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
                1934FOR FISCAL YEAR ENDED May 31,
                2008





o
            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 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, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):


Large
      accelerated filer  ̈ Accelerated
      filer x Non-accelerated
      filer  ̈





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange 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 December
      1, 2007, which was the date of the last business day of the registrant’s most
      recently completed second fiscal quarter, was $330,278,900





As
      of
      July 30, 2008, 21,317,091 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.




2


**TABLE
      OF CONTENTS**





Item
            
            Page
              Number**Part
                I**1.
            Business
            41A.
            Risk
                Factors
            121B.
            Unresolved
                Staff Comments
            162.
            Properties
            163.
            Legal
                Proceedings
            174.
            Submission
                of Matters to a Vote of Security Holders
            18**Part
                II**5.
            Market
                for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            196.
            Selected
                Financial Data
            207.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            217A.
            Quantitative
                and Qualitative Disclosures About Market Risk
            308.
            Financial
                Statements and Supplementary Data
            309.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            609A.
            Controls
                and Procedures
            609B.
            Other
                Information
            60**Part
                III**10.
            Directors
                and Executive Officers of the Registrant
            6111.
            Executive
                Compensation
            6112.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            6113.
            Certain
                Relationships and Related Transactions
            6114.
            Principal
                Accountant Fees and Services
            61**Part
                IV**15.
            Exhibits
                and Financial Statement Schedules
            62Signatures
            67





3


**PART
      I**





**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 2008, we sold
      approximately 678 million dozen shell eggs, which represented about 15.8% of
      domestic shell egg consumption in the United States. Our total flock of
      approximately 22 million layers and 6 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.





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 reduced cholesterol,
      cage free and organic eggs and are a rapidly growing segment of the market.
      In
      fiscal 2008, specialty shell eggs represented approximately 14% of our shell
      egg
      dollar sales, as compared to 15% for fiscal 2007. Retail prices for specialty
      eggs are less cyclical than standard 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 two distinct brands: *Egg-Land's
      Best* ( *TM* )
      and *Farmhouse* ( *TM* ). ** We
      own a
      25.9% non-voting equity interest in Egg-Land's Best, Inc., which markets the
      leading brand in the specialty shell egg segment. 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 *Farmhouse* brand
      and
      distribute those shell eggs across the southeast and southwest regions of the
      United States. We also produce market and distribute private label specialty
      shell eggs to several customers. Sales of specialty shell eggs accounted for
      approximately 12.0% of our total shell egg dozen volumes in fiscal 2008, as
      compared to 8.7% in fiscal 2007.





We
      are
      also a leader in industry consolidation. Since 1989, we have completed fourteen
      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 65 producers
      who each own more than one million layers and the ten largest producers own
      approximately 43% of total industry layers. We believe industry consolidation
      will continue and we plan to capitalize on opportunities as they
      arise.





**Hillandale
      Acquisition**





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




4




In
      August
      2006, in accordance with the Agreement, we purchased, for $6.1 million, an
      additional 13% of the Units of Hillandale, LLC based on their book value as
      of
      July 29, 2006. In August 2007, we purchased, for $6.8 million, an additional
      12%
      of the Units of Hillandale, LLC based on their book value as of July 28, 2007.
      Our ownership of Hillandale, LLC currently is 76%. Our obligation to acquire
      the
      remaining 24% of Hillandale, LLC is recorded at its present value of $20.0
      million as of May 31, 2008, of which $10.4 million is included in current
      liabilities and $9.6 million is included in other non-current liabilities in
      the
      accompanying consolidated balance sheet. During fiscal 2008, an early payment
      of
      $5.7 million was paid on the purchase obligation. We will purchase an additional
      12% of Hillandale LLC based on the book value of the Membership Units as of
      July
      26, 2008. This estimated obligation was adjusted in fiscal 2008 due to the
      effect of the expected earnings increase on the book value of the membership
      units. The Company will adjust the original Hillandale purchase price allocation
      based on the ultimate amount paid for the acquisition in accordance with SFAS
      141.




Prior
      to
      the acquisition of our Units of Membership in Hillandale, LLC, we had a 44%
      membership interest in American Egg Products, LLC (“AEP”) and Hillandale, LLC
      had a 27.5% membership interest in AEP. Prior to the acquisition of Hillandale,
      LLC, our membership interest in AEP was accounted for by the equity method.
      Effective with our acquisition of Hillandale, LLC, we own a majority of the
      membership interests in AEP. Accordingly, the financial statements of AEP have
      been consolidated with our financial statements effective July 29,
      2005.




We
      gained
      effective control of the Hillandale, LLC operations upon signing of the
      Agreement. Accordingly, the acquisition date for accounting purposes was July
      28, 2005. The operations of Hillandale, LLC were consolidated with our
      operations beginning July 29, 2005.




**Certain
      Other Acquisitions**





During
      fiscal 2007, we completed two other acquisitions of egg production facilities
      located in Arkansas, which added approximately two million laying hens and
      expanded our pullet growing facilities for replacements. Eggs produced at these
      facilities are being marketed to retail food businesses and distributors in
      the
      south central states. See Note 2 of Notes to Consolidated Financial Statements
      in Part II of this Annual Report on Form 10-K.





On
      June
      27, 2008, we completed the acquisition of the assets of Zephyr Egg Company,
      located in Zephyrhills, Florida. See Note 2 of Notes to Consolidated Financial
      Statements in Part II of this Annual Report on Form 10-K.





5





**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 web site 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
      30, 2008, the last sale price of our Common Stock on NASDAQ was $31.20 per
      share *.* Our
      fiscal year 2008 ended May 31, 2008, and the first three fiscal quarters of
      fiscal 2008 ended September 1, 2007, December 1, 2007 and March 1, 2008. 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.





IMPORTANT
      FACTORS RELATING TO FORWARD-LOOKING STATEMENTS





This
      report contains numerous forward-looking statements relating to the Company's
      shell egg business, including estimated production data, expected operating
      schedules, expected capital costs and other operating data. Such forward-looking
      statements are identified by the use of words such as "believes," "intends,"
      "expects," "hopes," "may," "should," "plan," "projected," "contemplates,"
      "anticipates" or similar words. Actual production, operating schedules, results
      of operations and other projections and estimates could differ materially from
      those projected in the forward-looking statements. The factors that could cause
      actual results to differ materially from those projected in the forward-looking
      statements include (i) the risk factors set forth below under the following
      Item
      1A, (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 the Company's future
      acquisition of new flocks or businesses. Readers are cautioned not to put undue
      reliance on forward-looking statements. The Company disclaims any intent or
      obligation to update publicly these forward-looking statements, whether as
      a
      result of new information, future events or otherwise.




6





**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 252 and 257 eggs.
      In
      2007, per capita consumption in the United States was 254 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. 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 2008, wholesale large shell egg prices in the southeast region
      averaged 137.7 cents per dozen compared to an average of 79.9 cents per dozen
      for fiscal years 2005 to 2007. According to USDA reports, for the first five
      months of calendar year 2008, egg production was lower in four of the five
      months compared with the same five months of the previous calendar year. It
      is
      expected that the number of layers in the table-egg laying flock will slowly
      begin to expand, as the number of egg-type chicks hatched has been higher in
      the
      first half of calendar year 2008, as compared to the same time the previous
      calendar year. Table-egg production is expected to be slightly higher than
      the
      previous year in the second half of calendar year 2008, but still below the
      amount produced in the second half of calendar year 2006. Due to the increased
      production, egg supply should be slightly higher for the second half of 2008,
      which could translate into a slight decrease in prices for this period, as
      compared to last year.





Factors
      currently influencing demand:





-
            industry
                advertising campaigns successfully promoting the health benefits
                of
                eggs;-
            positive
                announcements from the medical community highlighting eggs as a good
                source of protein;-
            increased
                consumption resulting from the factors noted above as well as the
                reduced
                level of cholesterol in eggs;
                and-
            increased
                demand from the foodservice
                channel.




Factors
      currently influencing supply:


-
            the
                living space requirements for newly hatched layers will increase
                for 2008
                according to guidelines put in place in 2002 by the United Egg Producers,
                in conjunction with the Food Marketing Institute, both industry trade
                associations;-
            the
                process to bring new shell egg production capacity online has become
                more
                complex than in the past, increasing
                the time it takes to bring new capacity to
                market.





**Feed
      Costs for Shell Egg Production**





Feed
      is a
      primary cost component in the production of shell eggs and represents over
      one-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. Current feed
      prices are higher than the previous year. Forecasts vary widely for prices
      over
      the next year, due to irregular weather patterns in the Midwest and a much
      stronger demand for corn from ethanol plants.




7




**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 fourteen acquisitions. In addition, we have built seven new “in-line”
shell egg production and processing facilities and one pullet growing facility
      which added 8 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 6.8 million at May 28, 1988 to an average
      of
      approximately 26.4 million for the past five fiscal years. Also, the number
      of
      dozens of shell eggs sold has increased from approximately 117.0 million in
      the
      fiscal year ended May 28, 1988 to an average of approximately 645.5 million
      over
      the past five fiscal years. Net sales amounted to $915.9 million in fiscal
      2008
      compared to net sales of $69.9 million in fiscal 1988.




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 *Farmhouse* brand,
      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 those of generic shell eggs, 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.





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 last fiscal year represented approximately 15.8% 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 93% of our total fiscal 2008 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 their facilities and are paid a fee based on
      production with incentives for performance.




8




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 33
      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 1.5 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 $86.7 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
      52%
      to 64% of total 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.





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 level 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
      678 million dozen shell eggs sold by us in the fiscal year ended May 31, 2008,
      535 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 10 customers
      accounted for an aggregate of 66.5% of net sales in fiscal 2008 and 67.4% of
      net
      sales for fiscal 2007. Two affiliated customers, Wal-Mart Stores and Sam’s Club,
      on a combined basis, accounted for 36.5% of net sales during fiscal 2008 and
      36.9% of net sales for fiscal 2007.




9




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 either delivered by us to our customers' warehouses and
      facilities 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 U.S. Department of Agriculture reports, since 2000, annual per capita
      consumption in the United States has varied between 252 and 257 eggs. While
      we
      believe that fast food restaurant consumption, high protein diet trends, reduced
      egg cholesterol levels and industry advertising campaigns may result in a
      continuance of the recent increases in 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.





***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, eight of our first quarters and four of our fourth quarters have
      resulted in net operating losses.





***Specialty
      Eggs.*** We
      also
      produce specialty eggs such as *Egg-Land’s
      Best(TM)* and *Farmhouse* eggs.
      For fiscal 2008, specialty eggs accounted for 14.2% of shell egg dollar sales
      and 12.0% of shell egg dozens sold. *Egg-Land’s
      Best* *(TM)*eggs
      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
      Best**(TM)*eggs*,*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 ordinary shell eggs.*Egg-Land’s
      Best**(TM)*eggs
      accounted for approximately 9.7% of our shell egg dollar sales in fiscal 2008,
      as compared to 11.2% in fiscal 2007.*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 4.5% of our shell egg dollar sales
      in
      fiscal 2008, as compared to 4.0% in fiscal 2007. 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
      Best**(TM)*eggs
      accounted for 8.0% of dozens sold for fiscal 2008, as compared to 6.3% in fiscal
      2007.*Farmhouse*and
      other non EB specialty eggs accounted for 4.0% of dozens sold for fiscal 2008,
      as compared to 2.4% for fiscal 2007. The statistical data concerning specialty
      egg sales reflects the upward trend of specialty 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. Although we are the largest combined producer, processor,
      and distributor of shell eggs in the United States, we do not occupy a
      controlling market position in any area where our eggs are sold.




10




The
      shell
      egg industry remains highly fragmented but is characterized by a growing
      concentration of producers . In
      2007,
      65 producers with one million or more layers owned 89% of the 284 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* and *Sunups* .
      We do
      not own any patents or proprietary technologies. We produce and market *Egg-Land's
      Best(TM)* eggs
      under license agreements with EB. We own a 25.9% non-voting 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
      do
      not know 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 do not currently know 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.





***Employees*** *.* As
      of May
      31, 2008, we had a total of approximately 1,800 employees of whom 1,600 worked
      in egg production, processing and marketing, 100 were engaged in feed mill
      operations and 100 were administrative employees, including officers, at our
      executive offices. Approximately 5% 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.





11





**ITEM 1A.**
            **RISK
                FACTORS**





We
      are
      subject to numerous risks and uncertainties, including the
      following:





**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 have experienced an upward trend since 2002
      and rose to historical highs in late 2003 and early 2004. In the early fall
      of
      2004, the demand trend related to the popular diets faded dramatically. During
      the time of increased demand, the egg industry had geared up to produce more
      eggs, resulting in an oversupply of eggs. In March 2005, the egg industry took
      action to better align the size of laying flocks with current demand needs.
      Current U.S. Department of Agriculture statistics indicate a reduced flock
      size
      that is now more in line with current demand. There can be no assurance that
      shell egg prices will remain at or near current levels and that the supply
      of
      shell eggs will remain level in the future ***.***





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.**





As
      discussed above, demand for shell eggs has increased in recent years as a result
      of a number of factors. We believe that increased fast food restaurant
      consumption, favorable 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 the increase
      in 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
      costs represent the largest element of our shell egg production (farm) cost,
      ranging from 52% to 64% of total farm annual cost in each of the last five
      fiscal years. Although feed ingredients are available from a number of sources,
      we have little, if any, control over the prices of the ingredients that we
      purchase, which are affected by various demand and supply factors and have
      experienced significant fluctuations in the past. Prices for corn and soybean
      meal, essential feed ingredients, are higher this year as compared to last
      year.
      However, there are wide swings in corn and soybean meal prices because of
      irregular weather patterns in the Midwest and widely varying forecast
      projections for the 2008 fall harvest season in September and October.
      Increasing demands for the use of corn and soybean in the production of
      renewable energy such as ethanol are also putting upward pressure on the price
      of these feed ingredients. ****** Increases
      in feed costs which are not accompanied by increases in the selling price of
      shell eggs will have a material adverse effect on the results of our
      operations.




12




**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.





**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 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 2008, 2007, and 2006, two affiliated customers, Wal-Mart Stores
      and
      Sam’s Clubs, on a combined basis, accounted for 36.5%, 36.9%, and 36.6% of our
      net sales, respectively. Our top 10 customers accounted for 66.5%, 67.4%, and
      66.8% of net sales during those periods. Although we have established long-term
      relationships with many of our customers, we do not have contractual
      relationships with any of our major customers for the sale of our shell eggs.
      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.




13





**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 United States Department
      of
      Agriculture, the USDA, and Food and Drug Administration, the FDA, regulation
      and
      various state and local health and agricultural agencies. Our shell egg
      processing facilities are subject to periodic USDA inspections. Our feed
      production 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.





If
      we
      fail to comply with any applicable law or regulation or permit, 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 and adversely affected.
      In
      addition, because these laws and regulations are becoming increasingly more
      stringent, there can be no assurances 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). 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.




