CAL-MAINE FOODS INC (CALM) FY 2023 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
OVERVIEW
Cal-Maine Foods, Inc. is primarily engaged in the production, grading, packaging, marketing and distribution of
fresh shell eggs.
Our
fiscal
year
end
is
the
Saturday
closest
to
May 31.
The
fiscal
year
2023
and
2022
included
53
weeks
and
52
weeks,
respectively.
The Company,
which
is headquartered
in Ridgeland,
Mississippi, is
the largest
producer and
distributor
of fresh
shell eggs in the United States
(“U.S”). In fiscal 2023, we sold approximately 1,147.4 million dozen shell
eggs, which we believe
represented
approximately
21% of
domestic shell
egg consumptio
n. Our
total flock
as of
June 3,
2023
of approximately
41.2
million layers and 10.8 million pullets and breeders is the largest in the
U.S. We 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.
The Company has one reportable
operating segment, which is the production,
grading, packaging, marketing and distribution
of
shell eggs. Many of our customers rely on us to provide most of their shell egg needs, including specialty and conventional eggs.
Specialty
eggs
represent
a
broad
range
of
products. We
classify
cage-free,
organic,
brown,
free-range,
pasture-raised
and
nutritionally enhanced
as specialty eggs for
accounting and reporting
purposes. We
classify all other
shell eggs as conventional
eggs.
While
we
report
separate
sales
information
for
these
types
of
eggs,
there
are
a
number
of
cost
factors
which
are
not
specifically
available
for
conventional
or
specialty
eggs due
to
the
nature
of egg
production.
We
manage
our
operations
and
allocate resources to these
types of eggs on a consolidated
basis based on the demands
of our customers. For further
description
of our business, refer to
Part I. Item I. Business
.
HPAI
Since the first detection in
a U.S. commercial flock in
February 2022, outbreaks of highly
pathogenic avian influenza
(“HPAI”)
continued
to occur
in U.S.
poultry flocks
throughout calendar
year 2022
and, less
frequently,
in calendar
year 2023,
which is
more than twice the length of time
of the last HPAI outbreak in 2014-2015. HPAI affected more than 58 million birds in 47 states
and
resulted
in
the
depopulation
of
43.3
million
commercial
layer
hens
and
1.0
million
pullets
leading
to
higher
prices
for
conventional
shell eggs
beginning in
the fourth
quarter of
fiscal 2022
and continuing
through the
third quarter
of fiscal
2023.
Though the virus is still present, due to seasonal migratory patterns of wild birds (which serve as carriers for the disease) the rate
of outbreaks has substantially
decreased and the last
occurrence in a commercial
egg laying flock was in
December 2022.
The
USDA
attributes
this,
in
large
part,
to
improved
biosecurity
measures
by
the
commercial
poultry
industry.
The
industry
and
USDA have devoted
significant resources to
attempt to prevent
future outbreaks. With
the spring wild
bird migration complete
in the U.S., focus is on the fall migration season.
We
believe the
HPAI
outbreak will
continue to
impact the overall
supply of
eggs until the
layer hen
flock is
fully replenished.
The egg industry typically experiences lower sales during the
summer. The layer hen flock five-year average from 2020-2022 for
the month of June is 321.5 million hens. According to the USDA the U.S.
flock consisted of 317.4 million layers producing table
or
market
type
eggs as
of
July
1,
2023,
which
is 0.9%
below
the
five-year
average
and
reflects
efforts
by
U.S.
producers
to
repopulate their flocks. As the layer flock began to recover in the fourth quarter of fiscal 2023, prices for conventional shell eggs
decreased
from
previous
highs.
There
have
been
no
positive
tests
for
HPAI
at
any
Cal-Maine
Foods’
owned
or
contracted
production facility as of July
25, 2023. While no farm
is immune from HPAI,
we believe we have implemented
and continue to
maintain robust biosecurity programs across our locations. We
are also working closely with federal, state and local government
officials
and focused
industry groups
to mitigate
the risk
of this
and future
outbreaks and
effectively
manage our
response, if
needed.
