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CAL-MAINE FOODS INC

CAL-MAINE FOODS INCCALMEarnings & Financial Report

Nasdaq · Consumer Staples · Agricultural Prod-Livestock & Animal Specialties

Cal-Maine Foods, Inc. is an American fresh egg producer based in Ridgeland, Mississippi. As of 2024, it was the largest egg producer in the United States. Its eggs are sold under several different brand names, including Egg-Land's Best, Land O'Lakes, Farmhouse Eggs, Sunups, Sunny Meadow, and 4-Grain. The company was founded in 1957 by Fred R. Adams, Jr., whose family owns a controlling interest in the company, which is publicly traded on the NASDAQ stock exchange.

What changed in CAL-MAINE FOODS INC's 10-K — 2022 vs 2023

Top changes in CAL-MAINE FOODS INC's 2023 10-K

292 paragraphs added · 284 removed · 196 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

69 edited+31 added−25 removed34 unchanged
Many of our customers rely on us to provide most of their shell egg needs, including specialty and conventional eggs. Specialty eggs encompass a broad range of products. We classify nutritionally enhanced, cage-free, organic, free-range, pasture-raised and brown eggs as specialty eggs for accounting and reporting purposes. We classify all other shell eggs as conventional products.
Many of our customers rely on us to provide most of their shell egg needs, including specialty and conventional eggs. Specialty eggs encompass a broad range of products. We classify cage-free, organic, brown, free-range, pasture-raised and nutritionally enhanced as specialty eggs for accounting and reporting purposes. We classify all other shell eggs as conventional products.
Most recently, effective on May 30, 2021, the Company acquired the remaining 50% membership interest in Red River Valley Egg Farm, LLC (“Red River”), which owns and operates a specialty shell egg production complex that includes 1.7 million cage-free hens. For further description of this transaction, refer to Part II. Item 8.
Most recently, effective on May 30, 2021, the Company acquired the remaining 50% membership interest in Red River Valley Egg Farm, LLC (“Red River”), which owns and operates a specialty shell egg production complex that includes 1.7 million cage-free hens. For a further description of this transaction, refer to Part II. Item 8.
We sell the majority of our conventional shell eggs based on formulas that take into account, in varying ways, independently quoted regional wholesale market prices for shell eggs or formulas related to our costs of production, which include the cost of corn and soybean meal.
We sell the majority of our conventional shell eggs based on formulas that take into account, in varying ways, independently quoted regional wholesale market prices for shell eggs 5 or formulas related to our costs of production, which include the cost of corn and soybean meal.
At each of our locations, our general managers are expected to uphold and implement our Employee Safety and Health Program in alignment with OSHA requirements. We believe that this program, which is reviewed annually by our senior management team, contributes to strong safety outcomes.
At each of our locations, our general managers are expected to uphold and implement our Safety and Health Program in alignment with OSHA requirements. We believe that this program, which is reviewed annually by our senior management team, contributes to strong safety outcomes.
The Company has one operating segment, which is the production, grading, packaging, marketing and distribution of shell eggs. Our integrated operations consist of hatching chicks, growing and maintaining flocks of pullets, layers and breeders, manufacturing feed, and producing, processing, packaging, and distributing shell eggs.
The Company has one reportable operating segment, which is the production, grading, packaging, marketing and distribution of shell eggs. Our integrated operations consist of hatching chicks, growing and maintaining flocks of pullets, layers and breeders, manufacturing feed, and producing, processing, packaging, and distributing shell eggs.
We will continue to closely evaluate the need to continue to expand and convert our own facilities to increase production of cage-free eggs based on a timeline designed to meet the anticipated needs of our customers and comply with evolving legal requirements.
We will also continue to closely evaluate the need to continue to expand and convert our own facilities to increase production of cage-free eggs based on a timeline designed to meet the anticipated needs of our customers and comply with evolving legal requirements.
The committee’s goals include working to help ensure that our engagements with our consumers, customers, and regulators evidence our strong commitment to our workers’ health and safety. Our commitment to our colleagues’ health includes a strong commitment to on-site worker safety, including a focus on accident prevention and life safety.
The 11 committee’s goals include working to help ensure that our engagements with our consumers, customers, and regulators evidence our strong commitment to our workers’ health and safety. Our commitment to our colleagues’ health includes a strong commitment to on-site worker safety, including a focus on accident prevention and life safety.
While we use several different pricing mechanisms in pricing agreements with our customers, we believe the majority of conventional shell eggs sold in the U.S. in the retail and foodservice channels are sold at prices that take into account, in varying ways, independently quoted wholesale market prices, such as those published by Urner Barry Publications, Inc. ("UB") for shell eggs.
While we use several different pricing mechanisms in pricing agreements with our customers, we believe the majority of conventional shell eggs sold in the U.S. in the retail and foodservice channels are sold at prices that take into account, in varying ways, independently quoted wholesale market prices, such as those published by Urner Barry Publications, Inc.
We have an extensive written protocol that allows the use of medically important antibiotics only when animal health is at risk, consistent with guidance from the United States Food and Drug Administration ("FDA") and the Guidance for Judicious Therapeutic Use of Antimicrobials in Poultry, developed by the American Association of Avian Pathologists.
We have an extensive written protocol that allows the use of medically important antibiotics only when animal health is at risk, consistent with guidance from the United States Food and Drug Administration (“FDA”) and the Guidance for Judicious Therapeutic Use of Antimicrobials in Poultry, developed by the American Association of Avian Pathologists.
We have aligned our AWP with regulatory, veterinary and our certifying bodies’ guidance to govern welfare of animals in our direct care, our contract farmers’ care and our farmer-suppliers’ care. We continually review our program to monitor and evolve standards that guide how we hatch chicks, rear pullets and nurture breeder and layer hens.
We have aligned our AWP with regulatory, veterinary and our third-party certifying bodies’ guidance to govern welfare of animals in our direct care, our contract farmers’ care and our farmer-suppliers’ care. We continually review our program to monitor and evolve standards that guide how we hatch chicks, rear pullets and nurture breeder and layer hens.
Our focus on equitable treatment extends to recruitment, employment applications, hiring, placement, job assignments, career development, training, remuneration, benefits, discharge and other matters tied to terms and conditions of employment. We are committed to offer our colleagues opportunities commensurate with our operational needs, their experiences, goals and contributions.
Our focus on equitable treatment extends to recruitment, employment applications, hiring, placement, job assignments, career development, training, remuneration, benefits, discharge and other matters tied to terms and conditions of employment. We are committed to offering our colleagues opportunities commensurate with our operational needs, their experiences, goals and contributions.
As the ongoing production of cage-free eggs is more costly than the production of conventional eggs, aligning our cage-free production capabilities with changing demand for cage-free eggs is important to the success of our business. Table of Contents 10 Trademarks and License Agreements We own the trademarks Farmhouse Eggs® , Sunups® , Sunny Meadow® and 4Grain® .
As the ongoing production of cage-free eggs is more costly than the production of conventional eggs, aligning our cage-free production capabilities with changing demand for cage-free eggs is important to the success of our business. 10 Trademarks and License Agreements We own the trademarks Farmhouse Eggs® , Sunups® , Sunny Meadow® and 4Grain® .
Government Regulation Our facilities and operations are subject to regulation by various federal, state, and local agencies, including, but not limited to, the FDA, USDA, Environmental Protection Agency ("EPA"), Occupational Safety and Health Administration ("OSHA") and corresponding state agencies or laws. The applicable regulations relate to grading, quality control, labeling, sanitary control and reuse or disposal of waste.
Government Regulation Our facilities and operations are subject to regulation by various federal, state, and local agencies, including, but not limited to, the FDA, USDA, Environmental Protection Agency (“EPA ”), Occupational Safety and Health Administration ("OSHA") and corresponding state agencies or laws. The applicable regulations relate to grading, quality control, labeling, sanitary control and reuse or disposal of waste.
Recruitment, Development and Retention We believe in compensating our colleagues with fair and competitive wages, in addition to offering competitive benefits. Approximately 76% of our employees are paid at hourly rates, with the majority paid at rates above the federal minimum wage requirement. We offer our full-time eligible employees a range of benefits, including company-paid life insurance.
Recruitment, Development and Retention We believe in compensating our colleagues with fair and competitive wages, in addition to offering competitive benefits. Approximately 76% of our employees are paid at hourly rates, which are all paid at rates above the federal minimum wage requirement. We offer our full-time eligible employees a range of benefits, including company-paid life insurance.
The Company provides a comprehensive self-insured health plan and pays approximately 85% of the costs of the plan for participating employees and their families as of December 31, 2021. Recent benchmarking of our health plan indicates comparable benefits, at lower employee contributions, when compared to an applicable Agriculture and Food Manufacturing sector grouping, as well as peer group data.
The Company provides a comprehensive self-insured health plan and pays approximately 84% of the costs of the plan for participating employees and their families as of December 31, 2022. Recent benchmarking of our health plan indicates comparable benefits, at lower employee contributions, when compared to an applicable Agriculture and Food Manufacturing sector grouping, as well as peer group data.
We review the success of our safety programs on a monthly basis to monitor their effectiveness and the development of any trends that need to be addressed. During fiscal year 2022 our recordable incident rates decreased by 6% compared to fiscal 2021. Diversity, Equity and Inclusion Our culture seeks to embrace the diversity and inclusion of all our team members.
We review the success of our safety programs on a monthly basis to monitor their effectiveness and the development of any trends that need to be addressed. During fiscal year 2023 our recordable incident rates decreased by 29% compared to fiscal 2022. Diversity, Equity and Inclusion Our culture seeks to embrace the diversity and inclusion of all our team members.
For example, our recent investment in MeadowCreek, discussed above, is intended to extend our reach in the foodservice and retail marketplace and bring new opportunities in the restaurant, institutional and industrial food products arenas.
For example, our recent investment in MeadowCreek, discussed under the heading “Egg Products” above, is intended to extend our reach in the foodservice and retail marketplace and bring new opportunities in the restaurant, institutional and industrial food products arenas.
As a point of reference, a multi-year comparison of the average of daily closing prices per Chicago Board of Trade for each period in our fiscal calendar are shown below for corn and soybean meal: Table of Contents 7 Shell Egg Production Our percentage of dozens produced to sold was 94.3% of our total shell eggs sold in fiscal 2022, with 91.7% of such production coming from company-owned facilities, and 8.3% from contract producers.
As a point of reference, a multi-year comparison of the average of daily closing prices per Chicago Board of Trade for each period in our fiscal calendar are shown below for corn and soybean meal: Shell Egg Production Our percentage of dozens produced to sold was 92.3% of our total shell eggs sold in fiscal 2023, with 91.8% of such production coming from company-owned facilities, and 8.2% from contract producers.
For fiscal 2022, the average monthly full-time equivalent for contingent workers was 1,046. None of our employees are covered by a collective bargain ing agreement. We consider our relations with employees to be good. Culture and Values We are proud to be contributing corporate citizens where we live and work and to help create healthy, prosperous communities.
For fiscal 2023, the average monthly full-time equivalent for contingent workers was 1,349. None of our employees are covered by a collective bargaining agreement. We consider our relations with employees to be good. Culture and Values We are proud to be contributing corporate citizens where we live and work and to help create healthy, prosperous communities.
As of May 28, 2022, our total workforce comprised 29% women and 52% of colleagues who identify as racial or ethnic minorities. Our Policy against Harassment, Discrimination, Unlawful or Unethical Conduct and Retaliation; Reporting Procedure affirms our commitment to supporting our employees regardless of race, color, religion, sex, national origin or any other basis protected by applicable law.
As of June 3, 2023, our total workforce comprised 29% women and 53% of colleagues who identify as racial or ethnic minorities. Our Policy against Harassment, Discrimination, Unlawful or Unethical Conduct and Retaliation; Reporting Procedure affirms our commitment to supporting our employees regardless of race, color, religion, sex, national origin or any other basis protected by applicable law.
The USDA estimates that 29% of eggs produced in the U.S. are sold as egg products (shell eggs broken and sold in liquid, frozen, or dried form) to institutions (e.g. companies producing baked goods). For information about egg producers in the U.S., see “Competition” below.
The USDA estimated that in 2022 approximately 29.6% of eggs produced in the U.S. were sold as egg products (shell eggs broken and sold in liquid, frozen, or dried form) to institutions (e.g. companies producing baked goods). For information about egg producers in the U.S., see “Competition” below.
Summary of Conventional and Specialty Shell Egg and Egg Product Sales The following table sets forth the contribution as a percentage of revenue and volumes of dozens sold of conventional and specialty shell egg and egg product sales for the following fiscal years: 2022 2021 2020 Revenue Volume Revenue Volume Revenue Volume Conventional Eggs 59.8 % 69.0 % 56.8 % 73.2 % 61.4 % 76.1 % Specialty Eggs Egg-Land’s Best® 19.2 % 15.9 % 20.9 % 13.5 % 19.2 % 12.7 % Other Specialty Eggs 17.3 % 15.1 % 19.1 % 13.3 % 16.7 % 11.2 % Total Specialty Eggs 36.5 % 31.0 % 40.0 % 26.8 % 35.9 % 23.9 % Egg Products 3.4 % 2.7 % 2.3 % Marketing and Distribution We sell most of our shell eggs in the southwestern, southeastern, mid-western and mid-Atlantic regions of the U.S. through our extensive distribution network to a diverse group of customers, including national and regional grocery store chains, club stores, companies servicing independent supermarkets in the U.S., foodservice distributors and egg product consumers.
Summary of Conventional and Specialty Shell Egg and Egg Product Sales The following table sets forth the contribution as a percentage of revenue and volumes of dozens sold of conventional and specialty shell egg and egg product sales for the following fiscal years: 2023 2022 2021 Revenue Volume Revenue Volume Revenue Volume Conventional Eggs 65.2 % 65.3 % 59.8 % 69.0 % 56.8 % 73.2 % Specialty Eggs Egg-Land’s Best® 14.7 % 16.6 % 19.2 % 15.9 % 20.9 % 13.5 % Other Specialty Eggs 15.7 % 18.1 % 17.3 % 15.1 % 19.1 % 13.3 % Total Specialty Eggs 30.4 % 34.7 % 36.5 % 31.0 % 40.0 % 26.8 % Egg Products 3.9 % 3.4 % 2.7 % Marketing and Distribution In fiscal 2023, we sold our shell eggs in 38 states through the southwestern, southeastern, mid-western and mid-Atlantic regions of the U.S. through our extensive distribution network to a diverse group of customers, including national and regional grocery store chains, club stores, companies servicing independent supermarkets in the U.S., foodservice distributors and egg product consumers.
We are a member of the Eggland’s Best, Inc. cooperative and produce, market, distribute and sell EB and Land O'Lakes branded eggs, directly and through our joint ventures, Specialty Eggs, LLC and Southwest Specialty Eggs, LLC, under exclusive license agreements in Alabama, Arizona, Florida, Georgia, Louisiana, Mississippi and Texas, and in portions of Arkansas, California, Table of Contents 9 Nevada, North Carolina, Oklahoma and South Carolina.
We are a member of the Eggland’s Best, Inc. cooperative and produce, market, distribute and sell Egg-Land’s Best® and Land O’ Lakes® branded eggs directly and through our joint ventures, Specialty Eggs, LLC and Southwest Specialty Eggs, LLC, under exclusive license agreements in Alabama, Arizona, Florida, Georgia, Louisiana, Mississippi and Texas, and in portions of Arkansas, California, Nevada, North Carolina, Oklahoma and South Carolina.
Our annual feed requirements for fiscal 2022 were 1.9 million tons of finished feed, of which we manufactured 1.8 million tons. We currently have the capacity to store 174 thousand tons of corn and soybean meal, and we replenish these stores as needed throughout the year.
Our annual feed requirements for fiscal 2023 were 2.0 million tons of finished feed, of which we manufactured 1.9 million tons. We currently have the capacity to store 182 thousand tons of corn and soybean meal, and we replenish these stores as needed throughout the year.
