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 August 29, 2009


OR





 ̈           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 xNo ̈





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  ̈No ̈





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


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


Yes  ̈    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 September 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





Page
                                  NumberPart
      I.
                                Financial
      InformationItem
      1.
                                
                                Condensed
      Consolidated Financial Statements (Unaudited)
                                3Condensed
      Consolidated Balance Sheets -August
      29, 2009 and May 30, 2009
                                3Condensed
      Consolidated Statements of Operations -Thirteen
      Weeks Ended August 29, 2009 andAugust
      30, 2008
                                4Condensed
      Consolidated Statements of Cash Flow -Thirteen
      Weeks Ended August 29, 2009 andAugust
      30, 2008
                                5Notes
      to Condensed Consolidated Financial Statements
                                6Item
      2.
                                
                                Management’s
      Discussion and Analysis ofFinancial
      Condition and Results of Operations
                                13Item
      3.
                                
                                Quantitative
      and Qualitative Disclosures of Market Risk
                                22Item
      4.
                                
                                Controls
      and Procedures
                                22Part
      II.
                                Other
      InformationItem
      1.
                                
                                Legal
      Proceedings
                                23Item
      1A.
                                
                                Risk
      Factors
                                24Item
      2.
                                
                                Unregistered
      Sales of Equity Securities and Use of Proceeds
                                25Item
      5.
                                
                                Other
      Information
                                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)




August 29, 2009
                                    
                                    
                                    May 30, 2009(unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                                    
                                    $
                                    51,542
                                    
                                    
                                    $
                                    66,883Investment
      securities available-for-sale
                                    
                                    
                                    6,097
                                    
                                    
                                    
                                    15,165Investment
      securities trading
                                    
                                    
                                    33,100
                                    
                                    
                                    
                                    -Trade
      and other receivables
                                    
                                    
                                    61,979
                                    
                                    
                                    
                                    44,628Inventories
                                    
                                    
                                    96,291
                                    
                                    
                                    
                                    97,535Prepaid
      expenses and other current assets
                                    
                                    
                                    23,340
                                    
                                    
                                    
                                    17,474Total
      current assets
                                    
                                    
                                    272,349
                                    
                                    
                                    
                                    241,685Investment
      securities trading
                                    
                                    
                                    -
                                    
                                    
                                    
                                    33,150Other
      investments
                                    
                                    
                                    18,250
                                    
                                    
                                    
                                    18,069Goodwill
                                    
                                    
                                    22,116
                                    
                                    
                                    
                                    22,455Amortizable
      intangible assets
                                    
                                    
                                    14,444
                                    
                                    
                                    
                                    15,056Other
      assets
                                    
                                    
                                    1,601
                                    
                                    
                                    
                                    2,472Property,
      plant and equipment
                                    
                                    
                                    476,430
                                    
                                    
                                    
                                    479,327Less
      accumulated depreciation
                                    
                                    
                                    (236,004
                                    )
                                    
                                    
                                    (229,369
                                    )Net
      property, plant and equipment
                                    
                                    
                                    240,426
                                    
                                    
                                    
                                    249,958TOTAL
      ASSETS
                                    
                                    $
                                    569,186
                                    
                                    
                                    $
                                    582,845LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                                    
                                    $
                                    63,082
                                    
                                    
                                    $
                                    58,423Accrued
      dividends payable
                                    
                                    
                                    -
                                    
                                    
                                    
                                    3,422Current
      maturities of purchase obligation
                                    
                                    
                                    -
                                    
                                    
                                    
                                    8,400Current
      maturities of long-term debt
                                    
                                    
                                    38,952
                                    
                                    
                                    
                                    13,806Deferred
      income taxes
                                    
                                    
                                    20,835
                                    
                                    
                                    
                                    19,635Total
      current liabilities
                                    
                                    
                                    122,869
                                    
                                    
                                    
                                    103,686Long-term
      debt, less current maturities
                                    
                                    
                                    87,930
                                    
                                    
                                    
                                    115,983Other
      non-current liabilities
                                    
                                    
                                    3,005
                                    
                                    
                                    
                                    3,532Deferred
      income taxes
                                    
                                    
                                    28,075
                                    
                                    
                                    
                                    26,635Total
      liabilities
                                    
                                    
                                    241,879
                                    
                                    
                                    
                                    249,836Stockholders’
      equity:Common
      stock $0.01 par value per share:Authorized
      shares – 60,000Issued
      35,130 shares and 21,407 shares outstanding atAugust
      29, 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 August 29, 2009 and May 30, 2009
                                    
                                    
                                    24
                                    
                                    
                                    
                                    24Paid-in
      capital
                                    
                                    
                                    32,386
                                    
                                    
                                    
                                    32,098Retained
      earnings
                                    
                                    
                                    316,788
                                    
                                    
                                    
                                    320,623Common
      stock in treasury – 13,723 shares at August 29, 2009and
      13,741 shares at May 30, 2009
                                    
                                    
                                    (21,018
                                    )
                                    
                                    
                                    (21,045
                                    )Total
      Cal-Maine Foods, Inc. stockholders’ equity
                                    
                                    
                                    328,531
                                    
                                    
                                    
                                    332,051Noncontrolling
      interests in consolidated entities
                                    
                                    
                                    (1,224
                                    )
                                    
                                    
                                    958Total
      stockholders’ equity
                                    
                                    
                                    327,307
                                    
                                    
                                    
                                    333,009TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                    
                                    $
                                    569,186
                                    
                                    
                                    $
                                    582,845





See notes to condensed consolidated
financial statements.


