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 March 1, 2025 and March 2, 2024 included

and

39 weeks

, respectively.

Use of Estimates

The preparation

of the

condensed consolidated

financial statements

in conformity

with GAAP

requires management

to make

estimates

and

assumptions

that

affect

the

amounts

reported

in

the

condensed

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

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 March

1, 2025 and June

1,

2024, reserves for credit losses were $

thousand and $

thousand, respectively. The Company extends credit to customers

based

on

an

evaluation

of

each

customer’s

condition

and

credit

history.

Collateral

is

not

required.

The

Company minimizes

exposure to

counter party

credit risk

through credit

analysis and

approvals, credit

limits, and

monitoring

procedures.

In

determining

our

reserve

for

credit

losses,

receivables

are

assigned

an

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

income attributable

to Cal-Maine

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

of

the

revenue

is

derived

from

agreements

or

contracts

with

based

upon

the

ordering

its

with

a

single

obligation

of

delivering

the

product.

The

Company

believes

the

obligation

is

met

upon

delivery

and

acceptance

of

the

product

by

our

which

occurs

upon

shipment

or

delivery

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

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

may

exist

as

of

the

date

the

are

issued

that

may

result

in

a

loss

to

the

Company but which will

only be resolved when

one or more future

events occur or fail

to occur.

and

its

legal

counsel

assess

such

liabilities,

and

such

inherently

involves

an

exercise

of

judgment.

In

assessing loss

contingencies related

to legal

proceedings that

are pending

against 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

indicates

a

loss

contingency

is

not

probable,

but

is

possible,

or

is

probable

but

cannot

be

estimated,

then

the

nature

of

the

liability,

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

In

2023,

the

FASB

issued

Accounting

Standards

Update

(“ASU”)

2023-07,

Segment

Reporting

(Topic

280):

Improvements to Reportable Segment Disclosures

. This ASU requires enhanced disclosures about significant segment expenses

regularly provided

to the

chief operating

decision maker

that are

included within

each reported

measure of

segment profit

or

loss, and

requires all

annual disclosures

currently required by

Topic

280 to

be included

in interim

periods. ASU 2023-07

is to

be applied

retrospectively for

all periods

presented in

the financial

statements and

is effective

for fiscal

years beginning

after

Index

December 15, 2023, and

interim periods within fiscal years

beginning after December 15,

2024, with early adoption

permitted.

The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial statement disclosures.

In

2023,

the

FASB

issued ASU

2023-09,

Income

Taxes

(Topic

–

Improvements

to

Income

Tax

Disclosures

.

This ASU

requires that

an entity,

on an

annual basis,

disclose additional

information, primarily

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

for

annual

periods

beginning

after

15,

The

Company

is

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

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

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.

Note 2 - Acquisitions

Acquisition of ISE America, Inc. Assets

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,

and

South

Carolina.

The

Company

accounted for the acquisition as a business combination.

The

table

summarizes

the

consideration

paid

for

the

ISE

assets

and

the

amounts

of

assets

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

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.

Acquisition of Deal-Rite Feeds, Inc. Assets

February 3, 2025

, the

Company acquired

certain assets

of Deal-Rite

Feeds, Inc.

of its

affiliates (“Deal-

Rite”)

for

approximately $

4.7

million.

The

assets

two

feed

mills,

storage

facilities, usable

grain,

vehicles,

Index

related equipment and

a retail feed

sales business located

in North Carolina.

The acquired assets

will produce and

deliver feed

to our nearby shell egg production facilities. The Company accounted for the acquisition as a business combination.

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.

Goodwill

recorded

in

with

the

Deal-Rite

is

attributable

to

improved

efficiencies

from

integrating the assets of Deal-Rite with

the operations of the Company.

The Company recognized goodwill of $

1.0

million as a

result of the acquisition.

