SANDERSON FARMS INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-Q
(MARK ONE)

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

For the quarterly period ended July 31, 2002
-----------------------------------

OR

( ) 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 0-16567

Sanderson Farms, Inc.
-----------------------------------------------------------------
(Exact name of registrant as specified in its charter)

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

225 North Thirteenth Avenue Laurel, Mississippi 39440
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(Address of principal executive offices) (Zip Code)

(601) 649-4030
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last
report.)

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 periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days.

Yes X 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 Per Share
Par Value-----13,150,276 shares outstanding as of July 31, 2002.

INDEX

SANDERSON FARMS, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Condensed consolidated balance sheets--July 31, 2002 and
October 31, 2001

Condensed consolidated statements of income--Three months ended July
31, 2002 and 2001; Nine months ended July 31, 2002 and 2001

Condensed consolidated statements of cash flows-Nine months ended
July 31, 2002 and 2001

Notes to condensed consolidated financial statements--
July 31, 2002 and 2001

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risks

PART II OTHER INFORMATION

Item 1. Legal Matters

Item 6. Exhibits and Reports on Form 8-K

SIGNATURES

1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

SANDERSON FARMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

See notes to condensed consolidated financial statements.

SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

Three Months Ended Nine Months Ended
July 31, July 31,
2002 2001 2002 2001
----------------- ------------------
(In thousands, except per share data)

See notes to condensed consolidated financial statements.

SANDERSON FARMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

Nine Months Ended
July 31,
2002 2001
(In thousands)

Operating activities
Net income $ 22,288 $14,961

Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 18,358 19,363
Change in assets and liabilities:
Accounts receivable, net (1,031) 1,426
Inventories (7,615) (7,661)
Refundable income taxes (1,127) 3,783
Other assets (2,380) (1,162)
Accounts payable and accrued expenses 6,249 6,371
------ ------
Total adjustments 12,454 22,120
------ ------
Net cash provided by operating activities 34,742 37,081

Investing activities
Net proceeds from sales of property and equipment 592 59
Capital expenditures (15,403) (10,786)
------ ------
Net cash used in investing activities (14,811) (10,727)

Financing activities
Principal payments on long-term debt (2,958) (2,954)
Net change in revolving credit (8,000) (19,000)
Purchase and retirement of common stock (12,935) (599)
Net proceeds from common stock issued 2,592 0
Dividends paid (3,927) (2,042)
------ ------
Net cash used in financing activities (25,228) (24,595)
------ -------
Net decrease in cash and temporary cash
investments ( 5,297) 1,759
Cash and temporary cash investments
at beginning of period 24,175 8,643
------ ------
Cash and temporary cash investments
at end of period $18,878 $10,402
====== ======

See notes to condensed consolidated financial statements.

SANDERSON FARMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
July 31, 2002
NOTE 1 -- BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments consisting of normal recurring accruals
considered necessary for a fair presentation have been included. Operating
results for the three and nine-month periods ended July 31, 2002 are not
necessarily indicative of the results that may be expected for the year ending
October 31, 2002.

The consolidated balance sheet at October 31, 2001 has been derived from the
audited consolidated financial statements at that date but does not include all
of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. For further
information, reference is made to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended October 31, 2001.

NOTE 2--INVENTORIES

Inventories consisted of the following:

July 31, October 31,
2002 2001
---------- -----------
(In thousands)

Live poultry-broilers and breeders $34,289 $30,649
Feed, eggs and other 7,602 6,597
Processed poultry 8,655 5,894
Processed food 5,338 4,918
Packaging materials 4,080 4,292
------- -------

$59,964 $52,350
======= =======

NOTE 3--COST OF SALES

In April 2002, the Company recognized $2,562,595 in a vendor settlement
pertaining to overcharges for vitamins purchased by the Company over a number of
years. The settlement is reflected in the accompanying condensed consolidated
financial statements as a reduction of cost of sales in the nine-month period
ending July 31, 2002.

NOTE 4--INCOME TAXES

Deferred income taxes relate principally to cash basis temporary differences and
depreciation expense that are accounted for differently for financial and income
tax purposes. Effective November 1, 1988, the Company changed from the cash to
the accrual basis of accounting for its farming subsidiary. The Taxpayer Relief
Act of 1997 (the "Act") provides that the taxes on the cash basis temporary
differences as of that date are payable over the next 20 years or in full in the
first fiscal year in which the Company fails to qualify as a "Family Farming
Corporation". The Company will continue to qualify as a "Family Farming
Corporation" provided there are no changes in ownership control, which
management does not anticipate during fiscal 2002.

