Another significant factor in the Committee’s decision-making is stockholder dilution, and the Committee strives to minimize the dilutive effect of equity awards on our stockholders. Our Board of Directors also adopted a share repurchase program under which we are currently authorized to repurchase up to two million shares of our common stock, in part to offset the reduced selling prices with lower costsdilutive effect of cornour equity compensation plans. We have repurchased over 2,300,000 shares under this program since the Board first authorized it in
2009.
We believe our executive culture is unique within our industry. Our management team is motivated by a strong “tone from the top” that has fostered our core mission to create returns for our stockholders. We believe our executives should be rewarded fairly for their loyalty to that mission, especially in years when we perform at the top of our industry.
Management, the Board of Directors, and soybean meal ingredients. The Company’s cost of cornthe Compensation Committee recognize that our business is cyclical and soybean meal was $60.0 million lower during fiscal 2005 as compared to fiscal 2004. During the fourth quarter of fiscal 2005, the Company was negatively impacted by Hurricane Katrinaseasonal, and had an estimated reduction in its operating income during the fourth quarter of $7.9 million related to the storm. The Company believes the remaining effects of lost production and additional expenses that will be incurred related to Hurricane Katrina during the first quarter of fiscal 2006 will be substantially covered by the Company’s insurance policies.
RESULTS OF OPERATIONS
Fiscal 2005 Compared to Fiscal 2004
The Company’s net sales during fiscal 2005 were $1.0 billion, a decrease of $46.1 million or 4.4% as compared to fiscal 2004. This reduction reflects lower prices for the Company’s poultry products of 6.5% during fiscal 2005 as compared to fiscal 2004, offset by an increase in the pounds of poultry products sold of 2.8%. The decrease in the average sale price of the Company’s poultry products resulted primarily from decreasesoften times factors beyond our control significantly influence our profitability. These factors include swings in the market prices for our primary product, fresh chicken, and our two primary input costs, corn and soybean meal. Supply and demand factors for poultry products and feed grains also play a role in the cyclicality of boneless breast meat, tendersour industry and wingsare influenced by global macroeconomic conditions and weather patterns. Accordingly, the Compensation Committee believes it is important to measure and reward outstanding performance as much by operational performance relative to our industry peers as in absolute dollars per share and other typical measuring tools. This concept of 24.9%, 30.8%placing significant emphasis on operational performance relative to our industry peers permeates our overall compensation plans and 12.4%, respectively.philosophy.
We expecttop-level
performance from our management team even during downturns in our industry, extraordinary conditions like theCOVID-19
pandemic, and periods of Company expansion. Accordingly, the criteria that the Committee has established for our performance-based awards have been historically very challenging to achieve. Nevertheless, even in years for which we have incurred a net loss, our company has often performed better than most of our industry peers. The Committee has considered these factors in evaluating our compensation plans and has made adjustments to the plans or discretionary awards to take into account our strong performance relative to the industry and our significant company growth. The Committee intends to continue its strategy of using programs that emphasize performance-based incentive compensation, with a goal to achieve an appropriate balance between our short and long-term performance and between our performance and stockholder return.
Benchmarking and Competitive Analyses
The Committee uses information gathered by analyzing the compensation levels and programs of a peer group and, in some cases, composite survey data compiled from unidentified companies of appropriate size and industry. The peer group serves as the chief point of comparison of the level and structure of executive pay, and is composed of companies similar to Sanderson Farms in size, median revenue, industry, geographic location, and/or performance. The Committee also uses data from a reference group of direct competitors that are considerably larger than Sanderson Farms as a comparator for components of executive pay, but not for pay levels. Selection of the peer and reference groups is based on the research of Willis Towers Watson with input from the Committee. Each year, Willis Towers Watson considers whether the composition of the peer and reference groups continues to be appropriate and if not, recommends changes. However, the softnessCommittee and Willis Towers Watson strive to minimize churn in the composition of the groups so that yearly comparisons remain stable.
17
Establishing a broader reference group of companies with a business environment similar to ours to assist in comparing the elements of executive and director compensation (not levels of pay);
Developing a long-term incentive program for executives designed to offer a variety of equity- based awards that are linked to stockholder value, and making adjustments to the program where necessary to take into account our significant Company growth and strong performance relative to our peers;
Implementing incentive programs to promote increased Company stock ownership by management andnon-employee
directors; Instituting share ownership guidelines for both management andnon-employee
directors; Adopting a compensation recoupment policy for incentive-based compensation, discussed below; and
Undertaking a formalized annual review of executive compensation packages with advice from the compensation consultant in light of market standards; company, industry, and officer performance; and individual merit.
The Committee has the sole authority to retain or terminate Willis Towers Watson (or any other compensation consultant) and to approve the consultant’s fees and other terms and conditions of its engagement related to executive compensation. In April 2020, as in prior years, the Committee directly engaged Willis Towers Watson to review its executive compensation components and levels and recommend any changes for fiscal 2021 necessary to bring our programs in line with market standards or Company performance. This included an assessment of the composition of the peer and reference groups for 2021, a review of compensation trends, development of specific compensation recommendations, and a presentation of its report to the Committee. The Company paid Willis Towers Watson a fee of approximately $89,000 for all of this work. The Company also paid Willis Towers Watson another $7,000 for analysis and advice in connection with fiscal 2021 director compensation matters.
Our Human Resources department has engaged Willis Towers Watson’s brokerage and advisory division to identify carriers for the life insurance, disability and other plans that are ancillary to our health plan and to secure stop-loss coverage for the health plan. While we do not pay Willis Towers Watson any fees for these prices were partially offsetservices, they earned approximately $857,000 in brokerage commissions and other compensation for these services in fiscal 2021.
In 2021, the Committee formally assessed the independence of its advisors, including Willis Towers Watson, based on specific information requested of the advisors, and determined that Willis Towers Watson and its other advisors are independent. The Committee will take measures to ensure that any future engagement of Willis Towers Watson by strong export demandour Company does not impair Willis Towers Watson’s independence.
Typically, the Committee chair meets with representatives from Willis Towers Watson at the outset of any engagement to discuss the Committee’s goals and objectives and to outline the parameters of the review that Willis Towers Watson will undertake. Company personnel are sometimes present for leg quartersthose meetings as a liaison with management, and pawsWillis Towers Watson uses Company personnel to gather internal information necessary for its work. The Committee chair also corresponds with Willis Towers Watson directly during an engagement as questions arise.
The CEO is the Committee’s chief source of information about the overall performance of the Company and of senior management. The Committee or its chair and the Lead Independent Director typically meet privately with the CEO to seek his view of Willis Towers Watson’s recommendations and to receive his input about factors that the Committee might consider in making its determinations with respect to the
19
President and CFO, who are his direct reports. Although the CEO has substantial influence on the Company’s compensation and could contact or meet with Willis Towers Watson or the Committee if he chooses, he is not directly involved in the Committee’s decision-making process or in meetings with Willis Towers Watson.
When compensation questions arise for the Committee’s consideration, senior management may be present for Willis Towers Watson’s presentations and to answer any questions by directors. However, when the Committee sets levels and components of compensation, senior managers are ultimately excused from the meeting to permit the Committee to meet with Willis Towers Watson and legal and accounting advisors, and to deliberate and vote. The Committee may ask the CEO to be present for the deliberations on the compensation of the other named executive officers, but he is excused from the deliberations and vote on his own compensation.
The Compensation Committee may form and delegate its authority to subcommittees consisting only of persons who are members of the Compensation Committee.
Compensation Committee Interlocks and Insider Participation
During fiscal 2021, none of the members of the Compensation Committee was an officer or employee of the Company and no member of the Committee is a former officer of the Company. In addition, during fiscal 2005. Bulk leg quarter prices were2021, none of our executive officers served on the board of directors of any entity whose directors or officers served on our Board of Directors.
Elements of Executive Compensation
The compensation of our executive officers consists of the following elements:
Base Salary
Annual cash incentive (bonus) awards
Long-term equity incentive awards, including:
Restricted stock
Performance shares
Management share purchase rights
In-service
and post-employment benefitsPerquisites
The Committee has used these elements of compensation to create a flexible package that reflects the cyclical nature of the poultry business and can reward both the short and long-term performance of the Company and the individual. Each item of compensation is considered individually, followed by consideration of the overall package, with the goal of treating executives equitably and rewarding and incentivizing outstanding performance. Generally, the Committee does not consider the amounts realizable from prior compensation in setting future benefits. However, the Committee has restructured our long-term performance incentives to reflect more fairly the conditions in our industry when past awards have failed to vest because of cyclical downturns in the poultry market and inefficiencies stemming from our significant internal growth. This is discussed in more detail below.
The CEO’s 2021 total compensation, as reported in the Summary Compensation Table below, was approximately 17.9%265 percent and 331 percent, respectively, higher than the total compensation for the President and CFO because of his higher level of responsibility within our Company and his more pervasive influence over our performance. The compensation of the President and CFO was likewise approximately 314 percent and 252 percent, respectively, higher than the Secretary’s for the same reasons.
20
Discussion of Summary Compensation and Grants of Plan-Based Awards Table
Performance share awards granted for the 2021 fiscal year are subject to atwo-year
performance period and an additionalone-year
vesting period during which the recipient must remain continuously employed by us. The number of shares actually issued depends upon our achieving certain prescribed levels of return on equity and return on sales, as described above in the Compensation Discussion and Analysis section. Shares of restricted stock granted under our restricted stock program vest generally on the fourth anniversary of the award, as long as the holder remains continuously employed by us during the restricted period. Restricted stock granted for fiscal 2021 vests on November 1, 2024.
Shares of restricted stock granted as matching contributions under our Management Share Purchase Plan are subject to a three-year vesting period starting on the date they are acquired by the participant. The participant must remain continuously employed by us during the vesting period.
During our 2021 fiscal year, the employment of our CEO, the President and the CFO were governed by employment agreements that were amended on August 8, 2021. The term of each agreement began on November 1, 2015, and ends when the officer’s employment terminates under the provision of FAS 123(R), unearned compensation related to unvested restricted stock awards are not recorded. Accordingly, any remaining unearned compensation related to unvested restricted stock awards and the corresponding amount in paid-in capital will no longer be included in stockholders’ equity beginning November 1, 2005.
In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” SFAS No. 151 amends Accounting Research Bulletin (“ARB”) No. 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight handling costs and wasted materials (spoilage) should be recognized as current-period charges. In addition, SFAS No. 151 requires that allocation of fixed production overhead to inventory during fiscal years beginning after June 15, 2005. The Company is currently assessing the impact that SFAS No. 151 will have on the results of operations, financial position or cash flows.
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Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Sanderson Farms, Inc.
We have audited the accompanying consolidated balance sheets of Sanderson Farms, Inc. and subsidiaries as of October 31, 2005 and 2004, and the related consolidated statements of income, stockholders’ equity, and cash flows for eachprovisions of the three years inemployment agreement. Each agreement provides for the period ended October 31, 2005. Our audits also included the financial statement schedule listed in the index at Item 15(a). These financial statementsofficer’s fiscal 2016 salary and schedule are the responsibility of the Company’s management. Our responsibility isbonus to express an opinion on these financial statements and schedule based on our audits.
We conducted our auditsbe paid in accordance with the
standardslevels and bonus program that we disclosed in our current report on Form8-K
filed on October 27, 2015. The officers’ compensation is reassessed annually.The amended agreements provide for a lump sum severance payment to be paid to the officers if:
before a change in control of our Company, the officers are terminated without cause, except in the case of poor performance;
at or after a change in control, the officers are terminated without cause; or
the officers resign for good reason.
“Cause” means, among other things, conviction of certain felonies, willful misconduct by the officer, failure or refusal by the officer to comply with our policies or a material breach by the officer of the Public Company Accounting Oversight Board (United States). Those standards requireemployment agreement. “Good reason” means, among other things, a material breach of the agreement by us, a reduction of the officer’s base salary or bonus that we plan and performis not part of a reduction program affecting all senior executives generally, the audit to obtain reasonable assurance about whetherrelocation of the financial statements are freeofficer’s principal place of employment by more than 40 miles, or after a change in control, the alteration of the officer’s position that results in a material misstatement. An audit includes examining, on a test basis, evidence supportingdiminution of his position.
The amount of the amounts and disclosuresseverance payments will be (i) in the financial statements. An audit also includes assessingcase of Mr. Sanderson, three times, and in the accounting principles usedcase of Messrs. Butts and significant estimates made by management, as well as evaluatingCockrell, two times, the overall financial statement presentation. We believe that our audits provide a reasonable basisfollowing amounts:
the officer’s annual base salary in effect for our opinion.2021, plus
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sanderson Farms, Inc. and subsidiaries at October 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each
fifty percent of the three years in the period ended October 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Sanderson Farms, Inc.’s internal control over financial reporting as of October 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 22, 2005 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
New Orleans, Louisiana
December 22, 2005
11
Sanderson Farms, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
| | | | | | | | |
| | October 31 | |
| | 2005 | | | 2004 | |
| | (In thousands) | |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 34,616 | | | $ | 75,910 | |
Accounts receivable, less allowance of $748,808 in 2005 and $1,555,452 in 2004 | | | 38,833 | | | | 49,240 | |
Receivable from insurance companies | | | 14,892 | | | | 0 | |
Inventories | | | 84,713 | | | | 75,603 | |
Refundable income taxes | | | 0 | | | | 2,592 | |
Prepaid expenses | | | 11,599 | | | | 13,077 | |
| | | | | | |
Total current assets | | | 184,653 | | | | 216,422 | |
Property, plant and equipment: | | | | | | | | |
Land and buildings | | | 212,463 | | | | 141,727 | |
Machinery and equipment | | | 296,449 | | | | 257,671 | |
| | | | | | |
| | | 508,912 | | | | 399,398 | |
Accumulated depreciation | | | (249,586 | ) | | | (242,685 | ) |
| | | | | | |
| | | 259,326 | | | | 156,713 | |
Other assets | | | 1,812 | | | | 1,872 | |
| | | | | | |
Total assets | | $ | 445,791 | | | $ | 375,007 | |
| | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 24,468 | | | $ | 30,384 | |
Accrued expenses | | | 48,148 | | | | 31,029 | |
Current maturities of long-term debt | | | 4,406 | | | | 4,385 | |
| | | | | | |
Total current liabilities | | | 77,022 | | | | 65,798 | |
Long-term debt, less current maturities | | | 6,511 | | | | 10,918 | |
Claims payable | | | 2,900 | | | | 2,600 | |
Deferred income taxes | | | 13,705 | | | | 16,350 | |
Stockholders’ equity: | | | | | | | | |
Preferred Stock: | | | | | | | | |
Series A Junior Participating Preferred Stock, $100 par value: authorized shares-500,000; none issued | | | | | | | | |
Par value to be determined by the Board of Directors: authorized shares-4,500,000; none issued | | | | | | | | |
Common Stock, $1 par value: authorized shares-100,000,000; issued and outstanding shares-20,063,070 in 2005 and 19,959,238 in 2004 | | | 20,063 | | | | 19,959 | |
Paid-in capital | | | 26,791 | | | | 9,090 | |
Unearned compensation | | | (13,607 | ) | | | 0 | |
Retained earnings | | | 312,406 | | | | 250,292 | |
| | | | | | |
Total stockholders’ equity | | | 345,653 | | | | 279,341 | |
| | | | | | |
Total liabilities and stockholders’ equity | | $ | 445,791 | | | $ | 375,007 | |
| | | | | | |
See accompanying notes.
12
Sanderson Farms, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
| | | | | | | | | | | | |
| | Years ended October 31 | |
| | 2005 | | | 2004 | | | 2003 | |
| | (In thousands, except per share data) | |
Net sales | | $ | 1,006,185 | | | $ | 1,052,297 | | | $ | 872,235 | |
Cost and expenses: | | | | | | | | | | | | |
Cost of sales | | | 826,670 | | | | 842,337 | | | | 741,420 | |
Selling, general and administrative | | | 66,031 | | | | 59,806 | | | | 40,293 | |
| | | | | | | | | |
| | | 892,701 | | | | 902,143 | | | | 781,713 | |
| | | | | | | | | |
Operating income | | | 113,484 | | | | 150,154 | | | | 90,522 | |
Other income (expense): | | | | | | | | | | | | |
Interest income | | | 1,257 | | | | 743 | | | | 80 | |
Interest expense | | | (433 | ) | | | (1,569 | ) | | | (2,484 | ) |
Other | | | 173 | | | | (60 | ) | | | 43 | |
| | | | | | | | | |
| | | 997 | | | | (886 | ) | | | (2,361 | ) |
| | | | | | | | | |
Income before income taxes | | | 114,481 | | | | 149,268 | | | | 88,161 | |
Income tax expense | | | 43,843 | | | | 57,840 | | | | 34,100 | |
| | | | | | | | | |
Net income | | $ | 70,638 | | | $ | 91,428 | | | $ | 54,061 | |
| | | | | | | | | |
Earnings per share: | | | | | | | | | | | | |
Basic | | $ | 3.53 | | | $ | 4.62 | | | $ | 2.78 | |
| | | | | | | | | |
Diluted | | $ | 3.51 | | | $ | 4.57 | | | $ | 2.75 | |
| | | | | | | | | |
Dividends per share | | $ | .42 | | | $ | .84 | | | $ | .61 | |
| | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | | | | |
Basic | | | 20,014 | | | | 19,789 | | | | 19,462 | |
| | | | | | | | | |
Diluted | | | 20,137 | | | | 19,995 | | | | 19,689 | |
| | | | | | | | | |
See accompanying notes.
