UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
___________________________
FORM 10-Q
___________________________
(MARK ONE)
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 20182021
OR
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file numbernumber: 1-14977
___________________________
Sanderson Farms, Inc.
(Exact name of registrant as specified in its charter)
___________________________
Mississippi64-0615843
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
127 Flynt Road, Laurel, Mississippi39443
(Address of principal executive offices)(Zip Code)
127 Flynt Road, Laurel, Mississippi                     39443
     (Address of principal executive offices)                     (Zip Code)
(601) 649-4030
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report.)
___________________________Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $1 par value per shareSAFMNASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x☒    No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x☒    No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer☒Accelerated filer☐
Large accelerated filerxAccelerated filer¨
Non-accelerated filer
¨  (Do not check if a smaller reporting company)☐
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨☐    No  x☒
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ¨☐    No  ¨☐
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Stock, $1 Par Value Per Share: 22,835,77422,330,394 shares outstanding as of February 19, 2018.
23, 2021.


INDEX
Table of Contents
TABLE OF CONTENTS
SANDERSON FARMS, INC. AND SUBSIDIARIES

3
Item 1.
3
3
Condensed consolidated statements of operations—Three months ended January 31, 20182021 and 20172020
4
Condensed consolidated statements of stockholders' equity—Three months ended January 31, 2021 and 2020
5
Condensed consolidated statements of cash flows—Three months ended January 31, 20182021 and 20172020
56
67
Item 2.
14
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
1519
Item 3.
2430
Item 4.
2531
2531
Item 1.
2531
Item 1A.
2731
Item 2.
2832
Item 6.
2933
3034
3135

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Table of Contents
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Item 1.    Financial Statements
SANDERSON FARMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except number of shares)
January 31,
2018		 October 31,
2017		January 31,
2021		October 31,
2020
(Unaudited) (Note 1) (Unaudited)(Note 1)
Assets   Assets
Current assets:   Current assets:
Cash and cash equivalents$388,896
 $419,285
Cash and cash equivalents$50,090 $49,061 
Accounts receivable, net134,045
 138,868
Accounts receivable, net167,711 147,546 
Inventories253,081
 252,765
Inventories325,672 290,007 
Refundable income taxesRefundable income taxes31,901 33,977 
Prepaid expenses and other current assets43,497
 38,620
Prepaid expenses and other current assets61,735 57,544 
Total current assets819,519
 849,538
Total current assets637,109 578,135 
Property, plant and equipment1,700,092
 1,657,084
Less accumulated depreciation(804,382) (780,276)
895,710
 876,808
Property, plant and equipment, netProperty, plant and equipment, net1,223,169 1,224,746 
Right of use assetsRight of use assets36,894 40,785 
Other assets6,995
 6,897
Other assets5,092 5,365 
Total assets$1,722,224
 $1,733,243
Total assets$1,902,264 $1,849,031 
Liabilities and stockholders’ equity   Liabilities and stockholders’ equity
Current liabilities:   Current liabilities:
Accounts payable$104,990
 $90,904
Accounts payable$131,332 $111,463 
Dividends payable7,305
 —
Dividends payable9,823 0 
Accrued expenses56,606
 101,168
Accrued expenses94,277 98,663 
Accrued income taxes6,649
 6,649
Lease liabilitiesLease liabilities14,253 13,981 
Total current liabilities175,550
 198,721
Total current liabilities249,685 224,107 
Long-term debtLong-term debt55,000 25,000 
Claims payable and other liabilities10,481
 9,762
Claims payable and other liabilities12,615 12,175 
Deferred income taxes57,862
 91,898
Deferred income taxes142,841 141,672 
Long-term lease liabilitiesLong-term lease liabilities22,641 26,804 
Commitments and contingencies
 
Commitments and contingencies00
Stockholders’ equity:   Stockholders’ equity:
Preferred Stock:
 
Preferred Stock:
Series A Junior Participating Preferred Stock, $100 par value: authorized 500,000 shares, none issued
 
Par value to be determined by the Board of Directors: authorized 4,500,000 shares; none issued
 
Common Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares—22,828,898 and 22,802,690 at January 31, 2018 and October 31, 2017, respectively22,829
 22,803
Series A Junior Participating Preferred Stock, $100 par value: authorized 500,000 shares, NaN issuedSeries A Junior Participating Preferred Stock, $100 par value: authorized 500,000 shares, NaN issued00
Par value to be determined by the Board of Directors: authorized 4,500,000 shares; NaN issuedPar value to be determined by the Board of Directors: authorized 4,500,000 shares; NaN issued00
Common Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares—22,325,635 and 22,251,071 at January 31, 2021 and October 31, 2020, respectivelyCommon Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares—22,325,635 and 22,251,071 at January 31, 2021 and October 31, 2020, respectively22,326 22,251 
Paid-in capital136,541
 134,999
Paid-in capital90,900 90,420 
Retained earnings1,318,961
 1,275,060
Retained earnings1,306,256 1,306,602 
Total stockholders’ equity1,478,331
 1,432,862
Total stockholders’ equity1,419,482 1,419,273 
Total liabilities and stockholders’ equity$1,722,224
 $1,733,243
Total liabilities and stockholders’ equity$1,902,264 $1,849,031 
See notes to condensed consolidated financial statements.

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Table of Contents
SANDERSON FARMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
Three Months Ended 
 January 31,		Three Months Ended 
 January 31,
2018 2017 20212020
Net sales$771,948
 $688,346
Net sales$909,306 $823,078 
Cost and expenses:   Cost and expenses:
Cost of sales702,101
 606,391
Cost of sales839,322 823,524 
Selling, general and administrative52,575
 46,070
Selling, general and administrative56,599 49,485 
754,676
 652,461
895,921 873,009 
Operating Income17,272
 35,885
Operating income (loss)Operating income (loss)13,385 (49,931)
Other income (expense):   Other income (expense):
Interest income419
 195
Interest expense(523) (432)Interest expense(638)(1,188)
Other2
 2
Other3 2 
(102) (235)(635)(1,186)
Income before income taxes17,170
 35,650
Income (loss) before income taxesIncome (loss) before income taxes12,750 (51,117)
Income tax expense (benefit)(34,036) 11,625
Income tax expense (benefit)3,272 (12,541)
Net income$51,206
 $24,025
Earnings per share:   
Net income (loss)Net income (loss)$9,478 $(38,576)
Earnings (loss) per share:Earnings (loss) per share:
Basic$2.24
 $1.06
Basic$0.42 $(1.76)
Diluted$2.24
 $1.06
Diluted$0.42 $(1.76)
Dividends per share$0.32
 $0.24
Dividends per share$0.44 $0.32 
See notes to condensed consolidated financial statements.



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Table of Contents
SANDERSON FARMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(In thousands, except shares and per share amounts)
Fiscal Year 2020Common StockPaid-In
Capital		Retained
Earnings		Total
Stockholders’
Equity
SharesAmount
Balance at October 31, 201922,203,920 $22,204 $86,010 $1,309,461 $1,417,675 
Net loss - first quarter 2020— — — (38,576)(38,576)
Cash dividends ($0.32 per share)— — — (7,113)(7,113)
Stock compensation plan transactions25,292 25 (4,721)— (4,696)
Amortization of unearned compensation— — 2,082 — 2,082 
Balance at January 31, 202022,229,212 $22,229 $83,371 $1,263,772 $1,369,372 



Fiscal Year 2021Common StockPaid-In
Capital		Retained
Earnings		Total
Stockholders’
Equity
SharesAmount
Balance at October 31, 202022,251,071 $22,251 $90,420 $1,306,602 $1,419,273 
Net income - first quarter 2021— — — 9,478 9,478 
Cash dividends ($0.44 per share)— — — (9,824)(9,824)
Stock compensation plan transactions74,564 75 (1,667)— (1,592)
Amortization of unearned compensation— — 2,147 — 2,147 
Balance at January 31, 202122,325,635 $22,326 $90,900 $1,306,256 $1,419,482 
See notes to condensed consolidated financial statements.
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Table of Contents
SANDERSON FARMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended 
 January 31,		 Three Months Ended 
 January 31,
2018 2017 20212020
Operating activities   Operating activities
Net income$51,206
 $24,025
Net income (loss)Net income (loss)$9,478 $(38,576)
Adjustments to reconcile net income to net cash provided by operating activities:   Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization26,630
 22,641
Depreciation and amortization40,566 36,697 
Non-cash stock compensation6,230
 5,685
Amortization of share-based compensationAmortization of share-based compensation2,671 2,747 
Live inventory adjustment (net of prior period reversal)Live inventory adjustment (net of prior period reversal)0 (2,800)
Deferred income taxes(34,036) 11,927
Deferred income taxes1,169 5,169 
(Gain) loss on asset disposals(Gain) loss on asset disposals(48)15 
Change in assets and liabilities:   Change in assets and liabilities:
Accounts receivable, net4,823
 8,715
Accounts receivable - tradeAccounts receivable - trade(20,165)(7,289)
Accounts receivable - insuranceAccounts receivable - insurance0 445 
Income taxes—
 (20,232)Income taxes2,076 (15,888)
Inventories(316) (16,047)Inventories(35,665)(2,228)
Prepaid expenses and other assets(5,237) (3,194)Prepaid expenses and other assets(4,191)(10,181)
Right of use assetsRight of use assets3,891 4,856 
Lease liabilitiesLease liabilities(3,891)(4,856)
Accounts payable19,984
 13,871
Accounts payable17,995 (17,225)
Accrued expenses and other liabilities(44,316) (7,939)Accrued expenses and other liabilities(4,455)(16,747)
Total adjustments(26,238) 15,427
Total adjustments(47)(27,285)
Net cash provided by operating activities24,968
 39,452
Net cash provided by (used in) operating activitiesNet cash provided by (used in) operating activities9,431 (65,861)
Investing activities   Investing activities
Capital expenditures(51,734) (46,265)Capital expenditures(36,859)(71,245)
Net proceeds from sale of property and equipment566
 302
Net proceeds from sale of property and equipment65 65 
Net cash used in investing activities(51,168) (45,963)Net cash used in investing activities(36,794)(71,180)
Financing activities   Financing activities
Borrowings from revolving line of creditBorrowings from revolving line of credit30,000 110,000 
Proceeds from issuance of restricted stock under stock compensation plans659
 187
Proceeds from issuance of restricted stock under stock compensation plans265 268 
Payments from issuance of common stock under stock compensation plans(4,848) (1,966)Payments from issuance of common stock under stock compensation plans(1,873)(5,228)
Net cash used in financing activities(4,189) (1,779)
Net cash provided by financing activitiesNet cash provided by financing activities28,392 105,040 
Net change in cash and cash equivalents(30,389) (8,290)Net change in cash and cash equivalents1,029 (32,001)
Cash and cash equivalents at beginning of period419,285
 234,111
Cash and cash equivalents at beginning of period49,061 95,417 
Cash and cash equivalents at end of period$388,896
 $225,821
Cash and cash equivalents at end of period$50,090 $63,416 
Supplemental disclosure of non-cash financing activity:   
Supplemental disclosure of non-cash investing and financing activities:Supplemental disclosure of non-cash investing and financing activities:
Capital expenditures included in accounts payableCapital expenditures included in accounts payable$5,405 $7,026 
Dividends payable$(7,305) $(5,458)Dividends payable$9,823 $7,113 
See notes to condensed consolidated financial statements.

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Table of Contents
SANDERSON FARMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
January 31, 20182021
NOTE 1—ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the three months ended January 31, 20182021 are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2018.2021.
The condensed consolidated balance sheet at October 31, 20172020 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for its fiscal year ended October 31, 2017.2020.
New Accounting Pronouncements
In July 2015,June 2016, the Financial Accounting Standards Board ("FASB") issued guidance that requires an entity to measure inventory at the lower of cost or net realizable value. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2016, our fiscal 2018. The Company adopted this guidance during the first quarter of fiscal 2018, and it did not have a material effect on the Company's consolidated financial statements.
During the third quarter of fiscal 2017, the Company early-adopted Accounting Standards Update ("ASU") 2016-09, Improvements2016-13, Financial Instruments - Credit Losses, to Employee Share-Based Payment Accounting. The provisions of this update that materially affectedprovide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. We adopted ASU 2016-13 during our consolidated financial statements, or could potentially materially affect them in the future, require all income tax effects of stock awards to be recognized in the statement of operations during the period the awards vest or are settled, rather than recording excess tax benefits or deficiencies in additional paid-in capital, and require the related amounts to be presented as operating activities on the statement of cash flows, rather than financing activities. During the period of adoption, the standard requires the Company to account for the transactions as if the standard had been adopted on the first day of the fiscal year in which it was adopted. As a result of adoption, our income tax expense for the first quarter of fiscal 2017 was reduced by approximately $852,000 from excess tax benefits attributable to awards that vested during the first quarter of fiscal 2017. As a result, the income tax expense on the statement of operations for the three months ended January 31, 2017 on this Form 10-Q is $852,000 less than the amount originally reported in our financial statements for the first quarter of fiscal 2017. Additionally, excess tax benefits are now presented as operating activities on the statement of cash flows, rather than financing activities. The Company chose to apply that provision retrospectively,2021, and as a result, reclassified the $2.2 million of excess tax benefits originally reported in our financial statements for the first quarter of fiscal 2017 from financing activities to operating activities on the statement of cash flows for the three months ended January 31, 2017 in this Form 10-Q. Additional provisions from this guidance relate to accounting for forfeitures and the presentation of an employee's use of shares to satisfy the employer's statutory tax withholding obligations. Adoption of those two provisionsadoption did not have a material effect on our consolidated financial statements. The Company has electedUnder the new standard, we are required to accountrecord on our balance sheet an allowance for forfeitures as they occur, rather than estimating forfeitures when determining the amount of compensation cost to recognize each period. The Company will continue to present employees' use of shares to satisfy our statutory withholding obligations as financing activitiesexpected credit losses, which is estimated utilizing historical experience and current and expected economic conditions. Our allowance for expected credit losses is recorded on the statementaccounts receivable, net line of cash flows.the Condensed Consolidated Balance Sheets and is immaterial to our financial position.
In May 2017,December 2019, the FASB issued ASU 2017-09, Scope of Modification2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which amends the requirementsis intended to simplify various aspects related to accounting for changesincome taxes. ASU 2019-12 removes certain exceptions to stock compensation awards. Thethe general principles in Accounting Standards Codification 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for interim and annual periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted. The impact this guidance will have on our consolidated financial statements will depend on the nature and extent of future changes, if any, to the terms and conditions of the Company's Stock Incentive Plan.
In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost. The guidance requires the service cost component of defined benefit pension plans and other post-retirement benefit plans to be reported in the same line item or items as other compensation costs arising from the services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be reported outside of operating income. The guidance is effective for interim and annual periods beginning after December 15, 2017, our

fiscal 2019. Early adoption is permitted. We do not expect adoption to have a material effect on our consolidated financial statements.
In February 2016, the FASB issued guidance which is intended to increase transparency and comparability among companies by requiring an entity that is a lessee to recognize on the balance sheet the right-of-use assets and lease liabilities arising from all leases with terms, as defined by the guidance, of greater than twelve months. The guidance also requires disclosures of key information about the leasing arrangements. The guidance is effective for annual reporting periods, and interim periods within those annual reporting periods, beginning after December 15, 2018,2020, our fiscal 2020. Early adoption is permitted. The Company is2022. We are currently evaluating the impact of this new guidance will have on our consolidated financial statements.
In May 2014,March 2020, the FASB issued ASU 2014-09, Revenue from Contracts with Customers,2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which changes theprovides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, for recognizing revenue. ASU 2014-09 was amended by ASU 2015-14that reference LIBOR or another reference rate expected to defer thebe discontinued. This guidance, which became effective date by one year. The guidance also modifies the related disclosure requirements, clarifies guidance for multiple-element arrangementson March 12, 2020, and provides guidance for transactions that werecan be applied through December 31, 2022, has not addressed fully in previous guidance. The guidance, as amended, is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2016. Companies have the option to adopt retrospectively or modified retrospectively with a cumulative effect adjustment. The Company expects to adopt this standard as of November 1, 2018, the beginning of our fiscal 2019, using the modified retrospective approach. The Company is currently evaluating the impact this guidance will have onaffected our consolidated financial statements. AlthoughWe have a revolving credit facility that references LIBOR, and we are still evaluating the impact, we do not currently expect adoptionassessing how this standard may be applied to have a material effect on our consolidated financial statements, other than additional disclosure requirements.specific contract modifications through December 31, 2022.
NOTE 2—REVENUE
Revenue Recognition
The Company recognizes revenue in connection with a contract in which the Company has agreed to sell, and a customer has agreed to purchase, specific quantities of product at agreed-upon prices and when the Company's performance obligation related to that contract has been satisfied. In the majority of its contracts with customers, the Company's performance obligation is satisfied when delivery of the product has occurred, either at the customer's facility or the Company's facility, depending on the terms of each contract. In a smaller number of contracts, ownership of the product passes from the Company to the customer at some point during transit, at which time the performance obligation is satisfied and revenue is recognized. Revenue and related receivables are recognized based on the transaction price within the contract and are reduced by estimated or known amounts for items such as rebates, discounts, cooperative advertising allowances and other various items.
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The cost incurred for shipping and handling activities to deliver the product to the customer is recognized in cost of sales during the period in which the corresponding revenue is recognized. Where shipping and handling activities occur after the customer has obtained control of the product, the Company has elected to account for those expenses as fulfillment costs in cost of sales, rather than an additional promised service. Revenue is reported gross of any freight charge that is separately invoiced to a customer, and all freight costs are accounted for as cost of sales.
Due to the nature of our contracts, commissions associated with such contracts provide only a short-term benefit (i.e. less than one year); therefore, we recognize costs of commissions paid to third-party brokers as selling, general and administrative expenses.
Disaggregation of Revenue
The following tables disaggregate our net sales by product category:
Product CategoryThree Months Ended January 31, 2021Three Months Ended January 31, 2020
(in thousands)
Fresh, chill-packed chicken$376,252 $287,267 
Fresh, vacuum-sealed chicken294,118 311,296 
Fresh, ice-packed chicken131,681 120,463 
Frozen chicken63,403 46,674 
Prepared chicken38,915 51,382 
Other4,937 5,996 
Total net sales$909,306 $823,078 
NOTE 3—INVENTORIES
Inventories consisted of the following:
Inventory typeJanuary 31, 2021October 31, 2020
(in thousands)
Live poultry-broilers and breeders$209,008 $180,013 
Feed, eggs and other63,862 53,318 
Processed poultry30,596 32,952 
Prepared chicken13,452 16,142 
Packaging materials8,754 7,582 
Total Inventories$325,672 $290,007 
 January 31, 2018 October 31, 2017
 (In thousands)
Live poultry-broilers and breeders$164,894
 $161,575
Feed, eggs and other39,077
 35,361
Processed poultry31,855
 37,769
Prepared chicken10,964
 12,207
Packaging materials6,291
 5,853
 $253,081
 $252,765
NOTE 3—4—PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net, consisted of the following:
DescriptionJanuary 31, 2021October 31, 2020
(in thousands)
Land and buildings$936,590 $931,674 
Machinery and equipment1,357,018 1,350,725 
Work-in-process43,449 16,914 
2,337,057 2,299,313 
Less accumulated depreciation(1,113,888)(1,074,567)
Property, plant and equipment, net$1,223,169 $1,224,746 
NOTE 5—STOCK COMPENSATION PLANS
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Refer to Note 810 and Note 911 of the Company’s October 31, 20172020 audited financial statements in the Company's 20172020 Annual Report on Form 10-K for further information on our employee benefit plans and stock based compensation plans, respectively. Total stock based compensation expense during the three months ended January 31, 20182021 was $6.2$2.7 million as compared to total stock based compensation expense of $5.7$2.7 million for the three months ended January 31, 2017.2020.
During the three months ended January 31, 2018,2021, participants in the Company’s Management Share Purchase Plan (MSPP)("MSPP") elected to receive a total of 4,6242,004 shares of restricted stock at an average price of $142.25$132.20 per share instead of a specified percentage of their cash compensation, and the Company issued 1,116479 matching restricted shares. During the three months ended January 31, 2018,2021, the Company recorded compensation expense for the MSPP shares, included in the total stock based compensation expense above, of $62,000$75,000, as compared to $60,000$56,000 during the three months ended January 31, 2017.2020.
During fiscal 2018, 20172021, 2020 and 2016,2019, the Company entered into performance share agreements that grant certain officers and key employees the right to receive shares of the Company's common stock, subject to the Company's achievement of certain performance measures. The performance share agreements specify a target number of shares that a participant can receive based upon the Company's average return on equity and average return on sales, as defined, during a two-year performance period beginning November 1 of each performance period. Although the performance share agreements have a two-year performance period, they are subject tothere is an additional one-year period during which the participant must remain employed by the Company before theythe shares are paid out. If the Company's average return on equity and average return on sales meet or exceed certain threshold amounts for the performance period, participants will receive 50 percent to 200 percent of the target number of

