SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 1
EXHIBIT 99.1
SANDERSON FARMS INCORPORATED
MODERATOR: JOE SANDERSON
SEPTEMBER 15, 2005
10:00 AM CT
Operator: Please stand by, we're about to begin. Thank you for
standing by and welcome to the Sanderson Farms
Incorporated conference call. Today's conference is being
recorded. Now at this time I'd like to turn the
conference over to the Chairman and the Chief Executive
Officer, Joe Sanderson. Mr. Sanderson, please go ahead.
Joe Sanderson: Thank you. Good morning. We appreciate your taking time
to join us this morning on this conference call during
which we will discuss the effects of Hurricane Katrina on
our business.
Lampkin Butts and Mike Cockrell are on the call with me
this morning. After making some opening remarks, I will
turn the call over to Lampkin to discuss our recovery
efforts over the last 2-1/2 weeks, and I will then ask
Mike to outline for you our insurance coverages and
financial information related to insurance.
Before we make any further comments, I will ask Mike to
give a cautionary statement regarding forward-looking
statements.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 2
Mike Cockrell: Thank you Joe and good morning to everyone. Before we
begin the call this morning, I need to caution you that
the call will contain forward-looking statements about
the business, financial condition and prospects of the
company. All forward-looking statements are made
pursuant to the Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995 and are based on
management's current expectations or beliefs as well as
assumptions made by and information currently available
to management.
The actual performance of the company could differ
materially from that indicated by the forward-looking
statements because of various risks and uncertainties.
Certain risks and uncertainties resulting from Hurricane
Katrina are found in our press conference dated September
6, 2005 which was filed with the Securities & Exchange
Commission as part of a current report on Form 8K on
September 7, 2005.
Additional risks and uncertainties are described in Item
7 of our most recent Annual Report on Form 10K and in
management's discussion and analysis of financial
conditions and results of operations found in Item 2 or
Part 1 of the company's quarterly report on Form 10Q
filed with the SEC in connection with our third fiscal
quarter ended July 31, 2005.
Joe Sanderson: Thank you Mike. The last 2-1/2 weeks have presented
significant challenges to our company. But I am please to
report to you that all of the company's systems are
operational. The most important thing that I can report
to you today is that the company has received no report
of serious injury or loss of life among its employees or
its contract growers.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 3
Many of our employees and contract growers experienced
significant damage to their personal property and
disruption of their lives. But I'm very grateful that we
experienced no loss of life.
I will also tell you that foremost on our minds has been
the people in Southern Mississippi, Louisiana and Alabama
who were more seriously affected by the storm than we
were, and those who have lost loved ones and in many
cases, all of their material possessions as a result of
the storm.
Our company is committed to doing what we can to aid in
the recovery effort and to continue to provide ice, food
and suppliers to those who need it.
As we reported last week, the company experienced no
significant damage to any of its Mississippi or Louisiana
processing facilities, feed mills or hatcheries as a
result of the storm. The company has four hatcheries
located in the affected area, all in Mississippi. All
four hatcheries maintained generator power following the
loss of electricity caused by Hurricane Katrina and were
able to maintain power to the incubation equipment that
houses millions of hatching eggs.
In addition to its hatcheries, the company operates three
feed mills in Mississippi, all of which were affected by
the storm. However, by Friday following the storm, all
three Mississippi feed mills had resumed operations and
were delivering feed to our flocks.
The company operates four poultry processing plants in
Mississippi and one in Louisiana as well as its prepared
foods plant in Mississippi. While all of our Mississippi
and Louisiana plants lost power as a result of the storm,
none experienced significant damage.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 4
By the weekend following the storm, operations had
resumed at all of our plants except for the Laurel,
Mississippi plant, which was slower in resuming
operations because of damage to the city of Laurel water
system.
Our Georgia and Texas operations were not affected by the
storm.
By the end of the weekend following the storm, the
company had substantially completed its assessment of
losses to live inventories. We estimate that 72 broiler
houses out of a total of 1,874 located in Mississippi and
Louisiana, or just under 4% were totally destroyed.
Another 86 houses experienced considerable damage and
will be unable to house broilers until repairs are made.