13
Sanderson Farms, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Total | |
| | Common Stock | | | Paid-In | | | Unearned | | | Retained | | | Stockholders’ | |
| | Shares | | | Amount | | | Capital | | | Compensation | | | Earnings | | | Equity | |
| (In thousands, except shares |
| and per share amounts) |
Balance at October 31, 2002 | | | 13,051,026 | | | $ | 13,051 | | | $ | 0 | | | $ | 0 | | | $ | 142,840 | | | $ | 155,891 | |
Three-for-two stock split | | | 6,525,513 | | | | 6,525 | | | | | | | | | | | | (6,525 | ) | | | 0 | |
| | | | | | | | | | | | | | | | | | |
Adjusted Balance at October 31, 2002 | | | 19,576,539 | | | | 19,576 | | | $ | 0 | | | $ | 0 | | | | 136,315 | | | | 155,891 | |
Net income for year | | | | | | | | | | | | | | | | | | | 54,061 | | | | 54,061 | |
Cash dividends ($.28 per share) | | | | | | | | | | | | | | | | | | | (5,449 | ) | | | (5,449 | ) |
Special cash dividends ($.33 per share) | | | | | | | | | | | | | | | | | | | (6,508 | ) | | | (6,508 | ) |
Purchase and retirement of common stock | | | (328,500 | ) | | | (328 | ) | | | (2,042 | ) | | | | | | | (2,790 | ) | | | (5,160 | ) |
Issuance of common stock | | | 272,775 | | | | 273 | | | | 3,991 | | | | | | | | | | | | 4,264 | |
| | | | | | | | | | | | | | | | | | | |
Balance at October 31, 2003 | | | 19,520,814 | | | | 19,521 | | | | 1,949 | | | | 0 | | | | 175,629 | | | | 197,099 | |
Net income for year | | | | | | | | | | | | | | | | | | | 91,428 | | | | 91,428 | |
Cash dividends ($.34 per share) | | | | | | | | | | | | | | | | | | | (6,753 | ) | | | (6,753 | ) |
Special cash dividends ($.50 per share) | | | | | | | | | | | | | | | | | | | (9,980 | ) | | | (9,980 | ) |
Redemption of fractional shares | | | | | | | | | | | | | | | | | | | (32 | ) | | | (32 | ) |
Issuance of common stock | | | 438,424 | | | | 438 | | | | 7,141 | | | | | | | | | | | | 7,579 | |
| | | | | | | | | | | | | | | | | | | |
Balance at October 31, 2004 | | | 19,959,238 | | | | 19,959 | | | | 9,090 | | | | 0 | | | | 250,292 | | | | 279,341 | |
Net income for year | | | | | | | | | | | | | | | | | | | 70,638 | | | | 70,638 | |
Cash dividends ( $.42 per share) | | | | | | | | | | | | | | | | | | | (8,524 | ) | | | (8,524 | ) |
Issuance of common stock | | | 103,832 | | | | 104 | | | | 2,033 | | | | | | | | | | | | 2,137 | |
Issuance of restricted common stock | | | | | | | | | | | 15,668 | | | | (15,360 | ) | | | | | | | 308 | |
Amortization of unearned compensation | | | | | | | | | | | | | | | 1,753 | | | | | | | | 1,753 | |
| | | | | | | | | | | | | | | | | | |
Balance at October 31, 2005 | | | 20,063,070 | | | $ | 20,063 | | | $ | 26,791 | | | $ | (13,607 | ) | | $ | 312,406 | | | $ | 345,653 | |
| | | | | | | | | | | | | | | | | | |
See accompanying notes.
14
SANDERSON FARMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | |
| | Years Ended October 31 | |
| | 2005 | | | 2004 | | | 2003 | |
| | (In thousands) | |
Operating activities | | | | | | | | | | | | |
Net income | | $ | 70,638 | | | $ | 91,428 | | | $ | 54,061 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | |
Depreciation and amortization | | | 24,752 | | | | 26,326 | | | | 24,485 | |
Amortization of unearned compensation | | | 1,753 | | | | 0 | | | | 0 | |
Provision for losses on accounts receivable | | | 1,063 | | | | 165 | | | | 727 | |
Deferred income taxes | | | (3,115 | ) | | | 500 | | | | (920 | ) |
Change in assets and liabilities: | | | | | | | | | | | | |
Accounts receivable | | | 9,344 | | | | (3,210 | ) | | | (5,849 | ) |
Receivable from insurance companies | | | (14,892 | ) | | | 0 | | | | 0 | |
Inventories | | | (9,110 | ) | | | (13,850 | ) | | | (3,789 | ) |
Prepaid expenses and refundable income taxes | | | 4,540 | | | | (3,483 | ) | | | 2,431 | |
Other assets | | | (95 | ) | | | (123 | ) | | | (135 | ) |
Accounts payable | | | (5,916 | ) | | | 11,351 | | | | (6,225 | ) |
Accrued expenses and claims payable | | | 17,419 | | | | (6,511 | ) | | | 11,029 | |
| | | | | | | | | |
Total adjustments | | | 25,743 | | | | 11,165 | | | | 21,754 | |
| | | | | | | | | |
Net cash provided by operating activities | | | 96,381 | | | | 102,593 | | | | 75,815 | |
Investing activities | | | | | | | | | | | | |
Capital expenditures | | | (128,107 | ) | | | (27,538 | ) | | | (23,430 | ) |
Net proceeds from sale of property and equipment | | | 897 | | | | 79 | | | | 394 | |
Other investment | | | 0 | | | | (1,597 | ) | | | 0 | |
| | | | | | | | | |
Net cash used in investing activities | | | (127,210 | ) | | | (29,056 | ) | | | (23,036 | ) |
Financing activities | | | | | | | | | | | | |
Net change in revolving credit | | | 0 | | | | 0 | | | | (20,000 | ) |
Principal payments on long-term debt | | | (4,126 | ) | | | (10,420 | ) | | | (7,014 | ) |
Principal payments on capital lease obligation | | | (260 | ) | | | (245 | ) | | | (230 | ) |
Dividends paid | | | (8,524 | ) | | | (16,733 | ) | | | (11,957 | ) |
Purchase and retirement of common stock | | | 0 | | | | (32 | ) | | | (5,160 | ) |
Net proceeds from common stock issued | | | 2,445 | | | | 7,579 | | | | 4,264 | |
| | | | | | | | | |
|
Net cash used in financing activities | | | (10,465 | ) | | | (19,851 | ) | | | (40,097 | ) |
| | | | | | | | | |
Net change in cash and cash equivalents | | | (41,294 | ) | | | 53,686 | | | | 12,682 | |
Cash and cash equivalents at beginning of year | | | 75,910 | | | | 22,224 | | | | 9,542 | |
| | | | | | | | | |
Cash and cash equivalents at end of year | | $ | 34,616 | | | $ | 75,910 | | | $ | 22,224 | |
| | | | | | | | | |
Supplemental disclosure of cash flow information: | | | | | | | | | | | | |
Income taxes paid | | $ | 33,002 | | | $ | 63,486 | | | $ | 20,093 | |
| | | | | | | | | |
Interest paid | | $ | 1,360 | | | $ | 1,611 | | | $ | 2,569 | |
| | | | | | | | | |
See accompanying notes.
15
Sanderson Farms, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Principles of Consolidation:The consolidated financial statements include the accounts of Sanderson Farms, Inc. (the “Company”) and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.
Business:The Company is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared food items. The Company’s net sales and cost of sales are significantly affected by market price fluctuations of its principal products sold and of its principal feed ingredients, corn and other grains.
The Company sells to retailers, distributors and casual dining operators primarily in the southeastern, southwestern and western United States. Revenue is recognized when product is delivered to customers. Revenue on certain international sales is recognized upon transfer of title, which may occur after shipment. Management periodically performs credit evaluations of its customers’ financial condition and generally does not require collateral. No customer accounted for more than 10.0% of consolidated net sales during fiscal 2005. One customer accounted for 12.5% and 11.7%, respectively, of consolidated sales for the years ended October 31, 2004 and October 31, 2003. Shipping and handling costs are included as a component of cost of sales.
Use of Estimates:The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Cash Equivalents:The Company considers all highly liquid investments with maturities of ninety days or less when purchased to be cash equivalents.
Allowance for Doubtful Accounts:In the normal course of business, the Company extends credit to its customers on a short-term basis. Although credit risks associated with our customers are considered minimal, the Company routinely reviews its accounts receivable balances and makes provisions for probable doubtful accounts based on an individual assessment of a customer’s credit quality as well as subjective factors and trends, including the aging of receivable balances. In circumstances where management is aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve is recorded to reduce the receivable to the amount expected to be collected. If circumstances change (i.e., higher than expected defaults or an unexpected material adverse change in a major customer’s ability to meet its financial obligations to us), our estimates of the recoverability of amounts due us could be reduced by a material amount and the allowance for doubtful accounts and related bad debt expense would increase by the same amount.
Hurricane Receivable from Insurance Companies:The Company has recorded insurance recoveries related to Hurricane Katrina when realization of the claim for recovery has been deemed probable and only to the extent the loss has been recorded in the financial statements. Any possible gain that may result from recoveriesofficer’s maximum opportunity under the Company’s insurance policies will be recognized whenbonus program in effect for 2021,
plus (ii) a portion of fifty percent of the insurance proceeds are received.
Inventories:Processed food and poultry inventories and inventories of feed, eggs, medication and packaging supplies are stated at the lower of cost (first-in, first-out method) or market.
Live poultry inventories of broilers are stated at the lower of cost or market and breeders at cost less accumulated amortization. The costs associated with breeders, including breeder chicks, feed, medicine and grower pay, are accumulated upofficer’s 2021 maximum bonus opportunity, prorated according to the production stage and amortized over nine months usingnumber of days in the straight-line method.fiscal year that have elapsed through his termination date.
16
Property, Plant and Equipment:Property, plant and equipment is stated at cost. Depreciation of property, plant and equipment is provided byIn addition, the straight-line and units of production methods overagreements provide, in the estimated useful lives of 15 to 39 years for buildings and 3 to 12 years for machinery and equipment.
Impairment of Long-Lived Assets:The Company continually reevaluates the carrying value of its long-lived assets for events or changes in circumstances which indicate that the carrying value may not be recoverable. As part of this reevaluation, the Company estimates the future cash flows expected to result from the usecase of the asset and its eventual disposal. Ifofficer’s death, for the sumcontinuation of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized through a charge to operations.
Self-Insurance Programs:Insurance expensehis annual salary payments for workers’ compensation benefits and employee-related health care benefits are estimated using historical experience and actuarial estimates. Stop-loss coverage is maintained with third party insurers to limit the Company’s total exposure. Management regularly reviews the assumptions used to recognize periodic expenses. Any resulting adjustments to accrued claims are reflected in current operating results.
Advertising and Marketing Costs:The Company expenses advertising costs as incurred. Advertising costs are included in selling, general and administrative expenses and totaled $13.0 million, $14.0 million and $0.8 million for fiscal 2005, 2004 and 2003, respectively.
Income Taxes:Deferred income taxes are accounted for using the liability method and relate principally to cash basis temporary differences and depreciation expense accounted for differently for financial and income tax purposes.
Stock Based Compensation:At October 31, 2005, the Company has a stock-based employee compensation plan, which is described more fully in Note 9. The Company accounts for this plan under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. No stock-based employee compensation cost applicable to employee stock options is reflected in net income, as all options granted had an exercise price at least equal to the market value of the underlying common stock onone year from the date of grant.his death. The following table illustratesagreements for Messrs. Butts and Cockrell also designate them as participants in our Supplemental Disability Plan.
The agreements prohibit the effectofficers from disclosing confidential information about us during and after their employment, subject to certain exceptions, and prohibit the officers from engaging in certain competitive activity during their employment and for two years after the termination of their employment for any reason other than poor performance.
See the “Potential Payments Upon Termination orsection, below, for a discussion of the impact of a change in control of our Company and certain other events, including competitive activity, on
net income andan officer’s unearned performance shares or restricted stock. Dividends are paid at rates applicable to all our stockholders on performance shares once they are paid out. Dividends (at normal rates) are paid on shares of restricted stock as soon as the shares are issued to the officer.
Amounts earned for fiscal 2021 under our Bonus Award Program were determined by reference to our earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.
| | | | | | | | | | | | |
| | Year Ended October 31 | |
| | 2005 | | | 2004 | | | 2003 | |
| | (In thousands) | |
Net income, as reported | | $ | 70,638 | | | $ | 91,428 | | | $ | 54,061 | |
Deduct: Total stock-based employee compensation expense for employee stock options determined under fair value based method for all awards, net of related tax effects | | | (45 | ) | | | (45 | ) | | | (60 | ) |
| | | | | | | | | |
Pro forma net income | | $ | 70,593 | | | $ | 91,383 | | | $ | 54,001 | |
| | | | | | | | | |
Earnings per share: | | | | | | | | | | | | |
Basic-as reported | | $ | 3.53 | | | $ | 4.62 | | | $ | 2.78 | |
| | | | | | | | | |
Basic-pro forma | | $ | 3.53 | | | $ | 4.62 | | | $ | 2.78 | |
| | | | | | | | | |
Diluted-as reported | | $ | 3.51 | | | $ | 4.57 | | | $ | 2.75 | |
| | | | | | | | | |
Diluted-pro forma | | $ | 3.51 | | | $ | 4.57 | | | $ | 2.74 | |
| | | | | | | | | |
Earnings Per Share:Basic earnings per share is based upon the weighted average number of common shares outstanding during the year. Diluted earnings per share includes any dilutive effects of options, warrants, restricted stock and convertible securities.
17
On January 29, 2004, the Board of Directors declared a 3 for 2 stock split to be effected in the form of a 50% stock dividend. This dividend was paid February 29, 2004 to stockholders of record on February 10, 2004. Share and per share data have been adjusted to reflect this stock split. Cash was paid in lieu of fractional shares. Stockholders’ equity was restated as of the earliest period presented to give retroactive recognition to the stock split by reclassifying the par value of the additional shares from retained earnings to common stock.
Fair Value of Financial Instruments:The carrying amounts for cash and temporary cash investments approximate their fair values. The carrying amounts of the Company’s borrowings under its credit facilities and long-term debt also approximate the fair values based on current rates for similar debt.
Impact of Recently Issued Accounting Standards:In December 2004, the FASB issued SFAS Statement No. 123 (revised 2004), “Share-Based Payment,” which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 123(R) supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the approach in Statement 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The Company is required to adopt SFAS No. 123(R) in the first quarter of fiscal 2006.
As permitted by SFAS No. 123, the Company currently accounts for share-based payments to employees using APB 25’s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS No. 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123operational performance versus our peers as described in the disclosure of pro forma net incomeCompensation Discussion and earnings per share in Note 1 to our audited financial statements. SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. While the Company cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the income tax benefits of such deductions were $966,000 and $3,726,000 for the fiscal years ended October 31, 2005 and 2004, respectively. Also,Analysis section, above. Unless severance is payable under the provisions of FAS 123(R), unearned compensation related to unvested restricted stock awards is not recorded. Accordingly, any remaining unearned compensation related to unvested restricted stock awards and the corresponding amountemployment agreements described above, a participant must have been employed in paid-in capital will no longer be included in stockholders’ equity beginning November 1, 2005.
In November 2004,a designated position at Sanderson Farms for nine months before the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” SFAS No. 151 amends Accounting Research Bulletin (“ARB”) No. 43, Chapter 4, to clarify that abnormal amounts of idled facility expense, freight handling costs and wasted materials (spoilage) should be recognized as current-period charges. In addition, SFAS No. 151 requires that allocation of fixed production overhead to inventory be based on the normal capacityend of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company is currently assessing the impact that SFAS No. 151 will have on the results of operations, financial position or cash flows.
