UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________to_______________
Commission file number 0-16567
Sanderson Farms, Inc.
(Exact name of registrant as specified in its charter)
Mississippi 64-0615843
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
225 North Thirteenth Avenue Laurel, Mississippi 39440
(Address of principal executive offices) (Zip Code)
(601) 649-4030
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days.
Yes X No _____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $1 Per Share Par Value-----14,370,080 shares outstanding
as of April 30, 1998.
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INDEX SANDERSON FARMS, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--April 30, 1998 and
October 31, 1997
Condensed consolidated statements of income (loss)--Three months
ended April 30, 1998 and 1997; Six months ended April 30, 1998
and 1997
Condensed consolidated statements of cash flows--Six months ended
April 30, 1998 and 1997
Notes to condensed consolidated financial statements--
April 30, 1998 and 1997
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SANDERSON FARMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
April 30, October 31,
1998 1997
(Unaudited) (Note)
(In thousands)
Assets
Current assets
Cash and temporary cash investments $ 1,962 $ 1,531
Accounts receivables, net 31,228 30,934
Inventories - Note 2 43,570 44,210
Refundable income taxes 1,918 2,112
Other current assets 5,528 5,535
Total current assets 84,206 84,322
Property, plant and equipment 319,703 310,721
Less accumulated depreciation (143,092) (132,533)
176,611 178,188
Other assets 1,908 2,383
Total assets $262,725 $264,893
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and
accrued expenses $ 20,931 $ 15,157
Current maturities of long-
term debt 4,018 3,114
Total current liabilities 24,949 18,271
Long-term debt, less current maturities 112,880 118,782
Deferred income taxes 11,069 11,069
Stockholders' equity
Preferred Stock:
Series A Junior Participating
Preferred Stock, $100 par value:
authorized 500,000 shares; none
issued
Par value to be determined by the
Board of Directors: authorized
4,500,000 shares; none issued
Common Stock, $1 par value: authorized
100,000,000 shares; issued and
outstanding shares - 14,370,080
and 14,367,580 at April 30, 1998 and
October 31, 1997, respectively 14,370 14,368
Paid-in capital 11,596 11,447
Retained earnings 87,861 90,956
Total stockholders' equity 113,827 116,771
Total liabilities and stockholders' equity $262,725 $264,893
NOTE: The consolidated balance sheet at October 31, 1997 has been derived from
the audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
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SANDERSON FARMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
Three Months Ended Six Months Ended
April 30, April 30,
1998 1997 1998 1997
(In thousands, except shares and per share data)
Net sales $128,582 $117,410 $242,256 $233,057
Cost and expenses:
Cost of sales 118,463 112,127 231,227 215,756
Selling, general and
administrative 4,493 4,996 9,747 10,257
122,956 117,123 240,974 226,013
OPERATING INCOME 5,626 287 1,282 7,044
Other income (expense):
Interest income 48 43 118 85
Interest expense (1,953) (1,457) (4,019) (2,580)
Other (85) (60) (14) (11)
(1,990) (1,474) (3,915) (2,506)
INCOME (LOSS) BEFORE
INCOME TAXES 3,636 (1,187) (2,633) 4,538
Income tax expense (benefit) 1,344 (436) (975) 1,711
NET INCOME (LOSS) $ 2,292 $ (751) $ (1,658) $ 2,827
Basic and diluted earnings
(loss) per share $ .16 $ (.05) $ (.12) $ .20
Dividends per share $ .05 $ .05 $ .10 $ .10
Basic weighted average
shares outstanding 14,367,636 14,364,299 14,367,608 14,363,679
Diluted weighted average
shares outstanding 14,394,226 14,364,229 14,367.608 14,464,363
See notes to condensed consolidated financial statements.
