CAL MAINE FOODS INC, 424B1, 1996-12-13

CAL MAINE FOODS INC
424B1, 1996-12-13
AGRICULTURAL PROD-LIVESTOCK & ANIMAL SPECIALTIES

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<PAGE> 1

PROSPECTUS

2,200,000 SHARES

[CAL-MAINE FOODS, INC. LOGO]
CAL-MAINE FOODS, INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
------------------------

Of the 2,200,000 shares of Common Stock, par value $0.01 per share (the
"Common Stock") offered hereby, 1,400,000 shares are being sold by Cal-Maine
Foods, Inc. ("Cal-Maine" or the "Company") and 800,000 shares are being sold by
its founder and principal stockholder (the "Selling Stockholder"). See
"Principal and Selling Stockholders" and "Use of Proceeds."

Prior to this offering there has been no public market for the Common
Stock. For information relating to the factors considered in determining the
initial offering price to the public, see "Underwriting."

The Common Stock has been approved for quotation and trading on the NASDAQ
Stock Market's National Market (the "NASDAQ National Market") under the symbol
"CALM."

The Company's outstanding capital stock includes Common Stock and Class A
Common Stock, par value $0.01 per share (the "Class A Common Stock," and
together with the Common Stock, the "Capital Stock"). Each share of Class A
Common Stock entitles its holder to 10 votes, whereas each share of Common Stock
entitles its holder to one vote. Immediately following this offering, the
principal stockholder of the Company and members of his family will own 48% of
the outstanding shares of Capital Stock and possess 80% of the total voting
power of the outstanding Capital Stock. See "Principal and Selling Stockholders"
and "Description of Capital Stock."

See "Risk Factors" on page 6 for certain information that should be
considered by prospective investors.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNTS(1) COMPANY(2) STOCKHOLDER(2)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share......................... $7.00 $0.518 $6.482 $6.482
- ----------------------------------------------------------------------------------------------------------
Total(3).......................... $15,400,000 $1,139,600 $9,074,800 $5,185,600
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>

(1) Excludes a non-accountable expense allowance payable to Paulson Investment
Company, Inc., the representative (the "Representative") of the several
underwriters (the "Underwriters"), equal to 2% of the total price to the
public of the shares being offered hereby (see note 2, below). The Company
has agreed to issue to the Representative warrants (the "Representative's
Warrants") to purchase up to 220,000 shares of Common Stock for $8.40 per
share and to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933. See "Underwriting."

(2) Before deduction of expenses estimated at $659,750, including the
Representative's non-accountable expense allowance. Of the total estimated
expenses, $544,252 is payable by the Company and $115,498 is payable by the
Selling Stockholder.

(3) The Company has granted to the Underwriters an option, exercisable for 30
days from the effective date of the public offering of the shares offered
hereby, to purchase a maximum of 330,000 additional shares of Common Stock
in order to cover over-allotments, if any. If the option is exercised in
full, the total Price to Public, Underwriting Discounts, Proceeds to Company
and Proceeds to Selling Stockholder will be $17,710,000, $1,310,540,
$11,213,860 and $5,185,600, respectively. See "Underwriting."
------------------------

The shares of Common Stock are offered by the several Underwriters subject
to prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected that
delivery of certificates for the shares will be made against payment therefor on
or about December 17, 1996.
------------------------
PAULSON INVESTMENT COMPANY, INC.
------------------------

The date of this Prospectus is December 11, 1996
<PAGE> 2

CAL-MAINE FOODS, INC.

LOCATION OF FACILITIES AND MARKET AREAS

U.S. MAP
- --------------------------------------------------------------------------------

The Company intends to furnish to its stockholders annual reports
containing financial statements audited by independent certified public
accountants, as well as quarterly financial information. The Company will be
subject to the information requirements of the Securities Exchange Act of 1934,
as amended, and in connection therewith will file reports, proxy statements and
other information with the Securities and Exchange Commission.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE> 3

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, INFORMATION IN THIS PROSPECTUS (i)
ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND (ii) IS
ADJUSTED TO REFLECT A RECENT RECAPITALIZATION, WHICH RESULTED IN THE CREATION OF
THE COMMON STOCK AND THE CLASS A COMMON STOCK, AND A 1,200-FOR-1 STOCK SPLIT OF
THE CAPITAL STOCK, EFFECTIVE AS OF OCTOBER 3, 1996. SEE
"CAPITALIZATION -- RECAPITALIZATION AND STOCK SPLIT."

THE COMPANY

GENERAL

The Company is primarily engaged in the production, cleaning, grading,
packing and sale of fresh shell eggs and the manufacture and sale of egg
products. Shell eggs accounted for approximately 92% and egg products
approximately 6% of the Company's net sales in fiscal 1996. The Company
currently is the largest producer and distributor of fresh shell eggs in the
United States, with fiscal 1996 sales of approximately 384.4 million dozen shell
eggs, representing approximately 7.5% of all shell eggs sold in the United
States. Cal-Maine primarily markets its shell eggs and egg products in 26
states, chiefly in the southwestern, southeastern, mid-western and mid-Atlantic
regions of the United States.

The Company's operations are fully integrated. It owns facilities to hatch
chicks, grow pullets, manufacture feed and produce, process, manufacture and
distribute shell eggs and egg products. Company-owned facilities accounted for
approximately 60% of total egg production in fiscal 1996, with the balance
attributable to contract producers used by the Company. Approximately 95% of the
feed for Company-owned farms and contract producers is manufactured by the
Company, from purchased ingredients, in feed mills that it owns and operates.
Shell eggs are sold directly by the Company primarily to national and regional
supermarket chains. Egg products are sold both on a direct basis and through egg
product brokers to institutional users, including manufacturers of baked goods,
mayonnaise and confections.

GROWTH STRATEGY

As a result of the Company's growth strategy, its total flock, including
pullets, layers and breeders, has increased from approximately 6.8 million at
May 28, 1988 to an average of approximately 17.4 million for each of the past
five fiscal years. Also, there has been a three-fold increase in the number of
dozens of shell eggs sold, from approximately 117 million in the fiscal year
ended May 28, 1988 to an average of approximately 394 million in each of the
past five fiscal years. Net sales amounted to approximately $282.8 million in
fiscal 1996, approximately four times net sales of approximately $70.0 million
in fiscal 1988. The Company expects to continue to pursue its growth strategy
and to use a portion of its net proceeds from this offering to acquire
additional shell egg production and processing facilities and feed mills.
However, it has no understandings or agreements in that regard at this time.

The Company's new "in-line" facilities result in the gathering, cleaning,
grading and packaging of shell eggs by less labor-intensive, more efficient,
mechanical means. The increased use of in-line facilities has generated
significant cost savings. The cost of eggs produced at these facilities was
lower by 1.0c, 1.5c, 2.1c, 2.3c and 3.1c per dozen in fiscal 1992, 1993, 1994,
1995 and 1996, respectively, than the cost to the Company of eggs produced from
non-in-line facilities. Also, the Company produces a higher percentage of grade
A eggs,

3
<PAGE> 4

which sell at higher prices, at its in-line facilities. The percentage of the
total number of layers housed in the Company's in-line facilities increased from
25% in fiscal 1992 to 55% in fiscal 1996.

The Company's acquisitions and construction of larger facilities, described
in the tables below, reflect the continuing concentration of shell egg
production in the United States in a decreasing number of shell egg producers.
The Company believes 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.

ACQUISITIONS OF EGG PRODUCTION AND PROCESSING FACILITIES

<TABLE>
<CAPTION>
LAYERS PURCHASE
FISCAL YEAR(1) SELLER LOCATION ACQUIRED PRICE
- -------------- ---------------------------------------- --------------- -------------- -----------
<C> <S> <C> <C> <C>
1989 Egg City, Inc........................... Arkansas 1,300,000 $ 6,716,000
1990 Sunny Fresh Foods, Inc.................. (2) 7,500,000 21,629,000
1991 Sunnyside Eggs, Inc..................... North Carolina 1,800,000 6,000,000
1994 Wayne Detling Farms..................... Ohio 1,500,000 12,194,000
1995 A&G Farms(3)............................ Kentucky 1,000,000 2,883,000
1997 Sunbest Farms(4)........................ Arkansas 600,000 1,302,000
---------- -----------
Total..................................................... 13,700,000 $50,724,000
========== ===========
</TABLE>

CONSTRUCTION OF EGG PRODUCTION, PULLET GROWING AND PROCESSING FACILITIES(5)

<TABLE>
<CAPTION>
FISCAL YEAR LAYER PULLET APPROXIMATE
COMPLETED LOCATION CAPACITY CAPACITY COST
- ----------- -------------------------------------------------- --------- -------- -----------
<C> <S> <C> <C> <C>
1990 Mississippi....................................... 1,000,000 200,000 $10,000,000
1992 Louisiana......................................... 1,000,000 -- 10,000,000
1992 Mississippi....................................... -- 500,000 3,500,000
1994 Mississippi....................................... 1,000,000 -- 9,200,000
1996 Texas............................................. 1,000,000 250,000 14,000,000
--------- ------- -----------
Total............................................. 4,000,000 950,000 $46,700,000
========= ======= ===========
</TABLE>

- ---------------
(1) The Company's fiscal year ends on the Saturday closest to May 31.

(2) New Mexico, Kansas, Texas, Alabama, Oklahoma, Arkansas and North Carolina.

(3) In connection with the purchase, the Company leased substantially all
facilities and certain equipment of the business under an operating lease
with monthly rentals of $79,000. See "Business -- Growth Strategy."

(4) Acquired subsequent to quarter ended August 31, 1996.

(5) Does not include (i) current construction in Chase, Kansas, expected to be
completed in fiscal 1999 at an estimated cost of approximately $16,000,000,
adding approximately 1,000,000 layer and 250,000 pullet capacity, and a feed
mill and grain storage; or (ii) proposed construction in Waelder, Texas,
expected to commence in fiscal 1997, and to be completed in fiscal 2000 at
an estimated cost of approximately $13,900,000, adding approximately
1,000,000 layer and 250,000 pullet capacity.

The Company was incorporated under Delaware law in 1969. Its principal
executive offices are located at 3320 Woodrow Wilson Drive, Jackson, Mississippi
39209, and its telephone number is (601) 948-6813. Except as otherwise indicated
by the context, references in this Prospectus to the "Company" or "Cal-Maine"
include all subsidiaries of the Company.

4
<PAGE> 5

THE OFFERING

Common Stock being offered.......... 1,400,000 shares by the Company and
800,000 shares by the Selling
Stockholder(1)

Common Stock to be outstanding after
the offering........................ 11,702,000 shares(1)(2)

Use of Proceeds..................... To provide additional funds for
possible future acquisitions, increase
working capital, and for general
corporate purposes.

Proposed NASDAQ National Market
trading symbol...................... CALM
- ---------------
(1) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."

(2) Excludes shares reserved under the Company's 1993 Stock Option Plan. See
"Management -- 1993 Stock Option Plan."

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 13 WEEKS ENDED
----------------------------------------------------------- --------------------
MAY 30, MAY 29, MAY 28, JUNE 3, JUNE 1, SEPT. 2, AUG. 31,
1992 1993 1994 1995 1996 1995 1996
-------- ----------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales.............................. $234,767 $ 235,908 $254,713 $242,649 $282,844 $56,219 $65,563
Net income (loss)...................... (2,192) 3,103 224 (8,685) 10,925 (1,635) 1,097
Net income (loss) per common
share(1)............................. $ (.18) $ .26 $ .02 $ (.74) $ .94 $ (.14) $ .10
Weighted average shares
outstanding(1)....................... 11,921 11,821 11,760 11,700 11,584 11,647 11,509
OPERATING DATA:
Total flock size (thousands)(2)........ 16,839 17,439 17,697 18,014 17,209 17,819 17,375
Total shell eggs sold (millions of
dozens).............................. 381.2 379.8 403.9 421.8 384.4 94.8 89.4

<CAPTION>
AUGUST 31, 1996
-----------------------
(UNAUDITED)
AS
ACTUAL ADJUSTED(3)
-------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................ $ 28,229 $ 38,454
Total assets........................... 150,351 160,576
Total long-term debt (including current
portion and capitalized lease
obligations)......................... 62,866 62,866
Total stockholders' equity............. 48,976 59,201
</TABLE>

- ---------------
(1) Reflects the 1,200-for-1 stock split effective October 3, 1996 as if the
split had occurred in the earliest period presented.

(2) Includes pullets (young female chickens, usually under 20 weeks of age),
layers (mature female chickens), and breeders (male or female birds used to
produce fertile eggs to be hatched for egg production flocks).

(3) Adjusted to give effect to (i) the sale of 1,400,000 shares of Common Stock
offered by the Company (at the initial public offering price of $7.00 per
share and after deduction of the underwriting discount and estimated
offering expenses payable by the Company) and the addition of the net
proceeds thereof to working capital, and (ii) an increase in stockholders'
equity resulting from the payment of a note payable to the Company by its
principal stockholder. See "Use of Proceeds" and "Capitalization."

5
<PAGE> 6

RISK FACTORS

In evaluating the Company and its business, prospective investors should
carefully consider the following risk factors in addition to the other
information contained herein.

VOLATILITY OF WHOLESALE SHELL EGG MARKET PRICES AND FEED COSTS AND EFFECT
THEREOF

The Company's operating income or loss is significantly affected by
wholesale shell egg market prices, which fluctuate widely. Although the Company
can take certain short-term steps to mitigate the adverse effect of low shell
egg market prices, fluctuations in egg prices are outside of the Company's
control. The pricing of shell eggs is affected by an inelasticity of demand, in
connection with which small increases in production or decreases in demand can
have a large adverse effect on prices and vice-versa. See "Business -- Shell
Eggs" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Feed cost represents the largest element of the Company's farm egg
production cost, ranging from 56% to 62% of total cost in the last five fiscal
years, or an average of approximately 60%. Although feed ingredients are
available from a number of sources, Cal-Maine has little, if any, control over
the prices of the ingredients it purchases, which are affected by various demand
and supply 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 the
Company's 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, the Company has tended to have higher profit margins
when feed costs are higher. However, this may not be the case in the future.

EXPANSION RISKS

The Company proposes to continue a growth strategy calling for the
acquisition of other companies engaged in the production and sale of shell eggs
and egg products. Federal anti-trust laws require regulatory approval of
acquisitions that exceed certain threshold levels of significance. Generally,
the Company will be required to obtain federal regulatory approval of any such
acquisition which exceeds $15 million in value if (i) the acquired entity is
engaged in manufacturing and has more than $10 million of annual revenues or
assets or (ii) the acquired entity is not engaged in manufacturing and has more
than $10 million of assets. (For purposes of this regulatory approval, drying,
freezing and breaking of eggs is considered manufacturing.) The Company also is
subject to federal and state laws generally prohibiting anti-competitive
conduct. Because the shell egg production and distribution industry is so
fragmented, the Company believes that its sales of shell eggs during its last
fiscal year represented only approximately 7.5% of domestic egg sales
notwithstanding that it is the largest producer and distributor of shell eggs in
the United States based on independently prepared industry statistics.
Accordingly, the Company believes that regulatory approval of any future
acquisitions generally will not be required and, if required, that such
approvals will be obtained.

The construction of new, more efficient production and processing
facilities is an integral part of the Company's growth strategy. Any such
construction can be expected to require compliance with environmental laws and
regulations, including the receipt of permits, that could cause schedule delays,
although the Company has not experienced any significant delays in the past.

AGRICULTURAL AND FOOD CONSUMPTION RISKS

The Company's egg production activities are subject to risks to which the
agriculture industry, in general, is exposed. These include, among others, risks
associated with weather conditions and disease factors that could have a
material adverse effect on the Company's operations. These risks are not within
the Company's control and could have a material adverse effect on its
operations. With respect to its products, the Company carries product liability
insurance in an amount deemed adequate. Also, the marketability of the Company's
shell eggs and egg products is subject to risks such as possible changes in food
consumption opinions and practices reflecting perceived health concerns.

6
<PAGE> 7

DECLINE IN PER CAPITA CONSUMPTION OF SHELL EGGS

The Company understands that the per capita consumption of shell eggs in
the United States declined during the 1980s, decreasing from approximately 260
eggs per year in the early 1980s to 239 eggs in 1989, based on independently
prepared industry statistics. This decline, which may have been attributable to
perceived health concerns relating to cholesterol content and lifestyle changes,
appears to have leveled off as annual per capita consumption has ranged between
234 and 239 eggs per year since 1990. While the Company believes that increased
fast food restaurant consumption, reduced egg cholesterol levels and industry
advertising campaigns may result in a continuation of, or possible increases in,
current per capita egg consumption levels, no assurance can be given that per
capita egg consumption will not decline in the future. Continuing consumer
concerns with cholesterol levels may adversely affect the Company's future
revenues. See "Business -- Shell Eggs" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

REGULATORY MATTERS

The Company is subject to federal and state regulations relating to
grading, quality control, labeling, sanitary control and waste disposal. As a
fully-integrated egg producer, the Company's shell egg facilities are subject to
United States Department of Agriculture ("USDA") and Food and Drug
Administration ("FDA") regulation. The Company's shell egg facilities are
subject to periodic USDA inspections, and its egg products plant is subject to
continuous on-site USDA inspection. The Company's operations and facilities are
subject to federal and state environmental laws and regulations, and the Company
has all required environmental permits.

COMPETITION

The production and sale of fresh shell eggs, which have accounted for
approximately 90% or more of the Company's net sales in recent years, is
intensely competitive. Although the Company currently is the largest producer of
shell eggs in the United States, it is not in a controlling market position in
any area where its eggs are sold. See "Business -- Competition."

DEPENDENCE UPON KEY PERSONNEL

The Company's success depends to a large extent upon the performance of
Fred R. Adams, Jr., the Company's Chairman and Chief Executive Officer. The loss
of Mr. Adams's services could have a material adverse effect on the Company. The
Company has not entered into any employment or non-compete agreements with Mr.
Adams, who is the principal shareholder of the Company, and does not maintain
keyman insurance on his life. See "Management."

