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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K/A
(Amendment No. 1)
(Mark One)
☒
þ
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended October 31, 20052021
☐
o
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from
to
Commission file number:
1-14977
SANDERSON FARMS INC.
(Exact name of registrant as specified in its charter)
Mississippi
 
64-0615843
Mississippi
(State or other jurisdiction of
incorporation or organization)
225 North 13th Avenue
(IRS Employer
Identification No.)
127 Flynt Road, Laurel, Mississippi
39443
(Address of principal executive offices)
 64-0615843
(IRS Employer
Identification No.)
39440
(Zip Code)
Registrant’s telephone number, including area code: (601)
649-4030
Securities registered pursuant to Section 12(b) of the Act: None
Title of each Class:
Trading
Symbol
Name of exchange
on which registered:
Common Stock, $1 par value per share
SAFM
NASDAQ
Securities registered pursuant to Section 12(g) of the Act: None
Common Stock, $1.00 per share par value
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
o   ☒   Yesþ    ☐   No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
o   ☐   Yesþ    ☒  No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
þ  ☒  Yeso    ☐  No
Indicate by check mark if disclosure of delinquent filerswhether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to ItemRule 405 of Regulation S-K is not contained herein, and will not be contained,
S-T
during the preceding 12 months (or for such shorter period that the registrant was required to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-Kosubmit such files).   ☒  Yes    ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, (as defineda
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Act).
þ Yeso NoExchange Act. (Check one):
 
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.    ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).
o   ☐  Yesþ    ☒  No
Aggregate market value of the voting and
non-voting
common equity held by
non-affiliates
of the Registrant computed by reference to the closing sales price of the common equity in theThe NASDAQ NationalStock Market System on the last business day of the Registrant’s most recently completed second fiscal quarter: $602,841,455.52 .$3,109,889,226.
Number of shares outstanding of the Registrant’s common stock as of December 28, 2005: 20,063,070February 22, 2022: 22,323,097 shares of common stock, $1.00 per share par value.
DOCUMENTS INCORPORATED BY REFERENCE
     Portions of the Registrant’s definitive proxy statement filed or to be filed in connection with its 2006 Annual Meeting of Stockholders are incorporated by reference into Part III.
 
 

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EXPLANATORY NOTE
This Amendment No. 1 onto Form
10-K
(this “Amendment No.1” or “Form
10-K/A amends certain items ofA”)
is being filed to amend the Annual Report on Form
10-K of Sanderson Farms, Inc. (the “Company” or the “Registrant”)
for the fiscal year ended October 31, 2005 as2021, of Sanderson Farms, Inc., a Mississippi corporation, originally filed December 21, 2021, with the United States Securities and Exchange Commission, or the “SEC” (the “Original Filing”). We are filing this Amendment No. 1 to include in the Original Filing the information required by Part III (Items 10, 11, 12, 13, and 14) of Form
10-K.
This information was previously omitted from the Original Filing in reliance on December 29, 2005 (the “Annual Report”) and presents onlyGeneral Instruction G(3) to Form
10-K,
which permits the information required by such items of Part III of Form
10-K
to be incorporated into by reference from a registrant’s definitive proxy statement, if such definitive proxy statement is filed with the Annual Report thatSEC not later than 120 days after the end of the registrant’s fiscal year covered by such Form
10-K.
We are filing this Amendment No. 1 to include Part III information in the Original Filing because we will not file a definitive proxy statement within such
120-day
period.
Part III (Items 10, 11, 12, 13 and 14) of the Original Filing is hereby deleted in its entirety and replaced with the following Part III set forth below, and Item 15 of Part IV of the Original Filing is being amended to add new exhibits. As required by Rule
12b-15
under the Securities Exchange Act of 1934, as amended, currently dated certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit 31.3 and Exhibit 31.4, respectively. Because no financial statements are included in this Amendment No. 1 and this Amendment No. 1 does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation
S-K,
paragraphs 3, 4 and 5 of the certifications have been omitted. Also, we are not including the certifications under Section 906 of Sarbanes-Oxley Act of 2002 as no financial statements are being amended. This Form 10-K/A doesfiled with this Amendment No. 1. Further, we are amending the cover page to update the number of ordinary shares outstanding and to remove the statement that information is being incorporated by reference from our definitive proxy statement.
Except as described above, no other changes have been made to the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing and our other filings with the SEC. The Original Filing continues to speak as of its date, and we have not updated the disclosures contained in the Original Filing to reflect any events occurringthat occurred after the filing of the original Annual ReportOriginal Filing.
Except where the context indicates otherwise, the terms “Registrant,” “Company,” “Sanderson Farms,” “we,” “us,” or modify or update those disclosures affected by subsequent events.“our” refer to Sanderson Farms, Inc. and its subsidiaries and predecessor organizations.
     The amendments include the following:
FORWARD-LOOKING STATEMENTS
•Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is being amended under the section entitled “Hurricane Katrina” to clarify the nature of the Company’s insurance receivables related to Hurricane Katrina;
•Item 7 is also being amended under the paragraph entitled “Contingencies” to clarify that the Company cannot estimate the possible loss or range of losses resulting from the legal proceedings to which it is a party;
•Item 8, “Financial Statements and Supplementary Data” is being amended to correct the stockholders’ equity portion of the Company’s consolidated balance sheets and its consolidated statements of stockholders’ equity to reflect the effect of a stock split in the earliest period presented, and to add an accompanying statement under Note 1 to the Consolidated Financial Statements, “Significant Accounting Policies—Earnings Per Share”;
•Item 8 is also being amended to revise Note 2 to the Consolidated Financial Statements, “Hurricane Receivable”;
•Item 8 is also being amended to expand the explanation of the Company’s Shareholder Rights Plan in Note 10 to the Consolidated Financial Statements;
•Item 8 is also being amended to add clarification to Note 11 regarding the manner in which the Company accrues reserves for pending legal proceedings; and
•Item 8 is also being amended to revise the Quarterly Financial Data by replacing operating income with gross profit information.

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PART II2
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations2
Item 8. Financial Statements and Supplementary Data11
PART IV28
Item 15. Exhibits and Financial Statement Schedules28
SIGNATURES33
EXHIBITS35
EX-23 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EX-31.1 SARBANES 302 CERTIFICATION OF THE CEO
EX-31.2 SARBANES 302 CERTIFICATION OF THE CFO
EX-32.1 SARBANES 906 CERTIFICATION OF THE CEO
EX-32.2 SARBANES 906 CERTIFICATION OF THE CFO
Ex-23 Consent of Independent Registered Public Accounting Firm
Ex-31.1 Section 302 Certification of the CEO
Ex-31.2 Section 302 Certification of the CFO
Ex-32.1 Section 906 Certification of the CEO
Ex-32.2 Section 906 Certification of the CFO

PART II
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE PERFORMANCE
This Annual Report, Form
10-K/A,
and other periodic reports filed by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other written or oral statements made by it or on its behalf, may include forward-looking statements whichwithin the meaning of the “Safe Harbor” provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These forward-looking statements are based on a number of assumptions about future events and are subject to various risks, uncertainties and other factors that may cause actual results to differ materially from the views, beliefs and estimates expressed in such statements. These risks, uncertainties and other factors include, but are not limited to, the risks described in the “Risk Factors” sections of the Original Filing and our most recent Quarterly Report on Form
10-Q,
and to the following:
(1) Changes in the market price for the Company’s finished products and feed grains, both of which may fluctuate substantially and exhibit cyclical characteristics typically associated with commodity markets.
(2) Changes in economic and business conditions, monetary and fiscal policies or the amount of growth, stagnation or recession in the global or U.S. economies, eitherany of which may affect the value of inventories, the collectability of accounts receivable or the financial integrity of customers.customers, and the ability of the end user or consumer to afford protein.
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(3) Changes in the political or economic climate, trade policies, laws and regulations or the domestic poultry industry of countries to which the Company or other companies in the poultry industry ship product, and other changes that might limit the Company’s or the industry’s access to foreign markets.
(4) Changes in laws, regulations, and other activities in government agencies and similar organizations applicable to the Company and the poultry industry and changes in laws, regulations and other activities in government agencies and similar organizations related to food safety.
(5) Various inventory risks due to changes in market conditions.conditions, including, but not limited to, the risk that net realizable values of live and processed poultry inventories might be lower than the cost of such inventories, requiring a downward adjustment to record the value of such inventories at the lower of cost or net realizable value as required by generally accepted accounting principles.
(6) Changes in and effects of competition, which is significant in all markets in which the Company competes, and the effectiveness of marketing and advertising programs. The Company competes with regional and national firms, some of which have greater financial and marketing resources than the Company.
(7) Changes in accounting policies and practices adopted voluntarily by the Company or required to be adopted by accounting principles generally accepted in the United States.
(8) Disease outbreaks affecting the production, performance and/or marketability of the Company’s poultry products, or the contamination of its products.

2

(9) Changes in the availability and cost of labor and growers.
(10) The loss of any of the Company’s major customers.
(11) Inclement weather that could hurt Company flocks or otherwise adversely affect the Company’s operations, or changes in global weather patterns that could affect the supply and price of feed grains.
(12) Failure to respond to changing consumer preferences and negative or competitive media campaigns.
(13) Failure to successfully and efficiently start up and run a new plant or integrate any business the Company might acquire.
(14) Unfavorable results from currently pending litigation and proceedings, or litigation and proceedings that could arise in the future.
(15) Changes resulting from the
COVID-19
pandemic, which could exacerbate any of the risks described above, and could include: high absentee rates that have prevented and may continue to prevent the Company from running some of its facilities at full capacity, or could in the future cause facility closures; an inability of contract poultry producers to manage their flocks; supply chain disruptions for feed grains; further changes in customer orders due to shifting consumer patterns; disruptions in logistics and the distribution chain for the Company’s products; liquidity challenges; and a continued or worsening decline in global commercial activity, among other unfavorable conditions.
(16) Risks relating to the Company’s entry into a definitive agreement to be acquired by a joint venture between Cargill, Incorporated (“Cargill”) and Continental Grain Company (“CGC”), including: the timing, receipt and terms and conditions of any required governmental or regulatory approvals of the proposed transaction and the related transactions involving affiliates of Cargill and CGC that could reduce the anticipated benefits of or cause the parties to abandon the proposed transaction; risks related to the satisfaction of the conditions to closing the proposed transaction (including the failure to obtain necessary regulatory approvals), and the related transactions involving affiliates of Cargill and CGC, in the anticipated timeframe or at all; the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the Company’s common stock; disruption from the proposed transaction making it more difficult to maintain business and operational relationships, including retaining and hiring key personnel and maintaining relationships with the Company’s customers, vendors and others with whom it
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does business; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement entered into pursuant to the proposed transaction or of the transactions involving affiliates of Cargill and CGC; risks related to disruption of management’s attention from the Company’s ongoing business operations due to the proposed transaction; significant transaction costs; and the risk of litigation and/or regulatory actions related to the proposed transaction or unfavorable results from litigation and proceedings that could arise in the future.
Readers are cautioned not to place undue reliance on forward-looking statements made by or on behalf of Sanderson Farms. Each such statement speaks only as of the day it was made. The Company undertakes no obligation to update or to revise any forward-looking statements. The factors described above cannot be controlled by the Company. When used in this quarterly report, theThe words “believes”, “estimates”, “plans”, “expects”, “should”, “outlook”,“believes,” “estimates,” “plans,” “expects,” “should,” “outlook,” and “anticipates” and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements. Examples of forward-looking statements include statements about management’s beliefs about future growth plans, future earnings, production levels, capital expenditures, grain prices, global economic conditions, supply and demand factors and other industry conditions.
GENERAL
The Company’s poultry operations
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EXPLANATORY NOTE
PART III
Item 10.Directors, Executive Officers and Corporate Governance1
Item 11Executive Compensation15
Item 12Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters52
Item 13Certain Relationships and Related Transactions, and Director Independence54
Item 14Principal Accountant Fees and Services56
PART IV
Item 15Exhibits, Financial Statement Schedules57
SIGNATURES
61
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Part III
Item 10—Directors, Executive Officers and Corporate Governance
Our Board of Directors
Our Board is divided into three classes, and directors in a class are integrated through its controlelected at our annual meeting to serve a term of all functions relativethree years until their successors are elected. Pursuant to our
by-laws,
the productionBoard has fixed the total number of its chicken products, including hatching egg production, hatching, feed manufacturing, raising chickens to marketable age (“grow-out”), processing and marketing. Consistent with the poultry industry, the Company’s profitability is substantially impacted by the market price for its finished products and feed grains, both of which may fluctuate substantially and exhibit cyclical characteristics typically associated with commodity markets. Other costs, excluding feed grains, related to the profitabilitydirectors at 13.
Below are biographical summaries current as of the Company’s poultry operations, including hatching egg production, hatching, growing, and processing cost, are responsive to efficient cost containment programs and management practices. Over the past three fiscal years, these other production costs have averaged approximately 62.1%date of the Company’s total production costs.this Form
10-K/A
for each of our directors.
The Company believes that value-added products are subject to less price volatility and generate higher, more consistent profit margin than whole chickens ice packed and shipped
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Class C Directors (term expiring in bulk form. To reduce its exposure to market cyclicality that has historically characterized commodity chicken market prices, the Company has increasingly concentrated on the production and marketing of value-added product lines with emphasis on product quality, customer service, and brand recognition. The Company adds value to its poultry products by performing one or more processing steps beyond the stage where the whole chicken is first saleable as a finished product, such as cutting, deep chilling, packaging and labeling the product. The Company believes that one of its major strengths is its ability to change its product mix to meet customer demands.2022)
The Company’s processed and prepared foods product line includes approximately 100 institutional and consumer packaged food items that it sells nationally, primarily to distributors and food service establishments. A majority of the prepared food items are made to the specifications of food service users.
Poultry prices per pound, as measured by the Georgia Dock price, fluctuated during the three years ended October 31, 2005 as follows:
                 
  1st 2nd 3rd 4th
  Quarter Quarter Quarter Quarter
Fiscal 2005                
High $.7525* $.7400  $.7475  $.7525*
Low $.7325* $.7375  $.7400  $.7425 
Fiscal 2004                
High $.7000  $.7500  $.8100* $.8075 
Low $.6825* $.7050  $.7525  $.7575 
Fiscal 2003                
High $.6250  $.6400  $.6775  $.6925*
Low $.6125* $.6250  $.6350  $.6800 
 
*Year High/Low
Fred L. Banks, Jr.
Independent Director
Age: 79
Director Since: 2007
Committees:
Audit
Nominating and
Governance
Business Experience:
•  Senior Partner since 2008, and Partner from 2001 to 2008, Phelps Dunbar LLP, Jackson, Mississippi, practicing general commercial litigation
•  Presiding Justice from 1999 to 2001, and Justice from 1991 to 1999, Mississippi Supreme Court
•  Circuit Court Judge, Hinds and Yazoo Counties, Mississippi, from 1985 to 1991
•  Representative, Mississippi House of Representatives, from 1976 to 1985
•  Managing Partner, Anderson, Banks, Nichols and Leventhal and successor firms, from 1968 to 1985
Other Positions:
•  National Board Member, NAACP, since 1982 (chair, legal committee and member of executive, finance, and audit committees)
•  Chairman, Mississippi Civil Rights Museum Advisory Commission, since 2014
•  Chairman, Capitol City Convention Center Commission, since 2006
•  Chairman, Community Foundation for Greater Jackson, from 2007 to 2008
Education:
•  Bachelor of Arts, Howard University
•  Juris Doctor,
cum laude
, Howard University School of Law
Experience and Qualifications to Serve on the Board:
•  Mr. Banks’ extensive experience in law as a legislator, judge, and practicing lawyer allow him to provide valuable insight to the Board in overseeing legal risk management and adopting and implementing governance best practices.
•  His active legal career in Mississippi, where we are incorporated and have our principal office, makes him eminently qualified to help lead the Board’s Nominating and Governance Committee.
•  Mr. Banks has been a leader in numerous civic and philanthropic organizations in Mississippi and nationally. His experience and perspective in the areas of civil rights and equality of opportunity are invaluable to the Board in fulfilling the Company’s social responsibilities.
On January 29,
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Toni D. Cooley
Independent Director
Age: 61
Director Since: 2007
Committees:
Compensation
Nominating and
Governance (Vice-Chair)
Diversity, Equity, and
Inclusion
Current Other Public Company Boards:
•  Trustmark Corporation (Nasdaq), since 2013
Business Experience:
•  Chief Executive Officer since 2020, Systems Automotive Interiors Alabama, LLC, a Tier One Supplier of upholstered seats to Mazda Toyota Manufacturing, USA, Inc.
•  Chief Executive Officer since 2016, and Founder and President from 2011 to 2016, Systems Automotive Interiors, LLC, a Tier One supplier of upholstered seats to Toyota Motor Manufacturing
•  Chief Executive Officer since 2016, and
Co-Founder
and President from 2001 to 2016, Systems Electro Coating, LLC, a Tier One supplier to Nissan of electrocoated vehicle frames and components
•  Chief Executive Officer since 2011, and President from 2002 to 2011, Systems IT, Inc., an IT training and consulting company
•  Chief Executive Officer since 2016, and President from 1994 to 2016, Systems Consultants Associates, Inc., a management training and consulting firm
Other Positions:
•  Director, Trustmark National Bank, since 2005
•  Former Director, Federal Reserve Bank of Atlanta, New Orleans Branch
•  Mentor and Benefactor, Center for Social Entrepreneurship, since 2016
Education:
•  Bachelor of Business Administration, Stephens College
•  Juris Doctor, University of Minnesota
Experience and Qualifications to Serve on the Board:
•  Ms. Cooley’s experience in founding and growing the Systems Group companies provides the Board with significant executive expertise in the manufacturing sector, including in programs designed to protect the environment from industrial activity.
•  Ms. Cooley’s service on the board of a publicly traded financial institution, including as chair of that company’s enterprise risk management committee, assists our Board in identifying and overseeing risk in areas such as compliance, insurance, employee relations and human resource management.
•  Her leadership at her family-owned management training firm, established with the express purpose of assisting minority businesses with capacity building, provides the Board with valuable insight into promoting diversity and organizational development.
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Sonia Pérez
Independent Director
Age: 65
Director Since: 2019
Committees:
Compensation (Vice-Chair)
Nominating and
Governance
Diversity, Equity, and
Inclusion
Current Other Public Company Boards:
•  Hancock Whitney Corp. (Nasdaq), since 2021
Business Experience:
•  President, AT&T Southeast States, since 2018
•  President, AT&T Louisiana, from 2010 to 2018
•  Vice-President, AT&T Houston, from 2005 to 2010
•  General Manager, South Texas, SBC Southwest, from 1997 to 2005
Other Positions:
•  Regent, Louisiana Board of Regents, since 2017
•  Vice Chair and member, Board of Trustees of the National WWII Museum, since 2013
•  Past Chair, Board of Trustees, Xavier University of Louisiana
•  Past Chair, Board of Directors, Louisiana Association of Business and Industry
Education:
•  Bachelor of Journalism with Honors, University of Texas at Austin
Experience and Qualifications to Serve on the Board:
•  As President of AT&T Southeast States, Ms. Pérez is responsible for the development of the company’s overall strategic plan in the Southeast region. In Louisiana, she leads a workforce of 3,500 employees and a roll of 6,500 retirees. Her executive leadership of an organization of that size with multi-state operations makes her eminently qualified for our Board.
•  The Board also benefits from her expertise with the deployment of AT&T’s 5G technology and infrastructure and leadership of teams responsible for matters affecting public policy, government affairs and philanthropy.
•  Ms. Pérez’s commitment to public service, as well as her professional experience working with communities in Texas, Louisiana, and North Carolina, are valuable to the Board as it evaluates our corporate social responsibility initiatives.
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Gail Jones Pittman
Independent Director
Age: 68
Director Since: 2002
Committees:
Audit
Compensation (Chair)
Business Experience:
•  Founder and Chief Executive Officer, Gail Pittman Inc., a design company of hand painted dinnerware and home accessories, since 1979
•  Creative Director, Southern Living at Home, from 2005 to 2010
Other Positions:
•  Alliance Member, Ole Miss Women’s Council for Philanthropy, since 2002
•  Member, International Women’s Forum, Mississippi Chapter, since 2015
•  Chair, Metro Jackson Chamber of Commerce, 1999
•  Chair, Madison County Foundation, from 2009 to 2012
•  Member, Advisory Board, Regions Bank, Central Mississippi, from 1998 to 2003
•  Member, Business Advisory Council, University of Mississippi, from 2000 to 2005
Education:
•  Bachelor of Arts, University of Mississippi
Experience and Qualifications to Serve on the Board:
•  Ms. Pittman’s skill, experience and perspective as a successful entrepreneur makes her exceptionally valuable to the Board. She is recognized by many as Mississippi’s preeminent female business executive.
•  The Board benefits from her manufacturing and production experience in its oversight and monitoring of our operational performance, and from her experience in the areas of brand growth and management, product development and sourcing, marketing, and business development.
•  A noted philanthropist, Ms. Pittman provides meaningful insights to the Company on a variety of areas in the Company’s ESG efforts and community involvement.
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Class A Directors (term expiring in 2023)
David Barksdale
Independent Director
Age: 45
Director Since: 2018
Committees:
Audit (Chair)
Compensation
Diversity, Equity, and Inclusion
Current Other Public Company Boards:
•  Tristar Acquisition I Corp. (NYSE), since 2021
Business Experience:
•  Principal, Alluvian Capital, a private investment office with diversified holdings in the telecommunications and software industries, since 2014
•  Co-Chairman
from 2015 to 2018, and Chief Executive Officer from 2009 to 2014, Spread Networks, LLC, a provider of
low-latency
fiber optic services to financial and enterprise customers, until its acquisition by Zayo Group Holdings, Inc.
•  Board Member, Servato Corp., a leading supplier of active battery management solutions to telecommunications, power, transportation, and solar companies, from 2014 to 2019
•  Attorney, Cleary Gottlieb Steen & Hamilton LLP, from 2005 to 2007
•  Principal, Barksdale Management Corporation, a private family office, from 2007 to 2014
Other Positions:
•  Member, Board of Trustees of Tulane University, from 2007 to 2021
•  Vice-Chair and former Board Treasurer of the Greater New Orleans Foundation, a
non-profit
that links philanthropists with charitable, environmental, cultural, and economic development organizations in the New Orleans community (member of the board since 2011)
•  Chair of the Board of Directors, the Idea Village, a globally recognized
non-profit
dedicated to supporting local entrepreneurs (member of the board since 2017)
Education:
•  Bachelor of Arts, Tulane University
•  Juris Doctor, New York University School of Law
•  National Association of Corporate Directors (NACD) Directorship CertificationTM
Experience and Qualifications to Serve on the Board:
•  Mr. Barksdale’s career as CEO and Chairman of a telecommunications and IT firm, from its
start-up
through the completion of its groundbreaking Chicago to New Jersey
low-latency
fiber optic network and expansion of lit fiber services in Chicago and New York, makes him a valuable member of the Board in its oversight of IT and cyber security risks and challenges.
•  The Board also draws on Mr. Barksdale’s extensive investment management experience and his leadership in the negotiation and sale of his company to a publicly traded holding company in overseeing the development and implementation of our strategic plan.
•  Mr. Barksdale has been active in many civic and charitable organizations, making him an excellent fit in our corporate culture.
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Lampkin Butts
President and
Director
Age: 70
Director Since: 1998
Business Experience:
•  President of the Company, since 2004
•  Vice President – Sales of the Company from 1996 to 2004, and various other positions at the Company from 1973 to 1996
Other Positions:
•  Director, Federal Reserve Bank of Atlanta, New Orleans Branch, since 2015
•  Director, National Chicken Council, since 1995
•  Director, Mississippi Poultry Association, since 1995
•  Member, Board of Directors, University of Mississippi Foundation, since 2020
•  Director, Southeast Poultry & Egg Association, from 2000 to 2003
Education:
•  Bachelor of Business Administration, University of Mississippi
Experience and Qualifications to Serve on the Board:
•  Mr. Butts’ extensive knowledge of our business from his almost
50-year
tenure with the Company makes him an extremely valuable director. He has served the Company in most every aspect of our operations, with roles ranging from shift manager, sales representative, and division manager, to his current role as head of our operations.
•  Mr. Butts has worked at the Company and served as a director throughout several of the profitability cycles that are characteristic of a commodity business like ours. His experience in managing the business through the volatility of our industry is especially helpful to our less senior directors whose tenures have not included a profitability downcycle.
•  Mr. Butts has had leadership roles at several poultry industry organizations, which enable him to share with the Board valuable insights into industry dynamics, developments, and innovations, as well as government and regulatory relations.
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Beverly W. Hogan
Independent Director
Age: 70
Director Since: 2004
Committees:
Compensation
Nominating and Governance
Diversity, Equity, and
Inclusion (Chair)
Business Experience:
•  President Emerita, President from 2002 to 2019, and various other positions from 1997 to 2002, Tougaloo College, a private, historically black, liberal arts college in Jackson, Mississippi
•  Commissioner, Mississippi Workers’ Compensation Commission, from 1987 to 1997
•  Executive Director, Governor’s Office of Federal State Programs, from 1984 to 1987
•  Executive Director, Mental Health Associations of Hinds County and the State of Mississippi, from 1974 to 1983
Other Positions:
•  Institutional Director, United Negro College Fund, since 2002
•  Chair, Board of Directors of the Jackson Medical Mall Foundation, which manages a redeveloped facility that houses healthcare providers for the underserved, since 2017
•  Appointed by President Obama to The President’s Board of Advisors on Historically Black Colleges and Universities, from 2009 to 2016
•  Chair, National Advisory Board, HBCU Capital Financing Program
•  Founding Member and former president, Central Mississippi Chapter, National Coalition of 100 Black Women
Education:
•  Bachelor of Arts, Tougaloo College
•  Master of Public Policy and Administration, Jackson State University
•  Doctoral studies in clinical psychology and human and organizational development
•  Honorary doctoral degrees from four universities, including Brown University
Experience and Qualifications to Serve on the Board:
•  As the first woman and the 13th president of a liberal arts college founded in 1869, Dr. Hogan is known as a visionary and trailblazer in Mississippi higher education. The Board has benefitted from her experience in the leadership, management, and growth of this historic college.
•  Dr. Hogan’s educational and professional experience in the public policy, government, and mental health fields has been valuable to the Board in its efforts to make Sanderson Farms a leader in environmental, social and governance best practices.
•  The Board has also benefitted from Dr. Hogan’s insights from her active involvement for many years in state and national civic and political affairs.
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Phil K. Livingston
Age: 78
Director Since: 1989
Committees:
Audit (Vice-Chair)
Compensation
Nominating and Governance
Business Experience:
•  Retired Consultant, AmSouth Bank of Alabama, from 1998 to 2001
•  President of South Louisiana, First American Bank of Tennessee, 1998
•  Chairman and Chief Executive Officer, Deposit Guaranty National Bank of Louisiana, from 1995 to 1998
•  Chief Executive Officer from 1973 to 1995, President from 1975 to 1995, and Chairman from 1987 to 1995, Citizens National Bank
Other Positions:
•  President, Louisiana Bankers Association, 1985
•  Founding Director, from 1997 to 2006, and President, from 2006 to 2015, University Facilities, Inc., a
non-profit
corporation formed to finance and contract for major campus improvements for Southeastern Louisiana University; completed projects during service totaled $115 million
•  Executive in Residence, Southeastern Louisiana University College of Business, since 2016
•  Member, Patient Family Advisory Council, North Oaks Health System
•  Member, Area Advisory Council, Mary Bird Perkins Cancer Center
Education:
•  Bachelor of Science, Mississippi State University
Experience and Qualifications to Serve on the Board:
•  Mr. Livingston’s extensive career in the banking industry, coupled with his leadership roles in a variety of industry and organization boards, make him a valuable member of our Board.
•  His bank executive career included the growth and sale of a community bank of which he was CEO, and involvement in four subsequent bank acquisitions. This experience has been valuable to the Board in its oversight and monitoring of our financial and borrowing risk, accounting and internal controls, and strategic plan.
•  Mr. Livingston also has significant experience in management training and formulation of executive pay structures. He has worked closely with compensation consultants and has been instrumental in the development of our performance-based pay programs.
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Joe F. Sanderson, Jr.
Chairman of the Board and Chief Executive Officer
Age: 74
Director Since: 1984
Business Experience:
•  Chairman of the Board of the Company since 1998, and Chief Executive Officer of the Company since 1989
•  Continuously employed in various positions at the Company since 1969
Other Positions:
•  Co-Chair,
Capital Campaign for Children’s of Mississippi (umbrella organization for University of Mississippi Medical Center pediatric hospital and clinics), since 2016
•  Member, Board of Directors, University of Mississippi Foundation, since 2017
•  Member, Board of Trustees of the National WWII Museum, since 2016
•  Past President, Mississippi Manufacturers’ Association, from 1992 to 1993
•  Past Chair, National Chicken Council, from 1993 to 1994
Education:
•  Bachelor of Arts, Millsaps College
Experience and Qualifications to Serve on the Board:
•  Mr. Sanderson is the grandson of one of our company’s founders. Under his outstanding leadership of our company since 1989, the Company has grown exponentially, including growth in annual revenues from $184 million in 1989 to nearly $4.8 billion in 2021. Also during his tenure, the Company has opened eight new plants in four states.
•  Mr. Sanderson is primarily responsible for the overall operation and strategic vision of our business. His role as Chairman of the Board has been key to our long-term success and growth in stockholder value.
•  Adhering to the values of our founders – integrity and ethical business practices, excellence in operations, and conservative financial management – Mr. Sanderson is directly responsible for setting the “tone at the top” of our company that has been a significant driver of our success.
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Class B Directors (term expiring in 2024)
LOGO
John Bierbusse
Outside Director
Age: 66
Director Since: 2006
Committees:
Diversity, Equity, and Inclusion
Business Experience:
•  Retired Vice President and Manager of Research Administration, from 2002 to 2004, Assistant Manager, Securities Research, from 1999 to 2002, and prior positions from 1987, A.G. Edwards
•  Vice President, Duff & Phelps, Inc., from 1981 to 1987
•  23 years’ experience as an equity research analyst in the packaged food and agri-products industries
•  One of the original authors of the NYSE’s Series 86/87 qualification examination required for publishing equity research analysts (committee member 2003-2007)
Other Positions:
•  Board member, Chamber Music America, an arts service
non-profit
organization based in New York, NY
•  Board member, Third Coast Percussion, a Grammy-award winning quartet based in Chicago, Illinois
•  Board member, Riot Ensemble, a contemporary chamber music ensemble based in London, England
•  Pro bono consultant to arts organizations in strategic planning, board development, financial forecasting, and executive coaching
Education:
•  Bachelor of Arts, Northwestern University
•  Master of Management, Northwestern University – Kellogg School of Management
•  Certified Financial Analyst
Experience and Qualifications to Serve on the Board:
•  Mr. Bierbusse’s experience as a sell-side equity research analyst brings to the Board substantial expertise in capital markets, strategic analysis, risk oversight, and financial modeling in our industry.
•  As a manager, Mr. Bierbusse also has extensive experience in hiring, mentoring, and evaluating finance professionals, which has benefitted the Board in management performance and succession oversight responsibilities.
•  He also has managerial experience in compliance and financial regulation, which has been valuable to the Board in evaluating and overseeing compliance risk.
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LOGO
Mike Cockrell
Treasurer, Chief Financial Officer, Chief Legal Officer, and Director
Age: 64
Director Since: 1998
Business Experience:
•  Treasurer, Chief Financial Officer and Chief Legal Officer of the Company, since 1993
•  Shareholder, Wise Carter Child & Caraway, Professional Association, Jackson, Mississippi, practicing securities and business transaction law, from 1984 to 1993
•  Associate, Nail McKinney Tate & Robinson, CPAs, from 1979 to 1980
Other Positions:
•  Chair, National Chicken Council Communication Committee, from 2013 to 2014
•  Member, Board of Directors, Mississippi Manufacturing Association, from 2007 to 2008
•  Numerous directorships over 30 years with various community and philanthropic organizations
Education:
•  Bachelor of Business Administration, University of Mississippi
•  Juris Doctor, University of Mississippi School of Law
•  Certified Public Accountant (inactive)
Experience and Qualifications to Serve on the Board:
•  Mr. Cockrell’s almost 30 years of experience as the CFO of our Company during our significant internal growth, and his management of our financial condition through the cycles of profitability that characterize our industry, provide the Board with a depth of knowledge about our financial management.
•  Mr. Cockrell oversees or has a key role in many aspects of our operations and management that are not typical for chief financial officers of public companies, including legal matters, investor relations, corporate responsibility reporting, our grain purchasing strategy, and risk management. He contributes a broad perspective on our operations to the Board process.
•  Mr. Cockrell has played a key role in the mentoring and training of our “next generation” of managers, which has assisted the Board in its oversight of management succession issues.
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LOGO
Edith Kelly-Green
Independent Director
Age: 69
Director Since: 2018
Committees:
Audit
Nominating and
Governance (Chair)
Current Other Public Company Boards:
•  Mid-America
Apartment Communities, Inc. (NYSE), since 2020
Business Experience:
•  Partner, The KGR Group, whose primary interests are investments in quick service restaurant franchises in Memphis, Tennessee, since 2005
•  Vice President-Strategic Sourcing and Supply and Chief Sourcing Officer from 1993 to 2003, FedEx Express, the world’s largest express transportation company and a subsidiary of FedEx Corporation (NYSE)
•  Vice President-Internal Audit and Quality, FedEx Corporation, from 1991 to 1993 and numerous other positions from 1977 to 1991 at both FedEx Corporation and FedEx Express
•  Interim Chief Executive Officer, Aeroxchange, Ltd., a multi-airline- owned
business-to-business
e-marketplace,
2000
•  Director, BULAB Holdings, Inc., a privately held, specialty chemical company, since 2012
•  Senior Auditor, Deloitte, from 1973 to 1977
Past Public Company Boards:
•  Applied Industrial Technologies, Inc. (NYSE), from 2002 to 2019
Other Positions:
•  Director, Methodist Health Care Systems, Memphis, since 2018
•  Director, Hatiloo Theater, Memphis, since 2014
•  Founding Member, Philanthropic Black Women of Memphis, since 2006
•  Founding Chair and Member, Ole Miss Women’s Council for Philanthropy, since 2000
•  Member, Advisory Board, Baptist Women’s Hospital, since 2011
Education:
•  Bachelor of Business Administration, University of Mississippi
•  Master of Business Administration, Vanderbilt University
•  Certified Public Accountant (inactive)
Experience and Qualifications to Serve on the Board:
•  Ms. Kelly-Green’s success as an entrepreneur and experience managing a large chain of restaurants in one of our key consumer markets are tremendous assets to our Board in overseeing risks related to marketing and consumer preferences.
•  Her professional experience in corporate operations, supply chain management, logistics, public accounting, and auditing complements the skill sets of our Board.
•  Ms. Kelly-Green’s service on another public company board for 17 years, including her role as chair of its corporate governance committee, and her service on numerous civic and charitable organization boards, provide our Board with further depth of experience in governance best practices.
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LOGO
Suzanne T. Mestayer
Lead Independent Director
Age: 69
Director Since: 2017
Committees:
Audit
Compensation
Nominating and
Governance
Business Experience:
•  Owner and Managing Principal, ThirtyNorth Investments, LLC, a registered investment advisory firm providing investment management services to individuals, benefit plans,
for-profit
and
non-profit
businesses and trusts, since 2010
•  Managing Member, Advisean Partners, LLC, a private investment and business consulting company, since 2008
•  Executive Vice President and President – New Orleans Market, Regions Bank, from 2000 to 2008
•  Partner, from 1983 to 1991, and other positions from 1973, Arthur Andersen & Co.
Past Public Company Boards:
•  McMoRan Exploration Co. (NYSE), from 2007 to 2013
Other Positions:
•  Member, Board of Directors of Pan American Life Insurance Company, since 2017
•  Past Chair and current member, Board of Directors of Ochsner Health System, the largest healthcare system in Louisiana, since 2004
•  Treasurer and member, Board of Trustees of the National WWII Museum, since 2012
•  Former director, Federal Reserve Bank of Atlanta, New Orleans Branch, from 2014 to 2018
Education:
•  Bachelor of Science, Louisiana State University
•  Certified Investment Management Analyst
®
•  Certified Public Accountant (inactive)
Experience and Qualifications to Serve on the Board:
•  Ms. Mestayer’s successful and distinguished career in investment management, banking, and accounting eminently qualify her to serve on our Board. Her professional expertise allows her to contribute a broad skill set to the Board.
•  Ms. Mestayer has served on over 20 public and private boards, presiding as chair for seven, and has served on the audit and compensation committees of several organizations. Her governance experience is extremely valuable in matters of board process and oversight.
•  Additionally, Ms. Mestayer’s professional and board experience make her an asset to our Board in its oversight of accounting and financial risk, internal controls, and executive compensation.
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Our Executive Officers
Certain information required by this Item regarding our executive officers appears in Part I, Item 4A of the Original Filing under the caption, “Executive Officers of the Registrant.” As Messrs. Butts, Cockrell and Sanderson are also directors of the Company, announced a three-for-two stock split to be effected as a 50% stock dividend. The new shares were distributed on February 26, 2004, to stockholdersadditional information regarding their experience is set forth above under the caption “Our Board of record asDirectors.”
Code of close of business on FebruaryEthics for Senior Financial Personnel

