UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
DC  20549





FORM
10-K





x
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 FOR THE FISCAL YEAR ENDED MAY 29,
2010





 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





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)





Securities
registered pursuant to Section 12 (b) of the Act:





Title of each Class:
                    
                    Name of exchange on
                      which registered:Common
      Stock,  $0.01 par
                      value
      per share
                    
                    The
      NASDAQ Global
Market





Securities
registered pursuant to Section 12 (g) of the Act:  NONE





Indicate
by check mark if the registrant is a well-known seasoned issuer as defined in
Rule 405 of the Securities Act.


Yes   ̈        No  x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.


Yes   ̈        No  x





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


Yes  x        No   ̈





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


Yes   ̈        No   ̈





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  x





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





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 Act).


Yes   ̈        No  x





The
aggregate market value, as reported by the NASDAQ Global Market, of the
registrant’s Common Stock, $0.01 par value, held by non-affiliates
at  November 28, 2009, which was the date of the last business day of
the registrant’s most recently completed second fiscal quarter, was
$385,589,660.





As of
August 1, 2010, 21,441,091 shares of the registrant’s Common Stock, $0.01 par
value, and 2,400,000 shares of the registrant’s Class A Common Stock, $0.01 par
value, were outstanding.





DOCUMENTS
INCORPORATED BY REFERENCE


The
information called for by Part III of the Form 10-K is incorporated herein by
reference from the registrant’s Definitive Proxy Statement which will be filed
pursuant to Regulation 14A not later than 120 days after the end of the fiscal
year covered by this report.





TABLE
OF CONTENTS





PageItem
                                  
                                  
                                  
                                  NumberPart I1.
                                  
                                  Business
                                  
                                  31A.
                                  
                                  Risk
      Factors
                                  
                                  91B.
                                  
                                  Unresolved
      Staff Comments
                                  
                                  122.
                                  
                                  Properties
                                  
                                  123.
                                  
                                  Legal
      Proceedings
                                  
                                  124.
                                  
                                  (Removed
      and Reserved)
                                  
                                  14Part
      II5.
                                  
                                  Market
      for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                                  
                                  156.
                                  
                                  Selected
      Financial Data
                                  
                                  167.
                                  
                                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                  
                                  177A.
                                  
                                  Quantitative
      and Qualitative Disclosures About Market Risk
                                  
                                  308.
                                  
                                  Financial
      Statements and Supplementary Data
                                  
                                  319.
                                  
                                  Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                                  
                                  679A.
                                  
                                  Controls
      and Procedures
                                  
                                  679B.
                                  
                                  Other
      Information
                                  
                                  69Part
      III10.
                                  
                                  Directors
      and Executive Officers of the Registrant
                                  
                                  6911.
                                  
                                  Executive
      Compensation
                                  
                                  6912.
                                  
                                  Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                  
                                  6913.
                                  
                                  Certain
      Relationships and Related Transactions
                                  
                                  6914.
                                  
                                  Principal
      Accountant Fees and Services
                                  
                                  69Part
      IV15.
                                  
                                  Exhibits
      and Financial Statement Schedules
                                  
                                  70Signatures
                                  
                                  73


2


PART
I





FORWARD-LOOKING
STATEMENTS





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, including anticipated results
of operations.  Such forward-looking statements are identified by the
use of words such as “believes,” “intends,” “expects,” “hopes,” “may,” “should,”
“plans,” “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 forward-looking statements are
based on management’s current intent, belief, expectations, estimates and
projections regarding our company and our industry.  These statements
are not guarantees of future performance and involve risks, uncertainties,
assumptions and other factors that are difficult to predict.  The
factors that could cause actual results to differ materially from those
projected in the forward-looking statements include, among others, (i) the risk
factors set forth in Item 1A and elsewhere in this report, (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 that could result from our future acquisition of new flocks or
businesses.  Readers are cautioned not to place undue reliance on
forward-looking statements because, while we believe the assumptions on which
the forward-looking statements are based are reasonable, there can be no
assurance that these forward-looking statements will prove to be
accurate.  We disclaim any intent or obligation to update publicly
these forward-looking statements, whether as a result of new information, future
events or otherwise.





ITEM
1.  BUSINESS





Our Business





Cal-Maine
Foods, Inc. (“we,” “us,” “our,” or the “Company”) is the largest producer and
marketer of shell eggs in the United States. In fiscal 2010, we sold
approximately 805 million dozen shell eggs, which represented approximately 18%
of domestic shell egg consumption. Our total flock of approximately 26 million
layers and seven million pullets and breeders is the largest in the United
States. Layers are mature female chickens, pullets are young female chickens
usually under 20 weeks of age, and breeders are male or female chickens used to
produce fertile eggs to be hatched for egg production flocks.





We
operate in a single segment. Our primary business is the production, grading,
packaging, marketing and distribution of shell eggs. We sell most 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. The strength of our position is
evidenced by the fact that we have the largest market share in the grocery
segment for shell eggs, and we sell shell eggs to a majority of the largest food
retailers in the United States.





We are
also one of the largest producers and marketers of value-added specialty shell
eggs in the United States. Specialty shell eggs include nutritionally enhanced,
cage free and organic eggs and are a rapidly growing segment of the market. In
fiscal 2010, specialty shell eggs represented approximately 21% of our shell egg
dollar sales, as compared to 19% for fiscal 2009. Retail prices for specialty
eggs are less cyclical than non-specialty shell egg prices and are generally
higher due to consumer willingness to pay for the increased benefits from those
products. We market our specialty shell eggs under the following brands: Egg-Land’s Best(TM), Farmhouse(TM), and 4-Grain(TM). We own a 29.1% equity
interest in Egg-Land’s Best, Inc., which markets the leading brand in the
specialty shell egg segment.  Egg-Land’s Best, Inc. operates as a
cooperative. We have exclusive license agreements to market and distribute Egg-Land’s Best(TM) specialty
shell eggs in major metropolitan areas, including New York City, and a number of
states in the southeast and southwest. We market cage free eggs under our
trademarked Farmhousebrand and distribute those shell eggs across the southeast and southwest
regions of the United States.   We market organic, all natural,
cage-free, vegetarian, and omega-3 eggs under our 4-Grain trademark. We also
produce market and distribute private label specialty shell eggs to several
customers. Sales of specialty shell eggs accounted for approximately 14.4% of
our total shell egg dozen volumes in fiscal 2010, as compared to 13.8% in fiscal
2009.





We are
also a leader in industry consolidation. Since 1989, we have completed sixteen
acquisitions ranging in size from 600,000 layers to 7.5 million layers. Despite
a market that has been characterized by increasing consolidation, the shell egg
production industry remains highly fragmented. There currently are 56 producers
who each own more than one million layers and the ten largest producers own
approximately 48% of total industry layers. We believe industry consolidation
will continue and we plan to capitalize on opportunities as they
arise.


3


Acquisitions





Hillandale, LLC
Acquisition





During
the first quarter of fiscal 2010, we made the final payment of $8.2 million on
the Hillandale, LLC purchase obligation.  Effective July 30, 2009,
Hillandale, LLC was merged into Cal-Maine Foods, Inc. Refer to Note 2 of our May
29, 2010 audited financial statements for further information on the Hillandale
Acquisition.





Benton County Foods, LLC
Acquisition





We now
own 100% of Benton County Foods, LLC.  We purchased the remaining 10%
ownership interest in Benton County Foods, LLC for $508,000 in the first quarter
of fiscal 2010.  Refer to Note 2 of our May 29, 2010 audited financial
statements for further information on the Benton County Foods, LLC
Acquisition.





Industry Background





Based on historical consumption trends,
demand for shell eggs increases in line with overall population growth,
averaging an increase of about 1% per year. According to U.S. Department of
Agriculture (“USDA”) reports, since 2000, annual per capita consumption in the
United States has varied between 248 and 258 eggs. In calendar year 2009, per
capita consumption in the United States was estimated to be 248 eggs, or
approximately five eggs per person per week.





Prices
for Shell Eggs





Shell egg prices are a critical
component of profitability in the industry. We estimate that over 90% of all
shell eggs sold in the United States in the retail and foodservice channels are
sold at prices related to the Urner Barry wholesale quotation for shell eggs.
For fiscal 2010, wholesale large shell egg prices in the southeast region
averaged $1.12 per dozen compared to an average of $1.17 per dozen for fiscal
years 2007 to 2009.  Based on USDA reports, the Company expects that
the table egg laying flock will expand in the upcoming months of calendar year
2010.   Due to the anticipated expansion in the laying flock,
shell egg production for the remainder of calendar year 2010 is expected to be
above production during the comparable period of calendar year 2009, which could
possibly lead to lower shell egg prices.





Feed Costs for Shell Egg
Production





Feed is a primary cost component in the
production of shell eggs and represents over half of industry farm level
production costs. Most shell egg producers are vertically integrated,
manufacturing the majority of the feed they require themselves. Although feed
ingredients, primarily corn and soybean meal, are available from a number of
sources, prices for ingredients can fluctuate and can be affected by weather and
by various supply and demand factors. Feed prices for fiscal 2010 were lower
than the previous year.





Growth Strategy and
Acquisitions





For many
years, we have pursued a growth strategy focused on the acquisition of existing
shell egg production and processing facilities, as well as the construction of
new and more efficient facilities.  Since the beginning of fiscal
1989, we have completed sixteen acquisitions. In addition, we have built seven
new “in-line” shell egg production and processing facilities and one pullet
growing facility which added eight million layers and 1.5 million growing
pullets to our capacity.  Each of the new shell egg production
facilities generally provide for the processing of approximately 400 cases of
shell eggs or 12,000 dozen eggs per hour. These increases in capacity have been
accompanied by the retirement of older and less efficient facilities and a
reduction in eggs produced by contract producers.  The “in-line”
facilities result in the gathering, grading and packaging of shell eggs by less
labor-intensive, more efficient, mechanical means.





As a
result of our strategy, our total flock, including pullets, layers and breeders,
has increased from approximately 22.3 million at May 28, 2005 to approximately
33.0 million as of May 29, 2010.  Also, the number of dozens of shell
eggs sold has increased from approximately 575.4 million in the fiscal year
ended May 28, 2005 to 805.4 million for the fiscal year ending May 29,
2010.  Net sales amounted to $910.1 million in fiscal 2010 compared to
net sales of $375.3 million in fiscal 2005.


4


We plan
to continue to pursue opportunities for the acquisition of other companies
engaged in the production and sale of shell eggs. We will continue to evaluate
and selectively pursue acquisitions that will expand our shell egg production
capabilities in existing markets and broaden our geographic reach. We have
extensive experience identifying, valuing, executing, and integrating
acquisitions and we intend to leverage that experience in the evaluation and
execution of future acquisitions. We will seek to acquire regional shell egg
businesses that have significant market share and long-standing customer
relationships. We believe that enhancing our national presence will help us
further strengthen our relationships with existing customers, which have
operations across the United States.





Through
exclusive license agreements with Egg-Land’s Best, Inc. in several key
territories and our trademarked Farmhousebrand, we are one
of the leading producers and marketers of value-added specialty shell eggs. We
also produce, market, and distribute private label specialty shell eggs to
several customers. Since selling prices of specialty shell eggs are not as
volatile as generic shell egg prices, we believe that growing our specialty eggs
business will enhance the stability of our margins. We expect that the price of
specialty eggs will remain at a premium to regular shell eggs. We intend to
pursue acquisitions that may expand our specialty shell egg
production.   As part of our Tampa Farms acquisition in December
2008, we acquired the 4-Grain brand of specialty
eggs. We market organic, all natural, cage-free, vegetarian, and omega-3 eggs
under our 4-Grain
trademark.





Federal
anti-trust laws require regulatory approval of acquisitions that exceed certain
threshold levels of significance.  Also, we are subject to federal and
state laws generally prohibiting anti-competitive conduct.  Because
the shell egg production and distribution industry is so fragmented, we believe
that our sales of shell eggs during the last fiscal year represented
approximately 18% of domestic shell egg sales notwithstanding that we are the
largest producer and distributor of shell eggs in the United States based on
independently prepared industry statistics. We believe that regulatory approval
of any future acquisitions either will not be required, or, if required, that
such approvals will be obtained.





The
construction of new, more efficient production and processing facilities is an
integral part of our growth strategy.  Any such construction will
require compliance with applicable environmental laws and regulations, including
the receipt of permits that could cause schedule delays, although we have not
experienced any significant delays in the past.





Shell
Eggs





Production.Our operations
are fully integrated. At our facilities, we hatch chicks, grow pullets,
manufacture feed and produce and distribute shell eggs.  Company-owned
facilities accounted for approximately 91% of our total fiscal 2010 egg
production, with the balance attributable to contract producers used by us.
Under arrangements with our contract producers, we own the entire flock, furnish
all feed and supplies, own the shell eggs produced and assume all market
risks.  The contract producers own and operate their facilities and
are paid a fee based on production with incentives for performance.





The
commercial production of shell eggs requires a source of baby chicks for laying
flock replacement. We produce approximately 95% of our chicks in our own
hatcheries and obtain the balance from commercial sources. We own breeder
facilities producing 15.5 million pullet chicks per year in a
computer-controlled environment. These pullets are distributed to 37
state-of-the-art laying operations around the southwestern, southeastern,
mid-western and mid-Atlantic regions of the United States. The facilities
produce an average of 1.7 million dozen shell eggs per day and process the shell
eggs through grading and packaging without handling by human hands. We have
spent a cumulative total of $111.4 million over the past five years upgrading
our facilities with the most advanced equipment and technology available in our
industry. We believe our focus on automation throughout the supply chain enables
us to be a low cost supplier in all the markets in which we
compete.





Feed for
the laying flocks is produced by Company-owned and operated mills located in the
southwestern, southeastern, mid-western and mid-Atlantic regions of the United
States. All ingredients necessary for feed production are readily available in
the open market and most are purchased centrally from Jackson,
Mississippi.  Approximately 95% of the feed for our flocks is
manufactured at feed mills owned and operated by us.  Poultry feed is
formulated using a computer model to determine the least-cost ration to meet the
nutritional needs of the flocks.  Although most feed ingredients are
purchased on an as-needed basis, from time-to-time when deemed advantageous, we
purchase ingredients in advance with a delayed delivery of several weeks or a
few months.





Feed cost
represents the largest element of our farm egg production cost, ranging from 55%
to 64% of total farm production cost in the last five years. Although feed
ingredients are available from a number of sources, we have little, if any,
control over the prices of the ingredients we purchase, which are affected by
weather and by various supply and demand factors.  Increases in feed
costs not accompanied by increases in the selling price of eggs can have a
material adverse effect on the results of our operations.  However,
higher feed costs may encourage producers to reduce production, possibly
resulting in higher egg prices.  Alternatively, low feed costs can
encourage industry overproduction, possibly resulting in lower egg
prices.  Historically, we have tended to have higher profit margins
when feed costs are higher.  However, this may not be the case in the
future.


5


After the
eggs are produced, they are graded and packaged.  Substantially all of
our farms have modern “in-line” facilities that mechanically gather, grade and
package the eggs produced.  The increased use of in-line facilities
has generated significant cost savings as compared to the cost of eggs produced
from non-in-line facilities.  In addition to greater efficiency, the
in-line facilities produce a higher percentage of grade A eggs, which sell at
higher prices.  Eggs produced on farms owned by contractors are
brought to our processing plants where they are graded and packaged. Since shell
eggs are perishable, we maintain very low shell egg inventories, usually
consisting of approximately four days of production.





Our egg
production activities are subject to risks inherent in the agriculture industry,
such as weather conditions and disease factors.  These risks are not
within our control and could have a material adverse effect on our
operations.  Also, the marketability of our shell eggs is subject to
risks such as possible changes in food consumption opinions and practices
reflecting perceived health concerns.





We
operate in a cyclical industry with total demand that is generally steady and a
product that is price-inelastic.  Thus, small increases in production
or decreases in demand can have a large adverse effect on prices and
vice-versa.  However, economic conditions in the egg industry are
expected to exhibit less cyclicality in the future.  The industry is
concentrating into fewer but stronger hands, which should help lessen the
extreme cyclicality of the past.





Marketing.Of the 805
million dozen shell eggs sold by us in the fiscal year ended May 29, 2010, 640
million were produced by our flocks.





We sell
our shell eggs to a diverse group of customers, including national and local
grocery store chains, club stores, foodservice distributors, and egg product
manufacturers. We utilize electronic ordering and invoicing systems that enable
us to manage inventory for certain of our customers. Our top ten customers
accounted for an aggregate of 71.0% of net sales dollars in fiscal 2010 and
65.5% of net sales dollars for fiscal 2009. One customer, Publix Super Markets,
Inc., accounted for 10.1% of net sales dollars during fiscal 2010 and 6.6% of
net sales dollars for fiscal 2009, and two affiliated customers, Wal-Mart Stores
and Sam’s Club, on a combined basis, accounted for 36.4% of net sales dollars
during fiscal 2010 and 32.9% of net sales dollars for fiscal 2009.





The
majority of eggs sold are merchandised on a daily or short-term
basis.  Most sales to established accounts are on open account with
terms ranging from seven to 30 days.  Although we have established
long-term relationships with many of our customers, they are free to acquire
shell eggs from other sources.





The shell
eggs we sell are delivered by us to our customers’ warehouses and facilities
either with our own fleet of owned or contracted refrigerated delivery trucks or
are picked up by our customers at our processing facilities.





We sell
our shell eggs at prices generally related to independently quoted wholesale
market prices. Wholesale prices are subject to wide fluctuations.  The
prices of our shell eggs reflect fluctuations in the quoted market, and the
results of our shell egg operations are materially affected by changes in market
quotations.  Egg prices reflect a number of economic conditions, such
as the supply of eggs and the level of demand, which, in turn, are influenced by
a number of factors that we cannot control.  No representation can be
made as to the future level of prices.





According
to USDA reports, for the past five years, annual per capita consumption in the
United States has varied between 248 and 258 eggs. Per capita consumption is
determined by taking the total supply of eggs for the shell egg industry divided
by the entire population in the United States (i.e. all eggs supplied
domestically by the shell egg industry are consumed). While we believe that fast
food restaurant consumption, high protein diet trends, reduced egg cholesterol
levels, and industry advertising campaigns may result in the sustainability of
current per capita egg consumption levels, no assurance can be given that per
capita consumption will not decline in the future.





We sell
the majority of our shell eggs in approximately 29 states across the
southwestern, southeastern, mid-western and mid-Atlantic regions of the United
States. We are a major factor in egg marketing in a majority of these states.
Many states in our market area are egg deficit regions; that is, production of
fresh shell eggs is less than total consumption. Competition from other
producers in specific market areas is generally based on price, service, and
quality of product. Strong competition exists in each of our
markets.


6


Seasonality.Shell
eggs are perishable. Consequently, we maintain very low shell egg inventories,
usually consisting of approximately four days of production.  Retail
sales of shell eggs are greatest during the fall and winter months and lowest
during the summer months.  Prices for shell eggs fluctuate in response
to seasonal demand factors and a natural increase in egg production during the
spring and early summer. We generally experience lower sales and net income in
our fourth and first fiscal quarters ending in May and August, respectively.
During the past ten years, seven of our first quarters have resulted in net
operating losses, and during this same period, three of our fourth quarters have
resulted in net operating losses.





Specialty Eggs.We also produce specialty eggs such as Egg-Land’s Bestä and
Farmhouse eggs. For
fiscal 2010, specialty eggs accounted for 21.4% of shell egg dollar sales and
14.4% of shell egg dozens sold.  Egg-Land’s Bestäeggs are patented eggs
that are believed by its developers, based on scientific studies, to cause no
increase in serum cholesterol when eaten as part of a low fat diet. We produce
and process Egg-Land’s
Bestäeggs under license from
Egg-Land’s Best, Inc. (“EB”) at our existing facilities under EB
guidelines.  The product is marketed to our established base of
customers at prices that reflect a premium over non-specialty shell eggs. Egg-Land’s Bestä eggs
accounted for approximately 13.9% of our shell egg dollar sales in fiscal 2010,
as compared to 12.7% in fiscal 2009. Farmhouse brand eggs are
produced at our facilities by hens that are not caged, and are provided with a
diet of natural grains. As in our other flocks, these hens are provided with
drinking water that is free of hormones or other chemical additives. Farmhouse and other non-EB
specialty eggs accounted for 7.5% of our shell egg dollar sales in fiscal 2010,
as compared to 6.3% in fiscal 2009. They are intended to meet the demands of
consumers who are sensitive to environmental and animal welfare
issues.  Based on dozens sold, Egg-Land’s Bestä eggs
accounted for 9.2% of dozens sold for fiscal 2010, as compared to 9.0% in fiscal
2009.  Farmhouse and other non-EB
specialty eggs accounted for 5.3% of dozens sold for fiscal 2010, as compared to
4.8% for fiscal 2009.  The statistical data concerning specialty egg
sales reflects the upward trend of specialty eggs.  In fiscal 2009, we
acquired the 4-Grain
brand of specialty eggs, which includes organic, all natural, cage-free,
vegetarian, and omega-3 eggs.




Competition.The production,
processing, and distribution of shell eggs is an intensely competitive business,
which traditionally has attracted large numbers of producers.  Shell
egg competition is generally based on price, service, and quality of
production.





The shell
egg industry remains highly fragmented but is characterized by a growing
concentration of producers.In 2009, 56 producers with one million or more layers owned 90% of the
283 million total U.S. layers, compared to 56 producers with one million or more
layers owning 64% of the 232 million total U.S. layers in 1990, and 61 producers
with one million or more layers owning 56% of the 248.0 million total U.S.
layers in 1985. We believe that a continuation of that concentration trend may
result in the reduced cyclicality of shell egg prices, but no assurance can be
given in that regard. A continuation of this trend could also create greater
competition among fewer producers.





Patents and Trade
Names.We own the trade
names Farmhouse, Rio
Grande,Sunups, Sunny
Meadowsand 4-Grains. We do not own any
patents or proprietary technologies. We produce and market Egg-Land's BestTMeggs under license agreements
with EB. We own a 29.1% equity interest in EB.





Government
Regulation.Our facilities
and operations are subject to regulation by various federal, state and local
agencies, including, but not limited to, the United States Food and Drug
Administration (“FDA”), the USDA, Environmental Protection Agency, Occupational
Safety and Health Administration and corresponding state agencies. The
applicable regulations relate to grading, quality control, labeling, sanitary
control and waste disposal. Our shell egg facilities are subject to periodic
USDA inspections. Our feed production facilities are subject to FDA regulation
and inspections. In addition, we maintain our own inspection program to assure
compliance with our own standards and customer specifications. We are not aware
of any major capital expenditures necessary to comply with such statutes and
regulations; however, there can be no assurance that we will not be required to
incur significant costs for compliance with such statutes and regulations in the
future.





Environmental
Regulation.Our operations and facilities are subject to
various federal, state and local environmental laws and regulations governing,
among other things, the generation, storage, handling, use, transportation,
disposal and remediation of hazardous materials. Under these laws and
regulations, we are also required to obtain permits from governmental
authorities, including, but not limited to, wastewater discharge permits. We
have made and will continue to make capital and other expenditures relating to
compliance with existing environmental, health and safety laws and regulations
and permits. We are not currently aware of any major capital expenditures
necessary to comply with such laws and regulations; however, because
environmental, health and safety laws and regulations are becoming increasingly
more stringent, including those relating to animal wastes and wastewater
discharges, there can be no assurance that we will not be required to incur
significant costs for compliance with such laws and regulations in the future.
In addition, under certain circumstances, we may incur costs associated with our
contract producers’ failure to comply with laws and regulations, including
environmental laws and regulations.


7


Employees.As of May 29, 2010, we had
approximately 1,950 employees, 1,575 of whom worked in egg production,
processing and marketing, 115 of whom were engaged in feed mill operations and
260 of whom were administrative employees, including our executive
officers.  Approximately 4% of our personnel are
part-time.  None of our employees are covered by a collective
bargaining agreement.  We consider our relations with employees to be
good.





Our Corporate Information





We were incorporated in Delaware in
1969. Our principal executive office is located at 3320 Woodrow Wilson Drive,
Jackson, Mississippi 39209. The telephone number of our principal executive
office is (601) 948-6813. We maintain a website at www.calmainefoods.com
where general information about our business is available. The information
contained in our website is not a part of this document. Our Annual Reports on
Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K,
Forms 3 and 4 ownership reports, and all amendments to those reports are
available, free of charge, through our website as soon as reasonably practicable
after they are filed with the SEC. Information concerning corporate governance
matters is also available on the website.





Our
Common Stock is listed on the NASDAQ Global Market (“NASDAQ”) under the symbol
“CALM”.On May 28,
2010, the last sale price of our Common Stock on NASDAQ was $32.37 per
share.Our fiscal year
2010 ended May 29, 2010, and the first three fiscal quarters of fiscal 2010
ended August 29, 2009, November 28, 2009, and February 27, 2010. All references
herein to a fiscal year means our fiscal year and all references to a year mean
a calendar year.





We have
adopted a Code of Conduct and Ethics for Directors, Officers and Employees,
including the chief executive and principal financial and accounting officers of
the Company. We will provide a copy of the code free of charge to any person
that requests a copy by writing to:





Cal-Maine
Foods, Inc.


P.O. Box
2960


Jackson,
Mississippi 39207


Attn.:  Investor
Relations





Requests
can be made by phone at (601) 948-6813





A copy is
also available at our website www.calmainefoods.com.  Information
contained on our website is not a part of this report.


8


ITEM 1A. RISK
FACTORS





Our
business and results of operations are subject to numerous risks and
uncertainties, many of which are beyond our control.  The following is
a description of some of the most significant factors that may materially affect
our business, financial condition or results of operations.  They
should be considered carefully, in addition to the information set forth
elsewhere in this Annual Report on Form 10-K, including under Item 7.
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” in making any investment decisions with respect to our
securities.





Market prices of wholesale shell eggs
are volatile and changes in these prices and costs can adversely impact our
results of operations.





Our operating results are significantly
affected by wholesale shell egg market prices, which fluctuate widely and are
outside of our control. Small increases in production or small decreases in
demand can have a large adverse effect on shell egg prices. Shell egg prices
trended upward from calendar 2002 until late 2003 and early 2004 when they rose
to historical highs.  In the early fall of calendar 2004, the demand
trend related to the increased popularity of high protein diets faded
dramatically and prices fell.  During the time of increased demand,
the egg industry had geared up to produce more eggs, resulting in an oversupply
of eggs.  Since calendar 2006, supplies appear to be more closely
balanced with demand and egg prices again reached record levels during 2007 and
2008.  Egg prices have since retreated from those record price levels
due to small increases in industry supply. There can be no assurance that shell
egg prices will remain at or near current levels or that the supply of and
demand for shell eggs will remain level in the future.In
general, a 1% increase or decrease in industry supply will translate into a 7%
corresponding change in shell egg prices.





Retail
sales of shell eggs are 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 shell egg production during the
spring and early summer. Shell egg prices tend to increase with the start of the
school year and are highest prior to holiday periods, particularly Thanksgiving,
Christmas and Easter. Consequently, we generally experience lower sales and net
income in our first and fourth fiscal quarters ending in August and May,
respectively. As a result of these seasonal and quarterly fluctuations,
comparisons of our sales and operating results between different quarters within
a single fiscal year are not necessarily meaningful comparisons.





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





We
believe that fast food restaurant consumption, reports from the medical
community regarding the health benefits of shell eggs, reduced shell egg
cholesterol levels, high protein diet trends and industry advertising campaigns
have all contributed to shell egg demand. However, there can be no assurance
that the demand for shell eggs will not decline in the future. Adverse publicity
relating to health concerns and changes in the perception of the nutritional
value of shell eggs, as well as movement away from high protein diets, could
adversely affect demand for shell eggs, which would have a material adverse
effect on our future results of operations and financial condition.





Feed costs are volatile and changes in
these costs can adversely impact our results of operations.





Feed cost
represents the largest element of our shell egg production (farm) cost, ranging
from 55% to 64% of total farm production cost in the last five years. Although
feed ingredients are available from a number of sources, we have little, if any,
control over the prices of the ingredients we purchase, which are affected by
weather and by various supply and demand factors.  Increases in feed
costs not accompanied by increases in the selling price of eggs can have a
material adverse effect on the results of our
operations.  Alternatively, low feed costs can encourage industry
overproduction, possibly resulting in lower egg prices.





Due
to the cyclical nature of our business, our financial results from year to year
may fluctuate.





The shell
egg industry has traditionally been subject to periods of high profitability
followed by periods of significant loss. In the past, during periods of high
profitability, shell egg producers have tended to increase the number of layers
in production with a resulting increase in the supply of shell eggs, which
generally has caused a drop in shell egg prices until supply and demand return
to balance. As a result, our financial results from year to year may vary
significantly.


9


We
purchase approximately 21% of the shell eggs we sell from outside producers and
our ability to obtain such eggs at prices and in quantities acceptable to us
could fluctuate.





We
produce approximately 79% of the total number of shell eggs sold by us and
purchase the remaining amount from outside producers. As the wholesale price for
shell eggs increases, our cost to acquire shell eggs from outside producers also
increases. There can be no assurance that we will be able to continue to acquire
shell eggs from outside producers in quantities and prices that are satisfactory
and our inability to do so may have a material adverse affect on our business
and profitability.





Our
acquisition growth strategy subjects us to various risks.





