UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC  20549





FORM
10-Q


(mark
one)





x           Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934





For the
quarterly period ended November 28, 2009


OR





o           Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934





For the
transition period from ____________ to ____________





Commission
file number:  000-04892





CAL-MAINE
FOODS, INC.


(Exact
name of registrant as specified in its charter)





Delaware
            64-0500378(State
      or other Jurisdiction of
            (I.R.S.
      Employer Identification No.)Incorporation
      or Organization)





3320
Woodrow Wilson Avenue, Jackson, Mississippi  39209


(Address
of principal executive offices)  (Zip Code)





(601)
948-6813


(Registrant’s
telephone number, including area code)





Indicate
by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.


Yes x Noo





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes o Noo





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer as defined in Rule 12b-2 of the Exchange
Act.





Large
      Accelerated filer o
            Accelerated
      filer  xNon- Accelerated filer o
              (Do
      not check if a smaller reporting company)
            Smaller
      reporting company o




Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).


Yes o    No  x


APPLICABLE
ONLY TO CORPORATE ISSUERS:


Indicate
number of shares outstanding of each of the issuer’s classes of common stock
(exclusive of treasury shares), as of December 26, 2009.


Common
      Stock, $0.01 par value
            21,407,091
      sharesClass
      A Common Stock, $0.01 par value
            2,400,000
      shares







CAL-MAINE
FOODS, INC. AND SUBSIDIARIES





INDEX





PageNumberPart
      I.           Financial
      InformationItem
      1.
                                            Financial
      Statements
                                            3Condensed
      Consolidated Financial Statements (Unaudited)
                                            3Condensed
      Consolidated Balance Sheets -November
      28, 2009 and May 30, 2009
                                            3Condensed
      Consolidated Statements of Income -Thirteen
      Weeks and Twenty-Six Weeks EndedNovember
      28, 2009 and  November 29, 2008
                                            4Condensed
      Consolidated Statements of Cash Flows -Twenty-Six
      Weeks Ended November 28, 2009 andNovember
      29, 2008
                                            5Notes
      to Condensed Consolidated Financial Statements
                                            6Item
      2.
                                            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                            14Item
      3.
                                            Quantitative
      and Qualitative Disclosures About Market Risk
                                            22Item
      4.
                                            Controls
      and Procedures
                                            22Part
      II.           Other
      Information
                                            23Item
      1.
                                            Legal
      Proceedings
                                            23Item
      1A.
                                            Risk
      Factors
                                            25Item
      4.
                                            Submission
      of Matters to a Vote of Security Holders
                                            25Item
      6.
                                            Exhibits
                                            25Signatures
                                            26




2





PART
I.  FINANCIAL INFORMATION


ITEM
1.   FINANCIAL STATEMENTS





CAL-MAINE
FOODS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(in
thousands, except per share amounts)





November 28, 2009
                          
                          
                          May 30, 2009(unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                          
                          $
                          111,211
                          
                          
                          $
                          66,883Investment
      securities available-for-sale
                          
                          
                          7,506
                          
                          
                          
                          15,165Investment
      securities trading
                          
                          
                          33,000
                          
                          
                          
                          —Trade
      and other receivables
                          
                          
                          79,730
                          
                          
                          
                          44,628Inventories
                          
                          
                          98,565
                          
                          
                          
                          97,535Prepaid
      expenses and other current assets
                          
                          
                          4,270
                          
                          
                          
                          17,474Total
      current assets
                          
                          
                          334,282
                          
                          
                          
                          241,685Investment
      securities trading
                          
                          
                          —
                          
                          
                          
                          33,150Investment
      securities available-for-sale
                          
                          
                          711
                          
                          
                          
                          —Other
      investments
                          
                          
                          17,954
                          
                          
                          
                          18,069Goodwill
                          
                          
                          22,116
                          
                          
                          
                          22,455Amortizable
      intangible assets
                          
                          
                          14,639
                          
                          
                          
                          15,056Other
      assets
                          
                          
                          1,743
                          
                          
                          
                          2,472Property,
      plant and equipment
                          
                          
                          481,711
                          
                          
                          
                          479,327Less
      accumulated depreciation
                          
                          
                          (242,985
                          )
                          
                          
                          (229,369
                          )Net
      property, plant and equipment
                          
                          
                          238,726
                          
                          
                          
                          249,958TOTAL
      ASSETS
                          
                          $
                          630,171
                          
                          
                          $
                          582,845LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                          
                          $
                          82,003
                          
                          
                          $
                          58,423Accrued
      dividends payable
                          
                          
                          4,087
                          
                          
                          
                          3,422Current
      maturities of purchase obligation
                          
                          
                          —
                          
                          
                          
                          8,400Current
      maturities of long-term debt
                          
                          
                          39,485
                          
                          
                          
                          13,806Deferred
      income taxes
                          
                          
                          20,495
                          
                          
                          
                          19,635Total
      current liabilities
                          
                          
                          146,070
                          
                          
                          
                          103,686Long-term
      debt, less current maturities
                          
                          
                          112,272
                          
                          
                          
                          115,983Other
      non-current liabilities
                          
                          
                          3,005
                          
                          
                          
                          3,532Deferred
      income taxes
                          
                          
                          29,515
                          
                          
                          
                          26,635Total
      liabilities
                          
                          
                          290,862
                          
                          
                          
                          249,836Stockholders’
      equity:Common
      stock $0.01 par value per share:Authorized
      shares – 60,000Issued
      35,130 shares and 21,407 shares outstanding atNovember
      28, 2009 and 21,389 shares outstanding at May 30, 2009
                          
                          
                          351
                          
                          
                          
                          351Class
      A common stock $0.01 par value per share, authorized, issued
      andoutstanding
      2,400 shares at November 28, 2009 and May 30, 2009
                          
                          
                          24
                          
                          
                          
                          24Paid-in
      capital
                          
                          
                          32,441
                          
                          
                          
                          32,098Retained
      earnings
                          
                          
                          328,794
                          
                          
                          
                          320,623Common
      stock in treasury – 13,723 shares at November 28, 2009and
      13,741 shares at May 30, 2009
                          
                          
                          (21,018
                          )
                          
                          
                          (21,045
                          )Total
      Cal-Maine Foods, Inc. stockholders’ equity
                          
                          
                          340,592
                          
                          
                          
                          332,051Noncontrolling
      interests in consolidated entities
                          
                          
                          (1,283
                          )
                          
                          
                          958Total
      stockholders’ equity
                          
                          
                          339,309
                          
                          
                          
                          333,009TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                          
                          $
                          630,171
                          
                          
                          $
                          582,845





See notes
to condensed consolidated financial statements.


3





CAL-MAINE
FOODS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF INCOME


(in
thousands, except per share amounts)


(unaudited)





13 Weeks Ended
                        
                        
                        26 Weeks EndedNovember 28,
                          2009
                        
                        
                        November 29,
                          2008
                        
                        
                        November 28,
                          2009
                        
                        
                        November 29,
                          2008Net
      sales
                        
                        $
                        229,233
                        
                        
                        $
                        238,314
                        
                        
                        $
                        416,899
                        
                        
                        $
                        445,202Cost
      of sales
                        
                        
                        182,406
                        
                        
                        
                        180,298
                        
                        
                        
                        351,855
                        
                        
                        
                        346,539Gross
      profit
                        
                        
                        46,827
                        
                        
                        
                        58,016
                        
                        
                        
                        65,044
                        
                        
                        
                        98,663Selling,
      general, and administrative
                        
                        
                        21,392
                        
                        
                        
                        14,892
                        
                        
                        
                        44,910
                        
                        
                        
                        37,558Operating
      income
                        
                        
                        25,435
                        
                        
                        
                        43,124
                        
                        
                        
                        20,134
                        
                        
                        
                        61,105Other
      income (expense):Interest
      expense, net
                        
                        
                        (1,675
                        )
                        
                        
                        (1,212
                        )
                        
                        
                        (3,391
                        )
                        
                        
                        (2,429
                        )Other
                        
                        
                        876
                        
                        
                        
                        880
                        
                        
                        
                        1,033
                        
                        
                        
                        1,533(799
                        )
                        
                        
                        (332
                        )
                        
                        
                        (2,358
                        )
                        
                        
                        (896
                        )Income
      before income tax
                        
                        
                        24,636
                        
                        
                        
                        42,792
                        
                        
                        
                        17,776
                        
                        
                        
                        60,209Income
      tax expense
                        
                        
                        9,045
                        
                        
                        
                        14,888
                        
                        
                        
                        7,019
                        
                        
                        
                        21,130Net
      income
                        
                        
                        15,591
                        
                        
                        
                        27,904
                        
                        
                        
                        10,757
                        
                        
                        
                        39,079Net
      (income) loss attributable to noncontrolling interest
                        
                        
                        503
                        
                        
                        
                        (660
                        )
                        
                        
                        1,505
                        
                        
                        
                        (688
                        )Net
      income attributable to Cal-Maine Foods, Inc.
                        
                        $
                        16,094
                        
                        
                        $
                        27,244
                        
                        
                        $
                        12,262
                        
                        
                        $
                        38,391Net
      income per common share:Basic
                        
                        $
                        0.68
                        
                        
                        $
                        1.15
                        
                        
                        $
                        0.52
                        
                        
                        $
                        1.62Diluted
                        
                        $
                        0.67
                        
                        
                        $
                        1.14
                        
                        
                        $
                        0.51
                        
                        
                        $
                        1.61Dividends
      declared per common share
                        
                        $
                        0.172
                        
                        
                        $
                        0.382
                        
                        
                        $
                        0.172
                        
                        
                        $
                        0.539Weighted
      average shares outstanding:Basic
                        
                        
                        23,807
                        
                        
                        
                        23,789
                        
                        
                        
                        23,799
                        
                        
                        
                        23,750Diluted
                        
                        
                        23,881
                        
                        
                        
                        23,826
                        
                        
                        
                        23,873
                        
                        
                        
                        23,797





See notes
to condensed consolidated financial statements.




4




CAL-MAINE
FOODS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(in
thousands)


(unaudited)




26
      Weeks EndedNovember 28, 2009
                
                
                November 29, 2008Operating
      ActivitiesNet
      income
                
                $
                10,757
                
                
                $
                39,079Noncontrolling
      interest allocation
                
                
                1,505
                
                
                
                (688
                )Depreciation
      and amortization
                
                
                15,019
                
                
                
                13,098Other
      adjustments/net
                
                
                9,384
                
                
                
                (11,193
                )Net
      cash provided by operating activities
                
                
                36,665
                
                
                
                40,296Investing
      ActivitiesPurchases
      of investments
                
                
                (8,167
                )
                
                
                (7,225
                )Sales
      of investments
                
                
                15,265
                
                
                
                10,515Acquisition
      of businesses, net of cash acquired
                
                
                (508
                )
                
                
                (29,757
                )Cash
      in escrow designated for acquisition
                
                
                —
                
                
                
                (60,672
                )Purchases
      of property, plant and equipment
                
                
                (10,763
                )
                
                
                (15,143
                )Payments
      received on notes receivable
                
                
                651
                
                
                
                555Increase
      in notes receivable
                
                
                (705
                )
                
                
                (896
                )Net
      proceeds from disposal of property, plant and equipment
                
                
                1,179
                
                
                
                268Net
      cash used in investing activities
                
                
                (3,048
                )
                
                
                (102,355
                )Financing
      ActivitiesProceeds
      from issuance of common stock from treasury
                
                
                317
                
                
                
                248Payment
      of purchase obligation
                
                
                (8,150
                )
                
                
                (12,425
                )Proceeds
      from long-term borrowings
                
                
                30,000
                
                
                
                26,000Principal
      payments on long-term debt
                
                
                (8,031
                )
                
                
                (4,512
                )Payments
      of dividends
                
                
                (3,425
                )
                
                
                (15,967
                )Net
      cash provided by (used in) financing activities
                
                
                10,711
                
                
                
                (6,656
                )Net
      change in cash and cash equivalents
                
                
                44,328
                
                
                
                (68,715
                )Cash
      and cash equivalents at beginning of period
                
                
                66,883
                
                
                
                94,858Cash
      and cash equivalents at end of period
                
                $
                111,211
                
                
                $
                26,143





See notes
to condensed consolidated financial statements.