shares, depending upon the Company's level of performance. Accruals for performance shares begin during the period management determines that achievement of the applicable performance based criteria is probable at some level. In estimating the probability of the number of shares that will be awarded, the Company considers, among other factors, current and projected grain costs and chicken volumes and pricing, as well as the amount of the Company's commitments to procure grain at a fixed price throughout the performance period. Due to the high level of volatility of these commodity prices and the impact that the change in pricing can have on the Company's results, the Company's assessment of probability can change from period to period and can result in a significant revision to the amounts accrued related to the arrangements, as the accruals are adjusted using the cumulative catch-up method of accounting.
The target number of shares specified in the performance share agreements entered intoexecuted on November 1, 20172020 totaled 53,850.87,350. As of January 31, 2018,2021, the Company could not determine that achievement of the applicable performance based criteria is probable due to operating results to date and the uncertainties discussed above, and therefore recorded no0 compensation expense related to those agreements.
The Company also has performance share agreements in place with certain officers and key employees that were entered into on November 1, 2016. During the quarter ended2019. The target number of shares specified in those agreements totaled 56,575. As of January 31, 2018,2021, the Company determinedcould not determine that achievement of the applicable performance based criteria is probable due to operating results to date and the uncertainties discussed above, and therefore recorded 0 compensation expense related to those agreements.
The performance period has lapsed for the November 1, 2016performance share agreements is probable at a level between the target and maximum levels. Accordingly, because the accrual is made using the cumulative catch-up method, the quarter ended January 31, 2018 includes compensation expense of $3.3 million, as compared to no compensation expense recorded during the quarter ended January 31, 2017 related to the agreementsthat were entered into on November 1, 2016. As of January 31, 2018, the aggregate number of shares estimated to be awarded related to the performance share agreements entered into on November 1, 2016 totaled 87,138 shares. The actual number of shares that can be awarded for those agreements could change materially from that estimate due toand the Company's actual performance duringaverage return on equity and average return on sales did not meet the remaining nine months of the performance period ending October 31, 2018, and due to potential forfeitures. The Company will recognize the remaining unearned compensation related to these shares over the remaining service period.
The Compensation Committee of the Company's Board of Directors has determined that the performance share agreements entered into on November 1, 2015 have been earned atthreshold amounts defined by those agreements. As a level between the target and maximum levels, subject to the satisfaction of the additional one-year service period ending on October 31, 2018. Accordingly, the three months ended January 31, 2018 includeresult, 0 compensation expense of $0.8 millionhas been recorded related to those agreements, as compared to compensation expense of $3.3 million during the three months ended January 31, 2017. Because management's initial determination of probability was made during the three months ended January 31, 2017, and because the accrual is made using the cumulative catch-up method, the compensation expense recorded during the three months ended January 31, 2017 related to the agreements entered into on November 1, 2015 was greater than that recorded during the first quarter of fiscal 2018. As of January 31, 2018, the aggregate number of shares estimated to be awarded related to the performance share agreements entered into on November 1, 2015 totaled 145,741 shares. Since the performance period for those agreements has ended, the actual number of shares that will be awarded can change only due to potential forfeitures during the remaining nine months of the service period ending October 31, 2018. The Company will recognize the remaining unearned compensation related to these shares over the remaining service period.agreements.
Had the Company determined that it was probable that the maximum amount of those outstanding awards from the agreements entered into on November 1, 20162019 and November 1, 20172020 would be earned, an additional $1.8$7.5 million and $1.3$1.9 million of compensation expense, respectively, would have been accrued as of January 31, 2018.2021.
The Company's compensation costexpense related to performance share agreements is summarized as follows (in thousands, except number of shares):
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    Three months ended
Date of Performance Share Agreement Number of shares issued (actual (a) or estimated (e)) January 31, 2018 January 31, 2017
November 1, 2014 102,193 (a) $—
 $634
November 1, 2015 145,741 (e) 846
 3,291
November 1, 2016 87,138 (e) 3,326
 —
November 1, 2017 (1) — (e) —
 —
Total compensation cost   $4,172
 $3,925


Three Months Ended
Date of Performance Share AgreementNumber of shares issued (actual (a) or estimated (e))January 31, 2021January 31, 2020
November 1, 201713,055 (a)$0 $190 
November 1, 20180 (a)0 0 
November 1, 2019 (1)0 (e)0 0 
November 1, 2020 (1)0 (e)0 0 
Total performance share compensation expense$0 $190 
Note (1) - As of January 31, 2018,2021, the Company could not determine that achievement of the applicable performance-based criteria is probable for the agreements entered into on November 1, 20172019 and November 1, 2020, due to the uncertainties discussed above, and therefore recorded no compensation expense related to those agreements.
On November 1, 2017,2020, the Company granted 53,85087,350 shares of restricted stock to certain officers and key management employees. The restricted stock had a grant date fair value of $148.23$127.97 per share and will vest on November 1, 2021.2024. On February 15, 2018,18, 2021, the Company granted an aggregate of 11,4009,760 shares of restricted stock to all of its non-employee directors. The restricted stock had a grant date fair value of $131.61$153.65 per share and vests one, two or three years from the date of grant. The Company also has unvested restricted stock grants outstanding that were granted during prior fiscal years to its officers, key employees and outside directors. The aggregate number of shares outstanding at January 31, 20182021 related to all unvested restricted stock grants totaled 282,854.286,178. During the three months ended January 31, 2018,2021, the Company recorded compensation expense, included in the total stock based compensation expense above, of $2.0$2.6 million related to restricted stock grants, as compared to $1.7$2.5 million during the three months ended January 31, 2017.2020. The Company had $15.9$21.9 million in unrecognized share-based compensation costsexpense as of January 31, 2018, that2021, which will be recognized over a weighted average remaining vesting period of approximately 2 years, 5 months.1 month.
NOTE 4—6—EARNINGS PER SHARE
Certain share-based payment awards described in Note 35 - Stock Compensation Plans above entitling holders to receive non-forfeitable dividends before vesting are considered participating securities and thus are included in the calculation of basic earnings per share, to the extent they are dilutive. These awards are included in the calculation of basic earnings per share under the two-class method. The two-class method allocates earnings for the period between common shareholders and other security holders. The participating awards receiving dividends are allocated the same amount of income as if they were vested shares.
The following table presentstables present earnings per share.share:
 Three Months Ended
 January 31, 2021January 31, 2020
 (in thousands except per share amounts)
Net income (loss)$9,478 $(38,576)
Distributed and undistributed (earnings) to unvested restricted stock(133)0 
Distributed and undistributed earnings (loss) to common shareholders—Basic$9,345 $(38,576)
Weighted average shares outstanding—Basic22,010 21,935 
Weighted average shares outstanding—Diluted22,010 21,935 
Earnings (loss) per common share—Basic$0.42 $(1.76)
Earnings (loss) per common share—Diluted$0.42 $(1.76)
 Three months ended
 January 31, 2018 January 31, 2017
 (in thousands except per share amounts)
Net Income$51,206
 $24,025
Distributed and undistributed (earnings) to unvested restricted stock(732) (368)
Distributed and undistributed earnings to common shareholders—Basic$50,474
 $23,657
Weighted average shares outstanding—Basic22,501
 22,379
Weighted average shares outstanding—Diluted22,501
 22,379
Earnings per common share—Basic$2.24
 $1.06
Earnings per common share—Diluted$2.24
 $1.06
NOTE 5—7—FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company holds certain items that are required to be disclosed at fair value, primarily cash equivalents.debt instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level hierarchy is followed for disclosure to show the extent and level of judgment used to estimate fair value measurements:
Level 1 – Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.
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Level 2 – Inputs used to measure fair value, other than quoted prices included in Level 1, are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

Level 3 – Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.
At January 31, 2018, and October 31, 2017, the fair value of the Company's cash and cash equivalents approximated their carrying value due to the short maturity of these financial instrumentsFair values for debt are based on quoted market prices or published forward interest rate curves, and were categorized as a Level 2 measurement. Inputs used to measuremeasurements. As of January 31, 2021 and October 31, 2020, the fair value were primarily recent trading prices and prevailing market interest rates.values of the Company's borrowings under its revolving credit facility approximate the carrying values.
NOTE 6—8—COMMITMENTS AND CONTINGENCIES
Property, Plant and Equipment
In March 2017,October 2019, the Company announced the selection of sites in Lindale, Mineola and Smith County, Texas, for the construction ofplans to construct a new poultry processing complex. The completed complexhatchery in Jones County, Mississippi. Upon completion of the project, the Company will consist of arelocate its existing hatchery feed mill, processing plant and waste water treatment facility.operations from its current, nearby hatchery facility located in Laurel, Mississippi. Construction commenced on this project during the fourthfirst quarter of fiscal 2017,2020, and initial operations of the completed complex are expected to begin during the first calendarsecond quarter of 2019.fiscal 2021. The Company estimates the total investment incost of the complexconstruction project will be approximately $200.5 million.$19.5 million, of which $9.4 million was spent during fiscal 2020 and $10.1 million is budgeted for fiscal 2021. As of January 31, 2018,2021, the Company has spent a total of approximately $28.3$14.3 million on the project, and has entered into commitments related to the new complex totaling approximately $115.7 million.
As of January 31, 2018, the Company has outstanding commitments totaling $26.2 million related to purchase agreements for future delivery of aircraft. These commitments are expected to be paid as follows: $22.1including $4.9 million during the remainderfirst three months of fiscal 20182021. We expect to spend the remaining budgeted amounts during the second and $4.1 million duringthird quarters of fiscal 2019.2021.
Litigation
In re Broiler Chicken Antitrust Litigation
Between September 2, 2016 and October 13, 2016, Sanderson Farms, Inc. and our subsidiaries were named as defendants, along with 13 other poultry producers and certain of their affiliated companies, in multiple putative class action lawsuits filed by direct and indirect purchasers of broiler chickens in the United States District Court for the Northern District of Illinois. The complaints allege that the defendants conspired to unlawfully fix, raise, maintain, and stabilize the price of broiler chickens, thereby violating federal and certain states'states’ antitrust laws, and also allege certain related state-law claims. The complaints also allege that the defendants fraudulently concealed the alleged anticompetitive conduct in furtherance of the conspiracy. The complaints seek damages, including treble damages for the antitrust claims, injunctive relief, costs, and attorneys’ fees. As detailed below, the courtCourt has consolidated all of the direct purchaser complaints into one case, and the indirect purchaser complaints into two cases, one on behalf of commercial and institutional indirect purchaser plaintiffs and one on behalf of end-user consumer plaintiffs. The cases are part of a coordinated proceeding captioned In re Broiler Chicken Antitrust Litigation.
On October 28, 2016, the direct and indirect purchaser plaintiffs filed consolidated, amended complaints, and on November 23, 2016, the direct and indirect purchaser plaintiffs filed second amended complaints. On December 16, 2016, the indirect purchaser plaintiffs separated into two cases. On that date, the commercial and institutional indirect purchaser plaintiffs filed a third amended complaint, and the end-user consumer plaintiffs filed an amended complaint.
On January 27, 2017, the defendants filed motions to dismiss the amended complaints in all of the cases, and on November 20, 2017, the motions to dismiss were denied. On February 7, 2018, the direct purchaser plaintiffs filed their third amended complaint, adding three additional poultry producers as defendants. On February 12, 2018, the end-user consumer plaintiffs filed their second amended complaint, in which they also added three additional poultry producers as defendants, along with Agri Stats.Stats, Inc. On February 15,20, 2018, the commercial and institutional indirect purchaser plaintiffs filed their fourth amended complaint. On November 13, 2018, the commercial and institutional indirect purchaser plaintiffs filed their fifth amended complaint, adding three additional poultry producers as defendants. On November 28, 2018, the end-user consumer plaintiffs filed their third amended complaint. On January 15, 2019, the direct purchaser plaintiffs filed their fourth amended complaint, and the commercial and institutional indirect purchaser plaintiffs filed their sixth amended complaint. Both the direct purchaser plaintiffs and the commercial and institutional indirect purchaser plaintiffs added two new poultry producers as defendants, as
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well as Agri Stats, Inc. On August 6, 2020, the end-user consumer plaintiffs filed a motion for leave to file their fourtha fifth amended complaint. The Court granted the end-user consumer plaintiffs’ motion on September 22, 2020 and deemed the version of the complaint filed on August 7, 2020 operative on October 19, 2020. On October 23, 2020, the direct purchaser plaintiffs filed their fifth amended complaint and the commercial and institutional indirect purchaser plaintiffs filed their seventh amended complaint.
Between December 8, 2017 and February 11, 2021, additional purported direct-purchaser entities individually brought sixty-six separate suits against 20 poultry producers, including Sanderson Farms, as well as Agri Stats, Inc. and Rabobank in the United States District Court for the Northern District of Illinois, the United States District Court for the District of Kansas, the United States District Court for the Western District of Arkansas, and the United States District Court for the District of Puerto Rico. These suits allege substantially similar claims to the direct purchaser class complaint described above; certain of the suits additionally allege related state-law and common-law claims, and related claims under federal and Georgia RICO statutes. Four complaints filed on June 12, 2020, another complaint amended on July 24, 2020, and ten additional direct action complaints also plead allegations of federal bid rigging. Those suits filed in the Northern District of Illinois are now pending in front of the same judge as the putative class action lawsuits. On June 26, 2018, the defendants filed a motion to transfer the case filed in the District of Kansas to the Northern District of Illinois, and that motion was granted on September 13, 2018. On June 7, 2019, the plaintiffs filed a motion to transfer the case filed in the Western District of Arkansas to the Northern District of Illinois, and that motion was granted on June 11, 2019. On July 24, 2019, one of the defendants filed a motion to transfer the case filed in the District of Puerto Rico to the Northern District of Illinois, and that motion was granted on July 25, 2019. On July 22, 2019, the Company moved to dismiss in part those direct-purchaser complaints that allege claims under federal and Georgia RICO statutes against it. The motion was fully briefed on September 20, 2019, and the Court heard argument on the motion on December 18, 2019. On March 3, 2020, the Court denied the Company's motion. On October 18, 2019, defendants moved to dismiss the case filed by the Commonwealth of Puerto Rico on its behalf and on behalf of its citizens. The motion was fully briefed on January 21, 2020. On July 15, 2020, the Court dismissed Puerto Rico's claims on behalf of its citizens. On July 2, 2020 and August 6, 2020, certain defendants, including the Company, moved to exclude bid rigging allegations and claims from the consolidated In re Broiler Chicken Antitrust Litigation. Plaintiffs filed oppositions on August 6, 2020 and August 20, 2020. Defendants filed replies on August 20, 2020 and September 3, 2020. On September 22, 2020, the Court ordered that plaintiffs’ bid-rigging allegations are bifurcated and any discovery on such claims is stayed until plaintiffs’ supply reduction and Georgia Dock Index theories are resolved. On October 20, 2020, certain direct action plaintiffs filed a motion for leave to amend their complaints. On October 23, 2020, the direct action plaintiffs filed a consolidated complaint. Defendants filed an opposition to certain direct action plaintiffs’ motion to amend on November 4, 2020. Briefing was completed on November 16, 2020. The Court granted the motion to amend on January 6, 2021, and individual direct purchasers filed an amended consolidated complaint incorporating those allegations on January 29, 2021.
On October 30, 2020, direct purchaser plaintiffs, commercial and institutional indirect purchaser plaintiffs, and end-user consumer plaintiffs filed motions for class certification. Defendants filed their oppositions to class certification on January 22, 2021. Class plaintiffs' replies in support of class certification are due March 29, 2021.
The parties are currently engaged in discovery, subject to the COVID-19-related delays discussed below. It is possible additional individual actions may be filed.
Since March 16, 2020, given the current COVID-19 public health emergency, the Northern District of Illinois issued three orders extending all deadlines in civil cases by 21 days, 28 days and 28 days, respectively, and seven orders that did not extend any deadlines, but explained other court procedures to protect the public health and welfare. These orders apply to the litigation described above. The Northern District of Illinois will vacate, amend or extend the Tenth Amended General Order on or before April 5, 2021.
Department of Justice Antitrust Investigation
The Company is awaitingaware that certain plaintiffs’ counsel in In re Broiler Chicken Antitrust Litigation received from the United States Department of Justice, Antitrust Division, a rulingsubpoena that included a request to produce all discovery in the case to a grand jury. On June 27, 2019, the Court in In re Broiler Chicken Antitrust Litigation permitted the United States Department of Justice to intervene in the case, as well as ordered certain discovery stayed until September 27, 2019. Before the discovery stay expired on September 27, 2019, the United States Department of Justice asked the Court in In re Broiler Chicken Antitrust Litigation to extend the discovery stay for an additional six months. On September 25, 2019, the Court granted the additional stay of not less than three months. On October 16, 2019, after further consideration, the Court extended the stay until June 27, 2020. On December 18, 2019, the Court after further consideration ordered that motion. the stay be lifted on March 31, 2020.
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The lawsuits will now move into discovery,Company received a grand jury subpoena in connection with the United States Department of Justice Antitrust Division investigation on September 9, 2019. The Company is complying with the subpoena and weproviding documents and information as requested by the Department of Justice in connection with its investigation.
State of New Mexico, ex rel. Hector Balderas v. Koch Foods Inc., et al.
On September 1, 2020, the Attorney General of the State of New Mexico filed a lawsuit in New Mexico state court against Agri Stats, Inc. and producer defendants, including the Company. The case brings claims under the New Mexico Antitrust Act and New Mexico Unfair Trade Practices Act, as well as a common law unjust enrichment claim. Defendants responded to the complaint on February 1, 2021.
We intend to continue to defend themthe lawsuits vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail or the Department of Justice were to pursue charges, the Company could be liable for damages or other sanctions, which could have a material, adverse effect on our financial position and results of operations.
Between December 8, 2017 and January 30, 2018, additional purported direct purchaser entities individually brought four separate suits against 16 poultry producers, including Sanderson Farms, and Agri Stats in the United States District Court for the Northern District of Illinois. These suits allege substantially similar claims to the direct purchaser class complaint described above and are now pending in front of the same judge. They are likely to move into discovery on the same or similar timeline as the putative class action lawsuits. It is possible additional individual actions may be filed.

