UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

___________________________

FORM 10-Q

___________________________

(MARK ONE)


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

For the quarterly period ended April 30, ~~2020~~2021


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

For the transition period from to

Commission file number: 1-14977

___________________________

Sanderson Farms, Inc.

(Exact name of registrant as specified in its charter)

___________________________


Mississippi			64-0615843
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

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 class	Trading Symbol	Name of each exchange on which registered
Common Stock, $1 par value per share	SAFM	NASDAQ

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 ☒ 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,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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: ~~22,239,574~~22,330,986 shares outstanding as of May ~~26, 2020.~~25, 2021.

Table of Contents

TABLE OF CONTENTS

SANDERSON FARMS, INC. AND SUBSIDIARIES


PART I. FINANCIAL INFORMATION			3
Item 1.	Financial Statements (Unaudited)	3
	Condensed consolidated balance sheets—April 30, ~~2020~~2021 and October 31, ~~2019~~2020	3
	Condensed consolidated statements of operations—Three and six months ended April 30, ~~2020~~2021 and ~~2019~~2020	4
	Condensed consolidated statements of stockholders' equity—Three and six months ended April 30 , 2021 and 2020 ~~and 2019~~	5
	Condensed consolidated statements of cash flows—Six months ended April 30 , 2021 and 2020 ~~and 2019~~	6
	Notes to condensed consolidated financial statements—April ~~30, 2020~~ 3 0 , 2021	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1920
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3133
Item 4.	Controls and Procedures	3234
PART II. OTHER INFORMATION			3234
Item 1.	Legal Proceedings	3234
Item 1A.	Risk Factors	3634
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3935
Item 6.	Exhibits	4036
INDEX TO EXHIBITS			4137
SIGNATURES			4238

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except number of shares)


		April 30, 2020		October 31, 2019			April 30, 2021		October 31, 2020
		(Unaudited)		(Note 1)			(Unaudited)		(Note 1)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	61,330	$	95,417	Cash and cash equivalents	$	122,911	$	49,061
Accounts receivable, net	Accounts receivable, net	132,072		131,778		Accounts receivable, net	188,870		147,546
Receivable from insurance companies	Receivable from insurance companies	—		445		Receivable from insurance companies	3,951		0
Inventories	Inventories	297,477		289,928		Inventories	347,442		290,007
Refundable income taxes	Refundable income taxes	127,372		6,612		Refundable income taxes	12,519		33,977
Prepaid expenses and other current assets	Prepaid expenses and other current assets	63,396		56,931		Prepaid expenses and other current assets	57,503		57,544
Total current assets	Total current assets	681,647		581,111		Total current assets	733,196		578,135
Property, plant and equipment, net	Property, plant and equipment, net	1,235,556		1,185,860		Property, plant and equipment, net	1,231,106		1,224,746
Right of use assets	Right of use assets	45,913		—		Right of use assets	32,198		40,785
Other assets	Other assets	6,394		7,163		Other assets	6,696		5,365
Total assets	Total assets	$	1,969,510	$	1,774,134	Total assets	$	2,003,196	$	1,849,031
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	119,961	$	132,741	Accounts payable	$	136,257	$	111,463
Dividends payable	Dividends payable	7,117		—		Dividends payable	9,826		0
Accrued expenses	Accrued expenses	82,214		82,940		Accrued expenses	101,911		98,663
Lease liabilities	Lease liabilities	15,188		—		Lease liabilities	13,059		13,981

Total current liabilities	Total current liabilities	224,480		215,681		Total current liabilities	261,053		224,107
Long-term debt	Long-term debt	200,000		55,000		Long-term debt	55,000		25,000
Claims payable and other liabilities	Claims payable and other liabilities	11,475		11,646		Claims payable and other liabilities	12,361		12,175
Deferred income taxes	Deferred income taxes	131,388		74,132		Deferred income taxes	145,353		141,672
Long-term lease liabilities	Long-term lease liabilities	30,725		—		Long-term lease liabilities	19,139		26,804
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred Stock:	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—22,239,574 and 22,203,920 at April 30, 2020 and October 31, 2019, respectively		22,239		22,204
Series A Junior Participating Preferred Stock, $100 par value: authorized 500,000 shares, NaN issued						Series A Junior Participating Preferred Stock, $100 par value: authorized 500,000 shares, NaN issued	0		0
Par value to be determined by the Board of Directors: authorized 4,500,000 shares; NaN issued						Par value to be determined by the Board of Directors: authorized 4,500,000 shares; NaN issued	0		0
Common Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares—22,332,310 and 22,251,071 at April 30, 2021 and October 31, 2020, respectively						Common Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares—22,332,310 and 22,251,071 at April 30, 2021 and October 31, 2020, respectively	22,332		22,251
Paid-in capital	Paid-in capital	86,430		86,010		Paid-in capital	94,616		90,420
Retained earnings	Retained earnings	1,262,773		1,309,461		Retained earnings	1,393,342		1,306,602
Total stockholders’ equity	Total stockholders’ equity	1,371,442		1,417,675		Total stockholders’ equity	1,510,290		1,419,273
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,969,510	$	1,774,134	Total liabilities and stockholders’ equity	$	2,003,196	$	1,849,031

See notes to condensed consolidated financial statements.

Table of Contents

SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share amounts)

Three Months Ended
April 30, Six Months Ended
April 30,
2020 2019 2020 2019
Net sales $ 844,711 $ 845,229 $ 1,667,789 $ 1,588,617
Cost and expenses:
Cost of sales 832,283 740,833 1,655,807 1,449,233
Selling, general and administrative 56,214 49,230 105,699 107,765
888,497 790,063 1,761,506 1,556,998
Operating income (loss) (43,786) 55,166 (93,717) 31,619
Other income (expense):
Interest expense (1,783) (1,173) (2,971) (1,682)
Other 3 2 5 2
(1,780) (1,171) (2,966) (1,680)
Income (loss) before income taxes (45,566) 53,995 (96,683) 29,939
Income tax expense (benefit) (51,684) 13,359 (64,225) 7,136
Net income (loss) $ 6,118 $ 40,636 $ (32,458) $ 22,803
Earnings (loss) per share:
Basic $ 0.28 $ 1.83 $ (1.48) $ 1.03
Diluted $ 0.28 $ 1.83 $ (1.48) $ 1.03
Dividends per share $ 0.32 $ 0.32 $ 0.64 $ 0.64


	Three Months Ended April 30,				Six Months Ended April 30,
	2021		2020		2021		2020
Net sales	$	1,133,880	$	844,711	$	2,043,186	$	1,667,789
Cost and expenses:
Cost of sales	941,936		832,283		1,781,258		1,655,807

Selling, general and administrative	64,245		56,214		120,844		105,699
	1,006,181		888,497		1,902,102		1,761,506
Operating income (loss)	127,699		(43,786)		141,084		(93,717)
Other income (expense):

Interest expense	(697)		(1,783)		(1,335)		(2,971)
Other	13		3		16		5
	(684)		(1,780)		(1,319)		(2,966)
Income (loss) before income taxes	127,015		(45,566)		139,765		(96,683)
Income tax expense (benefit)	30,104		(51,684)		33,376		(64,225)
Net income (loss)	$	96,911	$	6,118	$	106,389	$	(32,458)
Earnings (loss) per share:
Basic	$	4.34	$	0.28	$	4.76	$	(1.48)
Diluted	$	4.34	$	0.28	$	4.76	$	(1.48)
Dividends per share	$	0.44	$	0.32	$	0.88	$	0.64

See notes to condensed consolidated financial statements.

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SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)

(In thousands, except shares and per share amounts)

Fiscal Year 2019 Common Stock Paid-In
Capital Retained
Earnings Total
Stockholders’
Equity
Shares Amount
Balance at October 31, 2018 22,099,780 $ 22,100 $ 81,269 $ 1,284,524 $ 1,387,893
Net loss - first quarter 2019 — — — (17,833) (17,833)
Cash dividends ($0.32 per share) — — — (7,089) (7,089)
Stock compensation plan transactions 53,688 53 (2,126) — (2,073)
Amortization of unearned compensation — — 2,313 — 2,313
Balance at January 31, 2019 22,153,468 $ 22,153 $ 81,456 $ 1,259,602 $ 1,363,211
Net income - second quarter 2019 — — — 40,636 40,636
Cash dividends ($0.32 per share) — — — (7,089) (7,089)
Stock compensation plan transactions 777 1 1,628 — 1,629
Amortization of unearned compensation — — 2,325 — 2,325
Balance at April 30, 2019 22,154,245 $ 22,154 $ 85,409 $ 1,293,149 $ 1,400,712


Fiscal Year 2020	Common Stock			Paid-In Capital		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance at October 31, 2019	22,203,920	$	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 transactions	25,292	25		(4,721)		—		(4,696)
Amortization of unearned compensation	—	—		2,082		—		2,082
Balance at January 31, 2020	22,229,212	$	22,229	$	83,371	$	1,263,772	$	1,369,372
Net income - second quarter 2020	—	—		—		6,118		6,118
Cash dividends ($0.32 per share)	—	—		—		(7,117)		(7,117)
Stock compensation plan transactions	10,362	10		1,099		—		1,109
Amortization of unearned compensation	—	—		1,960		—		1,960
Balance at April 30, 2020	22,239,574	$	22,239	$	86,430	$	1,262,773	$	1,371,442

Fiscal Year 2020 Common Stock Paid-In
Capital Retained
Earnings Total
Stockholders’
Equity
Shares Amount
Balance at October 31, 2019 22,203,920 $ 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 transactions 25,292 25 (4,721) — (4,696)
Amortization of unearned compensation — — 2,082 — 2,082
Balance at January 31, 2020 22,229,212 $ 22,229 $ 83,371 $ 1,263,772 $ 1,369,372
Net income - second quarter 2020 — — — 6,118 6,118
Cash dividends ($0.32 per share) — — — (7,117) (7,117)
Stock compensation plan transactions 10,362 10 1,099 — 1,109
Amortization of unearned compensation — — 1,960 — 1,960
Balance at April 30, 2020 22,239,574 $ 22,239 $ 86,430 $ 1,262,773 $ 1,371,442


Fiscal Year 2021	Common Stock			Paid-In Capital		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance at October 31, 2020	22,251,071	$	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 transactions	74,564	75		(1,667)		—		(1,592)
Amortization of unearned compensation	—	—		2,147		—		2,147
Balance at January 31, 2021	22,325,635	$	22,326	$	90,900	$	1,306,256	$	1,419,482
Net income - second quarter 2021	—	—		—		96,911		96,911
Cash dividends ($0.44 per share)	—	—		—		(9,825)		(9,825)
Stock compensation plan transactions	6,675	6		1,514		—		1,520
Amortization of unearned compensation	—	—		2,202		—		2,202
Balance at April 30, 2021	22,332,310	$	22,332	$	94,616	$	1,393,342	$	1,510,290

See notes to condensed consolidated financial statements.

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SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)


		Six Months Ended April 30,							Six Months Ended April 30,
		2020		2019			2021		2020
Operating activities	Operating activities					Operating activities
Net income (loss)	Net income (loss)	$	(32,458)	$	22,803	Net income (loss)	$	106,389	$	(32,458)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:					Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	75,474		62,379		Depreciation and amortization	81,618		75,474
Amortization of share-based compensation	Amortization of share-based compensation	5,173		5,907		Amortization of share-based compensation	5,751		5,173
Live inventory adjustment (net of prior period reversal)	Live inventory adjustment (net of prior period reversal)	(2,800)		(9,600)		Live inventory adjustment (net of prior period reversal)	0		(2,800)
Provision for losses (recoveries) on accounts receivable		—		(1,500)

Deferred income taxes	Deferred income taxes	57,256		6,699		Deferred income taxes	3,681		57,256
Loss on asset disposals	Loss on asset disposals	238		—		Loss on asset disposals	46		238
Change in assets and liabilities:	Change in assets and liabilities:					Change in assets and liabilities:
Accounts receivable - trade	Accounts receivable - trade	(294)		(3,457)		Accounts receivable - trade	(41,324)		(294)
Accounts receivable - insurance	Accounts receivable - insurance	445		1,111		Accounts receivable - insurance	(3,951)		445
Income taxes	Income taxes	(120,760)		27,363		Income taxes	21,458		(120,760)
Inventories	Inventories	(4,749)		(35,817)		Inventories	(57,435)		(4,749)
Prepaid expenses and other assets	Prepaid expenses and other assets	(6,242)		(9,160)		Prepaid expenses and other assets	41		(6,242)
Right of use assets	Right of use assets	8,733		—		Right of use assets	8,587		8,733
Lease liabilities	Lease liabilities	(8,733)		—		Lease liabilities	(8,587)		(8,733)
Accounts payable	Accounts payable	(8,159)		(10,738)		Accounts payable	23,209		(8,159)
Accrued expenses and other liabilities	Accrued expenses and other liabilities	(353)		(6,193)		Accrued expenses and other liabilities	4,092		(353)
Total adjustments	Total adjustments	(4,771)		26,994		Total adjustments	37,186		(4,771)
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	(37,229)		49,797		Net cash provided by (used in) operating activities	143,575		(37,229)
Investing activities	Investing activities					Investing activities
Capital expenditures	Capital expenditures	(129,691)		(162,268)		Capital expenditures	(86,345)		(129,691)
Net proceeds from sale of property and equipment	Net proceeds from sale of property and equipment	207		880		Net proceeds from sale of property and equipment	452		207
Net cash used in investing activities	Net cash used in investing activities	(129,484)		(161,388)		Net cash used in investing activities	(85,893)		(129,484)
Financing activities	Financing activities					Financing activities

Payment of debt issuance costs	Payment of debt issuance costs	—		(2,225)		Payment of debt issuance costs	(1,877)		0
Borrowings from revolving line of credit	Borrowings from revolving line of credit	145,000		100,000		Borrowings from revolving line of credit	30,000		145,000

Proceeds from issuance of restricted stock under stock compensation plans	Proceeds from issuance of restricted stock under stock compensation plans	600		479		Proceeds from issuance of restricted stock under stock compensation plans	523		600
Payments from issuance of common stock under stock compensation plans	Payments from issuance of common stock under stock compensation plans	(5,861)		(3,829)		Payments from issuance of common stock under stock compensation plans	(2,655)		(5,861)
Dividends paid	Dividends paid	(7,113)		(7,089)		Dividends paid	(9,823)		(7,113)
Net cash provided by financing activities	Net cash provided by financing activities	132,626		87,336		Net cash provided by financing activities	16,168		132,626
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(34,087)		(24,255)		Net change in cash and cash equivalents	73,850		(34,087)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	95,417		121,193		Cash and cash equivalents at beginning of period	49,061		95,417
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	61,330	$	96,938	Cash and cash equivalents at end of period	$	122,911	$	61,330
Supplemental disclosure of non-cash investing and financing activities:	Supplemental disclosure of non-cash investing and financing activities:					Supplemental disclosure of non-cash investing and financing activities:
Capital expenditures included in accounts payable	Capital expenditures included in accounts payable	$	5,588	$	5,174	Capital expenditures included in accounts payable	$	5,117	$	5,588
Dividends payable	Dividends payable	$	7,117	$	7,089	Dividends payable	$	9,826	$	7,117

See notes to condensed consolidated financial statements.

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SANDERSON FARMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

April 30, ~~2020~~2021

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 and six months ended April 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, ~~2020.~~2021.

The condensed consolidated balance sheet at October 31, ~~2019~~2020 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, ~~2019.~~2020.

