CAL-MAINE FOODS INC

Note 1 - Summary of Significant Accounting Policies

Basis of Presentation

The

unaudited

condensed

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

accepted

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 1,

2024 (the

“2024

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

fiscal year ends on

the Saturday closest to

May 31. Each of

the three-month periods

ended on August 31, 2024

and September 2, 2023 included

13 weeks

.

Use of Estimates

The preparation of the

consolidated financial statements in

conformity with GAAP requires management

to make estimates and

that affect

the amounts

reported in

the consolidated

financial statements

and accompanying

notes. Actual

results

could differ from those estimates.

Investment Securities

Available-for-Sale

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

amortized

cost

of

debt

is

adjusted

for

amortization

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.

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

Condensed

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 August

and June

1,

2024,

reserves

for

credit

losses

were

$

and

$

thousand,

The

Company

extends

credit

to

customers based on

an evaluation of each

customer’s financial condition

and credit history.

Collateral is generally

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.

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

attributable to

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

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.

Index

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.

Revenue Recognition

The

Company

recognizes

revenue

through

sale of

its products

to

through

retail, foodservice

and

other

distribution

channels.

The

majority

of

the

revenue

is

derived

from

agreements

or

contracts

with

based

upon

the

ordering

its

with

a

single

performance

obligation

of

delivering

the

product.

The

Company

the

performance

obligation

is

met

upon

and

acceptance

of

the

product

by

our

customers,

which

occurs

upon

shipment

or

to

a

based

on

terms

of

the

sale.

Costs

paid

to

third

party

brokers

to

obtain

agreements

are

expensed as the Company’s

agreements are generally less than one year.

Revenues are

recognized in

an amount

that reflects

the net

consideration we

expect to

receive in

exchange for

delivery of

the

products.

The

Company

periodically

offers

sales

incentives

or

other

programs

such

as

rebates,

discounts,

coupons,

volume-

based incentives,

guaranteed sales and

other programs.

records an estimated

allowance for costs

associated with

these programs, which

is recorded as a

reduction in revenue at

the time of sale

using historical trends

and projected redemption

rates

of

each

program.

The

Company

regularly

reviews

these

and

any

difference

between

the

costs

and

actual realization of these programs would be recognized the subsequent

period.

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.

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.

and

its

legal

counsel

assess

such

liabilities,

and

such

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,

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

liability

would

be

accrued

in

the

statements.

If

the

indicates

a

potentially

loss

contingency

is

not

probable,

but

is

possible,

or

is

probable

but

cannot

be

estimated,

then

the

nature

of

the

liability,

together

with

an

of

the

range

of

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.

Index

Note 2 - Acquisition

Effective

June 28, 2024

, the

Company

substantially

all of

the commercial

shell egg

egg

products breaking

facilities of

ISE America,

Inc. and

certain of

its affiliates

(“ISE”).

The assets

acquired included

shell

egg

and

facilities

with

a

at

the

time

of

of

4.7

million

laying

hens, including

1.0

million cage-free,

and

1.2

million pullets, feed

mills, approximately

4,000

acres of land,

inventories and an

egg products breaking facility.

The acquired assets also include an extensive customer

distribution network across the Northeast

and

Mid-Atlantic

states,

and

in

Maryland,

New

Jersey,

Delaware

and

South

Carolina.

The

Company

accounted for the acquisition as a business combination.

Pending the

finalization of

valuation, the

following table

summarizes the

consideration paid

for the

ISE assets

and the amounts of assets acquired and liabilities assumed recognized

at the acquisition date (in thousands):

Cash consideration paid

$

111,521

Recognized amounts of identifiable assets acquired and liabilities assumed

Inventories

$

20,547

Property, plant and equipment

90,572

Intangible assets

Liabilities assumed

(308)

Total identifiable

net assets

$

111,521

Inventories consisted primarily of flock, feed ingredients,

packaging, and egg inventory.

Flock inventory was valued at carrying

value

as

that

its

carrying

value

best

approximates

its

fair

value.

Feed

ingredients,

packaging

and

egg

inventory were all valued based on market prices as of June 28, 2024.

Property,

plant and

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

lists

acquired.