3

10, 2004. Per share information in this Annual Report reflects the stock split. Cash was paid in lieu of fractional shares.
EXECUTIVE OVERVIEW OF RESULTS — 2005
The Company’sRegistrant has adopted a code of ethics that applies to its senior financial resultspersonnel, including its chief executive officer, chief financial officer and chief accounting officer. The code governs their responsibility for internal controls and full, fair, accurate, timely, and understandable disclosure in our periodic reports. The code of ethics can be found on our website at http://ir.sandersonfarms.com/corporate-governance. Additionally, the Registrant will provide a copy of the code of ethics free of charge to any person upon request to:
Sanderson Farms, Inc.
P.O. Box 988
Laurel, Mississippi 39441
Attn.: Chief Financial Officer
Requests can also be made by phone at (601)
649-4030.
Audit Committee
The Registrant’s Board of Directors has a standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act, whose members are David Barksdale (Chair), Phil K. Livingston (Vice Chair), Fred Banks, Jr., Edith Kelly-Green, Suzanne T. Mestayer and Gail J. Pittman. All members of the Audit Committee are independent directors under the listing standards of the NASDAQ Stock Market LLC. The Registrant’s Board of Directors has determined that David Barksdale, Edith Kelly-Green, Phil K. Livingston and Suzanne T. Mestayer are Audit Committee financial experts.
Item 11—Executive Compensation
Compensation Discussion and Analysis
In this section, we describe our compensation philosophy, the factors the Compensation Committee of our Board of Directors considered in developing our compensation packages, and the decision-making process it followed in setting compensation for our named executive officers for our 2021 fiscal year. You should read this section in conjunction with the tables and accompanying narratives that follow. We believe our executive compensation programs reflect our company’s
pay-for-performance
philosophy, assist us in creating long-term value for our stockholders, and are effective in retaining and motivating our executives.
Our “named executive officers” as defined under the SEC’s proxy statement rules for 2021 were:
Joe F. Sanderson, Jr., Chairman of the Board and Chief Executive Officer (CEO);
Lampkin Butts, President (President);
Mike Cockrell, Treasurer, Chief Financial Officer and Chief Legal Officer (CFO); and
Tim Rigney, Secretary and Controller (Secretary).
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Executive Summary
Sanderson Farms has always had a
pay-for-performance
culture. We expect top performance from our people every year and are willing to pay for that success. Accordingly, a substantial part of the compensation package for each named executive officer is at risk and is only earned if performance warrants. In addition to base salary, we offer our named executive officers the opportunity to earn an annual cash bonus if the Company meets certain performance goals, and we also grant long-term incentives to our named executive officers to align their pay with the long-term success of our company.
Our long-term equity incentives have a performance-based component and a time-based element to assist us in retaining our management team. Although we generally strive to appoint executives from within our company, our compensation programs will allow us to attract top management candidates from outside our company should the need arise. We encourage our named executive officers, other members of management, and our Board of Directors to follow our stock ownership guidelines. In addition, our executives participate in our Employee Stock Ownership Plan and can elect to participate in our Management Share Purchase Plan, which further aligns their interests with those of our stockholders.
The Compensation Committee has retained Willis Towers Watson as its independent compensation consultant. We use a peer group recommended by Willis Towers Watson and appropriate published surveys (based on industry and revenue size comparisons) to set compensation levels. We do not target our compensation levels at any particular point in the range established by data we gather, but we do consider the median of those markets along with many other factors in setting our pay opportunity. However, with above-target performance, our named executive officers can earn above-market pay.
The Committee compares our executive officers’ total realizable pay against our total stockholder return for the fiscal year ended October 31, 2005 reflect strong market prices for dark meat poultry products as well as favorable prices for feed grains. Although overall market prices forpast three years, to determine if there is alignment between our executive pay and our performance. Total realizable pay equals the sum of an officer’s base salary, actual bonus paid, performance-based awards paid out in the period, and the value of restricted stock awards at the Company’s current stock price. Based on this analysis, the Committee believes our executive compensation and our company’s performance have been strongly aligned over time, with less alignment in some years due to cyclicality in the poultry products were lower during fiscal 2005 as comparedindustry.
For our annual cash bonus plan, we measure operational performance using Agristats, a private industry benchmarking service that analyzes performance data submitted by a significant majority of the poultry industry, and through earnings per share. Even if we meet the operational and earnings per share targets, our executives will not receive payments under the bonus award plan unless we also meet a return on equity threshold. For our long-term performance share plan, we measure performance by return on sales and return on equity, and our stock price also factors into the final amount of the award to the historical highs experienced during fiscal 2004,named executive officers.
Our stockholders have approved the Company was ablecompensation of our named executive officers as disclosed in our annual meeting proxy statement by at least 92.7 percent of the votes cast in every year in which we have held a
Say-on-Pay
vote. The Committee took these approvals into account in determining to partiallyfollow the same policies, practices, and framework to set our executive pay as it has used in the past. Our Board has determined to hold a
Say-on-Pay
vote every year. However, we are required by law to hold a
non-binding
advisory vote on the frequency of our
Say-on-Pay
votes every six years. The next vote will occur at our 2026 annual meeting.
Principles and Objectives of the Executive Compensation Program
The main objectives of our executive compensation programs have been to reward outstanding performance by our executives appropriately and to ensure that management and stockholder interests are closely aligned. The Committee strives to structure compensation packages that create incentives for our executives to maximize long-term stockholder value, rather than to maximize their individual pay. A significant portion of our executive compensation opportunity is related to factors that directly and indirectly influence stockholder value, including stock performance, earnings per share, operational performance, return on sales, and return on equity.
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Another significant factor in the Committee’s decision-making is stockholder dilution, and the Committee strives to minimize the dilutive effect of equity awards on our stockholders. Our Board of Directors also adopted a share repurchase program under which we are currently authorized to repurchase up to two million shares of our common stock, in part to offset the reduced selling prices with lower costsdilutive effect of cornour equity compensation plans. We have repurchased over 2,300,000 shares under this program since the Board first authorized it in
2009.
We believe our executive culture is unique within our industry. Our management team is motivated by a strong “tone from the top” that has fostered our core mission to create returns for our stockholders. We believe our executives should be rewarded fairly for their loyalty to that mission, especially in years when we perform at the top of our industry.
Management, the Board of Directors, and soybean meal ingredients. The Company’s cost of cornthe Compensation Committee recognize that our business is cyclical and soybean meal was $60.0 million lower during fiscal 2005 as compared to fiscal 2004. During the fourth quarter of fiscal 2005, the Company was negatively impacted by Hurricane Katrinaseasonal, and had an estimated reduction in its operating income during the fourth quarter of $7.9 million related to the storm. The Company believes the remaining effects of lost production and additional expenses that will be incurred related to Hurricane Katrina during the first quarter of fiscal 2006 will be substantially covered by the Company’s insurance policies.
RESULTS OF OPERATIONS
Fiscal 2005 Compared to Fiscal 2004
The Company’s net sales during fiscal 2005 were $1.0 billion, a decrease of $46.1 million or 4.4% as compared to fiscal 2004. This reduction reflects lower prices for the Company’s poultry products of 6.5% during fiscal 2005 as compared to fiscal 2004, offset by an increase in the pounds of poultry products sold of 2.8%. The decrease in the average sale price of the Company’s poultry products resulted primarily from decreasesoften times factors beyond our control significantly influence our profitability. These factors include swings in the market prices for our primary product, fresh chicken, and our two primary input costs, corn and soybean meal. Supply and demand factors for poultry products and feed grains also play a role in the cyclicality of boneless breast meat, tendersour industry and wingsare influenced by global macroeconomic conditions and weather patterns. Accordingly, the Compensation Committee believes it is important to measure and reward outstanding performance as much by operational performance relative to our industry peers as in absolute dollars per share and other typical measuring tools. This concept of 24.9%, 30.8%placing significant emphasis on operational performance relative to our industry peers permeates our overall compensation plans and 12.4%, respectively.philosophy.
We expect
top-level
performance from our management team even during downturns in our industry, extraordinary conditions like the
COVID-19
pandemic, and periods of Company expansion. Accordingly, the criteria that the Committee has established for our performance-based awards have been historically very challenging to achieve. Nevertheless, even in years for which we have incurred a net loss, our company has often performed better than most of our industry peers. The Committee has considered these factors in evaluating our compensation plans and has made adjustments to the plans or discretionary awards to take into account our strong performance relative to the industry and our significant company growth.
The Committee intends to continue its strategy of using programs that emphasize performance-based incentive compensation, with a goal to achieve an appropriate balance between our short and long-term performance and between our performance and stockholder return.
Benchmarking and Competitive Analyses
The Committee uses information gathered by analyzing the compensation levels and programs of a peer group and, in some cases, composite survey data compiled from unidentified companies of appropriate size and industry. The peer group serves as the chief point of comparison of the level and structure of executive pay, and is composed of companies similar to Sanderson Farms in size, median revenue, industry, geographic location, and/or performance. The Committee also uses data from a reference group of direct competitors that are considerably larger than Sanderson Farms as a comparator for components of executive pay, but not for pay levels. Selection of the peer and reference groups is based on the research of Willis Towers Watson with input from the Committee. Each year, Willis Towers Watson considers whether the composition of the peer and reference groups continues to be appropriate and if not, recommends changes. However, the softnessCommittee and Willis Towers Watson strive to minimize churn in the composition of the groups so that yearly comparisons remain stable.
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The comparator groups yield information about the general level and components of pay for comparable executive positions at other companies. The Committee uses this information as a general guide in its deliberations, but it does not target our executive compensation levels at any point in the range established by the comparisons. Instead, the Committee bases its final decisions on its business judgment, which may be influenced by the median level of that range, as well as a variety of other factors discussed below. The companies in the comparator groups that Willis Towers Watson used in 2020 to make recommendations about fiscal 2021 pay were:
Peer GroupReference Group
B&G Foods, Inc.Hormel Foods
Brown-Forman Corp.Pilgrims Pride
Cal-Maine
Foods, Inc.
Tyson Foods
Central Garden & Pet Company
Darling Ingredients, Inc.
Flowers Foods, Inc.
Hain Celestial Group Inc.
JM Smucker Co.
Lamb Weston Holdings, Inc.
Lancaster Colony Corp.
McCormick & Co.
Post Holdings, Inc.
Seaboard Corp.
Seneca Foods Corp.
SunOpta, Inc.
Treehouse Foods Inc.
United Natural Foods Inc.
The Compensation Committee Process and the Role of Management and Compensation Consultants
Both management and the Compensation Committee recognize the importance of maintaining sound principles for the development and administration of compensation and benefit programs. Our Compensation Committee has taken steps to significantly enhance its ability to carry out its responsibilities effectively, as well as to ensure that the Company maintains strong links between executive pay and performance. Examples of actions that the Committee has taken include:
Retained an independent compensation consultant, Willis Towers Watson, to advise on executive and director compensation issues. The Committee selected Willis Towers Watson after considering the qualifications and proposals of several consulting firm candidates and interviews of the candidates with the Committee chair. The Committee periodically
re-assesses
whether Willis Towers Watson continues to be an appropriate choice.
Met regularly in executive sessions with the compensation consultant and legal and accounting advisors without Company management present.
Maintained important features of our executive and director compensation programs, including:
Establishing a peer group for primary comparisons of the level and structure of executive and director pay;
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Establishing a broader reference group of companies with a business environment similar to ours to assist in comparing the elements of executive and director compensation (not levels of pay);
Developing a long-term incentive program for executives designed to offer a variety of equity- based awards that are linked to stockholder value, and making adjustments to the program where necessary to take into account our significant Company growth and strong performance relative to our peers;
Implementing incentive programs to promote increased Company stock ownership by management and
non-employee
directors;
Instituting share ownership guidelines for both management and
non-employee
directors;
Adopting a compensation recoupment policy for incentive-based compensation, discussed below; and
Undertaking a formalized annual review of executive compensation packages with advice from the compensation consultant in light of market standards; company, industry, and officer performance; and individual merit.
The Committee has the sole authority to retain or terminate Willis Towers Watson (or any other compensation consultant) and to approve the consultant’s fees and other terms and conditions of its engagement related to executive compensation. In April 2020, as in prior years, the Committee directly engaged Willis Towers Watson to review its executive compensation components and levels and recommend any changes for fiscal 2021 necessary to bring our programs in line with market standards or Company performance. This included an assessment of the composition of the peer and reference groups for 2021, a review of compensation trends, development of specific compensation recommendations, and a presentation of its report to the Committee. The Company paid Willis Towers Watson a fee of approximately $89,000 for all of this work. The Company also paid Willis Towers Watson another $7,000 for analysis and advice in connection with fiscal 2021 director compensation matters.
Our Human Resources department has engaged Willis Towers Watson’s brokerage and advisory division to identify carriers for the life insurance, disability and other plans that are ancillary to our health plan and to secure stop-loss coverage for the health plan. While we do not pay Willis Towers Watson any fees for these prices were partially offsetservices, they earned approximately $857,000 in brokerage commissions and other compensation for these services in fiscal 2021.
In 2021, the Committee formally assessed the independence of its advisors, including Willis Towers Watson, based on specific information requested of the advisors, and determined that Willis Towers Watson and its other advisors are independent. The Committee will take measures to ensure that any future engagement of Willis Towers Watson by strong export demandour Company does not impair Willis Towers Watson’s independence.
Typically, the Committee chair meets with representatives from Willis Towers Watson at the outset of any engagement to discuss the Committee’s goals and objectives and to outline the parameters of the review that Willis Towers Watson will undertake. Company personnel are sometimes present for leg quartersthose meetings as a liaison with management, and pawsWillis Towers Watson uses Company personnel to gather internal information necessary for its work. The Committee chair also corresponds with Willis Towers Watson directly during an engagement as questions arise.
The CEO is the Committee’s chief source of information about the overall performance of the Company and of senior management. The Committee or its chair and the Lead Independent Director typically meet privately with the CEO to seek his view of Willis Towers Watson’s recommendations and to receive his input about factors that the Committee might consider in making its determinations with respect to the
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President and CFO, who are his direct reports. Although the CEO has substantial influence on the Company’s compensation and could contact or meet with Willis Towers Watson or the Committee if he chooses, he is not directly involved in the Committee’s decision-making process or in meetings with Willis Towers Watson.
When compensation questions arise for the Committee’s consideration, senior management may be present for Willis Towers Watson’s presentations and to answer any questions by directors. However, when the Committee sets levels and components of compensation, senior managers are ultimately excused from the meeting to permit the Committee to meet with Willis Towers Watson and legal and accounting advisors, and to deliberate and vote. The Committee may ask the CEO to be present for the deliberations on the compensation of the other named executive officers, but he is excused from the deliberations and vote on his own compensation.
The Compensation Committee may form and delegate its authority to subcommittees consisting only of persons who are members of the Compensation Committee.
Compensation Committee Interlocks and Insider Participation
During fiscal 2021, none of the members of the Compensation Committee was an officer or employee of the Company and no member of the Committee is a former officer of the Company. In addition, during fiscal 2005. Bulk leg quarter prices were2021, none of our executive officers served on the board of directors of any entity whose directors or officers served on our Board of Directors.
Elements of Executive Compensation
The compensation of our executive officers consists of the following elements:
Base Salary
Annual cash incentive (bonus) awards
Long-term equity incentive awards, including:
Restricted stock
Performance shares
Management share purchase rights
In-service
and post-employment benefits
Perquisites
The Committee has used these elements of compensation to create a flexible package that reflects the cyclical nature of the poultry business and can reward both the short and long-term performance of the Company and the individual. Each item of compensation is considered individually, followed by consideration of the overall package, with the goal of treating executives equitably and rewarding and incentivizing outstanding performance. Generally, the Committee does not consider the amounts realizable from prior compensation in setting future benefits. However, the Committee has restructured our long-term performance incentives to reflect more fairly the conditions in our industry when past awards have failed to vest because of cyclical downturns in the poultry market and inefficiencies stemming from our significant internal growth. This is discussed in more detail below.
The CEO’s 2021 total compensation, as reported in the Summary Compensation Table below, was approximately 17.9%265 percent and 331 percent, respectively, higher than the total compensation for the President and CFO because of his higher level of responsibility within our Company and his more pervasive influence over our performance. The compensation of the President and CFO was likewise approximately 314 percent and 252 percent, respectively, higher than the Secretary’s for the same reasons.
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We have employment agreements with the CEO, the President, and the CFO. The agreements provide those executives will remain employed until their agreements are terminated either by the Company or the executive for any reason. Among other benefits, the agreements provide for a severance payment to be paid to the officers if:
before a change in control of our company, the officers are terminated without cause, except in the case of poor performance;
at or after a change in control, the officers are terminated without cause; or
the officers resign for good reason.
The amount of the severance payments will be (i) in the case of Mr. Sanderson, three times, and in the case of Messrs. Butts and Cockrell, two times, the following amounts:
the officer’s annual base salary in effect for 2021, plus
fifty percent of the maximum bonus available to the executive under the Company’s bonus program in effect for 2021,
plus (ii) a portion of fifty percent of the officer’s 2021 maximum bonus opportunity, prorated according to the number of days in the fiscal year that have elapsed through his termination date.
The Committee believes these benefits are important officer retention tools that will protect the Company and its stockholders against an unexpected departure of our most senior management. In addition, the commitment to pay severance is counterbalanced by an agreement from the officers not to disclose confidential information about us during and after their employment, and not to engage in certain competitive activity during their employment and for two years after the termination of their employment for any reason other than poor performance. The Committee also believed it was crucial to structure the agreements so that, except in the case of a change in control, the officers will not be paid severance if they are terminated for poor performance.
In the context of a change in control, the severance is not payable unless the officer is subsequently terminated without cause. This is sometimes referred to as a “double trigger.” In the case of a merger or other transaction that would allow our stockholders to profit from a sale of control of our company, such provisions can help ensure that management will not be distracted in the transaction negotiations by concerns that they will be arbitrarily terminated by new management without any economic protection after the change of control is complete.
The agreements are discussed further below in the narrative following the table entitled, “Grants of Plan- Based Awards.”
Base Salaries
Salaries are used to provide a fixed amount of compensation for the executive’s regular work. The Committee reviews the salaries of the named executive officers annually in October, with input from the outside compensation consultant, and makes final salary decisions at that time. Salary increases are based on an evaluation of Company performance, the individual’s performance, and the individual’s level of pay compared to the pay levels for similar positions in the peer group. Although the peer group suggests a range of competitive levels for base salaries, exact levels are determined by the Committee based on each executive’s merit. The Committee also takes into account years of service, responsibilities, our future growth plans, industry conditions, and our current ability to pay.
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For fiscal 2021, the Committee determined to award a 1.25 percent merit-based salary increase to the President and CFO and a 3.0 percent increase to the Secretary. The CEO declined to be considered for an increase. For more information about the factors the Committee considered in setting fiscal 2021 compensation, see the subsection below entitled “Evaluation of Executive Performance.”
The effective date for salary increases typically is November 1 of each year. Salary increases can also occur upon an individual’s promotion.
Annual Cash Bonus Awards
We maintain a bonus award plan under which our salaried employees, including the named executive officers, are eligible for fiscal
year-end
cash incentive awards equal to a percentage of their base salary based on the Company’s performance (Bonus Award Program). These awards are designed to reward short-term performance and the achievement of designated operational results. For officers and key management employees, the total award has two components: a percentage based on our achieving certain target earnings per share goals, and a percentage based on our operational performance versus our industry peers as measured by Agristats.
The earnings per share goals under the Bonus Award Program are set annually, and reflect our growth and ability to generate earnings. We have experienced significant growth in production capacity over the past 20 years, and our ability to generate earnings has likewise grown significantly. As a result, the earnings per share targets established under the Bonus Award Program have moved higher over time to reflect our increased earnings capacity.
We have historically performed at or near the top of the industry in operational measures, and the targets set for operational goals under the Bonus Award Program reflect our culture and expectations of achieving superior performance relative to our peers. However, it is possible that even if we operate at the top of the industry, we still might not achieve an acceptable level of profitability due to factors such as the cyclical nature of the industry, external forces that are beyond the control of management, and short- term inefficiencies from our significant internal growth. Unless we achieve at least an 8 percent return on average stockholders’ equity (computed after taking into account any bonus to be paid), no payments are made under the Bonus Award Program even if the operational targets are reached, and payments are not cumulative. As a result of our aggressive targets and the volatility of our industry, the named executive officers have not had a bonus payout in eight of the last 16 years.
For fiscal 2021, the Committee established the maximum earnings per share goal by reference to an earnings level that would result in a 21.5 percent return on average equity.
While the Committee recognizes that there are many factors beyond the control of management that might affect our ability to achieve the plan goals, it has attempted to make the program competitive by awarding a relatively high percentage of salary payouts in years in which we achieve the plan’s aggressive targets. Likewise, the Committee sets aggressive targets when setting operational goals. The operational portion of the bonus is payable if the Company’s chickens rank in the top 30 percent of all chickens included in Agristats in bottom line profit per head. For participants to earn the top bonus, our chickens must rank in the top 10 percent of the industry.
The following table shows, for fiscal 2021, the percentage of base salary that the named executive officers were eligible to receive from each component of the bonus award.
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2021 Bonus Award Opportunities
Position  Bonus Opportunity as Percentage of
Base Salary From EPS Component		  Bonus Opportunity as
Percentage of Base Salary from
Operational Component		 
CEO   100%   100% 
President   80%   80% 
CFO   70%   70% 
Secretary   40%   40% 
The following table shows, for fiscal 2021, the earnings per share objectives and the corresponding percentages of the earnings per share component of a participant’s bonus award that could have been earned. The earnings per share component of the Bonus Award Program is based on our net income net of the bonus. The program provides that the earnings per share targets will be adjusted to reflect changes in the number of shares outstanding due to business combinations, recapitalizations, stock splits, or other changes in our corporate structure.
2021 Bonus Awards – EPS Component
Per Share Return ($)*  
Percentage of

