Cal-Maine Foods BANK of AMERICA 2021 CONSUMER & RETAIL TECHNOLOGY CONFERENCE March 2021 Disclaimer Forward‐Looking and CautionaryStatements This presentation contains "forward‐looking statements" relating to, among other things, our shell egg business, including estimated future production data, expected constructionschedules, projectedconstructioncosts, potentialfuturesupply ofanddemandforourproducts,potentialfuture cornandsoybeanprice trends,potentialfuture impact on our business of the novel coronavirus ...

Index UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☑ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended November 28, 2020 or ☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to ____________ Commission File Number: 000-38695 CAL-MAINE FOODS, INC. (Exact name of registrant as specified in its charter) Delaware 64-0500378 (S ...

Index UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☑ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended August 29, 2020 or ☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to ____________ Commission File Number: 000-38695 CAL-MAINE FOODS, INC. (Exact name of registrant as specified in its charter) Delaware 64-0500378 (Sta ...

Company Overview - The company is the largest producer and distributor of shell eggs in the U.S., with a mission focused on sustainability and high-quality products [15]. - The company has completed 22 acquisitions since 1989, enhancing its production capacity from 160 thousand to 7.5 million layers [19]. - The company operates an extensive distribution network across the southwestern, southeastern, mid-western, and mid-Atlantic regions of the U.S. [41]. - The company had 3,636 employees as of May 30, 2020, with 4.8% being part-time [57]. - The company expects to be controlled by the family of the late founder, which may affect corporate governance and influence over shareholder actions [102]. Financial Performance - For the fiscal year ended May 30, 2020, net sales were $1,351.6 million, a decrease of 0.8% from $1,361.2 million in the previous fiscal year [140]. - Gross profit for the fiscal year was $179.6 million, down from $222.9 million in the prior year, reflecting a significant decline [140]. - The company reported a net income attributable to Cal-Maine Foods, Inc. of $18.4 million for the fiscal year, compared to $54.2 million in the previous year, indicating a decrease of 66% [140]. - Total assets as of May 30, 2020, were $1,206.7 million, an increase from $1,156.3 million in the previous year [140]. - Total net sales for fiscal 2020 were $1,351.6 million, a slight increase from $1,361.2 million in fiscal 2019 [166]. - The effective tax rate for fiscal 2020 decreased to 8.6% from 22.5% in fiscal 2019, primarily due to the net operating loss carryback provisions under the CARES Act [190]. - Net income for fiscal 2020 was $18.4 million, or $0.38 per share, compared to $54.2 million, or $1.12 per share for fiscal 2019 [196]. Production and Sales - Approximately 87% of total shell eggs sold in fiscal 2020 were produced by the company, with 91% of that production coming from company-owned facilities [30]. - Total shell eggs sold amounted to 1,069.2 million dozens, up from 1,038.9 million dozens in the prior year [140]. - Conventional shell egg sales accounted for 62.9% of total shell egg revenue in fiscal 2020, up from 61.4% in fiscal 2019, with revenue increasing by $20.0 million [166]. - Specialty eggs accounted for 35.9% of revenue and 23.9% of volume sold in the latest fiscal year, indicating a growing market segment [40]. - Total dozens sold in fiscal 2020 were 1,069.2 million, an increase of 30.3 million dozen, or 2.9%, compared to 1,038.9 million sold in fiscal 2019 [160]. Costs and Expenses - Feed costs represented 55.4% of farm production costs, with annual feed requirements of 1.7 million tons, of which 1.6 million tons were manufactured in-house [28]. - Labor costs are a primary component of farm production costs, with approximately 74% of employees paid at hourly rates, making the company vulnerable to labor shortages and wage increases [100]. - Cost of sales for fiscal 2020 was $1,172.0 million, an increase of 3.0% from $1,138.3 million in fiscal 2019, driven by increased production volumes [173]. - Selling, general, and administrative expenses (SGA) were $178.2 million in fiscal 2020, a slight increase from $177.0 million in fiscal 2019 [180]. Market Dynamics - Shell egg prices are influenced by various factors, including consumer demand and the productivity of laying hens, leading to price volatility [25]. - The shell egg production industry is highly fragmented, with the ten largest producers owning approximately 54% of total industry layers, up from 50% in 2015 [49]. - The company faces intense competition in the shell egg market, which could lead to price reductions and loss of market share, adversely affecting financial performance [97]. - Market prices for wholesale shell eggs are volatile, with fluctuations impacting revenues and profits significantly [63]. Strategic Initiatives - The company plans to expand cage-free shell egg production capabilities in response to growing customer demand and legal requirements [151]. - The company is enhancing its focus on cage-free capacity when considering acquisition opportunities due to uncertainties in future demand [76]. - The company plans to pursue a growth strategy that includes selective acquisitions to expand cage-free shell egg production capabilities in key markets [81]. - The company has invested significantly in cage-free facilities to meet customer demand and comply with evolving legal requirements [37]. Risks and Challenges - Agricultural risks, including outbreaks of avian disease, could materially affect the quality and quantity of shell eggs produced, impacting financial results [95]. - The company is subject to various federal, state, and local regulations, which could increase operational costs and impact financial condition if compliance is not met [90]. - Future acquisitions may require significant capital resources and could divert management's attention from existing operations, posing integration risks [82]. - The company does not maintain insurance for product recalls, which could lead to significant financial losses and damage to reputation if contamination occurs [94]. Investments and Assets - The company invested over $371.7 million in facilities and equipment to expand cage-free production since 2008 [204]. - As of May 30, 2020, the company owned approximately 28.4 thousand acres of land with no material encumbrances [123]. - Working capital at May 30, 2020, was $429.1 million, down from $492.8 million at June 1, 2019, with a current ratio of 5.6 [198]. - The company retired all outstanding long-term debt, resulting in no long-term debt as of May 30, 2020, compared to $1.5 million at June 1, 2019 [199].

Index Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.01 par value per share CALM The NASDAQ Global Select Market UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (mark one) ☑ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended February 29, 2020 OR ☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period ...

