Cal-Maine Foods Inc.
Cal-Maine Foods Inc.
22/07/2025 | Press release | Distributed by Public on 23/07/2025 02:22
Annual Report for Fiscal Year Ending 05-31, 2025 (Form 10-K)
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
Part I. Item 1A. Risk
Factors
. 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
Part I. Item 1A.
Risk Factors
and
to
the
information
set
forth
in
the
section
of
Part
I
immediately preceding
Item
1
above
under
the
caption
"
Forward-Looking Statements
."
COMPANY OVERVIEW
Cal-Maine Foods, Inc. 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,
as
well
as
egg
products and a variety of prepared
foods. Our fiscal year end is
the Saturday closest to May 31. The fiscal
years 2025 and 2024
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
2025,
we
sold
approximately
1.3 billion dozen shell
eggs, which we
believe represented approximately
24% of domestic
shell egg consumption.
Our total flock
as of May 31, 2025 of
approximately 48.3 million layers and 11.5
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 operating and one
reportable segment, which is the production, packaging, marketing and
distribution of
shell eggs, egg products
and prepared foods. Many of
our customers rely on
us to provide most
of their shell egg
needs, including
specialty and
conventional eggs. We
have recently
expanded our
prepared foods
product offerings,
as described
in this
report.
For further description of our business, refer to
Part I. Item I. Business
.
ACQUISITIONS
During the
first quarter
of fiscal
2025, we
acquired substantially
all the
commercial shell
egg production,
processing and
egg
products breaking assets of ISE America, Inc. and certain of its
affiliates ("ISE"). The assets acquired included commercial shell
egg
production
and
processing
facilities
with
a
capacity
at
the
time
of
acquisition of
approximately 4.7
million
laying
hens,
including 1.0
million cage-free,
and 1.2
million pullets,
feed mills,
approximately 4,000
acres of
land, inventories
and an
egg
products breaking facility. The acquired assets also include an extensive customer distribution network across the Northeast and
Mid-Atlantic states, and production operations in Maryland, New Jersey, Delaware and South Carolina. These production assets
are our first in Maryland, New Jersey and Delaware. We believe this acquisition provides us with an opportunity to significantly
enhance our market reach in the Northeast and Mid-Atlantic states.
During the second
quarter of fiscal
2025, we completed
a strategic investment
with Crepini LLC,
establishing a new
egg products
and prepared foods venture. Crepini LLC, founded in 2007, grew its brand throughout
the U.S. and Mexico featuring egg wraps,
protein pancakes, crepes,
and wrap-ups, which
are sold online
and in over
3,500 retail stores.
The new entity, located in
Hopewell
Junction, New
York,
operates as
Crepini Foods
LLC ("Crepini").
We
capitalized Crepini with
approximately $6.75
million in
cash
to
purchase
additional
equipment
and
other
assets
and
fund
working
capital
in
exchange
for
a
51%
interest
in
the
new
venture. Crepini LLC contributed its existing assets and business in exchange for a 49% interest in the new venture.
In fiscal 2022,
we announced a
strategic investment in
a new entity, MeadowCreek Food,
LLC ("MeadowCreek"), which
became
a majority-owned subsidiary of
the Company.
During the fourth quarter
of fiscal 2023,
MeadowCreek began operations with
a
focus on
being a
leading provider
of hard-cooked
eggs. During
the second
quarter of
fiscal 2025,
we acquired
the remaining
ownership interests in MeadowCreek and it became a wholly-owned subsidiary of the Company.
During the
third quarter
of fiscal
2025, we
acquired certain
assets of
Deal-Rite Foods,
Inc. and
certain of
its affiliates
("Deal-
Rite"). The assets acquired included two feed mills, storage facilities, usable
grain, vehicles, related equipment and a retail feed
sales business located
in North
Carolina. The acquired
assets will produce
and deliver feed
to our nearby
shell egg production
operations.
In the second quarter of
fiscal 2024, we acquired the
assets of Fassio Egg Farms,
Inc. ("Fassio") related to its
commercial shell
egg production and
processing business. Fassio
owned and operated
commercial shell egg
production and processing
facilities
with a
capacity at
the time
of acquisition
of approximately
1.2 million
laying hens,
primarily cage-free,
a feed
mill, pullets,
a
fertilizer production and composting operation and land located in Erda, Utah, outside Salt Lake City. This acquisition provided
us with an opportunity to expand our market presence in Utah and the western U.S., particularly for cage-free eggs.