NOTE 5-LONG-TERM DEBT

Effective July 31, 2002, the Company amended its revolving credit agreement with
four banks to increase the available credit thereunder from $90 million to $100
million and to extend the maturity date from July 31, 2004 to July 31, 2005.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The following Discussion and Analysis should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in Item 7 of the Company's Annual Report on Form 10-K for
its fiscal year ended October 31, 2001.

This Quarterly Report, and other periodic reports filed by the Company under the
Securities Exchange Act of 1934, and other written or oral statements made by it
or on its behalf, may include forward-looking statements, which are based on a
number of assumptions about future events and are subject to various risks,
uncertainties and other factors that may cause actual results to differ
materially from the views, beliefs and estimates expressed in such statements.
These risks, uncertainties and other factors include, but are not limited to the
following:

(1) Changes in the market price for the Company's finished products and feed
grains, both of which may fluctuate substantially and exhibit cyclical
characteristics typically associated with commodity markets.

(2) Changes in economic and business conditions, monetary and fiscal policies or
the amount of growth, stagnation or recession in the global or U.S. economies,
either of which may affect the value of inventories, the collectability of
accounts receivable or the financial integrity of customers.

(3) Changes in the political or economic climate, trade policies, laws and
regulations or the domestic poultry industry of countries to which the Company
or other companies in the poultry industry ships products.

(4) Changes in laws, regulations, and other activities in government agencies
and similar organizations applicable to the Company and the poultry industry.

(5) Various inventory risks due to changes in market conditions.

(6) Changes in and effects of competition, which is significant in all markets
in which the Company competes. The Company competes with regional and national
firms, some of which have greater financial and marketing resources than the
Company.

(7) Changes in accounting policies and practices adopted voluntarily by the
Company or required to be adopted by accounting principles generally accepted in
the United States.

Readers are cautioned not to place undue reliance on forward-looking statements
made by or on behalf of Sanderson Farms. Each such statement speaks only as of
the day it was made. The Company undertakes no obligation to update or to revise
any forward-looking statements. The factors described above cannot be controlled
by the Company. When used in this quarterly report, the words "believes",
"estimates", "plans", "expects", "should", "outlook", and "anticipates" and
similar expressions as they relate to the Company or its management are intended
to identify forward-looking statements.

The Company's poultry operations are integrated through its control of all
functions relative to the production of its chicken products, including hatching

egg production, hatching, feed manufacturing, raising chickens to marketable age
("grow out"), processing, and marketing. Consistent with the poultry industry,
the Company's profitability is substantially impacted by the market prices for
its finished products and feed grains, both of which may fluctuate substantially
and exhibit cyclical characteristics typically associated with commodity
markets. Other costs, excluding feed grains, related to the profitability of the
Company's poultry operations, including hatching egg production, hatching,
growing, and processing cost, are responsive to efficient cost containment
programs and management practices.

The Company believes that value-added products are subject to less price
volatility and generate higher, more consistent profit margins than whole
chickens ice packed and shipped in bulk form. To reduce its exposure to market
cyclicality that has historically characterized commodity chicken market prices,
the Company has increasingly concentrated on the production and marketing of
value-added product lines with emphasis on product quality, customer service and
brand recognition. Nevertheless, market prices continue to have a significant
influence on prices of the Company's chicken products. The Company adds value to
its poultry products by performing one or more processing steps beyond the stage
where the whole chicken is first saleable as a finished product, such as
cutting, deep chilling, packaging and labeling the product. The Company believes
that one of its major strengths is its ability to change its product mix to meet
customer demands.

The Company's processed and prepared foods product line includes over 200
institutional and consumer packaged food items that it sells nationally and
regionally, primarily to distributors, food service establishments and
retailers. A majority of the prepared food items are made to the specifications
of food service users.

