January 25, 1999
Dear Stockholder:
The 1999 Annual Meeting of Stockholders of the Company will be held in
the Petroleum Room of the Ramada Inn in Laurel, Mississippi, at 10:00 A.M. on
Thursday, February 25, 1999. The purposes of the Annual Meeting are set forth in
the accompanying Notice and Proxy Statement.
The 1998 Annual Report, which is enclosed, contains financial and other
information concerning the Company and its business for the fiscal year ended
October 31, 1998. The Annual Report is not to be considered part of the proxy
solicitation materials.
We cordially invite you to attend the Annual Meeting. If you cannot
attend, please complete and return the enclosed Proxy so that your vote can be
recorded.
Cordially,
/s/Joe F. Sanderson, Jr.
Joe F. Sanderson, Jr.
Chairman of the Board
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held February 25, 1999
To the Stockholders:
The Annual Meeting of Stockholders of Sanderson Farms, Inc. (the "Company")
will be held in the Petroleum Room of the Ramada Inn in Laurel, Mississippi at
10:00 A.M. (local time) on Thursday, February 25, 1999, for the following
purposes:
(1) To elect four Class A Directors to serve until the 2002 annual
meeting;
(2) To consider and act upon a proposal to ratify and approve the
selection of Ernst & Young LLP as the Company's independent auditors for the
fiscal year ending October 31, 1999; and
(3) To transact such other business as may properly come before the
meeting or any adjournments thereof.
The business to be transacted at the Annual Meeting is more fully
described in the accompanying Proxy Statement, to which reference is hereby
made.
The Board of Directors has fixed the close of business on January 11,
1999 as the record date for determining stockholders entitled to notice of and
to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS:
/s/James A. Grimes, Secretary
Dated: January 25, 1999
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PROXY STATEMENT
General
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of Sanderson Farms, Inc. (the "Company"), P.O. Box 988, Laurel,
Mississippi 39441, in connection with the 1999 Annual Meeting of Stockholders to
be held February 25, 1999, and any adjournments of that meeting. Execution of
the Proxy will not in any way affect a stockholder's right to attend the meeting
and, upon revocation of the Proxy, to vote in person. Proxies may be revoked at
any time before they are voted by filing with the Secretary a written notice of
revocation or a duly executed Proxy bearing a later date. Unless they are
revoked, Proxies in the form enclosed, properly executed and received by the
Secretary of the Company prior to the Annual Meeting, will be voted at the
meeting as specified by the stockholder in the Proxy or, except with respect to
broker non-votes, if no specification is made in the Proxy, then FOR each of the
proposals set forth in the accompanying Notice of Annual Meeting of
Stockholders, and according to their discretion upon all other matters which may
properly come before the meeting. Broker non-votes will be treated as not
present for purposes of calculating the vote on a matter for which no
specification is made in the proxy, and will not be counted either as a vote FOR
or AGAINST a proposal or as an ABSTENTION with respect thereto. Abstentions will
not be counted either as a vote FOR or as a vote AGAINST a proposal. The cost of
soliciting Proxies is being paid by the Company.
The Company's 1998 Annual Report accompanies this Proxy Statement, but
is not to be considered a part of the proxy solicitation materials. The record
date for the Annual Meeting is January 11, 1999. These materials are being
mailed to stockholders on or about January 25, 1999.
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Capital Stock
The authorized capital stock of the Company consists of 5,000,000
shares of non-voting preferred stock, of which 500,000 shares have been
designated Series A Junior Participating Preferred Stock, par value $100.00 per
share, none of which shares have been issued, and 100,000,000 shares of voting
Common Stock, par value $1.00 per share, of which 14,387,830 shares had been
issued and were outstanding as of January 11, 1999, the record date for the
Annual Meeting. Only stockholders of record at the close of business on such
date are entitled to notice of and to vote at the Annual Meeting. Each such
stockholder is entitled to one vote for each share of common stock held at that
date.
Beneficial Ownership
The following table sets forth information, as of January 11, 1999,
concerning (a) the only stockholders known by the Company to own beneficially
more than 5% of the common stock of the Company, which is the only class of
voting securities outstanding, (b) the beneficial ownership of common stock of
the executive officers named in the "Summary Compensation Table" below, and (c)
the beneficial ownership of common stock by all directors and executive officers
of the Company as a group.
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Amount
Beneficial Owner(s) Beneficially Percent
and Address Owned(1)(2) of Class
Estate of Joe Frank Sanderson (3) 3,269,672 shares 22.73%
Dewey R. Sanderson, Jr. (4) 3,268,482 shares 22.72%
Joe F. Sanderson, Jr. (5) 3,452,821 shares 24.00%
William R. Sanderson (6) 3,468,599 shares 21.11%
D. Michael Cockrell (7) 21,389 shares (12)
Trustmark National Bank (8) 1,217,497 shares 8.46%
Lampkin Butts (2) (9) 1,249,445 shares 8.68%
Robin Robinson (2) (10) 1,217,497 shares 8.46%
All Directors and executive
officers as a
group (12 persons) (11) 8,504,557 shares 59.11%
(1) The shares are owned of record by the beneficial owners shown with
sole voting and investment power, except as set forth in the following notes.
