Cal-Maine Foods (NASDAQ: CALM) reported Q4 EPS of ($0.01), $0.18 better than the analyst estimate of ($0.19). Revenue for the quarter came in at $303 million versus the consensus estimate of $304.29 million.

Dolph Baker, chairman, president and chief executive officer of Cal-Maine Foods, Inc., stated, “Cal-Maine Foods had another record year in fiscal 2016 with sales of $1,908.7 million, surpassing the previous year’s record by 21.1 percent. Our net income for the year of $316.0 million was the highest annual net income in the Company’s history, and was 96.0 percent higher than the record set in fiscal 2015. Notably, we achieved these results during a period of unprecedented market conditions for the egg industry.

“Throughout this fiscal year, our industry continued to deal with the aftermath of the Avian Influenza (AI) outbreaks that occurred in the spring of 2015. While there have been no positive tests for AI at any of our locations, the outbreak significantly affected egg supplies and prices. Our results for the fourth quarter reflect these extremely volatile egg market conditions and supply disruptions. Market prices for shell eggs have dropped considerably from the historically high levels we experienced at the beginning of this fiscal year. The Urner Barry price index hit a decade-low level during our fourth quarter, before recovering a portion of these declines in recent weeks. In addition to the 21.7 percent drop in average selling prices over the same quarter last year, our sales for the fourth quarter reflect lower volumes, primarily related to the loss of a portion of a major customer’s co-pack business. While retail demand trends for shell eggs have been favorable, the market has continued to experience demand erosion for egg products and reduced egg exports. Based on USDA reports, the laying flock is expected to increase through the end of calendar 2016, creating more supply and the potential for further price declines.

“In fiscal 2016, we saw steady growth in demand for specialty eggs with our sales volumes up 14.7 percent for the year,” added Baker. “Sales of specialty eggs accounted for 22.9 percent of our total number of shell eggs sold and 29.1 percent of our shell eggs revenue for fiscal 2016. Specialty egg prices remained strong during the year; however, as non-specialty egg prices have come down, we are experiencing some margin and volume pressures on specialty egg sales. Going forward, we believe Cal-Maine Foods is well positioned to respond to demand trends for specialty eggs, as many food service customers, large restaurant chains and major retailers, including our largest customers, have committed to exclusive offerings of cage-free eggs by specified future dates. We are working with our customers to ensure a smooth transition to meet this demand as a trusted supplier of cage-free eggs. In addition, our product mix provides a wide variety of healthy choices for consumers including conventional, nutritionally enhanced and organic eggs.

“Overall, our operations performed very well in fiscal 2016, as our managers across all of Cal-Maine Foods’ locations did an outstanding job in executing our strategy to be an efficient, low-cost producer. For the year, we reported operating income of $470.3 million, compared with $235.3 million for the prior year. We benefited from lower feed and farm production costs during the year as our feed costs per dozen produced were 5.7 percent lower than fiscal 2015. These lower costs reflect an abundant supply of grain from the record harvest of corn and soybean crops last fall. Looking ahead, current USDA projections for harvested acres and yields for both crops should ensure an adequate supply of grain for end users, as long as weather conditions remain favorable through the summer.”

Baker concluded, “We are very pleased with Cal-Maine Foods’ performance in fiscal 2016 and the consistent execution of our strategy in a dynamic marketplace. We will remain focused on this same strategy in the year ahead. We will continue to manage our operations efficiently and leverage the additional capacity from our most recent joint ventures and expansion projects. Our cage-free joint venture with Rose Acre Farms in Texas is on schedule to reach our full expected capacity in early calendar 2017. In addition, we have a number of major capital projects underway across our operations, including additional conversions to further expand our cage-free capacity. We look forward to the new market opportunities these projects will provide for Cal-Maine Foods. We will also look for additional markets for specialty eggs and continue to enhance our product mix in line with customer demand. Importantly, our strong balance sheet provides us with the flexibility to pursue acquisitions and additional growth opportunities that add value to our operations. Together, we believe these efforts will reward both our customers and shareholders in fiscal 2017.”

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