Cover
Cover - shares | 6 Months Ended | |
Apr. 30, 2022 | May 24, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Apr. 30, 2022 | |
Document Transition Report | false | |
Entity File Number | 1-14977 | |
Entity Registrant Name | Sanderson Farms, Inc | |
Entity Incorporation, State or Country Code | MS | |
Entity Tax Identification Number | 64-0615843 | |
Entity Address, Address Line One | 127 Flynt Road | |
Entity Address, City or Town | Laurel | |
Entity Address, State or Province | MS | |
Entity Address, Postal Zip Code | 39443 | |
City Area Code | 601 | |
Local Phone Number | 649-4030 | |
Title of 12(b) Security | Common Stock, $1 par value per share | |
Trading Symbol | SAFM | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 22,320,192 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q2 | |
Entity Central Index Key | 0000812128 | |
Current Fiscal Year End Date | --10-31 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Apr. 30, 2022 | Oct. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 829,124 | $ 439,339 |
Accounts receivable, net | 260,438 | 223,865 |
Receivable from insurance companies | 0 | 2,057 |
Inventories | 434,458 | 350,959 |
Refundable income taxes | 0 | 7,418 |
Prepaid expenses and other current assets | 67,375 | 62,632 |
Total current assets | 1,591,395 | 1,086,270 |
Property, plant and equipment, net | 1,208,826 | 1,224,334 |
Right of use assets | 20,618 | 28,238 |
Other assets | 5,675 | 6,191 |
Total assets | 2,826,514 | 2,345,033 |
Current liabilities: | ||
Accounts payable | 169,621 | 152,421 |
Dividends payable | 9,821 | 0 |
Accrued expenses | 86,126 | 144,453 |
Lease liabilities | 9,120 | 12,189 |
Accrued income taxes | 13,159 | 0 |
Total current liabilities | 287,847 | 309,063 |
Claims payable and other liabilities | 13,203 | 13,078 |
Deferred income taxes | 155,752 | 156,531 |
Long-term lease liabilities | 11,570 | 16,122 |
Commitments and contingencies | ||
Preferred Stock: | ||
Common Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares—22,320,192 and 22,329,731 at April 30, 2022 and October 31, 2021, respectively | 22,320 | 22,330 |
Paid-in capital | 119,077 | 105,517 |
Retained earnings | 2,216,745 | 1,722,392 |
Total stockholders’ equity | 2,358,142 | 1,850,239 |
Total liabilities and stockholders’ equity | 2,826,514 | 2,345,033 |
Series A Junior Participating Preferred Stock, $100 par value: authorized 500,000 shares, none issued | ||
Preferred Stock: | ||
Preferred Stock: | ||
Par value to be determined by the Board of Directors: authorized 4,500,000 shares; none issued | ||
Preferred Stock: | ||
Preferred Stock: |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Apr. 30, 2022 | Oct. 31, 2021 |
Common Stock, par value (in usd per share) | $ 1 | $ 1 |
Common Stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common Stock, shares issued (in shares) | 22,320,192 | 22,329,731 |
Common Stock, shares outstanding (in shares) | 22,320,192 | 22,329,731 |
Series A Junior Participating Preferred Stock | ||
Preferred Stock, par value (in usd per share) | $ 100 | $ 100 |
Preferred Stock, authorized shares (in shares) | 500,000 | 500,000 |
Preferred Stock, shares issued (in shares) | 0 | 0 |
Other Preferred Stock | ||
Preferred Stock, authorized shares (in shares) | 4,500,000 | 4,500,000 |
Preferred Stock, shares issued (in shares) | 0 | 0 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2022 | Apr. 30, 2021 | Apr. 30, 2022 | Apr. 30, 2021 | |
Income Statement [Abstract] | ||||
Net sales | $ 1,539,714 | $ 1,133,880 | $ 2,867,142 | $ 2,043,186 |
Cost and expenses: | ||||
Cost of sales | 1,051,845 | 941,936 | 2,059,899 | 1,781,258 |
Selling, general and administrative | 66,382 | 64,245 | 132,120 | 120,844 |
Cost and expenses | 1,118,227 | 1,006,181 | 2,192,019 | 1,902,102 |
Operating income | 421,487 | 127,699 | 675,123 | 141,084 |
Other income (expense): | ||||
Interest income | 67 | 0 | 164 | 0 |
Interest expense | (567) | (697) | (1,144) | (1,335) |
Other | 3 | 13 | 6 | 16 |
Other income (expense) | (497) | (684) | (974) | (1,319) |
Income before income taxes | 420,990 | 127,015 | 674,149 | 139,765 |
Income tax expense | 99,800 | 30,104 | 160,152 | 33,376 |
Net income | $ 321,190 | $ 96,911 | $ 513,997 | $ 106,389 |
Earnings per share: | ||||
Basic (in usd per share) | $ 14.39 | $ 4.34 | $ 23.03 | $ 4.76 |
Diluted (in usd per share) | 14.39 | 4.34 | 23.03 | 4.76 |
Dividends per share (in usd per share) | $ 0.44 | $ 0.44 | $ 0.88 | $ 0.88 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands | Total | Common Stock | Paid-In Capital | Retained Earnings |
Beginning balance (in shares) at Oct. 31, 2020 | 22,251,071 | |||
Beginning balance at Oct. 31, 2020 | $ 1,419,273 | $ 22,251 | $ 90,420 | $ 1,306,602 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net income | 9,478 | 9,478 | ||
Cash dividends | (9,824) | (9,824) | ||
Stock compensation plan transactions (in shares) | 74,564 | |||
Stock compensation plan transactions | (1,592) | $ 75 | (1,667) | |
Amortization of unearned compensation | 2,147 | 2,147 | ||
Ending balance (in shares) at Jan. 31, 2021 | 22,325,635 | |||
Ending balance at Jan. 31, 2021 | 1,419,482 | $ 22,326 | 90,900 | 1,306,256 |
Beginning balance (in shares) at Oct. 31, 2020 | 22,251,071 | |||
Beginning balance at Oct. 31, 2020 | 1,419,273 | $ 22,251 | 90,420 | 1,306,602 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net income | 106,389 | |||
Ending balance (in shares) at Apr. 30, 2021 | 22,332,310 | |||
Ending balance at Apr. 30, 2021 | 1,510,290 | $ 22,332 | 94,616 | 1,393,342 |
Beginning balance (in shares) at Jan. 31, 2021 | 22,325,635 | |||
Beginning balance at Jan. 31, 2021 | 1,419,482 | $ 22,326 | 90,900 | 1,306,256 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net income | 96,911 | 96,911 | ||
Cash dividends | (9,825) | (9,825) | ||
Stock compensation plan transactions (in shares) | 6,675 | |||
Stock compensation plan transactions | 1,520 | $ 6 | 1,514 | |
Amortization of unearned compensation | 2,202 | 2,202 | ||
Ending balance (in shares) at Apr. 30, 2021 | 22,332,310 | |||
Ending balance at Apr. 30, 2021 | 1,510,290 | $ 22,332 | 94,616 | 1,393,342 |
Beginning balance (in shares) at Oct. 31, 2021 | 22,329,731 | |||
Beginning balance at Oct. 31, 2021 | 1,850,239 | $ 22,330 | 105,517 | 1,722,392 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net income | 192,807 | 192,807 | ||
Cash dividends | (9,823) | (9,823) | ||
Stock compensation plan transactions (in shares) | (5,665) | |||
Stock compensation plan transactions | (2,273) | $ (6) | (2,267) | |
