particularly in times of lower
unemployment, could adversely affect our business and results of operations. A shortage of labor available to us could cause our
farms to operate with reduced staff, which could negatively impact our production capacity and efficiencies. In fiscal 2022, our
labor costs increased primarily due to the pandemic and its effects, which caused us to increase wages in response to labor
shortages. In fiscal 2023 and 2024, labor wages continued to rise due to inflation and low unemployment. Accordingly, any
significant labor shortages or increases in our labor costs could have a material adverse effect on our results of operations.
We are controlled by the family of our late founder, Fred R. Adams, Jr., and Adolphus B. Baker, Chairman of our Board
of Directors, controls the vote of 100% of our outstanding Class A Common Stock.
Fred R. Adams, Jr., our Founder and Chairman Emeritus died on March 29, 2020. A limited liability company (the “Daughters’
LLC”), owned by Mr. Adams’ son-in-law, Adolphus B. Baker, Chairman of our board of directors, Mr. Baker’s spouse and her
three sisters (Mr. Adams’ four daughters) (collectively, the “Family”), owns 100% of our outstanding Class A Common Stock
(which has 10 votes per share), controlling approximately 52.0% of our total voting power. As sole managing member of the
Daughters’ LLC, Mr. Baker controls the vote of 100% of our outstanding Class A Common Stock, except that certain
extraordinary matters requiring the vote of the Company’s stockholders such as a merger or amendment of the Company’s Second
Amended and Restated Certificate of Incorporation require joint approval of Mr. Baker and members of the Daughters’ LLC
holding a majority of its voting interests. Family members also have additional voting power due to beneficial ownership of our
Common Stock (which has one vote per share), directly or indirectly through the Daughter’s LLC and other entities, resulting in
family voting control of approximately 53.8% of our total voting power.
We understand that the Family intends to retain ownership of a sufficient amount of our Common Stock and our Class A Common
Stock to assure continued ownership of more than 50% of the voting power of our outstanding shares of capital stock. As a result
of this ownership, the Family has the ability to exert substantial influence over matters requiring action by our stockholders,
including amendments to our certificate of incorporation and by-laws, the election and removal of directors, and any merger,
consolidation, or sale of all or substantially all of our assets, or other corporate transactions. Delaware law provides that the
holders of a majority of the voting power of shares entitled to vote must approve certain fundamental corporate transactions such
as a merger, consolidation and sale of all or substantially all of a corporation’s assets; accordingly, such a transaction involving
us and requiring stockholder approval cannot be effected without the approval of the Family. Such ownership will make an
unsolicited acquisition of our Company more difficult and discourage certain types of transactions involving a change of control
of our Company, including transactions in which the holders of our Common Stock might otherwise receive a premium for their
shares over then current market prices. The Family’s controlling ownership of our capital stock may adversely affect the market
price of our Common Stock.
For additional information, refer to Exhibit 4.1 to this Annual Report on Form 10-K, “Description of Registrant’s Securities
Registered Under Section 12 of the Exchange Act.”
The price of our Common Stock may be affected by the availability of shares for sale in the market, and you may
experience significant dilution as a result of future issuances of our securities, which could materially and adversely affect
the market price of our Common Stock.
The sale or availability for sale of substantial amounts of our Common Stock could adversely impact its price. The Daughters’
LLC holds approximately 1.1 million shares of Common Stock (the “Subject Shares”) that are subject to an Agreement Regarding
Common Stock (the “Agreement”) filed as an exhibit to this report. The Subject Shares remain subject to potential sale under the
Agreement. The Agreement generally provides that if a holder of Subject Shares intends to sell any of the Subject Shares, such
party must give the Company a right of first refusal to purchase all or any of such shares. The price payable by the Company to
purchase shares pursuant to the exercise of the right of first refusal will reflect a 6% discount to the then-current market price
based on the 20 business-day volume-weighted average price. If the Company does not exercise its right of first refusal and
purchase the shares offered, such party will, subject to the approval of a special committee of independent directors of the Board
18
of Directors, be permitted to sell the shares not purchased by the Company pursuant to a Company registration statement, Rule
144 under the Securities Act of 1933, or another manner of sale agreed to by the Company. Although pursuant to the Agreement
the Company will have a right of first refusal to purchase all or any of those shares, the Company may elect not to exercise its
rights of first refusal, and if so such shares would be eligible for sale pursuant to the registration rights in the Agreement or
pursuant to Rule 144 under the Securities Act of 1933. Sales, or the availability for sale, of a large number of shares of our
Common Stock could result in a decline in the market price of our Common Stock.
In addition, our articles of incorporation authorize us to issue 120,000,000 shares of our Common Stock. As of June 1, 2024,
there were 44,238,766 shares of our Common Stock outstanding. Accordingly, a substantial number of shares of our Common
Stock are outstanding and are, or could become, available for sale in the market. In addition, we may be obligated to issue
additional shares of our Common Stock in connection with employee benefit plans (including equity incentive plans).
In the future, we may decide to raise capital through offerings of our Common Stock, additional securities convertible into or
exchangeable for Common Stock, or rights to acquire these securities or our Common Stock. We may also issue such securities
as consideration in an acquisition. The issuance of such securities could result in dilution of existing stockholders’ equity interests
in us. Issuances of substantial amounts of our Common Stock, or the perception that such issuances could occur, may adversely
affect prevailing market prices for our Common Stock, and we cannot predict the effect this dilution may have on the price of our
Common Stock.
LEGAL AND REGULATORY RISK FACTORS
Pressure from animal rights groups regarding the treatment of animals may subject us to additional costs to conform our
practices to comply with developing standards or subject us to marketing costs to defend challenges to our current
practices and protect our image with our customers. In particular, changes in customer preferences and state legislation
have accelerated an increase in demand for cage-free eggs, which increases uncertainty in our business and increases our
costs.
We and many of our customers face pressure from animal rights groups, such as People for the Ethical Treatment of Animals and
the Humane Society of the United States, to require companies that supply food products to operate their business in a manner
that treats animals in conformity with certain standards developed or approved by these groups. In general, we may incur
additional costs to conform our practices to address these standards or to defend our existing practices and protect our image with
our customers. The standards promoted by these groups change over time, but typically require minimum cage space for hens,
among other requirements, and some of these groups have led successful legislative efforts to ban any form of caged housing in
various states.
As discussed in
, ten states have passed minimum space and/or cage-free
requirements for hens, and other states are considering such requirements. In addition, 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. While we
anticipate that our retail and foodservice customers will continue to transition to selling cage-free eggs given publicly stated goals,
there is no assurance that this transition will take place or take place according to the timeline of current cage-free goals. For
example, customers may accelerate their transition to stocking cage-free eggs, which may challenge our ability to meet the cage-
free volume needs of those customers and result in a loss of shell egg sales. Similarly, customers who commit to stock greater
proportional quantities of cage-free eggs are under no obligation to continue to do so, which may result in an oversupply of cage-
free eggs and result in lower specialty egg prices, which could reduce the return on our capital investment in cage-free production.
Changing our infrastructure and operating procedures to conform to consumer preferences, customer demands and recent laws
has resulted and will continue to result in additional costs, including capital and operating cost increases. The USDA reported
that the estimated U.S. cage-free flock was 122.0 million hens as of May 31, 2024, which is approximately 39.9% of the total
U.S. table egg layer hen population. According to the USDA Agricultural Marketing Service, as of May 2024 approximately
220.1 million hens, or about 72% of the U.S. non-organic laying flock would have to be in cage-free production to meet projected
cage-free commitments from the retailers, foodservice providers and food manufacturers that have stated goals to transition to
cage-free eggs.
In response to our customers’ announced goals and increased legal requirements for cage-free eggs, we have increased capital
expenditures to increase our cage-free production capacity. We are also enhancing our focus on cage-free capacity when
considering acquisition opportunities. Our customers typically do not commit to long-term purchases of specific quantities or
type of eggs with us, and as a result, we cannot predict with any certainty which types of eggs they will require us to supply in
future periods. The production of cage-free eggs is more costly than the production of conventional eggs, and these higher
production costs contribute to the prices of cage-free eggs, which historically have typically been higher than conventional egg
prices. Many consumers prefer to buy less expensive conventional shell eggs. These consumer preferences may in turn influence
19
our customers’ future needs for cage-free and conventional eggs. Due to these uncertainties, we may over-estimate future demand
for cage-free eggs, which could increase our costs unnecessarily, or we may under-estimate future demand for cage-free eggs,
which could harm us competitively. If our competitors obtain non-cancelable long-term contracts to provide cage-free eggs to
our existing or potential customers, then there may be decreased demand for our cage-free eggs due to these lost potential sales.
If we and our competitors increase cage-free egg production and there is no commensurate increase in demand for cage-free eggs,
this overproduction could lead to an oversupply of cage-free eggs, reducing the sales price for specialty eggs and our return on
capital investments in cage-free production.
Failure to comply with applicable governmental regulations, including environmental regulations, could harm our
operating results, financial condition, and reputation. Further, we may incur significant costs to comply with any such
regulations.
We are subject to federal, state and local regulations relating to grading, quality control, labeling, sanitary control, waste disposal,
and other areas of our business. As a fully-integrated shell egg producer, our shell egg facilities are subject to regulation and
inspection by the USDA, OSHA, EPA and FDA, as well as state and local health and agricultural agencies, among others. All of
our shell egg production and feed mill facilities are subject to FDA, EPA and OSHA regulation and inspections. In addition, rules
are often proposed that, if adopted as proposed, could increase our costs.
Our operations and facilities are subject to various federal, state and local environmental, health, and safety laws and regulations
governing, among other things, the generation, storage, handling, use, transportation, disposal, and remediation of hazardous
materials. Under these laws and regulations, we are required to obtain permits from governmental authorities, including, but not
limited to wastewater discharge permits and manure and litter land applications.
If we fail to comply with applicable laws or regulations, or fail to obtain necessary permits, we could be subject to significant
fines and penalties or other sanctions, our reputation could be harmed, and our operating results and financial condition could be
materially adversely affected. In addition, because these laws and regulations are becoming increasingly more stringent, it is
possible that we will be required to incur significant costs for compliance with such laws and regulations in the future.
Climate change and legal or regulatory responses may have an adverse impact on our business and results of operations.
Extreme weather events, such as derechos, wildfires, drought, tornadoes, hurricanes, storms, floods or other natural disasters
could materially and adversely affect our operating results and financial condition. In fact, derechos, fires, floods, tornadoes and
hurricanes have affected our facilities or the facilities of other egg producers in the past. Increased global temperatures and more
frequent occurrences of extreme weather events, which may be exacerbated by climate change, may cause crop and livestock
areas to become unsuitable, including due to water scarcity or high or unpredictable temperatures, which may result in much
greater stress on food systems and more pronounced food insecurity globally. Lower global crop production, including corn and
soybean meal, which are the primary feed ingredients that support the health of our animals, may result in significantly higher
prices for these commodity inputs, impact our ability to source the commodities we use to feed our flocks, and negatively impact
our ability to maintain or grow our operations. Climate change may increasingly expose workers and animals to high heat and
humidity stressors that adversely impact poultry production and our costs. Increased greenhouse gas emissions may also
negatively impact air quality, soil quality and water quality, which may hamper our ability to support our operations, particularly
in higher water- and soil-stressed regions.
Increasing frequency of severe weather events, whether tied to climate change or any other cause, may negatively impact our
ability to raise poultry and produce eggs profitably or to operate our transportation and logistics supply chains. Regulatory controls
and market pricing may continue to drive the costs of fossil -based fuels higher, which could negatively impact our ability to
source commodities necessary to operate our farms or plants and our current fleet of vehicles. These changes may cause us to
change, significantly, our day-to-day business operations and our strategy. Climate change and extreme weather events may also
impact demand for our products given evolution of consumer food preferences. Even if we take measures to position our business
in anticipation of such changes, future compliance with legal or regulatory requirements may require significant management
time, oversight and enterprise expense. We may also incur significant expense tied to regulatory fines if laws and regulations are
interpreted and applied in a manner that is inconsistent with our business practices. We can make no assurances that our efforts
to prepare for these adverse events will be in line with future market and regulatory expectations and our access to capital to
support our business may also be adversely impacted.
Current and future litigation could expose us to significant liabilities and adversely affect our business reputation.
We and certain of our subsidiaries are involved in various legal proceedings. Litigation is inherently unpredictable, and although
we believe we have meaningful defenses in these matters, we may incur liabilities due to adverse judgments or enter into
settlements of claims that could have a material adverse effect on our results of operations, cash flow and financial condition. For
20
a discussion of our ongoing legal proceedings see
Consolidated Financial Statements,
management’s attention, and may result in significant adverse judgments or settlements. Legal proceedings may expose us to
negative publicity, which could adversely affect our business reputation and customer preference for our products and brands.
FINANCIAL AND ECONOMIC RISK FACTORS
Weak or unstable economic conditions, including continued high inflation and interest rates, could negatively impact our
business.
Weak or unstable economic conditions, including continued high inflation and interest rates, may adversely affect our business
by:
●
Limiting our access to capital markets or increasing the cost of capital we may need to grow or operate our business;
●
Changing consumer spending and habits and demand for eggs, particularly higher-priced eggs;
●
Restricting the supply of energy sources or increasing our cost to procure energy; or
●
Reducing the availability of feed ingredients, packaging material, and other raw materials, or increasing the cost of these
items.
Deterioration of economic conditions could also negatively impact:
●
The financial condition of our suppliers, which may make it more difficult for them to supply raw materials;
●
The financial condition of our customers, which may decrease demand for eggs or increase our bad debt expense; or
●
The financial condition of our insurers, which could increase our cost to obtain insurance, and/or make it difficult for or
insurers to meet their obligations in the event we experience a loss due to an insured peril.
According to the U.S. Bureau of Labor Statistics, from May 2021 to May 2022, the Consumer Price Index for All Urban
Consumers (“CPI-U”) increased 8.5 percent, the largest 12-month increase since the period ending December 1981. The CPI-U
increased 4.1% and 3.3% from May 2022 to May 2023 and May 2023 to May 2024, respectively. Inflationary costs have increased
our input costs, and if we are unable to pass these costs through to the customer it could have an adverse effect on our business.