(2) Lampkin Butts, Robin Robinson and Trustmark National Bank are the
trustees of the Employee Stock Ownership Plan and Trust of Sanderson Farms, Inc.
and Affiliates (the "ESOP"), which is the record owner of 1,217,497 shares of
common stock of the Company. Trustmark National Bank and Mr. Butts and Ms.
Robinson, in their respective capacities as trustees of the ESOP, share with
each other investment power with respect to those shares of common stock and
therefore are each deemed to beneficially own, under applicable regulations of
the Securities and Exchange Commission, the 1,217,497 shares of common stock
owned of record by the ESOP. With respect to the voting power of the 1,217,497
shares of common stock, the members of the Administrative Committee of the ESOP
share with each other voting power as to 58,397 shares, which are the shares of
common stock not allocated to participant accounts under the ESOP, and the
participants in the ESOP exercise sole voting power as to the 1,159,100 shares
allocated to their respective accounts under the ESOP.
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(3) On January 4, 1998, Joe Frank Sanderson died. The 3,269,672 shares
that Joe Frank Sanderson beneficially owned are now beneficially owned by the
Estate of Joe Frank Sanderson (the "Estate"). The co-executors of the Estate are
Joe Frank Sanderson's sons, Joe F. Sanderson, Jr. and William R. Sanderson. The
amount in the table includes 3,269,672 shares owned of record by the Estate.
(4) Address: P. O. Box 988, Laurel, Mississippi 39441. Includes 223,257
shares owned of record by Dewey R. Sanderson, Jr.'s wife, as to which she
exercises sole voting and investment power, and as to which Dewey R. Sanderson,
Jr., pursuant to Rule 13d-4, disclaims beneficial ownership.
(5) Address: P. O. Box 988, Laurel, Mississippi 39441. The amount shown
in the table includes 59,882 shares owned of record by Joe F. Sanderson, Jr.,
over which he exercises sole voting and investment power, and 43,335 shares
allocated to Joe F. Sanderson, Jr.'s account in the Company's ESOP, with respect
to which he has sole voting power. The trustees of the ESOP share investment
power over the 43,335 shares allocated to Joe F. Sanderson, Jr.'s account under
the ESOP. The amount in the table includes the 3,269,672 shares beneficially
owned by Joe F. Sanderson, Jr. as co-executor of the Estate. The co-executors
share voting and investment power with respect to these shares. The amount shown
in the table also includes 6,539 shares owned of record by Joe F. Sanderson,
Jr.'s wife, over which she exercises sole voting and investment power. The
amount in the table also includes 58,393 shares owned of record by a charitable
private foundation established by Joe Frank Sanderson, for which Joe F.
Sanderson, Jr. serves as a director and as such, shares voting and investment
power with the other directors of the foundation with respect to such shares.
Pursuant to Rule 13d-4, Joe F. Sanderson, Jr. disclaims beneficial ownership of
the 6,539 shares owned of record by his wife, the 3,269,672 shares owned of
record by the Estate, and the 58,393 shares owned of record by the foundation.
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The amount in the table also includes 15,000 options to purchase shares owned by
Mr. Sanderson under the Company's Stock Option Plan, which options to purchase
such shares were exercisable on the date of the Proxy, and the exercise price of
which options was lower than the market price on that date.
(6) Address: P. O. Box 988, Laurel, Mississippi 39441. The amount in
the table includes 135,350 shares owned of record by William R. Sanderson, of
which he exercises sole voting and investment power, 8,211 shares allocated to
his account under the ESOP, 8,460 shares owned of record by William R.
Sanderson's wife, of which she exercises sole voting and investment power, and
20,656 owned by Mr. Sanderson as custodian for his minor children, of which he
exercises sole voting and investment power. The amount in the table includes
3,269,672 shares beneficially owned by William R. Sanderson as co-executor of
the Estate. The co-executors share voting and investment power with respect to
3,269,672 shares owned of record by the Estate. Pursuant to Rule 13d-4, William
R. Sanderson disclaims the beneficial ownership of the 8,460 shares owned of
record by his wife and the 3,269,672 shares owned of record by the Estate. The
amount in the table also includes 26,250 options to purchase shares owned by Mr.
Sanderson under the Company's Stock Option Plan, which options to purchase such
shares were exercisable on the date of the Proxy, and the exercise price of
which options was lower than the market on that date.
(7) Address: P. O. Box 988, Laurel, Mississippi 39441. The amount shown
in the table includes 450 shares owned of record by Mr. Cockrell over which he
exercises sole voting and investment power, and 314 shares allocated to Mr.
Cockrell's account in the Company's ESOP, with respect to which Mr. Cockrell has
sole voting power. The trustees of the ESOP share investment power over the 314
shares allocated to Mr. Cockrell's account under the ESOP. The amount in the
table also includes 20,625 options to purchase shares owned by Mr. Cockrell
under
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<PAGE>
the Company's Stock Option Plan, which options to purchase such shares were
exercisable on the date of this Proxy, and the exercise price of which options
was lower than the market price on that date.