2. Hurricane Receivable
The Company’s financial statements for the fourth fiscal quarter and fiscal year, endedand must have been employed on October 31 2005, reflect a receivable from the Company’s insurance carriers of $14.9 million for property damage and expenses incurred resulting from Hurricane Katrina. The Company’s total insurance claim through October 31, 2005, for property damage, expenses incurred and lost profits is approximately $20.0 million, net of the applicable deductible of $2,750,000. Duringfiscal year, to receive a bonus. However, if a Bonus Award Program participant dies, becomes disabled or retires before the fourth quarter of fiscal 2005, operating income was reduced by unrecognized lost profits and expenses of approximately $5.1 million. These unrecognized lost profits and expenses were the direct resultend of the effect of Hurricane Katrina and the Company’s efforts to minimize the potential loss from the hurricane.
Of the $5.1 million of unrecognized lost profits and expenses, $1.5 million was attributable to additional costs to compensate the Company’s contract poultry producers for the loss of revenue they incurred because of decreased efficiencies resulting from the storm. These payments to the Company’s contract poultry producers were included in cost of sales on the Company’s income statement for thefiscal year, ended October 31, 2005. While the Company’s management believes these additional payments to contract poultry producers are covered by the terms of the its insurance policies, it cannot deem such recovery as probable, and therefore did not recognize any possible reimbursement of these costs in its financial statements. The Company will recognize any reimbursements of these costs if and when they are received, and any such reimbursements will be classified in the period received as other income, with appropriate disclosures of the nature of such amount.
Also included in the $5.1 million is $3.6 million in lost profits. For several weeks after Hurricane Katrina, the Company was unable to sustain the workforce required to produce higher margin products normally sold by the Company, and therefore suffered $2.4 million in lost profits due to a less profitable product mix during the weeks immediately following the storm. The reasons for these human resource issues included the unavailability of fuel, damage to employees’ personal property and impassable roads due to down trees and power lines. In addition, the Company lost profits of $1.2 million that would have been realized on sales of live inventories destroyed by the hurricane. The Company has not recognized these lost profits as of December 31, 2005, but will recognize these amounts as other income when and if it receives reimbursement from the Company’s insurance carriers, with appropriate disclosures of the nature of such amounts.
The Company intends to seek reimbursement for all of its insured losses, including the unrecognized lost profits and expenses. Negotiations with the Company’s insurance carriers are expected to be completed during 2006. The Company believes the remaining effects of lost production and additional expenses related to Hurricane Katrina that will be incurred during the first fiscal quarter of 2006 will also be substantially covered by the Company’s insurance policies.
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3. Inventories
Inventories consisted of the following:
| | | | | | | | |
| | October 31 | |
| | 2005 | | | 2004 | |
| | (In thousands) | |
Live poultry-broilers and breeders | | $ | 42,662 | | | $ | 45,318 | |
Feed, eggs and other | | | 10,983 | | | | 10,081 | |
Processed poultry | | | 19,881 | | | | 11,024 | |
Processed food | | | 6,905 | | | | 5,172 | |
Packaging materials | | | 4,282 | | | | 4,008 | |
| | | | | | |
| | $ | 84,713 | | | $ | 75,603 | |
| | | | | | |
4. Prepaid expenses
Prepaid expenses consisted of the following:
| | | | | | | | |
| | October 31 | |
| | 2005 | | | 2004 | |
| | (In thousands) | |
Parts and supplies | | $ | 6,801 | | | $ | 5,698 | |
Current deferred tax assets | | | 1,930 | | | | 1,460 | |
Other prepaid expenses | | | 2,868 | | | | 5,919 | |
| | | | | | |
| | $ | 11,599 | | | $ | 13,077 | |
| | | | | | |
5. Accrued expenses
Accrued expenses and claims payable consisted of the following:
| | | | | | | | |
| | October 31 | |
| | 2005 | | | 2004 | |
| | (In thousands) | |
Income taxes payable | | $ | 12,990 | | | $ | 0 | |
Accrued bonuses | | | 13,515 | | | | 11,474 | |
Accrued rebates | | | 3,236 | | | | 3,387 | |
Workers’ compensation claims | | | 3,711 | | | | 3,484 | |
Accrued property taxes | | | 2,627 | | | | 2,306 | |
Accrued wages | | | 4,020 | | | | 3,201 | |
Accrued vacation | | | 3,199 | | | | 2,822 | |
Other accrued expenses | | | 4,850 | | | | 4,355 | |
| | | | | | |
| | $ | 48,148 | | | $ | 31,029 | |
| | | | | | |
6. Long-term Credit Facilities and Debt
Long-term debt consisted of the following:
19
| | | | | | | | |
| | October 31 | |
| | 2005 | | | 2004 | |
| | (In thousands) | |
Term loan with an insurance company, accruing interest at 7.05%; due in annual principal installments of $4,000,000, maturing in 2007 | | $ | 8,000 | | | $ | 12,000 | |
Note payable, accruing interest at 5%; due in annual installments of $161,400, including interest, maturing in 2009 | | | 597 | | | | 723 | |
6% Mississippi Business Investment Act bond-capital lease obligation, due November 1, 2012 | | | 2,320 | | | | 2,580 | |
| | | | | | |
| | | 10,917 | | | | 15,303 | |
Less current maturities of long-term debt | | | 4,406 | | | | 4,385 | |
| | | | | | |
| | $ | 6,511 | | | $ | 10,918 | |
| | | | | | |
At October 31, 2005, the Company had a $100.0 million revolving credit agreement with four banks. As of October 31, 2005, all of the credit was available. On November 17, 2005, the Company entered into a new $200.0 million revolving credit facility with six banks that extends until 2010. Borrowings are at prime or below and may be prepaid without penalty. A commitment fee of .25% is payable quarterly on the unused portion of the revolver. Covenants related to the revolving credit and the term loan agreements include requirements for maintenance of minimum consolidated net working capital, tangible net worth, debt to total capitalization and current ratio. The agreement also establishes limits on dividends, assets that can be pledged and capital expenditures. As of December 22, 2005, all of the credit under the new revolver was available.
The aggregate annual maturities of long-term debt at October 31, 2005 are as follows (in thousands):
| | | | |
Fiscal Year | | Amount | |
2006 | | $ | 4,406 | |
2007 | | | 4,433 | |
2008 | | | 455 | |
2009 | | | 482 | |
2010 | | | 381 | |
Thereafter | | | 760 | |
| | | |
| | $ | 10,917 | |
| | | |
7. Income Taxes
Income tax expense (benefit) consisted of the following:
| | | | | | | | | | | | |
| | Years Ended October 31 | |
| | 2005 | | | 2004 | | | 2003 | |
| | (In thousands) | |
Current: | | | | | | | | | | | | |
Federal | | $ | 41,453 | | | $ | 49,250 | | | $ | 29,940 | |
State | | | 5,505 | | | | 8,090 | | | | 5,080 | |
| | | | | | | | | |
| | | 46,958 | | | | 57,340 | | | | 35,020 | |
Deferred: | | | | | | | | | | | | |
Federal | | | (2,705 | ) | | | 430 | | | | (800 | ) |
State | | | (410 | ) | | | 70 | | | | (120 | ) |
| | | | | | | | | |
| | | (3,115 | ) | | | 500 | | | | (920 | ) |
| | | | | | | | | |
| | $ | 43,843 | | | $ | 57,840 | | | $ | 34,100 | |
| | | | | | | | | |
Significant components of the Company’s deferred tax assets and liabilities were as follows:
| | | | | | | | |
| | October 31 | |
| | 2005 | | | 2004 | |
| | (In thousands) | |
Deferred tax liabilities: | | | | | | | | |
Property, plant and equipment | | $ | 15,675 | | | $ | 17,977 | |
Prepaid and other assets | | | 495 | | | | 1,108 | |
| | | | | | |
Total deferred tax liabilities | | | 16,170 | | | | 19,085 | |
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| | | | | | | | |
| | October 31 | |
| | 2005 | | | 2004 | |
| | (In thousands) | |
Deferred tax assets: | | | | | | | | |
Accrued expenses and accounts receivable | | | 4,395 | | | | 4,195 | |
| | | | | | |
Net deferred tax liabilities | | $ | 11,775 | | | $ | 14,890 | |
| | | | | | |
Current deferred tax assets (included in prepaid expenses) | | $ | 1,930 | | | $ | 1,460 | |
Long-term deferred tax liabilities | | | 13,705 | | | | 16,350 | |
| | | | | | |
Net deferred tax liabilities | | $ | 11,775 | | | $ | 14,890 | |
| | | | | | |
The differences between the consolidated effective income tax rate and the federal statutory rate of 35.0%
are as follows:
| | | | | | | | | | | | |
| | Years Ended October 31 | |
| | 2005 | | | 2004 | | | 2003 | |
| | (In thousands) | |
Income taxes at statutory rate | | $ | 40,068 | | | $ | 52,244 | | | $ | 30,856 | |
State income taxes | | | 3,312 | | | | 5,584 | | | | 3,224 | |
Other, net | | | 463 | | | | 12 | | | | 20 | |
| | | | | | | | | |
Income tax expense | | $ | 43,843 | | | $ | 57,840 | | | $ | 34,100 | |
| | | | | | | | | |
8. Employee Benefit Plans
The Company has an Employee Stock Ownership Plan (“ESOP”) covering substantially all employees. Contributions to the ESOP are determined at the discretion of the Company’s Board of Directors. Total contributions to the ESOP were $5,500,000, $7,000,000 and $4,000,000 in fiscal 2005, 2004 and 2003, respectively.
The Company has a 401(k) Plan which covers substantially all employees after one year of service. Participants in the Plan may contribute up to the maximum allowed by IRS regulations. The Company matches 100% of employee contributions to the 401(k) Plan up to 3% of each employee’s compensation and 50% of employee contributions between 3% and 5% of each employee’s compensation. The Company’s contributions to the 401(k) Plan totaled $2,666,000 in fiscal 2005, $1,803,000 in fiscal 2004 and $1,551,000 in fiscal 2003.
9. Stock Compensation Plans
The Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for its employee stock options because the alternative fair value accounting provided for under FASB Statement No. 123, “Accounting for Stock-Based Compensation,” requires use of option valuation models that were not developed for use in valuing employee stock options.
Under the Company’s Stock Option Plan, 2,250,000 shares of Common Stock were reserved for grant to key management personnel. Options outstanding at October 31, 2005 were granted in fiscal 2002, have ten-year terms and vest over four years beginning one year after the date of grant. The Company did not grant any options during fiscal 2005, 2004 and 2003. The plan has been superceded by the Sanderson Farms, Inc. and Affiliates Stock Incentive Plan described below and no further options may be issued under the Stock Option Plan.
Pro forma information regarding net income and earnings per share is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model.
21
A summary of the Company’s stock option activity and related information is as follows:
| | | | | | | | |
| | | | | | Weighted-Average | |
| | Shares | | | Exercise Price | |
Outstanding at October 31, 2002 | | | 1,082,604 | | | $ | 9.61 | |
Granted | | | 0 | | | | 0.00 | |
Exercised | | | (272,775 | ) | | | 8.57 | |
Forfeited | | | (10,125 | ) | | | 12.37 | |
| | | | | | |
Outstanding at October 31, 2003 | | | 799,704 | | | | 14.41 | |
Granted | | | 0 | | | | 0.00 | |
Exercised | | | (440,078 | ) | | | 9.75 | |
Forfeited | | | (2,250 | ) | | | 12.37 | |
| | | | | | |
Outstanding at October 31, 2004 | | | 357,376 | | | | 11.56 | |
Granted | | | 0 | | | | 0.00 | |
Exercised | | | (102,332 | ) | | | 11.27 | |
Forfeited | | | (33,501 | ) | | | 12.22 | |
| | | | | | |
Outstanding at October 31, 2005 | | | 221,543 | | | $ | 11.66 | |
| | | | | | |
The exercise price of the options outstanding as of October 31, 2005, ranged from $7.47 to $12.37 per share. At October 31, 2005, the weighted average remaining contractual life of the options outstanding was 7 years and 150,336 options were exercisable.
In fiscal 2000, the Company granted 211,507 “phantom shares” to certain key management personnel. Upon exercise of a phantom share, the holder will receive a cash payment or an equivalent number of shares of the Company’s Common Stock, at the Company’s option, equal to the excess of the fair market value of the Company’s Common Stock at the time of exercise over the phantom share award value of $4.98 per share. The phantom shares have a ten-year term and vest over four years beginning one year after the date of grant. Compensation expense of $84,000, $1,567,000 and $1,942,000 for the phantom share plan is included in selling, general and administrative expense in the accompanying consolidated statement of income for fiscal 2005, 2004 and 2003, respectively.
A summary of the Company’s phantom share activity and related information is as follows:
| | | | | | | | |
| | | | | | Exercise | |
| | Shares | | | Price | |
Outstanding at October 31, 2002 | | | 211,500 | | | $ | 4.98 | |
Granted | | | 0 | | | | 0.00 | |
Forfeited | | | 0 | | | | 0.00 | |
Exercised | | | (141,750 | ) | | | 4.98 | |
| | | | | | |
Outstanding at October 31, 2003 | | | 69,750 | | | | 4.98 | |
Granted | | | 0 | | | | 0.00 | |
Forfeited | | | 0 | | | | 0.00 | |
Exercised | | | (63,000 | ) | | | 4.98 | |
| | | | | | |
Outstanding at October 31, 2004 | | | 6,750 | | | | 4.98 | |
Granted | | | 0 | | | | 0.00 | |
Forfeited | | | 0 | | | | 0.00 | |
Exercised | | | (6,750 | ) | | | 4.98 | |
| | | | | | |
Outstanding at October 31, 2005 | | | 0 | | | $ | 0.00 | |
| | | | | | |
On February 17, 2005, the shareholders of the Company approved the Sanderson Farms, Inc. and Affiliates Stock Incentive Plan (the “Plan”). The Plan allows the Company’s board of directors to grant certain incentive awards including stock options, stock appreciation rights, restricted stock, and other similar awards. The Company may award up to 2,250,000 shares under the Plan. Incentive awards granted under the Plan are accounted for in accordance with APB Opinion No. 25, “Accounting for Stock issued to Employees” and related interpretations.
22
Pursuant to the Plan, on February 23, 2005, the Company’s board of directors approved agreements for the issuance of restricted stock to directors, executive officers and other key employees as designated by the Company’s board of directors. Restricted stock granted to non-employee directors vests three years from the date of grant and all other restricted stock granted at that time pursuant to the Plan vests ten years from the date of grant. The vesting schedule is accelerated upon death, disability or retirement of the participant or upon a change in control, as defined. Restricted stock grants are valued based upon the closing market price of the Company’s Common Stock on the date of grant. Restricted stock grants are recorded as unearned compensation and are recognized as compensation expense over the vesting period. During the quarter ended April 30, 2005, the Company issued a total of 354,000 shares of restricted stock valuedhad been employed at $44.56 per share. During fiscal 2005, 11,000 shares granted on February 23, 2005 were forfeited. Compensation expense related to restricted stock grants totaled $1,744,000 during fiscal 2005.
Also on February 23, 2005 and pursuant to the Plan, the Company’s board of directors approved Management Share Purchase Plan agreements (the “Purchase Plan”) that authorized the issuance of shares of restricted stock to the Company’s directors, executive officers and other key employees as designated by the Company’s board of directors. Pursuant to the Purchase Plan, non-employee directors may elect to receive up to 100% of their annual retainer and meeting fees in the form of restricted stock. Other participants may elect to receive up to 15% of their salary and up to 75% of any bonus earned in the form of restricted stock. The purchase price of the restricted stock is the closing market price of the Company’s Common Stock on the date of purchase. The Company makes matching contributions of 25% of the restricted shares purchased by participants. Restricted stock issued pursuant to the Purchase Plan vests after three years or immediately upon death, disability, retirement or change in control, as defined. If a participant’s employment is terminated for any other reason prior to the three-year vesting period, the participant forfeits the matching contribution and the Company may, at its option, repurchase restricted stock purchased by the participant at the price paid by the participant. Matching contributions are recorded as unearned compensation and are recognized as compensation expense over the vesting period. During fiscal 2005, the participants purchased a total of 7,497 shares of restricted stock pursuant to the Purchase Plan valued at $41.13 per share and the Company issued 1,832 matching shares valued at $41.11 per share. Compensation expense related to the Company’s matching contribution totaled approximately $8,000 in fiscal 2005.
10. Shareholder Rights Agreement
On April 22, 1999, the Company adopted a shareholder rights agreement (the “Agreement”) with similar terms as the previous one. The purpose of the rights is to force a potential acquiror to negotiate with the Company’s board of directors to ensure that the Company’s shareholders receive a fair price in any acquisition transaction.