We plan to continue to pursue a growth
strategy, which includes acquisitions of other companies engaged in the
production and sale of shell eggs. Acquisitions can require capital resources
and divert management’s attention from our existing business. Acquisitions also
entail an inherent risk that we could become subject to contingent or other
liabilities, including liabilities arising from events or conduct prior to our
acquisition of a business that were not known to us at the time of acquisition.
We may also incur significantly greater expenditures in integrating an acquired
business than we had anticipated at the time of its purchase. We cannot assure
you that we:





-
            will
      identify suitable acquisition
candidates;





-
            can
      consummate acquisitions on acceptable terms;
or





-
            can
      successfully integrate any acquired business into our operations or
      successfully manage the operations of any acquired
    business.





No assurance can be given that
companies acquired by us in the future will contribute positively to our results
of operations or financial condition. In addition, federal anti-trust laws
require regulatory approval of acquisitions that exceed certain threshold levels
of significance.





The consideration we pay in connection
with any acquisition also affects our financial results. If we pay cash, we
could be required to use a portion of our available cash to consummate the
acquisition. To the extent we issue shares of our Common Stock, existing
stockholders may be diluted. In addition, acquisitions may result in the
incurrence of debt.





Our largest customers have historically
accounted for a significant portion of our net sales volume. Accordingly, our
business may be adversely affected by the loss of, or reduced purchases by, one
or more of our large customers.





For the fiscal years 2010, 2009, and
2008, two affiliated customers, Wal-Mart Stores and Sam’s Clubs, on a combined
basis, accounted for 36.4%, 32.9%, and 36.5% of our net sales dollars,
respectively. In addition, during fiscal 2010, another customer, Publix Super
Markets, Inc., accounted for 10.1% of net sales dollars. Our top ten customers
accounted for 71.0%, 65.5%, and 66.5% of net sales dollars during those periods.
We have established long-term relationships with most of our customers, who
continue to purchase from us based on our ability to service their needs. If,
for any reason, one or more of our larger customers were to purchase
significantly less of our shell eggs in the future or were to terminate their
purchases from us, and we are not able to sell our shell eggs to new customers
at comparable levels, it would have a material adverse effect on our business,
financial condition and results of operations.





Failure to comply with applicable
governmental regulations, including environmental regulations, could harm our
operating results, financial condition and reputation.





We are
subject to federal and state regulations relating to grading, quality control,
labeling, sanitary control and waste disposal. As a fully-integrated shell egg
producer, our shell egg facilities are subject to USDA and FDA regulation, as
well as regulation by various state and local health and agricultural agencies.
Our shell egg processing facilities are subject to periodic USDA inspections.
All of our shell egg and feed mill facilities are subject to FDA regulation and
inspections.





Our operations and facilities are also
subject to various federal, state and local environmental, health and safety
laws and regulations governing, among other things, the generation, storage,
handling, use, transportation, disposal and remediation of hazardous materials.
Under these laws and regulations, we are also required to obtain permits from
governmental authorities, including, but not limited to wastewater discharge
permits.


10


If we fail to comply with any
applicable law or regulation, or fail to obtain any necessary permits, we could
be subject to significant fines and penalties or other sanctions, our reputation
could be harmed and our operating results and financial condition could be
materially adversely affected. In addition, because these laws and regulations
are becoming increasingly more stringent, there can be no assurance that we will
not be required to incur significant costs for compliance with such laws and
regulations in the future.





Our business is highly
competitive.





The production and sale of fresh shell
eggs, which have accounted for virtually all of our net sales in recent years,
is intensely competitive. We compete with a large number of competitors that may
prove to be more successful than we are in marketing and selling shell eggs. We
cannot provide assurance that we will be able to compete successfully with any
or all of these companies. In addition, increased competition could result in
price reductions, greater cyclicality, reduced margins and loss of market share,
which would negatively affect our business, results of operations and financial
condition.





Pressure from animal rights groups
regarding the treatment of animals may subject us to additional costs to conform
our practices to comply with developing standards or subject us to marketing
costs to defend challenges to our current practices and protect our image with
our customers.





We and many of our customers are facing
pressure from animal rights groups, such as People for the Ethical Treatment of
Animals, or PETA, and the Humane Society of the United States, to require that
any companies that supply food products operate their business in a manner that
treats animals in conformity with certain standards developed by these animal
rights groups. As a result, we are reviewing and changing our operating
procedures with respect to our flock of hens to meet some or all of these
treatment standards. The treatment standards require, among other things, that
we provide increased cage space for our hens and modify beak trimming and forced
molting practices (the act of putting chickens into a regeneration cycle). These
groups have made legislative efforts to ban any form of caged housing in various
states.  Changing our procedures and infrastructure to conform to
these guidelines has resulted and will continue to result in additional costs to
our internal production of shell eggs, including cost increases from housing and
feeding the increased flock population resulting from the modification of
molting practices, and the cost for us to purchase shell eggs from our outside
suppliers. While some of these increased costs have been passed on to our
customers, we cannot provide assurance that we can continue to pass on these
costs, or any additional costs we will face, in the future.





We are dependent on our management
team, and the loss of any key member of this team may adversely affect the
implementation of our business plan in a timely manner.





Our success depends largely upon the
continued services of our senior management team, including Fred R. Adams, Jr.,
our Chairman and Chief Executive Officer. The loss or interruption of Mr. Adams’
services or those of one or more of our other executive officers could adversely
affect our ability to manage our operations effectively and/or pursue our growth
strategy. We have not entered into any employment or non-compete agreements with
any of our executive officers nor do we carry any significant key-man life
insurance on any such persons.





Agricultural
risks could harm our business.





Our shell egg production activities are
subject to a variety of agricultural risks. Unusual or extreme weather
conditions, disease and pests can materially and adversely affect the quality
and quantity of shell eggs we produce and distribute. If a substantial portion
of our production facilities are affected by any of these factors in any given
quarter or year, our business, financial condition and results of operations
could be materially and adversely affected.





We are controlled by a principal
stockholder.





Fred R. Adams, Jr., our Chairman of the
Board and Chief Executive Officer, and his spouse own 30.8% of the outstanding
shares of our Common Stock, which has one vote per share.  In
addition, Mr. Adams owns 74.9% and his son-in-law, Adolphus B. Baker, our
President, Chief Operating Officer and Director, owns 25.1% of the outstanding
shares of our Class A Common Stock, which has ten votes per share. Mr. Baker and
his spouse also own 1.8% of the outstanding shares of our Common Stock. As a
result, currently Mr. Adams and his spouse possess 54.1%, and Messrs. Adams and
Baker and their spouses possess 68.2%, of the total voting power represented by
the outstanding shares of our Common Stock and Class A Common Stock. These
stockholdings include shares of our Common Stock accumulated under our employee
stock ownership plan for the respective accounts of Messrs. Adams and
Baker.


11


The Adams family intends to retain
ownership of a sufficient amount of Common Stock and Class A Common Stock to
assure its continued ownership of over 50% of the combined voting power of our
outstanding shares of capital stock. Such ownership will make an unsolicited
acquisition of us more difficult and discourage certain types of transactions
involving a change of control of our company, including transactions in which
the holders of Common Stock might otherwise receive a premium for their shares
over then current market prices. In addition, certain provisions of our
Certificate of Incorporation require that our Class A Common Stock be issued
only to Fred R. Adams, Jr. and members of his immediate family, and that if
shares of our Class A Common Stock, by operation of law or otherwise, are deemed
not to be owned by Mr. Adams or a member of his immediate family, the voting
power of any such shares shall be automatically reduced to one vote per share.
The Adams family’s controlling ownership of our capital stock may adversely
affect the market price of our Common Stock.





Based on Mr. Adams’ beneficial
ownership of our outstanding capital stock, we are a “controlled company,” as
defined in Rule 5615(c)(1) of the listing standards of the NASDAQ Global Market
on which our shares of Common Stock are quoted. Accordingly, we are exempt from
certain requirements of NASDAQ’s corporate governance listing standards,
including the requirement to maintain a majority of independent directors on our
board of directors and the requirements regarding the determination of
compensation of executive officers and the nomination of directors by
independent directors.





ITEM
1B.  UNRESOLVED STAFF COMMENTS





None.





ITEM
2.  PROPERTIES





We operate farms, processing plants,
hatcheries, feed mills, warehouses, offices and other properties located in
Alabama, Arkansas, Florida, Georgia, Kansas, Kentucky, Louisiana, Mississippi,
New Mexico, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas and
Utah. The facilities currently include three breeding facilities, two
hatcheries, five wholesale distribution centers, 20 feed mills, 37 shell egg
production facilities, 26 pullet growing facilities, and 35 processing and
packing facilities.  We also own interests in two egg products
facilities and one spent hen processing facility, which are consolidated in our
financial statements. Most of our operations are conducted from properties we
own.





Presently,
we own approximately 19,600 acres of land in various locations throughout our
geographic market area. We have the ability to hatch 21.2 million pullet chicks
annually, grow 17 million pullets annually, house 31 million laying hens and
control the production of an aggregate total of 30 million layers, with the
remainder controlled by contract growers. We also own mills that can produce 700
tons of feed per hour, and processing facilities capable of processing 11,900
cases of shell eggs per hour (with each case containing 30 dozen shell
eggs).





Over the
past five fiscal years, our capital expenditures, excluding acquisitions of
shell egg production and processing facilities from others, have totaled an
aggregate amount of approximately $111.4 million.





ITEM 3.  LEGAL
PROCEEDINGS





Personal Injury Chicken
Litter Litigation





Cal-Maine Farms, Inc. is presently a
defendant in two personal injury cases in the Circuit Court of Washington
County, Arkansas.  Those cases are styled, McWhorter vs. Alpharma,
Inc.,et
al., and
Carroll,et
al.vs.
Alpharma, Inc.,et
al.Cal-Maine Farms, Inc.
was named as a defendant in the McWhorter case on
February 3, 2004.  It was named as a defendant in the Carroll case on May
2, 2005.  Co-defendants in both cases include other integrated poultry
companies such as Tyson Foods, Inc., Cargill, Incorporated, George’s Farms,
Inc., Peterson Farms, Inc., Simmons Foods, Inc., and Simmons Poultry Farms,
Inc.  The manufacturers of an additive for broiler feed are also
included as defendants.  Those defendants are Alpharma, Inc. and
Alpharma Animal Health, Co.





Both cases allege that the plaintiffs
have suffered medical problems resulting from living near land upon which
“litter” from the defendants’ flocks was spread as fertilizer.  The
McWhorter case
focuses on mold and fungi allegedly created by the application of
litter.  The Carroll case also
alleges injury from mold and fungi, but focuses primarily on the broiler feed
ingredient as the cause of the alleged medical injuries.  No trial
date for either the Carroll or McWhorter case has
been set.


12


Several other separate, but related,
cases were prosecuted in the same venue by the same attorneys.  The
same theories of liability were prosecuted in all of the cases.  No
Cal-Maine company was named as a defendant in any of those other
cases.  The plaintiffs selected one of those cases, Green,et
al.vs.
Alpharma, Inc.,et
al.,as a
bellwether case to go to trial first.  All of the poultry defendants
were granted summary judgment in the Green case on August
2, 2006.  On May 8, 2008, however, the Arkansas Supreme Court reversed
the summary judgment in favor of the poultry defendants and remanded the case
for trial.  Green was re-tried,
and again resulted in a defense verdict.  The plaintiffs have appealed
this judgment.  The appeal was noticed in July 2009.  The
appeal is pending.





There has been no effort by the
plaintiffs in the McWhorter and Carroll cases to set
those cases for trial.  Whether the plaintiffs in those cases will
prosecute those cases to trial is not known, and their likelihood of success if
they do cannot be gauged at this time.





State of Oklahoma Watershed
Pollution Litigation





On June
18, 2005, the State of Oklahoma filed suit in the United States District Court
for the Northern District of Oklahoma, against a number of companies, including
Cal-Maine Foods, Inc. and Cal-Maine Farms, Inc.  We and Cal-Maine
Farms filed our joint answer and motion to dismiss the suit on October 3,
2005.  The State of Oklahoma claims that through the disposal of
chicken litter the defendants have polluted the Illinois River
Watershed.  This watershed provides water to eastern
Oklahoma.  The Complaint seeks injunctive relief and monetary
damages.  The parties participated in a series of mediation meetings
without success.  Cal-Maine Foods, Inc. no longer operates in the
watershed.  Accordingly, we do not anticipate that Cal-Maine Foods,
Inc. will be materially affected by the request for injunctive
relief.  Cal-Maine Foods, Inc. owns 100% of Benton County Foods, LLC,
which is an ongoing commercial shell egg operation within the Illinois River
Watershed.  Benton County Foods, LLC is not a defendant in the
litigation.





The
district court has dismissed all damages claims against all
defendants.  The basis for that ruling was the absence of a necessary
party plaintiff, the Cherokee Nation.  The Cherokee Nation owns part
of the land and water in the watershed.  After the dismissal of the
damages claims, the Cherokee Nation attempted to intervene as a
plaintiff.  This attempt was rejected by the district
court.  The Cherokee Nation has appealed that denial to the 10th Circuit
Court of Appeals.  The appeal was noticed in September 2009, and was
heard on May 5, 2010 but no decision has been rendered.





The
remaining claims relate to the State of Oklahoma’s request for injunctive
relief, and the State of Oklahoma’s request for statutory penalties against the
defendants for alleged polluting activities.   The trial of these
remaining claims began on September 25, 2009.   The trial of this
matter has been concluded and the judge has heard final arguments.  No
decision has been rendered, but one is expected in the near future.





Egg Antitrust
Litigation





Between
September 25, 2008 and January 8, 2009, the Company was named as one of several
defendants in sixteen antitrust cases involving the United States shell egg
industry.  In all sixteen cases, the named plaintiffs sued on behalf
of themselves and a putative class of others who claim to be similarly
situated.  In fourteen of the cases, the named plaintiffs allege that
they are retailers or distributors that purchased shell eggs and egg products
directly from one or more of the defendants.  In the other two cases,
the named plaintiffs are individuals who allege that they purchased shell eggs
and egg products indirectly from one or more of the defendants - that is, they
purchased from retailers that had previously purchased from defendants or other
parties.




The
Judicial Panel on Multidistrict Litigation consolidated all of these cases (as
well as certain other cases in which the Company was not a named defendant) for
pretrial proceedings in the United States District Court for the Eastern
District of Pennsylvania.  The Pennsylvania court has organized the
cases around two groups (direct purchasers and indirect purchasers) and has
named interim lead counsel for the named plaintiffs in each
group.


13


The Direct Purchaser
Case.The named plaintiffs in the direct purchaser case filed
a consolidated complaint on January 30, 2009.  On April 30, 2009, the
Company filed motions to dismiss the direct purchasers’ consolidated
complaint.  The direct purchaser plaintiffs did not respond to those
motions.  Instead, the direct purchaser plaintiffs announced a
potential settlement with one defendant.  That settlement is still
subject to court approval, but if it is approved, the settlement would not
require the settling party to pay any money.  Instead, the settling
defendant, while denying all liability, would provide cooperation in the form of
documents and witness interviews to the plaintiffs’ attorneys.  After
announcing this potential settlement with one defendant, the direct purchaser
plaintiffs filed an amended complaint on December 11, 2009.  On
February 5, 2010, the Company joined with other defendants in moving to dismiss
the direct purchaser plaintiffs’ claims for damages outside the four year
statute of limitations period and claims arising from a supposed conspiracy in
the egg products sector.  On February 26, 2010, the Company filed its
answer and affirmative defenses to the direct purchaser plaintiffs’ amended
complaint.  On June 4, 2010, the direct purchaser plaintiffs announced
a potential settlement with a second defendant.  This settlement is
still subject to court approval.  If this settlement is approved, then
the defendant would pay a total of $25 million and would provide other
consideration in the form of documents, witness interviews, and
declarations.  This settling defendant denied all liability in its
potential agreement with the direct purchaser plaintiffs and stated publicly
that it settled merely to avoid the cost and uncertainty of continued
litigation.




The Indirect Purchaser
Case.The named plaintiffs in the indirect purchaser case
filed a consolidated complaint on February 27, 2009.  On April 30,
2009, the Company filed motions to dismiss the indirect purchasers’ consolidated
complaint.  The indirect purchaser plaintiffs did not respond to those
motions.  Instead, the indirect purchaser plaintiffs filed an amended
complaint on April 8, 2010.  On May 7, 2010, the Company joined with
other defendants in moving to dismiss the indirect purchaser plaintiffs’ claims
for damages outside the four-year statute of limitations period, claims arising
from a supposed conspiracy in the egg products sector, claims arising under
certain state antitrust and consumer frauds statutes, and common-law claims for
unjust enrichment.  On June 4, 2010, the Company filed its answer and
affirmative defenses to the indirect purchaser plaintiffs’ amended
complaint.




Allegations in Each
Case.In both consolidated complaints, the named plaintiffs
allege that the Company and certain other large domestic egg producers conspired
to reduce the domestic supply of eggs in a concerted effort to raise the price
of eggs to artificially high levels.  In both consolidated complaints,
plaintiffs allege that all defendants agreed to reduce the domestic supply of
eggs by (a) manipulating egg exports and (b) implementing industry-wide animal
welfare guidelines that reduced the number of hens and eggs.  The
indirect purchaser plaintiffs also say in conclusory fashion that all defendants
manipulated pricing information in the egg industry, exchanged price information
improperly, and refused to compete against each other.




Both
groups of named plaintiffs seek treble damages and injunctive relief on behalf
of themselves and all other putative class members in the United
States.  Both groups of named plaintiffs allege a class period
starting on January 1, 2000 and running “through the present.”  The
direct purchaser consolidated case alleges two separate sub-classes – one for
direct purchasers of shell eggs and one for direct purchasers of egg
products.  The direct purchaser consolidated case seeks relief under
the Sherman Act.  The indirect purchaser consolidated case seeks
relief under the Sherman Act and the statutes and common-law of various states,
the District of Columbia, and Puerto Rico.




The
Pennsylvania court has entered a series of orders related to case management and
scheduling.  There is no definite schedule in either consolidated case
for discovery, class certification proceedings, or filing motions for summary
judgment.  No trial date has been set in either consolidated
case.




The
Company intends to continue to defend these cases as vigorously as possible
based on defenses which the Company believes are meritorious and
provable.  The Company does not intend to enter into settlement
discussions with the Plaintiffs.




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 4. (REMOVED AND
RESERVED)


14


PART
II.





ITEM 5.   MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES





Our Common Stock is traded on the
NASDAQ Global Market under the symbol “CALM”.  The last reported sale
price for our Common Stock on July 29, 2010 was $31.66 per share. The following
table sets forth the high and low daily sale prices and dividends per share for
four quarters of fiscal 2009 and fiscal 2010.





Sales Price
                    
                    
                    DividendsFiscal Year Ended
                    
                    Fiscal Quarter
                    
                    High
                    
                    
                    LowMay
      30, 2009
                    
                    First
      Quarter
                    
                    $
                    48.80
                    
                    
                    $
                    27.72
                    
                    
                    $
                    0.157Second
      Quarter
                    
                    
                    42.21
                    
                    
                    
                    21.08
                    
                    
                    
                    0.382Third
      Quarter
                    
                    
                    30.99
                    
                    
                    
                    22.00
                    
                    
                    
                    0.432Fourth
      Quarter
                    
                    
                    27.96
                    
                    
                    
                    17.01
                    
                    
                    
                    0.144May
      29, 2010
                    
                    First
      Quarter
                    
                    $
                    31.68
                    
                    
                    $
                    22.76
                    
                    
                    $
                    0.000Second
      Quarter
                    
                    
                    29.42
                    
                    
                    
                    24.90
                    
                    
                    
                    0.172Third
      Quarter
                    
                    
                    36.35
                    
                    
                    
                    27.07
                    
                    
                    
                    0.483Fourth
      Quarter
                    
                    
                    38.88
                    
                    
                    
                    30.60
                    
                    
                    
                    0.294





There is
no public trading market for the Class A Common Stock, all the outstanding
shares of which are owned by Fred R. Adams, Jr., Chairman of the Board of
Directors and Chief Executive Officer of the Company (74.9%) and his son-in-law
Adolphus Baker, President, Chief Operating Officer and Director of the Company
(25.1%).





Stockholders





At July
20, 2010, there were approximately 274record holders of our
Common Stock and approximately 12,500 beneficial owners whose shares were held
by nominees or broker dealers.





Dividends





Cal-Maine
pays a dividend to shareholders of its Common Stock and Class A Common Stock on
a quarterly basis for each quarter for which the Company reports net income
computed in accordance with generally accepted accounting principles in an
amount equal to one-third (1/3) of such quarterly income. Dividends are paid to
shareholders of record as of the 60th day following the last day of such
quarter, except for the fourth fiscal quarter,  For the fourth
quarter,  the Company will pay dividends to shareholders of record on
the 70th day after the quarter end. Dividends are payable on the 15th day
following the record date. Following a quarter for which the Company does not
report net income, the Company shall not pay a dividend for a subsequent
profitable quarter until the Company is profitable on a cumulative basis
computed from the date of the last quarter for which a dividend was
paid.





Recent Sales of Unregistered
Securities





No sales of securities without
registration under the Securities Act of 1933 occurred during our fiscal year
ended May 29, 2010.


15


ITEM 6.  SELECTED
FINANCIAL DATA





Fiscal Years EndedMay 29
                        
                        
                        May 30
                        
                        
                        May 31
                        
                        
                        June 2
                        
                        
                        June 32010
                        
                        
                        2009 **
                        
                        
                        2008
                        
                        
                        2007 **
                        
                        
                        2006 **52 wks
                        
                        
                        52 wks
                        
                        
                        52 wks
                        
                        
                        52 wks
                        
                        
                        53 wksStatement
      of Operations Data:Net
      sales
                        
                        $
                        910,143
                        
                        
                        $
                        928,812
                        
                        
                        $
                        915,939
                        
                        
                        $
                        598,128
                        
                        
                        $
                        477,555Cost
      of sales
                        
                        
                        715,499
                        
                        
                        
                        724,085
                        
                        
                        
                        617,383
                        
                        
                        
                        479,504
                        
                        
                        
                        415,338Gross
      profit
                        
                        
                        194,644
                        
                        
                        
                        204,727
                        
                        
                        
                        298,556
                        
                        
                        
                        118,624
                        
                        
                        
                        62,217Selling,
      general and administrative
                        
                        
                        92,040
                        
                        
                        
                        83,253
                        
                        
                        
                        74,919
                        
                        
                        
                        60,394
                        
                        
                        
                        57,702Operating
      income
                        
                        
                        102,604
                        
                        
                        
                        121,474
                        
                        
                        
                        223,637
                        
                        
                        
                        58,230
                        
                        
                        
                        4,515Other
      income (expense):Interest
      expense (net of non cash interest expense & interest
      income)
                        
                        
                        (6,640
                        )
                        
                        
                        (4,565
                        )
                        
                        
                        (3,152
                        )
                        
                        
                        (4,993
                        )
                        
                        
                        (5,582
                        )Interest
      expense - non cash
                        
                        
                        (88
                        )
                        
                        
                        (477
                        )
                        
                        
                        (942
                        )
                        
                        
                        (882
                        )
                        
                        
                        (1,284
                        )Equity
      in income (loss) of affiliates
                        
                        
                        3,507
                        
                        
                        
                        2,612
                        
                        
                        
                        6,324
                        
                        
                        
                        1,699
                        
                        
                        
                        (757
                        )Other,
      net
                        
                        
                        4,110
                        
                        
                        
                        2,290
                        
                        
                        
                        5,699
                        
                        
                        
                        1,921
                        
                        
                        
                        1,465889
                        
                        
                        
                        (140
                        )
                        
                        
                        7,929
                        
                        
                        
                        (2,255
                        )
                        
                        
                        (6,158
                        )Income
      (loss) before income tax and noncontrolling interest
                        
                        
                        103,493
                        
                        
                        
                        121,334
                        
                        
                        
                        231,566
                        
                        
                        
                        55,975
                        
                        
                        
                        (1,643
                        )Income
      tax expense (benefit)
                        
                        
                        37,961
                        
                        
                        
                        41,510
                        
                        
                        
                        79,530
                        
                        
                        
                        19,605
                        
                        
                        
                        (465
                        )Net
      income (loss) before noncontrolling interest
                        
                        
                        65,532
                        
                        
                        
                        79,824
                        
                        
                        
                        152,036
                        
                        
                        
                        36,370
                        
                        
                        
                        (1,178
                        )Less:
      Net income (loss) attributable to noncontrolling interest
                        
                        
                        (2,291
                        )
                        
                        
                        324
                        
                        
                        
                        175
                        
                        
                        
                        (286
                        )
                        
                        
                        (165
                        )Net
      income (loss) attributable to Cal-Maine Foods, Inc.
                        
                        $
                        67,823
                        
                        
                        $
                        79,500
                        
                        
                        $
                        151,861
                        
                        
                        $
                        36,656
                        
                        
                        $
                        (1,013
                        )Net
      income (loss) per common share:Basic
                        
                        $
                        2.85
                        
                        
                        $
                        3.34
                        
                        
                        $
                        6.41
                        
                        
                        $
                        1.56
                        
                        
                        $
                        (0.04
                        )Diluted
                        
                        $
                        2.84
                        
                        
                        $
                        3.34
                        
                        
                        $
                        6.40
                        
                        
                        $
                        1.55
                        
                        
                        $
                        (0.04
                        )Cash
      dividends declared per common share *
                        
                        $
                        0.95
                        
                        
                        $
                        1.11
                        
                        
                        $
                        1.34
                        
                        
                        $
                        0.05
                        
                        
                        $
                        0.05Weighted
      average shares outstanding:Basic
                        
                        
                        23,812
                        
                        
                        
                        23,769
                        
                        
                        
                        23,677
                        
                        
                        
                        23,526
                        
                        
                        
                        23,496Diluted
                        
                        
                        23,877
                        
                        
                        
                        23,811
                        
                        
                        
                        23,733
                        
                        
                        
                        23,599
                        
                        
                        
                        23,496Balance
      Sheet Data:Working
      capital
                        
                        $
                        220,186
                        
                        
                        $
                        137,999
                        
                        
                        $
                        121,550
                        
                        
                        $
                        80,552
                        
                        
                        $
                        60,800Total
      assets
                        
                        
                        631,284
                        
                        
                        
                        582,845
                        
                        
                        
                        501,236
                        
                        
                        
                        364,568
                        
                        
                        
                        317,118Total
      debt (including current maturities)
                        
                        
                        134,673
                        
                        
                        
                        129,789
                        
                        
                        
                        97,150
                        
                        
                        
                        112,852
                        
                        
                        
                        103,912Total
      stockholders’ equity
                        
                        
                        376,956
                        
                        
                        
                        333,009
                        
                        
                        
                        277,367
                        
                        
                        
                        157,633
                        
                        
                        
                        120,694Operating
      Data:Total
      number of layers atperiod ended (thousands)
                        
                        
                        26,326
                        
                        
                        
                        27,022
                        
                        
                        
                        21,853
                        
                        
                        
                        23,181
                        
                        
                        
                        23,276Total
      shell eggs sold (millions of dozens)
                        
                        
                        805.4
                        
                        
                        
                        777.9
                        
                        
                        
                        678.5
                        
                        
                        
                        685.5
                        
                        
                        
                        683.1





*
            Effective
      October 2, 2008, our Class A Common Stock is paid a dividend rate equal to
      the rate on our Common Stock.  Prior to that date, Class A
      shares were paid at 95% of the common stock dividend
  rate.


**
              Results
      for fiscal 2006 include the results of operations of Hillandale, LLC,
      which was consolidated with our operations as of July 29,
      2005.  Results for fiscal 2007 include the results of operations
      of Green Forest Foods, LLC which was consolidated with our operations as
      of January 24, 2007, and Benton County Foods, LLC, which was consolidated
      with our operations as of April 20, 2007.  Results for fiscal
      2009 include the results of operations of Zephyr Egg, LLC, which was
      consolidated with our operations as of June 27, 2008, and Tampa Farms,
      LLC, which was consolidated with our operations as of December 11,
      2008.  See Note 2 to the Consolidated Financial Statements
      included in this Annual Report for a description of these acquisitions in
      fiscal 2006, 2007, and
2009.


16


ITEM 7.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





Risk Factors; Forward-Looking
Statements





For information relating to important
risks and uncertainties that could materially adversely affect our business,
securities, financial condition or operating results, reference is made to the
disclosure set forth under Item 1A above under the caption “Risk Factors.” In
addition, because the following discussion includes numerous forward-looking
statements relating to us, our results of operations, financial condition and
business, reference is made to the information set forth in the section of Part
I immediately preceding Item 1 above under the caption “Forward-Looking
Statements.”





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 nearest to May 31 which was May 29, 2010 (52 weeks), May 30,
2009 (52 weeks), and May 31, 2008 (52 weeks) for the most recent three fiscal
years.





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





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





We
currently use contract producers for approximately 9% of our total egg
production.  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 21%
of the total number of shell eggs sold by us is purchased from outside producers
for resale, as needed.





Our cost of production is materially
affected by feed costs, which currently averages about 62% of our total farm egg
production cost.  Changes in market prices for corn and soybean meal,
the primary ingredients of the feed we use, result in changes in our cost of
goods sold.   The cost of our feed ingredients, which are
commodities, are subject to factors over which we have little or no control such
as volatile price changes caused by weather, size of harvest, transportation and
storage costs, demand and the agricultural and energy policies of the United
States and foreign governments.  The corn and soybean crops were large
for the 2009 crop year.   Feed ingredient prices have decreased
recently from levels seen during the summer months of calendar 2009, but remain
high on a historical basis.  Market prices for corn remain higher in
part because of increasing demand from ethanol producers. Planted acreage for
corn is expected to increase for the 2010 – 2011 crop year.  Market
prices for soybean meal remain high because of competition for planted acres for
other grain production.  Feed costs, while considerably lower than in
calendar 2009, will likely remain relatively high, and could be volatile in the
year ahead.


