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, 1996
/ / 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
Laurel, Mississippi 39440
(Address of principal executive offices) (Zip Code)
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, 1996: approximately $93,280,714.
Number of Shares outstanding of the Registrant's common stock as of
December 31, 1996: 14,363,080 shares of common stock, $1.00 per share par
value.
Portions of the Registrant's definitive proxy statement filed or to be
filed in connection with its 1997 Annual Meeting of Stockholders are
incorporated by reference into Part III.
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, 1996, 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 23, 1997.
PART I
Item 1. Business
(a) GENERAL DEVELOPMENT OF THE REGISTRANT'S BUSINESS
The Registrant was incorporated in Mississippi in 1955, and 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, 1996, the Registrant processed 191.1 million chickens, or
approximately 644.1 million dressed pounds. According to 1996 industry
statistics, the Registrant was the 13th 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 417 grow-out farms
that provide it with sufficient housing capacity for its current operations.
The Registrant also has contracts with operators of 134 breeder farms.
The Registrant sells over 200 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.
<PAGE>
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 1995, this expansion included the expansion of the Registrant's
Hammond, Louisiana processing facility, the construction of new waste water
facilities at the Hammond, Louisiana and Collins and Hazlehurst, Mississippi
processing facilities, the addition of second shifts at the Hammond,
Louisiana, Laurel, Mississippi, Hazlehurst, Mississippi, and Collins,
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, the addition of deboning
capabilities at all of the Registrant's poultry processing facilities, and the
construction and start-up of its Pike County, Mississippi, production and
processing facilities, including a hatchery, a feed mill, a processing plant,
a waste water treatment facility and a water treatment facility. 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.
Capital expenditures for fiscal 1996 were funded by working capital,
borrowings under a revolving credit agreement, and the proceeds of the Bonds
(as defined below). Effective July 29, 1996, the Registrant amended and
restated its revolving credit agreement to, among other things, increase the
revolving credit available to the Registrant thereunder to $125.0 million from
$100.0 million. On November 16, 1995, the Registrant entered into a loan
agreement with the Robertson County, Texas Industrial Development Corporation
(the "Issuer") pursuant to which the Issuer loaned to the Registrant the
proceeds of the issuance of $7.2 million Variable Rate Demand Industrial
Development Bonds (Sanderson Farms, Inc. Project) Series 1995 (the "Bonds"),
for use by the Registrant in the construction of its feed manufacturing
facility to be located in Robertson County, Texas. The Bonds are secured by a
letter of credit issued pursuant to the Registrant's revolving credit
agreement. The Registrant anticipates that capital expenditures for fiscal
1997 will be funded by internally generated working capital, borrowings under
the revolving credit agreement, and the proceeds of the Bonds.
During fiscal 1996, the Registrant completed the double shifting of its
Pike County, Mississippi processing facility. The Registrant currently has
additional processing capacity available to it through the double shifting of
the second line at its Collins, Mississippi processing facility. During 1995
the Company announced that it would construct a new state-of-the-art poultry
complex consisting of a feedmill, hatchery, processing plant and wastewater
treatment facility in Brazos and Robertson Counties, Texas. At full capacity
this facility will have the capacity to process 1.2 million birds per week and
will employ approximately 1,400 people. Construction of the new facility
began during the fall of 1995 with initial operations expected to begin in the
Spring of 1997. The first eggs were set in the hatchery and feed production
begins at the feed mill in January 1997. 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.<PAGE>
(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, 1996, the Registrant processed approximately 191.1 million chickens, or
approximately 644.1 million dressed pounds. In addition, the Registrant
purchased and further processed 51.7 million pounds of poultry products during
fiscal 1996. According to 1996 industry statistics, the Registrant was the
13th largest 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 Sanderson Farms, Inc. The
production subsidiary, Sanderson Farms, Inc. (Production Division), which has
facilities in Laurel, Collins, Hazlehurst and Pike County, Mississippi, and
Bryan, Texas, 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, Hammond, Louisiana, and
Bryan, Texas, 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 200 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 sales of chicken products, of value added
and non-value added chicken products.
<TABLE>
Fiscal Year Ended October 31,
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Value added 96.3% 97.2% 98.3% 98.2% 98.2%
Non-value added 3.7% 2.8% 1.7% 1.8% 1.8%
Total Registrant
chicken sales 100.0% 100.0% 100.0% 100.0% 100.0%
</TABLE>
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.
<TABLE>
<CAPTION>
Fiscal Year Ended October 31,
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Registrant processed
chicken:
Value added:
Chill pack(1) 24.3% 20.9% 18.2% 19.3% 18.6%
Fresh bulk pack(1) 42.2 49.6 56.2 51.6 49.9
Frozen 9.2 8.8 10.2 13.5 17.0
Subtotal 75.7 79.3 84.6 84.4 85.5
Non-value added:
Ice pack 2.1 1.8 0.9 0.7 0.9
Frozen .8 0.4 0.6 0.8 0.7
Subtotal 2.9 2.2 1.5 1.5 1.6
Total Company
processed chicken 78.6 81.5 86.1 85.9 87.1
Processed and
prepared foods 20.9 18.4 13.8 14.1 12.9
Other(2) .5 0.1 0.1 0.0 0.0
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, 1995 and 1996 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 Registrant's 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 much of 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 few 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.
<PAGE>
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, 1996, the Registrant maintained contracts
with 28 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, 1996, by 106 independent contractors under the Registrant's
supervision. Eggs produced by independent contract breeders are transported
to Registrant's hatcheries in Registrant's vehicles.
The Registrant owns and operates four hatcheries located in Mississippi
where eggs are incubated and hatched in a process requiring 21 days. In
addition, the first eggs were set in the Registrant's new hatchery in Brazos
County, Texas, in January 1997. 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 October 31, 1996, the
Registrant's hatcheries were capable of producing an aggregate of
approximately 4.2 million chicks per week. The new hatchery in Brazos County,
Texas, will have the capacity to produce an additional 1.3 million chicks per
week at full capacity.
Grow-out. The Registrant places it chicks on 417 grow-out farms, as of
October 31, 1996, 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 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, 1996, the Registrant operated three feed mills,
all of which are located in Mississippi. In addition, feed production begins
at the Registrant's new feed mil in Robertson County, Texas, in January 1997.
The Registrant's annual feed requirements for fiscal 1996 were approximately
897,000 tons, and it has the capacity to produce approximately 936,000 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, 1996, the Registrant had approximately 396,500 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 double shift basis, is currently processing
approximately 1.2 million 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
five processing facilities. At October 31, 1996, all five of these deboning
facilities were operating on a double shifted basis resulting in a combined
capacity to process approximately 3.5 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, 1996, the Registrant
operated one by-products plant, and five automotive maintenance shops which
service approximately 407 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 172 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 1996, the Registrant purchased its pullets and its
cockerels from seven (7) 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.
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 seven 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, 1996, the Registrant had 5,526 employees, including
761 salaried and 4,765 hourly employees. A collective bargaining agreement
with the United Food and Commercial Workers International Union covering 641
hourly employees who work at the Registrant's processing plant in Hammond,
Louisiana 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.
A collective bargaining agreement with the Laborers' International
Union of North America, Professional Employees Local Union #693, AFL-CIO,
covering 475 hourly employees who work at the Registrant's processing plant in
Hazlehurst, Mississippi was negotiated and signed by the union and the
Registrant effective July 15, 1995. This Agreement will expire on June 30,
1999. This collective bargaining agreement has a grievance procedure and no
strike-no lockout clauses that should assist in maintaining stable labor
relations at the Hazlehurst plant.
A collective bargaining agreement with the Laborers' International Union
of North America, Professional Employees Local Union #693, AFL-CIO, covering
1,147 hourly employees who work at the Registrant's processing plant in
Collins, Mississippi was negotiated and signed by the union and the Registrant
effective September 9, 1995, and will expire on December 30, 1999. This
collective bargaining agreement also has a grievance procedure and no strike-
no lockout clauses that should assist in maintaining stable labor relations at
the Collins, Mississippi processing plant.
(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.
<PAGE>
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 $1,452,055 on December 31, 1996, 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 effective July 29, 1996, and under the $20 million long-term
fixed rate loan agreement effective 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 71 Chairman of the 1955 (1)
Board
Joe F. Sanderson, Jr. 49 President and 1984 (2)
Chief Executive
Officer
D. Michael Cockrell 39 Treasurer and Chief 1994 (3)
Financial Officer
James A. Grimes 48 Secretary and 1994 (4)
Chief Accounting Officer
Lampkin Butts 45 Vice President - Sales 1996 (5)
</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.
(5) Lampkin Butts became Vice President - Sales of the Registrant effective
November 1, 1996. Prior to that time, Mr. Butts served the Registrant
in various capacities since 1973.
________________
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.
<PAGE>
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 of record as of
December 31, 1996, was 594.
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 1996 High Low Dividends
<S> <C> <C> <C>
First Quarter $11.25 $10.125 $.05
Second Quarter $12.75 $10.50 $.05
Third Quarter $14.25 $10.625 $.05
Fourth Quarter $13.50 $10.875 $.05
Stock Price
Fiscal Year 1995 High Low Dividends
First Quarter $14.875 $11.875 $.05
Second Quarter $14.00 $11.125 $.05
Third Quarter $12.75 $10.00 $.05
Fourth Quarter $12.25 $10.50 $.05
</TABLE>
All dividends and stock prices have been adjusted to reflect a 3 for 2 stock
split effected in the form of a stock dividend in February 1995.
On December 31, 1996, the closing sales price for the common stock was $16.75
per share.
Item 6. Selected Financial Data.