Under the terms of the Agreement a purchase right (“right”) was declared as a dividend for each share of the Company’s Common Stock outstanding on May 4, 1999. The rights do not become exercisable and certificates for the rights will not be issued until ten business days after a person or group acquires or announces a tender offer for the beneficial ownership of 20% or more of the Company’s Common Stock. Special rules set forth in the Agreement apply to determine beneficial ownership for members of the Sanderson family. Under these rules, such a member will not be considered to beneficially own certain shares of Common Stock, the economic benefit of which is received by any member of the Sanderson family, and certain shares of Common Stock acquired pursuant to employee benefit plans of the Company.
The exercise price of a right has been established at $75. Once exercisable, each right would entitle the holder to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock, par value $100 per share. Because of the liquidation, voting and dividend preferences associated with the Preferred Stock, the value of one one-hundredth of a share of the Preferred Stock should approximate the value of one share of the Company’s Common Stock. In addition, after a person or group acquires 20% of the Common Stock, but before such person or group acquires 50%, the board of directors may exchange the rights for shares of the Company’s Common Stock at a ratio of one common share to each one one-hundredth of a preferred share.
In some circumstances, the agreement also permits the Company’s shareholders to acquire additional shares of the Company’s Common Stock, or shares of an acquiror’s common stock, at a discount. The rights may be redeemed by the Board of Directors at $0.001 per right prior to an acquisition, through open market purchases, a tender offer or otherwise, of the beneficial ownership of 20% or more of the Company’s Common Stock. The rights expire on May 4, 2009.
11. Other Matters
The Company has vehicle and equipment leases that expire at various dates through fiscal 2011. Rental expense under these leases totaled $4.9 million, $4.7 million and $3.6 million for fiscal 2005, 2004 and 2003, respectively. The minimum lease payments of obligations under non-cancelable operating leases at October 31, 2004 were as follows:
23
| | | | |
Fiscal Year | | Amount | |
2006 | | $5.6 million |
2007 | | 5.0 million |
2008 | | 3.5 million |
2009 | | 3.0 million |
2010 | | 1.8 million |
Thereafter | | .1 million |
| | | |
| | $ | 19.0 | |
| | | |
On May 19, 2003, a lawsuit was filed on behalf of 74 individual plaintiffs in the United States District Court for the Southern District of Mississippi alleging an “intentional pattern and practice of race discrimination and hostile environment in violation of Title VII and Section 1981 rights.” This lawsuit alleges that Sanderson Farms in
its capacity as an employer, has “engaged in (and continues to engage in) a
pattern and practice of intentional unlawful employment discrimination and intentional unlawful employment practicesdesignated position for at
its plants, locations, off-premises work sites, offices, and facilities in Pike County, Mississippi...in violation of Title VIIleast nine months, he or she will still receive a bonus award for the fiscal year (assuming the performance criteria are met). See the “Potential Payments Upon Termination orsection, below, for a discussion of the
Civil Rights Actimpact of
1964 (as amended)... .” The action further alleges that “Sanderson Farms has willfully, deliberately, intentionally, and with malice deprived black workers in its employ of the full and equal benefits of all laws in violation of the Civil Rights Act.. .” On June 6, 2003, thirteen additional plaintiffs joined in the pending lawsuit by the filing ofcertain events on a
First Amended Complaint. This brought the total number of plaintiffs to 87.participant’s annual bonus award. The plaintiffs in this lawsuit seek, among other things, back pay and other compensation in the amount of $500,000 each and unspecified punitive damages. The Company has aggressively defended the lawsuit and will continue to do so. The Company has a policy of zero tolerance for discrimination of any type, and preliminarily investigated the complaints alleged in this lawsuit when they were brought as EEOC charges. This investigation, which is ongoing, has substantiated none of the complaints alleged in the lawsuit, and the Company believes the charges are without merit. On July 21, 2003, the Company filed a Motion to Dismiss or, alternatively, Motion for Summary Judgment or Motion for More Definite Statement. On December 17, 2003, the court entered its order denying the Company’s motion for summary judgment, but granting its motion for more definite statement. The court also ordered that the union representing some of the plaintiffs be joined as a defendant. The court gave the plaintiffs until January 26, 2004 to amend their complaint to more specifically set out their claims. Although the Company’s motion to dismiss was denied, the court’s order permits the Company to refile its dispositive motions after the plaintiffs file an amended complaint. On January 27, 2004, 84 of the 87 plaintiffs filed their Second Amended Complaint. The remaining three plaintiffs voluntarily dismissed their claims. The Company filed its answer to the plaintiffs’ second amended complaint on March 26, 2004, denying any and all liability and setting forth numerous affirmative defenses. On July 1, 2004, the Company filed a Motion to Sever Plaintiffs’ Cases, wherein the Company requested that the court sever the pending lawsuit with 84 plaintiffs into 84 separate lawsuits, one for each plaintiff. The Company asserted in its motion that this relief should be granted because the 84 cases are too dissimilar and were misjoined. The Company further asserted that it would be prejudiced by being subjected to one common trial for all 84 plaintiffs, rather than separate trials for each plaintiff. On August 26, 2004, the Court issued its order severing this case into six separate causes of action, with the plaintiffs divided into six groups based on their job classifications. On October 12, 2004, the plaintiffs filed new complaints for each of the six severed cases, which the Company answered on November 24, 2004. A case management conference for each of the six cases was held on December 28, 2004, during which various procedural issues related to discovery were settled. On September 28, 2005, the Company filed a Motion for a Pre-Trial conference seeking to preclude the plaintiffs from utilizing a “pattern and practice” method of proof. This method of proof is typically reserved for class action cases, or cases brought by the government. The plaintiffs had indicated their intention to use this method of proof in the pleadings and discovery requests filed up to the date of the Company’s motion. On October 26, 2005, the court entered an order ruling that the plaintiffs would not be permitted to use the “pattern and practice” method of proof. Six separate trials are scheduled during 2006 and 2007For fiscal 2021, salary accounted for the plaintiffs’ causes of actions. The first of the six trials is currently set for September 18, 2006.
On September 26, 2000, three current and former contract growers filed suit against the Company in the Chancery Court of Lawrence County, Mississippi. The plaintiffs filed suit on behalf of “all Mississippi residents to whom, between, on or about November 1981 and the present, the Company induced into growing chickens for it and
24
paid compensation under the so-called ‘ranking system’.” Plaintiffs allege that the Company “has defrauded plaintiffs by unilaterally imposing and utilizing the so-called ‘ranking system’ which wrongfully places each grower into a competitive posture against other growers and arbitrarily penalizes each less successful grower based upon criteria which were never revealed, explained or discussed with plaintiffs.” Plaintiffs further allege that they are required to accept chicks that are genetically different and with varying degrees of healthiness, and feed of dissimilar quantity and quality. Finally, plaintiffs allege that they are ranked against each other although they possess dissimilar facilities, equipment and technology. Plaintiffs seek an unspecified amount in compensatory and punitive damages, as well as varying forms of equitable relief.
The Company is vigorously defending and will continue to vigorously defend this action. On November 22, 2002, the Court denied the Company’s motions to compel arbitration, challenging the jurisdiction of the Chancery Court of Lawrence County, Mississippi, and seeking to have the case dismissed pursuant to rule 5(c) of the Mississippi Rules of Civil Procedure. The Company then filed its motion for interlocutory appeal on these issues with the Mississippi Supreme Court. On December 6, 2002, the Mississippi Supreme Court agreed to hear this motion and stayed the action in the Chancery Court pending disposition of this motion. The Company’s motion for interlocutory appeal was granted and this matter is pending before the Mississippi Supreme Court. The Supreme Court granted the Company’s request that this case be consolidated with a second grower suit discussed below. Both this matter and the matter discussed below were decided by the court on October 6, 2005 with a decision in favor of the Company. The plaintiffs have indicated they plan to request a rehearing before the court and have until January 18, 2006 to file such a request.
On August 2, 2002, three contract egg producers filed suit against the Company in the Chancery Court of Jefferson Davis County, Mississippi. The Plaintiffs filed suit on behalf of “all Mississippi residents who, between June 1993 and the present, [the Company] fraudulently and negligently induced into housing, feeding and providing water for [the Company’s] breeder flocks and gathering, grading, packaging and storing the hatch eggs generated by said flocks and who have been compensated under the payment method established by the [Company].” Plaintiffs alleged that the Company “has defrauded Plaintiffs by unilaterally imposing and utilizing a method of payment which wrongfully and arbitrarily penalizes each grower based upon criteria which are under the control of the [Company] and which were never revealed, explained or discussed with each Plaintiff.” Plaintiffs allege that they were required to accept breeder hens and roosters which are genetically different, with varying degrees of healthiness, and feed of dissimilar quantity and quality. Plaintiffs further allege contamination of and damage to their real property. Plaintiffs alleged that they were “fraudulently and negligently induced into housing, feeding and providing water for the Company’s breeder flocks and gathering, grading, packaging and storing the hatch eggs produced from said flocks” for the Company. Plaintiffs seek unspecified amount of compensatory and punitive damages, as well as various forms of equitable relief.
On September 5, 2002, the Company filed its Motion to Dismiss and/or Transfer Jurisdiction and/or to Compel Arbitration and/or for Change of Venue. A hearing of this motion was completed on November 18, 2003. Prior to completion of the hearing, the Company filed a request with the American Arbitration Association (“AAA”) to arbitrate the claims made in this lawsuit. On June 7, 2004, the Chancery Court of Jefferson Davis County, Mississippi entered an Order denying all of the relief requested by the Company in its motion dated September 5, 2002. On June 29, 2004, the Company filed a Notice of Appeal and/or, in the Alternative, Petition to Appeal from Interlocutory Order and Motion for Stay Pursuant to M.R.A.P.5(c) with the Mississippi Supreme Court, requesting appellate review of the Chancery Court’s Order. On August 11, 2004, the Mississippi Supreme Court entered its Order accepting jurisdiction under the Notice of Appeal portion of the Company’s June 29, 2004 filing, but dismissed the Alternative Petition for Interlocutory Appeal portion of the same filing as moot. The court also agreed to consolidate this case with the broiler grower lawsuit described above. The Mississippi Supreme Court continued the stay previously entered, holding in abeyance the trial court proceedings pending a ruling by it on the consolidated appeals of both grower lawsuits. On October 6, 2005, the court decided this matter, together with the grower suit discussed above, in favor of the Company. The plaintiffs have indicated they plan to request a rehearing before the court and have until January 18, 2006 to file such a request.
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The Company is also involved in various other claims and litigation incidental to its business. Although the outcome of the matters referred to in the preceding sentence cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome should not have a material effect on the Company’s consolidated results of operation or financial position.
The Company recognizes the costs of legal defense for the legal proceedings to which it is a party in the periods incurred. A determination of the amount of reserves required, if any, for these matters is made after considerable analysisfollowing percentages of each individual case. Because the outcome of these cases cannot be determined with any certainty, no estimate of the possible loss or range of loss resulting from the cases can be made. At this time, the Company has not accrued any reserve for any of these matters. Future reserves may be required if losses are deemed probable due to changes in the Company’s assumptions, the effectiveness of legal strategies, or other factors beyond the Company’s control. Future results of operations may be materially affected by the creation of or changes to reserves or by accruals of losses to reflect any adverse determinations of these legal proceedings.officer’s total compensation:
26
QUARTERLY FINANCIAL DATA
| | | | | | | | | | | | | | | | |
| | Fiscal Year 2005 |
| | First | | Second | | Third | | Fourth |
| | Quarter | | Quarter | | Quarter | | Quarter(1) |
| | (In thousands, except per share data) |
| | (Unaudited) |
Net sales | | $ | 233,290 | | | $ | 259,176 | | | $ | 264,650 | | | $ | 249,069 | |
Gross profit | | | 29,535 | | | | 59,197 | | | | 57,346 | | | | 33,437 | |
Net income | | | 10,041 | | | | 26,520 | | | | 24,022 | | | | 10,055 | |
Diluted earnings per share | | $ | .50 | | | $ | 1.32 | | | $ | 1.19 | | | $ | .50 | |
| | | | | | | | | | | | | | | | |
| | Fiscal Year 2004 |
| | First | | Second | | Third | | Fourth |
| | Quarter | | Quarter | | Quarter | | Quarter |
| | (In thousands, except per share data) |
| | (Unaudited) |
Net sales | | $ | 226,441 | | | $ | 272,710 | | | $ | 293,923 | | | $ | 259,223 | |
Gross profit | | | 42,643 | | | | 69,215 | | | | 71,912 | | | | 26,190 | |
Net income | | | 18,986 | | | | 33,437 | | | | 33,944 | | | | 5,061 | |
Diluted earnings per share | | $ | .95 | | | $ | 1.67 | | | $ | 1.69 | | | $ | .25 | |
| | | | |
(1) | | During the fourth quarter Salary as a Percentage of fiscal 2005, the Company was negatively impacted by Hurricane Katrina and had an estimated reduction in its gross profit during the fourth quarterTotal Compensation | |
| | | 22 | % |
| | | 29 | % |
| | | 31 | % |
| | | 42 | % |
Outstanding Equity Awards at Fiscal 2021 Year End
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| |
| | | Number of Securities Underlying Unexercised Options (#)
| | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
| | |
| | | | | | Number of Shares or Units of Stock That Have Not Vested
| | | Market Value of Shares or Units of Stock That Have Not Vested
| | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
| | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
| |
Joe F. Sanderson, Jr., | | | 11/01/17 | | | | | | | | | | | | | | | | | | | | | | | | 16,750 | | | | 3,173,288 | | | | | | | | | |
Chairman of the | | | 11/01/18 | | | | | | | | | | | | | | | | | | | | | | | | 23,500 | | | | 4,452,075 | | | | | | | | | |
Board of Directors and | | | 11/01/19 | | | | | | | | | | | | | | | | | | | | | | | | 17,750 | | | | 3,362,738 | | | | 19,832 | | | | 3,757,172 | |
Chief Executive Officer | | | 11/01/20 | | | | | | | | | | | | | | | | | | | | | | | | 20,500 | | | | 3,883,725 | | | | 41,000 | | | | 7,767,450 | |
Lampkin Butts, | | | 11/01/17 | | | | | | | | | | | | | | | | | | | | | | | | 4,250 | | | | 805,163 | | | | | | | | | |
President | | | 11/01/18 | | | | | | | | | | | | | | | | | | | | | | | | 6,250 | | | | 1,184,063 | | | | | | | | | |
| | | 11/01/19 | | | | | | | | | | | | | | | | | | | | | | | | 4,750 | | | | 899,888 | | | | 5,308 | | | | 1,005,601 | |
| | | 11/01/20 | | | | | | | | | | | | | | | | | | | | | | | | 5,750 | | | | 1,089,338 | | | | 11,500 | | | | 2,178,675 | |
Mike Cockrell, | | | 11/01/17 | | | | | | | | | | | | | | | | | | | | | | | | 3,500 | | | | 663,075 | | | | | | | | | |
Treasurer and Chief | | | 11/01/18 | | | | | | | | | | | | | | | | | | | | | | | | 5,000 | | | | 947,250 | | | | | | | | | |
Financial Officer | | | 11/01/19 | | | | | | | | | | | | | | | | | | | | | | | | 3,750 | | | | 710,438 | | | | 4,191 | | | | 793,985 | |
| | | 11/01/20 | | | | | | | | | | | | | | | | | | | | | | | | 4,500 | | | | 852,525 | | | | 9,000 | | | | 1,705,050 | |
Tim Rigney, | | | 11/01/17 | | | | | | | | | | | | | | | | | | | | | | | | 650 | | | | 123,143 | | | | | | | | | |
Secretary and | | | 11/01/18 | | | | | | | | | | | | | | | | | | | | | | | | 925 | | | | 175,241 | | | | | | | | | |
Controller | | | 11/01/19 | | | | | | | | | | | | | | | | | | | | | | | | 750 | | | | 142,088 | | | | 839 | | | | 158,949 | |
| | | 11/01/20 | | | | | | | | | | | | | | | | | | | | | | | | 1,325 | | | | 251,021 | | | | 2,650 | | | | 502,043 | |
| | | Various | | | | | | | | | | | | | | | | | | | | | | | | 3 | | | | 568 | | | | | | | | | |
(1) | Consists of $7.9 million relatedrestricted stock granted pursuant to the storm.matching contribution provisions of our Management Share Purchase Plan. In addition to the amounts shown, Mr. Rigney owns 12 restricted shares that he purchased under the Management Share Purchase Plan with forgone salary valued at $2,273 as of October 31, 2021. |
(2) | Restricted stock (except for shares held in the Management Share Purchase Plan) vests in a lump sum in accordance with the schedule below. |
Sanderson Farms, Inc. and Subsidiaries
Valuation and Qualifying Accounts
Schedule II
| | | | | | | | | | | | | | | | | | | | |
COL. A | | COL. B | | COL. C | | COL. D | | COL. E | | COL. F |
| | Balance at | | Charged to | | Charged to | | | | | | Balance at |
| | Beginning | | Costs and | | Other | | Deductions | | End of |
Classification | | of Period | | Expenses | | Accounts | | Describe(1) | | Period |
| | (In Thousands) |
Year ended October 31, 2005 | | | | | | | | | | | | | | | | | | | | |
Deducted from accounts receivable: | | | | | | | | | | | | | | | | | | | | |
Allowance for doubtful accounts | | | | | | | | | | | | | | | | | | | | |
Totals | | $ | 1,555 | | | $ | 1,063 | | | | | | | $ | 1,869 | | | $ | 749 | |
Year ended October 31, 2004 | | | | | | | | | | | | | | | | | | | | |
Deducted from accounts receivable: | | | | | | | | | | | | | | | | | | | | |
Allowance for doubtful accounts | | | | | | | | | | | | | | | | | | | | |
Totals | | $ | 1,390 | | | $ | 165 | | | | | | | $ | 0 | | | $ | 1,555 | |
Year ended October 31, 2003 | | | | | | | | | | | | | | | | | | | | |
Deducted from accounts receivable: | | | | | | | | | | | | | | | | | | | | |
Allowance for doubtful accounts | | | | | | | | | | | | | | | | | | | | |
Totals | | $ | 663 | | | $ | 727 | | | | | | | $ | 0 | | | $ | 1,390 | |
| | |
(1) | | Uncollectible accounts written off, |
11/01/2017 | | 11/01/2021 |
11/01/2018 | | 11/01/2022 |
11/01/2019 | | 11/01/2023 |
11/01/2020 | | 11/01/2024 |
Grants of restricted stock usually vest on the fourth anniversary of the award, as long as the holder remains continuously employed by us during the restricted period.