The shell egg production industry remains highly fragmented. According to Egg Industry Magazine , the ten largest producers owned approximately 53% of industry table egg layer hens at year-end 2021 and 2020. We believe industry consolidation may continue, and we plan to capitalize on opportunities as they arise.
According to Egg Industry Magazine , the ten largest producers owned approximately 53% of industry table egg layer hens at year-end 2022 and 2021. We believe industry consolidation may continue, and we plan to capitalize on opportunities as they arise.
Management’s Discussion and Analysis – Results of Operations , conventional shell egg prices rose in our fourth quarter of fiscal 2022, due to the reduced supply related to the HPAI outbreak first detected in commercial flocks in February 2022 and steady shell egg demand.
Management’s Discussion and Analysis – Results of Operations , conventional shell egg prices rose during the fourth quarter of fiscal 2022 and first three quarters of fiscal 2023, due to the reduced supply related to the HPAI outbreak first detected in commercial flocks in February 2022, steady shell egg demand and higher production costs.
Regardless of the Table of Contents 12 employees’ elections to contribute to the KSOP, the Company contributes shares of Company stock or cash equivalent to 3% of pre-tax earnings for each pay period that hours are worked. We provide extensive training and development related to safety, regulatory compliance, and task training.
Regardless of the employees’ elections to contribute to the KSOP, the Company contributes shares of Company stock or cash equivalent to 3% of participants’ eligible compensation for each pay period that hours are worked. We provide extensive training and development related to safety, regulatory compliance, and task training.
According to the USDA’s Economic Research Service, estimated annual per capita consumption in the United States between 2016 and 2021 varied, ranging from 271 to 288 eggs. In calendar year 2021, per capita U.S. consumption was estimated to be 280 eggs, or approximately 5.4 eggs per person per week.
According to the USDA’s Economic Research Service, estimated annual per capita consumption in the United States between 2018 and 2022 varied, ranging from 279 to 292 eggs. In calendar year 2022, per capita U.S. consumption was estimated to be 279 eggs, or approximately 5.4 eggs per person per week.
The commercial production of shell eggs requires a source of baby chicks for laying flock replacement. We grow the majority of our chicks in our own breeder farms and hatcheries in a computer-controlled environment and obtain the balance from commercial sources. After eggs are produced, they are cleaned, graded and packaged.
The commercial production of shell eggs requires a source of baby chicks for laying flock replacement. We hatch the majority of our chicks in our own breeder farms and hatcheries in a computer-controlled environment and obtain the balance from commercial sources.
Department of Agriculture (“USDA”) Agricultural Marketing Service in 2021, approximately 71% of table eggs produced in the U.S. were sold as shell eggs, with 55.7% sold through food at home outlets such as grocery and convenience stores, 11.9% sold to food-away-from home channels such as restaurants and 3.7% that are exported.
Department of Agriculture (“USDA”) Agricultural Marketing Service, in 2022 approximately 71% of table eggs produced in the U.S. were sold as shell eggs, with 56.6% sold through food at home outlets such as grocery and convenience stores, 12.4% sold to food-away-from home channels such as restaurants and 1.7% exported.
Layers are mature female chickens, pullets are female chickens usually less than 18 weeks of age, and breeders are male and female chickens used to produce fertile eggs to be hatched for egg production flocks. Our total flock as of May 28, 2022 consisted of approximately 42.2 million layers and 11.5 million pullets and breeders.
Layers are mature female chickens, pullets are female chickens usually less than 18 weeks of age, and breeders are male and female chickens used to produce fertile eggs to be hatched for egg production flocks. Our total flock as of June 3, 2023 consisted of approximately 41.2 million layers and 10.8 million pullets and breeders.
Given historical consumption trends, we believe in the U.S. that general demand for eggs increases basically in line with the overall U.S. population growth. Specific events can impact egg consumption in a particular period, as occurred with the 2015 Table of Contents 5 HPAI outbreak, the pandemic, and the most recent HPAI outbreak.
Given historical consumption trends, we believe that general demand for eggs in the U.S. increases basically in line with the overall U.S. population growth; however, specific events can impact egg supply and consumption in a particular period, as occurred with the 2015 HPAI outbreak, the COVID-19 pandemic (particularly during 2020), and the most recent HPAI outbreak starting in early 2022.
Human Capital Resources As of May 28, 2022, we had 2,985 employees, of whom 2,346 worked in egg production, processing, and marketing, 197 worked in feed mill operations and 442, including our executive officers, were administrative employees. Approximately 4.7% of our personnel are part-time, and we utilize temporary employment agencies and independent contractors to augment our staffing needs when necessary.
Human Capital Resources As of June 3, 2023, we had 2,976 employees, of whom 2,305 worked in egg production, processing, and marketing, 207 worked in feed mill operations and 464, including our executive officers, were administrative employees. Approximately 5.4% of our personnel are part-time, and we utilize temporary employment agencies and independent contractors to augment our staffing needs when necessary.
The actual prices that we realize on any given transaction will not necessarily equal quoted market prices because of the individualized terms that we negotiate with individual customers which are influenced by many factors. Table of Contents 6 Specialty eggs are typically sold at prices and terms negotiated directly with customers.
The actual prices that we realize on any given transaction will not necessarily equal quoted market prices because of the individualized terms that we negotiate with individual customers which are influenced by many factors.
We do not use antibiotics for growth promotion or performance enhancement. Specialty Eggs We are one of the largest producers and marketers of value-added specialty shell eggs in the U.S., which continues to be a significant and growing segment of the market.
We do not use antibiotics for growth promotion or performance enhancement. Specialty Eggs We are one of the largest producers and marketers of value-added specialty shell eggs in the U.S., which continues to be a significant and growing segment of the market. We classify cage-free, organic, brown, free-range, pasture-raised and nutritionally enhanced as specialty eggs for accounting and reporting purposes.
Although we face intense competition from numerous other companies, we believe that we have the largest market share for the sale of shell eggs in the grocery segment, including large U.S. food retailers.
Although we face intense competition from numerous other companies, we believe that we have the largest market share for the sale of shell eggs in the grocery segment, including large U.S. food retailers. The majority of eggs sold are based on the daily or short-term needs of our customers.
Prices for Shell Eggs Wholesale shell egg sales prices are a critical component of revenue for the Company. Wholesale shell egg prices are volatile, cyclical, and impacted by a number of factors, including consumer demand, seasonal fluctuations, the number and productivity of laying hens in the U.S., the pandemic and outbreaks of HPAI .
Wholesale shell egg prices are volatile, cyclical, and impacted by a number of factors, including consumer demand, seasonal fluctuations, the number and productivity of laying hens in the U.S. and outbreaks of agricultural diseases such as HPAI.
While we report separate sales information for these egg types, there are many cost factors that are not specifically available for conventional or specialty eggs due to the nature of egg production. We manage our operations and allocate resources to these types of eggs on a consolidated basis based on the demands of our customers.
While we report separate sales information for these egg types, there are many cost factors that are not specifically available for conventional or specialty eggs due to the nature of egg production.
We have invested significant capital in recent years to acquire and construct cage-free facilities, and we expect our focus for future expansion will continue to include cage-free facilities.
We are engaging with our customers to help them meet their announced goals and needs. We have invested significant capital in recent years to acquire and construct cage-free facilities, and we expect our focus for future expansion will continue to include cage-free facilities.
Our enterprise safety committee comprises two corporate safety managers, eight area compliance managers, 55 local site compliance managers, feed mill managers and general managers. The committee that oversees health and safety regularly reviews our written policies and changes to OSHA regulation standards and shares information as it relates to outcomes from incidents in order to improve future performance.
The committee that oversees health and safety regularly reviews our written policies and changes to OSHA regulation standards and shares information as it relates to outcomes from incidents in order to improve future performance.
The in-line facilities also produce a higher percentage of USDA Grade A eggs, which sell at higher prices. Eggs produced on farms owned by contractors are brought to our processing plants to be graded and packaged. Because shell eggs are perishable, we do not maintain large egg inventories. Our egg inventory averaged six days of sales during fiscal 2022.
Eggs produced on farms owned by contractors are brought to our processing plants to be graded and packaged. Because shell eggs are perishable, we do not maintain large egg inventories. Our egg inventory averaged six days of sales during fiscal 2023.
Furthermore, due to the more limited supply for organic ingredients we may commit to purchase organic ingredients in advance to help assure supply. Ordinarily, we do not enter into long-term contracts beyond a year to purchase corn and soybean meal or hedge against increases in the prices of corn and soybean meal.
Ordinarily, we do not enter into long-term contracts beyond a year to purchase corn and soybean meal or hedge against increases in the prices of corn and soybean meal.
Our colleagues help us continue to enhance our community contributions, which are driven by our longstanding culture that strives to promote an environment that upholds integrity and respect and provides opportunities for each colleague to realize full potential.
Our colleagues help us continue to enhance our community contributions, which are driven by our longstanding culture that strives to promote an environment that upholds integrity and respect and provides opportunities for each colleague to realize full potential. These commitments are encapsulated in the Cal-Maine Foods Code of Ethics and Business Conduct and in our Human Rights Statement .
Our Farmhouse Eggs ® brand eggs are produced at our facilities by cage-free hens that are provided with a vegetarian diet. We market organic, vegetarian and omega-3 eggs under our 4-Grain® brand, which consists of conventional and cage-free eggs. We also produce, market and distribute private label specialty shell eggs to several customers.
Land O’ Lakes® branded eggs are produced by hens that are fed a whole-grain vegetarian diet. Our Farmhouse Eggs ® brand eggs are produced at our facilities by cage-free hens that are provided with a vegetarian diet. We market organic, vegetarian and omega-3 eggs under our 4-Grain® brand, which consists of conventional and cage-free eggs.
Although we have established long-term relationships with many of our customers, most of them are free to acquire shell eggs from other sources. The shell eggs we sell are either delivered to our customers’ warehouse or retail stores, by our own fleet or contracted refrigerated delivery trucks, or are picked up by our customers at our processing facilities.
The shell eggs we sell are either delivered to our customers’ warehouse or retail stores, by our own fleet or contracted refrigerated delivery trucks, or are picked up by our customers at our processing facilities.
Sustainability We understand that climate, and the potential consequences of climate change, freshwater availability and preservation of global biodiversity, in addition to responsible management of our flocks, are vital to the production of high-quality eggs and egg products and to the success of our Company. We have engaged in agricultural production for more than 60 years.
We invest in developing our future leaders through our Management Intern, Management Trainee and informal mentoring programs. 12 Sustainability We understand that climate, and the potential consequences of climate change, freshwater availability and preservation of global biodiversity, in addition to responsible management of our flocks, are vital to the production of high-quality eggs and egg products and to the success of our Company.
Under these laws and regulations, we must obtain permits from governmental authorities, including, but not limited to, wastewater discharge permits. We have made, and will continue to make, capital and other expenditures relating to compliance with existing environmental, health and safety laws and regulations and permits.
We have made, and will continue to make, capital and other expenditures relating to compliance with existing environmental, health and safety laws and regulations and permits.
We routinely fill our storage bins during harvest season when prices for feed ingredients are generally lower. To ensure continued availability of feed ingredients, we may enter into contracts for future purchases of corn and soybean meal, and as part of these contracts, we may lock-in the basis portion of our grain purchases several months in advance.
To ensure continued availability of feed ingredients, we may enter into contracts for future purchases of corn and soybean meal, and as part of these contracts, we may lock-in the basis portion of our grain purchases several months in advance. Basis is the difference between the local cash price for grain and the applicable futures price.
Foodservice customers include primarily companies that sell food products and related items to restaurants, healthcare and education facilities and hotels. Competition The production, processing, and distribution of shell eggs is an intensely competitive business, which has traditionally attracted large numbers of producers in the United States. Shell egg competition is generally based on price, service and product quality.
Competition The production, processing, and distribution of shell eggs is an intensely competitive business, which has traditionally attracted large numbers of producers in the United States. Shell egg competition is generally based on price, service and product quality. The shell egg production industry remains highly fragmented.
These commitments are encapsulated in the Cal-Maine Foods Code of Ethics for Directors, Officers and Employees and in our Human Rights Statement . Table of Contents 11 Health and Safety Our top priority is the health and safety of our employees, who continue to produce high-quality, affordable egg choices for our customers and contribute to a stable food supply.
Health and Safety Our top priority is the health and safety of our employees, who continue to produce high-quality, affordable egg choices for our customers and contribute to a stable food supply.
Egg Products Egg products are shell eggs broken and sold in liquid, frozen, or dried form. We sell liquid and frozen egg products primarily to the institutional, foodservice and food manufacturing sectors in the U.S. Our egg products are sold through our wholly owned subsidiaries American Egg Products, LLC located in Georgia and Texas Egg Products, LLC located in Texas.
We also produce, market and distribute private label specialty shell eggs to several customers. Egg Products Egg products are shell eggs broken and sold in liquid, frozen, or dried form. We sell liquid and frozen egg products primarily to the institutional, foodservice and food manufacturing sectors in the U.S.
Our fiscal year 2022 ended May 28, 2022, and the first three fiscal quarters of fiscal 2022 ended August 28, 2021, November 27, 2021, and February 26, 2022. All references herein to a fiscal year means our fiscal year and all references to a year mean a calendar year. Industry Background According to the U.S.
All references herein to a fiscal year means our fiscal year and all references to a year mean a calendar year. Industry Background According to the U.S.
MeadowCreek’s marketing plan is designed to extend our reach in the foodservice and retail marketplace and bring new opportunities in the restaurant, institutional and industrial food products arenas. We anticipate that the MeadowCreek operation will initiate production late in our fiscal 2023 second quarter.
We serve as the preferred provider to supply specialty and conventional eggs that MeadowCreek needs to manufacture egg products. MeadowCreek’s marketing plan is designed to extend our reach in the foodservice and retail marketplace and bring new opportunities in the restaurant, institutional and industrial food products arenas.
Table of Contents 4 Throughout the Company’s history, we have acquired other companies in our industry. Since 1989 through our fiscal year ended May 28, 2022, we have completed 23 acquisitions ranging in size from 160 thousand layers to 7.5 million layers.
Since 1989 through our fiscal year ended June 3, 2023, we have completed 23 acquisitions ranging in size from 160 thousand layers to 7.5 million layers.
Our customers typically do not commit to long-term purchases of specific quantities or types of eggs with us, and as a result, it is difficult to accurately predict customer requirements for cage-free eggs. We are, however, engaging with our customers in an effort to achieve a smooth transition in meeting their announced goals and needs.
Some of these customers have recently changed those goals to offer 70% cage-free eggs by the end of 2030. Our customers typically do not commit to long-term purchases of specific quantities or types of eggs with us, and as a result, it is difficult to accurately predict customer requirements for cage-free eggs.
Substantially all our farms have modern “in-line” facilities which mechanically gather, clean, grade and package the eggs at the location where they are laid. The in-line facilities generate significant efficiencies and cost savings compared to the cost of eggs produced from non-in-line facilities, which process eggs that have been laid at another location and transported to the facility.
The in-line facilities generate significant efficiencies and cost savings compared to the cost of eggs produced from non-in-line facilities, which process eggs that have been laid at another location and transported to the processing facility. The in-line facilities also produce a higher percentage of USDA Grade A eggs, which sell at higher prices.
Historically, prices for specialty eggs have experienced less volatility than prices for conventional shell eggs and have generally been higher due to customer and consumer willingness to pay more for specialty eggs. Feed Costs for Shell Egg Production Feed is a primary cost component in the production of shell eggs and represented 61.9% of our fiscal 2022 farm production costs.
Historically, prices for specialty eggs have experienced less volatility than prices for conventional shell eggs and have generally been higher due to customer and consumer willingness to pay more for specialty eggs. However, throughout most of fiscal 2023 conventional egg prices exceeded specialty egg prices.
The USDA calculates per capita consumption by dividing total shell egg disappearance in the U.S. by the U.S. population. Sales prices of eggs are dependent upon many factors other than consumption. For information about shell egg prices see “Prices for Shell Eggs” below.