5





CAL-MAINE
FOODS, INC. AND SUBSIDIARIES


Notes to
Condensed Consolidated Financial Statements


(in
thousands, except per share amounts)


November
28, 2009


(unaudited)


1.
            Presentation
      of Interim Information





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X.  Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.  In the opinion of management, all
adjustments, consisting of normal recurring adjustments, considered necessary
for a fair presentation have been included. Preparation of condensed
consolidated financial statements requires us to make estimates and
assumptions.  These estimates and assumptions affected reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the condensed consolidated financial statements and
the reported amounts of revenues and expenses during the reporting
period.  Operating results for the thirteen and twenty-six weeks ended
November 28, 2009 are not necessarily indicative of the results that may be
expected for the year ending May 29, 2010.





The
balance sheet at May 30, 2009 has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.





For
further information, refer to the consolidated financial statements and
footnotes thereto included in Cal-Maine Foods, Inc.'s annual report on Form 10-K
for the fiscal year ended May 30, 2009.





Subsequent
events have been evaluated through the time of filing on January 5, 2010, which
represents the date the Condensed Consolidated Financial Statements were issued.
References to “we,” “us,” “our,” or the “Company” refer to Cal-Maine Foods,
Inc.




Hillandale,
LLC Acquisition





During
the first quarter of fiscal 2010, we made the final payment of $8,150 on the
Hillandale, LLC purchase obligation.  Effective July 30, 2009,
Hillandale, LLC was merged into Cal-Maine Foods, Inc. Refer to Note 2 of our May
30, 2009 audited financial statements for further information on the Hillandale
Acquisition.





Benton
County Foods, LLC Acquisition





We  now
own 100% of Benton County Foods, LLC.  We purchased the remaining 10%
ownership interest in Benton County Foods, LLC for $508 in the first quarter of
fiscal 2010.  Refer to Note 2 of our May 30, 2009 audited financial
statements for further information on the Benton County Foods, LLC
Acquisition.




Stock
Compensation Plans




Total
stock based compensation expense for the twenty-six weeks ended November 28,
2009 and November 29, 2008 was $1,086 and $326, respectively.  Our
liabilities associated with Stock Appreciation Rights as of November 28, 2009
and November 29, 2008 was $4,376 and $4,654, respectively.





During
the twenty-six weeks, ended November 28, 2009, options were exercised for 18
shares of common stock. Proceeds from the exercise of these options amounted to
$107.  The Company made no stock-based grants during the twenty-six
weeks ended November 28, 2009.  Refer to Note 11 of our May 30, 2009
audited financial statements for further information on our stock compensation
plans.




6


2.
            Inventories





Inventories consisted of the
following:





November 28, 2009
                  
                  
                  May 30, 2009Flocks
                  
                  $
                  62,288
                  
                  
                  $
                  64,040Eggs
                  
                  
                  8,153
                  
                  
                  
                  6,880Feed
      and supplies
                  
                  
                  28,124
                  
                  
                  
                  26,615$
                  98,565
                  
                  
                  $
                  97,535





3.
            Debt





The
Company entered into a loan agreement dated November 12, 2009 with Metropolitan
Life Insurance Company, pursuant to which the Company issued a Secured
Promissory Note due November 1, 2019 for borrowings in the principal amount of
$30,000(the “Note”).  The annual interest rate on the Note is
6.20%.  Proceeds from the Note were used to fund working
capital.   This Note is secured by mortgages, security
agreements, assignments of lease and rents with respect to certain of the
Company’s egg production, feed mill, grain storage, and related facilities
located in Florida.





At
November 28, 2009, the Company maintained a $40,000 revolving line of credit
with three banks.  This line of credit matured on December 31, 2009,
and the Company did not renew the line of credit.  On the maturity
date, there was no outstanding balance on this line of credit. There was $3,900
of this revolving line of credit utilized for standby letters of
credit.  The standby letters of credit, which remain outstanding, are
collateralized with cash.





The
Company has entered into and borrowed proceeds under a revolving line of credit
with UBS Financial Services Inc. (“UBS”).   This revolving line
of credit is collateralized by auction rate securities in our account with
UBS.  As of November 28, 2009, the balance owed under this revolving
line of credit was $24,948.  This revolving line of credit is a net no
cost loan.   Thus, the interest expense on this revolving line of
credit is equal to the interest income we receive on the auction rate securities
held in our account.   This loan becomes due and payable as the
auction rate securities are liquidated.    Attributable to
this payback feature, we have classified the entire amount owed under this
revolving line of credit in the current liability portion of our condensed
consolidated balance sheet in the line item current maturities of long-term
debt, since the auction rate securities that collateralize this debt are
correspondingly classified as current assets.





4.
            Legal
      Proceedings





We are
defendants in certain legal actions.  It is our opinion, based on
advice of legal counsel, that the outcome of these actions cannot be reasonably
estimated nor can we determine the probable outcome of these legal actions.
Please refer to Part II, Item 1, of this report for a description of certain
pending legal proceedings.




7


5.
            Net
      Income per Common Share





Basic net
income per share was calculated by dividing net income by the weighted-average
number of common shares outstanding during the period.  Diluted net
income per share was calculated by dividing net income by the weighted-average
number of common shares outstanding during the period plus the dilutive effects
of options and warrants.  The computations of basic and diluted net
income per share attributable to the Company are as follows:





13 weeks ended
                          
                          
                          26 weeks endedNovember 28, 2009
                          
                          
                          November 29, 2008
                          
                          
                          November 28, 2009
                          
                          
                          November 29, 2008Net
      income attributable to Cal-Maine Foods, Inc.
                          
                          $
                          16,094
                          
                          
                          $
                          27,244
                          
                          
                          $
                          12,262
                          
                          
                          $
                          38,391Basic
      weighted-average common shares outstanding
                          
                          
                          23,807
                          
                          
                          
                          23,789
                          
                          
                          
                          23,799
                          
                          
                          
                          23,750Effect
      of dilutive securities:Common
      stock options
                          
                          
                          74
                          
                          
                          
                          37
                          
                          
                          
                          74
                          
                          
                          
                          47Dilutive
      common shares outstanding
                          
                          
                          23,881
                          
                          
                          
                          23,826
                          
                          
                          
                          23,873
                          
                          
                          
                          23,797Net
      income per common share attributable to Cal-Maine Foods
    Inc:Basic
                          
                          $
                          0.68
                          
                          
                          $
                          1.15
                          
                          
                          $
                          0.52
                          
                          
                          $
                          1.62Diluted
                          
                          $
                          0.67
                          
                          
                          $
                          1.14
                          
                          
                          $
                          0.51
                          
                          
                          $
                          1.61





6.
            Dividends
      declared per common share





Dividends
declared per common share is the average dividend declared on all classes of
common stock, calculated by dividing the dividends declared for the period by
the average number of common shares outstanding for the period.





7.
            Investment
      securities (available-for-sale and
trading)





Our
investment securities are accounted for in accordance with Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 320
(“ASC 320”). Our investment securities are stated at fair value.  They
consist of auction rate securities, which we classify as trading, and high
quality short-term municipal bonds, which we classify as available-for-sale.
Under ASC 320, securities purchased to be held for an indeterminate period of
time and not intended at the time of purchase to be held until maturity are
classified as available-for-sale securities with any unrealized gains and losses
reported as a separate component of accumulated other comprehensive
loss.  Trading securities are bought and held principally for selling
them. Unrealized holding gains and losses for trading securities are included in
earnings.





Our
auction rate securities were purchased from UBS.  They are long-term
debt obligations, which were rated AAA at the date of purchase. Although some of
the obligations have maintained their AAA rating, some of the securities have
declined to a rating of AA. The ratings on the auction rate securities take into
account credit support through insurance policies guaranteeing each of the
bonds’ payment of principal and accrued interest. Liquidity for these securities
has historically been provided by an auction process that resets interest rates
on these investments on average every 7-35 days. However, as was reported in the
financial press, the disruptions in the credit markets adversely affected the
auction market for these types of securities.





On August
8, 2008, UBS agreed to a settlement in principle with the Securities and
Exchange Commission, the New York Attorney General, the Massachusetts Securities
Division, the Texas State Securities Board, and other state regulatory agencies
represented by the North American Securities Administrators Association to
restore liquidity to all remaining UBS clients who hold auction rate securities.
On November 3, 2008, we agreed to accept Auction Rate Security Rights (the
“Rights”) from UBS offered through a UBS prospectus dated October 7, 2008. The
Rights permit us to sell, or put, our auction rate securities back to UBS at par
value anytime during the period from June 30, 2010 through July 2, 2012. We
expect to exercise our Rights and put our auction rate securities back to UBS on
June 30, 2010, the earliest date allowable under the Rights.




8


By
accepting the Rights, we can no longer assert that we have the intent to hold
the auction rate securities until anticipated recovery. Accordingly, we have
classified our investments in auction rate securities as trading securities. As
of the date of our acceptance of the Rights, the change in fair value of the
auction rate securities and Rights are included in earnings. Because we will be
permitted to put the auction rate securities back to UBS at par value, we have
accounted for the Rights as a separate asset that is measured at its fair value,
resulting in gains in an amount equal to the loss recognized on the auction rate
securities. Although the Rights represent the right to sell the securities back
to UBS at par, we periodically assess the economic ability of UBS to meet that
obligation in assessing the fair value of the Rights. We have classified the
auction rate securities and the related Rights as current investments as of
November 28, 2009 because we have the ability to put the auction rate securities
back to UBS on June 30, 2010.  The fair value of the auction rate
securities and Rights totaled $33,000 at November 28, 2009 and $33,150 at May
30, 2009.





At
November 28, 2009, we have $7,506 of current investment securities
available-for-sale and $711 of non-current investment securities
available-for-sale consisting primarily of high quality short-term municipal
bonds with maturities of three to fifteen months when purchased. Due to the
nature of the investments, the cost of available-for-sale securities
approximated fair value at November 28, 2009. Accordingly, other comprehensive
income (loss) has not been recognized as a separate component of stockholders'
equity in regards to the investment securities available-for-sale.





8.
            Fair
      value





The
Company 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 - Quoted prices in active markets for similar assets or liabilities,
      quoted prices in markets that are not active, or inputs other than quoted
      prices that are observable for the asset or
  liability




•
            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
disclosure of fair value of certain financial assets and liabilities that are
recorded at cost are as follows:




Cash and cash
equivalents:The carrying amount
approximates fair value due to the short maturity of these
instruments.




