CAL-MAINE FOODS INC

Our

and

results

of

are

subject

to

numerous

risks

and

uncertainties,

many

of

which

are

beyond

our

control. The following is a description of the known factors that may materially affect

our business, financial condition or results

of operations. They

should be considered

carefully,

in addition

to the information

set forth

elsewhere in

this Annual

Report on

Form

10-K,

under

Part

II.

Management’s

Discussion

and

Analysis

of

Condition

and

Results

of

Operations,

in

making

any

decisions

with

respect

to

our

securities. Additional

risks

or

that

are

not

currently known

to us,

or that we

are aware

of but

currently deem

to be

immaterial or

apply to

any company

could

also materially adversely affect our business, financial condition or results

of operations.

INDUSTRY RISK FACTORS

Market prices

of wholesale

are volatile,

and decreases

in these

prices can

adversely impact

our revenues

and

profits.

Our operating results are significantly

affected by wholesale shell egg

market prices, which fluctuate widely and

are outside our

control. As

a result,

our prior

should not

be presumed

to be

an accurate

indication of

future performance.

Under

certain circumstances, small increases

in production, or small

decreases in demand, within

the industry might

have a large adverse

effect on shell egg prices. Low shell egg prices adversely affect

our revenues and profits.

Market prices for

wholesale shell eggs

have been volatile

and cyclical. Shell

egg prices have

risen in the

past during periods

of

high demand such as the initial outbreak of

the COVID-19 pandemic and periods when high protein

diets are popular. Shell egg

prices

have

also

risen

during

periods

of

constrained

supply,

such

as

the

latest

highly

avian

(“HPAI”)

outbreak

that was

first detected

in domestic

commercial flocks

in February

2022. During

times when

prices are

high, the

egg

has

typically

geared

up

to

produce

more

eggs,

by

increasing

the

number

of

layers,

which

historically

has

ultimately resulted in an oversupply of eggs, leading to a period of lower prices.

As discussed

above in

Part I. Item 1. Business – Seasonality

, seasonal fluctuations

impact shell

egg prices. Therefore,

comparisons

of

our

sales

and

results

between

different

within

a

single

fiscal

year

are

not

necessarily

meaningful

comparisons.

A decline in consumer demand for shell eggs can negatively impact our business.

We believe high

-protein diet trends, industry advertising campaigns,

the improved nutritional reputation of eggs and an increase

in at-home consumption

of eggs during

the COVID-19 pandemic,

have all contributed

at one time or

another to increased

shell

egg demand. However, it is possible that the demand for shell eggs will decline in the future. Adverse publicity relating to health

or safety

concerns and

the perception

of the

nutritional

value

eggs,

consumer

views regarding

consumption of

animal-based products,

as well

as movement

away from

high protein

diets, could

shell eggs, which could have a material adverse effect on our future

results of operations and financial condition.

Feed costs are volatile and increases in these costs can

adversely impact our results of operations.

Feed costs are the largest element of our shell

egg (farm) production cost, ranging from 55%

to 63% of total farm production cost

in the last five fiscal years.

Although feed ingredients, primarily corn and soybean

meal, are available from a

number of sources, we do

not have control over

the prices

of the

ingredients we

purchase, which

are affected

by weather,

various global

and U.S.

supply and

demand factors,

transportation

and

storage

costs,

speculators,

and

agricultural,

energy

and

trade

policies

in

the

U.S.

and

internationally.

For

example, while feed

costs declined during fiscal

2024, we saw higher

prices for corn and soybean

meal in fiscal 2022

and 2023

as a result of

weather-related shortfalls in

production and yields,

ongoing supply chain

disruptions and the

Russia-Ukraine War

and its impact on the export markets. Our costs for corn and soybean meal

are also affected by local basis prices.

Increases in feed

costs unaccompanied by increases

in the selling price

of eggs can have

a material adverse effect

on the results

of our operations

and cash flow.

Alternatively,

low feed costs

can encourage

egg industry overproduction,

possibly resulting in

lower egg prices and lower revenue.

Agricultural risks,

including outbreaks

of avian

diseases such as

HPAI,

have harmed

and in

the future

could harm

our

Our shell egg

production activities are

subject to a variety

of agricultural risks.

Unusual or extreme

weather conditions, disease

and pests can materially and adversely affect the quality and quantity of shell eggs

we produce and distribute. Outbreaks of avian

influenza among poultry

occur periodically worldwide

and have occurred

sporadically in the

U.S. Since the

HPAI

outbreaks in

2015, there were no reported

significant outbreaks of HPAI in the commercial table egg

layer flocks in the

U.S. until the February

– December

2022 time

period and

then again

beginning in

November 2023.