3





CAL-MAINE
FOODS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(in
thousands, except per share amounts)


(unaudited)





13
      Weeks EndedAugust
      29, 2009
                                      
                                      
                                      August
      30, 2008Net
      sales
                                      
                                      $
                                      187,666
                                      
                                      
                                      $
                                      206,888Cost
      of sales
                                      
                                      
                                      169,449
                                      
                                      
                                      
                                      166,241Gross
      profit
                                      
                                      
                                      18,217
                                      
                                      
                                      
                                      40,647Selling,
      general and administrative
                                      
                                      
                                      23,518
                                      
                                      
                                      
                                      22,666Operating
      income (loss)
                                      
                                      
                                      (5,301
                                      )
                                      
                                      
                                      17,981Other
      income (expense):Interest
      expense, net
                                      
                                      
                                      (1,716
                                      )
                                      
                                      
                                      (1,217
                                      )Other
                                      
                                      
                                      158
                                      
                                      
                                      
                                      653(1,558
                                      )
                                      
                                      
                                      (564
                                      )Income
      (loss) before income taxes
                                      
                                      
                                      (6,859
                                      )
                                      
                                      
                                      17,417Income
      tax expense (benefit)
                                      
                                      
                                      (2,026
                                      )
                                      
                                      
                                      6,242Consolidated  net
      income (loss)
                                      
                                      
                                      (4,833
                                      )
                                      
                                      
                                      11,175Net
      (income) loss attributable to noncontrolling interest
                                      
                                      
                                      1,001
                                      
                                      
                                      
                                      (28
                                      )Net
      income (loss) attributable to Cal-Maine Foods, Inc.
                                      
                                      $
                                      (3,832
                                      )
                                      
                                      $
                                      11,147Net
      income (loss) per common share attributableto
      Cal-Maine Foods Inc:Basic
                                      
                                      $
                                      (0.16
                                      )
                                      
                                      $
                                      0.47Diluted
                                      
                                      $
                                      (0.16
                                      )
                                      
                                      $
                                      0.47Dividends
      declared per common share
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      0.1570Weighted
      average shares outstanding:Basic
                                      
                                      
                                      23,791
                                      
                                      
                                      
                                      23,730Diluted
                                      
                                      
                                      23,791
                                      
                                      
                                      
                                      23,769





See notes to condensed consolidated financial statements.


4





CAL-MAINE
FOODS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(in
thousands)


(unaudited)





13
      Weeks EndedAugust
      29, 2009
                      
                      
                      August
      30, 2008Cash
      flows from operating activitiesNet
      income (loss) attributable to Cal-Maine Foods, Inc.
                      
                      $
                      (3,832
                      )
                      
                      $
                      11,147Depreciation
      and amortization
                      
                      
                      7,412
                      
                      
                      
                      6,494Other
      adjustments, net
                      
                      
                      (8,985
                      )
                      
                      
                      3,290Net
      cash provided by (used in) operations
                      
                      
                      (5,405
                      )
                      
                      
                      20,931Investing
      activities:Purchase
      of investments
                      
                      
                      -
                      
                      
                      
                      (1,015
                      )Sales
      of investments
                      
                      
                      9,118
                      
                      
                      
                      4,500Acquisition
      of businesses, net of cash acquired
                      
                      
                      (508
                      )
                      
                      
                      (29,757
                      )Purchases
      of property, plant and equipment
                      
                      
                      (4,625
                      )
                      
                      
                      (5,920
                      )Payments
      received on notes receivable
                      
                      
                      195
                      
                      
                      
                      183Increase
      in notes receivable
                      
                      
                      (705
                      )
                      
                      
                      (2,922
                      )Net
      proceeds from disposal of property, plant and equipment
                      
                      
                      809
                      
                      
                      
                      152Net
      cash provided by (used in) investing activities
                      
                      
                      4,284
                      
                      
                      
                      (34,779
                      )Financing
      activities:Proceeds
      from issuance of common stock from treasury
                      
                      
                      262
                      
                      
                      
                      427Payment
      of purchase obligation
                      
                      
                      (8,150
                      )
                      
                      
                      (11,585
                      )Proceeds
      from long-term borrowings
                      
                      
                      -
                      
                      
                      
                      20,000Principal
      payments on long-term debt
                      
                      
                      (2,907
                      )
                      
                      
                      (2,250
                      )Payments
      of dividends
                      
                      
                      (3,425
                      )
                      
                      
                      (12,186
                      )Net
      cash used in financing activities
                      
                      
                      (14,220
                      )
                      
                      
                      (5,594
                      )Net
      change in cash and cash equivalents
                      
                      
                      (15,341
                      )
                      
                      
                      (19,442
                      )Cash
      and cash equivalents at beginning of period
                      
                      
                      66,883
                      
                      
                      
                      94,858Cash
      and cash equivalents at end of period
                      
                      $
                      51,542
                      
                      
                      $
                      75,416





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)


August
29, 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 weeks ended August 29,
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 September 29, 2009,
which represents the date the Condensed Consolidated Financial Statements were
issued.





Reclassifications





Certain
reclassifications have been made to the prior periods consolidated financial
statements to conform to the current period presentation. These
reclassifications had no effect on previously reported results of operations or
retained earnings.





Hillandale,
LLC Acquisition





We now
own 100% of Hillandale, LLC. We purchased the remaining 12% ownership interest
in Hillandale for $8,150 in the first quarter of fiscal
2010.  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
Based Compensation




Total
stock based compensation expense for the thirteen weeks ended August 29, 2009
and August 30, 2008 was $1,301 and $3,404, respectively.  Our
liabilities associated with Stock Appreciation Rights as of August 29, 2009 and
August 30, 2008 was $5,061 and $8,133, respectively.




During
the thirteen weeks ended August 29, 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 thirteen
weeks ended August 29, 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:





August 29, 2009
                    
                    
                    May 30, 2009Flocks
                    
                    $
                    63,841
                    
                    
                    $
                    64,040Eggs
                    
                    
                    7,839
                    
                    
                    
                    6,880Feed
      and supplies
                    
                    
                    24,611
                    
                    
                    
                    26,615$
                    96,291
                    
                    
                    $
                    97,535





3.    
    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 is not able to 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.





4.         
 Net Income (Loss) 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.  Options representing 74 shares were excluded
from the calculation of diluted earnings per share for the thirteen week period
ended August 29, 2009 because they would be antidilutive.  The
computations of basic and diluted net income (loss) per share attributable to
the Company are as follows:





13
      weeks endedAugust
      29, 2009
                            
                            
                            August
      30, 2008Net
      income (loss) attributable toCal-Maine
      Foods, Inc.
                            
                            $
                            (3,832
                            )
                            
                            $
                            11,147Basic
      weighted-average common shares
                            
                            
                            23,791
                            
                            
                            
                            23,730Effect
      of dilutive securities:Common
      stock options
                            
                            
                            -
                            
                            
                            
                            39Dilutive
      potential common shares
                            
                            
                            23,791
                            
                            
                            
                            23,769Net
      income (loss) per common share attributable to Cal-Maine Foods
      Inc:Basic
                            
                            $
                            (0.16
                            )
                            
                            $
                            0.47Diluted
                            
                            $
                            (0.16
                            )
                            
                            $
                            0.47





5.   
       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 stock outstanding for the period.





