CAL-MAINE FOODS INC

Note 1 - Summary of Significant Accounting Policies

Basis of Presentation

The unaudited

condensed consolidated

financial statements

of Cal-Maine

and its subsidiaries

(“Cal-Maine Foods,”

the

“Company,”

“we,”

“us,”

“our”)

have

been

in

with

the

instructions

to

Form

10-Q

and

Article

of

Regulation S-X and in accordance

with generally accepted accounting principles

in the United States of America

(“GAAP”) for

interim financial

reporting and

should be

read in

conjunction with

our Annual

Report on

Form 10-K

for the

fiscal year

ended

May

31,

(the

“2025

Annual

Report”).

These

reflect

all

that

are,

in

the

opinion

of

necessary

to

a

fair

statement

of

the

results

for

the

interim

periods

presented

and,

in

the

opinion

of

consist

of

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 30, 2025

and August 31, 2024 included

weeks.

Use of Estimates

The

preparation

of the

condensed

in

conformity

with GAAP

requires

management

to

make

and

assumptions

that

affect

the

amounts

in

the

condensed

and

accompanying notes. Actual results could differ from those estimates.

Dividends Payable

Dividends are accrued

at the end of each

quarter according to the Company’s

dividend policy adopted by

its Board of Directors

(“Board”).

pays a

to holders

of its

(and, prior

to its

conversion

to Common

Stock on

April

14,

Class

A

Common

Stock)

on

a

basis

for

each

quarter

for

which

the

Company

reports

net

income

to

Foods,

Inc.,

computed

in

with

GAAP

in

an

amount

equal

to

one-third

(1/3)

of

such

net

income.

Dividends are

paid

to stockholders

of record

as of

the 60th

day

the last

day

of

such quarter,

except for

the fourth

fiscal quarter.

For the

fourth quarter,

pays dividends

to stockholders

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

to

Foods,

Inc.,

the

Company

will

not

pay

a

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.

Revenue Recognition

The Company recognizes revenue through the sale of its products

to customers 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

believes

the

performance

obligation

is

met

upon

delivery

and

acceptance

of

the

product

by

its

customers,

which

occurs

upon

shipment

or delivery

to a

customer based

on

the 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

The

Company

regularly

reviews

these

and

any

difference

between

the

estimated

costs

and

actual realization of these programs would be recognized

in the subsequent period.

Index

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.

The

excess

of

the

price

over

fair

values

of

identifiable

assets

and

is

as

goodwill.

We

use

various

models

and

methods

to

determine

the

fair

values

of

identifiable

assets

and

liabilities,

such

as

top-down

and

bottom-up

for

inventory,

cost

method

and

market

for

property,

and

relief-from-royalty

and

multi-period

excess earnings to value

intangibles. 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.

New Accounting Pronouncements and Policies

In December

2023, the

Financial Accounting

Standards Board

(“FASB”)

issued Accounting Standards

Update (“ASU”)

2023-

09,

Income Taxes

(Topic

740. – Improvements to

Income Tax

Disclosures

. This ASU requires that an

entity, on an

annual basis,

disclose

income

tax

information,

related

to

the

rate

reconciliation

and

income

taxes

paid.

The

ASU

is

intended

to enhance

the transparency

and decision

usefulness of

income tax

disclosures. ASU

2023-09

is effective

for annual

periods

beginning

after

15,

The

Company

is

currently

evaluating

the

impact

of

ASU

2023-09

on

its

consolidated financial statement disclosures.

In

2024,

the

FASB

issued

ASU

2024-03,

Income

Statement

—

Reporting

Comprehensive

Income

—

Expense

Disaggregation Disclosures

(Subtopic 220-40)

. The objective of ASU

2024-03 is to improve disclosures

about a public entity’s

expenses, primarily

through additional

disaggregation of

income statement expenses.

Additionally,

in January

2025, the FASB

further

clarified

the

effective

date

of

ASU

2024-03

with

the issuance

of ASU

2025-01.

