UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC  20549





FORM
10-Q


(mark
one)





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





For the
quarterly period ended November 29, 2008


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 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  ̈
              (Do
      not check if a smaller reporting company)
            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 December 29, 2008.




Common
      Stock, $0.01 par value
                21,389,091
      sharesClass
      A Common Stock, $0.01 par value
                2,400,000
      shares











CAL-MAINE
FOODS, INC. AND SUBSIDIARIES





INDEX





PageNumberPart
      I.            
      Financial InformationItem
      1.
                                              Financial
      Statements
                                              3Condensed
      Consolidated Financial Statements (Unaudited)Condensed
      Consolidated Balance Sheets -November
      29, 2008 and May 31, 2008
                                              3Condensed
      Consolidated Statements of Income -Thirteen
      Weeks and Twenty-Six Weeks EndedNovember
      29, 2008 and December 1, 2007
                                              4Condensed
      Consolidated Statements of Cash Flows -Twenty-Six
      Weeks Ended November 29, 2008 andDecember
      1, 2007
                                              5Notes
      to Condensed Consolidated Financial Statements
                                              6Item
      2.
                                              Management’s
      Discussion and Analysis ofFinancial
      Condition and Results of Operations
                                              11Item
      3.
                                              Quantitative
      and Qualitative Disclosures About Market Risk
                                              18Item
      4.
                                              Controls
      and Procedures
                                              18Part
      II.           Other
      InformationItem
      1.
                                              Legal
      Proceedings
                                              19Item
      1A.
                                              Risk
      Factors
                                              20Item
      4.
                                              Submission
      of Matters to a Vote of Security
      Holders
                                              21Item
      6.
                                              Exhibits
                                              21Signatures
                                              22




2




PART I.  FINANCIAL
INFORMATION




ITEM
1.   FINANCIAL STATEMENTS





CAL-MAINE
FOODS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(in
thousands, except per share amounts)





November 29, 2008
                                
                                
                                May 31, 2008(unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                                
                                $
                                26,143
                                
                                
                                $
                                94,858Investment
      securities available-for-sale (Note 6)
                                
                                
                                1,209
                                
                                
                                
                                -Trade
      and other receivables
                                
                                
                                70,815
                                
                                
                                
                                47,930Inventories
                                
                                
                                92,377
                                
                                
                                
                                76,766Cash
      in escrow designated for acquisition (Note 1)
                                
                                
                                11,405
                                
                                
                                
                                -Prepaid
      expenses and other current assets
                                
                                
                                1,102
                                
                                
                                
                                4,711Total
      current assets
                                
                                
                                203,051
                                
                                
                                
                                224,265Investment
      securities available-for-sale (Note 6)
                                
                                
                                -
                                
                                
                                
                                40,754Investment
      securities trading (Note
      6)
                                
                                
                                37,650
                                
                                
                                
                                -Other
      investments
                                
                                
                                16,522
                                
                                
                                
                                13,421Cash
      in escrow designated for acquisition (Note 1)
                                
                                
                                49,267
                                
                                
                                
                                -Goodwill
                                
                                
                                20,167
                                
                                
                                
                                13,452Other
      assets
                                
                                
                                6,615
                                
                                
                                
                                2,851Property,
      plant and equipment
                                
                                
                                436,857
                                
                                
                                
                                410,326Less
      accumulated depreciation
                                
                                
                                (216,128
                                )
                                
                                
                                (203,833
                                )220,729
                                
                                
                                
                                206,493TOTAL
      ASSETS
                                
                                $
                                554,001
                                
                                
                                $
                                501,236LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                                
                                $
                                63,683
                                
                                
                                $
                                55,766Accrued
      dividends payable
                                
                                
                                9,081
                                
                                
                                
                                12,186Current
      maturities of purchase obligation
                                
                                
                                11,182
                                
                                
                                
                                10,358Current
      maturities of long-term debt
                                
                                
                                13,511
                                
                                
                                
                                11,470Deferred
      income taxes
                                
                                
                                17,725
                                
                                
                                
                                12,935Total
      current liabilities
                                
                                
                                115,182
                                
                                
                                
                                102,715Long-term
      debt, less current maturities
                                
                                
                                105,127
                                
                                
                                
                                85,680Non-controlling
      interests in consolidated entities
                                
                                
                                1,999
                                
                                
                                
                                1,687Purchase
      obligation, less current maturities
                                
                                
                                -
                                
                                
                                
                                9,598Other
      non-current liabilities
                                
                                
                                4,262
                                
                                
                                
                                4,120Deferred
      income taxes
                                
                                
                                22,940
                                
                                
                                
                                21,756Total
      liabilities
                                
                                
                                249,510
                                
                                
                                
                                225,556Stockholders’
      equity:Common
      stock $0.01 par value per share:Authorized
      shares – 60,000Issued
      35,130 shares and 21,389 shares outstanding atNovember
      29, 2008 and 21,317 shares outstanding at May 31, 2008
                                
                                
                                351
                                
                                
                                
                                351Class
      A common stock $0.01 par value per share, authorized, issued
      andoutstanding
      2,400 shares at November 29, 2008 and May 31, 2008
                                
                                
                                24
                                
                                
                                
                                24Paid-in
      capital
                                
                                
                                32,028
                                
                                
                                
                                29,697Retained
      earnings
                                
                                
                                293,133
                                
                                
                                
                                267,616Common
      stock in treasury – 13,741 shares at November 29, 2008and
      13,813 shares at May 31, 2008
                                
                                
                                (21,045
                                )
                                
                                
                                (21,156
                                )Accumulated
      other comprehensive loss
                                
                                
                                -
                                
                                
                                
                                (852
                                )Total
      stockholders’ equity
                                
                                
                                304,491
                                
                                
                                
                                275,680TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                
                                $
                                554,001
                                
                                
                                $
                                501,236




See notes
to condensed consolidated financial statements.




