Sanderson Farms, Inc. (NASDAQ: SAFM) today reported
results for its second fiscal quarter and six months ended
April 30, 2019.
Net sales for the second quarter of fiscal 2019 were $845.2
million compared with $813.5 million for the same period a
year ago. For the quarter, net income was $40.6 million, or $1.83
per share, compared with net income of $41.9 million, or $1.84
per share, for the second quarter of fiscal 2018.
Net sales for the first six months of fiscal 2019 were $1,588.6
million compared with $1,585.4 million for the same period of
fiscal 2018. Net income for the first half of the fiscal year
totaled $22.8 million, or $1.03 per share, compared with net
income of $93.2 million, or $4.08 per share, for the
first six months of fiscal 2018.
“Financial results for our second quarter of fiscal 2019 reflect
higher feed costs per pound, continued favorable demand for poultry
products from retail grocery store customers and a favorable export
environment," said Joe F. Sanderson, Jr., chairman and
chief executive officer of Sanderson Farms, Inc. “While market
prices for boneless breast meat produced at our plants that target
food service customers remained below historical averages for the
period and averaged 2.4 percent below last year’s second fiscal
quarter, they improved significantly compared to market prices
during our first fiscal quarter of 2019. Market prices for jumbo
wings reflected strong seasonal demand during the quarter, and
values have held up well in May. Our average sales price per pound
of fresh and frozen poultry increased 3.5 percent during the second
quarter of this fiscal year compared with the same period last year
and were higher by 0.6 percent through the first half of this
fiscal year compared to the first half of last year.
“Lower volumes of fresh and frozen chicken processed and sold
during the second fiscal quarter compared to last year’s second
quarter reflect scheduled down days at four plants to install new
equipment, and lower live weights at our Hammond, Louisiana plant,”
added Sanderson. “Hammond was also down a week to allow bird
weights to move back to weights that target the needs of food
service customers. The lower volume at these plants, when combined
with inefficiencies inherent in lower volumes during the startup of
our new Tyler, Texas poultry complex, contributed just over two
cents per pound to the three and one half cent per pound increase
in non-feed related cost of goods sold during this year’s second
fiscal quarter compared to the same period last year.”
According to Sanderson, overall market prices for chicken
products sold to retail grocery store customers remained relatively
strong during the second quarter and continued to reflect good
demand. Compared with the second fiscal quarter of 2018, quoted
boneless breast meat market prices were approximately 2.4 percent
lower, the average market price for bulk leg quarters decreased
approximately 7.0 percent, and jumbo wing market prices were higher
by 32.7 percent. Market prices for chicken breast tenders averaged
4.4 percent higher than a year ago. The Company’s average feed
costs per pound of poultry products processed increased by 3.0
percent when compared with the second quarter of fiscal 2018, while
prices paid for corn and soybean meal, the Company’s primary feed
ingredients, increased 4.9 percent and decreased 11.6 percent,
respectively, compared with the second quarter of fiscal 2018.
“Looking ahead to the second half of the fiscal year, we
continue to expect prices paid for grain to be lower for the year
compared to fiscal 2018,” added Sanderson. “While there are ample
supplies of both corn and soybeans worldwide, a slow start to the
United States planting season for 2019 corn and soybean crops due
to the cold, wet spring in the United States grain belt has put
upward pressure on market prices. Planting progress for corn stands
at 58 percent this week, which is below the five-year average of 90
percent. Only 29 percent of the soy bean crop has been planted,
versus a five-year average of 66 percent.
“With respect to chicken production numbers, the USDA reports
that the United States broiler breeder flock is approximately 1.0
percent larger than a year ago, but the agency also reports that
egg production, hatch rates and livability continue to trend below
historical averages. The current USDA forecast is for United States
broiler production during calendar year 2019 to increase
approximately 0.9 percent over calendar year 2018 and that forecast
seems reasonable. We expect our production during our third and
fourth fiscal quarters of 2019 to be up 6.0 percent and 7.5
percent, respectively, compared to the same quarters of fiscal
2018,” added Sanderson.