Sanderson Farms, Inc.; Joe F. Sanderson, Jr., the Chairman of the Registrant’s Board of Directors and its Chief Executive Officer; and D. Michael Cockrell, director and Chief Financial Officer, were named as defendants in a putative class action lawsuit filed on October 28, 2016, in the United States District Court for the Southern District of New York. On March 30, 2017, the lead plaintiff filed an amended complaint adding Lampkin Butts, director, Chief Operating Officer, and President, as a defendant, and on June 15, 2017, the lead plaintiff filed a second amended complaint. The complaint alleges that the defendants made statements in the Company's SEC filings and press releases, and other public statements, that were materially false and misleading in light of the Company's alleged, undisclosed violation of the federal antitrust laws described above. The complaint also alleges that the material misstatements were made in order to, among other things, “artificially inflate and maintain the market price of Sanderson Farms securities.” The complaint alleges the defendants thereby violated the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and, for the individual defendants, Section 20(a) of the Exchange Act, and seeks damages, interest, costs and attorneys’ fees. On January 19, 2018, the Court granted the defendants' motion to dismiss and entered judgment for the defendants. On January 31, 2018, the plaintiff filed a notice of appeal to the United States Court of Appeals for the Second Circuit. The Company cannot predict the outcome of this action or the appeal. If the plaintiffs were to prevail in the action, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.
On January 30, 2017, the Company received a letter from a putative shareholder demanding that the Company take action against current and/or former officers and directors of the Company for alleged breach of their fiduciary duties. The shareholder asserted that the officers and directors (i) failed to take any action to stop the alleged antitrust conspiracy described above, despite their alleged knowledge of the conspiracy, and (ii) made and/or caused the Company to make materially false and misleading statements by failing to disclose the alleged conspiracy. The shareholder also asserted that certain directors engaged in “insider sales” from which they improperly benefited. The shareholder also demanded that the Company adopt unspecified corporate governance improvements. On February 9, 2017, pursuant to statutory procedures available in connection with demands of this type, the Company’s board of directors appointed a special committee of qualified directors to determine, after conducting a reasonable inquiry, whether it is in the Company’s best interests to pursue any of the actions asserted in the shareholder’s letter. On April 26, 2017, the special committee reported to the Company’s board of directors its determination that it is not in the Company’s best interests to take any of the demanded actions at this time, and that no governance improvements related to the subject matter of the demand are needed at this time. On May 5, 2017, the special committee’s counsel informed the shareholder’s counsel of the committee’s determination. As of the date of filing of this report, and to the Company’s knowledge, no legal proceedings related to the shareholder’s demand have been filed.In re Broiler Chicken Grower Litigation
On January 27, 2017, Sanderson Farms, Inc. and our subsidiaries were named as defendants, along with four other poultry producers and certain of their affiliated companies, in a putative class action lawsuit filed in the United States District Court for the Eastern District of Oklahoma. On March 27, 2017, Sanderson Farms, Inc. and our subsidiaries were named as defendants, along with four other poultry producers and certain of their affiliated companies, in a second putative class action lawsuit filed in the United States District Court for the Eastern District of Oklahoma. The courtCourt ordered the suits consolidated into one proceeding, and on July 10, 2017, the plaintiffs filed a consolidated amended complaint. The consolidated amended complaint alleges that the defendants unlawfully conspired by sharing data on compensation paid to broiler farmers, with the purpose and effect of suppressing the farmers’ compensation below competitive levels. The consolidated amended complaint also alleges that the defendants unlawfully conspired to not solicit or hire the broiler farmers who were providing services to other defendants. The consolidated amended complaint seeks treble damages, costs and attorneys’ fees. On September 8, 2017, the defendants filed a motion to dismiss the amended complaint, on October 23, 2017, the plaintiffs filed their response, and on November 22, 2017, the defendants filed a reply. On January 19, 2018, the Court granted the defendants'Sanderson Farms defendants’ motion to dismiss for lack of personal jurisdiction.
On February 2,21, 2018, the plaintiffs filed a letter with the Court stating their intention to file a substantially similar complaintlawsuit in the United States District Court for the Eastern District of North Carolina against Sanderson Farms and our subsidiaries and another poultry producer. The plaintiffs subsequently moved to consolidate this action with the Eastern District of Oklahoma action in a judicial districtthe Eastern District of Oklahoma for pre-trial proceedings, with the defendants in which both personal jurisdictionsupport thereof. That motion was denied. On July 13, 2018, the defendants moved to dismiss the lawsuit in the Eastern District of North Carolina, and venue would be proper. Shouldbriefing was completed on September 4, 2018. On January 15, 2019, the Court granted in part the defendants’ motion to dismiss and stayed the action in the Eastern District of North Carolina pending resolution of the action in the Eastern District of Oklahoma. On January 6, 2020, the Court in the Eastern District of Oklahoma denied defendants’ motion to dismiss. On January 27, 2020, plaintiffs in the Oklahoma case moved for leave to amend their complaint. The Court in the Eastern District of Oklahoma granted the plaintiffs' motion, and the plaintiffs filefiled a consolidated amended complaint on February 21, 2020. The Oklahoma case is ongoing. On May 27, 2020, the Company moved to dismiss the action in the Eastern District of North Carolina under the first-to-file rule. Plaintiffs filed their opposition on June 17, 2020, and the Company filed its reply on July 1, 2020. The motion is fully briefed and awaiting the Court's decision.
On September 11, 2020, additional named grower plaintiffs filed an identical putative class action in the District Court of Colorado against Sanderson Farms, Inc. and its Foods, Production, and Processing Divisions, as well as the other poultry producer defendants in the Oklahoma action. On October 14, 2020, Defendants moved to dismiss the case under the first-to-file doctrine because it is substantively identical to the earlier-filed cases pending in Oklahoma and North Carolina. Briefing on that motion was completed on December 16, 2020.
On September 18, 2020, another complaint, wenamed grower plaintiff filed another duplicate class action in the District Court of Kansas against the same defendants as the Colorado action. On October 13, 2020, Defendants moved to dismiss the case under the first-to-file doctrine because it is substantively identical to the earlier-filed cases pending in Oklahoma, North Carolina, and Colorado. Briefing on that motion was completed on December 15, 2020.
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On October 8, 2020, new named grower plaintiffs filed another duplicate class action in the Northern District of California against the same defendants as the Colorado and Kansas actions. The Company waived service of the Complaint on December 11, 2020.
On October 23, 2020, the District Court of Kansas stayed proceedings in that action (other than those related to the first-to-file motion) pending resolution of the first-to-file motion and the multi-district litigation ("MDL") consolidation motion discussed below. On November 12, 2020, the District Court of Colorado stayed proceeding in that action (other than those related to the first-to-file motion) pending resolution of the first-to-file motion and the MDL consolidation motion discussed below.
On October 6, 2020, Plaintiffs in the Oklahoma action moved to consolidate all of these duplicative cases into a MDL before the judge presiding over the Oklahoma case. Briefing on that motion was completed on November 6, 2020, and oral argument on the motion occurred on December 3, 2020. On December 15, 2020, the panel ordered that all actions be consolidated in the Eastern District of Oklahoma for pretrial proceedings. On February 16, 2021, the first-to-file motions in the various actions described above were denied without prejudice. Discovery in the case is underway.
We intend to defend itthese cases vigorously; however, the Company cannot predict the outcome of this action.these actions. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.
Antitrust Civil Investigative Demands
On February 21, 2017, Sanderson Farms, Inc. received an antitrust civil investigative demand from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida. Among other things, the demand seeks information related to the Georgia Dock Index and other information on poultry and poultry products published by the Georgia Department of Agriculture and its Poultry Market News division. The Company is cooperating fully with the investigative demand, and we have responded to all requests received to date; however, we are unable to predict its outcome at this time. Separately, the Company has become aware that certain plaintiffs’ counsel in In re Broiler Chicken Antitrust Litigation received from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida, an antitrust civil investigative demand that includes a request to produce all documents submitted by the recipients to the Department of Justice relating to In re Broiler Chicken Antitrust Litigation.
The Company is also aware that certain plaintiffs’ counsel in In re Broiler Chicken Antitrust Litigation received from the Louisiana Department of Justice - Office of the Attorney General a Civil Investigation Demand that included a request to produce all deposition transcripts from the civil litigation.
On August 6, 2020, the Company received a Civil Investigative Demand from the Office of the Attorney General for the State of Washington seeking information in connection with its investigation of possible violations of the Washington Consumer Protection Act and/or the Sherman Act concerning contracts, combinations, or conspiracies in restraint of trade or commerce in the market for Broiler Chicken. The Company is cooperating with the investigative demand and providing documents and information as requested by the Office of the Attorney General. The Company is unable to predict the outcome of the investigation at this time.
Friends of the Earth, et al v. Sanderson Farms, Inc.
On June 22, 2017, the Company was named as a defendant in a lawsuit filed in the United States District Court for the Northern District of California. The complaint, which was brought by three non-profit organizations (the Organic Consumers Association, Friends of the Earth, and Center for Food Safety) alleged that the Company is violating the California Unfair

