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 accordance

with generally

accepted accounting

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 and

year-to-date periods

ended on November 30, 2024 and December 2, 2023 included

and

26 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 the

amounts reported

in the

consolidated financial

statements and

accompanying notes.

Actual results

could differ from those estimates.

Investment Securities Available-for-Sale

The Company 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

securities 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

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

2024 and

June 1,

2024, reserves

for credit

losses were

$

thousand and

$

thousand, respectively.

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.

The Company 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

computed in

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, the

Company 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

recognizes revenue

through sale

of its

products to

customers through

retail, foodservice

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

believes

the

performance

obligation

is

met

upon

and

acceptance

of

the

product

by

our

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.

The Company 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

estimates

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.

management

and

its

legal

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 the

Company 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

liability

would

be

accrued

in

the

statements.

If

the

assessment

indicates

a

potentially

material

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

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.

Index

Note 2 - Acquisitions

Acquisition of ISE America, Inc. Assets

Effective

June 28, 2024

, the

Company acquired

substantially all

of the

commercial shell

egg production,

egg

products breaking facilities

of ISE America,

Inc. and certain

of its affiliates

(“ISE”). The assets

acquired included commercial

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,

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

management

believes

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.

Other Acquisitions

Effective

30,

2024,

the

Company

the

remaining

9.23

%

in

our

majority-owned

subsidiary,

MeadowCreek Foods LLC.

Note 3 - Investment

Securities

The following represents the Company’s investment securities as of November 30, 2024 and June 1, 2024 (in thousands):

Amortized

Cost

Gains

Losses

Estimated

Fair Value

$

13,727

$

—

$

$

13,705

71,143

—

71,148

301,630

—

301,820

5,606

—

5,607

151,606

—

151,402

—

112,569

—

112,558

Total current investment securities

$

656,924

$

$

$

656,887

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

Total current investment securities

$

575,663

$

—

$

1,164

$

574,499

Available-for-sale

Proceeds from

available-for-sale

were $

426.5

$

196.1

million during

weeks ended November

and December

2, 2023,

Gross realized

gains for

weeks ended November 30, 2024 and December 2, 2023 were $

thousand and $

thousand, respectively. There were

no

gross

realized

losses

for

the

weeks

ended

30,

Gross

realized

losses

for

the

weeks

ended

December 2, 2023 were $

thousand. There was

no

allowance for credit losses at November 30, 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 November 30, 2024 are as follows (in thousands):

Estimated Fair Value

Within one year

$

401,873

1-5 years

255,014

Total

$

656,887

Note 4 - Fair Value Measurements

is required

to categorize

both financial

and nonfinancial

assets and

liabilities based

on the

following fair

value

hierarchy. The

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

the

hierarchy described

above, the

following

table shows

the

of

financial assets

and

liabilities measured at fair value on a recurring basis as of November 30, 2024 and June 1, 2024 (in thousands):

Level 1

Level 2

Level 3

Balance

Assets

$

—

$

13,705

$

—

$

13,705

—

71,148

—

71,148

—

301,820

—

301,820

—

5,607

—

5,607

—

151,402

—

151,402

—

—

—

112,558

—

112,558

Total assets measured at fair value

$

—

$

656,887

$

—

$

656,887

Liabilities

$

—

$

—

$

13,000

$

13,000

Total liabilities measured at fair value

$

—

$

—

$

13,000

$

13,000

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 securities

–

available-for-sale

classified as

Level 2

consist of

securities with

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

Fassio Egg

Farms, Inc.

(“Fassio”)

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

assumptions

and

unobservable

inputs

that

require

significant

judgement

used

in

the

include

weighted

average

cost

of

capital,

egg

prices,

projected

revenue

and

over

which

the

contingent considered

is measured,

and the

probability assessments

with respect

to the

likelihood of

achieving the

forecasted

projections.

The following table shows the beginning and ending balances in fair value of the contingent consideration:

Fassio Contingent Consideration

Balance, June 1, 2024

$

6,500

Fair value adjustments

6,500

Balance, November 30, 2024

$

13,000

Index

Adjustments to the fair value of contingent consideration are recorded within selling, general and administrative expenses in the

condensed consolidated statements of income.

Note 5 - Inventories

Inventories consisted of the following as of November 30, 2024 and June 1, 2024 (in thousands):

Flocks, net of amortization

$

166,634

$

149,985

Eggs and egg products

34,182

25,217

Feed and supplies

98,549

86,580

$

299,365

$

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

flocks).

Our

total

flock

at

2024 and

June 1,

2024 consisted

of approximately

12.0

11.8

million pullets

and breeders

and

48.1

39.9

million layers, respectively.

