CAL-MAINE FOODS INC

Note 1 - Summary of Significant Accounting Policies

Basis of Presentation

The

unaudited

condensed

consolidated

of

Foods,

Inc.

and

its

subsidiaries

(the

“Company,”

“we,” “us,” “our”)

have been prepared

in accordance with

the instructions to

Form 10-Q and

Article 10 of

Regulation S-X and

in

with generally

principles in

the

United

States of

America

(“GAAP”)

for

interim

reporting and

should be

read in

conjunction with

our Annual

Report on

Form 10-K

for the fiscal

year ended

June 3,

2023 (the

“2023

Annual

Report”).

These

reflect

all

adjustments

that

are,

in

the

opinion

of

management,

necessary

to

a

fair

statement of the results for

the interim periods presented

and, in the opinion of

management, consist of adjustments

of a normal

recurring nature.

Operating results for

the interim periods

are not necessarily

indicative of operating

results for the

entire fiscal

year.

Fiscal Year

The Company’s

fiscal year

ends on

the Saturday

closest to

May 31.

Each of

the three-month

periods and

year-to-date periods

ended on March 2, 2024 and February 25, 2023 included

13 weeks

and

39 weeks

, respectively.

Use of Estimates

The preparation of the

consolidated financial statements in

conformity with GAAP requires management

to make estimates and

assumptions

that affect

reported in

the consolidated

financial statements

and accompanying

notes. Actual

results

could differ from those estimates.

Investment Securities

has determined

that its

debt securities

are available-for-sale

investments. We

classify these

securities 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

cost

of

debt

is

for

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.

Investments

in

mutual

funds

are

at

fair

value

and

are

as

“Other

assets”

in

the

Balance

Sheets.

gains

and

losses

for

equity

are

in

other

income

(expenses) as Other, net in the Company’s

Condensed Consolidated Statements of Income.

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

(expenses)

as

Other,

net

in

the

Statements of Income. Interest and dividends on securities classified as available-for-sale

are recorded in interest income.

Trade Receivables

Trade receivables

are stated at their

carrying values, which

include a reserve

for credit losses. As

of March 2,

2024 and June

3,

2023, reserves for credit losses were

$

The Company extends credit to customers

based

on

an

evaluation

of

each

customer’s

condition

and

credit

history.

Collateral

is

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.

the

excess

of

the

price

over

the

fair

value

of

the

identifiable

net

assets

acquired.

is

evaluated

for

impairment

annually

by

first

performing

a

qualitative

assessment

to

whether

a

quantitative

goodwill

Index

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

unit

is

less

than

its

amount,

then

we

perform

additional

quantitative

tests

to

the

magnitude of any impairment.

Intangible Assets

Intangible

assets

are

initially

at

fair

value

in

acquisitions,

which

include

franchise

rights,

relationships, non-compete

agreements, trademark

and right

of use

intangibles. They

are amortized

over their

estimated useful

lives

of

to

years. The

gross

cost

and

accumulated

of

intangible

assets

are

removed

when

the

amounts

are fully

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

represents water rights. They are not amortized, but

are reviewed for impairment at least annually or more frequently if

impairment indicators arise.

Dividends Payable

We

accrue dividends at

the end of

each quarter according

to the Company’s

dividend policy adopted

by its Board

of Directors.

pays a dividend

to shareholders

of its Common

Stock and

Class A Common

Stock on

a quarterly basis

for each

quarter for

which the

Company reports

net income

Cal-Maine Foods,

Inc. computed

in accordance

with GAAP

in an amount

equal to one-third

(1/3) of such

quarterly income. Dividends

are paid to

shareholders of record

as of the 60th

day

following the

last day

of such quarter,

except for

the fourth fiscal

quarter.

For the

fourth quarter,

pays dividends

to shareholders 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 of

Directors.

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. We

determine the fair values of identifiable assets and liabilities

internally,

which requires estimates and

the

use

of

various

valuation

techniques.

When

a

market

value

is

not

readily

available,

our

internal

valuation

methodology

considers the remaining estimated life of the assets acquired and what

management believes is the market value for those assets.

We

typically use the income

method approach for

intangible assets acquired in

a business combination. 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. The

excess of the purchase

price over fair values

of identifiable assets and

liabilities is recorded

as goodwill.