24
Executive Overview of Results – Fiscal Years
Ended June 3, 2023, May 28, 2022 and May 29, 2021
Fiscal Years
Ended
June 3, 2023
May 28, 2022
May 29, 2021
Net sales (in thousands)
$
3,146,217
$
1,777,159
$
1,348,987
Gross profit (in thousands)
$
1,196,457
$
337,059
$
160,661
Net income attributable to Cal-Maine Foods, Inc.
$
758,024
$
132,650
$
2,060
Net income per share attributable to Cal-Maine Foods, Inc.
Basic
$
15.58
$
2.73
$
0.04
Diluted
$
15.52
$
2.72
$
0.04
Net average shell egg price
(a)
$
2.622
$
1.579
$
1.217
Average UB Southeast
Region - Shell Eggs - White Large
$
3.115
$
1.712
$
1.155
Feed costs per dozen produced
$
0.676
$
0.571
$
0.446
(a) The net average
shell egg selling price
is the blended price
for all sizes and
grades of shell eggs,
including non-graded
shell egg sales, breaking stock and undergrades.
For fiscal
2022, net
sales increased
to $1.8
billion, gross
profit to
$337.1 million
and net income
to $132.7
million from
fiscal
2021 net sales of
$1.3 billion, gross profit
of $160.7 million and
net income of $2.1
million. The increases resulted primarily
from
higher selling prices for
conventional eggs as well as an
increased volume of specialty
eggs sold, partially offset
by a decline in
the
volume
of
conventional
eggs
sold.
Gross
profit
and
net
income
increases
were
partially
offset
by
increased
cost
of
feed
ingredients and increased processing
costs. Consumer demand maintained
a steady growth throughout our
first three quarters of
fiscal
2021
but
began
trending
down
during
our
fourth
quarter
of
fiscal
2021
as
consumers
started
to
resume
pre-pandemic
activities.
We
believe
the
decreased
demand
in
foodservice
seen
throughout
the
first
three
quarters
of
fiscal
2021
due
to
the
pandemic contributed to the depressed price of shell
eggs for fiscal 2021 in the retail market due to the extra
supply entering the
retail channel from the foodservice channel.
For
fiscal
2022,
we
believe
prices
for
conventional
eggs
were
positively
impacted
by
a
better
alignment
of
the
size
of
the
conventional
production
layer
hen
flock
and
customer
and
consumer
demand
through
the
first
three
fiscal
quarters
of
2022.
Conventional egg
prices further
increased in
the fourth
quarter of
fiscal 2022
primarily due
to decreased
supply caused
by the
HPAI
outbreak
compounded
with
good
customer
demand.
Throughout
fiscal
2022
the
hen
numbers
reported
by
the
USDA
remained below the five-year average.
For fiscal
2023, net
sales increased
to $3.1
billion, gross
profit to
$1.2 billion
and net
income to
$758.0 million.
The increases
primarily resulted
from significantly
higher average
egg selling
prices, primarily
due to
the reduction
in egg
supply caused
by
HPAI
and
higher
grain
and
other
input
costs,
as
some
of
our
egg
sales
prices
are
based
on
formulas
related
to
our
costs
of
production. Gross
profit and
net income
increases were
partially offset
by the
increased cost
of feed
ingredients and
increased
processing, packaging
and warehouse costs.
The impact of
HPAI
continued throughout
the first three
quarters of fiscal
2023 as
prices continued to increase. For the
first three quarters of fiscal
2023, the average UB southeastern large index
price was 138.8%
higher
than
the
average
price
of
the
first
three
quarters
in
fiscal
2022.
For
the
fourth
quarter
of
fiscal
2023
the
average
UB
southeastern large index price decreased 13.8% to $2.163
from the same period in the
prior year as the egg supply
improved from
the effects
of HPAI.
Conventional egg
selling prices
declined significantly
during the
latter part
of the
fourth quarter
of fiscal
2023.
Our dozens sold
increased by 5.9%
for fiscal 2023
compared to fiscal
2022, primarily due
to an increase
in specialty egg
sales.