New Accounting Pronouncements

In ~~February~~June 2016, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases. The guidance 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 disclosure of key information about leasing arrangements. The Company adopted this guidance during the first quarter of fiscal 2020, and we used the transition method that requires a cumulative-effect adjustment to the beginning balance of retained earnings during the period of adoption, rather than restating prior-period financial statements; however no such cumulative-effect adjustment was required under our circumstances. This guidance also provides certain practical expedients, including a practical expedient package during transition. We elected to use this package, which allowed the Company to carry forward its determination of whether a lease exists, the classification of a lease, and whether initial direct lease costs exist for purposes of transition to the new standard. We did not utilize the hindsight practical expedient. As of April 30, 2020, we recognized right-of-use assets and lease liabilities of approximately $45.9 million, primarily related to transportation equipment. Adoption did not have a material effect on our consolidated statements of operations and cash flows. For further information regarding the Company's leases, refer to "Part I, Item 1, Notes to Condensed Consolidated Financial Statements, Note 11 - Leases."

~~In June 2016, the FASB issued ASU~~ 2016-13, Financial Instruments - Credit Losses, ~~which intends~~ to provide 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. ~~The~~We adopted ASU 2016-13 during our first quarter of fiscal 2021, and adoption did not have a material effect on our consolidated financial statements. Under the new standard, we are required to record on our balance sheet an allowance for expected credit losses, which is estimated utilizing historical experience and current and expected economic conditions. Our allowance for expected credit losses is recorded on the accounts receivable, net line of the Condensed Consolidated Balance Sheets and is immaterial to our financial position.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Accounting Standards Codification 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, ~~2019,~~2020, our fiscal ~~2021. Early adoption is permitted.~~ 2022. We ~~do not expect adoption to have a material effect~~are currently evaluating the impact of this new guidance on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. This guidance, which became effective on March 12, 2020, and can be applied through December 31, 2022, has not affected our consolidated financial statements. We have a revolving credit facility that references LIBOR, and we are assessing how this standard may be applied to 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.

Table of Contents

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

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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 (in thousands):~~category:


Product Category	Product Category	Three Months Ended April 30, 2020		Three Months Ended April 30, 2019		Product Category	Three Months Ended April 30, 2021		Three Months Ended April 30, 2020
							(in thousands)
Fresh, chill-packed chicken						Fresh, chill-packed chicken	$	387,328	$	343,165
Fresh, vacuum-sealed chicken	Fresh, vacuum-sealed chicken	$	265,258	$	330,713	Fresh, vacuum-sealed chicken	428,661		265,258
Fresh, chill-packed chicken		343,165		269,304
Fresh, ice-packed chicken	Fresh, ice-packed chicken	130,798		132,427		Fresh, ice-packed chicken	193,757		130,798
Frozen chicken						Frozen chicken	71,924		62,187
Prepared chicken	Prepared chicken	38,810		61,995		Prepared chicken	46,498		38,810
Frozen chicken		62,187		44,109
Other	Other	4,493		6,681		Other	5,712		4,493
Total net sales	Total net sales	$	844,711	$	845,229	Total net sales	$	1,133,880	$	844,711


Product Category	Product Category	Six Months Ended April 30, 2020		Six Months Ended April 30, 2019		Product Category	Six Months Ended April 30, 2021		Six Months Ended April 30, 2020
							(in thousands)
Fresh, chill-packed chicken						Fresh, chill-packed chicken	$	763,580	$	630,432
Fresh, vacuum-sealed chicken	Fresh, vacuum-sealed chicken	$	576,554	$	590,782	Fresh, vacuum-sealed chicken	722,779		576,554
Fresh, chill-packed chicken		630,432		537,768
Fresh, ice-packed chicken	Fresh, ice-packed chicken	251,261		232,459		Fresh, ice-packed chicken	325,438		251,261
Frozen chicken						Frozen chicken	135,327		108,861
Prepared chicken	Prepared chicken	90,192		119,391		Prepared chicken	85,413		90,192
Frozen chicken		108,861		92,700
Other	Other	10,489		15,517		Other	10,649		10,489
Total net sales	Total net sales	$	1,667,789	$	1,588,617	Total net sales	$	2,043,186	$	1,667,789

NOTE 3—INVENTORIES

Inventories consisted of the ~~following (in thousands):~~following:


Inventory type	Inventory type	April 30, 2020		October 31, 2019		Inventory type	April 30, 2021		October 31, 2020
							(in thousands)
Live poultry-broilers and breeders	Live poultry-broilers and breeders	$	195,265	$	179,870	Live poultry-broilers and breeders	$	223,762	$	180,013
Feed, eggs and other	Feed, eggs and other	40,599		47,417		Feed, eggs and other	60,290		53,318
Processed poultry	Processed poultry	37,969		35,121		Processed poultry	41,645		32,952
Prepared chicken	Prepared chicken	15,936		20,032		Prepared chicken	12,555		16,142
Packaging materials	Packaging materials	7,708		7,488		Packaging materials	9,190		7,582
Total Inventories	Total Inventories	$	297,477	$	289,928	Total Inventories	$	347,442	$	290,007

NOTE 4—PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net, consisted of the ~~following (in thousands):~~following:

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Description April 30, 2020 October 31, 2019
Land and buildings $ 900,897 $ 892,089
Machinery and equipment 1,302,518 1,236,095
Work-in-process 54,468 11,149
2,257,883 2,139,333
Less accumulated depreciation 1,022,327 953,473
Property, plant and equipment, net $ 1,235,556 $ 1,185,860


Description	April 30, 2021		October 31, 2020
	(in thousands)
Land and buildings	$	952,118	$	931,674
Machinery and equipment	1,382,694		1,350,725
Work-in-process	38,014		16,914
	2,372,826		2,299,313
Less accumulated depreciation	(1,141,720)		(1,074,567)
Property, plant and equipment, net	$	1,231,106	$	1,224,746

NOTE 5—STOCK COMPENSATION PLANS

Refer to Note 910 and Note 1011 of the Company’s October 31, ~~2019~~2020 audited financial statements in the Company's ~~2019~~2020 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 and six months ended April 30, ~~2020~~2021 was ~~$2.4~~$3.1 million and ~~$5.2~~$5.8 million, respectively, as compared to total stock based compensation expense of ~~$3.0~~$2.4 million and ~~$5.9~~$5.2 million, respectively, for the three and six months ended April 30, ~~2019.~~2020.

During the six months ended April 30, ~~2020,~~2021, participants in the Company’s Management Share Purchase Plan ("MSPP") elected to receive a total of ~~4,209~~3,662 shares of restricted stock at an average price of ~~$142.45~~$142.88 per share instead of a specified percentage of their cash compensation, and the Company issued ~~1,007~~869 matching restricted shares. During the three and six months ended April 30, ~~2020,~~2021, the Company recorded compensation expense for the MSPP shares, included in the total stock based compensation expense above, of ~~$48,000~~$125,000 and ~~$104,000,~~$200,000, respectively, as compared to ~~$105,000~~$48,000 and ~~$196,000,~~$104,000, respectively, during the three and six months ended April 30, ~~2019.~~2020.

During fiscal 2021, 2020 ~~2019~~ and ~~2018,~~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, there is an additional one-year period during which the participant must remain employed by the Company before the 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 executed on November 1, ~~2019~~2020 totaled ~~56,575.~~87,350. As of April 30, ~~2020,~~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 0 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, ~~2018.~~2019. The target number of shares specified in those agreements totaled ~~74,650.~~56,575. As of April 30, ~~2020,~~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 ~~Compensation Committee of the Company's Board of Directors~~performance period has ~~determined that~~lapsed for the performance share agreements that were entered into on November 1, ~~2017 have been earned at a level between~~2018, and the ~~threshold~~Company's average return on equity and ~~target levels for the~~average return on sales ~~criterion and that~~did not meet the threshold ~~level for the return on equity criterion was not achieved. The shares earned as~~amounts defined by those agreements. As a result, of achieving the return on sales criterion are subject to the satisfaction of the additional one-year service period ending on October 31, 2020. Accordingly, the three and six months ended April 30, 2020 include0 compensation expense ~~of $157,000 and~~has been recorded related to those agreements.

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$347,000, respectively, related to those agreements, as compared to 0 compensation expense related to those agreements during the three and six months ended April 30, 2019. There was no compensation expense recorded during the first six months of fiscal 2019, because management's initial determination of probability was made during the third quarter of fiscal 2019 and because the accrual is made using the cumulative catch-up method. As of April 30, 2020, the aggregate number of shares estimated to be awarded related to the performance share agreements entered into on November 1, 2017 totaled 13,093 shares. Because 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 six months of the service period ending October 31, 2020. The Company will recognize the remaining $324,000 of unearned compensation related to these shares over the remaining service period.

Had the Company determined that it was probable that the maximum amount of those outstanding awards from the agreements entered into on November 1, ~~2018~~2019 and November 1, ~~2019~~2020 would be earned, an additional ~~$7.5~~$9.0 million and ~~$3.0~~$3.7 million of compensation expense, respectively, would have been accrued as of April 30, ~~2020.~~2021.

The Company's compensation ~~cost~~expense related to performance share agreements is summarized as follows (in thousands, except number of shares):


			Three Months Ended						Six Months Ended								Three Months Ended				Six Months Ended
Date of Performance Share Agreement	Date of Performance Share Agreement	Number of shares issued (actual (a) or estimated (e))	April 30, 2020		April 30, 2019		April 30, 2020		April 30, 2019		Date of Performance Share Agreement	Number of shares issued (actual (a) or estimated (e))	April 30, 2021		April 30, 2020		April 30, 2021		April 30, 2020
November 1, 2016		84,511 (a)	$	—	$	650	$	—	$	1,263
November 1, 2017	November 1, 2017	13,093 (e)	157		—		347		—		November 1, 2017	13,055 (a)	$	0	$	157	$	0	$	347
November 1, 2018 (1)		— (e)	—		—		—		—
November 1, 2018											November 1, 2018	0 (a)	0		0		0		0
November 1, 2019 (1)	November 1, 2019 (1)	— (e)	—		—		—		—		November 1, 2019 (1)	0 (e)	0		0		0		0
Total compensation cost			$	157	$	650	$	347	$	1,263
November 1, 2020 (1)											November 1, 2020 (1)	0 (e)	0		0		0		0
Total performance share compensation expense											Total performance share compensation expense		$	0	$	157	$	0	$	347

Note (1) - As of April 30, ~~2020,~~2021, the Company could not determine that achievement of the applicable performance-based criteria is probable for the agreements entered into on November 1, ~~2018~~2019 and November 1, ~~2019,~~2020, due to the uncertainties discussed above, and therefore recorded no compensation expense related to those agreements.

On November 1, ~~2019,~~2020, the Company granted ~~56,575~~87,350 shares of restricted stock to certain officers and key management employees. The restricted stock had a grant date fair value of ~~$159.76~~$127.97 per share and will vest on November 1, ~~2023.~~2024. On February ~~13, 2020,~~18, 2021, the Company granted an aggregate of ~~12,100~~9,760 shares of restricted stock to all of its non-employee directors. The restricted stock had a grant date fair value of ~~$136.76~~$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 April 30, ~~2020~~2021 related to all unvested restricted stock grants totaled ~~265,353.~~283,142. During the three and six months ended April 30, ~~2020,~~2021, the Company recorded compensation expense, included in the total stock based compensation expense above, of ~~$2.2~~$3.0 million and ~~$4.7~~$5.6 million, respectively, related to restricted stock grants, as compared to $2.2 million and ~~$4.4~~$4.7 million, respectively, during the three and six months ended April 30, ~~2019.~~2020. The Company had ~~$18.0~~$21.1 million in unrecognized share-based compensation ~~costs~~expense as of April 30, ~~2020,~~2021, which will be recognized over a weighted average remaining vesting period of approximately 2two years.

NOTE 6—EARNINGS PER SHARE

Certain share-based payment awards described in Note 5 - 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 tables present earnings per share:


	Three Months Ended
	April 30, 2021		April 30, 2020
	(in thousands, except per share amounts)
Net income	$	96,911	$	6,118
Distributed and undistributed (earnings) to unvested restricted stock	(1,343)		(81)
Distributed and undistributed earnings to common shareholders—Basic	$	95,568	$	6,037
Weighted average shares outstanding—Basic	22,021		21,943
Weighted average shares outstanding—Diluted	22,021		21,943
Earnings per common share—Basic	$	4.34	$	0.28
Earnings per common share—Diluted	$	4.34	$	0.28

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		Three Months Ended
		April 30, 2020		April 30, 2019
		(in thousands except per share amounts)
Net income		$	6,118	$	40,636
Distributed and undistributed (earnings) to unvested restricted stock		(81)		(597)
Distributed and undistributed earnings to common shareholders—Basic		$	6,037	$	40,039
Weighted average shares outstanding—Basic		21,943		21,830
Weighted average shares outstanding—Diluted		21,943		21,830
Earnings per common share—Basic		$	0.28	$	1.83
Earnings per common share—Diluted		$	0.28	$	1.83

		Six Months Ended							Six Months Ended
		April 30, 2020		April 30, 2019			April 30, 2021		April 30, 2020
		(in thousands except per share amounts)							(in thousands, except per share amounts)
Net income (loss)	Net income (loss)	$	(32,458)	$	22,803	Net income (loss)	$	106,389	$	(32,458)
Distributed and undistributed (earnings) to unvested restricted stock	Distributed and undistributed (earnings) to unvested restricted stock	—		(340)		Distributed and undistributed (earnings) to unvested restricted stock	(1,487)		0
Distributed and undistributed earnings (loss) to common shareholders—Basic	Distributed and undistributed earnings (loss) to common shareholders—Basic	$	(32,458)	$	22,463	Distributed and undistributed earnings (loss) to common shareholders—Basic	$	104,902	$	(32,458)
Weighted average shares outstanding—Basic	Weighted average shares outstanding—Basic	21,939		21,822		Weighted average shares outstanding—Basic	22,015		21,939
Weighted average shares outstanding—Diluted	Weighted average shares outstanding—Diluted	21,939		21,822		Weighted average shares outstanding—Diluted	22,015		21,939
Earnings (loss) per common share—Basic	Earnings (loss) per common share—Basic	$	(1.48)	$	1.03	Earnings (loss) per common share—Basic	$	4.76	$	(1.48)
Earnings (loss) per common share—Diluted	Earnings (loss) per common share—Diluted	$	(1.48)	$	1.03	Earnings (loss) per common share—Diluted	$	4.76	$	(1.48)

NOTE 7—FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company holds certain items that are required to be disclosed at fair value, primarily 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.

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.

Fair values for debt are based on quoted market prices or published forward interest rate curves, and were categorized as Level 2 measurements. As of April 30, ~~2020~~2021 and October 31, ~~2019,~~2020, the fair values of the Company's borrowings under its revolving credit facility approximate the carrying values.

NOTE 8—COMMITMENTS AND CONTINGENCIES

~~Property, Plant and Equipment~~

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Litigation

In October 2019, the Company announced plans to construct a new hatchery in Jones County, Mississippi. Upon completion of the project, the Company will relocate its existing hatchery operations from its current, nearby hatchery facility located in Laurel, Mississippi. Construction commenced during the first quarter of fiscal 2020, and initial operations are expected to begin during the first quarter of fiscal 2021. The Company has entered into construction agreements related to the project totaling approximately $14.2 million. The Company estimates the total cost of the project will be approximately $18.5 million, of which $15.0 million is budgeted for fiscal 2020 and $3.5 million is expected to be budgeted for fiscal 2021. As of April 30, 2020, the Company has spent approximately $3.6 million on the project.