Gain on Involuntary Conversions

maintains insurance

for both

property damage

and business

interruption relating

to catastrophic

events, such

as

fires, hurricanes,

tornadoes

acts of

God, and

is eligible

to participate

in U.S.

Department

of Agriculture

(“USDA”)

and

programs

for

certain

losses

due

to

disease

outbreaks

such as

highly

pathogenic

avian

influenza

(“HPAI”).

Specifically,

the

Animal

Health

Protection

Act

authorizes

USDA to

provide

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. 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 the net book value of damaged assets, clean-up and

demolition

costs,

and

other

direct

post-event

costs

are

within

“Gain

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

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

Index

counsel

assess such

liabilities, and

such assessment

inherently

involves an

exercise

of judgment.

In assessing

loss

contingencies

related

to legal

proceedings

that are

pending against

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

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

No new accounting pronouncement issued or effective

during the fiscal year had or is expected to have a material

impact on our

Consolidated Financial Statements.

Note 2 - Acquisition

Effective

September 30, 2023

, the Company

acquired the assets of

Fassio Egg Farms,

Inc. (“Fassio”), related

to its commercial

shell

egg

and

business.

Fassio

owns

and

operates

shell

egg

and

facilities with

a capacity

at the

time of

1.2

million

laying hens,

a feed

mill,

pullets, a

fertilizer production

and composting

operation and

land located

in Erda, Utah,

outside Salt

Lake City.

accounted for the acquisition as a business combination.

table summarizes

the consideration

paid for

the Fassio

of assets

acquired and

assumed recognized at the acquisition date (in thousands):

Cash consideration paid

$

53,746

Fair value of contingent consideration

1,000

Total estimated purchase

54,746

Recognized amounts of identifiable assets acquired and

liabilities assumed

Inventory

$

6,164

Property, plant and equipment

44,540

Intangible assets

2,272

Other long-term assets

Liabilities assumed

(143)

Total identifiable

net assets

52,976

1,770

$

54,746

Inventory consisted

primarily of

flock, feed

packaging, and

egg inventory.

Flock inventory

was valued at

value

as

management

believes

that

its

value

best

approximates

its

fair

value.

Feed

packaging

and

egg

inventory were all valued based on market prices as of September 30, 2023.

Property,

equipment were

valued utilizing

the cost

approach which

is based

on replacement

or reproduction

costs of

the assets and subtracting any depreciation resulting from physical deterioration

and/or functional or economic obsolescence.

Intangible

assets

consisted

of

water

rights

within

the

property

acquired.

Water

rights

were

valued

using

the

sales

comparison approach.

Index

Contingent

liability

was

and

future

cash

payment

to

the

sellers

on

the

meeting

certain

return

on

profitability

milestones over

a

three-year

period,

commencing

on

the date

of

the

acquisition.

The fair

value of

the contingent

consideration is

estimated using

a discounted

cash flow

model. Key

assumptions

and

unobservable

inputs that

require

significant judgement

used in

the estimate

include weighted

of capital,

egg

prices, projected revenue

and expenses over which

the contingent considered

is measured, and the

probability assessments with

respect to the

likelihood of achieving

the forecasted projections.

A range of

potential outcomes cannot

be reasonably estimated

due to market volatility of egg prices.

the

excess

of

the

price

of

the

over

the

acquisition

date

fair

value

of

the

net

assets acquired.

Goodwill recorded

in connection

Fassio acquisition

is primarily

improved efficiencies

from integrating the assets of

Fassio with the operations

of the Company.

The Company recognized goodwill

of $

1.8

million as

a result of the acquisition.

Note 3 - Investment

Securities

The following represents the Company’s

investment securities as of March 2, 2024 and June 3, 2023 (in thousands):

Amortized

Cost

Gains

Losses

Estimated

Fair Value

$

6,147

$

—

$

$

6,084

42,864

—

42,825

121,430

—

121,063

1,830

—

1,828

115,165

—

114,966

9,418

—

9,503

31,455

—

31,451

$

328,309

$

$

$

327,720

$

1,108

$

$

—

$

1,124

Total noncurrent

$

1,108

$

$

—

$

1,124

Amortized

Cost

Gains

Losses

Estimated

Fair Value

$

16,571

$

—

$

$

16,296

56,486

—

56,409

139,979

—

1,402

138,577

—

—

101,240

—

100,769

13,459

—

13,308

29,069

—

29,056

$

357,479

$

—

$

2,389

$

355,090

$

2,172

$

—

$

$

2,081

Total noncurrent

$

2,172

$

—

$

$

2,081

Available-for-sale

Proceeds

from

sales and

maturities of

investment

securities available-for-sale

were $

273.9

million

and $

132.7

million

during

2, 2024

and February

25, 2023,

respectively.

