990863 Sanderson Farms Reports 3rd Quarter ResultsAugust 28, 1999Laurel, MI - Sanderson Farms, Inc. reported results for the third quarter and nine months ended July 31, 1999. For the quarter, the Company reported net income of $3,689,000, or $.26 per diluted share, compared with net income of $5,540,000, or $.38 per diluted share, for the third quarter of fiscal 1998. Net sales were $148.8 million, up 9.2% compared with $136.3 million for the same period a year ago. For the first nine months of fiscal 1999, the Company reported net income of $9,571,000, or $.67 per diluted share, compared with net income of $3,882,000, or $.27 per diluted share, for the first three quarters of fiscal 1998. Net sales for the most recent nine-month period were $409.7 million compared with net sales of $378.5 million for the same period last year. “Results for the third quarter reflect an improved cost structure compared with the same period a year ago, but also reflect a continuing softening in the poultry market,” said Joe F. Sanderson, Jr., President and Chief Executive Officer. “Compared with the same period last year, the cash market for corn and soybean meal, our primary feed ingredients, reflected a decrease of 14% and 19%, respectively, for the third quarter. However,” Sanderson continued, “while our cost environment has improved, chicken prices remain weak due to an oversupply of chicken and other meats. During the third quarter, the Georgia dock price for whole chickens averaged 60.50 cents per pound, down 3.4% from an average of 62.65 cents per pound during the same quarter a year ago. In addition, compared with the 1998 third quarter, leg quarter prices decreased 35.8% as a result of a decrease in export demand, primarily from Russia, while the average market price for deboned breast meat declined approximately 35 cents per pound, or 17.9%, reflecting an oversupply of that product as well. “In light of the current oversupply of all meats in the marketplace, we will reduce our chicken output by approximately 12% beginning in October 1999, and continue the cutback through the first quarter of fiscal 2000. In addition to this reduction in production, we have decided to delay until the second quarter of fiscal 2000 the double shifting of the second line of our Brazos County, Texas processing facility. The double shifting, originally scheduled to occur during the fourth quarter of calendar 1999, will increase our production by 300,000 head per week.” Sanderson added, “Although the market environment for our products remains weak, our operations continue to improve as the Company digests the expansion projects that have increased our production from 1.6 million to 5.1 million broilers per week over the past decade. The marketing strategy put in place during this expansion continues to result in the addition of many new retail and food service customers. This is particularly true at our Texas facility, which has completed its shift from fast food to retail chicken production. “Despite the challenges in the marketplace, Sanderson Farms and our industry continue to benefit from relatively low input costs. In light of favorable predictions regarding this year's corn and soybean harvests, we expect to be able once again to take advantage of relatively low grain prices for fiscal 2000.” According to Sanderson, the Company has repurchased 478,000 shares of it common stock since authorized to do so in January, and reduced overall debt by $3 million during the third quarter. Also, during the third quarter, the Company successfully completed the private placement of $20 million fixed rate, fixed term debt with an insurance company that carries a coupon rate of 6.41%. The proceeds of this unsecured debt placement were used to reduce the outstanding balance under the Company's revolving credit facility. The Company also has reduced its commitment under the revolving credit facility from $130 million to $100 million to reflect management's expectation of reduced cash needs and projected cash flow over the next year. Sanderson Farms, Inc. is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared food items. Its shares trade on the Nasdaq Stock Market under the symbol SAFM.
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