Sanderson Farms, Inc. (NASDAQ: SAFM) today reported results for
the fourth quarter and fiscal year ended October 31, 2019.
Net sales for the fourth quarter of fiscal 2019 were $906.5
million compared with $798.1 million for the same period a year
ago. For the quarter, the Company reported a net loss of $22.9
million, or $1.05 per share, compared with a net loss of $ 43.2
million, or $1.95 per share, for the fourth quarter of fiscal
2018.
Net sales for fiscal 2019 were $3.440 billion compared with
$3.236 billion for fiscal 2018. Net income for the fiscal year
totaled $53.3 million, or $2.41 per share, compared with net income
of $61.4 million, or $2.70 per share, for last fiscal year.
The results for the quarter and fiscal year ended October 31,
2018, included a charge of $9.6 million, or approximately $0.32 per
share net of income taxes, to record live inventories on hand at
October 31, 2018, at the lower of cost or net realizable value as
required by generally accepted accounting principles. Results for
the quarter and fiscal year ended October 31, 2019, include a
charge of $2.8 million, or approximately $0.10 cents per share net
of income taxes, to record live inventories on hand at October 31,
2019, at the lower of cost or net realizable value.
“The fourth quarter marked the end of the second fiscal year in
a row during which market prices for boneless breast meat produced
at our plants that process a larger bird for food service customers
fell to historically low levels after Labor Day,” said Joe F.
Sanderson, Jr., chairman and chief executive officer of Sanderson
Farms, Inc. “Similar to fiscal 2018, market conditions weakened
significantly during our fourth fiscal quarter of 2019. Despite
weakness during our fourth fiscal quarter, overall market prices
for poultry moved counter-cyclically higher during November and
December, and several factors are expected to support higher market
prices for poultry meat as we move into the new calendar year. The
protein deficit caused by African swine fever in China and other
countries, recently well-publicized chicken sandwich features at
quick serve restaurants, and expected higher retail pork and beef
prices should all support stronger poultry markets as we move into
2020.
“For the fiscal year, we reported record volume of poultry
products sold of 4.53 billion pounds, compared to 4.44 billion
pounds in fiscal 2018. Grain prices were slightly higher during
fiscal 2019 compared with prices paid in fiscal 2018; however, feed
costs in processed flocks were essentially flat per pound, as
higher prices paid for feed grain were offset by improved live bird
performance.”
According to Sanderson, overall realized prices for poultry
products were 3.5 percent higher in fiscal 2019 compared with
prices last year. Boneless breast meat market prices averaged 1.0
percent lower in the fourth quarter than the prior-year period. For
the full fiscal year, boneless breast meat market prices were 3.4
percent lower compared with fiscal 2018. Jumbo wing market prices
averaged $1.73 per pound during the fourth quarter of fiscal 2019,
up 19.0 percent from the average of $1.46 per pound during the
prior-year period. Jumbo wing market prices averaged $1.72 per
pound during the fiscal year, up 19.9 percent from the average of
$1.44 per pound for fiscal 2018. The average market price for bulk
leg quarters increased approximately 20.6 percent for the fourth
fiscal quarter of 2019 compared with the fourth fiscal quarter of
2018, and increased 1.3 percent for fiscal 2019 compared to fiscal
2018. Cash prices for corn during the fourth fiscal quarter
increased by 12.8 percent, while soybean meal cash prices were
lower by 8.4 percent. For the full fiscal year, cash corn prices
were higher by 4.9 percent, while soymeal cash prices were lower by
10.2 percent when compared to fiscal 2018.
“We continue to make progress toward full production at our new
poultry complex in Tyler, Texas,” added Sanderson. “The startup in
Tyler has gone very well, and we are now processing at
approximately 75 percent capacity. We expect to reach full
production of 1.3 million head per week at the new plant during our
second fiscal quarter of 2020. At full production, that plant will
produce approximately 390 million pounds of tray pack product
annually for our retail grocery store customers. We also continue
to evaluate sites for our next poultry complex, and, as always,
look forward to our next phase of growth.
“We are cautiously optimistic as we enter fiscal and calendar
2020. Poultry market prices have moved counter-cyclically higher in
November and December, and most expect protein markets to be
supported in 2020 by a worldwide protein deficit caused by African
swine fever’s impact on Asian pork supplies. In addition, increased
promotional activity for chicken sandwiches at quick-serve
restaurants and higher expected prices for beef and pork should
also support a stronger poultry market as we move into 2020.