14




**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
      have invested in auction rate securities, the market for which is currently
      illiquid. Funds associated with certain of our auction rate securities may
      not
      be accessible for an undetermined period of time.**





We
      are
      exposed to risk related to our investments in auction rate securities. Liquidity
      for these securities is typically provided by an auction process that resets
      the
      applicable interest rate at pre-determined intervals, usually on average every
      7-35 days. Because of the short interest rate reset period, we have historically
      recorded them on our consolidated balance sheet as current investment securities
      available-for-sale. The liquidity of these securities has been negatively
      impacted by the uncertainty in the credit markets and the exposure of these
      securities to the financial condition of bond insurance companies. These
      securities had been subject to auction processes for which there had been
      insufficient bidders on the scheduled rollover dates. We will not be able to
      liquidate any of our auction rate securities until a future auction is
      successful, a buyer is found outside of the auction process or the notes are
      redeemed. An auction failure, which is not a default in the underlying debt
      instrument, occurs when there are more sellers than buyers at a scheduled
      interest rate auction date and parties desiring to sell their securities are
      unable to do so. If the credit market does not improve, auctions for our
      invested amounts may continue to fail. If an auction fails for securities in
      which we have invested, we may be unable to liquidate some or all of our auction
      rate securities at par, should we need or desire to access the funds invested
      in
      those securities. In the event we need or desire to access these funds, we
      will
      not be able to do so until a future auction on these investments is successful
      or a buyer is found outside the auction process. If a buyer is found but is
      unwilling to purchase the investments at par, we may incur a loss. Furthermore,
      if the issuers of the auction rate securities are unable to successfully
      complete future auctions and their credit ratings deteriorate, we may be
      required to adjust the carrying value of these investments by recording an
      impairment charge.




There
      is
      no assurance as to when the market for auction rate securities will stabilize.
      The fair value of our auction rate securities could change significantly based
      on market conditions and continued uncertainties in the credit markets. If
      conditions in the credit markets deteriorate further causing additional auctions
      to fail, the funds associated with these auction rate securities may also not
      be
      accessible for an undetermined period of time, and we may be required to record
      losses or an impairment charge on our auction rate securities portfolio in
      future quarters, which may harm our financial condition.





**We
      are controlled by a principal stockholder.**





Fred
      R.
      Adams, Jr., our Chairman of the Board and Chief Executive Officer, and his
      spouse own 33.8% of the outstanding shares of our Common Stock, which has one
      vote per share, and Mr. Adams owns 81.3% and his son-in-law, Adolphus B. Baker,
      our president, chief operating officer and director, owns 18.7% of the
      outstanding shares of Class A Common Stock, which has ten votes per share.
      Mr.
      Baker and his spouse also own 1.7% of the outstanding shares of our Common
      Stock. As a result, currently Mr. Adams and his spouse possess 58.9%, and
      Messrs. Adams and Baker and their spouses possess 69.6%, 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.




15




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 the 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 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 4350(c) (5) 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**





Not
      applicable




**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, South
      Carolina, Tennessee, Texas and Utah. The facilities currently include two
      breeding facilities, two hatcheries, five wholesale distribution centers, 17
      feed mills, 33 shell egg production facilities, 21 pullet growing facilities,
      and 31 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 19,000 acres of land in various locations throughout our
      geographic market area. We have the ability to hatch 21.2 million pullet chicks
      annually, grow 15 million pullets annually, house 27 million laying hens and
      control the production of an aggregate total of 28 million layers. We also
      own
      or control mills that can produce 590 tons per hour of feed, and processing
      facilities capable of processing 10,400 cases of shell eggs per hour (with
      each
      case containing 30 dozen shell eggs). Our facilities are well-maintained and
      operate at a high level of efficiency. Typically, we insure our facilities
      for
      replacement value.





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 $86.7 million. The Company’s facilities
      currently are maintained in good operable condition and are insured to an extent
      the Company deems adequate.




16


ITEM3.
            LEGAL
                PROCEEDINGS




**Chicken
      Litter Litigation.**





On
      May 2,
      2005, Cal-Maine Farms, Inc. (“Cal-Maine Farms”), one of our subsidiaries, was
      added as a defendant in an ongoing action styled Leslie Carroll, et al. v.
      Alpharma, Inc., et al. in the Circuit Court of Washington County, Arkansas.
      There are approximately 80 plaintiffs in the action. The plaintiffs complain
      of
      a wide variety of medical problems which they attribute to the use of chicken
      manure and litter throughout Washington County, Arkansas. The theory of
      liability is the same as in the McWhorter case previously reported in our
      filings with the Securities and Exchange Commission and summarized below. An
      answer has been filed, and discovery has begun, but no trial date has been
      set.
      At this stage it is impossible to evaluate the potential exposure, if any,
      of
      Cal-Maine Farms to damages in this suit.





On
      February 3, 2004, Cal-Maine Farms was served with process in a civil complaint
      filed in the Circuit Court of Washington County, Arkansas, on behalf of Keith
      McWhorter and Patsy McWhorter, individually and as next friends and guardians
      of
      Hunter McWhorter. Other defendants include Alpharma Inc., Alpharma Animal Health
      Co., Cargill Incorporated, George’s Farms, Inc., Peterson Farms, Inc., Simmons
      Foods, Inc., Simmons Poultry Farms, Inc., and Tyson Foods, Inc. Each of the
      other poultry defendants is engaged in the broiler business. The Alpharma
      defendants produce additives for broiler feed. One individual was originally
      named as a defendant, but has been dismissed.





Both
      the
      McWhorter and Carroll suits 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 Carroll suit focuses on a feed
      ingredient that contains arsenic and is alleged to be in the litter that was
      spread. We do not use this particular feed ingredient in our shell egg
      production feed formulation. The McWhorter suit focuses on mold and fungi
      allegedly created by the application of litter. Both suits address conditions
      alleged to exist in Washington County. Both suits seek unspecified actual
      damages and request unspecified punitive damages. An answer has been filed
      on
      behalf of Cal-Maine Farms and some initial discovery has taken place. At this
      stage it is impossible to evaluate the potential exposure, if any, of Cal-Maine
      Farms to damages in these suits.





A
      number
      of other similar cases were filed by the same attorneys at the same time the
      McWhorter and Carroll cases were filed. The plaintiffs’ attorneys selected a
      test case which they prosecuted first. No Cal-Maine company was a defendant
      in
      that case, but the issues were the same as in the McWhorter and Carroll cases.
      Summary judgment was entered for the poultry defendants in that test case.
      The
      Arkansas Supreme has now reversed that entry of summary judgment. That test
      case
      has been scheduled for trial in 2009. Neither the McWhorter nor Carroll case
      has
      been scheduled for trial.





**State
      of Oklahoma Watershed Pollution Litigation.**





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





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




17




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





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





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





No
      matters were submitted to a vote of our security holders, through the
      solicitation of proxies or otherwise, during the fourth quarter of the fiscal
      year.




18




**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 30, 2008 was $38.02 per
      share. The following table sets forth the high and low daily sale prices and
      dividends per share for four quarters of fiscal 2007 and fiscal
      2008.





Sales Price
            
            DividendsFiscal Year Ended
            
            Fiscal Quarter
            
            High
            
            LowJune
                2, 2007
            
            
            First
                Quarter
            
            $
            7.58
            
            $
            6.29
            
            $
            0.0125Second
                Quarter
            
            
            8.45
            
            
            6.14
            
            $
            0.0125Third
                Quarter
            
            
            14.49
            
            
            7.91
            
            $
            0.0125Fourth
                Quarter
            
            
            14.07
            
            
            11.33
            
            $
            0.0125May
                31, 2008
            
            
            First
                Quarter
            
            $
            22.73
            
            $
            13.04
            
            $
            0.0125Second
                Quarter
            
            
            28.75
            
            
            19.59
            
            $
            0.0125Third
                Quarter
            
            
            35.90
            
            
            20.75
            
            $
            0.8038Fourth
                Quarter
            
            
            40.75
            
            
            26.60
            
            $
            0.5138





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 (81.3%) and his son-in-law Adolphus
      Baker, President, Chief Operating Officer and Director of the Company
      (18.7%).





**STOCKHOLDERS**





At
      August
      1, 2008, there were approximately 290 ** record
      holders of our Common Stock and approximately 19,300 beneficial owners whose
      shares were held by nominees or broker dealers.





**DIVIDENDS**





We
      have
      paid cash dividends on our Common Stock since 1998. The annual dividend rate
      of
      $0.05 per share of Common Stock, or $0.0125 per quarter, was paid in each of
      the
      fiscal quarters shown in the table above, through the second quarter of fiscal
      2008. We have also paid cash dividends on our Class A Common Stock at a rate
      equal to 95% of the annual rate on our Common Stock. Effective November 30,
      2007, the Company’s Board of Directors approved the adoption of a variable
      dividend policy to replace the Company’s fixed dividend policy. Commencing with
      the third quarter of fiscal 2008 Cal-Maine began to pay 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. The amount of the dividend payable on each
      share
      of Class A Common Stock is in an amount equal to 95% of the amount paid on
      each
      share of Common Stock. Dividends are paid to shareholders of record as of the
      sixtieth day following the last day of such quarter, and are payable on the
      fifteenth 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 31, 2008.


19





**ITEM 6.**
            **SELECTED
                FINANCIAL DATA**





The
      per
      share data shown in the following table has been adjusted to reflect the 2-for-1
      split of our Common Stock effective April 14, 2004, as if the split had occurred
      at the beginning of fiscal year 2004.


Fiscal
                  Years EndedMay
                  31
                2008
              
              June
                  2
                2007
              
              June
                  3
                2006
              
              May
                  28
                2005
              
              May
                  29
                200452
                  wks
              
              52
                  wks
              
              53
                  wks
              
              52
                  wks
              
              52
                  wks(Amounts
                  in thousands, except per share and operating data)**Statement
                  of Operations Data:**Net
                  sales
              
              $
              915,939
              
              $
              598,128
              
              $
              477,555
              
              $
              375,266
              
              $
              572,331Cost
                  of sales
              
              
              617,383
              
              
              479,504
              
              
              415,338
              
              
              339,833
              
              
              396,704Gross
                  profit
              
              
              298,556
              
              
              118,624
              
              
              62,217
              
              
              35,433
              
              
              175,627Selling,
                  general and administrative
              
              
              74,919
              
              
              60,394
              
              
              57,702
              
              
              47,758
              
              
              69,305Operating
                  income (loss)
              
              
              223,637
              
              
              58,230
              
              
              4,515
              
              
              (12,325
              )
              
              106,322Other
                  income (expense):Interest
                  expense (net of non cash interest expense & interest income)
              
              
              (3,152
              )
              
              (4,993
              )
              
              (5,582
              )
              
              (4,222
              )
              
              (6,527
              )Interest
                  expense - non cash
              
              
              (942
              )
              
              (882
              )
              
              (1,284
              )
              
              -
              
              
              -Equity
                  in income (loss) of affiliates
              
              
              6,324
              
              
              1,699
              
              
              (757
              )
              
              (88
              )
              
              5,923Non-controlling
                  interest
              
              
              (175
              )
              
              286
              
              
              165
              
              
              -
              
              
              -Other
                  (net)
              
              
              5,699
              
              
              1,921
              
              
              1,465
              
              
              1,227
              
              
              5247,754
              
              
              (1,969
              )
              
              (5,993
              )
              
              (3,083
              )
              
              (80
              )Income
                  (loss) before income tax
              
              
              231,391
              
              
              56,261
              
              
              (1,478
              )
              
              (15,408
              )
              
              106,242Income
                  tax expense (benefit)
              
              
              79,530
              
              
              19,605
              
              
              (465
              )
              
              (5,050
              )
              
              39,800Net
                  income (loss)
              
              $
              151,861
              
              $
              36,656
              
              $
              (1,013
              )
              $
              (10,358
              )
              $
              66,442Net
                  income (loss) per common share:Basic
              
              $
              6.41
              
              $
              1.56
              
              $
              (0.04
              )
              $
              (0.43
              )
              $
              2.78Diluted
              
              $
              6.40
              
              $
              1.55
              
              $
              (0.04
              )
              $
              (0.43
              )
              $
              2.73Cash
                  dividends declared per share *
              
              $
              1.34
              
              $
              0.05
              
              $
              0.05
              
              $
              0.05
              
              $
              0.05Weighted
                  average shares outstanding:Basic
              
              
              23,677
              
              
              23,526
              
              
              23,496
              
              
              23,834
              
              
              23,874Diluted
              
              
              23,733
              
              
              23,599
              
              
              23,496
              
              
              23,834
              
              
              24,342**Balance
                  Sheet Data:**Working
                  capital
              
              $
              121,550
              
              $
              80,552
              
              $
              60,800
              
              $
              73,587
              
              $
              92,949Total
                  assets
              
              
              501,236
              
              
              364,568
              
              
              317,118
              
              
              269,534
              
              
              301,559Total
                  debt (including current maturities)
              
              
              97,150
              
              
              112,852
              
              
              103,912
              
              
              82,994
              
              
              90,031Total
                  stockholders’ equity
              
              
              275,680
              
              
              155,739
              
              
              119,775
              
              
              121,855
              
              
              140,165**Operating
                  Data:**Total
                  number of layers at period ended (thousands)
              
              
              21,853
              
              
              23,181
              
              
              23,276
              
              
              18,164
              
              
              20,318Total
                  shell eggs sold (millions of dozens)
              
              
              678.5
              
              
              685.4
              
              
              683.1
              
              
              575.4
              
              
              605.2




* Class
      A
      shares paid at 95% of the common stock dividend rate.


20





**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 and financial condition and business, reference is made to the
      information set forth above in Item 1 under the caption "Important Factors
      Relating to Forward-Looking Statements."





OVERVIEW





We
      are
      primarily engaged in the production, grading, packing, and sale of fresh shell
      eggs. Our fiscal year end is the Saturday nearest to May 31 which was May 31,
      2008 (52 weeks), June 2, 2007 (52 weeks), and June 3, 2006 (53 weeks) for the
      most recent three fiscal years.





Our
      operations are fully integrated. At our facilities we hatch chicks, grow
      pullets, manufacture feed, and produce, process, and distribute shell eggs.
      We
      currently are the largest producer and distributor of fresh shell eggs in the
      United States. Shell eggs accounted for approximately 94% of our net sales
      in
      fiscal 2008 and 96% in fiscal 2007. Egg products accounted for approximately
      5%
      of our net sales in fiscal 2008 and 2% in fiscal 2007. We primarily market
      our
      shell eggs in the southwestern, southeastern, mid-western and mid-Atlantic
      regions of the United States. Shell eggs are sold directly by us primarily
      to
      national and regional supermarket chains.





We
      currently use contract producers for approximately 7% 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
      also
      own the eggs produced. Also, shell eggs are purchased, as needed, for resale
      by
      us from outside producers.





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





Our
      cost
      of production is materially affected by feed costs, which currently averages
      about 64% of our total farm egg production cost. Changes in feed costs result
      in
      changes in our cost of goods sold. The cost of feed ingredients is affected
      by a
      number of supply and demand factors such as crop production and weather, and
      other factors, such as the level of grain exports, over which we have little
      or
      no control.





The
      purchase of Hillandale, LLC, AEP and Hillandale Farms, LLC described above
      in
      Part 1, Item 1, is collectively referred to below as the “Hillandale
      Purchase".


