Pilgrim's Pride Corporation (PPC) Q1 2015 Earnings Report, Transcript and Summary

Good morning, and welcome to the First Quarter 2015 Pilgrim's Pride Earnings Conference Call and Webcast. [Operator Instructions] At the company's request, this call is being recorded. Please note that the slides referenced during today's call are available for download from the Investor Relations section of the company's website at www.pilgrims.com. [Operator Instructions]. I would now like to turn the conference over to Dunham Winoto, Director of Investor Relations for Pilgrim's Pride. Please go ahead.

Good morning, and thank you for joining us today as we review our operating and financial results for the first quarter ended March 29, 2015. Yesterday afternoon, we issued a press release providing an overview of our financial performance for the quarter, including a reconciliation of any non-GAAP measures we may discuss. A copy of the release is available in the Investor Relations section of our website along with the slides that we will reference during this call. These items have also been filed as 8-Ks and are available online at www.sec.gov. Presenting to you today are Bill Lovette, President and Chief Executive Officer; and Fabio Sandri, Chief Financial Officer. Before we begin our prepared remarks, I'd like to remind everyone of our safe harbor statement. Today's call may contain certain forward-looking statements that represent our outlook and current expectations as of the day of this release. Other additional factors not anticipated by management may cause actual results to differ materially from those projected in these forward-looking statements. Further information concerning these factors has been provided in today's press release, our 10-K and our regular filings with the SEC. I'd like to now turn the call over to Bill Lovette.