We hold significant cash balances in deposit accounts with deposits in excess of the amounts insured by the Federal Deposit
Insurance Corporation (“FDIC”). In the event of a bank failure at an institution where we maintain deposits in excess of the FDIC-
insured amount, we may lose such excess deposits.
The loss of any registered trademark or other intellectual property could enable other companies to compete more
effectively with us.
We utilize intellectual property in our business. For example, we own the trademarks
Farmhouse Eggs®
,
4Grain®, Sunups®
,
and
Sunny Meadow®
. We produce and market
Egg-Land’s Best®
Land O’ Lakes
® under license agreements with EB. We
have invested a significant amount of money in establishing and promoting our trademarked brands. The loss or expiration of any
intellectual property could enable our competitors to compete more effectively with us by allowing them to make and sell products
substantially similar to those we offer. This could negatively impact our ability to produce and sell those products, thereby
adversely affecting our operations.
Impairment in the carrying value of goodwill or other assets could negatively affect our results of operations or net worth.
Goodwill represents the excess of the cost of business acquisitions over the fair value of the identifiable net assets
acquired. Goodwill is reviewed at least annually for impairment by assessing qualitative factors to determine whether the
existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit
is less than its carrying amount. As of June 1, 2024, we had $45.8 million of goodwill. While we believe the current carrying
value of this goodwill is not impaired, future goodwill impairment charges could adversely affect our results of operations in any
particular period and our net worth.
Events beyond our control such as extreme weather and natural disasters could negatively impact our business.
Fire, bioterrorism, pandemics, extreme weather or natural disasters, including droughts, floods, excessive cold or heat, water
rights restrictions, hurricanes or other storms, could impair the health or growth of our flocks, decrease production or availability
of feed ingredients, or interfere with our operations due to power outages, fuel shortages, discharges from overtopped or breached
21
wastewater treatment lagoons, damage to our production and processing facilities, labor shortages or disruption of transportation
channels, among other things. Any of these factors could have a material adverse effect on our financial results.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
We understand the importance of cybersecurity and its role in the success of our Company. Our business operations depend on
the effective use of our information systems in order to properly serve our customers, manage our business and track and report
our financial results. Our technology operations consider risks from cybersecurity threats in the implementation and execution of
our business processes. We have considered and assessed the risks from cybersecurity threats as part of our overall risk assessment
process using the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework.
In order to identify, assess and manage material risks arising from cybersecurity threats, we maintain internal resources to monitor
and quickly respond to such threats. We perform vulnerability scans and penetration testing designed to test the effectiveness of
our security practices. We engage third-party service providers to assist in the evaluation of our internal controls over our
information systems through audit and consulting services to test the design and operational effectiveness of security controls.
We continually monitor our systems to detect and identify cybersecurity threats. Prior to contracting with third-party vendors, we
perform risk assessments of the vendors and require the vendors to manage cybersecurity risks to our business operations as well
as notify us of any potential or known cybersecurity risks. We also require our employees to complete training programs to
increase their awareness of and sensitivity to cybersecurity threats. These training programs include the identification of such
threats and the proper responses to a potential breach of cybersecurity that aligns with our adopted processes.
The Company has implemented a response process in the event of a cybersecurity incident through its crisis management plan.
The process includes the cooperation of the information technology team and our management team to properly detect and
respond to these incidents. These responses include determination of the potential impact and materiality of the incident, potential
disclosure and litigation matters, and mitigation of actual or potential damage to our systems or reputation arising from the
incident. An action plan is implemented to respond to any potential cybersecurity breach in order to continue to effectively serve
our customers and conduct our operations with as little interruption as practicable. The information technology team reviews the
response process on a regular basis to ensure that it is designed to be effective and to encompass current or new cybersecurity
threats.
As of July 23, 2024, we are not aware of any risks from cybersecurity threats, including as a result of prior cybersecurity incidents,
that have materially affected or that we believe are reasonably likely to materially affect the Company, including our business
strategy, results of operations or financial condition. See “Item 1A. Risk Factors” for further discussion about risks from
cybersecurity threats.
Governance
The Board is responsible for the oversight of management’s process for identifying and mitigating risks related to cybersecurity
threats. On a quarterly basis, the Director of Information Technology provides a report to the Audit Committee regarding ongoing
processes to improve and update our current cybersecurity protocols, new cybersecurity threats, results of internal assessments,
and any recent cybersecurity incidents. The Audit Committee will make the Board aware of any information it deems necessary
or appropriate in order for the Board to effectively oversee the Company’s cybersecurity risk management and strategy.
The Director of Information Technology and the team he manages are responsible for the operation and maintenance of our
information systems, including the assessment, identification and management of risks from cybersecurity threats. Together, the
Director of Information Technology and his team have over 150 years of experience in the information technology and security
environment. Our Chief Financial Officer, to whom the Director of Information Technology reports, has served as Chief Financial
Officer and a Board member since 2018 and has over 40 years of risk management experience.
22
ITEM 2. PROPERTIES
The table below provides summary information about the primary operational facilities we use in our business as of June 1, 2024.
Type
Quantity
Owned
Leased
Production Capacity
Location
Breeding Facilities
3
3
—
House up to 255,000 hens
GA, MS
Distribution Centers
6
6
—
NA
FL, GA, NC, TX
Feed Mills
26
25
1
Production capacity of 949 tons
of feed per hour
AL, AR, FL, GA, KS, KY, MO,
MS, OH, OK, SC, TN, TX, UT
Hatcheries
3
2
1
Hatch up to 780,848 chicks per
week
FL, MO, MS
Processing and
Packaging
44
44
—
Approximately 605,700 dozen
shell eggs per hour
AL, AR, FL, GA, KS, KY, LA,
MS, OH, OK, SC, TX, UT
Pullet Facilities
33
33
—
House up to 12.7 million pullets
AR, FL, GA, KS, KY, MS, SC,
TX, UT
Shell Egg Production
43
43
—
House up to 48.0 million layers
AL, AR, FL, GA, KS, KY, LA,
MS, OH, OK, SC, TX, UT
Egg Products Processing
Facilities
3
3
—
Production capacity of 59,000
lbs. per hour
GA, MO, TX
(a)
Does not include idled facilities or contract production and growers.
We also have ongoing construction projects to further expand the Company’s cage-free egg production capabilities. These
projects include expanding our cage-free egg production at existing farms or converting conventional housing with cage-free
production. These projects will phase into production through fiscal 2026. For additional information, see
As of June 1, 2024, we owned approximately 29.0 thousand acres of land. There are no material mortgages or liens on our
properties.
ITEM 3. LEGAL PROCEEDINGS
Refer to the description of certain legal proceedings pending against us under Part II. Item 8. Notes to the Consolidated Financial
Statements,
, which discussion is incorporated herein by reference.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
We have two classes of capital stock, Common Stock and Class A Common Stock. Our Common Stock trades on the Nasdaq
Global Select Market under the symbol “CALM”. There is no public trading market for the Class A Common Stock.
All outstanding shares of Class A Common Stock are owned by a limited liability company of which Adolphus Baker, our
Chairman, is the sole managing member. For additional information, see
, “We are controlled by the
family of our late founder, Fred R. Adams, Jr., and Adolphus B. Baker, Chairman of our Board of Directors, controls the vote of
100% of our outstanding Class A Common Stock.” At July 19, 2024, there were approximately 230 record holders of our
Common Stock and approximately 69,898 beneficial owners whose shares were held by nominees or broker dealers. For
additional information about our capital structure, see
Statements.
23
Dividends
Cal-Maine has a variable dividend policy adopted by its Board of Directors. Pursuant to the policy, Cal-Maine 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 will pay dividends to shareholders of record on
the 65th day after the quarter end. Dividends are payable on the 15th day following the record date. Following a quarter for which
the Company does not report net income attributable to Cal-Maine Foods, Inc., the Company will not pay a dividend for a
subsequent profitable quarter until the Company is profitable on a cumulative basis computed from the date of the last quarter for
which a dividend was paid. Under the Company's Credit Facility, dividends are restricted to the amount permitted under the
Company’s current dividend policy, and may not be paid if a default exists or will arise after giving effect to the dividend or if
the sum of cash and cash equivalents of the Company and its subsidiaries plus availability under the Credit Facility equals less
than $50 million.
Stock Performance Graph
The Company utilized the (i) Russell 2000 Total Return, and (ii) S&P Composite 1500 Food Products Industry Index to
benchmark the Company’s total shareholder return. The Company is a member of each of these indexes and believes the other
companies included in these indexes provide products and services similar to Cal-Maine Foods. The graph presents total
shareholder return and assumes $100 was invested on May 31, 2019 in the stock or index and dividends were reinvested.
May 31, 2019
May 29, 2020
May 28, 2021
May 27, 2022
June 2, 2023
May 31, 2024
Cal-Maine Foods, Inc.
$
100.00
$
120.37
$
94.39
$
130.51
$
141.75
$
190.54
Russell 2000 Total Return
100.00
96.56
158.91
133.69
131.71
151.16
S&P Composite 1500 Food
Products Industry Index
100.00
110.09
136.95
146.73
154.96
141.10
24
Issuer Purchases of Equity Securities
There were no purchases of our Common Stock made by or on behalf of our Company or any affiliated purchaser during our
fiscal 2024 fourth quarter.
Recent Sales of Unregistered Securities
No sales of securities without registration under the Securities Act of 1933 occurred during our fiscal year ended June 1, 2024.
Securities Authorized for Issuance under Equity Compensation Plans
Equity Compensation Plan Information
(a)
(b)
(c)
Number of
securities to be
issued upon exercise
of outstanding
options, warrants
and rights
Weighted average
exercise price of
outstanding
options, warrants
and rights
Number of securities
remaining available for future
issuance under equity
compensation plans (excluding
securities reflected in column
(a))
Equity compensation plans
approved by shareholders
—
$
—
277,954
Equity compensation plans not
approved by shareholders
—
—
—
Total
—
$
—
277,954
(a) There were no outstanding options, warrants or rights as of June 1, 2024. There were 856,119 shares of restricted
stock outstanding under our Amended and Restated 2012 Omnibus Long-Term Incentive Plan as of June 1, 2024.
(b) There were no outstanding options, warrants or rights as of June 1, 202 4.
(c) Reflects shares available for future issuance as of June 1, 2024 under our Amended and Restated 2012 Omnibus
Long-Term Incentive Plan.
For additional information, see
Statements.
ITEM 6. RESERVED
25
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RISK FACTORS; FORWARD -LOOKING STATEMENTS
For information relating to important risks and uncertainties that could materially adversely affect our business, securities,
financial condition, operating results, or cash flow, reference is made to the disclosure set forth under
. In addition, because the following discussion includes numerous forward -looking statements relating to our business,
securities, financial condition, operating results and cash flow, reference is made to the disclosure set forth under
“
.”
COMPANY OVERVIEW
Cal-Maine Foods, Inc. is primarily engaged in the production, grading, packaging, marketing and distribution of fresh shell eggs.
Our fiscal year end is the Saturday closest to May 31. The fiscal years 2024 and 2022 included 52 weeks and fiscal year 2023
included 53 weeks. The Company, which is headquartered in Ridgeland, Mississippi, is the largest producer and distributor of
fresh shell eggs in the United States (“U.S”). In fiscal 2024, we sold approximately 1.15 billion dozen shell eggs, which we
believe represented approximately 21% of domestic shell egg consumption. Our total flock as of June 1, 2024 of approximately
39.9 million layers and 11.8 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 throughout the majority of the U.S.
The Company has one reportable operating segment, which is the production, grading, packaging, marketing and distribution of
shell eggs. Many of our customers rely on us to provide most of their shell egg needs, including specialty and conventional eggs.
For further description of our business, refer to
ACQUISITIONS
On September 30, 2023, we completed our 24th acquisition since 1989, when 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. For a further description of this transaction, refer to Part II. Item 8. Notes to the Consolidated
Financial Statements,
. In March 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 remodeling and repurposing for use in shell egg
and egg products production to enhance our supply and distribution capabilities for customers in Missouri and surrounding areas.
In addition, subsequent to our fiscal 2024, we acquired substantially all the egg production and processing assets of ISE America,
Inc. and certain of its affiliates. The acquired assets include 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 significantly enhance our market reach in the Northeast
and Mid-Atlantic states. For further description of this transaction, refer to Part II. Item 8. Notes to the Consolidated Financial
Statements,
During fiscal 2022, we acquired the remaining 50% membership interest in Red River Valley Egg Farm, LLC (“Red River”),
which owns and operates a specialty shell egg production complex that includes 1.7 million cage-free hens.
HPAI
Since the HPAI outbreaks in 2015, there were no reported significant outbreaks of HPAI in the commercial table egg layer flocks
until the February – December 2022 time period. During this time, approximately 44.3 million commercial layers and pullets
were depopulated resulting in significant pressure on the overall supply of eggs. Thereafter, there were no HPAI cases affecting
commercial layers until November 2023. From November 2023 through the end of May 2024, approximately 32.8 million
commercial laying hens and pullets were depopulated.
26
During the third and fourth quarters of fiscal 2024, we experienced HPAI outbreaks within our facilities in Kansas and Texas,
resulting in the depopulation of approximately 3.1 million laying hens and 577,000 pullets and the temporary cessation of
operations at the facilities. Both locations have been cleared by the USDA to resume operations and we have begun to repopulate
the flock. We have continued efforts to minimize disruption to our customers.
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, refer to
27
Executive Overview of Results – Fiscal Years Ended June 1, 2024, June 3, 2023 and May 28, 2022
Fiscal Years Ended
June 1, 2024
June 3, 2023
May 28, 2022
Net sales (in thousands)
$
2,326,443
$
3,146,217
$
1,777,159
Gross profit (in thousands)
$
541,571
$
1,196,457
$
337,059
Net income attributable to Cal-Maine Foods, Inc.
$
277,888
$
758,024
$
132,650
Net income per share attributable to Cal-Maine Foods, Inc.
Basic
$
5.70
$
15.58
$
2.73
Diluted
$
5.69
$
15.52
$
2.72
Net average shell egg price
(a)
$
1.932
$
2.622
$
1.579
Average UB Southeast Region - Shell Eggs - White Large
$
2.049
$
3.115
$
1.712
Feed costs per dozen produced
$
0.550
$
0.676
$
0.571
(a) The net average shell egg selling price is the blended price for all sizes and grades of shell eggs, including graded and
non-graded shell egg sales, breaking stock and undergrades.