Part I. Financial Information [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited statements show a decreased financial position, a shift to a net loss, and significant cash used in operations [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows decreased total assets and stockholders' equity, driven by a reduction in cash and a net loss Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Nov 30, 2019 | June 1, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | $448,838 | $567,753 | | Cash and cash equivalents | $11,248 | $69,247 | | Investment securities | $123,275 | $250,181 | | **Total Assets** | **$1,111,280** | **$1,156,278** | | **Total Current Liabilities** | $102,848 | $74,907 | | **Total Liabilities** | **$176,987** | **$166,472** | | **Total Stockholders' Equity** | **$934,293** | **$989,806** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a significant net loss compared to a net income in the prior-year period, driven by lower sales and gross profit Statement of Operations Summary (in thousands, except per share data) | Metric | 13 Weeks Ended Nov 30, 2019 | 13 Weeks Ended Dec 1, 2018 | | :--- | :--- | :--- | | Net Sales | $311,522 | $356,040 | | Gross Profit | $29,375 | $70,535 | | Operating Income (Loss) | $(16,565) | $25,334 | | Net Income (Loss) | $(10,186) | $22,006 | | Diluted EPS | $(0.21) | $0.45 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations increased significantly, contributing to an overall decrease in cash and cash equivalents Cash Flow Summary - 26 Weeks Ended (in thousands) | Activity | Nov 30, 2019 | Dec 1, 2018 | | :--- | :--- | :--- | | Net cash provided by (used in) operations | $(74,272) | $27,688 | | Net cash provided by (used in) investing activities | $18,646 | $(6,513) | | Net cash used in financing activities | $(2,373) | $(23,401) | | **Net change in cash and cash equivalents** | **$(57,999)** | **$(2,226)** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail a recent acquisition, adoption of a new lease standard, dividend policy restrictions, and ongoing antitrust litigation - Effective October 20, 2019, the Company acquired certain assets of Mahard Egg Farm for **$45.5 million**, which included facilities with a current capacity for approximately **3.9 million laying hens**[38](index=38&type=chunk) - The company adopted the new lease standard ASU 2016-02 on June 2, 2019, using a modified retrospective transition approach, which **did not have a material effect** on the financial statements[32](index=32&type=chunk)[33](index=33&type=chunk)[36](index=36&type=chunk) - Due to cumulative losses, the company must recover **$75.6 million** before it can resume paying dividends under its established policy[61](index=61&type=chunk) - The company is a defendant in an ongoing egg antitrust litigation case, with remaining plaintiffs including Kraft, General Mills, and Nestle; while a material adverse outcome is **reasonably possible**, the amount of monetary exposure cannot be estimated[89](index=89&type=chunk)[90](index=90&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the decline in performance to lower egg prices from oversupply, while continuing investment in cage-free capacity [Overview](index=24&type=section&id=Overview) Operating results are highly dependent on volatile egg prices, which are currently depressed due to market oversupply - The average UB southeastern large index price was **down 12.7%** in Q2 compared to the prior-year period, while the company's net average selling price for all shell eggs was **down 11.5%**[101](index=101&type=chunk) - An oversupply of eggs, with **340.5 million hens** reported by the USDA (**4.6 million more** than a year ago), has negatively affected non-specialty egg prices[101](index=101&type=chunk) - The company is responding to increased demand for cage-free eggs, driven by customer goals and new state laws in California, Washington, Oregon, and others, by **expanding its cage-free capacity**[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Financial results deteriorated significantly with a 12.5% drop in net sales and a shift to a net loss from a net income year-over-year Q2 FY2020 vs Q2 FY2019 Performance (in millions) | Metric | Q2 FY2020 | Q2 FY2019 | | :--- | :--- | :--- | | Net Sales | $311.5 | $356.0 | | Gross Profit | $29.4 | $70.5 | | Operating Income (Loss) | $(16.6) | $25.3 | | Net Income (Loss) | $(10.1) | $21.8 | Shell Egg Sales Analysis (13 Weeks Ended) | Category | Net Avg. Selling Price (per dozen) | Dozens Sold (thousands) | | :--- | :--- | :--- | | **Non-specialty** | | | | Nov 30, 2019 | $0.937 | 199,566 | | Dec 1, 2018 | $1.097 | 197,163 | | **Specialty** | | | | Nov 30, 2019 | $1.878 | 58,216 | | Dec 1, 2018 | $1.958 | 61,717 | - Farm production cost per dozen produced **increased by 2.3%** to $0.741, driven by a 5.2% increase in non-feed costs such as accelerated amortization and higher labor costs[143](index=143&type=chunk) [Capital Resources and Liquidity](index=35&type=section&id=Capital%20Resources%20and%20Liquidity) Working capital decreased, all long-term debt was retired, and significant capital projects for cage-free expansion are underway - Working capital stood at **$346.0 million** at November 30, 2019, down from $492.8 million at June 1, 2019[176](index=176&type=chunk) - The company **retired all outstanding long-term debt** in Q2 and had no amounts borrowed under its $100.0 million Revolving Credit Facility as of November 30, 2019[177](index=177&type=chunk) Approved Construction Projects (in thousands) | Project Type | Projected Cost | Cost to Date | Remaining Cost | | :--- | :--- | :--- | :--- | | Convertible/Cage-Free Houses & Facilities | $154,721 | $51,355 | $103,366 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is commodity price volatility for its products (eggs) and key inputs (corn and soybean meal) - The company's main market risk exposure stems from price fluctuations in eggs, corn, and soybean meal[194](index=194&type=chunk) Impact of Feed Ingredient Price Changes | Feed Ingredient | Price Change | Approx. Impact on Feed Cost per Dozen | Approx. Annual Dollar Impact | | :--- | :--- | :--- | :--- | | Corn | $0.28 per bushel | $0.01 | $8,767,050 | | Soybean Meal | $27 per ton | $0.01 | $8,767,050 | [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of November 30, 2019[197](index=197&type=chunk) - **No changes occurred** during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[198](index=198&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company refers to previous disclosures regarding ongoing legal matters, particularly the egg antitrust litigation - The company directs readers to Note 12 of the financial statements for details on legal matters, most notably the **ongoing egg antitrust litigation**[89](index=89&type=chunk)[200](index=200&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) Key risks include pressure for cage-free production, uncertainty in forecasting demand, and challenges related to its acquisition strategy - Pressure from animal rights groups and new state laws (e.g., California's Proposition 12) are accelerating the demand for cage-free eggs, **increasing capital and operating costs** for the company[202](index=202&type=chunk)[207](index=207&type=chunk) - The company faces uncertainty in predicting future customer demand for cage-free versus conventional eggs, which could lead to **over- or under-investment** in new capacity[208](index=208&type=chunk) - The growth strategy through acquisitions presents risks including diversion of management attention, assumption of unknown liabilities, and challenges in **successfully integrating acquired businesses**[209](index=209&type=chunk)[210](index=210&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased a small number of shares to satisfy employee tax withholding obligations on vested restricted stock - In the second quarter, **223 shares were repurchased** at an average price of $44.09 to satisfy employee tax withholding obligations on vested restricted stock[216](index=216&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL data files

Company Profile - Cal-Maine Foods is the largest producer and marketer of shell eggs in the United States with 19% of the U S fresh shell egg market share in FY 2019[3] - The company has completed 22 acquisitions since 1989[3] Financial Performance - Fiscal Year 2019 sales reached $1.4 billion[38] - Fiscal Year 2019 EBITDA was $118 million, down from $168 million in 2018[38] - As of August 31, 2019, the company's total debt was $2.3 million[38] Market and Operations - Retail accounts for 90% of Cal-Maine's customers in Fiscal Year 2019[10] - The top 10 customers accounted for 69.8% of total sales in Fiscal Year 2019[11] - Company-owned facilities account for 91% of egg production[7] Growth and Strategy - Specialty egg sales represented 22.2% of dozens sold and 44.9% of sales revenue through Q1 FY 2020[29] - The company is investing over $300 million to expand and upgrade facilities for cage-free production[34] - Cal-Maine Foods and Rose Acre Farms entered a production joint venture to build a cage-free shell egg production complex near Bogata, Red River County, Texas, which provides for capacity of approximately 1.8 million laying hens, with permits for up to 2.9 million hens[26]

Index UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (mark one) ☑ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended August 31, 2019 OR ☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to ____________ Commission File Number: 000-04892 CAL-MAINE FOODS, INC. (Exact name of registrant as specified in its charter) | --- | --- | ...

