UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

___________________________

FORM 10-Q

___________________________

(MARK ONE)


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

For the quarterly period ended ~~July~~January 31, ~~2021~~2022


☐			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,~~328~~323,~~785~~097 shares outstanding as of ~~August~~February 2522, ~~2021~~2022.

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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—July 31, 2021 and October 31, 2020	3
	Condensed consolidated balance sheets—January 31, 2022 and October 31, 2021	3
	Condensed consolidated statements of operations—Three and nine months ended July 31, 2021 and 2020	4
	Condensed consolidated statements of operations—Three months ended January 31, 2022 and 2021	4
	Condensed consolidated statements of stockholders' equity—Three and nine months ended July 31, 2021 and 2020	5
	Condensed consolidated statements of stockholders' equity—Three months ended January 31, 2022 and 2021	5
	Condensed consolidated statements of cash flows—Nine months ended July 31, 2021 and 2020	6
	Condensed consolidated statements of cash flows—Three months ended January 31, 2022 and 2021	6
	Notes to condensed consolidated financial statements—July 31, 2021	7
	Notes to condensed consolidated financial statements—January 31, 2022	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2017
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3326
Item 4.	Controls and Procedures	3427
PART II. OTHER INFORMATION		3427
Item 1.	Legal Proceedings	3427
Item 1A.	Risk Factors	3427
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3828
Item 6.	Exhibits	3930
INDEX TO EXHIBITS		4031
SIGNATURES		4132

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except number of shares)

	July 31,2021		October 31,2020
	January 31,2022		October 31,2021
	(Unaudited)		(Note 1)
Assets
Current assets:
Cash and cash equivalents	$	~~245~~685,~~429~~823	$	49439,~~061~~339
Accounts receivable, net	~~211~~224,~~016~~082		~~147~~223,~~546~~865
Receivable from insurance companies	~~4,138~~—		—2,057
Inventories	~~364~~367,~~262~~454		~~290~~350,~~007~~959
Refundable income taxes	~~2,986~~—		337,~~977~~418
Prepaid expenses and other current assets	6269,~~924~~807		5762,~~544~~632
Total current assets	~~890~~1,~~755~~347,166		~~578~~1,~~135~~086,270
Property, plant and equipment, net	1,~~227~~207,~~772~~512		1,224,~~746~~334
Right of use assets	3024,~~849~~112		4028,~~785~~238
Other assets	65,~~844~~927		56,~~365~~191
Total assets	$	2,~~156~~584,~~220~~717	$	12,~~849~~345,~~031~~033
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	~~141~~206,~~367~~895	$	~~111~~152,~~463~~421
Dividends payable	9,~~825~~823		—
Accrued expenses	~~139~~80,~~798~~566		98144,~~663~~453
Lease liabilities	1210,~~686~~707		1312,~~981~~189
Total current liabilities	303,676		224,107
Accrued income taxes	50,946		—
Long-term debt	—		25,000
Total current liabilities	358,937		309,063
Claims payable and other liabilities	13,~~082~~005		1213,~~175~~078
Deferred income taxes	~~149~~160,~~476~~465		~~141~~156,~~672~~531
Long-term lease liabilities	1813,~~235~~477		2616,~~804~~122
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—22,329,135 and 22,251,071 at July 31, 2021 and October 31, 2020, respectively	22,329		22,251
Common Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares—22,324,066 and 22,329,731 at January 31, 2022 and October 31, 2021, respectively	22,324		22,330
Paid-in capital	~~101~~111,~~142~~133		90105,~~420~~517
Retained earnings	1,~~548~~905,~~280~~376		1,~~306~~722,~~602~~392
Total stockholders’ equity	12,~~671~~038,~~751~~833		1,~~419~~850,~~273~~239
Total liabilities and stockholders’ equity	$	2,~~156~~584,~~220~~717	$	12,~~849~~345,~~031~~033

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 July 31,				Nine Months Ended July 31,
	Three Months Ended January 31,
	2021		2020		2021		2020
	2022		2021
Net sales	$	1,~~352~~327,~~756~~428	$	~~956~~909,~~455~~306	$	~~3,395,942~~	$	~~2,624,244~~
Cost and expenses:
Cost of sales	1,~~049~~008,~~814~~054		~~865~~839,~~997~~322		~~2,831,072~~		~~2,521,804~~
Selling, general and administrative	8765,~~718~~738		5056,~~590~~599		~~208,562~~		~~156,289~~
	1,137,532		916,587		3,039,634		2,678,093
	1,073,792		895,921
Operating income (loss)	215,224		39,868		356,308		(53,849)
Operating income	253,636		13,385
Other income (expense):
Interest income	—97		~~466~~—		—		~~466~~
Interest expense	(~~623~~577)		(~~1,521~~638)		~~(1,958)~~		~~(4,492)~~
Other	3		23		19		7
	(620)		(1,053)		(1,939)		(4,019)
	(477)		(635)
Income (loss) before income taxes	214,604		38,815		354,369		(57,868)
Income before income taxes	253,159		12,750
Income tax expense (benefit)	49,841		6,005		83,217		(58,220)
Income tax expense	60,352		3,272
Net income	$	~~164~~192,~~763~~807	$	329,~~810~~478	$	~~271,152~~	$	~~352~~
Earnings per share:
Basic	$	78.3864	$	10.4842	$	~~12.14~~	$	~~0.02~~
Diluted	$	78.3864	$	10.4842	$	~~12.14~~	$	~~0.02~~
Dividends per share	$	0.44	$	0.3244	$	~~1.32~~	$	~~0.96~~

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 2020	Common Stock			Paid-InCapital		RetainedEarnings		TotalStockholders’Equity
Fiscal Year 2021	Common Stock			Paid-InCapital		RetainedEarnings		TotalStockholders’Equity
	Shares	Amount
Balance at October 31, 2019	22,203,920	$	22,204	$	86,010	$	1,309,461	$	1,417,675
Balance at October 31, 2020	22,251,071	$	22,251	$	90,420	$	1,306,602	$	1,419,273
Net loss - first quarter 2020	—	—		—		(38,576)		(38,576)
Net income - first quarter 2021	—	—		—		9,478		9,478
Cash dividends ($0.32 per share)	—	—		—		(7,113)		(7,113)
Cash dividends ($0.44 per share)	—	—		—		(9,824)		(9,824)
Stock compensation plan transactions	2574,~~292~~564	2575		(41,~~721~~667)		—		(41,~~696~~592)
Amortization of unearned compensation	—	—		2,~~082~~147		—		2,~~082~~147
Balance at January 31, 2020	22,229,212	$	22,229	$	83,371	$	1,263,772	$	1,369,372
Balance at January 31, 2021	22,325,635	$	22,326	$	90,900	$	1,306,256	$	1,419,482
Net income - second quarter 2020	—	—		—		6,118		6,118
Cash dividends ($0.32 per share)	—	—		—		(7,117)		(7,117)
Stock compensation plan transactions	10,362	10		1,099		—		1,109
Amortization of unearned compensation	—	—		1,960		—		1,960
Balance at April 30, 2020	22,239,574	$	22,239	$	86,430	$	1,262,773	$	1,371,442
Net income - third quarter 2020	—	—		—		32,810		32,810
Cash dividends ($0.32 per share)	—	—		—		(7,117)		(7,117)
Stock compensation plan transactions	399	1		152		—		153
Amortization of unearned compensation	—	—		2,000		—		2,000
Balance at July 31, 2020	22,239,973	$	22,240	$	88,582	$	1,288,466	$	1,399,288

Fiscal Year 2021	Common Stock			Paid-InCapital		RetainedEarnings		TotalStockholders’Equity
Fiscal Year 2022	Common Stock			Paid-InCapital		RetainedEarnings		TotalStockholders’Equity
	Shares	Amount
Balance at October 31, 2020	22,251,071	$	22,251	$	90,420	$	1,306,602	$	1,419,273
Balance at October 31, 2021	22,329,731	$	22,330	$	105,517	$	1,722,392	$	1,850,239
Net income - first quarter 2021	—	—		—		9,478		9,478
Net income - first quarter 2022	—	—		—		192,807		192,807
Cash dividends ($0.44 per share)	—	—		—		(9,~~824~~823)		(9,~~824~~823)
Stock compensation plan transactions	74(5,~~564~~665)	75(6)		(12,~~667~~267)		—		(12,~~592~~273)
Amortization of unearned compensation	—	—		27,~~147~~883		—		27,~~147~~883
Balance at January 31, 2021	22,325,635	$	22,326	$	90,900	$	1,306,256	$	1,419,482
Balance at January 31, 2022	22,324,066	$	22,324	$	111,133	$	1,905,376	$	2,038,833
Net income - second quarter 2021	—	—		—		96,911		96,911
Cash dividends ($0.44 per share)	—	—		—		(9,825)		(9,825)
Stock compensation plan transactions	6,675	6		1,514		—		1,520
Amortization of unearned compensation	—	—		2,202		—		2,202
Balance at April 30, 2021	22,332,310	$	22,332	$	94,616	$	1,393,342	$	1,510,290
Net income - third quarter 2021	—	—		—		164,763		164,763
Cash dividends ($0.44 per share)	—	—		—		(9,825)		(9,825)
Stock compensation plan transactions	(3,175)	(3)		216		—		213
Amortization of unearned compensation	—	—		6,310		—		6,310
Balance at July 31, 2021	22,329,135	$	22,329	$	101,142	$	1,548,280	$	1,671,751

See notes to condensed consolidated financial statements.

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SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

	Nine Months Ended July 31,
	Three Months Ended January 31,
	2021		2020
	2022		2021
Operating activities
Net income	$	~~271~~192,~~152~~807	$	~~352~~9,478
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	~~124~~43,~~318~~523		~~115~~40,~~274~~566
Amortization of share-based compensation	128,~~699~~406		72,~~500~~671
Live inventory adjustment (net of prior period reversal)	—		(2,800)
Deferred income taxes	3,934		1,169
Deferred income taxes	7,804		61,155
Gain on asset disposals	(119)		(48)
(Gain) loss on asset disposals	(95)		328
Change in assets and liabilities:
Accounts receivable - trade	(~~63,470~~217)		(1820,~~995~~165)
Accounts receivable - insurance	(42,~~138)~~057		~~445~~—
Income taxes	3058,~~991~~364		~~(34~~2,~~635)~~076
Inventories	(7416,~~255~~495)		6(35,~~787~~665)
Prepaid expenses and other assets	(57,~~780~~164)		(84,~~955~~191)
Right of use assets	94,~~936~~126		123,~~173~~891
Lease liabilities	(94,~~863~~126)		(123,~~173~~891)
Accounts payable	2955,~~347~~865		~~(23~~17,~~021)~~995
Accrued expenses and other liabilities	42(64,~~087~~459)		12(4,~~285~~455)
Total adjustments	9983,~~581~~695		~~115,368~~(47)
Net cash provided by operating activities	~~370~~276,~~733~~502		~~115~~9,~~720~~431
Investing activities
Capital expenditures	(~~126~~27,~~651~~876)		(~~165~~36,~~998~~859)
Net proceeds from sale of property and equipment	~~757~~156		~~336~~65
Net cash used in investing activities	(~~125~~27,~~894~~720)		(~~165~~36,~~662~~794)
Financing activities
Payment of debt issuance costs	(1,877)		—
Borrowings from revolving line of credit	—		30,000
Borrowings from revolving line of credit	30,000		145,000
Proceeds from issuance of restricted stock under stock compensation plans	656		265
Payments on revolving line of credit	(55,000)		(105,000)
Payments from issuance of common stock under stock compensation plans	(2,954)		(1,873)
Proceeds from issuance of restricted stock under stock compensation plans	744		879
Net cash provided by (used in) financing activities	(2,298)		28,392
Payments from issuance of common stock under stock compensation plans	(2,689)		(6,005)
Net change in cash and cash equivalents	246,484		1,029
Dividends paid	(19,649)		(14,230)
Cash and cash equivalents at beginning of period	439,339		49,061
Net cash provided by (used in) financing activities	(48,471)		20,644
Cash and cash equivalents at end of period	$	685,823	$	50,090
Net change in cash and cash equivalents	196,368		(29,298)
Cash and cash equivalents at beginning of period	49,061		95,417
Cash and cash equivalents at end of period	$	245,429	$	66,119
Supplemental disclosure of non-cash investing and financing activities:
Capital expenditures included in accounts payable	$	43,~~088~~740	$	35,~~242~~405
Dividends payable	$	9,~~825~~823	$	79,~~117~~823

See notes to condensed consolidated financial statements.

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SANDERSON FARMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~July~~January 31, ~~2021~~2022

NOTE 1—ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the three ~~and nine~~ months ended ~~July~~January 31, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, ~~2021~~2022.

The condensed consolidated balance sheet at October 31, ~~2020~~2021 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, ~~2020~~2021.

New Accounting Pronouncements

In ~~June~~December ~~2016~~2019, the ~~Financial Accounting Standards Board ("~~FASB") issued ~~Accounting Standards Update ("~~ASU") ~~2016~~2019-1312, ~~Financial~~Income ~~Instruments~~Taxes -(Topic ~~Credit~~740): ~~Losses,~~Simplifying ~~to provide financial statement users with more decision-useful information about~~ the ~~expected~~Accounting ~~credit~~for ~~losses~~Income onTaxes, ~~financial~~which ~~instruments~~is ~~and~~intended ~~other commitments~~ to ~~extend~~simplify ~~credit~~various ~~held~~aspects byrelated ato ~~reporting~~accounting ~~entity~~for atincome ~~each reporting date~~taxes. ~~We adopted~~ ASU ~~2016~~2019-1312 ~~during~~removes ~~our~~certain ~~first~~exceptions ~~quarter~~to ofthe ~~fiscal~~general ~~2021,~~principles ~~and~~in ~~adoption~~Accounting ~~did~~Standards ~~not~~Codification ~~have~~740 aand ~~material~~also ~~effect~~clarifies onand ~~our~~amends ~~consolidated~~existing ~~financial~~guidance ~~statements. Under the new standard, we are required~~ to ~~record~~improve onconsistent ~~our~~application. ~~balance~~This ~~sheet~~guidance anis ~~allowance~~effective for ~~expected~~annual ~~credit losses~~periods, ~~which~~and isinterim ~~estimated~~periods ~~utilizing~~within ~~historical~~those ~~experience~~annual ~~and~~periods, ~~current~~beginning ~~and~~after ~~expected~~December ~~economic~~15, ~~conditions.~~2020, ~~Our~~our ~~allowance~~fiscal ~~for~~2022. ~~expected~~We ~~credit~~adopted ~~losses~~this isguidance ~~recorded~~during on the ~~accounts~~first ~~receivable,~~quarter ~~net line~~ of ~~the~~fiscal ~~Condensed~~2022, ~~Consolidated~~and ~~Balance~~adoption ~~Sheets~~did ~~and~~not ismaterially ~~immaterial~~affect to our consolidated financial ~~position~~statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Accounting Standards Codification 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020, our fiscal 2022. We are currently evaluating the impact of this new guidance on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. This guidance, which became effective on March 12, 2020, and can be applied through December 31, 2022, has not affected our consolidated financial statements. We have a revolving credit facility that references LIBOR, and we are assessing how this standard may be applied to specific contract modifications through December 31, 2022.

NOTE 2—REVENUE

Revenue Recognition

The Company recognizes revenue in connection with a contract in which the Company has agreed to sell, and a customer has agreed to purchase, specific quantities of product at agreed-upon prices and when the Company's performance obligation related to that contract has been satisfied. In the majority of its contracts with customers, the Company's performance obligation is satisfied when delivery of the product has occurred, either at the customer's facility or the Company's facility, depending on the terms of each contract. In a smaller number of contracts, ownership of the product passes from the Company to the customer at some point during transit, at which time the performance obligation is satisfied and revenue is recognized. Revenue and related receivables are recognized based on the transaction price within the contract and are reduced by estimated or known amounts for items such as rebates, discounts, cooperative advertising allowances and other various items.

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

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Disaggregation of Revenue

The following ~~tables~~table ~~disaggregate~~disaggregates our net sales by product category:

Product Category	Three Months Ended ~~July~~January 31, ~~2021~~2022		Three Months Ended ~~July~~January 31, ~~2020~~2021
	(in thousands)
Fresh, vacuum-sealed chicken	$	~~539~~519,~~332~~631	$	~~303~~294,~~746~~118
Fresh, chill-packed chicken	~~449~~427,~~423~~191		~~395~~376,~~110~~252
Fresh, ice-packed chicken	~~217~~229,~~336~~125		~~133~~131,~~302~~681
Frozen chicken	7880,~~016~~624		6763,~~094~~403
Prepared chicken	6264,~~571~~256		5238,~~305~~915
Other	6,~~078~~601		4,~~898~~937
Total net sales	$	1,~~352~~327,~~756~~428	$	~~956~~909,~~455~~306

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

NOTE 3—INVENTORIES

Inventories consisted of the following:

Inventory type	~~July~~January 31, ~~2021~~2022		October 31, ~~2020~~2021
	(in thousands)
Live poultry-broilers and breeders	$	~~248~~236,~~206~~713	$	~~180~~229,~~013~~245
Feed, eggs and other	5462,~~528~~813		5357,~~318~~994
Processed poultry	3942,~~366~~911		3242,~~952~~775
Prepared chicken	1314,~~016~~252		1611,~~142~~157
Packaging materials	910,~~146~~765		79,~~582~~788
Total Inventories	$	~~364~~367,~~262~~454	$	~~290~~350,~~007~~959

NOTE 4—PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net, consisted of the following:


Description	January 31, 2022		October 31, 2021
	(in thousands)
Land and buildings	$	978,853	$	976,012
Machinery and equipment	1,467,741		1,439,762
Work-in-process	13,791		19,924
	2,460,385		2,435,698
Less accumulated depreciation	(1,252,873)		(1,211,364)
Property, plant and equipment, net	$	1,207,512	$	1,224,334

NOTE 5—STOCK COMPENSATION PLANS

Refer to Note 10 and Note 11 of the Company’s October 31, 2021 audited financial statements in the Company's 2021 Annual Report on Form 10-K for further information on our employee benefit plans and stock based compensation plans, respectively. Total stock based compensation expense during the three months ended January 31, 2022 was $8.4 million, as compared to total stock based compensation expense of $2.7 million for the three months ended January 31, 2021.

During the three months ended January 31, 2022, participants in the Company’s Management Share Purchase Plan ("MSPP") elected to receive a total of 3,443 shares of restricted stock at an average price of $190.64 per share instead of a specified percentage of their cash compensation, and the Company issued 824 matching restricted shares. During the three months ended January 31, 2022, the Company recorded compensation expense for the MSPP shares, included in the total stock based compensation expense above, of $58,000, as compared to $75,000 during the three months ended January 31, 2021.

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Description	July 31, 2021		October 31, 2020
	(in thousands)
Land and buildings	$	962,391	$	931,674
Machinery and equipment	1,408,052		1,350,725
Work-in-process	30,515		16,914
	2,400,958		2,299,313
Less accumulated depreciation	(1,173,186)		(1,074,567)
Property, plant and equipment, net	$	1,227,772	$	1,224,746

Pursuant to the Agreement and Plan of Merger with Walnut Sycamore Holdings LLC, a Delaware limited liability company (“Parent”), Sycamore Merger Sub LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of Parent (“Merger Sub”), and solely for purposes of certain provisions specified therein, Wayne Farms LLC, a Delaware limited liability company (the “Merger Agreement”), no new cash compensation reduction elections under the MSPP may be made after August 8, 2021, and no participants may increase their cash compensation reduction elections under the MSPP after August 8, 2021.

~~NOTE~~During ~~5—STOCK~~fiscal ~~COMPENSATION~~2020 ~~PLANS~~and 2021, 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.

~~Refer~~The totarget ~~Note~~number 10of ~~and~~shares ~~Note~~specified 11in of the ~~Company’s~~performance ~~October 31~~share agreements executed on November 1, 2020 ~~audited~~totaled ~~financial~~87,350. ~~statements~~During inthe first quarter of fiscal 2022, the Company's determined that achievement of the applicable performance based criteria for the November 1, 2020 ~~Annual~~agreements ~~Report~~is onprobable ~~Form~~at ~~10-K~~a level between threshold and target for ~~further~~the ~~information~~return on ~~our~~equity ~~employee~~criteria ~~benefit~~and ~~plans~~at a level between target and ~~stock~~maximum ~~based~~for the return on sales criteria. Accordingly, the quarter ended January 31, 2022 includes compensation ~~plans~~expense of $5,137,000, ~~respectively.~~included ~~Total~~in the total stock based compensation expense ~~during~~above, related to the ~~three~~agreements ~~and~~executed ~~nine~~on ~~months~~November 1, 2020, as compared to no compensation expense related to those same agreements recorded during the quarter ended ~~July~~ January 31, 2021. ~~was~~As ~~$6.9~~of ~~million~~January ~~and~~31, ~~$12~~2022, the aggregate number of shares estimated to be awarded related to the performance share agreements entered into on November 1, 2020 totaled 88,924 shares.7 ~~million~~The actual number of shares that can be awarded for those agreements could change materially from that estimate due to the Company's actual performance during the remaining nine months of the performance period ending October 31, ~~respectively~~2022, asand ~~compared~~due to ~~total~~potential ~~stock~~forfeitures. ~~based~~The Company will recognize the remaining unearned compensation ~~expense~~related ofto $2these agreements over the remaining service period, which ends on October 31, 2023.3 ~~million~~Had ~~and~~the Company determined that it was probable that the maximum amount of those outstanding awards from the agreements entered into on November 1, 2020 would be earned, an additional $73.5 million, ~~respectively,~~of ~~for~~compensation ~~the~~expense ~~three~~would ~~and~~have ~~nine~~been ~~months~~accrued ~~ended~~as ~~July~~of January 31, ~~2020~~2022.