Amortization of unearned compensation | 7,883 | 7,883 | ||
Ending balance (in shares) at Jan. 31, 2022 | 22,324,066 | |||
Ending balance at Jan. 31, 2022 | 2,038,833 | $ 22,324 | 111,133 | 1,905,376 |
Beginning balance (in shares) at Oct. 31, 2021 | 22,329,731 | |||
Beginning balance at Oct. 31, 2021 | 1,850,239 | $ 22,330 | 105,517 | 1,722,392 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net income | 513,997 | |||
Ending balance (in shares) at Apr. 30, 2022 | 22,320,192 | |||
Ending balance at Apr. 30, 2022 | 2,358,142 | $ 22,320 | 119,077 | 2,216,745 |
Beginning balance (in shares) at Jan. 31, 2022 | 22,324,066 | |||
Beginning balance at Jan. 31, 2022 | 2,038,833 | $ 22,324 | 111,133 | 1,905,376 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net income | 321,190 | 321,190 | ||
Cash dividends | (9,821) | (9,821) | ||
Stock compensation plan transactions (in shares) | (3,874) | |||
Stock compensation plan transactions | (8) | $ (4) | (4) | |
Amortization of unearned compensation | 7,948 | 7,948 | ||
Ending balance (in shares) at Apr. 30, 2022 | 22,320,192 | |||
Ending balance at Apr. 30, 2022 | $ 2,358,142 | $ 22,320 | $ 119,077 | $ 2,216,745 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares | 3 Months Ended | 6 Months Ended | ||||
Apr. 30, 2022 | Jan. 31, 2022 | Apr. 30, 2021 | Jan. 31, 2021 | Apr. 30, 2022 | Apr. 30, 2021 | |
Statement of Stockholders' Equity [Abstract] | ||||||
Cash dividends (in usd per share) | $ 0.44 | $ 0.44 | $ 0.44 | $ 0.44 | $ 0.88 | $ 0.88 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Apr. 30, 2022 | Apr. 30, 2021 | |
Operating activities | ||
Net income | $ 513,997 | $ 106,389 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 86,523 | 81,618 |
Amortization of share-based compensation | 16,702 | 5,751 |
Deferred income taxes | (779) | 3,681 |
Loss on asset disposals | 58 | 46 |
Change in assets and liabilities: | ||
Accounts receivable - trade | (36,573) | (41,324) |
Accounts receivable - insurance | 2,057 | (3,951) |
Income taxes | 20,576 | 21,458 |
Inventories | (83,499) | (57,435) |
Prepaid expenses and other assets | (4,732) | 41 |
Right of use assets | 7,621 | 8,587 |
Lease liabilities | (7,621) | (8,587) |
Accounts payable | 19,560 | 23,209 |
Accrued expenses and other liabilities | (59,011) | 4,092 |
Total adjustments | (39,118) | 37,186 |
Net cash provided by operating activities | 474,879 | 143,575 |
Investing activities | ||
Capital expenditures | (73,134) | (86,345) |
Net proceeds from sale of property and equipment | 206 | 452 |
Net cash used in investing activities | (72,928) | (85,893) |
Financing activities | ||
Payment of debt issuance costs | 0 | (1,877) |
Borrowings from revolving line of credit | 0 | 30,000 |
Proceeds from issuance of restricted stock under stock compensation plans | 656 | 523 |
Payments from issuance of common stock under stock compensation plans | (2,999) | (2,655) |
Dividends paid | (9,823) | (9,823) |
Net cash provided by (used in) financing activities | (12,166) | 16,168 |
Net change in cash and cash equivalents | 389,785 | 73,850 |
Cash and cash equivalents at beginning of period | 439,339 | 49,061 |
Cash and cash equivalents at end of period | 829,124 | 122,911 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Capital expenditures included in accounts payable | 2,770 | 5,117 |
Dividends payable | $ 9,821 | $ 9,826 |
ACCOUNTING POLICIES
ACCOUNTING POLICIES | 6 Months Ended |
Apr. 30, 2022 | |
Accounting Policies [Abstract] | |
ACCOUNTING POLICIES | ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the three and six months ended April 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2022. The condensed consolidated balance sheet at October 31, 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, 2021. New Accounting Pronouncements 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 adopted this guidance during the first quarter of fiscal 2022, and adoption did not materially affect 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. |
REVENUE
REVENUE | 6 Months Ended |
Apr. 30, 2022 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE | REVENUE Revenue Recognition The Company recognizes revenue in connection with a contract in which the Company has agreed to sell, and a customer has agreed to purchase, specific quantities of product at agreed-upon prices and when the Company's performance obligation related to that contract has been satisfied. In the majority of its contracts with customers, the Company's performance obligation is satisfied when delivery of the product has occurred, either at the customer's facility or the Company's facility, depending on the terms of each contract. In a smaller number of contracts, ownership of the product passes from the Company to the customer at some point during transit, at which time the performance obligation is satisfied and revenue is recognized. Revenue and related receivables are recognized based on the transaction price within the contract and are reduced by estimated or known amounts for items such as rebates, discounts, cooperative advertising allowances and other various items. The cost incurred for shipping and handling activities to deliver the product to the customer is recognized in cost of sales during the period in which the corresponding revenue is recognized. Where shipping and handling activities occur after the customer has obtained control of the product, the Company has elected to account for those expenses as fulfillment costs in cost of sales, rather than an additional promised service. Revenue is reported gross of any freight charge that is separately invoiced to a customer, and all freight costs are accounted for as cost of sales. Due to the nature of our contracts, commissions associated with such contracts provide only a short-term benefit (i.e. less than one year); therefore, we recognize costs of commissions paid to third-party brokers as selling, general and administrative expenses. Disaggregation of Revenue The following tables disaggregate our net sales by product category: Product Category Three Months Ended April 30, 2022 Three Months Ended April 30, 2021 (in thousands) Fresh, vacuum-sealed chicken $ 584,707 $ 428,661 Fresh, chill-packed chicken 474,228 387,328 Fresh, ice-packed chicken 318,647 193,757 Frozen chicken 78,677 71,924 Prepared chicken 75,585 46,498 Other 7,870 5,712 Total net sales $ 1,539,714 $ 1,133,880 Product Category Six Months Ended April 30, 2022 Six Months Ended April 30, 2021 (in thousands) Fresh, vacuum-sealed chicken $ 1,104,338 $ 722,779 Fresh, chill-packed chicken 901,419 763,580 Fresh, ice-packed chicken 547,772 325,438 Frozen chicken 159,301 135,327 Prepared chicken 139,841 85,413 Other 14,471 10,649 Total net sales $ 2,867,142 $ 2,043,186 |