Thank you, Dunham, and good morning, everyone. Thank you for joining us today. We generated $2.1 billion net revenue during the first quarter of 2015, resulting in an adjusted EBITDA of $364 million or 17.7% margins. Our net income of $204 million compared favorably to the same quarter of 2014 with 108% year-over-year increase. Adjusted earnings per share was $0.82 compared to $0.39 in the same quarter of last year. We're off to a great start for 2015 as our team has once again delivered strong results despite some export challenges during the quarter. Though we are pleased with the progress, we are not satisfied, and we'll continue to refine our portfolio model, which we believe will differentiate us from our peers. We think our unique strategy will give us the ability to outperform the industry in all periods, while giving us lower overall volatility and a more consistent performance over an extended period of time. To give you an example of this strategy, we'd like to highlight our presence in the small bird category. As you know, the industry as a whole has been shifting a greater proportion of production to large bird deboning. Over the past few years, small bird production has declined from about 40% of total head to about 20% currently according to industry reports. Despite this shift, we as a company have chosen to build a portfolio approach and continue to invest in our operations. In contrast to short-term thinking, we have maintained our exposure to small bird even as others have decided to pull back and convert to large bird deboning or a different category. As a result, we've strengthen our leadership into small bird and we are far more profitable than our nearest competitor. But we also have leading positions in big bird deboning and case-ready retail chicken and approximately 20% of our total sales in prepared foods. Despite being viewed as the single market, there are actually significant differences in supply and demand and operation of big bird and small bird. Also, pricing of different sizes of chicken can move independent of one another, which means our balanced strategy gives us an opportunity to profit from price demand movements in different segments while further reducing earnings volatility. Our forward-looking approach is playing out very well as small bird pricing has been edging higher over the past few quarters due to reduced supplies and strong demand. Margins on small birds have improved to the point where it is now more profitable for us on a relative basis compared to big bird and giving us a tailwind to our blended margins. This dynamic is yet another validation of the superior value of our portfolio strategy. We're also responding to increased demand for reducing antibiotic usage in poultry. In fact, we are already the largest ABF producer for some key customers in the U.S. and are aggressively migrating our production to have at least 25% of our chicken ABF certified by the end of 2018. We are currently only using antibiotic strictly for therapeutic purposes and working hard to eliminate antibiotics use in human medicine from our hatcheries over the next 18 months. We are doing more than our fair share as we believe in treating our chickens right, while meeting consumer demand and exceeding industry standards. We can also see our diversification efforts working well as we take advantage of the shift in U.S. demographics. More and more consumers are buying boneless leg meat and thighs. In order to meet this increasing demand, we are investing more in leg meat deboning capacity in our plants. For example, by the end of this year, we will have the capacity to debone over half -- one half of our large leg quarters. In addition, we'll process others than the whole legs for both domestic and export consumption. As we convert more of our production to ABF, we'll be able to sell an increasing amount of whole bird equivalence, which includes the back half for our premium and domestic markets. Therefore, altogether, we are in the process of a significant reduction in our dependence on commodity exports for leg quarters. And as a result, we expect to create higher margins. In keeping with our strategy to grow value-added export products, we continue to believe that foreign demand will continue to grow significantly in the coming years. To further our strategy of creating a more consistent earnings profile regardless of market conditions, we are pleased with the progress we're making with our prepared food sales and operations. Having reduced our sales footprint by eliminating SKUs, shuttering inefficient lines and simplifying our approach, we now have a sustainable base of business from which to grow and further support increasing demand from our key customers. Skilled foodservice, key broad-line distributors, key regional and national chain operators are among the key customer segments to which we are focusing resources. We're also taking advantage of strong Pierce Chicken brand equity in the supermarket deli segment by adding the ability to offer key customers a complete program of ready-to-eat Pierce brand chicken along with best-in-class quality fresh rotisserie birds for their delis and case-ready chicken products for fresh meat case. Our customers continue to tell us that Pilgrim's is their go-to chicken solution provider. And while this provides a sustainable benefit for them, it also gives us financial benefits over the long term in both strong and weak markets. To support this strategy, a significant portion of our CapEx spend for the next 2 years will be dedicated to equipment that will enhance our prepared foods capacity and efficiency, and increase our sales of boneless leg meat. This approach, combined with our enhanced agility to purchase more prepared foods raw materials from the market when financially beneficial, will create a more consistent earnings profile for our company. Our Mexican operations had another strong quarter despite the impact of the stronger dollar as consumers' demand for chicken continues to exceed our expectations. Prices started the year strongly in January then moderated slightly in February before rebounding in March. Pilgrim's locally produced volume in Mexico was up 4% compared to the same period in 2014. Q2 has started off on a very strong note as well and indicates a robust demand for chicken products in Mexico. That said, Mexico is still facing some issues with avian influenza, and authorities have recently informed of new outbreaks in the states of Puebla and Guerrero. Fortunately at this time, we have not seen any incidence of avian influenza at any of our Mexican facilities. However, we will not be complacent. We will remain vigilant in stepping up our straining efforts and other preventive measures to avoid the potential for AI spread to our own flocks. Construction at our Veracruz facility is proceeding as expected. Both feed mill and hatchery should start running by mid-May. This schedule puts us on track to begin the commercial production of live chickens around summer time frame and for the first chicken to hit the market in early September. On the Tyson Mexico acquisition, we're still awaiting final decision from the Mexican antitrust authorities but expect a resolution sometime during quarter 2. While we see robust demand from Mexico, which is Pilgrim's largest export destination, other areas of the world continue to show some weakness from the residual effects as a result of lower oil prices in 2014. Additionally, though current strength of the dollar has dampened international trade, we believe that even under these less favorable circumstances, our export product mix still represents a tremendous opportunity, and offers great value proposition to global consumers. We believe we will outperform the market, and our exports should remain relatively stable this year. Regarding high-path avian influenza impact on exports, while none of Pilgrim's U.S. operations have been directly affected by recent isolated incidence of high-path avian influenza in some U.S. states, several countries, nonetheless, currently maintain temporary bans on all U.S. chicken products, thus restricting our access to some key export markets including destinations like China and South Korea. Although we expect some of these bans to eventually be relaxed, many restrictions are largely to remain in place throughout the balance of 2015. We continue to be optimistic about our international export opportunities and see to impact from these bans is temporary. We do not foresee recent market volatility have any material or lasting effect on our mid- to long-term international prospects or ambition. Moving onto industry data. We expect no change to our previous outlook for 2015 on feed costs. Both corn and soybean meal should remain relatively benign and stable for the remainder of the year to a near-record existing stock levels and conservative worldwide planning expectations this year. Feed cost volatility should not be a determining factor in our ability to deliver good results this year. Regarding chicken production, we've seen the industry growing somewhat ahead of USDA's prior forecast mainly on weights. While there is some volatility in pullet data, some of the growth in recent pullet numbers can be explained by higher requirements to support hatching egg exports to Mexico and a replacement of the existing aging breeder flock. Additionally, on the operational side, the whole industry is currently operating at a very high capacity utilization rate, which constrains the ability to process the large increase in supply of birds within the short to medium term without significant investments in the whole value chain. We are also seeing higher demand than previously and therefore, believe supply and demand to remain in good balance this year. Poultry provides the best value relative to other options. Beef prices are expected to increase, even higher this grilling season versus last year's record levels, due to tighter supplies. Meanwhile, although pork production has grown year-over-year, retailers are not passing on the full savings to consumers. And as a result, chicken prices continue to remain very attractive. Breast meat and tenders have remain strong and are gaining momentum, and despite temporary uncertainties in export markets, cutouts have also remained higher than last year. Outside of leg quarters, cold storage inventory has remained low. We continue to see positive signs for demand, and chicken continues to be the best, best-value protein available for retail and foodservice. We believe our portfolio approach in fresh and prepared foods is relevant even in an environment where overall chicken supplies grow. Given our diversity in bird sizes, market segmentation and customer exposure, we are well positioned to benefit regardless of market conditions and outperform our peers with lower levels of earnings volatility. With that, I'd like to ask our CFO, Fabio Sandri to discuss our financial results.