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SANDERSON FARMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
April 30,
1998 1997
(In thousands)
Operating activities
Net income (loss) $(1,658) $ 2,827
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and amortization 11,580 10,225
Change in assets and liabilities:
Increase in accounts receivable (294) (1,174)
(Increase) decrease in inventories 640 (4,013)
Decrease in refundable income taxes 194 0
(Increase) decrease in other assets 146 (1,119)
Increase in accounts payable
and accrued expenses 5,774 1,371
Total adjustments 18,040 5,290
Net cash provided by
operating activities 16,382 8,117
Investing activities
Net proceeds from sale of equipment 158 1
Advance from insurance company for
fire loss 0 3,500
Capital expenditures (9,825) (40,933)
Net cash used in investing activities (9,667) (37,432)
Financing activities
Principal payments on long-term debt (2,998) (2,934)
Net borrowings (payments) under revolving
line of credit (2,000) 26,000
Additional long-term borrowings 0 4,945
Principal payment on note receivable-E.S.O.P. 125 125
Net proceeds from issuance of common stock 26 39
Dividends paid (1,437) (1,436)
Net cash provided by (used in)
financing activities (6,284) 26,739
Net increase (decrease) in cash and temporary
cash investments 431 (2,576)
Cash and temporary cash investments
at beginning of period 1,531 4,879
Cash and temporary cash investments
at end of period $ 1,962 $ 2,303
See notes to condensed consolidated financial statements.
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SANDERSON FARMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 30, 1998
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments consisting
of normal recurring accruals considered necessary for a fair presentation have
been included. Operating results for the six-month period ended April 30, 1998,
are not necessarily indicative of the results that may be expected for the year
ending October 31, 1998. For further information, reference is made to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended October 31, 1997. In
1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128 " Earnings per Share." Statement 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to conform to the
Statement 128 requirements.
NOTE 2--INVENTORIES
Inventories consisted of the following:
April 30, October 31,
1998 1997
(In thousands)
Live poultry-broilers and breeders $25,942 $24,980
Feed, eggs and other 6,274 5,790
Processed poultry 4,256 5,238
Processed food 3,885 5,234
Packaging materials 3,213 2,968
$43,570 $44,210
NOTE 3--INCOME TAXES
Deferred income taxes relate principally to cash basis temporary differences and
depreciation expense which are accounted for differently for financial and
income tax purposes. Effective November 1, 1988, the Company changed from the
cash to the accrual basis of accounting for its farming subsidiary. The Taxpayer
Relief Act of 1997 (the "Act") provides that the taxes on the cash basis
temporary differences as of that date are payable over the next 20 years or in
the first fiscal year in which the Company fails to qualify as a"Family Farming
Corporation" provided there are no changes in ownership control. Management does
not anticipate the payment of such taxes related to these cash basis temporary
differences during fiscal 1998.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following Discussion and Analysis should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in Item 7 of the Company's Annual Report on Form 10-K for
its fiscal year ended October 31, 1997. This Quarterly Report, and other
periodic reports filed by the Company under the Securities and Exchange Act of
1934, and other written and oral statements made by it or on its behalf, may
include forward-looking statements, which are based on a number of assumptions
about future events and are subject to various risks, uncertainties and other
factors that may cause actual results to differ materially from the views,
beliefs and estimates expressed in such statements. These risks, uncertainties
and other factors include, but are not limited to the following:
(1) Changes in the market price for the Company's finished products and feed
grains, both of which may fluctuate substantially and exhibit cyclical
characteristics typically associated with commodity markets.
(2) Changes in economic and business conditions, monetary and fiscal policies or
the amount of growth, stagnation or recession in the global or U.S. economies,
either of which may affect the demand for the Company's finished products, the
value of inventories, the collectability of accounts receivable or the financial
integrity of customers.
(3) Changes in laws, regulations, and other activities in government agencies
and similar organizations applicable to the Company and the poultry industry.
(4) Various inventory risks due to changes in market conditions.
(5) Changes in and effects of competition, which is significant in all markets
in which the Company competes, with regional and national firms, some of which
have greater financial and marketing resources than the Company.
(6) Changes in accounting policies and practices adopted voluntarily by the
Company or required to be adopted by generally accepted accounting principles.
Readers are cautioned not to place undue reliance on forward-looking statements
made by or on behalf of Sanderson Farms. Each such statement speaks only as of
the day it was made. The Company undertakes no obligation to update or to revise
any forward-looking statements. The factors described above can not be
controlled by the Company. When used in this Quarterly Report, the words
"believes," "estimates," "plans," "expects," "should," "outlook," and
"anticipates" and similar expressions as they relate to the Company or its
management are intended to identify forward-looking statements.
