0 Goldman Sachs Eighteenth Annual Agribusiness Conference New York, New York March 12, 2014
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 5,468,750 4,922,000 Kinston, NC Laurel, MS 1965 625,000 5,468,750 4,922,000 Hammond, LA 1974 625,000 5,468,750 4,922,000 Collins, MS 1981 1,250,000 10,937,500 9,843,750 Waco, TX 2007 1,250,000 10,937,500 9,843,750 Waco, TX McComb, MS Jackson, MS Hazlehurst, MS Palestine, TX 2015(4) 1,250,000 10,937,500 9,843,750 Retail Total 5,625,000 49,218,750 44,297,250 McComb, MS 1993 1,250,000 8,437,500 7,256,250 Bryan, TX 1997 1,250,000 8,437,500 7,256,250 Moultrie, GA 2005 1,250,000 8,437,500 7,256,250 Kinston, NC 2011 1,250,000 8,437,500 7,256,250 Total 5,000,000 33,750,000 29,025,000 Expected Capacity 10,625,000 82,968,750 73,322,250 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) Under construction. 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% 3,670 3,694 3,356 9% 1% 3,166 6% 2,959 3,041 4% 2,805 5% 3% 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. 6% production cut was restored during 3 rd Quarter of 2013. Assumes Palestine, TX 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 under construction focused on higher margin big bird deboning market 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 DELI
9 Strong Portfolio of Customers Big Bird Deboning / Foodservice
10 Tray Pack / Retail Strong Portfolio of Customers
11 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 2005 2006 2007 2008 2009 2010 2011 2012 2013 (2) 2014 57/43 53/47 55/45 49/51 46/54 46/54 49/51 53/47 53/47 53/47 Source: Agri Stats, Company Filings Small Bird Tray Pack Big Bird Deboning Note: (1) Industry average. Calendar year. (2) January 2014
12 Export Destinations (SAFM) Fiscal 2013 Sales Pounds 584.3 (million) 19.0% of total Gross Sales Dollars $292.6 (million) 10.6% of total Other 18% China 14% Other 16% China 19% Russia 15% Central Asia 26% Russia 14% Central Asia 25% Mexico 27% Mexico 26%
US Export Volumes RTC million pounds, paws excluded Country 2009 2010 2011 2012 2013 Mexico 816 965 1,006 1,237 1,404 Russia 1,609 712 469 588 609 Angola 167 326 359 401 456 Canada 258 278 312 381 372 Cuba 321 313 218 333 306 China 729 123 149 209 289 Iraq 223 186 225 162 236 Taiwan 154 223 217 261 212 Georgia 132 198 214 182 190 Guatemala 123 136 149 155 174 Other 2,287 3,302 3,648 3,365 3,116 Total 6,818 6,762 6,968 7,274 7,364 Source: ERS calculations using data from U.S. Department of Commerce, Bureau of the Census 13
Market Overview 14
15 Current Market Overview Broiler egg sets declined year over year during 2012; moved higher through the spring, summer and fall of 2013 and in to 2014; breeder flock remains constrained Cold storage inventories remain manageable Retail grocery demand remains steady Casual dining traffic remains weak; jobs, consumer confidence and macro economic conditions are the key; unemployment remains a drag; wing concepts remain strong; new chicken items on QSR and casual dining menus helped demand last summer High cost of competing protein could help chicken demand Corn and soybean meal prices have moved lower compared to fiscal 2013, but have moved higher since February Export market steady; one eye on Russia
Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 16 Pullet Placements Potential Breeder Placements 120% 115% 110% 105% 100% 95% 90% 85% 80% 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-13 Aug-13 Oct-13 Dec-13 % of Prior Year Broiler Eggs Set 108% 106% 104% 102% 100% 98% 96% 94% 92% 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 Nov-13 Jan-14 Mar-14 May-14 Jul-14 % of Prior Year Avg. Weekly Broiler Egg Sets 110% 220 108% 106% 104% 215 210 208.6 211.9 210.8 214.8 208.6 102% 100% 98% 205 200 200.3 205.7 198.3 198.6 200.3 96% 195 194.1 94% 190 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD Source: USDA Current Year Prior Year
