Market Overview

Cal-Maine Foods Reports Fourth Quarter and Fiscal 2020 Results

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Cal-Maine Foods, Inc. (NASDAQ:CALM) today reported results for the fourth quarter (13 weeks) and fiscal year ended May 30, 2020.

Net sales for the fourth quarter of fiscal 2020 were $453.3 million, a 61.6 percent increase compared to $280.6 million for the fourth quarter of fiscal 2019. The Company reported net income of $60.5 million, or $1.25 per basic share and $1.24 per diluted share, for the fourth quarter of fiscal 2020, compared to net loss of $19.8 million, or $(0.41) per basic and diluted share, for the fourth quarter of fiscal 2019.

For the fiscal year 2020, net sales were $1,351.6 million compared to $1,361.2 million for the prior year. The Company reported net income of $18.4 million, or $0.38 per basic and diluted share, for fiscal 2020, compared to net income of $54.2 million, or $1.12 per basic and diluted share, for the prior year.

Dolph Baker, chairman and chief executive officer of Cal-Maine Foods, Inc., stated, "Fiscal 2020 demonstrated Cal-Maine Foods' resiliency in the face of challenging business conditions and volatile egg prices. After three fiscal quarters characterized by an oversupply of eggs and depressed market prices, demand for eggs increased and market prices rose 62.4 percent during our fourth fiscal quarter over the average price for the first three quarters, as consumers purchased more eggs for preparing meals at home in response to the COVID-19 pandemic. This demand trend also coincided with higher seasonal demand during the peak Easter season. As a result, our sales volumes were up 10.9 percent compared with the fourth quarter of fiscal 2019. We are extremely proud of the dedicated work of Cal-Maine Foods' employees across our operations who worked particularly hard to meet the unexpected and unprecedented demand for eggs. The Southeast large market average price for conventional eggs for the fourth quarter of fiscal 2020 increased to $1.71 compared to $0.86 for the fourth quarter of fiscal 2019, with a high of $3.18 and a low of $1.02. For fiscal 2020 the Southeast large market average price for conventional eggs was $1.22 compared to $1.23 for fiscal 2019, with a high of $3.18 and a low of $0.62.

"The supply of eggs has continued to trend downward through the fourth quarter of fiscal 2020. Hen numbers reported by the United States Department of Agriculture ("USDA") as of June 1, 2020, were 319.8 million, which represents 13.9 million less hens than reported a year ago, when the USDA also reported high flock productivity. The USDA reported that the hatch from January through May 2020 decreased 5.0 percent, including a 13.1 percent decrease in May, as compared to the same period in 2019, which will likely further reduce future egg supply levels.

"For the fourth quarter, sales of specialty eggs were $133.3 million, accounting for 29.9 percent of our egg sales revenue, compared with $119.9 million, or 44.1 percent of egg sales revenue, in the fourth quarter of fiscal 2019. The increase in specialty egg revenue in the fourth quarter 2020 resulted from a 10.4 percent increase in specialty dozens sold in the fourth quarter of fiscal 2020 over the fourth quarter of fiscal 2019, as well as slight increase in specialty egg prices.

"Specialty eggs are an important part of our growth strategy, and we strive to provide a favorable product mix in line with consumer demand. We have continued to position Cal-Maine Foods to meet the expected additional demand for cage-free eggs. California, Colorado, Washington, Oregon, Massachusetts, Rhode Island and Michigan have all passed minimum space and/or cage-free requirements, mandating sale of only cage-free eggs with implementation of these laws ranging from January 2022 to January 2026. These states represent approximately 22.9 percent of the U.S. total population according to the U.S. Census Bureau. Legislation is also pending in Arizona and Hawaii for cage-free requirements. We have invested over $371.7 million in facilities, equipment and related operations to expand our cage-free production starting with our first facility in 2008. Throughout the next two years, additional cage-free capacity will come online in Florida, Texas and Utah, which will provide significant additional processing, pullet and production capacity in time to meet expected customers' needs.