Other Acquisitions

November 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 March 1, 2025 and June 1, 2024 (in thousands):

Amortized

Cost

Gains

Losses

Estimated

Fair Value

$

10,378

$

—

$

$

10,372

95,471

—

95,420

342,503

—

342,925

6,115

—

6,108

166,073

—

165,939

—

121,926

—

121,915

Total current investment securities

$

742,916

$

$

$

743,134

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

sales and

investment securities

available-for-sale

were $

654.4

$

273.9

million during

the

weeks

1,

and

March

2,

2024,

Gross

realized

gains

for

the

weeks

ended

March

1,

and

March

2,

were

$

thousand

and

$

thousand,

There

were

no

gross

realized

losses for the thirty-nine weeks ended March 1, 2025. Gross realized losses for the thirty-nine weeks ended March 2, 2024 were

$

thousand. There was

no

allowance for credit losses at March 1, 2025 and June 1, 2024.

Index

Actual maturities may differ

from contractual maturities as

some borrowers have

the right to call

or prepay obligations

with or

without penalties. Contractual maturities of current investments at March 1, 2025 are as follows (in thousands):

Estimated Fair Value

Within one year

$

424,063

1-5 years

319,071

Total

$

743,134

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.

Assets and Liabilities Measured at Fair Value

on a Recurring Basis

In

the

hierarchy described

above, the

table shows

the

of

financial assets

and

liabilities measured at fair value on a recurring basis as of March 1, 2025 and June 1, 2024 (in thousands):

Level 1

Level 2

Level 3

Balance

Assets

$

—

$

10,372

$

—

$

10,372

—

95,420

—

95,420

—

342,925

—

342,925

—

6,108

—

6,108

—

165,939

—

165,939

—

—

—

121,915

—

121,915

Total assets measured at fair value

$

—

$

743,134

$

—

$

743,134

Liabilities

$

—

$

—

$

16,500

$

16,500

Total liabilities measured at fair value

$

—

$

—

$

16,500

$

16,500

Index

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

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,

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

10,000

Balance, March 1, 2025

$

16,500

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 March 1, 2025 and June 1, 2024 (in thousands):

Flocks, net of amortization

$

164,561

$

149,985

Eggs and egg products

35,339

25,217

Feed and supplies

107,391

86,580

$

307,291

$

261,782

We

grow

and

maintain

flocks

of

layers

(mature

female

chickens),

pullets

(female

chickens,

under

weeks

of

age),

and

breeders (male and female chickens used to produce fertile eggs to

hatch for egg production flocks). Our total flock at March 1,

2025 and June 1, 2024

consisted of approximately

12.3

11.8

million pullets and breeders and

48.9

39.9

million layers, respectively.

Index

Note 6 - Equity

On

25,

2025,

the

Company

entered

an

Regarding

(the

“Conversion

Agreement”)

by

and

among the

DLNL, LLC,

a Delaware

limited liability

company (“Daughters’

LLC”), and

Fred R. Adams

Jr.’s

four

daughters

and

Adolphus

B.

Baker,

Board

Chair

and

Mr. Adams’

son-in-law

(the

“Members”

and

with

Daughters’

LLC, the “Stockholder Parties”).

entry into the Conversion

Agreement was a result

of the Members informing

the

Company

that

they

were

interested

in

diversifying

their

respective

portfolios,

through

the

potential sale of

all or

a portion of

the shares of

Common Stock, underlying

the Class A

Common Stock, held

by Daughters’

LLC, as

most of

them have

become more

focused on

their individual

estate planning

efforts and

philanthropic

endeavors.

The Conversion Agreement provides for the following:

●

The approval by

Board of Directors,

and approval by

Daughters’ LLC by

majority written consent, of

the

Third

Amended

and

Certificate

of

Incorporation

of

the

Company

(“Third

Amended

and

Charter”),

which

has

occurred.

The

Third

Amended

and

Charter

became

upon

filing

with

the

Delaware Secretary of State on March 27, 2025 (the “Restated Charter Effective Date”).

●

The approval by the

Company’s Board of

Directors of the Amended

and Restated Bylaws of

the Company (“Restated

Bylaws”), which has occurred. The Restated Bylaws became effective on the Restated Charter Effective Date.

