SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X / Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended October 31, 1994
/ / 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 : 0-16567
SANDERSON FARMS, INC.
(Exact name of registrant as specified in its charter)
Mississippi 64-0615843
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
225 North 13th Avenue 39440
Laurel, Mississippi (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (601) 649-4030
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $1.00 per share par value
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.
X Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ]
Aggregate market value (based on the closing sales price in the NASDAQ
National Market System) of the voting stock held by non-affiliates of the
Registrant as of December 31, 1994: approximately $82,736,860.18.
Number of Shares outstanding of the Registrant's common stock as of
December 31, 1994: 9,075,427 shares of common stock, $1.00 per share par
value.
Portions of the Registrant' definitive proxy statement filed or to be
filed in connection with its 1995 Annual Meeting of Stockholders are
incorporated by reference into Part III.
PAGE
<PAGE>
INTRODUCTORY
Definitions. Except where the context indicates otherwise, the
following terms have the following respective meanings when used in this
Annual Report. "Registrant" and "Company" mean Sanderson Farms, Inc. and its
subsidiaries and predecessor organizations. "Fiscal year" means the fiscal
year ended October 31, 1994, which is the year for which this Annual Report is
filed.
Presentation and Dates of Information. Except for Item 4A herein, the
Item numbers and letters appearing in this Annual Report correspond with those
used in Securities and Exchange Commission Form 10-K (and, to the extent that
it is incorporated into Form 10-K, the letters used in the Commission's
Regulation S-K) as effective on the date hereof, which specifies the
information required to be included in Annual Reports to the Commission. Item
4A ("Executive Officers of the Registrant") has been included by the
Registrant in accordance with General Instruction G(3) of Form 10-K and
Instruction 3 of Item 401(b) of Regulation S-K. The information contained in
this Annual Report is, unless indicated to be given as of a specified date or
for the specified period, given as of the date of this Report, which is
January 25, 1995.
PART I
Item 1. Business
(a) GENERAL DEVELOPMENT OF THE REGISTRANT'S BUSINESS
Sanderson Farms, Inc. was incorporated in Mississippi in 1955. The
Registrant is a fully-integrated poultry processing company engaged in the
production, processing, marketing and distribution of fresh and frozen chicken
products. In addition, through its wholly-owned subsidiary, Sanderson Farms,
Inc. (Foods Division), the Registrant is engaged in the processing, marketing
and distribution of processed and prepared food items.
The Registrant sells ice pack, chill pack and frozen chicken, in whole,
cut-up and boneless form, primarily under the Miss Goldy brand name to
retailers, distributors, and fast food operators principally in the
southeastern, southwestern and western United States. During its fiscal year
ended October 31, 1994, the Registrant processed 162.1 million chickens, or
approximately 522.8 million dressed pounds. According to 1994 industry
statistics, the Registrant was the 15th largest processor of dressed chickens
in the United States based on estimated average weekly processing.
The Registrant's chicken operations presently encompass four hatcheries,
three feed mills, five processing plants and one by-products plant. The
Registrant has contracts with operators of approximately 403 grow-out farms
that provide it with sufficient housing capacity for its current operations.
The Registrant also has contracts with operators of 161 breeder farms.
The Registrant sells over 100 processed and prepared food items
nationally and regionally, primarily to distributors, national food service
accounts, retailers and club stores. These food items include frozen entrees,
such as chicken and dumplings, lasagna, seafood gumbo, and shrimp creole and
specialty products, such as chicken patties and corn dogs. The Registrant
also sells a retail entree line of six different two-pound frozen entrees
including chicken primavera, lasagna with meat, seafood gumbo and mexican
casserole with beef. This product line is designed as a convenient, quality
product for the family.
Since the Registrant completed the initial public offering of its common
stock through the sale of 1,150,000 shares to an underwriting syndicate
managed by Smith Barney, Harris Upham & Co. Incorporated and Morgan Keegan &
Co. Inc. in May 1987, the Registrant has significantly expanded its operations
to increase production capacity, product lines and marketing flexibility.
Through 1993, this expansion included the expansion of the Registrant's
Hammond, Louisiana processing facility, the construction of new waste water
<PAGE>
facilities at the Hammond, Louisiana and Hazlehurst, Mississippi processing
facilities, the addition of second shifts at the Hammond, Louisiana, Laurel,
Mississippi and Hazlehurst, Mississippi processing facilities, expansion of
freezer and production capacity at its prepared foods facility in Jackson,
Mississippi, the expansion of freezer capacity at its Laurel, Mississippi,
Hammond, Louisiana and Collins, Mississippi processing facilities, and the
addition of deboning capabilities at four of the registrant's five poultry
processing facilities. In addition, since 1987, the Registrant completed the
expansion and renovation of the hatchery at its Hazlehurst, Mississippi
production facilities, and completed the renovation and expansion of its
Collins, Mississippi by-products facility, allowing for the elimination of a
smaller by-products facility at the Laurel, Mississippi plant.
During 1993, the Registrant began operations at its Pike County,
Mississippi, production and processing facilities. These facilities include a
hatchery, a feed mill, a processing plant, a waste water treatment facility
and a water treatment facility.
The Registrant continued its expansion during fiscal 1994. In January
1994, the Registrant began operations of a second processing line at its Pike
County, Mississippi processing facility, which increased the Registrant's
processing capacity by 325,000 birds per week to approximately 3,200,000 birds
per week. In addition to expanding the Pike County processing facilities to
include a second line, the Registrant expanded its Collins, Mississippi
processing plant in early fiscal 1994 to allow for the deboning of product.
The Registrant also began operations of a second shift on one of two
processing lines at its Collins, Mississippi processing plant during June
1994. The new shift reached its processing capacity during the fourth quarter
of fiscal 1994, and increased the number of birds the Company is processing to
approximately 3,475,000 birds per week.
Capital expenditures for fiscal 1994 were funded by working capital and
borrowings under a revolving credit agreement. Effective July 28, 1994, the
Registrant amended its revolving credit agreement to, among other things,
increase the revolving credit available to the Registrant thereunder to $70.0
million from $60.0 million. The Registrant anticipates that capital
expenditures for fiscal 1995 will be funded by internally generated working
capital and borrowings under the revolving credit agreement.
The Registrant currently has additional processing capacity available to
it through the double shifting of its Pike County, Mississippi processing
facility and the second line at its Collins, Mississippi processing facility.
In addition, the Registrant continually evaluates internal and external
expansion opportunities to continue its growth in poultry and/or related food
products.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Not applicable.
(c) NARRATIVE DESCRIPTION OF BUSINESS
REGISTRANT'S BUSINESS
General
The Registrant is engaged in the production, processing, marketing and
distribution of fresh and frozen chicken and the preparation, processing,
marketing and distribution of processed and prepared food items.
The Registrant sells chill pack, ice pack and frozen chicken, both whole
and cut-up, primarily under the Miss Goldy brand name to retailers,
distributors and fast food operators principally in the southeastern,
southwestern and western United States. During its fiscal year ended October
31, 1994, the Registrant processed approximately 162.1 million chickens, or
approximately 522.8 million dressed pounds. In addition, the purchased and
further processed 52.3 million pounds of poultry products during fiscal 1994.
According to 1994 industry statistics, the Registrant was the 15th largest
<PAGE>
processor of dressed chicken in the United States based on estimated average
weekly processing.
The Registrant conducts its chicken operations through Sanderson Farms,
Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division),
both of which are wholly-owned subsidiaries of the Sanderson Farms, Inc.
Sanderson Farms, Inc. (Production Division), which has facilities in Laurel,
Collins, Hazlehurst and Pike County, Mississippi, is engaged in the production
of chickens to the broiler stage. Sanderson Farms, Inc. (Processing Division),
which has facilities in Laurel, Collins, Hazlehurst and Pike County,
Mississippi, and Hammond, Louisiana, is engaged in the processing, sale and
distribution of chickens.
The Registrant conducts its processed and prepared foods business
through its wholly-owned subsidiary, Sanderson Farms, Inc. (Foods Division),
which has a facility in Jackson, Mississippi. The Foods Division is engaged
in the processing, marketing and distribution of over 100 processed and
prepared food items, which it sells nationally and regionally, principally to
distributors, national food service accounts, retailers and club stores.
Products
The Registrant has the ability to produce a wide range of processed
chicken products and processed and prepared food items thereby allowing it to
take advantage of marketing opportunities as they arise.
Processed chicken is first saleable as an ice packed whole chicken. The
Registrant adds value to its ice packed whole chickens by removing the
giblets, weighing, packaging and labelling the product to specific customer
requirements and cutting the product based on customer specifications. The
additional processing steps of giblet removal, close tolerance weighing and
cutting increase the value of the product to the customer over whole chickens
by reducing customer handling and cutting labor and capital costs, reducing
the shrinkage associated with cutting, and ensuring consistently sized
portions.
With respect to chill pack products, additional value can be achieved by
deep chilling and packaging whole chickens in bags or combinations of fresh
chicken parts in various sized individual trays under the Registrant's brand
name, which then may be weighed and prepriced, based on each customer's needs.
The chill pack process increases the value of the product by extending shelf
life, reducing customer weighing and packaging labor, and providing the
customer with a wide variety of products with uniform, well designed
packaging, all of which enhance the customer's ability to merchandise chicken
products.
To satisfy some customers' merchandising needs, the Registrant quick
freezes the chicken product, which adds value by meeting the customers'
handling, storage, distribution and marketing needs and by permitting shipment
of product overseas where transportation time may be as long as 25 days.
Value added products usually generate higher sale prices per pound,
exhibit less finished price volatility and generally result in higher and more
consistent profit margins over the long-term than non-value added product
forms. Selling fresh chickens as a prepackaged brand name product has been a
significant step in the development of the value added, higher margin consumer
business. The Registrant evaluates daily the potential profitability of all
product lines and attempts to maximize its profits on a short-term basis by
making strategic changes in its product mix to meet customer demand.
The following table sets forth, for the periods indicated, the
contribution, as a percentage of net sales of chicken products, of value added
and non-value added chicken products. <PAGE>
<PAGE>
<TABLE>
Fiscal Year Ended October 31,
<CAPTION>
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Value added . . . . 94.7% 95.7% 96.3% 97.2% 98.3%
Non-value added . . 5.3% 4.3% 3.7% 2.8% 1.7%
Total Registrant
chicken sales . . . 100.0% 100.0% 100.0% 100.0% 100.0%
The following table sets forth, for the years indicated, the
contribution, as a percentage of net sales, of each of the Registrant's major
product lines.
Fiscal Year Ended October 31,
1990 1991 1992 1993 1994
Registrant processed
chicken:
Value added:
Chill pack(1) . 28.7% 28.3% 24.3% 20.9% 18.2%
Fresh bulk pack(1) 38.9 37.8 42.2 49.6 56.2
Frozen . . . . 9.5 8.1 9.2 8.8 10.2
Subtotal . . 77.1 74.2 75.7 79.3 84.6
Non-value added:
Ice pack . . . 2.8 2.0 2.1 1.8 0.9
Frozen . . . . 1.5 1.4 .8 0.4 0.6
Subtotal . . 4.3 3.4 2.9 2.2 1.5
Total Company
processed
chicken . . 81.4 77.6 78.6 81.5 86.1
Processed and
prepared
foods . . . . . . 17.5 21.5 20.9 18.4 13.8
Other(2) . . . . . 1.1 0.9 .5 0.1 0.1
Total . . . . 100.0% 100.0% 100.0% 100.0% 100.0%
</TABLE>
(1) Vacuum pack poultry products have been restated in 1993 and included in
1994 as fresh bulk pack, which includes ice pack and vacuum pack products.
The vacuum pack products were classified as chill pack products in the 1993
Form 10-K.
(2) Consists of sales of poultry products that the Registrant purchases from
other poultry processors for resale, as necessary, to meet customer
demand.
Sales and Marketing
The Registrant's chicken products are sold primarily to retailers
(including national and regional supermarket chains and local supermarkets),
distributors and fast food operators located principally in the southeastern,
southwestern and western United States. The Registrant also sells its chicken
products to governmental agencies and to customers who resell the products
outside of the continental United States. This wide range of customers,
together with the Registrant's broad product mix, provides the Registrant with
flexibility in responding to changing market conditions in its effort to
maximize profits. This flexibility also assists the Registrant in its efforts
to reduce its exposure to market volatility.
Sales and distribution of the Registrant's chicken products are
conducted primarily by sales personnel at the Registrants general corporate
offices in Laurel, Mississippi and by customer service representatives at each
of its five processing complexes and through independent food brokers. Each
complex has individual on-site distribution centers and uses the Registrant's
truck fleet, as well as contract carriers, for distribution of its products.
Generally, the Registrant prices its chicken products based upon weekly
market prices reported by the United States Department of Agriculture.
Consistent with the industry, the Registrant's profitability is impacted by
such market prices, which may fluctuate substantially and exhibit cyclical
characteristics. The Registrant adds a markup to base prices, which depends
upon value added, volume, product mix and other factors. While base prices
may change weekly, the Registrant's markup is generally negotiated from time
to time with the Registrant's customers. The Registrant's sales are generally
made on an as-ordered basis, and the Registrant maintains no long-term sales
contracts with its customers.
The Registrant uses television, radio and newspaper advertising, coupon
promotion, point of purchase material and other marketing techniques to
develop consumer awareness of and brand recognition for its Miss Goldy
products. The Registrant has achieved a high level of public awareness and
acceptance of its products through television advertising featuring a
celebrity as the Registrant's spokesperson. Brand awareness is an important
element of the Registrant's marketing philosophy, and it intends to continue
brand name merchandising of its products.
The Registrant's processed and prepared food items are sold nationally
and regionally, primarily to distributors, national food service accounts,
retailers and club stores. Sales of such products are handled by independent
food brokers located throughout the United States, primarily in the southeast
and southwest United States, and by sales personnel of the Registrant.
Processed and prepared food items are distributed from the Registrant's plant
in Jackson, Mississippi, through arrangements with contract carriers.
Production and Facilities
General. The Registrant is a vertically-integrated producer of fresh
and frozen chicken products, controlling the production of hatching eggs,
hatching, feed manufacturing, growing, processing and packaging of its product
lines.
Breeding and Hatching. The Registrant maintains its own breeder flocks
for the production of hatching eggs. The Registrant's breeder flocks are
acquired as one-day old chicks (known as pullets or cockerels) from primary
breeding companies that specialize in the production of genetically designed
breeder stock. As of October 31, 1994, the Registrant maintained contracts
with 40 pullet farm operators for the grow-out of pullets (growing the pullet
to the point at which it is capable of egg production, which takes
approximately six months). Thereafter, the mature breeder flocks are
transported by Registrant vehicles to breeder farms that are maintained, as of
October 31, 1994, by 121 independent contractors under the Registrant's
supervision. Eggs produced by independent contract breeders are transported
to Registrant's hatcheries in Registrant vehicles.
During the beginning of fiscal year 1994, the Registrant supplemented
the production of hatching eggs by outside purchases of eggs for a period of
twelve weeks, to support the second processing line at the Pike County
processing facility.
The Registrant owns and operates four hatcheries located in Mississippi
where eggs are incubated and hatched in a process requiring 21 days. Once
hatched, the day-old chicks are vaccinated against common poultry diseases and
are transported by Registrant vehicles to independent contract grow-out farms.
As of November 1994, the Registrant's hatcheries were capable of producing an
aggregate of approximately 3.6 million chicks per week.
Grow-out. The Registrant places it chicks on 403 grow-out farms, as of
October 31, 1994, located in Mississippi and Louisiana where broilers are
grown to an age of approximately six to seven weeks. The farms provide the
Registrant with sufficient housing capacity for its operations, and are
typically family-owned farms which are operated under contract with the
Registrant. The farm owners provide facilities, utilities and labor; the
Registrant supplies the day-old chicks, feed and veterinary and technical
services. The farm owner is compensated pursuant to an incentive formula
designed to promote production cost efficiency.
Historically, the Registrant has been able to accommodate expansion in
grow-out facilities through additional contract arrangements with independent
growers.
Feed Mills. An important factor in the grow-out of chickens is the rate
at which chickens convert feed into body weight. The Registrant purchases on
the open market the primary feed ingredients, including corn and soybean meal,
which historically have been the largest cost components of the Registrant's
total feed costs. The quality and composition of the feed is critical to the
conversion rate, and accordingly, the Registrant formulates and produces its
own feed. As of October 31, 1994, the Registrant operated three feed mills,
all of which are located in Mississippi. The Registrant's annual feed
requirements for fiscal 1994 were approximately 752,000 tons, and it has the
capacity to produce approximately 904,800 tons of finished feed annually under
current configurations.
Feed grains are commodities subject to volatile price changes caused by
weather, size of harvest, transportation and storage costs and the
agricultural policies of the United States and foreign governments. On
October 31, 1994, the Registrant had approximately 401,000 bushels of corn
storage capacity at its feed mills, which was sufficient to store all of its
weekly requirements for corn. The Registrant purchases its corn and other
feed supplies at current prices from suppliers and, to a limited extent,
direct from farmers. Feed grains are available from an adequate number of
sources. Although the Registrant has not experienced and does not anticipate
problems in securing adequate supplies of feed grains, price fluctuations of
feed grains can be expected to have a direct and material effect upon the
Registrant's profitability. Although the Registrant sometimes purchases
grains in forward markets, it cannot eliminate the potentially adverse affect
of grain price increases.
Processing. Once the chicks reach processing weight, they are
transported to the Registrant's processing plants. These plants use modern,
highly automated equipment to process and package the chickens. The
Registrant's Pike County, Mississippi processing plant, which currently
operates two processing lines on a single shift basis, is currently processing
approximately 650,000 chickens per week. The Registrant's Collins, Mississippi
processing plant, which is currently operating one of its two lines on a
double shift basis and one line on a single shift basis, is currently
processing approximately 950,000 chickens per week. The Registrant's Laurel
and Hazlehurst, Mississippi and Hammond, Louisiana processing plants currently
operate on a double shift basis, and have the capacity to process an aggregate
of approximately 1,875,000 chickens per week. The Registrant also has the
capabilities to produce deboned product at all its processing facilities. At
October 31, 1994, four of these deboning facilities were operating on a double
shift basis and the fifth was operating on a single shift basis, resulting in
a combined capacity to process approximately 2.9 million pounds of product per
week at all deboning facilities.
