Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Apr. 30, 2018 | May 21, 2018 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Apr. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | SAFM | |
Entity Registrant Name | SANDERSON FARMS INC | |
Entity Central Index Key | 812,128 | |
Current Fiscal Year End Date | --10-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Share Outstanding (in shares) | 22,836,407 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Apr. 30, 2018 | Oct. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 327,260 | $ 419,285 |
Accounts receivable, net | 145,600 | 138,868 |
Inventories | 267,746 | 252,765 |
Refundable income taxes | 27,130 | 0 |
Prepaid expenses and other current assets | 37,669 | 38,620 |
Total current assets | 805,405 | 849,538 |
Property, plant and equipment | 1,784,475 | 1,657,084 |
Less accumulated depreciation | (828,629) | (780,276) |
Property, plant and equipment, net | 955,846 | 876,808 |
Other assets | 6,164 | 6,897 |
Total assets | 1,767,415 | 1,733,243 |
Current liabilities: | ||
Accounts payable | 104,212 | 90,904 |
Dividends payable | 7,307 | 0 |
Accrued expenses | 62,188 | 101,168 |
Accrued income taxes | 0 | 6,649 |
Total current liabilities | 173,707 | 198,721 |
Claims payable and other liabilities | 9,621 | 9,762 |
Deferred income taxes | 66,133 | 91,898 |
Commitments and contingencies | ||
Stockholders’ equity: | ||
Common Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares—22,836,407 and 22,802,690 at April 30, 2018 and October 31, 2017, respectively | 22,836 | 22,803 |
Paid-in capital | 141,517 | 134,999 |
Retained earnings | 1,353,601 | 1,275,060 |
Total stockholders’ equity | 1,517,954 | 1,432,862 |
Total liabilities and stockholders’ equity | 1,767,415 | 1,733,243 |
Series A Junior Participating Preferred Stock | ||
Stockholders’ equity: | ||
Preferred Stock | ||
Other Preferred Stock | ||
Stockholders’ equity: | ||
Preferred Stock |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Apr. 30, 2018 | Oct. 31, 2017 |
Common Stock, par value (in usd per share) | $ 1 | $ 1 |
Common Stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common Stock, shares issued (in shares) | 22,836,407 | 22,802,690 |
Common Stock, shares outstanding (in shares) | 22,836,407 | 22,802,690 |
Series A Junior Participating Preferred Stock | ||
Preferred Stock, par value (in usd per share) | $ 100 | $ 100 |
Preferred Stock, authorized shares (in shares) | 500,000 | 500,000 |
Preferred Stock, shares issued (in shares) | 0 | 0 |
Other Preferred Stock | ||
Preferred Stock, authorized shares (in shares) | 4,500,000 | 4,500,000 |
Preferred Stock, shares issued (in shares) | 0 | 0 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2018 | Apr. 30, 2017 | Apr. 30, 2018 | Apr. 30, 2017 | |
Income Statement [Abstract] | ||||
Net sales | $ 813,474 | $ 802,038 | $ 1,585,422 | $ 1,490,384 |
Cost and expenses: | ||||
Cost of sales | 703,410 | 655,283 | 1,405,511 | 1,261,674 |
Selling, general and administrative | 55,037 | 43,641 | 107,612 | 89,711 |
Cost and expenses | 758,447 | 698,924 | 1,513,123 | 1,351,385 |
Operating Income | 55,027 | 103,114 | 72,299 | 138,999 |
Other income (expense): | ||||
Interest income | 905 | 301 | 1,324 | 496 |
Interest expense | (506) | (428) | (1,029) | (860) |
Other | 4 | 3 | 6 | 5 |
Other income (expense) | 403 | (124) | 301 | (359) |
Income before income taxes | 55,430 | 102,990 | 72,600 | 138,640 |
Income tax expense (benefit) | 13,482 | 35,975 | (20,554) | 47,600 |
Net income | $ 41,948 | $ 67,015 | $ 93,154 | $ 91,040 |
Earnings per share: | ||||
Basic (in usd per share) | $ 1.84 | $ 2.95 | $ 4.08 | $ 4 |
Diluted (in usd per share) | 1.84 | 2.95 | 4.08 | 4 |
Dividends per share (in usd per share) | $ 0.32 | $ 0.24 | $ 0.64 | $ 0.48 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Apr. 30, 2018 | Apr. 30, 2017 | |
Operating activities | ||
Net income | $ 93,154 | $ 91,040 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 53,859 | 46,920 |
Non-cash stock compensation | 10,623 | 9,379 |
Deferred income taxes | (25,765) | 21,701 |
Change in assets and liabilities: | ||
Accounts receivable, net | (6,732) | (14,184) |
Income taxes | (33,779) | (14,383) |
Inventories | (14,981) | (14,490) |
Prepaid expenses and other assets | 1,161 | (7,525) |
Accounts payable | 6,970 | 6,714 |
Accrued expenses and other liabilities | (38,485) | (6,219) |
Total adjustments | (47,129) | 27,913 |
Net cash provided by operating activities | 46,025 | 118,953 |
Investing activities | ||
Capital expenditures | (126,928) | (96,635) |
Net proceeds from sale of property and equipment | 892 | 319 |
Net cash used in investing activities | (126,036) | (96,316) |
Financing activities | ||
Payments for debt issuance costs | 0 | (2,416) |
Proceeds from issuance of restricted stock under stock compensation plans | 894 | 475 |
Payments from issuance of common stock under stock compensation plans | (5,603) | (3,068) |
Dividends paid | (7,305) | (5,458) |
Net cash used in financing activities | (12,014) | (10,467) |
Net change in cash and cash equivalents | (92,025) | 12,170 |
Cash and cash equivalents at beginning of period | 419,285 | 234,111 |
Cash and cash equivalents at end of period | 327,260 | 246,281 |
Supplemental disclosure of non-cash financing activity: | ||
Dividends payable | $ (7,307) | $ (5,458) |
ACCOUNTING POLICIES
ACCOUNTING POLICIES | 6 Months Ended |
Apr. 30, 2018 | |
Accounting Policies [Abstract] | |
Accounting Policies | ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the three and six months ended April 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2018 . The condensed consolidated balance sheet at October 31, 2017 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for its fiscal year ended October 31, 2017 . New Accounting Pronouncements In July 2015, the Financial Accounting Standards Board ("FASB") issued guidance that requires an entity to measure inventory at the lower of cost or net realizable value. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2016, our fiscal 2018. The Company adopted this guidance during the first quarter of fiscal 2018, and it did not have a material effect on the Company's consolidated financial statements. During the third quarter of fiscal 2017, the Company early-adopted Accounting Standards Update ("ASU") 2016-09, Improvements to Employee Share-Based Payment Accounting. The provisions of this update that materially affected our consolidated financial statements, or could potentially materially affect them in the future, require all income tax effects of stock awards to be recognized in the statement of operations during the period the awards vest or are settled, rather than recording excess tax benefits or deficiencies in additional paid-in capital, and require the related amounts to be presented as operating activities on the statement of cash flows, rather than financing activities. During the period of adoption, the standard requires the Company to account for the transactions as if the standard had been adopted on the first day of the fiscal year in which it was adopted. As a result of adoption, our income tax expense for the first half of fiscal 2017 was reduced by approximately $924,000 from excess tax benefits attributable to awards that vested during the first half of fiscal 2017. As a result, the income tax expense on the statement of operations for the three and six months ended April 30, 2017 on this Form 10-Q is $72,000 and $924,000 , respectively, less than the amount originally reported in our financial statements for the second quarter of fiscal 2017. Additionally, excess tax benefits are now presented as operating activities on the statement of