[FORM 10-K Filing Information](index=1&type=section&id=FORM%2010-K) This section provides key administrative and financial details of Cal-Maine Foods, Inc.'s annual Form 10-K filing for fiscal year 2019 [Registrant Information](index=1&type=section&id=Registrant%20Information) Cal-Maine Foods, Inc. filed its annual Form 10-K for fiscal year 2019, detailing its Delaware incorporation, NASDAQ listing under 'CALM', and a $1.47 billion market value of non-affiliate common stock as of December 1, 2018 - Cal-Maine Foods, Inc. is a well-known seasoned issuer and a large accelerated filer[1](index=1&type=chunk)[2](index=2&type=chunk) Registrant Information | Metric | Value | | :----------------------------------------- | :-------------- | | Fiscal Year Ended | June 1, 2019 | | Common Stock Trading Symbol | CALM | | Exchange Registered | NASDAQ Global Select Market | | Market Value (non-affiliates, Dec 1, 2018) | $1,467,922,217 | | Common Stock Outstanding (July 19, 2019) | 43,894,478 shares | | Class A Common Stock Outstanding (July 19, 2019) | 4,800,000 shares | [PART I](index=3&type=section&id=PART%20I) This section covers the company's business operations, forward-looking statements, risk factors, property details, and legal proceedings [FORWARD-LOOKING STATEMENTS](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines the forward-looking nature of statements, emphasizing that actual results may differ materially due to risks such as market prices, feed costs, disease outbreaks, specialty egg demand, acquisition challenges, and litigation outcomes - Forward-looking statements are identified by words such as 'believes,' 'intends,' 'expects,' 'hopes,' 'may,' 'should,' 'plans,' 'projected,' 'contemplates,' 'anticipates' or similar words[6](index=6&type=chunk) - Factors that could cause actual results to differ materially include risks from the shell egg business (disease, weather, recalls), changes in demand and market prices for shell eggs and feed costs, ability to meet demand for specialty eggs, acquisition risks, and adverse litigation results[6](index=6&type=chunk) [ITEM 1. BUSINESS](index=3&type=section&id=ITEM%201.%20BUSINESS) Cal-Maine Foods, Inc. is the largest U.S. shell egg producer and marketer, operating fully integrated production, grading, packaging, marketing, and distribution, with a strategic focus on specialty eggs and growth through acquisitions and facility upgrades - Cal-Maine Foods, Inc. is the largest producer and marketer of shell eggs in the United States, selling approximately **1,038.9 million dozen** shell eggs in fiscal 2019, representing about **19% of domestic consumption**[7](index=7&type=chunk)[24](index=24&type=chunk) - The company operates as a single segment, encompassing the entire shell egg value chain from hatching chicks to distribution[8](index=8&type=chunk) [Our Business](index=3&type=section&id=Our%20Business) Cal-Maine Foods is the largest U.S. shell egg producer, focusing on integrated operations and expanding its specialty egg segment through strategic acquisitions and facility investments - In fiscal 2019, specialty shell eggs and co-pack specialty shell eggs accounted for **36.2%** and **2.0% of sales dollars**, respectively, and **23.8%** and **1.3% of total shell egg volumes**, respectively, marking an increase from fiscal 2018[12](index=12&type=chunk) - The company markets specialty eggs under brands like Egg-Land's Best®, Land O' Lakes®, Farmhouse®, and 4-Grain®, with a strategic focus on expanding cage-free production to meet customer commitments[11](index=11&type=chunk)[12](index=12&type=chunk) - Cal-Maine Foods has completed **21 acquisitions since 1989**, contributing to its leadership in a fragmented industry and plans to continue capitalizing on consolidation opportunities[13](index=13&type=chunk) [Industry Background](index=4&type=section&id=Industry%20Background) The U.S. egg industry saw per capita consumption rebound in 2018, with the majority of eggs sold as shell eggs to retail and foodservice - U.S. per capita egg consumption was estimated at **284 eggs in calendar year 2018**, rebounding from a **4% decrease in 2015** due to avian influenza[14](index=14&type=chunk) - Approximately **69% of U.S. eggs are sold as shell eggs**, primarily to retail and foodservice, while **31% are sold as egg products** to institutions, with egg products constituting about **3% of Cal-Maine's net sales** in fiscal 2019 and 2018[15](index=15&type=chunk) [Prices for Shell Eggs](index=5&type=section&id=Prices%20for%20Shell%20Eggs) Shell egg prices are highly volatile, with wholesale large shell egg prices in the southeast region fluctuating significantly year-over-year - Shell egg prices are highly volatile, with wholesale large shell egg prices in the southeast region averaging **$1.23 per dozen in fiscal 2019**, down from **$1.49 in fiscal 2018** but up from **$0.85 in fiscal 2017**[17](index=17&type=chunk) [Feed Costs for Shell Egg Production](index=5&type=section&id=Feed%20Costs%20for%20Shell%20Egg%20Production) Feed, primarily corn and soybean meal, constitutes over half of production costs, with fiscal 2019 seeing a 5.3% increase per dozen due to unfavorable crop conditions - Feed, primarily corn and soybean meal, accounts for over half of farm-level production costs, with fiscal 2019 seeing a **5.3% increase in feed cost per dozen** compared to fiscal 2018 due to unfavorable crop conditions[18](index=18&type=chunk) - The company anticipates more volatile and potentially higher feed costs in fiscal 2020 due to adverse weather affecting crops and geopolitical issues impacting grain prices[18](index=18&type=chunk) [Growth Strategy and Acquisitions](index=5&type=section&id=Growth%20Strategy%20and%20Acquisitions) Cal-Maine Foods pursues growth through strategic acquisitions and facility upgrades, expanding its production capabilities and geographic reach, particularly for cage-free eggs - Cal-Maine Foods has completed **21 acquisitions since fiscal 1989** and continues to pursue opportunities to expand production capabilities and geographic reach, leveraging its experience in identifying, valuing, executing, and integrating acquisitions[19](index=19&type=chunk)[22](index=22&type=chunk) - The company's total flock increased from **40.8 million in fiscal 2014 to 45.6 million as of June 1, 2019**, with shell eggs sold increasing from **1,013.7 million dozen to 1,038.9 million dozen** over the same period[21](index=21&type=chunk) - A key part of the growth strategy involves constructing new, more efficient 'in-line' facilities and upgrading existing ones to meet the increasing demand for cage-free and other specialty eggs[19](index=19&type=chunk)[20](index=20&type=chunk) [Shell Eggs](index=6&type=section&id=Shell%20Eggs) Cal-Maine's fully integrated operations produce most of its shell eggs, with a significant portion sold to top customers like Wal-Mart, and specialty eggs showing increasing sales and volume - Cal-Maine's operations are fully integrated, producing approximately **84% of total shell eggs sold**, with **91% from company-owned facilities** and **9% from contract producers**, and the remaining **16% purchased from outside producers**[26](index=26&type=chunk) - The company's facilities produce an average of **2.4 million dozen shell eggs per day**, utilizing advanced equipment and automation to maintain low-cost supplier status[28](index=28&type=chunk) - Top ten customers accounted for **69.8% of net sales in fiscal 2019**, with Wal-Mart Stores and Sam's Club combined representing **33.7% of net sales**[35](index=35&type=chunk) - Retail sales of shell eggs are seasonal, peaking in fall and winter and lowest in summer, leading to lower sales and net income in the fourth and first fiscal quarters[41](index=41&type=chunk) - Specialty eggs, including Egg-Land's Best®, Land O' Lakes®, 4Grain®, and Farmhouse® brands, accounted for **36.2% of shell egg dollar sales** and **23.8% of dozens sold in fiscal 2019**, up from **32.0%** and **23.5% in fiscal 2018**, respectively[43](index=43&type=chunk) [Egg Products](index=8&type=section&id=Egg%20Products) Egg products, including liquid, frozen, or dried forms, consistently represented approximately 3% of net sales in fiscal 2019 and 2018, primarily serving institutional and foodservice sectors - Egg products (liquid, frozen, or dried forms) represented approximately **3% of net sales** in both fiscal 2019 and 2018, primarily sold to institutional and foodservice sectors[44](index=44&type=chunk) [Competition](index=8&type=section&id=Competition) The U.S. shell egg industry is intensely competitive and fragmented, yet shows increasing concentration with 60 