In the fourth quarter of fiscal 2024, we acquired a broiler processing
plant, hatchery and feed mill in Dexter, Missouri, which we
repurposed for use in shell egg production.
For additional discussion of our
acquisitions during fiscal 2024 and 2025,
see
Note 2 - Acquisitions
in Part II. Item 8.
Notes to
Consolidated Financial Statements.
In addition, subsequent to our fiscal 2025, the Company acquired Echo Lake Foods, LLC (formerly Echo Lake Foods, Inc.) and
certain related companies (collectively "Echo Lake Foods"). Echo Lake
Foods is based in Burlington, Wisconsin
and produces,
packages,
markets
and
distributes
prepared
foods,
including
waffles,
pancakes,
scrambled
eggs,
frozen
cooked
omelets,
egg
patties, toast and diced
eggs. The purchase price
was approximately $258 million
and was funded with
available cash on hand.
Refer to
Part II. Item 8. Notes to the Consolidated Financial Statements, Note 17 - Subsequent Events
.
HPAI
Outbreaks of HPAI
have continued
to occur
in U.S. poultry
flocks. 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.
Thereafter,
there were
no HPAI
cases affecting
commercial layers
until November
2023. In
calendar year
2024, 40.2
million
commercial
layer
hens
and
pullets
were
depopulated
due
to
HPAI,
and
in
calendar
year
2025,
an
additional
39.0
million
commercial layer hens
and pullets
were depopulated
through May
due to
HPAI.
The United
States Department of
Agriculture
(the "USDA") reported that the
estimated table-egg layer flock as of
June 1, 2025 was approximately
285.5 million, compared to
304.3 million, 321.6 million, 311.5 million and 330.5 million as of June 1, 2024, 2023, 2022 and 2021, respectively.
HPAI is currently widespread in the wild bird population
worldwide. We remain dedicated to robust biosecurity programs
across
our locations and have invested more than $75 million in biosecurity
technology, equipment, procedures, and training across our
locations since the
last major HPAI
outbreak in 2015.
However, no
farm is immune
from HPAI.
For example, during
the third
and fourth quarters of fiscal 2024, we experienced
HPAI
outbreaks within our facilities located in Kansas and
Texas, which are
now fully operational. According
to the U.S. Centers
for Disease Control and
Prevention ("CDC"), as of
June 5, 2025, there
were
outbreaks in
1,073 herds
of dairy
cows in
17 states,
and 70
human cases
in the
U.S., almost
entirely among
poultry and
dairy
workers. In
2024, one
of the
human cases
resulted in
severe illness
after the
patient was
exposed to
sick and
dead birds
in backyard
flocks. The patient, who
was reported to have
underlying health conditions, died in
January 2025. There have been
no reported
cases
of
person-to-person
spread.
According
to
the
CDC,
the
human
health
risk
to
the
U.S.
public
from
the
HPAI
virus
is
considered to be low. The rate of depopulations slowed during our fourth quarter fiscal 2025 compared to our
third quarter fiscal
2025 and there
were no reported
significant depopulations in
June and through
July 22, 2025.
However, the
extent of possible
future outbreaks among U.S.
commercial egg layer
flocks, with heightened risk
during migration seasons, cannot
be predicted.
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
Part I. Item 1A. Risk Factors
.
We
have taken proactive
steps to help
mitigate the tight
egg supply situation
across the country.
Our efforts
resulted in a
18%
increase in
the average
number of
layer hens
(reflecting re-start
of prior
year facility
outages and
both organic
and inorganic
expansion) and a 56% increase
in total chicks hatched during
the fourth quarter of
fiscal 2025 compared to
the prior-year quarter.
Our breeder flocks increased 48% as of the end of
fiscal 2025 compared to the end of fiscal 2024. We
also continue to invest in
expansion projects
within our
current operations
that are
expected to
add approximately
1.1 million
cage-free layer
hens and
250,000 pullets by
the end of
calendar 2025, and
added production support
through the integration
of recently acquired
assets,
including the processing facilities from ISE and feed mills from Deal-Rite.
