calm-20240831

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 31, 2024

☐

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

44,236,582

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 October 1, 2024.

Index

INDEX

Page

Number

Part I.

Financial Information

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets -

August 31, 2024 and June 1, 2024

Condensed Consolidated Statements of Income -

Thirteen Weeks Ended August 31, 2024 and September 2, 2023

Condensed Consolidated Statements of Comprehensive Income -

Thirteen Weeks Ended August 31, 2024 and September 2, 2023

Condensed Consolidated Statements of Cash Flows -

Thirteen Weeks Ended August 31, 2024 and September 2, 2023

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)

(Unaudited)

August 31, 2024

June 1, 2024

Assets

Current assets:

Cash and cash equivalents

181,667

237,878

Investment securities available-for-sale

571,923

574,499

Trade and other receivables, net

272,092

151,983

Income tax receivable

10,459

Inventories

293,182

261,782

Prepaid expenses and other current assets

14,156

5,238

Total current

assets

1,343,479

1,241,839

Property, plant &

equipment, net

960,070

857,234

Investments in unconsolidated entities

11,753

11,195

Goodwill

45,776

Intangible assets, net

16,175

15,996

Other long-term assets

12,755

12,721

Total Assets

2,390,008

2,184,761

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

128,600

75,862

Accrued wages and benefits

18,961

32,971

Accrued income taxes payable

106,288

43,348

Dividends payable

49,971

37,760

Accrued expenses and other liabilities

21,595

37,802

Total current

liabilities

325,415

227,743

Other noncurrent liabilities

36,854

17,109

Deferred income taxes, net

128,676

142,866

Total liabilities

490,945

387,718

Commitments and contingencies - see Note 10

—

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

77,503

76,371

Retained earnings

1,856,405

1,756,395

Accumulated other comprehensive loss, net of tax

(474)

(1,773)

Common stock in treasury at cost –

26,024

shares at August 31, 2024 and

26,022

shares at June 1, 2024

(31,632)

(31,597)

Total Cal-Maine Foods,

Inc. stockholders’ equity

1,902,553

1,800,147

Noncontrolling interest in consolidated entity

(3,490)

(3,104)

Total stockholders’

equity

1,899,063

1,797,043

Total Liabilities and Stockholders’

Equity

2,390,008

2,184,761

See Notes to Condensed Consolidated Financial Statements.

Index

Cal-Maine Foods, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)

Thirteen Weeks

Ended

August 31, 2024

September 2, 2023

Net sales

785,871

459,344

Cost of sales

538,653

413,911

Gross profit

247,218

45,433

Selling, general and administrative

61,932

52,246

Loss on involuntary conversions

146

—

Gain on disposal of fixed assets

(1,817)

(56)

Operating income (loss)

186,957

(6,757)

Other income (expense):

Interest income, net

9,785

7,346

Other, net

1,211

144

Total other income, net

10,996

7,490

Income before income taxes

197,953

733

Income tax expense

48,363

322

Net income

149,590

411

Less: Loss attributable to noncontrolling interest

(386)

(515)

Net income attributable to Cal-Maine Foods, Inc.

149,976

926

Net income per common share:

Basic

3.08

0.02

Diluted

3.06

0.02

Weighted average

shares outstanding:

Basic

48,761

48,690

Diluted

48,932

48,840

See Notes to Condensed Consolidated Financial Statements.

Index

Cal-Maine Foods, Inc. and Subsidiaries

Condensed Consolidated Statements of

Comprehensive Income

(In thousands)

(Unaudited)

Thirteen Weeks

Ended

August 31, 2024

September 2, 2023

Net income

149,590

411

Other comprehensive income (loss), before tax:

Unrealized holding gain on available-for-sale securities, net of reclassification

adjustments

1,715

786

Income tax expense related to items of other comprehensive income

(416)

(191)

Other comprehensive income, net of tax

1,299

595

Comprehensive income

150,889

1,006

Less: Comprehensive loss attributable to the noncontrolling interest

(386)

(515)

Comprehensive income attributable to Cal-Maine Foods, Inc.

151,275

1,521

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 31, 2024

September 2, 2023

Cash flows from operating activities:

Net income

149,590

411

Depreciation and amortization

22,048

19,340

Deferred income taxes

(14,605)

322

Other adjustments, net

(39,581)

3,612

Net cash provided by operations

117,452

23,685

Cash flows from investing activities:

Purchases of investment securities

(202,196)

(28,296)

Sales and maturities of investment securities

209,673

135,768

Acquisition of business

(111,521)

—

Purchases of property,

plant and equipment

(35,773)

(26,666)

Net proceeds from disposal of property,

plant and equipment

3,946

Net cash provided by (used in) investing activities

(135,871)

80,880

Cash flows from financing activities:

Payments of dividends

(37,758)

(36,983)

Purchase of common stock by treasury

(34)

(5)

Principal payments on finance lease

—

(58)

Net cash used in financing activities

(37,792)

(37,046)

Net change in cash and cash equivalents

(56,211)

67,519

Cash and cash equivalents at beginning of period

237,878

292,824

Cash and cash equivalents at end of period

181,667

360,343

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

in accordance with

the instructions to

Form 10-Q and

Article 10 of

Regulation S-X and

accordance

with generally

accepted

accounting

principles in

the

United

States of

America

(“GAAP”)

for

interim

financial

reporting and

should be

read in

conjunction with

our Annual

Report on

Form 10-K

for the fiscal

year ended

June 1,

2024 (the

“2024

Annual

Report”).