Based on initial estimates, we expect repairs to the
significantly damaged houses to take up to four months to
complete.
In addition to broiler houses, two breeder houses in
Mississippi out of a total of 187 in this state were
totally destroyed and will have to be rebuilt.
Additionally, two pullet houses in Mississippi out of a
total of 100 in this state were destroyed.
We do not believe the loss of housing capacity will
affect the company's ongoing operations since we can
shorten layout time between flocks and take other
temporary measures to compensate for these losses. While
not perfect, we know it will work.
We are entering a time of year when layouts are extended
as we cut productions for the holiday season. This
relieves the pressure caused by the loss of housing
capacity.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
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In addition, our growers have been building new houses
needed for the Collins conversion to big birds, and some
of those houses can be used earlier than we planned.
As results of the storm, we estimate that approximately 3
million head of broiler chickens out of an average live
inventory in Mississippi and Louisiana of approximately
35 million head, representing about 8-1/2%, ranging in
age from one day to 62-days-old died.
In addition, we estimate that 26,500 breeder hens out of
an average inventory of approximately 1.2 million head
died. And 13,000 pullets out of an average live inventory
of approximately 1 million head were killed.
In addition the loss of live birds, the company's
hatcheries, while they maintain generator power
throughout the storm and afterwards were unable to
operate normally during the several days following
Hurricane Katrina. Many roads in our area were impassable
for days following the storm which made it impossible to
pick up and set hatching eggs from breeder farms or to
place newly hatched broiler chicks on broiler farms.
As a result of these interruptions to our hatchery and
placement process, we estimate that approximately 5.2
million head were lost. This inability to place chicks
and set eggs at our normal rate during the days following
the storm will impact the company's weekly processing
volume during the weeks in which chicks would have
matured and been available for processing.
These processing reductions will occur primarily during
the months of October and November.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 6
During normal operations, the company processes
approximately 4.2 million head per week at its
Mississippi and Louisiana plants. When you add chickens
that were destroyed in the field to the chickens that we
were unable to place on farms, the total head reduction
resulting from the storm is approximately 8.2 million
head. This is approximately two weeks of our normal
processing volume at our Mississippi and Louisiana plants
that will be lost over the coming months.
Those of you who are familiar with our operations know
that almost every grow out farm is equipped with backup
generator power to provide electricity to run feeding,
watering and ventilation equipment during power outages
until power is restored.
We live in an area that experiences frequent thunder
storms that will from time to time knock out power to our
farms. These generators are equipped and fueled in such a
way to maintain power for 28 to 48 hours. Obviously
following a storm of the magnitude we experienced 2-1/2
weeks ago, some farms still do not have power.
One of the largest challenges we faced immediately after
the storm was maintaining a supply of diesel fuel to run
generators at grow out farms operated by growers with
which we contract. Diesel fuel was difficult to find
immediately after the storm, but we were able to acquire
diesel and maintain the supply to the grow out farms as
power was restored.
Today we estimate that out of the total number of
contract grower farms in Mississippi and Louisiana, 85.3%
have power restored.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 7
As power has been restored, our need for diesel fuel has
lessened. But the company's ability to secure diesel fuel
until power is fully restored to all its farms will be an
important factor in maintaining our live inventories.
When all is said and done, I believe we restored our
systems and operations as quickly as possible and am
pleased that there should be no long term effects to any
of our operations as a result of the storm.
The lost head and lost efficiencies that resulted from
the storm will be short lived, and there will be no long
term effects on the company.
We have spent the last 2-1/2 weeks focused on returning
our operations to normal, but we'll now return our
attention to our strategic initiatives including the
conversion of our Collins facility to all big bird
deboning and continuing to increase production at our
Georgia facility.
I would like to give a quick update on the progress of
Georgia. Live grow out in the new houses in Georgia
continues to perform very well. As expected, broiler
performance has been outstanding during the first few
weeks of operations, and I have also been very pleased
with the progress at the plant.
We will process 270,000 birds on the first line of the
first shift next week and we'll complete the ramp up of
production on that line to 300,000 birds per week as
scheduled during the week of October 3.
We are on target to begin the second shift of the first
line in November and remain on schedule to be at full
production next summer.