Sanderson Farms, Inc. (Foods Division). The facilities of Sanderson
Farms, Inc. (Foods Division) are located in Jackson, Mississippi in a plant
with approximately 75,000 square feet of refrigerated manufacturing and
storage space. The plant uses highly automated equipment to prepare, process
and freeze food items. The Registrant could increase significantly its
production of processed and prepared food items without incurring significant
capital expenditures or delays.
Executive Offices; Other Facilities. The Registrant's corporate offices
are located in Laurel, Mississippi. As of October 31, 1994, the Registrant
operated one by-products plant, and five automotive maintenance shops which
service approximately 308 Registrant over-the-road and farm vehicles. In
addition, the Registrant has one child care facility located near its Collins,
Mississippi, processing plant currently serving over 200 children.
Quality Control
The Registrant believes that quality control is important to its
business and conducts quality control activities throughout all aspects of its
operations. The Registrant believes these activities are beneficial to
efficient production and in assuring its customers wholesome, high quality
products.
From the corporate offices, the Director of Technical Services
supervises the operation of a modern, well-equipped laboratory which, among
other things, monitors sanitation at the hatcheries, quality and purity of the
Registrant's feed ingredients and feed, the health of the Registrant's breeder
flocks and broilers, and conducts microbiological tests of live chickens,
facilities and finished products. The Registrant conducts on-site quality
control activities at each of the five processing plants and the processed and
prepared food plant.
Regulation
The Registrant's facilities and operations are subject to regulation by
various federal and state agencies, including, but not limited to, the federal
Food and Drug Administration ("F.D.A."), the United States Department of
Agriculture ("U.S.D.A."), the Environmental Protection Agency, the
Occupational Safety and Health Administration and corresponding state
agencies. The Registrant's chicken processing plants are subject to continuous
on-site inspection by the U.S.D.A. The Sanderson Farms, Inc. (Foods Division)
processing plant operates under the U.S.D.A.'s Total Quality Control Program
which is a strict self-inspection plan written in cooperation with and
monitored by the U.S.D.A. The F.D.A. inspects the production of the
Registrant's feed mills.
Compliance with existing regulations has not had a material adverse
effect upon the Registrant's earnings or competitive position in the past and
is not anticipated to have a materially adverse effect in the future.
Management believes that the Registrant is in substantial compliance with
existing laws and regulations relating to the operation of its facilities and
does not know of any major capital expenditures necessary to comply with such
statutes and regulations.
The Registrant takes extensive precautions to ensure that its flocks are
healthy and that its processing plants and other facilities operate in a
healthy and environmentally sound manner. Events beyond the control of the
Registrant, however, such as an outbreak of disease in its flocks or the
adoption by governmental agencies of more stringent regulations, could
materially and adversely affect its operations.
Competition
The Registrant is subject to significant competition from regional and
national firms in all markets in which it competes. Some of the Registrant's
competitors have greater financial and marketing resources than the
Registrant.
The primary methods of competition are price, product quality, number of
products offered, brand awareness and customer service. The Registrant has
emphasized product quality and brand awareness through its advertising
strategy. See "Business - Sales and Marketing". Although poultry is
relatively inexpensive in comparison with other meats, the Registrant competes
indirectly with the producers of other meats and fish, since changes in the
relative prices of these foods may alter consumer buying patterns.
Sources of Supply
During fiscal 1994, the Registrant purchased its pullets and its
cockerels from three major breeders. The Registrant has found the genetic
cross of the breeds supplied by these companies to produce chickens most
suitable to the Registrant's purposes. The Registrant has no written
contracts with these breeders for the supply of breeder stock. Other sources
of breeder stock are available, and the Registrant continually evaluates these
sources of supply. Should breeder stock from its present suppliers not be
available for any reason, the Registrant believes that it could obtain
adequate breeder stock from other suppliers.
During fiscal 1994, the Registrant purchased approximately 1.3% of its
hatching egg requirements from an outside source to supplement the
Registrant's hatching egg production. Purchases from this supplier were
discontinued during the first quarter of fiscal 1994 as sufficient breeder
operators were under contract to support the Registrant's operations.
Other major raw materials used by the Registrant include feed grains,
cooking ingredients and packaging materials. The Registrant purchases these
materials from a number of different vendors and believes that its sources of
supply are adequate for its present needs. The Registrant does not anticipate
any difficulty in obtaining these materials in the future.
Seasonality
The demand for the Registrant's chicken products generally is greatest
during the spring and summer months and lowest during the winter months.
Trademarks
The Registrant has registered with the United States Patent and
Trademark Office the trademark Miss Goldy which it uses in connection with
the distribution of its premium grade chill pack products. The Registrant
considers the protection of this trademark to be important to its marketing
efforts due to consumer awareness of and loyalty to the Miss Goldy label.
The Registrant also has registered with the United States Patent and Trademark
Office six other trademarks which are used in connection with the distribution
of chicken and other products and for other competitive purposes.
The Registrant has registered with the United States Patent and
Trademark Office the trademark Sanderson Farms which it uses in connection
with the distribution of its prepared foods and two pound frozen entree
products.
The Registrant, over the years, has developed important non-public
proprietary information regarding product related matters. While the
Registrant has internal safeguards and procedures to protect the
confidentiality of such information, it does not generally seek patent
protection for its technology.
Employees and Labor Relations
As of October 31, 1994, the Registrant had 4,854 employees, including
668 salaried and 4,186 hourly employees. A collective bargaining agreement,
which expired on November 30, 1994, with the United Food and Commercial
Workers International Union covering 483 hourly employees who work at the
Registrant's processing plant in Hammond, Louisiana, was renegotiated and
signed by the union and the Registrant effective November 6, 1994. This
agreement will expire on November 30, 1998. The collective bargaining
agreement has a grievance procedure and no strike-no lockout clauses that
should assist in maintaining stable labor relations at the Hammond plant.
On June 30, 1994, an election was held by the National Labor Relations
Board at the Registrant's Collins, Mississippi processing plant as a result of
a petition filed by the Laborer's International Union of North America Local
693 seeking recognition as the exclusive collective bargaining representative
of certain employees at that plant. The results of the election were
inconclusive, with 430 votes cast in favor of union representation, 413 votes
cast against union representation, and 29 votes not opened or counted because
of challenges to their eligibility.
On July 7, 1994, the Registrant filed its objections with the National
Labor Relations Board asking that Board to count the ballots challenged by the
union and to set aside the election as a result of improper election activity
on the part of the union. A hearing on these objections and the challenged
ballots was ordered, and was concluded on August 16, 1994. On October 9,
1994, the hearing officer issued his report and recommendation to the National
Labor Relations Board that the Registrant's objectives and challenges be
dismissed and that the appropriate certification of the union be issued. On
November 15, 1994, the Registrant filed its exceptions to the hearing
officer's report and recommendation, and the matter is now pending before the
National Labor Relations Board.
On December 14, 1994, the National Labor Relations Board scheduled an
election at the Registrant's Hazlehurst, Mississippi processing plant as a
result of a petition filed by the Laborer's International Union of North
America Local 693 seeking recognition as the exclusive collective bargaining
representative of certain employees at that plant. The election is scheduled
for January 27, 1995.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND
DOMESTIC OPERATIONS AND EXPORT SALES
The Registrant engages in no material foreign operations, and no
material portion of its revenues was derived from customers in foreign
countries.
Item 2. Properties.
The Registrant owns substantially all of its major operating facilities
with the following exceptions: one processing plant and feed mill complex is
leased on an annual renewal basis through 2063 with an option to purchase at a
nominal amount, at the end of the lease term. One processing plant complex is
leased under four leases, three of which are renewable annually through 2061,
2063, 2075 and 2073, respectively. Certain infrastructure improvements
associated with a processing plant are leased under a lease which expires in
2012 and is thereafter renewable annually through 2091. All of the foregoing
leases are capital leases.
There are no material encumbrances on the major operating facilities
owned by the Registrant, except that the plant of Sanderson Farms, Inc. (Foods
Division) is encumbered by a mortgage which collateralizes a note with an
outstanding principal balance of $1,609,208 on December 31, 1994, which bears
interest at the rate of 5% per annum and is payable in equal annual
installments through 2009. In addition, under the terms of the revolving
credit agreement obtained July 29, 1992, and under the $20 million long-term
fixed rate loan obtained in February, 1993, the Registrant may not pledge any
additional assets as collateral other than fixed assets up to 15% of its
tangible assets.
Management believes that the Company's facilities are suitable for its
current purposes, and believes that current renovations and expansions will
enhance present operations and allow for future internal growth.
Item 3. Legal Proceedings.
There are no material pending legal proceedings, other than routine
litigation incidental to the Registrant's business, to which the Registrant is
a party or of which its property is the subject, and no such proceedings are
known by the Registrant to be contemplated by governmental authorities.
Item 4. Submission of Matters to
a Vote of Security Holders.
No matters were submitted to a vote of the Registrant's security
holders, through the solicitation of proxies or otherwise, during the fourth
quarter of the Fiscal Year.
<TABLE>
Item 4A. Executive Officers of the Registrant.
Executive
Name Age Office Officer Since
<CAPTION>
<S> <C> <C> <C>
Joe Frank Sanderson 69 Chairman of the 1955 (1)
Board
Joe F. Sanderson, Jr. 47 President and 1984 (2)
Chief Executive
Officer
D. Michael Cockrell 37 Treasurer and Chief 1994 (3)
Financial Officer
James A. Grimes 46 Secretary and 1994 (4)
Chief Accounting
Officer
</TABLE>
(1) Joe Frank Sanderson, a founder of the Registrant, has served as Chairman
of the Board for more than five years. Prior to November 1, 1989, Mr.
Sanderson also served as Chief Executive Officer and Treasurer of the
Registrant.
(2) Joe F. Sanderson, Jr. has served as President and Chief Executive Officer
of the Registrant since November 1, 1989. From January 1984, to November
1989, Mr. Sanderson served as Vice-President, Processing and Marketing of the
Registrant.
(3) D. Michael Cockrell became Treasurer and Chief Financial Officer of the
Registrant effective November 1, 1993. Prior to that time, for more than five
years, Mr. Cockrell was a member and shareholder of the Jackson, Mississippi
law firm of Wise Carter Child & Caraway, Professional Association.
(4) James A. Grimes became Secretary of the Registrant effective November 1,
1993. Mr. Grimes also serves as Chief Accounting Officer, which position he
has held since 1985.
Executive officers of the Company serve at the pleasure of the Board of
Directors. There are no understandings or agreements relating to any person's
service or prospective service as an executive officer of the Registrant. Joe
F. Sanderson, Jr. is the son of Joe Frank Sanderson. Joe Frank Sanderson and
Joe F. Sanderson, Jr. are also Directors of the Registrant.
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters.
The Company's common stock is traded on the NASDAQ National Market
System under the symbol SAFM. The number of stockholders as of December 31,
1994, was 606.
<PAGE>
The following table shows quarterly cash dividends and quarterly high
and low prices for the common stock for the past two fiscal years. National
Market quotations are based on actual sales prices.
<TABLE>
Stock Price
<CAPTION>
Fiscal Year 1994 High Low Dividends
<S> <C> <C> <C>
First Quarter $18.50 $14.00 $.075
Second Quarter $17.75 $14.75 $.075
Third Quarter $19.75 $16.50 $.075
Fourth Quarter $20.25 $18.50 $.075
</TABLE>
<TABLE>
Stock Price
<CAPTION>
Fiscal Year 1993 High Low Dividends
<S> <C> <C> <C>
First Quarter $20.50 $13.50 $.075
Second Quarter $22.75 $18.75 $.075
Third Quarter $24.50 $15.50 $.075
Fourth Quarter $18.75 $14.75 $.075
</TABLE>
On December 30, 1994, the closing sales price for the common stock was $22.25
per share.
Item 6. Selected Financial Data.
<TABLE>
Year Ended October 31
<CAPTION>
1994 1993 1992 1991 1990
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $371,502 $269,059 $210,057 $186,077 $175,837
Income from operations 28,184 20,767 8,033 10,058 11,769
Net income 15,479 11,938 5,253 7,552 9,127
Earnings per share 1.71 1.32 .58 .83 1.01
Working capital 45,843 42,548 33,371 43,545 48,242
Total assets 181,709 169,006 126,339 94,198 87,745
Long-term debt, less
current maturities 56,176 60,253 29,826 1,931 2,032
Stockholders' equity 106,187 93,431 84,216 81,686 76,857
Cash dividends declared
per share $ .30 $ .30 $ .30 $ .30 $ .30
</TABLE>
<TABLE>
QUARTERLY FINANCIAL DATA
<CAPTION>
Fiscal Year 1994
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In thousands, except per share data)
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $81,445 $91,536 $99,382 $99,139
Operating income 2,578 5,704 9,204 10,698
Net income 1,186 3,041 5,175 6,077
Earnings per share $ .13 $ .34 $ .57 $ .67
</TABLE>
<TABLE>
Fiscal Year 1993
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In thousands, except per share data)
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $55,819 $62,057 $70,875 $80,308
Operating income 3,807 4,297 5,263 7,400
Net income 2,388 2,432 2,862 4,256
Earnings per share $ .26 $ .27 $ .32 $ .47
</TABLE>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
GENERAL
The Company's poultry operations are integrated through its control of all
functions relative to the production of its chicken products, including
hatching egg production, hatching, feed manufacturing, raising chickens to
marketable age ("grow out"), processing, and marketing. Consistent with the
industry, its profitability is substantially impacted by the market price for
finished product and feed grains, both of which may fluctuate substantially
and exhibit cyclical characteristics typically associated with commodity
markets. Other costs, excluding feed, related to the profitability of its
poultry operations, including hatching egg production, hatching, growing, and
processing cost, are responsive to efficient cost containment programs and
management practices. Over the past three fiscal years, these other
production costs have averaged approximately 60% of the Company's total
production costs.
The Company believes that value-added products are subject to less price
volatility and generate higher, more consistent profit margins than whole
chickens ice packed and shipped in bulk form. To reduce its exposure to
market cyclicality that has historically characterized commodity chicken
sales, 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. The Company adds value to its
poultry products by performing one or more processing steps beyond the stage
where the whole chicken is first saleable as a finished product, such as
cutting, deep chilling, packaging and labelling the product. The Company
believes that one of its major strengths is its ability to change its product
mix to meet customer demands.
The Company's processed and prepared foods product line includes over 100
institutional and consumer packaged food items which it sells nationally and
regionally, primarily to distributors, food service establishments and
retailers. A majority of the prepared food items are made to the
specifications of food service users.
On February 24, 1994, the Company announced plans to add a second shift to one
of two processing lines at its Collins, Mississippi processing plant. The new
shift began operations during June 1994 and reached its processing capacity
during the fourth quarter of fiscal 1994. This additional shift increased the
number of birds the Company is processing to approximately 3,475,000 birds per
week.
Poultry prices per pound, as measured by the Georgia dock price, fluctuated
during the three years ended October 31, 1994 as follows:
<TABLE>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
<CAPTION>
Fiscal 1994
<S> <C> <C> <C> <C>
High $.5525 $.5625 $.6025* $.5650
Low $.5250* $.5300 $.5650 $.5375
Fiscal 1993
High $.5325 $.5425 $.5675 $.5875*
Low $.4850* $.5075 $.5525 $.5525
Fiscal 1992
High $.4800 $.4875 $.5475 $.5625*
Low $.4675* $.4700 $.4950 $.5125
*Year High/Low
</TABLE>
Market prices, as measured by the Georgia dock price, have decreased from
October 31, 1994 through the Thanksgiving holiday to $.5125 per pound. Market
prices have remained stable at $.5125 per pound from Thanksgiving through the
Christmas season.
During fiscal 1993, the poultry industry experienced a favorable finished
product environment and an overall decline in feed grain prices. These
factors, together with the Company's expansion, favorably impacted income from
operations. During fiscal 1994, as in fiscal 1993, the poultry industry
experienced higher prices for poultry products as compared to the previous
fiscal year. However, the positive effect of improved prices of poultry
products was partially offset by higher costs of feed grains. Although feed
costs were higher overall for fiscal 1994 than for fiscal 1993, they declined
significantly during the last months of fiscal 1994. The Company is unable to
predict how long current conditions will continue or to what extent cyclical
pressures will affect operations.
RESULTS OF OPERATIONS:
Fiscal 1994 Compared to Fiscal 1993
Net sales for the year ended October 31, 1994, increased to $371.5 million, an
increase of $102.4 million, or 38.1%. The increase in net sales resulted from
a 35.2% increase in the total pounds of products sold and a 2.1% increase in
the average sale price of products. Net sales of poultry products sold
increased $100.0 million, or 45.8%, when compared to fiscal 1993. The
increase in the net sales of poultry products was due to an increase in the
pounds of poultry products sold of 38.3% and an increase in the average net
sales price of poultry products of 5.5%. Net sales of prepared food products
increased $2.4 million, or 4.7%. The pounds of prepared food products sold
increased 3.2% as the average sale price of prepared food products increased
1.5% during fiscal 1994 as compared to fiscal 1993.
Cost of sales for fiscal 1994 increased approximately $94.6 million, or 40.3%,
as compared to fiscal 1993. Cost of sales of poultry products sold increased
$92.6 million, or 46.1%, during fiscal 1994 as compared to fiscal 1993. The
increase in cost of sales for fiscal 1994 as compared to fiscal 1993, resulted
primarily from the increased pounds of poultry products sold and an increase
in the overall costs of feed grains. A simple average of the corn and soybean
meal cash market prices reflected an increase of 10.4% and a decrease of 3.5%,
respectively, during fiscal 1994 as compared to the previous fiscal year.
Cost of sales of prepared food products increased $2.0 million, or 6.1%,
during the year ended October 31, 1994 as compared to the year ended October
31, 1993.
Selling, general and administrative expenses in fiscal 1994 increased $.4
million, or 3.1%, as compared to fiscal 1993. Measured as a percentage of net
sales, selling, general and administrative expenses for fiscal 1994 were 3.8%
as compared to 5.1% during fiscal 1993.
Interest expense increased approximately $1.6 million during fiscal 1994 as
compared to fiscal 1993. The increase in interest expense is due primarily to
higher interest rates and reflects interest incurred on borrowed funds for the
financing of the Pike County complex and other major construction projects for
the entire year of fiscal 1994.
