UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1995
OR
( ) 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 (I.R.S. Employer
incorporation or organization) Identification No.)
225 North Thirteenth Avenue Laurel, Mississippi 39440
(Address of principal executive offices) (Zip Code)
(601) 649-4030
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
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 periods that the registrant was required to file such reports),
and (2) has been subject to such filing requirement for the past 90 days.
Yes X No _____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d)
of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court.
Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $1 Per Share Par Value-----13,613,080
shares outstanding as of January 31, 1995.
<PAGE>
INDEX
SANDERSON FARMS, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--January 31, 1995 and
October 31, 1994
Condensed consolidated statements of income--Three months
ended January 31, 1995 and 1994
Condensed consolidated statements of cash flows--Three months
ended January 31, 1995 and 1994
Notes to condensed consolidated financial statements
--January 31, 1995
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<CAPTION>
SANDERSON FARMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
January 31, October 31,
1995 1994
(Unaudited) (Note)
(In thousands)
<S> <C> <C>
Assets
Current assets
Cash and temporary cash investments $ 5,942 $ 4,125
Accounts receivables, net 19,136 18,986
Inventories - Note 2 29,782 29,375
Prepaid Expenses 3,847 3,293
Total current assets 58,707 55,779
Property, plant and equipment 206,205 202,877
Less accumulated depreciation (81,712) (78,110)
124,493 124,767
Other assets 1,267 1,163
Total assets $184,467 $181,709
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and
accrued expenses $ 11,595 $ 9,859
Current maturities of long-
term debt 226 77
Total current liabilities 11,821 9,936
Long-term debt, less current maturities 55,951 56,176
Deferred income taxes 9,410 9,410
Stockholders' equity - Note 4
Preferred Stock:
Series A Junior Participating
Preferred Stock, $100 par value:
authorized 500,000 shares; none
issued
Par value to be determined by the
Board of Directors: authorized
4,500,000 shares; none issued
Common Stock, $1 par value: authorized
100,000,000 shares; issued and
outstanding shares - 13,613,080 13,613 9,075
Paid-in capital 2,871 7,410
Retained earnings 90,801 89,702
Total stockholders' equity 107,285 106,187
Total liabilities and stockholders' equity $184,467 $181,709
NOTE: The balance sheet at October 31, 1994 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SANDERSON FARMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
Three Months Ended
January 31,
1995 1994
(In thousands, except share and per share data)
<S> <C> <C>
Net sales $ 87,569 $ 81,445
Cost and expenses:
Cost of sales 80,472 75,428
Selling, general and
administrative 3,333 3,439
83,805 78,867
OPERATING INCOME 3,764 2,578
Other income (expense):
Interest income 43 25
Interest expense (912) (820)
Other (35) 113
(904) (682)
INCOME BEFORE INCOME TAXES 2,860 1,896
Income tax expense 1,080 710
NET INCOME $ 1,780 $ 1,186
Earnings per share $ .13 $ .09
Dividends per share $ .05 $ .05
Weighted average shares
outstanding 13,613,080 13,613,080
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SANDERSON FARMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
January 31,
1995 1994
(In thousands)
<S> <C> <C>
Operating activities
Net income $ 1,780 $ 1,186
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,380 3,709
Change in assets and liabilities:
Increase in accounts receivable ( 150) ( 361)
Increase in inventories ( 407) (1,965)
Increase in other assets (745) ( 260)
Increase in accounts payable and
accrued expenses 1,736 2,825
Total adjustments 4,814 3,948
Net cash provided by operating activities 6,594 5,134
Investing activities
Net proceeds from sale of equipment 10 9
Capital expenditures ( 4,028) ( 9,538)
Net cash used in investing activities ( 4,018) ( 9,529)
Financing activities
Principal payments on long-term debt (77) (73)
Net borrowings under revolving
line of credit -0- 3,000
Dividends paid (682) (681)
Net cash provided by (used in)
financing activities ( 759) 2,246
Net Increase (decrease) in cash and
temporary cash investments 1,817 (2,149)
Cash and temporary cash investments
at beginning of period 4,125 3,979
Cash and temporary cash investments
at end of period $ 5,942 $ 1,830
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
SANDERSON FARMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
January 31, 1995
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments consisting of normal
recurring accruals considered necessary for a fair presentation have
been included. Operating results for the three month period ended
January 31, 1995, are not necessarily indicative of the results that
may be expected for the year ending October 31, 1995. For
further information, reference is made to the consolidated financial
statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended October 31, 1994.