21





RESULTS
      OF OPERATIONS





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





Percentage of Net Sales
              Fiscal Years EndedMay 31, 2008
            
            June 2, 2007
            
            June 3, 2006Net
                sales
            
            
            100.00
            %
            
            100.00
            %
            
            100.00
            %Cost
                of sales
            
            
            67.4
            
            
            80.2
            
            
            87.0Gross
                profit
            
            
            32.6
            
            
            19.8
            
            
            13.0Selling,
                general & administrative expenses
            
            
            8.2
            
            
            10.1
            
            
            12.1Operating
                income (loss)
            
            
            24.4
            
            
            9.7
            
            
            0
                .9Other
                income (expense)
            
            
            0.9
            
            
            (0.3
            )
            
            (1.2
            )Income
                (loss) before taxes
            
            
            25.3
            
            
            9.4
            
            
            (0.3
            )Income
                tax expense (benefit)
            
            
            8.7
            
            
            3.3
            
            
            (0.1
            )Net
                income (loss)
            
            
            16.6
            %
            
            6.1
            %
            
            (0.2
            )%




***Fiscal
      Year Ended May 31, 2008 Compared to Fiscal Year Ended June 2,
      2007***





*Net
      Sales.* In
      fiscal
      2008, approximately 94% of our net sales consisted of shell egg sales and
      approximately 5% was for sales of egg products, with the 1% balance consisting
      of sales of incidental feed sales to outside egg producers.  Net
      sales
      for the fiscal year ended May 31, 2008 were $915.9 million, an increase of
      $317.8 million, or 53.1%, from net sales of $598.1 million for fiscal 2007.
      In
      fiscal 2008 total dozens of eggs sold decreased and egg selling prices increased
      as compared to fiscal 2007. In fiscal 2008 total dozens of shell eggs sold
      were
      678.5 million, a decrease of 6.9 million dozen, or 1.0%, compared to 685.4
      million sold in fiscal 2007. Our average selling price of shell eggs increased
      from $.832 per dozen for fiscal 2007 to $1.260 per dozen for fiscal 2008, an
      increase of $.428 per dozen, or 51.4%. 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. Egg supply has been better balanced with demand resulting in
      favorable egg market conditions. According to statistics from the USDA, the
      number of table-egg laying hens was down from the previous year, which added
      continued support in balancing supply and demand in the shell egg market.
      Improved balancing of supply and demand, led to higher average shell egg selling
      prices throughout the fiscal year ended May 31, 2008, as compared to the
      previous year.





We
      continue to increase our sales volume of specialty eggs, which include reduced
      cholesterol, cage free and organic eggs. Specialty egg retail prices are less
      cyclical than standard shell egg prices and are generally higher due to consumer
      willingness to pay for the increased benefits from these products. For fiscal
      2008, specialty eggs accounted for 14.2% of shell egg dollar sales, as compared
      to 15.2% in fiscal 2007 and 12.0% of shell egg dozens sold in fiscal 2008,
      as
      compared to 8.7% in fiscal 2007. This fiscal year our egg product sales were
      $42.8 million, an increase of $28.9 million or 207.9%, as compared to $13.9
      million for fiscal 2007. Our consolidated net sales include the sales of egg
      products by AEP and Texas Egg Products, LLC. For fiscal 2008, egg product sales
      for AEP were $25.5 million, as compared to $13.5 million for fiscal 2007, an
      increase of $12.0 million, or 88.9%. The egg product sales for Texas Egg
      Products, LLC in fiscal 2008 were $17.3 million, as compared to $424,000 for
      fiscal 2007, an increase of $16.9 million. As described in note 1 to the
      consolidated financial statements, Texas Egg Products, LLC is a variable
      interest entity for which the Company is the primary beneficiary. Texas Egg
      Products, LLC began operations in fiscal 2007, and we consolidated 5 weeks
      of
      activity for fiscal 2007, as compared to 52 weeks in fiscal 2008. 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.


22


*Cost
      of Sales.* Cost
      of
      sales consists of costs directly related to production and processing of shell
      eggs, including feed costs, and purchases of shell eggs from outside egg
      producers. Cost of sales for the fiscal year ended May 31, 2008 was $617.4
      million, an increase of $137.9 million, or 28.8%, as compared to cost of sales
      of $479.5 million for fiscal 2007. On a comparable basis, dozens produced
      decreased, dozens purchased from outside shell egg producers decreased and
      cost
      of feed ingredients increased in fiscal 2008. The cost of the shell eggs
      purchased from outside producers increased due to improved egg market selling
      prices. This fiscal year we produced 79% of the eggs sold by us, as compared
      to
      78% for the previous year. Feed cost for fiscal 2008 was $.334 per dozen,
      compared to $.252 per dozen for the prior fiscal year, an increase of 32.5%.
      Higher than average egg selling prices, more than offset the increase in feed
      ingredient costs and higher costs of purchases from outside egg producers,
      resulting in an increase in gross profit from 19.8% of net sales for fiscal
      2007
      to 32.6% of net sales for fiscal 2008.





*Selling,
      General and Administrative Expenses.* Selling,
      general and administrative expenses include costs of marketing, distribution,
      accounting and corporate overhead. ** Selling,
      general and administrative expense was $74.9 million in fiscal 2008, an increase
      of $14.5 million as compared to $60.4 million for fiscal 2007. The increase
      in
      selling, general, and administrative expenses is primarily attributable to
      increases of $2.3 million in franchise fees for specialty egg sales, $4.8
      million in our equity compensation plan expense, $2.2 million in administrative
      payroll expenses, $2.1 million in employee insurance costs, $645,000 for
      commissions paid to egg brokers, with delivery costs slightly up with an
      increase of $598,000. The expense recognized in connection with our stock based
      compensation plans is dependent on the price of the Company's common stock,
      which increased from $13.46 at June 2, 2007 to $31.20 at May 31, 2008. Overall,
      delivery costs increased slightly, due to continued reduction in the number
      of
      Company long haul trucks and the increased use of contract trucking. As a
      percent of net sales, selling, general and administrative expense decreased
      from
      10.1% for fiscal 2007 to 8.2% for fiscal 2008.





*Operating
      Income (Loss).* As
      a
      result of the above, our operating income was $223.6 million for fiscal 2008,
      as
      compared to operating income of $58.2 million for fiscal 2007. The operating
      income as a percent of sales for fiscal 2008 was 24.4%, as compared to operating
      income of 9.7% for fiscal 2007. **





*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 2008 was $7.8 million as compared to other expense of $2.0
      million for fiscal 2007, an increase of $9.8 million. We had lower average
      long-term borrowing balances and higher invested cash balances, which decreased
      net interest expense.  Other
      income increased due to increased equity in income of affiliates, which are
      also
      in the shell egg business. Gains recorded on the sale of property, plant, &
equipment, which includes the sale of our feed mill in Albuquerque, NM, also
      increased other income. 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 income was .9%
      for
      fiscal 2008, as compared to other expense of .3% for fiscal 2007.





*Income
      Taxes.* For
      the
      fiscal year ended, May 31, 2008, our pre-tax income was $231.4 million, as
      compared to $56.3 million for fiscal 2007. Income tax expense of $79.5 million
      was recorded for fiscal 2008 with an effective income tax rate of 34.4%, as
      compared to $19.6 million for fiscal 2007 with an effective income tax rate
      of
      34.8%. Our effective tax rate differs from the federal statutory income tax
      rate
      of 35% due to state income taxes and certain items included in income for
      financial reporting purposes that are not included in taxable income or loss
      for
      income tax purposes, including tax exempt interest income, certain employee
      stock option expense and the minority ownership in the profits and losses held
      in consolidated entities.





*Net
      Income.* As
      a
      result of the above, net income for fiscal 2008 was $151.9 million, or $6.41
      per
      basic share and $6.40 per diluted share, as compared to $36.7 million, or $1.56
      per basic share and $1.55 per diluted share for fiscal 2007.


23





***Fiscal
      Year Ended June 2, 2007 Compared to Fiscal Year Ended June 3,
      2006***





*Net
      Sales.* In
      fiscal
      2007, approximately 96% of our net sales consisted of shell egg sales and
      approximately 2% was for incidental feed sales to outside egg producers, with
      the 2% balance consisting of sales of egg products.  Net
      sales
      for the fiscal year ended June 2, 2007 were $598.1 million, an increase of
      $120.5 million, or 25.2%, from net sales of $477.6 million for fiscal 2006.
      Total dozens of eggs sold and egg selling prices increased as compared to fiscal
      2006. In fiscal 2007 total dozens of shell eggs sold were 685.4 million, an
      increase of 2.3 million dozen, or .3%, compared to 683.1 million sold in fiscal
      2006. Our average selling price of shell eggs increased from $.672 per dozen
      for
      fiscal 2006 to $.832 per dozen for fiscal 2007, an increase of $.160 per dozen,
      or 23.8%. 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. During fiscal
      2004, consumer demand increased, partially due to the popularity of high protein
      diets. Egg producers increased egg supply to meet consumer demand. During our
      second fiscal 2005 quarter, consumer demand decreased to normal levels. At
      the
      same time, egg supply continued at the higher levels and resulted in a drop
      in
      egg selling prices for the remainder of fiscal 2005. During fiscal 2006,
      consumer demand improved slightly, but egg supply continued at higher levels.
      During fiscal 2007, consumer demand remained steady, but egg supply was lower,
      which resulted in stronger egg prices.





*Cost
      of Sales.* Cost
      of
      sales consists of costs directly related to production and processing of shell
      eggs, including feed costs, and purchases of shell eggs from outside egg
      producers. Cost of sales for the fiscal year ended June 2, 2007 was $479.5
      million, an increase of $64.2 million, or 15.5%, as compared to cost of sales
      of
      $415.3 million for fiscal 2006. On a comparable basis, dozens produced
      decreased, dozens purchased from outside shell egg producers increased and
      cost
      of feed ingredients increased in fiscal 2007. The cost of the shell eggs
      purchased from outside producers increased due to improved egg market selling
      prices. Feed cost for fiscal 2007 was $.252 per dozen, compared to $.206 per
      dozen for the prior fiscal year, an increase of 22.3%. Higher than average
      egg
      selling prices, more than offset the increase in feed ingredient costs and
      higher costs of purchases from outside egg producers, resulting in an increase
      in gross profit from 13% of net sales for fiscal 2006 to 19.8% of net sales
      for
      fiscal 2007.





*Selling,
      General and Administrative Expenses.* Selling,
      general and administrative expenses include costs of marketing, distribution,
      accounting and corporate overhead. ** Selling,
      general and administrative expense was $60.4 million in fiscal 2007, an increase
      of $2.7 million as compared to $57.7 million for fiscal 2006. The increase
      in
      selling, general, and administrative expenses is primarily attributable to
      an
      increase of $1.8 million in franchise fees for specialty egg sales, and an
      increase of $2.2 million in our equity compensation plan expense, with an
      overall decrease in delivery costs. The cost of the stock based compensation
      plans is dependent on the price of the Company's common stock, which increased
      from $7.19 at June 3, 2006 to $13.46 at June 2, 2007. Overall, delivery costs
      have decreased, due to a reduction in the number of Company long haul trucks,
      increased back haul loads and the increased use of contract trucking. Selling,
      general and administrative expense was $.088 per dozen sold for fiscal 2007
      as
      compared to $0.084 for fiscal 2006. As a percent of net sales, selling, general
      and administrative expense decreased from 12.1% for fiscal 2006 to 10.1% for
      fiscal 2007





*Operating
      Income (Loss).* As
      a
      result of the above, our operating income was $58.2 million for fiscal 2007,
      as
      compared to operating income of $4.5 million for fiscal 2006. The operating
      income as a percent of sales for fiscal 2007 was 9.7%, as compared to operating
      income of .9% for fiscal 2006. **





*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 2007 was $2.0 million as compared to other expense of $6.0
      million for fiscal 2006, a decrease of $4.0 million. Net interest expense for
      fiscal 2007 decreased by $1.0 million, due to lower average long-term debt
      balances. In fiscal 2007, we reduced interest expense by capitalizing $566,000
      of interest in connection with the construction of egg products and spent hen
      processing facilities in Waelder, TX. The non-cash interest expense, as
      explained below, decreased by $402,000. The reduction of other expense is
      attributable primarily to the increase in net income of affiliates. The non-cash
      expense is imputed on our non-interest bearing obligation to acquire the
      remaining membership units of Hillandale, LLC’s over the remaining acquisition
      period culminating with us having a 100% interest in Hillandale, LLC. As a
      percent of net sales, other expense was .3% for fiscal 2007, as compared to
      1.2%
      for fiscal 2006.


24





*Income
      Taxes.* For
      the
      fiscal year ended, June 2, 2007, our pre-tax income was $56.3 million, as
      compared to a pre-tax loss of $1.5 million for fiscal 2006. Income tax expense
      of $19.6 million was recorded for fiscal 2007 with an effective income tax
      rate
      of 34.8%, as compared to an income tax benefit of $465,000 for fiscal 2006
      with
      an effective income tax rate of 31.5%. Our effective tax rate differs from
      the
      federal statutory income tax rate of 35% due to state income taxes and certain
      items included in income for financial reporting purposes that are not included
      in taxable income or loss for income tax purposes, including tax exempt interest
      income, certain employee stock option expense and the minority ownership in
      the
      profits and losses held in consolidated entities such as Hillandale, LLC.





*Net
      Income.* As
      a
      result of the above, net income for fiscal 2007 was $36.7 million, or $1.56
      per
      basic share and $1.55 per diluted share, compared to net loss of $1.0 million,
      or $0.04 per basic and diluted share for fiscal 2006.





***Capital
      Resources and Liquidity*** *.* Our
      working capital at May 31, 2008 was $121.6 million compared to $80.6 million
      at
      June 2, 2007. Our current ratio was 2.18 at May 31, 2008 as compared with 2.06
      at June 2, 2007. Our need for working capital generally is highest in the first
      and second fiscal quarters ending in August and November. During the first
      quarter shell egg prices are normally at seasonal lows. In the second quarter,
      we usually build inventory balances in anticipation of the holiday season.
      Seasonal borrowing needs frequently are higher during these periods than during
      other fiscal periods. We have a $40 million line of credit with three banks,
      $2.7 million of which was utilized as a standby letter of credit at May 31,
      2008. Our long-term debt at that date, including current maturities, totaled
      $97.2 million, as compared to $112.9 million at June 2, 2007.





For
      the
      fiscal year ended May 31, 2008, $158.4 million in net cash was provided by
      operating activities. This compares to $59.7 million of net cash provided for
      the fiscal year ended June 2, 2007. In fiscal 2008, $31.7 million was used
      for
      purchases of property, plant and equipment, which includes $14.6 million in
      expenditures in connection with construction of our facilities in Farwell,
      TX.
      Net cash of $2.7 million was used for investments and $531,000 received on
      notes
      receivable. In fiscal 2008, we received $2.5 million from the disposal of
      property, plant and equipment. As part of our stock option plan, approximately
      $626,000 was received for sales of common stock from the treasury, and $19.7
      million was used for payments of dividends on our common stock. Payments of
      $15.7 million were made on long-term debt. In accord with the Hillandale, LLC
      purchase agreement, we made payments of $12.5 million on our long-term purchase
      obligation. The net result was an increase in cash and cash equivalents of
      approximately $79.8 million .





For
      the
      fiscal year ended June 2, 2007, $59.7 million in net cash was provided by
      operating activities. This compares to $20.9 million of net cash provided for
      the fiscal year ended June 3, 2006. In fiscal 2007, $12.1 million was used
      for
      acquisition of businesses; $23.5 million was used for purchases of property,
      plant and equipment. Net cash of $14.5 million was used for investments and
      $251,000 received on notes receivable. In fiscal 2007, we received $503,000
      from
      the disposal of property, plant and equipment. As part of our stock option
      plan,
      approximately $262,000 was received for sales of common stock from the treasury,
      and $1.2 million was used for payments of dividends on our common stock.
      Proceeds from long-term borrowings of $29.5 million were received and payments
      of $31.2 million were made on long-term debt. In accord with the Hillandale,
      LLC
      purchase agreement, we made a payment of $6.1 million on our long-term purchase
      obligation. The net result was an increase in cash and cash equivalents of
      approximately $1.7 million .