Competition Law and the California False Advertising Law by representing that its poultry products are “100% Natural” products raised with “100% Natural” farming procedures. Among other things, the plaintiffs alleged that the Company’s products contain residues of human and animal antibiotics, other pharmaceuticals, hormones, steroids, and pesticides. Plaintiffs seeksought an order enjoining the Company from continuing its allegedly unlawful marketing program and requiring the Company to conduct a corrective advertising campaign; an accounting of the Company’s profits derived from the allegedly unlawful marketing practices; and attorneys’ fees, costs and interest. On August 2, 2017, the Company moved to dismiss the lawsuit on various grounds. On August 23, 2017, the plaintiffs filed an amended complaint, which includesincluded substantially similar allegations as the original complaint, and the Company filed a motion to dismiss the amended complaint on September 13, 2017. On February 9, 2018, the Court denied the Company'sCompany’s motion to dismiss. An initial scheduling conference was held on March 1, 2018, and discovery started thereafter. On February 13,June 25, 2018, the plaintiffs amended their complaint for a second time, including to remove allegations that the USDA had found the Company’s chicken samples to contain residues of antibiotics or
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other substances. On July 9, 2018, the Company filed a motion to dismiss the second amended complaint. On July 18, 2018, during the pendency of that motion, the parties stipulated to the voluntary dismissal of one of the plaintiff organizations (the Organic Consumers Association). The other two plaintiffs continued to prosecute their claims. On September 11, 2018, the Court granted the motion to dismiss the second amended complaint with leave to amend the complaint, and on October 2, 2018, the remaining plaintiffs filed a third amended complaint. The third amended complaint alleged that the Company misleads consumers with regard to (1) the presence of unnatural residues in its chicken products; (2) the fact that it uses antibiotics in raising its chickens; (3) the conditions in which it raises its chickens; and (4) the risks of human antibiotic resistance caused by the Company’s use of antibiotics. On October 16, 2018, the Company filed a motion to dismiss the third amended complaint, and on December 3, 2018, the Court denied that motion. Fact discovery concluded on March 18, 2019. On April 1, 2019, the Company filed a motion to dismiss for sanctions under Federal Rulelack of Civil Procedure 11subject matter jurisdiction on grounds that the remaining plaintiffs lacked standing. The Court held a hearing on the basisCompany’s motion on May 30, 2019. On July 31, 2019, the Court granted the Company’s motion without prejudice, stating that dismissal for lack of standing must be without prejudice, but denied the plaintiffs leave to amend their complaint. On October 8, 2019, the Court taxed $12,701 in costs in favor of the Company as the prevailing party.
On August 30, 2019, plaintiffs filed a notice of appeal of the District Court’s order of dismissal before the United States Court of Appeals for the Ninth Circuit. Plaintiffs’ filed their opening brief on appeal on January 8, 2020, the Company filed its response brief on March 9, 2020, and Plaintiffs andfiled their counsel knowingly included false or inaccurate statements and unsupported allegations in their complaints and other filings.reply brief on April 29, 2020. The Company is awaitingCourt held oral argument on October 13, 2020, but has yet to issue a ruling on that motion. An initial scheduling conference is currently scheduled for March 1, 2018. The lawsuit is in its early stages, and weruling. We intend to vigorously defend it vigorously; however,the appeal. However, the Company cannot predict the outcome of this action. If the plaintiffs were to prevail, the Company'sCompany’s reputation and marketing program could be materially, adversely affected.affected, which could have a material, adverse effect on our financial position and results of operations.
Judy Jien v. Perdue Farms, Inc., et al.
On August 30, 2019, Sanderson Farms, Inc. and its Foods and Processing Divisions, as well as seventeen other poultry producers and their affiliates; Agri Stats, Inc.; and Webber, Meng, Sahl and Company, Inc. (“WMS”), were named in a putative class action filed in the United States District Court for the District of Maryland. Three other nearly identical putative class action complaints, each seeking to represent the same putative class, also were filed. The complaints, brought on behalf of non-supervisory production and maintenance employees at broiler chicken processing plants, alleged that the defendants unlawfully conspired by agreeing to fix and depress the compensation paid to them, including hourly wages and compensation benefits, from January 1, 2009 to the present. The plaintiffs claim that broiler producers shared competitively sensitive wage and benefits compensation information in three ways: (1) attending in-person meetings in Destin, Florida; (2) receiving Agri Stats reports, as well as surveys taken and published by WMS; and (3) directly exchanging wage and benefits information with plant managers at other defendant broiler producers. Plaintiffs allege that this conduct violated the Sherman Antitrust Act.
On November 12, 2019, the Court ordered that the four putative class action complaints would be consolidated for all pretrial purposes. The Court ordered plaintiffs to file their consolidated complaint on or before November 14, 2019. Defendants’ motions to dismiss the consolidated complaint were filed on November 22, 2019. Briefing was scheduled to be completed on or before February 28, 2020; however, after the defendants filed their motions to dismiss, on November 26, 2019, plaintiffs notified defendants that they intended to file an amended consolidated complaint. Plaintiffs filed an amended consolidated complaint on December 20, 2019. Plaintiffs name as defendants Sanderson Farms, Inc. and its Foods and Processing Divisions, as well as ten other broiler chicken producers and their affiliates; three turkey producers and their affiliates; Agri Stats, Inc.; and WMS. Plaintiffs bring their amended consolidated complaint on behalf of employees at broiler chicken and turkey processing plants and allege that the defendants unlawfully conspired by agreeing to fix and depress the compensation paid to them. On January 9, 2020 and January 27, 2020, the court approved the voluntary dismissal without prejudice of two of the three nearly identical putative class action lawsuits. On March 12, 2020, the Court approved the voluntary dismissal without prejudice of the third nearly identical putative class action lawsuit.
On March 2, 2020, defendants moved to dismiss the amended consolidated complaint. The Company also filed an individual motion to dismiss plaintiffs’ claims against the Company. Plaintiffs’ oppositions were originally due on April 24, 2020 and defendants’ replies were due on May 21, 2020. However, on March 20, 2020, the District of Maryland issued Second Amended Standing Order 2020-02, extending all filing deadlines set to fall between March 16, 2020 and April 24, 2020 by 42 days. On April 10, 2020, the District of Maryland issued Standing Order 2020-07, extending all filing deadlines set to fall between March 16, 2020 and June 5, 2020 by 84 days. On May 22, 2020, the District of Maryland issued Standing Order 2020-11, which affirmed the prior Order's 84-day extension but did not extend deadlines further. Pursuant to Standing Order 2020-07, plaintiffs’ filed their omnibus opposition to defendants’ motion to dismiss on July 17, 2020. Defendants filed replies on August 13, 2020. On September 16, 2020, the court granted in part and denied in part defendants’ motion without prejudice, finding that plaintiffs’ allegations against certain defendant corporate families, including the Company, were deficient. On October 16,
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2020, plaintiffs moved for leave to file a second amended complaint. Sanderson Farms moved to dismiss the second amended complaint on December 18, 2020. Briefing on motions to dismiss the second amended complaint will be complete by February 25, 2021. No discovery has taken place to date. We intend to defend this case vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.
La Fosse, et al. v. Sanderson Farms, Inc.
On October 11, 2019, three named plaintiffs (Daniel Lentz, Pam La Fosse, and Marybeth Norman) filed, in the United States District Court for the Northern District of California, a nationwide class action against the Company on behalf of a putative class of all individuals and businesses throughout the United States who purchased one or more of the Company's chicken products in the prior four years. The lawsuit alleges that the named plaintiffs and other class members purchased the Company's chicken products based on misleading representations in the Company’s advertising. Specifically, the plaintiffs in this case allege that the Company’s advertising (including, but not limited to, on its website, television commercials, radio advertisements, social media, print magazines, billboards, and trucks) misleads consumers into believing that (i) the Company’s chickens were not given antibiotics or other pharmaceuticals, (ii) the chickens were raised in a “natural” environment, (iii) there is no evidence that the use of antibiotics or other pharmaceuticals in poultry contributes to the evolution of antibiotic-resistant bacteria, and (iv) the Company’s chicken products do not contain antibiotic or pharmaceutical residues. Plaintiffs allege that (i) the Company “routinely” feeds antibiotics and pharmaceuticals to its chickens, (ii) the Company raises its chickens indoors in “unnatural” indoor conditions amounting to “intensive confinement” and without natural light (iii) there is “extensive” reliable evidence that the use of antibiotics in poultry contributes to antibiotic-resistant bacteria, and (iv) the Company’s chickens have been found to contain antibiotic and pharmaceutical residue. The original Complaint asserted five causes of action under California and North Carolina law. The plaintiffs sought injunctive relief directing the Company to correct its practices and to comply with consumer protection laws nationwide. The plaintiffs also sought monetary damages, as well as fees and costs. On December 20, 2019, the Company filed a motion to dismiss. On February 10, 2020, the Court granted the motion to dismiss in part, denied it in part, and granted the plaintiffs leave to amend the Complaint. On March 23, 2020, two of the three original plaintiffs (Pam La Fosse and Marybeth Norman) filed a First Amended Complaint in which they were joined by five additional named plaintiffs purporting to assert claims on behalf of a putative nationwide class of consumers and businesses who purchased the Company's chicken products in the prior four years. The core allegations and theories set forth in the First Amended Complaint are the same as in the original complaint. The First Amended Complaint asserted one cause of action under federal law and sixteen causes of action under the laws of various states. The plaintiffs again sought injunctive relief directing the Company to correct its practices and to comply with consumer protection laws nationwide, as well as monetary damages, fees and costs. On May 6, 2020, the Company filed a partial motion to dismiss the First Amended Complaint, which the Court granted on July 2, 2020 with leave to amend. On July 23, 2020, plaintiffs Pam La Fosse and Sharon Manier filed a Second Amended Complaint on behalf of a putative class of consumers who purchased the Company's chicken in California in the prior four years. Like the earlier iterations of the complaint, the Second Amended Complaint alleges that the remaining plaintiffs and other class members purchased the Company's chicken products based on misleading representations in the Company's advertising, including for the reasons set forth in their prior complaints. The plaintiffs again seek injunctive relief, monetary damages, fees and costs. On August 6, 2020, the Company moved to dismiss the Second Amended Complaint in part, requesting dismissal of plaintiffs' new implied warranty of merchantability claim. On August 20, 2020, plaintiffs voluntarily agreed to withdraw their new implied warranty claim. Discovery commenced in October 2020 and is ongoing. We intend to defend this case vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.
In Defense of Animals, et al. v. Sanderson Farms, Inc.
On July 31, 2020, two non-profit organizations (In Defense of Animals and Friends of the Earth) filed a complaint against the Company in the United States District Court for the Northern District of California. The complaint asserts substantially similar (and in many cases identical) allegations and claims against the Company as the prior case brought by Friends of the Earth and other organizations, which the court dismissed in July 2019 and which is currently on appeal to the United States Court of Appeals for the Ninth Circuit.Specifically, the plaintiffs assert that the Company violates the California Unfair Competition Law and the California False Advertising Law by representing that its poultry products are “100% Natural” products raised with “100% Natural” farming procedures. Plaintiffs allege that the Company’s advertising (including, but not limited to, on its website, television commercials, radio advertisements, social media, print magazines, billboards, and trucks) misleads consumers into believing that (i) the Company’s chickens were not given antibiotics or other pharmaceuticals, (ii) the chickens were raised in a “natural” environment, (iii) there is no evidence that the use of antibiotics or other pharmaceuticals in poultry
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contributes to the evolution of antibiotic-resistant bacteria, and (iv) the Company’s chicken products do not contain antibiotic or pharmaceutical residues. Plaintiffs allege that (i) the Company “routinely” feeds antibiotics and pharmaceuticals to its chickens, (ii) the Company raises its chickens indoors in “unnatural” indoor conditions amounting to “intensive confinement” and without natural light, (iii) there is “extensive” reliable evidence that the use of antibiotics in poultry contributes to antibiotic-resistant bacteria, and (iv) the Company’s chickens have been found to contain antibiotic and pharmaceutical residue. The plaintiffs seek injunctive relief directing the Company to correct its practices and to comply with consumer protection laws nationwide as well as in the form of a corrective advertising campaign. The plaintiffs also seek fees and costs. On August 12, 2020, the Company agreed to waive service of the complaint. The parties have agreed to stay the case at least through the earlier of April 2, 2021, or the United States Court of Appeals for the Ninth Circuit's decision in the pending appeal in the prior case brought by Friends of the Earth and other organizations. No discovery has taken place to date. We intend to defend this case vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.
Other
On January 30, 2017, the Company received a letter from an attorney representing a putative shareholder demanding that the Company take action against current and/or former officers and directors of the Company for alleged breach of their fiduciary duties. The shareholder asserted that the officers and directors (i) failed to take any action to stop the alleged antitrust conspiracy described above, despite their alleged knowledge of the conspiracy, and (ii) made and/or caused the Company to make materially false and misleading statements by failing to disclose the alleged conspiracy. The shareholder also asserted that certain directors engaged in “insider sales” from which they improperly benefited. In addition to demanding that the officers and directors be sued, the shareholder also demanded that the Company adopt unspecified corporate governance improvements. On February 9, 2017, pursuant to statutory procedures available in connection with demands of this type, the Company’s board of directors appointed a special committee of qualified directors to determine, after conducting a reasonable inquiry, whether it was in the Company’s best interests to pursue any of the actions demanded in the shareholder’s letter. On April 26, 2017, the special committee reported to the Company’s board of directors its determination that it was not in the Company’s best interests to take any of the demanded actions at that time, and that no governance improvements related to the subject matter of the demand were needed. On May 5, 2017, the special committee’s counsel informed the shareholder’s counsel of the committee’s determination. As of the date of filing of this report, and to the Company’s knowledge, no legal proceedings related to the shareholder’s demand have been filed.
The Company is involved in various other claims and litigation incidental to its business. Although the outcome of these matters cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome of currently pending matters, other than those discussed above, should not have a material effect on the Company’s consolidated results of operations 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. After a considerable analysis of each case, the Company has determined that no accrual is required for any of the foregoing matters as of January 31, 2018.2021. Future reserves may be required if losses are deemed reasonably estimable and 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 reserves or by accruals of losses to reflect any adverse determinations in these legal proceedings.
NOTE 7—9—CREDIT AGREEMENT
The Company is a party to a revolving credit facility dated April 28, 2017, as amended on November 22, 2017,March 21, 2019, with a maximum available borrowing capacity of $900.0 million. The facility has annual capital expenditure limitations of $105.0 million, $110.0 million, $115.0 million, $120.0 million and $125.0 million for fiscal years 2018 through 2022, respectively, and permits up to $20.0 million of the unused capital expenditure limitation for any fiscal year starting with fiscal 2017 to be carried over to the next fiscal year. The normal capital expenditure limitation for fiscal 2018 is $125.0 million, including $20.0 million carried over from fiscal 2017.
The credit facility also permits capital expenditures up to $200.5 million on the construction of a new poultry processing complex in Lindale, Mineola and Smith County, Texas, up to $210.0 million on the construction of a potential additional new poultry complex, up to $15.0 million on expansion of the Company's existing prepared chicken facility in Flowood, Mississippi, up to $60.0 million on a potential new prepared chicken facility, and up to $70.0 million on the purchase of three new aircraft. As amended on November 22, 2017, the facility also excludes from the normal capital expenditure limits certain capital projects in an aggregate amount of up to $135.0 million. These additional projects, which include the construction of a new feed mill, and other expansions, equipment and changes to the Laurel, Collins, McComb and Hazlehurst, Mississippi complexes; the Waco, Palestine and Brazos, Texas complexes; the Moultrie, Georgia complex; and the Kinston, North Carolina complex, are each subject to their own expenditure limitations.
$1.0 billion. Under the credit facility, the Company may not exceed a maximum debt to totaldebt-to-total capitalization ratio of 50%. The Company has a one-time right, at any time during the term of the agreement, to increase the maximum debt to totaldebt-to-total capitalization ratio then in effect by five5 percentage points in connection with the construction of any of the three aforementioneda new complexespoultry complex for the four fiscal quarters beginning on the first day of the fiscal quarter during which the Company gives written notice of its intent to exercise this right. The Company has not exercised this right. The facility also sets a minimum net worth requirement that at January 31, 2018,2021, was $1,007.2 million.$1.03 billion. The credit is unsecured and, unless extended, will expire on April 28, 2022.March 21, 2024. As of January 31, 2021 and February 20, 2018,24, 2021, the Company had no outstanding draws under the facility,borrowed $55.0 million, and had approximately $23.5$25.2 million outstanding in letters of credit, leaving $876.5$919.8 million of borrowing capacity available under the facility.
NOTE 8—10—INCOME TAXES

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On December 22, 2017, President Trump signedThe Company’s estimated annual effective tax rate for the "Tax Cutthree months ended January 31, 2021 was 25.7%, as compared to an estimated annual effective tax rate of 24.5% for the three months ended January 31, 2020. Excluding the effects of discrete items recognized during the periods, the Company's estimated annual effective tax rate for the three months ended January 31, 2021 would have been approximately 23.8%, as compared to an estimated annual effective tax rate of 24.0% for the three months ended January 31, 2020. The Company estimates its effective tax rate for the full fiscal year 2021, exclusive of discrete items, will be approximately 23.8%. As of January 31, 2021, the Company's deferred income tax liability was $142.8 million, as compared to $141.7 million at October 31, 2020, an increase of $1.1 million.
NOTE 11—SUBSEQUENT EVENT
Our operations in Texas, Louisiana and Jobs Act" (the "Tax Act") into law. The provisionsMississippi were affected by a significant winter weather event that began impacting the region on or around February 13, 2021. Because of the Tax Actrecord low temperatures, power failures, snow and ice, and hazardous road conditions, we were unable during the week of February 15, 2021, to operate our processing plants in those states, deliver day old chicks to broiler farms on our regular schedule, pick up hatching eggs from breeder farms and place those eggs in our hatcheries on our regular schedule, or manufacture and deliver chicken feed to the farms of our independent contract producers on our regular schedule. None of our facilities were damaged, our employees remained safe and we returned to normal operations on February 22, 2021, except for our Hazlehurst, Mississippi processing plant, which returned to normal operations on February 23, 2021. However, our live production supply chain experienced interruptions and losses. We lost 455,000 broilers in houses that either lost water, power or feed, or collapsed under the weight of snow and ice. Because the hazardous road conditions prevented us from delivering day old chicks to broiler farms on our regular schedule, we were forced to humanely euthanize 545,000 chicks in our Texas hatcheries. We also were unable to pick up and place approximately 703,000 hatching eggs in our hatcheries on our normal schedule.
As a result of these interruptions, we will materially affect our fiscal years 2018have approximately 1.6 million fewer chickens to process at Texas, Louisiana and thereafter include, but are not limited to, a reduction in the corporate federal income tax rate from 35% to 21% and a change in the bonus depreciation rules to allow full expensing of qualified property in the year placed in service. ProvisionsMississippi processing plants than originally planned. These losses represent just under 1% of the Tax Act that will not affectnumber of birds we expected to process during our fiscal year 2018, but could materially affect our fiscal years 2019 and thereafter include, but are not limited to, a lower tax rate on foreign-derived intangible income, the repeal of the domestic production activities deduction and changes to the rules regarding the deductibility of excessive employee remuneration for certain employees.
Our financial statements for the firstsecond quarter of fiscal 2018 were materially affected by the changes enacted by the Tax Act to the Internal Revenue Code of 1986, as amended. U.S. GAAP requires that the effects from changes in tax laws be recognized in the period in which the new law is enacted, which for the Tax Act is our first quarter of fiscal 2018. For fiscal 2018, our statutory federal income tax rate will decrease from the previously enacted 35% to approximately 23.3%. The fiscal 2018 statutory rate will not decrease entirely to 21%, because it is a blended rate of two months at 35% (before the Tax Act became effective) and ten months at 21% (after the Tax Act became effective). In addition to benefiting from the lower corporate federal income tax rate on current earnings, the Company recorded a tax benefit in accordance with U.S. GAAP related to the revaluation of its deferred tax assets and liabilities using the enacted tax rate expected to apply when the temporary differences from which the deferred taxes arose are expected to be settled.
Following the enactment of the Tax Act, the United States Securities and Exchange Commission issued guidance in Staff Accounting Bulletin 118 which provides the Company up to a one-year measurement period, beginning on the Tax Act's enactment date, in which to complete the required analysis and accounting for the effects of the Tax Act. The guidance allows the Company to record provisional adjustments related2021, prior to the impacts of the Tax Act whenwinter storms. In addition, both breeder and broiler chickens exposed to extreme temperatures typically suffer some performance losses over their lives. We are in the accountingprocess of estimating the total financial impact of this event. While the Company is insured for the effectscatastrophic events such as this one, it retains $2.75 million of the Tax Actrisk and is incomplete, but when reasonable estimates can be made regarding the effects of the Tax Act. Our accounting for the Tax Act is not complete, because it required the Companysubject to estimate the timing of settlement of the temporary differences from which our deferred taxes arose; however, we were able to make reasonable estimates, and we recorded those estimates as provisional adjustments as described in the paragraph below.a seven day deductible under its business interruption coverage. The Company will continueseek reimbursement for all of its insured losses. Insured losses related to monitor these estimatesdamaged or destroyed inventory and direct expenses incurred as we move througha result of the measurement period. If any adjustments to the provisional amounts are required, those adjustmentsevent will be recorded in the period such new information becomes available.
The Company's effective tax rate for the firstsecond quarter of fiscal 2018 was (198.23)%, as compared to 32.61% for the first quarter of fiscal 2017. The revaluation of our deferred taxes using the newly enacted tax rate resulted in a $37.5 million income tax benefit, or an approximately (218.4)% impact2021, up to the effective tax rate$2.75 million retained risk, and such losses that exceed that amount will be recorded as an insurance receivable. Recoveries for the first quarterlost revenue and reduced margins as a result of fiscal 2018. Additionally, the effective tax rates for the first quarter of fiscal 2018 and 2017, respectively, include approximately (4.2)% and (2.4)% favorable impacts related to excess tax benefits from share-based payments to employees. Excluding the impactsbusiness interruption will be recognized as calculations of the deferred tax revaluationclaims are completed and the excess tax benefits, the Company's effective tax rates for the first quarteragreements with our insurance carriers are reached.
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REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Sanderson Farms, Inc.
We have reviewed the condensed consolidated balance sheet of Sanderson Farms, Inc. and subsidiaries as of January 31, 2018, and the related condensed consolidated statements of operations and cash flows for the three-month periods ended January 31, 2018 and 2017. These financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Sanderson Farms, Inc. and subsidiaries as of October 31, 2017, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended not presented herein and we expressed an unqualified audit opinion on those consolidated financial statements in our report dated December 14, 2017. In our opinion, the accompanying condensed consolidated balance sheet of Sanderson Farms, Inc. and subsidiaries as of October 31, 2017, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ Ernst & Young LLP
New Orleans, Louisiana
February 21, 2018

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
The following Discussion and Analysis should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of the Company’s Annual Report on Form 10-K for its fiscal year ended October 31, 2017.2020.
This Quarterly Report, 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 within 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" section of our latest 10-K and 10-Q reports, 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, any of which may affect the value of inventories, the collectability of accounts receivable or the financial integrity of customers, and the ability of the end user or consumer to afford protein.
(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, including, but not limited to, the risk that marketnet 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 marketnet 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.
(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 itsthe 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.

