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 July 31, ~~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: ~~22,239,973~~22,328,785 shares outstanding as of August 25, ~~2020.~~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—July ~~31, 2020~~ 3 1 , 2021 and October 31, ~~2019~~2020	3
	Condensed consolidated statements of operations—Three and nine months ended July ~~31, 2020~~ 3 1 , 2021 and ~~2019~~2020	4
	Condensed consolidated statements of stockholders' equity—Three and nine months ended July 31 , 2021 and 2020 ~~and 2019~~	5
	Condensed consolidated statements of cash flows—Nine months ended July 31 , 2021 and 2020 ~~and 2019~~	6
	Notes to condensed consolidated financial statements—July ~~31, 2020~~ 3 1 , 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	3233
Item 4.	Controls and Procedures	3334
PART II. OTHER INFORMATION			3334
Item 1.	Legal Proceedings	3334
Item 1A.	Risk Factors	3834
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4138
Item 6.	Exhibits	4239
INDEX TO EXHIBITS			4340
SIGNATURES			4441

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)


		July 31, 2020		October 31, 2019			July 31, 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	$	66,119	$	95,417	Cash and cash equivalents	$	245,429	$	49,061
Accounts receivable, net	Accounts receivable, net	150,773		131,778		Accounts receivable, net	211,016		147,546
Receivable from insurance companies	Receivable from insurance companies	—		445		Receivable from insurance companies	4,138		—
Inventories	Inventories	285,941		289,928		Inventories	364,262		290,007
Refundable income taxes	Refundable income taxes	41,247		6,612		Refundable income taxes	2,986		33,977
Prepaid expenses and other current assets	Prepaid expenses and other current assets	66,249		56,931		Prepaid expenses and other current assets	62,924		57,544
Total current assets	Total current assets	610,329		581,111		Total current assets	890,755		578,135
Property, plant and equipment, net	Property, plant and equipment, net	1,229,771		1,185,860		Property, plant and equipment, net	1,227,772		1,224,746
Right of use assets	Right of use assets	42,473		—		Right of use assets	30,849		40,785
Other assets	Other assets	5,982		7,163		Other assets	6,844		5,365
Total assets	Total assets	$	1,888,555	$	1,774,134	Total assets	$	2,156,220	$	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	$	102,753	$	132,741	Accounts payable	$	141,367	$	111,463
Dividends payable	Dividends payable	7,117		—		Dividends payable	9,825		—
Accrued expenses	Accrued expenses	94,836		82,940		Accrued expenses	139,798		98,663
Lease liabilities	Lease liabilities	14,401		—		Lease liabilities	12,686		13,981

Total current liabilities	Total current liabilities	219,107		215,681		Total current liabilities	303,676		224,107
Long-term debt	Long-term debt	95,000		55,000		Long-term debt	—		25,000
Claims payable and other liabilities	Claims payable and other liabilities	11,801		11,646		Claims payable and other liabilities	13,082		12,175
Deferred income taxes	Deferred income taxes	135,287		74,132		Deferred income taxes	149,476		141,672
Long-term lease liabilities	Long-term lease liabilities	28,072		—		Long-term lease liabilities	18,235		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, NaN issued
Par value to be determined by the Board of Directors: authorized 4,500,000 shares; NaN issued
Common Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares—22,239,973 and 22,203,920 at July 31, 2020 and October 31, 2019, respectively		22,240		22,204
Series A Junior Participating Preferred Stock, $100 par value: authorized 500,000 shares, none issued						Series A Junior Participating Preferred Stock, $100 par value: authorized 500,000 shares, none issued	0		0
Par value to be determined by the Board of Directors: authorized 4,500,000 shares; none issued						Par value to be determined by the Board of Directors: authorized 4,500,000 shares; none issued	0		0
Common Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares—22,329,135 and 22,251,071 at July 31, 2021 and October 31, 2020, respectively						Common Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares—22,329,135 and 22,251,071 at July 31, 2021 and October 31, 2020, respectively	22,329		22,251
Paid-in capital	Paid-in capital	88,582		86,010		Paid-in capital	101,142		90,420
Retained earnings	Retained earnings	1,288,466		1,309,461		Retained earnings	1,548,280		1,306,602
Total stockholders’ equity	Total stockholders’ equity	1,399,288		1,417,675		Total stockholders’ equity	1,671,751		1,419,273
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,888,555	$	1,774,134	Total liabilities and stockholders’ equity	$	2,156,220	$	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
July 31, Nine Months Ended
July 31,
2020 2019 2020 2019
Net sales $ 956,455 $ 945,152 $ 2,624,244 $ 2,533,769
Cost and expenses:
Cost of sales 865,997 824,144 2,521,804 2,273,377
Selling, general and administrative 50,590 52,226 156,289 159,991
916,587 876,370 2,678,093 2,433,368
Operating income (loss) 39,868 68,782 (53,849) 100,401
Other income (expense):
Interest income 466 — 466 —
Interest expense (1,521) (1,492) (4,492) (3,174)
Other 2 4 7 6
(1,053) (1,488) (4,019) (3,168)
Income (loss) before income taxes 38,815 67,294 (57,868) 97,233
Income tax expense (benefit) 6,005 13,932 (58,220) 21,068
Net income $ 32,810 $ 53,362 $ 352 $ 76,165
Earnings per share:
Basic $ 1.48 $ 2.41 $ 0.02 $ 3.44
Diluted $ 1.48 $ 2.41 $ 0.02 $ 3.44
Dividends per share $ 0.32 $ 0.32 $ 0.96 $ 0.96


	Three Months Ended July 31,				Nine Months Ended July 31,
	2021		2020		2021		2020
Net sales	$	1,352,756	$	956,455	$	3,395,942	$	2,624,244
Cost and expenses:
Cost of sales	1,049,814		865,997		2,831,072		2,521,804

Selling, general and administrative	87,718		50,590		208,562		156,289
	1,137,532		916,587		3,039,634		2,678,093
Operating income (loss)	215,224		39,868		356,308		(53,849)
Other income (expense):
Interest income	—		466		—		466
Interest expense	(623)		(1,521)		(1,958)		(4,492)
Other	3		2		19		7
	(620)		(1,053)		(1,939)		(4,019)
Income (loss) before income taxes	214,604		38,815		354,369		(57,868)
Income tax expense (benefit)	49,841		6,005		83,217		(58,220)
Net income	$	164,763	$	32,810	$	271,152	$	352
Earnings per share:
Basic	$	7.38	$	1.48	$	12.14	$	0.02
Diluted	$	7.38	$	1.48	$	12.14	$	0.02
Dividends per share	$	0.44	$	0.32	$	1.32	$	0.96

See notes to condensed consolidated financial statements.

Table of Contents

SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)

(In thousands, except shares and per share amounts)

Fiscal Year 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
Net income - third quarter 2019 — — — 53,362 53,362
Cash dividends ($0.32 per share) — — — (7,090) (7,090)
Stock compensation plan transactions (1,504) (1) 115 — 114
Amortization of unearned compensation — — 3,367 — 3,367
Balance at July 31, 2019 22,152,741 $ 22,153 $ 88,891 $ 1,339,421 $ 1,450,465


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
Net income - third quarter 2020	—	—		—		32,810		32,810
Cash dividends ($0.32 per share)	—	—		—		(7,117)		(7,117)
Stock compensation plan transactions	399	1		152		—		153
Amortization of unearned compensation	—	—		2,000		—		2,000
Balance at July 31, 2020	22,239,973	$	22,240	$	88,582	$	1,288,466	$	1,399,288

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
Net income - third quarter 2020 — — — 32,810 32,810
Cash dividends ($0.32 per share) — — — (7,117) (7,117)
Stock compensation plan transactions 399 1 152 — 153
Amortization of unearned compensation — — 2,000 — 2,000
Balance at July 31, 2020 22,239,973 $ 22,240 $ 88,582 $ 1,288,466 $ 1,399,288


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
Net income - third quarter 2021	—	—		—		164,763		164,763
Cash dividends ($0.44 per share)	—	—		—		(9,825)		(9,825)
Stock compensation plan transactions	(3,175)	(3)		216		—		213
Amortization of unearned compensation	—	—		6,310		—		6,310
Balance at July 31, 2021	22,329,135	$	22,329	$	101,142	$	1,548,280	$	1,671,751

See notes to condensed consolidated financial statements.

Table of Contents

SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)


		Nine Months Ended July 31,							Nine Months Ended July 31,
		2020		2019			2021		2020
Operating activities	Operating activities					Operating activities
Net income	Net income	$	352	$	76,165	Net income	$	271,152	$	352
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	115,274		97,829		Depreciation and amortization	124,318		115,274
Amortization of share-based compensation	Amortization of share-based compensation	7,500		9,661		Amortization of share-based compensation	12,699		7,500
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)	—		(2,800)
Provision for losses (recoveries) on accounts receivable		—		(2,000)

Deferred income taxes	Deferred income taxes	61,155		21,000		Deferred income taxes	7,804		61,155
Loss on asset disposals		328		—
(Gain) loss on asset disposals						(Gain) loss on asset disposals	(95)		328
Change in assets and liabilities:	Change in assets and liabilities:					Change in assets and liabilities:
Accounts receivable - trade	Accounts receivable - trade	(18,995)		(8,294)		Accounts receivable - trade	(63,470)		(18,995)
Accounts receivable - insurance	Accounts receivable - insurance	445		1,494		Accounts receivable - insurance	(4,138)		445
Income taxes	Income taxes	(34,635)		25,719		Income taxes	30,991		(34,635)
Inventories	Inventories	6,787		(56,590)		Inventories	(74,255)		6,787
Prepaid expenses and other assets	Prepaid expenses and other assets	(8,955)		(17,729)		Prepaid expenses and other assets	(5,780)		(8,955)
Right of use assets	Right of use assets	12,173		—		Right of use assets	9,936		12,173
Lease liabilities	Lease liabilities	(12,173)		—		Lease liabilities	(9,863)		(12,173)
Accounts payable	Accounts payable	(23,021)		5,330		Accounts payable	29,347		(23,021)
Accrued expenses and other liabilities	Accrued expenses and other liabilities	12,285		9,099		Accrued expenses and other liabilities	42,087		12,285
Total adjustments	Total adjustments	115,368		75,919		Total adjustments	99,581		115,368
Net cash provided by operating activities	Net cash provided by operating activities	115,720		152,084		Net cash provided by operating activities	370,733		115,720
Investing activities	Investing activities					Investing activities
Capital expenditures	Capital expenditures	(165,998)		(210,878)		Capital expenditures	(126,651)		(165,998)
Net proceeds from sale of property and equipment	Net proceeds from sale of property and equipment	336		1,535		Net proceeds from sale of property and equipment	757		336
Net cash used in investing activities	Net cash used in investing activities	(165,662)		(209,343)		Net cash used in investing activities	(125,894)		(165,662)
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)		—
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
Payments on revolving line of credit	Payments on revolving line of credit	(105,000)		(70,000)		Payments on revolving line of credit	(55,000)		(105,000)
Proceeds from issuance of restricted stock under stock compensation plans	Proceeds from issuance of restricted stock under stock compensation plans	879		708		Proceeds from issuance of restricted stock under stock compensation plans	744		879
Payments from issuance of common stock under stock compensation plans	Payments from issuance of common stock under stock compensation plans	(6,005)		(3,976)		Payments from issuance of common stock under stock compensation plans	(2,689)		(6,005)
Dividends paid	Dividends paid	(14,230)		(14,179)		Dividends paid	(19,649)		(14,230)
Net cash provided by financing activities		20,644		10,328
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(48,471)		20,644
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(29,298)		(46,931)		Net change in cash and cash equivalents	196,368		(29,298)
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	$	66,119	$	74,262	Cash and cash equivalents at end of period	$	245,429	$	66,119
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	$	3,242	$	5,659	Capital expenditures included in accounts payable	$	4,088	$	3,242
Dividends payable	Dividends payable	$	7,117	$	7,089	Dividends payable	$	9,825	$	7,117

See notes to condensed consolidated financial statements.

Table of Contents

SANDERSON FARMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

July 31, ~~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 nine months ended July 31, ~~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 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 July 31, 2020, we recognized right-of-use assets and lease liabilities of approximately $42.5 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, 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.