Substantially
      all trade receivables and inventories collateralize our revolving line of credit
      and most of our property, plant and equipment collateralize our long-term debt
      under our loan agreements with our lenders. Unless otherwise approved by our
      lenders, we are required by provisions of these loan agreements to (1) maintain
      minimum levels of working capital (ratio of not less than 1.25 to 1) and net
      worth (minimum of $90.0 million tangible net worth adjusted for earnings);
      (2)
      limit capital expenditures less exclusions (not to exceed $60.0 million for
      any
      period of four consecutive fiscal quarters), lease obligations and additional
      long-term borrowings (total funded debt to total capitalization not to exceed
      55%); and (3) maintain various cash-flow coverage ratios (1.25 to 1), among
      other restrictions. At May 31, 2008, we were in compliance with the provisions
      of all loan agreements. Under certain of the loan agreements, the lenders have
      the option to require the prepayment of any outstanding borrowings in the event
      we undergo a change in control.


25


Under
      the
      terms of our Agreement with Hillandale and the Hillandale shareholders, a new
      Florida limited liability company named Hillandale, LLC was formed. In fiscal
      2006, we purchased 51% of the Units of Membership in Hillandale, LLC, with
      the
      remaining Units to be acquired in essentially equal annual installments over
      a
      four-year period. The purchase price of the Units is equal to their book value
      as calculated in accordance with the terms of the Agreement. In fiscal 2007,
      we
      purchased, pursuant to the Agreement, an additional 13% of the Units of
      Membership for $6.1 million from our cash balances. In fiscal 2008, we purchased
      an additional 12% of the Units of Membership for $6.8 million from our cash
      balances. During fiscal 2008, an early payment of $5.7 million was paid on
      the
      purchase obligation. We have recorded the obligation to acquire the remaining
      24% at its estimated present value of $20.0 million at May 31, 2008. The actual
      remaining purchase price may be higher or lower when the acquisitions are
      completed. Future funding is expected to be provided by our cash balances and
      borrowings. During fiscal 2008, the company revised the estimated purchase
      obligation upward for the remaining 24% interest to be acquired in Hillandale,
      LLC, based on the effect of the expected earnings increase on the book value
      of
      the membership units. This additional cost exceeded the estimated fair value
      of
      net assets acquired by $9,257 which has been assigned to goodwill on our
      consolidated balance sheets.





Capital
      expenditure requirements are expected to be for the normal repair and
      replacement of our facilities. In addition, we are constructing a new integrated
      layer production complex in West Texas to replace our Albuquerque, New Mexico
      complex, which has ceased egg production. The expected cost is approximately
      $30.0 million. Completion of this facility is estimated to be in January 2010.
      As of May 31, 2008 capital expenditures related to construction of this complex
      were $14.6 million. The remaining future capital expenditures will be funded
      by
      cash flows from operations, existing lines of credit and additional long-term
      borrowings.





As
      of May
      31, 2008, we were a guarantor of approximately $4.2 million of long-term debt
      of
      Delta Egg Farm, LLC, an unconsolidated affiliate located in Delta, Utah. Delta
      Egg Farm, LLC is constructing an organic egg production and distribution
      facility near Chase, Kansas. The cost of construction is estimated to be
      approximately $13.0 million. In connection with this project, we are a pro
      rata
      guarantor, with the other Delta Egg Farm, LLC owners, of additional debt
      undertaken to fund construction of this facility. With the inclusion of the
      original amount of debt for which we were a guarantor at May 31, 2008, we are
      currently a guarantor of approximately $7.5 million of long-term debt of Delta
      Egg Farm, LLC.





At
      May
      31, 2008, the Company held auction rate securities (“ARS”) with a cost of $42.3
      million and an estimated fair value of $40.8 million. These securities may
      be
      purchased or sold through an auction process in short term intervals, which
      on
      average range from 7-35 days, whereby the interest rate on the security is
      reset. A variety of financial market related credit issues challenged the
      liquidity within this investment arena, and resulted in a number of failed
      auction sell orders. We have designated these investments as available-for-sale
      securities and have accounted for them in accordance with the standards of
      Statement of Financial Accounting Standards SFAS No.115, "Accounting For Certain
      Investments: Debt and Equity Securities."  At
      May
      31, 2008, we determined that cost did not approximate fair value and recorded
      an
      unrealized loss in accumulated other comprehensive loss as a separate component
      of stockholders’ equity. The determination was also made that these assets
      should be reclassified as noncurrent available-for-sale securities. We are
      not
      certain how long we may be required to hold each security. However, given our
      current cash position, liquid cash equivalents, cash flow from operations and
      our borrowing capacity under our line of credit, we believe the current and
      near
      term illiquidity of the auction rate securities will not adversely affect
      management’s ability to achieve its operating goals. Subsequent to our fiscal
      year ending May 31, 2008, we did liquidate one ARS at par value for $4.5 million
      with accrued interest after this security was called on July 10, 2008 by the
      original issuer.





We
      currently have a $1.6 million deferred tax liability due to a subsidiary's
      change from a cash basis to an accrual basis taxpayer on May 29, 1988. The
      Taxpayer Relief Act of 1997 provides that this liability is payable ratably
      over
      the 20 years beginning in fiscal 1999. However, such taxes will be due in their
      entirety in the first fiscal year in which there is a change in ownership
      control so that we no longer qualify as a family farming corporation. We are
      currently making annual payments of approximately $150,000 related to this
      liability. However, while these current payments reduce cash balances, payment
      of the $1.6 million deferred tax liability would not impact our consolidated
      statement of operations or stockholders' equity, as these taxes have been
      accrued and are reflected on our consolidated balance sheet. See Note 10 of
      Notes to Consolidated Financial Statements.


26


Looking
      forward, we believe that our current cash balances, borrowing capacity,
      utilization of our revolving line of credit, and cash flows from operations
      are
      sufficient to fund our current and projected capital needs.





***Off-Balance
      Sheet Arrangements***





We
      have
      no existing off-balance sheet arrangements as defined under Securities and
      Exchange Commission regulations.





***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 7, and on lease obligations in Note 6, of
      Notes
      to Consolidated Financial Statements. The table includes the obligation incurred
      by us for the Hillandale acquisition, which is subject to change, because the
      exact amounts of which are to be determined under the terms of the Agreement.
      At
      the closing of the Hillandale transaction on October 12, 2005, we purchased
      51%
      of the Units of Membership in Hillandale, LLC. In August 2006, in accordance
      with the Agreement, we purchased, for $6.1 million, an additional 13% of the
      Units of Hillandale, LLC based on their book value as of July 29, 2006. In
      August 2007, we purchased, for $6.8 million , an additional 12% of the Units
      of
      Hillandale, LLC based on their book value as of July 28, 2007 . Our
      ownership of Hillandale, LLC currently is 76%.  We
      will
      incur costs for our purchase of the remaining 24% of the Units of Membership
      over the remaining two years, which will culminate with us having a 100% equity
      interest in Hillandale, LLC. Our obligation to acquire the remaining 24% of
      Hillandale, LLC is recorded at its present value of $20.0 million as of May
      31,
      2008 of which $10.4 million is included in current liabilities and $9.4 million
      is included in other non-current liabilities in the accompanying consolidated
      balance sheet. This estimated obligation was adjusted during fiscal 2008 due
      to
      the effect of the expected earnings increase on the book value of the membership
      units. The Company will adjust the original Hillandale purchase price allocation
      based on the ultimate amount paid for the acquisition in accordance with SFAS
      141.





Total
            
            2009
            
            2010
            
            2011
            
            2012
            
            2013
            
            Over 5 yearsLong-term debt
            
            $
            97,150
            
            $
            11,470
            
            $
            11,700
            
            $
            9,517
            
            $
            7,854
            
            $
            7,960
            
            $
            48,649Purchase
                obligation
            
            
            19,956
            
            
            10,358
            
            
            9,598
            
            
            -
            
            
            -
            
            
            -
            
            
            -Operating
                leases
            
            
            7,404
            
            
            2,453
            
            
            2,041
            
            
            1,258
            
            
            727
            
            
            687
            
            
            238Total
            
            $
            124,510
            
            $
            24,281
            
            $
            23,339
            
            $
            10,775
            
            $
            8,581
            
            $
            8,647
            
            $
            48,887




***Impact
      of Recently Issued Accounting Standards*** ***.***





We
      adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48
“Accounting for Uncertainty in Income Taxes” (“FIN 48”), effective June 3, 2007.
      FIN 48 clarifies the accounting for income taxes by prescribing the minimum
      recognition threshold a tax position is required to meet before being recognized
      in the financial statements. FIN 48 also provides guidance on derecognition,
      measurement, classification, interest and penalties, accounting in interim
      periods, disclosure and transition. We had no significant unrecognized tax
      benefits at the date of adoption or at May 31, 2008. 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 2003 remain open to examination by the federal and state taxing
      jurisdictions to which we are subject.





In
      September 2006, the FASB issued FASB Statement No.157, "Fair Value Measurements"
      (“FAS 157”). FAS 157 establishes a single authoritative definition of fair
      value, sets out a framework for measuring fair value, and expands on required
      disclosures about fair value measurement. FAS 157 is effective for us on June
      1,
      2008 and will not have a significant impact on the Company’s consolidated
      financial statements.




27




In
      February 2007, the FASB issued FASB Statement No. 159, "Establishing the Fair
      Value Option for Financial Assets and Liabilities" (“FAS 159”), to permit all
      entities to choose to elect to measure eligible financial instruments at fair
      value. FAS 159 is effective for us on June 1, 2008 and will not have a
      significant impact on the Company’s consolidated financial
      statements.




In
      December 2007, the FASB issued FASB Statement No. 141 (Revised 2007), or (R),
      “Business Combinations” (“FAS 141(R)”). FAS 141(R) retained the fundamental
      requirements in FAS 141 that the acquisition method of accounting (which FAS
      141
      called the purchase method) be used for all business combinations and for an
      acquirer to be identified or each business combination. FAS 141(R), which is
      broader in scope than that of FAS 141, which applied only to business
      combinations in which control was obtained by transferring consideration,
      applies the same method of accounting (the acquisition method) to all
      transactions and other events in which one entity obtains control over one
      or
      more other businesses. FAS 141(R) also makes certain other modifications to
      FAS
      141. This statement applies prospectively to business combinations for which
      the
      acquisition date is on or after the beginning of the first annual reporting
      period beginning on or after December 15, 2008, which will begin with our 2010
      fiscal year. Earlier adoption is prohibited. The Company is currently assessing
      the effect FAS 141(R) may have on its consolidated results of operations and
      financial position.




In
      December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling Interests
      in Consolidated Financial Statements- An amendment of ARB No. 51” (“FAS 160”).
      FAS 160 amends ARB No. 51 to establish accounting and reporting standards for
      the noncontrolling interest in a subsidiary and for the deconsolidation of
      a
      subsidiary. It clarifies that a noncontrolling interest in a subsidiary, which
      is sometimes referred to as minority interest, is an ownership interest in
      the
      consolidated entity that should be reported as equity in the consolidated
      financial statements. Among other requirements, this statement requires
      consolidated net income to be reported at amounts that include the amounts
      attributable to both the parent and the noncontrolling interest. It also
      requires disclosure, on the face of the consolidated income statement, of the
      amounts of consolidated net income attributable to the parent and to the
      noncontrolling interest. FAS 160 is effective for fiscal years, and interim
      periods within those fiscal years, beginning on or after December 15, 2008,
      which will begin with our 2010 fiscal year. Earlier adoption is prohibited.
      The
      Company is currently assessing the effect FAS 160 may have on its consolidated
      results of operations and financial position.




***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 $12.2 million at May 31, 2008. The combined total
      assets and total liabilities of these companies were approximately $35 million
      and $10 million, respectively, at May 31, 2008. We are a guarantor of
      approximately $4.2 million of long-term debt of one of the
      affiliates.





*Goodwill.* At
      May
      31, 2008, our goodwill balance represented 2.7% of total assets and 4.9% of
      stockholders’ equity. Goodwill relates to the fiscal 1999 acquisition of Hudson
      Brothers, Inc., the fiscal 2006 acquisition of Hillandale Farms, LLC, and the
      fiscal 2007 acquisition of Green Forest Foods, LLC. We adopted, as of June
      3,
      2001, Statement of Financial Accounting Standards No. 142, “Goodwill and Other
      Intangible Assets” (SFAS 142). Under SFAS 142, 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 statements contain forward-looking statements which 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 $4.5 million at May 31, 2008.




We
      are
      exposed to risk related to our investments in auction rate securities. Liquidity
      for these securities is typically provided by an auction process that resets
      the
      applicable interest rate at pre-determined intervals, usually on average every
      7-35 days. Because of the short interest rate reset period, we have historically
      recorded them as current available-for-sale securities. The liquidity of these
      securities has been negatively impacted by the uncertainty in the credit markets
      and the exposure of these securities to the financial condition of bond
      insurance companies. These securities had been subject to auction processes
      for
      which there had been insufficient bidders on the scheduled rollover dates.
      We
      will not be able to liquidate any of our auction rate securities until a future
      auction is successful, a buyer is found outside of the auction process or the
      notes are redeemed. An auction failure, which is not a default in the underlying
      debt instrument, occurs when there are more sellers than buyers at a scheduled
      interest rate auction date and parties desiring to sell their securities are
      unable to do so. If the credit market does not improve, auctions for our
      invested amounts may continue to fail. If an auction fails for securities in
      which we have invested, we may be unable to liquidate some or all of our auction
      rate securities at par, should we need or desire to access the funds invested
      in
      those securities. In the event we need or desire to access these funds, we
      will
      not be able to do so until a future auction on these investments is successful
      or a buyer is found outside the auction process. If a buyer is found but is
      unwilling to purchase the investments at par, we may incur a loss. Furthermore,
      if the issuers of the auction rate securities are unable to successfully
      complete future auctions and their credit ratings deteriorate, we may be
      required to adjust the carrying value of these investments by recording an
      impairment charge.




There
      is
      no assurance as to when the market for auction rate securities will stabilize.
      The fair value of our auction rate securities could change significantly based
      on market conditions and continued uncertainties in the credit markets. If
      conditions in the credit markets deteriorate further causing additional auctions
      to fail, the funds associated with these auction rate securities may also not
      be
      accessible for an undetermined period of time, and we may be required to record
      losses or an impairment charge on our auction rate securities portfolio in
      future quarters, which would harm our financial condition.





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





**ITEM 8.**
            **FINANCIAL
                STATEMENTS AND SUPPLEMENTARY
                DATA**





**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;




30




·
            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 31,
      2008. 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. We
      maintain documentation providing reasonable support for management’s assessment
      of the effectiveness of our internal control over financial reporting.
      Management’s documentation includes:





·
            The
                design of controls over all relevant assertions related to all significant
                accounts and disclosures in the financial
                statements;




·
            Information
                about how significant transactions are initiated, authorized, recorded,
                processed and reported;




·
            Sufficient
                information about the flow of transactions to identify the points
                at which
                material misstatements due to error or fraud could
                occur;




·
            Controls
                designed to prevent or detect fraud, including who performs the controls
                and the related segregation of
                duties;




·
            Controls
                over the period-end financial reporting
                process;




·
            Controls
                over safeguarding of assets; and




·
            The
                results of management’s testing and
                evaluation.




