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): October 4, 2012
SANDERSON FARMS, INC.
(Exact name of registrant as specified in its charter)
Mississippi | 1-14977 | 64-0615843 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) | ||
127 Flynt Road Laurel, Mississippi |
39443 | |||
(Address of principal executive offices) | (Zip Code) |
(601) 649-4030
(Registrants 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):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 1 Registrants Business and Operations
Item 1.01 | Entry into a Material Definitive Agreement. |
On October 4, 2012, the Registrant entered into an amendment to its Credit Agreement dated February 23, 2011 with BMO Harris Bank N.A., individually and as Agent; Bank of Montreal; BMO Harris Financing, Inc.; Regions Bank; AgFirst Farm Credit Bank; ING Capital LLC; U.S. Bank National Association; Farm Credit Services of America, PCA; Farm Credit Bank of Texas; Compass Bank; Trustmark National Bank; Bank of the West; Farm Credit Services of Mid-America, PCA; United FCS, PCA d/b/a FCS Commercial Finance Group; PNC Bank, N.A.; GreenStone Farm Credit Services, ACA; Farm Credit West, PCA; AgStar Financial Services, PCA; 1st Farm Credit Services, PCA; Northwest Farm Credit Services, PCA and American AgCredit, PCA.
The amendment changed the minimum tangible net worth that the Registrant is required to maintain under the facility to $478,000,000 through October 30, 2012 and $400,000,000 from and after October 31, 2012, subject to quarterly increases based in part on the Registrants quarterly consolidated net income. The amendment also modified the provision of the agreement that permits the Registrant to exceed temporarily a maximum leverage ratio to allow for the construction of either of two new poultry complexes anywhere in the United States. The leverage ratio provision in the original agreement only addressed the construction of one new complex in North Carolina. The amendment also limits the Registrants capital expenditures in any fiscal year to $55,000,000 plus a $10,000,000 carryover amount from the preceding fiscal year that was not actually spent, and also limits capital expenditures in connection with the construction of the two new poultry complexes to $125,000,000 each. Finally, the amendment modified the applicable margin over the Eurodollar rate that the Registrant is obligated to pay under the facility.
A copy of the amendment is filed as Exhibit 10.1 to this report and is incorporated herein by reference. The description above is a summary of the amendment and is qualified in its entirety by the complete text of the amendment. 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. |
| The Registrant maintains regular deposit accounts with Regions Bank, including its payroll accounts and cash management accounts, and the Registrant pays Regions Bank a fee for cash management services provided to the Registrant. Regions Bank also maintains the trust account for the Registrants health benefit plan and trust. |
| The Registrant has approximately $12 million in operating leases outstanding to PNC Equipment Finance, LLC, a wholly-owned subsidiary of PNC Bank, N.A., and $2.7 million in operating leases outstanding to Regions Bank for certain equipment, primarily trucks, trailers and tractors. |
| Northwest Farm Credit Services, PCA purchased $50,000,000 of senior notes due April 28, 2016 of the Registrant in a private placement pursuant to a Note Purchase Agreement dated April 28, 2006 with the Registrant. |
| Finally, one of the Registrants directors, Toni D. Cooley, is a director of Trustmark National Bank. |
Section 9 Financial Statements and Exhibits
Item 9.01 | Financial Statements and Exhibits. |
(d) The following exhibits are furnished with this Current Report:
Exhibit |
Description | |
10.1 | First Amendment to Credit Agreement dated October 4, 2012 among Sanderson Farms, Inc., the Banks party thereto and BMO Harris Bank N.A. as Agent for the Banks. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SANDERSON FARMS, INC.
(Registrant)
Date: October 9, 2012 |
By: | /s/ D. Michael Cockrell | ||||
D. Michael Cockrell | ||||||
Treasurer and Chief Financial Officer |
EXHIBIT INDEX
Exhibit |
Description | |
10.1 | First Amendment to Credit Agreement dated October 4, 2012 among Sanderson Farms, Inc., the Banks party thereto and BMO Harris Bank N.A. as Agent for the Banks. |
Exhibit 10.1
SANDERSON FARMS, INC.
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement (herein, the Amendment) is entered into as of October 4, 2012, among Sanderson Farms, Inc., a Mississippi corporation, the Banks party hereto, and BMO Harris Bank N.A., formerly known as Harris N.A., as Agent for the Banks, (Agent).
PRELIMINARY STATEMENTS
A. The Company, the several financial institutions from time to time party thereto, and the Agent are parties to a Credit Agreement dated as of February 23, 2011 (the Credit Agreement). All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement.