3





CAL-MAINE
FOODS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF INCOME


(in
thousands, except per share amounts)


(unaudited)





13
      Weeks Ended
                      
                      
                      26
      Weeks EndedNovember
      29, 2008
                      
                      
                      December
      1, 2007
                      
                      
                      November
      29, 2008
                      
                      
                      December
      1, 2007Net
      sales
                      
                      $
                      238,314
                      
                      
                      $
                      223,696
                      
                      
                      $
                      445,202
                      
                      
                      $
                      402,294Cost
      of sales
                      
                      
                      180,298
                      
                      
                      
                      147,664
                      
                      
                      
                      346,539
                      
                      
                      
                      280,682Gross
      profit
                      
                      
                      58,016
                      
                      
                      
                      76,032
                      
                      
                      
                      98,663
                      
                      
                      
                      121,612Selling,
      general andadministrative
                      
                      
                      14,892
                      
                      
                      
                      17,029
                      
                      
                      
                      37,558
                      
                      
                      
                      35,677Operating
      income
                      
                      
                      43,124
                      
                      
                      
                      59,003
                      
                      
                      
                      61,105
                      
                      
                      
                      85,935Other
      income (expense):Interest
      expense, net
                      
                      
                      (1,212
                      )
                      
                      
                      (1,377
                      )
                      
                      
                      (2,429
                      )
                      
                      
                      (3,024
                      )Other
                      
                      
                      220
                      
                      
                      
                      3,744
                      
                      
                      
                      845
                      
                      
                      
                      5,682(992
                      )
                      
                      
                      2,367
                      
                      
                      
                      (1,584
                      )
                      
                      
                      2,658Income
      before income tax
                      
                      
                      42,132
                      
                      
                      
                      61,370
                      
                      
                      
                      59,521
                      
                      
                      
                      88,593Income
      tax expense
                      
                      
                      14,888
                      
                      
                      
                      21,216
                      
                      
                      
                      21,130
                      
                      
                      
                      30,473Net
      income
                      
                      $
                      27,244
                      
                      
                      $
                      40,154
                      
                      
                      $
                      38,391
                      
                      
                      $
                      58,120Net
      income per common shareBasic
                      
                      $
                      1.15
                      
                      
                      $
                      1.70
                      
                      
                      $
                      1.62
                      
                      
                      $
                      2.46Diluted
                      
                      $
                      1.14
                      
                      
                      $
                      1.69
                      
                      
                      $
                      1.61
                      
                      
                      $
                      2.45Dividends
      per common share
                      
                      $
                      0.3817
                      
                      
                      $
                      0.01250
                      
                      
                      $
                      0.5387
                      
                      
                      $
                      0.02500Weighted
      average sharesoutstanding:Basic
                      
                      
                      23,789
                      
                      
                      
                      23,681
                      
                      
                      
                      23,750
                      
                      
                      
                      23,640Diluted
                      
                      
                      23,826
                      
                      
                      
                      23,714
                      
                      
                      
                      23,797
                      
                      
                      
                      23,719




See notes
to condensed consolidated financial statements.





4




CAL-MAINE
FOODS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(in
thousands)


(unaudited)





26
      Weeks EndedNovember 29, 2008
                    
                    
                    December 1, 2007Operating
      ActivitiesNet income
                    
                    $
                    38,391
                    
                    
                    $
                    58,120Depreciation/amortization
                    
                    
                    13,098
                    
                    
                    
                    11,732Other adjustments/net
                    
                    
                    (11,193
                    )
                    
                    
                    (11,051
                    )Net
      cash provided by operating activities
                    
                    
                    40,296
                    
                    
                    
                    58,801Investing
      ActivitiesPurchases of investments
                    
                    
                    (7,225
                    )
                    
                    
                    (36,000
                    )Sales of investments
                    
                    
                    10,515
                    
                    
                    
                    16,250Acquisition of businesses, net of cash
acquired
                    
                    
                    (29,757
                    )
                    
                    
                    -Cash in escrow designated for acquisition
                    
                    
                    (60,672
                    )
                    
                    
                    -Purchases of property, plant and equipment
                    
                    
                    (15,143
                    )
                    
                    
                    (12,171
                    )Payments received on notes receivable and from
      investments
                    
                    
                    555
                    
                    
                    
                    572Increase in notes receivable and investments
                    
                    
                    (896
                    )
                    
                    
                    (668
                    )Net proceeds from disposal of property, plant and
      equipment
                    
                    
                    268
                    
                    
                    
                    2,087Net
      cash (used in) investing activities
                    
                    
                    (102,355
                    )
                    
                    
                    (29,930
                    )Financing
      ActivitiesProceeds from issuance of common stock from
      treasury
                    
                    
                    248
                    
                    
                    
                    608Payment of purchase obligation
                    
                    
                    (12,425
                    )
                    
                    
                    (6,769
                    )Proceeds from issuance of long-term debt
                    
                    
                    26,000
                    
                    
                    
                    -Principal payments of long-term debt
                    
                    
                    (4,512
                    )
                    
                    
                    (8,619
                    )Payments of dividends
                    
                    
                    (15,967
                    )
                    
                    
                    (588
                    )Net
      cash (used in) financing activities
                    
                    
                    (6,656
                    )
                    
                    
                    (15,368
                    )Net
      change in cash and cash equivalents
                    
                    
                    (68,715
                    )
                    
                    
                    13,503Cash
      and cash equivalents at beginning of period
                    
                    
                    94,858
                    
                    
                    
                    15,032Cash
      and cash equivalents at end of period
                    
                    $
                    26,143
                    
                    
                    $
                    28,535





See notes
to condensed consolidated financial statements.




5




CAL-MAINE
FOODS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements


(in
thousands, except share amounts)


November
29, 2008


(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. Operating results for the
thirteen-week and twenty-six week periods ended November 29, 2008 are not
necessarily indicative of the results that may be expected for the year ending
May 30, 2009.





The
balance sheet at May 31, 2008 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 31, 2008.





Zephyr
Egg, LLC Acquisition





On June
27, 2008, we completed the acquisition of substantially all of the operating
assets of Zephyr Egg Company, Zephyr Feed Company, Inc. and Scarlett Farms
(together, "Sellers"), located in Zephyrhills, FL and transferred those assets
to a new Limited Liability Company, Hillandale Foods, LLC, formed on that date.
Pursuant to Articles of Amendment to the Articles of Organization for Hillandale
Foods, LLC, we changed the name of the Limited Liability Company to Zephyr Egg,
LLC. The approximate purchase price was reported in note 2 of our May 31, 2008
audited financial statements as $27,427. The final purchase price was $29,757
based upon the final valuation of the assets acquired. The purchase price was
funded from our available cash balances. The assets purchased included
approximately two million laying hens in modern, in-line facilities, pullet
growing facilities, two egg processing plants, a feed mill and a fleet of
delivery trucks for both eggs and feed. As part of the acquisition, the Company
also acquired the Egg-Land'sBestTMfranchise for southern
Florida, certain flocks of contract laying hens, and the Sellers 12.58% interest
in American Egg Products, Inc., in which the Company already had a majority
interest. Zephyr Egg, LLC's results of operations have been included in the
consolidated financial statements since the date of
acquisition.