4.  Management
      has determined that our internal control over financial reporting as of May
      31,
      2008 is effective and that there is no material weakness in our internal control
      over financial reporting as of that date. In that connection, a “material
      weakness,” is a significant deficiency, or a combination of significant
      deficiencies, that results in more than a remote likelihood that a material
      misstatement of the financial statements will not be prevented or detected.
      A
“significant deficiency” is a control deficiency or a combination of control
      deficiencies, that adversely affects our ability to initiate, authorize, record,
      process, or report external financial data reliably in accordance with generally
      accepted accounting principles such that there is more than a remote likelihood
      that a misstatement of our financial statements that is more than
      inconsequential will not be prevented or detected. A “control deficiency” exists
      when the design or operation of a control does not allow management or
      employees, in the normal course of performing their assigned functions, to
      prevent or detect misstatements on a timely basis. 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.





5.  The
      attestation report of Moore Stephens Frost on management’s assessment of our
      internal control over financial reporting, which includes that firm’s opinion on
      management’s assessment of the effectiveness of internal control over financial
      reporting and opinion on the effectiveness of internal control over financial
      reporting, is set forth below.


31




**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 31, 2008, 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 in
      Item 8. Our responsibility is to express an opinion on 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 that 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 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 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 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 31,
      2008, based on criteria established in *Internal
      Control-Integrated Framework* issued
      by
      Committee of Sponsoring Organizations of Treadway Commission (COSO).





We
      have
      also audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated balance sheets and the related
      consolidated statements of operations, stockholders’ equity and cash flows of
      Cal-Maine Foods, Inc. and Subsidiaries, and our report dated July 31, 2008
      expressed an unqualified opinion.





/s/
      Moore
      Stephens Frost





Little
      Rock, Arkansas


July
      31,
      2008




32


**Report
      of Independent Registered Public Accounting Firm**




Board
      of
      Directors and Shareholders


Cal-Maine
      Foods, Inc. and Subsidiaries


Jackson,
      Mississippi




We
      have
      audited the accompanying consolidated balance sheets of Cal-Maine Foods, Inc.
      and Subsidiaries as of May 31, 2008 and June 2, 2007, and the related
      consolidated statements of operations, stockholders’ equity and cash flows for
      the two years then ended. Our audit also included the financial statement
      schedule listed in the Index at Item 15(c). 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. The consolidated financial statements of
      Cal-Maine Foods, Inc. and Subsidiaries as of June 3, 2006, and the related
      consolidated statements of operations, stockholders’ equity and cash flows for
      the year ended June 3, 2006, were audited by other auditors whose report dated
      August 11, 2006, expressed an unqualified opinion on those
      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 that our audits 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 31, 2008 and June 2, 2007, 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.





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 31, 2008, 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 July 31, 2008, expressed an unqualified
      opinion.




/s/ Moore Stephens Frost





Little
      Rock, Arkansas


July
      31,
      2008




33




Report
      of
      Independent Registered Public Accounting Firm





The
      Board
      of Directors and Stockholders


Cal-Maine
      Foods, Inc.





We
      have
      audited the consolidated statements of operations, stockholders’ equity, and
      cash flows of Cal-Maine Foods, Inc. and subsidiaries as of June 3, 2006. Our
      audit also included the financial statement schedule listed in the Index at
      Item
      15(c). These financial statements and schedule are the responsibility of the
      Company’s management. Our responsibility is to express an opinion on these
      financial statements 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 the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audit provide a reasonable
      basis for our opinion.




In
      our
      opinion, the financial statements referred to above presents fairly, in all
      material respects, the consolidated results of operations and cash flows of
      Cal-Maine Foods, Inc. and subsidiaries at June 3, 2006, in conformity with
      U.S.
      generally accepted accounting principles. Also, in our opinion, the related
      financial statement schedule, when considered in relation to the basic 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), the effectiveness of Cal-Maine Foods Inc.’s
      internal control over financial reporting as of June 3, 2006, based on criteria
      established in Internal Control — Integrated Framework issued by the Committee
      of Sponsoring Organizations of the Treadway Commission and our report dated
      August 11, 2006 expressed an unqualified opinion thereon.





/s/
      Ernst
& Young LLP





New
      Orleans, Louisiana


August
      11, 2006




34




**Cal-Maine
      Foods, Inc. and Subsidiaries**


**Consolidated
      Balance Sheets**


*(in
      thousands, except for par value amounts)*


May
                      31
                    2008
                  
                  June
                      2
                    2007**Assets**Current
                      assets:Cash
                      and cash equivalents
                  
                  $
                  94,858
                  
                  $
                  15,032Investments
                      securities available-for-sale
                  
                  
                  -
                  
                  
                  39,500Receivables:Trade
                      receivables, less allowance for doubtful accounts of $313 in
                      2008 and $150
                      in 2007
                  
                  
                  44,793
                  
                  
                  37,096Other
                  
                  
                  3,137
                  
                  
                  1,08447,930
                  
                  
                  38,180Inventories
                  
                  
                  76,766
                  
                  
                  62,208Prepaid
                      expenses and other current assets
                  
                  
                  4,711
                  
                  
                  1,390Total
                      current assets
                  
                  
                  224,265
                  
                  
                  156,310Other
                      assets:Investments
                      securities available-for-sale
                  
                  
                  40,754
                  
                  
                  -Other
                      investments
                  
                  
                  13,421
                  
                  
                  7,898Goodwill
                  
                  
                  13,452
                  
                  
                  4,195Other
                  
                  
                  2,851
                  
                  
                  2,57570,478
                  
                  
                  14,668Property,
                      plant and equipment, less accumulated depreciation
                  
                  
                  206,493
                  
                  
                  193,590Total
                      assets
                  
                  $
                  501,236
                  
                  $
                  364,568Liabilities
                      and stockholders' equityCurrent
                      liabilities:Trade
                      accounts payable
                  
                  $
                  35,691
                  
                  $
                  27,978Accrued
                      dividends payable
                  
                  
                  12,186
                  
                  
                  -Accrued
                      wages and benefits
                  
                  
                  9,111
                  
                  
                  7,273Accrued
                      expenses and other liabilities
                  
                  
                  10,964
                  
                  
                  9,800Current
                      maturities of purchase obligation
                  
                  
                  10,358
                  
                  
                  5,435Current
                      maturities of long-term debt
                  
                  
                  11,470
                  
                  
                  13,442Deferred
                      income taxes
                  
                  
                  12,935
                  
                  
                  11,830Total
                      current liabilities
                  
                  
                  102,715
                  
                  
                  75,758Long-term
                      debt, less current maturities
                  
                  
                  85,680
                  
                  
                  99,410Non-controlling
                      interests in consolidated entities
                  
                  
                  1,687
                  
                  
                  1,894Purchase
                      obligation, less current maturities
                  
                  
                  9,598
                  
                  
                  9,867Other
                      noncurrent liabilities
                  
                  
                  4,120
                  
                  
                  2,150Deferred
                      income taxes
                  
                  
                  21,756
                  
                  
                  19,750Total
                      liabilities
                  
                  
                  225,556
                  
                  
                  208,829Commitments
                      and contingencies – See Notes 5 and 6Stockholders'
                      equity:Common
                      stock, $.01 par value Authorized shares - 60,000 in 2008 and
                      2007 Issued
                      35,130 shares in 2008 and 2007 with 21,317 and 21,193 shares
                      outstanding
                      respectively
                  
                  
                  351
                  
                  
                  351Class
                      A common stock, $.01 par value Authorized shares - 2,400 in
                      2008 and 2007
                      Issued and outstanding shares - 2,400 in 2008 and 2007
                  
                  
                  24
                  
                  
                  24Paid-in
                      capital
                  
                  
                  29,697
                  
                  
                  29,043Retained
                      earnings
                  
                  
                  267,616
                  
                  
                  147,667Common
                      stock in treasury–13,813 shares in 2008 and 13,937 in 2007
                  
                  
                  (21,156
                  )
                  
                  (21,346
                  )Accumulated
                      other comprehensive loss
                  
                  
                  (852
                  )
                  
                  -Total
                      stockholders' equity
                  
                  
                  275,680
                  
                  
                  155,739Total
                      liabilities and stockholders' equity
                  
                  $
                  501,236
                  
                  $
                  364,568


*See
      accompanying notes.*




35





**Cal-Maine
      Foods, Inc. and Subsidiaries**


**Consolidated
      Statements of Operations**


*(in
      thousands, except per share amounts)*





Fiscal
                years endedMay
                31
            
            June
                2
            
            June
                32008
            
            2007
            
            2006Net
                sales
            
            $
            915,939
            
            $
            598,128
            
            $
            477,555Cost
                of sales
            
            
            617,383
            
            
            479,504
            
            
            415,338Gross
                profit
            
            
            298,556
            
            
            118,624
            
            
            62,217Selling,
                general and administrative
            
            
            74,919
            
            
            60,394
            
            
            57,702Operating
                income
            
            
            223,637
            
            
            58,230
            
            
            4,515Other
                income (expense):Interest
                expense
            
            
            (7,712
            )
            
            (6,987
            )
            
            (7,949
            )Interest
                income
            
            
            3,618
            
            
            1,112
            
            
            1,083Equity
                in income (loss) of affiliates
            
            
            6,324
            
            
            1,699
            
            
            (757
            )Non-controlling
                interest
            
            
            (175
            )
            
            286
            
            
            165Other,
                net
            
            
            5,699
            
            
            1,921
            
            
            1,4657,754
            
            
            (1,969
            )
            
            (5,993
            )Income
                (loss) before income taxes
            
            
            231,391
            
            
            56,261
            
            
            (1,478
            )Income
                tax expense (benefit)
            
            
            79,530
            
            
            19,605
            
            
            (465
            )Net
                income (loss)
            
            $
            151,861
            
            $
            36,656
            
            $
            (1,013
            )Net
                income (loss) per share:Basic
            
            $
            6.41
            
            $
            1.56
            
            $
            (0.04
            )Diluted
            
            $
            6.40
            
            $
            1.55
            
            $
            (0.04
            )Weighted
                average shares outstanding:Basic
            
            
            23,677
            
            
            23,526
            
            
            23,496Diluted
            
            
            23,733
            
            
            23,599
            
            
            23,496





*See
      accompanying notes.*




36





**Cal-Maine
      Foods, Inc. and Subsidiaries**


**Consolidated
      Statements of Stockholders' Equity**


*(in
      thousands)*





**Common
                Stock****Class A**
            
            **Class A**
            
            **Treasury**
            
            **Treasury**
            
            **Paid In**
            
            **Retained**
            
            **Accum. Other****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Capital**
            
            **Earnings**
            
            **Comp. Loss**
            
            **Total**Balance
                at May 28, 2005
            
            
            35,130
            
            
            351
            
            
            2,400
            
            
            24
            
            
            14,043
            
            
            (21,507
            )
            
            28,621
            
            
            114,366
            
            
            -
            
            
            121,855Cash
                dividends paid ($.05 per commonshare) *
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,170
            )
            
            -
            
            
            (1,170
            )Issuance
                of common stock from treasury
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (4
            )
            
            24
            
            
            79
            
            
            -
            
            
            -
            
            
            103Net
                loss for fiscal 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,013
            )
            
            -
            
            
            (1,013
            )Balance
                at June 3, 2006
            
            
            35,130
            
            
            351
            
            
            2,400
            
            
            24
            
            
            14,039
            
            
            (21,483
            )
            
            28,700
            
            
            112,183
            
            
            -
            
            
            119,775Cash
                dividends paid ($.05 per common share) *
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,172
            )
            
            -
            
            
            (1,172
            )Issuance
                of common stock from treasury
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (102
            )
            
            137
            
            
            125
            
            
            -
            
            
            -
            
            
            262Vesting
                of stock based compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            218
            
            
            -
            
            
            -
            
            
            218Net
                income for fiscal 2007
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            36,656
            
            
            -
            
            
            36,656Balance
                at June 2, 2007
            
            
            35,130
            
            
            351
            
            
            2,400
            
            
            24
            
            
            13,937
            
            
            (21,346
            )
            
            29,043
            
            
            147,667
            
            
            -
            
            
            155,739Dividends
                **
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (31,912
            )
            
            -
            
            
            (31,912
            )Issuance
                of common stock from treasury
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (124
            )
            
            190
            
            
            436
            
            
            -
            
            
            -
            
            
            626Vesting
                of stock based compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            218
            
            
            -
            
            
            -
            
            
            218Net
                income for fiscal 2008
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            151,861
            
            
            -
            
            
            151,861Other
                comprehensive loss (net of tax $544)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (852
            )
            
            (852
            )Total
                comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            151,009Balance
                at May 31, 2008
            
            
            35,130
            
            $
            351
            
            
            2,400
            
            $
            24
            
            
            13,813
            
            $
            (21,156
            )
            $
            29,697
            
            $
            267,616
            
            $
            (852
            )
            $
            275,680




**$.05
      per common share for the 1 st and
      2 nd quarters, one third of net income for the 3 rd and
      4 th quarters.


*Class
      A
      shares paid at 95% of the common stock dividend rate.





*See
      accompanying notes.*




37




**Cal-Maine
      Foods, Inc. and Subsidiaries**


**Consolidated
      Statements of Cash Flows**


*(in
      thousands)*


Fiscal
                  year endedMay
                  31
              
              June
                  2
              
              June
                  32008
              
              2007
              
              2006**Cash
                  flows from operating activities**Net
                  income (loss)
              
              $
              151,861
              
              $
              36,656
              
              $
              (1,013
              )Adjustments
                  to reconcile net income (loss) to net cash provided by operating
                  activities:Depreciation
                  and amortization
              
              
              25,320
              
              
              21,476
              
              
              20,569Deferred
                  income taxes
              
              
              3,659
              
              
              1,205
              
              
              985Equity
                  in (income) loss of affiliates
              
              
              (6,324
              )
              
              (1,699
              )
              
              757Gain
                  (loss) on disposal of property, plant and equipment
              
              
              (1,657
              )
              
              38
              
              
              (1,108
              )Stock
                  compensation expense, net of amounts paid
              
              
              4,531
              
              
              1,650
              
              
              1,035Interest
                  on purchase obligation
              
              
              942
              
              
              882
              
              
              1,284Net
                  change in non-controlling interest in consolidated
                  entities
              
              
              (207
              )
              
              975
              
              
              (165
              )Change
                  in operating assets and liabilities, net of effects from
                  acquisitionsReceivables
                  and other assets
              
              
              (13,305
              )
              
              (8,097
              )
              
              3,244Inventories
              
              
              (14,558
              )
              
              47
              
              
              2,136Accounts
                  payable, accrued expenses and other liabilities
              
              
              8,154
              
              
              6,591
              
              
              (6,793
              )Net
                  cash provided by operating activities
              
              
              158,416
              
              
              59,724
              
              
              20,931**Cash
                  flows from investing activities**Purchases
                  of investments
              
              
              (122,825
              )
              
              (43,250
              )
              
              (60,823
              )Sales
                  of investments
              
              
              120,175
              
              
              28,750
              
              
              71,207Acquisition
                  of businesses, net of cash acquired
              
              
              -
              
              
              (12,053
              )
              
              (23,756
              )Payments
                  received on notes receivable and from investments
              
              
              1,199
              
              
              1,453
              
              
              2,288Purchases
                  of property, plant and equipment
              
              
              (31,686
              )
              
              (23,472
              )
              
              (12,372
              )Increase
                  in notes receivable and investments
              
              
              (668
              )
              
              (1,202
              )
              
              (2,048
              )Net
                  proceeds from disposal of property, plant and equipment
              
              
              2,470
              
              
              503
              
              
              2,638Net
                  cash used in investing activities
              
              
              (31,335
              )
              
              (49,271
              )
              
              (22,866
              )**Cash
                  flows from financing activities**Long-term
                  borrowings
              
              
              -
              
              
              29,500
              
              
              28,000Principal
                  payments on long-term debt
              
              
              (15,702
              )
              
              (31,204
              )
              
              (31,924
              )Payment
                  of purchase obligation
              
              
              (12,529
              )
              
              (6,102
              )
              
              -Proceeds
                  from issuance of common stock from treasury
              
              
              626
              
              
              262
              
              
              103Payments
                  of dividends
              
              
              (19,650
              )
              
              (1,172
              )
              
              (1,170
              )Net
                  cash used in financing activities
              
              
              (47,255
              )
              
              (8,716
              )
              
              (4,991
              )Increase
                  (decrease) in cash and cash equivalents
              
              
              79,826
              
              
              1,737
              
              
              (6,926
              )Cash
                  and cash equivalents at beginning of year
              
              
              15,032
              
              
              13,295
              
              
              20,221Cash
                  and cash equivalents at end of year
              
              $
              94,858
              
              $
              15,032
              
              $
              13,295





*See
      accompanying notes.*




38




**Cal-Maine
      Foods, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


*(in
      thousands, except share and per share amounts)*


*May
      31, 2008*




**1.
      Significant Accounting Policies**





**Principles
      of Consolidation**


The
      consolidated financial statements include the accounts of Cal-Maine Foods,
      Inc.
      and its subsidiaries (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 36.5%, 36.9% and 36.6% of the Company's net
      sales in fiscal 2008, 2007 and 2006, respectively. Another customer accounted
      for 9.6%, 9.8% and 9.9% of the Company's net sales in fiscal 2008, 2007 and
      2006, respectively.