The Company's effective tax rate increased in fiscal 1994 to approximately
37.7% as compared to approximately 37.1% in fiscal 1993. The increase is
primarily due to higher earnings in fiscal 1994 as compared to fiscal 1993,
which resulted in tax calculations using higher tax rates.
Fiscal 1993 Compared to Fiscal 1992
For the year ended October 31, 1993, net sales increased $59.0 million or
28.1% as compared to the year ended October 31, 1992. The increase in net
sales resulted from a 24.4% increase in the total pounds of products sold and
a 3.0% increase in the average sale price of products sold during fiscal 1993
as compared to fiscal 1992. Net sales of poultry products sold increased
$53.6 million, or 32.5%, when compared to fiscal 1992. The increase in net
sales of poultry during fiscal 1993 as compared to fiscal 1992 is a result of
an increase in the pounds of poultry products sold and an increase in the
average sale price of poultry products of 26.2% and 5.0%, respectively. Net
sales of prepared food products increased $5.4 million, or 11.9%. The pounds
of prepared food products sold increased 7.9% as the average sale price of
prepared food products increased 3.7%.
Cost of sales for fiscal 1993 increased approximately $45.8 million, or 24.2%,
over the prior fiscal year. Of the increase, approximately $42.6 million was
associated with poultry products and was due primarily to the increase in
pounds of poultry products sold. A simple average of the corn and soy meal
cash market prices reflected a decrease of 6.3% and an increase of 4.1%,
respectively, when compared to fiscal 1992. Cost of sales of prepared food
products sold increased $3.2 million, or 10.4%, during fiscal 1993 as compared
to fiscal 1992, primarily as a result of an increase in the pounds of prepared
food products sold.
Selling, general and administrative expenses in fiscal 1993 increased $.5
million, or 3.6%, as compared to fiscal 1992. Selling, general and
administrative expenses for fiscal 1993 were 5.1% of net sales as compared to
6.2% of net sales in fiscal 1992.
Interest expense increased approximately $1.9 million during fiscal 1993 as
compared to fiscal 1992. Interest costs of $.4 million and $.3 million were
capitalized as a result of additional borrowings incurred in connection with
the construction of the Pike County, Mississippi complex and other major
construction projects in fiscal 1993 and 1992, respectively. Interest income
decreased approximately $.2 million during fiscal 1993 as compared to fiscal
1992 as a result of reduced amounts available for investments and lower
interest rates.
The Company's effective tax rate increased in fiscal 1993 to approximately
37.1% as compared to approximately 36.0% in fiscal 1992. The increase is
primarily due to reduced tax-free interest income as a percentage of
net income before taxes. The effect of the retroactive tax rate increase
incorporated into the Revenue Reconciliation Act of 1993 was insignificant.
LIQUIDITY AND CAPITAL RESOURCES
On October 31, 1994, the Company's working capital totaled $45.8 million and
its current ratio was 5.6 to 1, as compared to working capital of $42.5
million and a current ratio of 6.6 to 1 at October 31, 1993. During fiscal
1994, the Company expended $22.4 million on planned capital projects and $4.0
million to reduce the outstanding debt under its revolving credit agreement.
During the third quarter of fiscal 1994, the credit agreement was amended
to, among other things, increase the revolving credit available to
the Company thereunder to $70.0 million from $60.0 million. The same group of
banks that were parties to the original revolving credit agreement were
parties to the amendment.
The Company's capital budget for fiscal 1995 is approximately $23.2 million.
The original capital budget for fiscal 1994 was approximately $21.6 million,
which was increased to approximately $26.7 million due to the addition of
items not approved at the beginning of fiscal 1994 pending justification,
field trial and alternate costing. Included in the fiscal 1995 budget is
approximately $3.9 million relating to fiscal 1994 budget items that were not
completed or started in fiscal 1994. Also included in the fiscal 1995 budget
are renovations to offices at three processing facilities and other major
capital projects for changes and additions to existing processing facilities
to allow better product flow and product mix for more market flexibility.
The Company anticipates that the capital expenditures for fiscal 1995 will be
funded by working capital and additional borrowings under its $70.0 million
revolving credit agreement.
<PAGE>
<TABLE>
Item 8. Financial Statements and Supplementary Data.
Sanderson Farms, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<CAPTION>
October 31
1994 1993
(In thousands)
<S> <C> <C>
Assets
Current assets:
Cash and temporary cash investments $ 4,125 $ 3,979
Accounts receivables, less allowance of
$100,000 in 1994 and $80,000 in 1993 18,986 17,014
Inventories (Note 2) 29,375 26,425
Prepaid expenses 3,293 2,752
Total current assets 55,779 50,170
Property, plant and equipment (Note 3):
Land and buildings 70,176 58,843
Machinery and equipment 126,060 106,275
Construction in process 6,641 15,637
202,877 180,755
Accumulated depreciation (78,110) (63,161)
124,767 117,594
Other assets 1,163 1,242
Total assets $181,709 $169,006
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,837 $ 3,356
Accrued expenses 5,399 3,687
Accrued income taxes 1,623 506
Current maturities of long-term debt 77 73
Total current liabilities 9,936 7,622
Long-term debt, less current maturities (Note 3) 56,176 60,253
Deferred income taxes (Note 4) 9,410 7,700
Stockholders' equity (Note 6):
Preferred Stock:
Series A Junior Participating Preferred Stock, $100
par value: authorized shares 500,000; none issued
Par value to be determined by the Board of Directors:
authorized shares 4,500,000; none issued
Common Stock, $1 par value: authorized shares 100,000,000;
issued and outstanding shares 9,075,427 9,075 9,075
Paid-in capital 7,410 7,410
Retained earnings 89,702 76,946
Total stockholders' equity 106,187 93,431
Total liabilities and stockholders' equity $181,709 $169,006
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sanderson Farms, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Years Ended October 31
1994 1993 1992
(In thousands, except per share data)
<S> <C> <C> <C>
Net sales $371,502 $269,059 $210,057
Cost and expenses:
Cost of sales 329,294 234,691 188,900
Selling, general and administrative 14,024 13,601 13,124
343,318 248,292 202,024
Operating income 28,184 20,767 8,033
Other income (expense):
Interest income 109 158 365
Interest expense (3,655) (2,090) (163)
Other 195 158 (37)
(3,351) (1,774) 165
Income before income taxes 24,833 18,993 8,198
Income tax expense (Note 4) 9,354 7,055 2,945
Net income $15,479 $11,938 $5,253
Net income per share $ 1.71 $ 1.32 $ .58
See accompanying notes.
</TABLE>
<TABLE>
Sanderson Farms, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Total
Common Stock Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
(In thousands, except shares)
<S> <C> <C> <C> <C> <C>
Balance at November 1, 1991 9,075,427 $9,075 $7,410 $65,201 $81,686
Net income for year 5,253 5,253
Cash dividends ($.30 per share) (2,723) (2,723)
Balance at October 31, 1992 9,075,427 9,075 7,410 67,731 84,216
Net income for year 11,938 11,938
Cash dividends ($.30 per share) (2,723) (2,723)
Balance at October 31, 1993 9,075,427 9,075 7,410 76,946 93,431
Net income for year 15,479 15,479
Cash dividends ($.30 per share) (2,723) (2,723)
Balance at October 31, 1994 9,075,427 $9,075 $7,410 $89,702 $106,187
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended October 31
1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Operating activities
Net income $15,479 $11,938 $5,253
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 15,604 11,370 7,935
Provision for losses on accounts
receivable 36 43 45
Deferred income taxes 1,500 1,300 500
Change in assets and liabilities:
Increase in accounts receivable (2,008) (5,332) (535)
Increase in inventories (2,950) (8,059) (1,832)
Increase in prepaid expenses (331) (798) (138)
Increase in other assets (269) (737) (405)
Increase (decrease) in accounts payable (519) 1,356 193
Increase in accrued expenses 2,829 201 1,019
Total adjustments 13,892 (656) 6,782
Net cash provided by
operating activities 29,371 11,282 12,035
Investing activities
Net proceeds from sale of
property and equipment 15 83 18
Capital expenditures (22,444) (38,181) (48,647)
Net cash used in investing activities (22,429) (38,098) (48,629)
Financing activities
Long-term borrowings -0- 20,000 -0-
Net change in revolving credit (4,000) 6,000 28,000
Principal payments on long-term debt (73) (105) (101)
Dividends paid (2,723) (2,723) (2,723)
Net cash provided by (used in)
financing activities (6,796) 23,172 25,176
Net increase in cash and temporary
cash investments 146 (3,644) (11,418)
Cash and temporary cash investments
at beginning of year 3,979 7,623 19,041
Cash and temporary cash investments
at end of year $ 4,125 $ 3,979 $7,623
Supplemental disclosure of
cash flow information:
Cash paid for income taxes $ 6,736 $ 6,229 $2,329
Cash paid for interest $ 3,945 $ 2,301 $ 89
Non-cash financing activities
related to capital lease $ -0- $ 4,500 $ -0-
See accompanying notes.
</TABLE> <PAGE>
Sanderson Farms, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include the
accounts of Sanderson Farms, Inc. (the "Company") and its wholly-owned
subsidiaries. All significant intercompany transactions and accounts have
been eliminated in consolidation.
Temporary Cash Investments: Temporary cash investments are stated at cost
which approximates market. Included are investment agreements for securities
purchased under agreements to resell with a maturity of one day.
Accounts Receivable: The Company sells fresh and frozen chicken and other
prepared food items to retailers, distributors and fast food operators in the
southern, southwestern and western United States. Management periodically
performs credit evaluations of its customers' financial condition and
generally does not require collateral. Credit losses have consistently been
within management's expectations.
Inventories: Processed food and poultry inventories and inventories of feed,
egg, medication and packaging supplies are stated at the lower of cost (first-
in, first-out method) or market.
Live poultry inventories of broilers are stated at the lower of cost or market
and breeders at cost less accumulated amortization. The costs associated with
breeders are accumulated up to the production stage and amortized over the
productive lives using the straight-line method.
Property, Plant and Equipment: Property, plant and equipment is stated at
cost. Depreciation of property, plant and equipment is provided by the
straight-line and units of production methods over the estimated useful lives.
Income Taxes: Deferred income taxes relate principally to cash basis temporary
differences and depreciation expense accounted for differently for financial
and income tax purposes. Effective November 1, 1988, the Company could no
longer use cash basis accounting for its farming subsidiary because of tax law
changes. The taxes on the cash basis temporary differences as of that date
will not be payable under current tax laws provided there are no changes in
ownership control and future annual revenues of the farming subsidiary exceed
1988 revenues. Management does not anticipate the payment of such taxes
related to these cash bases timing differences during fiscal 1995. (See Note
4).
Effective October 31, 1993, the Company adopted Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes." The effect of
adopting the statement was insignificant on the Company's financial position
and operations.
Earnings Per Share: Earnings per share are based upon the weighted average
number of shares outstanding during each year. The weighted average shares
outstanding were 9,075,427 in 1994, 1993 and 1992.
<PAGE>
2. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
October 31
1994 1993
(In thousands)
<S> <C> <C>
Live poultry broilers and breeders $16,453 $13,658
Feed, eggs and other 3,795 3,775
Processed poultry 3,005 2,288
Processed food 4,149 4,831
Packaging materials 1,973 1,873
$29,375 $26,425
</TABLE>
3. Long-term Credit Facilities and Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
October 31
1994 1993
(In thousands)
<S> <C> <C>
Revolving credit agreement with banks
(weighted average rate of 6.3% at
October 31, 1994) $30,000 $34,000
Term loan with an insurance company,
accruing interest at 7.49%; due in
annual principal installments
of $2,850,000 beginning in 1997 20,000 20,000
Note payable, accruing interest at 5%;
due in annual installments of $161,400,
including interest, maturing in 2009 1,694 1,767
6% Mississippi Business Investment Act
bond capital lease obligation 4,500 4,500
Notes payable to an insurance company,
accruing interest at 5% 59 59
56,253 60,326
Less current maturities of long-term
debt 77 73
$56,176 $60,253
</TABLE>
The Company has a $70.0 million ($40.0 million available at October 31, 1994)
revolving credit agreement with four banks. The revolver extends to 1997,
when the outstanding borrowings may be converted to a term loan payable in
equal semiannual installments over four years. Borrowings are at prime or
below and may be prepaid without penalty. A commitment fee of .375% is
payable quarterly on the unused portion of the revolver. Covenants related to
the revolving credit and the term loan agreements include requirements for
maintenance of minimum consolidated net working capital, tangible net worth,
debt to total capitalization and current ratio. The agreements also establish
limits on dividends, assets that can be pledged and capital expenditures.
Property, plant and equipment with a carrying value of approximately
$7,941,000 is pledged as collateral to a note payable and the capital lease
obligation.
Interest costs of $0, $416,000 and $250,000 were capitalized in 1994, 1993 and
1992, respectively.
<PAGE>
The aggregate annual maturities of long-term debt at October 31, 1994 are as
follows (in thousands):
<TABLE>
Fiscal Year Amount
<CAPTION>
<S> <C>
1995 $ 77
1996 226
1997 10,590
1998 10,604
1999 10,618
Thereafter 24,138
$56,253
<PAGE>
4. Income Taxes
Income tax expense consisted of the following:
</TABLE>
<TABLE>
Years Ended October 31
<CAPTION>
1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Current:
Federal $7,150 $5,233 $2,039
State 704 522 406
Deferred
Federal 1,370 1,200 470
State 130 100 30
$9,354 $7,055 $2,945
</TABLE>
Significant components of the Company's deferred tax assets and liabilities at
were as follows (in thousands):
Deferred tax assets (included in prepaid expenses):
<TABLE>
October 31,
<CAPTION>
1994 1993
<S> <C> <C>
Accrued expenses $ 550 $330
Prepaid expenses (140) (130)
$ 410 $200
Deferred tax liabilities:
Cash basis temporary differences $3,900 $3,900
Property, plant and equipment 5,510 3,800
$9,410 $7,700
</TABLE>
The differences between the consolidated effective income tax rate and the
federal statutory rate were as follows:
<TABLE>
Years Ended October 31
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Taxes at statutory rate 34.9% 34.3% 34.0%
State income taxes 3.1 3.8 3.3
State income tax credit (.8) (1.5) -0-
Tax exempt interest -0- -0- (1.0)
Other, net .5 .5 (.3)
37.7% 37.1% 36.0%
</TABLE>
5. Employee Benefit Plans
The Company has a defined contribution profit sharing plan that covers all
employees and an employee stock ownership plan that is restricted to salaried
employees. As of October 31, 1994, the Company is waiting to receive approval
from the Internal Revenue Service to merge the employee profit sharing plan
into the employee stock ownership plan. Annual contributions are made at the
discretion of the Board of Directors. Total contributions to the profit
sharing plan were $1,200,000 in 1994, $750,000 in 1993 and $350,000 in 1992.
Under the Company's Stock Option Plan, 500,000 shares of Common Stock have
been reserved for grant to key management personnel. Options to purchase an
aggregate of 30,000 shares at $16 per share and 57,000 shares at $16.50 are
outstanding at October 31, 1994. Options to purchase 6,000 shares were
exercisable at October 31, 1994.
6. Shareholder Rights Agreement
On April 21, 1989, the shareholders of the Company approved a shareholders
rights agreement (the "Agreement") under which one share purchase right
("right") was declared as a dividend for each share of the Company's Common
Stock outstanding on May 31, 1989. The rights do not become exercisable and
certificates for the rights will not be issued until ten business days after a
person or group acquires or announces a tender offer for the beneficial
ownership of 20% or more of the Company's Common Stock. Special rules set
forth in the Agreement apply to determine beneficial ownership for members of
the Sanderson family. Under these rules, such a member will not be considered
to beneficially own certain shares of Common Stock, the economic benefit of
which is received by any member of the Sanderson family, and certain shares of
Common Stock acquired pursuant to profit sharing plans of the Company.
The exercise price of a right has been established at $53. Once exercisable,
each right would entitle the holder to purchase one one-hundredth of a share
of Series A Junior Participating Preferred Stock, par value $100 per share.
The rights may be redeemed by the Board of Directors at $.01 per right prior
to an acquisition, through open market purchases, a tender offer or otherwise,
of the beneficial ownership of 20% or more of the Company's Common Stock, or
by two-thirds of the Directors who are not the acquirer, or an affiliate of
the acquirer, prior to the acquisition of 50% or more of the Company's Common
Stock by such acquirer. The rights expire on April 21, 1999.
7. Other Matters
One customer accounted for 10.4% and 11.6% of consolidated sales for the years
ended October 31, 1993 and 1992. No customer accounted for more than 10% of
consolidated sales for the year ended October 31, 1994. Export sales were
less than 10% of consolidated sales in each year presented.
The effects of adopting in 1994 FASB Statement No. 106 "Employers' Accounting
for Postretirment Benefits other than Pension" was insignificant to the
Company's financial position and operation for the year ended October 31,
1994.<PAGE>
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive
Officers of the Registrant.
As required by General Instruction G(3) to Form 10-K, reference is
made to the information concerning the Directors of the Registrant and the
nominees for election as Directors appearing in the Registrant's definitive
proxy statement filed or to be filed with the Commission pursuant to Rule
14a-6(c). Such information is incorporated herein by reference to the
definitive proxy statement.
Information concerning the executive officers of the Registrant is
set forth in Item 4A of Part I of this Annual Report.
Item 11. Executive Compensation.
As required by General Instruction G(3) to Form 10-K, reference is
made to the information concerning remuneration of Directors and executive
officers of the Registrant appearing in the Registrant's definitive proxy
statement filed or to be filed with the Commission pursuant to Rule 14a-6(c).
Such information is incorporated herein by reference to the definitive proxy
statement.
Item 12. Security Ownership of Certain
Beneficial Owners and Management.
As required by General Instruction G(3) to Form 10-K, reference is
made to the information concerning beneficial ownership of the Registrant's
Common Stock, which is the only class of the Registrant's voting securities,
appearing in the Registrant's definitive proxy statement filed or to be filed
with the Commission pursuant to Rule 14a-6(c). Such information is
incorporated herein by reference to the definitive proxy statement.
Item 13. Certain Relationships
and Related Transactions.