<TABLE>
Year Ended October 31
<CAPTION>
1996 1995 1994 1993 1992
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $ 455,100 $392,896 $371,502 $269,059 $210,057
Operating Income 1,189 21,239 28,184 20,767 8,033
Net income (loss) (2,443) 10,856 15,479 11,938 5,253
Earnings per share(1 ) (.18) 0.80 1.14 .88 .39
Working capital 60,826 47,605 45,843 42,548 33,371
Total assets 237,226 193,197 181,709 169,006 126,339
Long-term debt, less
current maturities 90,102 54,806 56,176 60,253 29,826
Stockholders' equity 118,250 114,319 106,187 93,431 84,216
Cash dividends declared
per share(1) $ .20 $ .20 $ .20 $ .20 $ .20
</TABLE>
<PAGE>
<TABLE>
QUARTERLY FINANCIAL DATA
Fiscal Year 1996
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In thousands, except per share data)
(Unaudited)
<S> <C> <C> <C> <C>
Net sales 103,754 110,719 116,419 124,208
Operating income (loss) (274) (3,233) 330 4,366
Net income (loss) (798) (2,734 (743) 1,832
Earnings (loss) per share(1) $ (.06) (.20) (.05) .13
</TABLE>
<TABLE>
Fiscal Year 1995
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In thousands, except per share data)
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $87,569 $92,449 $101,195 $111,683
Operating income 3,764 3,583 4,690 9,202
Net income 1,780 1,703 2,305 5,068
Earnings per share(1) $.13 $ .13 $ .17 $ .37
</TABLE>
(1)All per share numbers have been adjusted to reflect a 3 for 2 stock split
effected in the form of a stock dividend in February 1995.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE
PERFORMANCE
This Annual Report contains certain forward-looking statements about the
business, financial condition and/or prospects of the Company. The actual
performance of the Company could differ materially from that indicated by the
forward-looking statements because of various risks and uncertainties,
including, without limitation, 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, as described below; changes in competition and economic conditions;
various inventory risks due to changes in market conditions; changes in
governmental rules and regulations applicable to the Company and the poultry
industry; and other risks described below. These risks and uncertainties can
not be controlled by the Company. When used in this Annual 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.
GENERAL
The Company's poultry operations are integrated through its control of all
functions relative to the production of its chicken products, including
hatching eggs production, hatching, feed manufacturing, raising chickens to
marketable age ("grow-out"), processing and marketing. Consistent with the
poultry industry, the Company's profitability is substantially impacted by the
market price for finished products 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 the Company's poultry operations, and including hatching
eggs production, hatching, growing, and processing costs, are responsive to
efficient cost containment programs and management practices. Over the past
three fiscal years, these other production costs have averaged approximately
60.3% 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 margin 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's strengths is its ability to change its product mix to meet the
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.
The new poultry complex under construction in Brazos and Robertson Counties,
Texas, consists of a feed mill, hatchery and processing plant. The first eggs
were set in the hatchery and feed production begins at the feed mill during
January 1997. The processing plant is anticipated to start initial operations
during March 1997 with an initial single shift processing capacity of 650,000
birds per week. The new shift at the Texas complex will increase the
Company's overall processing capacity under current configurations to
4,700,000 birds per week.
Poultry prices per pound, as measured by the Georgia dock price, fluctuated
during the three years ended October 31, 1996, as follows:
<TABLE>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
<CAPTION>
Fiscal 1996
<S> <C> <C> <C> <C>
High $.6000 $.5825 $.6650 $.6675*
Low $.5825 $.5500* $.5675 $.6525
Fiscal 1995
High $.5300 $.5200 $.5675 $.6150*
Low $.5125* $.5125* $.5125* $.5775
Fiscal 1994
High $.5525 $.5625 $.6025* $.5650
Low $.5250* $.5300 $.5650 $.5375
*Year High/Low
</TABLE>
Market prices for whole birds, as measured by the Georgia dock price, remained
strong through the Thanksgiving holiday at $.6600 per pound. Market prices
for whole birds decreased after the Thanksgiving holiday to $.6450 per pound
at the end of December 1996.
For the year ended October 31, 1995, the Company experienced lower poultry
prices and higher feed costs as compared to the year ended October 31, 1994.
Although market prices for poultry products were higher during fiscal 1996 as
compared to fiscal 1995, the costs of feed grains were significantly higher
and reduced margins. During the final months of fiscal 1996 and continuing
into fiscal 1997, the cost of feed grains have steadily decreased. The
Company expects the lower prices for feed grains and the strong market prices
for poultry products the industry experienced during November and December
1996 to increase margins during the first quarter of fiscal 1997 as compared
to the first quarter of fiscal 1996. 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 1996 Compared to Fiscal 1995
Net sales for fiscal 1996 increased to $455.1 million, an increase of $62.2
million, or 15.8%. The increase in net sales resulted from an increase in the
net sales price of 3.7% and an increase in the pounds of products sold of
11.8%. Net sales of poultry products increased $55.7 million, or 16.4%,
during fiscal 1996 as compared to fiscal 1995. This increase in net sales of
poultry products was the result of an increase in the average sales price of
poultry products of 4.2% and a corresponding increase in the pounds of poultry
products sold of 11.7%. The increase in pounds of poultry products sold was
attributable primarily to the addition during the second quarter of fiscal
1996 of a second shift to the first line and the addition during the third
quarter of fiscal 1996 of a second shift to the second line of the Company's
Pike County, Mississippi, processing plant. Net sales of prepared food
products increased $6.5 million, or 12.2%, during fiscal 1996 as compared to
fiscal 1995, due primarily to an increase in the pounds of prepared food
products sold of 12.8%.
During fiscal 1996, cost of sales increased $80.9 million, or 22.7%, as
compared to fiscal 1995. Cost of sales of poultry products increased $74.6
million, or 24.1%, during the year ended October 31, 1996, as compared to the
year ended October 31, 1995. The additional pounds of poultry products sold
and a substantial increase in the cost of feed grains were responsible for the
increase in cost of sales of poultry products during fiscal 1996. A simple
average of the corn and soybean meal cash market prices reflected an increase
of 46.5% and 43.8%, respectively, during fiscal 1996 as compared to fiscal
1995. During fiscal 1996, cost of sales of prepared food products increased
$6.3 million, or 13.8%, as compared to the previous fiscal year.
Selling, general and administrative expenses in fiscal 1996 increased $1.4
million, or 8.7%, as compared to fiscal 1995 primarily as a result of
increased administrative cost associated with the new poultry complex in
Brazos and Robertson Counties, Texas. Measured as a percentage of net sales,
selling, general and administrative expenses for fiscal 1996 and 1995 were
3.8% and 4.0%, respectively.
Interest expense increased approximately $.6 million during the year ended
October 31, 1996, as compared to the year ended October 31, 1995. Interest
cost of approximately $.8 million was capitalized during fiscal 1996 as a
result of additional borrowings incurred in connection with the construction
of the new poultry complex in Brazos and Robertson Counties, Texas.
During fiscal 1996, the Company recorded a tax benefit of approximately 23.9%.
For the preceding fiscal year the Company's effective tax rate was 38.1%. The
change in the effective rate is principally from non-deductible expenses as a
percentage of pretax income (loss) being higher in fiscal 1996 as compared to
fiscal 1995.
Fiscal 1995 Compared to Fiscal 1994
For the year ended October 31, 1995, net sales increased to $392.9 million, an
increase of $21.4 million, or 5.8%. The increase in net sales resulted from
an increase in the pounds of product sold of 7.2%, while the average sales
price of products decreased by 1.3%. During fiscal 1995, net sales of poultry
products increased 6.5% as compared to fiscal 1994. The increase in the net
sales of poultry products resulted from an increase in the pounds of poultry
products sold of 7.8% and a decrease in the average sale price of poultry
products of 1.2% during fiscal 1995 as compared to fiscal 1994. For the year
ended October 31, 1995 as compared to the year ended October 31, 1994, net
sales of prepared foods products increased approximately 1.2%. This increase
in the net sales of prepared foods products resulted from an increase in the
average sale price of prepared foods products of 3.3%, which was partially
offset by a decrease in the pounds of prepared foods products sold of 2.1%.
Cost of sales for fiscal 1995 as compared to fiscal 1994 increased $26.6
million, or 8.1%. Costs of sales of poultry products increased $26.9 million,
or 9.5%, due to the increase in pounds of poultry products sold and higher
average feed grain prices. A simple average of corn cash market prices for
fiscal 1995 reflected an increase of 2.0% as compared to fiscal 1994. Cost of
sales of prepared food products sold decreased $.3 million, or .6%, during the
year ended October 31, 1995 as compared to the year ended October 31, 1994
primarily due to the decrease in pounds of prepared food products sold.
Selling, general and administrative expenses during fiscal 1995 as compared to
fiscal 1994 increased $1.7 million, or 12.3%. Measured as a percentage of net
sales, selling, general and administrative expenses for fiscal 1995 were 4.0%
as compared to 3.8% during fiscal 1994.
Interest expense during fiscal 1995 was approximately $3.8 million as compared
to approximately $3.7 million during fiscal 1994.
The Company's effective tax rate increased in fiscal 1995 to approximately
38.1% as compared to approximately 37.7% for fiscal 1994, primarily from state
income taxes.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 1996, the Company's current ratio was 4.5 to 1 and its
working capital was $60.8 million, as compared to a current ratio of 4.6 to 1
and working capital of $47.6 million at October 31, 1995. During the year
ended October 31, 1996, the Company invested $46.2 million on planned capital
projects, including $35.3 million on the new poultry complex in Texas.
The fiscal 1996 capital budget, as of October 31, 1996, was increased to $48.3
million from $46.1 million as of November 1, 1995. The increase of $2.2
million pertains to items not approved at the beginning of fiscal 1996 pending
justification, field trail and alternate costing.
The capital budget for fiscal 1997 is approximately $34.2 million, which
includes approximately $29.2 million pertaining to the new poultry processing
plant and hatchery under construction in Brazos County, Texas, and the new
feed mill under construction in Robertson county, Texas. Also included in the
budget for the year ended October 31, 1997, is approximately $.5 million
relating to fiscal 1996 budget items that were not completed or started during
fiscal 1996. Other major capital projects for fiscal 1997 include
renovations, changes and additions to existing processing facilities to allow
better product flow and product mix for more market flexibility.
