Cal-Maine Foods(US:CALM)2025-07-22 20:22Part I Business Cal-Maine Foods, the largest U.S. shell egg producer, pursues organic growth in specialty eggs and strategic acquisitions, facing volatile prices and customer concentration - The company is the largest producer and distributor of shell eggs in the United States, with a total flock of approximately 48.3 million layers and 11.5 million pullets and breeders as of May 31, 20251113 - The company's growth strategy is centered on both organic growth, particularly in cage-free and specialty eggs, and accretive acquisitions to expand its shell egg, egg product, and prepared foods businesses61 - Subsequent to fiscal year 2025, the company acquired Echo Lake Foods, a prepared foods company, for approximately $258 million, expanding its product offerings1649 FY2025 Product Sales Breakdown | Product Category | Revenue % | Volume % | | :--- | :--- | :--- | | Total Conventional Eggs | 66.9% | 63.3% | | Total Specialty Eggs | 27.6% | 36.7% | | Egg Products and Prepared Foods | 4.6% | N/A | - Feed is a primary cost, representing 53.4% of farm production costs in fiscal 2025. The company formulates and produces the vast majority of its own feed29 - Significant customer concentration exists, with the top three customers accounting for 49.2% of net sales in fiscal 2025. Walmart Inc. is the largest customer, representing 33.6% of net sales56 Risk Factors The company faces significant risks from volatile egg and feed prices, HPAI outbreaks, customer concentration, cage-free transition costs, and the recent loss of "controlled company" status - Operating results are significantly affected by volatile wholesale shell egg market prices, which are cyclical and outside the company's control. Small changes in industry production or demand can have a large adverse effect on prices8081 - Feed costs, the largest element of farm production cost (53% to 63% in the last five fiscal years), are volatile and subject to global supply/demand factors, weather, and geopolitical instability8485 - Outbreaks of agricultural diseases, particularly Highly Pathogenic Avian Influenza (HPAI), have harmed and could continue to harm the business by requiring flock depopulation and impacting supply and prices87 - The business is exposed to customer concentration risk, with the top three customers accounting for 49.2% of net sales in fiscal 2025. The loss of or reduced purchases by a large customer could materially affect results100101 - The company faces significant uncertainty and costs related to the transition to cage-free eggs, driven by state legislation and customer demands. This requires substantial capital investment and creates risk of misjudging future demand115117121 - On April 14, 2025, the company ceased to be a "controlled company" under Nasdaq rules after the founding family's Class A super-voting shares were converted to common stock. This could disrupt business and increase susceptibility to outside influence137139 Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None143 Cybersecurity The company manages cybersecurity risk using the NIST framework with Board oversight, reporting no material threats as of the report date - The company's cybersecurity risk management strategy is based on the National Institute of Standards and Technology (NIST) Cybersecurity Framework146 - The Board of Directors oversees cybersecurity risk management, with the Audit Committee receiving quarterly reports from the Director of Information Technology150 - As of July 22, 2025, the company is not aware of any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect the company149 Properties The company owns extensive production facilities across multiple states and 33,200 acres of land, with ongoing cage-free expansion projects Operational Facilities Summary (as of May 31, 2025) | Type | Quantity | Production Capacity Highlights | | :--- | :--- | :--- | | Shell Egg Production | 49 | House up to 51.8 million layers | | Feed Mills | 30 | 1,000 tons of feed per hour | | Processing and Packaging | 50 | ~674,700 dozen shell eggs per hour | | Pullet Facilities | 37 | House up to 14.3 million pullets | | Egg Products/Prepared Foods | 5 | 72,700 lbs. per hour | - The company has ongoing construction projects to expand cage-free egg production, which are expected to be completed through fiscal 2026153 - As of May 31, 2025, the company owned approximately 33,200 acres of land, with no material mortgages or liens on its properties154 Legal Proceedings The company is involved in significant legal proceedings, including antitrust investigations and litigation, with a $19.6 million accrual for one case - The company refers to Note 16 of the Consolidated