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 13thirteen 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. The cases are part of a coordinated proceeding captioned In re Broiler Chicken Antitrust Litigation.

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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~~adding three additional poultry producers as defendants, along with Agri ~~Stats.~~Stats, Inc. On February 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 well as Agri ~~Stats.~~Stats, Inc. On ~~April 29, 2019,~~August 6, 2020, the end-user consumer plaintiffs filed ~~their fourth~~a motion for leave to file a fifth amended complaint. The ~~parties are currently engaged in discovery.~~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, both of which include bid-rigging allegations.

Between December 8, 2017 and ~~April 11, 2020,~~May 18, 2021, additional purported direct-purchaser entities individually brought ~~thirty-six~~seventy-three separate suits against 19twenty poultry producers, including ~~Sanderson Farms~~the Company, as well as Agri Stats, Inc. and ~~Agri Stats,~~Utrecht-America Holdings, Inc. ("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~~common-law claims, and related claims under federal and Georgia RICO statutes. In addition, certain direct action complaints filed since June 12, 2020 include 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, certain 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 all direct action plaintiffs consolidated in the In re Broilers Chicken Antitrust Litigation before or on January 29, 2021 filed an amended consolidated complaint on January 29, 2021 incorporating those allegations.

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 filed replies in support of class certification on March 29, 2021.

The parties are currently engaged in discovery. Fact discovery is scheduled to close on July 30, 2021, subject to ~~the COVID-19-related delays discussed below.~~limited extensions for certain direct action discovery. It is possible that additional individual actions ~~may~~will be filed.

Department of Justice Antitrust Investigation

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The Company is aware that certain plaintiffs’ counsel in In re Broiler Chicken Antitrust Litigation received from the United States Department of Justice, Antitrust Division, a subpoena that included a request to produce all discovery in the case to a

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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 the stay be lifted on March 31, 2020.

The 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 providing documents and information as requested by the United States Department of Justice in connection with its investigation.

~~Since March 16,~~State of New Mexico, ex rel. Hector Balderas v. Koch Foods Inc., et al.

On September 1, 2020, ~~given~~ the ~~current COVID-19 public health emergency,~~Attorney General of the ~~Northern District~~State of ~~Illinois has issued three orders extending all deadlines~~New Mexico filed a lawsuit in ~~civil cases by 21 days, 28 days~~Santa Fe, New Mexico state court against Agri Stats, Inc. and ~~28 days, respectively,~~producer defendants, including the Company. The lawsuit is substantially similar to those brought in In re Broiler Chicken Antitrust Litigation. The case also brings claims under the New Mexico Antitrust Act and New Mexico Unfair Trade Practices Act, as well as a ~~fourth order that will take effect on May 29, 2020, which does not extend any deadlines. These orders apply~~common law unjust enrichment claim. Defendants responded to the ~~litigation described above.~~complaint on February 1, 2021.

State of Alaska v. Agri Stats, Inc., et al.

On February 19, 2021, the Attorney General of the State of Alaska filed a lawsuit in Anchorage, Alaska state court against Agri Stats, Inc. and producer defendants, including the Company. The ~~Northern District~~lawsuit is substantially similar to those brought in In re Broiler Chicken Antitrust Litigation. The case also brings claims under Alaska's antitrust statute and the Alaska Unfair Trade Practices and Consumer Protection Act, as well as a common law unjust enrichment claim. On May 12, 2021, certain defendants, including the Company, filed motions to dismiss the complaint for lack of ~~Illinois will vacate, amend or extend the Fourth Amended General Order on or before July 13, 2020.~~personal jurisdiction, which remain pending.

We intend to ~~continue to~~ defend the In re Broiler Chicken Antitrust Litigation and relatedlawsuits 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.

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.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~~the Company was named as ~~defendants,~~a defendant, 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 Sanderson Farms defendants’ motion to dismiss for lack of personal jurisdiction.

On February 21, 2018, the plaintiffs filed a substantially similar lawsuit in the United States District Court for the Eastern District of North Carolina against ~~Sanderson Farms and our subsidiaries~~the Company and another poultry producer. The plaintiffs subsequently moved to consolidate this action with the Eastern District of Oklahoma action in the Eastern District of Oklahoma for ~~pre-trial~~pretrial proceedings, with the defendants in support thereof. That motion was denied.

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On July 13, 2018, the defendants moved to dismiss the lawsuit in the Eastern District of North Carolina, and briefing was completed on September 4, 2018. On January 15, 2019, the Court granted in part the defendants’ motion to dismiss ~~and stayed~~by staying the action in the Eastern District of North Carolina under the first-to-file rule, pending resolution of the action in the Eastern District of Oklahoma. On January 6, 2020, the Court in the Eastern District of Oklahoma denied the remaining 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

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plaintiffs filed a second amended consolidated ~~amended~~ complaint on February 21, 2020. ~~The Oklahoma case is ongoing. We intend~~On May 27, 2020, the Company moved to ~~defend~~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.

On September 11, 2020, additional named grower plaintiffs filed an identical putative class action in the United States District Court for the District of Colorado against Sanderson Farms, Inc. and its Foods, Production, and Processing Divisions, as well as the other initial 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 named grower plaintiff filed another duplicate class action in the United States District Court for the District 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.

On October 8, 2020, new named grower plaintiffs filed another duplicate class action in the United States District Court for 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 proceedings 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. The cases are consolidated as In re Broiler Chicken Grower Antitrust Litigation, No. 6:20-md-2977-RJS-CMR (E.D. Okla.). On February 12, 2021, the MDL Court held a status conference and entered a scheduling order for the MDL. On February 16, 2021, the first-to-file motions in the various actions described above were denied without prejudice. On February 19, 2021, Plaintiffs filed a consolidated amended complaint before the MDL Court. On March 31, 2021, the Company filed its answers to Plaintiffs' consolidated amended complaint. Discovery in the case is underway.

We intend to defend these 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.~~the Company received an antitrust civil investigative demand ("CID") 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~~is also 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~~CID 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.

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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~~CID that ~~included~~includes a request to produce all deposition transcripts from the ~~civil litigation.~~In re Broiler Chicken Antitrust Litigation.

On August 6, 2020, the Company received a CID 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 for the State of Washington. The Company is unable to predict the outcome of the investigation at this time.

Separately, the Company is also aware that, On March 23, 2021, certain plaintiffs' counsel in In re Broiler Chicken Litigation also received a CID from the Office of the Attorney General for the State of Washington that includes a request to produce all deposition transcripts and expert reports from the In re Broiler Chicken Antitrust Litigation.

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 sought 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 included 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. An initial scheduling conference was held on March 1, 2018, and discovery started thereafter. On 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 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 toto: (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 lack of subject matter jurisdiction on grounds that the remaining plaintiffs lacked standing. The Court held a hearing on the Company’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,~~Briefing was complete as of April 29, 2020, and ~~Plaintiffs filed their reply brief~~the Court held oral argument on ~~April 29,~~October 13, 2020. ~~Oral argument is likely~~On March 31, 2021, a panel of the Ninth Circuit unanimously affirmed the District Court's dismissal. The organizations subsequently declined to ~~be scheduled~~seek reconsideration by the Ninth Circuit panel or en banc review by all active judges on the Ninth Circuit.

The organizations may still seek to file a petition for ~~late 2020 or early 2021. We~~certiorari seeking review by the U.S. Supreme Court. In the event that they do, we intend to vigorously defend the appeal. However, the Company cannot predict the outcome of ~~this action.~~such an appeal. If the plaintiffs were to prevail, the Company’s reputation and marketing program could be materially, adversely affected, which could have a material, adverse effect on our financial position and results of operations.

Judy Jien v. Perdue Farms, Inc., et al.

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from January 1, 2009 to the present. ~~The plaintiffs~~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~~named 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~~brought 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~~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. Under the current Standing Order, plaintiffs’ oppositionsPlaintiffs filed their omnibus opposition to defendants’ motions to dismiss ~~are due~~on July 17, 2020. ~~Defendants’ replies are due~~Defendants filed their reply briefs on August 13, 2020. ~~No discovery has taken place~~On September 16, 2020, the Court granted in part and denied in part defendants’ motion without prejudice, finding that plaintiffs’ allegations against certain corporate defendant families, including the Company, were deficient.

Plaintiffs filed a second amended consolidated complaint against the Company on November 2, 2020. The Company filed a renewed motion to ~~date.~~ dismiss resisting plaintiffs' amended allegations on December 18, 2020. The Court denied that motion on March 10, 2021. Discovery in the case is underway.

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~~(Daniel Lentz, Pam La Fosse, and Marybeth ~~Norman -~~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 Company's 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~~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 ~~compensatory, statutory, and punitive~~ damages, as well as ~~attorneys’~~fees and ~~experts’ fees, costs, and expenses.~~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.~~complaint. On March 23, 2020, two

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of the three original plaintiffs (Pam La Fosse and Marybeth Norman) filed a ~~First Amended Class Action Complaint~~first amended complaint in which they were joined by five additional named ~~plaintiffs.~~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~~first amended complaint are the same as in the original complaint. The ~~First Amended Complaint asserts~~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 ~~seek~~sought injunctive relief directing the Company to correct its practices and to comply with consumer protection laws nationwide, as well as monetary ~~compensatory, statutory~~damages, fees and ~~punitive damages and attorneys' and experts' fees, costs and expenses.~~costs. On May 6, 2020, the Company filed a partial motion to dismiss the ~~First Amended Complaint. No discovery has taken place~~first amended complaint, which the Court granted on July 2, 2020 with leave to ~~date.~~ 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 ~~these cases~~this case vigorously; however, the Company cannot predict the outcome of ~~these actions.~~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.

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 the Ninth Circuit unanimously confirmed in March 2021. 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 Company's 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 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.

The parties initially stipulated to a stay of the case pending resolution of the appeal in the related Friends of the Earth case. Following the Ninth Circuit's affirmance of the District Court's dismissal of that case, the Company moved to dismiss the In Defense of Animals case on April 28, 2021. In response to the Company's motion to dismiss, plaintiffs filed an amended complaint on May 26, 2021. The Company's responsive pleading is due on June 25, 2021. No discovery has taken place to date.

We intend to defend this case 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.

Other

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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.

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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 April 30, ~~2020.~~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 9—CREDIT AGREEMENT

The Company is a party to a revolving credit facility dated ~~March 21, 2019,~~April 23, 2021, with a maximum available borrowing capacity of $1.0 billion. Under the credit facility, the Company may not exceed a maximum ~~debt to total~~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~~debt-to-total capitalization ratio then in effect by ~~five~~5 percentage points in connection with the construction of a new poultry 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 April 30, ~~2020,~~2021, was ~~$999.2 million.~~$1.0 billion. The credit is unsecured and, unless extended, will expire on ~~March 21, 2024.~~April 23, 2026. As of April 30, ~~2020~~2021 and May ~~27, 2020,~~26, 2021, the Company had borrowed ~~$200.0~~$55.0 million and had approximately ~~$23.1~~$25.2 million outstanding in letters of credit, leaving ~~$776.9~~$919.8 million of borrowing capacity available under the facility.

NOTE 10—INCOME TAXES

~~On March 27,~~The Company’s estimated annual effective tax rates for the three and six months ended April 30, 2021 were 23.7% and 23.9%, respectively, as compared to effective tax rates of 113.4% and 66.4%, respectively, for the three and six months ended April 30, 2020. Excluding the effects of discrete items recognized during the periods, the Company's estimated annual effective tax rates for the three and six months ended April 30, 2021 would have been approximately 23.8% and 23.8%, respectively, as compared to effective tax rates of 30.2% and 26.9%, respectively, for the three and six months ended April 30, 2020. The discrete items recognized during the three and six months ended April 30, 2020 are primarily related to the Coronavirus Aid, Relief, and Economic Security Act ("the CARES Act") ~~was enacted.~~and are described in more detail below. The ~~CARES Act contains several income~~Company estimates its effective tax ~~provisions, as well as other measures, that are intended to assist businesses impacted by~~rate for the economic effects of the COVID-19 pandemic. The most significant provisions of the CARES Act that will materially affect our accounting for income taxes include, but are not limited to, a five-year carry-back allowance for taxable net operating losses generated in tax years 2018 through 2020, our fiscal years 2019 through 2021, and a technical correction to the Tax Cut and Jobs Act, enacted on December 22, 2017, that provides a two-year carry-back allowance for our taxable net operating loss generated infull fiscal year ~~2018.~~2021, exclusive of discrete items, will be approximately 23.8%.

Our financial statements for the ~~second quarter~~three and ~~first~~ six months ~~of fiscal~~ended April 30, 2020 were materially affected by the changes enacted by the CARES Act. U.S. GAAP requires that the effects from changes in tax laws be recognized induring the fiscal period in which the new law is enacted, which for the CARES Act iswas our second quarter of fiscal 2020. As a result of the applicable accounting guidance and the provisions enacted by the CARES Act, our income tax provision for the ~~second quarter~~three and ~~first~~ six months ~~of fiscal~~ended April 30, 2020 reflects the carry-back of taxable net operating losses generated during periods in which the statutory federal income tax rate was 21% to periods in which the statutory federal income tax rate was 35%. Due to the difference in statutory rates, we recorded a $49.4 million discrete income tax benefit related to the carry-back provisions during the three and six months ended April 30, 2020. Because the net operating losses were carried back to years in which we initially reduced our taxable income using the Domestic Production Activities Deduction, we recorded a partially offsetting $11.9 million discrete income tax expense during the three and six months ended April 30, 2020 to account for the reduced taxable income.

The Company’s effective tax rates for the three and six months ended April 30, 2020 were 113.4% and 66.4%, respectively, as compared to estimated annual effective tax rates of 24.7% and 23.8%, respectively, for the three and six months ended April 30, 2019. Excluding the effects of discrete items recognized during the periods, primarily related to the CARES Act, the Company's effective tax rates for the three and six months ended April 30, 2020 would have been approximately 30.2% and 26.9%, respectively, as compared to estimated annual effective tax rates of 24.9% and 24.5%, respectively, for the three and six months ended April 30, 2019. Normally during interim periods, the Company has estimated its annual effective tax rate for the full fiscal year to use when recording the interim period tax provision. Given significant volatility in the poultry markets as a result of the COVID-19 pandemic, as well as factors related to the carry-back provisions of the CARES Act, the Company is not able to reliably estimate its annual effective tax rate for the interim period ending April 30, 2020. Therefore, the income tax provision for the second quarter and first six months of fiscal 2020 was made using the actual effective tax rate for the six-month period ending April 30, 2020.

As of April 30, ~~2020,~~2021, the Company's deferred income tax liability was ~~$131.4~~$145.4 million, as compared to ~~$74.1~~$141.7 million at October 31, ~~2019,~~2020, an increase of ~~$57.3~~$3.7 million. ~~This increase is primarily attributable to the carry-back provisions discussed above, as well as bonus depreciation taken on qualifying assets placed in service during fiscal 2020.~~

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~~NOTE 11—LEASES~~

The Company, using the guidance in Accounting Standards Codification ("ASC") 842, Leases, determines if an agreement is a lease at the inception of the agreement, and when a lease exists, we follow the guidance in ASC 842 to determine whether the lease is an operating or finance lease. The Company is a party to certain agreements that are classified as operating leases, and those are recorded on our Condensed Consolidated Balance Sheet as Right of Use Assets, Current Lease Liabilities, and Long-term Lease Liabilities. The Company is not a party to any finance lease arrangements. The Company has elected not to record short-term leases with initial terms of twelve months or less in our Condensed Consolidated Balance Sheet. Lease expenses related to those short-term leases are recognized on a straight-line basis over the term of the lease.

