10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

___________________________

FORM 10-Q

___________________________

(MARK ONE)

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

For the quarterly period ended April 30, 2020

OR

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

For the transition period from                      to                     

Commission file number: 1-14977

___________________________

Sanderson Farms, Inc.

(Exact name of registrant as specified in its charter)

___________________________

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

         127 Flynt Road, Laurel, Mississippi      39443

         (Address of principal executive offices)      (Zip Code)

(601) 649-4030

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS

DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ☐    No  ☐

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Stock, $1 Par Value Per Share: 22,239,574 shares outstanding as of May 26, 2020.

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TABLE OF CONTENTS

SANDERSON FARMS, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (Unaudited)	3
	Condensed consolidated balance sheets—April 30, 2020 and October 31, 2019	3
	Condensed consolidated statements of operations—Three and six months ended April 30, 2020 and 2019	4
	Condensed consolidated statements of stockholders' equity—Three and six months ended April 30, 2020 and 2019	5
	Condensed consolidated statements of cash flows—Six months ended April 30, 2020 and 2019	6
	Notes to condensed consolidated financial statements—April 30, 2020	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32
PART II. OTHER INFORMATION		32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 6.	Exhibits	40
INDEX TO EXHIBITS		41
SIGNATURES		42

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except number of shares)

	April 30, 2020		October 31, 2019
	(Unaudited)		(Note 1)
Assets
Current assets:
Cash and cash equivalents	$	61,330	$	95,417
Accounts receivable, net	132,072		131,778
Receivable from insurance companies	—		445
Inventories	297,477		289,928
Refundable income taxes	127,372		6,612
Prepaid expenses and other current assets	63,396		56,931
Total current assets	681,647		581,111
Property, plant and equipment, net	1,235,556		1,185,860
Right of use assets	45,913		—
Other assets	6,394		7,163
Total assets	$	1,969,510	$	1,774,134
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	119,961	$	132,741
Dividends payable	7,117		—
Accrued expenses	82,214		82,940
Lease liabilities	15,188		—
Total current liabilities	224,480		215,681
Long-term debt	200,000		55,000
Claims payable and other liabilities	11,475		11,646
Deferred income taxes	131,388		74,132
Long-term lease liabilities	30,725		—
Commitments and contingencies
Stockholders’ equity:
Preferred Stock:
Series A Junior Participating Preferred Stock, $100 par value: authorized 500,000 shares, none issued
Par value to be determined by the Board of Directors: authorized 4,500,000 shares; none issued
Common Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares—22,239,574 and 22,203,920 at April 30, 2020 and October 31, 2019, respectively	22,239		22,204
Paid-in capital	86,430		86,010
Retained earnings	1,262,773		1,309,461
Total stockholders’ equity	1,371,442		1,417,675
Total liabilities and stockholders’ equity	$	1,969,510	$	1,774,134

See notes to condensed consolidated financial statements.

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SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share amounts)

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

See notes to condensed consolidated financial statements.

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SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)

(In thousands, except shares and per share amounts)

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

Fiscal Year 2020	Common Stock			Paid-In Capital		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance at October 31, 2019	22,203,920	$	22,204	$	86,010	$	1,309,461	$	1,417,675
Net loss - first quarter 2020	—	—		—		(38,576)		(38,576)
Cash dividends ($0.32 per share)	—	—		—		(7,113)		(7,113)
Stock compensation plan transactions	25,292	25		(4,721)		—		(4,696)
Amortization of unearned compensation	—	—		2,082		—		2,082
Balance at January 31, 2020	22,229,212	$	22,229	$	83,371	$	1,263,772	$	1,369,372
Net income - second quarter 2020	—	—		—		6,118		6,118
Cash dividends ($0.32 per share)	—	—		—		(7,117)		(7,117)
Stock compensation plan transactions	10,362	10		1,099		—		1,109
Amortization of unearned compensation	—	—		1,960		—		1,960
Balance at April 30, 2020	22,239,574	$	22,239	$	86,430	$	1,262,773	$	1,371,442

See notes to condensed consolidated financial statements.

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SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

	Six Months Ended   April 30,
	2020		2019
Operating activities
Net income (loss)	$	(32,458)	$	22,803
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	75,474		62,379
Amortization of share-based compensation	5,173		5,907
Live inventory adjustment (net of prior period reversal)	(2,800)		(9,600)
Provision for losses (recoveries) on accounts receivable	—		(1,500)
Deferred income taxes	57,256		6,699
Loss on asset disposals	238		—
Change in assets and liabilities:
Accounts receivable - trade	(294)		(3,457)
Accounts receivable - insurance	445		1,111
Income taxes	(120,760)		27,363
Inventories	(4,749)		(35,817)
Prepaid expenses and other assets	(6,242)		(9,160)
Right of use assets	8,733		—
Lease liabilities	(8,733)		—
Accounts payable	(8,159)		(10,738)
Accrued expenses and other liabilities	(353)		(6,193)
Total adjustments	(4,771)		26,994
Net cash provided by (used in) operating activities	(37,229)		49,797
Investing activities
Capital expenditures	(129,691)		(162,268)
Net proceeds from sale of property and equipment	207		880
Net cash used in investing activities	(129,484)		(161,388)
Financing activities
Payment of debt issuance costs	—		(2,225)
Borrowings from revolving line of credit	145,000		100,000
Proceeds from issuance of restricted stock under stock compensation plans	600		479
Payments from issuance of common stock under stock compensation plans	(5,861)		(3,829)
Dividends paid	(7,113)		(7,089)
Net cash provided by financing activities	132,626		87,336
Net change in cash and cash equivalents	(34,087)		(24,255)
Cash and cash equivalents at beginning of period	95,417		121,193
Cash and cash equivalents at end of period	$	61,330	$	96,938
Supplemental disclosure of non-cash investing and financing activities:
Capital expenditures included in accounts payable	$	5,588	$	5,174
Dividends payable	$	7,117	$	7,089

See notes to condensed consolidated financial statements.

6

SANDERSON FARMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

April 30, 2020

NOTE 1—ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the three and six months ended April 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2020.

The condensed consolidated balance sheet at October 31, 2019 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.

New Accounting Pronouncements

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

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which intends to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019, our fiscal 2021. Early adoption is permitted. We do not expect adoption to have a material effect on our consolidated financial statements.

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.

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

7

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):

Product Category	Three Months Ended April 30, 2020		Three Months Ended April 30, 2019
Fresh, vacuum-sealed chicken	$	265,258	$	330,713
Fresh, chill-packed chicken	343,165		269,304
Fresh, ice-packed chicken	130,798		132,427
Prepared chicken	38,810		61,995
Frozen chicken	62,187		44,109
Other	4,493		6,681
Total net sales	$	844,711	$	845,229

Product Category	Six Months Ended April 30, 2020		Six Months Ended April 30, 2019
Fresh, vacuum-sealed chicken	$	576,554	$	590,782
Fresh, chill-packed chicken	630,432		537,768
Fresh, ice-packed chicken	251,261		232,459
Prepared chicken	90,192		119,391
Frozen chicken	108,861		92,700
Other	10,489		15,517
Total net sales	$	1,667,789	$	1,588,617

NOTE 3—INVENTORIES

Inventories consisted of the following (in thousands):

Inventory type	April 30, 2020		October 31, 2019
Live poultry-broilers and breeders	$	195,265	$	179,870
Feed, eggs and other	40,599		47,417
Processed poultry	37,969		35,121
Prepared chicken	15,936		20,032
Packaging materials	7,708		7,488
Total Inventories	$	297,477	$	289,928

NOTE 4—PROPERTY, PLANT AND EQUIPMENT

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

8

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

NOTE 5—STOCK COMPENSATION PLANS

Refer to Note 9 and Note 10 of the Company’s October 31, 2019 audited financial statements in the Company's 2019 Annual Report on Form 10-K for further information on our employee benefit plans and stock based compensation plans, respectively. Total stock based compensation expense during the three and six months ended April 30, 2020 was $2.4 million and $5.2 million, respectively, as compared to total stock based compensation expense of $3.0 million and $5.9 million, respectively, for the three and six months ended April 30, 2019.

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

During fiscal 2020, 2019 and 2018, the Company entered into performance share agreements that grant certain officers and key employees the right to receive shares of the Company's common stock, subject to the Company's achievement of certain performance measures. The performance share agreements specify a target number of shares that a participant can receive based upon the Company's average return on equity and average return on sales, as defined, during a two-year performance period beginning November 1 of each performance period. Although the performance share agreements have a two-year performance period, there is an additional one-year period during which the participant must remain employed by the Company before the shares are paid out. If the Company's average return on equity and average return on sales meet or exceed certain threshold amounts for the performance period, participants will receive 50 percent to 200 percent of the target number of shares, depending upon the Company's level of performance. Accruals for performance shares begin during the period management determines that achievement of the applicable performance based criteria is probable at some level. In estimating the probability of the number of shares that will be awarded, the Company considers, among other factors, current and projected grain costs and chicken volumes and pricing, as well as the amount of the Company's commitments to procure grain at a fixed price throughout the performance period. Due to the high level of volatility of these commodity prices and the impact that the change in pricing can have on the Company's results, the Company's assessment of probability can change from period to period and can result in a significant revision to the amounts accrued related to the arrangements, as the accruals are adjusted using the cumulative catch-up method of accounting.

The target number of shares specified in the performance share agreements executed on November 1, 2019 totaled 56,575. As of April 30, 2020, 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 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, 2018. The target number of shares specified in those agreements totaled 74,650. As of April 30, 2020, 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 no 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 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. Accordingly, the three and six months ended April 30, 2020 include compensation expense of $157,000 and

9

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

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

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, 2020		April 30, 2019		April 30, 2020		April 30, 2019
November 1, 2016	84,511 (a)	$	—	$	650	$	—	$	1,263
November 1, 2017	13,093 (e)	157		—		347		—
November 1, 2018 (1)	— (e)	—		—		—		—
November 1, 2019 (1)	— (e)	—		—		—		—
Total compensation cost		$	157	$	650	$	347	$	1,263

Note (1) - As of April 30, 2020, 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, due to the uncertainties discussed above, and therefore recorded no compensation expense related to those agreements.

On November 1, 2019, the Company granted 56,575 shares of restricted stock to certain officers and key management employees. The restricted stock had a grant date fair value of $159.76 per share and will vest on November 1, 2023. On February 13, 2020, the Company granted an aggregate of 12,100 shares of restricted stock to all of its non-employee directors. The restricted stock had a grant date fair value of $136.76 per share and vests one, two or three years from the date of grant. The Company also has unvested restricted stock grants outstanding that were granted during prior fiscal years to its officers, key employees and outside directors. The aggregate number of shares outstanding at April 30, 2020 related to all unvested restricted stock grants totaled 265,353. During the three and six months ended April 30, 2020, the Company recorded compensation expense, included in the total stock based compensation expense above, of $2.2 million and $4.7 million, respectively, related to restricted stock grants, as compared to $2.2 million and $4.4 million, respectively, during the three and six months ended April 30, 2019. The Company had $18.0 million in unrecognized share-based compensation costs as of April 30, 2020, which will be recognized over a weighted average remaining vesting period of approximately 2 years.

NOTE 6—EARNINGS PER SHARE

Certain share-based payment awards described in Note 5 - Stock Compensation Plans above entitling holders to receive non-forfeitable dividends before vesting are considered participating securities and thus are included in the calculation of basic earnings per share, to the extent they are dilutive. These awards are included in the calculation of basic earnings per share under the two-class method. The two-class method allocates earnings for the period between common shareholders and other security holders. The participating awards receiving dividends are allocated the same amount of income as if they were vested shares.

The following tables present earnings per share:

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	Three Months Ended
	April 30, 2020		April 30, 2019
	(in thousands except per share amounts)
Net income	$	6,118	$	40,636
Distributed and undistributed (earnings) to unvested restricted stock	(81)		(597)
Distributed and undistributed earnings to common shareholders—Basic	$	6,037	$	40,039
Weighted average shares outstanding—Basic	21,943		21,830
Weighted average shares outstanding—Diluted	21,943		21,830
Earnings per common share—Basic	$	0.28	$	1.83
Earnings per common share—Diluted	$	0.28	$	1.83
	Six Months Ended
	April 30, 2020		April 30, 2019
	(in thousands except per share amounts)
Net income (loss)	$	(32,458)	$	22,803
Distributed and undistributed (earnings) to unvested restricted stock	—		(340)
Distributed and undistributed earnings (loss) to common shareholders—Basic	$	(32,458)	$	22,463
Weighted average shares outstanding—Basic	21,939		21,822
Weighted average shares outstanding—Diluted	21,939		21,822
Earnings (loss) per common share—Basic	$	(1.48)	$	1.03
Earnings (loss) per common share—Diluted	$	(1.48)	$	1.03

NOTE 7—FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company holds certain items that are required to be disclosed at fair value, primarily debt instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level hierarchy is followed for disclosure to show the extent and level of judgment used to estimate fair value measurements:

Level 1 – Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.

Level 2 – Inputs used to measure fair value, other than quoted prices included in Level 1, are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

Level 3 – Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

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

NOTE 8—COMMITMENTS AND CONTINGENCIES

Property, Plant and Equipment

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

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

On October 28, 2016, the direct and indirect purchaser plaintiffs filed consolidated, amended complaints, and on November 23, 2016, the direct and indirect purchaser plaintiffs filed second amended complaints. On December 16, 2016, the indirect purchaser plaintiffs separated into two cases. On that date, the commercial and institutional indirect purchaser plaintiffs filed a third amended complaint, and the end-user consumer plaintiffs filed an amended complaint.

On January 27, 2017, the defendants filed motions to dismiss the amended complaints in all of the cases, and on November 20, 2017, the motions to dismiss were denied. On February 7, 2018, the direct purchaser plaintiffs filed their third amended complaint, adding three additional poultry producers as defendants. On February 12, 2018, the end-user consumer plaintiffs filed their second amended complaint, in which they also added three additional poultry producers as defendants, along with Agri Stats. On February 20, 2018, the commercial and institutional indirect purchaser plaintiffs filed their fourth amended complaint. On November 13, 2018, the commercial and institutional indirect purchaser plaintiffs filed their fifth amended complaint, adding three additional poultry producers as defendants. On November 28, 2018, the end-user consumer plaintiffs filed their third amended complaint. On January 15, 2019, the direct purchaser plaintiffs filed their fourth amended complaint, and the commercial and institutional indirect purchaser plaintiffs filed their sixth amended complaint. Both the direct purchaser plaintiffs and the commercial and institutional indirect purchaser plaintiffs added two new poultry producers as defendants, as well as Agri Stats. On April 29, 2019, the end-user consumer plaintiffs filed their fourth amended complaint. The parties are currently engaged in discovery.