Customers

lists

were

valued

using

the

income

method

approach.

Note 3 - Investment

Securities

The following represents the Company’s

investment securities as of August 31, 2024 and June 1, 2024 (in thousands):

Amortized

Cost

Gains

Losses

Estimated

Fair Value

$

4,280

$

—

$

$

4,265

86,698

—

86,703

288,383

—

288,930

5,086

—

5,097

148,399

—

148,392

2,877

—

2,869

35,668

—

35,667

investment securities

$

571,391

$

$

$

571,923

Index

Amortized

Cost

Gains

Losses

Estimated

Fair Value

$

4,100

$

—

$

$

4,059

137,856

—

137,735

233,289

—

232,592

3,505

—

3,491

154,520

—

154,269

3,154

—

3,124

39,239

—

39,229

investment securities

$

575,663

$

—

$

1,164

$

574,499

Available-for-sale

Proceeds

from

sales and

maturities of

securities available-for-sale

were $

209.7

million

and $

135.8

million

during

the

thirteen

weeks

31,

and

2,

2023,

Gross

realized

gains

for

the

thirteen

weeks

ended August 31,

2024 and September

2, 2023 were

$

thousand and $

thousand, respectively.

There were

no

gross realized

losses for the thirteen weeks ended August 31, 2024. Gross realized losses for the

thirteen weeks ended September 2, 2023 were

$

thousand. There were

no

allowances for credit losses at August 31, 2024 and June 1, 2024.

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 August

31, 2024 are as follows (in thousands):

Estimated Fair Value

Within one year

$

365,628

1-5 years

206,295

Total

$

571,923

Note 4 - Fair Value

Measurements

is required

to categorize

both financial

and nonfinancial

assets and

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

table

shows

the

fair

value

of

assets and

liabilities measured at fair value on a recurring basis as of August 31, 2024 and June 1,

2024 (in thousands):

Level 1

Level 2

Level 3

Balance

Assets

$

—

$

4,265

$

—

$

4,265

—

86,703

—

86,703

—

288,930

—

288,930

—

5,097

—

5,097

—

148,392

—

148,392

—

2,869

—

2,869

—

35,667

—

35,667

Total assets measured at fair

value

$

—

$

571,923

$

—

$

571,923

Liabilities

$

—

$

—

$

6,500

$

6,500

Total liabilities measured

at fair value

$

—

$

—

$

6,500

$

6,500

Level 1

Level 2

Level 3

Balance

Assets

$

—

$

4,059

$

—

$

4,059

—

137,735

—

137,735

—

232,592

—

232,592

—

3,491

—

3,491

—

154,269

—

154,269

—

3,124

—

3,124

—

39,229

—

39,229

Total assets measured at fair

value

$

—

$

574,499

$

—

$

574,499

Liabilities

$

—

$

—

$

6,500

$

6,500

Total liabilities measured

at fair value

$

—

$

—

$

6,500

$

6,500

Investment

–

available-for-sale

classified

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.

classified as Level 3

consists

of the potential

obligation to pay

an earnout to

the sellers of Fassio

Egg

Farms,

Inc.

on

the

business

meeting

certain

return

on

profitability

milestones

over

a

three-year

period,

commencing on the date

of the acquisition in the

second quarter of fiscal 2024.

The fair value of the

contingent consideration is

using

a

discounted

cash

flow

model.

Key

and

unobservable

inputs

that

require

significant

judgement

used

in

the

include

weighted

average

cost

of

capital,

egg

prices,

projected

revenue

and

over

which

the

considered

is measured

,

and

the probability

assessments with

respect to

the likelihood

of achieving

the forecasted

projections.

Index

Note 5 - Inventories

Inventories consisted of the following as of August 31, 2024 and June 1,

2024 (in thousands):

Flocks, net of amortization

$

169,497

$

149,985

Eggs and egg products

30,800

25,217

Feed and supplies

92,885

86,580

$

293,182

$

261,782

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

August

and June

1, 2024

consisted of

10.9

11.8

million pullets

and breeders

and

46.7

39.9

million layers, respectively.