Not applicable.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K.
(a)1. FINANCIAL STATEMENTS:
The following consolidated financial statements of the Registrant
are included in Item 8:
Consolidated Balance Sheets - October 31, 1994 and 1993
Consolidated Statements of Income - Years ended October 31, 1994,
1993 and 1992
Consolidated Statements of Shareholders' Equity - Years
ended October 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows - Years ended
October 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements - October 31, 1994
(a)2. FINANCIAL STATEMENT SCHEDULES:
The following consolidated financial statement schedules of the
Registrant are included in Item 8:
Schedule V - Property, Plant and Equipment.
Schedule VI - Accumulated Depreciation of
Property, Plant and Equipment.
Schedule VIII - Valuation and Qualifying Accounts.
Schedule IX - Short-Term Borrowings.
Schedule X - Supplementary Income Statement
Information.
All other schedules are omitted as they are not applicable or the
required information is set forth in the Financial Statements or notes
thereto.
(a)3(i). EXHIBITS:
The following exhibits are filed with this Annual Report or are
incorporated herein by reference:
Exhibit Brief
Number Description
(1) 3-A - Copy of Articles of Incorporation of the
Registrant, as amended.
3-B - Copy of Restated By-Laws of the
Registrant as of October 27, 1994.
(1) 4 - Copy of Certificate of Designations of
Series A Junior Participating Preferred
Stock of the Registrant
(2) 10-A - Copy of Agreement of Purchase and Sale
of Assets dated March 10, 1986 among the
Registrant, National Prepared Foods,
Inc., Trend Line Corporation, Business
Advisors and Investor, Inc., W.T. Hogg,
Jr., W.T. Hogg, Jr. Trust for
Grandchildren, Noreen Mary Hogg Case
Trust Under Agreement December 20, 1972
and Sherri Ann Hogg Ford Trust Under
Agreement December 20, 1972.
(2) 10-B - Copy of Contract dated July 31, 1964
between the Registrant and the City of
Laurel, Mississippi.
(2) 10-B-1 - Copy of Contract Amendment dated
December 1, 1970 between the Registrant
and the City of laurel, Mississippi.
(2) 10-B-2 - Copy of Contract Amendment dated June
11, 1985 between the Registrant and the
City of Laurel, Mississippi.
(2) 10-B-3 - Copy of Contract Amendment dated October
7, 1986 between the Registrant and the
City of Laurel, Mississippi.
10-B-4 - Copy of Contract Amendment dated August
16, 1994 between the Registrant and the
City of Laurel, Mississippi.
(2) 10-C - Copy of Lease Agreement dated May 19,
1964 among the Town of Collins,
Covington County, Mississippi and
Mississippi Federated Cooperatives AAL.
(2) 10-C-1 - Copy of Assignment of Lease and
Leasehold Estate, and Conveyance of
Leaseholder Improvements and Other
Properties, Reserving a Purchase Money
Security Interest, dated December 21,
1981 between MFC Services (AAL) and
Sanderson Farms, Inc. (Processing
Division).
(2) 10-D - Copy of Lease Agreement dated November
28, 1962 between the Board of
Supervisors of Covington County,
Mississippi acting for and on behalf of
Supervisors Districts 1, 2, 3 and 5 of
Covington County, Mississippi and
Mississippi Federated Cooperatives, AAL.
(2) 10-D-1 - Copy of Contract dated October 2, 1972
between the Board of Supervisors of
Covington County, Mississippi, acting
for and on behalf of Covington County,
Mississippi and MFC Services (AAL).
(2) 10-D-2 - Copy of Lease Agreement dated May 1,
1976 between Supervisors Districts One,
Two, Three and Five of Covington County,
Mississippi and MFC Services (AAL).
(2) 10-D-3 - Copy of Assignment of Leases and
Leasehold Estate, and Conveyance of
Leasehold Improvements and Other
Properties, Reserving a Purchase Money
Security Interest, dated December 21,
1981 between MFC Services (AAL) and
Sanderson Farms, Inc. (Processing
Division).
(2) 10-E - Copy of Agreement dated December 1,
1986, between Sanderson Farms, Inc.
(Hammond Processing Division) and United
Food and Commercial Workers Local Union
210 affiliated with the United Food and
Commercial Workers International Union.
(5) 10-E-1 - Copy of Agreement dated February 14,
1990 between Sanderson Farms, Inc.
(Hammond Processing Division) and United
Food and Commercial Workers Local Union
210, affiliated with the United Food and
Commercial Workers International Union.
10-E-2 - Copy of Agreement effective November 6,
1994 between Sanderson Farms, Inc.
(Hammond Processing Division) and United
Food and Commercial Workers Local Union
210, affiliated with the United Food and
Commercial Workers International Union.
(2) 10-F - Copy of Employee Stock Ownership Plan
and Trust Agreement of Sanderson Farms,
Inc. and Affiliates.
(2) 10-F-1 - Copy of Amendment One to the Employee
Stock Ownership Plan and Trust Agreement
of Sanderson Farms, Inc. and Affiliates.
(3) 10-F-2 - Copy of Amendment Two to the Employee
Stock Ownership Plan and Trust Agreement
of Sanderson Farms, Inc. and Affiliates.
(2) 10-G - Copy of General Employee's Profit
Sharing-Retirement Trust Agreement of
Sanderson Farms, Inc. and Affiliates.
(6) 10-H - Copy of Sanderson Farms, Inc.
Performance Incentive Program effective
January 1, 1991.
(6) 10-H-1 - Copy of Sanderson Farms, Inc.
Performance Incentive Program for
Sanderson Farms, Inc. (Foods Division)
effective November 1, 1990.
(6) 10-H-2 - Copy of Sanderson Farms, Inc.
Performance Incentive Program for
Sanderson Farms, Inc. (Foods Division)
Retail Entree effective November 1,
1990.
10-H-3 - Copy of Sanderson Farms, Inc. Bonus
Award Program effective November 1,
1993.
(7) 10-I - Copy of Sanderson Farms, Inc. and
Affiliates Stock Option Plan.
(5) 10-J - Copy of Memorandum of Agreement dated as
of June 13, 1989, between Pike county,
Mississippi and the Registrant.
(6) 10-K - Copy of Wastewater Treatment Agreement
between the City of Magnolia,
Mississippi and the Registrant dated
August 19, 1991.
(6) 10-L - Copy of Memorandum of Agreement and
Purchase Option between Pike County,
Mississippi and the Registrant dated
May, 1991.
10-M - Copy of Lease Agreement between Pike
County, Mississippi and the Registrant
dated as of November 1, 1992.
13 - Copy of the Registrants definitive proxy
statement related to the 1995 Annual
Meeting of Shareholders.
22 - List of subsidiaries of the Registrant.
24 - Consent of Independent Auditors
27 - Copy of Financial Data Schedule
(2) 28-A - Copy of Certificate of Registration of
Trademark "Miss Goldy".
(2) 28-B - Copy of Certificate of Registration of
Trademark "Wise Choice".
(2) 28-C - Copy of Certificate of Registration of
Trademark "Buttercup Farms".
(2) 28-D - Copy of Certificate of Registration of
Trademark "Collinswood".
(2) 28-E - Copy of Certificate of Registration of
Trademark "Covington Farms".
(2) 28-F - Copy of Certificate of Registration of
Trademark "Smart Cuts".
(4) 28-G - Copy of Certificate of Registration of
Trademark "Kettle Classics".
(5) 28-H - Copy of Certificate of Registration of
Trademark "Sanderson Farms".
<PAGE>
(1) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1989, and incorporated herein by
reference.
(2) Filed as an exhibit to the Registrant's Registration Statement on Form
S-1 (Commission File No. 33-13141) and incorporated herein by
reference.
(3) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1987, and incorporated herein by
reference.
(4) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1988, and incorporated herein by
reference.
(5) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1990, and incorporated herein by
reference.
(6) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1991, and incorporated herein by
reference.
(7) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1992, and incorporated herein by
reference.
(a)(3)(ii) Agreements Available Upon Request by the Commission.
The Registrant is a party to various agreements defining the rights of holders
of long-term debt of the Registrant, but no single agreement authorizes
securities in an amount which exceeds 10% of the total assets of the Company.
Upon request of the Commission, the Registrant will furnish a copy of any such
agreement to the Commission. Accordingly, such agreements are omitted as
exhibits as permitted by Item 601(b)(4)(iii) of Regulation S-K.
(b) REPORTS ON FORM 8-K:
No reports on From 8-K were filed during the fourth quarter of the Fiscal Year
ended October 31, 1994.
QUALIFICATION BY REFERENCE
Information contained in this Annual Report as to the contents of any contract
or other document referred to or evidencing a transaction referred to is
necessarily not complete, and in each document filed as an exhibit to this
Annual Report or incorporated herein by reference, all such information being
qualified in its entirety by such reference.<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Sanderson Farms, Inc.
We have audited the accompanying consolidated balance sheets of Sanderson
Farms, Inc. and subsidiaries as of October 31, 1994 and 1993, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended October 31, 1994. Our audit also
included the financial statements listed in the index under Item 14(a). These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sanderson Farms,
Inc. and subsidiaries at October 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended October 31, 1994, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
/s/Ernst & Young LLP
Jackson, Mississippi
December 15, 1994
<PAGE>
<TABLE>
Sanderson Farms, Inc. and Subsidiaries
Property, Plant and Equipment
Schedule V
<CAPTION>
______________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
Other
Balance at Changes Balance
Beginning Additions Add Deduct at End
Classification of Period at Cost Retirements Describe of Period
(In thousands)
<S> <C> <C> <C> <C> <C>
Year ended
October 31, 1994
Land $1,067 $ 46 $(248)(3) $ 865
Building and
improvements 57,776 478 11,057(3) 69,311
Machinery and
equipment 106,275 5,222 $ 322 14,885(3) 126,060
Construction-in-
process 15,637 16,698 - (25,694)(3) 6,641
Totals $180,755 $22,444 $ 322 $ - $202,877
Year ended
October 31, 1993
Land $ 1,067 $ 1,067
Building and
improvements 30,787 $ 410 $ 5 $26,584(3) 57,776
Machinery and
equipment 70,818 10,656(1) 1,184 25,985(3) 106,275
Construction-in-
process 36,836 31,370(2) - (52,569)(3) 15,637
Totals $139,508 $42,436 $1,189 $ - $180,755
Year ended
October 31, 1992
Land $ 912 $ 155 $ 1,067
Building and
improvements 25,875 269 $ 1 $ 4,644(3) 30,787
Machinery and
equipment 57,764 3,457 819 10,416(3) 70,818
Construction-in-
process 7,130 44,766(2) - (15,060)(3) 36,836
Totals $ 91,681 $48,647 $ 820 $ - $139,508
</TABLE>
(1) Includes capital lease assets.
(2) Primarily construction of Pike County, Mississippi facilities.
(3) Reclassification.
<PAGE>
<TABLE>
Sanderson Farms, Inc. and Subsidiaries
Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
Schedule VI
<CAPTION>
_______________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
Additions Other
Balance at Charged to Changes Balance
Beginning Costs and Add (Deduct) at End
Classification of Period Expenses Retirements Describe of Period
(In thousands)
<S> <C> <C> <C> <C>
Year ended
October 31, 1994
Building and
improvements $ 12,977 $ 2,660 $ 15,637
Machinery and
equipment 50,184 12,590 $ 301 68,473
Totals $ 63,161 $15,250 $ 301 $ 78,110
Year ended
October 31, 1993
Building and
improvements $ 11,089 $ 1,921 $ 3 $ 12,977
Machinery and
equipment 70,818 10,656(1) 1,184 50,184
Totals $139,508 $42,436 $1,189 $ 63,161
Year ended
October 31, 1992
Building and
improvements $ 9,640 $ 1,420 $ 1 $ 11,059
Machinery and
equipment 56,622 6,441 815 42,248
Totals $ 46,262 $ 7,861 $ 816 $ 53,307
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sanderson Farms, Inc. and Subsidiaries
Valuation and Qualifying Accounts
Schedule VIII
________________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
Balance at Charged to Charged to Balance at
Beginning Costs and Other Deductions End of
Classification of Period Expenses Accounts Describe(1) Period
(In Thousands)
<S> <C> <C> <C> <C>
Year ended
October 31, 1994
Deducted from accounts
receivable:
Allowance for
doubtful
accounts
Totals $80 $34 $14 $100
Year ended
October 31, 1993
Deducted from accounts
receivable:
Allowance for
doubtful
accounts
Totals $50 $43 $13 $80
Year ended
October 31, 1992
Deducted from accounts
receivable:
Allowance for
doubtful
accounts $40 $45 $35 $50
Totals
(1) Uncollectible accounts written off, net of recoveries.
</TABLE>
<PAGE>
<TABLE>
Sanderson Farms, Inc. and Subsidiaries
Short-Term Borrowings
Schedule IX
<CAPTION>
_____________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
Maximum Average Weighted
Category of Weighted Amount Out- Amount Out- Average
Aggregate Balance at Average standing standing Int. Rate
Short-Term End of Interest During During the During the
Borrowings Period Rate the Period Period (1) Period (2)
(In Thousands)
<S> <C> <C> <C> <C> <C>
Year ended
October 31, 1992
Bank Borrowings -0- N/A $10,500 $719 4.9%
(1) The average amount during the period is the weighted average by day of
bank borrowings outstanding during the year.
(2) The weighted average interest rate is computed by dividing interest
expense by the average amount outstanding during the period.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sanderson Farms, Inc. and Subsidiaries
Supplementary Income Statement Information
Schedule X
_____________________________________________________________________________
COL. A COL. B
Item Charged to Costs and Expenses
Year ended October 31
1994 1993 1992
(In Thousands)
<S> <C> <C> <C>
Maintenance and repairs $ 7,636 $ 5,755 $4,475
Depreciation and amortization of intangible
assets, preoperating costs and similar
deferrals 15,604 11,370 7,935
Advertising costs 2,801 3,327 1,921
Amounts for royalties and taxes other than
payroll and income taxes are not presented
as they total less than 1% of total sales
for all periods presented
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SANDERSON FARMS, INC.
Date: January 25, 1995 By:/s/Joe Frank Sanderson
Joe Frank Sanderson
Chairman of the Board
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities as of the dates indicated.
/s/ Joe Frank Sanderson 1/25/95 /s/ John H. Baker, III 1/25/95
Joe Frank Sanderson, John H. Baker, III,
Chairman of the Board Director
/s/ Joe F. Sanderson, Jr. 1/25/95 /s/ Charles W. Ritter, Jr. 1/25/95
Joe F. Sanderson, Jr., Charles W. Ritter, Jr.,
President, Chief Executive Director
Officer and Director
/s/ Dewey R. Sanderson, Jr. 1/25/95 /s/ Rowan H. Taylor 1/25/95
Dewey R. Sanderson, Jr., Rowan H. Taylor,
Director Director
/s/Donald W. Zacharias 1/25/95 /s/ Robert Buck Sanderson 1/25/95
Donald W. Zacharias, Robert Buck Sanderson,
Director Director
/s/ Phil K. Livingston 1/25/95 /s/ James A. Grimes 1/25/95
Phil K. Livingston, James A. Grimes,
Director Secretary and
Chief Accounting Officer
/s/ D. Michael Cockrell 1/25/95
D. Michael Cockrell,
Treasurer and Chief
Financial Officer
EXHIBIT 3-B
BY-LAWS OF
SANDERSON FARMS, INC.
(As restated on October 27, 1994)
Article I. Name and the Location.
Section 1. The name of this corporation shall be Sanderson Farms, Inc.
Section 2. Its principal office shall be located in Laurel,
Mississippi.
Section 3. Other offices for the transaction of business shall be
located in such other places as the Board of Directors may from time to time
determine.
Article II. Capital Stock.
Section 1. The amount of capital stock shall be such amount as is
authorized by the Articles of Incorporation.
Section 2. All certificates of stock shall be signed by the Chairman
of the Board, the President and the Secretary and shall be sealed with the
corporate seal. Such signatures and seal may be facsimile if the certificate
is signed by the corporation's transfer agent or registrar.
Section 3. Treasury stock shall be held by the corporation subject to
disposition by the Board of Directors and shall neither be voted nor
participate in dividends.
Section 4. Transfers of stock shall be made only on the books of the
corporation or the books of the duly appointed transfer agent; an old
certificate, properly endorsed, shall be surrendered and cancelled before a
new certificate is issued.
Section 5. In case of loss or destruction of a certificate of stock,
no new certificate shall be issued in lieu thereof except upon satisfactory
proof of affidavit of such loss or destruction; and upon the giving of
satisfactory security, by bond or otherwise (if the Board of Directors so
requires), against loss to the corporation.
Article III. Stockholder meetings
Section 1. The annual meeting of stockholders shall be held each year
on such day in the month of February, or in such other month, as the Board of
Directors shall determine, at the principal office of the corporation or at
such other suitable place, within or without the State of Mississippi, and at
such convenient time as may be determined by the Board of Directors. At the
annual meeting the stockholders shall elect directors to serve until their
successors have been elected and have qualified.
Section 2. A special meeting of the stockholders, to be held at any
place at which the annual stockholders' meeting may be held, may be called at
any time by the Chairman, the Vice Chairman (if appointed), the President or
the Board of Directors. It shall be the duty of the Chairman, the Vice
Chairman (if appointed), the President or the Board of Directors to call such
a meeting whenever so requested or demanded by one or more stockholders
holding 10% or more of all the shares entitled to vote on any issue proposed
to be considered at the special meeting.
Section 3. Notice of the place, day and hour of all annual and special
stockholders' meetings shall be given by the Secretary of the corporation to
each stockholder entitled to vote at the meeting not fewer than ten (10) nor
more than sixty (60) days before the date of the meeting by mailing said
notice, with postage thereon prepaid, to the address of such stockholder
appearing on the stock records of the corporation. In the case of a special
meeting, the notice shall also state the purpose or purposes for which the
meeting is called.
Section 4. For the purpose of determining stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to demand a special meeting or to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the Board of Directors of the corporation may fix the record
date for such purpose, but such record date may not be more than seventy (70)
days before the meeting or action requiring a determination of stockholders.