For fiscal 2023, net sales increased to $3.1 billion, gross profit to $1.2 billion and net income to $758.0 million. The increases
primarily resulted from significantly higher average egg selling prices, primarily due to the reduction in egg supply caused by
HPAI and higher grain and other input costs, as some of our egg sales prices are based on formulas related to our costs of
production. Gross profit and net income increases were partially offset by the increased cost of feed ingredients and increased
processing, packaging and warehouse costs. The impact of HPAI continued throughout the first three quarters of fiscal 2023 as
prices continued to increase. For the first three quarters of fiscal 2023, the average UB southeastern large index price was 138.8%
higher than the average price of the first three quarters in fiscal 2022. For the fourth quarter of fiscal 2023 the average UB
southeastern large index price decreased 13.8% to $2.163 from the same period in the prior year as the egg supply improved from
the effects of HPAI. Conventional egg selling prices declined significantly during the latter part of the fourth quarter of fiscal
2023.
Our dozens sold increased by 5.9% for fiscal 2023 compared to fiscal 2022, primarily due to an increase in specialty egg sales,
with most of the increase due to an increase in cage-free eggs sold. Our feed costs per dozen produced increased to $0.676 in
fiscal 2023, compared to $0.571 in fiscal 2022. For fiscal year 2023, the average Chicago Board of Trade (“CBOT”) daily market
price was $6.57 per bushel for corn and $450 per ton for soybean meal, representing increases of 4.1% and 14.7%, respectively,
compared to the daily average CBOT prices for fiscal 2022. Supplies of corn and soybean meal remained tight relative to demand
throughout 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 supply chain disruptions and the Russia-Ukraine War and its impact on the export markets. Basis levels for
corn and soybean meal, which impact our costs for these feed ingredients, ran significantly higher in fiscal 2023 in our areas of
operation compared to our prior year fiscal year as a result of higher transportation and storage costs, adding to our expense.
For fiscal 2024, net sales decreased to $2.3 billion, gross profit to $541.6 million and net income to $277.9 million. The decreases
compared to fiscal 2023 are primarily a result of a decrease in average egg selling prices. The average UB southeastern large
index price for fiscal 2024 decreased 34% compared to fiscal 2023. The decrease is due in large part to the recovery of the egg
supply following the HPAI outbreaks during most of calendar year 2022. However, the resurgence of HPAI beginning in
November 2023 resulted in the UB southeastern large index price being 9.1% higher in the fourth quarter of fiscal 2024 compared
to the fourth quarter of fiscal 2023.
Our dozens sold for fiscal 2024 remained relatively flat compared to fiscal 2023. We had an increase in production capacity with
the acquisition of the commercial shell egg production and processing business of Fassio Egg Farms, Inc. during fiscal 2024,
which was offset by the temporary decrease in production due to the HPAI outbreaks at our facilities.
Our feed costs per dozen produced decreased to $0.550 in fiscal 2024, compared to $0.676 in fiscal 2023. For fiscal year 2024,
the average CBOT daily market price was $4.76 per bushel for corn and $390 per ton for soybean meal, representing decreases
of 27.5% and 13.4%, respectively, compared to the daily average CBOT prices for fiscal 2023. 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.
28
RESULTS OF OPERATIONS
The following table sets forth, for the fiscal years indicated, certain items from our Consolidated Statements of Income expressed
as a percentage of net sales.
Fiscal Year Ended
June 1, 2024
June 3, 2023
Net sales
100.0
%
100.0
%
Cost of sales
76.7
%
62.0
%
Gross profit
23.3
%
38.0
%
Selling, general and administrative
10.9
%
7.4
%
Gain on involuntary conversions
(1.0)
%
(0.1)
%
(Gain) loss on disposal of fixed assets
—
%
—
%
Operating income
13.4
%
30.7
%
Total other income
2.0
%
1.0
%
Income before income taxes
15.4
%
31.7
%
Income tax expense
3.6
%
7.7
%
Net income
11.8
%
24.0
%
Less: Net loss attributable to noncontrolling interest
(0.1)
%
—
%
Net income attributable to Cal-Maine Foods, Inc.
11.9
%
24.0
%
29
Fiscal Year Ended June 1, 2024 Compared to Fiscal Year Ended June 3, 2023
NET SALES
Net revenue is primarily generated through sales of shell eggs and egg products. Net shell egg sales represented 96.2% and 96.1%
of total net sales in fiscal 2024 and 2023, respectively. The Company’s shell egg offerings include specialty and conventional
shell eggs. Specialty shell eggs include cage-free, organic, brown, free-range, pasture-raised and nutritionally enhanced.
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 offering include liquid and frozen egg products and hard -cooked eggs.
The table below presents an analysis of our conventional and specialty shell egg sales (in thousands, except percentage data):
June 1, 2024
June 3, 2023
Total net sales
$
2,326,443
$
3,146,217
Conventional
$
1,291,743
57.7
%
$
2,051,961
67.9
%
Specialty
925,665
41.4
%
956,993
31.6
%
Egg sales, net
2,217,408
99.1
%
3,008,954
99.5
%
Other
20,026
0.9
%
14,993
0.5
%
Net shell egg sales
$
2,237,434
100.0
%
$
3,023,947
100.0
%
Dozens sold:
Conventional
746,687
65.1
%
749,076
65.3
%
Specialty
400,946
34.9
%
398,297
34.7
%
Total dozens sold
1,147,633
100.0
%
1,147,373
100.0
%
Net average selling price per dozen:
Conventional
$
1.730
$
2.739
Specialty
$
2.309
$
2.403
All shell eggs
$
1.932
$
2.622
Egg products sales:
Egg products net sales
$
89,009
$
122,270
Pounds sold
74,849
70,035
Net average selling price per pound
$
1.189
$
1.746
Shell egg net sales
-
For fiscal 2024, shell egg net sales decreased $786.5 million compared to fiscal 2023, primarily due to the decrease in
net average selling prices for conventional eggs, and to a lesser extent the decrease in the net average selling prices for
specialty eggs.
-
For fiscal 2024, conventional egg sales decreased $760.2 million, or 37.0%, compared to fiscal 2023, primarily due to
the decrease in conventional egg prices. Changes in price resulted in a $753.4 million decrease in net sales and changes
in volume resulted in a $6.5 million decrease in net sales.
-
Conventional egg prices reached record highs in fiscal 2023 due to HPAI outbreaks experienced throughout calendar
year 2022 as well seasonal demand during the winter holidays. Prices were lower in the first half of fiscal 2024 compared
to the same period of fiscal 2023 as the U.S. egg supply started to recover from outbreaks of HPAI. There has been a
resurgence of HPAI starting in November 2023, and continuing through the remainder of fiscal 2024, which increased
prices due to supply constraints. However, prices in fiscal 2024 remained lower on average than fiscal 2023.
-
Specialty egg sales decreased $31.3 million, or 3.3%, for fiscal 2024 compared to fiscal 2023, primarily due to a 3.9%
decrease in specialty egg prices partially offset by a 0.7% increase in the volume of specialty dozens sold. Changes in
price resulted in a $37.7 million decrease in net sales and changes in volume resulted in a $6.4 million increase in net
sales.
30
-
Our dozens sold for fiscal 2024 remained relatively flat compared to fiscal 2023. We had an increase in production
capacity with the acquisition of the commercial shell egg production and processing business of Fassio Egg Farms, Inc.
during fiscal 2024, which was offset by the temporary decrease in production due to the HPAI outbreaks at our facilities.
Egg products net sales
-
Egg products net sales decreased $33.3 million, or 27.2%, primarily due to a 31.9% selling price decrease compared to
fiscal 2023, which had a $41.7 million negative impact on net sales.
-
Our egg products net average selling price decreased in fiscal 2024, compared to fiscal 2023 as the supply of shell eggs
used to produce egg products increased.
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):
Fiscal Year Ended
June 1, 2024
June 3, 2023
% Change
Cost of Sales:
Farm production
$
987,861
$
1,118,741
(11.7)
%
Processing, packaging, and warehouse
335,949
342,836
(2.0)
Egg purchases and other (including change in inventory)
380,200
379,777
0.1
Total shell eggs
1,704,010
1,841,354
(7.5)
Egg products
80,862
108,406
(25.4)
Total
$
1,784,872
$
1,949,760
(8.5)
%
Farm production costs (per dozen produced)
Feed
$
0.550
$
0.676
(18.6)
%
Other
$
0.433
$
0.396
9.3
%
Total
$
0.983
$
1.072
(8.3)
%
Outside egg purchases (average cost per dozen)
$
2.16
$
3.02
(28.5)
%
Dozens produced
1,018,835
1,058,540
(3.8)
%
Percent produced to sold
88.8%
92.3%
(3.8)
%
Farm Production
-
Feed costs per dozen produced decreased 18.6% in fiscal 2024 compared to fiscal 2023, primarily due to lower feed
ingredient prices. Basis levels for corn and soybean meal were lower in our areas of operation compared to our prior
fiscal year.
-
For fiscal 2024, the average daily CBOT market price was $4.76 per bushel for corn and $390 per ton of soybean meal,
representing decreases of 27.6% and 13.4%, respectively, as compared to the average daily CBOT prices for fiscal 2023.
-
Other farm production costs increased due to higher flock amortization and increased facility costs. Flock amortization
increased primarily due to the increased capitalized value of our flocks. This is primarily due to the higher feeds costs
in earlier periods incurred during the growing phase of the flocks.
31
-
Facility costs increased due primarily to increased contract labor in response to labor shortages as well as higher
depreciation expense primarily due to the completion of several large construction projects during fiscal 2024.
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
-
Processing, packaging, and warehouse costs decreased primarily due to a 3.5% reduction in the volume of processed
dozens, partially offset by higher processing costs.
Egg purchases and other (including change in inventory)
-
Costs in this category remained relatively flat as the average cost per dozen of outside egg purchases decreased 28.5%
compared to fiscal 2023, offset by an increase of 29.2% in dozens purchased due to the loss of production primarily
caused by HPAI outbreaks at our facilities.
GROSS PROFIT
Gross profit, as a percentage of net sales, was 23.3% for fiscal 2024, compared to 38.0% for fiscal 2023. The decrease resulted
primarily from lower selling prices for conventional eggs, partially offset by the lower feed ingredients prices.
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):
Fiscal Year Ended
June 1, 2024
June 3, 2023
$ Change
% Change
Delivery expense
$
72,742
$
77,548
$
(4,806)
(6.2)
%
Marketing expense
52,285
57,198
(4,913)
(8.6)
%
Litigation loss contingency accrual
19,648
-
19,648
%
Other general and administrative expenses
107,950
97,461
10,489
10.8
%
Total
$
252,625
$
232,207
$
20,418
8.8
%
N.M. - Not Meaningful
Delivery expense
-
The decreased delivery expense is primarily due to a decrease in contract trucking expense and fuel costs.
Marketing expense
-
The decrease in marketing expense is primarily due to a decrease in franchise fees.
Litigation loss contingency accrual
-
The litigation loss contingency accrual in fiscal 2024 is discussed in
II. Item 8. Notes to Consolidated Financial Statements in this Annual Report.
32
Other general and administrative expenses
-
The increase in other general and administrative expenses is primarily due to an increase of $5.5 million in the fair value
of the contingent consideration associated with the Fassio asset acquisition, and increased legal costs, partially offset by
a decrease in accrued bonuses compared to the prior year.
GAIN ON INVOLUNTARY CONVERSIONS
For fiscal 2024 and 2023, we recorded a gain of $23.5 million and $3.3 million, respectively, due to recoveries under indemnity
and insurance programs that exceeded the amortized book value of the covered assets and our direct costs.
OPERATING INCOME
As a result of the above, our operating income was $312.5 million for fiscal 2024 , compared to $967.7 million for fiscal 2023.
OTHER INCOME (EXPENSE)
Total other income (expense) consists of items not directly charged to, or related to, operations such as interest income and
expense, equity in income or loss of unconsolidated entities, and patronage dividends, among other items. Patronage dividends
are paid to us from our membership in the EB cooperative.
The Company recorded interest income of $32.3 million in fiscal 2024, compared to $18.6 million in fiscal 2023, primarily due
to significantly higher cash and cash equivalents and investment securities available-for-sale balances and yields. We recorded
interest expense of $549 thousand and $583 thousand in fiscal 2024 and 2023, respectively, primarily related to commitment fees
on our Credit Facility described below.
INCOME TAXES
For the fiscal year ended June 1, 2024, our pre-tax income was $360.0 million, compared to $998.6 million for fiscal 2023.
Income tax expense of $83.7 million was recorded for fiscal 2024 with an effective tax rate of 23. 2%. For fiscal 2023, income
tax expense was $241.8 million with an effective tax rate of 24.2%.
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 LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
Net loss attributable to noncontrolling interest was $1.6 million for fiscal 2024 compared to a $1.3 million net loss for fiscal 2023.
NET INCOME ATTRIBUTABLE TO CAL-MAINE FOODS, INC.
As a result of the above, net income attributable to Cal-Maine Foods, Inc. for fiscal 2024 was $277.9 million, or $5.70 per basic
and $5.69 per diluted share, compared to $758.0 million, or $15.58 per basic and $15.52 per diluted share for fiscal 2023.
Fiscal Year Ended June 3, 2023 Compared to Fiscal Year Ended May 28, 2022
The discussion of our results of operations for the fiscal year ended June 3, 2023 compared to the fiscal year ended May 28, 2022
can be found in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the
Company’s fiscal 2023 Annual Report on Form 10-K.
33
LIQUIDITY AND CAPITAL RESOURCES
We aim to maintain a strong balance sheet and liquidity, particularly given the cyclical nature of our business. We believe a strong
balance sheet supports our growth opportunities and stockholder returns. Our priorities for the use of cash in recent periods have
included the payment of dividends pursuant to our variable dividend policy, inorganic growth through acquisitions of businesses,
organic growth including construction and conversion of cage-free facilities and investment in value-added products, and
maintenance capital expenditures.
