Cal-Maine Foods - 10-Q quarterly report FY2022 Q1

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Index

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,

20549

FORM

10-Q

☑

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange

Act of 1934

For the quarterly period ended

August 28, 2021

☐

Transition report

pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____________ to ____________

Commission File Number:

001-38695

CAL-MAINE FOODS, INC

(Exact name of registrant as specified in its charter)

Delaware

64-0500378

(State or other jurisdiction of incorporation or organization)

(I.R.S Employer Identification No.)

1052 Highland Colony Pkwy

Suite 200

Ridgeland

Mississippi

39157

(Address of principal executive offices)

(Zip Code)

(

601

)

948-6813

(Registrant’s telephone number,

including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

CALM

The

NASDAQ

Global Select Market

Indicate

check

mark

whether

the

registrant:

(1)

has

filed

all

reports

required

filed

Section

15(d)

the

Securities Exchange

Act of 1934

during the preceding

12 months (or

for such

shorter period that

the registrant was

required to

file such reports), and (2) has been subject to such filing requirements for the past

90 days.

Yes

☑

☐

Indicate by check

mark whether the

registrant has submitted

electronically every

Interactive Data File

required to be

submitted

pursuant to

Rule 405

of Regulation

S-T (§232.405

of this

chapter) during

the preceding

12 months

(or for

such shorter

period

that the registrant was required to submit such files).

Yes

☑

☐

Indicate by

check mark

whether the registrant

is a large

accelerated filer,

an accelerated

filer, a

non-accelerated filer,

a smaller

reporting

company,

emerging

growth

company.

See

the

definitions

“large

accelerated

filer,”

“accelerated

filer”,

“smaller reporting company”, and “emerging growth

company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer

☑

Accelerated filer

☐

Non – Accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

emerging

growth

company,

indicate

check

mark

the

registrant

has

elected

not

use

the

extended

transition

period

for

complying

with

any

new

revised

financial

accounting

standards

provided

pursuant

Section 13(a) of the Exchange Act

☐

Indicate by check mark whether the registrant is a shell company (as defined

in Rule 12b-2 of the Exchange Act).

Yes

☐

☑

There were

44,057,329

shares of Common

Stock, $0.01 par

value, and

4,800,000

shares of Class A

Common Stock, $0.01

par

value,

outstanding as of September 28, 2021.

Index

INDEX

Page

Number

Part I.

Financial Information

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets -

August 28, 2021 and May 29, 2021

Condensed Consolidated Statements of Operations -

Thirteen Weeks Ended August 28, 2021 and August 29, 2020

Condensed Consolidated Statements of Comprehensive Loss -

Thirteen Weeks Ended August 28, 2021 and August 29, 2020

Condensed Consolidated Statements of Cash Flows -

Thirteen Weeks Ended August 28, 2021 and August 29, 2020

Notes to Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

Part II.

Other Information

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.

Exhibits

Signatures

Index

PART

FINANCIAL

INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Cal-Maine Foods, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except for par value amounts)

August 28, 2021

May 29, 2021

Assets

Current assets:

Cash and cash equivalents

16,684

57,352

Investment securities available-for-sale

73,666

112,158

Trade and other receivables, net

134,400

126,639

Inventories

226,470

218,375

Prepaid expenses and other current assets

9,249

5,407

Total current

assets

460,469

519,931

Property, plant &

equipment, net

667,963

589,417

Finance lease right-of-use asset, net

486

525

Operating lease right-of-use asset, net

1,533

1,724

Investments in unconsolidated entities

10,722

54,941

Goodwill

44,006

35,525

Intangible assets, net

19,798

20,341

Other long-term assets

6,753

6,770

Total Assets

1,211,730

1,229,174

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable and accrued expenses

96,709

89,191

Current portion of finance lease obligation

217

215

Current portion of operating lease obligation

617

691

Total current

liabilities

97,543

90,097

Long-term finance lease obligation

383

438

Long-term operating lease obligation

916

1,034

Other noncurrent liabilities

10,325

10,416

Deferred income taxes

106,996

114,408

Total liabilities

216,163

216,393

Commitments and contingencies - see

Note 13

Stockholders’ equity:

Common stock ($

0.01

par value):

Common stock - authorized

120,000

shares, issued

70,261

703

Class A convertible common stock - authorized and issued

4,800

Paid-in capital

65,044

64,044

Retained earnings

957,951

975,977

Accumulated other comprehensive loss, net of tax

(728)

(558)

Common stock in treasury at cost –

26,203

shares at August 28, 2021 and

26,202

at May 29, 2021

(27,451)

(27,433)

Total stockholders’

equity

995,567

1,012,781

Total Liabilities and Stockholders’

Equity

1,211,730

1,229,174

See Notes to Condensed Consolidated Financial Statements.

Index

Cal-Maine Foods, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

Thirteen Weeks

Ended

August 28, 2021

August 29, 2020

Net sales

331,704

292,782

Cost of sales

325,059

276,017

Gross profit

6,645

16,765

Selling, general and administrative

46,525

43,965

(Gain) loss on disposal of fixed assets

(213)

Operating loss

(39,667)

(27,223)

Other income (expense):

Interest income, net

232

925

Royalty income

273

305

Equity income (loss) of unconsolidated entities

135

(44)

Other, net

5,163

512

Total other

income, net

5,803

1,698

Loss before income taxes

(33,864)

(25,525)

Income tax benefit

(15,838)

(6,126)

Net loss

(18,026)

(19,399)

Net loss per common share:

Basic

(0.37)

(0.40)

Diluted

(0.37)

(0.40)

Weighted average

shares outstanding:

Basic

48,858

48,501

Diluted

48,858

48,501

See Notes to Condensed Consolidated Financial Statements.

Index

Cal-Maine Foods, Inc. and Subsidiaries

Condensed Consolidated Statements of

Comprehensive Loss

(in thousands)

(unaudited)

Thirteen Weeks

Ended

August 28, 2021

August 29, 2020

Net loss

(18,026)

(19,399)

Other comprehensive income (loss), before tax:

Unrealized holding gain (loss) on available-for-sale securities, net

of reclassification

adjustments

(224)

468

Income tax benefit (expense) related to items of other comprehensive income

(114)

Other comprehensive income (loss), net of tax

(170)

354

Comprehensive loss

(18,196)

(19,045)

See Notes to Condensed Consolidated Financial Statements.

Index

Cal-Maine Foods, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Thirteen Weeks

Ended

August 28, 2021

August 29, 2020

Operating activities:

Net loss

(18,026)

(19,399)

Depreciation and amortization

17,389

14,744

Deferred income taxes

(15,838)

(6,126)

Other adjustments, net

(7,637)

(4,019)

Net cash used in operations

(24,112)

(14,800)

Investing activities:

Purchases of investment securities

(1,388)

(24,195)

Sales and maturities of investment securities

39,388

28,231

Distributions from unconsolidated entities

400

650

Acquisition of business, net of cash acquired

(44,823)

—

Purchases of property,

plant and equipment

(11,233)

(25,338)

Net proceeds from disposal of property,

plant and equipment

1,171

181

Net cash used in investing activities

(16,485)

(20,471)

Financing activities:

Purchase of common stock by treasury

(18)

—

Principal payments on finance lease

(53)

(50)

Net cash used in financing activities

(71)

(50)

Net change in cash and cash equivalents

(40,668)

(35,321)

Cash and cash equivalents at beginning of period

57,352

78,130

Cash and cash equivalents at end of period

16,684

42,809

Supplemental Information:

Cash paid for operating leases

217

237

Interest paid

See Notes to Condensed Consolidated Financial Statements.