cash flows, rather than financing activities. The Company chose to apply that provision retrospectively, and as a result, reclassified the $2.2 million of excess tax benefits originally reported in our financial statements for the second quarter of fiscal 2017 from financing activities to operating activities on the statement of cash flows for the six months ended April 31, 2017 on this Form 10-Q. In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which amends the requirements related to accounting for changes to stock compensation awards. The guidance is effective for interim and annual periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted. The impact this guidance will have on our consolidated financial statements will depend on the nature and extent of future changes, if any, to the terms and conditions of the Company's Stock Incentive Plan. In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost. The guidance requires the service cost component of defined benefit pension plans and other post-retirement benefit plans to be reported in the same line item or items as other compensation costs arising from the services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be reported outside of operating income. The guidance is effective for interim and annual periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted. We do not expect adoption to have a material effect on our consolidated financial statements. In February 2016, the FASB issued 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 guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2018, our fiscal 2020. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which changes the criteria for recognizing revenue. ASU 2014-09 was amended by ASU 2015-14 to defer the effective date by one year. The guidance also modifies the related disclosure requirements, clarifies guidance for multiple-element arrangements and provides guidance for transactions that were not addressed fully in previous guidance. The guidance, as amended, is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2016. Companies have the option to adopt retrospectively or modified retrospectively with a cumulative effect adjustment. The Company expects to adopt this standard as of November 1, 2018, the beginning of our fiscal 2019, using the modified retrospective approach. The Company is currently evaluating the impact this guidance will have on our consolidated financial statements. Although we are still evaluating the overall impact, we do not currently expect adoption to have a material effect on our consolidated financial statements, other than additional disclosure requirements. |
INVENTORIES
INVENTORIES | 6 Months Ended |
Apr. 30, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES Inventories consisted of the following: April 30, 2018 October 31, 2017 (In thousands) Live poultry-broilers and breeders $ 172,805 $ 161,575 Feed, eggs and other 43,598 35,361 Processed poultry 30,427 37,769 Prepared chicken 14,466 12,207 Packaging materials 6,450 5,853 $ 267,746 $ 252,765 |
STOCK COMPENSATION PLANS
STOCK COMPENSATION PLANS | 6 Months Ended |
Apr. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK COMPENSATION PLANS | STOCK COMPENSATION PLANS Refer to Note 8 and Note 9 of the Company’s October 31, 2017 audited financial statements in the Company's 2017 Annual Report on Form 10-K for further information on our employee benefit plans and stock based compensation plans, respectively. Total stock based compensation expense during the three and six months ended April 30, 2018 was $4.4 million and $10.6 million , respectively, as compared to total stock based compensation expense of $3.7 million and $9.4 million for the three and six months ended April 30, 2017 , respectively. During the six months ended April 30, 2018 , participants in the Company’s Management Share Purchase Plan ("MSPP") elected to receive a total of 6,617 shares of restricted stock at an average price of $135.27 per share instead of a specified percentage of their cash compensation, and the Company issued 1,592 matching restricted shares. During the three and six months ended April 30, 2018 , the Company recorded compensation expense for the MSPP shares, included in the total stock based compensation expense above, of $103,000 and $165,000 , respectively, as compared to $138,000 and $198,000 during the three and six months ended April 30, 2017 , respectively. During fiscal 2018, 2017 and 2016, the Company entered into performance share agreements that grant certain officers and key employees the right to receive shares of the Company's common stock, subject to the Company's achievement of certain performance measures. The performance share agreements specify a target number of shares that a participant can receive based upon the Company's average return on equity and average return on sales, as defined, during a two-year performance period beginning November 1 of each performance period. Although the performance share agreements have a two -year performance period, they are subject to an additional one -year period during which the participant must remain employed by the Company before they are paid out. If the Company's average return on equity and average return on sales 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, 2017 totaled 53,850 . As of April 30, 2018 , the Company could not determine that achievement of the applicable performance based criteria is probable due to the uncertainties discussed above, and therefore recorded no compensation expense related to those agreements. The Company also has performance share agreements in place with certain officers and key employees that were entered into on November 1, 2016. During the quarter ended January 31, 2018, the Company determined that achievement of the applicable performance based criteria for the November 1, 2016 agreements is probable at a level between the target and maximum levels. Accordingly, because the accrual is made using the cumulative catch-up method, the three and six months ended April 30, 2018 include compensation expense of $1.5 million and $4.8 million , respectively, as compared to no compensation expense recorded during the three and six months ended April 30, 2017 related to the agreements entered into on November 1, 2016. As of April 30, 2018 , the aggregate number of shares estimated to be awarded related to the performance share agreements entered into on November 1, 2016 totaled 105,765 shares. The actual number of shares that can be awarded for those agreements could change materially from that estimate due to the Company's actual performance during the remaining six months of the performance period ending October 31, 2018, and due to potential forfeitures. The Company will recognize the remaining unearned compensation related to these shares over the remaining service period. The Compensation Committee of the Company's Board of Directors has determined that the performance share agreements entered into on November 1, 2015 have been earned at a level between the target and maximum levels, subject to the satisfaction of the additional one -year service period ending on October 31, 2018. Accordingly, the three and six months ended April 30, 2018 include compensation expense of $0.8 million and $1.7 million , respectively, related to those agreements, as compared to compensation expense of $1.2 million and $4.5 million , respectively, during the three and six months ended April 30, 2017 . Because managment's initial determination of probability was made during the three months ended January 31, 2017, and because the accrual is made using the cumulative catch-up method, the compensation