NOTE 2--INVENTORIES
The components of inventory were as follows:
<TABLE>
<CAPTION>
January 31, October 31,
1995 1994
(In thousands)
<S> <C> <C>
Live poultry-broilers and breeders $16,732 $16,453
Feed, eggs and other 3,659 3,795
Processed poultry 2,829 3,005
Processed food 4,313 4,149
Packaging materials 2,249 1,973
$29,782 $29,375
</TABLE>
NOTE 3--INCOME TAXES
Deferred income taxes relate principally to cash basis temporary
differences and depreciation expense which are 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 exceed 1988 revenues. Management does not anticipate
the payment of such taxes related to these cash basis temporary
differences during fiscal 1995.
NOTE 4-COMMON STOCK
During the quarter ended January 31, 1995, the Company's Board of
Directors declared a 3 for 2 stock split effected in the form of
a stock dividend. All share and per share data presented herein have
been restated for the effect of the stock split.
<PAGE>
Item 2. 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.
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
labeling 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 that 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 January 26, 1995, the Company announced plans to add a second shift
at its poultry processing plant in Pike County, Mississippi. The
addition of the second shift will increase the plants total processing
capacity by 600,000 birds per week and will increase Sanderson Farms'
total processing capacity to more than 4 million birds per week.
Following the development of production capacity to support the
expanded processing level, the second shift is expected to begin
operations in the spring of 1996.
The Company announced plans to construct a new poultry complex in Texas
at the annual stockholders meeting on February 23, 1995. The state-of-art
complex will include a feed mill, hatchery, and poultry processing plant
with capacity to process 1.2 million birds per week. At full capacity,
it will employ approximately 1,400 people and require 280 contract
growers. Initial operations are scheduled to begin in the spring of
1997.
Results of Operations
Net sales for the three months ended January 31, 1995, increased $6.1
million or 7.5% as compared to the three months ended January 31, 1994.
The increase in net sales is due to a 10.7% increase in pounds of
products sold and a 2.9% decrease in the average sale price of products
as compared to the first quarter of fiscal 1994. During the first
quarter of fiscal 1995 the pounds of poultry products sold increased
11.4%, while the average sale price of poultry products decreased
3.6% as compared to the first quarter of fiscal 1994. Market prices
for poultry, as measured by the Georgia dock prices, ranged from a low
of $.5125 to a high of $.5300 during the first quarter of fiscal 1995,
as compared to a low of $ .5250 to a high of $.5525 in the first quarter
of fiscal 1994. For the three months ended January 31, 1995 as compared
to the three months ended January 31, 1994, the prepared foods operations
reported increases in both the average sale price and pounds of products
sold of 5.7% and 2.5%, respectively.
Cost of sales for the first three months during fiscal 1995 as compared
to the same period in fiscal 1994, increased $5.0 million or 6.7%.
Costs of sales of poultry products increased $4.7 million or 7.3% during
the first quarter of fiscal 1995 as compared to the first quarter of
fiscal 1994. The increase in the cost of poultry sales was a result of
the additional pounds of poultry products sold and lower costs of feed
grains. A simple average of the corn and soy meal cash market prices
for fiscal 1995 reflected a decrease of 18.0% and 23.0%, respectively,
when compared to fiscal 1994. For the three months ended January 31,
1995, cost of sales of prepared food products sold increased $0.3
million or 3.1%, primarily due to the increase in the pounds of
prepared food products sold.
During the first quarter of fiscal 1995 as compared to the first
quarter of fiscal 1994, the Company's average gross profit per pound
was adversely affected by lower prices for poultry products. However,
the decrease in the costs of feed grains and the increased margins
from prepared food products more than offset the decrease in the
average sale price of poultry products.
Selling, general and administrative expenses decreased $.1 million
or 3.1% during the quarter ended January 31, 1995 as compared to the
quarter ended January 31, 1994.
Interest expense increased $.1 million during the first quarter of
fiscal 1995 as compared to the same period during fiscal 1994. The
increase in interest expense resulted primarily from higher interest
rates.
The Company's effective tax rate for the three months ended January
31, 1995 was 37.8% as compared to 37.4 during the three months ended
January 31, 1994.