ASU

2024-03 is

effective

for

annual

periods beginning

after December

15, 2026, and

interim periods

within annual

reporting periods

beginning after

December 15,

2027. Early

adoption is permitted

and may

be applied

either on a

prospective or

retrospective basis. The

Company is

currently

evaluating the impact of ASU 2024-03 on its consolidated financial statement disclosures.

There are no

other new accounting

pronouncements

issued or effective

during the fiscal year

that had or

are expected to have

a

material impact on our consolidated financial statements.

Index

Note 2 - Acquisition

Acquisition of Echo Lake Foods, LLC

Effective

June 2, 2025

, the Company

acquired Echo

Lake Foods, LLC

and certain

related companies

(collectively “Echo

Lake

Foods”). Echo

in Burlington,

Wisconsin and

produces, packages,

markets and

distributes prepared

foods,

including waffles, pancakes, scrambled eggs, frozen

cooked omelets, egg patties, toast and diced eggs. The Company

accounted

for the acquisition as a business combination.

Pending

the

finalization

of

the

valuation,

the

table

summarizes

the

consideration

paid

for

Echo

Lake

Foods and the amounts of assets acquired and liabilities assumed recognized

at the acquisition date (in thousands):

Cash consideration paid

$

275,406

Recognized amounts of identifiable assets acquired and liabilities assumed

Cash

$

Investment securities available-for-sale

14,147

Accounts receivable

31,923

Inventories

21,601

Prepaid expenses and other current assets

3,131

Property, plant &

equipment

151,697

Intangible assets

36,800

259,414

Accounts payable and other current liabilities

(13,047)

Total identifiable

net assets

246,367

29,039

$

275,406

Cash and

accounts receivable

along with

liabilities assumed

were valued

at their

carrying value

which approximates

fair value due to the short maturity of these instruments.

Inventories consisted

primarily of

raw materials,

supplies and

finished goods.

Raw materials

and supplies

were valued

at their

carrying value as

management believes that

their carrying value

best approximates their

fair value. Finished

goods were valued

using both the bottom-up and top-down approach. The

bottom-up approach measures the value of inventory as the value created

by the

target company

(i.e., the

costs incurred,

profit realized,

and tangible

and intangible

assets utilized)

pre-acquisition date.

The top-down

approach measures

the value

of inventory

as the

incremental

inventory value

created by

the market

participant

buyer as part

of its selling

effort to an

end customer (i.e.,

the costs that

will be incurred,

the profit that

will be realized,

and the

tangible and intangible assets that will be utilized) post-acquisition date.

Property,

plant and

equipment were

valued

utilizing

the cost

and

market approach.

Machinery

and equipment

were

valued

utilizing

the

cost

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. Land and

buildings were valued

utilizing the market approach by using a real estate valuation.

Intangible assets

consisted primarily

of customer

relationships and

a trade name.

Customer relationships

were valued using

the

multi-period excess earnings method and the trade name was valued

using the relief-from-royalty method.

represents

the

excess

of

the

price

of

the

over

the

date

fair

value

of

the

net

assets acquired.

in

connection

with

the Echo

Lake

Foods

acquisition is

to projected

synergies

from integrating

the operations

of Echo

operations of

the Company.

recognized

goodwill of $

29.0

million as a result of the acquisition, all of which is deductible for tax purposes.

Index

transaction costs

of

$

thousand and

$

6.6

million

in the

of

and fiscal

year

2025, respectively,

as a result of the Echo Lake Foods acquisition.

Note 3 - Investment

Securities Available-for-Sale

represents the

available-for-sale as

of August

and May

31, 2025

(in

thousands):

Amortized

Cost

Gains

Losses

Estimated

Fair Value

$

22,072

$

$

—

$

22,140

81,527

—

81,504

536,273

2,120

—

538,393

4,960

—

4,968

245,019

—

245,084

109,288

—

109,386

$

999,139

$

2,359

$

$

Amortized

Cost

Gains

Losses

Estimated

Fair Value

$

21,695

$

$

—

$

21,698

90,880

—

90,830

431,378

—

431,508

5,200

—

5,194

240,655

—

240,395

103,119

—

103,083

$

892,927

$

$

$

892,708

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 investment securities

at August 30, 2025 are as follows (in thousands):

Estimated Fair Value

Within one year

$

472,795

1-5 years

528,680

Total

$

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

Index

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.