INVENTORIES
INVENTORIES | 6 Months Ended |
Apr. 30, 2022 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES Inventories consisted of the following: Inventory type April 30, 2022 October 31, 2021 (in thousands) Live poultry-broilers and breeders $ 279,301 $ 229,245 Feed, eggs and other 77,209 57,994 Processed poultry 38,696 42,775 Prepared chicken 28,611 11,157 Packaging materials 10,641 9,788 Total Inventories $ 434,458 $ 350,959 |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 6 Months Ended |
Apr. 30, 2022 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, PLANT AND EQUIPMENT | PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, net, consisted of the following: Description April 30, 2022 October 31, 2021 (in thousands) Land and buildings $ 984,721 $ 976,012 Machinery and equipment 1,476,116 1,439,762 Work-in-process 33,099 19,924 2,493,936 2,435,698 Less accumulated depreciation (1,285,110) (1,211,364) Property, plant and equipment, net $ 1,208,826 $ 1,224,334 |
STOCK COMPENSATION PLANS
STOCK COMPENSATION PLANS | 6 Months Ended |
Apr. 30, 2022 | |
Share-based Payment Arrangement [Abstract] | |
STOCK COMPENSATION PLANS | 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 and six months ended April 30, 2022 was $8.3 million and $16.7 million, respectively, as compared to total stock based compensation expense of $3.1 million and $5.8 million, respectively, for the three and six months ended April 30, 2021. During the six months ended April 30, 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 and six months ended April 30, 2022, the Company recorded compensation expense for the MSPP shares, included in the total stock based compensation expense above, of $70,000 and $128,000, respectively, as compared to $125,000 and $200,000, respectively, during the three and six months ended April 30, 2021. 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. During fiscal 2020 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 significant revisions to the amounts accrued related to the arrangements, as the accruals are adjusted using the cumulative catch-up method of accounting. The target number of shares specified in the performance share agreements executed on November 1, 2020 totaled 87,350. During the first quarter of fiscal 2022, the Company determined that achievement of the applicable performance based criteria for the November 1, 2020 agreements was probable at a level between threshold and target for the return on equity criteria and at a level between target and maximum for the return on sales criteria. Accordingly, the quarter ended January 31, 2022 includes compensation expense of $5.1 million, included in the total stock based compensation expense above, related to the agreements executed on November 1, 2020. During the second quarter of fiscal 2022, the Company determined that achievement of the applicable performance based criteria for the November 1, 2020 agreements is probable at the maximum level for both the return on sales and return on equity criteria. Due to the revision to the initial determination of probability, the Company recorded an additional catch-up accrual during the second quarter of fiscal 2022. Accordingly, the three months ended April 30, 2022 includes compensation expense of $5.9 million, included in the total stock based compensation expense above, as compared to no compensation expense related to those same agreements recorded during the quarter ended April 30, 2021. As of April 30, 2022, the aggregate number of shares estimated to be awarded related to the performance share agreements entered into on November 1, 2020 totaled 167,306 shares. The actual number of shares that can be awarded for those agreements could change materially from that estimate due to the Company's actual performance during the remaining six months of the performance period ending October 31, 2022, 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, 2023. 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. The Company has determined that shares covered by these agreements have been earned at a level between the threshold and target for the portion dependent upon return on equity criteria and at a level between target and maximum for the portion dependent upon return on sales criteria. Accordingly, the quarter ended April 30, 2022 includes compensation expense of $659,000 related 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 April 30, 2021. There was no compensation expense recorded during the second quarter of fiscal 2021 related to these agreements, because 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 April 30, 2022, the aggregate number of shares estimated to be awarded related to the performance share agreements entered into on November 1, 2019 totaled 59,642 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 remaining six months of the service period ending October 31, 2022. The Company will recognize the remaining unearned compensation related to these agreements over the remaining service period. Typically, the Company would have also entered into performance share agreements dated November 1, 2021, with its officers and key employees, but covenants in the Merger Agreement prohibited the Company from doing so. The Company's compensation expense related to performance share agreements is summarized as follows (in thousands, except number of shares): Three Months Ended Six Months Ended Date of Performance Share Agreement Number of shares issued (actual (a) or estimated (e)) April 30, 2022 April 30, 2021 April 30, 2022 April 30, 2021 November 1, 2019 59,642 (e) $ 659 — $ 1,540 — November 1, 2020 167,306 (e) 5,907 — 11,044 — Total performance share compensation expense $ 6,566 $ — $ 12,584 $ — |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Apr. 30, 2022 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | EARNINGS PER SHARE Certain share-based payment awards described in Note 5 - Stock Compensation Plans above entitling holders to receive non-forfeitable dividends before vesting are considered participating securities and thus are included in the calculation of basic earnings per share, to the extent they are dilutive. These awards are included in the calculation of basic earnings per share under the two-class method. The two-class method allocates earnings for the period between common shareholders and other security