On July 12, 1996, the Company sold 750,000 shares of its common stock at $13
per share to the Sanderson Farms, Inc. Employee Stock Option Plan (the "ESOP")
in a private placement. The net proceeds from the sale were $9,171,000 plus a
$500,000 note receivable from the plan. The proceeds from the sale of the
stock to the ESOP, additional long-term borrowings under the Revolving Credit
Agreement and the Robertson County Industrial Revenue Bonds and funds from
operations provided the funds for the capital investment during fiscal 1996.
The capital requirements for fiscal 1997 will be funded by working capital,
proceeds of the Industrial Revenue Bonds and additional borrowing under the
Revolving Credit Agreement.<PAGE>
<TABLE>
Item 8. Financial Statements and Supplementary Data.
Sanderson Farms, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<CAPTION>
October 31
1996 1995
(In thousands)
<S> <C> <C>
Assets
Current assets:
Cash and temporary cash investments $ 4,879 $ 447
Accounts receivables, less allowance of
$167,000 in 1996 and $130,000 in 1995 27,661 22,624
Inventories (Note 2) 39,060 33,275
Refundable income taxes 1,148 0
Prepaid expenses 5,616 4,619
Total current assets 78,364 60,965
Property, plant and equipment (Note 3):
Land and buildings 81,689 76,529
Machinery and equipment 151,861 140,678
Construction in process 37,380 8,997
270,930 226,204
Accumulated depreciation (112,974) (94,873)
157,956 131,331
Other assets 906 901
Total assets $237,226 $193,197
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,968 $ 4,205
Accrued expenses 9,470 7,372
Accrued income taxes 0 1,557
Current maturities of long-term debt 3,100 226
Total current liabilities 17,538 13,360
Long-term debt, less current maturities (Note 3) 90,102 54,806
Deferred income taxes (Note 4) 11,336 10,712
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 14,363,080 in 1996
and 13,613,080 in 1995 14,363 13,613
Paid-in capital 11,292 2,871
Retained earnings 92,595 97,835
Total stockholders' equity 118,250 114,319
Total liabilities and stockholders' equity $237,226 $ 193,197
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION
Sanderson Farms, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Years Ended October 31
1996 1995 1994
(In thousands, except per share data)
<S> <C> <C> <C>
Net sales $455,100 $392,896 $371,502
Cost and expenses:
Cost of sales 436,799 355,907 329,294
Selling, general and administrative 17,112 15,750 14,024
453,911 371,657 343,318
Operating income 1,189 21,239 28,184
Other income (expense):
Interest income 157 180 109
Interest expense (4,383) (3,774) (3,655)
Other (173) (99) 195
(4,399) (3,693) (3,351)
Income (loss) before income taxes (3,210) 17,546 24,833
Income tax expense (benefit) (Note 4) (767) 6,690 9,354
Net income (loss) $ (2,443) $ 10,856 $ 15,479
Net income (loss)per share $ (.18) $ .80 $ 1.14
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 October 31, 1993 9,075,427 9,075 7,410 76,946 93,431
Net income for year 15,479 15,479
Cash dividends ($.20 per share) (2,723) (2,723)
Balance at October 31, 1994 9,075,427 9,075 7,410 89,702 106,187
Net income for year 10,856 10,856
Cash dividends ($.20 per share) (2,723) (2,723)
Stock split (3 for 2) effected
in the form of stock
dividend 4,537,653 4,538 (4,538)
Redemption of fractional shares (1) (1)
Balance at October 31, 1995 13,613,080 13,613 2,871 97,835 114,319
Net loss for year (2,443) (2,443)
Cash dividends ($.20 per share) (2,797) (2,797)
Common Stock issued to ESOP 750,000 750 8,421 9,171
Balance at October 31, 1996 14,363,080 $14,363 $11,292 $92,595 $118,250
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
SANDERSON FARMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended October 31
1996 1995 1994
(In thousands)
<S> <C> <C> <C>
Operating activities
Net income (loss) $(2,443) $10,856 $15,479
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation an amortization 19,744 18,439 15,604
Provision for losses on accounts receivable 172 54 36
Deferred income taxes 150 950 1,500
Change in assets and liabilities:
Increase in accounts receivable (5,209) (3,692) (2,008)
Increase in inventories (5,785) (3,900) (2,950)
Increase in prepaid expenses (1,671) (974) (331)
Increase in other assets (240) (93) (269)
Increase (decrease) in accounts payable 763 1,368 (519)
Increase in accrued expenses 541 1,907 2,829
Total adjustments 8,465 14,059 13,892
Net cash provided by operating activities 6,022 24,915 29,371
Investing activities
Net proceeds from sale of property
and equipment 96 286 15
Capital expenditures (46,230) (24,934) (22,444)
Net cash used in investing activities (46,134) (24,648) (22,429)
Financing activities
Long-term borrowings 2,406 -0- -0-
Net change in revolving credit 36,000 (1,000) (4,000)
Principal payments on long-term debt (236) (77) (73)
Principal payments on capital lease -0- (144) -0-
Dividends paid (2,797) (2,723) (2,723)
Net proceeds from common stock issued
to ESOP 9,171 -0- -0-
Redemption of fractional shares -0- (1) -0-
Net cash provided by (used in)
financing activities 44,544 (3,945) (6,796)
Net increase (decrease) in cash and
temporary cash investments 4,432 (3,678) 146
Cash and temporary cash investments
at beginning of year 447 4,125 3,979
Cash and temporary cash investments
at end of year $4,879 $ 447 $4,125
Supplemental disclosure of cash flow information:
Cash paid for income taxes $1,991 $ 5,807 $6,736
Cash paid for interest $4,600 $ 3,492 $3,945
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.
Business: The Company is engaged in the production, processing, marketing and
distribution of fresh and frozen chicken and other prepared food items. The
Company's operations are significantly affected by market price fluctuations
of its principal products sold and of its principal ingredients, corn and
other grains. During fiscal 1996, corn prices were historically high, which
adversely affected cost of goods sold.
The Company sells to retailers, distributors and fast food operators in the
southern 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.
Use of Estimates: The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
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.
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
of 19 to 39 years for buildings and 3 to 7 years for machinery and equipment.
Income Taxes: Deferred income taxes are accounted for using the liability
method and 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 1997. (See Note 4).
Stock Based Compensation: The Company grants stock options for a fixed number
of shares to employees with an exercise price equal to or above the fair value
of the shares at the date of the grant. The Company accounts for stock option
grants in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and, accordingly, recognizes no compensation expense for the stock
option grants.
Earnings Per Share: Earnings per share are based upon the weighted average
number of shares outstanding during each year, including shares issuable under
the stock option plan when dilutive. The weighed average shares outstanding
used in the calculation of earnings per share were 13,842,588 in 1996 and
13,613,080 in 1996 and 1995.
Fair Value of Financial Instruments: The carrying amounts for cash and
temporary cash investments approximate their fair values. The carrying
amounts of the Company's borrowings under its credit facilities and long-term
debt also approximate the fair values based on current rates for similar debt.
Impact of Recently Issued Accounting Standards: In March 1995, the FASB
issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed," which requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimate to be
generated by those assets are less than the assets' carrying amount.
Statement 121 also addresses the accounting for long-lived assets that are
expected to be disposed. The Company will adopt Statement 121 in the first
quarter of fiscal 1997 and, based upon current circumstances, does not believe
the effect of adoption will be material.
<TABLE>
2. Inventories
Inventories consisted of the following:
<CAPTION>
October 31
1996 1995
(In thousands)
<S> <C> <C>
Live poultry broilers and breeders $23,505 $18,484
Feed, eggs and other 5,412 4,974
Processed poultry 3,951 3,999
Processed food 3,908 3,578
Packaging materials 2,284 2,240
$39,060 $33,275
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
3. Long-term Credit Facilities and Debt
Long-term debt consisted of the following:
October 31
1996 1995
(In thousands)
<S> <C> <C>
Revolving credit agreement with banks
(weighted average rate of 6.4% at
October 31, 1996) $65,000 $29,000
Term loan with an insurance company,
accruing interest at 7.49%; due in
annual principal installments of $2,850,000
beginning in February 1997 20,000 20,000
Note payable, accruing interest at 5%;
due in annual installments of $161,400,
including interest, maturing in 2009 1,537 1,617
6% Mississippi Business Investment Act
bond capital lease obligation 4,200 4,356
Robertson County, Texas, Industrial
Revenue Bonds (variable rate, 3.85%
at October 31, 1996) 2,406 -0-
Notes payable to an insurance company,
accruing interest at 5% 59 59
93,202 55,032
Less current maturities of long-term debt 3,100 226
$90,102 $54,806
</TABLE>
The Company has a $125.0 million ($52.8 million available at October 31, 1996)
revolving credit agreement with five banks. The revolver extends to 1999,
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 .20% is payable
quarterly on the unused portion of the revolver. The Company intends to renew
beyond one year of October 31, 1996 the amount of its borrowings at year-end
under 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.
On November 16, 1995, the Company obtained $7.2 million in industrial revenue
bond financing to finance the construction of a feed mill in Robertson County,
Texas. The banks participating in the revolving credit agreement provided a
letter of credit in connection with the issuance of the Industrial Revenue
Bonds. As of October 31, 1996, the Company has borrowed $2.4 million of the
$7.2 million available.
Property, plant and equipment with a carrying value of approximately
$7,123,000 is pledged as collateral to a note payable and the capital lease
obligation.
Interest costs of $775,000 was capitalized in 1996.