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The cost incurred for shipping and handling activities to deliver the product to the customer is recognized in cost of sales during the period in which the corresponding revenue is recognized. Where shipping and handling activities occur after the

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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 July 31, 2020		Three Months Ended July 31, 2019		Product Category	Three Months Ended July 31, 2021		Three Months Ended July 31, 2020
							(in thousands)
Fresh, vacuum-sealed chicken	Fresh, vacuum-sealed chicken	$	303,746	$	365,446	Fresh, vacuum-sealed chicken	$	539,332	$	303,746
Fresh, chill-packed chicken	Fresh, chill-packed chicken	395,110		301,795		Fresh, chill-packed chicken	449,423		395,110
Fresh, ice-packed chicken	Fresh, ice-packed chicken	133,302		146,117		Fresh, ice-packed chicken	217,336		133,302
Frozen chicken						Frozen chicken	78,016		67,094
Prepared chicken	Prepared chicken	52,305		67,825		Prepared chicken	62,571		52,305
Frozen chicken		67,094		58,073
Other	Other	4,898		5,896		Other	6,078		4,898
Total net sales	Total net sales	$	956,455	$	945,152	Total net sales	$	1,352,756	$	956,455


Product Category	Product Category	Nine Months Ended July 31, 2020		Nine Months Ended July 31, 2019		Product Category	Nine Months Ended July 31, 2021		Nine Months Ended July 31, 2020
							(in thousands)
Fresh, vacuum-sealed chicken	Fresh, vacuum-sealed chicken	$	880,300	$	956,228	Fresh, vacuum-sealed chicken	$	1,262,111	$	880,300
Fresh, chill-packed chicken	Fresh, chill-packed chicken	1,025,542		839,563		Fresh, chill-packed chicken	1,213,003		1,025,542
Fresh, ice-packed chicken	Fresh, ice-packed chicken	384,563		378,576		Fresh, ice-packed chicken	542,774		384,563
Frozen chicken						Frozen chicken	213,343		175,955
Prepared chicken	Prepared chicken	142,497		187,216		Prepared chicken	147,984		142,497
Frozen chicken		175,955		150,773
Other	Other	15,387		21,413		Other	16,727		15,387
Total net sales	Total net sales	$	2,624,244	$	2,533,769	Total net sales	$	3,395,942	$	2,624,244

NOTE 3—INVENTORIES

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


Inventory type	Inventory type	July 31, 2020		October 31, 2019		Inventory type	July 31, 2021		October 31, 2020
							(in thousands)
Live poultry-broilers and breeders	Live poultry-broilers and breeders	$	191,863	$	179,870	Live poultry-broilers and breeders	$	248,206	$	180,013
Feed, eggs and other	Feed, eggs and other	42,677		47,417		Feed, eggs and other	54,528		53,318
Processed poultry	Processed poultry	32,922		35,121		Processed poultry	39,366		32,952
Prepared chicken	Prepared chicken	9,934		20,032		Prepared chicken	13,016		16,142
Packaging materials	Packaging materials	8,545		7,488		Packaging materials	9,146		7,582
Total Inventories	Total Inventories	$	285,941	$	289,928	Total Inventories	$	364,262	$	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 July 31, 2020 October 31, 2019
Land and buildings $ 921,571 $ 892,089
Machinery and equipment 1,322,257 1,236,095
Work-in-process 34,943 11,149
2,278,771 2,139,333
Less accumulated depreciation 1,049,000 953,473
Property, plant and equipment, net $ 1,229,771 $ 1,185,860


Description	July 31, 2021		October 31, 2020
	(in thousands)
Land and buildings	$	962,391	$	931,674
Machinery and equipment	1,408,052		1,350,725
Work-in-process	30,515		16,914
	2,400,958		2,299,313
Less accumulated depreciation	(1,173,186)		(1,074,567)
Property, plant and equipment, net	$	1,227,772	$	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 nine months ended July 31, ~~2020~~2021 was ~~$2.3~~$6.9 million and ~~$7.5~~$12.7 million, respectively, as compared to total stock based compensation expense of ~~$3.8~~$2.3 million and ~~$9.7~~$7.5 million, respectively, for the three and nine months ended July 31, ~~2019.~~2020.

During the nine months ended July 31, ~~2020,~~2021, participants in the Company’s Management Share Purchase Plan ("MSPP") elected to receive a total of ~~6,616~~4,834 shares of restricted stock at an average price of ~~$132.79~~$153.81 per share instead of a specified percentage of their cash compensation, and the Company issued ~~1,580~~1,139 matching restricted shares. During the three and nine months ended July 31, ~~2020,~~2021, the Company recorded compensation expense for the MSPP shares, included in the total stock based compensation expense above, of ~~$48,000~~$88,000 and ~~$152,000,~~$288,000, respectively, as compared to ~~$63,000~~$48,000 and ~~$259,000,~~$152,000, respectively, during the three and nine months ended July 31, ~~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~~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 July 31, ~~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 0no 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 July 31, ~~2020,~~2021, the Company ~~could not determine~~has determined that achievement of both the ~~applicable performance based~~return on sales and return on equity 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 Compensation Committee of the Company's Board of Directors has determined that the performance share agreements entered into on November 1, 2017 have been earned~~ at ~~a level~~levels between the threshold and target levels for the return on sales criterion and that the threshold level for the return on equity criterion was not achieved. The shares earned 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.target. Accordingly, ~~the three and nine months ended July 31, 2020 include compensation expense of $162,000 and~~

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$509,000, respectively, related to those agreements, as compared to compensation expense of $1.2 million during the three and nine months ended July 31, 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, the fiscal quarter and nine months ended July 31, 2021 include compensation expense ~~recorded during~~of $4.4 million, included in the ~~first nine months of fiscal 2019~~total stock based compensation expense above, related to the agreements ~~entered into~~executed on November 1, ~~2017 was greater than that~~2019, as compared to no compensation expense related to those same agreements recorded during the ~~first~~quarter and nine months ~~of fiscal~~ended July 31, 2020. As of July 31, ~~2020,~~2021, the aggregate number of shares estimated to be awarded related to the performance share agreements entered into on November 1, ~~2017~~2019 totaled ~~13,093~~46,654 shares. ~~Because the performance period for those agreements has ended, the~~The actual number of shares that ~~will~~can be awarded ~~can~~for those agreements could change ~~only~~materially from that estimate due to ~~potential forfeitures~~the Company's actual performance during the remaining three months of the ~~service~~performance period ending

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October 31, ~~2020.~~2021, and due to potential forfeitures. The Company will recognize the remaining ~~$162,000 of~~ unearned compensation related to these ~~shares~~agreements over the remaining service ~~period.~~period, which ends on October 31, 2022.

The performance period has lapsed for the performance share agreements that were entered into on November 1, 2018, and the Company's average return on equity and average return on sales did not meet the threshold amounts defined by those agreements. As a result, no compensation expense has been recorded related to those agreements.

Had the Company determined that it was probable that the maximum amount of those outstanding awards from the agreements entered into on November 1, ~~2018~~2019 and November 1, ~~2019~~2020 would be earned, an additional ~~$8.8~~$6.0 million and ~~$4.5~~$5.5 million of compensation expense, respectively, would have been accrued as of July 31, ~~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 Nine Months Ended
Date of Performance Share Agreement Number of shares issued (actual (a) or estimated (e)) July 31, 2020 July 31, 2019 July 31, 2020 July 31, 2019
November 1, 2016 84,511 (a) $ — $ 596 $ — $ 1,859
November 1, 2017 13,093 (e) 162 1,212 509 1,212
November 1, 2018 (1) — (e) — — — —
November 1, 2019 (1) — (e) — — — —
Total compensation cost $ 162 $ 1,808 $ 509 $ 3,071


		Three Months Ended				Nine Months Ended
Date of Performance Share Agreement	Number of shares issued (actual (a) or estimated (e))	July 31, 2021		July 31, 2020		July 31, 2021		July 31, 2020
November 1, 2017	13,055 (a)	$	—	$	162	$	—	$	509
November 1, 2018	— (a)	—		—		—		—
November 1, 2019	46,654 (e)	4,360		—		4,360		—
November 1, 2020 (1)	— (e)	—		—		—		—
Total performance share compensation expense		$	4,360	$	162	$	4,360	$	509

Note (1) - As of July 31, ~~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 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 July 31, ~~2020~~2021 related to all unvested restricted stock grants totaled ~~263,053.~~278,317. During the three and nine months ended July 31, ~~2020,~~2021, the Company recorded compensation expense, included in the total stock based compensation expense above, of ~~$2.1~~$2.5 million and ~~$6.8~~$8.1 million, respectively, related to restricted stock grants, as compared to ~~$1.9~~$2.1 million and ~~$6.3~~$6.8 million, respectively, during the three and nine months ended July 31, ~~2019.~~2020. The Company had ~~$15.1~~$18.6 million in unrecognized share-based compensation ~~costs~~expense as of July 31, ~~2020,~~2021, which will be recognized over a weighted average remaining vesting period of approximately 1 year, 109 months.

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:

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		Three Months Ended							Three Months Ended
		July 31, 2020		July 31, 2019			July 31, 2021		July 31, 2020
		(in thousands except per share amounts)							(in thousands, except per share amounts)
Net income	Net income	$	32,810	$	53,362	Net income	$	164,763	$	32,810
Distributed and undistributed (earnings) to unvested restricted stock	Distributed and undistributed (earnings) to unvested restricted stock	(432)		(766)		Distributed and undistributed (earnings) to unvested restricted stock	(2,250)		(432)
Distributed and undistributed earnings to common shareholders—Basic	Distributed and undistributed earnings to common shareholders—Basic	$	32,378	$	52,596	Distributed and undistributed earnings to common shareholders—Basic	$	162,513	$	32,378
Weighted average shares outstanding—Basic	Weighted average shares outstanding—Basic	21,946		21,835		Weighted average shares outstanding—Basic	22,025		21,946
Weighted average shares outstanding—Diluted	Weighted average shares outstanding—Diluted	21,946		21,835		Weighted average shares outstanding—Diluted	22,025		21,946
Earnings per common share—Basic	Earnings per common share—Basic	$	1.48	$	2.41	Earnings per common share—Basic	$	7.38	$	1.48
Earnings per common share—Diluted	Earnings per common share—Diluted	$	1.48	$	2.41	Earnings per common share—Diluted	$	7.38	$	1.48

		Nine Months Ended
		July 31, 2020		July 31, 2019
		(in thousands except per share amounts)
Net income		$	352	$	76,165
Distributed and undistributed (earnings) to unvested restricted stock		(4)		(1,125)
Distributed and undistributed earnings to common shareholders—Basic		$	348	$	75,040
Weighted average shares outstanding—Basic		21,942		21,826
Weighted average shares outstanding—Diluted		21,942		21,826
Earnings per common share—Basic		$	0.02	$	3.44
Earnings per common share—Diluted		$	0.02	$	3.44


	Nine Months Ended
	July 31, 2021		July 31, 2020
	(in thousands, except per share amounts)
Net income	$	271,152	$	352
Distributed and undistributed (earnings) to unvested restricted stock	(3,761)		(4)
Distributed and undistributed earnings to common shareholders—Basic	$	267,391	$	348
Weighted average shares outstanding—Basic	22,018		21,942
Weighted average shares outstanding—Diluted	22,018		21,942
Earnings per common share—Basic	$	12.14	$	0.02
Earnings per common share—Diluted	$	12.14	$	0.02

NOTE 7—FAIR VALUE OF FINANCIAL INSTRUMENTS

~~The~~At times, the Company holds certain items that are required to be disclosed at fair value, primarily debt ~~instruments.~~instruments and cash equivalents. 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 ~~July~~October 31, 2020, ~~and October 31, 2019,~~ the fair values of the Company's borrowings under its revolving credit facility ~~approximate~~approximated the carrying ~~values.~~values, and as of July 31, 2021, the Company had no outstanding borrowings under its revolving credit facility.

NOTE 8—COMMITMENTS AND CONTINGENCIES

~~Property, Plant and Equipment~~Litigation

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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 July 31, 2020, the Company has spent approximately $5.5 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 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~~1 case, and the indirect purchaser complaints into ~~two~~2 cases, ~~one~~1 on behalf of commercial and institutional indirect purchaser plaintiffs and ~~one~~1 on behalf of end-user consumer plaintiffs. The cases are part of a coordinated proceeding captioned In re Broiler Chicken Antitrust Litigation.

On October 28, 2016, the direct and indirect purchaser plaintiffs filed consolidated, amended complaints, and on November 23, 2016, the direct and indirect purchaser plaintiffs filed second amended complaints. On December 16, 2016, the indirect purchaser plaintiffs separated into ~~two~~2 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~~3 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~~adding 3 additional poultry producers as defendants, along with Agri 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~~3 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~~2 new poultry producers as defendants, as well as Agri Stats, Inc. On August 6, 2020, the end-user consumer plaintiffs filed a motion for leave to file a fifth amended complaint. ~~Defendants' opposition is due August 28,~~The Court granted the end-user consumer plaintiffs’ motion on September 22, 2020 and ~~end-user consumer plaintiffs' reply is due September 11,~~deemed the version of the complaint filed on August 7, 2020 operative on October 19, 2020. ~~The parties are currently engaged in discovery.~~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 ~~June 12, 2020,~~August 17, 2021, additional purported direct-purchaser entities individually brought ~~forty~~NaN separate suits against 20 poultry producers, including ~~Sanderson Farms and~~the Company, as well as Agri Stats, Inc., and 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. ~~Four~~In addition, certain direct action complaints filed onsince June 12, 2020 ~~and another complaint amended on July 24, 2020 also plead~~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~~1 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~~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

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~~Plaintiffs~~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 May 14, 2021, certain direct action plaintiffs moved for reconsideration of the Court's September 22, 2020 bifurcation order, and that reconsideration motion is now fully briefed and pending.

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 ~~August 6, 2020 and August 20, 2020, and defendants~~January 22, 2021. Class plaintiffs filed ~~a reply~~replies in support of class certification on ~~August 20, 2020. Defendants' further reply is due on September 3, 2020.~~ March 29, 2021.