Results of Operations

The Company's net sales for the three months ended July 31, 2002 were $202.7
million as compared to $183.7 million for the same three-month period a year
ago. The increase of $19.0 million or 10.3% resulted from increased sales of
both the Company's poultry products and prepared food products. During the third
quarter of fiscal 2002, net sales of poultry products increased $15.7 million or
9.6% when compared to the same quarter during fiscal 2001. This increase was the
net result of an increase in the pounds of poultry products sold of 19.6%
and a decrease in the average sales price of poultry products of 8.4%. The
increase in the pounds of poultry products sold during the quarter ended July
31, 2002 as compared to the quarter ended July 31, 2001 resulted from an
increase in the average live weight of chickens produced of 8.6% and an increase
in the number of chickens produced of 2.8%. Overall market prices for poultry
products were significantly lower during the third quarter of 2002 as compared
to the third quarter of 2001. For example, market prices for leg quarters and
wings were 37.6% and 48.0% lower and breast tenders were 23.0% lower. However,
boneless breast meat during the third quarter of fiscal 2002 averaged $1.45 per
pound as compared to $1.34 per pound during the same period in the previous
fiscal year. In addition, a simple average of the Georgia Dock whole bird prices
reflected an increase of 1.6% over these same periods. During the third quarter
of fiscal 2002 as compared to the third quarter of fiscal 2001 the pounds of
prepared foods products sold increased 10.7% while the average sales price
decreased 5.9% due to a change in mix of products sold.

For the nine months ended July 31, 2002, the Company's net sales were $542.6
million, an increase of $43.2 million or 8.7% as compared to net sales of $499.4
million during the nine months ended July 31, 2001. This resulted from an
increase in the net sales of poultry products of $35.6 million or 8.0% and a
corresponding increase in net sales of prepared food products of $5.4 million or
9.2%. The increase in the net sales of poultry products was the net result of an
increase in the pounds of poultry products sold of 11.6% and a decrease in the
average sales price of poultry products of 3.2%. During the first nine months of
fiscal 2002 the Company and the industry were negatively impacted by
significantly lower market prices for leg quarters, wings and breast tenders,
which decreased 12.8%, 26.7% and 20.8%, respectively. A simple average of the
Georgia Dock whole bird prices increased 1.7% during the nine months ended July
31, 2002 as compared to the nine months ended July 31, 2001. Net sales of
prepared food products increased $5.4 million or 9.2% during the nine months
ended July 31, 2002 as compared to the nine months ended July 31, 2001. The
increase reflects an increase in the pounds of prepared food products sold of
7.6% and an increase in the average sales price of prepared food products sold
of 1.5%.

Cost of sales for the quarter ended July 31, 2002 as compared to the same
quarter a year ago increased $19.1 million or 11.9%. Cost of sales of poultry
products during this same period increased $15.3 million or 10.7%. This increase
is a net result of an increase in poultry pounds sold of 19.6% and a decrease in
the average cost of sales of poultry products of 7.5%. During the third quarter
of fiscal 2002 as compared to the third quarter of fiscal 2001 the Company
continued to benefit from improved operating performance. The average market
prices for corn and soy meal for the three months ended July 31, 2002 as
compared to the three months ended July 31, 2001 increased 11.0% and 1.2%,
respectively. During the third quarter of fiscal 2002 as compared to the third
quarter of fiscal 2001, cost of sales of prepared food products increased $3.8
million or 21.8% due to an increase in pounds of prepared food products sold of
10.7%, an increase in the cost of raw materials and a change in the mix of
products sold.

For the nine months ended July 31, 2002, cost of sales increased $30.9 million
or 6.8% as compared to the same nine month period ended July 31, 2001, which is
net of a $2.6 million settlement awarded in April 2002 from a vendor who
overcharged the Company for vitamins over a number of years. Cost of sales of
poultry products during the nine months ended July 31, 2002 increased $23.5
million or 5.8% when compared to cost of sales during the nine months ended July
31, 2001. The increase in the cost of sales of poultry products reflects a
decrease in the average cost of sales per pound of poultry products of 5.2% as
the Company benefitted from improved operating performance, lower energy costs
and the settlement for vitamins discussed above. Cash market prices for corn and
soy meal during the nine months ended July 31, 2002 as compared to the nine
months ended July 31, 2001 increased 3.2% and decreased 2.9%, respectively. For
the nine months ended July 31, 2002 as compared to the same nine-month period
during fiscal 2001, cost of sales of prepared food products increased $7.4
million or 15.6% due to an increase in pounds of prepared food products sold of
7.6%, an increase in the cost of raw materials and a change in the mix of
products sold.