The initial assets and corresponding liabilities recorded at commencement of our operating leases are based on the present value of the future minimum lease payments over the lease term. In determining the present value, we use the implicit interest rate in the agreement, if provided. If an implicit interest rate is not provided, we determine the present value of the future minimum lease payments using our incremental borrowing rate based on available information at the lease commencement. When lease agreements contain residual value guarantees that are considered probable, those are included in calculating the amount of lease liabilities to record. Operating lease expense is recognized on a straight-line basis over the lease term with a corresponding reduction to the Right of Use Asset and the applicable lease liability. Lease expense is classified as Cost of Sales or Selling, General and Administrative in our Condensed Consolidated Statements of Operations based on the use of the leased item.

The operating leases to which the Company is a party are primarily related to transportation equipment, equipment used in production processes and the assets of independent contract producers who house our live birds. A significant portion of the costs associated with leases related to the use of assets of independent contract poultry producers who house and care for our live birds are for non-lease components of our agreements with such producers. Non-lease components of payments made to independent contract poultry producers include those related to the operating costs of, and services provided by, such producers. For costs associated with such leases, we elected to account for the lease and non-lease components as a single lease component, and all costs associated with such leases are disclosed as variable lease costs in the table below. The following table presents the components of our lease costs (in thousands) paid during the three and six months ended April 30, 2020:

Description Three Months Ended April 30, 2020 Six Months Ended April 30, 2020
Operating lease cost $ 3,871 $ 8,268
Short-term lease cost 922 1,787
Variable lease cost ⁽¹⁾
102,298 203,940
Total lease cost $ 107,091 $ 213,995

(1) Variable lease costs are attributable to payments made to independent contract poultry producers and are based on or influenced by output received from contract producers, birds placed, poultry house size and relative performance.

~~Other information regarding our operating leases includes the following:~~


~~Description~~	~~Amount~~
~~Cash outflows for operating leases included in the measurement of lease liabilities during the six months ended April 30, 2020 (in thousands)~~	$	~~8,733~~
~~Non-cash amount of right of use assets and lease liabilities recorded upon adoption (in thousands)~~ ⁽¹⁾	$	~~54,665~~
~~Weighted-average remaining lease term as of April 30, 2020 (years)~~	~~4.0~~
~~Weighted-average discount rate as of April 30, 2020~~	~~2.45~~		%

~~(1) There were no new right of use assets obtained in exchange for lease liabilities during the six months ended April 30, 2020.~~

~~The future maturities of obligations under non-cancelable operating leases at April 30, 2020 were as follows (in thousands):~~

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Fiscal Year Amount
2020 (remainder) $ 7,299
2021 14,398
2022 11,969
2023 8,327
2024 4,744
Thereafter 2,430
Total undiscounted operating lease payments 49,167
Less: imputed interest (3,254)
Present value of lease liabilities $ 45,913

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NOTE 11—INSURANCE RECEIVABLE

Our operations in Texas, Louisiana and Mississippi were affected by significant winter weather events that began impacting the region on or around February 13, 2021. Because of record low temperatures, power failures, snow and ice, and hazardous road conditions during the week of February 15, 2021, we were unable 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 or our equipment were significantly 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 639,000 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 were also unable to pick up and place approximately 665,000 hatching eggs in our hatcheries on our normal schedule.

Our financial statements as of April 30, 2021 include a $4.0 million receivable from insurance carriers for property damage and expenses incurred as a result of the storms, net of the applicable self-insured retention and deductibles. The Company's applicable insurance policy includes a $2.5 million self-insured, eroding retention per policy year and an additional $250,000 deductible per occurrence. As a result, the Company's operating results for the second quarter of fiscal 2021 and the six months ended April 30, 2021 include $2.75 million in cost of goods sold for losses and expenses related to the winter storms. Additionally, the Company's operating results for the second quarter of fiscal 2021 and the six months ended April 30, 2021 were negatively affected by business interruption losses which were the direct result of the winter storms. While we expect to recover some portion of the business interruption losses, we are subject to a seven-day waiting period deductible under the applicable insurance policy. We continue to work with our insurers, adjusters and forensic accountants to refine the calculation of losses stemming from the storms, as well as the amount of those losses applicable to the deductible period. Any recoveries of the business interruption losses will be recognized once the calculations of the claims and negotiations with our insurance carriers are complete.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following 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, ~~2019.~~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 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 net realizable values of live and processed poultry inventories might be lower than the cost of such inventories, requiring a downward adjustment to record the value of such inventories at the lower of cost or net realizable value as required by generally accepted accounting principles.

(6)Changes in and effects of competition, which is significant in all markets in which the Company competes, and the effectiveness of marketing and advertising programs. The Company competes with regional and national firms, some of which have greater financial and marketing resources than the Company.

(7)Changes in accounting policies and practices adopted voluntarily by the Company or required to be adopted by accounting principles generally accepted in the United States.

(8)Disease outbreaks affecting the production, performance and/or marketability of the Company’s poultry products, or the contamination of its products.

(9)Changes in the availability and cost of labor and growers.

(10)The loss of any of the Company’s major customers.

(11)Inclement weather that could hurt Company flocks or otherwise adversely affect the Company's operations, or changes in global weather patterns that could affect the supply and price of feed grains.

(12)Failure to respond to changing consumer preferences and negative or competitive media campaigns.

(13)Failure to successfully and efficiently start up and run a new plant or integrate any business the Company might acquire.

(14)Unfavorable results from currently pending litigation and proceedings, or litigation and proceedings that could arise in the future.

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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, 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 ~~integrated~~fully, 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 and marketing. Consistent with the poultry industry, the Company’s profitability is substantially affected by the market price 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.

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 ~~distribution.~~ 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 demonstrate cyclical characteristics typical with commodity markets. 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 ~~130~~40 institutional and ~~consumer packaged~~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.

Consistent with the poultry industry, the Company’s profitability is substantially affected by the market prices for its finished products and feed grains, both of which may fluctuate substantially and exhibit cyclical characteristics typically associated with commodity markets. Costs other than feed grain costs, including hatching egg production, hatching, growing, and processing cost, are responsive to efficient cost containment programs and management practices.

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. ~~The~~From late February to late September 2020, the team ~~meets~~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 meeting once daily, rather than twice. Additionally, our Board of Directors has actively overseen our management of the ~~crisis and has met weekly since~~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 ~~over 18,000~~ 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. These restrictions have been adjusted as conditions have warranted throughout the pandemic, following consultations with an infectious disease expert.

•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 and coronavirus vaccinations are provided at no cost 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 in English and Spanish.~~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 ~~with~~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 temperature of 100°F or higher is denied entry. Employees denied entry are sent home with pay and are asked to contact their healthcare provider.

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•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 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 for 14~~pay. The specific isolation or quarantine period varies based on individual circumstances but generally ranges from 10 to 24 days. An employee who has tested positive may return to work after 14 days with clearance from a doctor. An employee who lives in the same household as or who works in close proximity to someone who has tested positive may return to work after 14 days if he or she has been symptom-free for 72 hours.

•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~~Until May 18, 2021, we provided and ~~requiring~~required employees, United States Department of Agriculture inspectors and essential visitors to wear face masks and/or face shields, and ~~face shields. Anyone~~anyone on the premises of our processing plants, feed mills, hatcheries and vehicle maintenance shops iswas required to wear this equipment. Where an employee's job function ~~does~~did not permit him or her to wear a face shield, we ~~require~~required the employee to wear safety ~~glasses~~glasses. As of May 18, 2021, anyone who is fully vaccinated is no longer required to wear this equipment on our premises.

•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 and~~stations. Additionally, we have optimized ~~air flow~~ventilation throughout our facilities to mitigate the risk of exposure to the virus.

•Our nurses have N95 respirator masks, gowns, gloves and ~~other protective equipment~~goggles appropriate for contact with potentially infected people.

•We ~~require~~have required employees to practice social distancing on breaks and have staggered break times to reduce the number of people in break ~~areas.~~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 ~~added~~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 as needed 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.

•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.

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•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 to quarantine with pay.

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 ~~are paying our~~paid hourly employees who ~~work~~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 ~~have~~ distributed written materials to our employees in ~~English and several other~~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.~~facilities and washable masks for them and their families.

•~~In appreciation for our employees' dedication and hard work in supporting the nation's food supply, we gave ten pounds~~We have given free, 10-pound packages of fresh chicken to ~~each hourly employee who worked on Good Friday and ten pounds of fresh chicken to each employee who worked on the Friday before Mother's Day.~~our employees in connection with several holidays.

•Because demand for the products we produce at our prepared chicken facility ~~has~~ significantly ~~declined,~~decreased during the early stages of the pandemic, we ~~have been running~~ran fewer shifts at that facility. We assisted our employees at the plant in filing for unemployment benefits due to their reduced work hours.

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We have continued to serve our customers and support our communities:

•As a result of the COVID-19 pandemic, most of the nation's restaurants ~~have been~~were forced to operate at significantly reduced capacity or to close ~~completely.~~completely for an extended period of time. 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 ~~have~~ increased the number of shifts at our plants that process retail ~~product. We~~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 ~~COVID-19~~ pandemic, we have donated over ~~700,000~~1.4 million pounds of chicken to employees, food banks and other relief organizations.

•~~As of May 20, 2020,~~During the pandemic, we have donated ~~23,740~~tens of thousands of N95, KN95, disposable and ~~KN95~~washable masks to a number of hospitals ~~in need of personal protective equipment for their front-line healthcare workers.~~and community organizations.

On March 27, 2020, the CARES Act was enacted. The CARES Act affects the Company in several areas including, but not limited to, the following:

•It allows for the deferral of the employer portion of social security payroll tax payments that would have otherwise been paid between the enactment date and December 31, 2020. We ~~are using~~used this provision to increase our available ~~liquidity,~~liquidity. During fiscal 2020, we deferred approximately $20.7 million, and during the first quarter of fiscal 2021, we ~~currently estimate~~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 ~~will result in approximately $26 million of payroll tax payments being deferred, with 50%~~deferral is due during calendar year 2021 and ~~50%~~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 remaining $6.5 million on or before June 15, 2022, so that we are able to deduct the corresponding payroll tax expenses on our fiscal 2020 and 2021 income tax returns, respectively.

•~~Certain~~The Employee Retention Credit, a refundable, wage-related tax ~~credits, including the Employee Retention Credit, are~~credit, was made available to eligible employers. We ~~are currently evaluating the potential impacts of~~recognized a $3.5 million benefit, before income taxes, related to this ~~credit.~~

•The Tax Cuts and Jobs Act enacted in December 2017 disallowed the carrying back of taxable net operating losses to offset prior years' taxable income. The CARES Act allows us to carry those losses back to offset taxable income recognized during prior years. We are electing to use that provision, which will provide additional liquidity in the form of an income tax refund currently estimated to be approximately $84 million. We believe we will receive the refundcredit during our fourth ~~fiscal~~ quarter of ~~2020. Additionally,~~fiscal 2020, and we ~~recorded a net discrete income tax benefit~~recognized additional pre-tax benefits of ~~approximately $37.4~~$1.1 million and $3.7 million, respectively, related to ~~the carry-back provisions. For more information regarding the income tax effects~~this credit during our first and second quarters of ~~the CARES Act, refer to "Part I., Item 1., Notes to Condensed Consolidated Financial Statements, Note 10 - Income Taxes."~~fiscal 2021.

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EXECUTIVE OVERVIEW OF RESULTS

For the second quarter of fiscal ~~2020,~~2021, we reported net income of $96.9 million, or $4.34 per share, as compared to net income of $6.1 million, or $0.28 per share, ~~and an operating margin of (5.2)%, as compared to net income of $40.6 million, or $1.83 per share, and an operating margin of 6.5%~~ during the second quarter of fiscal ~~2019.~~2020. Results for the second quarter of fiscal 2021 reflect a $6.5 million accrual for a probable Employee Stock Ownership Plan ("ESOP") contribution and $2.75 million in deductible and self-insured retention expenses related to the winter storms that affected our operations during the quarter. Additionally, our operating results for the quarter were negatively affected by business interruption losses which were the direct result of the winter storms. While we expect to recover some portion of the business interruption losses, we are subject to a seven-day waiting period deductible under the applicable insurance policy. We continue to work with our insurers, adjusters and forensic accountants to refine the calculation of losses stemming from the storms, as well as the amount of those losses applicable to the deductible period, and any recoveries of the business interruption losses will be recognized once the calculations of the claims and negotiations with our insurance carriers are complete. Results for the second quarter of fiscal 2020 include the recognition of a net $37.4 million discrete income tax benefit related to the net operating loss carry-back provisions of the CARES Act. Excluding the $6.5 million ESOP accrual and the $2.75 million in deductible and self-insured retention expenses related to the winter storms, net income for the second quarter of fiscal 2021 was $104.0 million, or $4.66 per share, and excluding the discrete income tax benefit ~~discussed above, our net loss for~~recognized during the second quarter of fiscal 2020, our net loss during the quarter ended April 30, 2020 was $31.3 million, or $1.43 per share. The significant improvement in our results is primarily attributable to significantly higher average selling prices for our products, partially offset by significantly higher costs of corn and soybean meal, our primary feed ingredients. Our ~~financial~~ results for the second quarter of fiscal ~~2020 were significantly~~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 food service customers has fluctuated from week to week, coinciding with the fluctuating governmental restrictions placed on the restaurant industry. The ~~sudden~~impact of fluctuating demand ~~shift caused significant declines~~is evidenced by the volatility demonstrated by the daily 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 early August 2020. The quoted price fell to $0.86 per pound by early October 2020, but by January 31, 2021, the end of our first fiscal quarter, the price reached $1.32 per pound. As of April 30, 2021, the end of our second fiscal quarter, the quoted price had risen to $2.03 per pound, and as of May 26, 2021, the price is $2.24 per pound. We believe the most recent improvement in the quoted market ~~prices for our products~~price is attributable, at least in part, to an increase in demand from quick-service restaurant chains that are ~~typically sold~~featuring or planning to feature chicken products on their menus. In addition, demand from food service customers continues to 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. ~~During some weeks~~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. Despite the production cuts and lower target live weights, we processed 1.22 billion pounds of dressed poultry during the second fiscal quarter of 2021, up 3.4% from the 1.18 billion pounds processed during the second fiscal quarter of 2020. The increase in pounds processed resulted from a 0.8% increase in the number of head processed and a 1.9% increase in the average live weight of the ~~quarter, some food service customers ordered as much as 75% fewer~~birds processed. In June 2021, we expect that the first of our plants where production is currently below capacity will return to full capacity. We will continue to return those plants to full capacity during the summer months and expect that all plants, except for St. Pauls, North Carolina and Palestine, Texas will be operating at full capacity by early September 2021. As a result, we estimate we will process 1.22 billion and 1.23 billion pounds ~~compared to weekly order volumes before~~of dressed poultry during the ~~pandemic.~~third and fourth quarters of fiscal 2021, respectively.

•The demand shift to food ~~consumed~~prepared at home caused demand from our retail grocery store customers to surge and we were able to shift some production from our plants that serve food service customers to plants that serve grocery store customers. However, the extent to which we can can shift production is limited by processing capacity at our plants that serve retail grocery store customers and the size of our live inventory. Overall, we processed 4.2% fewer pounds during the ~~quarter than we estimated we would when we announced our first quarter results on February 27, 2020.~~early stages of the pandemic, and that demand remains strong as some consumers continue to eat many, if not most, of their meals at home.