B. The Company has requested that the Required Banks amend the Credit Agreement, and the Required Banks are willing to do so on the terms and conditions set forth in this Amendment.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. | AMENDMENTS. |
Upon satisfaction of all of the conditions precedent set forth in Section 2 hereof, the Credit Agreement shall be amended to read as follows:
1.1. The table included in the definition of the term Applicable Margin contained in Section 4 of the Credit Agreement shall be amended to read as follows:
LEVEL I | LEVEL II | LEVEL III | LEVEL IV | LEVEL V | ||||||
Leverage Ratio |
<25% | ³ 25% and <35% |
³ 35% and <45% |
³ 45% and <55% |
³55% | |||||
Eurodollar Loans and L/C Participation Fee |
2.00% | 2.25% | 2.75% | 3.25% | 3.75% | |||||
Domestic Rate Loans |
1.00% | 1.25% | 1.75% | 2.25% | 2.75% | |||||
Commitment Fee |
0.35% | 0.40% | 0.45% | 0.50% | 0.50% |
1.2. Section 7.9 of the Credit Agreement shall be amended to read as follows:
Section 7.9. Consolidated Tangible Net Worth. The Company will maintain at all times Consolidated Tangible Net Worth during each fiscal year of the Company in an amount not less than $478,000,000 through October 30, 2012 and $400,000,000 from and after October 31, 2012, increasing on the last day of each fiscal quarter (commencing with the fiscal quarter ending January 31, 2013) by an amount equal to (a) 100% of any Net Proceeds of Stock issued during such quarter plus (b) 60% of an amount (but not less than zero) equal to (i) the Companys Consolidated Net Income for such fiscal quarter, minus (ii) the lesser of (x) $4,000,000 and (y) the aggregate amount of all dividends declared during such fiscal quarter rounded to the next highest $100,000.
1.3. Section 7.10 of the Credit Agreement shall be amended to read as follows:
Section 7.10. Consolidated Indebtedness for Borrowed Money to Total Capitalization. The Company will not permit the ratio of its Consolidated Indebtedness for Borrowed Money to its Total Capitalization (the Leverage Ratio), expressed as a percentage, at any time to exceed 55% from the date of this Agreement through October 30, 2014, and 50% from and after October 31, 2014 (at any time, the Scheduled Ratio); provided that the Company may elect to increase the maximum Leverage Ratio permitted by this Section (the Maximum Leverage Ratio) by 5% above the Scheduled Ratio then in effect (e.g., 55% to 60%) for four consecutive fiscal quarters by giving written notice to the Agent of such election (the Increase Notice) in connection with the construction of either of two new poultry processing complexes at locations to be determined by the Borrower but within the United States (such poultry processing complexes are referred to collectively as the New Processing Complexes and individually as a New Processing Complex). The Maximum Leverage Ratio will increase to a level 5% above the Scheduled Ratio then in effect on the first day of the fiscal quarter in which the Agent receives the Increase Notice and will continue in effect at such level for the following three fiscal quarters, provided that the Maximum Leverage Ratio shall revert to the Scheduled Ratio if the Company has not begun and does not begin construction of the New Processing Complex described in the applicable Increase Notice within three months of the date on which the Agent receives the Increase Notice. The Company may give only one Increase Notice during the term of this Agreement.
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1.4. Section 7.11 of the Credit Agreement shall be amended to read as follows:
Section 7.11. Capital Expenditures. (a) The Company will not, and will not permit any Subsidiary to, spend or be obligated to spend during any fiscal year for capital expenditures (as defined and classified in accordance with generally accepted accounting principles consistently applied, including without limitation any such capital expenditures in respect of Capitalized Leases but excluding any acquisition permitted by Section 7.14(d) which might constitute such a capital expenditure and the capital expenditures permitted by clause (b) below) in an aggregate amount for the Company and its Subsidiaries in excess of $55,000,000 for the Companys fiscal year ending October 31, 2012 and for each fiscal year of the Company thereafter, plus in each case up to $10,000,000 (the Carryover Amount) permitted to be spent in the preceding fiscal year but not actually spent therein. For purposes of this Section, any capital expenditures made in any fiscal year shall be applied first to the Carryover Amount, if any, available during such fiscal year.
(b) The Company will not, and will not permit any Subsidiary to, spend or be obligated to spend capital expenditures (as defined and classified in accordance with generally accepted accounting principles consistently applied) in connection with the construction of up to two New Processing Complexes in excess of $125,000,000 with respect to each such New Processing Complex during the term of this Agreement.
2. | CONDITIONS PRECEDENT. |
The effectiveness of this Amendment is subject to the satisfaction of all of the following conditions precedent:
2.1. The Company and the Required Banks shall have executed this Amendment.
2.2. Each Guarantor Subsidiary shall have executed the Guarantors Acknowledgment attached hereto.
2.3. The Company shall have paid to the Agent for the ratable benefit of the Banks that execute this Amendment an amendment fee in an amount equal to one-tenth of one percent (0.10%) of the amount of each such Banks Revolving Credit Commitment, which fee shall be fully earned when paid and shall be non-refundable.
2.4. The Company shall have paid to Bank of Montreal, acting under its trade name BMO Capital Markets, as Sole Lead Arranger and Sole Book Runner (in such capacity, the Arranger), for its own account such fee as the Company and the Arranger have agreed in writing, which fee shall be fully earned when paid and shall be non-refundable.
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3. | REPRESENTATIONS AND WARRANTIES. |
3.1. Each of the representations and warranties set forth in Section 5 of the Credit Agreement is true and correct.
3.2. The Company is in full compliance with all of the terms and conditions of the Credit Agreement and no Event of Default or Potential Default has occurred and is continuing thereunder or shall result after giving effect to this Amendment.