During the

third and

fourth quarters

of our

fiscal

experienced HPAI

outbreaks within

our facilities

located in

Kansas and

Texas,

resulting in

total depopulation

of 3.1

million laying hens

and 577,000 pullets.

Both locations have

been cleared by

the USDA to resume

operations and repopulation

is expected to

be completed

before calendar

year end. As

of July 5,

2024, the

U.S. Centers for

Disease Control

and Prevention

(“CDC”) reported

outbreaks in 138

dairy herds in

12 states and

five cases in

the U.S. in

persons who were

exposed to infected

cows or poultry.

The CDC has not

reported any case of

human-to-human transmission. The

CDC considers that the

overall risk

to the general U.S. public

posed by the virus remains

low; however,

as a precautionary measure,

the U.S. Department of

Health

and

Human

Services

has

awarded

funding

to

Moderna

to

develop

a

human

vaccine

against

avian

influenza.

For

information, refer to

Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations –

HPAI

.

We

and

to reduce

the risk

of

exposing

our

flocks and

to harmful

diseases;

despite these

efforts, outbreaks

of avian

diseases can

and do

still occur

and have

adversely impacted,

and may

in the

future adversely impact, the health of our flocks and could in the future adversely impact the health of our employees. Continued

or intensified spread of HPAI could have a material adverse impact on our financial results

by increasing government restrictions

on the sale and

distribution of our products

and requiring us to

euthanize the affected

layers. Negative publicity

from outbreaks

within our industry

can negatively impact

customer perception. If

a substantial portion

of our layers

or production facilities

are

affected by any of these factors in any given quarter or year,

our business, financial condition, and results of operations could

be

materially and adversely affected.

Shell

eggs

and

shell

egg

are

susceptible

to

microbial

contamination,

and

we

may

be

to,

or we

may

voluntarily, recall

contaminated products.

Shell eggs

and shell

are vulnerable

to contamination

by pathogens

such as

Salmonella. The

Company maintains

policies and procedures designed to comply with the complex rules and regulations governing egg production, such as The Final

Egg

Rule

issued

by

the

FDA

“Prevention

of

Salmonella

Enteritidis

in

Shell

Eggs

During

Production,

Storage,

and

Transportation,” and

the FDA’s

Food Safety Modernization Act. Shipment

of contaminated products, even

if inadvertent, could

result in a

violation of law and

lead to increased

risk of exposure

to product liability

claims, product recalls

and scrutiny by

federal

and

state

agencies.

We

have

little,

if

any,

control

over

proper

handling

once

the

product

has

been

shipped

or

delivered. In

purchased

from

other

could

contain

contaminants

that

might

be

inadvertently

redistributed by us. As such, we might decide or be required

to recall a product if we, our customers

or regulators believe it poses

a potential

health risk.

Any product

recall could

a loss

of consumer

confidence in

our products,

our

reputation

with existing

and potential

customers and

have a

material adverse

effect

on our

business, results

of operations

and

financial condition. We

currently maintain insurance

with respect to certain of

these risks, including product

liability insurance,

interruption

insurance,

product

recall

and

general

insurance,

but

in

many

cases

such

is

expensive, difficult

to obtain

and no

assurance can

be given

that such

insurance can

be maintained

in the

future on

acceptable

terms, or in sufficient amounts to protect us against losses due

to any such events, or at all.

Our profitability

may be adversely

impacted by

increases in other

input costs such

as packaging materials

and delivery

expenses, including as a result of inflation.

In addition to feed ingredient costs, other significant input costs include costs of packaging materials and delivery expenses. Our

packing materials

increased during

the past

three fiscal

years due

to inflation

and higher

labor costs,

and during

also as a

result of supply

chain constraints initially

caused by

the pandemic,

and these costs

may continue

to increase. We

also

experienced increases in delivery expenses during fiscal 2023 and 2022 due to increases in fuel and labor costs for both our fleet

and contract

trucking, and

these costs

may continue

to increase.

Increases in

these costs

are largely

outside of

our control

and

have an adverse effect on our profitability and cash flow.

BUSINESS AND OPERATIONAL

Our acquisition growth strategy subjects us to various risks.

As discussed in

Part I. Item I. Business – Growth Strategy

, we plan to continue to pursue a growth strategy that includes,

in part,

selective

of

other

engaged

in

the

and

sale of

shell

eggs,

with

a

priority

on

those

that

will

facilitate our ability to

expand our cage-free shell

egg production capabilities in

key locations and markets.

We may over-estimate

or under-estimate the demand for cage-free

eggs, which could cause

our acquisition strategy to be

less-than-optimal for our future

growth and profitability.

