Market Overview

Sanderson Farms, Inc. Reports Results for Third Quarter of Fiscal 2018


Sanderson Farms, Inc. (NASDAQ:SAFM) today reported results for the
third fiscal quarter and nine months ended July 31, 2018.

Net sales for the third quarter of fiscal 2018 were $852.4 million
compared with $931.9 million for the same period a year ago. For the
quarter, the Company reported net income of $11.5 million, or $0.50 per
share, compared with net income of $115.8 million, or $5.09 per share,
for the third quarter of fiscal 2017.

Net sales for the first nine months of fiscal 2018 were $2,437.9 million
compared with $2,422.3 million for the first nine months of fiscal 2017.
Net income for the first nine months of fiscal 2018 totaled
$104.6 million, or $4.58 per share, compared with net income of
$206.9 million, or $9.10 per share, for the first nine months of last

Net income for the third fiscal quarter reflects an accrual for probable
liability for a contribution to the Company's Employee Stock Ownership
Plan of $2.4 million before income tax, or $0.08 per share net of income
tax, compared to $12.5 million before income tax, or $0.36 per share net
of income tax, for the same period a year ago.

"Sanderson Farms' financial results for the third quarter of fiscal 2018
reflect significant counter-seasonal weakness in market prices for
boneless breast meat produced for food service customers," said Joe F.
Sanderson, Jr., chairman and chief executive officer of Sanderson Farms,
Inc. "In fact, market prices for boneless breast meat, chicken breast
tenders, boneless thigh meat, bulk leg quarters and jumbo wings produced
at our plants that process a larger bird were all significantly lower
this year when compared to last year's third fiscal quarter. We believe
the counter-seasonal softness is due, at least in part, to a lack of
chicken promotions at both food service and retail grocery stores and an
ample supply of competing proteins. Market prices for poultry produced
for retail grocery stores continue to reflect a more balanced supply and
demand environment. Feed costs per pound of chicken processed during the
third fiscal quarter were up 5.8 percent compared to last year's third
quarter and were higher by 7.7 percent sequentially."

According to Sanderson, compared with the third fiscal quarter of 2017,
market prices for chickens sold to retail grocery store customers
remained relatively flat at levels reflecting a good supply and demand
balance. Compared with the third fiscal quarter of 2017, jumbo boneless
breast meat prices were lower by approximately 26.6 percent, the average
market price for bulk leg quarters decreased approximately 12.0 percent,
and jumbo wing prices were lower by 35.4 percent. The Company's average
feed cost per pound of poultry products processed increased 1.5 cents
per pound, or 5.8 percent, compared with the third quarter of fiscal

Prices paid for corn and soybean meal, the Company's primary feed
ingredients, increased 4.3 percent and 15.5 percent, respectively,
compared with the third quarter of fiscal 2017. In its report published
August 10, 2018, the USDA's supply estimates for both corn and soybeans
were higher than analysts' expectations. If achieved, the USDA's current
yield and harvest estimates for the United States' 2018 corn and soybean
crops would leave both grains well supplied going into fiscal 2019. Had
the Company priced all of its feed grain needs for fiscal 2019 at
yesterday's closing Chicago Board of Trade prices, cash costs for grain
would be $15.2 million higher during fiscal 2019 compared to this fiscal

Sanderson added, "The USDA expects chicken production growth of 2.3
percent during calendar 2018, which alone shouldn't be a burdensome
supply number. However, chicken will continue to compete against an
abundant domestic supply of protein, which may continue to pressure
market prices. As always, we will manage our business consistently
regardless of market cycles.

"We continue to make progress at our new Tyler, Texas, facilities.
Construction is expected to be complete during the first quarter of
calendar 2019, and we look forward to the opportunities the new
facilities will provide to our shareholders, our customers and our
employees," said Sanderson.

Sanderson Farms will hold a conference call to discuss this press
release today, August 23, 2018, at 10:00 a.m. Central, 11:00 a.m.
Eastern. Investors will have the opportunity to listen to a live
internet broadcast of the conference call through the Company's website
To listen to the live call, please go to the website at least 15 minutes
early to register, download, and install any necessary audio software.
For those who cannot listen to the live broadcast, an internet replay
will be available shortly after the call and continue through September
24, 2018. Those without internet access or who prefer to participate via
telephone may call 1-888-204-4368, access code 7234032.

Sanderson Farms, Inc. is engaged in the production, processing,
marketing and distribution of fresh, frozen and minimally prepared
chicken. Its shares trade on the NASDAQ Global Select Market under the
symbol SAFM.

This press release includes forward-looking statements within the
meaning of the "safe harbor" provisions of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended.
Forward-looking statements are based on a
number of assumptions about future events and are subject to various
risks, uncertainties and other factors that may cause actual results to
differ materially from the views, beliefs, projections and estimates
expressed in such statements.
These risks, uncertainties and
other factors include, but are not limited to, those discussed
under "Risk Factors" in the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 2017, the Company's subsequent reports on
Form 10-Q, and the following:

(1) Changes in the market price for the Company's finished products and
feed grains, both of which may fluctuate substantially and exhibit
cyclical characteristics typically associated with commodity markets.