4. | MISCELLANEOUS. |
4.1. Reference to this specific Amendment need not be made in any note, document, letter, certificate, the Credit Agreement itself, the Revolving Notes, or any communication issued or made pursuant to or with respect to the Credit Agreement or the Revolving Notes, any reference to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby.
4.2. This Amendment may be executed in any number of counterparts, and by the different parties on different counterparts, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois.
[SIGNATURE PAGES TO FOLLOW]
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This Amendment is entered into as of the date and year first above written.
SANDERSON FARMS, INC. | ||||
By | /s/ D.M. Cockrell | |||
Its | Treasurer and CFO |
Accepted and agreed to as of the date and year first above written.
BMO HARRIS BANK N.A., individually and as Agent | ||||
By | /s/ Manuel J. Diaz | |||
Its Director |
BANK OF MONTREAL, as an L/C Issuer | ||||
By | /s/ Manuel J. Diaz | |||
Its | Director |
BMO HARRIS FINANCING, INC. | ||||
By | /s/ Manuel J. Diaz | |||
Its | Director |
REGIONS BANK | ||||
By | /s/ Stanley A. Herren | |||
Its | Senior Vice President |
Signature Page
Sanderson Farms, Inc.
First Amendment to Credit Agreement
AGFIRST FARM CREDIT BANK | ||||
By | /s/ Steven J. OShea | |||
Its | Vice President |
ING CAPITAL LLC | ||||
By | /s/ Evelin Herrera | |||
Its | Vice President | |||
By | ||||
Its |
US BANK NATIONAL ASSOCIATION | ||||
By | /s/ [illegible] | |||
Its | Vice President |
FARM CREDIT SERVICES OF AMERICA, PCA | ||||
By | /s/ Gary Mazour | |||
Its | Vice President |
FARM CREDIT BANK OF TEXAS | ||||
By | /s/ Alan Robinson | |||
Its | Vice President |
COMPASS BANK | ||||
By | /s/ Jason Goetz | |||
Its | Vice President |
Signature Page
Sanderson Farms, Inc.
First Amendment to Credit Agreement
TRUSTMARK NATIONAL BANK | ||||
By | /s/ William H. Edwards | |||
Its | First Vice President |
BANK OF THE WEST | ||||
By | /s/ Trevor Svoboda | |||
Its | Vice President |
FARM CREDIT SERVICES OF MID-AMERICA, PCA | ||||
By | /s/ [illegible] | |||
Its | VP Capital Markets |
UNITED FCS, PCA, d/b/a FCS COMMERCIAL FINANCE GROUP | ||||
By | /s/ Lisa Caswell | |||
Its | Vice President |
PNC Bank, N.A. | ||||
By | /s/ [illegible] | |||
Its | SVP |
GREEN STONE FARM CREDIT SERVICES, ACA | ||||
By | /s/ Alfred S. Compton, Jr. | |||
Its | SVP / Managing Director |
Signature Page
Sanderson Farms, Inc.
First Amendment to Credit Agreement
FARM CREDIT WEST, PCA | ||||
By | /s/ Ben Madonna | |||
Its | Vice President |
AGSTAR FINANCIAL SERVICES, PCA | ||||
By | /s/ Troy Mostaert | |||
Its | Vice President |
1ST FARM CREDIT SERVICES, PCA | ||||
By | /s/ Dale Richardson | |||
Its | Vice President, Capital Markets |
NORTHWEST FARM CREDIT SERVICES, PCA | ||||
By | /s/ Carol Sobson | |||
Its | Vice President |
AMERICAN AG CREDIT, PCA | ||||
By | ||||
Its |
Signature Page
Sanderson Farms, Inc.
First Amendment to Credit Agreement
GUARANTORS ACKNOWLEDGMENT
The undersigned, each of which has executed and delivered to the Banks a Guaranty Agreement dated as of February 23, 2011 (the Guaranty Agreement), hereby acknowledges the amendment of the Credit Agreement as set forth above and agrees that all of the Companys indebtedness, obligations and liabilities to the Banks and the Agent under the Credit Agreement, as amended by the foregoing Amendment, and the Notes is and shall continue to be entitled to the benefits of said Guaranty Agreement. The undersigned further agree that the Acknowledgment or consent of the undersigned to any further amendments of the Credit Agreement shall not be required as a result of this Acknowledgment having been obtained, except to the extent, if any, required by the Guaranty Agreement.
Dated as of October 4, 2012.
SANDERSON FARMS, INC. (FOODS DIVISION) | ||||
By | /s/ D.M. Cockrell | |||
Its | Treasurer and CFO |
SANDERSON FARMS, INC. (PRODUCTION DIVISION) | ||||
By | /s/ D.M. Cockrell | |||
Its | Treasurer and CFO |
SANDERSON FARMS, INC. (PROCESSING DIVISION) | ||||
By | /s/ D.M. Cockrell | |||
Its | Treasurer and CFO |