<PAGE>
<TABLE>
The aggregate annual maturities of long-term debt at October 31, 1996
(assuming borrowings under the revolver will be converted to a term loan in
1999) are as follows (in thousands):
<CAPTION>
<S> <C>
Fiscal Year Amount
1997 $ 3,100
1998 4,004
1999 20,268
2000 19,989
2001 19,398
Thereafter 26,443
$93,202
</TABLE>
4. Income Taxes
Income tax expense consisted of the following:
<TABLE>
<CAPTION>
Years Ended October 31
1996 1995 1994
(In thousands)
<S> <C> <C> <C>
Current:
Federal $ (692) $5,110 $7,150
State (225) 630 704
(917) 5,740 7,854
Deferred
Federal 115 780 1,370
State 35 170 130
150 950 1,500
$ (767) $6,690 $9,354
/TABLE
<PAGE>
<TABLE>
Significant components of the Company's deferred tax assets and liabilities
were as follows:
<CAPTION>
October 31,
1996 1995
<S> <C> <C>
Deferred tax assets (In thousands)
(included in prepaid expenses):
Accrued expenses $ 1,144 $ 898
Alternative Minimum tax credit
carry forward 230 0
Prepaid expenses (138) (13)
$ 1,236 $ 762
Deferred tax liabilities:
Cash basis temporary differences $ 3,900 $ 3,900
Property, plant and equipment 7,436 6,812
$11,336 $10,712
</TABLE>
The differences between the consolidated income taxes and the amounts computed
at the federal statutory rate are as follows:
<TABLE>
<CAPTION>
Years Ended October 31
1996 1995 1994
(In thousands)
<S> <C> <C> <C>
Taxes at statutory rate $(1,091) $6,012 $8,666
State income taxes (113) 671 769
State income tax credit 60 (140) (218)
Other, net 377 147 137
$(7,767) $6,690 $9,354
</TABLE>
5. Employee Benefit Plans
The Company had a defined contribution profit sharing plan covering all
employees and an employee stock ownership plan that was restricted to salaried
employees. During fiscal 1995, the profit sharing plan was merged into the
Employee Stock Ownership Plan ("ESOP"). The resulting defined contribution
employee stock ownership plan was expanded to cover all employees. The
Company did not contribute to the ESOP during 1996. Total contributions under
both plans were $850,000 in 1995 and $1,200,000 in 1994.
Under the Company's Stock Option Plan, 750,000 shares of Common Stock have
been reserved for grant to key management personnel. Options to purchase an
aggregate of 45,000 shares at $10.67 per share, 82,500 shares at $11.00 per
share, 108,000 shares at $11.25 per share and 124,000 shares at $10.87 are
outstanding at October 31, 1996. Options to purchase 102,000 shares are
exercisable at October 31, 1996.
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 $35 3/8. 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
No customer accounted for more than 10% of consolidated sales for the years
ended October 31, 1996 1995 or 1994. Export sales were less than 10% of
consolidated sales in each year presented.
The Company has commitments of approximately $29.2 million to complete
construction of the new complex in Brazos and Robertson Counties, Texas.
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.
<PAGE>
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.
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, 1996 and 1995
Consolidated Statements of Income - Years ended October 31, 1996,
1995 and 1994
Consolidated Statements of Stockholders' Equity - Years ended
October 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows - Years ended October 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements - October 31, 1996
(a)2. FINANCIAL STATEMENT SCHEDULES:
The following consolidated financial statement schedules of the
Registrant are included in Item 8:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted as they are not applicable or the
required information is set forth in the Financial Statements or notes
thereto.
<PAGE>
(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 January 8, 1997.
(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.
(8) 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.
(8) 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.
(9) 10-E-3 - Copy of Agreement effective July 15,
1995 between Sanderson Farms, Inc.
(Hazlehurst Processing Division) and
Laborers' International Union of North
America, Professional Employees Local
Union #697, AFL-CIO.
(9) 10-E-4 - Copy of Agreement effective September 9,
1995 between Sanderson Farms, Inc.
(Collins Processing Division) and
Laborers' International Union of North
America, Professional Employees Local
Union #697, AFL-CIO.
(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.
(8) 10-H-3 - Copy of Sanderson Farms, Inc. Bonus
Award Program effective November 1,
1993.
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.
(7) 10-M - Copy of Lease Agreement between Pike
County, Mississippi and the Registrant
dated as of November 1, 1992.
13 - Copy of the Registrant's definitive
proxy statement related to the 1996
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".
(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.
(8) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1994 and incorporated herein by
reference.
(9) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1995 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, 1996.
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, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended October 31, 1996. Our audit also
included the financial statement schedule listed in the index under Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule 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, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended October 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
/s/Ernst & Young LLP
Jackson, Mississippi
December 11, 1996
<PAGE>
<TABLE>
Sanderson Farms, Inc. and Subsidiaries
Valuation and Qualifying Accounts
Schedule II
<CAPTION>
____________________________________________________________________________ _
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, 1996
Deducted from accounts
receivable:
Allowance for doubtful
accounts
Totals $130 $172 $135 $167
Year ended October 31, 1995
Deducted from accounts
receivable:
Allowance for doubtful
accounts
Totals $100 $54 $24 $130
Year ended October 31, 1994
Deducted from accounts
receivable:
Allowance for doubtful
accounts
Totals $80 $36 $16 $100
(1) Uncollectible accounts written off, net of recoveries.
/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 23, 1997 /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 1/23/97 /s/John H. Baker, III 1/23/97
Joe Frank Sanderson, John H. Baker, III.
Chairman of the Board Director
/s/Joe F. Sanderson, Jr. 1/23/97 /s/Charles W. Ritter, Jr. 1/23/97
Joe F. Sanderson, Jr., Charles W. Ritter, Jr.,
President, Chief Executive Director
Officer and Director
/s/Dewey R. Sanderson, Jr. 1/23/97 /s/Rowan H. Taylor 1/23/97
Dewey R. Sanderson, Jr., Rowan H. Taylor,
Director Director
/s/Donald W. Zacharias 1/23/97 /s/Robert Buck Sanderson 1/23/97
Donald W. Zacharias, Robert Buck Sanderson,
Director Director
/s/Phil K. Livingston 1/23/97 /s/James A. Grimes 1/23/97
Phil K. Livingston, James A. Grimes,
Director Secretary and Chief Accounting
Officer
/s/D. Michael Cockrell 1/23/97
D. Michael Cockrell,
Treasurer and Chief
Financial Officer
Exhibit 3-B
BY-LAWS OF
SANDERSON FARMS, INC.
(As restated on January 8, 1997)
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 and Other Persons
Section 1. The Corporation shall indemnify its directors, officers,
those employees of the Corporation appointed by the President to serve on the
Corporation's Executive Committee and those employees selected by the
Executive Committee to be the Division Managers, to the fullest extent
permitted by law, except in an action brought directly by the Corporation
against such person, and except that such employees shall be entitled to
mandatory indemnification under this Article only to the same extent to which
officers are permitted by law to be indemnified.
Section 2. To the extent permitted by law, the right to indemnification
conferred in this Article (a)shall apply to acts or omissions antedating the
adoption of this Article; (b)shall be severable; (c)shall continue as to a
person who has ceased to be such director, officer or employee; and (d) shall
inure to the benefit of the heirs, executors and administrators of such
person.
Section 3. This article may be repealed or amended from time to time by
the Board of Directors with or without shareholder approval; provided however,
that no such repeal or amendment shall limit the right to indemnification
conferred in this Article for liability for acts or omissions which occurred
prior to the time of such repeal or amendment.
Section 4. If the Corporation indemnifies or advances expenses to a
director under this Article, the Corporation shall, if required by Section 79-
4-16.21(a) of the Mississippi Code of 1972, as amended, report the
indemnification or advance in writing to the shareholders with or before the
notice of the next shareholder meeting.
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 check or demand of either the Chairman of the Board,
the President, the Vice President(s), the Secretary or the Treasurer or by
authority granted to some other 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-I
SANDERSON FARMS, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT ("Agreement"), dated as of
the day of ________________, ____ (the "Date of Grant"), is delivered by
Sanderson Farms, Inc., and its subsidiaries and affiliates (collectively
referred to as "SFI") to ________________________________________ (the
"Optionee"), who is an executive officer or key employee of SFI.
WHEREAS, the Board of Directors of Sanderson Farms, Inc. (the
"Board") recommended stockholder approval of, the stockholders approved
and the Board adopted the Sanderson Farms, Inc. Stock Option Plan (as
amended and restated to the date hereof, the "Plan");
WHEREAS, the Plan provides for the granting of incentive stock
options by the Board (or, if applicable, a committee thereof appointed
pursuant to Section 1.02(d) of the Plan) to executive officers and key
employees of SFI to purchase, or to exercise certain rights with respect
to, shares of the Common Stock of SFI, par value $1.00 per share (the
"Stock"), in accordance with the terms and provisions thereof; and
WHEREAS, the Board (or, if applicable, a committee thereof
appointed pursuant to Section 1.02(d) of the Plan) considers the
Optionee to be a person who is eligible for grant of an incentive stock
option under the Plan, and has determined that it would be in the best
interest of SFI to grant the incentive stock option documented herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Grant of Incentive Stock Option.
(a) Subject to the terms and conditions hereinafter set forth,
SFI, with the approval and at the direction of the Board (or, if
applicable, a committee thereof appointed pursuant to Section 1.02(d) of
the Plan), hereby grants to the Optionee, as of the Date of Grant, an
option to purchase up to _______ shares of Stock at a price of
$__________ per share, which price per share is at or above the present
fair market value. Such option is hereinafter referred to as the
"Incentive Stock Option" and the shares of stock purchasable upon
exercise of the Incentive Stock Option are hereinafter sometimes
referred to as the "Incentive Stock Option Shares." The Incentive Stock
Option is intended by the parties hereto to be, and shall be treated as,
an "incentive stock option," pursuant to and as such term is defined
under Sections 421 and 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
(b) This Incentive Stock Option is granted subject to the
following additional terms and conditions (if none, so indicate):
2. Term and Exercise.
This Incentive Stock Option may be exercised during a period
beginning one year after and ending six years after the date of grant
thereof (the "option term"). Unless a shorter period is provided by the
Board (or, if applicable, a committee thereof appointed pursuant to
Section 1.02(d) of the Plan),
this Incentive Stock Option shall be
exercised in accordance with this section 2. During the first year of
the option term, no more than 25% of the initial total number of shares
covered by the Incentive Stock Option may be exercised and purchased by
the Optionee. During the second year of the option term, no more than
50% of the initial total number of shares covered by the Incentive Stock
Option may be exercised and purchased by the Optionee, such percentage
to include the percentage, by number of shares, purchased in the
previous year of the option term. During the third year of the option
term, no more than 75% of the initial total number of shares covered by
the Incentive Stock Option may be exercised and purchased by the
Optionee, such percentage to include the percentages, by number of
shares, previously purchased in earlier years of the option term on a
cumulative basis. During the fourth year of the option term, 100% of the
initial total number of shares covered by the Incentive Stock Option may
be exercised and purchased by the Optionee, such percentage to include
the percentages, by number of shares, previously purchased in earlier
years of the option term on a cumulative basis. No fractional shares
shall be issued as a result of the exercise of this Incentive Stock
Option. No Incentive Stock Option shall be exercisable after the
expiration of its option term.