Thank you, Bill, and good morning, everyone. We reported $2.1 billion in net revenue during the first quarter of 2015, resulting in an adjusted EBITDA of $364 million or 17.7% margin. That compares to $2 billion in net revenue and an adjusted EBITDA of $206 million or 10.2% margins the year before. Net income of $204 million compared favorably to $98 million in the same quarter of 2014 or 108% year-over-year increase. Adjusting for nonoperating items, mainly the impact of the devaluation of the peso, our earnings per share was $0.82 compared to $0.39 in the same quarter of last year. Our results were commendable for both the U.S. and Mexican operating units during this quarter despite some challenges in the international market, as mentioned by Bill. The strong quarterly results reflects the efforts we made in positioning our portfolio both in internal and external markets to be more resilient to market volatility. Our SG&A expense has remained close to 2.4% of net sales despite the increase of the incentive accruals for the level of performance our team members have delivered. The level of competitiveness of our SG&A focused on adding value to our operations shows our commitment to operational excellence, not only in the industrial standpoint, but also from our sales and support teams. The strengthen of our balance sheet is due to our relentless focus on cash flows from operating activities, continuous management of working capital and disciplined investments in high-return projects. During the quarter, we generated $250 million in free cash flow after taxes and after 2 -- $32 million in capital investments. Our strong cash generation gives us plenty of room to continue to seek the right investment opportunities. We will continue to focus on opportunities with a superior return on our investments and projects that increase our efficiency, quality and safety. During Q1, we've dedicated funds to implementing a full leg meat deboning operation at one of our facilities and expansion in our fully cooked lines. The infrastructure projects, such as wastewater improvements, a new feed mill and various cold chain projects. Each of these projects improves our ability to provide the best quality products to our customers, while returning value to our business and shareholders. We are maintaining our CapEx outlook for 2015 at $175 million. We're going to also continue our journey in improving our 0-based budget and management methods. Following our efforts, which have resulted in the cumulative total of $870 million in cost improvements over the past 4 years, we have identified $200 million in additional savings for 2015. During Q1, we were ahead of these savings opportunities identified. We continue to evolve in our model and true identification of specific actions to close gaps to superior performance, and the assignment of specific ownership for those action plans, we believe we are building a sustainable competitive advantage for our company. Last month, we successfully issued $500 million in 225 notes with an attractive 5.75% yield. The notes partially replaced our outstanding term loan and give us a more optimized mix of variable and fixed debt on our balance sheet. We are very pleased to see this issue very well received by the market, and it was substantially oversubscribed. Following these issues, our interest expense for 2015 should be in the range of $30 million to $40 million. We continue with our commitment to create shareholder value. We'll return cash to our shareholders and improve our capital structure, and we'll continue to pursue our growth strategy. With a strong cash flow from operations, our leverage is too low at 0.45x less 12 months EBITDA. And our commitment to pursue the right growth strategy remains intact. We will continue to review at each prospects accordingly to our value creation standards. Operator, this concludes our prepared remarks. Please open the call for questions.

[Operator Instructions] The first question comes from Kenneth Zaslow of BMO Capital Markets.

I just have two questions. One is you mentioned on the call, and I agree with this. I just wanted to kind of get your context, the pullet placement, obviously, have been up high single digit, but you kind of made references to 3 points: Mexico replacement of younger -- replacement of older pullets as well as capacity constraints. If you kind of put that in context, what do you think the pullet number really is? And what does that mean for the growth outlook?