TAX LIABILITY FROM LOSS OF FAMILY FARMING CORPORATION TAX STATUS

The Company has $3,100,000 of deferred tax liability due to a subsidiary's
change from a cash basis to an accrual basis taxpayer on May 29, 1988. This
liability will become payable with respect to the first fiscal year in which the
Company fails to qualify as a "family farming corporation" within the meaning of
Section 447 of the Internal Revenue Code (the "Code"). The Company could lose
such tax status as a result of a change in the tax laws, and will lose such tax
status if its annual "revenues from farming" for federal tax purposes are less
than $111,549,000 or if the members of a single family fail to own at least 50%
of the voting power of all voting stock and at least 50% of all other classes of
stock. The Company had "revenues from farming" of $250,152,000 for federal tax
purposes in fiscal 1996. The Company's revenues and the ownership of its stock
by Fred R. Adams, Jr. and other members of his family presently qualify the
corporation as a "family farming corporation." No assurance can be given that
the Company will continue to qualify for such status. If "family farming
corporation" status is lost, payment of the $3,100,000 deferred tax liability
would reduce the Company's cash but would not impact the Company's statement of
operations or reduce stockholders' equity, as these taxes have been accrued and
are reflected on the Company's balance sheet. The Company's cash and cash
equivalents amounted to $4,688,000 at August 31, 1996, and its current assets at
that date amounted to

7
<PAGE> 8

$61,445,000. See Note 9 of Notes to Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources and Liquidity."

SEASONALITY

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. Egg prices tend to increase with the start of the school year
and are highest prior to holiday periods. Consequently, the Company generally
experiences lower sales and net income in its first and fourth fiscal quarters
ending in August and May, respectively. To offset the effects of seasonal
factors the Company may break more eggs for egg products during the spring and
early summer months, decrease the size of its flocks, take hens out of
production to molt or reduce the number of shell eggs purchased from other
producers. See "Business -- Seasonality" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

DILUTION

Purchasers of the Common Stock offered hereby will incur an immediate and
substantial dilution of $2.41 per share in the net tangible book value of the
Common Stock from the initial public offering price. Additional dilution will
occur upon the exercise of outstanding stock options. Future acquisitions may
also result in additional dilution. See "Dilution."

RESTRICTIONS ON DIVIDENDS

The Company's line of credit and long-term loan agreements contain
financial covenants and restrictions that limit its ability to pay dividends on
its Capital Stock. Under its agreement with certain lenders, the Company may not
pay any dividend or make any distribution on any class of Capital Stock.
However, the lenders have agreed to eliminate this prohibition, as described
under "Dividend Policy."

The Company currently expects to retain a substantial part of any net
earnings for use in the financing of the Company's growth and other corporate
purposes. However, subject to compliance with its loan covenants, the Company
will consider the payment of cash dividends in the future depending upon the
results of its operations, its financial condition and capital needs for
acquisitions and new facilities construction, as well as other economic factors.
See "Dividend Policy."

CONTROL BY CURRENT PRINCIPAL STOCKHOLDER; CERTAIN PROVISIONS OF AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION

Upon completion of this offering, Fred R. Adams, Jr., Chairman of the Board
and Chief Executive Officer of the Company, and members of his family, will own
48.3% of the outstanding shares of Common Stock, which has one vote per share,
and Mr. Adams will own 100% of the outstanding shares of Class A Common Stock,
which has 10 votes per share. As a result, upon completion of this offering, Mr.
Adams will possess 70.6%, and together with his family will possess 79.5%, of
the total voting power represented by the then outstanding shares of Common
Stock and Class A Common Stock. 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 the outstanding
shares of Capital Stock in order to preserve the Company's status as a "family
farming corporation" for federal income tax purposes. Such ownership may make an
unsolicited acquisition of the Company more difficult and discourage certain
types of transactions involving change of control of the 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 the Company's Amended and Restated Certificate of Incorporation
require that the 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
Capital Stock ownership position may adversely

8
<PAGE> 9

affect the market price of the Common Stock. See "Principal and Selling
Stockholders" and "Description of Capital Stock."

LACK OF PRIOR PUBLIC MARKET FOR THE COMMON STOCK; POSSIBLE VOLATILITY OF TRADING
PRICE

Prior to this offering, there has been no public market for the Common
Stock. Although the Company's application for the quotation and trading of the
Common Stock on the NASDAQ National Market has been approved, there can be no
assurance that an active public market will develop, or that the initial public
offering price will correspond to the price at which the Common Stock will trade
in the public market subsequent to this offering. The initial public offering
price for the Common Stock has been determined by negotiations among the Company
and the Representative of the Underwriters based on the factors described under
"Underwriting." The trading price of the Common Stock could be subject to
significant fluctuations in response to variations in quarterly operating
results, seasonal and other general trends in the industry and other factors.

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of this offering, the Company will have outstanding
11,702,000 shares of Common Stock and 1,200,000 shares of Class A Common Stock
(convertible on a share-for-share basis into Common Stock). The 2,200,000 shares
of Common Stock offered hereby, and any shares issued in the event the
Underwriters' over-allotment option is exercised, will be freely transferable
without restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"). Similarly, any shares of Common Stock issuable
upon an exercise of the Representative's Warrants, during a four-year period
commencing one year from the effective date of the Registration Statement of
which this Prospectus is a part, also will be freely transferable without
restriction, subject to the maintenance of the effectiveness under the
Securities Act of the Registration Statement as agreed to by the Company. See
"Underwriting."

All other outstanding shares of Common Stock, as well as all outstanding
shares of Class A Common Stock, are "restricted securities" as that term is
defined in Rule 144 under the Securities Act, and may only be sold pursuant to a
Registration Statement under the Securities Act or an applicable exemption from
registration thereunder, including Rule 144. Except for the sale by the Selling
Stockholder of 800,000 shares of Common Stock in this offering, the officers,
directors and 5% stockholders of the Company have agreed not to sell, and the
Company has agreed not to sell, any shares of Common Stock or other equity
securities of the Company for 90 days following the effective date of the
Registration Statement of which this Prospectus is a part, without the prior
written consent of the Representative of the Underwriters. Upon expiration of
such 90-day period, 9,502,000 then outstanding restricted shares of Common Stock
will become eligible for resale in the public market by the holders thereof
subject to the volume limitations of Rule 144. Following this offering, sales or
the expectation of sales of a substantial number of shares of Common Stock in
the public market could adversely affect the prevailing market price for the
Common Stock. See "Description of Capital Stock" and "Shares Available for
Future Sale."

DISCRETION AS TO USE OF PROCEEDS

As indicated under "Use of Proceeds," the net proceeds of the offering will
be used for possible future acquisitions of shell egg operations and related
facilities, to increase working capital and for general corporate purposes. The
Board of Directors will have broad discretionary authority with respect to the
use of the offering proceeds and may effect acquisitions without stockholder
approval, unless such approval is required by law.

9
<PAGE> 10

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the Common
Stock offered by the Company are estimated to be approximately $8,531,000
($10,670,000 if the Underwriters' over-allotment option is exercised in full).

The Company intends to use the net proceeds to provide additional funds for
possible future acquisitions of shell egg operations and related facilities, to
increase working capital and for general corporate purposes. At this time,
Cal-Maine has no understandings or agreements with respect to any such
acquisitions. The Company may effect acquisitions, in the discretion of its
Board of Directors and management, without stockholder approval, unless such
approval is required by law. Pending use of the proceeds for any acquisitions,
the net proceeds from this offering may be invested in short-term,
interest-bearing, investment-grade obligations, and will be available for
general corporate purposes.

Fred R. Adams, Jr., Chairman of the Board and Chief Executive Officer of
the Company, will apply $1,694,444 of the proceeds from the sale of his shares
of Common Stock to satisfy his note payable in that amount to Cal-Maine. The
Company will add such funds to its working capital. See "Certain Transactions."

DIVIDEND POLICY

Although the Company has not paid any cash dividends on its Capital Stock,
the Board of Directors will consider the possible declaration of cash dividends
in the future in the light of the Company's results of operations, financial
condition, capital requirements for possible acquisitions and new construction,
and other relevant economic factors. Under the terms of the Company's agreements
with its principal lenders, Cal-Maine is subject to various financial covenants
limiting its ability to pay dividends. The Company is required to maintain
minimum levels of working capital and net worth, to limit capital expenditures,
leasing transactions and additional long-term borrowings, and to maintain
various current and cash-flow coverage ratios, among other restrictions. Under
its agreements with certain of the lenders, the Company is specifically
prohibited from paying any dividend or making any distribution on its Capital
Stock. However, those lenders have agreed to amendments that would, among other
things, eliminate the prohibition against the payment of cash dividends. The
amendments are subject to the completion of the offering being made hereby, and
would contain provisions that include the amount of any cash dividends in
cash-flow coverage ratio requirements. For the foreseeable future, the Company
expects to retain earnings for use in its business.

10
<PAGE> 11

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company at August 31, 1996 (see "Recapitalization and Stock Split," below), and
as adjusted to reflect (i) the issuance and sale by the Company of 1,400,000
shares of Common Stock offered hereby, at the initial public offering price of
$7 per share and after deducting the estimated underwriting discount and
offering expenses payable by the Company, and (ii) an increase in stockholders'
equity resulting from the payment of a note payable to the Company by its
principal stockholder. See "Use of Proceeds."

<TABLE>
<CAPTION>
AUGUST 31, 1996
--------------------
(UNAUDITED)
AS
ACTUAL ADJUSTED
-------- --------
(THOUSANDS)
<S> <C> <C>
Long-term debt (including current portion).............................. $ 61,535 $ 61,535
Capitalized lease obligations (including current portion)............... 1,331 1,331
Stockholders' equity:
Common Stock, par value $0.01 per share; 30,000,000 shares
authorized; 15,835,200 shares outstanding and 17,235,200 shares
outstanding, as adjusted(1)....................................... 158 172
Class A Common Stock, par value $0.01 per share; 1,200,000 shares
authorized; 1,200,000 shares outstanding.......................... 12 12
Paid-in capital.................................................... 8,229 16,746
Retained earnings.................................................. 48,155 48,155
Less: Common Stock in treasury (5,528,400 shares)....................... (5,884) (5,884)
Note receivable -- stockholder..................................... (1,694) --
-------- --------
Stockholders' equity.................................................... 48,976 59,201
-------- --------
Total capitalization.................................................... $111,842 $122,067
======== ========
</TABLE>

- ---------------
(1) Excludes a maximum of (i) 330,000 shares subject to the Underwriters'
over-allotment option, (ii) 800,000 shares of Common Stock issuable upon
exercise of options granted, or that may be granted, under the Company's
1993 Stock Option Plan, and (iii) 220,000 shares issuable upon exercise of
the Representative's Warrants.

RECAPITALIZATION AND STOCK SPLIT

On September 24, 1996, the shareholders approved an amendment to the
certificate of incorporation to authorize capital stock consisting of 30,000,000
shares of Common Stock and 1,200,000 shares of Class A Common Stock, each class
having a par value of $0.01 per share, and to reclassify and change each
previously outstanding share of Class A Common Stock, $1.00 par value per share,
and each previously outstanding share of Class B Common Stock, $1.00 par value
per share, into 1,200 shares each of Common Stock and Class A Common Stock,
respectively, each class with a par value of $0.01 per share. The Company's
Amended and Restated Certificate of Incorporation, which reflects such
authorized capital stock, was effective as of October 3, 1996. Unless otherwise
indicated, all references to historical earnings per share, and number and class
of shares outstanding, are as adjusted for the aforesaid recapitalization,
reclassification and stock split of the Company's capital stock.

11
<PAGE> 12

DILUTION

The book value of the Company as of August 31, 1996 was $48,976,000 or
$4.26 per share of Capital Stock. "Book value per share" represents the amount
of total assets of the Company less total liabilities, divided by the number of
shares of Capital Stock outstanding. After giving effect to (i) the sale by the
Company of the 1,400,000 shares of Common Stock offered hereby, at the initial
public offering price of $7 per share, (ii) the deduction of the underwriting
discounts and estimated offering expenses payable by the Company and (iii) an
increase in stockholders' equity resulting from the payment of a note payable to
the Company by its principal stockholder, the pro forma net book value of the
Company as of August 31, 1996, would be $59,201,000, or $4.59 per share. This
represents an immediate increase in book value of $.33 per share to existing
stockholders and an immediate dilution of $2.41 per share to investors
purchasing Common Stock in this offering. The following table illustrates this
per share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share............................... $7.00
Book value per share as of August 31, 1996....................... $4.26
Increase per share attributable to new investors................. .33
-----
Pro forma book value per share after offering......................... 4.59
-----
Dilution per share to new investors................................... $2.41
=====
</TABLE>

The following table sets forth as of August 31, 1996 the number of shares
of Capital Stock issued by the Company, the total consideration paid and the
weighted average price per share paid by existing stockholders and by new
investors, based on the initial offering price of $7 per share, before deducting
underwriting discounts and estimated offering expenses:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES PURCHASED(1) TOTAL CONSIDERATION(1) PRICE
--------------------- ---------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- --------
<S> <C> <C> <C> <C> <C>
Existing stockholders....................... 11,506,800 89.2% $ 8,399,000 46.2% $ .73
New investors............................... 1,400,000 10.8 9,800,000 53.8 $ 7.00
---------- ------- ----------- -------
Total............................. 12,906,800 100.0% $18,199,000 100.0%
========= ===== ========== =====
</TABLE>

- ---------------
(1) Sales by the Selling Stockholder in this offering will reduce the number of
shares held by existing stockholders to 10,706,800 shares, or 83.0% of the
total number of shares of Capital Stock to be outstanding after the
offering, and will increase the number of shares held by the new
stockholders to 2,200,000 shares, or 17.0% of the total number of shares of
Capital Stock to be outstanding after the offering. See "Principal and
Selling Stockholders."

The foregoing table assumes (i) no exercise of the Underwriters'
over-allotment option, (ii) no exercise of options outstanding under the 1993
Stock Option Plan, and (iii) no exercise of the Representative's Warrants. A
maximum of 330,000 shares of Common Stock are issuable upon exercise of the
Underwriters' over-allotment option. As of August 31, 1996, there were
outstanding stock options to purchase an aggregate of 504,000 shares of Common
Stock at an exercise price of $3.42 per share, and the Company had an additional
296,000 shares of Common Stock available for future option grants. The exercise
of these stock options would result in further dilution to new investors. See
"Management -- 1993 Stock Option Plan" and Note 8 of Notes to Consolidated
Financial Statements of the Company. Additional dilution may occur as a result
of future acquisitions. A maximum of 220,000 shares of Common Stock are issuable
upon exercise of the Representative's Warrants. The exercise price per share of
the Representative's Warrants is $8.40, or 120% of the per share price of the
Common Stock offered hereby.

12
<PAGE> 13

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

The income statement data presented below for each of the fiscal years,
which end on the Saturday closest to May 31, in the five-year period ended June
1, 1996, and the balance sheet data at June 3, 1995 and June 1, 1996, have been
derived from the Company's financial statements, which have been audited by
Ernst & Young LLP, independent auditors. In the opinion of management of the
Company, the unaudited information for the 13 week periods ended September 2,
1995 and August 31, 1996 has been prepared on a basis consistent with the
audited information and includes all adjustments, which consist only of normal
recurring accruals necessary for a fair presentation of the results for those
periods. The results of operations for the 13 weeks ended August 31, 1996 are
not necessarily indicative of the results of the complete fiscal year. The
selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
with the consolidated financial statements of the Company and notes thereto
included elsewhere in this Prospectus.

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL YEARS ENDED 13 WEEKS ENDED
-------------------------------------------------------- --------------------
MAY 30, MAY 29, MAY 28, JUNE 3, JUNE 1, SEPT. 2, AUG. 31,
1992 1993 1994 1995 1996 1995 1996
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................. $234,767 $235,908 $254,713 $242,649 $282,844 $56,219 $65,563
Cost of sales............................. 211,428 204,115 225,227 223,965 230,850 51,385 55,712
-------- -------- -------- -------- -------- -------- --------
Gross profit.............................. 23,339 31,793 29,486 18,684 51,944 4,834 9,851
Selling, general and administrative....... 24,694 24,776 26,094 27,934 29,653 6,569 7,140
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)............... (1,355) 7,017 3,392 (9,250) 22,341 (1,735) 2,711
Other income (expense):
Interest expense, net................. (3,658) (3,034) (4,318) (5,052) (5,487) (1,457) (1,116)
Equity in income of affiliate......... 299 506 283 24 721 29 64
Other................................. 1,322 674 1,238 993 (190) 562 135
-------- -------- -------- -------- -------- -------- --------
(2,037) (1,854) (2,797) (4,035) (4,956) (866) (917)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes......... (3,392) 5,163 595 (13,285) 17,385 (2,601) 1,794
Income tax expense (benefit).............. (1,200) 2,060 371 (4,600) 6,460 (966) 697
-------- -------- -------- -------- -------- -------- --------
Net income (loss)......................... $ (2,192) $ 3,103 $ 224 $ (8,685) $ 10,925 (1,635) 1,097
======== ======== ======== ======== ======== ======= =======
Net income (loss) per common share(1)..... $ (.18) $ .26 $ .02 $ (.74) $ .94 $ (.14) $ .10
======== ======== ======== ======== ======== ======= =======
Weighted average shares outstanding(1).... 11,921 11,821 11,760 11,700 11,584 11,647 11,509
</TABLE>

<TABLE>
<CAPTION>
MAY 30, MAY 29, MAY 28, JUNE 3, JUNE 1, AUGUST 31,
1992 1993 1994 1995 1996 1996
-------- -------- -------- -------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................. $ 29,216 $ 30,426 $ 28,958 $ 10,092 $ 26,742 $ 28,229
Total assets.................................... 125,662 128,260 144,859 147,402 149,991 150,351
Total debt (including current portion).......... 50,020 49,808 62,968 64,211 63,426 62,866
Total stockholders' equity...................... 43,529 46,387 46,489 37,472 47,900 48,976
</TABLE>

- ---------------
(1) Reflects the 1,200-for-1 stock split effective October 3, 1996 as if the
split had occurred in the earliest period presented.