3. Termination of Incentive Stock Option.
(a) Except as provided in Sections 3(b), 3(c) and 3(d) of this
Agreement, upon termination of the Optionee's employment, the Incentive
Stock Option, to the extent not previously exercised, shall terminate
immediately upon such termination of employment.
(b) Upon termination of the Optionee's employment by reason of
death of the Optionee, the Incentive Stock Option may be exercised, but
only to the extent exercisable on the date of such death, within one (1)
year from and after the date of the Optionee's death. The Incentive
Stock Option may be exercised by the executor or administrator of the
deceased Optionee's estate or by a person receiving the Incentive Stock
Option by will or under the laws of descent and distribution of the
state in which the Optionee resided.
(c) Upon termination of the Optionee's employment by reason of
permanent and total disability as defined under Section 22(e)(3) of the
Code, the Incentive Stock Option may be exercised, but only to the
extent exercisable on the date of such permanent and total disability,
during the one (1) year period following the date of such termination of
the Optionee's employment.
(d) Upon termination of the Optionee's employment by reason of
retirement or disability other than as defined by Section 3(c) of this
Agreement, the Incentive Stock Option may be exercised, but only to the
extent exercisable on the date of such retirement or disability, during
the three (3) month period following the date of such termination of the
Optionee's employment.
(e) A transfer of the Optionee's employment from one affiliate
of SFI to another shall not be deemed to be a termination of the
Optionee's employment.
(f) Notwithstanding any other provisions set forth herein or in
the Plan, if the Optionee shall (i) commit any act of malfeasance or
wrongdoing affecting SFI, (ii) breach any covenant not to compete or
employment contract with SFI, or (iii) engage in conduct that would
warrant the Optionee's discharge for cause (excluding general
dissatisfaction with the performance of the Optionee's duties, but
including any act of disloyalty or any conduct clearly tending to bring
discredit upon SFI), then any unexercised portion of the Incentive Stock
Option shall immediately terminate and be void.
4. Exercise of Incentive Stock Option.
(a) During the Option Term, the Optionee may exercise the
Incentive Stock Option with respect to all or any part of the number of
Incentive Stock Option Shares then exercisable hereunder by giving the
Board of SFI (or, if applicable, a committee thereof appointed pursuant
to Section 1.02(d) of the Plan) written notice of intent to exercise
substantially in the form attached hereto as Exhibit A. The notice of
exercise shall specify the number of Incentive Stock Option Shares as to
which the Incentive Stock Option is to be exercised and the date of
exercise thereof, which date shall be at least five days after the
giving of such notice unless an earlier date shall have been mutually
agreed upon.
(b) Full payment (in U.S. dollars) by the Optionee of the option
price for the Incentive Stock Option Shares purchased shall be made on
or before the exercise date specified in the notice of exercise in cash,
or, with the prior written consent of the Board (or, if applicable, a
committee thereof appointed pursuant to Section 1.02(d) of the Plan), in
whole or in part through the surrender of previously acquired shares of
Stock at their fair market value on the exercise date.
On the exercise date specified in the Optionee's notice or as soon
thereafter as is reasonably practicable, SFI shall cause to be delivered
to the Optionee, a certificate or certificates for the Incentive Stock
Option Shares then being purchased (out of theretofore unissued Stock or
reacquired or surrendered Stock, as SFI may elect) upon full payment for
such Incentive Stock Option Shares. The obligation of SFI to deliver
Stock shall, however, be subject to the condition that if at any time
the Board (or, if applicable, a committee thereof appointed pursuant to
Section 1.02(d) of the Plan) shall determine in its discretion that
(i) the listing, registration or qualification of the Incentive Stock
Option or the Incentive Stock Option Shares upon any securities exchange
or under any state or federal law, or (ii) the consent or approval of
any governmental regulatory body, or (iii) an agreement by the Optionee
with respect to the disposition of shares of Common Stock, is necessary
or desirable as a condition of, or in connection with, the Incentive
Stock Option or the issuance or purchase of Stock thereunder, the
Incentive Stock Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions
not acceptable to the Board (or, if applicable, a committee thereof
appointed pursuant to Section 1.02(d) of the Plan).
(c) If the Optionee fails to pay for any of the Incentive Stock
Option Shares specified in such notice or fails to accept delivery
thereof, the Optionee's right to purchase such Incentive Stock Option
Shares may be terminated by SFI. The date specified in the Optionee's
notice as the date of exercise shall be deemed to be the date of
exercise of the Incentive Stock Option, provided that payment in full
for the Incentive Stock Option Shares to be purchased upon such exercise
shall have been received by such date.
5. Adjustment of and Changes in Stock of SFI.
In the event of a reorganization, recapitalization, change of
shares, stock split, spinoff, stock dividend, reclassification,
subdivision or combination of shares, merger, consolidation, rights
offering, or any other change in the corporate structure or shares of
capital stock of SFI, the Board (or, if applicable, a committee thereof
appointed pursuant to Section 1.02(d) of the Plan) shall make such
adjustment as it deems appropriate in the number and kinds of shares of
Stock subject to the Incentive Stock Option or in the option price;
provided, however, that no such adjustment shall give the Optionee any
additional benefits under the Incentive Stock Option.
6. Fair Market Value.
"Fair market value" as of any date and in respect of any share of
Common Stock means the closing price on such date or on the next
business day, if such date is not a business day, of a share of Common
Stock reflected in the NASDAQ National Market System traded under the
Symbol SAFM, provided that, if shares of Common Stock shall not have
been traded on NASDAQ for more than 10 days immediately preceding such
date or if deemed appropriate by the Board (or, if applicable, a
committee thereof appointed pursuant to Section 1.02(d) of the Plan) for
any other reason, the fair market value of shares of Common Stock shall
be as determined by the Board (or, if applicable, a committee thereof
appointed pursuant to Section 1.02(d) of the Plan) in such other manner
as it may deem appropriate. In no event shall the fair market value of
any share of Common Stock be less than its par value.
7. No Rights as a Stockholder.
Neither the Optionee nor any personal representative shall be, or
shall have any of the rights and privileges of, a stockholder of SFI
with respect to any shares of Stock purchasable or issuable upon the
exercise of this Incentive Stock Option, in whole or in part, prior to
the issuance of certificates for shares of Common Stock to said person.
8. Insider Trading Short-Swing Profit Liability Exemption
Requirements.
Notwithstanding
any other provision of this Agreement to the
contrary, the Incentive Stock Option granted under this Agreement shall
be transferrable (i) by the option holder only by will or under the laws
of descent and distribution of the state in which the option holder
resided on the date of his death, and (ii) by the Company pursuant to a
qualified domestic relations order as defined by the Code or Title I of
the Employee Retirement Income Security Act or the Rules thereunder.
9. No Rights of Employment.
Neither the granting of this Incentive Stock Option nor its
exercise shall be construed as granting to the Optionee any right with
respect to continuance of employment with SFI. Except as may otherwise
be limited by a written agreement between SFI and the Optionee, and
acknowledged by the Optionee, the right of SFI to terminate at will the
Optionee's employment with it at any time (whether by dismissal,
discharge, retirement or otherwise) is specifically reserved by SFI.
10. Amendment of Incentive Stock Option.
The Board (or, if applicable, a committee thereof appointed
pursuant to Section 1.02(d) of the Plan) may, without further action by
the stockholders and without the consent of or further consideration
from the Optionee, amend, condition or modify this Incentive Stock
Option in response to changes in securities or other laws or rules,
regulations or regulatory interpretations thereof applicable to the
Incentive Stock Option or to comply with stock exchange rules or
requirements. The Board (or, if applicable, a committee thereof
appointed pursuant to Section 1.02(d) of the Plan) may amend this
Incentive Stock Option otherwise with the written consent of the
Optionee.
11. Notice.
Any notice to SFI provided for in this instrument shall be
addressed to it in care of its Secretary at its executive offices at
Post Office Box 988, Laurel, Mississippi 39441, and any notice to the
Optionee shall be addressed to the Optionee at the current address shown
on the payroll records of SFI. Any notice shall be deemed to be duly
given if and when properly addressed and posted by registered or
certified mail, postage prepaid.
12. Incorporation of Plan by Reference.
This Incentive Stock Option is granted pursuant to the terms of
the Plan, which terms are incorporated herein by reference, and the
Incentive Stock Option shall in all respects be interpreted in
accordance with the Plan. The
Board (or, if applicable, a committee
thereof appointed pursuant to Section 1.02(d) of the Plan) shall
interpret and construe the Plan and this instrument, and its
interpretations and determinations shall be conclusive and binding on
the parties hereto and any other person claiming an interest hereunder,
with respect to any issue arising hereunder or thereunder.
13. Governing law.
The validity, construction, interpretation and effect of this
instrument shall exclusively be governed by and determined in accordance
with the laws of the State of Mississippi, except to the extent
preempted by federal law, which shall to that extent govern.
IN WITNESS WHEREOF, SFI has caused its duly authorized officers to
execute and attest this Incentive Stock Option Agreement, and to apply
the corporate seal hereto, and the Optionee has placed his or her
signature hereon, effective as of the Date of Grant.
SANDERSON FARMS, INC.
ATTEST:
By:
Name:
Title:
ACCEPTED AND AGREED TO:
Optionee
<PAGE>
NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION
SANDERSON FARMS, INC.