"Our operations ran well during the fourth quarter, and our managers and employees have done an outstanding job, especially during the outbreak of COVID-19. Despite the challenges, we have remained focused on efficient and responsible management of our production facilities. Operating income was $76.1 million in the fourth quarter compared to an operating loss of $30.4 million in the prior-year fourth quarter. We also benefitted from a more favorable effective tax rate in fiscal 2020 and in the fourth quarter, as we recorded a tax benefit of $2.4 million related to the carryback provisions of the Coronavirus Aid, Relief and Economic Security Act of 2020 (CARES Act). Overall, our farm production costs per dozen were down 0.8 percent over the fourth quarter of fiscal 2019, reflecting a 1.5 percent drop in feed costs. According to USDA reports, current supplies of corn and soybeans are favorable, and we believe we will continue to have an adequate supply of both grains in fiscal 2021. However, current ongoing uncertainties and supply chain disruptions related to the COVID-19 outbreak, weather fluctuations and geopolitical issues surrounding trade agreements and international tariffs may lead to further price volatility.

"Looking ahead, we will continue to take all necessary precautions in the management of 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 and contribute to a stable food supply. We are also grateful for our supply chain partners who have supported our ability to operate and meet our delivery requirements with minimal disruption. As the coronavirus continues to spread and reach more rural communities where we operate, it is critical that we provide a safe working environment, and we continue to implement appropriate protections taking into account protocols recommended by the Centers for Disease Control (CDC) and other government health agencies. For fiscal 2020, we incurred expenses of approximately $2.8 million related primarily related to supplemental pay. We are committed to making the necessary investments to support and protect all Cal-Maine Foods employees.

"While we are facing an uncertain environment, we will continue to execute our growth strategy in fiscal 2021 - provide a favorable product mix, including cage-free and other specialty eggs, invest in our operations, identify acquisition or other growth opportunities that enhance our production, and manage our operations in a responsible and sustainable manner. On June 29, 2020, we published the Cal-Maine Foods 2019 Sustainability Overview, which includes our corporate initiatives that support environmental and social responsibility throughout our operations. Above all, we are focused on safely meeting the needs of our customers and providing outstanding products and service. We have a strong balance sheet with the financial flexibility to support our growth strategy, and we look forward to the opportunities ahead for Cal-Maine Foods in fiscal 2021," added Baker.

Pursuant to Cal-Maine Foods' variable dividend policy, for each quarter for which the Company reports net income, the Company pays a cash dividend to shareholders in an amount equal to one-third of such quarterly income. Following a quarter for which the Company does not report net income, the Company will not pay a dividend with respect to that quarter or 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. Therefore, the Company will not pay a dividend with respect to the fourth quarter of fiscal 2020. At the end of the fourth quarter of fiscal 2020, the amount of cumulative losses to be recovered before payment of a dividend was $1.4 million.

Selected operating statistics for the fourth quarter and fiscal year 2020 compared with the prior-year periods are shown below:

 

13 Weeks Ended

 

52 Weeks Ended

 

May 30, 2020

 

June 1, 2019

 

May 30, 2020

 

June 1, 2019

Dozen Eggs Sold (000)

282,422

 

 

254,772

 

 

1,069,150

 

 

1,038,900

 

Dozen Eggs Produced (000)

242,962

 

 

222,325

 

 

927,799

 

 

876,705

 

% Specialty Sales (dozen)

24.4

%

 

24.5

%

 

23.9

%

 

25.1

%

% Specialty Sales (dollars)

29.9

%

 

44.1

%

 

36.8

%

 

38.2

%

Net Average Selling Price (per dozen)

$

1.575

 

 

$

1.062

 

 

$

1.231

 

 

$

1.265

 

Net Average Selling Price Specialty Eggs (per dozen)

$

1.934

 

 

$

1.919

 

 

$

1.897

 

 

$

1.933

 

Feed Cost (per dozen)

$

0.405

 

 

$

0.411

 

 

$

0.409

 

 

$

0.415

 

Cal-Maine Foods, Inc. is primarily engaged in the production, grading, packing and sale of fresh shell eggs, including conventional, cage-free, organic and nutritionally enhanced eggs. The Company, which is headquartered in Jackson, Mississippi, is the largest producer and distributor of fresh shell eggs in the United States and sells the majority of its shell eggs in states across the southwestern, southeastern, mid-western and mid-Atlantic regions of the United States.