holders. The participating awards receiving dividends are allocated the same amount of income as if they were vested shares. The following tables present earnings per share: Three Months Ended April 30, 2022 April 30, 2021 (in thousands, except per share amounts) Net income $ 321,190 $ 96,911 Distributed and undistributed (earnings) to unvested restricted stock $ (3,555) $ (1,343) Distributed and undistributed earnings to common shareholders—Basic $ 317,635 $ 95,568 Weighted average shares outstanding—Basic 22,074 22,021 Weighted average shares outstanding—Diluted 22,074 22,021 Earnings per common share—Basic $ 14.39 $ 4.34 Earnings per common share—Diluted $ 14.39 $ 4.34 Six Months Ended April 30, 2022 April 30, 2021 (in thousands, except per share amounts) Net income $ 513,997 $ 106,389 Distributed and undistributed (earnings) to unvested restricted stock $ (5,759) $ (1,487) Distributed and undistributed earnings to common shareholders—Basic $ 508,238 $ 104,902 Weighted average shares outstanding—Basic 22,071 22,015 Weighted average shares outstanding—Diluted 22,071 22,015 Earnings per common share—Basic $ 23.03 $ 4.76 Earnings per common share—Diluted $ 23.03 $ 4.76 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Apr. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Litigation 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 13 other poultry producers and certain of their affiliated companies, in multiple putative class action lawsuits filed by direct and indirect purchasers of broiler chickens in the United States District Court for the Northern District of Illinois. The complaints allege that the defendants conspired to unlawfully fix, raise, maintain, and stabilize the price of broiler chickens, thereby violating federal and certain states’ antitrust laws, and also allege certain related state-law claims. The complaints also allege that the defendants fraudulently concealed the alleged anticompetitive conduct in furtherance of the conspiracy. The complaints seek damages, including treble damages for the antitrust claims, injunctive relief, costs, and attorneys’ fees. As detailed below, the Court has consolidated all of the direct purchaser complaints into one case, and the indirect purchaser complaints into two cases, one on behalf of commercial and institutional indirect purchaser plaintiffs and one on behalf of end-user consumer plaintiffs. The cases are part of a coordinated proceeding captioned In re Broiler Chicken Antitrust Litigation . On October 28, 2016, the direct and indirect purchaser plaintiffs filed consolidated, amended complaints, and on November 23, 2016, the direct and indirect purchaser plaintiffs filed second amended complaints. On December 16, 2016, the indirect purchaser plaintiffs separated into two cases. On that date, the commercial and institutional indirect purchaser plaintiffs filed a third amended complaint, and the end-user consumer plaintiffs filed an amended complaint. On January 27, 2017, the defendants filed motions to dismiss the amended complaints in all of the cases, and on November 20, 2017, the motions to dismiss were denied. On February 7, 2018, the direct purchaser plaintiffs filed their third amended complaint, adding three additional poultry producers as defendants. On February 12, 2018, the end-user consumer plaintiffs filed their second amended complaint, in which they also added three additional poultry producers as defendants, along with Agri Stats, 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. Between December 8, 2017 and April 25, 2022, additional purported direct-purchaser entities individually brought separate suits against 20 poultry producers, including Sanderson Farms and Agri Stats, Inc., which have been consolidated with the other cases. 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. Four complaints filed on June 12, 2020 also plead allegations of federal bid rigging. Since that time, an additional forty-nine individual actions have been 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. The court held a hearing on those motions on May 10 - 11, 2022, and 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. Track 1 consists of litigation regarding an alleged conspiracy to reduce supply and fix price via the Georgia Dock index. Track 2 consists of those same allegations, plus allegations based on an alleged bid-rigging theory. Track 1 is engaged in merits expert discovery. Plaintiffs proceeding on Track 2 filed a consolidated amended complaint on February 28, 2022. Defendants, including the Company, filed motions to dismiss certain of the second track's claims on May 6, 2022. Second track Plaintiffs' oppositions are due July 12, 2022, and Defendants' replies are due August 17, 2022. 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 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 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. The parties are currently engaged in 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, Sanderson Farms, Inc. and our subsidiaries were named as defendants, along with four other poultry producers and certain of their affiliated companies, in a second putative class action lawsuit filed in the United States District Court for the Eastern District of Oklahoma. The Court ordered the suits consolidated into one proceeding, and on July 10, 2017, the plaintiffs filed a consolidated amended complaint. The consolidated amended complaint alleges that the defendants unlawfully conspired by sharing data on compensation paid to broiler farmers, with the purpose and effect of suppressing the farmers’ compensation below competitive levels. The consolidated amended complaint also alleges that the defendants unlawfully conspired to not solicit or hire the broiler farmers who were providing services to other defendants. The consolidated amended complaint seeks treble damages, costs and attorneys’ fees. On September 8, 2017, the defendants filed a motion to dismiss the amended complaint, on October 23, 2017, the plaintiffs filed their response, and on November 22, 2017, the defendants filed a reply. On January 19, 2018, the Court granted the Sanderson Farms defendants’ motion to dismiss for lack of personal jurisdiction. On February 21, 2018, the plaintiffs filed a substantially similar lawsuit in the United States District Court for the Eastern District of North Carolina against Sanderson Farms and our subsidiaries and another poultry producer. The plaintiffs subsequently moved to consolidate this action with the Eastern District of Oklahoma action