17


The
purchase of Zephyr Egg, LLC and Tampa Farms, LLC described in Note 2 of the
notes to the consolidated financial statements are collectively referred to
below as the “Acquisitions.”  In fiscal 2009, we acquired Zephyr Egg,
LLC in the first quarter.  We acquired Tampa Farms, LLC in the third
quarter of fiscal 2009.  In the results of operations comparison
between fiscal 2009 and fiscal 2008, the exclusion of the Acquisitions refers to
the impact on the results of operations for fiscal 2009 if the Acquisitions had
not occurred.   To increase comparability in the results of
operations comparison between fiscal 2010 and fiscal 2009, the exclusion of the
Acquisitions refers to the exclusion of the fiscal 2010 first and second quarter
results of operations for Tampa Farms, LLC, because Tampa Farms, LLC was not
acquired until the third quarter of fiscal 2009. Since Zephyr Egg, LLC’s results
of operations are included in all four quarters of fiscal 2009 and fiscal 2010,
there was no adjustment necessary in the results of operations comparisons for
these periods.





RESULTS
OF OPERATIONS





The
following table sets forth, for the years indicated, certain items from our
consolidated statements of income expressed as a percentage of net
sales.





Percentage of Net Sales
                    Fiscal Years EndedMay 29, 2010
                  
                  
                  May 30, 2009
                  
                  
                  May 31, 2008Net
      sales
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %Cost
      of sales
                  
                  
                  78.6
                  
                  
                  
                  78.0
                  
                  
                  
                  67.4Gross
      profit
                  
                  
                  21.4
                  
                  
                  
                  22.0
                  
                  
                  
                  32.6Selling,
      general & administrative expenses
                  
                  
                  10.1
                  
                  
                  
                  8.9
                  
                  
                  
                  8.2Operating
      income
                  
                  
                  11.3
                  
                  
                  
                  13.1
                  
                  
                  
                  24.4Other
      income (expense)
                  
                  
                  0.1
                  
                  
                  
                  (0.0
                  )
                  
                  
                  0.9Income
      before taxes
                  
                  
                  11.4
                  
                  
                  
                  13.1
                  
                  
                  
                  25.3Income
      tax expense
                  
                  
                  4.2
                  
                  
                  
                  4.5
                  
                  
                  
                  8.7Net
      income
                  
                  
                  7.2
                  
                  
                  
                  8.6
                  
                  
                  
                  16.6Less:
      Net income (loss) attributable to noncontrolling interests
                  
                  
                  (0.3
                  )
                  
                  
                  0.1
                  
                  
                  
                  0.0Net
      income attributable to Cal-Maine Foods, Inc
                  
                  
                  7.5
                  %
                  
                  
                  8.5
                  %
                  
                  
                  16.6
                  %





Executive Overview of Results – May 29,
2010, May 30, 2009, and May 31, 2008





Our operating results are significantly
affected by wholesale shell egg market prices, which can fluctuate widely and
are outside of our control.  Primarily, our shell eggs are sold at
prices related to the Urner Barry Spot Egg Market Quotations for the
southeastern region of the country.  The following table shows our net
income (loss), net average shell egg selling price, and the average Urner Barry
wholesale large shell egg prices in the southeast region, for each of our three
most recent fiscal years.





FiscalYearended
                  
                  May 29, 2010
                  
                  
                  May30,2009
                  
                  
                  May31,2008Netincomeattributable to Cal-Maine Foods,
      Inc.- (in
      thousands)
                  
                  $
                  67,823
                  
                  
                  $
                  79,500
                  
                  
                  $
                  151,861Net average shell egg selling
      price
                  
                  $
                  1.08
                  
                  
                  $
                  1.14
                  
                  
                  $
                  1.26AverageUrner Barry Spot Egg Market
      Quotations1
                  
                  $
                  1.12
                  
                  
                  $
                  1.21
                  
                  
                  $
                  1.38




1-Average
daily price for the fiscal year




The shell
egg industry has traditionally been subject to periods of high profitability
followed by periods of significant loss. The periods of high profitability
reflect increased consumer demand relative to supply while the periods of
significant loss reflect excess supply for the then prevailing consumer
demand.  Historically, demand for shell eggs increases in line with
overall population growth. As reflected above, our operating results correspond
with changes in the spot egg market quote.   The net average
shell egg selling price is the blended price for all sizes and grades of shell
eggs, including non-graded shell egg sales, breaking stock and
undergrades.  In fiscal 2003 and 2004, shell egg demand increased at
higher than normal trend rates due to the increased popularity of high protein
diets.  This demand imbalance caused shell egg prices to
increase.  In late fiscal 2004, the popularity of these high protein
diets began to diminish, but our egg production had been increased to meet the
earlier higher demand levels.  Lower egg prices followed, and we
experienced net losses in fiscal 2005 and 2006.  Beginning in the
latter part of fiscal 2006, egg supplies appeared to become more aligned with
demand. Since that time, the supply-demand balance has
tightened.  Tighter supplies resulted in increased prices in fiscal
2007, and prices reached record levels in fiscal 2008.  These
increased prices resulted in significantly improved profitability.  In
fiscal 2009, egg prices declined as compared to fiscal 2008, due to slight
increases in supply.  In fiscal 2010, egg prices continued to decline
as compared to fiscal 2009, due to continued increases in industry
supply.  Egg sales at the retail level were good, and while there was
modest improvement in food service and restaurant sales, overall, there is
continued weakness in food service and restaurant sales.   For
fiscal 2010 our feed costs decreased, as compared to feed costs in fiscal
2009.


18


Fiscal Year Ended May 29, 2010 Compared
to Fiscal Year Ended May 30, 2009





Net Sales.In
fiscal 2010, approximately 96% of our net sales consisted of shell egg sales and
approximately 3% was for sales of egg products, with the 1% balance consisting
of sales of incidental feed and feed ingredients.Net sales for the fiscal
year ended May 29, 2010 were $910.1 million, a decrease of $18.7 million, or
2.0%, from net sales of $928.8 million for fiscal 2009.  In fiscal
2010 total dozens of eggs sold increased and egg selling prices decreased as
compared to fiscal 2009. In fiscal 2010 total dozens of shell eggs sold were
805.4 million, an increase of 27.5 million dozen, or 3.5%, compared to 777.9
million sold in fiscal 2009. Our average selling price of shell eggs decreased
from $1.136 per dozen for fiscal 2009 to $1.079 per dozen for fiscal 2010, a
decrease of $.057 per dozen, or 5.0%.  Our net average shell egg
selling price is the blended price for all sizes and grades of shell eggs,
including non-graded shell egg sales, breaking stock and
undergrades.  Our operating results are significantly affected by
wholesale shell egg market prices, which are outside of our control. Small
changes in production or demand levels can have a large effect on shell egg
prices.





On a comparable basis, excluding the
Acquisitions, net sales for fiscal 2010 were $865.6 million, a decrease of $63.2
million, or 6.8%, as compared to net sales of $928.8 million for fiscal
2009.   Dozens sold for fiscal 2010, excluding the Acquisitions,
were 764.3 million, a decrease of 13.6 million, or 1.7% as compared to 777.9
million for fiscal 2009.





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





FiscalYearsEnded
                      (52weeks)
                    
                    
                    QuarterEnded
                      (13weeks)May 29, 2010
                    
                    
                    May30,2009
                    
                    
                    May29,2010
                    
                    
                    May30,2009(Amountsinthousands)
                    
                    
                    (Amountsinthousands)Total net sales
                    
                    $
                    910,143
                    
                    
                    $
                    928,812
                    
                    
                    $
                    222,088
                    
                    
                    $
                    213,601Non-specialty shell egg
      sales
                    
                    
                    682,601
                    
                    
                    
                    714,836
                    
                    
                    
                    163,941
                    
                    
                    
                    161,595Specialty shell egg sales
                    
                    
                    186,507
                    
                    
                    
                    168,785
                    
                    
                    
                    48,110
                    
                    
                    
                    43,124Other
                    
                    
                    2,605
                    
                    
                    
                    3,841
                    
                    
                    
                    601
                    
                    
                    
                    1,019Net shell egg sales
                    
                    $
                    871,713
                    
                    
                    $
                    887,462
                    
                    
                    $
                    212,652
                    
                    
                    $
                    205,738Net shell egg sales as apercent of total net
      sales
                    
                    
                    96
                    %
                    
                    
                    95
                    %
                    
                    
                    96
                    %
                    
                    
                    96
                    %Non- specialty shell egg dozens
      sold
                    
                    
                    689,316
                    
                    
                    
                    670,860
                    
                    
                    
                    165,216
                    
                    
                    
                    178,260Specialty shell egg dozens
      sold
                    
                    
                    116,083
                    
                    
                    
                    107,025
                    
                    
                    
                    29,964
                    
                    
                    
                    26,997Total dozens sold
                    
                    
                    805,399
                    
                    
                    
                    777,885
                    
                    
                    
                    195,180
                    
                    
                    
                    205,257





Our
non-specialty shell eggs include all shell egg sales not specifically identified
as specialty shell egg sales.   The non-specialty shell egg
market is characterized by an inelasticity of demand, and small increases in
production or decreases in demand can have a large adverse effect on prices and
vice-versa.  In fiscal 2010, non-specialty shell eggs represented
approximately 78.3% of our shell egg dollar sales, as compared to 80.5% for
fiscal 2009.   Sales of non-specialty shell eggs accounted for
approximately 85.6% of our total shell egg dozen volumes in fiscal 2010, as
compared to 86.2% in fiscal 2009.





For the
thirteen-week period ended May 29, 2010, non-specialty shell eggs represented
approximately 77.1% of our shell egg dollar sales, as compared to 78.5% for the
thirteen-week period ended May 30, 2009.   For the thirteen-week
period ended May 29, 2010, non-specialty shell eggs accounted for approximately
84.6% of the total shell egg dozen volume, as compared to 86.8% for the
thirteen-week period ended May 30, 2009.





We
continue to increase our sales volume of specialty eggs, which include
nutritionally enhanced, cage free and organic eggs.  Specialty egg
retail prices are less cyclical than non-specialty shell egg prices and are
generally higher due to consumer willingness to pay for the increased benefits
from these products.   For fiscal 2010, specialty eggs accounted
for 21.4% of shell egg dollar sales, as compared to 19.0% in fiscal 2009 and
14.4% of shell egg dozens sold in fiscal 2010, as compared to 13.8% in fiscal
2009.  They are a rapidly growing part of the shell egg
market.  Due to healthier eating trends, the volume of specialty eggs
continues to increase.   From fiscal 2009 to fiscal 2010, the
volume of specialty eggs sold increased by 8.5%.


19


For the
thirteen-week period ended May 29, 2010, specialty shell eggs represented
approximately 22.6% of our shell egg dollar sales, as compared to 21.0% for the
thirteen-week period ended May 30, 2009.   For the thirteen-week
period ended May 29, 2010, specialty shell eggs accounted for approximately
15.4% of the total shell egg dozen volume, as compared to 13.2% for the
thirteen-week period ended May 30, 2009.





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





Egg products are shell eggs that are
broken and sold in liquid, frozen, or dried form. For fiscal 2010 our egg
product sales were $27.4 million, a decrease of $6.5 million or 19.2%, as
compared to $33.9 million for fiscal 2009.  Our volume of egg products
sold for fiscal 2010 was 59.5 million pounds, an increase of 2.1 million pounds
or 3.7%, as compared to 57.4 million pounds for fiscal 2009.  Egg
products are primarily sold into the institutional and food service sectors,
which continues to have weak demand. This led to significant declines in the
wholesale price of the three primary forms of egg products that we sell. Our egg
products are sold through American Egg Products, LLC (“AEP”) and Texas Egg
Products, LLC (“TEP”).  For fiscal 2010, egg product sales for AEP
were $15.5 million, as compared to $19.6 million for fiscal 2009, a decrease of
$4.1 million, or 20.9%.  For AEP the volume of egg products sold for
fiscal 2010 was 35.2 million pounds, an increase of 1.2 million pounds, or 3.5%,
as compared to 34.0 million pounds for fiscal 2009. The egg product sales for
TEP in fiscal 2010 were $11.9 million, as compared to $14.3 million for fiscal
2009, a decrease of $2.4 million or 16.8%. For TEP the volume of egg products
sold for fiscal 2010 was 24.3 million pounds, an increase of 900,000 pounds, or
3.8%, as compared to 23.4 million pounds for fiscal 2009.   As
described in Note 1 to the consolidated financial statements, TEP is a variable
interest entity of which the Company is the primary beneficiary.





Cost
of Sales.





The
following table presents an analysis of our cost of sales.





Fiscal Years Ended
                        (52 weeks)
                      
                      
                      Quarter Ended
                        (13 weeks)May 29, 2010
                      
                      
                      May 30, 2009
                      
                      
                      May 29, 2010
                      
                      
                      May 30, 2009(Amounts in thousands)
                      
                      
                      (Amounts in thousands)Cost
      of sales
                      
                      $
                      715,499
                      
                      
                      $
                      724,085
                      
                      
                      $
                      167,412
                      
                      
                      $
                      175,694Dozens
      produced
                      
                      
                      640,174
                      
                      
                      
                      598,042
                      
                      
                      
                      157,207
                      
                      
                      
                      161,082Dozens
      purchased outside*
                      
                      
                      165,225
                      
                      
                      
                      179,843
                      
                      
                      
                      37,973
                      
                      
                      
                      44,175Dozens
      sold
                      
                      
                      805,399
                      
                      
                      
                      777,885
                      
                      
                      
                      195,180
                      
                      
                      
                      205,257Feed
      cost (price per dozen produced )
                      
                      $
                      .349
                      
                      
                      $
                      .391
                      
                      
                      $
                      .327
                      
                      
                      $
                      .376Farm
      production cost (price per dozen produced)
                      
                      $
                      .566
                      
                      
                      $
                      .609
                      
                      
                      $
                      .550
                      
                      
                      $
                      .593Outside
      egg purchases (average price paid per dozen)
                      
                      $
                      1.167
                      
                      
                      $
                      1.114
                      
                      
                      $
                      1.183
                      
                      
                      $
                      .990





* - Net
of processing loss and inventory adjustments





Cost of
sales consists of costs directly related to production and processing of shell
eggs, including feed costs, and purchases of shell eggs from outside egg
producers. Cost of sales for the fiscal year ended May 29, 2010 was $715.5
million, a decrease of $8.6 million, or 1.2%, as compared to cost of sales
of  $724.1 million for fiscal 2009. On a comparable basis, dozens
produced increased, dozens purchased from outside shell egg producers decreased
and cost of feed ingredients decreased in fiscal 2010. The cost of the shell
eggs purchased from outside producers increased due to the volume of specialty
shell eggs purchased.   This fiscal year we produced 79% of the
eggs sold by us, as compared to 77% for the previous year. Feed cost for fiscal
2010 was $.349 per dozen, compared to $.391 per dozen for the prior fiscal year,
a decrease of 10.7%.  Gross profit decreased from 22.0% of net sales
for fiscal 2009 to 21.4% of net sales for fiscal 2010.





On a comparable basis, excluding the
Acquisitions, cost of sales for fiscal 2010 was $676.4 million, a decrease of
$47.7 million, or 6.6%, as compared to cost of sales of $724.1 million for
fiscal 2009.





Cost of sales for the thirteen-week
period ended May 29, 2010 was $167.4 million, a decrease of $8.3 million, or
4.7%, as compared to cost of sales of $175.7 million for the thirteen-week
period ended May 30, 2009.


20


Selling,
General and Administrative Expenses.





FiscalYearsEnded
                                  (52weeks)Actual
                                
                                
                                Less:Acquisitions
                                
                                
                                NetMay29,2010
                                
                                
                                May29,2010
                                
                                
                                May29,2010
                                
                                
                                May30,2009
                                
                                
                                ChangeCategory
                                
                                (Amountsinthousands)Stock
      compensation expense
                                
                                $
                                2,186
                                
                                
                                $
                                —
                                
                                
                                $
                                2,186
                                
                                
                                $
                                495
                                
                                
                                $
                                1,691Specialty
      egg expenses
                                
                                
                                21,362
                                
                                
                                
                                502
                                
                                
                                
                                20,860
                                
                                
                                
                                18,879
                                
                                
                                
                                1,981Payroll
      and overhead
                                
                                
                                19,927
                                
                                
                                
                                723
                                
                                
                                
                                19,204
                                
                                
                                
                                19,220
                                
                                
                                
                                (16
                                )Other
      expenses
                                
                                
                                20,055
                                
                                
                                
                                2,749
                                
                                
                                
                                17,306
                                
                                
                                
                                17,951
                                
                                
                                
                                (645
                                )Delivery expense
                                
                                
                                28,510
                                
                                
                                
                                2,747
                                
                                
                                
                                25,763
                                
                                
                                
                                26,708
                                
                                
                                
                                (945
                                )Total
                                
                                $
                                92,040
                                
                                
                                $
                                6,721
                                
                                
                                $
                                85,319
                                
                                
                                $
                                83,253
                                
                                
                                $
                                2,066





Selling,
general and administrative expenses include costs of marketing, distribution,
accounting and corporate overhead.  Selling, general and
administrative expense was $92.0 million in fiscal 2010, an increase of $8.7
million or 10.4%, as compared to $83.3 million for fiscal 2009. Excluding the
Acquisitions, selling, general and administrative expense for fiscal 2010 was
$85.3 million, an increase of $2.0 million, or 2.4%, as compared to $83.3
million for fiscal 2009.   Stock based compensation plan expense
increased $1.7 million for the current fiscal year due mainly to an increase in
the closing price of the Company’s Common Stock.  The calculation of
the stock based compensation plan expense is dependent on the closing stock
price of the Company’s Common Stock, which increased from $24.37 at May 30, 2009
to $32.37 at May 29, 2010, representing a 32.8%
increase.   Specialty egg expenses represent advertising,
commissions, and franchise fees as they are incurred with sales of our specialty
eggs.  The expense increase is attributable to the increase in the
dozens of specialty eggs sold this year as compared to last fiscal
year.  Payroll and overhead expenses decreased slightly but were
approximately the same as last year.  Other selling, general and
administrative expenses decreased due to decreases in legal, audit, and
general insurance expenses. Delivery expense decreased due to lower costs for
the use of outside trucking. As a percent of net sales, selling, general and
administrative expense increased from 8.9% for fiscal 2009 to 10.1% for fiscal
2010.





Fiscal Years Ended
                                  (13 weeks)May 29, 2010
                                
                                
                                May 30, 2009
                                
                                
                                ChangeCategory
                                
                                (Amounts in thousands)Stock
      compensation expense
                                
                                $
                                170
                                
                                
                                $
                                537
                                
                                
                                $
                                (367
                                )Specialty
      egg expenses
                                
                                
                                5,228
                                
                                
                                
                                5,179
                                
                                
                                
                                49Payroll
      and overhead
                                
                                
                                5,426
                                
                                
                                
                                5,501
                                
                                
                                
                                (75
                                )Other
      expenses
                                
                                
                                4,253
                                
                                
                                
                                4,658
                                
                                
                                
                                (405
                                )Delivery expense
                                
                                
                                7,066
                                
                                
                                
                                6,863
                                
                                
                                
                                203Total
                                
                                $
                                22,143
                                
                                
                                $
                                22,738
                                
                                
                                $
                                (595
                                )





Selling,
general and administrative expense was $22.1 million for the thirteen-week
period ended May 29, 2010, a decrease of $600,000 or 2.6%, as compared to $22.7
million for the thirteen-week period ending May 30, 2009.





Operating
Income.As a result of the above, our operating income
was $102.6 million for fiscal 2010, as compared to operating income of $121.5
million for fiscal 2009.  The operating income as a percent of sales
for fiscal 2010 was 11.3%, as compared to operating income of 13.1% for fiscal
2009.





Other Income (Expense).Other
income or expense consists of income or costs not directly charged or related to
operations such as equity in income of affiliates and interest expense.Other income for fiscal
2010 was $889,000 as compared to other expense of $140,000 for fiscal 2009.
Interest expense for fiscal 2010 was $520,000 more while interest income was
$1.2 million less than fiscal 2009.  Compared to the prior fiscal
year, we had higher average long-term borrowing balances and higher invested
cash balances. Rates earned on invested cash balances were lower in the current
year.  Other income also increased because of increased equity in
income of affiliates.  As a percent of net sales, other income was 0.1% for
fiscal 2010, as compared to other expense of 0.0% for fiscal 2009.





Income Taxes.  For
the fiscal year ended May 29, 2010, our pre-tax income was $103.5 million, as
compared to $121.3 million for fiscal 2009.  Income tax expense of
$38.0 million was recorded for fiscal 2010 with an effective income tax rate of
36.7%, as compared to $41.5 million for fiscal 2009 with an effective income tax
rate of 34.2%.


21





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





Net (income) loss attributable to
noncontrolling interest.Net loss attributable to noncontrolling interest
for fiscal 2010 was $2.3 million as compared to net income attributable to
noncontrolling interest of $324,000 for fiscal 2009.





Net Income.As a
result of the above, net income for fiscal 2010 was $67.8 million, or $2.85 per
basic share and $2.84 per diluted share, as compared to $79.5 million, or $3.34
per basic and diluted share for fiscal 2009.





Fiscal
Year Ended May 30, 2009 Compared to Fiscal Year Ended May 31, 2008





Net Sales.In
fiscal 2009, approximately 95% of our net sales consisted of shell egg sales and
approximately 4% was for sales of egg products, with the 1% balance consisting
of sales of incidental feed and feed ingredients.Net sales for the fiscal
year ended May 30, 2009 were $928.8 million, an increase of $12.9 million, or
1.4%, from net sales of $915.9 million for fiscal 2008.  In fiscal
2009 total dozens of eggs sold increased and egg selling prices decreased as
compared to fiscal 2008. In fiscal 2009 total dozens of shell eggs sold were
777.9 million, an increase of 99.4 million dozen, or 14.6%, compared to 678.5
million sold in fiscal 2008. Our average selling price of shell eggs decreased
from $1.260 per dozen for fiscal 2008 to $1.136 per dozen for fiscal 2009, a
decrease of $.124 per dozen, or 9.8%.  Our net average shell egg
selling price is the blended price for all sizes and grades of shell eggs,
including non-graded shell egg sales, breaking stock and
undergrades.  Our operating results are significantly affected by
wholesale shell egg market prices, which are outside of our control. Small
changes in production or demand levels can have a large effect on shell egg
prices.  In fiscal 2009, egg prices declined as compared to fiscal
2008.  Due to the state of the overall economy, we saw demand decrease
at the food service level.   Egg sales at the retail level remain
strong.  As a consequence of the current economic situation and the
drop in demand at the food service level, there was a drop in egg
prices.





On a
comparable basis, excluding the Acquisitions, net sales for fiscal 2009 were
$838.6 million, a decrease of $77.3 million, or 8.4%, as compared to net sales
of $915.9 million for fiscal 2008.   Dozens sold for fiscal 2009,
excluding the Acquisitions, were 703.1 million, an increase of 24.6 million, or
3.6% as compared to 678.5 million for fiscal 2008.





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





FiscalYearsEnded
                            (52weeks)
                          
                          
                          QuarterEnded
                            (13weeks)May 30, 2009
                          
                          
                          May 31, 2008
                          
                          
                          May30,2009
                          
                          
                          May 31, 2008(Amountsinthousands)
                          
                          
                          (Amountsinthousands)Total
      net sales
                          
                          $
                          928,812
                          
                          
                          $
                          915,939
                          
                          
                          $
                          213,601
                          
                          
                          $
                          235,628Non-specialty
      shell egg sales
                          
                          
                          714,836
                          
                          
                          
                          733,078
                          
                          
                          
                          161,595
                          
                          
                          
                          185,252Specialty
      shell egg sales
                          
                          
                          168,785
                          
                          
                          
                          121,229
                          
                          
                          
                          43,124
                          
                          
                          
                          34,706Other
                          
                          
                          3,841
                          
                          
                          
                          3,890
                          
                          
                          
                          1,019
                          
                          
                          
                          1,002Net
      shell egg sales
                          
                          $
                          887,462
                          
                          
                          $
                          858,197
                          
                          
                          $
                          205,738
                          
                          
                          $
                          220,960Net
      shell egg sales as apercent of total net
    sales
                          
                          
                          95
                          %
                          
                          
                          94
                          %
                          
                          
                          96
                          %
                          
                          
                          94
                          %Non-
      specialty shell egg dozens sold
                          
                          
                          670,860
                          
                          
                          
                          597,496
                          
                          
                          
                          178,260
                          
                          
                          
                          145,660Specialty
      shell egg dozens sold
                          
                          
                          107,025
                          
                          
                          
                          80,997
                          
                          
                          
                          26,997
                          
                          
                          
                          22,584Total
      dozens sold
                          
                          
                          777,885
                          
                          
                          
                          678,493
                          
                          
                          
                          205,257
                          
                          
                          
                          168,244





Our
non-specialty shell eggs include all shell egg sales not specifically identified
as specialty shell egg sales.   The non-specialty shell egg
market is characterized by an inelasticity of demand, and small increases in
production or decreases in demand can have a large adverse effect on prices and
vice-versa.  In fiscal 2009, non-specialty shell eggs represented
approximately 80.5% of our shell egg dollar sales, as compared to 85.4% for
fiscal 2008.   Sales of non-specialty shell eggs accounted for
approximately 86.2% of our total shell egg dozen volumes in fiscal 2009, as
compared to 88.1% in fiscal 2008.





For the
thirteen-week period ended May 30, 2009, non-specialty shell eggs represented
approximately 78.5% of our shell egg dollar sales, as compared to 83.8% for the
thirteen-week period ended May 31, 2008.   For the thirteen-week
period ended May 30, 2009, non-specialty shell eggs accounted for approximately
86.8% of the total shell egg dozen volume, as compared to 86.6% for the
thirteen-week period ended May 31, 2008.


22





We
continue to increase our sales volume of specialty eggs, which include
nutritionally enhanced, cage free and organic eggs.  Specialty egg
retail prices are less cyclical than non-specialty shell egg prices and are
generally higher due to consumer willingness to pay for the increased benefits
from these products.   For fiscal 2009, specialty eggs accounted
for 19.0% of shell egg dollar sales, as compared to 14.1% in fiscal 2008 and
13.8% of shell egg dozens sold in fiscal 2008, as compared to 11.9% in fiscal
2008.  They are a rapidly growing part of the shell egg
market.  Due to healthier eating trends, the volume of specialty eggs
continues to increase.   From fiscal 2008 to fiscal 2009, the
volume of specialty eggs sold increased by 32.1%.





For the
thirteen-week period ended May 30, 2009, specialty shell eggs represented
approximately 21.0% of our shell egg dollar sales, as compared to 15.7% for the
thirteen-week period ended May 31, 2008.   For the thirteen-week
period ended May 30, 2009, specialty shell eggs accounted for approximately
13.2% of the total shell egg dozen volume, as compared to 13.4% for the
thirteen-week period ended May 31, 2008.





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





Egg
products are shell eggs that are broken and sold in liquid, frozen, or dried
form. For fiscal
2009 our egg product sales were $33.9 million, a decrease of $8.9 million or
20.8%, as compared to $42.8 million for fiscal 2008.  Our volume of
egg products sold was unchanged at 57.4 million pounds for fiscal 2009 and
fiscal 2008.  Egg products are primarily sold into the institutional
and food service sectors, and the sizeable decrease in egg products sales is
attributable to the declines in these sectors.  This led to a decline
in the wholesale price of egg products.   Our consolidated net
sales include the sales of egg products by AEP and TEP.  For fiscal
2009, egg product sales for AEP were $19.6 million, as compared to $25.5 million
for fiscal 2008, a decrease of $5.9 million, or 23.1%.  For AEP the
volume of egg products sold for fiscal 2009 was 34.0 million pounds, a decrease
of 2.6 million pounds, or 7.1%, as compared to 36.6 million pounds for fiscal
2008. The egg product sales for TEP in fiscal 2009 were $14.3 million, as
compared to $17.3 million for fiscal 2008, a decrease of $3.0 million. For TEP
the volume of egg products sold for fiscal 2009 was 23.4 million pounds, an
increase of 2.6 million pounds, or 12.5%, as compared to 20.8 million pounds for
fiscal 2008.   As described in Note 1 to the consolidated
financial statements, TEP is a variable interest entity of which the Company is
the primary beneficiary.





Cost
of Sales.





The
following table presents an analysis of our cost of sales.


