STOCK COMPENSATION PLANS

9 Months Ended

Jul. 31, 2020

Share-based Payment Arrangement [Abstract]

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 nine months ended July 31, 2020 was $2.3 million and $7.5 million, respectively, as compared to total stock based compensation expense of $3.8 million and $9.7 million, respectively, for the three and nine months ended July 31, 2019.

During the nine months ended July 31, 2020, participants in the Company’s Management Share Purchase Plan ("MSPP") elected to receive a total of 6,616 shares of restricted stock at an average price of $132.79 per share instead of a specified percentage of their cash compensation, and the Company issued 1,580 matching restricted shares. During the three and nine months ended July 31, 2020, the Company recorded compensation expense for the MSPP shares, included in the total stock based compensation expense above, of $48,000 and $152,000, respectively, as compared to $63,000 and $259,000, respectively, during the three and nine months ended July 31, 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 July 31, 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 July 31, 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 nine months ended July 31, 2020 include compensation expense of $162,000 and

$509,000, respectively, related to those agreements, as compared to compensation expense of $1.2 million during the three and nine months ended July 31, 2019. Because management's initial determination of probability was made during the third quarter of fiscal 2019 and because the accrual is made using the cumulative catch-up method, the compensation expense recorded during the first nine months of fiscal 2019 related to the agreements entered into on November 1, 2017 was greater than that recorded during the first nine months of fiscal 2020. As of July 31, 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 three months of the service period ending October 31, 2020. The Company will recognize the remaining $162,000 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 $8.8 million and $4.5 million, respectively, would have been accrued as of July 31, 2020.

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


		Three Months Ended						Nine Months Ended
Date of Performance Share Agreement	Number of shares issued (actual (a) or estimated (e))	July 31, 2020		July 31, 2019		July 31, 2020		July 31, 2019
November 1, 2016	84,511 (a)	$	—	$	596	$	—	$	1,859
November 1, 2017	13,093 (e)	162		1,212		509		1,212
November 1, 2018 (1)	— (e)	—		—		—		—
November 1, 2019 (1)	— (e)	—		—		—		—
Total compensation cost		$	162	$	1,808	$	509	$	3,071

Note (1) - As of July 31, 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 July 31, 2020 related to all unvested restricted stock grants totaled 263,053. During the three and nine months ended July 31, 2020, the Company recorded compensation expense, included in the total stock based compensation expense above, of $2.1 million and $6.8 million, respectively, related to restricted stock grants, as compared to $1.9 million and $6.3 million, respectively, during the three and nine months ended July 31, 2019. The Company had $15.1 million in unrecognized share-based compensation costs as of July 31, 2020, which will be recognized over a weighted average remaining vesting period of approximately 1 year, 10 months.