According to
Information Resources,
Inc. (“IRI”),
for the
52 weeks
ended June
4, 2023,
which approximately
aligns with
our
fiscal year 2023, conventional egg dozens sold in the U.S. at multi-retail outlets decreased 9.3%, while specialty egg dozens sold
increased 9.9%
versus the
prior-year comparable
period. Our
conventional eggs
dozens sold
increased 0.2%
and specialty
egg
dozens sold increased 18.6% as compared to fiscal 2022, with most of the increase
due to an increase in cage-free eggs sold.
Our feed costs
per dozen produced
increased to $0.676
in fiscal 2023,
compared to $0.571
in fiscal 2022.
For fiscal year
2023,
the average Chicago
Board of Trade
(“CBOT”) daily market
price was $6.57
per bushel for
corn and $450
per ton for
soybean
meal,
representing
increases
of
4.1%
and
14.7%,
respectively,
compared
to
the
daily
average
CBOT
prices
for
fiscal
2022.
Supplies
of corn and soybean meal remained tight
relative to demand in throughout fiscal 2023,
as evidenced by a low stock-to-
use ratio
for corn,
as a
result of
weather-related
shortfalls in
production
and yields,
ongoing supply
chain disruptions
and
the
Russia-Ukraine War
and its
impact on
the export
markets. Basis
levels for
corn and
soybean meal,
which impact
our costs for
25
these feed ingredients, ran significantly higher in fiscal 2023 in our areas of operation compared to our prior year fiscal year as a
result of higher transportation and storage costs, adding to our expense.
RESULTS
OF OPERATIONS
The following table sets forth, for the
fiscal years indicated, certain items from our Consolidated
Statements of Income expressed
as a percentage of net sales.
Fiscal Year
Ended
June 3, 2023
May 28, 2022
Net sales
100.0
%
100.0
%
Cost of sales
62.0
%
81.0
%
Gross profit
38.0
%
19.0
%
Selling, general and administrative
7.4
%
11.2
%
Gain on insurance recoveries
(0.1)
%
(0.3)
%
(Gain) loss on disposal of fixed assets
—
%
—
%
Operating income
30.7
%
8.1
%
Total other income
1.0
%
1.3
%
Income before income taxes
31.7
%
9.4
%
Income tax expense
7.7
%
1.9
%
Net income
24.0
%
7.5
%
Less:
Net loss attributable to noncontrolling interest
—
%
—
%
Net income attributable to Cal-Maine Foods, Inc.
24.0
%
7.5
%
26
Fiscal Year
Ended June 3, 2023 Compared to Fiscal Year
Ended May 28, 2022
NET SALES
Total net sales for fiscal
2023
were $3.1 billion compared to $1.8 billion for fiscal 2022.
Net shell egg sales represented 96.1% and 96.6% of total net
sales for the fiscal year 2023
and 2022, respectively. Shell egg sales
classified as “Other” represent sales of miscellaneous byproducts and resale products included with our shell
egg operations. The
table below presents an analysis of our conventional and specialty shell egg
sales (in thousands, except percentage data):
June 03, 2023
May 28, 2022
Total net sales
$
3,146,217
$
1,777,159
Conventional
$
2,051,961
67.9
%
$
1,061,995
61.8
%
Specialty
956,993
31.6
%
648,838
37.8
%
Egg sales, net
3,008,954
99.5
%
1,710,833
99.6
%
Other
14,993
0.5
%
6,322
0.4
%
Net shell egg sales
$
3,023,947
100.0
%
$
1,717,155
100.0
%
Dozens sold:
Conventional
749,076
65.3
%
747,914
69.0
%
Specialty
398,297
34.7
%
335,875
31.0
%
Total dozens sold
1,147,373
100.0
%
1,083,789
100.0
%
Net average selling price per dozen:
Conventional
$
2.739
$
1.420
Specialty
$
2.403
$
1.932
All shell eggs
$
2.622
$
1.579
Egg products sales:
Egg products net sales
$
122,270
$
60,004
Pounds sold
70,035
63,968
Net average selling price per pound
$
1.746
$
0.938
Shell egg net sales
-
For
fiscal
2023,
shell
egg
net
sales
increased
$1.3
billion,
primarily
due
to
higher
net
average
selling
prices
for
conventional eggs, and to a lesser extent specialty eggs.