6.           Investment
securities





Our
investment securities consist of auction rate securities, which we classify as
trading, and prefunded municipal bonds, which we classify as available for sale.
Our investment securities are accounted for in accordance with FASB No. 115
(“FAS 115”), “Accounting for Certain Investments in Debt and Equity Securities.”
Available-for-sale securities are reported at fair value with unrealized gains
and losses excluded from earnings and reported in shareholders’ equity. Under
FAS 115, securities purchased to be held for indeterminate periods 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. We continually
evaluate whether any investments have been impaired and, if so, whether such
impairment is temporary or other than temporary. Trading securities are bought
and held principally for the purpose of selling them. Unrealized holding gains
and losses for trading securities are included in earnings.


7





Our
auction rate securities were purchased from UBS Financial Services, Inc. (“UBS”)
and 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. In
the past, the auction process allowed investors to obtain immediate liquidity if
so desired by selling the securities at their face amounts. 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 at any time 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
defined by FAS No. 115, on the date of our acceptance of the Rights. As a
result, we are required to record these securities at fair value each period
until the Rights are exercised and the auction rate securities are redeemed. At
August 29, 2009 the fair value of our auction rate securities was below par
value of which the entire amount has been charged to operations in fiscal 2009.
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 will 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.  We will put the auction rate securities back to
UBS on June 30, 2010.  At August 29, 2009, these securities were
classified in the current asset portion on our condensed consolidated balance
sheet in the line item investment securities trading with a value of
$33,100.





At August
29, 2009, we have $6,097 of current investment securities available-for-sale
consisting primarily of pre-funded municipal bonds with maturities of three to
six months when purchased. Due to the nature of the investments, the cost at
August 29, 2009 approximates fair value; therefore, other comprehensive income
(loss) has not been recognized as a separate component of stockholders' equity
in regards to the current investment securities available-for-sale.





7.       Fair
value





Effective
June 1, 2008, we adopted Financial Accounting Standards Board (“FASB”) Statement
No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 establishes a single
authoritative definition of fair value, sets out a framework for measuring fair
value, and expands on required disclosures about fair value
measurement.  In February 2008, FASB issued FASB Staff Position No.
157-2, “Effective Date of FASB Statement No. 157” which provided a one-year
deferral of the effective date of FAS 157 for non-financial assets and
non-financial liabilities except those that are recognized or disclosed in the
financial statements at fair value at least annually.




The
adoption of FAS 157 for our financial assets and financial liabilities did not
have a material impact on our financial statements.  Effective May 31,
2009, we adopted FAS 157 for nonfinancial assets and nonfinancial
liabilities.  This did not have a material impact on our financial
statements.  FAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (exit price).
Valuation techniques used to measure fair value under FAS 157 must maximize the
use of observable inputs and minimize the use of unobservable inputs. FAS 157
classifies the inputs used to measure fair value into the following
hierarchy:


8




•
            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.




Level 2


We
classified our current investment securities – available-for-sale as level
2.   These securities consist of pre-funded municipal bonds with
maturities of three to six 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 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 of 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.





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.


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 August 29, 2009:





Fair Value Measurements at Reporting Date UsingQuoted Pricesin Active
                      
                      SignificantMarkets for
                      
                      Other
                      
                      SignificantIdentical
                      
                      Observable
                      
                      UnobservableInstruments
                      
                      Inputs
                      
                      Inputs
                      
                      Total(In
      thousands)
                      (Level
      1)
                      
                      (Level
      2)
                      
                      (Level
      3)
                      
                      BalanceInvestment
      securitiesavailable-for-sale
      (Current)
                      
                      $
                      -
                      
                      
                      $
                      6,097
                      
                      
                      $
                      -
                      
                      
                      $
                      6,097Investment
      securitiestrading
      (Current) 1
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      33,100
                      
                      
                      
                      33,100Total
      assets measured at fair value
                      
                      $
                      -
                      
                      
                      $
                      6,097
                      
                      
                      $
                      33,100
                      
                      
                      $
                      39,197


_________


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 $30,705.  The fair value of the Rights is
      $2,395, 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
  $33,100.





The
following is a reconciliation of the beginning and ending balances for assets
measured at fair value on a recurring basis using significant unobservable
inputs (Level 3) during the period ended August 29, 2009:





(in
      thousands)
                    
                    Investment securities
                      trading -non-current
                    
                    
                    Investment securities
                      trading - current
                    
                    
                    TotalBeginning
      balance – May 30, 2009
                    
                    $
                    33,150
                    
                    
                    $
                    -
                    
                    
                    $
                    33,150Total
      gains – (realized/unrealized)Included
      in earnings (or changes in net assets), net
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Included
      in other comprehensive income, net
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Purchases,
      issuances, and settlements
                    
                    
                    (50
                    )
                    
                    
                    -
                    
                    
                    
                    (50
                    )Transfers
      in and/or out of Level 3
                    
                    
                    (33,100
                    )
                    
                    
                    33,100
                    
                    
                    
                    -Ending
      balance
                    
                    $
                    -
                    
                    
                    $
                    33,100
                    
                    
                    $
                    33,100





In
February 2007, the FASB issued FASB Statement No. 159, "Establishing the Fair
Value Option for Financial Assets and Liabilities" (“FAS 159”), to permit all
entities to choose to elect to measure eligible financial instruments at fair
value. We adopted FAS 159 effective June 1, 2008.   We have
elected the fair value option for our Rights.  We agreed to accept
these Rights from UBS on November 3, 2008.





UBS’s
obligations under the Rights are not secured by its assets and do not require
UBS to obtain any financing to support its performance obligations under the
Rights.  UBS has disclaimed any assurance that it will have sufficient
financial resources to satisfy its obligations under the Rights.





The
Rights represent a firm agreement in accordance with FASB Statement No. 133
“Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”),
which defines a firm agreement as an agreement binding on both parties and
usually legally enforceable, with the following characteristics: (a) the
agreement specifies all significant terms, including the quantity to be
exchanged, the fixed price, and the timing of the transaction, and (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 free standing asset separate
from the auction rate securities.   The Rights do not meet the
definition of a derivative instrument under FAS 133, because the underlying
securities are not readily convertible to cash.  Therefore, we have
elected to measure the Rights at fair value under FAS 159, 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.