Gross realized

gains for

weeks

2, 2024

and February

were $

thousand and

$

Gross realized

losses for

the

thirty-nine weeks ended March 2, 2024 and February

25, 2023 were $

no

allowances

for credit losses at March 2, 2024 and June 3, 2023.

Index

Actual maturities

may differ

from contractual

maturities as some

borrowers have

the right to

call or prepay

obligations with

or

without penalties. Contractual maturities of current investments at March

2, 2024 are as follows (in thousands):

Estimated Fair Value

Within one year

$

213,556

1-5 years

114,164

Total

$

327,720

Noncurrent

Proceeds from sales and maturities of noncurrent investment securities

were $

1.5

million and $

1.8

million during the thirty-nine

weeks ended March 2, 2024

and February 25, 2023, respectively.

Gross realized gains for the thirty-nine

2024 and February 25,

2023 were $

no

realized losses for the

weeks ended March 2, 2024. Gross realized losses for the thirty-nine

weeks ended February 25, 2023 were $

thousand.

Note 4 - Fair Value

Measurements

is required

to categorize

both financial

and nonfinancial

liabilities based

on the

following fair

value

hierarchy. The

fair value

of an

asset is

the price

at which

the asset

could be

sold in

an orderly

transaction between

unrelated,

knowledgeable, and willing

parties able to engage in

the transaction. A liability’s

fair value is defined

as the amount that would

be

paid

to

transfer

the

liability

to

a

new

obligor

in

a

transaction

between

such

parties,

not

the

amount

that

would

be paid

to

settle the liability with the creditor.

•

Level 1

• Quoted prices in active markets for identical assets or liabilities

•

Level 2

• Inputs

other than

quoted

prices included

in Level

1 that

are observable

for the

asset or

liability,

either

directly or indirectly,

including:

◦

Quoted prices for similar assets or liabilities in active markets

◦

Quoted prices for identical or similar assets in non-active markets

◦

Inputs other than quoted prices that are observable for the asset or liability

◦

Inputs derived principally from or corroborated by other observable

market data

•

Level 3

• Unobservable inputs for the asset or liability that are

supported by little or no market activity and that

are

significant to the fair value of the assets or liabilities

The disclosures of fair value of certain financial assets and liabilities that are recorded

at cost are as follows:

Cash and cash equivalents, accounts receivable,

and accounts payable:

The carrying amount approximates fair value due to the

short maturity of these instruments.

Index

Assets and Liabilities Measured at Fair

Value

on a Recurring Basis

In

with

the

fair

value

hierarchy

described

above,

the

following

table

shows

the

fair

value

of

liabilities measured at fair value on a recurring basis as of March 2, 2024 and June

3, 2023 (in thousands):

Level 1

Level 2

Level 3

Balance

Assets

$

—

$

6,084

$

—

$

6,084

—

42,825

—

42,825

—

121,063

—

121,063

—

1,828

—

1,828

—

114,966

—

114,966

—

9,503

—

9,503

—

31,451

—

31,451

1,124

—

—

1,124

Total assets measured at fair

value

$

1,124

$

327,720

$

—

$

328,844

Liabilities

Contingent consideration

$

—

$

—

$

1,000

$

1,000

Total liabilities measured

at fair value

$

—

$

—

$

1,000

$

1,000

Level 1

Level 2

Level 3

Balance

Assets

$

—

$

16,296

$

—

$

16,296

—

56,409

—

56,409

—

138,577

—

138,577

—

—

—

100,769

—

100,769

—

13,308

—

13,308

—

29,056

—

29,056

2,081

—

—

2,081

Total assets measured at fair

value

$

2,081

$

355,090

$

—

$

357,171

Investment

–

available-for-sale

as Level

consist

of

with maturities

of

three

months

or longer

when purchased. We

classified these securities as

current because amounts

invested are readily available

for current operations.

Observable inputs for these securities are yields, credit risks, default rates, and volatility.