The number of

existing businesses with

cage-free capacity

that we may be

able to purchase

is limited,

as

most

of

shell

eggs

by

other

in

our

markets

currently

does

not

meet

demands

or

legal

requirements to be designated as cage-free. Conversely,

if we acquire cage-free production capacity,

which is more expensive to

and

operate,

and

demands

or

legal

for

eggs

were

to

change,

the

lack

of

demand for cage-free eggs may result in higher costs and lower profitability

.

Acquisitions require capital resources and can divert management’s attention from our existing business. Acquisitions also entail

an inherent risk that we

could become subject to contingent or

other liabilities, including liabilities arising from

events or conduct

prior to

our acquisition

of a

business that

were unknown

to us

at the

time of

acquisition. We

could incur

significantly greater

expenditures in integrating an acquired business than we anticipated at the

time of its purchase.

We cannot assure

you that we:

●

will identify suitable acquisition candidates;

●

can consummate acquisitions on acceptable terms;

●

can successfully integrate an acquired business into our operations; or

●

can successfully manage the operations of an acquired business.

No

can

be

given

that

we

acquire

in

the

future

will

contribute

positively

to

our

results

of

or

financial condition.

In addition,

federal antitrust

laws require

regulatory approval

of acquisitions

that exceed

certain threshold

levels of significance, and we cannot guarantee that such approvals

would be obtained.

The consideration

we pay in

connection with any

acquisition affects

our financial results.

If we pay

cash, we could

be required

to

use

a

portion

of

our

cash

or

credit

facility

to

consummate

the

acquisition.

To

the

extent

we

issue

shares

of

our

Common Stock, existing stockholders may

be diluted. In addition,

acquisitions may result in

additional debt. Our ability to

access

any additional

capital that

may be

needed for

an acquisition

may be

adversely impacted

by higher

interest rates

and economic

uncertainty.

Global

or

health

crises including

pandemics

or

epidemics

could

have

an

adverse impact

on

our

business and

The

effects

of

global

or

pandemics

or

epidemics

can

significantly

impact

our

Although

demand

for

our

products could

increase as

a result

of restrictions

such as

travel bans

and restrictions,

quarantines, shelter-in-place

orders, and

business and government shutdowns, which can

prompt more consumers to eat

at home, these restrictions

could also significantly

increase our cost of doing business due to labor shortages, supply-chain disruptions, increased costs

and decreased availability of

packaging supplies or

feed, and increased

medical and other

costs.

We

experienced these impacts

as a result of

the COVID-19

pandemic,

during

our

fiscal

years

and

The

pandemic

recovery

also

contributed

to

higher

inflation

and

rates,

which

persist

and

may

to

persist.

The

impacts

of

health

crises

are

difficult

to

predict

and

depend

on

numerous factors

including the

severity,

length and

geographic scope

of the

outbreak, resurgences

of the

disease and

variants,

and

acceptance

of vaccines,

and governmental,

and

individuals’

responses.

A resurgence

of

COVID-19

and/or variants, or

any future major public

health crisis, would disrupt

our business and could

have a material adverse

effect on

our financial results.

Our largest customers have accounted for a significant portion of our net sales volume. Accordingly, our business may be

adversely affected by the loss of, or reduced purchases by,

one or more of our large customers.

Our customers, such as supermarkets, warehouse clubs

and food distributors, have continued to consolidate and consolidation

is

expected to continue. These consolidations have

produced larger customers and potential customers with

increased buying power

that are more

capable of operating

with reduced

inventories, opposing

price increases,

and demanding

lower pricing,

promotional programs and specifically tailored products. Because of these trends,

our volume growth could slow or

we may need

to lower prices or increase promotional spending for our products, any of

which could adversely affect our financial results.

Our top

three customers

an aggregate of

49.0%, 50.1%

and 45.9%

of net sales

dollars for

2023, and

2022, respectively.

Our largest

customer,

Walmart

Inc. (including

Sam's Club),

33.8%, 34.2%

and 29.5%

of net

sales dollars for fiscal 2024, 2023 and

2022, respectively. Although we have established long-term relationships with most of our

customers who

continue to purchase

from us based

on our ability

to service their

needs, they are

generally free to

acquire shell

eggs from

other sources. If,

for any

reason, one

or more

of our

large customers

were to

purchase significantly

less of

our shell

eggs in the

future or terminate their

purchases from us, and

we were not

able to sell

our shell eggs to

new customers at comparable

levels, it would have a material adverse effect on our business, financial

condition, and results of operations.

Our business is highly competitive.

The production and sale of fresh shell eggs, which accounted for 96.1% to 96.6% of our net sales in our

last three fiscal years, is

intensely

competitive.