EPS Based Award
 
15.09   100.0% 
14.92   95.0% 
14.74   90.0% 
14.57   85.0% 
14.40   80.0% 
14.22   75.0% 
14.05   70.0% 
13.88   65.0% 
13.70   60.0% 
13.53   55.0% 
13.38   50.0% 
13.22   45.0% 
13.07   40.0% 
12.92   35.0% 
12.77   30.0% 
12.62   25.0% 
12.47   20.0% 
12.32   15.0% 
12.17   10.0% 
12.02   5.0% 
*
Net of bonus and net of extraordinary,
non-recurring
income items not related to the fiscal year’s operations.
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The following table shows, for fiscal 2021, the performance objectives based on our performance versus our industry peers as reported by Agristats and the corresponding percentages of the operational component of a participant’s bonus award that could have been earned.
2021 Bonus Awards—
Operational Performance Component
Agristats Ranking—
Operating Profit per
Head of Chicken Sold
Percentage of

Operational

Performance Based

Award
Top 10%100.0% 
Top 20%63
2
⁄
3
% 
Top 30%33
1
⁄
3
% 
The following table shows, for the 2021 fiscal year, the maximum percentages of base salary that the named executive officers could have received under the Bonus Award Program and the actual awards received. Actual cash awards for past years are shown in the
“Non-Equity
Incentive Plan Compensation” column of the Summary Compensation Table that follows this Compensation Discussion and Analysis.
2021 Bonus Award Payments
Position  Maximum Bonus
Award Opportunity
as a Percentage of
Base Salary		  Percentage of Base
Salary Actually
Earned Under Bonus
Award Program		  Dollar Amount of
Actual Awards		 
CEO   200%   167%  $2,530,551 
President   160%   133%  $1,014,996 
CFO   140%   117%  $761,055 
Secretary   80%   67%  $233,301 
The Committee normally reviews and reconsiders the Bonus Award Program each January, along with the maximum bonus opportunities, the performance criteria under the program, and the earnings per share targets for the then-current fiscal year. It also receives reports from the outside compensation consultant concerning the level of similar short-term cash incentives paid by the peer group companies, and management’s recommended EPS and operational performance targets.
The Committee generally adopts the program in January for the current fiscal year. The parameters of the program and the performance criteria are then communicated to the participants. In general, once the Committee adopts the program, the bonus awards are determined solely according to the program criteria and are not subject to the discretion of the Committee. The program does provide that adjustments can be made to awards in the event of extraordinary operating conditions, errors in Agristats reporting or significant changes in the number of Agristats participants, changes in law or accounting procedures, or substantial and unforeseen fluctuations in sales pounds or dollars during the year. Bonuses earned for a completed fiscal year are usually paid in December following that fiscal year.
Long-Term Equity Incentive Awards
Equity-based compensation and ownership ensures that our executive officers and directors have a continuing stake in the long-term success of the Company. Generally, the Committee considers equity incentive awards to the named executive officers each October as part of its annual evaluation of
executive pay. The awards, if made, usually become effective in November at the start of the Company’s new fiscal year.
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Under the Stock Incentive Plan, the Board may grant restricted stock, performance shares, stock options, stock appreciation rights, phantom stock, management share purchase rights, and other stock-based awards. Since its inception in 2005, awards to the named executive officers under the plan have consisted only of restricted stock, performance shares, and management share purchase rights. The Committee strives to be conservative in the rate of usage, or run rate, of shares under the Stock Incentive Plan.
The Committee, with input from Willis Towers Watson, makes specific grants by comparing each executive’s current long-term incentive levels with the market range established by published survey and peer proxy statement data. Based on market studies, it identifies a typical multiple of the base salary for the individual’s management level that his or her long-term incentives should represent. These multiples are reconsidered annually based on the then-current market data. For fiscal 2021, the multiples were 325 percent for the CEO, 180 percent for the President, 170 percent for the CFO, and 80 percent for the Secretary. In the case of the Secretary, the multiple is applied to the average salary for all positions at the same management level.
The multiple of the officer’s salary yields a target annual long-term incentive award level that is then converted into a recommended number of shares to be awarded using the approximate stock price quoted on NASDAQ at that time. As discussed above, the Committee also bases its final decisions as compared to the award level on factors such as individual merit, responsibilities, individual and Company performance, and the dilutive effect of the award on our stockholders. The Committee then divides the total recommended share award equally between performance shares and restricted stock.
All of our restricted stock and Management Share Purchase Plan agreements provide that stock awarded under those plans will become fully vested in the event of a change in control of our Company and fully or partially vested upon certain other events, as described more fully in the “Potential Payments Upon Termination or
Change-in-Control”
section below. These provisions were adopted because they are customary for equity incentive awards of those types and because the Board of Directors deemed them to be reasonable and fair to our management. In the context of a merger or other transaction that would allow our stockholders to profit from a sale of control of our company, such provisions can help ensure that management will not be distracted in the transaction negotiations by concerns that the value of their awards will decline after the change of control is complete. The potential payments under these provisions played no part in the Committee’s decisions regarding other elements of our executive compensation.
Restricted Stock
Shares of restricted stock are shares granted subject to a vesting period during which the shares may not be transferred. All of our restricted stock awards have a vesting period of four years. The CEO, President, CFO, Secretary, and certain other salaried employees of the Company received restricted stock as part of their long-term incentive award in November 2020 for the 2021 fiscal 2004. A simpleyear. The fiscal 2021 restricted
stock generally will vest on November 1, 2024, as long as the holder remains continuously employed by us during the restricted period.
Recipients of restricted stock have all the rights of a stockholder of the Company, including voting rights and the right to receive dividends, beginning on the grant date. In the event a recipient forfeits shares of restricted stock before such shares vest, the shares are cancelled.
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Performance Shares
Performance shares provide a material incentive to executives by offering potential increased stock ownership in the Company tied directly to our stockholders’ return. The CEO, President, CFO, Secretary, and certain other salaried employees received performance share grants as part of their long-term incentive awards in November 2020. The performance share program entitles the holder to earn shares of Sanderson Farms common stock if we achieve certain relative levels of performance on stockholder return over a multi-year period following the grant, as long as the holder remains continuously employed by us until the end of the performance period and any additional vesting period. The length of the performance period reflects the cyclical nature of the poultry business, and is designed, generally, to measure our performance over an industry cycle. Currently, the performance period is two years and there is an additional
one-year
service-based vesting period before the shares are issued.
Performance shares carry no dividend or voting rights until they are issued after achievement of the performance objectives and the expiration of any additional vesting period.
The Board of Directors may pay earned performance shares in cash, shares of Sanderson Farms common stock, or in a combination of both. Once the performance criteria are established and the awards are granted, the payment of earned shares is generally not subject to the discretion of the Committee or the Board, but adjustments can be made in limited circumstances.
Performance share awards are made in a target amount of shares based on our average return on equity (ROE) and a target amount based on our average return on sales (ROS). The award establishes three possible
non-discretionary
percentages of those target amounts that the recipient could actually receive, depending on our actual performance measured at the end of the performance period.
Because the performance goals are based on our historical performance, years of past outstanding company performance can make the performance goals challenging to achieve in future years. The threshold performance level represents the 33rd percentile of the Company’s performance over 29
two-year
periods. The target level represents the 65th percentile of performance during the historical measurement period and the maximum level represents the 83rd percentile. The fiscal 2021 performance share awards were structured as follows:
2021 Performance Share Criteria
Measure
  
Weight
  
Threshold
(50% Payout)
  
Target

(100% Payout)
  
Maximum

(200% Payout)
 
ROE   50%   8.0%   14.7%   23.5% 
ROS   50%   1.8%   4.4%   7.0% 
If our average ROE or average ROS is otherwise between the threshold and maximum percentages, the number of performance shares for which the award recipient is eligible will be calculated using a straight- line interpolation. If average ROE or ROS is less than the threshold, the recipient will not be entitled to receive any shares of that portion of the target award measured by that metric.
Average ROE is equal to the mathematical average of the Georgia Dock pricesnet return on average equity for whole chickens decreased only 0.6% for fiscal 2005 as compared to fiscal 2004. Duringeach of the fourth quarter of fiscal 2005 the Company’s pounds of poultry products sold were lower because of chickens lost during Hurricane Katrina and a reduction in leg quarters soldtwo years in the export market becauseperformance period. Net return on average equity is computed by adding together stockholders’ equity on our audited financial statements at the beginning and end of hurricane related disruptions. Net sales of prepared food products decreased $9.2 million or 8.6% and resulted from a decrease in the pounds of prepared food products sold of 8.2% and a decrease in the average sale price of prepared food products sold of 0.5%.
Cost of sales for theeach fiscal year ended October 31, 2005, were $826.7 million, a decrease of $15.7 million, or 1.9%, as compared to the fiscal year ended October 31, 2004. This decrease resulted from the lower cost of feed grains during fiscal 2005 as compared to fiscal 2004, which result was partially offsetand dividing by the increase in the pounds of poultry products sold of 2.8% and increased cost of sales incurred at the new poultry complex in South Georgia. A simple average of the corn and soybean meal cash market prices during fiscal 2005 as compared to fiscal 2004 reflects decreases of 16.0% and 23.3%, respectively. Cost of sales of prepared food products decreased 18.6% due to the 24.9% reduction in prices for boneless breast meat. Boneless breast meattwo. The resulting number is a major component of the prepared foods division’s costs of sales and is purchased from the Company’s poultry operations.
Selling, general and administrative costs for fiscal 2005 were $66.0 million as compared to $59.8 million for fiscal 2004, an increase of $6.2 million. Approximately $4.1 million of the increase was due to the Company’s start up of the new poultry complex in Moultrie and Adel, Georgia. Expenses incurred prior to the start up of the complex which were incurred during the first three quarters of the fiscal year were included in selling, general and administrative costs. During the fourth quarter of fiscal 2005 the costs of operations at the new complex were included in cost of sales.
For fiscal 2005 the Company’s operating income was $113.5 million as compared to $150.2 million for fiscal 2004, a decrease of $36.7 million. The overall lower prices for poultry products were partially offset by the favorable prices for feed grains during fiscal 2005 as compared to fiscal 2004. The Company’s operating income was

4

negatively impacted by $7.9 million from Hurricane Katrina during the fourth quarter of fiscal 2005. The total reduction in operating income of $7.9 million relates to the insurance deductible of $2,750,000 and incurred but unrecognized lost profits and expenses of $5.1 million. The unrecognized lost profits and expenses were the direct result of the effect of Hurricane Katrina and the Company’s efforts to minimize the potential loss from the hurricane. In addition, the Company’s operating income was negatively impacted by the start up of the new complex in South Georgia. The Company expects that the impact of Hurricane Katrina on its operating income during fiscal 2006 to be minimal, as such impact will be substantially covered by the Company’s insurance policies. Also during fiscal 2006, the Company’s cost structure will improve as the new complex in South Georgia reaches full capacity during the summer of 2006.
Interest expense during fiscal 2005 was $433,000, a 72.4% decrease from the $1.6 million expensed during fiscal 2004. The reduction in interest expense was due to the capitalization of interest incurred to the cost of construction of the new complex in South Georgia and the new general offices in Laurel, Mississippi and, to a lesser extent, lower outstanding debt.
The Company’s effective tax rate during fiscal 2005 and fiscal 2004 was 38.30% and 38.75%, respectively.
Netthen divided into net income for the fiscal year ended October 31, 2005 was $70.6 million, or $3.51 per diluted share. For fiscal 2004, the Company’sas reported on our audited financial statements to reach net income was $91.4 million, or $4.57 per diluted share. During the fourth quarter of fiscal 2005 the Company had an estimated reduction in its operating income from Hurricane Katrina of $7.9 million. The $7.9 million before income taxes consist of the deductible under the Company’s insurance policies and certain expenses and lost profits of $5.1 million. The Company intends to seek reimbursementreturn on average equity for the unrecognized lost profits and incurred expense of $5.1 million andyear. Average ROS is equal to the $14.9 million recognized as of October 31, 2005. Negotiations with the Company’s insurance carriers are expected to be completed during 2006.
EXECUTIVE OVERVIEW OF RESULTS — 2004
Results for the fiscal year ended October 31, 2004 were driven by record high chicken market prices, although feed ingredient costs were also higher than the fiscal year ended October 31, 2003. Higher chicken prices also more than offset higher advertising costs incurred as part of the Company’s fiscal 2004 advertising and marketing program and a reduction in settlement proceeds from vitamin and methionine suppliers.
RESULTS OF OPERATIONS
Fiscal 2004 Compared to Fiscal 2003
For fiscal 2004 the Company’s net sales were a record $1.1 billion, an increase of $180.1 million, or 20.6%, over the previous fiscal year’s record net sales of $872.2 million. The increase in the Company’s net sales was due to favorable market prices of the Company’s poultry products and an increase in the pounds of poultry products sold of 6.1%. As measured by a simplemathematical average of the Georgia dock pricenet return on net sales for whole chickens, prices increased 15.0% duringthe two years in the performance period. Net return on net sales is computed by dividing net income by net sales, as both numbers are reported on our audited financial statements for the year.
Since the inception of the Stock Incentive Plan, we have granted 16 cycles of performance shares, one for each of the fiscal 2004 as comparedyears from 2006 through 2021. Only ten of those cycles of performance shares have been earned. Pending the Committee’s formal determination, the fiscal 2020 shares were earned at the
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levels shown in the table below. They are subject to an additional
one-year
holding period before they are paid out. The fiscal 2003. Also, average2021 awards are the only other performance share cycle currently in place under our performance share plan, and the payout on those awards, if achieved in accordance with their terms, will occur at the end of fiscal 2023.
Performance Shares Earned
       
Performance Criteria
    
       
Threshold

(50% Payout)
  
Target

(100% Payout)
  
Maximum

(200% Payout)
  
Actual Company

Performance
 
Performance
Period
  
Payout

Date
   
ROE
  
ROS
  
ROE
  
ROS
  
ROE
  
ROS
  
ROE
  
ROS
 
11/1/19-10/31/21
   10/31/2022    8.3%   2.1%   15.2%   4.5%   23.8%   7.0%   14.9%   5.1% 
The following table shows the number of shares earned by each named executive officer according to the percentage payouts reflected in the table above.
   
Performance Period

Ending 10/31/2021
 
Position
  
Target Award (#)
1
   
Shares

Earned (#)
2
 
CEO   17,750    19,832 
President   4,750    5,308 
CFO   3,750    4,191 
Secretary   750    839 
LOGO
(1)50 percent of the target amount of shares is allocated to the ROE component and 50 percent is allocated to the ROS component.
(2)This number is obtained by multiplying the percentage of the payout achieved for each of the two components of an award and adding the result. For example, the President’s award was calculated as follows: ROE component: (100% x 1,187.5) + (95.9% x 1,187.5) = 2,327; ROS component: (100% x 2,375) + (25.5% x 2,375) = 2,981; 2,327 + 2,981 = 5,308.
Management Share Purchase Rights
Under our Management Share Purchase Plan, executive officers and other key employees may elect to reduce their annual base salaries by up to 15 percent and their bonuses earned under the Bonus Award Program by up to 75 percent and instead receive those amounts in the form of restricted stock at the current market prices for boneless breast, leg quarters and wingsprice. The Company matches 25 percent of the employee’s contribution to the plan to grant additional shares. The shares purchased or granted through the plan generally vest on the third anniversary of their acquisition by the participant. Recipients of the shares purchased or granted have all showed considerable strength during fiscal 2004 as compared to fiscal 2003 and increased 22.0%, 41.0% and 65.2%, respectively. Although these same market prices were higherthe rights of a stockholder during the fourth quarterrestricted period. If the shares fail to vest, any dividends paid on the Company matched shares must be returned to us. In fiscal 2021, none of fiscal 2004the named executive officers participated in the plan. You can find more information about the plan in the narrative accompanying the Grant of Plan-Based Awards table, below.
In-Service
and Post-Employment Benefits
Employee Stock Ownership Plan
As mentioned above, we believe strongly in aligning the interests of management with those of our stockholders. We were among the first in our industry to adopt an Employee Stock Ownership Plan, and each of the named executive officers participates in the plan on the same basis as comparedall of our other employees. Participants are automatically enrolled in the plan after one year of service and become fully vested after six years. We contribute funds to the fourth quarterplan in most profitable years, and for the 2021 fiscal year we contributed $20 million to the plan.
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401(k) Retirement Plan
We sponsor a 401(k) retirement plan, and participants may contribute to the plan after 90 days of service. The named executive officers participate on the same basis as all other employees. Eligible employees may contribute up to 15 percent of their salary to the plan through payroll deductions. We began matching employee contributions to the plan in 2000, and for employees with one year of service, we match 100 percent of an employee’s contribution up to 3 percent of his or her salary, and 50 percent of such contribution that exceeds 3 percent but does not exceed 5 percent of his or her salary. Sanderson Farms common stock is not an investment option under the plan.
Other Benefit Plans
We provide other benefits such as medical, dental, and long-term/short-term disability (up to 66 2/3 percent of salary not exceeding $180,000 per year in long-term disability payments) coverage, as well as vacation and other paid holidays. Beginning with our 2001 fiscal 2003,year, we began paying premiums on term life insurance policies for all employees. The death benefit under these policies depends on the amount of the employee’s annual salary, up to a maximum benefit of $100,000 and a minimum of $50,000 for salaried employees. These benefit programs are comparable to those provided at other large companies. They are designed to provide certain basic quality of life benefits and protections to our employees and at the same time enhance our attractiveness as an employer.
In 2008, the Committee adopted a Supplemental Disability Plan for the CEO. The plan provides that if the CEO becomes disabled as defined in our long term disability plan for all our salaried employees, he will receive a monthly benefit equal to 66 2/3 percent of his salary beginning one year from the date of disability and continuing for 12 months. (Before age 70, payments would have continued until the date that he received five years of payments or his 70th birthday, whichever occurred first.) This is the same benefit that is provided to all participants in our long term disability plan who are 60 years or older. Participants who become disabled before their 60th birthday would receive the benefit until they reach age 65. The Committee adopted the supplemental plan because our long term disability plan places an annual dollar limit on the benefit that participants can receive, which would have resulted, if the CEO became disabled at the time the supplemental plan was adopted, in a benefit to him of only 26 percent of his then current salary. The employment agreements that the Company entered into with the President and CFO made those officers participants in the supplemental plan.
The Company’s portion of the cost of health benefits provided in the 2021 fiscal year for the named executive officers was as follows:
2021 Health Benefits
Officer
  
Cost to Company of Active

Health Benefits
 
CEO  $10,382 
President  $10,382 
CFO  $10,382 
Secretary  $10,382 
All employees may elect to continue participating in our health benefit plan following their retirement, but they must pay 100 percent of the premium cost.
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In rare instances, we have continued, because of the applicable circumstances, to pay the base salaries of certain key employees for a short period of time after their deaths. None of those employees served at any time as an executive officer of Sanderson Farms. However, our employment agreements with the CEO, President, and CFO provide that we will continue to make base salary payments to their designated beneficiary or estate for a period of one year from the date of the officer’s death.
The 401(k) contribution, health plan, and life insurance premiums, as well as dividends paid on restricted stock and matching charitable contributions, each as disclosed in the proxy statement, are ratified by the Committee in January of the year following the year for which they were less favorable duringmade. The Board of Directors approves the fourth quarterannual ESOP contribution, if any, in October of fiscal 2004 thaneach year.
Perquisites
We provide certain perquisites to our executives, which consist primarily of personal use of our company aircraft by the CEO and his immediate family. This perquisite provides flexibility to the CEO and increases travel efficiencies, allowing more productive use of executive time, in turn allowing greater focus on Sanderson Farms-related activities. The Company also permits the other named executive officers and other employees to use Company aircraft in times of family or other emergencies and to travel for personal reasons, space permitting, on planned Company flights. In some cases, the Company experiencedalso permits and pays for the first three quartersnamed executive officers’ spouses to accompany them on the corporate aircraft. The amounts of fiscal 2004. The increasethese perquisites are ratified by the Committee in January of the year following payment. More detail on our perquisites may be found in the poundsnarrative following the Summary Compensation Table, below.
Compensation Recoupment Policy
In October 2010, the Committee adopted a policy requiring the Board or the Committee to seek to recoup incentive-based compensation paid to our directors, executive officers or other personnel whenever required by law or the rules of poultry products sold resulted primarily from an increasethe NASDAQ Stock Market. In addition, the Board or the Committee, in the average live weight of chickens sold during fiscal 2004 as compared to fiscal 2003. Net sales of prepared food products decreased $6.2 million or 5.5%,its discretion, may determine, as a result of a decreaserestatement of our financial statements or misconduct that adversely affects us by a member of our management executive committee or a director, to take such actions it deems necessary or appropriate and in our best interests with respect to the executive committee member, or the director in the poundscase of prepared food products solddirector misconduct, to address the restatement or misconduct. Such actions may include, to the extent permitted by law and our charter and
by-laws:
Requiring the executive or director to repay some or all of 6.3%.any incentive compensation paid, including bonus, performance shares, or restricted stock;
Requiring the executive or director to repay gains realized on the exercise of stock options or the sale of vested stock;
Cancelling all or part of the executive’s or director’s incentive awards;
Adjusting the executive’s or director’s future cash or
non-cash
compensation or fees, as applicable;
Terminating the executive or seeking to remove the director; or
Initiating legal action against the executive or director.
The Company’s costrecoupment policy is in addition to the authority under the Stock Incentive Plan to cancel awards or recoup the value of sales were $842.3 million during fiscal 2004 as compared to $741.4 million during fiscal 2003. Cost of sales of the Company’s poultry products during fiscal 2004 were $734.2 million as compared to $638.9 million during the previous fiscal year, an increase of $95.3 million or 14.2%. The increaseshares in the Company’s costevent of salesdetrimental activity by the participant.
Stock Ownership Guidelines; Hedging and Pledging
In October 2004, the Committee recommended and the Board of poultry products resulted fromDirectors adopted
non-binding
stock ownership guidelines for our management, in an increaseeffort to encourage increased ownership of our company by key employees and directors. Willis Towers Watson has periodically reviewed the guidelines and in 2013, at Willis Towers Watson’s recommendation, the costCommittee determined to recalculate the
29
Table of feed grains,Contents
guidelines for officers using fiscal 2014 salaries. We believe that these guidelines are reasonable to achieve and will be a long-term benefit to a lesser

5

extent, an increase inall of our stockholders by helping to align management and stockholder interests. They also encourage officers and directors to hold purchased shares and vested option shares, restricted stock, and performance shares, as applicable, for long-term investment. “Stock ownership” includes stock owned directly, indirectly through the pounds of poultry products sold of 6.1% during fiscal 2004 as compared to fiscal 2003. In addition, during fiscal 2004 and fiscal 2003 the Company’s cost of sales were reduced by $0.3 million and $12.4 million, respectively, from proceeds related to lawsuits against vitamin and methionine suppliers.
The Company’s cost of corn and soybean meal, the Company’s primary feed ingredients, increased approximately 6.8% and 52.1% for the fiscal year ended October 31, 2004 as compared to the fiscal year ended October 31, 2003. Cost of sales of prepared food products increased $5.6 million401(k) plan or 5.5% due to an increase in poultry prices. The prepared foods operation purchases most of its chicken from the Company’s poultry operations, and such chicken is a major component of its raw materials.
Selling, general and administrative expenses for fiscal 2004 were $59.8 million as compared to $40.3 million, an increase of $19.5 million. This increase is primarily due to the cost of the Company’s advertising program and increased contributions to the Employee Stock Ownership Plan, (“ ESOP”).restricted stock, and earned performance shares. The Company’s fiscal 2004 advertising program beganguidelines are based on a multiple of base salary and director annual retainer fees, and are set forth in January 2004 and cost the Company approximately $14.0 million during fiscal 2004. The Company continued and expanded this program with new ads and in new markets during fiscal 2005. During fiscal 2004 the Company contributed $7.0 million to the ESOP, an increasetable below. As of $3.0 million as compared to the contribution the Company made during fiscal 2003 of $4.0 million.
The Company’s operating income for theour 2021 fiscal year, ended October 31, 2004 was a record $150.1 million as compared to $90.5 million duringeach named executive officer and all except two of our newest directors had exceeded the fiscal year ended October 31, 2003. This increase in the Company’s operating income of $59.6 million resulted from the favorable market for poultry products and continued strong operating performance. These factors enabled the Company to more than offset increased feed costs and the benefit received from additional settlement proceeds received during fiscal 2003 as compared to fiscal 2004.guidelines below.
During fiscal 2004, interest expense was $1.6 million as compared to $2.5 million during fiscal 2003. This decrease reflects lower outstanding debt during fiscal 2004 as compared to fiscal 2003. The Company’s total debt at October 31, 2004 was $15.3 as compared to $26.0 million as of October 31, 2003.
Stock Ownership Guidelines
The Company’s effective tax rate during fiscal 2004 and fiscal 2003 was 38.75% and 38.68%, respectively.
Position
  
