CAL-MAINE FOODS INC (CALM) FY 2025 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.
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
May 31, 2025
June 1, 2024
Net sales
100.0
%
100.0
%
Cost of sales
56.6
%
76.7
%
Gross profit
43.4
%
23.3
%
Selling, general and administrative
7.4
%
10.9
%
Gain on involuntary conversions
—
%
(1.0)
%
Operating income
36.0
%
13.4
%
Total other income
1.6
%
2.0
%
Income before income taxes
37.6
%
15.4
%
Income tax expense
9.0
%
3.6
%
Net income
28.6
%
11.8
%
Less:
Net loss attributable to noncontrolling interest
—
%
(0.1)
%
Net income attributable to Cal-Maine Foods, Inc.
28.6
%
11.9
%
Fiscal Year
Ended May 31, 2025 Compared to Fiscal Year Ended June 1, 2024
NET SALES
Total net sales for fiscal 2025 were $4.3 billion compared to $2.3 billion for the prior fiscal year.
Shell egg sales represented
94.3% and 95.3% of
total net sales in
fiscal 2025 and 2024,
respectively. The
Company’s shell
egg
offerings, for both branded and
private-label products, include specialty
and conventional shell eggs.
Specialty shell eggs include
cage-free,
organic,
brown,
free-range,
pasture-raised
and
nutritionally
enhanced
shell
eggs.
Conventional
shell
eggs
sales
represent all
other shell
egg sales
not sold
as specialty
shell eggs.
The Company’s
egg products
and prepared
foods offerings
include liquid and
frozen egg products
and prepared foods
such as hard-cooked
eggs, egg wraps,
protein pancakes, crepes
and
wrap-ups. Other sales represent feed sales, miscellaneous byproducts and resale products.
The table below presents net sales in key categories (in thousands, except percentage data):
Fiscal Year Ended
May 31,
2025
June 1, 2024
% Change
Shell Eggs
$
4,019,910
$
2,217,408
81.3
%
Egg products and prepared foods
198,833
89,009
123.4
Other
43,142
20,026
115.4
Total net sales
$
4,261,885
$
2,326,443
83.2
%
31
The table below presents an analysis of our shell egg sales (in thousands, except percentage data):
May 31, 2025
June 1, 2024
Shell egg sales
Conventional
$
2,835,423
70.5
%
$
1,291,743
58.3
%
Specialty
1,184,487
29.5
%
925,665
41.7
%
Total shell egg sales
4,019,910
100.0
%
2,217,408
100.0
%
Dozens sold
Conventional
812,396
63.3
%
746,687
65.1
%
Specialty
470,215
36.7
%
400,946
34.9
%
Total dozens sold
1,282,611
100.0
%
1,147,633
100.0
%
Net average selling price per dozen
Conventional
$
3.490
$
1.730
Specialty
$
2.519
$
2.309
All shell eggs
$
3.134
$
1.932
Shell egg sales
-
For
fiscal
2025,
shell
egg
sales
increased
$1.8
billion
compared
to
fiscal
2024,
primarily
due
to
the
increase
in
net
average selling prices for conventional eggs, and to a lesser extent the increase in dozens sold.
-
For fiscal 2025, conventional egg sales increased $1.5 billion, or 119.5%, compared to fiscal 2024, primarily due to the
increase
in
conventional
egg
prices.
Changes in
price resulted
in
a $1.4
billion
increase in
net
sales and
changes
in
volume resulted
in a
$114
million increase
in net
sales. Conventional
egg prices
increased significantly
during fiscal
2025 due to a resurgence of HPAI outbreaks, which decreased the supply.
-
Specialty egg
sales increased
$258.8 million,
or 28.0%,
for fiscal
2025 compared
to fiscal
2024, primarily
due to a
17.3%
increase in
the volume
of specialty
dozens sold,
and to
a lesser
extent a
9.1% increase
in price.
Changes in
volume
resulted in a $159.9 million increase in net sales and changes in price resulted in a $98.7 million increase in net sales.
-
Our dozens sold
for fiscal 2025
increased 11.8%
compared to fiscal
2024. We
had an
increase in production
capacity
with the acquisition
of the commercial
shell egg production
and processing business
of ISE during
the first quarter
of
fiscal 2025 as well as the resumption of full operations at our facilities in Chase, KS, and Farwell, TX, which were shut
down in the third and fourth quarters of fiscal 2024 due to HPAI outbreaks.