•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, ~~was soft during~~although demand and pricing for chicken paws sold to China has remained strong throughout the ~~quarter, with~~pandemic. During the ~~exception~~first two months of fiscal 2021, demand ~~from China. Many countries whose economies were shut down during~~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 through our second fiscal quarter. We believe this strength is the ~~quarter to curb the spread~~result of COVID-19, as well as countries whose economies depend on oil, faced logistical and liquidity issues and were unable to purchase our products. As expected, demand from China was strong during the quarter due to the country's protein deficit caused by African swine fever, which is discussed further below. Given the lack of competition in global demand, however, the Chinese were able to import poultry at relatively low prices during the quarter.several

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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 second quarter of fiscal 2021 includes approximately $8.6 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. By comparison, our second quarter of fiscal 2020 includes approximately $8.4 million in direct COVID-19 expenses for items and services including personal protective equipment, thermometers, professional cleaning, hourly employee attendance bonuses, and wages paid to employees for paid time off, among other things.expenses.

Our higher average cost of goods sold during the second quarter of fiscal ~~2020~~2021 as compared to the same quarter a year ago reflects ~~an increase~~increases in both non-feed related costs of goods sold, details of which are described in the "Results of Operations" section below, ~~partially offset by a decrease~~and in feed costs per pound of chicken processed. When combined, the average ~~cost of~~cash prices paid by the Company for corn and soybean meal ~~in chickens processed was~~were significantly higher during the second quarter of fiscal ~~2020~~2021 as compared to the ~~same period a year ago,~~second quarter of fiscal 2020, which ~~resulted in~~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 corn basis and needs through September 2021. Additionally, we have priced nearly all of our soybean meal needs ~~through July 2020.~~for fiscal 2021. Had we priced our remaining fiscal ~~2020~~2021 grain needs at May ~~27, 2020~~26, 2021 cash market prices quoted on the Chicago Board of Trade, we estimate our costs of feed grains based on ~~2019~~2020 volumes would be approximately ~~$49.1~~$367.6 million ~~lower~~higher during fiscal ~~2020~~2021 as compared to fiscal ~~2019, and~~2020. Based on our projected production levels for the remainder of the fiscal year, we estimate that those ~~prices~~higher grain costs, along with estimated basis costs, would result in approximately ~~0.69 cents~~$0.075 per pound ~~lower~~higher feed costs in broiler flocks processed for fiscal ~~2020~~2021 as compared to fiscal ~~2019. The worldwide supply~~2020. These numbers are estimates and are subject to change as we move through the balance of ~~both corn and soybeans remains healthy, and United States farmers have so far been able to plant their crops on time during~~ the ~~2020 planting season. Those factors typically result in stable grain prices, but we are unable to predict the future movement of grain prices.~~year.

The outbreak of African swine fever in China has reduced the worldwide supply of pork, which has in turn created a worldwide protein deficit. In November 2019, during our first quarter of fiscal 2020, China lifted its nearly five-year ban on the import of United States poultry, and we resumed shipments to China almost immediately. During the first six months of fiscal 2020, we sold approximately 14.9 million pounds of chicken paws and 9.4 million pounds of other products to customers who resold the product in China. When the ban was in place, we would have rendered the chicken paws for significantly lower returns and sold the other products for lower returns than we were able to realize. While revenue was recognized for 24.3 million pounds during the first six months of fiscal 2020, more product for which not all revenue recognition criteria were met had been shipped to customers in China. Between the date the ban was lifted and May 21, 2020, we have shipped to China, or have booked orders from our customers in China for, approximately 57.3 million pounds of various products. However, demand for products other than chicken paws softened during May 2020 as cold storage inventories were rebuilt and consumers in China have been slow to return to restaurants in the same numbers as before the COVID-19 outbreak. Nevertheless, the Chinese economy was the first to shut down due to COVID-19, and it could be the first to stabilize. If there are no significant resurgences of COVID-19 causing further economic shut downs in China, demand for protein to replace supply lost to African swine fever should continue to be significant and should ultimately benefit protein producers in the United States, including poultry producers.

~~We believe that our overall cost structure in the second half of fiscal 2020 will be stable, primarily because there is an adequate worldwide supply of grain as discussed above. We also believe that~~ demand for our ~~products from~~ retail grocery ~~stores will continue to be strong as people continue to consume more food at home than prior to the pandemic. 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 from the pandemic.~~

~~We also believe that market prices~~products and demand ~~for the products we produce at~~from our ~~plants that serve~~ food service distribution customers ~~could continue to be volatile. Market~~is currently favorable, resulting in selling prices for ~~those~~our products ~~especially~~that are more than offsetting the higher prices we are paying for boneless, skinless breast meat, began moving higher at the end of April, and we believe that is primarily because there are lower supplies of beef and pork available due to numerous meat plant closures related to COVID-19. We also believe there was an uptick in demand from food service customers in late April and early May because many areas of the United States have eased stay-at-home restrictions and have allowed restaurants to reopen at lower capacities. The move higher in market prices flattened in mid-May, and prices have since moved lower as food service demand softened once customers rebuilt inventories.

~~While the conditions in the markets for our retail and food service products are currently favorable,~~feed grains, it is uncertain how long ~~they~~these conditions will persist. How long ~~these~~current conditions will last and the future effect of the pandemic on our business will depend on many factors, including:

•the ~~amount~~acceptance rate of ~~time required for beef and pork production to return to normalized levels;~~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, ~~and order restaurant closures;~~as well as varying restrictions on restaurants;

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•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 ~~hotels~~ and ~~schools,~~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~~China;

•the effect of the pandemic on our operations, including labor shortages we ~~could~~have experienced and may continue to experience as a result of ~~infections among our employees.~~the pandemic; and

•with respect to feed grain prices, the quality and quantity of the 2021 corn and soybean crops.

RESULTS OF OPERATIONS

Net sales for the second quarter ended April 30, ~~2020~~2021 were ~~$844.7~~$1,133.9 million as compared to ~~$845.2~~$844.7 million for the second quarter ended April 30, ~~2019, a decrease~~2020, an increase of ~~$0.5~~$289.2 million, or ~~0.1%~~34.2%. Net sales of poultry products for the second quarter ended April 30, 2021 and 2020, ~~and 2019,~~ were ~~$805.7~~$1,087.2 million and ~~$782.9~~$805.7 million, respectively, an increase of ~~$22.8~~$281.5 million, or ~~2.9%~~34.9%. The increase in net sales of poultry products resulted from a ~~12.2%~~32.6% increase ~~in the pounds poultry products sold, partially offset by an 8.3% decrease~~ in the average sales price of poultry products sold and a 1.8% increase in the pounds of poultry products sold. During the second quarter of fiscal ~~2020,~~2021, the

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Company sold ~~1,179.7~~1,200.4 million pounds of poultry products, up from ~~1,051.4~~1,179.7 million pounds during the second quarter of fiscal ~~2019.~~2020. The increase in pounds of poultry products sold resulted from a ~~10.4%~~0.8% increase in the number of head processed ~~partially offset by~~and a ~~2.3% decrease~~1.9% increase in the average live weight of ~~poultry~~the birds processed. ~~The new Tyler, Texas processing facility, which began initial operations during~~Due to the ~~first quarter of fiscal 2019,~~winter storms mentioned above, the Company processed approximately ~~14.9~~2.3 million fewer head during the second quarter of fiscal ~~2020,~~2021 than what we originally planned prior to the storms' impacts. However, due to higher bird weights and improved yields, our actual pounds processed were higher than our original projection by approximately 1.9%, or ~~approximately 9.1% of the total head processed by the Company during the period, and sold approximately 92.3~~23.1 million ~~pounds of~~pounds.

Quoted market prices for poultry products increased during the second quarter of fiscal 2020, or approximately 7.8% of the total poultry pounds sold by the Company during the period. By comparison, the Tyler, Texas processing facility processed approximately 3.2 million head during the second quarter of fiscal 2019, or approximately 2.1% of the total head processed by the Company during the period, and sold approximately 23.7 million pounds of poultry products during the second quarter of fiscal 2019, or approximately 2.3% of the total poultry pounds sold by the Company during the period.

~~Overall, market prices for poultry products decreased during the second quarter of fiscal 2020~~2021 as compared to the same quarter of fiscal ~~2019.~~2020. When compared to the second quarter of fiscal ~~2019,~~2020, Urner Barry average market prices for ~~tenders,~~ jumbo wings, boneless breast meat, tenders, leg quarters and boneless thigh meat increased by 88.9%, 60.4%, 54.5%, 12.3% and ~~leg quarters decreased by 29.0%, 23.1%, 18.2%, 14.8% and 7.8%~~4.3%, respectively. Average realized prices for chicken products sold to retail grocery store customers ~~were flat~~increased by 4.6% during the second quarter of fiscal ~~2020,~~2021 as compared to the ~~second quarter~~same period of fiscal ~~2019,~~2020, and ~~continue to reflect strong demand.~~retail grocery store demand remains strong.

Net sales of prepared chicken products for the quarters ended April 30, 2021 and 2020 ~~and 2019~~ were ~~$39.0~~$46.6 million and ~~$62.3~~$39.0 million, respectively, representing ~~a decrease~~an increase of ~~37.5%~~19.7%. This ~~decrease~~increase is primarily attributable to ~~a 37.8% decrease~~an 18.4% increase in the pounds of prepared chicken products sold, while the average sales price of prepared chicken products sold also increased by ~~0.6%~~1.0%. During the second quarter of fiscal ~~2020,~~2021, the Company sold ~~20.7~~24.5 million pounds of prepared chicken products, ~~down~~up from ~~33.3~~20.7 million pounds during the second quarter of fiscal ~~2019. 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.~~2020.

Net sales for the ~~first~~ six months ~~of fiscal 2020~~ended April 30, 2021 were ~~$1,667.8 million,~~$2.04 billion as compared to ~~$1,588.6 million~~$1.67 billion for the ~~first~~ six months ~~of fiscal 2019,~~ended April 30, 2020, an increase of ~~$79.2~~$375.4 million, or ~~5.0%~~22.5%. Net sales of poultry products for the ~~first~~ six months ~~of fiscal~~ended April 30, 2021 and 2020 were $1.96 billion and ~~2019 were $1,577.2 million and $1,468.6 million,~~$1.58 billion, respectively, an increase of ~~$108.6~~$380.3 million, or ~~7.4%~~24.1%. The increase in net sales of poultry products resulted from a ~~10.2%~~23.1% increase in the ~~pounds~~average sales price of poultry products sold ~~partially offset by~~and a ~~2.5% decrease~~0.8% increase in the ~~average sales price~~pounds of poultry products sold. During the first six months of fiscal ~~2020,~~2021, the Company sold ~~2,331.6 million~~2.35 billion pounds of poultry products, up from ~~2,116.1 million~~2.33 billion pounds during the first six months of fiscal ~~2019.~~2020. The increase in pounds of poultry products sold ~~was primarily attributable to~~is the ~~ramp up in production at the new Tyler, Texas processing facility. The new facility~~result of a relatively flat number of head processed ~~approximately 27.6 million head~~ during the ~~first six months~~comparative periods, a 0.4% increase in the live weight of ~~fiscal 2020, or approximately 8.6% of the total head~~birds processed, ~~by the Company during the period,~~ and sold approximately 173.4 million pounds of poultry products during the first six months of fiscal 2020, or approximately 7.4% of the total poultry pounds sold by the Company during the period. By comparison, the Tyler, Texas facility processed approximately 3.2 million head during the first six months of fiscal 2019, or approximately 1.1% of the total head processed by the Company during the period, and soldimproved yields.

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~~approximately 23.7 million pounds of poultry products during the first six months of fiscal 2019, or approximately 1.1% of the total poultry pounds sold by the Company during the period.~~

~~Overall,~~Quoted market prices for poultry products ~~decreased~~increased during the ~~first~~ six months ~~of fiscal 2020~~ended April 30, 2021 as compared to the same period ofin fiscal ~~2019.~~2020. When compared to the ~~first~~ six months ~~of fiscal 2019,~~ended April 30, 2020, Urner Barry average market prices for jumbo wings, tenders and boneless breast meat ~~jumbo wings~~increased by 60.2%, 41.3% and ~~boneless thigh meat decreased by 20.1%, 11.6%, 11.1% and 9.6%~~36.8%, respectively, while average market prices for boneless thigh meat and leg quarters ~~increased~~decreased by ~~5.2%.~~20.4% and 6.6%, respectively. Average realized prices for chicken products sold to retail grocery ~~store customers were slightly higher~~stores increased by 3.8% during the first six months of fiscal ~~2020,~~2021 as compared to the same period of fiscal ~~2019,~~2020 and ~~continue to~~ reflect strong ~~demand.~~demand from our retail grocery store customers.

Net sales of prepared chicken products for the six months ended April 30, 2021 and 2020 were $85.7 million and ~~2019 were~~ $90.6 million, ~~and $120.0 million,~~ respectively, ~~representing~~ a decrease of ~~24.5%~~5.4%. This decrease is primarily attributable to a ~~25.8%~~4.8% decrease in the pounds of prepared chicken products sold ~~while~~and a 0.6% decrease in the average sales price of prepared chicken ~~products sold increased by 1.7%.~~products. During the first six months of fiscal ~~2020,~~2021, the Company sold ~~48.0~~45.7 million pounds of prepared chicken products, down from ~~64.7~~48.0 million pounds during the first six months of fiscal ~~2019. 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.~~2020.

Cost of sales for the second quarter of fiscal ~~2020~~2021 was ~~$832.3~~$941.9 million as compared to ~~$740.8~~$832.3 million during the second quarter of fiscal ~~2019,~~2020, an increase of ~~$91.5~~$109.7 million, or ~~12.3%~~13.2%. Cost of sales of poultry products during the second quarter of fiscal ~~2020,~~2021, as compared to the second quarter of fiscal ~~2019,~~2020, was ~~$795.2~~$893.1 million and ~~$682.9~~$795.2 million, respectively, which represents a ~~3.8%~~10.4% 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 transferred to the Company's prepared chicken plant, the increase in the cost of sales per pound of poultry products resulted from ~~a $0.0246 per pound, or 6.1%,~~an increase ~~in other costs of sales of poultry products, partially offset by a decrease~~ in the cost of feed per pound of broilers processed of ~~$0.0028,~~$0.0669, or ~~1.1%.~~26.6%, and a $0.0080 per pound, or 1.9%, increase in other costs of sales of poultry products.