Base Salary/

Average Annual Retainer
   
Desired
Ownership
Multiple
  
Share
Guideline
 
CEO  $1,362,984   6   125,3511 
President  $655,004   4   40,7721 
CFO  $559,832   4   34,9371 
Secretary  $214,992   3   9,8861 
Director  $25,000   8   4,000 
Net income for the fiscal year ended October 31, 2004 was $91.4 million, or $4.57 per diluted share, compared with net income of $54.1 million, or $2.75 per diluted share for the fiscal year ended October 31, 2003. During fiscal 2004, the Company recognized $177,000, net of income taxes,LOGO
(1)In recalculating ownership guidelines in 2013 for the named executive officers, the Committee used $65.24 per share, which was the approximate share price at the time.
It is Sanderson Farms’ share in the partial settlement of lawsuits against vitaminpolicy that our directors and methionine suppliers for overcharges, compared with total similar recoveries of $7.6 million, net of income taxes, or $0.38 per diluted share, during fiscal 2003.
Liquidity and Capital Resources
The Company’s working capital at October 31, 2005 was $107.6 million and its current ratio was 2.4 to 1. This compares to working capital of $150.6 million and a current ratio of 3.3 to 1 as of October 31, 2004. During fiscal 2005 the Company spent approximately $128.1 million on planned capital projects, which include $92.3 million on the new complex in south Georgia and $15.1 million on the new general offices in Laurel, Mississippi.
On January 29, 2004, the Company announced a three-for-two stock split to be effected as a 50% stock dividend. The new shares were distributed on February 26, 2004, to stockholders of record as of close of business on February 10, 2004. Share and per share data have been adjusted to reflect this stock split.
The Company’s capital budget for fiscal 2006 is approximately $73.4 million, and will be funded by cash on hand, internally generated working capital and cash flows from operations. If needed, the Company has a $200.0 million revolving line of credit available. The $73.4 million fiscal 2006 capital budget includes approximately $7.9 million in operating leases and $10.0 million to complete construction of the new corporate office building in Laurel, Mississippi. In addition, the fiscal 2006 capital budget includes $22.4 million to build a feed mill in Collins, Mississippi, complete the conversion of the Collins, Mississippi processing facility to a big bird deboning plant,

6

expand the Collins, Mississippi hatchery and $4.8 million to improve operating efficiencies at the Company’s prepared foods plant in Jackson, Mississippi. Without operating leases, the new office building and capital investment in Collins and Jackson, Mississippi, the Company’s capital budget for fiscal 2006 would be $28.3 million.
On November 17, 2005, the Company entered into a new revolving credit facility. The new facility, among other things, increased allowed capital expenditures, changed the net worth covenant to reflect the Company’s new dividend rate, extended the committed revolver by five years rather than the usual three year extension, reduced the interest rate charged on amounts outstanding, and removed a letter of credit commitment related to certain industrial development bonds.
On April 26, 2004, the Company gave notice to U.S. Bank National Association, as trustee under the Indenture of Trust dated as of November 16, 1995, related to the Robinson County Industrial Development Corporation Variable Rate Demand Industrial Development Revenue Bonds (Sanderson Farms, Inc. Project) Series 1995 (“Bonds”), of the Company’s intent to exercise its right to call all of the Bonds for optional redemption on June 1, 2004 (the “Redemption Date”) at a redemption price of 100% of the principal amount of the Bonds plus accrued interest to the Redemption Date. The Trustee redeemed the Bonds on June 1, 2004.
The Company regularly evaluates both internal and external growth opportunities, including acquisition opportunities and the possible construction of new production assets, and conducts due diligence activities in connection with such opportunities. The cost and terms of any financing to be raised in conjunction with any growth opportunity,employees, including the Company’s ability to raise debtnamed executive officers, not buy and sell or equity capital on termssell and at costs satisfactory to the Company, and the effect of such opportunities on the Company’s balance sheet, are critical considerations in any such evaluation.
Contractual Obligations
Obligations under long-term debt, long-term capital leases, non-cancelable operating leases, purchase obligations relating to feed grains, other feed ingredients and packaging supplies and claims payable relating to the Company’s workers’ compensation insurance policy at October 31, 2005 were as follows (in thousands):
                     
  Payments Due By Period
          1 - 3 3 - 5 More than
Contractual Obligations Total Less than 1 Year Years Years 5 Years
Long-term debt $8,597  $4,131  $4,283  $183  $0 
Capital lease obligations  2,320   275   605   680   760 
Operating leases  19,032   5,643   8,518   4,793   78 
Purchase obligations:                    
Feed grains, feed ingredients and packaging supplies  155,314   155,314   0   0   0 
Construction contracts  18,127   18,127   0   0   0 
Claims payable  6,611   3,711   2,900   0   0 
                     
Total $210,001  $187,201  $16,306  $5,656  $838 
                     
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting standards generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and assumptions, and the differences could be material.
Allowance for Doubtful Accounts

7

In the normal course of business, the Company extends credit to its customersbuy Sanderson Farms stock on a short-term basis. Although credit risks associated withbasis (i.e., shares must be held for a minimum of six months). Employees and directors may not purchase Sanderson Farms stock on margin, or hold Company securities in a margin account. Employees and directors may not pledge Company securities as collateral for a loan, although an employee or director can request a waiver of this policy where he or she can clearly demonstrate the financial capacity to repay the loan without resort to the pledged securities.
Our insider trading policy, which applies to officers, directors, the employees who participate in our customers are considered minimal,Stock Incentive Plan and any other personnel who receive or see our monthly financial statements, prohibits hedging transactions. The hedging prohibition in the Company routinely reviews its accounts receivable balances and makes provisions for probable doubtful accounts based onpolicy is excerpted below:
Hedging or monetization transactions can permit an individual assessment ofto hedge against or offset a customer’s credit quality as well as subjective factors and trends, including the aging of receivable balances. In circumstances where management is aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve is recorded to reduce the receivable to the amount expected to be collected. If circumstances change (i.e., higher than expected defaults or an unexpected material adverse change in a major customer’s ability to meet its financial obligations to us), our estimates of the recoverability of amounts due us could be reduced by a material amount, and the allowance for doubtful accounts and related bad debt expense would increase by the same amount.
Hurricane Katrina
The Company has recorded insurance recoveries related to Hurricane Katrina when realization of the claim for recovery has been deemed probable and only to the extent the loss has been recorded in the financial statements. Any possible gain that may result from recoveries under the Company’s insurance policies will be recognized when the insurance proceeds are received.
Hurricane Katrina struck Mississippi and Louisiana on August 29, 2005, and resulted in significant damage to South Mississippi and Southeastern Louisiana. Although the Company experienced no significant damage to any of its facilities in the affected areas, the Company’s operations throughout the region were affected by the loss of electricity to the Company’s facilities and to the facilities of the Company’s independent contract growers. Hurricane Katrina also destroyed approximately three million live chickens and approximately 5.2 million hatching eggs were either lost or destroyed and were not placed as broiler chicks. In addition, Hurricane Katrina destroyed approximately $2.5 million of processed inventory in independent contract cold storage facilities, as well as a lesser amount of processed product and other inventory in Company owned facilities.
The Company’s financial statements for the fourth fiscal quarter and fiscal year ended October 31, 2005, reflect a receivable from the Company’s insurance carriers of $14.9 million for property damage and expenses incurred resulting from Hurricane Katrina. The Company’s total insurance claim through October 31, 2005, for property damage, expenses incurred and lost profits is approximately $20.0 million, net of the applicable deductible of $2,750,000. During the fourth quarter of fiscal 2005, operating income was reduced by unrecognized lost profits and expenses of approximately $5.1 million. These unrecognized lost profits and expenses were the direct result of the effect of Hurricane Katrina and the Company’s efforts to minimize the potential loss from the hurricane.
Of the $5.1 million of unrecognized lost profits and expenses, $1.5 million was attributable to additional costs to compensate the Company’s contract poultry producers for the loss of revenue they incurred because of decreased efficiencies resulting from the storm. These payments to the Company’s contract poultry producers were included in cost of sales on the Company’s income statement for the year ended October 31, 2005. While the Company’s management believes these additional payments to contract poultry producers are covered by the terms of the its insurance policies, it cannot deem such recovery as probable, and therefore did not recognize any possible reimbursement of these costs in its financial statements. The Company will recognize any reimbursements of these costs if and when they are received, and any such reimbursements will be classified in the period received as other income, with appropriate disclosures of the nature of such amount.
Also included in the $5.1 million is $3.6 million in lost profits. For several weeks after Hurricane Katrina, the Company was unable to sustain the workforce required to produce higher margin products normally sold by the Company, and therefore suffered $2.4 million in lost profits due to a less profitable product mix during the weeks immediately following the storm. The reasons for these human resource issues included the unavailability of fuel, damage to employees’ personal property and impassable roads due to down trees and power lines. In addition, the Company lost profits of $1.2 million that would have been realized on sales of live inventories destroyed by the hurricane. The Company has not recognized these lost profits as of December 31, 2005, but will recognize these amounts as other income when and if it receives reimbursement from the Company’s insurance carriers, with appropriate disclosures of the nature of such amounts.
Inventories
Processed food and poultry inventories and inventories of feed, eggs, medication and packaging supplies are stated at the lower of cost (first-in, first-out method) or market. If market prices for poultry or feed grains move substantially lower, the Company would record adjustments to write down the carrying values of processed poultry and feed inventories to fair market value, which would increase the Company’s costs of sales.
Live poultry inventories of broilers are stated at the lower of cost or market and breeders at cost less accumulated amortization. The cost associated with broiler inventories, consisting principally of chicks, feed, medicine and payments to the growers who raise the chicks for us, are accumulated during the growing period. The cost associated with breeder inventories, consisting principally of breeder chicks, feed, medicine and grower payments are accumulated during the growing period. Capitalized breeder costs are then amortized over nine months using the

8

straight-line method. Mortality of broilers and breeders is charged to cost of sales as incurred. If market prices for chicks, feed or medicine or if grower payments increase (or decrease) during the period, the Company could have an increase (or decrease)decline in the market value of its inventory as well as an increase (or decrease) in costs of sales. Shoulda security, while at the Company decide that the nine month amortization period used to amortize the breeder costs is no longer appropriate as a result of operational changes, a shorter (or longer) amortization period could increase (or decrease) the costs of sales recorded in future periods. High mortality from disease or extreme temperatures would result in abnormal charges to cost of sales to write-down live poultry inventories.
Long-Lived Assets
Depreciable long-lived assets are primarily comprised of buildings and machinery and equipment. Depreciation is provided by the straight-line method over the estimated useful lives, which are 15 to 39 years for buildings and 3 to 12 years for machinery and equipment. An increase or decrease in the estimated useful lives would result in changes to depreciation expense.
The Company continually reevaluates the carrying value of its long-lived assets for events or changes in circumstances that indicate that the carrying value may not be recoverable. As part of this reevaluation, the Company estimates the future cash flows expected to result from the usesame time eliminating much of the asset and its eventual disposal. If the sum of the expected future cash flows (undiscounted and withoutindividual’s economic interest charges) is less than the carrying amount of the asset, an impairment loss is recognized to reduce the carryingin any rise in value of the long-lived asset tohedged securities. Because hedging transactions can present the estimated fairappearance of a bet against the Company, hedging or monetization transactions, whether direct or indirect, involving the Company’s securities are prohibited, regardless of whether the Insider possesses material,
non-public
information.
Transactions involving derivative securities, whether or not entered into for hedging or monetization purposes, may also create the appearance of impropriety in the event of any unusual activity in the underlying equity security. Accordingly, transactions involving Company-based derivative securities are prohibited, whether or not you are in possession of material,
non-public
information. Derivative securities are options, warrants, stock appreciation rights, convertible notes or similar rights whose value is derived from the value of the asset. If the Company’s assumptions with respectan equity security, such as Company common stock. Derivative securities include, but are not limited to, the future expected cash flows associated with the use of long-lived assets currently recorded change, then the Company’s determination
pre-paid
variable forward contracts, equity swaps, exchange funds, Company-based option contracts, straddles and collars. Transactions in debt that no impairment charges are necessary may change and result in the Company recording an impairment charge in a future period.
Accrued Self Insurance
Insurance expense for workers’ compensation benefits and employee-related health care benefits are estimated using historical experience and actuarial estimates. Stop-loss coverage is maintained with third party insurers to limit the Company’s total exposure. Management regularly reviews the assumptions used to recognize periodic expenses. If historical experience proves not to be a good indicator of future expenses, if management were to use different actuarial assumptions, or if there is a negative trend in the Company’s claims history, there could be a significant increase (or decrease) in cost of sales depending on whether these expenses increased or decreased, respectively.
Income Taxes
The Company determines its effective tax rate by estimating its permanent differences resulting from differing treatment of items for financial and income tax purposes. The Company is periodically audited by taxing authorities and considers any adjustments made as a result of the audits in computing the Company’s income tax expense. Any audit adjustments affecting permanent differences could have an impact on the Company’s effective tax rate.
Contingencies
The Company is a party to a number of legal proceedings and recognizes the costs of legal defense in the periods incurred. A determination of the amount of reserves required, if any, for these matters is made after considerable analysis of each individual case. Because the outcome of these cases cannot be determined with any certainty, no estimate of the possible loss or range of loss resulting from the cases can be made. At this time, the Company has not accrued any reserve for any of these matters. Future reserves may be required if losses are deemed probable due to changesconvertible into Company common stock would also constitute a transaction in the Company’s assumptions, the effectivenessderivative securities prohibited by this Policy.
30
Table of legal strategies, or other factors beyond the Company’s control. Future results of operations may be materially affected by the creation of or changes to reserves or by accruals of losses to reflect any adverse determinations of these legal proceedings.Contents
New
Accounting PronouncementsConsiderations
In December 2004, the FASB issued SFASfirst quarter of our 2006 fiscal year, we adopted Revised Statement of Financial Accounting Standards No. 123, (revised 2004), “Share-Based Payment,” which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No.Payment” (FAS 123(R) supersedes APB

9

Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the approach in Statement 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No.). FAS 123(R) requires all share-based payments to employees, including grants of employee stock options, restricted stock and performance shares, to be recognized in theour income statement based on their fair values. Pro forma disclosure is no longer an alternative. The Company is required to adopt SFAS No.Before the adoption of FAS 123(R) in the first quarter of fiscal 2006.
As permitted by SFAS No. 123, the Company currently accounts, we accounted for share-based payments to employees using APB 25’san intrinsic value method and, as such,therefore, we generally recognizesrecognized no compensation cost for employee stock options. Based upon the provisions of FAS 123(R), we are required to accrue stock-based compensation expense as it is earned. This change in accounting rules has influenced the Committee to make restricted stock and performance share awards in lieu of option awards. Other factors that have made restricted stock and performance share awards more attractive than option awards include their generally smaller dilutive effect and the performance incentive they provide even in times when our stock price is depressed.
Evaluation of Executive Performance
In evaluating the performance of the individual named executive officers before setting or adjusting compensation, the Committee and the Board of Directors do not rely solely on predetermined formulas. Rather, they focus on those officers’ individual objectives. The impactCommittee evaluates the CEO’s performance in consultation with the Board, and it evaluates the other named executive officers with the input of adoptionthe CEO.
In 2020, the Committee based its decisions for fiscal 2021 compensation on the assessment of SFAS No. 123(R) cannot be predicted at this time because it will depend on levelsthe Company’s fiscal 2020 performance and the named executive officers’ objectives and strategies, as follows:
Without question, fiscal 2020 was an unprecedented year for our company, our nation, and the world. The
COVID-19
pandemic presented us with extraordinary challenges we had never before faced in our company’s history. Violence against African-Americans, who make up a majority of share-based payments grantedour workforce, resulting social and racial unrest, a global recession, significant unemployment in our country, and market disruption in the future. However,poultry industry added to the extremely challenging conditions. Nevertheless, our named executive officers did an outstanding job of protecting our people and managing our business through these trying times.
Demand for chicken products sold to food service customers was under significant pressure for most of the year because of social distancing restrictions and temporary closures of restaurants and food service establishments and the steep decline in the number of consumers dining outside their homes during the pandemic. On the other hand, demand from our retail grocery store customers surged as consumers prepared more meals at home. Our management team reacted to these conditions quickly, leveraging the flexibility of our operations to increase production for our customers experiencing higher demand and reducing our volume of products sold to customer markets under pressure.
Indeed, our operations performed well during fiscal 2020. Despite production cuts we implemented because of the pandemic at our plants servicing food service customers, we had record-high revenues of $3.56 billion and record volumes with 4.81 billion pounds of poultry products sold for the year.
We reached full production at our newest processing facility in Tyler, Texas, which processed 60.5 million head of chickens during the year, or about 9.2 percent of the total head we processed in fiscal 2020, and sold approximately 388.0 million pounds of poultry products, or 8.1 percent of our total pounds sold.
31
Table of Contents
We benefitted from outstanding operating efficiencies at all of our processing plants, making good progress in meeting our aggressive operational goals for the year.
Our sales team did an outstanding job of placing new business during the year, especially in the surging retail grocery store customer market.
We made significant progress executing our strategic internal growth plan by evaluating a potential site for a new poultry complex.
We paid $31.1 million in dividends to our stockholders and ended the year with a solid balance sheet reflecting little debt, $1.85 billion in assets, stockholders’ equity of $1.42 billion, and net working capital of $354.0 million as of October 31, 2020. Our strong financial position allowed the Board of Directors to approve an increase in our dividend rate to $0.44 per share, for an annual dividend rate of $1.76 per share, and
re-authorize
and increase our share repurchase program.
For the third year in a row, challenging market conditions prevented us from meeting the minimum criteria for bonuses to be paid under our cash bonus plan. Additionally, conditions caused our fiscal 2019 performance shares not to be earned. Because of our 2020 results, our CEO once again declined to be considered for a salary increase, but he recommended that the President and CFO receive a modest salary increase of 1.25 percent in recognition of their outstanding performance managing the Company during the year. Additionally, the CFO recommended that the Secretary receive a 3.0 percent salary increase to bring his salary closer to that of his peers. The Committee adopted SFAS No. 123(R)these recommendations.
The Committee awarded long-term equity awards to incentivize future performance.
The Committee considered our three-year total shareholder return, which approximated the 25th percentile of the peer group for the CEO and CFO positions, and the realizable pay for those positions, which was in priorthe 70th percentile for the CEO position and the 45th percentile for CFO position.
Elements of compensation paid for the 2021 fiscal year are set forth in the Summary Compensation Table, below.
Director Compensation
The Nominating and Governance Committee is charged with recommending all cash and
non-cash
compensation of our
non-employee
directors. Willis Towers Watson reviews and reassesses our director pay periodically and makes recommendations to the Nominating and Governance Committee.
Our
non-employee
directors received cash fees for their service on the Board and its committees in fiscal 2021 as set forth below:
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Table of Contents
Director Cash Fees
   
Amount
 
Annual Stipend  $25,000 
Each Board of Directors meeting attended in person  $ 7,5001 
Each telephonic Board of Directors or Board committee meeting attended  $ 1,0002 
Each committee meeting attended in person, not in conjunction with a Board meeting  $6,000 
Received annually by Audit Committee Chair  $15,000 
Received annually by Compensation Committee Chair  $12,500 
Received annually by Nominating and Governance Committee Chair  $10,000 
Received annually by the Lead Independent Director  $25,000 
LOGO
(1)
During the
COVID-19
pandemic, regular Board meetings held virtually were treated as
“in-person”
meetings.
(2)We also pay this fee to directors who join telephonic committee meetings by invitation, even though they are not committee members. If a telephonic committee meeting is held in conjunction with a telephonic full Board meeting, only one $1,000 fee is paid for directors who participate in both calls.
The Nominating and Governance Committee also retained Willis Towers Watson to assess whether it was appropriate to pay a $12,000 supplement to our Lead Independent Director and each of our committee chairs in light of their participation in our stockholder engagement program in 2021. Willis Towers Watson determined the proposed amount, which aligned with our fees paid for committee meetings not held in conjunction with a Board meeting, was reasonable. The Board also approved, on Willis Towers Watson’s recommendation, a payment for 2021 of $18,000 to each member of the special DEI committee and an additional payment for the DEI Committee chair of $12,000.
In fiscal 2021, each
non-employee
director received an annual grant of restricted stock having a dollar value of $150,000. The annual grants have staggered one, two or three-year vesting periods, corresponding to the impactexpiration of a director’s three-year term. These awards combined with the cash fees achieve an approximately
60-40 percent
equity and cash pay mix.
The Nominating and Governance Committee recommended and the Board has approved an annual allowance of up to $10,000 per outside director to attend continuing education seminars related to corporate board of directors service and other topics relevant to the Company. The chair of our Nominating and Governance Committee must
pre-approve
the particular seminar requested by a director for reimbursement.
We also pay or reimburse directors for reasonable travel and related expenses they incur to attend Board or committee meetings and other Company events in which directors participate, like our annual investor day.
Non-employee
directors may participate in the Management Share Purchase Plan by reducing their director fees by up to 100 percent and instead receiving those amounts in the form of restricted shares of Sanderson Farms common stock. The Company matches 25 percent of the director’s contribution to grant additional restricted shares. Restricted shares held through the plan generally vest on the third anniversary of their acquisition by the director, as long as, with respect to the matching portion, he or she has served on the Board continuously through that date.
Non-employee
directors may also participate in the Company’s medical plan, but they must pay 100 percent of the premium cost with
after-tax
dollars.
More information about the actual compensation paid to
non-employee
directors in 2021 is set forth in the Director Compensation table, below.
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Table of Contents
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the foregoing Compensation Discussion and Analysis. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in our annual report on Form
10-K
for fiscal year 2021.
                            The Compensation Committee:
David BarksdaleSuzanne T. Mestayer
Toni D. CooleySonia Peréz (Vice Chair)
Beverly Wade HoganGail Jones Pittman (Chair)
Phil K. Livingston
2021 CEO Pay Ratio
In accordance with SEC rules, for 2021, we determined the annual total compensation of our median compensated employee and present a comparison of that standard would have approximatedannual total compensation to the impactannual total compensation of SFAS No. 123 as describedour Chairman and CEO, Joe F. Sanderson, Jr.
The 2021 annual total compensation of Mr. Sanderson was $6,895,511.
The 2021 annual total compensation of our median compensated employee was $39,334.
Accordingly, the ratio of Mr. Sanderson’s annual total compensation to the annual total compensation of our median compensated employee for 2021 was 175 to 1.
This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of the SEC’s Regulation
S-K.
Determining our Employee Population
To calculate this pay ratio, we began by identifying a median compensated employee for whom 2021 total compensation could be ascertained. We determined a median compensated employee by collecting compensation data for all employees. All of our employees currently reside in the disclosureUnited States. We excluded from this population independent contractors and other individuals classified as
non-employees
in their respective jurisdictions based on our employment and payroll tax records. In total, we collected compensation data for approximately 17,713 full-time and part-time employees residing in the United States.
Determining the Median Compensated Employee
To identify our median compensated employee, we used “Total Cash Pay” as our compensation measure, which, for these purposes, equaled the amount of pro forma net incomebase salary and/or wages, plus any overtime, vacation pay, and earnings per sharecash bonuses. We identified the median compensated employee from our employee population described above as of October 31, 2021, using Total Cash Pay earned and paid from November 1, 2020 through October 31, 2021. We did not annualize Total Cash Pay for any employees and did not make any
cost-of-living
adjustments.
Our “median compensated employee” is an individual who earned Total Cash Pay at the midpoint, that is, the point at which half of the employee population other than the CEO earned more Total Cash Pay and half of the employee population earned less Total Cash Pay.
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Table of Contents
Determining 2021 Annual Total Compensation
We determined 2021 annual total compensation for our median compensated employee by obtaining compensation data for this employee for 2021 consistent with the methodology we use to calculate total compensation for 2021 as it appears in Notethe 2021 Summary Compensation Table. Accordingly, it includes Total Cash Pay earned and paid from November 1, 2020, through October 31, 2021, 401(k) matching contributions, ESOP contributions and term life insurance premiums paid by the Company. In addition, for purposes of calculating the CEO pay ratio, SEC rules permit us to our audited financial statements. SFAS No. 123(R) also requires theinclude in annual total compensation any compensation and benefits of tax deductions in excess of recognized compensation costmade available to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. Whileemployees broadly. We elected to include amounts representing medical insurance premiums paid by the Company cannot estimate what those amounts will be in determining the future (because they depend on, among other things, when employees exercise stock options),2021 annual total compensation of our median employee.
We determined 2021 annual total compensation for Mr. Sanderson using the income tax benefits of such deductions were $966,000 and $3,726,000amount reported in our 2021 Summary Compensation Table, increased to include medical insurance premiums paid by the Company.
Executive Compensation Tables
The table below includes information about compensation paid to or earned by our named executive officers for theour fiscal years ended October 31, 20052019, 2020 and 2004, respectively. Also,2021.
Summary Compensation Table
Name and
Principal Position
  
Year
   
Salary
($)
1
   
Bonus
($)
2
   
Stock
Awards
3
($)
   
Option
Awards
($)
   
Non-Equity
Incentive Plan
Compensation
4
($)
   
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
   
All Other
Compensation
($)
   
Total
($)
 
Joe F. Sanderson, Jr.,
Chairman of the Board of Directors and Chief
Executive Officer
   2021    1,518,300    —      2,623,385    —      2,530,551    —      212,893    6,885,129 
   2020    1,518,300    —      2,835,740    —      0    —      178,453    4,532,493 
   2019    1,518,300    —      2,401,230    —      0    —      228,364    4,147,894 
Lampkin Butts,
President
   2021    761,232    —      735,828    —      1,014,996      81,760    2,593,816 
   2020    751,836    —      758,860    —      0    —      91,118    1,601,814 
   2019    740,772    —      638,625    —      0    —      62,823    1,442,220 
Mike Cockrell,
Treasurer, Chief Financial Officer and Chief Legal Officer
   2021    652,320    —      575,865    —      761,055    —      89,373    2,078,613 
   2020    644,268    —      599,100    —      0    —      52,618    1,295,986 
   2019    634,752    —      510,900    —      0    —      71,818    1,217,470 
Tim Rigney,
Secretary and Controller
   2021    349,944    41,993    169,560    —      233,301    —      31,289    826,087 
   2020    339,756    —      119,820    —      0    —      16,264    475,840 
   2019    334,740    —      94,517    —      0    —      18,353    447,610 
LOGO
(1)Includes, for Mr. Rigney, $800 for fiscal 2019, $0 for fiscal 2020, and $0 for fiscal 2021, allocated to the Company’s Management Share Purchase Plan, as described in the Grant of Plan-Based Awards table, below.
(2)Consists of a discretionary bonus paid to Mr. Rigney for work in connection with Company’s entry on August 8, 2021 into a definitive agreement to be acquired by a joint venture between Cargill, Incorporated and Continental Grain Company.
(3)This column reflects the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718. Performance shares are reflected in the table at values based upon the probable outcome of the performance conditions as of the grant date. Because the Company was unable to determine the probable outcome of the performance conditions for the performance shares as of the grant date, the performance shares are reflected in the Summary Compensation Table at no value. The values of performance shares at the grant date, assuming the highest level of performance conditions is achieved, are as follows:
35
Table of Contents
Name
  
Year
   
Grant Date Value of
Performance Shares
Assuming Maximum
Performance
 
Mr. Sanderson
   2021   $5,246,770 
   2020   $5,671,480 
   2019   $4,802,460 
Mr. Butts
   2021   $1,471,655 
   2020   $1,517,720 
   2019   $1,277,250 
Mr. Cockrell
   2021   $1,151,730 
   2020   $1,198,200 
   2019   $1,021,800 
Mr. Rigney
   2021   $339,121 
   2020   $239,640 
   2019   $189,034 
(4)
Consists of amounts earned under the annual Bonus Award Program.
The amounts included in the table above under “All Other Compensation” consist of the following:
All Other Compensation
Name
  
Year
   
Matching
Charitable
Contributions
($)
   
Dividends
Paid on
Restricted
Stock

($)
   
401(k)
Matching
Contribution
($)
   
ESOP
Contribution
($)
   
Term Life
Insurance
Premium
($)
   
Perquisites
1

($)
   
Accidental
Death
Premium
($)
 