Egg products and prepared foods sales
-
Egg products and prepared foods sales increased $109.8 million, or 123.4% compared to fiscal 2024, primarily due to a
138.7% increase in sales of liquid eggs, which had a $54.9
million positive impact on net sales, and a 41.4% increase in
volume of liquid egg products sold.
The increase in volume, which had a
$23.3 million positive impact on net
sales, is
primarily related to the acquisition of ISE, which included a breaking facility.
-
Our egg products net average selling price increased in fiscal 2025, compared to fiscal 2024 as the supply of shell eggs
used to produce egg products decreased due to the resurgence of HPAI outbreaks.
-
Sales from hard-cooked eggs increased
$22.7 million or 137.3% to 39.1
million in fiscal 2025, compared to
fiscal 2024,
as more processing capabilities came online throughout fiscal 2025 from our investments in MeadowCreek.
Other
-
Other sales increased compared to
the prior year period primarily
due to higher feed sales
related to our ISE acquisition.
32
COST OF SALES
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 egg products and other non-egg costs. Farm production costs are those costs
incurred
at the egg production facility, including feed, facility
(including labor), 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
May 31, 2025
June 1, 2024
% Change
Cost of Sales
Farm production
$
1,035,638
$
987,861
4.8
%
Processing, packaging, and warehouse
396,116
335,949
17.9
Egg purchases and other cost of sales
819,619
380,200
115.6
Egg products and prepared foods
159,627
80,862
97.4
Total cost of sales
$
2,411,000
$
1,784,872
35.1
%
Farm production costs (per dozen produced)
Feed
$
0.490
$
0.550
(10.9)
%
Other
$
0.428
$
0.433
(1.2)
%
Total farm production cost
$
0.918
$
0.983
(6.6)
%
Outside egg purchases (average cost per dozen)
$
3.67
$
2.16
69.9
%
Dozens produced
1,135,955
1,018,835
11.5
%
Percent produced to sold
88.6%
88.8%
(0.2)
%
Farm Production
-
Feed costs
per dozen
produced decreased
10.9% in
fiscal 2025
compared to
fiscal 2024,
primarily due
to lower
feed
ingredient prices. The decrease in feed cost per dozen
resulted in a decrease in cost of sales of
$68.2 million compared
to the prior year.
-
For fiscal 2025, the average daily CBOT market price was $4.38 per bushel for corn and $311 per ton of soybean meal,
representing decreases of 8.1% and 20.1%, respectively, as compared to the average daily CBOT prices for fiscal 2024.
-
Other farm production costs per dozen produced decreased primarily due to lower flock amortization. Feed costs
reached their peak in the second quarter of fiscal 2023 and have since trended downward. Lower costs resulted in
lower capitalized values of the flocks during the grow out phase, which reduced amortization cost over time.
Current indications for corn
and soybean project
a neutral stocks-to-use ratio
in the near term
compared with the levels
prevailing
today; however,
as long
as outside
factors remain
uncertain (including
weather patterns
and global
supply chain
disruptions),
volatility could remain.
Processing, packaging, and warehouse
-
Processing, packaging, and
warehouse costs increased
primarily due to
an 11.7%
increase in the
volume of processed
dozens as well as an increase in costs of packaging materials.
Egg purchases and other cost of sales
-
Costs in
this category
increased primarily due
to higher
shell egg
prices as
the average
cost per
dozen of
outside egg
purchases increased 69.9%
compared to fiscal
2024, as well
as due to an
increase of 27.6%
in dozens purchased.
Dozens
purchased increased due
to purchasing more
eggs to supply
our customers while
the nation experienced
lower supply
due to HPAI.
33
GROSS PROFIT
Gross
profit,
as
a
percentage
of
net
sales,
was
43.4%
for
fiscal
2025,
compared
to
23.3%
for
fiscal
2024.
The
increase
was
primarily due to higher net average selling
prices, particularly for conventional eggs, and higher volumes,
as well as lower feed
ingredient prices, partially offset by the increase in volume and price of outside egg purchases.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative (“SGA”)
expenses include costs of delivery, marketing, and
other general and administrative
expenses. Delivery expense includes contract trucking expense
and all costs to maintain and operate
our fleet of trucks to deliver
products to
customers including
the related
payroll expenses.