Great question, Ken. So we've done some analysis on this. And while, as you say, the -- you compared so far this year pullet place -- pullets placed are about 7.6% above last year. We believe that about 1% of that is attributed to a breed change led by, in our estimation, one company, that would be us. And that -- because the big bird breed, the Ross 708, produces less eggs per hen house. It takes more breeders then to get the same number of eggs. And we believe given the magnitude of that transition, that takes up to about 1% of the breeders or pullets placed. Another 2%, I think, is attributed to hatching egg exports and -- primarily for Mexico. And we've seen that, I think hatching egg exports were up 62% for the first quarter of 2015 over 2014. And then, we see another 1% for reducing the age of the overall flock. As we were constrained last year with need of eggs, we laid the breeder flock out, "we", meaning the whole industry. And to bring that back in line to be efficient, we think that's another 1%. So if you add up all of those attributes there, it's about 4% of the 7.6%. And so we believe that there's the ability -- sometime in the back half of 2015 carrying into 16, the ability to have 3% to 3.5% more hatching eggs. I can tell you, just because we know we're a little bit short right now on hatching eggs, and there are none to be found at a reasonable price in the U.S. as we speak. Even though, the hen flock is up 1.8% right now over where it was in 2014, hatching eggs are very, very tight. And we think we'll continue to be so into the second half of next -- of this year before we see a significant increase in the number of hens and production.

And just a follow-up to that, you said that you expected demand -- I think you said higher demand relative to that as well. Where are you actually seeing the demand increase? And is there any anecdotal evidence that you could kind of show us that, hey, this is really -- demand is actually better than people expected?

Absolutely. We see it every week. And by the way, before I comment further, I think that the supply that the industry will grow this year over last year in terms of total pounds, which could be over 4% or 5%. We think that demand will actually be commensurate, at least, commensurate with that supply growth. And so we don't see through this year any real deterioration or significant deterioration in prices from an oversupply situation, especially through quarter 3 and perhaps even into quarter 4. And I would tell you the reason for that is beef prices continue to be very high at retail, almost 15% higher than last year. And even though we have more pork on the market, and the wholesale price of pork has gone down, retail price of pork this year over last year's up 9.3%. And then chicken, while up, retail is only up 1.8%. So clearly consumers are being attracted to that better value for chicken. And we see that in our own business at retail. We've been able to raise prices through Q4 of 2014 into Q1 of 2015 and think that will continue. And then on the small bird side, we've seen a significant increase in demand for small birds, whether going to the deli for rotisserie birds or for the QSR segment. And we've seen prices go up on a commensurate level. And again, as I mentioned in the prepared remarks, that's why we believe our portfolio strategy is the winning strategy in the chicken business and will separate us from our peers because we're well balanced across all the different bird sizes in all the different consumer segments. And if the large bird deboning segment, for example, the prices there are not as highly as last year, then we make it up in other categories. And that's exactly what we saw in Q1.

The next question comes from Farha Aslam of Stephens.

Could you discuss pork, beef on a longer-term context? In terms of pricing for chicken, kind of, do you expect that the pork price will come down at retail as they reflect wholesale over time? And next year, do you see pressure from beef next year as you do get more cattle coming to market? Could you tell us a longer-term supply demand picture for chicken please?

Sure. So Farha, we're going to say that we still operate in a cyclical business. We believe, as compared to the last, call it, 5 to 7 years though, we've seen a significant structural change in chicken because if you go back to 2008, 2009, I think, at that time about 20% of the production was taken out through bankruptcies and less than stellar economics. And I think as a result, as we've talked before, we saw a significant shift in the number of primary breeders available. And that has not, so far, grown to where that's contributed to an oversupply yet. And I think, we'll maintain discipline at the primary breeder level, and I think we'll stay relatively disciplined in the chicken business as well. And I'd go back to the comment that we made in the prepared remarks, we're operating as an industry in a relatively high level of capacity utilization. So there has to be more capacity built. And while we see one plant coming on this year and the announcement of one or two more in the next couple of years, we don't see that as overburdensome for chicken. Now on pork and beef, yes, I do think that over time, we'll see pork prices coming down. And perhaps, 18 to 24 months, even beef prices coming down. But if you think about how a retailer operates, that retailer sees that fresh meat case sort of as one. And I think that's why we've seen, even though the wholesale pork prices have gone down, the retailers are capturing more margin there to help drive traffic on their beef sales and then selling a lot of chicken because of the relatively lower price of chicken. So I believe the retailer and the foodservice operator sort of look at that protein basket sort of as one and moves those dollars around as needed to keep that overall margin for them in healthy shape. And I think that, for that reason, we'll continue to see chicken demand very well supported. And that's why, I think, prices for 2015 will remain very good and -- especially at a margin level.