(8) Address: 415 North Magnolia, Laurel, Mississippi 39940. See note
(2) above for a description of the nature of Trustmark National Bank's
beneficial ownership of the 1,217,497 shares of common stock owned of record by
the ESOP. Trustmark National Bank, pursuant to Rule 13d-4, disclaims beneficial
ownership of all shares of common stock owned of record by the ESOP, which
constitute all shares reported as being beneficially owned by it.
(9) Address: P. O. Box 988, Laurel, Mississippi 39441. See note (2) for
a description of the nature of Mr. Butts' beneficial ownership of the 1,217,497
shares of common stock owned of record by the ESOP. The amount in the table also
includes 3,773 shares owned of record by Mr. Butts, and 50 shares held as
custodian for a minor child, over which he exercises sole voting and investment
power. With respect to the 22,102 shares allocated to his account under the
Company's ESOP, Mr. Butts has sole voting power, but shares investment power
with the other trustees of the ESOP. The amount in the table also includes
28,125 options to purchase shares owned by Mr. Butts under the Company's Stock
Option Plan, which options to purchase such shares were exercisable on the date
of this Proxy, and the exercise price of which options were lower than the
market price of that date. Mr. Butts, pursuant to Rule 13d-4, disclaims
beneficial ownership of all shares of common stock owned of record by the ESOP,
except the 22,102 shares allocated to his individual account, and the 50 shares
held as custodian.
(10) Address: P. O. Box 988, Laurel, Mississippi 39441. See note (2)
above for a description of the nature of Ms. Robinson's beneficial ownership of
the 1,217,497 shares of common stock owned of record by the ESOP. Ms. Robinson,
8
<PAGE>
pursuant to Rule 13d-4, disclaims beneficial ownership of all shares of common
stock owned of record by the ESOP, except the 6,198 shares allocated to her
individual account. There are 6,198 shares allocated to Ms. Robinson's account
in the Company's ESOP, with respect to which Ms. Robinson has sole voting power,
but over which she shares investment power with the other trustees of the ESOP.
(11) Includes an aggregate of 73,962 shares allocated to the accounts
of all Directors and executive officers, as a group (13 persons, 5
participating) under the ESOP. See note (2) above.
(12) Less than 1%
ELECTION OF DIRECTORS
The amended Articles of Incorporation of the Company provide that the
Board of Directors shall be divided into three classes (Class A, Class B and
Class C), with each class containing one-third, or as close to one-third as
possible, of the total number of directors, and that the total number of
directors shall be fixed by the Board of Directors in the By-laws. At the
current time, the Board of Directors has fixed the number of directors at
twelve, resulting in there being four directors in each class. At each annual
meeting of stockholders, directors constituting one class are elected for a
three-year term. At the 1999 Annual Meeting, stockholders will elect four Class
A directors, whose terms will expire at the 2002 annual meeting. One Class C
director position is currently vacant.
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<PAGE>
Nominees for Class A Directors
The Board of Directors proposes for election as Class A Directors the
four nominees listed below, each to serve as a Class A Director until the 2002
annual meeting or until his successor is elected and has qualified. Any vacancy
on the Board of Directors may be filled either by the Board of Directors or by
the stockholders, and any person elected to fill a vacancy will serve the
remainder of the term of the director whose position has become vacant.
Proxies in the enclosed form may also be voted for the election as
Class A Directors of substitute nominees who may be named by the Board of
Directors to replace any of the three nominees who become unavailable to serve
for any reason. (No such unavailability is presently known to the Board of
Directors.) In no event, however, will the Proxies be voted for more than four
persons. There are no arrangements or understandings relating to any person's
service or prospective service as a Class A Director of the Company. No nominee
listed below will be elected as a Class A Director unless such nominee receives
the affirmative vote of the holders of a majority of the shares entitled to vote
and represented (whether in person or by proxy) at the Annual Meeting at which a
quorum is present. If more nominees than the number of Directors to be elected
receive a majority vote, then those nominees, up to four persons, receiving the
highest number of votes will be elected. Abstentions will not be counted either
as a vote FOR or as a vote AGAINST the nominees for Class A Directors. Broker
non-votes will be treated as not present for purposes of calculating the vote
with respect to the election of the Class A Directors, and will not be counted
either as a vote FOR or AGAINST or as an ABSTENTION with respect thereto.
The following table lists the nominees for Class A Director and shows,
as of January 11, 1999, their respective beneficial ownership of common stock of
the
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Company. Joe F. Sanderson, Jr. is the nephew of Dewey R. Sanderson (Class B
Director), and the cousin of Robert Buck Sanderson (Class C Director) and the
brother of William R. Sanderson (Class C Director).
Shares
Nominees for Director Beneficially Percent
Class A Director Age Since Owned (1) of Class
- ---------------- --- ----- ---------- --------
Class A (Term expiring in 2002)
Joe F. Sanderson, Jr.(2) 51 1984 3,452,821 24.00%
Charles W. Ritter 65 1988 12,000 (5)
Phil K. Livingston 55 1989 10,000 (5)
Lampkin Butts (4) 47 1998 1,249,445 8.68%
(1) The shares are owned of record by the beneficial owners shown with
sole voting and investment power, except as set forth in the notes below.
(2) See note (5) to the table under the caption "Proxy Statement,
Beneficial Ownership" for a description of the nature of Mr. Sanderson's
beneficial ownership.