-
For fiscal 202
3, conventional
egg sales increased
$990.0 million,
or 93.2%, compared
to fiscal 2022,
primarily due
to
the increase in
conventional egg
prices. Changes
in price resulted
in a $988.0
million increase and
changes
in volume
resulted in a $1.7 million increase in net sales.
-
Conventional egg prices increased in the first three quarters
of fiscal 2023 primarily due to decreased supply
caused by
the HPAI outbreak, discussed above. Conventional egg prices decreased
substantially in the fourth
quarter of fiscal 2023
compared to average
fiscal 2023 levels, due
to an increased supply
of conventional eggs
caused by the repopulating
of
layer
flocks
in
response
to
the
impact
of
HPAI
and
typical
seasonal
decreases
in
demand.
Conventional
egg
prices
exceeded
specialty
egg
prices
during
fiscal
2022
and
for
the
first
three
quarters
of
fiscal
2023,
which
is
atypical
historically. Conventional
egg prices generally respond more quickly to market conditions because we sell the majority
of
our
conventional
shell
eggs
based
on
formulas
that
adjust
periodically
and
take
into
account,
in
varying
ways,
independently quoted regional wholesale market prices for shell
eggs or formulas related to our
costs of production. The
majority of our specialty eggs are typically sold at prices and terms negotiated
directly with customers and therefore do
not fluctuate as much as conventional pricing.
-
Specialty egg sales
increased $308.2 million, or
47.5%, for fiscal
2023
compared to fiscal
2022, primarily due
to a 24.4%
increase in specialty egg
prices and a 18.6% increase
in the volume of
specialty dozens sold. Changes
in price resulted
in a $187.6
million increase and
change in volume
resulted in a
$120.6 million increase
in net sales,
respectively.
Our
27
specialty egg sales also benefitted from our additional
cage-free production capacity.
Cage-free revenue for fiscal 2023
was 20.2% of total revenue, compared to 22.3% for fiscal 2022.
-
Net average selling
prices of specialty eggs
increased by agreements with
our customers in response
to rising feed and
other input costs as well as lower supply availability due to HPAI.
-
Demand for specialty
eggs increased during
the first three
quarters of fiscal
2023 as conventional
egg prices rose.
Our
sales volume benefited versus the prior-year period, through use of
our higher cage-free production capacity.
Egg products net sales
-
Egg products net sales increased $62.3 million or 103.8%, primarily due to an 86.1% selling price increase compared to
fiscal 2022, which had a $56.6 million positive impact on net sales.
-
Our egg products net average selling
price increased in fiscal 2023, compared
to fiscal 2022 as the supply of shell
eggs
used to produce egg products decreased due to the HPAI
outbreak that started in February 2022.
COST OF SALES
Cost of sales for fiscal 2023
were $1.9 billion compared to $1.4 billion for fiscal 2022.
Cost of
sales consists
of
costs directly
related
to producing,
processing
and
packing
shell eggs,
purchases
of
shell
eggs from
outside sources,
processing and
packing of
liquid and
frozen egg
products and
other non-egg
costs. 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):
Fiscal Year
Ended
June 03, 2023
May 28, 2022
% Change
Cost of Sales:
Farm production
$
1,118,741
$
927,806
20.6
%
Processing, packaging, and warehouse
342,836
289,056
18.6
Egg purchases and other (including change in inventory)
379,777
172,034
120.8
Total shell eggs
1,841,354
1,388,896
32.6
Egg products
108,406
51,204
111.7
Total
$
1,949,760
$
1,440,100
35.4
%
Farm production costs (per dozen produced)
Feed
$
0.676
$
0.571
18.4
%
Other
$
0.396
$
0.352
12.5
%
Total
$
1.072
$
0.923
16.1
%
Outside egg purchases (average cost per dozen)
$
3.02
$
1.72
75.6
%
Dozens produced
1,058,540
1,022,327
3.5
%
Percent produced to sold
92.3%
94.3%
(2.1)
%
Farm Production
-
Feed costs
per dozen
produced increased
18.4% in
fiscal 2023
compared to
fiscal 2022,
primarily due
to higher
feed
ingredient prices. Basis levels for corn and soybean meal
ran significantly higher in our areas of operation
compared to
our prior fiscal year due to higher transportation and storage costs, adding
to our expense.