13
<PAGE> 14

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company's operating income or loss is significantly affected by
wholesale shell egg market prices, which can fluctuate widely and are outside of
the Company's 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. The Company currently uses
contract producers for approximately 40% of its total egg production. Contract
producers operate under agreements with the Company for the use of their
facilities in the production of shell eggs by layers owned by the Company, which
owns the eggs produced. Also, some shell eggs are purchased for resale by the
Company from other, outside producers.

Because shell eggs are perishable, inventories rarely exceed four days of
production. Thus, shell egg inventories cannot be accumulated in response to low
egg market prices. However, egg product inventories can be stored for extended
periods and may be increased during periods of low prices and decreased during
periods of high prices. The Company continuously endeavors to increase its
profitability by effecting improvements in feed efficiency, molting programs and
other operating activities in order to enhance its operating efficiency. See
"Business -- Shell Eggs" for a further discussion.

The Company's cost of production is materially affected by feed costs,
which average about 60% of Cal-Maine's total farm egg production cost. Changes
in feed costs result in changes in the Company's cost of goods sold. A 20c per
bushel change in the cost of corn results in a 1c change in the cost of
production of one dozen eggs. A $20 change in the cost of a ton of soybean meal,
a feed ingredient, also results in a 1c change in the cost of production of one
dozen eggs. 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 the Company has little or no control.

The per capita consumption of shell eggs in the United States declined
during the 1980s, decreasing from approximately 260 eggs per year in the early
1980's to 239 eggs per year in 1989. This decline, which may have been
attributable to perceived health concerns relating to cholesterol content and
changes in lifestyle, appears to have leveled off and annual per capita
consumption has ranged between approximately 234 and 239 eggs per year since
1990. While the Company believes that increased fast food restaurant
consumption, reduced egg cholesterol levels and industry advertising campaigns
may result in a continuation of, or a possible increase in, current per capita
egg consumption levels, no assurance can be given that per capita egg
consumption will not decline in the future. Consumer concerns relating to the
effect of cholesterol levels in health may adversely impact the Company's
operations in the future. For additional information, see "Business -- Shell
Eggs."

14
<PAGE> 15

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain items in the Company's statements of
operations:

<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
-----------------------------------------------------
FISCAL YEAR ENDED 13 WEEKS ENDED
----------------------------- --------------------
(UNAUDITED)
MAY 28, JUNE 3, JUNE 1, SEPT. 2, AUG. 31,
1994 1995 1996 1995 1996
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................................. 88.4 92.3 81.6 91.4 85.0
------ ----- ----- ------ ------
Gross profit.................................. 11.6 7.7 18.4 8.6 15.0
Selling, general and administrative
expenses.................................... 10.3 11.5 10.5 11.7 10.9
------ ----- ----- ------ ------
Operating income (loss)....................... 1.3 (3.8) 7.9 (3.1) 4.1
Other income (expense)........................ (1.1) (1.7) (1.8) (1.5) (1.4)
------ ----- ----- ------ ------
Income (loss) before income taxes............. .2 (5.5) 6.1 (4.6) 2.7
Income tax provision (benefit)................ .1 (1.9) 2.2 (1.7) 1.0
------ ----- ----- ------ ------
Net income (loss)............................. .1% (3.6)% 3.9% (2.9)% 1.7%
====== ===== ===== ====== ======
</TABLE>

First Quarter Ended August 31, 1996 Compared to First Quarter Ended September
2, 1995

Net Sales. For the quarter ending August 31, 1996, net sales were $65.6
million, an increase of $9.3 million, or 16.6%, over last year's first quarter
sales of $56.2 million. For this year's first quarter, 89.4 million dozen eggs
were sold compared to 94.8 million dozen for last year's first quarter, a
decrease of 5.4 million dozen, or 6.0%. The decrease in dozens sold is primarily
attributable to the fact that the Company purchased fewer eggs from outside
sources during the quarter ended August 31, 1996 than during last year's first
quarter. The dollar increase in net sales is the result of a $2 million increase
in egg product sales and a 15% increase in average shell egg market prices. The
net average selling price per dozen for this year's first quarter was $.682,
compared to $.556 cents for the first quarter last year, an increase of 22.7%.
The "net average selling price" is the average selling price for all grades of
shell eggs, including non-graded egg sales, breaking stock and undergrades.

Cost of Sales. Total cost of sales for the quarter ended August 31, 1996
was $55.7 million, an increase of $4.3 million, or 8.4%, over a cost of sales of
$51.4 million in the last year's first quarter. The increase for this year's
first quarter is attributable to an increase in the cost of feed ingredients. At
the same time, there was a reduction in the cost of sales due to a reduction of
approximately 30% in the Company's purchases of eggs from outside sources. The
cost of feed per dozen produced during the quarter ended August 31, 1996 was
$.32 per dozen as compared to $.22 per dozen for the first quarter last year, or
an increase of approximately 45%. Feed costs account for almost 60% of the
Company's farm cost of egg production. Poor crop conditions in the mid-west
resulted in the higher cost of feed ingredients. With increases in egg prices
exceeding increases in production costs, the gross profit increased from 8.6% of
net sales in the quarter ended September 2, 1995 to 15.0% of net sales in the
quarter ended August 31, 1996.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the quarter ended August 31, 1996 was $7.1 million,
an increase of $500,000, or 8.7%, over the $6.6 million for the comparable
period last year. As a percent of net sales, selling, general and administrative
expenses have decreased slightly from 11.7% for last year's quarter to 10.9% for
this year's first quarter.

Operating Income. As a result of the above, operating income was $2.7
million for the quarter ending August 31, 1996 as compared to an operating loss
of $1.7 million for the first quarter last year. As a percent of net sales, the
quarter ended August 31, 1996 had a 4.1% operating profit, compared to a 3.1%
operating loss for the first quarter last year.

15
<PAGE> 16

Other Income (Expense). Net other expenses in each of the first quarters
of this and the last fiscal year were $900,000. A reduction of $300,000 in
interest expense for the quarter ended August 31, 1996, was offset by other
income in last year's quarter, principally from insurance claim proceeds.

Income Taxes. As a result of above, the Company's pre-tax income was $1.8
million for the quarter ended August 31, 1996 compared to a pre-tax loss of $2.6
million for last year's quarter ended September 2, 1995. For the quarter ended
August 31, 1996, an income tax expense of $700,000 was recorded, and for the
quarter ended September 2, 1995 an income tax benefit of $1.0 million was
recognized. The effective income tax rate was 39.9% for the quarter ended August
31, 1996, as compared to 37.1% for the quarter ended September 2, 1995. The
increase in the effective income tax rate is primarily attributable to an
increase in the effective state income tax rate.

Net Income. Net income for the quarter ended August 31, 1996 was $1.1
million, or $.10 per share, compared to a loss of $1.6 million, or $.14 per
share, for the quarter ended September 2, 1995.

Fiscal Year Ended June 1, 1996 Compared to Fiscal Year Ended June 3, 1995

Net Sales. Net sales in the fiscal year ended June 1, 1996 were $282.8
million, an increase of $40.2 million, or 16.6%, over net sales of $242.6
million in the fiscal year ended June 3, 1995. The increase was due to higher
shell egg prices. Apart from the impact of acquisitions and new facilities
construction, the sale price of shell eggs is the most important factor in
year-to-year changes in the Company's net sales. Cal-Maine's net average selling
price during fiscal 1996 was $.684 per dozen shell eggs, compared to $.528 per
dozen shell eggs in fiscal 1995. During fiscal 1996, the Company experienced a
decrease in the number of eggs sold because of a slight reduction in flock size
and fewer purchases from outside sources. The Company produced 308.8 million
dozens of eggs in fiscal 1996, compared with 322.7 million in fiscal 1995. The
Company purchased approximately 80.2 million dozens of eggs in fiscal 1996,
compared to 105.0 million in fiscal 1995. Approximately 12.9% of net sales in
fiscal 1996 were attributable to shell egg production and processing facilities
acquired from Wayne Detling Farm in 1994 and A&G Farms in 1995, and
approximately 8.6% of fiscal 1996 net sales were attributable to new facilities
constructed by the Company in Edwards, Mississippi in 1994 and Waelder, Texas in
1995. Such acquired facilities and constructed facilities accounted for 11.6%
and 5.4%, respectively, of fiscal 1995 net sales.

Cost of Sales. The total cost of sales in fiscal 1996 was $230.9 million,
an increase of $6.9 million, or 3.1%, above fiscal 1995's cost of sales of
$224.0 million. The increase was primarily due to an increase in feed ingredient
cost from $.211 per dozen eggs in fiscal 1995 to $.266 per dozen eggs in fiscal
1996. The gross profit margin increased to 18.4% in fiscal 1996 from 7.7% in
fiscal 1995, as a result of the increase in shell egg prices, which more than
offset the decrease in the number of eggs produced and the increase in feed
cost. Cost of sales, as a percentage of net sales, sharply declined in the
fiscal year ended June 1, 1996, primarily as a result of increases in shell egg
prices.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses in fiscal 1996 were $29.7 million, an increase of $1.8
million, or 6.2%, from $27.9 million in fiscal 1995. Selling, general and
administrative expenses as a percent of net sales were 10.5% in fiscal 1996, a
decrease from 11.5% in fiscal 1995.

Operating Income. As a result of the above, the Company's operating income
was $22.3 million in fiscal 1996, compared to an operating loss of $9.3 million
in fiscal 1995.

Other Income (Expense). Other expense increased from $4.0 million in
fiscal 1995 to $5.0 million in fiscal 1996. An increase of approximately $1.0
million in the Company's equity in the income of BCM Egg Company ("BCM"), a
partnership in which Cal-Maine is a 50% owner, was more than offset by an
increase in interest expense of $400,000 and a $1.2 million reduction in other
income.

Income Taxes. As a result of the above, the Company's pre-tax income was
$17.4 million in fiscal 1996, compared to a $13.3 million of loss before income
taxes in fiscal 1995. Income tax expense was $6.5 million in fiscal 1996
compared to an income tax benefit of $4.6 million in fiscal 1995. The effective
income tax rate was

16
<PAGE> 17

37.2% for the year ended June 1, 1996, compared to 34.6% for the year ended June
3, 1995. This increase was principally a result of the increased effective tax
rate for state income taxes.

Net Income. As a result of the above, the Company had net income of $10.9
million, or $.94 per share, in fiscal 1996, compared to a net loss of $8.7
million, or $.74 per share, in fiscal 1995.

Fiscal Year Ended June 3, 1995 Compared to Fiscal Year Ended May 28, 1994

Net Sales. Net sales in the fiscal year ended June 3, 1995 were $242.6
million, a decrease of $12.1 million, or 4.7%, from net sales of $254.7 million
in the fiscal year ended May 28, 1994. The decrease was due to lower shell egg
market prices. Apart from the impact of acquisitions and new facilities
construction, the sale price of shell eggs is the most important factor in
year-to-year changes in the Company's net sales. During fiscal 1995, the Company
increased its production of eggs as well as its purchases of eggs from other
producers. The Company produced approximately 322.7 million dozens of eggs in
fiscal 1995, compared to 317.9 million in fiscal 1994. The Company purchased
approximately 105.0 million dozens of eggs in fiscal 1995, compared to 91.3
million in fiscal 1994. Approximately 11.6% of net sales in fiscal 1995 were
attributable to shell egg production and processing facilities acquired from
Wayne Detling Farm in 1994 and A&G Farms in 1995, and approximately 5.4% of
fiscal 1995 net sales were attributable to new facilities constructed by the
Company in Edwards, Mississippi in 1994 and Waelder, Texas in 1995. The
facilities acquired from Wayne Detling Farms and the new facilities constructed
in Edwards, Mississippi accounted for 6.5% and 4.2%, respectively, of fiscal
1994 net sales.

Cost of Sales. The total cost of sales in fiscal 1995 was $224.0 million,
a decrease of $1.2 million, or 0.6%, below fiscal 1994's cost of sales of $225.2
million. The decrease was primarily due to decreased feed costs, which averaged
$.211 per dozen eggs in fiscal 1995 compared to $.239 per dozen eggs in fiscal
1994. The cost of sales as a percent of net sales increased from 88.4% in fiscal
1994 to 92.3% in fiscal 1995. The decrease in egg prices in fiscal 1995 more
than offset the increased egg production and lower feed costs in that year. Cost
of sales, as a percentage of net sales, sharply increased in the fiscal year
ended June 3, 1995, primarily as a result of decreases in shell egg prices.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses in fiscal 1995 were $27.9 million, an increase of $1.8
million, or 7.1%, over $26.1 million in fiscal 1994. Selling, general and
administrative expenses as a percent of net sales amounted to 11.5% in fiscal
1995, as compared to 10.3% in fiscal 1994.

Operating Income (Loss). As a result of the above, the Company had an
operating loss of $9.3 million in fiscal 1995, compared to operating income of
$3.4 million in fiscal 1994.

Other Income (Expense). Other expenses exceeded other income in fiscal
1995 by $4.0 million, an increase of $1.2 million, or 44.3%, above the $2.8
million excess of expenses over other income in fiscal 1994. The increase is
attributable primarily to an increase of $700,000 in interest expense, offset in
part by a decrease of $300,000 in the Company's equity in the income of BCM and
a decrease of $200,000 in other income.

Income Tax Expense (Benefit). The pre-tax loss in fiscal 1995 was $13.3
million compared to the prior year's pre-tax income of $600,000. The income tax
benefit was $4.6 million in fiscal 1995, compared to the prior fiscal year's
income tax expense of $400,000.

Net Income (Loss). The Company had a net loss of $8.7 million, or $.74 per
share, in fiscal 1995, compared to net income of $200,000, or $.02 per share, in
fiscal 1994.

CAPITAL RESOURCES AND LIQUIDITY

The Company's working capital at August 31, 1996 was $28.2 million compared
to $26.7 million of working capital at June 1, 1996. The Company's need for
working capital generally is highest in the first and last fiscal quarters
ending in August and May, respectively, when egg prices normally are at seasonal
lows. Seasonal borrowing needs frequently are higher during those periods than
during other fiscal periods.

17
<PAGE> 18

The Company had an unused $35 million line of credit with three banks at
August 31, 1996. Borrowings under the line of credit bear interest at 1.5% above
the federal funds rate or LIBOR, at the Company's option. At August 31, 1996,
the Company's long-term debt, including current maturities and capitalized lease
obligations, amounted to approximately $62.9 million.

Substantially all trade receivables and inventories collateralize the
Company's line of credit, and property, plant and equipment collateralize the
Company's long-term debt. The Company is required by certain provisions of these
loan agreements to (i) maintain minimum levels of working capital and net worth;
(ii) limit dividends, capital expenditures, lease obligations and additional
long-term borrowings; and (iii) maintain various current and cash-flow coverage
ratios, among other restrictions. The Company was in compliance with these
provisions at August 31, 1996.

In the quarter ended August 31, 1996, $3.1 million in net cash was provided
by operating activities, primarily from net income and depreciation. Of the $3.1
million, $1.8 million was used for construction and purchases of equipment, and
$600,000 was used to repay long-term debt. The net result of these activities
was a net increase in cash and cash equivalents of $729,000. One million dollars
of long-term borrowed funds have been used in the construction of the egg
production facility in Chase, Kansas.

In fiscal 1996, $25.3 million of net cash was provided by operating
activities, of which $8.8 million of cash was used primarily for property, plant
and equipment purchases and $15.5 million of net cash was used to repay
borrowings under the Company's line of credit.

The Company is financing approximately $13.5 million of the $16.0 million
total estimated cost to complete the construction of new shell egg production,
processing and feed mill facilities in Chase, Kansas through industrial revenue
bonds maturing in 2011 and secured by the property, plant and equipment there.
At August 31, 1996, the Company had expended approximately $2.2 million on this
recently-commenced construction, completion of which is expected in fiscal 1999.
In late fiscal 1997, the Company plans to commence construction of new shell egg
production and processing facilities in Waelder, Texas. It expects to complete
construction of those facilities in fiscal 2000 at a total estimated cost of
approximately $13.9 million, of which the Company plans to finance approximately
$10.4 million through a borrowing from an insurance company. That borrowing is
expected to mature 15 years from issuance and be secured by the property, plant
and equipment at Waelder.

The Company has $3,100,000 of deferred tax liability due to a subsidiary's
change from a cash basis to an accrual basis taxpayer on May 29, 1988. This
liability will become payable with respect to the first fiscal year in which the
Company fails to qualify as a "family farming corporation" within the meaning of
Section 447 of the Internal Revenue Code (the "Code"). The Company could lose
such tax status as a result of a change in the tax laws, and will lose such tax
status if its annual revenues from farming are less than $111,549,000 or if the
members of a single family fail to own at least 50% of the voting power of all
voting stock and at least 50% of all other classes of stock. The Company had
farming revenues of $250,152,000 for fiscal 1996. The Company's farming revenues
and the ownership of its stock by Fred R. Adams, Jr. and other members of his
family presently qualify the corporation as a "family farming corporation." If
"family farming corporation" status is lost, payment of the $3,100,000 deferred
tax liability would reduce the Company's cash but would not impact the Company's
statement of operations or reduce stockholders' equity, as these taxes have been
accrued and are reflected on the Company's balance sheet. See Note 9 of Notes to
Consolidated Financial Statements.