The Company's poultry operations are integrated through its control of all
functions relative to the production of its chicken products, including hatching
egg production, hatching, feed manufacturing, raising chickens to marketable age
("grow out"), processing, and marketing. Consistent with the poultry industry,
the Company's profitability is substantially impacted by the market prices for
its finished product and feed grains, both of which may fluctuate substantially
and exhibit cyclical characteristics typically associated with commodity
markets. Other costs, excluding feed grains, related to the profitability of the
Company's poultry operations, including hatching egg production, hatching,
growing, and processing cost, are responsive to efficient cost containment
programs and management practices.
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The Company believes that value-added products are subject to less price
volatility and generate higher, more consistent profit margins than whole
chickens ice packed and shipped in bulk form. To reduce its exposure to market
cyclicality that has historically characterized commodity chicken market prices,
the Company has increasingly concentrated on the production and marketing of
value-added product lines with emphasis on product quality, customer service and
brand recognition. Nevertheless, market prices continue to have a significant
influence on prices of the Company's chicken products. The Company adds value to
its poultry products by performing one or more processing steps beyond the stage
where the whole chicken is first saleable as a finished product, such as
cutting, deep chilling, packaging and labeling the product. The Company believes
that one of its major strengths is its ability to change its product mix to meet
customer demands. The Company's processed and prepared foods product line
includes over 200 institutional and consumer packaged food items that it sells
nationally and regionally, primarily to distributors, food service
establishments and retailers. A majority of the prepared food items are made to
the specifications of food service users.
Results of Operations
For the second quarter of fiscal 1998 as compared to the second quarter of
fiscal 1997, net sales increased $11.2 million or 9.5%. This increase in net
sales for the period resulted from an increase in the pounds of products sold of
10.7%, which increase was partially offset by an overall decrease in the
Company's average sale price of 1.1%. The pounds of poultry products sold during
the three months ended April 30, 1998 increased 10.1% when compared to the same
three months a year ago principally as a result of the additional pounds
processed and sold by the new poultry complex in Brazos and Robertson counties,
Texas, which reached full capacity on the first shift during the fourth quarter
of fiscal 1997. The average sale price of poultry products decreased 6.3% during
the second quarter of fiscal 1998 as compared to the second quarter of fiscal
1997. A simple average of the Georgia dock prices during the second quarter of
fiscal 1998 as compared to the second quarter of fiscal 1997 decreased 8.4%. The
Company's sales of prepared food products during the second quarter of fiscal
1998 increased $8.1 million or 42.6% when compared to the same quarter last
year, primarily as a result of increased sales of cooked chicken products, which
increase was partially offset by a decrease in the pounds of corn dogs produced
and sold.
For the first half of fiscal 1998 net sales increased $9.2 million or 3.9% as
compared to the first half of fiscal 1997. This increase in the net sales was
the result of an increase in the pounds of poultry products sold of 8.9% and an
increase in the pounds of prepared food products sold of 11.8%. The additional
pounds of poultry products produced and sold at the Company's new complex in
Brazos and Robertson counties, Texas during fiscal 1998 was partially offset by
a decrease in the average sale price of poultry products of 8.8% when compared
to the first half of fiscal 1997. A simple average of the Georgia dock price
during the six months ended April 30, 1998 was 10.9% lower than the same average
during the six months ended April 30, 1997. Net sales of prepared food products
increased $10.6 million or 29.4% during the first six months of fiscal 1998 as
compared to the first six months of fiscal 1997, primarily as a result of an
increase in the pounds of cooked chicken products produced and sold, partially
offset by a decrease in the pounds of corn dogs produced and sold.
Cost of sales for the second quarter of fiscal 1998 as compared to the second
quarter of fiscal 1997 increased $6.3 million or 5.7%. This increase in cost of
sales resulted from a decrease of $1.9 million in the cost of sales of poultry
products and an increase of $8.2 million in the cost of sales of prepared food
products. The decrease in the cost of sales of poultry products resulted from a
combination of an increase in the pounds of poultry products produced and sold,
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as discussed above, and a decrease in the cost of feed grains. The simple
average of corn and soy meal cash market prices for the three months ended April
30, 1998 as compared to the same period during fiscal 1997 reflected decreases
of 10.2% and 35.9%, respectively. Increased cost of sales of prepared food
products was the result of the increased volume of prepared food products
produced and sold and the change in mix mentioned in the previous paragraph.
