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 April 30, 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 April 30, 1995.
INDEX
SANDERSON FARMS, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--April 30, 1995 and
October 31, 1994
Condensed consolidated statements of income--Three months
ended April 30, 1995 and 1994; Six months ended
April 30, 1995 and 1994
Condensed consolidated statements of cash flows--Six months
ended April 30, 1995 and 1994
Notes to condensed consolidated financial statements
--April 30, 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
April 30, October 31,
1995 1994
(Unaudited) (Note)
(In thousands)
<S> <C> <C>
Assets
Current assets
Cash and temporary cash investments $ 3,184 $ 4,125
Accounts receivable, net 18,440 18,986
Inventories - Note 2 30,784 29,375
Other current assets 3,948 3,293
Total current assets 56,356 55,779
Property, plant and equipment 211,288 202,877
Less accumulated depreciation (85,543) (78,110)
125,745 124,767
Other assets 1,070 1,163
Total assets $183,171 $181,709
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and
accrued expenses $ 9,276 $ 9,859
Current maturities of long-
term debt 226 77
Total current liabilities 9,502 9,936
Long-term debt, less current
maturities - Note 5 55,951 56,176
Deferred income taxes 9,410 9,410
Stockholders' equity
Preferred Stock:
Series A Junior Participating
Preferred Stock, $100 par value:
authorized 500,000 shares; none
issued
Par value to be determined by the
Board of Directors: authorized
4,500,000 shares; none issued
Common Stock, $1 par value: authorized
100,000,000 shares; issued and
outstanding shares - 13,613,080 13,613 9,075
Paid-in capital 2,871 7,410
Retained earnings 91,824 89,702
Total stockholders' equity - Note 4 108,308 106,187
Total liabilities and stockholders' equity $183,171 $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 Six Months Ended
April 30, April 30,
1995 1994 1995 1994
(In thousands, except shares and per share data)
<S> <C> <C> <C> <C>
Net sales $ 92,449 $ 91,536 $180,018 $172,981
Cost and expenses:
Cost of sales 84,808 82,013 165,280 157,441
Selling, general and
administrative 4,058 3,819 7,391 7,258
88,866 85,832 172,671 164,699
OPERATING INCOME 3,583 5,704 7,347 8,282
Other income (expense):
Interest income 38 17 81 42
Interest expense (937) (891) (1,849) (1,711)
Other 35 25 -0- 138
(864) (849) (1,768) (1,531)
INCOME BEFORE INCOME TAXES 2,719 4,855 5,579 6,751
Income tax expense 1,016 1,814 2,096 2,524
NET INCOME $ 1,703 $ 3,041 $ 3,483 $ 4,227
Earnings per share $ .13 $ .22 $ .26 $ .31
Dividends per share $ .05 $ .05 $ .10 $ .10
Weighted average shares
outstanding 13,613,080 13,613,080 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>
Six Months Ended
April 30,
1995 1994
(In thousands)
<S> <C> <C>
Operating activities
Net income $ 3,483 $ 4,227
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,908 7,578
Change in assets and liabilities:
(Increase) decrease in accounts
receivable 546 (2,188)
(Increase) in inventories (1,409) (3,228)
(Increase) in other assets (736) ( 222)
Increase (decrease) in accounts payable and
accrued expenses (583) 4,928
Total adjustments 6,726 6,868
Net cash provided by operating activities 10,209 11,095
Investing activities
Net proceeds from sale of equipment 136 9
Capital expenditures (9,847) (16,751)
Net cash used in investing activities (9,711) (16,742)
Financing activities
Principal payments on long-term debt (77) (73)
Net borrowings under revolving
line of credit -0- 6,000
Dividends paid (1,362) (1,361)
Net cash provided by (used in)
financing activities (1,439) 4,566
Net decrease in cash and temporary
cash investments ( 941) ( 1,081)
Cash and temporary cash investments
at beginning of period 4,125 3,979
Cash and temporary cash investments
at end of period $ 3,184 $ 2,898
See notes to condensed consolidated financial statements.
</TABLE>
PAGE
<PAGE>
SANDERSON FARMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 30, 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 six month period ended
April 30, 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 consisted of the following:
<TABLE>
<CAPTION>
April 30, October 31,
1995 1994
(In thousands)
<S> <C> <C>
Live poultry-broilers and breeders $17,106 $16,453
Feed, eggs and other 4,741 3,795
Processed poultry 2,935 3,005
Processed food 3,635 4,149
Packaging materials 2,367 1,973
$30,784 $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.