18
<PAGE> 19

BUSINESS

The Company is primarily engaged in the production, grading, packing and
sale of fresh shell eggs, which accounted for approximately 92% of net sales in
the Company's fiscal year ended June 1, 1996, and the manufacture and sale of
egg products, which accounted for approximately 6% of net sales in fiscal 1996.
Cal-Maine's operations are fully integrated and it owns facilities to hatch
chicks, grow pullets, manufacture feed and produce, process, manufacture and
distribute eggs and egg products. The Company's products are principally
marketed in 26 states, chiefly in the southwestern, southeastern, mid-west and
mid-Atlantic regions of the United States.

GROWTH STRATEGY

During the past eight years the Company has pursued an aggressive growth
strategy, including 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, the Company has consummated six
acquisitions, adding an aggregate of 13.7 million layers to its capacity, and
built four major new "in-line" shell egg production and processing facilities
and one pullet growing facility, adding 4 million layers and 950,000 pullets to
its capacity. Each of the new shell egg production facilities generally provides
for the processing of approximately 300 cases of shell eggs per hour. (One case
equals 30 dozen eggs.) 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 new "in-line" facilities result in the
gathering, cleaning, grading and packaging of shell eggs by less
labor-intensive, more efficient, mechanical means.

As a result of the Company's growth strategy, the Company's total flock,
including pullets, layers and breeders, has increased from approximately 6.8
million at May 28, 1988 to an average of approximately 17.4 million for each of
the past five fiscal years. Also, there has been a three-fold increase in the
number of dozens of shell eggs sold, from approximately 117 million in the
fiscal year ended May 28, 1988 to an average of approximately 394 million in
each of the past five fiscal years. Net sales amounted to approximately $282.8
million in fiscal 1996, approximately four times net sales of approximately
$70.0 million in fiscal 1988.

ACQUISITIONS OF EGG PRODUCTION AND PROCESSING FACILITIES

<TABLE>
<CAPTION>
LAYERS PURCHASE
FISCAL YEAR(1) SELLER LOCATION ACQUIRED PRICE
- -------------- ---------------------------------------- --------------- -------------- -----------
<C> <S> <C> <C> <C>
1989 Egg City, Inc........................... Arkansas 1,300,000 $ 6,716,000
1990 Sunny Fresh Foods, Inc.................. (2) 7,500,000 21,629,000
1991 Sunnyside Eggs, Inc..................... North Carolina 1,800,000 6,000,000
1994 Wayne Detling Farms..................... Ohio 1,500,000 12,194,000
1995 A&G Farms(3)............................ Kentucky 1,000,000 2,883,000
1997 Sunbest Farms(4)........................ Arkansas 600,000 1,302,000
-------------- -----------
Total..................................................... 13,700,000 $50,724,000
========= ==========
</TABLE>

- ---------------
(1) The Company's fiscal year ends on the Saturday closest to May 31.

(2) New Mexico, Kansas, Texas, Alabama, Oklahoma, Arkansas and North Carolina.

(4) Acquired subsequent to quarter ended August 31, 1996.

19
<PAGE> 20

CONSTRUCTION OF EGG PRODUCTION, PULLET GROWING AND PROCESSING FACILITIES(1)

<TABLE>
<CAPTION>
FISCAL YEAR LAYER PULLET APPROXIMATE
COMPLETED LOCATION CAPACITY CAPACITY COST
- ----------- -------------------------------------------------- --------- -------- -----------
<C> <S> <C> <C> <C>
1990 Mississippi....................................... 1,000,000 200,000 $10,000,000
1992 Louisiana......................................... 1,000,000 -- 10,000,000
1992 Mississippi....................................... -- 500,000 3,500,000
1994 Mississippi....................................... 1,000,000 -- 9,200,000
1996 Texas............................................. 1,000,000 250,000 14,000,000
--------- -------- -----------
Total............................................. 4,000,000 950,000 $46,700,000
======== ======= ==========
</TABLE>

- ---------------
(1) Does not include (i) current construction in Chase, Kansas, expected to be
completed in fiscal 1999 at an estimated cost of approximately $16,000,000,
adding approximately 1,000,000 layer and 250,000 pullet capacity, and a feed
mill and grain storage; or (ii) proposed construction in Waelder, Texas,
expected to commence in fiscal 1997, and to be completed in fiscal 2000 at
an estimated cost of approximately $13,900,000, adding approximately
1,000,000 layer and 250,000 pullet capacity.

As part of its strategy of increasing market share through the acquisition
of production and processing facilities, the Company will consider the
acquisition of egg producers owning one million or more layers. The Company
believes that there are approximately 50 companies engaged in shell egg
production in the United States that own one million or more layers, of which
two own from 10 to 15 million layers, approximately five own from 5 to 10
million layers and approximately 40 own from 1 to 5 million layers, based on
independently prepared industry statistics. In addition, the Company intends to
consider the possible acquisition of facilities engaged in the manufacture and
sale of egg products. The Company expects to continue to pursue its growth
strategy and to use a portion of its net proceeds from this offering, promissory
notes and common stock to acquire additional shell egg production and related
facilities. However, it has no understandings or agreements in that regard at
this time.

The construction of new egg production and processing facilities has been,
and will continue to be, an important component of the Company's growth
strategy. Since the end of fiscal 1989, the Company has constructed four major
egg production and processing facilities in Mississippi, Louisiana and Texas and
a pullet growing facility in Mississippi, at a total cost of approximately $46.7
million, of which approximately $28.2 million was financed by bank and insurance
company borrowings and $6.85 million was funded by industrial revenue bonds. The
balance of the construction costs was met from the Company's working capital.
These new facilities, each of which generally provides for the processing of
approximately 300 cases of shell eggs per hour, have added a total capacity of
approximately 4.0 million layers and 1.0 million pullets to the Company's total
flock.

The Company currently is constructing new egg production, processing and
feed mill facilities in Chase, Kansas, which are expected to be completed in
fiscal 1999 at an estimated cost of approximately $16 million, of which
approximately $13.5 million is being financed through the issuance of industrial
revenue bonds. The new facilities are expected to have a 1.0 million layer and
250,000 pullet capacity. In addition, the Company plans in late fiscal 1997 to
commence the construction of a new in-line egg laying facility in Waelder,
Texas, which is expected to be completed in fiscal 2000 at an estimated total
cost of approximately $13.9 million, of which approximately $10.4 million is
expected to be borrowed from an insurance company. The facility is expected to
have a 1,000,000 layer and 250,000 pullet capacity. Although the Company has not
made any decisions or entered into any understandings or agreements relating to
the construction of additional shell egg production and processing or egg
product manufacturing facilities, it plans to continue to periodically consider
the construction of such facilities when consistent with market conditions and
other economic factors.

The increased use of in-line facilities has generated significant cost
savings. The cost of eggs at these facilities was lower by 1.0c, 1.5c, 2.1c,
2.3c and 3.1c per dozen in fiscal 1992, 1993, 1994, 1995 and 1996, respectively,
than costs to the Company of eggs from non-in-line facilities. Also, due to less
breakage, the Company produces a higher percentage of grade A eggs, which sell
at higher prices, at these facilities. The

20
<PAGE> 21

percentage of the Company's total layers housed in in-line facilities increased
from 25% in fiscal 1992 to 55% in fiscal 1996.

The following table sets forth certain selected consolidated operating data
for each of the Company's past eight fiscal years.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------
JUNE 3, JUNE 2, JUNE 1, MAY 30,
1989 1990 1991 1992
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHELL EGG OPERATING PROFIT (LOSS):
Profit (Loss) (cents per
dozen):
Feed Cost................ 26.0cents 24.2cents 23.3cents 22.7cents
Hen Amortization and
Mortality.............. 5.4 5.9 7.0 7.2
Facilities and Other Farm
Costs.................. 7.6 7.9 8.5 8.5
------ ------ ------ ------
Farm Egg Production
Cost................... 39.0 38.0 38.8 38.4
Purchases, Processing,
Distribution, SG&A
Cost................... 15.2 20.4 20.8 18.5
------ ------ ------ ------
Total Cost............... 54.2 58.4 59.6 56.9
Average Selling Price(1)...... 57.8 70.0 66.2 56.3
------ ------ ------ ------
Profit (Loss) (cents per
dozen)................. 3.6cents 11.6cents 6.6cents (0.6)cents
====== ====== ====== ======

<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------
MAY 29, JUNE 3, JUNE 2, JUNE 1,
1993 1994 1995 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHELL EGG OPERATING PROFIT (LOSS):
Profit (Loss) (cents per
dozen):
Feed Cost................ 21.9cents 23.9cents 21.1cents 26.6cents
Hen Amortization and
Mortality.............. 7.1 6.5 7.4 7.2
Facilities and Other Farm
Costs.................. 8.7 8.5 8.9 8.9
------ ------ ------ ------
Farm Egg Production
Cost................... 37.7 38.9 37.4 42.7
Purchases, Processing,
Distribution, SG&A
Cost................... 17.8 18.2 18.1 22.6
------ ------ ------ ------
Total Cost............... 55.5 57.1 55.5 65.3
Average Selling Price(1)...... 57.4 57.7 52.8 68.4
------ ------ ------ ------
Profit (Loss) (cents per
dozen)................. 1.9cents (0.6)cents (2.7)cents 3.1cents
======= ====== ====== ======
</TABLE>

- ---------------
(1) Represents average selling price for all grades, including non-graded egg
sales, breaking stock and undergrades.

21
<PAGE> 22

The following egg flow chart depicts the Company's production and marketing
of shell eggs and egg products:

Flow Chart

22
<PAGE> 23

SHELL EGGS

Production

Shell eggs are produced on farms owned by the Company or by contract
producers. The following table sets forth for each of the Company's last five
fiscal years, the percentages of egg production attributable to the Company's
own facilities and to contract producers.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------
MAY 20, MAY 28, MAY 30, JUNE 3, JUNE 1,
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Percentage of Egg Production
- ---------------------------------------------------
Company Facilities............................ 46.5% 50.0% 56.4% 59.3% 60.5%
Contract Producers............................ 53.5% 50.0% 43.6% 40.7% 39.5%
</TABLE>

Under Cal-Maine's arrangements with its contract producers, the Company
owns the entire flock, furnishes all feed and supplies, owns the shell eggs
produced, and assumes all market risks. The contract producers own their
facilities and are paid a fee based on production with incentives for
performance.

The Company may change the mix of its own versus contract egg production to
mitigate the adverse effect of low egg market prices upon its operations. By
reducing its use of contract producers during periods of low egg market prices,
the Company incurs lower overall production costs. Also, the Company
continuously seeks to make improvements in feed efficiency, egg production,
molting programs and other operating practices.

The commercial production of shell eggs requires a source of baby chicks to
be used for laying flock replacement. The Company produces approximately 98% of
its chicks in its own hatcheries and obtains the balance from commercial
sources. Feed for the laying flocks is produced by Company-owned and operated
mills located in Alabama, Arkansas, Louisiana, Missouri, Mississippi, New
Mexico, North Carolina, Ohio, Oklahoma, South Carolina and Texas. All
ingredients necessary for feed production are readily available in the open
market and are purchased centrally from Jackson, Mississippi. Approximately 95%
of the feed for Company-owned farms and contract producers is manufactured at
feed mills owned and operated by the Company. 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, the Company purchases
ingredients in advance with a delayed delivery of several weeks.

After the eggs are produced, they are cleaned, graded and packed.
Substantially all of the Company-owned farms have modern "in-line" facilities
that mechanically gather, clean, grade and package the eggs produced, thereby
reducing the amount of labor needed and increasing efficiency. Eggs produced on
farms owned by contractors are brought to the Company's processing plants where
they are cleaned, graded and packed. Some eggs are sold unprocessed to other
processors.

In fiscal 1994, 1995 and 1996, the Company purchased approximately $8.0
million, $7.5 million and $9.9 million of shell eggs, respectively, from BCM Egg
Company, a partnership of which the Company is a 50% owner.

The shell egg production and processing industry has been characterized by
a growing concentration of production in a decreasing number of shell egg
producers. In 1995, 53 producers with one million or more layers owned 68.2% of
the 246.7 million total U.S. layers, compared with the 56 producers with one
million or more layers owning 63.6% of the 231.9 million total U.S. layers in
1990, and 61 producers with one million or more layers owning 56.2% of the 248.0
million total U.S. layers in 1985. The Company believes 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.

23
<PAGE> 24

Marketing

Of the 384 million dozen shell eggs sold by the Company in the fiscal year
ended June 1, 1996, approximately 93% were cleaned, graded and packed in the
Company's processing facilities and sold by the Company, 5% were used by the
Company in its manufacture of egg products, and 2% were sold direct from the
Company's farms to other shell egg users.

Sales of shell eggs primarily are made to national and regional supermarket
chains that buy direct from the Company. During fiscal 1996, Cal-Maine's largest
customer accounted for less than 10% of net sales, and the top 10 customers
accounted for slightly more than 50% of net sales in the aggregate. 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 the Company has established a long-term relationship with many of
its customers, such customers are free to acquire shell eggs from other sources.

The Company sells its shell eggs at prices generally related to
independently quoted wholesale market prices. The prices of its shell eggs
reflect fluctuations in the quoted market, and the results of the Company's
shell egg operations are materially affected by changes in market quotations.
All major egg customers purchase eggs at significant discounts from quoted egg
prices which serve as a reference point in selling price determinations. 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
the Company cannot control. No representation can be made as to the future level
of prices, which are subject to wide fluctuations.

Shell eggs are perishable. Consequently, the Company maintains 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. Consequently, the Company generally
experiences lower sales and net income in its first and fourth fiscal quarters
ending in August and May, respectively.

The decline in per capita consumption of shell eggs that occurred during
the 1980's, which may be attributable to perceived health concerns relating to
cholesterol content and lifestyle changes, appears to have abated, as annual per
capita consumption has remained relatively level in the 1990's to date. The
annual per capita consumption of shell eggs since 1990 has ranged from 234 to
239, averaging 236. While the Company believes that increased fast food
restaurant consumption, reduced egg cholesterol levels and industry advertising
campaigns may result in a continuance of, or possible increase in, current per
capita egg consumption levels, no assurance can be given that per capita
consumption will not decline in the future.

EGG PRODUCTS

Egg products produced by the Company include liquid egg whites, liquid egg
yolks, liquid whole eggs, salt yolk, sugar yolk, similar products sold in frozen
form, and various forms of dried whole eggs, egg whites and yolks. The Company's
production facility is located in Jackson, Mississippi. Sales are made primarily
to national accounts which consist principally of manufacturers of baked goods,
mayonnaise and confections. The Company manufactures and distributes egg
products in liquid, frozen and dried forms and also processes egg products
according to customer specifications for use in special baking and manufacturing
applications. Egg products are sold on a direct basis to major institutional
users or with the assistance of egg product brokers. Egg products accounted for
approximately 6% of the Company's net sales in each of fiscal year 1996 and
fiscal 1995, and 7.2% in fiscal 1994.

Of the 23 million dozen of shell eggs used in the Company's egg product
operations in the fiscal 1996, approximately 83% were produced by the Company's
own and contract farms, and the balance was purchased by the Company from
outside sources.

Egg product sales are somewhat seasonal, with peak demands occurring prior
to holiday seasons. The Company's plant is operated at its highest capacity
during periods when egg prices are at their lowest. These periods normally do
not coincide with the high demand periods for egg products. As a result, the
Company's egg product inventories can be significant, requiring high working
capital. The Company tends to build egg

24
<PAGE> 25

product inventories during periods of shell egg surpluses and reduce inventories
when demand for shell eggs is stronger. Egg product inventories vary between two
and four months of sales.

SPECIALTY EGGS

The Company has developed the capability to produce specialty eggs such as
Egg-land's Best(TM) and Farmhouse eggs.

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. Cal-Maine produces and
processes Egg-land's Best(TM) eggs, under license from Egg-land's Best, Inc.
("EB"), at its existing facilities, under EB guidelines that require the use of
a proprietary vegetarian feed supplement, adherence to quality control standards
and use of approved packaging materials. The Company believes it is EB's largest
franchisee. The product is marketed to the Company's established base of
customers at prices that reflect a premium over ordinary shell eggs. Although
Egg-land's Best(TM) eggs accounted for less than 1% of the Company's net sales
in fiscal 1996, Cal-Maine believes that the product offers an important
opportunity for enhanced future operating results from additional sales in a
market that tends to avoid ordinary shell eggs.

"Farmhouse" brand eggs are currently produced and processed at Company
facilities located in Kansas, New Mexico, North Carolina and Texas. The hens
that produce these eggs are not caged, and are provided with a diet of natural
grains and drinking water that is free of hormones or other chemical additives.
Although Farmhouse eggs account for only a small part of net sales at this time,
they meet the demands of consumers who are sensitive to environmental and animal
welfare issues. The Company is committed to continuing production of Farmhouse
eggs, and believes that the United States market will grow in the future.

LIVESTOCK

The Company's livestock operations currently consist of the operation of a
1,440 head dairy facility, from which milk sales are made to a major milk
processor. Milk and cattle sales were approximately 2% of the Company's net
sales in fiscal 1996.

COMPETITION

The production, processing and distribution of shell eggs is an intensely
competitive business which, traditionally, has attracted large numbers of
producers. Competition is generally based on price, service and quality of
production. Although the Company is the largest combined producer, processor and
distributor of shell eggs in the United States, it does not occupy a controlling
market position in any area where its eggs are sold. The Company competes with
approximately 50 other manufacturers of egg products. Competition is not limited
by geographic boundaries and is predicated primarily on quality, price, product
availability and terms of sale.

PROPERTIES AND FACILITIES

The Company owns or leases farms, processing plants, hatcheries, feed
mills, warehouses, offices and other property located in Alabama, Arkansas,
Kansas, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, North Carolina,
Ohio, Oklahoma, South Carolina and Texas, as follows: two breeding facilities,
two hatcheries, 14 feed mills, 10 production facilities, 13 pullet growing
facilities, 19 processing and packing facilities, two wholesale distribution
facilities, one egg products plant and a dairy farm. Most of the Company's
property is owned and encumbered. See Notes 5, 6 and 7 of the Notes to
Consolidated Financial Statements of the Company.