The USDA calculates per capita consumption by dividing total shell egg disappearance in the U.S. by the U.S. population. Prices for Shell Eggs Wholesale shell egg sales prices are a critical component of revenue for the Company.
We classify nutritionally enhanced, cage-free, organic, free-range, pasture-raised, and brown eggs as specialty eggs for accounting and reporting purposes. Specialty eggs are intended to meet the demands of consumers who are sensitive to environmental, health and/or animal welfare issues.
Specialty eggs are intended to meet the demands of consumers sensitive to environmental, health and/or animal welfare issues and to comply with state requirements for cage-free eggs.
Likewise, the national supply for eggs from conventional production could exceed consumer demand which would decrease the price of conventional eggs. Environmental Regulation Our operations and facilities are subject to various federal, state, and local environmental, health and safety laws and regulations governing, among other things, the generation, storage, handling, use, transportation, disposal, and remediation of hazardous materials.
Environmental Regulation Our operations and facilities are subject to various federal, state, and local environmental, health and safety laws and regulations governing, among other things, the generation, storage, handling, use, transportation, disposal, and remediation of hazardous materials. Under these laws and regulations, we must obtain permits from governmental authorities, including, but not limited to, wastewater discharge permits.
We are a member of the Eggland’s Best, Inc. cooperative (“EB”) and produce, market, distribute and sell Egg-Land’s Best® and Land O’ Lakes® branded eggs under license from EB at our facilities under EB guidelines. Land O’ Lakes® branded eggs are produced by hens that are fed a whole-grain vegetarian diet.
At the same time, we understand the importance of our continued ability to provide conventional eggs in order to provide our customers with a variety of egg choices and to address hunger in our communities. 8 We are a member of the Eggland’s Best, Inc. cooperative (“EB”) and produce, market, distribute and sell Egg-Land’s Best® and Land O’ Lakes® branded eggs under license from EB at our facilities under EB guidelines.
Our agricultural practices continue to evolve as we continue to strive to meet the need for nutritious, affordable foods to feed a growing population even as we exercise responsible natural resource stewardship. We plan to publish our most recent sustainability update on or around late July 2022, which will be available on our website.
We have engaged in agricultural production for more than 60 years. Our agricultural practices continue to evolve as we continue to strive to meet the need for nutritious, affordable foods to feed a growing population even as we exercise responsible natural resource stewardship.
Work is expected to commence immediately with project completion expected by year-end 2025. When we use “we,” “us,” “our,” or the “Company” in this report, we mean Cal-Maine Foods, Inc. and our consolidated subsidiaries, unless otherwise indicated or the context otherwise requires.
In addition to growth through acquisitions, we have also grown by making substantial investments in our business, primarily to increase our cage-free production capacity. When we use “we,” “us,” “our,” or the “Company” in this report, we mean Cal-Maine Foods, Inc. and our consolidated subsidiaries, unless otherwise indicated or the context otherwise requires.
In fiscal 2022, approximately 87.5% of our revenue related to sales to retail customers, 9.1% to sales to foodservice providers and 3.4% to egg products sales. Retail customers include primarily national and regional grocery store chains, club stores, and companies servicing independent supermarkets in the U.S.
Retail customers include primarily national and regional grocery store chains, club stores, and companies servicing independent supermarkets in the U.S. Foodservice customers include primarily companies that sell food products and related items to restaurants, healthcare and education facilities and hotels.
Information contained in our website is not a part of this report. COVID-19 Pandemic For information regarding our response to the COVID-19 pandemic, and its impact on our business, see Part I.
The information contained in our website is not a part of this report.
Customers Our top three customers accounted for an aggregate of 45.9%, 48.6% and 51.1% of net sales dollars for fiscal 2022 , 2021, and 2020, respectively. Our largest customer, Walmart Inc. (including Sam's Club), accounted for 29.5%, 29.8% and 32.1% of net sales dollars for fiscal 2022, 2021 and 2020, respectively.
Our largest customer, Walmart Inc. (including Sam's Club), accounted for 34.2%, 29.5% and 29.8% of net sales dollars for fiscal 2023, 2022 and 2021, respectively. In fiscal 2023, approximately 85.3% of our revenue related to sales to retail customers, 10.8% to sales to foodservice providers and 3.9% to egg products sales.
Hens must have access to litter, protection from predators and be able to move in a barn in a manner that promotes bird welfare. A significant number of our customers have announced goals to offer cage-free eggs exclusively on or before 2026, subject in most cases to availability of supply, affordability and customer demand, among other contingencies.
Although we do not sell the majority of our eggs in these ten states, these state laws have impacted egg production practices nationally. A significant number of our customers previously announced goals to offer cage-free eggs exclusively on or before 2026, subject in most cases to availability of supply, affordability and consumer demand, among other contingencies.
We also have an exclusive license in New York City in addition to exclusivity in select New York metropolitan areas, including areas within New Jersey and Pennsylvania. The majority of eggs sold are based on the daily or short-term needs of our customers. Most sales to established accounts are on payment terms ranging from seven to 30 days.
We also have an exclusive license in New York City in addition to exclusivity in select New York metropolitan areas, including areas within New Jersey and Pennsylvania.
Sales of cage-free eggs represented approximately 22.1% of our shell egg revenues for fiscal year 2022.
Our volume of cage-free egg sales has continued to increase and account for a larger share of our product mix. Cage-free sales represented approximately 20.1% of our total net shell sales for fiscal year 2023.
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Notes to the Consolidated Financial Statements, Note 2 – Acquisition . In fiscal 2021, we announced that our Board of Directors approved several new capital projects with an estimated cost of $105 million to further expand the Company’s cage-free egg production capabilities. These projects include expanding our cage-free egg production at our Okeechobee, Florida, production facility.
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We manage our operations and allocate resources to these types of eggs on a consolidated basis based on the demands of our customers. 4 We believe that an important competitive advantage for Cal-Maine Foods is our ability to meet our customers’ evolving needs with a favorable product mix of conventional and specialty eggs, including cage-free, organic and other specialty offerings, as well as egg products.
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The project is designed to include the construction of two cage- free layer houses and one cage-free pullet house with capacity for approximately 400 thousand cage-free hens and 210 thousand pullets, respectively.
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We have also enhanced our efforts to provide free-range and pasture -raised eggs that meet consumers’ evolving choice preferences.
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Construction is well underway, with the first pullets placed in mid-May 2022, the first layer house to be finished by September 2022, and with the second layer house and project completion expected by January 2023.
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While a small part of our current business, the free-range and pasture-raised eggs we produce and sell represent attractive offerings to a subset of consumers, and therefore our customers, and help us continue to serve as the trusted provider of quality food choices. Throughout the Company’s history, we have acquired other companies in our industry.
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In Delta, Utah, we are constructing four new cage-free layer houses and two pullet house conversions with capacity for approximately 810 thousand cage-free layer hens, which is expected to be completed by fall of 2023.
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Notes to the Consolidated Financial Statements, Note 2 – Acquisition . We are also focused on additional ways to enhance our product mix and support new opportunities in the restaurant, institutional and commercial food preparation area. Beginning in fiscal 2022, we have invested approximately $32.3 million in Meadowcreek Foods, LLC (“Meadowcreek”), an egg products operation focused on offering hard-cooked eggs.
Removed
At our Guthrie, Kentucky farm, we are converting existing facilities into nine cage-free layer houses and two pullet houses with capacity for approximately 953 thousand cage-free hens, which is expected to be completed by spring of 2025. The Company plans to fund these projects through a combination of available cash on hand, investments and operating cash flow.
Added
The Company’s fiscal year-end is on the Saturday closest to May 31. Our fiscal year 2023 and fourth quarter ended June 3, 2023, included 53 weeks and 14 weeks, respectively. The first three fiscal quarters of fiscal 2023 ended August 27, 2022, November 26, 2022, and February 25, 2023, all included 13 weeks.
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In October 2021, we announced a strategic investment in MeadowCreek Foods, LLC, that will specialize in high value commercial product solutions targeting specific needs in the food industry. For further description of this transaction, refer to “— Egg Products” below.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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RISK FACTORS Our business and results of operations are subject to numerous risks and uncertainties, many of which are beyond our control. The following is a description of the known factors that may materially affect our business, financial condition or results of operations.
ITEM 1A. RISK FACTORS Our business and results of operations are subject to numerous risks and uncertainties, many of which are beyond our control. The following is a description of the known factors that may materially affect our business, financial condition or results of operations.
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Item 1A. Risk Factors and Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . Our Corporate Information We maintain a website at www.calmainefoods.com where general information about our business and corporate governance matters is available. The information contained in our website is not a part of this report.
Removed
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and all amendments to those reports are available, free of charge, through our website as soon as reasonably practicable after we file them with the SEC.
Removed
In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Information concerning corporate governance matters is also available on our website. Cal-Maine Foods, Inc. is a Delaware corporation, incorporated in 1969. ITEM 1A.

Item 2. Properties

Properties — owned and leased real estate

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Type Quantity (a) Owned Leased Production Capacity Location Breeding Facilities 3 3 — House up to 255,000 hens GA, MS Distribution Centers 4 4 — NA FL, GA, NC, TX Feed Mills 25 24 1 Production capacity of 859 tons of feed per hour AL, AR, FL, GA, KS, KY, LA, MS, OH, OK, SC, TN, TX, UT Hatcheries 2 1 1 Hatch up to 407,600 chicks per week FL, MS Processing and Packaging 43 42 1 Approximately 596,700 dozen shell eggs per hour AL, AR, FL, GA, KS, KY, LA, MS, OH, OK, SC, TX, UT Pullet Facilities 28 27 1 Grow 27.2 million pullets annually AR, FL, GA, KS, KY, MS, OH, SC, TX, UT Shell Egg Production 42 42 — House up to 48.8 million hens AL, AR, FL, GA, KS, KY, LA, MS, OH, OK, SC, TX, UT Egg Products Processing Facilities 2 2 — Production capacity of 72.8 million lbs. per year GA, TX (a) Does not include idled facilities.
Type Quantity (a) Owned Leased Production Capacity Location Breeding Facilities 3 3 — House up to 255,000 hens GA, MS Distribution Centers 6 6 — NA FL, GA, NC, TX Feed Mills 25 24 1 Production capacity of 859 tons of feed per hour AL, AR, FL, GA, KS, KY, LA, MS, OH, OK, SC, TN, TX, UT Hatcheries 2 1 1 Hatch up to 407,600 chicks per week FL, MS Processing and Packaging 43 43 — Approximately 587,700 dozen shell eggs per hour AL, AR, FL, GA, KS, KY, LA, MS, OH, OK, SC, TX, UT Pullet Facilities 29 29 — Grow 27.1 million pullets annually AR, FL, GA, KS, KY, MS, SC, TX, UT Shell Egg Production 42 42 — House up to 46.6 million layers AL, AR, FL, GA, KS, KY, LA, MS, OH, OK, SC, TX, UT Egg Products Processing Facilities 3 3 — Production capacity of 43,140 lbs. per hour GA, TX, MO (a) Does not include idled facilities.
ITEM 2. PROPERTIES The table below provides summary information about the primary operational facilities we use in our business as of May 28, 2022.
ITEM 2. PROPERTIES The table below provides summary information about the primary operational facilities we use in our business as of June 3, 2023.
Work is expected to commence immediately with project completion expected by year-end 2025. As of May 28, 2022, we owned approximately 28.0 thousand acres of land. There are no material mortgages or liens on our properties.
Management’s Discussion and Analysis – Results of Operations – Liquidity and Capital Resources . As of June 3, 2023, we owned approximately 28.0 thousand acres of land. There are no material mortgages or liens on our properties.
We also have ongoing construction projects to further expand the Company’s cage-free egg production capabilities. These projects include expanding our cage-free egg production at our Okeechobee, Florida, production facility. The project is designed to include the construction of two cage-free layer houses and one cage-free pullet house with capacity for approximately 400 thousand cage-free hens and 210 thousand pullets, respectively.
We also have ongoing construction projects to further expand the Company’s cage-free egg production capabilities. These projects include expanding our cage-free egg production at existing farms or converting conventional housing with cage-free production. These projects will phase into production through fiscal 2027. For additional information, see Part II. Item 7.
Removed
Our affiliate, MeadowCreek Foods, LLC (“MeadowCreek”) owns our new egg products facility that is currently being retrofitted and upgraded for future production. The facility is expected to be operational late in our fiscal 2023 second quarter. Once fully operational, MeadowCreek will have the capacity to produce approximately 500 thousand pounds of weekly hard-cooked egg products.
Removed
Construction has commenced, with the first layer house planned to be finished by October 1, 2022, with the second layer house and project completion expected by February 1, 2023.
Removed
In Delta, Table of Contents 20 Utah, we are constructing four new cage-free layer houses and two pullet houses conversions with capacity for approximately 810 thousand cage-free layer hens which is expected to be completed by fall of 2023.
Removed
At our Guthrie, Kentucky farm, we are converting nine existing houses to cage-free layer houses and two pullet houses with capacity for approximately 953 thousand cage-free hens which is expected to be completed by spring of 2025.
Removed
Subsequent to the end of fourth quarter 2022, the Company’s Board of Directors approved a capital project to expand the Company’s cage-free production capabilities. The proposed project at Chase, Kansas will convert existing conventional layer capacity to cage-free capacity for approximately 1.5 million cage-free hens and include remodels of all remaining pullet facilities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. LEGAL PROCEEDINGS Refer to the description of certain legal proceedings pending against us under Part II. Item 8. Notes to the Consolidated Financial Statements, Note – 18 Commitments and Contingencies , which discussion is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS Refer to the description of certain legal proceedings pending against us under Part II. Item 8. Notes to the Consolidated Financial Statements, Note 16 – Commitments and Contingencies , which discussion is incorporated herein by reference.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Pursuant to the policy, Cal-Maine pays a dividend to shareholders of its Common Stock and Class A Common Stock on a quarterly basis for each quarter for which the Company reports net income attributable to Cal-Maine Foods, Inc. computed in accordance with GAAP in an amount equal to one-third (1/3) of such quarterly income.
Pursuant to the policy, Cal-Maine pays a dividend to shareholders of its Common Stock and Class A Common Stock on a quarterly basis for each quarter for which the Company reports net income attributable to Cal-Maine Foods, Inc. computed in accordance with GAAP in an amount equal to one-third 21 (1/3) of such quarterly income.
For additional information, see Note 16 – Stock Compensation Plans in Part II. Item 8. Notes to the Consolidated Financial Statements.
For additional information, see Note 14 – Stock Compensation Plans in Part II. Item 8. Notes to the Consolidated Financial Statements.
There is no publ ic trading market for the Class A Common Stock. All outstanding Class A shares are owned by a limited liability company of which Adolphus Baker, our Chairman and Chief Executive Officer, is the sole managing member and will be voted at the direction of Mr. Baker.
There is no public trading market for the Class A Common Stock. All outstanding Class A shares are owned by a limited liability company of which Adolphus Baker, our Chairman, is the sole managing member and will be voted at the direction of Mr. Baker.
At July 12, 2022, there were approximately 324 record holders of our Common Stock and approximately 28,419 beneficial owners whose shares were held by nominees or broker dealers. For additional information about our capital structure, see Note 12 - Equity in Part II. Item 8. Notes to the Consolidated Financial Statements.
At July 14, 2023, there were approximately 319 record holders of our Common Stock and approximately 73,626 beneficial owners whose shares were held by nominees or broker dealers. For additional information about our capital structure, see Note 11 - Equity in Part II. Item 8. Notes to the Consolidated Financial Statements.
Table of Contents 22 Securities Authorized for Issuance under Equity Compensation Plans Equity Compensation Plan Information (a) (b) (c) 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 (excluding securities reflected in column (a)) Equity compensation plans approved by shareholders — $ — 317,844 Equity compensation plans not approved by shareholders — — — Total — $ — 317,844 (a) There were no outstanding options, warrants or rights as of May 28, 2022.
Securities Authorized for Issuance under Equity Compensation Plans Equity Compensation Plan Information (a) (b) (c) 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 (excluding securities reflected in column (a)) Equity compensation plans approved by shareholders — $ — 294,140 Equity compensation plans not approved by shareholders — — — Total — $ — 294,140 (a) There were no outstanding options, warrants or rights as of June 3, 2023.