Executive Overview of Results - Fiscal Years Ended May 31, 2025, June 1, 2024 and June 3, 2023
Fiscal Year Ended
May 31, 2025
June 1, 2024
June 3, 2023
Net sales (in thousands)
$
4,261,885
$
2,326,443
$
3,146,217
Gross profit (in thousands)
$
1,850,885
$
541,571
$
1,196,457
Net income attributable to Cal-Maine Foods, Inc.
$
1,220,048
$
277,888
$
758,024
Net income per share attributable to Cal-Maine Foods, Inc.
Basic
$
25.04
$
5.70
$
15.58
Diluted
$
24.95
$
5.69
$
15.52
Net average shell egg price
(a)
$
3.134
$
1.932
$
2.622
Average UB Southeast Region - Shell Eggs - White Large
$
4.474
$
2.049
$
3.115
Feed costs per dozen produced
$
0.490
$
0.550
$
0.676
(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 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
were 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.
For fiscal 2025, we recognized net sales of $4.3 billion and net income of $1.2 billion. We recorded a gross profit of $1.9 billion
compared to $541.6
million for
fiscal 2024, primarily
driven by an
increase in the
net average selling
price of shell
eggs, primarily
conventional egg prices, as well
as an increase in total
dozens sold. Our results were
also positively impacted by lower
feed costs
and our
recent acquisitions
discussed above,
and were
partially offset
by an
increase in
the volume
and price
of outside
egg
purchases.
Our net average selling price
per dozen for fiscal 2025
was $3.134 compared to $1.932
in fiscal 2024. Conventional egg
prices
per dozen were
$3.490 compared to
$1.730 for the
prior year, and specialty
egg prices per
dozen were $2.519
compared to $2.309
for the
prior year.
Egg prices
in fiscal
2025 were
elevated compared
to fiscal
2024, primarily
due to
the resurgence
of HPAI
outbreaks, which decreased supply during
the higher seasonal demand
cycle. According to the
USDA, the size of
the layer hen
flock was 285.5 million hens
at June 1, 2025, compared
to the five-year average of
313.1 million hens. The daily average
price
for the Urner Barry southeast large index for fiscal 2025 increased 118.3%
from fiscal 2024.
Our dozens sold
for fiscal 2025
increased 11.8%
compared to fiscal
2024. We
had an
increase in production
capacity with the
acquisitions of
the commercial
shell egg
production and
processing business
of ISE
during the
first quarter
of fiscal
2025. In
addition, sales increased in part due to increased volumes of outside egg purchases to provide shell
eggs to our customers during
the peak of HPAI outbreaks during the second and third quarters of fiscal 2025.
Our feed costs per dozen
produced decreased to $0.490 in
fiscal 2025, compared to $0.550
in fiscal 2024. For fiscal
year 2025,
the average Chicago Board
of Trade
("CBOT") daily market price
was $4.38 per bushel
for corn and $311
per ton for soybean
meal, representing decreases of 8.1% and 20.1%, respectively,
compared to the daily average CBOT prices for
fiscal 2024. Our
egg purchases and other cost of sales increased $439.4 million compared to fiscal 2024,
primarily due to higher shell egg prices
as well
as an
increase in
dozens purchased
to supply
eggs for
our customers,
including those
acquired in
our ISE
acquisition,
during the higher seasonal demand cycle while the nation experienced lower supply due to HPAI.
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
May 31, 2025
June 1, 2024
Net sales
100.0
%
100.0
%
Cost of sales
56.6
%
76.7
%
Gross profit
43.4
%
23.3
%
Selling, general and administrative
7.4
%
10.9
%
Gain on involuntary conversions
-
%
(1.0)
%
Operating income
36.0
%
13.4
%
Total other income
1.6
%
2.0
%
Income before income taxes
37.6
%
15.4
%
Income tax expense
9.0
%
3.6
%
Net income
28.6
%
11.8
%
Less:
Net loss attributable to noncontrolling interest
-
%
(0.1)
%
Net income attributable to Cal-Maine Foods, Inc.
28.6
%
11.9
%
Fiscal Year
Ended May 31, 2025 Compared to Fiscal Year Ended June 1, 2024
NET SALES
Total net sales for fiscal 2025 were $4.3 billion compared to $2.3 billion for the prior fiscal year.
Shell egg sales represented
94.3% and 95.3% of
total net sales in
fiscal 2025 and 2024,
respectively. The
Company's shell
egg
offerings, for both branded and
private-label products, include specialty
and conventional shell eggs.