**Fiscal
      Year**


The
      Company's fiscal year-end is on the Saturday nearest May 31, which was May
      31,
      2008 (52 weeks), June 2, 2007 (52 weeks), June 3, 2006 (53 weeks), for the
      most
      recent three fiscal years.





**Reclassifications**


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





**Variable
      Interest Entities**




Financial
      Accounting Standards Board Interpretation No. 46 (revised), *Consolidation
      of Variable Interest Entities* ,
      ("FIN
      46") 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.





Beginning
      in the fourth quarter of fiscal 2007, the Company had variable interests in
      three 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 FIN 46.    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.




39


The
      Company has a 43% ownership interest in Texas Egg, LLC and leases to Texas
      Egg,
      LLC its operating facility.  Texas Egg, LLC has 70% ownership interest in
      South Texas Protein, LLC and subleases the facility to South Texas Protein,
      LLC.  South Texas Protein, LLC is a spent hen processing facility in the
      start-up phase of its operations.





Total
      assets of the three VIEs for which the Company is the primary beneficiary
      totaled $2,851 for fiscal 2008 and $1,209 for fiscal 2007, net of elimination
      of
      intercompany balances.





**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
      $100.  At times, cash balances may be in excess of the FDIC insurance
      limit. The Company manages this risk through maintaining cash deposits and
      other
      highly liquid investments in high quality financial institutions.





**Investment
      Securities Available-for-Sale**


Investment
      securities available-for-sale consist of auction rate securities accounted
      for
      in accordance with Statement of Financial Accounting Standards No. 115,
“Accounting for Certain Investments in Debt and Equity Securities.”
Available-for-sale securities are reported at fair value with unrealized gains
      and losses excluded from earnings and reported in shareholders’ equity. Due to
      the nature of the investments, the cost at June 2, 2007 approximated fair value.
      Consequently, accumulated other comprehensive income (loss) was not recognized
      as a separate component of stockholders’ equity. At May 31, 2008, we determined
      that cost did not approximate fair value and recorded an unrealized loss in
      accumulated other comprehensive loss as a separate component of stockholders’
equity.





Our
      auction rate securities are long-term debt obligations rated AAA at the date
      of
      purchase. The ratings on the auction rate securities take into account credit
      support through insurance policies guaranteeing each of the bonds’ payment of
      principal and accrued interest. In the past, the auction process allowed
      investors to obtain immediate liquidity if so desired by selling the securities
      at their face amounts. Liquidity for these securities has historically been
      provided by an auction process that resets interest rates on these investments
      on average every 7-35 days. However, as has been reported in the financial
      press, the disruptions in the credit markets adversely affected the auction
      market for these types of securities. Because auction sell orders have failed
      during this fiscal year as a result of recent liquidity disruptions, the Company
      believes that presentation of these securities as long-term investments is
      appropriate at May 31, 2008. Net unrealized holding losses on available-for-sale
      securities of $852, net of income taxes, are included in accumulated other
      comprehensive loss as of May 31, 2008




40


**Trade
      Receivables**


Trade
      receivables are comprised primarily of amounts owed to the Company from
      customers, which amounted to $44,793 at May 31, 2008 and $37,096 at June 2,
      2007. Trade receivables are presented net of allowance for doubtful accounts
      of
      $313 at May 31, 2008 and $150 at June 2, 2007.





**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.





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 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.





**Impairment
      of Long-Lived Assets**


The
      Company reviews the carrying value of property, plant, and equipment 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.




41


**Intangible
      Assets**


Included
      in other assets are loan acquisition costs which are amortized over the life
      of
      the related loan and franchise fees which are amortized over ten
      years.





**Goodwill**


Goodwill
      represents the excess of cost of business acquisitions over the fair value
      of
      the net identifiable 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**


Effective
      November 30, 2007, the Company’s Board of Directors approved the adoption of a
      variable dividend policy to replace the Company’s fixed dividend policy.
      Commencing with the third quarter of fiscal 2008, 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. The amount of the dividend payable on each
      share
      of Class A Common Stock is in an amount equal to 95% of the amount paid on
      each
      share of Common Stock. Dividends are paid to shareholders of record as of the
      sixtieth day following the last day of such quarter, and are payable on the
      fifteenth 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.
      As of May 31, 2008, we accrued a dividend payable of $12,186, applicable to
      the
      Company’s fourth quarter 2008 net income.





**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·
            Collectibility
                is reasonably assured.





Costs
      to
      deliver product to customers are included in selling, general and administrative
      expenses in the accompanying consolidated statements of operations and totaled
      $21,703, $21,105, and $24,560, in fiscal 2008, 2007 and 2006,
      respectively.





**Advertising
      Costs**


The
      Company expenses advertising costs as incurred. Total advertising costs were
      $778 in fiscal 2008, $745 in fiscal 2007, and $875 in fiscal
      2006.


42


**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**


In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) Statement No. 123
      (revised 2004)(“SFAS No.123(R)”), "Share-Based Payment," which is a revision of
      SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS
      No. 123(R) supersedes Accounting Principles Board (“APB”) Opinion
      No. 25, "Accounting for Stock Issued to Employees", and amends SFAS
      No. 95, "Statement of Cash Flows". SFAS No. 123(R) 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. SFAS No. 123(R) also requires the
      benefits of tax deductions in excess of recognized compensation cost to be
      reported as a financing cash flow, rather than as an operating cash flow as
      required under current literature. This requirement will reduce net operating
      cash flows and increase net financing cash flows in periods after adoption.
      In
      the first quarter of fiscal 2007, The Company adopted SFAS No. 123(R) using
      the modified prospective method. Under the modified prospective method,
      compensation costs are recognized for all share-based payments granted after
      the
      adoption of SFAS No. 123(R) and for all awards granted to employees prior
      to the adoption date of SFAS No. 123(R) that remain unvested on the
      adoption date. Accordingly, no restatements were made to prior periods.





Prior
      to
      adoption of SFAS No. 123(R), the Company applied Accounting Principles Board
      (“APB”) No. 25 in accounting for employee stock compensation plans and generally
      recognized no compensation expense for employee stock options. Under the
      provisions of APB No. 25, the Company recognized a liability for Stock
      Appreciation Rights (“SARS”) and Tandem Stock Appreciation Rights (“TSARS”)
      (collectively, “Rights”) based upon the intrinsic value of vested SARS and TSARS
      at each period end. Under SFAS No. 123(R), the Company is required to recognize
      a liability for vested SARS and TSARS based upon their fair value at each period
      end using a Black-Scholes option pricing model and to record a cumulative effect
      adjustment for the change in method of accounting for such liability awards.
      The
      cumulative effect resulting from the adoption of SFAS No. 123(R) was
      insignificant and is included in stock based compensation expense for fiscal
      2007.





**Net
      Income (Loss) per Common Share**


Basic
      net
      income (loss) per share is based on the weighted average common shares
      outstanding. Diluted net income (loss) per share includes any dilutive effects
      of options and warrants outstanding. Stock options representing approximately
      85,000 common shares were excluded from the calculation of dilutive net loss
      per
      share for the year ended June 3, 2006 because the effect was anti-dilutive.





**Impact
      of Recently Issued Accounting Standards**





We
      adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48
“Accounting for Uncertainty in Income Taxes” (“FIN 48”), effective June 3, 2007.
      FIN 48 clarifies the accounting for income taxes by prescribing the minimum
      recognition threshold a tax position is required to meet before being recognized
      in the financial statements. FIN 48 also provides guidance on derecognition,
      measurement, classification, interest and penalties, accounting in interim
      periods, disclosure and transition. We had no significant unrecognized tax
      benefits at the date of adoption or at May 31, 2008. 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 2003 remain open to examination by the federal and state taxing
      jurisdictions to which we are subject.


43


In
      September 2006, the FASB issued FASB Statement No.157, "Fair Value Measurements"
      (“FAS 157”). FAS 157 establishes a single authoritative definition of fair
      value, sets out a framework for measuring fair value, and expands on required
      disclosures about fair value measurement. FAS 157 is effective for us on June
      1,
      2008 and will not have a significant impact on the Company’s consolidated
      financial statements.





In
      February 2007, the FASB issued FASB Statement No. 159, "Establishing the Fair
      Value Option for Financial Assets and Liabilities" (“FAS 159”), to permit all
      entities to choose to elect to measure eligible financial instruments at fair
      value. FAS 159 is effective for us on June 1, 2008 and will not have a
      significant impact on the Company’s consolidated financial
      statements.




In
      December 2007, the FASB issued FASB Statement No. 141 (Revised 2007), or (R),
      “Business Combinations” (“FAS 141(R)”). FAS 141(R) retained the fundamental
      requirements in FAS 141 that the acquisition method of accounting (which FAS
      141
      called the purchase method) be used for all business combinations and for an
      acquirer to be identified or each business combination. FAS 141(R), which is
      broader in scope than that of FAS 141, which applied only to business
      combinations in which control was obtained by transferring consideration,
      applies the same method of accounting (the acquisition method) to all
      transactions and other events in which one entity obtains control over one
      or
      more other businesses. FAS 141(R) also makes certain other modifications to
      FAS
      141. This statement applies prospectively to business combinations for which
      the
      acquisition date is on or after the beginning of the first annual reporting
      period beginning on or after December 15, 2008, which will begin with our 2010
      fiscal year. Earlier adoption is prohibited. The Company is currently assessing
      the effect FAS 141(R) may have on its consolidated results of operations and
      financial position.





In
      December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling Interests
      in Consolidated Financial Statements- An amendment of ARB No. 51” (“FAS 160”).
      FAS 160 amends ARB No. 51 to establish accounting and reporting standards for
      the noncontrolling interest in a subsidiary and for the deconsolidation of
      a
      subsidiary. It clarifies that a noncontrolling interest in a subsidiary, which
      is sometimes referred to as minority interest, is an ownership interest in
      the
      consolidated entity that should be reported as equity in the consolidated
      financial statements. Among other requirements, this statement requires
      consolidated net income to be reported at amounts that include the amounts
      attributable to both the parent and the noncontrolling interest. It also
      requires disclosure, on the face of the consolidated income statement, of the
      amounts of consolidated net income attributable to the parent and to the
      noncontrolling interest. FAS 160 is effective for fiscal years, and interim
      periods within those fiscal years, beginning on or after December 15, 2008,
      which will begin with our 2010 fiscal year. Earlier adoption is prohibited.
      The
      Company is currently assessing the effect FAS 160 may have on its consolidated
      results of operations and financial position.


44


**2.
      Acquisitions**


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 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





The
      preliminary purchase price was allocated based upon the fair value of the assets
      acquired and liabilities assumed as follows:




Assets
                acquired:Cash
                and cash equivalents
            
            $
            3,918Receivables
            
            
            7,181Inventories
            
            
            11,330Prepaid
                and other assets
            
            
            2,798Property,
                plant and equipment
            
            
            49,531Total
                assets acquired
            
            
            74,758Liabilities
                assumed:Accounts
                payable and accrued expenses
            
            
            3,567Notes
                payable and long-term debt
            
            
            21,794Total
                liabilities assumed
            
            
            25,361Net
                assets acquired
            
            $
            49,397





In
      October 2005, the Company paid substantially all of Hillandale, LLC’s notes
      payable and long-term debt and obtained a new $28,000 term loan from an
      insurance company secured by substantially all of the property, plant and
      equipment of Hillandale, LLC, and requires monthly principal payments of $150
      plus interest beginning in January 2007 through November 2020.





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 is 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. The actual remaining purchase
      price
      may be higher or lower when the Hillandale Purchase is completed. The Company
      will purchase an additional 12% of Hillandale LLC based on the book value of
      the
      units of membership as of July 26, 2008.




45


During
      fiscal 2008, the Company revised the estimated purchase obligation upward for
      the remaining 24% interest to be acquired in Hillandale, LLC, based on the
      effect of the expected earnings increase on the book value of the membership
      units. This additional cost exceeded the estimated fair value of net assets
      acquired by $9,257 which has been assigned to goodwill on our consolidated
      balance sheets.





The
      Company gained effective control of the Hillandale operations upon signing
      of
      the Agreement. Accordingly, the acquisition date for accounting purposes is
      July
      28, 2005. The operations of Hillandale, LLC were consolidated with our
      operations as of July 29, 2005.





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.





Prior
      to
      the acquisition, the Company had a 44% membership interest in American Egg
      Products, LLC ("AEP") and Hillandale, LLC had a 27.5% membership interest in
      AEP. Prior to the acquisition of Hillandale, LLC, the Company's membership
      in
      AEP was accounted for by the equity method. Effective with our acquisition
      of
      Hillandale, LLC, the Company acquired a majority of the membership interest
      in
      AEP. Accordingly, the financial statements of AEP have been consolidated with
      our financial statements beginning July 29, 2005. AEP, located in Georgia,
      processes shell eggs into liquid and frozen egg products that are sold primarily
      to food manufacturers and to the food service industry. AEP has contract shell
      egg production for approximately 50% of its shell egg requirements and purchases
      the balance from regional egg markets.





As
      of
      July 28, 2005, Hillandale, LLC owned a 50% ownership interest in Hillandale
      Farms, LLC that was accounted for by the equity method. On October 5, 2005,
      Hillandale, LLC acquired the other 50% interest in Hillandale Farms, LLC for
      $1,000. The purchase price was allocated to the assets acquired and liabilities
      assumed and resulted in approximately $900 of goodwill. Hillandale Farms, LLC
      is
      engaged in the production, processing and distribution of shell
      eggs.