ATTENTION: The Board of Directors
Stock Option Committee
Gentlemen:
Notice is hereby given of the undersigned's intent to exercise the
Incentive Stock Option granted to the undersigned pursuant to the
Incentive Stock Option Agreement dated _______________, ______ entered
into by and between the undersigned and Sanderson Farms, Inc. The
Incentive Stock Option shall be exercised with respect to
________________________ (_____) shares of the common stock, par value
$1.00 per share, of Sanderson Farms, Inc., at the exercise price of
$______________ per share. The date of exercise shall be
_______________, ______ which is five days or more after the date of
this notice.
In connection with the exercise of the Incentive Stock Option, the
undersigned acknowledges that no withholding of income taxes is
required.
Employee/Optionee
Dated: ________________, ______
<PAGE>
SANDERSON FARMS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS NONSTATUTORY STOCK OPTION AGREEMENT ("Agreement"), dated as of the
______ day of _______________, ______ (the "Date of Grant"), is delivered by
Sanderson Farms, Inc., and its subsidiaries and affiliates (collectively
referred to as "SFI") to_____________________________________ (the "Optionee"),
who is an executive officer or key employee of SFI.
WHEREAS, the Board of Directors of Sanderson Farms, Inc. (the "Board"),
recommended stockholder approval of, the stockholders approved and the Board
adopted, the Sanderson Farms, Inc. Stock Option Plan (as amended and restated
to the date hereof, the "Plan");
WHEREAS, the Plan provides for the granting of nonstatutory stock options
by the Board (or,if applicable, a committee thereof appointed pursuant to
Section 1.02(d) of the Plan) to executive officers and key employees of SFI
to purchase, or to exercise certain rights with respect to, shares of the
Common Stock of SFI, par value $1.00 per share (the "Stock"), in accordance
with the terms and provisions thereof; and
WHEREAS, the Board (or, if applicable, a committee thereof appointed
pursuant to Section 1.02(d) of the Plan) considers the Optionee to be a person
who is eligible for grant of a nonstatutory stock option under the Plan, and has
determined that it would be in the best interest of SFI to grant the
nonstatutory stock option documented herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. Grant of Nonstatutory Stock Option.
(a) Subject to the terms and conditions hereinafter set forth, SFI, with
the approval and at the direction of the Board (or, if applicable, a committee
thereof appointed pursuant to Section 1.02(d) of the Plan), hereby grants to
the Optionee, as of the Date of Grant, an option to purchase up to
________ shares of Stock at a price of $___________ per share, which price
per share is at or below the present fair market value. Such option is
hereinafter referred to as the "Nonstatutory Stock Option"
and the shares of stock purchasable upon exercise of the Nonstatutory Stock
Option are hereinafter sometimes referred to as the "Nonstatutory Stock
Option Shares." Notwithstanding any provision herein
to the contrary, the Option is not intended by the parties hereto to be, and
shall not be treated as, an "incentive stock option," pursuant to and as such
term is defined under Sections 421 and 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), but is intended
by the parties hereto to be, and shall be treated as, a "nonstatutory
stock option."
(b) This Nonstatutory Stock Option is granted subject to the
following additional terms and conditions (if none, so indicate):
2. Term and Exercise.
This Nonstatutory Stock Option may be exercised during a period beginning
one year after and ending six years after the date of grant thereof (the
"option term"). Unless a shorter period is provided
by the Board (or, if applicable, a committee thereof appointed pursuant to
Section 1.02(d) of the Plan), this Nonstatutory Stock Option shall be exercised
in accordance with this section 2. During the first year
of the option term, no more than 25% of the initial total number of shares
covered by the Nonstatutory Stock Option may be exercised and purchased by the
Optionee. During the second year of the option term, no more than 50% of the
initial total number of shares covered by the Nonstatutory Stock Option
may be exercised and purchased by the Optionee, such percentage to include the
percentage, by number of shares, purchased in the previous year of the option
term. During the third year of the option term, no more than 75% of the initial
total number of shares covered by the Nonstatutory Stock Option may be
exercised and purchased by the Optionee, such percentage to include the
percentages, by number of shares, previously purchased in earlier years of
the option term on a cumulative basis. During the fourth year of the option
term, 100% of the initial total number of shares covered by the Nonstatutory
Stock Option may be exercised and purchased by the Optionee, such percentage to
include the percentages, by number of shares, previously purchased in earlier
years of the option term on a cumulative basis. No fractional shares shall be
issued as a result of the exercise of this Nonstatutory Stock Option. No
Nonstatutory Stock Option shall be exercisable after the expiration of its
option term.
3. Termination of Nonstatutory Stock Option.
(a) Except as provided in Sections 3(b) and 3(c) of this Agreement,
upon termination of the Optionee's employment, the Nonstatutory Stock Option,
to the extent not previously exercised, shall terminate immediately upon such
termination of employment.
(b) Upon termination of the Optionee's employment by reason of death of
the Optionee, the Nonstatutory Stock Option may be exercised, but only to the
extent exercisable on the date of such death, within one (1) year from and
after the date of the Optionee's death. The Nonstatutory Stock Option may be
exercised by the executor or administrator of the deceased Optionee's estate
or by a person receiving the Nonstatutory Stock Option by will or under the
laws of descent and distribution of the state in which the Optionee resided.
(c) Upon termination of the Optionee's employment by reason of
retirement or disability (as defined by the
Board (or, if applicable, a committee thereof appointed pursuant to Section
1.02(d) ofthe Plan), the Nonstatutory Stock Option may be exercised, but only
to the extent exercisable on the date of such retirement or disability,
during the three (3) month period following the date of such termination of
the Optionee's employment.
(d) A transfer of the Optionee's employment from one affiliate of SFI to
another shall not be deemed to be a termination of the Optionee's employment.
(e) Notwithstanding any other provisions set forth herein or in the Plan,
if the Optionee shall (i) commit any act of malfeasance or wrongdoing affecting
SFI, (ii) breach any covenant not to compete or employment contract with SFI,
or (iii) engage in conduct that would warrant the Optionee's discharge for
cause (excluding general dissatisfaction with the performance of the Optionee's
duties, but including any act of disloyalty or any conduct clearly tending to
bring discredit upon SFI), then any unexercised portion of the Nonstatutory
Stock Option shall immediately terminate and be void.
4. Exercise of Nonstatutory Stock Option.
(a) During the Option Term, the Optionee may exercise the Nonstatutory
Stock Option with respect to all or any part of the number of Nonstatutory
Stock Option Shares then exercisable hereunder by giving the Board of SFI (or,
if applicable, a committee thereof appointed pursuant to Section 1.02(d) of the
Plan) written notice of intent to exercise substantially in the form attached
hereto as Exhibit A. The notice of exercise shall specify the number of
Nonstatutory Stock Option Shares as to which the Nonstatutory Stock Option is
to be exercised and the date of exercise thereof, which date shall be at
least five days after the giving of such notice unless an earlier date shall
have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by the Optionee of the option price
for the Nonstatutory Stock Option Shares purchased shall be made on or before
the exercise date specified in the notice of exercise in cash, or, with the
prior written consent of the Board (or, if applicable, a committee thereof
appointed pursuant to Section 1.02(d) of the Plan), in whole or in part
through the surrender of previously acquired shares of Stock at their fair
market value on the exercise date.
On the exercise date specified in the Optionee's notice or as soon
thereafter as is reasonably practicable, SFI shall cause to be delivered to the
Optionee, a certificate or certificates for the Nonstatutory Stock Option
Shares then being purchased (out of theretofore unissued Stock or reacquired
or surrendered Stock, as SFI may elect) upon full payment for such Nonstatutory
Stock Option Shares. The obligation of SFI to deliver Stock shall, however, be
subject to the condition that if at any time the Board (or, if applicable, a
committee thereof appointed pursuant to Section 1.02(d) of the Plan) shall
determine in its discretion that (i) the listing, registration or
qualification of the Nonstatutory Stock Option or the Nonstatutory Stock Option
Shares upon any securities exchange or under any state or federal law, or
(ii) the consent or approval of any governmental regulatory body or (iii) an
agreement by the Optionee with respect to the disposition of shares of Common
Stock, is necessary or desirable as a condition of, or in connection with, the
Option or the issuance or purchase of Stock thereunder, the Nonstatutory Stock
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the Board
(or, if applicable, a committee thereof appointed pursuant to Section 1.02(d)
of the Plan).
(c) If the Optionee fails to pay for any of the Nonstatutory Stock
Option Shares specified in such notice or fails to accept delivery thereof,
the Optionee's right to purchase such Nonstatutory Stock Option Shares may be
terminated by SFI. The date specified in the Optionee's notice as the date
of exercise shall be deemed to be the date of exercise of the Option,
provided that payment in full for the Nonstatutory Stock Option Shares to be
purchased upon such exercise shall have been received by such date.
5. Adjustment of and Changes in Stock of SFI.
In the event of a reorganization, recapitalization, change of shares,
stock split, spinoff, stock dividend, reclassification, subdivision or
combination of shares, merger, consolidation, rights offering, or
any other change in the corporate structure or shares of capital stock of
SFI, the Board (or, if applicable, a committee thereof appointed pursuant to
Section 1.02(d) of the Plan) shall make such adjustment as it deems
appropriate in the number and kinds of shares of Stock subject to the
Nonstatutory Stock Option or in the option price; provided, however, that
no such adjustment shall give the Optionee any additional benefits under the
Nonstatutory Stock Option.
6. Fair Market Value.
"Fair market value" as of any date and in respect of any share of Common
Stock means the closing price on such date or on the next business day, if
such date is not a business day, of a share of Common Stock reflected in the
NASDAQ National Market System traded under the Symbol SAFM, provided that, if
shares of Common Stock shall not have been traded on NASDAQ for more than 10
days immediately preceding such date or if deemed appropriate by the Board
(or, if applicable, a committee thereof appointed pursuant to Section 1.02(d)
of the Plan) for any other reason, the fair market value of shares of Common
Stock shall be as determined by the Board (or, if applicable, a committee
thereof appointed pursuant to Section 1.02(d) of the Plan) in such other
manner as it may deem appropriate. In no event shall the fair market value of
any share of Common Stock be less than its par value.