Long-term debt:The carrying value of
the Company’s long-term debt is at amortized cost.  We have not
elected to carry our long-term debt at fair value.  Fair values for
debt are based on quoted market prices or published forward interest rate
curves. The fair value and carrying value of the Company’s borrowings under its
credit facilities and long-term debt were as follows:




November 28, 2009
                  
                  
                  May 30, 2009Fair Value
                  
                  
                  Carrying Value
                  
                  
                  Fair Value
                  
                  
                  Carrying ValueTotal
      Debt
                  
                  $
                  150,686
                  
                  
                  $
                  151,757
                  
                  
                  $
                  130,868
                  
                  
                  $
                  129,789




9


Assets
Measured at Fair Value on a Recurring Basis





Assets
measured at fair value on a recurring basis consisted of the following types of
instruments as of November 28, 2009:





Fair Value Measurements at Reporting Date UsingQuoted Pricesin Active
                    
                    
                    SignificantMarkets for
                    
                    
                    Other
                    
                    
                    SignificantIdentical
                    
                    
                    Observable
                    
                    
                    UnobservableInstruments
                    
                    
                    Inputs
                    
                    
                    Inputs
                    
                    
                    Total(In
      thousands)
                    
                    (Level1)
                    
                    
                    (Level2)
                    
                    
                    (Level3)
                    
                    
                    BalanceInvestment
      securities available-for-sale (Current)
                    
                    $
                    —
                    
                    
                    $
                    7,506
                    
                    
                    $
                    —
                    
                    
                    $
                    7,506Investment
      securities available-for-sale (Non-current)
                    
                    
                    —
                    
                    
                    
                    711
                    
                    
                    
                    —
                    
                    
                    
                    711Investment securities
      trading (Current) 1
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    33,000
                    
                    
                    
                    33,000Total
      assets measured at fair value
                    
                    $
                    —
                    
                    
                    $
                    8,217
                    
                    
                    $
                    33,000
                    
                    
                    $
                    41,217





1
      –
              The
      investment securities (trading) are the aggregate fair value of the
      auction rate securities and the Rights.   The fair value of
      the auction rate securities is $30,753.   The fair value of
      the Rights is $2,247, determined as the difference between the par value
      and the fair value of the auction rate
      securities.    The aggregate fair value of the auction
      rate securities and the Rights is
  $33,000.




Assets
measured at fair value on a recurring basis consisted of the following types of
instruments as of May 30, 2009:





Fair Value Measurements at Reporting Date UsingQuoted Pricesin Active
                    
                    
                    SignificantMarkets for
                    
                    
                    Other
                    
                    
                    SignificantIdentical
                    
                    
                    Observable
                    
                    
                    UnobservableInstruments
                    
                    
                    Inputs
                    
                    
                    Inputs
                    
                    
                    Total(In thousands)
                    
                    (Level1)
                    
                    
                    (Level2)
                    
                    
                    (Level3)
                    
                    
                    BalanceInvestment
      securities available-for-sale (Current)
                    
                    $
                    -
                    
                    
                    $
                    15,165
                    
                    
                    $
                    -
                    
                    
                    $
                    15,165Investment
      securities trading (Non -Current)
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    33,150
                    
                    
                    
                    33,150Total
      assets measured at fair value
                    
                    $
                    -
                    
                    
                    $
                    15,165
                    
                    
                    $
                    33,150
                    
                    
                    $
                    48,315





1
      –
              The
      investment securities (trading) are the aggregate fair value of the
      auction rate securities and the Rights.   The fair value of
      the auction rate securities is $30,336.   The fair value of
      the Rights is $2,814, determined as the difference between the par value
      and the fair value of the auction rate
      securities.    The aggregate fair value of the auction
      rate securities and the Rights is
$33,150





Level 2


We
classified our current and long-term investment securities – available-for-sale
as level 2.   These securities consist of high quality short-term
municipal bonds with maturities of three to fifteen months, when
purchased.   Due to the nature of these securities, they are
reported at cost, which approximates fair value based upon quoted prices for
similar assets in active markets.  Observable inputs for these
securities are yields, credit risks, default rates, and volatility.





Level 3


We
classified our current investment securities – trading as level
3.  These securities consist of auction rate securities and the
Rights. Our auction rate securities consist of two types: formulaic muni auction
rate securities and student loan auction rate securities.   The
formulaic (i.e. formula based) muni auction rate securities are municipal
securities whose maximum rates are generally based on an index multiplied by a
percentage (which is based on the rating of the security).   The
student loan auction rate securities are securities issued by student loan
trusts.




For the
formulaic muni auction rate securities, the observable inputs include credit
risk, and yields or spreads of fixed rate municipal bonds issued by the same or
comparable issuers.  The unobservable input for the formulaic muni
auction rate securities is the assessment of the likelihood of
redemption.  For the student loan auction rate securities, the
observable inputs include tax status, credit risk, duration, insurance wraps,
and the portfolio composition, future cash flows based on maximum rate formulas,
and estimates of observable market data including yields or spreads of trading
instruments that are similar or comparable.  The unobservable input
for the student loan auction rate securities are the likelihood of
redemption.  Due to the combination of observable and unobservable
inputs, we believe that level 3 is the proper classification.


10





In
accordance with accounting guidance in ASC Topic 825 (Financial Instruments), we
have elected the fair value option for our Rights.  The value for the
Rights is derived from the difference between the par value and the fair value
of our auction rate securities.   When a gain or loss is recorded
on our auction rate securities, we record an offsetting gain or loss on the
Rights.   The impact of this treatment is that the auction rate
securities are recorded on our balance sheet at par value.





The
Rights are valued at $2,247 on our condensed consolidated balance sheet at
November 28, 2009.  They are included in the total amountfor “Investments securities trading” in the current asset portion
of our condensed consolidated balance sheet.  The Rights represent a
firm agreement in accordance with ASC Topic 815(Derivatives and Hedging), which
defines a firm agreement as an agreement binding on both parties and usually
legally enforceable.  It hasthe
following characteristics: (a) the agreement specifies all significant terms,
including the quantity to be exchanged, the fixed price, and the timing of the
transaction (b) the agreement includes a disincentive for nonperformance that is
sufficiently large to make performance probable.  The enforceability
of the Rights resulted in a put option that is recognized as a freestanding
asset separate from the auction rate securities.   The Rights do
not meet the definition of a derivative instrument under ASC Topic 815, because
the underlying securities are not readily convertible to
cash.  Therefore, we have elected to measure the Rights at fair value
under ASC Topic 825, which permits an entity to measure certain items at fair
value, to mitigate volatility in reported earnings from the changes in the fair
value of the auction rate securities.  As a result, unrealized gains
and losses will be included in earnings in future periods.  We expect
that future changes in the fair value of the Rights will largely mitigate fair
value movements in the related auction rate securities.





9.       Recent
accounting pronouncements





In June
2009, the FASB issued FASB Statement No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles – a
replacement of FASB Statement No. 162” (“FASB ASC 105”).   FASB
ASC 105 modifies the GAAP hierarchy by establishing only two levels of GAAP,
authoritative and nonauthoritative accounting literature.  Effective
July 2009, the FASB Accounting Standards Codification (“ASC”), also known
collectively as the “Codification”, is considered the single source of
authoritative U.S. accounting and reporting standards, except for additional
authoritative rules and interpretive releases issued by the Securities Exchange
Commission.  The Codification was developed to organize GAAP
pronouncements by topic so that users can more easily access authoritative
accounting guidance.   FASB ASC 105 became effective for the
second quarter of fiscal year 2010.  All other accounting standards
references have been updated in this report with ASC references.





In April
2008, the FASB issued new accounting and disclosure guidance related to the
determination of the useful life of intangible assets that requires entities to
consider their own historical experience in renewing or extending similar
arrangements when developing assumptions regarding the useful lives of
intangible assets and mandates certain related disclosure requirements. The
guidance is effective for fiscal years beginning after December 15, 2008, with
early adoption prohibited. The adoption of this guidance did not have an effect
on the Company’s consolidated financial statements.





In September 2006, the FASB issued new
accounting and disclosure guidance that defines fair value, establishes a
framework for measuring fair value in accounting principles generally accepted
in the United States, and expands disclosures about fair value measurements. It
does not require any new fair value measurements. The new guidance is effective
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years for financial assets and liabilities, and for fiscal years
beginning after November 15, 2008 for all nonrecurring fair value measurements
of nonfinancial assets and liabilities. We adopted the new guidance for
financial assets and liabilities in the first quarter of fiscal 2009 and for
nonrecurring fair value measurements of nonfinancial assets and liabilities in
the first quarter of fiscal 2010. The adoption did not have a significant impact
on our consolidated financial statements.





In April 2009, the FASB issued new
accounting and disclosure guidance that requires disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This guidance also requires those
disclosures in summarized financial information at interim reporting periods and
is effective for interim and annual reporting periods ending after June 15,
2009. The adoption of this guidance did not have an effect on the Company’s
consolidated financial statements.


11


In
December 2007, the FASB issued new accounting and disclosure guidance on how to
recognize, measure and present assets acquired, liabilities assumed,
noncontrolling interests and any goodwill recognized in a business combination.
The objective of this new guidance is to improve the information included in
financial reports about the nature and financial effects of business
combinations. We adopted the new guidance in the first quarter of fiscal 2010,
and we will apply it prospectively to all future business combinations. The
adoption did not have a significant impact on our consolidated condensed
financial statements, and the impact on our consolidated condensed financial
statements in future periods will depend on the nature and size of any future
business combinations.





In
December 2007, the FASB issued new accounting and reporting guidance for a
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. This guidance clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity and should be
reported as equity in the consolidated financial statements, rather than as a
liability or in the mezzanine section between liabilities and equity. The new
guidance also requires consolidated net income to be reported at amounts that
include the amounts attributable to both the parent and the noncontrolling
interest. We adopted the new accounting guidance in the first quarter of fiscal
2010, and we are applying it prospectively.  The new presentation and
disclosure requirements have been applied retrospectively. At May 30, 2009, in
connection with our adoption of these provisions, we reclassified into stockholders’ equity the historical balances
related to noncontrolling interests in consolidated entities. At May 30, 2009,
the carrying amount of noncontrolling interests in consolidated entities was
$958.  See note 10 for additional discussion of the effects of this
change.





In May
2009, the FASB issued authoritative accounting and disclosure guidance for
recognized and non-recognized subsequent events, which occur after the balance
sheet date but occur before the financial statements are issued. The new
guidance requires disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date. We adopted this guidance in the
first quarter of fiscal 2010. The adoption had no impact on our consolidated
condensed financial statements.





10.
            Noncontrolling
      Interest and Pro Forma Information





The
following reflects the stockholders’ equity activity for the twenty six-week
period ended November 28, 2009:





Cal-Maine Foods, Inc.Common Stock(in
      thousands)
                  
                  Amount
                  
                  
                  Class A
                    Amount
                  
                  
                  Treasury
                    Amount
                  
                  
                  Paid inCapital
                  
                  
                  RetainedEarnings
                  
                  
                  Noncontrolling
                    Interest
                  
                  
                  Total EquityBalance
      at May 30, 2009
                  
                  $
                  351
                  
                  
                  $
                  24
                  
                  
                  $
                  (21,045
                  )
                  
                  $
                  32,098
                  
                  
                  $
                  320,623
                  
                  
                  $
                  958
                  
                  
                  $
                  333,009Dividends
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (4,091
                  )
                  
                  
                  
                  
                  
                  
                  (4,091
                  )Issuance
      of common stock from treasury
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  27
                  
                  
                  
                  233
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  260Vesting
      of stock based compensation
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  110
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  110Capital
      distributions
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (736
                  )
                  
                  
                  (736
                  )Net
      income (loss)
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  12,262
                  
                  
                  
                  (1,505
                  )
                  
                  
                  10,757Balance
      November 28, 2009
                  
                  $
                  351
                  
                  
                  $
                  24
                  
                  
                  $
                  (21,018
                  )
                  
                  $
                  32,441
                  
                  
                  $
                  328,794
                  
                  
                  $
                  (1,283
                  )
                  
                  $
                  339,309





Noncontrolling
interests represents the earnings of the Company’s variable interest entities
(“VIEs”) under the consolidation provisions of ASC Topic 810
(Consolidation).    We include in noncontrolling interests,
the portion of earnings attributable to non-affiliated equity owners in
consolidated subsidiaries where we do not own 100% of the equity
interest.     Net loss attributable to noncontrolling
interest for the thirteen-week period ended November 28, 2009 was $503 as
compared to net income attributable to noncontrolling interest of $660 for the
thirteen-week period ended November 29, 2008.