(3) Mr. Livingston owns 8,755 shares of common stock of the company
through an IRA, over which he exercises sole voting and investment power. A
retirement account belonging to Mr. Livingston's wife is the owner of record of
1,245 shares, over which she exercises sole voting and investment power, as to
which Mr. Livingston, pursuant to Rule 13d-4, disclaims beneficial ownership.
(4) See note (9) to the table under the caption "Proxy Statement,
Beneficial Ownership" for a description of the nature of Mr. Butts' beneficial
ownership.
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(5) Less than 1%.
Directors Continuing in Office
The following table lists the Class B and Class C Directors of the Company,
whose terms expire at the 2000 and 2001 annual meetings, respectively, and
shows, as of January 11, 1999, the beneficial ownership of common stock by each
of them. Robert Buck Sanderson (Class C Director), is the cousin of Joe F.
Sanderson, Jr. (Class A Director) and William R. Sanderson (Class C Director),
and the son of Dewey R. Sanderson, Jr. (Class B Director). Dewey R. Sanderson,
Jr. (Class B Director) is the father of Robert Buck Sanderson (Class C
Director), and the uncle of Joe F. Sanderson, Jr. (Class A Director) and William
R. Sanderson (Class C Director). William R. Sanderson (Class C Director) is the
brother of Joe F. Sanderson, Jr. (Class A Director), the cousin of Robert Buck
Sanderson (Class C Director), and the nephew of Dewey R. Sanderson, Jr. (Class B
Director).
Shares
Name of Director Beneficially Percent
Continuing Director Age Since Owned (1) of Class
- ------------------ ---- ----- --------- --------
Class B (Term expiring in 2000)
Dewey R. Sanderson, Jr. (2) 75 1955 3,268,482 22.72%
Rowan H. Taylor 72 1989 5,500 (6)
John H. Baker, III (3) 56 1994 60,000 (6)
David M. Cockrell (4) 41 1998 21,389 (6)
Class C (Term expiring in 2001)
William R. Sanderson (5) 42 1998 3,468,599 24.11%
Robert Buck Sanderson 45 1992 254,241 1.77%
Donald W. Zacharias 63 1988 1,500 (6)
- --------------------------
(1) The shares are owned of record by the beneficial owners shown with
sole voting and investment power, except as set forth in the following notes.
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(2) See note (4) to the table under the caption "Proxy Statement,
Beneficial Ownership" for a description of the nature of Mr. Sanderson's
beneficial ownership.
(3) The amount in the table includes 30,000 shares owned of record by
Mr. Baker's wife, as to which she exercises sole voting and investment power,
and 30,000 shares owned of record by a trust for the benefit of Mr. Baker's
daughter, as to which an institutional trustee exercises sole voting and
investment power, and as to all of which Mr. Baker, pursuant to Rule 13d-14,
disclaims beneficial ownership.
(4) See note (7) to the table under the caption "Proxy Statement,
Beneficial Ownership" for a description of Mr. Cockrell's beneficial ownership.
(5) See note (6) to the table under the caption "Proxy Statement,
Beneficial Ownership" for a description of the nature of Mr. Sanderson's
beneficial ownership.
(6) Less than 1%.
Principal Occupations and Certain Directorships
The following paragraphs identify the principal occupations of all
Directors of the Company and directorships they hold in other companies with
securities registered with the Securities and Exchange Commission. Except as
otherwise indicated, each Director has served for at least five years in the
position shown.
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Joe F. Sanderson, Jr. has served as President and Chief Executive Officer
of the Company since November 1, 1989, and as Chairman of the Board since
January 8, 1998. Mr. Sanderson is a member of the Executive Committee of the
Company. Charles W. Ritter, Jr. has served, since 1967, as President and a
Director of the Attala Company, which is principally engaged in the business of
milling and selling feed and corn meal. He has also served as President of JRS,
Inc., a family owned real estate investment firm, since 1973. Mr. Ritter is a
director of First M & F Corp. and Merchants & Farmers Bank, Kosciusko,
Mississippi.
Phil K. Livingston served as President and Chief Executive Officer of
Citizens National Bancshares, Inc. in Hammond, Louisiana, from its organization
in 1983, until its merger into Deposit Guaranty Corporation on May 19, 1995.
Citizens National Bancshares, Inc., which was dissolved with the merger, was the
parent company of Citizens National Bank, which is now a wholly owned subsidiary
of Deposit Guaranty Corporation as a result of such merger. In July 1996, the
Citizens National Bank's charter was amended to change its name to Deposit
Guaranty National Bank of Louisiana. Mr. Livingston retired in 1998 as Chief
Executive Officer but continues to serve as Chairman of the Deposit Guaranty
National Bank of Louisiana.
Dewey R. Sanderson, Jr., a founder of the Company, has been retired for
more than the past five years.
Rowan H. Taylor served as President of Mississippi Valley Title Insurance
Company from 1975 until 1989, and as Chairman of the Board and Chief Executive
Officer of that company from 1989 until 1992. Mr. Taylor currently serves as
counsel for First American Title Insurance Company of Santa Anna, California,
and as counsel to the Jackson, Mississippi law firm of Alston & Jones. Mr.