-
For fiscal 2023, the average daily CBOT market price was $6.57 per bushel for corn and $450 per ton of soybean meal,
representing increases of 4.1% and 14.7%, respectively,
as compared to the average daily CBOT prices for fiscal 2022.
28
-
Other farm production
costs increased due
to higher
facility and
flock amortization.
Facility costs
increased due primarily
to increased labor costs. Labor costs increased 29.6%
due to increased use of contract labor and increased wages
raised
in response to labor shortages.
-
Flock amortization increased
primarily from higher
capitalized feed costs
as well as higher
amortization costs from
an
increase in our cage-free production.
Supplies of corn and soybean remained tight relative to demand throughout fiscal 2023, as evidenced by a low stock-to-use
ratio
for
corn,
as
a
result
of
weather-related
shortfalls
in
production
and
yields,
ongoing
supply
chain
disruptions
and
the
Russia-
Ukraine
War
and
its
impact
on
the
export
markets.
For
fiscal
2024,
we
expect
continued
corn
and
soybean
upward
pricing
pressures and further market volatility to affect feed costs.
Processing, packaging, and warehouse
-
Cost of packaging materials increased 18.6% compared to
fiscal 2022
as costs increased due to rising
inflation and labor
costs.
-
Labor costs increased 13.6% due to wage increases instituted in response
to labor shortages and rising inflation.
-
Dozens processed increased 3.6% compared to fiscal 2022, which
resulted in an $11.2 million increase in costs.
Egg purchases and other (including change in inventory)
-
Costs in this category increased
120.8% compared to fiscal 2022
primarily due to the
increase in egg prices. The
average
price
of outside
egg
purchases
increased
75.6%
per
dozen compared
to
fiscal
2022.
Additionally,
our
percentage
of
produced to
sold decreased
to 92.3%
in fiscal
2023 from
94.3% in
fiscal 2022
as we
increased our
volume of
outside
egg purchases in order to meet customer demand.
GROSS PROFIT
Gross profit,
as a percentage
of net sales,
was 38.0%
for fiscal 2023
,
compared to 19.0%
for fiscal 2022.
The increase resulted
primarily from higher selling prices for conventional eggs as well as the increased volume
of specialty eggs sold, partially offset
by the increased cost of feed ingredients and processing, packaging
and warehouse costs.
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES
Selling,
general,
and
administrative
(“SGA”)
expenses
include
costs
of
marketing,
distribution,
accounting,
and
corporate
overhead. SG&A expenses increased
$33.6 million to $232.2
million in fiscal 2023.
The following table presents
an analysis of
our SGA expenses (in thousands):
Fiscal Year
Ended
June 03, 2023
May 28, 2022
$ Change
% Change
Specialty egg expense
$
57,758
$
59,830
$
(2,072)
(3.5)
%
Delivery expense
77,548
62,677
14,871
23.7
%
Payroll, taxes and benefits
57,830
43,954
13,876
31.6
%
Stock compensation expense
4,205
4,063
142
3.5
%
Other expenses
34,866
28,107
6,759
24.0
%
Total
$
232,207
$
198,631
$
33,576
16.9
%
Specialty egg expense
-
Specialty egg
expense, which
includes franchise
fees, advertising
and promotion
costs generally
tracks with
specialty
egg
volumes,
which
were
up
18.6%
for
fiscal
2023
compared
to
fiscal
2022.
However,
our
specialty
egg
expense
decreased 3.5%,
primarily due
to a
significant reduction
in advertising
costs. The
higher prices
for conventional
eggs
and
the
comparatively
lower prices
for
specialty eggs
diminished
the need
to promote
specialty eggs
in fiscal
2023.
However, we anticipate that the need to promote specialty eggs will increase
in fiscal 2024 as the market recovers from
the effects of HPAI.