Assets and Liabilities Measured at Fair

Value

on a Recurring Basis

In accordance with

the fair value hierarchy

described above, the

following table shows the

fair value of our

financial assets and

that

are

to

be

measured

at

fair

value

on

a

recurring

basis

as

of

August

30,

and

May

31,

(in

thousands):

Level 1

Level 2

Level 3

Balance

Assets

$

—

$

22,140

$

—

$

22,140

—

81,504

—

81,504

—

538,393

—

538,393

—

4,968

—

4,968

—

245,084

—

245,084

—

109,386

—

109,386

Total assets measured at fair

value

$

—

$

$

—

$

Liabilities

$

—

$

—

$

21,500

$

21,500

Total liabilities measured

at fair value

$

—

$

—

$

21,500

$

21,500

Level 1

Level 2

Level 3

Balance

Assets

$

—

$

21,698

$

—

$

21,698

—

90,830

—

90,830

—

431,508

—

431,508

—

5,194

—

5,194

—

240,395

—

240,395

—

103,083

—

103,083

Total assets measured at fair

value

$

—

$

892,708

$

—

$

892,708

Liabilities

$

—

$

—

$

21,500

$

21,500

Total liabilities measured

at fair value

$

—

$

—

$

21,500

$

21,500

Investment securities – available-for-sale are all classified as Level 2 and consist of

securities with maturities of three months or

longer

when

purchased.

We

classified

these

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”) contingent

on the

business meeting

certain return

on profitability

milestones over

a

three-year

period that

commenced on the

date of the acquisition

in the second

2024. The fair

value of the

contingent consideration is

estimated using a discounted

cash flow model. Key assumptions

and unobservable inputs that require

significant judgment used

in the

estimate include

weighted average

cost of

capital, egg

prices, projected

revenue and

expenses over

the period

for which

the

contingent

consideration

is

measured,

and

the

probability

assessments

with

respect

to

the

likelihood

of

achieving

the

forecasted

projections. There

were

no

adjustments to

the fair

value of

contingent consideration

recorded in

weeks

ended August 30, 2025.

Index

Note 5 - Inventories

Inventories consisted of the following as of August 30, 2025 and May 31,

2025 (in thousands):

Flocks, net of amortization

$

168,968

$

166,507

Feed and supplies

107,165

99,188

Raw materials and finished goods inventory

52,296

29,975

$

328,429

$

295,670

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

30, 2025 and May

31, 2025 consisted of

11.1

11.5

million pullets and breeders

and

48.5

48.3

million layers, respectively.

Note 6 - Equity

The following reflects equity activity for the thirteen weeks ended

August 30, 2025 and August 31, 2024 (in thousands):

Ended August 30, 2025

Cal-Maine Foods, Inc. Stockholders

Treasury

Paid In

Accum. Other

Retained

Noncontrolling

Amount

Amount

Capital

Comp. Gain (Loss)

Earnings

Interest

Total

Balance at May 31, 2025

$

$

(85,893)

$

80,845

$

(1,007)

$

2,565,928

$

5,391

$

2,566,015

Other comprehensive

income, net of tax

—

—

—

1,961

—

—

1,961

Stock compensation plan

transactions

—

1,289

—

—

—

1,291

Dividends ($

1.371

per share)

—

—

—

—

(66,457)

—

(66,457)

Net income (loss)

—

—

—

—

199,340

(233)

199,107

Balance at August 30, 2025

$

$

(85,891)

$

82,134

$

$

2,698,811

$

5,158

$

2,701,917

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

Note 7 - Net Income per Common Share

Basic net

income per

share attributable

to Cal-Maine

on the

weighted average

shares of

(and when

they were

outstanding shares

of Class

A Common

Stock) outstanding.

