Cal-Maine 10-Qquarter ended 2026-02-28
MixedLegal / investigation
Recovering egg supply drove conventional egg prices lower; Echo Lake expanded prepared foods while integration weighed on efficiency.
Filed 2026-04-01 06:15 ET
Key figures · Q3 FY2026 · period ended 2026-02-28
- Revenue$667.0MYoY −53.0%QoQ −13.3%
- Operating income$35.9MYoY −94.3%QoQ −71.0%
- Net income$50.5MYoY −90.1%QoQ −50.9%
- Total assets$3.1BYoY +1.9%QoQ −0.2%
- Total debtNo debtYear ago $0Previous quarter $0
- Shareholders' equity$2.7BYoY +13.4%QoQ +0.3%
- Tangible book value$2.6BYoY +10.4%QoQ +0.4%
How this filing reads
- Health+0.8Cash of $392M, securities of $760M, and $353M free cash flow support investment and returns.
- Momentum−0.8Q3 revenue fell 53%, gross margin dropped from 50.5% to 17.9%, and operating income fell 94.3%.
- Outlook−0.3Projects will weigh on efficiency through FY2026, with completion expected in FY2027.
Executive Summary
Cal-Maine’s third-quarter earnings fell sharply as egg supply recovered from the prior-year avian-influenza disruption and conventional egg prices retreated; the decline was primarily a pricing reversal, not a collapse in volume. Acquisitions are expanding prepared foods and production capacity, but prepared foods remain a small share of sales and integration costs are weighing on efficiency. Substantial liquidity supports investment and shareholder returns, while earnings-linked dividends will fluctuate with egg prices. Investors should weigh the opportunity to build a more diversified business against persistent commodity-price volatility, disease exposure and unresolved antitrust litigation.
Key Financial Highlights
| Metric | Q3 FY2026 | 9M FY2026 / 02/28/2026 balance | Investor interpretation |
|---|---|---|---|
| Revenue | $667M, −53.0% Y/Y | $2.36B, −25.3% Y/Y | Lower shell-egg prices drove the decline. |
| Gross profit | $119M, −83.3% Y/Y | $638M, −51.6% Y/Y | Q3 gross margin fell to 17.9% from 50.5%. |
| Operating income | $35.9M, −94.3% Y/Y | $409M, −62.8% Y/Y | Costs did not fall nearly as fast as selling prices. |
| GAAP net income attributable to Cal-Maine | $50.5M vs $509M | $353M vs $878M | The prior-year pricing windfall has largely unwound. |
| Diluted EPS | $1.06 vs $10.38 | $7.34 vs $17.92 | Lower profit, partly offset by fewer shares. |
| Total assets | — | $3.14B | Acquisitions expanded the asset base. |
| Total equity | — | $2.71B, including noncontrolling interest | Balance sheet retains substantial capacity. |
| Tangible common equity | — | $2.56B | Total equity less noncontrolling interest, goodwill and net intangibles. |
- Pricing and mix: Q3 shell-egg volume fell 2.2%, but average selling price fell 56.5% to $1.77 per dozen. Specialty eggs reached 50.5% of shell-egg sales, largely because conventional prices fell faster—not because specialty sales grew.
- Cash conversion: 9M operating cash flow was $477M vs attributable net income of $353M; capital expenditures of $124M left free cash flow of $353M. Operating cash flow fell from $812M a year earlier, mainly as lower egg prices reduced customer collections.
- Liquidity and capital returns: Cash was $392M and current available-for-sale securities had $760M fair value. Dividends paid were $215M and treasury-stock purchases used $101M; period-end shares outstanding fell ≈1.12M net of issuance. Stock-based compensation was $4.0M.
- Acquisition spending: 9M cash used for acquisitions was $299M. Together with dividends and repurchases, it drew on liquidity despite positive free cash flow.
Business Developments
The $275M Echo Lake Foods acquisition broadened Cal-Maine’s prepared-food offerings, helping lift Q3 prepared-food sales to $63.6M from $11.8M. That business now offers a diversification path, but shell eggs still supplied 85.8% of quarterly revenue. Management expects Echo Lake integration and capacity projects to weigh on production efficiency through FY2026, with completion expected in FY2027.
Cal-Maine also acquired Clean Egg assets for ≈$23.7M during the period. After quarter-end, it acquired Creighton Brothers and Crystal Lake assets for ≈$129M, adding shell-egg capacity for ≈3.2M layers plus feed and processing facilities. Management is pursuing acquisitions, specialty eggs, prepared foods and cage-free capacity; the inferred investor test is whether those investments can produce steadier returns without eroding efficiency when egg prices normalize.
Risk Assessment
- Egg-price and margin volatility: Improved industry supply and the end of panic buying drove a 56.5% decline in average Q3 shell-egg selling price, while farm production cost rose 4.4% to $0.95 per dozen.
- Avian influenza: A post-quarter outbreak required depopulation of ≈350,000 Maryland pullets; further outbreaks could disrupt Cal-Maine’s production even as industry-wide losses can raise prices.
- Antitrust litigation: New conventional-egg pricing cases and government inquiries have unquantified potential losses; a separate processed-egg case carries a $43.6M jointly and severally imposed judgment, with $19.6M accrued for Cal-Maine’s estimated share pending further proceedings and appeal.
- Acquisition execution: Prepared-food growth depends on integrating Echo Lake and new assets while managing near-term efficiency costs; Echo Lake was outside management’s internal-control assessment for this quarter.
- Environmental remediation: An appealed Illinois River Watershed judgment imposes oversight and remediation planning over 30 years, creating obligations beyond Cal-Maine’s ≈$0.070M share of stated penalties.
This 10-Q lists no risk factors of its own and refers to the annual report. The risks above come from the rest of this filing. Full list: the company's 10-Ks on SEC.
Strategic Outlook and Investor Actionables
Cal-Maine has the liquidity to keep investing through the pricing downturn, but its near-term earnings and variable dividend remain tied predominantly to shell-egg economics. The central question is whether diversification and added capacity can improve earnings resilience enough to justify acquisition and integration spending.
- Monitor shell-egg selling price against farm cost per dozen and gross margin: sustained margin recovery would support earnings; further compression would challenge it.
- Monitor prepared-food revenue alongside integration costs and production efficiency: growth accompanied by improving efficiency would validate Echo Lake’s strategic contribution.
- Monitor operating cash flow, acquisition spending and shares outstanding: cash-funded expansion without a persistent liquidity draw would strengthen the capital-allocation case.
Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.
Model 005 · prompt 9e47f58d3c