producers owning 98% of total U.S. layers in 2018 - The U.S. shell egg industry is intensely competitive and highly fragmented but shows increasing concentration, with **60 producers owning 98% of total U.S. layers in 2018**[45](index=45&type=chunk)[46](index=46&type=chunk) [Patents and Trade Names](index=8&type=section&id=Patents%20and%20Trade%20Names) The company owns several trademarks and markets licensed brands like Egg-Land's Best® and Land O' Lakes® - The company owns trademarks such as Farmhouse®, Sunups®, Sunny Meadow®, and 4Grain®, and produces/markets Egg-Land's Best® and Land O' Lakes® under license agreements[47](index=47&type=chunk) [Government Regulation](index=8&type=section&id=Government%20Regulation) Operations are subject to extensive federal, state, and local regulations from agencies like FDA, USDA, and EPA, covering various aspects of egg production and distribution - Operations are subject to federal, state, and local regulations from agencies like FDA, USDA, and EPA, covering grading, quality control, labeling, sanitary control, and waste disposal[48](index=48&type=chunk) [Environmental Regulation](index=9&type=section&id=Environmental%20Regulation) The company's facilities are subject to environmental, health, and safety laws, requiring permits for activities like wastewater discharge, with potential for increased compliance costs - The company's facilities are subject to environmental, health, and safety laws, requiring permits for activities like wastewater discharge, with compliance costs potentially increasing due to increasingly stringent regulations[50](index=50&type=chunk) [Employees](index=9&type=section&id=Employees) As of June 1, 2019, Cal-Maine Foods had 3,490 employees, primarily in egg production, processing, and marketing, with no collective bargaining agreements - As of June 1, 2019, Cal-Maine Foods had **3,490 employees**, with the majority (**2,945**) in egg production, processing, and marketing, and none covered by a collective bargaining agreement[51](index=51&type=chunk) [Our Corporate Information](index=9&type=section&id=Our%20Corporate%20Information) Cal-Maine Foods, Inc. was founded in 1957, incorporated in Delaware in 1969, and its common stock is listed on NASDAQ under 'CALM' - Cal-Maine Foods, Inc. was founded in **1957** and incorporated in Delaware in **1969**, with its common stock listed on NASDAQ under 'CALM'[52](index=52&type=chunk)[53](index=53&type=chunk) [ITEM 1A. RISK FACTORS](index=9&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces significant risks from volatile egg prices, fluctuating feed costs, cyclical industry conditions, dependence on key customers, agricultural diseases, regulatory pressures, animal rights activism, and the controlling ownership by the founder's family, all of which could materially impact financial results - Wholesale shell egg market prices are highly volatile, and small changes in production or demand can significantly impact prices and profitability[55](index=55&type=chunk)[56](index=56&type=chunk) - Feed costs, representing **57% to 62% of total farm production costs**, are volatile and subject to external factors like weather and supply/demand, with increases potentially harming operating results[61](index=61&type=chunk) - The company's financial results fluctuate significantly due to the cyclical nature of the shell egg industry and seasonal demand patterns[62](index=62&type=chunk) - Dependence on two major customers (Wal-Mart Stores and Sam's Club) for **33.7% of net sales in fiscal 2019** poses a risk if purchases are reduced or terminated[70](index=70&type=chunk) - Agricultural risks, including avian disease outbreaks (like the **2015 avian influenza**), extreme weather, and microbial contamination, can materially affect flock health, production, and marketability, potentially leading to recalls and reputational damage[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - Pressure from animal rights groups for cage-free standards and other animal welfare guidelines has resulted in and will continue to incur additional capital and operating costs[84](index=84&type=chunk) - The company is controlled by the founder's family, holding approximately **65.5% of total voting power**, which could discourage unsolicited acquisitions and affect stock market price[88](index=88&type=chunk)[92](index=92&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=15&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) There are no unresolved staff comments from the SEC [ITEM 2. PROPERTIES](index=15&type=section&id=ITEM%202.%20PROPERTIES) Cal-Maine Foods operates extensive facilities across multiple U.S. states, including breeding, hatching, feed mills, and egg production, processing, and distribution centers, owning approximately **27,458 acres** of land and investing significantly in capacity expansion and upgrades - As of June 1, 2019, the company's facilities include **3 breeding facilities, 2 hatcheries, 6 wholesale distribution centers, 23 feed mills, 42 shell egg production facilities, 28 pullet growing facilities, 43 processing and packing facilities, and 1 egg products facility**[112](index=112&type=chunk) - The company owns approximately **27,458 acres of land** and has the capacity to hatch **21.2 million pullet chicks annually**, grow **26.2 million pullets annually**, house **44.4 million laying hens**, and process approximately **500,000 dozen shell eggs per hour**[113](index=113&type=chunk) - Capital expenditures over the past five fiscal years totaled approximately **$312.7 million**, excluding acquisitions[114](index=114&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=16&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) Cal-Maine Foods is involved in ongoing 'Egg Antitrust Litigation' with remaining claims from egg product plaintiffs after class action settlements, and a long-standing Oklahoma environmental lawsuit where material loss is deemed remote - The company was named in the 'Egg Antitrust Litigation' in **2008**, alleging a conspiracy to reduce domestic egg supply and raise prices[115](index=115&type=chunk)[121](index=121&type=chunk) - Direct and indirect purchaser class actions in the antitrust litigation have been settled, with the company previously settling with direct purchasers in **2014** and indirect purchasers in **2018** for an immaterial amount[115](index=115&type=chunk)[116](index=116&type=chunk) - Remaining non-class antitrust claims from 'Egg Products Plaintiffs' (Kraft Food Global, General Mills, Nestle USA, Kellogg Company) are ongoing, seeking treble damages and injunctive relief, with a motion for summary judgment denied in **June 2019**[118](index=118&type=chunk)[120](index=120&type=chunk) - A State of Oklahoma lawsuit, filed in **2005**, alleges pollution of the Illinois River Watershed, but Cal-Maine Foods discontinued operations in the watershed, and management believes the risk of material loss is remote[123](index=123&type=chunk)[124](index=124&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=18&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to Cal-Maine Foods, Inc [PART II](index=18&type=section&id=PART%20II) This section details market information for common equity, selected financial data, management's discussion and analysis, and disclosures about market risk [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=18&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Cal-Maine Foods' Common Stock trades on NASDAQ under 'CALM', while Class A Common Stock is privately held by the founder's family, with a dividend policy tied to one-third of quarterly net income, subject to cumulative profitability and loan covenants - The company's Common Stock is traded on The NASDAQ Global Select Market under the symbol 'CALM'[128](index=128&type=chunk) - There is no public trading market for Class A Common Stock, which is **100% owned by a limited liability company** controlled by Adolphus Baker and Mrs. Jean Adams[129](index=129&type=chunk) - No purchases of common stock were made by the company or affiliated purchasers during the fiscal 2019 fourth quarter[130](index=130&type=chunk) - The dividend policy is to pay **one-third of quarterly net income** attributable to Cal-Maine Foods, Inc., provided the company is cumulatively profitable since the last dividend payment and adheres to loan agreement restrictions[134](index=134&type=chunk)[138](index=138&type=chunk) Equity Compensation Plan Information (June 1, 2019) | Category | 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 | | :------------------------------------------- | :------------------------------------------------------------------------ | :---------------------------------------------------------- | :--------------------------------------------------------------------------- | | Equity compensation plans approved by shareholders | — | $— | 336,052 | | Equity compensation plans not approved by shareholders | — | — | — | | Total | — | $— | 336,052 | [ITEM 6. SELECTED FINANCIAL DATA](index=21&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section presents a five-year summary of selected financial, balance sheet, and operating data, highlighting significant volatility in net sales, gross profit, and net income driven by fluctuating shell egg prices and feed costs Selected Financial Data (Fiscal Years Ended June 1, 2019, June 2, 2018, June 3, 2017) | Statement of Operations Data (in thousands, except per share data) | June 1, 2019 (52 weeks) | June 2, 2018 (52 weeks) | June 3, 2017 (53 weeks) | | :------------------------------------------------- | :---------------------- | :---------------------- | :---------------------- | | Net sales | $1,361,188 | $1,502,932 | $1,074,513 | | Cost of sales | 1,138,329 | 1,141,886 | 1,028,963 | | Gross profit | 222,859 | 361,046 | 45,550 | | Selling, general and administrative | 174,795 | 179,316 | 176,032 | | Legal settlement expense | 2,250 | 80,750 | — | | Operating income (loss) | 45,781 | 100,507 | (134,146) | | Total other income | 25,024 | 16,830 | 19,852 | | Income (loss) before income tax and noncontrolling interest | 70,805 | 117,337 | (114,294) | | Income tax expense (benefit) | 15,743 | (8,859) | (39,867) | | Net income (loss) attributable to Cal-Maine Foods, Inc. | $54,229 | $125,932 | $(74,278) | | Basic Net income (loss) per common share | $1.12 | $2.60 | $(1.54) | | Diluted Net income (loss) per common share | $1.12 | $2.60 | $(1.54) | | Cash dividends per common share | $0.51 | $0.35 | $— | | **Balance Sheet Data (in thousands)** | | | | | Working capital | $492,846 | $479,682 | $371,527 | | Total assets | $1,156,278 | $1,150,447 | $1,033,094 | | Total debt (including current maturities) | $2,337 | $6,090 | $10,939 | | Total stockholders' equity | $989,806 | $955,682 | $844,493 | | **Operating Data** | | | | | Total number of layers at period-end (thousands) | 36,192 | 36,340 | 36,086 | | Total shell eggs sold (millions of dozens) | 1,038.9 | 1,037.7 | 1,031.1 | [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=22&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes Cal-Maine Foods' financial condition and operational results for fiscal years 2019-2017, emphasizing the impact of volatile egg prices and feed costs on profitability, the growth of specialty egg sales, and the company's capital resources and liquidity - Operating results are directly tied to highly volatile egg prices and feed costs, which are outside the company's control. The Urner-Barry Southeastern Regional Large Egg Market Price per dozen ranged from **$0.55 to $3.00 between fiscal 2006-2019**[150](index=150&type=chunk) - The U.S. laying hen flock recovered and exceeded pre-avian influenza levels by late **2016**, with continued growth in **2018 and early 2019**, leading to increased supply and pricing pressure[151](index=151&type=chunk) - Net average selling price per dozen shell eggs decreased by **9.4% from $1.397 in fiscal 2018 to $1.265 in fiscal 2019**, primarily due to an abundance of eggs in the market[153](index=153&type=chunk)[166](index=166&type=chunk) - Specialty shell eggs continue to be a significant and growing segment, with sales less volatile and generally higher priced than non-specialty eggs. The company is focusing future expansion on cage-free environments[154](index=154&type=chunk) - Feed costs averaged about **57% of total farm egg production cost in fiscal 2019**, increasing by **5.3% per dozen** compared to fiscal 2018 due to unfavorable crop conditions[156](index=156&type=chunk)[177](index=177&type=chunk) [OVERVIEW](index=22&type=section&id=OVERVIEW) Cal-Maine Foods is primarily engaged in the fully integrated production, grading, packaging, marketing, and distribution of fresh shell eggs, operating within a cyclical industry with seasonal fluctuations - Cal-Maine Foods is primarily engaged in the production, grading, packaging, marketing, and distribution of fresh shell eggs, with fully integrated operations[148](index=148&type=chunk)[149](index=149&type=chunk) - The company's fiscal year ends on the Saturday nearest May 31 (**June 1, 2019** for the most recent fiscal year)[148](index=148&type=chunk) - The shell egg industry is cyclical, with periods of high profitability followed by significant losses, and seasonal fluctuations typically result in lower sales and net income in the first and fourth fiscal quarters[150](index=150&type=chunk) - The national laying hen flock recovered and exceeded pre-avian influenza levels by late **2016**, leading to increased supply and pricing pressure in fiscal 2019[151](index=151&type=chunk)[153](index=153&type=chunk) [RESULTS OF OPERATIONS](index=24&type=section&id=RESULTS%20OF%20OPERATIONS) This section details the company's financial performance, including net sales, cost of sales, gross profit, and net income (loss), highlighting the impact of volatile egg prices and feed costs Statement of Operations Data as a Percentage of Net Sales | Category | June 1, 2019 | June 2, 2018 | June 3, 2017 | | :------------------------------------------------ | :----------- | :----------- | :----------- | | Net sales | 100.0 % | 100.0 % | 100.0 % | | Cost of sales | 83.6 % | 76.0 % | 95.8 % | | Gross profit | 16.4 % | 24.0 % | 4.2 % | | Selling, general and administrative | 12.8 % | 11.9 % | 16.4 % | | Legal settlement expense | 0.2 % | 5.4 % | — % | | Operating income (loss) | 3.4 % | 6.7 % | (12.5)% | | Income (loss) before income taxes and noncontrolling interest | 5.2 % | 7.8 % | (10.6)% | | Net income (loss) attributable to Cal-Maine Foods, Inc. | 4.0 % | 8.4 % | (6.9)% | Key Financial and Operating Metrics (Fiscal Years Ended) | Metric | June 1, 2019 | June 2, 2018 | June 3, 2017 | | :---------------------------------------------- | :----------- | :----------- | :----------- | | Net income (loss) attributable to Cal-Maine Foods, Inc. (in thousands) | $54,229 | $125,932 | $(74,278) | | Gross profit (in thousands) | $222,859 | $361,046 | $45,550 | | Net average shell egg selling price (rounded) | $1.27 | $1.40 | $1.01 | | Average Urner Barry Spot Egg Market Quotations | $1.23 | $1.49 | $0.85 | | Feed cost per dozen produced | $0.415 | $0.394 | $0.399 | - Net sales for fiscal 2019 decreased by **$141.7 million (9.4%) to $1,361.2 million**, primarily due to lower selling prices for non-specialty eggs caused by oversupply[164](index=164&type=chunk) - Total dozens sold in fiscal 2019 increased slightly by **0.1% to 1,038.9 million dozen**[165](index=165&type=chunk) - Non-specialty shell egg revenue decreased from **65.6% of total shell egg revenue in fiscal 2018 to 61.4% in fiscal 2019**, reflecting a drop in average selling price from **$1.226 to $1.041 per dozen**[169](index=169&type=chunk) - Specialty egg revenue increased from **32.0% of total shell egg revenue in fiscal 2018 to 36.2% in fiscal 2019**, with a stable average selling price of **$1.931 per dozen**[171](index=171&type=chunk) - Cost of sales decreased by **0.3% to $1,138.3 million in fiscal 2019**, despite a **5.3% increase in feed cost per dozen**, offset by a **13.2% decrease in outside egg purchase costs**[177](index=177&type=chunk) - Gross profit margin decreased from **24.0% in fiscal 2018 to 16.4% in fiscal 2019**, primarily due to lower non-specialty egg selling prices[179](index=179&type=chunk) - Selling, general and administrative expenses decreased by **2.5% to $174.8 million in fiscal 2019**, mainly due to reduced legal expenses from antitrust claim settlements[182](index=182&type=chunk)[183](index=183&type=chunk) - Legal settlement expense significantly decreased from **$80.8 million in fiscal 2018 to $2.3 million in fiscal 2019**[186](index=186&type=chunk) - Operating income for fiscal 2019 was **$45.8 million**, down from **$100.5 million in fiscal 2018**[188](index=188&type=chunk) - Total other income increased to **$25.0 million in fiscal 2019 from $16.8 million in fiscal 2018**, driven by higher interest income, patronage dividends, and equity in income of affiliates[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) - Income tax expense was **$15.7 million in fiscal 2019 (effective rate 22.5%)**, compared to a tax benefit of **$8.9 million in fiscal 2018 (effective rate 7.6%)**, with the prior year benefiting from the Tax Cuts and Jobs Act of 2017[193](index=193&type=chunk) - Net income attributable