Note 6 - Equity

The following reflects equity activity for the thirteen weeks ended November 30, 2024 and December 2, 2023 (in thousands):

Thirteen Weeks Ended November 30, 2024

Class A

Paid In

Accum.

Other

Amount

Amount

Amount

Capital

Total

Balance at August 31,

$

$

$

(31,632)

$

77,503

$

(474)

$

1,856,405

$

(3,490)

$

1,899,063

—

—

—

—

(434)

—

—

(434)

—

—

(29)

1,097

—

—

—

1,068

Contributions to

Crepini Foods LLC

—

—

—

—

—

—

6,485

6,485

Aquisition of

noncontrolling

interest in

MeadowCreek Foods

LLC

—

—

—

—

—

(3,826)

3,826

—

1.489

Common

—

—

—

—

—

(65,911)

—

(65,911)

—

—

—

—

—

(7,147)

—

(7,147)

—

—

—

—

—

219,064

(705)

218,359

Balance at November

$

$

$

$

78,600

$

(908)

$

$

6,116

$

Index

Thirteen Weeks Ended December 2, 2023

Class A

Paid In

Accum.

Other

Amount

Amount

Amount

Capital

Total

Balance at September

2, 2023

$

$

$

$

73,153

$

(2,291)

$

1,571,744

$

(2,013)

$

1,611,330

—

—

—

—

—

—

—

—

—

1,061

—

—

—

1,061

0.116

Common

—

—

—

—

—

(5,125)

—

(5,125)

—

—

—

—

—

(557)

—

(557)

—

—

—

—

—

17,009

(431)

16,578

Balance at December

2, 2023

$

$

$

$

74,214

$

(1,614)

$

1,583,071

$

(2,444)

$

1,623,964

Ended November 30, 2024

Class A

Paid In

Accum.

Other

Amount

Amount

Amount

Capital

Total

Balance at June 1,

$

$

$

(31,597)

$

76,371

$

(1,773)

$

1,756,395

$

(3,104)

$

1,797,043

—

—

—

—

—

—

—

—

(64)

2,229

—

—

—

2,165

Contributions to

Crepini Foods LLC

—

—

—

—

—

—

6,485

6,485

Aquisition of

noncontrolling

interest in

MeadowCreek Foods

LLC

—

—

—

—

—

(3,826)

3,826

—

2.509

Common

—

—

—

—

—

(110,986)

—

(110,986)

—

—

—

—

—

(12,038)

—

(12,038)

—

—

—

—

—

369,040

(1,091)

367,949

Balance at November

$

$

$

$

78,600

$

(908)

$

$

6,116

$

Index

Ended December 2, 2023

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

loss, net of tax

—

—

—

—

1,272

—

—

1,272

—

—

(6)

2,102

—

—

—

2,096

0.122

Common

—

—

—

—

—

(5,390)

—

(5,390)

—

—

—

—

—

(586)

—

(586)

—

—

—

—

—

17,935

(946)

16,989

Balance at December

2, 2023

$

$

$

$

74,214

$

(1,614)

$

1,583,071

$

(2,444)

$

1,623,964

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

following

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

$

218,359

$

16,578

$

367,949

$

16,989

Less: Loss attributable to

noncontrolling interest

(705)

(431)

(1,091)

(946)

Net income attributable to Cal-Maine

$

219,064

$

17,009

$

369,040

$

17,935

Denominator

Weighted-average common shares

outstanding, basic

48,765

48,690

48,762

48,691

Effect of dilutive restricted shares

Weighted-average common shares

outstanding, diluted

48,970

48,866

48,953

48,854

Net income per common share

attributable to Cal-Maine Foods, Inc.

Basic

$

4.49

$

0.35

$

7.57

$

0.37

Diluted

$

4.47

$

0.35

$

7.54

$

0.37

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, as

well as

ready-to-eat products

such as

hard-

cooked

eggs,

egg

wraps,

protein

pancakes,

crepes

and

wrap-ups.

Liquid

and

frozen

egg

are

sold

to

the

institutional,

foodservice

and

food

manufacturing

sectors.

Ready-to-eat

are

sold

within

the

retail

and

foodservice channels.

The following table provides revenue disaggregated by product category (in thousands):

Ended

Conventional shell egg sales

$

616,891

$

280,599

$

1,101,627

$

505,879

Specialty shell egg sales

286,970

217,905

543,747

426,586

40,651

20,012

75,826

42,235

Other

10,159

4,718

19,342

7,878

$

954,671

$

523,234

$

$

982,578

Note 9 - Stock Based Compensation

Total stock-based compensation expense was $

2.2

million and $

2.1

million for the twenty-six weeks ended November 30, 2024

and December 2, 2023, respectively.