~~During~~The ~~the~~Company ~~nine~~also ~~months~~has ~~ended~~performance ~~July 31,~~share ~~2021,~~agreements ~~participants~~ in ~~the~~place ~~Company’s~~with ~~Management~~certain ~~Share~~officers ~~Purchase~~and ~~Plan~~key ~~("MSPP")~~employees ~~elected~~that towere ~~receive~~entered ainto ~~total~~on November 1, 2019. The target number of 4shares specified in those agreements totaled 56,~~834~~575. The Company has determined that shares ofcovered ~~restricted~~by ~~stock~~these agreements have been earned at ana ~~average~~level ~~price~~between ofthe ~~$153.81~~threshold ~~per~~and ~~share~~target ~~instead~~for ofthe aportion ~~specified~~dependent ~~percentage~~upon ofreturn ~~their~~on ~~cash~~equity ~~compensation,~~criteria and ~~the~~at ~~Company~~a ~~issued~~level ~~1,139~~between ~~matching~~target ~~restricted~~and ~~shares.~~maximum ~~During~~for the ~~three~~portion ~~and~~dependent ~~nine~~upon ~~months~~return ~~ended~~on ~~July 31,~~sales ~~2021~~criteria. Accordingly, the ~~Company~~quarter ~~recorded~~ended January 31, 2022 includes compensation expense ~~for~~of ~~the~~$881,000 ~~MSPP~~related ~~shares~~to those agreements, included in the total stock based compensation expense above, as compared to no compensation expense related to those agreements recorded during the quarter ended January 31, 2021. There was no compensation expense recorded during the first quarter of ~~$88~~fiscal 2021 related to these agreements,~~000~~ ~~and~~because ~~$288~~the Company first determined it was probable that some portion of these shares would be earned during the third quarter of fiscal 2021. As of January 31,~~000,~~ ~~respectively~~2022, asthe ~~compared~~aggregate number of shares estimated to ~~$48~~be awarded related to the performance share agreements entered into on November 1,~~000~~ ~~and~~2019 ~~$152~~totaled 60,~~000,~~682 ~~respectively~~shares. Since the performance period for these agreements has ended, the actual number of shares that will be awarded can change only due to potential forfeitures during the ~~three~~remaining ~~and~~ nine months ~~ended~~of ~~July~~ the service period ending October 31, ~~2020~~2022. The Company will recognize the remaining unearned compensation related to these agreements over the remaining service period.

~~During fiscal 2021~~Typically, ~~2020~~the ~~and~~Company ~~2019,~~would ~~the~~have ~~Company~~also entered into performance share agreements ~~that~~dated 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 period2021, ~~participants~~with ~~will~~its ~~receive~~officers 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~~key ~~grain costs and chicken volumes and pricing~~employees, asbut ~~well~~covenants asin the ~~amount~~Merger ofAgreement ~~the~~prohibited ~~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~~doing ~~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~~so.

The ~~target~~Company's ~~number~~compensation ofexpense ~~shares~~related ~~specified~~to ~~in the~~ performance share agreements ~~executed~~is onsummarized ~~November~~as 1,follows ~~2020~~(in ~~totaled 87~~thousands,~~350.~~ Asexcept ofnumber ~~July 31, 2021, the Company could not determine that achievement~~ of the applicable performance based criteria is probable due to operating results to date and the uncertainties discussed above, and therefore recorded no compensation expense related to those agreements. shares):

The Company also has performance share agreements in place with certain officers and key employees that were entered into on November 1, 2019. The target number of shares specified in those agreements totaled 56,575. As of July 31, 2021, the Company has determined that achievement of both the return on sales and return on equity criteria is probable at levels between the threshold and target. Accordingly, because the accrual is made using the cumulative catch-up method, the fiscal quarter and nine months ended July 31, 2021 include compensation expense of $4.4 million, included in the total stock based compensation expense above, related to the agreements executed on November 1, 2019, as compared to no compensation expense related to those same agreements recorded during the quarter and nine months ended July 31, 2020. As of July 31, 2021, the aggregate number of shares estimated to be awarded related to the performance share agreements entered into on November 1, 2019 totaled 46,654 shares. The actual number of shares that can be awarded for those agreements could change materially from that estimate due to the Company's actual performance during the remaining three months of the performance period ending

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


		Three Months Ended
Date of Performance Share Agreement	Number of shares issued (actual (a) or estimated (e))	January 31, 2022		January 31, 2021
November 1, 2019	60,682 (e)	881		—
November 1, 2020	88,924 (e)	5,137		—
Total performance share compensation expense		$	6,018	$	—

The ~~performance~~Company ~~period~~ has ~~lapsed~~unvested ~~for~~restricted ~~the~~stock ~~performance~~grants ~~share~~outstanding ~~agreements~~ that were ~~entered~~granted ~~into~~during onprior ~~November~~fiscal 1,years ~~2018~~to its officers, key employees and outside directors. The aggregate number of shares outstanding at January 31, 2022 related to all unvested restricted stock grants totaled 223,767. During the three months ended January 31, 2022, the Company's ~~average~~recorded ~~return~~compensation onexpense, ~~equity~~included ~~and~~in ~~average~~the ~~return~~total onstock ~~sales~~based ~~did~~compensation ~~not~~expense ~~meet~~above, ~~the~~of ~~threshold~~$2.3 ~~amounts~~million ~~defined~~related byto ~~those~~restricted ~~agreements~~stock grants, as compared to $2.6 Asmillion aduring ~~result~~the three months ended January 31, no2021. The Company had $13.2 million in unrecognized share-based compensation expense ~~has~~as ~~been~~of ~~recorded~~January 31, ~~related~~2022, which will be recognized over a weighted average remaining vesting period of approximately 1 year, 8 months. Typically, the Company would have made new restricted stock grants to ~~those~~its ~~agreements~~officers and key employees effective on November 1, 2021, but covenants in the Merger Agreement prohibited the Company from doing so.

Had the Company determined that it was probable that the maximum amount of those outstanding awards from the agreements entered into on November 1, 2019 and November 1, 2020 would be earned, an additional $6.0 million and $5.5 million of compensation expense, respectively, would have been accrued as of July 31, 2021.

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

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

Note (1) - As of July 31, 2021, the Company could not determine that achievement of the applicable performance-based criteria is probable for the agreements entered into on November 1, 2020, due to the uncertainties discussed above, and therefore recorded no compensation expense related to those agreements.

On November 1, 2020, the Company granted 87,350 shares of restricted stock to certain officers and key management employees. The restricted stock had a grant date fair value of $127.97 per share and will vest on November 1, 2024. On February 18, 2021, the Company granted an aggregate of 9,760 shares of restricted stock to all of its non-employee directors. The restricted stock had a grant date fair value of $153.65 per share and vests one, two or three years from the date of grant. The Company also has unvested restricted stock grants outstanding that were granted during prior fiscal years to its officers, key employees and outside directors. The aggregate number of shares outstanding at July 31, 2021 related to all unvested restricted stock grants totaled 278,317. During the three and nine months ended July 31, 2021, the Company recorded compensation expense, included in the total stock based compensation expense above, of $2.5 million and $8.1 million, respectively, related to restricted stock grants, as compared to $2.1 million and $6.8 million, respectively, during the three and nine months ended July 31, 2020. The Company had $18.6 million in unrecognized share-based compensation expense as of July 31, 2021, which will be recognized over a weighted average remaining vesting period of approximately 1 year, 9 months.

NOTE 6—EARNINGS PER SHARE

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

The following ~~tables~~table ~~present~~presents earnings per share:


	Three Months Ended
	January 31, 2022		January 31, 2021
	(in thousands, except per share amounts)
Net income	$	192,807	$	9,478
Distributed and undistributed (earnings) to unvested restricted stock	$	(2,186)	$	(133)
Distributed and undistributed earnings to common shareholders—Basic	$	190,621	$	9,345
Weighted average shares outstanding—Basic	22,069		22,010
Weighted average shares outstanding—Diluted	22,069		22,010
Earnings per common share—Basic	$	8.64	$	0.42
Earnings per common share—Diluted	$	8.64	$	0.42

~~Table~~NOTE of7—COMMITMENTS ~~Contents~~AND CONTINGENCIES

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

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

NOTE 7—FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

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

Fair values for debt are based on quoted market prices or published forward interest rate curves, and were categorized as Level 2 measurements. As of October 31, 2020, the fair values of the Company's borrowings under its revolving credit facility approximated the carrying values, and as of July 31, 2021, the Company had no outstanding borrowings under its revolving credit facility.

NOTE 8—COMMITMENTS AND CONTINGENCIES

Litigation

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In re Broiler Chicken Antitrust Litigation

Between September 2, 2016 and October 13, 2016, Sanderson Farms, Inc. and our subsidiaries were named as defendants, along with ~~thirteen~~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.10

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, adding three additional poultry producers as defendants, along with Agri Stats, Inc. On February 20, 2018, the commercial and institutional indirect purchaser plaintiffs filed their fourth amended complaint. On November 13, 2018, the commercial and institutional indirect purchaser plaintiffs filed their fifth amended complaint, adding three additional poultry producers as defendants. On November 28, 2018, the end-user consumer plaintiffs filed their third amended complaint. On January 15, 2019, the direct purchaser plaintiffs filed their fourth amended complaint, and the commercial and institutional indirect purchaser plaintiffs filed their sixth amended complaint. Both the direct purchaser plaintiffs and the commercial and institutional indirect purchaser plaintiffs added two new poultry producers as defendants, as well as Agri Stats, Inc. On August 6, 2020, the end-user consumer plaintiffs filed a motion for leave to file a fifth amended complaint. The Court granted the end-user consumer plaintiffs’ motion on September 22, 2020 and deemed the version of the complaint filed on August 7, 2020 operative on October 19, 2020. On October 23, 2020, the direct purchaser plaintiffs filed their fifth amended complaint and the commercial and institutional indirect purchaser plaintiffs filed their seventh amended complaint, both of which include bid-rigging allegations.

Between December 8, 2017 and August 17, 2021, additional purported direct-purchaser entities individually brought eighty-one separate suits against twenty poultry producers, including the Company, as well as Agri Stats, Inc. and Utrecht-America Holdings, Inc. ("Rabobank") in the United States District Court for the Northern District of Illinois, the United States District Court for the District of Kansas, the United States District Court for the Western District of Arkansas, and the United States District Court for the District of Puerto Rico. These suits allege substantially similar claims to the direct purchaser class complaint described above; certain of the suits additionally allege related state-law and common-law claims, and related claims under federal and Georgia RICO statutes. In addition, certain direct action complaints filed since June 12, 2020 include allegations of federal bid rigging. Those suits filed in the Northern District of Illinois are now pending in front of the same judge as the putative class action lawsuits. On June 26, 2018, the defendants filed a motion to transfer the case filed in the District of Kansas to the Northern District of Illinois, and that motion was granted on September 13, 2018. On June 7, 2019, the plaintiffs filed a motion to transfer the case filed in the Western District of Arkansas to the Northern District of Illinois, and that motion was granted on June 11, 2019. On July 24, 2019, one of the defendants filed a motion to transfer the case filed in the District of Puerto Rico to the Northern District of Illinois, and that motion was granted on July 25, 2019. On July 22, 2019, the Company moved to dismiss in part those direct-purchaser complaints that allege claims under federal and Georgia RICO statutes against it. The motion was fully briefed on September 20, 2019, and the Court heard argument on the motion on December 18, 2019. On March 3, 2020, the Court denied the Company's motion. On October 18, 2019, defendants moved to dismiss the case filed by the Commonwealth of Puerto Rico on its behalf and on behalf of its citizens. The motion was fully briefed on January 21, 2020. On July 15, 2020, the Court dismissed Puerto Rico's claims on behalf of its citizens. On July 2, 2020 and August 6, 2020, certain defendants, including the Company, moved to exclude bid rigging allegations and claims from the consolidated In re Broiler Chicken Antitrust Litigation. Plaintiffs filed oppositions on August 6, 2020 and August 20, 2020. Defendants filed replies on August 20, 2020 and September 3, 2020. On September 22, 2020, the Court ordered that plaintiffs’ bid-rigging allegations are bifurcated and any discovery on such claims is stayed until plaintiffs’ supply reduction and Georgia Dock Index theories are resolved. On October 20, 2020, certain direct action plaintiffs filed a motion for leave to amend their complaints. On October 23, 2020, certain direct action plaintiffs filed a consolidated complaint. Defendants filed an

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~~opposition~~On toOctober ~~certain~~28, ~~direct~~2016, ~~action~~the ~~plaintiffs’~~direct ~~motion~~and toindirect ~~amend~~purchaser onplaintiffs ~~November~~filed 4consolidated, ~~2020.~~amended ~~Briefing~~complaints, ~~was~~and ~~completed~~ on November 1623, ~~2020.~~2016, ~~The Court granted~~ the ~~motion~~direct ~~to amend on January 6, 2021,~~ and ~~all~~indirect ~~direct~~purchaser ~~action~~ plaintiffs ~~consolidated~~filed insecond ~~the~~amended Incomplaints. reOn ~~Broilers~~December ~~Chicken~~16, ~~Antitrust Litigation before or on January 29~~2016, ~~2021~~the ~~filed~~indirect anpurchaser ~~amended~~plaintiffs ~~consolidated~~separated ~~complaint~~into ontwo ~~January 29, 2021 incorporating those allegations~~cases. On ~~May~~that 14date, ~~2021,~~the ~~certain~~commercial ~~direct~~and ~~action~~institutional ~~plaintiffs~~indirect ~~moved~~purchaser ~~for~~plaintiffs ~~reconsideration~~filed ofa ~~the~~third ~~Court's~~amended ~~September 22~~complaint, ~~2020 bifurcation order,~~ and ~~that~~the ~~reconsideration~~end-user ~~motion~~consumer isplaintiffs ~~now~~filed ~~fully~~an ~~briefed~~amended ~~and pending~~complaint.

On ~~October~~January 3027, ~~2020~~2017, the defendants filed motions to dismiss the amended complaints in all of the cases, and on November 20, 2017, the motions to dismiss were denied. On February 7, 2018, the direct purchaser plaintiffs filed their third amended complaint, adding three additional poultry producers as defendants. On February 12, 2018, the end-user consumer plaintiffs filed their second amended complaint, in which they also added three additional poultry producers as defendants, along with Agri Stats, Inc. On February 20, 2018, the commercial and institutional indirect purchaser plaintiffs filed their fourth amended complaint. On November 13, 2018, the commercial and institutional indirect purchaser plaintiffs filed their fifth amended complaint, adding three additional poultry producers as defendants. On November 28, 2018, the end-user consumer plaintiffs filed ~~motions~~their ~~for~~third ~~class~~amended ~~certification~~complaint. ~~Defendants~~On January 15, 2019, the direct purchaser plaintiffs filed their ~~oppositions~~fourth toamended ~~class~~complaint, ~~certification~~and onthe ~~January~~commercial 22and 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, ~~2021~~as well as Agri Stats, Inc. ~~Class~~On August 6, 2020, the end-user consumer plaintiffs filed ~~replies~~a inmotion ~~support~~for leave to file a fifth amended complaint. The Court granted the end-user consumer plaintiffs’ motion on September 22, 2020 and deemed the version of ~~class~~the ~~certification~~complaint filed on ~~March~~August 297, ~~2021~~2020 operative on October 19, 2020. On October 23, 2020, the direct purchaser plaintiffs filed their fifth amended complaint and the commercial and institutional indirect purchaser plaintiffs filed their seventh amended complaint.

~~The~~Between ~~parties~~December ~~are~~8, ~~currently~~2017 ~~engaged~~and inJune ~~discovery.~~11, ~~Fact~~2020, ~~discovery~~additional ~~closed~~purported ondirect-purchaser ~~July~~entities 30individually brought separate suits against 20 poultry producers, ~~2021~~including Sanderson Farms and Agri Stats, ~~subject~~Inc., which have been consolidated with the other cases. These suits allege substantially similar claims to ~~limited~~the ~~extensions~~direct ~~for~~purchaser class complaint described above; certain ~~direct~~of ~~action~~the ~~discovery~~suits additionally allege related state-law and common-law claims, and related claims under federal and Georgia RICO statutes. ItFour iscomplaints ~~possible~~filed on June 12, 2020 also plead allegations of federal bid rigging. Since that time, an additional forty-eight individual actions ~~will~~have bebeen filed, some of which also plead allegations of federal bid rigging. On January 29, 2021, the individual-action plaintiffs filed a consolidated amended complaint. 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 October 30, 2020, direct purchaser plaintiffs, commercial and institutional indirect purchaser plaintiffs, and end-user consumer plaintiffs filed motions for class certification. Defendants' oppositions to class certification were filed January 22, 2021. Class plaintiffs' replies in support of class certification were filed March 29, 2021. Those motions remain pending.

On October 15, 2021, the Court ordered two different tracks of litigation with different timelines. The Court further clarified the two tracks at a December 20, 2021 hearing and in a December 20, 2021 order. One track is engaged in merits expert discovery. Plaintiffs proceeding on the second track will file a consolidated amended complaint on February 28, 2022. Otherwise, the second track does not have an agreed-upon schedule to date. It is possible additional individual actions may be filed.

Department of Justice Antitrust Investigation

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

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

State of New Mexico, ex rel. Hector Balderas v. Koch Foods Inc., et al.

On September 1, 2020, the Attorney General of the State of New Mexico filed a lawsuit in Santa Fe, New Mexico state court against Agri Stats, Inc. and producer defendants, including the Company. The lawsuit is substantially similar to those brought in In re Broiler Chicken Antitrust Litigation. The case also brings claims under the New Mexico Antitrust Act and New Mexico Unfair Trade Practices Act, as well as a common law unjust enrichment claim. Defendants responded to the complaint on February 1, 2021.11

~~State~~Table of ~~Alaska v. Agri Stats, Inc., et al.~~Contents

On ~~February~~September 191, ~~2021~~2020, the Attorney General of the State of ~~Alaska~~New Mexico filed a lawsuit in ~~Anchorage,~~New ~~Alaska~~Mexico state court against Agri Stats, Inc. and producer defendants, including the Company. The lawsuit is substantially similar to those brought in In re Broiler Chicken Antitrust Litigation. The case also brings claims under ~~Alaska's~~the ~~antitrust~~New ~~statute~~Mexico Antitrust Act and ~~the~~New ~~Alaska~~Mexico Unfair Trade Practices ~~and Consumer Protection~~ Act, as well as a common law unjust enrichment claim. OnDefendants ~~May~~responded ~~12,~~to ~~2021,~~the ~~certain~~complaint ~~defendants,~~on ~~including~~February ~~the Company~~1, ~~filed~~2021. ~~motions~~The toparties ~~dismiss~~are ~~the~~currently ~~complaint~~engaged ~~for~~in ~~lack of personal jurisdiction, which remain pending~~discovery.

State of Alaska v. Agri Stats, Inc. et al.

On February 19, 2021, the Attorney General of the State of Alaska filed a lawsuit in Alaska state court against Agri Stats, Inc. and producer defendants, including the Company. The lawsuit is substantially similar to those brought in In re Broiler Chicken Antitrust Litigation. The case also brings claims under Alaska's antitrust statute and the Alaska Unfair Trade Practices and Consumer Protection Act, as well as a common law unjust enrichment claim. On May 12, 2021, certain defendants, including the Company, filed motions to dismiss the complaint for lack of personal jurisdiction. On November 18, 2021, the Court heard arguments on the motions to dismiss, but deferred ruling on the motions pending jurisdictional discovery.

State of Washington v. Tyson Foods, Inc. et al.

