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 July 31, 1997
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-----14,366,580 shares
outstanding as of July 31, 1997.
<PAGE>
INDEX
SANDERSON FARMS, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--July 31, 1997 and
October 31, 1996
Condensed consolidated statements of income (loss)--Three months
ended July 31, 1997 and 1996; Nine months ended July 31, 1997
and 1996
Condensed consolidated statements of cash flows--Nine months ended
July 31, 1997 and 1996
Notes to condensed consolidated financial statements--
July 31, 1997
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
SANDERSON FARMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
July 31, October 31,
1997 1996
(Unaudited) (Note)
(In thousands)
<S> <C> <C>
Assets
Current assets
Cash and temporary cash investments $ 557 $ 4,879
Accounts receivables, net 31,292 27,661
Inventories - Note 2 44,465 39,060
Refundable income taxes 0 1,148
Other current assets 7,562 5,616
Total current assets 83,876 78,364
Property, plant and equipment 307,857 270,930
Less accumulated depreciation (127,309) (112,974)
180,548 157,956
Other assets 2,635 906
Total assets $267,059 $237,226
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and
accrued expenses $ 17,453 $ 14,438
Current maturities of long-
term debt 3,104 3,100
Total current liabilities 20,557 17,538
Long-term debt, less current maturities 118,109 90,102
Deferred income taxes 11,336 11,336
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 - 14,366,580
and 14,363,080 at July 31, 1997 and
October 31, 1996, respectively 14,367 14,363
Paid-in capital 11,452 11,292
Retained earnings 91,238 92,595
Total stockholders' equity 117,057 118,250
Total liabilities and stockholders' equity $267,059 $237,226
NOTE: The balance sheet at October 31, 1996 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 (LOSS) (UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1997 1996 1997 1996
(In thousands, except shares and per share data)
<S> <C> <C> <C> <C>
Net sales $121,895 $116,419 $354,952 $330,892
Cost and expenses:
Cost of sales 119,730 111,803 335,486 321,267
Selling, general and
administrative 4,582 4,286 14,839 12,802
124,312 116,089 350,325 334,069
OPERATING INCOME (LOSS) (2,417) 330 4,627 (3,177)
Other income (expense):
Interest income 36 32 121 107
Interest expense (2,018) (1,471) (4,598) (3,639)
Other 57 (70) 46 (144)
(1,925) (1,509) (4,431) (3,676)
INCOME (LOSS) BEFORE
INCOME TAXES (4,342) (1,179) 196 (6,853)
Income tax expense (benefit) (1,637) (436) 74 (2,578)
NET INCOME (LOSS) BEFORE
EXTRAORDINARY GAIN (2,705) (743) 122 (4,275)
Extraordinary gain from fire
(net of income taxes
of $406,000) 676 0 676 0
NET INCOME (LOSS) $ (2,029) $ (743) $ 798 $ (4,275)
Earnings (loss) per share:
Earnings (loss) per share
before extraordinary gain $ (.19) $ (.05) $ .01 $ (.31)
Earnings gain from fire .05 .00 .05 .00
Earnings (loss) per share $ (.14) $ (.05) $ .06 $ (.31)
Dividends per share $ .05 $ .05 $ .15 $ .15
Weighted shares outstanding 14,366,580 13,776,123 14,364,657 13,667,825
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
SANDERSON FARMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTON>
Nine Months Ended
July 31,
1997 1996
(In thousands)
<S> <C> <C>
Operating activities
Net income (loss) $ 798 $(4,275)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 15,672 14,862
Extraordinary gain from fire (1,082) 0
Change in assets and liabilities:
Increase in accounts receivable (3,631) (5,530)
Increase in inventories (5,405) (8,897)
Increase in other assets (2,695) (3,372)
Increase in accounts payable
and accrued expenses 3,015 4,004
Total adjustments 5,874 1,067
Net cash provided by (used in)
operating activities 6,672 (3,208)
Investing activities
Net proceeds from sale of equipment 6 33
Advance from insurance company for
fire loss 1,931 0
Capital expenditures (38,951) (34,849)
Net cash used in investing activities (37,014) (34,816)
Financing activities
Principal payments on long-term debt (2,934) (81)
Net borrowings under revolving
line of credit 26,000 32,500
Additional long-term borrowings 4,945 2,406
Principal payment on note receivable-E.S.O.P. 125 0
Net proceeds from issuance of common stock 39 9,171
Dividends paid (2,155) (2,079)
Net cash provided by financing activities 26,020 41,917
Net increase (decrease) in cash and temporary
cash investments (4,322) 3,893
Cash and temporary cash investments
at beginning of period 4,879 447
Cash and temporary cash investments
at end of period $ 557 $ 4,340
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
SANDERSON FARMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
July 31, 1997
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 nine-month period ended July 31, 1997, are not necessarily
indicative of the results that may be expected for the year ending October
31, 1997. 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, 1996.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on January 31,
1998. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate any prior
periods. Under the new requirements for calculating earnings per share,
the dilutive effect of stock options will be excluded. The impact of
Statement 128 on the calculation of earnings per share is not expected to
be material.