Unrecognized compensation

expense as

a result

of non-vested

shares of

restricted stock

outstanding under

the Amended

and

Restated

Omnibus

Long-Term

Incentive

Plan

at

30,

of

$

5.1

million

will

be

over

a

weighted

average period of

1.7

years. Refer to Part II

Item 8, Notes to Consolidated

Financial 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 twenty-six weeks ended November 30, 2024 follows:

Number of

Shares

Weighted

Average Grant

Date Fair Value

Outstanding, June 1, 2024

277,954

$

49.38

Vested

(3,016)

45.07

Forfeited

(2,892)

52.88

Outstanding, November 30, 2024

272,046

$

49.39

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, the Company

and its subsidiary

Wharton County Foods,

LLC (“WCF”) were

named as defendants

in State

of

Texas

v.

Cal-Maine 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,

On

2024,

the

State

filed

an

amended petition,

to

address

a

procedural

deficiency

that

required

the

State

to

plead

it

was

seeking

monetary

relief

over

$

1.0

million

restitution, civil

penalties, attorney’s

fees and

costs. 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 defendants

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

Plaintiffs was

remanded from

a multi-district

litigation proceeding

in

the

United

States

Court

for

the

Eastern

of

Pennsylvania,

In

re

Processed

Egg

Products

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

Plaintiffs

alleged that

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

Plaintiffs

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 with

the 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

Plaintiffs $

17.8

million in damages. On

November 6, 2024, the

court entered a final

judgement against the Company and

other

defendants,

jointly

and

severally,

totaling

$

43.6

million

after

trebling.

On

December

4,

2024,

the

Company

filed

a

renewed

motion for judgment as a matter of law or for a new trial, and a motion to alter or amend the judgment.

On December 13, 2024,

the

court

granted

20,

motion

to

stay

enforcement

of

the

judgment

and

entered

an

agreed

order

requiring the

defendants to

post security

during post-judgment

proceedings and

appeal, and

stayed proceedings

to enforce

the

judgment until the disposition of the post-judgment motions and ultimate appeals. On

December 17, 2024, the Company posted

a bond

in the

approximate amount

of $

23.9

million, representing

a portion

of the

total bond

required to

preserve the

right to

appeal the trial court’s

decision. Another defendant posted a

bond for the remaining amount,

The Company intends to continue

to vigorously defend the claims asserted by the Egg Products Plaintiffs.

If the

jury’s

decision is

ultimately upheld,

would be

jointly and

severally liable

with other

defendants for

treble

damages,

or

$

43.6

subject

to

credit

for

certain

settlements

with

previous

settling

defendants,

plus

the

Egg

Product

Plaintiffs’

reasonable

attorneys’

fees.

During

our

second

fiscal

quarter

of

2024,

we

an

accrued

expense

of

$

19.6

million in

selling, general

and administrative

expenses in

Condensed Consolidated

Statements of

Income and

classified

as

other

noncurrent

liabilities

in

the

Balance

Sheets.

Although

less

than

the

bond

posted

by

the

Company,

the

accrual

represents

our

of

the

proportional

share

of

the

possible 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

their

contributions.

Our

accrual may change

in the future

based on the

outcome of those

discussions and may

also be revised

in whole or

in part in

the

future to the extent we are successful in further proceedings in the litigation.

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

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. Cal-Maine

Foods,

Inc.

discontinued

in

the

watershed

in

or

around

Since

the

litigation

began,

Foods,

Inc.

Index

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

remedies.

On

June

12,

2023,

the

court

ordered

the

parties

to

mediate

before

retired

Tenth

Circuit

Chief

Judge

Deanell

Reece

Tacha,

but

the

mediation

was

unsuccessful.

On

June

26,

2024,

the

district

court

denied

motion

to

dismiss

the

case.

On

September

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

5,

the

court

denied

September 20,

2024 motion

to certify

an interlocutory

appeal. The

evidentiary hearing

proceeded as

scheduled and

concluded

on

December

17,

The

court

directed

the

parties

to

present

their

proposed

findings

of

fact

and

conclusions

of

law

and

supporting briefs by

January 30, 2025.

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 monetary exposure,

if any,

to the Company due

to a range

of

factors,

including the

following,

among others:

uncertainties inherent

in

any

assessment 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

remedies,

the

ongoing

litigation

with

the

State

of

Oklahoma,

and

uncertainty

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.

Index

ITEM

MANAGEMENT’S

DISCUSSION

AND

ANALYSIS

OF

FINANCIAL

CONDITION

AND

RESULTS

OF