| Summary of Significant Accounting Policies |
Note 1 - Summary of Significant Accounting Policies Nature of Operations Cal -Maine Foods, Inc. (“we,” “us,” “our,” or the “Company”) is the largest egg company in the United States (“U.S.”) and a leading player in the egg-based food industry. The Company’s shell egg portfolio spans the full egg value ladder —from conventional to specialty, including cage-free, nutritionally enhanced, organic, brown, pasture -raised, and free-range eggs— serving both retail and foodservice customers nationwide. Cal -Maine Foods also participates in the growing prepared foods sector, with offerings such as pre-cooked egg patties, omelets, folded and scrambled egg formats, hard -cooked eggs, pancakes, waffles, and specialty wraps. Our branded portfolio includes Eggland’s Best®, Land O’Lakes®, Farmhouse Eggs®, 4Grain®, Sunups®, Van’s®, MeadowCreek Foods®, and Crepini®. We sell most of our products throughout much of the U.S. and aim to maintain efficient, state -of-the-art operations located close to our customers. We were founded in 1957 and are headquartered in Ridgeland, Mississippi. Principles of Consolidation The consolidated financial statements include the accounts of all wholly-owned subsidiaries and of majority -owned subsidiaries over which we exercise control. All significant intercompany transactions and accounts have been eliminated in consolidation. Fiscal Year The Company’s fiscal year -end is on the Saturday closest to May 31. The fiscal years ending on May 30, 2026, May 31, 2025, June 1, 2024 each included 52 Use of Estimates The preparation of the consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. We maintain bank accounts that are insured by the Federal Deposit Insurance Corporation up to $ 250,000 Company routinely maintains cash balances with certain financial institutions in excess of federally insured amounts. The Company has not experienced any loss in such accounts. The Company manages this risk through maintaining cash deposits and other highly liquid investments in high quality financial institutions. Investment Securities Available-for-Sale The Company has determined that its debt securities are available -for-sale investments and are classified as current because the amounts invested are available for current operations. Available -for-sale securities are carried at fair value, based on quoted market prices as of the balance sheet date, with unrealized gains and losses recorded in other comprehensive income. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity and is recorded in interest income. The Company regularly evaluates changes to the rating of its debt securities by credit agencies and economic conditions to assess and record any expected credit losses through allowance for credit losses, limited to the amount that fair value was less than the amortized cost basis. There was no allowance for credit losses at May 30, 2026 and May 31, 2025. The cost basis for realized gains and losses on available -for-sale securities is determined by the specific identification method. Gains and losses are recognized in other income (expense) as “Other, net” in the Company’s Consolidated Statements of Income. Interest and dividends on securities classified as available -for-sale are recorded in “Interest income , net” in the Company’s Consolidated Statements of Income. Trade receivables are stated at their carrying values, which include a reserve for credit losses. At May 30, 2026 and May 31, 2025, reserves for credit losses were $ 719 745 thousand, respectively. The Company extends credit to customers based on an evaluation of each customer ’s financial condition and credit history. Collateral is generally not required. The Company minimizes exposure to counter party credit risk through credit analysis and approvals, credit limits, and monitoring procedures. In determining our reserve for credit losses, receivables are assigned an expected loss based on historical loss information adjusted as needed for economic and other forward-looking factors. At May 30, 2026 and May 31, 2025, one customer accounted for approximately 26.2 % and 28.1 % of the Company’s trade accounts receivable, respectively. Inventories Inventories of flocks, feed, supplies, raw materials and finished goods are valued principally at the lower of cost or net realizable value. The cost of inventories is determined by either the first-in, first-out method or the weighted-average method. The cost associated with flocks, consisting principally of chicks, feed, labor, contractor payments and overhead costs, are accumulated during a growing period of approximately 22 weeks. Flock costs are amortized to cost of sales over the productive lives of the flocks, generally one two years . As the amortization period of the flocks is relatively short, disclosure of the gross cost and accumulated amortization is omitted. Flock mortality is charged to cost of sales as incurred. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is provided by the straight-line method over the estimated useful 15 25 years for buildings and improvements and 3 12 years for machinery and equipment. Expenditures that significantly extend the useful life of the related assets are capitalized. Normal repairs and maintenance are expensed as incurred. When property, plant, and equipment are retired, sold, or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts. Investments in Unconsolidated Entities The equity method of accounting is used when the Company can exert significant influence over an entity, but does not control its financial and operating decisions. Under the equity method, original investments are recorded at cost and adjusted by the Company’s share of undistributed earnings or losses of these entities. Equity investments without readily determinable fair values, when the Company does not have the ability to exercise significant influence over the investee, are recorded at cost, less impairment, plus or minus observable price changes. Goodwill Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired. Goodwill is evaluated for impairment at least annually or more frequently if impairment indicators arise by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. After assessing the totality of events or circumstances, if we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we perform additional quantitative tests to determine the magnitude of any impairment. Intangible assets are initially recorded at fair value in business acquisitions, which include franchise rights, customer relationships, non-compete agreements, trademarks and right of use intangibles. They are amortized over their estimated useful lives of 5 15 years. The gross cost and accumulated amortization of intangible assets are removed when the recorded amounts are fully amortized and the asset is no longer in use or the contract has expired. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts. Indefinite life assets are recorded at fair value in business acquisitions and represent brand names and water rights. They are not amortized, but are reviewed for impairment at least annually or more frequently if impairment indicators arise. Insurance Liabilities and Restricted Cash The Company uses a combination of insurance and self-insurance programs, including a wholly-owned captive insurance subsidiary (the “Captive”) to provide coverage for the potential liabilities for workers’ compensation, auto liability and general liability risks. Liabilities associated with these risks that are retained by the Company are not discounted and are estimated, in part, by considering historical claims experience, severity factors and other actuarial assumptions. These liabilities are recorded within “Accrued expenses and other current liabilities” in the Company’s Consolidated Balance Sheets and were $ 11.4 8.0 million at May 30, 2026 and May 31, 2025, respectively. The Captive maintains certain levels of cash and cash equivalents which are restricted in use to secure the insurer’s obligations for workers’ compensation, auto liability and general liability programs. Restricted cash was $ 6.3 1.0 May 30, 2026 and May 31, 2025, respectively, and is recorded within “Prepaid expenses and other current assets ” in the Company’s Consolidated Balance Sheets. The Company also maintains medical plans covering substantially all full-time employees. Under the plan, the Company self- insures its portion of medical claims and uses stop-loss insurance to limit its portion of medical claims to $ 275,000 Liabilities associated with these risks are estimated in part by considering historical claims experience, medical cost trends, demographic factors, severity factors and other actuarial assumptions. The Company’s expenses including accruals for incurred but not reported claims were approximately $ 26.6 22.8 23.0 million in fiscal years 2026, 2025, and 2024, respectively. The liability recorded for incurred but not reported claims was $ 4.3 3.0 million as of May 30, 2026, and May 31, 2025, respectively and are classified within “Accrued expenses and other current liabilities” in the Company’s Consolidated Balance Sheets. Dividends are accrued at the end of each quarter according to the Company’s dividend policy adopted by its Board of Directors (“Board”) . The Company pays a dividend to stockholders of its Common Stock on a quarterly basis for each quarter for which the Company reports net income attributable to Cal-Maine Foods, Inc. , computed in accordance with GAAP, in an amount equal to one-third (1/3) of such quarterly net income. Dividends are paid to stockholders of record as of the 60th day following the last day of such quarter, except for the fourth fiscal quarter. For the fourth quarter, the Company pays dividends to stockholders of record on the 65th day after the quarter end. Dividends are payable on the 15th day following the record date. Following a quarter for which the Company does not report net income attributable to Cal -Maine Foods, Inc., the Company will not pay a dividend for a subsequent profitable quarter until the Company is profitable on a cumulative basis computed from the date of the most recent quarter for which a dividend was paid. The dividend policy is subject to periodic review by the Board. In accordance with our variable dividend policy, we will not pay a cash dividend to holders of our Common Stock with respect to our fourth quarter Revenue Recognition The Company recognizes revenue through sale of its products to customers through retail, foodservice and other distribution channels. The majority of the Company’s revenue is derived from agreements or contracts with customers based upon the customer ordering its products with a single performance obligation of delivering the product. The Company believes the performance obligation is met upon delivery and acceptance of the product by our customers, which generally occurs upon shipment or delivery to a customer based on terms of the sale. Costs paid to third party brokers to obtain agreements are expensed as the Company’s agreements are generally less than one year. Revenues are recognized in an amount that reflects the net consideration we expect to receive in exchange for delivery of the products. The Company periodically offers sales incentives or other programs such as rebates, discounts, coupons, volume -based incentives, guaranteed sales and other programs. The Company records an estimated allowance for costs associated with these programs, which is recorded as a reduction in revenue at the time of sale using historical trends and projected redemption rates of each program. The Company regularly reviews these estimates and any difference between the estimated costs and actual realization of these programs would be recognized the subsequent period. Shipping and Distribution Costs to deliver product to customers are included in selling, general and administrative expenses in the accompanying Consolidated Statements of Income and totaled $ 108.0 93.5 72.7 million in fiscal years 2026, 2025, and Income taxes are accounted for using the liability method. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s policy with respect to evaluating uncertain tax positions is based upon whether management believes it is more likely than not the uncertain tax positions will be sustained upon review by the taxing authorities. The tax positions must meet the more-likely-than -not recognition threshold with consideration given to the amounts and probabilities of the outcomes that could be realized upon settlement using the facts, circumstances and information at the reporting date. The Company will reflect only the portion of the tax benefit that will be sustained upon resolution of the position and applicable interest on the portion of the tax benefit not recognized. The Company initially and subsequently measures the largest amount of tax benefit that is greater than 50% likely to be realized upon settlement with a taxing authority that has full knowledge of all relevant information. The Company records interest and penalties on uncertain tax positions as a component of income tax expense. Based upon management’s assessment, there are no uncertain tax positions expected to have a material impact on the Company’s consolidated financial statements. Business Combinations The Company applies the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed, including amounts attributable to noncontrolling interests, are recorded at their respective fair values at the date of acquisition. The excess of the purchase price over fair values of identifiable assets and liabilities is recorded as We use various models and methods to determine the fair values of identifiable assets and liabilities, such as top-down and bottom-up approach for inventory, cost method and market approach for property, relief-from-royalty and multi-period excess earnings to value intangibles. Significant estimates in valuing certain intangible assets include, but are not limited to, the amount and timing of future cash flows, growth rates, discount rates and useful lives. Gain (Loss) on Involuntary Conversions The Company maintains insurance for both property damage and business interruption relating to catastrophic events, such as fires, hurricanes, tornadoes and other acts of God, and is eligible to participate in U.S. Department of Agriculture (“USDA”) indemnity and compensation programs for certain losses due to disease outbreaks such as highly pathogenic avian influenza (“HPAI”). Specifically, the Animal Health Protection Act authorizes the USDA to provide indemnity payments to producers for birds and eggs that must be destroyed during a disease response. Payments received under these programs are based on the fair market value of the poultry and/or eggs at the time that HPAI virus is detected in the flock. Other covered costs include feed, depopulation and disposal costs, and virus elimination costs. The USDA does not provide indemnity for income or production losses suffered due to downtime or other business disruptions nor for indirect continuing expenses. Recoveries received for property damage, business interruption and disease outbreaks in excess of or less than the net book value of damaged assets, including poultry, clean-up and demolition costs, and other direct post-event costs are recorded within “Gain (loss) on involuntary conversions” in the period received or committed when all contingencies associated with the recoveries are resolved. Loss Contingencies Certain conditions may exist as of the date the consolidated financial statements are issued that may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. The Company expenses the costs of litigation as they are incurred. New Accounting Pronouncements and Policies In December 2023, the FASB issued ASU 2023 -09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures . This ASU requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023 -09 is effective for fiscal periods beginning after December 15, 2024. The Company has adopted ASU 2023-09 for the year ended May 30, 2026, on a prospective basis. See for additional disclosures. In November 2024, the FASB issued ASU 2024 -03, — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40) . The objective of ASU 2024 -03 is to improve disclosures about a public entity’s expenses, primarily through additional disaggregation of income statement expenses. Additionally, in January 2025, the FASB further clarified the effective date of ASU 2024 -03 with the issuance of ASU 2025 -01. ASU 2024 -03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted and may be applied either on a prospective or retrospective basis. The Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statement disclosures. There are no other new accounting pronouncements issued or effective during the fiscal year that had or are expected to have a material impact on our consolidated financial statements. |