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Poultry Cost of Sales

(In thousands, except per pound data)


		Three Months Ended April 30, 2020								Three Months Ended April 30, 2019								Incr/(Decr)							Three Months Ended April 30, 2021				Three Months Ended April 30, 2020		Incr/(Decr)
Description	Description	Dollars			Per lb.		Dollars			Per lb.		Dollars		Per lb.		Description	Dollars			Per lb.		Dollars			Per lb.		Dollars		Per lb.
Beginning Inventory	Beginning Inventory	$	37,861		$	0.3797	$	27,175		$	0.4041	$	10,686	$	(0.0244)	Beginning Inventory	$	30,596		$	0.4985	$	37,861		$	0.3797	$	(7,265)	$	0.1188
Feed in broilers processed	Feed in broilers processed	296,590			0.2513		275,411			0.2541		21,179		(0.0028)		Feed in broilers processed	388,976			0.3182		296,590			0.2513		92,386		0.0669

All other cost of sales	All other cost of sales	506,326			0.4290		438,322			0.4044		68,004		0.0246		All other cost of sales	534,152			0.4370		506,326			0.4290		27,826		0.0080

Less: Ending Inventory	Less: Ending Inventory	37,969			0.4129		33,327			0.4259		4,642		(0.0130)		Less: Ending Inventory	41,645			0.5838		37,969			0.4129		3,676		0.1709
Total poultry cost of sales	Total poultry cost of sales	$	802,808	⁽¹⁾	$	0.6758	$	707,581	⁽¹⁾	$	0.6596	$	95,227	$	0.0162	Total poultry cost of sales	$	912,079	(1)	$	0.7523	$	802,808	(1)	$	0.6758	$	109,271	$	0.0765

Pounds:	Pounds:															Pounds:
Beginning Inventory	Beginning Inventory	99,723					67,244									Beginning Inventory	61,374					99,723

Poultry processed/other	Poultry processed/other	1,180,139					1,083,823									Poultry processed/other	1,222,279					1,180,139
Poultry sold	Poultry sold	1,187,894		⁽¹⁾			1,072,820		⁽¹⁾							Poultry sold	1,212,315		(1)			1,187,894		(1)
Ending Inventory	Ending Inventory	91,968					78,247									Ending Inventory	71,338					91,968

Note (1) - For comparative purposes, includes the costs and pounds of product sold to the Company's prepared chicken plant.

Other costs of sales of poultry products consists primarily of labor, packaging, freight, maintenance and repairs, utilities, antimicrobial interventions, contract grower pay, chick costs and certain fixed costs. These non-feed related costs of poultry products sold increased by ~~$0.0246~~$0.0080 per pound processed, or ~~6.1%~~1.9%, during this year’s second fiscal quarter compared to the same quarter a year ago. This increase is primarily attributable to higher labor, packaging and certain fixed costs ~~as well as expenses~~in our processing facilities, slightly higher freight costs incurred ~~in response to~~for the ~~COVID-19 pandemic. The COVID-19 related~~delivery of finished product, and higher independent contract producer pay. COVID-19-related expenses included in other costs of sales during the ~~three months ended April 30, 2020,~~second quarter of fiscal 2021 total approximately ~~$4.9~~$3.7 million and include payroll expenses for employees who are quarantined ~~payroll~~and expenses ~~for attendance bonuses paid~~related to ~~hourly employees,~~various items and ~~purchases of various items~~services including personal protective equipment, thermometers, barriers and ~~barriers~~other social-distancing measures and additional nursing staff to protect the health and safety of our employees. By comparison, COVID-19-related expenses in other costs of sales during the second quarter of fiscal 2020 totaled $4.9 million.

Cost of sales of the Company’s prepared chicken products during the second quarter of fiscal ~~2020~~2021 were ~~$37.1~~$48.8 million as compared to ~~$57.9~~$37.1 million during the same quarter a year ago, ~~a decrease~~an increase of ~~$20.8~~$11.7 million, or ~~35.9%~~31.4%. This ~~decrease~~increase was ~~primarily~~ attributable to ~~a 37.8% decrease~~an 18.4% increase in the pounds of prepared chicken sold, which is primarily the result of ~~reduced~~improved demand for prepared chicken products from our food service customers, ~~due to~~and higher costs for the ~~COVID-19 pandemic.~~

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fresh chicken purchased by the plant.

Cost of sales for the first six months of fiscal ~~2020~~2021 was ~~$1,655.8 million,~~$1.78 billion, as compared to ~~$1,449.2 million~~$1.66 billion during the first six months of fiscal ~~2019,~~2020, an increase of ~~$206.6~~$125.5 million, or ~~14.3%~~7.6%. Cost of sales of poultry products during the first six months of fiscal ~~2020,~~2021, as compared to the first six months of fiscal ~~2019,~~2020, was ~~$1,571.0 million~~$1.70 billion and ~~$1,341.1 million,~~$1.57 billion, respectively, which represents a ~~6.3%~~7.0% 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 sold to the Company's prepared chicken plant, the increase in the cost of sales per pound of poultry products resulted from ~~a $0.0233 per pound, or 5.8%, increase in other costs of sales of poultry products and~~ an increase in the cost of feed per pound of broilers processed of ~~$0.0062,~~$0.0360, or ~~2.5%.~~14.1%, and a $0.0164 per pound, or 3.9%, increase in other costs of sales of poultry products.

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Poultry Cost of Sales

(In thousands, except per pound data)


		Six Months Ended April 30, 2020								Six Months Ended April 30, 2019								Incr/(Decr)							Six Months Ended April 30, 2021				Six Months Ended April 30, 2020		Incr/(Decr)
Description	Description	Dollars			Per lb.		Dollars			Per lb.		Dollars		Per lb.		Description	Dollars			Per lb.		Dollars			Per lb.		Dollars		Per lb.
Beginning Inventory	Beginning Inventory	$	35,121		$	0.3868	$	30,973		$	0.3686	$	4,148	$	0.0182	Beginning Inventory	$	32,952		$	0.4701	$	35,121		$	0.3868	$	(2,169)	$	0.0833
Feed in broilers processed	Feed in broilers processed	601,249			0.2555		536,262			0.2493		64,987		0.0062		Feed in broilers processed	692,023			0.2915		601,249			0.2555		90,774		0.0360

All other cost of sales	All other cost of sales	994,436			0.4226		858,939			0.3993		135,497		0.0233		All other cost of sales	1,042,378			0.4390		994,436			0.4226		47,942		0.0164
Reversal of prior-period inventory write-down	Reversal of prior-period inventory write-down	(2,800)			(0.0012)		(9,600)			(0.0045)		6,800		0.0033		Reversal of prior-period inventory write-down	—			—		(2,800)			(0.0012)		2,800		0.0012

Less: Ending Inventory	Less: Ending Inventory	37,969			0.4129		33,327			0.4259		4,642		(0.0130)		Less: Ending Inventory	41,645			0.5838		37,969			0.4129		3,676		0.1709
Total poultry cost of sales	Total poultry cost of sales	$	1,590,037	⁽¹⁾	$	0.6760	$	1,383,247	⁽¹⁾	$	0.6413	$	206,790	$	0.0347	Total poultry cost of sales	$	1,725,708	(1)	$	0.7272	$	1,590,037	(1)	$	0.6760	$	135,671	$	0.0512

Pounds:	Pounds:															Pounds:
Beginning Inventory	Beginning Inventory	90,805					84,020									Beginning Inventory	70,103					90,805

Poultry processed/other	Poultry processed/other	2,353,314					2,151,228									Poultry processed/other	2,374,195					2,353,314
Poultry sold	Poultry sold	2,352,151		⁽¹⁾			2,157,001		⁽¹⁾							Poultry sold	2,372,961		(1)			2,352,151		(1)
Ending Inventory	Ending Inventory	91,968					78,247									Ending Inventory	71,338					91,968

Note (1) - For comparative purposes, includes the costs and pounds of product sold to the Company's prepared chicken plant.

Other costs of sales of poultry products consists primarily of labor, packaging, freight, maintenance and repairs, utilities, antimicrobial interventions, contract grower pay, chick costs and certain fixed costs. These non-feed related costs of poultry products sold increased by ~~$0.0233~~$0.0164 per pound processed, or ~~5.8%~~3.9%, during the first six months of fiscal ~~2020,~~2021, as compared to the same period a year ago. Part of this increase is attributable to inefficiencies at the Company's new Tyler, Texas facilities, which began initial operations during the last month of the first quarter of fiscal 2019. A new facility's other costs of sales per pound processed will be higher compared to similar complexes until the new complex reaches full capacity. Excluding the Tyler facilities, other costs of sales would have increased by $0.0164 per pound processed, or 4.2%. This increase is primarily attributable to higher labor, packaging and certain fixed costs in our processing facilities, slightly higher freight costs incurred for the delivery of finished product, and higher independent contract producer pay, as well as expenses incurred in response to the COVID-19 ~~pandemic, and is partially offset by lower freight costs.~~pandemic. The COVID-19 related expenses included in other costs of sales during the first six months ~~ended April 30, 2020,~~of fiscal 2021 total approximately ~~$4.9~~$9.0 million and include payroll expenses for employees who are quarantined ~~payroll~~and expenses ~~for attendance bonuses paid~~related to ~~hourly employees,~~various items and ~~purchases of various items~~services including personal protective equipment, thermometers, barriers and ~~barriers~~other social-distancing measures and additional nursing staff to protect the health and safety of our employees. COVID-19 related expenses during the first six months of fiscal 2020 totaled approximately $4.9 million. Excluding the COVID-19 related expenses from each comparative period, other costs of sales increased by $0.0147 per pound processed, or 3.5%.

Cost of sales of the Company’s prepared chicken products during the first six months of fiscal 2021 were $85.8 million as compared to $84.8 million during the same period a year ago, an increase of $0.9 million, or 1.1%. This increase was primarily attributable to a 6.2% increase in the average cost of prepared chicken pounds sold, partially offset by a 4.8% decrease in the pounds of prepared chicken sold.

The Company recorded the value of live broiler inventories on hand at April 30, ~~2020~~2021 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 ~~where~~when 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 net realizable value. No such charge was required at April 30, ~~2020~~2021 or April 30, ~~2019.~~2020.

Selling, general and administrative ("SG&A") costs during the second quarter of fiscal ~~2020~~2021 were ~~$56.2~~$64.2 million, an increase of ~~$7.0~~$8.0 million compared to the ~~$49.2~~$56.2 million during the second quarter of fiscal ~~2019.~~2020. SG&A costs during the six months ended April 30, ~~2020~~2021 were ~~$105.7~~$120.8 million, ~~a decrease~~an increase of ~~$2.1~~$15.1 million compared to the ~~$107.8~~$105.7 million during the six months ended April 30, ~~2019.~~2020. The following tables include the components of SG&A costs for the three and six months ended April 30, ~~2020~~2021 and ~~2019.~~2020.

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Selling, General and Administrative Costs

(in thousands)


Description	Description	Three Months Ended April 30, 2020		Three Months Ended April 30, 2019		Increase/(Decrease)		Description	Three Months Ended April 30, 2021		Three Months Ended April 30, 2020		Increase/(Decrease)
ESOP expense								ESOP expense	$	6,500	$	—	$	6,500
Legal expense								Legal expense	9,137		7,454		1,683
COVID-19-related expense	COVID-19-related expense	$	3,496	$	—	$	3,496	COVID-19-related expense	4,927		3,496		1,431
Legal expense		7,454		6,148		1,306
Stock compensation expense								Stock compensation expense	2,776		2,203		573
Administrative salaries	Administrative salaries	12,325		11,306		1,019		Administrative salaries	12,806		12,325		481
Broker commissions								Broker commissions	3,302		3,189		113
Trainee expense								Trainee expense	3,095		3,146		(51)
Sanderson Farms Championship expense	Sanderson Farms Championship expense	2,051		2,504		(453)		Sanderson Farms Championship expense	1,953		2,051		(98)
Broker commissions		3,189		2,679		510
Stock compensation expense		2,203		2,754		(551)
Trainee expense		3,146		4,390		(1,244)
Advertising expense								Advertising expense	2,787		3,224		(437)
All other SG&A	All other SG&A	22,350		19,449		2,901		All other SG&A	16,962		19,126		(2,164)
Total SG&A	Total SG&A	$	56,214	$	49,230	$	6,984	Total SG&A	$	64,245	$	56,214	$	8,031

Regarding the table above, the increase in ESOP expense, payout of which is based on profitability, is the result of

probable earnings for fiscal 2021 being greater than fiscal 2020. The increase in legal expense is primarily attributable to our ongoing defense of the litigation described in "Part I, Item 1, Note 8 - Commitments and Contingencies" of this Form 10-Q, and the increase in COVID-19-related expense is the result of direct expenses for items and services related to the health, safety and welfare of our employees during the COVID-19 pandemic. The decrease in all other SG&A expenses is primarily the result of lower levels of travel and entertainment expenses as a result of the COVID-19 pandemic.

Selling, General and Administrative Costs

(in thousands)


Description	Six Months Ended April 30, 2021		Six Months Ended April 30, 2020		Increase/(Decrease)
COVID-19-related expense	$	11,089	$	3,499	$	7,590
ESOP expense	6,500		—		6,500
Legal expense	17,601		13,939		3,662
Administrative salaries	25,163		23,818		1,345
Broker commissions	6,596		5,776		820
Stock compensation expense	5,178		4,698		480
Sanderson Farms Championship expense	3,903		4,098		(195)
Trainee expense	6,081		6,421		(340)
Advertising expense	5,494		6,500		(1,006)
All other SG&A	33,239		36,950		(3,711)
Total SG&A	$	120,844	$	105,699	$	15,145

Regarding the table above, the increase in COVID-19-related expense is the result of direct expenses for items and services related to the health, safety and welfare of our employees during the COVID-19 ~~pandemic.~~pandemic, which was declared during the middle of our second fiscal quarter of 2020. The increase in ESOP expense, payout of which is based on profitability, is the result of probable earnings for fiscal 2021 being greater than fiscal 2020. The increase in legal expense is primarily attributable to our ongoing defense of the litigation described in "Part ~~II,~~I, Item ~~1. Legal Proceedings"~~1, Note 8 - Commitments and Contingencies" of this Form 10-Q. The decrease in ~~trainee expense~~all other SG&A expenses is primarily the result of ~~a reduction in the number~~lower levels of ~~trainee positions filled. The increase in all other SG&A~~travel and entertainment expenses ~~is the~~as a result of ~~a net increase in various other categories of SG&A costs.~~

~~Selling, General and Administrative Costs~~

~~(in thousands)~~

Description Six Months Ended
April 30, 2020 Six Months Ended
April 30, 2019 Increase/(Decrease)
Start-up expense (Tyler, Texas) $ — $ 9,361 $ (9,361)
Trainee expense 6,421 9,093 (2,672)
Stock compensation expense 4,698 5,494 (796)
Sanderson Farms Championship expense 4,098 4,028 70
Broker commissions 5,776 5,256 520
Administrative salaries 23,818 22,485 1,333
Legal expense 13,939 11,704 2,235
COVID-19-related expense 3,496 — 3,496
All other SG&A 43,453 40,344 3,109
Total SG&A $ 105,699 $ 107,765 $ (2,066)

Regarding the table above, 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 decrease in trainee expense is primarily the result of a reduction in the number of trainee positions filled. The increase in legal expense is primarily attributable to our ongoing defense of the litigation described in "Part II, Item 1. Legal Proceedings" of this Form 10-Q. The increase in COVID-19-related expense is the result of direct expenses for items and services related to the health, safety and welfare of our employees during the COVID-19 pandemic.

The Company’s operating income for the three and six months ended April 30, 2021 was $127.7 million and $141.1 million, respectively, as compared to an operating loss for the three and six months ended April 30, 2020 ~~was~~of $43.8 million and $93.7 million, ~~respectively, as compared to operating income for the three and six months ended April 30, 2019 of $55.2 million and $31.6 million,~~ respectively. The ~~decrease~~improvement in operating ~~income~~results for the periods ended April 30, ~~2020,~~2021, as compared to the same periods a year ago, resulted primarily from ~~lower~~higher average selling prices, ~~and~~partially offset by higher average costs of goods ~~sold, primarily attributable to the COVID-19 pandemic.~~sold.