We

compete

with

a large

number

of competitors

that may

prove to

be more

successful

than

we are

in

producing, marketing and selling shell eggs. We

cannot provide assurance that we will be able to compete successfully with any

or all of these companies. Increased competition could result in price reductions, greater cyclicality,

reduced margins and loss of

market share, which would negatively affect our business, results

of operations, and financial condition.

We

are

on

our

team,

and

the

loss

of

any

key

member

of

this

team

may

affect

the

implementation of our business plan in a timely manner.

Our success

depends largely

upon the

continued service

of our

senior management

team. The

loss or interruption

of service

of

one or more

of our key

executive officers

could adversely affect

our ability to

manage our operations

effectively and/or

pursue

our growth strategy.

We

have not entered

into any employment

or non-compete agreements

with any of

our executive officers.

Competition could cause us to lose talented employees, and unplanned turnover could deplete institutional knowledge

and result

in increased costs due to increased competition for employees.

Our

is

on

our

technology

systems

and

software,

and

failure

to

protect

against

or

effectively respond to

cyber-attacks, security

breaches, or other

incidents involving those systems,

could adversely affect

day-to-day operations

and decision making processes and have an adverse effect

on our performance and reputation.

The efficient operation of our business depends

on our information technology systems, which we rely

on to effectively manage

our

data,

communications,

logistics,

accounting,

and

other

processes.

If

we

do

not

allocate

and

effectively manage the resources necessary to build and sustain an appropriate technology environment, our business, reputation,

or financial results could be negatively impacted.

In addition, our information technology systems may be vulnerable

to damage

or

interruption

from

circumstances

beyond

our

control,

systems

failures,

natural

disasters,

terrorist

attacks,

viruses, ransomware, security breaches

or cyber incidents. Cyber-attacks

are becoming more sophisticated

and are increasing in

the number of attempts and frequency by groups and individuals with a wide range of motives. We

have experienced and expect

to continue to experience attempted cyber-attacks of our information

technology systems or networks.

We regularly engage with

third-party service providers

as part

of our operations

to provide a

high level of

service to our

customers.

We have

implemented certain practices and policies

to minimize the potential risks associated with

the exchange of information

with contracted

vendors. Despite

these practices

and policies,

we cannot

guarantee that

information technology

systems of

our

service providers

will prevent

and detect

all cybersecurity

breaches and

incidents. Although

we require

service providers to notify us

upon a potential breach

or incident, there is

a potential risk that

our business, reputation,

or financial

results could be negatively impacted by cybersecurity incidents at their businesses

.

Additionally, future or past business

transactions (such as acquisitions

or integrations) could expose

us to additional

risks and vulnerabilities, as our systems could be negatively affected

by vulnerabilities present in acquired or integrated systems

and technologies.

Furthermore, we

may discover

security issues

that were

not found

during due

diligence of

such acquired

or

integrated businesses,

and it

may be

difficult to

integrate businesses

into our

information technology

environment and security

Our information technology systems also subject us to numerous data privacy obligations. We

may at times fail (or be perceived

to have failed)

in our efforts

to comply with

our data privacy obligations.

If we or the

third parties on which

we rely fail, or

are

perceived to have failed, to address or comply

with applicable data privacy obligations, we could face significant

consequences,

including but not

limited to government

enforcement actions and

litigation. A security breach of

sensitive information could

result

in damage

to our reputation

and our relations

with our customers

or employees.

Any such damage

or interruption

could have

a

material adverse effect on our business.

and

related

business and

to change

rapidly.

Failure to

update

or replace

legacy

systems

to

address

these

changes

could

result

in

costs,

costs,

system

downtime,

third

party

litigation, regulatory actions or cyber security vulnerabilities which could

have a material adverse effect on our business.

Labor shortages or increases in labor costs could adversely

impact our business and results of operations.

Our

success

is

upon

recruiting,

motivating,

and

retaining

staff

to

operate

our

farms.

Approximately

76%

of

our

at hourly

rates, often

in entry-level

positions. While

all our

employees are

paid at

rates above

the federal

minimum wage requirements,

any significant increase

in local, state or

federal minimum wage

requirements could increase

our

labor costs. In

addition, any

regulatory changes

requiring us to

provide additional

employee benefits

or mandating

increases in

other employee-related

costs, such as

unemployment insurance

or workers compensation,

would increase our

costs. A shortage

in

the

labor

pool,

which

may

be

caused

by

competition

from

other

employers,

the

remote

locations

of

many

of

our

farms,

decreased labor participation rates

or changes in government-provided support

or immigration laws, particularly

in times of lower

unemployment, could adversely affect our business and results of operations. A shortage of labor available to us could cause our

farms to operate

with reduced staff,

which could negatively impact

our production capacity

and efficiencies.