Index

Cal-Maine Foods, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 1 - Summary of Significant Accounting Policies

Basis of Presentation

The

unaudited

condensed

consolidated

financial

statements

Cal-Maine

Foods,

Inc.

and

its

subsidiaries

(the

"Company,"

"we,"

"us,"

"our")

have

been

prepared

accordance

with

the

instructions

Form

10-Q

and

Article

Regulation

S-X.

Therefore, they

do not

include all of

the information

and footnotes

required by

generally accepted

accounting principles

in the

United

States

America

("GAAP")

for

complete

financial

statements

and

should

read

conjunction

with

our

Annual

Report

Form

10-K

for

the

fiscal

year

ended

May

29,

2021

(the

"2021

Annual

Report").

These

statements

reflect

all

adjustments that are, in

the opinion of management, necessary

to a fair statement of

the results for the interim

periods presented

and,

the

opinion

management,

consist

adjustments

normal

recurring

nature.

Operating

results

for

the

interim

periods are not necessarily indicative of operating results for the entire fiscal

year.

Fiscal Year

The Company's fiscal

year ends on

the Saturday closest

to May 31.

Each of the three-month

periods ended on

August 28, 2021

and August 29, 2020 included 13 weeks.

Use of Estimates

The preparation of the

consolidated financial statements in

conformity with GAAP requires management

to make estimates and

assumptions

that affect

the amounts

reported in

the consolidated

financial statements

and accompanying

notes. Actual

results

could differ from those estimates.

The severity,

magnitude and duration, as well as

the economic consequences of the COVID-19

pandemic, are uncertain, rapidly

changing

and

difficult

predict.

Therefore,

our

accounting

estimates

and

assumptions

might

change

materially

future

periods in response to COVID-19.

Investment Securities

Our investment

securities are

accounted

for in

accordance with

ASC 320,

“Investments -

Debt and

Equity Securities”

(“ASC

320”).

The

Company

considers

all

its

debt

securities

for

which

there

determinable

fair

market

value,

and

there

are

restrictions

the

Company's

ability

sell

within

the

months,

available-for-sale.

classify

these

securities

current, because the

amounts invested are available

for current operations.

Available-for-sale

securities are carried at

fair value,

with unrealized

gains and

losses reported

as a

separate

component

of stockholders’

equity.

The Company

regularly

evaluates

changes to

the rating of

its debt securities

by credit

agencies and economic

conditions to assess

and record

any expected cre

dit

losses through allowance

for credit losses,

limited to the

amount that fair value

was less than the

amortized cost basis. The

cost

basis for realized gains and

losses on available-for-sale securities is

determined by the specific identification

method. Gains and

losses

are

recognized

other

income

(expenses)

Other,

net

the

Company's

Condensed

Consolidated

Statements

Operations. Investments

in mutual

funds are

classified as

“Other long-term

assets” in

the Company’s

Condensed Consolidated

Balance Sheets.

Trade Receivables

Trade receivables

are stated at their

carrying values, which

include a reserve for

credit losses. At August

28, 2021 and May

29,

2021, reserves for credit losses were

583

thousand and $

795

thousand, respectively.

The Company extends credit to

customers

based

evaluation

each

customer's

financial

condition

and

credit

history.

Collateral

generally

not

required.

The

Company

minimizes exposure

to counter

party credit

risk through

credit analysis

and approvals,

credit limits,

and monitoring

procedures.

In determining

our

reserve for

credit losses,

receivables

are pooled

according

to age,

with

each pool

assigned

expected loss based on historical loss information adjusted as needed for economic

and other forward-looking factors.

Business Combinations

The

Company

applies fair

value

accounting

guidance

measure

non-financial

assets and

liabilities

associated

with

business

acquisitions.

These

assets

and

liabilities

are

measured

fair

value

for

the

initial

purchase price

allocation.

The

fair

value

Index

non-financial

assets

acquired

determined

internally. Our

internal

valuation

methodology

for

non-financial

assets

takes

into

account the remaining estimated life of the assets acquired and what management

believes is the market value for those assets.

Change in Accounting Principle

Effective

May

31,

2020,

the

Company

adopted

ASU

2016-13,

Financial

Instruments

–

Credit

Losses

(Topic

326),

which

intended

improve

financial

reporting

requiring

timely

recording

credit

losses

loans

and

other

financial

instruments held by financial institutions and other organizations.

The guidance replaces the prior “incurred loss” approach with

an “expected

loss” model

and requires

measurement of

all expected

credit losses

for financial

assets held

at the

reporting date

based

historical

experience,

current

conditions,

and

reasonable

and

supportable

forecasts.

The

Company

adopted

the

guidance on

a modified

retrospective basis

through a

cumulative effect

adjustment

to retained

earnings as

of the

beginning of

the period of

adoption. The Company

evaluated its current

methodology of

estimating allowance for

doubtful accounts and

the

risk

profile

its

receivables

portfolio

and

developed

model

that

includes

the

qualitative

and

forecasting

aspects

the

“expected

loss”

model

under

the

amended

guidance.

The

Company

finalized

its

assessment

the

impact

the

amended

guidance and recorded a $

422

thousand cumulative increase to retained earnings at May 31, 2020.

Note 2 – Acquisitions

Effective

May

30,

2021,

the

Company

acquired

the

remaining

membership

interest

Red

River

Valley

Egg

Farm,

LLC (“Red River”)

including certain

liabilities. As a

result of

the acquisition, the

entity became a

wholly owned

subsidiary of

the Company.

Red River owns and

operates a specialty

shell egg production

complex with approximately

1.7

million cage-free

laying

hens,

cage-free

pullet

capacity,

feed

mill,

processing

plant,

offices

and

outbuildings

and

equipment

located on approximately

400

acres near Bogata, Texas.

Pending the

finalization of

the Company’s

valuation, the

following table

summarizes the

consideration paid

for Red

River and

the amounts of the assets acquired and liabilities assumed recognized at

the acquisition date:

Cash consideration paid

48,500

Fair value of the Company's equity interest in Red River held before the business combination

48,500

97,000

Recognized amounts of identifiable assets acquired and

liabilities assumed

Cash

3,677

Accounts receivables, net

1,980

Inventory

8,789

Property, plant and equipment

85,002

Liabilities assumed

(2,448)

Deferred income taxes

(8,481)

Total identifiable

net assets

88,519

Goodwill

8,481

97,000

Cash and

accounts receivables

acquired along

with liabilities

assumed were

valued at

their carrying

value which

approximates

fair value due to the short maturity of these instruments.

Inventory consisted

primarily of

flock and feed

ingredients. Inventory

and property,

plant and equipment

were valued

utilizing

the cost approach.

The Company

recognized

a gain

of $

4.5

million

as a

result of

remeasuring

to fair

value its

% equity

interest in

Red

River

held before the business combination. The gain

was recorded in other income and expense under the

heading “Other, net” in the

Company’s

Condensed Consolidated

Statements of

Operations. The

acquisition of

Red River

resulted in

a discrete

tax benefit

of $

8.3

million which

includes $

7.3

million decrease

in deferred

income tax

expense related

to the

outside-basis of

our equity

Index

investment

Red

River,

with

corresponding

non-recurring,

non-cash

954,000

reduction

income

taxes

expense

the

non-taxable

remeasurement

gain

associated

with

the

acquisition.

part

the

acquisition

accounting,

the

Company

also

recorded a $

8.5

million deferred tax liability

for the difference

in the inside-basis

of the acquired

assets and liabilities assumed.