The
following table presents the preliminary allocation of the acquisition cost to
the assets acquired and liabilities assumed, based on their fair
values:





Accounts
      receivable
                        
                        $
                        2,788Inventories
                        
                        
                        5,886Other
      investments
                        
                        
                        1,532Property,
      plant, and equipment
                        
                        
                        12,375Goodwill and
      Intangible Assets
                        
                        
                        7,176Total
      assets acquired
                        
                        
                        29,757Total
      liabilities assumed
                        
                        
                        -Net
      assets acquired
                        
                        $
                        29,757





The
allocation of the purchase price is based on preliminary data and could change
when final valuation of certain assets is obtained.




6




Pro forma
information related to the above acquisition is not included because the impact
on the Company’s consolidated results of operations is not considered to be
material.





Tampa
Farms, LLC Acquisition





We
entered into a Membership Interests Purchase Agreement, made as of November 28,
2008 (the “Agreement”) with Tampa Farm Service, Inc., a Florida corporation
(“Seller”), TFS Holdings, Inc., a Florida corporation (“TFS Holdings”), and
Michael H. Bynum, Blair M. Bynum and Samuel G. Bynum (collectively, the
“Shareholders”). The Seller, based in Dover, Florida, was for many years engaged
directly, and through Okeechobee Egg Company Inc., an affiliated Florida
corporation, and through Seller’s other “Affiliates,” as defined in the
Agreement, in the production, grading, packaging and distribution of shell eggs
and related activities, including the production and milling of feed for laying
hens and pullets (the “Seller’s Business”), with operations in the southeastern
United States.





To
facilitate the sale of the Seller’s Business, the Seller conveyed all of its
assets, but none of its liabilities, to Tampa Farms, LLC (“Tampa Farms”), a
Florida limited liability company. In general, the assets acquired by the
Company include flock and egg inventories, finished feed and feed inventories,
materials and fuel, veterinary supplies, certain industry membership interests
and other assets. Under the Agreement, the Seller sold to the Company all of the
issued and outstanding membership interests (the “Membership Interests”) of
Tampa Farms to the Company as contemplated by and in accordance with the terms
of the Agreement.





At
November 29, 2008, approximately $60,672 was placed in an escrow
account.  Funds placed in the escrow account were designated to be
used for the acquisition of the assets of Tampa Farms.  These
designated amounts are displayed on the balance sheet as per the guidance in
Article 5-02 of Regulation S-X (17 C.F.R. § 210.5-02). The final purchase price
for the Membership Interests was $61,644, which was paid from the Company’s
available funds, and borrowings. The Company completed the acquisition of the
Seller’s Business on December 11, 2008. The transaction is expected to result in
an increase in the Company’s current egg production capacity by approximately
16%.





The
following table presents the preliminary allocation of the acquisition cost to
the assets acquired and liabilities assumed, based on their fair
values:





Inventories
                      
                      $
                      11,971Prepaid
      expenses
                      
                      
                      350Other
      investments
                      
                      
                      901Property,
      plant, and equipment
                      
                      
                      33,222Goodwill and
      Intangible Assets
                      
                      
                      15,200Total
      assets acquired
                      
                      
                      61,644Total
      liabilities assumed
                      
                      
                      -Net
      assets acquired
                      
                      $
                      61,644





The
allocation of the purchase price is based on preliminary data and could change
when final valuation of certain assets is obtained.




Hillandale
Acquisition





On
July 28, 2005, we entered into an Agreement to Form a Limited Liability Company
with Hillandale Farms, Inc. and Hillandale Farms of Florida, Inc. (together,
“Hillandale”), and the Hillandale shareholders (the “Agreement”). Under the
terms of the Agreement, we acquired 51% of the Units of Membership in
Hillandale, LLC for cash of approximately $27,006 on October 12, 2005, with the
remaining 49% of the Units of Membership to be acquired in essentially equal
annual installments over a four-year period. The purchase price of the Units
equals their book value at the time of purchase as calculated under the terms of
the Agreement.




7




In August
2006, in accordance with the Agreement, we purchased, for $6,102, an additional
13% of the Units of Hillandale, LLC based on their book value as of July 29,
2006. In August 2007, we purchased, for $6,769, an additional 12% of the Units
of Hillandale, LLC based on their book value as of July 28, 2007.  In
August 2008, we purchased, for $11,585, an additional 12% of the Units of
Hillandale, LLC based on their book value as of July 28, 2007.  Our
ownership of Hillandale, LLC currently is 88%. Our obligation to acquire the
remaining 12% of Hillandale, LLC is recorded at its present value of
$11,182 as of November 29, 2008, which is included in current liabilities in the
accompanying consolidated balance sheet.  During fiscal 2008,
additional payments totaling $5,700 were paid on the purchase obligation. We
will purchase the remaining 12% of Hillandale LLC based on the book value of the
Membership Units as of July 25, 2009.  The Company will adjust the
original Hillandale purchase price allocation based on the ultimate amount paid
for the acquisition in accordance with SFAS 141.




Stock
Compensation Plans




Total
stock based compensation expense for the twenty-six weeks ended November 29,
2008 and December 1, 2007 was $326 and $4,288, respectively.  Our
liabilities associated with Stock Appreciation Rights as of November 29, 2008
and December 1, 2007 was $4,654 and $5,327, respectively.




During
the twenty-six weeks ended November 29, 2008, options were exercised for 72
shares of common stock. Proceeds from the exercise of these options amounted to
$427.  The Company made no stock-based grants during the twenty-six
weeks ended November 29, 2008.  Refer to Note 9 of our May 31, 2008
audited financial statements for further information on our stock compensation
plans.




2.
            Inventories





Inventories
consisted of the following:





November 29, 2008
                      
                      
                      May 31, 2008Flocks
                      
                      $
                      56,537
                      
                      
                      $
                      49,176Eggs
                      
                      
                      7,877
                      
                      
                      
                      5,095Feed
      and supplies
                      
                      
                      27,963
                      
                      
                      
                      22,495$
                      92,377
                      
                      
                      $
                      76,766





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 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.





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. Effective October
2, 2008, our Class A Common Stock is paid at a rate equal to the rate on our
Common Stock.  See “Item 4. Submission of Matters to a Vote of
Security Holders” in “Part II. Other Information.”