On August 6, 2020, the Company received a civil investigative demand ("CID") from the Office of the Attorney General for the State of Washington seeking information in connection with its investigation of possible violations of the Washington Consumer Protection Act and/or the Sherman Act concerning contracts, combinations, or conspiracies in restraint of trade or commerce in the market for broiler chicken. The Company cooperated with the investigative demand and provided documents and information as requested by the Office of the Attorney General. On October 25, 2021, the Attorney General filed an action in Washington state court against Agri Stats, Inc. and producer defendants, including the Company. The lawsuit is substantially similar to those brought in In re Broiler Chicken Antitrust Litigation. The complaint brings claims under the Washington Consumer Protection Act. Sanderson Farms was served with the complaint on November 1, 2021. The Company filed an answer denying the substance of the allegations on January 21, 2022. Discovery is ongoing.

We intend to defend the In re Broiler Chicken Antitrust Litigation and related 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.

In re Broiler Chicken Grower Litigation

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, ~~the~~Sanderson ~~Company~~Farms, ~~was~~Inc. and our subsidiaries were named as ~~a defendant~~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.

13On 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 May 27, 2020, the

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~~the~~Company ~~plaintiffs~~moved ~~filed~~to adismiss ~~consolidated amended complaint. The consolidated amended complaint alleges that~~ the ~~defendants~~action ~~unlawfully~~in ~~conspired by sharing data on compensation paid to broiler farmers, with~~ the ~~purpose~~Eastern ~~and~~District ~~effect~~ of ~~suppressing~~North ~~the~~Carolina ~~farmers’~~under ~~compensation below competitive levels. The consolidated amended complaint also alleges that~~ the ~~defendants unlawfully conspired~~ first-to-file ~~not solicit or hire the broiler farmers who were providing services to other defendants~~rule. ~~The~~Plaintiffs ~~consolidated amended complaint seeks treble damages, costs and attorneys’ fees. On September 8, 2017, the defendants~~ filed atheir ~~motion~~opposition ~~to dismiss the amended complaint,~~ on ~~October~~June 2317, ~~2017~~2020, ~~the plaintiffs filed their response,~~ and ~~on November 22, 2017,~~ the ~~defendants~~Company filed aits reply. Onon ~~January~~July 191, ~~2018, the Court granted the Sanderson Farms defendants’ motion to dismiss for lack of personal jurisdiction~~2020.

On ~~February~~September 2111, ~~2018~~2020, ~~the~~additional named grower plaintiffs filed aan ~~substantially~~identical ~~similar~~putative ~~lawsuit~~class action in the ~~United States~~ District Court ~~for~~of ~~the~~Colorado ~~Eastern~~against ~~District~~Sanderson ofFarms, ~~North~~Inc. ~~Carolina~~and ~~against~~its ~~the~~Foods, ~~Company~~Production, and ~~another~~Processing Divisions, as well as the other poultry producer. ~~The~~defendants ~~plaintiffs~~in ~~subsequently~~the ~~moved~~Oklahoma toaction. ~~consolidate~~On ~~this~~October ~~action~~14, ~~with~~2020, ~~the~~Defendants ~~Eastern~~moved ~~District~~to ofdismiss ~~Oklahoma~~the ~~action~~case inunder the ~~Eastern~~first-to-file ~~District~~doctrine ofbecause ~~Oklahoma~~it ~~for~~is ~~pretrial~~substantively ~~proceedings,~~identical ~~with~~to the ~~defendants~~earlier-filed cases pending in ~~support~~Oklahoma ~~thereof~~and North Carolina. ~~That~~Briefing on that motion was ~~denied.~~completed on December 16, 2020.

On ~~July~~September 1318, ~~2018~~2020, ~~the~~another ~~defendants~~named ~~moved~~grower toplaintiff ~~dismiss~~filed ~~the~~another ~~lawsuit~~duplicate class action in the ~~Eastern~~ District Court of ~~North~~Kansas ~~Carolina,~~against ~~and~~the ~~briefing~~same ~~was~~defendants ~~completed~~as onthe ~~September~~Colorado ~~4, 2018~~action. On ~~January~~October 1513, ~~2019~~2020, ~~the~~Defendants ~~Court~~moved ~~granted in part the defendants’ motion~~ to dismiss ~~by staying~~ the ~~action~~case ~~in the Eastern District of North Carolina~~ under the first-to-file ~~rule,~~doctrine ~~pending~~because ~~resolution~~it ofis ~~the~~substantively ~~action~~identical ~~in the Eastern District of Oklahoma. On January 6, 2020, the Court in the Eastern District of Oklahoma denied the remaining defendants’ motion~~ to ~~dismiss. On January 27, 2020, plaintiffs in~~ the ~~Oklahoma~~earlier-filed ~~case~~cases ~~moved~~pending ~~for leave to amend their complaint. The Court~~ in ~~the Eastern District of~~ Oklahoma ~~granted the plaintiffs' motion~~, ~~and the plaintiffs filed a second amended consolidated complaint on February 21, 2020. On May 27, 2020, the Company moved to dismiss the action in the Eastern District of~~ North Carolina, ~~under~~and ~~the first-to-file rule~~Colorado. ~~Plaintiffs~~Briefing ~~filed their opposition~~ on ~~June~~that ~~17,~~motion ~~2020,~~was ~~and~~completed ~~the Company filed its reply~~ on ~~July~~December 115, 2020.

On ~~September~~October 118, 2020, ~~additional~~new named grower plaintiffs filed ananother ~~identical~~duplicate ~~putative~~ class action in the ~~United~~Northern ~~States~~ District ~~Court for the District~~ of ~~Colorado~~California against ~~Sanderson Farms, Inc. and its Foods, Production, and Processing Divisions, as well as~~ the ~~other~~same ~~initial poultry producer~~ defendants inas the ~~Oklahoma~~Colorado ~~action. On October 14, 2020, defendants moved to dismiss the case under the first-to-file doctrine because it is substantively identical to the earlier-filed cases pending in Oklahoma~~ and ~~North~~Kansas ~~Carolina~~actions. ~~Briefing on that motion was completed on December 16, 2020.~~

On ~~September~~October 1823, 2020, ~~another~~the ~~named~~District ~~grower~~Court ~~plaintiff~~of ~~filed~~Kansas ~~another~~stayed ~~duplicate~~proceedings ~~class~~in that action in(other ~~the~~than ~~United~~those ~~States~~related ~~District~~to ~~Court~~the ~~for~~first-to-file ~~the~~motion) ~~District~~pending resolution of ~~Kansas~~the ~~against~~first-to-file motion and the ~~same~~multi-district ~~defendants~~litigation as("MDL") ~~the~~consolidation ~~Colorado~~motion ~~action~~discussed below. On ~~October~~November 1312, 2020, ~~defendants~~the ~~moved~~District toCourt ~~dismiss~~of ~~the~~Colorado ~~case~~stayed ~~under~~proceeding ~~the~~in ~~first-to-file~~that ~~doctrine~~action ~~because~~(other itthan isthose ~~substantively~~related ~~identical~~ to the ~~earlier~~first-~~filed~~to-file ~~cases~~motion) pending inresolution ~~Oklahoma,~~of ~~North~~the ~~Carolina,~~first-to-file motion and ~~Colorado.~~the ~~Briefing~~MDL onconsolidation ~~that~~ motion ~~was~~discussed ~~completed on December 15, 2020~~below.

On October 86, 2020, ~~new~~Plaintiffs ~~named~~in ~~grower~~the ~~plaintiffs~~Oklahoma ~~filed~~action ~~another~~moved ~~duplicate~~to ~~class~~consolidate ~~action~~all inof ~~the~~these ~~United~~duplicative ~~States~~cases ~~District~~into ~~Court~~a ~~for~~MDL before the ~~Northern~~judge ~~District~~presiding ofover ~~California~~the ~~against~~Oklahoma case. Briefing on that motion was completed on November 6, 2020, and oral argument on the ~~same~~motion ~~defendants~~occurred ason December 3, 2020. On December 15, 2020, the ~~Colorado~~panel ~~and~~ordered ~~Kansas~~that all actions. ~~The~~be ~~Company~~consolidated ~~waived~~in ~~service~~the Eastern District of Oklahoma for pretrial proceedings. Given the ~~complaint~~panel's ruling on ~~December 11~~consolidation, ~~2020~~the Company does not expect rulings on the first-to-file motions in the various actions described above.

On ~~October~~February 2319, ~~2020~~2021, ~~the~~Plaintiffs ~~District~~filed ~~Court~~a ofConsolidated ~~Kansas~~Class ~~stayed~~Action ~~proceedings~~Complaint in ~~that action (other than those related to~~ the ~~first-to-file motion) pending resolution of the first-to-file motion and the multi-district litigation ("~~MDL") ~~consolidation motion discussed below~~Court. OnThe ~~November~~complaint ~~12,~~is ~~2020,~~substantively ~~the~~identical ~~District~~to ~~Court~~previous ofcomplaints. ~~Colorado~~Fact ~~stayed~~discovery ~~proceedings~~ in ~~that~~the ~~action~~MDL ~~(other~~is ~~than~~ongoing ~~those~~and ~~related~~is tocurrently ~~the~~scheduled ~~first-~~to~~-file~~ ~~motion)~~end ~~pending~~in ~~resolution~~August ~~of the first-to-file motion and the MDL consolidation motion discussed below~~2022.

On October 6, 2020, Plaintiffs in the Oklahoma action moved to consolidate all of these duplicative cases into a MDL before the judge presiding over the Oklahoma case. Briefing on that motion was completed on November 6, 2020, and oral argument on the motion occurred on December 3, 2020. On December 15, 2020, the panel ordered that all actions be consolidated in the Eastern District of Oklahoma for pretrial proceedings. The cases are consolidated as In re Broiler Chicken Grower Antitrust Litigation, No. 6:20-md-2977-RJS-CMR (E.D. Okla.). On February 12, 2021, the MDL Court held a status conference and entered a scheduling order for the MDL. On February 16, 2021, the first-to-file motions in the various actions described above were denied without prejudice. On February 19, 2021, Plaintiffs filed a consolidated amended complaint before the MDL Court. On March 31, 2021, the Company filed its answers to Plaintiffs' consolidated amended complaint. Discovery in the case is underway.

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.

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Antitrust Civil Investigative Demands

On February 21, 2017, ~~the~~Sanderson ~~Company~~Farms, Inc. received an antitrust ~~civil investigative demand ("~~CID") from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida. Among other things, the demand seeks information related to the Georgia Dock Index and other information on poultry and poultry products published by the Georgia Department of Agriculture and its Poultry Market News division. The Company is cooperating fully with the investigative demand, and we have responded to all requests received to date; however, we are unable to predict its outcome at this time.

Separately, the Company is also aware that certain plaintiffs’ counsel in In re Broiler Chicken Antitrust Litigation received from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida, an antitrust CID that includes a request to produce all documents submitted by the recipients to the Department of Justice relating to In re Broiler Chicken Antitrust Litigation.

The Company is also aware that certain plaintiffs’ counsel in In re Broiler Chicken Antitrust Litigation received from the Louisiana Department of Justice - Office of the Attorney General a CID that ~~includes~~included a request to produce all deposition transcripts from the Incivil ~~re Broiler Chicken Antitrust Litigation~~litigation.

On August 6, 2020, the Company received a CID from the Office of the Attorney General for the State of Washington seeking information in connection with its investigation of possible violations of the Washington Consumer Protection Act and/or the Sherman Act concerning contracts, combinations, or conspiracies in restraint of trade or commerce in the market for broiler chicken. The Company is ~~cooperating with the investigative demand and providing documents and information as requested by the Office of the Attorney General for the State of Washington. The Company is~~ unable to predict the outcome of ~~the~~these ~~investigation~~investigations at this time.

Separately, the Company is also aware that, On March 23, 2021, certain plaintiffs' counsel in In re Broiler Chicken Litigation also received a CID from the Office of the Attorney General for the State of Washington that includes a request to produce all deposition transcripts and expert reports from the In re Broiler Chicken Antitrust Litigation.

Friends of the Earth, et al v. Sanderson Farms, Inc.

On June 22, 2017, the Company was named as a defendant in a lawsuit filed in the United States District Court for the Northern District of California. The complaint, which was brought by three non-profit organizations (the Organic Consumers Association, Friends of the Earth, and Center for Food Safety) alleged that the Company is violating the California Unfair Competition Law and the California False Advertising Law by representing that its poultry products are “100% Natural” products raised with “100% Natural” farming procedures. Among other things, the plaintiffs alleged that the Company’s products contain residues of human and animal antibiotics, other pharmaceuticals, hormones, steroids, and pesticides. Plaintiffs sought an order enjoining the Company from continuing its allegedly unlawful marketing program and requiring the Company to conduct a corrective advertising campaign; an accounting of the Company’s profits derived from the allegedly unlawful marketing practices; and attorneys’ fees, costs and interest. On August 2, 2017, the Company moved to dismiss the lawsuit on various grounds. On August 23, 2017, the plaintiffs filed an amended complaint, which included substantially similar allegations as the original complaint, and the Company filed a motion to dismiss the amended complaint on September 13, 2017. On February 9, 2018, the Court denied the Company’s motion to dismiss. An initial scheduling conference was held on March 1, 2018, and discovery started thereafter. On June 25, 2018, the plaintiffs amended their complaint for a second time, including to remove allegations that the USDA had found the Company’s chicken samples to contain residues of antibiotics or other substances. On July 9, 2018, the Company filed a motion to dismiss the second amended complaint. On July 18, 2018, during the pendency of that motion, the parties stipulated to the voluntary dismissal of one 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.

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On August 30, 2019, plaintiffs filed a notice of appeal of the District Court’s order of dismissal before the United States Court of Appeals for the Ninth Circuit. Briefing was complete as of April 29, 2020, and the Court held oral argument on October 13, 2020. On March 31, 2021, a panel of the Ninth Circuit unanimously affirmed the District Court's dismissal. The organizations subsequently declined to seek reconsideration by the Ninth Circuit panel or en banc review by all active judges on the Ninth Circuit.

The organizations may still seek to file a petition for certiorari seeking review by the U.S. Supreme Court. In the event that they do, we intend to vigorously defend the appeal. However, the Company cannot predict the outcome of such an appeal. If the plaintiffs were to prevail, the Company’s reputation and marketing program could be materially, adversely affected, which could have a material, adverse effect on our financial position and results of operations.

Judy Jien v. Perdue Farms, Inc., et al.

On August 30, 2019, Sanderson Farms, Inc. and its Foods and Processing Divisions, as well as seventeen 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. 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.13

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 named 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 brought their amended consolidated complaint on behalf of employees at broiler chicken and turkey processing plants and allege that the defendants unlawfully conspired by agreeing to fix and depress the compensation paid to them. On January 9, 2020 and January 27, 2020, the Court 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 filed their omnibus opposition to defendants’ motions to dismiss on July 17, 2020. Defendants filed their reply briefs on August 13, 2020. On September 16, 2020, the Court granted in part and denied in part defendants’ motion without prejudice, finding that plaintiffs’ allegations against certain corporate defendant families, including the Company, were deficient.

Plaintiffs filed a second amended consolidated complaint against the Company on November 2, 2020. The Company filed a renewed motion to dismiss resisting plaintiffs' amended allegations on December 18, 2020. The Court denied that motion on March 10, 2021. Discovery in the case is underway.

We intend to defend this case vigorously; however, the Company cannot predict the outcome of these actions. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.

La Fosse, et al. v. Sanderson Farms, Inc.

On October 11, 2019, three 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

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~~allege~~On ~~that~~August ~~the Company’s advertising (including~~30, ~~but not limited to~~2019, onSanderson ~~its website~~Farms, ~~television~~Inc. ~~commercials,~~and ~~radio~~its ~~advertisements,~~Foods ~~social media, print magazines, billboards,~~ and ~~trucks)~~Processing ~~misleads consumers into believing that (i) the Company’s chickens were not given antibiotics or other pharmaceuticals~~Divisions, ~~(ii)~~as ~~the~~well ~~Company's~~as ~~chickens~~seventeen ~~were raised in a “natural” environment, (iii) there is no evidence that the use of antibiotics or~~ other ~~pharmaceuticals in~~ poultry ~~contributes~~producers toand ~~the~~their ~~evolution~~affiliates; ofAgri ~~antibiotic-resistant bacteria~~Stats, ~~and (iv) the Company’s chicken products do not contain antibiotic or pharmaceutical residues~~Inc.; ~~Plaintiffs allege that (i) the Company “routinely” feeds antibiotics~~ and ~~pharmaceuticals~~Webber, ~~to its chickens~~Meng, ~~(ii)~~Sahl ~~the~~and Company, ~~raises~~Inc. ~~its chickens indoors in~~ (“~~unnatural~~WMS” ~~indoor conditions amounting to “intensive confinement” and without natural light (iii~~), ~~there~~were isnamed ~~“extensive”~~in ~~reliable~~a ~~evidence~~putative ~~that~~class ~~the~~action ~~use~~filed ~~of antibiotics~~ in ~~poultry~~the ~~contributes~~United toStates ~~antibiotic-resistant~~District ~~bacteria,~~Court ~~and~~for ~~(iv)~~ the ~~Company’s~~District ~~chickens have been found to contain antibiotic and pharmaceutical residue. The original complaint asserted five causes~~ of ~~action under California and North Carolina law~~Maryland. ~~The~~To ~~plaintiffs sought injunctive relief directing the Company to correct its practices and to comply with consumer protection laws nationwide. The plaintiffs also sought monetary damages~~date, asthree ~~well~~other asnearly ~~fees~~identical ~~and~~putative ~~costs.~~class Onaction ~~December 20~~complaints, ~~2019,~~each ~~the~~seeking ~~Company filed a motion~~ to ~~dismiss.~~represent ~~On February 10, 2020,~~ the ~~Court~~same ~~granted~~putative ~~the motion to dismiss in part~~class, ~~denied~~also itwere ~~in part, and granted the plaintiffs leave to amend the complaint~~filed. OnThe ~~March 23~~complaints, ~~2020,~~brought ~~two of the three original plaintiffs (Pam La Fosse and Marybeth Norman) filed a first amended complaint in which they were joined by five additional named plaintiffs purporting to assert claims~~ on behalf of anon-supervisory ~~putative~~production ~~nationwide class of consumers~~ and ~~businesses~~maintenance ~~who~~employees ~~purchased~~at ~~the~~broiler ~~Company's~~ chicken ~~products~~processing inplants, ~~the~~alleged ~~prior~~that ~~four years. The core allegations and theories set forth in~~ the ~~first~~defendants ~~amended~~unlawfully ~~complaint~~conspired ~~are~~by ~~the~~agreeing ~~same~~to asfix ~~in the original complaint. The first amended complaint asserted one cause of action under federal law~~ and ~~sixteen~~depress ~~causes of action under~~ the ~~laws~~compensation ofpaid ~~various states. The plaintiffs again sought injunctive relief directing the Company~~ to ~~correct its practices and to comply with consumer protection laws nationwide~~them, asincluding ~~well~~hourly aswages ~~monetary damages, fees~~ and ~~costs.~~compensation Onbenefits, ~~May~~from 6,January ~~2020~~1, ~~the~~2009 ~~Company filed a partial motion~~ to ~~dismiss~~ the ~~first amended complaint, which the Court granted on July 2, 2020 with leave to amend~~present. OnThe ~~July 23, 2020,~~ plaintiffs ~~Pam~~claim Lathat ~~Fosse~~broiler ~~and~~producers ~~Sharon~~shared ~~Manier~~competitively ~~filed~~sensitive awage ~~second~~and ~~amended~~benefits ~~complaint~~compensation oninformation ~~behalf~~in ofthree aways: ~~putative~~(1) ~~class~~attending ~~of consumers who purchased the Company's chicken~~ in-person ~~California~~meetings in ~~the~~Destin, ~~prior~~Florida; ~~four~~(2) ~~years.~~receiving ~~Like~~Agri ~~the~~Stats ~~earlier iterations of the complaint~~reports, ~~the~~as ~~second~~well ~~amended~~as ~~complaint~~surveys ~~alleges~~taken ~~that~~and ~~the~~published ~~remaining~~by ~~plaintiffs~~WMS; and ~~other~~(3) ~~class~~directly ~~members~~exchanging ~~purchased~~wage ~~the~~and ~~Company's~~benefits ~~chicken~~information ~~products~~with ~~based~~plant onmanagers ~~misleading~~at ~~representations~~other indefendant ~~the~~broiler ~~Company's advertising, including for the reasons set forth in their prior complaints~~producers. ~~The~~Plaintiffs ~~plaintiffs~~allege ~~again~~that ~~seek~~this ~~injunctive~~conduct ~~relief,~~violated ~~monetary damages, fees and costs. On August 6, 2020,~~ the ~~Company~~Sherman ~~moved~~Antitrust ~~to dismiss the second amended complaint in part, requesting dismissal of plaintiffs' new implied warranty of merchantability claim~~Act. ~~On August 20, 2020, plaintiffs voluntarily agreed to withdraw their new implied warranty claim. Discovery commenced in October 2020 and is ongoing.~~

WeOn ~~intend~~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 ~~defend~~file ~~this~~their ~~case~~consolidated ~~vigorously;~~complaint ~~however~~on or before November 14, ~~the~~2019. ~~Company~~Defendants’ ~~cannot~~motions ~~predict~~to dismiss the ~~outcome~~consolidated ofcomplaint ~~this~~were ~~action~~filed on November 22, 2019. IfBriefing 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 ~~were~~notified defendants that they intended to ~~prevail~~file an amended consolidated complaint. Plaintiffs filed an amended consolidated complaint on December 20, ~~the~~2019. ~~Company~~Plaintiffs ~~could~~name beas ~~liable~~defendants ~~for~~Sanderson ~~damages~~Farms, ~~which~~Inc. ~~could~~and ~~have~~its aFoods ~~material~~and Processing Divisions, ~~adverse~~as ~~effect~~well as ten other broiler chicken producers and their affiliates; three turkey producers and their affiliates; Agri Stats, Inc.; and WMS. Plaintiffs brought their amended consolidated complaint on ~~our~~behalf ~~financial~~of ~~position~~employees at broiler chicken and ~~results~~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 ~~operations~~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.