The recognition

of deferred

tax liabilities resulted

in the

recognition of

goodwill. None

of the goodwill

recognized is

expected

to be deductible for income tax purposes.

Note 3 - Investment

Securities

The following represents the Company’s

investment securities as of August 28, 2021 and May 29, 2021 (in

thousands):

August 28, 2021

Amortized

Cost

Unrealized

Gains

Unrealized

Losses

Estimated

Fair Value

Municipal bonds

16,828

102

—

16,930

Commercial paper

1,999

—

1,999

Corporate bonds

45,545

334

—

45,879

Certificates of deposits

—

Asset backed securities

8,865

—

8,858

Total current

investment securities

73,237

436

73,666

Mutual funds

2,306

1,810

—

4,116

Total noncurrent

investment securities

2,306

1,810

—

4,116

May 29, 2021

Amortized

Cost

Unrealized

Gains

Unrealized

Losses

Estimated

Fair Value

Municipal bonds

16,424

—

16,480

Commercial paper

1,998

—

1,998

Corporate bonds

80,092

608

—

80,700

Certificates of deposits

1,077

—

1,076

Asset backed securities

11,914

—

11,904

Total current

investment securities

111,505

664

112,158

Mutual funds

2,306

1,810

—

4,116

Total noncurrent

investment securities

2,306

1,810

—

4,116

Available-for-sale

Proceeds from

sales and

maturities of

investment securities

available-for-sale

were $

39.4

million and

28.2

million during

the

thirteen

weeks

ended August

28,

2021

and

August

29,

2020,

respectively.

Gross

realized

gains

for

the

thirteen

weeks

ended

August 28, 2021 and August 29, 2020 were $

127

thousand and $

thousand, respectively.

Gross realized losses for the thirteen

weeks ended August

28, 2021 were

thousand. There were

gross realized losses

for the thirteen

weeks ended August

29,

2020. There were

allowances for credit losses at August 28, 2021 and May 29, 2021.

Actual maturities

may differ

from contractual

maturities as some

borrowers have

the right to

call or prepay

obligations with

without penalties. Contractual maturities of current investments at August

28, 2021 are as follows (in thousands):

Estimated Fair Value

Within one year

30,395

1-5 years

43,271

Total

73,666

Noncurrent

Proceeds

from

sales

and

maturities

noncurrent

investment

securities

were

385

thousand

during

the

thirteen

weeks

ended August 28, 2021.

Gross realized gains for

the thirteen weeks ended

August 28, 2021 were

130

thousand. There were

Index

sales of

noncurrent

investment securities

during

the thirteen

weeks ended

August 29,

2020. There

were

realized losses

for

the thirteen weeks ended August 28, 2021 and August 29, 2020.

Note 4 - Fair Value

Measurements

The Company

is required

to categorize

both financial

and nonfinancial

assets and

liabilities based

on the

following fair

value

hierarchy. The

fair value

of an

asset is

the price

at which

the asset

could be

sold in

an orderly

transaction between

unrelated,

knowledgeable, and willing

parties able to engage in

the transaction. A liability’s

fair value is defined

as the amount that would

paid

transfer

the

liability

new

obligor

transaction

between

such

parties,

not

the

amount

that

would

be paid

settle the liability with the creditor.

•

Level 1

- Quoted prices in active markets for identical assets or liabilities

•

Level 2

- Inputs

other than

quoted

prices included

in Level

1 that

are observable

for the

asset or

liability,

either

directly or indirectly,

including:

◦

Quoted prices for similar assets or liabilities in active markets

◦

Quoted prices for identical or similar assets in non-active markets

◦

Inputs other than quoted prices that are observable for the asset or liability

◦

Inputs derived principally from or corroborated by other observable market

data

•

Level 3

- Unobservable inputs for the asset or liability that are

supported by little or no market activity and that

are

significant to the fair value of the assets or liabilities

The disclosures of fair value of certain financial assets and liabilities that are recorded

at cost are as follows:

Cash and cash equivalents, accounts receivable,

and accounts payable:

The carrying amount approximates fair value due to the

short maturity of these instruments.

Lease obligations:

The carrying value of the Company’s lease obligations

is at its present value which approximates fair value.

Assets and Liabilities Measured at Fair

Value

on a Recurring Basis

accordance

with

the

fair

value

hierarchy

described

above,

the

following

table

shows

the

fair

value

financial

assets and

liabilities measured at fair value on a recurring basis as of August 28, 2021 and May 29,

2021 (in thousands):

August 28, 2021

Level 1

Level 2

Level 3

Balance

Assets

Municipal bonds

—

16,930

—

16,930

Commercial paper

—

1,999

—

1,999

Corporate bonds

—

45,879

—

45,879

Certificates of deposits

—

Asset backed securities

—

8,858

—

8,858

Mutual funds

4,116

—

4,116

Total assets measured at fair

value

4,116

73,666

—

77,782

May 29, 2021

Level 1

Level 2

Level 3

Balance

Assets

Municipal bonds

—

16,480

—

16,480

Commercial paper

—

1,998

—

1,998

Corporate bonds

—

80,700

—

80,700

Certificates of deposits

—

1,076

—

1,076

Asset backed securities

—

11,904

—

11,904

Mutual funds

4,116

—

4,116

Total assets measured at fair

value

4,116

112,158

—

116,274

Investment

securities

–

available-for-sale

classified

as Level

consist

securities

with maturities

three

months

or longer

when purchased. We

classified these securities as

current because amounts

invested are readily available

for current operations.

Observable inputs for these securities are yields, credit risks, default rates, and volatility.

Index

Note 5 - Inventories

Inventories consisted of the following as of August 28, 2021 and May 29,

2021 (in thousands):

August 28, 2021

May 29, 2021

Flocks, net of amortization

139,870

123,860

Eggs and egg products

20,869

21,084

Feed and supplies

65,731

73,431

226,470

218,375

grow

and

maintain

flocks

layers

(mature

female

chickens),

pullets

(female

chickens,

under

weeks

age),

and

breeders (male

and female

chickens used

to produce

fertile eggs

to hatch

for egg

production flocks).

Our total

flock at

August

28, 2021 consisted of approximately

10.3

million pullets and breeders and

40.8

million layers.

Note 6 - Accrued Dividends Payable and Dividends per Common

accrue dividends at

the end of

each quarter according

to the Company’s

dividend policy adopted

by its Board

of Directors.

The Company

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. Dividends

are paid to

shareholders of record

as of the 60th

day

following the

last day

of such quarter,

except for

the fourth fiscal

quarter. For

the fourth quarter,

the Company

pays dividends

to shareholders of record on the 65th day after the

quarter end. Dividends are payable on the 15th day following

the record date.

Following a quarter for which the Company does not report net income

attributable to Cal-Maine Foods, Inc., the Company will

not pay a dividend

for a subsequent profitable

quarter until the Company

is profitable on a cumulative

basis computed from the

date of

the last

quarter for

which a

dividend was

paid. At

the end

of the

first quarter

of fiscal

2022, the

amount of

cumulative

losses to be recovered before payment of a dividend was $

22.3

million.

our

condensed

consolidated

statement

operations,

determine

dividends

per

common

accordance

with

the

computation in the following table (in thousands, except per share data):

Thirteen Weeks

Ended

August 28, 2021

August 29, 2020

Net loss

(18,026)

(19,399)

Cumulative losses to be recovered prior to payment of divided at beginning

of period

(4,244)

(1,370)

Net income available for dividend

—

1/3 of net income attributable to Cal-Maine Foods, Inc. available for dividend

—

Common stock outstanding (shares)

44,057

Class A common stock outstanding (shares)

4,800

Total common stock

outstanding (shares)

48,857

*Dividends per common share

= 1/3 of Net

income (loss) attributable to

Cal-Maine Foods, Inc. available

for dividend ÷ Total

common stock

outstanding (shares).