8




6.
            Investment
      securities (available-for-sale and
trading)





Investment
securities available-for-sale consist of auction rate securities accounted for
in accordance with Statement of Financial Accounting Standards 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 marketable
investments have been impaired and, if so, whether such impairment is temporary
or other than temporary.





Our
auction rate securities are long-term debt obligations, which were rated AAA at
the date of purchase, but while 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 has been reported in the financial press, the disruptions
in the credit markets adversely affected the auction market for these types of
securities. The Company believes that the appropriate presentation of these
securities is long-term investments as reflected in our condensed consolidated
balance sheets at May 31, 2008 and November 29, 2008. Net unrealized holding
losses on available-for-sale securities of $852, net of income taxes, are
included in accumulated other comprehensive loss as of May 31,
2008.





We did
liquidate one auction rate security at par value for $4,500 with accrued
interest after this security was called on July 10, 2008 by the original
issuer.  Our auction rate securities are held in an account with UBS
Financial Services, Inc (“UBS”).  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.  Pursuant to
their plan of redemption, our timeframe for redemption is June 30, 2010 through
June 30, 2012.  During this timeframe, we may choose to continue to
hold the auction rate securities and earn interest or dividends or sell them to
UBS at par plus accrued interest at any time during this timeframe.





On
November 3, 2008, we agreed to accept Auction Rate Security Rights (the Rights)
from UBS offered through a prospectus filed on 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.





As of
November 29, 2008, we had the intent and ability to hold these securities until
anticipated recovery. As a result, we had recognized the unrealized loss
previously as a temporary impairment in other comprehensive income in
stockholders’ equity.





By
accepting the Rights, we can no longer assert that we have the intent to hold
the auction rate securities until anticipated recovery. Therefore, we recognized
an other-than-temporary impairment charge of approximately $4,713 in the second
quarter of fiscal 2009. The charge was measured as the difference between the
par value and market value of the auction rate securities on November 3, 2008,
the date we accepted the Rights. However as we will be permitted to put the
auction rate securities back to UBS at par value, we will account for the Rights
as a separate asset that will be measured at its fair value, resulting in a gain
of approximately $4,713 recorded on November 3, 2008, the date we accepted the
Rights. As a result of our acceptance of the Rights, we have elected to classify
the Rights and reclassify 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 will be required to assess the fair value of these two
individual assets and record changes each period until the Rights are exercised
and the auction rate securities are redeemed. Although the Rights represent the
right to sell the securities back to UBS at par, we will be required to
periodically assess the economic ability of UBS to meet that obligation in
assessing the fair value of the Rights. We will continue to classify the auction
rate securities as long-term investments until June 30, 2009, one year prior to
the expected settlement.




9




Investment
securities classified as trading securities consists of securities accounted for
in accordance with FAS 115.  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.





We feel
that the reclassification of our auction rate securities as trading is the most
appropriate classification, based on management’s intent by accepting the
Rights.





At
November 29, 2008, $1,209 is classified as current investment securities
available-for-sale. These securities include primarily 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 November 29, 2008
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 of financial instruments





Effective
June 1, 2008, we adopted 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
provides 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.  We are currently
evaluating the effect that the implementation of this standard for nonfinancial
assets and nonfinancial liabilities will have on our financial statements upon
full adoption in 2009. 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.




Our
financial assets and financial liabilities consisted of cash and cash
equivalents, and current investment securities available-for-sale at November
29, 2008 which we consider to be classified as Level 1 and our long-term
investment securities available-for-sale which we consider to be classified as
Level 2.




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.  Upon adoption, we did not
elect the fair value option for any items within the scope of FAS 159 and,
therefore, the adoption of FAS 159 did not have an impact on our financial
statements.





8.
            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
31, 2008 for a discussion of the impact of recently issued accounting standards.
There were no accounting standards issuedduring the quarter ended
November 29, 2008 that we expect will have a material impact on our consolidated
financial statements.




10




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 31, 2008, (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.





As widely
reported, financial markets have been experiencing extreme disruption in recent
months, including, among other things, extreme volatility in securities prices,
severely diminished liquidity and credit availability, rating downgrades of
certain investments and declining valuations of others. Among other risks we
face, the current tightening of credit in financial markets may adversely affect
our ability to obtain financing in the future, including, if necessary, to fund
a strategic acquisition, and our ability to refinance any of our long-term
debt.





In
addition, current economic conditions could harm the liquidity or financial
position of our customers or suppliers, which could in turn cause such parties
to fail to meet their contractual or other obligations to us.





In
addition, we maintain significant amounts of cash and cash equivalents at one or
more financial institutions that are in excess of federally insured limits.
Given the current instability of financial institutions, we cannot be assured
that we will not experience losses on these deposits.





OVERVIEW





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





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





We
currently produce approximately 78% of the total number of shell eggs sold by
us, with approximately 5% 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 22% of the total number of shell eggs
sold by us is purchased from outside producers for resale, as
needed.





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 66% 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.  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.  However, our feed
costs were lower than the previous quarter with both corn and soybean meal
prices moving precipitously lower after reaching record levels during the summer
of calendar year 2008.  Feed costs, while much improved, will likely
remain relatively high and could be volatile in the year ahead.




11




RESULTS
OF OPERATIONS





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





PercentageofNetSales13 Weeks Ended
                    
                    
                    26 Weeks EndedNovember 29, 2008
                    
                    
                    December 1, 2007
                    
                    
                    November 29, 2008
                    
                    
                    December 1, 2007Net
      sales
                    
                    
                    100.0
                    %
                    
                    
                    100.0
                    %
                    
                    
                    100.0
                    %
                    
                    
                    100.0
                    %Cost
      of sales
                    
                    
                    75.7
                    
                    
                    
                    66.0
                    
                    
                    
                    77.8
                    
                    
                    
                    69.8Gross
      profit
                    
                    
                    24.3
                    
                    
                    
                    34.0
                    
                    
                    
                    22.2
                    
                    
                    
                    30.2Selling,
      general and administrative
                    
                    
                    6.2
                    
                    
                    
                    7.6
                    
                    
                    
                    8.4
                    
                    
                    
                    8.9Operating
      income
                    
                    
                    18.1
                    
                    
                    
                    26.4
                    
                    
                    
                    13.8
                    
                    
                    
                    21.3Other
      income (expense)
                    
                    
                    (0.4
                    )
                    
                    
                    1.1
                    
                    
                    
                    (0.4
                    )
                    
                    
                    0.7Income
      before income tax
                    
                    
                    17.7
                    
                    
                    