Between December 8, 2017 and April 11, 2020, additional purported direct-purchaser entities individually brought thirty-six separate suits against 19 poultry producers, including Sanderson Farms and Agri Stats, in the United States District Court for the Northern District of Illinois, the United States District Court for the District of Kansas, the United States District Court for the Western District of Arkansas, and the United States District Court for the District of Puerto Rico. These suits allege substantially similar claims to the direct purchaser class complaint described above; certain of the suits additionally allege related state-law and common law claims, and related claims under federal and Georgia RICO statutes. Those suits filed in the Northern District of Illinois are now pending in front of the same judge as the putative class action lawsuits. On June 26, 2018, the defendants filed a motion to transfer the case filed in the District of Kansas to the Northern District of Illinois, and that motion was granted on September 13, 2018. On June 7, 2019, the plaintiffs filed a motion to transfer the case filed in the Western District of Arkansas to the Northern District of Illinois, and that motion was granted on June 11, 2019. On July 24, 2019, one of the defendants filed a motion to transfer the case filed in the District of Puerto Rico to the Northern District of Illinois, and that motion was granted on July 25, 2019. On July 22, 2019, the Company moved to dismiss in part those direct-purchaser complaints that allege claims under federal and Georgia RICO statutes against it. The motion was fully briefed on September 20, 2019, and the Court heard argument on the motion on December 18, 2019. On March 3, 2020, the Court denied the Company's motion. On October 18, 2019, defendants moved to dismiss the case filed by the Commonwealth of Puerto Rico on its behalf and on behalf of its citizens. The motion was fully briefed on January 21, 2020. The parties are currently engaged in discovery, subject to the COVID-19-related delays discussed below. It is possible additional individual actions may be filed.

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

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grand jury. On June 27, 2019, the Court in In re Broiler Chicken Antitrust Litigation permitted the United States Department of Justice to intervene in the case, as well as ordered certain discovery stayed until September 27, 2019. Before the discovery stay expired on September 27, 2019, the United States Department of Justice asked the Court in In re Broiler Chicken Antitrust Litigation to extend the discovery stay for an additional six months. On September 25, 2019, the Court granted the additional stay of not less than three months. On October 16, 2019, after further consideration, the Court extended the stay until June 27, 2020. On December 18, 2019, the Court after further consideration ordered that the stay be lifted on March 31, 2020.

The Company received a grand jury subpoena in connection with the United States Department of Justice Antitrust Division investigation on September 9, 2019. The Company is complying with the subpoena and providing documents and information as requested by the Department of Justice in connection with its investigation.

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

We intend to continue to defend the lawsuits vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail or the Department of Justice were to pursue charges, the Company could be liable for damages or other sanctions, which could have a material, adverse effect on our financial position and results of operations.

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.

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.

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

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plaintiffs filed a consolidated amended complaint on February 21, 2020. The Oklahoma case is ongoing. We intend to defend the Eastern District of North Carolina case vigorously; however, the Company cannot predict the outcome of this action. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.

On February 21, 2017, Sanderson Farms, Inc. received an antitrust civil investigative demand from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida. Among other things, the demand seeks information related to the Georgia Dock Index and other information on poultry and poultry products published by the Georgia Department of Agriculture and its Poultry Market News division. The Company is cooperating fully with the investigative demand, and we have responded to all requests received to date; however, we are unable to predict its outcome at this time. Separately, the Company has become aware that certain plaintiffs’ counsel in In re Broiler Chicken Antitrust Litigation received from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida, an antitrust civil investigative demand that includes a request to produce all documents submitted by the recipients to the Department of Justice relating to In re Broiler Chicken Antitrust Litigation. The Company is also aware that certain plaintiffs’ counsel in In re Broiler Chicken Antitrust Litigation received from the Louisiana Department of Justice - Office of the Attorney General a Civil Investigation Demand that included a request to produce all deposition transcripts from the civil litigation.

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 likely to be scheduled for late 2020 or early 2021. We intend to vigorously defend the appeal. However, the Company cannot predict the outcome of this action. If the plaintiffs were to prevail, the Company’s reputation and marketing program could be materially, adversely affected, which could have a material, adverse effect on our financial position and results of operations.

On August 30, 2019, Sanderson Farms, Inc. and its Foods and Processing Divisions, as well as seventeen other poultry producers and their affiliates; Agri Stats, Inc.; and Webber, Meng, Sahl and Company, Inc. (“WMS”), were named in a putative class action filed in the United States District Court for the District of Maryland. Three other nearly identical putative class action complaints, each seeking to represent the same putative class, also were filed. The complaints, brought on behalf of non-supervisory production and maintenance employees at broiler chicken processing plants, alleged that the defendants unlawfully conspired by agreeing to fix and depress the compensation paid to them, including hourly wages and compensation benefits,

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from January 1, 2009 to the present. The plaintiffs claim that broiler producers shared competitively sensitive wage and benefits compensation information in three ways: (1) attending in-person meetings in Destin, Florida; (2) receiving Agri Stats reports, as well as surveys taken and published by WMS; and (3) directly exchanging wage and benefits information with plant managers at other defendant broiler producers. Plaintiffs allege that this conduct violated the Sherman Antitrust Act.

On November 12, 2019, the Court ordered that the four putative class action complaints would be consolidated for all pretrial purposes. The Court ordered plaintiffs to file their consolidated complaint on or before November 14, 2019. Defendants’ motions to dismiss the consolidated complaint were filed on November 22, 2019. Briefing was scheduled to be completed on or before February 28, 2020; however, after the defendants filed their motions to dismiss, on November 26, 2019, plaintiffs notified defendants that they intended to file an amended consolidated complaint. Plaintiffs filed an amended consolidated complaint on December 20, 2019. Plaintiffs name as defendants Sanderson Farms, Inc. and its Foods and Processing Divisions, as well as ten other broiler chicken producers and their affiliates; three turkey producers and their affiliates; Agri Stats, Inc.; and WMS. Plaintiffs bring their amended consolidated complaint on behalf of employees at broiler chicken and turkey processing plants and allege that the defendants unlawfully conspired by agreeing to fix and depress the compensation paid to them. On January 9, 2020 and January 27, 2020, the court approved the voluntary dismissal without prejudice of two of the three nearly identical putative class action lawsuits. On March 12, 2020, the Court approved the voluntary dismissal without prejudice of the third nearly identical putative class action lawsuit.

On March 2, 2020, defendants moved to dismiss the amended consolidated complaint. The Company also filed an individual motion to dismiss plaintiffs’ claims against the Company. Plaintiffs’ oppositions were originally due on April 24, 2020 and defendants’ replies were due on May 21, 2020. However, on March 20, 2020, the District of Maryland issued Second Amended Standing Order 2020-02, extending all filing deadlines set to fall between March 16, 2020 and April 24, 2020 by 42 days. On April 10, 2020, the District of Maryland issued Standing Order 2020-07, extending all filing deadlines set to fall between March 16, 2020 and June 5, 2020 by 84 days. Under the current Standing Order, plaintiffs’ oppositions to defendants’ motions to dismiss are due July 17, 2020. Defendants’ replies are due August 13, 2020. No discovery has taken place to date. We intend to defend this case vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.

On October 11, 2019, three named plaintiffs - Daniel Lentz, Pam La Fosse, and Marybeth Norman - filed, in the United States District Court for the Northern District of California, a nationwide class action against the Company on behalf of a putative class of all individuals and businesses throughout the United States who purchased one or more of the Company's chicken products in the prior four years. The lawsuit alleges that the named plaintiffs and other class members purchased the Company's chicken products based on misleading representations in the Company’s advertising. Specifically, the plaintiffs in this case allege that the Company’s advertising (including, but not limited to, on its website, television commercials, radio advertisements, social media, print magazines, billboards, and trucks) misleads consumers into believing that (i) the Company’s chickens were not given antibiotics or other pharmaceuticals, (ii) the chickens were raised in a “natural” environment, (iii) there is no evidence that the use of antibiotics or other pharmaceuticals in poultry contributes to the evolution of antibiotic-resistant bacteria, and (iv) the Company’s chicken products do not contain antibiotic or pharmaceutical residues. Plaintiffs allege that (i) the Company “routinely” feeds antibiotics and pharmaceuticals to its chickens, (ii) the Company raises its chickens indoors in “unnatural” indoor conditions amounting to “intensive confinement” and without natural light (iii) there is “extensive” reliable evidence that the use of antibiotics in poultry contributes to antibiotic-resistant bacteria, and (iv) the Company’s chickens have been found to contain antibiotic and pharmaceutical residue. The original Complaint asserted five causes of action under California and North Carolina law. The plaintiffs sought injunctive relief directing the Company to correct its practices and to comply with consumer protection laws nationwide. The plaintiffs also sought monetary, compensatory, statutory, and punitive damages, as well as attorneys’ and experts’ fees, costs, and expenses. On December 20, 2019, the Company filed a motion to dismiss. On February 10, 2020, the Court granted the motion to dismiss in part, denied it in part, and granted the plaintiffs leave to amend the Complaint. On March 23, 2020, two of the three original plaintiffs (Pam La Fosse and Marybeth Norman) filed a First Amended Class Action Complaint in which they were joined by five additional named plaintiffs. The core allegations and theories set forth in the First Amended Complaint are the same as in the original complaint. The First Amended Complaint asserts one cause of action under federal law and sixteen causes of action under the laws of various states. The plaintiffs again seek injunctive relief directing the Company to correct its practices and to comply with consumer protection laws nationwide, as well as monetary, compensatory, statutory and punitive damages and attorneys' and experts' fees, costs and expenses. On May 6, 2020, the Company filed a motion to dismiss the First Amended Complaint. No discovery has taken place to date. We intend to defend these cases vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.

The Company is involved in various other claims and litigation incidental to its business. Although the outcome of these matters cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome

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of currently pending matters, other than those discussed above, should not have a material effect on the Company’s consolidated results of operations or financial position.

The Company recognizes the costs of legal defense for the legal proceedings to which it is a party in the periods incurred. After a considerable analysis of each case, the Company has determined that no accrual is required for any of the foregoing matters as of April 30, 2020. Future reserves may be required if losses are deemed reasonably estimable and probable due to changes in the Company’s assumptions, the effectiveness of legal strategies, or other factors beyond the Company’s control. Future results of operations may be materially affected by the creation of reserves or by accruals of losses to reflect any adverse determinations in these legal proceedings.

NOTE 9—CREDIT AGREEMENT

The Company is a party to a revolving credit facility dated March 21, 2019, with a maximum available borrowing capacity of $1.0 billion. 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 a new poultry complex for the four fiscal quarters beginning on the first day of the fiscal quarter during which the Company gives written notice of its intent to exercise this right. The Company has not exercised this right. The facility also sets a minimum net worth requirement that at April 30, 2020, was $999.2 million. The credit is unsecured and, unless extended, will expire on March 21, 2024. As of April 30, 2020 and May 27, 2020, the Company had borrowed $200.0 million, and had approximately $23.1 million outstanding in letters of credit, leaving $776.9 million of borrowing capacity available under the facility.

NOTE 10—INCOME TAXES

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("the CARES Act") was enacted. The CARES Act contains several income tax provisions, as well as other measures, that are intended to assist businesses impacted by the economic effects of the COVID-19 pandemic. The most significant provisions of the CARES Act that will materially affect our accounting for income taxes include, but are not limited to, a five-year carry-back allowance for taxable net operating losses generated in tax years 2018 through 2020, our fiscal years 2019 through 2021, and a technical correction to the Tax Cut and Jobs Act, enacted on December 22, 2017, that provides a two-year carry-back allowance for our taxable net operating loss generated in fiscal year 2018.

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

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

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

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NOTE 11—LEASES

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

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

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

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

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

Other information regarding our operating leases includes the following:

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

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

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

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

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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.

This Quarterly Report, and other periodic reports filed by the Company under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and other written or oral statements made by it or on its behalf, may include forward-looking statements within the meaning of the "Safe Harbor" provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These forward-looking statements are based on a number of assumptions about future events and are subject to various risks, uncertainties and other factors that may cause actual results to differ materially from the views, beliefs and estimates expressed in such statements. These risks, uncertainties and other factors include, but are not limited to, the risks described in the "Risk Factors" section of our latest 10-K and 10-Q reports, and the following:

(1)Changes in the market price for the Company’s finished products and feed grains, both of which may fluctuate substantially and exhibit cyclical characteristics typically associated with commodity markets.

(2)Changes in economic and business conditions, monetary and fiscal policies or the amount of growth, stagnation or recession in the global or U.S. economies, any of which may affect the value of inventories, the collectability of accounts receivable or the financial integrity of customers, and the ability of the end user or consumer to afford protein.

(3)Changes in the political or economic climate, trade policies, laws and regulations or the domestic poultry industry of countries to which the Company or other companies in the poultry industry ship product, and other changes that might limit the Company’s or the industry’s access to foreign markets.

(4)Changes in laws, regulations, and other activities in government agencies and similar organizations applicable to the Company and the poultry industry and changes in laws, regulations and other activities in government agencies and similar organizations related to food safety.

(5)Various inventory risks due to changes in market conditions, including, but not limited to, the risk that net realizable values of live and processed poultry inventories might be lower than the cost of such inventories, requiring a downward adjustment to record the value of such inventories at the lower of cost or net realizable value as required by generally accepted accounting principles.

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

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

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

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

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

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

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

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

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

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(15)Changes resulting from the COVID-19 pandemic, which could exacerbate any of the risks described above, and could include: high absentee rates that have prevented and may continue to prevent us from running some of our facilities at full capacity, or could in the future cause facility closures; an inability of our contract growers to manage their flocks; supply chain disruptions for feed grains; further changes in customer orders due to shifting consumer patterns; disruptions in logistics and the distribution chain for our products; liquidity challenges; and a continued or worsening decline in global commercial activity, among other unfavorable conditions.

Readers are cautioned not to place undue reliance on forward-looking statements made by or on behalf of Sanderson Farms. Each such statement speaks only as of the day it was made. The Company undertakes no obligation to update or to revise any forward-looking statements. The factors described above cannot be controlled by the Company. When used in this report, the words “believes,” “estimates,” “plans,” “expects,” “should,” “outlook,” and “anticipates” and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements. Examples of forward-looking statements include statements about management’s beliefs about future growth plans, earnings, production levels, capital expenditures, grain prices, global economic conditions, supply and demand factors and other industry conditions.

GENERAL

The Company’s poultry operations are integrated 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”), processing, marketing and distribution. The Company’s prepared chicken product line includes approximately 130 institutional and consumer packaged chicken items that it sells nationally, primarily to distributors and food service establishments. A majority of the prepared chicken items are made to the specifications of food service users.

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 fiscal 2020, the World Health Organization declared COVID-19 a pandemic. The effects of the pandemic and the related governmental actions to contain the spread of the novel coronavirus have materially affected our business, including our labor force, revenues, expenses, production levels, and senior management's time, among other things.

In late February 2020, we formed a COVID-19 response team of senior managers, including our CEO, President and CFO, to coordinate our Company's response to the pandemic and manage and mitigate related risks. The team meets twice daily to discuss COVID-19 developments affecting our business and the communities in which we operate. Additionally, our Board of Directors has actively overseen our management of the crisis and has met weekly since March 13, 2020 to receive updates and discuss our response to the pandemic with our executive leadership.

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.

•We are providing information about the novel coronavirus and measures to mitigate the risk of contracting and transmitting the virus on video displays throughout our facilities and on our employee mobile app in English and Spanish. We have also provided live training sessions about the virus to our hourly employees.

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

•Non-essential visitors may not enter our facilities.

•We are taking the temperature of each person attempting to enter our facilities. Anyone with a temperature of 100°F or higher is denied entry. Employees denied entry are sent home with pay and are asked to contact their healthcare provider.

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•Our Company nurses have received specialized training on identifying COVID-19 symptoms. Employees exhibiting symptoms while at work are immediately sent home with pay and are asked to contact a healthcare provider immediately.

•Employees who test positive for COVID-19, those who live in the same household as someone who has tested positive, and those who work in close proximity to an employee who has tested positive are sent home to self-quarantine with pay for 14 days. An employee who has tested positive may return to work after 14 days with clearance from a doctor. An employee who lives in the same household as or who works in close proximity to someone who has tested positive may return to work after 14 days if he or she has been symptom-free for 72 hours.