Index

Note 7 - Equity

The following reflects equity activity for the thirteen weeks ended

August 28, 2021 and August 29, 2020 (in thousands):

Thirteen Weeks Ended August

28, 2021

Cal-Maine Foods, Inc. Stockholders

Common Stock

Class A

Treasury

Paid In

Accum. Other

Retained

Amount

Capital

Comp. Loss

Earnings

Total

Balance at May 29, 2021

703

(27,433)

64,044

(558)

975,977

1,012,781

Other comprehensive loss, net of tax

—

(170)

—

(170)

Stock compensation plan

transactions

—

(18)

1,000

—

982

Net loss

—

(18,026)

Balance at August 28, 2021

703

(27,451)

65,044

(728)

957,951

995,567

Thirteen Weeks Ended August

29, 2020

Cal-Maine Foods, Inc. Stockholders

Common Stock

Class A

Treasury

Paid In

Accum. Other

Retained

Amount

Capital

Comp. Income

Earnings

Total

Balance at May 30, 2020

703

(26,674)

60,372

975,147

1,009,675

Impact of ASC 326, see

Note 1

—

422

Balance at May 31, 2020

703

(26,674)

60,372

975,569

1,010,097

Other comprehensive income, net of

tax

—

354

—

354

Stock compensation plan

transactions

—

(2)

895

—

893

Net loss

—

(19,399)

Balance at August 29, 2020

703

(26,676)

61,267

433

956,170

991,945

Note 8 - Net Loss per Common Share

Basic net loss per

share is based on

the weighted average

Common Stock and

Class A Common

Stock outstanding. Diluted

net

income per share

is based on

weighted-average common

shares outstanding

during the relevant

period adjusted

for the dilutive

effect of

share-based awards.

Restricted shares

131

thousand and

139

thousand were

antidilutive due

to the

net loss

for the

first quarters of fiscal 2022 and 2021, respectively.

These shares were not included in the diluted net loss per share calculation.

The

following

table

provides

reconciliation

the

numerators

and

denominators

used

determine

basic

and

diluted

net

income per common share (amounts in thousands, except per share data):

Thirteen Weeks

Ended

August 28, 2021

August 29, 2020

Numerator

Net loss

(18,026)

(19,399)

Denominator

Weighted-average

common shares outstanding, basic

48,858

48,501

Effect of dilutive restricted shares

—

Weighted-average

common shares outstanding, diluted

48,858

48,501

Net loss per common share attributable to Cal-Maine Foods, Inc.

Basic

(0.37)

(0.40)

Diluted

(0.37)

(0.40)

Index

Note 9 - Revenue Recognition

Satisfaction of Performance Obligation

Most of the

Company’s revenue

is derived from

contracts with customers

based on the

customer placing an

order for products.

Pricing for

the most

part is

determined when

the Company

and the

customer agree

upon the

specific order,

which establishes

the contract for that order.

Revenues are

recognized in

an amount

that reflects

the net

consideration we

expect to

receive in

exchange for

the goods. Our

shell eggs

are sold

at prices

related to

independently

quoted wholesale

market prices,

negotiated prices

or formulas

related to

our

costs of

production.

The Company’s

sales predominantly

contain

a single

performance obligation.

recognize

revenue

upon satisfaction

of the performance

obligation with

the customer,

which typically occurs

within days of

the Company

and the

customer agreeing upon the order.

Returns and Refunds

Some of our contracts

include a guaranteed sale

clause, pursuant to which

we credit the customer’s

account for product

that the

customer is unable

to sell before

expiration. The Company

records an estimate

of returns and

refunds by using

historical return

data

and

comparing

to current

period

sales and

accounts

receivable. The

allowance

is recorded

as a

reduction

in sales

with

corresponding reduction in trade accounts receivable.

Sales Incentives Provided to Customers

The

Company

periodically

provides

incentive

offers

its

customers

encourage

purchases.

Such

offers

include

current

discount offers

(e.g., percentage

discounts off

current purchases), inducement

offers (e.g.,

offers for

future discounts

subject to

a minimum

current purchase),

and other

similar offers.

Current discount

offers,

when accepted

by customers,

are treated

as a

reduction

the sales

price

of the

transaction,

while inducement

offers,

when

accepted

by customers,

are

treated

as a

reduction

sales

price

based

estimated

future

redemption

rates.

Redemption

rates

are

estimated

using

the

Company’s

historical

experience

for

similar

inducement

offers.

Current discount

and

inducement

offers

are

presented

as a

net amount

‘‘Net

sales.’’

Disaggregation of Revenue

The following table provides revenue disaggregated by product category

(in thousands):

Thirteen Weeks

Ended

August 28, 2021

August 29, 2020

Conventional shell egg sales

182,549

155,384

Specialty shell egg sales

138,657

129,245

Egg products

9,366

6,705

Other

1,132

1,448

331,704

292,782

Contract Costs

The Company can incur costs to

obtain or fulfill a contract with a

customer. If the

amortization period of these costs is less

than

one year,

they are

expensed as

incurred. When

the amortization

period is

greater than

one year,

a contract

asset is

recognized

and

amortized

over

the

contract

life

reduction

net

sales.

August

28,

2021

the

balance

for

contract

assets

immaterial.

Contract Balances

The Company receives payment from customers based on specified terms that are

generally less than 30 days from

delivery. There are rarely

contract assets or liabilities related to performance under the contract.

Index

Note 10 - Leases

Expenses related

to operating

leases, amortization

of finance

leases, right-of-use

assets, and

finance lease

interest are

included

in Cost of sales, Selling general and administrative expense, and Interest

income, net in the Condensed Consolidated Statements

of Operations. The Company’s lease cost consists

of the following (in thousands):

13 Weeks Ended

August 28, 2021

Operating Lease cost

217

Finance Lease cost

Amortization of right-of-use asset

Interest on lease obligations

Short term lease cost

1,097

Future minimum lease payments under non-cancelable leases are as follows (in

thousands):

As of August 28, 2021

Operating Leases

Finance Leases

Remainder fiscal 2022

586

181

2023

539

239

2024

380

217

2025

130

—

2026

—

2027

—

Total

1,666

637

Less imputed interest

(133)

(37)

Total

1,533

600

The

weighted-average

remaining

lease

term

and

discount

rate

for

lease

liabilities

included

our

Condensed

Consolidated

Balance Sheet are as follows:

As of August 28, 2021

Operating Leases

Finance Leases

Weighted-average

remaining lease term (years)

2.7

2.3

Weighted-average

discount rate

5.9

4.9

Note 11 - Stock Based Compensation

Total stock-based

compensation expense was $

1.0

million and $

893

thousand for the thirteen weeks ended August 28, 2021 and

August 29, 2020,

respectively.

Unrecognized

compensation

expense

as a

result

of non

-vested

restricted

stock outstanding

under

the

Amended

and

Restated 2012 Omnibus Long-Term

Incentive Plan at August 28, 2021 of $

5.6

million will be recorded over a weighted average

period

1.9

years.

Refer

Part

Item

Notes

Consolidated

Financial

Statements

and

Supplementary

Data,

Note

16:

Stock Compensation Plans in our 2021 Annual Report for further information

on our stock compensation plans.