29
Delivery expense
-
The increased
delivery expense
is primarily
due to
the increase
in fuel
and labor
costs for
both our
fleet and
contract
trucking. Compared to fiscal
2022, contract trucking and
labor expenses increased
approximately $10.2 million for
fiscal
2023.
Payroll, taxes and benefits expense
-
The
increase
in
payroll,
taxes
and
benefits
expense
is
primarily
due
to
an
increase
in
the
accrual
for
anticipated
performance-based bonuses.
Other expenses
-
The increase in other
expenses is due to
increased legal expenses of
approximately $3.6 million
as well as inflationary
pressure increasing costs.
OPERATING
INCOME (LOSS)
As a result of the above, our operating income was $967.7 million for fiscal 2023
,
compared to $143.5 million for fiscal 2022.
OTHER INCOME (EXPENSE)
Total
other
income
(expense)
consists
of
items
not
directly
charged
to,
or
related
to,
operations
such
as
interest
income
and
expense, equity in income or loss of unconsolidated entities, and patronage dividends,
among other items.
The Company recorded interest income of $18.6 million in fiscal 2023,
compared to $988 thousand in fiscal 2022, primarily due
to significantly
higher cash
and cash
equivalents and
investment securities
available-for-sale balances
and yields.
We
recorded
interest expense of $583 thousand and $403 thousand
in fiscal 2023 and 2022, respectively, primarily related to commitment fees
on our Credit Facility described below.
Equity in income from unconsolidated entities for fiscal 2023 was $746
thousand compared to $1.9 million for fiscal 2022.
Other, net
for fiscal 2023
was income of
$1.9 million compared
to $9.8 million for
fiscal 2022.
The majority of
the decrease is
due
to
our
acquisition
in
fiscal
2022
of
the
remaining
50% membership
interest
in
Red
River
Valley
Egg
Farm,
LLC
(“Red
River”) as we recognized a $4.5 million gain in fiscal 2022 due to the remeasurement of our equity investment.
We also received
$1.4 million in fiscal 2022 related
to our review and adjustment
of our various marketing agreements. Additionally, the Company
recorded a $2 million impairment of an investment in an unconsolidated entity
in fiscal 2023.
INCOME TAXES
For
the
fiscal
year
ended
June
3,
2023,
our
pre-tax
income
was
$998.6
million,
compared
to
$166.0
million
for
fiscal
2022.
Income tax expense of $241.8 million
was recorded for fiscal 2023 with an effective
tax rate of 24.2%.
For fiscal 2022, income
tax expense was $33.6 million with an effective tax rate
of 20.2%. Included in fiscal 2022 income tax expense is the discrete tax
benefit of
$8.3 million
discussed in
Note 2 – Acquisition
of Part
II. Item
8. Notes
to Consolidated
Financial Statements
in this
Annual Report.
Excluding the discrete
tax benefit,
income tax expense
was $41.9
million with an
adjusted effective
tax rate of
25.2%.
At June 3, 2023, the Company had
an income tax receivable of $67.0 million compared to
$42.1 million at May 28, 2022. During
fiscal 2022,
the Company
filed federal
carryback tax
returns for
fiscal 2020
and 2021
taxable net
operating losses
to recover
a
portion of
taxes paid
in fiscal 2015
and fiscal
2016. Subsequent
to fiscal
2023, we
received $31.8
million of
the $34.9
million
fiscal 2021 refund and believe we will receive the remaining amount of the fiscal 2020 and 2021 refunds, totaling
$11.7 million,
during our second fiscal quarter of 2024.
An additional $23.5 million income tax receivable was recorded as of June 3, 2023 for
fiscal 2023 federal overpayments in excess of federal tax liability.
Items causing
our effective
tax rate
to differ
from the
federal statutory
income tax
rate of
21% are
state income
taxes, certain
federal tax
credits and
certain items included
in income or
loss for financial
reporting purposes that
are not included
in taxable
income or
loss for income
tax purposes, including
tax exempt interest
income, certain
nondeductible expenses,
and net income
or loss attributable to noncontrolling interest.