The performance periods for performance shares end on the dates shown below.
| | |
| | |
11/01/2019 | | 10/31/2021 |
11/01/2020 | | 10/31/2022 |
*These shares are subject to an additionalone-year
vesting period after the expiration of the performance period before they are issued. The performance shares granted on November 1, 2019 are shown in the table at the level corresponding to actual performance, pending a formal determination by the Committee. In accordance with Instruction 3 to Item 402(f)(2) of SEC RegulationS-K,
the performance shares granted on November 1, 2020, are shown in the table at the maximum level for both the ROE criteria and the ROS criteria, based on our actual performance in fiscal 2021, the first year of the performance period. 41
(3) | Values of equity awards are based on our closing stock price on the NASDAQ Stock Market of $189.45 per share on October 29, 2021 (the last trading day of our fiscal year). |
Restricted shares held in the Management Share Purchase Plan are purchased by the participant on the last business day of each calendar quarter with forgone salary. A participant may also elect to reduce his or her bonus by a certain percentage and instead receive that amount in restricted shares purchased through the plan on the bonus payment date. We match 25 percent of the participant’s contribution in additional restricted shares that we issue simultaneously with the purchased shares. Each share of restricted stock held in the plan vests fully on the third anniversary of its acquisition by the participant, subject to certain exceptions that are described below under “Potential Payments Upon Termination or Option Exercises and Stock Vested
| | | | | | | | | | | | | | | | |
| | | | | | |
| | Number of Shares Acquired on Exercise
| | | Value Realized on Exercise
| | | Number of Shares Acquired on Vesting
| | |
| |
Joe F. Sanderson, Jr., Chairman of the Board of Directors and Chief Executive Officer | | | | | | | | | | | 26,000 | | | | 3,327,220 | |
| | | | |
Lampkin Butts, President | | | | | | | | | | | 6,750 | | | | 863,798 | |
Mike Cockrell, Treasurer and Chief Financial Officer | | | | | | | | | | | 5,500 | | | | 703,835 | |
Tim Rigney, Secretary and Controller | | | | | | | | | | | 1,000 | | | | 127,970 | |
(1) | Values are based on the closing price of our common stock on the NASDAQ Stock Market on the vesting dates. |
Potential Payments Upon Termination or We have employment agreements (amended on August 8, 2021) with the CEO, President and CFO as described above. We have no other employment agreements with any other employees of our Company. However, our annual cash bonus and Stock Incentive Plan awards provide for accelerated payments in the circumstances described below, and we have company policies that provide for severance payments for all our salaried employees generally. Except as described below, the named executive officers receive no payments upon the termination of their employment or a change in control of Sanderson Farms that are not received by all salaried employees generally.
The term of each agreement began on November 1, 2015, and ends when the officer’s employment terminates under the provisions of the employment agreement. Each agreement provides for the officer’s fiscal 2016 salary and bonus to be paid in accordance with the levels and bonus program that we disclosed in our current report on Form8-K
filed on October 27, 2015. The officers’ compensation is reassessed annually. 42
The agreements provide for a lump sum severance payment to be paid to the officers as soon as practicable following a qualifying termination if:
before a change in control of our company, the officers are terminated without cause, except in the case of poor performance;
at or after a change in control, the officers are terminated without cause; or
the officers resign for good reason.
“Cause” means, among other things, conviction of certain felonies, willful misconduct by the officer, failure or refusal by the officer to comply with our policies, or a material breach by the officer of the employment agreement. “Good reason” means, among other things, a material breach of the agreement by us, a reduction of the officer’s base salary or bonus that is not part of a reduction program affecting all senior executives generally, the relocation of the officer’s principal place of employment by more than 40 miles, or after a change in control, the alteration of the officer’s position that results in a material diminution of his position.
The amount of the severance payments will be (i) in the case of Mr. Sanderson, three times, and in the case of Messrs. Butts and Cockrell, two times, the following amounts:
the officer’s annual base salary in effect for 2021, plus
fifty percent of the officer’s maximum bonus opportunity under the Company’s bonus program in effect for 2021,
plus (ii) a portion of fifty percent of the officer’s 2021 maximum bonus opportunity, prorated according to the number of days in the fiscal year that have elapsed through his termination date.
If any severance payments are due, the officer is also entitled to the continuation of medical benefits that the officer would otherwise be eligible to receive as an active employee of the Company for 24 months or, if earlier, until such time as the officer becomes eligible for substantially similar benefits from a subsequent employer.
In addition, the agreements provide, in the case of the officer’s death, for the continuation of his annual salary payments for one year from the date of his death according to the Company’s regular payroll schedule.
The agreements prohibit the officers from disclosing confidential information about us during and after their employment, subject to certain exceptions, prohibit the officers from engaging in certain competitive activity with us during their employment and for two years after the termination of their employment for any reason other than poor performance and contain a mutualnon-disparagement
clause. The officers are also prohibited from soliciting the Company’s customers and employees during their employment and for the two years after the termination of their employment for any reason. If the officers breach the foregoing provisions, the agreements provide that they must return any portion of the severance payments we have already paid them and their entitlement to continued medical benefits ceases. We are also entitled to pursue other equitable and legal remedies such as restraining orders or damages. The severance payments are conditioned upon the officer signing (and not revoking) a release of claims in favor of Sanderson Farms and complying with applicable restrictive covenants.
An employee must be employed with the Company through October 31 to earn any bonus that may be payable under the Bonus Award Program for that fiscal year. However, if a Bonus Award Program participant dies, becomes disabled or retires before that time, and if the participant had been employed in a designated position at Sanderson Farms for at least nine months, he or she will still receive a cash bonus award for the fiscal year (assuming the performance criteria are met). The participant’s base salary during the portion of the fiscal year in which he or she was employed in the designated position is used to calculate the amount of the bonus award.
43
If a change in control of our Company occurs, or if a holder dies or becomes disabled, before the end of the restricted period, all shares of restricted stock become fully vested. If a holder ends employment after attaining retirement eligibility during the restricted period, a pro rata percentage of the shares will immediately vest based on the number of years of the restricted period that have passed before retirement, and the unvested portion is forfeited.
Shares Held in the Management Stock Purchase Plan
If an employee dies, becomes disabled or terminates employment after attaining eligibility for retirement, or if there is a change in control of Sanderson Farms, in each case before the end of the restricted period, all unvested shares of restricted stock held through the plan become fully vested. If an employee’s employment terminates for any other reason, then any unvested shares we granted to the employee through matching contributions are forfeited and dividends paid on those shares must be returned, and we have the right to repurchase all shares that the employee purchased through the plan with salary or bonus at the price the employee paid for them, less the amount of dividends paid. If we do not exercise that right, the purchased shares will vest on the third anniversary of their acquisition.
If a holder of unpaid performance shares dies, becomes disabled or terminates employment after attaining eligibility for retirement, or if there is a change in control of Sanderson Farms, the holder is entitled to receive a pro rata portion of the number of performance shares he would have been entitled to in proportion to the number of months he was employed during the performance period, assuming the performance criteria are met.
Anti-Competition Provisions
If the Board of Directors determines that a holder of restricted stock or performance shares has engaged in certain competitive activity against us while employed by us or during the two years after the holder’s voluntary termination or termination by us for cause, then he or she forfeits all unvested shares of restricted stock and all unissued performance shares. If restricted shares have already vested or performance shares have been issued, the holder must repay us the fair market value of the shares on their grant or issue date, respectively. In the case of the Management Share Purchase Plan, unvested shares of matching stock are forfeited and dividends paid on those shares must be returned, and we have the right to repurchase all shares that the employee purchased through the plan with salary or bonus at the price the employee paid for them, less the amount of dividends paid. If Company matching shares have already vested, the holder must repay us the fair market value of the shares on the date they were issued and any dividends paid.
We pay severance to all our salaried employees generally upon their termination of employment, except in cases of retirement, death, disability or termination for cause. We pay up to two weeks of severance to employees who resign after at least one year of service. If an employee is dismissed without cause, we pay two weeks of severance, plus one additional week for every year of the employee’s service, up to three months.
44
Change in Control Severance Plan
On August 8, 2021, in connection with the Merger Agreement described below, we adopted a severance plan that will take effect upon a change of control of the Company. Under the plan, each of our regular, full-time salaried employees as of the date immediately preceding a change in control (other than employees who are covered by another plan or agreement providing severance benefits in connection with a change of control, such as Messrs. Sanderson, Butts and Cockrell) will be entitled to a lump sum payment upon a qualifying termination of employment, with the payment based on the employee’s years of service with us. A qualifying termination means a termination that occurs upon a change in control or during the nine months following the change in control, in each case by us without “cause” or by the employee for “good reason.” The lump sum payment will consist of two weeks of salary for each completed and partial year of service with us, with a minimum of 13 weeks and a maximum of 52 weeks. An employee must sign and not revoke a release of claims in favor of us in order to be entitled to receive the severance payment. Under its terms, the plan does not apply to salaried employees who are part-time, temporary or seasonal, but we have no such employees as of the date of this Form10-K/A.
Compensation Payable under Merger Agreement
On August 8, 2021, we agreed to be acquired by a joint venture between Cargill, Inc. and Continental Grain Company pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) with Walnut Sycamore Holdings LLC, a Delaware limited liability company (“Parent”), Sycamore Merger Sub LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of Parent (“Merger Sub”), and solely for purposes of certain provisions specified therein, Wayne Farms LLC, a Delaware limited liability company, pursuant to which, among other things, Merger Sub will be merged with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and as an indirect wholly owned subsidiary of Parent. At the effective time of the Merger, each share of our common stock outstanding immediately before the effective time (other than certain excluded shares) will automatically be cancelled and converted into the right to receive $203.00 per share in cash, without interest (the “Merger Consideration”).
The Merger Agreement provides that if the Merger is completed, the named executive officers will be entitled to certain payments that differ from the payments they would have ordinarily received as described above, as follows:
Company Restricted Shares
Each share of our restricted stock that is outstanding immediately prior to the effective time of the Merger (other than any such shares of restricted stock granted to employees on or following August 8, 2021) will be fully vested and converted into the right to receive an amount in cash equal to the Merger Consideration, which will be paid no later than the fifth business day following the effective time.Company Performance Share Awards for Individuals Other Than Messrs. Sanderson, Butts and Cockrell
For each performance share award that is outstanding immediately prior to the effective time (including those held by Mr. Rigney):each share of our common stock covered by the award that is earned based on actual performance through October 31, 2021 (prorated according to the number of days elapsed during the applicable performance period as of the effective time) will be converted into the right to receive the Merger Consideration, which will be paid within five business days following the effective time, and
the excess of the maximum number of shares of our common stock covered by the award over the earned shares covered by the award that is earned based on actual performance through October 31, 2021 (prorated according to the number of days elapsed during the applicable performance period as of the effective time) will convert into an unvested cash award that will vest on the first anniversary of the closing date or upon an earlier qualifying termination of employment and be paid within five business days following the vesting date (but no later than the first anniversary of the closing date of the Merger), subject to continued employment through such vesting date.
45
Company Performance Share Awards for Messrs. Sanderson, Butts and Cockrell
At the effective time of the Merger, each outstanding performance share award held by each of Messrs. Sanderson, Butts and Cockrell will vest and be earned at the maximum level of performance, meaning 200% of the target number of shares covered by the awards (such maximum number of shares is equal to 76,500, 21,000 and 16,500, respectively), and each earned share will be converted into a right to receive an amount in cash equal to the Merger Consideration, which amount will be payable no later than the fifth business day following the effective time.Fiscal Year 2022 Cash Bonuses
If the effective time of the Merger occurs on or after November 1, 2021, Sanderson Farms employees employed as of the effective time shall receive fiscal year 2022 bonuses calculated at the target performance level andpro-rated
for the portion of the fiscal year that has elapsed through the later of the effective time and April 1, 2022.Mr. Rigney is eligible to receive a cash transaction bonus conditioned upon the successful completion of the Merger. The aggregate amount of Mr. Rigney’s bonus is equal to $174,972. Fifty percent of the bonus will vest and be payable immediately before the effective time, and the remaining 50% will vest and be payable upon theone-year
anniversary of the effective time, in each case, subject to Mr. Rigney’s continued employment through the applicable vesting date; provided that, in the event Mr. Rigney experiences a qualifying termination prior to the first-year anniversary of the effective time, the unvested portion of the transaction bonus will vest and become payable upon the date of such qualifying termination. Potential Payments Tables
The following tables show the payments that the named executive officers would be entitled to in the event of (a) a change in control of Sanderson Farms other than the Merger, (b) the completion of the Merger, (c) termination without cause or for good reason, (d) retirement, (e) disability and (f) death, in each case assuming such event occurred on October 29, 2021, the last business day of our 2021 fiscal year, in accordance with Item 402(j) of RegulationS-K.
The values in the tables are based on the closing market price of our common stock on October 29, 2021, except that payments upon completion of the Merger have been calculated based on the Merger Consideration of $203 per share. The amounts shown do not include payments that would be payable to all salaried employees generally such as pursuant to our severance policy or our change in control severance plan. We have not included in any table any amount for our fiscal 2019 performance shares because the minimum performance criteria for those shares were not met. In all tables other than the table entitled “Potential Payments—Change in Control under the Merger Agreement,” we based the values of our fiscal 2020 performance shares on the level corresponding to actual company performance during the performance period, pending a formal determination by the Committee. For our fiscal 2021 performance shares, we based the values on management’s view as of the date of this Form10-K/A
that it is probable that we will achieve between the minimum and target levels of ROE and between the target and maximum levels for ROS for the grant. In the table entitled “Potential Payments—Change in Control Under Merger Agreement,” we have calculated the values of our fiscal 2020 and 2021 performance shares as provided under the terms of the Merger Agreement.