The Company’s restricted share activity

for the thirteen weeks ended August 28, 2021 follows:

Number of

Weighted

Average Grant

Date Fair Value

Outstanding, May 29, 2021

302,147

39.37

Vested

(1,359)

40.34

Forfeited

(730)

37.70

Outstanding, August 28, 2021

300,058

39.37

Index

Note 13 - Commitments and Contingencies

Financial Instruments

The Company

maintained standby

letters of

credit ("LOC")

totaling $

4.1

million at

August 28,

2021 which

were issued

under

the Company's Revolving Credit

Facility. The

outstanding LOCs are for

the benefit of certain

insurance companies, and are

not

recorded as a liability on the consolidated balance sheets.

LEGAL PROCEEDINGS

State of Texas

v. Cal-Maine Foods, Inc. d/b/a Wharton;

and Wharton County Foods, LLC

On April

23, 2020,

the Company

and its subsidiary

Wharton County

Foods, LLC (“WCF”)

were named

as defendants in

State

Texas

Cal-Maine

Foods,

Inc.

d/b/a

Wharton;

and

Wharton

County

Foods,

LLC,

Cause

No.

2020-25427,

the

District

Court of

Harris County,

Texas.

The State

of Texas

(the “State”)

asserted claims

based on

the Company’s

and WCF’s

alleged

violation

the

Texas

Deceptive

Trade

Practices—Consumer

Protection

Act,

Tex.

Bus.

Com.

Code

§§

17.41-17.63

(“DTPA”).

The

State

claimed

that

the

Company

and

WCF

offered

shell

eggs

excessive

exorbitant

prices

during

the

COVID-19

state

emergency

and

made

misleading

statements

about

shell

egg

prices.

The

State

sought

temporary

and

permanent

injunctions

against

the

Company

and

WCF

prevent

further

alleged

violations

the

DTPA,

along

with

over

100,000

in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the State’s

original petition with

prejudice. On September

11, 2020,

the State filed a

notice of appeal,

which was assigned to

the Texas

Court of Appeals

for the

First District. The

State filed its

opening brief

on December 7,

2020. The

Company and WCF

filed their response

on February

8, 2021. The

Texas

Court of Appeals

has not ruled

on these submissions.

Management believes the

risk of material

loss related

to this matter to be remote.

Bell et al. v. Cal-Maine Foods et al.

April

30, 2020,

the Company

was named

as one

of several

defendants

Bell et

al. v.

Cal-Maine

Foods et

al.,

Case No.

1:20-cv-461,

the

Western

District

Texas,

Austin

Division.

The

defendants

include

numerous

grocery

stores,

retailers,

producers, and farms. Plaintiffs assert that defendants

violated the DTPA

by allegedly demanding exorbitant or

excessive prices

for

eggs during

the

COVID-19

state of

emergency.

Plaintiffs

request

certification

of a

class of

all consumers

who purchased

eggs

Texas

sold,

distributed,

produced,

handled

any

the

defendants

during

the

COVID-19

state

emergency.

Plaintiffs seek to enjoin

the Company and other

defendants from selling eggs

at a price more than

10% greater than the price

eggs prior

to the

declaration

of the

state of

emergency

and damages

in the

amount

of $

10,000

per violation,

or $

250,000

for

each violation

impacting anyone

over 65

years old.

On December

1, 2020,

the Company

and

certain other

defendants filed

motion to

dismiss the

plaintiffs’

amended

class action

complaint. The

plaintiffs

subsequently filed

a motion

to strike,

and the

motion to

dismiss and

related proceedings

were referred

to a

United States

magistrate judge.

On July

14, 2021,

the magistrate

judge

issued

report

and

recommendation

the

court

that

the

defendants’

motion

dismiss

granted

and

the

case

dismissed without

prejudice for

lack of

subject matter

jurisdiction. On

September 20,

2021, the

court adopted

the magistrate’s

report

and

recommendation

its

entirety

and

granted

defendants’

motion

dismiss

plaintiffs’

first

amended

class

action

complaint;

thereafter,

the court

entered a

final judgment

in favor

of the

Company and

certain other

defendants dismissing

the

case without prejudice.

Kraft Foods Global, Inc. et al. v.

United Egg Producers, Inc. et al.

As previously

reported, on

September 25,

2008, the

Company

was named

as one

of several

defendants

in numerous

antitrust

cases involving

the United

States shell

egg

industry.

The Company

settled all

of these

cases, except

for

the claims

of certain

plaintiffs who sought

substantial damages allegedly arising

from the purchase of egg

products (as opposed to shell

eggs). These

remaining plaintiffs

are Kraft

Food Global,

Inc., General

Mills, Inc.,

and Nestle

USA, Inc.

(the “Egg

Products Plaintiffs”)

and

The Kellogg Company.

On September

13, 2019,

the case

with the

Egg Products

Plaintiffs was

remanded from

a multi-district

litigation proceeding

the

United

States

District

Court

for

the

Eastern

District

Pennsylvania,

Processed

Egg

Products

Antitrust

Litigation,

MDL No. 2002, to

the United States District Court

for the Northern District

of Illinois, Kraft Foods Global,

Inc. et al. v.

United

Egg

Producers,

Inc.

al.,

Case

No.

1:11-cv-8808,

for

trial.

The

Egg

Products

Plaintiffs

allege

that

the

Company

and

other

defendants

violated

Section

the

Sherman

Act,

15.

U.S.C.

agreeing

limit

the

production

eggs

and

thereby

illegally to raise the prices that plaintiffs

paid for processed egg products. In particular,

the Egg Products Plaintiffs are

attacking

certain features of

the United Egg

Producers animal-welfare guidelines

and program used by

the Company and

many other egg

producers. The

Egg Products

Plaintiffs seek

to enjoin

the Company

and other

defendants from

engaging in

antitrust violations

and seek

treble money

damages. The

parties filed

a joint

status report

on May

18, 2020.

On August

4, 2021,

by docket

entry,

Index

the

court

instructed

the

parties

jointly

submit

second

status

report

the

court

that

included

proposed

schedule

for

preparing a final pretrial

order. On August

25, 2021, the parties filed a

joint status report, and

on August 26, 2021, the

court, by

docket entry, informed

the parties that the need to discuss issues was no longer

necessary and that a scheduled August 30, 2021,

status hearing was stricken. No trial schedule has yet been entered by the

court.

In addition,

on October

24, 2019,

the Company

entered into

a confidential

settlement agreement

with The

Kellogg Company

dismissing

all

claims

against

the

Company

for

amount

that

did

not

have

material

impact

the

Company’s

financial

condition or results

of operations. On

November 11,

2019, a stipulation

for dismissal was filed

with the court,

but the court

has

not yet entered a judgment on the filing.

The Company intends to

continue to defend the remaining

case with the Egg Products Plaintiffs

as vigorously as possible based

defenses

which

the

Company

believes

are

meritorious

and

provable.

Adjustments,

any,

which

might

result

from

the

resolution of

this remaining

matter with

the Egg

Products Plaintiffs

have not

been reflected

in the

financial statements.

While

management

believes

that

there

still

reasonable

possibility

material

adverse

outcome

from

the

case

with

the

Egg

Products Plaintiffs,

at the

present time,

it is not

possible to

estimate the

amount of

monetary exposure,

if any,

to the

Company

due to a range of

factors, including the following,

among others: the matter is in

the early stages of preparing

for trial following

remand;

any

trial

will

before

different

judge

and

jury

different

court

than

prior

cases;

there

are

significant

factual issues

to be

resolved; and

there are

requests for

damages other

than compensatory

damages (i.e.,

injunction and

treble

money damages).