Recent Sales of Unregistered Securities No sales of securities without registration under the Securities Act of 1933 occurred during our fiscal year ended May 28, 2022.
Recent Sales of Unregistered Securities No sales of securities without registration under the Securities Act of 1933 occurred during our fiscal year ended June 3, 2023.
There were 1,016,573 shares of restricted stock outstanding under our Amended and Restated 2012 Omnibus Long-Term Incentive Plan as of May 28, 2022. (b) There were no outstanding options, warrants or rights as of May 28, 2022. (c) Reflects shares available for future issuance as of May 28, 2022 under our Amended and Restated 2012 Omnibus Long-Term Incentive Plan.
There were 941,593 shares of restricted stock outstanding under our Amended and Restated 2012 Omnibus Long-Term Incentive Plan as of June 3, 2023. (b) There were no outstanding options, warrants or rights as of June 3, 202 3. (c) Reflects shares available for future issuance as of June 3, 2023 under our Amended and Restated 2012 Omnibus Long-Term Incentive Plan.
Table of Contents 21 Stock Performance Graph In fiscal year 2021, the Company utilized the NASDAQ Composite and NASDAQ 100 Total Return indexes to benchmark the Company’s total shareholder return. We are replacing these indexes with the (i) Russell 2000 Total Return, and (ii) S&P Composite 1500 Food Products Industry Index.
Stock Performance Graph The Company utilized the (i) Russell 2000 Total Return, and (ii) S&P Composite 1500 Food Products Industry Index to benchmark the Company’s total shareholder return. The Company is a member of each of these indexes and believes the other companies included in these indexes provide products and services similar to Cal-Maine Foods.
Beginning in fiscal year 2023, only the Russell 2000 Total Return and S&P Composite 1500 Food Products Industry indexes will be used as a comparison for total shareholder return. The graph assumes $100 was invested on June 2, 2017 in the stock or index and dividends were reinvested.
The graph presents total shareholder return and assumes $100 was invested on June 1, 2018 in the stock or index and dividends were reinvested.
Removed
The Company is a member of each of these indexes and believes the other companies included in these indexes provide products and services similar to Cal-Maine Foods. The NASDAQ Composite and NASDAQ 100 Total Return index performances are presented below on the performance graph for comparison purpose in the transitional year.
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June 1, 2018 May 31, 2019 May 29, 2020 May 28, 2021 May 27, 2022 June 3, 2023 Cal-Maine Foods, Inc. $ 100.00 $ 80.69 $ 97.12 $ 76.16 $ 105.31 $ 114.38 Russell 2000 Total Return 100.00 90.16 87.06 143.27 120.53 118.75 S&P Composite 1500 Food Products Industry Index 100.00 105.74 116.41 144.80 155.14 163.85 22 Issuer Purchases of Equity Securities The following table is a summary of our fourth quarter 2023 share repurchases: Issuer Purchases of Equity Securities Total Number of Maximum Number Shares Purchased of Shares that Total Number Average as Part of Publicly May Yet Be of Shares Price Paid Announced Plans Purchased Under the Period Purchased (1) per Share Or Programs Plans or Programs 2/26/23 to 3/25/23 — $ — — — 3/26/23 to 4/22/23 10,551 48.62 — — 4/23/23 to 6/03/23 — — — — 10,551 $ 48.62 — — (1) As permitted under our Amended and Restated 2012 Omnibus Long-Term Incentive Plan, these shares were withheld by us to satisfy tax withholding obligations for employees in connection with the vesting of restricted common stock.
Removed
June 2, 2017 June 1, 2018 May 31, 2019 May 29, 2020 May 28, 2021 May 27, 2022 Cal-Maine Foods, Inc. $ 100.00 $ 121.40 $ 97.94 $ 117.89 $ 92.44 $ 127.83 NASDAQ Composite 100.00 125.88 150.49 154.80 189.32 276.83 NASDAQ 100 Total Return 100.00 121.74 123.82 167.72 242.04 225.88 Russell 2000 Total Return 100.00 118.77 107.08 103.40 170.16 143.16 S&P Composite 1500 Food Products Industry Index 100.00 85.03 87.52 93.92 113.97 119.33 Issuer Purchases of Equity Securities There were no purchases of our Common Stock made by or on behalf of our Company or any affiliated purchaser during our fiscal 2022 fourth quarter.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Item 1A. Risk Factors . In addition, because the following discussion includes numerous forward -looking statements relating to our business, securities, financial condition, operating results and cash flow, reference is made to the disclosure set forth under Part I. Item 1A.
Risk Factors . In addition, because the following discussion includes numerous forward -looking statements relating to our business, securities, financial condition, operating results and cash flow, reference is made to the disclosure set forth under Part I. Item 1A.
We classify nutritionally enhanced, cage-free, organic, free-range, pasture- raised and brown eggs as specialty eggs for accounting and reporting purposes. We classify all other shell eggs as conventional eggs.
We classify cage-free, organic, brown, free-range, pasture-raised and nutritionally enhanced as specialty eggs for accounting and reporting purposes. We classify all other shell eggs as conventional eggs.
The fair values of identifiable assets and liabilities is determined internally and requires estimates and the use of various valuation techniques. When a market value is not readily available, our internal valuation methodology considers the remaining estimated life of the assets acquired and significant judgment is required as management determines the fair market value for those assets.
The fair values of identifiable assets and liabilities are determined internally and requires estimates and the use of various valuation techniques. When a market value is not readily available, our internal valuation methodology considers the remaining estimated life of the assets acquired and significant judgment is required as management determines the fair market value for those assets.
The Company has one operating segment, which is the production, grading, packaging, marketing and distribution of shell eggs. Many of our customers rely on us to provide most of their shell egg needs, including specialty and conventional eggs. Specialty eggs represent a broad range of products.
The Company has one reportable operating segment, which is the production, grading, packaging, marketing and distribution of shell eggs. Many of our customers rely on us to provide most of their shell egg needs, including specialty and conventional eggs. Specialty eggs represent a broad range of products.
Judgment and uncertainty exist with management’s application of tax regulations and evaluation of the more-likely-than-not recognition and measurement thresholds. We are periodically audited by taxing authorities. An adverse tax settlement could have a negative impact on our effective tax rate and our results of operations. Table of Contents 34
Judgment and uncertainty exist with management’s application of tax regulations and evaluation of the more-likely-than-not recognition and measurement thresholds. We are periodically audited by taxing authorities. An adverse tax settlement could have a negative impact on our effective tax rate and our results of operations. 34
ITEM 6. RESERVED Table of Contents 23 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RISK FACTORS; FORWARD -LOOKING STATEMENTS For information relating to important risks and uncertainties that could materially adversely affect our business, securities, financial condition, operating results, or cash flow, reference is made to the disclosure set forth under Part I.
ITEM 6. RESERVED 23 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RISK FACTORS; FORWARD -LOOKING STATEMENTS For information relating to important risks and uncertainties that could materially adversely affect our business, securities, financial condition, operating results, or cash flow, reference is made to the disclosure set forth under Part I. Item 1A.
Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations. Our critical accounting estimates are described below.
Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations.
The increase in cash flow from operations resulted primarily from higher selling prices for conventional eggs as well as the increased volume of specialty eggs, partially offset by the increased cost of feed ingredients and processing costs.
The increase in cash flow from operations resulted primarily from higher selling prices for conventional eggs as well as the increased volume of specialty eggs sold, partially offset by the increased cost of feed ingredients and processing, packaging and warehouse costs.
Business – Seasonality , we generally expect our need for working capital to be highest in the fourth and first fiscal quarters ending in May/June and August/September, respectively. Cash Flows from Operating Activities Net cash provided by operating activities was $126.2 million for fiscal year 2022 compared with $26.1 million for fiscal year 2021.
Business – Seasonality , we generally expect our need for working capital to be highest in the fourth and first fiscal quarters ending in May/June and August/September, respectively. Cash Flows from Operating Activities Net cash provided by operating activities was $863.0 million for fiscal year 2023 compared with $126.2 million for fiscal year 2022.
Fiscal Year Ended May 29, 2021 Compared to Fiscal Year Ended May 30, 2020 The discussion of our results of operations for the fiscal year ended May 29, 2021 compared to the fiscal year ended May 30, 2020 can be found in Part II. Item 7.
Fiscal Year Ended May 28, 2022 Compared to Fiscal Year Ended May 29, 2021 The discussion of our results of operations for the fiscal year ended May 28, 2022 compared to the fiscal year ended May 29, 2021 can be found in Part II. Item 7.
Table of Contents 32 BUSINESS COMBINATION S The Company applies the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed, including amounts attributable to noncontrolling interests, are recorded at their respective fair values at the date of acquisition.
Our critical accounting estimates are described below. 32 BUSINESS COMBINATION S The Company applies the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed, including amounts attributable to noncontrolling interests, are recorded at their respective fair values at the date of acquisition.
GOODWILL As a result of acquiring businesses, the Company has $44.0 million of goodwill on May 28, 2022. Goodwill is evaluated for impairment annually by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary.
GOODWILL As a result of acquiring businesses, the Company has $44.0 million of goodwill on June 3, 2023. Goodwill is evaluated for impairment annually by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary.
Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's fiscal 2021 Annual Report on Form 10-K. LIQUIDITY AND CAPITAL RESOURCES Working Capital and Current Ratio Our working capital at May 28, 2022 was $476.8 million, compared to $429.8 million at May 29, 2021.
Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company’s fiscal 2022 Annual Report on Form 10-K. LIQUIDITY AND CAPITAL RESOURCES Working Capital and Current Ratio Our working capital at June 3, 2023 was $942.2 million, compared to $476.8 million at May 28, 2022.
At May 28, 2022, goodwill represented 3.1% of total assets and 2.9% of stockholders’ equity. Judgment exists in management’s evaluation of the qualitative factors which include macroeconomic conditions, the current egg industry environment, cost inputs such as feed ingredients and overall financial performance.
At June 3, 2023, goodwill represented 2.3% of total assets and 2.7% of stockholders’ equity. Judgment exists in management’s evaluation of the qualitative factors which include macroeconomic conditions, the current egg industry environment, cost inputs such as feed ingredients and overall financial performance.
As a result of the above, net income attributable to Cal-Maine Foods, Inc. for fiscal 2022 was $132.7 million, or $2.73 per basic and $2.72 per diluted share, compared to $2.1 million, or $0.04 per basic and diluted share for fiscal 2021.
NET INCOME ATTRIBUTABLE TO CAL-MAINE FOODS, INC. As a result of the above, net income attributable to Cal-Maine Foods, Inc. for fiscal 2023 was $758.0 million, or $15.58 per basic and $15.52 per diluted share, compared to $132.7 million, or $2.73 per basic and $2.72 per diluted share for fiscal 2022.
Items causing our effective tax rate to differ from the federal statutory income tax rate of 21% are state income taxes, certain federal tax credits and certain items included in income or loss for financial reporting purposes that are not included in taxable income or loss for income tax purposes, including tax exempt interest income, certain nondeductible expenses, and net income or loss attributable to noncontrolling interest.
Items causing our effective tax rate to differ from the federal statutory income tax rate of 21% are state income taxes, certain federal tax credits and certain items included in income or loss for financial reporting purposes that are not included in taxable income or loss for income tax purposes, including tax exempt interest income, certain nondeductible expenses, and net income or loss attributable to noncontrolling interest. 30 NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST Net loss attributable to noncontrolling interest was $1.3 million for fiscal 2023 compared to a $209 thousand net loss for fiscal 2022.
The increase resulted primarily from higher selling prices for conventional eggs as well as the increased volume of specialty eggs sold, partially offset by the increased cost of feed ingredients, increased processing costs and the decline in the volume of conventional eggs sold.
The increases resulted primarily from higher selling prices for conventional eggs as well as an increased volume of specialty eggs sold, partially offset by a decline in the volume of conventional eggs sold. Gross profit and net income increases were partially offset by increased cost of feed ingredients and increased processing costs.
Costs to deliver product to customers are included in selling, general and administrative expenses in the accompanying Consolidated Statements of Income. Sales revenue reported in the accompanying Consolidated Statements of Income is reduced to reflect estimated returns and allowances.
The Company believes the performance obligation is met upon delivery and acceptance of the product by our customers. Costs to deliver product to customers are included in selling, general and administrative expenses in the accompanying Consolidated Statements of Income. Sales revenue reported in the accompanying Consolidated Statements of Income is reduced to reflect estimated returns and allowances.
Fiscal Year Ended May 28, 2022 May 29, 2021 Net sales 100.0 % 100.0 % Cost of sales 81.0 % 88.1 % Gross profit 19.0 % 11.9 % Selling, general and administrative 11.2 % 13.6 % (Gain) loss on disposal of fixed assets (0.3) % 0.2 % Operating income (loss) 8.1 % (1.9) % Total other income 1.3 % 1.2 % Income (loss) before income taxes 9.4 % (0.7) % Income tax expense (benefit) 1.9 % (0.9) % Net income 7.5 % 0.2 % Less: Net loss attributable to noncontrolling interest — % — % Net income attributable to Cal-Maine Foods, Inc. 7.5 % 0.2 % Table of Contents 26 Fiscal Year Ended May 28, 2022 Compared to Fiscal Year Ended May 29, 2021 NET SALES Total net sales for fiscal 2022 were $1,777.2 million compared to $1,349.0 million for fiscal 2021.
Fiscal Year Ended June 3, 2023 May 28, 2022 Net sales 100.0 % 100.0 % Cost of sales 62.0 % 81.0 % Gross profit 38.0 % 19.0 % Selling, general and administrative 7.4 % 11.2 % Gain on insurance recoveries (0.1) % (0.3) % (Gain) loss on disposal of fixed assets — % — % Operating income 30.7 % 8.1 % Total other income 1.0 % 1.3 % Income before income taxes 31.7 % 9.4 % Income tax expense 7.7 % 1.9 % Net income 24.0 % 7.5 % Less: Net loss attributable to noncontrolling interest — % — % Net income attributable to Cal-Maine Foods, Inc. 24.0 % 7.5 % 26 Fiscal Year Ended June 3, 2023 Compared to Fiscal Year Ended May 28, 2022 NET SALES Total net sales for fiscal 2023 were $3.1 billion compared to $1.8 billion for fiscal 2022.
(“IRI”), for the 52 weeks ended June 5, 2022, which approximately aligns with our fiscal year 2022, conventional egg dozens sold in the U.S. at multi-retail outlets decreased 14.3%, while specialty egg dozens sold increased 13.2% versus the prior-year comparable period. Our conventional eggs dozens sold decreased 3.4% and specialty egg dozens sold increased 12.5% as compared to fiscal 2021.
(“IRI”), for the 52 weeks ended June 4, 2023, which approximately aligns with our fiscal year 2023, conventional egg dozens sold in the U.S. at multi-retail outlets decreased 9.3%, while specialty egg dozens sold increased 9.9% versus the prior-year comparable period.
Net shell egg sales represented 96.6% and 97.3% of total net sales for the fiscal year 2022 and 2021, respectively. Shell egg sales classified as “Other” represent sales of hard -cooked eggs, hatching eggs, and other miscellaneous products included with our shell egg operations.
Net shell egg sales represented 96.1% and 96.6% of total net sales for the fiscal year 2023 and 2022, respectively. Shell egg sales classified as “Other” represent sales of miscellaneous byproducts and resale products included with our shell egg operations.
For fiscal year 2022, the average Chicago Board of Trade (“CBOT”) daily market price was $6.31 per bushel for corn and $392.06 per ton for soybean meal, Table of Contents 25 representing increases of 38.3% and 6.1%, respectively, compared to the daily average CBOT prices for fiscal 2021.
For fiscal year 2023, the average Chicago Board of Trade (“CBOT”) daily market price was $6.57 per bushel for corn and $450 per ton for soybean meal, representing increases of 4.1% and 14.7%, respectively, compared to the daily average CBOT prices for fiscal 2022.