Taylor
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served as an advisory director of Trustmark Corporation and Trustmark National
Bank located in Jackson, Mississippi until his retirement from such position in
1995.
John H. Baker, III has been the sole proprietor of John H. Baker Interests,
a real estate and development company in Houston, Texas since 1968.
Donald W. Zacharias served as President of Mississippi State University
from 1985 until his retirement in December 1997.
Robert Buck Sanderson has been employed by the Company since January 1,
1993. From 1978 through 1992, Mr. Sanderson served as President of Pioneer
Hardware & Supply Co., Inc. in Laurel, Mississippi.
William R. Sanderson has served, since 1996, as Director of Marketing for
the Company. Prior to 1996, Mr. Sanderson served as Director of Prepared Foods
for the Company. Mr. Sanderson is a member of the Executive Committee of the
Company.
Lampkin Butts has served, since 1996, as Vice President-Sales, for the
Company. Prior to 1996, Mr. Butts served as Director as Processing and Sales for
the Company. Mr. Butts is a member of the Executive Committee of the Company.
Mike Cockrell has served, since 1993, as Treasurer and Chief Financial
Officer for the Company. Prior to 1993, Mr. Cockrell was a shareholder and
member of the law firm Wise Carter Child & Caraway of Jackson, Mississippi. Mr.
Cockrell is a member of the Executive Committee of the Company.
15
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Committees of the Board of Directors; Attendance at Meetings
The Company's Board of Directors has not appointed any standing
committees as of the date of this proxy statement, except an Audit Committee.
The members of the Audit Committee are Messrs. Ritter, Livingston and Zacharias.
The function of the Audit Committee is, among other things, to recommend the
independent auditors to the Board of Directors, to review the scope of the
independent auditors' audit, to review the Company's major accounting and
financial reporting policies and practices and systems for compliance with
applicable statutes and regulations, and to review the Company's internal
auditing functions. During the fiscal year ended October 31, 1998, the Board of
Directors met 6 times and the Audit Committee met 4 times. Each incumbent
Director attended at least 75% of the aggregate of (i) the total number of Board
of Directors meetings held during the period for which he was a director and
(ii) the total number of meetings held by the Audit Committee, as applicable.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, officers and persons who own more than 10% of the
outstanding common stock of the Company, to file with the Securities and
Exchange Commission reports of changes in ownership of the common stock of the
Company held by such persons. Officers, directors and greater than 10%
stockholders are also required to furnish the Company with copies of all forms
they file under this regulation. Based solely on a review of the copies of the
reports furnished to the Company, the officers and directors of the Company are
in full compliance with all Section 16(a) filing requirements.
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Executive Compensation
The following table sets forth the cash compensation paid or to be paid
by the Company, as well as certain other compensation paid or accrued, during
the fiscal years indicated, to the named executive officers.
Summary Compensation Table
Annual Compensation
(a) (b) (c) (d) (e) (g)
Securities
Name and All Other Underlying
Principal Position Year Salary Bonus Compensation Options/SARs
($) ($)(1) ($)(3) (#)
Joe F. Sanderson, Jr 1998 419,520 -0- 35,107 60,000
Chief Executive Officer 1997 361,934 -0- 32,597 60,000
and President 1996 383,260 -0- (3) -0-
D. Michael Cockrell (2) 1998 195,467 -0- 2,425 15,000
Treasurer and 1997 151,430 -0- 320 15,000
Chief Financial Officer 1996 144,116 -0- (3) 7,500
Lampkin Butts (2) 1998 171,765 -0- 520 15,000
Vice President - Sales 1997 154,264 -0- 450 15,000
1996 149,695 -0- (3) 7,500
(1) The amounts in this column represent the bonuses paid to the named
individuals pursuant to the Company's Bonus Award Program, which covers all
salaried employees of the Company.
(2) Mr. Butts became an executive officer of the Company effective
November 1, 1996. Mr. Cockrell became an executive officer of the Company during
fiscal 1994.
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<PAGE>
(3) The amounts in this column represent the value of the contribution
made by the Company to the accounts of the named individuals under the Company's
Employee Stock Ownership Plan, and includes travel costs and amounts reimbursed
for estimated income tax liability related thereto. Although all employees of
the Company, including executive officers, participate in the Company's ESOP,
the Company made no contribution to the ESOP in 1996 or 1997, and contributed
$1.1 million in fiscal 1998. As of the date of this Proxy Statement, no amounts
have been allocated to the accounts of the named individuals under the ESOP with
respect to the fiscal year ended October 31,1998. The ESOP covers all employees
of the Company.
Stock Options Granted During Fiscal 1998 to the Named Executives
The following table shows all individual grants of stock options to the
named executives during the 1998 fiscal year.
<TABLE>
Potential Realizable Value
Number of % of Total at Assumed Annual
Securities Options Rates of Stock
Underlying Granted to Appreciation for
Name and Options Employees in Exercise Expiration Option Term (2)
Principal Position Granted(1) Fiscal Year Price Date 5% 10%
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Joe F. Sanderson, Jr
President and Chief
Executive Officer 60,000 30.92% $13.00 4/23/08 $490,800 $1,243,200
D. Michael Cockrell
Treasurer and Chief
Financial Officer 15,000 7.73% $13.00 4/23/08 $122,700 $ 310,800
Lampkin Butts
Vice President - Sales 15,000 7.73% $13.00 4/23/08 $122,700 $ 310,800
</TABLE>
(1) These shares represent options with respect to the Company's common stock.