I will now turn the call over to Lampkin to discuss our
operation and our sales efforts.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 8
Lampkin Butts: Thank you Joe. Since the hurricane hit 2-1/2 weeks ago,
our operations have steadily returned to normal. In the
days immediately following the storm, a priority was to
resume operations at our feed mill so that we could begin
delivering feed to our contract grower's farms.
In anticipation of the storm, we ran our mills over the
weekend before the storm and delivered feed to most all
of the farms.
Our Hazlehurst mill received power on Wednesday following
the storm and began delivering feed that day. By
Thursday, the Laurel Mill had received power and was
operational and by Friday we were operating our McComb
mill.
Because of damage to rail lines, we brought ingredients
in by truck during the first days following the storm,
but were able to secure adequate supplies of ingredients
to meet our needs. All rail lines are now operational and
our mills are back to normal operations.
A second priority was to resume operations of our live
production systems, including our hatcheries. Because of
interruptions to the transportation system in our area,
we were unable to place newly hatched chicks on grow out
farms on our normal schedule. We have now resumed normal
operations at all of our hatcheries.
By the weekend following the storm, all of our processing
plants in the affected area had power restored and were
operational except for our Laurel Mississippi facility.
The Laurel Mississippi plant began operations Wednesday
September the 7th.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 9
Once operational, the plants had been operating both
shifts every day, including this past weekend. I want to
express my gratitude to every employee of Sanderson Farms
who has been working extra hours and weekends to keep our
plants operational and to catch up on production loss
during downtime. We ran both shifts on Saturday and
Sunday and we will run again the next two Saturdays to
make up for production lost while were down.
While certain losses we experienced as a result of the
hurricane are known at this time, some will be unknown
for a period of time. Mike will discuss our known losses
and insurance issues in a moment, but there are certain
efficiencies and losses that are simply impossible to
quantify at this time.
Joe already mentioned that between the head lost in the
fields and the eggs and chicks lost in hatchery, we
estimate that 8.2 million head of chickens that would
normally be processed during September, October and
November will be unavailable. That will result in
increased cost per bird processed in the plants as well
as lost revenues from the pounds that would normally be
sold.
We will be unable to quantify the exact impact on our
income statements of these inefficiencies and lost
revenues until we know where chicken market prices will
be during the weeks those chickens will be sold.
The storm also disrupted our normal feeding schedule in
the field. This disruption will impact the performance
and efficiencies of the live inventory in the field, but
until we process those birds and compare their
performance with our normal performance, we will be
unable to quantify the impact of that lost performance.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 10
We will seek reimbursement of losses caused by these
reduced efficiencies and lost revenues under the business
interruption portion of our insurance policy. Mike will
address that in a moment.
The company paid its hourly employees for a normal 40
hour week during the week we were down. In addition, we
will continue to pay affected contract growers an amount
equal to what they normally would have received had the
storm not occurred based on historical averages.
We believe these expenses are required in order to
maintain the integrity of our systems and we will seek
reimbursement of these charges under the added expense
category of insurance that Mike will discuss in a moment.
While we began operating at all of our plants as quickly
as possible following the storm, we were not producing
our normal product mix. By Friday the 9th, we were able
to resume our normal distribution to our regular
customers and feel that we are now in the position to
fill all of their needs.
We will manage the lost head in such a way to meet the
needs of our regular customers.
Like Joe, I have been impressed with the reaction of our
employees and independent contract growers. Many worked
long and hard to protect our assets and to allow us to
resume operations as quickly as possible. I want to
publicly express my gratitude to them for their efforts
and for their continued support and willingness to work
extended hours as we make up for our loss of production.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 11
I also want to thank our friends at Pilgrim's Pride,
Goldkist, House of Raeford, Ozark Mountain Poultry,
Keystone and Nordic whose help after the hurricane helped
us adjust to the situation we faced.
At this time I want to turn the call over to Mike to
discuss in more detail our insurance position and some of
the losses we can quantify at this time.
Mike Cockrell: Thank you Lampkin. The company's property and casualty
provider is a London syndicate lead by Wellington. The
company is comfortable with the financial stability and
the resources of its carriers and we have had a good
relationship with our providers in the past.