I think Farha, over the long term, you can also consider the growth in international markets, both for beef and pork as well. The exports are growing really fast because of the increasing demand for protein in the developing economics, so that will continue.

Great. And just as a follow-up, could you share with us your plans for your balance sheet that's particularly strong? What M&A opportunities you're seeing out there?

Sure, sure. We are evaluating different opportunities that can complement our portfolio both in the branded products and in our geography. We identify the assets that fits to that growth strategy. And like you mentioned, our balance sheet is very strong. We have 0.45x less 12 months EBITDA. And the debt markets are also very favorable. But we will only do the acquisition if we believe that they are accretive to our shareholders, Farha.

Yes, our strategy hasn't changed, Farha. We continue to look for, in the chicken space, attractive brand voids and geographic voids, and in the processed meat segment, a strong and growing brand in processed meats that we think operationally we can add value to.

And anything in terms of size and scale that's on the market now? Or do you think that's going to be something that's going to develop over time?

I think it will continue to develop over time. We continue to look and -- where we see value, we'll go in relentless pursuit, but we're not going to overpay either. I think we've demonstrated that.

The next question comes from Brett Hundley, BB&T Capital Markets. Omar J. Mejias - BB&T Capital Markets, Research Division: This is actually Omar filling in for Brett. I had a quick question. When we think about the evolution of the industry and some of the investors's attitude towards the cycle and consume store supply, do you see, I think -- and we believe that it has a real opportunity, in our opinion, to take a significant margin risk, which is down at feed cost. Are you guys hedged on feed any further out?

No, we're pretty much on market. We bought some bases in soy meal out in front of us, but we think there's lot of downside risk to the soybean complex as we see really better-than-expected yields in South America, really robust planting expected in the U.S., and huge supplies relative to a year or 2 ago. In corn, we also see some downside risk as we rebuild stocks to levels where they were 10 or 12 years ago. Also seeing great prospects for plentiful acres being planted in corn and good weather conditions. Subsoil moisture looks pretty good. So we remain relatively close to the market because we don't see the need really to stretch out very far due to our pricing strategy on the finished product or a significant risk we got in front of us on stocks to use. Omar J. Mejias - BB&T Capital Markets, Research Division: That makes sense. And from our industry margin calculation, we estimate that margins trends were largely flat in the March quarter compared to the previous quarter in December. If this was the case, what were some of the main drivers that led to the outperformance from year out from PPC, at least in the U.S. on a sequential basis where we have seen cost savings, better mix. Any color on that will be helpful.

So I think you make a good point in that when you look at the overall blended market, you do see sort of flattish pricing. But as we said in our prepared remarks, it's our portfolio strategy that really continues to make the difference. And I think, I have used this term before, chicken is not necessarily a chicken. Smaller chickens that are used for different consumer purposes than larger chickens, at times, command a greater premium than others. And I think one of the advantages that we have and we'll continue to have is our mix management of our entire portfolio. And that's exactly what you saw in quarter 1 is we were able to take advantage of that portfolio diversity and get more money for our product as a result relative to the market.

And Omar, there is also the contribution of the operational improvements. Just like you mentioned, we identified $200 million for this year compared to last year. And we are ahead of that target for the Q1.

The next question comes from Akshay Jagdale with KeyBanc Capital Markets.

This is actually Lubi on for Akshay. My first question is just with regards to -- are there any, in your view, any physical constraints within the industry in terms of the industry's ability to facilitate more chickens on grow-up farms? We have heard of some constraints with regards to housing, et cetera. And then, if you're able to quantify the potential impact that, that might be having on supply as well, that'd be helpful. And then I have a follow-up.

