UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 1, 2008
SANDERSON FARMS, INC.
(Exact name of registrant as specified in its charter)
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| Mississippi
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1-14977
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64-0615843 |
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| (State or other jurisdiction
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(Commission File Number)
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(I.R.S. Employer |
| of incorporation)
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Identification No.) |
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| 127 Flynt Road
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| Laurel, Mississippi
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39443 |
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| (Address of principal executive offices)
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(Zip Code) |
(Registrant’s telephone number, including area code)
Not applicable.
(Former name or former address, if changed since last report)
Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Section 1 — Registrant’s Business and Operations
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| Item 1.01 |
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Entry into a Material Definitive Agreement. |
On May 1, 2008, the Registrant entered into a Credit Agreement with Bank of Montreal, Harris
N.A., BMO Capital Markets Financing, Inc., U.S. Bank National Association, Regions Bank, ING
Capital LLC, Trustmark National Bank, Farm Credit Bank of Texas, AgFirst Farm Credit Bank,
GreenStone Farm Credit Services, ACA and Farm Credit Services of America, PCA. The credit facility
replaced the Registrant’s existing $225.0 million unsecured revolving credit facility that was to
expire on April 1, 2012, with a $300.0 million unsecured revolving credit facility on a committed
basis with a five year maturity. At any time between October 1, 2009 and January 1, 2010, the
Registrant may request a one-year extension of the facility and may request further extensions each
year thereafter. The Registrant may reduce the commitment in a minimum amount of $1,000,000
without penalty upon notice to the Administrative Agent.
The Registrant will pay interest, at its option, at a variable base or Eurodollar rate as
determined under the Credit Agreement. The Registrant is also obligated to pay an applicable
margin over the Eurodollar rate, as well as a letter of credit participation fee and a commitment
fee payable on the amount of the average daily unused portion of the commitment, each according to
the ratio of its debt to total capitalization. If there is an event of default, loans outstanding
will bear an additional 1.50% rate of interest. The Registrant must also pay a fronting fee of
0.125% of the face amount of each standby letter of credit issued, as well as usual and customary
administrative fees.
Up to $10,000,000 of the new credit facility is available for the issuance of standby and
commercial letters of credit in the ordinary course of business. The Administrative Agent has also
established a $10,000,000 swing line facility that will permit funding of small or late day draws
not to exceed ten days that reduce available credit under the facility, with the credit risk
allocated ratably among the lenders. Swing line loans bear interest at the base rate plus the
applicable margin or the rate offered by the swing line lender in its discretion. The Credit
Agreement contains restrictive covenants, which include maintaining a minimum tangible net worth, a
maximum leverage ratio of 50 percent (55% for fiscal 2009), a minimum current ratio of 2.00 to 1
and limitations on capital expenditures. It also contains customary provisions relating to
acceleration of the Registrant’s payment obligations in an event of default, which include
non-payment of interest, principal or fees; covenant defaults, subject to grace periods for certain
covenants; inaccurate representations or warranties in any material respect; commencement of
insolvency or bankruptcy proceedings by or against the Registrant; a change in control; the entry
of certain judgments against the Registrant and cross-defaults on other agreements evidencing
indebtedness. The Registrant’s obligations under the Credit Agreement are jointly and severally
guaranteed by its wholly-owned subsidiaries under a Guaranty Agreement dated May 1, 2008.
Copies of the Credit Agreement and the Guaranty Agreement are filed as Exhibits 10.1 and 10.2,
respectively, to this report and are incorporated herein by reference. The descriptions above are
summaries of the Credit Agreement and Guaranty Agreement and are qualified in their entirely by the
complete text of those agreements.
Some of the lenders under the credit facility or their affiliates have, or may have in the
future, various relationships with the Registrant and its affiliates involving the provision of
financial services. As of the date of this report, the following such relationships exist:
Trustmark National Bank is the trustee of the Employee Stock Ownership Plan and Trust of Sanderson
Farms, Inc. and Affiliates and, from time to time, the Registrant may have one or more regular
deposit accounts with Regions Bank. In addition, one of the Registrant’s directors, Toni D.
Cooley, is a director of Trustmark National Bank.
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| Item 1.02 |
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Termination of a Material Definitive Agreement |
Also on May 1, 2008, upon entering into the Credit Agreement described above, the Registrant
terminated its Credit Agreement dated as of November 17, 2005, as amended, among the Registrant,
Harris N.A., SunTrust Bank, U.S. Bank National Association, Regions Bank, Trustmark National Bank
and ING Capital LLC, which provided for a $225.0 million unsecured revolving credit facility. The
Registrant did not incur any early termination penalties in connection with the termination. The
terminated credit facility provided for interest to be paid, at the Registrant’s option, at a
variable base or Eurodollar rate as determined under the Credit Agreement. The Registrant
was also obligated to pay an applicable margin over the Eurodollar rate, as well as a letter of
credit participation fee and a commitment fee payable on the amount of the average daily unused
portion of the commitment, each according to the ratio of its debt to total capitalization. If
there was an event of default, loans outstanding would have borne an additional 1.50% rate of
interest. The Registrant was also obligated to pay a fronting fee of 0.125% of the face amount of
each standby letter of credit issued, as well as usual and customary administrative fees. Up to
$5,000,000 of the old credit facility was available for the issuance of standby and commercial
letters of credit in the ordinary course of business and it provided for a $10,000,000 swing line
facility. The information provided in Item 1.01 of this report is incorporated by reference in
this Item 1.02.
Section 2 — Financial Information
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| Item 2.03 |
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Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant |
The information provided in Item 1.01 of this report is incorporated by reference into this
Item 2.03.
Section 9 — Financial Statements and Exhibits
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| Item 9.01 |
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Financial Statements and Exhibits. |
(c) The following exhibits are filed with this Current Report:
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| Exhibit No. |
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Description |
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10.1 |
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Credit Agreement dated May 1, 2008 among
Sanderson Farms, Inc. and Bank of Montreal,
Individually and as Agent for the Banks defined
therein. |
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10.2 |
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Guaranty Agreement dated May 1, 2008 of
Sanderson Farms, Inc. (Foods Division), Sanderson
Farms, Inc. (Production Division) and Sanderson Farms,
Inc. (Processing Division) |
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99 |
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Press Release dated May 1, 2008. |