STOCK COMPENSATION PLANS

Refer to Note 8 and Note 9 of the Company’s October 31, 2015 audited financial statements in the Company's 2015 Annual Report on Form 10-K for further information on our employee benefit plans and stock based compensation plans, respectively. Total stock based compensation expense during the three and nine months ended July 31, 2016 was $3,344,000 and $12,472,000, respectively, as compared to total stock based compensation expense of $3,095,000 and $13,004,000 for the three and nine months ended July 31, 2015, respectively.

During the nine months ended July 31, 2016, participants in the Company’s Management Share Purchase Plan (MSPP) elected to receive a total of 12,404 shares of restricted stock at an average price of $82.21 per share instead of a specified percentage of their cash compensation, and the Company issued 3,012 matching restricted shares. During the three and nine months ended July 31, 2016, the Company recorded compensation cost for the MSPP shares, included in the total stock based compensation expense above, of $59,000 and $237,000, respectively, as compared to $57,000 and $245,000 during the three and nine months ended July 31, 2015, respectively.

On November 1, 2015, the Company entered into performance share agreements that grant certain officers and key employees the right to receive a target number of 83,875 shares of the Company’s common stock, subject to the Company’s achievement of certain performance measures. As of July 31, 2016, the Company could not determine that achievement of the applicable performance based criteria is probable due to the uncertainties discussed below, and therefore recorded no compensation expense related to those shares.

The Company also has performance share agreements in place with certain officers and key employees that were entered into on November 1, 2014 and November 1, 2013. Each cycle of performance shares is subject to a two-year performance period and an additional one-year service-based vesting period. During the quarter ended April 30, 2016, the Company determined that achievement of the applicable performance based criteria for the November 1, 2014 agreements is probable at a level between the target and maximum levels. As a result, the three and nine months ended July 31, 2016 include compensation expense of $998,000 and $4,941,000, respectively, included in the total stock based compensation expense above. As of July 31, 2016, the aggregate number of shares estimated to be awarded related to the November 1, 2014 performance share agreements totaled 99,921 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 October 31, 2016, and due to potential forfeitures.

The Compensation Committee of the Company's Board of Directors has determined that the performance shares granted on November 1, 2013 have been earned at the maximum level, subject to the satisfaction of the additional one-year service period ending on October 31, 2016. Accordingly, the three and nine months ended July 31, 2016 include compensation expense of $800,000 and $2,366,000, respectively, included in the total stock based compensation expense above, related to the performance share agreements entered into on November 1, 2013, as compared to $787,000 and $5,625,000 during the three and nine months ended July 31, 2015, respectively. Because management's initial determination of probability was made during the first quarter of fiscal 2015, and because adjustments to the accrual are made using the cumulative catch up method of accounting, the compensation expense related to the agreements entered into on November 1, 2013 recorded during the first nine months of fiscal 2015 was greater than that recorded during the first nine months of fiscal 2016. As of July 31, 2016, the aggregate number of shares estimated to be awarded related to the November 1, 2013 performance share agreements totaled 146,169 shares. Since the performance period for those agreements has ended, the actual number of shares that will be awarded can change only due to potential forfeitures during the remaining three months of the service period ending October 31, 2016.

In estimating the compensation expense to record in a period for any outstanding performance share grants, the Company considers, among other factors, current and projected grain costs and chicken volumes and pricing, as well as the amount of the Company’s commitments to procure grain at a fixed price throughout the performance period. Due to the high level of volatility of these commodity prices and the impact that the change in pricing can have on the Company’s results, the Company’s assessment of probability can change from period to period and can result in a significant revision to the amounts accrued related to the arrangements. The accounting for these arrangements requires the Company to accrue over the three-year service period the estimated amounts that will be earned with changes made during the service period adjusted using the cumulative catch up method. Had the Company determined that it was probable that the maximum amount of those outstanding awards from the fiscal 2015 and 2016 agreements would be earned, an additional $0.4 million and $2.9 million, respectively, would have been accrued as of July 31, 2016.

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



		Three months ended				Nine months ended
Date of Performance Share Agreement	Number of shares issued (actual (a) or estimated (e))	July 31, 2016		July 31, 2015		July 31, 2016		July 31, 2015
November 1, 2012	186,951 (a)	$	—	$	709	$	—	$	2,165
November 1, 2013	146,169 (e)	800		787		2,366		5,625
November 1, 2014	99,921 (e)	998		—		4,941		—
November 1, 2015	0 (e)	—		—		—		—
Total compensation cost		$	1,798	$	1,496	$	7,307	$	7,790

On November 1, 2015, the Company granted 83,875 shares of restricted stock to certain officers and key management employees. The restricted stock had a grant date fair value of $69.51 per share and will vest on November 1, 2019. On February 11, 2016, the Company granted an aggregate of 18,060 shares of restricted stock to all of its non-employee directors. The restricted stock had a grant date fair value of $81.17 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, 2016, related to all unvested restricted stock grants totaled 294,060. During the three and nine months ended July 31, 2016, the Company recorded compensation cost, included in the total stock based compensation expense above, of $1,487,000 and $4,928,000, respectively, related to restricted stock grants, as compared to $1,542,000 and $4,969,000 during the three and nine months ended July 31, 2015, respectively. The Company had $10.5 million in unrecognized share-based compensation costs as of July 31, 2016, that will be recognized over a weighted average remaining vesting period of approximately 1 year, 9 months.