The parties are currently engaged in discovery. Fact discovery closed 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

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 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 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 ~~two orders that did not extend any deadlines, but explained other court procedures to protect the public health and welfare. These orders apply~~New Mexico Unfair Trade Practices Act, as well as a 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 September 14, 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~~4 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~~4 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~~1 proceeding, and on July 10, 2017,

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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

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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.

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’~~plaintiffs' motion, and the plaintiffs filed a second amended consolidated ~~amended~~ complaint on February 21, 2020. ~~The Oklahoma case is ongoing.~~ On May 27, 2020, the Company moved to dismiss the action in the Eastern District of North Carolina under the first-to-file rule. Plaintiffs filed their opposition on June 17, 2020, and the Company filed its reply on July 1, 2020.

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 ~~fully briefed and awaiting the Court’s decision.~~ underway.

We intend to defend ~~the Eastern District of North Carolina case~~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.

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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.

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 ~~Civil Investigative Demand~~CID from the Office of the Attorney General for the State of Washington seeking information in connection with its investigation of ~~alleged~~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 ~~coordinating with~~providing documents and information as requested by the Office of the Attorney General ~~with respect to responding to its requests.~~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~~3 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~~1 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.

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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, 2020. Oral argument is scheduled for~~ October 13, 2020. WeOn March 31, 2021, a panel of the Ninth Circuit unanimously affirmed the District Court's dismissal. The organizations subsequently declined to 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 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.

On August 30, 2019, Sanderson Farms, Inc. and its Foods and Processing Divisions, as well as ~~seventeen~~17 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~~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~~4 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~~10 other broiler chicken producers and their affiliates; ~~three~~3 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. On May 22, 2020, the District of Maryland issued Standing Order 2020-11, which affirmed the prior Order's 84-day extension, but did not extend deadlines further. Pursuant to Standing Order 2020-07, plaintiffs’Plaintiffs filed their omnibus opposition to defendants’ motions to dismiss on July 17, 2020. Defendants filed ~~replies~~their reply briefs on August 13, 2020. On September 16, 2020, the Court granted in part and denied in part defendants’ motion without prejudice, finding that plaintiffs’ allegations against certain 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 dismiss resisting plaintiffs' amended allegations on December 18, 2020. The Court denied that motion on March 10, 2021. Discovery in the case is ~~fully briefed and awaiting the Court's decision. No discovery has taken place to date.~~ 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~~3 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

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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

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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~~2 of the ~~three~~3 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~~5 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,~~first amended complaint, which the Court granted on July 2, 2020 with leave to amend.On July 23, 2020, ~~Plaintiffs~~plaintiffs Pam La Fosse and Sharon Manier filed a ~~Second Amended Complaint~~second amended complaint on behalf of a putative class of consumers who purchased the ~~Company’s~~Company's chicken in California in the prior four years.Like the earlier iterations of the complaint, the ~~Second Amended Complaint~~second amended complaint alleges that the remaining plaintiffs and other class members purchased the ~~Company’s~~Company's chicken products based on misleading representations in the ~~Company’s~~Company's advertising, including for the reasons set forth in ~~the~~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~~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. ~~No discovery has taken place to date.~~ 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~~2 non-profit organizations (In Defense of Animals and Friends of the Earth) filed a complaint against the Company in the United States District Court for the Northern District of California. The complaint asserts substantially similar (and in many cases identical) allegations and claims against the Company as the prior case brought by Friends of the Earth and other organizations, which the court dismissed in July 2019 and ~~which is currently on appeal to the United States Court of Appeals for~~ the Ninth ~~Circuit.~~Circuit unanimously confirmed in March 2021. Specifically, the plaintiffs assert that the Company ~~is violating~~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 ~~sought monetary, compensatory, statutory,~~seek fees and ~~punitive damages, as well as attorneys’ and experts’ fees, costs, and expenses. On August 12, 2020,~~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 ~~agreed~~moved to ~~waive service~~dismiss the In Defense of ~~the complaint. The Company's~~Animals case on April 28, 2021. In response to the Company's motion to dismiss, plaintiffs filed an amended complaint ~~is due~~ on ~~October 6, 2020.~~May 26, 2021. On June 25, 2021, the Company filed a motion to dismiss the amended complaint. No discovery has taken place to date.

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We intend to defend 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.

Other

On January 30, 2017, the Company received a letter from an attorney representing a putative shareholder demanding that the Company take action against current and/or former officers and directors of the Company for alleged breach of their fiduciary duties. The shareholder asserted that the officers and directors (i) failed to take any action to stop the alleged antitrust conspiracy described above, despite their alleged knowledge of the conspiracy, and (ii) made and/or caused the Company to make materially false and misleading statements by failing to disclose the alleged conspiracy. The shareholder also asserted that certain directors engaged in "insider sales" from which they improperly benefited. In addition to demanding that the officers and directors be sued, the shareholder also demanded that the Company adopt unspecified corporate governance improvements. On February 9, 2017, pursuant to statutory procedures available in connection with demands of this type, the Company's board of directors appointed a special committee of qualified directors to determine, after conducting a reasonable inquiry, whether it was in the Company's best interests to pursue any of the actions demanded in the shareholder's letter. On April 26, 2017, the special committee reported to the Company's board of directors its determination that it was not in the Company's best interests to take any of the demanded actions at that time, and that no governance improvements related to the subject matter of the demand were needed. On May 5, 2017, the special committee's counsel informed the shareholder's counsel of the committee's determination. As of the date of filing of this report, and to the Company's knowledge, no legal proceedings related to the shareholder's demand have been filed.

The Company is involved in various other claims and litigation incidental to its business. Although the outcome of these matters cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome of currently pending matters, other than those discussed above, should not have a material effect on the Company’s consolidated results of operations or financial position.

The Company recognizes the costs of legal defense for the legal proceedings to which it is a party in the periods incurred. After a considerable analysis of each case, the Company has determined that no accrual is required for any of the foregoing matters as of July 31, ~~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

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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 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 July 31, ~~2020,~~2021, was ~~$1,014.9 million.~~$1.1 billion. The credit is unsecured and, unless extended, will expire on ~~March 21, 2024.~~April 23, 2026. As of July 31, ~~2020~~2021 and August ~~26, 2020,~~25, 2021, the Company had ~~borrowed $95.0 million,~~no outstanding borrowings and had approximately ~~$19.8~~$24.1 million outstanding in letters of credit, leaving ~~$885.2~~$975.9 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 nine months ended July 31, 2021 were 23.2% and 23.5%, respectively, as compared to effective tax rates of 15.5% and 100.6%, respectively, for the three and nine months ended July 31, 2020. Excluding the effects of discrete items recognized during the periods, the Company's estimated annual effective tax rates for the three and nine months ended July 31, 2021 would have been approximately 24.2% and 24.1%, respectively, as compared to effective tax rates of 18.2% and 32.7%, respectively, for the three and nine months ended July 31, 2020. The discrete items recognized during nine months ended July 31, 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 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 24.1%.

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Our financial statements for the nine months ended July 31, 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 was 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 nine months ended July 31, 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 $49.5 million discrete income tax benefit related to the carry-back provisions during the nine months ended July 31, 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 $11.4 million discrete income tax expense during the nine months ended July 31, 2020 to account for the reduced taxable income.

The Company’s effective tax rates for the three and nine months ended July 31, 2020 were 15.5% and 100.6%, respectively, as compared to estimated annual effective tax rates of 20.7% and 21.7%, respectively, for the three and nine months ended July 31, 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 nine months ended July 31, 2020 would have been approximately 18.2% and 32.7%, respectively, as compared to estimated annual effective tax rates of 24.1% and 24.2%, respectively, for the three and nine months ended July 31, 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 July 31, 2020. Therefore, the income tax provision for the third quarter and first nine months of fiscal 2020 was made using the actual effective tax rate for the nine-month period ending July 31, 2020.

As of July 31, ~~2020,~~2021, the Company's deferred income tax liability was ~~$135.3~~$149.5 million, as compared to ~~$74.1~~$141.7 million at October 31, ~~2019,~~2020, an increase of ~~$61.2~~$7.8 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.~~

NOTE 11—~~LEASES~~INSURANCE RECEIVABLE

~~The Company, using~~Our operations in Texas, Louisiana and Mississippi were affected by significant winter weather events that began impacting the ~~guidance~~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 ~~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~~those states, deliver day old chicks 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~~broiler farms on our ~~Condensed Consolidated Balance Sheet as Right of Use Assets, Current Lease Liabilities,~~regular schedule, pick up hatching eggs from breeder farms 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~~place those eggs in our ~~Condensed Consolidated Balance Sheet. Lease expenses related to those short-term leases are recognized~~hatcheries on ~~a straight-line basis over the term of the lease.~~

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~~The initial assets~~our regular schedule, or manufacture 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 reductiondeliver chicken feed to the ~~Right~~farms 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~~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 ~~birds. A significant portion~~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 July 31, 2021 include a $4.1 million receivable from insurance carriers for property damage and expenses incurred as a result of the ~~costs associated with leases related to~~storms, net of the ~~use of assets of independent contract poultry producers who house~~applicable self-insured retention and ~~care~~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 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 nine months ended July 31, 2020:

Description Three Months Ended July 31, 2020 Nine Months Ended July 31, 2020
Operating lease cost $ 3,743 $ 12,011
Short-term lease cost 744 2,531
Variable lease cost ⁽¹⁾
106,166 310,106
Total lease cost $ 110,653 $ 324,648

(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 nine months ended July 31, 2020 (in thousands)~~	$	~~12,173~~
~~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 July 31, 2020 (years)~~	~~3.9~~
~~Weighted-average discount rate as of July 31, 2020~~	~~2.46~~		%

~~(1) There were no new right of use assets obtained in exchange for lease liabilities during~~ the nine months ended July 31, ~~2020.~~

~~The future maturities~~2021 include $2.75 million in cost of ~~obligations under non-cancelable~~goods sold for losses and expenses related to the winter storms. Additionally, the Company's operating ~~leases at~~results for the nine months ended July 31, ~~2020~~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 ~~follows (in thousands):~~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.

Fiscal Year Amount
2020 (remainder) $ 3,584
2021 14,398
2022 11,969
2023 8,327
2024 4,744
Thereafter 2,430
Total undiscounted operating lease payments 45,452
Less: imputed interest (2,979)
Present value of lease liabilities $ 42,473

NOTE 12—SUBSEQUENT EVENT

On August 8, 2021, the Company agreed to be acquired by a joint venture between Cargill, Inc. (“Cargill”) and Continental Grain Company (“CGC”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) with Walnut Sycamore Holdings LLC, a Delaware limited liability company (“Parent”), Sycamore Merger Sub LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of Parent (“Merger Sub”), and solely for purposes of certain provisions specified therein, Wayne Farms LLC, a Delaware limited liability company, pursuant to which, among other things, Merger Sub will be merged with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and as an indirect wholly owned subsidiary of Parent. Under the terms of the Merger Agreement, each outstanding share of the Company, other than certain excluded shares, will receive $203 per share in cash. The Merger is expected to close by the end of 2021 or early 2022, subject to approval by the Company’s shareholders, receipt of specified regulatory approvals and other customary closing conditions.

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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.

(16)Risks relating to the Company’s recently-announced entry into a definitive agreement to be acquired by a joint venture between Cargill, Incorporated (“Cargill”) and Continental Grain Company (“CGC”), including: the timing, receipt and terms and conditions of any required governmental or regulatory approvals of the proposed transaction and the related transactions involving affiliates of Cargill and CGC that could reduce the anticipated benefits of or cause the parties to abandon the proposed transaction; risks related to the satisfaction of the conditions to closing the proposed transaction (including the failure to obtain necessary regulatory approvals or the approval of the Company's stockholders), and the related transactions involving affiliates of Cargill and CGC, in the anticipated timeframe or at all; the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the Company's common stock; disruption from the proposed transaction making it more difficult to maintain business and operational relationships, including retaining and hiring key personnel and maintaining relationships with the Company's customers, vendors and others with whom it does business; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement entered into pursuant to the proposed transaction or of the transactions involving affiliates of Cargill and CGC; risks related to disruption of management's attention from the Company's ongoing business operations due to the proposed transaction; significant transaction costs; and the risk of litigation and/or regulatory actions related to the proposed transaction or unfavorable results from currently pending litigation and proceedings or litigation and proceedings that could arise in the future.

Readers are cautioned not to place undue reliance on forward-looking statements made by or on behalf of Sanderson Farms. Each such statement speaks only as of the day it was made. The Company undertakes no obligation to update or to revise any forward-looking statements. The factors described above cannot be controlled by the Company. When used in this 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 ~~140~~45 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

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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, and beginning in June 2021, the full COVID-19 response team ceased its daily meetings; however, a smaller group of senior managers continued to meet daily. Beginning on July 29, 2021, in response to the increasing number of COVID-19 cases within the states in which we operate, the full COVID-19 response team once again began meeting daily. Additionally, our Board of Directors has actively overseen our management of the crisis. Between March 13, 2020 and early June 2020, the Board met weekly to receive updates and discuss our response to the pandemic with our executive leadership. ~~Since~~In early June 2020, the Board ~~has~~began meeting generally ~~met~~ every two weeks, or more frequently if circumstances ~~warrant.~~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:

•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. We have also provided live training sessions about the virus to our hourly employees. Each of these aforementioned communications is provided in the languages spoken by our employee population.