Fiscal Years Ended
                    (52 weeks)
                  
                  
                  Quarter Ended
                    (13 weeks)May 30, 2009
                  
                  
                  May 31, 2008
                  
                  
                  May 30, 2009
                  
                  
                  May 31, 2008(Amounts in thousands)
                  
                  
                  (Amounts in thousands)Cost
      of sales
                  
                  $
                  724,085
                  
                  
                  $
                  617,383
                  
                  
                  $
                  175,694
                  
                  
                  $
                  163,586Dozens
      produced
                  
                  
                  598,042
                  
                  
                  
                  535,216
                  
                  
                  
                  161,082
                  
                  
                  
                  128,950Dozens
      purchased outside *
                  
                  
                  179,843
                  
                  
                  
                  143,277
                  
                  
                  
                  44,175
                  
                  
                  
                  39,294Dozens
      sold
                  
                  
                  777,885
                  
                  
                  
                  678,493
                  
                  
                  
                  205,257
                  
                  
                  
                  168,244Feed
      cost (price per dozen produced )
                  
                  $
                  .391
                  
                  
                  $
                  .334
                  
                  
                  $
                  .376
                  
                  
                  $
                  .424Farm
      production cost (price per dozen produced)
                  
                  $
                  .609
                  
                  
                  $
                  .524
                  
                  
                  $
                  .593
                  
                  
                  $
                  .596Outside
      egg purchases (average price paid per dozen)
                  
                  $
                  1.114
                  
                  
                  $
                  1.273
                  
                  
                  $
                  .990
                  
                  
                  $
                  1.323


_____________


* - Net
of processing loss and inventory adjustments





Cost
of sales consists of costs directly related to production and processing of
shell eggs, including feed costs, and purchases of shell eggs from outside egg
producers. Cost of sales for the fiscal year ended May 30, 2009 was $724.1
million, an increase of $106.7 million, or 17.3%, as compared to cost of sales
of  $617.4 million for fiscal 2008. On a comparable basis, dozens
produced increased, dozens purchased from outside shell egg producers increased
and cost of feed ingredients increased in fiscal 2009. The cost of the shell
eggs purchased from outside producers increased due to the volume of shell eggs
purchased from outside shell egg producers.   During fiscal 2009,
we produced 77% of the eggs sold by us, as compared to 79% for the previous
year. Feed cost for fiscal 2009 was $.391 per dozen, compared to $.334 per dozen
for the prior fiscal year, an increase of 17.1%.  Our average egg
selling prices did not offset the increase in feed ingredient costs and higher
costs incurred for egg purchases from outside egg producers, resulting in a
decrease in gross profit from 32.6% of net sales for fiscal 2008 to 22.0% of net
sales for fiscal 2009.





On a
comparable basis, excluding the Acquisitions, cost of sales for fiscal 2009 was
$656.7 million, an increase of $39.3 million, or 6.4%, as compared to cost of
sales of $617.4 million for fiscal 2008.


23





Cost of
sales for the thirteen-week period ended May 30, 2009 was $175.7 million, an
increase of $12.1 million, or 7.4%, as compared to cost of sales of $163.6
million for the thirteen-week period ended May 31, 2008.  On a
comparable basis, excluding the Acquisitions, cost of sales for the
thirteen-week period ended May 30, 2009 was $150.6 million, a decrease of $13.0
million, or 7.9%, as compared to cost of sales of $163.6 million for the
thirteen-week period ended May 31, 2008.





Selling,
General and Administrative Expenses.





FiscalYearsEnded
                            (52weeks)Actual
                          
                          
                          Less:Acquisitions
                          
                          
                          NetMay30,2009
                          
                          
                          May30,2009
                          
                          
                          May30,2009
                          
                          
                          May31,2008
                          
                          
                          ChangeCategory
                          
                          (Amounts in thousands)Stock
      compensation expense
                          
                          $
                          495
                          
                          
                          $
                          -
                          
                          
                          $
                          495
                          
                          
                          $
                          7,071
                          
                          
                          $
                          (6,576
                          )Specialty
      egg expenses
                          
                          
                          18,879
                          
                          
                          
                          2,663
                          
                          
                          
                          16,216
                          
                          
                          
                          12,639
                          
                          
                          
                          3,577Payroll
      and overhead
                          
                          
                          19,220
                          
                          
                          
                          2,132
                          
                          
                          
                          17,088
                          
                          
                          
                          16,758
                          
                          
                          
                          330Other
      expenses
                          
                          
                          17,951
                          
                          
                          
                          3,845
                          
                          
                          
                          14,106
                          
                          
                          
                          16,748
                          
                          
                          
                          (2,642
                          )Delivery expense
                          
                          
                          26,708
                          
                          
                          
                          4,608
                          
                          
                          
                          22,100
                          
                          
                          
                          21,703
                          
                          
                          
                          397Total
                          
                          $
                          83,253
                          
                          
                          $
                          13,248
                          
                          
                          $
                          70,005
                          
                          
                          $
                          74,919
                          
                          
                          $
                          (4,914
                          )





Selling,
general and administrative expenses include costs of marketing, distribution,
accounting and corporate overhead.  Selling, general and
administrative expense was $83.3 million in fiscal 2009, an increase of $8.4
million or 11.2%, as compared to $74.9 million for fiscal 2008. Excluding the
Acquisitions, selling, general and administrative expense for fiscal 2009 was
$70.0 million, a decrease of $4.9 million, or 6.5%, as compared to $74.9 million
for fiscal 2008.   Stock based compensation plan expense
decreased $6.6 million for the current fiscal year due mainly to a decrease in
the closing price of the Company’s Common Stock.  The calculation of
the stock based compensation plan expense is dependent on the closing stock
price of the Company’s Common Stock, which decreased from $31.20 at May 31, 2008
to $24.37 at May 30, 2009, representing a 21.9% decline.  Specialty
egg expenses represent advertising, commissions, and franchise fees as they are
incurred with sales of our specialty eggs.   The expense increase
is attributable to the increase in the dozens of specialty eggs sold this year
as compared to last fiscal year.  Payroll and overhead expenses
increased primarily due to an increase in the cost of employee benefits which
includes health insurance.  There was also a slight increase in
salaries and wages.  Other selling, general and administrative
expenses decreased primarily due to a decrease in our insurance
costs.  Our delivery expenses for the thirteen-week period ended May
30, 2009 remained relatively unchanged.   As a percent of net
sales, selling, general and administrative expense increased from 8.2% for
fiscal 2008 to 8.9% for fiscal 2009.





FiscalYearsEnded
                            (13weeks)Actual
                          
                          
                          Less:Acquisitions
                          
                          
                          NetMay30,2009
                          
                          
                          May30,2009
                          
                          
                          May30,2009
                          
                          
                          May31,2008
                          
                          
                          ChangeCategory
                          
                          (Amounts in thousands)Stock
      compensation expense
                          
                          $
                          537
                          
                          
                          $
                          -
                          
                          
                          $
                          537
                          
                          
                          $
                          (368
                          )
                          
                          $
                          905Specialty
      egg expenses
                          
                          
                          5,179
                          
                          
                          
                          692
                          
                          
                          
                          4,487
                          
                          
                          
                          3,541
                          
                          
                          
                          946Payroll
      and overhead
                          
                          
                          5,501
                          
                          
                          
                          967
                          
                          
                          
                          4,534
                          
                          
                          
                          5,178
                          
                          
                          
                          (644
                          )Other
      expenses
                          
                          
                          4,658
                          
                          
                          
                          2,231
                          
                          
                          
                          2,427
                          
                          
                          
                          5,939
                          
                          
                          
                          (3,512
                          )Delivery expense
                          
                          
                          6,863
                          
                          
                          
                          1,754
                          
                          
                          
                          5,109
                          
                          
                          
                          5,709
                          
                          
                          
                          (600
                          )Total
                          
                          $
                          22,738
                          
                          
                          $
                          5,644
                          
                          
                          $
                          17,094
                          
                          
                          $
                          19,999
                          
                          
                          $
                          (2,905
                          )





Selling,
general and administrative expense was $22.7 million for the thirteen-week
period ended May 30, 2009, an increase of $2.7 million or 13.5%, as compared to
$20.0 million for the thirteen-week period ending May 31, 2008. Excluding the
Acquisitions, selling, general and administrative expense for the thirteen-week
period ending May 30, 2009 was $17.1 million, a decrease of $2.9 million, or
14.5%, as compared to $20.0 million for the thirteen-week period ending May 31,
2008.  The decrease is primarily attributable to a decrease in our
insurance costs.





Operating Income
(Loss).As a result of the above, our operating income
was $121.5 million for fiscal 2009, as compared to operating income of $223.6
million for fiscal 2008.  The operating income as a percent of sales
for fiscal 2009 was 13.1%, as compared to operating income of 24.4% for fiscal
2008.


24





Other Income (Expense).Other
income or expense consists of income or costs not directly charged or related to
operations such as equity in income of affiliates and interest expense.Other expense for fiscal
2009 was $140,000 as compared to other income of $7.9 million for fiscal 2008, a
decrease of $8.0 million. We had higher average long-term borrowing balances and
our average invested cash balances were lower.  The effect of higher
average long-term borrowing balances and lower average invested cash balances
during fiscal 2009 was an increase in net interest expense.Other income decreased due
to decreased equity in income of affiliates, which are also in the shell egg
business.   During fiscal 2008, we recorded a gain on the sale of
the fixed assets at our Albuquerque feed mill.  We did not have a
similar fixed asset sale during fiscal 2009.  Our net interest expense
includes the computation of non-cash interest expense, which is imputed on our
non-interest bearing obligation to acquire the remaining membership units of
Hillandale, LLC over the remaining acquisition period culminating with us having
a 100% ownership interest in Hillandale, LLC. As a percent of net sales, other
expense was 0.0% for fiscal 2009, as compared to other income of 0.9% for fiscal
2008.





Income Taxes.  For
the fiscal year ended May 30, 2009, our pre-tax income was $121.3 million, as
compared to $231.6 million for fiscal 2008.  Income tax expense of
$41.5 million was recorded for fiscal 2009 with an effective income tax rate of
34.2%, as compared to $79.5 million for fiscal 2008 with an effective income tax
rate of 34.3%.





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





Net (income) loss attributable to
noncontrolling interest.Net income attributable to noncontrolling
interest for fiscal 2009 was $324,000 as compared to net income attributable to
noncontrolling interest of $175,000 for fiscal 2008.





Net Income.As a
result of the above, net income for fiscal 2009 was $79.5 million, or $3.34 per
basic and diluted share, as compared to $151.9 million, or $6.41 per basic share
and $6.40 per diluted share for fiscal 2008.





Capital Resources
and Liquidity.Our working
capital at May 29, 2010 was $220.2 million compared to $138.0 million at May 30,
2009. The calculation of working capital is defined as current assets less
current liabilities.  Our current ratio was 2.87 at May 29, 2010 as
compared with 2.33 at May 30, 2009. The current ratio is calculated by dividing
current assets by current liabilities. 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 $3.9 million in standby letters of credit outstanding,
which are collateralized with cash. Our long-term debt at May 29, 2010,
including current maturities, amounted to $134.7 million, as compared to $129.8
million at May 30, 2009.





For the
fiscal year ended May 29, 2010, $116.7 million in net cash was provided by
operating activities. This compares to $111.3 million of net cash provided by
operating activities for the fiscal year ended May 30, 2009.  For
fiscal 2010, approximately $31.5 million was provided from the sale of
short-term investments, $82.8 million was used for the purchase of investments,
and net $4.1 million was provided from notes receivable and equity investments
in affiliates. Approximately $7.0 million was provided from disposal of
property, plant and equipment, $20.8 million was used for purchases of property,
plant and equipment, $8.1 million was used for acquisition of the remaining
equity interest in the Hillandale business, and $508,000 was used to acquire the
remaining equity interest in Benton County Foods, LLC.  Approximately
$19.0 million was used for payment of dividends on Common Stock and $25.7
million was used for principal payments on long-term
debt.  Approximately $308,000 was received from the issuance of Common
Stock from treasury.  Approximately $30.0 million was received from
additional long-term borrowings. The net result of these activities was an
increase in cash of approximately $32.6 million since May 30, 2009.





For the
fiscal year ended May 30, 2009, $111.3 million in net cash was provided by
operating activities. This compares to $158.4 million of net cash provided by
operating activities for the fiscal year ended May 31, 2008.  For
fiscal 2009, $21.5 million was used for the purchase of short-term investments,
$15.4 million was provided from the sale of short-term investments, and net
$778,000 was provided from notes receivable and other
investments.  Approximately $128,000 was provided from disposal of
property, plant and equipment, $26.1 million was used for purchases of property,
plant and equipment and $14.6 million was used for an additional acquisition of
the Hillandale business.  We used $29.6 million for the acquisition of
Zephyr Egg, LLC, and $61.6 million for the acquisition of Tampa Farm,
LLC.  Approximately $35.3 million was used for payments of dividends
on the common stock, and $23.0 million was used for principal payments on
long-term debt. We received $427,000 from the issuance of common stock from the
treasury through the exercise of stock options.  Approximately $55.7
million was received from additional long-term borrowings. The net result of
these activities was a decrease in cash and cash equivalents of approximately
$28.0 million.


25





Property,
plant, and equipment collateralize our notes payable and senior secured notes.
Unless otherwise approved by our lenders, we are required by provisions of our
loan agreements to (1) maintain minimum levels of working capital (ratio of not
less than 1.25 to 1) and net worth (minimum of $90.0 million tangible net worth,
plus 45% of cumulative net income); (2) limit dividends paid in any given
quarter to not exceed an amount equal to one third of the previous quarter’s
consolidated net income (allowed if no events of default), capital expenditures
to an amount not to exceed $60.0 million in any twelve month period, and lease
obligations and additional long-term borrowings (total funded debt to total
capitalization not to exceed 55%); and (3) maintain various current and
cash-flow coverage ratios (1.25 to 1), among other restrictions. At May 29,
2010, we were in compliance with the financial covenant requirements of all loan
agreements. Under certain of the loan agreements, the lenders have the option to
require the prepayment of any outstanding borrowings in the event we undergo a
change in control, as defined in the applicable loan agreement. Our debt
agreements also require the Chief Executive Officer of the Company, or his
family, to maintain ownership of not less than 50% of the outstanding voting
stock of the Company.





Capital
expenditure requirements are expected to be for the normal repair and
replacement of our facilities. We are constructing a new integrated layer
production complex in Farwell, Texas to replace our Albuquerque, New Mexico
complex, which ceased egg production in fiscal 2007. The facility was expected
to cost approximately $32.0 million, and was estimated to be complete in January
2010. As of May 29, 2010, capital expenditures related to construction of this
complex were approximately $39.5 million (including replacement capital
expenditures related to the fire mentioned below).





On July
9, 2009, the Farwell, Texas egg production complex was damaged by a fire. The
700-acre facility includes a processing plant, feed mill, two pullet houses, and
nine layer houses. The fire completely destroyed four of the nine layer houses,
with additional loss of laying hens at a fifth house due to smoke inhalation.
The Company believes the effects of lost production and additional expenses
related to the fire will be substantially reimbursed by the Company’s insurance
carriers.  The Company has received $10.0 million in proceeds from its
insurance carriers through May 29, 2010 and anticipates additional insurance
proceeds to cover its losses due to the fire. The Company intends to seek
reimbursement for all of its insured losses, including lost profits and
expenses. The book value of assets written off and expenses incurred, net of
amounts reclassified to construction in progress and other assets, as the result
of the fire totaled $9.1 million through May 29, 2010. Insurance proceeds have
been recognized in the consolidated income statement for fiscal 2010 to offset
the assets written off and expenses incurred. No gain, if any, will be
recognized until all contingencies surrounding the resolution of the insurance
claim are resolved, which is expected to occur in fiscal year 2011.





The
Company believes that the fire at the Farwell, Texas facility will have minimal
financial impact on our operations and does not expect any long-term disruption
to our customers. Construction to rebuild the destroyed houses is substantially
complete.  In addition, the Company is adding a tenth layer house at
the complex which will add capacity above the original design.  Due to
this casualty and expansion, maximum operations at the Farwell facility will
likely be delayed to December 2010.  Future capital expenditures will
be funded by cash flows from operations and insurance recoveries.





Delta Egg
Farm, LLC, an unconsolidated affiliate, has constructed an organic egg
production and distribution facility near our Chase, Kansas location. In
connection with this project, we are a pro rata guarantor, with the other Delta
Egg Farm, LLC owners, of the additional debt that was undertaken to fund
construction of this facility. We are currently a guarantor of approximately
$6.2 million of long-term debt of Delta Egg Farm, LLC.





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





By
accepting the Rights, we can no longer assert that we have the intent to hold
the auction rate securities until anticipated recovery. Accordingly, we have
classified our investments in auction rate securities as trading securities. As
of the date of our acceptance of the Rights, the change in fair value of the
auction rate securities and Rights are included in earnings. Because we were
permitted to put the auction rate securities back to UBS at par value, we have
accounted for the Rights as a separate asset that is measured at its fair value,
resulting in gains in an amount equal to the loss recognized on the auction rate
securities. We have classified the auction rate securities and the related
Rights as current investments as of May 29, 2010.  On June 30, 2010,
we put the auction rate securities back to UBS. The fair value of the auction
rate securities and Rights totaled $22.9 million at May 29, 2010 and $33.2
million at May 30, 2009.


26





At May
29, 2010, we have $76.7 million of current investment securities
available-for-sale consisting primarily of commercial paper, certificates of
deposit, government agency bonds, taxable municipal bonds, variable rate
tax-exempt municipal bonds, tax-exempt municipal bonds, and zero coupon
municipal bonds with maturities of three to fifteen months when purchased. We
classified these securities as current, because amounts invested are available
for current operations. Due to the nature of the investments, the cost of
available-for-sale securities approximated fair value at May 29,
2010.





We
currently have a $1.3 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. We are currently making annual payments of approximately $150,000
related to this liability. However, while these current payments reduce cash
balances, payment of the $1.4 million deferred tax liability would not affect
our consolidated statement of income or stockholders’ equity, as these taxes
have been accrued and are reflected on our consolidated balance
sheet.





Looking
forward, we believe that our current cash balances, borrowing capacity, and cash
flows from operations will be sufficient to fund our current and projected
capital needs.





Off-Balance
Sheet Arrangements





The
Company owns 50% of the membership interests in Delta Egg Farm, LLC (“Delta
Egg”). The Company is a guarantor of 50% of Delta Egg’s long-term debt, which
totaled approximately $12.3 million at May 29, 2010.  Delta Egg’s
long-term debt is secured by substantially all of the fixed assets of Delta Egg
and is due in monthly installments through fiscal 2018.  Delta Egg is
engaged in the production, processing, and distribution of shell
eggs.  The other 50% owner also guarantees 50% of the
debt.  The guarantee arose when Delta Egg borrowed funds to construct
its production and processing facility in 1999.  The guarantee would
be required if Delta Egg is not able to pay the debt.  Management of
the Company believes that payment under the guarantee will be unlikely because
Delta Egg is now well capitalized.  On July 11, 2008, this debt was
refinanced for a term of ten years.  There were additional borrowings
under this refinancing due to the construction of an organic egg production and
distribution facility near Chase, Kansas costing approximately $13.0
million.





Contractual
Obligations





The
following table summarizes future estimated cash payments, in thousands, to be
made under existing contractual obligations. Further information on debt
obligations is contained in Note 9, and on lease obligations in Note 8, of Notes
to Consolidated Financial Statements.





Total
                
                
                2011
                
                
                2012
                
                
                2013
                
                
                2014
                
                
                2015
                
                
                Over 5 yearsLong-Term
      Debt
                
                $
                134,673
                
                
                $
                29,974
                
                
                $
                12,960
                
                
                $
                13,066
                
                
                $
                12,430
                
                
                $
                20,292
                
                
                $
                45,951Operating
      Leases
                
                
                5,372
                
                
                
                1,747
                
                
                
                1,177
                
                
                
                977
                
                
                
                449
                
                
                
                357
                
                
                
                665Total
                
                $
                140,045
                
                
                $
                31,721
                
                
                $
                14,137
                
                
                $
                14,043
                
                
                $
                12,879
                
                
                $
                20,649
                
                
                $
                46,616




Impact of Recently Issued
Accounting Standards.





In June
2009, the Financial Accounting Standards Board (“FASB”) issued authoritative
guidance that establishes the FASB Accounting Standards Codification (“ASC”) as
the single source of authoritative U.S. GAAP to be applied by nongovernmental
entities and modifies the U.S. GAAP hierarchy to only two levels: authoritative
and non-authoritative. This guidance became effective for interim periods and
fiscal years ending after September 15, 2009. The Company adopted the provisions
of the guidance in the second quarter of fiscal 2010. The adoption did not have
a material impact on the Company’s consolidated financial
statements.





In
December 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-17,
Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities, or ASU 2009-17. The amendments in this
update replace the quantitative-based risks and rewards calculation for
determining which reporting entity, if any, has a controlling financial interest
in a variable interest entity with an approach focused on identifying which
reporting entity has the power to direct the activities of a variable interest
entity that most significantly impact the entity’s economic performance and (1)
the obligation to absorb losses of the entity or (2) the right to receive
benefits from the entity. An approach that is expected to be primarily
qualitative will be more effective for identifying which reporting entity has a
controlling financial interest in a variable interest entity. The amendments in
this update also require additional disclosures about a reporting entity’s
involvement in variable interest entities, which will enhance the information
provided to users of financial statements. This standard is effective for fiscal
years beginning on or after December 15, 2009. We do not expect the adoption of
this guidance to have a material impact on our consolidated financial
statements.


27





In
January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and
Disclosures (ASC Topic 820) — Improving Disclosures About Fair Value
Measurements. The amendments in this update require new disclosures about
transfers into and out of Levels 1 (fair value determined based on quoted prices
in active markets for identical assets and liabilities) and 2 (fair value
determined based on significant other observable inputs), and separate
disclosures about purchases, sales, issuances, and settlements relating to Level
3 measurements. It also clarifies existing fair value disclosures about the
level of disaggregation and about inputs and valuation techniques used to
measure fair value. Except for the detailed Level 3 roll-forward disclosures,
the new standard is effective for interim and annual reporting periods beginning
after December 31, 2009. The requirement to provide detailed disclosures about
the purchases, sales, issuances, and settlements in the roll-forward activity
for Level 3 fair value measurements is effective for interim and annual
reporting periods beginning after December 31, 2010. We do not expect the
adoption of this guidance to have a material impact on our consolidated
financial statements.





In
February 2010, the FASB issued an accounting standards update which amends
certain implementation issues related to an entity’s requirement to perform and
disclose subsequent events procedures. The new guidance clarifies that
management must evaluate, as of each reporting period, events or transactions
that occur after the balance sheet date through the date that the financial
statements are issued. Management must perform its assessment for both interim
and annual financial reporting periods. This guidance exempts SEC filers from
disclosing the date through which subsequent events have been evaluated and is
effective immediately for financial statements that are issued or available to
be issued.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements—An Amendment of ARB No. 51” (“SFAS 160”) which
was codified primarily in ASC Topic 805, Business Combinations (“ASC 805”). SFAS
160 changes the accounting for noncontrolling (minority) interests in
consolidated financial statements, requires noncontrolling interests to be
reported as part of equity and changes the income statement presentation of
income or losses attributable to the noncontrolling interests. We adopted SFAS
160 as of May 31, 2009, as required. The adoption of SFAS 160 did not have a
material impact on our consolidated financial statements.





Critical
Accounting Policies.The preparation of
financial statements in accordance with U.S. generally accepted accounting
standards requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from these
estimates.





Management
suggests that our Summary of Significant Accounting Policies, as described in
Note 1 of the Notes to Consolidated Financial Statements, be read in conjunction
with this Management’s Discussion and Analysis of Financial Condition and
Results of Operations. We believe the critical accounting policies that most
impact our consolidated financial statements are described below.





Allowance for Doubtful Accounts.   In the normal course of business, we extend credit to
our customers on a short-term basis.  Although credit risks associated
with our customers are considered minimal, we routinely review our accounts
receivable balances and make provisions for probable doubtful accounts. In
circumstances where management is aware of a specific customer’s inability to
meet its financial obligations to us (e.g. bankruptcy filings), a specific
reserve is recorded to reduce the receivable to the amount expected to be
collected.  For all other customers, we recognize reserves for bad
debts based on the length of time the receivables are past due, generally 100%
for amounts more than 60 days past due.





Inventories.   Inventories
of eggs, feed, supplies and livestock are valued principally at the lower of
cost (first-in, first-out method) or market.  If market prices for
eggs and feed grains move substantially lower, we would record adjustments to
write-down the carrying values of eggs and feed inventories to fair market
value. The cost associated with flock inventories, consisting principally of
chick purchases, feed, labor, contractor payments and overhead costs, are
accumulated during the growing period of approximately 22
weeks.  Capitalized flock costs are then amortized over the productive
lives of the flocks, generally one to two years.  Flock mortality is
charged to cost of sales as incurred.  High mortality from disease or
extreme temperatures would result in abnormal adjustments to write-down flock
inventories.  Management continually monitors each flock and attempts
to take appropriate actions to minimize the risk of mortality
loss.


28





Long-Lived
Assets.  Depreciable long-lived assets are
primarily comprised of buildings and improvements and machinery and
equipment.  Depreciation is provided by the straight-line method over
the estimated useful lives, which are 15 to 25 years for buildings and
improvements and 3 to 12 years for machinery and equipment.  An
increase or decrease in the estimated useful lives would result in changes to
depreciation expense.  When property and equipment are retired, sold,
or otherwise disposed of, the asset’s carrying amount and related accumulated
depreciation are removed from the accounts and any gain or loss is included in
operations. We continually reevaluate the carrying value of our long-lived
assets, for events or changes in circumstances, which indicate that the carrying
value may not be recoverable from the estimated future cash flows expected to
result from its use and eventual disposition.  If the sum of the
expected future cash flows (undiscounted and without interest charges) are less
than the carrying amount of the asset, an impairment loss is recognized to
reduce the carrying value of the long-lived asset to the estimated fair value of
the asset.





Investment in
Affiliates.   We have invested in other companies engaged
in the production, processing and distribution of shell eggs and egg
products.  Our ownership percentages in these companies range from
less than 20% to 50%.  Therefore, these investments are recorded using
the cost or the equity method, and accordingly, not consolidated in our
financial statements.  Changes in the ownership percentages of these
investments might alter the accounting methods currently used. Our investment in
these companies amounted to $16.0 million at May 29, 2010. The combined total
assets and total liabilities of these companies were approximately $111.1
million and $61.6 million, respectively, at May 29, 2010. We are a guarantor of
approximately $6.2 million of long-term debt of one of the
affiliates.





Goodwill.   At May 29, 2010, our goodwill balance represented 3.5%
of total assets and 5.9% of stockholders’ equity.  Goodwill relates to
the following:





Fiscal Period
                          
                          Description
                          
                          Amount1999
                          
                          Acquisition
      of Hudson Brothers, Inc.
                          
                          $
                          3,1472006
                          
                          Acquisition
      of Hillandale Farms, LLC
                          
                          
                          8692007
                          
                          Acquisition
      of Green Forest Foods, LLC
                          
                          
                          1792008
                          
                          Revision
      to purchase price for incremental purchase of Hillandale
                          
                          
                          9,2572009
                          
                          Revision
      to purchase price for incremental purchase of Hillandale
                          
                          
                          2,5272009
                          
                          Acquisition
      of Zephyr Egg, LLC
                          
                          
                          1,8762009
                          
                          Acquisition
      of Tampa Farms, LLC
                          
                          
                          4,6002010
                          
                          Revision
      to purchase price for incremental purchase of Hillandale
                          
                          
                          (338
                          )Total
      Goodwill
                          
                          $
                          22,117





Goodwill
and indefinite lived intangible assets are no longer amortized but are reviewed
annually or more frequently if impairment indicators arise, for
impairment.  An impairment loss would be recorded if the recorded
goodwill exceeds its implied fair value. We have only one operating segment,
which is our sole reporting unit.  Accordingly, goodwill is tested for
impairment at the entity level.  Significant adverse industry or
economic changes, or other factors not anticipated could result in an impairment
charge to reduce recorded goodwill.





Income Taxes.   We determine our effective tax rate by estimating our
permanent differences resulting from differing treatment of items for tax and
accounting purposes.  We are periodically audited by taxing
authorities.  Any audit adjustments affecting permanent differences
could have an impact on our effective tax rate.





Forward-Looking
Statements





The
foregoing disclosure contains forward-looking statements that involve risks and
uncertainties, and our actual experience may differ materially from that
discussed above.  Factors that may cause such a difference include,
but are not limited to, those discussed in “Factors Affecting Future
Performance” below, as well as future events that have the effect of reducing
our available cash balances, such as unanticipated operating losses or capital
expenditures related to possible future acquisitions.  Readers are
cautioned not to place undue reliance on forward-looking statements, which
reflect management’s analysis only as the date hereof.  We assume no
obligation to update forward-looking statements.





Factors
Affecting Future Performance





Our
future operating results may be affected by various trends and factors which are
beyond our control.  These include adverse changes in shell egg prices
and in the grain markets.  Accordingly, past trends should not be used
to anticipate future results and trends.  Further, our prior
performance should not be presumed to be an accurate indication of future
performance.


29





ITEM
7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS





Our
interest expense is sensitive to changes in the general level of U.S. interest
rates.  We maintain certain of our debt as fixed rate in nature to
mitigate the impact of fluctuations in interest rates.  Under our
current policies, we do not use interest rate derivative instruments to manage
our exposure to interest rate changes.  A 1% adverse move (decrease)
in interest rates would adversely affect the net fair value of our debt by $4.6
million at May 29, 2010.





We are a
party to no other material market risk sensitive instruments requiring
disclosure.


30


ITEM 8.  FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA





Report of Independent
Registered Public Accounting Firm





Board of
Directors and Stockholders


Cal-Maine
Foods, Inc. and Subsidiaries


Jackson,
Mississippi





We have audited the accompanying
consolidated balance sheet of Cal-Maine Foods, Inc. and Subsidiaries as of May
29, 2010, and the related consolidated statements of operations, stockholders’
equity and cash flows for the year then ended.  Our audit also
included the consolidated financial statement schedule listed in the Index at
Item 15.  These consolidated financial statements are the
responsibility of the Company’s management.  Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.  The financial statements of Cal-Maine Foods, Inc. and
Subsidiaries as of May 30, 2009 and May 31, 2008, were audited by FROST, PLLC
who was merged into FRAZER FROST, LLP, and whose report dated August 10, 2009,
expressed an unqualified opinion on those financial statements.