The Company, which is headquartered in Ridgeland, Mississippi, is the largest producer and distributor of fresh shell eggs in the United States (“U.S”). In fiscal 2022, we sold approximately 1,083.8 million dozen shell eggs, which we believe represented approximately 20% of domestic shell egg consumption.
The fiscal year 2023 and 2022 included 53 weeks and 52 weeks, respectively. The Company, which is headquartered in Ridgeland, Mississippi, is the largest producer and distributor of fresh shell eggs in the United States (“U.S”). In fiscal 2023, we sold approximately 1,147.4 million dozen shell eggs, which we believe represented approximately 21% of domestic shell egg consumptio n.
COST OF SALES Cost of sales for fiscal 2022 were $1,440.1 million compared to $1,188.3 million for fiscal 2021. Cost of sales consi sts of costs directly related to producing, processing and packing shell eggs, purchases of shell eggs from outside producers, processing and packing of liquid and frozen egg products and other non-egg costs.
COST OF SALES Cost of sales for fiscal 2023 were $1.9 billion compared to $1.4 billion for fiscal 2022. Cost of sales consists of costs directly related to producing, processing and packing shell eggs, purchases of shell eggs from outside sources, processing and packing of liquid and frozen egg products and other non-egg costs.
We continue to monitor the increasing demand for cage-free eggs and to engage with our customers in an effort to achieve a smooth transition to meet their announced commitment timeline for cage-free egg sales.
We continue to monitor the increasing demand for cage-free eggs and to engage with our customers in efforts to help them achieve their announced timelines for cage-free egg sales.
OTHER INCOME (EXPENSE) Total other income (expense) consists of items not directly charged to, or related to, operations such as interest income and expense, equity in income or loss of unconsolidated entities, and patronage dividends, among other items. Table of Contents 29 The Company recorded interest income of $988 thousand in fiscal 2022, compared to $2.8 million in fiscal 2021.
OTHER INCOME (EXPENSE) Total other income (expense) consists of items not directly charged to, or related to, operations such as interest income and expense, equity in income or loss of unconsolidated entities, and patronage dividends, among other items.
Table of Contents 31 Material Cash Requirements Material cash requirements for operating activities consist of feed ingredients, employee related costs, and other general operating expenses, which we expect to be paid from our cash from operations.
Material Cash Requirements Material cash requirements for operating activities primarily consist of feed ingredients, processing, packaging and warehouse costs, employee related costs, and other general operating expenses, which we expect to be paid from our cash from operations and cash and investment securities on hand for at least the next 12 months.
The following table presents an analysis of our SGA expenses (in thousands): Fiscal Year Ended May 28, 2022 May 29, 2021 $ Change % Change Specialty egg expense $ 59,830 $ 59,294 $ 536 0.9 % Delivery expense 62,677 52,670 10,007 19.0 % Payroll, taxes and benefits 43,954 43,327 627 1.4 % Stock compensation expense 4,063 3,778 285 7.5 % Other expenses 28,107 24,874 3,233 13.0 % Total $ 198,631 $ 183,943 $ 14,688 8.0 % Specialty egg expense - Specialty egg expense which includes franchise fees, advertising and promotion costs generally tracks with specialty egg volumes, which were up 16.7% for fiscal 2022 compared to fiscal 2021.
The following table presents an analysis of our SGA expenses (in thousands): Fiscal Year Ended June 03, 2023 May 28, 2022 $ Change % Change Specialty egg expense $ 57,758 $ 59,830 $ (2,072) (3.5) % Delivery expense 77,548 62,677 14,871 23.7 % Payroll, taxes and benefits 57,830 43,954 13,876 31.6 % Stock compensation expense 4,205 4,063 142 3.5 % Other expenses 34,866 28,107 6,759 24.0 % Total $ 232,207 $ 198,631 $ 33,576 16.9 % Specialty egg expense - Specialty egg expense, which includes franchise fees, advertising and promotion costs generally tracks with specialty egg volumes, which were up 18.6% for fiscal 2023 compared to fiscal 2022.
Our total flock as of May 28, 2022 of approximately 42.2 million layers and 11.5 million pullets and breeders is the largest in the U.S.
Our total flock as of June 3, 2023 of approximately 41.2 million layers and 10.8 million pullets and breeders is the largest in the U.S.
We believe the HPAI outbreak will continue to impact the overall supply of eggs until the layer hen flock is fully replenished. While no farm is immune from HPAI, we believe we have implemented and continue to maintain robust biosecurity programs across our locations.
While no farm is immune from HPAI, we believe we have implemented and continue to maintain robust biosecurity programs across our locations.
Changes in price resulted in a $18.8 million increase and change in volume resulted in a $90.3 million increase in net sales, respectively. Our specialty egg sales also benefitted from our additional cage-free production capacity. Cage-free egg sales for fiscal 2022 were 22.1% of our total net shell egg sales.
Changes in price resulted in a $187.6 million increase and change in volume resulted in a $120.6 million increase in net sales, respectively. Our 27 specialty egg sales also benefitted from our additional cage-free production capacity.
The calculation of working capital is defined as current assets less current liabilities. Our current ratio was 3.58 at May 28, 2022 compared to 5.77 Table of Contents 30 at May 29, 2021. The current ratio is calculated by dividing current assets by current liabilities. Due to seasonal factors described in Part I. Item I.
The calculation of working capital is defined as current assets less current liabilities. Our current ratio was 6.16 at June 3, 2023 compared to 3.58 at May 28, 2022. The current ratio is calculated by dividing current assets by current liabilities.
See Note 14 – Revenue Recognition in Part II. Item 8. Notes to the Consolidated Financial Statements for further discussion of the policy. The Company believes the performance obligation is met upon delivery and acceptance of the product by our customers.
REVENUE RECOGNITION Revenue recognition is completed upon satisfaction of the performance obligation to the customer, which typically occurs within days of the Company and customer agreeing upon the order. See Note 13 – Revenue Recognition in Part II. Item 8. Notes to the Consolidated Financial Statements for further discussion of the policy.
Cash payments of $215 thousand and $205 thousand were made on our finance lease. As of May 28, 2022, cash increased $1.7 million since May 29, 2021, compared to a decrease of $20.8 million during fiscal 2021. Credit Facility We had no long-term debt outstanding at the end of fiscal 2022 and 2021.
As of June 3, 2023, cash increased $233.7 million since May 28, 2022, compared to an increase of $1.7 million during fiscal 2022. Credit Facility We had no long-term debt outstanding at the end of fiscal 2023 and 2022.
Included in fiscal 2022 income tax expense is the discrete tax benefit of $8.3 million discussed in Note 2 – Acquisition of Part II. Item 8. Notes to Condensed Consolidated Financial Statements in this Annual Report. Excluding the discrete tax benefit, income tax expense was $41.9 million with an adjusted effective tax rate of 25.2%.
Notes to Consolidated Financial Statements in this Annual Report. Excluding the discrete tax benefit, income tax expense was $41.9 million with an adjusted effective tax rate of 25.2%. At June 3, 2023, the Company had an income tax receivable of $67.0 million compared to $42.1 million at May 28, 2022.
The Credit Agreement provides for an increased senior secured revolving credit facility (the “Credit Facility”), in an initial aggregate principal amount of up to $250 million. As of May 28, 2022, no amounts were borrowed under the Credit Facility.
On November 15, 2021, we entered into an Amended and Restated Credit Agreement (as amended the “Credit Agreement”) with a five-year term. The Credit Agreement provides for a senior secured revolving credit facility (the “Credit Facility”), in an initial aggregate principal amount of up to $250 million. As of June 3, 2023, no amounts were borrowed under the Credit Facility.
Payments due by period Total Less than 1 year 1-3 years 3-5 years More than 5 years Finance leases $ 457 $ 239 $ 218 $ — $ — Operating leases 1,080 539 536 5 — Purchase obligations: Feed ingredients (a) 172,132 172,132 — — — Construction contracts and other equipment 27,568 19,281 8,287 — — Total $ 201,237 $ 192,191 $ 9,041 $ 5 $ — (a) Actual purchase obligations may change based on the contractual terms and agreements We believe our current cash balances, investments, cash flows from operations, and Credit Facility will be sufficient to fund our capital needs for at least the next 12 months.
Payments due by period Total Less than 1 year 1-3 years 3-5 years More than 5 years Lease obligations $ 1,714 $ 796 $ 914 $ 4 $ — Purchase obligations: Feed ingredients and fuel (a) 123,321 123,321 — — — Construction contracts and other equipment 105,414 61,108 44,306 — — Total $ 230,449 $ 185,225 $ 45,220 $ 4 $ — (a) Actual purchase obligations may change based on the contractual terms and agreements We believe our current cash balances, investments, cash flows from operations, and Credit Facility will be sufficient to fund our capital needs for at least the next 12 months and to fund our capital commitments currently in place thereafter.
The table below presents an analysis of our conventional and specialty shell egg sales (in thousands, except percentage data): May 28, 2022 May 29, 2021 Total net sales $ 1,777,159 $ 1,348,987 Conventional $ 1,061,995 61.8 % $ 766,284 58.4 % Specialty 648,838 37.8 % 539,780 41.1 % Egg sales, net 1,710,833 99.6 % 1,306,064 99.5 % Other 6,322 0.4 % 6,190 0.5 % Net shell egg sales $ 1,717,155 100.0 % $ 1,312,254 100.0 % Dozens sold: Conventional 747,914 69.0 % 785,446 73.2 % Specialty 335,875 31.0 % 287,765 26.8 % Total dozens sold 1,083,789 100.0 % 1,073,211 100.0 % Net average selling price per dozen: Conventional $ 1.420 $ 0.976 Specialty $ 1.932 $ 1.876 All shell eggs $ 1.579 $ 1.217 Egg products sales: Egg products net sales $ 60,004 $ 36,733 Pounds sold 63,968 63,627 Net average selling price per pound $ 0.938 $ 0.577 Shell egg net sales - For fiscal 2022, conventional egg sales increased $295.7 million, or 38.6%, compared to fiscal 2021, primarily due to the increase in conventional egg prices, partially offset by a 4.8% decrease in the volume of conventional eggs sold.
The table below presents an analysis of our conventional and specialty shell egg sales (in thousands, except percentage data): June 03, 2023 May 28, 2022 Total net sales $ 3,146,217 $ 1,777,159 Conventional $ 2,051,961 67.9 % $ 1,061,995 61.8 % Specialty 956,993 31.6 % 648,838 37.8 % Egg sales, net 3,008,954 99.5 % 1,710,833 99.6 % Other 14,993 0.5 % 6,322 0.4 % Net shell egg sales $ 3,023,947 100.0 % $ 1,717,155 100.0 % Dozens sold: Conventional 749,076 65.3 % 747,914 69.0 % Specialty 398,297 34.7 % 335,875 31.0 % Total dozens sold 1,147,373 100.0 % 1,083,789 100.0 % Net average selling price per dozen: Conventional $ 2.739 $ 1.420 Specialty $ 2.403 $ 1.932 All shell eggs $ 2.622 $ 1.579 Egg products sales: Egg products net sales $ 122,270 $ 60,004 Pounds sold 70,035 63,968 Net average selling price per pound $ 1.746 $ 0.938 Shell egg net sales - For fiscal 2023, shell egg net sales increased $1.3 billion, primarily due to higher net average selling prices for conventional eggs, and to a lesser extent specialty eggs. - For fiscal 202 3, conventional egg sales increased $990.0 million, or 93.2%, compared to fiscal 2022, primarily due to the increase in conventional egg prices.
The majority of the increase is due to our acquisition of the remaining 50% membership interest in Red River as we recognized a $4.5 million gain due to the remeasurement of our equity investment, along with the $1.6 million payments related to review and adjustment of our various marketing agreements.
The majority of the decrease is due to our acquisition in fiscal 2022 of the remaining 50% membership interest in Red River Valley Egg Farm, LLC (“Red River”) as we recognized a $4.5 million gain in fiscal 2022 due to the remeasurement of our equity investment.
The following table presents the key variables affecting our cost of sales (in thousands, except cost per dozen data): Fiscal Year Ended May 28, 2022 May 29, 2021 % Change Cost of Sales: Farm production $ 927,806 $ 730,902 26.9 % Processing, packaging, and warehouse 289,056 250,058 15.6 Egg purchases and other (including change in inventory) 172,034 177,634 (3.2) Total shell eggs 1,388,896 1,158,594 19.9 Egg products 51,204 29,536 73.4 Other — 196 (100.0) Total $ 1,440,100 $ 1,188,326 21.2 % Farm production costs (per dozen produced) Feed $ 0.571 $ 0.446 28.0 % Other $ 0.352 $ 0.320 10.0 % Total $ 0.923 $ 0.766 20.5 % Outside egg purchases (average cost per dozen) $ 1.72 $ 1.22 41.0 % Dozens produced 1,022,327 970,837 5.3 % Percent produced to sold 94.3% 90.5% 4.2 % Farm Production - Feed costs per dozen produced increased 28.0% in fiscal 2022 compared to fiscal 2021, primarily due to higher feed ingredient prices, discussed above. - Other farm production costs increased due to higher flock amortization, primarily from an increase in our cage-free production, which has higher capitalized costs.
The following table presents the key variables affecting our cost of sales (in thousands, except cost per dozen data): Fiscal Year Ended June 03, 2023 May 28, 2022 % Change Cost of Sales: Farm production $ 1,118,741 $ 927,806 20.6 % Processing, packaging, and warehouse 342,836 289,056 18.6 Egg purchases and other (including change in inventory) 379,777 172,034 120.8 Total shell eggs 1,841,354 1,388,896 32.6 Egg products 108,406 51,204 111.7 Total $ 1,949,760 $ 1,440,100 35.4 % Farm production costs (per dozen produced) Feed $ 0.676 $ 0.571 18.4 % Other $ 0.396 $ 0.352 12.5 % Total $ 1.072 $ 0.923 16.1 % Outside egg purchases (average cost per dozen) $ 3.02 $ 1.72 75.6 % Dozens produced 1,058,540 1,022,327 3.5 % Percent produced to sold 92.3% 94.3% (2.1) % Farm Production - Feed costs per dozen produced increased 18.4% in fiscal 2023 compared to fiscal 2022, primarily due to higher feed ingredient prices.
Gross profit increased $176.4 million to $337.1 million in fiscal 2022. The increase resulted primarily from higher selling prices for conventional eggs as well as the increased volume of specialty eggs sold, partially offset by the increased cost of feed ingredients, increased processing costs and the decline in the volume of conventional eggs sold.
The increase resulted primarily from higher selling prices for conventional eggs as well as the increased volume of specialty eggs sold, partially offset by the increased cost of feed ingredients and processing, packaging and warehouse costs. SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES Selling, general, and administrative (“SGA”) expenses include costs of marketing, distribution, accounting, and corporate overhead.
At May 28, 2022, the Company had an income tax receivable of $42.1 million compared to $42.5 million at May 29, 2021. The income tax receivable is related to the Company’s decision to carryback fiscal 2020 and fiscal 2021 taxable net operating losses to recover a portion of taxes paid in fiscal 2015 and fiscal 2016.
During fiscal 2022, the Company filed federal carryback tax returns for fiscal 2020 and 2021 taxable net operating losses to recover a portion of taxes paid in fiscal 2015 and fiscal 2016.
OPERATING INCOME (LOSS) As a result of the above, our operating income was $143.5 million for fiscal 2022, compared to operating loss of $26.3 million for fiscal 2021.
Other expenses - The increase in other expenses is due to increased legal expenses of approximately $3.6 million as well as inflationary pressure increasing costs. OPERATING INCOME (LOSS) As a result of the above, our operating income was $967.7 million for fiscal 2023 , compared to $143.5 million for fiscal 2022.
Proceeds from the sale of property, plant and equipment was $8.3 million for fiscal 2022, compared to $3.4 million for in fiscal 2021. We also acquired the remaining 50% membership interest in Red River during our first quarter of fiscal 2022 for $44.8 million, net of cash acquired.