If no record date is fixed for the determination of stockholders entitled to
notice of or to vote at a meeting of stockholders, or stockholders entitled to
demand a special meeting or to receive payment of a dividend, or for any
other proper purpose, the close of business on the day before the day on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of stockholders. When a
determination of stockholders entitled to notice of or to vote at any meeting
of stockholders has been made as provided in this section, such determination
shall be effective for any adjournment of the meeting unless the Board of
Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than one hundred, twenty (120) days after the date
fixed for the original meeting.
Section 5. The officer or agent having charge of the stock transfer
books for shares of the corporation shall make, no later than two (2) business
days after notice of the meeting is given for which the list was prepared, an
alphabetical list of the names of all its stockholders entitled to notice of
a stockholders' meeting. The list must be arranged by voting group (and
within each voting group by class or series of shares) and show the address of
and number of shares held by each stockholder. Such list shall be available
at the principal office of the corporation and shall be subject to inspection
by any stockholder at any time during usual business hours. Such list shall
also be available at the place identified in the meeting notice in the city
where the meeting will be held and shall be subject to the inspection of any
stockholder continuously through the meeting. The original stock transfer
books shall be prima facie evidence as to who are stockholders entitled to
examine such list or transfer books or to vote at any meeting of stockholders.
Section 6. The Chairman of the Board shall preside at all stockholder
meetings. In the event the Chairman is unable to preside, the next available
officer shall be authorized to preside in this order: Vice Chairman (if
appointed), President, Executive Vice President (if appointed), Vice
President (by seniority if more than one is appointed), Secretary or
Treasurer.
Section 7. Each outstanding share, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
stockholders, except to the extent that the voting rights of the shares of
preferred stock are limited or denied by the Articles of Incorporation, the
Board of Directors or as permitted by law.
Treasury shares shall not be voted at any meeting or counted in
determining the total number of outstanding shares at any given time.
A stockholder may vote either in person or by proxy appointed in writing
by the stockholder or by his duly authorized attorney-in-fact. No proxy shall
be valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
Shares standing in the name of another corporation, domestic or foreign
but not a corporation the majority of the outstanding shares of which are
owned, directly or indirectly, by this corporation, may be voted by any duly
elected officer, or any duly appointed agent, in person or by proxy, or as the
Board of Directors of this corporation may otherwise determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so
transferred.
Redeemable shares are not entitled to vote after notice of redemption is
mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company or other financial institution under an
irrevocable obligation to pay the holders the redemption price on surrender
of the shares.
Section 8. A majority of the votes represented in person or by proxy
entitled to be cast on a matter by the voting stockholders shall constitute a
quorum for the transaction of business at a meeting of stockholders. If a
quorum exists, action on a matter (other than the election of directors) by
the stockholders shall be approved if the votes cast favoring the action
exceed the votes cast opposing the action, unless the Articles of
Incorporation, the By-laws or the law requires a greater number of affirmative
votes.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for
that adjourned meeting.
An amendment to the Articles of Incorporation that adds, changes or
deletes a greater quorum or voting requirement must meet the same quorum
requirement and be adopted by the same vote required to take action under the
quorum and voting requirements then in effect or proposed to be adopted,
whichever is greater.
Directors shall be elected at such annual meeting of stockholders at
which their terms expire or at any special meeting of stockholders called for
that purpose by the affirmative vote of a majority, and not a plurality, of
the shares entitled to vote and represented, in person or by proxy, at such
meeting at which a quorum is present. There shall be no cumulative voting.
Section 9. Nominations by stockholders for the election of directors
may be made by stockholders from the floor at any annual or special meeting of
stockholders called for the election of directors if timely written notice of
such nominations has been given to the Secretary of the corporation. To be
timely, such notice must be received at the principal office of the
corporation not later than the close of business on the 15th day following the
day on which notice of the date of the meeting is given or made to
stockholders in accordance with these bylaws. A stockholder's notice to the
Secretary must set forth or be accompanied by (i) the name and address of
record of the stockholder who intends to make the nomination; (ii) a
representation that the stockholder is a holder of record of shares of the
corporation entitled to vote at such meeting and intends to appear in person
or by proxy at the meeting to nominate the person or persons specified in the
notice; (iii) the name, age, business and residence addresses, and principal
occupation or employment of each nominee; (iv) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed by such stockholder pursuant to the proxy
rules of the Securities and Exchange Commission, as then in effect; (v) the
consent of each nominee to serve as a director of the corporation if elected;
and (vi) a representation signed by each proposed nominee that states that
such nominee meets all of the qualifications set forth in Article IV of these
bylaws.
Section 10. Only business properly brought before stockholders'
meetings in accordance with these bylaws shall be conducted at such meetings.
To be properly brought before a meeting, business must be (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly before the meeting by or at the
direction of the Board of Directors, or (c) otherwise (i) properly requested
to be brought before the meeting by a stockholder of record entitled to vote
in the election of directors generally, and (ii) constitute a proper subject
to be brought before such meeting. Any stockholder who wishes to bring a
matter (other than the election of directors) before a meeting of stockholders
and is entitled to vote on such matter must deliver written notice of said
stockholder's intent to bring such matter before the meeting of stockholders
so that such notice is received by the Secretary no later than the close of
business on the 15th day following the date on which notice of the date of the
meeting is given or made to stockholders in accordance with these bylaws.
A stockholder's notice to the Secretary shall set forth as to each matter
the stockholder proposes to bring before the meeting of stockholders (a) a
brief description of the business desired to be brought before the meeting and
the reasons for conducting such business at the meeting, (b) the name and
address, as they appear on the Corporation's books, of the stockholder
intending to propose such business, (c) the class and number of shares of
stock of the Corporation beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. The Chairman of a
meeting shall, if the facts warrant, determine and declare to the meeting that
the business was not properly brought before the meeting in accordance with
the provisions hereof and, if he should so determine, he shall declare such to
the meeting and any such business not properly brought before the meeting
shall not be transacted.
Section 11. Action required or permitted to be taken at a stockholders'
meeting may be taken without a meeting if the action is taken by all the
stockholders entitled to vote on the action. The action must be evidenced by
one or more written consents describing the action taken, signed by all the
stockholders entitled to vote on the action, and delivered to the corporation
for inclusion in the minutes or filing with the corporate records.
If not otherwise set by the Board of Directors, the record date for
determining stockholders entitled to take action without a meeting is the date
the first stockholder signs the written consent.
A consent signed under this section has the effect of a meeting vote and
may be described as such in any document.
Article IV. Directors.
Section 1. All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the corporation managed under
the direction of, the Board of Directors, subject to any limitation set forth
in the Articles of Incorporation, which shall consist of nine (9) members, at
least two (2) of whom shall be independent directors. For purposes of this
Section, "independent director" shall mean a person other than an officer or
employee of the corporation or its affiliates or any other individual having a
relationship that, in the opinion of the Board of Directors, would interfere
with the exercise of independent judgment in carrying out the responsibilities
of a director.
Directors must be at least twenty-one (21) years of age and be citizens of the
United States, although directors need not be stockholders of the corporation
or residents of the state of Mississippi.
The Board of Directors shall appoint a Chairman who shall preside at
meetings of the Board of Directors and of stockholders and shall have such
other duties as may from time to time be assigned to the Chairman by the Board
of Directors. Each director shall receive such compensation for his services
as may, by the Board of Directors, be determined from time to time.
The terms of directors shall be staggered by dividing the total number of
directors into three (3) classes, with each class containing one-third (1/3),
or as close to one-third (1/3) as possible, of the total. With respect to
directors who are elected at the first annual stockholders' meeting where a
classified Board of Directors is elected, the terms of directors in the first
class shall expire at the first annual stockholders' meeting after their
election, the terms of the second class shall expire at the second annual
stockholders' meeting after their election, and the terms of the third class
shall expire at the third annual stockholders' meeting after their election.
At each annual stockholders' meeting held after such first meeting, directors
shall be chosen for a term of three (3) years to succeed those whose terms
expire.
A decrease in the number of directors does not shorten an incumbent
director's term. A director elected to fill a vacancy, whether such director
is elected by the stockholders or the Board of Directors, shall serve for the
unexpired portion of the term of the vacancy which is being filled. Despite
the expiration of a director's term, he shall continue to serve until his
successor is elected and qualifies or until there is a decrease in the number
of directors.
Section 2. The directors shall hold five (5) regular meetings, four
(4) of which shall be held on such quarterly dates as the Board or the
Chairman shall determine from time to time, and shall be held at the principal
office of the corporation in Laurel, Mississippi, or at such other place,
within or without the State of Mississippi, as may be determined by the
Chairman of the Board. The remaining one (1) regular meeting shall be held
immediately after, and at the same place as, the annual meeting of
stockholders.
Section 3. Special meetings of the Board of Directors, to be held at
the principal office of the corporation in Laurel, Mississippi, or at such
other place, within or without the State of Mississippi, as may be determined
by the Board or the Chairman, may be called by the Chairman or by any two
members of the Board of Directors.
Section 4. Any or all directors may participate in a regular or
special meeting by, or conduct the meeting through the use of, any means of
communication by which all directors participating may simultaneously hear
each other during the meeting. A director participating in a meeting by this
means is deemed to be present in person at the meeting.
Section 5. Notice as to date, time and place of all regular and
special meetings of the directors shall be given to each director, by the
Secretary, at least two (2) days prior to the time fixed for the meeting.
Such notice shall be given in any manner to each director at his usual address
or location and shall be deemed to be delivered, if mailed, when deposited
four (4) days prior to the time fixed for the meeting in the United States
mail, so addressed, with postage thereon prepaid. A director's attendance at
or participation in a meeting shall constitute a waiver of any required notice
of such meeting, unless the director at the beginning of the meeting (or
promptly upon his arrival) objects to holding the meeting or transacting
business at the meeting and does not hereafter vote for or assent to action
taken at the meeting.
Section 6. A quorum for the transaction of business at any regular or
special meeting of the directors shall consist of a majority of the number of
directors fixed by these Bylaws.
Section 7. The directors shall appoint the officers of the corporation
and fix the salary of the Chairman of the Board and the President; the
President, or in the absence of the President the directors, shall fix the
salaries of all other officers. Appointment of officers shall be made at the
directors' meeting following each annual stockholders' meeting.
Section 8. Any vacancy on the Board of Directors resulting from the
removal of a director as provided in the Articles of Incorporation shall be
filled by the stockholders; provided that, if the stockholders fail to fill
any such vacancy within ninety (90) days after the date that the director
was removed, then the Board of Directors may fill such vacancy. If a vacancy
occurs on the Board of Directors for reasons other than removal by
stockholders, including a vacancy resulting from an increase in the number of
directors: (a) the stockholders may fill the vacancy; (b) the Board of
Directors may fill the vacancy; or (c) if the directors remaining in office
constitute fewer than a quorum of the Board, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining in office.
A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date) may be filled before the vacancy occurs
but the new director may not take office until the vacancy occurs.
Section 9. The affirmative vote of a majority of the directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors, unless the Articles of Incorporation or the By-laws require the
vote of a greater number of directors.
Section 10. A director of the corporation who is present at a meeting
of the Board of Directors or a committee of the Board of Directors when
corporate action is taken shall be deemed to have assented to the action taken
unless: (a) he objects at the beginning of the meeting (or promptly upon his
arrival) to holding it or transacting business at the meeting; (b) his dissent
or abstention from the action taken is entered in the minutes of the meeting;
or (c) he delivers written notice of his dissent or abstention to the
presiding officer of the meeting before its adjournment or to the corporation
immediately after adjournment of the meeting. The right of dissent or
abstention shall not be available to a director who votes in favor of the
action taken.
Section 11. Any action required or permitted to be taken at a Board of
Directors' meeting may be taken without a meeting if the action is taken by
all members of the Board. The action must be evidenced by one or more written
consents describing the action taken, signed by each director, and included in
the minutes or filed with the corporate records reflecting the action taken.
Action taken under this section is effective when the last director signs
the consent, unless the consent specifies a different effective date.
A consent signed under this section has the effect of a meeting vote and
may be described as such in any document.
Section 12. A director may resign at any time by delivering written
notice to the Board of Directors, its Chairman or to the corporation. A
resignation is effective when the notice is delivered unless the notice
specifies a later effective date.
The stockholders may remove one or more directors with or without cause
unless otherwise provided by the Articles of Incorporation. The removal of
any director of the corporation elected or appointed by the stockholders of
the corporation or by its Board of Directors shall be effected only by the
vote of not less than two-thirds (2/3) of the total outstanding Common Stock.
Notwithstanding the foregoing, these voting requirements for director removal
shall not apply to any director elected by any class (other than Common Stock)
or series which may be or become entitled to elect a director voting as a
separate class or series, and the removal of such a director shall be governed
by the provisions relating to that class or series.
A director may be removed by the stockholders only at a meeting called
for the purpose of removing him and the meeting notice must state that the
purpose, or one of the purposes, of the meeting is removal of the director.
Section 13. The Board of Directors may create one or more committees
and appoint members of the Board of Directors to serve on them. Each
committee must have two (2) or more members, who serve at the pleasure of the
Board of Directors.
The creation of a committee and appointment of members to it must be
approved by a majority of all the directors in office when the action is
taken.
Prior to the annual meeting of stockholders, the Board of Directors shall
appoint a director nominating committee consisting of three directors serving
current terms, at least one of whom shall be an independent director. The
committee shall consider candidates for the class of directorships to be
filled at the meeting and shall submit a slate of candidates or nominees for
Board approval and inclusion in the corporate proxy materials for the annual
meeting and for vote by the stockholders at the annual meeting. Such
submission shall be deemed a nomination of each person named. The committee
may recommend one or more than one candidate or nominee for each vacancy to be
filled. Where a vacancy on the Board of Directors exists that is to be filled
by the Board of Directors, a director nominating committee shall also be
appointed by the Board of Directors to consider and submit a slate of
candidates or nominees for vote by the directors.
The provisions of the By-laws which govern meetings, action without
meetings, notice and waiver of notice, and quorum and voting requirements of
the Board of Directors, shall apply to committees and their members as well.
To the extent specified by the Board of Directors, each committee may
exercise the authority of the Board of Directors.
A committee may not, however: (a) authorize distributions; (b) approve or
propose to stockholders action that requires approval by stockholders; (c)
fill vacancies on committees of the Board of Directors; (d) amend the Articles
of Incorporation; (e) adopt, amend or repeal by-laws; (f) approve a plan of
merger not requiring stockholder approval; (g) authorize or approve
reacquisition of shares except according to a formula or method prescribed by
the Board of Directors; or (h) authorize or approve the issuance or sale or
contract for sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except that the
Board of Directors may authorize a committee (or a senior executive officer of
the corporation) to do so within limits specifically prescribed by the Board
of Directors.
The creation of, delegation of authority to, or action by a committee
does not alone constitute compliance by a director with the standards of
conduct required by law.
Section 14. Each director shall discharge his duties as a director,
including his duties as a member of a committee: (a) in good faith; (b) with
the care an ordinarily prudent person in a like position would exercise under
similar circumstances; and (c) in a manner he reasonably believes to be in the
best interests of the corporation.
In discharging his duties a director shall be entitled to rely on
information, opinions, reports or statements, including financial statements
and other financial data, if prepared or presented by: (a) one or more
officers or employees of the corporation whom the director reasonably believes
to be reliable and competent in the matters presented; (b) legal counsel,
public accountants or other persons as to matters the director reasonably
believes are within the person's professional or expert competence; or (c) a
committee of the Board of Directors of which he is not a member if the
director reasonably believes the committee merits confidence.
Article V. Officers.
Section 1. The officers of this corporation shall be a Chairman of the
Board, a Vice Chairman of the Board (if appointed by the Board at its
discretion), a President, an Executive Vice President (if appointed by the
Board at its discretion), one or more Vice Presidents, a Secretary and a
Treasurer, all of whom shall be appointed for the term of one (1) year, and
shall hold office until their successors are duly elected and qualified.
Such other officers and assistant officers as may be deemed necessary may
be appointed by the Board of Directors or by the officers duly appointed by
the Board of Directors. Any two or more offices may be
simultaneously held by the same person.
Section 2. The officers of the corporation shall be appointed annually
by the Board of Directors at the first meeting of the Board of Directors held
after each annual meeting of the stockholders. Officers of the corporation
may also be appointed by the Board of Directors to serve until the next annual
meeting, when a new office is created by amendment to, or restatement of,
these By-Laws or, in the absence of a resignation, when an incumbent officer
cannot perform the duties conferred upon him by reason of absence or inability
or unfitness to carry out said duties. The appointment of an officer shall
not itself create contract rights. Officers shall serve at the pleasure of
the Board of Directors.
Section 3. An officer may resign at any time by delivering notice to
the corporation. A resignation is effective when the notice is delivered
unless the notice specifies a later effective date. If a resignation is made
effective at a later date and the corporation accepts the future effective
date, it may fill the pending vacancy before the effective date if the
successor does not take office until the effective date. An officer's
resignation shall not affect the corporation's contract rights, if any, with
the officer.
Section 4. Any officer appointed by the Board of Directors may be
removed by the Board of Directors at any time with or without cause whenever
in its judgment the best interests of the corporation would be served thereby,
but such removal shall not affect the contract rights with the corporation,
if any, of the officer so removed. Any office or assistant officer, if
appointed by another officer, may likewise be removed by such officer.
Section 5. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise, may be filled by the Board of
Directors for the unexpired portion of the term.
Section 6. The Chairman of the Board shall preside at all directors'
meetings; shall sign all stock certificates (which signature may be by
facsimile as provided in Article II, Section 2, of these By-laws); and shall
have authority to sign on behalf of the corporation, bills, notes, receipts,
acceptances, endorsements, checks, releases, contracts and documents of every
nature and kind, to issue checks or otherwise draw upon the deposits or
credits of the corporation, excepting dividends, and to do such other acts not
specifically enumerated herein and which are not inconsistent with the
purposes of the business of the corporation and its charter authority or not
otherwise specifically delegated to any other officer.
Section 7. The Vice Chairman of the Board (if appointed by the Board
at its discretion) shall perform all the duties of the Chairman of the Board
at such times as the Chairman is unable to perform the duties conferred upon
him by reason of absence or inability or unfitness to carry out said duties.
The Vice Chairman shall further perform such duties as may be directed to him
by the Chief Executive Officer or by the Board of Directors.