expense recorded during the first half of fiscal 2017 related to the agreements entered into on November 1, 2015 was greater than that recorded during the first half of fiscal 2018. As of April 30, 2018 , the aggregate number of shares estimated to be awarded related to the performance share agreements entered into on November 1, 2015 totaled 145,469 shares. Since the performance period for those agreements has ended, the actual number of shares that will be awarded can change only due to potential forfeitures during the remaining six months of the service period ending October 31, 2018. The Company will recognize the remaining unearned compensation related to these shares over the remaining service period. Had the Company determined that it was probable that the maximum amount of those outstanding awards from the agreements entered into on November 1, 2016 and November 1, 2017 would be earned, an additional $1.2 million and $2.6 million, respectively, would have been accrued as of April 30, 2018 . The Company's compensation cost related to performance share agreements is summarized as follows (in thousands, except number of shares): Three months ended Six months ended Date of Performance Share Agreement Number of shares issued (actual (a) or estimated (e)) April 30, 2018 April 30, 2017 April 30, 2018 April 30, 2017 November 1, 2014 102,193 (a) $ — $ 709 $ — $ 1,343 November 1, 2015 145,469 (e) 828 1,193 1,674 4,484 November 1, 2016 105,765 (e) 1,519 — 4,845 — November 1, 2017 (1) — — — — — Total compensation cost $ 2,347 $ 1,902 $ 6,519 $ 5,827 Note (1) - As of April 30, 2018, the Company could not determine that achievement of the applicable performance-based criteria is probable for the agreements entered into on November 1, 2017 due to the uncertainties discussed above, and therefore recorded no compensation expense related to those agreements. On November 1, 2017, the Company granted 53,850 shares of restricted stock to certain officers and key management employees. The restricted stock had a grant date fair value of $148.23 per share and will vest on November 1, 2021 . On February 15, 2018, the Company granted an aggregate of 11,400 shares of restricted stock to all of its non-employee directors. The restricted stock had a grant date fair value of $131.61 per share and vests one , two or three years from the date of grant. The Company also has unvested restricted stock grants outstanding that were granted during prior fiscal years to its officers, key employees and outside directors. The aggregate number of shares outstanding at April 30, 2018 related to all unvested restricted stock grants totaled 282,156 . During the three and six months ended April 30, 2018 , the Company recorded compensation expense, included in the total stock based compensation expense above, of $1.9 million and $3.9 million , respectively, related to restricted stock grants, as compared to $1.7 million and $3.4 million during the three and six months ended April 30, 2017 , respectively. The Company had $14.9 million in unrecognized share-based compensation costs as of April 30, 2018 , which will be recognized over a weighted average remaining vesting period of approximately 2 years . |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Apr. 30, 2018 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | EARNINGS PER SHARE Certain share-based payment awards described in Note 3 - Stock Compensation Plans above entitling holders to receive non-forfeitable dividends before vesting are considered participating securities and thus are included in the calculation of basic earnings per share, to the extent they are dilutive. These awards are included in the calculation of basic earnings per share under the two-class method. The two-class method allocates earnings for the period between common shareholders and other security holders. The participating awards receiving dividends are allocated the same amount of income as if they were vested shares. The following tables present earnings per share. Three months ended April 30, 2018 April 30, 2017 (in thousands except per share amounts) Net income $ 41,948 $ 67,015 Distributed and undistributed (earnings) to unvested restricted stock (598 ) (1,016 ) Distributed and undistributed earnings to common shareholders—Basic $ 41,350 $ 65,999 Weighted average shares outstanding—Basic 22,511 22,396 Weighted average shares outstanding—Diluted 22,511 22,396 Earnings per common share—Basic $ 1.84 $ 2.95 Earnings per common share—Diluted $ 1.84 $ 2.95 Six months ended April 30, 2018 April 30, 2017 (in thousands except per share amounts) Net income $ 93,154 $ 91,040 Distributed and undistributed (earnings) to unvested restricted stock (1,329 ) (1,414 ) Distributed and undistributed earnings to common shareholders—Basic $ 91,825 $ 89,626 Weighted average shares outstanding—Basic 22,506 22,387 Weighted average shares outstanding—Diluted 22,506 22,387 Earnings per common share—Basic $ 4.08 $ 4.00 Earnings per common share—Diluted $ 4.08 $ 4.00 |
FAIR VALUE OF FINANCIAL INSTRUM
FAIR VALUE OF FINANCIAL INSTRUMENTS | 6 Months Ended |
Apr. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS The Company holds certain items that are required to be disclosed at fair value, primarily 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. At April 30, 2018 , and October 31, 2017, the fair value of the Company's cash and cash equivalents approximated their carrying value due to the short maturity of these financial instruments and were categorized as a Level 2 measurement. Inputs used to measure fair value were primarily recent trading prices and prevailing market interest rates. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Apr. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Property, Plant and Equipment In March 2017, the Company announced the selection of sites in Lindale, Mineola and Smith County, Texas, for the construction of a new poultry processing complex. The completed complex will consist of a hatchery, feed mill, processing plant and waste water treatment facility. Construction commenced on this project during the fourth quarter of fiscal 2017, and initial operations of the completed complex are expected to begin during the first calendar quarter of 2019. The Company estimates the total investment in the complex will be approximately $225.0 million , and the Company intends to request the banks party to its revolving credit facility described below in "Note 7 - Credit Agreement" to increase the capital expenditure limitation related to this facility to an amount sufficient to cover the total estimated expenditures. If the Company is unsuccessful negotiating such an increase, capital budgets will be adjusted to ensure compliance with the limitations currently set forth in the revolving credit facility. As of April 30, 2018, the Company has entered into commitments totaling approximately $186.0 million related to the new complex, of which approximately $54.4 million has been spent to date. As of April 30, 2018 , the Company has outstanding commitments totaling $12.6 million related to purchase agreements for future delivery of aircraft. These commitments are expected to be paid as follows: $8.5 million during the remainder of fiscal 2018 and $4.1 million during fiscal 2019. 