Statements contained in this press release that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on management's current intent, belief, expectations, estimates and projections regarding our company and our industry. These statements are not guarantees of 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 to differ materially from those projected in the forward-looking statements include, among others, (i) the risk factors set forth in the Company's SEC filings (including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K), (ii) the risks and hazards inherent in the shell egg business (including disease, pests, weather conditions and potential for recall), (iii) changes in the demand for and market prices of shell eggs and feed costs, (iv) our ability to predict and meet demand for cage-free and other specialty eggs, (v) risks, changes or obligations that could result from our future acquisition of new flocks or businesses and risks or changes that may cause conditions to completing a pending acquisition not to be met,(vi) risks relating to the evolving COVID-19 pandemic, and (vii) adverse results in pending litigation matters. SEC filings may be obtained from the SEC or the Company's website, www.calmainefoods.com. Readers are cautioned not to place undue reliance on forward-looking statements because, while we 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 to be accurate. Further, the forward-looking statements included herein are only made as of the respective dates thereof, or if no date is stated, as of the date hereof. Except as otherwise required by law, we disclaim any intent or obligation to publicly update these forward-looking statements, whether as a result of new information, future events or otherwise.

 

CAL-MAINE FOODS, INC. AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS

(Unaudited)

(In thousands, except per share amounts)

 

SUMMARY STATEMENTS OF OPERATIONS

 

 

13 Weeks Ended

 

52 Weeks Ended

 

 

May 30, 2020

 

June 1, 2019

 

May 30, 2020

 

June 1, 2019

Net sales

 

$

453,333

 

 

 

$

280,573

 

 

 

$

1,351,609

 

 

 

$

1,361,188

 

Cost of sales

 

331,823

 

 

 

267,818

 

 

 

1,172,021

 

 

 

1,138,329

 

Gross profit

 

121,510

 

 

 

12,755

 

 

 

179,588

 

 

 

222,859

 

Selling, general and administrative

 

45,803

 

 

 

42,296

 

 

 

178,237

 

 

 

177,045

 

(Gain) loss on disposal of fixed assets

 

(385

)

 

 

879

 

 

 

82

 

 

 

33

 

Operating income (loss)

 

76,092

 

 

 

(30,420

)

 

 

1,269

 

 

 

45,781

 

Other income, net

 

1,459

 

 

 

2,477

 

 

 

18,790

 

 

 

25,024

 

Income (loss) before income taxes

 

77,551

 

 

 

(27,943

)

 

 

20,059

 

 

 

70,805

 

Income tax (benefit) expense

 

17,087

 

 

 

(8,391

)

 

 

1,731

 

 

 

15,743

 

Net income (loss)

 

60,464

 

 

 

(19,552

)

 

 

18,328

 

 

 

55,062

 

Less: Income (loss) attributable to noncontrolling interest

 

1

 

 

 

209

 

 

 

(63

)

 

 

833

 

Net income (loss) attributable to Cal-Maine Foods, Inc.

 

$

60,463

 

 

 

$

(19,761

)

 

 

$

18,391

 

 

 

$

54,229

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share attributable to Cal-Maine Foods, Inc.:

 

 

 

 

 

 

 

 

Basic

 

$

1.25

 

 

 

$

(0.41

)

 

 

$

0.38

 

 

 

$

1.12

 

Diluted

 

$

1.24

 

 

 

$

(0.41

)

 

 

$

0.38

 

 

 

$

1.12

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

$

48,501

 

 

 

$

48,442

 

 

 

$

48,467

 

 

 

$

48,467

 

Diluted

 

$

48,608

 

 

 

$

48,442

 

 

 

$

48,467

 

 

 

$

48,589

 

 

CAL-MAINE FOODS, INC. AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS

(Unaudited)

(In thousands)

 

SUMMARY BALANCE SHEETS

 

 

May 30, 2020

 

June 1, 2019

ASSETS

 

 

 

 

Cash and short-term investments

 

$

232,293

 

 

$

319,428

 

Receivables, net

 

98,375

 

 

71,760

 

Inventories

 

187,216

 

 

172,237

 

Prepaid expenses and other current assets

 

4,367

 

 

4,328

 

Current assets

 

522,251

 

 

567,753

 

 

 

 

 

 

Property, plant and equipment (net)

 

557,375

 

 

455,347

 

Other noncurrent assets

 

127,068

 

 

133,178

 

Total assets

 

$

1,206,694

 

 

$

1,156,278

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Accounts payable and accrued expenses

 

$

92,182

 

 

$

73,211

 

Current maturities of long-term debt and lease obligations

 

1,001

 

 

1,696

 

Current liabilities

 

93,183

 

 

74,907

 

 

 

 

 

 

Long-term debt and lease obligations, less current maturities

 

2,387

 

 

858

 

Deferred income taxes and other liabilities

 

101,449

 

 

90,707

 

Stockholders' equity

 

1,009,675

 

 

989,806

 

Total liabilities and stockholders' equity

 

$

1,206,694

 

 

$

1,156,278

 

 

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