The Company operates 175 over-the-road tractors and 271 trailers, of which
91 and 186 are owned, respectively, and the balance are leased.

25
<PAGE> 26

At June 1, 1996, the Company owned approximately 12,070 acres of land and
owned facilities to:

<TABLE>
<CAPTION>
OPERATION CAPACITY
--------------------------------- ----------
<S> <C> <C> <C>
Hatch............................ 13,000,000 - pullet chicks per year
Grow (1)......................... 5,240,000 - pullets per year
House (2)........................ 9,200,000 - hens
Produce.......................... 547 - tons of feed per hour
Process (3)...................... 4,780 - cases of eggs per hour
Break (3)........................ 500 - cases of eggs per hour
Dry (4).......................... 5,500 - lbs. per hour liquid whites
5,570 - lbs. per hour liquid whole eggs
5,570 - lbs. per hour liquid yolk
</TABLE>

- ---------------
(1) The Company uses contract growers for the production of an additional 4.0
million pullets.

(2) The Company controls approximately 15.2 million layers, of which 6.0 million
are cared for by contract producers.

(3) One case equals 30 dozen eggs.

(4) One case of large eggs yields approximately 40 lbs. of liquid egg and
approximately 10 lbs. of dried egg.

Over the past five fiscal years, Cal-Maine's capital expenditures have been
approximately $88 million, including the acquisition of the operations of other
businesses. The Company's facilities currently are maintained in good operable
condition and are insured to an extent the Company deems adequate.

GOVERNMENT REGULATION

The Company is subject to federal and state regulations relating to
grading, quality control, labeling, sanitary control and waste disposal. As a
fully-integrated egg producer, the Company's shell egg facilities are subject to
USDA and FDA regulation. The Company's shell egg facilities are subject to
periodic USDA inspections, and its egg products plant is subject to continuous
on-site USDA inspection. Cal-Maine maintains its own inspection program to
assure compliance with the Company's own standards and customer specifications.

Cal-Maine is subject to federal and state environmental laws and
regulations and has all necessary permits. The construction of new facilities
requires compliance with environmental laws and regulations, including the
receipt of permits, that could cause schedule delays, although the Company has
not experienced any significant delays in the past.

EMPLOYEES

As of December 1, 1996, the Company had a total of approximately 1,585
employees of whom 1,425 worked in egg production, processing and marketing, 70
were engaged in feed mill operations, 50 in dairy activities, and 40 were
administrative employees, including officers, at the Company's executive
offices. About one-fourth of the Company's personnel is part-time. None of the
Company's employees is covered by a collective bargaining agreement. The Company
considers its relations with employees to be good.

26
<PAGE> 27

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and directors of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- --------------------------------------------------
<S> <C> <C>
Fred R. Adams, Jr.(1)(3)........... 64 Chairman of the Board of Directors and Chief
Executive Officer
Richard K. Looper(1)............... 69 President, Chief Operating Officer and Director
Bobby J. Raines(1)(2).............. 64 Vice President, Chief Financial Officer,
Treasurer, Secretary and Director
Adolphus B. Baker.................. 39 Vice President and Director of Marketing and
Director
Jack B. Self....................... 66 Vice President/Operations and Production and
Director
Joe M. Wyatt....................... 57 Vice President/Feed Mill Division and Director
Charles F. Collins................. 52 Vice President, Controller and Director
W.D. (Jack) Cox(2)(3).............. 71 Director
R. Faser Triplett, M.D.(2)(3)...... 63 Director
</TABLE>

- ---------------
(1) Member of the Executive Committee

(2) Member of the Audit Committee

(3) Member of the Compensation Committee

Fred R. Adams, Jr. has served as the Chief Executive Officer and director
of the Company since its formation in 1969 and as the Chairman of its Board of
Directors since 1982. He is a director and past chairman of National Egg
Company, United Egg Producers, Mississippi Poultry Association, U.S. Egg
Marketers, Inc., and Egg Clearinghouse, Inc. Mr. Adams is the father-in-law of
Mr. Baker.

Richard K. Looper has served as the President and Chief Operating Officer
of the Company since 1983. Previously, he had served as Executive Vice President
of the Company since 1982 and was originally employed by the Company in 1974.
Mr. Looper is a past chairman of the American Egg Board and U.S. Egg Marketers,
Inc. He has served as a director of the Company since 1982.

Bobby J. Raines has served as Vice President, Chief Financial Officer,
Treasurer and Secretary of the Company since 1972. Previously, he had handled
various operational responsibilities and has been employed by the Company since
its formation in 1969. He has served as a director of the Company since 1982.

Adolphus B. Baker has been Vice President and Director of Marketing of the
Company since 1988. Previously, he had served as Assistant to the President
since 1987 and has been employed by the Company since 1986. Mr. Baker is a
member of the American Egg Board, chairman of Mississippi Poultry Association,
and is a past chairman of Egg Clearinghouse, Inc. He has been a director of the
Company since 1991. Mr. Baker is Mr. Adams' son-in-law.

Jack B. Self has been Vice President/Operations and Production since the
Company's formation in 1969. He has served as a director of the Company since
1983.

Joe M. Wyatt has been Vice President/Feed Mill Division since 1977 and has
been employed by the Company since its formation in 1969. He has served as a
director of the Company since 1983.

Charles F. Collins has served as Vice President and Controller of the
Company since 1978. He has served as a director of the Company since 1983. He
has been employed by the Company since 1969.

W.D. (Jack) Cox has served as a director of the Company since September
1996. Mr. Cox has been a consultant to various food companies and a major farm
implement company since October 1990. Prior thereto,

27
<PAGE> 28

he served as Vice President for vegetable oil procurement at Kraft, Inc.
("Kraft"), and was a consultant to offshore and Canadian locations of Kraft's
facilities. In the early 1980s, Mr. Cox was Vice President for commodities and
ingredients of Nabisco Brands, Inc. From 1970 to 1972 Mr. Cox was employed by
the Company as Vice President for egg products.

R. Faser Triplett, M.D., has served as a director of the Company since
September 1996. Dr. Triplett is a practicing physician and a Clinical Assistant
Professor at the University of Mississippi School of Medicine. He is the
majority owner of Avanti Travel, Inc. and a director of Mobile
Telecommunications Technologies Corp.

The Executive Committee may exercise all of the powers of the full Board of
Directors, except for certain major actions, such as the adoption of any
agreement of merger or consolidation, the recommendation to stockholders of any
disposition of substantially all of the Company's assets or a dissolution of the
Company, and the declaration of a dividend or authorization of an issuance of
stock. The Executive Committee acts on matters, within the scope of its
authority, between meetings of the full Board. The Company's Compensation
Committee reviews and recommends to the Board of Directors the compensation and
benefits of all officers of the Company, reviews general policy matters relating
to compensation and benefits of employees of the Company and administers the
issuance of stock options to the Company's officers, employees and directors.
The Audit Committee meets with management and the Company's independent auditors
to determine the adequacy of internal controls and other financial reporting
matters.

EXECUTIVE COMPENSATION

The following Summary Compensation Table sets forth all compensation
awarded to, earned by or paid for services rendered to the Company in all
capacities during the fiscal year ended June 1, 1996 by (i) the Company's chief
executive officer and (ii) the Company's four other most highly compensated
executive officers who were serving as executive officers at the end of that
year.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
FISCAL 1996 SHARES OF
ANNUAL COMPENSATION COMMON STOCK
-------------------- UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITIONS SALARY BONUS(1) OPTIONS PAYOUTS COMPENSATION(2)
- --------------------------------------- -------- -------- ------------ ------- ---------------
<S> <C> <C> <C> <C> <C>
Fred R. Adams, Jr. -- Chairman of the
Board and Chief Executive Officer.... $336,910 $250,000 None None $83,797
Richard K. Looper -- President and
Chief Operating Officer.............. 129,903 150,000 120,000 $50,000(3) 1,246
Bobby J. Raines -- Vice President,
Chief Financial Officer, Treasurer
and Secretary........................ 115,577 91,000 96,000 (4) 977
Jack B. Self -- Vice
President/Operations and
Production........................... 82,500 37,250 48,000 (4) 1,102
Joe M. Wyatt -- Vice President/Feed
Mill Divisions....................... 78,896 27,250 48,000 (4) 730
</TABLE>

- ---------------
(1) Bonuses are determined annually by the Board of Directors on a discretionary
basis based on the results of the Company's operations and the Board's
evaluation of the executive officer's contribution to such performance.
(2) The amounts shown represent premiums paid under separate life insurance
policies purchased by the Company for each person named in the table. The
policy on Mr. Adams' life is owned by an Adams family intervivos trust, and
the beneficiaries are Mr. Adams' four daughters and their descendants.
Messrs. Looper, Raines, Self and Wyatt are the owners of their respective
policies, and members of their families are the beneficiaries. The Company
is not a beneficiary under any of such policies and will not receive any
portion of the proceeds paid thereunder upon the death of any of the
insureds.
(3) Pursuant to Mr. Looper's incentive compensation agreement with the Company.
See "Long Term Incentive Plans," below.
(4) Amount earned but payable in the future pursuant to long term incentive
plans not included. See "Long Term Incentive Plans," below.

28
<PAGE> 29

EMPLOYEE STOCK OWNERSHIP PLAN

The Company maintains a payroll-based Employee Stock Ownership Plan (the
"ESOP"). Pursuant to the ESOP, originally established in 1976, substantially all
persons employed at January 1, 1994, as well as substantially all new full-time
employees over age 21 with one or more years of service, participate. The ESOP
is administered by an Administrative Committee including Messrs. Raines, Looper
and Collins, directors of the Company. Its assets, which are managed by a
trustee designated by the Board, consist primarily of Common Stock of the
Company. Contributions by the Company may be made in cash or shares of Common
Stock, as determined by the Board of Directors. Employee contributions are not
permitted. Company contributions generally may not exceed 15% of the aggregate
annual compensation of participating employees. Contributions are allocated to
the accounts of participating employees in the proportion which each employee's
compensation for the year bears to the total compensation (up to $150,000 per
employee) of all participating employees. Company contributions vest 20%
annually beginning with the participating employee's third year of service.

Shares of Common Stock held in an employee's account are voted by the ESOP
trustee in accordance with the employee's instructions. An employee or his or
her beneficiary is entitled to distribution of the balance of his or her account
upon termination of employment. The Company's contributions to the ESOP amounted
to approximately $911,000 in fiscal 1994, $808,000 in fiscal 1995 and $992,000
in fiscal 1996. At June 1, 1996, 4,054,800 shares of Common Stock were held by
and allocated to employee accounts maintained under the ESOP. For the fiscal
year ended June 1, 1996, the Company's contributions to the ESOP on behalf of
each of the executive officers named in the Summary Compensation Table were:
Fred R. Adams, Jr. -- $8,523, Richard K. Looper -- $8,263, Bobby J.
Raines -- $9,135, Jack B. Self -- $5,292 and Joe M. Wyatt -- $4,757.

1993 STOCK OPTION PLAN

Pursuant to the Company's 1993 Stock Option Plan, which was adopted on May
25, 1993 and amended on September 23, 1996, with stockholder approval, (the
"1993 Plan") a total of 800,000 shares of Common Stock are reserved for issuance
upon the exercise of options that may be granted to directors, officers and key
employees of the Company. Options are awarded by the Board of Directors of the
Company.

The 1993 Plan is designed to obtain for the Company and its shareholders
the benefits resulting from equity ownership in Cal-Maine by directors, officers
and key employees. The Company believes that the 1993 Plan will aid in
attracting and retaining competent persons through the opportunity to acquire a
proprietary interest in Cal-Maine. Options granted under the 1993 Plan may be
either incentive stock options ("ISOs") that satisfy the requirements of Section
422 of the Code or nonstatutory options ("NSOs") which are not intended to
satisfy such requirements.

The exercise price per share under any option granted under the 1993 Plan
may not be less than 100% of the fair market value of the Common Stock on the
date of grant, or in the case of ISOs, less than 110% of such fair market value
if the option is granted to a person who holds 10% or more of the voting power
of the Capital Stock. Fair market value will be as determined by the Board of
Directors in good faith. The aggregate fair market value of the Common Stock
subject to an ISO, as determined upon a grant, which is exercisable by an
optionee for the first time during any calendar year cannot exceed $100,000. The
number and kind of shares subject to an option, and the option exercises price,
may be adjusted in certain circumstances to prevent dilution. The method of
payment of an option exercise price will be as determined by the Board of
Directors and set forth in the individual stock option agreement.

No options may be granted under the 1993 Plan more than ten years after the
date of its adoption, and no option may exercised more than 10 years after the
date of its grant, or in the case of an ISO, more than five years after the date
of grant if granted to a person holding more than 10% of the voting power of the
Common Stock. The term or times at which an option may be exercised and any
conditions or restrictions relating thereto will be as determined by the Board
of Directors and set forth in the individual stock option agreement. If for any
reason other than death, an optionee ceases to be an employee or director of the
Company, any unexercised portion of the option as of the date of termination of
employment or director service may be

29
<PAGE> 30

exercised for 90 days thereafter. Upon the death of an optionee while employed
by the Company or serving on its Board, his or her legal representative or a
legatee may, within six months after the death, exercise any unexercised portion
of the option as of the time of the optionee's death. Options are not
transferable or assignable otherwise than by will or the laws of descent and
distribution, and during his or her lifetime may only be exercised by the
optionee.

The presently outstanding options granted under the 1993 Plan are
exercisable on a cumulative basis over a period of six years from the date of
grant at the rate of 20% per year beginning twelve months after the date of
grant. The shares issued upon any exercise of an option will be deemed to be
"restricted securities" until the Company registers such shares under the 1933
Act.

Pursuant to the 1993 Plan, options have been granted and are outstanding
for the purchase of 504,000 shares of Common Stock at an exercise price of $3.42
per share and for the purchase of 24,000 shares of Common Stock at an exercise
price of $4.33 per share. None of the options granted by the Company to date
have been exercised. Options to purchase Common Stock at a price of $3.42 per
share were granted on August 2, 1993 to the following executive officers of the
Company: Richard K. Looper -- 120,000 shares; Bobby J. Raines -- 96,000 shares;
Adolphus B. Baker, Jack B. Self, Joe M. Wyatt, and Charles F. Collins -- 48,000
shares each; and options to purchase 12,000 shares each of Common Stock at a
price of $4.33 per share were granted on October 15, 1996 to W. D. (Jack) Cox
and R. Faser Triplett, directors of the Company. All options expire ten years
after grant.

SAVINGS AND RETIREMENT PLAN

Since 1985, the Company has maintained a defined contribution savings and
retirement plan (the "Retirement Plan"), which is designed to qualify under
Sections 401(a) and 401(k) of the Code. An employee is eligible to participate
in the Retirement Plan on or after having attained age 21 and after one year of
service. The Retirement Plan is administered by the Company and permits covered
employees to contribute up to 10% of their annual compensation, up to a maximum
of $9,500 per year, as adjusted for inflation, through salary reduction on a
pre-tax basis in accordance with the Code. Highly compensated employees may be
subject to further limitations on the amount of their maximum contribution. The
Company may make discretionary contributions matching each employee's pre-tax
contributions. The Retirement Plan is intended to comply with the Employee
Retirement Income Security Act of 1974, as amended.

Participating employees are at all times 100% vested in their account
balances under the Retirement Plan. Benefits are paid at the time of a
participant's death, retirement, disability, termination of employment, and,
under limited circumstances, may be withdrawn prior to the employee's
termination of service. Contributions are not taxable to employees until such
funds are distributed to them.

LONG TERM INCENTIVE PLANS

The Company has entered into certain incentive compensation continuation
agreements (the "Agreements") with Richard K. Looper, Bobby J. Raines, Jack B.
Self and Joe M. Wyatt. Pursuant to the Agreements, each such executive officer
may earn up to ten years of compensation payments if he remains with the Company
until age 65. If the officer's employment ends before his 65th birthday, he
would be entitled to fewer years of incentive compensation payments, depending
on the length of time served as an officer. The incentive compensation payments
are made monthly, beginning immediately after the officer's 65th birthday, at
the annual rate of $50,000 per year for Messrs. Looper and Raines, and $20,000
per year for Messrs. Self and Wyatt. Further, the Agreement with Mr. Self was
amended, effective September 2, 1994, so that for each subsequent year, after
age 65, Mr. Self serves as an officer of the Company, he is entitled to receive
one additional year of incentive compensation payable at the annual rate of
$20,000 per year. The Agreements provide that once payments begin or have been
earned, any remaining payments will continue to be made to the officer's estate
after his death.

Messrs. Looper and Raines have each earned 10 years of incentive
compensation payments under the Agreements, and Mr. Self has earned 12 years of
such payments. Mr. Looper began receiving his payments on December 1, 1991,
while Mr. Raines' payments will not begin until after his 65th birthday. Mr.
Self's

30
<PAGE> 31

payments will not begin until he retires. Mr. Wyatt has earned six years of
incentive compensation payments, and will become entitled to four additional
years if he continues to serve as an employee of the Company until August 4,
2004.

LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
ESTIMATED FUTURE
NAME PERIOD WHEN PAYOUT BEGINS ANNUAL PAYMENTS
- --------------------------- ------------------------- ----------------
<S> <C> <C>
Bobby J. Raines............ November 1, 2005 $ 50,000
Jack B. Self............... (1) $ 20,000
Joe M. Wyatt............... September 1, 2008 $ 20,000
</TABLE>

- ---------------
(1) At a future date not presently determinable.