Specialty shell eggs include
cage-free,
organic,
brown,
free-range,
pasture-raised
and
nutritionally
enhanced
shell
eggs.
Conventional
shell
eggs
sales
represent all
other shell
egg sales
not sold
as specialty
shell eggs.
The Company's
egg products
and prepared
foods offerings
include liquid and
frozen egg products
and prepared foods
such as hard-cooked
eggs, egg wraps,
protein pancakes, crepes
and
wrap-ups. Other sales represent feed sales, miscellaneous byproducts and resale products.
The table below presents net sales in key categories (in thousands, except percentage data):
Fiscal Year Ended
May 31,
2025
June 1, 2024
% Change
Shell Eggs
$
4,019,910
$
2,217,408
81.3
%
Egg products and prepared foods
198,833
89,009
123.4
Other
43,142
20,026
115.4
Total net sales
$
4,261,885
$
2,326,443
83.2
%
The table below presents an analysis of our shell egg sales (in thousands, except percentage data):
May 31, 2025
June 1, 2024
Shell egg sales
Conventional
$
2,835,423
70.5
%
$
1,291,743
58.3
%
Specialty
1,184,487
29.5
%
925,665
41.7
%
Total shell egg sales
4,019,910
100.0
%
2,217,408
100.0
%
Dozens sold
Conventional
812,396
63.3
%
746,687
65.1
%
Specialty
470,215
36.7
%
400,946
34.9
%
Total dozens sold
1,282,611
100.0
%
1,147,633
100.0
%
Net average selling price per dozen
Conventional
$
3.490
$
1.730
Specialty
$
2.519
$
2.309
All shell eggs
$
3.134
$
1.932
Shell egg sales
-
For
fiscal
2025,
shell
egg
sales
increased
$1.8
billion
compared
to
fiscal
2024,
primarily
due
to
the
increase
in
net
average selling prices for conventional eggs, and to a lesser extent the increase in dozens sold.
-
For fiscal 2025, conventional egg sales increased $1.5 billion, or 119.5%, compared to fiscal 2024, primarily due to the
increase
in
conventional
egg
prices.
Changes in
price resulted
in
a $1.4
billion
increase in
net
sales and
changes
in
volume resulted
in a
$114
million increase
in net
sales. Conventional
egg prices
increased significantly
during fiscal
2025 due to a resurgence of HPAI outbreaks, which decreased the supply.
-
Specialty egg
sales increased
$258.8 million,
or 28.0%,
for fiscal
2025 compared
to fiscal
2024, primarily
due to a
17.3%
increase in
the volume
of specialty
dozens sold,
and to
a lesser
extent a
9.1% increase
in price.
Changes in
volume
resulted in a $159.9 million increase in net sales and changes in price resulted in a $98.7 million increase in net sales.
-
Our dozens sold
for fiscal 2025
increased 11.8%
compared to fiscal
2024. We
had an
increase in production
capacity
with the acquisition
of the commercial
shell egg production
and processing business
of ISE during
the first quarter
of
fiscal 2025 as well as the resumption of full operations at our facilities in Chase, KS, and Farwell, TX, which were shut
down in the third and fourth quarters of fiscal 2024 due to HPAI outbreaks.
Egg products and prepared foods sales
-
Egg products and prepared foods sales increased $109.8 million, or 123.4% compared to fiscal 2024, primarily due to a
138.7% increase in sales of liquid eggs, which had a $54.9
million positive impact on net sales, and a 41.4% increase in
volume of liquid egg products sold.
The increase in volume, which had a
$23.3 million positive impact on net
sales, is
primarily related to the acquisition of ISE, which included a breaking facility.
-
Our egg products net average selling price increased in fiscal 2025, compared to fiscal 2024 as the supply of shell eggs
used to produce egg products decreased due to the resurgence of HPAI outbreaks.
-
Sales from hard-cooked eggs increased
$22.7 million or 137.3% to 39.1
million in fiscal 2025, compared to
fiscal 2024,
as more processing capabilities came online throughout fiscal 2025 from our investments in MeadowCreek.
Other
-
Other sales increased compared to
the prior year period primarily
due to higher feed sales
related to our ISE acquisition.