These

statements

reflect

all

adjustments

that

are,

the

opinion

management,

necessary

fair

statement of the results for

the interim periods presented

and, in the opinion of

management, consist of adjustments

of a 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 31, 2024

and September 2, 2023 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.

Investment Securities

Available-for-Sale

The Company

has determined

that its

debt securities

are available-for-sale

investments. We

classify these

securities as

current

because the

amounts invested

are available

for current

operations. Available

-for-sale

securities are

carried at

fair value,

based

on quoted market prices

as of the balance sheet

date, with unrealized gains

and losses recorded in other

comprehensive income.

The

amortized

cost

debt

securities

adjusted

for

amortization

premiums

and

accretion

discounts

maturity

and

recorded in interest

income. The Company regularly

evaluates changes to the

rating of its debt

securities by credit agencies

and

economic conditions

to assess and

record any

expected credit

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 of Income. Interest and dividends on securities classified as available-for-sale

are recorded in interest income.

Trade Receivables

Trade receivables

are stated at

their carrying

values, which

include a reserve

for credit losses.

As of August

31, 2024

and June

2024,

reserves

for

credit

losses

were

716

thousand

and

490

thousand,

respectively.

The

Company

extends

credit

customers based on

an evaluation of each

customer’s financial condition

and credit history.

Collateral is generally

not required.

The

Company

minimizes

exposure

counter

party

credit

risk

through

credit

analysis

and

approvals,

credit

limits,

and

monitoring

procedures.

determining

our

reserve

for

credit

losses,

receivables

are

assigned

expected

loss

based

historical loss information adjusted as needed for economic and

other forward-looking factors.

Dividends Payable

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.

Index

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 most recent quarter

for which a dividend was paid.

The dividend policy is subject to

periodic review by the Board of

Directors.

Revenue Recognition

The

Company

recognizes

revenue

through

sale of

its products

customers

through

retail, foodservice

and

other

distribution

channels.

The

majority

the

Company’s

revenue

derived

from

agreements

contracts

with

customers

based

upon

the

customer

ordering

its

products

with

single

performance

obligation

delivering

the

product.

The

Company

believes

the

performance

obligation

met

upon

delivery

and

acceptance

the

product

our

customers,

which

generally

occurs

upon

shipment

delivery

customer

based

terms

the

sale.

Costs

paid

third

party

brokers

obtain

agreements

are

expensed as the Company’s

agreements are generally less than one year.

Revenues are

recognized in

an amount

that reflects

the net

consideration we

expect to

receive in

exchange for

delivery of

the

products.

The

Company

periodically

offers

sales

incentives

other

programs

such

rebates,

discounts,

coupons,

volume-

based incentives,

guaranteed sales and

other programs.

The Company

records an estimated

allowance for costs

associated with

these programs, which

is recorded as a

reduction in revenue at

the time of sale

using historical trends

and projected redemption

rates

each

program.

The

Company

regularly

reviews

these

estimates

and

any

difference

between

the

estimated

costs

and

actual realization of these programs would be recognized the subsequent

period.

Business Combinations

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. We

determine the fair values of identifiable assets and liabilities

internally,

which requires estimates and

the

use

various

valuation

techniques.

When

market

value

not

readily

available,

our

internal

valuation

methodology

considers the remaining estimated life of the assets acquired and what

management believes is the market value for those assets.

typically use the income

method approach for

intangible assets acquired in

a business combination. Significant

estimates in

valuing

certain

intangible

assets

include,

but

are

not

limited

to,

the

amount

and

timing

future

cash

flows,

growth

rates,

discount rates and

useful lives. The

excess of the purchase

price over fair values

of identifiable assets and

liabilities is recorded

as goodwill.

Loss Contingencies

Certain

conditions

may

exist

the

date

the

consolidated

financial

statements

are

issued

that

may

result

loss

the

Company but

which will only

be resolved when

one or more

future events occur

or fail to

occur.

The Company’s

management

and

its

legal

counsel

assess

such

contingent

liabilities,

and

such

assessment

inherently

involves

exercise

judgment.

assessing loss

contingencies

related to

legal proceedings

that are

pending against

the Company

or unasserted

claims that

may

result in

such proceedings,

the Company’s

legal counsel

evaluates the

perceived merits

of any

legal proceedings

or unasserted

claims as well as the perceived merits of the amount of relief sought or expected

to be sought therein.

If the assessment

of a contingency

indicates it is

probable that

a material loss

has been incurred

and the amount

of the liability

can

estimated,

the

estimated

liability

would

accrued

the

Company’s

consolidated

financial

statements.

the

assessment

indicates

potentially

material

loss

contingency

not

probable,

but

reasonably

possible,

probable

but

cannot

estimated,

then

the

nature

the

contingent

liability,

together

with

estimate

the

range

possible

loss

determinable

and material,

would be

disclosed.

