safm-20220131

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

___________________________

FORM 10-Q

___________________________

(MARK ONE)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-14977

___________________________

Sanderson Farms, Inc.

(Exact name of registrant as specified in its charter)

___________________________


Mississippi			64-0615843
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

127 Flynt Road, Laurel, Mississippi 39443

(Address of principal executive offices) (Zip Code)

(601) 649-4030

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $1 par value per share	SAFM	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS

DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Stock, $1 Par Value Per Share: 22,323,097 shares outstanding as of February 22, 2022.


PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (Unaudited)	3
	Condensed consolidated balance sheets—January 31, 2022 and October 31, 2021	3
	Condensed consolidated statements of operations—Three months ended January 31, 2022 and 2021	4
	Condensed consolidated statements of stockholders' equity—Three months ended January 31, 2022 and 2021	5
	Condensed consolidated statements of cash flows—Three months ended January 31, 2022 and 2021	6
	Notes to condensed consolidated financial statements—January 31, 2022	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	27
PART II. OTHER INFORMATION		27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 6.	Exhibits	30
INDEX TO EXHIBITS		31
SIGNATURES		32


	January 31, 2022		October 31, 2021
	(Unaudited)		(Note 1)
Assets
Current assets:
Cash and cash equivalents	$	685,823	$	439,339
Accounts receivable, net	224,082		223,865
Receivable from insurance companies	—		2,057
Inventories	367,454		350,959
Refundable income taxes	—		7,418
Prepaid expenses and other current assets	69,807		62,632
Total current assets	1,347,166		1,086,270
Property, plant and equipment, net	1,207,512		1,224,334
Right of use assets	24,112		28,238
Other assets	5,927		6,191
Total assets	$	2,584,717	$	2,345,033
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	206,895	$	152,421
Dividends payable	9,823		—
Accrued expenses	80,566		144,453
Lease liabilities	10,707		12,189
Accrued income taxes	50,946		—

Total current liabilities	358,937		309,063

Claims payable and other liabilities	13,005		13,078
Deferred income taxes	160,465		156,531
Long-term lease liabilities	13,477		16,122
Commitments and contingencies
Stockholders’ equity:
Preferred Stock:
Series A Junior Participating Preferred Stock, $100 par value: authorized 500,000 shares, none issued
Par value to be determined by the Board of Directors: authorized 4,500,000 shares; none issued
Common Stock, $1 par value: authorized 100,000,000 shares; issued and outstanding shares—22,324,066 and 22,329,731 at January 31, 2022 and October 31, 2021, respectively	22,324		22,330
Paid-in capital	111,133		105,517
Retained earnings	1,905,376		1,722,392
Total stockholders’ equity	2,038,833		1,850,239
Total liabilities and stockholders’ equity	$	2,584,717	$	2,345,033


	Three Months Ended January 31,
	2022		2021
Net sales	$	1,327,428	$	909,306
Cost and expenses:
Cost of sales	1,008,054		839,322

Selling, general and administrative	65,738		56,599
	1,073,792		895,921
Operating income	253,636		13,385
Other income (expense):
Interest income	97		—
Interest expense	(577)		(638)
Other	3		3
	(477)		(635)
Income before income taxes	253,159		12,750
Income tax expense	60,352		3,272
Net income	$	192,807	$	9,478
Earnings per share:
Basic	$	8.64	$	0.42
Diluted	$	8.64	$	0.42
Dividends per share	$	0.44	$	0.44


Fiscal Year 2021	Common Stock			Paid-In Capital		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance at October 31, 2020	22,251,071	$	22,251	$	90,420	$	1,306,602	$	1,419,273
Net income - first quarter 2021	—	—		—		9,478		9,478
Cash dividends ($0.44 per share)	—	—		—		(9,824)		(9,824)
Stock compensation plan transactions	74,564	75		(1,667)		—		(1,592)
Amortization of unearned compensation	—	—		2,147		—		2,147
Balance at January 31, 2021	22,325,635	$	22,326	$	90,900	$	1,306,256	$	1,419,482


Fiscal Year 2022	Common Stock			Paid-In Capital		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance at October 31, 2021	22,329,731	$	22,330	$	105,517	$	1,722,392	$	1,850,239
Net income - first quarter 2022	—	—		—		192,807		192,807
Cash dividends ($0.44 per share)	—	—		—		(9,823)		(9,823)
Stock compensation plan transactions	(5,665)	(6)		(2,267)		—		(2,273)
Amortization of unearned compensation	—	—		7,883		—		7,883
Balance at January 31, 2022	22,324,066	$	22,324	$	111,133	$	1,905,376	$	2,038,833


Product Category	Three Months Ended January 31, 2022		Three Months Ended January 31, 2021
	(in thousands)
Fresh, vacuum-sealed chicken	$	519,631	$	294,118
Fresh, chill-packed chicken	427,191		376,252
Fresh, ice-packed chicken	229,125		131,681
Frozen chicken	80,624		63,403
Prepared chicken	64,256		38,915
Other	6,601		4,937
Total net sales	$	1,327,428	$	909,306


Inventory type	January 31, 2022		October 31, 2021
	(in thousands)
Live poultry-broilers and breeders	$	236,713	$	229,245
Feed, eggs and other	62,813		57,994
Processed poultry	42,911		42,775
Prepared chicken	14,252		11,157
Packaging materials	10,765		9,788
Total Inventories	$	367,454	$	350,959