•We continuously look for commonalities among our employees who test positive, including geographic concentrations in their places of residence, so we can reduce or prevent the spread of the virus in our facilities.

•We sent home for 14 days, with pay, approximately 400 employees who work in our Moultrie, Georgia facility and are residents of a nearby county that experienced a high rate of community infections.

•We are providing and requiring employees, United States Department of Agriculture inspectors and essential visitors to wear face masks and face shields. Anyone on the premises of our processing plants, feed mills, hatcheries and vehicle maintenance shops is required to wear this equipment. Where an employee's job function does not permit him or her to wear a face shield, we require the employee to wear safety glasses and we have installed barriers between work stations and optimized air flow to mitigate the risk of exposure to the virus.

•Our nurses have N95 respirator masks and other protective equipment appropriate for contact with potentially infected people.

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

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

•A third-party sanitation service provider performs an antiviral sanitation process at each of our facilities at least weekly, and we have increased the frequency of cleaning common areas and frequently touched surfaces.

•Salaried employees who are considered to be at high risk for severe illness from COVID-19 are permitted to work from home, provided their job duties allow for remote work.

•We have closed our Company-owned childcare facility in Collins, Mississippi until further notice.

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, we are paying our hourly employees who work all of their scheduled hours during a week an attendance bonus equal to $1.00 per hour.

•We enhanced our health plan to provide for 100% coverage of testing and treatment of COVID-19 at no cost to plan participants.

•We provided detailed guidance to our employees on the steps to take to ensure timely receipt of the stimulus payment provided under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

•We have distributed written materials to our employees in English and several other languages 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.

•In appreciation for our employees' dedication and hard work in supporting the nation's food supply, we gave ten pounds of fresh chicken to each hourly employee who worked on Good Friday and ten pounds of fresh chicken to each employee who worked on the Friday before Mother's Day.

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

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

•As a result of the COVID-19 pandemic, most of the nation's restaurants have been forced to operate at significantly reduced capacity or to close completely. As a result, our retail grocery store customers experienced a surge in demand for food prepared at home. Because of the significant decrease in demand from our food service customers, during the quarter we were able to divert approximately 4.3 million head of chickens from our big bird program to be processed at our plants that serve retail grocery store customers. To accomplish this, we have increased the number of shifts at our plants that process retail product. We have not experienced any significant delays or other hindrances in our shipment of products to our retail grocery store customers.

•Since the beginning of the COVID-19 pandemic, we have donated over 700,000 pounds of chicken to employees, food banks and other relief organizations.

•As of May 20, 2020, we have donated 23,740 N95 and KN95 masks to a number of hospitals in need of personal protective equipment for their front-line healthcare workers.

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 this provision to increase our available liquidity, and we currently estimate this will result in approximately $26 million of payroll tax payments being deferred, with 50% due during calendar year 2021 and 50% due during calendar year 2022.

•Certain refundable, wage-related tax credits, including the Employee Retention Credit, are available to eligible employers. We are currently evaluating the potential impacts of this credit.

•The Tax Cuts and Jobs Act enacted in December 2017 disallowed the carrying back of taxable net operating losses to offset prior years' taxable income. The CARES Act allows us to carry those losses back to offset taxable income recognized during prior years. We are electing to use that provision, which will provide additional liquidity in the form of an income tax refund currently estimated to be approximately $84 million. We believe we will receive the refund during our fourth fiscal quarter of 2020. Additionally, we recorded a net discrete income tax benefit of approximately $37.4 million related to the carry-back provisions. 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."

EXECUTIVE OVERVIEW OF RESULTS

For the second quarter of fiscal 2020, we reported net income of $6.1 million, or $0.28 per share, and an operating margin of (5.2)%, as compared to net income of $40.6 million, or $1.83 per share, and an operating margin of 6.5% during the second quarter of fiscal 2019. Excluding the discrete income tax benefit discussed above, our net loss for the second quarter of fiscal 2020 was $31.3 million, or $1.43 per share. Our financial results for the second quarter of fiscal 2020 were significantly affected by the COVID-19 pandemic. The primary impacts were:

•Orders from food service customers declined dramatically during the quarter due to widespread closures or significant reductions in operating capacity of restaurants and other venues where food is consumed away from home. The sudden demand shift caused significant declines in the market prices for our products that are typically sold to food service customers. During some weeks of the quarter, some food service customers ordered as much as 75% fewer pounds compared to weekly order volumes before the pandemic.

•The demand shift to food consumed at home caused demand from our retail grocery store customers to surge, and we were able to shift some production from our plants that serve food service customers to plants that serve grocery store customers. However, the extent to which we can can shift production is limited by processing capacity at our plants that serve retail grocery store customers and the size of our live inventory. Overall, we processed 4.2% fewer pounds during the quarter than we estimated we would when we announced our first quarter results on February 27, 2020.

•Demand for our products from the export markets was soft during the quarter, with the exception of demand from China. Many countries whose economies were shut down during the quarter to curb the spread of COVID-19, as well as countries whose economies depend on oil, faced logistical and liquidity issues and were unable to purchase our products. As expected, demand from China was strong during the quarter due to the country's protein deficit caused by African swine fever, which is discussed further below. Given the lack of competition in global demand, however, the Chinese were able to import poultry at relatively low prices during the quarter.

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•Our top priority throughout the crisis has been protecting the health, safety and welfare of our employees. As a result, the quarter includes approximately $8.4 million in direct COVID-19 expenses for items and services including personal protective equipment, thermometers, professional cleaning, hourly employee attendance bonuses, and wages paid to employees for paid time off, among other things.

Our higher average cost of goods sold during the second quarter of fiscal 2020 as compared to the same quarter a year ago reflects an increase in non-feed related costs of goods sold, details of which are described in the "Results of Operations" section below, partially offset by a decrease in feed costs per pound of chicken processed. When combined, the average cost of corn and soybean meal in chickens processed was higher during the second quarter of fiscal 2020 as compared to the same period a year ago, which resulted in an increase in feed costs in broiler flocks processed. We have priced a portion of our corn and soybean meal needs through July 2020. Had we priced our remaining fiscal 2020 grain needs at May 27, 2020 cash market prices quoted on the Chicago Board of Trade, our costs of feed grains based on 2019 volumes would be approximately $49.1 million lower during fiscal 2020 as compared to fiscal 2019, and we estimate those prices would result in approximately 0.69 cents per pound lower feed costs in broiler flocks processed for fiscal 2020 as compared to fiscal 2019. The worldwide supply of both corn and soybeans remains healthy, and United States farmers have so far been able to plant their crops on time during the 2020 planting season. Those factors typically result in stable grain prices, but we are unable to predict the future movement of grain prices.

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

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

•people will continue to work from home in higher numbers than before the pandemic;

•some restaurants will remain closed, there will be reduced capacity at open restaurants due to social distancing restrictions and some consumers will continue to choose not to dine in restaurants for safety reasons; and

•consumers will have lower levels of disposable income due to unemployment and other financial constraints from the pandemic.

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

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

•the amount of time required for beef and pork production to return to normalized levels;

•whether there are resurgences in COVID-19 infections that make people fearful of dining out or cause state, local and foreign governments to reimpose stay-at-home restrictions and order restaurant closures;

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

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

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

•with respect to our export sales, the condition of the oil market, the relative strength of foreign currencies against the U.S. dollar and political uncertainty that could affect trade relations with other countries, especially with China, and

•the effect of the pandemic on our operations, including labor shortages we could experience as a result of infections among our employees.

RESULTS OF OPERATIONS

Net sales for the second quarter ended April 30, 2020 were $844.7 million as compared to $845.2 million for the second quarter ended April 30, 2019, a decrease of $0.5 million, or 0.1%. Net sales of poultry products for the second quarter ended April 30, 2020 and 2019, were $805.7 million and $782.9 million, respectively, an increase of $22.8 million, or 2.9%. The increase in net sales of poultry products resulted from a 12.2% increase in the pounds poultry products sold, partially offset by an 8.3% decrease in the average sales price of poultry products sold. During the second quarter of fiscal 2020, the Company sold 1,179.7 million pounds of poultry products, up from 1,051.4 million pounds during the second quarter of fiscal 2019. The increase in pounds of poultry products sold resulted from a 10.4% increase in the number of head processed, partially offset by a 2.3% decrease in the average live weight of poultry processed. The new Tyler, Texas processing facility, which began initial operations during the first quarter of fiscal 2019, processed approximately 14.9 million head during the second quarter of fiscal 2020, or approximately 9.1% of the total head processed by the Company during the period, and sold approximately 92.3 million pounds of poultry products during the second quarter of fiscal 2020, or approximately 7.8% of the total poultry pounds sold by the Company during the period. By comparison, the Tyler, Texas processing facility processed approximately 3.2 million head during the second quarter of fiscal 2019, or approximately 2.1% of the total head processed by the Company during the period, and sold approximately 23.7 million pounds of poultry products during the second quarter of fiscal 2019, or approximately 2.3% of the total poultry pounds sold by the Company during the period.

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

Net sales of prepared chicken products for the quarters ended April 30, 2020 and 2019 were $39.0 million and $62.3 million, respectively, representing a decrease of 37.5%. This decrease is primarily attributable to a 37.8% decrease in the pounds of prepared chicken products sold, while the average sales price of prepared chicken products sold increased by 0.6%. During the second quarter of fiscal 2020, the Company sold 20.7 million pounds of prepared chicken products, down from 33.3 million pounds during the second quarter of fiscal 2019. The decrease in pounds of prepared chicken products sold resulted from the decrease in demand from our food service customers due to the COVID-19 pandemic, as described above.

Net sales for the first six months of fiscal 2020 were $1,667.8 million, as compared to $1,588.6 million for the first six months of fiscal 2019, an increase of $79.2 million, or 5.0%. Net sales of poultry products for the first six months of fiscal 2020 and 2019 were $1,577.2 million and $1,468.6 million, respectively, an increase of $108.6 million, or 7.4%. The increase in net sales of poultry products resulted from a 10.2% increase in the pounds of poultry products sold, partially offset by a 2.5% decrease in the average sales price of poultry products sold. During the first six months of fiscal 2020, the Company sold 2,331.6 million pounds of poultry products, up from 2,116.1 million pounds during the first six months of fiscal 2019. The increase in pounds of poultry products sold was primarily attributable to the ramp up in production at the new Tyler, Texas processing facility. The new facility processed approximately 27.6 million head during the first six months of fiscal 2020, or approximately 8.6% of the total head processed by the Company during the period, and sold approximately 173.4 million pounds of poultry products during the first six months of fiscal 2020, or approximately 7.4% of the total poultry pounds sold by the Company during the period. By comparison, the Tyler, Texas facility processed approximately 3.2 million head during the first six months of fiscal 2019, or approximately 1.1% of the total head processed by the Company during the period, and sold

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

Overall, market prices for poultry products decreased during the first six months of fiscal 2020 as compared to the same period of fiscal 2019. When compared to the first six months of fiscal 2019, Urner Barry average market prices for tenders, boneless breast meat, jumbo wings and boneless thigh meat decreased by 20.1%, 11.6%, 11.1% and 9.6%, respectively, while average market prices for leg quarters increased by 5.2%. Average realized prices for chicken products sold to retail grocery store customers were slightly higher during the first six months of fiscal 2020, as compared to the same period of fiscal 2019, and continue to reflect strong demand.

Net sales of prepared chicken products for the six months ended April 30, 2020 and 2019 were $90.6 million and $120.0 million, respectively, representing a decrease of 24.5%. This decrease is primarily attributable to a 25.8% decrease in the pounds of prepared chicken products sold, while the average sales price of prepared chicken products sold increased by 1.7%. During the first six months of fiscal 2020, the Company sold 48.0 million pounds of prepared chicken products, down from 64.7 million pounds during the first six months of fiscal 2019. The decrease in pounds of prepared chicken products sold resulted from the decrease in demand from our food service customers due to the COVID-19 pandemic, as described above.

Cost of sales for the second quarter of fiscal 2020 was $832.3 million as compared to $740.8 million during the second quarter of fiscal 2019, an increase of $91.5 million, or 12.3%. Cost of sales of poultry products during the second quarter of fiscal 2020, as compared to the second quarter of fiscal 2019, was $795.2 million and $682.9 million, respectively, which represents a 3.8% increase in the average cost of sales per pound of poultry products. As illustrated in the table below, which for comparative purposes includes poultry products transferred to the Company's prepared chicken plant, the increase in the cost of sales per pound of poultry products resulted from a $0.0246 per pound, or 6.1%, increase in other costs of sales of poultry products, partially offset by a decrease in the cost of feed per pound of broilers processed of $0.0028, or 1.1%.

Poultry Cost of Sales

(In thousands, except per pound data)

	Three Months Ended   April 30, 2020					Three Months Ended   April 30, 2019					Incr/(Decr)
Description	Dollars			Per lb.		Dollars			Per lb.		Dollars		Per lb.
Beginning Inventory	$	37,861		$	0.3797	$	27,175		$	0.4041	$	10,686	$	(0.0244)
Feed in broilers processed	296,590			0.2513		275,411			0.2541		21,179		(0.0028)
All other cost of sales	506,326			0.4290		438,322			0.4044		68,004		0.0246
Less: Ending Inventory	37,969			0.4129		33,327			0.4259		4,642		(0.0130)
Total poultry cost of sales	$	802,808	(1)	$	0.6758	$	707,581	(1)	$	0.6596	$	95,227	$	0.0162
Pounds:
Beginning Inventory	99,723					67,244
Poultry processed/other	1,180,139					1,083,823
Poultry sold	1,187,894		(1)			1,072,820		(1)
Ending Inventory	91,968					78,247

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

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

Cost of sales of the Company’s prepared chicken products during the second quarter of fiscal 2020 were $37.1 million as compared to $57.9 million during the same quarter a year ago, a decrease of $20.8 million, or 35.9%. This decrease was primarily attributable to a 37.8% decrease 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.

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Cost of sales for the first six months of fiscal 2020 was $1,655.8 million, as compared to $1,449.2 million during the first six months of fiscal 2019, an increase of $206.6 million, or 14.3%. Cost of sales of poultry products during the first six months of fiscal 2020, as compared to the first six months of fiscal 2019, was $1,571.0 million and $1,341.1 million, respectively, which represents a 6.3% increase in the average cost of sales per pound of poultry products. As illustrated in the table below, which for comparative purposes includes poultry products sold to the Company's prepared chicken plant, the increase in the cost of sales per pound of poultry products resulted from a $0.0233 per pound, or 5.8%, increase in other costs of sales of poultry products and an increase in the cost of feed per pound of broilers processed of $0.0062, or 2.5%.

Poultry Cost of Sales

(In thousands, except per pound data)

	Six Months Ended   April 30, 2020					Six Months Ended   April 30, 2019					Incr/(Decr)
Description	Dollars			Per lb.		Dollars			Per lb.		Dollars		Per lb.
Beginning Inventory	$	35,121		$	0.3868	$	30,973		$	0.3686	$	4,148	$	0.0182
Feed in broilers processed	601,249			0.2555		536,262			0.2493		64,987		0.0062
All other cost of sales	994,436			0.4226		858,939			0.3993		135,497		0.0233
Reversal of prior-period inventory write-down	(2,800)			(0.0012)		(9,600)			(0.0045)		6,800		0.0033
Less: Ending Inventory	37,969			0.4129		33,327			0.4259		4,642		(0.0130)
Total poultry cost of sales	$	1,590,037	(1)	$	0.6760	$	1,383,247	(1)	$	0.6413	$	206,790	$	0.0347
Pounds:
Beginning Inventory	90,805					84,020
Poultry processed/other	2,353,314					2,151,228
Poultry sold	2,352,151		(1)			2,157,001		(1)
Ending Inventory	91,968					78,247

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

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

The Company recorded the value of live broiler inventories on hand at April 30, 2020 at cost. When market conditions are favorable, 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 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, the Company will make an adjustment to lower the value of live birds in inventory to the net realizable value. No such charge was required at April 30, 2020 or April 30, 2019.