Working Capital and Current Ratio
Our working capital at June 1, 2024 was $1.0 billion, compared to $942.2 million at June 3, 2023. The calculation of working
capital is defined as current assets less current liabilities. Our current ratio was 5.5 at June 1, 2024 compared to 6.2 at June 3,
2023. The current ratio is calculated by dividing current assets by current liabilities. The decrease in our current ratio is primarily
due to the increase in total current liabilities, which increased by $45.0 million to $227.7 million at June 1, 2024, due to increases
in income tax payable and accrued expenses and other liabilities primarily resulting from the $19.6 million litigation loss
contingency accrual recorded in fiscal 2024 . Due to seasonal factors described in
, we
generally expect our need for working capital to be highest in the fourth and first fiscal quarters ending in May/June and
August/September, respectively.
Cash Flows from Operating Activities
Net cash provided by operating activities was $451.4 million for fiscal 2024 compared with $863.0 million for fiscal 2023. The
decrease in cash flow from operations resulted primarily from lower selling prices for conventional eggs, partially offset by the
lower cost of feed ingredients.
Cash Flows from Investing Activities
For fiscal 2024, $412.6 million was used in investing activities, primarily due to the purchases of investment securities, the
acquisition of the assets of Fassio Egg Farms, Inc., and purchases of property, plant and equipment compared to $375.1 million
used in investing activities in the same period of fiscal 2023. Purchases of investment securities were 573.6 million in fiscal 2024
compared to 530.8 million in fiscal 2023. Sales and maturities of investment securities were $358.9 million in fiscal 2024,
compared to $291.8 million for fiscal 2023. Purchases of property, plant and equipment were $147.1 million and $136.6 million
in fiscal 2024 and 2023, respectively, primarily reflecting progress on our construction projects.
Cash Flows from Financing Activities
We paid dividends totaling $91.9 million and $252.3 million in fiscal 2024 and 2023, respectively.
As of June 1, 2024, cash decreased $54.9 million since June 3, 2023.
Acquisition of ISE America, Inc. Assets
Subsequent to our fiscal 2024 year-end, we acquired substantially all the assets of ISE America, Inc. and certain of its affiliates
related to their commercial shell egg production and processing facilities. The purchase price was approximately $112 million
and was funded with available cash on hand. For additional information, refer to Part II. Item 8. Notes to the Consolidated
Financial Statements,
Credit Facility
We had no long-term debt outstanding at the end of fiscal 2024 and 2023. On November 15, 2021, we entered into an Amended
and Restated Credit Agreement (as amended, the “Credit Agreement”) with a five-year term. The Credit Agreement provides for
a senior secured revolving credit facility (the “Credit Facility”), in an initial aggregate principal amount of up to $250 million.
As of June 1, 2024, no amounts were borrowed under the Credit Facility. We have $4.7 million in outstanding standby letters of
credit, which were issued under our Credit Facility for the benefit of certain insurance companies. Refer to Part II. Item 8. Notes
to the Financial Statements,
34
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 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 help
them achieve their announced timelines for cage-free egg sales. The following table presents material construction projects
approved as of June 1, 2024 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of
June 1, 2024
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses
Fiscal 2025
86,837
81,757
5,080
Dexter, MO Renovations
Fiscal 2025
10,944
771
10,173
Feed Mill
Fiscal 2026
10,480
3,254
7,226
Solar Project
Fiscal 2026
5,789
475
5,314
Cage-Free Layer & Pullet Houses
Fiscal 2026
135,905
108,035
27,870
$
249,955
$
194,292
$
55,663
As of June 1, 2024, we had $102.2 million of purchase obligations outstanding, of which $84.6 million are due within one year.
Purchase obligations primarily include contractual agreements to purchase feed ingredients and commitments to make capital
expenditures. Timing of payments and actual amounts paid may be different depending on the timing of the receipt of goods or
services or changes to agreed-upon amounts for some obligations.
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 needs for at least the next 12 months and to fund our capital commitments
currently in place thereafter.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
For information on changes in accounting principles and new accounting principles, see “
New Accounting Pronouncements and
Policies
” in Part II. Item 8. Notes to Consolidated Financial Statements,
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from these estimates. Critical accounting estimates are those
estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably
likely to have a material impact on the financial condition or results of operations. Our critical accounting estimates are described
below.
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. The excess of the purchase price over fair values of identifiable assets and liabilities is recorded as
goodwill.
We typically use the income method approach for intangible assets acquired in a business combination. Significant judgment
exists in valuing certain intangible assets and the most significant assumptions requiring judgment involve estimating the amount
and timing of future cash flows, growth rates, discount rates selected to measure the risks inherent in the future cash flows and
the asset’s expected useful lives.
35
The fair values of identifiable assets and liabilities are generally determined internally and 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 significant judgment is required as management determines the fair market
value for those assets.
Due to inherent industry uncertainties including volatile egg prices and feed costs, unanticipated market changes, events, or
circumstances may occur that could affect the estimates and assumptions used, which could result in subsequent impairments.
INVENTORIES
Inventories of eggs, feed, supplies and flocks are valued principally at the lower of cost (first-in, first-out method) or net realizable
value. If market prices for eggs and feed grains move substantially lower, we record adjustments to write down the carrying
values of eggs and feed inventories to fair market value. The cost associated with flock inventories, consisting principally of chick
purchases or hatching costs, feed, labor, contractor payments and overhead costs, are accumulated during the hatching and
growing periods of approximately 22 weeks. Capitalized flock costs are then amortized over the flock’s productive life, generally
one to two years. Judgment exists in determining the flock’s productive life including factors such as laying rate and egg size,
molt cycles, and customer demand. Furthermore, other factors such as hen type or weather conditions could affect the productive
life. These factors could make our estimates of productive life differ from actual results. Flock mortality is charged to cost of
sales as incurred. High mortality from disease or extreme temperatures will result in abnormal write-downs to flock
inventories. Management continually monitors each flock and attempts to take appropriate actions to minimize the risk of
mortality loss.
GOODWILL
As a result of acquiring businesses, the Company has $45.8 million of goodwill on June 1, 2024. Goodwill is evaluated for
impairment annually by first performing a qualitative assessment to determine whether a quantitative goodwill test is
necessary. After assessing the totality of events or circumstances, if we determine it is more likely than not that the fair value of
a reporting unit is less than its carrying amount, then we perform additional quantitative tests to determine the magnitude of any
impairment.
The Company has determined that all of our locations share similar economic characteristics and support each other in the
production of eggs and customer support. Therefore, we aggregate all our locations as a single reporting unit for testing goodwill
for impairment. When the Company acquires a new location, we determine whether it should be integrated into our single
reporting unit or treated as a separate reporting unit. Historically, we have concluded that acquired operations should be integrated
into our single reporting unit due to the operational changes, redistribution of customers, and significant changes in management
that occur when we acquire businesses, which result in the acquired operations sharing similar economic characteristics with the
rest of our locations. Once goodwill associated with acquired operations becomes part of goodwill of our single reporting unit, it
no longer represents the particular acquired operations that gave rise to the goodwill. We may conclude that a business acquired
in the future should be treated as a separate reporting unit, in which case it would be tested separately for goodwill impairment.
At June 1, 2024, goodwill represented 2.1% of total assets and 2.5% of stockholders’ equity.
Judgment exists in management’s evaluation of the qualitative factors which include macroeconomic conditions, the current egg
industry environment, cost inputs such as feed ingredients and overall financial performance. Furthermore, judgment exists in the
evaluation of the threshold of whether it is more likely than not that the fair value of a reporting unit is less than its carrying
amount. Uncertainty exists due to uncontrollable events that could occur that could negatively affect our operating conditions.
Goodwill is evaluated for impairment at least annually or more frequently if impairment indicators arise. During our annual
impairment test which is the first day of the fourth quarter, we determined that goodwill passed the qualitative assessment and
therefore no quantitative analysis of goodwill impairment was necessary in fiscal 2024.
REVENUE RECOGNITION
Revenue recognition is completed upon satisfaction of the performance obligation which generally occurs upon shipment or
delivery to a customer based on terms of the sale.
36
Revenues are recognized in an amount that reflects the net consideration we expect to receive in exchange for delivery 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 in the subsequent period.
As the estimates noted above are based on historical information, we do not believe that there will be a material change in the
estimates and assumptions used to recognize revenue. However, if actual results varied significantly from our estimates it could
expose us to material gains or losses.
LOSS CONTINGENCIES
The Company evaluates whether a loss contingency exists, and if the assessment of a contingency indicates it is probable that a
material loss has been incurred and the amount of the loss can be reasonably estimated, the estimated loss would be accrued in
the Company’s financial statements. The Company expenses the costs of litigation as they are incurred.
Except for the $19.6 million litigation loss contingency accrual in fiscal 2024, there were no loss contingency accruals for the
past three fiscal years. Our evaluation of whether loss contingencies exist primarily relates to litigation matters. The outcome of
litigation is uncertain due to, among other things, uncertainties regarding the facts will be established during the proceedings,
uncertainties regarding how the law will be applied to the facts established, and uncertainties regarding the calculation of any
potential damages or the costs of any potential injunctive relief. If the facts discovered or the Company’s assumptions change,
future accruals for loss contingencies may be required. Results of operations may be materially affected by losses or a loss
contingency accrual resulting from adverse legal proceedings.
INCOME TAXES
We determine our effective tax rate by estimating our permanent differences resulting from differing treatment of items for tax
and accounting purposes. Judgment and uncertainty exist with management’s application of tax regulations and evaluation of the
more-likely-than-not recognition and measurement thresholds. We are periodically audited by taxing authorities. An adverse tax
settlement could have a negative impact on our effective tax rate and our results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
COMMODITY PRICE RISK
Our primary exposure to market risk arises from changes in the prices of conventional eggs, which are subject to significant price
fluctuations that are largely beyond our control. We are focused on growing our specialty shell egg business because the selling
prices of specialty shell eggs are generally not as volatile as conventional shell egg prices. Our exposure to market risk also
includes changes in the prices of corn and soybean meal, which are commodities subject to significant price fluctuations due to
market conditions that are largely beyond our control. 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 and commit to purchase organic ingredients to help assure supply. Ordinarily, we do
not enter long-term contracts beyond a year to purchase corn and soybean meal or hedge against increases in the price of corn
and soybean meal. The following table outlines the impact of price changes for corn and soybean meal on feed costs per dozen
as feed ingredient pricing varies:
Change in price per bushel of corn
$
(0.84)
$
(0.56)
$
(0.28)
$
0.00
$
0.28
$
0.56
$
0.84
Change
per ton
soybean
meal
$
(76.50)
0.49
0.50
0.51
0.52
0.53
0.54
0.55
$
(51.00)
0.50
0.51
0.52
0.53
0.54
0.55
0.56
$
(25.50)
0.51
0.52
0.53
0.54
0.55
0.56
0.57
$
0.00
0.52
0.53
0.54
0.55
(a)
0.56
0.57
0.58
$
25.50
0.53
0.54
0.55
0.56
0.57
0.58
0.59
$
51.00
0.54
0.55
0.56
0.57
0.58
0.59
0.60
$
76.50
0.55
0.56
0.57
0.58
0.59
0.60
0.61
37
(a)
Based on 2024 actual costs, table flexes feed cost inputs to show $0.01 impacts to per dozen egg feed production costs.
INTEREST RATE RISK
We have a $250 million Credit Facility, borrowings under which would bear interest at variable rates. No amounts were
outstanding under that facility during fiscal 2024 or fiscal 2023. Under our current policies, we do not use interest rate derivative
instruments to manage our exposure to interest rate changes.
FIXED INCOME SECURITIES RISK
At June 1, 2024, the effective maturity of our cash equivalents and investment securities available for sale was 8.5 months, and
the composite credit rating of the holdings are A+ / A1 / A+ (S&P / Moody’s / Fitch). Generally speaking, rising interest rates
decrease the value of fixed income securities portfolios. As of June 1, 2024, the estimated fair value of our fixed income securities
portfolio was approximately $574.5 million and reflected unrealized losses of approximately $1.2 million. For additional
information see
Sale” and
CONCENTRATION OF CREDIT RISK
Our financial instruments exposed to concentrations of credit risk consist primarily of trade receivables. Concentrations of credit
risk with respect to receivables are limited due to our large number of customers and their dispersion across geographic areas,
except that at June 1, 2024 and June 3, 2023, 26.8% and 30.1%, respectively, of our net accounts receivable balance was due
from Walmart Inc. (including Sam’s Club). No other single customer or customer group represented 10% or greater of net
accounts receivable at June 1, 2024 and June 3, 2023.
38
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Cal-Maine Foods, Inc. and Subsidiaries
Ridgeland, Mississippi
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Cal-Maine Foods, Inc. and Subsidiaries as of June 1,
2024 and June 3, 2023, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash
flows for each of the three years in the period ended June 1, 2024, and the related consolidated notes and schedule listed in the
Index at Items 15(a)(1) and 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of Cal-Maine Foods, Inc. and
Subsidiaries as of June 1, 2024 and June 3, 2023, and the results of their operations and their cash flows for each of the three
years in the period ended June 1, 2024, in conformity with accounting principles generally accepted in the United States of
America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the Cal-Maine Foods, Inc. and Subsidiaries’ internal control over financial reporting as of June 1, 2024,
based on the criteria established in 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated July 23, 2024 expressed an unqualified opinion.
Basis for Opinion
These consolidated financial statements are the responsibility of the entities’ management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to Cal-Maine Foods, Inc. and Subsidiaries in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe our
audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the Audit Committee and that: (1) relate to
accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing
a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Contingent Liabilities – Litigation and Claims – Refer to Note 16 in the Consolidated Financial Statements
Critical Audit Matter Description
Cal-Maine Foods, Inc. and Subsidiaries record liabilities for legal proceedings and claims in those instances where they
can reasonably estimate the amount of the loss and when the liability is probable. Where the reasonable estimate of the probable
loss is a range, Cal-Maine Foods, Inc. and Subsidiaries record the most likely estimate of the loss, or the low end of the range if
there is no one best estimate. Cal-Maine Foods, Inc. and Subsidiaries either disclose the amount of a possible loss or range of loss
39
in excess of established accruals if estimable, or states that such an estimate cannot be made. Cal-Maine Foods, Inc. and
Subsidiaries disclose significant legal proceedings and claims even where liability is not probable or the amount of the liability
is not estimable, or both, if Cal-Maine Foods, Inc. and Subsidiaries believe there is at least a reasonable possibility that a loss
may be incurred.