NOTE 2--INVENTORIES
Inventories consisted of the following:
<TABLE>
July 31, October 31,
1997 1996
(In thousands)
<CAPTION>
<S> <C> <C>
Live poultry-broilers and breeders $25,999 $23,505
Feed, eggs and other 6,351 5,412
Processed poultry 5,578 3,951
Processed food 4,138 3,908
Packaging materials 2,399 2,284
$44,465 $39,060
</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. Effective August 5, 1997, the taxes
on the cash basis temporary differences as of November 1, 1998 will be
payable over twenty years 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 1997.
<PAGE>
NOTE 4--OTHER MATTERS
On July 12, 1996, the Company sold 750,000 shares of its common stock at
$13 per share (based on an independent valuation of the stock as of that
date) to Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan
in a private placement. Net proceeds from the issuance of the common
shares were $9,171,000 plus a $500,000 note receivable from the Plan.
During the nine months ended July 31, 1997, the Company received a $125,000
principal payment on the note receivable.
On January 29, 1997, a fire broke out at the Company's processing plant in
McComb, Mississippi. The fire was confined primarily to an area of the
plant housing packaging and supplies. Substantially all of the cost of
repairs and reconstruction of the plant were covered by the Company's
property insurance. Certain costs associated with the McComb plant's
downtime and processing of chickens at the Company's other processing
plants were covered by the Company's business interruption insurance
coverage. The excess of the proceeds received for replacement of property
and equipments over the book value of the assets destroyed of $1,082,000,
before the applicable income tax expense $406,000, has been accounted for
as an extraordinary gain in the accompanying consolidated statements of
income (loss).
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following Discussion and Analysis should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in Item 7 of the Company's Annual Report on Form 10-K
for its fiscal year ended October 31, 1996.
This Quarterly Report, and other periodic reports filed by the Company
under the Securities and Exchange Act of 1934, and other written or oral
statements made by it or on its behalf, may include forward-looking
statements, which are based on a number of assumptions about future events
and are subject to various risks, uncertainties and other factors that may
cause actual results to different materially from the views, beliefs and
estimates expressed in such statements. These risks, uncertainties and
other factors include, but are not limited to the following:
(1) Changes in the market price for the Company's finished products and
feed grains, both of which may fluctuate substantially and exhibit cyclical
characteristics typically associated with commodity markets.
(2) Changes in economic and business conditions, monetary and fiscal
policies or the amount of growth, stagnation or recession in the global or
U.S. economies, either of which may affect the value of inventories, the
collectability of accounts receivable or the financial integrity of
customers.
(3) Changes in laws, regulations, and other activities in government
agencies and similar organizations applicable to the Company and the
poultry industry.
(4) Various inventory risks due to changes in market conditions.
(5) Changes in and effects of competition, which is significant in all
markets in which the Company competes from regional and national firms,
some of which have greater financial and marketing resources than the
Company.
(6) Changes in accounting policies and practices adopted voluntarily by
the Company or required to be adopted by generally accepted accounting
principles.
Readers are cautioned not to place undue reliance on forward-looking
statements made by or on behalf of Sanderson Farms. Each such statement
speaks only as of the day it was made. The Company undertakes no
obligation to update or to revise any forward-looking statements. The
factors described above can not be controlled by the Company. When used in
this quarterly report, the words "believes," "estimates," "plans,"
"expects," "should," "outlook," and "anticipates" and similar expressions
as they relate to the Company or its management are intended to identify
forward-looking statements.
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
market prices, 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 200
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.
During March 1997, the Company began initial operations at the new complex
in Brazos and Robertson Counties, Texas. The Company anticipates that the
initial single shift processing capacity of 650,000 birds per week will be
reached before the end of fiscal 1997. The new shift will increase the
Company's overall processing capacity under current configurations to
4,700,000 birds per week.