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

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Selling, General and Administrative Costs

(in thousands)

Description	Three Months Ended   April 30, 2020		Three Months Ended   April 30, 2019		Increase/(Decrease)
COVID-19-related expense	$	3,496	$	—	$	3,496
Legal expense	7,454		6,148		1,306
Administrative salaries	12,325		11,306		1,019
Sanderson Farms Championship expense	2,051		2,504		(453)
Broker commissions	3,189		2,679		510
Stock compensation expense	2,203		2,754		(551)
Trainee expense	3,146		4,390		(1,244)
All other SG&A	22,350		19,449		2,901
Total SG&A	$	56,214	$	49,230	$	6,984

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

Selling, General and Administrative Costs

(in thousands)

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

Regarding the table above, the change in start-up expense in any particular period relates to the stage of the start-up process in which a facility under construction is in during the period. Non-construction related expenses, such as labor, training and office-related expenses for a facility under construction are recorded as start-up expense until the facility begins operations. As a facility moves closer to start-up, the expenses incurred for labor, training, etc. increase. As a result, amounts classified as start-up expenses will increase period over period until the facility begins production. Once production begins, the expenses from that point forward are recorded as costs of goods sold. The decrease in trainee expense is primarily the result of a reduction in the number of trainee positions filled. The increase in legal expense is primarily attributable to our ongoing defense of the litigation described in "Part II, Item 1. Legal Proceedings" of this Form 10-Q. The increase in COVID-19-related expense is the result of direct expenses for items and services related to the health, safety and welfare of our employees during the COVID-19 pandemic.

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

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

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

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

As of April 30, 2020, the Company's deferred income tax liability was $131.4 million as compared to $74.1 million at October 31, 2019, an increase of $57.3 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 months ended April 30, 2020, the Company’s net income was $6.1 million, or $0.28 per share, and during the six months ended April 30, 2020, the Company's net loss was $32.5 million, or $1.48 per share. For the three and six months ended April 30, 2019, the Company’s net income was $40.6 million, or $1.83 per share, and $22.8 million, or $1.03 per share, respectively. The decrease in net income for the second quarter and first six months of fiscal 2020 as compared to the same periods in fiscal 2019 is primarily attributable to lower average selling prices and higher average costs of goods sold, partially offset by the income tax benefits recognized as a result of the CARES Act. Details related to each of the aforementioned drivers of the changes in net income have been discussed above.

Liquidity and Capital Resources

The Company’s working capital, calculated by subtracting current liabilities from current assets, at April 30, 2020 was $457.2 million, and its current ratio, calculated by dividing current assets by current liabilities, was 3.0 to 1. The Company’s working capital and current ratio at October 31, 2019 were $365.4 million and 2.7 to 1, respectively. These measures reflect the Company’s ability to meet its 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 include cash on hand at October 31, 2019 and funds available under the Company’s revolving credit facility. As described below, the Company is a party to a revolving credit facility dated March 21, 2019, with a maximum available borrowing capacity of $1.0 billion. As of April 30, 2020 and May 27, 2020, the Company had borrowed $200.0 million under the facility, and had approximately $23.1 million outstanding in letters of credit, leaving $776.9 million of borrowing capacity available under the facility. In addition to the borrowing capacity under the facility, the Company expects to receive a federal income tax refund of approximately $84 million before the end of fiscal 2020. Management believes the Company has sufficient liquidity to meet its needs and comply with financial covenants included in the facility.

The Company’s cash position at April 30, 2020 and October 31, 2019 consisted of $61.3 million and $95.4 million, respectively, in cash and short-term cash investments. The Company’s ability to invest cash is limited by covenants in its revolving credit agreement to short-term investments. All of the Company’s cash at April 30, 2020 and October 31, 2019 was held in bank accounts and highly-liquid investment accounts. There were no restrictions on the Company’s access to its cash, and such cash was available to the Company on demand to fund its operations.

Cash flows used in operating activities during the six months ended April 30, 2020 totaled $37.2 million, as compared to cash flows provided by operating activities of $49.8 million during the six months ended April 30, 2019. Cash flows from operating activities decreased by $87.0 million, resulting from two primary factors. Firstly, during the first six months of fiscal 2020, the Company realized lower margins due to a decrease in average selling prices and an increase in average costs of goods sold, as compared to the first six months of fiscal 2019. Secondly, the change in cash paid or received for income taxes during the first six months of fiscal 2020, as compared to the first six months of fiscal 2019 caused cash flows from operating activities to decrease. During the first six months of fiscal 2020, the Company's net cash payments related to income taxes totaled approximately $1.1 million, as compared to approximately $26.9 million in net cash received related to income taxes during the first six months of fiscal 2019.

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Cash flows used in investing activities during the first six months of fiscal 2020 and 2019 were $129.5 million and $161.4 million, respectively. The Company’s capital expenditures during the first six months of fiscal 2020 were approximately $129.7 million, and included approximately $28.2 million for multiple large-scale equipment and building upgrades at multiple complexes. Capital expenditures for the first six months of fiscal 2019 were $162.3 million, and included approximately $54.8 million related to construction at the Tyler, Texas complex, and approximately $9.4 million related to final payments made under purchase agreements for delivery of new aircraft.

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

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

In March 2017, the Company announced the selection of sites in Lindale, Mineola and Smith County, Texas, for the construction of a new poultry processing complex. The completed complex consists of a hatchery, feed mill, processing plant and waste water treatment facility with the capacity to process 1.3 million chickens per week. The initial phase of operations of the new complex began during the first quarter of fiscal 2019, and the complex is now operating at near full capacity.

On October 2, 2017, 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.

The Company regularly evaluates both internal and external growth opportunities, including acquisition opportunities and the possible construction of new production assets, and conducts due diligence activities in connection with such opportunities. The cost and terms of any financing to be raised in conjunction with any growth opportunity, including the Company’s ability to raise debt or equity capital on terms and at costs satisfactory to the Company, and the effect of such opportunities on the Company’s balance sheet, are critical considerations in any such evaluation.

Revolving Credit Facility

The Company is a party to a revolving credit facility dated March 21, 2019, with a maximum available borrowing capacity of $1.0 billion. 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 a new poultry complex for the four fiscal quarters beginning on the first day of the fiscal quarter during which the Company gives written notice of its intent to exercise this right. The Company has not exercised this right. The facility also sets a minimum net worth requirement that at April 30, 2020, was $999.2 million. The credit is unsecured and, unless extended, will expire on March 21, 2024. As of April 30, 2020 and May 27, 2020, the Company had borrowed $200.0 million under the facility, and had approximately $23.1 million outstanding in letters of credit, leaving $776.9 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.

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.

New Accounting Pronouncements

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

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which intends to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019, our fiscal 2021. Early adoption is permitted. We do not expect adoption to have a material effect on our consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is a purchaser of certain commodities, primarily corn and soybean meal, for use in manufacturing feed for its chickens. As a result, the Company’s earnings are affected by changes in the price and availability of such feed ingredients. Feed grains are subject to volatile price changes caused by factors described below that include weather, size of harvest, transportation and storage costs and the agricultural policies of the United States and foreign governments. The price fluctuations of feed grains have a direct and material effect on the Company’s profitability.

Generally, the Company commits to purchase feed ingredients for deferred delivery from one month to nine months after the time of the commitment. The grain purchases are made directly with our usual grain suppliers, which are companies in the business of regularly supplying grain to end users, and do not involve options to purchase. Such purchases occur when our chief operating decision maker concludes that market factors indicate that prices at the time the grain is needed are likely to be higher than current prices, or where, based on current and expected market prices for the Company’s poultry products, our chief operating decision maker believes the Company can purchase feed ingredients at prices that will allow the Company to earn a reasonable return for its shareholders. The Company sometimes purchases its feed ingredients for prompt delivery to its feed mills at market prices at the time of such purchases. Market factors considered by our chief operating decision maker in determining whether or not and to what extent to commit to buy grain for deferred delivery include:

•Current market prices;

•Current and predicted weather patterns in the United States, South America, China and other grain producing areas, as such weather patterns might affect the planting, growing, harvesting and yield of feed grains;

•The expected size of the harvest of feed grains in the United States and other grain producing areas of the world as reported by governmental and private sources;

•Current and expected changes to the agricultural policies of the United States and foreign governments;

•The relative strength of United States currency and expected changes therein as it might affect the ability of foreign countries to buy United States feed grain commodities;

•The current and expected volumes of export of feed grain commodities as reported by governmental and private sources;

•The current and expected use of available feed grains for uses other than as livestock feed grains (such as the use of corn for the production of ethanol, which use is affected by the price of crude oil); and

•Current and expected market prices for the Company’s poultry products.

The Company purchases physical grain, not financial instruments such as puts, calls or straddles that derive their value from the value of physical grain. Thus, the Company does not use derivative financial instruments as defined in ASC 815, “Accounting for Derivatives for Instruments and Hedging Activities,” or any market risk sensitive instruments of the type contemplated by Item 305 of Regulation S-K. The Company does not enter into any derivative transactions or purchase any grain-related contracts other than the physical grain contracts described above.

Although the Company does not use derivative financial instruments as defined in ASC 815 or purchase market risk sensitive instruments of the type contemplated by Item 305 of Regulation S-K, the commodities that the Company does purchase for physical delivery, primarily corn and soybean meal, are subject to price fluctuations that have a direct and material effect on the Company’s profitability as mentioned above. During the second quarter of fiscal 2020, the Company purchased approximately 30.4 million bushels of corn and approximately 288,834 tons of soybean meal for use in manufacturing feed for its live chickens. A $1.00 change in the average market price paid per bushel for corn would have affected the Company’s cash outlays for corn by approximately $30.4 million in the second quarter of fiscal 2020. Likewise, a $10.00 change in the price paid per ton for soybean meal would affect the Company’s cash outlays by approximately $2.9 million.

Although changes in the market price paid for feed grains affect cash outlays at the time the Company purchases the grain, such changes do not immediately affect cost of sales. The cost of feed grains is recognized in cost of sales, on a first-in-first-out basis, at the same time that the sales of the chickens that consume the feed grains are recognized. Thus, there is a lag between the time cash is paid for feed ingredients and the time the cost of such feed ingredients is reported in cost of goods sold. For example, corn delivered to a feedmill and paid for one week might be used to manufacture feed the following week. However, the chickens that eat that feed might not be processed and sold for another 48-62 days, and only at that time will the costs of the feed consumed by the chicken become included in cost of goods sold.

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During the second quarter of fiscal 2020, the Company’s average feed cost per pound of broilers processed totaled $0.2513 per pound. Feed costs per pound of broilers processed consist primarily of feed grains, but also include other feed ingredients such as vitamins, fat and mineral feed supplements. The average feed cost per pound is influenced not only by the price of feed ingredients, but also by the efficiency with which live chickens convert feed into body weight. Factors such as weather, poultry husbandry, quality of feed ingredients and the quality, size and health of the bird, among others, affect the quantity of feed necessary to mature chickens to the target live weight and the efficiency of that process. Generally, however, a $1.00 change in the average price paid per bushel of corn fed to a chicken during its life would have affected average feed cost per pound of broilers processed by $0.0258, based on the quantity of grain used during the second quarter of fiscal 2020. Similarly, a $10.00 change in the average price paid per ton of soybean meal would have influenced the average feed cost per pound of broilers processed by $0.0024 during the second quarter of fiscal 2020.

The following table shows the impact of hypothetical changes in the price of corn and soybean meal on both the Company’s cash flow and cost of goods sold, based on quantities actually purchased in the second quarter of fiscal 2020:

Feed Ingredient	Quantity Purchased during the Second Fiscal Quarter of 2020	Hypothetical Price Change	Impact on Cash Outlay	Ultimate Impact on Feed Cost per Pound of broilers Processed
Corn	30.4 million bushels	$1.00 per bushel	$30.4 million	$0.0258/lb processed
Soybean meal	288,834 tons	$10.00 per ton	$2.9 million	$0.0024/lb processed

The Company’s interest expense is sensitive to changes in the general level of interest rates in the United States, and when the Company is indebted, it typically maintains certain of its debt as fixed rate in nature to mitigate the impact of fluctuations in interest rates. At April 30, 2020 the Company had no fixed-rate debt on its balance sheet; however, management believes the potential effects of near-term changes in interest rates on the Company's debt are not material.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of April 30, 2020, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of April 30, 2020.

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

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

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purchaser plaintiffs separated into two cases. On that date, the commercial and institutional indirect purchaser plaintiffs filed a third amended complaint, and the end-user consumer plaintiffs filed an amended complaint.

On January 27, 2017, the defendants filed motions to dismiss the amended complaints in all of the cases, and on November 20, 2017, the motions to dismiss were denied. On February 7, 2018, the direct purchaser plaintiffs filed their third amended complaint, adding three additional poultry producers as defendants. On February 12, 2018, the end-user consumer plaintiffs filed their second amended complaint, in which they also added three additional poultry producers as defendants, along with Agri Stats. On February 20, 2018, the commercial and institutional indirect purchaser plaintiffs filed their fourth amended complaint. On November 13, 2018, the commercial and institutional indirect purchaser plaintiffs filed their fifth amended complaint, adding three additional poultry producers as defendants. On November 28, 2018, the end-user consumer plaintiffs filed their third amended complaint. On January 15, 2019, the direct purchaser plaintiffs filed their fourth amended complaint, and the commercial and institutional indirect purchaser plaintiffs filed their sixth amended complaint. Both the direct purchaser plaintiffs and the commercial and institutional indirect purchaser plaintiffs added two new poultry producers as defendants, as well as Agri Stats. On April 29, 2019, the end-user consumer plaintiffs filed their fourth amended complaint. The parties are currently engaged in discovery.

Between December 8, 2017 and April 11, 2020, additional purported direct-purchaser entities individually brought thirty-six separate suits against 19 poultry producers, including Sanderson Farms and Agri Stats, in the United States District Court for the Northern District of Illinois, the United States District Court for the District of Kansas, the United States District Court for the Western District of Arkansas, and the United States District Court for the District of Puerto Rico. These suits allege substantially similar claims to the direct purchaser class complaint described above; certain of the suits additionally allege related state-law and common law claims, and related claims under federal and Georgia RICO statutes. Those suits filed in the Northern District of Illinois are now pending in front of the same judge as the putative class action lawsuits. On June 26, 2018, the defendants filed a motion to transfer the case filed in the District of Kansas to the Northern District of Illinois, and that motion was granted on September 13, 2018. On June 7, 2019, the plaintiffs filed a motion to transfer the case filed in the Western District of Arkansas to the Northern District of Illinois, and that motion was granted on June 11, 2019. On July 24, 2019, one of the defendants filed a motion to transfer the case filed in the District of Puerto Rico to the Northern District of Illinois, and that motion was granted on July 25, 2019. On July 22, 2019, the Company moved to dismiss in part those direct-purchaser complaints that allege claims under federal and Georgia RICO statutes against it. The motion was fully briefed on September 20, 2019, and the Court heard argument on the motion on December 18, 2019. On March 3, 2020, the Court denied the Company's motion. On October 18, 2019, defendants moved to dismiss the case filed by the Commonwealth of Puerto Rico on its behalf and on behalf of its citizens. The motion was fully briefed on January 21, 2020. The parties are currently engaged in discovery, subject to the COVID-19-related delays discussed below. It is possible additional individual actions may be filed.