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 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
May 31, 2025
June 1, 2024
% Change
Cost of Sales
Farm production
$
1,035,638
$
987,861
4.8
%
Processing, packaging, and warehouse
396,116
335,949
17.9
Egg purchases and other cost of sales
819,619
380,200
115.6
Egg products and prepared foods
159,627
80,862
97.4
Total cost of sales
$
2,411,000
$
1,784,872
35.1
%
Farm production costs (per dozen produced)
Feed
$
0.490
$
0.550
(10.9)
%
Other
$
0.428
$
0.433
(1.2)
%
Total farm production cost
$
0.918
$
0.983
(6.6)
%
Outside egg purchases (average cost per dozen)
$
3.67
$
2.16
69.9
%
Dozens produced
1,135,955
1,018,835
11.5
%
Percent produced to sold
88.6%
88.8%
(0.2)
%
Farm Production
-
Feed costs
per dozen
produced decreased
10.9% in
fiscal 2025
compared to
fiscal 2024,
primarily due
to lower
feed
ingredient prices. The decrease in feed cost per dozen
resulted in a decrease in cost of sales of
$68.2 million compared
to the prior year.
-
For fiscal 2025, the average daily CBOT market price was $4.38 per bushel for corn and $311 per ton of soybean meal,
representing decreases of 8.1% and 20.1%, respectively, as compared to the average daily CBOT prices for fiscal 2024.
-
Other farm production costs per dozen produced decreased primarily due to lower flock amortization. Feed costs
reached their peak in the second quarter of fiscal 2023 and have since trended downward. Lower costs resulted in
lower capitalized values of the flocks during the grow out phase, which reduced amortization cost over time.
Current indications for corn
and soybean project
a neutral stocks-to-use ratio
in the near term
compared with the levels
prevailing
today; 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 increased
primarily due to
an 11.7%
increase in the
volume of processed
dozens as well as an increase in costs of packaging materials.
Egg purchases and other cost of sales
-
Costs in
this category
increased primarily due
to higher
shell egg
prices as
the average
cost per
dozen of
outside egg
purchases increased 69.9%
compared to fiscal
2024, as well
as due to an
increase of 27.6%
in dozens purchased.
Dozens
purchased increased due
to purchasing more
eggs to supply
our customers while
the nation experienced
lower supply
due to HPAI.
GROSS PROFIT
Gross
profit,
as
a
percentage
of
net
sales,
was
43.4%
for
fiscal
2025,
compared
to
23.3%
for
fiscal
2024.
The
increase
was
primarily due to higher net average selling
prices, particularly for conventional eggs, and higher volumes,
as well as lower feed
ingredient prices, partially offset by the increase in volume and price of outside egg purchases.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative ("SGA")
expenses include costs of delivery, marketing, and
other general and administrative
expenses. Delivery expense includes contract trucking expense
and all costs to maintain and operate
our fleet of trucks to deliver
products to
customers including
the related
payroll expenses.
Marketing expense
includes franchise
fees that
are submitted
to
Eggland's Best, Inc. ("EB") 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
May 31, 2025
June 1, 2024
$ Change
% Change
Delivery expense
$
93,460
$
72,742
$
20,718
28.5
%
Marketing expense
53,861
52,285
1,576
3.0
%
Litigation loss contingency accrual
-
19,648
(19,648)
N.M.
%
Other general and administrative expenses
167,128
107,950
59,178
54.8
%
Total
$
314,449
$
252,625
$
61,824
24.5
%
N.M. - Not Meaningful
Delivery expense
-
The increased delivery expense is primarily due to an increase
in our sales volumes of egg and egg products
compared
to fiscal 2024.
Contract trucking
expenses increased
in connection
with our
acquisition of
ISE and our
facilities in
Chase,
KS and Farwell, TX being fully operational in fiscal year 2025.
Marketing expense
-
Marketing expense increased
slightly in fiscal
2025 compared to
fiscal 2024 primarily
due to an
increase in franchise
fees as specialty sales increased.
Litigation loss contingency accrual
-
In the second quarter of fiscal 2024, we accrued a $19.6 million loss contingency relating to a jury decision returned in
pending anti-trust
litigation. See
further discussion
in
Note 16 - Commitments and Contingencies
of Part
II. Item
8.
Notes to Consolidated Financial Statements.
Other general and administrative expenses
-
The increase
in other
general and
administrative expense
is primarily
due both
to an
increase in
the accrual
for anticipated
employee bonuses
and to
a $15
million increased
adjustment to
the fair
value of
contingent consideration
associated
with the
Fassio acquisition.