Net loss
attributable to noncontrolling interest for the twenty-six week period ended
November 28, 2009 was $1,505 as compared to net income attributable to
noncontrolling interest of $688 for the twenty-six week period ended November
29, 2008.


12


Upon
adoption of ASC Topic 810, the Company no longer absorbs 100% of the losses
attributable to noncontrolling interests.  Under previous guidance,
the Company absorbed those losses when the attribution of the losses to the
noncontrolling interests would create a deficit balance in the noncontrolling
interest account on the balance sheet.   ASC Topic 810 allows for
the attribution of losses to the noncontrolling interests even when doing so
will create a deficit balance on the balance sheet. The following table
reconciles the reported net income (loss) attributable to Cal-Maine Foods, Inc.
to the pro forma consolidated net income (loss) and net income (loss) per share
that would have been attributable to Cal-Maine Foods, Inc. had the Company not
adopted the provisions of ASC Topic 810 on May 31, 2009:





13 weeks ended
                    
                    
                    26 weeks ended(in thousands, except per share amount)
                    
                    November 28,2009
                    
                    
                    November 29,2008
                    
                    
                    November 28,2009
                    
                    
                    November 29,2008Net
      income attributed to Cal-Maine Foods, Inc., as reported
                    
                    $
                    16,094
                    
                    
                    $
                    27,244
                    
                    
                    $
                    12,262
                    
                    
                    $
                    38,391Pro
      forma loss attributable to noncontrolling interest had the Company not
      adopted the provisions of ASC Topic 810
                    
                    
                    (506
                    )
                    
                    
                    —
                    
                    
                    
                    (1,098
                    )
                    
                    
                    —Net
      income attributed to Cal-Maine Foods, Inc., pro forma
                    
                    $
                    15,588
                    
                    
                    $
                    27,244
                    
                    
                    $
                    11,164
                    
                    
                    $
                    38,391Basic
      net income per share attributable to Cal-Maine Foods, Inc’s common
      shareholders, as reported
                    
                    $
                    0.68
                    
                    
                    $
                    1.15
                    
                    
                    $
                    0.52
                    
                    
                    $
                    1.62Basic
      net income per share attributable to Cal-Maine Foods, Inc’s common
      shareholders, pro forma
                    
                    $
                    0.65
                    
                    
                    $
                    1.15
                    
                    
                    $
                    0.47
                    
                    
                    $
                    1.62Diluted
      net income per share attributable to Cal-Maine Foods, Inc’s common
      shareholders, as reported
                    
                    $
                    0.67
                    
                    
                    $
                    1.14
                    
                    
                    $
                    0.51
                    
                    
                    $
                    1.61Diluted
      net income per share attributable to Cal-Maine Foods, Inc’s common
      shareholders, pro forma
                    
                    $
                    0.65
                    
                    
                    $
                    1.14
                    
                    
                    $
                    0.47
                    
                    
                    $
                    1.61





11.
            Insurance
      Receivable





On July
9, 2009, the Farwell, TX egg production complex was damaged by a fire. The
700-acre facility includes a processing plant, feed mill, two pullet houses, and
nine layer houses. The fire completely destroyed four of the nine layer houses,
with additional loss of laying hens at a fifth house due to smoke inhalation.
The Company believes the effects of lost production and additional expenses
related to the fire will be substantially reimbursed by the Company’s insurance
carriers.  The Company has received $10,000 in proceeds from its
insurance carriers through November 28, 2009 and anticipates additional
insurance proceeds to cover its losses due to the fire. The Company intends to
seek reimbursement for all of its insured losses, including lost profits and
expenses. The book value of assets written off and expenses incurred as the
result of the fire totaled $9,527 through November 28, 2009. Insurance proceeds
have been recognized in the consolidated income statement for the 26-week period
ended November 28, 2009 to offset the assets written off and expenses
incurred.  No gain, if any, will be recognized until all contingencies
surrounding the resolution of the insurance claim are resolved, which is
expected to occur in calendar 2010.


13


ITEM
      2.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





This
report contains numerous forward-looking statements relating to our shell egg
business, including estimated production data, expected operating schedules,
expected capital costs and other operating data. Such forward-looking statements
are identified by the use of words such as "believes," "intends," "expects,"
"hopes," "may," "should," "plan," "projected," "contemplates," "anticipates" or
similar words. Actual production, operating schedules, results of operations and
other projections and estimates could differ materially from those projected in
the forward-looking statements. The factors that could cause actual results to
differ materially from those projected in the forward-looking statements include
(i) the risk factors set forth under Item 1A of our Annual Report on Form 10-K
for the fiscal year ended May 30, 2009, (ii) the risks and hazards inherent in
the shell egg business (including disease, pests, and weather conditions), (iii)
changes in the market prices of shell eggs, and (iv) changes or obligations that
could result from our future acquisition of new flocks or businesses. Readers
are cautioned not to put undue reliance on forward-looking statements. We
disclaim any intent or obligation to update publicly these forward-looking
statements, whether because of new information, future events or
otherwise.





OVERVIEW





Cal-Maine
Foods, Inc. (“we”, “us”, “our”, or the “Company”) is primarily engaged in the
production, grading, packaging, marketing and distribution of fresh shell
eggs.  Our fiscal year end is the Saturday closest to May
31.





Our
operations are fully integrated.  At our facilities we hatch chicks,
grow and maintain flocks of pullets (young female chickens, usually under 20
weeks of age), layers (mature female chickens) and breeders (male or female
birds used to produce fertile eggs to be hatched for egg production flocks),
manufacture feed, and produce, process and distribute shell eggs. We are the
largest producer and marketer of shell eggs in the United States.  We
market the majority of our shell eggs in 29 states, primarily in the
southwestern, southeastern, mid-western, and mid-Atlantic regions of the United
States.  We market our shell eggs through our extensive distribution
network to a diverse group of customers, including national and regional grocery
store chains, club stores, foodservice distributors, and egg product
manufacturers.





Our
operating results are directly tied to egg prices, which are highly volatile and
subject to wide fluctuations, and are outside of our control. The shell egg
industry has traditionally been subject to periods of high profitability
followed by periods of significant loss. In the past, during periods of high
profitability, shell egg producers have tended to increase the number of layers
in production with a resulting increase in the supply of shell eggs, which
generally has caused a drop in shell egg prices until supply and demand return
to balance.  As a result, our financial results from year to year may
vary significantly.   Shorter term, retail sales of shell eggs
historically have been greatest during the fall and winter months and lowest
during the summer months.  Our need for working capital generally is
highest in the last and first fiscal quarters ending in May and August,
respectively, when egg prices are normally at seasonal
lows.   Prices for shell eggs fluctuate in response to seasonal
factors and a natural increase in shell egg production during the spring and
early summer.  Shell egg prices tend to increase with the start of the
school year and are highest prior to holiday periods, particularly Thanksgiving,
Christmas, and Easter.  Consequently, we generally experience lower
sales and net income in our first and fourth fiscal quarters ending in August
and May, respectively. Because of these seasonal and quarterly fluctuations,
comparisons of our sales and operating results between different quarters within
a single fiscal year are not necessarily meaningful comparisons.





For the
quarter ended November 28, 2009, we produced approximately 80% of the total
number of shell eggs sold by us, with approximately 10% of such total shell egg
production being with contract producers.  Contract producers operate
under agreements with us for the use of their facilities in the production of
shell eggs by layers owned by us. We own the shell eggs produced under these
arrangements.  Approximately 20% of the total number of shell eggs
sold by us was purchased from outside producers.





Our cost
of production is materially affected by feed costs, which currently average
about 61% of our total farm egg production cost.  Changes in market
prices for corn and soybean meal, the primary ingredients of the feed we use,
result in changes in our cost of goods sold.   The cost of our
feed ingredients, which are commodities, are subject to factors over which we
have little or no control such as volatile price changes caused by weather, size
of harvest, transportation and storage costs, demand and the agricultural and
energy policies of the United States and foreign governments.  The
corn and soybean crops are very large for the 2009 crop
year.   Prices have moved down recently from levels seen during
the summer months, but remain high on a historical basis.  Market
prices for corn remain higher in part because of increasing demand from ethanol
producers. Market prices for soybean meal remain higher because of competition
for acres from other grain producers.  Feed costs, while much
improved, will likely remain relatively high, and could be volatile in the year
ahead.


14





The
purchase of Tampa Farms, LLC on November 28, 2008 described in note 2 of our May
30, 2009 audited financial statements is referred to below as the
“Acquisition".





RESULTS
OF OPERATIONS





The following table sets forth, for the
periods indicated, certain items from our Condensed Consolidated Statements of
Income expressed as a percentage of net sales.





Percentage of Net Sales13 weeks ended
                  
                  
                  26 weeks endedNovember 28, 2009
                  
                  
                  November 29, 2008
                  
                  
                  November 28, 2009
                  
                  
                  November 29, 2008Net
      sales
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %Cost
      of Sales
                  
                  
                  79.6
                  
                  
                  
                  75.7
                  
                  
                  
                  84.4
                  
                  
                  
                  77.8Gross
      profit
                  
                  
                  20.4
                  
                  
                  
                  24.3
                  
                  
                  
                  15.6
                  
                  
                  
                  22.2Selling,
      general, and administrative
                  
                  
                  9.3
                  
                  
                  
                  6.2
                  
                  
                  
                  10.8
                  
                  
                  
                  8.4Operating
      income
                  
                  
                  11.1
                  
                  
                  
                  18.1
                  
                  
                  
                  4.8
                  
                  
                  
                  13.8Other
      expense
                  
                  
                  (0.3
                  )
                  
                  
                  (0.1
                  )
                  
                  
                  (0.6
                  )
                  
                  
                  (0.2
                  )Income
      before income tax
                  
                  
                  10.8
                  
                  
                  
                  18.0
                  
                  
                  
                  4.2
                  
                  
                  
                  13.6Income
      tax expense
                  
                  
                  3.9
                  
                  
                  
                  6.2
                  
                  
                  
                  1.7
                  
                  
                  
                  4.7Net
      income
                  
                  
                  6.9
                  
                  
                  
                  11.8
                  
                  
                  
                  2.5
                  
                  
                  
                  8.9Net
      (income) loss attributable to noncontrolling interest
                  
                  
                  0.1
                  
                  
                  
                  (0.3
                  )
                  
                  
                  0.4
                  
                  
                  
                  (0.2
                  )Net
      income attributable to Cal-Maine Foods, Inc.
                  