InOn ~~Defense~~March of2, ~~Animals~~2020, etdefendants almoved to dismiss the amended consolidated complaint. vThe Company also filed an individual motion to dismiss plaintiffs’ claims against the Company. After several COVID-19 related extensions, plaintiffs filed their omnibus opposition to defendants’ motions to dismiss on July 17, 2020. Defendants filed their reply brief on August 13, 2020. On September 16, 2020, the Court granted in part and denied in part defendants’ motion without prejudice, finding that plaintiffs’ allegations against certain corporate defendant families, including Sanderson Farms, ~~Inc~~were deficient.

OnPlaintiffs ~~July 31, 2020, two non-profit organizations (In Defense of Animals and Friends of the Earth)~~ filed a ~~complaint~~second ~~against~~amended ~~the Company in the United States District Court for the Northern District of California. The~~ complaint ~~asserts substantially similar (and in many cases identical) allegations and claims~~ against ~~the~~Sanderson ~~Company as the prior case brought by Friends of the Earth and other organizations~~Farms, ~~which~~Inc. ~~the~~on ~~court~~November ~~dismissed in July 2019 and the Ninth Circuit unanimously confirmed in March 2021. Specifically~~2, the plaintiffs assert that the Company violates the California Unfair Competition Law and the California False Advertising Law by representing that its poultry products are “100% Natural” products raised with “100% Natural” farming procedures2020. ~~Plaintiffs~~Sanderson ~~allege~~Farms ~~that~~filed ~~the~~a ~~Company’s~~renewed ~~advertising~~motion ~~(including, but not limited~~ to, ondismiss ~~its~~resisting 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 Companyplaintiffs's ~~chickens~~amended ~~were~~allegations. ~~raised~~The inCourt adenied ~~“natural” environment, (iii) there is no evidence~~ that ~~the~~motion ~~use of antibiotics or other pharmaceuticals in poultry contributes to the evolution of antibiotic-resistant bacteria,~~ and ~~(iv)~~allowed ~~the~~plaintiffs' ~~Company’s~~case ~~chicken products do not contain antibiotic or pharmaceutical residues. Plaintiffs allege that (i) the Company “routinely” feeds antibiotics and pharmaceuticals~~ to ~~its~~go ~~chickens,~~forward ~~(ii) the Company raises its chickens indoors~~ in ~~“unnatural”~~an ~~indoor~~order ~~conditions~~dated ~~amounting~~March ~~to “intensive confinement” and without natural light~~10, ~~(iii)~~2021. ~~there~~Sanderson isFarms ~~“extensive”~~filed ~~reliable~~an ~~evidence~~answer ~~that~~denying the ~~use~~substance of ~~antibiotics~~plaintiffs' inallegations ~~poultry~~on ~~contributes~~April ~~to antibiotic-resistant bacteria~~7, ~~and (iv) the Company’s chickens have been found to contain antibiotic and pharmaceutical residue~~2021. ~~The~~ ~~plaintiffs~~Discovery ~~seek injunctive relief directing the Company to correct its practices and to comply with consumer protection laws nationwide as well as~~ in ~~the~~this ~~form~~case ofis ~~a corrective advertising campaign~~underway. ~~The plaintiffs also seek fees and costs.~~

~~The~~Plaintiffs ~~parties~~filed ~~initially stipulated to~~ a ~~stay~~motion offor ~~the~~leave ~~case~~to ~~pending~~file ~~resolution~~a ofThird ~~the~~Amended ~~appeal~~Complaint inon ~~the~~December ~~related~~17, ~~Friends~~2021, ofand the ~~Earth~~Plaintiffs ~~case.~~filed ~~Following~~an ~~the~~amended ~~Ninth~~motion ~~Circuit's~~for ~~affirmance~~leave ofto ~~the~~file ~~District~~a ~~Court's~~Third ~~dismissal~~Amended ofComplaint ~~that~~on ~~case~~January 20, ~~the~~2022. ~~Company~~Defendants ~~moved~~filed totheir ~~dismiss~~response ~~the~~to InPlaintiffs' ~~Defense~~motion ~~of Animals case~~ on ~~April~~February 284, ~~2021~~2022. InPlaintiffs' ~~response~~proposed toThird ~~the~~Amended ~~Company's~~Complaint, ~~motion~~among toother ~~dismiss~~things, ~~plaintiffs~~adds ~~filed~~new anallegations, ~~amended~~expands ~~complaint~~the onputative ~~May~~class ~~26,~~to ~~2021.~~include Onworkers ~~June~~at ~~25,~~hatcheries ~~2021,~~and ~~the~~feed ~~Company~~mills, ~~filed~~and aextends ~~motion~~the toputative ~~dismiss~~class ~~the~~period ~~amended~~to ~~complaint.~~January No1, ~~discovery~~2000 ~~has~~through ~~taken~~July ~~place~~20, ~~to date~~2021.

17We 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.

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We intend to defend this case vigorously; however, the Company cannot predict the outcome of this action. If the plaintiffs were to prevail, the Company could be liable for damages, which could have a material, adverse effect on our financial position and results of operations.

Other

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

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demand were needed. On May 5, 2017, the special committee’s counsel informed the shareholder’s counsel of the committee’s determination. As of the date of filing of this report, and to the Company’s knowledge, no legal proceedings related to the shareholder’s demand have been filed.

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

The Company recognizes the costs of legal defense for the legal proceedings to which it is a party in the periods incurred. After a considerable analysis of each case, the Company has determined that no accrual is required for any of the foregoing matters as of ~~July~~ January 31, ~~2021~~2022. 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 98—CREDIT AGREEMENT

The Company is a party to a revolving credit facility dated April 23, 2021, with a maximum available borrowing capacity of $1.0 billion. Under the credit facility, the Company may not exceed a maximum debt-to-total 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 ~~July~~January 31, ~~2021~~2022, was $1.13 billion. The credit is unsecured and, unless extended, will expire on April 23, 2026. As of ~~July~~January 31, ~~2021~~2022, the Company had no outstanding borrowings and ~~August~~had 25approximately $24.1 million outstanding in letters of credit, ~~2021~~leaving $975.9 million of borrowing capacity available under the facility. As of February 23, 2022, the Company had no outstanding borrowings and had approximately $2429.1 million outstanding in letters of credit, leaving $~~975~~970.9 million of borrowing capacity available under the facility.

NOTE 109—INCOME TAXES

The Company’s estimated annual effective tax ~~rates~~rate for the three ~~and nine~~ months ended ~~July~~January 31, ~~2021~~2022 ~~were~~was 23.28% ~~and 23.5%~~, ~~respectively,~~ as compared to an estimated annual effective tax ~~rates~~rate of 1525.57% ~~and 100.6%~~, ~~respectively,~~ for the three ~~and nine~~ months ended ~~July~~January 31, ~~2020~~2021. Excluding the effects of discrete items recognized during the periods, the Company's estimated annual effective tax ~~rates~~rate for the three ~~and nine~~ months ended ~~July~~January 31, ~~2021~~2022 would have ~~been~~remained approximately 2423.28% ~~and 24.1%~~, ~~respectively,~~ as compared to an estimated annual effective tax ~~rates~~rate of 1823.28% ~~and 32.7%, respectively,~~ for the three ~~and nine~~ months ended ~~July~~January 31, ~~2020~~2021. The discrete items recognized during nine months ended July 31, 2020 are primarily related to the Coronavirus Aid, Relief, and Economic Security Act ("the CARES Act") and are described in more detail below. The Company estimates its effective tax rate for the full fiscal year ~~2021~~2022, exclusive of discrete items, will be approximately 2423.18%.

18As of January 31, 2022, the Company's deferred income tax liability was $160.5 million, as compared to $156.5 million at October 31, 2021, an increase of $3.9 million.

NOTE 10—MERGER AGREEMENT

On August 8, 2021, the Company agreed to be acquired by a joint venture between Cargill, Inc. (“Cargill”) and Continental Grain Company (“CGC”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) with Walnut Sycamore Holdings LLC, a Delaware limited liability company (“Parent”), Sycamore Merger Sub LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of Parent (“Merger Sub”), and solely for purposes of certain provisions specified therein, Wayne Farms LLC, a Delaware limited liability company, pursuant to which, among other things, Merger Sub will be merged with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and as an indirect wholly owned subsidiary of Parent. Under the terms of the Merger Agreement, each outstanding share of the Company, other than certain excluded shares, will receive $203 per share in cash. The closing of the Merger is subject to the receipt of specified regulatory approvals and other customary closing conditions including, among other things, expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Waiting Period"). On December 20, 2021, the Company and Parent each received a request for additional information and documentary material (the "Second Request") from the Department of Justice (the "DOJ") in connection with the DOJ's review of the transaction contemplated by the Merger Agreement. Issuance of the Second Request extends the HSR Waiting Period until 30 days after both the Company and Parent have substantially complied with the Second Request, unless

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~~Our financial statements for~~ the ~~nine~~waiting ~~months ended July 31, 2020 were materially affected by the changes enacted by the CARES Act. U.S. GAAP requires that the effects from changes in tax laws be recognized during the fiscal~~ period ~~in which the new law~~ is ~~enacted,~~terminated ~~which~~earlier ~~for~~by the ~~CARES~~DOJ ~~Act~~or ~~was~~extended ~~our~~by ~~second~~agreement ~~quarter~~ of ~~fiscal 2020. As a result of~~ the ~~applicable~~Company ~~accounting guidance~~ and ~~the~~Parent. ~~provisions~~The ~~enacted~~Company byand ~~the~~Parent ~~CARES~~will ~~Act,~~continue ~~our~~to ~~income~~cooperate ~~tax~~with ~~provision for~~ the ~~nine~~DOJ ~~months~~staff ~~ended~~in ~~July~~its ~~31,~~review ~~2020 reflects the carry-back~~ of ~~taxable net operating losses generated during periods in which~~ the ~~statutory~~transactions ~~federal~~contemplated ~~income~~by ~~tax rate was 21% to periods in which~~ the ~~statutory~~Merger ~~federal income tax rate was 35%~~Agreement. ~~Due~~The toparties ~~the~~expect ~~difference~~that ~~in statutory rates, we recorded a $49.5 million discrete income tax benefit related to~~ the ~~carry-back~~Merger ~~provisions~~will ~~during~~be ~~the~~completed ~~nine months ended July 31, 2020. Because the net operating losses were carried back to years~~ in ~~which we initially reduced our taxable income using~~ the ~~Domestic~~first ~~Production~~half ~~Activities~~of ~~Deduction,~~calendar weyear ~~recorded a partially offsetting $11~~2022.~~4 million discrete income tax expense during the nine months ended July 31, 2020 to account for the reduced taxable income.~~

~~As of July 31, 2021, the Company's deferred income tax liability was $149.5 million, as compared to $141.7 million at October 31, 2020, an increase of $7.8 million.~~16

NOTE 11—INSURANCE RECEIVABLE

Our operations in Texas, Louisiana and Mississippi were affected by significant winter weather events that began impacting the region on or around February 13, 2021. Because of record low temperatures, power failures, snow and ice, and hazardous road conditions during the week of February 15, 2021, we were unable to operate our processing plants in those states, deliver day old chicks to broiler farms on our regular schedule, pick up hatching eggs from breeder farms and place those eggs in our hatcheries on our regular schedule, or manufacture and deliver chicken feed to the farms of our independent contract producers on our regular schedule. None of our facilities or our equipment were significantly damaged, our employees remained safe and we returned to normal operations on February 22, 2021, except for our Hazlehurst, Mississippi processing plant, which returned to normal operations on February 23, 2021. However, our live production supply chain experienced interruptions and losses. We lost 639,000 broilers in houses that either lost water, power or feed, or collapsed under the weight of snow and ice. Because the hazardous road conditions prevented us from delivering day old chicks to broiler farms on our regular schedule, we were forced to humanely euthanize 545,000 chicks in our Texas hatcheries. We were also unable to pick up and place approximately 665,000 hatching eggs in our hatcheries on our normal schedule.

Our financial statements as of July 31, 2021 include a $4.1 million receivable from insurance carriers for property damage and expenses incurred as a result of the storms, net of the applicable self-insured retention and deductibles. The Company's applicable insurance policy includes a $2.5 million self-insured, eroding retention per policy year and an additional $250,000 deductible per occurrence. As a result, the Company's operating results for the nine months ended July 31, 2021 include $2.75 million in cost of goods sold for losses and expenses related to the winter storms. Additionally, the Company's operating results for the nine months ended July 31, 2021 were negatively affected by business interruption losses which were the direct result of the winter storms. While we expect to recover some portion of the business interruption losses, we are subject to a seven-day waiting period deductible under the applicable insurance policy. We continue to work with our insurers, adjusters and forensic accountants to refine the calculation of losses stemming from the storms, as well as the amount of those losses applicable to the deductible period. Any recoveries of the business interruption losses will be recognized once the calculations of the claims and negotiations with our insurance carriers are complete.

NOTE 12—SUBSEQUENT EVENT

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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, ~~2020~~2021.

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.

2017

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

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

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

GENERAL

The Company’s poultry operations are fully, vertically-integrated through its control of all functions ~~relative~~relating to the production of its chicken products, including hatching egg production, hatching, feed manufacturing, raising chickens to marketable age (“grow-out”), processing and marketing. Consistent with the poultry industry, the Company’s profitability is substantially affected by the market price for its finished products and feed grains, both of which may fluctuate substantially and independently of each other, and exhibit cyclical characteristics typically associated with commodity markets. Other costs, excluding feed grains, related to the profitability of the Company’s poultry operations, including hatching egg production, hatching, growing, and processing cost, are responsive to efficient cost containment programs and management practices.

The Company believes that value-added products are subject to less price volatility and generate higher, more consistent profit margin than whole chickens ice-packed and shipped in bulk form. To reduce its exposure to market cycles that have historically characterized commodity chicken market prices, the Company has increasingly concentrated on the production and marketing of value-added product lines with emphasis on product quality, customer service, and brand recognition. However, the Company cannot eliminate its exposure to fluctuations in commodity market prices for chicken since market prices for value-added products also demonstrate cyclical characteristics typical ~~with~~of commodity markets. The Company adds value to its poultry products by performing one or more processing steps beyond the stage where the whole chicken is first salable as a finished product, such as cutting, deboning, deep chilling, packaging and labeling the product.

The Company’s also has a prepared chicken product line that includes approximately 4550 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.

COVID-19

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

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~~our~~In ~~business~~late February 2020, ~~including~~we ~~our~~formed ~~labor~~a ~~force~~COVID-19 response team of senior managers, ~~revenues~~including our CEO, ~~expenses~~President, ~~production~~and ~~levels~~CFO, to coordinate our response to the pandemic and ~~senior~~manage and mitigate related risks. Additionally, our Board of Directors has actively overseen our management's ~~time~~of and response to the pandemic. During the first few months of the pandemic, ~~among~~the ~~other~~Board ~~things~~met weekly to receive updates and discuss our response with our executive leadership team. Today, the Board continues to receive COVID-19-related updates on a monthly basis.

InOur ~~late~~top ~~February~~priority ~~2020,~~throughout wethe ~~formed~~crisis ahas ~~COVID-19~~been ~~response~~protecting ~~team~~the ~~of senior managers~~health, ~~including~~safety ~~our CEO, President~~ and ~~CFO,~~welfare toof ~~coordinate~~ our ~~Company's~~employees. ~~response~~In toconsultation ~~the~~with ~~pandemic~~infectious ~~and~~disease ~~manage~~specialists and ~~mitigate~~epidemiologists, ~~related~~including ~~risks.~~an ~~From~~infectious ~~late~~disease ~~February~~expert towho ~~late~~toured ~~September~~our ~~2020~~facilities, ~~the~~we ~~team~~implemented ~~met~~a ~~twice~~number ~~daily~~of tosteps ~~discuss~~and ~~COVID-19~~procedures ~~developments~~to ~~affecting~~promote ~~our~~health ~~business~~ and ~~the~~safety ~~communities~~ in ~~which~~our ~~we operate~~operations. ~~Beginning~~We incontinue ~~late~~to ~~September~~consult ~~2020,~~with ~~the~~experts ~~team~~and ~~began~~update ~~meeting~~our ~~once~~protocols ~~daily, rather than twice,~~ and ~~beginning~~procedures inas ~~June 2021,~~ the ~~full~~number ~~COVID-19 response team ceased its daily meetings; however, a smaller group~~ of ~~senior~~infections ~~managers~~nationwide ~~continued~~and ~~to meet daily. Beginning on July 29, 2021,~~ in ~~response to~~ the ~~increasing~~areas ~~number of COVID-19 cases within the states~~ in which we operate, ~~the full COVID-19 response team once again began meeting daily~~fluctuates. ~~Additionally,~~Practices ~~our~~that ~~Board~~remain ofin ~~Directors~~place ~~has actively overseen our management of the crisis. Between March 13~~include, ~~2020~~but ~~and~~are ~~early~~not ~~June~~limited ~~2020, the Board met weekly~~ to ~~receive updates and discuss our response to the pandemic with our executive leadership. In early June 2020~~, the Board began meeting generally every two weeks, or more frequently if circumstances warranted, and in August 2020, the Board began meeting on an as needed basis. Throughout the pandemic, regardless of meeting frequency, the Board has received weekly materials providing operational and COVID-19-related updates.following:

~~Our~~•We ~~top~~have ~~priority~~on-site ~~throughout~~medical ~~the~~clinics ~~crisis~~at ~~has~~each ~~been protecting the health, safety and welfare~~ of our ~~employees.~~processing Inplants ~~consultation~~that ~~with~~are ~~infectious~~staffed ~~disease~~by ~~specialists~~third-party ~~and~~medical ~~epidemiologists,~~providers. ~~including~~The anclinics ~~infectious~~provide ~~disease~~telemedicine ~~expert who toured our facilities~~services, weflu ~~have taken a number of steps to promote health~~ and ~~safety~~coronavirus intests, ~~our operations. We also frequently communicate with state~~ and ~~local~~flu ~~officials~~ and ~~health~~coronavirus ~~departments~~vaccinations ~~regarding~~at ~~our~~no ~~practices.~~cost ~~Some~~to of our ~~practices are more stringent than those recommended by the Centers for Disease Control and Prevention~~employees. ~~Our practices include, but are not limited to:~~

•WeAny ~~implemented~~employee ~~strict~~who ~~personal~~becomes ~~and work~~fully-~~related~~vaccinated ~~travel~~against ~~and~~COVID-19 ~~public~~receives ~~gathering~~a ~~restrictions for all of our employees~~$1,000 ~~contractors and members of their households~~bonus. ~~These restrictions have been adjusted as conditions have warranted throughout the pandemic, following consultations with an infectious disease expert.~~

•At each of our processing plants, we set up on-site medical clinics, which are staffed by third-party medical providers. At these clinics, telemedicine services, flu and coronavirus tests, and flu and coronavirus vaccinations are provided at no cost for our employees.

•We are providing information about the novel coronavirus and measures to mitigate the risk of contracting and transmitting the virus on video displays throughout our facilities and on our employee mobile app. We have also provided live training sessions about the virus to our hourly employees. Each of these aforementioned communications is provided in the languages spoken by our employee population.

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

•Non-essential visitors may not enter our facilities.

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

•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 and unvaccinated employees who live in the same household as someone who has tested positive or who work in close proximity to an employee who has tested positive are sent home to isolate or self-quarantine with pay. The specific isolation or quarantine period varies based on individual circumstances but generally ranges from 10 to 24 days. Vaccinated employees who have had known contact with someone who has tested positive may continue working but must be tested for COVID-19 within 3 to 5 days following the known contact.

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

•In May 2020, we sent home for 14 days, with pay, approximately 400 employees who work in our Moultrie, Georgia facility and are residents of a nearby county that experienced a high rate of community infections.