Cost of sales for the six months ended April 30, 1998 as compared to cost of
sales for the six months ended April 30, 1997 increased $15.5 million or 7.2%.
As in the second quarter, this increase in cost of sales resulted from the
additional pounds produced of poultry products and prepared food products when
compared with the same period in the prior year. The increase in the pounds of
poultry products produced was partially offset by decreases in the cost of feed
grains. The simple average of the corn and soy meal cash market prices reflected
decreases of 6.0% and 23.5%, respectively, during the first six months of fiscal
1998 as compared to the same period during fiscal 1997. Cost of sales of
prepared food products increased $11.0 million or 34.6% during the six months
ended April 30, 1998 as compared to the six months ended April 30, 1997,
primarily as a result of the increase in the pounds of cooked chicken products
produced and sold, which products had a higher average sale price and cost of
sales than the prepared food product mix during the first half of fiscal 1997.
Selling, general and administrative expenses for the three months and the six
months ended April 30, 1998 decreased $.5 million as compared to the three
months and the six months ended April 30, 1997. During the first half of fiscal
1997 the Company experienced additional selling and administrative cost
associated with the start-up of the complex in Brazos and Robertson counties,
Texas.
During the second quarter of fiscal 1998, as compared to the second quarter of
fiscal 1997, the Company's operating income increased $5.3 million. This
improvement is primarily attributable to the lower cost of corn and soy meal
during the period. For the six months ended April 30, 1998 as compared to the
six months ended April 30, 1997, lower market prices for fast food and chill
pack poultry products, which are the primary poultry markets of the Company,
were responsible for the reduction in operating income of $5.8 million.
Interest expense during the three months and the six months ended April 30, 1998
as compared to the same periods ended April 30, 1997 increased $.5 million and
$1.4 million, respectively. The increase in interest expense is primarily
related to higher outstanding debt incurred to finance the construction of the
new complex that is now in operation in Texas. The Company's weighted effective
interest rate on long term debt for the three and six months ended April 30,
1998 was 5.5%.
The Company's effective tax rate was approximately 37.0% during fiscal 1998 and
fiscal 1997.
Liquidity and Capital Resources
As of April 30, 1998 the Company's current ratio and working capital was 3.4 to
1 and $59.3 million, respectively, compared to a current ratio of 4.6 to 1 and
working capital of $66.1 million at October 31, 1997. During the first six
months of fiscal 1998 the Company expended approximately $9.8 million on planned
capital projects. This represents a significant reduction from the $40.9 million
of capital expenditures during the first six months of fiscal 1997, primarily
because of the construction of the complex in Texas. The anticipated capital
expenditures during the remainder of fiscal 1998 will be well below the level
during the same period in fiscal 1997.
The capital budget for fiscal 1998 has been increased to $17.9 million from
$12.0 million as of November 1, 1997. The increase of $5.9 million pertains to
items not approved at the beginning of fiscal 1998 pending justification, field
trial and alternate costing. Included in the capital budget for fiscal 1998 is
the anticipated cost of adding a second shift at the new complex in Texas, and
approximately $1.9 million relating to fiscal 1997 budget items that were not
completed or started during fiscal 1997. The fiscal 1998 capital budget also
includes the cost of renovations, changes and additions to existing processing
facilities to allow better product flow and product mix for more market
flexibility.
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The Company believes that anticipated capital expenditures for fiscal 1998 will
be funded from working capital and by cash flows from operations; however, if
needed, the Company has $35.0 million available under its revolving credit
agreement as of April 30, 1998.
Impact of Year 2000
The Company is continuing to assess the impact of the year 2000 on its computer
systems and believes that certain software currently in use will have to be
modified or replaced. The Company estimates the cost of modifications to
existing software and conversions to new software to be approximately $.5
million dollars and will be substantially completed by December 31, 1998. With
the modifications to existing software and conversions to new software, the year
2000 issue will not pose significant operational problems for the Company's
computer systems. However, if such modifications and conversions are not made,
or are not completed timely, the year 2000 issue could have a material impact on
the operations of the Company.