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Interest expense during the second quarter and first six months of fiscal ~~2020~~2021 was ~~$1.8~~$0.7 million and ~~$3.0~~$1.3 million, respectively, as compared to ~~$1.2~~$1.8 million and ~~$1.7~~$3.0 million, respectively, during the second quarter and first six months of fiscal

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~~2019.~~ 2020. The ~~increase~~decrease in interest expense during the ~~second quarter and first six months of fiscal 2020, as compared to the same~~comparative periods ~~a year ago,~~ is the result of ~~an increase in the~~lower outstanding ~~draws under the Company's revolving credit facility~~debt levels during fiscal ~~2020 periods as compared~~2021, in addition to ~~the outstanding draws during the same periods of fiscal 2019.~~lower interest rates.

The Company’s estimated annual effective tax rates for the three and six months ended April 30, ~~2020~~2021 were ~~113.4%~~23.7% and ~~66.4%~~23.9%, respectively, as compared to ~~estimated annual~~ effective tax rates of ~~24.7%~~113.4% and ~~23.8%~~66.4%, respectively, for the three and six months ended April 30, ~~2019. During the second quarter of fiscal 2020, we recorded a net discrete income tax benefit of approximately $37.4 million related to the carry-back provisions allowed by the CARES Act.~~2020. Excluding the effects of discrete items recognized during the periods, ~~primarily related to the CARES Act,~~ the Company's estimated annual effective tax rates for the three and six months ended April 30, ~~2020~~2021 would have been approximately ~~30.2%~~23.8% and ~~26.9%~~23.8%, respectively, as compared to ~~estimated annual~~ effective tax rates of ~~24.9%~~30.2% and ~~24.5%~~26.9%, respectively, for the three and six months ended April 30, ~~2019. Normally~~2020. The discrete items recognized during ~~interim periods,~~ the three and six months ended April 30, 2020 are primarily related to the Coronavirus Aid, Relief, and Economic Security Act ("the CARES Act") and are described in more detail in Note 10 - Income Taxes. The Company ~~has estimated~~estimates its ~~annual~~ effective tax rate for the full fiscal year ~~to use when recording the interim period tax provision. Given significant volatility in the poultry markets as a result~~2021, exclusive of the COVID-19 pandemic, as well as factors related to the carry-back provisions of the CARES Act, the Company is not able to reliably estimate its annual effective tax rate for the interim period ending April 30, 2020. Therefore, the income tax provision for the second quarter and first six months of fiscal 2020 was made using the actual effective tax rate for the six-month period ending April 30, 2020.

discrete items, will be approximately 23.8%. As of April 30, ~~2020,~~2021, the Company's deferred income tax liability was ~~$131.4~~$145.4 million as compared to ~~$74.1~~$141.7 million at October 31, ~~2019,~~2020, an increase of ~~$57.3~~$3.7 million. ~~This increase is primarily attributable to the carry-back provisions discussed above, as well as bonus depreciation taken on qualifying assets placed in service during fiscal 2020.~~

During the three and six months ended April 30, 2021, the Company’s net income was $96.9 million, or $4.34 per share, and $106.4 million, or $4.76 per share, respectively. For the three months ended April 30, 2020, the Company’s net income was $6.1 million, or $0.28 per share, and ~~during~~for the six months ended April 30, 2020, the Company's net loss was $32.5 million, or $1.48 per share. ~~For the three and six months ended April 30, 2019, the Company’s net income was $40.6 million, or $1.83 per share, and $22.8 million, or $1.03 per share, respectively.~~ The ~~decrease~~increase in net income for the ~~second quarter and first six months of fiscal 2020 as compared to the same~~comparative periods ~~in fiscal 2019~~ is primarily attributable to ~~lower~~higher average selling prices, ~~and~~partially offset by higher average costs of goods ~~sold, partially offset by the income tax benefits recognized as a result of the CARES Act.~~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 April 30, ~~2020~~2021 was ~~$457.2~~$472.1 million, and its current ratio, calculated by dividing current assets by current liabilities, was ~~3.0~~2.8 to 1. The Company’s working capital and current ratio at October 31, ~~2019~~2020 were ~~$365.4~~$354.0 million and ~~2.7~~2.6 to 1, respectively. These measures reflect the Company’s ability to meet its ~~short term~~short-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 ~~2020~~2021 include cash on hand at October 31, ~~2019~~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 ~~March 21, 2019,~~April 23, 2021, with a maximum available borrowing capacity of $1.0 billion. As of April 30, ~~2020~~2021 and May ~~27, 2020,~~26, 2021, the Company had borrowed ~~$200.0~~$55.0 million under the facility, and had approximately ~~$23.1~~$25.2 million outstanding in letters of credit, leaving ~~$776.9~~$919.8 million of borrowing capacity available under the facility. ~~In addition to the borrowing capacity under the facility, the Company expects to receive a federal income tax refund of approximately $84 million before the end of fiscal 2020.~~ Management believes the Company has sufficient liquidity available to meet its ~~needs and comply with financial covenants included in the facility.~~needs.

The Company’s cash position at April 30, ~~2020~~2021 and October 31, ~~2019~~2020 consisted of ~~$61.3~~$122.9 million and ~~$95.4~~$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-term investments. All of the Company’s cash at April 30, ~~2020~~2021 and October 31, ~~2019~~2020 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 ~~used in~~provided by operating activities during the six months ended April 30, ~~2020~~2021 totaled ~~$37.2~~$143.6 million, as compared to cash flows ~~provided by~~used in operating activities of ~~$49.8~~$37.2 million during the six months ended April 30, ~~2019.~~2020. Cash flows from operating activities ~~decreased~~increased by ~~$87.0~~$180.8 million, resulting from two primary factors. ~~Firstly, during~~During the first six months of fiscal ~~2020,~~2021, the Company realized ~~lower~~higher margins due to ~~a decrease in~~higher average selling prices, ~~and an increase in~~partially offset by higher average costs of goods sold, as compared to the first six months of fiscal ~~2019. Secondly, the change~~2020. This increase in cash ~~paid or received for income taxes~~flows was partially offset by an increase in inventories, especially our live bird and feed inventories, during the first six months of fiscal ~~2020, as compared to~~2021. The increase in inventories is primarily the ~~first six months~~result of fiscal 2019 caused cash flows from operating activities to decrease. During the first six months of fiscal 2020, the Company's net cash payments related to income taxes totaled approximately $1.1 million, as compared to approximately $26.9 million in net cash received related to income taxessignificantly higher prices paid for corn and soybean meal, our primary feed ingredients, during the first six months of fiscal ~~2019.~~

~~Table~~2021 as compared to the same period in fiscal 2020. Details related to the corn and soy markets are discussed above in the Executive Overview of ~~Contents~~

Results section.

Cash flows used in investing activities during the first six months of fiscal 2021 and 2020 ~~and 2019~~ were ~~$129.5~~$85.9 million and ~~$161.4~~$129.5 million, respectively. The Company’s capital expenditures during the first six months of fiscal 2021 were approximately $86.3 million, and included approximately $22.1 million for multiple large-scale equipment and building upgrades at multiple complexes and approximately $9.8 million on construction of a new hatchery in Jones County, Mississippi. Capital expenditures for the first six months of fiscal 2020 were ~~approximately~~ $129.7 million, and included approximately $28.2 million for multiple large-scale equipment and building upgrades at multiple complexes. ~~Capital expenditures for the first six months~~

Table of fiscal 2019 were $162.3 million, and included approximately $54.8 million related to construction at the Tyler, Texas complex, and approximately $9.4 million related to final payments made under purchase agreements for delivery of new aircraft.Contents

Cash flows provided by financing activities during the six months ended April 30, ~~2020~~2021 totaled ~~$132.6~~$16.2 million, as compared to cash flows provided by financing activities of ~~$87.3~~$132.6 million during the six months ended April 30, ~~2019.~~2020. The change in cash flows from financing activities is primarily attributable to the ~~Company drawing $145.0 million~~decrease in borrowings under ~~its~~the Company's revolving credit ~~facility during~~facility. During the ~~first~~ six months ~~of fiscal 2020,~~ended April 30, 2021, the Company's borrowings under the facility totaled $30.0 million as compared to ~~drawing $100.0~~borrowings of $145.0 million under the facility during the ~~first~~ six months ~~of fiscal 2019.~~ended April 30, 2020.

As of May ~~20, 2020,~~17, 2021, the ~~Company estimates its~~Company's fiscal 2021 capital budget ~~for fiscal 2020, excluding operating leases, will be~~is approximately ~~$216.8~~$191.9 million. The Company expects the ~~2020~~2021 capital budget to be funded by cash on hand, internally generated working capital, cash flows from operations and funds available under the Company's revolving credit facility. ~~Included in the approximately $216.8 million~~The fiscal 2021 capital budget isincludes an aggregate of approximately ~~$41.5~~$46.4 million for multiple large-scale equipment and building upgrades at multiple complexes, ~~approximately $15.0~~$13.3 million to purchase new vehicles that would have been leased prior to fiscal 2020, and $10.1 million for construction of a new hatchery to replace the hatchery currently in service in Laurel, Mississippi, and approximately $11.5 million to purchase new vehicles that in previous years would have been leased. These vehicles primarily consist of semi-tractors and trailers that are used to haul the Company's live birds and feed.Mississippi. Excluding the budgeted amounts for the items detailed above, the fiscal ~~2020~~2021 capital budget is ~~estimated to be~~ approximately ~~$148.8~~$122.1 million. These amounts are estimates and are subject to change as we move through ~~fiscal 2020.~~

~~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 consists of a hatchery, feed mill, processing plant and waste water treatment facility with the capacity to process 1.3 million chickens per week. The initial phase of operations of the new complex began during the first quarterremainder of fiscal ~~2019, and the complex is now operating at near full capacity.~~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 ~~March 21, 2019,~~April 23, 2021, with a maximum available borrowing capacity of $1.0 billion. Under the credit facility, the Company may not exceed a maximum ~~debt to total~~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~~debt-to-total capitalization ratio then in effect by five percentage points in connection with the construction of a new poultry 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 April 30, ~~2020,~~2021, was ~~$999.2 million.~~$1.0 billion. The credit is unsecured and, unless extended, will expire on ~~March 21, 2024.~~April 23, 2026. As of April 30, ~~2020~~2021 and May ~~27, 2020,~~26, 2021, the Company had borrowed ~~$200.0~~$55.0 million under the facility and had approximately ~~$23.1~~$25.2 million outstanding in letters of credit, leaving ~~$776.9~~$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 ~~March 27, 2019.~~April 28, 2021.

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, ~~2019.~~2020.

New Accounting Pronouncements

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In ~~February~~June 2016, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases. The guidance 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 disclosure of key information about leasing arrangements. The Company adopted this guidance during the first quarter of fiscal 2020, and we used the transition method that requires a cumulative-effect adjustment to the beginning balance of retained earnings during the period of adoption, rather than restating prior-period financial statements; however no such cumulative-effect adjustment was required under our circumstances. This guidance also provides certain practical expedients, including a practical expedient package during transition. We elected to use this package, which allowed the Company to carry forward its determination of whether a lease exists, the classification of a lease, and whether initial direct lease costs exist for purposes of transition to the new standard. We did not utilize the hindsight practical expedient. As of April 30, 2020, we recognized right-of-use assets and lease liabilities of approximately $45.9 million, primarily related to transportation equipment. Adoption did not have a material effect on our consolidated statements of operations and cash flows. For further information regarding the Company's leases, refer to Part I, Item 1, Notes to Condensed Consolidated Financial Statements, Note 11 - Leases.

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to improve consistent application. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, ~~2019,~~2020, our fiscal ~~2021. Early adoption is permitted.~~ 2022. We ~~do not expect adoption to have a material effect~~are currently evaluating the impact of this new guidance on our consolidated financial statements.

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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 second quarter of fiscal ~~2020,~~2021, the Company purchased approximately 30.4 million bushels of corn and approximately ~~288,834~~295,606 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 $30.4 million in the second quarter of fiscal ~~2020.~~2021. Likewise, a $10.00 change in the price paid per ton for soybean meal would affect the Company’s cash outlays by approximately ~~$2.9~~$3.0 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~~feed mill 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 second quarter of fiscal ~~2020,~~2021, the Company’s average feed cost per pound of broilers processed totaled ~~$0.2513~~$0.3182 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 ~~$0.0258,~~$0.0249, based on the quantity of grain used during the second quarter of fiscal ~~2020.~~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 second quarter of fiscal ~~2020.~~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 second quarter of fiscal ~~2020:~~2021:

Feed Ingredient

Quantity Purchased
during the Second
Fiscal Quarter of
~~2020~~2021

Hypothetical Price
Change

Impact on Cash
Outlay

Ultimate Impact on
Feed Cost per
Pound of broilers
Processed

Corn

30.4 million bushels

$1.00 per bushel

$30.4 million

$~~0.0258/~~0.0249/lb processed

Soybean meal

~~288,834~~295,606 tons

$10.00 per ton

$~~2.9~~3.0 million

$0.0024/lb processed

The 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 ~~typically~~sometimes maintains certain of its debt as fixed rate in nature to mitigate the impact of fluctuations in interest rates. At April 30, ~~2020~~2021 the Company had no fixed-rate debt on its balance 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

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 April 30, ~~2020,~~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 April 30, ~~2020.~~2021.

There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter ended April 30, ~~2020~~2021 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. Legal Proceedings

~~Between September 2, 2016 and October 13, 2016, Sanderson Farms, Inc. and~~For information regarding 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. The cases are part of a coordinated proceeding captioned ~~In re Broiler Chicken Antitrust Litigation~~.

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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 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 well as Agri Stats. On April 29, 2019, the end-user consumer plaintiffs filed their fourth amended complaint. The parties are currently engaged in discovery.

Between December 8, 2017 and April 11, 2020, additional purported direct-purchaser entities individually brought thirty-six separate suits against 19 poultry producers, including Sanderson Farms and Agri Stats, 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. 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. 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.

~~The Company is aware that certain plaintiffs’ counsel in~~ ~~In re Broiler Chicken Antitrust Litigation~~ ~~received from the United States Department of Justice, Antitrust Division, a subpoena 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 the stay be lifted on March 31, 2020.

The 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 providing documents and information as requested by the Department of Justice in connection with its investigation.

Since March 16, 2020, given the current COVID-19 public health emergency, the Northern District of Illinois has issued three orders extending all deadlines in civil cases by 21 days, 28 days and 28 days, respectively, and a fourth order that will take effect on May 29, 2020, which does not extend any deadlines. These orders apply to the litigation described above. The Northern District of Illinois will vacate, amend or extend the Fourth Amended General Order on or before July 13, 2020.

We intend to continue to defend the 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.

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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~~refer to ~~the shareholder’s demand have been filed. However, we are voluntarily disclosing the existence of the shareholder demand for the sake of completeness, in light of its relationship~~"Litigation" within "Part I, Item 1, Notes to ~~the putative antitrust class action lawsuits described above.~~

~~On January 27, 2017, Sanderson Farms, Inc.~~Consolidated Financial Statements, Note 8 - Commitments 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 conspiredContingencies," which is incorporated herein 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 Sanderson Farms defendants’ motion to dismiss for lack of personal jurisdiction.