in the Eastern District of Oklahoma for pre-trial proceedings, with the defendants in support thereof. That motion was denied. On July 13, 2018, the defendants moved to dismiss the lawsuit in the Eastern District of North Carolina, and briefing was completed on September 4, 2018. On January 15, 2019, the Court granted in part the defendants’ motion to dismiss and stayed the action in the Eastern District of North Carolina pending resolution of the action in the Eastern District of Oklahoma. On January 6, 2020, the Court in the Eastern District of Oklahoma denied defendants’ motion to dismiss. On May 27, 2020, the Company moved to dismiss the action in the Eastern District of North Carolina under the first-to-file rule. Plaintiffs filed their opposition on June 17, 2020, and the Company filed its reply on July 1, 2020. On September 11, 2020, additional named grower plaintiffs filed an identical putative class action in the District Court of Colorado against Sanderson Farms, Inc. and its Foods, Production, and Processing Divisions, as well as the other poultry producer defendants in the Oklahoma 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 Carolina. Briefing on that motion was completed on December 16, 2020. On September 18, 2020, another named grower plaintiff filed another duplicate class action in the District Court of Kansas against the same defendants as the Colorado action. On October 13, 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, North Carolina, and Colorado. Briefing on that motion was completed on December 15, 2020. On October 8, 2020, new named grower plaintiffs filed another duplicate class action in the Northern District of California against the same defendants as the Colorado and Kansas actions. On October 23, 2020, the District Court of Kansas stayed proceedings 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. On November 12, 2020, the District Court of Colorado stayed proceeding in that action (other than those related to the first-to-file motion) pending resolution of the first-to-file motion and the MDL consolidation motion discussed below. 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. Given the panel's ruling on consolidation, the Company does not expect rulings on the first-to-file motions in the various actions described above. On February 19, 2021, Plaintiffs filed a Consolidated Class Action Complaint in the MDL Court. The complaint is substantively identical to previous complaints. Fact discovery in the MDL is ongoing and is currently scheduled to end in August 2022. 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. Antitrust Civil Investigative Demands On February 21, 2017, Sanderson Farms, Inc. received an antitrust 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 included a request to produce all deposition transcripts from the civil litigation. The Company is unable to predict the outcome of these investigations at this time. 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. To date, three other nearly identical putative class action complaints, each seeking to represent the same putative class, also were filed. The complaints, brought on behalf of non-supervisory production and maintenance employees at broiler chicken processing plants, alleged that the defendants unlawfully conspired by agreeing to fix and depress the compensation paid to them, including hourly wages and compensation benefits, from January 1, 2009 to the present. The plaintiffs claim that broiler producers shared competitively sensitive wage and benefits compensation information in three ways: (1) attending in-person meetings in Destin, Florida; (2) receiving Agri Stats reports, as well as surveys taken and published by WMS; and (3) directly exchanging wage and benefits information with plant managers at other defendant broiler producers. Plaintiffs allege that this conduct violated the Sherman Antitrust Act. On November 12, 2019, the Court ordered that the four putative class action complaints would be consolidated for all pretrial purposes. The Court ordered plaintiffs to file their consolidated complaint on or before November 14, 2019. Defendants’ motions to dismiss the consolidated complaint were filed on November 22, 2019. Briefing was scheduled to be completed on or before February 28, 2020; however, after the defendants filed their motions to dismiss, on November 26, 2019, plaintiffs notified defendants that they intended to file an amended consolidated complaint. Plaintiffs filed an amended consolidated complaint on December 20, 2019. Plaintiffs name as defendants Sanderson Farms, Inc. and its Foods and Processing Divisions, as well as ten other broiler chicken producers and their affiliates; three turkey producers and their affiliates; Agri Stats, Inc.; and WMS. Plaintiffs 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. 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, were deficient. Plaintiffs filed a second amended complaint against Sanderson Farms, Inc. on November 2, 2020. Sanderson Farms filed a renewed motion to dismiss resisting plaintiffs' amended allegations. The Court denied that motion and allowed plaintiffs' case to go forward in an order dated March 10, 2021. Sanderson Farms filed an answer denying the substance of plaintiffs' allegations on April 7, 2021. Discovery in this case is underway. On February 16, 2022, Plaintiffs filed a Third Amended Consolidated Complaint. The Third Amended Consolidated Complaint, among other things, adds new allegations, expands the putative class to include workers at hatcheries and feed mills, and extends the putative class period to January 1, 2000 through July 20, 2021. Sanderson Farms moved to dismiss in part the Third Amended Consolidated Complaint on April 18, 2022. On May 18, 2022, Plaintiffs filed their opposition to Sanderson Farms' motion to dismiss in part. Sanderson Farms' reply brief in support of its motion to dismiss in part is due on June 8, 2022. 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. The Company is also aware that the United States Department of Justice, Antitrust Division, has opened a civil investigation into human resources antitrust matters and that at least one party to Judy Jien v. Perdue Farms, Inc. et al. has received a civil investigative demand in relation to that investigation. 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. The Company is involved in various other claims and litigation incidental to its business. Although the outcome of these matters cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome of currently pending matters, other than those discussed above, should not have a material effect on the Company’s consolidated results of operations or financial position. The Company recognizes the costs of legal defense for the legal proceedings to which it is a party in the periods incurred. After a considerable analysis of each case, the Company has determined that no accrual is required for any of the foregoing matters as of April 30, 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. |