Sanderson Farms announced on May 23, 2019 that, effective June
2, 2019, hourly wages for all hourly employees at the Company will
be raised by at least $1.00 per hour, so that all employees who
have worked for the Company for at least 90 days will earn at least
$15.00 per hour. Hourly rates for truck drivers, hourly maintenance
employees and upgraded positions will increase by more than $1.00
per hour. This decision reflects, in part, the Company’s efforts to
continue to recruit and retain the best employee base possible. The
Company already pays 75 percent of the cost of health insurance for
employees and their families and offers a generous retirement
package.
“We believe these hourly rate increases, when combined with
other benefits, will allow the Company to remain very competitive
in an economic climate where employees have more choices available
to them. We also estimate that the costs of this increase can be
offset with increased efficiencies, by reaching our target plant
yields and by achieving our target live weights,” Sanderson
concluded.
Sanderson Farms will hold a conference call to discuss this
press release today, May 30, 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 and 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
June 30, 2019. You may listen and participate in the call by
dialing 866-575-6539, confirmation code 7948391.
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, 2018 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. 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,” “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 production levels, commodity market conditions,
grain prices, supply and demand factors, growth plans and other
industry conditions.
SANDERSON FARMS, INC. AND SUBSIDIARIES Condensed
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share
amounts)
Three Months EndedApril
30,
Six Months EndedApril
30,
2019 2018 2019
2018 Net sales $ 845,229 $ 813,474 $ 1,588,617 $ 1,585,422
Cost and expenses: Cost of sales 740,833 703,410 1,449,233
1,405,511
Selling, general and administrative
49,230 55,037 107,765
107,612 790,063 758,447
1,556,998 1,513,123 Operating income
55,166 55,027 31,619 72,299 Other income (expense) Interest income
- 905 - 1,324 Interest expense (1,173 ) (506 ) (1,682 ) (1,029 )
Other 2 4 2 6
(1,171 ) 403 (1,680 ) 301
Income before income taxes 53,995 55,430 29,939 72,600
Income tax expense (benefit) 13,359 13,482
7,136 (20,554 ) Net income $ 40,636
$ 41,948 $ 22,803 $ 93,154
Earnings per share: Basic $ 1.83 $ 1.84 $ 1.03
$ 4.08 Diluted $ 1.83 $ 1.84 $ 1.03 $
4.08 Dividends per share $ 0.32 $ 0.32 $ 0.64
$ 0.64
SANDERSON FARMS, INC. AND
SUBSIDIARIES Condensed Consolidated Balance Sheets
(In thousands)
April 30, 2019
October 31, 2018 (unaudited) (1) Assets
Current assets: Cash and cash equivalents $ 96,938 $ 121,193
Accounts receivable, net 126,889 121,932 Receivable from insurance
companies 5,983 7,094 Inventories 285,473 240,056 Refundable income
taxes 5,611 32,974 Prepaid expenses and other current assets
52,250 43,240 Total current assets 573,144
566,489 Property, plant and equipment 2,091,324 1,961,497 Less
accumulated depreciation (923,947 ) (873,909 )
1,167,377 1,087,588 Other assets 7,211 5,363
Total assets $ 1,747,732 $ 1,659,440
Liabilities and stockholders' equity Current liabilities: Accounts
payable $ 98,451 $ 128,936 Dividends payable 7,089 - Accrued
expenses 61,932 69,953 Total current
liabilities 167,472 198,889 Long-term debt 100,000 - Claims payable
and other liabilities 10,056 9,865 Deferred income taxes 69,492
62,793 Commitments and contingencies Stockholders' equity: Common
stock 22,154 22,100 Paid-in capital 85,409 81,269 Retained earnings
1,293,149 1,284,524 Total stockholders'
equity 1,400,712 1,387,893 Total
liabilities and stockholders' equity $ 1,747,732 $ 1,659,440
(1) The Condensed Consolidated Balance Sheet at October 31,
2018, 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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version on businesswire.com: https://www.businesswire.com/news/home/20190530005255/en/
Mike CockrellTreasurer & Chief Financial Officer(601)
649-4030
Sanderson Farms (NASDAQ:SAFM)
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