All shares

of Class

A Common

Stock were

Index

converted into

on April

14, 2025.

Diluted net

income per

share attributable

to Cal-Maine

on weighted-average

shares of

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 attributable to Cal-Maine Foods, Inc.

(amounts in thousands, except per share data):

Ended

Numerator

$

199,107

$

149,590

(233)

(386)

$

199,340

$

149,976

Denominator

Weighted-average

common shares outstanding, basic

48,281

48,761

Effect of dilutive restricted shares

Weighted-average

common shares outstanding, diluted

48,424

48,932

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

Basic

$

4.13

$

3.08

Diluted

$

4.12

$

3.06

Note 8 - Stock Based Compensation

Total

stock-based compensation

expense was

$

1.3

$

1.1

weeks ended

August 30,

2025 and

August 31, 2024, respectively.

Unrecognized

compensation expense

as a

result of

non-vested shares

of equity-based

awards outstanding

under the

Amended

and

Restated 2012

Omnibus Long-Term

Incentive

Plan at

August

30,

of $

8.0

million will

be recorded

over a

weighted

average period of

2.0

years. Refer to Part

II Item 8,

Notes to Consolidated

Financial Statements and

Supplementary Data, Note

13 – Stock-Based Compensation in our 2025 Annual Report for further

information on our stock compensation plans.

The Company’s equity-based award

activity for the thirteen weeks ended August 30, 2025 was as follows:

Number of

Shares

Weighted

Average Grant

Date Fair Value

Outstanding, May 31, 2025

212,717

$

66.93

Granted

13,518

101.14

Vested

(529)

54.10

Forfeited

(793)

73.93

Outstanding, August 30, 2025

224,913

$

68.99

Index

Note 9 – Segment Reporting

The Company has

one

operating and

one

reportable segment, which is

the production, packaging, marketing

and distribution of

prepared foods and egg products. The Company is managed on a consolidated basis.

operating segment

is determined

on the

basis of

our organizational

structure and

information that

is regularly

reviewed by

our Chief

Operating Decision Maker

(“CODM”). The

CODM is Sherman

Miller, President

and Chief

Executive Officer.

The CODM reviews net income,

which is reported on the

Condensed Consolidated Statements of

Income, to

assess the

performance of,

and make

decisions on

how to

allocate resources

to, the

segment. The

CODM utilizes

expense information

regularly provided

in the CODM

package in

order to

assist with assessing

performance and

deciding how

to

allocate

resources,

which

align

with

the

expense

categories

as

on

the

face

of

the

Consolidated Statements

of Income.

The measure

of segment

assets is

reported on

the Condensed

Consolidated Balance

Sheet

as Total assets.

Revenue

derives

from

the

sales

of

shell

eggs,

foods,

and

egg

throughout

the

Unites

States.

The

shell

egg

product

include

and

shell

eggs.

shell

eggs

include

cage-free,

organic,

brown,

pasture-raised

and

eggs.

shell

eggs

sales

all

other

shell egg sales not sold as specialty shell eggs. The Company’s

prepared foods include offerings such as pre-cooked

egg patties,

folded

and

scrambled

egg

formats,

eggs,

pancakes,

waffles,

and

wraps.

Egg

include

liquid and frozen egg products.

Other sales represent feed sales, miscellaneous byproducts and resale products.

The following table provides revenue disaggregated by product category

(in thousands):

Ended

Conventional shell egg sales

$

505,941

$

484,736

Specialty shell egg sales

283,456

256,777

83,936

8,938

37,107

26,237

Other

12,162

9,183

$

922,602

$

785,871

The following table provides revenue disaggregated by sales channel

(in thousands):

Ended

Retail

$

739,787

$

669,709

Foodservice

152,085

109,845

Other

30,730

6,317

$

922,602

$

785,871

Retail customers include primarily national

and regional grocery store chains,

club stores, and companies servicing independent

supermarkets

in

the

U.S.