•Until May 18, 2021, we provided and required employees, United States Department of Agriculture inspectors and essential visitors to wear face masks and/or face shields, and anyone on the premises of our processing plants, feed mills, hatcheries and vehicle maintenance shops was required to wear this equipment. Where an employee's job function did not permit him or her to wear a face shield, we required the employee to wear safety glasses. As of

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

•In areas of our facilities where space allows, we have implemented social distancing measures, and in areas where equipment configurations allow, we have installed physical barriers between work stations. Additionally, we have optimized ventilation throughout our facilities to mitigate the risk of exposure to the virus.

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

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

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

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

•~~Salaried~~We ~~employees~~continuously ~~who~~track ~~are~~COVID-19 ~~considered~~positive tocases beand atexposure ~~high~~within ~~risk~~our ~~for~~workforce, ~~severe~~and ~~illness~~impose ~~from~~isolation ~~COVID-19~~or ~~are~~quarantine ~~permitted~~periods tothat ~~work~~vary ~~from~~based ~~home,~~on ~~provided~~individual ~~their job duties allow for remote work~~circumstances.

~~•In~~The ~~November~~COVID-19 ~~2020,~~response weteam ~~adopted~~met adaily ~~practice~~throughout tothe ~~temporarily~~first ~~send~~quarter ~~home,~~of ~~with~~fiscal ~~pay,~~2022 ~~employees~~to ~~ages~~coordinate 65our orresponse ~~older~~to ~~who~~the ~~work~~threat atof ~~Company~~the ~~locations~~new atOmicron ~~which~~variant of the ~~number~~virus, ofwhich ~~positive~~significantly ~~coronavirus~~impacted ~~cases~~all asof athe ~~percentage~~communities ofin ~~total~~which ~~employees~~we atoperate. As the ~~location~~number ~~reaches~~of acases ~~certain~~dropped ~~threshold.~~significantly ~~This~~during ~~has~~February ~~been~~2022, ~~triggered~~the atteam ~~only~~transitioned ~~two~~to ~~locations~~meeting on an as needed basis.

~~•We~~In ~~closed~~the ~~our~~first ~~Company-owned~~quarter ~~childcare~~of ~~facility~~fiscal 2022, we incurred approximately $6.8 million in ~~Collins~~costs directly related to COVID-19. These included payroll expenses for employees who were quarantined, ~~Mississippi~~vaccination ~~early~~bonuses, and items and services related to workplace safety, including personal protective equipment, thermometers, barriers and other social-distancing measures, professional cleaning, on-site ~~during~~medical clinics, and additional nursing staff, among other things. By comparison, our results for the ~~pandemic~~first quarter of fiscal 2021 included approximately $11.4 million in direct COVID-19 expenses.

•In certain of our facilities that are located in communities that experienced high infection rates, we cooperated with local health authorities or determined on our own to test all our employees at the facility for coronavirus. Employees who tested positive were sent home to quarantine with pay.

During the COVID-19 pandemic, we have also provided assistance to our employees including, but not limited to, the following:

•As a food producer, we have been designated by the federal government as part of the United States' critical infrastructure with a special responsibility to continue operations. Therefore, from late-March 2020 through mid-September 2020, we paid hourly employees who worked all of their scheduled hours during a week an attendance bonus equal to $1.00 per hour.

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

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

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

•We have given our employees free bottles of hand sanitizer which they may refill from supplies at our facilities and washable masks for them and their families.

•During calendar year 2020, we gave free, 10-pound packages of fresh chicken to our employees in connection with several holidays.

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

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 were forced to operate at significantly reduced capacity or to close completely for an extended period of time. As a result, our retail grocery store customers experienced a surge in demand for food to be prepared at home. Because of the significant decrease in

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

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

•During the pandemic, we have donated tens of thousands of N95, KN95, disposable and washable masks to a number of hospitals and community organizations.

On March 27, 2020, the CARES Act was enacted. The CARES Act affects the Company in several areas including, but not limited to, the following:

•It allows for the deferral of the employer portion of social security payroll tax payments that would have otherwise been paid between the enactment date and December 31, 2020. We used this provision to increase our available liquidity. During fiscal 2020, we deferred approximately $20.7 million, and during the first quarter of fiscal 2021, we deferred an additional $6.5 million, resulting in a total deferral of approximately $27.2 million that would have been a cash outflow in the absence of the CARES Act. We remitted approximately $20.7 million of the deferred payroll taxes on June 10, 2021, and we intend to remit the remaining $6.5 million on or before June 15, 2022, so that we may deduct the corresponding payroll tax expenses on our fiscal 2020 and 2021 income tax returns, respectively.

•The Employee Retention Credit, a refundable, wage-related tax credit, was made available to eligible employers. We recognized a $3.5 million benefit, before income taxes, related to this credit during our fourth quarter of fiscal 2020, and we recognized additional pre-tax benefits of $1.1 million and $3.7 million, respectively, related to this credit during our first and second quarters of fiscal 2021.

EXECUTIVE OVERVIEW OF RESULTS

For the ~~third~~first quarter of fiscal ~~2021~~2022, we ~~reported~~earned net income of $~~164~~192.8 million, or $78.3864 per share, as compared to net income of $329.85 million, or $10.4842 per share, during the ~~third~~first quarter of fiscal ~~2020. Results for the third quarter of fiscal~~ 2021 ~~reflect a $41~~.5 ~~million~~The ~~accrual~~significant ~~for~~improvement ~~probable~~in ~~liability under~~ our ~~bonus~~results ~~award~~during ~~programs,~~the afirst ~~$10.2~~quarter ~~million~~of ~~accrual~~fiscal ~~for~~2022 aas ~~probable~~compared ~~Employee~~to ~~Stock~~the ~~Ownership~~first ~~Plan~~quarter ~~("ESOP")~~of ~~contribution,~~fiscal ~~and~~2021 ~~a $4.4 million accrual for probable liability under outstanding performance share agreements entered into in November 2019. The significant improvement in our results~~ is primarily attributable to ~~significantly~~an ~~higher~~increase in the average selling prices for our products, ~~partially~~of ~~offset~~$0.3129 byper ~~significantly~~pound ~~higher~~sold, ~~costs~~or of40.3%, ~~corn~~partially ~~and~~offset ~~soybean~~by ~~meal,~~an ~~our~~increase ~~primary~~in feed ~~ingredients.~~costs ~~Our~~per ~~results~~pound ~~for~~of ~~the~~broilers ~~third~~processed ~~quarter~~ of ~~fiscal~~$0.0655, ~~2021~~or ~~continued~~24.9%, toand behigher ~~affected~~labor byand ~~the~~other ~~COVID-19~~variable ~~pandemic~~costs. ~~The primary impacts were:~~

~~•Orders~~The ~~from~~increase ~~food~~in ~~service~~average ~~customers~~selling ~~declined~~prices ~~dramatically~~for fresh and frozen chicken products during the ~~second~~first quarter of fiscal ~~2020~~2022 ~~due~~versus tothe ~~widespread~~same ~~closures~~quarter ora ~~significant~~year ~~reductions~~ago inreflects ~~operating~~significantly ~~capacity~~higher ofrealized ~~restaurants~~prices ~~and~~for ~~other~~products ~~venues where food is consumed away~~ from ~~home.~~our ~~Since~~plants that ~~time,~~process ~~demand~~a ~~from~~larger ~~our~~bird primarily for food service customers ~~has~~and ~~fluctuated~~further ~~from~~processors. ~~week~~These toprices ~~week,~~are ~~coinciding~~determined ~~with~~by ~~the~~contractually ~~fluctuating~~negotiated ~~governmental~~formulas ~~restrictions~~based ~~placed~~ on ~~the~~published ~~restaurant~~quotes ~~industry~~for commodity chicken products. The ~~impact~~quoted ofmarket ~~fluctuating~~prices ~~demand~~typically ismove ~~evidenced~~higher byor ~~the~~lower ~~volatility~~based ofon the ~~daily~~supply ~~Urner~~and ~~Barry~~demand ~~quote~~dynamics ~~for~~of ~~boneless~~chicken ~~breast~~products ~~meat~~sold into the food service market. InThe ~~mid-May~~higher ~~2020,~~quoted market prices during the ~~quoted~~quarter ~~price~~reflect ~~reached~~significantly ~~$1.58~~improved ~~per~~demand ~~pound~~from ~~before~~food ~~falling~~service customers as consumers continue to ~~$0.97~~become ~~per~~more ~~pound~~comfortable indining ~~mid-June~~away ~~2020~~from ~~and~~home ~~recovering~~given toimproving ~~$1.19~~pandemic ~~per~~conditions, ~~pound~~combined bywith ~~early~~a ~~August~~limited ~~2020.~~supply ~~The~~and ~~quoted~~elevated ~~price~~prices ~~fell~~of tocompeting $0proteins.86 ~~per~~Although ~~pound~~we byproduce ~~early~~little ~~October~~for ~~2020~~this market, ~~but~~demand byis ~~May~~particularly ~~18,~~strong ~~2021,~~from ~~the~~quick ~~price~~service ~~reached~~restaurants ~~$2.26~~featuring ~~per~~chicken ~~pound.~~sandwich Asmenu ofitems. ~~August~~In 25addition, ~~2021,~~wing ~~the~~concept ~~quoted~~restaurants ~~market~~have ~~price~~operated iswell ~~$2.04~~throughout ~~per~~the ~~pound.~~pandemic, Weand ~~believe~~demand ~~the~~for ~~strength~~wing ~~that~~products weremains ~~have~~good. ~~seen~~This instrong ~~the~~demand ~~quoted~~for ~~market~~chicken ~~price~~has iscoincided ~~attributable,~~with atconstraints ~~least~~on inthe ~~part~~supply side, toincluding ~~strong~~limited ~~demand~~capacity ~~from~~expansion ~~quick-service~~in ~~restaurant~~the ~~chains~~industry ~~that~~due ~~are~~to ~~featuring~~labor ~~chicken~~shortages ~~products~~and onsupply ~~their~~chain ~~menus~~logistics. In addition, ~~demand~~the ~~from~~United ~~food~~States ~~service~~Department ~~customers~~of ~~has~~Agriculture ~~continued~~reports tolow ~~improve~~hatchability asrates ~~more~~for ~~consumers~~hatching ~~dine~~eggs ~~away~~and ~~from~~well ~~home~~below asaverage ~~governmental~~livability ~~restrictions~~rates ~~are~~for ~~relaxed~~broiler orchickens. Finally, ~~lifted~~while insomewhat ~~certain~~constrained ~~areas~~by oflogistical ~~the~~challenges, ~~country~~export ~~and~~demand ashas ~~the~~improved ~~number~~relative ofto ~~people~~a ~~vaccinated~~year ~~for~~ago, ~~COVID-19~~which ~~increases~~has impacted domestic supplies.

~~•We~~Realized ~~announced~~prices ~~during~~for ~~our~~products ~~second~~sold ~~fiscal quarter of 2020 that, in response~~ to ~~reduced~~retail ~~demand~~grocery ~~from~~store ~~food service~~ customers ~~caused~~were byalso ~~the~~higher ~~COVID-19~~when ~~pandemic,~~compared weto ~~would reduce production at plants processing~~ a ~~larger~~year ~~bird for food service customers~~ago. These ~~Additionally,~~prices weare ~~reduced~~typically ~~the~~negotiated ~~target~~on ~~live~~an ~~weight~~annual ~~for our Hazlehurst~~basis, ~~Mississippi~~use ~~plant~~either ~~from~~ a ~~big~~flat ~~bird~~price ~~size~~or to a ~~chill-pack~~pricing ~~size,~~formula ~~and~~based ~~the birds processed at that plant reached the target live weight~~ on ora ~~about~~regularly ~~November~~quoted 23market price, ~~2020. Due to the production cuts~~ and ~~lower~~are ~~target~~fixed ~~live~~for ~~weights,~~one weto ~~processed~~three 1years.21 ~~billion pounds of dressed poultry during the third fiscal quarter of 2021~~However, ~~down~~many ~~1.1% from the 1.23 billion pounds processed during the third fiscal quarter~~ of ~~2020.~~these ~~The~~contracts ~~decrease~~provide inthat ~~pounds~~either ~~processed~~party ~~resulted~~can ~~from~~request aprice ~~3.7% decrease in the average live weight of the birds processed, partially offset by a 1.6% increase in the number of head processed and~~

2419

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~~improved~~adjustments ~~yields~~during the term of the agreements to reflect material changes in grain and other costs and other factors. WeWhile ~~now~~neither ~~estimate~~party is required to adjust prices, we ~~will~~were ~~process~~able 1to negotiate price increases during the contract terms with some of our grocery store customers over the past few quarters to reflect materially higher grain costs.22 ~~billion~~A ~~pounds~~portion of ~~dressed~~the ~~poultry~~price ~~during~~increases were fully reflected in the ~~fourth~~first quarter of fiscal 2022, resulting in a 7.0% increase in average realized prices for products sold to retail grocery store customers when compared to the first quarter of fiscal 2021. Additionally, a larger portion of the negotiated price increases were effective either during January or February 2022 and will be fully reflected in our second fiscal quarter. Despite these price increases, however, our margins earned on products sold to retail grocery stores during the first fiscal quarter declined significantly, due in part to higher grain costs, as discussed below.

~~•The~~Demand ~~demand~~for ~~shift~~our toproducts ~~food~~from ~~prepared~~our attraditional ~~home~~export ~~caused~~partners ~~demand~~has improved from ~~our~~levels ~~retail~~we ~~grocery~~experienced ~~store customers to surge~~ during the early stages of the pandemic,. ~~and~~We ~~that~~believe ~~demand~~this ~~remains~~relative ~~strong~~strength asis ~~some~~the ~~consumers~~result ~~continue~~of several factors, including the benefit of higher crude oil prices to ~~eat~~countries ~~many~~whose economies depend on oil, ifthe ~~not~~value ~~most~~of the United States dollar in relation to foreign currencies, and the lessening of ~~their~~governmental ~~meals~~restrictions atrelated ~~home~~to COVID-19.

~~•Demand~~However, ~~for~~during ~~our~~December ~~products~~2021, ~~from~~a ~~our~~highly ~~traditional~~pathogenic ~~export~~strain ~~partners~~of ~~was~~avian ~~soft~~influenza ~~following~~("AI") ~~the~~was ~~onset~~detected ofin ~~the~~North ~~pandemic.~~America ~~Many~~and ~~countries~~has tosince ~~which~~been wedetected ~~export~~in ~~our~~many ~~products~~wild ~~faced~~birds ~~myriad~~and ~~issues~~five ~~ranging~~commercial ~~from~~poultry ~~lack~~flocks ofwithin ~~liquidity~~the toeastern ~~logistical~~and ~~challenges~~central asUnited aStates. ~~result~~China ofand ~~COVID-19.~~Mexico, ~~These~~the ~~challenges~~top ~~created~~two ~~volatility~~countries inby ~~most~~volume ~~export~~and ~~markets,~~value ~~although~~to ~~demand~~which ~~and~~we ~~pricing~~export, ~~for~~will ~~chicken~~initially ~~paws~~ban ~~sold~~all toproduct ~~China~~from ~~has~~any ~~remained~~state ~~strong~~where ~~throughout~~AI ~~the~~is ~~pandemic.~~detected ~~During~~in ~~the~~a ~~first~~commercial ~~two~~flock. ~~months~~Mexico ofwill ~~fiscal~~subsequently ~~2021,~~initiate ~~demand~~a ~~and~~process ~~pricing~~to ~~for~~coordinate ~~products~~with ~~typically~~United ~~sold~~States ~~for~~officials ~~export,~~to ~~such~~reduce asthe ~~leg~~ban ~~quarters~~from ~~and~~a ~~drumsticks,~~statewide ~~remained~~level ~~soft;~~to ~~however,~~a ~~demand~~county ~~and~~level ~~pricing~~as ~~for~~specified ~~those~~information ~~products~~regarding ~~improved~~detection ~~significantly~~and ~~beginning~~remediation inof ~~January~~AI ~~2021~~is ~~and~~provided. ~~continuing~~To ~~through~~date, ~~the~~AI ~~first~~has ~~half~~not ofbeen ~~our~~detected ~~third~~in ~~fiscal~~a ~~quarter.~~commercial ~~Beginning~~flock in ~~the~~a ~~latter~~state ~~half~~where ofwe ~~our~~operate, ~~third~~so ~~fiscal~~we ~~quarter,~~have ~~demand~~not ~~and~~experienced ~~pricing~~any ~~began~~material disruptions to ~~soften~~our ~~slightly~~operations ~~but~~or ~~remain~~export ~~strong~~sales. ~~relative~~We tohave ~~the~~initiated ~~environment~~our weCrisis ~~experienced~~Management ~~during~~Response ~~the~~for ~~second~~Avian ~~half~~Influenza ofand ~~fiscal~~are ~~2020.~~taking Weappropriate ~~believe~~and ~~this~~best ~~strength~~practice issteps to protect the ~~result~~health of ~~several~~our ~~factors~~flocks. However, ~~including~~we ~~higher~~cannot ~~crude~~be ~~oil~~certain ~~prices~~one ~~and~~or ~~the~~more ~~value~~ of ~~the~~our ~~United~~flocks ~~States~~won't ~~dollar~~be inaffected ~~relation~~by tothe ~~foreign~~AI ~~currencies~~virus.

~~•Our~~During ~~top~~fiscal ~~priority~~2021, ~~throughout~~we ~~the~~sold ~~crisis~~444.1 ~~has~~million ~~been~~pounds ~~protecting~~of ~~the~~product ~~health,~~to ~~safety~~customers ~~and~~in ~~welfare~~Mexico at a gross sales value of ~~our~~approximately ~~employees~~$228.3 Asmillion, aand ~~result,~~we ~~the~~sold ~~third~~91.8 ~~quarter~~million pounds of ~~fiscal~~product ~~2021~~to ~~includes~~customers in China at a gross sales value of approximately $4121.7 million. inIf ~~direct~~our ~~COVID-19~~exports ~~costs~~to ~~for~~Mexico ~~payroll~~are ~~expenses~~banned, ~~for~~we ~~employees~~would ~~who~~be ~~are~~forced ~~quarantined~~to ~~and~~seek ~~items~~alternative ~~and~~markets ~~services~~for ~~related~~products sold to ~~workplace~~that ~~safety,~~market ~~including~~at ~~personal~~potentially ~~protective~~lower ~~equipment,~~returns. ~~thermometers,~~The ~~barriers~~primary products we export to China are chicken paws and ~~other~~wing ~~social-distancing~~tips. ~~measures,~~Because ~~professional~~there ~~cleaning,~~are ~~on-site~~no ~~medical~~material ~~clinics,~~domestic ~~and~~or ~~additional~~export ~~nursing~~markets ~~staff,~~for ~~among~~these products other ~~things.~~than ~~By comparison~~China, ~~our~~we ~~results~~would ~~for~~be ~~the~~forced ~~third~~to ~~quarter~~render ofthose ~~fiscal~~products ~~2020~~for ~~include~~significantly ~~approximately~~lower ~~$16.0~~returns ~~million~~if inour ~~direct~~exports ~~COVID-19~~to ~~expenses~~China are banned.

Our higher average cost of goods sold during the ~~third~~first quarter of fiscal ~~2021~~2022 as compared to the same ~~quarter~~period a year ago reflects increases in both non-feed related costs of goods sold, details of which are described in the "Results of Operations" section below, and in feed costs per pound of chicken processed. ~~When~~The ~~combined, the~~ average cash prices paid by the Company for ~~corn~~grain ~~and soybean meal~~ were significantly higher during the ~~third~~first quarter of fiscal ~~2021~~2022 as compared to the ~~third~~first quarter of fiscal ~~2020~~2021, which contributed to an increase in feed costs in broiler flocks processed. Unfavorable growing conditions and weather events in certain areas of the United States during the late summer and fall of 2020 caused corn and soybean production in the United States to fall below levels that were originally estimated by the United States Department of Agriculture and other industry analysts. The production shortfall, combined with significant export demand and uncertainty about the 2021 corn and soybean crops, ~~have~~ contributed to ~~current~~significantly higher market prices ~~for~~during ~~feed~~fiscal ~~grains~~2021. ~~that~~Market ~~are~~prices ~~significantly~~for ~~higher~~grain ~~than~~began ~~prices~~to ~~paid~~moderate byduring the ~~Company~~fourth ~~during~~quarter of fiscal ~~2020.~~2021, Webut ~~have~~remain ~~priced~~elevated ~~most~~compared ~~all~~to ofthe ~~our~~pricing ~~corn~~environment ~~and~~during ~~soybean~~the ~~meal~~first ~~needs~~quarter ~~through~~of ~~October~~fiscal 2021. ~~Had~~The weCompany has priced ~~the~~very ~~remainder~~little of its grain needs past February 2022. Had we priced our remaining fiscal ~~2021~~2022 ~~grain~~ needs at ~~August~~February 2522, ~~2021~~2022 cash market prices quoted on the Chicago Board of Trade, we estimate our costs of feed grains based on ~~2020~~fiscal 2021 volumes would be approximately $~~369~~144.0 million higher during fiscal ~~2021~~2022 as compared to fiscal ~~2020~~2021. Based on our projected production levels for ~~the remainder of the~~ fiscal ~~year~~2022, we estimate that ~~those~~ higher grain costs, along with estimated basis costs, would result in approximately $0.~~084~~0339 per pound higher feed costs in broiler flocks processed for fiscal ~~2021~~2022 as compared to fiscal ~~2020~~2021. These numbers are estimates and are subject to change as we move through the balance of the year and as grain prices and actual production levels fluctuate.