The Company is aware that certain plaintiffs’ counsel in In re Broiler Chicken Antitrust Litigation received from the United States Department of Justice, Antitrust Division, a subpoena that included a request to produce all discovery in the case to a grand jury. On June 27, 2019, the Court in In re Broiler Chicken Antitrust Litigation permitted the United States Department of Justice to intervene in the case, as well as ordered certain discovery stayed until September 27, 2019. Before the discovery stay expired on September 27, 2019, the United States Department of Justice asked the Court in In re Broiler Chicken Antitrust Litigation to extend the discovery stay for an additional six months. On September 25, 2019, the Court granted the additional stay of not less than three months. On October 16, 2019, after further consideration, the Court extended the stay until June 27, 2020. On December 18, 2019, the Court after further consideration ordered that the stay be lifted on March 31, 2020.

The Company received a grand jury subpoena in connection with the United States Department of Justice Antitrust Division investigation on September 9, 2019. The Company is complying with the subpoena and providing documents and information as requested by the Department of Justice in connection with its investigation.

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

We intend to continue to defend the lawsuits vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail or the Department of Justice were to pursue charges, the Company could be liable for damages or other sanctions, which could have a material, adverse effect on our financial position and results of operations.

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

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

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.

On February 21, 2018, the plaintiffs filed a substantially similar lawsuit in the United States District Court for the Eastern District of North Carolina against Sanderson Farms and our subsidiaries and another poultry producer. The plaintiffs subsequently moved to consolidate this action with the Eastern District of Oklahoma action in the Eastern District of Oklahoma for pre-trial proceedings, with the defendants in support thereof. That motion was denied. On July 13, 2018, the defendants moved to dismiss the lawsuit in the Eastern District of North Carolina, and briefing was completed on September 4, 2018. On January 15, 2019, the Court granted in part the defendants’ motion to dismiss and stayed the action in the Eastern District of North Carolina pending resolution of the action in the Eastern District of Oklahoma. On January 6, 2020, the Court in the Eastern District of Oklahoma denied defendants’ motion to dismiss. On January 27, 2020, plaintiffs in the Oklahoma case moved for leave to amend their complaint. The Court in the Eastern District of Oklahoma granted the plaintiffs' motion, and the plaintiffs filed a consolidated amended complaint on February 21, 2020. The Oklahoma case is ongoing. We intend to defend the Eastern District of North Carolina case vigorously; however, the Company cannot predict the outcome of this action. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.

On February 21, 2017, Sanderson Farms, Inc. received an antitrust civil investigative demand from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida. Among other things, the demand seeks information related to the Georgia Dock Index and other information on poultry and poultry products published by the Georgia Department of Agriculture and its Poultry Market News division. The Company is cooperating fully with the investigative demand, and we have responded to all requests received to date; however, we are unable to predict its outcome at this time. Separately, the Company has become aware that certain plaintiffs’ counsel in In re Broiler Chicken Antitrust Litigation received from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida, an antitrust civil investigative demand that includes a request to produce all documents submitted by the recipients to the Department of Justice relating to In re Broiler Chicken Antitrust Litigation. The Company is also aware that certain plaintiffs’ counsel in In re Broiler Chicken Antitrust Litigation received from the Louisiana Department of Justice - Office of the Attorney General a Civil Investigation Demand that included a request to produce all deposition transcripts from the civil litigation.

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

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products contain residues of human and animal antibiotics, other pharmaceuticals, hormones, steroids, and pesticides. Plaintiffs sought an order enjoining the Company from continuing its allegedly unlawful marketing program and requiring the Company to conduct a corrective advertising campaign; an accounting of the Company’s profits derived from the allegedly unlawful marketing practices; and attorneys’ fees, costs and interest. On August 2, 2017, the Company moved to dismiss the lawsuit on various grounds. On August 23, 2017, the plaintiffs filed an amended complaint, which included substantially similar allegations as the original complaint, and the Company filed a motion to dismiss the amended complaint on September 13, 2017. On February 9, 2018, the Court denied the Company’s motion to dismiss. An initial scheduling conference was held on March 1, 2018, and discovery started thereafter. On June 25, 2018, the plaintiffs amended their complaint for a second time, including to remove allegations that USDA had found the Company’s chicken samples to contain residues of antibiotics or other substances. On July 9, 2018, the Company filed a motion to dismiss the second amended complaint. On July 18, 2018, during the pendency of that motion, the parties stipulated to the voluntary dismissal of one of the plaintiff organizations (the Organic Consumers Association). The other two plaintiffs continued to prosecute their claims. On September 11, 2018, the Court granted the motion to dismiss the second amended complaint with leave to amend the complaint, and on October 2, 2018, the remaining plaintiffs filed a third amended complaint. The third amended complaint alleged that the Company misleads consumers with regard to (1) the presence of unnatural residues in its chicken products; (2) the fact that it uses antibiotics in raising its chickens; (3) the conditions in which it raises its chickens; and (4) the risks of human antibiotic resistance caused by the Company’s use of antibiotics. On October 16, 2018, the Company filed a motion to dismiss the third amended complaint, and on December 3, 2018, the Court denied that motion. Fact discovery concluded on March 18, 2019. On April 1, 2019, the Company filed a motion to dismiss for lack of subject matter jurisdiction on grounds that the remaining plaintiffs lacked standing. The Court held a hearing on the Company’s motion on May 30, 2019. On July 31, 2019, the Court granted the Company’s motion without prejudice, stating that dismissal for lack of standing must be without prejudice, but denied the plaintiffs leave to amend their complaint. On October 8, 2019, the Court taxed $12,701 in costs in favor of the Company as the prevailing party.

On August 30, 2019, plaintiffs filed a notice of appeal of the District Court’s order of dismissal before the United States Court of Appeals for the Ninth Circuit. Plaintiffs’ filed their opening brief on appeal on January 8, 2020, the Company filed its response brief on March 9, 2020, and Plaintiffs filed their reply brief on April 29, 2020. Oral argument is likely to be scheduled for late 2020 or early 2021. We intend to vigorously defend the appeal. However, the Company cannot predict the outcome of this action. If the plaintiffs were to prevail, the Company’s reputation and marketing program could be materially, adversely affected, which could have a material, adverse effect on our financial position and results of operations.

On August 30, 2019, Sanderson Farms, Inc. and its Foods and Processing Divisions, as well as seventeen other poultry producers and their affiliates; Agri Stats, Inc.; and Webber, Meng, Sahl and Company, Inc. (“WMS”), were named in a putative class action filed in the United States District Court for the District of Maryland. Three other nearly identical putative class action complaints, each seeking to represent the same putative class, also were filed. The complaints, brought on behalf of non-supervisory production and maintenance employees at broiler chicken processing plants, alleged that the defendants unlawfully conspired by agreeing to fix and depress the compensation paid to them, including hourly wages and compensation benefits, from January 1, 2009 to the present. The plaintiffs claim that broiler producers shared competitively sensitive wage and benefits compensation information in three ways: (1) attending in-person meetings in Destin, Florida; (2) receiving Agri Stats reports, as well as surveys taken and published by WMS; and (3) directly exchanging wage and benefits information with plant managers at other defendant broiler producers. Plaintiffs allege that this conduct violated the Sherman Antitrust Act.

On November 12, 2019, the Court ordered that the four putative class action complaints would be consolidated for all pretrial purposes. The Court ordered plaintiffs to file their consolidated complaint on or before November 14, 2019. Defendants’ motions to dismiss the consolidated complaint were filed on November 22, 2019. Briefing was scheduled to be completed on or before February 28, 2020; however, after the defendants filed their motions to dismiss, on November 26, 2019, plaintiffs notified defendants that they intended to file an amended consolidated complaint. Plaintiffs filed an amended consolidated complaint on December 20, 2019. Plaintiffs name as defendants Sanderson Farms, Inc. and its Foods and Processing Divisions, as well as ten other broiler chicken producers and their affiliates; three turkey producers and their affiliates; Agri Stats, Inc.; and WMS. Plaintiffs bring their amended consolidated complaint on behalf of employees at broiler chicken and turkey processing plants and allege that the defendants unlawfully conspired by agreeing to fix and depress the compensation paid to them. On January 9, 2020 and January 27, 2020, the court approved the voluntary dismissal without prejudice of two of the three nearly identical putative class action lawsuits. On March 12, 2020, the Court approved the voluntary dismissal without prejudice of the third nearly identical putative class action lawsuit.

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

35

days. On April 10, 2020, the District of Maryland issued Standing Order 2020-07, extending all filing deadlines set to fall between March 16, 2020 and June 5, 2020 by 84 days. Under the current Standing Order, plaintiffs’ oppositions to defendants’ motions to dismiss are due July 17, 2020. Defendants’ replies are due August 13, 2020. No discovery has taken place to date. We intend to defend this case vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.

On October 11, 2019, three named plaintiffs - Daniel Lentz, Pam La Fosse, and Marybeth Norman - filed, in the United States District Court for the Northern District of California, a nationwide class action against the Company on behalf of a putative class of all individuals and businesses throughout the United States who purchased one or more of the Company's chicken products in the prior four years. The lawsuit alleges that the named plaintiffs and other class members purchased the Company's chicken products based on misleading representations in the Company’s advertising. Specifically, the plaintiffs in this case allege that the Company’s advertising (including, but not limited to, on its website, television commercials, radio advertisements, social media, print magazines, billboards, and trucks) misleads consumers into believing that (i) the Company’s chickens were not given antibiotics or other pharmaceuticals, (ii) the chickens were raised in a “natural” environment, (iii) there is no evidence that the use of antibiotics or other pharmaceuticals in poultry contributes to the evolution of antibiotic-resistant bacteria, and (iv) the Company’s chicken products do not contain antibiotic or pharmaceutical residues. Plaintiffs allege that (i) the Company “routinely” feeds antibiotics and pharmaceuticals to its chickens, (ii) the Company raises its chickens indoors in “unnatural” indoor conditions amounting to “intensive confinement” and without natural light (iii) there is “extensive” reliable evidence that the use of antibiotics in poultry contributes to antibiotic-resistant bacteria, and (iv) the Company’s chickens have been found to contain antibiotic and pharmaceutical residue. The original Complaint asserted five causes of action under California and North Carolina law. The plaintiffs sought injunctive relief directing the Company to correct its practices and to comply with consumer protection laws nationwide. The plaintiffs also sought monetary, compensatory, statutory, and punitive damages, as well as attorneys’ and experts’ fees, costs, and expenses. On December 20, 2019, the Company filed a motion to dismiss. On February 10, 2020, the Court granted the motion to dismiss in part, denied it in part, and granted the plaintiffs leave to amend the Complaint. On March 23, 2020, two of the three original plaintiffs (Pam La Fosse and Marybeth Norman) filed a First Amended Class Action Complaint in which they were joined by five additional named plaintiffs. The core allegations and theories set forth in the First Amended Complaint are the same as in the original complaint. The First Amended Complaint asserts one cause of action under federal law and sixteen causes of action under the laws of various states. The plaintiffs again seek injunctive relief directing the Company to correct its practices and to comply with consumer protection laws nationwide, as well as monetary, compensatory, statutory and punitive damages and attorneys' and experts' fees, costs and expenses. On May 6, 2020, the Company filed a motion to dismiss the First Amended Complaint. No discovery has taken place to date. We intend to defend these cases vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.

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

The Company recognizes the costs of legal defense for the legal proceedings to which it is a party in the periods incurred. After a considerable analysis of each case, the Company has determined that no accrual is required for any of the foregoing matters as of April 30, 2020. Future reserves may be required if losses are deemed reasonably estimable and probable due to changes in the Company’s assumptions, the effectiveness of legal strategies, or other factors beyond the Company’s control. Future results of operations may be materially affected by the creation of reserves or by accruals of losses to reflect any adverse determinations in these legal proceedings.

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, 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.

There have been no material changes from the risk factors previously disclosed in the Company's Form 10-K for the fiscal year ended October 31, 2019, except as follows.

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

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

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

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

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

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

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

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

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

37

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

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

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

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

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

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

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

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

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

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

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

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

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

•currency fluctuations;

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

•disruptions in shipping channels; and

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

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

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

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

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

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

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

Period	(a) Total Number of Shares Purchased(1)	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs(2) (3)
Feb. 1 - Feb. 28, 2020	3,467	$	140.56	3,467	1,176,615
Mar. 1 - Mar. 31, 2020	1,176	123.32		1,176	1,176,615
Apr. 1 - Apr. 30, 2020	—	—		—	1,176,615
Total	4,643	$	136.19	4,643	1,176,615

___________________

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, 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. The Company’s repurchases of vested restricted stock to satisfy tax withholding obligations of its Stock Incentive Plan participants are not made under the 2018 general repurchase plan.

3Does not include vested restricted shares that may yet be repurchased under the Stock Incentive Plan as described in Note 1.

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Item 6. Exhibits

The following exhibits are filed with this report.

Exhibit 3.1 Restated Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 filed with the Registrant's Quarterly Report on Form 10-Q for the Quarter ended on July 31, 2015.)

Exhibit 3.2 Bylaws of the Registrant, amended and restated as of October 24, 2017. (Incorporated by reference to Exhibit 3 filed with the Registrant’s Current Report on Form 8-K on October 24, 2017.)

Exhibit 10.1+ Sanderson Farms, Inc. Bonus Award Program effective November 1, 2019. (Incorporated by

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

        Exhibit 31.1* Certification of Chief Executive Officer.

Exhibit 31.2* Certification of Chief Financial Officer.

Exhibit 32.1** Section 1350 Certification.

Exhibit 32.2** Section 1350 Certification.

Exhibit 101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Exhibit 101.SCH XBRL Taxonomy Extension Schema

Exhibit 101.CAL XBRLTaxonomy Extension Calculation Linkbase

Exhibit 101.DEF XBRL Taxonomy Extension Definition Linkbase

Exhibit 101.LAB XBRL Taxonomy Extension Label Linkbase

Exhibit 101.PRE XBRL Taxonomy Extension Presentation Linkbase

___________________

* Filed herewith.

** Furnished herewith.

+  Management contract or compensatory plan or arrangement.

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INDEX TO EXHIBITS

Exhibit Number	Description of Exhibit
3.1	Restated Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 filed with the Registrant's Quarterly Report on Form 10-Q for the Quarter ended on July 31, 2015.)
3.2	Bylaws of the Registrant, amended and restated as of October 24, 2017. (Incorporated by reference to Exhibit 3 filed with the Registrant’s Current Report on Form 8-K on October 24, 2017.)
10.1+	Sanderson Farms, Inc. Bonus Award Program effective November 1, 2019. (Incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K on February 18, 2020.)
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

___________________

* Filed herewith.