CREDIT AGREEMENT
CREDIT AGREEMENT | 6 Months Ended |
Apr. 30, 2022 | |
Debt Disclosure [Abstract] | |
CREDIT AGREEMENT | CREDIT AGREEMENTThe 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 April 30, 2022, was $1.5 billion. The credit is unsecured and, unless extended, will expire on April 23, 2026. As of April 30, 2022 and May 25, 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. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Apr. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company’s estimated annual effective tax rates for the three and six months ended April 30, 2022 were 23.7% and 23.8%, respectively, as compared to estimated annual effective tax rates of 23.7% and 23.9%, respectively, for the three and six months ended April 30, 2021. There were no significant discrete items recognized during any of the comparative periods. The Company estimates its effective tax rate for the full fiscal year 2022, exclusive of discrete items, will be approximately 23.8%. As of April 30, 2022, the Company's deferred income tax liability was $155.8 million, as compared to $156.5 million at October 31, 2021, a decrease of $0.8 million. |
MERGER AGREEMENT
MERGER AGREEMENT | 6 Months Ended |
Apr. 30, 2022 | |
Discontinued Operations and Disposal Groups [Abstract] | |
MERGER AGREEMENT | MERGER AGREEMENTOn 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 the waiting period is terminated earlier by the DOJ or extended by agreement of the Company and Parent. The Company and Parent will continue to cooperate with the DOJ staff in its review of the transactions contemplated by the Merger Agreement. The parties expect that the Merger will be completed in the first half of calendar year 2022. |
ACCOUNTING POLICIES (Policies)
ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Apr. 30, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the three and six months ended April 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2022. The condensed consolidated balance sheet at October 31, 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, 2021. |
New Accounting Pronouncements | New Accounting Pronouncements 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 adopted this guidance during the first quarter of fiscal 2022, and adoption did not materially affect 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. |
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. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue in connection with a contract in which the Company has agreed to sell, and a customer has agreed to purchase, specific quantities of product at agreed-upon prices and when the Company's performance obligation related to that contract has been satisfied. In the majority of its contracts with customers, the Company's performance obligation is satisfied when delivery of the product has occurred, either at the customer's facility or the Company's facility, depending on the terms of each contract. In a smaller number of contracts, ownership of the product passes from the Company to the customer at some point during transit, at which time the performance obligation is satisfied and revenue is recognized. Revenue and related receivables are recognized based on the transaction price within the contract and are reduced by estimated or known amounts for items such as rebates, discounts, cooperative advertising allowances and other various items. The cost incurred for shipping and handling activities to deliver the product to the customer is recognized in cost of sales during the period in which the corresponding revenue is recognized. Where shipping and handling activities occur after the customer has obtained control of the product, the Company has elected to account for those expenses as fulfillment costs in cost of sales, rather than an additional promised service. Revenue is reported gross of any freight charge that is separately invoiced to a customer, and all freight costs are accounted for as cost of sales. |
REVENUE (Tables)
REVENUE (Tables) | 6 Months Ended |
Apr. 30, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of Revenue | The following tables disaggregate our net sales by product category: Product Category Three Months Ended April 30, 2022 Three Months Ended April 30, 2021 (in thousands) Fresh, vacuum-sealed chicken $ 584,707 $ 428,661 Fresh, chill-packed chicken 474,228 387,328 Fresh, ice-packed chicken 318,647 193,757 Frozen chicken 78,677 71,924 Prepared chicken 75,585 46,498 Other 7,870 5,712 Total net sales $ 1,539,714 $ 1,133,880 Product Category Six Months Ended April 30, 2022 Six Months Ended April 30, 2021 (in thousands) Fresh, vacuum-sealed chicken $ 1,104,338 $ 722,779 Fresh, chill-packed chicken 901,419 763,580 Fresh, ice-packed chicken 547,772 325,438 Frozen chicken 159,301 135,327 Prepared chicken 139,841 85,413 Other 14,471 10,649 Total net sales $ 2,867,142 $ 2,043,186 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 6 Months Ended |
Apr. 30, 2022 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Inventories consisted of the following: Inventory type April 30, 2022 October 31, 2021 (in thousands) Live poultry-broilers and breeders $ 279,301 $ 229,245 Feed, eggs and other 77,209 57,994 Processed poultry 38,696 42,775 Prepared chicken 28,611 11,157 Packaging materials 10,641 9,788 Total Inventories $ 434,458 $ 350,959 |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 6 Months Ended |
Apr. 30, 2022 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment, Net | Property, plant and equipment, net, consisted of the following: Description April 30, 2022 October 31, 2021 (in thousands) Land and buildings $ 984,721 $ 976,012 Machinery and equipment 1,476,116 1,439,762 Work-in-process 33,099 19,924 2,493,936 2,435,698 Less accumulated depreciation (1,285,110) (1,211,364) Property, plant and equipment, net $ 1,208,826 $ 1,224,334 |
STOCK COMPENSATION PLANS (Table
STOCK COMPENSATION PLANS (Tables) | 6 Months Ended |