During fiscal 2022, we also acquired the remaining 50% membership interest in Red River for $44.8 million, net of cash acquired. Cash Flows from Financing Activities We paid dividends totaling $252.3 million and $6.1 million in fiscal 2023 and 2022, respectively.
We have $4.1 million in outstanding standby letters of credit, which were issued under our Credit Facility for the benefit of certain insurance companies. Refer to Part II. Item 8. Notes to the Financial Statements, Note 10 – Credit Facility for further information regarding our long-term debt.
We have $4.3 million in outstanding standby letters of credit, which were issued under our Credit Facility for the benefit of certain insurance companies. In May 2023, we entered into 31 an amendment to the Credit Agreement to replace the London Interbank Offered Rate interest rate benchmark. Refer to Part II. Item 8.
Executive Overview of Results – Fiscal Years Ended May 28, 2022, May 29, 2021 and May 30, 2020 Fiscal Years Ended May 28, 2022 May 29, 2021 May 30, 2020 Net sales (in thousands) $ 1,777,159 $ 1,348,987 $ 1,351,609 Gross profit (in thousands) $ 337,059 $ 160,661 $ 179,588 Net average shell egg price (a) $ 1.579 $ 1.217 $ 1.231 Average UB Southeast Region - Shell Eggs - White Large $ 1.712 $ 1.155 $ 1.220 Feed costs per dozen produced $ 0.571 $ 0.446 $ 0.409 (a) The net average shell egg selling price is the blended price for all sizes and grades of shell eggs, including non-graded shell egg sales, breaking stock and undergrades.
Basic $ 15.58 $ 2.73 $ 0.04 Diluted $ 15.52 $ 2.72 $ 0.04 Net average shell egg price (a) $ 2.622 $ 1.579 $ 1.217 Average UB Southeast Region - Shell Eggs - White Large $ 3.115 $ 1.712 $ 1.155 Feed costs per dozen produced $ 0.676 $ 0.571 $ 0.446 (a) The net average shell egg selling price is the blended price for all sizes and grades of shell eggs, including non-graded shell egg sales, breaking stock and undergrades.
Costs also increased due to rising inflation. - Labor costs increased 14.4% due to wage increases in response to labor shortages, primarily due to the pandemic and its effects. - Dozens processed increased 5.0% compared to fiscal 2021, which resulted in an $11.4 million increase in costs.
Processing, packaging, and warehouse - Cost of packaging materials increased 18.6% compared to fiscal 2022 as costs increased due to rising inflation and labor costs. - Labor costs increased 13.6% due to wage increases instituted in response to labor shortages and rising inflation. - Dozens processed increased 3.6% compared to fiscal 2022, which resulted in an $11.2 million increase in costs.
Also, the strong conventional market diminished the need to promote specialty eggs; and as a result, EB temporarily reduced the related franchise fees for certain specialty egg products to encourage continued production of these products. Delivery expense - The increased delivery expense is primarily due to the increase in fuel and labor costs for both our fleet and contract trucking.
However, we anticipate that the need to promote specialty eggs will increase in fiscal 2024 as the market recovers from the effects of HPAI. 29 Delivery expense - The increased delivery expense is primarily due to the increase in fuel and labor costs for both our fleet and contract trucking.
Table of Contents 27 Egg products net sales - Egg products net sales increased $23.3 million or 63.4%, primarily due to a 62.6% selling price increase compared to fiscal 2021, which had a $23.1 million positive impact on net sales. - Our egg products net average selling price increased in fiscal 2022, compared to fiscal 2021 as foodservice channel demand has begun to shift more towards pre-pandemic levels.
Egg products net sales - Egg products net sales increased $62.3 million or 103.8%, primarily due to an 86.1% selling price increase compared to fiscal 2022, which had a $56.6 million positive impact on net sales. - Our egg products net average selling price increased in fiscal 2023, compared to fiscal 2022 as the supply of shell eggs used to produce egg products decreased due to the HPAI outbreak that started in February 2022.
The increase in accounts payables, accrued expenses and other liabilities is primarily due to $62.3 million balance for dividends and income tax payables as of May 28, 2022. Cash Flows from Investing Activities We continue to invest in our facilities, with $72.4 million used to purchase property, plant and equipment for fiscal 2022, compared to $95.1 million in fiscal 2021.
Cash Flows from Investing Activities We continue to invest in our facilities, with $136.6 million used to purchase property, plant and equipment for fiscal 2023, compared to $72.4 million in fiscal 2022. These investments were primarily made to expand our cage-free production capacity.
We recorded interest expense of $403 thousand and $213 thousand in fiscal 2022 and 2021, respectively, primarily related to commitment fees on our Credit Facility described below. Patronage dividends, which represent distributions from our membership in EB, increased $1.1 million or 12.5%. Patronage dividends are paid once a year based on EB’s profits and its available cash.
We recorded interest expense of $583 thousand and $403 thousand in fiscal 2023 and 2022, respectively, primarily related to commitment fees on our Credit Facility described below. Equity in income from unconsolidated entities for fiscal 2023 was $746 thousand compared to $1.9 million for fiscal 2022.
Notes to the Consolidated Financial Statements. As of May 28, 2022, we had no outstanding long-term debt.
Further information on debt obligations is contained in Note 10 – Credit Facility in Part II. Item 8. Notes to the Consolidated Financial Statements. As of June 3, 2023, we had no outstanding long-term debt.
Table of Contents 28 Egg purchases and other (including change in inventory) - Costs in this category decreased primarily due to the decrease in the volume of outside egg purchases, as our percentage of produced to sold increased to 94.3% in fiscal 2022 from 90.5% in fiscal 2021, partially offset by higher egg prices.
Egg purchases and other (including change in inventory) - Costs in this category increased 120.8% compared to fiscal 2022 primarily due to the increase in egg prices. The average price of outside egg purchases increased 75.6% per dozen compared to fiscal 2022.
INCOME TAXES For the fiscal year ended May 28, 2022, our pre-tax income was $166.0 million, compared to pre-tax loss of $9.9 million for fiscal 2021. Income tax expense of $33.6 million was recorded for fiscal 2022 with an effective tax rate of 20.2%.
Income tax expense of $241.8 million was recorded for fiscal 2023 with an effective tax rate of 24.2%. For fiscal 2022, income tax expense was $33.6 million with an effective tax rate of 20.2%. Included in fiscal 2022 income tax expense is the discrete tax benefit of $8.3 million discussed in Note 2 – Acquisition of Part II. Item 8.
We are also working closely with federal, state and local government officials and focused industry groups to mitigate the risk of this and future outbreaks and effectively manage our response, if needed.
We are also working closely with federal, state and local government officials and focused industry groups to mitigate the risk of this and future outbreaks and effectively manage our response, if needed. 24 Executive Overview of Results – Fiscal Years Ended June 3, 2023, May 28, 2022 and May 29, 2021 Fiscal Years Ended June 3, 2023 May 28, 2022 May 29, 2021 Net sales (in thousands) $ 3,146,217 $ 1,777,159 $ 1,348,987 Gross profit (in thousands) $ 1,196,457 $ 337,059 $ 160,661 Net income attributable to Cal-Maine Foods, Inc. $ 758,024 $ 132,650 $ 2,060 Net income per share attributable to Cal-Maine Foods, Inc.
Centers for Disease Control and Prevention, these detections do not present an immediate public health concern. There have been no positive tests for HPAI at any Cal-Maine Foods’ owned or contracted production facility as of July 19, 2022.
As the layer flock began to recover in the fourth quarter of fiscal 2023, prices for conventional shell eggs decreased from previous highs. There have been no positive tests for HPAI at any Cal-Maine Foods’ owned or contracted production facility as of July 25, 2023.
During our annual impairment test in fiscal 2022, we determined that goodwill passed the qualitative assessment and therefore no quantitative analysis of goodwill impairment was necessary. Table of Contents 33 REVENUE RECOGNITION Revenue recognition is completed upon satisfaction of the performance obligation to the customer, which typically occurs within days of the Company and customer agreeing upon the order.
The change in impairment assessment date did not have any impact on goodwill or the impairment of goodwill. The change has been applied prospectively and will not have an impact on a retrospective basis. During our annual impairment test in fiscal 2023, we determined that goodwill passed the qualitative assessment and therefore no quantitative analysis of goodwill impairment was necessary.
However, in the fourth quarter of fiscal 2020, the average UB southeastern large index price was 62.4% higher than the average price through the first three quarters in fiscal 2020 due to increased demand related to the onset of the pandemic, as consumers purchased more eggs in anticipation of preparing more meals at home.
For the first three quarters of fiscal 2023, the average UB southeastern large index price was 138.8% higher than the average price of the first three quarters in fiscal 2022.
Removed
For further description of our business, refer to Part I. Item I. Business . HPAI We are closely monitoring the outbreaks of highly pathogenic avian influenza (“HPAI”) , the latest of which was detected in commercial flocks in the U.S. in February 2022. According to the U.S.
Added
For further description of our business, refer to Part I. Item I. Business .
Removed
The USDA division of Animal and Plant Health Inspection Service (“APHIS”), reported that approximately 30.7 million commercial layer hens have been depopulated due to HPAI. Pullets impacted comprise approximately 1.0 million. According to APHIS, the most recently reported outbreaks of HPAI affecting commercial layer hens and pullets occurred June 7, 2022 and June 9, 2022, respectively.
Added
HPAI Since the first detection in a U.S. commercial flock in February 2022, outbreaks of highly pathogenic avian influenza (“HPAI”) continued to occur in U.S. poultry flocks throughout calendar year 2022 and, less frequently, in calendar year 2023, which is more than twice the length of time of the last HPAI outbreak in 2014-2015.
Removed
COVID-19 Since early 2020, the coronavirus (“COVID-19”) outbreak, characterized as a pandemic by the World Health Organization on March 11, 2020, has caused significant disruptions in international and U.S. economies and markets. We understand the challenges and difficult economic environment facing families in the communities where we live and work, and we are committed to helping where we can.
Added
HPAI affected more than 58 million birds in 47 states and resulted in the depopulation of 43.3 million commercial layer hens and 1.0 million pullets leading to higher prices for conventional shell eggs beginning in the fourth quarter of fiscal 2022 and continuing through the third quarter of fiscal 2023.
Removed
We have provided food assistance to those in need by donating approximately 829 thousand dozen eggs in fiscal 2022. We believe we are taking all reasonable precautions in the management of our operations in response to the COVID-19 pandemic.
Added
Though the virus is still present, due to seasonal migratory patterns of wild birds (which serve as carriers for the disease) the rate of outbreaks has substantially decreased and the last occurrence in a commercial egg laying flock was in December 2022. The USDA attributes this, in large part, to improved biosecurity measures by the commercial poultry industry.
Removed
Our top priority is the health and safety of our employees, who work hard each day to produce eggs for our customers. As part of the nation’s food supply, we work in a critical infrastructure industry, and we believe we have a special responsibility to maintain our normal work schedule.
Added
The industry and USDA have devoted significant resources to attempt to prevent future outbreaks. With the spring wild bird migration complete in the U.S., focus is on the fall migration season. We believe the HPAI outbreak will continue to impact the overall supply of eggs until the layer hen flock is fully replenished.
Removed
As such, we are in regular communication with our managers across our operations and continue to closely monitor the situation in our facilities and in the communities where we live and work.
Added
The egg industry typically experiences lower sales during the summer. The layer hen flock five-year average from 2020-2022 for the month of June is 321.5 million hens.
Removed
We have implemented procedures designed to protect our employees, taking into account guidelines published by the Centers for Disease Control and other government health agencies, and we have strict sanitation protocols and biosecurity measures in place Table of Contents 24 throughout our operations with restricted access to visitors.
Added
According to the USDA the U.S. flock consisted of 317.4 million layers producing table or market type eggs as of July 1, 2023, which is 0.9% below the five-year average and reflects efforts by U.S. producers to repopulate their flocks.
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There are no known indications that COVID-19 affects chickens or can be transferred through the food supply. We continue to proactively monitor and manage operations during the COVID-19 pandemic, including additional related costs that we incurred or may incur in the future.
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For fiscal 2022, net sales increased to $1.8 billion, gross profit to $337.1 million and net income to $132.7 million from fiscal 2021 net sales of $1.3 billion, gross profit of $160.7 million and net income of $2.1 million.
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The pandemic had a negative impact on our business through disruptions in the supply chain such as increased costs and limited availability of packaging supplies, increased labor costs, increased medical costs and, more recently, inflation. In fiscal 2022 and 2021, we spent $2.2 million and $2.3 million (excluding medical insurance claims) related to the pandemic and its effects, respectively.
Added
For fiscal 2023, net sales increased to $3.1 billion, gross profit to $1.2 billion and net income to $758.0 million.
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The majority of these expenses resulted from additional labor and increased cost of packaging materials, which are primarily reflected in cost of sales. Medical insurance claims related to COVID-19 paid during fiscal 2022 and 2021 were an additional $2.4 million and $1.4 million, respectively.
Added
The increases primarily resulted from significantly higher average egg selling prices, primarily due to the reduction in egg supply caused by HPAI and higher grain and other input costs, as some of our egg sales prices are based on formulas related to our costs of production.
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Throughout the first three quarters of our fiscal year 2020, an oversupply of eggs negatively affected the price of conventional eggs and demand for specialty eggs was negatively impacted by the low conventional egg prices. For the first three quarters of fiscal 2020, the average UB southeastern large index price was down 21.9% compared with the prior-year period.
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Gross profit and net income increases were partially offset by the increased cost of feed ingredients and increased processing, packaging and warehouse costs. The impact of HPAI continued throughout the first three quarters of fiscal 2023 as prices continued to increase.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

49 edited+19 added−11 removed65 unchanged
As a fully-integrated shell egg producer, our shell egg facilities are subject to regulation and inspection by the USDA, OSHA, EPA and FDA, as well as state and local health and agricultural agencies, among others. All of our shell egg production and feed mill facilities are subject to FDA, EPA and OSHA regulation and inspections.
As a fully-integrated shell egg producer, our shell egg facilities are subject to regulation and inspection by the USDA, OSHA, EPA and FDA, as well as state and local health and agricultural agencies, among others. All of 18 our shell egg production and feed mill facilities are subject to FDA, EPA and OSHA regulation and inspections.
In response to our customers' announced goals and increased legal requirements for cage-free eggs, we increased capital expenditures to increase our cage-free production capacity. We are also enhancing our focus on cage-free capacity when considering acquisition opportunities.
In response to our customers’ announced goals and increased legal requirements for cage-free eggs, we have increased capital expenditures to increase our cage-free production capacity. We are also enhancing our focus on cage-free capacity when considering acquisition opportunities.
The Company maintains policies and procedures designed to comply with the complex rules and regulations governing egg production, such as The Final Egg Rule issued by the FDA "Prevention of Salmonella Enteritidis in Shell Eggs During Production, Storage, and Transportation,” and the FDA’s Food Safety Modernization Act.
The Company maintains policies and procedures designed to comply with the complex rules and regulations governing egg production, such as The Final Egg Rule issued by the FDA “Prevention of Salmonella Enteritidis in Shell Eggs During Production, Storage, and Transportation,” and the FDA’s Food Safety Modernization Act.
Lower global crop production, including corn and soy, which are the primary feed ingredients that support the health of our animals, may result in significantly higher prices for these commodity inputs, impact our ability to source the commodities we use to feed our flocks, and negatively impact our ability to maintain or grow our operations.
Lower global crop production, including corn and soybean meal, which are the primary feed ingredients that support the health of our animals, may result in significantly higher prices for these commodity inputs, impact our ability to source the commodities we use to feed our flocks, and negatively impact our ability to maintain or grow our operations.
Such ownership will make an unsolicited acquisition of our Company more difficult and Table of Contents 16 discourage certain types of transactions involving a change of control of our Company, including transactions in which the holders of our Common Stock might otherwise receive a premium for their shares over then current market prices.
Such ownership will make an unsolicited acquisition of our Company more difficult and discourage certain types of transactions involving a change of control of our Company, including transactions in which the holders of our Common Stock might otherwise receive a premium for their shares over then current market prices.