Contingent

as

Level

consists

of

the

obligation

to

pay

an

earnout

to

the

sellers

of

Fassio

contingent on the

acquired business meeting

certain return on

profitability milestones over

a

three-year

period, commencing on

the date of

the acquisition. The fair

value of the

contingent consideration is

estimated using a

discounted cash flow

model. Key

assumptions and

unobservable inputs

that require

significant judgement

used in

the estimate

include weighted

of

capital,

egg

prices,

revenue

and

over

which

the

considered

is

measured,

and

the

probability

assessments

with

respect

to

the

likelihood

of

achieving

the

forecasted

projections.

See

further

in

Note 2 -

Acquisition

.

Note 5 - Inventories

Inventories consisted of the following as of March 2, 2024 and June 3,

2023 (in thousands):

Flocks, net of amortization

$

150,441

$

164,540

Eggs and egg products

26,770

28,318

Feed and supplies

92,033

91,560

$

269,244

$

284,418

Index

We

grow

and

maintain

flocks

of

layers

(mature

female

chickens),

pullets

(female

chickens,

under

weeks

of

age),

and

breeders (male and female

chickens used to produce fertile

eggs to hatch for egg

production flocks). Our total

flock at March 2,

2024 and June

3, 2023 consisted of

10.9

million and

10.8

million pullets and breeders

and

42.2

million and

41.2

million layers, respectively.

Note 6 - Equity

The following reflects equity activity for the thirteen weeks ended

March 2, 2024 and February 25, 2023 (in thousands):

Ended March 2, 2024

Class A

Paid In

Accum.

Other

Amount

Amount

Amount

Capital

Total

Balance at December

2, 2023

$

$

$

(30,014)

$

74,214

$

(1,614)

$

1,583,071

$

(2,444)

$

1,623,964

—

—

—

—

—

—

—

—

(1,583)

1,012

—

—

—

(571)

0.997

Common

—

—

—

—

—

(44,111)

—

(44,111)

—

—

—

—

—

(4,786)

—

(4,786)

—

—

—

—

—

146,712

(349)

146,363

Balance at March 2,

$

$

$

$

75,226

$

(1,514)

$

$

(2,793)

$

Ended February 25, 2023

Class A

Paid In

Accum.

Other

Amount

Amount

Amount

Capital

Total

Balance at November

26, 2022

$

$

$

(28,496)

$

70,005

$

(3,087)

$

1,281,784

$

(652)

$

1,320,305

—

—

—

—

—

—

—

—

(1,500)

—

—

—

(528)

2.199

Common

—

—

—

—

—

(97,123)

—

(97,123)

—

—

—

—

—

(10,555)

—

(10,555)

—

—

—

—

—

323,219

(450)

322,769

Balance at February

$

$

$

(29,996)

$

70,977

$

(3,067)

$

1,497,325

$

(1,102)

$

1,534,888

Index

Class A

Paid In

Accum.

Other

Amount

Amount

Amount

Capital

Total

Balance at June 3,

$

$

$

(30,008)

$

72,112

$

(2,886)

$

1,571,112

$

(1,498)

$

1,609,583

—

—

—

—

1,372

—

—

1,372

—

—

(1,589)

3,114

—

—

—

1,525

1.119

Common

—

—

—

—

—

(49,501)

—

(49,501)

—

—

—

—

—

(5,372)

—

(5,372)

—

—

—

—

—

164,647

(1,295)

163,352

Balance at March 2,

$

$

$

$

75,226

$

(1,514)

$

$

(2,793)

$

Class A

Paid In

Accum.

Other

Amount

Amount

Amount

Capital

Total

Balance at May 28,

$

$

$

(28,447)

$

67,989

$

(1,596)

$

1,065,854

$

(206)

$

1,104,345

loss, net of tax

—

—

—

—

(1,471)

—

—

(1,471)

—

—

(1,549)

2,988

—

—

—

1,439

4.403

Common

—

—

—

—

—

(194,478)

—

(194,478)

—

—

—

—

—

(21,144)

—

(21,144)

—

—

—

—

—

647,093

(896)

646,197

Balance at February

$

$

$

(29,996)

$

70,977

$

(3,067)

$

1,497,325

(1,102)

$

1,534,888

Note 7 - Net Income per Common Share

Basic net income

per share is

based on the

weighted average Common

Stock and Class

A Common Stock

outstanding. Diluted

net

income

per

share

is

based

on

weighted-average

common

shares

during

the

relevant

period

for

the

dilutive effect of share-based awards.