Sure. Just at a broad level, it's far more expensive, and from a regulatory and permitting standpoint, far more difficult to build a chicken house today in the U.S. than it was 10 or 15 years ago. And I think that has actually served as somewhat of a barrier to growth. But I will tell you that, I think, I know our company and most likely other companies continue to build chicken houses, but it's more for replacement of older houses as opposed to incremental capacity. And so I think, that is somewhat of a natural barrier just the cost and the permitting challenges that exist today. But again, we continue to build houses just for replacement.

I think the movement to ABF also required more investment in housing, better housing and more housing. And that puts a little bit of pressure in that segment as well.

Yes. As the industry -- that's a good point, Fabio. As the industry grows in its percentage of ABF chicken, those chickens require more space per head. And so overall, it requires more square footage. So that's yet another sort of barrier to overall growth as well.

Got it. That's very helpful. And then, with regards to -- you had mentioned that capacity utilization is running very high in the industry. I'm wondering if you can quantify that at all. And then also, if you could just comment on whether -- I think, you guys have a couple idled plants. And do you have any plans to open any of those plants anytime in the near future?

Yes. We do not have plans to open any idled plants in the near future. I can tell you that. And as far as -- what was the other part of your question?

Just capacity utilization, I mean.

Yes. We think it's somewhere in the 96% area. And I don't think you can get much beyond that, maybe 1%, 2%, at the outside.

[Operator Instructions] The next question is from Carla Casella of JPMorgan. Carla Casella - JP Morgan Chase & Co, Research Division: Just a follow-up on your commentary about the small bird versus big bird. Did you say what percentage of your production today is small versus big?

Carla, we didn't give a number, but we're relatively evenly balanced across the enterprise on small, medium and large. Carla Casella - JP Morgan Chase & Co, Research Division: Okay. So you'd be just about 10% higher maybe than the industry on the small bird?

Yes, we're definitely higher. Yes.

The next question comes from Bryan Hunt of Wells Fargo Securities.

Bill and Fabio, first, just kind of dissecting your comments, Bill. You talked about AI not impacting the intermediate term or the long term, and I would concur with that statement. But if I look at Urner Barry pricing for leg quarters, they've dropped more than $0.20 year-to-date. How do you avoid that lower pricing as well as slower exports with 40 countries that have banned U.S. poultry?

Yes, great question. Well, the fact of the matter, Bryan, is we don't avoid it. If we sell a commodity leg quarter on the market, we're going to get market for it. The way we mitigate the impact of that on our total margin, though, is in managing our mix and converting those commodity leg quarters into products that give us a better return. So for example, we talked about increasing our capacity to create boneless leg meat and thigh meat. We continue to do that, as I said in the prepared remarks. And we also mitigate that with value-added products for our export key customers as well. We -- the good news is, if you remember, we started this strategy back in 2011. So even though leg quarters had been very strong on a relative basis the last few years, we've been in the industry long enough to know that, at some point in time, given the cyclicality of our business that those commodity leg quarters are, perhaps, going to be less -- less in price. And so that's why we chose that strategy, and we've been building on and implementing that strategy for the last 3 to 4 years, and it's for sure paying off now. And I'm certainly glad we did it, and we're not going to change that. We're going to continue to convert our exposure to commodity leg quarters especially to other products. At the same time, we believe that foreign demand for chicken is going to continue to grow at a robust pace, and we're going to be a large participant in supplying that chicken, especially, in the form that those foreign consumers need it and are willing to pay for.

And Bryan, also even in the commodity segment, by diversifying our portfolio of countries that we achieve, and that is when the affiliation with JBS help, because of their network, global network, we can expand and diversify the destinations that we sell even on the commodity segment.

And I think, elevated, Bryan, in the fact that if you look at our 10-K and look at our total inventory, you didn't see much of a change while the total industry inventory, who we saw a huge change. And so I think that's just another quantifiable indicator that our strategy is outperforming the rest of the industry.

And the success is obvious, I would say, with your margins and looking at your inventory as well. However, is your strategy of going value-added in deboning and going various other directions of bring value to the leg quarters, preventing your product from being dragged down with the rest of the market. In other words, is your margin per pound spread even greater today than what it would have been 3, 4 months ago?

Yes. It continues to be. And we look at it on a whole bird equivalent basis, not just on a leg quarter basis. And again, part of our strategy that we started in 2011 was driving ownership and accountability deeper in our organization. And the one way we did that is we have a sales manager for every plant we have, and we hold that sales manager accountable for that whole bird equivalent return, not just the return on one part. And as our team saw this weakness coming in the commodity leg quarter market, we started moving far ahead of, I think, most other participants. And so we took away that exposure to us where other companies may not have done that.