We have contacted our providers and have already had an
adjustor designated for our claim and we're in
conversation with them as we begin to quantify our
losses. Generally speaking our insurance coverage for an
event of this magnitude can be divided into five
categories. While these five categories of losses have
separate limits, there's only one retention and
deductible applicable to all categories.
The company's retention amount for insured losses is 2.5
million while an additional deductible exists of 250,000.
Thus the company's total deductible and retention amount
is $2.75 million. Once this amount is reached, there are
no additional deductibles applicable to the individual
coverages of losses that I will now discuss.
The first category of insurance is the company's poultry
floater. This coverage applies to live poultry in the
field that are lost or destroyed. As Joe and Lampkin
mentioned, the company estimates that it lost just over 3
million head of live chickens.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 12
Our initial estimate is that our average cost in each
broiler was approximately 96 cents per head, the average
cost of each breeder chicken was $6.27 per head, and the
average cost of each lost pullet was approximately $5.35,
meaning that our total loss as the result of the loss of
live poultry was $3.15 million. This amount is within the
limits of our poultry floater.
The second category of losses is the loss of property
located offsite. The company had approximately $1
million in finished product inventory located in a cold
storage warehouse in New Orleans waiting shipment into
the export market.
This product was totally destroyed by the storm and the
company will seek reimbursement for the cost of that
inventory. In addition to the finished product inventory,
the company had feed supplies and medication located
offsite on the property of its independent contract
producers whose farms were seriously damaged. While this
is not a large amount of money, we will also seek
reimbursement for these losses and believe that our
limits are adequate to cover our losses.
The third category of losses is our general property and
casualty coverage. As Joe mentioned, we were very
fortunate that none of our facilities experienced
significant damage. In addition to the repairs that will
be required at our facilities, we will seek reimbursement
for debris removable and the small amount of finished
good inventories that were lost at our plants under this
policy.
While we don't have an exact dollar amount of the various
repairs that will be required and have been required as a
result of the storm, we are comfortable that these losses
are well within the limits of our property coverage.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
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The last two category of losses are more difficult to
quantify at this time. They include coverage for
additional expenses and for business interruption. The
company has experienced and will continue to experience
additional expenses necessary to allow it to resume
operations as quickly as possible and to maintain its
operations.
These expenses include providing diesel fuel for our
contract growers to maintain generator power to the farms
housing our live inventories, providing gasoline to our
employees so that they can get to the plant and work in a
time when gasoline is very difficult or impossible to
find, maintaining normal payroll during downtime in order
to maintain our workforce and maintaining normal grower
pay to enable our contract growers to meet their
obligations and maintain the availability of their farms
to house our live inventories going forward.
In addition to these expenses, the company will pay
overtime to many employees. We will experience additional
travel necessary to move employees to areas of need.
We will have expenses associated with the cost of
disposing of dead birds on farms of our contract growers,
and the cost of quickly constructing a communications
system following the storm when normal communication
systems fail.
The company believes that the limits under its insurance
policy to cover added expenses are adequate to reimburse
it for these needs, but cannot state with certainty that
our insurance company will agree that all of these
expenses fall within the policy.
The most difficult loss to quantify at this time is the
company's lost profits as a result of the business
interruption caused by Katrina. As Joe and Lampkin
discussed, the company's volume will be affected through
November. Until
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 14
we know what the chicken market would have allowed us to
sell the lost volume for, we cannot state for sure what
our lost profits will be.
In addition, there will certainly be efficiencies lost in
the field and in the processing plants as a result of
these reduced pounds.
We will quantify that lost efficiency and seek
reimbursement under the business interruption portion of
the policy.
The business interruption portion of our insurance policy
includes a seven day waiting period before reimbursement
begins for certain events, and we are currently assessing
whether or not that waiting period will apply in this
instance.
If it does, profit loss during the first week following
the storm will not be reimbursable. As Joe and Lampkin
discussed, the company was unable to process product
until Saturday and Sunday following the storm which hit
on Monday. We normally process 4.2 million head per week
during an average week at the affected plants, but we
were able to process only 610,000 head during the seven
days following the storm.
While we are not in a position to state precisely what
our lost profits will be for those seven days, we
believe it will be in the range of $3 million before
taxes.
