investor presentation 12-2020 · 2020-07-24 · this presentation includes forward-looking...
TRANSCRIPT
Dolph Baker Chairman & CEO
Max Bowman Vice President & CFO
Investor Presentation
Fiscal Year 2020
2
FORWARD LOOKING STATEMENTSThis presentation includes forward-looking statements, which are all statements other than historical facts, can be identified by use of words such as “expect,” “will,” and “anticipate,” and include statements regarding expected operating results, acquisition transactions and potential effects of industry events or trends on our business. Important factors that can cause our results to differ materially from those anticipated in the forward-looking statements include egg prices and feed costs; changes in consumer demand or requirements of major customers; unanticipated results of acquisitions or joint ventures; ability to obtain eggs from outside producers; agricultural, regulatory and litigation risks; and other factors described in the cautionary language included in our filings with the Securities and Exchange Commission, including in the “Risk Factors” section of our annual report on Form 10-K and subsequent filings. We undertake no obligation to update any forward-looking statements.
3
CAL-MAINE FOODS PROFILE
We are the largest producer and marketer of shell eggs in the United States
• Founded in 1957 in Jackson, Mississippi
• Acquired Ralston-Purina egg operations
in 1972
• Completed 22 acquisitions since 1989
• Fully integrated egg producer
• Since 1996, publicly traded on NASDAQ
under symbol "CALM"
• FY 2020 U.S. fresh shell egg market
share - 19 percent
4
KEY INVESTMENT POINTS
• Largest egg producer and marketer in the United States
• Commitment to Sustainability
• Efficient, state-of-the-art operations
• Solid customer base of leading retail and food service companies
• Strong consumer demand for eggs
• Leading producer and marketer of high-margin specialty eggs
• Solid financial position
• Proven management team and systems
5
THE U.S. EGG INDUSTRY
Food Service Shell Eggs -19.6 Million Cases7.4%
Exports - 7.4 Million Cases2.8%
Retail Shell Eggs - 157.6Million Cases 59.5%
Further Processing - 80.1 Million Cases30.3%
Case = 30 dozen eggs
6
Period Ending
(in m
illio
ns) (in m
illions)
Net Sales Eggs Sold
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
400
500
600
700
800
900
1,000
1,100
1,200
SALES HISTORY
7
CAL-MAINE LOCATIONS
Eggland's Best Franchise TerritoryIncluding Investment in Unconsolidated Entities
8
FULLY-INTEGRATED OPERATIONS
9
EGG PRODUCTION FACILITIES
Contractproduction9%
Company-owned91%
Lake City, Florida
Total FlockAs of May 30, 2020
Layers 40.1 millionPullets and Breeders 10.7 million
10
COMPANY-OWNED FACILITIES
• State-of-the-art
• Fully automated
• Temperature controlled
• Labor efficient
• Located near customers
11
CAL-MAINE CUSTOMERS
Fiscal Year 2020
Retail 92%
Food Service 6%
Egg Products 2%
12
ToP 10 CUSTOMERS - FISCAL 2020Top 3 over 51%
1. Walmart Inc. (Including Sam's Club) of Fiscal 2020 Sales2. H.E. Butt Co.3. Publix Super Markets4. Food Lion5. Aldi6. Eggs America (Sysco, US Foodservice, etc.)7. Kroger Company8. CCF Brands9. Costco10. Wakenfern Food Corporation
13
MONTHLY HEN INVENTORYM
illio
n H
ens F
irst D
ay o
f Mon
th
2014 2015 2016 2017 2018 2019 2020
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec270,000
280,000
290,000
300,000
310,000
320,000
330,000
340,000
350,000
Source: USDA National Agricultural Statistics Service
14
UB Southeast Region - Shell Eggs - White Large Price
FY 18 FY 19 FY 20 5 Yr Avg
Q1
Q2
Q3
Q4
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
ANNUAL EGG PRICES
Source: Urner Barry
15
FEED INGREDIENT PRICESSo
ybea
n M
eal $
/ton
Corn $/bushel
Corn Soybean Meal
1/1/20
15
5/1/20
15
9/1/20
15
1/1/20
16
5/1/20
16
9/1/20
16
1/1/20
17
5/1/20
17
9/1/20
17
1/1/20
18
5/1/20
18
9/1/20
18
1/1/20
19
5/1/20
19
9/1/20
19
1/1/20
20
5/1/20
20$250
$300
$350
$400
$2.5
$3
$3.5
$4
$4.5
$5
$5.5
Source: Monthly Average of Daily Closing Prices per Chicago Board of Trade
Feed ingredient Approximate change in feed ingredient costApproximate impact