State of Oklahoma Watershed Pollution

Litigation

On June 18,

2005, the

State of

Oklahoma filed

suit, in

the United

States District

Court for

the Northern

District of

Oklahoma,

against Cal-Maine Foods, Inc. and

Tyson Foods,

Inc. and affiliates, Cobb-Vantress,

Inc., Cargill, Inc. and its

affiliate, George’s,

Inc. and

its affiliate,

Peterson Farms, Inc.

and Simmons Foods,

Inc. The

State of Oklahoma

claims that through

the disposal of

chicken

litter the

defendants have

polluted the

Illinois River

Watershed.

This watershed

provides

water to

eastern Oklahoma.

The complaint

seeks injunctive

relief and

monetary damages,

but the

claim for

monetary damages

has been

dismissed by

the

court.

Cal-Maine

Foods,

Inc.

discontinued

operations

the

watershed.

Accordingly,

not

anticipate

that

Cal-Maine

Foods,

Inc.

will

materially

affected

the

request

for

injunctive

relief

unless

the

court

orders

substantial

affirmative

remediation. Since

the litigation

began, Cal-Maine

Foods, Inc.

purchased 100%

of the membership

interests of

Benton County

Foods, LLC,

which is

an ongoing

commercial shell

egg operation

within the

Illinois River

Watershed.

Benton County

Foods,

LLC is not a defendant in the litigation.

The trial in the case

began in September 2009 and

concluded in February 2010. The

case was tried without a jury,

and the court

has not yet issued its ruling. Management believes the risk of material loss related

to this matter to be remote.

Other Matters

In addition to

the above, the Company

is involved in

various other claims

and litigation incidental

to its business. Although

the

outcome of

these matters

cannot be

determined with

certainty,

management, upon

the advice

of counsel,

is of

the opinion

that

the final outcome should not have a material effect on the Company’s

consolidated results of operations or financial position.

Note 14 - Related Party Transaction

August

24,

2020,

Mrs.

Jean

Reed

Adams,

the

wife

the

Company’s

late

founder

Fred

Adams,

Jr.,

and

the

Fred

Adams,

Jr.

Daughters’

Trust,

dated

July

20,

2018

(the

“Daughters’

Trust”),

which

the

daughters

Mr.

Adams

are

beneficiaries

(together,

the

“Selling

Stockholders”),

completed

registered

secondary

public

offering

6,900,000

Common Stock held by them, pursuant to a previously

disclosed Agreement Regarding Common Stock (the “Agreement”)

filed

as an exhibit to our 2021 Annual Report. Mrs. Adams and

the Daughters’ Trust advised the Company that

they were conducting

the

offering

order

pay

estate

taxes

the

settlement

Mr.

Adam’s

estate

and

obtain

liquidity.

The

public

offering

was

made

pursuant

the

Company’s

effective

shelf

registration

statement

Form

S-3

(File

No.

333-227742),

including the Prospectus

contained therein dated

October 9, 2018, and

a related Prospectus Supplement

dated August 19,

2020,

each of

which is on

file with the

Securities and

Exchange Commission.

The public offering

involved only

the sale of

shares of

Common

Stock

that

were

already

outstanding,

and

thus

the

Company

did

not

issue

any

new

raise

any

additional

capital

the

offering.

The

expenses

the

offering

(not

including

the

underwriting

discount

and

legal

fees

and

expenses

legal

counsel

for

the

Selling

Stockholders,

which

were

paid

the

Selling

Stockholders)

paid

the

Company

were

1.1

million. Pursuant to the Agreement, the Selling Stockholders reimbursed

the Company $

551

thousand.

Index

ITEM

MANAGEMENT’S

DISCUSSION

AND

ANALYSIS

FINANCIAL

CONDITION

AND

RESULTS

OPERATIONS

The following

should be

read in

conjunction

with Management’s

Discussion and

Analysis of

Financial Condition

and Results

of Operations

included in

Item 7

of the

Company’s

Annual Report

on Form

10-K for

its fiscal

year ended

May 29,

2021 (the

“2021

Annual

Report”),

and

the accompanying

financial

statements

and

notes included

in Part

Item 8

the 2021

Annual

Report and in

Part

I Item I

of this Quarterly Report on Form 10-Q (“Quarterly Report”).

This

report

contains

numerous

forward-looking

statements

within

the

meaning

Section

27A

the

Securities

Act

1933

(the “Securities

Act”) and

Section 21E

of the

Securities Exchange

Act of

1934 (the

“Exchange Act”)

relating to

our shell

egg

business,

including

estimated

future

production

data,

expected

construction

schedules,

projected

construction

costs,

potential

future

supply

of and

demand

for

our

products,

potential

future

corn

and

soybean price

trends,

potential

future

impact

our

business

the

COVID-19

pandemic,

potential

future

impact

our

business

new

legislation,

rules

policies,

potential

outcomes

legal

proceedings,

and

other

projected

operating

data,

including

anticipated

results

operations

and

financial

condition.

Such

forward-looking

statements

are

identified

the

use

words

such

“believes,”

“intends,”

“expects,”

“hopes,”

“may,”

“should,”

“plans,”

“projected,”

“contemplates,”

“anticipates,”

similar

words.

Actual

outcomes

results

could

differ

materially

from

those

projected

the

forward-looking

statements. The

forward-looking

statements

are

based

management’s

current

intent,

belief,

expectations,

estimates,

and

projections

regarding

the

Company

and

its

industry. These

statements

are

not

guarantees

future

performance

and

involve

risks,

uncertainties,

assumptions,

and

other

factors

that

are

difficult

to predict

and

may be

beyond

our

control. The

factors

that

could cause

actual results

differ

materially

from those

projected

in the

forward-looking

statements include,

among others,

(i) the

risk factors

set forth

in Part

I, Item

1A of

the 2021

Annual

Report

(ii)

the

risks

and

hazards

inherent

the

shell egg

business

(including

disease, pests,

weather

conditions,

and

potential for

product recall),

(iii) changes

in the

demand for

and market

prices of

shell eggs

and feed

costs, (iv)

our ability

predict

and

meet

demand

for

cage-free

and

other

specialty

eggs,

(v)

risks,

changes,

obligations

that

could

result

from

our

future

acquisition

new

flocks

businesses

and

risks

changes

that

may

cause

conditions

completing

pending

acquisition not to

be met, (vi) risks

relating to the

evolving COVID-19 pandemic,

and (vii) adverse

results in pending litigation

matters. Readers

are

cautioned

not

place

undue

reliance

forward-looking

statements

because,

while

believe

the

assumptions on

which the

forward-looking statements

are based

are reasonable,

there can

be no

assurance that

these forward-

looking

statements

will

prove

accurate. Further,

forward-looking statements

included

herein

are

only

made

the

respective

dates

thereof,

date

stated,

the date

hereof. Except

otherwise

required

law,

disclaim

any

intent or obligation

to update publicly

these forward-looking statements,

whether because of

new information, future

events, or

otherwise.

GENERAL

Cal-Maine

Foods,

Inc.

primarily

engaged

the

production,

grading,

packaging,

marketing

and

distribution

fresh

shell

eggs. Our operations are fully integrated

under one operating segment.

We are

the largest producer and

distributor of fresh shell

eggs in the

United States (“U.S.”).

Our total flock

of approximately 40.8

million layers and

10.3 million pullets

and breeders is

the largest

in the

U.S. We

sell most

of our

shell eggs

to a

diverse group

of customers,

including national

and regional

grocery

store chains,

club stores, companies

servicing independent

supermarkets in

the U.S., food

service distributors,

and egg product

consumers in states across the southwestern, southeastern, mid-western

and mid-Atlantic regions of the U.S.