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(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 us from running some of our facilities at full capacity, or could in the future cause facility closures; an inability of our contract growers 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 our products; liquidity challenges; and a continued or worsening decline in global commercial activity, among other unfavorable conditions.
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 report, the words “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 are integratedfully, vertically-integrated through its control of all functions relative to the production of its chicken products, including hatching egg production, hatching, feed manufacturing, raising chickens to marketable age (“grow out”grow-out”), processing marketing and distribution. The Company’s prepared chicken product line includes approximately 95 institutional and consumer packaged chicken items that it sells nationally, primarily to distributors and food service establishments. A majority of the prepared chicken items are made to the specifications of food service users.
marketing. Consistent with the poultry industry, the Company’s profitability is substantially affected by the market pricesprice for its finished products and feed grains, both of which may fluctuate substantially and independently of each other, and exhibit cyclical characteristics typically associated with commodity markets. Other costs, excluding feed grains, related to the profitability 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.
In February 2015,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 in bulk form. To reduce its exposure to market cycles that have 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. However, the Company cannot eliminate its exposure to fluctuations in commodity market prices for chicken since market prices for value-added products also exhibit cycles. The Company adds value to its poultry products by performing one or more processing steps beyond the stage where the whole chicken is first salable as a finished product, such as cutting, deboning, deep chilling, packaging and labeling the product.
The Company’s prepared chicken product line includes approximately 40 institutional and consumer-packaged chicken items that it sells nationally, primarily to distributors and food service establishments. A majority of the prepared chicken items are made to the specifications of food service users.
COVID-19
During the second quarter of our fiscal 2020, the World Health Organization declared COVID-19 a pandemic. The effects of the pandemic and the related governmental actions to contain the spread of the novel coronavirus have materially affected our business, including our labor force, revenues, expenses, production levels, and senior management's time, among other things.
In late February 2020, we formed a COVID-19 response team of senior managers, including our CEO, President and CFO, to coordinate our Company's response to the pandemic and manage and mitigate related risks. From late February to late September 2020, the team met twice daily to discuss COVID-19 developments affecting our business and the communities in which we operate. Beginning in late September 2020, the team began initial operationsmeeting once daily, rather than twice. Additionally, our Board of Directors has actively overseen our management of the crisis. Between March 13, 2020 and early June 2020, the Board met weekly to receive updates and discuss our response to the pandemic with our executive leadership. In early June 2020, the Board began meeting generally every two weeks, or more frequently if circumstances warranted, and in August 2020, the Board began meeting on an as needed basis. Throughout the pandemic, regardless of meeting frequency, the Board has received weekly materials providing operational and COVID-19-related updates.
Our top priority throughout the crisis has been protecting the health, safety and welfare of our employees. In consultation with infectious disease specialists and epidemiologists, including an infectious disease expert who toured our facilities, we have taken a number of steps to promote health and safety in our operations. We also frequently communicate with state and local officials and health departments regarding our practices. Some of our practices are more stringent than those recommended by the Centers for Disease Control and Prevention. Our practices include, but are not limited to:
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•We implemented strict personal and work-related travel and public gathering restrictions for all of our employees, contractors and members of their households.
•At each of our processing plants, we set up on-site medical clinics, which are staffed by third-party medical providers. At these clinics, telemedicine services, flu and coronavirus tests and flu vaccinations are provided at no cost for our employees. Additionally, we are communicating and coordinating with our third-party medical providers and state and local health officials in preparation for utilizing these clinics to provide coronavirus vaccinations once they become available for our employees.
•We are providing information about the novel coronavirus and measures to mitigate the risk of contracting and transmitting the virus on video displays throughout our facilities and on our employee mobile app. We have also provided live training sessions about the virus to our hourly employees. Each of these aforementioned communications is provided in the languages spoken by our employee population.
•We have created an internal hotline monitored by our nurses at our general corporate offices that employees may call to ask questions or voice concerns about the virus.
•Non-essential visitors may not enter our facilities.
•We are taking the temperature of each person attempting to enter our facilities. Anyone with a new poultry processing complextemperature of 100°F or higher is denied entry. Employees denied entry are sent home with pay and are asked to contact their healthcare provider.
•Our Company nurses have received specialized training on identifying COVID-19 symptoms. Employees exhibiting symptoms while at work are immediately sent home with pay and are asked to contact a healthcare provider immediately.
•Employees who test positive for COVID-19, those who live in Palestine, Texas.the same household as someone who has tested positive, and those who work in close proximity to an employee who has tested positive are sent home to isolate or self-quarantine with pay. The complex consistsspecific isolation or quarantine period varies based on individual circumstances but generally ranges from 10 to 24 days.
•We continuously look for commonalities among our employees who test positive, including geographic concentrations in their places of residence, so we can reduce or prevent the spread of the virus in our facilities.
•We sent home for 14 days, with pay, approximately 400 employees who work in our Moultrie, Georgia facility and are residents of a nearby county that experienced a high rate of community infections.
•We are providing and requiring employees, United States Department of Agriculture inspectors and essential visitors to wear face masks and/or face shields. Anyone on the premises of our processing plants, feed mill, hatchery, poultrymills, hatcheries and vehicle maintenance shops is required to wear this equipment. Where an employee's job function does not permit him or her to wear a face shield, we require the employee to wear safety glasses.
•In areas of our facilities where space allows, we have implemented social distancing measures, and in areas where equipment configurations allow, we have installed physical barriers between work stations. In areas where social distancing or the installation of physical barriers is not achievable, the use of face shields is mandatory. Additionally, we have optimized ventilation throughout our facilities to mitigate the risk of exposure to the virus. We are also providing and requiring employees and essential visitors at our general corporate offices and our laboratory to wear face masks while in common areas and in instances where social distancing is not achievable.
•Our nurses have N95 respirator masks, gowns, gloves and goggles appropriate for contact with potentially infected people.
•We require employees to practice social distancing on breaks and have staggered break times to reduce the number of people in break areas at any one time. We have installed physical partitions in our break rooms to provide barriers between employees and have erected tents outside of our facilities to provide employees with more space during breaks.
•We have installed additional hand sanitizer stations appropriate for use in food processing facilities at all our facilities.
•A third-party sanitation service provider performs an antiviral sanitation process at each of our facilities at least weekly, and we have increased the frequency of cleaning common areas and frequently touched surfaces.
•Salaried employees who are considered to be at high risk for severe illness from COVID-19 are permitted to work from home, provided their job duties allow for remote work.
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•In November 2020, we adopted a practice to temporarily send home, with pay, employees ages 65 or older who work at Company locations at which the number of positive coronavirus cases as a percentage of total employees at the location reaches a certain threshold. This has been triggered at only two locations.
•We have closed our Company-owned childcare facility in Collins, Mississippi until further notice.
•In certain of our facilities that are located in communities that experienced high infection rates, we cooperated with local health authorities or determined on our own to test all our employees at the facility for coronavirus. Employees who tested positive were sent home with pay for the periods described above. To date, we have performed five facility-wide tests resulting in positive rates per employee tested of 3.3%, 0.5%, 5.8%, 3.3% and 7.3%.
During the COVID-19 pandemic, we have also provided assistance to our employees including, but not limited to, the following:
•As a food producer, we have been designated by the federal government as part of the United States' critical infrastructure with a special responsibility to continue operations. Therefore, from late-March 2020 through mid-September 2020, we paid hourly employees who worked all of their scheduled hours during a week an attendance bonus equal to $1.00 per hour.
•We enhanced our health plan to provide for 100% coverage of testing and treatment of COVID-19 at no cost to plan participants.
•We provided detailed guidance to our employees on the steps to take to ensure timely receipt of the stimulus payment provided under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
•We distributed written materials to our employees in all languages appropriate for our employee population to inform them about COVID-19 risks and encourage good personal hygiene, cleaning and social distancing practices away from work and when carpooling to work to protect themselves and their families.
•We have given our employees free bottles of hand sanitizer which they may refill from supplies at our facilities and washable masks for them and their families.
•We have given free, 10-pound packages of fresh chicken to our employees in connection with several holidays.
•Because demand for the products we produce at our prepared chicken facility significantly decreased during the early stages of the pandemic, we ran fewer shifts at that facility. We assisted our employees at the plant in filing for unemployment benefits due to their reduced work hours.
We have continued to serve our customers and wastewater facility withsupport our communities:
•As a result of the COVID-19 pandemic, most of the nation's restaurants have been forced to operate at significantly reduced capacity or to close completely. As a result, our retail grocery store customers experienced a surge in demand for food to be prepared at home. Because of the significant decrease in demand from our food service customers, during the second quarter of fiscal 2020 we were able to divert approximately 4.3 million head of chickens from our big bird program to be processed at our plants that serve retail grocery store customers. To accomplish this, we increased the number of shifts at our plants that process 1.25retail product, and we have not experienced any significant delays or other hindrances in our shipment of products to our retail grocery store customers.
•Since the beginning of the pandemic, we have donated over 1.4 million chickens per week.pounds of chicken to employees, food banks and other relief organizations.
•During the pandemic, we have donated tens of thousands of N95, KN95, disposable and washable masks to a number of hospitals and community organizations.
On March 27, 2020, the CARES Act was enacted. The facility reached full capacity during fiscal 2016.
In March 2015,CARES Act affects the Company announcedin several areas including, but not limited to, the selection of St. Pauls and Robeson County, North Carolina,following:
•It allows for the construction of a new poultry processing complex. The completed complex consists of a hatchery, processing plant, waste water treatment facility with the capacity to process 1.25 million chickens per week, and an expansiondeferral of the Company's existing feed mill in Kinston, North Carolina. Construction began in July 2015, initial operationsemployer portion of social security payroll tax payments that would have otherwise been paid between the new complex beganenactment date and December 31, 2020. We used this provision to increase our available liquidity. During fiscal 2020, we deferred approximately $20.7 million, and during the first quarter of fiscal 2017,2021, we deferred an additional $6.5 million, resulting in a total deferral of approximately $27.2 million that would have been a cash outflow in the absence of the CARES Act. Fifty percent of this deferral is due during calendar year 2021 and fifty percent is due during calendar year 2022. We intend to remit approximately $20.7 million of the deferred payroll taxes on or before June 15, 2021 and the facility reached near full capacityremaining $6.5 million on or before June 15, 2022, so
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that we are able to deduct the corresponding payroll tax expenses on our fiscal 2020 and 2021 income tax returns, respectively.
•The Employee Retention Credit, a refundable, wage-related tax credit, was made available to eligible employers. We recognized a $3.5 million benefit, before income taxes, related to this credit during January 2018. The Company expects the facility will reach full capacityour fourth quarter of fiscal 2020, and we recognized an additional $1.1 million benefit, before income taxes, related to this credit during April 2018. Duringour first quarter of fiscal 2021.
EXECUTIVE OVERVIEW OF RESULTS
For the first quarter of fiscal 2018, the St. Pauls processing plant processed approximately 122.7 2021, we reported net income of $9.5 million, pounds of dressed poultry meat,or $0.42 per share, as compared to 4.0a net loss of $38.6 million, pounds during the first quarter of fiscal 2017.
In March 2017, the Company announced the selection of sites in Lindale, Mineola and Smith County, Texas, for the construction of a new poultry processing complex. The completed complex will consist of a hatchery, feed mill, processing plant and waste water treatment facility with the capacity to process 1.25 million chickensor $1.76 per week. We are in the early stages of construction, and initial operations of the new complex are expected to begin during the first calendar quarter of 2019. Before the complex can become operational, we will need to obtain the necessary licenses and permits, enter into construction contracts, enter into contracts with a sufficient number of independent contract poultry producers to house the live inventory and hire and train our workforce. See "The construction and potential benefits of our new facilities are subject to risks and uncertainties" in the Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended October 31, 2017.
The Company is a party to a revolving credit facility dated April 28, 2017, as amended on November 22, 2017, with a maximum available borrowing capacity of $900.0 million. The facility has annual capital expenditure limitations of $105.0 million, $110.0 million, $115.0 million, $120.0 million and $125.0 million for fiscal years 2018 through 2022, respectively, and permits up to $20.0 million of the unused capital expenditure limitation for any fiscal year starting with fiscal 2017 to be carried over to the next fiscal year. The normal capital expenditure limitation for fiscal 2018 is $125.0 million, including $20.0 million carried over from fiscal 2017.
The credit facility also permits capital expenditures up to $200.5 million on the construction of a new poultry processing complex in Lindale, Mineola and Smith County, Texas, up to $210.0 million on the construction of a potential additional new poultry complex, up to $15.0 million on expansion of the Company's existing prepared chicken facility in Flowood, Mississippi, up to $60.0 million on a potential new prepared chicken facility, and up to $70.0 million on the purchase of three new aircraft. As amended on November 22, 2017, the facility also excludes from the normal capital expenditure limits certain capital projects in an aggregate amount of up to $135.0 million. These additional projects, which include the construction of a new feed mill, and other expansions, equipment and changes to the Laurel, Collins, McComb and Hazlehurst, Mississippi complexes; the Waco, Palestine and Brazos, Texas complexes; the Moultrie, Georgia complex; and the Kinston, North Carolina complex, are each subject to their own expenditure limitations.

Under the credit facility, the Company may not exceed a maximum debt to total capitalization ratio of 50%. The Company has a one-time right, at any time during the term of the agreement, to increase the maximum debt to total capitalization ratio then in effect by five percentage points in connection with the construction of any of the three aforementioned new complexes for the four fiscal quarters beginning on the first day of the fiscal quarter during which the Company gives written notice of its intent to exercise this right. The Company has not exercised this right. The facility also sets a minimum net worth requirement that at January 31, 2018, was $1,007.2 million. The credit is unsecured and, unless extended, will expire on April 28, 2022. As of January 31 and February 20, 2018, the Company had no outstanding draws under the facility, and had approximately $23.5 million outstanding in letters of credit, leaving $876.5 million of borrowing capacity available under the facility. For more information about the facility, see Item 1.01 of our Current Report on Form 8-K filed May 4, 2017, and Item 1.01 of our Current Report on Form 8-K filed November 29, 2017, which are incorporated herein by reference.
EXECUTIVE OVERVIEW OF RESULTS
The Company's margins decreasedshare during the first quarter of fiscal 2018 when compared2020. The significant improvement in our results is primarily attributable to the same period a year ago, reflecting lower average sales prices and higher average costs of good sold. Our lower average sales prices reflect a mix of lower marketselling prices for our products, sold to food service customers, higher market prices for products sold to export customers and stable market prices for products sold to retail grocery store customers. Ourslightly offset by higher average costs of goods sold. Our results for the first quarter of fiscal 2021 continued to be affected by the COVID-19 pandemic. The primary impacts were:
•Orders from food service customers declined dramatically during the second quarter of fiscal 2020 due to widespread closures or significant reductions in operating capacity of restaurants and other venues where food is consumed away from home. Since that time, demand from our largest food service customers has fluctuated from week to week, coinciding with the fluctuating governmental restrictions placed on the restaurant industry. The average weekly volume sold reflect a decrease in feed coststo our largest food service customers during our first quarter of fiscal 2021 ranged from 72% to 105% of levels seen before the pandemic. The impact of fluctuating demand is evidenced by the Urner Barry quote for boneless breast meat. In mid-May 2020, the quoted price reached $1.58 per pound before falling to $0.97 per pound in mid-June and recovering to $1.19 per pound by August 5, 2020. The quoted price fell to $0.86 per pound by October 5, 2020, was $1.32 per pound on January 31, 2021, and has now risen further to $1.45 per pound as of chicken processed, which was more than offset byFebruary 24, 2021. We believe the most recent improvement in the quoted market price is attributable, at least in part, to an increase in demand from quick-service restaurant chains that are featuring or planning to feature chicken products on their menus. In addition, we expect demand from food service customers will improve as more consumers dine away from home as governmental restrictions are relaxed or lifted in certain areas of the country and as the number of people vaccinated for COVID-19 increases.
•We announced during our second fiscal quarter of 2020 that, in response to reduced demand from food service customers caused by the COVID-19 pandemic, we would reduce production at plants processing a larger bird for food service customers. Additionally, we reduced the target live weight for our Hazlehurst, Mississippi plant from a big bird size to a chill-pack size, and the birds processed at that plant reached the target live weight on or about November 23, 2020. As a result of the production cuts and the lower live weight in Hazlehurst, we processed 1.15 billion pounds of dressed poultry during the first fiscal quarter of 2021, down 1.6% from the 1.17 billion pounds processed during the first fiscal quarter of 2020.
•The demand shift to food prepared at home caused demand from our retail grocery store customers to surge during the early stages of the pandemic, and that demand remains strong as a result of the fluctuating options available for dining away from home and some consumers' unwillingness to dine away from home in close proximity to others.
•Demand for our products from our traditional export partners was soft following the onset of the pandemic. Many countries to which we export our products faced myriad issues ranging from lack of liquidity to logistical challenges as a result of COVID-19. These challenges created volatility in most export markets, although demand and pricing for chicken paws sold to China has remained strong throughout the pandemic. During the first two months of fiscal 2021, demand and pricing for products typically sold for export, such as leg quarters and drumsticks, remained soft; however, demand and pricing for those products improved significantly beginning in January 2021 and continuing into February. We believe this strength is the result of several factors, including higher crude oil prices and the value of the United States dollar in relation to other foreign currencies.
•Our top priority throughout the crisis has been protecting the health, safety and welfare of our employees. As a result, the first quarter of fiscal 2021 includes approximately $11.4 million in direct COVID-19 costs for payroll expenses for employees who are quarantined and items and services related to workplace safety, including personal protective equipment, thermometers, barriers and other social-distancing measures, professional cleaning, on-site medical clinics, and additional nursing staff, among other things.
Our higher average cost of goods sold during the first quarter of fiscal 2021 as compared to the same quarter a year ago reflects increases in both non-feed related costs of goods sold, details of which are described in more detail in the "Results of Operations" section below.
Marketbelow, and in feed costs per pound of chicken processed. When combined, the average cash prices paid by the Company for corn were slightly higher and for soybean meal were slightly lowerhigher during the first quarter of fiscal 2018 as compared to the same period a year ago. This combination, along with improved broiler performance, resulted in a decrease in our average feed cost in broiler flocks processed of 1.9%,2021 as compared to the first quarter of fiscal 2017.2020,
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which contributed to an increase in feed costs in broiler flocks processed. Unfavorable growing conditions and weather events in certain areas of the United States during the late summer and fall of 2020 caused corn and soybean production in the United States to fall below levels that were originally estimated by the United States Department of Agriculture and other industry analysts. The production shortfall, combined with significant export demand, have contributed to current market prices for feed grains that are significantly higher than prices paid by the Company during fiscal 2020. We have priced a significant portion of our graincorn basis through July 2021 and a significant portion of our soybean meal basis through October 2021. Although we have priced significant portions of our basis needs, through the second quarterwe have priced none of fiscal 2018. Bothour actual corn and soybean balance tables are healthy as we head into the 2018 planting season, but market prices have moved higher over themeal needs past several weeks based on weather concerns in Argentina and strong export demand.March 2021. Had we priced our remaining fiscal 20182021 grain needs at February 19, 201824, 2021 cash market prices quoted on the Chicago Board of Trade, we estimate our costs of feed grains based on 2020 volumes would be approximately $52.9$325.4 million higher during fiscal 20182021 as compared to fiscal 2017.2020. Based on our projected production levels for the remainder of the fiscal year, we estimate that those higher grain costs, along with estimated basis costs, would result in approximately $0.0668 per pound higher feed costs in broiler flocks processed for fiscal 2021 as compared to fiscal 2020. These numbers are estimates and are subject to change as we move through the balance of the year.
Our overall cost structure will be higher during fiscal 2021 than in fiscal 2020, primarily because of higher grain prices. We believe that demand for our products from retail grocery stores will continue to be strong as consumers continue to prepare more food at home than prior to the pandemic. While we expect some improvement in food service demand, we believe this trend will continue to some extent because we expect, among other factors:
•people will continue to work from home in higher numbers than before the pandemic;
•some restaurants will remain closed, there will be reduced capacity at open restaurants due to social distancing restrictions and some consumers will continue to choose not to dine in restaurants for safety reasons; and
•consumers will have lower levels of disposable income due to unemployment and other financial constraints caused by the pandemic.
While demand for our retail grocery products is currently favorable and demand from our food service customers has improved, it is uncertain how long these conditions will persist. How long current conditions will last and the future effect of the pandemic on our business will depend on many factors, including:
•the timing of the distribution of COVID-19 vaccines;
•whether there are resurgences in COVID-19 infections that make people fearful of dining out or cause state, local and foreign governments to extend or reimpose stay-at-home restrictions, as well as varying restrictions on restaurants;
•the ability of restaurants to survive financially in depressed business conditions, and the extent to which the volume of food sold by restaurants is affected by required social distancing measures that reduce the number of customers they can serve;
•whether other venues where people eat food away from home, such as sporting events and hotels, resume or increase operations;
•the extent to which unemployment levels and possible recessionary conditions affect the amount of disposable income consumers have to spend on food and how consumers allocate their food dollars;
•with respect to our export sales, the condition of the oil market, the relative strength of foreign currencies against the U.S. dollar and political uncertainty that could affect trade relations with other countries, especially with China; and
•the effect of the pandemic on our operations, including labor shortages we have experienced and may continue to experience as a result of the pandemic.
In addition to the challenges created by the COVID-19 pandemic, our employees, managers, contractors and independent contract producers in Texas, Louisiana and Mississippi have navigated the historic winter weather event that began affecting the region on February 13, 2021. Because of the record low temperatures, power failures, snow and ice, and hazardous road conditions, we were unable during the week of February 15, 2021, to operate our processing plants in those states, deliver day old chicks to broiler farms on our regular schedule, pick up hatching eggs from breeder farms and place those eggs in our hatcheries on our regular schedule, or manufacture and deliver chicken feed to the farms of our independent contract producers on our regular schedule. None of our facilities were damaged, our employees remained safe, and we returned to normal operations on February 22, 2021, except for our Hazlehurst, Mississippi processing plant, which returned to normal operations on February 23, 2021. However, our live production supply chain experienced interruptions and losses. We lost 455,000 broilers in houses that either lost water, power or feed, or collapsed under the weight of snow and ice. Because the hazardous road conditions prevented us from delivering day old chicks to broiler farms on our regular schedule, we were forced to
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humanely euthanize 545,000 chicks in our Texas hatcheries. We also were unable to pick up and place approximately 703,000 hatching eggs in our hatcheries on our normal schedule.
As a result of these interruptions, we will have approximately 1.6 million fewer chickens to process at Texas, Louisiana and Mississippi processing plants than originally planned. These losses represent just under 1% of the number of birds we expected to process during our second quarter of fiscal 2021, prior to the impacts of the winter storms. In addition, both breeder and broiler chickens exposed to extreme temperatures typically suffer some performance losses over their lives. We are in the process of estimating the total financial impact of this event. While the Company is insured for catastrophic events such as this one, it retains $2.75 million of the risk and is subject to a seven day deductible under its business interruption coverage. The Company will seek reimbursement for all of its insured losses. Insured losses related to damaged or destroyed inventory and direct expenses incurred as a result of the event will be recorded in the second quarter of fiscal 2021, up to the $2.75 million retained risk, and such losses that exceed that amount will be recorded as an insurance receivable. Recoveries for lost revenue and reduced margins as a result of business interruption will be recognized as calculations of the claims are completed and agreements with our insurance carriers are reached.
RESULTS OF OPERATIONS
Net sales for the first quarter ended January 31, 20182021 were $771.9$909.3 million as compared to $688.3$823.1 million for the first quarter ended January 31, 2017,2020, an increase of $83.6$86.2 million, or 12.1%10.5%. Net sales of poultry products for the first quarter ended January 31, 20182021 and 2017,2020, were $731.4$870.2 million and $647.5$771.5 million, respectively, an increase of $83.9$98.7 million, or 13.0%12.8%. The increase in net sales of poultry products resulted from a 14.4%13.0% increase in the poundsaverage sales price of poultry products sold, partiallyslightly offset by a 1.2%0.1% decrease in the average sales pricepounds of poultry products sold. During the first quarter of fiscal 2018,2021, the Company sold 1,106.01,150.2 million pounds of poultry products, updown from 967.21,151.8 million pounds during the first quarter of fiscal 2017.2020. The increaseddecrease in pounds of poultry products sold resulted from a 12.4% increase0.8% decrease in the number of head processed and a 1.6%1.1% decrease in the average live weight of poultry processed. The new St. Pauls processing facility, which began initial operations in January 2017, processed approximately 14.4 million head
Overall, quoted market prices for poultry products increased during the first quarter of fiscal 2018, or approximately 10.0% of the Company's total head processed during the period, and sold approximately 123.6 million pounds of poultry products during the first quarter of fiscal 2018, or approximately 11.2% of the Company's total poultry pounds sold during the period. By comparison, the St. Pauls facility processed approximately 0.5 million head during the first quarter of fiscal 2017, or approximately 0.4% of the Company's total head processed during the period, and sold approximately 8.8 million pounds of poultry products during the first quarter of fiscal 2017, or approximately 0.9% of the Company's total poultry pounds sold during the period. Overall, market prices for poultry products decreased during the first quarter of fiscal 20182021 as compared to the same quarter of fiscal 2017.2020. When compared to the first quarter of fiscal 2017,2020, Urner Barry average market prices for jumbo wings, tenders and boneless breast meat increased by 34.3%, 27.4%, and tenders decreased by 9.0%, 2.8% and 1.7%10.5%, respectively, while average quoted market prices for bulkboneless thigh meat and leg quarters increaseddecreased by 15.9%.43.5% and 26.4%, respectively. Average marketrealized prices for chicken products sold to retail grocery store customers remained relatively strongincreased by 3.1% during the first quarter of fiscal 20182021 as compared to the same period of fiscal 2020 and continue to reflect goodstrong demand.
Net sales of prepared chicken products for the first quarterquarters ended January 31, 20182021 and 20172020 were $40.5$39.1 million and $40.8$51.6 million, respectively, orrepresenting a decrease of 0.8%24.3%. This decrease resulted fromis primarily attributable to a 0.9%22.4% decrease in the pounds of prepared chicken products sold, partially offset by a 0.1% increase inwhile the average sales price of prepared chicken products sold.sold also decreased by 2.3%. During the first quarter of fiscal 2018,2021, the Company sold 20.521.2 million pounds of prepared chicken products, down from 20.727.3 million pounds during the first quarter of fiscal 2017.2020. The decrease in pounds of prepared chicken products sold resulted from the decrease in demand from our food service customers due to the COVID-19 pandemic, as described above.
Cost of sales for the first quarter of fiscal 20182021 was $702.1$839.3 million as compared to $606.4$823.5 million during the first quarter of fiscal 2017,2020, an increase of $95.7$15.8 million, or 15.8%1.9%. Cost of sales of poultry products during the first quarter of fiscal 2018,2021, as compared to the first quarter of fiscal 2017,2020, was $666.9$802.3 million and $571.0$775.8 million, respectively, which represents a 2.1%3.6% increase in the average cost of sales per pound of poultry products. As illustrated in the table below, which for comparative purposes