RESULTS OF OPERATIONS:
For the three months ended July 31, 1997, net sales increased $5.5 million
or 4.7% as compared to the three months ended July 31, 1996. Net sales of
poultry products during the same periods increased $1.7 million or 1.7%,
as a result of an increase in the pounds of poultry products sold of 6.9%
and a decrease in the average sale price of poultry products of 4.8%. The
additional poultry volume during the third quarter of fiscal 1997 was
obtained from the expansion during the third quarter of fiscal 1996 at the
Company s McComb, Mississippi processing complex and the startup of
operations during the second quarter of fiscal 1997 at the Company s new
complex in Texas. During the quarter ended July 31, 1997 as compared to
the same quarter during fiscal 1996, net sales of prepared food products
increased $3.8 million or 22.3% as a result of an increase of 7.8% in the
pounds of prepared food products sold and the mix of prepared food products
sold.
Net sales for the nine months ended July 31, 1997, increased $24.1 million
or 7.3% as compared to the nine months ended July 31, 1996. This increase
in net sales resulted from an increase in net sales of poultry products of
$10.5 million or 3.6% and a corresponding increase in net sales of prepared
food products of $13.6 million or 31.5%. The increase in net sales of
poultry products was the result of an increase in the pounds of poultry
products sold of 5.3% and a decrease in the average sale price of poultry
products of 1.6%. During the nine months ended July 31, 1997 as compared
to the same period during fiscal 1996, the Company obtained additional
poultry volume internally from its expansion of the McComb, Mississippi
poultry complex during fiscal 1996, and the startup of the new complex in
Texas during fiscal 1997. These increases were offset by fewer pounds
purchased from external sources. The poultry purchased from external
sources had a higher average sale price and cost of sales per pound than
the Company s normal product mix. The increase in net sales of prepared
food products was the result of an increase of 20.7% in the pounds of
prepared food products sold and the mix of prepared food products sold.
During the third quarter of fiscal 1997 cost of sales increased $7.9
million or 7.1% when compared to the third quarter of fiscal 1996. Cost of
sales of poultry products increased $3.9 million or 4.0% during these same
quarters. However, the average cost of sales per pound of poultry products
decreased primarily due to a decrease in the average cost of feed grains.
A simple average of the corn and soy meal cash market prices for the third
quarter of fiscal 1997 as compared to the third quarter of fiscal 1996
reflected a decrease of 42.5% and an increase of 16.0%, respectively. Cost
of sales of prepared food products also increased during the three months
ended July 31, 1997 as compared to the three months ended July 31, 1997.
The increase in cost of sales of prepared food products of $4.0 million or
27.3% resulted from an increase in the pounds of cooked chicken products
which have a higher average production cost than the average prepared food
products sold during the three months ended July 31, 1996.
For the nine months ended July 31, 1997 as compared to the nine months
ended July 31, 1996, cost of sales increased $14.2 million or 4.4%. Cost
of sales of poultry products increased only $.9 million or .3%, despite an
increase in the pounds of poultry products sold of 5.3%. This decrease in
the average cost of poultry products sold during the first nine months of
fiscal 1997 as compared to the first nine months of fiscal 1996 was the
result of a decrease in the pounds of poultry products purchased from
external sources and a decrease in the average cost of feed grains. A
simple average of corn and soy meal cash market prices for the nine months
ended July 31, 1997 as compared to the nine months ended July 31, 1996
reflected a decrease of 30.7 % and an increase of 15.4%, respectively.
Cost of sales of prepared food products increased $13.3 or 35.7% due to an
increase in the pounds of cooked chicken products which have a higher
average production cost than the average prepared food products sold during
the nine months ended July 31, 1997 as compared to the nine months ended
July 31, 1996.
For the three months ended July 31, 1997 as compared to the same period
during fiscal 1996, the Company s operating income decreased $2.7 million
primarily due to an overall decline in the market prices of poultry
products which more than offset a decrease in the average cost of feed
grains. In addition, during the second quarter of this fiscal year, the
Company altered the formulation of the feed used for its broiler chickens.
The new feed formulation resulted in poor grow-out performance and a
decrease in the bird weight delivered to our processing plants. The lower
bird weight processed by the Company during the third quarter resulted in
lower margins per pound. The feed formulation has been corrected and the
negative effects of the change should work their way completely out of the
Company's operations during the fourth quarter. The Company also incurred
start-up costs associated with the new processing facility in Texas. For
the nine months ended July 31, 1997 as compared to the nine months ended
July 31, 1996 the Company s operating income increased $7.8 million
primarily as a result of lower average feed costs.