As Joe mentioned, it is our belief that all of the issues
we had discussed are short term in nature and that none
of our systems or operations have been affected in a way
that will impact them over the long term.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 15
I can report that our information systems, our accounting
systems and all of our controls remained operational and
functioned very well. I would like to add my gratitude to
our employees who have worked hard and put in long hours
over the last 2-1/2 weeks.
At this point, we will open up the call for questions.
Operator: Very good. If you would like to ask a question, you may
do so by pressing the star key followed by the digit 1
and star 1 if you've been utilizing your mute button. You
want to make sure that is disengaged. And we'll take our
first question from Christine McCracken with FTN Midwest.
Christine McCracken: Good morning.
Man: Good morning Christine.
Christine McCracken: First of all, let me say that all of us here are
extremely happy that everyone came through the storm in
good shape.
Can I start by asking what you're seeing? I guess it
sounds like your operations are actually in relatively
good shape and you had a good contingency plan. But I'm
more concerned with the other affected growers in your
region from the perspective that surely they've seen some
significant loss. And it's unclear at this point how
quickly they'll be able to come back.
Is it - can you comment on that and what you're seeing
down in your region?
Man: We have a neighbor plant here in Jones County, and they
seem to have fared fairly well as far as losing houses.
They did not - my understanding is they lost about 12
houses. They have - they're probably going to have some
lost
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
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production because of problems in the hatchery during the
week following the hurricane.
We understand another company in Mississippi. And I think
they reported the loss. Tyson didn't - Tyson report the
loss of 200 chicken houses.
Christine McCracken: Yes.
Joe Sanderson: And I talked with another processor this morning. They
had minor damage, didn't lose any chicken houses in
Mississippi. There are two or three processors that I
have not heard from. Do you know anything different than
that Lampkin?
Lampkin Butts: No. But I think that's the major damage, what you've
already mentioned.
Joe Sanderson: Yes, I would guess that they're going - for certain for
us it'll be kind of the last two weeks of October and the
first two weeks of November. And that was primarily,
during that four week period, that was primarily for
problems with gathering eggs, setting eggs and placing
baby chicks. And I think during that period of time, it
would probably be through for the others that were
affected like that.
I don't - cannot gauge the impact of the loss of 200
chicken houses.
Christine McCracken: Okay.
Joe Sanderson: They can do some things to mitigate that by reducing
density or increasing density or by shortening the layout
time.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 17
Christine McCracken: So of the total losses that you've seen, do you think you
can get half that back by doing some of these or I guess
making some of these changes to the production, I guess
the speed or the ramp up in production?
Joe Sanderson: We think that once we get passed November...
Joe Sanderson: When did you return to full chick placements in the
field?
Mike Cockrell: The week after the storm.
Joe Sanderson: We already - we got back to full chick placements out of
our hatcheries last week. And we're - we have enough
housing to do that by shortening our layout time on the
farms. Layout time on the farms is normally 14 days.
We're probably running four and five right now. And after
we process the next two weekends, we ought to be up to
six or seven. We can do that for 30, 45 days. We'd like
to not do that in January and February.
Additionally, we have some new houses -- I don't have a
number -- but we're going to have some houses that we
were going to use for the Collins conversion, should be
available to us in October, November and December...
Christine McCracken: Okay.
Joe Sanderson: And back to full production by - I've lost track of...
Mike Cockrell: The 1st of December.
Joe Sanderson: Yes.
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 18
Christine McCracken: So yes, it sounds like the - toward the end of the
calendar year you'll kind of be back on track.
Joe Sanderson: Should be, yes.
Christine McCracken: Good to hear it. In terms of the cost of rebuilding some
of these facilities, is that something that you expect to
be covered by insurance? It seems like the building costs
as a result of the hurricane may be getting supplies to
the area. Those might be challenges for you. Can you
comment on that?
Mike Cockrell: Well on - as far as the insurance paying for it, the
insurance of course will not pay for contract growers to
rebuild their facilities.
Joe Sanderson: Our insurance won't.
Mike Cockrell: Our insurance won't. Our contract growers have insurance
that should assist them in their losses. But our
insurance won't pay for their houses to be rebuilt. They
own those.