17 Intended Placements: Broiler-Type Pullet Chicks for Hatchery Supply Flocks by Month and Total, 2011-14 2012 2013 2014 Cumulative Potential Placements Month Pullet Chicks Hatched as % of as % of as % of Relative to Current Supply Flocks 2011 2012 2013 7-15 Months Earlier 2011 2012 2013 2014 2011 2012 2013 2014 1,000 1,000 1,000 1,000 Percent Percent Percent 1,000 1,000 1,000 1,000 US Placements Jan 6,557 6,673 6,303 6,470 102 94 103 62,996 64,111 60,864 60,546 Feb 7,284 7,025 7,156 96 102 63,283 63,679 60,646 60,850 Mar 7,058 6,753 6,589 96 98 63,250 63,323 61,094 61,214 Apr 7,044 6,524 6,222 93 95 63,751 63,209 61,342 61,457 May 7,721 7,472 7,565 97 101 63,990 62,941 60,934 61,385 Jun 7,211 6,800 7,011 94 103 64,558 62,547 60,676 61,444 Jul 6,444 6,071 6,569 94 108 64,656 61,927 60,591 61,524 Aug 7,233 7,338 7,131 101 97 64,388 61,556 60,370 61,772 Sep 6,657 6,686 6,911 100 103 63,321 60,860 60,054 Oct 6,289 6,265 6,231 100 99 63,251 60,402 59,843 Nov 6,890 6,767 7,215 98 107 63,620 60,482 59,994 Dec 6,438 6,668 6,669 104 100 64,028 60,721 60,221 Annual Total 82,826 81,042 81,572 98 101 Source: USDA
18 USDA Broiler-Type Eggs Set (in thousands) Week End 2010 2011 2012 2013 2014 Week Ending 2010 2011 2012 2013 Jan 04 202,247 205,419 193,220 196,205 199,379 Jul 05 206,138 194,961 193,765 202,502 Jan 11 200,307 205,099 193,079 196,004 201,500 Jul 12 209,753 196,576 196,111 202,737 Jan 18 202,034 204,116 193,909 195,604 199,325 Jul 19 208,724 195,141 195,117 200,313 Jan 25 202,304 203,933 193,924 197,531 200,647 Jul 26 208,549 194,434 196,294 201,122 Feb 01 204,076 205,787 193,162 197,420 200,439 Aug 02 207,588 195,036 195,058 199,085 Feb 08 205,734 204,337 195,481 197,087 199,184 Aug 09 206,602 194,164 192,962 202,022 Feb 15 206,981 207,150 194,663 198,947 199,715 Aug 16 207,381 193,090 191,718 200,520 Feb 22 207,365 206,633 195,259 199,646 200,326 Aug 23 206,575 193,007 192,248 201,626 Mar 01 206,494 208,530 197,687 199,971 201,772 Aug 30 203,941 189,258 190,242 200,308 Mar 08 205,825 207,931 198,739 199,188 Sep 06 204,833 185,218 185,586 195,444 Mar 15 207,915 208,714 197,551 199,737 Last 6 weeks Sep 13 196,963 179,528 184,443 193,058 Mar 22 205,735 209,434 196,488 199,429 2014 vs 2013 Sep 20 205,808 187,841 188,027 191,190 Mar 29 204,921 207,520 198,100 200,484 101.0% Sep 27 197,354 181,765 185,350 195,618 Apr 05 209,257 207,969 199,324 199,712 Oct 04 200,470 186,317 187,879 185,238 Apr 12 206,893 208,968 199,648 200,291 Oct 11 196,697 181,852 181,818 190,356 Apr 19 207,422 209,132 200,195 199,242 Oct 18 200,202 183,537 178,135 186,897 Apr 26 207,319 207,087 198,162 199,333 Oct 25 200,781 185,172 187,104 194,011 May 03 209,188 207,982 199,964 201,072 Nov 01 199,721 186,594 180,603 189,924 May 10 210,586 206,342 199,790 201,913 Nov 08 204,203 194,224 190,391 191,479 May 17 211,658 206,792 200,720 203,696 Nov 15 205,716 195,158 196,628 201,392 May 24 211,315 205,932 201,023 202,847 Nov 22 207,175 194,560 196,887 200,299 May 31 211,771 205,234 201,501 203,424 Nov 29 203,973 194,178 201,061 201,608 Jun 07 211,108 204,659 199,864 203,145 Dec 06 205,282 194,887 190,428 199,855 Jun 14 210,421 199,826 196,536 202,524 Dec 13 205,187 194,602 195,792 201,448 Jun 21 211,324 198,340 195,500 202,006 Dec 20 205,240 195,380 197,196 201,094 Jun 28 207,492 197,158 195,717 200,840 Dec 27 203,224 192,967 195,303 200,493 Average 200,254 205,688 198,259 194,141 198,595 Source: USDA
19 USDA Young Chickens Slaughtered by Month and Total, 2012-2014 2013 2014 2013 2014 Month Head as % of as % of Live Pounds as % of as % of 2012 2013 2012 2013 2012 2013 2014 2012 2013 2014 1,000 1,000 1,000 % % 1,000 Avg Wt 1,000 Avg Wt 1,000 Avg Wt % % Jan 707,215 734,639 704,449 104 96 4,131,497 5.84 4,350,217 5.92 4,225,699 6.00 105 97 Feb 674,192 650,086 96 3,931,177 5.83 3,838,905 5.91 98 Mar 699,277 679,656 97 4,060,986 5.81 3,992,344 5.87 98 Apr 683,191 720,296 105 3,986,151 5.83 4,252,247 5.90 107 May 749,248 743,372 99 4,370,321 5.83 4,366,772 5.87 100 Jun 706,126 679,873 96 4,135,595 5.86 4,000,638 5.88 97 Jul 722,612 748,382 104 4,166,439 5.77 4,370,339 5.84 105 Aug 760,582 742,973 98 4,419,889 5.81 4,383,333 5.90 99 Sep 663,470 694,104 105 3,899,244 5.88 4,127,927 5.95 106 Oct 745,981 768,311 103 4,435,745 5.95 4,613,761 6.01 104 Nov 674,146 655,651 97 4,011,475 5.95 3,939,558 6.01 98 Dec 642,807 687,163 107 3,801,045 5.91 4,117,659 5.99 108 Annual 8,428,847 8,504,506 101 49,349,564 5.85 50,353,700 5.92 102 Source: NASS, USDA - Poultry Slaughter Report