NOTE 5-CREDIT FACILITY
The Company amended its existing revolving credit agreement with four
banks to, among other things, increase the available credit thereunder
from $70.0 million to $100.0 million effective April 17, 1995. The
revolver has been extended to fiscal 1998, when the outstanding
borrowings may be converted to a term loan payable over four years.
<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 May 17, 1995, the Company announced that Brazos County, Texas
has been selected as the site for the construction of a new poultry
processing plant and hatchery. In addition, the Company has chosen
a location near Franklin in Robertson County, Texas, as the site
for a new feed mill. The three facilities will comprise a
state-of-art poultry complex with capacity to process 1.2 million
birds per week. At full capacity, it will employ approximately
1,400 people and require 140 contract growers.
The Company expects to invest $68 million in construction of the
Texas complex and related equipment. In addition, the Company
anticipates that associated contract growers will invest an
additional $56 million in poultry production facilities.
Construction of the new complex is expected to begin during
the fall of 1995 with initial operations scheduled to begin in
the spring of 1997.
Results of Operations
Net sales for the three months ended April 30, 1995 increased $.9
million or 1.0% as compared to the three months ended April 30, 1994.
Net sales of poultry products increased $1.2 million or 1.6% during
the second quarter of fiscal 1995 as compared to the second quarter
of fiscal 1994. The increase in the net sales of poultry products
resulted from an increase in the pounds of poultry products sold of
7.4%, while the average sales price of poultry products decreased
5.4%. Market prices for poultry, as measured by the Georgia dock
price, ranged from a low of $.5125 to a high of $.5200 during the
second quarter of fiscal 1995, as compared to a low of $.5300 to a
high of $.5625 during the second quarter of fiscal 1994. A simple
average of the Georgia dock prices for whole birds for the three months
ended April 30, 1995 decreased 6.0% as compared to the same period in
fiscal 1994. The prepared foods operation reported an increase in the
average sale price of prepared food products of 6.3% and a decrease in
the pounds of prepared food products sold of 8.3%.
For the six months ended April 30, 1995, net sales increased $7.0
million or 4.1% as compared to the six months ended April 30, 1994.
The increase in net sales was due to an 8.4% increase in the pounds
of products sold and a decrease in the average sale price of products
sold of 4.0%. During the first half of fiscal 1995 as compared to the
first half of fiscal 1994 the pounds of poultry products sold increased
9.3%, while the average sale price of poultry products decreased 4.6%.
A simple average of the Georgia dock prices for whole birds for the six
months ended April 30, 1995 decreased 5.3% as compared to the six months
ended April 30, 1994. For the six months ended April 30, 1994, the
prepared foods operations reported a decrease in the pounds of prepared
food products sold of 2.9% and an increase in the average sale price of
prepared food products of 6.1%.
During the second quarter of fiscal 1995 as compared to the second
quarter of fiscal 1994, cost of sales increased $2.8 million or 3.4%.
Cost of sales of poultry products for the three month period ended
April 30, 1995, increased $3.4 million or 4.7% as compared to the same
three month period ended April 30, 1994. The increase in the cost of
sales of poultry products was a result of the increased pounds of
poultry products sold, which were partially offset by lower costs of
feed grains as compared to the same period during fiscal 1994. A
simple average of the corn and soy meal cash market prices for the
second quarter of fiscal 1995 reflected a decrease of 11.1% and 19.0%,
respectively, when compared to the second quarter during fiscal 1994.
For the three months ended April 30, 1995, cost of sales of prepared
food products sold decreased $.6 million or 5.3%, due to the reduction
in the pounds of prepared food products sold.
Cost of sales for the six months ended April 30, 1995, increased $7.8
million or 5.0% as compared to the same period during fiscal 1994.
Cost of sales of poultry products increased $8.0 million or 6.0% during
the first half of fiscal 1995 as compared to the first half of fiscal
1994. The increase in cost of sales of poultry products resulted from
the additional pounds of poultry products sold, which were partially
offset by lower feed grain prices. A simple average of the corn and
soy meal cash market prices for the six months ended April 30, 1995
reflected a decrease of 14.8% and 20.9% respectively when compared to
the six months ended April 30, 1994. During the six months ended
April 30, 1995 as compared to the six months ended April 30, 1994,
cost of sales of prepared food products sold decreased $.2 million or
1.0%.
