Business Context and Reporting Period
Company: Cal-Maine Foods, Inc. (CALM)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Thirteen and thirty-nine weeks ended February 28, 2026 (Fiscal Q3 2026)
Business Overview: The largest egg company in the U.S., producing shell eggs, prepared foods, and egg products. The company operates as a single reportable segment.
Key Financial Metrics
| Metric | 13 Weeks Ended Feb 28, 2026 | 39 Weeks Ended Feb 28, 2026 |
|---|---|---|
| Net Sales | $666.95 million | $2.36 billion |
| Gross Profit | $119.28 million (17.9% margin) | $637.98 million (27.0% margin) |
| Operating Income | $35.94 million (5.4% margin) | $409.00 million (17.2% margin) |
| Net Income (Attributable to Cal-Maine) | $50.46 million | $352.56 million |
| Diluted EPS | $1.06 | $7.34 |
| Cash and Cash Equivalents | $392.16 million | (Balance Sheet Item) |
| Investment Securities (Available-for-Sale) | $759.77 million | (Balance Sheet Item) |
| Total Debt | $0 (No borrowings under Credit Facility) | (Balance Sheet Item) |
| Working Capital | $1.54 billion | (Calculated) |
Material Changes vs. Prior Period
- Revenue Decline: Net sales decreased 53.0% year-over-year for the quarter and 25.3% for the 39-week period. This was primarily driven by a 56.5% drop in the net average selling price of shell eggs (from $4.06 to $1.77 per dozen) due to improved supply following prior-year HPAI disruptions.
- Profitability Compression: Operating income fell from $635.7 million in the prior-year quarter to $35.9 million. Gross margin contracted from 50.5% to 17.9% as selling prices normalized while production costs remained relatively stable.
- Prepared Foods Growth: Prepared foods sales increased 441.2% quarter-over-year, driven by the acquisition of Echo Lake Foods (completed June 2025) and volume growth at Crepini.
- Cost Structure: Farm production costs per dozen increased 4.4% due to higher facility and labor costs, though feed costs remained flat. SG&A expenses increased 4.2% due to higher delivery and marketing costs associated with acquisitions and franchise fees.
Guidance, Outlook, Risks, and Unusual Items
- Acquisitions:
- Completed: Acquired Echo Lake Foods ($275.4M) and Clean Egg ($23.7M) during the fiscal year.
- Subsequent Event: On March 2, 2026, acquired Creighton Brothers LLC assets for approximately $128.5 million.
- HPAI Risks: Highly Pathogenic Avian Influenza remains a significant risk. In March 2026 (post-period), the company depopulated 350,000 pullets due to an outbreak. Industry-wide depopulations in 2026 were lower than 2025, contributing to price normalization.
- Legal Proceedings:
- Antitrust Litigation: Named in multiple class-action lawsuits alleging price manipulation. Cases consolidated in Western District of Wisconsin; company intends to vigorously defend.
- DOJ Investigation: Subject to a Civil Investigative Demand regarding antitrust conduct; cooperating with DOJ and state attorneys general.
- Processed Egg Products Litigation: A $43.6 million treble damage judgment was entered against the company in late 2024. The company has posted a bond and is appealing; an accrual of $19.6 million was previously recorded.
- Oklahoma Watershed: Final judgment imposed ~$70,000 in penalties; company is appealing and funding a remediation trust.
- Capital Allocation:
- Dividends: Declared $0.355 per share for Q3 2026 (payable May 2026).
- Share Repurchases: Repurchased ~$99.2 million of stock during the 39-week period. $350.8 million remains authorized under the $500 million program.
Investor Verification Checklist
- Price Normalization: Verify the sustainability of the 56.5% drop in egg selling prices and its impact on future margins.
- Acquisition Integration: Assess the integration progress and synergy realization from Echo Lake Foods and Clean Egg, noting temporary production reductions at Echo Lake.
- Legal Exposure: Monitor the status of the antitrust class actions and the appeal of the $43.6 million processed egg products judgment.
- HPAI Impact: Track future HPAI outbreaks and their potential to disrupt supply and cause price volatility.
- Liquidity: Confirm the company's ability to fund the $128.5M Creighton Brothers acquisition and ongoing capex without debt, given the reduction in operating cash flow.