10


The
Rights are valued at $2,395 on our condensed consolidated balance sheet at
August 29, 2009.  They are included in the total amount for
“Investments securities trading” in the current asset portion of our
consolidated balance sheet.  The auction rate securities are measured
at fair value using the assumptions discussed
previously.   According to the fair value hierarchy established
by FAS 157, the Company determined that the assumptions used to measure these
securities are level 3 assumptions.    Accordingly, the
assumptions used to measure the rights are level 3 assumptions.  The
value of the rights is the difference between the par value and fair value of
our auction rate securities.





8.       Recent
accounting pronouncements





In February 2008, FASB issued FASB
Staff Position No. 157-2, “Effective Date of FASB Statement No. 157” which
provided a one-year deferral of the effective date of FAS 157 for non-financial
assets and non-financial liabilities except those that are recognized or
disclosed in the financial statements at fair value at least
annually.  Effective May 31, 2009, we adopted FAS 157 for nonfinancial
assets and nonfinancial liabilities.  There was no material impact on
the Company’s results of operations or financial condition upon
adoption.





In
December 2007, the FASB issued FASB Statement No. 141 (Revised 2007), or (R),
“Business Combinations” (“FAS 141(R)”). FAS 141(R) retained the fundamental
requirements in FAS 141 that the acquisition method of accounting (which FAS 141
called the purchase method) be used for all business combinations and for an
acquirer to be identified or each business combination. FAS 141(R), which is
broader in scope than that of FAS 141, which applied only to business
combinations in which control was obtained by transferring consideration,
applies the same method of accounting (the acquisition method) to all
transactions and other events in which one entity obtains control over one or
more other businesses. FAS 141(R) also makes certain other modifications to FAS
141. This statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. Earlier adoption is
prohibited.  We adopted this statement effective May 31, 2009. There
was no material impact on the Company’s results of operations or financial
condition upon adoption of the new statement.





In
December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling Interests
in Consolidated Financial Statements- An amendment of Accounting Research
Bulletin (“ARB”) (“FAS 160”).” FAS 160 amends ARB No. 51 to establish accounting
and reporting standards for the noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest
in a subsidiary, which is sometimes referred to as minority interest, is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Among other requirements, this
statement requires consolidated net income or loss to be reported at amounts
that include the amounts attributable to both the parent and the noncontrolling
interest. It also requires disclosure, on the face of the consolidated
statements of operations, of the amounts of consolidated net income or loss
attributable to the parent and to the noncontrolling interest. FAS 160 is
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Accordingly, we adopted this statement
effective May 31, 2009. This statement is applied prospectively as of the
beginning of the fiscal year in which this Statement is initially adopted,
except for the presentation and disclosure requirements.  The
presentation and disclosure requirements are applied retrospectively for all
periods presented. Accordingly, we have reclassified amounts in the financial
statements for all prior periods presented.





In April
2008, the FASB posted FASB Staff Position No. FAS 142-3, “Determination of the
Useful Life of Intangible Assets” (“FSP FAS 142-3”), which applies to recognized
intangible assets that are accounted for pursuant to SFAS No. 142, “Goodwill and
Other Intangible Assets”. FSP FAS 142-3 amends the factors an entity must
consider when developing renewal or extension assumptions used in determining
the useful life of a recognized intangible asset. It also requires entities to
provide certain disclosures about its assumptions. FSP FAS 142-3 is effective
for financial statements issued for fiscal years beginning after December 15,
2008 and interim periods within those fiscal years. Accordingly, we adopted this
statement effective May 31, 2009. There was no material impact on the Company’s
results of operations or financial condition upon adoption of the new
statement.


11


In April
2009, the FASB issued FASB Staff Position Statement of Financial Accounting
Standards 107-1 and Accounting Principles Board (“APB”) Opinion No. 28-1,
“Interim Disclosures about Fair Value of Financial Instruments,” which amends
FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments,”
(“FAS 107”) and APB Opinion No. 28, “Interim Financial Reporting,” to require an
entity to provide interim disclosures about the fair value of all financial
instruments within the scope of FAS 107 and to include disclosures related to
the methods and significant assumptions used in estimating those
instruments.   This FASB Staff Position is effective for interim
and annual periods ending after June 15, 2009, and accordingly, the Company
adopted it during the first quarter of fiscal 2010.  Adoption of this
FASB Staff Position had no material impact on the Company’s financial
statements.  See Note 7 for these disclosures.





In May
2009, the FASB issued FASB Statement No. 165, “Subsequent Events” (“FAS 165”).
FAS 165 establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued. This statement does not apply to subsequent events or transactions that
are within the scope of other applicable generally accepted accounting
principles that provide different guidance on the accounting treatment for
subsequent events or transactions. FAS 165 applies to both interim financial
statements and annual financial statements and should not result in significant
changes in the subsequent events that are reported. FAS 165 introduces the
concept of financial statements being available to be issued. It requires the
disclosure of the date through which a Company has evaluated subsequent events
and the basis for that date, whether that represents the date the financial
statements were issued or were available to be issued. FAS 165 should alert all
users of financial statements that an entity has not evaluated subsequent events
after that date in the set of financial statements being presented. This
statement is effective for interim or annual reporting periods ending after June
15, 2009.  The Company adopted this statement during the first quarter
of fiscal 2010.





9.       Noncontrolling
Interest and Pro Forma Information





The following reflects the equity
activity, including our noncontrolling interest, for the thirteen-week period
ended August 29, 2009:





Cal-Maine
      Foods, Inc.Common
      Stock(in
      thousands)
                      
                      Amount
                      
                      
                      Class
      A
                        Amount
                      
                      
                      Treasury
                        Amount
                      
                      
                      Paid
      in
                        Capital
                      
                      
                      Retained
                        Earnings
                      
                      
                      Noncontrolling
                        Interest
                      
                      
                      Total
      EquityBalance
      at May 30, 2009
                      
                      $
                      351
                      
                      
                      $
                      24
                      
                      
                      $
                      (21,045
                      )
                      
                      $
                      32,098
                      
                      
                      $
                      320,623
                      
                      
                      $
                      958
                      
                      
                      $
                      333,009Dividends
      paid
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (3
                      )
                      
                      
                      
                      
                      
                      
                      (3
                      )Issuance
      of common stockfrom
      treasury
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      27
                      
                      
                      