includes poultry products soldtransferred to the Company's prepared chicken plant, and excludes poultry products processed and sold under our agreement with House of Raeford Farms as described in "Note (2)" to the table, the increase in the average cost of sales per pound of poultry products resulted from a $0.0188$0.0251 per pound, or 6.0%, increase in other costs of sales of poultry products, partially offset by a decreaseand an increase in the cost of feed per pound of broilers processed of $0.0047,$0.0034, or 1.9%1.3%.








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Poultry Cost of Sales
(In thousands, except per pound data)
First Quarter 2018 First Quarter 2017 Increase/(Decrease) Three Months Ended 
 January 31, 2021		Three Months Ended 
 January 31, 2020		Incr/(Decr)
DescriptionDollars Per lb. Dollars Per lb. Dollars Per lb.DescriptionDollarsPer lb.DollarsPer lb.DollarsPer lb.
Beginning Inventory$37,769
 $0.4437
 $15,378
 $0.3397
 $22,391
 $0.1040
Beginning Inventory$32,952 $0.4701 $35,121 $0.3868 $(2,169)$0.0833 
Feed in broilers processed265,757
 0.2446
 245,149
 0.2493
 20,608
 (0.0047)Feed in broilers processed303,047 0.2631 304,658 0.2597 (1,611)0.0034 
All other cost of sales396,050
 0.3645
 339,972
 0.3457
 56,078
 0.0188
All other cost of sales508,226 0.4412 488,111 0.4161 20,115 0.0251 
Reversal of prior-period inventory write-downReversal of prior-period inventory write-down— — (2,800)(0.0024)2,800 0.0024 
Less: Ending Inventory31,855
 0.4405
 21,300
 0.3925
 10,555
 0.0480
Less: Ending Inventory30,596 0.4985 37,861 0.3797 (7,265)0.1188 
Total poultry cost of sales$667,721
(1) (2) 
$0.6077
 $579,199
(1) 
$0.5947
 $88,522
 $0.0130
Total poultry cost of sales$813,629 (1)$0.7010 $787,229 (1)$0.6762 $26,400 $0.0248 
Pounds:           Pounds:
Beginning Inventory85,120
   45,272
      Beginning Inventory70,103 90,805 
Poultry processed1,086,434
(2) 
  983,400
      
Poultry processed/otherPoultry processed/other1,151,917 1,173,174 
Poultry sold1,098,783
(1) (2) 
  973,874
(1) 
     Poultry sold1,160,646 (1)1,164,256 (1)
Ending Inventory72,322
   54,273
      Ending Inventory61,374 99,723 
Note (1) - For comparative purposes, includes the costs and pounds of product sold to the Company's prepared chicken plant.
Note (2) - On April 17, 2017, the Company announced that it had agreed to process chickens grown by House of Raeford Farms at the Company's processing facility located in St. Pauls, North Carolina. House of Raeford Farms, a private company headquartered in Rose Hill, North Carolina, operates poultry grow-out operations and processing facilities in four southeastern states. The House of Raeford Farms Teachey, North Carolina, facility was severely damaged by a fire in late February 2017. Under the terms of the agreement, the Company purchased, processed and sold chickens grown by House of Raeford Farms through mid-December 2017. During the first quarter of fiscal 2018, the Company processed and sold approximately 14.2 million pounds as a result of this agreement. For comparative purposes, those pounds and the associated direct and indirect costs have been excluded from the data set forth in this table.
Other costs of sales of poultry products includeconsists primarily of labor, packaging, freight, maintenance and repairs, utilities, antimicrobial interventions, contract grower pay, packaging, freightchick costs and certain fixed costs, among other costs. These non-feed related costs of poultry products sold increased by $0.0188$0.0251 per pound processed, or 5.4%6.0%, during this year’s first fiscal quarter compared to the same quarter a year ago,ago. This increase is primarily attributable to higher labor, freightpackaging and certain fixed costs acrossin our operations, partially offset by efficiencies realized atprocessing facilities, slightly higher freight costs incurred for the Company's St. Pauls, North Carolina facilities, which weredelivery of finished product, and higher independent contract producer pay, as well as expenses incurred in response to the early stagesCOVID-19 pandemic. The COVID-19 related expenses included in other costs of initial operationssales during the first quarter of fiscal 20172021 total approximately $5.3 million and operating at near full capacity duringinclude payroll expenses for employees who are quarantined and expenses related to various items and services including personal protective equipment, thermometers, barriers and other social-distancing measures and additional nursing staff to protect the first quarterhealth and safety of fiscal 2018.our employees. Excluding St. Pauls,the COVID-19 related expenses, other costs of sales would have increased by $0.0264$0.0206 per pound processed, or 7.7%4.9%.
CostsCost of sales of the Company’s prepared chicken products during the first quarter of fiscal 20182021 were $35.2$37.0 million as compared to $35.4$47.7 million during the same quarter a year ago, a decrease of $0.2$10.7 million, or 0.4%,22.5%. This decrease was primarily attributable to a 0.9%22.4% decrease in the pounds of prepared chicken sold, and a 3.1% decrease inwhich is the costs per poundresult of raw material purchases, partially offset by a 12.9% increase in processing costs per pound. The increase in processing costs per pound is primarily attributable to a 4.5% decrease in the Company'sreduced demand for prepared chicken pounds processed comparedproducts from our food service customers due to the first quarter of fiscal 2017.COVID-19 pandemic.
The Company recorded the value of live broiler inventories on hand at January 31, 20182021 at cost. When market conditions are favorable,In periods when the Company estimates that the cost to grow live birds in inventory to a marketable age and then process and distribute those birds will be lower in the aggregate than the anticipated sales proceeds, the Company values the broiler inventories on hand at cost and accumulates costs as the birds are grown to a marketable age subsequent to the balance sheet date. In periods wherewhen the Company estimates that the cost to grow live birds in inventory to a marketable age, process, and distribute those birds will be higher in the aggregate than the anticipated sales price,proceeds, the Company will make an adjustment to lower the value of live birds in inventory to the marketnet realizable value. No such charge was required at January 31, 20182021 or January 31, 2017.2020.
Selling, general and administrative ("SG&A") costs during the three months ended January 31, 2018first quarter of fiscal 2021 were $52.6$56.6 million, an increase of $6.5$7.1 million compared to the $46.1$49.5 million during the three months ended January 31, 2017.first quarter of fiscal 2020. The following table includes the components of SG&A costs for the three months ended January 31, 20182021 and 2017.2020.






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Selling, General and Administrative Costs
(in thousands)
DescriptionThree Months Ended 
 January 31, 2021		Three Months Ended 
 January 31, 2020		Increase/(Decrease)
COVID-19-related expense6,162 — 6,162 
Legal expense8,464 6,485 1,979 
Administrative salaries12,357 11,493 864 
Broker commissions3,294 2,587 707 
Stock compensation expense2,402 2,495 (93)
Sanderson Farms Championship expense1,950 2,047 (97)
Trainee expense2,986 3,275 (289)
All other SG&A18,984 21,103 (2,119)
Total SG&A$56,599 $49,485 $7,114 
DescriptionThree Months Ended January 31, 2018 Three Months Ended January 31, 2017 Increase/(Decrease)
Trainee expense$5,189
 $3,312
 $1,877
Administrative salaries10,210
 8,467
 1,743
Legal expense2,592
 1,556
 1,036
Start-up expense (Tyler)846
 —
 846
Stock compensation expense6,051
 5,607
 444
Advertising expense8,774
 8,734
 40
Start-up expense (St. Pauls)—
 4,022

(4,022)
All other S,G & A18,913
 14,372

4,541
Total S,G & A$52,575
 $46,070

$6,505
The increasesRegarding the table above, the increase in traineeCOVID-19-related expense is the result of direct expenses for items and administrative salaries are primarily attributableservices related to increases in personnel that coincide with the Company's currenthealth, safety and future growth plans, as well as wage increases. Thewelfare of our employees during the COVID-19 pandemic, and the increase in legal expense is primarily attributable to our ongoing defense of the litigation described in "Part II. Other Information,I, Item 1. Legal Proceedings"1, Note 8 - Commitments and Contingencies" of this Form 10-Q. The change in start-up expense in any particular period relates to the stage of the start-up process in which a facility under construction is in during the period. Non-construction related expenses, such as labor, training and office-related expenses for a facility under construction are recorded as start-up expense until the facility begins operations. As a facility moves closer to start-up, the expenses incurred for labor, training, etc. increase. As a result, amounts classified as start-up expenses will increase period over period until the facility begins production. Once production begins, the expenses from that point forward are recorded as costs of goods sold. The increasedecrease in all other SG&A expenses is primarily the result of lower levels of travel and entertainment expenses as a net increase in various other categoriesresult of SG&A costs.the COVID-19 pandemic.
The Company’s operating income for the three months ended January 31, 20182021 was $17.3$13.4 million, as compared to an operating incomeloss for the three months ended January 31, 20172020 of $35.9$49.9 million. The decreaseincrease in operating income for the three monthsperiod ended January 31, 2018,2021, as compared to the same period a year ago, resulted primarily from a 1.7% decrease inhigher average selling prices, per pound and a 1.6% increase inpartially offset by higher average costs of goods sold per pound, partially offset by a 14.0% increase in pounds sold.
Interest income during the first quarter of fiscal 2018 was $0.4 million, as compared to $0.2 million during the same period a year ago. Interest expense during the first quarter of fiscal 20182021 was $0.5$0.6 million, as compared to $0.4$1.2 million during the first quarter of fiscal 2020. The decrease in interest expense during the first quarter of fiscal 2021, as compared to the same period a year ago.ago, is the result of lower outstanding debt levels during fiscal 2021, in addition to lower interest rates.
The Company’s estimated annual effective tax rate for the three months ended January 31, 20182021 was (198.2)%25.7%, as compared to 32.6%an estimated annual effective tax rates of 24.5% for the three months ended January 31, 2017. As described in our financial statement footnote "Note 8 - Income Taxes,"2020. Excluding the revaluationeffects of our deferred taxes usingdiscrete items recognized during the newly enacted tax rate resulted in a $37.5 million discrete income tax benefit, or an approximately (218.4)% impact toperiods, the Company's estimated annual effective tax rate for the first quarter of fiscal 2018. Additionally, the effective tax rates for the first quarter of fiscal 2018 and 2017, respectively, include approximately (4.2)% and (2.4)% favorable discrete impacts related to excess tax benefits from share-based payments to employees. Excluding the impacts of these discrete items, the Company's effective tax rates for the first quarter of fiscal 2018 and 2017three months ended January 31, 2021 would have been approximately 24.4% and 35.0%23.8%, respectively.as compared to an estimated annual effective tax rate 24.0% for the three months ended January 31, 2020. The Company estimates its effective tax rate for the full fiscal 2018year 2021, exclusive of discrete items, will be approximately 24.4%23.8%.
As of January 31, 2018,2021, the Company's long-term deferred income tax liability was $57.9$142.8 million as compared to $91.9$141.7 million at October 31, 2017, a decrease2020, an increase of $34.0$1.1 million. This decrease is attributable to the revaluation of our deferred tax assets and liabilities, as U.S. GAAP requires that deferred tax assets and liabilities be measured using the enacted tax rate expected to apply when the temporary differences from which the deferred taxes arose are expected to be settled. Prior to the enactment of the Tax Cuts and Jobs Act, our deferred taxes were measured using the enacted 35% federal income tax statutory rate. Following enactment, we remeasured our deferred taxes using a 23.3% blended federal income tax statutory rate for temporary differences expected to reverse in fiscal 2018 and a 21% federal income tax statutory rate for temporary differences expected to reverse after fiscal 2018.