Selling, general and administrative expenses increased $.6 million or 9.7%
during the third quarter of fiscal 2002 as compared to the same quarter during
fiscal 2001. Selling, general and administrative expenses increased $2.7 million
during the nine months ended July 31, 2002 as compared to the same period during
fiscal 2001. The increase during the nine months ended July 31, 2002 as compared
to the nine months ended July 31, 2001, resulted from additional accruals for
contributions to the Company's Employee Stock Ownership Plan and Employee
Incentive Plan based on the Company's increased profitability.

During the third quarter of fiscal 2002 as compared to the third quarter of
fiscal 2001, the Company's operating income decreased $778,000. During the
quarter, improvements obtained in the operating performance and marketing
execution of the Company's poultry operations were offset by overall lower
prices for poultry products. For the nine months ended July 31, 2002 the
Company's operating income was $38.8 million as compared to operating income of
$29.1 million for the nine months ended July 31, 2001. The improvement of $9.7
million reflects the Company's improved operating performance and marketing
strategy, the settlement awarded during the second quarter of fiscal 2002 from a

vendor for overcharging the Company and lower energy costs. The Russian embargo
of United States poultry products continued to have a significant impact on the
Company's export business during the third quarter of fiscal 2002. While
shipments have resumed on a limited basis, it is difficult to determine when
volumes will return to historical levels until a new protocol governing future
shipments is defined.

Interest expense during the quarter ended July 31, 2002 was $1.0 million as
compared to $1.6 million during the quarter ended July 31 2001. During the nine
months ended July 31, 2002, interest expense incurred was $2.9 million, a
reduction of $2.6 million or 47.5% as compared to interest expense incurred
during the nine months ended July 31, 2001. The reduction in interest expense
during fiscal 2002 as compared to fiscal 2001 resulted from less debt
outstanding and lower interest rates. Since January 31, 2001 the Company has
reduced its outstanding debt by $37.0 million. The Company expects interest
expense to remain significantly lower through the remainder of fiscal 2002 as
compared to fiscal 2001.

The Company's effective tax rates for fiscal 2002 and fiscal 2001 were 38.0% and
37.3%, respectively.

LIQUIDITY AND CAPITAL RESOURCES

As of July 31, 2002, the Company's working capital was $77.5 million and its
current ratio was 2.4 to 1. The Company's working capital at October 31, 2001
was $77.0 million and its current ratio was 2.6 to 1. During the first nine
months of fiscal 2002,the Company spent approximately $15.4 million on planned
capital projects, including approximately $4.8 million to convert facilities to
accommodate big bird production at Hazlehurst, Mississippi. In addition, during
the first quarter of fiscal 2002 the Company spent approximately $12.7 million
to purchase and retire 621,079 shares, or 4.5% of the Company's outstanding
common stock, from two major shareholders, the estates of Joe Frank Sanderson
and Dewey R. Sanderson, Jr.

The Company's capital budget for fiscal 2002 is approximately $24.1 million, and
will be funded by internally generated working capital and cash flows from
operations. However, if needed, the Company has $64.0 million available under
its revolving credit agreement as of July 31, 2002. This revolving credit
facility was amended effective July 31, 2002 to, among other things, increase
the available credit thereunder from $90 million to $100 million. This line of
credit remains unsecured.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the market risks reported in the
Company's fiscal 2001 Annual Report on Form 10-K.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On April 5, 2000, thirteen individuals claiming to be former hourly employees of
the Company's processing subsidiary (Sanderson Farms, Inc. (Processing Division)
(the "Processing Division")) filed a lawsuit in the United States District Court
for the Southern District of Texas claiming that the Processing Division
violated requirements of the Fair Labor Standards Act. The Plaintiffs' lawsuit
also purports to represent similarly situated workers who have filed or will
file consents to be included as plaintiffs in the suit. A total of 109
individuals have consented to join the lawsuit.

The lawsuit alleges that the Processing Division (1) failed to pay its hourly
employees "for time spent donning and doffing sanitary and safety equipment,
obtaining and sharpening knives and scissors, working in the plant and elsewhere
before and after the scheduled end of the shift, cleaning safety equipment and
sanitary equipment, and walktime," and (2) altered employee time records by
using an automated time keeping system. Plaintiffs further claim that the
Processing Division concealed the alteration of time records and seek on that
account an equitable tolling of the statute of limitations beyond the three-year
limitation period back to the date the automated time-keeping system was
allegedly implemented.