On August 25, 1997, the Company announced that it had eliminated 110
salaried positions, representing approximately 13% of the Company's
salaried positions and 1.7% of the Company's totaled workforce. The
eliminated positions were spread throughout the Company, and included
positions at the corporate offices as well as supervisory positions at each
of our processing plants and production facilities. The cost savings
resulting from these actions will be realized beginning in the first fiscal
quarter of 1998.
Interest expense increased $.5 million during the third quarter of fiscal
1997 as compared to the third quarter of fiscal 1996. For the first nine
months of fiscal 1997 compared to the first nine months of fiscal 1996,
interest expense increased $1.0 million. The increase in interest expense
resulted from the increased funds borrowed to construct the new poultry
complex in Brazos and Robertson Counties, Texas. The Company capitalized
approximately $.6 million of interest cost related to the construction of
the new complex during the first nine months of fiscal 1997. The Company
capitalized interest costs through the date the complex began operations in
the second quarter of fiscal 1997. The Company expects interest expense
during the remainder of fiscal 1997 to be higher than the same period
during fiscal 1996.
The Company s effective tax rate for the three months and the nine months
ended July 31, 1997 was approximately 37.7%. For the three months and the
nine months ended July 31, 1996 the Company s effective tax rate was 37.0%
and 37.6%, respectively.
On January 29, 1997, a fire damaged sections of the McComb, Mississippi
processing plant, including some equipment and refrigeration. The fire
resulted in an extraordinary gain during the third quarter of fiscal 1997
of $.7 million, net income taxes of $.5 million.
Liquidity and Capital Resources
The Company s working capital on July 31, 1997, was $63.3 million and its
current ratio was 4.1 to 1 as compared to working capital of $60.8 million
and a current ratio of approximately 4.5 to 1 at October 31, 1996.
For the nine months ended July 31, 1997 the Company expended $37.0 million
on planned capital projects, including approximately $29.3 million on the
new poultry complex in Texas. In addition, as of July 31, 1997, the
Company had expended $1.3 million in excess of reimbursements from its
property insurance carrier, for reconstruction of the Company s McComb
Mississippi processing facility which was damaged by a fire on January 29,
1997. The Company temporarily borrowed funds from its revolving credit
agreement to pay for the repairs pending receipt of the insurance proceeds.
In August 1997, the Company received from its property insurance carrier
reimbursements for substantially all the repairs to the McComb facility
and the destroyed packaging and product inventories. Also, during August
1997 the Company s carrier of business interruption insurance reimbursed
the Company for certain costs associated with the McComb plant s downtime
and related processing of additional chickens at the Company s other
processing plants.
The capital budget for fiscal 1997 has been increased, as of July 31, 1997,
to $38.5 million from $34.2 million at October 31, 1996. The increase of
$4.3 million pertains to items not approved at the beginning of fiscal 1997
pending justification, field trial and alternate costing. The remaining
capital requirements for fiscal 1997 will be funded by cash flows from
operations and additional borrowings under the Revolving Credit Agreement.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this report
Exhibit 15a Independent Accountants' Review Report
Exhibit 15b Accountants' Letter re: unaudited financial
information
Exhibit 15c Press Release dated August 25, 1997
(b) The Company did not file any reports on Form 8-K during the
three months ended July 31, 1997.
<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: August 26, 1997 By:/s/D. Michael Cockrell
D. Michael Cockrell
Treasurer and Chief
Financial Officer
Date: August 26, 1997 By:/s/James A. Grimes
James A. Grimes
Secretary and Principal
Accounting Officer
<PAGE>
<PAGE>
EXHIBIT 15a
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
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 July 31, 1997, and the
related condensed consolidated statements of income (loss) for the three-
month and nine-month periods ended July 31, 1997 and 1996, and the
condensed consolidated statements of cash flows for the nine-month periods
ended July 31, 1997 and 1996. 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 have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Sanderson Farms, Inc. and
subsidiaries as of October 31, 1996, 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 11, 1996, 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, 1996, is fairly
stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Jackson, Mississippi
August 21, 1997
<PAGE>
<PAGE>
EXHIBIT 15b
Shareholders and Board of Directors
Sanderson Farms, Inc.