We identified litigation and claims as a critical audit matter because of the challenges auditing management’s judgments
applied in determining the likelihood of loss related to the resolution of such claims. Specifically, auditing management’s
determination of whether any contingent loss arising from the related litigation and claims is probable, reasonably possible, or
remote, and the related disclosures, is subjective and requires significant judgment due to the sensitivity of the issue.
How the Critical Audit Matter was addressed during the Audit
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of the controls
relating to the Cal-Maine Foods, Inc. and Subsidiaries’ evaluation of the liability related to legal proceedings and claims, including
controls over determining the likelihood of a loss and whether the amount of loss can be reasonably estimated, as well as financial
statement disclosures over the legal proceedings and claims. These procedures also included obtaining and evaluating the letters
of audit inquiry with external legal counsel, evaluating the reasonableness of Cal-Maine Foods, Inc. and Subsidiaries’ assessment
regarding whether an unfavorable outcome is reasonably possible or probable, and reasonably estimable, evaluating the
sufficiency of Cal-Maine Foods, Inc. and Subsidiaries’ disclosures related to legal proceedings and claims and evaluating the
completeness and accuracy of Cal-Maine Foods, Inc. and Subsidiaries’ legal contingencies.
We have served as the Company’s auditor since 2007.
Little Rock, Arkansas
July 23, 2024
40
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except for par value amounts)
June 1, 2024
June 3, 2023
Assets
Current assets:
Cash and cash equivalents
$
$
Investment securities available-for-sale
Receivables:
Trade receivables, net
Income tax receivable
Other
Total receivables, net
Inventories, net
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:
Trade accounts payable
$
$
Dividends payable
Accrued wages and benefits
Income tax payable
Accrued expenses and other liabilities
Total current liabilities
Other noncurrent liabilities
Deferred income taxes
Total liabilities
Commitments and contingencies - see
Note 16
—
—
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
(1,773 )
(2,886 )
Common stock in treasury, at cost –
respectively
(31,597 )
(30,008 )
Total Cal-Maine Foods, Inc. stockholders’ equity
Noncontrolling interest in consolidated equity
(3,104 )
(1,498 )
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
$
See Notes to Consolidated Financial Statements.
41
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands, except per share amounts)
Fiscal years ended
June 1, 2024
June 3, 2023
May 28, 2022
52 weeks
53 weeks
52 weeks
Net sales
$
$
$
Cost of sales
Gross profit
Selling, general and administrative
Gain on involuntary conversions
(23,532 )
(3,345 )
(5,492 )
(Gain) loss on disposal of fixed assets
(131 )
Operating income
Other income (expense):
Interest expense
(549 )
(583 )
(403 )
Interest income
Patronage dividends
Equity in income of unconsolidated entities
Other, net
Total other income
Income before income taxes
Income tax expense
Net income
Less: Net loss attributable to noncontrolling interest
(1,606 )
(1,292 )
(209 )
Net income attributable to Cal-Maine Foods, Inc.
$
$
$
Net income per share attributable to Cal-Maine Foods, Inc.:
Basic
$
$
$
Diluted
$
$
$
Weighted average shares outstanding:
Basic
Diluted
See Notes to Consolidated Financial Statements.
42
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Statements of
Comprehensive Income
(in thousands)
Fiscal years ended
June 1, 2024
June 3, 2023
May 28, 2022
Net income
$
$
$
Other comprehensive income (loss), before tax:
Unrealized holding gain (loss) available-for-sale securities, net of
reclassification adjustments
(1,714 )
(1,398 )
(Increase) decrease in accumulated post-retirement benefits obligation, net of
reclassification adjustments
(27 )
(9 )
Other comprehensive income (loss), before tax
(1,741 )
(1,407 )
Income tax expense (benefit) related to items of other comprehensive income
(loss)
(451 )
(369 )
Other comprehensive income (loss), net of tax
(1,290 )
(1,038 )
Comprehensive income
Less: comprehensive loss attributable to the noncontrolling interest
(1,606 )
(1,292 )
(209 )
Comprehensive income attributable to Cal-Maine Foods, Inc.
$
$
$
See Notes to Consolidated Financial Statements.
43
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
(in thousands)
Accum.
Other
Common Stock
Comp.
Shares
Amount
Class A
Shares
Class A
Amount
Treasury
Shares
Treasury
Amount
Paid In
Capital
Retained
Earnings
(loss)
Noncontrolling
Interest
Total
Balance at May 29, 2021
$
$
$
(27,433 )
$
$
$
(558 )
$
—
Stock compensation plan transactions
—
—
—
—
(81 )
(1,014 )
—
—
—
Dividends ($
Common
—
—
—
—
—
—
—
(38,578 )
—
—
(38,578 )
Class A common
—
—
—
—
—
—
—
(4,195 )
—
—
(4,195 )
Contributions
—
—
—
—
—
—
—
—
—
Net income (loss)
—
—
—
—
—
—
—
—
(209 )
Other comprehensive loss, net of tax
—
—
—
—
—
—
—
—
(1,038 )
—
(1,038 )
Balance at May 28, 2022
—
(28,447 )
(1,596 )
(206 )
Stock compensation plan transactions
—
—
—
—
(44 )
(1,561 )
—
—
Dividends ($
Common
—
—
—
—
—
—
—
(227,993 )
—
—
(227,993 )
Class A common
—
—
—
—
—
—
—
(24,773 )
—
—
(24,773 )
Net income (loss)
—
—
—
—
—
—
—
—
(1,292 )
Other comprehensive loss, net of tax
—
—
—
—
—
—
—
—
(1,290 )
(1,290 )
Balance at June 3, 2023
(30,008 )
(2,886 )
(1,498 )
Stock compensation plan transactions
—
—
—
—
(55 )
(1,589 )
—
—
—
Dividends ($
Common
—
—
—
—
—
—
—
(83,565 )
—
—
(83,565 )
Class A common
—
—
—
—
—
—
—
(9,040 )
—
—
(9,040 )
Net income (loss)
—
—
—
—
—
—
—
—
(1,606 )
Other comprehensive income, net of tax
—
—
—
—
—
—
—
—
—
Balance at June 1, 2024
$
$
$
(31,597 )
$
$
$
(1,773 )
$
(3,104 )
$
See Notes to Consolidated Financial Statements.
44
Cal-Maine Foods, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Fiscal year ended
June 1, 2024
June 3, 2023
May 28, 2022
Cash flows from operating activities:
Net income
$
$
$
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Deferred income taxes
(9,672 )
Stock compensation expense, net of amounts paid
Loss on change in fair value contingent consideration
Other operating activities, net
(6,908 )
(1,491 )
(9,099 )
Change in operating assets and liabilities, net of effects from acquisitions:
Increase (decrease) in trade receivables
(27,570 )
(88,063 )
Increase (decrease) in inventories
(21,102 )
(36,152 )
Increase (decrease) in income taxes payable/receivable
(42,218 )
Increase in accounts payable and current accrued expenses
Decrease in other operating assets and liabilities
(553 )
(2,890 )
(7,101 )
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of investments
(573,565 )
(530,781 )
(98,243 )
Sales of investments
Acquisition of business, net of cash acquired
(53,746 )
(44,823 )
Investment in unconsolidated entities
(363 )
(1,673 )
(3,000 )
Distributions from unconsolidated entities
Purchases of property, plant and equipment
(147,116 )
(136,569 )
(72,399 )
Net proceeds from insurance settlement - property, plant and equipment
Net proceeds from disposal of property, plant and equipment
Net cash used in investing activities
(412,586 )
(375,111 )
(117,021 )
Cash flows from financing activities:
Principal payments on finance lease
(214 )
(224 )
(215 )
Purchase of common stock by treasury
(1,688 )
(1,643 )
(1,127 )
Payments of dividends
(91,856 )
(252,292 )
(6,117 )
Contributions
Net cash used in financing activities
(93,758 )
(254,159 )
(7,456 )
Increase (decrease) in cash and cash equivalents
(54,946 )
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
$
$
$
Supplemental information:
Income taxes paid
$
$
$
See Notes to Consolidated Financial Statements.
45
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Nature of Operations
Cal-Maine Foods, Inc. (“we,” “us,” “our,” or the “Company”) is primarily engaged in the production, grading, packaging,
marketing and distribution of fresh shell eggs, including conventional, cage-free, organic, brown, free -range, pasture-raised and
nutritionally-enhanced eggs. The Company, which is headquartered in Ridgeland, Mississippi, is the largest producer and
distributor of fresh shell eggs in the United States and sells most of its shell eggs throughout the majority of the United States.
Principles of Consolidation
The consolidated financial statements include the accounts of all wholly-owned subsidiaries and of majority-owned subsidiaries
over which we exercise control. All significant intercompany transactions and accounts have been eliminated in consolidation.
Fiscal Year
The Company’s fiscal year-end is on the Saturday closest to May 31. The fiscal years ending on June 1, 2024 and May 28,
2022 included
Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”)
in the United States of America 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.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash
equivalents. We maintain bank accounts that are insured by the Federal Deposit Insurance Corporation up to $
. The
Company routinely maintains cash balances with certain financial institutions in excess of federally insured amounts. The
Company has not experienced any loss in such accounts. The Company manages this risk through maintaining cash deposits and
other highly liquid investments in high quality financial institutions.
We primarily utilize a cash management system with a series of separate accounts consisting of lockbox accounts for receiving
cash, concentration accounts to which funds are moved, and zero-balance disbursement accounts for funding accounts payable.
Checks issued, but not presented to the banks for payment, may result in negative book cash balances, which are included in
accounts payable.
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 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. At June 1, 2024 and June 3, 2023,
reserves for credit losses were $
46
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. At June 1, 2024 and June 3, 2023,
approximately
% and
% of the Company’s trade accounts receivable, respectively.
Inventories
Inventories of eggs, feed, supplies and flocks are valued principally at the lower of cost (first-in, first-out method) or net realizable
value.
The cost associated with flocks, consisting principally of chicks, feed, labor, contractor payments and overhead costs, are
accumulated during a growing period of approximately
lives of the flocks, generally
one
. As the amortization period of the flocks is relatively short, disclosure of the gross
cost and accumulated amortization is omitted. Flock mortality is charged to cost of sales as incurred.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is provided by the straight-line method over the estimated useful
lives, which are
maintenance are expensed as incurred. Expenditures that increase the value or productive capacity of assets are capitalized. When
property, plant, and equipment are retired, sold, or otherwise disposed of, the asset’s carrying amount and related accumulated
depreciation are removed from the accounts and any gain or loss is included in operations. When certain events or changes in
operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of
the carrying amounts.
Investments in Unconsolidated Entities
The equity method of accounting is used when the Company can exert significant influence over an entity, but does not control
its financial and operating decisions. Under the equity method, original investments are recorded at cost and adjusted by the
Company’s share of undistributed earnings or losses of these entities. Equity investments without readily determinable fair values,
when the Company does not have the ability to exercise significant influence over the investee, are recorded at cost, less
impairment, plus or minus observable price changes.
Membership in cooperatives are recorded at cost, plus or minus any allocated equities and retains.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired. Goodwill is
evaluated for impairment at least annually or more frequently if impairment indicators arise by first performing a qualitative
assessment to determine whether a quantitative goodwill test is necessary. After assessing the totality of events or circumstances,
if we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we perform
additional quantitative tests to determine the magnitude of any impairment.
Intangible Assets
Intangible assets are initially recorded at fair value in business acquisitions, which include franchise rights, customer relationships,
non-compete agreements, trademarks and right of use intangibles. They are amortized over their estimated useful lives of
years. The gross cost and accumulated amortization of intangible assets are removed when the recorded amounts are fully
amortized and the asset is no longer in use or the contract has expired. When certain events or changes in operating conditions
occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts.
Indefinite life assets are recorded at fair value in business acquisitions and represent water rights. They are not amortized, but
are reviewed for impairment at least annually or more frequently if impairment indicators arise.
Accrued Self Insurance
We use a combination of insurance and self-insurance mechanisms to provide coverage for the potential liabilities for health and
welfare, workers’ compensation, auto liability and general liability risks. Liabilities associated with our risks retained are
estimated, in part, by considering claims experience, demographic factors, severity factors and other actuarial assumptions.
47
Dividend Payable
We accrue dividends at the end of each quarter according to the Company’s dividend policy adopted by its Board of Directors.
The Company pays a dividend to shareholders of its Common Stock and Class A Common Stock on a quarterly basis for each
quarter for which the Company reports net income attributable to Cal-Maine Foods, Inc. computed in accordance with GAAP in
an amount equal to one-third (1/3) of such quarterly income. Dividends are paid to shareholders of record as of the 60th day
following the last day of such quarter, except for the fourth fiscal quarter. For the fourth quarter, the Company pays dividends to
shareholders of record on the 65th day after the quarter end. Dividends are payable on the 15th day following the record date.
Following a quarter for which the Company does not report net income attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend for a subsequent profitable quarter until the Company is profitable on a cumulative basis computed from the
date of the most recent quarter for which a dividend was paid. The dividend policy is subject to periodic review by the Board of
Directors.
Treasury Stock
Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as
treasury stock. The grant of restricted stock through the Company’s share-based compensation plans is funded through the
issuance of treasury stock. Gains and losses on the subsequent reissuance of shares in accordance with the Company’s share-
based compensation plans are credited or charged to paid-in capital in excess of par value using the average-cost method.
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.
Shipping and Distribution
Costs to deliver product to customers are included in selling, general and administrative expenses in the accompanying
Consolidated Statements of Income and totaled $
2022, respectively.