Pursuant to the Agreement with Mr. Raines, for each of 10 consecutive
approximately 14-month periods (or any portion thereof) ending November 1, 1997
that Mr. Raines is employed by the Company, he is entitled to receive, starting
at age 65, one year of incentive compensation payable at the annual rate of
$50,000 per year. Mr. Raines served a portion of the ninth such period during
the fiscal year ended June 1, 1996, and, accordingly, is entitled to an
additional year of incentive compensation payable beginning November 1, 2005, at
the annual rate of $50,000 per year.

Under the Agreement, as amended, with Mr. Self, for each 12-month period
ending August 31 that Mr. Self serves as an employee of the Company, he is
entitled to receive one additional year of incentive compensation payable at the
annual rate of $20,000 per year. For his service as an employee of the Company
for the 12-month period ended August 31, 1995, Mr. Self is entitled to an
additional year of incentive compensation payable beginning the eleventh year
after his retirement.

Mr. Wyatt's Agreement provides that for each of 10 consecutive
approximately 19-month periods (or any portion thereof) ending August 4, 2004
that Mr. Wyatt is employed by the Company, he is entitled to receive, starting
at age 65, one year of incentive compensation payable at the annual rate of
$20,000 per year. Mr. Wyatt served a portion of the fifth such period during the
fiscal year ended June 1, 1996, and, accordingly, is entitled to an additional
year of incentive compensation payable beginning September 1, 2008, at the
annual rate of $20,000 per year.

DIRECTOR COMPENSATION

The Company's non-employee directors are each entitled to receive $10,000
annually as compensation for their services as a director and may be granted
options to purchase Common Stock under the 1993 Plan. They also may be
compensated for any services performed in addition to their normal duties as a
director of the Company. Employee-directors receive no additional compensation
for their services as directors of the Company.

CERTAIN TRANSACTIONS

Fred R. Adams, Jr., Chairman of the Board and Chief Executive Officer of
the Company, is indebted to the Company in the amount of $1,694,444 under a
non-interest bearing demand note receivable. Mr. Adams will use an equal amount
of the proceeds from his sale of Common Stock in this offering to pay his note
in full. The highest balance of the note was $1,769,000, in May 1986, and no
advances to Mr. Adams have been made since that time. Approximately $710,000 of
the borrowing was used by Mr. Adams to purchase shares of the Company's former
convertible preferred stock from an unaffiliated seller. The shares were
converted into common stock of the Company by Mr. Adams in fiscal 1990. The
balance of the loan proceeds were used by Mr. Adams for personal purposes.

Between September 1993 and September 1996, the Company and the ESOP have
repurchased, for cash, shares of Cal-Maine capital stock owned by Fred R. Adams,
Jr., and members of his family and his spouse's

31
<PAGE> 32

family, in the following aggregate amounts: Fred R. Adams, Jr. -- 456,000 shares
for $1,656,890; Jean Adams (Mr. Adams' spouse) -- 175,200 shares for $598,850;
Mr. Adams children and their spouses -- 82,800 shares for $299,688; and, Mrs.
Adams' children and their spouses -- 24,000 shares for $83,030. All of such
repurchases were made at prices approximating book value, as determined by an
unaffiliated, independent business appraiser.

In 1994, Mr. Adams, to satisfy certain personal obligations, as a
guarantor, executed and delivered to a bank a Promissory Note (the "Note") in
the principal amount of $720,064.41 and pledged 194,400 shares (subsequently
reduced to 127,200 shares as discussed below) of Common Stock of the Company
owned by him (the "Collateralized Shares") to secure his obligation under the
Note. The Company, in a Redemption Agreement with Mr. Adams executed March 7,
1994 (the "Agreement"), agreed to repurchase the Collateralized Shares from the
bank, at a purchase price equal to the book value thereof, in the event of a
default under the Note, based on the determination of the Board of Directors
that it would be in the best interest of the Company for the Collateralized
Shares to be acquired, if necessary, by the Company rather than by an unrelated
party. There has been no default under the Note. Pursuant to the Agreement, the
bank had the right to require the Company to repurchase a portion of the
Collateralized Shares if shares of Common Stock of the Company (other than the
Collateralized Shares) were sold by Mr. Adams other than to members of his
family in an amount in excess of $500,000 in any year. Mr. Adams advised the
bank in September 1996 of his intention to sell 800,000 shares of Common Stock
owned by him in the public offering to which this Prospectus relates. The bank
has agreed that in consideration of Mr. Adams paying the bank approximately
$65,000, the bank will waive its right to cause the Company to purchase a
portion of the Collateralized Shares. The bank's waiver is limited to the
repurchase right which would result from Mr. Adams's sale of Common Stock in the
public offering. The bank has not waived any future right of repurchase under
the Agreement. At October 4, 1996, the principal amount of the Note had been
reduced to $454,326 and the amount of Collateralized Shares securing Mr. Adams'
obligation thereunder had been reduced to 127,200 shares.

32
<PAGE> 33

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of the Company's outstanding Common Stock as of December 1, 1996, and
as adjusted to reflect the sale of the shares of Common Stock offered hereby, by
(i) each person known to the Company to beneficially own more than 5% of Common
Stock, (ii) each director of the Company, (iii) each executive officer named in
the Summary Compensation Table, and (iv) all directors and executive officers of
the Company as a group.

<TABLE>
<CAPTION>
SHARES OWNED PRIOR TO THE
OFFERING(1) SHARES OWNED AFTER THE OFFERING(1)(2)
----------------------------------- ----------------------------------------
COMMON STOCK
COMMON STOCK -------------------------
-------------------- PERCENT OF SHARES OFFERED NUMBER PERCENT OF
NUMBER OF PERCENT TOTAL VOTING BY SELLING OF PERCENT TOTAL VOTING
NAME OF STOCKHOLDER(3) SHARES OF CLASS POWER(4) STOCKHOLDER SHARES OF CLASS POWER(2)(4)
- -------------------------------- --------- -------- ------------ -------------- -------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fred R. Adams, Jr.(5)........... 6,452,136(5)(6) 62.6% 82.7% 800,000 5,652,136(6) 48.3% 79.5%
Cal-Maine Foods, Inc. Employee
Stock Ownership Plan.......... 4,054,800 39.3 18.2 4,054,800 34.7 17.1
Richard K. Looper............... 328,696(7) 3.2 1.5 328,696(7) 2.8 1.1
Bobby J. Raines................. 296,830(8) 2.9 1.3 296,830(8) 2.5 1.0
Adolphus B. Baker............... 244,426(9) 2.3 1.1 244,426(9) 2.1 *
Jack B. Self.................... 168,576(10) 1.6 * 168,576(10) 1.4 *
Joe M. Wyatt.................... 168,234(11) 1.6 * 168,234(11) 1.4 *
Charles F. Collins.............. 93,213(12) * * 93,213(12) * *
W.D. (Jack) Cox................. -- * * -- * *
R. Faser Triplett............... -- * * -- * *
All directors and executive
officers as a group (nine
persons)(13).................. 7,752,111 73.5% 87.6% 6,952,111 58.2% 79.1%
</TABLE>

- ---------------
* Less than 1%.

(1) The information as to beneficial ownership is based on information known to
the Company or statements furnished to the Company by the beneficial
owners. As used in this table, "beneficial ownership" means the sole or
shared power to vote, or to direct the voting of a security, or the sole or
shared investment power with respect to a security (i.e., the power to
dispose of, or to direct the disposition of a security). For purposes of
this table, a person is deemed as of any date to have "beneficial
ownership" of any security that such person has the right to acquire within
60 days after such date, such as under the 1993 Plan. See note (5), below,
in this connection.

(2) Gives effect to the assumed issuance of shares by the Company of Common
Stock in this offering, but not to the exercise of the Underwriters'
over-allotment option. If the Underwriter's over-allotment option is
exercised, 330,000 additional shares of Common Stock will be sold by the
Company.

(3) The address of each person, except Jack Cox and R. Faser Triplett, is
Cal-Maine Foods, Inc., 3320 Woodrow Wilson Drive, Jackson, Mississippi
39207. The address of Mr. Cox is 1161 Oak River Road, Memphis, Tennessee
38120, and of Dr. Triplett is 3691 Old Canton Road, Jackson, Mississippi
39216.

(4) Percent of total voting power is based on the total votes to which the
Common Stock and Class A Common Stock are entitled. Mr. Adams beneficially
owns 100% of the Class A Common Stock.

(5) Mr. Adams is the Selling Shareholder in the offering being made by this
Prospectus. The number of shares shown in the table include 740,400 shares
of Common Stock owned by his spouse and other members of his family as to
which Mr. Adams disclaims any beneficial ownership and 127,200 shares
pledged to a bank to secure the promissory note obligation described under
"Certain Transactions" and 660,000 shares to secure other bank borrowings.
The Class A Common Stock, which is 100% owned by Mr. Adams, is convertible
on a shares-for-share basis into shares of Common Stock, but such Class A
shares are not included in the table, except as indicated in note (4)
above.

(6) Includes 284,136 shares accumulated under the ESOP.

(7) Includes 255,496 shares accumulated under the ESOP, and 72,000 shares
subject to stock options exercisable within 60 days.

33
<PAGE> 34

(8) Includes 238,030 shares accumulated under the ESOP, and 57,600 shares
subject to stock options exercisable within 60 days.

(9) Includes 28,800 shares subject to stock options exercisable within 60 days,
and 62,400 shares owned by Mr. Baker's spouse separately and as custodian
for their children as to which Mr. Baker disclaims any beneficial
ownership. Such 62,400 shares are also included in the 740,400 shares
referred to in note (5), above. Also includes 22,426 shares accumulated
under the ESOP.

(10) Includes 134,976 shares accumulated under the ESOP, and 28,800 shares
subject to stock options exercisable within 60 days.

(11) Includes 138,234 shares accumulated under the ESOP, and 28,800 shares
subject to stock options exercisable within 60 days.

(12) Includes 64,413 shares accumulated under the ESOP, and 28,800 shares
subject to stock options exercisable within 60 days.

(13) Includes shares as to which Messrs. Adams and Baker disclaims any
beneficial ownership. See notes (5) and (9), above.

The shares of Common Stock accumulated in the ESOP, as indicated in notes
(6) through (12) above, also are included in the 4,054,800 shares as shown in
the table as owned by the ESOP.

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, par value $0.01 per share, and 1,200,000 shares of Class A Common
Stock, par value $0.01 per share, of which 10,302,000 and 1,200,000 shares,
respectively, were issued and outstanding at December 1, 1996. Upon completion
of this offering, there will be outstanding 11,702,000 shares of Common Stock
(12,032,000 shares if the Underwriters' over-allotment option is exercised) and
1,200,000 shares of Class A Common Stock.

Dividends. Holders of shares of Capital Stock are entitled to receive such
dividends as may be declared by the Company's Board of Directors out of funds
legally available for such purpose. No dividend may be declared or paid in cash
or property on any share of any class of Capital Stock, however, unless
simultaneously the equivalent dividend is declared or paid on each share of the
other class of Capital Stock. However, any cash dividend payable upon a share of
Class A Common Stock shall be in an amount equal to 95% of any cash dividend
payable on a share of Common Stock. In the case of any stock dividend, holders
of Common Stock are entitled to receive the same percentage dividend (payable
only in shares of Common Stock) as the holders of Class A Common Stock receive
(payable only in shares of Class A Common Stock). See "Dividend Policy" as to
certain dividend restrictions under the Company's line of credit and loan
agreements.

Voting Rights. Holders of shares of Capital Stock vote as a single class
on all matters submitted to a vote of the stockholders, with each share of
Common Stock entitled to one vote and each share of Class A Common Stock
entitled to ten votes. Holders of Capital Stock have the right of cumulative
voting in the election of directors. Under Delaware law, the affirmative vote of
the holders of a majority of the outstanding shares of any class of Capital
Stock is required to approve, among other things, a change in the designations,
preferences and limitations of the shares of such class of Capital Stock. See
"Other Provisions," below.

Liquidation Rights. Upon liquidation, dissolution, or winding-up of the
Company, the holders of Common Stock are entitled to share ratably with the
holders of Class A Common Stock in all assets available for distribution after
payment in full of creditors.

Ownership of Class A Stock. The Class A Common Stock may only be issued to
Fred R. Adams, Jr., and members of his immediate family, including his spouse,
his natural children, his sons-in-law and his grandchildren. In the event any
share of Class A Common Stock, by operation of law or otherwise is, or shall be
deemed to be owned by any person other than Mr. Adams or a member of his
immediate family, the voting power of such stock will be reduced from ten votes
per share to one vote per share. Also, shares of Class A Common Stock shall be
automatically converted into Common Stock on a share per share basis in the
event

34
<PAGE> 35

the beneficial or record ownership of any such share of Class A Common Stock is
transferred, by any means, to any person other than Mr. Adams or a member of his
immediate family.

Other Provisions. Each share of Class A Common Stock is convertible, at
the option of its holder, into one share of Common Stock at any time. The
holders of Common Stock and Class A Common Stock are not entitled to preemptive
or subscription rights. The shares of Capital Stock presently outstanding are,
and the shares of Common Stock offered hereby will be, upon issuance, validly
issued, fully paid and nonassessable. In any merger, consolidation or business
combination, the consideration to be received per share by holders of Common
Stock must be identical to that received by holders of Class A Common Stock,
except that if any such transaction in which shares of Capital Stock are
distributed, such shares may differ as to voting rights to the extent that
voting rights now differ among the classes of Capital Stock. No class of Capital
Stock may be combined or subdivided unless the other classes of Capital Stock
are combined or subdivided in the same proportion.

TRANSFER AGENT

SunTrust Bank, Atlanta, of Atlanta, Georgia, will be the Transfer Agent and
Registrar for the Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has not been a market for the Common Stock.
All of the outstanding shares of Class A Common Stock are owned by Fred R.
Adams, Jr., who does not plan to sell any of such shares.

Upon completion of this offering, there will be outstanding 11,702,000
shares of Common Stock (12,032,000 shares assuming exercise of the Underwriters'
over-allotment option). Of these shares, the 2,200,000 sold in this offering
will be freely tradeable without restriction (except as to affiliates of the
Company) or further registration under the Securities Act.

The remaining 9,502,000 shares of Common Stock outstanding upon completion
of this offering are "restricted securities" within the meaning of Rule 144
under the Securities Act, were issued and sold by the Company in private
transactions more than three years ago and may be publicly sold only if
registered under the Securities Act or sold in accordance with an applicable
exemption from registration, such as Rule 144. (The provisions of Rule 144 are
summarized below.) Of such outstanding shares, a total of 5,376,400 shares will
be beneficially owned by Fred R. Adams, members of his family and other
directors and executive officers deemed to be affiliates of the Company
(excluding a total of 1,137,711 shares accumulated under the ESOP for their
benefit); 4,054,800 shares will be owned by the ESOP; and the balance of 70,800
shares will be owned by other persons not deemed to be affiliates of the
Company.

Mr. Adams, the ESOP and the Company's directors and executive officers, who
upon completion of this offering will beneficially own an aggregate of 9,431,200
outstanding shares, have entered into lock-up agreements with the Underwriters
providing that they will not sell any shares of Common Stock owned by them,
without the prior written consent of the Representative, for a period of 90 days
after the effective date of the Registration Statement of which the Prospectus
is a part. Therefore, upon completion of this offering, 70,800 shares of Common
Stock will become eligible for resale in the public market without restriction
pursuant to Rule 144(k) as discussed below, and beginning 90 days after the date
of this Prospectus, 9,431,200 shares will become eligible for resale in the
public market, subject to the volume limitations of Rule 144 described below.
Future sales of substantial amounts of Common Stock in the public market could
adversely affect prevailing market prices.

In general, under Rule 144, a person (or persons whose shares are
aggregated) who has beneficially owned restricted securities within the meaning
of Rule 144 ("Restricted Shares") for at least two years, including the holding
period of any securities which are converted into the Restricted Shares and
including the holding period of any prior owner except an affiliate, would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of one percent of the then outstanding shares of Common Stock
or the average weekly trading volume of the Common Stock on the NASDAQ National
Market during

35
<PAGE> 36

the four calendar weeks preceding such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. Any person (or
persons whose shares are aggregated) who is not deemed to have been an affiliate
of the Company at any time during the 90 days preceding a sale, and who has
beneficially owned shares for at least three years (including any period of
ownership of preceding non-affiliated holders), would be entitled to sell such
shares under Rule 144(k) without regard to the volume limitations, manner of
sale provisions, public information requirements or notice requirements.

The Company intends to file a registration statement under the Securities
Act covering the 800,000 shares of Common Stock issuable under the Company's
1993 Plan. See "Management -- Stock Option Plan." Such registration statement
will automatically become effective upon filing and, accordingly, shares
registered under such registration statement will be available for sale in the
open market, subject to vesting restrictions.

UNDERWRITING

The Underwriters named below, acting through Paulson Investment Company,
Inc., the Representative, have agreed, severally and not jointly, subject to the
terms and conditions contained in the Underwriting Agreement, to purchase the
Common Stock offered by this Prospectus from the Company and the Selling
Shareholder in the amounts set forth below:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------------------------------------------------------------------------- ----------------
<S> <C>
Paulson Investment Company, Inc. ............................................ 1,250,000
Millennium Financial Group, Inc. ............................................ 300,000
Cohig & Associates, Inc. .................................................... 250,000
Kashner Davidson Securities Corporation...................................... 150,000
First Colonial Securities Group, Inc. ....................................... 100,000
RAF Financial Corporation.................................................... 75,000
Rabo Securities N.V. ........................................................ 50,000
Culverwell & Co., Inc. ...................................................... 25,000
-------------
Total.............................................................. 2,200,000
=============
</TABLE>

The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the shares of the Common Stock offered by this Prospectus if any
shares are purchased. The Company and the Selling Stockholder have been advised
that the Underwriters propose to offer the Common Stock to the public initially
at the offering price shown on the cover page of this Prospectus and to selected
dealers, including Underwriters, at that price less a concession to be
determined by the Representative. After the initial public offering of the
Common Stock, the public offering price and other offering terms may be changed.