** Furnished herewith.

+  Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SANDERSON FARMS, INC.
	(Registrant)
Date: May 28, 2020	By:	/s/ D. Michael Cockrell
		Treasurer, Chief Financial Officer and Chief Legal Officer
Date: May 28, 2020	By:	/s/ Tim Rigney
		Secretary, Corporate Controller and
		Chief Accounting Officer

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Joe F. Sanderson, Jr., certify that:

1.I have reviewed this quarterly report on Form 10-Q of Sanderson Farms, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 28, 2020

/s/ Joe F. Sanderson, Jr.

Chief Executive Officer and

Chairman of the Board

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, D. Michael Cockrell, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Sanderson Farms, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 28, 2020

/s/ D. Michael Cockrell

Treasurer, Chief Financial Officer and Chief Legal Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. 1350

In connection with the Quarterly Report of Sanderson Farms, Inc. (the “Company”) on Form 10-Q for the quarter ended April 30, 2020 (the “Report”), I, Joe F. Sanderson, Chairman and Chief Executive Officer of the Company, certify that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Joe F. Sanderson, Jr.

Joe F. Sanderson, Jr.

Chief Executive Officer and

Chairman of the Board

May 28, 2020

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. 1350

In connection with the Quarterly Report of Sanderson Farms, Inc. (the “Company”) on Form 10-Q for the quarter ended April 30, 2020 (the “Report”), I, D. Michael Cockrell, Treasurer and Chief Financial Officer of the Company, certify that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ D. Michael Cockrell

D. Michael Cockrell

Treasurer, Chief Financial Officer and Chief Legal Officer

May 28, 2020

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INVENTORIES

6 Months Ended

Apr. 30, 2020

Inventory Disclosure [Abstract]

INVENTORIES

INVENTORIES

Inventories consisted of the following (in thousands):

Inventory type	April 30, 2020		October 31, 2019
Live poultry-broilers and breeders	$	195,265	$	179,870
Feed, eggs and other	40,599		47,417
Processed poultry	37,969		35,121
Prepared chicken	15,936		20,032
Packaging materials	7,708		7,488
Total Inventories	$	297,477	$	289,928

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Apr. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIESProperty, Plant and Equipment

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

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

On October 28, 2016, the direct and indirect purchaser plaintiffs filed consolidated, amended complaints, and on November 23, 2016, the direct and indirect purchaser plaintiffs filed second amended complaints. On December 16, 2016, the indirect purchaser plaintiffs separated into two cases. On that date, the commercial and institutional indirect purchaser plaintiffs filed a third amended complaint, and the end-user consumer plaintiffs filed an amended complaint.

On January 27, 2017, the defendants filed motions to dismiss the amended complaints in all of the cases, and on November 20, 2017, the motions to dismiss were denied. On February 7, 2018, the direct purchaser plaintiffs filed their third amended complaint, adding three additional poultry producers as defendants. On February 12, 2018, the end-user consumer plaintiffs filed their second amended complaint, in which they also added three additional poultry producers as defendants, along with Agri Stats. On February 20, 2018, the commercial and institutional indirect purchaser plaintiffs filed their fourth amended complaint. On November 13, 2018, the commercial and institutional indirect purchaser plaintiffs filed their fifth amended complaint, adding three additional poultry producers as defendants. On November 28, 2018, the end-user consumer plaintiffs filed their third amended complaint. On January 15, 2019, the direct purchaser plaintiffs filed their fourth amended complaint, and the commercial and institutional indirect purchaser plaintiffs filed their sixth amended complaint. Both the direct purchaser plaintiffs and the commercial and institutional indirect purchaser plaintiffs added two new poultry producers as defendants, as well as Agri Stats. On April 29, 2019, the end-user consumer plaintiffs filed their fourth amended complaint. The parties are currently engaged in discovery.

Between December 8, 2017 and April 11, 2020, additional purported direct-purchaser entities individually brought thirty-six separate suits against 19 poultry producers, including Sanderson Farms and Agri Stats, in the United States District Court for the Northern District of Illinois, the United States District Court for the District of Kansas, the United States District Court for the Western District of Arkansas, and the United States District Court for the District of Puerto Rico. These suits allege substantially similar claims to the direct purchaser class complaint described above; certain of the suits additionally allege related state-law and common law claims, and related claims under federal and Georgia RICO statutes. Those suits filed in the Northern District of Illinois are now pending in front of the same judge as the putative class action lawsuits. On June 26, 2018, the defendants filed a motion to transfer the case filed in the District of Kansas to the Northern District of Illinois, and that motion was granted on September 13, 2018. On June 7, 2019, the plaintiffs filed a motion to transfer the case filed in the Western District of Arkansas to the Northern District of Illinois, and that motion was granted on June 11, 2019. On July 24, 2019, one of the defendants filed a motion to transfer the case filed in the District of Puerto Rico to the Northern District of Illinois, and that motion was granted on July 25, 2019. On July 22, 2019, the Company moved to dismiss in part those direct-purchaser complaints that allege claims under federal and Georgia RICO statutes against it. The motion was fully briefed on September 20, 2019, and the Court heard argument on the motion on December 18, 2019. On March 3, 2020, the Court denied the Company's motion. On October 18, 2019, defendants moved to dismiss the case filed by the Commonwealth of Puerto Rico on its behalf and on behalf of its citizens. The motion was fully briefed on January 21, 2020. The parties are currently engaged in discovery, subject to the COVID-19-related delays discussed below. It is possible additional individual actions may be filed.

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

grand jury. On June 27, 2019, the Court in In re Broiler Chicken Antitrust Litigation permitted the United States Department of Justice to intervene in the case, as well as ordered certain discovery stayed until September 27, 2019. Before the discovery stay expired on September 27, 2019, the United States Department of Justice asked the Court in In re Broiler Chicken Antitrust Litigation to extend the discovery stay for an additional six months. On September 25, 2019, the Court granted the additional stay of not less than three months. On October 16, 2019, after further consideration, the Court extended the stay until June 27, 2020. On December 18, 2019, the Court after further consideration ordered that the stay be lifted on March 31, 2020.

The Company received a grand jury subpoena in connection with the United States Department of Justice Antitrust Division investigation on September 9, 2019. The Company is complying with the subpoena and providing documents and information as requested by the Department of Justice in connection with its investigation.

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

We intend to continue to defend the lawsuits vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail or the Department of Justice were to pursue charges, the Company could be liable for damages or other sanctions, which could have a material, adverse effect on our financial position and results of operations.

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.

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.

On February 21, 2018, the plaintiffs filed a substantially similar lawsuit in the United States District Court for the Eastern District of North Carolina against Sanderson Farms and our subsidiaries and another poultry producer. The plaintiffs subsequently moved to consolidate this action with the Eastern District of Oklahoma action in the Eastern District of Oklahoma for pre-trial proceedings, with the defendants in support thereof. That motion was denied. On July 13, 2018, the defendants moved to dismiss the lawsuit in the Eastern District of North Carolina, and briefing was completed on September 4, 2018. On January 15, 2019, the Court granted in part the defendants’ motion to dismiss and stayed the action in the Eastern District of North Carolina pending resolution of the action in the Eastern District of Oklahoma. On January 6, 2020, the Court in the Eastern District of Oklahoma denied defendants’ motion to dismiss. On January 27, 2020, plaintiffs in the Oklahoma case moved for leave to amend their complaint. The Court in the Eastern District of Oklahoma granted the plaintiffs' motion, and the

plaintiffs filed a consolidated amended complaint on February 21, 2020. The Oklahoma case is ongoing. We intend to defend the Eastern District of North Carolina case vigorously; however, the Company cannot predict the outcome of this action. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.

On February 21, 2017, Sanderson Farms, Inc. received an antitrust civil investigative demand from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida. Among other things, the demand seeks information related to the Georgia Dock Index and other information on poultry and poultry products published by the Georgia Department of Agriculture and its Poultry Market News division. The Company is cooperating fully with the investigative demand, and we have responded to all requests received to date; however, we are unable to predict its outcome at this time. Separately, the Company has become aware that certain plaintiffs’ counsel in In re Broiler Chicken Antitrust Litigation received from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida, an antitrust civil investigative demand that includes a request to produce all documents submitted by the recipients to the Department of Justice relating to In re Broiler Chicken Antitrust Litigation. The Company is also aware that certain plaintiffs’ counsel in In re Broiler Chicken Antitrust Litigation received from the Louisiana Department of Justice - Office of the Attorney General a Civil Investigation Demand that included a request to produce all deposition transcripts from the civil litigation.

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 likely to be scheduled for late 2020 or early 2021. We intend to vigorously defend the appeal. However, the Company cannot predict the outcome of this action. If the plaintiffs were to prevail, the Company’s reputation and marketing program could be materially, adversely affected, which could have a material, adverse effect on our financial position and results of operations.

On August 30, 2019, Sanderson Farms, Inc. and its Foods and Processing Divisions, as well as seventeen other poultry producers and their affiliates; Agri Stats, Inc.; and Webber, Meng, Sahl and Company, Inc. (“WMS”), were named in a putative class action filed in the United States District Court for the District of Maryland. Three other nearly identical putative class action complaints, each seeking to represent the same putative class, also were filed. The complaints, brought on behalf of non-supervisory production and maintenance employees at broiler chicken processing plants, alleged that the defendants unlawfully conspired by agreeing to fix and depress the compensation paid to them, including hourly wages and compensation benefits,

from January 1, 2009 to the present. The plaintiffs claim that broiler producers shared competitively sensitive wage and benefits compensation information in three ways: (1) attending in-person meetings in Destin, Florida; (2) receiving Agri Stats reports, as well as surveys taken and published by WMS; and (3) directly exchanging wage and benefits information with plant managers at other defendant broiler producers. Plaintiffs allege that this conduct violated the Sherman Antitrust Act.

On November 12, 2019, the Court ordered that the four putative class action complaints would be consolidated for all pretrial purposes. The Court ordered plaintiffs to file their consolidated complaint on or before November 14, 2019. Defendants’ motions to dismiss the consolidated complaint were filed on November 22, 2019. Briefing was scheduled to be completed on or before February 28, 2020; however, after the defendants filed their motions to dismiss, on November 26, 2019, plaintiffs notified defendants that they intended to file an amended consolidated complaint. Plaintiffs filed an amended consolidated complaint on December 20, 2019. Plaintiffs name as defendants Sanderson Farms, Inc. and its Foods and Processing Divisions, as well as ten other broiler chicken producers and their affiliates; three turkey producers and their affiliates; Agri Stats, Inc.; and WMS. Plaintiffs bring their amended consolidated complaint on behalf of employees at broiler chicken and turkey processing plants and allege that the defendants unlawfully conspired by agreeing to fix and depress the compensation paid to them. On January 9, 2020 and January 27, 2020, the court approved the voluntary dismissal without prejudice of two of the three nearly identical putative class action lawsuits. On March 12, 2020, the Court approved the voluntary dismissal without prejudice of the third nearly identical putative class action lawsuit.

On March 2, 2020, defendants moved to dismiss the amended consolidated complaint. The Company also filed an individual motion to dismiss plaintiffs’ claims against the Company. Plaintiffs’ oppositions were originally due on April 24, 2020 and defendants’ replies were due on May 21, 2020. However, on March 20, 2020, the District of Maryland issued Second Amended Standing Order 2020-02, extending all filing deadlines set to fall between March 16, 2020 and April 24, 2020 by 42 days. On April 10, 2020, the District of Maryland issued Standing Order 2020-07, extending all filing deadlines set to fall between March 16, 2020 and June 5, 2020 by 84 days. Under the current Standing Order, plaintiffs’ oppositions to defendants’ motions to dismiss are due July 17, 2020. Defendants’ replies are due August 13, 2020. No discovery has taken place to date. We intend to defend this case vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.

On October 11, 2019, three named plaintiffs - Daniel Lentz, Pam La Fosse, and Marybeth Norman - filed, in the United States District Court for the Northern District of California, a nationwide class action against the Company on behalf of a putative class of all individuals and businesses throughout the United States who purchased one or more of the Company's chicken products in the prior four years. The lawsuit alleges that the named plaintiffs and other class members purchased the Company's chicken products based on misleading representations in the Company’s advertising. Specifically, the plaintiffs in this case allege that the Company’s advertising (including, but not limited to, on its website, television commercials, radio advertisements, social media, print magazines, billboards, and trucks) misleads consumers into believing that (i) the Company’s chickens were not given antibiotics or other pharmaceuticals, (ii) the chickens were raised in a “natural” environment, (iii) there is no evidence that the use of antibiotics or other pharmaceuticals in poultry contributes to the evolution of antibiotic-resistant bacteria, and (iv) the Company’s chicken products do not contain antibiotic or pharmaceutical residues. Plaintiffs allege that (i) the Company “routinely” feeds antibiotics and pharmaceuticals to its chickens, (ii) the Company raises its chickens indoors in “unnatural” indoor conditions amounting to “intensive confinement” and without natural light (iii) there is “extensive” reliable evidence that the use of antibiotics in poultry contributes to antibiotic-resistant bacteria, and (iv) the Company’s chickens have been found to contain antibiotic and pharmaceutical residue. The original Complaint asserted five causes of action under California and North Carolina law. The plaintiffs sought injunctive relief directing the Company to correct its practices and to comply with consumer protection laws nationwide. The plaintiffs also sought monetary, compensatory, statutory, and punitive damages, as well as attorneys’ and experts’ fees, costs, and expenses. On December 20, 2019, the Company filed a motion to dismiss. On February 10, 2020, the Court granted the motion to dismiss in part, denied it in part, and granted the plaintiffs leave to amend the Complaint. On March 23, 2020, two of the three original plaintiffs (Pam La Fosse and Marybeth Norman) filed a First Amended Class Action Complaint in which they were joined by five additional named plaintiffs. The core allegations and theories set forth in the First Amended Complaint are the same as in the original complaint. The First Amended Complaint asserts one cause of action under federal law and sixteen causes of action under the laws of various states. The plaintiffs again seek injunctive relief directing the Company to correct its practices and to comply with consumer protection laws nationwide, as well as monetary, compensatory, statutory and punitive damages and attorneys' and experts' fees, costs and expenses. On May 6, 2020, the Company filed a motion to dismiss the First Amended Complaint. No discovery has taken place to date. We intend to defend these cases vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.

The Company is involved in various other claims and litigation incidental to its business. Although the outcome of these matters cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome

of currently pending matters, other than those discussed above, should not have a material effect on the Company’s consolidated results of operations or financial position. The Company recognizes the costs of legal defense for the legal proceedings to which it is a party in the periods incurred. After a considerable analysis of each case, the Company has determined that no accrual is required for any of the foregoing matters as of April 30, 2020. Future reserves may be required if losses are deemed reasonably estimable and probable due to changes in the Company’s assumptions, the effectiveness of legal strategies, or other factors beyond the Company’s control. Future results of operations may be materially affected by the creation of reserves or by accruals of losses to reflect any adverse determinations in these legal proceedings.

