Summary and Analysis of Key Points

Overview of the Company’s Financial Performance:

• Cal-Maine Foods, Inc. is the largest producer and distributor of fresh shell eggs in the U.S. with a total flock of approximately 48.1 million layers and 12.0 million pullets and breeders.
• The company’s operating results are materially impacted by volatile market prices for eggs and feed grains, which are independent of each other and out of the company’s control.
• Retail sales of shell eggs are typically highest during the fall and winter months and lowest during the summer months.

Cage-Free Eggs:

• Several states have passed legislation mandating minimum space or cage-free requirements for egg production, representing approximately 27% of the U.S. population.
• Many of the company’s customers have announced goals to either exclusively offer cage-free eggs or significantly increase the volume of cage-free egg sales in the future.
• The company has invested significant capital in recent years to acquire and construct cage-free facilities and expects future expansion to continue to include cage-free facilities.

Acquisitions:

• The company acquired the commercial shell egg production, processing and egg products breaking assets of ISE America, Inc. in the first quarter of fiscal 2025.
• The company completed a strategic investment with Crepini LLC, establishing a new egg products and prepared foods venture called Crepini Foods LLC.
• The company acquired the assets of Fassio Egg Farms, Inc. related to its commercial shell egg production and processing business in the second quarter of fiscal 2024.

HPAI Outbreaks:

• Outbreaks of highly pathogenic avian influenza (HPAI) have continued to occur in U.S. poultry flocks, resulting in the depopulation of millions of commercial layer hens and pullets.
• The company’s facilities in Kansas and Texas that experienced HPAI in fiscal 2024 are now fully operational.

Financial Results:

• For the second quarter and first two quarters of fiscal 2025, the company recorded a gross profit of $356.0 million and $603.3 million, respectively, compared to $91.1 million and $136.6 million for the same periods of fiscal 2024.
• The increase in gross profit was primarily driven by an increase in the net average selling price of shell eggs, as well as an increase in total dozens sold, partially offset by an increase in the volume and price of outside egg purchases.
• The company’s net average selling price per dozen for the second quarter of fiscal 2025 was $2.740 compared to $1.730 in the prior-year period.
• Farm production costs per dozen produced decreased 8.5% in the second quarter of fiscal 2025 compared to the prior-year period, primarily due to lower feed costs.

Outlook and Strengths:

• The company believes its current cash balances, investments, projected cash flows from operations, and available borrowings under its credit facility will be sufficient to fund its capital expenditure needs for at least the next 12 months.
• The company’s ability to meet its customers’ evolving needs with a favorable mix of branded and private-label products of conventional and specialty eggs is an important competitive advantage.

Analysis:

• Cal-Maine Foods has demonstrated strong financial performance in the second quarter and first two quarters of fiscal 2025, driven by higher egg prices and increased sales volumes, particularly in the specialty egg segment.
• The company’s investments in cage-free production capacity and strategic acquisitions position it well to meet the growing demand for cage-free eggs from its customers.
• However, the company remains exposed to risks from HPAI outbreaks, which have continued to impact the U.S. poultry industry, and volatile feed ingredient prices, which can significantly affect its profitability.
• Overall, Cal-Maine Foods appears to be navigating the evolving market dynamics effectively, leveraging its scale and diversified product offerings to drive strong financial results.