•We have created an internal hotline monitored by our nurses at our general corporate offices that employees may call to ask questions or voice concerns about the virus.

•Non-essential visitors may not enter our facilities.

•We are taking the temperature of each person attempting to enter our facilities. Anyone with a 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~~and unvaccinated employees who live in the same household as someone who has tested positive ~~and those~~or 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~~Vaccinated employees who ~~has tested positive may return to work after 14 days~~have had known contact 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~~continue working but must be tested for COVID-19 within 3 to ~~work after 14~~5 days ~~if he or she has been symptom-free for 72 hours.~~following the known contact.

•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.

•WeIn May 2020, 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. As of

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May 18, 2021, anyone who is fully vaccinated was no longer required to wear this equipment on our premises; however, beginning July 23, 2021, we reverted to the face mask and face shield policies that were in effect prior to May 18, 2021.

•In areas of our facilities where space allows, we have implemented social distancing measures, and in areas where equipment configurations allow, we have installed physical barriers between work stations. ~~In areas where social distancing or the installation of physical barriers is not achievable, the use of face shields is mandatory.~~ Additionally, we have optimized ventilation throughout our facilities to mitigate the risk of exposure to the virus. We are also providing and requiring employees and essential visitors at our general corporate offices and our laboratory to wear face masks while in common areas and in instances where social distancing is not achievable.

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

•We ~~require~~have required employees to practice social distancing on breaks and have staggered break times to reduce the number of people in break areas at any one time. We have installed physical partitions in our break rooms to provide barriers between employees and have erected tents outside of our facilities to provide employees with more space during breaks.

•We have installed additional hand sanitizer stations appropriate for use in food processing facilities at all our facilities.

•A third-party sanitation service provider performs an antiviral sanitation process 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.

•We ~~have~~ closed our Company-owned childcare facility in Collins, Mississippi ~~until further notice.~~early on during the pandemic.

•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 for the periods described above. To date, we have performed four facility-wide tests resulting in positive rates per employee tested of 3.3%, 0.5%, 5.8%, and 3.3%.~~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.

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•We ~~have~~ distributed written materials to our employees in all languages appropriate for our employee population to inform them about COVID-19 risks and encourage good personal hygiene, cleaning and social distancing practices away from work and when carpooling to work to protect themselves and their families.

•We have given our employees free bottles of hand sanitizer which they may refill from supplies at our ~~facilities.~~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,~~During calendar year 2020, we gave ~~ten pounds~~free, 10-pound packages of fresh chicken to each hourly employee who worked on Good Friday, ten pounds of fresh chicken to each hourly and salaried employee who worked on the Friday before Mother's Day, and ten pounds of fresh chicken to each hourly and salaried employee who worked on the Friday before Father's Day.our employees in connection with several holidays.

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

•On Friday, September 4, 2020, we intend to give each employee a washable, reusable mask screen-printed with the slogan "Hero at Work." Employees will also be able to take additional washable, reusable masks home to their family members.

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

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demand from our food service customers, during the second quarter of fiscal 2020 we were able to divert approximately 4.3 million head of chickens from our big bird program to be processed at our plants that serve retail grocery store customers. To accomplish this, we increased the number of shifts at our plants that process retail product, and we have not experienced any significant delays or other hindrances in our shipment of products to our retail grocery store customers.

•Since the beginning of the pandemic, we have donated over ~~900,000~~1.4 million pounds of chicken to employees, food banks and other relief organizations.

•~~Since the beginning of~~During the pandemic, we have donated ~~23,740~~tens of thousands of N95, KN95, disposable and ~~KN95 masks, approximately 20,000 disposable masks and approximately 250~~ washable ~~reusable~~ 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. ~~As of July 31,~~During fiscal 2020, we ~~have~~ deferred approximately ~~$10.5~~$20.7 million, and during the first quarter of fiscal 2021, we deferred an additional $6.5 million, resulting in a total deferral of approximately $27.2 million that would have been a cash outflow in the absence of the CARES ~~Act, and we currently estimate this provision will result in a total of~~Act. We remitted approximately ~~$26 million of payroll tax payments being deferred, with 50% due during calendar year 2021 and 50% due during calendar year 2022. We intend to remit approximately $22.0~~$20.7 million of the deferred payroll taxes on ~~or before~~ June ~~15,~~10, 2021, and we intend to remit the remaining ~~$4.0~~$6.5 million on or before June 15, 2022, so that we ~~are able to~~may deduct the corresponding payroll tax expenses on our fiscal 2020 and 2021 income tax ~~returns.~~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 elected to use that provision, which provided additional liquidity in the form of an income tax refund of approximately $84.4 million, which we receivedcredit during our ~~third~~fourth quarter of fiscal 2020, and ~~subsequently used~~we recognized additional pre-tax benefits of $1.1 million and $3.7 million, respectively, related to ~~reduce the amount of outstanding borrowings under~~this credit during our ~~revolving credit facility. Additionally, during the~~ first ~~nine months~~and second quarters of fiscal 2020, we recorded a net discrete income tax benefit of approximately $38.1 million related to the carry-back provisions of the CARES Act. For more information regarding the income tax effects of the CARES Act, refer to "Part I., Item 1., Notes to Condensed Consolidated Financial Statements, Note 10 - Income Taxes."2021.

EXECUTIVE OVERVIEW OF RESULTS

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For the third quarter of fiscal ~~2020,~~2021, we reported net income of $164.8 million, or $7.38 per share, as compared to net income of $32.8 million, or $1.48 per share, ~~as compared to net income of $53.4 million, or $2.41 per share~~ during the third quarter of fiscal 2020. Results for the third quarter of fiscal 2021 reflect a $41.5 million accrual for probable liability under our bonus award programs, a $10.2 million accrual for a probable Employee Stock Ownership Plan ("ESOP") contribution, and a $4.4 million accrual for probable liability under outstanding performance share agreements entered into in November 2019. 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 third 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. ~~During the third quarter,~~Since that time, demand from our ~~largest~~ food service customers has fluctuated from week to week, coinciding with the ~~opening and closing of food service establishments. The average weekly volume sold to our largest food service customers during~~fluctuating governmental restrictions placed on the ~~quarter ranged from 68% to 95% of normal levels seen before the pandemic.~~restaurant industry. The impact of ~~this~~ fluctuating demand is evidenced by the volatility of 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 2020 and recovering to ~~$1.17~~$1.19 per pound ~~on July 31,~~by early August 2020. The quoted price ~~has now moved lower again~~fell to ~~$1.01~~$0.86 per pound asby early October 2020, but by May 18, 2021, the price reached $2.26 per pound. As of August ~~26, 2020.~~25, 2021, the quoted market price is $2.04 per pound. We believe the strength that we have seen in the quoted market price is attributable, at least in part, to strong demand from quick-service restaurant chains that are featuring chicken products on their menus. In addition, demand from food service customers has continued 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.

•~~The Company~~We announced during ~~its~~our second fiscal quarter of 2020 that, in response to reduced demand from food service customers caused by the COVID-19 pandemic, itwe would reduce production at plants processing a larger bird for food service customers. ~~The Company~~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 ~~1.23~~at that plant reached the target live weight on or about November 23, 2020. Due to the production cuts and lower target live weights, we processed 1.21 billion pounds of dressed poultry during the third fiscal quarter of ~~2020, up 3.5%~~2021, down 1.1% from the ~~1.19~~1.23 billion pounds processed during the third fiscal quarter of ~~2019.~~2020. The ~~increase reflects additional production at~~decrease in pounds processed resulted from a 3.7% decrease in the ~~Company's new Tyler, Texas facility,~~average live weight of the birds processed, partially offset by a 1.6% increase in the ~~COVID-19 related production cuts. The 1.23~~number of head processed and

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improved yields. We now estimate we will process 1.22 billion pounds processed during the third fiscal quarter is approximately 60.0 million, or 4.7%, fewer pounds than estimated prior to the pandemic's effects being known. Given these planned production cuts in response to the decreased demand caused by the pandemic, we estimate our total productionof dressed poultry during the fourth quarter of fiscal ~~2020 will be approximately 1.22 billion pounds, lower by 5.0% compared to the fourth quarter of fiscal 2019, and 4.2% lower than our pre-COVID-19 estimate.~~2021.

•The demand shift to food prepared at home caused demand from our retail grocery store customers to surge during the early stages of the pandemic, and that demand remains strong as ~~a result~~some consumers continue to eat many, if not most, of ~~the reduced options available for dining away from~~their meals at home.

•Demand for our products from ~~the~~our traditional export ~~markets~~partners was soft ~~during~~following the ~~quarter.~~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, ~~while~~although demand and pricing for chicken paws sold to China has remained ~~stable. Demand from China for dark meat was~~ strong ~~during our second quarter~~throughout the pandemic. During the first two months of fiscal ~~2020 due~~2021, demand and pricing for products typically sold for export, such as leg quarters and drumsticks, remained soft; however, demand and pricing for those products improved significantly beginning in January 2021 and continuing through the first half of our third fiscal quarter. Beginning in the latter half of our third fiscal quarter, demand and pricing began to soften slightly but remain strong relative to the ~~country's protein deficit caused by African swine fever; however, China now has ample supplies~~environment we experienced during the second half of ~~dark meat stored~~fiscal 2020. We believe this strength is the result of several factors, including higher crude oil prices and the value of the United States dollar in ~~freezers, and demand has slowed considerably.~~relation to foreign currencies.

•Our top priority throughout the crisis has been protecting the health, safety and welfare of our employees. As a result, the third quarter of fiscal 2021 includes approximately ~~$15.9~~$4.7 million in direct COVID-19 ~~expenses~~costs for payroll expenses for employees who are quarantined ~~payroll expenses for attendance bonuses paid to hourly employees,~~ 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. ~~Results~~By comparison, our results for the ~~nine months ended July 31,~~third quarter of fiscal 2020 include ~~a total of~~ approximately ~~$24.3~~$16.0 million in ~~expenses related to these items and services.~~direct COVID-19 expenses.

Our higher average cost of goods sold during the third 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 lower~~were significantly higher during the third quarter of fiscal ~~2020~~2021 as compared to the ~~same period a year ago,~~third quarter of fiscal 2020, which ~~resulted in a decrease~~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 and uncertainty about the 2021 corn and soybean crops, 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 most all of our corn and soybean meal needs through ~~September 2020.~~October 2021. Had we priced the remainder of our ~~remaining~~ fiscal ~~2020~~2021 grain needs at August ~~26, 2020~~25, 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 ~~$46.8~~$369.0 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 ~~0.83 cents~~$0.084 per pound ~~lower~~higher feed costs in broiler flocks processed for fiscal ~~2020~~2021 as compared to fiscal ~~2019. We have not priced any of our corn~~2020. These numbers are estimates and ~~soybean meal needs for fiscal 2021.~~

~~The outbreak of African swine fever in China has reduced~~are subject to change as we move through 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 third quarter of fiscal 2020, we sold approximately 18.6 million pounds of chicken paws 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. Demand for products other than chicken paws softened considerably during our third quarter 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.

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~~We believe that our overall cost structure during our fourth quarter of fiscal 2020 will be stable, primarily because we have priced most of our grain for the remainder~~balance of the fiscal year as noted above. We also believe that demand for our products from retail grocery stores will continue to be strong as people continue to prepare 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 caused by the pandemic.~~

We also believe that market prices and demand for the products we produce at our plants that serve food service customers will continue to be volatile as our customers and the food service industry as a whole continue to navigate the effects of the pandemic and the related openings and closings of restaurants and other venues where food is consumed away from home.year.

While demand for our retail grocery products ~~is currently favorable~~ and demand from our food service distribution customers ~~remains volatile,~~is currently favorable, resulting in selling prices for our products that are more than offsetting the higher prices we are paying for feed grains, it is uncertain how long these conditions will persist. How long current conditions will last and the future effect of the pandemic on our business will depend on many factors, including:

•~~whether there are~~the acceptance rate of COVID-19 vaccines;

•the extent to which 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;

•the ability of restaurants to survive financially in depressed business conditions, and the extent to which the volume of food sold by restaurants is affected by required social distancing measures that reduce the number of customers they can serve;

•whether other venues where people eat food away from home, such as sporting events and hotels, resume or increase operations;

•the extent to which unemployment levels and possible recessionary conditions affect the amount of disposable income consumers have to spend on food and how consumers allocate their food dollars;

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•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 third quarter ended July 31, ~~2020~~2021 were ~~$956.5~~$1,352.8 million as compared to ~~$945.2~~$956.5 million for the third quarter ended July 31, ~~2019,~~2020, an increase of ~~$11.3~~$396.3 million, or ~~1.2%~~41.4%. Net sales of poultry products for the third quarter ended July 31, 2021 and 2020, ~~and 2019,~~ were ~~$903.9~~$1,290.0 million and ~~$877.0~~$903.9 million, respectively, an increase of ~~$26.9~~$386.2 million, or ~~3.1%~~42.7%. The increase in net sales of poultry products resulted from a ~~6.3%~~44.7% increase in the ~~pounds~~average sales price of poultry products sold, partially offset by ~~an 3.0%~~a 1.4% decrease in the ~~average sales price~~pounds of poultry products sold. During the third quarter of fiscal ~~2020,~~2021, the Company sold ~~1,221.8 million~~1.20 billion pounds of poultry products, updown from ~~1,149.6 million~~1.22 billion pounds during the third quarter of fiscal ~~2019.~~2020. The ~~increase~~decrease in pounds of poultry products sold resulted from a ~~4.0%~~3.7% decrease in the average live weight of birds processed, partially offset by a 1.6% increase in the number of head processed ~~partially offset by a 1.2% decrease in the average live weight of~~and improved yields.