We conducted our audit in accordance
with the standards of the Public Company Accounting Oversight Board (United
States).  Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation.  We believe our audit provides a reasonable basis for
our opinion.





In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Cal-Maine Foods, Inc. and Subsidiaries as
of May 29, 2010 and the consolidated results of their operations and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.  Also, in our opinion, the
related consolidated financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.





We also have audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United
States), Cal-Maine Foods, Inc. and Subsidiaries internal control over financial
reporting as of May 29, 2010, based on criteria established in Internal Control
– Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”), and our report dated August 2, 2010, expressed
an unqualified opinion.





/s/
      FRAZER FROST, LLPCertified
      Public Accountants





Little
Rock, Arkansas


August 2,
2010


31


Report of Independent
Registered Public Accounting Firm





Board of
Directors and Stockholders


Cal-Maine
Foods, Inc. and Subsidiaries


Jackson,
Mississippi





We have
audited the accompanying consolidated balance sheet of Cal-Maine Foods, Inc. and
Subsidiaries as of May 30, 2009, and the related consolidated statements of
operations, stockholders’ equity and cash flows for the two years then
ended.  Our audits also included the consolidated financial statement
schedule listed in the Index at Item 15.  These consolidated financial
statements are the responsibility of the Company’s management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.





We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United
States).  Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation.  We believe our audits provide a reasonable basis for
our opinion.





In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Cal-Maine Foods, Inc. and Subsidiaries as
of May 30, 2009 and the consolidated results of its operations and its cash
flows for the two years then ended in conformity with accounting principles
generally accepted in the United States of America.  Also, in our
opinion, the related consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth
therein.





/s/
      FROST, PLLCCertified
      Public Accountants




Little
Rock, Arkansas


August
10, 2009


32


Cal-Maine
Foods, Inc. and Subsidiaries


Consolidated
Balance Sheets


(in
thousands, except for par value amounts)




May
      29
                              
                              
                              May
      302010
                              
                              
                              2009AssetsCurrent
      assets:Cash
      and cash equivalents
                              
                              $
                              99,453
                              
                              
                              $
                              66,883Investment
      securities available-for-sale
                              
                              
                              76,702
                              
                              
                              
                              15,165Investment
      securities trading
                              
                              
                              22,900
                              
                              
                              
                              —Receivables:Trade
      receivables, less allowance for doubtful accounts of  $595 in
      2010 and  $394 in 2009
                              
                              
                              43,212
                              
                              
                              
                              43,682Other
                              
                              
                              375
                              
                              
                              
                              94643,587
                              
                              
                              
                              44,628Inventories
                              
                              
                              93,968
                              
                              
                              
                              97,535Prepaid
      expenses and other current assets
                              
                              
                              1,550
                              
                              
                              
                              17,474Total
      current assets
                              
                              
                              338,160
                              
                              
                              
                              241,685Other
      assets:Investment
      securities trading
                              
                              
                              —
                              
                              
                              
                              33,150Other
      investments
                              
                              
                              17,708
                              
                              
                              
                              18,069Goodwill
                              
                              
                              22,117
                              
                              
                              
                              22,455Other
      intangible assets
                              
                              
                              12,523
                              
                              
                              
                              15,056Other
      long-lived assets
                              
                              
                              6,665
                              
                              
                              
                              2,47259,013
                              
                              
                              
                              91,202Property,
      plant and equipment, less accumulated depreciation
                              
                              
                              234,111
                              
                              
                              
                              249,958Total
      assets
                              
                              $
                              631,284
                              
                              
                              $
                              582,845Liabilities
      and stockholders' equityCurrent
      liabilities:Trade
      accounts payable
                              
                              $
                              37,479
                              
                              
                              $
                              40,327Accrued
      dividends payable
                              
                              
                              7,009
                              
                              
                              
                              3,422Accrued
      wages and benefits
                              
                              
                              9,426
                              
                              
                              
                              9,559Accrued
      expenses and other liabilities
                              
                              
                              14,106
                              
                              
                              
                              8,537Current
      maturities of purchase obligation
                              
                              
                              —
                              
                              
                              
                              8,400Current
      maturities of long-term debt
                              
                              
                              29,974
                              
                              
                              
                              13,806Deferred
      income taxes
                              
                              
                              19,980
                              
                              
                              
                              19,635Total
      current liabilities
                              
                              
                              117,974
                              
                              
                              
                              103,686Long-term
      debt, less current maturities
                              
                              
                              104,699
                              
                              
                              
                              115,983Other
      noncurrent liabilities
                              
                              
                              3,299
                              
                              
                              
                              3,532Deferred
      income taxes
                              
                              
                              28,356
                              
                              
                              
                              26,635Total
      liabilities
                              
                              
                              254,328
                              
                              
                              
                              249,836Commitments
      and contingencies – See Notes 8, 9, & 14Stockholders'
      equity:Common
      stock, $.01 par valueAuthorized
      shares - 60,000 in 2010 and 2009Issued
      35,130 shares in 2010 and 2009 with 21,441 and 21,389 shares outstanding
      respectively
                              
                              
                              351
                              
                              
                              
                              351Class
      A common stock, $.01 par valueAuthorized
      shares - 2,400 in 2010 and 2009Issued
      and outstanding shares - 2,400 in 2010 and 2009
                              
                              
                              24
                              
                              
                              
                              24Paid-in
      capital
                              
                              
                              32,699
                              
                              
                              
                              32,098Retained
      earnings
                              
                              
                              365,821
                              
                              
                              
                              320,623Common
      stock in treasury, at cost, –13,689 shares in 2010 and 13,741 in
      2009
                              
                              
                              (20,966
                              )
                              
                              
                              (21,045
                              )Total
      Cal-Maine Foods, Inc. stockholders' equity
                              
                              
                              377,929
                              
                              
                              
                              332,051Noncontrolling
      interest in consolidated entities
                              
                              
                              (973
                              )
                              
                              
                              958Total
      stockholders’ equity
                              
                              
                              376,956
                              
                              
                              
                              333,009Total
      liabilities and stockholders' equity
                              
                              $
                              631,284
                              
                              
                              $
                              582,845


See
accompanying notes.


33





Cal-Maine
Foods, Inc. and Subsidiaries


Consolidated
Statements of Income


(in
thousands, except per share amounts)





Fiscal years endedMay 29
                      
                      
                      May 30
                      
                      
                      May 312010
                      
                      
                      2009
                      
                      
                      2008Net
      sales
                      
                      $
                      910,143
                      
                      
                      $
                      928,812
                      
                      
                      $
                      915,939Cost
      of sales
                      
                      
                      715,499
                      
                      
                      
                      724,085
                      
                      
                      
                      617,383Gross
      profit
                      
                      
                      194,644
                      
                      
                      
                      204,727
                      
                      
                      
                      298,556Selling,
      general and administrative
                      
                      
                      92,040
                      
                      
                      
                      83,253
                      
                      
                      
                      74,919Operating
      income
                      
                      
                      102,604
                      
                      
                      
                      121,474
                      
                      
                      
                      223,637Other
      income (expense):Interest
      expense
                      
                      
                      (7,616
                      )
                      
                      
                      (7,096
                      )
                      
                      
                      (7,712
                      )Interest
      income
                      
                      
                      888
                      
                      
                      
                      2,054
                      
                      
                      
                      3,618Equity
      in income of affiliates
                      
                      
                      3,507
                      
                      
                      
                      2,612
                      
                      
                      
                      6,324Other,
      net
                      
                      
                      4,110
                      
                      
                      
                      2,290
                      
                      
                      
                      5,699889
                      
                      
                      
                      (140
                      )
                      
                      
                      7,929Income
      before income taxes and noncontrolling interest
                      
                      
                      103,493
                      
                      
                      
                      121,334
                      
                      
                      
                      231,566Income
      tax expense
                      
                      
                      37,961
                      
                      
                      
                      41,510
                      
                      
                      
                      79,530Net
      income before noncontrolling interest
                      
                      
                      65,532
                      
                      
                      
                      79,824
                      
                      
                      
                      152,036Less:  Net
      income (loss) attributable to noncontrolling interest
                      
                      
                      (2,291
                      )
                      
                      
                      324
                      
                      
                      
                      175Net
      income attributable to Cal-Maine Foods, Inc.
                      
                      $
                      67,823
                      
                      
                      $
                      79,500
                      
                      
                      $
                      151,861Net
      income per share:Basic
                      
                      $
                      2.85
                      
                      
                      $
                      3.34
                      
                      
                      $
                      6.41Diluted
                      
                      $
                      2.84
                      
                      
                      $
                      3.34
                      
                      
                      $
                      6.40Weighted
      average shares outstanding:Basic
                      
                      
                      23,812
                      
                      
                      
                      23,769
                      
                      
                      
                      23,677Diluted
                      
                      
                      23,877
                      
                      
                      
                      23,811
                      
                      
                      
                      23,733


See
accompanying notes.


34





Cal-Maine
Foods, Inc. and Subsidiaries


Consolidated
Statements of Stockholders' Equity


(in
thousands)





Common StockClass A
                              
                              
                              Class A
                              
                              
                              Treasury
                              
                              
                              Treasury
                              
                              
                              Paid In
                              
                              
                              Retained
                              
                              
                              Accum. Other
                              
                              
                              NoncontrollingShares
                              
                              
                              Amount
                              
                              
                              Shares
                              
                              
                              Amount
                              
                              
                              Shares
                              
                              
                              Amount
                              
                              
                              Capital
                              
                              
                              Earnings
                              
                              
                              Comp. Loss
                              
                              
                              Interests
                              
                              
                              TotalBalance
      at June 2, 2007
                              
                              
                              35,130
                              
                              
                              $
                              351
                              
                              
                              
                              2,400
                              
                              
                              $
                              24
                              
                              
                              
                              13,937
                              
                              
                              $
                              (21,346
                              )
                              
                              $
                              29,043
                              
                              
                              $
                              147,667
                              
                              
                              $
                              -
                              
                              
                              $
                              1,894
                              
                              
                              $
                              157,633Dividends*
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (31,912
                              )
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (31,912
                              )Distributions
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (382
                              )
                              
                              
                              (382
                              )Issuance
      of common stock from treasury
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (124
                              )
                              
                              
                              190
                              
                              
                              
                              436
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              626Vesting
      of stock based compensation
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              218
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              218Net
      income for fiscal 2008
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              151,861
                              
                              
                              
                              -
                              
                              
                              
                              175
                              
                              
                              
                              152,036Other
      comprehensive loss (net of tax $544)
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (852
                              )
                              
                              
                              -
                              
                              
                              
                              (852
                              )Total
      comprehensive income
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              151,184Balance
      at May 31, 2008
                              
                              
                              35,130
                              
                              
                              $
                              351
                              
                              
                              
                              2,400
                              
                              
                              $
                              24
                              
                              
                              
                              13,813
                              
                              
                              $
                              (21,156
                              )
                              
                              $
                              29,697
                              
                              
                              $
                              267,616
                              
                              
                              $
                              (852
                              )
                              
                              $
                              1,687
                              
                              
                              $
                              277,367Dividends
      *
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (26,493
                              )
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (26,493
                              )Distributions
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (1,053
                              )
                              
                              
                              (1,053
                              )Issuance
      of common stock from treasury
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (72
                              )
                              
                              
                              111
                              
                              
                              
                              2,183
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              2,294Vesting
      of stock based compensation
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              218
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              218Net
      income for fiscal 2009
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              79,500
                              
                              
                              
                              -
                              
                              
                              
                              324
                              
                              
                              
                              79,824Other
      comprehensive gain (net of tax $544)
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              852
                              
                              
                              
                              -
                              
                              
                              
                              852Total
      comprehensive income
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              80,676Balance
      at May 30, 2009
                              
                              
                              35,130
                              
                              
                              $
                              351
                              
                              
                              
                              2,400
                              
                              
                              $
                              24
                              
                              
                              
                              13,741
                              
                              
                              $
                              (21,045
                              )
                              
                              $
                              32,098
                              
                              
                              $
                              320,623
                              
                              
                              $
                              -
                              
                              
                              $
                              958
                              
                              
                              $
                              333,009Dividends*
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (22,625
                              )
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (22,625
                              )Distributions
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (1,137
                              )
                              
                              
                              (1,137
                              )Contributions
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              1,497
                              
                              
                              
                              1,497Issuance
      of common stock from treasury
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (52
                              )
                              
                              
                              79
                              
                              
                              
                              383
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              462Vesting
      of stock based compensation
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              218
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              218Net
      income (loss) for fiscal 2009
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              67,823
                              
                              
                              
                              -
                              
                              
                              
                              (2,291
                              )
                              
                              
                              65,532Balance
      at May 29, 2010
                              
                              
                              35,130
                              
                              
                              $
                              351
                              
                              
                              
                              2,400
                              
                              
                              $
                              24
                              
                              
                              
                              13,689
                              
                              
                              $
                              (20,966
                              )
                              
                              $
                              32,699
                              
                              
                              $
                              365,821
                              
                              
                              $
                              -
                              
                              
                              $
                              (973
                              )
                              
                              $
                              376,956





*
            For
      Fiscal 2008, dividends paid at $.05 per common share for the 1st
      and 2nd
      quarters, and for the subsequent quarters the dividend was determined from
      one third of net income. For Fiscal 2009 and thereafter, dividends are
      calculated as 1/3 of net income for the entire
  year.





See
accompanying notes.


35




Cal-Maine
Foods, Inc. and Subsidiaries


Consolidated
Statements of Cash Flows


(in
thousands)





Fiscal year endedMay 29
                      
                      
                      May 30
                      
                      
                      May 312010
                      
                      
                      2009
                      
                      
                      2008Cash
      flows from operating activitiesNet
      income attributable to Cal-Maine Foods, Inc.
                      
                      $
                      67,823
                      
                      
                      $
                      79,500
                      
                      
                      $
                      151,861Net
      income (loss) attributable to noncontrolling interests
                      
                      
                      (2,291
                      )
                      
                      
                      324
                      
                      
                      
                      175Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                      
                      
                      31,785
                      
                      
                      
                      29,558
                      
                      
                      
                      25,320Deferred
      income taxes
                      
                      
                      2,066
                      
                      
                      
                      11,035
                      
                      
                      
                      3,659Equity
      in income of affiliates
                      
                      
                      (3,507
                      )
                      
                      
                      (2,612
                      )
                      
                      
                      (6,324
                      )Gain
      on disposal of property, plant and equipment
                      
                      
                      (67
                      )
                      
                      
                      (1,062
                      )
                      
                      
                      (2,040
                      )Stock
      compensation (benefit) expense, net of amounts paid
                      
                      
                      (533
                      )
                      
                      
                      (2,722
                      )
                      
                      
                      4,531Interest
      on purchase obligation
                      
                      
                      88
                      
                      
                      
                      477
                      
                      
                      
                      942Change
      in operating assets and liabilities, net of effects from
      acquisitionsReceivables
      and other assets
                      
                      
                      13,106
                      
                      
                      
                      (5,062
                      )
                      
                      
                      (13,304
                      )Inventories
                      
                      
                      5,311
                      
                      
                      
                      (2,911
                      )
                      
                      
                      (14,558
                      )Accounts
      payable, accrued expenses and other liabilities
                      
                      
                      2,887
                      
                      
                      
                      4,757
                      
                      
                      
                      8,154Net
      cash provided by operating activities
                      
                      
                      116,668
                      
                      
                      
                      111,282
                      
                      
                      
                      158,416Cash
      flows from investing activitiesPurchases
      of investments
                      
                      
                      (82,824
                      )
                      
                      
                      (21,453
                      )
                      
                      
                      (122,825
                      )Sales
      of investments
                      
                      
                      31,537
                      
                      
                      
                      15,388
                      
                      
                      
                      120,175Acquisition
      of businesses, net of cash acquired
                      
                      
                      (508
                      )
                      
                      
                      (91,223
                      )
                      
                      
                      -Payments
      received on notes receivable andfrom investments in
      affiliates
                      
                      
                      4,785
                      
                      
                      
                      1,674
                      
                      
                      
                      1,199Purchases
      of property, plant and equipment
                      
                      
                      (20,786
                      )
                      
                      
                      (26,112
                      )
                      
                      
                      (31,686
                      )Increase
      in notes receivable and investments in affiliates
                      
                      
                      (705
                      )
                      
                      
                      (896
                      )
                      
                      
                      (668
                      )Net
      proceeds from disposal of property, plant and equipment
                      
                      
                      6,950
                      
                      
                      
                      128
                      
                      
                      
                      2,470Net
      cash used in investing activities
                      
                      
                      (61,551
                      )
                      
                      
                      (122,494
                      )
                      
                      
                      (31,335
                      )Cash
      flows from financing activitiesLong-term
      borrowings
                      
                      
                      30,000
                      
                      
                      
                      55,661
                      
                      
                      
                      -Principal
      payments on long-term debt
                      
                      
                      (25,667
                      )
                      
                      
                      (23,022
                      )
                      
                      
                      (15,702
                      )Payment
      of purchase obligation
                      
                      
                      (8,149
                      )
                      
                      
                      (14,561
                      )
                      
                      
                      (12,529
                      )Stock
      options exercised
                      
                      
                      308
                      
                      
                      
                      427
                      
                      
                      
                      626Payments
      of dividends
                      
                      
                      (19,039
                      )
                      
                      
                      (35,268
                      )
                      
                      
                      (19,650
                      )Net
      cash used in financing activities
                      
                      
                      (22,547
                      )
                      
                      
                      (16,763
                      )
                      
                      
                      (47,255
                      )Increase
      (decrease) in cash and cash equivalents
                      
                      
                      32,570
                      
                      
                      
                      (27,975
                      )
                      
                      
                      79,826Cash
      and cash equivalents at beginning of year
                      
                      
                      66,883
                      
                      
                      
                      94,858
                      
                      
                      
                      15,032Cash
      and cash equivalents at end of year
                      
                      $
                      99,453
                      
                      
                      $
                      66,883
                      
                      
                      $
                      94,858Supplemental
      cash flow information:Cash
      paid during the year for:Income
      taxes, net of refunds received
                      
                      $
                      14,381
                      
                      
                      $
                      42,342
                      
                      
                      $
                      81,184Interest
      (net of amount capitalized)
                      
                      
                      6,876
                      
                      
                      
                      6,164
                      
                      
                      
                      7,302





See
accompanying notes.


36





Cal-Maine
Foods, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


(in
thousands, except share and per share amounts)


May
29, 2010




1.
Significant Accounting Policies





Principles
of Consolidation


The
consolidated financial statements include the accounts of Cal-Maine Foods, Inc.
and its subsidiaries (“we,” “us,” “our,” or the “Company”) and variable interest
entities in which the Company is the primary beneficiary. All significant
intercompany transactions and accounts have been eliminated in
consolidation.





Business


The
Company is engaged in the production, processing and distribution of shell eggs.
The Company’s operations are significantly affected by the market price
fluctuation of its principal products sold, shell eggs, and the costs of its
principal feed ingredients, corn and other grains.





Primarily
all of the Company’s sales are to wholesale egg buyers in the southeastern,
southwestern, mid-western and mid-Atlantic regions of the United States. Credit
is extended based upon an evaluation of each customer’s financial condition and
credit history and generally collateral is not required. Credit losses have
consistently been within management’s expectations. Two affiliated customers, on
a combined basis, accounted for 36.4%, 32.9% and 36.5% of the Company’s net
sales in fiscal 2010, 2009 and 2008, respectively. Another customer accounted
for 10.1% of the Company’s net sales in fiscal 2010.





Fiscal Year


The
Company’s fiscal year-end is on the Saturday nearest May 31, which was May 29,
2010 (52 weeks), May 30, 2009 (52 weeks), May 31, 2008 (52 weeks), for the most
recent three fiscal years.





Variable
Interest Entities




Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 810 (Consolidation) (“ASC 810”) requires variable interest entities
(“VIEs”) to be consolidated if a party with ownership, contractual or other
financial interest in the VIE (a variable interest holder) is obligated to
absorb a majority of the risk of loss from the VIE’s activities, is entitled to
receive a majority of the VIE’s residual returns (if no party absorbs a majority
of the VIE’s losses), or both. A variable interest holder that consolidates the
VIE is called the primary beneficiary.





The
Company has variable interests in two entities in which it is the primary
beneficiary and accordingly consolidates the statements of financial position,
results of operations and cash flows of these entities pursuant to ASC
810.   The Company has a 37% ownership interest in Texas Egg
Products, LLC and leases to Texas Egg Products, LLC its operating
facility.  Texas Egg Products, LLC processes shell eggs into liquid
and frozen egg products that are sold primarily to food manufacturers and to the
food service industry.





The
Company had a 43% ownership interest in Texas Egg, LLC, which was a VIE in which
the Company was the primary beneficiary.   In July 2009, Texas
Egg, LLC merged into South Texas Protein, LLC, which was also a VIE in which the
Company was the primary beneficiary.  The Company now has a 43%
ownership interest and remains the primary beneficiary in South Texas Protein,
LLC.  The Company leases to South Texas Protein, LLC its operating
facility.  South Texas Protein, LLC is a spent hen processing
facility.


37





Total
assets of the VIEs for which the Company is the primary beneficiary totaled
$2,190 for fiscal 2010 and $2,772 for fiscal 2009, net of elimination of
intercompany balances.  The total assets of the VIEs for which the
Company is the primary beneficiary represent 0.3% and 0.5 % of the total assets
shown in the consolidated balance sheets for fiscal periods 2010 and 2009,
respectively.





We are
the primary beneficiary for all our VIEs.  Accordingly, they are
consolidated in our financial statements.  The classifications of
assets and liabilities in the Company’s consolidated balance sheet associated
with our VIEs are as follows at May 29, 2010, and May 30, 2009:





May 29, 2010
                            
                            
                            May 30, 2009Current
      assetsCash
                            
                            $
                            324
                            
                            
                            $
                            763ReceivablesTrade
      receivables, less allowance for doubtful accounts of $55 and $18,
      respectively
                            
                            
                            1,115
                            
                            
                            
                            892Inventories
                            
                            
                            381
                            
                            
                            
                            347Prepaid
      expenses and other current assets
                            
                            
                            137
                            
                            
                            
                            107Total
      current assets
                            
                            
                            1,957
                            
                            
                            
                            2,109Other
      long-lived assets
                            
                            
                            20
                            
                            
                            
                            489Property,
      plant and equipment, less accumulated depreciation
                            
                            
                            213
                            
                            
                            
                            174Total
      assets
                            
                            $
                            2,190
                            
                            
                            $
                            2,772Current
      liabilitiesAccounts
      payable
                            
                            $
                            366
                            
                            
                            $
                            786Accrued
      expenses
                            
                            
                            36
                            
                            
                            
                            34Notes
      Payable
                            
                            
                            552
                            
                            
                            
                            —Total
      current liabilities
                            
                            
                            954
                            
                            
                            
                            820Total
      liabilities
                            
                            
                            954
                            
                            
                            
                            820Equity
                            
                            $
                            1,236
                            
                            
                            $
                            1,952





Use
of Estimates


The
preparation of the consolidated financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amount reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.





Cash
Equivalents


The
Company considers all highly liquid investments with a maturity of three months
or less when purchased to be cash equivalents. We maintain bank accounts that
are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to
$250.  At times, cash balances may be in excess of the FDIC insurance
limits. The Company manages this risk through maintaining cash deposits and
other highly liquid investments in high quality financial
institutions.


38





Investment
Securities


Our
investment securities are accounted for in accordance with FASB ASC Topic 320
(Investments-Debt and Equity Securities) (“ASC 320”). Our investment securities
are stated at fair value.  They consist of auction rate securities,
which we classify as trading, and commercial paper, certificates of deposit,
government agency bonds, taxable municipal bonds, variable rate tax-exempt
municipal bonds, tax-exempt municipal bonds, and zero coupon municipal bonds,
which are all classified as available-for-sale. Under ASC 320, the Company
considers all of its debt and equity securities, for which there is a
determinable fair market value and no restrictions on the Company's ability to
sell within the next 12 months, as available-for-sale. Available-for-sale
securities are carried at fair value, with unrealized gains
and losses reported as a separate component of stockholders' equity. For the
years ended May 29, 2010 and May 30, 2009, there were no significant unrealized
gains or losses. Realized gains and losses are included in other income. The
cost basis for realized gains and losses on available-for-sale securities is
determined on a specific identification basis. Trading securities are bought and
held principally for sale in the near term. Unrealized holding gains and losses
for trading securities are included in earnings.





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





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





By
accepting the Rights, we can no longer assert that we have the intent to hold
the auction rate securities until anticipated recovery. Accordingly, we have
classified our investments in auction rate securities as trading securities. As
of the date of our acceptance of the Rights, the change in fair value of the
auction rate securities and Rights are included in earnings. Because we were
permitted to put the auction rate securities back to UBS at par value, we have
accounted for the Rights as a separate asset that is measured at its fair value,
resulting in gains in an amount equal to the loss recognized on the auction rate
securities. We have classified the auction rate securities and the related
Rights as current investments as of May 29, 2010.  On June 30, 2010 we
put the auction rate securities back to UBS. The fair value of the auction rate
securities and Rights totaled $22,900 at May 29, 2010 and $33,150 at May 30,
2009.





At May
29, 2010 and May 30, 2009, we had $76,702 and $15,165 of current investment
securities available-for-sale consisting primarily of commercial paper,
certificates of deposit, government agency bonds, taxable municipal bonds,
variable rate tax-exempt municipal bonds, tax-exempt municipal bonds, and zero
coupon municipal bonds with maturities of three to fifteen months when
purchased. We classified these securities as current, because amounts invested
are available for current operations. Due to the nature of the investments, the
cost of available-for-sale securities approximated fair value at May 29, 2010,
and May 30, 2009.


39





Investment
in Affiliates


The
equity method of accounting is used when the Company has a 20% to 50% interest
in other entities or when we exercise significant influence over the entity.
Under the equity method, original investments are recorded at cost and adjusted
by the Company’s share of undistributed earnings or losses of these entities.
Nonmarketable investments in which the Company has less than a 20% interest and
in which it does not have the ability to exercise significant influence over the
investee are initially recorded at cost, and periodically reviewed for
impairment.





Trade
Receivables


Trade
receivables are comprised primarily of amounts owed to the Company from
customers, which amounted to $43,212 at May 29, 2010 and $43,682 at May 30,
2009. Trade receivables are presented net of allowance for doubtful accounts of
$595 at May 29, 2010 and $394 at May 30, 2009. The Company extends credit to
customers based upon an evaluation of each customer’s financial condition and
credit history. Collateral is generally not required. Credit losses have
consistently been within management’s expectations. We determine that a
concentration of credit risk exists when any one customer and its affiliates
represents greater than 10% of trade receivables. At May 29, 2010 and May 30,
2009, two affiliated customers accounted for 29% and 30% of the Company’s trade
accounts receivable, respectively.





Allowance
for Doubtful Accounts


In the
normal course of business, we extend credit to our customers on a short-term
basis based upon an evaluation of each customer’s financial condition and credit
history.  Collateral is generally not required. Although credit risks
associated with our customers are considered minimal, we routinely review our
accounts receivable balances and make provisions for probable doubtful accounts.
In circumstances where management is aware of a specific customer’s inability to
meet its financial obligations to us (e.g., bankruptcy filings), a specific
reserve is recorded to reduce the receivable to the amount expected to be
collected. For all other customers, we recognize reserves for bad debts based on
the length of time the receivables are past due, generally 100% for amounts more
than 60 days past due.





Inventories


Inventories
of eggs, feed, supplies and livestock are valued principally at the lower of
cost (first-in, first-out method) or market.





The cost
associated with flocks, consisting principally of chick purchases, feed, labor,
contractor payments and overhead costs, are accumulated during a growing period
of approximately 22 weeks. Flock costs are amortized over the productive lives
of the flocks, generally one to two years.





Property,
Plant and Equipment


Property,
plant and equipment are stated at cost. Depreciation is provided by the
straight-line method over the estimated useful lives, which are 15 to 25 years
for buildings and improvements and 3 to 12 years for machinery and equipment.
Repairs and maintenance are expensed as incurred. Expenditures that increase the
value or productive capacity of assets are capitalized. When property, plant,
and equipment are retired, sold, or otherwise disposed of, the asset’s carrying
amount and related accumulated depreciation are removed from the accounts and
any gain or loss is included in operations. The Company capitalizes interest
cost incurred on funds used to construct property, plant, and equipment. The
capitalized interest is recorded as part of the asset to which it relates and is
amortized over the asset’s estimated useful life.


40


Impairment
of Long-Lived Assets
 The
Company reviews the carrying value of long-lived assets, other than goodwill,
for impairment whenever events and circumstances indicate that the carrying
value of an asset may not be recoverable from the estimated future cash flows
expected to result from its use and eventual disposition. In cases where
expected future cash flows (undiscounted and without interest charges) are less
than the carrying value, an impairment loss is recognized equal to an amount by
which the carrying value exceeds the fair value of assets. The factors
considered by management in performing this assessment include current operating
results, trends and prospects, the manner in which the property is used, and the
effects of obsolescence, demand, competition, and other economic
factors.
 
 Intangible
Assets
 Included
in other assets are loan acquisition costs, which are amortized over the life of
the related loan.  Separable intangible assets, which include
franchise fees, non-compete agreements and customer relationship intangibles,
are amortized over their estimated useful lives of 3 to 25 years.
 
 Goodwill
 Goodwill
represents the excess of cost of business acquisitions over the fair value of
the  identifiable net assets acquired. Goodwill is reviewed for
impairment annually or more frequently if impairment indicators
arise.
 