to Cal-Maine Foods, Inc. for fiscal 2019 was **$54.2 million ($1.12 per share)**, a decrease from **$125.9 million ($2.60 per share) in fiscal 2018**[198](index=198&type=chunk) [CAPITAL RESOURCES AND LIQUIDITY](index=30&type=section&id=CAPITAL%20RESOURCES%20AND%20LIQUIDITY) The company's working capital increased, long-term debt decreased, and operating cash flow declined, while a new revolving credit facility provides liquidity under specific covenants - Working capital increased to **$492.8 million at June 1, 2019**, from **$479.7 million at June 2, 2018**, with a current ratio of **7.58**[200](index=200&type=chunk) - Long-term debt and capital leases decreased to **$2.3 million at June 1, 2019**, from **$6.1 million at June 2, 2018**[201](index=201&type=chunk) - Net cash provided by operating activities decreased to **$115.1 million in fiscal 2019** from **$200.4 million in fiscal 2018**, primarily due to lower gross profit margins[202](index=202&type=chunk) - The company entered into a **$100.0 million Senior Secured Revolving Credit Facility in July 2018**, with no amounts borrowed as of June 1, 2019, but **$3.7 million in outstanding standby letters of credit**[201](index=201&type=chunk)[207](index=207&type=chunk) - Loan agreements include covenants requiring minimum working capital and net worth, limits on dividends, and maintenance of family ownership of voting stock[206](index=206&type=chunk)[207](index=207&type=chunk) Material Construction Projects Approved as of July 19, 2019 (in thousands) | Project | Location | Projected Cost | Spent as of June 1, 2019 | Remaining Projected Cost | | :---------------------------------------- | :---------------- | :------------- | :----------------------- | :----------------------- | | Convertible/Cage-Free Layer Houses | Pittsburg, TX | $11,069 | $9,711 | $1,358 | | Convertible/Cage-Free Layer Houses | Lake City, FL | 11,782 | 8,383 | 3,399 | | Convertible/Cage-Free Layer Houses | Harwood, TX | 12,505 | 10,173 | 2,332 | | Convertible/Cage-Free Layer Houses | Bushnell, FL | 11,543 | 2,103 | 9,440 | | Convertible/Cage-Free Layer Houses | Bushnell, FL | 6,151 | 245 | 5,906 | | Cage-Free Pullet Houses | Zephyrhills, FL | 6,332 | 2 | 6,330 | | Convertible/Cage-Free Layer & Pullet Houses | Pittsburg, TX | 25,550 | 397 | 25,153 | | Convertible/Cage-Free Layer Houses | Delta, UT | 17,177 | 1,631 | 15,546 | | Cage-Free Layer & Pullet Houses/Processing Facility | Delta, UT | 84,664 | 208 | 84,456 | | Total | | $186,773 | $32,853 | $153,920 | [CONTRACTUAL OBLIGATIONS](index=32&type=section&id=CONTRACTUAL%20OBLIGATIONS) This section outlines the company's future estimated cash payments under various contractual obligations, including long-term debt, capital leases, and operating leases Future Estimated Cash Payments Under Contractual Obligations (in thousands) | Obligation Type | Total | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | | :---------------------------------- | :------ | :---- | :---- | :---- | :---- | :---- | :--------- | | Long-Term Debt & Capital Leases (Principal) | $2,554 | $1,696 | $205 | $215 | $224 | $214 | $— | | Long-Term Debt & Capital Leases (Interest) | 148 | 70 | 34 | 25 | 15 | 4 | — | | Operating Leases | 1,953 | 641 | 593 | 487 | 215 | 17 | — | | Total | $4,655 | $2,407 | $832 | $727 | $454 | $235 | $— | [IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS](index=32&type=section&id=IMPACT%20OF%20RECENTLY%20ISSUED%20ACCOUNTING%20STANDARDS) The company will adopt ASU 2016-02, Leases, in fiscal 2020, expecting to recognize approximately $2.0 million in new ROU assets and lease liabilities without material financial statement impact - The company will adopt ASU 2016-02, Leases, on **June 2, 2019**, using a modified retrospective approach, which is expected to result in the recognition of approximately **$2.0 million in new ROU assets and lease liabilities** for operating leases at the beginning of fiscal 2020, but is not expected to materially affect financial statements[301](index=301&type=chunk)[302](index=302&type=chunk)[305](index=305&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=32&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Key accounting policies include the valuation of investment securities, allowance for doubtful accounts, inventory valuation, long-lived asset impairment review, goodwill evaluation, and revenue recognition - Key accounting policies include valuation of investment securities (available-for-sale at fair value), allowance for doubtful accounts (based on aging and specific customer risk), and inventory valuation (lower of cost or net realizable value, with flock costs amortized over productive life)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk) - Long-lived assets are depreciated using the straight-line method and reviewed for impairment when circumstances indicate carrying value may not be recoverable[220](index=220&type=chunk) - Goodwill is evaluated for impairment annually through a qualitative assessment, followed by quantitative tests if necessary[224](index=224&type=chunk) - Revenue is recognized upon satisfaction of performance obligations, typically upon delivery and customer acceptance, with delivery costs included in SG&A[226](index=226&type=chunk)[227](index=227&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=35&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risks stem from volatile commodity prices for eggs, corn, and soybean meal, and interest rate changes, which are mitigated by a focus on specialty eggs and fixed-rate debt - Primary market risk exposure is from changes in prices of eggs, corn, and soybean meal, which are volatile commodities[232](index=232&type=chunk) - The company focuses on growing its specialty shell egg business to enhance margin stability, as specialty egg prices are generally less volatile[232](index=232&type=chunk) Impact of Price Changes for Corn and Soybean Meal on Feed Cost per Dozen (Fiscal 2019) | Feed ingredient | Approximate change in feed ingredient cost | Approximate impact on feed costs per dozen | Approximate dollar impact on farm production cost for the 2019 fiscal year | | :-------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------------------------------------- | | Corn | $0.25 change in the average market price per bushel | $0.01 | $8,767,050 | | Soybean Meal | $25.00 change in the average market price per ton | $0.01 | $8,767,050 | - All outstanding term debt at June 1, 2019, was fixed-rate, limiting exposure to interest rate fluctuations, and the company does not use interest rate derivative instruments[234](index=234&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=37&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents the audited consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows for fiscal years 2017-2019, along with the independent auditor's report and detailed notes on accounting policies and financial disclosures - The consolidated financial statements were audited by Frost, PLLC, who expressed an unqualified opinion on both the financial statements and the effectiveness of internal control over financial reporting as of **June 1, 2019**[238](index=238&type=chunk)[239](index=239&type=chunk) [Report of Independent Registered Public Accounting Firm](index=37&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Frost, PLLC, the company's auditor since 2007, issued an unqualified opinion on the consolidated financial statements and internal control over financial reporting - Frost, PLLC, served as the company's auditor since **2007** and issued an unqualified opinion on the consolidated financial statements and internal control over financial reporting[238](index=238&type=chunk)[239](index=239&type=chunk)[244](index=244&type=chunk) [Consolidated Balance Sheets](index=38&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity as of June 1, 2019, and June 2, 2018 Consolidated Balance Sheets (in thousands) | Assets | June 1, 2019 | June 2, 2018 | | :------------------------------------------------------------------ | :----------- | :----------- | | Cash and cash equivalents | $69,247 | $48,431 | | Investment securities available-for-sale | 250,181 | 282,586 | | Total current assets | 567,753 | 587,520 | | Investments in unconsolidated entities | 67,554 | 66,806 | | Goodwill | 35,525 | 35,525 | | Property, plant and equipment, less accumulated depreciation | 456,294 | 425,384 | | Total assets | $1,156,278 | $1,150,447 | | **Liabilities and Stockholders' Equity** | | | | Trade accounts payable | $39,210 | $37,840 | | Accrued dividends payable | — | 17,093 | | Total current liabilities | 74,907 | 107,838 | | Long-term debt, less