We are aware of the incorporation by reference in the Registration
Statement (Form S-8) of Sanderson Farms, Inc. for the registration of
500,000 shares of its common stock of our report dated August 21, 1997
relating to the unaudited condensed consolidated interim financial
statements of Sanderson Farms, Inc. that are included in its Form 10-Q for
the quarter ended July 31, 1997.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a
part of the registration statement prepared or certified by accountants
within the meaning of Section 7 or 11 of the Securities Act of 1933.
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Jackson, Mississippi
August 21,
1997<PAGE>
<PAGE>
EXHIBIT 15c
Contact: Mike Cockrell
Treasurer & Chief Financial Officer
(601) 649-4030
SANDERSON FARMS, INC. REPORTS THIRD QUARTER RESULTS
LAUREL, Miss. (August 25, 1997) - Sanderson Farms, Inc. (NASDAQ/NMS:SAFM)
today reported results for the third quarter and nine months ended July 31,
1997. For the quarter, the Company reported a net loss, before
extraordinary gain from fire, of $2.71 million, or $.19 per share, compared
with a net loss of $743,000, or $.05 per share, for the third quarter of
fiscal 1996. Net sales were $121.9 million compared with $116.4 million
for the same period a year ago.
For the first nine months of fiscal 1997, net income, before extraordinary
gain from fire, totaled $122,000, or $.01 per share, compared with a net
loss of $4.3 million, or $.31 per share, for the first three quarters of
fiscal 1996. Net sales for the most recent nine-month period were $354.9
million compared with net sales of $330.9 million for the same period last
year.
"Sanderson Farms' results for the third quarter of fiscal 1997 were
affected by a number of factors," said Joe F. Sanderson, Jr., President and
Chief Executive Officer. "First, the startup of our new Texas poultry
complex in March followed by the addition of a second line in June had the
negative impact on profitability typical of a start-up operation. The
Texas complex is performing very well, however, and should continue to gain
efficiency as its operations mature. Full first shift capacity will be
reached on schedule by Labor Day. Also during the third quarter, our
McComb processing facility continued rebuilding efficiency lost as a result
of a fire earlier this year, and should be back to normal operations during
the fourth quarter.
"Additionally, earlier this year we altered the formulation of the feed
used on our broiler farms in an effort to lower feed costs. The new feed
formulation resulted in poor grow-out performance and a decrease in bird
weight delivered to our processing plants. The decrease in bird weight
resulting from this nutritional decision had a significant negative impact
on margins in the third quarter. We have corrected the feed formulation
and expect the negative effects of the change to work their way completely
out of our operations early during the fourth fiscal quarter.
Sanderson continued, "Overall, our outlook for the fourth quarter is
cautious. Market prices for poultry products during the third quarter
based on a simple average of the Georgia Dock price were over 2% lower than
the same quarter a year ago, and we do not expect a material improvement in
market conditions during the fourth quarter. We also are concerned about
corn prices, which have trended up in recent days as a result of concerns
about this fall's corn harvest.
<PAGE>
SAFM Reports Third Quarter Results
Page 2
August 25, 1997
"On the positive side, demand for our products is encouraging. Sales are
strong, our product mix is favorable and we have added a number of
significant new customers. Our cost structure, however, has been too high.
As a result, since the first quarter of this fiscal year, we have
eliminated 110 salaried positions in our company, representing
approximately 13% of our salaried positions and 1.7% of our total
workforce. The majority of these layoffs occurred on August 22 and were
spread across the Company. They included positions at the corporate
offices as well as supervisory positions at each of our processing plants
and production facilities. The cost savings resulting from these actions
will be realized beginning in the first quarter of fiscal 1998.
"We are disappointed with our performance in the third quarter and regret
that we have had to reduce employment. However, we believe the steps we
have taken are in the best long term interest of our shareholders, our
customers and our employees.
Sanderson Farms, Inc. is engaged in the production, processing, marketing
and distribution of fresh and frozen chicken and other prepared food items.
Its shares trade on the NASDAQ Stock Market under the symbol SAFM.
SANDERSON FARMS, INC. AND SUBSIDIARIES
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
July 31, July 31,
1997 1996 1997 1996
Net Sales $121,895 $116,419 $354,952 $330,892
Net income (loss) before
Extraordinary Item $ (2,705) $ (743) $ 122 $ (4,275)
Net income (loss) $ (2,029) $ (743) $ 798 $ (4,275)
Earnings (loss) per share
before Extraordinary Item $ (.19) $ (.05) $ .01 $ (.31)
Earnings (loss) per share $ (.14) $ (.05) $ .06 $ (.31)
Weighted average shares
outstanding 14,367 13,776 14,365 13,668
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