 Accrued
Self Insurance
 We use a
combination of insurance and self-insurance mechanisms to provide for the
potential liabilities for health and welfare, workers’ compensation, auto
liability and general liability risks. Liabilities associated with our risks
retained are estimated, in part, by considering claims experience, demographic
factors, severity factors and other actuarial assumptions.
 
 Dividends
 Cal-Maine
pays a dividend to shareholders of its Common Stock and Class A Common Stock on
a quarterly basis for each quarter for which the Company reports net income
computed in accordance with generally accepted accounting principles in an
amount equal to one-third (1/3) of such quarterly income. Dividends are paid to
shareholders of record as of the 60th day
following the last day of such quarter, except for the fourth fiscal
quarter.  For the fourth quarter, the Company will pay dividends to
shareholders of record on the 70th day
after the quarter end. Dividends are payable on the 15th day
following the record date. Following a quarter for which the Company does not
report net income, the Company will not pay a dividend for a subsequent
profitable quarter until the Company is profitable on a cumulative basis
computed from the date of the last quarter for which a dividend was
paid.  As of fiscal 2010 and fiscal 2009, we accrued dividends payable
of $7,009 and $3,422 respectively, applicable to the Company’s fourth quarter
net income for each fiscal year.
 
 Treasury
Stock
 Treasury
stock purchases are accounted for under the cost method whereby the entire cost
of the acquired stock is recorded as treasury stock.  Gains and losses
on the subsequent reissuance of shares in accordance with the Company’s
share-based compensation plans are credited or charged to capital in excess of
par value using the average-cost method.
  41
  Revenue
Recognition and Delivery Costs
 The
Company recognizes revenue only when all of the following criteria have been
met:
 ·
              Persuasive
      evidence of an arrangement exists;
 ·
              Delivery
      has occurred;
 ·
              The
      fee for the arrangement is determinable;
and
 ·
              Collectability
      is reasonably assured.
 
 The
Company believes the above criteria are met upon delivery and acceptance of the
product by our customers. Costs to deliver product to customers are included in
selling, general and administrative expenses in the accompanying consolidated
statements of operations and totaled $28,510, $26,708 and $21,703, in fiscal
2010, 2009 and 2008, respectively.
 
 Advertising
Costs
 The
Company expenses advertising costs as incurred. Total advertising costs were
$2,098 in fiscal 2010, $1,190 in fiscal 2009, and $778 in fiscal
2008.
 
 Income
Taxes
 Income
taxes have been provided using the liability method. Deferred income taxes
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes.
 
 Stock
Based Compensation
 We
account for share-based compensation in accordance with ASC 718,
“Compensation-Stock Compensation” (“ASC 718”).  ASC 718 requires all
share-based payments to employees, including grants of employee stock options,
restricted stock and performance-based shares to be recognized in the income
statement based on their fair values. ASC 718 also requires the benefits of tax
deductions in excess of recognized compensation cost to be reported as a
financing cash flow.
 
 Net
Income per Common Share
 Basic net
income per share is based on the weighted average common and Class A shares
outstanding. Diluted net income per share includes any dilutive effects of
options and warrants outstanding.
 
 Basic net
income per share was calculated by dividing net income by the weighted-average
number of common and Class A 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 stock options.  The computations
of basic net income per share and diluted net income per share are as
follows
 
 May 29, 2010
                              
                              
                              May 30, 2009
                              
                              
                              May 31, 2008Net
      income
                              
                              $
                              67,823
                              
                              
                              $
                              79,500
                              
                              
                              $
                              151,861Basic
      weighted-average common shares (including Class A)
                              
                              
                              23,812
                              
                              
                              
                              23,769
                              
                              
                              
                              23,677Effect
      of dilutive securities:Common
      stock options
                              
                              
                              65
                              
                              
                              
                              42
                              
                              
                              
                              56Dilutive
      potential common shares
                              
                              
                              23,877
                              
                              
                              
                              23,811
                              
                              
                              
                              23,733Net
      income per common share:Basic
                              
                              $
                              2.85
                              
                              
                              $
                              3.34
                              
                              
                              $
                              6.41Diluted
                              
                              $
                              2.84
                              
                              
                              $
                              3.34
                              
                              
                              $
                              6.40
  42
  Contingencies
 Certain
conditions may exist as of the date the financial statements are issued that may
result in a loss to the Company but which will only be resolved when one or more
future events occur or fail to occur. The Company’s management and its legal
counsel assess such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to
legal proceedings that are pending against the Company or unasserted claims that
may result in such proceedings, the Company’s legal counsel evaluates the
perceived merits of any legal proceedings or unasserted claims as well as the
perceived merits of the amount of relief sought or expected to be sought
therein.
 
 If the
assessment of a contingency indicates that it is probable that a material loss
has been incurred and the amount of the liability can be estimated, then the
estimated liability would be accrued in the Company’s financial statements. If
the assessment indicates that a potentially material loss contingency is not
probable, but is reasonably possible, or is probable but cannot be estimated,
then the nature of the contingent liability, together with an estimate of the
range of possible loss if determinable and material, would be
disclosed.
 
 Loss
contingencies considered remote are generally not disclosed unless they involve
guarantees, in which case the nature of the guarantee would be
disclosed.
 
 Impact
of Recently Issued Accounting Standards
 In June
2009, the Financial Accounting Standards Board (“FASB”) issued authoritative
guidance that establishes the FASB Accounting Standards Codification (“ASC”) as
the single source of authoritative U.S. GAAP to be applied by nongovernmental
entities and modifies the U.S. GAAP hierarchy to only two levels: authoritative
and non-authoritative. This guidance became effective for interim periods and
fiscal years ending after September 15, 2009. The Company adopted the provisions
of the guidance in the second quarter of fiscal 2010. The adoption did not have
a material impact on the Company’s consolidated financial
statements.
 
 In
December 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-17,
Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities, or ASU 2009-17. The amendments in this
update replace the quantitative-based risks and rewards calculation for
determining which reporting entity, if any, has a controlling financial interest
in a variable interest entity with an approach focused on identifying which
reporting entity has the power to direct the activities of a variable interest
entity that most significantly impact the entity’s economic performance and (1)
the obligation to absorb losses of the entity or (2) the right to receive
benefits from the entity. An approach that is expected to be primarily
qualitative will be more effective for identifying which reporting entity has a
controlling financial interest in a variable interest entity. The amendments in
this update also require additional disclosures about a reporting entity’s
involvement in variable interest entities, which will enhance the information
provided to users of financial statements. This standard is effective for fiscal
years beginning on or after December 15, 2009. We do not expect the adoption of
this guidance to have a material impact on our consolidated financial
statements.
  43
  In
January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and
Disclosures (ASC Topic 820) — Improving Disclosures About Fair Value
Measurements. The amendments in this update require new disclosures about
transfers into and out of Levels 1 (fair value determined based on quoted prices
in active markets for identical assets and liabilities) and 2 (fair value
determined based on significant other observable inputs), and separate
disclosures about purchases, sales, issuances, and settlements relating to Level
3 measurements. It also clarifies existing fair value disclosures about the
level of disaggregation and about inputs and valuation techniques used to
measure fair value. Except for the detailed Level 3 roll-forward disclosures,
the new standard is effective for interim and annual reporting periods beginning
after December 31, 2009. The requirement to provide detailed disclosures about
the purchases, sales, issuances, and settlements in the roll-forward activity
for Level 3 fair value measurements is effective for interim and annual
reporting periods beginning after December 31, 2010. We do not expect the
adoption of this guidance to have a material impact on our consolidated
financial statements.
 
 In
February 2010, the FASB issued an accounting standards update which amends
certain implementation issues related to an entity’s requirement to perform and
disclose subsequent events procedures. The new guidance clarifies that
management must evaluate, as of each reporting period, events or transactions
that occur after the balance sheet date through the date that the financial
statements are issued. Management must perform its assessment for both interim
and annual financial reporting periods. This guidance exempts SEC filers from
disclosing the date through which subsequent events have been evaluated and is
effective immediately for financial statements that are issued or available to
be issued.
 
 In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements—An Amendment of ARB No. 51” (“SFAS 160”) which
was codified primarily in ASC Topic 805, Business Combinations (“ASC 805”). SFAS
160 changes the accounting for noncontrolling (minority) interests in
consolidated financial statements, requires noncontrolling interests to be
reported as part of equity and changes the income statement presentation of
income or losses attributable to the noncontrolling interests. We adopted SFAS
160 as of May 31, 2009, as required. The adoption of SFAS 160 did not have a
material impact on our consolidated financial statements.
  44
  2.  Acquisitions
 
 Hillandale,
LLC Acquisition
 The
Company entered into an Agreement to Form a Limited Liability Company, Transfer
Assets Thereto, and Purchase Units of Membership Therein, dated July 28, 2005,
with Hillandale Farms, Inc. and Hillandale Farms of Florida, Inc. (together,
“Hillandale”), and the Hillandale shareholders (the “Agreement”). Under the
terms of the Agreement, the Company acquired 51% of the units of membership in
Hillandale, LLC for cash of approximately $27,000 on October 12, 2005. The
remaining 49% of the units of membership in Hillandale, LLC will be acquired in
essentially equal annual installments over a four-year period, with the purchase
price of the units equal to their book value at the time of purchases as
calculated in accordance with the terms of the Agreement. The total preliminary
purchase price was estimated to be as follows:
 
 Cash
      consideration paid to seller for 51% of Hillandale, LLC’s membership
      units
                  
                  $
                  27,006Obligation
      to acquire 49% of Hillandale, LLC’s membership units
                  
                  
                  25,94752,953Less
      discount of preliminary purchase price to the present value as of July 28,
      2005
                  
                  
                  (3,556
                  )Total
      preliminary purchase price
                  
                  $
                  49,397
 
 In August
2006, in accordance with the Agreement, the Company purchased, for $6,102, an
additional 13% of the units of membership of Hillandale, LLC based on the book
value as of July 29, 2006.  In August 2007, in accordance with the
Agreement, the Company purchased, for $6,769, an additional 12% of the units of
membership of Hillandale, LLC based on the book value as of July 28,
2007.  During fiscal 2008, an early payment of $5,700 was paid on the
purchase obligation.  The Company’s obligation to acquire the
remaining 24% of Hillandale, LLC was recorded at its present value of $19,956 as
of May 31, 2008 of which $10,358 is included in current liabilities and $9,598
is included in other non-current liabilities in the accompanying consolidated
balance sheet.  In August 2008, in accordance with the Agreement, the
Company purchased, for $9,185, an additional 12% of the units of membership of
Hillandale, LLC based on the book value as of July 26,
2008.   During fiscal 2009, early payments of $5,376 were paid on
the purchase obligation.    We purchased the remaining 12%
ownership interest in Hillandale, LLC for $8,150 in the first quarter of fiscal
2010. We now own 100% of Hillandale, LLC.
 
 During
fiscal 2009, the Company revised the estimated purchase obligation upward for
the remaining 12% interest to be acquired in Hillandale, LLC, based on the
effect of the expected earnings increase on the book value of the membership
units.  For fiscal 2009 this additional cost exceeded the estimated
fair value of net assets acquired by $2,527, which was assigned to goodwill on
our consolidated balance sheets.
 
 During
fiscal 2010, the Company revised the purchased obligation downward for the
remaining interest acquired in Hillandale, LLC, based on the effect of revisions
to the purchase price.   These revisions to the purchase price
were due to earnings expectations for Hillandale, LLC.   For
fiscal 2010, the revision to the purchase price for the purchase of the
remaining interest in Hillandale was $338, which has been recorded as a downward
adjustment to goodwill on our consolidated balance sheets.
  45
 
 Hillandale,
LLC’s production facilities are principally located in Florida. Hillandale, LLC
is a fully integrated shell egg producer with its own feed mills, hatchery,
production, processing and distribution facilities.
 
 Effective
July 30, 2009 Hillandale, LLC was merged into Cal-Maine Foods, Inc.
 
 Green
Forest Foods, LLC Acquisition
 
 As of
June 3, 2006, the Company owned 50% of Green Forest Foods, LLC, which was
accounted for under the equity method of accounting.  On January 24,
2007, we purchased the remaining 50% interest in Green Forest Foods, LLC for
$2,000 in cash. We allocated the purchase price to the net assets acquired
consisting principally of flock inventories and facilities leased under a
capital lease. Effective with the purchase, the results of operations of Green
Forest Foods, LLC are consolidated in the Company’s financial
statements.  Green Forest Foods, LLC located in Green Forest,
Arkansas, had been jointly owned and operated by Pier 44 Properties, LLC, an
unaffiliated entity, and the Company, since January 2006. Subsequent to the
acquisition, the Company paid the capital lease obligation of approximately
$10,500 in full. Green Forest Foods, LLC produces, processes, and markets eggs
from approximately one million laying hens, along with pullet growing for
replacements.
 
 Benton
County Foods, LLC Acquisition
 On April
20, 2007, through our 90% owned subsidiary, Benton County Foods, LLC, we
acquired the assets and business of the shell egg division of George’s, Inc., an
unaffiliated entity, located near Siloam Springs, Arkansas.  Benton
County Foods, LLC was a newly formed company jointly owned by the Company and
PW3 Holdings, LLC, an unaffiliated entity. The purchase price totaled $10,900 in
cash. The assets acquired include approximately one million laying hens and a
feed mill in Watts, Oklahoma. As part of this acquisition, Benton County Foods,
LLC will lease growing facilities from George’s Inc. for replacement pullets.
CCF Brands (an affiliate of PW3 Holdings, LLC) has a supply agreement in place
for approximately 50% of the eggs produced by Benton County Foods, LLC. Eggs are
marketed to retail food businesses and food service distributors in the south
central region of the United States. The results of operations of the shell egg
business acquired are included in the Company’s consolidated financial
statements subsequent to the acquisition date.
 
 We
purchased the remaining 10% ownership interest in Benton County Foods, LLC for
$508 in the first quarter of fiscal 2010. We now own 100% of Benton County
Foods, LLC.
 
 Zephyr
Egg, LLC Acquisition
 On June
27, 2008, we purchased 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.   We own 100% of the
membership interests in Zephyr Egg, LLC.  The purchase price totaled
$29,579 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’s
BestTM
franchise for southern Florida, certain flocks of contract laying hens, and the
Sellers’ 12.58% interest in AEP, 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.
  46
  The
following table presents the allocation of the purchase price to the assets
acquired and liabilities assumed, based on their fair values:
 
 Accounts
      receivable
                                    
                                    $
                                    2,610Inventories
                                    
                                    
                                    5,886Other
      investments
                                    
                                    
                                    1,532Property,
      plant, and equipment
                                    
                                    
                                    12,375Intangible
      assets
                                    
                                    
                                    5,300Goodwill
                                    
                                    
                                    1,876Total
      asset acquired
                                    
                                    $
                                    29,579Total
      liabilities assumed
                                    
                                    
                                    -Net
      assets acquired
                                    
                                    $
                                    29,579
 
 The
purchase price exceeded the fair values of the tangible assets acquired by
$7,176.  Of this amount, $5,300 represents the cost of acquired
intangible assets, which is made up of franchise rights of $1,600 (8-year useful
life), customer relationship intangible of $2,200 (8-year useful life) and a
non-compete agreement of $1,500 (3-year useful life). The remainder of the
excess purchase price, amounting to $1,876 was recorded as goodwill, of which
the entire amount is expected to be deductible for income tax
purposes.  The goodwill arising from the acquisition consists largely
of the synergies and economies of scale expected from combining the operations
of the Company and Zephyr Egg, LLC.
 
 Effective
July 30, 2009 Zephyr Egg, LLC was merged into Cal-Maine Foods, Inc.
 
 Tampa
Farms, LLC Acquisition
 We
entered into a Membership Interests Purchase Agreement 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, and its affiliates were
for many years engaged directly 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.
 
 The
assets acquired by the Company include approximately four million laying hens in
modern, in-line facilities, pullet growing facilities, two feed mills and a
fleet of delivery trucks for both eggs and feed.  In addition, the
Company acquired the 4-GrainTM brand
of specialty eggs, certain flocks of contract laying hens, and the Seller’s
12.88% interest in AEP, which gives us approximately a 99.5% ownership interest
in AEP.  To facilitate the sale of the Seller’s Business, the Seller
transferred all of its assets, but none of its liabilities, to Tampa Farms, LLC
(“Tampa Farms”), a Florida limited liability company. 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 in
accordance with the terms of the Agreement.
  47
  The final
purchase price for the Membership Interests was $61,644, which was paid from the
Company’s available funds.  The Company completed the acquisition of
the Seller’s Business on December 11, 2008. Tampa Farms’ results of operations
have been included in the consolidated financial statements since the date of
acquisition.
 
 The
following table presents the allocation of the purchase price to the assets
acquired and liabilities assumed, based on their fair values:
 
 Inventories
                              
                              $
                              11,971Prepaid
      expenses
                              
                              
                              350Other
      investments
                              
                              
                              901Property,
      plant, and equipment
                              
                              
                              33,222Intangible
      assets
                              
                              
                              10,600Goodwill
                              
                              
                              4,600Total
      asset acquired
                              
                              $
                              61,644Total
      liabilities assumed
                              
                              
                              -Net
      assets acquired
                              
                              $
                              61,644
 
 The
purchase price exceeded the fair values of the tangible assets acquired by
$15,200.  Of this amount, $10,600 represents the cost of acquired
intangible assets, which is made up of franchise rights of $1,900 (8-year useful
life) and a customer relationship intangible of $8,700 (8-year useful life). The
remainder of the excess purchase price, amounting to $4,600, was recorded as
goodwill, of which the entire amount is expected to be deductible for tax
purposes.  The goodwill arising from the acquisition consists largely
of the synergies and economies of scale expected from combining the operations
of the Company and Tampa Farms.
 
 The
following unaudited pro forma information was prepared assuming that the
acquisitions of Zephyr Egg, LLC and Tampa Farms, LLC had taken place at the
beginning of fiscal 2008. In preparing the pro forma financial information,
various assumptions were made; therefore, the Company does not imply that the
future results will be indicative of the following pro forma
information:
  May 30, 2009
                    
                    
                    May 31, 2008Net
      sales
                    
                    $
                    992,054
                    
                    
                    $
                    1,157,285Net
      income
                    
                    
                    81,301
                    
                    
                    
                    175,298Net
      income per share – basic
                    
                    
                    3.42
                    
                    
                    
                    7.40Net
      income per share - diluted
                    
                    
                    3.41
                    
                    
                    
                    7.39
 
 Effective
July 30, 2009, Tampa Farms was merged into Cal-Maine Foods, Inc.
 
 3.  Investment
in Affiliates
 
 The
Company owns 50% each of Specialty Eggs LLC and Delta Egg Farm, LLC (“Delta
Egg”) and 33.3% of Dallas Reinsurance, Co., LTD. as of May 29,
2010.  Investment in affiliates, recorded using the equity method of
accounting are included in “Other Investments” in the accompanying consolidated
balance sheets and totaled $16,001 and $16,444 at May 29, 2010 and at May 30,
2009, respectively.  Equity in income of $3,507, $2,612, and $6,324
from these entities has been included in the consolidated statements of income
for fiscal 2010, 2009, and 2008, respectively.
  48
  The
Company is a guarantor of 50% of Delta Egg’s long-term debt, which totaled
approximately $12,250 at May 29, 2010.  Delta Egg’s long-term debt is
secured by substantially all fixed assets of Delta Egg and is due in monthly
installments through fiscal 2018.  Delta Egg is engaged in the
production, processing and distribution of shell eggs.  The other 50%
owner also guarantees 50% of the debt.  The guarantee arose when Delta
Egg borrowed funds to construct its production and processing facility in
1999.  The guarantee would be required if Delta Egg is not able to pay
the debt.  Management of the Company believes this possibility is
unlikely because Delta Egg is now well capitalized.
 
 At May
29, 2010 and May 30, 2009, ”Other Investments” as shown on the Company’s
consolidated balance sheet include the cost of an investment in Egg-Land’s Best,
Inc., in which the Company has a 29.1% equity interest at those dates.
Egg-Land’s Best operates as a cooperative.   The Company cannot
exert significant influence over Egg-Land’s Best, Inc.’s operating and financial
activities; therefore, the Company accounts for this investment using the cost
method.   The carrying value of this investment at May 29, 2010
and May 30, 2009 was $768 and $768, respectively.
  The
Company regularly transacts business with its affiliates. The following relates
to the Company’s transactions with these unconsolidated affiliates for the years
indicated:
  May 29, 2010
                    
                    
                    May 30, 2009
                    
                    
                    May 31, 2008Sales
      to affiliates
                    
                    $
                    13,383
                    
                    
                    $
                    13,432
                    
                    
                    $
                    12,380Purchases
      from affiliates
                    
                    
                    43,453
                    
                    
                    
                    36,937
                    
                    
                    
                    30,706
  May 29, 2010
                    
                    
                    May 30, 2009Accounts
      receivable from affiliates
                    
                    $
                    837
                    
                    
                    $
                    830Accounts
      payable to affiliates
                    
                    
                    2,090
                    
                    
                    
                    1,148
  4.  Inventories
 
 Inventories
consisted of the following:
 
 May 29, 2010
                    
                    
                    May 30,2009Flocks
                    
                    $
                    60,387
                    
                    
                    $
                    64,040Eggs
                    
                    
                    7,481
                    
                    
                    
                    6,880Feed
      and supplies
                    
                    
                    26,100
                    
                    
                    
                    26,615$
                    93,968
                    
                    
                    $
                    97,535
 
 5.
Prepaid Expenses and Other Current Assets
 
 Prepaid
expenses and other current assets consisted of the following at May 29, 2010 and
May 30, 2009:
 May 29, 2010
                    
                    
                    May 30, 2009Refundable
      income taxes
                    
                    $
                    —
                    
                    
                    $
                    16,065Prepaid
      insurance
                    
                    
                    938
                    
                    
                    
                    660Other
      prepaid expenses
                    
                    
                    441
                    
                    
                    
                    459Other
      current assets
                    
                    
                    171
                    
                    
                    
                    290$
                    1,550
                    
                    
                    $
                    17,474
  49
 
 6.  Goodwill
and Other Intangible Assets
 
 Goodwill
and other intangibles consisted of the following:
 
 Other IntangiblesGoodwill
                    
                    
                    Franchise
                      rights
                    
                    
                    Customer
                      relationships
                    
                    
                    Non-compete
                      agreements
                    
                    
                    TotalBalance
      May 31, 2008
                    
                    $
                    13,452
                    
                    
                    $
                    302
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    13,754Additions
                    
                    
                    9,003
                    
                    
                    
                    3,979
                    
                    
                    
                    10,900
                    
                    
                    
                    1,500
                    
                    
                    
                    25,382Amortization
                    
                    
                    -
                    
                    
                    
                    (367
                    )
                    
                    
                    (796
                    )
                    
                    
                    (462
                    )
                    
                    
                    (1,625
                    )Balance
      May 30, 2009
                    
                    
                    22,455
                    
                    
                    
                    3,914
                    
                    
                    
                    10,104
                    
                    
                    
                    1,038
                    
                    
                    
                    37,511Adjustments
                    
                    
                    (338
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (338
                    )Amortization
                    
                    
                    -
                    
                    
                    
                    (557
                    )
                    
                    
                    (1,476
                    )
                    
                    
                    (500
                    )
                    
                    
                    (2,533
                    )Balance
      May 29, 2010
                    
                    $
                    22,117
                    
                    
                    $
                    3,357
                    
                    
                    $
                    8,628
                    
                    
                    $
                    538
                    
                    
                    $
                    34,640
 
 For the
Other Intangibles listed above, the gross carrying amounts and accumulated
amortization are as follows:
 
 May 29, 2010
                  
                  
                  May 30, 2009Gross carrying
                    amount
                  
                  
                  Accumulated
                    amortization
                  
                  
                  Gross carrying
                    amount
                  
                  
                  Accumulated
                    amortizationAmortized
      intangible assets:Franchise
      Rights
                  
                  $
                  5,284
                  
                  
                  $
                  (1,927
                  )
                  
                  $
                  5,284
                  
                  
                  $
                  (1,370
                  )Customer
      Relationships
                  
                  
                  10,900
                  
                  
                  
                  (2,272
                  )
                  
                  
                  10,900
                  
                  
                  
                  (796
                  )Non-compete
      agreements
                  
                  
                  1,500
                  
                  
                  
                  (962
                  )
                  
                  
                  1,500
                  
                  
                  
                  (462
                  )Total
                  
                  $
                  17,684
                  
                  
                  $
                  (5,161
                  )
                  
                  $
                  17,684
                  
                  
                  $
                  (2,628
                  )
 
 No
significant residual value is estimated for these intangible assets. Aggregate
amortization expense for the years ended May 29, 2010 and May 30, 2009 totaled
$2,533 and $1,625, respectively. The following table represents the total
estimated amortization of intangible assets for the five succeeding
years:
 
 For fiscal period
                      
                      Estimated amortization expense2011
                      
                      $
                      2,3832012
                      
                      
                      1,9222013
                      
                      
                      1,8832014
                      
                      
                      1,8832015
                      
                      
                      1,850Thereafter
                      
                      
                      2,602Total
                      
                      $
                      12,523
  50
  7.
Property, Plant and Equipment
 
 Property,
plant and equipment consisted of the following:
 
 May 29
                      
                      
                      May 302010
                      
                      
                      2009Land
      and improvements
                      
                      $
                      57,533
                      
                      
                      $
                      57,277Buildings
      and improvements
                      
                      
                      198,274
                      
                      
                      
                      196,339Machinery
      and equipment
                      
                      
                      226,021
                      
                      
                      
                      220,170Construction-in-progress
                      
                      
                      8,927
                      
                      
                      
                      5,541490,755
                      
                      
                      
                      479,327Less:
      accumulated depreciation
                      
                      
                      256,644
                      
                      
                      
                      229,369$
                      234,111
                      
                      
                      $
                      249,958
 
 Depreciation expense was $29,252, $27,933 and
$24,965 in fiscal 2010, 2009 and 2008, respectively.
 
 8.  Leases
 
 Future
minimum payments under noncancelable operating leases that have initial or
remaining noncancelable terms in excess of one year at May 29, 2010 are as
follows:
 
 2011
                      
                      $
                      1,7472012
                      
                      
                      1,1772013
                      
                      
                      9772014
                      
                      
                      4492015
                      
                      
                      357Thereafter
                      
                      
                      665Total
      minimum lease payments
                      
                      $
                      5,372
 
 Substantially
all of the leases provide that the Company pays taxes, maintenance, insurance
and certain other operating expenses applicable to the leased
assets.  The Company has guaranteed under certain operating leases the
residual value of transportation equipment at the expiration of the
leases.  Rent expense was $4,872, $3,864 and $5,032 in fiscal 2010,
2009 and 2008, respectively, primarily for the lease of certain operating
facilities, equipment and transportation equipment.  Included in rent
expense are vehicle rents totaling $693, $661 and $660 in fiscal 2010, 2009 and
2008, respectively.
  51
  9.  Credit
Facilities and Long-Term Debt
 Long-term
debt consisted of the following:
 
 May 29
                                                    
                                                    
                                                    May 302010
                                                    
                                                    
                                                    2009Note
      payable at 6.20%, due in monthly principal installments of $250, plus
      interest, maturing in 2019
                                                    
                                                    $
                                                    28,500
                                                    
                                                    
                                                    $
                                                    —Note
      payable at 5.99%, due in monthly principal installments of $150, plus
      interest, maturing in 2021
                                                    
                                                    
                                                    21,700
                                                    
                                                    
                                                    
                                                    23,500Series
      A Senior Secured Notes at 5.45%, due in monthly installments of $176, plus
      interest, beginning in January 2009 through 2018
                                                    
                                                    
                                                    16,841
                                                    
                                                    
                                                    
                                                    18,947Note
      payable at 6.35%, due in monthly principal installments of $100, plus
      interest, maturing in 2017
                                                    
                                                    
                                                    16,300
                                                    
                                                    
                                                    
                                                    17,500Line
      of credit at no net cost, due in its entirety in 2011
                                                    
                                                    
                                                    14,799
                                                    
                                                    
                                                    
                                                    25,161Note
      payable at 8.26%, due in monthly installments of $155, including interest,
      maturing in 2015
                                                    
                                                    
                                                    11,356
                                                    
                                                    
                                                    
                                                    12,242Note
      payable at 6.80%, due in monthly principal installments of $165, plus
      interest, maturing in 2014
                                                    
                                                    
                                                    7,130
                                                    
                                                    
                                                    
                                                    9,110Note
      payable at 6.40%, due in monthly principal installments of $35, plus
      interest, maturing in 2018
                                                    
                                                    
                                                    5,240
                                                    
                                                    
                                                    
                                                    5,660Note
      payable at 7.06%, due in monthly installments of $53, including interest,
      maturing in 2015
                                                    
                                                    
                                                    3,985
                                                    
                                                    
                                                    
                                                    4,325Note
      payable at 6.87%, due in monthly installments of $45, including interest,
      maturing in 2015
                                                    
                                                    
                                                    3,387
                                                    
                                                    
                                                    
                                                    3,678Note
      payable at 6.07%, due in monthly principal installments of $33, plus
      interest, maturing in 2015
                                                    
                                                    
                                                    1,768
                                                    
                                                    
                                                    
                                                    2,168Industrial
      revenue bonds at 6.10%, due in monthly installments of $146, including
      interest, maturing in 2011
                                                    
                                                    
                                                    1,417
                                                    
                                                    
                                                    
                                                    3,024Note
      payable at 5.80%, due in annual principal installments of $250 through
      2015 with interest due quarterly
                                                    
                                                    
                                                    1,250
                                                    
                                                    
                                                    
                                                    1,500Note
      Payable-Texas Egg Products, LLC (payable to non-affiliate equity
      members)
                                                    
                                                    
                                                    552
                                                    
                                                    
                                                    
                                                    —Note
      payable at 7.5%, due in monthly installments of $36, including interest,
      maturing in 2012
                                                    
                                                    
                                                    448
                                                    
                                                    
                                                    
                                                    831Series
      B Senior Secured Notes at 7.18%, due in annual principal installments of
      $2,143 through 2009 with interest due semi-annually
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    2,143134,673
                                                    
                                                    
                                                    
                                                    129,789Less
      current maturities
                                                    
                                                    
                                                    29,974
                                                    
                                                    
                                                    
                                                    13,806$
                                                    104,699
                                                    
                                                    
                                                    $
                                                    115,983
  52
  
 The
aggregate annual fiscal year maturities of long-term debt at May 29, 2010 are as
follows:
 
 2011
                    
                    $
                    29,9742012
                    
                    
                    12,9602013
                    
                    
                    13,0662014
                    
                    
                    12,4302015
                    
                    
                    20,292Thereafter
                    
                    
                    45,951$
                    134,673
 
 The
Company has a line of credit with a financial institution limited to the par
value of auction rate securities held in an ARS-only Collateral
Account.  The Company has utilized $14,799 of this $33,150 line as of
May 29, 2010. The balance of the auction rate securities was sold as of June 30,
2010 and the line of credit was discontinued.
 