Section 8. The President shall be the chief executive officer of the
corporation. He shall sign all stock certificates (which signature may be by
facsimile as provided in Article II, Section 2, of these By-laws) and shall
perform all of the duties of the Chairman of the Board at such times as the
Chairman or Vice Chairman (if appointed) is unable to perform the duties
conferred upon him by reason of absence or inability or unfitness to carry out
said duties. He shall have general supervision over the affairs of the
corporation; shall perform the duties generally conferred upon the chief
executive officer of a corporation, including the authority to conduct the
affairs of the corporation and to carry out the policies thereof; and shall
have authority to sign on behalf of the corporation, bills, notes, receipts,
acceptances, endorsements, checks, releases, contracts and documents of every
nature and kind, to issue checks or otherwise draw upon the deposits or
credits of the corporation, excepting dividends, to extend credit to persons
and in amounts as he may deem advisable, and to do such other acts not
specifically enumerated herein and which are not inconsistent with the
purposes of the business of the corporation and its charter authority or not
otherwise specifically delegated to any other officer. He shall have general
charge of the office and the plant or plants of the corporation, with
authority to employ and terminate such office assistants and employees as he
may deem advisable and necessary, and to fix and pay salaries for such
employment. The President shall further perform such duties as may be
directed to him by the Board of Directors and shall have authority to delegate
any of the duties herein set forth.
Section 9. The Executive Vice President (if appointed by the Board at
its discretion) shall perform all the duties of the President at such times as
the President is unable to perform the duties conferred upon him by reason of
absence or inability or unfitness to carry out said duties. The Executive
Vice President shall further perform such duties as may be directed to him by
the President or by the Board of Directors.
Section 10. The Vice President(s) shall perform such duties as may be
directed to him(them) by the President or by the Board of Directors.
Section 11. The Secretary shall issue notices of all directors' and
stockholders' meetings, and shall attend and keep the minutes of the same;
shall have charge of all corporate books, records and papers; shall be the
custodian of the corporate seal; shall authenticate records of the
corporation; shall attest with his signature and impress with the corporate
seal all stock certificates (which signature and seal may be facsimile as
provided in Article II, Section 2, of these By-laws) and written contracts of
the corporation, but such attestation shall not be limited to the Secretary
and the absence of such attestation shall not affect the legal validity of any
written contracts; and shall perform all other such duties as are incidental
to his office and that may be specifically delegated to his office.
Section 12. The Treasurer shall have custody of all monies and
securities of the corporation, and he shall keep regular books of account and
shall submit them, together with all his vouchers, receipts, records and other
papers to the directors for their examination and approval as often as they
may require. The Treasurer, or such other officer, if any, who has been
designated as the chief financial officer by the Board of Directors, shall
have the fiscal responsibility for the affairs of the corporation, including
future operations, and shall from time to time propose or otherwise institute
such fiscal policy as may be determined by the Board of Directors.
Section 13. The duties of the Secretary or Treasurer or any part
thereof may be from time to time delegated by the Secretary or Treasurer, with
the consent of the Board of Directors, to an Assistant Secretary or Assistant
Treasurer. The Assistant Secretary or Assistant Treasurer shall have the
authority to perform such acts as may be delegated to him by the Secretary or
Treasurer with the consent of the Board of Directors.
Section 14. For their services, the Vice Chairman (if appointed), the
Executive Vice President (if appointed), the Vice President(s), the
Secretary, the Treasurer and the Assistant Secretary or Assistant Treasurer
(if appointed) shall each receive such salary and other compensation as may be
fixed by the President, or, in his absence, by the directors.
Section 15. As assigned and directed by the Board of Directors, the
Vice President(s), the Secretary or the Treasurer shall perform those duties
of the Chairman, the Vice Chairman (if appointed), the President or the
Executive Vice President (if appointed) at such times as the Chairman, the
Vice Chairman (if appointed), the President or the Executive Vice President
(if appointed) is unable to perform the duties conferred upon him by reason of
absence or inability or unfitness to carry out said duties.
Section 16. Any officer with discretionary authority shall discharge
his duties under that authority: (a) in good faith; (b) with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances; and (c) in a manner he reasonably believes to be in the best
interests of the corporation.
In discharging his duties any officer is entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, if prepared or presented by: (a) one or more officers or
employees of the corporation whom the officer reasonably believes to be
reliable and competent in the matters presented; or (b) legal counsel, public
accountants or other persons as to matters the officer reasonably believes
are within the person's professional or expert competence.
Article VI. Indemnification of Directors,
Officers Employees and Agents.
Section 1. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
Section 2. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no indem-
nification shall be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable for gross negligence or
willful misconduct in the performance of his duty to the corporation unless
and only to the extent that the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
Section 3. To the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections 1. and 2., or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection therewith.
Section 4. Any indemnification under Sections 1. and 2. (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in Sections 1. and 2. Such
determination shall be made (a) by the Board of Directors by a majority vote
of a quorum consisting of directors not at the time parties to such action,
suit or proceeding; or (b) if a quorum cannot be obtained under subsection
(a), by majority vote of a committee duly designated by the Board of
Directors (in which designation the directors who are parties may
participate), consisting solely of two (2) or more directors not at the time
parties to such action, suit or proceeding; (c) by special legal counsel (i)
selected by the Board of Directors or its committee in the manner prescribed
in subsection (a) or (b); or (ii) if a quorum of the Board of Directors cannot
be obtained under subsection (a) and a committee cannot be designated under
subsection (b), selected by a majority vote of the full Board of Directors (in
which selection directors who are parties may participate); or (d) by the
stockholders, but shares owned by or voted under the control of directors who
are at the time parties to such action, suit or proceeding may not be voted on
the determination.
Authorization of indemnification and evaluation as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection
(c) to select counsel.
Section 5. Expenses (including attorneys' fees) incurred in defending
a civil or criminal action, suit or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit or proceeding as
authorized in the manner provided in Section 4. Upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to
repay such amount unless it shall ultimately be determined that he is entitled
to be indemnified by the corporation as authorized in this Article.
Section 6. The corporation may purchase and maintain insurance on
behalf of an individual who is or was a director, officer, employee or agent
of the corporation, or who, while a director, officer, employee or agent of
the corporation, is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, against liability asserted against or incurred by him in
that capacity or arising from his status as a director, officer, employee or
agent, whether or not the corporation would have power to indemnify him
against the same liability under the preceding provisions of this Article.
Section 7. The corporation shall have power to make any further
indemnity, including advance of expenses to and to enter contracts of
indemnity with any director, officer, employee or agent, before or after the
event, except an indemnity against his gross negligence or willful misconduct.
Any determination as to any further indemnity shall be made in accordance with
Section 4. of this Article. Each such indemnity may continue as to a person
who has ceased to have the capacity referred to above and may inure to the
benefit of the heirs, executors and administrators of such person.
Section 8. The corporation shall have power to pay or reimburse
expenses incurred by a director, officer, employee or agent in connection with
his appearance as a witness in a proceeding at a time when he has not been
made a named defendant or respondent to the proceeding.
Section 9. The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its disposition conferred in
this Article (a) shall apply to acts or omissions antedating their adoption of
this by-law; (b) shall be severable; (c) shall not be exclusive of any other
rights to which those indemnified or to whom expenses are paid may be entitled
under any by-law, agreement, vote of stockholders or disinterested directors,
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office; (d) shall continue as to a person
who has ceased to be such director, officer, employee or agent; and (e) shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Article VII. Dividends and Finance.
Section 1. Dividends may be declared from time to time by resolution
of the Board of Directors; but no dividends shall be paid if, after giving
them effect, (a) the corporation would not be able to pay its debts as they
become due in the usual course of business; or (b) the corporation's total
assets would be less than the sum of its total liabilities plus (unless the
Articles of Incorporation permit otherwise) the amount that would be needed,
if the corporation were to be dissolved at the time of the distribution, to
satisfy the preferential rights upon dissolution of stockholders whose
preferential rights are superior to those receiving the distribution.
Section 2. The funds of the corporation shall be deposited in those
depository institutions designated by the Board of Directors, and such funds
may be withdrawn upon the chairman of the Board, President (if any), the Vice
President(s), the Secretary or authority granted to some other the Treasurer,
or by individual by the Chairman of the Board, the Vice Chairman of the
Board, or the President or the Executive Vice President (if any) and one other
officer of the corporation by appropriate notice directed to any such banking
institution or trust company.
Article VIII. Contracts and Loans.
The Board of Directors may authorize any officer or officers, and any
agent or agents to enter into any contract, make any loan or execute and
deliver any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to a specific instance.
Article IX. Fiscal Year.
The fiscal year of the corporation shall end on the 31st day of October
in each year.
Article X. Corporate Seal.
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation,
the state of incorporation and the words "Corporate Seal." The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Article XI. Waiver of Notice.
Whenever any notice is required to be given to any stockholder or
director of the corporation under the provisions of these By-laws or under the
provisions of the Articles of Incorporation or under the provisions of the
Mississippi Business Corporation Act, a waiver thereof in writing, signed by
the person or persons entitled to such notice, whether before or after the
date and time stated in the notice, and filed with the minutes or corporate
records, shall be equivalent to the giving of such notice.
Article XII. Transfer Agent.
The Board of Directors shall be authorized, in its discretion, to
contract with and employ a securities transfer agent, either within or without
the State of Mississippi for the general purposes of issuing and cancelling
stock and other security certificates of the corporation, of transfer
processing and of other related security services. The services of any
security transfer agent, for which the Board may contract, may include, but
not be limited to, all security processing, stockholder record-keeping,
election processing, dividend payment, dividend reinvestment, tax information,
notices and proxies, securities regulation reporting, and corporate
reorganization work related to securities. Any transfer agent, if employed,
shall be authorized and empowered to affix official signatures and the seal of
the corporation to stock and other security certificates by facsimile and to
sign on its behalf any and all stock and other security certificates issued by
the corporation.
Article XIII. Amendments.
These By-laws may be altered, amended or repealed or new By-laws may be
adopted by the Board of Directors at any regular or special meeting of the
Board of Directors. Any alteration, amendment or repeal of, or any addition
to, these By-laws which affects classes of directors, the filling of vacancies
on the Board of Directors, the removal of directors, super majority voting
requirements, cumulative voting and classes of stock including preferences,
limitations and relative rights thereof shall require an affirmative vote of
two-thirds (2/3) or more of all the directors in office when the action is
taken; provided that such two-thirds (2/3) vote shall not be required for any
such alteration, amendment or repeal of, or any addition to, these By-laws at
a time when no person, corporation or entity, other than a member of the
Sanderson Family (as such term is defined in Article NINTH of the Articles of
Incorporation), beneficially owns (as such term is defined in Article NINTH of
the Articles of Incorporation) 20% or more of the outstanding shares of Common
Stock of the corporation or 20% or more of the total voting power of the
corporation entitled to vote on any such matter at a meeting of stockholders.
EXHIBIT 10-B-4
STATE OF MISSISSIPPI
COUNTY OF JONES
SANDERSON FARMS, INC.
LAUREL AIRPORT BOARD
Contract Amendment
This Agreement is made and entered into on this the 16th day of August,
1994, by and between the Laurel Airport Board, a political subdivision of the
City of Laurel, Mississippi (hereinafter referred to as "Airport Board") and
Sanderson Farms, Inc., a Mississippi corporation (hereinafter referred to as
the "Company").
WHEREAS, the Airport Board and the Company entered into an Airport
Property Lease dated November 29, 1974 (the "Lease"), which lease covers
certain real property located in the County of Jones, State of Mississippi, in
what is known as the Laurel Municipal Airport; and
WHEREAS, the Company has constructed a poultry processing plant,
Feedmill and related facilities in accordance with the terms of a Contract
between the Company and the City of Laurel dated July 31, 1964, which
facilities are currently being operated by the Company; and
WHEREAS, by ordinance number 1234-1994 dated May 5, 1994, the City
Council of the City of Laurel closed and vacated that certain street running
along the West side of the poultry processing plant constructed in accordance
with the Contract, which street had been previously dedicated as a public
street by the City, but which had never been developed or used as a public
street, and which street is located on property controlled by the Airport
Board; and
WHEREAS, the Company and the Airport Board desire to amend the Lease to
add to the property leased from the Airport Board to the Company pursuant
thereto the street running along the West side of the poultry processing plant
referred to above, and to make the property constituting such street subject
to the terms and conditions of the Lease.
NOW, THEREFORE, IN CONSIDERATION of the premises and in consideration of
the mutual agreements hereinafter contained, the Airport Board and Company
agree as follows:
I. The description of the Leased Premises in the Lease shall be amended to
include the following property:
That certain street running along the side of the West side of the
Sanderson Processing Plant site more particularly described as
follows: Commencing on the Building Restriction line
approximately 5108.6' South of the Northwest Corner Section 12, T-
8-N, R-12-W; thence South 45 degrees 00' East for a distance of
924.4 feet more or less to the Southwest corner of the Sanderson
Processing plant site; thence North 28 degrees 40' East for a
distance of 674.0 feet; thence North 61 degrees 20' West for a
distance of 50.0 feet; thence South 28 degrees 40' West for a
distance of 659.3 feet; thence South 45 degrees 00' East for a
distance of 52.1 feet to the point of beginning.
II. The Company hereby agrees and obligates itself to maintain the above
described property as a portion of the Leased Premises under the Lease at its
own expense throughout the remaining term of the Lease and any renewal
thereof, and agrees to pay as additional rent $275.00 each year during the
remaining term of the Lease and any extensions or renewals thereof, beginning
November 1, 1994.
III. All other provisions, terms and conditions of the Lease shall remain in
full force and effect.
WITNESS the signature and the official seal of the Airport Board hereto
affixed by its duly authorized Director, as approved by the Airport Board on
the 16th day of August, 1994.
Laurel Airport Board,
City of Laurel, Mississippi
By:/s/Robert Burrough
ATTEST: /s/Billy Howard, Jr.
<PAGE>
WITNESS the signature and corporate seal of Sanderson Farms, Inc., a
Mississippi corporation, hereto affixed by its duly authorized President and
Chief Executive Officer and Treasurer and Chief Financial Officer, this the
16th day of August, 1994.
SANDERSON FARMS, INC.
By:/s/Joe F. Sanderson, Jr.
Joe F. Sanderson, Jr.
President and Chief
Executive Officer
ATTEST:
/s/D. Michael Cockrell
D. Michael Cockrell
Treasurer and Chief
Financial Officer
STATE OF MISSISSIPPI
COUNTY OF JONES
Personally appeared before me, the undersigned authority in and for the
jurisdiction aforesaid, the within named Robert Burrough, Chairman of the
Laurel Airport Board of the City of Laurel, Mississippi, who acknowledged
that he signed, executed and delivered the above and foregoing instrument as
the act and deed of the Laurel Airport Board of the City of Laurel,
Mississippi, having been first duly authorized to do so, and on the day and
date therein mentioned.
Given under my hand and official seal this the 16th day of August, 1994.
/s/June G. Munsy
NOTARY PUBLIC
My Commission Expires:
Mississippi Statewide Notary Public
My Commission Expires March 1, 1994
Bonded Thru Stegall Notary Service
STATE OF MISSISSIPPI
COUNTY OF JONES
Personally appeared before me, the undersigned authority in and for the
jurisdiction aforesaid, the within named Joe F. Sanderson, Jr. and D. Michael
Cockrell, personally known to me to be the President and Chief Executive
Officer and Treasurer and Chief Financial Officer, respectively, of Sanderson
Farms, Inc., a Mississippi corporation, who acknowledged that as such
officers, they executed and delivered the above foregoing instrument on the
day and year therein mentioned for and on behalf of said corporation after
first being duly authorized to do so.
Given under my hand and official seal on this the 16th day of August,
1994.
/s/Peggy Y. Fuller
NOTARY PUBLIC
My Commission Expires:
April 22, 1997
<PAGE>
STATE OF MISSISSIPPI
COUNTY OF JONES
I, Daryl Cooper, the duly appointed, qualified and acting Manager of the
Laurel Airport Board of the City of Laurel, Mississippi, and lawful custodian
of the Minutes of the meetings of the Airport Board, hereby certify that the
foregoing is a true and exact copy of a document approved by resolution
adopted by the Laurel Airport Board at its meeting held on the 16th day of
August, 1994, the same being a regular meeting.
Witness my signature and official seal of office, on this the 16th day
of August, 1994.
/s/Daryl Cooper
(Seal)
EXHIBIT 10-E-2
ARTICLE I
AGREEMENT
Section 1. This Agreement made and entered into this 6th day of November,
1994, by and between Sanderson Farms, Inc. (Hammond Processing Division) of
Hammond, Louisiana, hereinafter referred to as the Company or Employer, and
United Food and Commercial Workers Local Union 210, affiliated with the United
Food and Commercial Workers International Union, hereinafter referred to as
the Union.
Section 2. The general purpose of this Agreement is to establish just and
equitable terms and conditions of employment and to provide methods for fair
and peaceful adjustment of differences which may arise. It is recognized by
the Agreement to be the respective duty of the Company, the Union and the
Employees to cooperate fully, individually and collectively toward the
accomplishment of said aims.
ARTICLE II
RECOGNITION
Section 1. The Company recognizes the Union as the exclusive bargaining agent
for all production and maintenance employees, including truck drivers, at the
Employer's poultry processing and rendering plant in Hammond, Louisiana, and
excluding office clerical employees, guards and/or watchmen, salesmen,
professional employees, and supervisors as defined in the Act.
<PAGE>
ARTICLE III
MANAGEMENT PREROGATIVES
Section 1. Nothing in this Agreement shall be deemed to limit the Employer in
any way in the exercise of the customary functions of management which are
recognized as the Employer's exclusive responsibility, including, but not
limited to, the right to plan, direct, and control operations, to utilize the
services of contractors, to determine the number, size and location of its
establishments, to close an establishment or departments thereof, to hire, to
promote, to demote, and for proper cause to discipline, suspend or discharge,
to assign and schedule work and transfer employees from one job or department
to another, and to make and enforce reasonable rules and regulations relative
to any and all of these matters or to the management of its operation,
provided that the reasonableness of rules may be tested in the grievance
procedure. The Employer shall be the exclusive judge of all matters
pertaining to its operations and their scheduling and the methods, processes,
equipment, means of operation and size of workforce.