Financial Statements for a detailed description of its legal proceedings155 Mine Safety Disclosures This item is not applicable to the company - Not applicable156 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq, with a variable dividend policy and a new $500 million share repurchase program, having lost its "controlled company" status - The company's variable dividend policy is to pay a quarterly dividend equal to one-third (1/3) of the quarterly net income attributable to Cal-Maine Foods, Inc159 - On February 25, 2025, the company announced a $500 million share repurchase program. During the fourth quarter of fiscal 2025, 551,876 shares were repurchased for approximately $50 million164232 - Following the conversion of all Class A Common Stock to Common Stock in fiscal 2025, the company is no longer a "controlled company" under Nasdaq rules158 Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2025 saw record net sales of $4.3 billion and net income of $1.2 billion, driven by higher egg prices due to HPAI and increased sales volume, with strong liquidity Fiscal Year 2025 vs 2024 Performance | Metric | Fiscal 2025 | Fiscal 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $4,261.9M | $2,326.4M | +83.2% | | Gross Profit | $1,850.9M | $541.6M | +241.7% | | Net Income (to CALM) | $1,220.0M | $277.9M | +339.0% | | Diluted EPS | $24.95 | $5.69 | +338.5% | | Net Avg. Shell Egg Price/Doz | $3.134 | $1.932 | +62.2% | | Feed Costs/Doz Produced | $0.490 | $0.550 | -10.9% | - The significant increase in net sales and profit in fiscal 2025 was primarily driven by higher average selling prices for shell eggs, especially conventional eggs, due to reduced national supply caused by HPAI outbreaks185186 - Total dozens sold increased by 11.8% in fiscal 2025, supported by the acquisition of ISE's commercial shell egg business and increased outside egg purchases to meet customer demand187 - The company's liquidity remains strong, with working capital increasing to $1.7 billion at fiscal year-end 2025 from $1.0 billion in 2024, and cash from operations was $1.2 billion223224 - As of May 31, 2025, the company has approved material construction projects with a remaining projected cost of $53.2 million, primarily for cage-free layer and pullet houses235 Results of Operations Net sales surged 83.2% to $4.3 billion in fiscal 2025, driven by higher shell egg prices and increased egg product sales, significantly expanding gross profit margin Shell Egg Sales Analysis (FY2025 vs FY2024) | Category | FY2025 Sales ($M) | FY2024 Sales ($M) | Dozens Sold (M) FY25 | Dozens Sold (M) FY24 | Avg. Price/Doz FY25 | Avg. Price/Doz FY24 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Conventional | $2,835.4 | $1,291.7 | 812.4 | 746.7 | $3.490 | $1.730 | | Specialty | $1,184.5 | $925.7 | 470.2 | 400.9 | $2.519 | $2.309 | | Total | $4,019.9 | $2,217.4 | 1,282.6 | 1,147.6 | $3.134 | $1.932 | Cost of Sales Analysis (FY2025 vs FY2024) | Cost Component | FY2025 ($M) | FY2024 ($M) | % Change | | :--- | :--- | :--- | :--- | | Farm production | $1,035.6 | $987.9 | +4.8% | | Processing, packaging, warehouse | $396.1 | $335.9 | +17.9% | | Egg purchases and other | $819.6 | $380.2 | +115.6% | | Egg products and prepared foods | $159.6 | $80.9 | +97.4% | | Total Cost of Sales | $2,411.0 | $1,784.9 | +35.1% | - Farm production costs per dozen produced decreased by 6.6% to $0.918, primarily due to a 10.9% drop in feed costs per dozen to $0.490200205 - SG&A expenses increased by $61.8 million (24.5%), mainly due to a $20.7 million increase in delivery expense, and a $59.2 million increase in other general and administrative expenses, which included a $15 million adjustment to contingent consideration207211 Liquidity and Capital Resources Liquidity significantly improved in fiscal 2025 with working capital at $1.7 billion and $1.2 billion in operating cash flow, supporting acquisitions and capital projects Key Liquidity Metrics | Metric | May 31, 2025 | June 1, 2024 | | :--- | :--- | :--- | | Working Capital | $1.7 billion | $1.0 billion | | Current Ratio | 6.4 | 5.5 | | Cash and Cash Equivalents | $499.4 million | $237.9 million | Cash Flow Summary (Fiscal 2025) | Cash Flow Activity | Amount ($M) | | :--- | :--- | | Net Cash from Operating Activities | $1,224.7 | | Net Cash used in Investing Activities | ($575.5) | | Net Cash used in Financing Activities | ($386.7) | | Increase in Cash | $262.5 | - Subsequent to fiscal year-end, the company acquired Echo Lake Foods for approximately $258 million, funded with available cash on hand228 - The company has a $250 million senior secured revolving credit facility which was undrawn as of May 31, 2025229 Quantitative and Qualitative Disclosures