Our

operating

results

are

materially

impacted

market

prices for

eggs

and

feed

grains

(corn

and

soybean

meal),

which

are

highly

volatile,

independent

each

other,

and

out

our

control.

Generally,

higher

market

prices

for

eggs

have

positive

impact

our

financial

results

while

higher

market

prices

for

feed

grains

have

negative

impact

our

financial

results.

Although we

use a

variety of

pricing mechanisms

in pricing

agreements with

our customers,

we sell

most of

our conventional

shell eggs

based on

formulas that

consider,

in varying

ways, independently

quoted regional

wholesale

market prices

for shell

eggs

formulas

our

costs

production

which

include

the

cost

corn

and

soybean

meal.

example

the

volatility

the

market

prices

shell

eggs,

the

Urner-Barry

Southeastern

Regional

Large

Egg

Market

Price

per

dozen

eggs

(“UB southeastern large index”) in fiscal year 2021 ranged

from a low of $0.87 in July 2020 to a high of $1.63 in March 2021.

Generally,

we purchase

primary feed

ingredients,

mainly corn

and soybean

meal, at

current market

prices. Corn

and soybean

meal

are

commodities

and

are

subject

volatile

price

changes

due

weather,

various

supply

and

demand

factors,

transportation and storage costs, speculators, and agricultural, energy

and trade policies in the U.S. and internationally.

An important competitive advantage

for Cal-Maine Foods is

our ability to meet

our customers’ evolving needs

with a favorable

product mix

of conventional,

cage-free, organic

and other

specialty eggs

and egg

products. We

have also

enhanced our

efforts

provide

free-range

and

pasture-raised

eggs

that

meet

consumers’

evolving

choice

preferences.

While

small

part

our

Index

current

business,

the

free-range

and

pasture-raised

eggs

produce

and

sell

represent

attractive

offerings

subset

consumers,

and therefore our customers, and help us continue to serve as the trusted provider of quality

food choices.

Specialty shell

eggs have

been a

significant and

growing portion

of the

market. In

recent years,

a significant

number of

large

restaurant chains, food

service companies and

grocery chains, including

our largest customers,

announced goals to

transition to

an exclusively

cage-free egg

supply chain

by specified

future dates.

Additionally,

several states,

representing 2

4% of

the U.S.

total population

according to

the 2020

U.S. Census,

have passed

legislation requiring

that all eggs

sold in

those states

must be

cage-free

eggs by

specified

future dates,

and

other states

are

considering

such legislation.

For additional

information, see

the

2021 Annual

Report, Part

I, Item

1, “Business

– Growth

Strategy” and

“– Government

Regulation,” and

the first

risk factor

Part I Item 1A, “Risk Factors” under the sub-heading “Legal and Regulatory

Risk Factors.”

Retail

sales

shell

eggs

historically

have

been

highest

during

the

fall

and

winter

months

and

lowest

during

the

summer

months. Prices

for shell

eggs fluctuate

in response

to seasonal

demand factors

and a

natural increase

in egg

production during

the

spring

and

early

summer.

Historically,

shell

egg

prices

tend

increase

with

the

start

the

school

year

and

tend

highest

prior

holiday

periods,

particularly

Thanksgiving,

Christmas,

and

Easter.

Consequently,

and

all

other

things

being

equal, we would

expect to experience

lower selling prices, sales

volumes and net

income (and may incur

net losses) in our

first

and

fourth

fiscal

quarters

ending

August/September

and

May/June,

respectively.

Because

the

seasonal

and

quarterly

fluctuations,

comparisons

our

sales

and

operating

results

between

different

quarters

within

single

fiscal

year

are

not

necessarily meaningful comparisons.

COVID-19

Since early

2020, the

coronavirus (“COVID-19”)

outbreak, characterized

as a

pandemic by

the World

Health Organization

March

11,

2020,

has

caused

significant

disruptions

international

and

U.S.

economies

and

markets.

understand

the

challenges

and

difficult

economic

environment

facing

families

the

communities

where

live

and

work,

and

are

committed

helping

where

can.

have

provided

food

assistance

those

need

donating

approximately

239

thousand

dozen

eggs

date

fiscal

2022.

believe

are

taking

all

reasonable

precautions

the

management

our

operations in

response to

the COVID-19

pandemic. Our

top priority

is the

health and

safety of

our employees,

who work

hard

every day

to produce

eggs for our

customers. As

part of the

nation’s

food supply,

we work

in a critical

infrastructure industry,

and

believe

have

special

responsibility

maintain

our

normal

work

schedule.

such,

are

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. We

have implemented procedures designed to protect our employees, taking into account

guidelines

published

the Centers

for

Disease Control

and

other

government

health

agencies,

and

have

strict sanitation

protocols

and

biosecurity

measures

place

throughout

our

operations

with

restricted

access to

visitors.

There

are

no known

indications that COVID-19 affects hens or can be transferred

through the food supply.

continue to

proactively monitor

and manage

operations during

the COVID-19 pandemic,

including additional

related costs

that

incurred

may

incur

the

future.

The pandemic

had

negative

impact

on our

business

through

disruptions

the

supply chain such as increased costs and limited availability of packaging

supplies, and increased labor costs and medical costs.

In the

first quarters

of fiscal

2022 and

2021,

we spent

$553 thousand

and $832

thousand (excluding

medical insurance

claims)

the

pandemic,

respectively.

The

majority

these

expenses

fiscal

2022

resulted

from

additional

labor

costs and

increased

cost

packaging

materials,

primarily

reflected

cost

sales.

fiscal

2021,

most

these

expenses

additional

labor

costs.

Medical

insurance

claims

COVID-19

paid

during

the

first

quarter

fiscal

2022

were

additional $267 thousand as compared to $324 thousand paid in the

same quarter in fiscal 2021.

EXECUTIVE OVERVIEW

For the first

quarter of fiscal

2022,

we recorded a

gross profit of $6.6

million compared to

$16.8 million for

the same period

fiscal 2021,

with the decrease due primarily to the higher costs of feed

ingredients and higher processing costs. Our total

dozens

sold decreased

1.7%

to 259.4

million dozen

shell eggs

for the

first quarter

of fiscal

2022 compared

to 264.0

million dozen

for

the

same

period

fiscal

2021.

For

the

first

quarter

fiscal

2022,

conventional

dozens

sold

decreased

5.5%

and

specialty

dozens sold

increased 8.9%

as compared

to the

same quarter

in fiscal 2021.

Specialty dozens

sold increased

as more

cage-free

facilities came into production which helped increase our cage-free

egg sales.

The

daily

average

price

for

the

southeastern

large

index

for

first

quarter

fiscal

2022

increased

41.2%

from

the

same

period

the prior

year.

Our net

average

selling

price

per dozen

for

the

first

quarter

of fiscal

2021

was

$1.238

compared

$1.078

the

prior

year

period.

Hen

numbers

reported

by the

USDA as

September

1, 2021,

were 319.5

million,

which

approximately

the same

number of

hens in

same period

for the

prior year.

The USDA

also reported

that the

hatch from

April

Index

2021 through August 2021 increased 2.1%

compared to the prior-year period. As of September 1, 2021, eggs in incubators were

down 4.9% versus the prior-year period.