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Apr. 30, 2020	Jan. 31, 2020	Apr. 30, 2019	Jan. 31, 2019	Apr. 30, 2020	Apr. 30, 2019
Earnings Per Share [Abstract]
Net income (loss)	$ 6,118	$ (38,576)	$ 40,636	$ (17,833)	$ (32,458)	$ 22,803
Distributed and undistributed (earnings) to unvested restricted stock	(81)		(597)		0	(340)
Distributed and undistributed earnings to common shareholders—Basic	$ 6,037		$ 40,039		$ (32,458)	$ 22,463
Weighted average shares outstanding—Basic (in shares)	21,943		21,830		21,939	21,822
Weighted average shares outstanding—Diluted (in shares)	21,943		21,830		21,939	21,822
Earnings per common share-Basic (in usd per share)	$ 0.28		$ 1.83		$ (1.48)	$ 1.03
Earnings per common share-Diluted (in usd per share)	$ 0.28		$ 1.83		$ (1.48)	$ 1.03

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INVENTORIES (Details) - USD ($) $ in Thousands	Apr. 30, 2020	Oct. 31, 2019
Inventory [Line Items]
Inventories	$ 297,477	$ 289,928
Live poultry-broilers and breeders
Inventory [Line Items]
Inventories	195,265	179,870
Feed, eggs and other
Inventory [Line Items]
Inventories	40,599	47,417
Processed poultry
Inventory [Line Items]
Inventories	37,969	35,121
Prepared chicken
Inventory [Line Items]
Inventories	15,936	20,032
Packaging materials
Inventory [Line Items]
Inventories	$ 7,708	$ 7,488

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Document and Entity Information - shares	6 Months Ended
	Apr. 30, 2020	May 26, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Apr. 30, 2020
Document Transition Report	false
Entity File Number	1-14977
Entity Registrant Name	SANDERSON FARMS INC
Entity Incorporation, State or Country Code	MS
Entity Tax Identification Number	64-0615843
Entity Address, Address Line One	127 Flynt Road
Entity Address, City or Town	Laurel
Entity Address, State or Province	MS
Entity Address, Postal Zip Code	39443
City Area Code	601
Local Phone Number	649-4030
Title of 12(b) Security	Common Stock, $1 par value per share
Trading Symbol	SAFM
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Share Outstanding (in shares)		22,239,574
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Entity Central Index Key	0000812128
Current Fiscal Year End Date	--10-31

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LEASES (Tables)

6 Months Ended

Apr. 30, 2020

Leases [Abstract]

Lease, Cost

The following table presents the components of our lease costs (in thousands) paid during the three and six months ended April 30, 2020:

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

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

Other information regarding our operating leases includes the following:

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

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

Schedule of Future Minimum Rental Payments for Operating Leases

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

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

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STOCK COMPENSATION PLANS (Tables)

6 Months Ended

Apr. 30, 2020

Share-based Payment Arrangement [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, 2020		April 30, 2019		April 30, 2020		April 30, 2019
November 1, 2016	84,511 (a)	$	—	$	650	$	—	$	1,263
November 1, 2017	13,093 (e)	157		—		347		—
November 1, 2018 (1)	— (e)	—		—		—		—
November 1, 2019 (1)	— (e)	—		—		—		—
Total compensation cost		$	157	$	650	$	347	$	1,263

Note (1) - As of April 30, 2020, 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, due to the uncertainties discussed above, and therefore recorded no compensation expense related to those agreements.

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

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Lease Payments of Obligations Under Non-Cancelable Operating Leases (Details) $ in Thousands	Apr. 30, 2020 USD ($)
Leases [Abstract]
2020 (remainder)	$ 7,299
2021	14,398
2022	11,969
2023	8,327
2024	4,744
Thereafter	2,430
Total undiscounted operating lease payments	49,167
Lessee, Operating Lease, Liability, Undiscounted Excess Amount	(3,254)
Present value of lease liabilities	$ 45,913

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LEASES	6 Months Ended
	Apr. 30, 2020
Leases [Abstract]
LEASES	LEASESThe Company, using the guidance in Accounting Standards Codification ("ASC") 842, Leases, determines if an agreement is a lease at the inception of the agreement, and when a lease exists, we follow the guidance in ASC 842 to determine whether the lease is an operating or finance lease. The Company is a party to certain agreements that are classified as operating leases, and those are recorded on our Condensed Consolidated Balance Sheet as Right of Use Assets, Current Lease Liabilities, and Long-term Lease Liabilities. The Company is not a party to any finance lease arrangements. The Company has elected not to record short-term leases with initial terms of twelve months or less in our Condensed Consolidated Balance Sheet. Lease expenses related to those short-term leases are recognized on a straight-line basis over the term of the lease. The initial assets and corresponding liabilities recorded at commencement of our operating leases are based on the present value of the future minimum lease payments over the lease term. In determining the present value, we use the implicit interest rate in the agreement, if provided. If an implicit interest rate is not provided, we determine the present value of the future minimum lease payments using our incremental borrowing rate based on available information at the lease commencement.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Operating activities
Net income (loss)	$ (32,458)	$ 22,803
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	75,474	62,379
Amortization of share-based compensation	5,173	5,907
Live inventory adjustment (net of prior period reversal)	(2,800)	(9,600)
Provision for losses (recoveries) on accounts receivable	0	(1,500)
Deferred income taxes	57,256	6,699
Gain (Loss) on Disposition of Assets	238	0
Change in assets and liabilities:
Accounts receivable - trade	(294)	(3,457)
Accounts receivable - insurance	445	1,111
Income taxes	(120,760)	27,363
Inventories	(4,749)	(35,817)
Prepaid expenses and other assets	(6,242)	(9,160)
Right of use assets	8,733	0
Lease liabilities	(8,733)	0
Accounts payable	(8,159)	(10,738)
Accrued expenses and other liabilities	(353)	(6,193)
Total adjustments	(4,771)	26,994
Net cash provided by (used in) operating activities	(37,229)	49,797
Investing activities
Capital expenditures	(129,691)	(162,268)
Net proceeds from sale of property and equipment	207	880
Net cash used in investing activities	(129,484)	(161,388)
Financing activities
Payment of debt issuance costs	0	(2,225)
Borrowings from revolving line of credit	145,000	100,000
Proceeds from issuance of restricted stock under stock compensation plans	600	479
Payments from issuance of common stock under stock compensation plans	(5,861)	(3,829)
Dividends paid	(7,113)	(7,089)
Net cash provided by financing activities	132,626	87,336
Net change in cash and cash equivalents	(34,087)	(24,255)
Cash and cash equivalents at beginning of period	95,417	121,193
Cash and cash equivalents at end of period	61,330	96,938
Supplemental disclosure of non-cash investing and financing activities:
Capital expenditures included in accounts payable	5,588	5,174
Dividends payable	$ 7,117	$ 7,089

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ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands	Apr. 30, 2020	Oct. 31, 2019
Accounting Policies [Abstract]
Right of use assets	$ 45,913	$ 0
Present value of lease liabilities	$ 45,913

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REVENUE (Tables)

6 Months Ended

Apr. 30, 2020

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following tables disaggregate our net sales by product category (in thousands):

Product Category	Three Months Ended April 30, 2020		Three Months Ended April 30, 2019
Fresh, vacuum-sealed chicken	$	265,258	$	330,713
Fresh, chill-packed chicken	343,165		269,304
Fresh, ice-packed chicken	130,798		132,427
Prepared chicken	38,810		61,995
Frozen chicken	62,187		44,109
Other	4,493		6,681
Total net sales	$	844,711	$	845,229

Product Category	Six Months Ended April 30, 2020		Six Months Ended April 30, 2019
Fresh, vacuum-sealed chicken	$	576,554	$	590,782
Fresh, chill-packed chicken	630,432		537,768
Fresh, ice-packed chicken	251,261		232,459
Prepared chicken	90,192		119,391
Frozen chicken	108,861		92,700
Other	10,489		15,517
Total net sales	$	1,667,789	$	1,588,617

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Apr. 30, 2020	Oct. 31, 2019
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)	22,239,574	22,203,920
Common Stock, shares outstanding (in shares)	22,239,574	22,203,920
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

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EARNINGS PER SHARE (Tables)

6 Months Ended

Apr. 30, 2020

Earnings Per Share [Abstract]

Earnings Per Share

The following tables present earnings per share:

	Three Months Ended
	April 30, 2020		April 30, 2019
	(in thousands except per share amounts)
Net income	$	6,118	$	40,636
Distributed and undistributed (earnings) to unvested restricted stock	(81)		(597)
Distributed and undistributed earnings to common shareholders—Basic	$	6,037	$	40,039
Weighted average shares outstanding—Basic	21,943		21,830
Weighted average shares outstanding—Diluted	21,943		21,830
Earnings per common share—Basic	$	0.28	$	1.83
Earnings per common share—Diluted	$	0.28	$	1.83
	Six Months Ended
	April 30, 2020		April 30, 2019
	(in thousands except per share amounts)
Net income (loss)	$	(32,458)	$	22,803
Distributed and undistributed (earnings) to unvested restricted stock	—		(340)
Distributed and undistributed earnings (loss) to common shareholders—Basic	$	(32,458)	$	22,463
Weighted average shares outstanding—Basic	21,939		21,822
Weighted average shares outstanding—Diluted	21,939		21,822
Earnings (loss) per common share—Basic	$	(1.48)	$	1.03
Earnings (loss) per common share—Diluted	$	(1.48)	$	1.03

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PROPERTY, PLANT AND EQUIPMENT

6 Months Ended

Apr. 30, 2020

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment, net, consisted of the following (in thousands):

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

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CREDIT AGREEMENT	6 Months Ended
	Apr. 30, 2020
Debt Disclosure [Abstract]
CREDIT AGREEMENT	CREDIT AGREEMENTThe Company is a party to a revolving credit facility dated March 21, 2019, with a maximum available borrowing capacity of $1.0 billion. 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 a new poultry complex for the four fiscal quarters beginning on the first day of the fiscal quarter during which the Company gives written notice of its intent to exercise this right. The Company has not exercised this right. The facility also sets a minimum net worth requirement that at April 30, 2020, was $999.2 million. The credit is unsecured and, unless extended, will expire on March 21, 2024. As of April 30, 2020 and May 27, 2020, the Company had borrowed $200.0 million, and had approximately $23.1 million outstanding in letters of credit, leaving $776.9 million of borrowing capacity available under the facility.

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STOCK COMPENSATION PLANS - Compensation Costs (Details) - USD ($)	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock based compensation expense	$ 2,400,000	$ 3,000,000.0	$ 5,200,000	$ 5,900,000
Performance Based Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock based compensation expense	$ 157,000	650,000	$ 347,000	1,263,000
Performance Based Awards | Performance Share Plan 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of share issued (in shares)	84,511		84,511
Total stock based compensation expense	$ 0	650,000	$ 0	1,263,000
Performance Based Awards | Performance Share Plan 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of share issued (in shares)	13,093		13,093
Total stock based compensation expense	$ 157,000	0	$ 347,000	0
Performance Based Awards | Performance Share Plan 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of share issued (in shares)	0		0
Total stock based compensation expense	$ 0	0	$ 0	0
Performance Based Awards | Performance Share Plan 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of share issued (in shares)	0		0
Total stock based compensation expense	$ 0	$ 0	$ 0	$ 0

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REVENUE - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Revenue from External Customer [Line Items]
Net sales	$ 844,711	$ 845,229	$ 1,667,789	$ 1,588,617
Fresh, vacuum-sealed chicken
Revenue from External Customer [Line Items]
Net sales	265,258	330,713	576,554	590,782
Fresh, chill-packed chicken
Revenue from External Customer [Line Items]
Net sales	343,165	269,304	630,432	537,768
Fresh, ice-packed chicken
Revenue from External Customer [Line Items]
Net sales	130,798	132,427	251,261	232,459
Prepared chicken
Revenue from External Customer [Line Items]
Net sales	38,810	61,995	90,192	119,391
Frozen chicken
Revenue from External Customer [Line Items]
Net sales	62,187	44,109	108,861	92,700
Other
Revenue from External Customer [Line Items]
Net sales	$ 4,493	$ 6,681	$ 10,489	$ 15,517

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INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019	Oct. 31, 2019
Income Tax Disclosure [Abstract]
CARES act, income tax benefit			$ 49,400
CARES act, income tax expense			$ 11,900
Effective income tax rate	113.40%	24.70%	66.40%	23.80%
Effective income tax rate, excluding discrete items	30.20%	24.90%	26.90%	24.50%
Deferred income taxes	$ 131,388		$ 131,388		$ 74,132
Increase in deferred income taxes			$ 57,300

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FAIR VALUE OF FINANCIAL INSTRUMENTS

6 Months Ended

Apr. 30, 2020

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 debt instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level hierarchy is followed for disclosure to show the extent and level of judgment used to estimate fair value measurements:

Level 1 – Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.

Level 2 – Inputs used to measure fair value, other than quoted prices included in Level 1, are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

Level 3 – Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

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

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Property, Plant, and Equipment (Tables)

6 Months Ended

Apr. 30, 2020

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

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

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

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Operating Leases and Service Commitment - Other lease information (Details) $ in Thousands	6 Months Ended
	Apr. 30, 2020 USD ($)
Leases [Abstract]
Cash outflows for operating leases included in the measurement of lease liabilities	$ 8,733
Non-cash amount of right of use assets and lease liabilities recorded upon adoption	$ 54,665
Weighted-average remaining lease term (years)	4 years
Weighted-average discount rate	2.45%

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Paid-In Capital	Retained Earnings
Beginning Balance (in shares) at Oct. 31, 2018		22,099,780
Beginning Balance at Oct. 31, 2018	$ 1,387,893	$ 22,100	$ 81,269	$ 1,284,524
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(17,833)			(17,833)
Cash dividends ($0.32 per share)	(7,089)			(7,089)
Stock compensation plan transactions (in shares)		53,688
Stock compensation plan transactions	(2,073)	$ 53	(2,126)
Amortization of unearned compensation	2,313		2,313
Ending Balance (in shares) at Jan. 31, 2019		22,153,468
Ending Balance at Jan. 31, 2019	1,363,211	$ 22,153	81,456	1,259,602
Beginning Balance (in shares) at Oct. 31, 2018		22,099,780
Beginning Balance at Oct. 31, 2018	1,387,893	$ 22,100	81,269	1,284,524
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	22,803
Ending Balance (in shares) at Apr. 30, 2019		22,154,245
Ending Balance at Apr. 30, 2019	1,400,712	$ 22,154	85,409	1,293,149
Beginning Balance (in shares) at Jan. 31, 2019		22,153,468
Beginning Balance at Jan. 31, 2019	1,363,211	$ 22,153	81,456	1,259,602
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	40,636			40,636
Cash dividends ($0.32 per share)	(7,089)			(7,089)
Stock compensation plan transactions (in shares)		777
Stock compensation plan transactions	1,629	$ 1	1,628
Amortization of unearned compensation	2,325		2,325
Ending Balance (in shares) at Apr. 30, 2019		22,154,245
Ending Balance at Apr. 30, 2019	1,400,712	$ 22,154	85,409	1,293,149
Beginning Balance (in shares) at Oct. 31, 2019		22,203,920
Beginning Balance at Oct. 31, 2019	1,417,675	$ 22,204	86,010	1,309,461
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(38,576)			(38,576)
Cash dividends ($0.32 per share)	(7,113)			(7,113)
Stock compensation plan transactions (in shares)		25,292
Stock compensation plan transactions	(4,696)	$ 25	(4,721)
Amortization of unearned compensation	2,082		2,082
Ending Balance (in shares) at Jan. 31, 2020		22,229,212
Ending Balance at Jan. 31, 2020	1,369,372	$ 22,229	83,371	1,263,772
Beginning Balance (in shares) at Oct. 31, 2019		22,203,920
Beginning Balance at Oct. 31, 2019	1,417,675	$ 22,204	86,010	1,309,461
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(32,458)
Ending Balance (in shares) at Apr. 30, 2020		22,239,574
Ending Balance at Apr. 30, 2020	1,371,442	$ 22,239	86,430	1,262,773
Beginning Balance (in shares) at Jan. 31, 2020		22,229,212
Beginning Balance at Jan. 31, 2020	1,369,372	$ 22,229	83,371	1,263,772
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	6,118			6,118
Cash dividends ($0.32 per share)	(7,117)			(7,117)
Stock compensation plan transactions (in shares)		10,362
Stock compensation plan transactions	1,109	$ 10	1,099
Amortization of unearned compensation	1,960		1,960
Ending Balance (in shares) at Apr. 30, 2020		22,239,574
Ending Balance at Apr. 30, 2020	$ 1,371,442	$ 22,239	$ 86,430	$ 1,262,773

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COMMITMENTS AND CONTINGENCIES (Detail) - USD ($) $ in Thousands	6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Long-term Purchase Commitment [Line Items]
Total purchase obligation	$ 18,500
Purchase obligation, 2021	3,500
Capital expenditures	129,691	$ 162,268
MISSISSIPPI
Long-term Purchase Commitment [Line Items]
Estimated cost of investment	14,200
Purchase obligation, 2020	15,000
Capital expenditures	$ 3,600

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Property, Plant, and Equipment (Details) - USD ($) $ in Thousands	Apr. 30, 2020	Oct. 31, 2019
Property, Plant and Equipment [Abstract]
Land and buildings	$ 900,897	$ 892,089
Machinery and equipment	1,302,518	1,236,095
Work-in-process	54,468	11,149
Property, plant and equipment, net	2,257,883	2,139,333
Less accumulated depreciation	1,022,327	953,473
Property, plant and equipment, net	$ 1,235,556	$ 1,185,860

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REVENUE

6 Months Ended

Apr. 30, 2020

Revenue from Contract with Customer [Abstract]

REVENUE

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.