                      233
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      260Vesting
      of stock basedcompensation
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      55
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      55Capital
      distributions
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (1,181
                      )
                      
                      
                      (1,181
                      )Net
      loss
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (3,832
                      )
                      
                      
                      (1,001
                      )
                      
                      
                      (4,833
                      )Balance
      August 29, 2009
                      
                      $
                      351
                      
                      
                      $
                      24
                      
                      
                      $
                      (21,018
                      )
                      
                      $
                      32,386
                      
                      
                      $
                      316,788
                      
                      
                      $
                      (1,224
                      )
                      
                      $
                      327,307


12


Noncontrolling
interests represents the earnings of the Company’s variable interest entities
(“VIEs”) under the consolidation provisions of FASB Interpretation No. 46,
“Consolidation of Variable Interest Entities,” (“FIN
46”).    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 first quarter of fiscal 2010 was $1,000 as compared to net
income attributable to noncontrolling interest of $28 for the first quarter of
fiscal 2009.   Upon adoption of FAS 160, 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 FAS 160 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 FAS 160 on May 31, 2009:





13
      weeks ended(in
      thousands, except per share amount)
                    
                    August
      29, 2009
                    
                    
                    August
      30, 2008Net
      income (loss) attributed to Cal-Maine Foods, Inc., as
    reported
                    
                    $
                    (3,832
                    )
                    
                    $
                    11,147Pro
      forma loss attributable to noncontrolling interest had the Company notadopted
      the provisions of FAS 160
                    
                    
                    (592
                    )
                    
                    
                    -Net
      income (loss) attributed to Cal-Maine Foods, Inc., pro
    forma
                    
                    $
                    (4,424
                    )
                    
                    $
                    11,147Basic
      and diluted net income (loss) per share attributable to Cal-Maine Foods,
      Inc’s common shareholders, as reported
                    
                    $
                    (0.16
                    )
                    
                    $
                    0.47Basic
      and diluted net income (loss) per share attributable to Cal-Maine Foods,
      Inc’s common shareholders, pro forma
                    
                    $
                    (0.19
                    )
                    
                    $
                    0.47





10.
       Insurance Receivable





On July
9, 2009 the Farwell 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.
Included in other receivables at August 29, 2009 is a receivable from the
Company’s insurance carriers of $8,899 for probable recoveries from the carriers
for property damage and expenses incurred resulting from the fire. The Company
intends to seek reimbursement for all of its insured losses, including lost
profits and expenses. The Company believes the effects of lost production and
additional expenses related to the fire that will be incurred will be
substantially covered by the Company’s insurance policies.  Any gain
resulting from recoveries from the insurance carriers will be recognized when
the claim is ultimately settled.





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 as a result 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.


13





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. As a result 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 August 29, 2009 we produced approximately 81% of the total number
of shell eggs sold by us, with approximately 9% of such total shell egg
production being through the use of 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 19% of the total
number of shell eggs sold by us was purchased from outside
producers.





Our
operating income or loss is significantly affected by wholesale shell egg market
prices, which can fluctuate widely and are outside of our
control.  Retail sales of shell eggs are generally greatest during the
fall and winter months and lowest during the summer months.  Prices
for shell eggs fluctuate in response to seasonal factors and a natural increase
in egg production during the spring and early summer.





Our cost
of production is materially affected by feed costs, which currently average
about 60% 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 in 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.  Prospects for both the corn and soybean crops are very
positive for the 2009 crop year.   Prices have moved down
recently for both corn and soybean meal, 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 as a result 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.





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".


14





RESULTS
OF OPERATIONS





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





Percentage of Net Sales13 Weeks EndedAugust 29, 2009
                      
                      
                      August 30, 2008Net
      sales
                      
                      
                      100.0
                      %
                      
                      
                      100.0
                      %Cost
      of sales
                      
                      
                      90.3
                      
                      
                      
                      80.3Gross
      profit
                      
                      
                      9.7
                      
                      
                      
                      19.7Selling,
      general & administrative
                      
                      
                      12.5
                      
                      
                      
                      11.0Operating  income
      (loss)
                      
                      
                      (2.8
                      )
                      
                      
                      8.7Other
      expense
                      
                      
                      (0.8
                      )
                      
                      
                      (0.3
                      )Income
      (loss) before taxes
                      
                      
                      (3.6
                      )
                      
                      
                      8.4Income
      tax expense (benefit)
                      
                      
                      (1.1
                      )
                      
                      
                      3.0Consolidated
      net income (loss)
                      
                      
                      (2.5
                      )
                      
                      
                      5.4Net
      (income) loss attributable to
                        noncontrolling
      interest
                      
                      
                      0.5
                      
                      
                      
                      (0.0
                      )Net
      income (loss) attributable to
                        Cal-Maine
      Foods, Inc.
                      
                      
                      (2.0
                      )
      %
                      
                      
                      5.4
                      %





NET
SALES





Approximately
95% of our net sales consisted 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 first quarter of fiscal 2010 were
$187.7 million, a decrease of $19.2 million, or 9.3 %, as compared to net sales
of $206.9 million for the first quarter of fiscal 2009.  Total dozen
eggs sold increased and egg selling prices decreased in the current fiscal 2010
quarter as compared to the same fiscal 2009 quarter.  Dozens sold for
the 2010 current quarter were 193.0 million dozen, an increase of 22.3 million
dozen, or 13.1%, as compared to the first quarter of fiscal 2009. Our net
average selling price per dozen for the fiscal 2010 first quarter was $.922,
compared to $1.135 for the first quarter of fiscal 2009, a decrease of
18.8%.  Our net average selling price 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 first quarter of
fiscal 2010 were $167.1 million, a decrease of $39.8 million, or 19.2%, as
compared to net sales of $206.9 million for the first quarter of fiscal
2009.   Dozens sold for the first quarter of fiscal 2010,
excluding the Acquisition, were 172.8 million, an increase of 2.1 million, or
1.2% as compared to 170.7 million for the first quarter of fiscal
2009.