In fiscal 2022, our

labor

costs

due

to

the

pandemic

and

its

effects,

which

caused

us

to

wages

in

response

to

labor

shortages.

In

fiscal

and

2024,

labor

wages

continued

to

rise

due

to

inflation

and

low

unemployment.

Accordingly,

any

significant labor shortages or increases in our labor costs could have

a material adverse effect on our results of operations.

We are controlled by the family of our late founder, Fred

R. Adams, Jr., and Adolphus B. Baker,

Chairman of our Board

of Directors,

controls the vote of 100% of our outstanding Class A Common Stock.

Fred R. Adams, Jr.,

our Founder and Chairman Emeritus

died on March 29, 2020. A

limited liability company (the

“Daughters’

LLC”), owned by

Mr. Adams’

son-in-law,

Adolphus B. Baker,

Chairman of our board

of directors, Mr.

Baker’s spouse and

her

three sisters

(Mr.

Adams’ four

daughters) (collectively,

the “Family”),

owns 100%

of our

outstanding Class

A Common

Stock

(which has

10 votes

per share),

controlling approximately

52.0% of

our total

voting power.

As sole

managing member

of the

Daughters’

LLC,

Mr.

Baker

the

vote

of

100%

of

our

Class

A

Common

Stock,

except

that

certain

extraordinary matters requiring the

vote of the

Company’s stockholders such as a

merger or amendment of

the Company’s Second

Amended

and Restated

Certificate of

Incorporation

require joint

of Mr.

Baker and

members of

the Daughters’

LLC

holding a majority of its voting

interests. Family members also have

additional voting power due to beneficial

ownership of our

Common Stock (which has one vote per share), directly or indirectly

through the Daughter’s LLC and other entities, resulting in

family voting control of approximately 53.8% of our total voting power.

We understand that the Family

intends

to retain ownership

of a

sufficient amount of our

Common Stock and

our Class A

Common

Stock to assure continued ownership of more than 50% of the voting power of

our outstanding shares of capital stock. As a result

of

this ownership,

the

Family has

the

ability

to exert

substantial

influence

over

matters requiring

action

by our

stockholders,

amendments

to our

certificate

of incorporation

and by-laws,

the election

and removal

of directors,

and any

merger,

consolidation,

or

sale of

all or

all of

our

assets,

or

other

transactions.

law

that

the

holders of a majority of the voting power of shares entitled to vote must approve certain fundamental corporate transactions such

as a merger,

consolidation and sale of

all or substantially all

of a corporation’s

assets; accordingly,

such a transaction involving

us

and

requiring

stockholder

cannot

be

effected

without

the

of

the

Family.

Such

ownership

will

make

an

unsolicited acquisition of our Company more difficult and discourage

certain types of transactions involving a change of control

of our Company, including

transactions in which the holders of our Common Stock might otherwise receive a premium for their

shares over then current market prices.

The Family’s controlling

ownership of our capital stock may adversely

affect the market

price of our Common Stock.

For

refer

to

Exhibit

4.1

to

this

Annual

Report

on

Form

10-K,

“Description

of

Registrant’s

Registered Under Section 12 of the Exchange Act.”

The

price

of

our

Common

Stock

may

be

affected

by

the

of

shares

for

sale

in

the

market,

and

you

may

experience significant dilution as a result of future issuances

of our securities, which could materially and

the market price of our Common Stock.

The sale or

availability for

sale of substantial

amounts of

Stock could adversely

impact its price.

The Daughters’

LLC holds approximately 1.1

million shares of

Common Stock (the “Subject

Shares”) that are

subject to an

Agreement Regarding

Common Stock (the “Agreement”) filed as an exhibit to this report. The Subject Shares remain subject to potential sale

Agreement. The Agreement

generally provides that

if a holder of

Subject Shares intends

to sell any of

the Subject Shares,

such

party must give the

Company a right of first

refusal to purchase all or

any of such shares.

The price payable by

the Company to

purchase shares

pursuant to

the exercise

of the

right of

first refusal

will reflect

a 6%

discount to

the then-current

market price

based

on

the

business-day

volume-weighted

average

price.