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

customer has obtained control of the product, the Company has elected to account for those expenses as fulfillment costs in cost of sales, rather than an additional promised service. Revenue is reported gross of any freight charge that is separately invoiced to a customer, and all freight costs are accounted for as cost of sales.

Due to the nature of our contracts, commissions associated with such contracts provide only a short-term benefit (i.e. less than one year); therefore, we recognize costs of commissions paid to third-party brokers as selling, general and administrative expenses.

Disaggregation of Revenue

The following tables disaggregate our net sales by product category (in thousands):

Product Category	Three Months Ended April 30, 2020		Three Months Ended April 30, 2019
Fresh, vacuum-sealed chicken	$	265,258	$	330,713
Fresh, chill-packed chicken	343,165		269,304
Fresh, ice-packed chicken	130,798		132,427
Prepared chicken	38,810		61,995
Frozen chicken	62,187		44,109
Other	4,493		6,681
Total net sales	$	844,711	$	845,229

Product Category	Six Months Ended April 30, 2020		Six Months Ended April 30, 2019
Fresh, vacuum-sealed chicken	$	576,554	$	590,782
Fresh, chill-packed chicken	630,432		537,768
Fresh, ice-packed chicken	251,261		232,459
Prepared chicken	90,192		119,391
Frozen chicken	108,861		92,700
Other	10,489		15,517
Total net sales	$	1,667,789	$	1,588,617

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EARNINGS PER SHARE

6 Months Ended

Apr. 30, 2020

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

Certain share-based payment awards described in Note 5 - Stock Compensation Plans above entitling holders to receive non-forfeitable dividends before vesting are considered participating securities and thus are included in the calculation of basic earnings per share, to the extent they are dilutive. These awards are included in the calculation of basic earnings per share under the two-class method. The two-class method allocates earnings for the period between common shareholders and other security holders. The participating awards receiving dividends are allocated the same amount of income as if they were vested shares.

The following tables present earnings per share:

	Three Months Ended
	April 30, 2020		April 30, 2019
	(in thousands except per share amounts)
Net income	$	6,118	$	40,636
Distributed and undistributed (earnings) to unvested restricted stock	(81)		(597)
Distributed and undistributed earnings to common shareholders—Basic	$	6,037	$	40,039
Weighted average shares outstanding—Basic	21,943		21,830
Weighted average shares outstanding—Diluted	21,943		21,830
Earnings per common share—Basic	$	0.28	$	1.83
Earnings per common share—Diluted	$	0.28	$	1.83
	Six Months Ended
	April 30, 2020		April 30, 2019
	(in thousands except per share amounts)
Net income (loss)	$	(32,458)	$	22,803
Distributed and undistributed (earnings) to unvested restricted stock	—		(340)
Distributed and undistributed earnings (loss) to common shareholders—Basic	$	(32,458)	$	22,463
Weighted average shares outstanding—Basic	21,939		21,822
Weighted average shares outstanding—Diluted	21,939		21,822
Earnings (loss) per common share—Basic	$	(1.48)	$	1.03
Earnings (loss) per common share—Diluted	$	(1.48)	$	1.03

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ACCOUNTING POLICIES (Policies)

6 Months Ended

Apr. 30, 2020

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, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2020.

The condensed consolidated balance sheet at October 31, 2019 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.

New Accounting Pronouncements

New Accounting Pronouncements

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

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which intends to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019, our fiscal 2021. Early adoption is permitted. We do not expect adoption to have a material effect on our consolidated financial statements.

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.

Fair Value Of Financial Instruments

The Company holds certain items that are required to be disclosed at fair value, primarily debt instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level hierarchy is followed for disclosure to show the extent and level of judgment used to estimate fair value measurements:

Level 1 – Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.

Level 2 – Inputs used to measure fair value, other than quoted prices included in Level 1, are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

Level 3 – Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

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, 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.

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CREDIT AGREEMENT (Details)	Apr. 30, 2020 USD ($)	Oct. 31, 2019 USD ($)	Mar. 21, 2019 USD ($)
Debt Instrument [Line Items]
Revolving credit facility, maximum borrowing capacity			$ 1,000,000,000.0
Long-term debt	$ 200,000,000	$ 55,000,000
Line of credit | Revolving Credit Facility
Debt Instrument [Line Items]
Ratio of indebtedness to net capital			0.50
Ratio of indebtedness to net capital, maximum increase			0.05
Revolving credit facility, minimum net worth requirement	999,200,000
Long-term debt	200,000,000.0
Revolving credit facility, remaining available balance	776,900,000
Line of credit | Letter of Credit
Debt Instrument [Line Items]
Long-term debt	$ 23,100,000

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STOCK COMPENSATION PLANS - Additional Information (Details) - USD ($)			3 Months Ended		6 Months Ended
	Nov. 01, 2019	Feb. 14, 2019	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019	Nov. 01, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock based compensation expense			$ 2,400,000	$ 3,000,000.0	$ 5,200,000	$ 5,900,000
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock based compensation expense			$ 2,200,000	2,200,000	$ 4,700,000	4,400,000
Aggregate number of shares outstanding (in shares)			265,353		265,353
Unrecognized share-based compensation costs			$ 18,000,000.0		$ 18,000,000.0
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)		12,100
Grant date fair value of restricted shares (in usd per share)		$ 136.76
Restricted Stock | Outside Directors | Scenario One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)		1 year
Restricted Stock | Outside Directors | Scenario Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)		2 years
Restricted Stock | Outside Directors | Scenario Three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)		3 years
Performance Based Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock based compensation expense			157,000	650,000	$ 347,000	1,263,000
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			$ 48,000	105,000	$ 104,000	196,000
Management Share Purchase Plan | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares issued (in shares)					4,209
Average price per share purchased by participants (in usd per share)			$ 142.45		$ 142.45
Management Share Purchase Plan | Matching Restricted Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares issued (in shares)					1,007
Performance Share Plan 2018 | 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)							56,575
Aggregate number of shares outstanding (in shares)			0		0
Potential accrued compensation cost			$ 3,000,000.0		$ 3,000,000.0
Performance Share Plan 2018 | 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)	56,575
Grant date fair value of restricted shares (in usd per share)	$ 159.76
Performance Share Plan 2017 | Performance Based Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock based compensation expense			$ 157,000	0	$ 347,000	0
Aggregate number of shares outstanding (in shares)			13,093		13,093
Compensation not yet recognized			$ 324,000		$ 324,000
Potential accrued compensation cost			7,500,000		7,500,000
Performance Share Plan 2016 | Performance Based Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock based compensation expense			$ 0	$ 650,000	$ 0	$ 1,263,000
Additional service period					1 year
Aggregate number of shares outstanding (in shares)			84,511		84,511
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%

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INCOME TAXES

6 Months Ended

Apr. 30, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("the CARES Act") was enacted. The CARES Act contains several income tax provisions, as well as other measures, that are intended to assist businesses impacted by the economic effects of the COVID-19 pandemic. The most significant provisions of the CARES Act that will materially affect our accounting for income taxes include, but are not limited to, a five-year carry-back allowance for taxable net operating losses generated in tax years 2018 through 2020, our fiscal years 2019 through 2021, and a technical correction to the Tax Cut and Jobs Act, enacted on December 22, 2017, that provides a two-year carry-back allowance for our taxable net operating loss generated in fiscal year 2018.

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

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

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

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ACCOUNTING POLICIES

6 Months Ended

Apr. 30, 2020

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, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2020.

The condensed consolidated balance sheet at October 31, 2019 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.

New Accounting Pronouncements

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

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which intends to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019, our fiscal 2021. Early adoption is permitted. We do not expect adoption to have a material effect on our consolidated financial statements.

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STOCK COMPENSATION PLANS

6 Months Ended

Apr. 30, 2020

Share-based Payment Arrangement [Abstract]

STOCK COMPENSATION PLANS

STOCK COMPENSATION PLANS

Refer to Note 9 and Note 10 of the Company’s October 31, 2019 audited financial statements in the Company's 2019 Annual Report on Form 10-K for further information on our employee benefit plans and stock based compensation plans, respectively. Total stock based compensation expense during the three and six months ended April 30, 2020 was $2.4 million and $5.2 million, respectively, as compared to total stock based compensation expense of $3.0 million and $5.9 million, respectively, for the three and six months ended April 30, 2019.

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

During fiscal 2020, 2019 and 2018, the Company entered into performance share agreements that grant certain officers and key employees the right to receive shares of the Company's common stock, subject to the Company's achievement of certain performance measures. The performance share agreements specify a target number of shares that a participant can receive based upon the Company's average return on equity and average return on sales, as defined, during a two-year performance period beginning November 1 of each performance period. Although the performance share agreements have a two-year performance period, there is an additional one-year period during which the participant must remain employed by the Company before the shares are paid out. If the Company's average return on equity and average return on sales meet or exceed certain threshold amounts for the performance period, participants will receive 50 percent to 200 percent of the target number of shares, depending upon the Company's level of performance. Accruals for performance shares begin during the period management determines that achievement of the applicable performance based criteria is probable at some level. In estimating the probability of the number of shares that will be awarded, the Company considers, among other factors, current and projected grain costs and chicken volumes and pricing, as well as the amount of the Company's commitments to procure grain at a fixed price throughout the performance period. Due to the high level of volatility of these commodity prices and the impact that the change in pricing can have on the Company's results, the Company's assessment of probability can change from period to period and can result in a significant revision to the amounts accrued related to the arrangements, as the accruals are adjusted using the cumulative catch-up method of accounting.

The target number of shares specified in the performance share agreements executed on November 1, 2019 totaled 56,575. As of April 30, 2020, 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 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, 2018. The target number of shares specified in those agreements totaled 74,650. As of April 30, 2020, 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 no 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 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. Accordingly, the three and six months ended April 30, 2020 include compensation expense of $157,000 and

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

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

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, 2020		April 30, 2019		April 30, 2020		April 30, 2019
November 1, 2016	84,511 (a)	$	—	$	650	$	—	$	1,263
November 1, 2017	13,093 (e)	157		—		347		—
November 1, 2018 (1)	— (e)	—		—		—		—
November 1, 2019 (1)	— (e)	—		—		—		—
Total compensation cost		$	157	$	650	$	347	$	1,263

Note (1) - As of April 30, 2020, 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, due to the uncertainties discussed above, and therefore recorded no compensation expense related to those agreements.

On November 1, 2019, the Company granted 56,575 shares of restricted stock to certain officers and key management employees. The restricted stock had a grant date fair value of $159.76 per share and will vest on November 1, 2023. On February 13, 2020, the Company granted an aggregate of 12,100 shares of restricted stock to all of its non-employee directors. The restricted stock had a grant date fair value of $136.76 per share and vests one, two or three years from the date of grant. The Company also has unvested restricted stock grants outstanding that were granted during prior fiscal years to its officers, key employees and outside directors. The aggregate number of shares outstanding at April 30, 2020 related to all unvested restricted stock grants totaled 265,353. During the three and six months ended April 30, 2020, the Company recorded compensation expense, included in the total stock based compensation expense above, of $2.2 million and $4.7 million, respectively, related to restricted stock grants, as compared to $2.2 million and $4.4 million, respectively, during the three and six months ended April 30, 2019. The Company had $18.0 million in unrecognized share-based compensation costs as of April 30, 2020, which will be recognized over a weighted average remaining vesting period of approximately 2 years.

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INVENTORIES (Tables)

6 Months Ended

Apr. 30, 2020

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventories consisted of the following (in thousands):

Inventory type	April 30, 2020		October 31, 2019
Live poultry-broilers and breeders	$	195,265	$	179,870
Feed, eggs and other	40,599		47,417
Processed poultry	37,969		35,121
Prepared chicken	15,936		20,032
Packaging materials	7,708		7,488
Total Inventories	$	297,477	$	289,928

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Apr. 30, 2020	Oct. 31, 2019
Current assets:
Cash and cash equivalents	$ 61,330	$ 95,417
Accounts receivable, net	132,072	131,778
Receivable from insurance companies	0	445
Inventories	297,477	289,928
Refundable income taxes	127,372	6,612
Prepaid expenses and other current assets	63,396	56,931
Total current assets	681,647	581,111
Property, plant and equipment, net	1,235,556	1,185,860
Right of use assets	45,913	0
Other assets	6,394	7,163
Total assets	1,969,510	1,774,134
Current liabilities:
Accounts payable	119,961	132,741
Dividends payable	7,117	0
Accrued expenses	82,214	82,940
Lease liabilities	15,188	0
Total current liabilities	224,480	215,681
Long-term debt	200,000	55,000
Claims payable and other liabilities	11,475	11,646
Deferred income taxes	131,388	74,132
Long-term lease liabilities	30,725	0
Commitments and contingencies
Stockholders’ equity:
Common Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares—22,239,574 and 22,203,920 at April 30, 2020 and October 31, 2019, respectively	22,239	22,204
Paid-in capital	86,430	86,010
Retained earnings	1,262,773	1,309,461
Total stockholders’ equity	1,371,442	1,417,675
Total liabilities and stockholders’ equity	1,969,510	1,774,134
Series A Junior Participating Preferred Stock, $100 par value: authorized 500,000 shares, none issued
Stockholders’ equity:
Preferred Stock
Par value to be determined by the Board of Directors: authorized 4,500,000 shares; none issued
Stockholders’ equity:
Preferred Stock

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares	3 Months Ended
	Jan. 31, 2020	Oct. 31, 2019	Jan. 31, 2019	Oct. 31, 2018
Statement of Stockholders' Equity [Abstract]
Cash dividends, per share (in usd per share)	$ 0.32	$ 0.32	$ 0.32	$ 0.32

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Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Apr. 30, 2020	Apr. 30, 2020
Leases [Abstract]
Operating lease cost	$ 3,871	$ 8,268
Short-term lease cost	922	1,787
Variable lease cost	102,298	203,940
Total lease cost	$ 107,091	$ 213,995