Quoted market prices for poultry ~~processed. The new Tyler, Texas processing facility, which began initial operations during the first quarter of fiscal 2019, processed approximately 16.9 million head~~products increased during the third quarter of fiscal 2020, or approximately 10.1% of the total head processed by the Company during the period, and sold approximately 108.4 million pounds of poultry products during the third quarter of fiscal 2020, or approximately 8.9% of the total poultry pounds sold by the Company during the period. By comparison, the Tyler, Texas processing facility processed approximately 7.6 million head during the third quarter of fiscal 2019, or approximately 4.7% of the total head processed by the Company during the period, and sold approximately 51.6 million pounds of poultry products during the third quarter of fiscal 2019, or approximately 4.5% of the total poultry pounds sold by the Company during the period.

~~Overall, market prices for poultry products decreased during the third quarter of fiscal 2020~~2021 as compared to the same quarter of fiscal ~~2019.~~2020. When compared to the third quarter of fiscal ~~2019,~~2020, Urner Barry average market prices for ~~leg quarters,~~ tenders, jumbo wings, boneless thigh meat, ~~and jumbo wings decreased by 39.1%, 26.8%, 17.5% and 13.2%, respectively, while average market prices for~~ boneless breast meat, and leg quarters increased by ~~3.2%.~~107.3%, 107.0%, 84.1%, 71.4% and 66.3%, respectively. Average realized prices for chicken products sold to retail grocery

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store customers increased by ~~1.8%~~4.4% during the third quarter of fiscal ~~2020~~2021 as compared to the 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 July 31, 2021 and 2020 ~~and 2019~~ were ~~$52.6~~$62.7 million and ~~$68.2~~$52.6 million, respectively, representing ~~a decrease~~an increase of ~~22.8%~~19.3%. This ~~decrease~~increase is primarily attributable to a ~~21.5% decrease~~14.7% increase in the pounds of prepared chicken products sold, while the average sales price of prepared chicken products sold ~~decreased~~also increased by ~~1.7%~~4.0%. During the third quarter of fiscal ~~2020,~~2021, the Company sold ~~27.9~~32.0 million pounds of prepared chicken products, ~~down~~up from ~~35.6~~27.9 million pounds during the third 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~~ nine months ~~of fiscal 2020~~ended July 31, 2021 were ~~$2,624.2 million,~~$3.40 billion as compared to ~~$2,533.8 million~~$2.62 billion for the ~~first~~ nine months ~~of fiscal 2019,~~ended July 31, 2020, an increase of ~~$90.5~~$771.7 million, or ~~3.6%~~29.4%. Net sales of poultry products for the ~~first~~ nine months ~~of fiscal~~ended July 31, 2021 and 2020 were $3.25 billion and ~~2019 were $2,481.1 million and $2,345.6 million,~~$2.48 billion, respectively, an increase of ~~$135.5~~$766.4 million, or ~~5.8%~~30.9%. The increase in net sales of poultry products resulted from ~~an 8.8%~~a 30.8% increase in the ~~pounds~~average sales price of poultry products sold ~~partially offset by a 2.8% decrease in the average sales price~~and relatively flat pounds of poultry products sold. During the first nine months of fiscal ~~2020,~~2021, the Company sold ~~3,553.4 million~~3.56 billion pounds of poultry products, slightly up from ~~3,265.7 million~~3.55 billion pounds during the first nine months of fiscal ~~2019.~~2020. The increase in pounds of poultry products sold ~~was primarily attributable to~~is the ~~ramp up~~result of a 0.5% increase in ~~production at~~ the ~~new Tyler, Texas processing facility. The new facility~~number of head processed ~~approximately 44.5 million head~~and improved yields during the ~~first nine months~~comparative periods, partially offset by a 1.0% decrease in the live weight of fiscal 2020, or approximately 9.1% of the total head processed by the Company during the period, and sold approximately 281.8 million pounds of poultry products during the first nine months of fiscal 2020, or approximately 7.9% of the total poultry pounds sold by the Company during the period. By comparison, the Tyler, Texas facility processed approximately 10.7 million head during the first nine months of fiscal 2019, or approximately 2.4% of the total head processed by the Company during the period, and sold approximately 73.6 million pounds of poultry products during the first nine months of fiscal 2019, or approximately 2.3% of the total poultry pounds sold by the Company during the period.birds processed.

~~Overall,~~Quoted market prices for poultry products ~~decreased~~increased during the ~~first~~ nine months ~~of fiscal 2020~~ended July 31, 2021 as compared to the same period ofin fiscal ~~2019.~~2020. When compared to the ~~first~~ nine months ~~of fiscal 2019,~~ended July 31, 2020, Urner Barry average market prices for jumbo wings, tenders, ~~leg quarters,~~boneless breast meat, boneless thigh meat ~~jumbo wings~~ and ~~boneless breast meat decreased~~leg quarters increased by ~~22.6%~~76.1%, ~~12.9%~~64.0%, ~~12.5%~~50.0%, ~~11.9%~~14.4% and ~~6.4%~~13.9%, respectively. Average realized prices for chicken products sold to retail grocery ~~store customers~~stores increased by ~~0.9%~~4.0% during the first nine 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 nine months ended July 31, 2021 and 2020 were $148.5 million and ~~2019 were~~ $143.2 million, ~~and $188.2 million,~~ respectively, ~~representing a decrease~~an increase of ~~23.9%~~3.7%. This ~~decrease~~increase is primarily attributable to a ~~24.3% decrease~~2.4% increase in the pounds of prepared chicken products sold ~~while~~and a 1.3% increase in the average sales price of prepared chicken ~~products sold increased by 0.5%.~~products. During the first nine months of fiscal ~~2020,~~2021, the Company sold ~~75.9~~77.7 million pounds of prepared chicken products, ~~down~~up from ~~100.2~~75.9 million pounds during the first nine 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 third quarter of fiscal ~~2020~~2021 was ~~$866.0~~$1,049.8 million as compared to ~~$824.1~~$866.0 million during the third quarter of fiscal ~~2019,~~2020, an increase of ~~$41.9~~$183.8 million, or ~~5.1%~~21.2%. Cost of sales of poultry products during the third quarter of fiscal ~~2020,~~2021, as compared to the third quarter of fiscal ~~2019,~~2020, was ~~$815.9~~$970.7 million and ~~$759.1~~$815.9 million, respectively, which represents a ~~1.1%~~20.6% increase in the average cost of sales per pound of poultry products. As illustrated in the table below, which for comparative purposes includes poultry products transferred to the Company's prepared chicken plant, the increase in the cost

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of sales per pound of poultry products resulted from ~~a $0.0214 per pound, or 5.2%,~~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 ~~$0.0142,~~$0.1102, or ~~5.6%.~~

~~Table~~45.8%, and a $0.0410 per pound, or 9.5%, increase in other costs of ~~Contents~~

sales of poultry products.

Poultry Cost of Sales

(In thousands, except per pound data)


		Three Months Ended July 31, 2020								Three Months Ended July 31, 2019								Incr/(Decr)							Three Months Ended July 31, 2021				Three Months Ended July 31, 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	$	37,969		$	0.4129	$	33,327		$	0.4259	$	4,642	$	(0.0130)	Beginning Inventory	$	41,645		$	0.5838	$	37,969		$	0.4129	$	3,676	$	0.1709
Feed in broilers processed	Feed in broilers processed	294,556			0.2404		302,038			0.2546		(7,482)		(0.0142)		Feed in broilers processed	427,384			0.3506		294,556			0.2404		132,828		0.1102

All other cost of sales	All other cost of sales	531,593			0.4338		489,214			0.4124		42,379		0.0214		All other cost of sales	578,877			0.4748		531,593			0.4338		47,284		0.0410

Less: Ending Inventory	Less: Ending Inventory	32,922			0.4065		43,300			0.4514		(10,378)		(0.0449)		Less: Ending Inventory	39,366			0.5813		32,922			0.4065		6,444		0.1748
Total poultry cost of sales	Total poultry cost of sales	$	831,196	⁽¹⁾	$	0.6723	$	781,279	⁽¹⁾	$	0.6686	$	49,917	$	0.0037	Total poultry cost of sales	$	1,008,540	(1)	$	0.8248	$	831,196	(1)	$	0.6723	$	177,344	$	0.1525

Pounds:	Pounds:															Pounds:
Beginning Inventory	Beginning Inventory	91,968					78,247									Beginning Inventory	71,338					91,968

Poultry processed/other	Poultry processed/other	1,225,452					1,186,226									Poultry processed/other	1,219,103					1,225,452
Poultry sold	Poultry sold	1,236,431		⁽¹⁾			1,168,543		⁽¹⁾							Poultry sold	1,222,718		(1)			1,236,431		(1)
Ending Inventory	Ending Inventory	80,989					95,930									Ending Inventory	67,724					80,989

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~~During the third quarter of fiscal 2021, management determined that achievement of the applicable criteria required to earn payouts under the Company's bonus award programs is probable at certain levels; accordingly, during the third quarter of fiscal 2021, other costs of sales of poultry products also include approximately $26.0 million of accrued expenses related to the Company's bonus award program, as compared to no such expenses during the third quarter of fiscal 2020. Collectively, non-feed related costs of poultry products sold increased by ~~$0.0214~~$0.0410 per pound processed, or ~~5.2%~~9.5%, during this year’s third fiscal quarter compared to the same quarter a year ~~ago. This increase is~~ago, primarily attributable to ~~higher labor, packaging and certain fixed costs,~~the bonus accruals described above, as well as ~~expenses~~higher packaging, maintenance and repairs and certain other variable costs in our processing facilities, higher freight costs incurred ~~in response to~~for the ~~COVID-19 pandemic. The COVID-19 related~~delivery of finished product, and higher chick costs. COVID-19-related expenses included in other costs of sales during the ~~three months ended July 31, 2020,~~third quarter of fiscal 2021 total approximately ~~$11.4~~$1.7 million and include payroll expenses for employees who are quarantined ~~payroll expenses for attendance bonuses paid to hourly employees,~~ and expenses related to various items and services including personal protective equipment, thermometers, barriers and other social-distancing measures and additional nursing staff to protect the health and safety of our employees. ~~Excluding the COVID-19 related~~By comparison, COVID-19-related expenses in other costs of sales ~~increased by $0.0121 per pound processed, or 2.9%.~~during the third quarter of fiscal 2020 totaled $11.2 million.

Cost of sales of the Company’s prepared chicken products during the third quarter of fiscal ~~2020~~2021 were ~~$50.1~~$79.1 million as compared to ~~$65.0~~$50.1 million during the same quarter a year ago, ~~a decrease~~an increase of ~~$14.9~~$29.0 million, or ~~23.0%~~57.8%. This ~~decrease~~increase was ~~primarily~~ attributable to a ~~21.5% decrease~~14.7% 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 substantially higher costs for the ~~COVID-19 pandemic.~~fresh chicken purchased by the plant.

Cost of sales for the first nine months of fiscal ~~2020~~2021 was ~~$2,521.8 million,~~$2.83 billion, as compared to ~~$2,273.4 million~~$2.52 billion during the first nine months of fiscal ~~2019,~~2020, an increase of ~~$248.4~~$309.3 million, or ~~10.9%~~12.3%. Cost of sales of poultry products during the first nine months of fiscal ~~2020,~~2021, as compared to the first nine months of fiscal ~~2019,~~2020, was ~~$2,386.9 million~~$2.67 billion and ~~$2,100.2 million,~~$2.39 billion, respectively, which represents ~~a 4.4%~~an 11.6% increase in the average cost of sales per pound of poultry products. As illustrated in the table below, which for comparative purposes includes poultry products sold to the Company's prepared chicken plant, the increase in the cost of sales per pound of poultry products resulted from ~~a $0.0225 per pound, or 5.6%,~~an increase ~~in other costs of sales of poultry products and a decrease~~ in the cost of feed per pound of broilers processed of ~~$0.0009,~~$0.0612, or ~~0.4%.~~

24.4%, and a $0.0248 per pound, or 5.8%, increase in other costs of sales of poultry products.