●

The agreement by the Stockholder Parties not to convert any shares of Class A Common Stock (“Class A Shares”) into

(“Common Shares”)

prior to

the later

of (i)

the Restated

Charter Effective

Date or

date

the

Company

obtained

an

amendment

to

its

Amended

and

Credit

such

that

the

Class

A

Conversion, defined

below,

would not

result in

a “Change

of Control”

within the

meaning of

such agreement.

Both

conditions were met on March 27, 2025.

●

The agreement by the Stockholder Parties that if Daughters’ LLC converts any Class A Shares into Common Shares, it

will simultaneously convert all (but not less than all) Class A Shares into Common Shares (the “Class A Conversion”).

●

After

the

date

of

the

Class

A

(the

“Class

A

Date”),

and

ending

on

the

12-month

anniversary

of

the

Class

A

Date

(or,

if

earlier,

December 31, 2026),

certain

registration

rights

of

the

Members to offer or sell Common Shares in a registered offering under the Securities Act of 1933, as amended.

●

The adoption by the

Stockholder Parties of an

amended and restated limited

liability company operating agreement of

Daughters’ LLC, which provides

for certain changes

to permit Daughters’ LLC

to take the

actions provided for

in the

Conversion Agreement.

The

the

documents

contemplated

by

that

agreement,

are

referred

to

collectively

as

the

“Transactions.”

The

Transactions

do

not

require

any

Stockholder

Party

to

convert

Class

A

Common

Shares

into

Common

Shares or to sell any Common Shares.

On February

25, 2025,

Board of

Directors approved

a new

$

million share

repurchase program.

repurchase program authorizes

the Company,

in management’s

discretion, to repurchase

Common Stock from

time to time

for

an

aggregate purchase

price up

to $

million (exclusive

of any

fees, taxes,

commissions or

other expenses

related

to such

repurchases), subject to

market conditions and

other factors. The

actual timing, number

and value of

shares repurchased under

the

program

will be

determined by

management in

its discretion

and

will depend

on

a

number

of

including, but

not

limited to, the market price of the Common Stock and general market and economic conditions.

Index

The following reflects equity activity for the thirteen weeks ended March 1, 2025 and March 2, 2024 (in thousands):

Thirteen Weeks Ended March 1, 2025

Class A

Paid In

Accum.

Other

Amount

Amount

Amount

Capital

Total

Balance at November

30, 2024

$

$

$

(31,661)

$

78,600

$

(908)

$

1,998,585

$

6,116

$

2,051,483

—

—

—

—

—

—

—

—

(3,835)

1,077

—

—

—

(2,758)

3.456

Common

—

—

—

—

—

(152,932)

—

(152,932)

—

—

—

—

—

(16,589)

—

(16,589)

—

—

—

—

—

508,533

(380)

508,153

Balance at March 1,

$

$

$

$

79,677

$

(757)

$

$

5,736

$

Thirteen Weeks Ended March 2, 2024

Class A

Paid In

Accum.

Other

Amount

Amount

Amount

Capital

Total

Balance at December

2, 2023

$

$

$

(30,014)

$

74,214

$

(1,614)

$

1,583,071

$

(2,444)

$

1,623,964

—

—

—

—

—

—

—

—

(1,583)

1,012

—

—

—

(571)

0.997

Common

—

—

—

—

—

(44,111)

—

(44,111)

—

—

—

—

—

(4,786)

—

(4,786)

—

—

—

—

—

146,712

(349)

146,363

Balance at March 2,

$

$

$

$

75,226

$

(1,514)

$

1,680,886

$

(2,793)

$

1,720,959

Index

Thirty-nine Weeks Ended March 1, 2025

Class A

Paid In

Accum.