46
Potential Payments—Change in Control
| | | | | | | | | | | | |
| | Value of Fully Vested Restricted Stock | | |
| | | | |
Mr. Sanderson | | $ | 14,871,825 | | | | 5,445,551 | | | | 20,317,376 | |
Mr. Butts | | $ | 3,978,450 | | | | 1,481,310 | | | | 5,459,760 | |
Mr. Cockrell | | $ | 3,173,288 | | | | 1,165,875 | | | | 4,339,163 | |
Mr. Rigney | | $ | 694,334 | | | | 271,671 | | | | 966,005 | |
Potential Payments—Change in Control Under Merger Agreement
| | | | | | | | | | | | | | | | |
| | Value of Fully Vested Restricted Stock | | | Value of Earned Performance Shares 1 | | | | | | | |
Mr. Sanderson | | $ | 15,935,500 | | | | 15,529,500 | | | | 0 | | | | 31,465,000 | |
Mr. Butts | | $ | 4,263,000 | | | | 4,263,000 | | | | 0 | | | | 8,526,000 | |
Mr. Cockrell | | $ | 3,400,250 | | | | 3,349,500 | | | | 0 | | | | 6,749,750 | |
Mr. Rigney | | $ | 743,995 | | | | 437,871 | | | | 87,486 | | | | 1,269,352 | |
(1) | Mr. Rigney would be entitled to receive an additional $404,579 not reflected in the table above upon the first anniversary of the closing date of the Merger or upon an earlier qualifying termination of employment, subject to continued employment through such date. |
(2) | Mr. Rigney would be entitled to receive an additional $87,486 not reflected in the table above upon the first anniversary of the closing date of the Merger or upon an earlier qualifying termination of employment, subject to continued employment through such date. |
Potential Payments—Termination Without Cause1
or for Good Reason | | | | | | | | | | | | |
| | | | |
| | | | |
Mr. Sanderson | | $ | 10,628,100 | | | | 20,764 | | | | 10,648,864 | |
Mr. Butts | | $ | 3,349,421 | | | | 20,764 | | | | 3,370,185 | |
Mr. Cockrell | | $ | 2,674,512 | | | | 20,764 | | | | 2,695,276 | |
Mr. Rigney | | $ | 0 | | | | 0 | | | | 0 | |
(1) | Prior to a change in control, severance is not payable in the case of termination for poor performance. |
(2) | Consists of (i) for Mr. Sanderson, three times, and for Messrs. Butts and Cockrell, two times, his fiscal 2021 base salary plus 50 percent of the maximum bonus he could have earned for fiscal 2021, plus (ii) a pro rata portion of 50 percent of the officer’s maximum 2021 bonus opportunity. |
(3) | Consists of 24 months of continued medical benefits assuming the officer does not earlier receive similar benefits from a subsequent employer. Benefits would be paid monthly. |
47
Potential Payments—Retirement
| | | | | | | | | | | | | | | | |
| |
| | |
| | |
| | | | |
Mr. Sanderson | | $ | 5,446,688 | | | | 5,445,551 | | | | 2,530,551 | | | | 13,422,790 | |
Mr. Butts | | $ | 1,420,875 | | | | 1,481,310 | | | | 1,014,996 | | | | 3,917,181 | |
Mr. Cockrell | | $ | 1,148,541 | | | | 1,165,875 | | | | 761,055 | | | | 3,075,471 | |
Mr. Rigney | | $ | 215,499 | | | | 271,671 | | | | 233,301 | | | | 720,472 | |
Potential Payments—Disability
| | | | | | | | | | | | | | | | | | | | |
| | Value of Fully Vested Restricted Stock | | | Value of Earned Performance Shares | | | | | | Supplemental Long Term Disability 1 | | | | |
Mr. Sanderson | | $ | 14,871,825 | | | | 5,445,551 | | | | 2,530,551 | | | | 1,012,200 | | | | 23,860,127 | |
Mr. Butts | | $ | 3,978,450 | | | | 1,481,310 | | | | 1,014,996 | | | | 507,488 | | | | 6,982,244 | |
Mr. Cockrell | | $ | 3,173,288 | | | | 1,165,875 | | | | 761,055 | | | | 2,138,160 | | | | 7,238,378 | |
Mr. Rigney | | $ | 694,334 | | | | 271,671 | | | | 233,301 | | | | 0 | | | | 1,199,306 | |
(1) | Due to their respective ages, Messrs. Sanderson, Butts and Cockrell are entitled to a monthly long term disability benefit equal to 66 2/3 percent of their salary beginning one year from the date of disability until the earlier of the date they have received five years of payments or their 70th birthday. In each case the benefit is paid for at least 12 months. The amount shown in the table represents the total amount payable under this benefit assuming payments begin on October 31, 2022. |
| | | | | | | | | | | | | | | | | | | | |
| | | | | Value of Fully Vested Restricted Stock | | | Value of Earned Performance Shares | | | | | | | |
Mr. Sanderson | | $ | 1,518,300 | | | | 14,871,825 | | | | 5,445,551 | | | | 2,530,551 | | | | 24,366,227 | |
Mr. Butts | | $ | 761,232 | | | | 3,978,450 | | | | 1,481,310 | | | | 1,014,996 | | | | 7,235,988 | |
Mr. Cockrell | | $ | 652,320 | | | | 3,173,288 | | | | 1,165,875 | | | | 761,055 | | | | 5,752,538 | |
Mr. Rigney | | $ | 0 | | | | 694,334 | | | | 271,671 | | | | 233,301 | | | | 1,199,306 | |
(1) | This total amount would be paid in equal monthly installments over the course of the year following the date of death. |
48
The tables below include information about compensation paid to or earned by ournon-employee
directors for our fiscal year ended October 31, 2021. Director Compensation—Fiscal Year 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | | 24,333 | | | | 5,817 | | | | 0 | | | | 0 | | | | 0 | | | | 2,627 | | | | 32,777 | |
Fred Banks, Jr. | | | 89,500 | | | | 172,341 | | | | 0 | | | | 0 | | | | 0 | | | | 12,875 | | | | 247,716 | |
David Barksdale | | | 107,500 | | | | 163,378 | | | | 0 | | | | 0 | | | | 0 | | | | 5,458 | | | | 276,336 | |
John Bierbusse | | | 102,500 | | | | 153,703 | | | | 0 | | | | 0 | | | | 0 | | | | 3,630 | | | | 259,833 | |
Toni D. Cooley | | | 107,500 | | | | 172,333 | | | | 0 | | | | 0 | | | | 0 | | | | 13,914 | | | | 293,747 | |
Beverly Wade Hogan | | | 121,500 | | | | 153,671 | | | | 0 | | | | 0 | | | | 0 | | | | 6,465 | | | | 281,636 | |
Edith Kelly-Green | | | 109,500 | | | | 152,187 | | | | 0 | | | | 0 | | | | 0 | | | | 6,157 | | | | 267,844 | |
Phil K. Livingston | | | 127,500 | | | | 154,787 | | | | 0 | | | | 0 | | | | 0 | | | | 6,819 | | | | 289,106 | |
Suzanne T. Mestayer | | | 115,500 | | | | 156,216 | | | | 0 | | | | 0 | | | | 0 | | | | 7,209 | | | | 278,925 | |
Sonia Pérez | | | 108,500 | | | | 161,229 | | | | 0 | | | | 0 | | | | 0 | | | | 6,995 | | | | 276,724 | |
Gail Jones Pittman | | | 114,000 | | | | 152,187 | | | | 0 | | | | 0 | | | | 0 | | | | 6,937 | | | | 273,124 | |
(1) | Includes fees foregone at the election of the director for the purchase of shares through our Management Share Purchase Plan, in the amounts reflected in the table in footnote 2 below, under the column “Grant Date Fair Value of Shares Purchased.” |
(2) | Reflects the aggregate grant date fair value of awards made in fiscal 2021 under FASB ASC Topic 718. Includes 976 restricted shares issued to each director in fiscal 2021, which had a grant date fair value for each grantee of $153.65 per share. Also includes shares granted pursuant to the matching contribution provisions of the Management Share Purchase Plan. Acquisitions bynon-employee directors under the Management Share Purchase Plan in fiscal 2021 were as follows: |
49
| | | | | | | | | | | | | | | | | | | | |
| | Shares Purchased in Fiscal 2021
| | | Shares Acquired in Company Match in Fiscal 2021
| | | Total Shares Acquired in Fiscal 2021
| | |
| | | Grant Date Fair Value of Company Match
| |
Mr. Baker | | | 176 | | | | 44 | | | | 220 | | | | 23,267 | | | | 5,817 | |
Mr. Banks | | | 561 | | | | 139 | | | | 700 | | | | 90,425 | | | | 22,379 | |
Mr. Barksdale | | | 336 | | | | 83 | | | | 419 | | | | 54,296 | | | | 13,416 | |
Mr. Bierbusse | | | 98 | | | | 23 | | | | 121 | | | | 15,948 | | | | 3,741 | |
Ms. Cooley | | | 562 | | | | 139 | | | | 701 | | | | 90,444 | | | | 22,371 | |
Ms. Hogan | | | 96 | | | | 23 | | | | 119 | | | | 15,532 | | | | 3,709 | |
Ms. Kelly-Green | | | 61 | | | | 14 | | | | 75 | | | | 9,807 | | | | 2,225 | |
Mr. Livingston | | | 128 | | | | 30 | | | | 158 | | | | 20,654 | | | | 4,825 | |
Ms. Mestayer | | | 162 | | | | 39 | | | | 201 | | | | 26,111 | | | | 6,254 | |
Ms. Pérez | | | 284 | | | | 70 | | | | 354 | | | | 45,758 | | | | 11,267 | |
Ms. Pittman | | | 63 | | | | 14 | | | | 77 | | | | 10,183 | | | | 2,225 | |
(3) | Consists of matching gifts made by the Company under its Matching Gift Program, pursuant to which the Company will match gifts up to $2,500 annually per donee made by directors (and employees) to qualifying colleges and universities, and dividends on restricted stock grants. |
(4) | Mr. Baker retired from the Board on February 18, 2021. |
The following table shows as of October 31, 2021 the aggregate number of unvested stock awards outstanding for eachnon-employee
director who was in office on that date, including shares purchased or granted as matching contributions under the Management Share Purchase Plan: | | | | |
| |
| |
Mr. Banks | | | 5,999 | |
Mr. Barksdale | | | 3,486 | |
Mr. Bierbusse | | | 1,407 | |
Ms. Cooley | | | 5,358 | |
Ms. Hogan | | | 2,484 | |
Ms. Kelly-Green | | | 1,760 | |
Mr. Livingston | | | 2,664 | |
Ms. Mestayer | | | 1,951 | |
Ms. Pérez | | | 2,915 | |
Ms. Pittman | | | 3,604 | |
For a description of cash fees paid tonon-employee
directors, see the Compensation Discussion and Analysis section, above. All restricted stock held bynon-employee
directors will fully vest in the event of a change in control of our Company. Additionally, all restricted stock held bynon-employee
directors will become fully vested if the director dies, becomes disabled, or, for shares held in the Management Share Purchase Plan, if the director retires at the completion of his term of service. 50
Compensation and Risk Management
In 2010, the Compensation Committee engaged Willis Towers Watson to formally assess the level of risk arising from our compensation policies and practices. The Committee believes that Willis Towers Watson was best equipped to perform this assessment because of the depth of its understanding and experience with the current executive compensation landscape for public companies.
Willis Towers Watson reviewed our annual Bonus Award Program and Stock Incentive Plan and the following five factors related to our compensation process and design:
The extent of oversight of our pay plans by top management and the Compensation Committee.
Whether the roles of management and the Committee in overseeing the alignment of our pay plans with our business goals and risk tolerance are reasonable and clearly defined.
The extent of the balance in our plans between fixed and variable pay, cash and equity, short and long-term incentives, and overall company versus individual performance goals.
The presence of “red flags” in our plan design, such as steep incentive curves, unreasonable goals or thresholds, uncapped payouts, awards based solely on formulas, misalignment in the timing of payouts or undue focus on any one element of pay mix; compared with risk-mitigating features, such as exercise of the Committee’s discretion, clawback policies, and stock ownership requirements.
Whether performance criteria reflect appropriate risk and the use of capital, quality and sustainability of results and employee influence on meeting performance goals.
Based on this framework, Willis Towers Watson concluded that our pay plans represent a low level of risk to our Company. In particular, they noted the following:
They consider that the Bonus Award Program has appropriate performance metrics and reasonable levels of potential payouts..
Awards under the bonus plan are not paid out until our independent audit is complete, thus providing a safeguard from manipulation.
The balance in our long-term incentive plan between performance-based pay and time-based restricted stock mitigates the potential for undue risk-taking, and the use of earnings per share and return on equity metrics focus the plan on profitable growth and efficient use of capital.
Our stock ownership guidelines are also a risk-mitigating factor.
Change in control benefits for our three senior officers assist with executive retention and mitigate the risk of a conflict of interest in the context of a potential acquisition of our Company.
The Board and the Committee regularly review and address our financial performance.
Based on Willis Towers Watson’s assessment and the Committee’s independent analysis, and their respective annualre-assessments
of our compensation programs and structure, the Committee has concluded that there are no risks arising from our compensation policies and practices that are reasonably likely to have a material adverse effect on us. In reaching this conclusion, the Committee has also considered the fact that our business is primarily driven by the performance of the commodities markets, specifically the markets for fresh chicken, corn and soybean meal. These markets are external to our business and therefore the Committee does not believe that our performance-based compensation promotes excessive or inappropriate risk-taking by our management. In addition, in 2010 the Board adopted a policy under which it has the discretion to, among other things, recoup the compensation of our senior management if we have a financial restatement or if the manager in question has engaged in misconduct adversely affecting the Company. This should further help to mitigate any risk associated with our compensation programs.
Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information as of February 22, 2022 concerning:
the only stockholders known by us to own beneficially more than 5 percent of our outstanding common stock, which is our only class of voting securities outstanding,
the beneficial ownership of common stock of our directors and named executive officers, and
the beneficial ownership of common stock by all of our directors and executive officers as a group.
On February 22, 2022 there were 22,323,097 shares of our common stock outstanding.
Unless otherwise indicated, the address of each person named in the table is P.O. Box 988, Laurel, Mississippi 39441.
| | | | | | | | |
| | | | | | |
| | | | | | | | |
| | | 2,261,338 | | | | 10.13 | % |
| | | 2,060,245 | | | | 9.23 | % |
| | | 1,369,720 | | | | 6.14 | % |
Directors and Named Executive Officers: 5 | | | | | | | | |
| | | 768,399 | | | | 3.44 | % |
| | | 102,338 | | | | * | |
| | | 85,232 | | | | * | |
| | | 15,568 | | | | * | |
| | | 26,801 | | | | * | |
| | | 4,803 | | | | * | |
| | | 8,539 | | | | * | |
| | | 22,589 | | | | * | |
| | | 17,861 | | | | * | |
| | | 3,296 | | | | * | |
| | | 10,569 | | | | * | |
| | | 4,406 | | | | * | |
| | | 2,972 | | | | * | |
| | | 17,884 | | | | * | |
All directors and executive officers as a group (14 persons) | | | 1,091,257 | | | | 4.89 | % |
(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) | Based on information reported in a Schedule 13G dated February 8, 2022 filed by BlackRock, Inc., 55 East 52nd Street, New York, NY 10055. The report does not specify who has sole or shared voting or investment power over the shares. |
(3) | Based on information reported in Amendment No. 11 to Schedule 13G dated February 9, 2022 filed by The Vanguard Group, Inc., 100 Vanguard Blvd., Malvern, Pennsylvania 19355. The Schedule 13G states that The Vanguard Group has the sole power to vote or direct the vote of 0 shares, shared power to vote or direct the vote of 35,572 shares, sole power to dispose or direct the disposition of 2,006,808 shares, and shared power to dispose or direct the disposition of 53,437 shares. |
(4) | Based on information reported in Amendment No. 2 to Schedule 13G dated February 10, 2022 filed by Nuance Investments, LLC, 4900 Main Street, Suite 220, Kansas City, MO 64112. The report states that Nuance Investments, LLC has sole voting and investment power over all the shares. |
(5) | Includes: (a) shares of common stock allocated to the Employee Stock Ownership Plan (ESOP) account of the director or officer in the amounts shown in the table below, with respect to which the individual shares voting and investment power with the ESOP trustee; (b) unvested shares of restricted stock held by the director or officer in the amount shown in the table below, issued pursuant to the Sanderson Farms, Inc. and Affiliates Stock Incentive Plan, as amended, including the Management Share Purchase Plan (see “Compensation Discussion and Analysis” for a discussion of these shares); and (c) shares of common stock held in the director’s or officer’s 401(k) plan account in the amounts shown in the table below, over which the plan’s investment committee has voting power and over which the individual has investment power. |
| | | | | | | | | | | | |
| | | | | | | | | |
| | | 106,696 | | | | 61,750 | | | | — | |
| | | 0 | | | | 16,750 | | | | — | |
| | | 3,074 | | | | 13,250 | | | | — | |
| | | 3,343 | | | | 3,000 | | | | 33 | |
| | | — | | | | 5,880 | | | | — | |
| | | — | | | | 3,559 | | | | — | |
| | | — | | | | 1,382 | | | | — | |
| | | — | | | | 5,354 | | | | — | |
| | | — | | | | 2,482 | | | | — | |
| | | — | | | | 1,773 | | | | — | |
| | | — | | | | 2,631 | | | | — | |
| | | — | | | | 1,887 | | | | — | |
| | | — | | | | 2,972 | | | | — | |
| | | — | | | | 3,594 | | | | — | |
(6) | The shares shown in the table include 9,808 shares owned of record by Mr. Sanderson’s wife, over which she exercises sole voting and investment power. Pursuant to Rule13d-4 under the Exchange Act, Mr. Sanderson disclaims beneficial ownership of the 9,808 shares owned of record by his wife. |
(7) | The shares shown in the table include 1,367 shares owned of record by Mr. Livingston’s wife, over which she exercises sole voting and investment power. Pursuant to Rule13d-4 under the Exchange Act, Mr. Livingston disclaims beneficial ownership of the 1,367 shares owned of record by his wife. |
The following table provides information as of October 31, 2021, with respect to compensation plans (including individual compensation arrangements) under which equity securities of the Registrant are authorized for issuance. The Registrant has no equity compensation plan not approved by security holders. All outstanding awards were issued under the Registrant’s Stock Incentive Plan approved by shareholders on February 17, 2005, as most recently amended and approved by shareholders on February 13, 2020. No further options or other awards may be granted under the Stock Option Plan. There are 4,800,000 shares of common stock authorized for issuance under the Stock Incentive Plan.