The Company has granted the Underwriters an option, exercisable by the
Representative during the 30-day period after the date of this Prospectus, to
purchase up to 330,000 additional shares on the same terms as the Common Stock
being purchased by the Underwriters from the Company. The Representative may
exercise this option only to cover over-allotments in the sale of the Common
Stock.

The Underwriters will purchase the Common Stock (including the shares
subject to the Underwriters' over-allotment option) offered hereby at a discount
equal to 7.4% of the public offering price, or $.518 per share.

The Representative will also receive at the Closing a non-accountable
expense allowance equal to 2% of the aggregate initial public offering price of
the Common Stock sold in the offering.

The Company has agreed to issue to the Representative warrants (the
"Representative's Warrants") to purchase up to 220,000 shares of Common Stock.
The Representative's Warrants are exercisable for a period of four years
beginning one year from the date of this Prospectus at a price of $8.40 per
share and are nontransferable except (i) to any of the Underwriters or to
individuals who are either an officer or a partner of

36
<PAGE> 37

an Underwriter or (ii) by will or the laws of descent and distribution. The
holders of the Representative's Warrants will have, in that capacity, no voting,
dividend or other shareholder rights. Any profits realized by the Representative
on the sale of the Common Stock issuable on exercise of the Representatives'
Warrants may be deemed to be additional underwriting compensation.

The shares of Common Stock underlying the Representative's Warrants are
being registered on the Registration Statement of which this Prospectus is a
part. The Company has agreed to maintain an effective registration statement
with respect to such shares to permit their resale at all times during the
period in which the Representative's Warrants are exercisable. The sale of the
shares issuable upon exercise of the Representative's Warrants could dilute the
interests of the other holders of Common Stock and the existence of the
Representative's Warrants may make the raising of additional capital by the
Company more difficult. At any time at which exercise of the Representative's
Warrants might be expected, it is likely that the Company could raise additional
capital on terms more favorable than the terms of the Representative's Warrants.

All officers, directors and 5% stockholders of the Company have agreed not
to sell any Common Stock of the Company owned by such person, pursuant to Rule
144 under the Securities Act or otherwise, and the Company has agreed not to
sell any Common Stock (other than shares issuable upon the exercise of options
under the 1993 plan), without the prior written consent of the Representative,
for a period of 90 days after the date of this Prospectus.

In addition, the Company and the Selling Stockholder have agreed to
indemnify the Underwriters against certain liabilities, including liabilities
under the Securities Act, and to contribute in certain events to any liabilities
incurred by the Underwriters in connection with the sale of the Common Stock.

Rabo Securities N.V., one of the Underwriters named in the table above, is
an affiliate of Cooperative Centrale Raiffeisen -- Boerenleenbank B.A.
("Rabobank Nederland") and will participate in the European distribution of the
Common Stock being offered. Rabobank Nederland is the lead bank under the
Company's $35,000,000 line of credit with three banks, none of which is
currently used. The Company is indebted to Rabobank Nederland under two notes
payable, maturing in 2000, in the amount, as of August 31, 1996, of $9,780,000
and $607,000, respectively, and Rabobank Nederland has issued a letter of credit
of approximately $7,500,000 with respect to the Company's redemption
requirements under industrial revenue bonds. See Note 7 of Notes to Consolidated
Financial Statements of the Company in this connection.

DETERMINATION OF OFFERING PRICE

Prior to this offering, there has been no public market for the Common
Stock. Consequently, the public offering price of the shares has been determined
by negotiation between the Company and the Underwriters. Factors considered in
determining the public offering price of the Common Stock included the Company's
net worth and earnings, the amount of dilution per share of Common Stock to the
public investors, prospects for the industry in which the Company operates, the
present state of the Company's activities and the general condition of the
securities markets at the time of the offering.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Wells, Moore, Simmons & Neeld, PLLC, Jackson,
Mississippi. Freedman, Levy, Kroll & Simonds, Washington, D.C, have acted as
special counsel to the Company with respect to legal matters under the federal
securities laws. Certain legal matters in connection with this offering will be
passed upon for the Underwriters by Morse, Zelnick, Rose & Lander, LLP, New
York, New York.

EXPERTS

The consolidated financial statements of the Company as of June 3, 1995 and
June 1, 1996, and for each of the three years in the period ended June 1, 1996,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing

37
<PAGE> 38

elsewhere herein and are included in reliance upon such report, given on the
authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement on Form S-1 under the
Securities Act with respect to the shares of Common Stock being offered by this
Prospectus. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain portions of which are omitted in accordance
with the rules and regulations of the Commission. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement of
which this Prospectus forms a part, and each such statement is qualified in all
respects by such reference and the exhibits and schedules thereto.

The Company is subject to the information and reporting requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. The
Registration Statement, the exhibits and schedules forming a part thereof and
the reports and other information filed by the Company with the Commission in
accordance with the Exchange Act can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and should also be available for
inspection and copying at the following regional offices of the Commission: 7
World Trade Center, Suite 1300, New York, New York 10007; and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.

38
<PAGE> 39

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF CAL-MAINE FOODS, INC.:
Report of Independent Auditors...................................................... F-2
Consolidated balance sheets as of June 3, 1995, June 1, 1996 and August 31, 1996
(unaudited)...................................................................... F-3
Consolidated statements of operations for the fiscal years ended May 28, 1994, June
3, 1995 and June 1, 1996 and the 13 weeks ended September 2, 1995 (unaudited) and
August 31, 1996 (unaudited)...................................................... F-4
Consolidated statements of changes in stockholders' equity for the fiscal years
ended May 28, 1994, June 3, 1995 and June 1, 1996 (unaudited) and the 13 weeks
ended August 31, 1996 (unaudited)................................................ F-5
Consolidated statements of cash flows for the fiscal years ended May 28, 1994, June
3, 1995 and June 1, 1996 and the 13 weeks ended September 2, 1995 (unaudited) and
August 31, 1996 (unaudited)...................................................... F-6
Notes to consolidated financial statements.......................................... F-7
</TABLE>

F-1
<PAGE> 40

REPORT OF INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS
CAL-MAINE FOODS, INC.

We have audited the accompanying consolidated balance sheets of Cal-Maine
Foods, Inc. and subsidiaries as of June 3, 1995 and June 1, 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended June 1, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cal-Maine
Foods, Inc. and subsidiaries at June 3, 1995 and June 1, 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 1, 1996, in conformity with generally
accepted accounting principles.

Ernst & Young LLP

Jackson, Mississippi
July 22, 1996, except for Note 13, as to
which the date is October 3, 1996

F-2
<PAGE> 41

CAL-MAINE FOODS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

JUNE 3, JUNE 1, AUGUST 31,
1995 1996 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 3,050 $ 3,959 $ 4,688
Receivables:
Trade receivables, less allowance for doubtful accounts of $34 at June 3,
1995 and $31 and $109 (unaudited) at June 1 and August 31, 1996 (Note
7)..................................................................... 10,173 13,387 13,550
Other.................................................................... 590 160 171
-------- -------- ----------
10,763 13,547 13,721
Recoverable federal and state income taxes................................... 1,462 460 460
Inventories (Notes 4 and 7).................................................. 38,370 40,969 40,684
Prepaid expenses and other current assets.................................... 1,112 1,513 1,892
-------- -------- ----------
Total current assets............................................................. 54,757 60,448 61,445
Other assets:
Notes receivable and investments............................................. 4,338 5,318 5,373
Other........................................................................ 937 529 503
-------- -------- ----------
5,275 5,847 5,876
Property, plant and equipment, less accumulated depreciation (Notes 5 and 7)..... 85,713 82,426 81,841
Leased property under capital leases, less accumulated amortization (Note 6)..... 1,657 1,270 1,189
-------- -------- ----------
Total assets..................................................................... $147,402 $149,991 $ 150,351
======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks....................................................... $ 15,500 $ -- $ --
Trade accounts payable....................................................... 11,643 13,780 13,792
Accrued wages and benefits................................................... 3,398 4,077 3,004
Accrued expenses and other liabilities....................................... 1,325 2,237 2,689
Current maturities of:
Long-term debt........................................................... 3,888 3,807 4,075
Capitalized lease obligations............................................ 281 450 301
-------- -------- ----------
4,169 4,257 4,376
Deferred income taxes........................................................ 8,630 9,355 9,355
-------- -------- ----------
Total current liabilities........................................................ 44,665 33,706 33,216
Long-term debt, less current maturities (Note 7)................................. 58,645 58,214 57,460
Capitalized lease obligations, less current maturities (Note 6).................. 1,397 955 1,030
Deferred expenses (Note 8)....................................................... 1,503 1,561 2,014
Deferred income taxes (Note 9)................................................... 3,720 7,655 7,655
-------- -------- ----------
Total liabilities................................................................ 109,930 102,091 101,375
Commitments and contingencies (Note 10)
Stockholders' equity (Note 13):
Common stock, $0.01 par value (Note 8):
Authorized shares -- 18,000,000 at June 3, 1995 and June 1, 1996 and
30,000,000 (unaudited) at August 31, 1996..............................
Issued and outstanding shares -- 17,035,200 at June 3, 1995 and June 1,
1996 and 15,835,200 (unaudited) at August 31, 1996..................... 170 170 158
Class A Common stock, $0.01 par (Note 8):
Authorized shares -- None at June 3, 1995 and June 1, 1996 and 1,200,000
(unaudited) at August 31, 1996.........................................
Issued and outstanding shares -- None at June 3, 1995 and June 1, 1996
and 1,200,000 (unaudited) at August 31, 1996........................... -- -- 12
Paid-in capital.............................................................. 8,230 8,229 8,229
Retained earnings............................................................ 36,133 47,058 48,155
Common stock in treasury (5,379,600 shares at June 3, 1995, 5,522,400 shares
at June 1, 1996 and 5,528,400 (unaudited) shares at August 31, 1996)....... (5,367) (5,863) (5,884)
Note receivable -- stockholder............................................... (1,694) (1,694) (1,694)
-------- -------- ----------
Total stockholders' equity (Note 13)............................................. 37,472 47,900 48,976
-------- -------- ----------
Total liabilities and stockholders' equity....................................... $147,402 $149,991 $ 150,351
======== ======== =========
</TABLE>

See accompanying notes.

F-3
<PAGE> 42

CAL-MAINE FOODS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED 13 WEEKS ENDED
-------------------------------- --------------------
MAY 28, JUNE 3, JUNE 1, SEPT. 2, AUG. 31,
1994 1995 1996 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales................................... $254,713 $242,649 $282,844 $ 56,219 $ 65,563
Cost of sales............................... 225,227 223,965 230,850 51,385 55,712
-------- -------- -------- -------- --------
Gross profit................................ 29,486 18,684 51,994 4,834 9,851
Selling, general and administrative......... 26,094 27,934 29,653 6,569 7,140
-------- -------- -------- -------- --------
Operating income (loss)..................... 3,392 (9,250) 22,341 (1,735) 2,711
Other income (expense):
Interest expense (Note 7).............. (4,318) (5,052) (5,487) (1,457) (1,116)
Equity in income of affiliate (Note
3)................................... 283 24 721 29 64
Other.................................. 1,238 993 (190) 562 135
-------- -------- -------- -------- --------
(2,797) (4,035) (4,956) (866) (917)
-------- -------- -------- -------- --------
Income (loss) before income taxes........... 595 (13,285) 17,385 (2,601) 1,794
Income tax expense (benefit) (Note 9)....... 371 (4,600) 6,460 (966) 697
-------- -------- -------- -------- --------
Net income (loss)........................... $ 224 $ (8,685) $ 10,925 $ (1,635) $ 1,097
======== ======== ======== ======= =======
Net income (loss) per common share.......... $ .02 $ (.74) $ .94 $ (.14) $ .10
======== ======== ======== ======= =======
</TABLE>

See accompanying notes.

F-4
<PAGE> 43

CAL-MAINE FOODS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
CLASS
A COMMON NOTE
COMMON COMMON PAID-IN RETAINED STOCK IN RECEIVABLE --
STOCK STOCK CAPITAL EARNINGS TREASURY STOCKHOLDER TOTAL
------ ------ ------- -------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at May 29, 1993........... $170 $-- $8,231 $44,594 $ (4,914) $(1,694) $46,387
Purchases of common stock for
treasury...................... -- -- -- -- (122) -- (122)
Net income for 1994............. -- -- -- 224 -- -- 224
----- ----- ------ ------- -------- --------- -------
Balance at May 28, 1994........... 170 -- 8,231 44,818 (5,036) (1,694) 46,489
Redemption of fractional shares
of common stock............... -- -- (1) -- -- -- (1)
Purchases of common stock for
treasury...................... -- -- -- -- (331) -- (331)
Net loss for 1995............... -- -- -- (8,685) -- -- (8,685) .
----- ----- ------ ------- -------- --------- -------
Balance at June 3, 1995........... 170 -- 8,230 36,133 (5,367) (1,694) 37,472
Redemption of fractional shares
of common stock............... -- -- (1) -- -- -- (1)
Purchases of common stock for
treasury...................... -- -- -- -- (496) -- (496)
Net income for 1996............. -- -- -- 10,925 -- -- 10,925
----- ----- ------ ------- -------- --------- -------
Balance at June 1, 1996........... 170 -- 8,229 47,058 (5,863) (1,694) 47,900
Exchange of common stock for
Class A common stock
(unaudited)................... (12) 12 -- -- -- -- --
Purchase of common stock for
treasury (unaudited).......... -- -- -- -- (21) -- (21)
Net income for the 13 weeks
ended August 31, 1996
(unaudited)................... -- -- -- 1,097 -- -- 1,097
----- ----- ------ ------- -------- --------- -------
Balance at August 31, 1996
(unaudited)..................... $158 $12 $8,229 $48,155 $ (5,884) $(1,694) $48,976
===== ===== ====== ======= ======== ========= =======
</TABLE>

See accompanying notes.

F-5
<PAGE> 44

CAL-MAINE FOODS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED 13 WEEKS ENDED
-------------------------------- --------------------
MAY 28, JUNE 3, JUNE 1, SEPT. 2, AUG. 31,
1994 1995 1996 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).................................... $ 224 $ (8,685) $ 10,925 $ (1,635) $ 1,097
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization.................... 9,148 9,894 10,444 2,577 2,559
Provision for doubtful accounts.................. 21 4 41 -- 78
Provision for deferred income taxes.............. 2,210 (3,210) 4,660 -- --
Equity in income of affiliate.................... (283) (24) (721) (29) (64)
(Gain) loss on sales of property, plant and
equipment...................................... 145 (873) 956 (181) (47)
Increase in deferred compensation................ 60 60 60 15 15
Change in operating assets and liabilities, net of
effects from purchases of shell egg production and
processing businesses in 1994 and 1995:
(Increase) decrease in receivables and other
assets......................................... (3,694) 2,388 (2,220) (1,562) (605)
(Increase) decrease in inventories............... (976) 2,205 (2,599) (1,316) 285
Increase (decrease) in accounts payable, accrued
expenses and deferred expenses................. 823 (2,033) 3,728 (1,117) (171)
-------- -------- -------- -------- --------
Net cash provided by (used in) operating
activities......................................... 7,678 (274) 25,274 (3,248) 3,147
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment........... (15,563) (15,944) (8,768) (2,427) (2,112)
Purchases of shell egg production and processing
businesses......................................... (12,194) (2,883) -- -- --
Payments received on notes receivable and from
investments........................................ 606 136 513 8 9
Increase in note receivable and investments.......... (10) (40) (13) -- --
Net proceeds from sales of property, plant and
equipment.......................................... 959 1,292 687 246 266
-------- -------- -------- -------- --------
Net cash used in investing activities................ (26,202) (17,439) (7,581) (2,173) (1,837)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) under line of credit....... -- 15,500 (15,500) 8,000 --
Long-term borrowings................................. 17,745 6,000 5,050 -- 1,000
Principal payments on long-term debt and capital
leases............................................. (4,586) (5,432) (5,835) (1,301) (1,560)
Purchases of common stock for treasury............... (121) (332) (497) (60) (21)
Redemption of fractional shares of common stock...... -- (1) (2) -- --
-------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities......................................... 13,038 15,735 (16,784) 6,639 (581)
-------- -------- -------- -------- --------
Increase (decrease) in cash and cash equivalents..... (5,486) (1,978) 909 1,218 729
Cash and cash equivalents at beginning of period..... 10,514 5,028 3,050 3,050 3,959
-------- -------- -------- -------- --------
Cash and cash equivalents at end of period........... $ 5,028 $ 3,050 $ 3,959 $ 4,268 $ 4,688
======== ======== ======== ======== ========
Non-cash investing and financing activities:
Notes received from sales of properties.......... $ -- $ 330 $ 664 $ -- $ --
======== ======== ======== ======== ========
Capital lease obligations for equipment.......... $ 914 $ 676 $ -- $ -- $ --
======== ======== ======== ======== ========
</TABLE>

See accompanying notes.

F-6
<PAGE> 45

CAL-MAINE FOODS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

JUNE 1, 1996

1. SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Cal-Maine
Foods, Inc. and its subsidiaries ("the Company") all of which are wholly-owned.
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 and egg products and livestock operations. The Company's operations
are significantly affected by market price fluctuation of its principal products
sold, shell eggs, and the costs of its principal ingredients, corn and other
grains. In fiscal year 1996, corn prices were historically high, which adversely
affected cost of goods sold. Management anticipates that corn prices may remain
abnormally high in fiscal year 1997, at least through the harvesting of the 1996
crops, which will have an adverse effect on the fiscal 1997 cost of goods sold.

Primarily all of the Company's sales are to wholesale egg and egg products
buyers in the southwestern, southeastern, midwestern and mid-Atlantic regions of
the United States. Revenue is recognized when shell eggs and products are
shipped to customers. 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.