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 case, and the indirect purchaser complaints into two cases, one on behalf of commercial and institutional indirect purchaser plaintiffs and one on behalf of end-user consumer plaintiffs. On October 28, 2016, the direct and indirect purchaser plaintiffs filed consolidated, amended complaints, and on November 23, 2016, the direct and indirect purchaser plaintiffs filed second amended complaints. On December 16, 2016, the indirect purchaser plaintiffs separated into two cases. On that date, the commercial and institutional indirect purchaser plaintiffs filed a third amended complaint, and the end-user consumer plaintiffs filed an amended complaint. On January 27, 2017, the defendants filed motions to dismiss the amended complaints in all of the cases, and on November 20, 2017, the motions to dismiss were denied. On February 7, 2018, the direct purchaser plaintiffs filed their third amended complaint, adding three additional poultry producers as defendants. On February 12, 2018, the end-user consumer plaintiffs filed their second amended complaint, in which they also added three additional poultry producers as defendants, along with Agri Stats. On February 20, 2018, the commercial indirect purchaser plaintiffs filed their fourth amended complaint. The parties are currently engaged in discovery. 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, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations. Between December 8, 2017 and May 16, 2018, additional purported direct-purchaser entities individually brought six separate suits against 17 poultry producers, including Sanderson Farms, and Agri Stats in the United States District Court for the Northern District of Illinois and the United States District Court for the District of Kansas. These suits allege substantially similar claims to the direct purchaser class complaint described above and are now pending in front of the same judge. They are moving into discovery on a similar timeline as the putative class action lawsuits. It is possible additional individual actions may be filed. Sanderson Farms, Inc.; Joe F. Sanderson, Jr., the Chairman of the Registrant’s Board of Directors and its Chief Executive Officer; and D. Michael Cockrell, director and Chief Financial Officer, were named as defendants in a putative class action lawsuit filed on October 28, 2016, in the United States District Court for the Southern District of New York. On March 30, 2017, the lead plaintiff filed an amended complaint adding Lampkin Butts, director, Chief Operating Officer, and President, as a defendant, and on June 15, 2017, the lead plaintiff filed a second amended complaint. The complaint alleges that the defendants made statements in the Company’s SEC filings and press releases, and other public statements, that were materially false and misleading in light of the Company’s alleged, undisclosed violation of the federal antitrust laws described above. The complaint also alleges that the material misstatements were made in order to, among other things, “artificially inflate and maintain the market price of Sanderson Farms securities.” The complaint alleges the defendants thereby violated the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and, for the individual defendants, Section 20(a) of the Exchange Act, and seeks damages, interest, costs and attorneys’ fees. On January 19, 2018, the Court granted the defendants’ motion to dismiss and entered judgment for the defendants. On January 31, 2018, the plaintiff filed a notice of appeal to the United States Court of Appeals for the Second Circuit, and the Company is awaiting a ruling on that appeal. The Company cannot predict the outcome of this action or the appeal. If the plaintiffs were to prevail in the action, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations. On January 30, 2017, the Company received a letter from a putative shareholder demanding that the Company take action against current and/or former officers and directors of the Company for alleged breach of their fiduciary duties. The shareholder asserted that the officers and directors (i) failed to take any action to stop the alleged antitrust conspiracy described above, despite their alleged knowledge of the conspiracy, and (ii) made and/or caused the Company to make materially false and misleading statements by failing to disclose the alleged conspiracy. The shareholder also asserted that certain directors engaged in “insider sales” from which they improperly benefited. The shareholder also demanded that the Company adopt unspecified corporate governance improvements. On February 9, 2017, pursuant to statutory procedures available in connection with demands of this type, the Company’s board of directors appointed a special committee of qualified directors to determine, after conducting a reasonable inquiry, whether it is in the Company’s best interests to pursue any of the actions asserted in the shareholder’s letter. On April 26, 2017, the special committee reported to the Company’s board of directors its determination that it is not in the Company’s best interests to take any of the demanded actions at this time, and that no governance improvements related to the subject matter of the demand are needed at this time. On May 5, 2017, the special committee’s counsel informed the shareholder’s counsel of the committee’s determination. As of the date of filing of this report, and to the Company’s knowledge, no legal proceedings related to the shareholder’s demand have been filed. On January 27, 2017, Sanderson Farms, Inc. and our subsidiaries were named as defendants, along with four other poultry producers and certain of their affiliated companies, in a putative class action lawsuit filed in the United States District Court for the Eastern District of Oklahoma. On March 27, 2017, Sanderson Farms, Inc. and our subsidiaries were named as defendants, along with four other poultry producers and certain of their affiliated companies, in a second putative class action lawsuit filed in the United States District Court for the Eastern District of Oklahoma. The Court ordered the suits consolidated into one proceeding, and on July 10, 2017, the plaintiffs filed a consolidated amended complaint. The consolidated amended complaint alleges that the defendants unlawfully conspired by sharing data on compensation paid to broiler farmers, with the purpose and effect of suppressing the farmers’ compensation below competitive levels. The consolidated amended complaint also alleges that the defendants unlawfully conspired to not solicit or hire the broiler farmers who were providing services to other defendants. The consolidated amended complaint seeks treble damages, costs and attorneys’ fees. On September 8, 2017, the defendants filed a motion to dismiss the amended complaint, on October 23, 2017, the plaintiffs filed their response, and on November 22, 2017, the defendants filed a reply. On January 19, 2018, the Court granted the Sanderson Farms defendants’ motion to dismiss for lack of personal jurisdiction. The motion to dismiss the complaint filed in the Eastern District of Oklahoma on its merits is pending as to the remaining defendants. On February 21, 2018, the plaintiffs filed a substantially similar lawsuit in United States District Court for the Eastern District of North Carolina against Sanderson Farms and our subsidiaries and another poultry producer. Defendants subsequently moved to consolidate this action with the Eastern District of Oklahoma action in the Eastern District of Oklahoma for pre-trial proceedings. The judge in the Eastern District of North Carolina granted a stay of litigation pending the decision on consolidation. The Company is awaiting ruling on that motion for consolidation. We intend to defend this case vigorously; however, the Company cannot predict the outcome of this action. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations. On February 21, 2017, Sanderson Farms, Inc. received an antitrust civil investigative demand from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida. Among other things, the demand seeks information related to the Georgia Dock Index and other information on poultry and poultry products published by the Georgia Department of Agriculture and its Poultry Market News division. The Company is cooperating fully with the investigative demand, and we are unable to predict its outcome at this time. On June 22, 2017, the Company was named as a defendant in a lawsuit filed in the United States District Court for the Northern District of California. The complaint, which was brought by three non-profit organizations (the Organic Consumers Association, Friends of the Earth, and Center for Food Safety) alleged that the Company is violating the California Unfair Competition Law and the California False Advertising Law by representing that its poultry products are “100% Natural” products raised with “100% Natural” farming procedures. Among other things, the plaintiffs alleged that the Company’s products contain residues of human and animal antibiotics, other pharmaceuticals, hormones, steroids, and pesticides. Plaintiffs seek an order enjoining the Company from continuing its allegedly unlawful marketing program and requiring the Company to conduct a corrective advertising campaign; an accounting of the Company’s profits derived from the allegedly unlawful marketing practices; and attorneys’ fees, costs and interest. On August 2, 2017, the Company moved to dismiss the lawsuit on various grounds. On August 23, 2017, the plaintiffs filed an amended complaint, which includes substantially similar allegations as the original complaint, and the Company filed a motion to dismiss the amended complaint on September 13, 2017. On February 9, 2018, the Court denied the Company’s motion to dismiss. On February 13, 2018, the Company filed a motion for sanctions under Federal Rule of Civil Procedure 11 on the basis that Plaintiffs and their counsel knowingly included false or inaccurate statements and unsupported allegations in their complaints and other filings. The Court denied that motion on April 2, 2018. An initial scheduling conference was held on March 1, 2018, and discovery is underway. The lawsuit is in its early stages, and we intend to defend it vigorously; however, the Company cannot predict the outcome of this action. If the plaintiffs were to prevail, the Company’s reputation and marketing program could be materially, adversely affected, which could have a material, adverse effect on our financial position and results of operations. The Company is involved in various other claims and litigation incidental to its business. Although the outcome of these matters cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome of currently pending matters, other than those discussed above, should not have a material effect on the Company’s consolidated results of operations or financial position. The Company recognizes the costs of legal defense for the legal proceedings to which it is a party in the periods incurred. After a considerable analysis of each case, the Company has determined that no accrual is required for any of the foregoing matters as of April 30, 2018. Future reserves may be required if losses are deemed reasonably estimable and probable due to changes in the Company’s assumptions, the effectiveness of legal strategies, or other factors beyond the Company’s control. Future results of operations may be materially affected by the creation of reserves or by accruals of losses to reflect any adverse determinations in these legal proceedings. |
CREDIT AGREEMENT
CREDIT AGREEMENT | 6 Months Ended |
Apr. 30, 2018 | |
Debt Disclosure [Abstract] | |
CREDIT AGREEMENT | CREDIT AGREEMENT The Company is a party to a revolving credit facility dated April 28, 2017, as amended on November 22, 2017, with a maximum available borrowing capacity of $900.0 million . The facility has annual capital expenditure limitations of $105.0 million , $110.0 million , $115.0 million , $120.0 million and $125.0 million for fiscal years 2018 through 2022, respectively, and permits up to $20.0 million of the unused capital expenditure limitation for any fiscal year starting with fiscal 2017 to be carried over to the next fiscal year. The normal capital expenditure limitation for fiscal 2018 is $125.0 million , including $20.0 million carried over from fiscal 2017. The credit facility also permits capital expenditures up to $200.5 million on the construction of a new poultry processing complex in Lindale, Mineola and Smith County, Texas, up to $210.0 million on the construction of a potential additional new poultry complex, up to $15.0 million on expansion of the Company's existing prepared chicken facility in Flowood, Mississippi, up to $60.0 million on a potential new prepared chicken facility, and up to $70.0 million on the purchase of three new aircraft. As amended on November 22, 2017, the facility also excludes from the normal capital expenditure limits certain capital projects in an aggregate amount of up to $135.0 million . These additional projects, which include the construction of a new feed mill, and other expansions, equipment and changes to the Laurel, Collins, McComb and Hazlehurst, Mississippi complexes; the Waco, Palestine and Brazos, Texas complexes; the Moultrie, Georgia complex; and the Kinston, North Carolina complex, are each subject to their own expenditure limitations. Under the credit facility, the Company may not exceed a maximum debt to total capitalization ratio of 50% . The Company has a one-time right, at any time during the term of the agreement, to increase the maximum debt to total capitalization ratio then in effect by five percentage points in connection with the construction of any of the three aforementioned new complexes for the four fiscal quarters beginning on the first day of the fiscal quarter during which the Company gives written notice of its intent to exercise this right. The Company has not exercised this right. The facility also sets a minimum net worth requirement that at April 30, 2018 , was $1,028.2 million . The credit is unsecured and, unless extended, will expire on April 28, 2022 . As of April 30, 2018 , and May 23, 2018, the Company had no outstanding draws under the facility, and had approximately $23.5 million outstanding in letters of credit, leaving $876.5 million of borrowing capacity available under the facility. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Apr. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES On December 22, 2017, President Trump signed the "Tax Cut and Jobs Act" (the "Tax Act") into law. The provisions of the Tax Act that will materially affect our fiscal years 2018 and thereafter include, but are not limited to, a reduction in the corporate federal income tax rate from 35% to 21% and a change in the bonus depreciation rules to allow full expensing of qualified property in the year placed in service. Provisions of the Tax Act that will not affect our fiscal year 2018, but could materially affect our fiscal years 2019 and thereafter include, but are not limited to, a lower tax rate on foreign-derived intangible income, the repeal of the domestic production activities deduction and changes to the rules regarding the deductibility of excessive employee remuneration for certain employees. Our financial statements for the first half of fiscal 2018 were materially affected by the changes enacted by the Tax Act to the Internal Revenue Code of 1986, as amended. U.S. GAAP requires that the effects from changes in tax laws be recognized in the period in which the new law is enacted, which for the Tax Act is our first quarter of fiscal 2018. For fiscal 2018, our statutory