0 BMO Capital Markets 2013 Farm to Market Conference New York, New York May 14, 2013
1 Forward Looking Statement Warning This presentation contains forward-looking statements about the business, financial condition and prospects of the Company. The actual performance of the Company could differ materially from that indicated by the forward-looking statements because of various risks and uncertainties. These risks and uncertainties are described in our most recent Annual Report on Form 10-K.
The Company 2
3 We Are a Leading Chicken Producer Organized in 1947 Incorporated in 1955 Who We Are Vertically integrated in 1961 Initial public offering in 1987 3 rd largest poultry processor in the U.S. Current processing capacity of 9.375MM head/week
4 Top 10 Poultry Companies for 2012 All Other 39.3% Tyson 21.4% Source: WATT PoultryUSA Survey, March 2013 Pilgrim's 19.0% Koch 6.1% Perdue 7.0% Sanderson 7.3% Processing Further Processing Million Million Lbs Average Million Lbs % R-T-C Company Plants Operations Head Live Weight Live Weight R-T-C Market Share Tyson Foods, Inc. 33 9/13 35.40 196.23 5.53 167.51 21.4% Pilgrim's Corporation 26 0/9 33.11 165.47 5.46 149.03 19.0% Sanderson Farms, Inc. 9 0/1 8.62 64.91 7.53 56.90 7.3% Perdue Farms Incorporated 12 3/4 12.01 68.16 5.67 54.71 7.0% Koch Foods, Inc. 8 4/1 12.00 61.20 5.10 48.00 6.1% Mountaire Farms, Inc. 3 5.79 44.93 7.76 39.26 5.0% Wayne Farms, LLC 8 0/2 5.65 41.88 7.41 36.65 4.7% Peco Foods, Inc. 5 1/1 4.82 30.46 7.30 23.05 2.9% House of Raeford Farms, Inc. 5 2/0 3.54 27.52 7.78 21.88 2.8% Foster Farms 5 5/2 5.84 35.46 6.07 20.92 2.7% Total Top 10 114 24/33 126.78 736.22 5.81 617.91 78.8% All Others 40 23/11 37.78 208.73 5.52 166.64 21.2% Total 154 47/44 164.56 944.95 5.71 784.55 100.0%
5 Balanced Asset Base Poultry Plants Big Bird Deboning Full Capacity Live Pounds Processed Pounds Per Week (1) Per Week (2) Per Week (3) Hazlehurst, MS 1961 625,000 5,343,750 4,782,500 Kinston, NC Laurel, MS 1965 625,000 5,343,750 4,782,500 Hammond, LA 1974 625,000 5,343,750 4,782,500 Collins, MS 1981 1,250,000 10,687,500 9,565,000 Waco, TX 2007 1,250,000 10,687,500 9,565,000 Waco, TX McComb, MS Jackson, MS Hazlehurst, MS Palestine, TX (4) 1,250,000 10,687,500 9,565,000 Retail Total 5,625,000 48,093,750 43,042,500 McComb, MS 1993 1,250,000 8,187,500 7,041,250 Bryan, TX 1997 1,250,000 8,187,500 7,041,250 Moultrie, GA 2005 1,250,000 8,187,500 7,041,250 Kinston, NC 2011 1,250,000 8,187,500 7,041,250 Total 5,000,000 32,750,000 28,165,000 Expected Capacity 10,625,000 80,843,750 71,207,500 Prepared Chicken Plant Jackson, MS 1986 Note: (1) Capacity measured in head/w eek. (2) Based on target live w eights. (3) Based on historical yields. (4) Announced; No construction date set. Moultrie, GA Collins, MS Laurel, MS Hammond, LA Bryan, TX Palestine, TX (4) Big Bird Deboning Plants Retail Tray Pack Plants Prepared Chicken Plant
6 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 Strong Track Record of Organic Growth 795 722 10% 986 1,077 1,167 1,308 24% 9% 8% 12% Pounds Processed (millions) 2,441 2,426 21% -1% 2,025 1,802 12% 1,530 1,580 14% 1,437 10% 6% 3% 3,550 3,588 3,259 9% 1% 3,108 3,044 5% 2,959 2% 2,805 3% 5% 2,567 9% 6% 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013* 2014* 2015* 2016* 2017* * Estimated. Assumes 6% production cut is restored during 3 rd Quarter of 2013. Assumes Palestine, TX construction begins in 2013, opens January 2015, and reaches full production in March 2016.
