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): November 17, 2005
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
of incorporation)
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(Commission File Number)
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(I.R.S. Employer
Identification No.) |
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225 N. 13th Avenue
P.O. Box 988
Laurel, Mississippi
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39440 |
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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))
TABLE OF CONTENTS
Section 1 – Registrant’s Business and Operations
Item 1.01 Entry into a Material Definitive Agreement.
On November 17, 2005, the Registrant entered into a Credit Agreement with Harris N.A.,
individually and as Administrative Agent for SunTrust Bank, AmSouth Bank, U.S. Bank National
Association, Regions Bank and Trustmark National Association. This new credit facility replaced the
Registrant’s existing $100.0 million unsecured revolving credit facility that was to expire on July
31, 2009 with a $200.0 million unsecured revolving credit facility on a committed basis with a five
year maturity. Two years prior to the facility’s termination, 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 $5,000,000 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 a rate offered by the
Administrative Agent in its discretion. The Credit Agreement contains restrictive covenants, which
include maintaining a minimum tangible net worth, a maximum leverage ratio of 50 percent, 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
November 17, 2005.
In connection with the new credit facility, the lenders under the Credit Agreement entered
into an Intercreditor Agreement dated as of November 17, 2005 with The Lincoln National Life
Insurance Company as a noteholder of the Registrant’s 6.65% Senior Notes, due July 7, 2007, having
an aggregate principal amount of $20,000,000.
Copies of the Credit Agreement, the Guaranty Agreement and the Intercreditor Agreement are
filed as Exhibits 10.1, 10.2 and 10.3, respectively, to this report and are incorporated herein by
reference. The descriptions above are summaries of the Credit Agreement, Guaranty Agreement and
the Intercreditor Agreement and are qualified in their entirely by the complete text of those
agreements.
Some of the lenders under the terminated and new credit facilities 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 a trustee of the Employee Stock Ownership Plan and
Trust of Sanderson Farms, Inc. and Affiliates, and Harris Trust and Savings Bank and SunTrust Bank
are lenders under a Credit Agreement dated March 21, 2000 with the Estate of Joe Frank Sanderson,
which is an affiliate of the Registrant.
Item 1.02
Termination of a Material Definitive Agreement.
Also on November 17, 2005, upon entering into the Credit Agreement described above, the
Registrant terminated its Credit Agreement dated as of July 31, 1996, as amended, among the
Registrant, Harris Trust and Savings Bank, individually and as Agent for SunTrust Bank, AmSouth
Bank and Trustmark National Bank, which
provided for a $100 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 either a variable base or Eurodollar rate. The Registrant was
also obligated to pay an applicable margin over the Eurodollar rate, as well as a commitment fee
payable on the amount of the average daily unused portion of the commitment, each according to its
leverage ratio; a commission fee in an amount of the rate per year equal to the applicable
Eurodollar margin of the amount of each standby letter of credit and a fee of 0.25% per year on the
face amount of each trade letter of credit. The Registrant was also obligated to pay an additional
1.50% in an event of default. The terminated credit facility did not provide for a swing line
facility but contained an option exercisable by the Registrant to convert the facility to term
loans from each of the lenders who were parties to the facility payable in eight semiannual
installments of principal each equal to 12.5% of the original principal amount of the term loans.
The information provided in Item 1.01 of this report is incorporated by reference in this Item
1.02.
Section 2 – Financial Information
Item 2.03 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
Item 9.01 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 |
10.1
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Credit Agreement dated November 17, 2005 among
Sanderson Farms, Inc. and Harris N.A., Individually
and as Agent for the Banks defined therein. |
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10.2
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Guaranty Agreement dated November 17, 2005 of
Sanderson Farms, Inc. (Foods Division), Sanderson
Farms, Inc. (Production Division) and Sanderson Farms,
Inc. (Processing Division). |
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10.3
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Intercreditor Agreement dated as of November 17, 2005
among The Lincoln National Life Insurance Company,
Harris N.A., SunTrust Bank, AmSouth Bank, U.S. Bank
National Association, Regions Bank, and Trustmark
National Bank. |