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Poultry Cost of Sales

(In thousands, except per pound data)


		Nine Months Ended July 31, 2020								Nine Months Ended July 31, 2019								Incr/(Decr)							Nine Months Ended July 31, 2021				Nine Months Ended July 31, 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	895,804			0.2503		838,300			0.2512		57,504		(0.0009)		Feed in broilers processed	1,119,407			0.3115		895,804			0.2503		223,603		0.0612

All other cost of sales	All other cost of sales	1,526,030			0.4264		1,348,153			0.4039		177,877		0.0225		All other cost of sales	1,621,254			0.4512		1,526,030			0.4264		95,224		0.0248
Reversal of prior-period inventory write-down	Reversal of prior-period inventory write-down	(2,800)			(0.0008)		(9,600)			(0.0029)		6,800		0.0021		Reversal of prior-period inventory write-down	—			—		(2,800)			(0.0008)		2,800		0.0008

Less: Ending Inventory	Less: Ending Inventory	32,922			0.4065		43,300			0.4514		(10,378)		(0.0449)		Less: Ending Inventory	39,366			0.5813		32,922			0.4065		6,444		0.1748
Total poultry cost of sales	Total poultry cost of sales	$	2,421,233	⁽¹⁾	$	0.6747	$	2,164,526	⁽¹⁾	$	0.6509	$	256,707	$	0.0238	Total poultry cost of sales	$	2,734,247	(1)	$	0.7604	$	2,421,233	(1)	$	0.6747	$	313,014	$	0.0857

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

Poultry processed/other	Poultry processed/other	3,578,766					3,337,454									Poultry processed/other	3,593,299					3,578,766
Poultry sold	Poultry sold	3,588,582		⁽¹⁾			3,325,544		⁽¹⁾							Poultry sold	3,595,678		(1)			3,588,582		(1)
Ending Inventory	Ending Inventory	80,989					95,930									Ending Inventory	67,724					80,989

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~~During the first nine months of fiscal 2021, management determined that achievement of the applicable criteria required to earn a bonus is probable at certain levels; accordingly, other costs of sales of poultry products during the period also include approximately $26.0 million of expenses related to the Company's bonus award program, as compared to no such expenses during the same period of fiscal 2020. Collectively, non-feed related costs of poultry products sold increased by ~~$0.0225~~$0.0248 per pound processed, or ~~5.6%~~5.8%, during the first nine 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 $0.0192 per pound processed, or 4.9%. This increase is primarily attributable to ~~higher labor and certain fixed costs,~~the bonus accruals described above, as well as ~~expenses~~higher packaging, maintenance and repairs and certain other variable costs in our processing facilities, slightly higher freight costs incurred ~~in response to~~for the ~~COVID-19 pandemic,~~delivery of finished product, and ~~is partially offset by lower freight~~higher chick costs. ~~The~~ COVID-19 related expenses included in other costs of sales during the nine months ended July 31, ~~2020,~~2021 total approximately ~~$16.2~~$10.5 million and include payroll expenses for employees who are quarantined ~~payroll expenses for attendance bonuses paid to hourly employees,~~ and expenses related to various items and services including personal protective equipment, thermometers, barriers and other social-distancing measures and additional nursing staff to protect the health and safety of our employees. ~~Excluding the~~By comparison, COVID-19 related expenses ~~not attributable to our Tyler facilities, other costs~~during the first nine months of ~~sales, excluding Tyler facilities, increased by $0.0148 per pound processed, or 3.7%.~~fiscal 2020 totaled approximately $16.0 million.

Cost of sales of the Company’s prepared chicken products during the first nine months of fiscal ~~2020~~2021 were ~~$134.9~~$164.8 million as compared to ~~$173.2~~$134.9 million during the same period a year ago, an increase of ~~fiscal 2019, a decrease of $38.2~~$29.9 million, or ~~22.1%~~22.2%. This ~~decrease~~increase was ~~primarily~~ attributable to a ~~24.3% decrease~~19.3% increase in the average cost of prepared chicken pounds sold and a 2.4% increase in the pounds of prepared chicken ~~sold, which is the result of reduced demand for prepared chicken products from our food service customers due to the COVID-19 pandemic.~~sold.

The Company recorded the value of live broiler inventories on hand at July 31, ~~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 July 31, ~~2020~~2021 or July 31, ~~2019.~~2020.

Selling, general and administrative ("SG&A") costs during the third quarter of fiscal ~~2020~~2021 were ~~$50.6~~$87.7 million, ~~a decrease~~an increase of ~~$1.6~~$37.1 million compared to the ~~$52.2~~$50.6 million during the third quarter of fiscal ~~2019.~~2020. SG&A costs during the nine months ended July 31, ~~2020~~2021 were ~~$156.3~~$208.6 million, ~~a decrease~~an increase of ~~$3.7~~$52.3 million compared to the ~~$160.0~~$156.3 million during the nine months ended July 31, ~~2019.~~2020. The following tables include the components of SG&A costs for the three and nine months ended July 31, ~~2020~~2021 and ~~2019.~~2020.

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Selling, General and Administrative Costs

(in thousands)


Description	Description	Three Months Ended July 31, 2020		Three Months Ended July 31, 2019		Increase/(Decrease)		Description	Three Months Ended July 31, 2021		Three Months Ended July 31, 2020		Increase/(Decrease)
Bonus expense								Bonus expense	$	14,766	$	—	$	14,766
ESOP expense	ESOP expense	$	—	$	2,700	$	(2,700)	ESOP expense	10,200		—		10,200
Stock compensation expense	Stock compensation expense	2,091		3,608		(1,517)		Stock compensation expense	6,859		2,091		4,768
Legal expense								Legal expense	10,720		6,054		4,666
Administrative salaries								Administrative salaries	12,759		12,238		521
Trainee expense	Trainee expense	2,857		3,796		(939)		Trainee expense	3,091		2,857		234
Broker commissions								Broker commissions	3,659		3,647		12
Sanderson Farms Championship expense								Sanderson Farms Championship expense	1,950		2,034		(84)
Advertising expense	Advertising expense	3,004		3,695		(691)		Advertising expense	2,758		3,004		(246)
Sanderson Farms Championship expense		2,034		1,947		87
Legal expense		6,054		5,463		591
Broker commissions		3,647		2,852		795
Administrative salaries		12,238		11,341		897
COVID-19-related expense	COVID-19-related expense	4,550		—		4,550		COVID-19-related expense	2,863		4,550		(1,687)
All other SG&A	All other SG&A	14,115		16,824		(2,709)		All other SG&A	18,093		14,115		3,978
Total SG&A	Total SG&A	$	50,590	$	52,226	$	(1,636)	Total SG&A	$	87,718	$	50,590	$	37,128

Regarding the table above, the ~~decrease~~increases in both ESOP ~~expense, payout~~and bonus expenses, payouts of which isare based on profitability, are the results of management's determination that it is probable that those payouts will be earned based on results during the ~~result~~first nine months of fiscal 2021 and probable ~~earnings~~results for the remainder of the fiscal ~~2020 being less than fiscal 2019 earnings.~~year. The ~~decrease~~increase in ~~stock~~stock-based compensation expense is primarily attributable to the ~~result~~timing of ~~lower~~ accruals related to the ~~outstanding~~Company's performance share agreements described in "Part I, Item 1, Note 5 - Stock Compensation Plans" 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 ourwith key 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 Nine Months Ended
July 31, 2020 Nine Months Ended
July 31, 2019 Increase/(Decrease)
Start-up expense (Tyler, Texas) $ — $ 9,361 $ (9,361)
Trainee expense 9,278 12,889 (3,611)
ESOP expense — 2,700 (2,700)
Stock compensation expense 6,789 9,102 (2,313)
Advertising expense 9,504 10,176 (672)
Sanderson Farms Championship expense 6,132 5,975 157
Broker commissions 9,423 8,108 1,315
Administrative salaries 36,056 33,826 2,230
Legal expense 19,993 17,167 2,826
COVID-19-related expense 8,049 — 8,049
All other SG&A 51,065 50,687 378
Total SG&A $ 156,289 $ 159,991 $ (3,702)

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 decrease in ESOP expense, payout of which is based on profitability, is the result of probable earnings for fiscal 2020 being less than fiscal 2019 earnings. The decrease in stock compensation expense is primarily the result of lower accruals related to the outstanding performance share agreements described in "Part I, Item 1, Note 5 - Stock Compensation Plans" of this Form 10-Q. 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 increase in ~~COVID-19-related~~all other SG&A expenses is primarily the result of travel and entertainment expenses returning to a normal level during our third quarter of fiscal 2021 as compared to our third quarter of fiscal 2020, when a substantial portion of business travel was halted due to the COVID-19 pandemic.

28Selling, General and Administrative Costs

~~Table~~(in thousands)


Description	Nine Months Ended July 31, 2021		Nine Months Ended July 31, 2020		Increase/(Decrease)
ESOP expense	$	16,700	$	—	$	16,700
Bonus expense	14,766		—		14,766
Legal expense	28,321		19,993		8,328
COVID-19-related expense	13,952		8,049		5,903
Stock compensation expense	12,037		6,789		5,248
Administrative salaries	37,922		36,056		1,866
Broker commissions	10,255		9,423		832
Trainee expense	9,172		9,278		(106)
Sanderson Farms Championship expense	5,853		6,132		(279)
Advertising expense	8,252		9,504		(1,252)
All other SG&A	51,332		51,065		267
Total SG&A	$	208,562	$	156,289	$	52,273

Regarding the table above, the increases in both ESOP and bonus expenses, payouts of ~~Contents~~

which are based on profitability, are the results of management's determination that it is probable that those payouts will be earned based on results during the first nine months of fiscal 2021 and probable results for the remainder of the fiscal year. 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. 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 stock-based compensation expense is primarily attributable to the timing of accruals related to the Company's performance share agreements with key employees, as described in "Part I, Item 1, Note 5 - Stock Compensation Plans" of this Form 10-Q.

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The Company’s ~~operating income for the three months ended July 31, 2020 was $39.9 million and its operating loss for the nine months ended July 31, 2020 was $53.8 million, as compared to~~ operating income for the three and nine months ended July 31, ~~2019 of $68.8~~2021 was $215.2 million and ~~$100.4~~$356.3 million, respectively, as compared to an operating income and loss for the three and nine months ended July 31, 2020 of $39.9 million and $(53.8) million, respectively. The ~~decrease~~improvement in operating ~~income~~results for the periods ended July 31, ~~2020,~~2021, as compared to the same periods a year ago, resulted primarily from ~~lower~~significantly higher average selling prices, ~~and~~partially offset by higher average costs of goods ~~sold, primarily attributable to the COVID-19 pandemic.~~sold.

~~The Company recognized interest income of $0.5 million during the third quarter and first nine months of fiscal 2020, as compared to no interest income during the same periods of fiscal 2019.~~ Interest expense during the third quarter and first nine months of fiscal ~~2020~~2021 was ~~$1.5~~$0.6 million and ~~$4.5~~$2.0 million, respectively, as compared to $1.5 million and ~~$3.2~~$4.5 million, respectively, during the third quarter and first nine months of fiscal ~~2019.~~2020. The ~~increase~~decrease in interest expense during the ~~first nine months of fiscal 2020, as compared to the same period a year ago,~~comparative periods is the result of ~~the Company's higher~~lower outstanding debt levels during fiscal ~~2020, partially offset by~~2021, in addition to lower interest rates.

The Company’s estimated annual effective tax rates for the three and nine months ended July 31, ~~2020~~2021 were ~~15.5%~~23.2% and ~~100.6%~~23.5%, respectively, as compared to ~~estimated annual~~ effective tax rates of ~~20.7%~~15.5% and ~~21.7%~~100.6%, respectively, for the three and nine months ended July 31, 2019. During the nine months ended July 31, 2020, we recorded a net discrete income tax benefit of approximately $38.1 million related to the carry-back provisions allowed by the CARES Act, in addition to other smaller discrete items.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 nine months ended July 31, ~~2020~~2021 would have been approximately ~~18.2%~~24.2% and ~~32.7%~~24.1%, respectively, as compared to ~~estimated annual~~ effective tax rates of ~~24.9%~~18.2% and ~~24.2%~~32.7%, respectively, for the three and nine months ended July 31, ~~2019. Normally~~2020. The discrete items recognized during ~~interim periods,~~ the nine months ended July 31, 2020 are primarily related to the Coronavirus Aid, Relief, and Economic Security Act ("the CARES Act") and are described in more detail in "Part I, Item 1, Note 10 - Income Taxes" of this Form 10-Q. 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 July 31, 2020. Therefore, the income tax provision for the third quarter and first nine months of fiscal 2020 was made using the actual effective tax rate for the nine-month period ending July 31, 2020.

discrete items, will be approximately 24.1%. As of July 31, ~~2020,~~2021, the Company's deferred income tax liability was ~~$135.3~~$149.5 million as compared to ~~$74.1~~$141.7 million at October 31, ~~2019,~~2020, an increase of ~~$61.2~~$7.8 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 nine months ended July 31, 2021, the Company’s net income was $164.8 million, or $7.38 per share, and $271.2 million, or $12.14 per share, respectively. For the three and nine months ended July 31, 2020, the Company’s net income was $32.8 million, or $1.48 per share, and $0.4 million, or $0.02 per share, respectively. ~~For the three and nine months ended July 31, 2019, the Company’s net income was $53.4 million, or $2.41 per share, and $76.2 million, or $3.44 per share, respectively.~~ The ~~decrease~~increase in net income for the ~~third quarter and first nine months of fiscal 2020 as compared to the same~~comparative periods ~~in fiscal 2019~~ is primarily attributable to ~~lower~~significantly 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 July 31, ~~2020~~2021 was ~~$391.2~~$587.1 million, and its current ratio, calculated by dividing current assets by current liabilities, was ~~2.8~~2.9 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, and an approximately $84.4 million income tax refund, resulting from the carry-back provision allowed by the CARES Act, received during the third quarter.~~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 July 31, ~~2020~~2021 and August ~~26, 2020,~~25, 2021, the Company had ~~borrowed $95.0 million~~no outstanding draws under the facility, and had approximately ~~$19.8~~$24.1 million outstanding in letters of credit, leaving ~~$885.2~~$975.9 million of borrowing capacity available under the facility. Management believes the Company has sufficient liquidity available to meet its needs.

