Cal-Maine Foods Inc. has released results for the fourth quarter of 2018 and fifty-two weeks ended June 2, 2018.

Net sales for the fourth quarter of fiscal 2018 were $443.1 million, a 61.4% increase compared with $274.6 million for the fourth quarter of fiscal 2017. The company reported net income of $71.8 million, or $1.48 per basic and diluted share, for the fourth quarter of 2018, compared with a net loss of $24.5 million, or 51 cents per basic and diluted share, for the fourth quarter of 2017. The fourth quarter of fiscal 2018 was a 13-week period, compared with 14 weeks for the same period in fiscal 2017.

For the fiscal year ended June 2, 2018, net sales were $1.50 billion, compared with $1.07 billion for the prior-year period.

The company reported net income of $125.9 million, or $2.60 per basic and diluted share, for fiscal 2018, compared with net loss of $74.3 million, or $1.54 per basic and diluted share, for fiscal 2017. Fiscal 2018 included 52 weeks, while fiscal 2017 had 53 weeks.

Cal-Maine said its results for fiscal 2018 were favorably affected by a $43.0 million, or 89 cents per basic and diluted share, tax benefit related to the Tax Cuts & Jobs Act (TCJA) tax reform legislation and the subsequent revaluation of its deferred tax liabilities at the new lower corporate tax rate. The company recorded provisional adjustments related to the TCJA in the third quarter and recorded adjustments related to the completed analysis in the fourth quarter. These results also include an after-tax charge of $54.8 million, or $1.13 per basic and diluted share, recorded in the second quarter of fiscal 2018, related to the settlement of certain previously disclosed antitrust litigation.

“We are pleased with our financial and operating performance for the fourth quarter, marking a strong finish to fiscal 2018. Notably, these results represent the best fourth-quarter performance in the company’s history,” Cal-Maine chairman, president and chief executive officer Dolph Baker said. “The impressive sales gains reflect strong consumer demand and significantly higher average selling prices compared with the same period a year ago.”

Baker said the Easter holiday and retail grocery promotions featuring shell eggs were key drivers of sales for the fourth quarter, along with good foodservice demand. “These favorable market conditions supported our business with a significant improvement in profitability compared with a year ago. Importantly, our financial performance allows us to resume our quarterly cash dividend payment to our shareholders,” he added.

According to Baker, market prices were “exceptionally strong” during the first part of the quarter but fell significantly following the Easter holiday.

“Overall, average customer selling prices were up 74.1% compared with the fourth quarter last year,” he said.

Baker cited consumer market research firm IRI's report that retail demand was favorable throughout the period, especially around the Easter holiday season, and added that export demand remained near historical levels during the fourth quarter.

“Together, these demand trends have supported market prices at recent production levels. However, according to recent [U.S. Department of Agriculture] reports, the chick hatch rate has been up for the last eight months and has increased by approximately 10% since the beginning of calendar 2018," he said. "Given these trends, the projected increase in the U.S. laying hen flock and potential excess shell egg supply could create additional pricing pressure.”

Committed to specialty eggs

Baker noted that Cal-Maine remains committed to specialty eggs, even as the industry continues to determine its trajectory.

Specialty eggs, excluding co-pack sales, accounted for 25.5% of the company’s sales volumes during the fourth quarter, compared with 22.7% a year ago. Specialty egg revenue was 29% of total shell egg revenue, compared with 42% for the fourth quarter of 2017, which the company said reflects significantly higher market prices for non-specialty eggs in the current period.

Despite the decline in specialty egg sales and volumes, Baker said specialty eggs remain a primary focus of the company’s growth strategy as it strives to offer a favorable product mix that reflects consumer demand trends.

“As the egg industry moves forward in anticipation of the expected increase in demand for cage-free eggs, we are working closely with our customers to ensure their needs are met through this transition,” he explained. “As such, we intend to make the required investments in our operations and adjust our cage-free production capacity in line with expected demand.”

Baker continued, “We are also closely monitoring industry developments surrounding a proposed referendum that will be on the ballot for voters in California later this calendar year. This referendum mandates, over a period of time, that all egg production in California must be cage-free, with specific space requirements for laying hens. In addition, if passed, the referendum will require that all eggs and egg products sold in the state of California must be cage-free by a certain future date. This referendum, if adopted, could affect sourcing and production of eggs in California, which would create uncertainty surrounding supply and pricing in other areas of the country.”

Overall performance

Baker said operations performed well throughout fiscal 2018 as managers across all Cal-Maine Foods locations maintained a consistent focus on efficient and responsible management.

For the fourth quarter, operating income was $91.3 million, compared with an operating loss of $38.3 million a year ago.

The company reported that feed costs for the fourth quarter were up 9.2% over last year due to higher costs of feed ingredients, primarily soybean meal, and a slightly lower feed conversion rate. Overall farm production costs per dozen for the fourth quarter were also slightly higher than a year ago, Cal-Maine added.

“Feed costs have been volatile since the end of our fiscal year but have come down recently. Looking ahead, the current corn and soybean crops are ahead of schedule, and favorable growing conditions should support lower prices for feed ingredients," the company said. "However, the current geopolitical risks associated with the recently imposed and additional proposed tariffs are creating more price volatility and uncertainty.”

Baker said, “We are proud of our accomplishments for fiscal 2018 as we continued to execute our growth strategy with favorable results. Looking ahead, we will remain focused on this same strategy: manage our operations efficiently and responsibly; provide a favorable product mix, including cage-free and other specialty eggs, and look for acquisition or other growth opportunities that enhance our operations.”

Above all, Baker said Cal-Maine is focused on meeting the needs of our customers and providing excellent service.

“We have a strong balance sheet, including a new five-year, $100 million revolving credit facility that provides additional financial flexibility to support our growth strategy, and we look forward to the opportunities ahead for Cal-Maine Foods in fiscal 2019,” he said.