If

the

Company

does

not exercise

its right

of

first

refusal

and

purchase the shares offered, such party will, subject to the approval of a special committee of independent directors of the

Board

of Directors, be

permitted to sell

the shares not

purchased by the

Company pursuant to

a Company registration

statement, Rule

144 under the Securities Act of 1933, or another manner of sale agreed to by the Company. Although pursuant

to the Agreement

will have a

right of first

refusal to purchase

all or any

of those shares,

may elect not

to exercise its

rights

of

first

refusal,

and

if so

such

shares

would

be

eligible for

sale pursuant

to

the registration

rights

in

the

or

to

Rule

under

the Securities

Act

of

Sales, or

the

for

sale, of

a

large

number

of

our

Common Stock could result in a decline in the market price of our Common

Stock.

In addition,

our articles

of incorporation

authorize us

to issue

120,000,000 shares

of our

Common Stock.

As of

June 1,

2024,

there were

44,238,766 shares

of our

outstanding. Accordingly,

a substantial

Stock

are

and

are,

or

could

become,

for

sale

in

the

market.

In

we

may

be

obligated

to

issue

shares of our Common Stock in connection with employee benefit plans (including

equity incentive plans).

In the

future, we

may decide

to raise

capital through

offerings of

Stock, additional

securities convertible

into or

exchangeable for Common

Stock, or rights to acquire

these securities or our Common

Stock. We

may also issue such securities

as consideration in an

acquisition. The issuance of

such securities could result

in dilution of

existing stockholders’ equity interests

in us. Issuances of substantial

amounts of our Common

Stock, or the perception that

such issuances could occur,

may adversely

affect prevailing market prices for our Common Stock, and we

cannot predict the effect this dilution may have on

the price of our

Common Stock.

LEGAL AND REGULATORY

Pressure from animal rights groups regarding the treatment of animals may subject us to additional costs to conform our

practices

to

comply

with

developing

or

subject

us

to

costs

to

defend

challenges

to

our

current

practices and protect our

image with our customers.

In particular,

changes in customer preferences

and state legislation

have accelerated an increase in demand for cage-free eggs, which increases uncertainty

in our business and increases our

costs.

We and many of our customers face pressure from animal rights groups, such

as People for the Ethical Treatment of Animals

and

the Humane

Society of

the United States,

to require

companies that supply

food products

to operate

their business in

a manner

that

treats

animals

in

conformity

with

certain

developed

or

by

these

groups.

In

general,

we

may

incur

additional costs to conform our practices to address

these standards or to defend our existing

practices and protect our image with

our customers.

The standards promoted

by these groups

change over time,

but typically

require minimum

cage space

for hens,

among other requirements, and some

of these groups have led successful

legislative efforts to ban

any form of caged housing

in

various states.

As

discussed

in

Part I. Item 1. Business - Government Regulation

,

ten

states

have

passed

minimum

space

and/or

for hens,

states are

considering such

requirements. In

addition, a

our customers

have announced goals to either exclusively offer cage-free eggs or significantly increase the volume of cage-free

egg sales in the

future, subject in most cases to availability of supply, affordability and

consumer demand, among other contingencies. While we

anticipate that our

retail and foodservice

customers will continue

to transition to

selling cage-free eggs

given publicly stated

goals,

no assurance

that this

transition will

take place

or take

place according

to the

timeline of

current cage-free

goals. For

example, customers may accelerate their transition to stocking cage-free eggs, which may challenge our ability to meet the cage-

free volume

needs of

those customers

and result

in a loss

egg sales.

Similarly,

customers who

commit to

stock greater

proportional quantities of cage-free eggs are under no obligation to continue to do

so, which may result in an oversupply of

cage-

free eggs and result

in lower specialty

egg prices,

which could reduce the

return on our capital

investment in cage-free production.

Changing our

infrastructure and

operating procedures

to conform

to consumer

preferences, customer

demands and

recent laws

has resulted

and will

continue to

additional costs,

including capital

and operating

cost increases.

The USDA

reported

that the

estimated U.S.

cage-free flock

was 122.0 million hens

as of

May 31,

2024, which

is approximately

39.9% of

the total

U.S. table

egg

layer hen

population.

to the

USDA Agricultural

Marketing

Service, as

of May

2024 approximately

220.1 million hens, or about

72% of the U.S.

non-organic laying flock would have to be

in cage-free production to meet

cage-free commitments

from the

retailers, foodservice

providers and

food manufacturers

that have

stated goals

to transition

to

cage-free eggs.

In response

to our

customers’ announced

goals and

increased legal

requirements for

cage-free eggs,

we have

increased capital

expenditures

to

our

capacity.

We

are

also

enhancing

our

focus

on

when

considering

acquisition opportunities.

Our customers

typically do

not commit

to long-term

purchases of

specific quantities

or

type of eggs

with us, and

as a result,

we cannot predict

with any certainty

which types of

eggs they will

require us to

supply in

future

periods.