30
NET LOSS ATTRIBUTABLE
TO NONCONTROLLING INTEREST
Net loss attributable
to noncontrolling
interest was $1.3
million for fiscal
2023
compared to a
$209 thousand
net loss for
fiscal
2022.
NET INCOME ATTRIBUTABLE
TO CAL-MAINE FOODS, INC.
As a result of the above, net income attributable to Cal-Maine Foods, Inc. for fiscal
2023 was $758.0 million, or $15.58 per basic
and $15.52 per diluted share, compared to $132.7 million, or $2.73 per basic
and $2.72 per diluted share for fiscal 2022.
Fiscal Year
Ended May 28, 2022 Compared to Fiscal Year
Ended May 29, 2021
The discussion
of our
results of
operations for
the fiscal
year ended
May 28,
2022 compared
to the
fiscal year
ended May
29,
2021 can be found in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations in
the Company’s fiscal 2022
Annual Report on Form 10-K.
LIQUIDITY AND CAPITAL
RESOURCES
Working
Capital and Current Ratio
Our working capital at
June 3, 2023 was
$942.2 million, compared to $476.8 million at
May 28, 2022.
The calculation of working
capital is defined as current assets less current liabilities. Our current ratio was 6.16 at June 3, 2023 compared to 3.58 at May 28,
2022.
The current
ratio is
calculated
by dividing
current assets
by current
liabilities. The
increase
in our
working
capital and
current ratio
is primarily due
to the increase
in total current
assets, which increased
by $463.4 million
to $1.1 billion
at June 3,
2023,
due
to significant
increases in
cash and
cash equivalents
and
investment
securities available
-for-sale.
Due to
seasonal
factors described in
Part I. Item I. Business – Seasonality
, we generally expect
our need for working
capital to be highest in
the
fourth and first fiscal quarters ending in May/June and August/September,
respectively.
Cash Flows from Operating Activities
Net cash provided
by operating activities
was $863.0
million for fiscal
year 2023
compared with $126.2
million for fiscal
year
2022.
The increase in cash flow from operations
resulted primarily from higher selling prices for conventional eggs
as well as the
increased volume of specialty eggs
sold, partially offset by the increased
cost of feed ingredients and processing,
packaging and
warehouse costs.
Cash Flows from Investing Activities
We
continue
to
invest
in
our
facilities,
with
$136.6
million
used
to
purchase
property,
plant
and
equipment
for
fiscal
2023,
compared to $72.4
million in fiscal 2022.
These investments were primarily
made to expand our
cage-free production capacity.
We
have for many years
invested substantial amounts
to expand our cage-free
production capacity and
expect to continue to
do
so.
Purchases
of
investments
were
$530.8
million
in
fiscal
2023,
compared
to
$98.2
million
in
fiscal
2022.
The
increase
in
purchases of
investment securities
is primarily
due to
the utilization
of increased
liquidity resulting
from increased
cash flows
provided by operating
activities noted above.
Sales and maturities
of investment securities
were $291.8
million for fiscal
2023,
compared to $92.7 million
for fiscal 2022. During fiscal
2022, we also acquired the
remaining 50% membership interest
in Red
River for $44.8 million, net of cash acquired.
Cash Flows from Financing Activities
We paid dividends
totaling $252.3 million and $6.1 million in fiscal 2023
and 2022, respectively.
As of
June 3,
2023, cash
increased
$233.7 million
since May
28, 2022,
compared to
an increase
of $1.7
million during
fiscal
2022.
Credit Facility
We had no
long-term debt outstanding at the end of fiscal 2023
and 2022. On November 15, 2021, we entered
into an Amended
and Restated Credit Agreement (as amended the “Credit
Agreement”) with a five-year term. The Credit Agreement provides for
a senior
secured revolving
credit facility
(the “Credit
Facility”), in
an initial
aggregate principal
amount of
up to
$250 million.
As of June 3, 2023, no amounts were borrowed under
the Credit Facility. We
have $4.3
million in outstanding standby letters of
credit, which were issued under our Credit Facility for the
benefit of certain insurance companies. In May 2023,
we entered into
31
an amendment to
the Credit Agreement
to replace the
London Interbank Offered
Rate interest rate
benchmark. Refer
to Part II.