Most recently, an outbreak of HPAI, which was first detected in February 2022, impacted the industry. Prior to 2022, there was another significant HPAI outbreak in the U.S. impacting poultry during 2015. There have been no positive tests for HPAI at any Cal-Maine Foods’ owned or contracted facility as of July 19, 2022.
Most recently, an outbreak of HPAI, which was first detected in February 2022, has impacted the industry. Prior to 2022, there was another significant HPAI outbreak in the U.S. impacting poultry during 2015. There have been no positive tests for HPAI at any Cal-Maine Foods’ owned or contracted facility as of July 25, 2023.
Delaware law provides that the holders of a majority of the voting power of shares entitled to vote must approve certain fundamental corporate transactions such as a merger, consolidation and sale of all or substantially all of a corporation’s assets; accordingly, such a transaction involving us and requiring stockholder approval cannot be effected without the approval of the Adams and Baker families.
Delaware law provides that the holders of a majority of the voting power of shares entitled to vote must approve certain fundamental corporate transactions such as a merger, consolidation and sale of all or substantially all of a corporation’s assets; accordingly, such a transaction involving us and requiring stockholder approval cannot be effected without the approval of the Family.
Table of Contents 15 We are dependent on our management team, and the loss of any key member of this team may adversely affect the implementation of our business plan in a timely manner. Our success depends largely upon the continued service of our senior management team.
We are dependent on our management team, and the loss of any key member of this team may adversely affect the implementation of our business plan in a timely manner. Our success depends largely upon the continued service of our senior management team.
Table of Contents 18 Increasing frequency of severe weather events, whether tied to climate change or any other cause, may negatively impact our ability to raise poultry and produce eggs profitably or to operate our transportation and logistics supply chains.
Increasing frequency of severe weather events, whether tied to climate change or any other cause, may negatively impact our ability to raise poultry and produce eggs profitably or to operate our transportation and logistics supply chains.
Although feed ingredients, primarily corn and soybean meal, are available from a number of sources, we do not have control over the prices of the ingredients we purchase, which are affected by weather, various global and U.S. supply and demand factors, transportation and storage costs, speculators, and agricultural, energy and trade policies in the U.S. and internationally and most recently the Russia-Ukraine war.
Although feed ingredients, primarily corn and soybean meal, are available from a number of sources, we do not have control over the prices of the ingredients we purchase, which are affected by weather, various global and U.S. supply and demand factors, transportation and storage costs, speculators, and agricultural, energy and trade policies in the U.S. and internationally.
Weak or unstable economic conditions, including higher inflation, may adversely affect our business by: ● Limiting our access to capital markets or increasing the cost of capital we may need to grow our business; ● Changing consumer spending and habits and demand for eggs, particularly higher-priced specialty eggs; ● Restricting the supply of energy sources or increasing our cost to procure energy; or ● Reducing the availability of feed ingredients, packaging material, and other raw materials, or increasing the cost of these items.
Weak or unstable economic conditions, including continued higher inflation and rising interest rates, may adversely affect our business by: ● Limiting our access to capital markets or increasing the cost of capital we may need to grow our business; ● Changing consumer spending and habits and demand for eggs, particularly higher-priced eggs; 19 ● Restricting the supply of energy sources or increasing our cost to procure energy; or ● Reducing the availability of feed ingredients, packaging material, and other raw materials, or increasing the cost of these items.
A shortage of labor available to us could cause our farms to operate with reduced staff, which could negatively impact our production capacity and efficiencies. In fiscal 2021 and 2022, our labor costs increased primarily due to the pandemic and its effects, which caused us to increase wages in response to labor shortages, and these trends may continue.
A shortage of labor available to us could cause our farms to operate with reduced staff, which could negatively impact our production capacity and efficiencies. In fiscal 2021 and 2022, our labor costs increased primarily due to the pandemic and its effects, which 16 caused us to increase wages in response to labor shortages.
Business, seasonal fluctuations impact shell egg prices. Therefore, comparisons of our sales and operating results between different quarters within a single fiscal year are not necessarily meaningful comparisons. A decline in consumer demand for shell eggs can negatively impact our business.
Therefore, comparisons of our sales and operating results between different quarters within a single fiscal year are not necessarily meaningful comparisons. A decline in consumer demand for shell eggs can negatively impact our business.
As a result of this ownership, the Adams and Baker families have the ability to exert substantial influence over matters requiring action by our stockholders, including amendments to our certificate of incorporation and by-laws, the election and removal of directors, and any merger, consolidation, or sale of all or substantially all of our assets, or other corporate transactions.
As a result of this ownership, the Family has the ability to exert substantial influence over matters requiring action by our stockholders, including amendments to our certificate of incorporation and by-laws, the election and removal of directors, and any merger, consolidation, or sale of all or substantially all of our assets, or other corporate transactions.
Adverse publicity relating to health or safety concerns and changes in the perception of the nutritional value of shell eggs, changes in consumer views regarding consumption of animal-based products, as well as movement away from high protein diets, could adversely affect demand for shell eggs, which would have a material adverse effect on our future results of operations and financial condition.
Adverse publicity relating to health or safety concerns and changes in the perception of the nutritional value of shell eggs, changes in consumer views regarding consumption of animal-based products, as well as movement away from high protein diets, could adversely affect demand for shell eggs, which would have a material adverse effect on our future results of operations and financial condition. 13 Feed costs are volatile and increases in these costs can adversely impact our results of operations.
Adams, also have additional voting power due to beneficial ownership of our Common Stock (which has one vote per share), directly or indirectly through related entities, resulting in family voting control of approximately 57.5% of our total voting power. Mr. Baker controls the vote of 100% of our outstanding Class A Common Stock.
Such persons also have additional voting power due to beneficial ownership of our Common Stock (which has one vote per share), directly or indirectly through related entities, resulting in family voting control of approximately 53.8% of our total voting power. Mr. Baker controls the vote of 100% of our outstanding Class A Common Stock.
As of May 28, 2022, we had $44.0 million of goodwill. While we believe the current carrying value of this goodwill is not impaired, future goodwill impairment charges could adversely affect our results of operations in any particular period and our net worth. Events beyond our control such as pandemics, extreme weather and natural disasters could negatively impact our business.
While we believe the current carrying value of this goodwill is not impaired, future goodwill impairment charges could adversely affect our results of operations in any particular period and our net worth. Events beyond our control such as extreme weather and natural disasters could negatively impact our business.
According to the USDA Agricultural Marketing Service, approximately 221 million hens, or about 74.0% of the U.S. non-organic laying flock would have to be in cage-free production by 2026 to meet projected demand from the retailers, foodservice providers and food manufacturers that have made promises to transition to cage-free eggs.
According to the USDA Agricultural Marketing Service, as of May 2023 approximately 221 million hens, or about 70.5% of the U.S. non-organic laying flock would have to be in cage-free production by 2026 to meet projected demand from the retailers, foodservice providers and food manufacturers that have made goals to transition to cage- free eggs.
Any product recall could result in a loss of consumer confidence in our products, adversely affect our reputation with existing and potential customers and have a material adverse effect on our business, results of operations and financial condition. Agricultural risks, including outbreaks of avian disease, could harm our business.
Any product recall could result in a loss of consumer confidence in our products, adversely affect our reputation with existing and potential customers and have a material adverse effect on our business, results of operations and financial condition.
We understand that the Adams and Baker families intend to retain ownership of a sufficient amount of our Common Stock and our Class A Common Stock to assure continued ownership of more than 50% of the voting power of our outstanding shares of capital stock.
We understand that the Family intends to retain ownership of a sufficient amount of our Common Stock and our Class A Common Stock to assure continued ownership of more than 50% of the voting power of our outstanding shares of capital stock.
Baker, our Chief Executive Officer and Chairman of our Board of Directors controls the vote of 100% of our outstanding Class A Common Stock. Fred R. Adams, Jr., our Founder and Chairman Emeritus died on March 29, 2020. Mr. Adams’ son-in-law, Adolphus B. Baker, our Chief Executive Officer and Chairman of our board of directors, Mr.
Baker, Chairman of our Board of Directors, controls the vote of 100% of our outstanding Class A Common Stock. Fred R. Adams, Jr., our Founder and Chairman Emeritus died on March 29, 2020. Mr. Adams’ son-in-law, Adolphus B. Baker, Chairman of our board of directors, Mr. Baker’s spouse and her three sisters (Mr.
According to the U.S. Bureau of Labor Statistics, from May 2021 to May 2022, the Consumer Price Index for All Urban Consumers increased 8.6 percent, the largest 12-month increase since the period ending December 1981.
According to the U.S. Bureau of Labor Statistics, from May 2021 to May 2022, the Consumer Price Index for All Urban Consumers (“CPI-U”) increased 8.5 percent, the largest 12-month increase since the period ending December 1981. The CPI-U increased 4.1% from May 2022 to May 2023.
Increases in feed costs unaccompanied by increases in the selling price of eggs can have a material adverse effect on the results of our operations and cash flow. Alternatively, low feed costs can encourage industry overproduction, possibly resulting in lower egg prices and lower revenue.
Increases in feed costs unaccompanied by increases in the selling price of eggs can have a material adverse effect on the results of our operations and cash flow. Alternatively, low feed costs can encourage industry overproduction, possibly resulting in lower egg prices and lower revenue. Agricultural risks, including outbreaks of avian disease, could harm our business.
Labor is a primary component of our farm production costs. Our success is dependent upon recruiting, motivating, and retaining staff to operate our farms. Approximately 76% of our employees are paid at hourly rates, often in entry-level positions.
Labor shortages or increases in labor costs could adversely impact our business and results of operations. Labor is a primary component of our farm production costs. Our success is dependent upon recruiting, motivating, and retaining staff to operate our farms. Approximately 76% of our employees are paid at hourly rates, often in entry-level positions.
Our largest customer, Walmart Inc. (including Sam's Club), accounted for 29.5%, 29.8% and 32.1% of net sales dollars for fiscal 2022, 2021, and 2020, respectively.
Our largest customer, Walmart Inc. (including Sam's Club), accounted for 34.2%, 29.5% and 29.8% of net sales dollars for fiscal 2023, 2022, and 2021, respectively.
Similarly, customers who commit to stock greater proportional quantities of cage-free eggs are under no obligation to continue to do so, which may result in an oversupply of cage-free eggs and result in lower specialty egg prices.
Similarly, customers who commit to stock greater proportional quantities of cage-free eggs are under no obligation to continue to do so, which may result in an oversupply of cage-free eggs and result in lower specialty egg prices, which could reduce the return on our capital investment in cage-free production.
During times when prices are high, the egg industry has typically geared up to produce more eggs, primarily by increasing the number of layers, which historically has ultimately resulted in an oversupply of eggs, leading to a period of lower prices. Table of Contents 13 As discussed above under the heading “Seasonality” in Part I. Item 1.
During times when prices are high, the egg industry has typically geared up to produce more eggs, primarily by increasing the number of layers, which historically has ultimately resulted in an oversupply of eggs, leading to a period of lower prices. As discussed above in Part I. Item 1. Business – Seasonality , seasonal fluctuations impact shell egg prices.
Sales, or the availability for sale, of a large number of shares of our Common Stock could result in a decline in the market price of our Common Stock. In addition, our articles of incorporation authorize us to issue 120,000,000 shares of our Common Stock. As of May 28, 2022, there were 44,139,524 shares of our Common Stock outstanding.
Sales, or the availability for sale, of a large number of shares of our Common Stock could result in a decline in the market price of our Common Stock. In addition, our articles of incorporation authorize us to issue 120,000,000 shares of our Common Stock. As of June 3, 2023, there were 44,184,048 shares of our Common Stock outstanding.
Accordingly, any significant labor shortages or increases in our labor costs could have a material adverse effect on our results of operations. We are controlled by the family of our late founder, Fred R. Adams, Jr., and Adolphus B.
In fiscal 2023, labor wages continued to rise due to increasing inflation and low unemployment. Accordingly, any significant labor shortages or increases in our labor costs could have a material adverse effect on our results of operations. We are controlled by the family of our late founder, Fred R. Adams, Jr., and Adolphus B.
Goodwill is reviewed at least annually for impairment by assessing qualitative factors to determine whether the Table of Contents 19 existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
Goodwill is reviewed at least annually for impairment by assessing qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. As of June 3, 2023, we had $44.0 million of goodwill.
Due to these uncertainties, we may over-estimate future demand for cage-free eggs, which could increase our costs unnecessarily, or we may under-estimate future demand for cage-free eggs, which could harm us competitively.
These consumer preferences may in turn influence our customers’ future needs for cage-free and conventional eggs. Due to these uncertainties, we may over-estimate future demand for cage-free eggs, which could increase our costs unnecessarily, or we may under-estimate future demand for cage-free eggs, which could harm us competitively.
We believe the increase in meals prepared at home due to COVID-19 pandemic, high-protein diet trends, industry advertising campaigns and the improved nutritional reputation of eggs have all contributed at one time or another to increased shell egg demand. However, it is possible that the demand for shell eggs will decline in the future.
We believe the increase in meals prepared at home due to concerns and restrictions during the initial outbreak of the COVID-19 pandemic, high-protein diet trends, industry advertising campaigns and the improved nutritional reputation of eggs have all contributed at one time or another to increased shell egg demand.
The Adams and Baker families’ controlling ownership of our capital stock may adversely affect the market price of our Common Stock.
The Family’s controlling ownership of our capital stock may adversely affect the market price of our Common Stock.
After the sale, approximately 5.0 million shares (the “Subject Shares”) remain subject to potential sale under the Agreement. The Agreement generally provides that if a holder of Subject Shares intends to sell any of the Subject Shares, such party must give the Company a right of first refusal to purchase all or any of such shares.
The Agreement generally provides that if a holder of Subject Shares intends to sell any of the Subject Shares, such party must give the Company a right of first refusal to purchase all or any of such shares.
Baker’s spouse and her three sisters (Mr. Adams’ four daughters) beneficially own, directly or indirectly through related entities, 100% of our outstanding Class A Common Stock (which has 10 votes per share), controlling approximately 52.1% of our total voting power. Additionally, such persons and Jean Reed Adams (“Mrs. Adams”), the widow of Mr.
Adams’ four daughters) (collectively, the “Family”) beneficially own, directly or indirectly through related entities, 100% of our outstanding Class A Common Stock (which has 10 votes per share), controlling approximately 52.1% of our total voting power.
Shell egg prices have also risen during periods of constrained supply, such as the latest highly pathogenic avian influenza (“HPAI”) outbreak that was first detected in domestic commercial flocks in February 2022. We believe, based on published industry estimates, that the HPAI outbreak has impacted approximately 30.7 million laying hens in 2022 through June.
Shell egg prices have also risen during periods of constrained supply, such as the latest highly pathogenic avian influenza (“HPAI”) outbreak that was first detected in domestic commercial flocks in February 2022.
Feed costs are volatile and increases in these costs can adversely impact our results of operations. Feed costs are the largest element of our shell egg (farm) production cost, ranging from 55% to 62% of total farm production cost in the prior five fiscal years.
Feed costs are the largest element of our shell egg (farm) production cost, ranging from 55% to 63% of total farm production cost in the last five fiscal years.
While we do not import corn or soy directly from the region, the Russia-Ukraine war has had a negative impact on the worldwide supply of grain, including corn, putting upward pressure on prices.
More recently, the Russia-Ukraine War has had a negative impact on the worldwide supply of grain, including corn, putting upward pressure on prices.
A security breach of sensitive information could result in damage to our reputation and our relations with our customers or employees. Any such damage or interruption could have a material adverse effect on our business. Labor shortages or increases in labor costs could adversely impact our business and results of operations.
We have experienced and expect to continue to experience attempted cyber-attacks of our information technology systems or networks. A security breach of sensitive information could result in damage to our reputation and our relations with our customers or employees. Any such damage or interruption could have a material adverse effect on our business.
As such, we might decide or be required to recall a product if we, our customers or regulators believe it poses a potential health risk.