                  
                  7.0
                  %
                  
                  
                  11.5
                  %
                  
                  
                  2.9
                  %
                  
                  
                  8.7
                  %





NET
SALES





Year-
to-date, approximately 95% of our net sales consist of shell egg sales and
approximately 3% was for sales of egg products, with the 2% balance consisting
of sales of incidental feed and feed ingredients.  Net sales for the
thirteen-week period ended November 28, 2009 were $229.2 million, a decrease of
$9.1 million or 3.8%, as compared to net sales of $238.3 million for the
thirteen-week period ended November 29, 2008.  Total dozens of eggs
sold increased and egg-selling prices decreased in the current thirteen-week
period as compared to the same comparable thirteen-week period in fiscal 2009.
Dozens sold for the current thirteen-week period were 206.3 million dozen, an
increase of 21.1 million dozen, or 11.4% as compared to the similar
thirteen-week period of fiscal 2009.  During this quarter, there was
good demand for eggs at the retail level, but a declining demand for eggs from
the institutional and food service sectors.  Our net average selling
price per dozen for the thirteen-week period ended November 28, 2009 was $1.057,
compared to $1.209 for the thirteen-week period ended November 29, 2008, a
decrease of $.152 per dozen, or 12.6%. The net average selling price per dozen
is the blended price for all sizes and grades of shell eggs, including
non-graded egg sales, breaking stock and undergrades.





On a
comparable basis, excluding the Acquisition, net sales for the thirteen-week
period ended November 28, 2009 were $205.3 million, a decrease of $33.0 million,
or 13.8%, as compared to net sales of $238.3 million for the thirteen-week
period ended November 29, 2008.   Dozens sold for the
thirteen-week period ended November 28, 2009, excluding the Acquisition, were
185.4 million, an increase of 200,000, or 0.1% as compared to 185.2 million for
the thirteen-week period ended November 29, 2008.





Our egg
product sales represent approximately 3% of our net sales. For the thirteen
weeks, ended November 28, 2009, egg product sales were $7.7 million, a decrease
of $4.0 million, or 34.2%, as compared to $11.7 million for the same thirteen-
week period last year. Egg products are primarily sold into the institutional
and food service sectors, and the sizeable decrease in egg products sales is
attributable to the declines in these sectors.





Net sales
for the twenty-six week period ended November 28, 2009 were $416.9 million, a
decrease of $28.3 million, or 6.4% compared to net sales of $445.2 million for
the fiscal 2009 twenty-six week period.  Dozens sold for the current
twenty-six week period were 399.3 million compared to 355.8 million for the same
twenty-six week period in fiscal 2009, an increase of 43.5 million dozen, or
12.2%.  For the current fiscal 2010 twenty-six week period, our net
average selling price per dozen was $.992, compared to $1.173 per dozen for the
same period last year, a decrease of $.181 per dozen, or 15.4%.


15


On a
comparable basis, excluding the Acquisition, net sales for the twenty-six week
period ended November 28, 2009 were $372.4 million, a decrease of $72.8 million,
or 16.4%, as compared to net sales of $445.2 million for the twenty-six week
period ended November 29, 2008.   Dozens sold for the twenty-six
week period ended November 28, 2009, excluding the Acquisition, were 358.2
million, an increase of 2.4 million, or 0.7% as compared to 355.8 million for
the twenty-six week period ended November 29, 2008.





For the
twenty-six week period ended November 28, 2009, egg product sales were $13.7
million, a decrease of $8.2 million, or 37.4%, as compared to $21.9 million for
the same twenty-six week period last year. Egg products are primarily sold into
the institutional and food service sectors, and the sizeable decrease in egg
products sales is attributable to the declines in these sectors.





The table
below represents an analysis of our non-specialty and specialty shell egg
sales.  Following the table is a discussion of the information
presented in the table.





13 weeks ended
                  
                  
                  26 weeks ended(Amounts in thousands)
                  
                  November 28, 2009
                  
                  
                  November 29, 2008
                  
                  
                  November 28, 2009
                  
                  
                  November 29, 2008Total
      net sales
                  
                  $
                  229,233
                  
                  
                  $
                  238,314
                  
                  
                  $
                  416,899
                  
                  
                  $
                  445,202Non-specialty
      shell egg sales
                  
                  $
                  173,087
                  
                  
                  $
                  183,307
                  
                  
                  $
                  310,937
                  
                  
                  $
                  343,476Specialty
      shell egg sales
                  
                  
                  44,873
                  
                  
                  
                  40,573
                  
                  
                  
                  85,070
                  
                  
                  
                  74,006Other
                  
                  
                  698
                  
                  
                  
                  738
                  
                  
                  
                  1,520
                  
                  
                  
                  1,684Net
      shell egg sales
                  
                  $
                  218,658
                  
                  
                  $
                  224,618
                  
                  
                  $
                  397,527
                  
                  
                  $
                  419,166Net
      shell egg sales as a percent of total net sales
                  
                  
                  95
                  %
                  
                  
                  94
                  %
                  
                  
                  95
                  %
                  
                  
                  94
                  %Non-specialty
      shell egg dozens sold
                  
                  
                  178,065
                  
                  
                  
                  158,920
                  
                  
                  
                  345,674
                  
                  
                  
                  307,946Specialty
      shell egg dozens sold
                  
                  
                  28,186
                  
                  
                  
                  26,273
                  
                  
                  
                  53,624
                  
                  
                  
                  47,898Total
      dozens sold
                  
                  
                  206,251
                  
                  
                  
                  185,193
                  
                  
                  
                  399,298
                  
                  
                  
                  355,844





Our
non-specialty shell eggs include all shell egg sales not specifically identified
as specialty shell egg sales.   The non-specialty shell egg
market is characterized by an inelasticity of demand, and small increases in
production or decreases in demand can have a large adverse effect on prices and
vice-versa.  For the thirteen-week period ended November 28, 2009,
non-specialty shell eggs represented approximately 79.2% of our shell egg dollar
sales, as compared to 81.6%, for the thirteen-week period ended November 29,
2008.   For the thirteen-week period ended November 28, 2009,
non-specialty shell eggs accounted for approximately 86.3% of the total shell
egg dozen volume, as compared to 85.8% for the thirteen-week period ended
November 29, 2008.





For the
twenty-six week period ended November 28, 2009, non-specialty shell eggs
represented approximately 78.2% of our shell egg dollar sales, as compared to
81.9% for the twenty-six week period ended November 29,
2008.   For the twenty-six week period ended November 28, 2009,
non-specialty shell eggs accounted for approximately 86.6% of the total shell
egg dozen volumes, as compared to 86.5% for the twenty-six week period ended
November 29, 2008.





We
continue to increase our sales volume of specialty eggs, which include
nutritionally enhanced, cage free and organic eggs. Specialty egg retail prices
are less cyclical than standard shell egg prices and are generally higher due to
consumer willingness to pay for the increased benefits from these products. For
the thirteen-week period ended November 28, 2009, specialty shell eggs
represented approximately 20.5% of our shell egg dollar sales, as compared to
18.1%, for the thirteen-week period ended November 29, 2008. For the
thirteen-week period ended November 28, 2009, specialty shell eggs accounted for
approximately 13.7% of the total shell egg dozen volume, as compared to 14.2%
for the thirteen-week period ended November 29, 2008. This decline is due to the
weak economy and consumers increasingly demanding lower priced
eggs.





The shell egg sales classified as other
represent sales of hard cooked eggs, hatching eggs, and baby chicks, which are
included with our shell egg operations.




16




For the
twenty-six week period ended November 28, 2009, specialty shell eggs represented
approximately 21.4% of our shell egg dollar sales, as compared to 17.7% for the
twenty-six week period ended November 29, 2008. For the twenty-six week period
ended November 28, 2009, specialty shell eggs accounted for approximately 13.4%
of the total shell egg dozen volumes, as compared to 13.5% for the twenty-six
week period ended November 29, 2008.





COST OF
SALES





The
following table presents the key variables affecting our cost of
sales.





13 weeks ended
                  
                  
                  26 weeks ended(Amounts in thousands)
                  
                  November 28,
                    2009
                  
                  
                  November 29,
                    2008
                  
                  
                  November 28,
                    2009
                  
                  
                  November 29,
                    2008Cost
      of sales
                  
                  $
                  182,406
                  
                  
                  $
                  180,298
                  
                  
                  $
                  351,855
                  
                  
                  $
                  346,539Dozens
      produced
                  
                  
                  164,647
                  
                  
                  
                  142,868
                  
                  
                  
                  320,790
                  
                  
                  
                  276,510Dozens
      purchased outside*
                  
                  
                  41,604
                  
                  
                  
                  42,325
                  
                  
                  
                  78,508
                  
                  
                  
                  79,334Dozens
      sold
                  
                  
                  206,251
                  
                  
                  
                  185,193
                  
                  
                  
                  399,298
                  
                  
                  
                  355,844Feed
      cost (price per dozen produced)
                  
                  $
                  0.347
                  
                  
                  $
                  0.385
                  
                  
                  $
                  0.352
                  
                  
                  $
                  0.417Farm
      production cost (price per dozen produced)
                  
                  $
                  0.556
                  
                  
                  $
                  0.605
                  
                  
                  $
                  0.573
                  
                  
                  $
                  0.636Outside
      egg purchases (average price paid per dozen)
                  
                  $
                  1.126
                  
                  
                  $
                  1.190
                  
                  
                  $
                  1.084
                  
                  
                  $
                  1.155





*Net of processing
loss and inventory adjustments


Cost of sales consists of costs
directly related to production and processing of shell eggs, including feed
costs, and purchases of shell eggs from outside egg producers. Total cost of
sales for the thirteen-week period ended November 28, 2009 was $182.4 million,
an increase of $2.1 million, or 1.2% as compared to the cost of sales of $180.3
million for the thirteen-week period ended November 29, 2008.  On a
comparable basis, excluding the Acquisition, cost of sales for the thirteen-week
period ended November 28, 2009 was $162.8 million, a decrease of $17.5 million,
or 9.7% as compared to $180.3 million for the thirteen-week period ended
November 29, 2008.  This decrease is the result of lower costs of feed
ingredients and costs of shell eggs purchased from outside producers. Feed cost
for the thirteen-week period ended November 28, 2009 was $.347 per dozen, a
decrease of 9.9%, as compared to cost per dozen of $.385 for the same
thirteen-week period in fiscal 2009.   Decreases in feed cost are
the result of lower market prices for corn and soybean meal, primary ingredients
for the feed we use. Although feed costs decreased, our average shell egg
selling prices decreased by a larger amount, which resulted in a net decrease in
gross profit from 24.3% of net sales for the thirteen-week period ended November
29, 2008 to 20.4% of net sales for the thirteen-week period ended November 28,
2009.





For the twenty-six week period ended
November 28, 2009, total cost of sales was $351.9 million, an increase of $5.4
million, or 1.6%, as compared to cost of sales of $346.5 million for the
twenty-six week period ended November 29, 2008. On a comparable basis, excluding
the Acquisition, cost of sales for the twenty-six week period ended November 28,
2009 was $312.8 million, a decrease of $33.7 million, or 9.7% as compared to
$346.5 million for the twenty-six week period ended November 29, 2008. This
decrease is the result of lower costs of feed ingredients and costs of shell
eggs purchased from outside producers. Feed cost for the current twenty-six week
period was $.352 per dozen, compared to $.417 per dozen for the twenty-six week
period ended November 29, 2008, a decrease of 15.6%. Gross profit decreased to
15.6% of net sales for the twenty-six week period ended November 28, 2009 from
22.2% for the comparable twenty-six week period ended November 29,
2008.