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(Amounts in thousands)
                  
                  August 29, 2009
                  
                  
                  August 30, 2008Total
      net sales
                  
                  $
                  187,666
                  
                  
                  $
                  206,888Non-specialty
      shell egg sales
                  
                  $
                  138,673
                  
                  
                  $
                  161,115Specialty
      shell egg sales
                  
                  
                  40,196
                  
                  
                  
                  33,433Net
      shell egg sales
                  
                  $
                  178,869
                  
                  
                  $
                  194,548Net
      shell egg sales as a percent of total net sales
                  
                  
                  95
                  %
                  
                  
                  94
                  %Non-specialty
      shell egg dozens sold
                  
                  
                  167,608
                  
                  
                  
                  149,026Specialty
      shell egg dozens sold
                  
                  
                  25,439
                  
                  
                  
                  21,625Total
      dozens sold
                  
                  
                  193,047
                  
                  
                  
                  170,651





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 August 29, 2009,
non-specialty shell eggs represented approximately 77.5% of our shell egg dollar
sales, as compared to 82.8% for the thirteen-week period ended August 30,
2008.   For the thirteen-week period ended August 29, 2009,
non-specialty shell eggs accounted for approximately 86.8% of the total shell
egg dozen volume, as compared to 87.3% for the thirteen-week period ended August
30, 2008.


15





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 August 29, 2009, specialty shell eggs represented
approximately 22.5% of our shell egg dollar sales, as compared to 17.2% for the
thirteen-week period ended August 30, 2008. For the thirteen-week period ended
August 29, 2009, specialty shell eggs accounted for approximately 13.2% of the
total shell egg dozen volume, as compared to 12.7% for the thirteen-week period
ended August 30, 2008.





Our egg
product sales represent approximately 3% of our net sales. For the 13 weeks
ended August 29, 2009, egg product sales were $6.0 million, a decrease of $4.2
million, or 41.2%, as compared to $10.2 million for the same 13 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.





COST OF
SALES





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





13 weeks ended(Amounts in thousands)
                    
                    August 29, 2009
                    
                    
                    August 30, 2008Cost
      of Sales
                    
                    $
                    169,449
                    
                    
                    $
                    166,241Dozens
      produced
                    
                    
                    156,143
                    
                    
                    
                    133,642Dozens
      purchased outside
                    
                    
                    36,904
                    
                    
                    
                    37,009Dozens
      sold
                    
                    
                    193,047
                    
                    
                    
                    170,651Feed
      cost (price per dozen produced)
                    
                    $
                    0.357
                    
                    
                    $
                    0.458Farm
      production cost (price per dozen produced)
                    
                    $
                    0.599
                    
                    
                    $
                    0.669Outside
      egg purchases (average price paid per dozen)
                    
                    $
                    1.030
                    
                    
                    $
                    1.171





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. Cost of sales for
the first quarter of fiscal 2010 was $169.4 million, an increase of $3.2
million, or 1.9%, as compared to cost of sales of $166.2 million for the first
quarter of fiscal 2009. On a comparable basis, excluding the Acquisition, cost
of sales for the first quarter of fiscal 2010 was $149.9 million, a decrease of
$16.3 million, or 9.8%, as compared to cost of sales of $166.2 million for the
first quarter of fiscal 2009.The decrease is due to decreases in feed costs and
the cost of egg purchases from outside egg producers.   Prices
paid for outside egg purchases decreased in line with the decrease in egg
selling prices.  Feed cost per dozen for the fiscal 2010 first quarter
was $.357, compared to $.458 per dozen for the comparable fiscal 2009 first
quarter, a decrease of 22.1%. The decreases in feed costs and costs for outside
egg purchases did not keep pace with the decrease in egg selling prices and
resulted in a decrease in gross profit from 19.7% of net sales for the quarter
ended August 30, 2008 to 9.7% of net sales for the current quarter ended August
29, 2009.





SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES





13 weeks ended(Amounts in thousands)
                  
                  Actual
                    August 29, 2009
                  
                  
                  Less: Acquisition
                    August 29, 2009
                  
                  
                  Net
                    August 29, 2009
                  
                  
                  August 30, 2008
                  
                  
                  ChangeStock
      compensation expense
                  
                  $
                  1,301
                  
                  
                  $
                  -
                  
                  
                  $
                  1,301
                  
                  
                  $
                  3,404
                  
                  
                  $
                  (2,103
                  )Specialty
      egg expense
                  
                  
                  4,266
                  
                  
                  
                  89
                  
                  
                  
                  4,177
                  
                  
                  
                  3,374
                  
                  
                  
                  803Payroll
      and overhead
                  
                  
                  5,256
                  
                  
                  
                  414
                  
                  
                  
                  4,842
                  
                  
                  
                  5,171
                  
                  
                  
                  (329
                  )Other
      expenses
                  
                  
                  5,746
                  
                  
                  
                  1,588
                  
                  
                  
                  4,158
                  
                  
                  
                  4,268
                  
                  
                  
                  (110
                  )Delivery
      expense
                  
                  
                  6,949
                  
                  
                  
                  1,290
                  
                  
                  
                  5,659
                  
                  
                  
                  6,449
                  
                  
                  
                  (790
                  )Total
                  
                  $
                  23,518
                  
                  
                  
                  3,381
                  
                  
                  $
                  20,137
                  
                  
                  $
                  22,666
                  
                  
                  $
                  (2,529
                  )


16





Selling, general and administrative
expenses include costs of marketing, distribution, accounting and corporate
overhead. Selling, general and administrative expense for the first quarter of
fiscal 2010 was $23.5 million, an increase of $800,000, or 3.5%, as compared to
the expense of $22.7 million for the first quarter of fiscal 2009. Excluding the
Acquisition, selling, general, and administrative expense for the first quarter
of fiscal 2010 was $20.1 million, a decrease of $2.6 million, or 11.5%, as
compared to the expense of $22.7 million for the first quarter of fiscal 2009.
Stock based compensation plans expense decreased due to a decrease in the
closing price of the stock.  The calculation of the stock based
compensation plans expense is dependent on the closing stock price of the
Company’s stock, which decreased from $39.49 at August 30, 2008 to $28.95 at
August 29, 2009, which is a 26.7% decline in the Company’s stock
price.  Specialty egg expenses represent advertising, commissions, and
franchise fees as they are incurred with sales of our specialty
eggs.  The increase in specialty egg expense is attributable to the
increase in the dozens of specialty eggs sold this year as compared to last
fiscal year.  Payroll and overhead decreased slightly as compared to
the same period the prior year.  Other expenses, which include
expenses for insurance, supplies, repairs, professional fees, and other
expenses, remained relatively unchanged from the same period the prior
year.  Delivery expense decreased, but overall it remained relatively
level as compared to the same period the prior year. As a percent of net sales,
selling, general and administrative expense increased from 11.0% for fiscal 2009
first quarter to 12.5% for fiscal 2010 first quarter.