Note 6 - Equity

The following reflects equity activity for the thirteen weeks ended

August 31, 2024 and September 2, 2023 (in thousands):

Ended August 31, 2024

Cal-Maine Foods, Inc. Stockholders

Class A

Treasury

Paid In

Accum.

Other

Retained

Noncontrolling

Amount

Amount

Amount

Capital

Comp. Loss

Earnings

Interest

Total

Balance at June 1,

$

$

$

(31,597)

$

76,371

$

(1,773)

$

1,756,395

$

(3,104)

$

1,797,043

Other comprehensive

income, net of tax

—

—

—

—

1,299

—

—

1,299

Stock compensation

plan transactions

—

—

(35)

1,132

—

—

—

1,097

Dividends ($

1.019

per share)

Common

—

—

—

—

—

(45,075)

—

(45,075)

Class A common

—

—

—

—

—

(4,891)

—

(4,891)

Net income (loss)

—

—

—

—

—

149,976

(386)

149,590

Balance at August 31,

$

$

$

(31,632)

$

77,503

$

(474)

$

1,856,405

$

(3,490)

$

1,899,063

Index

Ended September 2, 2023

Cal-Maine Foods, Inc. Stockholders

Class A

Treasury

Paid In

Accum.

Other

Retained

Noncontrolling

Amount

Amount

Amount

Capital

Comp. Loss

Earnings

Interest

Total

Balance at June 3,

$

$

$

(30,008)

$

72,112

$

(2,886)

$

1,571,112

$

(1,498)

$

1,609,583

Other comprehensive

income, net of tax

—

—

—

—

—

—

Stock compensation

plan transactions

—

—

(6)

1,041

—

—

—

1,035

Dividends ($

0.006

per share)

Common

—

—

—

—

—

(265)

—

(265)

Class A common

—

—

—

—

—

(29)

—

(29)

Net income (loss)

—

—

—

—

—

(515)

Balance at September

2, 2023

$

$

$

(30,014)

$

73,153

$

(2,291)

$

1,571,744

$

(2,013)

$

1,611,330

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

outstanding

during

the

relevant

period

adjusted

for

the

dilutive effect of share-based awards.

The

table

a

reconciliation

of

the

numerators

and

denominators

used

to

determine

basic

and

diluted

net

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

Ended

Numerator

$

149,590

$

(386)

(515)

$

149,976

$

Denominator

Weighted-average

common shares outstanding, basic

48,761

48,690

Effect of dilutive restricted shares

Weighted-average

common shares outstanding, diluted

48,932

48,840

Net income per common share attributable to Cal-Maine Foods, Inc.

Basic

$

3.08

$

0.02

Diluted

$

3.06

$

0.02

Index

Note 8 - Revenue from Contracts with Customers

Net revenue is primarily generated through the sales of

shell eggs and egg products. The Company’s

shell egg product offerings

include specialty and

conventional shell eggs.

Specialty shell eggs include

cage-free, organic,

brown, free-range, pasture-raised

and nutritionally enhanced eggs. Conventional shell egg sales represent all other

shell egg sales not sold as specialty shell eggs.

egg products

offerings

include liquid

and frozen

egg products

and hard-cooked

eggs.

Liquid and

frozen egg

are

sold

to

the

institutional,

foodservice

and

food

manufacturing

sectors.

Hard-cooked

eggs

are

sold

primarily within the foodservice and retail channels.

The following table provides revenue disaggregated by product category

(in thousands):

Ended

Conventional shell egg sales

$

484,736

$

225,280

Specialty shell egg sales

256,777

208,681

Egg products

35,175

22,223

Other

9,183

3,160

$

785,871

$

459,344

Note 9 - Stock Based Compensation

Total

stock-based compensation

expense was

$

1.1

$

1.0

million for

the thirteen

weeks ended

August 31,

2024 and

September 2, 2023, respectively.

Unrecognized

compensation

expense

as a

result

of non

-vested

shares

of

restricted

stock outstanding

under

the

Amended

and

Restated 2012 Omnibus Long-Term

Incentive Plan at August 31, 2024 of $

6.3

million will be recorded over a weighted average

period

of

1.9

years.