The options are exercisable for a ten (10) year period beginning as of April 23,
1998. Vesting begins at 25% on April 23, 1999, the end of the first year, and
continues at 25% per year over the next 3 years until fully vested. The exercise
price of $13.00 represents the fair market value of the common stock as of the
date the options were granted. Options that have not been exercised on April 23,
2008 will expire. Unvested options are forfeited upon termination of employment
18
<PAGE>
or the appointment or transfer of the optionee to a position within the Company
that does not qualify for participation in the Company's Stock Option Plan.
These options do not qualify as "incentive stock options" under the Internal
Revenue Code.
2) Potential realizable values are based on the assumption that the common stock
price appreciates at annual rates shown compounded annually from the date of
grant until the end of the ten (10) year option term and are not intended to
forecast appreciation in stock price. The common stock price at the end of the
ten (10) year term based on a 5% annual appreciation would be $21.18 and on a
10% annual appreciation would be $33.72.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table sets forth the value at December 31, 1998 of
unexercised options for each of the named executive officers.
Options at Value of Unexercised
Fiscal Year-End In-the-Money Options
(#) at December 31, 1998(4)
------------------- ----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Joe F. Sanderson, Jr.(1) 15,000 105,000 $ 5,625 $159,375
D. Michael Cockrell(2) 20,625 31,875 $ 74,297 $ 64,453
Lampkin Butts(3) 28,125 31,875 $109,547 $ 64,453
(1) Mr. Sanderson's options consist of the following:
- 60,000 shares granted on July 24, 1997 at $15.00 per share,
expiring July 23, 2007, of which 15,000 are exercisable.
- 60,000 shares granted on April 23, 1998, at $13.00 per share,
expiring April 23, 2008, of which none are exercisable.
(2) Mr. Cockrell's options consist of the following:
- 7,500 shares granted on April 29, 1994, at $11.00 per share,
expiring April 29, 2000, of which 7,500 are exercisable.
- 7,500 shares granted on April 27, 1995, at $11.25 per share,
expiring April 27, 2001, of which 5,625 are exercisable.
- 7,500 shares granted on July 25, 1996, at $10.87 per share,
expiring July 25, 2002, of which 3,750 are exercisable.
- 15,000 shares granted on July 24, 1997, at $15.00 per share,
expiring July 24, 2007, of which 3,750 are exercisable.
- 15,000 shares granted on April 23,1998, at $13.00 per share,
expiring April 23, 2008, of which none are exercisable.
(3) Mr. Butts' options consist of the following:
- 7,500 shares granted on July 12, 1993, at $10.67 per share,
expiring July 12, 1999, of which 7,500 are exercisable.
- 7,500 shares granted on April 29, 1994, at $11.00 per share,
expiring April 29, 2000, of which 7,500 are exercisable.
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- 7,500 shares granted on April 27, 1995, at $11.25 per share,
expiring April 27, 2001, of which 5,625 are exercisable.
- 7,500 shares granted on July 25, 1996, at $10.87 per share,
expiring July 25, 2002, of which 3,750 are exercisable.
- 15,000 shares granted on July 24, 1997, at $15.00 per share,
expiring July 24, 2007, of which 3,750 are exercisable.
- 15,000 shares granted on April 23,1998, at $13.00 per share,
expiring April 23, 2008, of which none are exercisable.
(4) Amounts represent the excess of the market value over the exercise
price as of December 31, 1998.
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Director's Fees
During fiscal 1998, Directors who were not also officers or employees
of the Company received a fee of $2,000 per meeting attended plus an annual
stipend of $10,000.
Board Report on Executive Compensation
The Company did not have a standing Compensation Committee for fiscal
year ended 1998 and therefore the Board of Directors prepared the following
Report.
Generally, executive officer compensation is not directly related to
factors such as profitability, sales growth, return on equity or market share,
except to the extent that such factors impact the Company's overall ability to
satisfy its compensation obligations to all employees.
Annual compensation for the President, Chief Executive Officer and
Chairman of the Board ("CEO"), is determined by the full Board of Directors of
the Company. For fiscal 1998, a special Compensation Committee of the Company's
Board of Directors made recommendations to the full Board relating to stock
option awards to executive officers and other key personnel pursuant to the
Company's Stock Option Plan. The annual compensation for the Treasurer and Chief
Financial Officer ("CFO") and the Vice President-Sales ("VP-Sales") is
determined by the President. The components of the annual compensation paid to
the CEO, CFO and VP-Sales are as follows: (i) base salary; (ii) a bonus
calculated pursuant to the provisions of the Company's Bonus Award Program;
(iii) stock option awards made
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under the Company's Stock Option Plan; and (iv) allocation of contributions made
by the Company to the respective accounts of the CEO, CFO and VP-Sales under the
ESOP.