SELLING,
GENERAL, AND ADMINISTRATIVE EXPENSES





13 weeks ended(Amounts in thousands)
                                    
                                    Actual
                                      November 28,
                                      2009
                                    
                                    
                                    Less:
                                      (Acquisition)
                                    
                                    
                                    Net
                                      November 28,
                                      2009
                                    
                                    
                                    November 29,
                                      2008
                                    
                                    
                                    ChangeStock
      compensation expense
                                    
                                    $
                                    (215
                                    )
                                    
                                    $
                                    —
                                    
                                    
                                    $
                                    (215
                                    )
                                    
                                    $
                                    (3,078
                                    )
                                    
                                    $
                                    2,863Specialty
      egg expense
                                    
                                    
                                    4,109
                                    
                                    
                                    
                                    413
                                    
                                    
                                    
                                    3,696
                                    
                                    
                                    
                                    4,585
                                    
                                    
                                    
                                    (889
                                    )Payroll
      and overhead
                                    
                                    
                                    4,386
                                    
                                    
                                    
                                    309
                                    
                                    
                                    
                                    4,077
                                    
                                    
                                    
                                    3,734
                                    
                                    
                                    
                                    343Bad
      debt expense
                                    
                                    
                                    1,179
                                    
                                    
                                    
                                    (166
                                    )
                                    
                                    
                                    1,345
                                    
                                    
                                    
                                    113
                                    
                                    
                                    
                                    1,232Other
      expenses
                                    
                                    
                                    4,756
                                    
                                    
                                    
                                    1,326
                                    
                                    
                                    
                                    3,430
                                    
                                    
                                    
                                    3,251
                                    
                                    
                                    
                                    179Delivery
      expense
                                    
                                    
                                    7,177
                                    
                                    
                                    
                                    1,458
                                    
                                    
                                    
                                    5,719
                                    
                                    
                                    
                                    6,287
                                    
                                    
                                    
                                    (568
                                    )Total
                                    
                                    $
                                    21,392
                                    
                                    
                                    $
                                    3,340
                                    
                                    
                                    $
                                    18,052
                                    
                                    
                                    $
                                    14,892
                                    
                                    
                                    $
                                    3,160


17


Selling,
general, and administrative expenses include costs of marketing, distribution,
accounting and corporate overhead. Selling, general, and administrative expense
for the thirteen-week period ended November 28, 2009 was $21.4 million, an
increase of $6.5 million, or 43.6%, as compared to $14.9 million for the
thirteen-week period ended November 29, 2008.   Excluding the
Acquisition, selling, general, and administrative expense for the thirteen-week
period ended November 28, 2009 was $18.1 million, an increase of $3.2 million,
or 21.5%, as compared to $14.9 million for the thirteen-week period ended
November 29, 2008.  The calculation of the stock based compensation
plans expense is dependent on the closing stock price of the Company’s common
stock, which increased from $25.21 at November 29, 2008 to $27.42 at November
28, 2009.  Our stock price did decline from the previous thirteen-week
period this fiscal 2010 period and for the same thirteen-week period in fiscal
2009.  For fiscal 2009, the common stock price decreased from $39.49
at August 30, 2008 to $25.21 at November 29, 2008, which is a 36.2% decline. For
fiscal 2010, the common stock price decreased from $28.95 at August 29, 2009 to
$27.42 at November 28, 2009, which is a 5.3% decline.  Specialty egg
expense represents advertising, commissions, and franchise fees as they are
incurred with sales of our specialty eggs.   As a percentage of
our dozens sold, specialty eggs declined from 14.2% for the thirteen-week period
ended November 29, 2008 to 13.7% for the thirteen-week period ended November 28,
2009.  This decline is due to the weak economy and consumers
increasingly demanding lower priced eggs.  Our payroll and bad debt
expense increased this thirteen-week period of fiscal 2010, as compared to the
same period in fiscal 2009.   We recognize reserves for bad debts
based on the length of time the trade receivables are past due, generally 100%
for amounts more than 60 days past due.  During the current quarter, a
few of our formerly current status customers have slipped into a slow-pay
status.  We anticipate that those accounts will come into current
status in the next quarter, thereby reducing the reserve requirement.  Our
net delivery expense decreased for the thirteen-week period ended November 28,
2009.  Delivery expense decreased due to lower fuel costs and lower
costs for the use of outside trucking.  As a percent of net sales,
selling, general, and administrative expense increased from 6.2% for the
thirteen-week period ended November 29, 2008 to 9.3% for the thirteen-week
period ended November 28, 2009.





26 weeks ended(Amounts in thousands)
                                    
                                    Actual
                                      November 28,
                                      2009
                                    
                                    
                                    Less:
                                      (Acquisition)
                                    
                                    
                                    Net
                                      November 28,
                                      2009
                                    
                                    
                                    November 29,
                                      2008
                                    
                                    
                                    ChangeStock
      compensation expense
                                    
                                    $
                                    1,086
                                    
                                    
                                    $
                                    —
                                    
                                    
                                    $
                                    1,086
                                    
                                    
                                    $
                                    326
                                    
                                    
                                    $
                                    760Specialty
      egg expense
                                    
                                    
                                    8,375
                                    
                                    
                                    
                                    502
                                    
                                    
                                    
                                    7,873
                                    
                                    
                                    
                                    7,959
                                    
                                    
                                    
                                    (86
                                    )Payroll
      and overhead
                                    
                                    
                                    9,643
                                    
                                    
                                    
                                    723
                                    
                                    
                                    
                                    8,920
                                    
                                    
                                    
                                    8,905
                                    
                                    
                                    
                                    15Bad
      debt expense
                                    
                                    
                                    1,210
                                    
                                    
                                    
                                    26
                                    
                                    
                                    
                                    1,184
                                    
                                    
                                    
                                    29
                                    
                                    
                                    
                                    1,155Other
      expenses
                                    
                                    
                                    10,470
                                    
                                    
                                    
                                    2,723
                                    
                                    
                                    
                                    7,747
                                    
                                    
                                    
                                    7,603
                                    
                                    
                                    
                                    144Delivery
      expense
                                    
                                    
                                    14,126
                                    
                                    
                                    
                                    2,747
                                    
                                    
                                    
                                    11,379
                                    
                                    
                                    
                                    12,736
                                    
                                    
                                    
                                    (1,357
                                    )Total
                                    
                                    $
                                    44,910
                                    
                                    
                                    $
                                    6,721
                                    
                                    
                                    $
                                    38,189
                                    
                                    
                                    $
                                    37,558
                                    
                                    
                                    $
                                    631





For
the twenty-six weeks, ended November 28, 2009, selling, general, and
administrative expense was $44.9 million, an increase of $7.3 million, or 19.4%
as compared to $37.6 million for the same period in fiscal
2009.  Excluding the Acquisition, selling, general, and administrative
expense for the twenty-six week period ended November 28, 2009 was $38.2
million, an increase of $631,000, or 1.6%, as compared to $37.6 million for the
twenty-six week period ended November 29, 2008.   Stock
compensation, payroll and overhead, and bad debt expense increased this
twenty-six week period of fiscal 2010, as compared to the same period in fiscal
2009. Specialty egg expenses decreased for this twenty-six week period of fiscal
2010, as compared to the same period in fiscal 2009.   As
discussed in the previous section, bad debt expense is a reserve based on the
length of time trade receivables are past due.   Generally we
make a reserve for 100% of the trade receivables that are 60 days past
due.  This reserve for bad debt expense increased because of some
customers who have slipped into a slow-pay status.  We anticipate that
the accounts will come into current status in the next quarter, thereby reducing
the reserve requirement. Our net delivery expense decreased for the twenty-six
week period ended November 28, 2009.  Delivery expense decreased due
to lower fuel costs and lower costs for the use of outside
trucking.  As a percent of net sales, selling, general, and
administrative expense increased from 8.4% for the twenty-six week period of
fiscal 2009 to 10.8% for the current comparable period in fiscal
2010.





OPERATING INCOME





As a result of the above, operating
income was $25.4 million for the thirteen-weeks ended November 28, 2009, as
compared to operating income of $43.1 million for the thirteen-week period ended
November 29, 2008.  As a percent of net sales, operating income for
the thirteen-week period ended November 28, 2009 was 11.1%, as compared to 18.1%
for the thirteen-week period ended November 29, 2008.


18


For the twenty-six weeks, ended
November 28, 2009, operating income was $20.1 million, compared to operating
income of $61.1 million for the comparable period in fiscal 2009.  As
a percent of net sales, operating income for the current fiscal 2010 period was
4.8%, as compared to 13.8% for the same period in fiscal 2009.





OTHER INCOME (EXPENSE)





Other income or expense consists of
costs or income not directly charged to, or related to, operations such as
interest expense and equity in income from affiliates. Other expense for the
thirteen-week period ended November 29, 2009 was $799,000, which is an increase
of $467,000 from other expense of $332,000 for same thirteen-week period of
fiscal 2009. This net increase for the current thirteen-week period was
primarily the result of an increase in net interest expense. We had higher
average long-term borrowing balances, which increased net interest expense. As a
percent of net sales, other expense was .3% for the thirteen-weeks ended
November 28, 2009, compared to other expense of .1% for the comparable period
last year.





For the twenty-six weeks ended November
28, 2009, other expense was $2.4 million, which is an increase of $1.4 million
from other expense of $896,000 for the comparable period in fiscal
2009.  Similar to the current thirteen-week period, this increase was
due primarily to an increase in interest expense.  As a percent of net
sales, other expense was .6% for the current fiscal 2010 twenty-six week period,
as compared to other expense of .2% for the comparable period in fiscal
2009.





INCOME
TAXES





As a result of the above, our pre-tax
income was $24.6 million for the thirteen-week period ended November 28, 2009,
compared to pre-tax income of $42.8 million for last year’s comparable
period.  For the current thirteen-week period, income tax expense of
$9.0 million was recorded with an effective tax rate of 36.7% as compared to an
income tax expense of $14.9 million with an effective rate of 34.8% for last
year’s comparable thirteen-week period.





For the twenty-six week period ended
November 28, 2009, pre-tax income was $17.8 million, compared to pre-tax income
of $60.2 million for the comparable period in fiscal 2009.  For the
current fiscal 2010 twenty-six week period, income tax expense of $7.0 million
was recorded with an effective tax rate of 39.5%, as compared to an income tax
expense of $21.1 million with an effective rate of 35.1% for last year’s
comparable period.





Our
effective rate differs from the federal statutory income tax rate of 35% due to
state income taxes and certain items included in income or loss for financial
reporting purposes that are not included in taxable income or loss for income
tax purposes, including tax exempt interest income, the domestic manufacturers
deduction, non-taxable Hillandale LLC income or loss and net income or loss
attributable to noncontrolling interest.





NET (INCOME) LOSS ATTRIBUTABLE TO
NONCONTROLLING INTEREST





Noncontrolling interest represents the
earnings of the Company’s variable interest entities (“VIEs”) under the
consolidation provisions of ASC Topic 810.   We also include in
noncontrolling interest the portion of earnings attributable to non-affiliated
equity owners in consolidated subsidiaries where we do not own 100% of the
equity interest.     Net loss attributable to
noncontrolling interest for the thirteen-week period ended November 28, 2009 was
$503,000 as compared to net income attributable to noncontrolling interest of
$660,000 for the thirteen-week period ended November 29,
2008.   Upon adoption of the consolidation provisions of ASC
Topic 810, the Company no longer absorbs 100% of the losses attributable to
noncontrolling interests.  Under previous guidance, the Company
absorbed those losses when the attribution of the losses to the noncontrolling
interests would create a deficit balance in the noncontrolling interest account
on the balance sheet.   The adoption of these consolidation
provisions allows for the attribution of losses to the noncontrolling interests
even when doing so will create a deficit balance on the balance
sheet.