Refer

to

Part

II

Item

8,

Notes

to

Statements

and

Supplementary

Data,

Note 14

Stock Compensation Plans in our 2024 Annual Report for further information

on our stock compensation plans.

The Company’s restricted share activity

for the thirteen weeks ended August 31, 2024 follows:

Number of

Shares

Weighted

Average Grant

Date Fair Value

Outstanding, June 1, 2024

277,954

$

49.38

Vested

(2,057)

44.72

Forfeited

(1,682)

54.64

Outstanding, August 31, 2024

274,215

$

49.38

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

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

COVID-19

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

Index

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 and

remanded to

the

trial

court

for

further

proceedings.

The district

court

entered a

pre-trial

order

scheduling

pre-trial

proceedings

and

tentatively

setting a trial date for August 11, 2025. Management

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

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.

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 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

Condensed Consolidated Statements

of Income

and classified as

other noncurrent liabilities

in the Company’s

Condensed Consolidated

Balance Sheets. The

accrual represents

our

of

the

proportional

share

of

the

ultimate

damages

award,

excluding

the

Egg

Product Plaintiffs’

attorneys’ fees

that we

believe would

be approximately

offset by

the credits

noted above.

We

have entered

into a judgment

allocation and joint

defense agreement

with the other

major producer

defendant remaining

in the case,

and are

in discussions

with other

defendants regarding

their contributions.

Our accrual

may change

in the future

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, including

the Company,

filed a motion for

judgment as a

matter of

law in

their favor,

known as

a directed

verdict, notwithstanding

the jury’s

decision. The

court denied

this motion

on

30, 2024.

is evaluating

the court’s

30, 2024

order and

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

United States

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

monetary

damages,

but

the

claim

for

monetary

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

contract

producers.

The

court

directed

the

parties

to

confer

in

attempt

to

reach

agreement

on

appropriate

remedies.

On

June

12,

2023,

the

court

ordered

the

parties

to

mediate

before

retired

Tenth

Index

Circuit

Chief

Judge

Deanell

Reece

Tacha,

but

the

mediation

was

unsuccessful.

On

June

26,

2024,

the

district

court

denied

defendants’

motion

to

dismiss

the

case.

On

13,

2024,

a

status

hearing

was

held

and

the

court

scheduled

an

evidentiary

hearing

for December

3, 2024,

to determine

whether any

legal remedy

is available

the now

14 year

old

record

and

changed

circumstances

of

the

Illinois

River

watershed.

On

20,

2024,

the

filed

motions

to

certify an interlocutory

appeal and stay

further proceedings

pending appeal to

the United States

Court of Appeals

for the Tenth

Circuit.

The

court

has

not ruled

on these

motions.

While

there

is a

reasonable

possibility

of a

loss from

the case,

at the

present time,

it is

not possible

to estimate

the amount

of monetary

exposure, if

any,

to the

Company

due

to

a

range

of

factors,

including

the

following,

among

others:

uncertainties

inherent

in

any

of

potential

costs

associated with injunctive

relief or other penalties

based on a decision

in a case tried over

14 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 uncertainty regarding

what our proportionate share of any

remedy would be,

although we believe that our share compared to the other defendants is small.

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

Effective

on

9,

2024,

the

Company

completed

a

strategic

with

Crepini

LLC,

establishing

a

new

egg

products and

prepared foods

venture. Crepini

LLC, founded

in 2007,

grew its

brand throughout

the United

States and

Mexico

featuring

egg

wraps,

protein

pancakes,

crepes,

and

wrap-ups,

which

are

sold

online

and

in

over

3,500

retail

stores.

The

new

entity,

located in Hopewell Junction,

New York,

operates as Crepini

Foods LLC (“Crepini”).

The Company capitalized Crepini

with

$

6.75

million

in

cash

to

purchase

equipment

and

other

assets

and

fund

working

capital

in

exchange for a

% interest in the new venture.

Crepini LLC contributed its existing

assets and business in exchange

for a

%

interest in the new venture.

Index

ITEM

MANAGEMENT’S

DISCUSSION

AND

ANALYSIS

OF

FINANCIAL

CONDITION

AND

RESULTS

OF