Christine McCracken: Right.
Joe Sanderson: She's correct though, about the availability of tin and
insulation cost of lumber. All that will be some factor.
But it's not going to be anything different than what we
faced over in Georgia.
Christine McCracken: Okay. And just in terms of I guess your export business,
we've seen Russia has tried to I guess, ban imports from
the affected region. Is that something that you expect to
affect your business? Can you talk about how you might be
able to reroute any product that could have been
affected?
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
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Lampkin Butts: Christine, there was some questions from Russia about
product shipping from plants that were in the affected
area. But immediately USDA addressed that and assured the
Russian officials that they would only approve product
that met the standards. So that issue was resolved and
taken care of.
Russia is importing as normal. We are - we were shipping
almost all of our export product to Russia and other
countries, the dark meat through the gulf. So we are
having to divert that to other ports and other co-stores,
facilities.
We - Mobile is back open now. So we have access to
Mobile. And some of the other volume has shifted to
Pensacola and Jacksonville. And we're using some Georgia
co-stores facilities that would have been in Louisiana
prior to the storm.
Christine McCracken: I assume then that's a significantly higher cost though,
to get that product into these other I guess, fairly...
Lampkin Butts: It's costing us 2 to 2-1/2 cents a pound more in freight
going to those ports I mentioned than what we were doing
before.
Christine McCracken: That's helpful. And then just finally, wondering how your
customers are reacting I guess to any potential
disruption from you. Clearly I guess there's been some
comments by some of your competitors relative to their
ability to meet that demand. Is that business that you
expect to get back? Is there any potential that as a
result of this, there'd be any potential future impact on
your business?
Lampkin Butts: Christine, all of our customers could not have been
better to work with during the week. We were - the five
days we were down, they were all primarily interested in
whether or not we survived the storm. And they were -
just
SANDERSON FARMS INCORPORATED
Moderator: Joe Sanderson
09-15-05/10:00 am CT
Confirmation #2633945
Page 20
couldn't have been better to work with. We started
running the plants some Saturday and the rest on Sunday
other than Laurel after the storm. So we've begun - we're
back in those systems now and I'm not aware of any loss
of business other than short term and temporary.
Also when we were talking a minute ago about the extra
cost of exports, we are exporting 3-1/2 to 4 million
pounds a week of product. So it's $90,000 to $100,000 a
week in extra freight. But we do expect that to be part
of our insurance claim.
Christine McCracken: Well certainly at these prices, that's still very
profitable business to...
Lampkin Butts: Yes. Yes it is.
Christine McCracken: Thanks much.
Operator: We'll next then go to (John Rosenberg) with GE Capital
Group.
(John Rosenberg): Yes, I too would like to add my relief that the company
and your employees were not affected by this storm.
Additionally I'd also like to laud your efforts in
helping your employees in the local community in
recovering from this tragedy.
You guys are facing a couple of other challenges. I know
that you're coming up on a year end reporting date. Last
year if I recall, it was Pearl Harbor Day, December 7?
Mike Cockrell: Correct.
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(John Rosenberg): And to my knowledge, FASBI has so far taken the position
on this that this is not an extraordinary event for the
storm. Am I wrong in that? This is just a minor reporting
question.
Mike Cockrell: We will - we - the - in fact our accountants have already
been in our office and they're coming in next week to
start the year end reviews. And we expect to meet all of
our deadlines.
(John Rosenberg): Okay, well that's not my question. Actually my question
or my remark is more that I - as much as I appreciate
this call and I certainly do, that you also make every
effort to break out these costs on your year end report
so that we can see just how we can make a better - a good
assessment of how much of the costs were from the storm
even if FASBI does not necessarily allow it in your GAAP
in your statements.
Mike Cockrell: We appreciate that. Thank you.
(John Rosenberg): Well thank you very much.
Operator: We'll next go to (Michael Hanno) with AAD Capital.
Michael Hanno): Hello. Good morning everybody. And thank you very much
for having this call. You gave an extraordinary amount of
detail. And I was very impressed by everything that you
ran so thank you very much.
The question I had was I was hoping you'd give us some
update as to where you are in your forward-purchasing of
corn?
