Cal-Maine Foods(CALM) - 2022 Q4 - Annual Report

Company Overview - The company is the largest producer and distributor of shell eggs in the U.S., with a total flock of approximately 42.2 million layers and 11.5 million pullets and breeders as of May 28, 2022[6]. - The company has completed 23 acquisitions since 1989, with the most recent acquisition of Red River Valley, which includes 1.7 million layers[8]. - The company is a member of the Eggland's Best cooperative, producing and marketing branded eggs under exclusive license agreements[23]. - The shell egg production industry remains highly fragmented, with the ten largest producers owning approximately 53% of industry table egg layer hens[27]. Financial Performance - Total net sales for fiscal 2022 were $1,777.2 million, an increase of 31.7% compared to $1,349.0 million for fiscal 2021[95]. - Gross profit increased by $176.4 million to $337.1 million in fiscal 2022, primarily due to higher selling prices for conventional eggs[91]. - Net income attributable to Cal-Maine Foods, Inc. was 7.5% for fiscal 2022, a significant increase from 0.2% in fiscal 2021[92]. - Operating income for fiscal 2022 was $143.5 million, compared to an operating loss of $26.3 million in fiscal 2021[102]. - The company reported a comprehensive income of $131,612,000 for the fiscal year ended May 28, 2022, compared to $1,423,000 in the previous year[141]. Production and Sales - In fiscal 2022, 94.3% of the total shell eggs sold were produced, with 91.7% from company-owned facilities and 8.3% from contract producers[17]. - Sales of cage-free eggs represented approximately 22.1% of shell egg revenues for fiscal year 2022[18]. - Conventional eggs accounted for 59.8% of revenue and 69.0% of volume in fiscal 2022, while total specialty eggs contributed 36.5% of revenue and 31.0% of volume[22]. - The company sold approximately 1,083.8 million dozen shell eggs in fiscal 2022, representing about 20% of domestic shell egg consumption[87]. Market Conditions - Wholesale shell egg prices are volatile and influenced by factors such as consumer demand and supply fluctuations, with prices rising in the fourth quarter of fiscal 2022 due to HPAI[11]. - The highly pathogenic avian influenza outbreak impacted approximately 30.7 million laying hens in 2022 through June, affecting supply and prices[43]. - The average per capita U.S. egg consumption in 2021 was estimated to be 280 eggs, or approximately 5.4 eggs per person per week[10]. - Specialty eggs are generally sold at higher prices and have experienced less volatility compared to conventional shell eggs[13]. Cost Structure - In fiscal 2022, feed costs represented 61.9% of the company's farm production costs, with annual feed requirements of 1.9 million tons[14]. - Feed costs per dozen produced rose to $0.571 in fiscal 2022, a 28.1% increase from $0.446 in fiscal 2021[91]. - The average Chicago Board of Trade daily market price for corn was $6.31 per bushel and $392.06 per ton for soybean meal in fiscal 2022, representing increases of 38.3% and 6.1%, respectively[93]. Investments and Expansion - The company plans to invest $105 million to expand cage-free egg production capabilities, including new facilities in Florida and Utah, expected to be completed by 2023 and 2025 respectively[8]. - The company has invested up to $18.5 million in MeadowCreek Foods, LLC, to specialize in high-value commercial egg product solutions, with production expected to start in late fiscal 2023 second quarter[21]. - Approximately $516 million has been invested in facilities and equipment to expand cage-free production since 2008, with a projected cost of $131.974 million for a new facility expected to be completed in fiscal 2023[116]. Regulatory and Compliance - Ten states have passed legislation mandating cage-free requirements for egg production, affecting approximately 27% of the U.S. population[30]. - The company may face significant costs to comply with evolving animal welfare regulations, particularly regarding cage-free egg production[56]. - The company is closely monitoring HPAI outbreaks and has implemented robust biosecurity measures across its locations[10]. Workforce and Diversity - As of May 28, 2022, the company employed 2,985 individuals, with 2,346 in egg production, processing, and marketing, and 197 in feed mill operations[32]. - Women represent 29% of the company's board, while 52% of the workforce identifies as racial or ethnic minorities, highlighting diversity efforts[36]. - Approximately 76% of employees are paid at hourly rates, with most earning above the federal minimum wage[37]. Risks and Challenges - The company faces risks from agricultural factors, including outbreaks of avian disease, which can adversely affect the quality and quantity of shell eggs produced[52]. - Cyber-attacks and security breaches pose risks to the company's information technology systems, potentially impacting operations and reputation[52]. - Labor costs increased significantly in fiscal 2021 and 2022 due to pandemic-related wage increases, with approximately 76% of employees paid hourly[53]. Shareholder Returns - The company has a variable dividend policy, paying dividends equal to one-third of quarterly net income attributable to the company[77]. - Total dividends paid increased to $6.1 million in fiscal 2022 from $1.7 million in fiscal 2021, reflecting a significant rise in shareholder returns[113].