Index

The

following

table

a

reconciliation

of

the

numerators

and

denominators

used

to

basic

and

diluted

net

income per common share (amounts in thousands, except per share data):

Ended

Numerator

$

146,363

$

322,769

$

163,352

$

646,197

Less: Loss attributable to

noncontrolling interest

(349)

(450)

(1,295)

(896)

Net income attributable to Cal-Maine

$

146,712

$

323,219

$

164,647

$

647,093

Denominator

Weighted-average

common shares

outstanding, basic

48,727

48,653

48,702

48,634

Effect of dilutive restricted shares

Weighted-average

common shares

outstanding, diluted

48,884

48,842

48,865

48,832

Net income per common share

attributable to Cal-Maine Foods, Inc.

Basic

$

3.01

$

6.64

$

3.38

$

13.31

Diluted

$

3.00

$

6.62

$

3.37

$

13.25

Note 8 - Revenue from Contracts with Customers

Satisfaction of Performance Obligation

The vast majority of the Company’s

revenue is derived from agreements with customers based on the customer

placing an order

for products. Pricing

for the most part

is determined when

the Company and

the customer agree

upon the specific

order, which

establishes the contract for that order.

Revenues are

recognized in

an amount

that reflects

the net

consideration we

expect to

receive in

exchange for

the goods.

Our

shell

eggs

are

sold

at

prices

related

to

independently

quoted

wholesale

market

prices

or

formulas

related

to

our

costs

of

production.

The

sales

predominantly

contain

a

single

obligation.

We

recognize

revenue

upon

satisfaction

of

the

obligation

with

the

customer,

which

typically

occurs

within

days

of

the

Company

and

the

customer agreeing upon the order.

Returns and Refunds

Some of our contracts include a guaranteed sale clause, pursuant to which we

credit the customer’s account for product that the

customer is unable to sell before expiration. The Company records an allowance for

expected customer returns using historical

return data compared to current period sales and accounts receivable.

The allowance is recorded as a reduction of sales in the

same period the revenue is recognized.

Sales Incentives Provided to Customers

The

Company

periodically

incentive

offers

to

its

to

encourage

purchases.

Such

offers

include

current

discount offers

(e.g., percentage

discounts off

current purchases), inducement

offers (e.g.,

offers for

future discounts subject

to

a minimum

current purchase),

similar offers.

Current discount

offers,

when accepted

by customers,

are treated

as a

to

the sales

price

of the

related

transaction,

while inducement

offers,

when

by customers,

are

treated

as

a

to

sales

price

based

on

future

redemption

rates.

Redemption

rates

are

using

the

historical

experience

for

similar

inducement

offers.

Current discount

and

inducement

offers

are

presented

as a

net amount

in

‘‘Net sales.’’

Index

Disaggregation of Revenue

The following table provides revenue disaggregated by product category

(in thousands):

Ended

Conventional shell egg sales

$

413,619

$

689,022

$

919,498

$

1,656,528

Specialty shell egg sales

262,293

272,205

688,879

700,803

Egg products

21,759

32,582

63,994

88,274

Other

5,405

3,684

13,283

11,932

$

703,076

$

997,493

$

$

Contract Costs

The Company can incur costs to

obtain or fulfill a contract with a

customer. If the

amortization period of these costs is less

than

one year,

they are

expensed as

incurred. When

the amortization

period is

greater than

one year,

a contract

asset is

recognized

and

is

over

the

life

as

a

in

net

sales.

As

of

March

2,

and

June

3,

2023,

the

balance

for

contract assets was immaterial.

Contract Balances

The Company receives payment from customers based on specified terms that are

generally less than 30 days from delivery.

There are rarely contract assets or liabilities related to performance under the

contract.

Note 9 - Stock Based Compensation

Total

stock-based

expense

was

$

3.2

and

$

3.1

million

for

the

weeks

ended

March

2,

and

February 25, 2023, respectively.

Unrecognized

expense

as a

result

of non

-vested

shares

of

restricted

stock outstanding

under

the

Amended

and

Restated 2012

Omnibus Long-Term

Incentive Plan

at March 2,

2024 of

$

8.6

million will be

recorded over

a weighted average

period

of

2.2

years.

Refer

to

Part

II

Item

8,

Notes

to

and

Data,

Note 14

Stock Compensation Plans in our 2023 Annual Report for further information

on our stock compensation plans.