Plaintiffs seek an unspecified amount of unpaid hourly and overtime wages plus
an equal amount as liquidated damages, for present and former hourly employees
who file consents to join in the lawsuit. There were 5,887 hourly workers
employed at the Processing Division's plants as of July 31, 2002.

On April 21, 2001, the Court granted the Processing Division's summary judgment
motion and entered a final judgment in favor of the Processing Division.
Plaintiffs appealed that decision to the United States Fifth Circuit Court of
Appeals, where oral argument was heard on March 5, 2002. On March 7, 2002, the
United States Fifth Circuit Court of Appeals affirmed the decision of the United
States District Court granting the Processing Division's motion for summary
judgment. The plaintiffs had 90 days from March 7, 2002 to request that the
United States Supreme Court hear an appeal of this case, which time has expired.

On May 15, 2000, an employee of the Company's production subsidiary (Sanderson
Farms, Inc. (Production Division) (the "Production Division) filed suit against
the Production Division in the United States District Court for the Southern
District of Texas on behalf of live-haul drivers to recover an unspecified
amount of overtime compensation and liquidated damages. Approximately 26
employees filed consents to this lawsuit.

Previously, the United States Department of Labor ("DOL") filed a similar suit
against the Production Division in the United States District Court for the
Southern District of Mississippi, Hattiesburg Division, on behalf of live-haul
employees at the Production Division's Laurel, Mississippi facility. Both
lawsuits were brought under the Fair Labor Standards Act and seek recovery of
overtime compensation, together with an equal amount as liquidated damages, for
live-haul employees (i.e., live-haul drivers, chicken catchers, and
loader-operators) employed by the Production Division. The lawsuits assert that
additional overtime compensation and liquidated damages may be owed to certain
employees. The lawsuits also seek an injunction to prevent the withholding of
overtime compensation to live-haul employees in the future.

On January 18, 2001, the United States District Court for the Southern District
of Texas granted the Production Division's request to move the suit pending
before that court to the Southern District of Mississippi, Hattiesburg Division.
The Production Division later filed its motion with the United States District
Court for the Southern District of Mississippi to have the two cases
consolidated, which motion was granted. On February 4, 2002, the Production
Division reached a settlement with the Department of Labor that fully and
completely compromised and settled the claims of all live-haul employees in the
Production Division, other than certain Production Division employees
represented in a collective bargaining agreement in Texas. The settlement,
approved by the court on March 11, 2002, and pursuant to which the Production
Division paid during its second fiscal quarter (accrued as a liability and
expensed during its first fiscal quarter) approximately $450,000 in back pay and
interest to the involved current and former employees in the Production
Division's Mississippi and Texas operations, terminates the private rights of
these employees under the Fair Labor Standards Act with respect to the claims
made in this suit. With respect to approximately 74 employees represented under
a collective bargaining agreement in Texas, the case is still pending and the
court has indicated it will set the case for trial during March 2003.

Substantially similar lawsuits to those described above have been filed against
other integrated poultry companies. In addition, organizing activity conducted
by the representatives or affiliates of the United Food and Commercial Workers
Union against the poultry industry has encouraged worker participation in these
and the other lawsuits.

On September 26, 2000, three current and former contract growers filed suit
against the Company in the Chancery Court of Lawrence County, Mississippi. The
plaintiffs filed suit on behalf of "all Mississippi residents to whom, between,
on or about November 1981 and the present, the Company induced into growing
chickens for it and paid compensation under the so-called `ranking system'."
Plaintiffs allege that the Company "has defrauded plaintiffs by unilaterally
imposing and utilizing the so-called `ranking system' which wrongfully places
each grower into a competitive posture against other growers and arbitrarily
penalizes each less successful grower based upon criteria which were never
revealed, explained or discussed with plaintiffs." Plaintiffs further allege
that they are required to accept chicks that are genetically different and with
varying degrees of healthiness, and feed of dissimilar quantity and quality.
Finally, plaintiffs allege that they are ranked against each other although they
possess dissimilar facilities, equipment and technology. Plaintiffs seek an
unspecified amount in compensatory and punitive damages, as well as varying
forms of equitable relief.

The Company is and will continue to vigorously defend this action. The Company's
motions to compel arbitration and challenging the jurisdiction of the Chancery
Court of Lawrence County, Mississippi are currently pending, and a November 18,
2002 trial date has been set. Court ordered mediation in this case took place on
August 19, 2002, but no settlement was reached. As with the wage and hour and
donning and doffing lawsuits discussed above, substantially similar lawsuits
have been filed against other integrated poultry companies.