                    27.5
                    
                    
                    
                    13.4
                    
                    
                    
                    22.0Income
      tax expense
                    
                    
                    6.2
                    
                    
                    
                    9.5
                    
                    
                    
                    4.7
                    
                    
                    
                    7.6Net
      income
                    
                    
                    11.5
                    %
                    
                    
                    18.0
                    %
                    
                    
                    8.7
                    %
                    
                    
                    14.4
                    %





NET
SALES





Year-
to-date, approximately 94% of our net sales consist of shell egg sales and
approximately 5% was for sales of egg products, with the 1% balance consisting
of sales of incidental feed and feed ingredients.  Net sales for the
thirteen-week period ended November 29, 2008 were $238.3 million, an increase of
$14.6 million compared to net sales of $223.7 million for the thirteen-week
period ended December 1, 2007.  The Zephyr acquisition accounted for
$10.7 million of the increase.  Excluding the Zephyr acquisition, on a
comparable basis, net sales increased $3.9 million or 1.7%, for the second
fiscal 2009 quarter.  Total dozens of eggs sold increased and egg
selling prices increased in the current thirteen-week period as compared to the
same comparable thirteen-week period in fiscal 2008. Dozens sold for the current
thirteen-week period, including 8.3 million dozen sold by the Zephyr
acquisition, were 185.2 million dozen, an increase of 12.9 million dozen, or
7.5% as compared to the similar thirteen-week period of fiscal
2008.  On a comparable basis, excluding the Zephyr acquisition, dozens
sold increased 2.7%.  In the current thirteen-week period domestic
demand for shell eggs was relatively levelas
compared to a year ago.  During this quarter there was good demand for
eggs at the retail level, but a declining demand for eggs from the institutional
and food service sectors.  Our net average selling price per dozen for
the thirteen-week period ended November 29, 2008 was $1.209, compared to $1.183
for the thirteen-week period ended December 1, 2007, an increase of 2.2%. Based
on the Urner Barry wholesale quotation for shell eggs, average shell egg selling
prices actually decreased for the thirteen-week period ending November 29, 2008
as compared to the same period in fiscal 2008.  Due to the increased
percentage of specialty shell egg sales as a percentage of our total shell egg
sales, our net average selling price per dozen increased this quarter as
compared to last year. The net average selling price per dozen is the blended
price for all sizes and grades of shell eggs, including non-graded egg sales,
breaking stock and undergrades.





Our shell
egg sales which represent approximately 94% of our net sales, includes the sale
of specialty shell eggs. Specialty shell eggs include reduced cholesterol, cage
free and organic eggs.  In the thirteen weeks ended November 29, 2008,
specialty shell eggs represented approximately 18.1% of our shell egg dollar
sales, as compared to 14.0% for the same thirteen-week period last
year.  For the thirteen weeks ended November 29, 2008, specialty shell
eggs represented 14.2% of the total dozen eggs sold, as compared to 11.7% for
the same thirteen-week period last year.




12




Our egg
product sales represent approximately 5% of our net sales. For the thirteen
weeks ended November 29, 2008, egg product sales were $11.7 million, an increase
of $1.9 million, or 19.4%, as compared to $9.8 million for the same thirteen-
week period last year.





Net sales
for the twenty-six week period ended November 29, 2008 were $445.2 million, an
increase of $42.9 million, or 10.7% compared to net sales of $402.3 million for
the fiscal 2008 twenty-six week period.  Excluding the net sales of
the Zephyr acquisition of $17.7 million, on a comparable basis, sales have
increased $25.2 million, or 6.3%. Dozens sold for the current twenty-six week
period, which include 14.3 million by the Zephyr acquisition,  were
355.8 million compared to 336.2 million for the same twenty-six week period in
fiscal 2008, an increase of 19.6 million dozen, or 5.8%.  On a
comparable basis, excluding the Zephyr acquisition, dozens sold have increased
1.6%.   As in the current quarter, favorable egg market
conditions resulted in an increase to our net average shell egg selling
prices.  For the current fiscal 2009 twenty-six week period, our net
average selling price per dozen was $1.173, compared to $1.077 per dozen for the
same period last year, an increase of $.096 per dozen, or 8.9%.





For the
twenty-six weeks ended November 29, 2008, specialty shell eggs represented
approximately 17.7% of our shell egg dollar sales, as compared to 14.2% for the
same twenty-six week period last year.  For the twenty-six weeks ended
November 29, 2008, specialty shell eggs represented 13.5% of the total dozen
eggs sold, as compared to 10.8% for the same twenty-six week period last
year.  For the twenty-six weeks ended November 29, 2008, egg product
sales were $21.9 million, an increase of $4.4 million, or 25.1%, as compared to
$17.5 million for the same twenty-six week period last year.





COST OF
SALES





Cost of
sales consists of costs directly related to production and processing of shell
eggs, including feed costs, and purchases of shell eggs from outside egg
producers. Total cost of sales for the thirteen-week period ended November 29,
2008 was $180.3 million, an increase of $32.6 million, as compared to the cost
of sales of $147.7 million for the thirteen-week period ended December 1,
2007.  The Zephyr acquisition’s cost of sales accounted for $7.3
million of the increase.  Excluding the Zephyr acquisition, on a
comparable basis, cost of sales increased $25.3 million, or
17.1%.  This increase is the result of higher costs of feed
ingredients and costs of shell eggs purchased from outside producers. Due to the
increase in the volume of eggs purchased from other egg producers, our outside
egg purchase cost increased. Feed cost for the thirteen-week period ended
November 29, 2008 was $.385 per dozen, an increase of 27.1%, as compared to cost
per dozen of $.303 for the same thirteen-week period in fiscal
2008.   Increases in feed cost are the result of higher market
prices for corn and soybean meal, primary ingredients for the feed we use. Other
operating costs have also increased from last fiscal year. Increases in our net
average shell egg selling prices did not offset the increase in feed
ingredients, costs of purchased eggs and other operating costs, which resulted
in a net decrease in gross profit from 34.0% of net sales for the thirteen-week
period ended December 1, 2007 to 24.3% of net sales for the thirteen-week period
ended November 29, 2008.