| | | | | | | | |
| | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights 1 | | | (b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) 2 | |
Equity compensation plans approved by security holders | | | 170,650 | | | | 712,150 | |
Equity compensation plans not approved by security holders | | | — | | | | — | |
| | | 170,650 | | | | 712,150 | |
(1) | This column reflects 170,650 unearned performance shares at October 31, 2021, at the maximum level. However, management could not determine that achievement of the applicable performance based criteria is probable for those unearned performance shares. |
(2) | This column reflects the 1,345,680 shares of restricted stock granted to participants under the Stock Incentive Plan, the 322,262 shares of restricted stock purchased by or granted to participants under the MSPP provisions of the Stock Incentive Plan, the 981,464 earned performance shares that have been issued or are expected to be issued under the Stock Incentive Plan, and the 170,650 unearned outstanding performance shares that could be earned as described in footnote (1) above, in each case since the inception of the plan and net of recoveriesforfeitures, but including shares withheld to satisfy tax withholding obligations |
27
Item 13—Certain Relationships and Related Transactions and Director Independence
Review and Approval of Certain Transactions
The Audit Committee’s charter charges it with reviewing, on anon-going
basis, certain transactions between the Company and its directors, officers, major stockholders and certain other persons for conflicts of interest. The types of transactions that are subject to this review are those “related party transactions” that must be disclosed in our proxy statement under the rules of the SEC, which are transactions, arrangements or relationships in which we or any of our subsidiaries was or will be a participant, the amount of which involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest. A “related person” means generally: any of our executive officers, directors, or nominees for director;
any person who is known by us to be the beneficial owner of more than 5.0 percent of our common stock; and
any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling,orof an executive officer, director, nominee for director, or a beneficial owner of more than 5.0 percent of our common stock, and any person (other than a tenant or employee) sharing the household of such person. The Audit Committee must recommend to a special committee of qualified, independent directors whether or not the transaction should be approved. The special committee may retain independent legal, accounting, or other advisors to advise it in this process. In determining whether to approve or disapprove entry into a related party transaction, our Audit Committee takes into account, among other factors, whether the related party transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
PARTThe Audit Committee was appointed by the Board of Directors to serve as the special committee to review and consider the employment by the Company of Casey Butts and Norman Butts, who are related persons because they are the son and brother, respectively, of Director and President Lampkin Butts. The Audit Committee approved their employment and compensation. The Company paid these related persons the following compensation in fiscal year 2021:
Fiscal 2021 Related Party Compensation1
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Non-Equity Incentive Plan | | |
Fair Value of Restricted Stock ($) | | | | | |
| |
| | | | | Maximum Opportunity as % of Salary | | | | |
| | | 353,164 | | | | 45 | % | | | 135,382 | | | | 79,981 | | | | 33,431 | | | | 601,958 | |
Corporate Maintenance Manager | | | 197,694 | | | | 40 | % | | | 69,194 | | | | 32,755 | | | | 23,729 | | | | 323,372 | |
(1) | Does not include health plan benefits, which are paid according to the same criteria applicable to all salaried employees generally. |
(2) | Consists of 401(k) Plan matching contribution, ESOP allocation, dividends paid on restricted stock, vacation time sold, vaccine incentive bonus, and life insurance premium, in each case if applicable to the related person. |
The Audit Committee will review the employment and compensation of Casey Butts and Norman Butts on an annual basis.
The current Board consists of 13 directors, three of whom are employed by the Company (Messrs. Sanderson, Butts, and Cockrell). The Board conducted an annual review and affirmatively determined that all of thenon-employee
directors other than Mr. Bierbusse (Mses. Cooley, Hogan, Kelly-Green, Mestayer, Pérez and Pittman and Messrs. Banks, Barksdale, and Livingston) are “independent” under the NASDAQ standards. Mr. Bierbusse does not meet the NASDAQ Stock Market’s definition of independent director because his brother is a “principal” in the business consulting division of Ernst & Young LLP, our independent registered public accounting firm. A “principal” is a partner who is not an accountant. Mr. Bierbusse’s brother is not involved in Ernst & Young LLP’s audit of our financial statements or any other services they provide to us and Ernst & Young LLP has concluded that his relationship to Mr. Bierbusse does not impair that firm’s independence. In addition, we believe that neither Mr. Bierbusse nor his brother have any interest in the fees we pay to Ernst & Young LLP, but if such an interest exists, it is not material. Therefore, we have not entered into a “related party transaction” that must be approved by a special committee of qualified, independent directors pursuant to the charter of the Audit Committee of our Board of Directors.
Item 14—Principal Accounting Fees and Services
Fees Paid to Ernst & Young
Ernst & Young were our independent auditors for our 2021 fiscal year. Fees for services performed by them related to fiscal years 2020 and 2021 are as follows:
| | | | | | | | |
| | | | | | |
| | $ | 1,508,886 | | | $ | 1,495,106 | |
| | | — | | | | — | |
| | | 189,371 | | | | 331,076 | |
| | | — | | | | 24,125 | |
| | | | | | | | |
| | $ | 1,698,257 | | | $ | 1,850,307 | |
(1) | Includes $49,922 of Audit Fees related to fiscal year 2020 that were not available for inclusion at the time our 2021 proxy statement was filed. |
(2) | “Audit Fees” include amounts paid for the audit of the Company’s annual financial statements, reviews of the financial statements included in the Company’s Forms10-Q, and other regulatory filings and registration statements, and audit procedures performed with respect to the Company’s internal control over financial reporting, as required by Sarbanes-Oxley Act Section 404. |
(3) | “Tax Fees” consist of amounts paid for federal and state tax consultation services and tax planning, including preparation and filing of necessary forms and documentation related to securing various federal and state tax credits, tax incentives and refunds, and a diesel engine replacement grant. |
(4) | “All Other Fees” consist of amounts paid for services specifically related to the pending Merger Agreement. |
The Audit Committee has considered whether the provision of services by Ernst & Young for the Company other than audit services is compatible with maintaining Ernst & Young’s independence and has concluded that it is compatible.
Audit CommitteePre-Approval
Policies and Procedures The Audit Committeepre-approves
all auditing services and permittednon-audit
services (including the fees and terms of those services) to be performed for the Company by its independent auditors prior to engagement, subject to the de minimis exceptions fornon-audit
services permitted by the Securities Exchange Act of 1934, as amended (Exchange Act) which are approved by the Audit Committee prior to the completion of the audit. The Audit Committee may form and delegate authority to subcommittees of one or more Audit Committee members, including authority to grantpre-approvals
of audit andnon-audit
services, provided that any decision of that subcommittee to grantpre-approval
is presented to the full Audit Committee at its next scheduled meeting. The Audit Committee chairperson is also authorized to grant preapprovals of audit and permittednon-audit
services provided the chairperson’s decisions are reported to the full committee. For fiscal 2021, the Audit Committeepre-approved
allnon-audit
services performed by the independent auditors.
Item 15. 15—Exhibits, and Financial Statement Schedules.Schedules
(a)1. FINANCIAL STATEMENTS:(a) | The following documents are filed as a part of this report: |
The following consolidated financial statements of the Registrant are included in Item 8:8 of the Original Filing:
Consolidated Balance Sheets — October 31, 20052021 and 20042020
Consolidated Statements of IncomeOperations — Years ended October 31, 2005, 20042021, 2020 and 20032019
Consolidated Statements of Stockholders’ Equity — Years ended October 31, 2005, 20042021, 2020 and 20032019
Consolidated Statements of Cash Flows — Years ended October 31, 2005, 20042021, 2020 and 20032019
Notes to Consolidated Financial Statements — October 31, 20052021
(a)2. FINANCIAL STATEMENT SCHEDULES: | | FINANCIAL STATEMENT SCHEDULES |
The following consolidated financial statement schedules of the Registrant are included in Item 8:8 of the Original Filing:
Schedule II — Valuation and Qualifying Accounts
All other schedules are omitted as they are not required, are not applicable or the required information is set forth in the Financial Statements or notes thereto.
(a) 3. EXHIBITS:
The following exhibits are filed with this Annual Report or are incorporated herein by reference:
| | |
| | |
| |
2.1 | | |
Exhibit | | |
Number | | Description |
| 3.1 | | | ArticlesAgreement and Plan of IncorporationMerger, dated as of the Registrant dated October 19, 1978.August 8, 2021, by and among Sanderson Farms, Inc., Walnut Sycamore Holdings LLC, Sycamore Merger Sub LLC and solely for purposes of certain provisions specified therein, Wayne Farms LLC. (Incorporated by reference to Exhibit 4.12.1 filed with the registration statementRegistrant’s Current Report on Form S-8 filed by the Registrant8-K on July 15, 2002, Registration No. 333-92412.August 9, 2021.) |
| |
3.1 | | | | |
| 3.2 | | | Articles of Amendment, dated March 23, 1987, to theRestated Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.23.1 filed with the registration statementRegistrant’s Quarterly Report on Form S-8 filed by10-Q for the RegistrantQuarter ended on July 15, 2002, Registration No. 333-92412.31, 2015.) |
| |
3.2 | | | | |
| 3.3 | | | Articles of Amendment, dated April 21, 1989, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.3 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) |
| | | | |
| 3.4 | | | Certificate of Designations of Series A Junior Participating Preferred Stock of the Registrant dated April 21, 1989. (Incorporated by reference to Exhibit 4.4 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) |
| | | | |
| 3.5 | | | Article of Amendment, dated February 20, 1992, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.5 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) |
| | | | |
| 3.6 | | | Article of Amendment, dated February 27, 1997, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.6 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) |
| | | | |
| 3.7 | | | By-LawsBylaws of the Registrant, amended and restated as of December 2, 200430, 2020. (Incorporated by reference to Exhibit 33.1 filed with the Registrant’s Current Report on Form 8-K on December 8, 2004.January 5, 2021.) |
28
| |
4.1 | | | | |
Exhibit | | |
Number | | Description |
| 10.1 | | | Contract dated July 31, 1964 between the Registrant and the City of Laurel, Mississippi.capital stock. (Incorporated by reference to Exhibit 10-D4.1 filed with the registration statementRegistrant’s Annual Report on Form S-1 filed by10-K for the Registrant on April 3, 1987, Registration No. 33-13141.year ended October 31, 2019.) |
| |
10.1+ | | | | |
| 10.2 | | | Contract Amendment dated December 1, 1970 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-1 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) |
| | | | |
| 10.3 | | | Contract Amendment dated June 11, 1985 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-2 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) |
| | | | |
| 10.4 | | | Contract Amendment dated October 7, 1986 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-3 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) |
| | | | |
| 10.5 + *** | | | Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan, as amended and restated effective November 1, 1997.2013. (Incorporated by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2013.) |
| |
10.2+ | | | | |
| 10.6 + *** | | | First Amendment One dated October 22, 2002 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. |
| | | | |
| 10.7 + *** | | | Amendment Two dated December 2, 2003 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. |
| | | | |
| 10.8 + *** | | | Amendment Three dated February 11, 2004 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. |
| | | | |
| 10.9 + *** | | | Amendment Four dated January 1, 2003 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. |
| | | | |
| 10.10 + *** | | | Amendment Five dated March 28, 2005 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. |
| | | | |
| 10.11 + | | | Sanderson Farms, Inc. and Affiliates Employee Stock OptionOwnership Plan (Amended and Restateddated as of February 28, 2002).July 23, 2014. (Incorporated by reference to Exhibit 4.8 filed with10.6 to the registration statementRegistrant’s Annual Report on Form S-8 filed by10-K for the Registrant on July 15, 2002, Registration No. 333-92412.year ended October 31, 2016.) |
| | |
10.3+ | | | | |
| 10.12 + | | | FormSecond Amendment to the Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan dated as of Nonstatutory Stock Option Agreement.May 2, 2016. (Incorporated by reference to Exhibit 4.9 filed with10.7 to the registration statementRegistrant’s Annual Report on Form S-8 filed by10-K for the Registrant on July 15, 2002, Registration No. 333-92412.year ended October 31, 2016.) |
| |
10.4+ | | | | |
| 10.13 + | | | Third Amendment to the Sanderson Farms, Inc. Bonus Award Program effective November 1, 2004.and Affiliates Employee Stock Ownership Plan dated as of October 20, 2016. (Incorporated by reference to Exhibit 1010.8 to the Registrant’s CurrentAnnual Report on Form 8-K filed December 8, 2004.10-K for the year ended October 31, 2016.) |
| |
10.5+ | | Fourth Amendment to the Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan dated as of January 19, 2017. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2017.) |
| |
10.6+ | | Fifth Amendment to the Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan dated as of October 19, 2017. (Incorporated by reference to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2017.) |
| 10.14 + |
10.7+ | | Sixth Amendment to the Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan dated as of January 16, 2020. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2020.) |
| |
10.8+ | | Seventh Amendment to the Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan dated as of October 29, 2020. (Incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2020.) |
| |
10.9+ | | Eighth Amendment to the Sanderson Farms, Inc. and Affiliates Employee Stock Ownership Plan dated as of July 16, 2020. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2020.) |
| |
10.10+ | | Sanderson Farms, Inc. and Affiliates Stock Incentive Plan.Plan, as amended and restated on February 13, 2020. (Incorporated by reference to Exhibit B4.3 to the Registrant’s Definitive Proxy Statementregistration statement on Form S-8 filed by the Registrant on January 14, 2005 for its Annual Meeting held February 17, 2005.27, 2020, Registration No. 333-236686.) |
| |
10.11+ | | | | |
| 10.15 + | | | Form of Restricted Stock Agreement between the Registrant and its non-employee directors who are granted restricted stock.Sanderson Farms, Inc. Bonus Award Program Effective November 1, 2020. (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K on March 1, 2005.January 25, 2021.) |
| |
10.12+ | | | | |
| 10.16 + | | | Form of Restricted Stock Agreement between Registrant and its officers and employees who are granted restricted stock.Sanderson Farms, Inc. Supplemental Disability Plan effective September 1, 2008. (Incorporated by reference to Exhibit 10.2 filed with10 to the Registrant’s Current Report on Form 8-K filed by the Registrant on October 1, 2008). |
29
| |
10.13+ | | | | |
Exhibit | | |
Number | | Description |
| | | | Form 8-K on March 1, 2005.) |
| | | | |
| 10.17 + | | | Form of Share Purchase Agreement between the Registrant and its non-employee directors who participate in its management share purchase plan, as amended. (Incorporated by reference to Exhibit 10.310.2 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.April 30, 2007.) |
| |
10.14+ | | | | |
| 10.18 + | | | Form of Share Purchase Agreement between the Registrant and its officers and employees who participate in its management share purchase plan, as amended. (Incorporated by reference to Exhibit 10.410.1 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarterQuarter ended July 31, 2005.April 30, 2008.) |
| |
10.15+ | | | | |
| 10.19 + | | | Form of Restricted Stock Agreement between the Registrant and its officers and employees who are granted restricted stock.stock with a four-year vesting period (for awards granted on or after November 1, 2013). (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed December 2, 2005.) |
| | | | |
| 10.20 + | | | Form of Performance Share Agreement between Registrant and its officers and employees who are granted performance shares. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed December 2, 2005.) |
| | | | |
| 10.21 | | | Memorandum of Agreement dated June 13, 1989, between Pike County, Mississippi and the Registrant. (Incorporated by reference to Exhibit 10-L filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1990.) |
| | | | |
| 10.22 | | | Wastewater Treatment Agreement between the City of Magnolia, Mississippi and the Registrant dated August 19, 1991. (Incorporated by reference to Exhibit 10-M filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1991.) |
| | | | |
| 10.23 | | | Memorandum of Agreement and Purchase Option between Pike County, Mississippi and the Registrant dated May 1991. (Incorporated by reference to Exhibit 10-N filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1991.) |
| | | | |