Loss contingencies

considered

remote

are generally

not disclosed

unless they

involve guarantees, in which case the nature of the guarantee would be disclosed.

The Company expenses the costs of litigation as they are incurred.

New Accounting Pronouncements and Policies

No new accounting pronouncement issued or effective

during the fiscal year had or is expected to have a material impact on

our

Consolidated Financial Statements.

Index

Note 2 - Acquisition

Effective

June 28, 2024

, the

Company

acquired

substantially

all of

the commercial

shell egg

production,

processing and

egg

products breaking

facilities of

ISE America,

Inc. and

certain of

its affiliates

(“ISE”).

The assets

acquired included

commercial

shell

egg

production

and

processing

facilities

with

capacity

the

time

acquisition

approximately

4.7

million

laying

hens, including

1.0

million cage-free,

and

1.2

million pullets, feed

mills, approximately

4,000

acres of land,

inventories and an

egg products breaking facility.

The acquired assets also include an extensive customer

distribution network across the Northeast

and

Mid-Atlantic

states,

and

production

operations

Maryland,

New

Jersey,

Delaware

and

South

Carolina.

The

Company

accounted for the acquisition as a business combination.

Pending the

finalization of

the Company’s

valuation, the

following table

summarizes the

consideration paid

for the

ISE assets

and the amounts of assets acquired and liabilities assumed recognized

at the acquisition date (in thousands):

Cash consideration paid

111,521

Recognized amounts of identifiable assets acquired and liabilities assumed

Inventories

20,547

Property, plant and equipment

90,572

Intangible assets

710

Liabilities assumed

(308)

Total identifiable

net assets

111,521

Inventories consisted primarily of flock, feed ingredients,

packaging, and egg inventory.

Flock inventory was valued at carrying

value

management

believes

that

its

carrying

value

best

approximates

its

fair

value.

Feed

ingredients,

packaging

and

egg

inventory were all valued based on market prices as of June 28, 2024.

Property,

plant and

equipment were

valued utilizing

the cost

approach which

is based

on replacement

or reproduction

costs of

the assets and subtracting any depreciation resulting from physical deterioration

and/or functional or economic obsolescence.

Intangible

assets

consisted

primarily

customer

lists

acquired.

Customers

lists

were

valued

using

the

income

method

approach.

Note 3 - Investment

Securities

The following represents the Company’s

investment securities as of August 31, 2024 and June 1, 2024 (in thousands):

August 31, 2024

Amortized

Cost

Unrealized

Gains

Unrealized

Losses

Estimated

Fair Value

Municipal bonds

4,280

—

4,265

Commercial paper

86,698

—

86,703

Corporate bonds

288,383

547

—

288,930

Certificates of deposits

5,086

—

5,097

US government and agency obligations

148,399

—

148,392

Asset backed securities

2,877

—

2,869

Treasury bills

35,668

—

35,667

Total current

investment securities

571,391

563

571,923

Index

June 1, 2024

Amortized

Cost

Unrealized

Gains

Unrealized

Losses

Estimated

Fair Value

Municipal bonds

4,100

—

4,059

Commercial paper

137,856

—

121

137,735

Corporate bonds

233,289

—

697

232,592

Certificates of deposits

3,505

—

3,491

US government and agency obligations

154,520

—

251

154,269

Asset backed securities

3,154

—

3,124

Treasury bills

39,239

—

39,229

Total current

investment securities

575,663

—

1,164

574,499

Available-for-sale

Proceeds

from

sales and

maturities of

investment

securities available-for-sale

were $

209.7

million

and $

135.8

million

during

the

thirteen

weeks

ended August

31,

2024

and

September

2023,

respectively.

Gross

realized

gains

for

the

thirteen

weeks

ended August 31,

2024 and September

2, 2023 were

thousand and $

thousand, respectively.

There were

gross realized

losses for the thirteen weeks ended August 31, 2024. Gross realized losses for the

thirteen weeks ended September 2, 2023 were

thousand. There were

allowances for credit losses at August 31, 2024 and June 1, 2024.

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

31, 2024 are as follows (in thousands):

Estimated Fair Value

Within one year

365,628

1-5 years

206,295

Total

571,923

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.

Index

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 31, 2024 and June 1,

2024 (in thousands):

August 31, 2024

Level 1

Level 2

Level 3

Balance

Assets

Municipal bonds

—

4,265

—

4,265

Commercial paper

—

86,703

—

86,703

Corporate bonds

—

288,930

—

288,930

Certificates of deposits

—

5,097

—

5,097

US government and agency obligations

—

148,392

—

148,392

Asset backed securities

—

2,869

—

2,869

Treasury bills

—

35,667

—

35,667

Total assets measured at fair

value

—

571,923

—

571,923

Liabilities

Contingent consideration

—

6,500

Total liabilities measured

at fair value

—

6,500

SEC Form 10-Q filed by Cal-Maine Foods Inc.