The

of

eggs

is

more

costly

than

the

of

eggs,

and

these

higher

production costs contribute

to the prices

of cage-free eggs,

which historically have

typically been higher

than conventional egg

prices. Many consumers prefer to buy less expensive conventional shell eggs. These consumer preferences may in turn influence

our customers’ future needs for

cage-free and conventional eggs. Due

to these uncertainties, we

may over-estimate future demand

eggs, which

could increase

our costs

unnecessarily,

or we

may under-estimate

future demand

eggs,

which could

harm us

competitively.

If our

competitors obtain

non-cancelable

long-term contracts

to provide

cage-free eggs

to

our existing or potential customers,

then there may be decreased demand

for our cage-free eggs due

to these lost potential sales.

If we and our

competitors increase cage-free egg production

and there is no

commensurate increase in demand for

cage-free eggs,

this overproduction

could lead to

an oversupply of

cage-free eggs, reducing

the sales price

for specialty eggs

and our return

on

capital investments in cage-free production.

Failure

to

comply

with

governmental

environmental

could

harm

our

operating results,

financial condition,

and reputation.

Further,

we may

incur significant

costs to

comply with

any such

regulations.

We are subject to federal, state and local

regulations relating to grading, quality

control, labeling, sanitary control, waste

areas of

our business.

As a

fully-integrated

producer,

our shell

egg facilities

are subject

to regulation

and

inspection by the USDA, OSHA, EPA and

FDA, as well as state and local health and agricultural agencies, among others. All of

our shell egg production and

feed mill facilities are subject

to FDA, EPA and OSHA regulation and inspections. In addition, rules

are often proposed that, if adopted as proposed, could increase our costs.

Our operations and facilities are subject to various federal, state and local environmental, health, and safety laws and regulations

governing,

among

other

things,

the

generation,

storage,

handling,

use,

transportation,

and

of

hazardous

materials. Under these laws and

regulations, we are required to obtain permits

from governmental authorities, including, but

not

limited to wastewater discharge permits and manure

and litter land applications.

If we

fail to

comply with

applicable laws

or regulations,

or fail

to obtain

necessary permits,

we could

be subject

to significant

fines and penalties or other sanctions, our reputation could be harmed, and our operating results and financial condition could be

affected.

In

because

these

are

becoming

increasingly

more

stringent,

it is

possible that we will be required to incur significant costs for compliance

with such laws and regulations in the future.

Climate change and legal or regulatory responses

may have an adverse impact on our business and results of

Extreme

weather

events,

such

as derechos,

wildfires,

drought,

tornadoes,

hurricanes,

storms,

floods

or

other

natural

disasters

could materially and adversely affect our operating

results and financial condition. In fact, derechos, fires, floods,

tornadoes and

hurricanes have affected our facilities or the facilities of other egg producers in the past. Increased global temperatures

and more

frequent occurrences

of extreme

weather events,

which may

be exacerbated

by climate

change, may

cause crop

and livestock

areas to

become unsuitable,

including due

to water

scarcity or

high or

unpredictable

temperatures,

which may

much

greater stress on food systems and more pronounced food

insecurity globally. Lower

global crop production, including corn and

the primary

feed ingredients

that support

the health of

our animals,

in significantly

higher

prices for these commodity inputs, impact our ability to source the commodities we use to feed our flocks, and negatively impact

to maintain

or grow our

operations. Climate

change may

increasingly expose

workers and

animals to

high heat

and

humidity

stressors

that

impact

poultry

and

our

costs.

Increased

greenhouse

gas

emissions

may

also

negatively impact air quality, soil quality and water quality, which

may hamper our ability to support our operations, particularly

in higher water- and soil-stressed regions.

Increasing

frequency of

severe weather

events, whether

tied to

climate change

or any

other cause,

may negatively

impact our

ability to raise

poultry and

produce eggs profitably

or to

operate our transportation

and logistics

supply chains. Regulatory

and

market

pricing may

to drive

the costs

of fossil

-based

fuels higher,

which

could negatively

impact

to

source commodities

necessary to

operate our

farms or

plants and

our current

fleet of

vehicles. These

changes may

cause us

to

change, significantly, our day-to-day

business operations and our strategy. Climate change and extreme weather events may also

impact demand for our products

given evolution of consumer food preferences.

Even if we take

measures to position our business

in anticipation

of such

changes, future

compliance

with legal

or regulatory

requirements may

require significant

time, oversight and enterprise expense. We

may also incur significant expense tied to regulatory fines if laws and regulations are

interpreted and applied

in a manner that

is inconsistent with our

business practices. We

can make no

assurances that our efforts

to prepare

for these

adverse events

will be

in line

with future

market and

regulatory expectations

and our

access to

capital

to

support our business may also be adversely impacted.