Apr. 30, 2022 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Compensation Expense Related to Performance Share Agreements | The Company's compensation expense related to performance share agreements is summarized as follows (in thousands, except number of shares): Three Months Ended Six Months Ended Date of Performance Share Agreement Number of shares issued (actual (a) or estimated (e)) April 30, 2022 April 30, 2021 April 30, 2022 April 30, 2021 November 1, 2019 59,642 (e) $ 659 — $ 1,540 — November 1, 2020 167,306 (e) 5,907 — 11,044 — Total performance share compensation expense $ 6,566 $ — $ 12,584 $ — |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Apr. 30, 2022 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | The following tables present earnings per share: Three Months Ended April 30, 2022 April 30, 2021 (in thousands, except per share amounts) Net income $ 321,190 $ 96,911 Distributed and undistributed (earnings) to unvested restricted stock $ (3,555) $ (1,343) Distributed and undistributed earnings to common shareholders—Basic $ 317,635 $ 95,568 Weighted average shares outstanding—Basic 22,074 22,021 Weighted average shares outstanding—Diluted 22,074 22,021 Earnings per common share—Basic $ 14.39 $ 4.34 Earnings per common share—Diluted $ 14.39 $ 4.34 Six Months Ended April 30, 2022 April 30, 2021 (in thousands, except per share amounts) Net income $ 513,997 $ 106,389 Distributed and undistributed (earnings) to unvested restricted stock $ (5,759) $ (1,487) Distributed and undistributed earnings to common shareholders—Basic $ 508,238 $ 104,902 Weighted average shares outstanding—Basic 22,071 22,015 Weighted average shares outstanding—Diluted 22,071 22,015 Earnings per common share—Basic $ 23.03 $ 4.76 Earnings per common share—Diluted $ 23.03 $ 4.76 |
REVENUE - Disaggregation of Rev
REVENUE - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2022 | Apr. 30, 2021 | Apr. 30, 2022 | Apr. 30, 2021 | |
Revenue from External Customer [Line Items] | ||||
Net sales | $ 1,539,714 | $ 1,133,880 | $ 2,867,142 | $ 2,043,186 |
Fresh, vacuum-sealed chicken | ||||
Revenue from External Customer [Line Items] | ||||
Net sales | 584,707 | 428,661 | 1,104,338 | 722,779 |
Fresh, chill-packed chicken | ||||
Revenue from External Customer [Line Items] | ||||
Net sales | 474,228 | 387,328 | 901,419 | 763,580 |
Fresh, ice-packed chicken | ||||
Revenue from External Customer [Line Items] | ||||
Net sales | 318,647 | 193,757 | 547,772 | 325,438 |
Frozen chicken | ||||
Revenue from External Customer [Line Items] | ||||
Net sales | 78,677 | 71,924 | 159,301 | 135,327 |
Prepared chicken | ||||
Revenue from External Customer [Line Items] | ||||
Net sales | 75,585 | 46,498 | 139,841 | 85,413 |
Other | ||||
Revenue from External Customer [Line Items] | ||||
Net sales | $ 7,870 | $ 5,712 | $ 14,471 | $ 10,649 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Apr. 30, 2022 | Oct. 31, 2021 |
Inventory [Line Items] | ||
Inventories | $ 434,458 | $ 350,959 |
Live poultry-broilers and breeders | ||
Inventory [Line Items] | ||
Inventories | 279,301 | 229,245 |
Feed, eggs and other | ||
Inventory [Line Items] | ||
Inventories | 77,209 | 57,994 |
Processed poultry | ||
Inventory [Line Items] | ||
Inventories | 38,696 | 42,775 |
Prepared chicken | ||
Inventory [Line Items] | ||
Inventories | 28,611 | 11,157 |
Packaging materials | ||
Inventory [Line Items] | ||
Inventories | $ 10,641 | $ 9,788 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands | Apr. 30, 2022 | Oct. 31, 2021 |
Property, Plant and Equipment [Line Items] | ||
Property, plant, equipment, gross | $ 2,493,936 | $ 2,435,698 |
Less accumulated depreciation | (1,285,110) | (1,211,364) |
Property, plant and equipment, net | 1,208,826 | 1,224,334 |
Land and buildings | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant, equipment, gross | 984,721 | 976,012 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant, equipment, gross | 1,476,116 | 1,439,762 |
Work-in-process | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant, equipment, gross | $ 33,099 | $ 19,924 |
STOCK COMPENSATION PLANS - Addi
STOCK COMPENSATION PLANS - Additional Information (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||||
Apr. 30, 2022 | Jan. 31, 2022 | Apr. 30, 2021 | Apr. 30, 2022 | Apr. 30, 2021 | Nov. 01, 2020 | Nov. 01, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Compensation expense | $ 8,300,000 | $ 3,100,000 | $ 16,700,000 | $ 5,800,000 | |||
Management Share Purchase Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Compensation expense | 70,000 | 125,000 | 128,000 | 200,000 | |||
Restricted Stock | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Compensation expense | $ 1,700,000 | 3,000,000 | $ 4,000,000 | 5,600,000 | |||
Aggregate number of shares outstanding (in shares) | 220,167 | 220,167 | |||||
Unrecognized share-based compensation expense | $ 11,200,000 | $ 11,200,000 | |||||
Weighted average vesting period | 1 year 7 months | 1 year 7 months | |||||
Restricted Stock | Outside Directors | Greater than or equal to 25 percent less than or equal to 35 percent | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting period | 2 years | ||||||
Restricted Stock | Management Share Purchase Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of shares issued (in shares) | 3,443 | ||||||
Average price per share purchased by participants (in usd per share) | $ 190.64 | $ 190.64 | |||||
Matching Restricted Shares | Management Share Purchase Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of shares issued (in shares) | 824 | ||||||
Performance Based Awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Compensation expense | $ 6,566,000 | 0 | $ 12,584,000 | 0 | |||
Additional service period | 1 year | ||||||
Performance Based Awards | Minimum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Percentage of potential performance shares received | 50.00% | ||||||
Performance Based Awards | Maximum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Percentage of potential performance shares received | 200.00% | ||||||
Performance Based Awards | Performance Share Plan, 2021 | Outside Directors | Greater than or equal to 25 percent less than or equal to 35 percent | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting period | 2 years | ||||||
Performance Based Awards | Performance Share Plan 2020 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Compensation expense | $ 5,907,000 | $ 5,100,000 | 0 | $ 11,044,000 | 0 | ||
Target number of common stock to be granted (in shares) | 167,306 | 167,306 | 87,350 | ||||
Aggregate number of shares outstanding (in shares) | 167,306 | 167,306 | |||||