Section 2. The Employer retains all prerogatives and rights of management and
all privileges and responsibilities not specifically limited by this
Agreement.
ARTICLE IV
SHOP STEWARDS
Section 1. The Employer recognizes the right of the Union to designate shop
stewards, not to exceed eight (8) in number, who shall be assigned to serve
specific areas of the plant to handle such Union business as may arise. The
shop stewards shall be employees of the Company. The Union shall notify the
Company in writing as to the names of the stewards and of any changes in
designation of stewards.
Section 2. A representative of the Union shall be permitted to enter the
plant at reasonable times, upon Employer's premises and plant, provided such
representative shall in no way interfere with the operations of Employer's
business and shall make arrangements with the Employer's manager.
ARTICLE V
GRIEVANCE PROCEDURE
Section 1. Grievances arising under this contract are herein defined as a
claim by a party to this Agreement or an employee covered by this Agreement
that the Company or the Union has violated a provision of this Agreement.
STEP I
The employee shall discuss the grievance or complaint with the immediate
supervisor within five (5) working days after the event giving rise thereto
occurs, or within five (5) working days following the date on which the
grievant had or reasonably would have had knowledge thereof. In the event the
employee so requests, the appropriate steward shall be present at this step.
The supervisor shall give an answer within five (5) working days after the
grievance is received.
<PAGE>
STEP 2
If there is no settlement in Step 1, the grievance may be presented by
the employee and/or shop steward within five (5) working days from the date on
which the supervisor's answer was given in Step 1. The grievance must be
presented in writing to the department superintendent and must state the
following information:
(a) name or names of employee or employees involved;
(b) the department or departments involved;
(c) the date and time of the occurrence or discovery of the grievance;
(d) the facts of the incident on which the claim is based;
(e) the specific provision of this Agreement alleged to have been
violated;
(f) the remedy requested.
The department superintendent shall give the Company's answer in writing
within five (5) working days after the grievance is received by the
superintendent.
STEP 3
In the event the grievance is not settled in Step 2, then the grievance
may be appealed in writing to the division manager or a designated
representative by the Union to Step 3 within five (5) working days from the
Company's answer in Step 2. The division manager or a designated
representative shall give an answer in writing within five (5) working days
from the date of the appeal. In the event the grievance is not settled then
the aggrieved party or parties shall have the right to request arbitration.
In the event a grievance arises on behalf of the Employer, the matter
shall be presented to the Union Business Agent in writing, who shall have
seven (7) days from the date of submission within which to endeavor to
reconcile the grievance presented and shall give an answer in writing within
that time. If not settled within that time, the aggrieved party or parties
shall have the right to request arbitration.
Section 2. Discharge grievances shall be processed initially under Step 3 of
the grievance procedure. The written grievance shall be filed with the
division manager within five (5) working days following the date of discharge.
Section 3. A failure to observe the time limit specified herein for original
presentation of a grievance or presentation in any subsequent step of the
grievance procedure on the part of either the grievant or the Union shall be
conclusive evidence that the grievance has been settled and abandoned.
Failure on the part of the Company to comply with the time limits for
delivering its answer in any step of the grievance procedure shall
automatically advance the grievance to the next step of the grievance
procedure.
The time limits of the grievance procedure may be extended by mutual
consent of the Union and the Company.
<PAGE>
ARTICLE VI
ARBITRATION
Section 1. If a party to this Agreement desires to take a grievance to
arbitration, it shall within fifteen (15) calendar days after the denial of
the grievance, give written notice of his intention to the other party,
together with a written statement of the specific provision or provisions of
this Agreement at issue.
Section 2. The parties shall attempt to select an impartial arbitrator. If
they are unable to agree upon a choice within seven (7) calendar days after
the receipt of Notice of Intent to Arbitrate, either party may request the
Federal Mediation and Conciliation Service to submit a list of five (5)
arbitrators, from which the arbitrator will be selected. Selection shall be
made by the parties alternately striking any name from the list (the first to
strike shall be the party requesting arbitration) until only one (1) name
remains. The final name remaining shall be the arbitrator of the grievance.
Section 3. The jurisdiction and the decision of the arbitrator of the
grievance shall be confined to a determination of the acts and the
interpretation or application of the specific provision or provisions of this
Agreement at issue. The Arbitrator shall be bound by terms and provisions of
this Agreement and shall have the authority to consider only grievances
representing solely an arbitration issue under this Agreement. The arbitrator
shall have no authority to add to, alter, amend, or modify any provision of
this Agreement. The decision of the arbitrator in writing on any issue
properly before the arbitrator in accordance with the provisions of this
Agreement, shall be final and binding on the aggrieved employee or employees,
the Union, and the Employer.
Section 4. Multiple grievances shall not be heard before one arbitrator at
the same hearing except by mutual agreement of the parties.
Section 5. The Union and the Employer shall each bear its own costs in these
arbitration proceedings, except that they shall share equally the fee and
other expenses of the arbitrator in connection with the grievance.
ARTICLE VII
NO STRIKE - NO LOCK OUT
Section 1. For the duration of this Agreement, there shall be no strike,
stoppages, slowdowns, picketing, or other interruption of or interference with
the operations of the plant.
Section 2. The Company shall not lock out employees for the duration of this
Agreement.
Section 3. Neither the violation of any provisions of the Agreement, nor the
commission of any act constituting an unfair labor practice, or otherwise made
unlawful, shall excuse the employees, the Union, or the Company from their
obligations under the provisions of this Article.
Section 4. An employee discharged or otherwise disciplined for violation of
this Article, may seek review of such discipline through the grievance and
arbitration procedures provided herein. In this event, the only question to
be reviewed shall be whether or not the employee participated in the
prohibited conduct.
ARTICLE VIII
UNION BULLETIN BOARD
The Employer will provide a bulletin board in the plant for posting of
Union notices. All matters to be posted shall be submitted to the Division
Manager or a designated representative for approval prior to posting, and
management's decision shall be final.
ARTICLE IX
HOURS OF WORK
Section 1. The regular work week shall consist of five (5) days or forty
(40) hours. This shall not be construed as a guarantee of any amount of hours
or work. The basic work week shall be the seven (7) day period from 12:01
a.m. Sunday until midnight the following Saturday. Employees will be given at
least one (1) calendar week's notice of any change by the Company of the
payroll week.
Section 2. An employee who works more than forty (40) hours in any one week
shall be paid at time and one-half the regular rate of pay for all hours in
excess of forty (40).
Section 3. When employees are called to work a shift outside their regularly
scheduled shift and report for work, or when they report to work at their
regularly scheduled time, they shall be given the opportunity to work a
minimum of three (3) hours or receive pay for same at the applicable hourly
rate, except that no such pay shall be made when the plant cannot operate for
reasons beyond the control of the Employer, such as, but not limited to,
strikes, utility failure, fire, flood, storms or other acts of God interfering
with work, or a breakdown of machinery or equipment when the Company notifies
the employees not to report to work at least four (4) hours prior to the
scheduled time to work.
Section 4. Employees will be paid at their regular rate for all waiting time
of thirty (30) minutes or less, so long as they do any job they are assigned.
Employees will not be paid for waiting time which exceeds thirty (30) minutes
if (1) they are relieved of all duties, (2) are free to leave the plant, and
(3) are told the time they must return to work. Employees will not be
relieved without pay more than once in any workday except for a lunch break of
not more than one (1) hour.
Section 5. The Company will provide one (1) unpaid break of not less than
thirty (30) minutes for lunch during each shift, and shall provide one (1)
twelve (12) minute paid rest period prior to lunch each day. In addition, all
employees will be allowed one (1) twelve (12) minute paid rest period after
the lunch break provided the work time is expected to be not less than two and
one-half (2 1/2) hours. No unpaid break shall be provided for maintenance
employees and truck drivers.
The Company shall have the right to provide a twenty-four (24) minute
paid lunch break to Clean-Up Line Operators on restricted hours in lieu of all
breaks provided in this Section.
Section 6. A Clean-Up Line Operator who has completed the probationary
period and is permanently assigned to restricted hours in the clean up
department shall receive an hourly adjustment of ninety (90) cents for each
hour worked in that assignment.
Section 7. Employees who have completed the probationary period and are
temporarily assigned for one or more consecutive hours to perform the duties
of an absent employee in a higher paid classification shall receive the rate
of that classification while performing the duties of the classification.
Employees who work at more than one pay rate during a week in which they earn
overtime shall receive overtime pay based upon an average of the rates earned
during that week.
ARTICLE X
SENIORITY
Section 1. Seniority is defined as the length of an employee's continuous
employment in the bargaining unit at the Company's Hammond, Louisiana, poultry
processing plant since the last permanent date of employment. For purposes of
layoff, recall, promotion, and vacation only, this shall include continuous
service which began prior to the acquisition of the plant by the Company.
<PAGE>
Section 2. All newly hired or rehired employees shall be considered as
probationary employees for a period of ninety (90) days during which period
they shall not acquire seniority, and during which they may be discharged
without recourse to the grievance and arbitration procedures provided herein.
If retained as a regular employee upon satisfactory completion of the
probationary period, seniority shall be retroactive to the first day of
employment.
Section 3. In matters of layoff, recall, and promotion, consideration will
be given to an employee's skill, ability, attendance, versatility, training,
physical fitness, and seniority; and when, in the opinion of the Company, the
factors other than seniority are relatively equal, seniority will be the
deciding factor.
Section 4. An employee's seniority shall be lost and employment considered
terminated by:
(a) discharge for just cause;
(b) failure to return from layoff within five (5) working days after
written notice by certified mail is sent by the Company to the
employee's last known address on the Company's books. Actual
notice to the employee of recall by any other means shall satisfy
the terms of this provision;
(c) voluntary termination of employment;
(d) failure to report after termination of a leave of absence
approved by the Company in writing on the first scheduled day
following the expiration of such leave of absence;
(e) engaging in a gainful occupation while on leave of absence;
(f) absence from work for three (3) consecutive working days without
notice to the Company, which shall be considered as a voluntary
quit, unless notice was prevented by a cause beyond the control
of the employee;
(g) separation from the Company's active payroll for any reason,
exclusive of leaves of absence approved by the Company, for a
period exceeding an employee's length of service in the Hammond
plant, or three (3) months, whichever is less.
Section 5. For the purposes of this Agreement, layoffs shall be classified
as (a) "short term" and (b) "long term". A short term layoff is a layoff
which will not exceed ten (10) workdays in length. Short term layoffs may be
made without regard to seniority. A long term layoff is a layoff which will
exceed ten (10) workdays in length. Long term layoffs shall be made subject
to Section 3 of this Article.
Section 6. All permanent job vacancies in premium rated classifications
shall be posted for twenty-four (24) hours on the plant bulletin board.
Employees in lower rated classifications desiring promotion to such jobs shall
sign a bid sheet posted on the bulletin board. An employee who does not sign
such bid sheet shall have no right to consideration for the vacancy. However,
the fact that an employee did not sign the bid sheet will not preclude that
employee's selection for the job by the Company if none of the signers is
determined to be qualified. If no qualified employee bids on the posted
position, the Company may fill the position in its discretion. If, after a
reasonable period not to exceed thirty (30) days, the employee selected for
the posted position achieves an acceptable level of performance, the employee
shall receive the rate of the new position. If the employee fails to perform
in an acceptable manner, such employee shall return to a job in their former
classification and the premium job shall be posted again. An employee who
self-disqualifies shall return to the extra board at the line operator's rate
of pay and shall not be eligible for bidding on a premium job for a period of
six (6) months.
Section 7. Assignments involving employees on the extra board shall be in
order of seniority. Within a department, no extra board employee shall be
retained over a permanently assigned employee.
ARTICLE XI
LEAVES OF ABSENCE
Section 1. An employee who has completed the probationary period may be
granted, at the Company's discretion, a leave of absence without pay for a
reasonable period of time, not to exceed one (1) month, for the following
reasons:
(a) emergency personal business;
(b) serious illness in the immediate family (spouse,
children or parents), supported by a doctor's certificate; and
(c) Union business, upon written request by the Union's
Business Manager, provided that no more than three (3)
employees shall be on such leave simultaneously.
Section 2. Employees who have completed their probationary period are
eligible for up to thirteen (13) weeks per year of unpaid family and medical
treatment leave for the following reasons:
(a) Employee's serious health condition -- a medical certification
will be required which states that the employee is unable to perform the
functions of the employee's position.
(b) Family serious health condition -- spouse, parent, or child. A
medical certification will be required stating the employee is "needed to care
for the individual."
(c) New child leave -- the birth, adoption or foster care placement
by a state agency of a child, and, the need to care for the child; such leave
may be prior to the actual birth or placement.
The provisions of this Section shall be administered in accordance with
the Family and Medical Leave Act of 1993 (FMLA).
Section 3. Employees who have completed their probationary period who lose
actual work time in order to attend the funeral of a family member shall
receive a paid funeral leave for time necessarily lost during the employee's
regularly scheduled shift, provided the employee would have been scheduled and
at work during that day. Said leave shall be up to three (3) days with pay
for a deceased parent, spouse, child, brother, or sister and one (1) day for a
deceased father-in-law, mother-in-law, grandparent, brother-in-law, or sister-
in-law. In order to receive pay under this Section, an employee must be
actively working, must make application for such paid leave, and must attend
the funeral. The Company may require satisfactory evidence of attendance at
the funeral and the relationship of the deceased.
Section 4. If the Company has knowledge that an employee, in a premium-rated
classification, will be on family and medical leave, military leave, or an
industrial injury leave for more than thirty (30) calendar days, the job will
be posted and filled on a temporary basis. The successful bidder will receive
the rate of the premium classification for the period its duties are
performed. When employees on leave under this Section return, they shall be
immediately assigned to their old job; employees temporarily filling the job
shall return to their regular classification and pay rate.
Section 5. The Company shall pay each active employee who reports for jury
duty the difference between pay up to eight times the hourly rate for time
actually lost and the juror's daily fee for each day the employee is required
to serve on a jury. The employee must report to work during those days of his
regularly scheduled shift during which the employee is not required to report
for jury duty or be available at court for jury service. The employee must
present proof of jury service and the amount of compensation received from the
court.
ARTICLE XII
SENIORITY LIST
Section 1. Upon request at any reasonable time, the Company shall furnish to
the Union a current seniority list.
ARTICLE XIII
MISCELLANEOUS
Section 1. The Company shall maintain safe, sanitary, and healthy working
conditions at all times, and employees will be required to cooperate in
maintaining such conditions. Any complaints regarding safety or health shall
be processed through the grievance and arbitration provisions of this
Agreement.
Section 2. The Company will provide any uniforms required of employees who
have completed their probationary period.
The Company will furnish required safety equipment, gloves, aprons, hair
nets, freezer gloves, cotton gloves, and smocks at no cost to the employee.
Needed replacements, through normal use, will be made at no cost provided the
worn out article is returned to the Company. If an item is lost or destroyed
through employee negligence, the employee will be charged for its replacement.
Section 3. The Employer may require any employee to take a physical
examination at any time at the Employer's expense.
Section 4. It shall be the responsibility of all employees to keep the
Employer apprised of their current address, telephone number, marital status
and number of dependents.
Section 5. It is the intent of the parties hereto that no provisions of this
Agreement shall require either party to perform any act which shall be
unlawful under any Louisiana or Federal statute.
ARTICLE XI V
VACATIONS
Section 1. Regular full-time employees shall be eligible for one (1) week's
vacation after the first anniversary date of continuous employment, and after
the anniversary date of each succeeding year.
Employees shall be eligible for a second week of vacation after the
second anniversary date of continuous employment, and after the anniversary
date of each succeeding year of continuous employment.
Employees shall be eligible for a third week of vacation after the tenth
anniversary date of continuous employment, and after the anniversary date of
each succeeding year of continuous employment.
Section 2. To be eligible for a vacation, an employee must have worked
sixteen hundred (1,600) hours during the preceding twelve (12) months or
eighty (80) percent of available hours for that period, whichever is less.
Vacations and holidays not worked shall be considered time worked for purposes
of this Section.
Section 3. Vacation pay shall be computed at forty (40) times the Employee's
regular straight time hourly rate.
Section 4. Due consideration will be given employees' choice of vacation
time, but all vacations scheduled are subject to the final approval of the
Company in keeping with the Company's scheduling needs. In the event that two
or more employees cannot be released at the same time, the employee with the
longest service with the Company will be given preference. An employee who
notifies the Company of a vacation choice thirty (30) days in advance shall
not lose that vacation choice to another employee. Vacations may not be
scheduled for periods of less than a week, and all vacations must be taken
within an anniversary year.
Section 5. The Company reserves the right to schedule a plant shutdown for
one .(l) week in any year, which shall be treated as a vacation week for those
employees entitled to vacation.
ARTICLE XV
INSURANCE
The Company will provide a group insurance program for employees covered
by this Agreement. The Company will continue to make monthly contributions
toward group insurance premiums in the same proportion as is currently in
effect. Employees will bear the remaining costs of the insurance.
ARTICLE XVI
HOLIDAYS
Section 1. The following shall be considered holidays:
New Year's Day Labor Day
Martin Luther King's Birthday Thanksgiving Day
July Fourth Christmas Day
additional holiday which shall be announced each year by the Company one week
prior to the day when it will be observed. In the event any holiday falls on
a Saturday or Sunday, the Company will announce whether it will be observed on
the Friday preceding or the Monday following the holiday. Such notice shall
be given at least four (4) days in advance.
Section 2. All regular full-time employees who have completed their
probationary period shall be paid for eight (8) hours at their regular
straight time rate for each holiday enumerated above, provided they report for
work and work all scheduled hours on the workday preceding and the workday
next following the holiday, unless the employee was necessarily absent due to
personal illness, supported by a doctor's certificate, or because of an
emergency occurring to the employee or the employee's immediate family
(meaning only spouse, children, or parents). No employee shall lose holiday
pay because of missing no more than thirty (30) minutes on the workday before
or the workday following the holiday.
In any event, an employee must work at least one (1) day during the
calendar week in which a holiday falls in order to be eligible for holiday
pay, except the employee who is on vacation.
Section 3. Employees required to work on a holiday shall be paid the amount
provided above, in addition to their regular earnings for that day. Hours not
worked on a holiday shall not be considered as work time in computing any
additional compensation due under the overtime provisions of this contract.