Mr. Sanderson
   2021    7,500    138,160    11,400    12,105    136    43,581    11 
   2020    5,000    117,600    11,200    0    136    44,506    11 
   2019    5,000    123,200    11,000    1,953    148    87,054    9 
Mr. Butts
   2021    5,000    36,960    11,400    12,105    183    16,097    15 
   2020    6,000    30,800    11,200    0    183    42,920    15 
   2019    6,000    32,000    11,000    1,953    183    11,675    12 
Mr. Cockrell
   2021    0    29,480    11,400    12,105    272    36,093    23 
   2020    2,500    24,850    11,200    0    272    13,774    22 
   2019    2,500    25,920    11,000    1,953    272    30,155    18 
Mr. Rigney
   2021    0    6,489    11,400    12,105    272    1,000    23 
   2020    0    4,770    11,200    0    272    0    22 
   2019    0    5,110    11,000    1,953    272    0    18 
(1)
The amounts for Mr. Sanderson include the aggregate incremental cost to the Company of his personal use, or use by his immediate family, of Company and charter aircraft of $84,099 of such costs for fiscal 2019, $44,410 for fiscal 2020, and $43,581 for fiscal 2021. The amounts shown for Mr. Butts include $9,859 of such costs for fiscal 2019, $41,036 for fiscal 2020, and $14,212 for fiscal 2021. The amounts shown for Mr. Cockrell include $29,930 of such costs for fiscal 2019, $13,774 for fiscal 2020, and $34,187 for fiscal 2021. These amounts were calculated by taking into account the direct variable operating cost of a personal trip on an hourly basis, including all costs that may vary by the hours flown, but excluding fixed costs incurred for the overall ownership and staffing of the aircraft. Variable costs include fuel and oil; travel, lodging and other expenses for the crew; the prorated amount of repairs and maintenance; catering; landing fees and permits; insurance required for a particular flight; crew overtime; telecommunication expenses; and the amount of any disallowed tax deductions associated with the personal use.
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Table of Contents
The amounts shown in this column also include the value of other travel expenses incurred by the immediate family of Messrs. Sanderson, Butts and Cockrell while accompanying them on Company business of $2,955, $1,816 and $225, respectively, for fiscal 2019, $97, $1,884 and $0, respectively, for fiscal 2020, and $0, $885 and $906, respectively, for fiscal 2021. Finally, the amounts in this column also include a $1,000 vaccine incentive bonus paid to Messrs. Butts, Cockrell and Rigney in fiscal 2021. Although Mr. Sanderson was entitled to receive the vaccine bonus, he declined it.
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Table of Contents
Grants of Plan-Based Awards
Fiscal Year 2021
        
Estimated Future Payouts Under

Non-Equity Incentive Plan Awards
1
  
Estimated Future Payouts Under Equity
Incentive Plan Awards
2
  
All Other Stock
Awards: Number
of Shares of
Stock or Units

(#)
  
All Other
Option
Awards:
Number of
Securities
Underlying
Options

(#)
  
Exercise
or Base
Price of
Option
Awards

($/Sh)
  
Grant Date
Fair Value
of Stock
and Option
Awards
3

($)
 
Name
 
Grant

Date
  
Approval

Date
  
Threshold

($)
  
Target

($)
  
Maximum

($)
  
Threshold

(#)
  
Target

(#)
  
Maximum

(#)
 
Joe F. Sanderson, Jr., Chairman of the Board of Directors and Chief Executive Officer
  11/01/20   10/21/20   582,014   1,771,351   3,036,600   10,250   20,500   41,000   20,500     2,623,385 
Lampkin Butts, President
  11/01/20   10/21/20   233,444   710,483   1,217,971   2,875   5,750   11,500   5,750     735,828 
Mike Cockrell, Treasurer and Chief Financial Officer
  11/01/20   10/21/20   175,039   532,728   913,248   2,250   4,500   9,000   4,500     575,865 
Tim Rigney, Secretary
  11/01/20   10/21/20   53,658   163,307   279,955   663   1,325   2,650   1,325     169,560 
(1)
The estimated payments shown reflect the minimum,
mid-point
and maximum amounts that could have been earned under our fiscal 2021 Bonus Award Program. Actual bonus awards earned are shown in the Summary Compensation Table, above. For a discussion of how bonus awards are determined, see Compensation Discussion and Analysis section, above.
(2)
The estimated payouts shown reflect the number of shares of stock that potentially could be paid out for performance shares granted in fiscal 2021 under our Stock Incentive Plan upon the achievement of specified performance criteria at the end of the performance period.
(3)
Reflects the grant date fair value of each equity award computed under FAS 123R and FASB ASC Topic 718. Grant date values for performance shares are based on probable outcome of the performance conditions as of the grant date. Because the Company was unable to determine the probable outcome of the performance conditions for the performance shares as of the grant date, the performance shares are reflected in the Grants of Plan-Based Awards Table at no value.
38
Table of Contents
Discussion of Summary Compensation and Grants of Plan-Based Awards Table
Performance share awards granted for the 2021 fiscal year are subject to a
two-year
performance period and an additional
one-year
vesting period during which the recipient must remain continuously employed by us. The number of shares actually issued depends upon our achieving certain prescribed levels of return on equity and return on sales, as described above in the Compensation Discussion and Analysis section.
Shares of restricted stock granted under our restricted stock program vest generally on the fourth anniversary of the award, as long as the holder remains continuously employed by us during the restricted period. Restricted stock granted for fiscal 2021 vests on November 1, 2024.
Shares of restricted stock granted as matching contributions under our Management Share Purchase Plan are subject to a three-year vesting period starting on the date they are acquired by the participant. The participant must remain continuously employed by us during the vesting period.
During our 2021 fiscal year, the employment of our CEO, the President and the CFO were governed by employment agreements that were amended on August 8, 2021. The term of each agreement began on November 1, 2015, and ends when the officer’s employment terminates under the provision of FAS 123(R), unearned compensation related to unvested restricted stock awards are not recorded. Accordingly, any remaining unearned compensation related to unvested restricted stock awards and the corresponding amount in paid-in capital will no longer be included in stockholders’ equity beginning November 1, 2005.
In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” SFAS No. 151 amends Accounting Research Bulletin (“ARB”) No. 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight handling costs and wasted materials (spoilage) should be recognized as current-period charges. In addition, SFAS No. 151 requires that allocation of fixed production overhead to inventory during fiscal years beginning after June 15, 2005. The Company is currently assessing the impact that SFAS No. 151 will have on the results of operations, financial position or cash flows.

10

Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Sanderson Farms, Inc.
We have audited the accompanying consolidated balance sheets of Sanderson Farms, Inc. and subsidiaries as of October 31, 2005 and 2004, and the related consolidated statements of income, stockholders’ equity, and cash flows for eachprovisions of the three years inemployment agreement. Each agreement provides for the period ended October 31, 2005. Our audits also included the financial statement schedule listed in the index at Item 15(a). These financial statementsofficer’s fiscal 2016 salary and schedule are the responsibility of the Company’s management. Our responsibility isbonus to express an opinion on these financial statements and schedule based on our audits.
We conducted our auditsbe paid in accordance with the standardslevels and bonus program that we disclosed in our current report on Form
8-K
filed on October 27, 2015. The officers’ compensation is reassessed annually.
The amended agreements provide for a lump sum severance payment to be paid to the officers if:
before a change in control of our Company, the officers are terminated without cause, except in the case of poor performance;
at or after a change in control, the officers are terminated without cause; or
the officers resign for good reason.
“Cause” means, among other things, conviction of certain felonies, willful misconduct by the officer, failure or refusal by the officer to comply with our policies or a material breach by the officer of the Public Company Accounting Oversight Board (United States). Those standards requireemployment agreement. “Good reason” means, among other things, a material breach of the agreement by us, a reduction of the officer’s base salary or bonus that we plan and performis not part of a reduction program affecting all senior executives generally, the audit to obtain reasonable assurance about whetherrelocation of the financial statements are freeofficer’s principal place of employment by more than 40 miles, or after a change in control, the alteration of the officer’s position that results in a material misstatement. An audit includes examining, on a test basis, evidence supportingdiminution of his position.
The amount of the amounts and disclosuresseverance payments will be (i) in the financial statements. An audit also includes assessingcase of Mr. Sanderson, three times, and in the accounting principles usedcase of Messrs. Butts and significant estimates made by management, as well as evaluatingCockrell, two times, the overall financial statement presentation. We believe that our audits provide a reasonable basisfollowing amounts:
the officer’s annual base salary in effect for our opinion.2021, plus
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sanderson Farms, Inc. and subsidiaries at October 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each
fifty percent of the three years in the period ended October 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Sanderson Farms, Inc.’s internal control over financial reporting as of October 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 22, 2005 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
New Orleans, Louisiana
December 22, 2005

11

Sanderson Farms, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
         
  October 31 
  2005  2004 
  (In thousands) 
Assets
        
Current assets:        
Cash and cash equivalents $34,616  $75,910 
Accounts receivable, less allowance of $748,808 in 2005 and $1,555,452 in 2004  38,833   49,240 
Receivable from insurance companies  14,892   0 
Inventories  84,713   75,603 
Refundable income taxes  0   2,592 
Prepaid expenses  11,599   13,077 
       
Total current assets  184,653   216,422 
Property, plant and equipment:        
Land and buildings  212,463   141,727 
Machinery and equipment  296,449   257,671 
       
   508,912   399,398 
Accumulated depreciation  (249,586)  (242,685)
       
   259,326   156,713 
Other assets  1,812   1,872 
       
Total assets $445,791  $375,007 
       
Liabilities and Stockholders’ Equity
        
Current liabilities:        
Accounts payable $24,468  $30,384 
Accrued expenses  48,148   31,029 
Current maturities of long-term debt  4,406   4,385 
       
Total current liabilities  77,022   65,798 
Long-term debt, less current maturities  6,511   10,918 
Claims payable  2,900   2,600 
Deferred income taxes  13,705   16,350 
Stockholders’ equity:        
Preferred Stock:        
Series A Junior Participating Preferred Stock, $100 par value: authorized shares-500,000; none issued        
Par value to be determined by the Board of Directors: authorized shares-4,500,000; none issued        
Common Stock, $1 par value: authorized shares-100,000,000; issued and outstanding shares-20,063,070 in 2005 and 19,959,238 in 2004  20,063   19,959 
Paid-in capital  26,791   9,090 
Unearned compensation  (13,607)  0 
Retained earnings  312,406   250,292 
       
Total stockholders’ equity  345,653   279,341 
       
Total liabilities and stockholders’ equity $445,791  $375,007 
       
See accompanying notes.

12

Sanderson Farms, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
             
  Years ended October 31 
  2005  2004  2003 
  (In thousands, except per share data) 
Net sales $1,006,185  $1,052,297  $872,235 
Cost and expenses:            
Cost of sales  826,670   842,337   741,420 
Selling, general and administrative  66,031   59,806   40,293 
          
   892,701   902,143   781,713 
          
Operating income  113,484   150,154   90,522 
Other income (expense):            
Interest income  1,257   743   80 
Interest expense  (433)  (1,569)  (2,484)
Other  173   (60)  43 
          
   997   (886)  (2,361)
          
Income before income taxes  114,481   149,268   88,161 
Income tax expense  43,843   57,840   34,100 
          
Net income $70,638  $91,428  $54,061 
          
Earnings per share:            
Basic $3.53  $4.62  $2.78 
          
Diluted $3.51  $4.57  $2.75 
          
Dividends per share $.42  $.84  $.61 
          
Weighted average shares outstanding:            
Basic  20,014   19,789   19,462 
          
Diluted  20,137   19,995   19,689 
          
See accompanying notes.

13

Sanderson Farms, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
                         
                      Total 
  Common Stock  Paid-In  Unearned  Retained  Stockholders’ 
  Shares  Amount  Capital  Compensation  Earnings  Equity 
 (In thousands, except shares
 and per share amounts)
Balance at October 31, 2002  13,051,026  $13,051  $0  $0  $142,840  $155,891 
Three-for-two stock split  6,525,513   6,525          (6,525)  0 
                   
Adjusted Balance at October 31, 2002  19,576,539   19,576  $0  $0   136,315   155,891 
Net income for year                  54,061   54,061 
Cash dividends ($.28 per share)                  (5,449)  (5,449)
Special cash dividends ($.33 per share)                  (6,508)  (6,508)
Purchase and retirement of common stock  (328,500)  (328)  (2,042)      (2,790)  (5,160)
Issuance of common stock  272,775   273   3,991           4,264 
                    
Balance at October 31, 2003  19,520,814   19,521   1,949   0   175,629   197,099 
Net income for year                  91,428   91,428 
Cash dividends ($.34 per share)                  (6,753)  (6,753)
Special cash dividends ($.50 per share)                  (9,980)  (9,980)
Redemption of fractional shares                  (32)  (32)
Issuance of common stock  438,424   438   7,141           7,579 
                    
Balance at October 31, 2004  19,959,238   19,959   9,090   0   250,292   279,341 
Net income for year                  70,638   70,638 
Cash dividends ( $.42 per share)                  (8,524)  (8,524)
Issuance of common stock  103,832   104   2,033           2,137 
Issuance of restricted common stock          15,668   (15,360)      308 
Amortization of unearned compensation              1,753       1,753 
                   
Balance at October 31, 2005  20,063,070  $20,063  $26,791  $(13,607) $312,406  $345,653 
                   
See accompanying notes.

14

SANDERSON FARMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
             
  Years Ended October 31 
  2005  2004  2003 
  (In thousands) 
Operating activities
            
Net income $70,638  $91,428  $54,061 
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization  24,752   26,326   24,485 
Amortization of unearned compensation  1,753   0   0 
Provision for losses on accounts receivable  1,063   165   727 
Deferred income taxes  (3,115)  500   (920)
Change in assets and liabilities:            
Accounts receivable  9,344   (3,210)  (5,849)
Receivable from insurance companies  (14,892)  0   0 
Inventories  (9,110)  (13,850)  (3,789)
Prepaid expenses and refundable income taxes  4,540   (3,483)  2,431 
Other assets  (95)  (123)  (135)
Accounts payable  (5,916)  11,351   (6,225)
Accrued expenses and claims payable  17,419   (6,511)  11,029 
          
Total adjustments  25,743   11,165   21,754 
          
Net cash provided by operating activities  96,381   102,593   75,815 
Investing activities
            
Capital expenditures  (128,107)  (27,538)  (23,430)
Net proceeds from sale of property and equipment  897   79   394 
Other investment  0   (1,597)  0 
          
Net cash used in investing activities  (127,210)  (29,056)  (23,036)
Financing activities
            
Net change in revolving credit  0   0   (20,000)
Principal payments on long-term debt  (4,126)  (10,420)  (7,014)
Principal payments on capital lease obligation  (260)  (245)  (230)
Dividends paid  (8,524)  (16,733)  (11,957)
Purchase and retirement of common stock  0   (32)  (5,160)
Net proceeds from common stock issued  2,445   7,579   4,264 
          
 
Net cash used in financing activities  (10,465)  (19,851)  (40,097)
          
Net change in cash and cash equivalents  (41,294)  53,686   12,682 
Cash and cash equivalents at beginning of year  75,910   22,224   9,542 
          
Cash and cash equivalents at end of year $34,616  $75,910  $22,224 
          
Supplemental disclosure of cash flow information:
            
Income taxes paid $33,002  $63,486  $20,093 
          
Interest paid $1,360  $1,611  $2,569 
          
See accompanying notes.

15

Sanderson Farms, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Principles of Consolidation:The consolidated financial statements include the accounts of Sanderson Farms, Inc. (the “Company”) and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.
Business:The Company is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared food items. The Company’s net sales and cost of sales are significantly affected by market price fluctuations of its principal products sold and of its principal feed ingredients, corn and other grains.
     The Company sells to retailers, distributors and casual dining operators primarily in the southeastern, southwestern and western United States. Revenue is recognized when product is delivered to customers. Revenue on certain international sales is recognized upon transfer of title, which may occur after shipment. Management periodically performs credit evaluations of its customers’ financial condition and generally does not require collateral. No customer accounted for more than 10.0% of consolidated net sales during fiscal 2005. One customer accounted for 12.5% and 11.7%, respectively, of consolidated sales for the years ended October 31, 2004 and October 31, 2003. Shipping and handling costs are included as a component of cost of sales.
Use of Estimates:The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts 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 maturities of ninety days or less when purchased to be cash equivalents.
Allowance for Doubtful Accounts:In the normal course of business, the Company extends credit to its customers on a short-term basis. Although credit risks associated with our customers are considered minimal, the Company routinely reviews its accounts receivable balances and makes provisions for probable doubtful accounts based on an individual assessment of a customer’s credit quality as well as subjective factors and trends, including the aging of receivable balances. In circumstances where management is aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve is recorded to reduce the receivable to the amount expected to be collected. If circumstances change (i.e., higher than expected defaults or an unexpected material adverse change in a major customer’s ability to meet its financial obligations to us), our estimates of the recoverability of amounts due us could be reduced by a material amount and the allowance for doubtful accounts and related bad debt expense would increase by the same amount.
Hurricane Receivable from Insurance Companies:The Company has recorded insurance recoveries related to Hurricane Katrina when realization of the claim for recovery has been deemed probable and only to the extent the loss has been recorded in the financial statements. Any possible gain that may result from recoveriesofficer’s maximum opportunity under the Company’s insurance policies will be recognized whenbonus program in effect for 2021,
plus (ii) a portion of fifty percent of the insurance proceeds are received.
Inventories:Processed food and poultry inventories and inventories of feed, eggs, medication and packaging supplies are stated at the lower of cost (first-in, first-out method) or market.
Live poultry inventories of broilers are stated at the lower of cost or market and breeders at cost less accumulated amortization. The costs associated with breeders, including breeder chicks, feed, medicine and grower pay, are accumulated upofficer’s 2021 maximum bonus opportunity, prorated according to the production stage and amortized over nine months usingnumber of days in the straight-line method.fiscal year that have elapsed through his termination date.

16

Property, Plant and Equipment:Property, plant and equipment is stated at cost. Depreciation of property, plant and equipment is provided byIn addition, the straight-line and units of production methods overagreements provide, in the estimated useful lives of 15 to 39 years for buildings and 3 to 12 years for machinery and equipment.
Impairment of Long-Lived Assets:The Company continually reevaluates the carrying value of its long-lived assets for events or changes in circumstances which indicate that the carrying value may not be recoverable. As part of this reevaluation, the Company estimates the future cash flows expected to result from the usecase of the asset and its eventual disposal. Ifofficer’s death, for the sumcontinuation of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized through a charge to operations.
Self-Insurance Programs:Insurance expensehis annual salary payments for workers’ compensation benefits and employee-related health care benefits are estimated using historical experience and actuarial estimates. Stop-loss coverage is maintained with third party insurers to limit the Company’s total exposure. Management regularly reviews the assumptions used to recognize periodic expenses. Any resulting adjustments to accrued claims are reflected in current operating results.
Advertising and Marketing Costs:The Company expenses advertising costs as incurred. Advertising costs are included in selling, general and administrative expenses and totaled $13.0 million, $14.0 million and $0.8 million for fiscal 2005, 2004 and 2003, respectively.
Income Taxes:Deferred income taxes are accounted for using the liability method and relate principally to cash basis temporary differences and depreciation expense accounted for differently for financial and income tax purposes.
Stock Based Compensation:At October 31, 2005, the Company has a stock-based employee compensation plan, which is described more fully in Note 9. The Company accounts for this plan under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. No stock-based employee compensation cost applicable to employee stock options is reflected in net income, as all options granted had an exercise price at least equal to the market value of the underlying common stock onone year from the date of grant.his death. The following table illustratesagreements for Messrs. Butts and Cockrell also designate them as participants in our Supplemental Disability Plan.
The agreements prohibit the effectofficers from disclosing confidential information about us during and after their employment, subject to certain exceptions, and prohibit the officers from engaging in certain competitive activity during their employment and for two years after the termination of their employment for any reason other than poor performance.
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Table of Contents
See the “Potential Payments Upon Termination or
Change-in-Control”
section, below, for a discussion of the impact of a change in control of our Company and certain other events, including competitive activity, on net income andan officer’s unearned performance shares or restricted stock.
Dividends are paid at rates applicable to all our stockholders on performance shares once they are paid out. Dividends (at normal rates) are paid on shares of restricted stock as soon as the shares are issued to the officer.
Amounts earned for fiscal 2021 under our Bonus Award Program were determined by reference to our earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.
             
  Year Ended October 31 
  2005  2004  2003 
  (In thousands) 
Net income, as reported $70,638  $91,428  $54,061 
Deduct: Total stock-based employee compensation expense for employee stock options determined under fair value based method for all awards, net of related tax effects  (45)  (45)  (60)
          
Pro forma net income $70,593  $91,383  $54,001 
          
Earnings per share:            
Basic-as reported $3.53  $4.62  $2.78 
          
Basic-pro forma $3.53  $4.62  $2.78 
          
Diluted-as reported $3.51  $4.57  $2.75 
          
Diluted-pro forma $3.51  $4.57  $2.74 
          
Earnings Per Share:Basic earnings per share is based upon the weighted average number of common shares outstanding during the year. Diluted earnings per share includes any dilutive effects of options, warrants, restricted stock and convertible securities.

17

On January 29, 2004, the Board of Directors declared a 3 for 2 stock split to be effected in the form of a 50% stock dividend. This dividend was paid February 29, 2004 to stockholders of record on February 10, 2004. Share and per share data have been adjusted to reflect this stock split. Cash was paid in lieu of fractional shares. Stockholders’ equity was restated as of the earliest period presented to give retroactive recognition to the stock split by reclassifying the par value of the additional shares from retained earnings to common stock.
Fair Value of Financial Instruments:The carrying amounts for cash and temporary cash investments approximate their fair values. The carrying amounts of the Company’s borrowings under its credit facilities and long-term debt also approximate the fair values based on current rates for similar debt.
Impact of Recently Issued Accounting Standards:In December 2004, the FASB issued SFAS Statement No. 123 (revised 2004), “Share-Based Payment,” which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 123(R) supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the approach in Statement 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The Company is required to adopt SFAS No. 123(R) in the first quarter of fiscal 2006.
As permitted by SFAS No. 123, the Company currently accounts for share-based payments to employees using APB 25’s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS No. 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123operational performance versus our peers as described in the disclosure of pro forma net incomeCompensation Discussion and earnings per share in Note 1 to our audited financial statements. SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. While the Company cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the income tax benefits of such deductions were $966,000 and $3,726,000 for the fiscal years ended October 31, 2005 and 2004, respectively. Also,Analysis section, above. Unless severance is payable under the provisions of FAS 123(R), unearned compensation related to unvested restricted stock awards is not recorded. Accordingly, any remaining unearned compensation related to unvested restricted stock awards and the corresponding amountemployment agreements described above, a participant must have been employed in paid-in capital will no longer be included in stockholders’ equity beginning November 1, 2005.
In November 2004,a designated position at Sanderson Farms for nine months before the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” SFAS No. 151 amends Accounting Research Bulletin (“ARB”) No. 43, Chapter 4, to clarify that abnormal amounts of idled facility expense, freight handling costs and wasted materials (spoilage) should be recognized as current-period charges. In addition, SFAS No. 151 requires that allocation of fixed production overhead to inventory be based on the normal capacityend of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company is currently assessing the impact that SFAS No. 151 will have on the results of operations, financial position or cash flows.
2. Hurricane Receivable
The Company’s financial statements for the fourth fiscal quarter and fiscal year, endedand must have been employed on October 31 2005, reflect a receivable from the Company’s insurance carriers of $14.9 million for property damage and expenses incurred resulting from Hurricane Katrina. The Company’s total insurance claim through October 31, 2005, for property damage, expenses incurred and lost profits is approximately $20.0 million, net of the applicable deductible of $2,750,000. Duringfiscal year, to receive a bonus. However, if a Bonus Award Program participant dies, becomes disabled or retires before the fourth quarter of fiscal 2005, operating income was reduced by unrecognized lost profits and expenses of approximately $5.1 million. These unrecognized lost profits and expenses were the direct resultend of the effect of Hurricane Katrina and the Company’s efforts to minimize the potential loss from the hurricane.
Of the $5.1 million of unrecognized lost profits and expenses, $1.5 million was attributable to additional costs to compensate the Company’s contract poultry producers for the loss of revenue they incurred because of decreased efficiencies resulting from the storm. These payments to the Company’s contract poultry producers were included in cost of sales on the Company’s income statement for thefiscal year, ended October 31, 2005. While the Company’s management believes these additional payments to contract poultry producers are covered by the terms of the its insurance policies, it cannot deem such recovery as probable, and therefore did not recognize any possible reimbursement of these costs in its financial statements. The Company will recognize any reimbursements of these costs if and when they are received, and any such reimbursements will be classified in the period received as other income, with appropriate disclosures of the nature of such amount.
Also included in the $5.1 million is $3.6 million in lost profits. For several weeks after Hurricane Katrina, the Company was unable to sustain the workforce required to produce higher margin products normally sold by the Company, and therefore suffered $2.4 million in lost profits due to a less profitable product mix during the weeks immediately following the storm. The reasons for these human resource issues included the unavailability of fuel, damage to employees’ personal property and impassable roads due to down trees and power lines. In addition, the Company lost profits of $1.2 million that would have been realized on sales of live inventories destroyed by the hurricane. The Company has not recognized these lost profits as of December 31, 2005, but will recognize these amounts as other income when and if it receives reimbursement from the Company’s insurance carriers, with appropriate disclosures of the nature of such amounts.
The Company intends to seek reimbursement for all of its insured losses, including the unrecognized lost profits and expenses. Negotiations with the Company’s insurance carriers are expected to be completed during 2006. The Company believes the remaining effects of lost production and additional expenses related to Hurricane Katrina that will be incurred during the first fiscal quarter of 2006 will also be substantially covered by the Company’s insurance policies.