 The
Company’s 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
$90,000 tangible net worth, and 45% of cumulative net income); (2) limit
dividends paid in any given quarter to not exceed an amount equal to one third
of the previous quarter’s consolidated net income (allowed if no default),
capital expenditures not to exceed $60,000 in any twelve month period, lease
obligations and additional long-term borrowings (total funded debt to total
capitalization not to exceed 55%); and (3) maintain various current and
cash-flow coverage ratios (1.25 to 1), among other restrictions. At May 29,
2010, we were in compliance with the financial covenant requirements of all loan
agreements. Under certain of the loan agreements, the lenders have the option to
require the prepayment of any outstanding borrowings in the event we undergo a
change in control.  The Chief Executive Officer of the Company, or his
family, must maintain ownership of not less than 50% of the outstanding voting
stock of the Company.
 
 Interest
of $7,175, $6,679 and $7,697 was paid during fiscal 2010, 2009 and 2008,
respectively.  Interest of $299, $515 and $395 was capitalized for
construction of certain facilities during fiscal 2010, 2009 and 2008,
respectively.
 
 10.  Employee
Benefit Plans
 
 The
Company maintains a medical plan that is qualified under Section 401(a) of the
Internal Revenue Code and not subject to tax under present income tax
laws.  Under its plan, the Company self-insures, in part, coverage for
substantially all full-time employees with coverage by insurance carriers for
certain stop-loss provisions for losses greater than $150 for each
occurrence.  The Company’s expenses including accruals for incurred
but not reported claims were approximately $5,115, $6,507 and $4,081 in fiscal
2010, 2009 and 2008, respectively.
 
 The
Company has a 401(k) plan which covers substantially all
employees.  Participants in the Plan may contribute up to the maximum
allowed by Internal Revenue Service regulations.  The Company does not
make contributions to the 401(k) plan.
  53
 
 The
Company has an employee stock ownership plan (ESOP) that covers substantially
all employees.  The Company makes contributions to the ESOP of 3% of
participants’ compensation, plus an additional amount determined at the
discretion of the Board of Directors.  Contributions may be made in
cash or the Company’s common stock. Total ESOP shares were considered to be
shares outstanding for earnings per share calculations, and dividends on shares
held by the ESOP were paid to the ESOP trust.  Company contributions
to the ESOP vest immediately.  The Company’s contributions to the plan
were $1,439, $1,154, $1,214 and in fiscal 2010, 2009 and 2008,
respectively.
 
 The
Company has deferred compensation agreements with certain officers for payments
to be made over specified periods beginning when the officers reach age 65 or
over as specified in the agreements.  Amounts accrued for these
agreements are based upon deferred compensation earned over the estimated
remaining service period of each officer.  Deferred compensation
expense totaled approximately $184 in fiscal 2010, $71 in fiscal 2009 and $206
in fiscal 2008.
 
 In
December 2006, the Company adopted an additional deferred compensation plan to
provide deferred compensation to named officers of the Company.  On
December 24, 2009, an award of $127 was issued under this plan.
 
 11.  Stock
Compensation Plans
 
 On July
28, 2005, the Company’s Board of Directors approved the Cal-Maine Foods, Inc.
2005 Incentive Stock Option Plan (the “ISO Plan”) and reserved 500,000 shares
for issuance upon exercise of options granted under the ISO Plan. Options issued
pursuant to the ISO Plan may be granted to any of the Company’s employees. The
options may have a term of up to ten years and generally will vest ratably over
five years. On August 17, 2005, the Company issued 360,000 options with an
exercise price of $5.93. The options have ten-year terms and vest over five
years beginning from the date of grant. The ISO Plan was ratified by the
Company’s shareholders at the annual meeting of shareholders on October 13,
2005.
 
 On July
28, 2005, the Company’s Board of Directors also approved the Cal-Maine Foods,
Inc. Stock Appreciation Rights Plan (the “Rights Plan”). The Rights Plan covers
1,000,000 shares of common stock of the Company. Stock appreciation rights
(“SARs”) may be granted to any employee or non-employee member of the Board of
Directors. Upon exercise of a SAR, the holder will receive cash equal to the
difference between the fair market value of a single share of common stock at
the time of exercise and the strike price which is equal to the fair market
value of a single share of common stock on the date of the grant. The SARs have
a ten-year term and vest over five years. On August 17, 2005, the Company issued
592,500 SARs under the Rights Plan with a strike price of $5.93 and, on August
26, 2005, the Company issued 22,500 SARs with a strike price of $6.71. On August
24, 2006, the Company issued 15,000 SARs with a strike price of $6.93. The
Rights Plan was ratified by the Company’s shareholders at the annual meeting of
shareholders on October 13, 2005.
 
 The
Company recognized stock based compensation expense of $218 for equity awards
and $1,968 for liability awards in fiscal 2010. In fiscal 2009, the Company
recognized stock based compensation expense of $218 for equity awards and $277
for liability awards.  In fiscal 2008, the Company recognized stock
based compensation expense of $218 for equity awards and $6,853 for liability
awards.
  54
  A summary
of our equity award activity and related information is as follows:
  WeightedWeighted
                                          
                                          
                                          AverageNumber
                                          
                                          
                                          Exercise
                                          
                                          
                                          Remaining
                                          
                                          
                                          Aggregateof
                                          
                                          
                                          Price
                                          
                                          
                                          Contractual
                                          
                                          
                                          IntrinsicOptions
                                          
                                          
                                          Per Share
                                          
                                          
                                          Life (in Years)
                                          
                                          
                                          ValueOutstanding,
      May 31, 2008
                                          
                                          
                                          259,200
                                          
                                          
                                          
                                          5.65Granted
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —Exercised
                                          
                                          
                                          72,000
                                          
                                          
                                          
                                          5.93Forfeited
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —Outstanding,
      May 30, 2009
                                          
                                          
                                          187,200
                                          
                                          
                                          
                                          5.45Granted
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —Exercised
                                          
                                          
                                          52,000
                                          
                                          
                                          
                                          5.93Forfeited
                                          
                                          
                                          12,000
                                          
                                          
                                          
                                          5.93Outstanding,
      May 29, 2010
                                          
                                          
                                          123,200
                                          
                                          
                                          $
                                          5.34
                                          
                                          
                                          
                                          4.86
                                          
                                          
                                          $
                                          3,332Exercisable,
      May 29, 2010
                                          
                                          
                                          57,200
                                          
                                          
                                          $
                                          4.65
                                          
                                          
                                          
                                          4.45
                                          
                                          
                                          $
                                          1,586
  Unrecognized
share based compensation cost as of May 29, 2010 totaled $218 and will be
recognized over a weighted average period of 1 year.  The intrinsic
value of stock options exercised totaled $1,693, $1,328, and $3,254 in fiscal
2010, 2009, and 2008 respectively.
 
 A summary
of our liability award activity and related information is as
follows:
  WeightedWeighted
                        
                        
                        AverageNumber
                        
                        
                        Average
                        
                        
                        Remaining
                        
                        
                        AggregateOf
                        
                        
                        Strike Price
                        
                        
                        Contractual
                        
                        
                        IntrinsicRights
                        
                        
                        Per Right
                        
                        
                        Life (in Years)
                        
                        
                        ValueOutstanding,
      May 31, 2008
                        
                        
                        351,350
                        
                        
                        $
                        5.95Granted
                        
                        
                        -
                        
                        
                        
                        -Exercised
                        
                        
                        87,100
                        
                        
                        
                        5.97Forfeited
                        
                        
                        -
                        
                        
                        
                        -Outstanding,
      May 30, 2009
                        
                        
                        264,250
                        
                        
                        
                        6.00Granted
                        
                        
                        -
                        
                        
                        
                        -Exercised
                        
                        
                        106,900
                        
                        
                        
                        5.96Forfeited
                        
                        
                        -
                        
                        
                        
                        -Outstanding,
      May 29, 2010
                        
                        
                        157,350
                        
                        
                        $
                        6.03
                        
                        
                        
                        5.30
                        
                        
                        $
                        4,146Exercisable,
      May 29, 2010
                        
                        
                        53,850
                        
                        
                        $
                        6.04
                        
                        
                        
                        5.33
                        
                        
                        $
                        1,418
 
 Unrecognized
share based compensation cost for liability awards based upon the fair value
determined as of May 29, 2010 was $3,960 and will be recognized over a weighted
average period of 1.5 years.  Total payments for liability awards
exercised totaled $1,968, $277, and $6,853 for fiscal 2010, 2009 and 2008,
respectively.
 
 The fair
value of liability awards was estimated as of May 29, 2010, May 30, 2009, and
May 31, 2008 using a Black-Scholes option-pricing model using the following
weighted-average assumptions:
 
 May 29,2010
                      
                      
                      May 30,2009
                      
                      
                      May 31, 2008Risk-free
      interest rate
                      
                      
                      0.76
                      %
                      
                      
                      1.42
                      %
                      
                      
                      2.90
                      %Dividend
      Yield
                      
                      
                      1.00
                      %
                      
                      
                      1.00
                      %
                      
                      
                      1.00
                      %Volatility
      factor of the expectedmarket
      price of our stock
                      
                      
                      33.47
                      %
                      
                      
                      56.55
                      %
                      
                      
                      35.80
                      %Weighted-avg.
      expected life of the rights
                      
                      1.5
      yrs.
                      
                      
                      2.5
      yrs.
                      
                      
                      3.5
      yrs.
  55
  12.  Income
Taxes
 
 Income
tax expense (benefit) consisted of the following:
  Fiscal year endedMay 29
                  
                  
                  May 30
                  
                  
                  May 312010
                  
                  
                  2009
                  
                  
                  2008Current:Federal
                  
                  $
                  30,765
                  
                  
                  $
                  28,335
                  
                  
                  $
                  63,406State
                  
                  
                  5,130
                  
                  
                  
                  2,140
                  
                  
                  
                  12,46535,895
                  
                  
                  
                  30,475
                  
                  
                  
                  75,871Deferred:Federal
                  
                  
                  2,292
                  
                  
                  
                  9,295
                  
                  
                  
                  2,779State
                  
                  
                  (226
                  )
                  
                  
                  1,740
                  
                  
                  
                  8802,066
                  
                  
                  
                  11,035
                  
                  
                  
                  3,659$
                  37,961
                  
                  
                  $
                  41,510
                  
                  
                  $
                  79,530
 
 Significant
components of the Company’s deferred tax liabilities and assets were as
follows:
 
 May 29
                  
                  
                  May 302010
                  
                  
                  2009Deferred
      tax liabilities:Property,
      plant and equipment
                  
                  $
                  26,120
                  
                  
                  $
                  25,060Cash
      basis temporary differences
                  
                  
                  1,308
                  
                  
                  
                  1,471Inventories
                  
                  
                  23,452
                  
                  
                  
                  23,425Investment
      in affiliates
                  
                  
                  4,154
                  
                  
                  
                  2,405Other
                  
                  
                  1,562
                  
                  
                  
                  1,160Total
      deferred tax liabilities
                  
                  
                  56,596
                  
                  
                  
                  53,521Deferred
      tax assets:Accrued
      expenses
                  
                  
                  4,065
                  
                  
                  
                  4,316Discount
      on acquisition purchase price
                  
                  
                  1,433
                  
                  
                  
                  1,398Other
                  
                  
                  2,762
                  
                  
                  
                  1,537Total
      deferred tax assets
                  
                  
                  8,260
                  
                  
                  
                  7,251Net
      deferred tax liabilities
                  
                  $
                  48,336
                  
                  
                  $
                  46,270
 
 Effective
May 29, 1988, the Company could no longer use cash basis accounting for its
farming subsidiary because of tax law changes. The  Taxpayer Relief
Act of 1997 provides that taxes on the cash basis temporary differences as of
that date are generally payable over 20 years beginning in fiscal 1999 or in
full in the first fiscal year in which there is a change in ownership control.
The Company uses the farm-price method for valuing inventories for income tax
purposes.
  56
  The
differences between income tax expense (benefit) at the Company’s effective
income tax rate and income tax expense (benefit) at the statutory federal income
tax rate were as follows:
  Fiscal year endMay 29
                        
                        May 30
                        
                        May 312010
                        
                        2009
                        
                        2008Statutory
      federal income tax (benefit)
                        $
                        37,024
                        
                        $
                        42,353
                        
                        $
                        80,287State
      income taxes (benefit), net
                        
                        3,187
                        
                        
                        2,522
                        
                        
                        8,675Domestic
      manufacturers deduction
                        
                        (2,017
                        )
                        
                        (1,819
                        )
                        
                        (4,115
                        )Non-taxable
      (deductible) Hillandale, LLC income (loss)
                        
                        -
                        
                        
                        (1,152
                        )
                        
                        (5,022
                        )Tax
      exempt interest income
                        
                        (265
                        )
                        
                        (557
                        )
                        
                        (872
                        )Other,
      net
                        
                        32
                        
                        
                        163
                        
                        
                        577$
                        37,961
                        
                        $
                        41,510
                        
                        $
                        79,530
 
 We had no
significant unrecognized tax benefits at May 29, 2010 or at May 30, 2009.
Accordingly, we do not have any interest or penalties related to uncertain tax
positions. However, if interest or penalties were to be incurred related to
uncertain tax positions, such amounts would be recognized in income tax expense.
Tax periods for all years after fiscal 2005 remain open to examination by the
federal and state taxing jurisdictions to which we are subject.
 
 13.
Other Matters
 
 The
carrying amounts in the consolidated balance sheet for cash and cash
equivalents, accounts receivable, and accounts payable approximate their fair
values. The fair value of the Company’s long-term debt is estimated to be
$135,575.  The fair value for long-term debt is estimated using discounted
cash flow analysis, based on the Company’s current incremental borrowing
rate.
  The
Company’s interest expense is sensitive to changes in the general level of U.S.
interest rates.  The Company maintains certain of its debt as fixed rate in
nature to mitigate the impact of fluctuations in interest rates.  Under its
current policies, the Company does not use interest rate derivative instruments
to manage its exposure to interest rate changes.  A one percent (1%)
adverse move (decrease) in interest rates would adversely affect the net fair
value of the Company’s debt by $4,583 at May 29, 2010.  The Company is a
party to no other market risk sensitive instruments requiring
disclosure.
 
 14.
Contingencies
 
 The
Company is the defendant in certain legal actions.  The Company intends to
vigorously defend its position regarding this litigation. The ultimate outcome
of this litigation cannot presently be determined. Consequently, no estimate of
any possible loss related to this litigation can reasonably be determined.
However, in management’s opinion, the likelihood of a material adverse outcome
is remote in regards to all matters except the egg antitrust
litigation.
 
 Management
determined that recent developments in the egg antitrust litigation have changed
the likelihood of a material adverse outcome to reasonably possible. Two of the
defendants in the case have reached a settlement agreement with the plaintiffs,
subject to court approval.  Neither settlement agreement admits any
liability on the part of the defendants. Since the inception of this litigation,
the Company has denied the allegations of the plaintiffs and has been vigorously
defending the case.  The Company’s decision to defend has not been
altered by settlement by two of our co-defendants.  Based on
information known to the Company at the present time, the Company has no plans
to enter into settlement discussions with the plaintiffs and plans to continue
to defend the case based on defenses which we believe are meritorious and
provable.  At the present time it is not possible to estimate the
amount of monetary exposure, if any, to the Company as a result of this
case.
  57
  Accordingly,
adjustments, if any, which might result from the resolution of these legal
matters, have not been reflected in the financial statements. These legal
actions are discussed below.
 
 Personal Injury Chicken
Litter Litigation
 
 Cal-Maine
Farms, Inc. is presently a defendant in two personal injury cases in the Circuit
Court of Washington County, Arkansas.  Those cases are styled,
McWhorter vs. Alpharma, Inc., et al., and Carroll, et al. vs. Alpharma, Inc., et
al.  Cal-Maine Farms, Inc. was named as a defendant in the McWhorter
case on February 3, 2004.  It was named as a defendant in the Carroll
case on May 2, 2005.  Co-defendants in both cases include other
integrated poultry companies such as Tyson Foods, Inc., Cargill, Incorporated,
George’s Farms, Inc., Peterson Farms, Inc., Simmons Foods, Inc., and Simmons
Poultry Farms, Inc.  The manufacturers of an additive for broiler feed
are also included as defendants.  Those defendants are Alpharma, Inc.
and Alpharma Animal Health, Co.
 
 Both
cases allege that the plaintiffs have suffered medical problems resulting from
living near land upon which “litter” from the defendants’ flocks was spread as
fertilizer.  The McWhorter case focuses on mold and fungi allegedly
created by the application of litter.  The Carroll case also alleges
injury from mold and fungi, but focuses primarily on the broiler feed ingredient
as the cause of the alleged medical injuries.  No trial date for
either the Carroll or McWhorter case has been set.
 
 Several
other separate, but related, cases were prosecuted in the same venue by the same
attorneys.  The same theories of liability were prosecuted in all of
the cases.  No Cal-Maine company was named as a defendant in any of
those other cases.  The plaintiffs selected one of those cases, Green,
et al. vs. Alpharma, Inc., et al., as a bellwether case to go to trial
first.  All of the poultry defendants were granted summary judgment in
the Green case on August 2, 2006.  On May 8, 2008, however, the
Arkansas Supreme Court reversed the summary judgment in favor of the poultry
defendants and remanded the case for trial.  Green was re-tried, and
again resulted in a defense verdict.  The plaintiffs have appealed
this judgment.  The appeal was noticed in July 2009.  The
appeal is pending.
 
 There has
been no effort by the plaintiffs in the McWhorter and Carroll cases to set those
cases for trial.  Whether the plaintiffs in those cases will prosecute
those cases to trial is not known, and their likelihood of success if they do
cannot be gauged at this time.
  58
  State of Oklahoma Watershed
Pollution Litigation
 
 On June
18, 2005, the State of Oklahoma filed suit in the United States District Court
for the Northern District of Oklahoma, against a number of companies, including
Cal-Maine Foods, Inc. and Cal-Maine Farms, Inc.  We and Cal-Maine
Farms filed our joint answer and motion to dismiss the suit on October 3,
2005.  The State of Oklahoma claims that through the disposal of
chicken litter the defendants have polluted the Illinois River
Watershed.  This watershed provides water to eastern
Oklahoma.  The Complaint seeks injunctive relief and monetary
damages.  The parties participated in a series of mediation meetings
without success.  Cal-Maine Foods, Inc. no longer operates in the
watershed.  Accordingly, we do not anticipate that Cal-Maine Foods,
Inc. will be materially affected by the request for injunctive
relief.  Cal-Maine Foods, Inc. owns 100% of Benton County Foods, LLC,
which is an ongoing commercial shell egg operation within the Illinois River
Watershed.  Benton County Foods, LLC is not a defendant in the
litigation.
 
 The
district court has dismissed all damages claims against all
defendants.  The basis for that ruling was the absence of a necessary
party plaintiff, the Cherokee Nation.  The Cherokee Nation owns part
of the land and water in the watershed.  After the dismissal of the
damages claims, the Cherokee Nation attempted to intervene as a
plaintiff.  This attempt was rejected by the district
court.  The Cherokee Nation has appealed that denial to the 10th
Circuit Court of Appeals.  The appeal was noticed in September 2009,
and was heard on May 5, 2010 but no decision has been rendered.
 
 The
remaining claims relate to the State of Oklahoma’s request for injunctive
relief, and the State of Oklahoma’s request for statutory penalties against the
defendants for alleged polluting activities.   The trial of these
remaining claims began on September 25, 2009.   The trial of this
matter has been concluded and the judge has heard final arguments.  No
decision has been rendered, but one is expected in the near future.
 
 Egg Antitrust
Litigation
 
 Between
September 25, 2008 and January 8, 2009, the Company was named as one of several
defendants in sixteen antitrust cases involving the United States shell egg
industry.  In all sixteen cases, the named plaintiffs sued on behalf of
themselves and a putative class of others who claim to be similarly
situated.  In fourteen of the cases, the named plaintiffs allege that they
are retailers or distributors that purchased shell eggs and egg products
directly from one or more of the defendants.  In the other two cases, the
named plaintiffs are individuals who allege that they purchased shell eggs and
egg products indirectly from one or more of the defendants - that is, they
purchased from retailers that had previously purchased from defendants or other
parties.
 The
Judicial Panel on Multidistrict Litigation consolidated all of these cases (as
well as certain other cases in which the Company was not a named defendant) for
pretrial proceedings in the United States District Court for the Eastern
District of Pennsylvania.  The Pennsylvania court has organized the cases
around two groups (direct purchasers and indirect purchasers) and has named
interim lead counsel for the named plaintiffs in each group.
  59
  The Direct Purchaser
Case.  The named plaintiffs in the direct purchaser case filed
a consolidated complaint on January 30, 2009.  On April 30, 2009, the
Company filed motions to dismiss the direct purchasers’ consolidated
complaint.  The direct purchaser plaintiffs did not respond to those
motions.  Instead, the direct purchaser plaintiffs announced a
potential settlement with one defendant.  That settlement is still
subject to court approval, but if it is approved, the settlement would not
require the settling party to pay any money.  Instead, the settling
defendant, while denying all liability, would provide cooperation in the form of
documents and witness interviews to the plaintiffs’ attorneys.  After
announcing this potential settlement with one defendant, the direct purchaser
plaintiffs filed an amended complaint on December 11, 2009.  On
February 5, 2010, the Company joined with other defendants in moving to dismiss
the direct purchaser plaintiffs’ claims for damages outside the four year
statute of limitations period and claims arising from a supposed conspiracy in
the egg products sector.  On February 26, 2010, the Company filed its
answer and affirmative defenses to the direct purchaser plaintiffs’ amended
complaint.  On June 4, 2010, the direct purchaser plaintiffs announced
a potential settlement with a second defendant.  This settlement is
still subject to court approval.  If this settlement is approved, then
the defendant would pay a total of $25 million and would provide other
consideration in the form of documents, witness interviews, and
declarations.  This settling defendant denied all liability in its
potential agreement with the direct purchaser plaintiffs and stated publicly
that it settled merely to avoid the cost and uncertainty of continued
litigation.
 
 The Indirect Purchaser
Case.  The named plaintiffs in the indirect purchaser case
filed a consolidated complaint on February 27, 2009.  On April 30,
2009, the Company filed motions to dismiss the indirect purchasers’ consolidated
complaint.  The indirect purchaser plaintiffs did not respond to those
motions.  Instead, the indirect purchaser plaintiffs filed an amended
complaint on April 8, 2010.  On May 7, 2010, the Company joined with
other defendants in moving to dismiss the indirect purchaser plaintiffs’ claims
for damages outside the four-year statute of limitations period, claims arising
from a supposed conspiracy in the egg products sector, claims arising under
certain state antitrust and consumer frauds statutes, and common-law claims for
unjust enrichment.  On June 4, 2010, the Company filed its answer and
affirmative defenses to the indirect purchaser plaintiffs’ amended
complaint.
 
 Allegations in Each
Case.In both consolidated complaints, the named plaintiffs
allege that the Company and certain other large domestic egg producers conspired
to reduce the domestic supply of eggs in a concerted effort to raise the price
of eggs to artificially high levels.  In both consolidated complaints,
plaintiffs allege that all defendants agreed to reduce the domestic supply of
eggs by (a) manipulating egg exports and (b) implementing industry-wide animal
welfare guidelines that reduced the number of hens and eggs.  The indirect
purchaser plaintiffs also say in conclusory fashion that all defendants
manipulated pricing information in the egg industry, exchanged price information
improperly, and refused to compete against each other.
 Both
groups of named plaintiffs seek treble damages and injunctive relief on behalf
of themselves and all other putative class members in the United States. 
Both groups of named plaintiffs allege a class period starting on January 1,
2000 and running “through the present.”  The direct purchaser consolidated
case alleges two separate sub-classes – one for direct purchasers of shell eggs
and one for direct purchasers of egg products.  The direct purchaser
consolidated case seeks relief under the Sherman Act.  The indirect
purchaser consolidated case seeks relief under the Sherman Act and the statutes
and common-law of various states, the District of Columbia, and Puerto
Rico.
 
 The
Pennsylvania court has entered a series of orders related to case management and
scheduling.  There is no definite schedule in either consolidated case for
discovery, class certification proceedings, or filing motions for summary
judgment.  No trial date has been set in either consolidated
case.
  60




The
Company intends to continue to defend these cases as vigorously as possible
based on defenses which the Company believes are meritorious and
provable.  The Company does not intend to enter into settlement
discussions with the Plaintiffs.





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.




15.
              Description
      of Rights and Privileges of Capital Stock—Capital Structure Consists of
      Common Stock





The
Company has two classes of capital stock: Common Stock and Class A Common Stock.
Holders of shares of the Company’s capital stock vote as a single class on all
matters submitted to a vote of the stockholders, with each share of Common Stock
entitled to one vote and each share of Class A Common Stock entitled to ten
votes. The Common Stock and Class A Common Stock have equal liquidation rights
and the same dividend rights.  In the case of any stock dividend,
holders of Common Stock are entitled to receive the same percentage dividend
(payable only in shares of Common Stock) as the holders of Class A Common Stock
receive (payable only in shares of Class A Common Stock). Upon liquidation,
dissolution, or winding-up of the Company, the holders of Common Stock are
entitled to share ratably with the holders of Class A Common Stock in all assets
available for distribution after payment in full of creditors. The Class A
Common Stock may only be issued to Fred R. Adams, Jr., the Company’s Chief
Executive Officer, and members of his immediate family, as defined. In the event
any share of Class A Common Stock, by operation of law or otherwise is, or shall
be deemed to be owned by any person other than Mr. Adams or a member of his
immediate family, the voting power of such stock will be reduced from ten votes
per share to one vote per share. Also, shares of Class A Common Stock shall be
automatically converted into Common Stock on a share per share basis in the
event the beneficial or record ownership of any such share of Class A Common
Stock is transferred to any person other than Mr. Adams or a member of his
immediate family. Each share of Class A Common Stock is convertible, at the
option of its holder, into one share of Common Stock at any time. The holders of
Common Stock and Class A Common Stock are not entitled to preemptive or
subscription rights. In any merger, consolidation or business combination, the
consideration to be received per share by holders of Common Stock must be
identical to that received by holders of Class A Common Stock, except that if
any such transaction in which shares of Capital Stock are distributed, such
shares may differ as to voting rights to the extent that voting rights now
differ among the classes of Capital Stock. No class of Capital Stock may be
combined or subdivided unless the other classes of Capital Stock are combined or
subdivided in the same proportion. No dividend may be declared and paid on Class
A Common Stock unless the dividend is payable only to the holders of Class A
Common Stock and a dividend payable to Common Stock is declared and paid
concurrently in respect of outstanding shares of Common Stock in the same number
of shares of Common Stock per outstanding share.




61


16.
              Fair
      Value Measures





The
Company is required to categorize both financial and nonfinancial assets and
liabilities based on the following fair value hierarchy.  The fair
value of an asset is the price at which the asset could be sold in an orderly
transaction between unrelated, knowledgeable, and willing parties able to engage
in the transaction. A liability’s fair value is defined as the amount that would
be paid to transfer the liability to a new obligor in a transaction between such
parties, not the amount that would be paid to settle the liability with the
creditor.