Our farm

production costs

per dozen

produced for

the first

quarter of

fiscal 2022

increased 25.4%

or $0.182

compared to

the

first quarter

of fiscal 2021

This increase was

primarily due

to increased

prices for

feed ingredients

caused by

increased export

demand,

well

weather-related

shortfalls

production

and

yields,

which

have

placed

additional

pressure

domestic

supplies. For the

first quarter,

the average Chicago

Board of Trade

(“CBOT”) daily market

price was $5.96

per bushel for

corn

and $364

per ton

for soybean

meal, representing

an increase of

81.8%

and 26.1%,

respectively,

compared to

the average

daily

CBOT prices for

the first quarter

of fiscal 2021.

Other farm production

costs for the

first quarter of

fiscal 2022 increased

7.6%

compared to the same period in the prior fiscal year due to higher flock amortization

and facility expenses.

RESULTS OF

OPERATIONS

The

following

table

sets

forth,

for

the

periods

indicated,

certain

items

from

our

Condensed

Consolidated

Statements

Operations expressed as a percentage of net sales.

13 Weeks Ended

August 28, 2021

August 29, 2020

Net sales

100.0

Cost of sales

98.0

94.3

Gross profit

2.0

5.7

Selling, general and administrative

14.0

15.0

(Gain) loss on disposal of fixed assets

(0.1)

—

Operating loss

(11.9)

(9.3)

Total other income, net

1.7

0.6

Loss before income taxes

(10.2)

(8.7)

Income tax benefit

(4.8)

(2.1)

Net loss

(5.4)

(6.6)

Index

NET SALES

Total

net sales for the

first quarter of fiscal

2022 were $331.7

million, compared to

$292.8 million for

the same period of

fiscal

2021.

Net shell

egg

sales represented

97.2% and

97.7% of

total net

sales for

the first

quarter of

fiscal 2022

and 2021,

respectively.

Shell

egg

sales

classified

“Other”

represent

sales

hard

cooked

eggs,

hatching

eggs,

and

other

miscellaneous

products

included with

our shell

egg operations.

The table

below presents

an analysis

of our

conventional and

specialty shell

egg sales

(in thousands, except percentage data):

13 Weeks Ended

August 28, 2021

August 29, 2020

Total net sales

331,704

292,782

Conventional

182,549

56.6

155,384

54.3

Specialty

138,657

43.0

129,245

45.2

Egg sales, net

321,206

99.6

284,629

99.5

Other

1,132

0.4

1,448

0.5

Net shell egg sales

322,338

100.0

286,077

100.0

Net shell egg sales as a percent of total net sales

97.2

97.7

Dozens sold:

Conventional

184,487

71.1

195,238

74.0

Specialty

74,898

28.9

68,756

26.0

Total dozens sold

259,385

100.0

263,994

100.0

Net average selling price per dozen:

Conventional

0.989

0.796

Specialty

1.851

1.880

All shell eggs

1.238

1.078

Egg products sales:

Egg products net sales

9,366

6,705

Pounds sold

15,269

15,030

Net average selling price per pound

0.613

0.446

Shell egg net sales

the

first

quarter

fiscal

2022,

conventional

egg

sales

increased

$27.2

million

17.5%,

compared

the

first

quarter of

fiscal 2021,

primarily due

to the

increase in

price, partially

offset by

a decrease

in volume

of conventional

eggs

sold.

Changes

price

resulted

$35.6

million

increase

and

change

volume

resulted

$10.6

million

decrease in net sales, respectively.

Higher quarter-over-quarter conventional

egg prices were primarily due

to depressed prices in the first

quarter of fiscal

2021,

which

resulted

from

conventional

eggs

entering

the

retail

channel

from

the

foodservice

channel

due

the

pandemic.

The decrease

in volume

of conventional

eggs sold

was primarily

due to

the first

quarter of

fiscal 2021

elevated retail

demand due

to consumers’

preferences to

purchase eggs

for in-home

meal preparation

due to

the pandemic.

saw

this consumer preference

begin to shift in

the fourth quarter of

fiscal 2021 as consumers

began

to resume out-of-home

dining and prepare

fewer meals at home.

Specialty

egg

sales increased

$9.4

million,

or 7.3

primarily

due

increased

volume of

8.9%

which

resulted

$11.4 million

increase in net sales.

More cage-free facilities

came into production

which helped increase our

cage-free

egg sales.

We believe that

higher demand for specialty eggs has been driven by the pandemic

as consumers prepared more meals

for in-home

consumption rather

than dining

out.

believe higher

at-home meal

preparation has

driven a

consumer

preference to purchase higher-priced specialty eggs.

Index

Egg products net sales

Egg products

net sales

increased $2.7

million or

39.7%, primarily

due to

a 37.4%

selling price

increase compared

the first quarter of fiscal 2021, which had a $1.6 million positive impact

on net sales.

Selling prices for

egg products in

the first quarter

of fiscal 2021

were negatively impacted

by a decline

in foodservice

demand

due to

the pandemic.

Our egg

products net

average selling

price

increased in

the first

quarter of

fiscal 2022

compared to

the same

period in

fiscal 2021

as foodservice

channel demand

has begun

to shift

more to

pre-pandemic

levels.

COST OF SALES

Costs of

sales for

the first

quarter of

fiscal 2022

were $325.1

million compared

to $276.0

million for

the same

period of

fiscal

2021.

Cost of

sales consists

costs directly

to producing,

processing

and

packing

shell eggs,

purchases

shell

eggs from

outside producers, processing and packing of liquid

and frozen egg products and other non-egg costs. Farm

production costs are

those costs

incurred at

the egg production

facility,

including feed,

facility,

hen amortization,

and other

related farm

production

costs.

The following table presents the key variables affecting our cost of

sales (in thousands, except cost per dozen data):

13 Weeks Ended

August 28, 2021

August 29, 2020

% Change

Cost of Sales:

Farm production

207,495

161,863

28.2

Processing, packaging, and warehouse

65,059

59,869

8.7

Egg purchases and other (including change in inventory)

44,691

48,933

(8.7)

Total shell eggs

317,245

270,665

17.2

Egg products

7,814

5,352

46.0

Total

325,059

276,017

17.8

Farm production costs (per dozen produced)

Feed

0.545

0.388

40.5

Other

0.353

0.328

7.6

Total

0.898

0.716

25.4

Outside egg purchases (average cost per dozen)

1.35

1.04

29.8

Dozens produced

236,458

231,161

2.3

Dozens sold

259,385

263,994

(1.7)

Farm Production

Feed costs per dozen produced

increased 40.5% in the first quarter of

fiscal 2022 compared to the first

quarter of fiscal

2021,

primarily

due

higher

feed

ingredient

prices

resulting

from

increased

export

demand,

well

weather-

related shortfalls in production and yields, which have placed additional

pressure on domestic supplies.

Other

farm

production

costs increased

due

to higher

flock amortization

primarily

from an

increase

our

cage-free

production,

which

has

higher

capitalized

costs.

Also,

higher

feed

costs,

which

began

rise

our

third

quarter

fiscal 2021, are capitalized in our flocks during pullet production and

increased our amortization expense.

We had higher

facility expense as more cage-free facilities came into production.

Processing, packaging, and warehouse

Cost

packaging

materials

increased

8.9%

compared

the

first

quarter

fiscal

2021

demand

for

packaging

products

increased

due

pandemic

supply

chain

constraints

and

manufacturers

increased

prices

and

implemented

pandemic surcharges.

Labor costs increased 11.1% due to wage

increases in response to labor shortages, primarily due to the pandemic.

Egg purchases and other (including change in inventory)

Costs

this

Cal-Maine Foods - 10-Q quarterly report FY2022 Q1

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