During the three months ended January 31, 2018,2021, the Company’s net income was $51.2$9.5 million, or $2.24 per share. Excluding the $37.5 million discrete income tax benefit for the revaluation of deferred income taxes, net income for the three months ended January 31, 2018 would have been $13.7 million, or $0.60$0.42 per share. For the three months ended January 31, 2017,2020, the Company’s net incomeloss was $24.0$38.6 million, or $1.06$1.76 per share. The increase in net income for the first quarter of fiscal 2021, as compared to the same period in fiscal 2020 is primarily attributable to higher average selling prices, partially offset by higher average costs of goods sold. Details related to each of the aforementioned drivers of the changes in net income have been discussed above.
Liquidity and Capital Resources
The Company’s working capital, calculated by subtracting current liabilities from current assets, at January 31, 20182021 was $644.0$387.4 million, and its current ratio, calculated by dividing current assets by current liabilities, was 4.72.6 to 1. The Company’s working capital and current ratio at October 31, 20172020 were $650.8$354.0 million and 4.32.6 to 1.1, respectively. These measures reflect the Company’s ability to meet its short termshort-term obligations and are included here as a measure of the Company’s short term market liquidity. The Company’s principal sources of liquidity during fiscal 20182021 include cash on hand at October 31, 2017,2020, cash flows from operations, and funds available under the Company’s revolving credit facility. As described below, the Company is a party to a revolving credit facility dated April 28, 2017,March 21, 2019, with a maximum available borrowing capacity of $900.0 million.$1.0 billion. As of January 31, 2021 and February 19, 2018,24, 2021, the Company had no outstanding drawsborrowed $55.0 million under the facility, and had approximately $23.5$25.2 million outstanding in letters of credit, leaving $876.5$919.8 million of borrowing capacity available under the facility. Management believes the Company has sufficient liquidity available to meet its needs.
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The Company’s cash position at January 31, 20182021 and October 31, 20172020 consisted of $388.9$50.1 million and $419.3$49.1 million, respectively, in cash and short-term cash investments. The Company’s ability to invest cash is limited by covenants in its revolving credit agreement to short termshort-term investments. All of the Company’s cash at January 31, 20182021 and October 31, 20172020 was held in bank accounts and highly-liquid investment accounts. There were no restrictions on the Company’s access to its cash, and such cash was available to the Company on demand to fund its operations.
Cash flows provided by operating activities during the three months ended January 31, 2018 and 2017, were $25.02021 totaled $9.4 million, and $39.5as compared to cash flows used in operating activities of $65.9 million respectively.during the three months ended January 31, 2020. Cash flows from operating activities decreasedincreased by $14.5$75.3 million, resulting primarily from two primary factors. During the first three months of fiscal 2021, the Company realized higher margins due to an increase in cash bonuses paidaverage selling prices, partially offset by the Company, which were approximately $36.0 million during the first quarteran increase in average costs of 2018,goods sold, as compared to $0.4 million during the first quarterthree months of 2017,fiscal 2020. This increase in cash flows was partially offset by a decreasean increase in cash paid for income taxes. During theinventories, especially our live bird and feed inventories, during our first fiscal quarter of 2017, the Company paid approximately $19.9 million in income taxes, but did not pay any income taxes2021, as we began purchasing higher-priced corn and soybean meal during the first quarter of 2018.quarter.
Cash flows used in investing activities during the first three months of fiscal 20182021 and 20172020 were $51.2$36.8 million and $46.0$71.2 million, respectively. The Company’s capital expenditures during the first three months of fiscal 20182021 were approximately $51.7$36.9 million, and included approximately $15.0$12.2 million related tofor multiple large-scale equipment and building upgrades at multiple complexes and approximately $4.9 million on construction at the Tyler, Texas complex, and $10.0 million related to progress payments made under purchase agreements for future delivery of a new aircraft as described below.hatchery in Jones County, Mississippi. Capital expenditures for the first three months of fiscal 20172020 were $46.3$71.2 million, includingand included approximately $14.0$20.6 million related to progress payments made under the aircraft purchase agreements,for multiple large-scale equipment and approximately $11.7 million related to constructionbuilding upgrades at the St. Pauls, North Carolina complex.multiple complexes.
Cash flows used inprovided by financing activities during the three months ended January 31, 2018 and 2017 were $4.22021 totaled $28.4 million, and $1.8as compared to cash flows provided by financing activities of $105.0 million respectively.during the three months ended January 31, 2020. The Company made no change in cash flows from financing activities is primarily attributable to the net outstandingdecrease in borrowings under itsthe Company's revolving credit facility. During the three months ended January 31, 2021, the Company's borrowings under the facility in eithertotaled $30.0 million as compared to borrowings of $110.0 million under the comparative periods.facility during the three months ended January 31, 2020.
As of February 18, 2018,17, 2021, the Company’sCompany's fiscal 2021 capital budget for fiscal 2018, excluding operating leases, is expected to be approximately $345.6$173.6 million. The Company expects the 20182021 capital budget to be funded by cash on hand, internally generated working capital, cash flows from operations and as needed, funds available under the Company's revolving credit facility. The Company had $876.5 million available under the revolving line of credit at January 31, 2018. The fiscal 20182021 capital budget includes an aggregate of approximately $178.0$34.9 million for construction of the Company's new Tyler, Texas complex, approximately $32.2 million for progress payments due under purchase agreements for future delivery of new aircraft as described below, approximately $37.3 million combined for multiple large-scale equipment upgrades and corresponding building upgrades at multiple complexes, further described below and approximately $4.2$12.4 million to completepurchase new vehicles that in previous years would have been leased, and $10.1 million for construction of a new hatchery to replace the expansion of the Company's existing prepared chicken facilityhatchery currently in Flowood,service in Laurel, Mississippi. Excluding the budgetsbudgeted amounts for the projectsitems detailed above, the fiscal 20182021 capital budget is approximately $93.9$116.2 million. These amounts are estimates and are subject to change as we move through fiscal 2018.
The Company has entered into three separate purchase agreements for three new aircraft to be delivered at different dates during fiscal 2018 and 2019. The new aircraft will replace aircraft currently owned by the Company that are scheduled to be retired and removed from service in the ordinary course of business. The agreements require that the Company make periodic payments, with final payments due upon delivery of each aircraft. To date, the Company has made payments totaling $39.0

million under the agreements, and expects to make payments of approximately $22.2 million during the remainder of fiscal 2018 and approximately $4.0 million during fiscal 2019.
In March 2015, the Company announced the selection of St. Pauls and Robeson County, North Carolina, for the construction of a new poultry processing complex. The completed complex consists of a hatchery, processing plant, waste water treatment facility with the capacity to process 1.25 million chickens per week, and an expansion of the Company's existing feed mill in Kinston, North Carolina. Construction began in July 2015, initial operations of the new complex began during the first quarter of fiscal 2017, and the facility reached near full capacity during January 2018. The Company expects the facility will reach full capacity during April 2018. As of January 31, 2018, the Company has spent approximately $163.3 million on the project, of which approximately $1.4 million was spent during the first three months of fiscal 2018.
In March 2017, the Company announced the selection of sites in Lindale, Mineola and Smith County, Texas, for the construction of a new poultry processing complex. The completed complex will consist of a hatchery, feed mill, processing plant and waste water treatment facility with the capacity to process 1.25 million chickens per week. We are in the early stages of construction, and initial operations of the new complex are expected to begin during the first calendar quarter of 2019. Before the complex can become operational, we will need to obtain the necessary licenses and permits, enter into construction contracts, enter into contracts with a sufficient number of independent contract poultry producers to house the live inventory and hire and train our workforce. See "The construction and potential benefits of our new facilities are subject to risks and uncertainties" in the Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended October 31, 2017.2021.
On October 2, 2017,2020, the Company filed a shelf registration statement on Form S-3 to register for possible future sale shares of the Company's common and/or preferred stock. An indeterminate amount of common stock and preferred stock may be offered by the Company in amounts, at prices and on terms to be determined by the board of directors if and when shares are issued. The registration statement became automatically effective upon filing with the SEC on October 2, 2017.2020.
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, including the Company’s ability to raise debt or equity capital on terms 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.
Revolving Credit Facility
The Company is a party to a revolving credit facility dated April 28, 2017, as amended on November 22, 2017,March 21, 2019, with a maximum available borrowing capacity of $900.0 million. The facility has annual capital expenditure limitations of $105.0 million, $110.0 million, $115.0 million, $120.0 million and $125.0 million for fiscal years 2018 through 2022, respectively, and permits up to $20.0 million of the unused capital expenditure limitation for any fiscal year starting with fiscal 2017 to be carried over to the next fiscal year. The normal capital expenditure limitation for fiscal 2018 is $125.0 million, including $20.0 million carried over from fiscal 2017.
The credit facility also permits capital expenditures up to $200.5 million on the construction of a new poultry processing complex in Lindale, Mineola and Smith County, Texas, up to $210.0 million on the construction of a potential additional new poultry complex, up to $15.0 million on expansion of the Company's existing prepared chicken facility in Flowood, Mississippi, up to $60.0 million on a potential new prepared chicken facility, and up to $70.0 million on the purchase of three new aircraft. As amended on November 22, 2017, the facility also excludes from the normal capital expenditure limits certain capital projects in an aggregate amount of up to $135.0 million. These additional projects, which include the construction of a new feed mill, and other expansions, equipment and changes to the Laurel, Collins, McComb and Hazlehurst, Mississippi complexes; the Waco, Palestine and Brazos, Texas complexes; the Moultrie, Georgia complex; and the Kinston, North Carolina complex, are each subject to their own expenditure limitations.
$1.0 billion. Under the credit facility, the Company may not exceed a maximum debt to totaldebt-to-total capitalization ratio of 50%. The Company has a one-time right, at any time during the term of the agreement, to increase the maximum debt to totaldebt-to-total capitalization ratio then in effect by five percentage points in connection with the construction of any of the three aforementioneda new complexespoultry complex for the four fiscal quarters beginning on the first day of the fiscal quarter during which the Company gives written notice of its intent to exercise this right. The Company has not exercised this right. The facility also sets a minimum net worth requirement that at January 31, 2018,2021, was $1,007.2 million.$1.03 billion. The credit is unsecured and, unless extended, will expire on April 28, 2022.March 21, 2024. As of January 31, 2021 and February 20, 2018,24, 2021, the Company had no outstanding drawsborrowed $55.0 million under the facility, and had approximately $23.5$25.2 million outstanding in letters of credit, leaving $876.5$919.8 million of borrowing capacity available under the facility. For more

information about the facility, see Item 1.01 of our Current Report on Form 8-K filed May 4, 2017, and Item 1.01March 27, 2019.
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Table of our Current Report on Form 8-K filed November 29, 2017, which are incorporated herein by reference.Contents

Critical Accounting Estimates
We consider accounting policies related to allowance for doubtful accounts, inventories, long-lived assets, accrued self-insurance, performance share plans, income taxes and contingencies to be critical accounting estimates. These policies are summarized in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended October 31, 2017.2020.


New Accounting Pronouncements
In July 2015,June 2016, the Financial Accounting Standards Board ("FASB") issued guidance that requires an entity to measure inventory at the lower of cost or net realizable value. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2016, our fiscal 2018. The Company adopted this guidance during the first quarter of fiscal 2018, and it did not have a material effect on the Company's consolidated financial statements.
During the third quarter of fiscal 2017, the Company early-adopted Accounting Standards Update ("ASU") 2016-09, Improvements2016-13, Financial Instruments - Credit Losses, to Employee Share-Based Payment Accounting. The provisions of this update that materially affectedprovide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. We adopted ASU 2016-13 during our consolidated financial statements, or could potentially materially affect them in the future, require all income tax effects of stock awards to be recognized in the statement of operations during the period the awards vest or are settled, rather than recording excess tax benefits or deficiencies in additional paid-in capital, and require the related amounts to be presented as operating activities on the statement of cash flows, rather than financing activities. During the period of adoption, the standard requires the Company to account for the transactions as if the standard had been adopted on the first day of the fiscal year in which it was adopted. As a result of adoption, our income tax expense for the first quarter of fiscal 2017 was reduced by approximately $852,000 from excess tax benefits attributable to awards that vested during the first quarter of fiscal 2017. As a result, the income tax expense on the statement of operations for the three months ended January 31, 2017 on this Form 10-Q is $852,000 less than the amount originally reported in our financial statements for the first quarter of fiscal 2017. Additionally, excess tax benefits are now presented as operating activities on the statement of cash flows, rather than financing activities. The Company chose to apply that provision retrospectively,2021, and as a result, reclassified the $2.2 million of excess tax benefits originally reported in our financial statements for the first quarter of fiscal 2017 from financing activities to operating activities on the statement of cash flows for the three months ended January 31, 2017 in this Form 10-Q. Additional provisions from this guidance relate to accounting for forfeitures and the presentation of an employee's use of shares to satisfy the employer's statutory tax withholding obligations. Adoption of those two provisionsadoption did not have a material effect on our consolidated financial statements. The Company has electedUnder the new standard, we are required to accountrecord on our balance sheet an allowance for forfeitures as they occur, rather than estimating forfeitures when determining the amount of compensation cost to recognize each period. The Company will continue to present employees' use of shares to satisfy our statutory withholding obligations as financing activitiesexpected credit losses, which is estimated utilizing historical experience and current and expected economic conditions. Our allowance for expected credit losses is recorded on the statementaccounts receivable, net line of cash flows.the Condensed Consolidated Balance Sheets and is immaterial to our financial position.
In May 2017,December 2019, the FASB issued ASU 2017-09, Scope of Modification2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which amends the requirementsis intended to simplify various aspects related to accounting for changesincome taxes. ASU 2019-12 removes certain exceptions to stock compensation awards. Thethe general principles in Accounting Standards Codification 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for interim and annual periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted. The impact this guidance will have on our consolidated financial statements will depend on the nature and extent of future changes, if any, to the terms and conditions of the Company's Stock Incentive Plan.
In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost. The guidance requires the service cost component of defined benefit pension plans and other post-retirement benefit plans to be reported in the same line item or items as other compensation costs arising from the services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be reported outside of operating income. The guidance is effective for interim and annual periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted. We do not expect adoption to have a material effect on our consolidated financial statements.
In February 2016, the FASB issued guidance which is intended to increase transparency and comparability among companies by requiring an entity that is a lessee to recognize on the balance sheet the right-of-use assets and lease liabilities arising from all leases with terms, as defined by the guidance, of greater than twelve months. The guidance also requires disclosures of key information about the leasing arrangements. The guidance is effective for annual reporting periods, and interim periods within those annual reporting periods, beginning after December 15, 2018,2020, our fiscal 2020. Early adoption is permitted. The Company is2022. We are currently evaluating the impact of this new guidance will have on our consolidated financial statements.

In May 2014,March 2020, the FASB issued ASU 2014-09, Revenue from Contracts with Customers,2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which changes theprovides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, for recognizing revenue. ASU 2014-09 was amended by ASU 2015-14that reference LIBOR or another reference rate expected to defer thebe discontinued. This guidance, which became effective date by one year. The guidance also modifies the related disclosure requirements, clarifies guidance for multiple-element arrangementson March 12, 2020, and provides guidance for transactions that werecan be applied through December 31, 2022, has not addressed fully in previous guidance. The guidance, as amended, is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2016. Companies have the option to adopt retrospectively or modified retrospectively with a cumulative effect adjustment. The Company expects to adopt this standard as of November 1, 2018, the beginning of our fiscal 2019, using the modified retrospective approach. The Company is currently evaluating the impact this guidance will have onaffected our consolidated financial statements. AlthoughWe have a revolving credit facility that references LIBOR, and we are still evaluating the impact, we do not currently expect adoptionassessing how this standard may be applied to have a material effect on our consolidated financial statements, other than additional disclosure requirements.specific contract modifications through December 31, 2022.

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Item 3.Quantitative and Qualitative Disclosures about Market Risk
Item 3.    Quantitative and Qualitative Disclosures about Market Risk
The Company is a purchaser of certain commodities, primarily corn and soybean meal, for use in manufacturing feed for its chickens. As a result, the Company’s earnings are affected by changes in the price and availability of such feed ingredients. Feed grains are subject to volatile price changes caused by factors described below that include weather, size of harvest, transportation and storage costs and the agricultural policies of the United States and foreign governments. The price fluctuations of feed grains have a direct and material effect on the Company’s profitability.
Generally, the Company commits to purchase feed ingredients for deferred delivery from one month to nine months after the time of the commitment. The grain purchases are made directly with our usual grain suppliers, which are companies in the business of regularly supplying grain to end users, and do not involve options to purchase. Such purchases occur when our chief operating decision maker concludes that market factors indicate that prices at the time the grain is needed are likely to be higher than current prices, or where, based on current and expected market prices for the Company’s poultry products, our chief operating decision maker believes the Company can purchase feed ingredients at prices that will allow the Company to earn a reasonable return for its shareholders. The Company sometimes purchases its feed ingredients for prompt delivery to its feed mills at market prices at the time of such purchases. Market factors considered by our chief operating decision maker in determining whether or not and to what extent to commit to buy grain for deferred delivery include:
•Current market prices;
•Current and predicted weather patterns in the United States, South America, China and other grain producing areas, as such weather patterns might affect the planting, growing, harvesting and yield of feed grains;
•The expected size of the harvest of feed grains in the United States and other grain producing areas of the world as reported by governmental and private sources;
•Current and expected changes to the agricultural policies of the United States and foreign governments;
•The relative strength of United States currency and expected changes therein as it might affect the ability of foreign countries to buy United States feed grain commodities;
•The current and expected volumes of export of feed grain commodities as reported by governmental and private sources;
•The current and expected use of available feed grains for uses other than as livestock feed grains (such as the use of corn for the production of ethanol, which use is affected by the price of crude oil); and
•Current and expected market prices for the Company’s poultry products.
The Company purchases physical grain, not financial instruments such as puts, calls or straddles that derive their value from the value of physical grain. Thus, the Company does not use derivative financial instruments as defined in ASC 815, “Accounting for Derivatives for Instruments and Hedging Activities,” or any market risk sensitive instruments of the type contemplated by Item 305 of Regulation S-K. The Company does not enter into any derivative transactions or purchase any grain-related contracts other than the physical grain contracts described above.
Although the Company does not use derivative financial instruments as defined in ASC 815 or purchase market risk sensitive instruments of the type contemplated by Item 305 of Regulation S-K, the commodities that the Company does purchase for physical delivery, primarily corn and soybean meal, are subject to price fluctuations that have a direct and material effect on the Company’s profitability as mentioned above. During the first quarter of fiscal 2018,2021, the Company purchased approximately 28.830.7 million bushels of corn and approximately 264,575276,820 tons of soybean meal for use in manufacturing feed for its live chickens. A $1.00 change in the average market price paid per bushel for corn would have affected the Company’s cash outlays for corn by approximately $28.8$30.7 million in the first quarter of fiscal 2018.2021. Likewise, a $10.00 change in the price paid per ton for soybean meal would affect the Company’s cash outlays by approximately $2.6$2.8 million.
Although changes in the market price paid for feed grains affect cash outlays at the time the Company purchases the grain, such changes do not immediately affect cost of sales. The cost of feed grains is recognized in cost of sales, on a first-in-first-out basis, at the same time that the sales of the chickens that consume the feed grains are recognized. Thus, there is a lag between the time cash is paid for feed ingredients and the time the cost of such feed ingredients is reported in cost of goods sold. For example, corn delivered to a feedmill and paid for one week might be used to manufacture feed the following week. However, the chickens that eat that feed might not be processed and sold for another 48-62 days, and only at that time will the costs of the feed consumed by the chicken become included in cost of goods sold.