federal income tax rate will decrease from the previously enacted 35% to approximately 23.3% . The fiscal 2018 statutory rate will not decrease entirely to 21%, because it is a blended rate of two months at 35% (before the Tax Act became effective) and ten months at 21% (after the Tax Act became effective). In addition to benefiting from the lower corporate federal income tax rate on current earnings, the Company recorded a tax benefit in accordance with U.S. GAAP related to the revaluation of its deferred tax assets and liabilities using the enacted tax rate expected to apply when the temporary differences from which the deferred taxes arose are expected to be settled. Following the enactment of the Tax Act, the United States Securities and Exchange Commission issued guidance in Staff Accounting Bulletin 118 which provides the Company up to a one-year measurement period, beginning on the Tax Act's enactment date, in which to complete the required analysis and accounting for the effects of the Tax Act. The guidance allows the Company to record provisional adjustments related to the impacts of the Tax Act when the accounting for the effects of the Tax Act is incomplete, but when reasonable estimates can be made regarding the effects of the Tax Act. Our accounting for the Tax Act is not complete, because it required the Company to estimate the timing of settlement of the temporary differences from which our deferred taxes arose; however, we were able to make reasonable estimates, and we recorded those estimates as provisional adjustments as described in the paragraph below. The Company will continue to monitor these estimates as we move through the measurement period. If any adjustments to the provisional amounts are required, those adjustments will be recorded in the period such new information becomes available. The Company's estimated annual effective tax rates for the three and six months ended April 30, 2018 were 24.3% and (28.3)% , respectively, as compared to 34.9% and 34.3% , respectively, for the three and six months ended April 30, 2017. The revaluation of our deferred taxes using the newly enacted tax rate resulted in a $37.5 million discrete income tax benefit recognized during the first quarter of fiscal 2018. There were no other material discrete items affecting the comparative periods. Excluding the effects of discrete items, the Company's estimated annual effective tax rate for the six months ended April 30, 2018 would have been approximately 24.4%, as compared to approximately 35.0% for the six months ended April 30, 2017. |
ACCOUNTING POLICIES (Policies)
ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Apr. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Accounting | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the three and six months ended April 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2018 . The condensed consolidated balance sheet at October 31, 2017 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for its fiscal year ended October 31, 2017 . |
New Accounting Pronouncements | New Accounting Pronouncements In July 2015, the Financial Accounting Standards Board ("FASB") issued guidance that requires an entity to measure inventory at the lower of cost or net realizable value. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2016, our fiscal 2018. The Company adopted this guidance during the first quarter of fiscal 2018, and it did not have a material effect on the Company's consolidated financial statements. During the third quarter of fiscal 2017, the Company early-adopted Accounting Standards Update ("ASU") 2016-09, Improvements to Employee Share-Based Payment Accounting. The provisions of this update that materially affected our consolidated financial statements, or could potentially materially affect them in the future, require all income tax effects of stock awards to be recognized in the statement of operations during the period the awards vest or are settled, rather than recording excess tax benefits or deficiencies in additional paid-in capital, and require the related amounts to be presented as operating activities on the statement of cash flows, rather than financing activities. During the period of adoption, the standard requires the Company to account for the transactions as if the standard had been adopted on the first day of the fiscal year in which it was adopted. As a result of adoption, our income tax expense for the first half of fiscal 2017 was reduced by approximately $924,000 from excess tax benefits attributable to awards that vested during the first half of fiscal 2017. As a result, the income tax expense on the statement of operations for the three and six months ended April 30, 2017 on this Form 10-Q is $72,000 and $924,000 , respectively, less than the amount originally reported in our financial statements for the second quarter of fiscal 2017. Additionally, excess tax benefits are now presented as operating activities on the statement of cash flows, rather than financing activities. The Company chose to apply that provision retrospectively, and as a result, reclassified the $2.2 million of excess tax benefits originally reported in our financial statements for the second quarter of fiscal 2017 from financing activities to operating activities on the statement of cash flows for the six months ended April 31, 2017 on this Form 10-Q. In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which amends the requirements related to accounting for changes to stock compensation awards. The guidance is effective for interim and annual periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted. The impact this guidance will have on our consolidated financial statements will depend on the nature and extent of future changes, if any, to the terms and conditions of the Company's Stock Incentive Plan. In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost. The guidance requires the service cost component of defined benefit pension plans and other post-retirement benefit plans to be reported in the same line item or items as other compensation costs arising from the services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be reported outside of operating income. The guidance is effective for interim and annual periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted. We do not expect adoption to have a material effect on our consolidated financial statements. In February 2016, the FASB issued 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 guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2018, our fiscal 2020. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which changes the criteria for recognizing revenue. ASU 2014-09 was amended by ASU 2015-14 to defer the effective date by one year. The guidance also modifies the related disclosure requirements, clarifies guidance for multiple-element arrangements and provides guidance for transactions that were not addressed fully in previous guidance. The guidance, as amended, is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2016. Companies have the option to adopt retrospectively or modified retrospectively with a cumulative effect adjustment. The Company expects to adopt this standard as of November 1, 2018, the beginning of our fiscal 2019, using the modified retrospective approach. The Company is currently evaluating the impact this guidance will have on our consolidated financial statements. Although we are still evaluating the overall impact, we do not currently expect adoption to have a material effect on our consolidated financial statements, other than additional disclosure requirements. |