See further
discussion in
Note 4 - Fair Value Measurements
of Part
II. Item
8. Notes
to
Consolidated Financial Statements.
(GAIN) LOSS ON INVOLUNTARY
CONVERSIONS
For fiscal 2025
and 2024, we
recorded a loss
of $156 thousand
and gain of
$23.5 million, respectively. The gain
recorded in fiscal
2024 was due
to recoveries
under indemnity
and insurance
programs that exceeded
the amortized
book value
of the covered
assets
and our direct costs, primarily related to the HPAI outbreaks
at our Kansas and Texas facilities.
OPERATING
INCOME
As a result of the above, our operating income was $1.5 billion for fiscal 2025, compared to $312.5 million for fiscal 2024.
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 $48.7 million
in fiscal 2025, compared to $32.3 million in
fiscal 2024, primarily due
to significantly higher
cash and cash
equivalents and investment
securities available-for-sale balances
and yields. We
recorded
interest expense of $612
thousand and $549 thousand
in fiscal 2025 and
2024, respectively, primarily related to commitment
fees
on our Credit Facility described below.
INCOME TAXES
For the fiscal year ended
May 31, 2025, our pre-tax
income was $1.6 billion, compared
to $360.0 million for fiscal
2024. Income
tax expense
of $384.9
million was
recorded for
fiscal 2025
with an
effective tax
rate of
24.0%.
For fiscal
2024, income
tax
expense was $83.7 million with an effective tax rate of 23.2%.
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 $1.8 million
for fiscal 2025
compared to a
$1.6 million net
loss for fiscal
2024.
NET INCOME ATTRIBUTABLE
TO CAL-MAINE FOODS, INC.
As a result
of the above,
net income attributable
to Cal-Maine Foods,
Inc. for fiscal
2025 was $1.2
billion, or $25.04
per basic
and $24.95 per diluted share, compared to $277.9 million, or $5.70 per basic and $5.69 per diluted share for fiscal 2024.
Fiscal Year
Ended June 1, 2024 Compared to Fiscal Year Ended June 3, 2023
The discussion of our results of operations for the fiscal year ended June 1, 2024 compared to the fiscal year ended June 3, 2023
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 2024 Annual Report on Form 10-K.
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
May 31,
2025 was
$1.7 billion, compared
to $1.0
billion at
June 1,
2024. The
calculation of
working
capital is defined as
current assets less current
liabilities. Our current ratio was
6.4 at May 31,
2025 compared to 5.5
at June 1,
2024. The current ratio is calculated by dividing
current assets by current liabilities. The increase
in our current ratio is primarily
due to the increase in total current assets, which increased by $726.3 million to $2.0 billion at May 31, 2025, due to increases in
cash
and
cash
equivalents
and
investment
securities
available-for-sale.
Due
to
seasonal
factors
described
in
Part I. Item I.
Business - Seasonality
, 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 $1.2
billion for
fiscal 2025,
compared to
$451.4 million for
fiscal 2024.
The increase
in
cash
flow
from
operating
activities
resulted
primarily
from
higher
net
average
selling
prices
per
dozen,
particularly
for
conventional eggs, increased volume of sales and
a decrease in feed ingredient costs compared
to the prior year,
partially offset
by the increase in volume and price of outside egg purchases.
Cash Flows from Investing Activities
For fiscal 2025, $575.5 million was
used in investing activities, primarily due
to purchases of investment securities,
purchases of
property, plant and equipment
and the acquisition
of assets of
ISE compared to
$412.6 million used
in investing activities
in fiscal
2024, primarily due to purchases
of investment securities, purchases of
property, plant and equipment and the Fassio acquisition.
Purchases of investment
securities were $1.2
billion in fiscal
2025 compared to
$573.6 million in
fiscal 2024. Sales
and maturities
of investment securities were
$907.6 million in fiscal
2025, compared to $358.9 million
for fiscal 2024. The increase
in sales and
maturities of investment securities is primarily due to the maturities of
short-term investments during fiscal 2025. Cash paid for
business acquisitions was $116.2 million in
fiscal 2025, primarily related to
the ISE acquisition, and
$53.7 million in fiscal 2024,
related to
the Fassio
acquisition. Purchases
of property,
plant and
equipment were
$161.3 million
and $147.1
million in
fiscal
2025 and 2024, respectively, primarily reflecting progress on our construction projects.