•
            Level 1 - Quoted prices in active
      markets for identical assets or
  liabilities


•
            Level 2 - Quoted prices in active
      markets for similar assets or liabilities, quoted prices in markets that
      are not active, or inputs other than quoted prices that are observable for
      the asset or liability


•
            Level
      3 - Unobservable inputs for the asset or liability that are supported by
      little or no market activity and that are significant to the fair value of
      the assets or liabilities





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




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




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




May 29, 2010
                  
                  
                  May 30, 2009Fair Value
                  
                  
                  Carrying Value
                  
                  
                  Fair Value
                  
                  
                  Carrying ValueTotal
      Debt
                  
                  $
                  135,575
                  
                  
                  $
                  134,673
                  
                  
                  $
                  130,868
                  
                  
                  $
                  129,789





Assets
Measured at Fair Value on a Recurring Basis





Assets
measured at fair value on a recurring basis consisted of the following types of
instruments as of May 29, 2010:





Fair Value Measurements at Reporting Date UsingQuoted Pricesin Active
                                                      
                                                      
                                                      SignificantMarkets for
                                                      
                                                      
                                                      Other
                                                      
                                                      
                                                      SignificantIdentical
                                                      
                                                      
                                                      Observable
                                                      
                                                      
                                                      UnobservableInstruments
                                                      
                                                      
                                                      Inputs
                                                      
                                                      
                                                      Inputs
                                                      
                                                      
                                                      Total(Level 1)
                                                      
                                                      
                                                      (Level 2)
                                                      
                                                      
                                                      (Level 3)
                                                      
                                                      
                                                      BalanceInvestment
      securities
                                                        available-for-sale
      (Current)
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      76,702
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      76,702Investment
      securities
                                                        trading
      (Current) 1
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      22,900
                                                      
                                                      
                                                      
                                                      22,900Total
      assets measured at fair value
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      76,702
                                                      
                                                      
                                                      $
                                                      22,900
                                                      
                                                      
                                                      $
                                                      99,602




1 –
              Investment
      securities trading (Current) is the aggregate fair value of the auction
      rate securities and the Rights.   The fair value of the
      auction rate securities is $21,177.   The fair value of the
      Rights is $1,723, determined as the difference between the par value and
      the fair value of the auction rate securities.    The
      aggregate fair value of the auction rate securities and the Rights is
      $22,900.


62


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





Fair Value Measurements at Reporting Date UsingQuoted Pricesin Active
                                                    
                                                    
                                                    SignificantMarkets for
                                                    
                                                    
                                                    Other
                                                    
                                                    
                                                    SignificantIdentical
                                                    
                                                    
                                                    Observable
                                                    
                                                    
                                                    UnobservableInstruments
                                                    
                                                    
                                                    Inputs
                                                    
                                                    
                                                    Inputs
                                                    
                                                    
                                                    Total(Level 1)
                                                    
                                                    
                                                    (Level 2)
                                                    
                                                    
                                                    (Level 3)
                                                    
                                                    
                                                    BalanceInvestment
      securities
                                                      available-for-sale
      (Current)
                                                    
                                                    $
                                                    —
                                                    
                                                    
                                                    $
                                                    15,165
                                                    
                                                    
                                                    $
                                                    —
                                                    
                                                    
                                                    $
                                                    15,165Investment
      securities
                                                      trading
      (Non -Current)1
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    33,150
                                                    
                                                    
                                                    
                                                    33,150Total
      assets measured at fair value
                                                    
                                                    $
                                                    —
                                                    
                                                    
                                                    $
                                                    15,165
                                                    
                                                    
                                                    $
                                                    33,150
                                                    
                                                    
                                                    $
                                                    48,315




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


The
following is a reconciliation of the beginning and ending balances for assets
measured at fair value on a recurring basis using significant unobservable
inputs (Level 3) during the period ended May 29, 2010.





Investment securities
                  Trading (Non-Current)
                
                
                Investment securities
                  Trading (Current)
                
                
                TotalBeginning
      balance – May 30, 2009
                
                $
                33,150
                
                
                $
                —
                
                
                $
                33,150Total
      gains – (realized/unrealized)
                
                
                —
                
                
                
                —
                
                
                
                —Included
      in earnings (or changes in net assets), net
                
                
                —
                
                
                
                —
                
                
                
                —Included
      in other comprehensive income, net
                
                
                —
                
                
                
                —
                
                
                
                —Purchases,
      issuances, and settlements
                
                
                —
                
                
                
                (10,250
                )
                
                
                (10,250
                )Transfers
      in and/or out of Level 3
                
                
                (33,150
                )
                
                
                33,150
                
                
                
                —Ending
      balance – May 29, 2010
                
                $
                —
                
                
                $
                22,900
                
                
                $
                22,900





Level
2


We
classified our current investment securities – available-for-sale as level
2.   These securities consist of commercial paper, certificates
of deposit, government agency bonds, taxable municipal bonds, variable rate tax
exempt municipal bonds, tax exempt municipal bonds, and zero coupon municipal
bonds with maturities of three to fifteen months when purchased. We classified
these securities as current, because amounts invested are available for current
operations.   Due to the nature of these securities, they are
reported at cost, which approximates fair value based upon quoted prices for
similar assets in active markets.  Observable inputs for these
securities are yields, credit risks, default rates, and volatility.





Level
3


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




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




63


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





The
Rights are valued at $1,723 on our condensed consolidated balance sheet at May
29, 2010.  They are included in the total amount for “Investment
securities trading” in the current asset portion of our condensed consolidated
balance sheet.  The Rights represent a firm agreement in accordance
with ASC Topic 815 (Derivatives and Hedging) (“ASC 815”), which defines a firm
agreement as an agreement binding on both parties and usually legally
enforceable.  It has the following characteristics: (a) the agreement
specifies all significant terms, including the quantity to be exchanged, the
fixed price, and the timing of the transaction, and (b) the agreement includes a
disincentive for nonperformance that is sufficiently large to make performance
probable.  The enforceability of the Rights resulted in a put option
that is recognized as a freestanding asset separate from the auction rate
securities.   We determined that the Rights do not meet the
definition of a derivative security as described in the authoritative guidance
for accounting for derivative instruments and hedging activities because the
Rights are non-transferrable, and we must tender the related auction rate
securities to receive the cash settlement.  Therefore, we have elected to
measure the Rights at fair value under ASC 825, which permits an entity to
measure certain items at fair value, to mitigate volatility in reported earnings
from the changes in the fair value of the auction rate securities.  As
a result, unrealized gains and losses will be included in earnings in future
periods.  We expect that future changes in the fair value of the
Rights will largely mitigate fair value movements in the related auction rate
securities.


64


17.   Quarterly
Financial Data:  (unaudited, amount in thousands, except per
share data):




Fiscal Year 2010First
                  
                  
                  Second
                  
                  
                  Third
                  
                  
                  FourthQuarter
                  
                  
                  Quarter
                  
                  
                  Quarter
                  
                  
                  QuarterNet
      sales
                  
                  $
                  187,666
                  
                  
                  $
                  229,233
                  
                  
                  $
                  271,156
                  
                  
                  $
                  222,088Gross
      profit
                  
                  
                  18,217
                  
                  
                  
                  46,827
                  
                  
                  
                  74,924
                  
                  
                  
                  54,676Net
      income attributable to Cal-Maine Foods, Inc.
                  
                  
                  (3,832
                  )
                  
                  
                  16,094
                  
                  
                  
                  34,534
                  
                  
                  
                  21,027Net
      income per share:Basic
                  
                  $
                  (0.16
                  )
                  
                  $
                  0.68
                  
                  
                  $
                  1.45
                  
                  
                  $
                  0.88Diluted
                  
                  $
                  (0.16
                  )
                  
                  $
                  0.67
                  
                  
                  $
                  1.45
                  
                  
                  $
                  0.88
 
 Fiscal Year 2009First
                  
                  
                  Second
                  
                  
                  Third
                  
                  
                  FourthQuarter
                  
                  
                  Quarter
                  
                  
                  Quarter
                  
                  
                  QuarterNet
      sales
                  
                  $
                  206,888
                  
                  
                  $
                  238,314
                  
                  
                  $
                  270,009
                  
                  
                  $
                  213,601Gross
      profit
                  
                  
                  40,647
                  
                  
                  
                  58,016
                  
                  
                  
                  68,157
                  
                  
                  
                  37,907Net
      income attributable to Cal-Maine Foods, Inc.
                  
                  
                  11,147
                  
                  
                  
                  27,244
                  
                  
                  
                  30,843
                  
                  
                  
                  10,266Net
      income per share:Basic
                  
                  $
                  0.47
                  
                  
                  $
                  1.15
                  
                  
                  $
                  1.30
                  
                  
                  $
                  0.43Diluted
                  
                  $
                  0.47
                  
                  
                  $
                  1.14
                  
                  
                  $
                  1.29
                  
                  
                  $
                  0.43




65


SCHEDULE
II - VALUATION AND QUALIFYING ACCOUNTS


Years
ended May 29, 2010, May 30, 2009, and May 31, 2008


(in thousands)





Balance at
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  Balance atBeginning of
                                  
                                  
                                  Charged to
                                  
                                  
                                  Write-off
                                  
                                  
                                  End ofDescription
                                  
                                  Period
                                  
                                  
                                  Cost and Expense
                                  
                                  
                                  of Accounts
                                  
                                  
                                  PeriodYear
      ended May 29, 2010Allowance
      for doubtful accounts
                                  
                                  $
                                  394
                                  
                                  
                                  $
                                  921
                                  
                                  
                                  $
                                  720
                                  
                                  
                                  $
                                  595Year
      ended May 30, 2009:Allowance
      for doubtful accounts
                                  
                                  $
                                  313
                                  
                                  
                                  $
                                  563
                                  
                                  
                                  $
                                  482
                                  
                                  
                                  $
                                  394Year
      ended May 31, 2008:Allowance
      for doubtful accounts
                                  
                                  $
                                  150
                                  
                                  
                                  $
                                  394
                                  
                                  
                                  $
                                  231
                                  
                                  
                                  $
                                  313


66


ITEM 9.  CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE





None.





ITEM 9A.  CONTROLS
AND PROCEDURES





Disclosure
Controls and Procedures





Our
disclosure controls and procedures are designed to provide reasonable assurance
that information required to be disclosed by us in the reports we file or submit
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission’s rules and
forms.  Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by us in the reports that we file or submit under the Exchange
Act is accumulated and communicated to management, including our principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure. 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 were effective as of May 29, 2010 at the reasonable
assurance level.





Internal
Control Over Financial Reporting





(a)               Management’s
Report on Internal Control Over Financial Reporting





The
following sets forth, in accordance with Section 404(a) of the Sarbanes-Oxley
Act of 2002 and Item 308 of the Securities and Exchange Commission’s Regulation
S-K, the report of management on our internal control over financial
reporting.





1.            Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. “Internal control over financial reporting” is
a process designed by, or under the supervision of, our Chief Executive Officer
and Chief Financial Officer, together with other financial officers, and
effected by our Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:





·
            Pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of our
      assets;




·
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that our receipts and expenditures are being
      made only in accordance with authorizations of our management and
      directors; and




·
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on the financial
statements.




2.               Our
management, in accordance with Rule 13a-15(c) under the Securities Exchange Act
of 1934 and with the participation of our Chief Executive Officer and Chief
Financial Officer, together with other financial officers, evaluated the
effectiveness of our internal control over financial reporting as of May 29,
2010.  The framework on which management’s evaluation of our internal
control over financial reporting is based is the “Internal Control – Integrated
Framework”published in 1992 by
the Committee of Sponsoring Organizations (“COSO”) of the Treadway
Commission.





3.               Management
has determined that our internal control over financial reporting as of May 29,
2010 is effective. It is noted that internal control over financial reporting
cannot provide absolute assurance of achieving financial reporting objectives,
but rather reasonable assurance of achieving such objectives.





4.               The
attestation report of FRAZER FROST, LLP on our internal control over financial
reporting, which includes that firm’s opinion on the effectiveness of our
internal control over financial reporting, is set forth below.




67


(b)              AttestationReport of the
Registrant’s Public Accounting Firm





Report of Independent
Registered Public Accounting Firm on Internal Control Over Financial
Reporting





Board of
Directors and Stockholders


Cal-Maine
Foods, Inc. and Subsidiaries


Jackson,
Mississippi





We have
audited Cal-Maine Foods, Inc. and Subsidiaries internal control over financial
reporting as of May 29, 2010, based on criteria established in Internal Control
– Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”).  Cal-Maine Foods, Inc. and
Subsidiaries management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying
Management’s Report on Internal Control Over Financial Reporting.  Our
responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects.  Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial
reporting, assessing that the risks that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk.  Our audit also included performing such other
procedures as we considered necessary in the circumstances.  We
believe our audit provides a reasonable basis for our opinion.





A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of consolidated financial statements for external purposes
in accordance with generally accepted accounting principles.  A
company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of consolidated financial statements
in accordance with generally accepted accounting principles, and that receipts
and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Company’s assets that could have a
material effect on the consolidated financial statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.





In our
opinion, Cal-Maine Foods, Inc. and Subsidiaries maintained, in all material
respects, effective internal control over financial reporting as of May 29,
2010, based on criteria established in Internal Control-Integrated Framework
issued by COSO.





We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheet and the related
consolidated statements of operations, stockholders’ equity and cash flows of
Cal-Maine Foods, Inc. and Subsidiaries, and our report dated August 2, 2010
expressed an unqualified opinion.





/s/
      FRAZER FROST, LLPCertified
      Public Accountants





Little
Rock, Arkansas


August 2,
2010


68


(c)               Changes in
Internal Control Over Financial Reporting





In
accordance with Rule 13a-15(c) under the Securities Exchange Act of 1934,
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, together with other financial officers, evaluated the
effectiveness, as of May 29, 2010, of our internal control over financial
reporting.  Management determined that there was no change in our
internal control over financial reporting that occurred during the fourth
quarter ended May 29, 2010, that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.





ITEM
9B.      OTHER INFORMATION





Not
applicable.





PART
III





ITEM
10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT





The
information concerning directors and executive officers is incorporated by
reference from our definitive proxy statement which is to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934 in connection with our
2010 Annual Meeting of Shareholders.





ITEM
11.  EXECUTIVE COMPENSATION





The
information concerning executive compensation is incorporated by reference from
our definitive proxy statement which is to be filed pursuant to Regulation 14A
under the Securities Exchange Act of 1934 in connection with our 2010 Annual
Meeting of Shareholders.





ITEM
      12.
              SECURITY OWNERSHIP OF
      CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER   MATTERS





The
information concerning security ownership of certain beneficial owners and
management and related stockholder matters is incorporated by reference from our
definitive proxy statement which is to be filed pursuant to Regulation 14A under
the Securities Exchange Act of 1934 in connection with our 2010 Annual Meeting
of Shareholders.





ITEM 13.  CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS





The
information concerning certain relationships and related transactions is
incorporated by reference from our definitive proxy statement which is to be
filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 in
connection with our 2010 Annual Meeting of Shareholders.





ITEM
14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES





The
information concerning principal accountant fees and services is incorporated by
reference from our definitive proxy statement which is to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934 in connection with our
2010 Annual Meeting of Shareholders.




69


PART
IV





ITEM
      15.
            EXHIBITS AND FINANCIAL
      STATEMENT SCHEDULES





(a)(1)     Financial
Statements





The
following consolidated financial statements and notes thereto of Cal-Maine
Foods, Inc. and subsidiaries are included in Item 8 and are filed
herewith:




The
following consolidated financial statements of Cal-Maine Foods, Inc. and
subsidiaries are included in Item 8:





Reports
      of Independent Registered Public Accounting Firms.
                    31-32Consolidated
      Balance Sheets – May 29, 2010 and May 30, 2009.
                    33Consolidated
      Statements of Income – Fiscal Years Ended May 29, 2010, May 30, 2009and
      May 31, 2008.
                    34Consolidated
      Statements of Changes in Shareholders' Equity for the Fiscal Years
      EndedMay
      29, 2010, May 30, 2009and May 31, 2008.
                    35Consolidated
      Statements of Cash Flows for the Fiscal Years Ended May 29, 2010, May 30,
      2009and May 31, 2008.
                    36Notes
      to Consolidated Financial Statements.
                    37(a)(2) Financial Statement
ScheduleSchedule
      II – Valuation and Qualifying Accounts
                    66


All
other schedules are omitted either because they are not applicable or required,
or because the required information is included in the financial statements or
notes thereto.





(a)(3)
Exhibits Required by
Item 601 of Regulation S-K





See
Part (b) of this Item 15.





(b)  Exhibits Required by Item
601 of Regulation S-K





The
following exhibits are filed herewith or incorporated by reference:




Exhibit
              Number
            
            Exhibit2.1
            
            Agreement
      to Form a Limited Liability Company, Transfer Assets Thereto, and Purchase
      Units of Membership Therein, dated July 28, 2005, by and among Hillandale
      Farms of Florida, Inc., Hillandale Farms, Inc., Cal-Maine Foods, Inc. and
      Jack E. Hazen, Jack E. Hazen, Jr., Homer E. Honeycutt, Jr., Orland R.
      Bethel and Dorman W. Mizell (incorporated by reference to the same exhibit
      in Registrant’s Form 8-K, dated July 28, 2005)3.1
            
            Amended
      and Restated Certificate of Incorporation of the Registrant (incorporated
      by reference to the same exhibit in Registrant’s Form S-1 Registration
      Statement No. 333-14809)3.1(a)
            
            Amendment
      to Article 4 of the Certificate of Incorporation of the Registrant
      (incorporated by reference to the same exhibit in Registrant’s Form 10-K
      for fiscal year ended May 29, 2004)3.2
            
            By-Laws
      of the Registrant, as amended (incorporated by reference to the same
      exhibit in Registrant’s Form 8-K, dated August 13,
2007)4.1
            
            See
      Exhibits 3.1 and 3.2 as to the rights of holders of the Registrant’s
      Common Stock.




70





Exhibit
                                  Number
                                
                                Exhibit10.1
                                
                                Amended
      and Restated Term Loan Agreement, dated as of May 29, 1990, between
      Cal-Maine Foods, Inc. and Cooperative Centrale Raiffeisen - Boerenleenbank
      B.A., “Rabobank Nederland,” New York Branch, and Amended and Restated
      Revolving Credit Agreement among Cal-Maine Foods, Inc., and Barclays Banks
      PLD (New York) and Cooperatieve Centrale Raiffeisen-Borenleenbank B.A.,
      dated as of  May 29, 1990, and amendments thereto (without
      exhibits) (incorporated by reference to the same exhibit in Registrant’s
      Form S-1 Registration Statement No. 333-14809)10.1(a)
                                
                                Amendment
      to Term Loan Agreement dated as of June 3, 1997 (without exhibits)
      (incorporated by reference to the same exhibit in Registrant’s Form 10-K
      for fiscal year ended May 31, 1997)10.1(b)
                                
                                Amendment
      to Term Loan Agreement dated as of April 14, 2004 (without exhibits)
      (incorporated by reference to the same exhibit in Registrant’s Form 10-K
      for fiscal year ended May 29, 2004)10.1(c)
                                
                                Amendment
      to Term Loan Agreement dated as of April 14, 2004 (without exhibits)
      (incorporated by reference to the same exhibit in Registrant’s Form 10-K
      for fiscal year ended May 29, 2004)10.1(d)
                                
                                Amendment
      to Term Loan Agreement dated as of August 6, 2004 (without exhibits)
      (incorporated by reference to the same exhibit in Registrant’s Form 10-K
      for fiscal year ended May 28, 2005)10.1(e)
                                
                                Amendment
      to Term Loan Agreement dated as of March 15, 2005 (without exhibits)
      (incorporated by reference to the same exhibit in Registrant’s Form 10-K
      for fiscal year ended May 28, 2005)10.1(f)
                                
                                Amendment
      to Term Loan Agreement) dated as of October 13, 2006 (without exhibits)
      (incorporated by reference to the same exhibit in Registrant’s Form 10-K
      for fiscal year ended June 3, 2006)10.1(g)
                                
                                Second
      Amendment and Restated [through Ninth Amendment] Revolving Credit
      Agreement dated as of February 6, 2002, among Cal-Maine Foods, Inc. and
      (as defined herein) First South, Rabobank and Harris (without exhibits,
      schedules or annex) (incorporated by reference to the same exhibit in
      Registrant’s Form 8-K, dated March 9, 2007)10.1(h)
                                
                                Tenth
      Amendment to Second Amendment and Restated Revolving Credit Agreement,
      dated as of March 15, 2007, among Cal-Maine Foods, Inc. and (as defined
      herein) First South, Rabobank and Harris (without exhibits, schedules or
      annex) (incorporated by reference to the same exhibit in Registrant’s Form
      8-K, dated March 9, 2007)10.1(i)
                                
                                Eleventh
      Amendment to Second Amendment and Restated Revolving Credit Agreement,
      dated as of November 30, 2007, among Cal-Maine Foods, Inc. and (as defined
      herein) First South, Rabobank and Harris (without exhibits, schedules, or
      annex) (incorporated by reference to the same exhibit in Registrant’s Form
      10-Q for the quarter ended December 1, 2007)10.1(j)
                                
                                Twelfth
      Amendment to Second Amendment and Restated Revolving Credit Agreement,
      dated as of January 30, 2008, among Cal-Maine Foods, Inc. and (as defined
      herein) First South, Rabobank and Harris (without exhibits, schedules, or
      annex) (incorporated by reference to the same exhibit in Registrant’s Form
      10-K for the year ended May 31, 2008)10.2
                                
                                Note
      Purchase Agreement, dated as of November 10, 1993, between John Hancock
      Mutual Life Insurance Company and Cal-Maine Foods, Inc., and amendments
      thereto (without exhibits) (incorporated by reference to the same exhibit
      in Registrant’s Form S-1 Registration Statement No.
    333-14809)10.3
                                
                                Loan
      Agreement, dated as of May 1, 1991, between Metropolitan Life Insurance
      Corporation and Cal-Maine Foods, Inc., and amendments thereto (without
      exhibits) (incorporated by reference to the same exhibit in Registrant’s
      Form S-1 Registration Statement No. 333-14809)10.4
                                
                                Employee
      Stock Ownership Plan, as Amended and Restated effective January 1, 1994
      (incorporated by reference to the same exhibit in Registrant’s Form S-1
      Registration Statement No. 333-14809)+10.5
                                
                                1993
      Stock Option Plan, as Amended (incorporated by reference to the same
      exhibit in Registrant’s Form S-1 Registration Statement No.
      333-14809)+10.6
                                
                                Wage
      Continuation Plan, dated as of July 1, 1986, between Jack Self and the
      Registrant, as amended on September 2, 1994 (incorporated by reference to
      the same exhibit in Registrant’s Form S-1 Registration Statement No.
      333-14809)+10.7
                                
                                Wage
      Continuation Plan, dated as of April 15, 1988, between Joe Wyatt and the
      Registrant (incorporated by reference to the same exhibit in Registrant’s
      Form S-1 Registration Statement No. 333-14809)+10.8
                                
                                Redemption
      Agreement, dated March 7, 1994, between the Registrant and Fred R. Adams,
      Jr. (incorporated by reference to the same exhibit in Registrant’s Form
      S-1 Registration Statement No. 333-14809)10.9
                                
                                Note
      Purchase Agreement, dated December 18, 1997, among the Registrant,
      Cal-Maine Farms, Inc., Cal-Maine Egg Products, Inc., Cal-Maine
      Partnership, LTD, CMF of Kansas LLC and First South Production Credit
      Association and Metropolitan Life Insurance Company (without exhibits,
      except names of guarantors and forms of notes) (incorporated by reference
      to the same exhibit in Registrant’s Form 10-Q for the quarter ended
      November 29, 1997)10.10
                                
                                Wage
      Continuation Plan, dated as of January 14, 1999, among Stephen Storm,
      Charles F. Collins, Bob Scott and the Registrant (incorporated by
      reference to the same exhibit in Registrant’s Form 10-K for fiscal year
      ended May 29,
1999)+




71




Exhibit
                      Number
                    
                    Exhibit10.11
                    
                    Secured
      Note Purchase Agreement, dated September 28, 1999 among the Registrant,
      Cal-Maine Partnership, LTD, and John Hancock Mutual Life Insurance
      Company, and John Hancock Variable Life Insurance Company (without
      exhibits, annexes and disclosure schedules) (incorporated by reference to
      the same exhibit in Registrant’s Form 10-Q for the quarter ended November
      27, 1999)10.11(a)
                    
                    Amended
      and Restated Second Note Purchase Agreement, dated as of September 30,
      2003, conformed copy reflecting First, Second, and Third Amendments, among
      Cal-Maine Foods, Inc., Cal-Maine Partnership, Ltd., and John Hancock Life
      Insurance Company and John Hancock Variable Life Insurance Company
      (without exhibits, schedules or annex) (incorporated by reference to the
      same exhibit in Registrant’s Form 8-K, dated March 9,
  2007)10.11(b)
                    
                    Fourth
      Amendment and Waiver Agreement dated as of March 1, 2007, among Cal-Maine
      Foods, Inc. and Cal-Maine Partnership, LTD, and John Hancock Life
      Insurance Company and John Hancock Variable Life Insurance Company
      (without exhibits, schedules or annex) (incorporated by reference to the
      same exhibit in Registrant’s Form 8-K, dated March 9,
  2007)10.11(c)
                    
                    Fifth
      Amendment and Waiver Agreement dated as of May 30, 2007, among Cal-Maine
      Foods, Inc. and Cal-Maine Partnership, LTD, and John Hancock Life
      Insurance Company and John Hancock Variable Life Insurance Company
      (without exhibits, schedules or annex) (incorporated by reference to the
      same exhibit in Registrant’s Form 10-K for the year ended May 31,
      2008)10.11(d)
                    
                    Sixth
      Amendment Agreement, dated as of January 30, 2008, among Cal-Maine Foods,
      Inc. and John Hancock Life Insurance Company and John Hancock Variable
      Life Insurance Company (without exhibits, schedules or annex)
      (incorporated by reference to the same exhibit in Registrant’s Form 10-Q
      for the quarter ended March 1, 2008)10.11(e)
                    
                    Seventh
      Amendment Agreement, dated as of May 15, 2008, among Cal-Maine Foods, Inc.
      and John Hancock Life Insurance Company and John Hancock Variable Life
      Insurance Company (without exhibits, schedules or annex) (incorporated by
      reference to the same exhibit in Registrant’s Form 10-K for the year ended
      May 31, 2008)10.12
                    
                    1999
      Stock Option Plan (incorporated by reference to Registrant’s Form S-8
      Registration Statement No. 333-39940, dated June 23,
  2000)+10.13
                    
                    2005
      Stock Option Plan (incorporated by reference to Appendix B to Registrant’s
      Proxy Statement for Annual Meeting held October 13,
  2005)+10.14
                    
                    2005
      Stock Appreciation Rights Plan (incorporated by reference to Appendix C to
      Registrant’s Proxy Statement for Annual Meeting held October 13,
      2005)+10.15
                    
                    Deferred
      Compensation Plan, dated December 28, 2006 (incorporated by reference to
      the same exhibit in Registrant’s Form 8-K, dated December 28,
      2006)+10.16
                    
                    Loan
      Agreement, dated as of November 13, 2006, between Metropolitan Life
      Insurance Company and Cal-Maine Foods Inc. (without exhibits)
      (incorporated by reference to the same exhibit in Registrant’s Form 10-Q
      for the quarter ended December 2, 2006)10.17
                    
                    Loan
      Agreement, dated as of November 12, 2009, between Cal-Maine Foods, Inc.
      and Metropolitan Life Insurance Company (incorporated by reference to the
      same exhibit in Registrant’s Form 8-K, dated November 12,
      2009)21
                    
                    Subsidiaries
      of the Registrant23.1
                    
                    Consent
      of FRAZER FROST, LLP23.2
                    
                    Consent
      of FROST, PLLC31.1
                    
                    Certification
      of Chief Executive Officer31.2
                    
                    Certification
      of Chief Financial Officer32
                    
                    Certifications
      of the Chief Executive Officer and the Chief Financial
    Officer





The
Company agrees to file with the Securities and Exchange Commission, upon
request, copies of any instrument defining the rights of the holders of its
consolidated long-term debt.





(c)              Financial Statement
Schedules Required by Regulation S-X





The
financial statement schedule required by Regulation S-X is filed at page 66. All
other schedules for which provision
is made in the applicable accounting regulations of the Securities and Exchange
Commission are not required under the
related instructions or are inapplicable and therefore have been
omitted.


72


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) 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, in Jackson, Mississippi, on this
2nd   day
of August, 2010.





CAL-MAINE
      FOODS, INC./s/ Fred R. Adams, Jr.Fred
      R. Adams, Jr.Chairman
      of the Board andChief
      Executive Officer





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:





Signature
                            
                            Title
                            
                            Date/s/ Fred R. Adams, Jr.
                            
                            Chairman
      of the Board and
                            
                            August 2, 2010Fred
      R. Adams, Jr.
                            
                            Chief
      Executive Officer(Principal
      Executive Officer)/s/  Richard K.
      Looper
                            
                            Vice
      Chairman of the Board
                            
                            August 2, 2010Richard
      K. Looper
                            
                            and
      Director/s/  Adolphus B.
      Baker
                            
                            President
      and Director
                            
                            August 2, 2010Adolphus
      B. Baker/s/  Timothy A.
      Dawson
                            
                            Vice
      President, Chief Financial
                            
                            August 2, 2010Timothy
      A. Dawson
                            
                            Officer
      and Director(Principal
      Financial Officer)/s/  Charles F.
      Collins
                            
                            Vice
      President, Controller
                            
                            August 2, 2010Charles
      F. Collins
                            
                            (Principal
      Accounting Officer)/s/  Letitia C.
      Hughes
                            
                            Director
                            
                            August 2, 2010Letitia
      C. Hughes/s/  James E.
    Poole
                            
                            Director
                            
                            August 2, 2010James
      E. Poole/s/  Steve W.
    Sanders
                            
                            Director
                            
                            August 2, 2010Steve
      W. Sanders




73


CAL-MAINE FOODS,
INC.


Form 10-K
for the fiscal year


Ended May
29, 2010


EXHIBIT
INDEX





ExhibitNumber
              
              Exhibit21
              
              Subsidiaries
      of Cal-Maine Foods, Inc23.1
              
              Consent
      of FRAZER FROST, LLP23.2
              
              Consent
      of FROST, PLLC31.1
              
              Certification
      of The Chief Executive Officer31.2
              
              Certification
      of The Chief Financial Officer32
              
              Certifications
      of The Chief Executive Officer and Chief Financial
  Officer


74