For the three months and the six months ended April 30, 1995, the
Company's gross profit was adversely affected by lower prices for
poultry products. Although the costs of feed grains have been
significantly lower during fiscal 1995 as compared to fiscal 1994,
the reduction in the cost of feed did not offset the lower prices
for poultry products.
Selling, general and administrative expenses increased $.2 million
or 6.3% during the second quarter of fiscal 1995 as compared to the
second quarter of fiscal 1994. For the six months ended April 30,
1995, selling, general and administrative expenses increased $.1
million or 1.8% as compared to the same period during fiscal 1994.
Interest expense for the three months and the six months ended April
30, 1995 was approximately the same as compared to the three months
and the six months ended April 30, 1994.
For the second quarter of fiscal 1995 and the second quarter of
fiscal 1994, the Company's effective tax rate was 37.4%. The
Company's effective tax rate for the six months ended April
30, 1995 was 37.6% as compared to 37.4% for the same period
during fiscal 1994.
Liquidity and Capital Resources
On April 30, 1995, the Company's working capital was $46.9 million
and its current ratio was 5.9 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 six months ended April 30, 1995, the
Company expended $9.8 million from working capital on planned
capital projects.
Effective April 17, 1995, the Company amended its revolving credit
agreement to, among other things, increase the revolving credit
available to the Company thereunder to $100.0 million from $70.0
million. The same group of banks that were parties to the original
revolving credit agreement were parties to the amendment. The
Company believes that the amounts available under the revolving
credit agreement, along with the Company's working capital, will
be sufficient for ordinary capital expenditures and construction
of the new poultry complex in Texas.
The Company's capital budget for fiscal 1995 as of April 30, 1995,
has been increased to $28.0 million from $23.2 as of October 31,
1994. This increase of $4.8 million pertains to items not approved
at the end of the fiscal year pending justification, field trial
and alternate costing.<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information
As reported on page 9 of the Company's quarterly report
on Form 10-Q for the quarter ended January 31, 1995, the
Company's objections to a National Labor Relations Board
election held at the Company's Collins, Mississippi
processing plant are pending. Also as reported on page 9
of the Company's Form 10-Q for the quarter ended January
31, 1995, on February 3, 1995 the Company filed
objections with the National Labor Relations Board asking
that Board to set aside an election at the Company's
Hazlehurst, Mississippi processing plant , which election
was held 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. By
motion dated March 10, 1995, the Company withdrew its
objections to the Hazlehurst election, and on March 21,
1995, the National Labor Relations Board certified the
Laborer's International Union of North America Local 693
as the exclusive collective bargaining representative of
all production and maintenance employees at the Company's
Hazlehurst, Mississippi processing plant.
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 April 30, 1995.<PAGE>
<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 the undersigned thereunto duly authorized.
_____ SANDERSON FARMS, INC. _______
(Registrant)
Date: May 24, 1995 By: D. Michael Cockrell
D. Michael Cockrell
Treasurer and Chief
Financial Officer
Date: May 24, 1995 By: James A. Grimes
James A. Grimes
Secretary and Principal
Accounting Officer
PAGE
<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 April 30,
1995, the related condensed consolidated statements of income for
the three-month and six-month periods ended April 30, 1995 and 1994,
the condensed consolidated statements of cash flows for the six-month
periods ended April 30, 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.
EARNEST & YOUNG LLP
Jackson, Mississippi
May 19, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> APR-30-1995
<CASH> 3184
<SECURITIES> 0
<RECEIVABLES> 18440
<ALLOWANCES> 112
<INVENTORY> 30784
<CURRENT-ASSETS> 56356
<PP&E> 211288
<DEPRECIATION> 85543
<TOTAL-ASSETS> 183171
<CURRENT-LIABILITIES> 9502
<BONDS> 55951
<COMMON> 13613
0
0
<OTHER-SE> 94695
<TOTAL-LIABILITY-AND-EQUITY> 183171
<SALES> 92449
<TOTAL-REVENUES> 92449
<CGS> 84808
<TOTAL-COSTS> 84808
<OTHER-EXPENSES> 4058
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 937
<INCOME-PRETAX> 2719
<INCOME-TAX> 1016
<INCOME-CONTINUING> 1703
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1703
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