The costs of the projects and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the 1998 Annual Meeting of Shareholders of Sanderson Farms, Inc. held
February 19, 1998, the shareholders elected the following persons to the
Company's Board of Directors by the votes indicated below:
Name For Withheld
William R. Sanderson 13,421,531.0 33,268.0
Robert Buck Sanderson 13,423,917.5 35,881.5
Donald W. Zacharias 13,419,237.5 35,561.5
By a vote of 13,430,797.5 for, 5,902.5 against, and 18,099 abstaining, the
shareholders ratified the Board's selection of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending October 31, 1989.
By a vote of 13,179,409.5 for, 114,619.5 against and 41,996.0 abstaining,
the shareholders approved a proposal to amend Section 1 of Article IV of the
Company's By-laws, as amended, to increase the number of directors from 9 to 12.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this report
Exhibit 15a Independent Accountants' Review Report
Exhibit 15b Accountants' Letter re: Unaudited Financial
Information
Exhibit 3-A Copy of Articles of Incorporation of the Company, as
amended,filed as an exhibit to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31, 1989, and
incorporated herein by reference.
Exhibit 3-B Copy of the Company's Re-stated By-Laws as of
February 19, 1998.
Exhibit 10 Copy of material contracts to which the Company
is a party filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1997, and
incorporated herein by reference.
(b) The Company did not file any reports on Form 8-K during
the three months ended April 30, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
_____ SANDERSON FARMS, INC. _______
(Registrant)
Date: May 21, 1998 By: /s/D. Michael Cockrell
D. Michael Cockrell
Treasurer and Chief
Financial Officer
Date: May 21, 1998 By: /s/James a. Grimes
James A. Grimes
Secretary and Principal
Accounting Officer
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EXHIBIT 15a
INDEPENDENT AUDITORS' REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION
Shareholders and
Board of Directors
Sanderson Farms, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Sanderson Farms, Inc. and subsidiaries as of April 30, 1998, and the related
condensed consolidated statements of income (loss) for the three-month and six-
month periods ended April 30, 1998 and 1997, and the condensed consolidated
statements of cash flows for the six-month periods ended April 30, 1998 and
1997. These financial statements are the responsibility of the Company's
management. We conducted our reviews in accordance with standards established by
the American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion. Based on our reviews, we are not aware of any material modifications
that should be made to the accompanying condensed consolidated financial
statements referred to above for them to be in conformity with generally
accepted accounting principles. We have previously audited, in accordance with
generally accepted auditing standards, the consolidated balance sheet of
Sanderson Farms, Inc. and subsidiaries as of October 31, 1997, and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended (not presented herein) and in our report dated December 12,
1997, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of October 31, 1997, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
/s/Ernst & Young LLP
Jackson, Mississippi
May 19, 1998
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EXHIBIT 15b
Shareholders and Board of Directors
Sanderson Farms, Inc.
We are aware of the incorporation by reference in Post-Effective Amendment No.
1 to the Registration Statement (Form S-8-No. 33-67474) of Sanderson Farms, Inc.
for the registration of 750,000 shares of its common stock of our report dated
May 19, 1998 relating to the unaudited condensed consolidated interim financial
statements of Sanderson Farms, Inc. that are included in its Form 10-Q for the
quarter ended April 30, 1998.
/s/Ernst & Young LLP
Jackson, Mississippi
May 19, 1998
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Oct-31-1998
<PERIOD-END> APR-30-1998
<CASH> 1,962
<SECURITIES> 0
<RECEIVABLES> 31,477
<ALLOWANCES> 249
<INVENTORY> 43,570
<CURRENT-ASSETS> 84,206
<PP&E> 319,703
<DEPRECIATION> 143,092
<TOTAL-ASSETS> 262,725
<CURRENT-LIABILITIES> 24,949
<BONDS> 112,880
0
0
<COMMON> 14,370
<OTHER-SE> 99,457
<TOTAL-LIABILITY-AND-EQUITY> 262,725
<SALES> 128,582
<TOTAL-REVENUES> 128,582
<CGS> 118,463
<TOTAL-COSTS> 118,463
<OTHER-EXPENSES> 4,530
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,953
<INCOME-PRETAX> 3,636
<INCOME-TAX> 1,344
<INCOME-CONTINUING> 2,292
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,292
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
BY-LAWS OF
SANDERSON FARMS, INC.
(As restated on February 19, 1998)
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 twelve (12) 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.
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.