Income Taxes
Income taxes are accounted for using the liability method. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. The Company’s policy with respect to evaluating uncertain tax positions is based upon whether management
believes it is more likely than not the uncertain tax positions will be sustained upon review by the taxing authorities. The tax
positions must meet the more-likely-than-not recognition threshold with consideration given to the amounts and probabilities of
the outcomes that could be realized upon settlement using the facts, circumstances and information at the reporting date. The
Company will reflect only the portion of the tax benefit that will be sustained upon resolution of the position and applicable
interest on the portion of the tax benefit not recognized. The Company initially and subsequently measures the largest amount of
tax benefit that is greater than 50% likely to be realized upon settlement with a taxing authority that has full knowledge of all
relevant information. The Company records interest and penalties on uncertain tax positions as a component of income tax
expense. Based upon management’s assessment, there are no uncertain tax positions expected to have a material impact on the
Company’s consolidated financial statements.
48
Stock Based Compensation
The Company recognizes all share-based payments to employees and directors, including grants of employee stock options,
restricted stock and performance-based shares, in the Consolidated Statements of Income based on their fair values. The benefits
of tax deductions in excess of recognized compensation cost are reported as a financing cash flow. See
Business Combinations
The Company applies the acquisition method of accounting, which requires that once control is obtained, all the assets acquired
and liabilities assumed, including amounts attributable to noncontrolling interests, are recorded at their respective fair values at
the date of acquisition. We determine the fair values of identifiable assets and liabilities internally, which requires estimates and
the use of various valuation techniques. When a market value is not readily available, our internal valuation methodology
considers the remaining estimated life of the assets acquired and what management believes is the market value for those assets.
We typically use the income method approach for intangible assets acquired in a business combination. Significant estimates in
valuing certain intangible assets include, but are not limited to, the amount and timing of future cash flows, growth rates, discount
rates and useful lives. The excess of the purchase price over fair values of identifiable assets and liabilities is recorded as goodwill.
Gain on Involuntary Conversions
The Company maintains insurance for both property damage and business interruption relating to catastrophic events, such as
fires, hurricanes, tornadoes and other acts of God, and is eligible to participate in U.S. Department of Agriculture (“USDA”)
indemnity and compensation programs for certain losses due to disease outbreaks such as highly pathogenic avian influenza
(“HPAI”). Specifically, the Animal Health Protection Act authorizes the USDA to provide indemnity payments to producers for
birds and eggs that must be destroyed during a disease response. Payments received under these programs are based on the fair
market value of the poultry and/or eggs at the time that HPAI virus is detected in the flock. Other covered costs include feed,
depopulation and disposal costs, and virus elimination costs. The USDA does not provide indemnity for income or production
losses suffered due to downtime or other business disruptions nor for indirect continuing expenses. Recoveries received for
property damage, business interruption and disease outbreaks in excess of the net book value of damaged assets, including poultry,
clean-up and demolition costs, and other direct post-event costs are recorded within “Gain on involuntary conversions” in the
period received or committed when all contingencies associated with the recoveries are resolved.
Loss Contingencies
Certain conditions may exist as of the date the financial statements are issued that may result in a loss to the Company but which
will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel
assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss
contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such
proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well
as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability
can be estimated, the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates a
potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the
nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be
disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the
nature of the guarantee would be disclosed.
The Company expenses the costs of litigation as they are incurred.
New Accounting Pronouncements and Policies
No new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our
Consolidated Financial Statements.
49
Note 2 – Acquisition
On
, the Company announced the acquisition of 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
feed mill, pullets, a fertilizer production and composting operation and land located in Erda, Utah, outside Salt Lake City. The
Company accounted for the acquisition as a business combination.
The following table summarizes the consideration paid for the Fassio assets and the amounts of assets acquired and liabilities
assumed recognized at the acquisition date (in thousands):
Cash consideration paid
$
Fair value of contingent consideration
Total estimated purchase consideration
Recognized amounts of identifiable assets acquired and liabilities assumed
Inventory
$
Property, plant and equipment
Intangible assets
Other long-term assets
Liabilities assumed
(143 )
Total identifiable net assets
Goodwill
$
Inventory consisted primarily of flock, feed ingredients, packaging, and egg inventory. Flock inventory was valued at carrying
value as management believes that its carrying value best approximates its fair value. Feed ingredients, packaging and egg
inventory were all valued based on market prices as of September 30, 2023.
Property, plant and equipment were valued utilizing the cost approach which is based on replacement or reproduction costs of
the assets and subtracting any depreciation resulting from physical deterioration and/or functional or economic obsolescence.
Intangible assets consisted primarily of water rights within the property acquired. Water rights were valued using the sales
comparison approach.
Contingent consideration liability was recorded and represents potential future cash payment to the sellers contingent on the
acquired business meeting certain return on profitability milestones over a
three-year
acquisition. The fair value of the contingent consideration is estimated using a discounted cash flow model. Key assumptions and
unobservable inputs that require significant judgement used in the estimate include weighted average cost of capital, egg prices,
projected revenue and expenses over the period for which the contingent consideration is measured, and the probability
assessments with respect to the likelihood of achieving the forecasted projections. A range of potential outcomes cannot be
reasonably estimated due to market volatility of egg prices.
Goodwill represents the excess of the purchase price of the acquired business over the acquisition date fair value of the net assets
acquired. Goodwill recorded in connection with the Fassio acquisition is primarily attributable to improved efficiencies from
integrating the assets of Fassio with the operations of the Company. The Company recognized goodwill of $
of the acquisition.
50
Note 3 - Investment Securities Available -for-Sale
The following presents the Company’s investment securities available-for-sale as of June 1, 2024 and June 3, 2023 (in thousands):
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
$
$
$
$
June 3, 2023
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
$
$
$
$
Proceeds from the sales and maturities of available-for-sale securities were $
during fiscal 2024, 2023, and 2022, respectively. Gross realized gains for fiscal 2024, 2023, and 2022 were $
thousand, and $
and $
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 investment securities at June 1, 2024 are as follows (in thousands):
Estimated Fair Value
Within one year
$
1-5 years
Total
$
Note 4 - Fair Value Measures
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:
o
Quoted prices for similar assets or liabilities in active markets
o
Quoted prices for identical or similar assets in non-active markets
51
o
Inputs other than quoted prices that are observable for the asset or liability
o
Inputs derived principally from or corroborated by other observable market data
●
Level 3
to the fair value of the assets or liabilities
The disclosure of fair value of certain financial assets and liabilities recorded at cost are as follows:
Cash and cash equivalents, accounts receivable, and accounts payable:
short maturity of these instruments.
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 our financial assets and
liabilities that are required to be measured at fair value on a recurring basis as of June 1, 2024 and June 3, 2023 (in thousands):
June 1, 2024
Level 1
Level 2
Level 3
Balance
Investment securities available-for-sale
Municipal bonds
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
US government and agency obligations
Asset backed securities
Treasury bills
Total investment securities available-for-sale
measured at fair value
$
$
$
$
Liabilities
Contingent consideration
Total liabilities measured at fair value
$
$
$
$
June 3, 2023
Level 1
Level 2
Level 3
Balance
Investment securities available-for-sale
Municipal bonds
$
$
$
$
Commercial paper
Corporate bonds
Certificates of deposits
US government and agency obligations
Asset backed securities
Treasury bills
Total investment securities available-for-sale
measured at fair value
$
$
$
$
Investment securities – available-for-sale are all classified as Level 2 and consist of securities with maturities of three months or
longer when purchased. Observable inputs for these securities are yields, credit risks, default rates, and volatility.
Contingent consideration classified as Level 3 consists of the potential obligation to pay an earnout to the sellers of Fassio
contingent on the acquired business meeting certain return on profitability milestones over a
three-year
the date of the acquisition. The fair value of the contingent consideration is estimated using a discounted cash flow model. Key
assumptions and unobservable inputs that require significant judgement used in the estimate include weighted average cost of
capital, egg prices, projected revenue and expenses over the period for which the contingent consideration is measured, and the
probability assessments with respect to the likelihood of achieving the forecasted projections. See further discussion in
52
The following table shows the beginning and ending balances in fair value of the contingent consideration:
Fassio Contingent Consideration
Balance, June 4, 2023
Acquisition of Fassio
$
Fair value adjustments
Balance, June 1, 2024
$
Adjustments to the fair value of contingent consideration are recorded within selling, general and administrative expenses in the
consolidated statements of income.
Note 5 - Inventories
Inventories consisted of the following (in thousands):
June 1, 2024
June 3, 2023
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 June 1, 2024 and
June 3, 2023, consisted of approximately
layers, respectively.
The Company expensed amortization and mortality associated with the flocks to cost of sales as follows (in thousands):
June 1, 2024
June 3, 2023
May 28, 2022
Amortization
$
$
$
Mortality
Total flock costs charged to cost of sales
$
$
$
Note 6 - Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
June 1, 2024
June 3, 2023
Land and improvements
$
$
Buildings and improvements
Machinery and equipment
Construction-in-progress
Less: accumulated depreciation
$
$
Depreciation expense was $
and May 28, 2022, respectively.
Note 7 - Investment in Unconsolidated Entities
As of June 1, 2024 and June 3, 2023, the Company owned
% in Specialty Eggs, LLC (“Specialty Eggs”) and Southwest
Specialty Eggs, LLC (“Southwest Specialty Eggs”), which are accounted for using the equity method of accounting. Specialty
53
Eggs owns the Egg-Land’s Best franchise for most of Georgia and South Carolina, as well as a portion of western North Carolina
and eastern Alabama. Southwest Specialty Eggs owns the Egg-Land’s Best franchise for Arizona, southern California and Clark
County, Nevada (including Las Vegas).
Equity method investments are included in “Investments in unconsolidated entities” in the accompanying Consolidated Balance
Sheets and totaled $
Equity in income of unconsolidated entities of $
in the Consolidated Statements of Income for fiscal 2024, 2023, and 2022, respectively.
The consolidated financial information for the Company’s unconsolidated joint ventures was as follows (in thousands):
For the fiscal year ended
June 1, 2024
June 3, 2023
May 28, 2022
Net sales
$
$
$
Net income
Total assets
Total liabilities
Total equity
The following relates to the Company’s transactions with these unconsolidated affiliates (in thousands):
For the fiscal year ended
June 1, 2024
June 3, 2023
May 28, 2022
Sales to unconsolidated entities
$
$
$
Purchases from unconsolidated entities
Distributions from unconsolidated entities
June 1, 2024
June 3, 2023
Accounts receivable from unconsolidated entities
$
$
Accounts payable to unconsolidated entities
Note 8 - Goodwill and Other Intangible Assets
Goodwill and other intangibles consisted of the following (in thousands):
Other Intangibles
Franchise
Customer
Non-compete
Right of
Water
Total
Goodwill
rights
relationships
agreements
Use
rights
Trademark
intangibles
Balance May 28, 2022
$
$
$
$
$
$
$
$
Amortization
—
(1,657 )
(356 )
(152 )
(18 )
(51 )
(2,234 )
Balance June 3, 2023
Additions
Amortization
—
(1,627 )
(362 )
(134 )
(50 )
(2,173 )
Balance June 1, 2024
$
$
$
$
$
$
$
$
54
For the Other Intangibles listed above, the gross carrying amounts and accumulated amortization are as follows (in thousands):
June 1, 2024
June 3, 2023
Gross carrying
Accumulated
Gross carrying
Accumulated
amount
amortization
amount
amortization
Other intangible assets:
Franchise rights
$
$
(17,497 )
$
$
(15,870 )
Customer relationships
(2,292 )
(8,674 )
Non-compete agreements
(876 )
(742 )
Water rights *
—
—
Trademark
(365 )
(315 )
Total
$
$
(21,030 )
$
$
(25,601 )
* Water rights are an indefinite life intangible asset.
No significant residual value is estimated for these intangible assets. Aggregate amortization expense for fiscal years 2024, 2023,
and 2022 totaled $
The following table presents the total estimated amortization of intangible assets for the five succeeding years (in thousands):
For fiscal year
Estimated amortization expense
2025
$
2026
2027
2028
2029
Thereafter
Total
$
Note 9 - Employee Benefit Plans
The Company maintains a medical plan that is qualified under Section 401(a) of the Internal Revenue Code and is not subject to
tax under present income tax laws. The plan is funded by contributions from the Company and its employees. Under its plan, the
Company self-insures its portion of medical claims for substantially all full-time employees. The Company uses stop-loss
insurance to limit its portion of medical claims to $
incurred but not reported claims were approximately $
and 2022, respectively. The liability recorded for incurred but not reported claims was $
1, 2024 and June 3, 2023, respectively and are classified within “Accrued expenses and other liabilities” in the Company’s
Consolidated Balance Sheets.
The Company has a KSOP plan that covers substantially all employees (the “Plan”). The Company makes contributions to the
Plan at a rate of
% of participants’ eligible compensation, plus an additional amount determined at the discretion of the Board
of Directors. Contributions can be made in cash or the Company’s Common Stock, and vest immediately. The Company’s cash
contributions to the Plan were $
Company did
t make direct contributions of the Company’s Common Stock in fiscal years 2024, 2023, or 2022. Dividends on
the Company’s Common Stock are paid to the Plan in cash. The Plan acquires the Company’s Common Stock, which is listed on
the Nasdaq Global Select Market, by using the dividends and the Company’s cash contributions to purchase shares in the public
markets. The Plan sells Common Stock on the Nasdaq to pay benefits to Plan participants. Participants may make contributions
to the Plan up to the maximum allowed by Internal Revenue Service regulations. The Company does not match participant
contributions.
Deferred Compensation Plans
The Company has deferred compensation agreements with certain officers for payments to be made over specified periods
beginning when the officers reach age
upon deferred compensation earned over the estimated remaining service period of each officer. Payments made under these
agreements were $
55
related to these agreements was $
within “Other noncurrent liabilities” in the Company’s Consolidated Balance Sheets.
The Company sponsors an unfunded, non-qualified deferred compensation plan, which was amended and restated effective
December 1, 2021 (the “Amended DC Plan”) to expand eligibility for participation from named officers only to a select group of
management or highly compensated employees of the Company, expand the investment options available and add the ability of
participants to make elective deferrals. Participants may be awarded long-term incentive contributions (“Awards”) under the
Amended DC Plan. Awards vest on December 31
st
or, if earlier, the participant’s attainment of age
thousand, $
DC Plan were $
for the Amended DC Plan was $
and is classified within “Other noncurrent liabilities” in the Company’s Consolidated Balance Sheets.