The Company’s restricted share activity

for the thirty-nine weeks ended March 2, 2024 follows:

Number of

Shares

Weighted

Average Grant

Date Fair Value

Outstanding, June 3, 2023

294,140

$

43.72

Granted

86,363

54.91

Vested

(99,360)

37.70

Forfeited

(1,329)

44.68

Outstanding, March 2, 2024

279,814

$

49.31

Index

Note 10 - Commitments and Contingencies

LEGAL PROCEEDINGS

State of Texas

v. Cal-Maine Foods, Inc. d/b/a Wharton;

and Wharton County Foods, LLC

On April

23, 2020,

and its subsidiary

Wharton County

Foods, LLC (“WCF”)

were named

as defendants in

State

of

Texas

v.

Foods,

Inc.

d/b/a

Wharton;

and

Wharton

County

Foods,

LLC,

Cause

No.

2020-25427,

in

the

Court of

Harris County,

Texas.

The State

of Texas

(the “State”)

asserted claims

based on

and WCF’s

alleged

violation

of

the

Texas

Deceptive

Trade

Practices—Consumer

Protection

Act,

Tex.

Bus.

&

Com.

Code

§§

17.41-17.63

(“DTPA”).

The

State

claimed

that

the

Company

and

WCF

offered

shell

eggs

at

excessive

or

exorbitant

prices

during

the

state

of

emergency

and

made

misleading

about

shell

egg

prices.

The

State

sought

temporary

and

permanent

injunctions

against

the

Company

and

WCF

to

prevent

further

alleged

violations

of

the

DTPA,

along

with

over

$

100,000

in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the State’s

original petition with

prejudice. On September

11, 2020,

the State filed a

notice of appeal,

which was assigned to

the Texas

Court of Appeals

for the

First

District.

On

August

16,

2022,

the

appeals

court

reversed

and

remanded

the

case

back

to

the

trial

court

for

further

proceedings. On October 31, 2022,

the Company and WCF appealed

the First District Court’s

decision to the Supreme Court

of

Texas.

On

September

29,

2023,

the

Supreme

Court

of

Texas

denied

the

Petition

for

Review

so

the

case

will

be

remanded to the

trial court for further

proceedings. The district

court has set

a case management conference

for April 12, 2024.

Management believes the risk of material loss related to this matter to be remote.

Bell et al. v. Cal-Maine Foods et al.

On

April

30, 2020,

was named

as one

of several

in

Bell et

al. v.

Foods et

al.,

Case No.

1:20-cv-461,

in

the

Western

of

Texas,

Austin

Division.

The

include

numerous

grocery

stores,

retailers,

producers, and farms. Plaintiffs assert that defendants

violated the DTPA

by allegedly demanding exorbitant or

excessive prices

for

eggs during

the

state of

emergency.

request

certification

of a

class of

all consumers

who purchased

eggs

in

Texas

sold,

distributed,

produced,

or

handled

by

any

of

the

during

the

state

of

emergency.

Plaintiffs seek to enjoin

the Company and other

defendants from selling eggs

at a price more than

10% greater than the price

of

eggs prior

to the

declaration

of the

state of

emergency

and damages

in the

amount

of $

10,000

per violation,

or $

250,000

for

each violation

impacting anyone

over 65

years old.

On December

1, 2020,

and

certain other

defendants filed

a

dismiss the

amended

class action

complaint. The

plaintiffs

subsequently filed

a motion

to strike,

and the

dismiss and

related proceedings

were referred

to a

magistrate judge.

On July

14, 2021,

the magistrate

judge

issued

a

report

and

recommendation

to

the

court

that

the

defendants’

motion

to

dismiss

be

granted

and

the

case

be

dismissed without prejudice for lack of subject matter jurisdiction. On

September 20, 2021, the court dismissed the case without

prejudice.

On

July

13,

2022,

the

court

denied

the

motion

to

set

aside

or

amend

the

to

amend

their

complaint.

On March 15, 2022,

plaintiffs filed a

second suit against the

Company and several

defendants in Bell et

al. v.

Cal-Maine Foods

et al.,

Case No.

1:22-cv-246, in

the Western

District of

Texas,

Austin Division

alleging the

same assertions

as laid

out in

the

first

complaint.

On

August

12,

2022,

the

Company

and

other

in

the

case

filed

a

motion

to

dismiss

the

class action

complaint. On

January 9,

court entered

an order

and final

judgement granting

dismiss.