OPERATING
INCOME (LOSS)





As a result of the above, operating
loss was $5.3 million for the first quarter of fiscal 2010, as compared to
operating income of $18.0 million for the fiscal 2009 first
quarter.  As a percent of net sales, the first fiscal 2010 quarter had
an operating loss of 2.8% of net sales, compared to operating income of 8.7% of
net sales for the first quarter of fiscal 2009.





OTHER
INCOME (EXPENSE)





Other
expense consists of costs not directly charged to, or related to, operations
such as interest expense and equity in income (loss) of affiliates for equity
method investments.  Upon adoption of FAS 160, we no longer include
the net income or loss attributable to noncontrolling interests in other
expense. Through retrospective application of this standard, we reclassified
$28,000 of income out of other expense to the line item the line item titled net
(income) loss attributable to noncontrolling
interest.    Other expense for the first quarter ended
August 29, 2009 was $1.6 million, an increase of $1.0 million, as compared to
$564,000 for the quarter ended August 30, 2008. For the first quarter of fiscal
2010, net interest expense increased $499,000. For the first quarter of fiscal
2010 other income decreased $495,000, as compared to the first quarter of fiscal
2009.   This decrease is attributable to decreased equity in
income of affiliates, which are also in the shell egg business. For the 13 weeks ended
August 30, 2008, we capitalized $57,000 of interest expense in connection with
our ongoing construction activities. As a percent of net sales, other expense
increased from .3% for the fiscal 2009 first quarter to .8% for the fiscal 2010
first quarter.





INCOME
TAXES





As a result of the above, we had a
pre-tax loss of $6.9 million for the quarter ended August 29, 2009, as compared
to pre-tax income of $17.4 million for the quarter ended August 30, 2008. For
the fiscal 2009 first quarter, an income tax benefit of $2.0 million was
recorded with an effective tax rate of 29.5%, as compared to income tax expense
of $6.2 million with an effective tax rate of 35.8% for the fiscal 2009 first
quarter.





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 FASB Interpretation No. 46, “Consolidation of
Variable Interest Entities,” (“FIN 46”).   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 first quarter of fiscal 2010 was $1.0 million as
compared to net income attributable to noncontrolling interest of $28,000 for
the first quarter of fiscal 2009.   Upon adoption of FAS 160, 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 FAS 160 allows for the attribution of
losses to the noncontrolling interests even when doing so will create a deficit
balance on the balance sheet.


17





NET
INCOME (LOSS) ATTRIBUTABLE TO CAL-MAINE FOODS, INC





As a result of the above, net loss
attributable to the Company for the first quarter ended August 29, 2009 was $3.8
million, or $.16 per basic and diluted share, as compared to net income
attributable to the Company of $11.1 million, or $.47 per basic and diluted
share for the quarter ended August 30, 2008. As a percent of net sales, net loss
attributable to the Company was 2.0% for the quarter ended August 29, 2009,
compared to net income attributable to the Company of 5.4% for the quarter ended
August 30, 2008.





CAPITAL RESOURCES AND
LIQUIDITY





Our
working capital at August 29, 2009 was $149.5 million compared to $138.0 million
at May 30, 2009. Our current ratio was 2.22 at August 29, 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 August 29, 2009. Our long-term debt at
August 29, 2009, including current maturities, amounted to $126.9 million, as
compared to $129.8 million at May 30, 2009.





For the
thirteen weeks ended August 29, 2009, $5.4 million in net cash was used in
operating activities.  This compares to net cash provided by
operations of $20.9 million for the thirteen weeks ended August 30, 2008. In the
first 2009 fiscal quarter, approximately $9.1 million was provided from the sale
of short-term investments, and net $510,000 was used for notes receivable.
Approximately $809,000 was provided from disposal of property, plant and
equipment, $4.6 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 $2.9 million was used for
principal payments on long-term debt.  Approximately $262,000 was
received from the issuance of common stock from the treasury.  The net
result of these activities was a decrease in cash of approximately $15.3 million
since May 30, 2009.





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
not to exceed $60,000,000 in any twelve month period, 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 August 29, 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 August 29, 2009 capital expenditures
related to construction of this complex totaled $31.7
million.  .


18





On July
9, 2009 the Farwell 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. There
were no personal injuries and minimal physical damage was sustained to the rest
of the complex. The Farwell complex was designed to house up to 1.5 million
laying hens and accounted for approximately three to four percent of the
Company’s weekly production at the time of the fire. This facility, as well as
all of the Company’s other facilities, are fully insured for their replacement
value, including the estimated loss of production. It is too early to estimate
the total amount of gain or loss that will ultimately be recognized due to this
fire. Based on preliminary estimates, the Company has determined that the net
book value of plant, and equipment lost due to this casualty is approximately
$7.2 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, existing
lines of credit and insurance recoveries.





Delta Egg Farm, LLC, an unconsolidated
affiliate, is constructing an organic egg production and distribution facility
near our Chase, Kansas location. The cost of construction is estimated to be
approximately $15.3 million. 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 $6.7 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 at any time 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
defined by FAS No. 115, on the date of our acceptance of the Rights. As a
result, we are required to record these securities at fair value each period
until the Rights are exercised and the auction rate securities are redeemed. At
August 29, 2009 the fair value of our auction rate securities was below par
value of which the entire amount has been charged to operations in fiscal 2009.
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 will 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.  We will put the auction rate securities back to
UBS on June 30, 2010.  At August 29, 2009, these securities were
recorded in the current asset portion on our condensed consolidated balance
sheet in the line item investment securities trading with a value of $33.1
million.





At August
29, 2009, we have $6.1 million of current investment securities
available-for-sale consisting primarily of pre-funded municipal bonds and
certificates of deposit with maturities of three to six months when purchased.
Due to the nature of the investments, the cost at August 29, 2009 approximates
fair value; therefore, other comprehensive income (loss) has not been recognized
as a separate component of stockholders' equity in regards to the current
investment securities available-for-sale.





Fair
Value





Effective
June 1, 2008, we adopted Financial Accounting Standards Board (“FASB”) Statement
No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 establishes a single
authoritative definition of fair value, sets out a framework for measuring fair
value, and expands on required disclosures about fair value
measurement.  In February 2008, FASB issued FASB Staff Position No.
157-2, “Effective Date of FASB Statement No. 157” which provided a one-year
deferral of the effective date of FAS 157 for non-financial assets and
non-financial liabilities except those that are recognized or disclosed in the
financial statements at fair value at least annually.