| 10.24 | | | Lease Agreement between Pike County, Mississippi and the Registrant dated as of November 1, 1992. (Incorporated by reference to Exhibit 10-M filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1993.) |
| | | | |
| 10.25 | | | Credit Agreement dated as of July 31, 1996 among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank, Atlanta; Deposit Guaranty National Bank; Caisse National de Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10-N to Amendment No. 1 to the Quarterly Report of the Registrant for the quarter ended July 31, 1996.) |
| | | | |
| 10.26 | | | First Amendment to Credit Agreement, dated as of October 23, 1997, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.2510.14 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.2013.) |
| |
10.16+ | | | | |
| 10.27 | | | Second Amendment to CreditForm of Restricted Stock Agreement datedbetween the Registrant and its non-employee directors who are granted restricted stock, as of July 23, 1998, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank.amended. (Incorporated by reference to Exhibit 10.2610.4 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2007.) |
| | | | |
Exhibit | | |
Number | | Description |
| | | | Branch; and Trustmark National Bank.its employees who are granted performance shares (for fiscal 2020). (Incorporated by reference to Exhibit 10.2710.17 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.2019.) |
| |
10.19+ | | | | |
| 10.29 | | | Fourth Amendment to CreditForm of Performance Share Agreement dated as of March 17, 2000, bybetween the Registrant and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank.its employees who are granted performance shares (for fiscal 2021). (Incorporated by reference to Exhibit 10.2810.20 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.2020.) |
| |
10.20+ | | | | |
| 10.30 | | | Fifth Amendment to CreditEmployment Agreement dated as of February 16, 2001, byNovember 1, 2015 between the Registrant and amongJoe F. Sanderson, Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank.Jr. (Incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.) |
| | | | |
| 10.31 | | | Sixth Amendment to Credit Agreement dated as of July 2, 2001, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10d to the Quarterly Report of the Registrant for the quarter ended January 31, 2002.) |
| | | | |
| 10.32 | | | Seventh Amendment to Credit Agreement dated as of July 29, 2002, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the Quarterly Report of the Registrant for the quarter ended July 31, 2002.) |
| | | | |
| 10.33 | | | Eighth Amendment to Credit Agreement dated as of July 31, 2003, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, individually and as Agent; SunTrust Bank; AmSouth Bank; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2003.) |
| | | | |
| 10.34 | | | Ninth Amendment dated May 18, 2004 to Credit Agreement dated as of July 31, 1996, as amended, among Sanderson Farms, Inc., Harris Trust and Savings Bank, as agent for the Banks, and Harris Trust and Savings Bank, Sun Trust Bank, AmSouth Bank and Trustmark National Bank. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2004.) |
| | | | |
| 10.35 | | | Agreement dated as of April 22, 1999 between Sanderson Farms, Inc. and Chase Mellon Shareholder Services, L.L.C. (Incorporated by reference to Exhibit 4.1 filed with the Registrant’s Current Report on Form 8-K dated April 22, 1999.8-K/A on January 13, 2016.) |
| |
10.21+ | | Employment Agreement dated as of November 1, 2015 between the Registrant and Lampkin Butts. (Incorporated by reference to Exhibit 10.2 filed with the Registrant’s Current Report on Form 8-K/A on January 13, 2016.) |
| |
10.22+ | | Employment Agreement dated as of November 1, 2015 between the Registrant and D. Michael Cockrell. (Incorporated by reference to Exhibit 10.3 filed with the Registrant’s Current Report on Form 8-K on November 2, 2015.) |
| 10.36 |
10.23+ | | Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and Lampkin Butts. (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K on August 9, 2021.) |
| |
10.24+ | | Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and Joe F. Sanderson, Jr. (Incorporated by reference to Exhibit 10.2 filed with the Registrant’s Current Report on Form 8-K on August 9, 2021.) |
| |
10.25+ | | Employment Agreement Amendment, dated as of August 8, 2021, by and between Sanderson Farms, Inc. and Michael Cockrell. (Incorporated by reference to Exhibit 10.3 filed with the Registrant’s Current Report on Form 8-K on August 9, 2021.) |
| |
10.26 | | Lease Agreement dated as of December 1, 2004, between Moultrie-Colquitt County Development Authority, as Lessor, and Sanderson Farms, Inc. (Processing Division) as Lessee. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.) |
| |
10.27 | | | | |
| 10.37 | | | Bond Purchase Loan Agreement between Moultrie-Colquitt County Development Authority, as Issuer, and Sanderson Farms, Inc. (Processing Division), as Purchaser. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.) |
| |
10.28 | | | | |
| 10.38 | | | Credit Agreement, dated November 17, 2005April 23, 2021, among Sanderson Farms, Inc. and, BMO Harris Bank, N.A., Individually and as Agentagent for the Banksbanks defined therein.therein, and the banks party thereto. (Incorporated by reference to Exhibit 10.1 tofiled with the Registrant’s Current Report on Form 8-K filed November 23, 2005. on April 28, 2021.) |
| |
10.29 | | | | |
| 10.39 | | | Guaranty Agreement dated November 17, 2005April 23, 2021, of Sanderson Farms, Inc. (Foods Division), Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division). (Incorporated by reference to Exhibit 10.2 tofiled with the Registrant’s Current Report on Form 8-K filed November 23, 2005. on April 28, 2021.) |
31
| |
10.30 | | | | |
Exhibit | | |
Number | | Description |
| 10.40 | | | IntercreditorLease Agreement dated as of November 17, 2005 among The Lincoln National Life Insurance Company, Harris N.A., SunTrust Bank, AmSouth Bank, U.S. Bank National Association, Regions Bank,July 1, 2006, between Adel Industrial Development Authority as Lessor, and Trustmark National Bank.Sanderson Farms, Inc. (Production Division) as Lessee. (Incorporated by reference to Exhibit 10.3 to10.1 filed with the Registrant’s CurrentQuarterly Report on Form 8-K filed November 23, 2005.10-Q for the quarter ended July 31, 2006.) |
| | |
* | | Filed herewith.previously with the Original Filing. |
|
*** | | Filed previously.Furnished previously with the Original Filing. |
|
+ | | Management contract or compensatory plan or arrangement. |
(b) Agreements Available Upon Request by the Commission.
The Registrant’s credit agreement with the banks for which Harris Trust and Savings Bank acts as agent is filed or incorporated by reference as an exhibit to this report. The Registrant is a party to various other agreements defining the rights
QUALIFICATION BY REFERENCE
Any statement contained in this Annual Report concerning the contents of any contract or other document filed as an exhibit to this Annual Report or incorporated herein by reference is not necessarily complete, and in each instance reference is made to the copy of the document filed.
32
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | |
| | SANDERSON FARMS, INC. |
| | | | |
| | By: | | /s/ D. Michael Cockrell |
| | | | Treasurer and Chief Financial Officer |
Date: June 28, 2006
33
EXHIBITS:
The following exhibits are filed with this Annual Report or are incorporated herein by reference:
| | | | |
Exhibit | | |
Number | | Description |
| 3.1 | | | Articles of Incorporation of the Registrant dated October 19, 1978. (Incorporated by reference to Exhibit 4.1 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) |
| | | | |
| 3.2 | | | Articles of Amendment, dated March 23, 1987, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.2 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) |
| | | | |
| 3.3 | | | Articles of Amendment, dated April 21, 1989, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.3 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) |
| | | | |
| 3.4 | | | Certificate of Designations of Series A Junior Participating Preferred Stock of the Registrant dated April 21, 1989. (Incorporated by reference to Exhibit 4.4 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) |
| | | | |
| 3.5 | | | Article of Amendment, dated February 20, 1992, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.5 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) |
| | | | |
| 3.6 | | | Article of Amendment, dated February 27, 1997, to the Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 4.6 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) |
| | | | |
| 3.7 | | | By-Laws of the Registrant, amended and restated as of December 2, 2004 (Incorporated by reference to Exhibit 3 filed with the Registrant’s Current Report on Form 8-K on December 8, 2004.) |
| | | | |
| 10.1 | | | Contract dated July 31, 1964 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) |
| | | | |
| 10.2 | | | Contract Amendment dated December 1, 1970 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-1 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) |
| | | | |
| 10.3 | | | Contract Amendment dated June 11, 1985 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-2 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) |
| | | | |
| 10.4 | | | Contract Amendment dated October 7, 1986 between the Registrant and the City of Laurel, Mississippi. (Incorporated by reference to Exhibit 10-D-3 filed with the registration statement on Form S-1 filed by the Registrant on April 3, 1987, Registration No. 33-13141.) |
| | | | |
| 10.5 + *** | | | Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates, amended and restated effective November 1, 1997. |
| | | | |
| 10.6 + *** | | | Amendment One dated October 22, 2002 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. |
| | | | |
| 10.7 + *** | | | Amendment Two dated December 2, 2003 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. |
34
| | | | |
Exhibit | | |
Number | | Description |
| 10.8 + *** | | | Amendment Three dated February 11, 2004 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. |
| | | | |
| 10.9 + *** | | | Amendment Four dated January 1, 2003 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. |
| 10.10 + *** | | | Amendment Five dated March 28, 2005 to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. |
| 10.11 + | | | Sanderson Farms, Inc. and Affiliates Stock Option Plan (Amended and Restated as of February 28, 2002). (Incorporated by reference to Exhibit 4.8 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) |
| | | | |
| 10.12 + | | | Form of Nonstatutory Stock Option Agreement. (Incorporated by reference to Exhibit 4.9 filed with the registration statement on Form S-8 filed by the Registrant on July 15, 2002, Registration No. 333-92412.) |
| | | | |
| 10.13 + | | | Sanderson Farms, Inc. Bonus Award Program effective November 1, 2004. (Incorporated by reference to Exhibit 10 to the Registrant’s Current Report on Form 8-K filed December 8, 2004.) |
| | | | |
| 10.14 + | | | Sanderson Farms, Inc. and Affiliates Stock Incentive Plan. (Incorporated by reference to Exhibit B to the Registrant’s Definitive Proxy Statement filed on January 14, 2005 for its Annual Meeting held February 17, 2005.) |
| | | | |
| 10.15 + | | | Form of Restricted Stock Agreement between the Registrant and its non-employee directors who are granted restricted stock. (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K on March 1, 2005.) |
| | | | |
| 10.16 + | | | Form of Restricted Stock Agreement between Registrant and its officers and employees who are granted restricted stock. (Incorporated by reference to Exhibit 10.2 filed with the Registrant’s Current Report on Form 8-K on March 1, 2005.) |
| | | | |
| 10.17 + | | | Form of Agreement between Registrant and its non-employee directors who participate in its management share purchase plan, as amended. (Incorporated by reference to Exhibit 10.3 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.) |
| | | | |
| 10.18 + | | | Form of Agreement between Registrant and its officers and employees who participate in its management share purchase plan, as amended. (Incorporated by reference to Exhibit 10.4 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.) |
| | | | |
| 10.19 + | | | Form of Restricted Stock Agreement between Registrant and its officers and employees who are granted restricted stock. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed December 2, 2005.) |
| | | | |
| 10.20 + | | | Form of Performance Share Agreement between Registrant and its officers and employees who are granted performance shares. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed December 2, 2005.) |
| | | | |
| 10.21 | | | Memorandum of Agreement dated June 13, 1989, between Pike County, Mississippi and the Registrant. (Incorporated by reference to Exhibit 10-L filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1990.) |
| | | | |
| 10.22 | | | Wastewater Treatment Agreement between the City of Magnolia, Mississippi and the Registrant dated August 19, 1991. (Incorporated by reference to Exhibit 10-M filed with the Registrant’s Annual Report |
35
| | | | |
Exhibit | | |
Number | | Description |
| | | | on Form 10-K for the year ended October 31, 1991.) |
| | | | |
| 10.23 | | | Memorandum of Agreement and Purchase Option between Pike County, Mississippi and the Registrant dated May 1991. (Incorporated by reference to Exhibit 10-N filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1991.) |
| | | | |
| 10.24 | | | Lease Agreement between Pike County, Mississippi and the Registrant dated as of November 1, 1992. (Incorporated by reference to Exhibit 10-M filed with the Registrant’s Annual Report on Form 10-K for the year ended October 31, 1993.) |
| | | | |
| 10.25 | | | Credit Agreement dated as of July 31, 1996 among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank, Atlanta; Deposit Guaranty National Bank; Caisse National de Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10-N to Amendment No. 1 to the Quarterly Report of the Registrant for the quarter ended July 31, 1996.) |
| | | | |
| 10.26 | | | First Amendment to Credit Agreement, dated as of October 23, 1997, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.) |
| | | | |
| 10.27 | | | Second Amendment to Credit Agreement, dated as of July 23, 1998, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.) |
| | | | |
| 10.28 | | | Third Amendment to Credit Agreement, dated as of July 29, 1999, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; First American National Bank, D/B/A Deposit Guaranty National Bank; Caisse Nationale De Credit Agricole, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.) |
| | | | |
| 10.29 | | | Fourth Amendment to Credit Agreement, dated as of March 17, 2000, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.) |
| | | | |
| 10.30 | | | Fifth Amendment to Credit Agreement, dated as of February 16, 2001, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.) |
| | | | |
| 10.31 | | | Sixth Amendment to Credit Agreement dated as of July 2, 2001, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; Credit Agricole Indosuez, Chicago Branch; and Trustmark National Bank. (Incorporated by reference to Exhibit 10d to the Quarterly Report of the Registrant for the quarter ended January 31, 2002.) |
| | | | |
| 10.32 | | | Seventh Amendment to Credit Agreement dated as of July 29, 2002, by and among Sanderson Farms, Inc.; Harris Trust and Savings Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the Quarterly Report of the Registrant for the quarter ended July 31, 2002.) |
| | | | |
| 10.33 | | | Eighth Amendment to Credit Agreement dated as of July 31, 2003, by and among Sanderson Farms, |
36
| | | | |
Exhibit | | |
Number | | Description |
| | | | Inc.; Harris Trust and Savings Bank, individually and as Agent; SunTrust Bank; AmSouth Bank; and Trustmark National Bank. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2003.) |
| | | | |
| 10.34 | | | Ninth Amendment dated May 18, 2004 to Credit Agreement dated as of July 31, 1996, as amended, among Sanderson Farms, Inc., Harris Trust and Savings Bank, as agent for the Banks, and Harris Trust and Savings Bank, Sun Trust Bank, AmSouth Bank and Trustmark National Bank. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2004.) |
| | | | |
| 10.35 | | | Agreement dated as of April 22, 1999 between Sanderson Farms, Inc. and Chase Mellon Shareholder Services, L.L.C. (Incorporated by reference to Exhibit 4.1 filed with the Registrant’s Current Report on Form 8-K dated April 22, 1999.) |
| | | | |
| 10.36 | | | Lease Agreement dated as of December 1, 2004 between Moultrie-Colquitt County Development Authority, as Lessor, and Sanderson Farms, Inc. (Processing Division) as Lessee. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.) |
| | | | |
| 10.37 | | | Bond Purchase Loan Agreement between Moultrie-Colquitt County Development Authority, as Issuer, and Sanderson Farms, Inc. (Processing Division), as Purchaser. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.) |
| | | | |
| 10.38 | | | Credit Agreement dated November 17, 2005 among Sanderson Farms, Inc. and Harris N.A., Individually and as Agent for the Banks defined therein. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 23, 2005.) |
| | | | |
| 10.39 | | | Guaranty Agreement dated November 17, 2005 of Sanderson Farms, Inc. (Foods Division), Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division). (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed November 23, 2005.) |
| | | | |
| 10.40 | | | Intercreditor Agreement dated as of November 17, 2005 among The Lincoln National Life Insurance Company, Harris N.A., SunTrust Bank, AmSouth Bank, U.S. Bank National Association, Regions Bank, and Trustmark National Bank. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed November 23, 2005.) |
| | | | |
| 21 | | | List of Subsidiaries of the Registrant. (Incorporated by reference to Exhibit 21 to the Registrant’s Annual Report on Form 10-K for the year ended October 31, 2002.) |
| | | | |
| 23* | | | Consent of Independent Registered Public Accounting Firm. |
| | | | |
| 31.1* | | | Certification of Chief Executive Officer. |
| | | | |
| 31.2* | | | Certification of Chief Financial Officer. |
| | | | |
| 32.1** | | | Section 1350 Certification. |
| | | | |
| 32.2** | | | Section 1350 Certification. |
| | |
* |
| |
| | Filed herewith. |
|
** | | Furnished herewith.Treasurer, Chief Financial Officer and Chief Legal Officer |
|
*** | | Filed previously. |
|
+ | | Management contract or compensatory plan or arrangement. |
37