The
      unaudited financial information in the table below summarizes the combined
      results of our operations and Hillandale, LLC, on a pro forma basis, as though
      we had been combined as of the beginning of the earliest period presented.
      The
      pro forma financial information is presented for informational purposes only
      and
      is not indicative of the results of operations that would have been achieved
      if
      the acquisition had taken place at the beginning of the earliest period
      presented.




Fiscal Year
                Ended
                June 3 2006Net
                sales
            
            $
            490,529Net
                loss
            
            $
            (5,169
            )Basic
                net loss per share
            
            $
            (0.22
            )Diluted
                net loss per share
            
            $
            (0.22
            )




46


**Green
      Forest Foods, LLC Acquisition**





As
      of
      June 3, 2006, the Company owned 50 percent of Green Forest Foods, LLC, which
      was
      accounted for under the equity method of accounting. On January 24, 2007, we
      purchased the remaining 50 percent interest in Green Forest Foods, LLC for
      $2
      million 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 Cal-Maine
      Foods, Inc. since January 2006. Subsequent to the acquisition, the Company
      paid
      the capital lease obligation of approximately $10.5 million 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 is a newly formed company jointly owned by the Company and PW3 Holdings,
      LLC, an unaffiliated entity. The purchase price totaled $10.9 million 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 percent of the eggs produced by the 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.





Pro
      forma
      information and the allocation of the purchase price to the net assets acquired
      with respect to the acquisitions of Green Forest Foods, LLC and Benton County
      Foods, LLC is not significant to the Company’s consolidated financial statements
      and accordingly has not been presented.




**Zephyr
      Egg, LLC Acquisition**





On
      June
      27, 2008, we completed the acquisition of the assets of Zephyr Egg Company,
      located in Zephyrhills, FL. We purchased these assets with cash of approximately
      $27,427. These 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.
      In
      connection with the acquisition, the Company acquired the *Egg-Land’s
      Best* *TM* franchise for southern Florida, certain flocks of contract laying hens, and
      Zephyr’s 12.58% interest in American Egg Products, Inc., in which the Company
      already had a majority interest.




47


**3.
      Investment in Affiliates**





The
      Company owns 50% each of Specialty Eggs LLC and Delta Egg Farm, LLC ("Delta
      Egg") as of May 31, 2008. Investment in affiliates, recorded using the equity
      method of accounting, totaled $12,189 and $6,428 at May 31, 2008 and at June
      2,
      2007 , respectively. Equity in income or (loss) of $6,324, $1,699, and ($757),
      from these entities have been included in the consolidated statements of
      operations for fiscal 2008, 2007, and 2006, respectively.





The
      Company is a guarantor of 50% of Delta Egg's long-term debt, which totaled
      approximately $8,320 at May 31, 2008. Delta Egg's long-term debt is secured
      by
      substantially all fixed assets of Delta Egg and is due in monthly installments
      through fiscal 2009. 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. As of July 11, 2008, this
      debt has been 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 having an estimated
      cost of approximately $13,000. Due to refinancing of the old debt and the
      inclusion of additional borrowings under this refinancing, we are currently
      a
      guarantor of approximately $7,500 of Delta Egg Farm, LLC’s long-term
      debt.





At
      May
      31, 2008 and June 2, 2007, "Other Investments" as shown on the Company's
      consolidated balance sheet includes the cost of an investment in Egg-Land's
      Best, Inc., in which the Company has a 25.9% non-voting equity interest as
      of
      May 31, 2008 and June 2, 2007. 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 31, 2008 and June 2, 2007, was $440.





At
      May
      31, 2008, "Other Investments" as shown on the Company's consolidated balance
      sheet includes our investment in Dallas Re-Insurance Company, Ltd., in which
      the
      Company has a 33% equity interest as of May 31, 2008. The carrying value of
      this
      investment at May 31, 2008 and June 2, 2007 was $468. We have historically
      accounted for this investment at cost. During fiscal 2008 there was a change
      in
      the ownership structure. As a result of this change, the number of equity owners
      was reduced to three with each having a proportional share of the ownership
      interest. Our ownership percentage increased as a result of these changes.
      We
      are currently evaluating the impact of these changes that occurred during fiscal
      2008. These changes are not significant to the Company’s consolidated financial
      statements.


48





**4.
      Inventories**





Inventories
      consisted of the following:





May 31
            
            June 22008
            
            2007Flocks
            
            $
            49,176
            
            $
            40,773Eggs
            
            
            5,095
            
            
            4,704Feed
                and supplies
            
            
            22,495
            
            
            16,731$
            76,766
            
            $
            62,208





**5.
      Property, Plant and Equipment**





Property,
      plant and equipment consisted of the following:





May 31
            
            June 22008
            
            2007Land and improvements
            
            $
            44,923
            
            $
            43,222Buildings
                and improvements
            
            
            167,312
            
            
            163,946Machinery
                and equipment
            
            
            183,155
            
            
            168,422Construction-in-progress
            
            
            14,936
            
            
            726410,326
            
            
            376,316Less
                accumulated depreciation
            
            
            203,833
            
            
            182,726$
            206,493
            
            $
            193,590





Depreciation  expense  was
      $24,965, $21,164 and $20,417 in fiscal 2008, 2007 and 2006,
      respectively.





We
      are
      constructing a new integrated layer production complex in West Texas to replace
      our Albuquerque, New Mexico complex, which has ceased egg production. The
      expected cost is approximately $30.0 million. Completion of this facility is
      estimated to be in January 2010. As of May 31, 2008 capital expenditures related
      to construction of this complex were $14.6 million. The remaining future capital
      expenditures will be funded by cash flows from operations, existing lines of
      credit and additional long-term borrowings.


49





**6.
      Leases**





Future
      minimum payments under noncancelable operating leases that have initial or
      remaining noncancelable terms in excess of one year at May 31, 2008 are as
      follows:





2009
            
            $
            2,4532010
            
            
            2,0412011
            
            
            1,2582012
            
            
            7272013
            
            
            687Thereafter
            
            
            238Total
                minimum lease payments
            
            $
            7,404





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
      $5,032, $8,390 and $9,918 in fiscal 2008, 2007 and 2006, respectively, primarily
      for the lease of certain operating facilities, equipment and transportation
      equipment. Included in rent expense are vehicle rents totaling $660, $840 and
      $1,049 in fiscal 2008, 2007 and 2006, respectively.




50




**7.
      Credit Facilities and Long-Term Debt**


Long-term
      debt consisted of the following:





May
                31
            
            June
                22008
            
            2007Note
                payable at 8.26%, due in monthly installments of $155, including
                interest,
                maturing in 2015
            
            $
            13,057
            
            $
            13,808Series
                A Senior Secured Notes at 6.87%, paid in 2008
            
            
            -
            
            
            1,917Series
                B Senior Secured Notes at 7.18%, due in annual principal installments
                of
                $2,143 beginning in December 2003 through 2009 with interest due
                semi-annually
            
            
            4,286
            
            
            6,429Industrial
                revenue bonds at 6.10%, due in monthly installments of $146, including
                interest, maturing in 2011
            
            
            4,537
            
            
            5,961Note
                payable at 7.5%, due in monthly installments of $36, including interest,
                maturing in 2012
            
            
            1,187
            
            
            1,516Note
                payable at 7.06%, due in monthly installments of $53, including interest,
                maturing in 2015
            
            
            4,641
            
            
            4,936Note
                payable at 6.87%, due in monthly installments of $45, including interest,
                maturing in 2015
            
            
            3,950
            
            
            4,204Note
                payable at 6.80%, due in monthly principal installments of $165,
                plus
                interest, maturing in 2014
            
            
            11,090
            
            
            13,070Note
                payable at 5.80%, due in annual principal installments of $250 beginning
                in April 2006 through 2015 with interest due quarterly
            
            
            1,750
            
            
            2,000Note
                payable at 5.99%, due in monthly principal installments of $150,
                plus
                interest, maturing in 2021
            
            
            25,300
            
            
            27,100Note
                payable at 6.75%, paid in 2008
            
            
            -
            
            
            2,525Note
                payable at 6.35%, due in monthly principal installments of $100,
                plus
                interest, maturing in 2017
            
            
            18,700
            
            
            19,900Note
                payable at 6.07%, due in monthly principal installments of $33, plus
                interest, maturing in 2015
            
            
            2,567
            
            
            2,966Note
                payable at 6.40%, due in monthly principal installments of $35, plus
                interest, maturing in 2018
            
            
            6,080
            
            
            6,500Other
            
            
            5
            
            
            2097,150
            
            
            112,852Less
                current maturities
            
            
            11,470
            
            
            13,442$
            85,680
            
            $
            99,410


51
 
 The
        aggregate annual fiscal year maturities of long-term debt at May 31, 2008
        are as
        follows:
 
 2009
              
              $
              11,4702010
              
              
              11,7002011
              
              
              9,5172012
              
              
              7,8542013
              
              
              7,960Thereafter
              
              
              48,649$
              97,150
 
 The
        Company has a $40,000 line of credit with three banks, $2,700 of which was
        utilized for a standby letter of credit at May 31, 2008 and June 2, 2007.
        The
        balance of the credit facility remains undrawn. The line of credit, which
        expires on December 31, 2009, is limited in availability based upon accounts
        receivable and inventories. The Company had $37,300 available to borrow under
        the line of credit at May 31, 2008. Borrowings under the line of credit bear
        interest at margins above the federal funds rate based upon the Company's
        leverage. As of May 31, 2008 the margin was 1.5%. Facilities fees of 0.3%
        per
        annum are payable quarterly on the unused portion of the line.
 
 Substantially
        all trade receivables and inventories collateralize our revolving line of
        credit
        and most of our property, plant and equipment collateralize our long-term
        debt.
        Unless otherwise approved by our lenders, we are required by provisions of
        these
        loan agreements to (1) maintain minimum levels of working capital (ratio
        of not
        less than 1.25 to 1) and net worth (minimum of $90.0 million tangible net
        worth
        adjusted for earnings); (2) limit capital expenditures less exclusions (not
        to
        exceed $60.0 million for any period of four consecutive fiscal quarters),
        lease
        obligations and additional long-term borrowings (total funded debt to total
        capitalization not to exceed 55%); and (3) maintain various cash-flow coverage
        ratios (1.25 to 1), among other restrictions. At May 31, 2008, we were in
        compliance with the provisions of all loan agreements. Under certain of the
        loan
        agreements, the lenders have the option to require the prepayment of any
        outstanding borrowings in the event we undergo a change in control. 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 $6,755, $6,992 and $7,198 was paid during fiscal 2008, 2007 and 2006,
        respectively. Interest of $395, $566 and $222 was capitalized for construction
        of certain facilities during fiscal 2008, 2007 and 2006,
        respectively.
  52
  **8.
        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 medical plan expense including accruals for incurred but not reported
        claims were approximately $4,081, $4,632 and $5,128 in fiscal 2008, 2007
        and
        2006, 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.
 
 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. Company contributions to the ESOP vest immediately.
        The
        Company's contributions to the plan were $1,214, $1,115 and $1,069 in fiscal
        2008, 2007 and 2006, 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
        $206
        in fiscal 2008, $37 in fiscal 2007, and $59 in fiscal 2006.
 
 In
        December 2006, the Company adopted an additional deferred compensation plan
        to
        provide deferred compensation to named officers of the Company. As of May
        31,
        2008 an award of $156 was issued under this plan.
 
 **9.
        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.
  53
  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 SAR's 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 has reserved 1,000,000 shares under its 1999 Stock Option Plan, all
        of
        which were granted to officers and key employees in fiscal 2000. Each stock
        option granted under the 1999 Stock Option Plan was accompanied by the grant
        of
        a Tandem Stock Appreciation Right ("TSAR").
 
 The
        options and TSARs have ten-year terms and vest annually over five years
        beginning one year from the grant date. Upon exercise of a stock option,
        the
        related TSAR is also considered to be exercised, and the holder will receive
        a
        cash payment from the Company equal to the excess of the fair market value
        of
        the Company's common stock and the option exercise price.
 
 The
        Company recognized stock based compensation expense of $218 for equity awards
        and $6,853 for liability awards in fiscal 2008. In fiscal 2007, the Company
        recognized stock based compensation expense of $218 for equity awards and
        $1,650
        for liability awards.
 
 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,
                  June 3, 2006
              
              
              473,400
              
              
              4.97Granted
              
              
              -
              
              
              -Exercised
              
              
              89,800
              
              
              2.92Forfeited
              
              
              -
              
              
              -Outstanding,
                  June 2, 2007
              
              
              383,600
              
              
              5.45Granted
              
              
              -
              
              
              -Exercised
              
              
              124,400
              
              
              5.04Forfeited
              
              
              -
              
              
              -Outstanding,
                  May 31, 2008
              
              
              259,200
              
              $
              5.65
              
              
              6.97
              
              $
              6,623Exercisable,
                  May 31, 2008
              
              
              43,200
              
              $
              4.24
              
              
              6.15
              
              $
              1,165
 
 Unrecognized
        share based compensation cost as of May 31, 2008 totaled $654 and will be
        recognized over a weighted average period of 3 years. The intrinsic value
        of
        stock options exercised totaled $3,254, $946, and $83 in fiscal 2008, 2007
        and
        2006, respectively.
  54
  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,
                  June 3, 2006
              
              
              652,000
              
              $
              5.71Granted
              
              
              15,000
              
              
              6.93Exercised
              
              
              105,550
              
              
              4.66Forfeited
              
              
              69,000
              
              
              5.93Outstanding,
                  June 2, 2007
              
              
              492,450
              
              
              5.95Granted
              
              
              -
              
              
              -Exercised
              
              
              135,100
              
              
              5.83Forfeited
              
              
              6,000
              
              
              5.93Outstanding,
                  May 31, 2008
              
              
              351,350
              
              $
              5.99
              
              
              7.25
              
              $
              8,856Exercisable,
                  May 31, 2008
              
              
              28,850
              
              $
              5.93
              
              
              7.21
              
              $
              729
 
 Unrecognized
        share based compensation cost for liability awards based upon the fair value
        determined as of May 31, 2008 was $7,215 and will be recognized over a weighted
        average period of 3.5 years. Total payments for liability awards exercised
        totaled $6,853 and $1,650 for fiscal 2008 and 2007, respectively.
 
 The
        fair
        value of liability awards was estimated as of May 31, 2008 and June 2, 2007
        using a Black-Scholes option pricing model using the following weighted-average
        assumptions:
 
 May 31, 2008
              
              June 2, 2007Risk-free
                  interest rate
              
              
              2.9%
              
              
              4.9%Dividend
                  yield
              
              
              1.0%
              
              
              1.0%Volatility
                  factor of the expected market price of our stock
              
              
              35.8%
              
              
              34.9%Weighted-average
                  expected life of the rights
              
              
              3.5
                  years
              
              
              4.5
                  years
  55
  **10.
        Income Taxes**
 
 Income
        tax expense (benefit) consisted of the following:
  Fiscal year endedMay 31
              
              June 2
              
              June 32008
              
              2007
              
              2006Current:Federal
              
              $
              63,406
              
              $
              16,730
              
              $
              (1,450
              )State
              
              
              12,465
              
              
              1,670
              
              
              -75,871
              
              
              18,400
              
              
              (1,450
              )Deferred:Federal
              
              
              2,779
              
              
              675
              
              
              1,245State
              
              
              880
              
              
              530
              
              
              (260
              )3,659
              
              
              1,205
              
              
              985$
              79,530
              
              $
              19,605
              
              $
              (465
              )
 
 Significant
        components of the Company's deferred tax liabilities and assets were as
        follows:
 
 May 31
              
              June 22008
              
              2007Deferred
                  tax liabilities:Property,
                  plant and equipment
              
              $
              19,082
              
              $
              16,163Cash
                  basis temporary differences
              
              
              1,634
              
              
              1,752Inventories
              
              
              17,403
              
              
              14,001Investment
                  in affiliates
              
              
              2,787
              
              
              2,135Other
              
              
              1,142
              
              
              1,012Total
                  deferred tax liabilities
              
              
              42,048
              
              
              35,063Deferred
                  tax assets:Accrued
                  expenses
              
              
              5,254
              
              
              2,777Discount
                  on acquisition purchase price
              
              
              1,212
              
              
              471Other
              
              
              891
              
              
              235Total
                  deferred tax assets
              
              
              7,357
              
              
              3,483Net
                  deferred tax liabilities
              
              $
              34,691
              
              $
              31,580
  56
  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.
 