~~While~~We ~~demand~~processed ~~for~~1.21 ~~our~~billion ~~retail~~pounds ~~grocery~~of ~~products~~dressed ~~and~~poultry ~~demand~~during the first fiscal quarter of 2022, up 4.4% from ~~our~~the ~~food~~1.15 ~~service~~billion ~~distribution~~pounds ~~customers~~processed isduring ~~currently~~the ~~favorable~~first fiscal quarter of 2021. The increase in pounds processed resulted from a 4.2% increase in the number of head processed, ~~resulting~~partially offset by a slight decrease in ~~selling~~the ~~prices~~average ~~for~~live weight of the birds processed. We reduced production at our ~~products~~plants ~~that~~processing ~~are~~a ~~more~~larger ~~than~~bird ~~offsetting~~for food service customers at the ~~higher~~onset ~~prices~~of wethe ~~are~~pandemic ~~paying~~in ~~for~~response ~~feed~~to ~~grains,~~reduced itdemand isand ~~uncertain~~labor ~~how~~and ~~long~~logistical ~~these~~challenges. As those conditions ~~will~~moderate, ~~persist~~we intend to return to full production. ~~How~~We ~~long~~now ~~current~~estimate ~~conditions~~we will ~~last~~process ~~and~~1.19 billion pounds of dressed poultry during the ~~future~~second ~~effect~~quarter of fiscal 2022, 1.26 billion pounds of dressed poultry during the ~~pandemic~~third onquarter ~~our~~of ~~business~~fiscal ~~will~~2022, ~~depend~~and 1.27 billion pounds during the fourth quarter of fiscal 2022. These estimates may change based on ~~many~~weather, ~~factors~~production decisions, ~~including:~~bird weights and market conditions.

•While demand for our retail grocery products and demand from our food service distribution customers continues to be favorable, resulting in selling prices for our products that are more than offsetting the ~~acceptance~~higher ~~rate~~prices we are paying for feed grains and other costs, it is uncertain how long these conditions will persist. How long current conditions will last and the future effect of ~~COVID-19~~the ~~vaccines;~~pandemic on our business will depend on many factors, including:

•the extent to which resurgences in COVID-19 infections make people fearful of dining out or cause state, local and foreign governments to extend or reimpose stay-at-home restrictions, as well as varying restrictions on restaurants;20

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

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

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

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•~~with~~the ~~respect~~extent to ~~our~~which ~~export~~resurgences ~~sales,~~in ~~the~~COVID-19 ~~condition~~infections ofmake ~~the~~people ~~oil~~fearful ~~market, the relative strength~~ of ~~foreign~~dining ~~currencies~~out ~~against~~or ~~the~~cause ~~U.S.~~state, ~~dollar~~local and ~~political~~foreign ~~uncertainty~~governments ~~that~~to ~~could~~extend ~~affect~~or ~~trade~~reimpose ~~relations~~stay-at-home ~~with~~restrictions, ~~other~~as ~~countries,~~well ~~especially~~as ~~with~~varying ~~China~~restrictions on restaurants;

•the ~~effect~~extent ofto ~~the~~which ~~pandemic~~inflationary onconditions ~~our~~affect ~~operations,~~the ~~including~~amount ~~labor~~of ~~shortages~~disposable weincome consumers have ~~experienced~~to ~~and~~spend ~~may~~on ~~continue~~food toand ~~experience~~how asconsumers aallocate ~~result~~their offood ~~the pandemic~~dollars; ~~and~~

•with respect to ~~feed~~our ~~grain~~export ~~prices~~sales, the ~~quality~~condition ~~and~~of ~~quantity~~the oil market, the relative strength of foreign currencies against the ~~2021~~U.S. ~~corn~~dollar, ~~and~~the ~~soybean~~impact ~~crops~~of avian influenza in the U.S., and political uncertainty that could affect trade relations with other countries, especially with China;

•the effect of the pandemic on our operations, including labor shortages we have experienced at various times throughout the pandemic and could continue to experience as a result of the pandemic; and

•with respect to feed grain prices, the quality and quantity of the 2022 corn and soybean crops.

RESULTS OF OPERATIONS

Net sales for the ~~third~~first quarter ended ~~July~~January 31, ~~2021~~2022 were $1,~~352~~327.84 million as compared to $~~956~~909.53 million for the ~~third~~first quarter ended ~~July~~January 31, ~~2020~~2021, an increase of $~~396~~418.31 million, or 4146.40%. Net sales of poultry products for the ~~third~~first quarter ended ~~July~~January 31, ~~2021~~2022 and ~~2020~~2021, were $1,~~290~~263.01 million and $~~903~~870.92 million, respectively, an increase of $~~386~~392.29 million, or 4245.71%. The increase in net sales of poultry products resulted from a 4440.75% increase in the average sales price of poultry products sold, ~~partially~~and ~~offset by~~ a 13.43% ~~decrease~~increase in the pounds of poultry products sold, each of which is primarily the result of improved demand from food service customers and supply constraints, as discussed in the Executive Overview above. During the ~~third~~first quarter of fiscal ~~2021~~2022, the Company sold 1.2019 billion pounds of poultry products, ~~down~~up from 1.2215 billion pounds during the ~~third~~first quarter of fiscal ~~2020~~2021. The ~~decrease~~increase in pounds of poultry products sold resulted primarily from a 34.72% ~~decrease~~increase in the ~~average~~number ~~live weight~~ of ~~birds~~head processed, partially offset by a ~~1.6%~~slight ~~increase~~decrease in the ~~number~~average oflive ~~head~~weight ~~processed~~of ~~and~~the ~~improved~~birds ~~yields~~processed.

Quoted market prices for poultry products increased during the ~~third~~first quarter of fiscal ~~2021~~2022 as compared to the same quarter of fiscal ~~2020~~2021. When compared to the ~~third~~first quarter of fiscal ~~2020~~2021, Urner Barry average market prices for ~~tenders, jumbo wings,~~ boneless thigh meat, boneless breast meat, ~~and~~tenders, leg quarters and jumbo wings increased by ~~107~~187.35%, ~~107~~108.01%, 8463.17%, 7130.48% and 6624.35%, respectively. Average realized prices for chicken products sold to retail grocery store customers increased by 47.40% during the ~~third~~first quarter of fiscal ~~2021~~2022 as compared to the same period of fiscal ~~2020~~2021, and retail grocery store demand remains strong.

Net sales of prepared chicken products for the quarters ended ~~July~~January 31, ~~2021~~2022 and ~~2020~~2021 were $6264.74 million and $5239.61 million, respectively, ~~representing~~ an increase of 1964.36%. This increase is primarily attributable to a 1444.74% increase in the pounds of prepared chicken products sold, while the average sales price of prepared chicken products sold also increased by 414.0%. The increase in pounds and sales price of prepared chicken products was primarily the result of improved demand from our food service customers. During the ~~third~~first quarter of fiscal ~~2021~~2022, the Company sold 3230.06 million pounds of prepared chicken products, up from 2721.92 million pounds during the ~~third~~first quarter of fiscal ~~2020~~2021.

~~Net~~Cost of sales for the ~~nine~~first ~~months~~quarter ~~ended~~of ~~July 31,~~fiscal ~~2021~~2022 ~~were~~was $31,008.401 ~~billion~~million as compared to $2839.623 ~~billion~~million ~~for~~during the ~~nine~~first ~~months~~quarter ~~ended~~of ~~July 31,~~fiscal ~~2020~~2021, an increase of $~~771~~168.7 million, or 2920.41%. ~~Net~~Cost of sales of poultry products ~~for~~during the ~~nine~~first ~~months~~quarter ~~ended~~of ~~July 31~~fiscal 2022, ~~2021~~as ~~and~~compared ~~2020~~to ~~were~~the ~~$3.25~~first ~~billion~~quarter ~~and~~of ~~$2.48~~fiscal ~~billion~~2021, ~~respectively,~~was an$928.8 ~~increase~~million ofand $~~766~~802.43 million, orrespectively, ~~30.9%.~~which ~~The~~represents ~~increase in net sales of poultry products resulted from~~ a 3012.81% increase in the average ~~sales~~cost ~~price~~ of ~~poultry~~sales ~~products~~per ~~sold~~pound ~~and relatively flat pounds~~ of poultry products ~~sold~~. ~~During~~As ~~the~~illustrated ~~first~~in ~~nine~~the ~~months~~table ~~of fiscal 2021~~below, ~~the~~which ~~Company~~for ~~sold~~comparative ~~3.56 billion~~purposes ~~pounds~~includes of poultry products, ~~slightly~~transferred upto ~~from~~the ~~3.55 billion~~Company's ~~pounds~~prepared ~~during~~chicken plant, the ~~first~~increase ~~nine~~in ~~months~~the cost of ~~fiscal~~sales ~~2020.~~per ~~The~~pound ~~increase in pounds~~ of poultry products ~~sold~~resulted isfrom ~~the~~an ~~result of a 0.5%~~ increase in the ~~number~~cost of ~~head~~feed ~~processed~~per ~~and~~pound ~~improved~~of ~~yields~~broilers ~~during~~processed ~~the~~of ~~comparative periods~~$0.0655, ~~partially~~or ~~offset~~24.9%, byand a 1.$0.0279 per pound, or 6.3%, ~~decrease~~increase in ~~the~~other ~~live~~costs ~~weight~~of sales of ~~birds~~poultry ~~processed~~products.

Quoted market prices for poultry products increased during the nine months ended July 31, 2021 as compared to the same period in fiscal 2020. When compared to the nine months ended July 31, 2020, Urner Barry average market prices for jumbo wings, tenders, boneless breast meat, boneless thigh meat and leg quarters increased by 76.1%, 64.0%, 50.0%, 14.4% and 13.9%, respectively. Average realized prices for chicken products sold to retail grocery stores increased by 4.0% during the first nine months of fiscal 2021 as compared to the same period of fiscal 2020 and reflect strong demand from our retail grocery store customers. 21

Net sales of prepared chicken products for the nine months ended July 31, 2021 and 2020 were $148.5 million and $143.2 million, respectively, an increase of 3.7%. This increase is primarily attributable to a 2.4% increase in the pounds of prepared chicken products sold and a 1.3% increase in the average sales price of prepared chicken products. During the first nine months of fiscal 2021, the Company sold 77.7 million pounds of prepared chicken products, up from 75.9 million pounds during the first nine months of fiscal 2020.

Cost of sales for the third quarter of fiscal 2021 was $1,049.8 million as compared to $866.0 million during the third quarter of fiscal 2020, an increase of $183.8 million, or 21.2%. Cost of sales of poultry products during the third quarter of fiscal 2021, as compared to the third quarter of fiscal 2020, was $970.7 million and $815.9 million, respectively, which represents a 20.6% increase in the average cost of sales per pound of poultry products. As illustrated in the table below, which for comparative purposes includes poultry products transferred to the Company's prepared chicken plant, the increase in the cost

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of sales per pound of poultry products resulted from an increase in the cost of feed per pound of broilers processed of $0.1102, or 45.8%, and a $0.0410 per pound, or 9.5%, increase in other costs of sales of poultry products.

Poultry Cost of Sales

(In thousands, except per pound data)

Three Months Ended July 31, 2021

Three Months Ended July 31, 2020

Incr/(Decr)

Three Months Ended January 31, 2022

Three Months Ended January 31, 2021

Incr/(Decr)

Description

Dollars

Per lb.

Dollars

Per lb.

Dollars

Per lb.

Beginning Inventory

4142,~~645~~775

0.~~5838~~5646

3732,~~969~~952

0.~~4129~~4701

39,~~676~~823

0.~~1709~~0945

Feed in broilers processed

~~427~~396,~~384~~435

0.~~3506~~3286

~~294~~303,~~556~~047

0.~~2404~~2631

~~132~~93,~~828~~388

0.~~1102~~0655

All other cost of sales

~~578~~565,~~877~~854

0.~~4748~~4691

~~531~~508,~~593~~226

0.~~4338~~4412

4757,~~284~~628

0.~~0410~~0279

Less: Ending Inventory

3942,~~366~~912

0.~~5813~~5488

3230,~~922~~596

0.~~4065~~4985

612,~~444~~316

0.~~1748~~0503

Total poultry cost of sales

1962,~~008,540~~152

(1)

0.~~8248~~7992

~~831~~813,~~196~~629

(1)

0.~~6723~~7010

~~177~~148,~~344~~523

0.~~1525~~0982

Pounds:

Beginning Inventory

7175,~~338~~757

9170,~~968~~103

Poultry processed/other

1,~~219~~206,~~103~~367

1,~~225~~151,~~452~~917

Poultry sold

1,~~222~~203,~~718~~933

(1)

1,~~236~~160,~~431~~646

(1)

Ending Inventory

6778,~~724~~191

8061,~~989~~374

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. During the third quarter of fiscal 2021, management determined that achievement of the applicable criteria required to earn payouts under the Company's bonus award programs is probable at certain levels; accordingly, during the third quarter of fiscal 2021, other costs of sales of poultry products also include approximately $26.0 million of accrued expenses related to the Company's bonus award program, as compared to no such expenses during the third quarter of fiscal 2020. Collectively, these non-feed related costs of poultry products sold increased by $0.~~0410~~0279 per pound processed, or 96.53%, during this year’s ~~third~~first fiscal quarter compared to the same quarter a year ago, primarily attributable to ~~the~~higher ~~bonus accruals described above~~labor, ~~as well as higher~~ packaging, maintenance and repairs and certain other variable costs in our processing facilities, higher freight costs incurred for the delivery of finished product, and higher chick costs. COVID-19-related expenses included in other costs of sales of poultry products during the ~~third~~first quarter of fiscal ~~2021~~2022 total approximately $1.76 million and include payroll expenses for employees who ~~are~~were quarantined, ~~and~~vaccination bonuses, expenses related to various items and services including personal protective equipment, thermometers, barriers and other social-distancing measures and additional nursing staff to protect the health and safety of our employees. By comparison, COVID-19-related expenses in other costs of sales of poultry products during the ~~third~~first quarter of fiscal ~~2020~~2021 totaled $115.2 million.

Cost of sales of the Company’s prepared chicken products during the ~~third~~first quarter of fiscal ~~2021~~2022 were $79.12 million as compared to $5037.10 million during the same quarter a year ago, an increase of $2942.02 million, or 57114.82%. This increase was attributable to a 1444.74% increase in the pounds of prepared chicken sold, ~~which~~resulting isfrom ~~primarily the result of~~ improved ~~demand~~customer ~~for prepared chicken products from our food service customers~~demand, and substantially higher costs for the fresh chicken purchased by the plant.

~~Cost~~The ofCompany ~~sales~~recorded ~~for~~ the ~~first~~value ~~nine~~of ~~months~~live ofbroiler ~~fiscal~~inventories ~~2021~~on ~~was~~hand ~~$2.83~~at ~~billion~~January 31, as2022 ~~compared~~and toOctober ~~$2.52~~31, ~~billion~~2021 ~~during~~at ~~the~~cost. ~~first~~In ~~nine~~periods ~~months~~when ofthe ~~fiscal~~Company ~~2020,~~estimates anthat ~~increase~~the ofcost ~~$309.3~~to ~~million,~~grow orlive ~~12.3%.~~birds ~~Cost~~in ofinventory ~~sales~~to ofa ~~poultry~~marketable ~~products~~age ~~during~~and ~~the~~then ~~first~~process ~~nine~~and ~~months~~distribute ofthose ~~fiscal~~birds ~~2021,~~will asbe ~~compared~~lower toin the ~~first~~aggregate ~~nine~~than ~~months~~the ofanticipated ~~fiscal~~sales ~~2020~~proceeds, ~~was~~the ~~$2.67~~Company ~~billion~~values ~~and~~the ~~$2.39~~broiler ~~billion,~~inventories ~~respectively,~~on ~~which~~hand ~~represents~~at ancost ~~11.6%~~and ~~increase~~accumulates incosts as the ~~average~~birds ~~cost~~are ofgrown ~~sales~~to ~~per~~a ~~pound~~marketable ofage ~~poultry~~subsequent ~~products.~~to ~~As illustrated in~~ the ~~table~~balance ~~below,~~sheet ~~which~~date. ~~for~~In ~~comparative~~periods ~~purposes~~when ~~includes~~the ~~poultry~~Company ~~products~~estimates ~~sold~~those tocosts ~~the~~will ~~Company's~~be ~~prepared~~higher ~~chicken~~in ~~plant,~~ the ~~increase~~aggregate inthan the ~~cost~~anticipated of sales ~~per~~proceeds, ~~pound~~the ofCompany ~~poultry~~will ~~products~~make ~~resulted from~~ an ~~increase~~adjustment into reduce the ~~cost~~value of ~~feed~~live ~~per~~birds ~~pound~~in ofinventory ~~broilers~~to ~~processed~~the ofnet $0realizable value.~~0612,~~ orNo ~~24.4%,~~such ~~and~~adjustment awas ~~$0.0248~~required ~~per~~at ~~pound~~January 31, 2022 or ~~5.8%~~January 31, ~~increase in other costs of sales of poultry products~~2021.

27Selling, general and administrative ("SG&A") costs during the first quarter of fiscal 2022 were $65.7 million, an increase of $9.1 million compared to the $56.6 million during the first quarter of fiscal 2021. The following table includes the components of SG&A costs for the three months ended January 31, 2022 and 2021.

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Poultry Cost of Sales

(In thousands, except per pound data)

	Nine Months Ended July 31, 2021					Nine Months Ended July 31, 2020					Incr/(Decr)
Description	Dollars			Per lb.		Dollars			Per lb.		Dollars		Per lb.
Beginning Inventory	$	32,952		$	0.4701	$	35,121		$	0.3868	$	(2,169)	$	0.0833
Feed in broilers processed	1,119,407			0.3115		895,804			0.2503		223,603		0.0612
All other cost of sales	1,621,254			0.4512		1,526,030			0.4264		95,224		0.0248
Reversal of prior-period inventory write-down	—			—		(2,800)			(0.0008)		2,800		0.0008
Less: Ending Inventory	39,366			0.5813		32,922			0.4065		6,444		0.1748
Total poultry cost of sales	$	2,734,247	(1)	$	0.7604	$	2,421,233	(1)	$	0.6747	$	313,014	$	0.0857
Pounds:
Beginning Inventory	70,103					90,805
Poultry processed/other	3,593,299					3,578,766
Poultry sold	3,595,678		(1)			3,588,582		(1)
Ending Inventory	67,724					80,989

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

Other costs of sales of poultry products consists primarily of labor, packaging, freight, maintenance and repairs, utilities, antimicrobial interventions, contract grower pay, chick costs and certain fixed costs. During the first nine months of fiscal 2021, management determined that achievement of the applicable criteria required to earn a bonus is probable at certain levels; accordingly, other costs of sales of poultry products during the period also include approximately $26.0 million of expenses related to the Company's bonus award program, as compared to no such expenses during the same period of fiscal 2020. Collectively, non-feed related costs of poultry products sold increased by $0.0248 per pound processed, or 5.8%, during the first nine months of fiscal 2021, as compared to the same period a year ago. This increase is primarily attributable to the bonus accruals described above, as well as higher packaging, maintenance and repairs and certain other variable costs in our processing facilities, slightly higher freight costs incurred for the delivery of finished product, and higher chick costs. COVID-19 related expenses included in other costs of sales during the nine months ended July 31, 2021 total approximately $10.5 million and include payroll expenses for employees who are quarantined and expenses related to various items and services including personal protective equipment, thermometers, barriers and other social-distancing measures and additional nursing staff to protect the health and safety of our employees. By comparison, COVID-19 related expenses during the first nine months of fiscal 2020 totaled approximately $16.0 million.

Cost of sales of the Company’s prepared chicken products during the first nine months of fiscal 2021 were $164.8 million as compared to $134.9 million during the same period a year ago, an increase of $29.9 million, or 22.2%. This increase was attributable to a 19.3% increase in the average cost of prepared chicken pounds sold and a 2.4% increase in the pounds of prepared chicken sold.