current maturities | 641 | 2,554 | | Deferred income taxes, net | 82,597 | 76,055 | | Total liabilities | 166,472 | 194,765 | | Total Cal-Maine Foods, Inc. stockholders' equity | 986,624 | 953,333 | | Noncontrolling interest in consolidated entities | 3,182 | 2,349 | | Total stockholders' equity | 989,806 | 955,682 | | Total liabilities and stockholders' equity | $1,156,278 | $1,150,447 | [Consolidated Statements of Operations](index=40&type=section&id=Consolidated%20Statements%20of%20Operations) This section presents the company's financial performance, including net sales, cost of sales, gross profit, and net income (loss) for fiscal years 2017-2019 Consolidated Statements of Operations (in thousands, except per share amounts) | Category | Fiscal Year Ended June 1, 2019 | Fiscal Year Ended June 2, 2018 | Fiscal Year Ended June 3, 2017 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Net sales | $1,361,188 | $1,502,932 | $1,074,513 | | Cost of sales | 1,138,329 | 1,141,886 | 1,028,963 | | Gross profit | 222,859 | 361,046 | 45,550 | | Selling, general and administrative | 174,795 | 179,316 | 176,032 | | Legal settlement expense | 2,250 | 80,750 | — | | Operating income (loss) | 45,781 | 100,507 | (134,146) | | Total other income | 25,024 | 16,830 | 19,852 | | Income (loss) before income taxes and noncontrolling interest | 70,805 | 117,337 | (114,294) | | Income tax expense (benefit) | 15,743 | (8,859) | (39,867) | | Net income (loss) attributable to Cal-Maine Foods, Inc. | $54,229 | $125,932 | $(74,278) | | Basic Net income (loss) per share | $1.12 | $2.60 | $(1.54) | | Diluted Net income (loss) per share | $1.12 | $2.60 | $(1.54) | [Consolidated Statements of Comprehensive Income (Loss)](index=41&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) This section details the company's comprehensive income (loss), including net income and other comprehensive income (loss) components, for fiscal years 2017-2019 Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Category | Fiscal Year Ended June 1, 2019 | Fiscal Year Ended June 2, 2018 | Fiscal Year Ended June 3, 2017 | | :--------------------------------------------------------------------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net income (loss), including noncontrolling interests | $55,062 | $126,196 | $(74,427) | | Other comprehensive income (loss), before tax | 1,370 | (902) | (157) | | Income tax (benefit) expense related to items of other comprehensive income | 322 | (370) | (77) | | Other comprehensive income (loss), net of tax | 1,048 | (532) | (80) | | Comprehensive income (loss) | 56,110 | 125,664 | (74,507) | | Comprehensive income (loss) attributable to Cal-Maine Foods, Inc. | $55,277 | $125,400 | $(74,358) | [Consolidated Statements of Stockholders' Equity](index=42&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section outlines the changes in the company's stockholders' equity, including net income, dividends, and stock compensation expense, for fiscal years 2017-2019 - Total stockholders' equity increased from **$955.7 million at June 2, 2018, to $989.8 million at June 1, 2019**[247](index=247&type=chunk)[258](index=258&type=chunk) - Key changes in stockholders' equity for fiscal 2019 included net income of **$54.2 million**, dividends of **$(24.6) million**, and stock compensation expense of **$3.6 million**[258](index=258&type=chunk) [Consolidated Statements of Cash Flows](index=43&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's cash flow activities, categorized into operating, investing, and financing, for fiscal years 2017-2019 Consolidated Statements of Cash Flows (in thousands) | Cash Flows from Operating Activities | Fiscal Year Ended June 1, 2019 | Fiscal Year Ended June 2, 2018 | Fiscal Year Ended June 3, 2017 | | :------------------------------------------------------------------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) including noncontrolling interests | $55,062 | $126,196 | $(74,427) | | Net cash provided by (used in) operating activities | 115,085 | 200,415 | (45,918) | | **Cash Flows from Investing Activities** | | | | | Purchases of investments securities | (176,951) | (275,287) | (29,849) | | Sales and maturities of investment securities | 209,806 | 127,664 | 248,292 | | Acquisition of businesses, net of cash acquired | (17,889) | — | (85,822) | | Purchases of property, plant and equipment | (67,989) | (19,671) | (66,657) | | Net cash provided by (used in) investing activities | (47,817) | (163,850) | 52,734 | | **Cash Flows from Financing Activities** | | | | | Principal payments on long-term debt | (3,754) | (4,849) | (16,510) | | Payments of dividends | (41,713) | — | — | | Net cash used in financing activities | (46,452) | (5,698) | (18,298) | | Increase (decrease) in cash and cash equivalents | 20,816 | 30,867 | (11,482) | | Cash and cash equivalents at end of year | $69,247 | $48,431 | $17,564 | [Notes to Consolidated Financial Statements](index=44&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements, covering significant accounting policies, acquisitions, debt, and other financial matters [1. Significant Accounting Policies](index=44&type=section&id=1.%20Significant%20Accounting%20Policies) This note details the company's key accounting principles, including fiscal year end, revenue recognition, investment securities valuation, inventory methods, and dividend policy - The company's fiscal year ends on the Saturday nearest May 31, with the most recent three fiscal years ending on **June 1, 2019 (52 weeks), June 2, 2018 (52 weeks), and June 3, 2017 (53 weeks)**[266](index=266&type=chunk) - Two customers, Wal-Mart and Sam's Club, on a combined basis, accounted for **33.7%, 33.2% and 28.9% of the Company's net sales** in fiscal years 2019, 2018, and 2017, respectively[265](index=265&type=chunk) - Investment securities available-for-sale are carried at fair value, with unrealized gains and losses reported in stockholders' equity, and at June 1, 2019, unrealized gains, net of tax, were **$1.0 million**[271](index=271&type=chunk) - Inventories of eggs, feed, supplies, and flocks are valued at the lower of cost (FIFO) or net realizable value, with flock costs amortized over their productive lives (generally one to two years)[275](index=275&type=chunk) - The dividend policy is to pay **one-third of quarterly net income** attributable to Cal-Maine Foods, Inc., subject to cumulative profitability, and at June 1, 2019, cumulative losses of **$19.8 million** needed to be recovered before paying a dividend[284](index=284&type=chunk)[285](index=285&type=chunk) - The company adopted the new revenue recognition standard (ASU 2014-09) on **June 3, 2018**, using the full retrospective method, which did not have a material impact on its financial statements[393](index=393&type=chunk) [2. Acquisition](index=50&type=section&id=2.%20Acquisition) On October 14, 2018, Cal-Maine Foods acquired Featherland Egg Farms' commercial egg production and processing assets for $17.9 million in cash - On **October 14, 2018**, Cal-Maine Foods acquired substantially all commercial egg production and processing assets of Featherland Egg Farms, Inc. for **$17.9 million in cash**[308](index=308&type=chunk) - The acquired assets include facilities for approximately **600,000 laying hens**, a feed mill, and related production/distribution facilities near Marion, Texas[308](index=308&type=chunk) Featherland Egg Farms Acquisition Purchase Price Allocation (in thousands) | Category | Amount | | :------------------------ | :------- | | Inventory | $1,433 | | Property, plant and equipment | 16,206 | | Intangible assets | 250 | | Purchase price | $17,889 | [3. Investment in Unconsolidated Entities](index=50&type=section&id=3.%20Investment%20in%20Unconsolidated%20Entities) The company holds 50% interests in three joint ventures, accounted for using the equity method, with equity in income increasing in fiscal 2019 - The company holds **50% interests** in Red River Valley Egg Farm, LLC, Specialty Eggs, LLC, and Southwest Specialty Eggs, LLC, accounted for using the equity method[310](index=310&type=chunk) - Equity in income of unconsolidated entities increased to **$4.8 million in fiscal 2019** from **$3.5 million in fiscal 2018**, primarily due to improved results at Red River[191](index=191&type=chunk)[313](index=313&type=chunk) Condensed Consolidated Financial Information for Unconsolidated Joint Ventures (in thousands) | Category | Fiscal Year Ended June 1, 2019 | Fiscal Year Ended June 2, 2018 | Fiscal Year Ended June 3, 2017 | | :------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Net sales | $112,396 | $107,705 | $86,072 | | Net income | 9,490 | 7,071 | 2,804 | | Total assets | 128,470 | 134,056 | 131,871 | | Total liabilities | 7,600 | 5,859 | 6,543 | | Total equity | 120,870 | 128,197 | 125,328 | [4. Inventories](index=51&type=section&id=4.