19





The
adoption of FAS 157 for our financial assets and financial liabilities did not
have a material impact on our financial statements.  Effective May 31,
2009, we adopted FAS 157 for nonfinancial assets and nonfinancial
liabilities.  This did not have a material impact on our financial
statements.  FAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (exit price).
Valuation techniques used to measure fair value under FAS 157 must maximize the
use of observable inputs and minimize the use of unobservable inputs. FAS 157
classifies the inputs used to measure fair value into the following
hierarchy:





•
            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.




Level 2


We
classified our current investment securities – available-for-sale as level
2.   These securities consist of pre-funded municipal bonds with
maturities of three to six 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 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 of 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.





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.


20


Assets
measured at fair value on a recurring basis consisted of the following types of
instruments as of August 29, 2009:





Fair Value Measurements at Reporting Date UsingQuoted Pricesin Active
                  
                  SignificantMarkets for
                  
                  Other
                  
                  SignificantIdentical
                  
                  Observable
                  
                  UnobservableInstruments
                  
                  Inputs
                  
                  Inputs
                  
                  Total(In
      thousands)
                  (Level 1)
                  
                  (Level 2)
                  
                  (Level 3)
                  
                  BalanceInvestment
      securities available-for-sale (Current)
                  
                  $
                  -
                  
                  
                  $
                  6,097
                  
                  
                  $
                  -
                  
                  
                  $
                  6,097Investment
      securities trading (Current) 1
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  33,100
                  
                  
                  
                  33,100Total
      assets measured at fair value
                  
                  $
                  -
                  
                  
                  $
                  6,097
                  
                  
                  $
                  33,100
                  
                  
                  $
                  39,197





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 $30,705.   The fair value
of the Rights is $2,395, 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
$33,100.




The
following is a reconciliation of the beginning and ending balances for assets
measured at fair value on a recurring basis using significant unobservable
inputs (Level 3) during the period ended August 29, 2009:




(In thousands)
            
            Investment securities
              trading -non-current
            
            
            Investment securities
              trading - current
            
            
            TotalBeginning
      balance – May 30, 2009
            
            $
            33,150
            
            
            $
            -
            
            
            $
            33,150Total
      gains – (realized/unrealized)Included
      in earnings (or changes in net assets), net
            
            
            -
            
            
            
            -
            
            
            
            -Included
      in other comprehensive income, net
            
            
            -
            
            
            
            -
            
            
            
            -Purchases,
      issuances, and settlements
            
            
            (50
            )
            
            
            -
            
            
            
            (50
            )Transfers
      in and/or out of Level 3
            
            
            (33,100
            )
            
            
            33,100
            
            
            
            -Ending
      balance
            
            $
            -
            
            
            $
            33,100
            
            
            $
            33,100




In
February 2007, the FASB issued FASB Statement No. 159, "Establishing the Fair
Value Option for Financial Assets and Liabilities" (“FAS 159”), to permit all
entities to choose to elect to measure eligible financial instruments at fair
value. We adopted FAS 159 effective June 1, 2008.   We have
elected the fair value option for our Rights.  We agreed to accept
these Rights from UBS on November 3, 2008.





UBS’s
obligations under the Rights are not secured by its assets and do not require
UBS to obtain any financing to support its performance obligations under the
Rights.  UBS has disclaimed any assurance that it will have sufficient
financial resources to satisfy its obligations under the Rights.





The
Rights represent a firm agreement in accordance with FASB Statement No. 133
“Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”),
which defines a firm agreement as an agreement binding on both parties and
usually legally enforceable, with the following characteristics: (a) the
agreement specifies all significant terms, including the quantity to be
exchanged, the fixed price, and the timing of the transaction, and (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 free standing asset separate
from the auction rate securities.   The Rights do not meet the
definition of a derivative instrument under FAS 133, because the underlying
securities are not readily convertible to cash.  Therefore, we have
elected to measure the Rights at fair value under FAS 159, 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.





The
Rights are valued at $2.4 million on our condensed consolidated balance sheet at
August 29, 2009.  They are included in the total amount for
“Investments securities trading” in the current asset portion of our
consolidated balance sheet.  The auction rate securities are measured
at fair value using the assumptions discussed
previously.   According to the fair value hierarchy established
by FAS 157, the Company determined that the assumptions used to measure these
securities are level 3 assumptions.    Accordingly, the
assumptions used to measure the rights are level 3 assumptions.  The
value of the rights is the difference between the par value and fair value of
our auction rate securities.


21





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 impact 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,
utilization of our revolving line of credit, and cash flows from operations are
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
August 29, 2009 that we expect will have a material impact on our consolidated
financial statements.





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 a new corporation, 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.   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.  The named plaintiffs in the indirect purchaser case
filed a consolidated complaint on February 27, 2009.




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.  On April 30, 2009, the Company filed motions to dismiss both
the direct purchaser consolidated case and the indirect purchaser consolidated
case.  The plaintiffs have not yet responded to those
motions.  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.




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.


24





ITEM 2.  UNREGISTERED SALES
OF EQUITY SECURITIES AND USE OF PROCEEDS





We made
no sales of unregistered securities during the first quarter of fiscal
2010.





For
information as to working capital utilization see “Capital Resources” under Part
1, Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations of this Form 10-Q.





ITEM 5.  OTHER
INFORMATION





On
September 28, 2009, we issued a press release announcing our financial results
for the quarter ended August 29, 2009.





ITEM
6.  EXHIBITS





a.
                  
                  ExhibitsNo.
                  
                  Description31.1
                  
                  Certification
      of The Chief Executive Officer31.2
                  
                  Certification
      of The Chief Financial Officer32.0
                  
                  Section
      1350 Certification of The Chief Executive Officer and The Chief Financial
      Officer99.1
                  
                  Press
      release dated September 28, 2009 announcing interim period financial
      information


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:  September
      29, 2009
                  /s/ Timothy A. DawsonTimothy
      A. DawsonVice
      President/Chief Financial Officer(Principal
      Financial Officer)Date:  September
      29, 2009
                  /s/ Charles F. CollinsCharles
      F. CollinsVice
      President/Controller(Principal
      Accounting
Officer)


26