On February

8, 2023,

the plaintiffs

appealed

the lower

court’s

judgement

to the

Court of

Appeals for

the Fifth

Circuit, Case No. 23-50112. On February

12, 2024, the court affirmed the judgment of the district court.

Kraft Foods Global, Inc. et al. v.

United Egg Producers, Inc. et al.

As previously

reported, on

September 25,

2008, the

Company

was named

as one

of several

in numerous

antitrust

cases involving

the United

States shell

egg

industry.

settled all

of these

cases, except

for

the claims

of certain

plaintiffs who sought substantial

damages allegedly arising from

the purchase of egg products (as

opposed to shell eggs). These

remaining plaintiffs

are Kraft Food

Global, Inc.,

General Mills, Inc.,

and Nestle USA,

Inc. (the

“Egg Products

Plaintiffs”) and,

until a subsequent settlement was reached as described below,

The Kellogg Company.

Index

On September

13, 2019,

the case

Egg Products

Plaintiffs was

remanded from

a multi-district

litigation proceeding

in

the

United

States

Court

for

the

Eastern

of

Pennsylvania,

In

re

Processed

Egg

Antitrust

Litigation,

MDL No. 2002, to

the United States District Court

for the Northern District

of Illinois, Kraft Foods Global,

Inc. et al. v.

United

Egg

Producers,

Inc.

et

al., Case

No.

1:11-cv-8808,

for

trial. The

Egg

alleged

that

the

Company

and

other

violated

Section

of

the

Sherman

Act,

U.S.C.

§

1,

by

agreeing

to

limit

the

of

eggs

and

thereby

illegally

to

raise

the

prices

that

plaintiffs

paid

for

processed

egg

products.

In

particular,

the

Egg

attacked

certain features of

the United Egg

Producers animal-welfare guidelines

and program used by

the Company and

many other egg

producers.

On October 24, 2019,

the Company entered into

a confidential settlement agreement

with The Kellogg Company

dismissing all

claims against the

Company for an

amount that did

not have a

material impact on

financial condition or

results

of operations.

On November

11,

2019, a

stipulation

for dismissal

was filed

court, and

on March

28, 2022,

the court

dismissed the Company with prejudice.

The trial of this case began

on October 17, 2023. On December

1, 2023, the jury returned a decision

awarding the Egg Products

$

17.8

million

in damages.

If the

jury’s

decision

is ultimately

upheld,

the defendants

would

be jointly

and

severally

liable

for

treble

damages,

or

$

53.3

subject

to

credit

for

the

Kellogg

settlement

described

above

and

certain

other

settlements with

previous

settling defendants,

plus the

Egg Product

Plaintiffs’

reasonable

attorneys’

fees. This

decision is

not

final and

remains subject

to the

defendants’ motion

for a

directed verdict

noted below

and appeals

by the

parties. During

our

second fiscal quarter

of 2024, we

recorded an accrued

expense of $

19.6

million in selling,

general and

administrative expenses

in

the

of

Income

and

as

other

noncurrent

in

the

Condensed Consolidated

Balance Sheets. The

accrual represents

our estimate of

proportional share

of the reasonably

possible ultimate damages

award, excluding the Egg

Product Plaintiffs’ attorneys’

fees that we believe

would

be

offset

by the

credits

noted above.

We

have

entered

into a

allocation

and joint

defense

agreement

with

the

other

major

producer

defendant

remaining

in

the

case,

and

are

in

discussions

with

other

their

contributions. Our accrual may change in the future

based on the outcome of those discussions. Our accrual

may also be revised

in whole or in

part in the future

to the extent we

are successful in further

proceedings in the litigation.

On November 29, 2023,

the

defendants,

the

Company,

filed

a

motion

for

as

a

matter

of

law

in

their

favor,

known

as

a

directed

verdict, notwithstanding

the jury’s

decision. The

Company intends

to continue

to vigorously

defend the

claims asserted

by the

Egg Products Plaintiffs.

State of Oklahoma Watershed Pollution

Litigation

On June

18, 2005,

the State

of Oklahoma

filed suit,

in the

District Court

for the

Northern District

of Oklahoma,

against Cal-Maine

Foods,

Inc. and

Tyson

Foods,

Inc., Cobb-Vantress,

Inc., Cargill,

Inc., George’s,

Inc., Peterson

Farms, Inc.

and

Simmons

Foods,

Inc.,

and

certain

of

their

affiliates.