Net loss
attributable to noncontrolling interest for the twenty-six week period ended
November 28, 2009 was $1.5 million as compared to net income attributable to
noncontrolling interest of $688,000 for the twenty-six week period ended
November 29, 2008.


19


NET
INCOME ATTRIBUTABLE TO CAL-MAINE FOODS, INC
 
 Net income for the thirteen-week period
ended November 28, 2009 was $16.1 million, or $.68 per basic and $.67 per
diluted share, compared to net income of $27.2 million, or $1.15 per basic and
$1.14 per diluted share for the same period last year.
 
 For the twenty-six week period ended
November 28, 2009, net income was $12.3 million or $.52 per basic and $.51 per
diluted share, compared to a fiscal 2009 net income of $38.4 million, or $1.62
per basic and $1.61 per diluted share.
 
 CAPITAL
RESOURCES AND LIQUIDITY
 
 Our
working capital at November 28, 2009 was $188.2 million compared to $138.0
million at May 30, 2009. Our current ratio was 2.29 at November 28, 2009 as
compared with 2.33 at May 30, 2009. Our need for working capital generally is
highest in the last and first fiscal quarters ending in May and August,
respectively, when egg prices are normally at seasonal lows.  Seasonal
borrowing needs frequently are higher during these quarters than during other
fiscal quarters. We have a $40 million line of credit with three banks, $3.9
million of which was utilized for standby letters of credit at November 28,
2009.   This line of credit expired on December 31, 2009 and the
Company has chosen not to renew it.  Current cash balances, expected
borrowing capability and ongoing operating cash flow should provide adequate
liquidity going forward.   The standby letters of credit, which
remain outstanding, are collateralized with cash. Our long-term debt at November
28, 2009, including current maturities, amounted to $151.8 million, as compared
to $129.8 million at May 30, 2009.
 
 The
Company entered into a loan agreement dated November 12, 2009 with Metropolitan
Life Insurance Company, pursuant to which the Company issued a Secured
Promissory Note due November 1, 2019 for borrowings in the principal amount of
$30.0 million (the “Note”).  The annual interest rate on the Note is
6.20%.  Proceeds from the Note were used to fund working
capital.   This Note is secured by mortgages, security
agreements, assignments of lease and rents with respect to certain of the
Company’s egg production, feed mill, grain storage, and related facilities
located in Florida.
 
 For the
twenty-six weeks ended November 28, 2009, $36.7 million in cash was provided by
operating activities.  This compares to cash provided by operating
activities of $40.3 million for the 26 weeks ended November 29,
2008.  For the twenty-six weeks ended November 28, 2009, approximately
$15.3 million was provided from the sale of short-term investments, $8.2 million
was used for the purchase of investments, and net $54,000 was used for notes
receivable. Approximately $1.2 million was provided from disposal of property,
plant, and equipment, $10.8 million was used for purchases of property, plant,
and equipment, $8.2 million was used for acquisition of the remaining equity
interest in the Hillandale business, and $508,000 was used to acquire the
remaining equity interest in Benton County Foods, LLC.  Approximately
$3.4 million was used for payment of dividends on common stock and $8.0 million
was used for principal payments on long-term debt.  Approximately
$317,000 was received from the issuance of common stock from
treasury.  Approximately $30.0 million was received from additional
long-term borrowings. The net result of these activities was an increase in cash
of approximately $44.3 million since May 30, 2009.
 
 For the twenty-six weeks ended November
29, 2008, $7.2 million was used for the purchase of short-term investments,
$10.5 million was provided from the sale of short-term investments, and net
$341,000 was used for notes receivable.  Approximately $268,000 was
provided from disposal of property, plant, and equipment, $15.1 million was used
for purchases of property, plant, and equipment, and $12.4 million was used for
an additional acquisition of the Hillandale business.  We used $29.8
million for the acquisition of Zephyr Egg, LLC.  We designated $60.7
million for the purchase of Tampa Farms, LLC.  Approximately $16.0
million was used for payments of dividends on the common stock, and $4.5 million
was used for principal payments on long-term debt. We received $248,000 from the
issuance of common stock from treasury through the exercise of stock
options.  Approximately $26.0 million was received from additional
long-term borrowings. The net result of these activities was a decrease in cash
and cash equivalents of $68.7 million since May 31, 2008.
  20
  Substantially all trade receivables,
auction rate securities, and inventories collateralize our lines of credit and
property, plant, and equipment collateralize our notes payable and senior
secured notes. Unless otherwise approved by our lenders, we are required by
provisions of our loan agreements to (1) maintain minimum levels of working
capital (ratio of not less than 1.25 to 1) and net worth (minimum of $90.0
million tangible net worth, plus 45% of cumulative net income); (2) limit
dividends paid in any given quarter to not exceed an amount equal to one third
of the previous quarter’s consolidated net income (allowed if no events of
default), capital expenditures to an amount not to exceed $60.0 million in any
twelve month period, and lease obligations and additional long-term borrowings
(total funded debt to total capitalization not to exceed 55%); and (3) maintain
various current and cash-flow coverage ratios (1.25 to 1), among other
restrictions. At November 28, 2009, we were in compliance with the financial
covenant requirements of all loan agreements. Under certain of the loan
agreements, the lenders have the option to require the prepayment of any
outstanding borrowings in the event we undergo a change in control, as defined.
Our debt agreements also require the Chief Executive Officer of the Company, or
his family, to maintain ownership of not less than 50% of the outstanding voting
stock of the Company.
 
 Capital expenditure requirements are
expected to be for the normal repair and replacement of our facilities. We are
constructing a new integrated layer production complex in Farwell, TX to replace
our Albuquerque, New Mexico complex, which ceased egg production in fiscal 2007.
The facility was expected to cost approximately $32.0 million, and was estimated
to be complete in January 2010. As of November 28, 2009, capital expenditures
related to construction of this complex were approximately $32.5
million.
 
 The
Company believes that this will have minimal financial impact on our operations
and does not expect any long-term disruption to our customers. Debris removal
has been completed and construction to rebuild the destroyed houses has
begun.  Due to this casualty, estimated completion time for the
Farwell facility will likely be delayed to January 2011.  Future
capital expenditures will be funded by cash flows from operations and insurance
recoveries.
 
 On July
9, 2009, the Farwell, TX egg production complex was damaged by a fire. The
700-acre facility includes a processing plant, feed mill, two pullet houses, and
nine layer houses. The fire completely destroyed four of the nine layer houses,
with additional loss of laying hens at a fifth house due to smoke inhalation.
The Company believes the effects of lost production and additional expenses
related to the fire will be substantially reimbursed by the Company’s insurance
carriers.  The Company has received $10.0 million in proceeds from its
insurance carriers through November 28, 2009 and anticipates additional
insurance proceeds to cover its losses due to the fire. The Company intends to
seek reimbursement for all of its insured losses, including lost profits and
expenses. The book value of assets written off and expenses incurred as the
result of the fire totaled $9.5 million through November 28, 2009. Insurance
proceeds have been recognized in the consolidated income statement for the
26-week period ended November 28, 2009 to offset the assets written off and
expenses incurred. No gain, if any, will be recognized until all contingencies
surrounding the resolution of the insurance claim are resolved, which is
expected to occur in calendar 2010.
 
 Delta Egg Farm, LLC, an unconsolidated
affiliate, has constructed an organic egg production and distribution facility
near our Chase, Kansas location. In connection with this project, we are a pro
rata guarantor, with the other Delta Egg Farm, LLC owners, of the additional
debt that was undertaken to fund construction of this facility. We are currently
a guarantor of approximately $6.5 million of long-term debt of Delta Egg Farm,
LLC.
 
 On August
8, 2008, UBS agreed to a settlement in principle with the Securities and
Exchange Commission, the New York Attorney General, the Massachusetts Securities
Division, the Texas State Securities Board, and other state regulatory agencies
represented by the North American Securities Administrators Association to
restore liquidity to all remaining UBS clients who hold auction rate securities.
On November 3, 2008, we agreed to accept Auction Rate Security Rights (the
“Rights”) from UBS offered through a UBS prospectus dated October 7, 2008. The
Rights permit us to sell, or put, our auction rate securities back to UBS at par
value anytime during the period from June 30, 2010 through July 2, 2012. We
expect to exercise our Rights and put our auction rate securities back to UBS on
June 30, 2010, the earliest date allowable under the Rights.
 
 By
accepting the Rights, we can no longer assert that we have the intent to hold
the auction rate securities until anticipated recovery. Accordingly, we have
classified our investments in auction rate securities as trading securities. As
of the date of our acceptance of the Rights, the change in fair value of the
auction rate securities and Rights are included in earnings. Because we will be
permitted to put the auction rate securities back to UBS at par value, we have
accounted for the Rights as a separate asset that is measured at its fair value,
resulting in gains in an amount equal to the loss recognized on the auction rate
securities. Although the Rights represent the right to sell the securities back
to UBS at par, we periodically assess the economic ability of UBS to meet that
obligation in assessing the fair value of the Rights. We have classified the
auction rate securities and the related Rights as current investments as of
November 28, 2009 because we have the ability to put the auction rate securities
back to UBS on June 30, 2010.  The fair value of the auction rate
securities and Rights totaled $33,000 at November 28, 2009 and $33,150 at May
30, 2009.
  21
  At
November 28, 2009, we have $7,506 of current investment securities
available-for-sale and $711 of non-current investment securities
available-for-sale consisting primarily of high quality short-term municipal
bonds with maturities of three to fifteen months when purchased. Due to the
nature of the investments, the cost of available-for-sale securities
approximated fair value at November 28, 2009. Accordingly, other comprehensive
income (loss) has not been recognized as a separate component of stockholders'
equity in regards to the investment securities available-for-sale.
 
 We
currently have a $1.4 million deferred tax liability due to a subsidiary's
change from a cash basis to an accrual basis taxpayer on May 29, 1988. The
Taxpayer Relief Act of 1997 provides that this liability is payable ratably over
the 20 years beginning in fiscal 1999. However, such taxes will be due in their
entirety in the first fiscal year in which there is a change in ownership
control so that we no longer qualify as a family farming corporation. We are
currently making annual payments of approximately $150,000 related to this
liability. However, while these current payments reduce cash balances, payment
of the $1.4 million deferred tax liability would not affect our consolidated
statement of income or stockholders' equity, as these taxes have been accrued
and are reflected on our consolidated balance sheet.
 
 Looking
forward, we believe that our current cash balances, borrowing capacity, and cash
flows from operations will be sufficient to fund our current and projected
capital needs.
 
 Impact of
Recently Issued Accounting Standards.  Please refer
to Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in our Annual Report Form 10-K for the year ended May 30,
2009 for a discussion of the impact of recently issued accounting standards.
There were no accounting standards issuedduring the quarter ended
November 28, 2009 that we expect will have a material impact on our consolidated
financial statements. For recently adopted accounting standards, please see note
9 in the notes to the consolidated financial statements in Item 1 of this
10-Q.
 
 Critical
Accounting Policies. We
suggest that our Summary of Significant Accounting Policies, as described in
Note 1 of the Notes to Consolidated Financial Statements included in Cal-Maine
Foods, Inc. and Subsidiaries annual report on Form10-K for the fiscal year ended
May 30, 2009, be read in conjunction with this Management’s Discussion and
Analysis of Financial Condition and Results of Operations. There have been no
changes to critical accounting policies identified in our Annual Report on Form
10-K for the year ended May 30, 2009.
 