Deferred compensation expense for both plans totaled $
and 2022, respectively.
Other Postretirement Employee Benefits
The Company maintains an unfunded postretirement medical plan to provide limited health benefits to certain qualified retired
employees and officers. Retired non-officers and spouses are eligible for coverage until attainment of Medicare eligibility, at
which time coverage ceases. Retired officers and spouses are eligible for lifetime benefits under the plan. Officers, who retired
prior to May 1, 2012 and their spouses must participate in Medicare Plans A and B. Officers, who retire on or after May 1, 2012
and their spouses must participate in Medicare Plans A, B, and D.
The plan is accounted for in accordance with ASC 715, Compensation – Retirement Benefits (“ASC 715”), whereby an employer
recognizes the funded status of a defined benefit postretirement plan as an asset or liability, and recognizes changes in the funded
status in the year the change occurs through comprehensive income. Additionally, this expense is recognized on an accrual basis
over the employees’ approximate period of employment. The liability associated with the plan was $
at June 1, 2024 and June 3, 2023, respectively. The remaining disclosures associated with ASC 715 are immaterial to the
Company’s financial statements.
Effective March 1, 2023, the Company adopted a non-qualified supplemental executive retirement plan (“SERP”) and a split
dollar life insurance plan (“Split Dollar Plan”) designed to provide deferred compensation and a pre-retirement death benefit for
a select group of management or highly compensated employees of the Company. Provided the vesting conditions are met,
participants in the SERP are eligible to receive an aggregate retirement benefit of $
, which is paid in annual installments
of $
. A participant becomes vested in the retirement benefit over
% per
year. If a participant becomes disabled, attains the retirement age of 65, or the Company experiences a change in control, vesting
will be accelerated to
%. If a participant dies while employed, he or she will not receive any benefits under the SERP, but
their beneficiaries will instead be entitled to the life insurance benefit provided under the Split Dollar Plan, which is $500,000.
The liability recorded for these plans was $
classified within “Other noncurrent liabilities” in the Company’s Consolidated Balance Sheets.
Note 10 - Credit Facility
For fiscal years 2024, 2023 and 2022, interest expense was $
primarily related to commitment fees on the Credit Facility described below.
On May 26, 2023, we entered into the First Amendment (the “Amendment”) to the Amended and Restated Credit Agreement,
dated November 15, 2021 (as amended, the “Credit Agreement”). The Amendment replaced the London Interbank Offered Rate
interest rate benchmark with the secured overnight financing rate as administered by the Federal Reserve Bank of New York or
a successor administrator of the secured overnight financing rate (“SOFR”). The Credit Agreement has a
five
-year term. The
Credit Agreement provides for a senior secured revolving credit facility (the “Credit Facility” or “Revolver”) in an initial
aggregate principal amount of up to $
credit and a $
consent of BMO Harris Bank N.A. (the “Administrative Agent”), an increase in the Credit Facility in the aggregate up to $
million by adding one or more incremental senior secured term loans or increasing one or more times the revolving commitments
under the Revolver.
56
fiscal 2023. The Company had $
2024.
The interest rate in connection with loans made under the Credit Facility is based on, at the Company’s election, either the
Adjusted Term SOFR Rate plus the Applicable Margin or the Base Rate plus the Applicable Margin. The “Adjusted Term SOFR”
means with respect to any tenor, the per annum rate equal to the sum of (i) Term SOFR as defined in the Credit Agreement plus
(ii)
% (10 basis points); provided, if Adjusted Term SOFR determined as provided above shall ever be less than the Floor,
then Adjusted Term SOFR shall be deemed to be the Floor. The “Floor” means the rate per annum of interest equal to
%.
The “Base Rate” means a fluctuating rate per annum equal to the highest of (a) the federal funds rate plus
% per annum, (b)
the prime rate of interest established by the Administrative Agent, and (c) the Adjusted Term SOFR for a
one
-month tenor plus
%. The “Applicable Margin” means
% to
% per annum for Base Rate Loans and
% to
% per annum for
SOFR Loans, in each case depending upon the Total Funded Debt to Capitalization Ratio for the Company at the quarterly pricing
date. The Company will pay a commitment fee on the unused portion of the Credit Facility payable quarterly from
% to
% in each case depending upon the Total Funded Debt to Capitalization Ratio for the Company at the quarterly pricing date.
The Credit Facility is guaranteed by all the current and future wholly -owned direct and indirect domestic subsidiaries of the
Company (the “Guarantors”), and is secured by a first-priority perfected security interest in substantially all of the Company’s
and the Guarantors’ accounts, payment intangibles, instruments (including promissory notes), chattel paper, inventory (including
farm products) and deposit accounts maintained with the Administrative Agent.
The Credit Agreement for the Credit Facility contains customary covenants, including restrictions on the incurrence of liens,
incurrence of additional debt, sales of assets and other fundamental corporate changes and investments. The Credit Agreement
requires maintenance of two financial covenants: (i) a maximum Total Funded Debt to Capitalization Ratio tested quarterly of no
greater than
%; and (ii) a requirement to maintain Minimum Tangible Net Worth at all times of $
% of net
income (if net income is positive) less permitted restricted payments for each fiscal quarter after November 27, 2021.
Additionally, the Credit Agreement requires that Fred R. Adams Jr.’s spouse, natural children, sons-in-law or grandchildren, or
any trust, guardianship, conservatorship or custodianship for the primary benefit of any of the foregoing, or any family limited
partnership, similar limited liability company or other entity that
% of the voting control of such entity is held by any of the
foregoing, shall maintain at least
% of the Company's voting stock. Failure to satisfy any of these covenants will constitute a
default under the terms of the Credit Agreement. Further, under the terms of the Credit Agreement, payment of dividends under
the Company's current dividend policy of one-third of the Company's net income computed in accordance with GAAP and
payment of other dividends or repurchases by the Company of its capital stock is allowed, as long as after giving effect to such
dividend payments or repurchases no default has occurred and is continuing and the sum of cash and cash equivalents of the
Company and its subsidiaries plus availability under the Credit Facility equals at least $
The Credit Agreement also includes customary events of default and customary remedies upon the occurrence of an event of
default, including acceleration of the amounts due under the Credit Facility and foreclosure of the collateral securing the Credit
Facility.
At June 1, 2024, we were in compliance with the covenant requirements of the Credit Facility.
Note 11 - Equity
The Company has
or the Company's Second Amended and Restated Certificate of Incorporation (“Restated Charter”), holders of shares of the
Company’s capital stock vote as a single class on all matters submitted to a vote of the stockholders, with each share of Common
Stock entitled to
of cumulative voting in the election of directors. The Common Stock and Class A Common Stock have equal liquidation rights
and the same dividend rights. In the case of any dividend payable in stock, holders of Common Stock are entitled to receive the
same percentage dividend (payable only in shares of Common Stock) as the holders of Class A Common Stock receive (payable
only in shares of Class A Common Stock). Upon liquidation, dissolution, or winding-up of the Company, the holders of Common
Stock are entitled to share ratably with the holders of Class A Common Stock in all assets available for distribution after payment
in full of creditors. The holders of Common Stock and Class A Common Stock are not entitled to preemptive or subscription
rights. No class of capital stock may be combined or subdivided unless the other classes of capital stock are combined or
subdivided in the same proportion. No dividend may be declared and paid on Class A Common Stock unless the dividend is
payable only to the holders of Class A Common Stock and a dividend is declared and paid to Common Stock concurrently.
Each share of Class A Common Stock is convertible, at the option of its holder, into
The Company’s Restated Charter identifies family members of Mr. Adams (“Immediate Family Members”) and arrangements
57
and entities that are permitted to receive and hold shares of Class A Common Stock, with
converting into shares of Common Stock, with one vote per share (“Permitted Transferees”). The Permitted Transferees include
arrangements and entities such as revocable trusts and limited liability companies that could hold Class A Common Stock for the
benefit of Immediate Family Members. Each Permitted Transferee must have a relationship, specifically defined in the Restated
Charter, with another Permitted Transferee or an Immediate Family Member. A share of Class A Common Stock transferred to
a person other than a Permitted Transferee would automatically convert into Common Stock with one vote per share. Additionally,
the Restated Charter includes a sunset provision pursuant to which all of the outstanding Class A Common Stock will
automatically convert to Common Stock if: (a) less than
beneficially owned by Immediate Family Members and/or Permitted Transferees, or (b) if less than
Common Stock and Common Stock, in the aggregate, are beneficially owned by Immediate Family Members and/or Permitted
Transferees.
Note 12 - Net Income per Common Share
Basic net income per share attributable to Cal-Maine Foods, Inc. is based on the weighted average Common Stock and Class A
Common Stock outstanding. Diluted net income per share attributable to Cal-Maine Foods, Inc. 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 attributable to Cal-Maine Foods, Inc. (amounts in thousands, except per share data):
June 1, 2024
June 3, 2023
May 28, 2022
Numerator
Net income
$
$
$
Less: Net loss attributable to noncontrolling interest
(1,606 )
(1,292 )
(209 )
Net income attributable to Cal-Maine Foods, Inc.
$
$
$
Denominator
Weighted-average common shares outstanding, basic
Effect of dilutive securities of restricted shares
Weighted-average common shares outstanding, diluted
Net income per common share attributable to Cal-Maine Foods, Inc.
Basic
$
$
$
Diluted
$
$
$
58
Note 13 - Revenue Recognition
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 eggs sales represent all other shell egg sales not sold as specialty shell eggs.
The Company’s egg products offering 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):
13 Weeks Ended
14 Weeks Ended
52 Weeks Ended
53 Weeks Ended
June 1, 2024
June 3, 2023
June 1, 2024
June 3, 2023
Conventional shell egg sales
$
$
$
$
Specialty shell egg sales
Egg products
Other
$
$
$
$
Our largest customer, Walmart Inc. (including Sam’s Club) accounted for
%,
% and
% of net sales dollars for fiscal
2024, 2023, and 2022, respectively.
Note 14 - Stock Compensation Plans
On October 2, 2020, shareholders approved the Amended and Restated Cal-Maine Foods, Inc. 2012 Omnibus Long-Term
Incentive Plan (the “LTIP Plan”). The purpose of the LTIP Plan is to assist us and our subsidiaries in attracting and retaining
selected individuals who are expected to contribute to our long-term success. The maximum number of shares of Common Stock
available for awards under the LTIP Plan is
authorized but unissued shares or treasury shares. Awards may be granted under the LTIP Plan to any employee, any non-
employee member of the Company’s Board of Directors, and any consultant who is a natural person and provides services to us
or one of our subsidiaries (except for incentive stock options, which may be granted only to our employees).
The only outstanding awards under the LTIP Plan are restricted stock awards. The restricted stock vests three years from the grant
date, or upon death or disability, change in control, or retirement (subject to certain requirements). The restricted stock contains
no other service or performance conditions. Restricted stock is awarded in the name of the recipient and, except for the right of
disposal, constitutes issued and outstanding shares of the Company’s Common Stock for all corporate purposes during the period
of restriction including the right to receive dividends. Compensation expense is a fixed amount based on the grant date closing
price and is amortized on a straight-line basis over the vesting period. Forfeitures are recognized as they occur.
Total stock-based compensation expense was $
respectively.
Our unrecognized compensation expense as a result of non-vested shares was $
June 3, 2023. The unrecognized compensation expense will be amortized to stock compensation expense over a period of
years.
59
A summary of our equity award activity and related information for our restricted stock is as follows:
Number of
Shares
Weighted Average Grant
Date Fair Value
Outstanding, May 28, 2022
$
Granted
Vested
(98,684 )
Forfeited
(9,989 )
Outstanding, June 3, 2023
$
Granted
Vested
(101,660 )
Forfeited
(1,329 )
Outstanding, June 1, 2024
$
Note 15 - Income Taxes
Income tax expense consisted of the following:
Fiscal year ended
June 1, 2024
June 3, 2023
May 28, 2022
Current:
Federal
$
$
$
State
Deferred:
Federal
(7,371 )
State
(2,301 )
(9,672 )
$
$
$
Significant components of the Company’s deferred tax liabilities and assets were as follows:
June 1, 2024
June 3, 2023
Deferred tax liabilities:
Property, plant and equipment
$
$
Inventories
Investment in affiliates
Other
Total deferred tax liabilities
Deferred tax assets:
Accrued expenses
State operating loss carryforwards
Other comprehensive income
Other
Total deferred tax assets
Net deferred tax liabilities
$
$
60
The differences between income tax expense at the Company’s effective income tax rate and income tax expense at the statutory
federal income tax rate were as follows:
Fiscal year end
June 1, 2024
June 3, 2023
May 28, 2022
Statutory federal income tax
$
$
$
State income taxes, net
Tax exempt interest income
(9 )
Reversal of outside basis in equity investment - Red River
(7,310 )
Non-taxable remeasurement gain - Red River
(955 )
Other, net
(262 )
$
$
$
As of June 1, 2024, we had
penalties related to uncertain tax positions.
We are subject to income tax in many jurisdictions within the U.S. We are currently not under audit by the Internal Revenue
Service or by any state and local tax authorities. Tax periods for all years beginning with fiscal year 2020 remain open to
examination by federal and state taxing jurisdictions to which we are subject.
Note 16 - Commitments and Contingencies
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 $
2020, the court granted the defendants’ motion to dismiss the State’s original petition with prejudice. On September 11, 2020,
the State filed a notice of appeal, which was assigned to the Texas Court of Appeals for the First District. On August 16, 2022,
the appeals court reversed and remanded the case back to the trial court for further proceedings. On October 31, 2022, the
Company and WCF appealed the First District Court’s decision to the Supreme Court of Texas. On September 29, 2023, the
Supreme Court of Texas denied the Company’s Petition for Review 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.