Marketing expense
includes franchise
fees that
are submitted
to
Eggland’s Best, Inc. (“EB”) to
support the EB
brand, brokerage and
commission fees, and
other general marketing
expenses such
as
payroll expenses
for our
in-house sales
team. Other
general
and
administrative expenses
include corporate
payroll related
expenses
and
other
general
corporate
overhead
costs.
The
following
table
presents
an
analysis
of
our
SGA
expenses
(in
thousands):
Fiscal Year Ended
May 31, 2025
June 1, 2024
$ Change
% Change
Delivery expense
$
93,460
$
72,742
$
20,718
28.5
%
Marketing expense
53,861
52,285
1,576
3.0
%
Litigation loss contingency accrual
—
19,648
(19,648)
N.M.
%
Other general and administrative expenses
167,128
107,950
59,178
54.8
%
Total
$
314,449
$
252,625
$
61,824
24.5
%
N.M. - Not Meaningful
Delivery expense
-
The increased delivery expense is primarily due to an increase
in our sales volumes of egg and egg products
compared
to fiscal 2024.
Contract trucking
expenses increased
in connection
with our
acquisition of
ISE and our
facilities in
Chase,
KS and Farwell, TX being fully operational in fiscal year 2025.
Marketing expense
-
Marketing expense increased
slightly in fiscal
2025 compared to
fiscal 2024 primarily
due to an
increase in franchise
fees as specialty sales increased.
Litigation loss contingency accrual
-
In the second quarter of fiscal 2024, we accrued a $19.6 million loss contingency relating to a jury decision returned in
pending anti-trust
litigation. See
further discussion
in
Note 16 – Commitments and Contingencies
of Part
II. Item
8.
Notes to Consolidated Financial Statements.
Other general and administrative expenses
-
The increase
in other
general and
administrative expense
is primarily
due both
to an
increase in
the accrual
for anticipated
employee bonuses
and to
a $15
million increased
adjustment to
the fair
value of
contingent consideration
associated
with the
Fassio acquisition.
See further
discussion in
Note 4 – Fair Value Measurements
of Part
II. Item
8. Notes
to
Consolidated Financial Statements.
(GAIN) LOSS ON INVOLUNTARY
CONVERSIONS
For fiscal 2025
and 2024, we
recorded a loss
of $156 thousand
and gain of
$23.5 million, respectively. The gain
recorded in fiscal
2024 was due
to recoveries
under indemnity
and insurance
programs that exceeded
the amortized
book value
of the covered
assets
and our direct costs, primarily related to the HPAI outbreaks
at our Kansas and Texas facilities.
34
OPERATING
INCOME
As a result of the above, our operating income was $1.5 billion for fiscal 2025, compared to $312.5 million for fiscal 2024.
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. Patronage dividends
are paid to us from our membership in the EB cooperative.
The Company recorded interest income of $48.7 million
in fiscal 2025, compared to $32.3 million in
fiscal 2024, primarily due
to significantly higher
cash and cash
equivalents and investment
securities available-for-sale balances
and yields. We
recorded
interest expense of $612
thousand and $549 thousand
in fiscal 2025 and
2024, respectively, primarily related to commitment
fees
on our Credit Facility described below.
INCOME TAXES
For the fiscal year ended
May 31, 2025, our pre-tax
income was $1.6 billion, compared
to $360.0 million for fiscal
2024. Income
tax expense
of $384.9
million was
recorded for
fiscal 2025
with an
effective tax
rate of
24.0%.
For fiscal
2024, income
tax
expense was $83.7 million with an effective tax rate of 23.2%.
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.
NET LOSS ATTRIBUTABLE
TO NONCONTROLLING INTEREST
Net loss attributable
to noncontrolling interest
was $1.8 million
for fiscal 2025
compared to a
$1.6 million net
loss for fiscal
2024.
NET INCOME ATTRIBUTABLE
TO CAL-MAINE FOODS, INC.
As a result
of the above,
net income attributable
to Cal-Maine Foods,
Inc. for fiscal
2025 was $1.2
billion, or $25.04
per basic
and $24.95 per diluted share, compared to $277.9 million, or $5.70 per basic and $5.69 per diluted share for fiscal 2024.
Fiscal Year
Ended June 1, 2024 Compared to Fiscal Year Ended June 3, 2023
The discussion of our results of operations for the fiscal year ended June 1, 2024 compared to the fiscal year ended June 3, 2023
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 2024 Annual Report on Form 10-K.
