Cal-Maine Foods(CALM) - 2024 Q1 - Quarterly Report

Part I Item 1. Financial Statements Unaudited Q1 FY2024 financial statements show significant declines in net income and operating cash flow, driven by lower egg prices Condensed Consolidated Balance Sheets As of September 2, 2023, total assets slightly decreased to $1.90 billion, liabilities fell to $289.0 million, and equity remained stable Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 2, 2023 | June 3, 2023 | | :--- | :--- | :--- | | Total Current Assets | $1,064,058 | $1,124,925 | | Total Assets | $1,900,367 | $1,954,525 | | Total Current Liabilities | $126,382 | $182,731 | | Total Liabilities | $289,037 | $344,942 | | Total Stockholders' Equity | $1,611,330 | $1,609,583 | Condensed Consolidated Statements of Income Q1 FY2024 net sales declined to $459.3 million, resulting in an operating loss of $6.8 million and net income plummeting to $0.9 million Income Statement Summary (in thousands, except per share data) | Metric | Thirteen Weeks Ended Sep 2, 2023 | Thirteen Weeks Ended Aug 27, 2022 | | :--- | :--- | :--- | | Net Sales | $459,344 | $658,344 | | Gross Profit | $45,433 | $217,490 | | Operating Income (Loss) | $(6,757) | $163,850 | | Net Income Attributable to Cal-Maine | $926 | $125,287 | | Diluted EPS | $0.02 | $2.57 | Condensed Consolidated Statements of Comprehensive Income Q1 FY2024 comprehensive income significantly decreased to $1.5 million, primarily due to the substantial drop in net income Comprehensive Income (in thousands) | Metric | Thirteen Weeks Ended Sep 2, 2023 | Thirteen Weeks Ended Aug 27, 2022 | | :--- | :--- | :--- | | Net Income | $411 | $125,134 | | Other Comprehensive Income (Loss), net of tax | $595 | $(754) | | Comprehensive Income | $1,006 | $124,380 | | Comprehensive Income Attributable to Cal-Maine | $1,521 | $124,533 | Condensed Consolidated Statements of Cash Flows Net cash from operations significantly decreased to $23.7 million, while investing activities provided $80.9 million and financing activities used $37.0 million Cash Flow Summary (in thousands) | Cash Flow Activity | Thirteen Weeks Ended Sep 2, 2023 | Thirteen Weeks Ended Aug 27, 2022 | | :--- | :--- | :--- | | Net cash provided by operations | $23,685 | $172,812 | | Net cash provided by (used in) investing | $80,880 | $(59,122) | | Net cash used in financing | $(37,046) | $(36,753) | | Net change in cash | $67,519 | $76,937 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, key financial items, legal proceedings, and a significant subsequent asset acquisition - The financial statements were prepared in accordance with U.S. GAAP for interim reporting and reflect all necessary adjustments of a normal recurring nature[15] - No new accounting pronouncements issued or effective during the fiscal year had or are expected to have a material impact on the company's Consolidated Financial Statements[30] Investment Securities by Type (in thousands) | Security Type | Estimated Fair Value (Sep 2, 2023) | Estimated Fair Value (June 3, 2023) | | :--- | :--- | :--- | | Corporate bonds | $126,941 | $138,577 | | US government and agency obligations | $94,264 | $100,769 | | Commercial paper | $8,898 | $56,409 | | Other | $19,516 | $49,329 | | Total Current Investments | $249,619 | $355,090 | Revenue by Product Category (in thousands) | Product Category | Q1 FY2024 | Q1 FY2023 | | :--- | :--- | :--- | | Conventional shell egg sales | $225,280 | $425,589 | | Specialty shell egg sales | $208,681 | $200,820 | | Egg products | $22,223 | $27,640 | | Other | $3,160 | $4,295 | | Total | $459,344 | $658,344 | - Subsequent to the quarter end, on September 28, 2023, the company entered into a definitive agreement to acquire substantially all the assets of Fassio Egg Farms, Inc., which has a capacity of approximately 1.2 million laying hens, primarily cage-free[92] - The company is involved in several legal proceedings, including antitrust litigation with Egg Products Plaintiffs (trial set for October 17, 2023) and watershed pollution litigation in Oklahoma, with management believing a material adverse outcome is reasonably possible but unable to estimate monetary exposure[5][86][90] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY2024's significant financial downturn, driven by a 48.7% drop in conventional egg prices, impacting gross profit despite lower feed costs, as the company pursues cage-free investments Executive Overview Q1 FY2024 results were impacted by volatile egg prices, with a significant drop in conventional egg prices reducing gross profit, as the company expands cage-free capacity - Cal-Maine Foods is the largest producer and distributor of fresh shell eggs in the U.S., with a flock of approximately 41.9 million layers and 10.0 million pullets and breeders[97] - The