Earnings Per Share | Certain share-based payment awards described in Note 3 - 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. |
Fair Value Of Financial Instruments | The Company holds certain items that are required to be disclosed at fair value, primarily 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. At April 30, 2018 , and October 31, 2017, the fair value of the Company's cash and cash equivalents approximated their carrying value due to the short maturity of these financial instruments and were categorized as a Level 2 measurement. Inputs used to measure fair value were primarily recent trading prices and prevailing market interest rates. |
Commitments and Contingencies | The Company is involved in various other claims and litigation incidental to its business. Although the outcome of these matters cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome of currently pending matters, other than those discussed above, should not have a material effect on the Company’s consolidated results of operations or financial position. The Company recognizes the costs of legal defense for the legal proceedings to which it is a party in the periods incurred. After a considerable analysis of each case, the Company has determined that no accrual is required for any of the foregoing matters as of April 30, 2018. Future reserves may be required if losses are deemed reasonably estimable and probable due to changes in the Company’s assumptions, the effectiveness of legal strategies, or other factors beyond the Company’s control. Future results of operations may be materially affected by the creation of reserves or by accruals of losses to reflect any adverse determinations in these legal proceedings. |
INVENTORIES (Tables)
INVENTORIES (Tables) | 6 Months Ended |
Apr. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Inventories consisted of the following: April 30, 2018 October 31, 2017 (In thousands) Live poultry-broilers and breeders $ 172,805 $ 161,575 Feed, eggs and other 43,598 35,361 Processed poultry 30,427 37,769 Prepared chicken 14,466 12,207 Packaging materials 6,450 5,853 $ 267,746 $ 252,765 |
STOCK COMPENSATION PLANS (Table
STOCK COMPENSATION PLANS (Tables) | 6 Months Ended |
Apr. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of Compensation Cost Related to Performance Share Agreements | The Company's compensation cost related to performance share agreements is summarized as follows (in thousands, except number of shares): Three months ended Six months ended Date of Performance Share Agreement Number of shares issued (actual (a) or estimated (e)) April 30, 2018 April 30, 2017 April 30, 2018 April 30, 2017 November 1, 2014 102,193 (a) $ — $ 709 $ — $ 1,343 November 1, 2015 145,469 (e) 828 1,193 1,674 4,484 November 1, 2016 105,765 (e) 1,519 — 4,845 — November 1, 2017 (1) — — — — — Total compensation cost $ 2,347 $ 1,902 $ 6,519 $ 5,827 Note (1) - As of April 30, 2018, the Company could not determine that achievement of the applicable performance-based criteria is probable for the agreements entered into on November 1, 2017 due to the uncertainties discussed above, and therefore recorded no compensation expense related to those agreements. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Apr. 30, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | The following tables present earnings per share. Three months ended April 30, 2018 April 30, 2017 (in thousands except per share amounts) Net income $ 41,948 $ 67,015 Distributed and undistributed (earnings) to unvested restricted stock (598 ) (1,016 ) Distributed and undistributed earnings to common shareholders—Basic $ 41,350 $ 65,999 Weighted average shares outstanding—Basic 22,511 22,396 Weighted average shares outstanding—Diluted 22,511 22,396 Earnings per common share—Basic $ 1.84 $ 2.95 Earnings per common share—Diluted $ 1.84 $ 2.95 Six months ended April 30, 2018 April 30, 2017 (in thousands except per share amounts) Net income $ 93,154 $ 91,040 Distributed and undistributed (earnings) to unvested restricted stock (1,329 ) (1,414 ) Distributed and undistributed earnings to common shareholders—Basic $ 91,825 $ 89,626 Weighted average shares outstanding—Basic 22,506 22,387 Weighted average shares outstanding—Diluted 22,506 22,387 Earnings per common share—Basic $ 4.08 $ 4.00 Earnings per common share—Diluted $ 4.08 $ 4.00 |
ACCOUNTING POLICIES (Details)
ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Apr. 30, 2017 | Apr. 30, 2018 | Apr. 30, 2017 | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||
Amount of excess tax benefit | $ 72 | $ 924 | $ 924 |
Net cash used in financing activities | 12,014 | 10,467 | |
Net cash provided by operating activities | $ 46,025 | 118,953 | |
Accounting Standards Update 2016-09 | |||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||
Net cash used in financing activities | 2,200 | ||
Net cash provided by operating activities | $ 2,200 |
INVENTORIES (Detail)
INVENTORIES (Detail) - USD ($) $ in Thousands | Apr. 30, 2018 | Oct. 31, 2017 |
Inventory [Line Items] | ||
Inventories | $ 267,746 | $ 252,765 |
Live poultry-broilers and breeders | ||
Inventory [Line Items] | ||
Inventories | 172,805 | 161,575 |
Feed, eggs and other | ||
Inventory [Line Items] | ||
Inventories | 43,598 | 35,361 |
Processed poultry | ||
Inventory [Line Items] | ||
Inventories | 30,427 | 37,769 |
Prepared chicken | ||
Inventory [Line Items] | ||
Inventories | 14,466 | 12,207 |
Packaging materials | ||
Inventory [Line Items] | ||
Inventories | $ 6,450 | $ 5,853 |
STOCK COMPENSATION PLANS - Addi
STOCK COMPENSATION PLANS - Additional Information (Details) - USD ($) | Feb. 09, 2017 | Nov. 01, 2016 | Apr. 30, 2018 | Apr. 30, 2017 | Apr. 30, 2018 | Apr. 30, 2017 | Apr. 30, 2018 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Total stock based compensation expense | $ 4,400,000 | $ 3,700,000 | $ 10,600,000 | $ 9,400,000 | |||
Restricted Stock | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Total stock based compensation expense | $ 1,900,000 | 1,700,000 | $ 3,900,000 | 3,400,000 | |||
Aggregate number of shares outstanding (in shares) | 282,156 | 282,156 | 282,156 | ||||
Unrecognized share-based compensation costs | $ 14,900,000 | $ 14,900,000 | $ 14,900,000 | ||||
Weighted average vesting period | 2 years | ||||||
Restricted Stock | Outside Directors | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Shares of restricted stock granted (in shares) | 11,400 | ||||||
Grant date fair value of restricted shares (in usd per share) | $ 131.61 | ||||||
Restricted Stock | Outside Directors | Scenario One | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting period | 1 year | ||||||
Restricted Stock | Outside Directors | Scenario Two | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting period | 2 years | ||||||
Restricted Stock | Outside Directors | Scenario Three | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting period | 3 years | ||||||
Performance Based Awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Total stock based compensation expense | 2,347,000 | 1,902,000 | $ 6,519,000 | 5,827,000 | |||
Performance period (in years) | 2 years | ||||||
Additional service period | 1 year | ||||||
Management Share Purchase Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Total stock based compensation expense | $ 103,000 | 138,000 | $ 165,000 | 198,000 | |||
Management Share Purchase Plan | Restricted Stock | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of shares issued (in shares) | 6,617 | ||||||
Average price per share purchased by participants (in usd per share) | $ 135.27 | $ 135.27 | $ 135.27 | ||||
Management Share Purchase Plan | Matching Restricted Shares | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of shares issued (in shares) | 1,592 | ||||||