LIQUIDITY AND CAPITAL RESOURCES
We aim to maintain
a strong balance
sheet and liquidity, particularly
given the cyclical
nature of our
business. We believe a
strong
balance sheet supports our growth opportunities and stockholder returns. Our priorities for the use of cash in
recent periods have
included the payment of
dividends pursuant to our
variable dividend policy, inorganic growth through acquisitions
of businesses,
organic
growth
including
construction
and
conversion
of
cage-free
facilities
and
investment
in
value-added
products,
and
maintenance capital expenditures.
Working Capital and Current Ratio
Our working
capital at
May 31,
2025 was
$1.7 billion, compared
to $1.0
billion at
June 1,
2024. The
calculation of
working
capital is defined as
current assets less current
liabilities. Our current ratio was
6.4 at May 31,
2025 compared to 5.5
at June 1,
2024. The current ratio is calculated by dividing
current assets by current liabilities. The increase
in our current ratio is primarily
due to the increase in total current assets, which increased by $726.3 million to $2.0 billion at May 31, 2025, due to 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.
35
Cash Flows from Operating Activities
Net cash
provided by
operating activities
was $1.2
billion for
fiscal 2025,
compared to
$451.4 million for
fiscal 2024.
The increase
in
cash
flow
from
operating
activities
resulted
primarily
from
higher
net
average
selling
prices
per
dozen,
particularly
for
conventional eggs, increased volume of sales and
a decrease in feed ingredient costs compared
to the prior year,
partially offset
by the increase in volume and price of outside egg purchases.
Cash Flows from Investing Activities
For fiscal 2025, $575.5 million was
used in investing activities, primarily due
to purchases of investment securities,
purchases of
property, plant and equipment
and the acquisition
of assets of
ISE compared to
$412.6 million used
in investing activities
in fiscal
2024, primarily due to purchases
of investment securities, purchases of
property, plant and equipment and the Fassio acquisition.
Purchases of investment
securities were $1.2
billion in fiscal
2025 compared to
$573.6 million in
fiscal 2024. Sales
and maturities
of investment securities were
$907.6 million in fiscal
2025, compared to $358.9 million
for fiscal 2024. The increase
in sales and
maturities of investment securities is primarily due to the maturities of
short-term investments during fiscal 2025. Cash paid for
business acquisitions was $116.2 million in
fiscal 2025, primarily related to
the ISE acquisition, and
$53.7 million in fiscal 2024,
related to
the Fassio
acquisition. Purchases
of property,
plant and
equipment were
$161.3 million
and $147.1
million in
fiscal
2025 and 2024, respectively, primarily reflecting progress on our construction projects.
Cash Flows from Financing Activities
We
paid
dividends
totaling
$330.3
million
and
$91.9
million
in
fiscal
2025
and
2024,
respectively.
During
fiscal
2025,
we
repurchased $54.0 million
in shares of
Common Stock, primarily
under our share
repurchase program. See
“Share Repurchase
Program,” below.
Increase (decrease) in Cash and Cash Equivalents
As of May 31, 2025, cash increased $261.5 million since June 1, 2024, compared to a $54.9 million decrease
during fiscal 2024.
The increase is primarily due to the increase in net sales during fiscal 2025.
Acquisition of Echo Lake Foods
Subsequent to our fiscal 2025 year-end, we acquired Echo Lake Foods. The purchase price was approximately $258 million and
was funded with available cash on hand. For additional information, refer to Part II. Item 8. Notes to the Consolidated Financial
Statements,
Note 17 – Subsequent Events
.
Credit Facility
On November 15,
2021, we entered
into an Amended
and Restated Credit
Agreement (as amended,
the “Credit Agreement”)
with
a five-year term. The Credit Agreement provides
for a senior secured revolving credit facility
(the “Credit Facility”), in an initial
aggregate principal amount of up to $250 million. As of May 31, 2025, no amounts were borrowed under the Credit Facility. As
of May 31, 2025, we
had $4.7 million in outstanding
standby letters of credit, which
were issued under our Credit
Facility for the
benefit of
certain insurance
companies. On
March 25,
2025, we
entered into
the Second
Amendment to
the Credit
Facility to
amend the definition
of Change of
Control to exclude
the conversion of
all outstanding shares
of Class A
Common Stock into
Common Stock.
Refer to
Part II.