On February 21, 2018, the plaintiffs filed a substantially similar lawsuit 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 the Eastern District of Oklahoma for pre-trial proceedings, with the defendants in support thereof. That motion was denied. On July 13, 2018, the defendants moved to dismiss the lawsuit in the Eastern District of North Carolina, and briefing 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 filed a consolidated amended complaint on February 21, 2020. The Oklahoma case is ongoing. We intend to defend the Eastern District of North Carolina case 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 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.~~

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products contain residues of human and animal antibiotics, other pharmaceuticals, hormones, steroids, and pesticides. Plaintiffs sought 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 included 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. An initial scheduling conference was held on March 1, 2018, and discovery started thereafter. On June 25, 2018, the plaintiffs amended their complaint for a second time, including to remove allegations that USDA had found the Company’s chicken samples to contain residues of antibiotics or 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 lack of subject matter jurisdiction on grounds that the remaining plaintiffs lacked standing. The Court held a hearing on the Company’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 filed their reply brief on April 29, 2020. Oral argument is likely to be scheduled for late 2020 or early 2021. We intend to vigorously defend the appeal. 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, which could have a material, adverse effect on our financial position and results of operations.

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.

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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. Under the current Standing Order, plaintiffs’ oppositions to defendants’ motions to dismiss are due July 17, 2020. Defendants’ replies are due August 13, 2020. 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.

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, compensatory, statutory, and punitive damages, as well as attorneys’ and experts’ fees, costs, and expenses. 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 Class Action Complaint in which they were joined by five additional named plaintiffs. The core allegations and theories set forth in the First Amended Complaint are the same as in the original complaint. The First Amended Complaint asserts one cause of action under federal law and sixteen causes of action under the laws of various states. The plaintiffs again seek injunctive relief directing the Company to correct its practices and to comply with consumer protection laws nationwide, as well as monetary, compensatory, statutory and punitive damages and attorneys' and experts' fees, costs and expenses. On May 6, 2020, the Company filed a motion to dismiss the First Amended Complaint. No discovery has taken place to date. We intend to defend these cases 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.

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 April 30, 2020. 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.reference.

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, ~~2019,~~2020, including under the heading “Item 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 aware of or that we currently consider immaterial also may materially adversely affect the Company’s business, financial condition and future results. Risks we have identified but currently consider immaterial could still materially adversely affect the Company’s business, financial condition and future results if our assumptions about those risks are 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, ~~2019, except as follows.~~

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~~The COVID-19 pandemic has had, and may continue to have, a negative effect on our business.~~

The public health crisis caused by the COVID-19 pandemic and the measures taken by governments, businesses, including us, and the public at large to limit the spread of the disease have had, and may continue to have, a negative effect on our business including, without limitation, the following:

•We have experienced a decrease in demand and commodity prices for products from our plants that serve food service customers, restaurants, and other customers who sell food for consumption away from home. These customers have been significantly negatively affected by stay-at-home restrictions or recommendations, closings of restaurants, social distancing requirements and cancellations of major sporting and other events. This negative trend may continue to some degree even though stay-at-home restrictions are being reduced or lifted because restaurants and other venues may be required to operate at reduced capacities and consumers may fear gathering in public places. In addition, a resurgence of COVID-19 infections after restrictions are lifted could cause governments to impose new or stricter stay-at-home and social distancing requirements, which could cause consumer demand for food away from home to worsen. While we have experienced increased demand for products from our plants that serve retail grocery store customers, that increase in demand cannot entirely offset the decrease in demand from our food service customers. We also cannot predict whether and to what extent recent changes in consumer food purchasing behavior will persist even after the threat of the pandemic has been eliminated or how those changes would affect our business.

•Deteriorating economic and political conditions caused by the COVID-19 pandemic, such as increased unemployment, decreases in disposable income and consumer spending, declines in consumer confidence, changes in consumer buying patterns, or economic slowdowns or recessions, could cause a further decrease in demand for our products, especially products from our plants that serve food service customers.

•We have experienced some disruption in our operations due to the pandemic, including higher than normal absenteeism related to COVID-19 among our hourly employees, inefficiencies from significant new hires, and delays due to additional health and safety procedures. While we have been able to operate despite these disruptions, a higher level of disruption could materially and adversely affect our operations. For example, although we are taking measures to protect our employees and prevent the spread of coronavirus in our facilities, these measures may not be sufficient to prevent an outbreak of infections among our employees. Government restrictions like social distancing regulations or limits on the number of persons who can be present in our facilities could also impair operations. The absence of a significant number of employees to staff our plants could cause a material reduction in our production volumes and could also hurt our ability to make certain products that require more labor to produce. If an outbreak at any of our facilities is severe, we could even be forced to close the facility, which in turn would constrain our ability to meet customer orders, increase our costs and reduce our revenues.

•We have incurred additional expenses directly related to COVID-19, which consist primarily of additional wage expense to pay our $1 per hour attendance bonus, paid time off for employees who are not working for reasons related to COVID-19 and overtime expense to run our retail grocery store plants on Saturdays to meet increased demand. We have also incurred costs for personal protective equipment, cleaning and other measures we have taken in our facilities to protect against the spread of disease. These expenses may be ongoing for an uncertain period of time and could increase if we are required to take additional measures to continue to ensure we can continue to operate during the pandemic.

•Some meat producers in the United States have experienced significant outbreaks of COVID-19 among their employees, which has caused some meat processing plants to close. This has led to public and media criticism of companies and the meat packing industry in general, including the poultry industry, for their management of the pandemic and working conditions for their employees. We could be affected by negative public perception of our industry resulting from the pandemic.

•If the pandemic worsens in countries where we ship our products, we could face more significant delays than we have experienced to date in the delivery of our product in the export markets due to, among other things, additional safety requirements imposed by port authorities, closures of or congestion at ports, and other capacity constraints. Additionally, while we have so far not experienced significant delays in the distribution of our products to our customers within the United States, higher rates of infection or illness among truck drivers could create domestic shipping delays.

•Declining oil prices, which have been caused in part by the contraction of commercial activity worldwide due to the pandemic, have limited and may continue to limit the ability of some of our export customers to purchase our products because their domestic economies depend on oil. Additionally, the value of the U.S. dollar against some

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~~foreign currencies has increased. This has led and may continue to lead to weaker demand and prices for our products in the export markets.~~

•If the effects of the pandemic continue to cause market prices for our products to fall, then as explained in the Risk Factors section of our Annual Report on Form 10-K for our 2019 fiscal year, we may have to record adjustments to write down the carrying values of our live inventories in future quarters.

•As a result of the COVID-19 pandemic, we have permitted some office-based employees who are at high risk for severe illness from COVID-19 to work remotely. Our information technology systems may be more vulnerable to cyber attacks or other disruptions as a result of team members accessing our networks and systems from off-site.

•~~Actions we have taken or may take, or decisions we have made or may make, as a consequence of the COVID-19 pandemic may result in legal claims or litigation against us.~~

•We rely on third-party service providers and business partners, such as independent contract poultry producers, cloud data storage and other information technology service providers, suppliers (particularly suppliers of feed grains), distributors, and other external business partners, for certain functions or for services in support of key portions of our operations. These third-party service providers and business partners are subject to risks and uncertainties related to the COVID-19 pandemic, which may interfere with their ability to fulfill their respective commitments and responsibilities to us in a timely manner and in accordance with the agreed-upon terms.

•We may experience an increase in working capital needs and/or an increase in trade accounts receivable write-offs (and associated reserves) as a result of increased financial pressures on our suppliers or customers who are not able to pay in a timely manner or at all.

•Depending on the duration of the pandemic and market conditions for our products, we may have a need to preserve liquidity, which could result in a reduction or suspension of our quarterly dividend or delays in implementing or an inability to implement our strategic planning initiatives.

•The resumption of normal business operations after the disruptions caused by the COVID-19 pandemic may be delayed or constrained by its lingering effects on our customers, consumers, independent contract poultry producers or third-party service providers.

•Governmental authorities in the United States may increase or impose new income taxes or indirect taxes, or revise interpretations of existing tax rules and regulations, as a means of financing the costs of stimulus and other measures enacted or taken, or that may be enacted or taken in the future, to protect the United States economy from the impact of the pandemic. Such actions could have a material adverse effect on our results of operations, financial condition and cash flows.

Any of the negative impacts of the COVID-19 pandemic, including those described above, may have a material adverse effect on our results of operations, financial condition and cash flows. Any of these negative impacts could exacerbate the risk factors discussed under the heading "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended October 31, 2019. The full extent to which the COVID-19 pandemic will negatively affect our results of operations, financial condition and cash flows will depend on future developments that are highly uncertain and that we cannot predict, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

~~A decrease in demand for our products in the export markets could materially and adversely affect our results of operations, financial condition and cash flows.~~

Nearly all of our customers are based in the United States, but we sell some of our product to foreign customers and some to United States based customers who resell the product in the export markets. Approximately 8.1% of our gross sales in fiscal 2019 were to export markets, including approximately $156.6 million to Mexico, $43.6 million to countries in Central Asia and $29.0 million to Cuba. Any disruption in the export markets could materially adversely affect our revenues or create an oversupply of poultry in the United States, which would cause domestic poultry prices to decline. Disruptions could include, for example:

•~~trade embargoes, tariffs, import bans, duties, or quotas;~~

•~~currency fluctuations;~~

•~~adverse political, social or economic conditions in countries to which we export our products;~~

•~~disruptions in shipping channels; and~~

•~~changes in governmental trade policies or agreements with countries to which we sell products.~~

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~~Any of these conditions could materially and adversely affect our revenues, results of operations, financial condition or cash flows.~~

For example, the outbreak of African swine fever in China has affected the worldwide supply of pork, which has in turn created a worldwide protein deficit. In November 2019, China lifted its nearly five-year ban on the import of United States poultry, and we resumed shipments almost immediately. The deficit of protein available to consumers in China as a result of the outbreak of African swine fever in that country has been widely expected to create additional demand for protein produced in the United States. However, the spread of COVID-19 in China and the government's actions taken to limit the spread of the virus depressed Chinese demand for protein during our first and second fiscal quarters of 2020 because quarantines limited travel within the country and restaurants were closed. Despite those travel restrictions, quarantines and reduced consumer demand, we continued receiving orders and shipping our products into China during our first and second quarters of fiscal 2020. Demand for products other than chicken paws softened during May 2020 as cold storage inventories were rebuilt and consumers in China have been slow to return to restaurants in the same numbers as before the COVID-19 outbreak. Similar conditions have occurred in other countries to which we export our product as COVID-19 has spread. We do not know how long and to what extent the pandemic will impact demand for our products in export markets.

Our operations, or those of our business partners, independent contract poultry producers and customers, and demand for our products could be adversely affected by events outside of our control such as natural disasters, terrorist attacks, epidemics, pandemics, war, or the fear of these events.

We may be affected by natural disasters, terrorist attacks, epidemics, pandemics like COVID-19, war or other events outside of our control. These events may impact our operations directly, or may disrupt the operations of our business partners, independent contract poultry producers and customers in ways that can adversely affect our results of operations, financial condition or cash flows. Fear of such events might also alter consumer confidence, behavior and spending patterns, which could decrease demand for protein, including our products.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the second quarter of fiscal ~~2020,~~2021, the company repurchased shares of its common stock as follows:

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)}
Feb. 1 - Feb. 28, 2020 3,467 $ 140.56 3,467 1,176,615
Mar. 1 - Mar. 31, 2020 1,176 123.32 1,176 1,176,615
Apr. 1 - Apr. 30, 2020 — — — 1,176,615
Total 4,643 $ 136.19 4,643 1,176,615


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)
Feb. 1 - Feb. 28, 2021	5,001	$	152.18	5,001	2,000,000
Mar. 1 - Mar. 31, 2021	132	155.48		132	2,000,000
Apr. 1 - Apr. 30, 2021	—	—		—	2,000,000
Total	5,133	$	152.26	5,133	2,000,000

___________________

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 ~~May 31, 2018,~~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 ~~May 31, 2021. During the fourth quarter of fiscal 2018, the Company purchased 823,385 shares in open market transactions under this program.~~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 ~~2018~~ general repurchase plan.

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

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, 2019. (Incorporated by~~

~~reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K on February 18, 2020.)~~

~~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 - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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~~


Exhibit No.						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 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						Credit Agreement dated April 23, 2021 among Sanderson Farms, Inc., BMO Harris Bank N.A. as agent for the banks defined therein, and the banks party thereto. (Incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K on April 28, 2021.)

10.2						Guaranty Agreement dated April 23, 2021 of Sanderson Farms, Inc. (Foods Division), Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division). (Incorporated by reference to Exhibit 10.2 filed with the Registrant's Current Report on Form 8-K on April 28, 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.INS						XBRL 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.SCH						XBRL Taxonomy Extension Schema

101.CAL						XBRLTaxonomy Extension Calculation Linkbase

101.DEF						XBRL Taxonomy Extension Definition Linkbase

101.LAB						XBRL Taxonomy Extension Label Linkbase

101.PRE						XBRL Taxonomy Extension Presentation Linkbase

104						Cover 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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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+~~10.1	Credit Agreement dated April 23, 2021 among Sanderson Farms, Inc. ~~Bonus Award Program effective November 1, 2019.~~, BMO Harris Bank N.A. as agent for the banks defined therein, and the banks party thereto. (Incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K on ~~February 18, 2020.~~April 28, 2021.)

10.2	Guaranty Agreement dated April 23, 2021 of Sanderson Farms, Inc. (Foods Division), Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division). (Incorporated by reference to Exhibit 10.2 filed with the Registrant's Current Report on Form 8-K on April 28, 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.INS	XBRL 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.SCH	XBRL Taxonomy Extension Schema

101.CAL	XBRL Taxonomy Extension Calculation Linkbase

101.DEF	XBRL Taxonomy Definition Linkbase

101.LAB	XBRL Taxonomy Extension Label Linkbase

101.PRE	XBRL Taxonomy Extension Presentation Linkbase

104	Cover 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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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)

Date: May ~~28, 2020~~27, 2021	By:	/s/ D. Michael Cockrell
		Treasurer, Chief Financial Officer and Chief Legal Officer

Date: May ~~28, 2020~~27, 2021	By:	/s/ Tim Rigney
		Secretary, Corporate Controller and
		Chief Accounting Officer


Fiscal Year 2019	Common Stock							Paid-In Capital		Retained Earnings		Total Stockholders’ Equity
		Shares			Amount
Balance at October 31, 2018	22,099,780		$	22,100		$	81,269	$	1,284,524	$	1,387,893
Net loss - first quarter 2019	—		—			—		(17,833)		(17,833)
Cash dividends ($0.32 per share)	—		—			—		(7,089)		(7,089)
Stock compensation plan transactions	53,688		53			(2,126)		—		(2,073)
Amortization of unearned compensation	—		—			2,313		—		2,313
Balance at January 31, 2019	22,153,468		$	22,153		$	81,456	$	1,259,602	$	1,363,211
Net income - second quarter 2019	—		—			—		40,636		40,636
Cash dividends ($0.32 per share)	—		—			—		(7,089)		(7,089)
Stock compensation plan transactions	777		1			1,628		—		1,629
Amortization of unearned compensation	—		—			2,325		—		2,325
Balance at April 30, 2019	22,154,245		$	22,154		$	85,409	$	1,293,149	$	1,400,712


Fiscal Year	Amount
2020 (remainder)	$	7,299
2021	14,398
2022	11,969
2023	8,327
2024	4,744
Thereafter	2,430
Total undiscounted operating lease payments	49,167
Less: imputed interest	(3,254)
Present value of lease liabilities	$	45,913


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)}
Feb. 1 - Feb. 28, 2020	3,467	$	140.56	3,467	1,176,615
Mar. 1 - Mar. 31, 2020	1,176	123.32		1,176	1,176,615
Apr. 1 - Apr. 30, 2020	—	—		—	1,176,615
Total	4,643	$	136.19	4,643	1,176,615