Other

Amount

Amount

Amount

Capital

Total

Balance at June 1,

$

$

$

$

76,371

$

(1,773)

$

1,756,395

$

(3,104)

$

1,797,043

—

—

—

—

1,016

—

—

1,016

—

—

(3,899)

3,306

—

—

—

(593)

Contributions to

Crepini Foods LLC

—

—

—

—

—

—

6,485

6,485

Acquisition of

noncontrolling

interest in

MeadowCreek Foods

LLC

—

—

—

—

—

(3,826)

3,826

—

5.965

Common

—

—

—

—

—

(263,918)

—

(263,918)

—

—

—

—

—

(28,627)

—

(28,627)

—

—

—

—

—

877,573

(1,471)

876,102

Balance at March 1,

$

$

$

$

79,677

$

(757)

$

$

5,736

$

Thirty-nine Weeks Ended March 2, 2024

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

—

—

—

—

1,372

—

—

1,372

—

—

(1,589)

3,114

—

—

—

1,525

1.119

Common

—

—

—

—

—

(49,501)

—

(49,501)

—

—

—

—

—

(5,372)

—

(5,372)

—

—

—

—

—

164,647

(1,295)

163,352

Balance at March 2,

$

$

$

$

75,226

$

(1,514)

$

1,680,886

$

(2,793)

$

1,720,959

Note 7 - Net Income per Common Share

Basic net income per

share is based on

the weighted average Common Stock

and Class A Common

Stock outstanding. Diluted

net

income

per

share

is

based

on

weighted-average

common

shares

during

the

relevant

period

for

the

dilutive effect of share-based awards.

Index

The

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):

Numerator

$

508,153

$

146,363

$

876,102

$

163,352

Less: Loss attributable to

noncontrolling interest

(380)

(349)

(1,471)

(1,295)

Net income attributable to Cal-Maine

$

508,533

$

146,712

$

877,573

$

164,647

Denominator

Weighted-average common shares

outstanding, basic

48,798

48,727

48,774

48,702

Effect of dilutive restricted shares

Weighted-average common shares

outstanding, diluted

48,971

48,884

48,962

48,865

Net income per common share

attributable to Cal-Maine Foods, Inc.

Basic

$

10.42

$

3.01

$

17.99

$

3.38

Diluted

$

10.38

$

3.00

$

17.92

$

3.37

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):

Conventional shell egg sales

$

1,016,438

$

413,619

$

2,118,065

$

919,498

Specialty shell egg sales

328,944

262,293

872,691

688,879

61,024

21,759

136,850

63,994

Other

11,279

5,405

30,621

13,283

$

$

703,076

$

$

Note 9 - Stock Based Compensation

Total

stock-based compensation expense was

$

3.4

million and $

3.2

million for the thirty-nine

weeks ended March 1,

2025 and

March 2, 2024, respectively.

Unrecognized compensation

expense as

a result

of non-vested

restricted stock

outstanding under

the Amended

and

Restated 2012 Omnibus

Long-Term Incentive

Plan at March

1, 2025 of

$

9.2

million will be

recorded over a

weighted average

2.3

years.

Refer to

Item 8,

Consolidated Financial

Statements and

Supplementary Data,

Note 14

Stock Compensation Plans in our 2024 Annual Report for further information on our stock compensation plans.

Index

The Company’s restricted share activity for the thirty-nine weeks ended March 1, 2025 follows:

Number of

Shares

Weighted

Average Grant

Date Fair Value

Outstanding, June 1, 2024

277,954

$

49.38

Granted

47,700

109.97

Vested

(108,058)

41.32

Forfeited

(4,324)

53.43

Outstanding, March 1, 2025

213,272

$

66.93

Note 10 - Commitments and Contingencies

LEGAL PROCEEDINGS

Civil Investigative Demand

In March 2025, the Company received a

civil investigative demand 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.

The

Company

is

cooperating

with

the

investigation.

Management

cannot

predict

the

eventual scope,

duration or

outcome of

this investigation

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, 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

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

tentatively

setting

a

trial

date

for

August

11,

On

November 30,

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.

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.

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

Index

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

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

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

recorded

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

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

began,

Foods,

Inc.