 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 31
              
              June 2
              
              June 32008
              
              2007
              
              2006Statutory
                  federal income tax (benefit)
              
              $
              80,287
              
              $
              19,598
              
              $
              (518
              )State
                  income taxes (benefit), net
              
              
              8,675
              
              
              1,430
              
              
              (169
              )Domestic
                  manufacturers deduction
              
              
              (4,115
              )
              
              (526
              )Non-taxable
                  (deductible) Hillandale,LLC
                  income (loss)
              
              
              (5,022
              )
              
              (449
              )
              
              750Tax
                  exempt interest income
              
              
              (872
              )
              
              (278
              )
              
              (634
              )Other,
                  net
              
              
              577
              
              
              (170
              )
              
              106$
              79,530
              
              $
              19,605
              
              $
              (465
              )
 
 Federal
        and state income taxes of $82,223, $15,679, and $128 were paid in fiscal
        2008,
        2007 and 2006, respectively. Federal and state income taxes of $1,039, $1,426
        and $7,077 were refunded in fiscal 2008, 2007 and 2006,
        respectively.
 
 **11.
        Other Matters**
 
 The
        carrying amounts in the consolidated balance sheet for cash and cash
        equivalents, accounts receivable, investment securities available-for-sale,
        other investments, and accounts payable approximate their fair values. The
        fair
        value of the Company's long-term debt is estimated to be $101,059.  The
        fair values for notes receivable and long-term debt are estimated using
        discounted cash flow analysis, based on the Company's current incremental
        borrowing rates for similar arrangements.
  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 $4,452 at May 31, 2008.  The Company is a
        party to no other market risk sensitive instruments requiring
        disclosure.
 
 The
        Company is the defendant in certain legal actions.  It is the opinion of
        management, based on advice of legal counsel, that the outcome of these actions
        will not have a material adverse effect on the Company's consolidated financial
        position or operations.
  57
 
 **12.
        Quarterly Financial Data:** (unaudited, amount in thousands, except per share data):
  Fiscal Year 2008First
              
              Second
              
              Third
              
              FourthQuarter
              
              Quarter
              
              Quarter
              
              QuarterNet
                  sales
              
              $
              178,598
              
              $
              223,696
              
              $
              278,017
              
              $
              235,628Gross
                  profit
              
              
              45,580
              
              
              76,032
              
              
              104,902
              
              
              72,042Net
                  income
              
              
              17,966
              
              
              40,154
              
              
              57,183
              
              
              36,558Net
                  income per share:Basic
              
              $
              .76
              
              $
              1.70
              
              $
              2.41
              
              $
              1.54Diluted
              
              $
              .76
              
              $
              1.69
              
              $
              2.41
              
              $
              1.54
  Fiscal Year 2007First
              
              Second
              
              Third
              
              FourthQuarter
              
              Quarter
              
              Quarter
              
              QuarterNet
                  sales
              
              $
              115,308
              
              $
              137,737
              
              $
              175,211
              
              $
              169,872Gross
                  profit
              
              
              8,407
              
              
              24,955
              
              
              44,182
              
              
              41,080Net
                  income (loss)
              
              
              (5,431
              )
              
              6,401
              
              
              17,403
              
              
              18,283Net
                  income (loss) per share:Basic
              
              $
              (0.23
              )
              $
              0.27
              
              $
              0.74
              
              $
              0.78Diluted
              
              $
              (0.23
              )
              $
              0.27
              
              $
              0.74
              
              $
              0.77
  58
  **SCHEDULE
        II - VALUATION AND QUALIFYING ACCOUNTS**
 **Years
        ended May 31, 2008, June 2, 2007, and June 3, 2006**
 **(** ***in
        thousands*** **)**
 
 **Balance at**
              
              
              
              
              
              **Balance at****Beginning of**
              
              **Charged to**
              
              **Write-off**
              
              **End of****Description**
              
              **Period**
              
              **Cost and Expense**
              
              **of Accounts**
              
              **Period**Year
                  ended May 31, 2008:Allowance
                  for doubtful accounts
              
              $
              150
              
              $
              394
              
              $
              231
              
              $
              313Year
                  ended June 2, 2007:Allowance
                  for doubtful accounts
              
              $
              346
              
              $
              612
              
              $
              808
              
              $
              150Year
                  ended June 3, 2006:Allowance
                  for doubtful accounts
              
              $
              92
              
              $
              892
              
              $
              638
              
              $
              346
  59
 
 **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 it in its periodic reports filed
        with the Securities and Exchange Commission is recorded, processed, summarized
        and reported, within the time periods specified in the Commission’s rules and
        forms. Based on an evaluation of our disclosure controls and procedures
        conducted by our Chief Executive Officer and Chief Financial Officer, together
        with other financial officers, such officers concluded that our disclosure
        controls and procedures were effective as of May 31, 2008.
 
 ***Internal
        Control Over Financial Reporting***
 
 (a)  ***Management’s
        Report on Internal Control Over Financial Reporting***
 
 In
        accordance with Section 404(a) of the Sarbanes-Oxley Act of 2002 and Item
        308(a)
        of the Commission’s Regulation S-K, the report of management on our internal
        control over financial reporting is set forth in this Annual Report on Form
        10-K
        under Item 8. Financial Statements and Supplementary Data.
 
 (b)  ***Attestation*** **** ***Report
        of the Registrant’s Public Accounting Firm***
 
 The
        attestation report of Moore Stephens Frost on management’s assessment of our
        internal control over financial reporting is set forth in this Annual Report
        on
        Form 10-K under Item 8. Financial Statements and Supplementary
        Data.
 
 (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 June 2, 2007, 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 31, 2008, that has materially affected, or is reasonably likely to
        materially affect, our internal control over financial reporting.
 
 **ITEM
        9B. OTHER INFORMATION**
 
 Not
        applicable.
  60
 
 **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
        2008 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 2008 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 2008 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 2008 Annual Meeting of Shareholders.
 
 **ITEM
        14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**
 
 The
        information concerning principal accounting 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
        2008 Annual Meeting of Shareholders.
  61
  **PART
        IV**
 
 **ITEM
        15.**  **EXHIBITS
        AND FINANCIAL STATEMENT SCHEDULES**
 (a)(1)Financial StatementsThe
                    following financial statements 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.
                34Consolidated
                    Balance Sheets – May 31, 2008 and June 2, 2007.
                35Consolidated
                    Statements of Operations – Fiscal Years Ended May 31, 2008, June 2, 2007
                    and June 3, 2006.
                36Consolidated
                    Statements of Changes in Shareholders' Equity for the Fiscal
                    Years Ended
                    May 31, 2008, June 2, 2007 and June 3, 2006.
                37Consolidated
                    Statements of Cash Flows for the Fiscal Years Ended May 31, 2008,
                    June 2,
                    2007 and June 3, 2006.
                38Notes
                    to Consolidated Financial Statements.
                39
  (a)(2)Financial
                    Statement ScheduleSchedule
                    II – Valuation and Qualifying AccountsAll
                    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-KSee
                    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:
 
 ExhibitNumber
              
              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.
                  (9)3.1
              
              Amended
                  and Restated Certificate of Incorporation of the Registrant.
                  (1)3.1(a)
              
              Amendment
                  to Article 4 of the Certificate of Incorporation of the Registrant.
                  (7)3.2
              
              By-Laws
                  of the Registrant, as amended. (16)4.1
              
              See
                  Exhibits 3.1 and 3.2 as to the rights of holders of the Registrant’s
                  common stock.
  62
  10.1
              
              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 29 May 1990, and amendments thereto (without exhibits).
                  (1)10.1(a)
              
              Amendment
                  to Term Loan Agreement (see Exhibit 10.1) dated as of June 3, 1997
                  (without exhibits). (2)10.1(b)
              
              Amendment
                  to Term Loan Agreement (see Exhibit 10.1) dated as of March 31,
                  2004
                  (without exhibits). (7)10.1(c)
              
              Amendment
                  to Term Loan Agreement (see Exhibit 10.1) dated as of April 14,
                  2004
                  (without exhibits). (7)10.1(d)
              
              Amendment
                  to Term Loan Agreement (see Exhibit 10.1) dated as of August 6**,**2004
                  (without exhibits). (8)10.1(e)
              
              Amendment
                  to Term Loan Agreement (see Exhibit 10.1) dated as of March 15**,**2005
                  (without exhibits). (8)10.1(f)
              
              Amendment
                  to Term Loan Agreement (see Exhibit 10.1) dated as of October 13,
                  2006
                  (without exhibits). (12)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). (15)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). (15)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). (17)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).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). (1)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). (1)10.4
              
              Employee
                  Stock Ownership Plan, as Amended and Restated. (1)+10.5
              
              1993
                  Stock Option Plan, as Amended. (1)+10.6
              
              Wage
                  Continuation Plan, dated as of July 1, 1986, between Jack Self
                  and the
                  Registrant, as amended on September 2, 1994. (1)+10.7
              
              Wage
                  Continuation Plan, dated as of April 15, 1988, between Joe Wyatt
                  and the
                  Registrant. (1)+10.8
              
              Redemption
                  Agreement, dated March 7, 1994, between the Registrant and Fred
                  R. Adams,
                  Jr. (1)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)
                  (3)
  63
  10.10
              
              Wage
                  Continuation Plan, dated as of January 14, 1999, among Stephen
                  Storm,
                  Charles F. Collins, Bob Scott and the Registrant (4)+10.11
              
              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) (5)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). (15)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). (15)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).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).
                  (18)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).10.12
              
              1999
                  Stock Option Plan (6)+10.13
              
              2005
                  Stock Option Plan (10)+10.14
              
              2005
                  Stock Appreciation Rights Plan (11)+10.15
              
              Deferred
                  Compensation Plan, dated December 28, 2006. (13)10.16
              
              Loan
                  Agreement, dated as of November 13, 2006, between Metropolitan
                  Life
                  Insurance Company and Cal-Maine Foods Inc. (without exhibits.)
                  (14)21
              
              Subsidiaries
                  of the Registrant23.1
              
              Consent
                  of Moore Stephens Frost23.2
              
              Consent
                  of Ernst & Young LLP31.1
              
              Certification
                  of Chief Executive Officer31.2
              
              Certification
                  of Chief Financial Officer32
              
              Written
                  Statement of the Chief Executive Officer and the Chief Financial
                  Officer
  64
  
 +
              
              Management
                  contract or compensatory plan.(1)
              
              Incorporated
                  by reference to the same exhibit in Registrant’s Form S-1 Registration
                  Statement No. 333-14809.(2)
              
              Incorporated
                  by reference to the same exhibit in Registrant’s Form 10-K for fiscal year
                  ended May 31, 1997.(3)
              
              Incorporated
                  by reference to the same exhibit in Registrant’s Form 10-Q for the quarter
                  ended November 29, 1997.(4)
              
              Incorporated
                  by reference to the same exhibit in Registrant’s Form 10-K for fiscal year
                  ended May 29, 1999.(5)
              
              Incorporated
                  by reference to the same exhibit in Registrant’s Form 10-Q for the quarter
                  ended November 27, 1999.(6)
              
              Incorporated
                  by reference to Registrant’s Form S-8 Registration Statement No.
                  333-39940, dated June 23, 2000.(7)
              
              Incorporated
                  by reference to the same exhibit in Registrant’s Form 10-K for fiscal year
                  ended May 29, 2004.(8)
              
              Incorporated
                  by reference to the same exhibit in Registrant’s Form 10-K for fiscal year
                  ended May
                  28, 2005.(9)
              
              Incorporated
                  by reference to the same exhibit in Registrant’s Form 8-K, dated July 28,
                  2005.(10)
              
              Incorporated
                  by reference to Appendix B to Registrant’s Proxy Statement for Annual
                  Meeting held October 13, 2005.(11)
              
              Incorporated
                  by reference to Appendix C to Registrant’s Proxy Statement for Annual
                  Meeting held October 13, 2005.(12)
              
              Incorporated
                  by reference to the same exhibit in Registrant’s Form 10-K for fiscal year
                  ended June 3, 2006(13)
              
              Incorporated
                  by reference to the same exhibit in Registrant's Form 8-K, dated
                  December
                  28, 2006.(14)
              
              Incorporated
                  by reference to the same exhibit in Registrant’s Form 10-Q for the quarter
                  ended December 2, 2006(15)
              
              Incorporated
                  by reference to the same exhibit in Registrant's Form 8-K, dated
                  March 9,
                  2007.(16)
              
              Incorporated
                  by reference to the same exhibit in Registrant’s Form 8-K, dated August
                  13, 2007.(17)
              
              Incorporated
                  by reference to the same exhibit in Registrant’s Form 10-Q for the quarter
                  ended December 1, 2007(18)
              
              Incorporated
                  by reference to the same exhibit in Registrant’s Form 10-Q for the quarter
                  ended March 1, 2008
  65
  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
        59. 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.
  66
  **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
        4th  day
        of
        August, 2008.
  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
              
              08/04/2008Fred R. Adams, Jr.
              
              Chief Executive Officer(Principal Executive Officer)/s/ Richard K. Looper
              
              Vice Chairman of the Board
              
              08/04/2008Richard K. Looper
              
              and Director/s/ Adolphus B. Baker
              
              President and Director
              
              08/04/2008Adolphus B. Baker/s/
                  Timothy A. Dawson
              
              Vice
                  President, Chief Financial
              
              08/04/2008Timothy
                  A. Dawson
              
              Officer
                  and Director(Principal
                  Financial Officer)/s/
                  Charles F. Collins
              
              Vice
                  President, Controller
              
              08/04/2008Charles
                  F. Collins
              
              (Principal
                  Accounting Officer)/s/
                  Letitia C. Hughes
              
              Director
              
              08/04/2008Letitia
                  C. HughesDirector
              
              _________R.
                  Faser Triplett/s/
                  James E. Poole
              
              Director
              
              08/04/2008James
                  E. Poole
  67
  CAL-MAINE
        FOODS, INC.
 Form
        10-K
        for the fiscal year
 Ended
        May
        31, 2008
 EXHIBIT
        INDEX
 
 ExhibitNumber
              
              Exhibit10.1(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).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).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).21
              
              Subsidiaries
                  of Cal-Maine Foods, Inc23.1
              
              Consent
                  of Moore Stephens Frost23.2
              
              Consent
                  of Ernst & Young LLP31.1
              
              Certification
                  of The Chief Executive Officer31.2
              
              Certification
                  of The Chief Financial Officer32
              
              Written
                  Statement of The Chief Executive Officer and Chief Financial
                  Officer
  68