7 Key Strengths Low Cost Producer As one of the industry s most efficient producers, well positioned to capture share Favorable Product Mix New plant focused on higher margin tray pack / retail markets Attractive Growth Profile Track record of generating strong internal growth History of delivering above industry average returns Strong Balance Sheet Managed and maintained appropriate capital structure Strong balance sheet enables growth even during industry downturns
8 Strong Portfolio of Customers Prepared Foods / Foodservice DELI DELI DELI DELI DELI DELI DELI DELI DELI DELI DELI DELI DELI DELI
9 Strong Portfolio of Customers Retail
10 Favorable Product Mix Operating Margin / Head (Cents) (1) Shift to Higher Margin Foodservice Market 80 70 60 50 40 30 20 10 0 (10) (20) (30) Mix (%) Tray Pack / BBD 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(2) 59/41 57/43 53/47 55/45 49/51 46/54 46/54 49/51 53/47 53/47 Source: Agri Stats, Company Filings Note: (1) Industry average. (2) YTD through March. Small Bird Tray Pack Big Bird Deboning
11 Export Destinations (SAFM) Fiscal 2012 Sales Pounds 621.3 (million) 20.7% of total Gross Sales Dollars $318.7 (million) 13.0% of total Other 12% Mexico 24% Other 13% Mexico 21% Central Asia 24% China 11% Central Asia 23% China 16% Russia 29% Russia 27%
US Export Volumes RTC million pounds, paws excluded Country 2009 2010 2011 2012 Mexico 816 968 1,007 1,236 Russia 1,609 712 469 589 Angola 167 326 360 401 Canada 258 278 312 381 Cuba 321 313 218 333 Taiwan 154 223 217 262 Hong Kong 174 430 516 228 China 729 123 149 209 Kazakhstan 25 36 60 198 Lithuania 157 205 146 193 Other 2,409 3,151 3,516 3,250 Total 6,818 6,765 6,971 7,281 Source: ERS calculations using data from U.S. Department of Commerce, Bureau of the Census 12
Market Overview 13
14 Current Market Overview Broiler egg sets declined year over year during 2012; have moved higher over the past few weeks; pullet placements have been lower than prior year every month but four since July 2011; breeder flock remains lower Cold storage inventories remain manageable Retail grocery demand remains steady Casual dining traffic remains weak; jobs and high priced gasoline are the key; unemployment remains a drag; wing concepts remain strong; new chicken items on QSR and casual dining menus helping demand Corn and soybean meal prices remain significantly higher than historical averages; late plant a growing concern Export market steady; one eye on avian influenza in China
May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 15 Pullet Placements Potential Breeder Placements 120% 115% 110% 105% 100% 95% 90% 85% 80% Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 108% 106% 104% 102% 100% 98% 96% 94% 92% Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Source: USDA % of Prior Year Source: USDA % of Prior Year Broiler Eggs Set Avg. Weekly Broiler Egg Sets 110% 220 108% 106% 104% 102% 100% 98% 96% 215 210 205 200 208.6 211.9 210.8 214.8 208.6 200.3 205.7 198.3 198.6 94% 92% 195 194.1 90% 190 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD Source: USDA Current Year Prior Year Source: USDA