Base salaries for executive officers of the Company are originally
fixed using a comparison of similarly situated officers of other poultry
companies. Also taken into account are benefits, years of service,
responsibilities, Company growth, future plans and the Company's current ability
to pay. Periodic increases in base salary are based on evaluations of past and
current performance and current market conditions. In addition, in accordance
with the Company's Wage and Salary Administration manual in effect since 1979,
the base salary of each salaried employee of the Company, including the
executive officers, is increased on January 1 of each year to reflect cost of
living increases, provided that the Company is in a financial position to make
an increase. In January 1998, the base salary of all salaried employees of the
Company, including the executive officers, was increased by 1.5%. The cost of
living increase for 1999, which took effect January 1, 1999, was 1%.
The CEO, CFO and VP are participants in the Company's Bonus Award
Program, which covers all salaried employees of the Company. The amounts payable
to all salaried employees, including the executive officers, are based on the
Company's financial performance and its operating performance relative to other
companies in the industry. The bonus for the CEO, CFO and VP-Sales is calculated
by multiplying such person's average monthly salary by 12 and multiplying that
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product by a percentage ranging from 25% to 100% for the CEO, and from 17.5% to
70% for the CFO and VP-Sales, depending on the performance of the Company. No
bonuses were paid for fiscal 1995, 1996, or 1997, and no bonuses have been or
will be paid for fiscal 1998.
In addition, all executive officers participate in the Company's
Employee Stock Ownership Plan which covers all employees of the Company.
Allocations to the executive officers under this plan are made on the same basis
as allocations to all other participants. No contribution was made by the
Company to the ESOP during fiscal 1997 or 1996. At its meeting held October 22,
1998, the Board of Directors authorized a contribution to the ESOP in the amount
of $1.1 million, which contribution was made by the Company during fiscal 1998.
However, as of the date of this proxy, such contribution had not yet been
allocated to of the participants.
Joe F. Sanderson, Jr Donald W. Zacharias
William R. Sanderson Rowan H. Taylor
Dewey R. Sanderson, Jr John H. Baker, III
Phil K. Livingston Mike Cockrell
Robert Buck Sanderson Lampkin Butts
Charles W. Ritter, Jr
23
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Performance Graph
The following graph presents a comparison of the five year cumulative total
stockholder return1 among the Company, the NASDAQ Composite Index, and new and
old group of peer companies. Companies in the old peer group were as follows:
Cagles, Inc., Golden Poultry Co., Pilgrim's Pride, Inc., WLR Foods, Inc. and
Hudson Foods, Inc. The new peer group consists of the following companies:
Cagles, Inc., Pilgrim's Pride, Inc., WLR Foods, Inc. and Tyson Foods, Inc. (the
"Peer Group Index"). Golden Poultry Company was acquired by Gold Kist on
September 5, 1997, a non-publicly traded company. Hudson Foods, Inc. was
acquired by Tyson Foods, Inc. on January 9, 1998. Accordingly, Golden Poultry
and Hudson's returns on investment only include stock price data through their
last day of active trading. The Company selected the Peer Group Index because
the return reflected in the Peer Group Index presents stockholders with a
comparison of total stockholder return with companies of similar size, product
and market capitalization.
YEARS2
1993 1994 1995 1996 1997 1998
Sanderson Farms, Inc. 100 130 108 137 136 158
NASDAQ Composite Index 100 101 135 160 210 236
New Peer Group 100 108 105 124 125 162
Old Peer Group 100 133 108 105 129 197
INDEPENDENT AUDITORS
Ernst & Young LLP, Independent Auditors, Jackson, Mississippi, were
the independent auditors for the Company during the fiscal year ended October
31, 1998. A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting. The representative will have the opportunity to make a statement
at the meeting if he desires to do so, and will be available to respond to any
appropriate questions.
The Board of Directors of the Company has selected the firm of Ernst &
Young LLP as the Company's independent auditors for the fiscal year ending
October 31, 1999. Stockholder approval and ratification of this selection is not
required by law or by the By-Laws of the Company. Nevertheless, the Board has
chosen to submit it to the stockholders for their approval and ratification. Of
the shares represented and entitled to vote at the Annual Meeting (whether in
person or by proxy), more votes must be cast in favor of than votes cast against
the proposal to ratify and approve the selection of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending October 31, 1999, in
order for this proposal to be adopted. The Proxyholders named in the
accompanying proxy card will vote FOR the foregoing proposal unless otherwise
directed therein. Abstentions will not be counted either as a vote FOR or as a
vote AGAINST the proposal to ratify and approve the selection of Ernst & Young
LLP as the Company's independent auditors for the fiscal year ending October 31,
1999. Broker non-votes will be treated as not present for purposes of
calculating the vote with respect to the foregoing proposal, and will not be
counted either as a vote FOR or AGAINST or as an ABSTENTION with respect
thereto. If more votes are cast AGAINST this
- --------
1 Assumes $100 invested on November 1, 1994 total return assumes
reinvestment of dividends.
2 Fiscal year ends October 31.
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proposal than FOR, the Board of Directors will take such decision into
consideration in selecting independent auditors for the Company.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows
of no matters likely to be brought before the Annual Meeting other than those
set forth in the Notice of the Meeting. If other matters properly come before
the Meeting, each Proxy will be voted in accordance with the discretion of the
Proxyholders named therein.