“As of October 31, 2019, our balance sheet reflected $1.774
billion in assets, stockholders’ equity of $1.418 billion and net
working capital of $365.4 million. We believe our balance sheet
provides us with the financial strength not only to support our
growth strategy, but also to consistently manage our operations
through the cycles that characterize our industry. We deeply
appreciate the hard work and dedication to excellence of our
employees, growers and everyone associated with our company,”
Sanderson concluded.
Sanderson Farms will hold a conference call to discuss this
press release today, December 19, 2019, 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 at www.sandersonfarms.com. 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
December 26, 2019. Those without internet access, or who prefer to
participate via telephone, may call 1-800-263-0877, access code
8103164.
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 year ended October 31, 2019, 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 market 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 its 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.
Each such statement speaks only as of the day it was made. The
Company undertakes no obligation to update or to revise any
forward-looking statements. The factors described above 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”, “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 its growth plans, future demand for its products,
future prices for feed grains, future expenses, future production
levels, future earnings, future growth plans or other industry
conditions.
SANDERSON FARMS, INC. AND
SUBSIDIARIES
Condensed Consolidated
Statements of Operations
(In thousands, except per share
amounts)
Three Months EndedOctober 31, Twelve Months
EndedOctober 31,
2019
2018
2019
2018
Net sales
$ 906,489
$ 798,148
$ 3,440,258
$ 3,236,004
Cost and expenses: Cost of sales
884,946
787,660
3,158,323
2,974,739
Live inventory adjustment
2,800
9,600
2,800
9,600
Selling, general and administrative
51,150
58,575
211,141
221,965
938,896
855,835
3,372,264
3,206,304
Operating income (loss)
(32,407)
(57,687)
67,994
29,700
Other income (expense) Interest income
-
842
-
2,911
Interest expense
(982)
(518)
(4,156)
(2,066)
Other
3
3
9
12
(979)
327
(4,147)
857
Income (loss) before income taxes
(33,386)
(57,360)
63,847
30,557
Income tax expense (benefit)
(10,515)
(14,162)
10,553
(30,874)
Net income (loss)
$ (22,871)
$ (43,198)
$
53,294
$
61,431
Earnings (loss) per share: Basic
$ (1.05)
$ (1.95)
$ 2.41
$ 2.70
Diluted
$ (1.05)
$ (1.95)
$ 2.41
$ 2.70
Dividends per share
$ 0.32
$ 0.32
$ 1.28
$ 1.28
(1)
The Condensed Consolidated
Statements of Operations for the twelve months ended October 31,
2019 and 2018 were derived from the audited consolidated financial
statements for those periods, but do not include all of the
information and footnotes required by U.S. generally accepted
accounting principles for complete financial statements.
SANDERSON FARMS, INC. AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In thousands)
October 31, 2019 October 31,
2018
(1)
(1)
Assets Current assets: Cash and cash equivalents
$
95,417
$
121,193
Accounts receivable, net
131,778
121,932
Receivable from insurance companies
445
7,094
Inventories
289,928
240,056
Refundable income taxes
6,612
32,974
Prepaid expenses
56,931
43,240
Total current assets
581,111
566,489
Property, plant and equipment
2,139,333
1,961,497
Less accumulated depreciation
(953,473)
(873,909)
1,185,860
1,087,588
Other assets
7,163
5,363
Total assets
$
1,774,134
$
1,659,440
Liabilities and stockholders' equity Current liabilities:
Accounts payable
$
132,741
$
128,936
Accrued expenses
82,940
69,953
Total current liabilities
215,681
198,889
Long-term debt
55,000
-
Claims payable and other liabilities
11,646
9,865
Deferred income taxes
74,132
62,793
Commitments and contingencies Stockholders' equity: Common stock
22,204
22,100
Paid-in capital
86,010
81,269
Retained earnings
1,309,461
1,284,524
Total stockholders' equity
1,417,675
1,387,893
Total liabilities and stockholders' equity
$
1,774,134
$
1,659,440
(1)
The Condensed Consolidated Balance
Sheets at October 31, 2019 and 2018 were derived from the audited
consolidated financial statements at those dates, but do not
include all of the information and footnotes required by U.S.
generally accepted accounting principles for complete financial
statements
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191219005199/en/
Mike Cockrell Treasurer
& Chief Financial Officer (601) 426-1454
Sanderson Farms (NASDAQ:SAFM)
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