16 Intended Placements: Broiler-Type Pullet Chicks for Hatchery Supply Flocks by Month and Total, 2010-13 2011 2012 2013 Cumulative Potential Placements Month Pullet Chicks Hatched as % of as % of as % of Relative to Current Supply Flocks 2010 2011 2012 7-15 Months Earlier 2010 2011 2012 2013 2010 2011 2012 2013 1,000 1,000 1,000 1,000 Percent Percent Percent 1,000 1,000 1,000 1,000 US Placements Jan 6,637 6,557 6,673 6,303 99 102 94 62,833 62,996 64,111 60,864 Feb 7,021 7,284 7,025 7,156 104 96 102 62,005 63,283 63,679 60,646 Mar 6,673 7,058 6,753 6,325 106 96 94 62,142 63,250 63,323 61,094 Apr 6,825 7,044 6,524 103 93 62,672 63,751 63,209 61,342 May 8,351 7,721 7,472 92 97 61,918 63,990 62,941 60,934 Jun 7,128 7,211 6,800 101 94 62,049 64,558 62,547 60,676 Jul 6,675 6,444 6,071 97 94 61,903 64,656 61,927 60,591 Aug 7,313 7,233 7,338 99 101 62,300 64,388 61,556 60,370 Sep 7,128 6,657 6,686 93 100 61,663 63,321 60,860 60,054 Oct 6,876 6,289 6,265 91 100 61,179 63,251 60,402 59,579 Nov 7,589 6,890 6,767 91 98 61,790 63,620 60,482 Dec 6,771 6,438 6,668 95 104 62,978 64,028 60,721 Annual Total 84,987 82,826 81,042 97 98
17 USDA Broiler-Type Eggs Set (in thousands) Week Ending 2009 2010 2011 2012 2013 Week Ending 2009 2010 2011 2012 Jan 05 201,843 202,247 205,419 193,220 196,205 Jul 06 202,101 206,138 194,961 193,765 Jan 12 203,806 200,307 205,099 193,079 196,004 Jul 13 204,579 209,753 196,576 196,111 Jan 19 201,674 202,034 204,116 193,909 195,604 Jul 20 201,353 208,724 195,141 195,117 Jan 26 198,417 202,304 203,933 193,924 197,531 Jul 27 201,806 208,549 194,434 196,294 Feb 02 201,805 204,076 205,787 193,162 197,420 Aug 03 200,277 207,588 195,036 195,058 Feb 09 202,817 205,734 204,337 195,481 197,087 Aug 10 201,307 206,602 194,164 192,962 Feb 16 204,603 206,981 207,150 194,663 198,947 Aug 17 200,665 207,381 193,090 191,718 Feb 23 206,753 207,365 206,633 195,259 199,646 Aug 24 200,648 206,575 193,007 192,248 Mar 02 202,111 206,494 208,530 197,687 199,971 Aug 31 195,627 203,941 189,258 190,242 Mar 09 203,708 205,825 207,931 198,739 199,188 Sep 07 193,228 204,833 185,218 185,586 Mar 16 201,053 207,915 208,714 197,551 199,737 Sep 14 187,892 196,963 179,528 184,443 Mar 23 200,465 205,735 209,434 196,488 199,429 Sep 21 193,476 205,808 187,841 188,027 Mar 30 204,257 204,921 207,520 198,100 200,484 Sep 28 183,016 197,354 181,765 185,350 Apr 06 203,712 209,257 207,969 199,324 199,743 Oct 05 190,600 200,470 186,317 187,879 Apr 13 203,819 206,893 208,968 199,648 200,352 Oct 12 186,101 196,697 181,852 181,818 Apr 20 202,068 207,422 209,132 200,195 199,256 Oct 19 188,815 200,202 183,537 178,135 Apr 27 201,582 207,319 207,087 198,162 198,463 Oct 26 182,901 200,781 185,172 187,104 May 04 204,581 209,188 207,982 199,964 200,086 Nov 02 190,700 199,721 186,594 180,603 May 11 205,499 210,586 206,342 199,790 Nov 09 201,573 204,203 194,224 190,391 May 18 205,375 211,658 206,792 200,720 Last 6 weeks Nov 16 201,906 205,716 195,158 196,628 May 25 206,039 211,315 205,932 201,023 2013 vs 2012 Nov 23 202,644 207,175 194,560 196,887 Jun 01 206,916 211,771 205,234 201,501 100.3% Nov 30 201,274 203,973 194,178 201,061 Jun 08 205,567 211,108 204,659 199,864 Dec 07 205,271 205,282 194,887 190,428 Jun 15 204,273 210,421 199,826 196,536 Dec 14 204,677 205,187 194,602 195,792 Jun 22 202,562 211,324 198,340 195,500 Dec 21 203,723 205,240 195,380 197,196 Jun 29 201,322 207,492 197,158 195,717 Dec 28 202,676 203,224 192,967 195,303 Average 200,297 205,688 198,259 194,141
18 USDA Young Chickens Slaughtered by Month and Total, 2011-2013 2012 2013 2012 2013 Month Head as % of as % of Live Pounds as % of as % of 2011 2012 2011 2012 2011 2012 2013 2011 2012 2013 1,000 1,000 1,000 % % 1,000 Avg Wt 1,000 Avg Wt 1,000 Avg Wt % % Jan 713,525 707,215 734,645 99 104 4,176,056 5.85 4,131,497 5.84 4,349,498 5.92 99 105 Feb 659,359 674,192 650,086 102 96 3,799,518 5.76 3,931,177 5.83 3,838,905 5.91 103 98 Mar 764,270 699,277 679,579 91 97 4,397,350 5.75 4,060,986 5.81 3,991,209 5.87 92 98 Apr 686,762 683,191 99 3,953,271 5.76 3,986,151 5.83 101 May 745,396 749,248 101 4,330,769 5.81 4,370,322 5.83 101 Jun 752,493 706,126 94 4,370,138 5.81 4,135,595 5.86 95 Jul 699,465 722,612 103 4,035,393 5.77 4,166,439 5.77 103 Aug 767,360 760,580 99 4,436,343 5.78 4,420,069 5.81 100 Sep 721,908 663,470 92 4,240,244 5.87 3,899,244 5.88 92 Oct 701,599 745,932 106 4,124,746 5.88 4,435,014 5.95 108 Nov 666,201 674,146 101 3,879,516 5.82 4,011,475 5.95 103 Dec 658,722 642,807 98 3,809,326 5.78 3,801,045 5.91 100 Annual 8,537,060 8,428,796 99 49,552,670 5.80 49,349,014 5.85 100 Source: NASS, USDA - Poultry Slaughter Report