For the
twenty-six week period ended November 29, 2008, total cost of sales was $346.5
million, an increase of $65.8 million, or 23.4%, as compared to cost of sales of
$280.7 million for the twenty-six week period ended December 1, 2007. The Zephyr
acquisition’s cost of sales accounted for $13.4 million of the
increase.  Excluding the Zephyr acquisition, on a comparable basis,
cost of sales increased $52.4 million, or 18.7%. The increase in cost of sales
is the result of higher cost of eggs purchased from outside producers and an
increase in the cost of feed ingredients. Feed cost for the current twenty-six
week period was $.417 per dozen, compared to $.294 per dozen for the twenty-six
week period ended December 1, 2007, an increase of 41.8%. Gross profit decreased
to 22.2% of net sales for the twenty-six week period ended November 29, 2008
from 30.2% for the comparable twenty-six week period ended December 1,
2007.




13




SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES





Selling,
general and administrative expenses include costs of marketing, distribution,
accounting and corporate overhead. Selling, general and administrative expense
for the thirteen-week period ended November 29, 2008 was $14.9 million, a
decrease of $2.1 million, or 12.4%, as compared to $17.0 million for the
thirteen-week period ended December 1, 2007.  In the thirteen-week
period ended November 29, 2008, stock compensation expense decreased by $5.0
million, and franchise fees and promotional expenses pertaining to our
increasing specialty egg business increased by $1.6 million.  The
calculation of the stock based compensation plans expense is dependent on the
closing stock price of the Company’s common stock, which increased from $24.63
at December 1, 2007 to $25.21 at November 29, 2008, however our stock price did
decline from the previous thirteen-week period this fiscal 2009
period.  The common stock price decreased from $39.49 at August 30,
2008 to $25.21 at November 29, 2008. Our net delivery expense increased by
$952,000 for the thirteen-week period ended November 29,
2008.    As a percent of net sales, selling, general and
administrative expense decreased from 7.6% for the thirteen-week period ended
December 1, 2007 to 6.2% for the thirteen-week period ended November 29,
2008.





For the
twenty-six weeks ended November 29, 2008, selling, general and administrative
expense was $37.6 million, an increase of $1.9 million, or 5.3% as compared to
$35.7 million for the same period in fiscal 2008. In the twenty-six weeks ended
November 29, 2008, franchise fees and promotional expenses pertaining to our
increasing specialty egg business increased by approximately $2.7 million. In
the current twenty-six week period, stock compensation expense decreased by
approximately $4.0 million, and administrative payroll expenses increased
approximately $956,000.  A significant portion of the increase in
payroll expense is due to the inclusion of the Zephyr acquisition. Our net
delivery expense increased by $2.2 million for the twenty-six week period ended
November 29, 2008.  As a percent of net sales, selling, general and
administrative expense decreased from 8.9% for the twenty-six weeks of fiscal
2008 to 8.4% for the current comparable period in fiscal 2009.





OPERATING
INCOME





As a
result of the above, operating income was $43.1 million for the second quarter
ended November 29, 2008, as compared to operating income of $59.0 million for
the second quarter of fiscal 2008.  As a percent of net sales, the
current fiscal 2009 quarter had an 18.1% operating income, compared to 26.4% for
the comparable period in fiscal 2008.





For the
twenty-six weeks ended November 29, 2008, operating income was $61.1 million,
compared to operating income of $85.9 million for the comparable period in
fiscal 2008.  As a percent of net sales, the current fiscal 2009
period had 13.8% operating income, compared to 21.3% operating income for the
same period in fiscal 2008.





OTHER
INCOME (EXPENSE)





Other
income or expense consists of costs or income not directly charged to, or
related to, operations such as interest expense and equity in income from
affiliates. Other expense for the thirteen-week period ended November 29, 2008
was $992,000, which is a decrease of $3.4 million from other income of $2.4
million for same thirteen-week period of fiscal 2008. This net decrease for the
current thirteen-week period was primarily the result of a $165,000 decrease in
net interest expense and a $3.5 million decrease in other income. Although we
had higher average long-term borrowing balances this was offset by our higher
invested cash balances, which decreased net interest expense. Other income
decreased due to decreased equity in income of affiliates, and last year we
recorded a significant gain on the sale of fixed assets.  As a percent
of net sales, other expense was .4% for the thirteen-weeks ended November 29,
2008, compared to other income of 1.1% for the comparable period last
year.





For the
twenty-six weeks ended November 29, 2008, other expense was $1.6 million, which
is a decrease of $4.3 million from other income of $2.7 million for the
comparable period in fiscal 2008.  For the current fiscal 2009
twenty-six week period, net interest expense decreased by $595,000. Similar to
the current thirteen-week period, we had higher average long-term borrowing
balances, which were offset by our higher invested cash balances, which
decreased net interest expense. Other income decreased $4.8 million from
decreases in the equity in income of affiliates, and last year we recorded a
significant gain on the sale of fixed assets. As a percent of net sales, other
expense was .4% for the current fiscal 2009 twenty-six week period, as compared
to other income of .7% for the comparable period in fiscal 2008.




14




INCOME
TAXES





As a result of the above, our pre-tax
income was $42.1 million for the thirteen-week period ended November 29, 2008,
compared to pre-tax income of $61.4 million for last year’s comparable
period.  For the current thirteen-week period, income tax expense of
$14.9 million was recorded with an effective tax rate of 35.3% as compared to an
income tax expense of $21.2 million with an effective rate of 34.6% for last
year’s comparable thirteen-week period.





For the twenty-six week period ended
November 29, 2008, pre-tax income was $59.5 million, compared to pre-tax income
of $88.6 million for the comparable period in fiscal 2008.  For the
current fiscal 2009 twenty-six week period, income tax expense of $21.1 million
was recorded with an effective tax rate of 35.5%, as compared to an income tax
expense of $30.5 million with an effective rate of 34.4% for last year’s
comparable period. Our effective tax rate differs from the federal statutory
income tax rate of 35% due to state income taxes and certain items included in
income for financial reporting purposes that are not included in taxable income
or loss for income tax purposes, including tax exempt interest income, certain
stock option expense and the minority ownership interest in the profits and
losses of Hillandale, LLC for income tax purposes.





NET
INCOME





Net income for the thirteen-week period
ended November 29, 2008 was $27.2 million, or $1.15 per basic and $1.14 per
diluted share, compared to net income of $40.2 million, or $1.70 per basic and
$1.69 per diluted share for the same period last year.





For the twenty-six week period ended
November 29, 2008, net income was $38.4 million or $1.62 per basic and $1.61 per
diluted share, compared to a fiscal 2008 net income of $58.1 million, or $2.46
per basic and $2.45 per diluted share.