%20Inventories) This note details the composition of inventories, including flocks, eggs, feed, and supplies, and the flock costs charged to cost of sales Inventories (in thousands) | Category | June 1, 2019 | June 2, 2018 | | :------------------------ | :----------- | :----------- | | Flocks, net of accumulated amortization | $105,536 | $96,594 | | Eggs | 14,318 | 17,313 | | Feed and supplies | 52,383 | 54,737 | | Total | $172,237 | $168,644 | - Total flock at June 1, 2019, consisted of approximately **9.4 million pullets and breeders** and **36.2 million layers**[315](index=315&type=chunk) Flock Costs Charged to Cost of Sales (in thousands) | Category | Fiscal Year Ended June 1, 2019 | Fiscal Year Ended June 2, 2018 | Fiscal Year Ended June 3, 2017 | | :-------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Amortization | $119,658 | $117,774 | $118,859 | | Mortality | 5,161 | 4,438 | 5,213 | | Total flock costs charge to cost of sales | $124,819 | $122,212 | $124,072 | [5. Goodwill and Other Intangible Assets](index=52&type=section&id=5.%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill remained stable at $35.5 million with no impairment, while other intangible assets decreased due to amortization - Goodwill remained at **$35.5 million at June 1, 2019**, with no impairment recognized[225](index=225&type=chunk)[318](index=318&type=chunk) Goodwill by Acquisition (in thousands) | Fiscal Year | Description | Amount | | :---------- | :---------------------------------------- | :----- | | 1999 | Acquisition of Hudson Brothers, Inc. | $3,147 | | 2006 | Acquisition of Hillandale Farms, LLC | 869 | | 2007 | Acquisition of Green Forest Foods, LLC | 179 | | 2008 | Revised Hillandale incremental purchase price | 9,257 | | 2009 | Revised Hillandale incremental purchase price | 2,527 | | 2009 | Acquisition of Zephyr Egg, LLC | 1,876 | | 2009 | Acquisition of Tampa Farms, LLC | 4,600 | | 2010 | Revised Hillandale incremental purchase price | (338) | | 2013 | Acquisition of Maxim Production Co., Inc. | 2,300 | | 2014 | Purchase of joint venture partner's 50% in Delta Egg | 4,779 | | 2017 | Acquisition of Foodonics International, Inc. | 3,389 | | 2017 | Acquisition of Happy Hen Egg Farms, Inc. | 2,940 | | Total Goodwill | | $35,525| - Other intangible assets, net, decreased to **$23.8 million at June 1, 2019**, from **$26.3 million at June 2, 2018**, primarily due to amortization[318](index=318&type=chunk) Estimated Amortization Expense for Other Intangible Assets (in thousands) | Fiscal Period | Estimated amortization expense | | :------------ | :----------------------------- | | 2020 | $2,815 | | 2021 | 2,278 | | 2022 | 1,974 | | 2023 | 1,974 | | 2024 | 1,945 | | Thereafter | 12,056 | | Total | $23,042 | [6. Property, Plant and Equipment](index=54&type=section&id=6.%20Property%2C%20Plant%20and%20Equipment) This note details the composition of property, plant, and equipment, including land, buildings, machinery, and construction-in-progress, along with depreciation expense Property, Plant and Equipment (in thousands) | Category | June 1, 2019 | June 2, 2018 | | :------------------------ | :----------- | :----------- | | Land and improvements | $93,046 | $90,757 | | Buildings and improvements | 370,451 | 360,030 | | Machinery and equipment | 496,166 | 478,997 | | Construction-in-progress | 52,551 | 9,307 | | Total | 1,012,214 | 939,091 | | Less: accumulated depreciation | 555,920 | 513,707 | | Net Property, Plant and Equipment | $456,294 | $425,384 | - Depreciation expense was **$51.7 million in fiscal 2019, $51.1 million in fiscal 2018, and $48.8 million in fiscal 2017**[321](index=321&type=chunk) [7. Leases](index=54&type=section&id=7.%20Leases) This note outlines future minimum payments under non-cancelable operating leases and the company's rent expense Future Minimum Payments Under Non-Cancelable Operating Leases (in thousands) | Fiscal Year | Total minimum lease payments | | :---------- | :--------------------------- | | 2020 | $641 | | 2021 | 593 | | 2022 | 487 | | 2023 | 215 | | 2024 | 17 | | Total | $1,953 | - Rent expense (excluding vehicle rent) was **$3.9 million in fiscal 2019, $3.2 million in fiscal 2018, and $3.5 million in fiscal 2017**[323](index=323&type=chunk) [8. Credit Facilities and Long-Term Debt](index=55&type=section&id=8.%20Credit%20Facilities%20and%20Long-Term%20Debt) This note details the company's long-term debt, capital lease obligations, and the terms and covenants of its $100.0 million Senior Secured Revolving Credit Facility Long-Term Debt (in thousands) | Category | June 1, 2019 | June 2, 2018 | | :--------------------------------------------------------------------------------------------------- | :----------- | :----------- | | Note payable at 6.20%, due in monthly principal installments of $250,000, plus interest, maturing in fiscal 2020 | $1,500 | $4,500 | | Note payable at 5.40%, due in monthly principal installments of $125,000, plus interest, matured in fiscal 2019 | — | 250 | | Capital lease obligations | 1,054 | 1,340 | | Total debt | 2,554 | 6,090 | | Less: capitalized loan costs | 217 | — | | Total debt (net of capitalized loan costs) | 2,337 | 6,090 | | Less: current maturities | 1,696 | 3,536 | | Long-term debt, less current maturities | $641 | $2,554 | - The company entered into a **$100.0 million Senior Secured Revolving Credit Facility in July 2018**, with no amounts borrowed as of June 1, 2019, but **$3.7 million in outstanding standby letters of credit**[327](index=327&type=chunk) - The Revolving Credit Facility includes financial covenants such as a minimum working capital ratio of **2.00 to 1.00** and an annual capital expenditure limit of **$100.0 million**, along with a requirement for the Adams/Baker family to maintain at least **50% of the company's voting stock**[332](index=332&type=chunk) - As of June 1, 2019, the company was in compliance with all loan agreement covenants[334](index=334&type=chunk) [9. Employee Benefit Plans](index=56&type=section&id=9.%20Employee%20Benefit%20Plans) This note describes the company's employee benefit plans, including a self-insured medical plan, a KSOP plan, and deferred compensation and postretirement medical plans - The company maintains a self-insured medical plan with stop-loss insurance, incurring expenses of **$18.1 million in fiscal 2019**[335](index=335&type=chunk) - A KSOP plan covers substantially all employees, with company cash contributions of **$3.7 million in fiscal 2019**[336](index=336&type=chunk) - Deferred compensation plans for officers resulted in a total liability of **$4.9 million at June 1, 2019** (**$1.5 million for one plan, $3.4 million for another**)[338](index=338&type=chunk)[339](index=339&type=chunk) - An unfunded postretirement medical plan had a liability of **$2.9 million at June 1, 2019**[342](index=342&type=chunk) [10. Stock Compensation Plans](index=57&type=section&id=10.%20Stock%20Compensation%20Plans) This note details the company's stock compensation plans, including shares available for issuance, restricted stock grants, vesting schedules, and compensation expense - The **2012 Omnibus Long-Term Incentive Plan** had **336,052 shares available** for future issuance as of June 1, 2019[343](index=343&type=chunk) - In **January 2018, 94,189 restricted shares were granted**, vesting over three years or upon specific events, with unrecognized compensation expense of **$6.0 million at June 1, 2019**, to be amortized over **2.1 years**[344](index=344&type=chunk)[345](index=345&type=chunk) - Stock compensation expense was **$3.6 million in fiscal 2019, $3.5 million in fiscal 2018, and $3.4 million in fiscal 2017**[345](index=345&type=chunk) Summary of Equity Award Activity for Restricted Stock | Category | Number of Shares (June 1, 2019) | Weighted Average Grant Date Value (June 1, 2019) | | :------------------------ | :------------------------------ | :----------------------------------------------- | | Outstanding, June 3, 2017 | 247,735 | $35.97 | | Granted | 88,965 | $43.81 | | Vested | (85,990) | $36.76 | | Forfeited | (9,420) | $42.43 | | Outstanding, June 2, 2018 | 241,290 | $42.30

Index UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (mark one) þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 2, 2019 OR ¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to ____________ | --- | --- | --- | --- | --- | --- | --- | |--------------------------------------------------------------------------------- ...