Mike Cockrell: (Michael), we knew someone was going to ask that.
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Michael Hanno): Yes, and I know that that was a concern by some in some
sell side reports. Enough numbers for next year were as
high as 230 a bushel. Last time I checked, it was at
about $1.72. So I was just wondering where you were on
your forward purchasing.
Joe Sanderson: Well the December contract right now is around 2.05. It
was 2.06 when I came into this meeting and 2.19 on the
March and normal carry going through. Soybean meal was at
I believe 178-1/2 on a December contract with normal
carry going forward.
We're following our normal pattern of pricing grain when
it falls in the - of being aggressive pricing when it
falls in the bottom 25% of a normal trading range. And
being mindful of the carry out of USDA reported carry
outs of approximately 2 billion bushels plus on corn and
200 million bushels on soybean. So we're doing as we
normally do.
Man: Okay great.
Operator: And as a reminder, it is star 1 for an initial question
or a follow-up. We'll next go then to (Paula Asum) with
(Stephens) Incorporated.
(Paula Asum): Hi. Good morning again. My relief that everything's going
well at your company. And thank you for all the details.
Just looking out in terms of the industry and the impact
that this storm will have on chicken prices. How much do
you think looking out into '06 will the issues with the
storm reduce supply? And what do you think the impact is
going to be on pricing?
Joe Sanderson: I think based on what we know -- and we've not heard from
every processor in Mississippi -- but based on what we -
I think if there's any impact, it'll be in
October/November and shouldn't go beyond that
significantly.
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Mississippi processes 18 million head out of 170 million.
Joe Sanderson: About 10 - a little less than 10% of the total.
Joe Sanderson: And I don't see any impact in '06. I think it'll be over
by the end of the year in the main as far as national
supply is concerned. And the thing that will - I still
you refer you to are pullet placements. And right now,
the last one we got wasn't it 100% a year ago? And what
are you running for the nine months?
Mike Cockrell: A hundred and one.
Joe Sanderson: A hundred and one percent.
Joe Sanderson: Or the week of the storm you had all of Mississippi down
for a period of time. So you had 10% off the market. And
we did see short term prices go up. But once - as Joe
said, once you get out past October and November, I think
pretty much supply will get back to where it would have
been without the storm.
(Paula Asum): The supply demand will return to normal in 2006?
Joe Sanderson: That's what we would guess, yes.
(Paula Asum): And given where grain pricing is right now, could you
anticipate your grain costs in fiscal '06 to be up or
flat for next year?
Joe Sanderson: If we had priced all of our grain needs excepting (Adel)
which is the Georgia which we don't - they hadn't bought
yet. But had we priced everything yesterday, our cost
would have been up $12 million for the fiscal year.
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(Paula Asum): That's pretty great considering you had some great grain
pricing this year.
And looking out into exports, how long do you think it's
going to be before you and the industry returns to normal
export volumes given the disruptions in the port of New
Orleans?
Joe Sanderson: We think the export shipments are going out of different
ports now.
(Paula Asum): So you think we're - the US in general is back to sort of
90% to 100% of export volumes that normally went out
ahead of the storm?
Lampkin Butts: Yes. I mentioned this earlier. But all of our exports are
going as they were before. They're just going through
different ports. Our volume of export is the same as a
percentage. We just missed some days processing which
we're making up. But the exports for the industry have
been up 25% through I believe July. And I think that will
- I think that will continue?
(Paula Asum): Okay, and my last question, aside from that freight, are
the cold storage facilities more expensive in these other
regions that - given we've taken out some cold storage
that was available in Louisiana?
Lampkin Butts: No it's not the cold storage expense. It's just it takes
- the proximity is not as close. So we have more freight
getting to them. And if they are inland cold storage is -
then sometimes we have additional freight to get from
that facility to the port.
(Paula Asum): Great. Thank you for all of the detail.
Lampkin Butts: You're welcome.
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Man: Thank you (Paula).
Operator: With that, there are no further questions. I'd like to
turn the conference back to Joe Sanderson for an
additional or closing remark.
Joe Sanderson: Again, I appreciate all of you joining us today on this
call. We look forward to completing our fiscal year in
October and reporting our year end results to you in
December. Thank you.
END