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3. Inventories
Inventories consisted of the following:
         
  October 31 
  2005  2004 
  (In thousands) 
Live poultry-broilers and breeders $42,662  $45,318 
Feed, eggs and other  10,983   10,081 
Processed poultry  19,881   11,024 
Processed food  6,905   5,172 
Packaging materials  4,282   4,008 
       
  $84,713  $75,603 
       
4. Prepaid expenses
Prepaid expenses consisted of the following:
         
  October 31 
  2005  2004 
  (In thousands) 
Parts and supplies $6,801  $5,698 
Current deferred tax assets  1,930   1,460 
Other prepaid expenses  2,868   5,919 
       
  $11,599  $13,077 
       
5. Accrued expenses
Accrued expenses and claims payable consisted of the following:
         
  October 31 
  2005  2004 
  (In thousands) 
Income taxes payable $12,990  $0 
Accrued bonuses  13,515   11,474 
Accrued rebates  3,236   3,387 
Workers’ compensation claims  3,711   3,484 
Accrued property taxes  2,627   2,306 
Accrued wages  4,020   3,201 
Accrued vacation  3,199   2,822 
Other accrued expenses  4,850   4,355 
       
  $48,148  $31,029 
       
6. Long-term Credit Facilities and Debt
     Long-term debt consisted of the following:

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  October 31 
  2005  2004 
  (In thousands) 
Term loan with an insurance company, accruing interest at 7.05%; due in annual principal installments of $4,000,000, maturing in 2007 $8,000  $12,000 
Note payable, accruing interest at 5%; due in annual installments of $161,400, including interest, maturing in 2009  597   723 
6% Mississippi Business Investment Act bond-capital lease obligation, due November 1, 2012  2,320   2,580 
       
   10,917   15,303 
Less current maturities of long-term debt  4,406   4,385 
       
  $6,511  $10,918 
       
At October 31, 2005, the Company had a $100.0 million revolving credit agreement with four banks. As of October 31, 2005, all of the credit was available. On November 17, 2005, the Company entered into a new $200.0 million revolving credit facility with six banks that extends until 2010. Borrowings are at prime or below and may be prepaid without penalty. A commitment fee of .25% is payable quarterly on the unused portion of the revolver. Covenants related to the revolving credit and the term loan agreements include requirements for maintenance of minimum consolidated net working capital, tangible net worth, debt to total capitalization and current ratio. The agreement also establishes limits on dividends, assets that can be pledged and capital expenditures. As of December 22, 2005, all of the credit under the new revolver was available.
The aggregate annual maturities of long-term debt at October 31, 2005 are as follows (in thousands):
     
Fiscal Year Amount 
2006 $4,406 
2007  4,433 
2008  455 
2009  482 
2010  381 
Thereafter  760 
    
  $10,917 
    
7. Income Taxes
     Income tax expense (benefit) consisted of the following:
             
  Years Ended October 31 
  2005  2004  2003 
  (In thousands) 
Current:            
Federal $41,453  $49,250  $29,940 
State  5,505   8,090   5,080 
          
   46,958   57,340   35,020 
Deferred:            
Federal  (2,705)  430   (800)
State  (410)  70   (120)
          
   (3,115)  500   (920)
          
  $43,843  $57,840  $34,100 
          
     Significant components of the Company’s deferred tax assets and liabilities were as follows:
         
  October 31 
  2005  2004 
  (In thousands) 
Deferred tax liabilities:        
Property, plant and equipment $15,675  $17,977 
Prepaid and other assets  495   1,108 
       
Total deferred tax liabilities  16,170   19,085 

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  October 31 
  2005  2004 
  (In thousands) 
Deferred tax assets:        
Accrued expenses and accounts receivable  4,395   4,195 
       
Net deferred tax liabilities $11,775  $14,890 
       
Current deferred tax assets (included in prepaid expenses) $1,930  $1,460 
Long-term deferred tax liabilities  13,705   16,350 
       
Net deferred tax liabilities $11,775  $14,890 
       
     The differences between the consolidated effective income tax rate and the federal statutory rate of 35.0%
are as follows:
             
  Years Ended October 31 
  2005  2004  2003 
  (In thousands) 
Income taxes at statutory rate $40,068  $52,244  $30,856 
State income taxes  3,312   5,584   3,224 
Other, net  463   12   20 
          
Income tax expense $43,843  $57,840  $34,100 
          
8. Employee Benefit Plans
The Company has an Employee Stock Ownership Plan (“ESOP”) covering substantially all employees. Contributions to the ESOP are determined at the discretion of the Company’s Board of Directors. Total contributions to the ESOP were $5,500,000, $7,000,000 and $4,000,000 in fiscal 2005, 2004 and 2003, respectively.
The Company has a 401(k) Plan which covers substantially all employees after one year of service. Participants in the Plan may contribute up to the maximum allowed by IRS regulations. The Company matches 100% of employee contributions to the 401(k) Plan up to 3% of each employee’s compensation and 50% of employee contributions between 3% and 5% of each employee’s compensation. The Company’s contributions to the 401(k) Plan totaled $2,666,000 in fiscal 2005, $1,803,000 in fiscal 2004 and $1,551,000 in fiscal 2003.
9. Stock Compensation Plans
The Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for its employee stock options because the alternative fair value accounting provided for under FASB Statement No. 123, “Accounting for Stock-Based Compensation,” requires use of option valuation models that were not developed for use in valuing employee stock options.
Under the Company’s Stock Option Plan, 2,250,000 shares of Common Stock were reserved for grant to key management personnel. Options outstanding at October 31, 2005 were granted in fiscal 2002, have ten-year terms and vest over four years beginning one year after the date of grant. The Company did not grant any options during fiscal 2005, 2004 and 2003. The plan has been superceded by the Sanderson Farms, Inc. and Affiliates Stock Incentive Plan described below and no further options may be issued under the Stock Option Plan.
Pro forma information regarding net income and earnings per share is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model.

21

A summary of the Company’s stock option activity and related information is as follows:
         
      Weighted-Average 
  Shares  Exercise Price 
Outstanding at October 31, 2002  1,082,604  $9.61 
Granted  0   0.00 
Exercised  (272,775)  8.57 
Forfeited  (10,125)  12.37 
       
Outstanding at October 31, 2003  799,704   14.41 
Granted  0   0.00 
Exercised  (440,078)  9.75 
Forfeited  (2,250)  12.37 
       
Outstanding at October 31, 2004  357,376   11.56 
Granted  0   0.00 
Exercised  (102,332)  11.27 
Forfeited  (33,501)  12.22 
       
Outstanding at October 31, 2005  221,543  $11.66 
       
The exercise price of the options outstanding as of October 31, 2005, ranged from $7.47 to $12.37 per share. At October 31, 2005, the weighted average remaining contractual life of the options outstanding was 7 years and 150,336 options were exercisable.
In fiscal 2000, the Company granted 211,507 “phantom shares” to certain key management personnel. Upon exercise of a phantom share, the holder will receive a cash payment or an equivalent number of shares of the Company’s Common Stock, at the Company’s option, equal to the excess of the fair market value of the Company’s Common Stock at the time of exercise over the phantom share award value of $4.98 per share. The phantom shares have a ten-year term and vest over four years beginning one year after the date of grant. Compensation expense of $84,000, $1,567,000 and $1,942,000 for the phantom share plan is included in selling, general and administrative expense in the accompanying consolidated statement of income for fiscal 2005, 2004 and 2003, respectively.
A summary of the Company’s phantom share activity and related information is as follows:
         
      Exercise 
  Shares  Price 
Outstanding at October 31, 2002  211,500  $4.98 
Granted  0   0.00 
Forfeited  0   0.00 
Exercised  (141,750)  4.98 
       
Outstanding at October 31, 2003  69,750   4.98 
Granted  0   0.00 
Forfeited  0   0.00 
Exercised  (63,000)  4.98 
       
Outstanding at October 31, 2004  6,750   4.98 
Granted  0   0.00 
Forfeited  0   0.00 
Exercised  (6,750)  4.98 
       
Outstanding at October 31, 2005  0  $0.00 
       
On February 17, 2005, the shareholders of the Company approved the Sanderson Farms, Inc. and Affiliates Stock Incentive Plan (the “Plan”). The Plan allows the Company’s board of directors to grant certain incentive awards including stock options, stock appreciation rights, restricted stock, and other similar awards. The Company may award up to 2,250,000 shares under the Plan. Incentive awards granted under the Plan are accounted for in accordance with APB Opinion No. 25, “Accounting for Stock issued to Employees” and related interpretations.

22

Pursuant to the Plan, on February 23, 2005, the Company’s board of directors approved agreements for the issuance of restricted stock to directors, executive officers and other key employees as designated by the Company’s board of directors. Restricted stock granted to non-employee directors vests three years from the date of grant and all other restricted stock granted at that time pursuant to the Plan vests ten years from the date of grant. The vesting schedule is accelerated upon death, disability or retirement of the participant or upon a change in control, as defined. Restricted stock grants are valued based upon the closing market price of the Company’s Common Stock on the date of grant. Restricted stock grants are recorded as unearned compensation and are recognized as compensation expense over the vesting period. During the quarter ended April 30, 2005, the Company issued a total of 354,000 shares of restricted stock valuedhad been employed at $44.56 per share. During fiscal 2005, 11,000 shares granted on February 23, 2005 were forfeited. Compensation expense related to restricted stock grants totaled $1,744,000 during fiscal 2005.
Also on February 23, 2005 and pursuant to the Plan, the Company’s board of directors approved Management Share Purchase Plan agreements (the “Purchase Plan”) that authorized the issuance of shares of restricted stock to the Company’s directors, executive officers and other key employees as designated by the Company’s board of directors. Pursuant to the Purchase Plan, non-employee directors may elect to receive up to 100% of their annual retainer and meeting fees in the form of restricted stock. Other participants may elect to receive up to 15% of their salary and up to 75% of any bonus earned in the form of restricted stock. The purchase price of the restricted stock is the closing market price of the Company’s Common Stock on the date of purchase. The Company makes matching contributions of 25% of the restricted shares purchased by participants. Restricted stock issued pursuant to the Purchase Plan vests after three years or immediately upon death, disability, retirement or change in control, as defined. If a participant’s employment is terminated for any other reason prior to the three-year vesting period, the participant forfeits the matching contribution and the Company may, at its option, repurchase restricted stock purchased by the participant at the price paid by the participant. Matching contributions are recorded as unearned compensation and are recognized as compensation expense over the vesting period. During fiscal 2005, the participants purchased a total of 7,497 shares of restricted stock pursuant to the Purchase Plan valued at $41.13 per share and the Company issued 1,832 matching shares valued at $41.11 per share. Compensation expense related to the Company’s matching contribution totaled approximately $8,000 in fiscal 2005.
10. Shareholder Rights Agreement
On April 22, 1999, the Company adopted a shareholder rights agreement (the “Agreement”) with similar terms as the previous one. The purpose of the rights is to force a potential acquiror to negotiate with the Company’s board of directors to ensure that the Company’s shareholders receive a fair price in any acquisition transaction.
Under the terms of the Agreement a purchase right (“right”) was declared as a dividend for each share of the Company’s Common Stock outstanding on May 4, 1999. The rights do not become exercisable and certificates for the rights will not be issued until ten business days after a person or group acquires or announces a tender offer for the beneficial ownership of 20% or more of the Company’s Common Stock. Special rules set forth in the Agreement apply to determine beneficial ownership for members of the Sanderson family. Under these rules, such a member will not be considered to beneficially own certain shares of Common Stock, the economic benefit of which is received by any member of the Sanderson family, and certain shares of Common Stock acquired pursuant to employee benefit plans of the Company.
The exercise price of a right has been established at $75. Once exercisable, each right would entitle the holder to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock, par value $100 per share. Because of the liquidation, voting and dividend preferences associated with the Preferred Stock, the value of one one-hundredth of a share of the Preferred Stock should approximate the value of one share of the Company’s Common Stock. In addition, after a person or group acquires 20% of the Common Stock, but before such person or group acquires 50%, the board of directors may exchange the rights for shares of the Company’s Common Stock at a ratio of one common share to each one one-hundredth of a preferred share.
In some circumstances, the agreement also permits the Company’s shareholders to acquire additional shares of the Company’s Common Stock, or shares of an acquiror’s common stock, at a discount. The rights may be redeemed by the Board of Directors at $0.001 per right prior to an acquisition, through open market purchases, a tender offer or otherwise, of the beneficial ownership of 20% or more of the Company’s Common Stock. The rights expire on May 4, 2009.
11. Other Matters
     The Company has vehicle and equipment leases that expire at various dates through fiscal 2011. Rental expense under these leases totaled $4.9 million, $4.7 million and $3.6 million for fiscal 2005, 2004 and 2003, respectively. The minimum lease payments of obligations under non-cancelable operating leases at October 31, 2004 were as follows:

23

     
Fiscal Year Amount 
2006 $5.6 million
2007 5.0 million
2008 3.5 million
2009 3.0 million
2010 1.8 million
Thereafter .1 million
    
  $19.0 
    
     On May 19, 2003, a lawsuit was filed on behalf of 74 individual plaintiffs in the United States District Court for the Southern District of Mississippi alleging an “intentional pattern and practice of race discrimination and hostile environment in violation of Title VII and Section 1981 rights.” This lawsuit alleges that Sanderson Farms in its capacity as an employer, has “engaged in (and continues to engage in) a pattern and practice of intentional unlawful employment discrimination and intentional unlawful employment practicesdesignated position for at its plants, locations, off-premises work sites, offices, and facilities in Pike County, Mississippi...in violation of Title VIIleast nine months, he or she will still receive a bonus award for the fiscal year (assuming the performance criteria are met). See the “Potential Payments Upon Termination or
Change-in-Control”
section, below, for a discussion of the Civil Rights Actimpact of 1964 (as amended)... .” The action further alleges that “Sanderson Farms has willfully, deliberately, intentionally, and with malice deprived black workers in its employ of the full and equal benefits of all laws in violation of the Civil Rights Act.. .” On June 6, 2003, thirteen additional plaintiffs joined in the pending lawsuit by the filing ofcertain events on a First Amended Complaint. This brought the total number of plaintiffs to 87.participant’s annual bonus award.
     The plaintiffs in this lawsuit seek, among other things, back pay and other compensation in the amount of $500,000 each and unspecified punitive damages. The Company has aggressively defended the lawsuit and will continue to do so. The Company has a policy of zero tolerance for discrimination of any type, and preliminarily investigated the complaints alleged in this lawsuit when they were brought as EEOC charges. This investigation, which is ongoing, has substantiated none of the complaints alleged in the lawsuit, and the Company believes the charges are without merit. On July 21, 2003, the Company filed a Motion to Dismiss or, alternatively, Motion for Summary Judgment or Motion for More Definite Statement. On December 17, 2003, the court entered its order denying the Company’s motion for summary judgment, but granting its motion for more definite statement. The court also ordered that the union representing some of the plaintiffs be joined as a defendant. The court gave the plaintiffs until January 26, 2004 to amend their complaint to more specifically set out their claims. Although the Company’s motion to dismiss was denied, the court’s order permits the Company to refile its dispositive motions after the plaintiffs file an amended complaint. On January 27, 2004, 84 of the 87 plaintiffs filed their Second Amended Complaint. The remaining three plaintiffs voluntarily dismissed their claims. The Company filed its answer to the plaintiffs’ second amended complaint on March 26, 2004, denying any and all liability and setting forth numerous affirmative defenses. On July 1, 2004, the Company filed a Motion to Sever Plaintiffs’ Cases, wherein the Company requested that the court sever the pending lawsuit with 84 plaintiffs into 84 separate lawsuits, one for each plaintiff. The Company asserted in its motion that this relief should be granted because the 84 cases are too dissimilar and were misjoined. The Company further asserted that it would be prejudiced by being subjected to one common trial for all 84 plaintiffs, rather than separate trials for each plaintiff. On August 26, 2004, the Court issued its order severing this case into six separate causes of action, with the plaintiffs divided into six groups based on their job classifications. On October 12, 2004, the plaintiffs filed new complaints for each of the six severed cases, which the Company answered on November 24, 2004. A case management conference for each of the six cases was held on December 28, 2004, during which various procedural issues related to discovery were settled. On September 28, 2005, the Company filed a Motion for a Pre-Trial conference seeking to preclude the plaintiffs from utilizing a “pattern and practice” method of proof. This method of proof is typically reserved for class action cases, or cases brought by the government. The plaintiffs had indicated their intention to use this method of proof in the pleadings and discovery requests filed up to the date of the Company’s motion. On October 26, 2005, the court entered an order ruling that the plaintiffs would not be permitted to use the “pattern and practice” method of proof. Six separate trials are scheduled during 2006 and 2007
For fiscal 2021, salary accounted for the plaintiffs’ causes of actions. The first of the six trials is currently set for September 18, 2006.
     On September 26, 2000, three current and former contract growers filed suit against the Company in the Chancery Court of Lawrence County, Mississippi. The plaintiffs filed suit on behalf of “all Mississippi residents to whom, between, on or about November 1981 and the present, the Company induced into growing chickens for it and

24

paid compensation under the so-called ‘ranking system’.” Plaintiffs allege that the Company “has defrauded plaintiffs by unilaterally imposing and utilizing the so-called ‘ranking system’ which wrongfully places each grower into a competitive posture against other growers and arbitrarily penalizes each less successful grower based upon criteria which were never revealed, explained or discussed with plaintiffs.” Plaintiffs further allege that they are required to accept chicks that are genetically different and with varying degrees of healthiness, and feed of dissimilar quantity and quality. Finally, plaintiffs allege that they are ranked against each other although they possess dissimilar facilities, equipment and technology. Plaintiffs seek an unspecified amount in compensatory and punitive damages, as well as varying forms of equitable relief.
     The Company is vigorously defending and will continue to vigorously defend this action. On November 22, 2002, the Court denied the Company’s motions to compel arbitration, challenging the jurisdiction of the Chancery Court of Lawrence County, Mississippi, and seeking to have the case dismissed pursuant to rule 5(c) of the Mississippi Rules of Civil Procedure. The Company then filed its motion for interlocutory appeal on these issues with the Mississippi Supreme Court. On December 6, 2002, the Mississippi Supreme Court agreed to hear this motion and stayed the action in the Chancery Court pending disposition of this motion. The Company’s motion for interlocutory appeal was granted and this matter is pending before the Mississippi Supreme Court. The Supreme Court granted the Company’s request that this case be consolidated with a second grower suit discussed below. Both this matter and the matter discussed below were decided by the court on October 6, 2005 with a decision in favor of the Company. The plaintiffs have indicated they plan to request a rehearing before the court and have until January 18, 2006 to file such a request.
     On August 2, 2002, three contract egg producers filed suit against the Company in the Chancery Court of Jefferson Davis County, Mississippi. The Plaintiffs filed suit on behalf of “all Mississippi residents who, between June 1993 and the present, [the Company] fraudulently and negligently induced into housing, feeding and providing water for [the Company’s] breeder flocks and gathering, grading, packaging and storing the hatch eggs generated by said flocks and who have been compensated under the payment method established by the [Company].” Plaintiffs alleged that the Company “has defrauded Plaintiffs by unilaterally imposing and utilizing a method of payment which wrongfully and arbitrarily penalizes each grower based upon criteria which are under the control of the [Company] and which were never revealed, explained or discussed with each Plaintiff.” Plaintiffs allege that they were required to accept breeder hens and roosters which are genetically different, with varying degrees of healthiness, and feed of dissimilar quantity and quality. Plaintiffs further allege contamination of and damage to their real property. Plaintiffs alleged that they were “fraudulently and negligently induced into housing, feeding and providing water for the Company’s breeder flocks and gathering, grading, packaging and storing the hatch eggs produced from said flocks” for the Company. Plaintiffs seek unspecified amount of compensatory and punitive damages, as well as various forms of equitable relief.
     On September 5, 2002, the Company filed its Motion to Dismiss and/or Transfer Jurisdiction and/or to Compel Arbitration and/or for Change of Venue. A hearing of this motion was completed on November 18, 2003. Prior to completion of the hearing, the Company filed a request with the American Arbitration Association (“AAA”) to arbitrate the claims made in this lawsuit. On June 7, 2004, the Chancery Court of Jefferson Davis County, Mississippi entered an Order denying all of the relief requested by the Company in its motion dated September 5, 2002. On June 29, 2004, the Company filed a Notice of Appeal and/or, in the Alternative, Petition to Appeal from Interlocutory Order and Motion for Stay Pursuant to M.R.A.P.5(c) with the Mississippi Supreme Court, requesting appellate review of the Chancery Court’s Order. On August 11, 2004, the Mississippi Supreme Court entered its Order accepting jurisdiction under the Notice of Appeal portion of the Company’s June 29, 2004 filing, but dismissed the Alternative Petition for Interlocutory Appeal portion of the same filing as moot. The court also agreed to consolidate this case with the broiler grower lawsuit described above. The Mississippi Supreme Court continued the stay previously entered, holding in abeyance the trial court proceedings pending a ruling by it on the consolidated appeals of both grower lawsuits. On October 6, 2005, the court decided this matter, together with the grower suit discussed above, in favor of the Company. The plaintiffs have indicated they plan to request a rehearing before the court and have until January 18, 2006 to file such a request.

25

     The Company is also involved in various other claims and litigation incidental to its business. Although the outcome of the matters referred to in the preceding sentence cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome should not have a material effect on the Company’s consolidated results of operation or financial position.
     The Company recognizes the costs of legal defense for the legal proceedings to which it is a party in the periods incurred. A determination of the amount of reserves required, if any, for these matters is made after considerable analysisfollowing percentages of each individual case. Because the outcome of these cases cannot be determined with any certainty, no estimate of the possible loss or range of loss resulting from the cases can be made. At this time, the Company has not accrued any reserve for any of these matters. Future reserves may be required if losses are deemed probable due to changes in the Company’s assumptions, the effectiveness of legal strategies, or other factors beyond the Company’s control. Future results of operations may be materially affected by the creation of or changes to reserves or by accruals of losses to reflect any adverse determinations of these legal proceedings.officer’s total compensation:

26

QUARTERLY FINANCIAL DATA
                 
  Fiscal Year 2005
  First Second Third Fourth
  Quarter Quarter Quarter Quarter(1)
  (In thousands, except per share data)
  (Unaudited)
Net sales $233,290  $259,176  $264,650  $249,069 
Gross profit  29,535   59,197   57,346   33,437 
Net income  10,041   26,520   24,022   10,055 
Diluted earnings per share $.50  $1.32  $1.19  $.50 
                 
  Fiscal Year 2004
  First Second Third Fourth
  Quarter Quarter Quarter Quarter
  (In thousands, except per share data)
  (Unaudited)
Net sales $226,441  $272,710  $293,923  $259,223 
Gross profit  42,643   69,215   71,912   26,190 
Net income  18,986   33,437   33,944   5,061 
Diluted earnings per share $.95  $1.67  $1.69  $.25 
 
(1)
Name
  During the fourth quarter
Salary as a Percentage
of fiscal 2005, the Company was negatively impacted by Hurricane Katrina and had an estimated reduction in its gross profit during the fourth quarterTotal Compensation
Mr. Sanderson
22% 
Mr. Butts
29% 
Mr. Cockrell
31% 
Mr. Rigney
42% 
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Table of Contents
Outstanding Equity Awards at Fiscal 2021 Year End
       
Option Awards
   
Stock Awards
2, 3
 
Name
  
Grant

Date
   
Number of
Securities
Underlying
Unexercised
Options (#)

Exercisable
   
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
   
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options

(#)
   
Option
Exercise
Price

($)
   
Option
Expiration
Date
   
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested

(#)
  
Market
Value of
Shares
or Units
of Stock
That
Have
Not
Vested

($)
   
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested

($)
   
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested

($)
 
Joe F. Sanderson, Jr.,   11/01/17                             16,750   3,173,288           
Chairman of the   11/01/18                             23,500   4,452,075           
Board of Directors and   11/01/19                             17,750   3,362,738    19,832    3,757,172 
Chief Executive Officer   11/01/20                             20,500   3,883,725    41,000    7,767,450 
Lampkin Butts,   11/01/17                             4,250   805,163           
President   11/01/18                             6,250   1,184,063           
    11/01/19                             4,750   899,888    5,308    1,005,601 
    11/01/20                             5,750   1,089,338    11,500    2,178,675 
Mike Cockrell,   11/01/17                             3,500   663,075           
Treasurer and Chief   11/01/18                             5,000   947,250           
Financial Officer   11/01/19                             3,750   710,438    4,191    793,985 
    11/01/20                             4,500   852,525    9,000    1,705,050 
Tim Rigney,   11/01/17                             650   123,143           
Secretary and   11/01/18                             925   175,241           
Controller   11/01/19                             750   142,088    839    158,949 
    11/01/20                             1,325   251,021    2,650    502,043 
    Various                             3
1
 		  568           
(1)Consists of $7.9 million relatedrestricted stock granted pursuant to the storm.matching contribution provisions of our Management Share Purchase Plan. In addition to the amounts shown, Mr. Rigney owns 12 restricted shares that he purchased under the Management Share Purchase Plan with forgone salary valued at $2,273 as of October 31, 2021.
(2)Restricted stock (except for shares held in the Management Share Purchase Plan) vests in a lump sum in accordance with the schedule below.
Sanderson Farms, Inc. and Subsidiaries
Valuation and Qualifying Accounts
Schedule II
                     
COL. A COL. B COL. C COL. D COL. E COL. F
  Balance at Charged to Charged to     Balance at
  Beginning Costs and Other Deductions End of
Classification of Period Expenses Accounts Describe(1) Period
  (In Thousands)
Year ended October 31, 2005                    
Deducted from accounts receivable:                    
Allowance for doubtful accounts                    
Totals $1,555  $1,063      $1,869  $749 
Year ended October 31, 2004                    
Deducted from accounts receivable:                    
Allowance for doubtful accounts                    
Totals $1,390  $165      $0  $1,555 
Year ended October 31, 2003                    
Deducted from accounts receivable:                    
Allowance for doubtful accounts                    
Totals $663  $727      $0  $1,390 
(1)
Grant Date
  Uncollectible accounts written off,
Vesting Date
11/01/201711/01/2021
11/01/201811/01/2022
11/01/201911/01/2023
11/01/202011/01/2024
Grants of restricted stock usually vest on the fourth anniversary of the award, as long as the holder remains continuously employed by us during the restricted period.
The performance periods for performance shares end on the dates shown below.
Grant Date
Performance Period Ends*
11/01/201910/31/2021
11/01/202010/31/2022
*These shares are subject to an additional
one-year
vesting period after the expiration of the performance period before they are issued.
The performance shares granted on November 1, 2019 are shown in the table at the level corresponding to actual performance, pending a formal determination by the Committee. In accordance with Instruction 3 to Item 402(f)(2) of SEC Regulation
S-K,
the performance shares granted on November 1, 2020, are shown in the table at the maximum level for both the ROE criteria and the ROS criteria, based on our actual performance in fiscal 2021, the first year of the performance period.
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Table of Contents
(3)Values of equity awards are based on our closing stock price on the NASDAQ Stock Market of $189.45 per share on October 29, 2021 (the last trading day of our fiscal year).
Restricted shares held in the Management Share Purchase Plan are purchased by the participant on the last business day of each calendar quarter with forgone salary. A participant may also elect to reduce his or her bonus by a certain percentage and instead receive that amount in restricted shares purchased through the plan on the bonus payment date. We match 25 percent of the participant’s contribution in additional restricted shares that we issue simultaneously with the purchased shares. Each share of restricted stock held in the plan vests fully on the third anniversary of its acquisition by the participant, subject to certain exceptions that are described below under “Potential Payments Upon Termination or
Change-in-Control.”
Option Exercises and Stock Vested
Fiscal Year 2021
   
Option Awards
   
Restricted Stock Awards
 
Name
  
Number of
Shares
Acquired on
Exercise

(#)
   
Value Realized
on Exercise

($)
   
Number of
Shares
Acquired on
Vesting

(#)
   
Value Realized

on Vesting

($)
1
 
Joe F. Sanderson, Jr.,
Chairman of the Board of
Directors and Chief
Executive Officer
             26,000    3,327,220 
     