In addition, products purchased from other producers could contain contaminants that might be inadvertently redistributed by us. As such, we might decide or be required to recall a product if we, our customers or regulators believe it poses a potential health risk.
LEGAL AND REGULATORY RISK FACTORS Pressure from animal rights groups regarding the treatment of animals may subject us to additional costs to conform our practices to comply with developing standards or subject us to marketing costs to defend challenges to our current practices and protect our image with our customers.
Issuances of substantial amounts of our Common Stock, or the perception that such issuances could occur, may adversely affect prevailing market prices for our Common Stock, and we cannot predict the effect this dilution may have on the price of our Common Stock. 17 LEGAL AND REGULATORY RISK FACTORS Pressure from animal rights groups regarding the treatment of animals may subject us to additional costs to conform our practices to comply with developing standards or subject us to marketing costs to defend challenges to our current practices and protect our image with our customers.
In addition, in recent years, many large restaurant chains, foodservice companies and grocery chains, including our largest customers, announced goals to transition to an exclusively cage-free egg supply chain by specified future dates, in some cases subject to available supply, affordability and consumer demand.
Business - Government Regulation , ten states have passed minimum space and/or cage-free requirements for hens, and other states are considering such requirements. In addition, in recent years, many large restaurant chains, foodservice companies and grocery chains, including our largest customers, announced goals to transition to an exclusively cage-free egg supply chain by specified future dates.
For a discussion of our ongoing legal proceedings see Part I. Item 3. Legal Proceedings below. Such lawsuits are expensive to defend, divert management’s attention, and may result in significant adverse judgments or settlements. Legal proceedings may expose us to negative publicity, which could adversely affect our business reputation and customer preference for our products and brands.
For a discussion of our ongoing legal proceedings see Part I. Item 3. Legal Proceedings below and Part II. Item 8. Notes to the Consolidated Financial Statements, Note 16 – Commitments and Contingencies . Such lawsuits are expensive to defend, divert management’s attention, and may result in significant adverse judgments or settlements.
The ongoing production of cage-free eggs is more costly than the production of conventional eggs, and these higher production costs contribute to the higher prices of cage-free eggs compared with conventional eggs. Many consumers prefer to buy less expensive conventional shell eggs. These consumer preferences may in turn influence our customers’ future needs for cage-free eggs.
The production of cage-free eggs is more costly than the production of conventional eggs, and these higher production costs contribute to the prices of cage-free eggs, which historically have typically been higher than conventional egg prices. Many consumers prefer to buy less expensive conventional shell eggs.
The USDA reported that the estimated cage-free flock is 103.6 million hens as of July 1, 2022, which is approximately 34.8% of the total U.S. table egg layer hen population. These numbers reflect recent cage-free layer hen losses due to the HPAI outbreak.
The USDA reported that the estimated U.S. cage-free flock was 121.6 million hens as of June 30, 2023, which is approximately 38.3% of the total U.S. table egg layer hen population.
Shipment of contaminated products, even if inadvertent, could result in a violation of law and lead to increased risk of exposure to product liability claims, product recalls and scrutiny by federal and state regulatory agencies. In addition, products purchased from other producers could contain contaminants that might be inadvertently redistributed by us.
Shipment of contaminated products, even if inadvertent, could result in a violation of law and lead to increased risk of exposure to product liability claims, product recalls and scrutiny by federal and state regulatory agencies. We have little, if any, control over proper handling once the product has been shipped or delivered.
Inflationary costs have increased our input costs, and if we are unable to pass these costs through to the customer it could have an adverse effect on our business. The loss of any registered trademark or other intellectual property could enable other companies to compete more effectively with us. We utilize intellectual property in our business.
Inflationary costs have increased our input costs, and if we are unable to pass these costs through to the customer it could have an adverse effect on our business. We hold significant cash balances in deposit accounts with deposits in excess of the amounts insured by the Federal Deposit Insurance Corporation (“FDIC”).
FINANCIAL AND ECONOMIC RISK FACTORS Weak or unstable economic conditions, including higher inflation, could negatively impact our business.
Legal proceedings may expose us to negative publicity, which could adversely affect our business reputation and customer preference for our products and brands. FINANCIAL AND ECONOMIC RISK FACTORS Weak or unstable economic conditions, including continued higher inflation and rising interest rates, could negatively impact our business.
Our largest customers have accounted for a significant portion of our net sales volume. Accordingly, our business may be adversely affected by the loss of, or reduced purchases by, one or more of our large customers. Our top three customers accounted for an aggregate of 45.9%, 48.6% and 51.1% of net sales dollars for fiscal 2022, 2021, and 2020, respectively.
Because of these trends, our volume growth could slow or we may need to lower prices or increase promotional spending for our products, any of which could adversely affect our financial results. Our top three customers accounted for an aggregate of 50.1%, 45.9% and 48.6% of net sales dollars for fiscal 202 3, 2022, and 2021, respectively.
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BUSINESS AND OPERATIONAL RISK FACTORS Table of Contents 14 The COVID-19 pandemic has had an adverse impact on our business and operations Since early 2020, the coronavirus ("COVID-19") outbreak, characterized as a pandemic by the World Health Organization on March 11, 2020, has caused significant disruptions in international and U.S. economies and markets.
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However, it is possible that the demand for shell eggs will decline in the future.
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The effects of COVID-19 have had, and may continue to have (if a significant resurgence occurs including due to variants or related strains of the virus become prevalent) a negative impact on our business.
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We saw increasing prices for corn and soybean meal for fiscal years 2022 and 2023 as a result of weather- related shortfalls in production and yields, ongoing supply chain disruptions and the Russia-Ukraine War and its impact on the export markets. Our costs for corn and soybean meal are also affected by local basis prices.
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Negative impacts have included, and may include in the future, disruptions in the supply chain resulting in increased costs and decreased availability of packaging supplies, increased labor costs and increased medical costs. Our acquisition growth strategy subjects us to various risks. As discussed in Part I. Item I.
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Factors that can affect basis levels include transportation and storage costs. We saw basis levels increase in our areas of operation during fiscal 2023 as a result of higher transportation and storage costs, resulting in higher farm production costs during the year.
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The sale or availability for sale of substantial amounts of our Common Stock could adversely impact its price. As described in Note 19 – Related Party Transaction of Part II. Item 8. Notes to the Consolidated Financial Statements, in August 2020 Mrs.
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We currently maintain insurance with respect to certain of these risks, including product liability insurance, business interruption insurance and general liability insurance, but in many cases such insurance is expensive, difficult to obtain and no assurance can be given that such insurance can be maintained in the future on acceptable terms, or in sufficient amounts to protect us against losses due to any such events, or at all.
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Adams and the Daughters’ Trust (of which the daughters of our late founder are beneficiaries) sold 6.9 million shares of Common Stock in a secondary public offering pursuant to a previously disclosed Agreement Regarding Common Stock (the “Agreement”) filed as an exhibit to this report.
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Our profitability may be adversely impacted by increases in other input costs such as packaging materials and delivery expenses, including as a result of inflation. In addition to feed ingredient costs, other significant input costs include costs of packaging materials and delivery expenses.
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Issuances of substantial amounts of our Common Stock, or the perception that such issuances could occur, may adversely affect prevailing market prices for our Common Stock, and we cannot predict the effect this dilution may have on the price of our Common Stock.
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Our costs of packing materials increased during fiscal 2023 and 2022 due to rising inflation and labor costs, and during 2022 also as a result of supply chain constraints initially caused by the pandemic, and these costs may continue to increase.
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Business - Government Regulation, several states have passed minimum space and/or cage-free requirements for hens, and other states are considering such requirements.
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We also 14 experienced increases in delivery expenses during fiscal 2023 and 2022 due to increases in fuel and labor costs for both our fleet and contract trucking, and these costs may continue to increase. Increases in these costs are largely outside of our control and have an adverse effect on our profitability and cash flow.
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In addition, legislation passed by Table of Contents 17 states requiring cage-free sale of eggs is facing and may continue to face legal challenges and could be stayed or overturned.
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BUSINESS AND OPERATIONAL RISK FACTORS Global or regional health crises including pandemics or epidemics could have an adverse impact on our business and operations. The effects of global or regional pandemics or epidemics can significantly impact our operations.
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These or other judicial outcomes could also lead to an oversupply of cage-free eggs and result in lower specialty egg prices, which could reduce the return on our capital investment in cage-free production.
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Although demand for our products could increase as a result of restrictions such as travel bans and restrictions, quarantines, shelter-in-place orders, and business and government shutdowns, which can prompt more consumers to eat at home, these restrictions could also significantly increase our cost of doing business due to labor shortages, supply-chain disruptions, increased costs and decreased availability of packaging supplies, and increased medical and other costs.
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Pandemics such as COVID-19, or similar disease outbreaks in the future, may depress demand for shell eggs due to quarantines or restrictions on public interactions that would limit the ability of consumers to purchase shell eggs. Pandemics, or similar disease outbreaks in the future, may disrupt our supply chain and operations at our facilities.
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We experienced these impacts as a result of the COVID-19 pandemic, primarily during our fiscal years 2020 and 2021. The pandemic recovery also contributed to increasing inflation and interest rates, which persist and may continue to persist.
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If a significant percentage of our workforce, or the workforce of our suppliers or transportation providers, is unable to work because of illness or government restrictions, our operations would be negatively impacted, potentially materially. Pandemics or disease outbreaks may also impact hens or the food supply.
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The impacts of health crises are difficult to predict and depend on numerous factors including the severity, length and geographic scope of the outbreak, resurgences of the disease and variants, availability and acceptance of vaccines, and governmental, business and individuals’ responses.
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A resurgence of COVID-19 and/or variants, or any future major public health crisis, would disrupt our business and could have a material adverse effect on our financial results. Our acquisition growth strategy subjects us to various risks. As discussed in Part I. Item I.
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Our ability to access any additional capital that may be needed for an acquisition may be adversely impacted by higher interest rates and economic uncertainty. Our largest customers have accounted for a significant portion of our net sales volume.
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Accordingly, our business may be adversely affected by the loss of, or reduced purchases by, one or more of our large customers. Our customers, such as supermarkets, warehouse clubs and food distributors, have continued to consolidate and consolidation is expected to continue.
Added
These consolidations have produced larger customers and potential customers with increased buying power who are more capable of operating with reduced inventories, opposing price increases, and demanding lower pricing, increased 15 promotional programs and specifically tailored products.
Added
Technology and business and regulatory requirements continue to change rapidly. Failure to update or replace legacy systems to address these changes could result in increased costs, including remediation costs, system downtime, third party litigation, regulatory actions or cyber security vulnerabilities which could have a material adverse effect on our business.
Added
The sale or availability for sale of substantial amounts of our Common Stock could adversely impact its price. The Family holds approximately 1.4 million shares of Common Stock (the “Subject Shares”) that are subject to an Agreement Regarding Common Stock (the “Agreement”) filed as an exhibit to this report. The Subject Shares remain subject to potential sale under the Agreement.
Added
A significant number of our customers previously announced goals to offer cage-free eggs exclusively on or before 2026, in most cases subject to available supply, affordability and consumer demand, among other contingencies. Some of these customers have recently changed those goals to offer 70% cage-free eggs by the end of 2030.
Added
In the event of a bank failure at an institution where we maintain deposits in excess of the FDIC- insured amount, we may lose such excess deposits. The loss of any registered trademark or other intellectual property could enable other companies to compete more effectively with us. We utilize intellectual property in our business.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+2 added−2 removed5 unchanged
Concentrations of credit risk with respect to receivables are limited due to our large number of customers and their dispersion across geographic areas, except that at May 28, 2022 and May 29, 2021, 27.9% and 23.8%, respectively, of our net accounts receivable balance was due from Walmart Inc. (including Sam’s Club).
Concentrations of credit risk with respect to receivables are limited due to our large number of customers and their dispersion across geographic areas, except that at June 3, 2023 and May 28, 2022, 30.1% and 27.9%, respectively, of our net accounts receivable balance was due from Walmart Inc. (including Sam’s Club).
FIXED INCOME SECURITIES RISK At May 28, 2022, the effective maturity of our cash equivalents and investment securities available for sale was 9.5 months, and the composite credit rating of the holdings are A / A2 / A (S&P / Moody’s / Fitch).
FIXED INCOME SECURITIES RISK At June 3, 2023, the effective maturity of our cash equivalents and investment securities available for sale was 4.8 months, and the composite credit rating of the holdings are AA- / Aa3 / AA- (S&P / Moody’s / Fitch).
The following table outlines the impact of price changes for corn and soybean meal on feed costs per dozen as feed ingredient pricing varies: Change in price per bushel of corn $ (0.84) $ (0.56) $ (0.28) $ 0.00 $ 0.28 $ 0.56 $ 0.84 Change in price per ton Soybean Meal $ (76.50) 0.511 0.521 0.531 0.541 0.551 0.561 0.571 $ (51.00) 0.521 0.531 0.541 0.551 0.561 0.571 0.581 $ (25.50) 0.531 0.541 0.551 0.561 0.571 0.581 0.591 $ 0.00 0.541 0.551 0.561 0.571 (a) 0.581 0.591 0.601 $ 25.50 0.551 0.561 0.571 0.581 0.591 0.601 0.611 $ 51.00 0.561 0.571 0.581 0.591 0.601 0.611 0.621 $ 76.50 0.571 0.581 0.591 0.601 0.611 0.621 0.631 (a) Based on 2022 actual costs, table flexes feed cost inputs to show $0.01 impacts to per dozen egg feed production costs.
The following table outlines the impact of price changes for corn and soybean meal on feed costs per dozen as feed ingredient pricing varies: Change in price per bushel of corn $ (0.84) $ (0.56) $ (0.28) $ 0.00 $ 0.28 $ 0.56 $ 0.84 Change in price per ton soybean meal $ (76.50) 0.616 0.626 0.636 0.646 0.656 0.666 0.676 $ (51.00) 0.626 0.636 0.646 0.656 0.666 0.676 0.686 $ (25.50) 0.636 0.646 0.656 0.666 0.676 0.686 0.696 $ 0.00 0.646 0.656 0.666 0.676 (a) 0.686 0.696 0.706 $ 25.50 0.656 0.666 0.676 0.686 0.696 0.706 0.716 $ 51.00 0.666 0.676 0.686 0.696 0.706 0.716 0.726 $ 76.50 0.676 0.686 0.696 0.706 0.716 0.726 0.736 (a) Based on 2023 actual costs, table flexes feed cost inputs to show $0.01 impacts to per dozen egg feed production costs.
No other single customer or customer group represented 10% or greater of net accounts receivable. Table of Contents 35
No other single customer or customer group represented 10% or greater of net accounts receivable at June 3, 2023 and May 28, 2022. 35
INTEREST RATE RISK The fair value of our debt is sensitive to changes in the general level of U.S. interest rates. In November 2021, we entered into a $250 million Credit Facility which bears interest at a variable rate. No amounts were outstanding under that facility during fiscal 2022.
INTEREST RATE RISK We have a $250 million Credit Facility, borrowings under which would bear interest at variable rates. No amounts were outstanding under that facility during fiscal 2023 or fiscal 2022. Under our current policies, we do not use interest rate derivative instruments to manage our exposure to interest rate changes.
Removed
Under our current policies, we do not use interest rate derivative instruments to manage our exposure to interest rate changes.
Added
Generally speaking, rising interest rates, as have been experienced in recent periods, decrease the value of fixed income securities portfolios. As of June 3, 2023, the estimated fair value of our fixed income securities portfolio was approximately $355 million and reflected unrealized losses of approximately $2.4 million.
Removed
CONCENTRATION OF CREDIT RISK Our financial instruments exposed to concentrations of credit risk consist primarily of trade receivables.
Added
For additional information see Note 1 – Summary of Significant Accounting Policies under the heading “Investment Securities” and Note 3 – Investment Securities in Part II. Item 8. Notes to the Consolidated Financial Statements. CONCENTRATION OF CREDIT RISK Our financial instruments exposed to concentrations of credit risk consist primarily of trade receivables.

Other CALM 10-K year-over-year comparisons