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20 160,000 Breasts & Breast Meat Total Frozen Chicken United States Cold Storage Stocks, 2009-2012 90,000 Wings 150,000 80,000 140,000 130,000 120,000 110,000 100,000 70,000 60,000 50,000 40,000 30,000 20,000 90,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 10,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2013 2012 2011 2010 2013 2012 2011 2010 140,000 Leg Quarters 26,000 Whole Chickens 130,000 24,000 120,000 110,000 22,000 100,000 20,000 90,000 18,000 80,000 16,000 70,000 60,000 14,000 50,000 12,000 40,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 10,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2013 2012 2011 2010 2013 2012 2011 2010
Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 21 1.0400 Georgia Dock 1.0200 1.0000 0.9800 0.9600 0.9400 0.9200 0.9000 0.8800 0.8600 0.8400 5 Year Average -.8933 0.8200 0.8000 Source: ubcomtell.com
Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 22 2.0000 UB Boneless Skinless Breast (Approx. 8.0 million pounds/week assuming 22.50% yield) 2.0000 UB Breast Tenders (Approx. 1.6 million pounds/week assuming 4.50% yield) 1.9000 1.8000 5 Year Average - 1.3914 1.8000 1.7000 1.6000 1.6000 1.5000 1.4000 1.4000 1.3000 1.2000 1.2000 1.0000 5 Year Average - 1.4523 1.1000 1.0000 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 0.8000 1.9000 UB Jumbo Wings (Approx. 2.7 million pounds/week assuming 7.65% yield) 0.6000 UB Leg Quarters (Approx. 12.3 million pounds/week assuming 34.50 % yield) 1.7000 0.5500 1.5000 1.3000 1.1000 0.5000 0.4500 0.4000 0.3500 0.9000 0.7000 5 Year Average 1.2619 0.3000 0.2500 5 Year Average -.4333 0.5000 0.2000 Source: ubcomtell.com
CBOT - CORN 23
CBOT SOYBEAN MEAL 24
25 Corn/Soy Sensitivity Quantity Purchased Hypothetical Price Change Fiscal 2012 Impact on Cash Ultimate Impact on COGS Corn 87.6 Million Bushels $0.10 / bushel $8.76 million $0.0030 / lb processed Soybean M 766,000 Tons $10.00 / ton $7.66 million $0.0026 / lb processed Quantity Purchased Q1 Fiscal 2013 Hypothetical Price Change Impact on Cash Ultimate Impact on COGS Corn 20.7 Million Bushels $0.10 / bushel $2.07 million $0.0028 / lb processed Soybean M 194,000 Tons $10.00 / ton $1.94 million $0.0027 / lb processed
Financial Summary 26
Strong Track Record of Financial Performance Pounds Sold Operating and Net Margin (MM) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2,800 2,956 2,399 2,463 2,581 2,049 1,809 1,449 1,537 1,580 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 EPS 25% 20% 15% 10% 5% 0% -5% -10% -15% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Gross Profit Operating Income Net Income ($/Share) 8.00 6.00 4.00 2.00 0.00 (2.00) (4.00) (6.00) (8.00) 6.07 2.78 4.62 3.53 3.91 3.94 2.35 (0.57) (2.13) (5.74) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 27
28 Capital Expenditures $160 $140 $120 $100 $80 $60 $40 $20 $0 42.1 23.7 28.6 16.6 14.6 92.3 15.1 24.2 4.8 9.4 15.2 88.2 19.7 23.4 27.5 29.0 20.7 26.2 8.1 40.7 25.4 107.7 37.1 18.6 44.4 46.3 46.4 45.5 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Maintenance Waco Complex General Office Foods Collins Expansion Georgia Complex Kinston Complex
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