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Sanderson Farms, Inc. Reports Results for Third Quarter of Fiscal 2010

^{Published on 2010-08-23 03:42:31 - Market Wire}
 

LAUREL, Miss.--([ BUSINESS WIRE ])--Sanderson Farms, Inc. (NASDAQ: SAFM) today reported results forthe third fiscal quarter and nine months ended July 31, 2010.

"Sanderson Farmsa™ financial results for the third quarter of fiscal 2010 reflect favorable marketconditions and solid execution in our operations, offset by the effect of the extreme heat on our live operations"

Net sales for the third quarter of fiscal 2010 were $489.1 million compared with $504.8 million for the same period a year ago. For the quarter, the Company reported net income of $36.1 million, or $1.55 per share, compared with $43.0 million, or $2.06 per share, for the third quarter of fiscal 2009.

Net sales for the first nine months of fiscal 2010 were $1,396.3 million compared with $1,320.5 millionfor the first nine months of fiscal 2009. Net income for the first nine months of fiscal 2010 totaled $87.0million, or $3.96 per share, compared with $62.5million, or $3.00 per share, forthe firstnine months of last year.

aSanderson Farmsa™ financial results for the third quarter of fiscal 2010 reflect favorable marketconditions and solid execution in our operations, offset by the effect of the extreme heat on our live operations,a said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc. aMarket prices for poultry products were lower than last yeara™s third quarter. Retail grocery store demand has remained strong, although food service demand has remained sluggish, and will likely remain that way until the employment market gains traction and more consumers return to restaurants. Overall, our operations continue to run well, resulting in solid operating margins for the third quarter. We were also able to benefit from slightly lower costs for corn and soybean meal, our primary feed ingredients, compared with the same period a year ago. Despite lower grain costs, live production costs were negatively affected by the extreme heat across our production areas. Heat negatively impacts live weights and feed conversions, which in turn results in fewer pounds processed and sold.a

According to Sanderson, overall market prices for poultry products were slightly lower inthethirdquarter of fiscal 2010 compared with prices in the third quarter of fiscal 2009. As measured by a simple average of the Georgia dock price for whole chickens, prices were relatively flat, showing a one percent decline compared with the third quarter of fiscal 2009. Driven by seasonal demand, boneless breast meat prices improved during the quarter, and averaged almost nine percent higher than the prior-year period, and averaged 7.9 percent higher for the first nine months of the year compared with the prior year. Jumbo wing prices weakened seasonally and averaged $1.07 per pound for the third quarter of fiscal 2010, down 19 percent from the average of $1.32 per pound for the third quarter of fiscal 2009. The average quoted market price for bulk leg quarters decreased approximately 22 percent for the quarter, reflecting weaker export sales. Cashprices for corn and soybean meal delivered to the Company decreased 9.3 percent and 10.2percent,respectively, compared with the third quarter a year ago. For the nine months endedJuly 31, 2010, corn decreased 8.4percent and soybean meal increased 1.3 percent when comparedto the nine monthsended July 31, 2009.

aSolid execution through our first three fiscal quarters by our managers has put the Company in a position where it is probable that the Companya™s fiscal 2010 earnings will trigger bonuses underthe Companya™s bonus award program and a contribution to the Companya™s Employee Stock Ownership Plan,a added Sanderson. aAccordingly, our third quarter results reflect total accruals forboth the bonus award program and the ESOP of approximately $16.1 million. Approximately $8.7million of this total is reflected in our cost of goods sold for the quarter, with $7.4 million in administrative costs. By comparison, our results for the third fiscal quarter of 2009 included total accruals for bonuses and the ESOP of $14.6 million, with $6.3 million allocated to cost of goods sold and $8.3 million to administrative costs.

aThe development of our new Kinston, North Carolina, complex is moving forward on schedule,a added Sanderson. aWe have moved into the hatchery, the feed mill will be completed soon, and we expect to begin processing birds in January 2011. We look forward to the new opportunities this plant will provide for Sanderson Farms, our employees, customers and shareholders.a

Sanderson Farms will hold a conference call to discuss this press release today, August23,2010, at10:00 a.m. Central, 11:00 a.m. Eastern. Investors will have the opportunity tolisten to a live Internet broadcast of the conference call through the Company's Web site at [ www.sandersonfarms.com ] or through[ www.earnings.com ]. To listen to the live call, please go to theWeb site at least 15 minutes early toregister, download, and install any necessary audio software. Forthose who cannot listen to the live broadcast, an Internet replay will be available shortlyafter the call and continue through August 31, 2010. Those without internet access or whoprefer to listen via telephone may call 800-817-8869, access code1490852.

Sanderson Farms, Inc. is engaged in the production, processing, marketing and distribution offresh and frozen chicken and other prepared food items. Its shares trade on the NASDAQ GlobalSelect Market under the symbol SAFM.

This press release includes forward-looking statements within the meaning of the asafe harbora provisions of the Private Securities Litigation Reform Act of 1995, 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 fromthe views, beliefs, projections and estimates expressed in such statements. Theserisks, uncertainties and other factors include, but are not limited to those discussed underaRisk Factorsa inthe Companya™s Quarterly Reports on Form 10-Q for the quarters ended April30,2010 and July31,2010, and the following:

(1) Changes in the market price for the Companya™s finished products and feed grains, both of whichmay 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, either of which may affect the value of inventories, the collectability of accounts receivable or the financial integrity of customers, and theability of the end user or consumer to afford protein.

(3) Changes in the political or economic climate, trade policies, laws and regulations or the domesticpoultry industry of countries to which the Company or other companies in the poultry industry ship product, and other changes that might limit the Companya™s or the industrya™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.

(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 thanthe Company.

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

(8) Disease outbreaks affecting the production performance and/or marketability of the Companya™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 Companya™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 impact the supply of feed grains.

(12)Failure to respond to changing consumer preferences.

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

Readers are cautioned not to place undue reliance on forward-looking statements made byoron 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. Thefactors described above cannot be controlled by the Company. When used in this press release,thewords abelievesa, aestimatesa, aplansa, aexpectsa, ashoulda, aoutlooka, and aanticipatesa and similarexpressions as they relate to the Company or its management are intended to identifyforward-looking statements. Examples of forward-looking statements include statements ofthe Companya™s belief about future earnings.