The matters described above in this Item 1 of Part II were also discussed in
Item 1 of Part II of the Company's Quarterly Reports on Form 10-Q filed by the
Company for the quarters ended January 31, and April 30, 2002.

On August 2, 2002, three contract egg producers filed suit against the Company
in the Chancery Court of Jefferson Davis County, Mississippi. The Plaintiffs
filed suit on behalf of "all Mississippi residents who, between June 1993 and
the present, [the Company] fraudulently and negligently induced into housing,
feeding and providing water for [the Company's] breeder flocks and gathering,
grading, packaging and storing the hatch eggs generated by said flocks and who
have been compensated under the payment method established by the [Company]."
Plaintiffs alleged that the Company "has defrauded Plaintiffs by unilaterally
imposing and utilizing a method of payment which wrongfully and arbitrarily
penalizes each grower based upon criteria which are under the control of the
[Company] and which were never revealed, explained or discussed with each
Plaintiff." Plaintiffs allege that they were required to accept breeder hens and
roosters which are genetically different, with varying degrees of healthiness,
and feed of dissimilar quantity and quality. Plaintiffs further allege
contamination of and damage to their real property. Plaintiffs alleged that they
were "fraudulent and negligently induced into housing, feeding and providing
water for Sanderson's breeder flocks and gathering, grading, packaging and
storing the hatch eggs produced from said flocks" for Sanderson. Plaintiffs seek
unspecified amount of compensatory and punitive damages, as well as various
forms of equitable relief. The Company will vigorously defend this lawsuit.

On July 25, 2002, a current contract grower and her husband filed suit against
the Company and Farmers State Bank, N.A. in the District Court of Milam County,
Texas. The Plaintiffs alleged "a conspiracy to defraud Plaintiffs in connection
with [Sanderson's] promotion of a get-rich-quick scheme portrayed to Plaintiffs
as a good investment for Plaintiff's future." The Plaintiffs further alleged
that the Company and Farmers State Bank "conspired to defraud Plaintiffs by
convincing them to purchase farm land, execute loan documents for the
construction of chicken barns, and then forcing them to sign contracts of
adhesion that made Plaintiffs the domestic servants of the defendants." The
Plaintiffs further alleged that the Company and Farmers State Bank violated the
Texas Deceptive Trade Practices-Consumer Protection Act. Plaintiffs seek an
unspecified amount in compensatory damages, treble damages, attorney's fees,
pre- and post-judgement interest and all costs of court. The Plaintiffs also
seek a Permanent Injunction enjoining the Farmers State Bank from foreclosing on
or otherwise taking possession or control of Plaintiff's real estate and the
improvements thereon and other equitable relief. On August 8, 2002, the court
heard arguments on the Plaintiff's motion for permanent injunction and on the
Company's motion to stay the proceeding with respect to it pending arbitration
of the matter as required by the Egg Producers Contract entered into by and
between one of the Plaintiffs and the Company. On August 19, 2002, the court
granted the Company's motion to compel arbitration in this case with respect to
the Company and its grower pursuant to the arbitration provision of the
contract. The case before the District Court of Milam County, Texas will be
stayed pending arbitration between the Company and its grower. The Company will
vigorously defend this lawsuit.

The Company is also involved in various claims and litigation incidental to its
business. Although the outcome of the matters referred to in the preceding
sentence cannot be determined with certainty, management, upon the advice of
counsel, is of the opinion that the final outcome should not have a material
effect on the Company's consolidated results of operation or financial position.

Item 6. Exhibits and Reports on Form 8-K

(a) The following exhibits are filed with this report.
Exhibit 3.1 Articles of Incorporation of the registrant dated
October 19, 1978. (Incorporated by reference to Exhibit 4.1
filed with the registration statement on Form S-8 filed by
the registrant on July 15, 2002, registration no.
333-92412.)

Exhibit 3.2 Articles of Amendment, dated March 23, 1987, to the
Articles of Incorporation of the registrant. (Incorporated
by reference to Exhibit 4.2 filed with the registration
statement on Form S-8 filed by the registrant on July 15,
2002, registration no. 333-92412.)

Exhibit 3.3 Articles of Amendment, dated April 21, 1989, to the
Articles of Incorporation of the registrant. (Incorporated
by reference to Exhibit 4.3 filed with the registration
statement on Form S-8 filed by the registrant on July 15,
2002, registration no. 333-92412.)