The Company recorded the value of live broiler inventories on hand at July 31, 2021 at cost. In periods when the Company estimates that the cost to grow live birds in inventory to a marketable age and then process and distribute those birds will be lower in the aggregate than the anticipated sales proceeds, the Company values the broiler inventories on hand at cost and accumulates costs as the birds are grown to a marketable age subsequent to the balance sheet date. In periods when the Company estimates that the cost to grow live birds in inventory to a marketable age, process, and distribute those birds will be higher in the aggregate than the anticipated sales proceeds, the Company will make an adjustment to lower the value of live birds in inventory to the net realizable value. No such charge was required at July 31, 2021 or July 31, 2020.

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

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Selling, General and Administrative Costs

(in thousands)

Description	Three Months Ended ~~July~~January 31, ~~2021~~2022		Three Months Ended ~~July~~January 31, ~~2020~~2021		Increase/(Decrease)
Bonus expense	$	14,766	$	—	$	14,766
Stock compensation expense	8,218		2,402		5,816
ESOP expense	10,200		—		10,200
Legal expense	11,473		8,464		3,009
Stock compensation expense	6,859		2,091		4,768
Administrative salaries	12,899		12,357		542
Legal expense	10,720		6,054		4,666
Sanderson Farms Championship expense	2,207		1,950		257
Administrative salaries	12,759		12,238		521
Broker commissions	3,471		3,294		177
Trainee expense	32,~~091~~512		2,~~857~~986		~~234~~(474)
Broker commissions	3,659		3,647		12
Advertising expense	2,127		2,707		(580)
Sanderson Farms Championship expense	1,950		2,034		(84)
COVID-19-related expense	5,167		6,162		(995)
Advertising expense	2,758		3,004		(246)
All other SG&A	17,664		16,277		1,387
COVID-19-related expense	2,863		4,550		(1,687)
Total SG&A	$	65,738	$	56,599	$	9,139
All other SG&A	18,093		14,115		3,978
Total SG&A	$	87,718	$	50,590	$	37,128

Regarding the table above, the increases in both ESOP and bonus expenses, payouts of which are based on profitability, are the results of management's determination that it is probable that those payouts will be earned based on results during the first nine months of fiscal 2021 and probable results for the remainder of the fiscal year. The increase in stock-based compensation expense is primarily attributable to the timing of accruals related to the Company's performance share agreements with key employees, as described in "Part I, Item 1, Note 5 - Stock Compensation Plans" of this Form 10-Q. The increase in legal expense is primarily attributable to our ongoing defense of the litigation described in "Part I, Item 1, Note 87 - Commitments and Contingencies" of this Form 10-Q. The increase in all other SG&A expenses is primarily the result of travel and entertainment expenses returning to a more normal level during a large portion of our ~~third~~first quarter of fiscal ~~2021~~2022 as compared to our ~~third~~first quarter of fiscal ~~2020~~2021, when a substantial portion of business travel was halted due to the ~~COVID-19~~ pandemic.

~~Selling~~The Company’s operating income for the three months ended January 31, ~~General~~2022 ~~and~~was ~~Administrative~~$253.6 ~~Costs~~million, as compared to an operating income for the three months ended January 31, 2021 of $13.4 million. The improvement in operating results for the period ended January 31, 2022, as compared to the same period a year ago, resulted primarily from significantly higher average selling prices, partially offset by higher average costs of goods sold.

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

Interest expense during the first quarter of fiscal 2022 was $0.6 million, as compared to $0.6 million during the first quarter of fiscal 2021.

~~Regarding~~The ~~the~~Company’s ~~table~~estimated ~~above,~~annual ~~the~~effective ~~increases~~tax inrate ~~both~~for ~~ESOP~~the ~~and~~three ~~bonus~~months ~~expenses~~ended January 31, ~~payouts~~2022 ofwas ~~which are based on profitability~~23.8%, ~~are~~as ~~the~~compared ~~results~~to ofan ~~management's~~estimated ~~determination~~annual ~~that~~effective ittax israte ~~probable~~of ~~that~~25.7% ~~those~~for ~~payouts will be earned based on results during~~ the ~~first~~three ~~nine~~ months ofended ~~fiscal~~January 31, 2021. ~~and~~Excluding ~~probable results for~~ the ~~remainder~~effects of ~~the~~discrete ~~fiscal~~items ~~year. The~~recognized ~~increase~~during inthe ~~legal~~periods, ~~expense~~the isCompany's ~~primarily~~estimated ~~attributable~~annual toeffective ~~our~~tax ~~ongoing~~rate ~~defense~~for of the ~~litigation~~three ~~described~~months inended ~~"Part~~January I31, ~~Item~~2022 1,would ~~Note~~have 8remained -approximately ~~Commitments and Contingencies" of this Form 10-Q~~23.8%, ~~The~~as ~~increase~~compared into ~~COVID-19-related~~an ~~expense~~estimated isannual ~~the~~effective ~~result~~tax rate of ~~direct~~23.8% ~~expenses~~ for ~~items~~the ~~and~~three ~~services~~months ~~related~~ended toJanuary ~~the health~~31, ~~safety~~2021. ~~and~~The ~~welfare~~Company ofestimates ~~our~~its ~~employees~~effective ~~during~~tax ~~the~~rate ~~COVID-19~~for ~~pandemic,~~the ~~which~~full ~~was~~fiscal ~~declared~~year ~~during~~2022, ~~the~~exclusive ~~middle~~ of ~~our~~discrete ~~second~~items, ~~fiscal~~will ~~quarter~~be ofapproximately ~~2020~~23.8%. ~~The~~As ~~increase in stock-based compensation expense is primarily attributable to the timing~~ of ~~accruals~~January 31, ~~related~~2022, to the Company's ~~performance~~deferred ~~share~~income ~~agreements~~tax ~~with~~liability ~~key~~was ~~employees,~~$160.5 million as ~~described~~compared into ~~"Part~~$156.5 I,million ~~Item~~at 1October 31, ~~Note~~2021, 5an -increase ~~Stock Compensation Plans"~~ of ~~this~~$3.9 ~~Form 10-Q~~million.

29During the three months ended January 31, 2022, the Company’s net income was $192.8 million, or $8.64 per share. For the three months ended January 31, 2021, the Company’s net income was $9.5 million, or $0.42 per share. The increase in net income for the comparative periods is primarily attributable to significantly higher average selling prices, partially offset by higher average costs of goods sold. Details related to each of the aforementioned drivers of the changes in net income have been discussed above.

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

Interest expense during the third quarter and first nine months of fiscal 2021 was $0.6 million and $2.0 million, respectively, as compared to $1.5 million and $4.5 million, respectively, during the third quarter and first nine months of fiscal 2020. The decrease in interest expense during the comparative periods is the result of lower outstanding debt levels during fiscal 2021, in addition to lower interest rates.

The Company’s estimated annual effective tax rates for the three and nine months ended July 31, 2021 were 23.2% and 23.5%, respectively, as compared to effective tax rates of 15.5% and 100.6%, respectively, for the three and nine months ended July 31, 2020. Excluding the effects of discrete items recognized during the periods, the Company's estimated annual effective tax rates for the three and nine months ended July 31, 2021 would have been approximately 24.2% and 24.1%, respectively, as compared to effective tax rates of 18.2% and 32.7%, respectively, for the three and nine months ended July 31, 2020. The discrete items recognized during the nine months ended July 31, 2020 are primarily related to the Coronavirus Aid, Relief, and Economic Security Act ("the CARES Act") and are described in more detail in "Part I, Item 1, Note 10 - Income Taxes" of this Form 10-Q. The Company estimates its effective tax rate for the full fiscal year 2021, exclusive of discrete items, will be approximately 24.1%. As of July 31, 2021, the Company's deferred income tax liability was $149.5 million as compared to $141.7 million at October 31, 2020, an increase of $7.8 million.

During the three and nine months ended July 31, 2021, the Company’s net income was $164.8 million, or $7.38 per share, and $271.2 million, or $12.14 per share, respectively. For the three and nine months ended July 31, 2020, the Company’s net income was $32.8 million, or $1.48 per share, and $0.4 million, or $0.02 per share, respectively. The increase in net income for the comparative periods is primarily attributable to significantly higher average selling prices, partially offset by higher average costs of goods sold. Details related to each of the aforementioned drivers of the changes in net income have been discussed above.

Liquidity and Capital Resources

The Company’s working capital, calculated by subtracting current liabilities from current assets, at ~~July~~January 31, ~~2021~~2022 was $~~587~~988.12 million, and its current ratio, calculated by dividing current assets by current liabilities, was 23.98 to 1. The Company’s working capital and current ratio at October 31, ~~2020~~2021 were $~~354~~777.02 million and 23.65 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 ~~2021~~2022 include cash on hand at October 31, ~~2020~~2021, cash flows from operations, and funds available under the Company’s revolving credit facility. As described below, the Company is a party to a revolving credit facility dated April 23, 2021, with a maximum available borrowing capacity of $1.0 billion. As of ~~July~~January 31, ~~2021 and August 25~~2022, ~~2021,~~ the Company had no outstanding draws under the facility, and had approximately $24.1 million outstanding in letters of credit, leaving $975.9 million of borrowing capacity available under the facility. ~~Management~~As ~~believes~~of February 23, 2022, the Company ~~has~~had ~~sufficient~~no ~~liquidity~~outstanding ~~available~~borrowings toand ~~meet~~had ~~its~~approximately ~~needs~~$29.1 million outstanding in letters of credit, leaving $970.9

The Company’s cash position at July 31, 2021 and October 31, 2020 consisted of $245.4 million and $49.1 million, respectively, in cash and short-term cash investments. The Company’s ability to invest cash is limited by covenants in its revolving credit agreement to short-term investments. All of the Company’s cash at July 31, 2021 and October 31, 2020 was held in bank 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.23

Cash flows provided by operating activities during the nine months ended July 31, 2021 totaled $370.7 million, as compared to cash flows provided by operating activities of $115.7 million during the nine months ended July 31, 2020. Cash flows from operating activities increased by $255.0 million. During the first nine months of fiscal 2021, the Company realized higher margins due to higher average selling prices, partially offset by higher average costs of goods sold, as compared to the first nine months of fiscal 2020. This increase in cash flows was partially offset by an increase in inventories, especially our live bird and feed inventories, during the first nine months of fiscal 2021. The increase in inventories is primarily the result of significantly higher prices paid for corn and soybean meal, our primary feed ingredients, during the first nine months of fiscal 2021 as compared to the same period in fiscal 2020. Details related to the corn and soy markets are discussed above in the Executive Overview of Results section. The increase in cash flows between the two periods was further offset by cash flows related to income taxes. During the nine months ended July 31, 2021, the Company's net cash outflows related to income taxes

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~~totaled~~million ~~approximately~~of ~~$44.4~~borrowing ~~million,~~capacity asavailable ~~compared~~under tothe ~~approximately $82~~facility.9 ~~million~~Management inbelieves ~~net~~the ~~cash~~Company ~~received~~has ~~related~~sufficient toliquidity ~~income~~available ~~taxes~~to ~~during~~meet ~~the~~its ~~nine months ended July 31, 2020~~needs.

~~Cash~~The ~~flows~~Company’s ~~used~~cash inposition ~~investing~~at ~~activities~~January 31, ~~during~~2022 ~~the~~and ~~first~~October 31, ~~nine~~2021 ~~months~~consisted of ~~fiscal 2021 and 2020 were~~ $~~125~~685.98 million and $~~165~~439.73 million, respectively., ~~The~~in ~~Company’s~~cash ~~capital~~and ~~expenditures~~short-term ~~during~~cash ~~the~~investments. ~~first~~The ~~nine~~Company’s ~~months~~ability ofto ~~fiscal~~invest ~~2021~~cash ~~were~~is ~~approximately~~limited ~~$126.7~~by ~~million,~~covenants ~~and~~in ~~included~~its ~~approximately~~revolving ~~$29.5~~credit ~~million~~agreement ~~for~~to ~~multiple large~~short-~~scale~~term ~~equipment and building upgrades at multiple complexes, approximately $10~~investments.1 ~~million~~All ~~on construction~~ of athe ~~new~~Company’s ~~hatchery~~cash inat ~~Jones County~~January 31, ~~Mississippi,~~2022 and ~~approximately~~October 31, ~~$9.7~~2021 ~~million~~was toheld ~~purchase~~in ~~new~~bank ~~vehicles~~accounts. ~~that~~There ~~would~~were ~~have~~no ~~been~~restrictions ~~leased~~on ~~prior to fiscal 2020. Capital expenditures for~~ the ~~first~~Company’s ~~nine~~access ~~months~~to ofits ~~fiscal 2020 were $166.0 million~~cash, and ~~included~~such ~~approximately~~cash ~~$46.2~~was ~~million~~available ~~for multiple large-scale equipment and building upgrades at multiple complexes and $9.7 million~~ to ~~purchase~~the ~~new~~Company ~~vehicles~~on ~~that~~demand ~~would have been leased prior~~ to ~~fiscal~~fund ~~2020.~~its operations.

Cash flows ~~used~~provided inby ~~financing~~operating activities during the ~~nine~~three months ended ~~July~~January 31, ~~2021~~2022 totaled $48276.5 million, as compared to cash flows provided by ~~financing~~operating activities of $209.64 million during the ~~nine~~three months ended ~~July~~January 31, ~~2020~~2021. ~~The~~Cash ~~change in cash~~ flows from ~~financing~~operating activities isincreased ~~primarily~~by ~~attributable~~$267.1 tomillion. During the ~~change~~first inthree ~~outstanding~~months ~~borrowings~~of ~~under~~fiscal 2022, the Company's ~~revolving~~realized ~~credit~~higher ~~facility.~~margins ~~During~~due to higher average selling prices, partially offset by higher average costs of goods sold, as compared to the ~~nine~~first three months ~~ended~~of ~~July 31,~~fiscal 2021. This increase in cash flows was partially offset by an increase in inventories, ~~the~~especially ~~Company's~~our ~~outstanding~~live ~~borrowings~~bird ~~under~~and feed inventories, during the ~~facility~~first ~~decreased~~three bymonths ~~$25~~of fiscal 2022.0 ~~million~~The increase in inventories is primarily the result of significantly higher prices paid for corn, our primary feed ingredient, during the first three months of fiscal 2022 as compared to anthe ~~increase~~same period in ~~outstanding~~fiscal ~~borrowings~~2021. Details related to the corn and soy markets are discussed above in the Executive Overview of Results section. The increase in cash flows between the two periods was further offset by outflows for cash bonuses paid during December 2021. These bonus payments totaled approximately $4055.09 million, ~~under~~compared ~~the~~to ~~facility~~no such payout during the ~~nine~~first ~~months~~quarter ~~ended~~of ~~July 31,~~fiscal ~~2020~~2021.

AsCash offlows ~~August~~used ~~17,~~in ~~2021,~~investing ~~the~~activities ~~Company's~~during ~~fiscal~~the ~~2021~~first ~~capital~~three ~~budget~~months isof ~~approximately~~fiscal ~~$195.1~~2022 ~~million.~~and ~~The Company expects the~~ 2021 ~~capital~~were ~~budget~~$27.7 tomillion beand ~~funded~~$36.8 ~~by cash on hand~~million, ~~internally~~respectively. ~~generated~~The ~~working~~Company’s capital, ~~cash~~expenditures ~~flows~~during ~~from operations and funds available under~~ the ~~Company's~~first ~~revolving~~three ~~credit~~months ~~facility.~~of ~~The~~ fiscal ~~2021~~2022 ~~capital~~were ~~budget~~approximately ~~includes~~$27.9 anmillion, ~~aggregate~~and ofincluded approximately $467.48 million for multiple large-scale equipment and building upgrades at multiple complexes, and approximately $120.5 million to purchase new vehicles that would have been leased prior to fiscal 2020~~, and $10~~.1 ~~million~~Capital expenditures for ~~construction~~the offirst athree ~~new~~months ~~hatchery~~of tofiscal ~~replace~~2021 ~~the~~were ~~hatchery~~$36.9 ~~previously~~million, inand ~~service~~included inapproximately ~~Laurel, Mississippi~~$12.2 ~~Excluding~~million ~~the budgeted amounts~~ for ~~the~~multiple ~~items~~large-scale ~~detailed~~equipment ~~above,~~and ~~the~~building ~~fiscal~~upgrades ~~2021~~at ~~capital~~multiple ~~budget~~complexes isand ~~approximately~~ $~~126~~4.19 million. ~~These~~on ~~amounts~~construction ~~are~~of ~~estimates~~a ~~and~~new ~~are~~hatchery ~~subject~~in toJones ~~change~~County, ~~as we move through the remainder of fiscal 2021~~Mississippi.

Cash flows used in financing activities during the three months ended January 31, 2022 totaled $2.3 million, as compared to cash flows provided by financing activities of $28.4 million during the three months ended January 31, 2021. The change in cash flows from financing activities is primarily attributable to the change in outstanding borrowings under the Company's revolving credit facility. During the three months ended January 31, 2022, the Company's outstanding borrowings remained unchanged, as compared to an increase in outstanding borrowings of $30.0 million under the facility during the three months ended January 31, 2021.

As of February 14, 2022, the Company's fiscal 2022 capital budget is approximately $201.7 million. The Company expects the 2022 capital budget to be funded by cash on hand, internally generated working capital, cash flows from operations and funds available under the Company's revolving credit facility. The fiscal 2022 capital budget includes an aggregate of approximately $59.5 million for multiple large-scale equipment and building upgrades at multiple complexes and $18.1 million to purchase new vehicles that would have been leased prior to fiscal 2020. Excluding the budgeted amounts for the items detailed above, the fiscal 2022 capital budget is approximately $124.1 million. These amounts are estimates and are subject to change as we move through the remainder of fiscal 2022.

On October 2, 2020, the Company filed a shelf registration statement on Form S-3 to register for possible future sale shares of the Company's common and/or preferred stock. An indeterminate amount of common stock and preferred stock may be offered by the Company in amounts, at prices and on terms to be determined by the board of directors if and when shares are issued. The registration statement became automatically effective upon filing with the SEC on October 2, 2020.

The Company regularly evaluates both internal and external growth opportunities, including acquisition opportunities and the possible construction of new production assets, and conducts due diligence activities in connection with such opportunities. The cost and terms of any financing to be raised in conjunction with any growth opportunity, including the Company’s ability to raise debt or equity capital on terms and at costs satisfactory to the Company, and the effect of such opportunities on the Company’s balance sheet, are critical considerations in any such evaluation. Covenants in the pending Merger Agreement to which the Company is a party limit the Company's ability to pursue any strategy outside the ordinary course of business.

Revolving Credit Facility

The Company is a party to a revolving credit facility dated April 23, 2021, with a maximum available borrowing capacity of $1.0 billion. Under the credit facility, the Company may not exceed a maximum debt-to-total 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 July 31, 2021, was $1.1 billion. The credit is unsecured and, unless extended, will expire on April 23, 2026. As of July 31, 2021 and August 25, 2021, the Company had no outstanding draws under the facility and had approximately $24.1 million outstanding in letters of credit, leaving $975.9 million of borrowing capacity available under the facility. For more information about the facility, see Item 1.01 of our Current Report on Form 8-K filed April 28, 2021.

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The Company is a party to a revolving credit facility dated April 23, 2021, with a maximum available borrowing capacity of $1.0 billion. Under the credit facility, the Company may not exceed a maximum debt-to-total 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 January 31, 2022, was $1.3 billion. The credit is unsecured and, unless extended, will expire on April 23, 2026. As of January 31, 2022, the Company had no outstanding draws under the facility and had approximately $24.1 million outstanding in letters of credit, leaving $975.9 million of borrowing capacity available under the facility. As of February 23, 2022, the Company had no outstanding borrowings and had approximately $29.1 million outstanding in letters of credit, leaving $970.9 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 April 28, 2021.

Critical Accounting Estimates

We consider accounting policies related to allowance for doubtful accounts, inventories, long-lived assets, accrued self-insurance, performance share plans, income taxes and contingencies to be critical accounting estimates. These policies are summarized in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended October 31, ~~2020~~2021.

New Accounting Pronouncements

31In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Accounting Standards Codification 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020, our fiscal 2022. We adopted this guidance during the first quarter of fiscal 2022, and adoption did not materially affect our consolidated financial statements.

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In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses, to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. We adopted ASU 2016-13 during our first quarter of fiscal 2021, and adoption did not have a material effect on our consolidated financial statements. Under the new standard, we are required to record on our balance sheet an allowance for expected credit losses, which is estimated utilizing historical experience and current and expected economic conditions. Our allowance for expected credit losses is recorded on the accounts receivable, net line of the Condensed Consolidated Balance Sheets and is immaterial to our financial position.