7. No Rights as a Stockholder.
Neither the Optionee nor any personal representative shall be, or shall
have any of the rights and privileges of, a stockholder of SFI with respect to
any shares of Stock purchasable or issuable upon the exercise of this
Nonstatutory Stock Option, in whole or in part, prior to the issuance of
certificates for shares of Common Stock to said person.
8. Insider Trading Short-Swing Profit Liability Exemption Requirements.
Notwithstanding any other provision of this Agreement to the contrary,
the Nonstatutory Stock Option granted under this Agreement shall be
transferrable (i) by the option holder only by will or under the laws of
descent and distribution of the state in which the option holder resided on
the date of his death or (ii) by the Company pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act or the Rules thereunder [except that it may
be transferred to members of the Optionee s immediate family or to trusts for
their benefit or partnerships in which such members hold the entire
partnership interest].
9. No Rights of Employment.
Neither the granting of this Nonstatutory Stock Option nor its exercise
shall be construed as granting to the Optionee any right with respect to
continuance of employment with SFI. Except as may otherwise be limited by a
written agreement between SFI and the Optionee, and acknowledged by the
Optionee, the right of SFI to terminate at will the Optionee's employment with
it at any time (whether by dismissal, discharge, retirement or otherwise) is
specifically reserved by SFI.
10. Amendment of Nonstatutory Stock Option.
The Board (or, if applicable, a committee thereof appointed pursuant to
Section 1.02(d) of the Plan) may, without further action by the stockholders
and without the consent of or further consideration from the Optionee, amend,
condition or modify this Nonstatutory Stock Option in response to changes
in securities or other laws or rules, regulations or regulatory
interpretations thereof applicable to the Nonstatutory Stock Option or to
comply with stock exchange rules or requirements. The Board (or, if applicable,
a committee thereof appointed pursuant to Section 1.02(d) of the Plan) may
amend this Nonstatutory Stock Option otherwise with the written consent of the
Optionee.
11. Notice.
Any notice to SFI provided for in this instrument shall be addressed to
it in care of its Secretary at its executive offices at Post Office Box 988,
Laurel, Mississippi 39441, and any notice to the Optionee shall be addressed
to the Optionee at the current address shown on the payroll records of
SFI. Any notice shall be deemed to be duly given if and when properly
addressed and posted by registered or certified mail, postage prepaid.
12. Incorporation of Plan by Reference.
This Nonstatutory Stock Option is granted pursuant to the terms of the
Plan, which terms are incorporated herein by reference, and the Nonstatutory
Stock Option shall in all respects be interpreted in accordance with the
Plan. The Board (or, if applicable, a committee thereof appointed pursuant
to Section 1.02(d) of the Plan) shall interpret and construe the Plan and
this instrument, and its interpretations and determinations shall be
conclusive and binding on the parties hereto and any other person claiming
an interest hereunder, with respect to any issue arising hereunder or
thereunder.
13. Governing Law.
The validity, construction, interpretation and effect of this instrument
shall exclusively be governed by and determined in accordance with the laws
of the State of Mississippi, except to the extent preempted by federal law,
which shall to that extent govern.
IN WITNESS WHEREOF, SFI has caused its duly authorized officers to
execute and attest this Nonstatutory Stock Option Agreement, and to apply the
corporate seal hereto, and the Optionee has placed his or her signature
hereon, effective as of the Date of Grant.
SANDERSON FARMS, INC.
ATTEST:
By:
Name:
Title:
ACCEPTED AND AGREED TO:
Optionee
<PAGE>
NOTICE OF EXERCISE OF NONSTATUTORY STOCK OPTION
SANDERSON FARMS, INC.
ATTENTION: The Board of Directors
Stock Option Committee
Gentlemen:
Notice is hereby given of the undersigned's intent to exercise the
Nonstatutory Stock Option granted to the undersigned pursuant to the
Nonstatutory Stock Option Agreement dated _______________, ______, entered
into by and between the undersigned and Sanderson Farms, Inc. The
Nonstatutory Stock Option shall be exercised with respect to
__________________ (______) shares of the common stock, par value $1.00 per
share, of Sanderson Farms, Inc., at the exercise price of $__________ per
share. The date of exercise shall be _______________, ______, which is five
days or more after the date of this notice.
In connection with the exercise of the Nonstatutory Stock Option, the
undersigned authorizes SFI to withhold all appropriate federal and state
income and payroll taxes where cash is paid. Where only stock is transferred,
the undersigned will remit to SFI an amount in cash equal to the appropriate
federal and state income and payroll taxes upon being advised of the amount.
Alternatively, SFI may reduce the number of shares distributed by an amount or
number equal in value to the withholding amount.
Employee/Optionee
Dated: ,
<PAGE>
SANDERSON FARMS, INC.
ALTERNATE STOCK APPRECIATION RIGHTS AGREEMENT
THIS ALTERNATE STOCK APPRECIATION RIGHTS AGREEMENT ( Agreement ), dated
as of the ______ day of _______________ , _____ (the Date of Grant ), is
delivered by Sanderson Farms, Inc., and its subsidiaries and affiliates
(collectively referred to as "SFI") to ______________________________________
(the Optionee ), who is an executive officer or key employee of SFI.
WHEREAS, the Board of Directors of Sanderson Farms, Inc. (the Board ),
recommended stockholder approval of, the stockholders approved and the Board
adopted, the Sanderson Farms, Inc. Stock Option Plan (as amended and restated
to the date hereof, the Plan );
WHEREAS, the Plan provides for the granting of alternate stock
appreciation rights by the Board (or, if applicable, a committee thereof
appointed pursuant to Section 1.02(d) of the Plan) to
executive officers and key employees of SFI to receive the appreciation
in value of shares of the Common Stock of SFI, par value of $1.00 per share
(the "Stock"), in accordance with the terms and provisions thereof; and
WHEREAS, the Board (or, if applicable, a committee thereof appointed
pursuant to Section 1.02(d) of the Plan) considers the Optionee to be a person
who is eligible for a grant of an alternate stock appreciation right under the
Plan, and has determined that it would be in the best interest of SFI to
grant the alternate stock appreciation right documented herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. Grant of Alternate Stock Appreciation Right.
(a) Subject to the terms and conditions hereinafter set forth, SFI, with
the approval and at the direction of the Board (or, if applicable, a
committee thereof appointed pursuant to Section 1.02(d) of the Plan),
hereby grants to the Optionee, as of the Date of Grant, an alternate stock
appreciation right related to a certain __________ Stock Option granted
pursuant to a certain __________ Stock Option Agreement dated _______________,
_____. The shares of stock purchasable upon exercise of the related
__________ Stock Option are hereinafter referred to as "Option Shares."
Notwithstanding any provision herein to the contrary, the Alternate Stock
Appreciation Right is not intended by the parties hereto to be, and shall
not be treated as, an "incentive stock option," pursuant to and as such term is
defined under Sections 421 and 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
(b) This Alternate Stock Appreciation Right is granted subject to the
following additional terms and conditions (if none, so indicate):
2. Exercise of Alternate Stock Appreciation Right.
The Optionee may, in lieu of the exercise of the ____________ Stock
Option or portion thereof to which this Alternate Stock Appreciation Right
relates, exercise this Alternate Stock Appreciation Right or portion
hereof with respect to all or part of the option shares then exercisable and
shall be entitled to receive from SFI the appreciated value of the option
shares. The appreciated value of the option shares shall be equal to 100% of
the amount, if any, by which the fair market value of a share of Common
Stock on the date this Alternate Stock Appreciation Right is exercised exceeds
the fair market value of a share of Common Stock on the date the option, to
which this Alternate Stock Appreciation Right was awarded as an alternate, was
granted. This Alternate Stock Appreciation Right shall be exercisable only
to the extent that, and subject to the same conditions as, the option to which
it relates is exercisable and only when the fair market value of a share of
Common Stock on the exercise date exceeds the exercise price of the option to
which this Alternate Stock Appreciation Right relates. The Optionee may
exercise this Alternate Stock Appreciation Right by giving the Secretary of
SFI written notice of intent to exercise substantially in the form attached
hereto as Exhibit A. The notice of exercise shall specify the number of Option
Shares as to which this Alternate Stock Appreciation Right is to be
exercised and the date of exercise thereof, which date shall be at least
five days after the giving of such notice unless an earlier date shall
have been mutually agreed upon. Payment of the appreciated value of
the Option Shares may be made in cash or in Common Stock or a combination of
both, provided that no fractional share of Common Stock shall be issued as a
result of the exercise of this Alternate Stock Appreciation Right. The exercise
of this Alternate Stock Appreciation Right or portion hereof shall
cancel the related option on an equal number of shares of Common Stock under
the __________ Stock Option to which this Alternate Stock Appreciation Right
relates.
3. Termination of Alternate Stock Appreciation Right Related to Nonstatutory
Stock Option.
(a) Except as provided in Sections 3(b) and 3(c) of this Agreement, upon
termination of the Optionee's employment, this Alternate Stock Appreciation
Right, to the extent not previously exercised, shall terminate immediately
upon such termination of employment.
(b) Upon termination of the Optionee's employment by reason of death of
the Optionee, this Alternate Stock Appreciation Right may be exercised, but
only to the extent exercisable on the date of such death, within one (1) year
from and after the date of the Optionee's death. This Alternate Stock
Appreciation Right may be exercised by the executor or administrator of the
deceased Optionee's estate or by a person receiving this Alternate Stock
Appreciation Right by will or under the laws of descent and distribution of
the state in which the Optionee resided.
(c) Upon termination of the Optionee's employment by reason of
retirement or disability (as defined by the Board (or, if applicable, a
committee thereof appointed pursuant to Section 1.02(d) of the Plan),
this Alternate Stock Appreciation Right may be exercised, but only to the
extent exercisable on the date of such retirement or disability, during the
three (3) month period following the date of such termination of the
Optionee's employment.
(d) A transfer of the Optionee's employment from one affiliate of SFI to
another shall not be deemed to be a termination of the Optionee's employment.