CAPITAL
RESOURCES AND LIQUIDITY





Our
working capital at November 29, 2008 was $87.9 million compared to $121.6
million at May 31, 2008. Our current ratio was 1.76 at November 29, 2008 as
compared with 2.18 at May 31, 2008. 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, $6.0
million of which was outstanding and $2.7 million of which was utilized as a
standby letter of credit at November 29, 2008. Our long-term debt at November
29, 2008, including current maturities, amounted to $118.6 million, as compared
to $97.2 million at May 31, 2008.





For the twenty-six weeks ended November
29, 2008, $40.3 million in net cash was provided by operating
activities.  This compares to net cash provided by operating
activities of $58.9 million for the 26 weeks ended December 1,
2007.  For the twenty-six weeks ended November 29, 2008, $7.2 million
was used for the purchase of short-term investments, $10.5 million was provided
from the sale of short-term investments, and net $341,000 was used for notes
receivable and other investments.  Approximately $268,000 was provided
from disposal of property, plant and equipment, $15.1 million was used for
purchases of property, plant and equipment and $12.4 million was used for an
additional acquisition of the Hillandale business.  We used $29.8
million for the acquisition of Zephyr Egg, LLC.  We designated $60.7
million for the purchase of Tampa Farms, LLC.  Approximately $16.0
million was used for payments of dividends on the common stock, and $4.5 million
was used for principal payments on long-term debt. We received $248,000 from the
issuance of common stock from the treasury through the exercise of stock
options.  Approximately $26.0 million was received from additional
long-term borrowings. The net result of these activities was a decrease in cash
and cash equivalents of $68.7 million since May 31, 2008.





For the twenty-six weeks ended December
1, 2007, $19.8 million was used for the purchase of short-term investments and
$96,000 was used for notes receivable and investments.  Approximately
$2.1 million was provided from disposal of property, plant and equipment, $12.2
million was used for purchases of property, plant and equipment and $6.8 million
was used for payment on the purchase obligation for Hillandale, LLC.
Approximately $588, 000 was used for payments of dividends on the common stock,
and $8.6 million was used for principal payments on long-term debt. We received
$608,000 from the issuance of common stock from the treasury through the
exercise of stock options.  The net result of these activities was an
increase in cash and cash equivalents of $13.5 million since June 2,
2007.




15




Substantially
all trade receivables and inventories collateralize our revolving line of
credit. Most of our property, plant and equipment collateralize our long-term
debt under our loan agreements with our lenders. Unless otherwise approved by
our lenders, we are required by provisions of these 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 adjusted for
earnings); (2) limit capital expenditures less exclusions (not to exceed $60.0
million for any period of four consecutive fiscal quarters), lease obligations
and additional long-term borrowings (total funded debt to total capitalization
not to exceed 55%); and (3) maintain various cash-flow coverage ratios (1.25 to
1), among other restrictions. At November 29, 2008 we were in compliance with
the provisions 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.





Under the terms of our Agreement with
Hillandale and the Hillandale shareholders, a new Florida limited liability
company named Hillandale, LLC was formed. In fiscal 2006, we purchased 51% of
the Units of Membership in Hillandale, LLC for cash of approximately $27.0
million, with the remaining Units to be acquired in essentially equal annual
installments over a four-year period. The purchase price of the Units is equal
to their book value as calculated in accordance with the terms of the Agreement.
In fiscal 2007, we purchased, pursuant to the Agreement, an additional 13% of
the Units of Membership for $6.1 million from our cash balances. In fiscal 2008,
we purchased an additional 12% of the Units of Membership for $6.8 million from
our cash balances. During fiscal 2008, an additional payment of $5.7 million was
paid on the purchase obligation.  In fiscal 2009, we purchased an
additional 12% of the Units of Membership for $11.6 million from our cash
balances. We have recorded the obligation to acquire the remaining 12% at its
estimated present value of $11.2 million at November 29, 2008. The actual
remaining purchase price may be higher or lower when the acquisitions are
completed. Future funding is expected to be provided by our cash balances and
borrowings under our existing credit facilities.





Capital expenditure requirements are
expected to be for the normal repair and replacement of our facilities. In
addition, we are constructing a new integrated layer production complex in the
city of Farwell in west Texas to replace our Albuquerque, New Mexico complex,
which has ceased egg production. The expected cost is approximately $30.0
million. Completion of this facility is estimated to be in January 2010. As of
November 29, 2008 capital expenditures related to construction of this complex
were $23.2 million.  The remaining future capital expenditures will be
funded by cash flows from operations, existing lines of credit and additional
long-term borrowings.





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 $13.0 million.  In connection with this project, we are
a pro rata guarantor, with the other Delta Egg Farm, LLC owners, of additional
debt undertaken to fund construction of this facility. We are currently a
guarantor of approximately $7.3 million of long-term debt of Delta Egg Farm,
LLC.





On
November 3, 2008, we agreed to accept Auction Rate Security Rights (the Rights)
from UBS offered through a prospectus filed on 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.





As of
November 29, 2008, we had the intent and ability to hold these securities until
anticipated recovery. As a result, we had recognized the unrealized loss
previously as a temporary impairment in other comprehensive income in
stockholders’ equity.





By
accepting the Rights, we can no longer assert that we have the intent to hold
the auction rate securities until anticipated recovery. Therefore, we recognized
an other-than-temporary impairment charge of approximately $4,713 in the second
quarter of fiscal 2009. The charge was measured as the difference between the
par value and market value of the auction rate securities on November 3, 2008,
the date we accepted the Rights. However as we will be permitted to put the
auction rate securities back to UBS at par value, we will account for the Rights
as a separate asset that will be measured at its fair value, resulting in a gain
of approximately $4,713 recorded on November 3, 2008, the date we accepted the
Rights. As a result of our acceptance of the Rights, we have elected to classify
the Rights and reclassify 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 will be required to assess the fair value of these two
individual assets and record changes each period until the Rights are exercised
and the auction rate securities are redeemed. Although the Rights represent the
right to sell the securities back to UBS at par, we will be required to
periodically assess the economic ability of UBS to meet that obligation in
assessing the fair value of the Rights. We will continue to classify the auction
rate securities as long-term investments until June 30, 2009, one year prior to
the expected settlement.




16




Investment
securities classified as trading securities consists of securities accounted for
in accordance with FAS 115.  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.





We feel
that the reclassification of our auction rate securities as trading is the most
appropriate classification, based on management’s intent by accepting the
Rights.