20 Total Frozen Chicken United States Cold Storage Stocks, 2010 2013 (1,000 pounds) 850,000 Total Chicken 800,000 750,000 700,000 650,000 600,000 550,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: USDA 2014 2013 2012 2011
21 160,000 150,000 140,000 130,000 120,000 110,000 100,000 90,000 Total Frozen Chicken United States Cold Storage Stocks, 2010 2013 (1,000 pounds) Breasts & Breast Meat 110,000 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 Wings 80,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 20,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 2013 2012 2011 2014 2013 2012 2011 170,000 Leg Quarters 28,000 Whole Chickens 160,000 26,000 150,000 24,000 140,000 130,000 120,000 110,000 22,000 20,000 18,000 100,000 16,000 90,000 14,000 80,000 12,000 70,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: USDA 2014 2013 2012 2011 10,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 2013 2012 2011
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-13 Aug-13 Oct-13 Dec-13 Feb-14 22 1.0800 1.0600 1.0400 1.0200 1.0000 0.9800 0.9600 0.9400 0.9200 0.9000 0.8800 0.8600 0.8400 0.8200 0.8000 Georgia Dock 5 Year Average -.9235 Source: comtell.com
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-13 Aug-13 Oct-13 Dec-13 Feb-14 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-13 Aug-13 Oct-13 Dec-13 Feb-14 23 2.1000 UB Boneless Skinless Breast (Approx. 8.0 million pounds/week assuming 22.50% yield) 2.1000 UB Breast Tenders (Approx. 1.6 million pounds/week assuming 4.50% yield) 2.0000 1.9000 5 Year Average - 1.4352 2.0000 1.9000 5 Year Average - 1.5112 1.8000 1.8000 1.7000 1.7000 1.6000 1.6000 1.5000 1.5000 1.4000 1.4000 1.3000 1.3000 1.2000 1.2000 1.1000 1.1000 1.0000 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-13 Aug-13 Oct-13 Dec-13 Feb-14 1.0000 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-13 Aug-13 Oct-13 Dec-13 Feb-14 1.8500 1.7000 UB Jumbo Wings (Approx. 2.7 million pounds/week assuming 7.65% yield) 0.5500 0.5000 UB Leg Quarters (Approx. 12.3 million pounds/week assuming 34.50 % yield) 1.5500 1.4000 1.2500 1.1000 0.4500 0.4000 0.3500 0.9500 0.8000 0.6500 5 Year Average 1.2906 0.3000 0.2500 5 Year Average -.4391 0.5000 0.2000 Source: comtell.com
24 CBOT - CORN Source: CMEgroup.com
25 CBOT SOYBEAN MEAL Source: CMEgroup.com
26 Corn/Soy Sensitivity Quantity Purchased Hypothetical Price Change Fiscal 2013 Impact on Cash Ultimate Impact on COGS Corn 87.4 Million Bushels $0.10 / bushel $8.74 million $0.0028 / lb processed Soybean M 801,000 Tons $10.00 / ton $8.01 million $0.0026 / lb processed Quantity Purchased Q1 Fiscal 2014 Hypothetical Price Change Impact on Cash Ultimate Impact on COGS Corn 21.0 Million Bushels $0.10 / bushel $2.10 million $0.0029 / lb processed Soybean M 201,000 Tons $10.00 / ton $2.01 million $0.0028 / lb processed
Financial Summary 27
28 (MM) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 ($/Share) Pounds Sold Strong Track Record of Financial Performance 3,124 2,956 3,038 2,800 2,399 2,463 2,581 2,049 1,809 1,537 1,537 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(1) Operating and Net Margin 8.00 6.07 5.68 6.00 4.62 3.53 3.91 3.94 4.00 2.35 1.25 2.00 0.00 (2.00) (0.57) (4.00) (2.13) (6.00) (8.00) (5.74) (2) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Note: (1) Estimated (2) Through first quarter EPS 25% 20% 15% 10% 5% 0% -5% -10% -15% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(2) Gross Profit Operating Income Net Income
29 $180 Capital Expenditures $160 $140 $120 $100 $80 $60 $40 $20 $0 Note: 23.4 27.5 92.3 15.1 20.7 24.2 4.8 9.4 15.2 88.2 29.0 26.2 8.1 40.7 25.4 107.7 37.1 18.6 44.4 5.5 49.2 49.0 110.0 24.5 59.3 55.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* 2015* * Estimated Maintenance Waco Complex General Office Foods Collins Expansion Georgia Complex Kinston Complex Palestine Complex
30