I think another thing is our portfolio, Bryan, that in the small birds, you tend to sell more whole birds or 9-piece or 8-piece. So you don't depend so much on exporting the back half; of the bird. That is more important on the big bird segment.

And just two quick ones. One, Tom Vilsack, the Head of the USDA, is working with China and other of our trade partners in trying to change the export bans from countrywide bans or state bans, just down to county bans with regards to trade. Based on your insight on what's going on in those discussions, do you -- how successful have they been so far? And obviously, that would be huge for the whole industry as well as yourselves. But what are you hearing from those discussions?

Yes. So when we use sites as our base, that argument is very effective. Because if you take a large state, it doesn't make sense to ban the whole state when that incidence is perhaps only in 1 or 2 counties. I think we saw that in the case of our Arkansas, where Mexico stepped in and only banned Boone County, I believe, maybe 1 or 2 other counties. So we've had limited success in doing that. But we continue to make the argument and the argument is based on science, not on anyone's opinion, and I think it's a valid argument. We're going to continue to try to make that argument.

And then my last question is you've gone to this huge exercise of moving out your plant productivity up, and the goal is to be in the top of Agri Stats. Can you talk about where you stand today kind of across the board? And maybe how many plants you have lagging below the median or below the average on Agri Stats overall? And again, I really appreciate you talking to that.

Sure, Bryan. I can tell you, unequivocally, in quarter 1, we were in the top quartile in profitability for all of our operations as a whole. Yes, we do have a small handful of operations that we continue to move between average and the top quartile but all in all, we're very pleased that the rate of progress across the entire enterprise that we've had with all of our plants moving up. But I think that we attribute that to -- driving that ownership and accountability deep in the organization. We expect our local managers to manage those operations as if they owned the operations themselves and if their total net worth personally is coming from those operations. And we think that formula has worked very well for us and continues to work.

[Operator Instructions] And we have a follow-up from Akshay Jagdale with KeyBanc Capital Markets.

This is Lubi again. Just had a quick question on the demand side. So obviously, wings and the whole birds demand for those products seem to have been really strong; and to some degree, diverging from what we're seeing in boneless skinless breast and leg quarters. I'm just wondering if you could talk a little bit about what your outlook is for wings and the whole birds for the rest of the year. And then, maybe if you can just comment on, again, just the key points that are sort of driving the strength in those products.

Yes, good questions. We believe that wings will continue to be a great value for the customer and consumer. And we also think that the pricing from demand is going to be very strong, too. And the reason is, as I said before, from a supply standpoint, not much of the supply growth is coming from the growth in hen. And as there's only 2 wings on each bird, it's a piece count issue. And as wings continue to be well supported and demanded, the price continues to be very well supported. Tenders are the same way. There's only 2 tenders per head. And the same math works there in terms of price and demand. And we're seeing tremendous strength for tenders so far this year. And breast meat right now is very strong. We've seen, I think, $0.08 a pound increase just this week in Urner Barry quote. And the trading levels are at a basis that indicates that demand is very, very strong for breast meat. And we think that breast meat will continue to go up through Memorial Day. And as seasonally expected, maybe weaken a little bit in June before it starts making another run towards the 4th of July. So we see the patterns, at least, for breast meat, wings and tenders very similar to what happened last year. And we believe that that's good news from a margin standpoint for chicken producers and us as well.

And sorry, your outlook for whole birds.

Yes. Whole birds are very, very in demand and supported. I think the Georgia Dock is at an all-time high right now. It went up another 1/4 yesterday at 115.75. And we don't see any reason for demand for whole birds to trail off, at least, through Labor Day. And then as is normal, we see a seasonal decline. But as of right now, whole birds are stronger than they've been really in quite a while. We don't -- our outlook is that's not going to change.

That concludes the question-and-answer session. I would like to turn the conference back over to Bill Lovette for closing remarks.

Well, thank you. And as we begin Q2, we continue to be upbeat regarding prospects for 2015. In spite of temporary effects of avian influenza and trade bans, consumer demand for chicken remains robust, which is reflected by strong cutout prices just ahead of summer. We would like to thank our team members, customers and other interested parties in our company. And hope you continue to follow our journey to become the best managed and most respected company in our industry. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.