Cash Flows from Financing Activities
We
paid
dividends
totaling
$330.3
million
and
$91.9
million
in
fiscal
2025
and
2024,
respectively.
During
fiscal
2025,
we
repurchased $54.0 million
in shares of
Common Stock, primarily
under our share
repurchase program. See
"Share Repurchase
Program," below.
Increase (decrease) in Cash and Cash Equivalents
As of May 31, 2025, cash increased $261.5 million since June 1, 2024, compared to a $54.9 million decrease
during fiscal 2024.
The increase is primarily due to the increase in net sales during fiscal 2025.
Acquisition of Echo Lake Foods
Subsequent to our fiscal 2025 year-end, we acquired Echo Lake Foods. The purchase price was approximately $258 million and
was funded with available cash on hand. For additional information, refer to Part II. Item 8. Notes to the Consolidated Financial
Statements,
Note 17 - Subsequent Events
.
Credit Facility
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 May 31, 2025, no amounts were borrowed under the Credit Facility. As
of May 31, 2025, we
had $4.7 million in outstanding
standby letters of credit, which
were issued under our Credit
Facility for the
benefit of
certain insurance
companies. On
March 25,
2025, we
entered into
the Second
Amendment to
the Credit
Facility to
amend the definition
of Change of
Control to exclude
the conversion of
all outstanding shares
of Class A
Common Stock into
Common Stock.
Refer to
Part II.
Item 8.
Notes to
the Financial
Statements,
Note 10 - Credit Facility
for further
information
regarding our long-term debt.
Share Repurchase Program
On
February
25,
2025,
the
Board
approved
a
new
$500
million
share
repurchase
program.
The
share
repurchase
program
authorizes the Company, in management's discretion, to repurchase Common Stock from time to time for
an aggregate purchase
price up
to $500
million (exclusive
of any
fees, taxes,
commissions or
other expenses
related to
such repurchases),
subject to
market
conditions
and
other
factors.
The
actual
timing,
number
and
value
of
shares
repurchased
under
the
program
will
be
determined by
management in
its discretion
and will
depend on
a number
of factors,
including, but
not limited
to, the
market
price of the Common Stock and general market and economic conditions.
The Company expects to strategically and opportunistically repurchase shares from time to time through solicited or unsolicited
transactions in the
open market, in
privately negotiated transactions
or by other
means in accordance
with securities laws.
The
Company expects that share repurchases under the program will be
funded from one or a combination of existing cash balances
and future free
cash flow.
The share repurchase
program does not
obligate the Company
to repurchase any
specific amount of
shares, does
not have an
expiration date, and
may be suspended,
modified or
discontinued at
any time without
prior notice. During
fiscal
2025,
the
Company
repurchased
approximately
$50
million
in
shares
under
the
program.
See
Part II. Item 5. Issuer
Purchases of Equity Securities
and Part II. Item 8. Notes to the Financial Statements,
Note 11 - Equity
for further information.
Dividends
In
accordance
with
our
variable
dividend
policy,
we
will
pay
a
cash
dividend
totaling
approximately
$114.2
million,
or
approximately $2.362 per share, to holders
of our Common Stock with respect
to our fourth quarter of fiscal
2025. The amount
paid per
share will vary
based on
the number of
outstanding shares on
the record date.
The dividend is
payable on August
19,
2025 to holders of record on August 4, 2025.
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 May 31, 2025 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of
May 31, 2025
Remaining
Projected Cost
Feed Mill
Fiscal 2026
$
9,800
$
4,936
$
4,864
Egg Products Expansion
Fiscal 2026
19,576
10,958
8,618
Cage-Free Layer & Pullet Houses
Fiscal 2026
219,004
179,281
39,723
$
248,380
$
195,175
$
53,205
As of May
31, 2025, we
had $75.5 million
of purchase obligations
outstanding, all of
which is 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,
Note 1 - Summary of Significant Accounting Policies
.
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 materially
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.
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 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
materially 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 had $46.8 million of goodwill
as of May 31, 2025, representing
1.5% of total
assets
and
1.8%
of
stockholders'
equity.
Goodwill
is
evaluated
for
impairment
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.
During
our
annual
impairment
test,
which
was
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 2025.
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.
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.
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.
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 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.
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