(e) Notwithstanding any other provisions set forth herein or in the Plan,
if the Optionee shall (i) commit any act of malfeasance or wrongdoing affecting
SFI, (ii) breach any covenant not to compete or employment contract with SFI,
or (iii) engage in conduct that would warrant the Optionee's
discharge for cause (excluding general dissatisfaction with the performance of
the Optionee's duties, but including any act of disloyalty or any conduct
clearly tending to bring discredit upon SFI), then any unexercised portion of
the Alternate Stock Appreciation Right shall immediately terminate and be void.
4. Termination of Alternate Stock Appreciation Right Related to Incentive
Stock Option.
(a) Except as provided in Sections 4(b), 4(c) and 4(d) of this Agreement,
upon termination of the Optionee's employment, this Alternate Stock
Appreciation Right, to the extent not previously exercised, shall terminate
immediately upon such termination of employment.
(b) Upon termination of the Optionee's employment by reason of death of
the Optionee, this Alternate Stock Appreciation Right may be exercised, but
only to the extent exercisable on the date of such death, within one (1) year
from and after the date of the Optionee's death. This Alternate Stock
Appreciation Right may be exercised by the executor or administrator of the
deceased Optionee's estate or by a person receiving the Alternate Stock
Appreciation Right by will or under the laws of descent and distribution of
the state in which the Optionee resided.
(c) Upon termination of the Optionee's employment by reason of permanent
and total disability as defined under Section 22(e)(3) of the Code, this
Alternate Stock Appreciation Right may be exercised, but only to the extent
exercisable on the date of such permanent and total disability, during
the one (1) year period following the date of such termination of the
Optionee's employment.
(d) Upon termination of the Optionee's employment by reason of retirement
or disability, other than disability defined by Section 4(c) of this Agreement,
this Alternate Stock Appreciation Right may be exercised, but only to the
extent exercisable on the date of such retirement or disability, during the
three (3) month period following the date of such termination of the
Optionee's employment.
(e) A transfer of the Optionee's employment from one affiliate to
another of SFI shall not be deemed to be a termination of the Optionee's
employment.
(f) Notwithstanding any other provision set forth herein or in the Plan,
if the Optionee shall (i) commit any act of malfeasance or wrong-doing
affecting SFI, (ii) breach any covenant not to compete or employment contract
with SFI, or (iii) engage in conduct that would warrant the Optionee's
discharge for cause (excluding general dissatisfaction with the performance
of the Optionee's duties, but including any act of disloyalty or any conduct
clearly tending to bring discredit upon SFI), then any unexercised portion of
the Alternate Stock Appreciation Right shall immediately terminate and be void.
5. Adjustment of and Changes in Stock of SFI.
In the event of a reorganization, recapitalization, change of shares,
stock split, spinoff, stock dividend, reclassification, subdivision or
combination of shares, merger, consolidation, rights offering, or
any other change in the corporate structure or shares of capital stock
of SFI, the Board (or, if applicable, a committee thereof appointed pursuant
to Section 1.02(d) of the Plan) shall make such adjustment as it
deems appropriate in the number and kinds of shares of Stock subject to the
Alternate Stock Appreciation Right; provided, however, that no such
adjustment shall give the Optionee any additional benefits under the
Alternate Stock Appreciation Right.
6. Fair Market Value.
"Fair market value" as of any date and in respect of any share of Common
Stock means the closing price on such date or on the next business day, if
such date is not a business day, of a share of Common Stock reflected in the
NASDAQ National Market System traded under the Symbol SAFM, provided that, if
shares of Common Stock shall not have been traded on NASDAQ for more than 10
days immediately preceding such date or if deemed appropriate by the Board
(or, if applicable, a committee thereof appointed pursuant to Section 1.02(d)
of the Plan) for any other reason, the fair market value of shares of Common
Stock shall be as determined by the Board (or, if applicable, a committee
thereof appointed pursuant to Section 1.02(d) of the Plan) in such other
manner as it may deem appropriate. In no event shall the fair market value of
any share of Common Stock be less than its par value.
7. No Rights as a Stockholder.
Neither the Optionee nor any personal representative shall be, or shall
have any of the rights and privileges of, a stockholder of SFI with respect to
any shares of Stock related to the exercise of the Alternate Stock
Appreciation Right, in whole or in part, prior to the issuance of certificates
for shares of Common Stock to said person.
8. Insider Trading Short-Swing Profit Liability Exemption Requirements.
Notwithstanding any other provision of this Agreement to the contrary,
the Alternate Stock Appreciation Right granted under this Agreement shall be
transferrable (i) by the option holder only by will or under the laws of
descent and distribution of the state in which the option holder resided on
the date of his death or (ii) by the Company pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act or the Rules thereunder [, except
that, if the Alternate Stock Appreciation Right granted hereby relates to
a Nonstatutory Stock Option, it may be transferred to members of the
Optionee s immediate family or to trusts for their benefit or
partnerships in which such members hold the entire partnership interest].
9. No Rights of Employment.
Neither the granting of this Alternate Stock Appreciation Right nor its
exercise shall be construed as granting to the Optionee any right with respect
to continuance of employment with SFI. Except as may otherwise be limited by a
written agreement between SFI and the Optionee, and acknowledged by the
Optionee, the right of SFI to terminate at will the Optionee's employment
with it at any time (whether by dismissal, discharge, retirement or otherwise)
is specifically reserved by SFI.
10. Amendment of Alternate Stock Appreciation Right.
The Board (or, if applicable, a committee thereof appointed pursuant to
Section 1.02(d) of the Plan) may, without further action by the stockholders
and without the consent of or further consideration from the Optionee, amend,
condition or modify this Alternate Stock Appreciation Right in response to
changes in securities or other laws or rules, regulations or regulatory
interpretations thereof applicable to the Alternate Stock Appreciation Right
or to comply with stock exchange rules or requirements. The Board (or,
if applicable, a committee thereof appointed pursuant to Section 1.02(d) of
the Plan) may amend this Alternate Stock Appreciation Right otherwise with the
written consent of the Optionee.
11. Notice.
Any notice to SFI provided for in this instrument shall be addressed to
it in care of its Secretary at its executive offices at Post Office Box 988,
Laurel, Mississippi 39441, and any notice to the Optionee shall be
addressed to the Optionee at the current address shown on the payroll records
of SFI. Any notice shall be deemed to be duly given if and when properly
addressed and posted by registered or certified mail, postage prepaid.
12. Incorporation of Plan by Reference.
This Alternate Stock Appreciation Right is granted pursuant to the terms
of the Plan, which terms are incorporated herein by reference, and the
Alternate Stock Appreciation Right shall in all respects be interpreted
in accordance with the Plan. The Board (or, if applicable, a committee
thereof appointed pursuant to Section 1.02(d) of the Plan) shall interpret and
construe the Plan and this instrument, and its interpretations and
determinations shall be conclusive and binding on the parties hereto and
any other person claiming an interest hereunder, with respect to any issue
arising hereunder or thereunder.
13. Governing law.
The validity, construction, interpretation and effect of this instrument
shall exclusively be governed by and determined in accordance with the laws of
the State of Mississippi, except to the extent preempted by federal law,
which shall to that extent govern.
IN WITNESS WHEREOF, SFI has caused its duly authorized officers to
execute and attest this Alternate Stock Appreciation Right Agreement, and to
apply the corporate seal hereto, and the Optionee has placed his or her
signature hereon, effective as of the Date of Grant.
SANDERSON FARMS, INC.
ATTEST:
By:
Name:
Title:
ACCEPTED AND AGREED TO:
Optionee
<PAGE>
NOTICE OF EXERCISE OF ALTERNATE STOCK APPRECIATION RIGHT
SANDERSON FARMS, INC.
ATTENTION: The Board of Directors
Stock Option Committee
Gentlemen:
Notice is hereby given of the undersigned's intent to exercise the
Alternate Stock Appreciation Right granted to the undersigned pursuant to
the Alternate Stock Appreciation Rights Agreement dated
________________, _____ , entered into by and between the undersigned
and Sanderson Farms, Inc. The Alternate Stock Appreciation Right shall be
exercised with respect to ______________ (______) shares of the Common Stock,
$1.00 par value, of Sanderson Farms, Inc. The date of exercise shall be
_______________, ____, which is five days or more after the date of this
notice.
In connection with the exercise of the Alternate Stock Appreciation
Right, the undersigned authorizes SFI to withhold all appropriate federal and
state income and payroll taxes where cash is paid. Where only stock is
transferred, the undersigned will remit to SFI an amount in cash equal to the
appropriate federal and state income and payroll taxes upon being advised
of the amount. Alternatively, SFI may reduce the number of shares distributed
by an amount or number equal in value to the withholding amount.
Employee/Optionee
Dated: _______________. _____
Exhibit 24
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the Sanderson Farms, Inc. and Affiliates Stock Option
Plan of our report dated December 11, 1996, with respect to the consolidated
financial statements and schedule of Sanderson Farms, Inc. included in the
Annual Report (Form 10-K) for the year ended October 31, 1996.
/s/Ernst & Young LLP
Jackson, Mississippi
January 23, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 4,879
<SECURITIES> 0
<RECEIVABLES> 27,661
<ALLOWANCES> 167
<INVENTORY> 39,060
<CURRENT-ASSETS> 78,364
<PP&E> 270,930
<DEPRECIATION> 112,974
<TOTAL-ASSETS> 237,226
<CURRENT-LIABILITIES> 17,538
<BONDS> 90,102
14,363
0
<COMMON> 0
<OTHER-SE> 103,887
<TOTAL-LIABILITY-AND-EQUITY> 237,226
<SALES> 455,100
<TOTAL-REVENUES> 455,100
<CGS> 436,799
<TOTAL-COSTS> 436,799
<OTHER-EXPENSES> 17,112
<LOSS-PROVISION> 172
<INTEREST-EXPENSE> 4,383
<INCOME-PRETAX> (3,210)
<INCOME-TAX> (767)
<INCOME-CONTINUING> (2,443)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,443)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