Section 4. If an employee is required to work and fails to report or fails
to work scheduled hours on a holiday, the employee shall forfeit holiday pay
for that day.
Section 5. Employees on vacation during the week in which a holiday falls
shall receive holiday pay.
ARTICLE XVII
WAGES
Section 1. Wages shall be paid as provided in Appendix A attached hereto and
made a part of this Agreement.
Section 2. Whenever a new job classification is created by the Company, or
there is a change or merger of job classifications or the job content of job
classifications, the Company will discuss the appropriate wage rate with the
Union. If a mutually satisfactory rate cannot be agreed upon, the Company
will set the rate. The Union may file a grievance on the rate, and the
dispute shall be settled in accordance with the grievance and arbitration
procedures of this contract.
Section 3. Any employees who, upon the effective date of the wage rate set
forth in Appendix A, are earning in excess of the applicable rate, shall,
during the term of this Agreement, continue to receive their current rate
until the contract rate equals or exceeds that rate. This section shall not
apply to any employee in a classification which has been paid on a salary
basis under any past contract.
Section 4. If, during the term of this Agreement, Congress enacts new
minimum wage legislation which requires the payment of a minimum wage greater
than the rate provided in Appendix A for newly-hired employees, the rate for
newly-hired employees shall be raised to the federal minimum rate, and the
spread between the rates provided in this Agreement shall be maintained. Any
such change shall be effective upon the effective date of the new federal
minimum rate.
Section 5. In addition to the wage rates as provided in Appendix A,
production employees who have been continuously employed for five (5) or more
years shall receive seniority pay of twenty (20) cents per hour. Maintenance
employees and distribution drivers who have been continuously employed for
five (5) or more years will receive seniority pay of fifty (50) cents per
hour.
Section 6. Employees who have been continuously employed for one (1) or more
years shall receive a night shift differential of twenty-five (25) cents per
hour for work performed on a shift starting during the hours beginning 12:00
noon through 1:00 a.m. The starting time of a shift determines if it is
subject to the shift differential. Employees performing work on a night shift
which is not their regular shift will receive shift differential for such work
if it lasts three (3) or more hours. Distribution drivers shall not receive
shift differential regardless of the time they begin work.
ARTICLE XVIII
NO DISCRIMINATION
Section 1. The Company and the Union agree that they will not discriminate
against any person with regard to employment or Union membership because of
race, creed, color, sex, religion, age, national origin, or disability (as
defined in the Americans With Disabilities Act).
Section 2. Whenever masculine gender is used in this Agreement, it shall apply
to the feminine gender.
ARTICLE XIX
AUTHORIZATION FOR REPRESENTATION AND CHECK-OFF
Section 1. During the term of this Agreement, the Company will deduct
initiation fees, assessments, and Union dues from the wages of employees who
individually authorize the Company on a form in compliance with Appendix B to
this Agreement.
Section 2. The Union shall save the Company harmless against and from all
claims, demands, suits or other forms of liability that arise out of or by
reason of action taken or not taken by the Company in reliance upon or
compliance with any provisions of this Article.
Section 3. It is agreed that by reason of institution of the above check-off
system, collections by any other method on the Company's premises are
prohibited, except with the permission of the Company.
ARTICLE XX
UNION SECU RITY
Section 1. It shall be a condition of employment that all employees of the
Employer covered by this Agreement become members of the Union in good
standing not later than thirty-one (31) days after the effective date of this
Agreement, and remain members in good standing of the Union. It shall also be
a condition of employment that all employees covered by this Agreement and
hired on or after its effective date shall on the thirty-first (31st) day
following the beginning of such employment become and remain members in good
standing in the Union.
The Union shall save the Company harmless against and from all claims,
demands, suits, or other forms of liability that arise out of or by reason of
action taken or not taken by the Company in reliance upon or compliance with
any provisions of this Article.
It is understood and agreed that the provisions of this Article shall be
effective only to the extent permitted by applicable law.
ARTICLE XXI
PROFIT SHARING -- RETIREMENT
Section 1. Since November 1, 1989 employees covered by this Agreement have
been covered by the General Employees Profit Sharing - Retirement Trust
Agreement of Sanderson Farms, Inc. and Affiliates. Approval has been sought
from the Internal Revenue Service (IRS) to merge said Plan into the Employee
Stock Ownership Plan of Sanderson Farms, Inc. and Affiliates, effective as of
November 1, 1993. When the merger is approved, participation and benefits in
the newly merged plan shall be in accordance with the provisions of that plan
beginning with the effective date of the merger. In the event the IRS does
not approve the merger, employees covered by this Agreement shall continue to
be governed by the preexisting Plan and its provisions.
<PAGE>
ARTICLE XX II
DURATION O F AGREEMENT
Section 1. This Agreement shall remain in full force and effect from the 6th
day of November, 1994 until the 30th day of November, 1998, and shall continue
thereafter from year to year until either party to this Agreement desires to
terminate this Agreement by giving written notice at least sixty (60) days
prior to November 30, 1998, or at least sixty (60) days' written notice prior
to any anniversary date thereafter. The parties to this Agreement shall
endeavor to satisfactorily negotiate any contemplated change or execute a new
Agreement during the sixty (60) day period, after proper notice in writing has
been given as provided herein and above. Notice, as specified in this
Article, shall be mailed via United States Certified Mail.
IN WITNESS WHEREOF, the parties have hereunto signed their names this 9th
day of January, 1994.
SANDERSON FARMS, INC. UNITED FOOD AND COMMERCIAL
(Hammond Processing Division) WORKERS LOCAL UNION 210,
Affiliated with the United
Food and Commercial Workers
International Union
/s/Stephen C. Blessey /s/O'Neal Scott
/s/Hattie Lloyd
/s/Raymond Carver
/s/Annie Landry
<PAGE>
<TABLE>
APPENDIX "A"
WAGE SCHEDULE
<CAPTION>
EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE
11/6/94 1/7/96 1/5/97 1/4/98
<S> <C> <C> <C> <C>
PROCESSING
Receiving
Forklift Operator 7.10 7.30 7.50 7.70
Hanging Dock 6.95 7.15 7.35 7.55
Picking
Killer 7.20 7.40 7.60 7.80
Floorworker 6.85 7.05 7.25 7.45
Line Operator 6.70 6.90 7.10 7.30
Eviscerating
Floorworker 6.85 7.05 7.25 7.45
Bird Chiller Operator 6.85 7.05 7.25 7.45
Line Operator 6.70 6.90 7.10 7.30
By-Products Department
By-Products Operator 6.95 7.15 7.35 7.55
CUSTOMER SERVICE
Saws
Floorworker 6.85 7.05 7.25 7.45
Line Operator 6.70 6.90 7.10 7.30
Packing
Scale Operator 6.95 7.15 7.35 7.55
Floorworker 6.85 7.05 7.25 7.45
Giblet Chiller Operator 6.85 7.05 7.25 7.45
Grader 6.80 7.00 7.20 7.40
Line Operator 6.70 6.90 7.10 7.30
Specialty
Forklift Operator 7.15 7.35 7.55 7.75
Scale Operator 6.95 7.15 7.35 7.55
Floorworker 6.85 7.05 7.25 7.45
Stackoff 6.80 7.00 7.20 7.40
Line Operator 6.70 6.90 7.10 7.30
Marination
Scale Operator 6.95 7.15 7.35 7.55
Formulating Mixer 6.85 7.05 7.25 7.45
Floorworker 6.85 7.05 7.25 7.45
Stack Off 6.80 7.00 7.20 7.40
Line Operator 6.70 6.90 7.10 7.30
/TABLE
<PAGE>
<TABLE>
<CAPTION>
EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE
1/6/94 1/7/96 1/5/97 1/4/98
<S> <C> <C> <C> <C>
SHIPPING
Forklift Operator 7.15 7.35 7.55 7.75
Cooler & Shipping Dock 6.80 7.00 7.20 7.40
Distribution Driver 8.45 9.45 9.65 9.85
DEBONE DEPARTMENT
Deboning
Forklift Operator 7.10 7.30 7.50 7.70
Scale Operator 6.95 7.15 7.35 7.55
Floorworker 6.85 7.05 7.25 7.45
Front Half Puller 6.80 7.00 7.20 7.40
Combo Packe 6.80 7.00 7.20 7.40
Stack Off 6.80 7.00 7.20 7.40
Line Operator 6.70 6.90 7.10 7.30
Quality Control Technician 6.95 7.15 7.35 7.55
MAINTENANCE DEPARTMENT
Master Skilled
Operator I 11.20 11.70 11.90 12.10
Master Skilled
Operator II 9.70 10.20 10.40 10.60
Skilled Maintenance
Men 8.80 9.30 9.50 9.70
Mechanic 8.20 8.70 8.90 9.10
Mechanic Helper 7.00 7.20 7.40 7.60
Clean-Up Line Operators 6.70 6.90 7.10 7.30
</TABLE>
Probationary employees shall receive a training rate of $5.40 per hour for the
first ninety (90) days of their employment, which shall be $5.50 effective
January 7, 1996, $5.60 effective January 5, 1997, and $5.70 effective January
4, 1998. Upon the expiration of the ninety (90) day period, the rate shall be
$6.15 per hour, which shall be $6.25 effective January 7, 1996, $6.35
effective January 5, 1997, and $6.45 effective January 4, 1998. After one
year of employment, an employee's rate shall be as shown hereinabove. Newly
hired employees in premium classifications above shall receive the rate of
that classification upon the expiration of a forty-five (45) day period.
<PAGE>
APPENDIX "B"
CHECK-OFF AUTHORIZATION
To: Any Employer under contract with United Food and Commercial
Workers Union, Local 210, AFL-CIO
You are hereby authorized and directed to deduct from my wages,
commencing with the next payroll period, an amount equivalent to dues
and initiation fees as shall be certified by the Secretary-Treasurer
of Local 210, of the United Food and Commercial Workers International
Union, AFL-CIO, and remit same to said Secretary-Treasurer.
This authorization and assignment is voluntary, made in consideration
for the cost of representation and collective bargaining and is not
contingent upon my present or future membership in the Union. This
authorization and assignment shall be irrevocable for a period of one
(1) year from the date of execution or until the termination date of
the Agreement between the Employer and Local 210, whichever occurs
sooner, and from year to year thereafter, unless not less than thirty
(30) days and not more than forty-five (45) days prior to the end of
any subsequent yearly period, I give the Employer and Union written
notice of revocation bearing my signature thereto. The Secretary-
Treasurer of Local 210 is authorized to deposit this authorization
with any Employer under contract with Local 210 and is further
authorized to transfer this authorization to any other Employer under
contract with Local 210 in the event that I should change employment.
EXHIBIT 10-H-3
SANDERSON FARMS, INC.
Bonus Award Program
as of November 1, 1993
I. PURPOSE
The Board of Directors of Sanderson Farms, Inc. has determined that in
addition to the Company's existing competitive and equitable total
compensation package, it is desirable to maintain a bonus award program for
its salaried employees. The purposes for such a program include:
A. To encourage excellence and high levels of performance.
B. To recognize the contributions of the salaried employees to the
overall profitability of the Company.
C. To encourage all employees from every division in the Company to
cooperate, share information and work together as a team for the
overall benefit of the Company and its shareholders.
<PAGE>
SANDERSON FARMS, INC.
Bonus Award Program
as of November 1, 1993
II. PARTICIPATION AND MAXIMUM AWARD
The Executive Committee of Sanderson Farms, Inc. will select and
recognize personnel eligible to participate in the bonus award program, and
reserves the right to review and change the class of eligible employees at any
time. Those now designated include:
A. Salaried personnel within the corporate structure of Sanderson
Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms,
Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division).
B. All salaried management and accounting trainees within the
corporate structure.
The maximum bonus award achievable will be 25% of the employee's base
salary.<PAGE>
SANDERSON FARMS, INC.
Bonus Award Program
as of November 1, 1993
III. ELIGIBILITY
EMPLOYMENT
Except in the case of death, disability or retirement, as set forth
below, employees must be employed in a designated position on October 31 of
the applicable fiscal year to be eligible to participate in the bonus award
program.
PARTICIPATION LEVEL
If a person becomes an employee in a designated position during the year
and is employed in a designated position on October 31, the base salary paid
to such employee during that portion of the year during which he or she was
employed in a designated position will be used in calculating the amount of
such employee's bonus award. Base salary for this purpose shall include
regular compensation only, and shall not include bonus award payments and any
other miscellaneous payments that might be treated as income to the employee.
DEATH, DISABILITY AND RETIREMENT
If an eligible employee terminates employment with the Company during
the fiscal year before October 31 as a result of death, disability or
retirement, such employee will be eligible to participate in the Bonus Award
Program notwithstanding the fact that the employee is not employed on October
31, and the base salary paid to such employee during that portion of the year
during which he or she was employed in a designated position will be used to
calculate the amount of such employee's bonus award.
EXTRAORDINARY CIRCUMSTANCES
Extraordinary circumstances will be subject to review by the Executive
Committee.
<PAGE>
SANDERSON FARMS, INC.
Bonus Award Program
as of November 1, 1993
IV. DETERMINATION OF AWARD AND PAYMENT
Bonus award programs for many corporations focus in some form or another
on the real dollar profits earned by the corporation within a given timeframe.
This method of determining bonuses to be paid to employees recognizes that
bonuses should be paid to employees only after a fair and equitable return has
been earned for the shareholders who own the company.
In recognition of the fact that one of our primary obligations as
employees of this Company is to our shareholders, the Executive Committee and
the Board of Directors have determined that net profits made by the
consolidated corporations [Sanderson Farms, Inc., Sanderson Farms, Inc.
(Production Division), Sanderson Farms, Inc. (Processing Division) and
Sanderson Farms, Inc. (Foods Division)] on a per share basis for the period
November 1 through October 31 of each year will be the basis for bonus awards.
The cost of the bonus awards program will be included in the operating cost of
the corporations in determining the actual annual per share net income.
The audited annual financial statements, on a consolidated basis, of
Sanderson Farms, Inc. will be the measuring tool for the bonus award program.
The annual bonus award will be paid to participants in the bonus award program
after the outside auditors have completed their annual audit of the
corporations, which is usually approximately two (2) months after the end of
the fiscal year.<PAGE>
SANDERSON FARMS, INC.
Bonus Award Program
as of November 1, 1993
V. OBJECTIVES AND FORMULAS FOR DETERMINATION OF
THE BONUS AWARD
The net income per share objective and the corresponding bonus award
percentage will be determined by the Executive Committee of Sanderson Farms,
Inc. on an annual basis.
The objectives and award percentages for fiscal 1995 (November 1, 1994
through October 31, 1995) are as follows:
<TABLE>
<CAPTION>
RANK PER SHARE RETURN* AWARD PERCENTAGE
<S> <C> <C>
Best (1st) $3.5012 25.000%
2nd $3.4293 23.887%
3rd $3.3482 22.776%
4th $3.2672 21.665%
5th $3.1862 20.554%
6th $3.1052 19.443%
7th $3.0241 18.332%
8th $2.9431 17.221%
9th $2.8621 16.110%
10th $2.7811 14.999%
11th $2.7000 13.888%
12th $2.6190 12.777%
13th $2.5380 11.666%
14th $2.4570 10.555%
15th $2.3759 9.444%
16th $2.2949 8.333%
17th $2.2139 7.222%
18th $2.1329 6.111%
19th $2.0518 5.000%
20th BELOW ZERO (0)
</TABLE>
*Net of bonus.<PAGE>
The following formula will be utilized to determine the exact dollar
amount of a participant's bonus award.
A = Gross Award
S = Base Salary (excluding bonus award
payments and other items of miscellaneous income) of the
Participant during that portion of the year in which he
or she was employed in a designated position.
P = Percentage of Award Earned
FORMULA
S X P = A
EXAMPLE
A = Gross Award
S = Base Salary paid to the eligible employee during the
year of $30,780
P = Percentage of Award 10th Place = 14.999%
$30,780 x 14.999% = $4,616.69<PAGE>
SANDERSON FARMS, INC.
Bonus Award Program
as of November 1, 1993
VI. PARAMETERS
This bonus award program has been designed to encourage teamwork and
cooperation among all of the divisions of Sanderson Farms, and to ensure that
Sanderson Farms is consistently among the leaders in profitability in the
broiler and prepared foods industry. The program is also designed to pay a
bonus to employees only after the Company has returned to its shareholders a
fair and equitable return.
1. In the event of extraordinary operating conditions that were
unforeseen when setting the objectives and percentages in this bonus award
program, such circumstances will be considered by the Executive Committee of
Sanderson Farms, Inc. in making awards.
2. In the event of possible reporting errors affecting the ranking, such
circumstances will be considered by the Executive Committee of Sanderson
Farms, Inc. in making awards.
3. In the event changes in laws or accounting procedures affect the
ranking, such circumstances will be considered by the Executive Committee of
Sanderson Farms, Inc. in making awards.
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-67474) pertaining to the Sanderson Farms, Inc. and Affiliates
Stock Option Plan of our report dated December 15, 1994, with respect to the
consolidated financial statements and schedules of Sanderson Farms, Inc.
included in the Annual Report (Form 10-K) for the year ended October 31, 1994.
/s/Ernst & Young LLP
Jackson, Mississippi
December 15, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
<CASH> 4,125
<SECURITIES> 0
<RECEIVABLES> 18,986
<ALLOWANCES> 100
<INVENTORY> 29,375
<CURRENT-ASSETS> 55,779
<PP&E> 202,877
<DEPRECIATION> 78,110
<TOTAL-ASSETS> 181,709
<CURRENT-LIABILITIES> 9,936
<BONDS> 56,176
<COMMON> 9,075
0
0
<OTHER-SE> 113,597
<TOTAL-LIABILITY-AND-EQUITY> 181,709
<SALES> 371,502
<TOTAL-REVENUES> 371,502
<CGS> 329,294
<TOTAL-COSTS> 329,294
<OTHER-EXPENSES> 14,024
<LOSS-PROVISION> 36
<INTEREST-EXPENSE> 3,655
<INCOME-PRETAX> 24,833
<INCOME-TAX> 9,354
<INCOME-CONTINUING> 15,479
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,479
<EPS-PRIMARY> 1.71
<EPS-DILUTED> 1.71
</TABLE>