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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 generally affected by the price of crude oil); and

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

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

Although the Company does not use derivative financial instruments as defined in ASC 815 or purchase market risk sensitive instruments of the type contemplated by Item 305 of Regulation S-K, the commodities that the Company does purchase for physical delivery, primarily corn and soybean meal, are subject to price fluctuations that have a direct and material effect on the Company’s profitability as mentioned above. During the ~~third~~first quarter of fiscal ~~2021~~2022, the Company purchased approximately 3031.83 million bushels of corn and approximately ~~280~~285,~~603~~771 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 $3031.83 million in the ~~third~~first quarter of fiscal ~~2021~~2022. Likewise, a $10.00 change in the price paid per ton for soybean meal would affect the Company’s cash outlays by approximately $2.89 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 feed mill and paid for one week might be used to manufacture feed the following week. However, the chickens that eat that feed might not be processed and sold for another 48-62 days, and only at that time will the costs of the feed consumed by the chicken become included in cost of goods sold.

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During the ~~third~~first quarter of fiscal ~~2021~~2022, the Company’s average feed cost per pound of broilers processed totaled $0.~~3506~~3286 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.~~0252~~0260, based on the quantity of grain used during the ~~third~~first quarter of fiscal ~~2021~~2022. 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.~~0023~~0024 during the ~~third~~first quarter of fiscal ~~2021~~2022.

The following table shows the impact of hypothetical changes in the price of corn and soybean meal on both the Company’s cash flow and cost of goods sold, based on quantities actually purchased in the ~~third~~first quarter of fiscal ~~2021~~2022:

Feed Ingredient

Quantity Purchasedduring the ~~ThirdFiscal~~FirstFiscal Quarter ~~of2021~~of2022

Hypothetical PriceChange

Impact on CashOutlay

Ultimate Impact onFeed Cost perPound of broilersProcessed

Corn

3031.83 million bushels

$1.00 per bushel

$3031.83 million

$0.~~0252~~0260/lb processed

Soybean meal

~~280~~285,~~603~~771 tons

$10.00 per ton

$2.89 million

$0.~~0023~~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 sometimes maintains certain of its debt as fixed rate in nature to mitigate the impact of fluctuations in interest rates. AtAlthough ~~July 31, 2021~~ the Company had no ~~outstanding~~fixed-rate debt on its balance sheet at January 31, 2022, management believes the potential effects of near-term changes in interest rates on the Company's debt are immaterial.

Item 4. Controls and Procedures

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

As of ~~July~~January 31, ~~2021~~2022, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of ~~July~~January 31, ~~2021~~2022.

There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter ended ~~July~~January 31, ~~2021~~2022 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

For information regarding our legal proceedings, refer to "Litigation" within "Part I, Item 1, Notes to Consolidated Financial Statements, Note 87 - Commitments and Contingencies," which is incorporated herein by reference.

Item 1A. Risk Factors

In addition to the other information set forth in this quarterly report, you should carefully consider the risks discussed in our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2020~~2021, including under the heading “Item 1A. Risk Factors,” which, along with risks described in this report, are risks we believe could materially affect the Company’s business, financial condition and future results. These are not the only risks facing the Company. Other risks and uncertainties we are not currently aware of or that we currently consider immaterial also may materially adversely affect the Company’s business, financial condition and future results. Risks we have identified but currently consider immaterial could still materially adversely affect the Company’s business, financial condition and future results if our assumptions about those risks are incorrect or if circumstances change.

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There were no material changes during the period covered in this report to the risk factors previously disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended October 31, ~~2020~~2021, except as follows:

~~Risks~~Operational ~~Relating to Proposed Acquisition by Cargill and CGC~~Risks

~~The~~Outbreaks ~~Merger~~of isavian ~~subject~~disease, tosuch ~~receipt~~as ofavian ~~approval~~influenza, ~~from~~or ~~our~~the ~~shareholders~~perception asthat ~~well~~outbreaks asmay ~~the~~occur, ~~satisfaction~~can ofsignificantly ~~other~~restrict ~~closing~~our ~~conditions~~ability into ~~the~~conduct ~~Merger~~our ~~Agreement.~~operations and can significantly affect demand for our products.

~~The~~Events ~~Merger~~beyond ~~Agreement~~our ~~contains a number of customary conditions to complete the Merger~~control, ~~including,~~such ~~(i)~~as the ~~approval~~outbreak of ~~the~~avian ~~Merger~~disease ~~Agreement~~or by the ~~holders~~perception ofthat atan ~~least~~outbreak ~~two-thirds~~may ofoccur, ~~our~~even ~~outstanding~~if ~~shares~~it ofdoes ~~common~~not ~~stock,~~affect ~~(ii)~~our ~~the~~flocks, ~~absence~~could ofsignificantly ~~any~~restrict ~~order~~our orability ~~injunction~~to ~~issued~~conduct byour aoperations ~~court of competent jurisdiction~~ or ~~governmental~~our ~~entity~~sales. ~~prohibiting~~An ~~the~~outbreak ~~consummation~~ of ~~the~~disease ~~transaction,~~could ~~(iii)~~result ~~the~~in ~~expiration~~governmental orrestrictions ~~termination~~on of the ~~applicable~~import ~~waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iv) the receipt of regulatory approvals in China~~ and ~~Mexico,~~export ~~(v) the accuracy~~ of ~~the~~fresh ~~representations~~ and ~~warranties~~frozen ~~contained in the Merger Agreement (generally subject to certain materiality qualifiers)~~chicken, ~~(vi)~~including ~~performance~~our infresh ~~all material respects of the obligations~~ and ~~the~~frozen ~~compliance~~chicken inproducts, ~~all~~or ~~material~~other ~~respects~~products ~~with~~to ~~the~~or ~~covenants~~from inour ~~the Merger Agreement~~suppliers, ~~(vii)~~facilities ~~the~~or ~~absence~~customers, ofor arequire ~~Company~~us ~~Material~~to ~~Adverse~~destroy ~~Effect~~one ~~(as~~or ~~defined~~more ~~in the Merger Agreement) and (viii) the absence~~ of anour ~~MAE~~flocks. ~~Detriment~~This ~~(as~~could ~~defined~~result in the ~~Merger~~cancellation ~~Agreement)~~of ~~with~~orders ~~respect~~by toour ~~the~~customers ~~consents, approvals, clearances~~ and ~~other~~create ~~authorizations~~adverse orpublicity ~~expirations in connection with regulatory approvals in China and Mexico. We can provide no assurance~~ that ~~all~~may ~~required~~have ~~approvals~~a ~~will~~material beadverse ~~obtained~~effect oron ~~that~~our ~~all closing conditions will be satisfied~~business, ~~and,~~reputation ~~if all required approvals are obtained~~ and ~~the~~prospects. ~~closing~~In ~~conditions are satisfied~~addition, weworld-wide ~~can~~fears ~~provide~~about noavian ~~assurance as to the terms~~disease, ~~conditions and timing of~~ such ~~approvals~~as oravian ~~the~~influenza, ~~timing~~have, ~~of the completion of the Merger. Any delay~~ in ~~completing~~ the ~~Merger~~past, ~~could~~depressed ~~cause~~demand usfor ~~not~~fresh tochicken, ~~realize~~which ~~some~~adversely oraffected ~~all~~our ofsales ~~the~~during ~~benefits~~and around that ~~we expect to achieve if the Merger is successfully completed within its expected timeframe~~time.

~~Failure~~In topast ~~complete~~years there has been substantial publicity regarding a highly pathogenic Asian strain of avian influenza, or AI, known as H5N1, which has affected Asia since 2002 and which has been found in Europe, the ~~Merger~~Middle ~~could~~East ~~materially~~and ~~adversely~~Africa. ~~affect~~It ~~our~~is ~~business~~widely ~~operations~~believed that this strain of AI is spread by migratory birds, ~~financial~~such ~~results~~as ducks and ~~stock~~geese. ~~price~~There have also been some cases where this strain of AI is believed to have passed from birds to humans as humans came into contact with live birds that were infected with the disease.

IfUntil ~~the~~2015, ~~Merger~~AI isoutbreaks ~~not~~in ~~completed,~~North ~~including~~America ashad anot ~~result~~generated ofthe ~~our~~same ~~shareholders~~level ~~failing~~of toconcern, ~~adopt~~or received the ~~Merger~~same ~~Agreement~~level of publicity, ~~our~~or ~~shareholders~~been ~~will~~accompanied ~~not~~by ~~receive~~the ~~any~~same ~~payment~~reduction in demand for ~~their~~poultry ~~shares~~products in ~~connection~~certain countries, as that associated with the ~~Merger~~Asian strains. ~~Instead~~Beginning in January 2015, however, the ~~Company~~United ~~will~~States ~~remain~~experienced anwhat ~~independent~~some ~~public~~industry ~~company,~~observers ~~and~~believe was the ~~shares~~worst ~~will~~AI ~~continue~~outbreak in United States history during which, according to bethe ~~traded~~United onStates ~~NASDAQ~~Animal and Plant Health Inspection Service (APHIS), approximately 7.8 ~~Our~~million ~~ongoing~~turkeys ~~business~~and ~~may~~40.3 bemillion ~~materially~~chickens ~~adversely~~were affected. ~~and~~The weaffected ~~would~~chickens bewere ~~subject~~almost toall ahens ~~number~~that oflay ~~risks,~~eggs ~~including~~for the ~~following:~~table egg industry, and not broiler chickens such as those we raise.

~~•we~~On ~~may~~February ~~experience~~8, ~~negative~~2022 ~~reactions~~the ~~from~~highly ~~the~~pathogenic ~~financial~~H5N1 ~~markets,~~strain ~~including~~of ~~negative~~AI ~~impacts~~was ondiscovered ~~our~~in ~~stock~~a ~~price,~~commercial turkey flock in Indiana and ithas issubsequently ~~uncertain~~been ~~when,~~detected ifin ~~ever~~four other commercial poultry flocks, ~~the~~at ~~price~~least one of ~~the~~which ~~shares~~was ~~would~~a ~~return~~broiler toflock, within the ~~prices~~eastern atand ~~which~~central ~~the~~United ~~shares~~States. ~~currently trade;~~

~~•we~~We ~~may~~have ~~experience~~a ~~negative~~high ~~publicity~~degree of confidence in our industry’s biosecurity program, ~~which~~but ~~could~~we ~~have~~cannot anbe ~~adverse~~certain ~~effect~~our onflocks or others in our ~~ongoing~~industry ~~operations~~will ~~including~~not be significantly affected by AI. Given our high degree of confidence in our biosecurity programs, ~~but~~we ~~not~~believe ~~limited~~the toprimary risks associated with domestic outbreaks of AI are market risks, ~~retaining~~as many countries to which our industry sells product typically impose bans on the import of broiler meat produced in the United States when AI is found. The extent of the bans varies by country and ~~attracting~~can ~~employees~~range from county-specific, ~~growers~~which means product of a certain county is banned, ~~customers~~to nationwide, ~~suppliers~~under ~~and~~which ~~distributors;~~any poultry produced in the United States is banned.

~~•we~~While ~~will~~the ~~still~~bans bewere ~~required~~in toplace ~~pay~~following ~~certain~~the ~~significant~~2015 ~~costs~~outbreak, ~~relating~~the tomarket price for leg quarters fell significantly below historical averages. While domestic demand for broiler meat was not materially affected by the ~~Merger~~2015 outbreak, ~~such~~we ascannot ~~legal,~~assure ~~accounting~~you that additional outbreaks, ~~financial~~including ~~advisor~~the 2022 outbreak, ~~printing~~will not materially adversely affect both domestic and ~~other~~international ~~professional~~demand ~~services~~for ~~fees~~poultry products produced in the United States. Because the virus is carried by migratory water fowl, ~~which~~it ~~may~~is ~~relate~~possible the virus could be spread to ~~activities~~domestic ~~that~~poultry weflocks ~~would~~during ~~not~~any ~~have~~seasonal ~~undertaken~~migration ~~other~~of ~~than~~those water fowl. If AI were to ~~complete~~affect ~~the~~a ~~Merger;~~significant number of our flocks, or materially reduce domestic demand for our products, either or both of these events could have a material adverse effect on our business, reputation or prospects.

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

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

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

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

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

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

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

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

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

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

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

Risks Related to the COVID-19 Pandemic

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

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

•At times during the pandemic, we experienced a decrease in demand and commodity prices for products from our plants that serve food service customers, restaurants, and other customers who sell food for consumption away from home. These customers have been significantly negatively affected by stay-at-home restrictions or recommendations, closings of restaurants, social distancing requirements and cancellations of major sporting and other events. This negative trend continued to some degree throughout fiscal 2020 and into fiscal 2021 even though government restrictions were reduced or lifted because restaurants and other venues in some parts of the country have been required to operate at reduced capacities and, especially in areas of the country with low COVID-19 vaccination rates, consumers may fear gathering in public places. While we have experienced an increase in demand and market prices for products produced for food service customers during the spring and summer of 2021, resurgences of COVID-19 infections associated with the "Delta" variant after restrictions were lifted are causing and could continue to cause governments to impose new or stricter closure, capacity or social distancing requirements. This could cause consumer demand for food away from home to again worsen. We also cannot predict whether and to what extent changes in consumer food purchasing behavior will persist even after the threat of the pandemic has been eliminated or how those changes would affect our business.

•Deteriorating economic and political conditions caused by the resurgence of the COVID-19 "Delta" variant, such as increased unemployment, decreases in disposable income and consumer spending, declines in consumer confidence, changes in consumer buying patterns, or economic slowdowns or recessions, may again contribute to lower demand for our products, especially products from our plants that serve food service customers.

•We experienced some disruption in our operations due to the pandemic, including higher than normal absenteeism related to COVID-19 among our employees and inefficiencies from a significant number of new hires. Beginning

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during late July 2021 and continuing into August 2021, we have again seen an increase in absenteeism rates associated with COVID-19, and the number of positive cases among our employees has risen. While we have been able to operate despite these disruptions, a higher level of disruption could materially and adversely affect our operations. For example, although we are taking measures to protect our employees and prevent the spread of coronavirus in our facilities, these measures may not be sufficient to prevent an outbreak of infections among our employees. Government restrictions like social distancing regulations or limits on the number of persons who can be present in our facilities could also impair operations. The absence of a significant number of employees to staff our plants could cause a material reduction in our production volumes and could also hurt our ability to make certain products that require more labor to produce. If an outbreak at any of our facilities is severe, we could even be forced to close the facility, which in turn would constrain our ability to meet customer orders, increase our costs and reduce our revenues.

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

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

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

•Declining oil prices during the first year of the pandemic, which were caused in part by the contraction of commercial activity worldwide due to the pandemic, limited 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 versus some foreign currencies increased. This led to weaker demand and prices for our products in the export markets. While oil prices have moved higher and the value of the U.S. dollar has become more favorable versus foreign currencies, a resurgence in COVID-19 cases could again cause both of these factors to impact demand for our products from other countries.

•If the effects of the pandemic cause market prices for our products to fall as they did during the first year of the pandemic, we may have to record adjustments to write down the carrying values of our live inventories in future quarters.

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

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

•We rely on third-party service providers and business partners, such as independent contract poultry producers, cloud data storage and other information technology service providers, suppliers (particularly suppliers of feed grains), distributors, and other external business partners, for certain functions or services that support 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 need to preserve liquidity, which could result in a reduction or suspension of our quarterly dividend or delays in implementing or an inability to implement our strategic planning initiatives.

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

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

Any of the negative impacts of the COVID-19 pandemic, including those described above, may have a material adverse effect on our results of operations, financial condition and cash flows. Any of these negative impacts could exacerbate the other risk factors discussed below. The full extent to which the COVID-19 pandemic will negatively affect our results of operations, financial condition and cash flows will depend on future developments that are highly uncertain and that we cannot predict, including the scope and duration of the pandemic, the impact of the spread of the "Delta" variant, and actions by governmental authorities and other third parties in response to the pandemic.

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

During the ~~third~~first quarter of fiscal ~~2021~~2022, the company repurchased shares of its common stock as follows:

Period	(a) Total Number ofShares Purchased(1)	(b) Average PricePaid per Share		(c) Total Number ofShares Purchased asPart of PubliclyAnnounced PlansorPrograms(2)	(d) MaximumNumber (orApproximate DollarValue) of Shares thatMay Yet BePurchased Under thePlans or Programs(2) (3)
May 1 - May 31, 2021	—	$	—	—	2,000,000
Nov. 1 - Nov. 30, 2021	10,944	$	191.46	10,944	2,000,000
Jun. 1 - Jun. 30, 2021	169	188.20		169	2,000,000
Dec. 1 - Dec. 31, 2021	4,498	189.93		4,498	2,000,000
Jul. 1 - Jul. 31, 2021	—	—		—	2,000,000
Jan. 1 - Jan. 31, 2022	—	—		—	2,000,000
Total	~~169~~15,442	$	~~188~~191.2001	~~169~~15,442	2,000,000

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___________________

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 October 22, 2020, the Company’s Board of Directors expanded and extended the share repurchase program originally approved on October 22, 2009, under which the Company was originally authorized to purchase up to one million shares of its common stock and is now authorized to purchase up to two million shares of its common stock in open market transactions or negotiated purchases, subject to market conditions, share price and other considerations. The authorization will expire on October 22, 2023. The Company’s repurchases of vested restricted stock to satisfy tax withholding obligations of its Stock Incentive Plan participants are not made under the general repurchase plan.

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

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Item 6. Exhibits

The following exhibits are filed with this report.

Exhibit No.						Description of Exhibit
2.1						Agreement and Plan of Merger, dated as of August 8, 2021, by and among Sanderson Farms, Inc., Walnut Sycamore Holdings LLC, Sycamore Merger Sub LLC and solely for purposes of certain provisions specified therein, Wayne Farms LLC. (Incorporated by reference to Exhibit 2.1 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)
3.1						Restated Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 filed with the Registrant's Quarterly Report on Form 10-Q for the Quarter ended on July 31, 2015.)
3.2						Bylaws of the Registrant, amended and restated as of December 30, 2020. (Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K on January 5, 2021.)
10.1						Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and Lampkin Butts. (Incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)
10.2						Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and Joe F. Sanderson, Jr. (Incorporated by reference to Exhibit 10.2 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)
10.3						Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and Michael Cockrell. (Incorporated by reference to Exhibit 10.3 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)
31.1*						Certification of Chief Executive Officer.
31.2*						Certification of Chief Financial Officer.
32.1**						Section 1350 Certification.
32.2**						Section 1350 Certification.
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File, because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						XBRL Taxonomy Extension Schema
101.CAL						XBRLTaxonomy Extension Calculation Linkbase
101.DEF						XBRL Taxonomy Extension Definition Linkbase
101.LAB						XBRL Taxonomy Extension Label Linkbase
101.PRE						XBRL Taxonomy Extension Presentation Linkbase
104						Cover Page Interactive Data File (embedded within the Inline XBRL document).

___________________

* Filed herewith.

** Furnished herewith.

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INDEX TO EXHIBITS

ExhibitNumber						Description of Exhibit
2.1						Agreement and Plan of Merger, dated as of August 8, 2021, by and among Sanderson Farms, Inc., Walnut Sycamore Holdings LLC, Sycamore Merger Sub LLC and solely for purposes of certain provisions specified therein, Wayne Farms LLC. (Incorporated by reference to Exhibit 2.1 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)
3.1						Restated Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 filed with the Registrant's Quarterly Report on Form 10-Q for the Quarter ended on July 31, 2015.)
3.2						Bylaws of the Registrant, amended and restated as of December 30, 2020. (Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K on January 5, 2021.)
10.1						Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and Lampkin Butts. (Incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)
10.2						Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and Joe F. Sanderson, Jr. (Incorporated by reference to Exhibit 10.2 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)
10.3						Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and Michael Cockrell. (Incorporated by reference to Exhibit 10.3 filed with the Registrant's Current Report on Form 8-K on August 9, 2021.)
31.1*						Certification of Chief Executive Officer
31.2*						Certification of Chief Financial Officer
32.1**						Section 1350 Certification.
32.2**						Section 1350 Certification.
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						XBRL Taxonomy Extension Schema
101.CAL						XBRL Taxonomy Extension Calculation Linkbase
101.DEF						XBRL Taxonomy Definition Linkbase
101.LAB						XBRL Taxonomy Extension Label Linkbase
101.PRE						XBRL Taxonomy Extension Presentation Linkbase
104						Cover Page Interactive Data File (embedded within the Inline XBRL document).

___________________

* Filed herewith.

** Furnished herewith.

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SIGNATURES

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

	SANDERSON FARMS, INC.
	(Registrant)
Date: August 26, 2021	By:	/s/ D. Michael Cockrell
Date: February 24, 2022	By:	/s/ D. Michael Cockrell
		Treasurer, Chief Financial Officer and Chief Legal Officer
Date: August 26, 2021	By:	/s/ Tim Rigney
Date: February 24, 2022	By:	/s/ Tim Rigney
		Secretary, Corporate Controller and
		Chief Accounting Officer

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