Performance Based Awards | Performance Share Plan 2020 | Outside Directors | Greater than or equal to 25 percent less than or equal to 35 percent | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting period | 2 years | ||||||
Performance Based Awards | Performance Share Plan 2019 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Compensation expense | $ 659,000 | $ 0 | $ 1,540,000 | $ 0 | |||
Target number of common stock to be granted (in shares) | 59,642 | 59,642 | 56,575 | ||||
Aggregate number of shares outstanding (in shares) | 59,642 | 59,642 | |||||
Performance Based Awards | Performance Share Plan 2019 | Outside Directors | Greater than or equal to 25 percent less than or equal to 35 percent | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting period | 2 years |
STOCK COMPENSATION PLANS - Comp
STOCK COMPENSATION PLANS - Compensation Costs (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Apr. 30, 2022 | Jan. 31, 2022 | Apr. 30, 2021 | Apr. 30, 2022 | Apr. 30, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Total performance share compensation expense | $ 8,300,000 | $ 3,100,000 | $ 16,700,000 | $ 5,800,000 | |
Performance Based Awards | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Total performance share compensation expense | $ 6,566,000 | 0 | $ 12,584,000 | 0 | |
Performance Share Plan 2019 | Performance Based Awards | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of share issued (in shares) | 59,642 | 59,642 | |||
Total performance share compensation expense | $ 659,000 | 0 | $ 1,540,000 | 0 | |
Performance Share Plan 2020 | Performance Based Awards | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of share issued (in shares) | 167,306 | 167,306 | |||
Total performance share compensation expense | $ 5,907,000 | $ 5,100,000 | $ 0 | $ 11,044,000 | $ 0 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Apr. 30, 2022 | Jan. 31, 2022 | Apr. 30, 2021 | Jan. 31, 2021 | Apr. 30, 2022 | Apr. 30, 2021 | |
Earnings Per Share [Abstract] | ||||||
Net income | $ 321,190 | $ 192,807 | $ 96,911 | $ 9,478 | $ 513,997 | $ 106,389 |
Distributed and undistributed (earnings) to unvested restricted stock | (3,555) | (1,343) | (5,759) | (1,487) | ||
Distributed and undistributed earnings to common shareholders—Basic | $ 317,635 | $ 95,568 | $ 508,238 | $ 104,902 | ||
Weighted average shares outstanding—Basic (in shares) | 22,074 | 22,021 | 22,071 | 22,015 | ||
Weighted average shares outstanding—Diluted (in shares) | 22,074 | 22,021 | 22,071 | 22,015 | ||
Earnings per common share - Basic (in usd per share) | $ 14.39 | $ 4.34 | $ 23.03 | $ 4.76 | ||
Earnings per common share - Diluted (in usd per share) | $ 14.39 | $ 4.34 | $ 23.03 | $ 4.76 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) | Jan. 15, 2019poultry_producer | Nov. 13, 2018poultry_producer | Feb. 12, 2018poultry_producer | Feb. 07, 2018poultry_producer | Jul. 10, 2017lawsuit | Mar. 27, 2017poultry_producer | Jan. 27, 2017poultry_producer | Dec. 16, 2016case | Oct. 13, 2016casepoultry_producer | Apr. 25, 2022poultry_producer | Dec. 20, 2021track | Oct. 15, 2021track | Jun. 12, 2020complaint | Dec. 20, 2019turkey_producerbroiler_chicken_producer | Nov. 12, 2019complaint | Aug. 30, 2019poultry_producercomplaint |
Broiler Chicken Antitrust Litigation | ||||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||||
Number of poultry producers named as defendants | poultry_producer | 2 | 3 | 3 | 3 | 13 | |||||||||||
Number of cases, direct purchaser complaints | case | 1 | |||||||||||||||
Number of cases, indirect purchaser complaints | case | 2 | 2 | ||||||||||||||
Litigation case behalf of commercial and institutional indirect purchaser plaintiffs | case | 1 | |||||||||||||||
Litigation case, behalf of end-user consumer plaintiffs | case | 1 | |||||||||||||||
Number of poultry producers against lawsuit filed | poultry_producer | 20 | |||||||||||||||
Number of complaints filed | complaint | 4 | |||||||||||||||
Number of additional individual action complaints filed | complaint | 49 | |||||||||||||||
Number of court order tracks | track | 2 | 2 | ||||||||||||||
Broiler Chicken Grower Litigation | ||||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||||
Number of poultry producers named as defendants | poultry_producer | 4 | 4 | ||||||||||||||
Number of cases, consolidation of suits | lawsuit | 1 | |||||||||||||||
Judy Jien v. Perdue Farms, Inc., et al. | ||||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||||
Number of poultry producers, named in putative class action | poultry_producer | 17 | |||||||||||||||
Number of identical putative class action complaints | complaint | 3 | |||||||||||||||
Putative class action complaints | complaint | 4 | |||||||||||||||
Number of broiler chicken producers, named as defendants | broiler_chicken_producer | 10 | |||||||||||||||
Number of turkey producers, named as defendants | turkey_producer | 3 |
CREDIT AGREEMENT (Details)
CREDIT AGREEMENT (Details) - Line of credit | May 25, 2022USD ($) | Apr. 30, 2022USD ($) | Apr. 23, 2021USD ($)right |
Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Revolving credit facility, maximum borrowing capacity | $ 1,000,000,000 | ||
Ratio of indebtedness to net capital | 0.50 | ||
Number of rights | right | 1 | ||
Ratio of indebtedness to net capital, maximum increase | 0.05 | ||
Revolving credit facility, minimum net worth requirement | $ 1,500,000,000 | ||
Revolving Credit Facility | Subsequent Event | |||
Debt Instrument [Line Items] | |||
Long-term debt | $ 0 | ||
Revolving credit facility, remaining available balance | 970,900,000 | ||
Letter of Credit | Subsequent Event | |||
Debt Instrument [Line Items] | |||
Long-term debt | $ 29,100,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Apr. 30, 2022 | Apr. 30, 2021 | Apr. 30, 2022 | Apr. 30, 2021 | Oct. 31, 2022 | Oct. 31, 2021 | |
Tax Credit Carryforward [Line Items] | ||||||
Effective income tax rate | 23.70% | 23.70% | 23.80% | 23.90% | ||
Deferred income taxes | $ 155,752 | $ 155,752 | $ 156,531 | |||
Decrease in deferred income taxes | $ 800 | |||||
Scenario, Forecast | ||||||
Tax Credit Carryforward [Line Items] | ||||||
Effective income tax rate, excluding discrete items | 23.80% |
MERGER AGREEMENT (Details)
MERGER AGREEMENT (Details) | Aug. 08, 2021$ / shares |
Joint Venture Between Cargill, Inc. and Continental Grain Company | Disposal Group, Disposed of by Sale, Not Discontinued Operations | Sanderson Farm | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Merger price per share to be paid at close (USD price per share) | $ 203 |