Cal-Maine Foods, Inc. — FY2022 Form 10-K
Business context and reporting period. Cal-Maine is a U.S. producer and distributor of shell eggs, with one operating segment. The fiscal year ended May 28, 2022 (52 weeks); comparisons are with the year ended May 29, 2021. Although the request metadata refers to 2021 Q4, this filing reports FY2022. Its final 13-week quarter ended May 28, 2022.
Key financial results
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $1,777.2 million | $1,349.0 million |
| Gross profit / margin | $337.1 million / 19.0% | $160.7 million / 11.9% |
| Operating income (loss) | $143.5 million | $(26.3) million |
| Net income attributable to Cal-Maine | $132.7 million; $2.73 diluted EPS | $2.1 million; $0.04 diluted EPS |
| Cash from operating activities | $126.2 million | $26.1 million |
| Capital expenditures | $72.4 million | $95.1 million |
| Cash and cash equivalents | $59.1 million | $57.4 million |
| Working capital / current ratio | $476.8 million / 3.58 | $429.8 million / 5.77 |
| Long-term debt | None | None |
Available-for-sale current investment securities were $115.4 million at year-end. The company had a $250 million revolving credit facility, with no borrowings and $4.1 million of standby letters of credit outstanding. Management said cash, investments, operating cash flow and the facility should fund capital needs for at least 12 months.
Material changes and drivers
- Net sales rose about 31.7%, and gross profit more than doubled. Higher conventional egg prices and greater specialty egg volume drove the improvement, partly offset by lower conventional volume and higher feed and processing costs.
- Conventional egg sales increased 38.6% to $1,062.0 million; conventional volume fell 4.8%, while average selling price rose to $1.420 per dozen from $0.976.
- Specialty egg sales increased 20.2% to $648.8 million, reflecting 16.7% higher volume and a 3.0% higher average price. Cage-free eggs represented 22.1% of shell egg sales revenue.
- Egg products sales rose 63.4% to $60.0 million, primarily due to higher selling prices.
- Feed costs per dozen produced increased 28.0% to $0.571. Feed represented 61.9% of farm production costs. Corn and soybean meal prices faced upward pressure from constrained grain markets, inflation and the Russia-Ukraine war.
- Operating cash flow improved substantially, while cash flow from investing was negative $117.0 million, including the Red River acquisition and facility investment. Cash increased $1.7 million during the year.
- Fourth-quarter net sales were $593.0 million versus $349.8 million a year earlier; net income attributable to Cal-Maine was $110.0 million versus a loss of $4.2 million. The filing attributes the stronger quarter chiefly to higher conventional egg prices amid HPAI-related supply reductions and steady demand.
Outlook, risks and unusual items
- Outlook: The filing provides no specific earnings or revenue guidance. Management said market indications pointed to higher and more volatile corn and soybean prices in FY2023. It expects HPAI to affect egg supply until flocks are replenished.
- Capacity and investment: The company reported approximately $105 million of cage-free projects, with capacity planned to increase by about 2.2 million hens. It also disclosed a subsequent board-approved $55.3 million Chase, Kansas project to convert capacity for about 1.5 million cage-free hens. MeadowCreek Foods, in which Cal-Maine committed up to $18.5 million, was expected to begin production late in FY2023’s second quarter.
- Acquisition and tax item: Cal-Maine acquired the remaining 50% of Red River Valley Egg Farm for $48.5 million cash and consolidated the business. Remeasuring its prior investment generated a $4.5 million gain; the acquisition also produced an $8.3 million discrete tax benefit. These items boosted reported results and are not necessarily recurring.
- Key risks: Volatile shell egg prices and feed costs, HPAI and other disease, labor shortages and inflation, customer concentration, cage-free transition costs and uncertain customer demand, food safety/recalls, weather and environmental regulation, and litigation. Walmart and Sam’s Club accounted for 29.5% of FY2022 net sales; the top three customers accounted for 45.9%.
- Legal contingency: In the long-running egg-products antitrust case, management acknowledged a reasonable possibility of a material adverse outcome but said the monetary exposure could not be estimated; no related adjustment was recorded. Texas COVID-era price litigation was assessed by management as remote risk of material loss. Other disclosed proceedings were generally assessed as not expected to have a material effect, subject to litigation uncertainty.
- Dividends: The variable policy generally pays one-third of quarterly GAAP net income attributable to Cal-Maine, subject to cumulative profitability and credit-agreement restrictions. FY2022 dividends were $0.874 per share; the fourth-quarter amount was $0.749 per share.
Most important facts for investors to verify
- Whether elevated egg prices and margins persist as HPAI-related supply effects change, and how quickly industry flocks recover.
- Whether feed-cost increases can be passed through to customers without weakening demand or margins.
- Progress, costs and timing of cage-free projects, and whether customer commitments support the capacity being added.
- The recurring earnings picture excluding the Red River remeasurement gain and discrete acquisition-related tax benefit.
- Developments in the egg-products antitrust litigation, for which a material adverse outcome was considered reasonably possible but exposure was not estimable.
- Customer concentration and the company’s ability to maintain major accounts; also review the dual-class structure, under which Class A shares carry ten votes each and the Adams/Baker families control a majority of voting power.