Liquidity and Capital Resources
The Company's working capital on January 31, 1995 was $46.9 million
and its current ratio was 5.0 to 1 as compared to working capital of
$45.8 million and a current ratio of approximately 5.6 to 1 at October
31, 1994. During the three months ended January 31, 1995 the Company
expended $4.0 million on planned capital projects. The Company's
outstanding debt on its $70.0 million revolving credit agreement
remained at $30.0 million at January 31, 1995.
The capital budget for fiscal 1995 as of January 31, 1995, has been
increased to $23.9 million from $23.2 as of October 31, 1994. This
increase of $.7 million pertains to items not approved at the end of
the fiscal year pending justification, field trial and alternate
costing.
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information
On June 30, 1994, an election was held by the National
Labor Relations Board at the Company'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 Company filed its objections with
the National Labor Relations Board asking that Board to
set aside the election as a result of improper election
activity on the part of the union, and to open 20 ballots
cast by employees at the child care center. A hearing
was conducted, and on October 19, 1994, a hearing officer
issued a report adverse to the Company. Exceptions to
the report were filed by the Company with the National
Labor Relations Board in Washington D.C. on November 16,
1994. This matter is pending.
On January 27, 1995, a National Labor Relations Board
election was held at the Company'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. 223 votes were cast in favor of union
representation, 195 cast against union representation,
with 21 ballots not opened or counted because of
challenges to their eligibility. On February 3, 1995,
the Company filed objections with the National Labor
Relations Board asking that Board to set aside the
election as a result of improper election activity on
the part of the union. This matter is pending.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this report
(15) Letter re: Unaudited financial information
(b) The Company is a party of various agreements
defining the rights of holders of long-term debt
of the Company, but no single agreement
authorized securities in an amount which exceeds
10% of the total assets of the Company. Upon
request of the Commission, the Company will
furnish a copy of such agreements to the
Commission. Such agreements are therefore
omitted as exhibits as permitted by Item
601(b)(4)(v) of Regulation S-K.
(c) The Company did not file any reports on Form 8-K
during the three months ended January 31, 1995.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by he undersigned thereunto duly authorized.
_____ SANDERSON FARMS, INC. ____
(Registrant)
Date: February 28, 1995 By: D. Michael Cockrell
D. Michael Cockrell
Treasurer and Chief
Financial Officer
Date: February 28, 1995 By: James A. Grimes
James A. Grimes
Secretary and Principal
Accounting Officer
<PAGE>
EXHIBIT 15
INDEPENDENT AUDITORS' REPORT ON REVIEW OF INTERIM
FINANCIAL INFORMATION
Shareholders and
Board of Directors
Sanderson Farms, Inc.
We have reviewed the accompanying condensed consolidated balance
sheet of Sanderson Farms, Inc. and subsidiaries as of January 31,
1995, and the related condensed consolidated statements of income and
cash flows for the three-months ended January 31, 1995 and 1994. These
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data, and making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit in accordance with generally accepted
auditing standards, which will be performed for the full year with
the objective of expressing an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion. Based on our reviews, we are not aware of any material
modifications that should be made to the accompanying condensed
consolidated financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Sanderson Farms, Inc.
and subsidiaries as of October 31, 1994, and the related consolidated
statements of income, stockholders' equity and cash flows for the year
then ended (not presented herein) and in our report dated December 15,
1994, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of October 31,
1994, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
ERNST & YOUNG LLP
Jackson, Mississippi
February 23, 1995
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> JAN-31-1995
<CASH> 5942
<SECURITIES> 0
<RECEIVABLES> 19136
<ALLOWANCES> 103
<INVENTORY> 29782
<CURRENT-ASSETS> 58707
<PP&E> 206205
<DEPRECIATION> 81712
<TOTAL-ASSETS> 184467
<CURRENT-LIABILITIES> 11821
<BONDS> 55951
<COMMON> 13613
0
0
<OTHER-SE> 93672
<TOTAL-LIABILITY-AND-EQUITY> 184467
<SALES> 87569
<TOTAL-REVENUES> 87569
<CGS> 80472
<TOTAL-COSTS> 80472
<OTHER-EXPENSES> 3333
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> 912
<INCOME-PRETAX> 2860
<INCOME-TAX> 1080
<INCOME-CONTINUING> 1780
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1780
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