%

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

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

17,

The

court

directed

the

parties

to

present

their

findings

of

fact

and

conclusions

of

law

and

supporting

briefs

by

January

30,

The parties

submitted their

post-trial briefs

on

January 20,

While

believes there

is a

reasonable possibility

of a

material loss

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

the

following,

among

others:

uncertainties

inherent

in

any

of

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

with

the

State

of

Oklahoma,

and

Index

uncertainty regarding what our proportionate share of any remedy would be, although we believe that our share compared to the

other defendants is small.

Other Matters

In addition to the above,

the Company is involved in

various other claims and litigation

incidental to its business. Although

the

outcome of

these matters

cannot be determined

with certainty,

management, upon the

advice of counsel,

is of

the opinion that

the final outcome should not have a material effect on the Company’s consolidated results of operations or financial position.

Note 11 - Subsequent Events

Second Amendment to Amended and Restated Credit Agreement

On

March

25,

2025,

the

Company

entered

into

the

Second

Amendment

(the

“Second

Amendment”)

to

its

Amended

and

Restated Credit

Agreement (as

amended,

the “Credit

Agreement”)). Under

the

Credit Agreement,

a Change

of

Control is

an

event

of

default.

The

Second

Amendment

amended

the

definition

of

Change

of

Control

to

exclude

from

that

definition

the

conversion (the “Class A Conversion”) of all outstanding shares of the Company’s Class A Common Stock into Common Stock

in accordance with the Conversion Agreement.

Under the Second Amendment, prior to the Class A Conversion, the definition of Change of Control is unchanged. On and after

the Class A

Conversion, Change of Control

will mean any

of (i) the

acquisition by any “person”

or “group” (as

such terms are

used in

sections 13(d)

and 14(d)

of the

Securities Exchange

Act of

1934, as

amended) at

any time

of beneficial

ownership of

30.0

% or more of

the outstanding capital stock

or other equity interests

of the Company on

a fully-diluted basis, (ii)

the failure

of individuals who

are members of

the board of

directors (or similar

governing body) of

the Company on

the effective date

of

the Second Amendment (together with any new or replacement directors whose initial nomination for election was approved by

a majority of the directors who were either directors on the effective date of the Second Amendment or previously so approved)

to constitute a majority

of the board of

directors (or similar governing

body) of the

Company, or

(iii) any “Change of

Control”

(or words of

like import), as

defined in any

agreement or indenture

relating to any

issue of Material

Indebtedness of any

Loan

Party or any Subsidiary of a Loan Party (each as defined in the Credit Agreement), shall occur.

For

the

Credit

Facility,

see

Note

–

Credit

Facility

to

the

audited

statements included in the 2024 Annual Report.

Third Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws

On

March

27,

2025,

the

Third

Amended

and

Certificate

of

Incorporation

was

filed

with

the

Secretary

of

State

and

became

effective.

Also

on

March

27,

2025,

the

Amended

and

Bylaws

became

effective.

Agreement to Acquire Echo Lake Foods, Inc.

On

April

8,

2025,

the

Company

signed

a

definitive

to

acquire

Echo

Lake

Foods,

Inc.

(“Echo

Lake

Foods”)

for

approximately $

million, excluding

expected tax

assets resulting

transaction, to

be funded

with available

cash on

hand. Echo

was founded

in 1941

and acquired

by the

Meinerz family

in 1981.

Based in

Burlington, Wisconsin,

Echo Lake Foods produces, packages, markets and distributes ready-to-eat egg products and

breakfast foods, including waffles,

pancakes, scrambled eggs, frozen cooked omelets, egg patties,

toast and diced eggs. The transaction has

been approved by both

companies’ boards of directors and

is expected to close

by the end of

fiscal 2025 following completion of

regulatory approvals

and subject to customary closing conditions.

The transaction is not subject to shareholder approval.

Index

ITEM

MANAGEMENT’S

DISCUSSION

AND

ANALYSIS

OF

FINANCIAL

CONDITION

AND

RESULTS

OF