on feed costs per dozenApproximate dollar impact on farm
production cost for the 2020 fiscal yearCorn $0.28 change in the average market price per bushel $ 0.01 $ 9,278,000 Soybean Meal $27.50 change in the average market price per ton $ 0.01 $ 9,278,000
16
FEED COSTS - CENTS PER DOZEN PRODUCED
48
4344
4142
43
4140
43
3940
38 3839 39
4241
42 42 4241
4241 41
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
30
35
40
45
50
55
60Feed ingredient Approximate change in
Approximate impact on feed costs per dozen
$ impact on production cost for the FY 2019
Corn $0.28 change per bushel $ 0.01 $ 9,278,000
Soybean Meal $27.50 change in per ton $ 0.01 $ 9,278,000
17
GROWTH STRATEGY
▪ Pursue selected acquisitions of existing shell egg production and processing facilities in key locations and markets
▪ Enhance production capacity and efficiency
▪ Increase value-added specialty egg business including cage-free capacity
18
PURSUE ACQUISITION OPPORTUNITIES
▪ Leverage solid track record with completion of 22 acquisitions since 1989
▪ Extend ability to identify, execute and integrate additional operations
▪ Expand capabilities in existing markets and broaden geographic reach
▪ Enhance national presence and strengthen customer relationships
19
ACQUISITION OPPORTUNITIESCal-Maine Foods 44.99 S&R Egg Farm 4.53 Demler Brothers 1.50Rose Acre Farms 26.60 Sauder's Egg 4.50 Demler Enterprises 1.50Versova Holdings 21.10 National Food Corp. 4.00 Dutt & Wagner 1.44Hillandale Farms 20.00 Konos Inc. 3.40 Simpson's Eggs 1.35Daybreak Foods 14.00 Pearl Valley Eggs 2.90 Dakota Layers LLP 1.30Michael Foods 13.30 Esbenshade Farms 2.80 Sperry Farms 1.30Rembrandt Enterprises 11.90 Forsman Farms 2.60 J.S. West & Company/JEM Eggs 1.28MPS Egg Farms 10.90 Ritewood/Oakdell Egg Farms 2.60 3 Puglisi Brothers 1.27Center Fresh Group 10.80 Creighton Brothers 2.40 Mercer Landmark 1.25Prairie Star Farms 10.80 Sunrise Acres Egg Farm 2.31 Morning Fresh Farms 1.25Herbruck's Poultry Ranch 8.60 Giroux's Poultry Farm 2.25 Fassio Egg Farms 1.20Weaver Brothers 8.55 CHS 2.21 Hertzfeld Poultry Farms Inc. 1.05Opal Foods 7.79 Central Valley Eggs 2.20 Feather Crest 0.98Fremont Farms of Iowa 7.06 Kreher's Eggs 2.09 Chino Valley Ranchers/MCM Poultry 0.85Kreider Farms 6.08 Minnich Poultry 2.00 Colorado Eggs 0.80ISE America 5.80 Schipper Eggs LLC 1.85 Wilcox Farms 0.79Hickman's Egg Ranch 5.60 Heritage PMS/LaValle Egg Farms 1.70 Hidden Villa Ranch 0.70Sparboe Farms 5.58 Lathem Farms 1.67 Hillside Poultry Farms Inc. 0.70Gemperle Farms 5.10 Country Charm Eggs 1.64 Weber Family Farms 0.52Cooper Farms 5.00 Braswell Egg 1.60 Sunrise Farms LLC 0.50Sunrise Farms Inc. 5.00 Egg Innovations 1.60 Demler Egg Ranch 0.35Mid-States Specialty Eggs 4.94 Wenger Feeds/Duchland Farms 1.60 Vital Farms 0.30Wabash Valley Produce 4.66 Berne Hi-Way Hatchery Inc. 1.50
Total 342.28
Layers in Production, December 31, 2019, in millions Source: Egg Industry Magazine - February 2020
20
ACQUISITIONS
– Foodonics International, Inc. (dba Dixie Egg Company) - Acquired 2016
Includes capacity for 1.6 million laying hens and related feed production, milling and distribution facilities in Georgia and Florida as well as contract grower arrangements for an additional 1.5 million laying hens.
– Happy Hen Egg Farms, Inc. - Acquired 2017
Includes capacity for 350,000 laying hens and distribution facilities near Harwood and Wharton, Texas. Site designed for capacity of up to 1.2 million laying hens.
– Featherland Egg Farms, Inc. - Acquired 2018
Includes capacity for 600,000 laying hens, a feed mill and related production and distribution facilities near Marion, Texas.
21
RED RIVER VALLEY EGG FARM, LLC
Cal-Maine Foods and Rose Acre Farms entered a production joint venture to build a cage-free shell egg production complex near
Bogata, Red River County, Texas
▪ Provides for capacity of approximately 1.8 million
laying hens, with permits for up to 2.9 million hens
▪ Production facilities fully online in 2017
▪ Enhances ability to meet growing demand for cage-
free and other specialty eggs
22
MAHARD EGG FARM, INC.