Current and future litigation could expose us to significant

liabilities and adversely affect our business reputation.

We and certain of our subsidiaries are involved in various legal proceedings.

Litigation is inherently unpredictable, and although

we

believe

we

have

meaningful

defenses

in

these

matters,

we

may

incur

due

to

adverse

judgments

or

enter

into

settlements of claims that

could have a material

adverse effect on our

results of operations, cash

flow and financial condition.

For

a

discussion

of

our

ongoing

legal

see

Part I. Item 3. Legal Proceedings

below

and

Part

II.

Item

Notes

to

the

Consolidated Financial

.

Such lawsuits are

expensive to

defend, divert

attention, and

may

adverse judgments

or settlements.

may expose

us to

negative publicity,

which could adversely affect our business reputation and customer

preference for our products and brands.

FINANCIAL AND ECONOMIC RISK FACTORS

Weak or unstable economic conditions, including continued high inflation and interest rates,

could negatively impact our

Weak

or unstable economic

conditions, including

continued high inflation

and interest rates,

may adversely

affect our

by:

●

Limiting our access to capital markets or increasing the cost of capital we may

need to grow or operate our business;

●

Changing consumer spending and habits and demand for eggs, particularly

higher-priced eggs;

●

Restricting the supply of energy sources or increasing our cost to procure

energy; or

●

Reducing the availability of feed

ingredients, packaging material, and other raw

materials, or increasing the cost

items.

Deterioration of economic conditions could also negatively

impact:

●

The financial condition of our suppliers, which may make it more

difficult for them to supply raw materials;

●

The financial condition of our customers, which may decrease demand

for eggs or increase our bad debt expense; or

●

The financial condition of our insurers, which could increase our cost to obtain insurance, and/or make it difficult for or

insurers to meet their obligations in the event we experience a loss due to an insured

peril.

to

the

U.S.

Bureau

of

Labor

Statistics,

from

May

to

May

2022,

the

Consumer

Price Index for

All

Urban

Consumers (“CPI-U”) increased

8.5 percent, the largest

12-month increase since

the period ending December

1981. The CPI-U

increased 4.1% and

3.3% from May

2022 to May

2023 and May

2023 to May

2024, respectively. Inflationary costs have

our input costs, and if we are unable to pass these costs through to the customer

it could have an adverse effect on our business.

We

hold

cash balances

in deposit

accounts with

deposits in

excess of

the amounts

insured by

the Federal

Deposit

Insurance Corporation (“FDIC”). In

the event of

a bank failure

at an institution

where we maintain

deposits in excess

of the FDIC-

insured amount, we may lose such excess deposits.

The

loss

of

any

registered

trademark

or

other

intellectual

property

could

enable

other

to

compete

more

effectively with us.

We

utilize intellectual

property in

our business. For

example, we

own the

trademarks

Farmhouse Eggs®

,

4Grain®, Sunups®

,

and

. We

produce and market

Best®

and

Land O’ Lakes

® under license

agreements with EB. We

have invested a significant amount of

money in establishing and promoting

our trademarked brands. The loss or

expiration of any

intellectual property could

enable our competitors

to compete more

effectively with us

by allowing them

to make and

sell products

similar

to

those

we

offer. This

could

negatively

impact

our

ability

to

produce

and

sell

those

products,

thereby

adversely affecting our operations.

Impairment in the carrying value

of goodwill or other assets

could negatively affect our results of

operations or net worth.

the

excess

of

the

cost

of

over

the

fair

value

of

the

net

assets

acquired. Goodwill

is

reviewed

at

least

for

by

assessing

qualitative

factors

to

whether

the

existence of events or circumstances

leads to a determination that

it is more likely than not

that the fair value of

a reporting unit

is less

than its

amount. As of

June 1,

had $45.8 million

of goodwill. While

the current

value of this goodwill is not impaired, future goodwill impairment charges could adversely affect our results of operations in any

particular period and our net worth.

Events beyond our control such as extreme

weather and natural disasters could negatively impact our business.

Fire,

bioterrorism,

pandemics,

extreme

weather

or natural

disasters, including

droughts,

floods,

excessive

cold

or

heat, water

rights restrictions, hurricanes or other storms, could impair the health or growth of our flocks, decrease production or availability

of feed ingredients, or interfere

with our operations due to

power outages, fuel shortages, discharges from

overtopped or breached

wastewater treatment lagoons, damage to our production and processing facilities, labor shortages or disruption of transportation

channels, among other things. Any of these factors could have a material adverse

effect on our financial results.

UNRESOLVED

STAFF COMMENTS