Use of Estimates

The preparation of the consolidated financial statements in conformity with
general 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.

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 are accumulated during a growing period of
approximately 18 weeks and are amortized over the productive lives of the
flocks, generally one to two years.

Property, Plant and Equipment

Property, plant and equipment is stated at cost. Depreciation is provided
by the straight-line method over the estimated useful lives, which is 15 to 25
years for buildings and improvements and 3 to 8 years for machinery and
equipment.

Income Taxes

Income taxes have been provided using the liability method in accordance
with FASB Statement No. 109, "Accounting for Income Taxes". Deferred income
taxes reflect the net tax effects of temporary

F-7
<PAGE> 46

1. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.

Stock Based Compensation

The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to or above the fair value of the shares at the
date of the grant. The Company accounts for stock option grants in accordance
with APB Opinion No. 25, "Accounting for Stock Issued to Employees," and,
accordingly, recognizes no compensation expense for the stock option grants.

Net Income Per Common Share

Net income per common share is based upon the weighted average number of
common shares outstanding of 11,760,000, 11,700,000, 11,584,000, 11,647,000
(unaudited) and 11,509,000 (unaudited) during fiscal 1994, 1995, 1996, and for
the 13 weeks ended August 31, 1995 and 1996, respectively (see Note 12).

Impact of Recently Issued Accounting Standards

In March 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed" which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed. The Company adopted Statement 121 in
fiscal 1997, the effect of which was not material (unaudited) to the Company's
financial position or operations.

Fiscal Year

The Company's fiscal year-end is on the Saturday nearest May 31 which was
May 28, 1994 (52 weeks), June 3, 1995 (53 weeks) and June 1, 1996 (52 weeks) for
the most recent three years.

Reclassifications

Certain reclassifications have been made to the fiscal 1994 and fiscal 1995
consolidated financial statements to conform to the fiscal 1996 presentation.

2. ACQUISITION

In June 1994, the Company purchased, for $2,883, certain inventories, land
and equipment of a shell egg production and processing business and accounted
for the transaction as a purchase. In connection with the purchase, the Company
leased substantially all facilities and certain equipment of the business under
an operating lease with monthly rentals of $79 through May 1998. The Company may
renew the lease for three years with monthly rentals of $79 through May 2001.
The Company has the option to purchase the facilities and equipment for
approximately $3,820 after fiscal 1999 or $1,750 after fiscal 2002.

In July 1993, the Company acquired certain operating assets of a shell egg
production and processing business for $12,194. The transaction was accounted
for as a purchase.

The operating results of these assets acquired are included in the
consolidated statements of operations of the Company for the periods subsequent
to the acquisition dates. Prior operations of these assets acquired are
immaterial to the Company's net sales, net income (loss) and net income (loss)
per common share for the fiscal years ended May 28, 1994 and June 3, 1995.

F-8
<PAGE> 47

3. INVESTMENT IN AFFILIATE

The Company is a fifty percent owner of BCM Egg Company ("BCM"), a
partnership. Equity in earnings of $283, $24, $721, $29 (unaudited) and $64
(unaudited) from BCM have been included in the consolidated statements of
operations in fiscal 1994, 1995, 1996 and the 13 weeks ended August 31, 1995 and
1996, respectively. The Company purchased approximately $8,046, $7,492, $9,929,
$1,980 (unaudited) and $2,745 (unaudited) of eggs from BCM during each of those
periods, which represented a significant percentage of BCM's sales.

4. INVENTORIES

Inventories consisted of the following:

JUNE 3, JUNE 1, AUGUST 31,
1995 1996 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Flocks................................................. $22,154 $23,501 $24,748
Eggs and egg products.................................. 3,953 3,127 4,150
Feed and supplies...................................... 7,932 10,424 7,888
Livestock.............................................. 4,331 3,917 3,898
------- ------- -------
$38,370 $40,969 $40,684
======= ======= =======
</TABLE>

5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

JUNE 3, JUNE 1, AUGUST 31,
1995 1996 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land and improvements................................ $ 17,789 $ 18,854 $ 19,496
Buildings and improvements........................... 47,511 48,830 49,048
Machinery and equipment.............................. 66,993 68,836 70,318
Construction-in-progress............................. 7,850 3,617 2,896
-------- -------- --------
140,143 140,137 141,758
Less accumulated depreciation and amortization....... 54,430 57,711 59,917
-------- -------- --------
$ 85,713 $ 82,426 $ 81,841
======== ======== =========
</TABLE>

6. LEASES

Leased property under capital leases consisted of the following:

JUNE 3, JUNE 1, AUGUST 31,
1995 1996 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment.................................. $2,100 $2,100 $2,100
Less accumulated amortization............................ 443 830 911
------ ------ ------
$1,657 $1,270 $1,189
====== ====== ======
</TABLE>

F-9
<PAGE> 48

6. LEASES -- (CONTINUED)

Future minimum payments under capital leases and noncancelable operating
leases that have initial or remaining noncancelable terms in excess of one year
at June 1, 1996 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------ ---------
<S> <C> <C>
1997............................................................... $ 534 $2,786
1998............................................................... 303 2,574
1999............................................................... 303 1,428
2000............................................................... 322 1,008
2001............................................................... 152 584
Thereafter......................................................... -- 362
------ ------
Total minimum lease payments.................................. 1,614 $8,742
======
Less amount representing interest (rates from 7.25% to 9.0%)....... 209
------
Present value of minimum lease payments............................ 1,405
Less amounts due within one year................................... 450
------
Amounts due after one year......................................... $ 955
======
</TABLE>

Substantially all of the leases provide that the Company pay 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 $2,443, $3,726, $3,901, $933 (unaudited) and $1,000 (unaudited) in
fiscal 1994, 1995, 1996 and for the 13 weeks ended August 31, 1995 and 1996,
respectively. Included in rent expense are vehicle rents totaling $1,407,
$1,726, $1,718, $427 (unaudited) and $451 (unaudited) in fiscal 1994, 1995, 1996
and for the 13 weeks ended August 31, 1995 and 1996, respectively.

F-10
<PAGE> 49

7. CREDIT FACILITIES AND LONG-TERM DEBT

Long-term debt consisted of the following:

JUNE 3, JUNE 1, AUGUST 31,
1995 1996 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Note payable at 6.62%; due in monthly installments of $130,
plus interest, maturing in 2000.............................. $17,450 $15,890 $15,245
Note payable at 7.64%; due in monthly installments of $114,
including interest, maturing in 2003......................... 11,562 11,053 10,919
Note payable at federal funds rate plus 1.65%; due in quarterly
installments of $298, plus interest, maturing in 2000........ 11,273 10,079 9,780
Note payable, 9.625%; due in monthly installments of $60, plus
interest, maturing in 2001................................... 8,205 7,485 7,320
Note payable at 7.75%; due in monthly installment of $55, plus
interest, maturing in 2003................................... 4,265 8,655 8,490
Note payable, federal funds rate plus 1.5%; due in quarterly
installments of $36, plus interest, maturing in 2000......... 786 643 607
Note payable at 8.69%; due in monthly installments of $8,
including interest, maturing in 2001......................... 451 392 377
Note payable at 6.61%; due in monthly installments of $7,
including interest, maturing in 2000......................... 400 335 319
Note payable at 4%; due in monthly installments of $4,
including interest, maturing in 1999......................... 191 149 138
Industrial revenue bonds....................................... 7,950 7,340 8,340
------- ------- -------
62,533 62,021 61,535
Less current maturities........................................ 3,888 3,807 4,075
------- ------- -------
$58,645 $58,214 $57,460
======= ======= =======
</TABLE>

The industrial revenue bonds with principal balances of $5,040, $2,300 and
$1,000 at August 31, 1996 are due November 1, 2005, May 1, 2006 and April 1,
2011, respectively, with interest due monthly at variable rates (6.15% at June
3, 1995 and 5.60% at June 1, 1996). The bonds have been issued by local county
authorities and, under their terms, are redeemable at the option of the Company
on a monthly basis subject to certain mandatory redemption requirements. The
bonds are collateralized by letters of credit of approximately $7,500.

The aggregate annual maturities of long-term debt at June 1, 1996 are as
follows:

<TABLE>
<S> <C>
1997....................................................... $ 3,807
1998....................................................... 4,979
1999....................................................... 5,393
2000....................................................... 15,129
2001....................................................... 14,590
Thereafter................................................. 18,123
-------
$62,021
=======
</TABLE>

The Company has a $35,000 line of credit with three banks, of which all was
unused at June 1, 1996. The line of credit is limited in availability based upon
the levels of accounts receivable and inventories. Borrowings under the line of
credit bear interest at 1.5% above the federal funds rate or LIBOR, at the
Company's option. Facilities fees of .25% per annum are payable quarterly on the
unused portion of the line.

Substantially all trade receivables and inventories collateralize the line
of credit and property, plant and equipment collateralize the long-term debt.
The Company is required, by certain provisions of the loan

F-11
<PAGE> 50

7. CREDIT FACILITIES AND LONG-TERM DEBT -- (CONTINUED)

agreements, to maintain minimum levels of working capital and net worth; to
limit dividends, capital expenditures and additional long-term borrowings; and
to maintain various current and debt-to-equity ratios. Additionally, the chief
executive officer of the Company, or his family, must maintain ownership of not
less than 50% of the outstanding voting power represented by the capital stock
of the Company. The Company was in compliance with these provisions as of June
1, 1996.

Interest of $3,780, $5,594, $5,910, $1,557 (unaudited) and $1,161
(unaudited) was paid during fiscal 1994, 1995, 1996 and for the 13 weeks ended
August 31, 1995 and 1996, respectively. Interest of $208, $438, $305, $100
(unaudited) and $45 (unaudited) was capitalized for construction of certain
facilities during fiscal 1994, 1995, 1996 and for the 13 weeks ended August 31,
1995 and 1996, respectively.

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 $60 for each occurrence.
The Company's expenses, including accruals for incurred but not reported claims,
were approximately $1,700, $2,100, $3,130, $587 (unaudited) and $776 (unaudited)
in fiscal 1994, 1995, 1996 and the 13 weeks ended August 31, 1995 and 1996,
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 has an employee stock ownership plan (ESOP) that covers
substantially all employees. The Company has historically made contributions to
the ESOP of 3% of participants' compensation, plus an additional amount
determined at the discretion of the Board. The amount of these contributions are
determined at the discretion of the Board of Directors and may be made in cash
or common stock. The contributions vest 20% annually beginning with the
participant's third year of service. The Company's contributions to the plan
were approximately $911, $808, $992, $268 (unaudited) and $295 (unaudited) in
fiscal 1994, 1995, 1996 and the 13 weeks ended August 31, 1995 and 1996,
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. Amounts accrued for these agreements are based upon deferred compensation
earned, discounted over the estimated remaining service life of each officer.
Deferred compensation expense totaled $60 in fiscal 1994, 1995, 1996,
respectively, and $15 (unaudited) for the 13 weeks ended August 31, 1995 and
1996, respectively.

The Company has reserved 800,000 shares under its 1993 Stock Option Plan.
In August 1993, options to purchase 504,000 shares of common stock were granted
to certain officers of the Company at $3.42 per share which was the estimated
fair value of the common stock at the date of grant. The options vest annually
over five years after one year from the grant date. Total options exercisable at
June 1, 1996 and August 31, 1996 were 201,600 shares and 302,400 shares
(unaudited), respectively.

F-12
<PAGE> 51

9. INCOME TAXES

Income tax expense (benefit) consisted of the following:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------
MAY 28, JUNE 3, JUNE 1,
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Current:
Federal...................................... $(1,839) $(1,390) $ 1,700
State........................................ -- -- 100
------- ------- -------
(1,839) (1,390) 1,800
Deferred:
Federal...................................... 2,170 (2,810) 4,020
State........................................ 40 (400) 640
------- ------- -------
2,210 (3,210) 4,660
------- ------- -------
$ 371 $(4,600) $ 6,460
======= ======= ======
</TABLE>

Significant components of the Company's deferred tax liabilities were as
follows:

<TABLE>
<CAPTION>
JUNE 3, JUNE 1,
1995 1996
------- -------
<S> <C> <C>
Current deferred tax liabilities:
Inventories.................................................. $ 8,460 $ 9,330
Prepaid expenses............................................. 245 235
Accrued expenses............................................. -- (200)
Other........................................................ (75) (10)
------- -------
Total current deferred tax liabilities............................ 8,630 9,355
Long-term deferred tax liabilities:
Property, plant and equipment................................ 5,370 5,830
Investments.................................................. 235 385
Deferred compensation........................................ (295) (300)
State net operating loss carryforwards....................... (560) (255)
Alternative minimum tax credit carryforwards................. -- (1,105)
Federal net operating loss carryforward...................... (4,130) --
Cash basis temporary differences............................. 3,100 3,100
------- -------
Total long-term deferred tax liabilities.......................... 3,720 7,655
------- -------
Total deferred tax liabilities.................................... $12,350 $17,010
======= =======
</TABLE>

Effective May 29, 1988, the Company could no longer use cash basis
accounting for its farming subsidiary because of tax law changes. The taxes on
the cash basis temporary differences as of that date will not be payable under
current tax laws provided there are no changes in ownership control and future
annual revenues of the farming subsidiary exceed 1988 revenues. Management does
not anticipate the payment of such taxes related to these cash basis timing
differences during 1997. The Company uses the farm-price method for valuing
inventories for income tax reporting.

F-13
<PAGE> 52

9. INCOME TAXES -- (CONTINUED)

The differences between income tax expense at the Company's effective
income tax rate and income tax expense (benefit) at the statutory federal income
tax rate were as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED 13 WEEKS ENDED
----------------------------- --------------------------
MAY 28, JUNE 3, JUNE 1, SEPTEMBER 2, AUGUST 31,
1994 1995 1996 1995 1996
------- ------- ------- ------------ ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statutory federal income tax (benefit).............. $ 202 $(4,517) $5,911 $ (884) $ 610
State income taxes, net (benefit)................... 26 (268) 488 (73) 50
Other, net.......................................... 143 185 61 (9) 37
------ ------- ------ ------ --------
$ 371 $(4,600) $6,460 $ (966) $ 697
====== ======= ====== ====== ========
</TABLE>

Federal and state income taxes of $2,370, $294, $1,985 and $257 (unaudited)
were paid in fiscal 1994, 1995 and 1996, and the 13 weeks ended August 31, 1996,
respectively. Federal and state income taxes of $51, $3,267, $1,500 and $27
(unaudited) were refunded in fiscal 1994, 1995 and 1996, and the 13 weeks ended
August 31, 1996, respectively.

10. COMMITMENTS AND CONTINGENCIES

The Company has begun construction on operating facilities with an
estimated total cost of $16,000 of which $2,200 (unaudited) was expended as of
August 31, 1996. The cost to complete the facilities will be primarily funded by
future advances from industrial revenue bonds totaling $13,500 of which $1,000
(unaudited) was advanced as of August 31, 1996. Principal payments of $90 plus
interest are due monthly beginning November 1, 1998 through April 2011. Interest
is payable monthly at a fixed rate based upon the average-life US Treasury rate
plus 2% at the date funds are received.

The Company is the defendant in certain legal actions. It is the opinion of
management, based on advise of legal counsel, that the outcome of these actions
will not have a material adverse effect on the Company's financial position.

11. FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the balance sheet for cash and cash
equivalents, notes receivable and investments, long-term debt and capitalized
leases approximate their carrying value. The fair values for notes receivables,
long-term debt and capitalized leases are estimated using discounted cash flow
analysis, based on the Company's current incremental borrowing rates for similar
types of borrowing arrangements.

12. NOTE RECEIVABLE -- STOCKHOLDER

The Company had a note receivable from its principal stockholder of $1,694
at August 31, 1996, June 1, 1996 and June 3, 1995. The note is non-interest
bearing and has no stated maturity.

13. SUBSEQUENT EVENTS

The Company intends to file a registration statement with the Securities
and Exchange Commission covering 1,700,000 shares of common stock to be sold by
the Company in an underwritten public offering. Effective July 29, 1996, the
Board of Directors adopted and the shareholders approved an amendment to the
Company's certificate of incorporation that authorized 14,000 shares of Class A
common stock and 1,000 shares of Class B common stock, both with $1.00 par
value. Effective September 24, 1996, the Board of Directors adopted and the
shareholders approved an amendment to the Company's certificate of incorporation
to reclassify both classes of common stock and increase the authorized shares to
30,000,000 shares of common stock and 1,200,000 shares of Class A common, each
class with a par value of $.01 per share. Effective October 3, 1996, the Company
completed a 1200-for-1 stock split of its common stock and Class A common stock.
The unaudited August 31, 1996 stockholders' equity balances have been restated
and the net income (loss) per common share have been restated for each period
presented to reflect these transactions.

F-14
<PAGE> 53

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF, OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE SUCH DATE.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 10
Dividend Policy....................... 10
Capitalization........................ 11
Dilution.............................. 12
Selected Historical Consolidated
Financial Information............... 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 14
Business.............................. 19
Management............................ 27
Certain Transactions.................. 31
Principal and Selling Stockholders.... 33
Description of Capital Stock.......... 34
Shares Eligible for Future Sale....... 35
Underwriting.......................... 36
Legal Matters......................... 37
Experts............................... 37
Additional Information................ 38
Index to Financial Statements......... F-1
</TABLE>

------------------------
UNTIL JANUARY 5, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------

- ------------------------------------------------------
- ------------------------------------------------------
[CAL-MAINE FOODS, INC. LOGO]

CAL-MAINE FOODS, INC.

2,200,000 SHARES

COMMON STOCK
(PAR VALUE $0.01 PER SHARE)

------------------------
PROSPECTUS
------------------------

PAULSON INVESTMENT
COMPANY, INC.

- ------------------------------------------------------
- ------------------------------------------------------