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Cal-Maine, Sanderson Farms emerge as stars; Microtek

Public company lineup shrinks

Several years ago, Mississippi was a powerhouse of public companies, boasting Friede Goldman, Mississippi Chemical and WorldCom, a Fortune 500 company. In 2001, WorldCom was far and away the largest publicly traded company in Mississippi according to market capitalization: $41.4 billion compared to the second place $1.6 billion.

Today, as the state’s remaining public companies continue to weather the recent economic downturn, those that put groceries on the table have performed exceedingly well. Makers of healthcare products aren’t far behind.

“It’s slim pickings these days, compared to six or seven years ago,” said Ashby Foote III, president of Vector Money Management in Jackson. “We no longer have some of the major players, and the remaining ones have really struggled, but a couple of stars have emerged: Cal-Maine Foods and Sanderson Farms.”

Dramatic performance for Cal-Maine

Cal-Maine Foods Inc. (NASDAQ: CALM). For the 39 weeks ended Feb. 28, net sales for the Jackson-based egg producer jumped 51% to $430 million. Stimulated by improved gross margins and decreased interest expenses, net income rose from $7.9 million to $49.2 million. The stock price increased 378%, from a 52-week low of $2.53 on June 30, to a 52-week high of $22.80 on Feb. 18.

The company primarily markets shell eggs directly to national and regional supermarket chains in the Southeast, Southwest, Mid West and Middle Atlantic, produces specialty eggs such as Eggland’s Best and Farmhouse eggs, and operates a dairy facility.

During fiscal 2003, sales increased 18.8% to $387.5 million, accounting for nearly 600 million dozen shell eggs sold. About 1,500 people are employed at Cal-Maine.

“If you look back two years, Cal-Maine’s performance has been even more dramatic, up 649%,” said Foote. “Cal-Maine and Sanderson Farms are two old-economy companies that are big beneficiaries from the Atkins Diet. That’s one of those trends that’s lasted so long, it’s dramatically changed the supply-and-demand balance. The supply demand for chickens and eggs is a lot different than making widgets. They’ve had the wind at their back with good pricing power and have done well financially.”

Tough going for MissChem; regional banks performing well

Even with the rise in commodity prices in the last year and a half, it was to no avail for Mississippi Chemical, said Foote.

“International competition, where overseas competitors have significantly lower natural gas prices, which is one of their key inputs, made it impossible for Mississippi Chemical to get back on their feet,” he said.

Banks have probably been the best performing sector, especially regional banks, said Foote.

“Nationally, the big money center banks have struggled because of corporate problems and fraud, like with WorldCom,” he said. “But in the past few years, regional mid-tier banks have been one of the best places. Now they haven’t done much year-to-date, nor in the last 12 months. But they’re certainly one of the safe havens. Typically, a rising interest rate market is not the best environment for banks, so they may have the wind in their face for a while, as rates are probably going to go up.”

BancorpSouth (NYSE: BXS). The Tupelo-based bank holding company, with commercial banking and financial services operations in Mississippi, Alabama, Arkansas, Louisiana, Tennessee and Texas, reported assets of more than $10 billion and total deposits of about $8.6 billion as of Dec. 31. Last August, the bank completed a merger agreement with insurance company Ramsey, Krug, Farrell & Lensing Inc.

In 2003, the company reported sales of $717 million, up less than one percent from the previous year. But net income rose 17% to $131.1 million. With a 4.5% increase in employees last year, about 4,000 people work for BancorpSouth.

Other publicly traded banks in the state include Jackson-based Trustmark (NASDAQ: TRMK), which reported $7.1 billion in total assets for the last fiscal year; Gulfport-based Hancock Holding Company (NASDAQ: HBHC), with assets of $3.9 billion; Tupelo-based Peoples Holding (AMEX: PHC), with $1.3 billion in assets; Starkville-based NBC Capital Corporation (AMEX: NBY), with $1.1 billion in assets; First M & F Corporation (NASDAQ: FMFC) of Kosciusko, with $1 billion in assets; Philadelphia-based Citizens Holding Company (AMEX: CIZ), with $518 million in assets; and Natchez-based Britton & Koontz (NASDAQ: BKBK), with $308 million in assets.