Description	January 31, 2022		October 31, 2021
	(in thousands)
Land and buildings	$	978,853	$	976,012
Machinery and equipment	1,467,741		1,439,762
Work-in-process	13,791		19,924
	2,460,385		2,435,698
Less accumulated depreciation	(1,252,873)		(1,211,364)
Property, plant and equipment, net	$	1,207,512	$	1,224,334


		Three Months Ended
Date of Performance Share Agreement	Number of shares issued (actual (a) or estimated (e))	January 31, 2022		January 31, 2021
November 1, 2019	60,682 (e)	881		—
November 1, 2020	88,924 (e)	5,137		—
Total performance share compensation expense		$	6,018	$	—


	Three Months Ended January 31, 2022					Three Months Ended January 31, 2021					Incr/(Decr)
Description	Dollars			Per lb.		Dollars			Per lb.		Dollars		Per lb.
Beginning Inventory	$	42,775		$	0.5646	$	32,952		$	0.4701	$	9,823	$	0.0945
Feed in broilers processed	396,435			0.3286		303,047			0.2631		93,388		0.0655

All other cost of sales	565,854			0.4691		508,226			0.4412		57,628		0.0279



Less: Ending Inventory	42,912			0.5488		30,596			0.4985		12,316		0.0503
Total poultry cost of sales	$	962,152	(1)	$	0.7992	$	813,629	(1)	$	0.7010	$	148,523	$	0.0982

Pounds:
Beginning Inventory	75,757					70,103


Poultry processed/other	1,206,367					1,151,917
Poultry sold	1,203,933		(1)			1,160,646		(1)
Ending Inventory	78,191					61,374


	Three Months Ended January 31,
	2022		2021
Operating activities
Net income	$	192,807	$	9,478
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	43,523		40,566
Amortization of share-based compensation	8,406		2,671


Deferred income taxes	3,934		1,169
Gain on asset disposals	(119)		(48)
Change in assets and liabilities:
Accounts receivable - trade	(217)		(20,165)
Accounts receivable - insurance	2,057		—
Income taxes	58,364		2,076
Inventories	(16,495)		(35,665)
Prepaid expenses and other assets	(7,164)		(4,191)
Right of use assets	4,126		3,891
Lease liabilities	(4,126)		(3,891)
Accounts payable	55,865		17,995
Accrued expenses and other liabilities	(64,459)		(4,455)
Total adjustments	83,695		(47)
Net cash provided by operating activities	276,502		9,431
Investing activities
Capital expenditures	(27,876)		(36,859)
Net proceeds from sale of property and equipment	156		65
Net cash used in investing activities	(27,720)		(36,794)
Financing activities




Borrowings from revolving line of credit	—		30,000

Proceeds from issuance of restricted stock under stock compensation plans	656		265
Payments from issuance of common stock under stock compensation plans	(2,954)		(1,873)

Net cash provided by (used in) financing activities	(2,298)		28,392
Net change in cash and cash equivalents	246,484		1,029


Description	Three Months Ended January 31, 2022		Three Months Ended January 31, 2021		Increase/(Decrease)
Stock compensation expense	8,218		2,402		5,816
Legal expense	11,473		8,464		3,009
Administrative salaries	12,899		12,357		542
Sanderson Farms Championship expense	2,207		1,950		257
Broker commissions	3,471		3,294		177
Trainee expense	2,512		2,986		(474)
Advertising expense	2,127		2,707		(580)
COVID-19-related expense	5,167		6,162		(995)
All other SG&A	17,664		16,277		1,387
Total SG&A	$	65,738	$	56,599	$	9,139


Period	(a) Total Number of Shares Purchased(1)	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs(2) (3)
Nov. 1 - Nov. 30, 2021	10,944	$	191.46	10,944	2,000,000
Dec. 1 - Dec. 31, 2021	4,498	189.93		4,498	2,000,000
Jan. 1 - Jan. 31, 2022	—	—		—	2,000,000
Total	15,442	$	191.01	15,442	2,000,000


Exhibit No.						Description of Exhibit
3.1						Restated Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 filed with the Registrant's Quarterly Report on Form 10-Q for the Quarter ended on July 31, 2015.)

3.2						Bylaws of the Registrant, amended and restated as of December 30, 2020. (Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K on January 5, 2021.)

31.1*						Certification of Chief Executive Officer.

31.2*						Certification of Chief Financial Officer.

32.1**						Section 1350 Certification.

32.2**						Section 1350 Certification.

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File, because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema

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Exhibit Number						Description of Exhibit

3.1						Restated Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 filed with the Registrant's Quarterly Report on Form 10-Q for the Quarter ended on July 31, 2015.)

3.2						Bylaws of the Registrant, amended and restated as of December 30, 2020. (Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K on January 5, 2021.)

31.1*						Certification of Chief Executive Officer

31.2*						Certification of Chief Financial Officer

32.1**						Section 1350 Certification.

32.2**						Section 1350 Certification.

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema

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	SANDERSON FARMS, INC.
	(Registrant)

Date: February 24, 2022	By:	/s/ D. Michael Cockrell
		Treasurer, Chief Financial Officer and Chief Legal Officer

Date: February 24, 2022	By:	/s/ Tim Rigney
		Secretary, Corporate Controller and
		Chief Accounting Officer

SEC Form 10-Q filed by Sanderson Farms Inc.