Foodservice

include

companies

that

sell

food

and

related

items

to

restaurants, convenience stores, healthcare and education facilities and hotels.

Note 10 - Commitments and Contingencies

LEGAL PROCEEDINGS

Civil Investigative Demand

In

March

2025,

the

Company

received

a

Civil

Investigative

Demand

(“CID”)

from

the

Department

of

Justice

(“DOJ”)

in

connection with

an antitrust investigation

to determine whether

there is, has

been or may

be a violation

of the antitrust

laws by

anticompetitive

conduct

by

and

among

egg

producers.

In August

2025,

the

Company

received

a

subpoena

from

the

State

of

New York

requesting information

and documents

related to its

investigation of

anticompetitive conduct

and high

egg prices

in

the

egg

The

Company

is

complying

with

the

CID

and

the

subpoena

and

cooperating

with

the

investigations.

Index

Management

cannot

predict

the

eventual

scope,

duration

or

outcome

of

these

investigations

and

is

unable

to

estimate

the

amount or range of potential losses, if any,

at this time.

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

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

proceedings. On October 31, 2022,

the Company and WCF appealed

the First District Court’s

decision to the Supreme Court

of

Texas.

29, 2023,

the Supreme

Court of

Texas

denied the

Petition for

Review and

remanded to

the

trial

court

for

further

proceedings.

On

30,

2024,

the

State

filed

an

amended

petition,

to

address

a

procedural

deficiency

that

the

State

to

plead

it

was

seeking

relief

over

$

1.0

million

restitution,

civil

penalties,

attorney’s

fees

and

costs.

Pre-trial

proceedings

are

progressing

in

with

the

court’s

schedule. 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.

25, 2008,

was named

as one

of several

defendants in

numerous antitrust

cases involving

the U.S.

shell

egg

The

Company

settled

all of

these

cases,

except

for

the

claims

of

certain

who

sought

substantial

damages

allegedly

arising from

the purchase

of egg

products (as

opposed

to shell

eggs). These

remaining

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.

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

Plaintiffs

alleged

that

the

Company

and

other

defendants

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

paid

for

processed

egg

products.

In

particular,

the

Egg

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

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

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

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

defendants’

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

a portion

of the

total bond

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

expenses in

Consolidated Statements

of Income

and

classified

as

other

noncurrent

in

the

Balance

Sheets.

Although

less

than

the

bond

posted

by

the

the

accrual

represents

our

estimate

of

the

proportional

share

of

the

reasonably

Index

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

defendants remaining in the

case. Our accrual may change

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

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

operations

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

defendants jointly

and severally

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. 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

defendants’ motion

to dismiss

the case.

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 based

on the now

14-year-old record

and changed

circumstances of the

Illinois River watershed.

On June 17,

2025, the court

entered

an opinion

and order

that found

that the

State satisfied

its burden

to show

that conditions

in the

Illinois River

watershed have

not materially changed

since the original trial

and the case was

not moot. On

July 9, 2025, the

State of Oklahoma filed

its form

of proposed

final judgment

and brief

in support

thereof seeking

over $100

million in

total fines

from all

defendants, including

$

18.2

million

in

fines

from

the

plus

attorneys’

fees.

On

July

30,

2025,

the

Company

and

other

defendants filed

their form of proposed

final judgment and

brief in support

thereof seeking no

monetary fines or

penalties. The

court has not

ruled on these

submissions but is

expected to enter

a final judgment

imposing fines and

potentially non-monetary

remedies,

if

any,

in

the

future.

No

accrual

for

this

legal

proceeding

has

been

as

of

August

30,

Based

on

information available as

of September 30,

2025, management expects

that the ultimate

resolution of this

litigation will result

in

a loss to the Company, if any,

that is substantially less than the amount sought from the Company by the State of

Oklahoma.

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