Exhibit 3.4 Certificate of Designations of Series A Junior
Participating Preferred Stock of the registrant dated April
21, 1989. (Incorporated by reference to Exhibit 4.4 filed
with the registration statement on Form S-8 filed by the
registrant on July 15, 2002, registration no. 333-92412.)

Exhibit 3.5 Article of Amendment, dated February 20, 1992, to
the Articles of Incorporation of the registrant.
(Incorporated by reference to Exhibit 4.5 filed with the
registration statement on Form S-8 filed by the registrant
on July 15, 2002, registration no. 333-92412.)

Exhibit 3.6 Article of Amendment, dated February 27, 1997, to
the Articles of Incorporation of the registrant.
(Incorporated by reference to Exhibit 4.6 filed with the
registration statement on Form S-8 filed by the registrant
on July 15, 2002, registration no. 333-92412.)

Exhibit 3.7 By-Laws of the registrant, amended and restated as
of July 27, 2000. (Incorporated by reference to Exhibit 4.7
filed with the registration statement on Form S-8 filed by
the registrant on July 15, 2002, registration no.
333-92412.)

Exhibit 15a* Independent Accountants' Review Report

Exhibit 15b* Accountants' Letter re: Unaudited Financial
Information.

Exhibit 10-E-10* Agreement between Sanderson Farms, Inc.
(McComb Production Division) and United Food and Commercial
Workers, Local 1529, AFL-CIO affiliated with United Food
and Commercial Workers International Union, AFL-CIO

Exhibit 99.01* Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

Exhibit 99.02* Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

(b) The Company did not file any reports on Form 8-K during the three
months ended July 31, 2002.

-----------------
* Filed herewith.

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 duly authorized officers.

_____ SANDERSON FARMS, INC. _______
(Registrant)

Date: August 22, 2002 By: /s/D. Michael Cockrell
Treasurer and Chief
Financial Officer

Date: August 22, 2002 By: /s/James A. Grimes
Secretary and Principal
Accounting Officer

INDEX TO EXHIBITS

Exhibit
Number Description of Exhibit

3.1 Articles of Incorporation of the registrant dated
October 19, 1978. (Incorporated by reference
to Exhibit 4.1 filed with the registration statement
on Form S-8 filed by the registrant on July
15, 2002, registration no. 333-92412.)

3.2 Articles of Amendment, dated March 23, 1987, to
the Articles of Incorporation of the
registrant. (Incorporated by reference to Exhibit 4.2
filed with the registration statement on
Form S-8 filed by the registrant on July 15, 2002,
registration no. 333-92412.)

3.3 Articles of Amendment, dated April 21, 1989, to
the Articles of Incorporation of the
registrant. (Incorporated by reference to Exhibit 4.3
filed with the registration statement on
Form S-8 filed by the registrant on July 15, 2002,
registration no. 333-92412.)

3.4 Certificate of Designations of Series A Junior Participating
Preferred Stock of the registrant dated April 21, 1989.
(Incorporated by reference to Exhibit 4.4 filed with the
registration statement on Form S-8 filed by the registrant
on July 15, 2002, registration no. 333-92412.)

3.5 Article of Amendment, dated February 20, 1992, to the
Articles of Incorporation of the registrant. (Incorporated
by reference to Exhibit 4.5 filed with the registration
statement on Form S-8 filed by the registrant on July 15,
2002, registration no. 333-92412.)

3.6 Article of Amendment, dated February 27, 1997, to the
Articles of Incorporation of the registrant. (Incorporated
by reference to Exhibit 4.6 filed with the registration
statement on Form S-8 filed by the registrant on July 15,
2002, registration no. 333-92412.)

3.7 By-Laws of the registrant, amended and restated as of
July 27, 2000. (Incorporated by reference to Exhibit 4.7
filed with the registration statement on Form S-8 filed by
the registrant on July 15, 2002, registration no.
333-92412.)

15a* Independent Accountants' Review Report

15b* Accountants' Letter re: Unaudited Financial Information.

10-E-10* Agreement between Sanderson Farms, Inc.(McComb
Production Division) and United Food and
Commercial Workers, Local 1529, AFL-CIO affiliated
with United Food and Commercial Workers International
Union, AFL-CIO

99.01* Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

99.02* Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

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* Filed herewith.