▪ On November 20, 2019 Cal-Maine Foods acquired certain assets of Mahard Egg Farm, Inc.
▪ Includes capacity for 3.9 million hens, feed mill, and related production facilities in Chillicothe, Texas, and Nebo, Oklahoma, and a distribution warehouse located in Gordonville, Texas.
▪ Sites are permitted for capacity of up to 8.0 million laying hens.
23
INCREASE VALUE-ADDED SPECIALTY EGG BUSINESS
▪ Offer nutritionally enhanced eggs, cage-free and organic eggs
▪ Meet consumer demand in rapidly growing segment
▪ Benefit from higher and less cyclical selling prices
▪ FY 2020, represented 23.9 percent of dozens sold and 46.8 percent of sales revenue
24
Dozen Eggs Sold (in millions)
805 821884
9481,014
1,063 1,054 1,031 1,038 1,0391,069
116 132 144176
202233
263 253 257 261 256
All Shell Eggs Specialty Eggs
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 20200
200
400
600
800
1,000
1,200
SPECIALTY EGG SALES
25
CAGE-FREE COMMITMENT AND LEGISLATION
– Over 200 Companies have cage-free egg commitments over the next six years
State laws already passed– California - Michigan– Washington - Rhode Island– Colorado - Oregon– Massachusetts
Cage-free estimated monthly U.S Egg Production - (July 6, 2020)
Certified Organic Cage-Free LayersEst. Layer Flock Size: 15,812,500Est. Lay Rate: 78.50%
Non-Organic Cage-Free LayersEst. Layer Flock Size: 62,590,000Est. Lay Rate: 78.50%
All Cage-Free LayersEst. Layer Flock Size: 78,402,500Est. Lay Rate: 78.50%
Layer Flock
Legislation Pending– Arizona - Hawaii
26
INVESTMENT IN CAGE-FREE ▪ New capacity and conversions for cage-free hens, additional pullets and processing plants
and related equipment
▪ Preparing for California demand in 2020 and 2022 and nearest our customer base
▪ Invested over $371.7 million in facilities, equipment and related operations to expand our cage-free production starting with our first facility in 2008
Project(s) TypeProjected
CompletionProjected
CostSpent as of May
30, 2020Remaining
Projected CostConvertible/Cage-Free Layer Houses & Pullet Houses Fiscal 2021 38,032 28,412 9,620 Cage-Free Layer & Pullet Houses/Processing Facility Fiscal 2022 87,204 50,411 36,793
$ 125,236 $ 78,823 $ 46,413
27
KEY STRENGTHS
Low Cost Producerl Fully-integrated operations in 16 states
l Focused on automation throughout the supply chain
Favorable Consumer Demand Trends l
Eggs taste great and provide an affordable and convenient source of protein
Attractive Growth Profile
l Solid track record of internal growth and acquisitions
l Increasing sales of high-margin specialty eggs
Solid Customer Base lLeading names of retail and institutional food service customers
Strong Balance Sheet l Solid financial position supports future growth
28
FINANCIAL HIGHLIGHTS - FISCAL YEAR 2020
2020 Sales - $1.4 billion
2020 EBITDA - $79 million down from $125 million in 2019
Cash & Investments - $232 million
Working Capital - $429 million
No Outstanding Debt
29
INCOME STATEMENT - Fourth Qtr 2020
(Unaudited; in thousands except per share amounts) For the 13 Weeks Ended
May 30, 2020 June 1, 2019Net sales $ 453,333 $ 280,573 Gross profit 121,510 12,755 Operating income 76,092 (30,420) Other income, net 1,459 2,477 Income before taxes 77,551 (27,943) Net income attributable to Cal-Maine Foods, Inc. $ 60,463 $ (19,761)
Net income per share attibutable to Cal-Maine Foods, Inc.:Basic $ 1.25 $ (0.41) Diluted $ 1.24 $ (0.41)
Weighted average shares outstanding:Basic 48,501 48,442 Diluted 48,608 48,442
30
INCOME STATEMENT - 2020
Fiscal Years Ended
May 30, 2020 June 1, 2019Net sales $ 1,351,609 $ 1,361,188 Gross profit 179,588 222,859 Operating income 1,269 45,781 Other income, net 18,790 25,024 Income before taxes 20,059 70,805 Net income attributable to Cal-Maine Foods, Inc. $ 18,391 $ 54,229