The Company’s cash position at July 31, ~~2020~~2021 and October 31, ~~2019~~2020 consisted of ~~$66.1~~$245.4 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 July 31, ~~2020~~2021 and October 31, ~~2019~~2020 was

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held in bank ~~accounts and highly-liquid investment~~ accounts. There were no restrictions on the Company’s access to its cash, and such cash was available to the Company on demand to fund its operations.

Cash flows provided by operating activities during the nine months ended July 31, ~~2020~~2021 totaled ~~$115.7~~$370.7 million, as compared to cash flows provided by operating activities of ~~$152.1~~$115.7 million during the nine months ended July 31, ~~2019.~~2020. Cash flows from operating activities ~~decreased~~increased by ~~$36.4 million, resulting from two primary factors.~~$255.0 million. During the first nine 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 nine months of fiscal ~~2019. The decrease caused by the lower realized margins~~2020. This increase in cash flows was partially offset by an increase in inventories, especially our live bird and feed inventories, during the ~~change~~first nine months of fiscal 2021. The increase in inventories is primarily the result of significantly higher prices paid for corn and soybean meal, our primary feed ingredients, during the first nine months of fiscal 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 Results section. The increase in cash ~~received~~flows between the two periods was further offset by cash flows related to income taxes. During the ~~first~~ nine months ~~of fiscal 2020,~~ended July 31, 2021, the Company's net cash ~~received~~outflows related to income taxes

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totaled approximately ~~$82.9~~$44.4 million, as compared to approximately ~~$25.7~~$82.9 million in net cash received related to income taxes during the ~~first~~ nine months ~~of fiscal 2019.~~ended July 31, 2020.

Cash flows used in investing activities during the first nine months of fiscal 2021 and 2020 ~~and 2019~~ were ~~$165.7~~$125.9 million and ~~$209.3~~$165.7 million, respectively. The Company’s capital expenditures during the first nine months of fiscal 2021 were approximately $126.7 million, and included approximately $29.5 million for multiple large-scale equipment and building upgrades at multiple complexes, approximately $10.1 million on construction of a new hatchery in Jones County, Mississippi, and approximately $9.7 million to purchase new vehicles that would have been leased prior to fiscal 2020. Capital expenditures for the first nine months of fiscal 2020 were ~~approximately~~ $166.0 million, and included approximately $46.2 million for multiple large-scale equipment and building upgrades at multiple complexes and $9.7 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~~leased prior to ~~haul the Company's live birds and feed. Capital expenditures for the first nine months of~~ fiscal 2019 were $210.9 million, and included approximately $62.7 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.2020.

Cash flows ~~provided by~~used in financing activities during the nine months ended July 31, ~~2020~~2021 totaled ~~$20.6~~$48.5 million, as compared to cash flows provided by financing activities of ~~$10.3~~$20.6 million during the nine months ended July 31, ~~2019.~~2020. The change in cash flows from financing activities is primarily attributable to the ~~increase~~change in ~~net~~outstanding borrowings under the Company's revolving credit facility. During the nine months ended July 31, ~~2020,~~2021, the Company's ~~net~~outstanding borrowings under the facility ~~totaled $40.0~~decreased by $25.0 million as compared to ~~net~~an increase in outstanding borrowings of ~~$30.0~~$40.0 million under the facility during the nine months ended July 31, ~~2019.~~2020.

As of August ~~21, 2020,~~17, 2021, the ~~Company estimates its~~Company's fiscal 2021 capital budget ~~for fiscal 2020, excluding operating leases, will be~~is approximately ~~$225.1~~$195.1 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 $225.1 million~~The fiscal 2021 capital budget isincludes an aggregate of approximately ~~$52.7~~$46.4 million for multiple large-scale equipment and building upgrades at multiple complexes, ~~approximately $15.0~~$12.5 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~~previously 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 ~~$145.9~~$126.1 million. These amounts are estimates and are subject to change as we move through the remainder of 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 quarter 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

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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 July 31, ~~2020,~~2021, was ~~$1,014.9 million.~~$1.1 billion. The credit is unsecured and, unless extended, will expire on ~~March 21, 2024.~~April 23, 2026. As of July 31, ~~2020~~2021 and August ~~26, 2020,~~25, 2021, the Company had ~~borrowed $95.0 million~~no outstanding draws under the facility and had approximately ~~$19.8~~$24.1 million outstanding in letters of credit, leaving ~~$885.2~~$975.9 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 July 31, 2020, we recognized right-of-use assets and lease liabilities of approximately $42.5 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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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 third quarter of fiscal ~~2020,~~2021, the Company purchased approximately ~~33.0~~30.8 million bushels of corn and approximately ~~307,804~~280,603 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 ~~$33.0~~$30.8 million in the third 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 ~~$3.1~~$2.8 million.

Although changes in the market price paid for feed grains affect cash outlays at the time the Company purchases the grain, such changes do not immediately affect cost of sales. The cost of feed grains is recognized in cost of sales, on a first-in-first-out basis, at the same time that the sales of the chickens that consume the feed grains are recognized. Thus, there is a lag between the time cash is paid for feed ingredients and the time the cost of such feed ingredients is reported in cost of goods sold. For example, corn delivered to a ~~feedmill~~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 third quarter of fiscal ~~2020,~~2021, the Company’s average feed cost per pound of broilers processed totaled ~~$0.2404~~$0.3506 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 ~~$0.0269,~~$0.0252, based on the quantity of grain used during the third 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 ~~$0.0025~~$0.0023 during the third 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 third quarter of fiscal ~~2020:~~2021:

Feed Ingredient

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

Hypothetical Price
Change

Impact on Cash
Outlay

Ultimate Impact on
Feed Cost per
Pound of broilers
Processed

Corn

~~33.0~~30.8 million bushels

$1.00 per bushel

$~~33.0~~30.8 million

$~~0.0269/~~0.0252/lb processed

Soybean meal

~~307,804~~280,603 tons

$10.00 per ton

$~~3.1~~2.8 million

$~~0.0025/~~0.0023/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 July 31, ~~2020~~2021 the Company had no ~~fixed-rate~~outstanding 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.~~sheet.

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 July 31, ~~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 July 31, ~~2020.~~2021.

There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter ended July 31, ~~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, 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, Inc. On August 6, 2020, the end-user consumer plaintiffs filed a motion for leave to file a fifth amended complaint. Defendants' opposition is due August 28, 2020, and end-user consumer plaintiffs' reply is due September 11, 2020. The parties are currently engaged in discovery.

Between December 8, 2017 and June 12, 2020, additional purported direct-purchaser entities individually brought forty separate suits against 20 poultry producers, including Sanderson Farms and Agri Stats, Inc., in the United States District Court for the Northern District of Illinois, the United States District Court for the District of Kansas, the United States District Court for the Western District of Arkansas, and the United States District Court for the District of Puerto Rico. These suits allege substantially similar claims to the direct purchaser class complaint described above; certain of the suits additionally allege related state-law and common law claims, and related claims under federal and Georgia RICO statutes. Four complaints filed on June 12, 2020 and another complaint amended on July 24, 2020, also plead allegations of federal bid rigging. Those suits filed in the Northern District of Illinois are now pending in front of the same judge as the putative class action lawsuits. On June 26, 2018, the defendants filed a motion to transfer the case filed in the District of Kansas to the Northern District of Illinois, and that motion was granted on September 13, 2018. On June 7, 2019, the plaintiffs filed a motion to transfer the case filed in the Western District of Arkansas to the Northern District of Illinois, and that motion was granted on June 11, 2019. On July 24, 2019, one of the defendants filed a motion to transfer the case filed in the District of Puerto Rico to the Northern District of Illinois, and that motion was granted on July 25, 2019. On July 22, 2019, the Company moved to dismiss in part those direct-purchaser complaints that allege claims under federal and Georgia RICO statutes against it. The motion was fully briefed on September 20, 2019, and the Court heard argument on the motion on December 18, 2019. On March 3, 2020, the Court denied the Company's motion. On October 18, 2019, defendants moved to dismiss the case filed by the Commonwealth of Puerto Rico on its behalf and on behalf of its citizens. The motion was fully briefed on January 21, 2020. On July 15, 2020, the Court dismissed Puerto Rico's claims on behalf of its citizens. On July 2, 2020 and August 6, 2020, certain defendants, including the Company, moved to exclude bid rigging allegations and claims from the consolidated ~~In re Broiler Chicken Antitrust Litigation.~~ Plaintiffs filed oppositions on August 6, 2020 and August 20, 2020, and defendants filed a reply on August 20, 2020. Defendants' further reply is due on September 3, 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 issued three orders extending all deadlines in civil cases by 21 days, 28 days and 28 days, respectively, and two orders that did not extend any deadlines, but explained other court procedures to protect the public health and welfare. These orders apply to the litigation described above. The Northern District of Illinois will vacate, amend or extend the Fourth Amended General Order on or before September 14, 2020.

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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.

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~~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 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 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. On May 27, 2020, the Company moved to dismiss the action in the Eastern District of North Carolina under the first-to-file rule. Plaintiffs filed their opposition on June 17, 2020, and the Company filed its reply on July 1, 2020. The motion is fully briefed and awaiting the Court's decision. 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~~

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~~Chicken Antitrust Litigation.~~ ~~The Company is also aware that certain plaintiffs’ counsel in~~ ~~In re Broiler Chicken Antitrust Litigation~~ received from the Louisiana Department of Justice - Office of the Attorney General a Civil Investigation Demand that included a request to produce all deposition transcripts from the civil litigation. On August 6, 2020, the Company received a Civil Investigative Demand from the Office of the Attorney General for the State of Washington seeking information in connection with its investigation of alleged conspiracies in restraint of trade or commerce in the market for broiler chicken. The Company is cooperating with the investigative demand and coordinating with the Office of the Attorney General with respect to responding to its requests. The Company is unable to predict the outcome of the investigation at this time.

On June 22, 2017, the Company was named as a defendant in a lawsuit filed in the United States District Court for the Northern District of California. The complaint, which was brought by three non-profit organizations (the Organic Consumers Association, Friends of the Earth, and Center for Food Safety) alleged that the Company is violating the California Unfair Competition Law and the California False Advertising Law by representing that its poultry products are “100% Natural” products raised with “100% Natural” farming procedures. Among other things, the plaintiffs alleged that the Company’s products contain residues of human and animal antibiotics, other pharmaceuticals, hormones, steroids, and pesticides. Plaintiffs 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 scheduled for October 13, 2020. 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,

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plaintiffs notified defendants that they intended to file an amended consolidated complaint. Plaintiffs filed an amended consolidated complaint on December 20, 2019. Plaintiffs name as defendants Sanderson Farms, Inc. and its Foods and Processing Divisions, as well as ten other broiler chicken producers and their affiliates; three turkey producers and their affiliates; Agri Stats, Inc.; and WMS. Plaintiffs bring their amended consolidated complaint on behalf of employees at broiler chicken and turkey processing plants and allege that the defendants unlawfully conspired by agreeing to fix and depress the compensation paid to them. On January 9, 2020 and January 27, 2020, the court approved the voluntary dismissal without prejudice of two of the three nearly identical putative class action lawsuits. On March 12, 2020, the Court approved the voluntary dismissal without prejudice of the third nearly identical putative class action lawsuit.

On March 2, 2020, defendants moved to dismiss the amended consolidated complaint. The Company also filed an individual motion to dismiss plaintiffs’ claims against the Company. Plaintiffs’ oppositions were originally due on April 24, 2020 and defendants’ replies were due on May 21, 2020. However, on March 20, 2020, the District of Maryland issued Second Amended Standing Order 2020-02, extending all filing deadlines set to fall between March 16, 2020 and April 24, 2020 by 42 days. On April 10, 2020, the District of Maryland issued Standing Order 2020-07, extending all filing deadlines set to fall between March 16, 2020 and June 5, 2020 by 84 days. On May 22, 2020, the District of Maryland issued Standing Order 2020-11, which affirmed the prior Order's 84-day extension but did not extend deadlines further. Pursuant to Standing Order 2020-07, plaintiffs’ filed their omnibus opposition to defendants’ motion to dismiss on July 17, 2020. Defendants filed replies on August 13, 2020. The motion is fully briefed and awaiting the Court's decision. 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, which the Court granted on July 2, 2020 with leave to amend. On July 23, 2020, plaintiffs Pam La Fosse and Sharon Manier filed a Second Amended Complaint on behalf of a putative class of consumers who purchased the Company's chicken in California in the prior four years. Like the earlier iterations of the complaint, the Second Amended Complaint alleges that the remaining plaintiffs and other class members purchased the Company's chicken products based on misleading representations in the Company's advertising, including for the reasons set forth in their prior complaints. 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. 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 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

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~~Earth and other organizations, which the court dismissed in July 2019 and~~Contingencies," which is ~~currently on appeal to the United States Court of Appeals for the Ninth Circuit.Specifically, the plaintiffs assert that the Company is violating the California Unfair Competition Law and the California False Advertising Law~~incorporated herein by representing that its poultry products are “100% Natural” products raised with “100% Natural” farming procedures. Plaintiffs allege that the Company’s advertising (including, but not limited to, on its website, television commercials, radio advertisements, social media, print magazines, billboards, and trucks) misleads consumers into believing that (i) the Company’s chickens were not given antibiotics or other pharmaceuticals, (ii) the chickens were raised in a “natural” environment, (iii) there is no evidence that the use of antibiotics or other pharmaceuticals in poultry 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 sought monetary, compensatory, statutory, and punitive damages, as well as attorneys’ and experts’ fees, costs, and expenses. On August 12, 2020, the Company agreed to waive service of the complaint. The Company's response to the complaint is due on October 6, 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.