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STOCKHOLDER PROPOSALS
Procedure
The Company's By-laws provide that stockholders may nominate
individuals for election as directors from the floor at any annual or special
meeting of stockholders called for the election of directors only if timely
written notice of such nomination has been given to the Secretary of the
Company. To be timely, such notice must be received at the principal office of
the Company no 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 the Bylaws. The By-laws specify what such a notice of such
nomination must include. In addition, the By-laws set forth the procedure that
must be followed by stockholders to properly bring a matter before a
stockholders' meeting. If a stockholder wishes to bring a matter before the
meeting that has not been specified in the notice of the meeting, the
stockholder must deliver written notice of said stockholder's intent to bring
the matter before the meeting of stockholders so that the notice is received by
the Secretary of the Company no later than the close of business on the 15th day
following the date on which notice of the day of the meeting is given or made to
stockholders in accordance with the By-laws. The By-laws also specify what such
a notice must include.
2000 Annual Meeting
A stockholder who intends to present a proposal, which relates to a
proper subject for stockholder action, at the 2000 Annual Meeting of
Stockholders and who wishes such proposal to be considered for inclusion in the
Company's proxy materials for such meeting must cause such proposal to be
received, in proper
26
<PAGE>
form, at the Company's principal executive offices no later than September 24,
1999. Any such proposals, as well as any questions relating thereto, should be
directed to the Company to the attention of its President.
METHODS AND COST OF SOLICITING PROXIES
The Proxy card enclosed with this Proxy Statement is solicited by and
on behalf of the Board of Directors of the Company. In addition to solicitation
of stockholders of record by mail, telephone or personal contact, arrangements
will be made with brokerage houses to furnish proxy materials to their
principals, and the Company will reimburse them for their mailing expenses.
Custodians and fiduciaries will be supplied with proxy materials to forward to
beneficial owners of common stock. Whether or not you expect to be present at
the Annual Meeting, please sign, date and return the enclosed Proxy card
promptly. No postage is necessary if mailed in the United States. The cost of
solicitation, including the preparation, printing and mailing, is being paid by
the Company.
BY ORDER OF THE BOARD OF DIRECTORS:
/s/James A. Grimes, Secretary
Dated: January 25, 1999
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APPENDIX "A"
SANDERSON FARMS, INC.
The undersigned hereby appoints D. Michael Cockrell and James A.
Grimes and each of them, as proxies for the undersigned, with full power of
substitution, to vote all of the undersigned's shares of common stock, $1.00 per
share par value, of Sanderson Farms, Inc. at the Annual Meeting on February
25,1999 (and any adjournments thereof), as instructed herein with respect to the
matters herein set forth (and, to the extent not so instructed, as set forth in
the related Proxy Statement), and according to their discretion upon all other
matters which may properly come before such Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED UPON THE
MATTERS SET FORTH ON THE REVERSE. IF NO DIRECTION IS INDICATED, THIS PROXY WILL
BE VOTED "FOR" PROPOSALS 1 and 2. THIS PROXY CONFERS DISCRETIONARY VOTING
AUTHORITY AS TO ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE ANNUAL
MEETING. SEE ACCOMPANYING PROXY STATEMENT.
Dated: , 1999
Signature(s)
Executors, Administrators, Trustees, etc. should
give full title. This proxy should be signed
as name appears on certificate(s).
THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS OF SANDERSON FARMS, INC.
(SEE BALLOT ON REVERSE)
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<PAGE>
BALLOT
MANAGEMENT RECOMMENDS A VOTE
"FOR" THE FOLLOWING PROPOSALS
1. To elect four Class A Directors to serve until the 2002 annual meeting:
---- ----
/ / FOR all nominees / / WITHHOLD AUTHORITY
listed below (except (to vote for all
as indicated to the nominees listed below)
contrary below)
Joe F. Sanderson Jr., Phil K. Livingston, Charles W. Ritter, Jr. and
Lampkin Butts
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write the nominee's name here:
----------------------- ------------------------
2. To consider and act upon a proposal to ratify and approve the selection of
Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending October 31, 1999:
---- ---- ----
/ / FOR / / AGAINST / / ABSTAIN
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<PAGE>
SANDERSON FARMS, INC.
BALLOT
1. To elect four Class A Directors to serve until the 2002 annual meeting:
---- ----
/ / FOR all nominees / / WITHHOLD AUTHORITY
listed below (except (to vote for all
as indicated to the nominees listed below)
contrary below)
Joe F. Sanderson Jr., Phil K. Livingston, Charles W. Ritter, Jr.
and Lampkin Butts
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
the nominee's name here:
3. To consider and act upon a proposal to ratify and approve the selection of
Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending October 31, 1999.
---- ---- ----
/ / FOR / / AGAINST / / ABSTAIN
---- ---- ----
Dated:_____________________, 1999 ______________________
Participant
----------------------
(Print Name)
PLEASE DATE, SIGN AND RETURN THIS BALLOT IN THE ENCLOSED ADDRESSED AND POSTAGE
PREPAID ENVELOPE TO THE ADMINISTRATIVE COMMITTEE OF THE ESOP NO LATER THAN
FEBRUARY 15, 1999, THROUGH COMPANY MAIL OR BY UNITED STATES MAIL.
30
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