Net income per share attibutable to Cal-Maine Foods, Inc.:Basic $ 0.38 $ 1.12 Diluted $ 0.38 $ 1.12
Weighted average shares outstanding:Basic 48,467 48,467 Diluted 48,584 48,589
31
OPERATING HIGHLIGHTS - Fourth Qtr 2020
For the 13 Weeks EndedMay 30, 2020 June 1, 2019
Dozens Sold (in thousands)Conventional 213,467 192,301 Specialty 68,955 62,473 Total 282,422 254,774
Dozens Produced 242,962 222,325 % Production 86.0 % 87.3 %
% Specialty Sales (dozen) 24.4 % 24.5 %% Specialty Sales (dollars) 29.9 % 44.1 %
Net Average Selling Price Shell Eggs (per dozen)Conventional $ 1.459 $ 0.785 Specialty $ 1.934 $ 1.919 All Shell Eggs $ 1.575 $ 1.063
Farm Production Cost (per dozen produced)Feed $ 0.405 $ 0.411 Other 0.328 0.328 Total $ 0.733 $ 0.739
Outside egg purchases (average cost per dozen) $ 1.65 $ 1.05
32
OPERATING HIGHLIGHTS - 2020
Fiscal Years EndedMay 30, 2020 June 1, 2019
Dozens Sold (in thousands)Conventional 813,255 778,052 Specialty 255,895 260,848 Total 1,069,150 1,038,900
Dozens Produced 927,799 876,705 % Production 86.8 % 84.4 %
% Specialty Sales (dozen) 23.9 % 25.1 %% Specialty Sales (dollars) 36.8 % 38.2 %
Net Average Selling Price Shell Eggs (per dozen)Conventional $ 1.021 $ 1.041 Specialty $ 1.897 $ 1.933 All Shell Eggs $ 1.231 $ 1.265
Farm Production Cost (per dozen produced)Feed $ 0.409 $ 0.415 Other 0.329 0.319 Total $ 0.738 $ 0.734
Outside egg purchases (average cost per dozen) $ 1.26 $ 1.26
33
BALANCE SHEET HIGHLIGHTS
May 30, 2020 June 1, 2019Cash and short-term investments $ 232,293 $ 319,428
Total assets $ 1,206,694 $ 1,156,278
Stockholders' equity $ 1,009,675 $ 989,806
Working capital $ 429,068 $ 492,846
• On July 10, 2018, we entered into a $100.0 million Senior Secured Revolving Credit Facility, which provides additional financial flexibility to support our growth strategy
34
Net
Sal
es
Operating Incom
e
Annual Net Sales and Operating Income ($ in millions)
Net Sales Operating Income
2013 2014 2015 2016 2017 2018 2019 20200
500,000
1,000,000
1,500,000
2,000,000
2,500,000
-600,000
-300,000
0
300,000
600,000
900,000
DozenEggs Sold
(in millions)948 1,014 1,063 1,054 1,031 1,038 1,039 1,069
FINANCIAL SUMMARY
35
CASH USE PRIORITIES
• Variable Dividend1/3 of Net Income Paid Quarterly
(after recovery of losses)
• Selective Acquisition of Existing Capacity
• Capital expansion to meet customer cage-free requirements
• At the end of fiscal 2020, the amount of cumulative losses to be recovered before payment of a dividend was $1.4 million
36
CASH DIVIDENDS PAID*C
ents
per
sha
re
*Cents per share, as adjusted for October 31, 2014, two-for-one stock split
9
24
15
3
11
24
52
16 18
26
710
21
3
18
30
2219
25
3532
98
75
44
35
9
15
27
1Q102Q10
3Q104Q10
1Q112Q11
3Q114Q11
1Q122Q12
3Q124Q12
1Q132Q13
3Q134Q13
1Q142Q14
3Q144Q14
1Q152Q15
3Q154Q15
1Q162Q16
3Q164Q16
1Q172Q17
3Q174Q17
1Q182Q18
3Q184Q18
1Q192Q19
3Q194Q19
1Q202Q20
3Q204Q20
0
20
40
60
80
100
120
37
STOCK OWNERSHIP AND FLOAT
Holdings as of May 30, 2020
OwnershipCommon
StockClass A
Common Stock % of VotesShares Owned by Adams/Baker Family
(Excludes ESOP) 11,324,179 4,800,000 64.8 %
Shares Owned by Other Insiders(Excludes ESOP) 174,615 — 0.2 %
Shares Owned by ESOP 2,088,705 — 2.3 %
Public Float 29,913,219 — 32.7 %
Total Outstanding Shares 43,500,718 4,800,000 100.0 %
Cal-Maine Foods is a "controlled company" as defined in Rule 5615(c)(1) of NASDAQ's listing standards due to the Adams family's beneficial ownership of 65.6% of total voting power of all Common Stock and Class A Common Stock
38
Largest egg producer and marketer in the United States
Commitment to Sustainability
Efficient, state-of-the-art operations
Solid customer base of leading retail and food service companies
Strong consumer demand for eggs
Growing market for high-margin specialty eggs
Solid financial position
Proven management team
KEY INVESTMENT POINTS