About Market Risk Primary market risks include volatile commodity prices for eggs and feed, with significant credit risk concentration from Walmart Inc - The primary market risk arises from volatile prices of conventional eggs and feed ingredients like corn and soybean meal, which the company ordinarily does not hedge with long-term contracts253 - A sensitivity analysis indicates that a $0.28 change in the price per bushel of corn or a $25.46 change in the price per ton of soybean meal each result in a $0.01 change to the feed cost per dozen eggs253 - A significant concentration of credit risk exists with Walmart Inc. (including Sam's Club), which represented 28.1% of the company's net accounts receivable balance as of May 31, 2025256 Financial Statements and Supplementary Data Audited financial statements received an unqualified opinion, with contingent liabilities from litigation identified as a Critical Audit Matter, reflecting strong fiscal 2025 performance - The independent registered public accounting firm, Frost, PLLC, issued an unqualified opinion on the consolidated financial statements258 - The auditor identified "Contingent Liabilities – Litigation and Claims" as a Critical Audit Matter due to the subjective judgment required to assess the likelihood and amount of potential losses262263 Consolidated Balance Sheet Highlights (in thousands) | Account | May 31, 2025 | June 1, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,968,110 | $1,241,839 | | Total Assets | $3,084,619 | $2,184,761 | | Total Current Liabilities | $308,371 | $227,743 | | Total Liabilities | $518,604 | $387,718 | | Total Stockholders' Equity | $2,566,015 | $1,797,043 | - Note 16 (Commitments and Contingencies) details ongoing litigation, including a DOJ antitrust investigation and an accrued expense of $19.6 million in Q2 FY24 related to the Kraft Foods antitrust case390397 - Note 17 (Subsequent Events) discloses the acquisition of Echo Lake Foods on June 2, 2025, for approximately $258 million401 - Note 11 (Equity) details the conversion of all Class A Common Stock on April 14, 2025, after which the company was no longer a "controlled company"366371 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on any matter of accounting principles or practices, or financial statement disclosure - None403 Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective, with the auditor issuing an unqualified attestation report - Management concluded that the company's disclosure controls and procedures were effective as of May 31, 2025404 - Management determined that the company's internal control over financial reporting was effective as of May 31, 2025, based on the COSO 2013 framework405 - The independent registered public accounting firm, Frost, PLLC, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of May 31, 2025406 Other Information No director or officer adopted or terminated any Rule 10b5-1 trading arrangement during the fourth quarter of fiscal 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the fourth quarter of fiscal 2025413 Part III Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the company's definitive proxy statement for its 2025 annual meeting of stockholders - Information is incorporated by reference from the registrant's Definitive Proxy Statement for its 2025 annual meeting of stockholders416 Executive Compensation Information for this item concerning executive compensation is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the registrant's Definitive Proxy Statement for its 2025 annual meeting of stockholders419 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item regarding security ownership is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the registrant's Definitive Proxy Statement for its 2025 annual meeting of stockholders420 Certain Relationships and Related Transactions, and Director Independence Information for this item concerning related party transactions and director independence is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the registrant's Definitive Proxy Statement for its 2025 annual meeting of stockholders421 Principal Accountant Fees and Services Information for this item regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the registrant's Definitive Proxy Statement for its 2025 annual meeting of stockholders423 Part IV Exhibit and Financial Statement Schedules This section details the financial statements, schedules, and exhibits included in the Form 10-K filing - This section lists the financial statements included in Item 8 and all exhibits filed with or incorporated by reference into the Form 10-K424426 Form 10-K Summary The company has not provided a summary for its Form 10-K - None429