Lampkin Butts, President             6,750    863,798 
Mike Cockrell, Treasurer and
Chief Financial Officer
             5,500    703,835 
Tim Rigney, Secretary and
Controller
             1,000    127,970 
LOGO
(1)Values are based on the closing price of our common stock on the NASDAQ Stock Market on the vesting dates.
Potential Payments Upon Termination or
Change-in-Control
We have employment agreements (amended on August 8, 2021) with the CEO, President and CFO as described above. We have no other employment agreements with any other employees of our Company. However, our annual cash bonus and Stock Incentive Plan awards provide for accelerated payments in the circumstances described below, and we have company policies that provide for severance payments for all our salaried employees generally. Except as described below, the named executive officers receive no payments upon the termination of their employment or a change in control of Sanderson Farms that are not received by all salaried employees generally.
Employment Agreements
The term of each agreement began on November 1, 2015, and ends when the officer’s employment terminates under the provisions of the employment agreement. Each agreement provides for the officer’s fiscal 2016 salary and bonus to be paid in accordance with the levels and bonus program that we disclosed in our current report on Form
8-K
filed on October 27, 2015. The officers’ compensation is reassessed annually.
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Table of Contents
The agreements provide for a lump sum severance payment to be paid to the officers as soon as practicable following a qualifying termination if:
before a change in control of our company, the officers are terminated without cause, except in the case of poor performance;
at or after a change in control, the officers are terminated without cause; or
the officers resign for good reason.
“Cause” means, among other things, conviction of certain felonies, willful misconduct by the officer, failure or refusal by the officer to comply with our policies, or a material breach by the officer of the employment agreement. “Good reason” means, among other things, a material breach of the agreement by us, a reduction of the officer’s base salary or bonus that is not part of a reduction program affecting all senior executives generally, the relocation of the officer’s principal place of employment by more than 40 miles, or after a change in control, the alteration of the officer’s position that results in a material diminution of his position.
The amount of the severance payments will be (i) in the case of Mr. Sanderson, three times, and in the case of Messrs. Butts and Cockrell, two times, the following amounts:
the officer’s annual base salary in effect for 2021, plus
fifty percent of the officer’s maximum bonus opportunity under the Company’s bonus program in effect for 2021,
plus (ii) a portion of fifty percent of the officer’s 2021 maximum bonus opportunity, prorated according to the number of days in the fiscal year that have elapsed through his termination date.
If any severance payments are due, the officer is also entitled to the continuation of medical benefits that the officer would otherwise be eligible to receive as an active employee of the Company for 24 months or, if earlier, until such time as the officer becomes eligible for substantially similar benefits from a subsequent employer.
In addition, the agreements provide, in the case of the officer’s death, for the continuation of his annual salary payments for one year from the date of his death according to the Company’s regular payroll schedule.
The agreements prohibit the officers from disclosing confidential information about us during and after their employment, subject to certain exceptions, prohibit the officers from engaging in certain competitive activity with us during their employment and for two years after the termination of their employment for any reason other than poor performance and contain a mutual
non-disparagement
clause. The officers are also prohibited from soliciting the Company’s customers and employees during their employment and for the two years after the termination of their employment for any reason.
If the officers breach the foregoing provisions, the agreements provide that they must return any portion of the severance payments we have already paid them and their entitlement to continued medical benefits ceases. We are also entitled to pursue other equitable and legal remedies such as restraining orders or damages. The severance payments are conditioned upon the officer signing (and not revoking) a release of claims in favor of Sanderson Farms and complying with applicable restrictive covenants.
Annual Cash Bonus Awards
An employee must be employed with the Company through October 31 to earn any bonus that may be payable under the Bonus Award Program for that fiscal year. However, if a Bonus Award Program participant dies, becomes disabled or retires before that time, and if the participant had been employed in a designated position at Sanderson Farms for at least nine months, he or she will still receive a cash bonus award for the fiscal year (assuming the performance criteria are met). The participant’s base salary during the portion of the fiscal year in which he or she was employed in the designated position is used to calculate the amount of the bonus award.
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Table of Contents
Restricted Stock
If a change in control of our Company occurs, or if a holder dies or becomes disabled, before the end of the restricted period, all shares of restricted stock become fully vested. If a holder ends employment after attaining retirement eligibility during the restricted period, a pro rata percentage of the shares will immediately vest based on the number of years of the restricted period that have passed before retirement, and the unvested portion is forfeited.
Shares Held in the Management Stock Purchase Plan
If an employee dies, becomes disabled or terminates employment after attaining eligibility for retirement, or if there is a change in control of Sanderson Farms, in each case before the end of the restricted period, all unvested shares of restricted stock held through the plan become fully vested. If an employee’s employment terminates for any other reason, then any unvested shares we granted to the employee through matching contributions are forfeited and dividends paid on those shares must be returned, and we have the right to repurchase all shares that the employee purchased through the plan with salary or bonus at the price the employee paid for them, less the amount of dividends paid. If we do not exercise that right, the purchased shares will vest on the third anniversary of their acquisition.
Performance Shares
If a holder of unpaid performance shares dies, becomes disabled or terminates employment after attaining eligibility for retirement, or if there is a change in control of Sanderson Farms, the holder is entitled to receive a pro rata portion of the number of performance shares he would have been entitled to in proportion to the number of months he was employed during the performance period, assuming the performance criteria are met.
Anti-Competition Provisions
If the Board of Directors determines that a holder of restricted stock or performance shares has engaged in certain competitive activity against us while employed by us or during the two years after the holder’s voluntary termination or termination by us for cause, then he or she forfeits all unvested shares of restricted stock and all unissued performance shares. If restricted shares have already vested or performance shares have been issued, the holder must repay us the fair market value of the shares on their grant or issue date, respectively. In the case of the Management Share Purchase Plan, unvested shares of matching stock are forfeited and dividends paid on those shares must be returned, and we have the right to repurchase all shares that the employee purchased through the plan with salary or bonus at the price the employee paid for them, less the amount of dividends paid. If Company matching shares have already vested, the holder must repay us the fair market value of the shares on the date they were issued and any dividends paid.
Company Severance Policy
We pay severance to all our salaried employees generally upon their termination of employment, except in cases of retirement, death, disability or termination for cause. We pay up to two weeks of severance to employees who resign after at least one year of service. If an employee is dismissed without cause, we pay two weeks of severance, plus one additional week for every year of the employee’s service, up to three months.
44
Table of Contents
Change in Control Severance Plan
On August 8, 2021, in connection with the Merger Agreement described below, we adopted a severance plan that will take effect upon a change of control of the Company. Under the plan, each of our regular, full-time salaried employees as of the date immediately preceding a change in control (other than employees who are covered by another plan or agreement providing severance benefits in connection with a change of control, such as Messrs. Sanderson, Butts and Cockrell) will be entitled to a lump sum payment upon a qualifying termination of employment, with the payment based on the employee’s years of service with us. A qualifying termination means a termination that occurs upon a change in control or during the nine months following the change in control, in each case by us without “cause” or by the employee for “good reason.” The lump sum payment will consist of two weeks of salary for each completed and partial year of service with us, with a minimum of 13 weeks and a maximum of 52 weeks. An employee must sign and not revoke a release of claims in favor of us in order to be entitled to receive the severance payment. Under its terms, the plan does not apply to salaried employees who are part-time, temporary or seasonal, but we have no such employees as of the date of this Form
10-K/A.
Compensation Payable under Merger Agreement
On August 8, 2021, we agreed to be acquired by a joint venture between Cargill, Inc. and Continental Grain Company pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) with Walnut Sycamore Holdings LLC, a Delaware limited liability company (“Parent”), Sycamore Merger Sub LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of Parent (“Merger Sub”), and solely for purposes of certain provisions specified therein, Wayne Farms LLC, a Delaware limited liability company, pursuant to which, among other things, Merger Sub will be merged with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and as an indirect wholly owned subsidiary of Parent. At the effective time of the Merger, each share of our common stock outstanding immediately before the effective time (other than certain excluded shares) will automatically be cancelled and converted into the right to receive $203.00 per share in cash, without interest (the “Merger Consideration”).
The Merger Agreement provides that if the Merger is completed, the named executive officers will be entitled to certain payments that differ from the payments they would have ordinarily received as described above, as follows:
Company Restricted Shares
.
Each share of our restricted stock that is outstanding immediately prior to the effective time of the Merger (other than any such shares of restricted stock granted to employees on or following August 8, 2021) will be fully vested and converted into the right to receive an amount in cash equal to the Merger Consideration, which will be paid no later than the fifth business day following the effective time.
Company Performance Share Awards for Individuals Other Than Messrs. Sanderson, Butts and Cockrell
.
For each performance share award that is outstanding immediately prior to the effective time (including those held by Mr. Rigney):
each share of our common stock covered by the award that is earned based on actual performance through October 31, 2021 (prorated according to the number of days elapsed during the applicable performance period as of the effective time) will be converted into the right to receive the Merger Consideration, which will be paid within five business days following the effective time, and
the excess of the maximum number of shares of our common stock covered by the award over the earned shares covered by the award that is earned based on actual performance through October 31, 2021 (prorated according to the number of days elapsed during the applicable performance period as of the effective time) will convert into an unvested cash award that will vest on the first anniversary of the closing date or upon an earlier qualifying termination of employment and be paid within five business days following the vesting date (but no later than the first anniversary of the closing date of the Merger), subject to continued employment through such vesting date.
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Table of Contents
Company Performance Share Awards for Messrs. Sanderson, Butts and Cockrell
.
At the effective time of the Merger, each outstanding performance share award held by each of Messrs. Sanderson, Butts and Cockrell will vest and be earned at the maximum level of performance, meaning 200% of the target number of shares covered by the awards (such maximum number of shares is equal to 76,500, 21,000 and 16,500, respectively), and each earned share will be converted into a right to receive an amount in cash equal to the Merger Consideration, which amount will be payable no later than the fifth business day following the effective time.
Fiscal Year 2022 Cash Bonuses
.
If the effective time of the Merger occurs on or after November 1, 2021, Sanderson Farms employees employed as of the effective time shall receive fiscal year 2022 bonuses calculated at the target performance level and
pro-rated
for the portion of the fiscal year that has elapsed through the later of the effective time and April 1, 2022.
Transaction Bonus
.
Mr. Rigney is eligible to receive a cash transaction bonus conditioned upon the successful completion of the Merger. The aggregate amount of Mr. Rigney’s bonus is equal to $174,972. Fifty percent of the bonus will vest and be payable immediately before the effective time, and the remaining 50% will vest and be payable upon the
one-year
anniversary of the effective time, in each case, subject to Mr. Rigney’s continued employment through the applicable vesting date; provided that, in the event Mr. Rigney experiences a qualifying termination prior to the first-year anniversary of the effective time, the unvested portion of the transaction bonus will vest and become payable upon the date of such qualifying termination.
Potential Payments Tables
The following tables show the payments that the named executive officers would be entitled to in the event of (a) a change in control of Sanderson Farms other than the Merger, (b) the completion of the Merger, (c) termination without cause or for good reason, (d) retirement, (e) disability and (f) death, in each case assuming such event occurred on October 29, 2021, the last business day of our 2021 fiscal year, in accordance with Item 402(j) of Regulation
S-K.
The values in the tables are based on the closing market price of our common stock on October 29, 2021, except that payments upon completion of the Merger have been calculated based on the Merger Consideration of $203 per share. The amounts shown do not include payments that would be payable to all salaried employees generally such as pursuant to our severance policy or our change in control severance plan. We have not included in any table any amount for our fiscal 2019 performance shares because the minimum performance criteria for those shares were not met.
In all tables other than the table entitled “Potential Payments—Change in Control under the Merger Agreement,” we based the values of our fiscal 2020 performance shares on the level corresponding to actual company performance during the performance period, pending a formal determination by the Committee. For our fiscal 2021 performance shares, we based the values on management’s view as of the date of this Form
10-K/A
that it is probable that we will achieve between the minimum and target levels of ROE and between the target and maximum levels for ROS for the grant.
In the table entitled “Potential Payments—Change in Control Under Merger Agreement,” we have calculated the values of our fiscal 2020 and 2021 performance shares as provided under the terms of the Merger Agreement.
46
Table of Contents
Potential Payments—Change in Control
Name
  
Value of Fully
Vested Restricted
Stock
   
Value of Earned

Performance

Shares
   
Total
 
Mr. Sanderson  $14,871,825    5,445,551    20,317,376 
Mr. Butts  $3,978,450    1,481,310    5,459,760 
Mr. Cockrell  $3,173,288    1,165,875    4,339,163 
Mr. Rigney  $694,334    271,671    966,005 
Potential Payments—Change in Control Under Merger Agreement
Name
  
Value of Fully
Vested
Restricted
Stock
   
Value of Earned
Performance
Shares
1
   
Transaction
Bonus
2
   
Total
 
Mr. Sanderson  $15,935,500    15,529,500    0    31,465,000 
Mr. Butts  $4,263,000    4,263,000    0    8,526,000 
Mr. Cockrell  $3,400,250    3,349,500    0    6,749,750 
Mr. Rigney  $743,995    437,871    87,486    1,269,352 
LOGO
(1)Mr. Rigney would be entitled to receive an additional $404,579 not reflected in the table above upon the first anniversary of the closing date of the Merger or upon an earlier qualifying termination of employment, subject to continued employment through such date.
(2)Mr. Rigney would be entitled to receive an additional $87,486 not reflected in the table above upon the first anniversary of the closing date of the Merger or upon an earlier qualifying termination of employment, subject to continued employment through such date.
Potential Payments—Termination Without Cause
1
or for Good Reason
Name
  
Severance
Payment
   
Continuation of

Medical Benefits
   
Total
 
Mr. Sanderson  $10,628,100    20,764    10,648,864 
Mr. Butts  $3,349,421    20,764    3,370,185 
Mr. Cockrell  $2,674,512    20,764    2,695,276 
Mr. Rigney  $0    0    0 
LOGO
(1)Prior to a change in control, severance is not payable in the case of termination for poor performance.
(2)Consists of (i) for Mr. Sanderson, three times, and for Messrs. Butts and Cockrell, two times, his fiscal 2021 base salary plus 50 percent of the maximum bonus he could have earned for fiscal 2021, plus (ii) a pro rata portion of 50 percent of the officer’s maximum 2021 bonus opportunity.
(3)Consists of 24 months of continued medical benefits assuming the officer does not earlier receive similar benefits from a subsequent employer. Benefits would be paid monthly.
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Table of Contents
Potential Payments—Retirement
Name
  
Value of Fully

Vested Restricted

Stock
   
Value of Earned

Performance

Shares
   
Bonus Awards

Payment
   
Total
 
Mr. Sanderson  $5,446,688    5,445,551    2,530,551    13,422,790 
Mr. Butts  $1,420,875    1,481,310    1,014,996    3,917,181 
Mr. Cockrell  $1,148,541    1,165,875    761,055    3,075,471 
Mr. Rigney  $215,499    271,671    233,301    720,472 
Potential Payments—Disability
Name
  
Value of
Fully Vested
Restricted
Stock
   
Value of
Earned
Performance
Shares
   
Bonus Award
Payment
   
Supplemental
Long Term
Disability
1
   
Total
 
Mr. Sanderson  $14,871,825    5,445,551    2,530,551    1,012,200    23,860,127 
Mr. Butts  $3,978,450    1,481,310    1,014,996    507,488    6,982,244 
Mr. Cockrell  $3,173,288    1,165,875    761,055    2,138,160    7,238,378 
Mr. Rigney  $694,334    271,671    233,301    0    1,199,306 
LOGO
(1)Due to their respective ages, Messrs. Sanderson, Butts and Cockrell are entitled to a monthly long term disability benefit equal to 66 2/3 percent of their salary beginning one year from the date of disability until the earlier of the date they have received five years of payments or their 70th birthday. In each case the benefit is paid for at least 12 months. The amount shown in the table represents the total amount payable under this benefit assuming payments begin on October 31, 2022.
Potential Payments—Death
Name
  
Continuation
of Salary
1
   
Value of Fully
Vested
Restricted
Stock
   
Value of
Earned
Performance
Shares
   
Bonus
Awards
Payment
   
Total
 
Mr. Sanderson  $1,518,300    14,871,825    5,445,551    2,530,551    24,366,227 
Mr. Butts  $761,232    3,978,450    1,481,310    1,014,996    7,235,988 
Mr. Cockrell  $652,320    3,173,288    1,165,875    761,055    5,752,538 
Mr. Rigney  $0    694,334    271,671    233,301    1,199,306 
LOGO
(1)This total amount would be paid in equal monthly installments over the course of the year following the date of death.
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Table of Contents
The tables below include information about compensation paid to or earned by our
non-employee
directors for our fiscal year ended October 31, 2021.
Director Compensation—Fiscal Year 2021
Name
  
Fees

Earned

or Paid

in Cash
1

($)
   
Stock

Awards
2

($)
   
Option

Awards

($)
   
Non-Equity

Incentive Plan

Compensation

($)
   
Change in

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings

($)
   
All Other

Compensation

($)
   
Total

($)
 
John H. Baker, III
4
   24,333    5,817    0    0    0    2,627    32,777 
Fred Banks, Jr.   89,500    172,341    0    0    0    12,875    247,716 
David Barksdale   107,500    163,378    0    0    0    5,458    276,336 
John Bierbusse   102,500    153,703    0    0    0    3,630    259,833 
Toni D. Cooley   107,500    172,333    0    0    0    13,914    293,747 
Beverly Wade Hogan   121,500    153,671    0    0    0    6,465    281,636 
Edith Kelly-Green   109,500    152,187    0    0    0    6,157    267,844 
Phil K. Livingston   127,500    154,787    0    0    0    6,819    289,106 
Suzanne T. Mestayer   115,500    156,216    0    0    0    7,209    278,925 
Sonia Pérez   108,500    161,229    0    0    0    6,995    276,724 
Gail Jones Pittman   114,000    152,187    0    0    0    6,937    273,124 
LOGO
(1)Includes fees foregone at the election of the director for the purchase of shares through our Management Share Purchase Plan, in the amounts reflected in the table in footnote 2 below, under the column “Grant Date Fair Value of Shares Purchased.”
(2)
Reflects the aggregate grant date fair value of awards made in fiscal 2021 under FASB ASC Topic 718. Includes 976 restricted shares issued to each director in fiscal 2021, which had a grant date fair value for each grantee of $153.65 per share. Also includes shares granted pursuant to the matching contribution provisions of the Management Share Purchase Plan. Acquisitions by
non-employee
directors under the Management Share Purchase Plan in fiscal 2021 were as follows:
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Table of Contents
Name
  
Shares
Purchased in
Fiscal 2021

(#)
   
Shares Acquired
in Company
Match in Fiscal
2021

(#)
   
Total Shares
Acquired in
Fiscal 2021

(#)
   
Grant Date Fair

Value of Shares
Purchased

($)
   
Grant Date
Fair Value of
Company
Match

($)
 
Mr. Baker   176    44    220    23,267    5,817 
Mr. Banks   561    139    700    90,425    22,379 
Mr. Barksdale   336    83    419    54,296    13,416 
Mr. Bierbusse   98    23    121    15,948    3,741 
Ms. Cooley   562    139    701    90,444    22,371 
Ms. Hogan   96    23    119    15,532    3,709 
Ms. Kelly-Green   61    14    75    9,807    2,225 
Mr. Livingston   128    30    158    20,654    4,825 
Ms. Mestayer   162    39    201    26,111    6,254 
Ms. Pérez   284    70    354    45,758    11,267 
Ms. Pittman   63    14    77    10,183    2,225 
LOGO
(3)Consists of matching gifts made by the Company under its Matching Gift Program, pursuant to which the Company will match gifts up to $2,500 annually per donee made by directors (and employees) to qualifying colleges and universities, and dividends on restricted stock grants.
(4)Mr. Baker retired from the Board on February 18, 2021.
The following table shows as of October 31, 2021 the aggregate number of unvested stock awards outstanding for each
non-employee
director who was in office on that date, including shares purchased or granted as matching contributions under the Management Share Purchase Plan:
Name
Stock Awards
Outstanding

at Fiscal Year End
Mr. Banks5,999
Mr. Barksdale3,486
Mr. Bierbusse1,407
Ms. Cooley5,358
Ms. Hogan2,484
Ms. Kelly-Green1,760
Mr. Livingston2,664
Ms. Mestayer1,951
Ms. Pérez2,915
Ms. Pittman3,604
For a description of cash fees paid to
non-employee
directors, see the Compensation Discussion and Analysis section, above.
All restricted stock held by
non-employee
directors will fully vest in the event of a change in control of our Company. Additionally, all restricted stock held by
non-employee
directors will become fully vested if the director dies, becomes disabled, or, for shares held in the Management Share Purchase Plan, if the director retires at the completion of his term of service.
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Table of Contents
Compensation and Risk Management
In 2010, the Compensation Committee engaged Willis Towers Watson to formally assess the level of risk arising from our compensation policies and practices. The Committee believes that Willis Towers Watson was best equipped to perform this assessment because of the depth of its understanding and experience with the current executive compensation landscape for public companies.
Willis Towers Watson reviewed our annual Bonus Award Program and Stock Incentive Plan and the following five factors related to our compensation process and design:
The extent of oversight of our pay plans by top management and the Compensation Committee.
Whether the roles of management and the Committee in overseeing the alignment of our pay plans with our business goals and risk tolerance are reasonable and clearly defined.
The extent of the balance in our plans between fixed and variable pay, cash and equity, short and long-term incentives, and overall company versus individual performance goals.
The presence of “red flags” in our plan design, such as steep incentive curves, unreasonable goals or thresholds, uncapped payouts, awards based solely on formulas, misalignment in the timing of payouts or undue focus on any one element of pay mix; compared with risk-mitigating features, such as exercise of the Committee’s discretion, clawback policies, and stock ownership requirements.
Whether performance criteria reflect appropriate risk and the use of capital, quality and sustainability of results and employee influence on meeting performance goals.
Based on this framework, Willis Towers Watson concluded that our pay plans represent a low level of risk to our Company. In particular, they noted the following:
They consider that the Bonus Award Program has appropriate performance metrics and reasonable levels of potential payouts..
Awards under the bonus plan are not paid out until our independent audit is complete, thus providing a safeguard from manipulation.
The balance in our long-term incentive plan between performance-based pay and time-based restricted stock mitigates the potential for undue risk-taking, and the use of earnings per share and return on equity metrics focus the plan on profitable growth and efficient use of capital.
Our stock ownership guidelines are also a risk-mitigating factor.
Change in control benefits for our three senior officers assist with executive retention and mitigate the risk of a conflict of interest in the context of a potential acquisition of our Company.
The Board and the Committee regularly review and address our financial performance.
Based on Willis Towers Watson’s assessment and the Committee’s independent analysis, and their respective annual
re-assessments
of our compensation programs and structure, the Committee has concluded that there are no risks arising from our compensation policies and practices that are reasonably likely to have a material adverse effect on us. In reaching this conclusion, the Committee has also considered the fact that our business is primarily driven by the performance of the commodities markets, specifically the markets for fresh chicken, corn and soybean meal. These markets are external to our business and therefore the Committee does not believe that our performance-based compensation promotes excessive or inappropriate risk-taking by our management.
In addition, in 2010 the Board adopted a policy under which it has the discretion to, among other things, recoup the compensation of our senior management if we have a financial restatement or if the manager in question has engaged in misconduct adversely affecting the Company. This should further help to mitigate any risk associated with our compensation programs.
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Table of Contents
Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information as of February 22, 2022 concerning:
the only stockholders known by us to own beneficially more than 5 percent of our outstanding common stock, which is our only class of voting securities outstanding,
the beneficial ownership of common stock of our directors and named executive officers, and
the beneficial ownership of common stock by all of our directors and executive officers as a group.
On February 22, 2022 there were 22,323,097 shares of our common stock outstanding.
Unless otherwise indicated, the address of each person named in the table is P.O. Box 988, Laurel, Mississippi 39441.
Beneficial Owner(s)
  
Amount
Beneficially
Owned
1
   
Percent of
Class
 
5% Shareholders:
    
BlackRock, Inc.
2
   2,261,338    10.13% 
The Vanguard Group3
   2,060,245    9.23% 
Nuance Investments, LLC
4
   1,369,720    6.14% 
Directors and Named Executive Officers:
5
    
Joe F. Sanderson, Jr.
6
   768,399    3.44% 
Lampkin Butts
   102,338    * 
Mike Cockrell
   85,232    * 
Tim Rigney
   15,568    * 
Fred Banks, Jr.
   26,801    * 
David Barksdale
   4,803    * 
John Bierbusse
   8,539    * 
Toni D. Cooley
   22,589    * 
Beverly Wade Hogan
   17,861    * 
Edith Kelly-Green
   3,296    * 
Phil K. Livingston
7
   10,569    * 
Suzanne T. Mestayer
   4,406    * 
Sonia Pérez
   2,972    * 
Gail Jones Pittman
   17,884    * 
All directors and executive officers as a group (14 persons)
   1,091,257    4.89% 
*
Less than 1 percent
(1)
The shares are owned of record by the beneficial owners shown with sole voting and investment power, except as set forth in the following notes.
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Table of Contents
(2)
Based on information reported in a Schedule 13G dated February 8, 2022 filed by BlackRock, Inc., 55 East 52nd Street, New York, NY 10055. The report does not specify who has sole or shared voting or investment power over the shares.
(3)
Based on information reported in Amendment No. 11 to Schedule 13G dated February 9, 2022 filed by The Vanguard Group, Inc., 100 Vanguard Blvd., Malvern, Pennsylvania 19355. The Schedule 13G states that The Vanguard Group has the sole power to vote or direct the vote of 0 shares, shared power to vote or direct the vote of 35,572 shares, sole power to dispose or direct the disposition of 2,006,808 shares, and shared power to dispose or direct the disposition of 53,437 shares.
(4)
Based on information reported in Amendment No. 2 to Schedule 13G dated February 10, 2022 filed by Nuance Investments, LLC, 4900 Main Street, Suite 220, Kansas City, MO 64112. The report states that Nuance Investments, LLC has sole voting and investment power over all the shares.
(5)
Includes: (a) shares of common stock allocated to the Employee Stock Ownership Plan (ESOP) account of the director or officer in the amounts shown in the table below, with respect to which the individual shares voting and investment power with the ESOP trustee; (b) unvested shares of restricted stock held by the director or officer in the amount shown in the table below, issued pursuant to the Sanderson Farms, Inc. and Affiliates Stock Incentive Plan, as amended, including the Management Share Purchase Plan (see “Compensation Discussion and Analysis” for a discussion of these shares); and (c) shares of common stock held in the director’s or officer’s 401(k) plan account in the amounts shown in the table below, over which the plan’s investment committee has voting power and over which the individual has investment power.
   