The

State

of

Oklahoma

claims

that

through

the

disposal

of

chicken

litter the

defendants polluted

the Illinois

River Watershed.

This watershed

provides water

to eastern

Oklahoma. The

complaint

sought

injunctive

relief

and

damages,

but

the

claim

for

damages

was dismissed

by

the

court.

Foods,

Inc.

discontinued

in

the

watershed

in

or

around

Since

the

litigation

began,

Foods,

Inc.

purchased

%

of

the

membership

interests

of

Benton

County

Foods,

LLC,

which

is

an

ongoing

shell

egg

operation within

the Illinois

River Watershed.

Benton County

Foods, LLC

is not

a defendant

in the

litigation. We

also have

a

number of small contract producers that operate in the area.

The non-jury trial in the case began in September 2009

and concluded in February 2010. On January 18, 2023, the court entered

findings of

fact and

conclusions of

law in favor

of the

State of

Oklahoma, but

no penalties

were assessed.

The court

found the

liable

for

state

law

nuisance,

federal

common

law

nuisance,

and

state

law

trespass.

The

court

also

found

the

producers

vicariously

liable

for

the

actions

of

their

producers.

The

court

directed

the

parties

to

confer

in

attempt

to

reach agreement

on appropriate

remedies. On

June 12,

court ordered

the parties

to mediate

before the

retired Tenth

Circuit Chief Judge Deanell

Reece Tacha.

On October 26, 2023, the parties

filed separate status reports informing

the court that

the mediation

was unsuccessful.

Also on

October 26,

defendants filed

a post-trial

dismiss and

supporting

brief arguing

that the

case should

be dismissed

due to

the state record

before the

court, the resulting

mootness of

the case,

and

violation

of

due

process.

On

November

10,

2023,

the

State

of

Oklahoma

filed

its

response

in

opposition

to

the

motion

to

dismiss and on

November 17, 2023,

the defendants filed

their reply.

The court has not

ruled on the motion.

While management

believes there

is a

reasonable

possibility of

a material

loss from

the case,

at the

present time,

it is

not possible

to estimate

the

amount

of

exposure,

if

any,

to

the

Company

due

to

a

range

of

factors,

the

following,

among

others:

uncertainties

inherent

in

any

assessment

of

costs

associated

with

injunctive

relief

or

other

penalties

based

on

a

decision in a

case tried over

13 years ago based

on environmental conditions

that existed at the

time, the lack

of guidance from

the court as to what

might be considered appropriate

remedies, the ongoing litigation

with the State of Oklahoma

and motion to

dismiss before

the court, and

uncertainty regarding

what our proportionate

share of any

remedy would be,

although we believe

that our share compared to the other defendants is small.

Index

Other Matters

In addition to the above, the Company is involved in various other claims and litigation incidental

to its business. Although the

outcome of these matters cannot be determined with certainty,

management, upon the advice of counsel, is of the opinion that

the final outcome should not have a material effect on the Company’s

consolidated results of operations or financial position.

Note 11 - Subsequent Events

On March

14, 2024,

completed the

previously announced

acquisition from

Tyson

of a

closed broiler

processing plant, hatchery and feed mill in Dexter,

Missouri.

On

April

1,

2024,

one

of

the

located

in

Parmer

County,

Texas,

tested

for

HPAI,

affecting

1.6

million laying hens

and

337,000

pullets, or approximately

3.6

% of the Company’s

total flock as of

The

Company

has

and

continues

to

follow

all

guidelines

by

the

United

States

Department

of

Agriculture

(the

“USDA”)

and

other

regulatory

agencies

to

depopulate

and

sanitize

the

facilities.

As

such,

will

be

eligible

to

participate

in

the

USDA

program

and

other

programs

designed

to

compensate

for

the

loss of

birds

and

eggs.

The

plans

are

to

repopulate

the

and

resume

normal

at

the

within

6-8

months.

Due

to

volatility in

the market

prices of

eggs and

uncertain future

supply,

demand and

other market

conditions, an

estimate of

the net

income effect cannot be reasonably made.

Index

ITEM

MANAGEMENT’S

DISCUSSION

AND

ANALYSIS

OF

FINANCIAL

CONDITION

AND

RESULTS

OF