Performance Share Plan 2017 | Performance Based Awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Total stock based compensation expense | $ 0 | 0 | $ 0 | 0 | |||
Target number of common stock to be granted (in shares) | 53,850 | ||||||
Aggregate number of shares outstanding (in shares) | 0 | 0 | 0 | ||||
Performance Share Plan 2017 | Performance Based Awards | Officers And Key Management Employees | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Shares of restricted stock granted (in shares) | 53,850 | ||||||
Grant date fair value of restricted shares (in usd per share) | $ 148.23 | ||||||
Performance Share Plan 2016 | Performance Based Awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Total stock based compensation expense | $ 1,519,000 | 0 | $ 4,845,000 | 0 | |||
Aggregate number of shares outstanding (in shares) | 105,765 | 105,765 | 105,765 | ||||
Performance Share Plan 2015 | Performance Based Awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Total stock based compensation expense | $ 828,000 | $ 1,193,000 | $ 1,674,000 | $ 4,484,000 | |||
Additional service period | 1 year | ||||||
Aggregate number of shares outstanding (in shares) | 145,469 | 145,469 | 145,469 | ||||
Potential accrued compensation cost | $ 2,600,000 | $ 1,200,000 | |||||
Minimum | Performance Based Awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Percentage of potential performance shares received | 50.00% | ||||||
Maximum | Performance Based Awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Percentage of potential performance shares received | 200.00% |
STOCK COMPENSATION PLANS - Comp
STOCK COMPENSATION PLANS - Compensation Costs (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2018 | Apr. 30, 2017 | Apr. 30, 2018 | Apr. 30, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total compensation cost | $ 4,400,000 | $ 3,700,000 | $ 10,600,000 | $ 9,400,000 |
Performance Based Awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total compensation cost | $ 2,347,000 | 1,902,000 | $ 6,519,000 | 5,827,000 |
Performance Based Awards | Performance Share Plan 2014 | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of share issued (in shares) | 102,193 | 102,193 | ||
Total compensation cost | $ 0 | 709,000 | $ 0 | 1,343,000 |
Performance Based Awards | Performance Share Plan 2015 | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of share issued (in shares) | 145,469 | 145,469 | ||
Total compensation cost | $ 828,000 | 1,193,000 | $ 1,674,000 | 4,484,000 |
Performance Based Awards | Performance Share Plan 2016 | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of share issued (in shares) | 105,765 | 105,765 | ||
Total compensation cost | $ 1,519,000 | 0 | $ 4,845,000 | 0 |
Performance Based Awards | Performance Share Plan 2017 | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of share issued (in shares) | 0 | 0 | ||
Total compensation cost | $ 0 | $ 0 | $ 0 | $ 0 |
EARNINGS PER SHARE (Detail)
EARNINGS PER SHARE (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2018 | Apr. 30, 2017 | Apr. 30, 2018 | Apr. 30, 2017 | |
Earnings Per Share [Abstract] | ||||
Net income | $ 41,948 | $ 67,015 | $ 93,154 | $ 91,040 |
Distributed and undistributed (earnings) to unvested restricted stock | (598) | (1,016) | (1,329) | (1,414) |
Distributed and undistributed earnings to common shareholders—Basic | $ 41,350 | $ 65,999 | $ 91,825 | $ 89,626 |
Weighted average shares outstanding—Basic (in shares) | 22,511 | 22,396 | 22,506 | 22,387 |
Weighted average shares outstanding—Diluted (in shares) | 22,511 | 22,396 | 22,506 | 22,387 |
Earnings per common share-Basic (in usd per share) | $ 1.84 | $ 2.95 | $ 4.08 | $ 4 |
Earnings per common share-Diluted (in usd per share) | $ 1.84 | $ 2.95 | $ 4.08 | $ 4 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Detail) $ in Millions | 13 Months Ended |
Apr. 30, 2018USD ($) | |
Long-term Purchase Commitment [Line Items] | |
Total purchase obligation | $ 12.6 |
Purchase obligation, due in 2018 | 8.5 |
Purchase obligation, due in 2019 | 4.1 |
Texas | |
Long-term Purchase Commitment [Line Items] | |
Estimated cost of investment | 225 |
Total purchase obligation | 186 |
Construction and development costs | $ 54.4 |
CREDIT AGREEMENT (Detail)
CREDIT AGREEMENT (Detail) | Apr. 28, 2017USD ($) | Apr. 30, 2018USD ($) |
Debt Instrument [Line Items] | ||
Revolving credit facility, maximum borrowing capacity | $ 900,000,000 | |
Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Revolving credit facility, permitted carry over of capital expenditure limitation | $ 20,000,000 | |
Revolving credit facility, annual capital expenditure limitations | 125,000,000 | |
Line of credit | ||
Debt Instrument [Line Items] | ||
Increase in debt to total capitalization ratio (as percent) | 5.00% | |
Line of credit | 2018 | ||
Debt Instrument [Line Items] | ||
Revolving credit facility, capital expenditure limitation | $ 105,000,000 | |
Revolving credit facility, permitted carry over of capital expenditure limitation | 20,000,000 | |
Line of credit | 2019 | ||
Debt Instrument [Line Items] | ||
Revolving credit facility, capital expenditure limitation | 110,000,000 | |
Line of credit | 2020 | ||
Debt Instrument [Line Items] | ||
Revolving credit facility, capital expenditure limitation | 115,000,000 | |
Line of credit | 2021 | ||
Debt Instrument [Line Items] | ||
Revolving credit facility, capital expenditure limitation | 120,000,000 | |
Line of credit | 2022 | ||
Debt Instrument [Line Items] | ||
Revolving credit facility, capital expenditure limitation | $ 125,000,000 | |
Line of credit | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Revolving credit facility, maximum debt to total capitalization ratio (as percent) | 0.50 | |
Revolving credit facility, minimum net worth requirement | 1,028,200,000 | |
Revolving credit facility, outstanding borrowings | 0 | |
Revolving credit facility, remaining available balance | 876,500,000 | |
Line of credit | Letter of Credit | ||
Debt Instrument [Line Items] | ||
Revolving credit facility, outstanding borrowings | $ 23,500,000 | |
Construction expenditure limitation | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Revolving credit facility, construction expenditure limitation | $ 135,000,000 | |
Construction expenditure limitation | Revolving Credit Facility | Tyler, Texas | ||
Debt Instrument [Line Items] | ||
Revolving credit facility, construction expenditure limitation | 200,500,000 | |
Construction expenditure limitation | Revolving Credit Facility | Unknown City and State | ||
Debt Instrument [Line Items] | ||
Revolving credit facility, construction expenditure limitation | 210,000,000 | |
Construction expenditure limitation | Revolving Credit Facility | Floowood, Mississippi | ||
Debt Instrument [Line Items] | ||
Revolving credit facility, construction expenditure limitation | 15,000,000 | |
Processing Complex | Revolving Credit Facility | Unknown City and State | ||
Debt Instrument [Line Items] | ||
Revolving credit facility, construction expenditure limitation | 60,000,000 | |
Aircraft expenditure | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Revolving credit facility, capital expenditure limitation | $ 70,000,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Apr. 30, 2018 | Jan. 31, 2018 | Apr. 30, 2017 | Apr. 30, 2018 | Apr. 30, 2017 | Oct. 31, 2018 | |
Income Taxes [Line Items] | ||||||
Effective income tax rate reconciliation | 24.30% | 34.90% | (28.30%) | 34.30% | ||
Change in tax rate, deferred tax asset, provisional income tax benefit | $ 37.5 | |||||
Scenario, Forecast | ||||||
Income Taxes [Line Items] | ||||||
Federal statutory income tax rate, percent | 23.30% |