61
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 the defendants’ motion for a directed verdict noted below and appeals by the parties. During our
second fiscal quarter of 2024, we recorded an accrued expense of $
in the Company’s Condensed Consolidated Statements of Income and classified as other noncurrent liabilities in the Company’s
Condensed Consolidated Balance Sheets. The accrual represents our estimate of the Company’s proportional share of the
reasonably possible ultimate damages award, excluding the Egg Product Plaintiffs’ attorneys’ fees that we believe would be
approximately offset by the credits noted above. We have entered into a judgment allocation and joint defense agreement with
the other major producer defendant remaining in the case, and are in discussions with other defendants regarding their
contributions. Our accrual may change in the future based on the outcome of those discussions. Our accrual may also be revised
in whole or in part in the future to the extent we are successful in further proceedings in the litigation. On November 29, 2023,
the defendants, including the Company, filed a motion for judgment as a matter of law in their favor, known as a directed verdict,
notwithstanding the jury’s decision. The court has not ruled on this motion. The Company intends to continue to vigorously
defend the claims asserted by the Egg Products Plaintiffs.
State of Oklahoma Watershed Pollution Litigation
On June 18, 2005, the State of Oklahoma filed suit, in the United States District Court for the Northern District of Oklahoma,
against Cal-Maine Foods, Inc. and Tyson Foods, Inc., Cobb-Vantress, Inc., Cargill, Inc., George’s, Inc., Peterson Farms, Inc. and
Simmons Foods, Inc., and certain of their affiliates. The State of Oklahoma claims that through the disposal of chicken litter the
defendants polluted the Illinois River Watershed. This watershed provides water to eastern Oklahoma. The complaint sought
injunctive relief and monetary damages, but the claim for monetary damages was dismissed by the court. Cal-Maine Foods, Inc.
discontinued operations in the watershed in or around 2005. Since the litigation began, Cal-Maine Foods, Inc. purchased
%
of the membership interests of Benton County Foods, LLC, which is an ongoing commercial shell egg operation within the Illinois
River Watershed. Benton County Foods, LLC is not a defendant in the litigation. We also have a number of small contract
producers that operate in the area.
The non-jury trial in the case began in September 2009 and concluded in February 2010. On January 18, 2023, the court entered
findings of fact and conclusions of law in favor of the State of Oklahoma, but no penalties were assessed. The court found the
defendants liable for state law nuisance, federal common law nuisance, and state law trespass. The court also found the producers
vicariously liable for the actions of their contract producers. The court directed the parties to confer in attempt to reach agreement
on appropriate remedies. On June 12, 2023, the court ordered the parties to mediate before the retired Tenth Circuit Chief Judge
Deanell Reece Tacha. On October 26, 2023, the parties filed separate status reports informing the court that the mediation was
unsuccessful. Also on October 26, 2023, the defendants filed a post-trial motion to dismiss and supporting brief arguing that the
case should be dismissed due to the state record before the court, the resulting mootness of the case, and violation of due process.
On November 10, 2023, the State of Oklahoma filed its response in opposition to the motion to dismiss and on November 17,
2023, the defendants filed their reply. On June 26, 2024, the district court denied defendants’ motion to dismiss. While
management believes there is a reasonable possibility of a material loss from the case, at the present time, it is not possible to
estimate the amount of monetary exposure, if any, to the Company due to a range of factors, including the following, among
others: uncertainties inherent in any assessment of potential costs associated with injunctive relief or other penalties based on a
decision in a case tried over 13 years ago based on environmental conditions that existed at the time, the lack of guidance from
the court as to what might be considered appropriate remedies, the ongoing litigation with the State of Oklahoma and motion to
dismiss before the court, and uncertainty regarding what our proportionate share of any remedy would be, although we believe
that our share compared to the other defendants is small.
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.
62
Note 17 – Subsequent Events
Effective on
, the Company acquired substantially all the assets of ISE America, Inc. and certain of its affiliates,
related to their commercial shell egg production and processing facilities with a capacity at the time of acquisition of
approximately
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. The purchase price was approximately $
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Fiscal Years ended June 1, 2024, June 3, 2023, and May 28, 2022
(in thousands)
Description
Balance at
Beginning of Period
Charged to Cost
and Expense
Write-off
of Accounts
Balance at
End of Period
Year ended June 1, 2024
Allowance for credit losses
$
$
$
$
Year ended June 3, 2023
Allowance for credit losses
$
$
(148 )
$
$
Year ended May 28, 2022
Allowance for credit losses
$
$
$
$
63
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. 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 Securities Exchange Act of 1934, as amended (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 June 1, 2024 at the reasonable assurance level.
Internal Control Over Financial Reporting
(a) Management’s Report on Internal Control Over Financial Reporting
The following sets forth, in accordance with Section 404(a) of the Sarbanes-Oxley Act of 2002 and Item 308 of the Securities
and Exchange Commission’s Regulation S-K, the report of management on our internal control over financial reporting.
1.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
“Internal control over financial reporting” is a process designed by, or under the supervision of, our Chief Executive
Officer and Chief Financial Officer, together with other financial officers, and effected by our Board of Directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:
●
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of our assets;
●
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and
expenditures are being made only in accordance with authorizations of our management and directors; and
●
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the financial statements.
2. Our management, in accordance with Rule 13a-15(c) under the Exchange Act and with the participation of our
Chief Executive Officer and Chief Financial Officer, together with other financial officers, evaluated the
effectiveness of our internal control over financial reporting as of June 1, 2024. The framework on which
management’s evaluation of our internal control over financial reporting is based is the “Internal Control –
Integrated Framework”
published in 2013 by the Committee of Sponsoring Organizations (“COSO”) of the
Treadway Commission.
3. Management has determined that our internal control over financial reporting as of June 1, 2024 is effective. It is
noted that internal control over financial reporting cannot provide absolute assurance of achieving financial
reporting objectives, but rather reasonable assurance of achieving such objectives.
4. The attestation report of FROST, PLLC on our internal control over financial reporting, which includes that firm’s
opinion on the effectiveness of our internal control over financial reporting, is set forth below.
(b) Attestation Report of the Registrant’s Public Accounting Firm
64
Report of Independent Registered Public Accounting Firm
on Internal Control Over Financial Reporting
Board of Directors and Stockholders
Cal-Maine Foods, Inc. and Subsidiaries
Ridgeland, Mississippi
Opinion on Internal Control Over Financial Reporting
We have audited Cal-Maine Foods, Inc. and Subsidiaries’ internal control over financial reporting as of June 1, 2024,
based on criteria established in 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). In our opinion, Cal-Maine Foods, Inc. and Subsidiaries maintained, in
all material respects, effective internal control over financial reporting as June 1, 2024, based on criteria established in 2013
Internal Control – Integrated Framework issued by the COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the consolidated balance sheets and the related consolidated statements of income, comprehensive income,
stockholders’ equity, and cash flows of Cal-Maine Foods, Inc. and Subsidiaries and our report dated July 23, 2024 expressed an
unqualified opinion.
Basis for Opinion
Cal-Maine Foods, Inc. and Subsidiaries’ management is responsible for maintaining effective internal control over
financial reporting, and for their assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control Over Financial Reporting in Item 9A. Our responsibility is to express
an opinion on the entities’ internal control over financial reporting based on our audit. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to Cal-Maine Foods, Inc. and Subsidiaries in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCOAB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained
in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures
as we considered necessary in the circumstances. We believe our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America. An entities’ internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the entities; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America, and that receipts and expenditures of the entities are being made only in
accordance with authorizations of management and directors of the entities; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the entities’ assets that could have a material
effect on the consolidated financial statements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
July 23, 2024
65
(c) Changes in Internal Control Over Financial Reporting
In connection with its evaluation of the effectiveness, as of June 1, 2024, of our internal control over financial reporting,
management determined that there was no change in our internal control over financial reporting that occurred during the fourth
quarter ended June 1, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
ITEM 9B. OTHER INFORMATION
On July 23, 2024, our Board of Directors (“Board”) approved and adopted, effective as of July 23, 2024, the Company’s Amended
and Restated Bylaws (as amended and restated, the “Bylaws”). The amendments to the Bylaws, among other things:
●
Modify the Bylaws to more closely align with the current Delaware General Corporation Law (the “DGCL”) and current
practices, including provisions related to meetings held by remote communications, accessing the stockholder list,
providing for consents, notices and other communications by means of electronic transmission, addressing uncertificated
shares, adding that a determination whether indemnification is proper may also be made by a committee of non-party
directors even though less than a quorum, and deleting the requirement for an “Annual Statement” at the annual meeting
of stockholders.
●
Add the Chairman of the Board as a person entitled to call a special meeting of stockholders and specify that the
Chairman of the Board, or such other person designated by him or the Board, will preside at stockholders’ meetings.
●
Amend Article VII to make advancement of expenses (including attorneys’ fees) incurred by current and former directors
and officers in defending actions, suits or proceedings against them mandatory (subject to their delivery of an
undertaking to repay if it is ultimately determined that they are not entitled to be indemnified), and to provide that the
indemnification and expense advancement rights in the bylaws are not the exclusive means by which a person could be
entitled to such rights.
●
Add new Article VIII to provide that, unless the Company consents in writing to the selection of an alternative forum,
the Court of Chancery of the State of Delaware (or if such court does not have subject matter jurisdiction another state
or federal court (as appropriate) located within the State of Delaware) shall, to the fullest extent permitted by law, be the
sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company; (ii) any action
asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee, or
stockholder of the Company to the Company or its stockholders, creditors or other constituents; (iii) any action asserting
a claim against the Company or any current or former director, officer, employee, or stockholder of the Company arising
pursuant to any provision of the DGCL or the certificate of incorporation or the bylaws (as they may be amended and/or
restated from time to time) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of
Delaware; or (iv) any action asserting a claim governed by the internal affairs doctrine. A stockholder bringing any such
action will be deemed to have consented to the personal jurisdiction of the state and federal courts located within the
State of Delaware and to service of process on such stockholder’s counsel in such action as agent for such stockholder.
To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring or holding any interest in
shares of capital stock of the Company shall be deemed to have notice of and consented to the provisions of this
paragraph.
In addition, certain other technical, ministerial, clarifying and conforming changes were made to the Bylaws. The foregoing
description of the amendments to the Company’s Bylaws is not intended to be complete and is qualified in all respects by reference
to the text of the Bylaws, a copy of which is filed as Exhibit 3.2 to this Annual Report on Form 10-K and is incorporated herein
by reference.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Except as set forth below, the information concerning directors, executive officers and corporate governance required by Item 10
is incorporated by reference from our definitive proxy statement which is to be filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934 in connection with our 2024 Annual Meeting of Shareholders.
66
We have adopted a Code of Ethics and Business Conduct that applies to our directors, officers and employees, including the chief
executive officer and principal financial and accounting officers of the Company. We will provide a copy of the code free of
charge to any person that requests a copy by writing to:
Cal-Maine Foods, Inc.
1052 Highland Colony Pkwy, Suite 200
Ridgeland, MS 39157
Attn.: Investor Relations
Requests can be made by phone at (601) 948-6813.
A copy is also available at our website www.calmainefoods.com under the heading “Investor Relations – Corporate
Governance.” We intend to disclose any amendments to, or waivers from, the Code of Ethics and Business Conduct on our
website promptly following the date of any such amendment or waiver. Information contained on our website is not a part of this
report.
ITEM 11. EXECUTIVE COMPENSATION
The information concerning executive compensation required by Item 11 is incorporated by reference from our definitive proxy
statement which is to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 in connection with our 2024
Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information concerning security ownership of certain beneficial owners and management and related stockholder matters
required by Item 12 is incorporated by reference from our definitive proxy statement which is to be filed pursuant to Regulation
14A under the Securities Exchange Act of 1934 in connection with our 2024 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information concerning certain relationships and related transactions, and director independence required by Item 13 is
incorporated by reference from our definitive proxy statement which is to be filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934 in connection with our 2024 Annual Meeting of Shareholders.
ITEM 14. PRINCIPAL ACCOUNT ANT FEES AND SERVICES
The information concerning principal accountant fees and services required by Item 14 is incorporated by reference from our
definitive proxy statement which is to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 in
connection with our 2024 Annual Meeting of Shareholders.
PART IV.
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
67
The following consolidated financial statements and notes thereto of Cal-Maine Foods, Inc. and subsidiaries are included in Item
8 and are filed herewith:
)
(a)(2) Financial Statement Schedule
All other schedules are omitted either because they are not applicable or required, or because the required information is included
in the financial statements or notes thereto.
(a)(3) Exhibits Required by Item 601 of Regulation S-K
See Part (b) of this Item 15.
68
(b) Exhibits Required by Item 601 of Regulation S-K
The following exhibits are filed herewith or incorporated by reference:
Exhibit
Number
Exhibit
3.1
3.2**
4.1**
10.1
10.2*
10.3
10.4
10.5*
10.6*
10.7*
10.8*
Form of Restricted Stock Agreement for Amended and Restated Cal-Maine Foods, Inc. 2012 Omnibus Long-
10.9*
10.10*
19.1**
21**
23.1**
31.1**
31.2**
32***
97**
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)
* Management contract or compensatory plan or arrangement
** Filed herewith as an Exhibit
*** Furnished herewith as an Exhibit
† Submitted electronically with this Annual Report on Form 10-K
(c) Financial Statement Schedules Required by Regulation S-X
The financial statement schedule required by Regulation S-X is filed at page 62. All other schedules for which provision is made
in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions
or are inapplicable and therefore have been omitted.
69
ITEM 16. FORM 10-K SUMMARY
None.
70
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in Ridgeland, Mississippi.
CAL-MAINE FOODS, INC.
/s/ Sherman L. Miller
Sherman L. Miller
President and Chief Executive Officer
Date:
July 23, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Sherman L. Miller
President, Chief Executive Officer
July 23, 2024
Sherman L. Miller
and Director
(Principal Executive Officer)
/s/ Max P. Bowman
Vice President, Treasurer, Secretary,
July 23, 2024
Max P. Bowman
Chief Financial Officer and Director
(Principal Financial Officer)
/s/ Matthew S. Glover
Vice President, Accounting
July 23, 2024
Matthew S. Glover
(Principal Accounting Officer)
/s/ Adolphus B. Baker
Chairman of the Board and Director
July 23, 2024
Adolphus B. Baker
/s/ Letitia C. Hughes
Director
July 23, 2024
Letitia C. Hughes
/s/ James E. Poole
Director
July 23, 2024
James E. Poole
/s/ Steve W. Sanders
Director
July 23, 2024
Steve W. Sanders
/s/ Camille S. Young
Director
July 23, 2024
Camille S. Young