ESOP
Shares
   
Unvested
Restricted
Stock
   
401(k)
Plan
Shares
 
Joe F. Sanderson, Jr.
   106,696    61,750    —   
Lampkin Butts
   0    16,750    —   
Mike Cockrell
   3,074    13,250    —   
Tim Rigney
   3,343    3,000    33 
Fred Banks, Jr.
   —      5,880    —   
David Barksdale
   —      3,559    —   
John Bierbusse
   —      1,382    —   
Toni D. Cooley
   —      5,354    —   
Beverly Wade Hogan
   —      2,482    —   
Edith Kelly-Green
   —      1,773    —   
Phil K. Livingston
   —      2,631    —   
Suzanne T. Mestayer
   —      1,887    —   
Sonia Pérez
   —      2,972    —   
Gail Jones Pitman
   —      3,594    —   
(6)
The shares shown in the table include 9,808 shares owned of record by Mr. Sanderson’s wife, over which she exercises sole voting and investment power. Pursuant to Rule
13d-4
under the Exchange Act, Mr. Sanderson disclaims beneficial ownership of the 9,808 shares owned of record by his wife.
(7)
The shares shown in the table include 1,367 shares owned of record by Mr. Livingston’s wife, over which she exercises sole voting and investment power. Pursuant to Rule
13d-4
under the Exchange Act, Mr. Livingston disclaims beneficial ownership of the 1,367 shares owned of record by his wife.
The following table provides information as of October 31, 2021, with respect to compensation plans (including individual compensation arrangements) under which equity securities of the Registrant are authorized for issuance. The Registrant has no equity compensation plan not approved by security holders. All outstanding awards were issued under the Registrant’s Stock Incentive Plan approved by shareholders on February 17, 2005, as most recently amended and approved by shareholders on February 13, 2020. No further options or other awards may be granted under the Stock Option Plan. There are 4,800,000 shares of common stock authorized for issuance under the Stock Incentive Plan.
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Table of Contents
Plan Category
  
(a) Number of securities to
be issued upon exercise of
outstanding options,
warrants and rights
1
   
(b) Number of securities
remaining available for future
issuance under equity
compensation plans
(excluding securities reflected
in column (a)
2
 
Equity compensation plans approved by security holders
   170,650    712,150 
Equity compensation plans not approved by security holders
   —      —   
Total
   170,650    712,150 
(1)
This column reflects 170,650 unearned performance shares at October 31, 2021, at the maximum level. However, management could not determine that achievement of the applicable performance based criteria is probable for those unearned performance shares.
(2)
This column reflects the 1,345,680 shares of restricted stock granted to participants under the Stock Incentive Plan, the 322,262 shares of restricted stock purchased by or granted to participants under the MSPP provisions of the Stock Incentive Plan, the 981,464 earned performance shares that have been issued or are expected to be issued under the Stock Incentive Plan, and the 170,650 unearned outstanding performance shares that could be earned as described in footnote (1) above, in each case since the inception of the plan and net of recoveriesforfeitures, but including shares withheld to satisfy tax withholding obligations

27

Item 13—Certain Relationships and Related Transactions and Director Independence
Review and Approval of Certain Transactions
The Audit Committee’s charter charges it with reviewing, on an
on-going
basis, certain transactions between the Company and its directors, officers, major stockholders and certain other persons for conflicts of interest. The types of transactions that are subject to this review are those “related party transactions” that must be disclosed in our proxy statement under the rules of the SEC, which are transactions, arrangements or relationships in which we or any of our subsidiaries was or will be a participant, the amount of which involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest. A “related person” means generally:
any of our executive officers, directors, or nominees for director;
any person who is known by us to be the beneficial owner of more than 5.0 percent of our common stock; and
any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law
or
sister-in-law
of an executive officer, director, nominee for director, or a beneficial owner of more than 5.0 percent of our common stock, and any person (other than a tenant or employee) sharing the household of such person.
The Audit Committee must recommend to a special committee of qualified, independent directors whether or not the transaction should be approved. The special committee may retain independent legal, accounting, or other advisors to advise it in this process. In determining whether to approve or disapprove entry into a related party transaction, our Audit Committee takes into account, among other factors, whether the related party transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
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Table of Contents
PART
The Audit Committee was appointed by the Board of Directors to serve as the special committee to review and consider the employment by the Company of Casey Butts and Norman Butts, who are related persons because they are the son and brother, respectively, of Director and President Lampkin Butts. The Audit Committee approved their employment and compensation. The Company paid these related persons the following compensation in fiscal year 2021:
Fiscal 2021 Related Party Compensation
1
       
Non-Equity Incentive Plan
   
Aggregate
Grant Date

Fair Value
of
Restricted
Stock ($)
   
All Other
2
($)
   
Total

($)
 
Related Person/Title
  
Salary
($)
   
Maximum
Opportunity
as % of
Salary
  
Dollar
Amount
Paid
 
Casey Butts,
Staff Attorney
   353,164    45%   135,382    79,981    33,431    601,958 
Norman Butts,
Corporate Maintenance Manager
   197,694    40%   69,194    32,755    23,729    323,372 
(1)
Does not include health plan benefits, which are paid according to the same criteria applicable to all salaried employees generally.
(2)
Consists of 401(k) Plan matching contribution, ESOP allocation, dividends paid on restricted stock, vacation time sold, vaccine incentive bonus, and life insurance premium, in each case if applicable to the related person.
The Audit Committee will review the employment and compensation of Casey Butts and Norman Butts on an annual basis.
Director Independence
The current Board consists of 13 directors, three of whom are employed by the Company (Messrs. Sanderson, Butts, and Cockrell). The Board conducted an annual review and affirmatively determined that all of the
non-employee
directors other than Mr. Bierbusse (
i.e.,
Mses. Cooley, Hogan, Kelly-Green, Mestayer, Pérez and Pittman and Messrs. Banks, Barksdale, and Livingston) are “independent” under the NASDAQ standards.
Mr. Bierbusse does not meet the NASDAQ Stock Market’s definition of independent director because his brother is a “principal” in the business consulting division of Ernst & Young LLP, our independent registered public accounting firm. A “principal” is a partner who is not an accountant. Mr. Bierbusse’s brother is not involved in Ernst & Young LLP’s audit of our financial statements or any other services they provide to us and Ernst & Young LLP has concluded that his relationship to Mr. Bierbusse does not impair that firm’s independence. In addition, we believe that neither Mr. Bierbusse nor his brother have any interest in the fees we pay to Ernst & Young LLP, but if such an interest exists, it is not material. Therefore, we have not entered into a “related party transaction” that must be approved by a special committee of qualified, independent directors pursuant to the charter of the Audit Committee of our Board of Directors.
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Table of Contents
Item 14—Principal Accounting Fees and Services
Fees Paid to Ernst & Young
Ernst & Young were our independent auditors for our 2021 fiscal year. Fees for services performed by them related to fiscal years 2020 and 2021 are as follows:
   
2020
1
   
2021
 
Audit Fees
2
  $1,508,886   $1,495,106 
Audit-Related Fees
   —      —   
Tax Fees
3
   189,371    331,076 
All Other Fees
4
   —      24,125 
  
 
 
   
 
 
 
Total
  $1,698,257   $1,850,307 
(1)
Includes $49,922 of Audit Fees related to fiscal year 2020 that were not available for inclusion at the time our 2021 proxy statement was filed.
(2)
“Audit Fees” include amounts paid for the audit of the Company’s annual financial statements, reviews of the financial statements included in the Company’s Forms
10-Q,
and other regulatory filings and registration statements, and audit procedures performed with respect to the Company’s internal control over financial reporting, as required by Sarbanes-Oxley Act Section 404.
(3)
“Tax Fees” consist of amounts paid for federal and state tax consultation services and tax planning, including preparation and filing of necessary forms and documentation related to securing various federal and state tax credits, tax incentives and refunds, and a diesel engine replacement grant.
(4)
“All Other Fees” consist of amounts paid for services specifically related to the pending Merger Agreement.
The Audit Committee has considered whether the provision of services by Ernst & Young for the Company other than audit services is compatible with maintaining Ernst & Young’s independence and has concluded that it is compatible.
Audit Committee
Pre-Approval
Policies and Procedures
The Audit Committee
pre-approves
all auditing services and permitted
non-audit
services (including the fees and terms of those services) to be performed for the Company by its independent auditors prior to engagement, subject to the de minimis exceptions for
non-audit
services permitted by the Securities Exchange Act of 1934, as amended (Exchange Act) which are approved by the Audit Committee prior to the completion of the audit. The Audit Committee may form and delegate authority to subcommittees of one or more Audit Committee members, including authority to grant
pre-approvals
of audit and
non-audit
services, provided that any decision of that subcommittee to grant
pre-approval
is presented to the full Audit Committee at its next scheduled meeting. The Audit Committee chairperson is also authorized to grant preapprovals of audit and permitted
non-audit
services provided the chairperson’s decisions are reported to the full committee. For fiscal 2021, the Audit Committee
pre-approved
all
non-audit
services performed by the independent auditors.
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Table of Contents
Part IV
Item 15. 15—Exhibits, and Financial Statement Schedules.Schedules
(a)1. FINANCIAL STATEMENTS:
(a)
The following documents are filed as a part of this report:
1.
FINANCIAL STATEMENTS
The following consolidated financial statements of the Registrant are included in Item 8:8 of the Original Filing:
Consolidated Balance Sheets — October 31, 20052021 and 20042020
Consolidated Statements of IncomeOperations — Years ended October 31, 2005, 20042021, 2020 and 20032019
Consolidated Statements of Stockholders’ Equity — Years ended October 31, 2005, 20042021, 2020 and 20032019
Consolidated Statements of Cash Flows — Years ended October 31, 2005, 20042021, 2020 and 20032019
Notes to Consolidated Financial Statements — October 31, 20052021
(a)2. FINANCIAL STATEMENT SCHEDULES:
2.
FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedules of the Registrant are included in Item 8:8 of the Original Filing:
Schedule II — Valuation and Qualifying Accounts
All other schedules are omitted as they are not required, are not applicable or the required information is set forth in the Financial Statements or notes thereto.
(a) 3. EXHIBITS:
3.
EXHIBITS
The following exhibits are filed with this Annual Report or are incorporated herein by reference:
Exhibit
Number
  
Description
  2.1  
Exhibit
NumberDescription
3.1ArticlesAgreement and Plan of IncorporationMerger, dated as of the Registrant dated October 19, 1978.August 8, 2021, by and among Sanderson Farms, Inc., Walnut Sycamore Holdings LLC, Sycamore Merger Sub LLC and solely for purposes of certain provisions specified therein, Wayne Farms LLC. (Incorporated by reference to Exhibit 4.12.1 filed with the registration statementRegistrant’s Current Report on Form S-8 filed by the Registrant8-K on July 15, 2002, Registration No. 333-92412.August 9, 2021.)
  3.1  
3.2Articles of Amendment, dated March 23, 1987, to theRestated Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.23.1 filed with the registration statementRegistrant’s Quarterly Report on Form S-8 filed by10-Q for the RegistrantQuarter ended on July 15, 2002, Registration No. 333-92412.31, 2015.)
  3.2  
3.3Articles of Amendment, dated April 21, 1989, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.3 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)
3.4Certificate of Designations of Series A Junior Participating Preferred Stock of the Registrant dated April 21, 1989. (Incorporated by reference to Exhibit 4.4 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)
3.5Article of Amendment, dated February 20, 1992, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.5 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)
3.6Article of Amendment, dated February 27, 1997, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.6 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)
3.7By-LawsBylaws of the Registrant, amended and restated as of December 2, 200430, 2020. (Incorporated by reference to Exhibit 33.1 filed with the Registrant’s Current Report on Form 8-K on December 8, 2004.January 5, 2021.)

28

  4.1  
Exhibit
NumberDescription
10.1Contract dated July 31, 1964 between the Registrant and the City of Laurel, Mississippi.capital stock. (Incorporated by reference to Exhibit 10-D4.1 filed with the registration statementRegistrant’s Annual Report on Form S-1 filed by10-K for the Registrant on April 3, 1987, Registration No. 33-13141.year ended October 31, 2019.)
10.1+  
10.2Contract Amendment dated December 1, 1970 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-1 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.)
10.3Contract Amendment dated June 11, 1985 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-2 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.)
10.4Contract Amendment dated October 7, 1986 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-3 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.)
10.5 + ***Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan, as amended and restated effective November 1, 1997.2013. (Incorporated by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2013.)
10.2+  
10.6 + ***First Amendment One dated October 22, 2002 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates.
10.7 + ***Amendment Two dated December 2, 2003 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates.
10.8 + ***Amendment Three dated February 11, 2004 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates.
10.9 + ***Amendment Four dated January 1, 2003 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates.
10.10 + ***Amendment Five dated March 28, 2005 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates.
10.11 +Sanderson Farms, Inc. and Affiliates Employee Stock OptionOwnership Plan (Amended and Restateddated as of February 28, 2002).July 23, 2014. (Incorporated by reference to Exhibit 4.8 filed with10.6 to the registration statementRegistrant’s Annual Report on Form S-8 filed by10-K for the Registrant on July 15, 2002, Registration No. 333-92412.year ended October 31, 2016.)
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Table of Contents
10.3+  
10.12 +FormSecond Amendment to the Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan dated as of Nonstatutory Stock Option Agreement.May 2, 2016. (Incorporated by reference to Exhibit 4.9 filed with10.7 to the registration statementRegistrant’s Annual Report on Form S-8 filed by10-K for the Registrant on July 15, 2002, Registration No. 333-92412.year ended October 31, 2016.)
10.4+  
10.13 +Third Amendment to the Sanderson Farms, Inc. Bonus Award Program effective November 1, 2004.and Affiliates Employee Stock Ownership Plan dated as of October 20, 2016. (Incorporated by reference to Exhibit 1010.8 to the Registrant’s CurrentAnnual Report on Form 8-K filed December 8, 2004.10-K for the year ended October 31, 2016.)
10.5+  Fourth Amendment to the Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan dated as of January 19, 2017. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2017.)
10.6+  Fifth Amendment to the Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan dated as of October 19, 2017. (Incorporated by reference to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2017.)
10.14 +
10.7+  Sixth Amendment to the Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan dated as of January 16, 2020. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2020.)
10.8+Seventh Amendment to the Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan dated as of October 29, 2020. (Incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2020.)
10.9+Eighth Amendment to the Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan dated as of July 16, 2020. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2020.)
10.10+Sanderson Farms, Inc. and Affiliates Stock Incentive Plan.Plan, as amended and restated on February 13, 2020. (Incorporated by reference to Exhibit B4.3 to the Registrant’s Definitive Proxy Statementregistration statement on Form S-8 filed by the Registrant on January 14, 2005 for its Annual Meeting held February 17, 2005.27, 2020, Registration No. 333-236686.)
10.11+  
10.15 +Form of Restricted Stock Agreement between the Registrant and its non-employee directors who are granted restricted stock.Sanderson Farms, Inc. Bonus Award Program Effective November 1, 2020. (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K on March 1, 2005.January 25, 2021.)
10.12+  
10.16 +Form of Restricted Stock Agreement between Registrant and its officers and employees who are granted restricted stock.Sanderson Farms, Inc. Supplemental Disability Plan effective September 1, 2008. (Incorporated by reference to Exhibit 10.2 filed with10 to the Registrant’s Current Report on Form 8-K filed by the Registrant on October 1, 2008).

29

10.13+  
Exhibit
NumberDescription
Form 8-K on March 1, 2005.)
10.17 +Form of Share Purchase Agreement between the Registrant and its non-employee directors who participate in its management share purchase plan, as amended. (Incorporated by reference to Exhibit 10.310.2 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.April 30, 2007.)
10.14+  
10.18 +Form of Share Purchase Agreement between the Registrant and its officers and employees who participate in its management share purchase plan, as amended. (Incorporated by reference to Exhibit 10.410.1 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarterQuarter ended July 31, 2005.April 30, 2008.)
10.15+  
10.19 +Form of Restricted Stock Agreement between the Registrant and its officers and employees who are granted restricted stock.stock with a four-year vesting period (for awards granted on or after November 1, 2013). (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed December 2, 2005.)
10.20 +Form of Performance Share Agreement between Registrant and its officers and employees who are granted performance shares. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed December 2, 2005.)
10.21Memorandum of Agreement dated June 13, 1989, between Pike County, Mississippi and the Registrant. (Incorporated by reference to Exhibit 10-L filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1990.)
10.22Wastewater Treatment Agreement between the City of Magnolia, Mississippi and the Registrant dated August 19, 1991. (Incorporated by reference to Exhibit 10-M filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1991.)
10.23Memorandum of Agreement and Purchase Option between Pike County, Mississippi and the Registrant dated May 1991. (Incorporated by reference to Exhibit 10-N filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1991.)
10.24Lease Agreement between Pike County, Mississippi and the Registrant dated as of November 1, 1992. (Incorporated by reference to Exhibit 10-M filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1993.)
10.25Credit Agreement dated as of July 31, 1996 among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank, Atlanta; Deposit Guaranty National Bank; Caisse National de Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10-N to Amendment No. 1 to the Quarterly Report of the Registrant for the quarter ended July 31, 1996.)
10.26First Amendment to Credit Agreement, dated as of October 23, 1997, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.2510.14 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.2013.)
10.16+  
10.27Second Amendment to CreditForm of Restricted Stock Agreement datedbetween the Registrant and its non-employee directors who are granted restricted stock, as of July 23, 1998, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank.amended. (Incorporated by reference to Exhibit 10.2610.4 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2007.)
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Table of Contents
10.17+Form of Performance Share Agreement between the Registrant and its employees who are granted performance shares (for fiscal 2019). (Incorporated by reference to Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.2018.)
10.18+  
10.28Third Amendment to CreditForm of Performance Share Agreement dated as of July 29, 1999, bybetween the Registrant and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; First American National Bank, D/B/A Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago

30

Exhibit
NumberDescription
Branch; and Trustmark National Bank.its employees who are granted performance shares (for fiscal 2020). (Incorporated by reference to Exhibit 10.2710.17 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.2019.)
10.19+  
10.29Fourth Amendment to CreditForm of Performance Share Agreement dated as of March 17, 2000, bybetween the Registrant and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank.its employees who are granted performance shares (for fiscal 2021). (Incorporated by reference to Exhibit 10.2810.20 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.2020.)
10.20+  
10.30Fifth Amendment to CreditEmployment Agreement dated as of February 16, 2001, byNovember 1, 2015 between the Registrant and amongJoe F. Sanderson, Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank.Jr. (Incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)
10.31Sixth Amendment to Credit Agreement dated as of July 2, 2001, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10d to the Quarterly Report of the Registrant for the quarter ended January 31, 2002.)
10.32Seventh Amendment to Credit Agreement dated as of July 29, 2002, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the Quarterly Report of the Registrant for the quarter ended July 31, 2002.)
10.33Eighth Amendment to Credit Agreement dated as of July 31, 2003, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, individually and as Agent; SunTrust Bank; AmSouth Bank; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2003.)
10.34Ninth Amendment dated May 18, 2004 to Credit Agreement dated as of July 31, 1996, as amended, among Sanderson Farms, Inc., Harris Trust and Savings Bank, as agent for the Banks, and Harris Trust and Savings Bank, Sun Trust Bank, AmSouth Bank and Trustmark National Bank. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2004.)
10.35Agreement dated as of April 22, 1999 between Sanderson Farms, Inc. and Chase Mellon Shareholder Services, L.L.C. (Incorporated by reference to Exhibit 4.1 filed with the Registrant’s Current Report on Form 8-K dated April 22, 1999.8-K/A on January 13, 2016.)
10.21+  Employment Agreement dated as of November 1, 2015 between the Registrant and Lampkin Butts. (Incorporated by reference to Exhibit 10.2 filed with the Registrant’s Current Report on Form 8-K/A on January 13, 2016.)
10.22+  Employment Agreement dated as of November 1, 2015 between the Registrant and D. Michael Cockrell. (Incorporated by reference to Exhibit 10.3 filed with the Registrant’s Current Report on Form 8-K on November 2, 2015.)
10.36
10.23+  Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and Lampkin Butts. (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K on August 9, 2021.)
10.24+Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and Joe F. Sanderson, Jr. (Incorporated by reference to Exhibit 10.2 filed with the Registrant’s Current Report on Form 8-K on August 9, 2021.)
10.25+Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and Michael Cockrell. (Incorporated by reference to Exhibit 10.3 filed with the Registrant’s Current Report on Form 8-K on August 9, 2021.)
10.26Lease Agreement dated as of December 1, 2004, between Moultrie-Colquitt County Development Authority, as Lessor, and Sanderson Farms, Inc. (Processing Division) as Lessee. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.)
10.27  
10.37Bond Purchase Loan Agreement between Moultrie-Colquitt County Development Authority, as Issuer, and Sanderson Farms, Inc. (Processing Division), as Purchaser. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.)
10.28  
10.38Credit Agreement, dated November 17, 2005April 23, 2021, among Sanderson Farms, Inc. and, BMO Harris Bank, N.A., Individually and as Agentagent for the Banksbanks defined therein.therein, and the banks party thereto. (Incorporated by reference to Exhibit 10.1 tofiled with the Registrant’s Current Report on Form 8-K filed November 23, 2005. on April 28, 2021.)
10.29  
10.39Guaranty Agreement dated November 17, 2005April 23, 2021, of Sanderson Farms, Inc. (Foods Division), Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division). (Incorporated by reference to Exhibit 10.2 tofiled with the Registrant’s Current Report on Form 8-K filed November 23, 2005. on April 28, 2021.)

31

10.30  
Exhibit
NumberDescription
10.40IntercreditorLease Agreement dated as of November 17, 2005 among The Lincoln National Life Insurance Company, Harris N.A., SunTrust Bank, AmSouth Bank, U.S. Bank National Association, Regions Bank,July 1, 2006, between Adel Industrial Development Authority as Lessor, and Trustmark National Bank.Sanderson Farms, Inc. (Production Division) as Lessee. (Incorporated by reference to Exhibit 10.3 to10.1 filed with the Registrant’s CurrentQuarterly Report on Form 8-K filed November 23, 2005.10-Q for the quarter ended July 31, 2006.)
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  10.31 Bond Purchase Agreement dated as of July 31, 2006, between Sanderson Farms, Inc. (Production Division) as Purchaser and Adel Industrial Development Authority as Issuer. (Incorporated by reference to Exhibit 10.2 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2006.)
  21 List of Subsidiaries of the Registrant. (Incorporated by reference to Exhibit 21 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)
  
23* Consent of Independent Registered Public Accounting Firm. (Incorporated by reference to Exhibit 23 to the Original Filing.)
  31.1* 
31.1* Certification of Chief Executive Officer. (Incorporated by reference to Exhibit 31.1 to the Original Filing.)
  31.2* 
31.2* Certification of Chief Financial Officer. (Incorporated by reference to Exhibit 31.2 to the Original Filing.)
  
32.1*31.3** Certification of Chief Executive Officer.
Section 1350 Certification.
  
32.2*31.4** Certification of Chief Financial Officer
  32.1***Section 1350 Certification. (Incorporated by reference to Exhibit 32.1 to the Original Filing.)
  32.2***Section 1350 Certification. (Incorporated by reference to Exhibit 32.2 to the Original Filing.)
101.INSXBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema
101.CALXBRL Taxonomy Extension Calculation Linkbase
101.DEFXBRL Taxonomy Extension Definition Linkbase
101.LABXBRL Taxonomy Extension Label Linkbase
101.PREXBRL Taxonomy Extension Presentation Linkbase
104Cover Page Interactive Data File (embedded within the Inline XBRL document).
 
*
Filed herewith.previously with the Original Filing.
**Furnished
Filed herewith.
***Filed previously.
Furnished previously with the Original Filing.
+
Management contract or compensatory plan or arrangement.
(b) Agreements Available Upon Request by the Commission.
The Registrant’s credit agreement with the banks for which Harris Trust and Savings Bank acts as agent is filed or incorporated by reference as an exhibit to this report. The Registrant is a party to various other agreements defining the rights
60
Table of holders of long-term debt of the Registrant, but, of those other agreements, no single agreement authorizes securities in an amount which exceeds 10% of the total assets of the Company. Upon request of the Commission, the Registrant will furnish a copy of any such agreement to the Commission. Accordingly, such agreements are omitted as exhibits as permitted by Item 601(b)(4)(iii) of Regulation S-K.Contents
QUALIFICATION BY REFERENCE
Any statement contained in this Annual Report concerning the contents of any contract or other document filed as an exhibit to this Annual Report or incorporated herein by reference is not necessarily complete, and in each instance reference is made to the copy of the document filed.

32

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized.
SANDERSON FARMS, INC.
By:/s/ D. Michael Cockrell
Treasurer and Chief Financial Officer
Date: June 28, 2006

33

EXHIBITS:
     The following exhibits are filed with this Annual Report or are incorporated herein by reference:
Exhibit
NumberDescription
3.1Articles of Incorporation of the Registrant dated October 19, 1978. (Incorporated by reference to Exhibit 4.1 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)
3.2Articles of Amendment, dated March 23, 1987, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.2 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)
3.3Articles of Amendment, dated April 21, 1989, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.3 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)
3.4Certificate of Designations of Series A Junior Participating Preferred Stock of the Registrant dated April 21, 1989. (Incorporated by reference to Exhibit 4.4 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)
3.5Article of Amendment, dated February 20, 1992, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.5 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)
3.6Article of Amendment, dated February 27, 1997, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.6 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)
3.7By-Laws of the Registrant, amended and restated as of December 2, 2004 (Incorporated by reference to Exhibit 3 filed with the Registrant’s Current Report on Form 8-K on December 8, 2004.)
10.1Contract dated July 31, 1964 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.)
10.2Contract Amendment dated December 1, 1970 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-1 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.)
10.3Contract Amendment dated June 11, 1985 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-2 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.)
10.4Contract Amendment dated October 7, 1986 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-3 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.)
10.5 + ***Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates, amended and restated effective November 1, 1997.
10.6 + ***Amendment One dated October 22, 2002 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates.
10.7 + ***Amendment Two dated December 2, 2003 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates.

34

Exhibit
NumberDescription
10.8 + ***Amendment Three dated February 11, 2004 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates.
10.9 + ***Amendment Four dated January 1, 2003 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates.
10.10 + ***Amendment Five dated March 28, 2005 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates.
10.11 +Sanderson Farms, Inc. and Affiliates Stock Option Plan (Amended and Restated as of February 28, 2002). (Incorporated by reference to Exhibit 4.8 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)
10.12 +Form of Nonstatutory Stock Option Agreement. (Incorporated by reference to Exhibit 4.9 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.)
10.13 +Sanderson Farms, Inc. Bonus Award Program effective November 1, 2004. (Incorporated by reference to Exhibit 10 to the Registrant’s Current Report on Form 8-K filed December 8, 2004.)
10.14 +Sanderson Farms, Inc. and Affiliates Stock Incentive Plan. (Incorporated by reference to Exhibit B to the Registrant’s Definitive Proxy Statement filed on January 14, 2005 for its Annual Meeting held February 17, 2005.)
10.15 +Form of Restricted Stock Agreement between the Registrant and its non-employee directors who are granted restricted stock. (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K on March 1, 2005.)
10.16 +Form of Restricted Stock Agreement between Registrant and its officers and employees who are granted restricted stock. (Incorporated by reference to Exhibit 10.2 filed with the Registrant’s Current Report on Form 8-K on March 1, 2005.)
10.17 +Form of Agreement between Registrant and its non-employee directors who participate in its management share purchase plan, as amended. (Incorporated by reference to Exhibit 10.3 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.)
10.18 +Form of Agreement between Registrant and its officers and employees who participate in its management share purchase plan, as amended. (Incorporated by reference to Exhibit 10.4 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.)
10.19 +Form of Restricted Stock Agreement between Registrant and its officers and employees who are granted restricted stock. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed December 2, 2005.)
10.20 +Form of Performance Share Agreement between Registrant and its officers and employees who are granted performance shares. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed December 2, 2005.)
10.21Memorandum of Agreement dated June 13, 1989, between Pike County, Mississippi and the Registrant. (Incorporated by reference to Exhibit 10-L filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1990.)
10.22Wastewater Treatment Agreement between the City of Magnolia, Mississippi and the Registrant dated August 19, 1991. (Incorporated by reference to Exhibit 10-M filed with the Registrant’s Annual Report

35

Exhibit
NumberDescription
on Form 10-K for the year ended October 31, 1991.)
10.23Memorandum of Agreement and Purchase Option between Pike County, Mississippi and the Registrant dated May 1991. (Incorporated by reference to Exhibit 10-N filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1991.)
10.24Lease Agreement between Pike County, Mississippi and the Registrant dated as of November 1, 1992. (Incorporated by reference to Exhibit 10-M filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1993.)
10.25Credit Agreement dated as of July 31, 1996 among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank, Atlanta; Deposit Guaranty National Bank; Caisse National de Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10-N to Amendment No. 1 to the Quarterly Report of the Registrant for the quarter ended July 31, 1996.)
10.26First Amendment to Credit Agreement, dated as of October 23, 1997, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)
10.27Second Amendment to Credit Agreement, dated as of July 23, 1998, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)
10.28Third Amendment to Credit Agreement, dated as of July 29, 1999, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; First American National Bank, D/B/A Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)
10.29Fourth Amendment to Credit Agreement, dated as of March 17, 2000, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)
10.30Fifth Amendment to Credit Agreement, dated as of February 16, 2001, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)
10.31Sixth Amendment to Credit Agreement dated as of July 2, 2001, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10d to the Quarterly Report of the Registrant for the quarter ended January 31, 2002.)
10.32Seventh Amendment to Credit Agreement dated as of July 29, 2002, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the Quarterly Report of the Registrant for the quarter ended July 31, 2002.)
10.33Eighth Amendment to Credit Agreement dated as of July 31, 2003, by and among Sanderson Farms,

36

Exhibit
NumberDescription
Inc.; Harris Trust and Savings Bank, individually and as Agent; SunTrust Bank; AmSouth Bank; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2003.)
10.34Ninth Amendment dated May 18, 2004 to Credit Agreement dated as of July 31, 1996, as amended, among Sanderson Farms, Inc., Harris Trust and Savings Bank, as agent for the Banks, and Harris Trust and Savings Bank, Sun Trust Bank, AmSouth Bank and Trustmark National Bank. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2004.)
10.35Agreement dated as of April 22, 1999 between Sanderson Farms, Inc. and Chase Mellon Shareholder Services, L.L.C. (Incorporated by reference to Exhibit 4.1 filed with the Registrant’s Current Report on Form 8-K dated April 22, 1999.)
10.36Lease Agreement dated as of December 1, 2004 between Moultrie-Colquitt County Development Authority, as Lessor, and Sanderson Farms, Inc. (Processing Division) as Lessee. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.)
10.37Bond Purchase Loan Agreement between Moultrie-Colquitt County Development Authority, as Issuer, and Sanderson Farms, Inc. (Processing Division), as Purchaser. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.)
10.38Credit Agreement dated November 17, 2005 among Sanderson Farms, Inc. and Harris N.A., Individually and as Agent for the Banks defined therein. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 23, 2005.)
10.39Guaranty Agreement dated November 17, 2005 of Sanderson Farms, Inc. (Foods Division), Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division). (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed November 23, 2005.)
10.40Intercreditor Agreement dated as of November 17, 2005 among The Lincoln National Life Insurance Company, Harris N.A., SunTrust Bank, AmSouth Bank, U.S. Bank National Association, Regions Bank, and Trustmark National Bank. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed November 23, 2005.)
21List of Subsidiaries of the Registrant. (Incorporated by reference to Exhibit 21 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.)
23*Consent of Independent Registered Public Accounting Firm.
31.1*Certification of Chief Executive Officer.
31.2*Certification of Chief Financial Officer.
32.1**Section 1350 Certification.
32.2**Section 1350 Certification.
 
*
SANDERSON FARMS, INC.
By:
 Filed herewith.
/s/ D. Michael Cockrell
** Furnished herewith.
D. Michael Cockrell
Treasurer, Chief Financial Officer and Chief Legal Officer
***Filed previously.
+Management contract or compensatory plan or arrangement.
Date: February 28, 2022

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