STOCK COMPENSATION PLANS

Refer to Note 8 and Note 9 of the Company’s October 31, 2016 audited financial statements in the Company's 2016 Annual Report on Form 10-K for further information on our employee benefit plans and stock based compensation plans, respectively. Total stock based compensation expense during the three months ended January 31, 2017 was $5,685,000 as compared to total stock based compensation expense of $2,722,000 for the three months ended January 31, 2016.

During the three months ended January 31, 2017, participants in the Company’s Management Share Purchase Plan (MSPP) elected to receive a total of 3,058 shares of restricted stock at an average price of $94.19 per share instead of a specified percentage of their cash compensation, and the Company issued 734 matching restricted shares. During the three months ended January 31, 2017, the Company recorded compensation cost for the MSPP shares, included in the total stock based compensation expense above, of $60,000 as compared to $89,000 during the three months ended January 31, 2016.

During fiscal 2017, 2016 and 2015, 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. The target number of shares specified in the performance share agreements executed on November 1, 2016 totaled 68,250. As of January 31, 2017, the Company could not determine that achievement of the applicable performance based criteria is probable for the agreements entered into on November 1, 2016 due to the uncertainties discussed below, 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, 2015. During the quarter ended January 31, 2017, the Company determined that achievement of the applicable performance based criteria for the November 1, 2015 agreements is probable at a level between the target and maximum levels. Accordingly, the quarter ended January 31, 2017 includes compensation expense of $3,291,000, included in the total stock based compensation expense above, as compared to no compensation expense recorded during the quarter ended January 31, 2016, related to the agreements entered into on November 1, 2015. As of January 31, 2017, the aggregate number of shares estimated to be awarded related to the performance share agreements entered into on November 1, 2015 totaled 113,084 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 nine months of the performance period ending October 31, 2017, and due to potential forfeitures.

The Compensation Committee of the Company's Board of Directors has determined that the performance shares entered into on November 1, 2014 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, 2017. Accordingly, the three months ended January 31, 2017 include compensation expense of $634,000, related to those agreements, as compared to no compensation expense during the three months ended January 31, 2016. There was no compensation expense recorded during the quarter ended January 31, 2016 related to the agreements entered into on November 1, 2014, because management's initial determination of probability was made during the second quarter of fiscal 2016. As of January 31, 2017, the aggregate number of shares estimated to be awarded related to the performance share agreements entered into on November 1, 2014 totaled 102,387 shares. Since the performance period for those agreements has ended, the actual number of shares that will be awarded can change only due to potential forfeitures during the remaining nine months of the service period ending October 31, 2017.

In estimating the compensation expense to record in a period for any outstanding performance share grants, 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. The accounting for these arrangements requires the Company to accrue over the three-year service period the estimated amounts that will be earned with changes made during the service period adjusted using the cumulative catch up method. Had the Company determined that it was probable that the maximum amount of those outstanding awards from the agreements entered into on November 1, 2015 and November 1, 2016 would be earned, an additional $1.4 million and $1.0 million, respectively, would have been accrued as of January 31, 2017.

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



		Three months ended
Date of Performance Share Agreement	Number of shares issued (actual (a) or estimated (e))	January 31, 2017		January 31, 2016
November 1, 2013	146,169 (a)	$	—	$	767
November 1, 2014	102,387 (e)	634		—
November 1, 2015	113,084 (e)	3,291		—
November 1, 2016 (1)	— (e)	—		—
Total compensation cost		$	3,925	$	767

Note (1) - As of January 31, 2017, the Company could not determine that achievement of the applicable performance based criteria is probable for the agreements entered into on November 1, 2016 due to the uncertainties discussed above, and therefore recorded no compensation expense related to those agreements.

On November 1, 2016, the Company granted 68,250 shares of restricted stock to certain officers and key management employees. The restricted stock had a grant date fair value of $91.61 per share and will vest on November 1, 2020. On February 9, 2017, the Company granted an aggregate of 15,237 shares of restricted stock to all of its non-employee directors. The restricted stock had a grant date fair value of $88.61 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 January 31, 2017 related to all unvested restricted stock grants totaled 310,700. During the three months ended January 31, 2017, the Company recorded compensation cost, included in the total stock based compensation expense above, of $1,700,000 related to restricted stock grants, as compared to $1,866,000 during the three months ended January 31, 2016. The Company had $13.4 million in unrecognized share-based compensation costs as of January 31, 2017, that will be recognized over a weighted average remaining vesting period of approximately 2 years, 4 months.