We
currently have a $1.6 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 $1.6 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 in light of the
disruptions in the financial markets.  These disruptions in the
financial markets include among other things, extreme volatility in securities
prices, severely diminished liquidity and credit availability, rating downgrades
of certain investments and declining valuations of others. In light of the
current tightening of credit in the financial markets, we might suffer adverse
affects in so far as our ability to secure financing in the future, including,
if necessary, to fund a strategic acquisition, and our ability to refinance any
of our long-term debt.





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 31,
2008 for a discussion of the impact of recently issued accounting standards.
There were no accounting standards issuedduring the quarter ended
November 29, 2008 that we expect will have a material impact on our consolidated
financial statements.





Effective
June 1, 2008, we adopted 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
provides 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.  We are currently
evaluating the effect that the implementation of this standard for nonfinancial
assets and nonfinancial liabilities will have on our financial statements upon
full adoption in 2009. 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.




17




Our
financial assets and financial liabilities consisted of cash and cash
equivalents, and current investment securities available-for-sale at November
29, 2008 which we consider to be classified as Level 1 and our long-term
investment securities available-for-sale which we consider to be classified as
Level 2.




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.  Upon adoption, we did not
elect the fair value option for any items within the scope of FAS 159 and,
therefore, the adoption of FAS 159 did not have an impact on our 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 31, 2008, 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 31, 2008.





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 31, 2008.





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, except the change discussed under “Change in Internal Control over
Financial Reporting,” below.




Changes
in Internal Control over Financial Reporting




During
the second quarter of fiscal 2009, we began implementing a new enterprise
resource planning (“ERP”) system. The implementation of the ERP system
represents a material change in our internal controls over financial
reporting.




Management
is reviewing and evaluating the design of key controls in the new ERP system and
the accuracy of the data conversion that is taking place during the
implementation and thus far has not uncovered a control deficiency or
combination of control deficiencies that management believes meet the definition
of a material weakness in internal control over financial reporting. Although
management believes internal controls are being maintained or enhanced by the
new ERP system, it has not completed its testing of the operating effectiveness
of all key controls in the new system. As such, there is a risk such control
deficiencies may exist that have not yet been identified and that could
constitute, individually or in combination, a material weakness. Management will
continue to evaluate the operating effectiveness of related key controls during
subsequent periods.




18




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 31, 2008.





Chicken Litter
Litigation.





Cal-Maine
Farms, Inc., a subsidiary of ours, is 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 company of ours 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.  No new trial date in the Green case has been set.





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 ninety percent 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.





Some
dispositive motions have been filed jointly by all defendants. Some of those
motions were rejected by the Court, and others were left unresolved after oral
arguments. Other dispositive motions will be filed. We are not able at present
to give an opinion regarding the ultimate resolution of the action.





In
February, 2008, a hearing was had on the plaintiff’s motion for preliminary
injunctive relief. The principal relief sought was a moratorium on litter
application in the watershed. The district court has not yet ruled on the
motion.





The
presiding judge has appointed a fellow district court judge to act as a
settlement judge. That judge has initiated settlement discussions. Three
settlement meetings have taken place, but thus far have not been
productive.




19




Egg Antitrust
Litigation





Between September
25 and November 24, 2008, the Company was named as one of several
defendants in fifteen antitrust cases involving the United States
shell egg industry.  In all fifteen cases, the named plaintiffs sue 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 one other case, the named plaintiffs are
individuals who allege that they purchased eggs and egg products indirectly from
defendants - that is, they purchased from retailers that had previously
purchased from defendants or other parties.  In all of the cases, the
named plaintiffs allege that the Company and all of the 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.  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.  Plaintiffs seek treble damages on behalf of themselves and all
other putative class members in the United States.  The class periods in
these cases vary, with some extending as far as back as January 1,
2000.  Thirteen of the direct purchaser cases seek relief under the
Sherman Act and are pending in the United States District Court for the Eastern
District of Pennsylvania.  The other direct purchaser case also seeks
relief under the Sherman Act and is pending in the United States District Court
for the District of Minnesota.  The one indirect purchaser class
action seeks relief under the Sherman Act and the statutes and common-law of
various states and the District of Columbia, and is pending in the United
States District Court for the Eastern District of Pennsylvania.  The
Judicial Panel on Multidistrict Litigation is currently considering a motion to
consolidate these actions into one court for pretrial
proceedings.





The judge
presiding over the Pennsylvania cases has entered a series of scheduling orders,
but there is no definite schedule in any of the cases for filing motions to
dismiss, discovery, class certification proceedings, or filing motions for
summary judgment.  No trial date has been set.





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
31, 2008.





20





ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS





The
Company’s Annual Meeting of Shareholders was held on October 2,
2008.





The
following persons were nominated and elected to serve as members of the Board of
Directors until our next      annual meeting of
shareholders and until their successors are elected and qualified. Fred R.
Adams, Jr. (38,035,831 votes for and 4,238,350 votes withheld), Richard K.
Looper (38,723,124 votes for and 3,550,992 votes withheld), Adolphus B. Baker
(38,077,771 votes for and 4,196,345 votes withheld), James E. Poole (41,733,427
votes for and 540,689 votes withheld), R. Faser Triplett (38,212,326 votes for
and 4,061,790 votes withheld), Letitia C. Hughes (41,617,492 votes for and
656,349 votes withheld), and Timothy A. Dawson (38,016,346 votes for and
4,257,770 votes withheld).





The
amendment of the Certificate of Incorporation to provide for payment of equal
dividends on Common Stock and Class A Common Stock on a per share basis was
approved with 36,992,491 votes for, 5,246,359 votes against passage, and 34,398
abstained.





The
resolution proposed by The Humane Society of the United States concerning
maintaining laying hens in cages failed to pass with 342,736 common stock votes
for, 37,279,391 votes against.





No other
matters were voted upon at the annual meeting.





ITEM
6.  EXHIBITS





No.
                  
                  Description3.1(b)
                  
                  Amendment
      to Article 4 of the Certificate of Incorporation of the
      Registrant.31.1
                  
                  Certification
      of The Chief Executive Officer31.2
                  
                  Certification
      of The Chief Financial Officer32.0
                  
                  Written
      Statement of The Chief Executive Officer and The Chief Financial
      Officer





21




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:  December
      31, 2008
                        /s/ Timothy A. DawsonTimothy
      A. DawsonVice
      President/Treasurer(Principal
      Financial Officer)Date:
      December 31, 2008
                        /s/ Charles F. CollinsCharles
      F. CollinsVice
      President/Controller(Principal
      Accounting Officer)




22