U.S. layer hen flock has largely recovered from the HPAI outbreak but remains slightly below the five-year average, with numbers at 318.2 million as of September 1, 2023, up 3.1% from a year ago[69][70] - The company is expanding its cage-free production to meet evolving state requirements and customer goals, with cage-free egg revenue representing approximately 33.0% of total net shell egg revenue for Q1 FY2024[66] Q1 FY2024 vs. Q1 FY2023 Key Metrics | Metric | Q1 FY2024 | Q1 FY2023 | | :--- | :--- | :--- | | Net Average Selling Price / Dozen | $1.589 | $2.275 | | Conventional Egg Price / Dozen | $1.241 | $2.368 | | Specialty Egg Price / Dozen | $2.278 | $2.101 | | Gross Profit (in millions) | $45.4 | $217.5 | Results of Operations Q1 FY2024 net sales decreased 30.2% to $459.3 million, driven by a 47.1% drop in conventional egg prices, resulting in a 9.9% gross margin and an operating loss Shell Egg Sales Analysis (Q1 FY2024 vs Q1 FY2023) | Category | Net Sales Change | Price Change | Volume Change | | :--- | :--- | :--- | :--- | | Conventional Eggs | -47.1% | -47.6% | +1.0% | | Specialty Eggs | +3.9% | +8.4% | -4.2% | Cost of Sales Analysis (per dozen produced) | Cost Component | Q1 FY2024 | Q1 FY2023 | % Change | | :--- | :--- | :--- | :--- | | Feed | $0.597 | $0.667 | -10.5% | | Other Farm Production | $0.439 | $0.379 | +15.8% | | Total Farm Production | $1.036 | $1.046 | -1.0% | - Other farm production costs increased primarily due to higher flock amortization from increased cage-free production and a 16.5% increase in labor costs[163][164] - Selling, general, and administrative (SGA) expenses decreased 2.5% to $52.2 million, primarily due to lower delivery expenses and franchise fees[200] Liquidity and Capital Resources The company maintains strong liquidity with $937.7 million in working capital and no long-term debt, despite lower net cash from operations - Working capital was $937.7 million at September 2, 2023, compared to $942.2 million at June 3, 2023[172] - The company has no long-term debt outstanding and access to a $250 million senior secured revolving credit facility, under which no amounts were borrowed as of September 2, 2023[174] Approved Material Construction Projects (in thousands) | Project Type | Projected Completion | Total Projected Cost | Remaining Cost | | :--- | :--- | :--- | :--- | | Cage-Free Layer & Pullet Houses | Fiscal 2024-2027 | $190,607 | $88,981 | | Feed Mill | Fiscal 2025 | $10,800 | $10,764 | | Total | | $201,407 | $99,745 | Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk exposure occurred during Q1 FY2024 compared to prior Annual Report disclosures - There have been no material changes in the company's exposure to market risk during the thirteen weeks ended September 2, 2023[176] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of September 2, 2023, with no material changes to internal controls - Based on an evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 2, 2023[215] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[192] Part II Item 1. Legal Proceedings Legal proceedings information is incorporated by reference from Note 9 of the Condensed Consolidated Financial Statements and the 2023 Annual Report - Information regarding legal proceedings is incorporated by reference from Note 9 of the Notes to Condensed Consolidated Financial Statements in this report and from the company's 2023 Annual Report[211] Item 1A. Risk Factors No material changes occurred in risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - There have been no material changes in the risk factors previously disclosed in the Company's 2023 Annual Report[180] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities During Q1 FY2024, the company repurchased shares primarily to satisfy employee tax withholding obligations related to restricted stock vesting Q1 2024 Share Repurchases | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | 06/04/23 to 07/01/23 | — | — | | 07/02/23 to 07/29/23 | 106 | $44.75 | | 07/30/23 to 09/02/23 | — | — | | Total | 106 | $44.75 | - The repurchased shares were withheld by the company to satisfy employee tax withholding obligations related to the vesting of restricted common stock[194] Item 6. Exhibits This section lists exhibits filed, including corporate documents, officer certifications, and Inline XBRL documents - Exhibits filed with this report include officer certifications required by the Sarbanes-Oxley Act and various Inline XBRL taxonomy documents[181] Signatures The report was duly signed on October 3, 2023, by the Vice President and Chief Financial Officer and Vice President – Accounting - The report was duly signed on October 3, 2023, by Max P. Bowman, Vice President and Chief Financial Officer, and Matthew S. Glover, Vice President – Accounting[183][197]