Small company, deepwater assets

Callon Petroleum Company (NYSE: CPE). Headed by John and Fred Callon, the Natchez-based company employs computer-aided technology such as 3-D surveys to explore and develop oil and gas properties. Even though Callon was formed circa 1950, the company did not become publicly traded until 1994. Since the mid-1990s, Callon has focused on acquiring acreage with exploration and drilling opportunities in the Gulf of Mexico Shelf area. The company also acquired an infrastructure of production platforms, gathering systems and pipelines to minimize drilling development expenses.

Most of the company’s holdings are in the Gulf of Mexico’s federal waters, with some onshore in Alabama and Louisiana, totaling 230 producing oil wells and 250 producing gas wells. Natural gas accounts for nearly 90% of its daily production. In the last year, its stock price has ranged from $5.46 to $13.65, peaking in May. In 2003, company sales increased 9.8% to $73.7 million. The company employs less than 100 people.

“Callon is a very interesting company because they’re one of the smallest to have significant deep-water assets,” said Subash Chandra, managing director for Morgan Keegan. “The production is ramping up; the cash flow is very nice. Leverage has been a big problem for them in previous years, and now the company is in a position to de-lever. The prospects are the best Callon’s seen in the last five years.”

D&PL an industry leader

Delta and Pine Land Company (NYSE: DLP). With its home base located at One Cotton Row in the tiny Delta town of Scott, this dynamo is the nation’s top cottonseed breeder and producer. Known as an industry leader in breeding programs and the use of biotechnology to develop cottonseed with improved crop yield and fiber traits, Delta and Pine Land (D&PL) also breeds, produces and sells soybean seed. The company has three major product lines: Deltapine, Paymaster and Sure-Grow. By partnering with Monsanto, D&PL has developed herbicide-tolerant (Roundup Ready) cotton and soybeans and pest-resistant (Bollgard) cottonseed.

D&PL’s 2003 sales totaled $281.3 million, up 9.1% over the previous year. Net income was $27.8 million, down 8.3%. The company’s employee growth was down 2.3%; D&PL now employs 542.

“Delta and Pine Land made a deal to be bought by Monsanto, but the stock dropped dramatically when that deal fell through,” said Foote. “Now Delta and Pine Land stock is down 5% over last year.”

Monsanto announced in May its intention to end its licensing agreements with DP&L, and has filed a dispute with the American Arbitration Association. DP&L said the issues “have been reviewed carefully and DP&L believes these claims are without merit.”

Microtek’s turnaround story

Microtek Medical Holdings Inc. (NASDAQ: MTMD) Even though the Columbus-based company produces disposable fluid collection pouches, pneumatic pumps and the Liquid Treatment System, a powder that solidifies infectious waste, the company, formerly Isolyser, is best known for making infection-control drapes used to cover operating room patients and equipment. Microtek’s OREX Technologies International unit generates products that can be dissolved in hot water. The company markets its products directly through distributors.

In 2003, company sales totaled $98.7 million, up 13.8% over the previous year. Net income jumped 90.5% to $16 million. One-year employee growth was 39%, to 1,813.

“Microtek has been a turnaround story for the last couple of years,” said Julie Schumacher, senior analyst of medical technology for Hibernia Southcoast Capital. “The management team now in place has done a significant job of turning the company around, and we saw the effects of those changes last year. Dan Lee was appointed chairman at the end of 2000, and starting putting into place new initiatives. The company name was changed in July 2002. They signed strategic agreements that have helped increase their revenue and led to explosive growth in 2003. This year, we’ve seen the effects of the November 2003 Plasco acquisition. Also, Microtek has hired new marketing managers who have focused efforts and increased branded product sales.”

Microtek’s expansion into Europe is a smart move, said Schumacher.

“In fact, their coating technology seems very promising, and an excellent fit,” she said. “Before Microtek acquired this European company, sales were declining because Cardinal Health had really neglected it. With this new focus, and Microtek’s already rather large distribution in the U.S., I think you’re going to see nice growth in that company’s revenue.”

Contact MBJ contributing writer Lynne W. Jeter at mbj@thewritingdesk.com.


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