 ITEM
3.  QUANTATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
 
 There have been no material changes in
the market risk reported in the Company's Annual Report on Form 10-K for the
fiscal year ended May 30, 2009.
 
 ITEM
4.  CONTROLS  AND  PROCEDURES
 
 Our disclosure controls and procedures
are designed to provide reasonable assurance that information we are required to
disclose in our periodic reports filed with the Securities and Exchange
Commission is recorded, processed, summarized and reported within the time
periods specified in the Commission’s rules and forms.  Based on an
evaluation of our disclosure controls and procedures conducted by our Chief
Executive Officer and Chief Financial Officer, together with other financial
officers, such officers concluded that our disclosure controls and procedures
are effective as of the end of the period covered by this report.There were no changes in our internal
control over financial reporting identified in connection with the evaluation
that occurred during our last fiscal quarter that has significantly affected or
is reasonably likely to materially affect our internal controls over financial
reporting.
  22
  PART
II.         OTHER
INFORMATION
 
 ITEM
1.  LEGAL PROCEEDINGS
 
 Except as
noted below, there have been no new matters or changes to matters identified in
our Annual Report on Form 10-K for the year ended May 30, 2009.
 
 Personal Injury Chicken
Litter Litigation
 
 Cal-Maine Farms, Inc. is presently a
defendant in two personal injury cases in the Circuit Court of Washington
County, Arkansas.  Those cases are styled, McWhorter vs. Alpharma,
Inc.,et
al., and
Carroll,et
al. vs.
Alpharma, Inc.,et
al.  Cal-Maine Farms, Inc. was named as a defendant in the
McWhorter case
on February 3, 2004.  It was named as a defendant in the Carroll case on May
2, 2005.  Co-defendants in both cases include other integrated poultry
companies such as Tyson Foods, Inc., Cargill, Incorporated, George’s Farms,
Inc., Peterson Farms, Inc., Simmons Foods, Inc., and Simmons Poultry Farms,
Inc.  The manufacturers of an additive for broiler feed are also
included as defendants.  Those defendants are Alpharma, Inc. and
Alpharma Animal Health, Co.
 
 Both cases allege that the plaintiffs
have suffered medical problems resulting from living near land upon which
“litter” from the defendants’ flocks was spread as fertilizer.  The
McWhorter case
focuses on mold and fungi allegedly created by the application of
litter.  The Carroll case also
alleges injury from mold and fungi, but focuses primarily on the broiler feed
ingredient as the cause of the alleged medical injuries.  No trial
date for either the Carroll or McWhorter case has
been set.
 
 Several other separate, but related,
cases were prosecuted in the same venue by the same attorneys.  The
same theories of liability were prosecuted in all of the cases.  No
Cal-Maine company was named as a defendant in any of those other
cases.  The plaintiffs selected one of those cases, Green,et
al. vs.
Alpharma, Inc., et
al., as a bellwether case to go to trial first.  All of the
poultry defendants were granted summary judgment in the Green case on August
2, 2006.  On May 8, 2008, however, the Arkansas Supreme Court reversed
the summary judgment in favor of the poultry defendants and remanded the case
for trial.  Green was re-tried,
and again resulted in a defense verdict.  The plaintiffs have appealed
this judgment.  The appeal was noticed in July 2009.  The
appeal is pending.
 
 There has been no effort by the
plaintiffs in the McWhorter and Carroll cases to set
those cases for trial.  Whether the plaintiffs in those cases will
prosecute those cases to trial is not known, and their likelihood of success if
they do cannot be gauged at this time.
 
 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 a number of companies, including
Cal-Maine Foods, Inc. and Cal-Maine Farms, Inc.  We and Cal-Maine
Farms filed our joint answer and motion to dismiss the suit on October 3,
2005.  The State of Oklahoma claims that through the disposal of
chicken litter the defendants have polluted the Illinois River
Watershed.  This watershed provides water to eastern
Oklahoma.  The Complaint seeks injunctive relief and monetary
damages.  The parties participated in a series of mediation meetings
without success.  Cal-Maine Foods, Inc. no longer operates in the
watershed.  Accordingly, we do not anticipate that Cal-Maine Foods,
Inc. will be materially affected by the request for injunctive
relief.  Cal-Maine Foods, Inc. owns 100% of Benton County Foods, LLC,
which is an ongoing commercial shell egg operation within the Illinois River
Watershed.  Benton County Foods, LLC is not a defendant in the
litigation.
 
 The
district court has dismissed all damages claims against all
defendants.  The basis for that ruling was the absence of a necessary
party plaintiff, the Cherokee Nation.  The Cherokee Nation owns part
of the land and water in the watershed.  After the dismissal of the
damages claims, the Cherokee Nation attempted to intervene as a
plaintiff.  This attempt was rejected by the district
court.  The Cherokee Nation has appealed that denial to the 10th Circuit
Court of Appeals.  The appeal was noticed in September 2009, and is
pending.
  23
  The
remaining claims related to the State of Oklahoma’s request for injunctive
relief, and the State of Oklahoma’s request for statutory penalties against the
defendants for alleged polluting activities.   The trial of these
remaining claims began on September 25, 2009.   At the conclusion
of the plaintiffs proofs on December 21, 2009 the defendants, individually and
collectively, moved for a defense judgment, which at that time was denied, by
the court.  However, the defendants plan to move for a final defense
ruling at the conclusion of the defendants’ proofs.  The trial is
projected to last six to eight weeks.  The plaintiff’s likelihood of
success cannot be gauged at this point.
 
 Egg Antitrust
Litigation
 
 Between
September 25, 2008 and January 8, 2009, the Company was named as one of several
defendants in sixteen antitrust cases involving the United States shell egg
industry.  In all sixteen cases, the named plaintiffs sued on behalf of
themselves and a putative class of others who claim to be similarly
situated.  In fourteen of the cases, the named plaintiffs allege that they
are retailers or distributors that purchased shell eggs and egg products
directly from one or more of the defendants.  In the other two cases, the
named plaintiffs are individuals who allege that they purchased shell eggs and
egg products indirectly from one or more of the defendants - that is, they
purchased from retailers that had previously purchased from defendants or other
parties.
  The
Judicial Panel on Multidistrict Litigation consolidated all of these cases (as
well as certain other cases in which the Company was not a named defendant) for
pretrial proceedings in the United States District Court for the Eastern
District of Pennsylvania.  The Pennsylvania court has organized the cases
around two groups (direct purchasers and indirect purchasers) and has named
interim lead counsel for the named plaintiffs in each group.
  The named
plaintiffs in the direct purchaser case filed a consolidated complaint on
January 30, 2009.  On April 30, 2009, the Company filed motions to dismiss
the direct purchasers’ consolidated complaint.  The direct purchaser
plaintiffs did not respond to those motions.  Instead, the direct
purchaser plaintiffs filed an amended complaint on December 11,
2009.  The current deadline for the Company to respond to the direct
purchaser plaintiffs’ amended complaint is February 5, 2010.
  The named
plaintiffs in the indirect purchaser case filed a consolidated complaint on
February 27, 2009.  On April 30, 2009, the Company filed motions to
dismiss the indirect purchasers’ consolidated complaint.  The indirect
purchaser plaintiffs still have not responded to those motions.  The
indirect purchaser plaintiffs have asked the Court to permit limited discovery
from a settling party, and depending on how the Court rules on that motion, the
indirect purchaser plaintiffs may be permitted to file an amended
complaint.
  In both
consolidated complaints, the named plaintiffs allege that the Company and
certain other large domestic egg producers conspired to reduce the domestic
supply of eggs in a concerted effort to raise the price of eggs to artificially
high levels.  In both consolidated complaints, plaintiffs allege that all
defendants agreed to reduce the domestic supply of eggs by (a) manipulating egg
exports and (b) implementing industry-wide animal welfare guidelines that
reduced the number of hens and eggs.  The indirect purchaser plaintiffs
also allege that all defendants manipulated pricing information in the egg
industry, exchanged price information improperly, and refused to compete against
each other.
  Both
groups of named plaintiffs seek treble damages and injunctive relief on behalf
of themselves and all other putative class members in the United States. 
Both groups of named plaintiffs allege a class period starting on January 1,
2000 and running “through the present.”  The direct purchaser consolidated
case alleges two separate sub-classes – one for direct purchasers of shell eggs
and one for direct purchasers of egg products.  The direct purchaser
consolidated case seeks relief under the Sherman Act.  The indirect
purchaser consolidated case seeks relief under the Sherman Act and the statutes
and common-law of various states, the District of Columbia, and Puerto
Rico.
  The
Pennsylvania court has entered a series of orders related to case management and
scheduling.  There is no definite schedule in either consolidated case for
discovery, class certification proceedings, or filing motions for summary
judgment.  No trial date has been set in either consolidated
case.
  24
  Florida Civil Investigative
Demand
  On November 4, 2008, the Company received an antitrust civil investigative
demand from the Attorney General of the State of Florida.  The demand seeks
production of documents and responses to interrogatories relating to the
production and sale of eggs and egg products.  The Company is cooperating
with this investigation and expects to provide responsive information.  No
allegations of wrongdoing have been made against the Company in this
matter.
 
 ITEM 1A.   RISK FACTORS
 
 There
have been no material changes in the risk factors previously disclosed in the
Company's Annual Report on  Form 10-K for the fiscal year ended May
30, 2009.
 
 ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF
SECURITYHOLDERS
 
 The
Company’s Annual Meeting of Shareholders was held on September 30,
2009.
 
 The
following persons were nominated and elected to serve as members of the Board of
Directors until our next      annual meeting of
shareholders and until their successors are elected and qualified. Fred R.
Adams, Jr. (38,156,985 votes for and 5,436,024 votes withheld), Richard K.
Looper (43,203,274 votes for and 389,735 votes withheld), Adolphus B. Baker
(39,775,539 votes for and 3,817,470 votes withheld), Timothy A. Dawson
(39,673,285 votes for and 3,919,724 votes withheld), Letitia C. Hughes
(43,407,492 votes for and 185,517 votes withheld), James E. Poole (43,391,431
votes for and 201,578 votes withheld), and Steve W. Sanders (43,174,715 votes
for and 418,294 votes withheld).
 
 Shareholders
voted on and approved the appointment of FROST, PLLC, an independent registered
public accounting firm, as the Company’s independent auditor for its 2010 fiscal
year (43,494,070 votes for and 71,639 votes against, with 273,300
abstaining).
 
 The
resolution proposed by The Humane Society of the United States concerning
political contribution disclosures failed to pass with 3,411,533 common stock
votes for, 35,337,083 votes against, with 891,922 votes abstaining.
 
 No other
matters were voted upon at the annual meeting.
 
 ITEM
6.  EXHIBITS
 
 No.
                    
                    Description31.1
                    
                    Certification
      of The Chief Executive Officer31.2
                    
                    Certification
      of The Chief Financial Officer32.0
                    
                    Written
      Statement of The Chief Executive Officer and The Chief Financial
      Officer
 
 25
  SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
 
 CAL-MAINE
      FOODS, INC.(Registrant)Date:  January
      5, 2010
                      /s/   Timothy A.
      DawsonTimothy
      A. DawsonVice
      President/Treasurer(Principal
      Financial Officer)Date:
      January 5, 2010
                      /s/   Charles F.
      CollinsCharles
      F. CollinsVice
      President/Controller(Principal
      Accounting
Officer)
  26