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During the first quarter of fiscal 2018,2021, the Company’s average feed cost per pound of broilers processed totaled $0.2446$0.2631 per pound. Feed costs per pound of broilers processed consist primarily of feed grains, but also include other feed ingredients such as vitamins, fat and mineral feed supplements. The average feed cost per pound is influenced not only by the price of feed ingredients, but also by the efficiency with which live chickens convert feed into body weight. Factors such as weather, poultry husbandry, quality of feed ingredients and the quality, size and health of the bird, among others, affect the quantity of feed necessary to mature chickens to the target live weight and the efficiency of that process. Generally, however, a $1.00 change in the average price paid per bushel of corn fed to a chicken during its life would have affected average feed cost per pound of broilers processed by $0.0265,$0.0266, based on the quantity of grain used during the first quarter of fiscal 2018.2021. Similarly, a $10.00 change in the average price paid per ton of soybean meal would have influenced the average feed cost per pound of broilers processed by $0.0024 during the first quarter of fiscal 2018.2021.
The following table shows the impact of hypothetical changes in the price of corn and soybean meal on both the Company’s cash flow and cost of goods sold, based on quantities actually purchased in the first quarter of fiscal 2018:
2021:
Feed Ingredient
Quantity Purchased

during the First

Fiscal Quarter of
2018

2021
Hypothetical Price

Change
Impact on Cash

Outlay
Ultimate Impact on

Feed Cost per

Pound of broilers

Processed
Corn28.830.7 million bushels$1.00 per bushel$28.830.7 million$0.0265/0.0266/lb processed
Soybean meal264,575276,820 tons$10.00 per ton$2.62.8 million$0.0024/lb processed
Typically, theThe Company’s interest expense is sensitive to changes in the general level of interest rates in the United States, and when the Company is indebted, it sometimes maintains certain of its debt as fixed rate in nature to mitigate the impact of fluctuations in interest rates. At January 31, 2018,2021 the Company had no outstandingfixed-rate debt on its balance sheet.sheet; however, management believes the potential effects of near-term changes in interest rates on the Company's debt are not material.
Item 4.Controls and Procedures
Item 4.    Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of January 31, 2018,2021, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of January 31, 2018.2021.
There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter ended January 31, 20182021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1.
Item 1.    Legal Proceedings
Between September 2, 2016 and October 13, 2016, Sanderson Farms, Inc. and our subsidiaries were named as defendants, along with 13 other poultry producers and certain of their affiliated companies, in multiple putative class action lawsuits filed by direct and indirect purchasers of broiler chickens in the United States District Court for the Northern District of Illinois. The complaints allege that the defendants conspired to unlawfully fix, raise, maintain and stabilize the price of broiler chickens, thereby violating federal and certain states' antitrust laws, and also allege certain related state-law claims. The complaints also allege that the defendants fraudulently concealed the alleged anticompetitive conduct in furtherance of the conspiracy. The complaints seek damages, including treble damages for the antitrust claims, injunctive relief, costs and attorneys’ fees. As detailed below, the court has consolidated all of the direct purchaser complaints into one case, and the indirect purchaser complaints into two cases, one on behalf of commercial and institutional indirect purchaser plaintiffs and one on behalf of end-user consumer plaintiffs.

On October 28, 2016, the direct and indirect purchaser plaintiffs filed consolidated, amended complaints, and on November 23, 2016, the direct and indirect purchaser plaintiffs filed second amended complaints. On December 16, 2016, the indirect purchaser plaintiffs separated into two cases. On that date, the commercial and institutional indirect purchaser plaintiffs filed a third amended complaint, and the end-user consumer plaintiffs filed an amended complaint. On January 27, 2017, the defendants filed motions to dismiss the amended complaints in all of the cases, and on November 20, 2017, the motions to dismiss were denied. On February 7, 2018, the direct purchaser plaintiffs filed their third amended complaint, adding three additional poultry producers as defendants. On February 12, 2018, the end-user consumer plaintiffs filed their second amended complaint, in which they also added three additional poultry producers as defendants, along with Agri Stats. On February 15, 2018, the commercial indirect purchaser plaintiffs filed a motion for leave to file their fourth amended complaint. The Company is awaiting a ruling on that motion. The lawsuits will now move into discovery, and we intend to continue to defend them vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect onFor information regarding our financial position and results of operations.
Between December 8, 2017 and January 30, 2018, additional purported direct purchaser entities individually brought four separate suits against 16 poultry producers, including Sanderson Farms, and Agri Stats in the United States District Court for the Northern District of Illinois. These suits allege substantially similar claims to the direct purchaser class complaint described above and are now pending in front of the same judge. They are likely to move into discovery on the same or similar timeline as the putative class action lawsuits. It is possible additional individual actions may be filed.
Sanderson Farms, Inc.; Joe F. Sanderson, Jr., the Chairman of the Registrant’s Board of Directors and its Chief Executive Officer; and D. Michael Cockrell, director and Chief Financial Officer, were named as defendants in a putative class action lawsuit filed on October 28, 2016, in the United States District Court for the Southern District of New York. On March 30, 2017, the lead plaintiff filed an amended complaint adding Lampkin Butts, director, Chief Operating Officer, and President, as a defendant, and on June 15, 2017, the lead plaintiff filed a second amended complaint. The complaint alleges that the defendants made statements in the Company's SEC filings and press releases, and other public statements, that were materially false and misleading in light of the Company's alleged, undisclosed violation of the federal antitrust laws described above. The complaint also alleges that the material misstatements were made in order to, among other things, “artificially inflate and maintain the market price of Sanderson Farms securities.” The complaint alleges the defendants thereby violated the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and, for the individual defendants, Section 20(a) of the Exchange Act, and seeks damages, interest, costs and attorneys’ fees. On January 19, 2018, the Court granted the defendants' motion to dismiss and entered judgment for the defendants. On January 31, 2018, the plaintiff filed a notice of appeal to the United States Court of Appeals for the Second Circuit. The Company cannot predict the outcome of this action or the appeal. If the plaintiffs were to prevail in the action, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.
On January 30, 2017, the Company received a letter from a putative shareholder demanding that the Company take action against current and/or former officers and directors of the Company for alleged breach of their fiduciary duties. The shareholder asserted that the officers and directors (i) failed to take any action to stop the alleged antitrust conspiracy described above, despite their alleged knowledge of the conspiracy, and (ii) made and/or caused the Company to make materially false and misleading statements by failing to disclose the alleged conspiracy. The shareholder also asserted that certain directors engaged in “insider sales” from which they improperly benefited. The shareholder also demanded that the Company adopt unspecified corporate governance improvements. On February 9, 2017, pursuant to statutory procedures available in connection with demands of this type, the Company’s board of directors appointed a special committee of qualified directors to determine, after conducting a reasonable inquiry, whether it is in the Company’s best interests to pursue any of the actions asserted in the shareholder’s letter. On April 26, 2017, the special committee reported to the Company’s board of directors its determination that it is not in the Company’s best interests to take any of the demanded actions at this time, and that no governance improvements related to the subject matter of the demand are needed at this time. On May 5, 2017, the special committee’s counsel informed the shareholder’s counsel of the committee’s determination. As of the date of filing of this report, and to the Company’s knowledge, no legal proceedings, relatedrefer to the shareholder’s demand have been filed. However, we are voluntarily disclosing the existence of the shareholder demand in light of its relationship"Litigation" within "Part I, Item 1, Notes to the putative antitrustConsolidated Financial Statements, Note 8 - Commitments and securities class action lawsuits described above.Contingencies," which is incorporated herein by reference.

On January 27, 2017, Sanderson Farms, Inc. and our subsidiaries were named as defendants, along with four other poultry producers and certain of their affiliated companies, in a putative class action lawsuit filed in the United States District Court for the Eastern District of Oklahoma. On March 27, 2017, Sanderson Farms, Inc. and our subsidiaries were named as defendants, along with four other poultry producers and certain of their affiliated companies, in a second putative class action lawsuit filed in the United States District Court for the Eastern District of Oklahoma. The court ordered the suits consolidated into one proceeding, and on July 10, 2017, the plaintiffs filed a consolidated amended complaint. The consolidated amended complaint alleges that the defendants unlawfully conspired by sharing data on compensation paid to broiler farmers, with the purpose and effect of suppressing the farmers’ compensation below competitive levels. The consolidated amended complaint also alleges that the defendants unlawfully conspired to not solicit or hire the broiler farmers who were providing services to other defendants. The consolidated amended complaint seeks treble damages, costs and attorneys’ fees. On September 8, 2017, the defendants filed a motion to dismiss the amended complaint, on October 23, 2017, the plaintiffs filed their response, and on November 22, 2017, the defendants filed a reply. On January 19, 2018, the Court granted the defendants' motion to dismiss for lack of personal jurisdiction. On February 2, 2018, the plaintiffs filed a letter with the Court stating their intention to file a substantially similar complaint against Sanderson Farms in a judicial district in which both personal jurisdiction and venue would be proper. Should the plaintiffs file another complaint, we intend to defend it vigorously; however, the Company cannot predict the outcome of this action. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.
On February 21, 2017, Sanderson Farms, Inc. received an antitrust civil investigative demand from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida. Among other things, the demand seeks information related to the Georgia Dock Index and other information on poultry and poultry products published by the Georgia Department of Agriculture and its Poultry Market News division. The Company is cooperating fully with the investigative demand, and we are unable to predict its outcome at this time.
On June 22, 2017, the Company was named as a defendant in a lawsuit filed in the United States District Court for the Northern District of California. The complaint, which was brought by three non-profit organizations (the Organic Consumers Association, Friends of the Earth, and Center for Food Safety) alleged that the Company is violating the California Unfair Competition Law and the California False Advertising Law by representing that its poultry products are “100% Natural” products raised with “100% Natural” farming procedures. Among other things, the plaintiffs alleged that the Company’s products contain residues of human and animal antibiotics, other pharmaceuticals, hormones, steroids, and pesticides. Plaintiffs seek an order enjoining the Company from continuing its allegedly unlawful marketing program and requiring the Company to conduct a corrective advertising campaign; an accounting of the Company’s profits derived from the allegedly unlawful marketing practices; and attorneys’ fees, costs and interest. On August 2, 2017, the Company moved to dismiss the lawsuit on various grounds. On August 23, 2017, the plaintiffs filed an amended complaint, which includes substantially similar allegations as the original complaint, and the Company filed a motion to dismiss the amended complaint on September 13, 2017. On February 9, 2018, the Court denied the Company's motion to dismiss. On February 13, 2018, the Company filed a motion for sanctions under Federal Rule of Civil Procedure 11 on the basis that Plaintiffs and their counsel knowingly included false or inaccurate statements and unsupported allegations in their complaints and other filings. The Company is awaiting a ruling on that motion. An initial scheduling conference is currently scheduled for March 1, 2018. The lawsuit is in its early stages, and we intend to defend it vigorously; however, the Company cannot predict the outcome of this action. If the plaintiffs were to prevail, the Company's reputation and marketing program could be materially, adversely affected.
The Company is involved in various other claims and litigation incidental to its business. Although the outcome of these matters cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome of currently pending matters, other than those discussed above, should not have a material effect on the Company’s consolidated results of operations 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. After a considerable analysis of each case, the Company has determined that no accrual is required for any of the foregoing matters as of January 31, 2018. Future reserves may be required if losses are deemed reasonably estimable and 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 reserves or by accruals of losses to reflect any adverse determinations in these legal proceedings.
Item 1A.Risk Factors
Item 1A.    Risk Factors
In addition to the other information set forth in this quarterly report, you should carefully consider the risks discussed in our Annual Report on Form 10-K for the fiscal year ended October 31, 2017,2020, including under the heading “Item 1A:1A. Risk Factors,” which, along with risks described in this report, are risks we believe could materially affect the Company’s business, financial

condition and future results. These are not the only risks facing the Company. Other risks and uncertainties we are not currently known to usaware of or that we currently deem to beconsider immaterial also may materially adversely affect the Company’s business, financial condition and future results. Risks we have identified but currently deem to beconsider immaterial could still materially adversely affect the Company’s business, financial condition and future results if our assumptions with respect to suchabout those risks proveare incorrect or if circumstances change.
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There have been no material changes from the risk factors previously disclosed in the Company's Form 10-K for the fiscal year ended October 31, 2017.2020.
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
During the first quarter of fiscal 2018,2021, the company repurchased shares of its common stock as follows:
Period
(a) Total Number of
Shares Purchased1
 
(b) Average Price
Paid per Share
 
(c) Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or
Programs2
 
(d) Maximum
Number (or
Approximate Dollar
Value) of Shares that
May Yet Be
Purchased Under the
Plans or Programs3
Nov. 1 - Nov. 30, 201731,189
 $148.20
 31,189
 1,000,000
Dec. 1 - Dec. 31, 20171,618
 140.04
 1,618
 1,000,000
Jan. 1 - Jan. 31, 2018—
 —
 —
 1,000,000
Total32,807
 $147.80
 32,807
 1,000,000
Period
(a) Total Number of
Shares Purchased(1)
(b) Average Price
Paid per Share
(c) Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or
Programs(2)
(d) Maximum
Number (or
Approximate Dollar
Value) of Shares that
May Yet Be
Purchased Under the
Plans or Programs(2) (3)
Nov. 1 - Nov. 30, 202013,209 $127.97 13,209 2,000,000 
Dec. 1 - Dec. 31, 20201,410 131.62 1,410 2,000,000 
Jan. 1 - Jan. 31, 2021— — — 2,000,000 
Total14,619 $128.32 14,619 2,000,000 
___________________
1All purchases were made pursuant to the Company’s Stock Incentive Plan, as amended and restated on February 11, 2016, under which shares were withheld to satisfy tax withholding obligations.

1All purchases were made pursuant to the Company’s Stock Incentive Plan, as amended and restated on February 13, 2020, under which shares were withheld to satisfy tax withholding obligations.
2On April 23, 2015, the Company’s Board of Directors expanded and extended the share repurchase program originally approved on October 22, 2009, under which the Company may purchase up to one million shares of its common stock in open market transactions or negotiated purchases, subject to market conditions, share price and other considerations. The authorization will expire on April 23, 2018. The Company’s repurchase of vested restricted stock to satisfy tax withholding obligations of its Stock Incentive Plan participants will not be made under the 2015 general repurchase plan.

2On October 22, 2020, the Company’s Board of Directors expanded and extended the share repurchase program originally approved on October 22, 2009, under which the Company was originally authorized to purchase up to one million shares of its common stock and is now authorized to purchase up to two million shares of its common stock in open market transactions or negotiated purchases, subject to market conditions, share price and other considerations. The authorization will expire on October 22, 2023. The Company’s repurchases of vested restricted stock to satisfy tax withholding obligations of its Stock Incentive Plan participants are not made under the general repurchase plan.
3Does not include vested restricted shares that may yet be repurchased under the Stock Incentive Plan as described in Note 1. In March 2015, the Company repurchased 700,003 shares of its common stock in open market transactions, and on April 23, 2015, the Company's Board of Directors expanded the share repurchase program by 700,003 shares to authorize the repurchase of up to 1,000,000 additional shares.

3Does not include vested restricted shares that may yet be repurchased under the Stock Incentive Plan as described in Note 1.
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Item 6.Exhibits
Item 6.    Exhibits
The following exhibits are filed with this report.
Exhibit 3.1 Restated Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 filed with the Registrant's Quarterly Report on Form 10-Q for the Quarter ended on July 31, 2015.)
Exhibit 3.2 Bylaws of the Registrant, amended and restated as of October 24, 2017. (Incorporated by reference to Exhibit 3 filed with the Registrant’s Current Report on Form 8-K on October 24, 2017.)
Exhibit 10.1+ Sanderson Farms, Inc. Bonus Award Program Effective November 1, 2017. (Incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K on February 20, 2018.)
Exhibit 10.2 First Amendment to the Credit Agreement among Sanderson Farms, Inc. and BMO Harris Bank N.A. as Agent for the Banks defined therein dated as of November 22, 2017. (Incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K on November 29, 2017.)

Exhibit 15* Accountants’ Letter re: Unaudited Financial Information.
Exhibit 31.1* Certification of Chief Executive Officer.
Exhibit 31.2* Certification of Chief Financial Officer.
Exhibit 32.1** Section 1350 Certification.
Exhibit 32.2** Section 1350 Certification.
Exhibit 101.INS XBRL Instance Document
Exhibit 101.SCH XBRL Taxonomy Extension Schema
Exhibit 101.CAL XBRLTaxonomy Extension Calculation Linkbase
Exhibit 101.DEF XBRL Taxonomy Extension Definition Linkbase
Exhibit 101.LAB XBRL Taxonomy Extension Label Linkbase
Exhibit 101.PRE XBRL Taxonomy Extension Presentation Linkbase
___________________
*Exhibit No.Filed herewith.Description of Exhibit
3.1Restated Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 filed with the Registrant's Quarterly Report on Form 10-Q for the Quarter ended on July 31, 2015.)
**3.2Furnished herewith.Bylaws of the Registrant, amended and restated as of December 30, 2020. (Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K on January 5, 2021.)
+10.1+Management contract or compensatory plan or arrangement.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 January 25, 2021.)
31.1*Certification of Chief Executive Officer.
31.2*Certification of Chief Financial Officer.
32.1**Section 1350 Certification.
32.2**Section 1350 Certification.
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.CALXBRLTaxonomy 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.
**    Furnished herewith.
+    Management contract or compensatory plan or arrangement.

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Table of Contents
INDEX TO EXHIBITS
Exhibit
Number
Description of Exhibit
3.1
Restated Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 filed with the Registrant's Quarterly Report on Form 10-Q for the Quarter ended on July 31, 2015.)
3.2
Bylaws of the Registrant, amended and restated as of October 24, 2017.December 30, 2020. (Incorporated by reference to Exhibit 33.1 filed with the Registrant’s Current Report on Form 8-K on October 24, 2017.January 5, 2021.)
10.1+
10.231.1*
15*
Accountants’ Letter re: Unaudited Financial Information.
31.1*
Certification of Chief Executive Officer
31.2*
32.1**
32.2**
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 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.
**Furnished herewith.
+Management contract or compensatory plan or arrangement.

*    Filed herewith.
**    Furnished herewith.
+    Management contract or compensatory plan or arrangement.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SANDERSON FARMS, INC.
(Registrant)
SANDERSON FARMS, INC.
(Registrant)
Date: February 21, 201825, 2021By:/s/ D. Michael Cockrell
Treasurer, and Chief Financial Officer and Chief Legal Officer
Date: February 21, 201825, 2021By:/s/ Tim Rigney
Secretary, Corporate Controller and
Chief Accounting Officer


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