(2) Changes in economic and business conditions, monetary and fiscal
policies or the amount of growth, stagnation or recession in the global
or U.S. economies, any of which may affect the value of inventories, the
collectability of accounts receivable or the financial integrity of
customers, and the ability of the end user or consumer to afford protein.

(3) Changes in the political or economic climate, trade policies, laws
and regulations or the domestic poultry industry of countries to which
the Company or other companies in the poultry industry ship product, and
other changes that might limit the Company's or the industry's access to
foreign markets.

(4) Changes in laws, regulations, and other activities in government
agencies and similar organizations applicable to the Company and the
poultry industry and changes in laws, regulations and other activities
in government agencies and similar organizations related to food safety.

(5) Various inventory risks due to changes in market conditions,
including, but not limited to, the risk that net realizable values of
live and processed poultry inventories might be lower than the cost of
such inventories, requiring a downward adjustment to record the value of
such inventories at the lower of cost or net realizable value as
required by generally accepted accounting principles.

(6) Changes in and effects of competition, which is significant in all
markets in which the Company competes, and the effectiveness of
marketing and advertising programs. The Company competes with regional
and national firms, some of which have greater financial and marketing
resources than the Company.

(7) Changes in accounting policies and practices adopted voluntarily by
the Company or required to be adopted by accounting principles generally
accepted in the United States.

(8) Disease outbreaks affecting the production, performance and/or
marketability of the Company's poultry products, or the contamination of
its products.

(9) Changes in the availability and cost of labor and growers.

(10) The loss of any of the Company's major customers.

(11) Inclement weather that could hurt Company flocks or otherwise
adversely affect the Company's operations, or changes in global weather
patterns that could affect the supply and price of feed grains.

(12) Failure to respond to changing consumer preferences and negative or
competitive media campaigns.

(13) Failure to successfully and efficiently start up and run a new
plant or integrate any business the Company might acquire.

(14) Unfavorable results from currently pending litigation and
proceedings or litigation and proceedings that could arise in the future.

Readers are cautioned not to place undue reliance on forward-looking
statements made by or on behalf of Sanderson Farms.
such statement speaks only as of the day it was made. The Company
undertakes no obligation to update or to revise any forward-looking
statements. The factors described above cannot be controlled by the
Company. When used in this press release or in the related conference
call, the words "believes," "estimates," "plans," "expects," "should,"
"could," "outlook," and "anticipates" and similar expressions as they
relate to the Company or its management are intended to
identify forward-looking statements.
Examples of
forward-looking statements include statements of the Company's belief
about future earnings, production levels, capital expenditures, grain
prices, global economic conditions, supply and demand factors, growth
plans and other industry conditions.



Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

Three Months Ended

Nine Months Ended

July 31,

July 31,





Net sales $ 852,434 $ 931,901 $ 2,437,856 $ 2,422,285
Costs and expenses:
Cost of sales 781,568 692,585 2,187,079 1,954,259
Selling, general and administrative   55,778   62,036   163,390   151,747
  837,346   754,621   2,350,469   2,106,006
Operating income 15,088 177,280 87,387 316,279
Other income (expense):
Interest income 745 327 2,069 823
Interest expense (519 ) (515 ) (1,548 ) (1,375 )
Other 3 3 9 8
  229   (185 )   530   (544 )
Income before income taxes 15,317 177,095 87,917 315,735
Income tax expense (benefit)   3,842   61,261   (16,712 )   108,861
Net income $ 11,475 $ 115,834 $ 104,629 $ 206,874
Basic earnings per share $ 0.50 $ 5.09 $ 4.58 $ 9.10
Diluted earnings per share $ 0.50 $ 5.09 $ 4.58 $ 9.10
Dividends per share $ 0.32 $ 0.24 $ 0.96 $ 0.72


Condensed Consolidated Balance Sheets

(In thousands)

July 31,

October 31,



(Unaudited) (1)
Current assets:
Cash and cash equivalents $ 288,284 $ 419,285
Accounts receivable, net 130,921 138,868
Inventories 282,056 252,765
Refundable income taxes 26,266 0
Prepaid expenses and other current assets   44,235   38,620
Total current assets 771,762 849,538
Property, plant and equipment 1,869,845 1,657,084
Less accumulated depreciation   (856,039 )   (780,276 )
1,013,806 876,808
Other assets   6,036   6,897
Total assets $ 1,791,604 $ 1,733,243
Current liabilities:
Accounts payable $ 110,220 $ 90,904
Dividends payable 7,308 0
Accrued expenses 71,361 101,168
Accrued income taxes 0   6,649
Total current liabilities 188,889 198,721
Claims payable and other liabilities 9,667 9,762
Deferred income taxes 68,036 91,898
Commitments and contingencies
Stockholders' equity:
Common stock 22,838 22,803
Paid-in capital 144,407 134,999
Retained earnings   1,357,767   1,275,060
Total stockholders' equity   1,525,012   1,432,862
Total liabilities and stockholders' equity $ 1,791,604 $ 1,733,243
(1)   The Condensed Consolidated Balance Sheet at October 31, 2017, was
derived from the audited consolidated financial statements at that
date, but does not include all of the information and footnotes
required by U.S. generally accepted accounting principles for
complete financial statements.

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