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 July 31, 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~~were no material changes ~~from~~during the period covered in this report to the risk factors previously disclosed in ~~the Company's~~Part I, Item 1A, of our Annual Report on Form 10-K for the ~~fiscal~~ year ended October 31, ~~2019,~~2020, except as ~~follows.~~follows:

Risks Relating to Proposed Acquisition by Cargill and CGC

The Merger is subject to receipt of approval from our shareholders as well as the satisfaction of other closing conditions in the Merger Agreement.

The Merger Agreement contains a number of customary conditions to complete the Merger, including, (i) the approval of the Merger Agreement by the holders of at least two-thirds of our outstanding shares of common stock, (ii) the absence of any order or injunction issued by a court of competent jurisdiction or governmental entity prohibiting the consummation of the transaction, (iii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iv) the receipt of regulatory approvals in China and Mexico, (v) the accuracy of the representations and warranties contained in the Merger Agreement (generally subject to certain materiality qualifiers), (vi) performance in all material respects of the obligations and the compliance in all material respects with the covenants in the Merger Agreement, (vii) the absence of a Company Material Adverse Effect (as defined in the Merger Agreement) and (viii) the absence of an MAE Detriment (as defined in the Merger Agreement) with respect to the consents, approvals, clearances and other authorizations or expirations in connection with regulatory approvals in China and Mexico. We can provide no assurance that all required approvals will be obtained or that all closing conditions will be satisfied, and, if all required approvals are obtained and the closing conditions are satisfied, we can provide no assurance as to the terms, conditions and timing of such approvals or the timing of the completion of the Merger. Any delay in completing the Merger could cause us not to realize some or all of the benefits that we expect to achieve if the Merger is successfully completed within its expected timeframe.

Failure to complete the Merger could materially adversely affect our business operations, financial results and stock price.

If the Merger is not completed, including as a result of our shareholders failing to adopt the Merger Agreement, our shareholders will not receive any payment for their shares in connection with the Merger. Instead, the Company will remain an independent public company, and the shares will continue to be traded on NASDAQ. Our ongoing business may be materially adversely affected and we would be subject to a number of risks, including the following:

•we may experience negative reactions from the financial markets, including negative impacts on our stock price, and it is uncertain when, if ever, the price of the shares would return to the prices at which the shares currently trade;

•we may experience negative publicity, which could have an adverse effect on our ongoing operations including, but not limited to, retaining and attracting employees, growers, customers, suppliers and distributors;

•we will still be required to pay certain significant costs relating to the Merger, such as legal, accounting, financial advisor, printing and other professional services fees, which may relate to activities that we would not have undertaken other than to complete the Merger;

•we may be required to pay a cash termination fee as required under the Merger Agreement;

•the Merger Agreement places certain restrictions on the conduct of our business, which may have delayed or prevented us from undertaking business opportunities that, absent the Merger Agreement, we may have pursued;

•matters relating to the Merger require substantial commitments of time and resources by our management, which could result in the distraction of management from ongoing business operations and refraining from pursuing other opportunities that could have been beneficial to us; and we may incur additional costs in connection with the defense or settlement of any shareholder litigation in connection with the Merger, which may adversely affect our ability to complete the Merger.

If the Merger is not consummated, the risks described above may materialize and they may have a material adverse effect on our business operations, financial results and stock price, especially to the extent that the current market price of our common stock reflects an assumption that the Merger will be completed.

We will be subject to various uncertainties while the Merger is pending that may cause disruption and may make it more difficult to maintain relationships with employees, growers, customers, suppliers and distributors.

Uncertainty about the effect of the Merger on employees, growers, customers, suppliers and distributors may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel until the Merger is completed, and could cause growers, customers, suppliers, distributors and others that deal with us to attempt to change existing business relationships with us. Retention and motivation of certain employees may be challenging while the Merger is pending, as certain employees may experience uncertainty about their future roles. If key employees depart, our business could be harmed. In addition, there could be distractions to or disruptions for our employees and management associated with obtaining the required approvals to close the Merger. Our growers, customers, suppliers and distributors may experience uncertainty with

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the Merger, including with respect to current or future business relationships following the Merger. Our business relationships may be subject to disruption as customers, suppliers, distributors and others may attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than with us. These disruptions could have an adverse effect on our business operations and financial results. The risks, and adverse effects, of such disruptions could be exacerbated by a delay in completion of the Merger or termination of the Merger Agreement.

We are subject to certain restrictions in the Merger Agreement that may hinder operations pending the consummation of the Merger.

Whether or not the Merger is completed, the pending Merger may disrupt our current plans and operations, which could have an adverse effect on our business operations and financial results. The Merger Agreement generally requires us to use commercially reasonable efforts to conduct our business in all material respects in the ordinary course and preserve intact in all material respects its business organization, employee relationships, assets and properties, our existence in good standing, and our business relationships during the period between the date of the Merger Agreement and the closing of the Merger, and not to engage in specified types of transactions during this period, subject to certain exceptions. These restrictions could be in place for an extended period of time if the consummation of the Merger is delayed, which may delay or prevent us from undertaking business opportunities that, absent the Merger Agreement, we might have pursued, or effectively respond to competitive pressures or industry developments. For these and other reasons, the pendency of the Merger could adversely affect our business operations and financial results.

If the Merger Agreement is terminated, we may, under certain circumstances, be obligated to pay a termination fee to Cargill and CGC. These costs could require us to use cash that would have otherwise been available for other uses.

If the Merger is not completed, in certain circumstances, we could be required to pay a termination fee of $158 million to Cargill and CGC. If the Merger Agreement is terminated, the termination fee we may be required to pay, if any, under the Merger Agreement may require us to use available cash that would have otherwise been available for general corporate purposes or other uses. The payment of a termination fee may also have an adverse impact on our financial condition and could affect the structure, pricing and terms proposed by a third party seeking to acquire or merge with us or deter such third party from making a competing acquisition proposal. Further, a failed transaction may result in negative publicity and a negative impression of us in the investment community. For these and other reasons, termination of the Merger Agreement could materially adversely affect our business operations and financial results, which in turn would materially and adversely affect the price of our common stock.

Risks Related to the COVID-19 Pandemic

The COVID-19 pandemic has had, and ~~may continue~~continues 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~~At times during the pandemic, we 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~~continued to some degree throughout fiscal 2020 and into fiscal 2021 even though ~~stay-at-home~~government restrictions ~~are being~~were reduced or lifted because restaurants and other venues ~~may be~~in some parts of the country have been required to operate at reduced capacities and, especially in areas of the country with low COVID-19 vaccination rates, consumers may fear gathering in public places. ~~In addition, a resurgence~~While we have experienced an increase in demand and market prices for products produced for food service customers during the spring and summer of 2021, resurgences of COVID-19 infections associated with the "Delta" variant after restrictions were lifted are ~~lifted~~causing and could continue to cause governments to impose new or stricter ~~stay-at-home and~~closure, capacity or social distancing ~~requirements, which~~requirements. This could cause

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consumer demand for food away from home to again 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 resurgence of the COVID-19 ~~pandemic,~~"Delta" variant, 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~~may again contribute to lower 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 and inefficiencies from a significant number of new ~~hires,~~hires. Beginning

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during late July 2021 and ~~delays due to additional health~~continuing into August 2021, we have again seen an increase in absenteeism rates associated with COVID-19, and ~~safety procedures.~~the number of positive cases among our employees has risen. 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 at the beginning of the pandemic, 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.~~plants. We have also incurred costs for personal protective equipment, cleaning, on-site medical clinics 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~~if the ~~pandemic.~~pandemic worsens.

•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 during the first year of the pandemic, which ~~have been~~were 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~~versus some foreign currencies ~~has~~ increased. This ~~has~~ led ~~and may continue to lead~~ to weaker demand and prices for our products in the export markets. While oil prices have moved higher and the value of the U.S. dollar has become more favorable versus foreign currencies, a resurgence in COVID-19 cases could again cause both of these factors to impact demand for our products from other countries.

•If the effects of the pandemic ~~continue to~~ cause market prices for our products to fall ~~then~~ as ~~explained in~~they did during the ~~Risk Factors section~~first year of ~~our Annual Report on Form 10-K for our 2019 fiscal year,~~the pandemic, 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

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grains), distributors, and other external business partners, for certain functions or ~~for~~ services inthat 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.

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•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 other 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.~~below. 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, the impact of the spread of the "Delta" variant, 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.~~

~~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 the third quarter of fiscal 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.

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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 third 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)}
May 1 - May 31, 2020 — $ — — 1,176,615
Jun. 1 - Jun. 30, 2020 1,220 117.64 1,220 1,176,615
Jul. 1 - Jul. 31, 2020 — — — 1,176,615
Total 1,220 $ 117.64 1,220 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)
May 1 - May 31, 2021	—	$	—	—	2,000,000
Jun. 1 - Jun. 30, 2021	169	188.20		169	2,000,000
Jul. 1 - Jul. 31, 2021	—	—		—	2,000,000
Total	169	$	188.20	169	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 No.						Description of Exhibit
2.1						Agreement and Plan of Merger, dated as of August 8, 2021, by and among Sanderson Farms, Inc., Walnut Sycamore Holdings LLC, Sycamore Merger Sub LLC and solely for purposes of certain provisions specified therein, Wayne Farms LLC. (Incorporated by reference to Exhibit 2.1 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)

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						~~Sixth amendment to the~~Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and ~~Affiliates Employee Stock Ownership Plan dated as of January 16, 2020.~~Lampkin Butts. (Incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)

~~10.2+~~10.2						~~Eighth amendment to the~~Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and ~~Affiliates Employee Stock Ownership Plan~~Joe F. Sanderson, Jr. (Incorporated by reference to Exhibit 10.2 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)

10.3						Employment Agreement Amendment, dated as of ~~July 16, 2020.~~August 8, 2021, by and between Sanderson Farms, Inc. and Michael Cockrell. (Incorporated by reference to Exhibit 10.3 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)

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

2.1						Agreement and Plan of Merger, dated as of August 8, 2021, by and among Sanderson Farms, Inc., Walnut Sycamore Holdings LLC, Sycamore Merger Sub LLC and solely for purposes of certain provisions specified therein, Wayne Farms LLC. (Incorporated by reference to Exhibit 2.1 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)

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						~~Sixth amendment to the~~Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and ~~Affiliates Employee Stock Ownership Plan dated as of January 16, 2020.~~Lampkin Butts. (Incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)

~~10.2+~~10.2						~~Eighth amendment to the~~Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and ~~Affiliates Employee Stock Ownership Plan~~Joe F. Sanderson, Jr. (Incorporated by reference to Exhibit 10.2 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)

10.3						Employment Agreement Amendment, dated as of ~~July 16, 2020.~~August 8, 2021, by and between Sanderson Farms, Inc. and Michael Cockrell. (Incorporated by reference to Exhibit 10.3 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)

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: August ~~27, 2020~~26, 2021	By:	/s/ D. Michael Cockrell
		Treasurer, Chief Financial Officer and Chief Legal Officer

Date: August ~~27, 2020~~26, 2021	By:	/s/ Tim Rigney
		Secretary, Corporate Controller and
		Chief Accounting Officer

4441


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
Net income - third quarter 2019	—		—			—		53,362		53,362
Cash dividends ($0.32 per share)	—		—			—		(7,090)		(7,090)
Stock compensation plan transactions	(1,504)		(1)			115		—		114
Amortization of unearned compensation	—		—			3,367		—		3,367
Balance at July 31, 2019	22,152,741		$	22,153		$	88,891	$	1,339,421	$	1,450,465


Fiscal Year	Amount
2020 (remainder)	$	3,584
2021	14,398
2022	11,969
2023	8,327
2024	4,744
Thereafter	2,430
Total undiscounted operating lease payments	45,452
Less: imputed interest	(2,979)
Present value of lease liabilities	$	42,473


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)}
May 1 - May 31, 2020	—	$	—	—	1,176,615
Jun. 1 - Jun. 30, 2020	1,220	117.64		1,220	1,176,615
Jul. 1 - Jul. 31, 2020	—	—		—	1,176,615
Total	1,220	$	117.64	1,220	1,176,615